February 9, 2022
* Currencies & metals rally on Tuesday & overnight
* One of the unintended consequences of QE… Chuck explains…
Good Day… And a Wonderful Wednesday to you! Well, I received an email from a reader yesterday, that had me stop and think… He told me to stop complaining about everything, and write the way I used to… So, I thought… Hmmm… I guess I could not tell people what’s going on in the real world, and tell everyone that everything is seashells and balloons… I don’t get it, when I used to be at EverBank people would write me and tell me to get serious… So, I guess there’s a happy medium somewhere… But for now, I’m not going to go looking for it. I like the way the letter goes these days, and until I get a reason to be happy about everything going on, I’ll keep on keepin’ on… One of my all-time fave bands are up this morning… I’m greeted this morning by Chicago, and their song: Beginnings…
Well, the day yesterday, started out not so good for the currencies and metals, but sometime around mid-morning, they turned the tables, and started to move into positive territory… The euro found a little upward movement, along with the Aussie dollar (A$), and the rest of the currencies followed… There was some slippage in the Russian ruble as the price of Oil slid further back to a $89 handle… The 10-year Treasury’s yield saw a rise to 1.95% yesterday, finally moving off of the 1.92/3% it was clinging to this week, after soaring to 1.93% last Friday. And don’t look now but the 30-year mortgage rate is nearing 4%…. That’s not going to be a good thing for housing, at least I don’t think it will…
Gold & Silver had good days yesterday, with Gold gaining $5.30 to close at $ 1,826.60. And Silver gained 17 -cents to close at $23.27 I’m liking what I’m seeing in the metals these days… Yes, they are still be manipulated, but… each time they get taken down, they bounce right back up and trade even higher than that did before they were taken down… At least that’s my view from the Cheap Seats on the recent trading of the metals…
Oh, and I’m not complaining here, just pointing out that Gold & Silver had greater gains at one point in the day, only to see those greater gains pared back…
In other news… poor Bitcoin, it has seen better times, for sure… Times when every country allowed the cryptocurrency to be traded… But these days, it’s like a waiting session to see which country will come next in the line of countries that have banned Bitcoin… Yesterday, it was Ireland, who is “highly unlikely” to allow investment funds aimed at mom and pop investors to hold crypto assets and is limiting retail investment funds’ exposure to special purpose acquisition companies.
On a sidebar… did I tell you that I’m going to Ireland this summer? That is as long as they let me in the country! HA! We will stay for a few days at the Butler House… Sounds pretty cool, eh? My wife and I will celebrate our 46th anniversary while in Ireland… that is as long as God is willing and the Creek don’t rise…
Some days I feel like my old self again, and then most days I feel like someone that has been on Chemo for 14.5 years! But I don’t complain about it, and attempt to make the most of every day, even on days where I feel like death warmed over!
In the overnight markets last night… The late rally by the dollar in yesterday’s trading, was reversed overnight, and the dollar got sold throughout the night. The BBDXY, which closed last night at 1,175.64, has dropped to 1,173.11 as we start today… Gold & Silver are flat to up a tiny bit to start the day today. The price of Oil has slipped further downward, and trades with an $88 handle this morning. I saw a report on Bloomberg.com this morning that said that “the bond selloff is over”… Hmmm… Things that make you scratch your head and wonder, eh?
I think that, going into the report on consumer inflation that will print tomorrow, that traders are getting leery of what that report will show, and have positioned themselves ahead of that print, by selling dollars… I guess we’ll know for sure if the dollar selling overnight continues this morning…
The first part of the Trade Deficit printed yesterday, for December, and I don’t want you to think I’m complaining about this, but in the last year the Trade Deficit has grown at the fastest rate in 4 decades… The full-year trade deficit for 2021 increased 27 percent to $859.1 billion, passing the previous record of $763.53 billion set in 2006. Commerce Department records go back to 1960.
I told you a couple of years ago that the trade war that was waged at that time with China would not help reduce the Trade Deficit… There were no governors placed on the Chinese at that time, and well… now we have this… Not complaining, just pointing out…
OK… in a follow up of what I call “The Great Resignation” I read yesterday that over 20 million people quit their jobs in the second half of 2021. And to make matters worse, the hours worked by those that are still toiling away at their jobs, fell below 2019 levels… So, there’s less workers and those that are working are working less…
I don’t know about you, but from where I sit, this situation with workers, is getting to be a real problem… I’m not complaining, just pointing out, that in other times, meaning non-inflationary, we could be seeing the Fed/ Cabal/ Cartel announcing more bond buying… Because… These people at the FOMC truly believe that a washing the economy with freshly printed dollars is the cure-all to what ails an economy…
There are problems with bond buying that have been identified, but not acted on… One of those problems come in the shape of corporate debt issuance/ bonds… Corporate Debt now makes up about half of the U.S. GDP, at $11 Trillion in outstand debt… To me, it would be one thing if these Corporations used the funding from the debt issuance to grow their businesses… But they didn’t, as a whole, they used the funding to buy back their stock, which is a sly way of gaining profits… This scenario or lack of a scenario has been quite evident in the Capital Goods Orders each month, as I have pointed out, when they print.
You have a Corporation that issues debt in the form of a bond, that pays .02% interest… They then take the funding from the bond sale, and buy back their stock, that has a dividend yield of 3%, they book a profit on that transaction… Now, all they have to worry about is at what level will interest rates be when they bond comes due, and they need to roll it into a new maturity, because they don’t have the funds to pay it off…..
So, now you know why Corporations were buying back their own stock… Well, that, and one other minor detail… And that is that their buying of their own stock, drives the price of the stock higher, and the CEO’s bonus is tied to the stock performance…
I have to get away from this discussion, otherwise I’m going to begin to complain about all of these goings on!
Yesterday’s U.S. Data Cupboard had the Small Business Index for January, and it showed a fall from 98.9 to 97.1… Still too high as far as I think it should be, but not complaining about it, just pointing it out.. In addition, yesterday’s Data Cupboard yielded the December report on Consumer Credit (read debt)… This from Zerohedge.com “One month after a shocking consumer credit report, which saw the biggest increase in history driven by a mind-blowing surge in revolving credit (i.e., credit card usage), moments ago the Fed released the latest consumer credit report for the month of December which saw a dramatic drop in growth rate, with total credit rising just $18.9BN, well below the consensus estimate of $25 billion, and a 50% plunge from the November increase of $38.8 billion.”
Chuck again, so while that’s good news for Consumers to cut their debt, but it’s not a good thing for the economy, and economy that depends heavily on Consumer spending…
We still don’t have much in the way of real economic data getting printed today, but as I told you on Monday, tomorrow’s data cupboard will have the stupid CPI (consumer inflation) … And once it prints, I’ll be heading over the shadowstats.com to see what the REAL inflation number is!
To recap… The currencies & metals turned the tables yesterday, and around mid-morning they began to rally VS the dollar. Gold gained $5 and Silver earned 17-cents on the day. Chuck likes what the metals are building in recent trading. The Great Resignation is in full swing, and folks are working less too… And the price of Oil has slipped further from its recent high of $93 a few days ago. Chuck explains why there is so much Corporate Debt, and what it’s being used for.
For What It’s Worth… Ok, I know you get tired of hearing from me about the price manipulators and thought it would be best if I let you hear someone else, and this isn’t just someone else, it’s the Silver guru, Ted Butler (no relation that I know of) and his thoughts on the price action of last week, when Gold & Silver got whacked. And it can be found here: Pure Collusion | SilverSeek
Or, here’s your snippet: “The most recent Commitments of Traders (COT) report, for positions held as of Tuesday Feb 1, indicated, even more than expected, massive managed money selling and commercial (bank) buying in COMEX gold and silver futures. So, once again, as on every big price decline for decades, the banks were big buyers, while the managed money traders were big sellers. In the near 40 years I have followed these markets closely, there has never been an exception to this pattern – on big price downdrafts, the banks on the COMEX are always big buyers.
No doubt, the level of commercial buying on the recent plunge in gold and silver prices should provide the basis for a significant rally, also as usual, but I’d like to stop and have you reflect on this in a different manner. There is a reason why the banks always end up as big buyers on every gold and silver price smash and that reason is that they collude with each other. In fact, there is no possible alternative explanation.
Take this most recent COT report for example. Within the course of 5 trading days and in which gold prices plunged more than $70 and silver plunged more than $1.70, the roughly 70 reporting commercial traders in each market (largely the same banks) bought close to 50,000 net contracts of gold (5 million oz.) and more than 12,000 net silver contracts (62 million oz.).
The first thing that you should be asking yourself is how the heck could 70 different commercial traders managed to buy (covering shorts and adding longs) on such an extreme selloff – such as, are they just lucky or is God on their side? No, God is not on the banks’ side, nor are they simply lucky – it’s something else entirely. The 70-odd gold and silver commercial traders on the COMEX colluded among themselves to make sure they stuck together and refused to pay up to buy the 50,000 gold and more than 12,000 silver contracts and let the sellers come to them. Try coming up with another explanation.”
Chuck Again… You know that’s an approach I should take more often, and that is to say “Try coming up with another explanation” … I wish I would have had that in my back pocket, every time I got called out at EverBank for talking about price manipulation!
Market Prices 2/9/2022: American Style: A$ .7184, kiwi .6693, C$ .7885, euro 1.1440, sterling 1.3585, Swiss $1.0836, European Style: rand 15.3074, krone 8.7964, SEK 9.0980, forint 308.39, zloty 3.9508, koruna 21.2313, RUB 74.73, yen 115.73, sing 1.3420, HKD 7.7920, INR 74.75, China 6.3635, peso 20.53, BRL 5.2412, BBDXY 1,173.11, Dollar Index 95.44, Oil $88.93, 10-year 1.92%, Silver $23.34, Platinum $1,049.00, Palladium $2,355.00, Copper $4.46, and Gold… $1,828.40
That’s it for today… Well the northern east Coast is getting pummeled again with a cold front and snow, and we get the tail end of the cold air… The Sun didn’t make an appearance yesterday, and that coupled with the cooler air, made of a day that I stayed inside all day… My Billikens won their basketball game at LaSalle last night. They were on ESPN+, so I couldn’t watch the game. But I was able to watch my beloved Mizzou Tigers lose to Vanderbilt, UGH!… Well, guys, you have less than a week to secure your VD gift… The Greatest Super Bowl Commercials were aired last night on TV, and the Budweiser reunion commercial won the best of all time! I love those SB commercials! I get to go to dinner tonight with some friends, instead of ordering my dinner to be delivered! Well, it appears now that Spring Training is going to be delayed, and probably shortened when they do get around to getting together to save the game… Now THAT I AM COMPLAINING ABOUT, and well I should be! The owners and players are ruining my game! Poco takes us to the finish line today with their song: Just For You And Me… I hope you have a Wonderful Wednesday today, and Please Be Good To Yourself! Be Positive, Test Negative!
Chuck Butler