May 15, 2023
* currencies & metals get whacked on Friday…
* No AM radio? That sounds very fishy to me!
Good Day… And a Marvelous Monday to you! A wet and rainy weekend is what we had here in the MidWest this past weekend, but we needed the rain, so no complaining from me… I hope that all the moms out there had a marvelous Mother’s Day, and that your kids thanked you for doing the most important job in the world… You know, I believe that I received traits and guidance from both my parents, but my mom… She ALWAYS supported me… And for that I’m very thankful… My beloved Cardinals come home after winning 5 of 6 games in Chicago and Boston. Have they turned it around? We’ll see! The Temptations greet me this morning with their song: I Wish It Would Rain…
Well, Fridays seem to be the day of the week that the short paper traders like to flex their muscles… Last Friday saw the BBDXY gain 6 index points! Where’d all that dollar buying come from? It certainly isn’t coming from foreign nations… And most U.S. investors are seeing the writing on the wall for the dollar.. That leaves the U.S Gov’t as the sole buyer of dollars, using their Exchange Stabilization Fund (ESF)… So, now we have the U.S. Gov’t predominating the GDP numbers with their spending, and propping up the dollar… in the Church Lady’s voice: Now, isn’t that special?”
Gold lost $4.10 on Friday, which wasn’t as bad as the whacking that Silver has been taking lately, with Friday’s loss at 21-cents… Just 10 days ago, Gold was closing in on $2,100, and Silver $27… Friday’s close for the both these metals were $2,011.54, and $24.04… that’s crazy folks… There was nothing, absolutely nothing, say it again, absolutely nothing that changed in those days that brought Gold & Silver back down… So, it was up to the short paper traders to do the trick… And they did, they suceeded, now if they would only go away, not go away mad, just go away, and never darken our doorways again!
The price of Oil is so wishy washy these days… One day, the supply problems cause the price to rise, and the next day the slowdown in the Gobla economy cause the price to fall… Friday, the price of Oil ended the week trading with a $70 handle… I’m still a believer that all the negativity that the Gov’t is throwing at fossil fuels these days is going to come back and bite them in the you know what… The U.S. Gov’t is trying to kill the Goose that laid the Golden egg… And I just don’t get it… Oil is what made the U.S. the great economic engine it was… And now the Gov’t wants to get rid of Oil? … I shake my head in wonderment as to how they got where they are, being so full of doltness…
The 10-year Treasury’s yield ended the week at 3.46%… Talk about wishy-washy… You know that the 10-year’s yield is used to price mortage rates, right? So… the Gov’t can’t have 4% and higher yields, which translate to 6+% mortgage rates… So, I know that the Fed Heads say that they are out of the bond buying business… But I do believe they had their fingers crossed behind their backs when saying that! … I’m just saying
So, everything is manipulated these days… Isn’t that a shame… Why can’t markets be left alone to trade, and let the chips fall where they do? Rhetorical question, I know… but when a thought crosses my mind, you know my fat fingers start typing the thought!
In the overnight markets last night… There hasn’t been that much activity, the dollar has slipped a little bit, with the BBDXY down 1 index point as we start the day and week today… Gold is flat to start the week, but Silver continues to get whacked, and this morning, Silver has lost the $24 handle! Silver is down 8-cents to start the day.. UGH! The price of Oil is steady Eddie with a $70 handle, and the 10-year’s yield has ratcheted up to 3.50% to start the day today… What are the bond boys thinking this week? They go from one stance to another in recent weeks, and it drives me crazy, because these are not the bond boys that I grew up in the markets with… That’s a discussion for another day… The main question for the week is: “Have the short paper traders finished with their whacking of Gold & Silver, or is there more to come?” I would like to think tht it’s over, for now… But then I’m always an optimistic person… I said that last part with a smile like the Cheshire Cat!
Well, recent reading by yours truly, has me believing that the flight from the dollar is picking up steam and velocity… Those are two things you don’t want to see if you’re a dollar holder… Here’s a snippet from an article on zerohedge.com, “It’s a gigantic snowball all over the world. We cannot even keep up
with it”, Pepe Escobar said in an interview with the New Rules
podcast.
“It’s very important what is going to be discussed at the BRICS summit
in South Africa. This will probably be the crossroads moment where
things are going to then go.”
Escobar explained that a growing number of countries in the Global
South were doing the math and concluding that the US dollar was not a
safe bet. The combination of aggressive US sanctions policy and
reckless government spending has dramatically reduced the greenback’s
international appeal.”
So, it appears to me that the dollar’s only friend, right now is the PPT and their ESF treasure chest… How much longer can that last? I don’t know, but considering how many times in the past 3 years, the PPT has spent their ESF money, I can’t believe it can go on much longer… I say 3 years, becuase it was 3 years ago, that the dollar heading south, and I thought we could be in for a long term downward trend for the dollar, only to have it all turned around by the PPT and their ESF… And there have been quite a few instances in the past 3 years, that would lead someong observing the markets to believe the dollar’s strong trend was over… Only to be corrected by the PPY and their ESF… Last week was the latest example of how the PPT pulled the dollar out of the fire once again…
The PPT uses thier ESF as an intimidation factor, much like Robert Rubin used to remind traders that “a strong dollar is in the best interests of the U.S.”… Every time he would repeat that phrase, the dollar selling would be stopped in its tracks… Of course this was more than 20 years ago… Today, they don’t need a phrase, Robert Rubin, or anyone else for that matter, to pull the dollar out of the fire… They have the ESF instead…
Remember the old saying” Throwing good money and bad things”? Well, that’s what the PPT is doing, but then one would question the term “good money”, when talking about the dollar… I’m just saying…
And it’s not just dollars… I’ve been telling you that China and Japan haven’t been showing up at the auction window for Treasuries like they used to, and longtime reader Bob, sent me this link: Inter-Imperialist Rivalry: China Is Cutting its U.S. Treasury Bond Holdings – RCIT – Revolutionary Communist International Tendency (thecommunists.net)
And here’s the gist of the article: “According to the latest data published by the U.S. Administration, foreign states are increasingly reducing their holdings of U.S. Treasury bonds since the beginning of the Ukraine War. [1] In total, foreign holdings declined from $7703.6 billion (February 2022) to $7343.6 billion (February 2023), i.e. by minus 4.7%. (See the Table in the Appendix)
It is particularly remarkable, that the two largest foreign holders of U.S. Treasury bonds – Japan and China which held a combined 30.3% of all U.S. Treasury bonds by February 2022 – reduced their share even more. Japan cut its holdings from $1303 to $1081.8bn (-17.0%) and China from $1028.7 to $848.8bn (-17.5%). Britain, the third-largest foreign state which currently has a share of 8.8% of all foreign holdings, slightly increased its holdings in the same period from $627 to $643bn.”
Chuck again… when you hear that China and Japan is backing off their Treasury purchases, you say, show me! Well, that’s what I just did!
Let’s shift gears here now, and talk about the Debt escalator that only goes upward… I’m not falling for that calling it a Debt Ceiling, as there is no “ceiling” to it, instead it’s an escalator that only goes upward! But until the Congressmen and women working on this come to an agreement, we have this that I found on Bloomberg.com: “The U.S. Treasury Department said in a statement Friday that it had just $88 billion of extraordinary measures to help keep the government’s bills paid as of May 10.
That’s down from around $110 billion a week earlier and that means that just over a quarter of the $333 billion of authorized measures are still available to keep the U.S. government from running out of borrowing room under the statutory debt limit.”
So, what you’re telling me Bloomberg, is that those “extraordinary measures” that the Treasury has been using to pay bills during this debacle, are now running out? No wonder the flight from the dollar is picking up steam!
Doesn’t the term “extraordinary measures” have a eeiree sound to it? So, what do you believe the Treasury is taking from to fund Yellen’s “extraordinary measures”? I don’t know, since the Social Security System funds have already been raided years ago, with only IOUs in place… I can’t think of another Gov’t Entity that would fall under the umbrella, that requires them to fund the Gov’t in case of emergencies…
The European Central Bank (ECB) hiked rates last week to 3.75%, still way behind the rate of inflation in the Eurozone, but at least the ECB heads said that there would be more rate hikes… To repeat what I reported last week, the Bank of England, and the Reserve Bank of Australia hiked rates last week, with both mentioning that if inflation remains high, that more rate hikes would be coming…
So, here’s the scenario folks… The Eurozone, England, Australia, New Zealand, (they’ll be hiking rates at their next meeting) are all seeing their interest rate structures rising, while here in the U.S. they are fading… Now, back in the day, that would mean that you buy the currencies from the countries with higher interest rate possibilities, and sell the ones that don’t… So, dollar’s would be exchanged for euros, sterling, A$’s, and kiwi… But that’ was “back in the day” when fundamentals ruled…
The U.S. Data Cupboard last week went into the weekend limping… The Weekly Initial Jobless Claims shot higher to 264,000 from 242,000 the previous week. I kept telling you that eventually we would see this data set’s numbers go higher, and it looks like they are finally reacting accordingly… PPI (Wholesale inflation) showed a drop in the monthly and annual numbers, which to me looked awfully suspicious of being tampered with… I’m just saying…
This week’s Data Cupboard is lacking today, but tomorrow will have the April Retail Sales, from which the Butler Household Index (BHI) indicates to me thta April’s number will not be negative, as March’s was… And we also has the Easter purchases in April…
To recap… The dollar got saved once again from falling off cliff by the PPT and their ESF… Chuck wonders how much longer this can go on, when considering the number of times that the PPY has used the ESF in the past 3 years… The ECB hiked rates last week, joining the BOE And RBA as Central Banks hiking rates and talking about hiking them more… Chuck thinks about back in the day when fundamentals ruled!
For What It’s Worth…. I made a big deal out of the countries with rising interest rate structures Vs the Fed/ Cabal/ Cartel, and then I saw this which goes into the Fed heads “pause”, and it can be found here: David Stockman on the Federal Reserve’s “Great Pause”… And What Happens Next (internationalman.com)
Or, here’s your snippet: “Every headline in the financial press earlier this week says the same thing. The Fed’s “Great Pause” has now commenced.
The Federal Reserve raised interest rates by a quarter point—and could be done.
Well, they might be done “raising” rates, but they shouldn’t be in the rate setting business—up, down or sideways— in the first place. That’s because market capitalism doesn’t work if financial asset prices are being pegged artificially and falsely by a 12-man monetary politburo rather than the vast throng of suppliers and users of funds in the global marketplace.
Here is the madness that rate pegging has led to over the last 22 years.
To wit, the Fed has made overnight money so ungodly cheap that it has distorted, tortured and twisted the very warp and woof of the entire financial system. All financial asset prices have been drastically falsified because 221 months of negative carry costs in real terms have triggered reckless leveraged speculations, rampant options chasing and dangerous financial asset arbitrages like never before.
Alas, none of this is stable or sustainable. So here we are with another day in which the stock market is open, and like clockwork a new batch of regional banks are hitting the skids.
Now that a consequent cyclone is ripping through the small banking sector, this supposedly warrants a Fed pause, and then a sharp reversal to rate cuts during the second half of the year and unto 2024. In fact, the market is anticipating approximately 180 basis points of rate reductions from the Federal Reserve in the second half of this year and the first half of next year.
But that would truly be another case of Einstein’s famous definition of insanity—doing the same thing over and over and expecting a different result. The truth is, all three interest rate cutting sprees since the turn of the century—2001-2005, 2008-2011 and 2020-2022—were not remotely warranted. As shown in the first chart above, they simply drove real interest rates deeply underwater and caused the US economy to become submerged in excess debt, speculation and macroeconomic instability.”
Chuck Again… Yes a pause would be a HUGE mistake, and in my opinion, would allow inflation to run rampant but… don’t let that thought get in the way of a good excuse to pause…
Market Prices 5/15/2023: American Style: A$ .6851, kiwi .6330, C$ .7471, euro 1.0947, sterling 1.2607, Swiss $1.1217, European Style: rand 18.7567, krone 10.5571, SEK 10.2280, forint 338.97, zloty 4.1407, koruna 21.3704, RUB 76.11, yen 135.27, sing 1.3327, HKD 7.8311, INR 82.01, China 6.9213, peso 17.72, BRL 4.9877, BBDXY 1,230.49, Dollar Index 102.51, OIl $70.78, 10-year 3.50%, Silver $23.97, Platinum $1,065.00, Palladium $1,540.00, Copper $3.76, and Gold… $2,011.96
That’s it for today… A very rainy weekend here with some periods of sun and warmth… I got chased inside two days in row, when storms blew in while I was outside watching the games… Hey! did you hear the news that U.S. Car Makers are no longer putting AM radios in their new cars? Now, you don’t think that they’re doing this to shut down the radio networks out there confronting the Gov’t? Nah… that can’t be, or could it? My spider sense is tingling, folks, that’s all I’ll say about that! Stranger things have happened, eh? Well, I made smash burgers on my new Blackstone grill for 10 people yesterday… Lots of fun! I made myself breakfast on the griddle Saturday morning… Well, next week I head to S. Florida again… So, no Pfennig on Tuesday as it will be a travel day for yours truly… Just a short two weeks trip down to take care of some business there… I’m tolerating my new chemo so far, so good… Now, I’m just wondering if it’s doing anything! I always thought that the worse the medicine made you feel the stronger it was at taking on your problem! Uriah Heep takes us to the finish line today with their song: Stealin’ … I hope you have a Marvelous Monday today, and please Be Good To Yourself!
Chuck Butler