Derivatives… Again!

  • Currencies & metals get whacked on Tuesday…
  • Default, debts, deficits, and Chuck turns all gloom and doom…

Good Day… And a Wonderful Wednesday to you!  Yesterday was Shrove Tuesday, and I went for breakfast and had blueberry pancakes or shroves… Yummy! I don’t eat sweets these days, so whenever I do have something with a little sugar in it, I enjoy it immensely!  Today is Ash Wednesday, and the beginning of Lent…  So, do your repenting, and fasting, etc. Our Blues had been playing better hockey lately, but ran into a buzzsaw in Toronto last night, losing to the Maple Leafs… UGH!  Blind Faith greets me this morning with their song: Can’t Find My Way Home… 

Well… I should slap myself in the forehead doing a version of a V-8 commercial for my utterly stupid suggestion on Monday this week that the data would hurt the dollar… When I should have known and do know better than to say something like that, given that my thought was that inflation would tick up… That means longer & higher for interest rates, and that is good for the dollar, no matter that inflation is a killer to an economy, the dollar thrives on knowing that its current interest rate will not be cut any time soon… So, after sending myself to the corner to wear a dunce cap, and repeat over and over again, that higher inflation is good for the dollar, and bad for Gold, I have emerged wiser… 

The BBDXY gained 9 index points yesterday… That’s right I said 9 index points! The currencies all look sick, very sick this morning…  And Gold? Gold got whacked yesterday, with some help from the short Gold Paper traders, the shiny metal lost $35! And fell below the $2,000 figure again… The last time Gold fell below $2,000 after looking like it was over the figure for good, it came back with a vengeance, so maybe that will happen again?   

Silver lost 84-cents! Nearly a buck off the value of Silver yesterday, brought Silver to a closing price of $22.16… The short Silver paper traders were also quite evident in the Silver trades yesterday…  As I’ve explained before, whenever there’s a slight disturbance in the force in Gold & Sliver, the short paper traders then pile on making things much worse than they would have been without the boys in the band… 

The price of oil briefly bumped to a $78 handle yesterday, but then closed below the figure at the close at $77.61… And bonds got sold like funnel cakes at the State Fair yesterday, after the STUPID CPI printed, and the 10-year’s yield closed trading yesterday at 4.31%… 

Yes, the STUPID CPI came in at a gain of 3.1%, year-on-year, compared to forecasts for up 2.9% and compares to a rise of 3.4% in the December report. The “core” CPI (excluding food and energy) for January also came in warmer than expected at up 3.9%, year-on-year. So, it was weaker than the previous month, but ran much hotter than expected, and that caused the initial selling in all asset classes… stocks included…   So, since the markets put so much emphasis on the STUPID CPI, this is what happens when it disappoints them… 

In the overnight markets last night…. There was some slipping in the dollar, but not enough to write home about. The BBDXY is at 1,249 this morning, and the currencies still look all sickly… Gold is still getting sold this morning and is down $3 in the early trading today. Silver is also down this morning, 8-cents.

The price of Oil continues to rise in the $77 handle, and the 10-year’s yield is at 4.30% this morning. That’s a HUGE jump from yesterday, folks… From 4.16% yield yesterday to 4.30% yield today is a HUGE jump for bonds, and it’s also a HUGE loss in the bond price…

The Good folks at GATA sent me this note from Alasdair Macleod yesterday: “Today the U.S. consumer price index came in a little better than expected, not that a few decimals mean anything. Gold was marked down $35. So what was that about?

Quite simply, the bullion bank traders know that gold is going to go much higher and want to go long in the paper market. Physical supply is being cornered by central banks, sovereign wealth funds, and ultra-wealthy individuals, particularly in Asia.

The reason they can hit the price is that they are not being challenged in paper markets, where speculative interest has died.”

Chuck again… So, they sell Gold to get it cheaper to buy?  Well, they had better buy at some time!  here’s the thing folks that many people just don’t understand… Inflation, whether it’s 9% or 3.4% eats away at your dollar… James Rickards said this recently, “But a 3.4% inflation rate cuts the value of a dollar in half in 21 years and half again in another 21 years. That’s a 75% dollar devaluation in just 42 years or the course of a typical career from age 23 to age 65.”   So, during my lifetime, the dollar’s value has gone down over 90%… And we’ve still got more years in my life, at least I hope so! 

So, do your best to say, “I don’t need Gold, I have stocks and they’ll never go down.” Or, I don’t need Gold I’ve done just fine without it” or, whatever other rationalization you use to admit you’ve never bought Gold, and when the you know what hits the fan, you’ll be on the outside looking in, and saying to yourself… “I should’ve bought Gold”… 

I know, I know, that the last bit isn’t for most of you, because you have bought your Gold, and are storing your wealth properly, but there are a lot of folks out there, that haven’t even begun to think about buying Gold…  It’s those folks that need to read that last bit…  Got Gold?

Good friend, Dennis Miller, recently ran an article that interviewed me in the letter… In the letter I said the things that many of you have heard over the years, but just for grins and giggles, let’s go back to the interview, because I said something there that everyone needs to hear…  this can be found at 

“A graph from Ray Dalio about “The Changing World Order” got my attention.

He put an arrow where he feels we, as a nation, currently sit. We are in the middle of three steps; printing money, internal conflict and loss of reserve currency.

Do you agree with his assessment?

CHUCK: Yes, I do… I too read Ray Dalio’s book, and when I saw that graph, I said to myself, “WOW, only 4 steps from a new order.” We’re much closer to default and new order than I dreamed of in 2021.

Ray certainly did his homework, the research, going back hundreds of years to track different countries, regions, economic history, and each one that he researched had this track record as shown in this graph.

“In the things that really matter – money and war – the elites of both parties are unified, as tight as a head gasket. President’s change – but the laws, regulations, bureaucracy, the Deep State, the wars and deficits don’t.”

— Bill Bonner

Very few people in the U.S. (other than readers of The Daily Pfennig, Miller on the Money, Bill Bonner, Paul Craig Roberts or Ray’s book) have any inkling something like this is on the horizon. I fear many will be stunned and shocked when it all happens, particularly when they realize their nest egg has been reduced to ashes.

I don’t want to sound like “Mr. Gloom and Doom,” but these are things that need to be said, and heard, by the masses. Major changes are coming and I fear they will not be pretty.”  again… Got Gold?

The U.S. Data Cupboard yesterday, has already been gone through… Today’s Data Cupboard is empty , except for two Fed Head speeches on the docket… 

To recap… the STUPID CPI got the markets all fired up, and thinking that higher and longer for interest rates are in the cards, and that got the dollar bugs all excited and running all around the kitchen floor, buying dollars, and sending the currencies to the woodshed. Gold & Silver got whacked! And whacked good! With the short paper traders in both assets, taking liberty with piling on yesterday… Gold is back below $2,000, and now maybe we can see it return with a vengeance!   

For What It’s Worth… Well, a lot has been written about derivatives, and a lot more will be written about them in the future, but for us here and now, there’s the folks at, Russ & Pam Martens bring us this update on derivatives, what Ron Paul calls weapons of mass destruction… And it can be found here: Five Wall Street Banks Hold $223 Trillion in Derivatives — 83 Percent of All Derivatives at 4,600 Banks (

Or, here’s your snippet: “According to the Financial Crisis Inquiry Commission (FCIC), derivatives played a major role in the financial crash of 2007 to 2010 in the United States, the worst financial crisis in the U.S. since the Great Depression of the 1930s.  The FCIC wrote in its final report: “…the existence of millions of derivatives contracts of all types between systemically important financial institutions — unseen and unknown in this unregulated market — added to uncertainty and escalated panic….”

Americans believed that the Dodd-Frank financial reform legislation of 2010 would fulfill its promise of reining in concentrated risks like derivatives. It did not. (See our report from 2015: President Has His Facts Seriously Wrong on Financial Reform.)

According to data from the Office of the Comptroller of the Currency (OCC), the regulator of national banks, as of March 31, 2009, five bank holding companies held $277.57 trillion in derivatives (notional/face amount). At that time, according to the FDIC, there were 8,249 federally-insured commercial banks and savings associations in the U.S. but just five bank holding companies held 95 percent of all derivatives at all U.S. banks. Those financial institutions were: JPMorgan Chase, Bank of America, Goldman Sachs Group, Morgan Stanley and Citigroup.

Now flash forward to the most recent report from the OCC for the quarter ending September 30, 2023. According to that report, those same five bank holding companies hold $223 trillion of the $268 trillion in derivatives held by all banks in the U.S., or 83 percent.

Another major area of concern is who is on the other side of these derivative trades with the mega banks – their so-called “counterparty.”

According to federal researchers, there are both mega bank counterparties as well as  “non-bank financial counterparties” – which could be insurance companies, brokerage firms, asset managers or hedge funds. There are also “non-financial corporate counterparties” – which could be just about any domestic or foreign corporation. To put it another way, the American people have no idea if they own common stock in a publicly-traded company that could blow up any day from reckless dealings in derivatives with global banks.”

Chuck again… Don’t think anything bad will happen from these derivatives? Well, then maybe you forgot that Merrill Lynch blew up Orange County, California with derivatives. Some of the biggest trading houses on Wall Street blew up the giant insurer, AIG, with derivatives in 2008, forcing the U.S. government to take over AIG with a massive bailout….  I’m just saying…

Market Prices today 2/14/2024: American Style: A$ .6479, kiwi .6079, C$ .7387, euro 1.0706, sterling 1.2554, Swiss $1.1276, European Style: rand 19.0753, krone 10.5967, SEK 10.5727, forint 362.90, zloty 4.0557, koruna 23.1376, RUB 91.53, yen 150.16, sing 1.3496, HKD 7.8186, INR 83.02, China 7.1936, peso 17.14, BRL 4.9538, BBDXY 1,249.62, Dollar Index 104.89, Oil $77.89, 10-year 4.30%, Silver $22.09, Platinum $896.00, Palladium $900.00, Copper $3.71, and Gold… $1,990.76

That’s it for today… I bet you thought I had forgotten about this being Valentine’s Day? Not so fast there Tim!  Yes, today is Valentine’s Day, so… What did you get for that love of your life? We will be going out for dinner tonight, and I have purchased a special Valentine’s Day Shirt to wear! I can’t wait to show it off! I have special shirts for every holiday, and important event… Bet your didn’t know I had this “wild streak” in me?  I’m still full of surprises!  And here’s a twist on all that lovey, dovey stuff…   How about… a Valentine’s Spay? Hear about the shelter letting you name a feral cat after your ex and have them neutered?  That’s cold, Willis! And the Righteous Brothers sing a song this morning, that I hope you never experience: You’ve Lost That Lovin’ Feeling… I hope you have a Wonderful Ash Wednesday today, and Valentine’s Day, and will be Good To Yourself! 

Chuck Butler