September 29, 2022
* Currencies & metals rally on Wednesday
* Sweden hikes rates 100 Basis Points!
Good Day… And a Tub Thumpin’ Thursday to one and all! Well, my beloved Cardinals must have partied too long into the Tuesday night, after clinching 1st Place in the Central Division, for only a couple of the regular starters were in the lineup last night, and our 2nd team took on the Brewers, and the outcome was not a good one… But we move on from a long road trip, and come home to play the Pirates for the last 3 home games at Busch Stadium for Molina and Pujols… Only 6 games remain in the regular season, and to me all 6 games will feel anticlimactic after Tuesday night’s celebration. I wish the playoffs started this weekend, that way I could attend them! I was telling my neighbors, Duane and Paul last night that it seemed to be ever since Autumn was upon us the weather changed, and it’s already cold at night here! UGH! The Outlaws greet me this morning with their song: There Goes Another Love Song…
Well, the wrecking ball dollar ran into a bit of a buzzsaw yesterday, and as the day went on the dollar lost its grip and the BBDXY ended up losing 5 index points on the day. The British pound sterling had one of its best trading days in a month of Sundays, and Gold rallied to the tune of +$30 on the day, without any intervention… Hmmm… The Gold rally was chalked up to “a massive short covering”… I’ll get to that in a minute… but first, the rest of the non-dollar or anti-dollar assets saw good movement yesterday. Silver saw a 53-cent gain, Copper rose by a buck, the price of Oil saw a $4 gain and closed above $80 once again, while bonds got bought on the day with the 10-year’s yield dropped to 3.76%, when it started the day at 3.95%… The 10-year briefly traded above 4% yield on Tuesday, and since then it has seen major buying…
The euro remains well below 1$ and I’m looking for a brief spike around the next meeting of the European Central Bank (ECB)… But that’s not happening until 11/30… So, we’ll have gone through most of the College Football season, and stuffed our faces at Thanksgiving, and then rushed out on Black Friday to Christmas shop before the ECB meets again… The euro could be in for some rough times between now and then… I’m just saying.. .
OK, back to the reason all the folks in the markets were saying was the cause of the huge gain in Gold yesterday… “a massive short covering”… Now that should raise some hairs on the back of the necks of regulators, but it won’t… To have “a massive short covering” there has to be “a massive amount of short positions”.. . And if that doesn’t spell price manipulation, then I failed spelling in the 3rd grade! Well, I was an A student so I didn’t fail spelling in any grade! So, this is how these guys do this short paper trading… the short covering meant buying Gold… So they have an entry price of the price they received on the short covering… They will watch Gold go up for a while and then sell it short again, taking the profit from their buy entry point.. And then the whole shootin’ match plays out again… There are no deliveries taking place here folks, it’s simply a short paper trade that gets traded for a long paper trade… makes me sick that they get away with this, but they do, and so we must live with it… for now that is… one day… one day Alice, to the moon! And they won’t be able to stop it!
In The overnight markets last night… Well, when I went to bed last night, the BBDXY was getting sold and was down 15 index points! So, this morning that was the first thing I checked to see if the selling had any follow through, and… drum roll please… The BBDXY is down 14 index points, so no follow up during the night, but a clamp on the selling of the wrecking ball dollar. But Gold is down this morning $12 to start the day… Hmmm…. Silver has given back 27-cents of the gain it carved out yesterday. There was some real problems in the U.K. gilt market yesterday, but the BOE decided to reimplement QE, and all the day was saved… And I believe that Gold’s $30 gain yesterday wasn’t only massive short covering, but some flight to safety, with the U.K. problems…
The price of Oil has rebounded and trades this morning with a $82 handle, while bonds are back to getting their yields pushed higher… The euro has climbed back above 97-cents this morning, and the pound sterling is back above 1.08 as we start the day today… Was the selling of the wrecking ball something or just a one day correction? I guess we’ll see, eh?
Well, I came across this report on Consumer Spending the other day, and here are some very scary data points… a new report from CreditCards.com, 60% of credit card holders have been carrying balances on their cards for at least a year, up 10% from 2021.
The report shows that 59% of Americans who earn less than $50,000 a year carry a credit card balance from month to month. The percentage drops slightly to 49% for those who earn between $50,000 and $80,000 and dips again to 46% for people making $80,000 to $100,000 a year.
“It’s even harder to get out of debt when it’s spending on necessities that got you into that position in the first place,” said Ted Rossman, senior analyst at Creditcards.com. “These expenses aren’t easily avoided.”
YIKES! Now I get using your credit card at the grocery store, if you are one to pay off your credit card balance each month… But if you’re not one of those that do that, then you’re digging yourself a deep, deep hole to dig yourself out of that’s for sure! Because when you buy good on credit, it’s not like the food doesn’t get consumed, and then you have nothing to show for the debt your just piled up… Please do not fall into this debt trap… it’s easy to do, and not so easy to get out of…
I mentioned above that the pound sterling had one of its better trading days in a month of Sundays, and to its credit, the Bank of England (BOE) was doing some jawboning about intervention, and bond buying and other things that got traders’ heads turned… But … there’s always the threat of a sell off if there’s no follow through by the BOE… So, be careful here folks, don’t look at yesterday’s price action in sterling and think that the currency is out of the woods… Far from it, in my humble opinion…
So… what’s going on with the renminbi? I don’t recall seeing it being sold like this before, with every day a new record low being recorded.. .record low since 2008 that is… The markets are getting quite full of themselves right now, thinking that they can dictate to the Peoples Bank of China (PBOC) what direction they will take the renminbi… I think they are playing with fire, and you know what they say about what happens when you play with fire, right? These traders don’t think the PBOC can stand up to the wrecking ball dollar right now… I say bunk ! I guess we’ll have to wait-n-see, eh?
Recall that I told you last week that this wrecking ball dollar reminded me of the scenario around the years 2000 and 2001… At that time the dollar was KING, and there were no two ways about it… But I what I saw in the currency market was a dollar that had gotten too strong for its fundamentals, and would reverse its course soon… And soon came in February 2002… And the dollar was KING no more… Well at least not for the next ten years, until the debts of Greece were exposed, and then everyone rushed to the dollar for protection. Thus creating a new currency trend, that has lasted on and off for the last 11 years… So, not only has the dollar gotten too big for its britches, it’s also long in the tooth for a currency trend… I’m just saying…
I have been remiss in not mentioning that Sweden hiked rates 100 Basis Points last week or 1.0%! This brought their internal rate to 1.75%… You may recall that Sweden was one of the first countries to test negative rates, and after about two years, they scrubbed it, and said that it didn’t work the way they had thought it would.. .Other countries didn’t listen or paid no attention to Sweden’s words.. And to date, there’s still one major country with negative rates, and that’s Japan…
The U.S. Data Cupboard yesterday really only had the Pending Home Sales data that showed a drop of -2.0% in August… That’s a HUGE drop folks… There were 5 different Fed Heads speaking yesterday, and none of them had anything quotable to say… So, we move onto today’s Data Cupboard, which will have the usual Tub Thumpin’ Thursday fare of Initial weekly Jobless Claims.. .This number has been trending downward lately, and I would have thought with all the announced layoffs from major companies, that this data would begin to show gains any time now…
To recap.. well we have to take it for what it was… I’m talking about Gold and its $30 gain yesterday, and that is that it was caused by a “mass short covering”… Chuck points out that you can’t have a “massive short covering” if you don’t have massive short trades on the books! If I were king.. .I would dictate that the only sells that could be entered would have to have the metal to make delivery at the end of the contract, no cancellations or buy backs allowed! I reckon I’m not high on the hit parade of newsletter writers that the metals traders at JPMorgan, or any of the other bullion banks that participate in price manipulation..
Before I head to the Big Finish today, have you been following the “dart” that NASA fired at the asteroid to break it up, and to proven to themselves that they could defend Earth from asteroids? I found this information on this “dart” to be quite interesting.. Star Wars for 2022…
For What It’s Worth… Well, we all know who Stanley Drunkenmiller is right? Well, he of investing lore, is ringing the warning bell… And that’s the gist of this article that can be found here: Druckenmiller: “We Are In Deep Trouble… I Don’t Rule Out Something Really Bad” | ZeroHedge
Or, here’s your snippet: “For once, billionaire investor Stanley Druckenmiller did not say anything even remotely controversial when he echoed what we (and Morgan Stanley) have been warning for a long time, and said the Fed’s attempt to quickly unwind the excesses it itself built up over the past 13 years with its ultra easy monetary policy will end in tears for the U.S. economy.
“Our central case is a hard landing by the end of ’23,” Druckenmiller said at CNBC’s Delivering Alpha Investor Summit in New York City Wednesday. “I would be stunned if we don’t have recession in ’23. I don’t know the timing but certainly by the end of ’23. I will not be surprised if it’s not larger than the so called average garden variety.”
And the legendary investor, who has never had a down year in the markets, fears it could be something even worse. “I don’t rule out something really bad,” he said effectively repeating what we said in April that “Every Fed Hiking Cycle Ends With Default And Bankruptcy Of Governments, Banks And Investors”
He pointed to massive global quantitative easing that reached $30 trillion as what’s driving the looming recession: “Our central case is a hard landing by the end of next year”, he said, adding that we have also had a bunch of myopic policies such as the Treasury running down the savings account, and Biden’s irresponsible oil SPR drain.
Repeating something else even the rather slow “transitory bros” and “team MMT” know by now, Druckenmiller said he believes the extraordinary quantitative easing and zero interest rates over the past decade created an asset bubble.
“All those factors that cause a bull market, they’re not only stopping, they’re reversing every one of them,” Druckenmiller said. “We are in deep trouble.”
Druckenmiller said the Fed made a policy error – as did we… repeatedly… last summer – when it came up with a “ridiculous theory of transitory,” thinking inflation was driven by supply chain and demand factors largely associated with the pandemic.
“When you make a mistake, you got to admit you’re wrong and move on that nine or 10 months, that they just sat there and bought $120 billion in bonds,” Druckenmiller said. “I think the repercussions of that are going to be with us for a long, long time.”
Chuck again… yes, old Stanley is correct.. but I would phrase it differently.. I would say that the Fed lied to us about inflation last year, and now they are behind the inflation 8 ball… But then that’s just me calling a liar a liar and not beating around the bush!
Market Prices 9/29/2022: American Style: A$ .6491, kiwi .5707, C$ .7313, euro .9733, sterling 1870,
Swiss 1.0213, European Style: rand 17.9265, krone 10.7269, SEK 11.2463, forint 430.68, zloty 4.9842, koruna 25.3592, RUB 57.87, yen 144.68, sing 1.4364, HKD 7.8500, INR 81.85, China 7.1327, BRL 5.2750, BBDXY 1,339.32, Dollar Index 112.83, Oil $82.49, 10-year 3.83%, Silver $18.72, Platinum $869.00, Palladium $2,206.00, Copper $3.41, and Gold… $1,649.42
That’s it for today ,and this week… Ok, next week… I’ll write to you on Monday and Tuesday, but Wednesday is a travel day for me, so no Pfennig… And then it’s just Thursday left, and I doubt I’ll get to write anything after having traveled the day before and opening up our place… So, just Monday and Tuesday next week, I hope you’ll be able to manage without me! HA! I go to see my oncologist again tomorrow, (another Friday appt, aren’t you proud of me?) I doubt there will be anything new, but one never knows, if I recall correctly, I didn’t believe there was anything wrong with me other than a pain in my hip when I found out I had cancer in two parts of my body! So there’s that! I hope all the folks in hurricane Ian’s path got to safety… John Mellencamp takes us to the finish line today with his song: Pink Houses… I hope you have a Tub Thumpin’ Thursday today, and please, please, please, remember to Be Good To Yourself!