Rocktober 18, 2022
* currencies & metals gain a bit on Monday
* the dollar gets sold in the overnight markets two nights in a row…
Good Day… And a Tom Terrific Tuesday to you! Brrrr… it was cold here yesterday, and I braved it going out to my car with just short sleeves on… YIKES! It’s too darn early to be pulling the winter coat out of the closet… Congrats to the for winning their playoff series and moving onto play the Astros… I had a wonderful lunch yesterday with Dennis and Dean Miller, and Frank Trotter… We talked business, we talked about all sorts of things, and it was very much like the times that Frank & I used to spend together in the past… Our meeting yesterday, got me thinking, and much of today’s letter will reflect my thoughts on the future… But before then, Chicago greets me this morning with their song: Movin’ In…
Well, the dollar was sliding yesterday, and looked to be in trouble on the day, as the BBDXY was down 4 index points, Gold was up $15, and the world looked to be attempting to right things… But then the white knight showed up and bought dollars to bring the BBDXY back to flat on the day, and Gold only able to book at $4 gain… That white knight, had to be the Plunge Protection Team (PPT). The euro climbed above 99-cents yesterday while sterling gained on the day to end the day with a 1.13 handle. While the Japanese yen fell another point to trade at 149.00. The Swiss franc popped its head back above 1.00, but barely…
The Price of Oil traded Steady Eddie yesterday, and remained with a $85 handle to close the day. And the 10-year Treasury popped back above the 4.00% yield and ended the day there.
I say that the white knight came and saved the dollar yesterday, based on what I had read during the day about how Chinese banks are selling dollars and buying renminbi. Yes in reality it’s not that simple of a trade, but when you get down to the nit and gritty, it’s selling dollars and buying renminbi. The Chinese see this a killing two birds with one stone… They get to get rid of dollars, and prop up their currency, which had been quite week in recent times.
In the overnight markets last night… The dollar got sold, marking two consecutive overnight sessions where traders sold dollars… As I said yesterday morning, “it’ll be interesting to see if there’s any follow up in the U.S. markets”… The BBDXY lost 4 index points last night, and trades this morning at 1,3336… Gold is up $8 in the early trading today, and Silver is up 50-cents, so it appears that today will be a good day for the metals and currencies, but then we’ll have to keep an eye out for the White Knight, eh?
The price of Oil remains steady at $85, and the 10-year Treasury is keeping the 4% yield for now.. .In recent days, that 4% yield has been fleeting, and not steady… At a 4% 10-year yield, mortgage rates will be as high as 6%… I know that to some young folks, that sounds outrageous, but it’s more than ½ of what I paid in mortgage interest when I first bought a house in the 80’s! But then I wasn’t looking to buy a McMansion, just a little ranch in a river town…
Want to hear something really scary? There are talks going around that Saudi Arabia is in talks to join the BRICS nations that consists of countries that are known to be diversifying out of their dollar positions… Saudi Arabia has been playing with fire regarding selling their Oil for a currency other than dollars, and now this? I’m envisioning another Oil embargo that would bring the U.S. economy to its knees, long before the Fed Heads can with their rate hikes…
OK… here we go down a deep dark rabbit hole, folks… If you don’t want to come along, then please, just skip ahead to the data cupboard recap.. Ready? OK… the stupid CPI report last Thursday, got me thinking over the weekend, and then again yesterday, about how, instead of inflation backing off, it’s remaining strong… Even with the 8 Fed Head interest rate hikes that have been booked so far.. So, when you look at this logically, you come to a realization that the Fed Heads have a lot of work to do… Even if they hike rates 75 Basis Points at their next two meetings, they’ll still be far behind the inflation 8 ball… And we haven’t begun to feel the real pain of having higher interest rates…
Add to that, and you’ve got our ever expanding debt, which is now over $31 Trillion. And then the piece de resistance, the NGD… The New Green Deal, which will not only add to our debt, but will also put trillions of dollars out there to be spent, and thus creating more inflation… I don’t know about what you are thinking about reducing our dependence on fossil fuels… But how will you feel about having to walk everywhere in the future? We are a country of movers… We like to move from place to place, and we like to get there by car… now, don’t even get me started on electric cars… where do they get the power for electric cars? From the batteries, where do the batteries come from? Gotcha! We built our country to be a strong dependent country on the ability to extract Oil, and put it toward our industrial society…
I just don’t see how going to electric cars solve anything… Besides, why are we doing that? Because, supposedly that there is climate change… Well, hell yes, there’s climate change, there have been many phases of climate change in our Earth’s history… Some warming, some icy cold, but the climate is always changing… So, you’re not going to get me to go down that rabbit hole of needing to change to electric cars because of climate change… No sir, not buying it!
Of course, if someone absolutely feels the need to own an electric car, more power to them, that’s the beauty of living in a free country, making decisions without government interference… But that’s not the direction we’re heading… In California you won’t be able to buy a gas-powered car after 2030… That’s government interference… And that’s what we’re going to have to get used to going forward…
I truly believe that the U.S. will follow China eventually, and have a credit checking system for individuals… You should check that out on how it works in China, because someday…
Inflation is the main thing we need, as a country, to tame, we don’t want to let it get away from us, like Germany did in the 30’s, and like Zimbabwe did in the 2000’s… And Argentina has done several times in the past, and now Venezuela joins the list of countries with runaway inflation…
Ok, I’ve climbed back out of the rabbit hole, and will talk normally here on out today… I’ve got to settle down some though, and I have an idea on how to do that, add some levity to the letter… here goes…
On the thought of higher inflation, Dave Gonigam has this to say in his 5 Minute Forecast yesterday, “The cost of preventing your house from getting egged has gone up 13%,” says a snarky take at the Fark website.
With Halloween around the corner, the commenter is reacting to news that the cost of candy is up 13.1% year over year in the government’s aforementioned inflation report released last week.
That’s the biggest yearly jump in candy prices ever. “For comparison,” reports NPR, “it took nine years — from 1997–2006 — for candy prices to rise 13%.” Blame the current increase on a 17% jump in sugar prices.
“Costumes, too, may feel more expensive than usual,” NPR adds. “While the CPI report does not specifically track costumes, the price of clothing has jumped 5.5% since last year,” NPR adds. “Those crafty enough to make handmade costumes will feel the pinch even more: Sewing machines, fabric and supplies are up 11% since last September.”
There’s something perverse about do-it-yourself being more costly, no?” -Dave Gonigam, 5 Minute Forecast
Chuck again… That’s pretty clever, saying that to protect your house on Halloween, you need to give out candy, and candy will cost you 13% more this year, so that’s the price increase of the protection of your house, or… you can choose to get egged!
Hey, have you heard the news that 10 emoji’s have been cancelled by the Gen Z, cancel culture? No more thumbs up, or OK sign with your fingers… Haven’t these people cancelled enough already? Now they are going after emoji’s? Nothing is sacred with these people.. If you want the full list of emojis that going to be cancelled click this link: Gen Z has already cancelled the thumbs-up emoji. It’s not a fan of these 9 others (moneycontrol.com)
The U.S. Data Cupboard got off on the wrong foot for the week yesterday, when the Empire Region PMI (manufacturing index) came in a negative -9.1 following August’s negative -5.0… A negative number here is not a good thing folks, and doesn’t bode well for the national number due in a few weeks. Today’s Data Cupboard has Sept Capacity Utilization, and Industrial Production… Both should show the effects of higher interest rates on Corporations…
To recap… The dollar was getting sold yesterday, until a White Knight showed up to protect and save the dollar from falling more. Chuck believes the White Knight to be the PPT… China said that their banks were selling dollars and buying renminbi, thus killing two birds with one stone… Gold was up $15 at one point yesterday, but was only allowed to gain $4 on the day… The BBDXY was flat on the day after having been down 9 index points during the day.
For What It’s Worth… In keeping with my “down the rabbit hole” thoughts this morning, this came to me from long time reader, Bob, and it’s about a warning from the central bank in Finland, and he found it on www.nakedcapital.com
Or, here’s your snippet: “Finland, like its Scandinavian peers, is among the world’s most cashless economies. But according to the central banker, now is not a good time to give up on cash.
Households in Finland should make sure they have some cash on hand, just in case the country’s payments system were to go down, warns Paivi Heikkinen, the Head of the Payment Systems Department and Chief Cashier at the Bank of Finland. In an interview {1} with the national broadcaster MTV3 on Tuesday, Heikkinen said (machine translated) her intention was not to “fabricate catastrophic scenarios”. That was before saying that in the worst-case scenario, the payments system could go down for a period of weeks.
“I don’t want to paint devils on the wall”, she said, “but now we are talking about more serious disruption than what has been brought up in the past”.
Since applying to join Nato in July this year, Finland has allegedly been the target of a number of cyber attacks, including a Denial-of-Service (DoS) attack that targeted the Finnish Parliament on August 09 2022, temporarily disabling the organization’s website. Since then, the State has begun awarding grants {2} of up to 100,000 euros to companies, large and small to help them bolster their cyber security.
Although Finland has not yet joined Nato, its foreign minister Pekka Haavisto recently said {3} it would still receive help from its Nato partners in the event of a direct threat, even before full membership. Now, a senior official of that country’s central bank is warning of a possible cyber attack against the payments system that could disrupt the system for over a week and is urging people to have some cash savings at home just in case.
Not a Good Time to Give Up Cash
The irony is that Finland, like its Scandinavian peers, is among the world’s most cashless economies. According to {4} the Bank of Finland, it is on track to become completely cashless by 2030. A survey conducted last year by the central bank found that only 7% of people use cash when making purchases. Ninety percent of the survey’s respondents said they pay for their groceries with a card or mobile payment app.
However, Heikkinen says that now is not a good time to give up cash completely, given the rising risk of attacks against Finnish infrastructure, including its payments system”
Chuck again… I’ll just remind you of this… just because this is going on in another country, doesn’t mean it can’t go on here… I’m just saying…
Market Prices 10/18/2022: American Style: A$ .6315, kiwi .5694, C$ .7276, euro .9826, sterling 1.1300, Swiss 1.0003, European Style: rand 18.1056, krone 10.5306, SEK 11.1037, forint 420.10, zloty 4.8866, koruna 25.0163, RUB 61.97, yen 149.12, sing 1.4202, HKD 7.8495, INR 82.36, China 7.1993, peso 19.98, BRL 5.2693, BBDXY 1,336.64, Dollar Index 111.89, Oil $85.21, 10-year 4.00%, Silver $ 18.79, Platinum $923.00, Palladium $2,028.00, Copper $3.44, and Gold… $1,653.10
That’s it for today… What a great time at lunch yesterday, as it was great to see Dennis looking so goo, and eating again… I also got to meet his MIT grad, song, Dean, who is well spoken, and is probably the smartest guy in the room, at most times… The restaurant is one of my faves, and I ended up eating more for lunch than I had in a long time! The last time I met up with Dennis was in 2018, before he was diagnosed with throat cancer… And Frank Trotter? Well, Frank looks the same to me today as he did 15 years ago, and is still of sharp mind, which is good because he has decided to do an EverBank2… And this time do it even better! His new bank is called Battle Bank, and you can see what he’s up to at www.battlebank.com He received approval for the bank from the OCC last week, and now awaits the FDIC, with plans to open his virtual doors in February… I can’t wait for his virtual doors to open! Mitch Ryder and the Detroit Wheels take us to the finish line today with their rockin’ song: Devil With the Blue I Dress… I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!
Chuck Butler