September 12, 2023
* currencies & metals rally on Monday
* China & Japan send out messages to stop short trades…
Good Day… And a Tom Terrific Tuesday to you! Well, the Cardinals had their way, last week with the Braves and Reds, but ran into a buzzsaw in Baltimore last night, and lost to the Orioles… I recall when the Orioles held their spring training in Ft. Lauderdale, and we could drive the hour down the road to watch the Cardinals play there… It was an old stadium, but I loved it, great sight lines, wide concourses… And, best of all, once I ran into my live-long fave player of all time, Ted Simmons! I got my picture taken with him… I used to work with Ted in the offseason of 1982, he spent some time working in the bond dept. at Mark Twain Bank, and I spent a lot of time explaining bonds and clearing of them to him… Now that was unreal to me, as he was always an idol to me, and now I was teaching him about bonds! Good Memories, for sure! It was a dreary day here yesterday, as it should be, given it was the remembrance of 9/11… But the sun will come out today… And that leads me to Bill Withers greeting me this morning with his song: Lovely Day…
Well, the dollar selling turned out to be more than just some plain profit taking yesterday… When I left you yesterday, the BBDXY was down 3 index points from its close Friday, and I said that maybe, the dollar selling will continue once the U.S. boys got to their desks… And that it did! The dollar continued to get sold, and the BBDXY ended the day down 7 index points from where it closed Friday… That’s a HUGE move and one that has the warning of China to short paper traders to clear steer of the renminbi, and… hints by the Bank of Japan (BOJ) that they could be hiking rates sooner than later, to blame… The Asian traders have their fingerprints all over this initial bout of dollar selling Sunday night, but the U.S. markets saw what the Asian Central Banks were saying, and decided to take their money and run (Stevie guitar Miller)…
Gold couldn’t hold its early gains, as the short paper traders saw to that! But Gold did end the day up $3.10, to close at $1,922.80.. Silver added to its early gains of 2-cents to end the day up 14-cents and close at $23.15. Those pesky short paper traders just can’t seem to keep their hands out of the cookie jar, can they? I’ve explained to you previously how the short paper traders book profits on these trades, so I won’t get into that again here, but I will say that it seems that the short paper traders are just keeping a lid on Gold’s upward movement, allowing it to gain, but in small pieces, as to not get everyone all lathered up… Then when Gold reaches the upward price they are looking for they will close our their long positions, and go all-in short again… It’s a vicious cycle, but 52 weeks ago, Gold was $1,791… I’m just saying…
The price of Oil remained steady with an $87 handle yesterday, and the 10-year’s yield did the same trading all day with a 4.29% yield… As I understand the flow of bonds being issued, there is a ton of bonds maturing in the next week, and all those new bonds that get issued to take their place, will have a much higher interest rate / yield on them… The cost of servicing the bonds just keeps going higher…. I’m just saying…
In the overnight markets last night…. The dollar bugs fought back, and there was some buying of dollars. The BBDXY is up 2 index points this morning at 1,252… Gold is down $7 to start the day today, while Silver is also down 25-cents to start the day… This selling of the metals doesn’t make any sense to me, so it’s got to be tied to short paper trading once again… And that negates what I just talked about above… UGH! The price of Oil is so close to the $88 handle it could spit in $88’s back yard! I read an article this morning about how the Saudi Oil production cuts haven’t been felt just yet… Oh boy! I can hardly wait for that to be felt! And the 10-year Treasury saw a little slippage in its yield to start today with 4.27% yield…
I noticed yesterday that the Russian ruble had rallied from the 98 handle to the 96 handle… This was the first time in weeks that the ruble reacted to the higher price of Oil… The currency that got all the media coverage, during Oil’s rise in price was the Mexican peso… But the bloom is off the rose now with the peso, and unless the Mexican Central Banks wants to hike rates further, I think the peso has seen its heights… I don’t think it will trail off too much though, as the price of Oil remains a good stimulant for the currency… And Russian leader, Putin, recently put in his two cents on the currency, saying that the currency’s swings are “manageable”… For whom, Vlad?
The Chinese renminbi saw its first gain in weeks on Sunday night into Monday, as I think all those lame traders that got scared by the Chinese Gov’t saying they should steer clear of shorting the renminbi, took the message to heart and skedaddled… thus giving some gains to the renminbi…
And once again, we see investors piling back into Japanese yen, because the BOJ said they were considering a rate hike… Give me a Break! This is called jawboning folks and doesn’t mean a hill of beans! But these yen buyers, never learn, do they?
Well, the news from the UAW strike isn’t good, financially that is… There is a report out that says that the U.S. GDP will suffer a $5.6 Billion setback even if the strike is short-lived… that’s just what the economy needs is a hit to its size… That’ll be 143,774 workers that are not working… And the line items add up to a reduction in GDP of $5.6 Billion, and that’s if the strike only lasts 10 days…
Quite a few years ago now, I wrote about how I thought the U.S. Gov’t will come to a point where they make U.S. citizens buy Treasuries in their retirement accounts… I know of a few people that liquidated their 401’s and bought Gold at that time… I know I would be ticked if I received a letter from the Gov’t telling me that my 401 would be liquidated and Treasuries would replace the assets sold… Well, that was then… and we were nowhere close to the edge of the cliff that we are at now… So, I fully expect this to happen in the next two years… Probably before then, if all this green spending keeps going higher and higher… like the image I get when I say higher and higher, and that is of the great Sly Stone at Woodstock, with his arms in the air, singing I wanna take you higher!
The US. Data Cupboard is still barren again today, and will pick up the pace tomorrow the Stupid CPI… Could there be a more worthless piece of data? I don’t think so, although the Consumer Confidence report runs a close second… On Thursday this week the data cupboard will have the August Retail Sales… I can tell you now that the BHI indicates that this report will be disappointing when compared to July’s Retail Sales that included back-to-school spending, something that you didn’t see mentioned anywhere but here, but I digress…
To recap… The dollar continued to get sold throughout the day yesterday, and from Friday’s close the BBDXY was down 7 index points! So, it was more than profit taking… Chuck thinks that it was a result of the news from Asia, where China and Japan were both in the news, and causing some short trades to in their respective currencies to be closed out… Chuck points out that a huge maturity of Treasuries is coming due soon and will be rolled into new bonds with higher interest rates/ yields…. Higher debt servicing costs, are becoming a real problem, folks…
For What It’s Worth…. well, there are surveys, and polls, and there are surveys run by the NY Fed… So, I sit up and pay attention to what they have to say, and that’s what this article does… It focuses on the deterioration of the household’s finances sentiment… and it can be found here: NY Fed Survey Finds Sharp Deterioration In Household Financial Sentiment As Long-Term Inflation Seen Rising To 15 Month High | ZeroHedge
Or, here’s your snippet: “After four months of declines in the 1-Year inflation expectation as reported by the NY Fed’s consumer survey, August saw a reversal in this series which traditionally is also a proxy for the price of oil (which just hit a 2023 high this morning), however this was offset by a small decline in 3-year inflation expectations. However, the most concerning observations was that the inflation outlook at the 5-year point hit the highest since March 2022 while households turned even less optimistic about their financial situation.
Here are the details: as shown in the chart below, while inflation expectations at the one-year horizon were slightly higher at 3.63% in Aug. from the previous month’s 3.55%, three-year-ahead inflation expectations, conversely, fell to 2.79% from 2.91%. Finally, 5-year-ahead inflation expectations rose from 2.90% to 3.00%, the highest since March 2022.
The report also noted that median inflation uncertainty (the uncertainty expressed regarding future inflation outcomes) was unchanged at the one-year-ahead horizon and decreased at the three- and five-year-ahead horizons.
Turning to median home price growth expectations, the survey found that these increased by 0.3% point to 3.1%, its highest reading since July 2022… which of course is just the opposite of what the Fed wants to achieve and suggests that the Fed’s tightening plans have failed miserably at slowing the growth in what is arguably the most important asset class for the US middle class. The increase was most pronounced for respondents under the age of 60 and those with a high school education or less.
Next, turning to year-ahead commodity price expectations, these rose across the board in August, increasing by 0.4% for gas (to 4.9%), 0.1% for food (to 5.3%), 0.8% for the cost of medical care (to 9.2%), and 0.2% for the cost of college education (to 8.2%) and rent (to 9.2%).
But while the latest reversal in the downward trend of inflation is troubling, what is even more concerning was the report’s finding that the median expected growth in household income fell to 2.94% (the decline was largest for respondents with a high-school education or less) to the lowest since July 2021…
… prompting the report authors to write that “perceptions about current credit conditions and expectations about future conditions both deteriorated.” Digging into the details of the household finance survey reveals substantial deterioration across all indicators, and especially when it comes to applying – or receiving – new credit:”
Chuck again… This is an interesting article I must say… We’ll have to see where this takes us, but in my opinion, it’ll take to crying tears…
Market Prices 9/12/2023: American Style: A$ 6417, kiwi .5898, C$ .7361, euro 1.0716, sterling 1.2466, Swiss $1.1210, European Style: rand 18.9575, krone 10.6868, SEK 11.0955, forint 347.44, zloty 4.3628, koruna 22.9705, RUB 94.74, yen 146.99, sing 1.3623, HKD 7.8294, INR 82.92, China 7.2916, peso 17.32, BRL 4.9300, BBDXY 1,252.56, Dollar Index 104.83, Oil $87.97, 10-year 4.27%, Silver $22.90, Platinum $896.00, Palladium $1,214.00, Copper $3.78, and Gold… $1,915.08
That’s it for today… Well, the NFL season started this past weekend, and last night, was the first Monday Night Football game of the year… My cable provider settled with Disney, and so I had to miss 2 Mizzou Football games, but not anymore, as the Disney channels came back on-board last night… I was seriously thinking about cutting the cord, and go to streaming, but I didn’t have to… I realize that streaming is the way it will be in the future, but for now, I’m happy not having to stream… Well… I was at Evie’s grandparents day last Friday, and a little girl asked me why I had casts on both legs (I have compression wraps) … Kathy laughed and said, I want to hear you explain that! I just told the little girl that they were wraps that helped me walk, and she was fine with that… This time I didn’t have to sit on one of those little chairs that the kids sit on… And that was great with me! And Saturday I went to grandson, Everett’s tackle football game… He sure looked small out there! Caught a couple of passes though… And Sunday went to grandson Braden’s soccer game… A full weekend of attendance at games! Crowded House takes us to the finish line today with their 80’s song: Don’t Dream It’s Over…. I hope you have a Tom Terrific Tuesday today, and Please Be Good To Yourself!
Chuck Butler