- Currencies & metals rally VS the dollar on Friday
- Chuck talks about diversification…
Good Day… And a Marvelous Monday to you! Well, before the All-Star Game break, the Cardinals were on a roll, and appeared to be setting themselves up for a run into the playoffs… And then they weren’t on a roll… And not it appears that my beloved Cardinals will finish the year with a losing record, and out of the playoffs for the second year in a row… In economics, 2 negative quarters of growth equals a recession… In baseball, 2 consecutive bad years, should lead to showing the GM and manager the door… Having little Evie with us all last week, kind of had me thinking about when our kids were so little… Then on Saturday, I woke up and asked Kathy if Evie was coming, and she informed me that it was only during the week… I like hearing her little feat running across the floor… Steeler’s Wheel greets me this morning with their song: Stuck In The Middle With You…
Well, you know that I don’t like to start the letter with data, but this has to be front and center this morning… The July Retail Sales printed a blowout 1% gain… That was good, right? Well, when you look under the hood, you may question just how good it will turn out to have been… You see, the June’s Retail Sales were revised to a negative figure, and in fact for 8 of the months in the fiscal year, there has been a downward revision… Here’s Zerohedge.com with their thoughts on this fiasco…
“So in addition to the July print, significant revisions in either direction could alter the trajectory of retail sales, and if past is prologue, last month’s retail sales print will be revised lower in keeping with the original forecast. But since algos only react to the here and now, a big jump from a sharply downward revised previous number will be viewed much more favorably than a modest drop from an unrevised prior month, even if they both end up at the same place.”
When will the markets get the idea in their hard heads that initial prints aren’t worth the paper they’re printed on, and that you need to wait for the next month’s revision? It just nags me to death, that revisions are never even considered by the markets…
The dollar rallied Big time after the Retail Sales print, with the BBDXY gaining 4 index points, to end the week at 1,244… Now, you would think that with the BBDXY gaining 4 index points, that the currencies would look to be a shambles… But they all held their ground, considering the strong move in the BBDXY. The euro did lose the 1.10 handle, but sits just below that figure, ready for another dollar selloff…
And Gold didn’t get too bothered by the stronger dollar… As time goes by, I kind of get the feeling that the dollar doesn’t have much to say in the price of Gold any longer… Look at YTD for example… The dollar had been very strong for most of this year, only starting its decline in the last month, and in the old days that would mean that Gold would struggle to gain with a strong dollar… But, not so this time, Gold has rallied almost all year, with several set backs, but the underlying rally would pick up again as soon as the short paper traders went back into their holes… So… Gold gained $9 on Thursday, and on Friday, Gold gained $51, and ended the week at $2,508.70… Silver gained 81-cents on Thursday, and on Friday it gained 69-cents, to end the week at $29.11
So, a good ending to the week for Gold & Silver, eh? I wonder where the lions are? (Bruce Cochburn) I had just heard that sone play so the lyrics were in my mind, when I was thinking about the short paper traders… I’m not unhappy with the fact that they were nowhere to be found late last week.
The price of Oil dropped another buck late last week, and ended the week trading with a $76 handle… What the heck happened here, we started the week with Oil reaching $80 and now it’s $76? I dunno… I’m sure the Oil boys would point to supplies, and lack of demand, etc. But C’mon, these are things that have already been priced into Oil! The Bond boys didn’t get too lathered up by the trumped-up Retail Sales print and kept the 10-year’s yield at 3.90% going into the weekend.
In The overnight markets last night… The selling of the dollar continued overseas, and the BBDXY starts the day and week at 1,235… That’s down 5 more index points overnight! The euro is pushing the envelope across the desk this morning, as the offset currency to the dollar, you normally see dollar weakness in euro strength and this time is no different… I was reading an article this weekend about how the rally in the S. African rand is really getting legs, and is surprising the currency markets with its strength. I had to laugh out loud, because this how a weak dollar plays out, currencies like the rand, zloty, koruna, and forint that never get any attention, work in the background, and when the dust settles, they are great performers VS the dollar. The thing that sets these currencies aside is their internal interest rates…
So, here’s how this works… S. Africa has an 8.25% internal rate (like our Fed Funds rate that nobody but the Casino Banks get) But for illustration purposes, lets just say that you get 8% on your rand deposit… On annual basis, if the rand loses more than 8% to the dollar, then your rand investment is a loss… But if the rand gains, say 3%, in the currency, then you add that to the interest rate and your overall gain in rand is 11%… I chose to illustrate the rand because it has been one of the most volatile currencies in the world since I’ve been following currencies.
So… The dollar starts the week down… Gold starts the week also down, $16 while I write this morning… I would think that someone that’s short-sighted would take some profits after Gold’s HUGE gain on Friday… Silver starts the day/ week down 11-cents… Same goes here… As always, and I’m sure I don’t have to remind you, but I will anyway… I don’t look at Gold’s profits, and it’s not for sale… Gold is a store of wealth, and that’s all I have to say about that!
The price of Oil starts the week trading with a $76 handle, and the 10-year’s yield is 3.87% to start the week…
Have you heard the economic plan of one of the candidates? This is not political, it’s a simple discussion about “Price Controls”… In my mind, it’s a communist’s way of running an economy… Price increases for Businesses have gone up as much as costs to consumers… Instead of coming out with a plan to put curbs on Gov’t deficit spending, this plan will go about all the wrong way… I’m just saying…
And you can debate this issue with me if you choose to deal with the facts that they have never worked. They are anti-capitalistic, and they are the tools of a communist regime. History shows us that when the government tries to control prices, it leads to disastrous consequences—supply shortages, reduced quality of goods, and ultimately, higher prices. Ready?
OK, onto other things, market wise, but did you see what I did there, with the idea that it’s more important to curb Gov’t deficit spending? Pretty tricky, eh? I sure wish either candidate would make this issue of deficit spending part of their plans for the economy… But we can only wish, hope and pray, right? You won’t see either of them take that on, as it is not what the Elites, oligarchs, dark side want to deal with…
Well, as we head into the 3rd week of August, The dollar seems to be teetering, take out the 4-point BBDXY gain it had on Friday… I don’t see the dollar making any BIG comeback either… The odds are stacked against a dollar rally of any magnitude, remember? I laid them all out for you last week… We’re another week closer to the Sept. FOMC meeting, when I expect, and everyone and their brother, expects, the Fed Heads will cut rates… If they don’t, THEN, we have a newsworthy story… But their rate cut? Not newsworthy, because it’s so expected, and a 100% chance of a rate cut on the market’s futures…
Why would, if you were a dollar bug, be buying dollars, when you know that your Central Bank is going to debase the currency in 10 business days or so? This is when you need to be backing up the truck and looking to buy currencies that you feel will perform well VS the dollar… This is called diversification, and it’s been what I spent a good portion of my career on the speaking circuit, telling people that they needed to do with their investment portfolios… This way not all of your investments are in dollars… And currencies aren’t the only investment that you can make to diversify your portfolio… The metals make an excellent diversification… Just wait-n-see what happens when the FOMC begins their rate cuts…
Boy, I’m on a roll this morning, so if you are a dollar bug, you had better head for the hills…
Well, once again this week there’ll be little to no economic data printing… UGH! Today’s Data Cupboard as the July Leading Indicators, which have been negative more months this year than it has been positive, and I expect the July print to be negative once again… On Wednesday this week, we’ll get to see the color of the FOMC’s Meeting Minutes from their last meeting, when they left rates unchanged. The markets will be looking over these minutes with a fine tooth comb, for any signs that the Fed Heads were close to cutting rates then…
For if they were close to cutting them a month ago, then they will be on board to cut them next week when they meet… Like I said above the Fed Futures have a rate cut at 100% chance, so these minutes will just be more fuel for the rate cut fire…
To recap… Chuck goes all mental on the July Retail Sales print… You’ll have to go back and read it if you are wondering what he said… Chuck also goes all mental on implementing price controls… What is our democracy coming to? Chuck feels that if we implement price controls, that we’ll be acting like communists… I’m just saying…
For What It’s Worth… Well, I don’t like to talk about revaluations of Gold because they just never come to fruition, but this article that the good folks at GATA sent me, kind of hit a chord with me…. For the U.S. does need 1. Inflation to help melts away at our debt, and it needs a HUGE jackpot of funds to make our debt to GDP ratio look better. So, given those things, here is the link to the story: The U.S. is ready with a gold revaluation mechanism too | Gold Anti-Trust Action Committee | Exposing the long-term manipulation of the gold market (gata.org)
Or, here’s your snippet: “In an interview this week with Mark Moss of Market Disruptors, Luke Gromen remarked that a substantial official U.S. revaluation of gold — say, to $20,000 per ounce or more — might enable the creation of trillions of dollars for the U.S. government to use to repay enough of its debt to make the country’s ratio of debt to gross national product appear more plausible and sustainable.
Moss responds that such a revaluation likely would generate huge inflation, but Gromen says that only huge inflation can diminish the debt problem and that other countries have survived and adjusted to such periods.
Of course in the end gold revaluation, like the recent proposal for the Treasury to mint platinum coins with trillion-dollar denominations and turn them into cash at the Fed, is just legerdemain, accounting trickery to rationalize creation of money far out of proportion to national economic production. But that governments and central banks are so prepared for gold revaluation may be a reminder that the metal remains not just money but also the secret knowledge of the financial universe — and that the nuttiest gold bugs of all are central bankers and the elected officials whose bidding they do, creating a world financial system so crazy that only gold may be able to save it.”
Chuck again… Yes, this all makes abundant sense, do does that mean the Gov’t will pursue it? Hardly! They are all, for the most part, numbskulls, and beholden to the elite, oligarchs, dark side, and they no longer represent you and me, nor do they have the Gov’ts best interest at heart…
Market Prices 8/19/2024: American Style: A$ .6695, kiwi .6073, C$ .7311, euro 1.1037, sterling 1.2947, Swiss 1.1558, European Style: rand 17.8328, krone 10.6157, SEK 10.4062, forint 356.67, zloty 3.8608, koruna 22.8156, RUB 90.10, yen 146.15, sing 1.3106, HKD 7.7953, INR 83.87, China 7.459, peso 18.74, BRL 5.3536, BBDXY 1,235.85, Dollar Index 102.19, Oil $76.05, 10-year 3.87%, Silver $29.00, Platinum $949.00, Palladium $930.00, Copper $4.22, and Gold… $2,492.10
That’s It for today… I touched on commenting on political today, I hope you don’t mind, I don’t mean to, but sometimes the politicians say things that just get in my craw! Pfennig absent alert… There will be no Pfennig this coming Thursday, I will be taking Kathy to have her other eye surgery… Then I’ll be meeting some of my classmates for lunch… This is a small group of people that have a ton of time in the past together… So, we always have something to talk about… Remember when I came back from my sojourn to Ireland, and I had a cold? Well, that cold has relapsed, and it’s back with a vengeance! Hopefully it doesn’t hang on for a long time… Well, my beloved Cardinals picked a good night to play good baseball, when they were on national television Saturday night… If you lived under a rock and just came out to watch that game, you would think that the Cardinals must be a very good team to defeat the Dodgers like that! The great Todd Rundgren takes us to the finish line today with his song: Hello, It’s Me… I hope you have a Marvelous Monday today, and please Be Good To Yourself!
Chuck Butler