August 2, 2022
* dollar fights back in the overnight markets last night
* Chuck hopes it’s all just saber rattling…
Good Day… And a Tom Terrific Tuesday to you! OK, I had a dear reader send me a note yesterday, saying that he would take up a collection to keep me writing! OK, you called my bluff… I’m not going anywhere, so you all are stuck with me! A pretty dull day yesterday, the weather was hotter than a firecracker, and I only spent about an hour outside, due to the heat. I’m all alone at home right now, but Kathy comes home tonight, so the quiet that exists now, will end! HA ! Don’t tell her I said that! And I’m talking to you: Lisa, and Lynn! The Zombies greet me this morning with their song: All You Zombies… Whenever I hear that song, it takes me back to 1987, and we were having a 4th of July pool party, and we had a new camcorder, and were filming a lot of the goings on in the back yard, and this song, All You Zombies, was playing on the boom box…
Well, the weakness of the dollar recently, was brought to a pause yesterday, now we’ll have to see which way it decides to go… Continue to get weaker, or rally back? I believe that all signs are pointing to door #1, as far as the options go… But, as I said in the Pfennig yesterday, one has to wonder whether the PPT is going to spend some of those Exchange Stabilization Funds that they have stored up, to prop up the dollar or not… The BBDXY actually gained 1 index point yesterday to close the day at 1,263. The euro climbed 10 bips, and the rest of the currencies kind of held their ground. The price of Oil took another hit yesterday. After briefly trading over $100 last week, the price of Oil has fallen by $7 total, with yesterday’s $3 loss putting the price to trade with a $93 handle.
Gold gained $6 yesterday to close the day at $1,773.50… Silver lost a penny yesterday… That’s right! Silver lost 1-cent yesterday to close the day at $20.44 I’m reading article about how the Fed has induced a short squeeze in Gold… And that’s why Gold has been gaining a little bit each day… I would have to think that if was a real short squeeze, then the upward movement in Gold would be greater than it has been… I’m just saying…
The 10-year Treasury is on a roll folks… all that bear market for bonds that existed before July came along, is gone with the wind… The Fed/ Cabal/ Cartel’s 2 back-to-back 75 Basis Point rate hikes has really got the bond bulls on cloud nine… They think the Fed Heads are really serious about fighting inflation back… I would have to say that I question their thinking on that one. I really do… For I’m of the opinion that the Fed heads will pivot soon, maybe not in Sept (their next meeting), but a head fake will probably be their choice in Sept. With the rate hike being much less than 75 Basis Points… And that leads to no rate hike at the next meeting, which would be the last one before the mid-term elections… For Heaven’s sake, the Fed Heads can’t be seen as being political! HAHAHAHAHAHA! As if!
In The overnight markets last night… Well, the dollar fought back, and gained in the overnight markets last night. The BBDXY gained nearly 3 index points and trades this morning at 1,265… The euro has given back its gains from yesterday, and the Aussie dollar fell back below 70-cents overnight… We’ll have to see how this all plays out in the U.S. trading session today, but I have this feeling that this is no more than a head fake, and that we’ll get back to dollar weakness soon… The price of Oil has wrapped a tourniquet around the bleeding and trades this morning with a $94 handle.
Gold is up $6 in the early trading this morning, and Silver is down 3-cents, so that’s where we are to start the day today…
The 10-year’s yield has fallen to 2.55%… as I just said above, the 10-year is on a roll!
I have one more thought to share with you on the FOMC’s 75 Basis Point rate hike last week… Ok, so everyone is up in arms about how the Fed is pushing the economy to a collapse, but that’s the price you pay for all the years of easy money, zero interest rates, currency printing, and everything else they Fed and Gov’t has done to ruin the economy… Besides that 75 Basis Point rate hike brought our Fed Funds Rate to 2.50%… How are you expecting to fight inflation that’s 15%, with 2.5% rates? As they say in the country, That dog ain’t gonna hunt! But the beltway folks, the elites, the dark side, all believe that 2.5% rates will do the trick of bringing inflation down…
Shoot Rudy, if the Fed Heads did nothing, and let inflation run its course, we would be in the same boat as other 3rd world countries that did the same thing… So, to the masses that don’t really follow this stuff, or are too young to remember the 70’s, they would say that at least the Fed Heads are fighting inflation… But longtime followers of the markets, and readers of the Pfennig, know better, that 2.5% rates are doing nothing, nada, squat, nil, a big fat goose egg, toward fighting inflation…
Well… I guess I was on mark with most of what I said yesterday, as there were no dissenting comments in the Pfennig Replies box yesterday! YAHOO! Everybody does love me, they really do! Well, what else would I take from that? Well, maybe you all are just tied of telling me I’m full of baloney! Nah, that can’t be, it’s gotta be that everyone loves me! HA!
Alrighty then… now that we have that settled… let’s see what else Chuck has on his mind this morning!
About 10 years ago, a colleague of mine, David Galland, gave me a book for a Christmas present, the book? The 4th Turning, by authors, Stauss and Howe… They tracked these 4 turnings through history, and surmised that the U.S. was in a 4th turning… What’s in a 4th Turning? I’m glad you asked! Here’s a brief explanation curtesy of Doug Casey’s International Man.com : “Then, in a Fourth Turning, again a generation later, power having been seized, the sociopaths seek total power – the elimination of all freedoms, to be replaced by totalitarian rule.
Historically, in a Third Turning, a complacent people make it possible for sociopaths to take power. In a Fourth Turning, the sociopaths exert that power.
It matters little whether the excuses put forward by political leaders are climate control, racial equity, CBDCs, cancel culture, owning nothing, digital IDs, transhumanism, vaccine mandates or a Green New Deal, the objective is singular: total dominance of the ruling class over the subservient class. Any excuse will do, if it has totalitarian rule as its outcome.
In any Fourth Turning, those who are more thoughtful and forward-thinking will begin to make sense of the ruse, but find themselves being heavily criticized by all and sundry. The media will do all within their power to slap down those who denounce the ruling class. But more to the point, the greater proportion of the populace will remain in their slumber and resist the awakening strenuously.”
Chuck again… Hmmm, does that sound like where we are as a country right now? I suggest you pick up the book the Fourth Turning, by Strauss and Howe, and learn what comes next… spoiler alert, it ain’t pretty!
So… the major countries of the world, have all hiked rates to combat inflation in their respective countries… Well, all except Japan… The Japanese remain the poster child for negative rates, and from what I read about what’s going on there, I don’t see that changing any time soon!
There are still many cross trades in dollar/ yen… And so with the recent dollar weakness, the yen has rallied back from the 136 level to 132, still extremely very weak… Japan has always sought, well since 1998, some inflation in their economy, but not like they are seeing now, for the high inflation is destroying the Japanese economy… It’s time for the Bank of Japan (BOJ) to get off their rear ends and hike rates… But that’s not going to happen, so the yen should remain very weak…
Before I left on my annual summer vacation, the Aussie dollar (A$) had lost a lot of ground, with a large chunk of that loss coming after the Reserve Bank of Australia (RBA) hiked rates! While I was gone, the A$ rallied from the 68-cent handle to over 70-cents… The Australian economy is recovering from their Covid induced slow down, and I expect to see more rate hikes coming from the RBA in the future, so hang on to those A$’s… of course that’s my opinion and I could be wrong on that!
The Petrol Currencies that include the : Russian ruble, Norwegian krone, British sterling, Brazilian real, Canadian dollar, and even the Mexican peso, have really lagged in moving with the price of Oil… when the price of Oil first began to rise late last year, these currencies all rallied alongside Oil, but since the price of Oil reached $90 the Petrol currencies have lagged… I think this has something to do with the volatility that the price of Oil has seen in recent months. I suggest that the currency traders are not fond of volatility, and have chosen to remain on the sidelines while the price of Oil goes up and down, over and over again…
The U.S. Data Cupboard today has the Job Openings and Job Quits data for June for us to view today… The Job Quits data is always interesting to me, as it has remained steady Eddie for months now at 4.3 million job quits each and every month… St. Louis Fed President, James Bullard will be speaking today, and he’s always good for a quote about the next rate hike….
To recap… The dollar weakness took a pause yesterday, but the euro found a way to eke out 10 Bips in gains VS the dollar on the day. Gold gained $6 on the day, and Silver lost 1-cent… Chuck discusses the prospects for the yen, and the Aussie dollar in today’s letter. And Chuck thinks that we as a country, are in our 4th Turning… The overnight markets brought us to where we are this morning with the DDBXY
For What It’s Worth… I couldn’t find anything that was really FWIW worthy today, so this article comes to us from Bloomberg.com and talks about how Pelosi rattled the chains of China last week, and has the potential to lead us to war… and the article can be found here: Nancy Pelosi Trip Moves Japan Yen, Taiwan Dollar, Other Asian Currencies – Bloomberg
Or, here’s your snippet: “Pelosi’s trip is creating a fresh pressure point for investors already dealing with the prospects of a US recession, worldwide rate hikes and surging inflation. The moves so far suggest traders are hedging against tension escalating, with analysts warning of the tailrisk of a conflict between the world’s two largest economies that wreaks havoc on global markets.
“China will show her displeasure by ratcheting up retaliatory actions, but it won’t get out of hand given its economy is weak,” said Rajeev De Mello, a global macro portfolio manager at GAMA Asset Management in Geneva. “However, the risk is if there is any military ‘incident,’ which could lead to an accidental military escalation, which would stress global financial markets.”
While the White House has sought to dial back rising tensions by insisting there is no change in its position toward Taiwan, which China considers as part of its territory, Beijing has called Pelosi’s visit a “dangerous gamble” with grave consequences. It has responded to past visits by foreign officials with large sorties into Taiwan’s air defense identification zone or across the median line that divides the strait.”
Chuck again… oh that’s just peachy isn’t it? Now we have not only 1 super power mad at us and ready to launch missiles, but now we have 2 super powers not pleased with our stance… How are you going to fight a war VS Russia and China at the same time? Oh, I can see the war mongers in Washington D.C. wringing their hands that they finally get to fight a real war, and not one where the enemy hides in caves. I cringe even thinking about all this folks, and I would be you would be too…I’m hoping that this is all just saber rattling… Just wishin’ and hopin’ and prayin’… (Dusty Springfield)
Market Prices 8/2/2022: American Style: A$ .6940, kiwi .6298, C$ .7781, euro 1.0234, sterling 1.2218, Swiss $1.05, European Style: rand 16.5782, krone 9.6906, SEK 10.1542, forint 387.67, zloty 4.5962, koruna 24.0749, RUB 60.34, yen 130.98, sing 1.3784, HKD 7.8498, INR 78.15, China 6.7583, peso 20.47, BRL 5.1860, BBDXY 1,265.80, Dollar Index 105.55, Oil $94.26, 10-year 2.55%, Silver $20.41, Platinum $916.00, Palladium $2,179.00, Copper $3.53, and Gold… $1,779.02
That’s it for today… thanks to those of you who took a moment yesterday to send me a “welcome back” email… I read the letter written by Rob Rains each day regarding the St. Louis Cardinals, and a couple of weeks ago he put out a challenge to his readers to respond with their thoughts on what he had just written about… So, being the crazy Cardinals fan that I am, I fired off my opinions on the team, and a couple of days later, I received an email from Rob, that said that “you are a Winner!” and my winnings were 2 tickets to the Cards/ Cubs game this Thursday night! YAHOO! I think I’ve told you this before, but if I didn’t, here it is… My mom, always thought I was going to a sports caster, or writer, she always thought I had the eye for things going on in games… So, after winning the writing contest, I’m thinking, is it too late to start a new career? HA! Ok, the band Looking Glass takes us to the finish line today with their song: Brandy… Brandy, you’re a fine girl what a good wife you would be… Yeah that song… I hope you have a Tom Terrific Tuesday today, and please remember to Be Good To Yourself!
Chuck Butler