The Dollar Climbs Back Into The Driver’s Seat

Rocktober 10, 2022

* Currencies & metals get sold on Friday and in the overnight markets last night….

* Consumer credit (read debt!) explodes higher! 

Good Day… And a Marvelous Monday to you! Well, all’s well that ends well, right? The end of the season came early for my beloved Cardinals Saturday night, as they lost two straight to the Phillies, and had to pack their bags and return home… The last game for Yadier Molina and Albert Pujols, who both, will be named to the Hall of Fame in 5 years, was not how they planned to go out. But the plans of mice and men… I arrived at my winter home last week, and immediately went out to the deck to read! Good friends arrived yesterday, and I’m excited that we have company! The Beatles greet me this morning with a song from their critically acclaimed album, Sgt. Pepper’s… With A Little Help From My Friends… Joe Cocker also made the song popular, but I prefer the original!

Well, I may have changed locations, briefly, but the markets haven’t changed their tunes.. The dollar is still strong, and even stronger than it was when I left last week. I have to say this, now, so hear me now and listen to me later, this rally in the dollar looks very suspicious to me… Let me explain… On Tuesday last week, the BBDXY (dollar index) had reflected a weakening dollar, that had been weakening for a few days, and appeared to be heading in the opposite direction (down)… Then suddenly, it wasn’t weak any longer, and the dollar buying was being added to by the truckload… What changed? Can you say, “the Plunge Protection Team?” I knew you could!

So, the dollar rallied strongly on Friday last week, and didn’t take any prisoners. The BBDXY which was around 1327, last Tuesday morning, ended the week at 1,3335.43… The euro is back to looking sickly, and the pound sterling has lost some of its gains from last week. Gold lost $17.80 on Friday, while Silver lost 51-cents… Not much had changed, The stupid BLS Jobs Jamboree said that the Unemployment Rate in the U.S. had fallen to 3.5%… And that got all those traders who were still stuck on stupid, I mean, stuck on the Fed Heads pivoting, saw the light in the Jobs report, and came to realize that the Fed Heads are nowhere near to pivoting on rate hikes…

The price of Oil has taken to higher levels once again.. Ahem, didn’t you tell your dear readers last week, about the oil production cut, and that it should remedy the cheaper Oil prices, Chuck? Ok, I did, and last week, the price of Oil soared higher and ended the week trading with a $93 handle! Our friends (NOT!) a OPEC wanted to put a floor of $90 under the price of Oil with their production cut announcement, and I’m thinking they got it! (see how observant I am? HAHAHAHA)

In the overnight markets last night… The dollar buying continued last night, and the BBDXY is up 3 more index points this morning. I thought we were past all this love for the dollar ast this time last week, but that was not to be!  Gold is down $18 in the early trading this morning, while Silver has given back 44-cents, so some large losses for the metals this morning. 

 The one currency that had been immune to all this dollar strength, the Russian ruble has taken a tumble in the overnight markets and trades this morning with a 62 handle…  With the price of Oil rising again, I would have thought this would underpin the ruble, but apparently not, so we move one, despite my shortcomings! HA!   

The price of Oil has slipped by a buck overnight, and trades this morning with a $92 handle, while bonds are flat, with little to no movement overnight.  This looks to be a very ugly day for the non-dollar assets, so batten down the hatches and don’t peek as the day goes on…  I’ll try not to say anything controversial this morning, as it’s the new nicer, understanding, Chuck…    Yeah, and if you believe that one, I have a bridge to sell you!   

Bonds were getting back to seeing their yields rise again late last week. The 10-year Treasury ended the week with a 3.88% yield… Recall that earlier in Sept, we saw the 10-year’s yield rise above 4%, but then came the problems in the U.K. and everyone rushed to buy Treasuries as a safe haven, and that pushed down yields by a large margin. But all that has calmed now, and things are getting back to the way they were before the U.K. scared the bejeebers out of everyone.

The strong dollar has really been a problem for a lot of U.S. Corporations that export to other countries… This from Reuters this past weekend: “A towering rally in the U.S. dollar is expected to hit third-quarter corporate earnings, potentially presenting another obstacle to stocks in a year that has experienced an already-painful market decline.

The dollar index , which measures the greenback’s performance against a basket of peers, traded an average of 16.7% higher in the quarter that ended Sept. 30 than in the same period a year ago, helped by a hawkish Federal Reserve and turmoil in global financial markets that boosted the dollar’s safe-haven appeal.

August consumer credit report from the Federal Reserve was another shocker especially after last month’s unexpected slow down in credit card debt, which we attributed to the surge in credit card rates and wondered if this implicit deleveraging would continue as the US economy slid into recession, or if U.S. consumers are so desperate for liquidity they will max out their cards – without expecting to repay them – if it meant being able to pay for one more month of goods and services at record prices. We just got the answer when moments ago the Fed published the latest consumer credit data and it was a doozy.

Total consumer credit rose $32.2 billion, well above last month’s $26 billion and also above the $25 billion consensus estimate.

And while non-revolving credit (student and car loans) rose by a relatively pedestrian$15.1 billion…

… the stunner again was revolving, or credit card debt, which soared from last month’s sharp drop, rising by the second highest on record at $17.2 billion (from $10.4 billion last month) and only lower than the highest print on record, March’s downward revised $25.9 billion…

The U.S. Debt passed $31 Trillion last week… That last Trillion didn’t take long now did it? You know, when I began to write the Pfennig in 1992, the debt was $4 Trillion… I began harping about the debt in 2004, when it hit $7 Trillion, and then really began stomping my foot in 2008, when it hit $10 Trillion… The debt has taken only 5 years (2017 to 2022) to rise $10 Trillion! And the way the debt has gained momentum, the debt clock tells me that it will only take 4 more years to reach $40 Trillion! 4 short, high school years… What will the economy, and landscape of the U.S. look like then? I shudder to think of such things…

I read a lot of articles in the past week, about Gold… Some talked about the physical shortages of both Gold and Silver… Some talked about how Central Banks around the world are buying physical Gold by the truck loads, and that they are doing this to prepare for a fall of the dollar. I didn’t come across one article that talked about how Gold is going to fall, in price, by great lengths… That was promising!

Speaking of Gold… I saw this bit of info on this past weekend.. check this out! “Last week, when gold prices dropped to a two-year low, the market was down roughly 12% since the start of the year. This week, the precious metal has seen a short-covering rally pushing prices back above $1,700, cutting the loss to 6% year-to-date. While the S&P500 is down 23% so far this year… So… to my way of thinking, Gold has provided the hedge it was bought for… While Gold has not kept up with inflation this year, my thinking is that it would be doing just that, if not for the price manipulators…

There also seems to be a major disconnect between physical and paper Gold going on here folks… The premiums to buy physical Gold are still outrageously high, which indicate that there’s a shortage of the physical Gold bars and coins, which should lead to a rising Gold price, right? Well the paper Gold trading has seen contra trades by the arms full… And they aren’t going away anytime soon!

The U.S. Data Cupboard last week had the aforementioned stupid BLS Jobs Jamboree, where the BLS said that 263,000 jobs had been “created” in September. Here’s something that didn’t get reported… The number one jobs creators this year has been “leisure and hospitality” … And guess what the BLS had to do this month with that category? Oh, I’m going to tell you, you knew that! The BLS had to subtract 63,000 jobs from that category that they had reported as “created” previously… See? This is why I question every report the BLS puts out because they have all these “assumptions, and creations” …

The U.S. Data Cupboard is barren today… It’s Columbus Day! Yes, we get to celebrate the finding of the explorer from centuries ago… When I was a young boy in school, we used to make paper hats and swords, and march around the school to celebrate Columbus Day… You can only imagine how distraught I was to find out years later that he didn’t really discover North America… Oh well, I recall those days as fun! And they can’t take that away from me, like the folks do everything else these days…

To recap… The dollar was on a losing streak last week, until it wasn’t… .Chuck suspects the PPT had something to do with that, and now the dollar is back to kicking tail and taking no prisoners… Chuck has a slew of other things to think about this morning… Gold is on his mind a lot this morning… You won’t want to have missed anything he talks about this morning!

For What It’s Worth… In September 2019, I began to write about the Fed’s Repos and the banks that had to deal with them because of their iffy money positions… then all that talk about the rot in banks went to the side of the road, as Covid became the story that everyone wanted to know about… But guess what? Those repos are still a major funding mechanism for the Casino Banks, and this article tells us that the size of the total repos is now at record levels! The article can be found here The Fed’s reverse repo use just hit a fresh record of $2.4 trillion — why that’s one of the clearest ‘bad signs’ for the market (

Or, here’s your snippet: “There’s been yet another record-high uptake in the amount of cash investors are stashing in a major Federal Reserve facility.

The Fed parks excess cash reserves from banks in the Overnight Reverse Repurchase Facility. A reverse repo, or RRP, helps the central bank conduct monetary policy by selling securities to counterparties to be bought back for a higher price later on — essentially working as a short-term loan.

The RRP facility was hit with $2.367 trillion on Sep. 28, higher than the previous record of $2.359 trillion set on Sep. 22.

Investors are sticking with ol’ reliable cash in order to ride out the current economic uncertainty — but it doesn’t seem as though the market will return to normal anytime soon.

Rising interest rates have seen investors pull back on taking risks — the S&P 500 has plunged for three consecutive quarters — which means they’re now turning to avenues with lower risk and safer returns.

Enter cash and cash-like assets. Investments like money market funds, which are fixed income mutual funds that invest in short-term, low-risk debt securities, have been a safe space for investors during periods of high volatility.

The Treasury Department has been shrinking its cash balance from about $1.6 trillion at the beginning of 2022, to around $300 billion (returning to pre-pandemic levels). The drop in bill issuance means investors have needed a place to put their spare cash — and that place has been the RRP facility.

Since March, experts have been projecting that RRP usage would rise in order to help normalize cash supply levels.”

Chuck Again… of course this article talks about the Casino Banks needing this funding mechanism, as something that’s “normal”or “good”… I say hogwash!

Market Prices 10/10/2022: American Style: A$.6313, kiwi .5590, C$ .7282, euro .9705, sterling 1.1057, Swiss 1.0016, European Style: rand 18.1583, krone 10.6925, SEK 10.2957, forint 438.29, zloty 5.0187, koruna 25.2543, RUB 62.81, yen 145.52, sing 1.4272, HKD 7.8496, INR 81.3243, China 7.1474, peso 19.97, BRL 5.2096, BBDXY 1,343,54, Dollar Index 113.10, Oil $92.28, 10-year 3.88%, Silver $19.78,
Platinum $906.00, Palladium $2214.00, Copper $3.47, and Gold… $1,678.00

That’s it for today… Well, every Saturday that my two beloved teams played, if Mizzou lost, so did the Cardinals, and that played out again last Saturday! UGH! I really wanted to see the Cardinals go at least a little further into the playoffs to show off their pitching and defense… But that was not to be… Oh, well, life goes on… Now it’s time to turn our attention to the St. Louis Blues! The NHL season will begin later this week, so.. Let’s Go Blues! Things are going well for me these days, my stomach gives me problems but if that’s it, I can live with it! My little buddy, grandson Everett, was not happy with the Cardinals game Saturday night… I told him that I too was upset that our Cardinals didn’t show better… The 80’s band, Madness, take us to the finish line today with their song: Our House… Good friend Rick will get a kick out that one, as he’s a kid of the 80’s! I hope you have a Marvelous Monday today, and please remember to Be Good To Yourself!

Chuck Butler