Currencies Rally On Monday…

April 6, 2021

* Gold & Silver rally in the overnight markets… 

* Mortgage bonds are in peril… 

Good day… And a Tom Terrific Tuesday to you! My beloved Cardinals got back on track last night with pitching and defense… Now, they need to do it again tonight! I got a visit from good friend, Mike Kettler last night, who watched a couple of innings of the game with me… I was outside to watch the game, but had to fold up tent, and go inside for the last 2 innings… The Final game of the NCAA Tournament did not go the way I expected it to go… But Congrats to Baylor!  And what the heck has happened to our Blues? They’ve now lost 7 games in a row! And are out of the playoffs at this time! UGH! My fave AC/DC song greets me this morning as my iPod plays their song: You Shook Me All Night Long… 

Well, as traders got back to work, not all, but some, they saw the writing on the wall regarding more deficit spending and more dollars being printed, and decided that enough dollar strength was enough! That is for one day… You see, the Plunge Protection Team (PPT) is still hanging over currency traders like the Sword of Damocles… So, for a day, it was about selling the dollar… The euro climbed back above 1.18, and the Dollar Index lost 36 BPS to end the day at 92.60… That’s a significant move in the Dollar Index for one day’s trading. 

I wasn’t told that the recognition of all the new deficit spending was the reason the currency traders all decided to sell dollars yesterday…  In all my years experience of not only trading currencies, but writing this letter and observing the markets, I’m pretty darn sure that was the motive for selling dollars yesterday…  That’s my story, and I’m sticking to it!

Gold & Silver tried like the devil to get back to even after starting the day down… And they both almost made it, but fell a few shekels short… Gold ended the day down $1.80  to close at $1,729.50, and Silver was down 7-cents to close at $24.94… In the after markets trading Gold was up $6.30, and Silver was up 12-cents, and back above $25….

In the overnight markets… Well, Gold & Silver did hold their aftermarket gains overnight, and have added a bit to them in the early trading, with Gold up $8.30, and Silver remaining at up 12-cents…  The Dollar Index was fought back and is 92.73 this morning, which means the dollar saw some buying overnight, not much, but some…  I read this morning that Treasury Secretary Janet Yellen has proposed a minimum tax rate for Corporations, globally…  Really? Ok, you’re going to be the tax monitor for a country in Africa, or the one of the stans in Asia? Come on, get serious here…  I do believe that Corporations should play more than their fair share to keep their buildings and personnel safe (Police and Fire) but to play tax monitor is something that’s impossible to do, in my humble opinion! 

I don’t know if you noticed the price of Copper yesterday, but it had fallen below the $4 figure for the first time in 2 months… But overnight the price of Copper skipped higher to $4.04… As I’ve told you previously, the price of Copper is a good indicator of coming inflation… I don’t know if you pay attention when you go to the grocery store, but inflation is all around us folks… All around, and please do not listen or pay attention to the CPI data behind the curtain!  And you won’t see it in the yields of Treasuries, because the Fed is performing their yield curve control… UGH! So, for now, watch the price of Copper… 

I was really put off by a comment to me yesterday… The reader told me to stop quoting Bill Bonner, as he reduces the integrity of my letter….  Really? Bill Bonner is one of the most respected analysts around, and has been for a couple of decades! And he’s my friend… So, no… whenever I get an opportunity to quote Bill Bonner, I will do so…  Now, we’ve put that to bed!

I had a dear reader ask me for the name of a book that would explain the relationship of Gold & Bond Yields… I responded that I wasn’t aware of such book, but would give my own take on that, and then told him: But what is a bond yield at all? The bond yield is a return on investment, expressed as a percentage, for a bond. In other words, they are interest rates offered by bonds. The bond yields are inversely related to the bond prices. The lower the price, the higher the yield, and vice versa. Because both gold and Treasuries are considered to be safe-haven assets, there is a positive correlation between gold and bond prices, and negative correlation between gold prices and bond yields. This is because there are opportunity costs of holding gold, which does not bear any yield, so capital flows from gold to bonds, when yields become sufficiently high, and it flows in a reverse direction, when bond yields become too low.

OK… onto other things…  Long time Reader Bob, sent me a note yesterday regarding the Russian ruble, and I thought I would share a piece of that with you… “Hopes that Russia’s ruble will rise at the beginning of the year have been dashed. Despite relatively good fundamentals – from the Russian economy’s recovery rate to oil prices – the national currency remained volatile. The situation will be uncertain in the second quarter of the year, too, said experts interviewed by Izvestia.”

“The risk of sanctions is the main thing that prevents the Russian currency from strengthening,” Finam analyst Andrei Maslov noted. “Many analysts believe that the ruble is underrated because with oil prices above $60 per barrel, the Russian currency is still weak against the dollar and the euro, which is the result of a serious lack of investor trust based precisely on geopolitical risks,” the expert explained. According to him, the ruble will strengthen over the course of the year, provided that oil prices remain above the $60 level and no tough sanctions are introduced.” From TASS…”

I read an email from the good folks at GATA who quoted Dave Kranzler, of whom I’ve quoted a few times through the years. Mr. Kranzler was talking about the recent sell off of Gold & Silver, and that he thought it was probably due to the price manipulators attempting to get the long holders of the metals to sell their April Contracts or roll them out to July…. Now, I hear you asking, why would that be their goal?  Ahhh Grasshopper… You see, if the April Contracts all stand for delivery of the metals, the COMEX could have a problem making delivery…  Now do you see why the price manipulators were working to achieve this goal?

Yesterday, I loaded up for bear, and really came out firing after a brief holiday… Today, I’m just going to talk a bit about something that I’ve gone through a few times in the last year.. .And that is the danger of armegeddon with housing… The lack of payments on the bonds, and the end holders holding worthless paper…   Well, I have this whole scenario in the FWIS section today, so don’t change that dial!

The U.S. Data Cupboard yesterday had Factory Orders for Feb… In January Factory Orders rallied 2.7%, but February saw it go negative -.8%…  Not a good indicator for the economy….  Today’s Data Cupboard has Job Openings for Feb… really old news… And the IMF will print their World Economic Review…  talk about some boring reading!

To Recap…  The currencies rallied on Monday, and Chuck thinks it had to do with traders seeing the amount of deficit spending coming down the pike… Gold & Silver started the day down but rallied and fought back to close down by a small margin… The Dollar Index yesterday went from 92.96 to 92.60…  A significant swing in Chuck’s mind… And Dave Kranzler tells us that the recent bloodletting in Gold & Sliver was due to the price manipulators trying to get long metals holders to sell their April Contract, or roll it to July… And Chuck explains why!

For What It’s Worth…  The Day of Reckoning is coming for banks and lending companies and the mortgage bonds… You don’t stop receiving payments on debt for over a year, and not have ramifications… I’ve talked about how this could all end up in tears previously, but this time I’m goig to let Bloomberg tell you about what’s coming… And that article can be found here: Mortgage Firms Warned to Prepare for a ‘Tidal Wave’ of Distress – Bloomberg

Or, here’s your snippet: “Mortgage companies could face penalties if they don’t take steps to prevent a deluge of foreclosures that threatens to hit the housing market later this year, a U.S. regulator said Thursday.

The Consumer Financial Protection Bureau warning is tied to forbearance relief that’s allowed million of borrowers to delay their mortgage payments due to the pandemic. To avoid what the bureau called “avoidable foreclosures” when the relief lapses, mortgage servicers should start reaching out to affected homeowners now to advise them on ways they can modify their loans.

“There is a tidal wave of distressed homeowners who will need help,” Dave Uejio, the CFPB’s acting director, said in a statement. “Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”

In a separate compliance bulletin released Thursday, the CFPB said that companies “that are unable to adequately manage loss mitigation can expect the bureau to take enforcement or supervisory action.”

More than 2 million borrowers as of January had either postponed their payments or failed to make them for at least three months, the bureau said. Once government-authorized forbearance plans begin to end in September, hundreds of thousands of people may need assistance getting back on track.”

Chuck Again.. Unintended Consequences… They always come back to bit you in the ask me no more questions, I’ll tell you no more lies…. I’m just saying…

Market Prices 4/6/2021: American Style: A$ .7626,  kiwi .7020,  C$ .7957, euro 1.1808, sterling 1.3828, Swiss $1.0666, European Style: rand 14.5086, krone 8.5298, SEK 8.6857,  forint 304.97,  zloty 3.8850,   koruna 22.0602, RUB 76.34, yen 110.31, sing 1.3409, HKD 7.7767, INR 73.38, China 6.5669, peso 20.29, BRL 5.6851,  Dollar Index 92.73,  Oil $59.93,   10-year 1.69%, Silver $25.06, Platinum $1,214.00, Palladium $2,744.00, Copper $4.04, and Gold $1,737.80, 

That’s it for today… Man… I had to put a new battery in my car upon returning home, and it’s not like it used to be…where you loosened a couple of bolts and  took the old battery out, and then put the new one in, and tightened the bolts… I had to do all kinds of releases and then I dropped a bolt and when I went to reach it, I sliced open my arm on some metal… OUCH!  I hope no one was around because I let off a set of swear words that would make a Sailor blush! I didn’t need stitches, but it was close… UGH! Well… I’m now down 65 lbs from last Rocktober, and my blood sugar numbers are in line, finally! I would like to lose another 50lbs… But getting here has been very difficult to do for me… But, I’ve got to try! My weight through the years has been up and down, with more ups than downs… So, to get where I need to be, and stabilize that, would be a giant step in the right direction for my health! My visitor last night reminded me that I said that if the weather was good that I would have a driveway happy hour this Friday… And it looks like the weather will be good, so if you’re reading this and want to join us, with safe distancing, come on by!  The Babys  take us to the finish line today with their song: Midnight Rendezvous…  “driving faster than you want me to, Can’t help myself when I’m alone with you, Alright!”  I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler