June 20th, 2023
* the dollar gets bought in the overnight markets
* The Fed Heads look backward to decide what to do in the future?
Good Day… And a Tom Terrific Tuesday to you! 3 in a row! WOW! Well, my beloved Cardinals, are proving that they are not dead yet, after coming behind from a 5-run deficit yesterday to win in Washington, thus marking a very modest 3-game winning streak! I was beginning to wonder why I was watching the game, after we fell behind 0-5… But good friend, Duane, was watching with me, and we decided that the Cardinals would come back in the game, and they did! Little Evie spent the night with us last night, which meant… The three of us watched Cinderella, the movie from probably the 50’s! Pretty hokey, if you ask me, but little Evie loved it! Bob Marley and the Whalers, greet me this morning with their song: 3 Little Birds…
Well, on a day that it was realized that the U.S. had gone over $32 Trillion in current debt, the dollar held onto its overnight gains and then puttered throughout the rest of the day. The U.S. Gov’t has already added $572 Billion in debt since the debt escalator agreement was signed… I do believe that I told you that would happen, that the debt would soar after the agreement was signed, because all those bills had been put on the back burner, until they were ready to be paid… Not ready to be paid like your bills and my bills… because if we don’t have the balance in our accounts to cover the bill, they are NOT read to be paid… The U.S. Gov’t just has to go into debt further, have the Treasury issue some more bonds, and the Fed Heads to print the money… It’s so darn easy, when you think about it, no wonder lawmakers always choose to print more money instead of cutting deficit spending…
So… the dollar ended yesterday with the BBDXY at 1,224… The same level it stood at the start of the day, after the overnight markets had given it a lift. Gold fought back, but still ended the day down $7.40, and Silver ended the day down 27-cents… Gold’s closing price was $1,951.80, and Silver’s was $24.02… Just the idea that the U.S. debt jumped by $572 Billion in the last 10 days, should have been enough for the dollar bugs to choke on… But they swallowed the debt amount without a problem, and we move along… Onward and upward to $40 Trillion, that will come around in 4 short years…
The price of Oil slipped a bit yesterday, and trades this morning with a $70 handle… And the 10-year’s yield, rose to 3.80%… It seems here lately, that every time the 10-year’s yield climbs to 3.80%, it gets chopped back down, and has to start all over again to climb back to 3.80%… See, what manipulation will do for a market? Make it look volatile, when in its purest form it is not volatile!
In the overnight markets last night… the overseas market seem to like dollars right now, and that is confusing, because for the most part the major countries overseas are being kind to dollars these days… Oh well, it is what it is… The BBDXY gained 2 index points overnight, and Gold is starting the day in the red by $2, while Silver has lost 32-cents to start the day. I don’t see this pattern of no movement in the U.S. but buying of the dollar overnight, continuing too long, for it just doesn’t make sense to me… But then there’s not much going on in the manipulated markets that does make sense to me these days, but I carry on despite my shortcomings… I would add a HAHAHAHAHA at the end of that, but it’s really not that funny, OK, maybe a bit funny…
The price of Oil bumped back to a $71 handle overnight, and the 10-year is getting bought as we start the day as the yield has dropped to 3.78%… I would have thought that the price of Oil would received a larger bump upward after the Chinese announced stimulus… Maybe it’s still on the way… Remember, school’s out for the summer, school’s out forever, no more, wait! Chuck you weren’t supposed to sing the Alice Cooper song, but were supposed to instead, talk about the the beginnng of the summer driving season… And how oil usually sees some price increases as families pack up the station wagon, no wait, they dont’ drive those any longer, instead it’s Large SUV’s, and head West, North, South, or East depending on their destinations…
Well, last week, I told you about how China was planning on raiding their treasury chest of reserves, and provide a stimulus package to their economy… The renminbi did see some upward movement after the stimulus announcement, but the moves in renminbi are so small, they are almost unnoticeable!
I read an article yesterday that talked about how the Aussie dollar (A$) has benefitted from the Chinese stimulus announcement more than the renminbi… The writer reasoned, and rightly so in my opinion, that because of all the trade (imports and exports) with China, that the benefit will be to the A$… You wouldn’t know that the A$ was receiving a benefit yesterday, when it lost about 1/2-cent…
The euro, which last week, climbed above 1.08 and then 1.09 in the same week, as taken a pause for the cause, but still remains above 1.09… But it has lost its momentum that late last week, had the euro looking like it would take out 1.10 soon… The thing is while some of the gains last week came about from the ECB’s rate hike, the rest of the gains came from dollar weakness… I’ve explained this before, so here we go… The euro is the offset currency to the dollar, so whenever the dollar is getting sold, it show up in euro strength…
I told you all a couple of years ago, that fundamentals were thrown out the window, and trader sentiment had taken over, and those traders are all dollar-centric… To them, everything is based on the dollar, so if the dollar is to be stronger, no fundamentals overseas is going to stop the foreign currency from getting sold… And that’s why I concentrate on what’s going on in the U.S. as it dictates how the rest of the word responds…
I don’t know if you’ve been following the Mexican peso in the currency roundup or not, but yesterday when the peso hit 17.09, it hit a level against the dollar that hadn’t been seen in 22 years! That would be 2001, when Hanging By A Moment, by Lifehouse was the #1 song for the year… Now I don’t know about you, but to me that seems a very long time ago, because even I don’t recall that song!
But what I do recall about 2001, was that we, EverBank, were in our 2nd location off of Hwy 270, and I loved that office! Better than our 3rd and final location… by a long shot! Any old way, it was 22 years ago, and the Mexican peso is finally back to that level! And rightly so, given their interest rate environment, and finally providing investors what I call a “risk premium”…
The euro wannabes, the Polish zloty, Hungarian forint, and Czech koruna, have been stealth-like but have been gaining against the dollar again, and whenever I see that, I let you know that the dollar is on the tenterhooks again…
I’ve been chronicling how Corporate bankruptcies are piling up so far this year, and we’re only 1/2 the way through the year… Companies that took on billions of debt at 3% interest now have to refinance at 7%. And they can’t print money. The bankruptcies will clean out all the excesses and allow those that remain to come back stronger and reorganized, and hopefully aware of the mistake they made that put them in the precarious position…
And for new corporations… the pickin’s look very slim that they’ll get an VC money to help them start… Venture Capital has imploded over the last 18 months. Last week, the Wall Street Journal released a distressing analysis. They’ve found many startups are now unable to secure the funding they need.
The U.S. is a hurting bird, with two broken wings… And too much debt has been the cause of the bird’s problems, and will continue to be a problem going forward, until… Well, that’s a discussion for another day…
The U.S. Data Cupboard remains lacking today, after having nothing for us yesterday. Today we’ll see some housing data, and that’s it… Tomorrow and Thursday, Jerome Powell will talk to lawmakers, and probably bring his bag-o-lies with him… And then finally we’ll see some real economic data on Thursday, when the Leading Indicators for May will print…
You know something that’s stuck in my craw since last week’s “skip” rate hike announcement? That the Fed Heads made a big deal out of saying that they needed to monitor the data… Why does that statement bother you so much, Chuck? Well, isn’t all data looking backward? So, the Fed admitted, but were not called on it, that they are stuck in the past, and trying to make interest rate calls for the future…. That’s what!
To recap… The dollar gained in the Sunday night overnight markets and then petered out throughout Monday, not gaining any more, or losing any either… The U.S. Fed Heads are looking backward to make a forward call… Now tell me if that’s not just a bit strange? Gold & Silver got sold yesterday, and didn’t fare too well in the overnight markets last night either… The A$ is receiving benefits from the Chinese Stimulus… And Chuck points out that the euro wannabes, are being stealth-like with their recent moves against the dollar.
For What It’s Worth… Good friend, Dennis Miller, sent me a link to this article, that talks about how we reached the $32 Trillion without fanfare, but now the catch up with Treasury Issuance is getting played, just like I told you it would, and it can be found here:”US National Debt Hits $32 Trillion, up $572 billion since Debt Ceiling Suspended. TGA Starts Refilling, Drains Liquidity from Markets | Wolf Street
Or, here’s your snippet: “Debt doesn’t matter. Until it does. And now it does — in several ways, including interest on the debt, and fuel for inflation. Interest rates have come up because inflation started to rage in early 2021, and all this fiscal stimulus from deficit-spending is throwing fuel on the inflation fire, and so “core” inflation – inflation minus food, whose prices have ticked down, and energy whose prices have plunged – has been stubbornly stuck in the 5% range annualized for seven months, driven by inflation in services:
The US national debt comes in two types of Treasury securities, “nonmarketable” (cannot be traded in the bond market) and marketable (can be traded in the bond market).
“Nonmarketable” Treasury securities include the “I bonds” that Americans can buy – they pay a base rate plus a rate based on CPI. The Treasuries securities held by government pension funds, the Social Security Trust Fund, etc. are nonmarketable. These nonmarketable Treasury securities jumped by $96 billion since the debt ceiling was suspended, to $6.86 trillion.
“Marketable” Treasury securities spiked by $476 billion since the debt ceiling was suspended, to $25.2 trillion. These are the securities that the government sells via auctions to the public.
The Treasury Department is now selling a flood of Treasury securities to replenish its checking account that had been drawn down to near-nothing during the debt-ceiling standoff. These securities include a large amount of Treasury bills (with a maturity date in one year or less), short-term Cash Management bills (at the last CMB auction on June 13, it sold $45 billion in 42-day CMBs), and longer-term notes and bonds, including TIPS.
The Treasury General Account at the New York Fed, which is the government’s checking account, had fallen to a closing balance of $23 billion just before the debt ceiling was suspended – a hair-thin cushion, given the huge amounts that flow daily through this account. The default-day would have been sometime in early June. In this respect, this 2023 debt ceiling farce mirrored prior debt ceiling farces.
What flows into the TGA are tax receipts and the proceeds from selling Treasury securities. June 15 was also the deadline for quarter estimated taxes that corporations and self-employed have to pay. So there was a surge in the balance of the TGA.
Since the debt ceiling was suspended, the TGA has jumped by $227 billion – including the June 15 tax receipts – to a balance of $250 billion. But the tax receipts are going to get spent promptly, as they do every quarter.
Last year, the June 15 tax payments caused the TGA balance to jump by $140 billion. And a month later, the balance was down by $200 billion. Deficit spending will see to it that tax receipts are outspent at a very fast clip.”
Chuck again… Deficit spending will be the death of our economy sooner or later… And like the article says, “debt is not a problem, until it is”… and then It’s too late, baby now it’s too late… (Carol King)
Market prices 6/20/2023: American Style: A$ .6784, kiwi .6172, C$ .7557, euro 1.0920, sterling 1.2748, Swiss $1.1137, European Style: rand 18.2865, krone 10.7321, SEK 10.7838, forint 341.68, zloty 4.0711, koruna 21.7639, RUB 84.24, yen 141.50, sing 1.3441, HKD 7.8258, INR 82.11, China 7.1762, peso 17.11, BRL 4.7785, BBDXY 1,226.17, Dollar Index 102.48, Oil $71.05, 10-year 3.78%, Silver $23.72, Platinum $966.00, Palladium $1,405.00. Copper $3.90, and Gold… $1,949.00
That’s it for today… Well, 2 asked, and 2 no gos, for attending tomorrow night’s soccer game with me… The last game I went to, I went by myself… so I guess if it comes down to that! Cardinals play in Washington D.C. again tonight, and then a day game tomorrow on get-away-day… Little Evie is 3, and sometimes a little too much for even me, but most times, she’s fun to be around, because you never know what she’ll say next! She was in the pool for most of the late day and early evening… We had two girls over on Sunday, and one of them was going into 3rd grade… I said to her, “Stella, come sit here and tell me about yourself”… She then proceeded to talk my ear off for the next 30 minutes! Finally, she said, Umm, and I said, did you finally reach an end? And she said she had! I thought to myself, that’s what I get for getting a girl to talk to me! HA! Ok… Chiliwac takes us to the finish line today with their great song: Fly By Night…. I hope you have a Tom Terrific Tuesday today, and will not forget to Be Good To Yourself!
Chuck Butler