Author: admin

June 30, 2021

* currencies drift on Tuesday… 

* Gold & Silver see the price manipulation again… 

Good Day… And a Wonderful Wednesday to you…  I had an awful day yesterday with the pain in my head… I’m not one to subject myself to pain medication, but… There comes a point, where there’s no other choice, and that’s where I was yesterday afternoon…  This morning is touch and go so far, so this may or may not be of regular length today… And quote frankly, I don’t think there’ll be a letter tomorrow, as I’m just not up to doing it, with all this pain in my head. That will send us into the 4^th of July holiday weekend, with Sunday being the actual holiday, and Monday being the work week holiday… I have to wait until next Wednesday for my brain MRI… stupid people… And that’s all I have to say about that! REO Speedwagon greets me this morning with their top 70’s hit: Ridin’ The Storm Out… Which is what I fell like I’m doing…

So, I told you yesterday that I didn’t see the currencies doing much this week, and that they would probably result in nothing but drifting this week… And that’s exactly what we had yesterday! Get this… The BBDXY was 1,138.79, yesterday morning, and 1,138.75 at the day’s end… The Dollar Index also showed drifting as it opened yesterday morning at 92.04, and ended the day at 92.02…  So, nothing to see here, move along…

Gold & Silver however, didn’t see any drifting, and took shots to the mid-section yesterday. Gold lost $17.30 to close at $1,762.10, a multi-month low… And Silver lost 35-cents to close below $26, at $25.84…  James Rickards is back to calling a huge gain in Gold… I found this in Dave Gonigam’s 5 Minute Forecast yesterday…  And here’s what Rickards sees…

“Gold’s third bull market began on Dec. 16, 2015, with gold hitting a bottom of $1,050 per ounce at the end of the prior bear market. Since then, gold has rallied to about $1,800 per ounce as of this writing, almost an 80% gain.

“If we take a simple average of the price gains and durations of the two prior gold bull markets, we arrive at a 1,435% gain over a period of 10.7 years,” Jim says. “Applying that gain and duration to a baseline of $1,050 per ounce beginning in December 2015 leads to a projection for this bull market of $15,070 per ounce by August 2026.” – James Rickards in the 5- Minute Forecast…

Well, I sure hope I’m still around in 2026 to see that!  But, to me that’s quite a forecast… And I just can’t get my arms around $15,000 Gold… But IF it does get there, my kids and grandkids will be celebrating, I’m sure!

In the overnight markets last night… saw some dollar buying, not much but the BBDXY rose to 1,139, and the euro dropped below 1.19… Gold & Silver start the day on positive notes, with Gold up 50-cents and Silver up 13-cents to draw close to $26 once again. I really don’t see the ADP Employment report that’s due to print this morning holding a grasp over the markets, but then maybe traders are desperate for something to trade off of that it will be, today… But like I said I doubt it… 

So another day of kicking ’round the cobblestones, look at the fun in feeling groovy! 

OK… time for some silliness… Ok, I had to laugh out loud when I read this tweet by Sven Henrich, of whom I’m quoted off of Twitter before… This time he had this line that really hits home: “When will the Fed get slapped with an anti-trust suit for monopolizing the entire financial market?”   LOL!

Too bad it’s true about the Fed, and not about them being slapped with an anti-trust suit!

And back to our regular programming… And in other news… I read yesterday that some grocery stores are going to start charging 10-cents a bag for non-reusable shopping bags…  Oh, it’s starting here folks… right where it’ll be added to your grocery bill, probably without you knowing it… Until… you do!   And I know you can’t wait for digital dollars to appear, and your bank begins to charge you for who knows what, in fees… It’s all starting right here, right now with grocery stores…  a fee for this, a fee for that, and if you don’t like it, a fee for whining!

Ok.. I got to thinking the other day, in between periods, when my brain hurt so much I couldn’t think, that I’ve heard this song before… What song am I talking about? The song the Fed heads are singing about inflation, but only the words have changed…  Remember when then Fed Chairman Alan Greenspan said that there was no housing bubble?  And that real estate always went up?  And then no one except me, held his feet to the fire when the housing bubble burst and almost caused a collapse of our financial system!  Well, recently current Fed Chairman Powell, was singing from the same song sheet as Greenspan, but only this time he’s saying there’s no inflation to speak of, that’s it not real, and will be gone soon…   I’m going out on a limb here and say that he will put the Fed’s batting avg. at .000 of being correct…

A day without some talk about inflation is like a day without pain… no wait that’s just me, for everyone else it’s like a day without sunshine…  So, who else to set things straight but the best selling author, and publishing guru, Bill Bonner…   I’ll start with how Bill was showing how Paul Krugman is wrong most of the time, and let him take it from there, this is from Bill Bonner’s Diary:

“But what do we learn from Krugman?

He tells us not to worry about inflation – so, it is inflation we should be worried about.

He tells us central bankers will “step on the brakes” when inflation begins to go over the “speed limit.” Ergo, central bankers will not put on the brakes at all; they will push down on the accelerator.

He tells us not to worry about a replay of the 1970s. But wait…

In the 1970s, U.S. national debt stayed under $1 trillion. Now, it is over $28 trillion.

Total U.S. debt – households, businesses, and the government – was still under $2 trillion in 1971. Now, it’s over $85 trillion.

And in the 1970s, central bankers – as well as leading economists – still feared inflation and believed they had a duty to keep it under control. Now, they are under Krugman’s spell.

Inflation is no problem, they believe. And more government spending is the cure for every problem – from global warming to inequality.” – Bill Bonner’s Diary

In case you didn’t notice, I’m using a lot of quotes from other people today, as I really don’t have much else to add to the market movements… The currencies are drifting with no economic data, and Gold & Silver got manipulated downward once again yesterday.

The U.S. Data Cupboard yesterday has the Case/Shiller Home Price Index, which showed an increase in home prices for April… Wait until next month’s report, that’ll really show an increase, in my humble opinion… But there’s not a new housing bubble forming, here… according to the Fed…   Of course as I told you earlier, they’ve sung from that song sheet before, and were so wrong, they were almost right…

Today’s Data Cupboard as the ADP Employment Report for June…  And Friday we’ll see the color of the BLS’s Jobs report at the Jobs Jamboree…  But as I’ve told you before, I don’t care what the BLS prints any longer, it’s all lies and doubletalk… UGH

To recap… The currencies drifted yesterday, and Gold & Silver got manipulated downward once again… Chuck gives us the thoughts of James Rickards and Bill Bonner today, now that’s a 1-2 punch that carries some umph!  And that’s that!

For What It’s Worth…  Long ago, I used to quote the guys at Bullion Star.com a lot… But then they kind of when separate ways, and I lost track of them. Then yesterday, I found this on Ed Steer’s letter, that highlighted a story on BullionStar.com, and I knew then I just had to use it, because, after reading it, I had already planned some snide remarks, not about the article. So that’s the FWIW article today, about Central Banks buying physical Gold, and it can be found here: Thai central bank leads pack, buying 90 tonnes of gold over April and May (bullionstar.com)

Or, here’s your snippet: “In early April this year, the Hungarian central bank stunned gold markets with the surprise that it had purchased a massive 63 tonnes of gold during March, and in doing so tripled its gold reserves from 31.5 tonnes to 94.5 tonnes.

At the time, this 63.5 tonnes purchase (the details of which we covered ) was the largest year-to-date gold purchase by a central bank during 2021.

Fast forward to June and that record has now been broken, as Thailand’s central bank has now made public that over the two months of April and May inclusive, it purchased a total of 90 tonnes of gold, thereby putting the Bank of Thailand in the pole position of the global central bank gold purchases during the first half of 2021.

In fact, with China and Russia now ‘officially’ out of the market for buying gold since 2019 and early 2020, respectively, this Bank of Thailand gold buying is the largest short-term gold accumulation operation by any central bank sovereign since the Polish central bank bought 100 tonnes of gold in London during the first half of 2019 and promptly to Warsaw.

Thailand’s 90 tonnes addition in its gold reserves over April and May comprised a 43.5 tonnes increase in during April, and another 46.5 tonnes increase during May, taking its total gold reserves from 154 tonnes to 244 tonnes, a 58.4% increase.”

Chuck again… Ok, we’ve got these Central Banks loading the boat with physical Gold that they have bought, and the price of Gold goes down?  Thanks a lot you dastardly price manipulators, for nothing, absolutely nothing, say it again!

Market Prices 6/30/2021: American Style: A$ .7506,  kiwi .6990, C$ .8075, euro 1.1888, sterling 1.3866, Swiss $1.0866, European Style: rand 14.2973, krone 8.5468, SEK 5.070,  forint 295.53,  zloty 3.7992,  koruna 21.4176, RUB 72.53, yen 110.53, sing 1.3440, HKD 7.7659, INR 74.24, China 6.4605, peso 19.82, BRL 4.9340, BBDXY 1,139.10, Dollar Index 92.10,  Oil $73.87, 10-year 1.45%, Silver $25.98, Platinum $1,064.00, Palladium $2,780.00, Copper $4.21, and Gold… $1,762.60

That’s it for today, this week and until next Tuesday… And by then hopefully I’ve weathered the storm and gotten some relief for the pain… I’m really surprised I made it this long this morning, as I was ready to throw in the towel at the onset this morning! But I soldiered through… There’s really nothing I can do to help this situation except take the pain medicine… Don’t worry, I hate taking it so much, I would never be tempted to get addicted to it… As I always tell the nurse after she goes over my medicines… “Better living through Chemistry”…   So, what will you do for the 4^th of July 3-day Holiday Weekend?  I used to be a big fireworks guy… But not so much any more…  Instead, I’ll put some huge chunk of meat on the Big Green Egg, smoke it till the sun doesn’t shine, and have a great Bar-b-que, even if it is just me and Kathy!  You know what, after dealing with the hospital yesterday, I’m tired of dealing with stupid people! People that take no pride in their work, people that don’t care that the customer is who they need to take care of!  And not the other way around! I’m tired of it… And from now on I’m going to be a real pain in the rear to people who treat me like that… So watch out America! Grand Funk Railroad takes us to the finish line today with a very apropos song: We’re An American Band…  “We’re coming to your town, we’ll help you party it down, we’re an American Band” I hope you have a Wonderful Wednesday, and big 4^th of July holiday, and please remember to Be Good To Yourself!

Chuck Butler

June 29, 2021

* Currencies drift on Monday… 

* Choppy trading in metals continues… 

Good Day… And a Tom Terrific Tuesday to you! Rain, rain please go away, Chuck wants to go outside and play! We’re stuck in a weather pattern that keeps these Thunderstorms popping up at any time, and brother have they brought the rain! And according to my trusty weather app, we’ve got 3 more days of this weather pattern. Well, my trip to the oncologist yielded the news that I’ve lost another 9 lbs in the last month since last seeing her… I told her, “I was wondering why my pants keep falling down!” I’m waiting for the scheduling dept. to call me to give me the appt. to have an MRI of my brain… (spoiler alert: they won’t find one! HA!) No seriously, I’ve been experiencing really bad head aches for a week now, so the MRI will tell us why…  I won’t beat around the bush here, with my history of cancer popping up like those Thunderstorms, anywhere and any place, I’m concerned about what the MRI will find… Most likely I’ve pinched a nerve in my neck that’s causing the head aches… Recall, I told you I had done something to the trap muscle in my neck about 10 days ago? One of my fave guitarists, Alvin Lee, and his band Ten Years After greet me this morning with their song: I’d Love To Change The World….

Well, we ended last week with the currencies moving higher VS the dollar, and Gold rising $7 on Friday, with Silver adding 18-cents to its value to end the week. The Data on Friday was interesting, as Personal Income in May was down -2.0%, and Personal Spending was flat…  Which told me that the stimmy checks have all been spent, and now there’s no more dinero to spend…

Yesterday we saw the currencies drift on the day, the BBDXY which when I last wrote to you last Thursday, was 1,137, and yesterday at the close it was 1,137… So no movements to speak of… And Gold lost $3.10 yesterday while Silver lost 2-cents!  Gold closed yesterday at $1,779.40, and Silver at $26.19…  There’s really no impetus for Traders to sell or buy dollars at the start of this week, as there’s really no economic data to speak of until we get to Friday, when we get the June Jobs Jamboree… Tomorrow will bring us the ADP Employment Report, but considering the large gaps between the ADP jobs report that the BLS jobs report, I’m beginning to get the feeling that the markets are no longer thinking that the ADP is the precursor of the BLS report…  Shoot Rudy, I could have told them they had no relationship a long time ago, if you’d only had asked me!  There’s no telling what the BLS will pull out of their magic hat when it comes to the jobs report each month…

In the overnight markets… mainly the European session, we’ve seen some dollar buying, not much, but some, as the BBDXY has risen to 1,138.79 and Gold is down $9.90 in the early trading, with Silver following suit and losing 19-cents…  I really didn’t expect to see Gold  & Silver losing ground this morning when I turned on my laptop…  I’ll have to do some searching later to find out what caused that selling… No time right now to do so, and besides, that kind of news doesn’t break as the asset is trading… No time left for me, no time… (Guess Who) 

The Petrol Currencies remain well bid, and we have a new front runner of the Petrol Currencies, and that is the Brazilian real… The real has really been on a run of late, and is trading below the 5 handle, which I don’t recall seeing for a few years now… About 10 years ago, when interest rates around the world were pretty much normal, the real put in the best year of performance of any currency… But that was then… No reason to believe that it could do that again, given today’s mess of interest rates, etc. But, for now, the real is for real…. HA!  

Well, last Thursday I gave you an dissertation on the U.S. Debt…  And then I came across this article on Reuters about how Janet Yellen is banging the drum for an increase to the debt limit, of which I didn’t think even existed any longer… It has all been a show to complain about the debt ceiling and how the Gov’t was going to shut down, etc, etc.,  and then it would get increased…  But everyone had gotten comfortably numb about the debt limit that I hadn’t seen nor heard of any talk of a debt ceiling for years! But apparently it’s still around, and Janet Yellen is fearful of it… let’s listen in…

“U.S. Treasury Secretary Janet Yellen on Wednesday warned Congress that the United States risks a debt default and a new financial crisis as soon as the August recess if lawmakers fail to act quickly to suspend or raise the federal borrowing limit.

Yellen said defaulting on U.S. debt obligations would be “unthinkable” and “would have absolutely catastrophic economic consequences.”

Yellen said that to avoid uncertainty for financial markets, Congress should pass new debt limit legislation – allowing the Treasury to continue borrowing – before the latest suspension expires on July 31.”

Chuck Again…  Joe Cocker did a song in the 70’s called Cry Me A River… That’s when he was doing his Mad dogs and Englishmen bit with the great Leon Russell…  But that’s what I’d tell Yellen, Cry Me a River, Janet….

“I was treated this past weekend to a link to a YOUTUBE video with the author of Rigged, Stuart Englert, who’s book came out in 2020… I recommended the book at that time, because it gave a very good layman’s explanation of how and why the Gold price is manipulated…  So, this video has the author explaining Basel 3, and what could come of it, IF it is adopted and adhered to by the Central Banks of the West… And I have that link for you today… It’s a 20 minute long video, so make sure you reserve enough time to hear what Mr. Englert has to say…  Stuart Englert: Basel III and Gold — What Does it Mean, Why Does it Matter? – YouTube

Spoiler alert: he’s like me in this understanding of what Basel 3 could be, it could be good for Gold, or it may mean nothing…

OK.. onto other things…  Talk that the Federal Reserve should develop a “digital dollar” is everywhere, but a top U.S. central banker today signaled he isn’t on board.

The Fed’s top overseer of the banking system — Fed Vice Chairman Randal Quarles — said he doesn’t see the benefits for a digital dollar and that the new product would “pose considerable risks” to the financial system.”

I got that info from the good Folks at GATA who took it from a story on MarketWatch.com

Before I go on… Let me say that I see what Quarles is doing here… He’s just putting up a smoke screen to be able to say when the whole financial system comes crashing down that he was against digital dollars… But this one person won’t put a stop to the charge to digital dollars, folks… It’s coming… are you ready? 

So… with little in the Data Cupboard this week until we get to Friday, I would think we’ll go through the week really drifting around with the currencies, and Gold & Silver being choppy at best… 

Oh, and there was one other piece of economic data last week that was interesting… The PCE (personal consumption expenditures) a key inflation indicator that the Federal Reserve uses to set policy rose 3.4% in May, the fastest increase since the early 1990s… Yes April 1992.. Where were you in April 1992?  That’s a long time ago in my book… But again, the Fed heads were quick to sweep the number under the rug, and say “move along, nothing to be seen here”…

To recap… The end of the week last week brought about some currency, and metals gains, nothing to write home about, but gains nonetheless. Yesterday, was a day of drifting for the currencies, and Chuck thinks that’s what we can expect the rest of this week as there is no real economic data to print this week until we get to Friday. Gold did lost a bit yesterday, and Silver was basically flat, down 2-cents on the day.

For What It’s Worth… I was reading Ed Steer’s Saturday letter on Saturday, and came across this article that he had highlighted in his letter that can be found here: www.edsteergoldandsilver.com  He pulled it from zerohedge.com, and that’s where you’ll find this article from Kyle Bass, about inflation, and that can be found here: Kyle Bass Slams Fed, Sees Inflation Everywhere He Looks | ZeroHedge

Or, here’s your snippet: “With U.S. stocks back at all-time highs as the market seemingly shrugged off the FOMC’s reaction to the latest inflation numbers, Hayman Capital’s Kyle Bass returned to CNBC for an interview with the “Closing Bell” crew on Thursday, where he offered a dramatically different vision of the present economic scenario vis-à-vis inflation.

In an interview where he expounded upon his claim that the U.S. is already grappling with real inflation rates above 10%, the billionaire investor proclaimed that “in every single aspect of life, I see inflation.”

Why? Because during the past year and a half, the Fed has introduced more broad money into the American economy in the shortest time than we have seen at any point in American history.

“I think look we’re going to see a short-term turn-down in inflation because the initial inflationary burst was enormous…this transitory comment may play out to be true for a short period of time but I think Sarah when you look at the the money supply the broad money in the US system from 1980 to 2010 it it vacillated between 50% and 60% of GDP and post the global financial crisis it moved up from roughly 60% to 68% 69% of GDP now that we’re approaching 90 so in the one year period one and a half year period since COVID started we have introduced 34% more broad money in our system in the shortest time period in the history United States so we’re going to see prices stay high and move higher over time if the fed continues to expand its balance sheet,” Bass said.

Even as the financial press prattles on about the significance of the Fed finally starting to consider tapering its asset purchases, Bass believes that the central bank won’t be able to shrink its balance sheet so easily.

“If you’re in the market place you want to own commodities if you’re in the real world you want to own productive real estate you even want to buy rural land in front of major demographic moves in the U.S…I’d rather own hard assets than equities today because I think we’re only seeing just the beginning of population moves in the U.S.”

Chuck again… I agree with Kyle Bass here… we may well see a pullback of inflation this summer, but… and like Rickards and Rosenberg keep saying, inflation is a 2022 story…

Market Prices 6/29/2021: American Style: A$ .7530,  kiwi .7000, C$ .8085, euro 1.1907, sterling 1.3841, Swiss $1.0860, European Style: rand 14.3482, krone 8.5690, SEK 8.5223,  forint 295.04,  zloty 3.7965,  koruna 21.4072, RUB 71.17, yen 110.60, sing 1.3441, HKD 7.7635, INR 74.17, China 6.4559, peso 19.86, BRL 4.9342, BBDXY 1,138.79, Dollar Index 92.04,  Oil $72.51, 10-year 1.48%, Silver $26.00, Platinum $1,078.00, Palladium $2,758.00, Copper $4.20, and Gold… $1,769.50

That’s it for today… Well the month of June can’t get over fast enough for my beloved Cardinals who have only won 8 games during the month… The June Swoon… UGH! Daily readers will recall me saying back in March, during Spring Training that “This team can’t hit”… I thought we would win games with pitching and defense… But pitching has been bad, except for one pitcher… And well, we haven’t won many games!  Little Evie was here this past weekend on Sunday, and she and I have become good buddies… She gets away with some attitude with her Mimi, mom and dad, but not me… I forgot to mention last week when I was talking about Alex’s birthday on Monday, that it was also the wedding anniversary of Daughter Dawn and Jerry… I do believe it was their 18^th…  I remember the crowd at the reception all singing happy birthday to 8 year old Alex… OK… Charlie Daniels takes us to the finish line today with his country rock song: Long Haired Country Boy…   Which I Identified with in my youth!  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

June 24, 2021

* Currencies couldn’t hold their Tuesday gains on Wednesday

* Silver is kept from closing over $26 once again… 

Good Day… And a Tub Thumpin’ Thursday to one and all! Well, my beloved Cardinals come home from a 6 game road trip having only won 1 game… They have to be the worst Cardinals team in 30 years! But the season isn’t 1/2 over yet, so there’s still time to turn things around…  That’s me being the ever optimist here, in spite of what I see on the field each night…  Oh, poor me, right? For once Chuck has to suffer through a losing season… HA!  Another beautiful day here, warm, lots of sunshine, but that appears to be the last one for a few days that is… The weather app says rain the next 7 days.. UGH! I don’t believe it will be days full of rain, just thunder showers off an on, so there will be plenty of time to get outside, with or without sunshine! Red Rider greets me this morning with their song: Lunatic Fringe…  This is a song about the 70’s uprising against Jews…

Well, no beating around the bush today, I tell you straight up that I have a long explanation for you this morning about debt… I have a kind of long explanation of Basel 111, and some optimistic thoughts from me… So, with no more ado…

The currencies couldn’t hold their gains from Tuesday during Wednesday’s trading, and they slipped a little, with the euro coming back to 1.1925, from 1.1950 in the morning, and the BBDXY closing at 1,138.73, up from 1,138.40 in the morning.  The movement wasn’t big… but it was a move in the dollar’s favor on the day… Gold which traded most of the day up, and at one point was up to $1,796.00, before ending the day down 50-cents at $1,779.30… Silver traded much the same way moving higher at one point in the day to $26.39, before settling on a 10-cent gain to close at $25.96, and thus Ed Steer was correct again, when he said that the price manipulators wouldn’t allow Silver to close above $26.00….

In the overnight markets…. There was just a tad bit of dollar selling overnight, the BBDXY dropped to 1,137.05, from its close yesterday of 1,138.74… The euro is well into the 1.19 handle, and the Petrol Currencies are looking perky as I write, the price of Oil is near $73 at $72.97, which is helping the Petrol Currencies with their perkiness…  Gold is up $6 in the early trading, and Silver is up 19-cents, so it will interesting once again to see if these two metals can close above their recent lines drawn in the sand of $1,800 and $26… 

The U.S. Data Cupboard this morning finally has some market moving data, in the form of May Durable Goods and Capital Goods Orders… The usual fare of Weekly Initial Jobless Claims will also print this morning… This data surprised the markets last week with an uptick of Claims for the previous week… You may recall that the April prints of Durable & Capital Goods Orders were very disappointing, and negative… I would expect the boys & girls that do the reports have gotten the memo that says, these reports must be positive this month… And so they will be…

OK… I’ve got a long winded explanation of debt for you taken from my perusal of the Debt Clock…

Well… Long ago, and oh so far away… I fell in love with you, before the second show… No Wait! Come on Chuck, this is serious stuff you’re going to talk about!  OK… got your head on straight now? I guess so… I really don’t want to talk about this stuff, but I will…

I made a trip to the Debt Clock yesterday just for grins… 

The Debt Clock shows us that Total Tax Revenues taken in by the U.S. this fiscal year has been $3.5 Trillion  (rounded off)…  And that the Federal Spending this fiscal year has been $6.8 Trillion (rounded off)…  We are 3/4’s of the way through the fiscal year now… And so far we have amassed a deficit of $3.3 Trillion just this year!  When all the beans are counted our current deficit will be greater than $30 Trillion…

So, where does the U.S. obtain the difference of $3.3 Trillion?  Well, they sell U.S. Treasuries, which right now the 10-year Treasury has an interest rate of 1.45%…  So, that’s bond servicing costs, or interest cost, whichever you prefer to call it. 

Currently our debt is $28 Trillion… 

About $7 Trillion is what is called interagency debt that the U.S. owes to itself…

About $8 Trillion is owed to foreign governments…

The remainder is owned by investors around the world, including the U.S.

So doing the math… the U.S. currently pays interest on about $21 Trillion in issued U.S. Treasuries…($28 Trillion minus $7 Trillion)

(Now not all of the Treasuries are 10 year notes, some are longer dated bonds with higher interest rates, so for our calculations we’ll use 2% as the interest rate)

On $21 Trillion the interest costs per year are: $420 Billion …

So… while the markets got all giddy last week and bought dollars, because the Fed turned somewhat hawkish, let’s review what that means…  So, let’s say inflation begins to soar, and the Fed has no other choice but to raise rates, and let’s also say that interest rates return to normal at 5%… That would mean the interest cost on their debt servicing would be $1 Trillion per year…

Now, how in the world would that work?  Well, unless you as a Gov’t want to default on your debt, you have no choice but to pay the interest costs…  And if you pay the interest costs, you don’t have money for other boondoggles, like welfare, and the war on drugs, and the war on poverty, and oh, even social security might be in the path of the cuts… 

I’m sorry to have gone so long in this discussion, but it needed to be said, and every citizen in this country should understand these numbers, then maybe they wouldn’t be so demanding about receiving stimmy checks, and what have you…  So, I’m leaving it up to you dear reader to get this out to anyone you know…. Otherwise there will be 10’s of Millions of people that don’t understand what happened when the fit hits the shan…. I’m just saying…

OK, one down… now for the next explanation… Basel 3 is an interesting regulation for Banks and this will include the Bullion Banks who happen to also be the price manipulators.  These banks are going to have to reserve more money to hold unallocated Gold…  Here’s quick explanation from the folks at Basel 3…

“So, whilst Basel III does not materially change the treatment of allocated gold, it does increase the costs of holding unallocated gold. But does this mean the unallocated gold market will disappear? No it won’t, but the costs of holding unallocated gold will go up. Unallocated gold is an essential source of market liquidity. The clearing and settlement regime depends on it, and without an unallocated gold market it will be very difficult to finance (and facilitate) the upstream activities of gold producers and refiners, and the downstream users of gold such as jewellers and fabricators. The real economy demand for gold relies on the unallocated gold market. So whilst the funding cost of unallocated gold will increase, we are unlikely to see a major distortion in favour of allocated metal due to the imposition of the NSFR.”

Chuck again…  Gold is a safe harbor asset. Its lack of credit risk,  and its highly liquid nature means it can act as a financial system stabilizer. Anything that discourages banks from holding gold may increase the vulnerabilities of the financial system during liquidity crises.  There are some analysts that believe Basel 3 will be a non event for banks, and other analysts that believe it will be a God send for Gold…  I’m on the fence here, and not sure which mast I want to pin my colors to!

OK… I know that at times I sound doom and gloomy, and I’m really not that kind of person… I’m an optimistic kind of guy, always looking for good, but most of the time finding bad… And so when I was going through Twitter yesterday, I came across this tweet from Jon Gordon, and thought… This is more me… check it out:

“7 Ways to Make Today a Better Day:

1. Look for the good.
2. Appreciate the little things.
3. Be a helper.
4. Tell someone they matter.
5. Give more than you take.
6. Speak words of encouragement and hope (to yourself and others).
7. Believe the best is yet to come.”

To recap… The currencies couldn’t hold their gains from Tuesday on Wednesday and begin today trying to regain their advantage over the dollar bulls… Gold traded down, then up, then back down on the day and closed 50-cents down. And Silver did the same closing up 10-cents but remaining below $26 once again… Chuck gives a long explanation about debt, he talks a bit about Basel 3, and tries to cover up all his gloom and doom talk with some things to make today better…

For What It’s Worth…  Ok… I’ve followed James Rickards for years, met him in Florida many years ago, and have read all his books. The guy knows what he’s talking about folks… He predictions and forecasts may not come to fruition, but the thought process behind it was good, and therefore warranted being aware… Well, Rickards has a new article about the Great Reset, and I think it behooves us to listen to what he has to say about it. The article can be found here: The “Great Reset” Is Here – The Daily Reckoning

Or, here’s your snippet: “or years, currency analysts (myself included) have looked for signs of an international monetary “reset” that would diminish the dollar’s role as the leading reserve currency and replace it with a substitute, which would be agreed upon at some Bretton Woods-style monetary conference.

Now, it looks like the move towards the long-expected Great Reset is accelerating.

At the recent G7 summit in the UK, G7 leaders gave their blessings to a $100 billion allocation of IMF special drawing rights (SDRs) to help lower-income countries address the COVID-19 crisis.

President Biden fully supports the idea. The White House issued the following statement:

The United States and our G7 partners are actively considering a global effort to multiply the impact of the proposed Special Drawing Rights (SDR) allocation to the countries most in need…

At potentially up to $100 billion in size, the proposed effort would further support health needs – including vaccinations…

A separate press release from the same day continued the same sentiment, stating, “We strongly support the effort to recycle SDRs to further support health needs.”

In another development, IMF Managing Director Kristalina Georgieva said last Wednesday that she expected the fund’s governors to approve a $650 billion allocation of SDRs in mid-August.

The basic idea behind the SDR is that the global monetary system centered around the dollar is inherently unstable and needs to be reformed.

Part of the problem is due to a process called Triffin’s Dilemma, named after economist Robert Triffin. Triffin said that the issuer of a dominant reserve currency had to run trade deficits so that the rest of the world could have enough of the currency to buy goods from the issuer and expand world trade.

But, if you run deficits long enough, you would eventually go broke. This was said about the dollar in the early 1960s. The SDR would solve Triffin’s Dilemma.”

Chuck again… Russia and China have already begun their dedollarization, and now the IMF is ready to replace dollars with SDR’s around the world?  Uh-0h speghetti-0’s…

Market prices 6/24/2021: American Style: A$ .7575,  kiwi .7057, C$ .8130, euro 1.1940, sterling 1.3910, Swiss $1.0888, European Style: rand 14.2140, krone 8.5135, SEK 8.4661,  forint 293.45,  zloty 3.7903,  koruna 21.2797, RUB 72.68, yen 110.82, sing 1.3435, HKD 7.7642, INR 74.05, China 6.4761, peso 20.11, BRL 4.9590, BBDXY 1,137.05, Dollar Index 91.78,  Oil $72.97, 10-year 1.49%, Silver $26.15, Platinum $1,091.00, Palladium $2,692.00, Copper $4.21, and Gold… $1,785.70

That’s it for today… Thanks for sticking with me today as I did some wordy explanations… On Monday next week, I won’t be writing as I will be at the hospital to visit my oncologist… I DO have the date right this time! And since I won’t be writing on Monday, I need to wish my youngest son, Alex , a Happy Birthday today for his birthday on Monday… Very Longtime readers will recall when Alex was 3 and would sit on my lap and help me write the Pfennig, with comments like: $#@*&T%$A HA!  Alex will be 26 on Monday… He a practicing Physical Therapist these days, owns a house, a car, a dog, and has grown up to be quite the responsible adult… I’m proud of him!  As a family, we will probably celebrate his birthday on Sunday, hopefully the weather will be nice, and I can cook some good stuff on the Big Green Egg! I know he loves the way I cook Turkey breasts, so I’m figuring that’s on the agenda for Sunday! I have a picture of Me, Andrew, and Alex at the All-Star Game here in 2009… one of my fave pictures… Oh, and last night Rachel was here and was walking to her car with little Evie, and I came to do the door and said, “hey Evie!”, she turned and ran to me across the front yard, and gave me a big hug… I was so excited that she did that! Made my day, week, year!  Ok, I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and a we’ll talk again next Tuesday! The Beatles take us to the finish line today with their song: When I’m 64…  (will you still need me, will you still feed me, when I’m 64?) And Please Be Good To Yourself!

Chuck Butler

 

June 23, 2021

* Currencies rally on the Powell testimony to Congress

* Is Silver’s new line in the sand $26? 

Good Day… and a Wonderful Wednesday to you! Man do I love the cool down that we’re experiencing this week here in the Midwest… The days are still very warm, but not HOT! I sat outside to read yesterday for 2 hours, and then came inside, sat in my recliner, and next thing I knew, I had slept for 3 hours! Reading is like taking a sleeping pill for me…  Well, my beloved Cardinals got back on the ball field last night, only to embarrass themselves, losing to the rebuilding Tigers, by a large margin. UGH! I’m going to play manager here, and shake up the lineup… And fire the hitting coach! He’s been here for 3 years, and in that time our offense has gotten worse, when you would have thought that the only way to go was up from where they were… But noooooo!   One of my all-time fave bands, and songs, greet me this morning, as Chicago plays their song: Beginnings… 

Well… Fed Chairman, Jerome Powell, spoke to Congress on Tuesday, and basically spoke out of both sides of his mouth, with no one calling him out on that… Did anyone in Congress take an economics course or two in college? Powell, said things like: “The overshoot of inflation comes from categories like used cars and trucks that are directly affected by the reopening of the economy.” And then would follow that up with: “That inflation could turn out to be more persistent than expected.” 

I also found it interesting that he only highlighted cars and trucks as inflationary items… Hey Jay! How about food, clothing, housing, insurance, health care, and the list could go on, and on, of inflationary items right now, but he chose to mention only two… which tells me he has no idea whatsoever of what is happening in the real world…

I have a ditty on inflation in the FWIW section today… so you won’t want to miss that!

So, that was a long intro to tell you that the currencies found solace in Powell’s words, and rallied on the day.. As he made sure the markets heard that the Fed is NOT going to raise rates until 2023… The euro climbed back over the 1.19 figure, the BDDXY which began the day at 1,143.96, ended the day at 1,138.48, and the Dollar Index was 92.04 yesterday morning, and closed at 91.75… So, you can see that there was definitely slippage in the dollar yesterday…  So, we’re back to having the dollar at risk… we were here about 10 days ago, and then voila! We weren’t there any longer. The Plunge Protection Team did their thang and pushed the dollar higher for over a week of trading, and now we’re back to having the dollar at risk… That doesn’t mean that the dollar will be weaker every day, but the general direction will be downward… Until it’s not…

But it wasn’t a good day for Gold & Silver… It was NOT as bad of a day as, pick any day last week, but Gold ended the day down $4.60 to close at $1,779.80, and Silver ended the day down 19-cents to close at $25.86… I have no idea why Gold was getting sold yesterday, when the dollar was getting sold… But it was….   I truly expect the price of Gold to be choppy for the next few weeks… The summer months are usually a time when Gold does drift, as investors have other things on their minds…

Ed Steer of www.edsteergoldsilver.com titled his letter this morning: Silver Not Allowed To Close Above $26….   yeah, remember before the debacle that was last week, I talked about how $28 seemed to be the line drawn in the sand for Silver?  And now it’s $26?  Yikes! Well, a quick look at Silver this morning shows that it has moved past $26 in the early trading today, so now the question is will it be allowed to close above $26? Well, only the shadow knows…. 

Another thing that was surprising to me yesterday with the selling of Gold was that Bitcoin had an absolutely horrible day, and traded below $30,000…   I would have thought most investors that have taken part in the scam that is Bitcoin, would be taking their Bitcoin sale money and buying Gold, but stranger things have happened these days, and this is one of those strange things…

In the overnight markets last night… When I was getting ready to retire last night, I did a quick check of the currencies & metals, and they didn’t appear to be doing well… But in checking the figures early this morning I see that the memo finally got through to the overseas traders, that the dollar buying was over, and the currencies & metals turned around and headed north…  

The BBDXY which closed yesterday at 1,138.48, is just a tad below that figure this morning at 1.38.40, and the Dollar Index is in the same boat, slipping only a tad this morning.  So, we start today with the euro trading up VS the dollar, and Gold up $4.40, and Silver up 19-cents in the early trading…  There’s no data again today to move the markets, so if these asset classes are left alone with no outside interference, they should be just fine today… 

The U.S. Data Cupboard is still basically empty today.. The 1^st QTR Current Account Balance will print, but it’s old news… And instead of saying “Balance” I should just say “Deficit”…  The so-called experts are looking for the Current Account Deficit to widen in the 1^st QTR to $205 Billion from $188 Billion in the final quarter of 2020… The markets used to watch this data like a hawk watches over its young, but not any longer, and so it qualifies as being a non-market moving data print…

To recap… Fed Chairman Powell, spoke to Congress using contracting statements that no one in Congress called him out on… But the one thing he did do is make sure the markets were listening to him, when he said that the Fed will not hike rates before 2023… That news got the currencies in gear, and they started beating back the dollar bugs, to end the day with some nice gains VS the dollar. Gold & Silver weren’t allowed to party with the currencies yesterday… Chuck thinks it’s very strange that Gold was sold on a day when Bitcoin fell below $30,000…  But stranger things have happened… 

Before we head to the Big Finish today, I wanted to highlight something that longtime reader Bob, sent me from Bill Sardi…  I’ll set this up by talking about how I keep saying that we all know there’s something not right in America… Well Bill Sardi has listed them, and of course his list is not conclusive, but it’s a good start… let’s listen in has he lists them:

“Reality is scoffed at, and illusion is usually king.”  – Dr. Stan Monteith

It appears, in the very near future, Americans are going to wake up to an America:

• Where money is nearly worthless due to intentionally-induced inflation;
• Where there are contrived shortages of gasoline, food, water and electricity;
• Where those who don’t comply with mandatory vaccination will have to be crated to re-education camps to save the rest of us;
• Where guns will be taken away to save the people from themselves.
• Where the masses must be placed on a guaranteed basic income and be thankful their government saved them from the consequences of a capitalist/racist society.
• Where a man-made mutated virus is racing through the population that cannot be controlled by vaccines.

And it will never even cross the minds of naïve Americans this was all staged… 

Chuck again…  This has been a public service announcement, now you can go back to our regular programming… 

For What It’s Worth…  Well, good friend, Dennis Miller of www.milleronthemoney.com sent me this link to the article in our FWIW section today… It’s an article that shows how even IF the inflation we are seeing right now is transitory, it’s still damaging, and it can be found here: Why Even “Transitory” Inflation Permanently Erodes Your Savings (birchgold.com)

Or, here’s your snippet: “Inflation might be transitory, but its damage is permanent

Here’s why inflation is forever…

Consider our imaginary friend Arthur. He nets $100 per month. After year of 5% inflation, Arthur’s monthly money buys 5% less. Next year, it turns out the inflation spike really was transitory, so the inflation rate goes to 0%.

Here’s the thing: Arthur’s monthly income STILL buys 5% less.

It’s as if Chairman Powell reached into Arthur’s pocket and stole $5 every month. Forever.

That’s why we called inflation the Federal Reserve’s tax that no one voted for and everyone pays.

Wolf Richter laid out the ugly scenario that plagues our savings right now:

Inflation is a game of Whac-a-Mole. One pops up as another backs off. So it could very well be that CPI inflation may be 4% next May, down from 5% now, and we’ll be celebrating that the 5% was “temporary,” and was replaced by 4%, hahahaha. But the purchasing power of the dollar that is lost every month is lost permanently. [emphasis added]

Of course this is nothing new. The dollar’s buying power has been on a downhill slide overall since June of 1913, with the exception of a notable four-year recovery from September 1929 to May 1933. (Another interesting correlation is the Federal Reserve was also established in December of 1913.)

Wolf also believes the dollar’s descent hasn’t reached the bottom yet, and that it never will. With a Federal Reserve that’s so terrified of deflation they’ll do anything to prevent it, there’s not much of a chance that any of that lost buying power will return.

Remember, even if inflation reaches zero, it will be too late — you will have already been robbed.”

Chuck again… Well nothing here that I haven’t told you over and over again about inflation and your loss of buying power, but just like when you have kids that don’t listen to you, but will listen to someone else, I thought having someone else explain it here, would do a world of good…

I had a dear reader ask me if the increase in price of a sandwich at her local bodega would come back down if inflation is only transitory? I explained that this is the problem with even transitory inflation… once the prices increase, they don’t come back down… On a sidebar here; Did you ever notice how when a restaurant has new menus, the new menus reflect new prices?  Funny how that works, and not funny ha-ha, either! 

Market prices 6/23/2021: American Style: A$ .7572,  kiwi .7036, C$ .8138, euro 1.1950, sterling 1.3969, Swiss $1.0902, European Style: rand 14.1833, krone 8.5279, SEK 8.4780,  forint 291.69,  zloty 3.7834,  koruna 21.2796, RUB 73.04, yen 110.78, sing 1.3445, HKD 7.7655, INR 74.13, China 6.4729, peso 20.28, BRL 5.0009, BBDXY 1,138.40, Dollar Index 91.74,  Oil $73.43, 10-year 1.46%, Silver $26.02, Platinum $1,086.00, Palladium $2,668.00, Copper $4.21, and Gold… $1,784.20

That’s it for today…  The Moody Blues sing a song titled: Lost In A Lost World, and that’s were the markets seem to be these days… We all know in our heart of hearts that something’s not right, and yet stocks keep rising, I do believe at this point the stock market is seeing a bad case of FOMO by investors… And that’s not a good thing…  But… no one seems to care… I almost didn’t answer the bell this morning, Man, I wanted to continue to sleep… But… I rationalize with myself that I could go back to sleep after I finished writing, and that got me up and going! HA!  It appears to be another Chamber of Commerce Day today, weather-wise, and what do I have here?  The Rascals take us to the finish line today with their song: A Beautiful Morning….  I was singing this song to Evie on Saturday morning, and she just looked at me like I had three eyes…  But I never let a kid looking at me like that deter me! I just kept singing!  I hope you have a Wonderful Wednesday, and Please Be Good To Yourself!

Chuck Butler

June 22, 2021

* Currencies & metals rally on short coverings on Monday

* The price of Oil continues to rise… 

Good day… And a Tom Terrific Tuesday to you! My beloved Cardinals had a day off yesterday, so I was a lost soul last night not having my Cardinals on TV to watch! UGH! But I survived! We had major storms come through on Sunday night, and the temps have cooled, which is a great reprieve from the oppressive heat we had last week… Don’t get me wrong, I’m always saying I love warm weather, but oppressive heat I can do without! I like to sit outside, and read, under the sun, soaking up Vitamin D, but not when it’s so hot! OK… moving on… Man I did something to my trap muscle in my neck area, and it reminds me every time I move my left arm… Silly stuff… But you know, with me… it’s always something! Brian Setzer plays his rendition of the old Santo and Johnny song to greet me this morning: Sleepwalk… Which is something I feel like I’m doing some mornings! HA!

Well… Short covering was the order of the day yesterday, and those buys to cover the shorts were the main reason, along with investors taking advantage of the excellent buying opportunities, Gold finally had a positive day price-wise, in what seemed to be a Blue Moon..  Gold started the day up $19 yesterday morning, and then during the morning session, it dropped to being up just $10. But it recovered in the afternoon, and ended the day up $19.60 to close the day at $1,784.70, and Silver gained 14-cents on the day to close at $26.04

The currencies came back with a vengeance yesterday, and stormed through the day acting like they were getting revenge on the dollar for last week…  The euro climbed back above 1.19 on the day, and all the other currencies followed the Big Dog euro… The BBDXY which ended the day on Friday at 1,144.82, ended the day on Monday at 1,139.99, so a large slide there, and the Dollar Index which closed at 92.22 on Friday ended the day on Monday at 91.85…  I had told you yesterday that Gold was oversold, and it proved to be just that on Monday… It’s still quite oversold, but at least we had one day of recovery…

So, last week was put to bed, and it was all a case of propping up the dollar… You know, if little old me in the Midwest can see that the dollar was heading south, then the Ivy league propeller heads up East can see it too, and they proceeded to render the situation null and void… But if my thoughts are correct, they’ll have to keep coming back to correct the dollar’s slide over and over again as we go forward… The Exchange Stabilization Fund, (ESF) has Billions of dollars to spend to prop up the dollar, so it’ll all be a opportunity, whenever the Plunge Protection Team decides to spend some ESF money, and bring the currencies, Gold & Silver all down, to pick them up at some bargain prices, once the PPT has finished…

Just for the record…. The Treasury Dept. describes the ESF like this: The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s, the Act provides in part that “the Department of the Treasury has a stabilization fund …Consistent with the obligations of the Government in the International Monetary Fund (IMF) on orderly exchange arrangements and an orderly system of exchange rates, the Secretary …, with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities.

Just in case anyone out there doesn’t believe me when I say the ESF is propping up the dollar! 

Oh, and for the record, the ESF last year was given $500 Billion in the Cares Act….   That’s either comprised of fake money, printed up on the go, or tax dollars, folks…

Ok, moving on… In the overnight markets last night, there was some additional dollar buying, as if the Asian and European traders didn’t get the memo yesterday, that the dollar buying was over!  The euro slipped back below 1.19, but Gold & Silver are holding to their gains from yesterday. Gold is flat to up a buck or two, and Silver is up a wooden nickel…  

The price of Oil this morning, is trading with a $73 handle…  So, lumber may be seeing price declines, but the price of Oil isn’t, and this commodity is used by everyone so its price increase hurts the buying power/ disposable income of everyone!  

The Petrol Currencies for the most part, are doing better this morning, as the Norwegian krone, Brazilian real, and Canadian dollar/ loonie, are all stronger this morning. The usual leader of the pack, The Russian ruble, has stumbled back above the 73 figure… I guess the BIG SUMMIT between the POTUS and Putin didn’t solve any of the problems that are going on between the two countries…  Did you think it would? I figured from the first I heard of it happening, that it was just a photo op… 

I’m sure that Putin tried to get Biden to ease up on the sanctions, but Biden has his marching orders from the Deep State, to keep the sanctions in place, and so that was that… 

Moving on… Recall a couple of months ago, when I reported that the FBI had seized safety boxes of individuals in Las Angeles, and how lawyers were saying that it was unlawful to do so?  Well, here’s the follow up from G. Edward Griffen’s Need To Know site: “Beverly Hills: A class-action suit claims FBI exceeded its search warrant in March and took possession of the contents of about 800 safe deposit boxes kept with storage provider US Private Vaults (USPV), which was indicted for conspiracy to sell drugs and launder money. However, the owners of the boxes are not accused of committing any crimes. The search warrant only authorized the FBI to inspect the safe deposit boxes to “identify their owners in order to notify them” about claiming their property. Owners’ boxes have been seized under civil forfeiture proceedings and the civil forfeiture notices said the feds can deny return of the items if it judges the responses are not filled out “correctly.”

So, it will be interesting to see how this all plays out… Either way, it does make you question what’s going on here, right? Is the FBI above the law? And the other question is where can you store valuables without subjecting them to FBI searches? 

Not that the safe boxes seizure has anything to with markets, so I digress here, and I apologize… 

The U.S. Data Cupboard remains basically empty today, with only some housing starts data to print…  But there is one thing on the docket today that has the markets wondering what he might say again, and that is a testimony by Fed Chairman, Powell to Congress on the pandemic… and its effects on the economy…  

I don’t need no stinkin’ Fed Chairman to tell me the effects of the pandemic on the economy… Or rather the effects of shutting down the entire economy for longer than two weeks… Supply Chain disruptions are the bugaboo for trade, and this will continue for at least the rest of this year folks… Which will keep the inflation rate high.. 

You know back in the 1970’s when Gold had a decade of price increases, there was no Exchange Stabilization Fund, and the likes of Kissinger, and others at that time hadn’t quite figured out how to stop the price increases, but they knew they had to do something, or the dollar would collapse… They eventually figured out to manipulate the price of Gold, and the rest is history… 

So, when inflation was soaring in the 1970’s and Gold was keeping up with the inflation increases, the markets traded like free markets, and not the manipulated markets that we have today… For if we did, Gold would be soaring right now, in the face of the high inflation rate in the U.S.  And the dollar would be getting sold like funnel cakes at a State Fair!  I’m just saying… 

Things are just so strange these days, that I sit here in the morning and attempt to make sense of it, and find most days that I’m at a loss… For things are so strange, there’s no excuse for their actions…  But I know, and I think you do to, that there’s something seriously wrong going on in this country, and that at some point it will come to a head…  

To recap… The currencies and metals rebounded somewhat on Monday, as short covering helped Gold & Silver recover some lost ground from last week, and the currencies all acted like they were getting back at the dollar for last week’s debacle… Powell gives a testimony to Congress today, and the price of Oil continues to climb higher, trading this morning with a $73 handle. 

For What It’s Worth…  I have a snippet today from long time friend, successful publisher, and best selling author, Bill Bonner, who does a great job of explaining what’s going on each day, and yesterday, he was talking about a 5 year forecast, and it can be found here: The Feds’ Five-Year Economic Forecast | Rogue Economics

Or, here’s your snippet: “But in the meantime, as the inflation twister draws closer, investors will become unsettled.

A study by economists at investment research firm Gavekal shows that rising inflation levels means falling stock market gains:

For the last 130 years (the period for which we have data both for U.S. prices and for the U.S. stock market), all the excess return on U.S. equities relative to cash have been realized during periods of decelerating inflation. The excess returns during periods of accelerating inflation have been a robust zero.

They go on to say that since World War II, every major bear market (with a drop of 50% or more) has come during a time when consumer price increases are speeding up.

Which should investors fear – a crash or inflation?

The answer is… both.

And herewith our simple Five-Year Forecast:

The feds will inflate. The stock market will deflate.

And then… the feds will inflate even more…

…until the inflation tornado has made a wreck out of everything.”

Chuck again… Yes the Feds will inflate more… as of right now there’s talk of another $6 Trillion deficits spending plan… That, in case you don’t know, is money we don’t have, so to spend it we’ll have to create it… And Milton Friedman said it oh so many years ago… Central Bank money supply feeds inflation… 

Market prices 6/22/2021: American Style: A$ .7516,  kiwi .6986, C$ .8074, euro 1.1897, sterling 1.3884, Swiss $1.0870, European Style: rand 14.2979, krone 8.5882, SEK 8.5493,  forint 297.48,  zloty 3.8084,  koruna 21.4670, RUB 73.03, yen 110.47, sing 1.3458, HKD 7.7653, INR 74.22, China 6.4638, peso 20.56, BRL 5.0604, BBDXY 1,142.96/ Dollar Index 92.04,  Oil $73.15, 10-year 1.48%, Silver $26.10, Platinum $1,065.00, Palladium $2,643.00, Copper $4.14, and Gold… $1,786.40

That’s it for today…  Last Friday, was an anniversary of sorts for me… It marked 14 years since I had my first major cancer surgery. It’s been 14 years since I was diagnosed with Stage 4 metastatic renal cell carcinoma (kidney cancer). And next week will mark the 14 years since my second major cancer surgery. Time flies when you’re having fun right? Well, these past 14 years seem like the first 50 years I was on earth!  But I’m still here…  still kicking, still loving life, family, friends, baseball, and pizza! There are many people to thank for me still being here, first and foremost, the Good Lord, then my wife, and kids, the doctors who have looked over me, my friends, the different medicines I’ve taken, and the people that have prayed for me…  And I can’t forget my old boss, who allowed me to continue to work, even with my missed days, short days, and time away to have scans etc.  Every day is a blessing for me… And I try to make the most of the day…  By first writing this letter… And with that, we’ll head to the finish line today with a song by John Lodge and Justin Hayward (Blue Jays): I Dreamed Last Night… (one of my all-time fave songs)  I hope you have a Tom Terrific Tuesday, and Please Be Good To Yourself!

Chuck Butler

June 21, 2021

* Wed, Thurs, Fri, all saw dollar buying last week

* Gold & Silver attempt to comeback in the overnight markets

Good Day…. And a Marvelous Monday to you! Well, how was your Father’s Day Weekend? Mine was marvelous! We had little Evie here for Friday & Saturday, and she brought me such joy and laughter… Then on Sunday, all my kids and grandkids were here, and everyone except me, spent the day in the pool, because it was such a hot day… They keep me from getting in the pool because they don’t want the water level to rise! HA! Just kidding… I was watching my beloved Cardinals play the Braves…  A free week for me, this week, with no doctor appts!  The Allman Brothers greet me this morning with their song, and my favorite song from them: Melissa… 

Well… Friday was no different than Wednesday and Thursday last week, which saw the currencies and metals get sold down the river, and the dollar climb up into its throne as the king currency once again.  This was brought on by somewhat hawkish statements by Fed Chairman Jerome Powell on Wednesday, last week, when he mentioned that prices were rising faster than forecast, and that the Fed would be considering raising rates twice in 2023…  That’s right I said in 2023, not next month, not next quarter, or even next year!  

I asked myself on Friday morning, when I saw that the currencies and metals were getting sold again, “Why on earth did traders and market participants get their panties all bunched up about that statement? ” Did they even consider for one minute that ANYTHING can happen in 1 1/2 years? Wouldn’t it be better to trade on Knowns, not WHAT IFS? 

So, the currencies tried to recover on Friday but were pushed down, the euro fell below 1.19, and all other currencies lost appreciable ground… The BBDXY rose to 1,144.82, and The Dollar Index rose to 92.22 to end the week, which was probably one of the worst weeks for the non-dollar asset classes that I had seen.  Gold lost another $10.20 on Friday to close the week at $1,765.10, and Silver lost 10-cents to close the week at $25.90… Like I just said, that was one of the worst weeks I had seen… I just repeated that to emphasize what I’m trying to get across… 

What that did, if you want to put a silver lining on all that selling is bring about some excellent buying opportunities… And that’s all I can say about last week that’s upbeat… 

In the overnight markets last night, the dollar buying has stopped, for now… The BBDXY has slipped to 1,142, and the Dollar Index has slipped to 92.05… And Gold is up $19 in the early trading, with Silver gaining 20-cents today.  

Long ago, and far away, I used to be a Foreign bond trader, and I would use a program on Bloomberg that measured Relative Strength, it was the RSI. Over the years, I never used it for currencies, I don’t know why, but I didn’t…  So, it was interesting on Friday to read that an analyst was using the RSI on Gold, and saying that Gold was way oversold when you looked at it in the RSI (relative strength index)…  That brought back some great memories for me, but also pointed out something that I was thinking, and that was that Gold was oversold by  truckloads… 

And then I read a research paper that talked about the Fed’s Dot plot… As you well know the Fed uses dots on a board to signal its outlook for the path of interest rates… And these dots are projecting a rate hike in 2023, but when have the dots signaled a rate hike that didn’t happen?  Well, just recently… In Sept 2019, there were dots that projected a rate hike to 1.6275% for 2020… Well, we all know that didn’t happen, and it just shows to go you that Things Can Happen, with rate projections that far out… 

Ok… Have you heard the news that Russia has developed their own payment system that they can use to complete trading with other countries, IF the U.S. bounces them out of SWIFT?  SWIFT is the payment system that is used by all countries to complete trade.  Here’s Russian Deputy Foreign Minister Alexander Pankin  who was speaking  at parliamentary hearings in the State Duma. Let’s listen in… 

“Of course, we need to prepare for additional restrictive measures, we usually call sanctions. It is clear that it is impossible to prepare for everything, but already in the economic and financial departments, serious work has been launched related to the transfer of settlements into national currencies, the introduction of payment systems.” 

I will be thinking of some dastardly things about SWIFT, if this new payment system cuts the mustard… 

Well it wouldn’t be a Daily Pfennig without mentioning Inflation… For those of you keeping score at home, you’ll want to make sure you note that the price of Copper has fallen out of bed, and that the price of Lumber has fallen too…  Is the inflation fear going to peter out like David Rosenberg said it would?  Well, I’m from Missouri, so I’m going to have to be shown, because if memory serves me correct, inflation was beginning to ramp up pre March 2020, and so it was put on hold for a year.. . And now it’s picking up where it left off… I wouldn’t put too much stock in inflation fading just because the price of lumber came down…  There was definitely a shortage of lumber, and now there isn’t…  People just stopped buying new homes to build because the prices kept going higher…  When the demand slips, so does the price…  until… the demand returns, which it will, with mortgage rates in the 2’s… 

But, what if James Rickards and David Rosenberg are correct and inflation doesn’t rule the day until 2022?  What does that do to the Fed’s Dot plot? See? I’m just trying to show that the markets reaction to the Fed’s rate projections are misplaced… erroneous… just plain wrong!  But a wise man once told me that “The markets are never wrong”… (Thanks Ed!) So, we have to pick up the pieces of our scattered dreams and attempt to put them back together again… This is not the end of the price gains for Gold… and weakness in the dollar… 

The U.S. Data Cupboard is empty today, and will remain that way, pretty much that is, for the rest of the week…  It sure seems to me these days, that traders don’t really pay attention to the data like they used to… But then that was when fundamentals ruled the day, and these days it’s all about trader sentiment…  So, no data doesn’t mean what it used to, and busy data days don’t either…  Makes no difference to the traders..

To Recap…  Well, last week was one of the worst weeks for the non-dollar asset classes that Chuck had ever seen… Friday was no different from Wednesday and Thursday last week, with the currencies losing major ground, and Gold losing another $10, to make its weekly loss about $100… In the overnight markets Gold is up $19 and the BBDXY has slipped… 

For What It’s Worth… So, last week it was announced that the ECB would issue a new bond offering for the first time in a while… And then it didn’t take long for the folks at www.wallstreetonparade.com, Pam and Russ Martens to find out that a couple of U.S. banks will not be allowed to participate in the bond offering… That story and more can be found here: JPMorgan, Citigroup and BofA Ruled Not “Fit” to Participate in Huge European Bond Offering Because of Past Crimes (wallstreetonparade.com)

Or, here’s your snippet: “How embarrassing it must be for Jerome Powell, Chairman of the Federal Reserve, that three of the largest banks in the U.S. that are supervised by the Fed, have been deemed not trustworthy enough by the European Commission that they were banned from participating in this week’s historic European Union bond offering.

It is also egg on the face of the U.S. Department of Justice, which has been handing out deferred prosecution agreements to these same banks for felony counts like it’s a meter maid doling out parking tickets.

JPMorgan Chase, Citigroup and Bank of America were banned along with seven non-U.S. banks from participating in this week’s European Union bond offering. The syndicated offering is part of what will grow over the next five years to be a $969 billion COVID-19 recovery fund for the European Union, part of the plan it’s calling NextGenerationEU.

The seven non-U.S. banks that were barred are: Barclays, Crédit Agricole, Deutsche Bank, Natixis, NatWest, Nomura and UniCredit.

Adding to the embarrassment of the three U.S. banks that have been banned is the fact that a much smaller U.S. bank in terms of assets, Morgan Stanley, snagged the position as one of the joint lead managers on the deal.

According to reporting in the Financial Times, the European Commission explained the ban this way: “The Commission implements a strict approach to ensuring that the entities with whom it works are fit to be a counterparty of the E.U.”

The banned banks are deemed unfit because they have been charged by the European Commission with engaging in cartel activity within the European Union. In the case of JPMorgan Chase and Citigroup, they settled with the European Commission in 2019 over charges of being part of a larger bank cartel rigging foreign currency markets. JPMorgan Chase and Citigroup were also charged and settled with the European Commission in 2013 for being part of a larger bank cartel rigging Yen interest rate derivatives.

Chuck again… serves them right!  The past sins are not forgotten… 

Market prices 6/21/2021: American Style: A$ .7514,  kiwi .6970, C$ .8052, euro 1.1898, sterling 1.3880, Swiss $1.0858, European Style: rand 14.2268, krone 8.6443, SEK 8.5896,  forint 297.27,  zloty 3.8066,  koruna 21.4755, RUB 72.75, yen 110.12, sing 1.3443, HKD 7.7639, INR 74.04, China 6.4480, peso 20.57, BRL 5.0883, BBDXY 1,142.57, Dollar Index 92.05,  Oil $71.81, 10-year 1.43%, Silver $26.10, Platinum $1,042.00, Palladium $2,574.00, Copper $4.18, and Gold… $1,784.70

That’s it for today… Well, the official start of summer began yesterday, with the Summer Solstice… It’s now onto the 4th of July which will be in two weeks… I have to say that it sure is nice that people can get together again, and go to ballgames, etc. We ARE humans and We do NEED social interaction!  So, little Evie helps me cool off my hot coffee in the morning, I ask her to blow on the coffee and she give it a little puff of air, and I say, Thank you, you cooled it off!” and she smiles with this smile that will melt your heart…  I put an 11.5 lb pork but in the Big Green Egg on Saturday, and 13 hours later, I pulled it off and prepared it for pulled pork on Sunday… man was that tasty!  OK… the late great Leon Russell takes us to the finish line today with his song: Stranger In A Strange Land…   I hope you have a Marvelous Monday, and please Be Good To Yourself! 

Chuck Butler

June 17, 2021

* Currencies & metals get sold down the river on Wednesday

* Fed admits that prices are rising faster than they forecast! 

Good day… And a Tub Thumpin’ Thursday to you! The letter is going out late today, no biggie, just another day when I didn’t want to answer the bell…  Boy did the Fed throw a spanner into the works yesterday! Or, as I used to say… the Fed threw a cat among the pigeons….. I’m glad I was at the ballgame and wasn’t following their statement. Speaking of the ballgame, what an absolute beautiful day it was, and we saw an excellent pitched game by both teams, and to top it off the Cardinals won 1-0 with a walk off win in the bottom of the 9th, to send the crowd home happy… Chicago greets me this morning with their song: Free…  

Well, where do I begin? I may as well get to the losses and then explain why that all happened…  The dollar was king yesterday, but only after the FOMC meeting, and the announcement following. The currencies are trading this morning with prices that look very strange. There were only two currencies that held their ground VS the dollar yesterday, The Brazilian real and Chinese renminbi / yuan. 

The BBDXY went from 1,123 in the morning to end the day at 1,139… That’s quite a leap folks… The euro took the brunt of the dollar buying, and fell through two figures, down to 1,1934 this morning.  But that’s nothing compared to the losses Gold & Silver suffered yesterday. 

Gold lost $46.80 on the day to end the day at $1,812.90, and the selling hasn’t stopped today, with Gold down another $23 in the early trading today, to bring the shiny metal below $1,800… And Silver couldn’t hide from the dollar buying either, with a $71-cent loss yesterday, and another 49-cent loss this morning…  

The price of Oil continues to trade with a $72 handle, and was spared yesterday… The 10-year Treasury got sold too, with the yield rising from 1.48% yesterday morning to 1.57% today…  

So, what did Fed Chairman Powell say in the press conference after the meeting that caused all these losses?  Well, let’s break this down… first, the : Fed officials surprised markets after their two-day meeting with a forecast for two rate hikes in 2023, after previously predicting none. And second… The Fed also said it discussed tapering its bond program, as expected, but it provided no timeline on when it would begin the process.

The Fed did also admit that inflation is rising faster than they projected 3 months ago, and that’s the reason they feel they will need to hike rates in 2023…  

The key here is they are saying 2023… if I not blind, and can see a calendar, that’s 1 1/2 years from now… There’s a whole lot of good and bad that can happen between now and 2023…  So, why were the markets so moved to push all these asset classes to lower levels?  Well, for one, they were surprised by the statement… And they got their panties all in a wad, when Powell, sounded so hawkish…  

There are tons of things I’m thinking about all this, and the one that keeps coming forward in my brain is my concern that remains about whether  the central bank can continue to manage the path away from its extraordinary policies smoothly. I doubt they will be able to, but that’s a discussion for another day. 

The other thing that gets me is the markets didn’t punish the Fed for their continuing mantra of inflation is only Transitory… The Fed admitted that prices are rising faster than they forecast 3 months ago…  So, if their forecast for prices is wrong, then their forecast for rate hikes is probably going to be wrong too… 

I know what the Fed is thinking here folks… That inflation is rising faster than they expected, and their hands are tied for now to combat it, so they’ll try to jawbone inflation down with talk of rate hikes 1 1/2 years from now… 

And in the end… What they have done is give every procrastinator a buying opportunity… When was the last time you could get Gold below $1,800 or Silver below $27, and pick your currency, they all have levels that are way below their recent levels…  

One more thing about the losses in Gold & Silver… These losses were not completely brought on Gold owners selling… Once the Fed press conference was over the price manipulators saw an opportunity to really stick it to Gold & Silver, and they showed up at the COMEX with arms full of short Gold or Silver paper trades…  These no good, varmints should be taken out to the north 40 and, well… I guess I need to stop there… 

So, the negative print for Retail Sales on Tuesday was forgotten about, nothing to see here, move along…  And it was all about the stupid Fed talking about rate hikes in 2023…  What will inflation be in 2023?  The Fed didn’t tell us what their models say about that and that would be the reason for their rate hikes… This is all shrouded in darkness to me folks, and therefore I’m going to just go batten down the hatches until this all blows over… 

There’s only the Weekly Initial Jobless Claims in the U.S. Data Cupboard today and they haven’t moved the markets in a long time, so basically there’s nothing to see in the Cupboard today, and tomorrow, there are no prints scheduled, so an end of the week with not much to trade off of… 

To recap… The Fed surprised the markets with hawkish comments yesterday that led to a discussion about when they see rate hikes, and that turned out to be 2023… They admitted that prices are rising faster than they forecast 3 months ago. But never apologized for saying that inflation is only Transitory…  The currencies & metals got sold like funnel cakes at a State Fair, and look to be still on the selling blocks this morning. 

For What It’s Worth…  Well, I mentioned the price manipulators above, and this article talks about how they went about bringing the price of paper Gold down yesterday… The good folks at GATA sent this to me and it can be found here: Comex Gold Trading Was Form vs. Substance Today | Investment Research Dynamics

Or, here’s your snippet: “In his commentary a few hours ago at Investment Research Dynamics in Denver, Dave Kranzler wrote it’s unlikely that anyone either bought or sold real gold at the smashed prices reported on the New York Commodities Exchange Wednesday afternoon after the Federal Reserve made its latest announcement about the U.S. economy. The smash was entirely a matter of derivatives:

But then of course most gold trading in recent years has been a matter of derivatives, not actual metal, and derivatives have vastly inflated what the world considers the gold supply — and the world cooperates by continuing to give credence to derivative prices rather than prices for real metal in hand. This is the racket the world lives in.

Mainstream financial news organizations pretended t o construe the Fed’s statement as being on the tough side because, while it acknowledged that inflation is high, it contemplated two increases in interest rates — two years from now!

In a free market less controlled by derivatives, such silliness from the Fed might have sent monetary metals prices soaring. Instead somebody heavily sold gold futures in New York and prices crashed.

Just who did all that selling? 

Of course financial news organizations didn’t ask, but the sellers were almost certainly the major investment banks trading on behalf of the U.S. government, banks that are always short the metals, never long. — because they are not trading for themselves. The consistency of their position implies a practice not of seeking profit — nobody seeking to maximize profit sells all at once, as was done again today — but a practice of executing policy for an entity that needs monetary metals prices suppressed.

Of course on days like Wednesday, this work may seem useless — as useless as the World Gold Council and the mining companies it purports to represent. But Wednesday was actually a demonstration of the government’s weakness, not its strength. For Wednesday was another reminder that subtlety no longer works in gold price suppression — that the government is being forced into the open to keep the gold price down and no longer can afford not to be seen and thus no longer can keep from being exposed.

The challenge now is not so much of exposure — that long has been accomplished — but one of making people care about the injustice being      done. Understandably, even most people who know what is happening — including the journalists, newsletter writers, mining company executives, and the financial people — are still too scared to care.

But there will come a point when a few more people are inspired enough to care and find their courage, as in the great scene from “On the Waterfront,” where a diminutive and aging steve dore decides he has had enough from his union’s gangster boss: 

On what seem like bad days, the best advice may come from two very different and often adversarial but nevertheless world-changing figures from history. 

“The day may dawn,” Churchill said, “when fair play, love for one’s fellow men, and respect for justice and freedom will enable tormented generations to march forth serene and triumphant from the hideous epoch in which we have to dwell. Meanwhile, never flinch, never weary, never despair.”

And from Gandhi: “When I despair, I remember that all through history the way of truth and love has always won. There have been tyrants and murderers, and for a time they seem invincible, but in the end they always fall. Think of it — always.

Yes, there’s still going to be a great day, and some of us may even live to see it:

Chuck again… long winded snippet, yes… but one that needed to be read… pieces of this snippet belong to Dave Kranzler and others to Chris Powell… 

Market prices 6/17/21: American Style: A$ .7569,  kiwi .7014,  C$ .8107, euro 1.1934, sterling 1.3952, Swiss $1.0926, European Style: rand 14.0975, krone 8.5533, SEK 8.5345,  forint 296.88,  zloty 3.8061,  koruna 21.3747, RUB 72.13, yen 110.73, sing 1.3403, HKD 7.7650, INR 74.07, China 6.3978, peso 20.52, BRL 5.0399, BBDXY 1,139.66, Dollar Index 91.79,  Oil $72.08, 10-year 1.57%, Silver $26.56, Platinum $1,102.00, Palladium $2,827.00, Copper $4.30, and Gold… $1,789.80

That’s it for today…  Well, Sunday is Father’s Day… Longtime readers will recall me going all sappy about my dad in the past…  There was a recent Prager U. video about the need for fathers… I agreed 100%… I know I needed one in my life to teach me how to be a man… gentleman, a scholar, a good person…  I miss my dad, and wish he were here to help me understand the things that are going on today…  So, if your dad is still around, be sure to give him a hug and tell him you love him… I know I would if I could… I don’t have a poem for fathers today… sorry… My beloved Cardinals head to Hotlanta for 4 games and need to keep their better play going on the road…  Elvis, yes Elvis takes us to the finish line today with his song: One Night…  I hope you have a Tub Thumpin’ Thursday today, and Please Be Good To Yourself! 

Chuck Butler

 

 

June 16, 2021

* Currencies gain tiny amounts on Tuesday… 

* It’s Groundhog Day again for Gold & Silver… 

Good day… And a Wonderful Wednesday…  First of all I want to thank all of you who sent along messages to me yesterday regarding me not answering the bell… I do need to make one thing clear… I’ll be on chemo for the rest of my life… I have a kind of cancer that will just pop up anywhere, witness the eye cancer years ago… So, there will be no “end of treatments” for me, until they drop me down 6 feet… Or cremate me, whatever Kathy chooses to do… Not that I’m expecting that to happen any time in the near future, so I’ll keep truckin’, and have to call in sick once in a while…  Fun stuff to start the day with, eh? That’s my life…  Ok… well, we’ve passed the ½-way mark of June… Soon it will be the 4^th of July before we know it! The Moody Blues greet me this morning with their song from the Seventh Sojourn Album (one of the albums I would take to the island with me!): Lost In A Lost World…  Which is where I find myself these days… lost, in a lost world…

Yesterday’s rant about inflation, failed to point out something that I’ve talked about previously several times, and that is the supply chain disruptions causing shortages, and thus higher prices…  That is just one of the things causing inflation folks… Government printing of currency, is the main one… And let me remind everyone that I kept pointing out the inching higher of the Producer Prices (wholesale inflation) and pointing out that PP feeds consumer inflation… And yesterday, the Producer price Index for May rose .7%, which doesn’t sound that bad… But… and you knew there would be a but here, the .7% gain pushes the annual Producer Prices to a 6.6% rate… For those of you keeping score at home that 6.6% surge was the biggest 12-month rise in the final demand index since the Bureau of Labor Statistics began tracking the data in November 2010. 

Ok… I knew someone would come up with something funny about all this inflation… so here goes: Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars’ worth of groceries. Today, a five-year-old can do it.  That’s one of those funny lines that would be even more funny if it weren’t true! 

So last week we had the highest consumer inflation in 13 years, and this week we get the highest producer inflation in 11 years…   And the Fed Heads meet today to discuss all these rising prices and decide whether or not they want to backtrack on their “transitory” mantra…  I don’t see them doing a mea culpa here, but maybe in some Fed-speak they come out and admit that prices are rising too quickly…  Don’t bet the farm on that!

So, once again, and Ed Steer is right, this does feel like Groundhog Day, and the metals couldn’t find a bid all day, and the currencies couldn’t find one that lasted for more than an hour or two… So, we start today with some very ugly looking numbers, but we’ve seen uglier, so we shouldn’t let it get to us too much…   But I’ve got to say this… In all my years of following markets beginning in 1973, I know most of you who have met me in person, are saying there’s no way he’s that old! HA!  But in all those years, I’ve never seen markets trade like this. Complete opposite of what should be going on…  So, as I said yesterday, James Rickards, believes inflation is a 2022 story… So, if the markets are truly forward looking shouldn’t they be looking at that? And trading accordingly? Never mind the inflation now, they’ve missed the boat on that… 

For the record…  The currencies ended the U.S. session with very tiny gains VS the dollar, it was as if currency traders were just not committed to selling dollars, which in my humble country boy opinion, they should be doing hand over fist… But they are not… at least not yet…  For comparison purposes between the morning and night in the currencies, the BBDXY began the day at 1,124.91, and ended it at 1,124.18…  

Gold & Silver like I said above couldn’t find a bid all day, and ended the day with Gold down $7.20 to close at $1,859.70, and Silver down 16-cents to close at $27.76…  Groundhog Day… 

The price of Oil is till rising and trades with a $72 handle this morning… This rise in the price of Oil has given the Petrol Currencies a little bit of comfort and they haven’t lost as much ground as the non-petrol currencies…

In the overnight markets… There’s been just a little more dollar selling, but not much, as the currencies try to push the gains higher, but are meeting major resistance. The BBDXY begins the day at 1,123.64, so some slippage from the end of the day yesterday, but the “some” is being liberally applied! 

The sad part is that it’s Groundhog Day once again for Gold, as the shiny metal is down $3.50 in the early trading, while Silver is up 4-cents, so both are not being traded a lot early this morning, which makes some sense as market participants await to hear what the Cabal Chairman has to say this afternoon about tapering… 

Well, I spoke of the Fed above, and while I was traversing through Twitter yesterday, I found this from Fred Hickey on his Twitter feed: “Years ago, the Federal Reserve Board was comprised of bankers & businessmen. Over time, it was taken over by economists, then by mostly “progressive” Ivy-league economists who care more about social activism than sound money & protecting the value of US$”

Man… that’s really doing an Aaron Neville and telling it like it is…

As I said above, the FOMC meeting is today, and is just a one day meeting, so no time to get the board games out, and hear Kashkari yell “you sunk my battleship”!   No, fun and games today, all serious business to be taken on, and then this afternoon they will announce what great plans they have to save the universe once again…  OK, they may be serious, but I’m not…  The markets kind of think that maybe, just maybe, cause you never know, the Fed will announce when they will begin tapering their bond purchases… I say, I’m from Missouri, and they’ll have to show me that this is what they are going to do, and then do it for me to believe that malarkey!

OK, after I said all that, watch, Jerome Powell get up in front of the press corps and tell them the Fed is going to start tapering in the 4^th QTR… Just to spite me!  Come on Jay, I know that someone at the Fed reads the Pfennig, and they tell you everything I say about the Cabal…

If I were one of the Press Corps there to ask a question of the Fed Chairman, Jerome Powell, I would say, “Hey Jay, did you hear the news?”  What news is that?   That a company that owns more than 100 shopping centers across the US has filed for bankruptcy, citing “significant challenges” as a result of the Covid-19 pandemic. Washington Prime Group, which currently owns 102 shopping centers across the country, filed for Chapter 11 bankruptcy protection late on Sunday…. 

I would continue with, “don’t you think that if the economy is that fragile, that we need to begin tapering bond purchases?” To which he would probably respond with, “That’s only Transitory”…  Because that’s his standard answer for everything these days… 

Speaking of currency printing… The POTUS was at the G7 meeting and telling the other member countries that they should continue their deficit spending, which means that he’s going to do that here at home…   I borrowed these numbers from Bill Bonner: $2.6 trillion in revenues through May. But $4.7 trillion in spending. You can do the math yourself, even using old school math where 2+2 = 4… And The deficit just keeps getting bigger and bigger… So, go ahead Magic Money Tree folks that include the POTUS, just keep spending money we don’t have… I shake my head in disgust, and say Tsk, Tsk…

The U.S. Data Cupboard yesterday, had May Retail Sales, and they were not a pretty sight to see, as they printed negative -1.3%, and when you just look at core sales, excluding Auto sales, the number was still negative at -.7%…  No new stimmy checks, no Retail Sales…   And Industrial Production for May disappointed, and left the markets with a sour taste in their collective mouths… But it just won’t change their “buy dollars” mantra right now…. 

Today’s Data Cupboard is dominated by the Federal Open Market Committee (FOMC)… And I’m afraid that getting excited about the outcome of the meeting is akin to playing solitaire till dawn with a deck of 51…

To recap… The currencies traded back and forth all day yesterday, and ended the day with some tiny gains VS the dollar, with the Petrol Currencies holding steady Eddie with the continuing rise in the price of Oil, which is trading with a $72 handle this morning… for Gold & Silver it was truly Groundhog Day, as Ed Steer calls it, because once again the metals couldn’t find a bid all day long…

For What It’s Worth….  Ok, I played around with the FOMC meeting today, and while I don’t believe the CABAL is ready to do any tapering, they could begin discussions on how and when to do it, and if Jay Powell decides to let the press know that these discussions took place, the markets could react violently, so we’ll have to wait-n-see, but first… I have this article that talks about the Cabal and its need to taper, and it can be found here: Fed tiptoes towards the taper stage months before the curtain call | Reuters

Or, here’s your snippet: “For the second time in less than a decade, the Federal Reserve is getting ready to launch a thorny debate over how and when to sunset a massive asset-purchase program that helped cushion an economy battered by crisis but left it with a mountain of bonds that may linger on its balance sheet for years to come.

Officials’ opening discussion about how and when to taper the U.S. central bank’s $120 billion in monthly bond purchases looks set to occur at this week’s two-day policy meeting and will take place against a dramatically different backdrop than the last time around, when they were more skittish about owning such a substantial slice of the bond market.

“I think the discussion will start” at the Fed’s policy meeting on Tuesday and Wednesday, said Robin Brooks, chief economist at the Institute of International Finance. “I think it will start very, very cautiously,” he added, and Fed Chair Jerome Powell won’t be in any rush to conclude it.

The risk of another “taper tantrum” – the market ruckus that erupted eight years ago when Fed policymakers first broached the notion of scaling back their bond-buying after the 2007-2008 financial crisis – appears remote this time. Fed officials have posted plenty of trail markers for the path to tapering, and key officials have signaled the discussion is underway in the background. Markets so far have taken it all in stride.”

Chuck again… Like I said, we’ll have to just wait-n-see in a few hours from now the FOMC meeting will conclude, and the press conference will begin…

Market price 6/16/2021: American Style: A$ .7706, kiwi .7145,  C$ .8210, euro 1.2117, sterling 1.4116, Swiss $1,1117, European Style: rand 13.7460, krone 8.3504, SEK 8.3584,  forint 290.30,  zloty 3.7276,  koruna 21.0038, RUB 72.06, yen 109.95, sing 1.3262, HKD 7.7619, INR 73.27, China 6.4008, peso 19.99, BRL 5.0602, BBDXY 1,123.64, Dollar Index 90.54,  Oil $72.34, 10-year 1.48%, Silver $27.80, Platinum $1,149.00, Palladium $2,856, Copper $4.31, and Gold… $1,856.20

That’s it for today….  Things are just so weird these days, that I have to stop myself from launching an all out attack on anyone that has anything to do with these days of opposites!  There! That’s been said! Well, my beloved Cardinals  have won two straight after last night’s 9^th inning walk off home run by Paul Goldschmidt… The Cardinals have fallen from first place to 4^th place with 2 weeks of shoddy baseball. Hopefully they’ve seen the light, and are ready to get back to playing baseball Cardinals style! As St. Louis fans, we don’t expect the Cardinals to win every game, but we do expect to see good fundamental baseball with tons of hustle, and grit at the plate every game…. There’s a day game at Busch today, and I’m going to go to the game! I hope I don’t feel like I need a nap during the game, so it’s up to you Cardinals to keep me entertained! HA! I love day baseball games…  And then tonight I’ll welcome home my beautiful bride from her 16 day vacation away from me! While she was gone, our 45^th wedding anniversary took place… 45 years… that’s a long time! OK… Midnight Oil takes us to the finish line today with their song: Beds Are Burning….  In the 90’s Midnight Oil was BIG, but then they faded away, like many of the other 90’s bands… I hope you have a Wonderful Wednesday, and Please Be Good To Yourself!

Chuck Butler

 

 

June 15, 2021

* The powers that be have said the dollar rules… 

* Gold & Silver can’t find a bid… 

Good Day… And a  Tom Terrific Tuesday to you! Well, I told you last week that there would be no Pfennig yesterday, as I had a dr. appt. scheduled. I realized over the weekend that I did not have an appt. that I had read my calendar wrong. What a dolt, right? But so I planned on surprising you with a Monday Pfennig… But it was one of those days… When the chemo catches up with me, and causes me to want to sleep all day… I finally woke up around noon… And the rest of the day, I kept thinking, I sure could use a nap! So, I guess I have to put that down as a day I couldn’t answer the bell… If you’ve never been on a chemo treatment plan, and you should thank God for that if you haven’t, you get what I’m talking about… I don’t use Chemo as an excuse for many things in life, I could… but I don’t… The Eagles greet me this morning with their song: Seven Bridges Road…

Well…  Last Thursday, we saw the stupid CPI print for May gain more than expected, and on an annual basis, consumer inflation is up 5%, a figure not seen here in the U.S. since 2008, and that’s when the price of Oil was $150.00!!!  John Williams over at Shadowstats.com reports that if we calculated inflation without the hedonic adjustments it would reflect a 13% inflation rate… Now I ask you this, doesn’t what you’re experiencing reflect more on the 13%, rather than the 5%?  I thought so… A dear reader send me a note last week telling me that his local grocery store sold a lb of bananas for 39-cents a month ago, and now they sell for 69-cents…  That looks like a greater than 5% move to me!

And still crickets from the Fed Heads about what they are going to do to put a halt to these rising prices… Do you recall that early in the 70’s after Nixon closed the Gold window, that inflation was beginning to rise rapidly, while the dollar went to hell in a hand basket, and Nixon implemented price controls?  Good try Dick, but it didn’t work!  So, what can the Fed Heads do to stop these rising prices?

Good friend, Dennis Miller sent me an article over the weekend from Zerohedge.com that was very interesting: “Denying that the current inflation cycle is nothing more than a base effect and is, therefore, “transitory” brings back memories of the 1970s. In the 1970s, Federal Reserve Chair Arthur Burns denied that monetary policy played a role in the inflation cycle. Mr. Burns argued that higher inflation was due to idiosyncratic factors, such as food shortages and the OPEC oil embargo.

Chuck again… Talk about a delusional man! I wonder what he thought by 1978?

OK, now back to the question at hand, of how can the Fed Heads stop these rising prices? Well, first of all they would have to WANT TO TAME INFLATION… And right now they, the Fed Heads, are allowing inflation to run hot… And secondly, they can’t do a damn thing to stop them! I’ve told you previously a few times that raising interest rates to combat inflation is out of the question for the Fed, that is unless they want to bring the economy to a screeching collapse!

Famous author and analyst, James Rickards, believes that inflation is NOT a 2021 story, but a 2022 story… Hmmm… Well, whether he’s right or wrong on that, mom and pops still need to deal with the rising costs of food, health care, insurance, autos, tuitions, you name it, NOW!

And reading all that, you might be thinking to yourself… Chuck has told us that inflation is the dollar’s kryptonite, and Gold’s steroids, so the dollar must be down and Gold soaring on this news…  Well, you would be wrong… Because… The powers that be have decided that this is NOT going to be the way things go with this inflation…  This can only go on for so long folks…

But for now the powers that be are winning the battles, as the dollar rallied strongly on Thursday, and Gold got whacked once again. The exact opposites of what you would have expected to see, or at least what I would have expected to see! But I do not expect them to win the war… Sooner or later, this will all be reversed… Be it now, next year (according to Rickards), or whenever… I believe in my heart of hearts that this will be reversed… So hang on Sloopy, Sloopy, hang on…  I love that song!

So, last week was a disaster for the currencies and metals… And yesterday didn’t seem to hold any elixir either, as Gold lost more ground… Gold started the day at $1,870.00, and at one point in the day was down to $1,844.00, before mounting a rally that left it down $12.00 on the day to close at $1,866.90, down $11.90 on the day.

Silver didn’t see the major selling that Gold did last week, and has stayed right around the $28 figure that I say is the line drawn in the sand by the price manipulators… To show you what I’m talking about, at one point yesterday, Silver was up to $28.10, but was forced back below $28 to close at $27.93, down 10-cents on the day… 

The currencies saw most of the selling and losses late last week, as yesterday, they drifted along all day… The Dollar Index began Monday at 90.55, and ended the day at 90.52…  Why on earth would anyone besides the government buy dollars in the face of the highest level of inflation in 13 years last week? So the only person, place or thing that would buy dollars is the Exchange Stabilization Fund (ESF) or the Plunge Protection Team, which is basically the same unit…

So, don’t doubt yourself for owning currencies to diversify your investment portfolio… Things in this country are very weird right now, and you have to be honest with yourself and admit that in your gut you know something is wrong in this country…   I borrowed this next paragraph from Tom Woods, of whom I read daily…

“Whether it’s economic trends, or the debt, or Big Tech suppression of dissident voices, or a school system that is somehow managing to get even more propagandistic, we have to figure out what we’re going to do.”

Chuck Again…  I would say that it’s not a question of whether, but all of these things! And what are we going to do?  Got Gold?

In the overnight markets last night… there was more dollar buying, which is just stupid in my opinion… The Dollar Index is 90.61, so the dollar buying wasn’t of major proportions but… it WAS dollar buying…  Gold & Silver just can’t find a bid and have given away more ground in the early trading today… Gold is down $1.80, and Silver is down 24-cents…  Ed Steer, of whom I read daily, and his letter: www.edsteergoldsilver.com, calls what’s going on in Gold “Ground Hog Day”…  

The U.S. Data Cupboard was empty yesterday, but will be restocked today, with Retail Sales for May, which the BHI indicates to me will be negative… And Industrial Production and Capacity Utilization, which should be pretty steady with the previous month.  I said last week that I just don’t trust government reports and you shouldn’t either… For instance: I told you last week that you can never tell what will be the outcome of the CPI print beforehand because of all the hedonic adjustments that are made to it… Even with that in mind, the May print of CPI was .7%, which was greater than expected, with annual inflation hitting 5%!!!! That’s up from 4.2% in April…  5%… and it’s only just begun, to live… and grow taller, and hungrier… I told you last year when the Fed said that they were going to allow inflation to run hot, that they had better be careful, because once inflation gets going, it will be too late to put the kyboshes on it! And look where we’re going now?

Inflation is the scourge of the economy, and a little inflation begets more inflation and more and more until everything costs so much, no one can afford to buy it any longer. The reason this occurs is that once Mabel hears that inflation is rising, and tells Josephine, who confirms it by saying how much more she just paid at the grocery store. Then Mabel rushes out to buy what she wanted before the prices get to high, and that causes more inflation to happen…  Now think of this, Mabel is 1 Million people, and Josephine is 5 Million people, and they tell 10 Million people, and well, I think you get the picture here… 

But in the end… Shadow Stats has inflation at 13%… So, who’s report on inflation are you going to side with, the government’s or Shadow Stats’…. I know who I pinned my colors to!

One more thing regarding the Data Cupboard, tomorrow is a FOMC Day… The Fed Heads will meet and say that inflation is “transitory”, to move long for this is not the inflation that we’re looking for…  If I were there I would ask them, “What inflation ARE you looking for? , Wages are rising, food has risen, along with a myriad of other items, so please tell me and the rest of the U.S. just what inflation you ARE looking for?”

To recap… Chuck is beside himself this morning, as he rants and rants some more about inflation. You must forgive him because he lived through the 70’s and remembers what inflation did to the U.S. economy and mom and pops’ buying power…  And with soaring inflation Gold & Currencies got sold like funnel cakes at a State Fair!  And he can’t believe that happened, but it did, and then he returns to talking about inflation some more…

One more thing today before we head to the Big Finish… The price of Oil continues to rise and this morning it trades with a $71 handle… I had to fill up my gas tank last week and paid $3.25 for gas… And said to myself, “I’m sure glad I don’t have to drive to work every day any longer”…  But I imagined people that do have to drive to work, and pay these inflated prices for gas, and how that has to put a HUGE dent in their disposable income, if they had any at al to begin with! 

For What It’s Worth… One more thing that didn’t make any sense to me as a long time investment analyst, bond trader, and currency trader, and that is the way that Treasuries reacted to the inflation news… The yield on the 10-year Treasury fell to 1.49%, instead of people selling bonds to not be locked in on low yields when rates rise to combat inflation, these knuckleheads bought bonds! And the Fed Heads are all pointing to the bond market saying that this proves their “Transitory” mantra… Well, there are other problems going on in bonds right now, and this article from zerohedge.com  talks about those problems and it can be found here: “We Are Building Up To A Big Accident” – Gap Between 10Y Yields And CPI Is The Highest Since 1980 | ZeroHedge

Or, here’s your snippet: “Even though US CPI smashed expectations again, Deustche Bank’s chief credit strategist Jim Reid correctly points out that “the data isn’t going to change anyone’s mind of whether inflation is transitory or not.”

Still, as an aside for those who still care about fundamentals, he notes that the current gap between 10yr US yields (c.1.5%) and US CPI (5.0%) is a whopping 3.5%, the highest since 1980. In fact, the gap has only been more negative for 10 months in the last 70 years, all of which were in 1974, 1975 or 1980.

While such a deeply negative (albeit crude) proxy for real yields (as opposed to the manipulated ones where the Fed is implicitly setting real rates with its purchases of TIPS) is great for financial conditions today, the DB credit strategist asks, rhetorically, if “we are building up to a big accident with such a mismatch between inflation and bond yields?”

And just as rhetorically, Reid concludes that despite this stunning observation, “no-one is going to have a different opinion to what they had yesterday though”

Chuck again… Yes, that’s right… It’s all a matter of what you are experiencing VS what the Fed Heads are telling us…  And I’m here to tell you that the Fed Heads are wrong… So wrong they’re almost right…

Market Prices 6/15/2021: American Style: A$ .7690,  kiwi .7125,  C$ .8198, euro 1.2111, sterling 1.4048, Swiss $1.1112, European Style: rand 13.7899, krone 8.3205, SEK 8.3232,  forint 291.06,  zloty 3.7381,  koruna 21.0118, RUB 72.10, yen 110.10, sing 1.3265, HKD 7.7623, INR 73.29, China 6.3967, peso 19.96, BRL 5.0919,   BBDXY 1,124.91, Dollar Index 90.61,  Oil $71.52, 10-year 1.49%, Silver $27.69, Platinum $1,162.00, Palladium $2,842.00, Copper $4.38, and Gold… $1,865.10

That’s it for today… Sorry for my rant about inflation… but someone has to be the adult in the room here and admit that prices are soaring and something needs to be done about it… Maybe Rickards is right that inflation is a 2022 story, well if that’s true can you even imagine what prices will be then? I’m also sorry for not answering the bell yesterday… Sunday was a Chamber of Commerce Day here in the Midwest, we had warm temps, and a lovely breeze that blew all day… But Monday was right back to high 90’s temps… Oh, it’s a hot one, like seven inches from the midday sun! Summer is here, and it’s not even the Summer Solstice yet! The young grandkids were all here on Sunday, only Delaney Grace had other plans (she’s going to be 14 this summer, I always knew this day was coming!)  I didn’t get up until noon yesterday, and then had clothes to clean, and dishes to wash and forgot to put my flag out for Flag Day… see like I said, what a dolt, eh?  Hang in there folks, things can only get worse… I mean better… at least that’s what I ALWAYS hold out hope for!  Dave Loggins takes us to the finish line today with his 70’s hit song: Please Come To Boston…   I hope you have a Tom Terrific Tuesday, and Please Be Good To Yourself!

Chuck Butler

June 10, 2021

* Currencies & metals lose ground on Wednesday

* Bill Bonner & Mohammed El-Erian join us for a discussion of inflation! 

Good Day… And a Tub Thumpin’ Thursday to one and all! Well, after a week of frustrating losses for my beloved Cardinals they finally won a game last night to stop their losing streak at 6…  Now they head to a weekend series with the Cubs… who are red hot!  OK… Well, today is the birthday of my good friend Mike Kettler, who happens to be on a wine tour for his birthday… Happy Birthday Mike! Mike turns 60 today… A youngster, right? HA! I sat outside watching the game last night with neighbor Paul.. So at least I had some company. Usually, I sit out there alone during the week. I go to get my new shell for my eye made today… It’s always an interesting adventure… Neil Young greets me this morning with his song: Southern Man, which was the song the band Leynyrd Skynyrd sang about in their southern rock classic: Sweet Home Alabama…

Well, all of the gains that the currencies booked in the overnight markets the night before, were wiped out in the U.S. market yesterday… Just switching things up on us… Just when I was pointing out how the overnight markets were buying dollars, and the U.S. market was selling dollars, they switch things up and go the other way… I’m sure just to throw investors off the scent of a collaborating deal with Traders… So… The BBDXY started yesterday at 1,116.10 and ended the day at 1,118.88, the euro which yesterday morning was within spittin’ distance of 1.22, fell back by about 1/3^rd of a cent… And then to make things even more obvious of what’s going on, Gold ended the day down $4.50, but Silver closed up 14-cents!  I actually kept checking the Gold price yesterday as the day went along, and it traded in a tight range of up $4 to down $4… 

So, for those of you keeping score at home…. Gold closed the day at $1,889.00, and Silver closed the day at $27.83… I already gave you the close of the BBDXY, so the Dollar Index closed the day at 90.12, up from 89.99 early in the morning…  So… the move to buy dollars was not a major event like it was earlier this week with the engineered takedown… But still it was a case of buy the dollar, which to me make about as much sense as checking on how much gas you have with a match! HA!

In The overnight markets…  There’s been little to no movement in the currencies, and they begin the day here in the U.S. looking very much like they did yesterday morning… The BBDXY this morning is 1,118.56, compared to yesterday’s close of 1,118.58, so you see right there that the currencies are flat to begin the day. Gold on the other hand is down $9.80, this morning and Silver is down 10-cents…  Gold and Silver down the morning that inflation is reported?  Greasing the tracks is what that looks like to me, getting the tracks ready for a rise today that will have to start from station… 

Well today is the day the markets and traders have been waiting for… Why I have no idea, but to them the stupid CPI (consumer inflation index) is something for them to follow, and as you may recall April’s print showed inflation rising at the fastest pace in years… The traders want confirmation that inflation is here to stay and not transitory like the Fed Heads keep telling us…  Spoiler Alert…. The so-called experts think that inflation will have cooled a bit in May from April, from .8% in April to .5% in May… There’s no telling what the number will be by the time the bean counters get finished with all their hedonic adjustments. And as I always tell you… if you want to know what the real inflation rate is, you need to go to www.shadowstats.com  For it is here that John Williams calculates inflation the way it was done before Clinton and Greenspan moved the goalposts, and added their hedonic adjustments…

You know it’s just like most Gov’t reports… You can’t and shouldn’t trust them for accuracy… The BLS adds jobs out of thin air for their Jobs reports… as just another example of the Gov’t sticking their hands in the cookie jar… To make us all feel better and keep the merry-go-round going… For if we all decide to get off at the same time, the ride comes to a halt, and that would not be what Humpty Dumpty and all the King’s Men and all the King’s horses need …. For if we all get off at the same time, the economy comes to halt, and tax receipts go to hell in a hand basket, and the deficit goes higher, and higher… I can imagine Sly Stone at Woodstock, singing “I wanna take you higher”…  Sly and his band sure put on a show at Woodstock…

That reminds me I haven’t watched that movie in a long time, it’s time for to get it back out and experience the excellence of Alvin Lee, CS&N, Santana, Sly Stone, and others at Woodstock… 

OK… back to the world…  I told you earlier this week that if I heard one more Fed Head say that the inflation we’re seeing is Transitory, I would be yelling at the walls and not holding back on the language I used!  I have Mohammed El-Erian talking inflation in the FWIW article today, so I don’t want to steal his thunder, instead I have Bill Bonner, giving us his thoughts on inflation.. So take it away Bill!

“Well… since this century began, U.S. GDP has gone up from about $10 trillion to about $22 trillion. A solid double.

But the Fed’s balance sheet? Around $700 billion 20 years ago, if it had kept pace with GDP growth, it would be around $1.5 trillion today.

Instead, it’s now around $8 trillion – five times where it should be.

If we were looking for a simple explanation of inflation, need we look any further?” – Bill Bonner from his Bill Bonner’s Diary…

Good friend, Dennis Miller, called me from the road yesterday, and told me that we will never find another Paul Volcker, ( I had said that in the Pfennig that morning) and if we did, it would not be a good thing, because….  Let’s say inflation goes to 10%, and we would need to raise rates to near 20% to combat and bring the inflation under control… That would mean that all the tax receipts the Gov’t receives would go toward paying the interest on the debt! There would be nothing left for Medicare, Soc. Security, WIC and other Gov’t programs…  Thanks Dennis…

The Data Cupboard today has the Weekly Initial Jobless Claims, of which they have become a data print that carries little interest in the markets, as the numbers keep going down… But the markets have it all wrong, because as these numbers go down, people fall off the list of Unemployed, and are no longer counted as unemployed…  There are still 3.77 Million people on continuing claims, that will eventually run out… Here we go again on the merry-go-round…

Folks, I don’t mean to sound so gloom and doom, because that’s not my nature, I’m really a very optimistic kind of guy… But all the bad things that I talk about keep happening and growing worse all the time, what should I do say everything is seashells and balloons?

We already talked about the stupid CPI print today, so let’s move on now…

To recap… The currencies lost all the ground they had gained the night before during Wednesday’s U.S. session… Switching places that’s all, as Chuck pointed out… Gold  went back and forth all day in an $8 trading range and ended the day down $4.50, while Silver experienced a similar trading range, but Silver closed the day up 14-cents… In the overnight markets last night…. the currencies are trading in yesterday’s clothes, but Gold & Silver are down to start the day. 

For What It’s Worth…  I’ve spent a lot of time in the past year talking about rising inflation, and how it can destroy your buying power. There are some economists that still don’t believe that we have inflation and say it’s still deflation… I respect them, but don’t agree with them. This FWIW article today has a very well respected analyst talking about inflation, and I think behooves us to listen to what he has to say. It’s an interview, so we have to deal with the questions too… The article can be found here:Mohamed El-Erian on inflation and the recovery – Marketplace

Or, here’s your snippet: “Mohamed A. El-Erian: I’m more and more worried because of what I’m seeing on the ground, talking to CEOs and other people that really are participating in the price-formation process. We’re seeing significant supply bottlenecks. We’re seeing soaring transportation costs, difficulties in hiring. And all of these things are not immediately reversible. So when you look at the economy from the bottom up, you start sensing mounting inflationary pressures that are being encouraged by incredibly loose monetary policy.

Ryssdal: As you know, though, [Federal Reserve Chairman] Jay Powell and many others say, “You know what, we see all that too, but it’s transitory. These are weird times in this economy.” I’m paraphrasing the chairman here. These are weird times in this economy, we’ve been deeply scarred, it’s all gonna work itself out. And clearly you don’t buy that.

El-Erian: I buy the view that these are uncertain times. What I don’t buy is the notion that we are therefore confident that inflation is transitory. Undoubtedly, there are two elements that are transitory. One are called base effects. Simply, when you compare with the previous year, it really does matter that the price level came down. And the other one are very short-term imbalances between supply and demand. But we are seeing deeper things going on in the economy. And I just think you have to be open-minded to the fact that the supply side and the demand side are evolving structurally in a way that may be pro-inflationary.

Ryssdal: Can I read that as you saying that perhaps the Fed is not being open-minded right now, and that maybe Chair Powell has painted himself into a corner?

El-Erian: I fear that’s the case. And I say I fear because Fed credibility is key. So the Fed has done two things. One, it has repeated the “transitory” narrative, and it has become a mantra. Literally a mantra. And the second one is that it shifted at an unfortunate time from a forecast-based approach to an outcome-based approach. So if the Fed is wrong, it will be late. And if it is late, it’s gonna have to slam on the brakes. And if it has to slam on the brakes, history suggests we end up in a recession, and we may end up with financial instability. So there’s a lot at stake here. And that’s why slowly easing your foot off the accelerator is a much better outcome than having to slam on the brakes.

Ryssdal: Let’s translate here for a second. When you say “slam on the brakes,” you mean raise interest rates precipitously, which will then drive the economy into recession and markets will go haywire.

El-Erian: Correct. And the last thing we need right now is to derail the recovery and to derail what I think is a significant economic policy shift by the [Joe] Biden administration.

Ryssdal: So what are you looking at to let you know when this might not be transitory? I mean, Treasury Secretary [Janet] Yellen said this weekend she’s looking at expectations, right, what people are thinking about inflation. Also low-wage earners and their pay increases. What are your tells here?

El-Erian: So first, I’m looking at the fact that from the aggregate data, we have completely missed the surge in both CPI inflation and what’s called [personal consumption expenditures] inflation. Second, I listen very carefully to what companies tell us on their quarterly earnings and then look at the functioning of the labor market. How do you explain that booming demand is not resulting in higher jobs being created? How do you explain the fact that we have over 8 million openings that are not being filled? So I look —

Ryssdal: Well, sorry to jump in. But you look at the pay of these jobs. You look at the fact that people are still being scared of catching a disease. And then also, as you know, in this country, there’s the whole discussion about federal [unemployment insurance] benefits. I mean, there’s a lot of factors here.

El-Erian: Correct. And over the next few months, some of them should be reversed. So the UI argument we will know by the end of September. We will also get a better feel for how worried people are about going back to work. We will also get a better feel for what happens when you open schools. But I do think child care is important. I do think that we are having skill mismatches. There’s simply too many uncertainties. The alternative of just repeating over and over again, that it’s transitory inflation suggests that you have conviction when there’s little foundation for that view.”

Chuck again… I know that was a long snippet, but well worth it, right?  El-Erian said that he feared the Fed had painted itself into a corner, and that reminded me of a slide that former boss and good friend, Frank Trotter us to show in his presentations, of a man with a paint can and brush, standing in a corner with the rest of the room’s floor painted…

Market prices 6/10/2021: American Style: A$ .7741,  kiwi .7188,  C$ .8260, euro 1.2160, sterling 1.4097, Swiss $1,1164, European Style: rand 13.6530, krone 8.3235, SEK 8.2737,  forint 284.37,  zloty 3.6847,  koruna 20.8660, RUB 72.19, yen 109.48, sing 1.3246, HKD 7.7594, INR 73.00, China 6.3889, peso 19.73, BRL 5.0467,  BBDXY 1,118.56,  Dollar Index 90.18,  Oil $70.01, 10-year 1.50%, Silver $27.73, Platinum $1,146.00, Palladium $2,847.00, Copper $4.42, and Gold… $1,879.20

That’s it for today… Pretty wordy today, but that should hold you through the weekend and through Monday too, as I explained yesterday, there will be no Pfennig on Monday… My last weekend of batching it. HA! Darling daughter Dawn, as been here each night this week teaching swim lessons to little swimmers… Those little kids are so cute when they learning to swim, and when they finally “get it”, the smiles on their respective faces… Just so cute! I can’t wait for little Evie to start swim lessons… Now that will be priceless! Monday will be Flag Day… Don’t forget to fly your Flag!  Well, we’re going from spring weather that was back and forth, to hot summer days this weekend! As the heat index will be 102!  I’m sure the grandkids will be over to swim! I think I’ll go to the butcher today after I get my new eye, and buy a Pork Butt, and smoke it it in my Big Green Egg for when the kids and grandkids come over… I can almost taste some tender pulled pork, with BBQ sauce and Cole slaw already! YUM! Ok… I get a double shot of Neil Young today, and Neil Young and Crazy Horse (his band) take us to the finish line with a song from their Live at the Filmore album titled: Cowgirl In The Sand… I hope you have a Tum Thumpin’ Thursday, and Please! Be Good To Yourself!

Chuck Butler