September 1, 2020
* Currencies & Metals both rally on Monday…
* Chuck’s thoughts on The Fed’s Inflation averaging…
Good Day… And a Tom Terrific Tuesday to you! A real downer day here yesterday with clouds and rain, but by dinner time the sun was out, and it was a nice evening…. I wasn’t feeling up to sitting outside to watch the game last night, as my stomach was questioning the gumbo I ate for dinner…. But I got through it unscathed and was able to watch the whole game that the Cardinals won…. A dear reader sent me a note yesterday, and said that I failed to mention the 3-2-8 double play the Cardinals pulled off this past weekend…. Now that combination doesn’t happen every day folks! The Eagles greet me this morning with their big song: Desperado…. Why don’t you come to your senses, come down from your fences, oh renegade….
After last Friday’s Valentine’s Day Massacre for the dollar, it regained its footing, and held ground for the most part on Monday…. The euro inched higher in the 1.19 handle, and the A$ moved upward toward the 74-cent handle…. Gold gained $3 in the morning, and held it the rest of the day, to close at $1,968.40… And Silver at $28.24…. So, all-in-all not a bad day for the currencies and metals, and in the end it’s really the kind days you would like to see take place on a daily basis…. Not too strong, not too weak, just right…. The Baby Bear would love days like yesterday….
In the overnight markets…. The currencies haven’t moved much, but…. but the metals have pushed higher once again with Gold gaining $23 and is up to $1,991 this morning, and Silver has added 70-cents to bring it to $28.94… We’ll have to see how that sits with the price manipulators today… Speaking of the price manipulators, don’t you wish they would go away… They don’t have to go away mad, just go away…..
Speaking of the aforementioned Gold…. I was sitting in my recliner, having finished my book, Sirens ot Titan, and thinking about the Fed’s new “hard 2% Average Inflation Target” And do you know what I came up with? That since they announced that they are going to average 2% inflation and as we all know their version of “inflation” hasn’t been to 2% for some time, so if they are really going to average the inflation target, then they’re going to HAVE to allow inflation to run above 2%, to achieve their goal…. Hey! They said it, they were the ones that put the “average inflation target at 2%” in stone, and now comes the difficult part…. How to get their version of inflation rising….
Well… if they would simply ask me, I would tell them they their inflation measures aren’t worth the paper they’re printed on, and to go back to computing inflation like they did before the 90’s and the Clinton Administration, who along with Big Al Greenspan worked on a way to get inflation down, so that interest rates could be lowered, and housing could become more affordable to the masses….
I’ve told you all this before… But Clinton put the onus on Greenspan to come up with a plan to lower inflation… Greenspan hired the Boston Commission, who came up with hedonic adjustments to the inflation calculator, and voila! Inflation was lower, and so were interest rates…. The biggest change was to allow substitutions for the items in the basket that were used previously , when their prices got too high…. For instance, if steak got too expensive, they would say that mom’s would substitute hamburger, so that’s what they did, they substituted by taking steak out of the basket of goods, and adding hamburger…. And so on through the years…. They took out housing and substituted rents, they played these games with the Inflation Calculator… So, if they want to figure out to get inflation going again, calculate it like it was pre 1995….
John Williams at Shadowstats.com does a fantastic job of calculating inflation the way it was calculated Pre 1995… Right now, he’s showing that CPI (consumer inflation) is above 4%…. While the CPI that is hedonically adjusted is just .3%…. And don’t forget what I showed you a couple of months ago where the Chapwood Index…. They show the real price increases in goods & services for the top 50 cities, and just for the top 10 their 2020 inflation average is 10.8%….
So, which one feels like the one you live with? .3%, or 4%, or 10.8%? As I’ve ALWAYS said, “inflation is a personal thing and will be different among people, but the overall feel will be the same…. For example, I spend currency on baseball tickets, there are those of you who wouldn’t think of spending currency on a ball game, so when baseball tickets keep going up, I feel that inflation and you don’t!
OK, so… in my opinion, of which I could be wrong, but, we’ll have to see about that! I think that The Fed’s statement last Thursday should have opened the door for Gold & Silver to push higher without speed bumps…. Man I guess I could have just said that instead of spending all morning talking about inflation calculators!
Of course, the decision to allow housing to be more affordable to the masses, was the root cause of the 2008 financial meltdown…. Think about that for a minute, and then you’ll say, “May, he’s right, I should have never questioned him”! HAHAHAHA!
To believe or not to believe that’s the question that keeps nagging at me, and I’m not talking about religion, I’m talking about the Gov’t’s data prints…. I just don’t see how anyone could trade with 100% surety that the numbers that just printed were real, true representations of the economy…. I’m just saying…
Well, I told you the other day about the Iron Ore prices that were rising, which was because of the nascent recovery in China, which was also responsible for the rise in the Aussie dollar (A$) , for it’s the Aussies that supply the majority of those raw materials to China…. Well, just so you have an idea of the rise…. Yesterday, Iron ore prices surged above $125 per ton for the first time since February of 2014. Just for grins, I went to 10-year chart for the A$, and in August 2014, the last time iron ore prices were above 125, the A$ was 92-cents…. Hmmmm…..
And longtime reader, Bob, sent me a link to an article about the Russian economy, and how it was not going to drop as much as first believed due to the short-term economic shutdown for the COVID-19 virus…. And that got me thinking of just what the heck currency traders want to see from Russia to get the ruble on the rally tracks?
The U.S. Data Cupboard needed a breather yesterday after the Data Deluge late last week, and so today’s Data Cupboard gets back to printing data releases such as, the ISM (Manufacturing Index) for July, which to tell you the truth, I was absolutely shocked In June when this Index went from the sub 50 number to one that was above 50…. Remember 50 is the line in the sand that decides expansion (over 50) and contraction (under 50) And the July print is expected to rise even higher than June’s 54.2%….
Later this week, on Friday, that is, it will be a Jobs Jamboree Friday, of which I decided after watching the BLS destroy accounting for the Unemployment rate for the last time, last month, that I’m not paying attention to it any longer…. Oh, sure I’ll report on it, but I’m not going to allow the BLS to get under my skin any longer…. It is what it is… and that’s that!
We’ll also see Construction spending for July today…. June’s print was a negative -.7%…. With all that’s going on I would expect this data to have risen in July… but by how much will decided by the powers that be…
And in my never ending attempt to show that the economy is not recovering… This word from Zerohedge.com that J.C. Penney, who filed for bankruptcy previously, is most likely headed to liquidation, which would cost 70,000 jobs….
To recap…. Currencies and metals both had “just right” or a baby bears day yesterday, which is just fine with Chuck, who would rather see Traders take their time with these asset classes, but having said that, Gold is up $23 this morning, and Silver is up 70-cents! Chuck goes through a long and tedious explanation of how the CPI data gets manipulated, massaged and cooked each month…. And JCP looks like it’s headed to liquidation….
For What It’s Worth…. Well, I think that this article’s gist is the reason why Gold is soaring this morning…. This is an article about China and India rattling sabers again, and it can be found here: https://www.zerohedge.com/geopolitical/fresh-tensions-erupt-along-sino-indian-border-causing-financial-tremors
Or, here’s your snippet: “Fresh clashes between Indian and Chinese troops were reported along the heavily contested Himalayan border this past weekend.
India’s Defense Ministry accused Chinese troops of “provocative military movements” late on Saturday night. Here’s the Indian Army’s full statement of their account of what happened:
“On the Night of 29/30 August 2020, PLA troops violated the previous consensus arrived at during military and diplomatic engagements during the ongoing standoff in Eastern Ladakh and carried out provocative military movements to change the status quo.
Indian troops pre-empted this PLA activity on the Southern Bank of Pangong Tso Lake, undertook measures to strengthen our positions and thwart Chinese intentions to unilaterally change facts on the ground. The Indian Army is committed to maintaining peace and tranquility through dialogue but is also equally determined to protect its territorial integrity. A Brigade Commander level Flag Meeting is in progress at Chushul to resolve the issues.”
The latest skirmish between both sides took place in the Southern bank of the Pangong Tso, a glacial lake at 14,000 feet elevation along the Line of Actual Control, a 2,162-mile Sino-Indian border. Both countries have moved troops, tanks, artillery guns, helicopters, fighter jets, and other reinforcements as hostilities continue into the fifth month this week.
As for the actual skirmish, Asian News International (ANI), an Indian news agency in New Delhi, reported that Indian sources said Chinese troops tried to ‘infringe‘ on Indian land using a ‘sizeable number of troops‘ but Indian forces were able to thwart the move. The number of casualties or captured troops has yet to be reported by either country.
Indian forces told ANI that Chinese stealth aircraft (Chengdu J-20) have been patrolling the Sino-Indian border as tensions continue to increase.
Indian Congress chief spokesperson Randeep Surjewala tweeted: “Our armed forces are standing fearlessly to protect Mother India. But, when will Modi ji show his red eyes.”
Chuck again…. this could end up being a big deal folks… but one has to weigh it against the fact that these two nations have had several skirmishes through the years over border lines…. I guess we’ll have to wait-n-see with this one, eh?
Market prices 9/1/20: American Style: A$ .7385, kiwi .6767, C$ .7688, euro 1.1992, sterling 1.3475, Swiss $1.1046, European Style: rand 16.6534, krone 8.7080, SEK 8.6421, forint 295.33, zloty 3. 6618, koruna 21.8621, RUB 74.02, yen 105.83, sing 1.3575, HKD 7.7498, INR 72.85, China 6.8491, peso 21.76, BRL 5.4311, Dollar Index 91.81, Oil $43.12, 10-year .72%, Silver $28.94, Platinum $961.00, Palladium $2,327.00, and Gold… $1,991.90
That’s it for today…. A little shorter this morning, and for that you can thank my shaky stomach last night…. UGH! I just didn’t read that much… Well, I have something for you to look forward to…. I do believe that next week, good friend, Dennis Miller (www.milleronthemoney.com) is going to print an interview he did with me…. I don’t hold back any punches with answers to his questions, so you’ll want to be sure you’re already on the list of subscribers before the letter comes out, and you can do that by going to the web address above, and remember… It’s Free! Looks like another dud day outside right now, UGH! Aliota Haynes and Jeremiah takes us to the finish line today with their rock classic song: Lake Shore Drive…. I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!
Chuck Butler