Wave Goodbye To Easy Money…

February 7, 2022

* Dollar gets bought on Friday & overnight

* What on earth did the BLS do to get 467,000 jobs created? 

Good Day… And a Marvelous Monday to you! Well, back home they are still digging out from the snowstorm they received late last week… Kathy went home on Saturday to all that… Better her than me! Yes, I’m all alone once again, and after I cooked myself some breakfast yesterday, I didn’t hear anyone getting upset because I made a mess of the oven!  Good basketball games on Saturday, with both my St. Louis U. Billikens and Mizzou Tigers winning! OK, longtime readers know that I’m a HUGE Jack Reacher fan, and was thoroughly disappointed when they gave Tom Cruise the role of Jack Reacher in the two movies that have been made. But Amazon got it right! They made the latest movie on Jack Reacher, and this guy matched the description that Lee Child had made in the books!  Sugar Ray greets me this morning with their song: Every Morning…

Well, I have to start today’s letter by saying… What a Crock! And I’m talking about the BLS’s attempt to throw everyone off the scent of a decaying economy, by changing the way they computed the jobs report, and came up with 467,000 job created by the BLS in January…  Trust me on this one folks, the BLS changed the whole process for computing the report…  Let me give you the skinny on that…

BLS revised four years’ worth of claimed jobs and population data. By subtracting over a million prior jobs from 2021, essentially wiping out the COVID pandemic monthly impact, and by changing the workforce population over the same number of years, the BLS was able to recalculate the current number of people in the workforce and claim 467,000 jobs were recently created.

Here’s how it was described by the conservativetreehouse.com “In my lifetime of reviewing data and analytics, I have never reviewed a level of statistical manipulation that even comes close to this.  Well, at least not since the 1980’s junk bond valuations used for corporate restructuring and asset removal.  What the BLS produced today will likely go down in the annals of actuarial history as one of the most comprehensively fraudulent manipulations of labor and statistics in history.”

So, I’m going to leave that there, for today… But doesn’t it just make you sick to think that a Gov’t agency would stoop so low to throw us off the scent of a decaying economy?  And why would they do that? Well, you certainly can’t be seen hiking rates when a country is losing jobs, right? Or better said, you shouldn’t be hiking rates when a country is losing jobs, so what does the BLS do, they go hyper-hedonic adjustment, and show a HUGE gain in jobs…  You may recall that the ADP Employment Report last week had January jobs at negative 301,000…  

So… after this report on Friday, the euro soared higher… The euro ended the week trading with a 1.14 handle!  The BBDXY though actually gained nearly 2 points on the day… It was as Ed Steer described the trading in Gold & Silver on Saturday, “déjà vu all over again”… I think you know that means, right? That Gold & Silver were putting in good days, when suddenly they weren’t any longer… We all know how that happens, but for any new readers, it goes like this… The price manipulators show up at the COMEX with arms full of paper short trades in Gold & Silver… 

Gold did end the week up $3.80 to close at $1,809.40, and Silver gained 11-cents to close at $22.60…  The two assets that soared on Friday, were… drum roll please…  The price of Oil soared to trade with a $92 handle, and the 10-year Treasury’s yield soared to 1.92% !  

Remember when I said that by the time I’m sitting in my seats behind home plate for a Spring Training game the 10-year’s yield would be 2%?  Well, it looks like the 10-year is going to have to go it alone, because it sure looks like Spring Training is going to be set back…

I could go on for a day and then some describing all the things I’ll be missing by not starting Spring Training on time, but I won’t bore you with my love of baseball…

In the overnight markets last night…. There was more dollar buying, but the buying is not affecting the euro, which is very strange. The euro has held its gains from late last week, and is trading with a 1.14 handle this morning… The price of Oil has slipped back to a $90 handle, and bonds are stuck in the mud… Gold is up $2 in the early trading, and Silver is up 19-cents, so it could be the start of a strong week for the metals… Notice I said, “could”, because there’s always the Big Bad Wolf waiting to pounce on Little Red Riding Hood… 

On a sidebar, the song, Little Red Riding Hood, was the first song I taught myself to play on my guitar, oh, so many years ago!  Sam the Sham and the Pharaohs…  did the song originally… 

Not that I’m going to go all-in on talking about the Data Cupboard this week, but, there is one data print that will prove to be quite interesting… And that is Thursday’s print of the stupid CPI… I say it will be interesting because by all accounts, the CPI should show a 7.3% increase in consumer inflation from a year ago… That would be 7.3%, according to the stupid BLS…   Let’s do a roll call of some items that people buy all the time: homes are up 25%, rent is up 30%, new car prices are up 15%, used cars are up 30%, grocery bills are up 30%, and gas is up 40%…  But the BLS says that inflation is only up 7.3%? these people should be taken out back and flogged until they admit they are doing the dirty deeds for the government, and promise not to do it any longer! 

OK… It just make me sick to think about how the media eats up Gov’t reports like it’s homemade goodness, instead of picking it apart, and asking questions, looking under the hood and around the corner…

The ECB is talking about ending bond buying… And well they should! They have been stoking the inflation fire for months now, and like our Fed/ Cabal/ Cartel, they aren’t doing a thing about it… This is not the old Bundesbank, where inflation was Taboo… I’m surprised that we haven’t heard from the Bundesbank, (Germany’s Central Bank) regarding the rising inflation in the Eurozone… But this announcement of ending bond buying is what sent the euro soaring on Friday…

It does appear to me that we need to be saying so long to easy money… Good buy, and Good riddance!  The Bank of England (BOE) announced last week that they are prepared to make their second rate hike, and I just told you about the ECB, and we have the Fed/ Cabal/ Cartel, supposedly going to hike next month… That would signal that an end of ZIRP (zero interest rate policy) was coming to an end…  of course, one rate hike doesn’t make a trend, just like one swallow doesn’t make it summer… And technically, easy money will still be in place, but for how much longer? That’s up to the Fed/ Cabal/ Cartel… 

I had a long conversation with good friend Dennis Miller on Friday… We talked about a lot of things, but one topic really took up a lot of our time… And it was about how the Fed/ Cabal/ Cartel had stopped buying bonds, and how the bond yields should begin to move higher, even if the Fed Funds rate doesn’t…   For those of you new to class… The Fed Funds rate is the interest rate that everyone talks about regarding the Fed/ Cabal/ Cartel… It historically was used by banks as the rate they charged other banks for overnight loans, but through the years, it has become the Key Rate when discussing rates, when actually the 10-year Treasury’s yield is the Key Rate, for it is used to price mortgage loans, car loans, student loans, individual loans, etc.  

Without Fed/ Cabal/ Cartel interference in the bond markets, I believe two things:

  1. That there’s going to be a huge supply of Treasuries, without the Central Bank buying
  2. That surplus will have to see higher yields to attract buyers…

And I should have added another number, with the thought that all of those buyers and holders of Treasuries that have bought them previously, will be experiencing losses in the bonds should they need to sell them before maturity…  but you knew that already…

On a side bar… I’ve gotta say that I’m loving the Trucker Caravan in Canada… At some time I knew that the public would stand up to the stupid demands of Gov’t… And if this is the way to get that done, so be it! 

The U.S. Data Cupboard today is basically empty, and furthermore, we don’t get into the real meat of economic data until Thursday this week… That’s when the aforementioned stupid CPI will print, along with usual Tub Thumpin’ Thursday fare of Weekly Initial Claims…  And then on Friday we go back to not much to look at in the Data Cupboard. So, this will be a week of waiting for something or someone to do or say something that gets everyone up in arms… And it’s not going to be me! For I’m just an old country boy, Money have I none. But I’ve got silver in the stars. Gold in the mornin’ sun…

To recap… Chuck calls FOUL on the BLS this morning saying that their jobs report for January was a Crock! Then goes on to explain what the BLS did and it ain’t pretty!  But the dollar rallied on that news, even though it was a CROCK!  Gold & Silver saw déjà vu all over again, with trading, and the euro climbed through the 1.13 handle and traded with a 1.14 handle to end the week. The overnight markets have the dollar getting bought once again, but it’s not affecting the euro… Gold & Silver are up a bit in the early trading, and Chuck says we need to begin to say goodbye to easy money… 

For What’ It’s Worth… Well, I mentioned this article above that explained the trickery that the BLS used to get to 467,000 jobs created in January, and it was well written and very good at explaining how they did it. So… That’s my FWIW article today, and it can be found here: BLS Cooks Books to Generate January Jobs Report That No One Believes, For Good Reason – The Last Refuge (theconservativetreehouse.com)

Or, here’s your snippet:” In order to get to a point of being able to claim 467,000 job gains last month, the BLS needed to revise four years’ worth of claimed jobs and population data. By subtracting over a million prior jobs from 2021, essentially wiping out the COVID pandemic monthly impact, and by changing the workforce population over the same number of years, the BLS was able to recalculate the current number of people in the workforce and claim 467,000 jobs were recently created.

Again, to unpack this effort would require a week of intensive education on statistics.  {Summary Here}

To avoid that complexity, just think of the big picture this way:

In order to claim a nonexistent gain today, you have to change what took place before.

Ex. Your home is worth $1.4 million as of this morning.  Your home is worth $400,000 more today alone. Why? Because your appreciation was stopped for the past year, and you are now comparing January 2022 to December 2020 when your home was worth $1 million.   You need to pretend the $33,000 your home was gaining in value each month never existed.  Instead, your home went from $1 million to 1.4 million in one day, today.

This is, essentially, the methodologic mindset behind the statistical manipulation.

Additionally, again using this actuary example, to justify your current home valuation to a quizzical audience (a potential buyer), the appraiser (BLS) would have to change every previously appraised value of the entire neighborhood – for every comparable that took place in the prior year.  This is akin to changing the population in the workforce statistics.

The problem becomes that once you set this numerical foundation (the number of people working), all subsequent job reports will have to reflect a new position against a higher base.   Without expanded economic activity to support it, future job gains will be lowered because they are going up against a higher baseline, because the entire population of workers has been changed.

We also know that U.S. economic activity is not expanding.

The value of this January BLS report is essentially nil.”

Chuck again…  I think to get the full effect of what the BLS did, you’ll need to go to the link and read the whole article. I think a corralled it the best I could, in the snippet, but you never really know…

Market Prices 2/7/2022: American Style: A$ .7093,  kiwi .6618, C$ .7857, euro 1.1425, sterling 1.3517, Swiss $1.0819, European Style: rand 15.5588, krone 8.8473, SEK 9.1496,  forint 308.89,  zloty 3.9853,  koruna 21.2267, RUB 75.54, yen 115.09, sing 1.3450, HKD 7.7933, INR 74.67, China 6.3597, peso 20.66, BRL 5.3261,  BBDXY 1,176.04, Dollar Index 95.57,  Oil $90.90, 10-year 1.92%, Silver $22.79, Platinum $1,020.00, Palladium $2,337.00, Copper $4.44, and Gold… $1,811.50

That’s it for today… Man I was wound up this morning like a top! I’ve settled down a bit now, that I’ve had a cup of coffee, while writing… Coffee to me is calming… it doesn’t’ get me jumpy, or fill me with energy… I know, that’s strange, but as Popeye would say, “I ams what I am”… Sunday was an absolutely beautiful day here, folks… I finally got out side about 2pm to enjoy the warm sun, and finish reading by new book: The Lords of Easy Money…  I’m so depressed about baseball, that I’m going to have to find something else to do with my time in March down here! And that depresses me to no end! I know, I don’t sound like I’m depressed, but I am, believe me! The great Marshall Tucker Band (one of my all-time fave bands)  takes us to the finish line today with their song: Can’t You See…   now you fellow Marshall Tucker Band fans, will be humming the melody to that song all day! HA! I hope you have a Marvelous Monday, and Please Be Good To Yourself! Be Positive, Test Negative!

Chuck Butler