Could The Next Move By The Fed Heads Be A Rate Hike?

  • dollar drifts through the end of last week
  • Germany may be added to the list of recession countries.

Good Day… And a Tom Terrific Tuesday to you! Well, as you probably figured out when there was no Pfennig yesterday, that it was a holiday, and Chuck took full advantage of that! Yes, another day of sleeping late did me some good, for sure! One week done… the first Friday of lent, saw Kathy trying to get me to eat some sausages… But I refused, and had tuna salad instead! She can’t be blamed though, as down here, she rarely knows what day of the week it is… If I didn’t write the Pfennig each day, I wouldn’t know either! The whole team of Cardinals reported yesterday, to Spring Training, and the crowds around the back fields where practice is held, are growing in numbers… I remember when I could pull up close to the back fields, and go find a place in the stands and watch practice… But the crowds have grown so much, that it’s impossible to do what I used to do… The Stylistics greet me this morning with their one hit wonder: Betcha By, Golly Wow

Well… Late last week, saw the dollar get sold on Thursday to the tune of 5 index points in the BBDXY, and then drift about the open sea on Friday… Friday we saw that PPI, wholesale inflation, is still showing that prices will not be going down soon, and that has the markets afraid that the rate cut they all salivate over, may not come until June… or later… Gold & Sliver got back on the rally tracks and ran with the engine fully stoked to higher levels… On Thursday Gold gained $12 and Silver gained 56-cents.. On Friday, Gold gained $9.20 and Silver gained 49-cents… Gold ended the week at $2,013.20, and Silver at $23.38… 

The price of Oil booked gains on Thursday and Friday last week and ended the week trading with a $79 handle… Have you noticed your gas pump prices are rising again?  The 10-year’s yield was pretty Steady Eddie late last week, and ended the week with a 4.28% yield… 

Yesterday was a holiday in the U.S. and Canada, so the markets were watered down greatly… The dollar still traded overseas, and so did Gold… And all day long, every time I checked on Gold, it was up about $4… And then at the end of the day, it dropped to a 50-cent loss on the day.. to close at: $2,017.90… Ad Silver had the same thing happen to it, late in the day, to lose 2-cents on the day, to close at: $23.05… The price of Oil remained trading in the $79 handle, and the 10-year’s yield inched higher to 4.30%… 

In the overnight markets last night… There was some slippage in the dollar, as the BBDXY starts today down 1 index point. The euro has regained the 1.08 handle, and the rest of the currencies all look as though they are healing, after being sick in bed all last week. Gold is up today $10 to start the day, and Silver is up 12-cents. This will be a data -deprived week for us, and so that leads to sentiment and speeches that will be coming to decide the direction of the dollar, and metals this week. 

The price of Oil also saw some slippage last night, as it slid just below $79…  And it must have been a night for slipping and sliding, because the 10-year’s yield also dropped a bit to 4.27%… I have this feeling that this week will prove to me key for the non-dollar assets, and whether or not there is interference will also play into this week’s activities… 

I saw this the other day in Business “A wave of inflationary signals means that the Federal Reserve’s next move could be a rate hike, former Treasury Secretary Larry Summers said.

“There’s a meaningful chance, maybe it’s 15%, that the next move is going to be upwards in rates, not downwards,” Summers said during an interview on Bloomberg TV on Friday, adding that the Fed has to be “very careful.”

Chuck again… I was never a fan of Larry Summers when he ran the Treasury, but after reading what he had to say last Friday, I think he’s bang on with his thoughts… 

And another reason why bond buyers need to beware… Sure, at some time in the future the Fed Heads will get around to a rate cut again, but when that will be and how long into the future is the question, and as long as there is a question or two about rate directions, I, for one, wouldn’t be buying Bonds… But then that’s just me, and I have this inner ability to think logically… 

Last week I told you that Britain had entered a recession in the 4th QTR of 2023, and then on Friday, Reuters reported that, “British retail sales jumped by the most in almost three years, suggesting the economy could emerge quickly from its recession in the second half of last year. Sales volumes increased by 3.4% from December, much stronger than the median forecast of a 1.5% increase in a Reuters poll of economists.”

Of course, December is Christmas shopping season, and in my opinion, the people that make these calls, need to wait-n-see January’s Retail Sales, before sounding the all-clear horn for Britain…  

Now, the reports are circulating that Germany entered a recession in the 4th QTR too… That would make Germany, Britain, and Japan all in recessions now… And the U.S.?  Well, the GDP in the country won’t budge to negative territory because of all the Gov’t spending… And besides, every time the U.S. was about to slip into a recession since the Big Al Fed Head days, the Fed Heads have loosened monetary conditions to keep the U.S. from falling into a recession… In other words… Kicking the can down the road, for when the mother-of-all-recessions hits us, it will have all hose years of pent up frustration to unleash on us…  I’m just saying… reported this morning that: “Oil held near the highest level in three weeks as persistent geopolitical tensions countered concerns over the demand outlook.”

Chuck again… Geopolitical problems are growing folks… And that’s bullish for Oil and Gold… There were reports yesterday that the terrorists attack in the Red Sea had the crew abandoning ship which means the attack was very strong… So much for the U.S. putting the terrorists in their place, eh? 

And I found this on, and it’s Michael Snyder, of whom I’ve talked about and highlighted his comments previously, here’s Michael Snyder: “If stock prices are going to start plunging just because inflation is running a little bit hotter than expected, what is going to happen once the market finally realizes that the entire economy is literally starting to come apart at the seams?  Consumer delinquency rates are spiking, the commercial real estate crisis is rapidly picking up steam, banks from coast to coast are in deep financial trouble, large corporations all over America are conducting mass layoffs, and homelessness has been rising at the fastest pace ever recorded.  But if you ignore all of those little details, you can be just like Joe Biden and Janet Yellen, and pretend that everything is just fine.”

Chuck again… Ahem… Does that sound like me or what? I’ve been talking about all those things except homelessness, of which I find shameful on this country! 

 The U.S. Data Cupboard last week was, I described what I thought it would look like, bang on with my thought… First off on Thursday, Jan. Retail Sales came in a horrid -.8%, and the Core Retail Sales ,you know without, food, energy, or housing, as if anyone could live without those things, was still -.6%…   Really, I don’t know why they do a separate calculation for this… The powers that be see this as a way to confuse the masses…  So, going onward, Industrial Production was negative -.1% in Jan. and Capacity Utilization was down to 78.5 VS 78.7 in Dec.   

On Friday, we saw PPI come in much stronger than expected, thus showing what I keep saying that inflation is sticky and not going away anytime soon… PPI was .3% in Jan, VS -.1% in Dec.   As I’ve explained previously, PPI is wholesale inflation and those higher prices will show up sooner or later in Consumer Inflation… 

Today’s Data Cupboard has the January Leading Indicators… Some of you will recall that for 18 previous months we’ve seen negative numbers for this forward looking piece of data… And I would think that today’s print will make it 19 consecutive months…  The rest of the week is a non-event for data… 

To recap… Late last week saw damaging economic data for the U.S. And that kept the dollar bugs from running all over the kitchen floor… The BBDXY has remained in the 1,243 handle for 3 consecutive days… Thursday, Friday, and Monday saw little to no movement in the dollar… On Thursday, last week, the BBDXY fell 6 index points to 1,243… And that loss came after the bad Retail Sales report that day… The mental giants believe that the U.K. will leave their recession very quickly… Chuck says, Whoa, there partner!   And it looks like Germany will join Britain and Japan as countries that have recessions, right now… 

For What It’s Worth… I found this article last Friday morning, while perusing on my phone… This is an article regarding something that I mentioned previously, that has Jerome Powell, saying that it’s time we had an adult conversation about the debt, and more, and it can be found here: Jerome Powell Says $34 Trillion National Debt Is Ready For An ‘Adult Conversation’ — Janet Yellen Calls Sustainable Fiscal Path ‘Critically Important’ (

Or, here’s your snippet: “Most everyone understands the U.S. national debt is not on a long-term sustainable path, but no one seems sure when the breaking point might be for real-world consequences.

In a recent “60 Minutes” interview, Federal Reserve Chairman Jerome Powell brought up the elephant in the room, stressing that it’s now “time, or past time, to get back to an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path.”

Frustration and worry were visibly apparent in the usually poker-faced Powell, who said that we’re “borrowing from future generations.” Taking on more debt is just another word for borrowing, and with the massive size of the debt, it won’t be paid back overnight.

What’s most troubling is not the absolute number of the $34 trillion debt but the pace at which it’s increasing and the rising cost of interest payments to service it.

The U.S. spends more in gross interest payments on its debt than on national defense, at a time when America’s military strength is especially crucial with increased tensions in the Middle East, the Russian invasion of Ukraine and China’s continued threats toward Taiwan.

With the Fed maintaining high interest rates as part of its effort to completely stamp out inflation, it makes both new borrowing and interest payments on that money borrowed even more expensive for the U.S. government.

U.S. Secretary of the Treasury Janet Yellen also highlighted the importance of fiscal responsibility, telling lawmakers during a hearing before the House Financial Services Committee, “It’s critically important that the U.S. be on a fiscally sustainable path.””

Chuck Again…  Like I said previously when I heard Powell say that, “now is a dollar short and a day late for that conversation, Jerome!, it should have been done 20 years ago! But that’s water under the bridge now, and there’s no use crying about spilt milk…  Let’s start axing deficit spending, and see where that takes us! 

Market Prices 2/20/2024: American Style: A$.6562, kiwi .6172, C$ .7421, euro 1.0805, sterling 1.2605, Swiss $1.1339, European Style: rand 19.9597, krone 10.4655, SEK 10.3822, forint 349.61, zloty 4.00koruna 23.5379, RUB 92.49, yen 150.11, sing 1.3446, HKD 7.8211, INR 82.97, China 7.1948, peso 17.01, BRL 4.9558, BBDXY 1,242.28, Dollar Index 104.08, Oil $78.85, 10-year 4.27%, Silver $23.17, Platinum $916.00, Palladium $992.00, Copper $3.82, and Gold… $2,027.80

That’s it for today… Well, tradition calls for Chuck to go on his annual Spring vacation in March… And this year, I’ll start it a little earlier, and begin it on 2/26/2024, and end it on 3/5/2024… A week without Chuck, What will you do? HA!  It was another ugly weekend for my two basketball teams, as Mizzou and StL. U. both lost again on Saturday… UGH! Hopefully these are rebuilding years for the two universities… Just 4 more days till the first Spring Training Game, that I will be attending by myself… My Spring Training buddies don’t arrive until Sunday 2/25… And Kathy will head back to St. Louis this Friday… This won’t be the first time I’ve been there by myself… And it probably won’t be the last either! Bill Withers takes us to the finish line today with his great song: Ain’t No Sunshine (When She’s gone)… I hope you have a Tom Terrific Tuesday today, and Please remember to Be Good To Yourself! 

Chuck Butler