- Currencies rally on Friday, and in the overnight markets last night…
- Heard of the Sahm Rule? Well, you will now!
Good Day… And a Marvelous Monday to you! Well, the temps backed off from their searing high levels this past weekend here in the MidWest… I had told my water hole buddies that it had been hotter here, than in S. Florida… Things sure were hot in Chicago this past weekend for the Cardinals’ rival Cubs, as they took 3 of 4 games from the Cardinals, and quite frankly should have swept, my beloved team… I’m still not 100% recovered from my episode in the ER two weeks ago… They had to give me 3 units (bags) of blood, and even still my blood level was just barely above the minimum level… I get so darn tired so easily… But, I am getting stronger every day, so there’s that! Steely Dan greets me this morning with their song: Don’t Take Me Alive…
Well, the BIG NEWS from last Friday, was the Jobs Jamboree… Which actually fell in line with the ADP Employment Report, which you may recall printed at 122,000 jobs created in July… The BLS came in with a print of 114,000 jobs created in July, and for once in a Blue Moon, the two reports lined up. But here’s the BIG Difference… The BLS had to add 246,000 jobs out of thin air to get to 114,000… So, the way Chuck looks at jobs in the U.S., July had a negative 360,000 jobs for the month… The Unemployment Rate rose to 4.3%, and had economists all running for the hills, as they now claim that the U.S. economy is heading to a recession… Well, in my opinion, bring it on! It’s about time we had a cleaning out of the excesses!
So, the dollar got taken to the woodshed on Friday… First of all, on Wednesday last week we saw a weakening of the dollar, as it lost 9 index point in the BBDXY, but then on Thursday, the dollar rebounded a bit, gaining 4 index points… But after the Jobs Report printed, the dollar got sent directly to the woodshed, and was not a allowed to pass Go or collect $200… The BBDXY showed a loss of 9 index points on Friday, as it ended the week at 1,249…
I’ll point this out again, because it’s important to remember the beginnings of a trend… The BBDXY on July 2nd, just a month ago, was 1,271… So, that’s 21 index points during the last 30 days… Time for the PPT to come out with both guns blazing, and buy dollars, don’t you think? I say that because every darn time the dollar has been perched on the edge of the cliff, the PPT comes in and buys dollars, and all the momentum that was in the currencies and metals favor is washed away… I’ve always contended that the PPT’s (Exchange Stabilization Fund) didn’t have a bottomless pit, and that the funds would dry up sooner or later… Maybe, just maybe, cause you never know, this is the time that the ESF has dried up…
Gold & Sliver had and interesting day on Friday… Here’s Ed Steer with his view on what happened with Gold & Siver on Friday: “It was more than obvious that the collusive commercial shorts knew what the non-farm payroll number was in advance — and they were on the precious metals in Globex trading overseas even before the number came out at 8:30 a.m. in New York.
It was full-on battle stations for them once that number hit the street — and even then, with the DXY in the dumpster, they were having problems. But, regardless of that, they really put the hammer down at 10:25 a.m. — and through sheer brute force [as the volumes indicated] did whatever it took to prevent those running from all things paper, into all things precious metal.
But both gold and silver came roaring back after their engineered 11:15 a.m. EDT low ticks were in — and it was patently obvious that ‘da boyz’ had to step in on more than one occasion after that to prevent both from running away to the upside once again.”
Chuck again… Ed always has his finger on the pulse of who he calls “da boyz”… and their antics… You can find Ed here: www.edsteergoldsilver.com
You know me, I don’t like starting the letter with a data print, but Friday’s Jobs Jamboree had such an affect on the markets, that I had no other choice today… Stocks got taken to the woodshed too, and that was strange given that the jobs report just about sealed the idea that the Fed Heads will cut rates at their next meeting in Sept. The idea behind the selloff in stocks was the U.S. economy is heading to a recession… And historically, stocks do not perform well in a recession…
The price of Oil had a rotten two-day performance… When I left you on Thursday morning, the price of Oil had a $78 handle… Well, apparently, the lack of demand for Oil, is weighing heavily on Texas Tea, Black Gold… On Thursday Oil lost $2 and on Friday it lost $3, to end the week trading with a $73 handle… The war risks are being outweighed right now with the lack of demand… I find that to be quite interesting…
And the 10-year’s yield is still being marked downward, with all the buying of the 10-year, in anticipation of a rate cut, the yield on the 10-year ended the week at 3.79%… It wasn’t that long ago that the 10-year’s yield was around 4.60%… So, that’s quite a drop in the yield, and rise in the price of the bond.
In the overnight markets last night… Well, the short paper traders came out the wallboard where they reside, and scattered around the kitchen floor, with their arms full of short paper trades already this morning, and gold has lost $75 to start the day / week today… Silver is down $1.95 to start the day/ week, and the dollar is getting trampled on otherwise Gold’s loss would be around $91 this morning… The Dollar Index has fallen to 102 handle, and the BBDXY is down big this morning… The euro, the offset to the dollar, continues to climb in the 1.09 handle, and the Swiss franc is kicking tail and taking names later, as a flight to save havens is soaring… I couldn’t believe my eye, this morning when I wrote down the franc price (1.18), and then the Japanese yen (142), thus confirming my suspicion that safe haven buying is going on… The trap door has been sprung on the Aussie dollar (A$), and my friend, Bob, that lives down under, tells me that traders have gone sour on the A$… And it shows!
The poor Norwegian krone, getting yanked one direction and then another… Early last week the krone was receiving the double whammy, with no jokers, from the rising euro and the stronger price of Oil… The krone had rallied from above 11 to a 10 handle… But then the price of Oil fell out of bed, and there went one of the props for the krone, and it’s back to above 11 this morning…
And what’s going on with the honker and renminbi? These two currencies showed that they rallied BIG TIME overnight, and I can’t find anything on the reason… So, more on these two tomorrow!
Speaking of Oil… The price of Oil remained trading with a $72 handle last night… And the 10-year’s yield continued to drop as it trades this morning with a 3 .67% yield… I get it, the Fed Heads have a 1005 change of cutting rates at their next meeting, and so bond buyers are just getting out ahead of the Fed heads… But by this much? What happens if, like I described previously, if the Fed Heads cut rates and inflation comes back with a vengeance, like it did to Fed Chairman, Volcker back in the early 80’s… Yes, after hiking rates to 20%, and inflation started to abate, Volcker cut rates too soon, and when inflation proved it was sticky, and came back strong, he had to reverse is rate cut and hike rates again… The bonds were whipsawed, and early buyers of bonds got their rear ends handed to them… I’m just saying… What if?
Well, last week there were 3 Central Bank meetings, and 2 of them were done by Thursday… And then on Thursday, the Bank of England met, and decided to cut rates 25 Basis Points (1/4%) to 5.00%… The Pound sterling got taken to the woodshed on Thursday following the rate announcement, but fought back on Friday to end the week at 1.28… Of course, just about every currency on the market rallied on Friday, with the dollar getting taken to the woodshed… I mean, just look at the Japanese yen… The yen ended the week trading 146.50, you’ve come a long way baby, from where you were a month ago!
The euro is back above 1.09, and the Eurozone received some inflation news last week that will most likely keep rates unchanged here… Inflation was 2.6% higher than the previous month, and once again it proves my point that inflation is sticky…
Circling back to the BOE’s rate cut… In my mind, that about seals the deal on the Fed Heads cutting rates in Sept, because the two Central Banks like to work in harmony… I’m just saying…
So, what we have now is recession fears greater than ever, a forthcoming rate cut, and Gold ready to take advantage of both… Got Gold?
And have you heard about the Sahm Rule? Well, the U.S. economy triggered the Sahm Rule that predicts a recession… here’s the skinny on the Sahm Rule: the Sahm rule signals a recession when the three-month moving average of the national unemployment rate rises by 0.5 percentage points or more, relative to its low during the previous 12 months. The Sahm rule is not a forecast, nor does it trigger before there’s a recession. The with the Unemployment rates rising, and that triggered a move in the current rate of the Sahm Rule… The current Sahm Rule reading is 0.53%, according to Fed data, having surged from 0.43%… And that .53% is the Sahm Rue going into its recession warning mode…
The U.S. Data Cupboard last week didn’t leave anyone feeling warm and fuzzy… U.S. Factory Orders plunged 3.3% MoM in June (the biggest MoM drop since COVID lock-downs), dragging orders down 3.6% YoY (also the worst since COVID lock-downs)… And…The final durable goods orders print was worse than the initial – down a shocking 6.7% MoM… longtime readers know that I only really look at “real economic data prints”… And these two qualify under that heading for sure! The economy is quaking folks… There’s no two ways to look at it… So, what will you do to offset the coming recession… Again, I ask, Got Gold?
Speaking of Gold… here’s the latest from Gold.org… “The World Gold Council’s Q2 2024 Gold Demand Trends report reveals that total global gold demand increased 4% year-on-year to 1,258t, marking the strongest Q2 in our data series1. Total demand was supported by healthy over-the-counter (OTC2) transactions, up a notable 53% year-on-year at 329t.
Increased OTC demand, continued buying from central banks, and a slowdown in ETF outflows drove record-high gold prices in Q2. The gold price averaged US$2,338/oz, 18% higher year-on-year, reaching a record of US$2,427/oz during the quarter.”
Chuck again… The U.S. Data Cupboard doesn’t have much for us to look at this week… Really, there’s not much, and one has to wonder if the powers that be, have it that way, to put some time and space between last week’s bad data prints, and what’s coming? I wouldn’t put it past them to pull something like that off… I’m just saying…
To recap… The Jobs Jamboree last Friday, was awful, and if all was counted correctly, it would have been really awful! The dollar got taken to the woodshed on Friday after the Jobs print, and now economists are calling for a recession in the U.S. economy… Of course, Chuck says, bring it on! Gold & Silver were subjected to short paper trading on Friday, and Chuck wonders if the PPT’s ESF has run dry?
For What It’s Worth… Well, I came across this article last week, and then lost it! I had to search and search to find it again. I did so, because this is a famed economist claiming the Fed manipulates Treasuries, and it can be found here: Veteran economist accuses Treasury of manipulating bond market (yahoo.com)
Or, here’s your snippet: “Some Republican politicians see a conspiracy in the Treasury’s recent handling of auctions, a conspiracy to keep long-term rates low and thus stimulate the economy.
And they accuse the Treasury of keeping short-term rates high to put money into consumers’ pockets.
Famed economist Nouriel Roubini (known as Dr. Doom for his dire economic forecasts) and Stephen Miran, a Treasury official under President Donald Trump, have now accused the Treasury of improperly manipulating debt auctions in a recent commentary published by money manager Hudson Bay Capital, where both have positions.
Related: With Fed set to cut rates, this money move may pay off
“By adjusting the maturity profile of its debt issuance, Treasury is dynamically managing financial conditions and through them, the economy,” the duo wrote.
That is “usurping core functions of the Federal Reserve,” they said. “We dub this novel tool activist Treasury issuance (ATI). By manipulating the amount of interest rate-risk owned by investors, ATI works through the same channels as the Fed’s quantitative easing programs.”
Chuck again… Of course there’s a lot more to this article, so to read more, click the link above. But remember when I used to say that the Fed Heads manipulated Treasuries? Well, it’s come full circle now…
Market Pirces 8/5/2024: American Style: A$.6437, kiwi .5934, C$ .7227, euro 1.0968, sterling 1.2752, Swiss $1.1830, European Style: rand 18.6229, krone 11.0537, SEK 10.5224, forint 363.37, zloty 3.9347, koruna 23.0632, RUB 85.00, yen 142.50, sing 1.3299, HKD 7.7779, INR 83.34, China 7.1177, peso 19.07, BRL 5.8056, BBDXY , Dollar Index 102.39, Oil $72.40, 10-year 3.67%, Silver $26,60, Platinum $931.00, Palladium $836.00, Copper $3.94, and Gold… $2,267.97
That’s it for today, except to say GREAT BIG HAPPY BIRTHDAY that was yesterday, to my darling granddaughter, Delaney Grace… Can you believe this one… She turned 17! When she was a very young girl, I was in Vancouver, and had just received pictures that her mom had taken of her, and of course I was the proud Grandfather, and showed them to anyone that visited our booth! Delaney Grace, has grown into a beautiful young lady, and I’m sure her dad has to keep the boys at bay… The only sad thing about this is that every year I’m reminded of when I was diagnosed with Stage 4 cancer… 17 years ago! Little Evie has taken Delaney’s place as the “little girl” of the family, but Delaney will always be MY Little d! I have to finish up here and get ready to go see my oncologist today at noon… I have a lot to talk about with her at this appt. Micael Franti & Spearhead take us to the finish line today with his one=hit song: Say Hey ! (I Love You) I saw this band open up for Carlos Santana a few years ago, when Michael’s song was a hit… I hope you have a Marvelous Monday today, and please Be Good To Yourself!
Chuck Butler