January 31, 2022
* Currencies and Metals continued to get sold on Friday
* Economic data last week was just plain awful!
Good Day… And a Marvelous Monday to you! Well, I know other parts of the country were a whole lot colder and wintry weather like, than us down here in S. Florida, but it was downright cold here yesterday morning… If you were in the direct sun, it was warm, otherwise… But I know I can’t moan about cold S. Florida weather, other than to point out that the citrus crops were in danger! Well, my Chiefs decided that they didn’t need a field goal at the end of the first half, and they ended up losing by 3 points… Serves them right, for being so arrogant… I don’t like either team in the NFC Championship, so I didn’t care who won… Jimmy Buffett greets me this morning with his song: Son of a Son of a Sailor…
Well, I decided to not go on vacation from the markets, as you can tell this morning… I just couldn’t find a place in the states that was warmer than here, so I decided to stay put, and come back today full of you know what and vinegar! The Friday markets were just as bizarre as the earlier days of the week… And all I can hope for is that they return to markets that look at stuff inside and out before making brash decisions… Because we sure didn’t get that kind of trading last week!
On Friday of last week, Gold continued to get sold and lost $5.50, and Silver, which is now trading with a $22 handle, lost 27-cents… The dollar continued to get bought and the BBDXY closed the week at 1,189.71… It began the week at 1,175.54… The euro has dropped two cents in the week, and so did the Aussie dollar, and pound sterling… It was quite possibly the ugliest week for currencies and metals that I’ve ever witnessed… So, now we get to pick up the pieces and attempt to put them back together again. With the major problem of putting them back together again being that we have no control over that… Traders and investors that are trading with visions of sugarplums dancing in their collective heads have the con…
Gold ended the week at 1,792.60, and Silver ended the week at $22.56… I know, I know those ending prices look ugly… But they are what they are, and so we suck it up, and get back out there! Hey, that’s the way I was brought up… I was knocked out on the football field once, and the coach came out and put smelling salts under my nose, and when they got me back to the sideline, he said, “now suck it up Butler, and get back out there!” I wasn’t injured in any way, and it was the only time I was ever knocked out…
And all this time you thought, that there was this “something” about the way my mind works… HA!
OK… So that was last week, and last week’s gone… In the overnight markets last night, we saw some low volumes of trading going on and that left us with the BBDXY up to 1,190.24, so up just slightly, and Gold down $1.10, while Silver is down one red cent in the early trading… So, not much movement to speak of in the overnight markets last night, and that’s might be an indication as to how this week will go here in the U.S. Of course, only the Shadow knows that!
Recall that I told you last week that the end of the week was when all the data was getting reported? And on Friday we saw a plethora of data, but one piece of data that wasn’t on the calendar was the Fed Atlanta’s GDP NOW that computes what GDP is at this particular time… And their report showed that GDP has dropped to just .1%, which is very close to negative growth… Here’s Zerohedge.com with their report on the GDP Now report:
“The initial GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2022 to just 0.1 percent on January 28, i.e. on the verge of contraction.
This is dramatically below consensus (for now), but as we recently noted, BofA is already hinting at a recession being imminent.”
Chuck again… Well that was after it was reported late last week that GDP for 2021 grew at 5.7%, which was the fastest rate since Ronald Regan was president! But I’m telling you now that it was not real GDP… GDP takes in consideration Gov’t spending… And Gov’t spending in 2021 was HUGE! And that’s why we have soaring inflation!
What a crock of you know what! GDP… 5.7%… And I take issue with all the economists that should know better, or at least if they had my lessons in economics, would know better, and took this print and started genuflecting to the GDP print… I shake my head in disgust at these people… steering the consumers and investors the wrong way… In my best Gomer Pyle voice, Shame, Shame, Shame!
The other data from Friday was not good either… But when has any of the economic data that is reported been good? Take Personal Spending in December was negative -1.0%, and personal Income in the same month was only up .3%… Wages are NOT keeping up with inflation, and that’s a real bad thing folks… And the U. of Michigan Consumer Confidence dropped from 68.8 to 67.2…
But then we had the PCE, the Fed’s preferred inflation gauge… hit 4.9%… here’s Wolfstreet.com with their thoughts on the PCE… “The “core PCE” price index, which excludes food and energy and which understates inflation by the most of all of the government’s inflation measures and which is therefore wisely used by the Fed for its inflation target, spiked by 0.50% in December from November, and by 4.9% year-over-year, the worst inflation reading since 1983, according to the Bureau of Economic Analysis today. As measured by this lowest lowball inflation measure, inflation, is well over double the Fed’s inflation target:”
Chuck Again, again… So there were other prints late last week but these were the highlights, or lowlights I should say…
Starting out this week, the U.S. Data Cupboard is basically empty today… But we’ll end the week with the Jobs Jamboree for January…
In other news… this one really got under my skin folks… here it is from the BBC.com “A U.S. appeals court has overturned the convictions of two former Deutsche Bank traders who were prosecuted for rigging interest rates.
In a legally significant judgment, U.S. judges acquitted Matthew Connolly, 56, from New Jersey and Gavin Black, 52, from Twickenham, Middlesex.
The court ruled that their conduct was not against the rules.
It means that what has been prosecuted as interest rate rigging in the U.K. is not regarded as a crime in the U.S.”
Chuck again, again… Can you believe that? Well, I guess in this day and age that just about everything is believable, eh? But how can a judge in the U.S. see that interest rate rigging wasn’t illegal? Did the traders that were on trial have pictures of the Judge? I’m telling you now, so you can listen to me later, that something like that has happened, because this is blatantly illegal!
To recap… The end of the data last week was simply awful for economics in the U.S. folks… The markets continued to trade in a very bizarre fashion on Friday, but Chuck decided to stay put… Aren’t you happy about that? HAHAHAHAHA! The currencies have lost major ground to the dollar in the past week, as too have the metals, and we now have to pick up the pieces and start over… The overnight markets didn’t have much movement, and we start today at about the same place we ended Friday…
For What’s It’s Worth… You know, I’ve talked about all the corporate debt in the U.S. in past Pfennigs, and it came to my attention that rising rates are going to be a stake to the hearts of Corporate leaders, and then I saw this article in Ed Steer’s Saturday letter, and thought it be TWIW worth… The article can be found here: https://ca.finance.yahoo.com/news/slump-junk-bond-sales-spells-101958905.html
Or, here’s your snippet:” The inevitability of central bank rate increases is roiling junk-bond markets across the globe, bringing higher costs for companies needing to refinance debt and bankers waiting to sell billions to fund major acquisition deals.
In the U.S., the Federal Reserve’s months-long signaling of coming rate increases already has reduced new sales of high-yield bonds by 45% from last year’s pace. European junk-debt offerings have decreased by more than 50% so far in 2022, the worst start to a year since 2019, according to data compiled by Bloomberg.
Fed Chair Jerome Powell on Wednesday provided even more clarity on the central bank’s plan to reduce liquidity and hike rates this year to combat inflation. While the investment-grade bond market is relatively stable, and Athenahealth Inc. sold high-yield debt this week without a hitch, signs are emerging that junk issuers face investors who demand greater reward for taking on more rate risk.
“We are now facing the reality of a much more hawkish Fed that will withdraw liquidity faster than expected,” said David Knutson, head of U.S. fixed income product management at Schroders Plc. “This has curtailed demand in the riskier parts of the market as they will be impacted first. The balance between borrowers and lenders is starting to turn in favor of lenders.”
Chuck again… Uh-Oh! What will these Corporate leaders do, when their zero percent loan comes due and they need to refinance at a higher rate? Well as far as I can tell, it won’t be all seashells and balloons!
Market Prices 1/30/2022: American Style: A$ .7044, kiwi .6569, C$ .7839, euro 1.1157, sterling 1.3406, Swiss $1.0710, European Style: rand 15.5669, krone 8.9951, SEK 9.3946, forint 320.73, zloty 4.1128, koruna 21.8747, RUB 77.69, yen 115.41, sing 1.3552, HKD 7.7979, INR 74.68, China 6.3612, peso 20.82, BRL 5.3843, BBDXY 1,190.24, Dollar Index 97.17, Oil $87.11, 10-year 1.78%, Silver $22.55, Platinum $1,017.00, Palladium $2,468.00, Copper $4.40, and Gold $1,791.50
That’s it for today… Well, we said goodbye to our friends, Jack and Lorraine last night, as their month-long stay here had come to an end… They will be driving back to Annapolis first thing, today, and I wish them “severe clear”… Well that was some storm that hit the east coast last weekend, eh? I hope any of you who were in the path of that weather are safe and warm… My St. Louis U. Billikens won their game on Saturday, while the Mizzou Tigers lost theirs… And our Blues headed to the All-Star Break with a loss on Saturday afternoon. The Blues first half of the season was pretty darn good, but… it can be improved on, and I hope they can achieve that! Back home the weather forecast is for an appreciable amount of snow this week… Glad I’m not there! And glad I don’t have to go to work in it… When I was working I was always the first one in the office each day, and on snowy or icy days the folks in the office would all call me and ask me how the roads were! OK, Mamma’s Pride takes us to the finish line today with their song: Blue Mist… I hope you have a Marvelous Monday today, and Please Be Good To Yourself, and don’t forget to Be Positive, Test Negative!
Chuck Butler