September 5, 2023
* currencies & metals get sold in recent sessions
* We, as a country, are going to give banking to who?
Good Day… And a Tom Terrific Tuesday to you! And welcome to September… Which is also the title song of one of my favorite tunes! Well, did you have a great holiday weekend? I was so bummed because usually, we have the Butler Labor Day BBQ & Pool Party, but this year it had to be cancelled because our house is in ruins, from the flood caused by a broken water pipe while we were on Vacation… UGH! I missed cooking all day on my Big Green Egg, and Weber grills… And this year, I have a Blackstone Griddle added, that I had great plans for… But those had to be put on hold… Oh well, we’re here, and no one was hurt, so we carry on… I’m doing much better these days, with the bleeding abating, along with my stomach problems… Thanks to those of you who said an extra prayer for me…
Eddie Floyd greets me this morning with his great 60’s song: Knock on Wood…
Well, what got the dollar bugs all lathered up on Friday? Was it the better than expected Jobs number? Was it the improvement of the ISM Manufacturing Index? Or, was it someting on the outside that got the ball rolling for the dollar bugs, like PPT intervention? I say that because at 8:00 a.m. on Friday morning the BBDXY was down 1 index point at 1,239… And then suddenly, the dollar shot higher like it was on a moon shot… The BBDXY ended the day up 5.47 Index points to 1,245.62… The euro, which had reached 1.09 the previous day, fell all the way through the 1.08 handle to trade with a 1.07 handle to close the week… There’s some news on the euro that I’ll get to in a minute… But first…
Gold ended the day exactly at the same level to the the penny, that it ended Thursday… $1,940.60… As Ed Steer said in his Saturday letter, “I don’t think that happened by accident either”… Gold actually was up $20 higher during the day, but then was subjected to short paper trading, and so, all its gains were erased… Silver wasn’t allowed to end the day/ week, on an up note, falling short on Friday by 24-cents, to end the week at $24.26
You know, a long time ago, back when I was first learning the ropes to trading, a wise man told me that the “Commitment of Traders Report” (COT) Was not something to ignore, that it indicated what Traders were going long, and that could very well mean good things for the asset you’re watching…. Through the years, I’ve followed Ed Steer’s reporting of the COT, and I have to say that the recent COT’s have been very good for Gold… But what good does that do, when the short paper traders can wipe out a day’s gains in a NY Minute?
The price of Oil has responded to the news that Russia will narrow their Oil production… On Thursday, last week, Oil rose $4, and then on Friday it added another $2, to end the week trading with an $86 handle! Even with the interference that has been hanging over the price of Oil like the Sword of Damocles couldn’t compete with the suppy/ demand price discovery in Oil…
The 10-year Treasury Note, saw its yield rise on Friday, after all the shenanigans of earlier in the week, with what I know in my bones was Fed intervention to bring rates back down with buying, even though they are supposed to be out of the bond buying business… The 10-year’s yield ended the week at 4.18%, after it had fallen as low at 4.07% the day before…
Yesterday, with the U.S. markets closed, the rest of the world went about their business of trading, the volumes were as Ed Steer calls them, Vapors, but the dollar gained another index point, Gold lost $1.60, Silver lost 20-cents, and the price of Oil was steady at $86… There wasn’t much to the trading day, and so we move along to the overnight markets last night..
In the overnight markets last night… What the heck is going on here? The overnight markets have ambushed the currencies and the BBDXY has gained over 7 index points overnight! This is really getting out of hand, folks… I would say that the only bright spot to all this dollar buying, is that the currencies and metals are cheaper, and represent good buying opportunities… Gold is down $7 to start the day, and Silver is down 40-cents… The short paper traders are working overtime, here folks… It’s a shame to watch them destroy values the way they do… But one day, they won’t exist, and we can all be like the munchkins in The Wizard of Oz, when the Good Witch, Glinda, says, “come out, you can come out now”…. Now, we just need someone to drop a house on the short paper traders….
Even the Petrol Currencies that include: the ruble, krone, peso, sterling, loonie, and others, have had this tug-o-war going on with the price of Oil rising it takes these currencies higher VS the dollar, and then on the other hand, they have the price of the dollar pulling them down… Sort of like the angel and the devil on your shoulder… The angle tells you not to do something, but the devil says, go ahead what’s it going to hurt? And then you rue the day you listened to the devil…
The price of Oil has slid down to an $85 handle this morning, but the writing is on the wall here folks… The U.S. hates Oil, but the rest of the world still is aware that Oil is what made them what they are, and that it needs to be protected and used… And with the Oil producers, i.e. Russia, saying they are going to cut production even more, then the dynamics of supply and demand come back…
Well, I hate to have to do this, but we might as well go straight to the Data Cupboard’s yield from last week… Because if you read the reports about the dollar’s rally, it was tied to these data prints… (I’m not buying it, one iota, but then you didn’t expect me to did you?) The Jobs Jamboree on Friday last week showed that 187,000 jobs had been created in August, with 103,000 of them being added to the surveys by the BLS out of thin air… That would put the job creation in August at just 54,000… And I’m sure the BLS saw that, and panic set in, knowing all too well that the Big Guy, won’t like that, so they added 103,000 made up jobs to the surveys, and that made the day for the markets, who look to the hedonic adjustment with a blind eye…
And so, then the question would be: Why would the markets think that 187,000 jobs created was good? Because it beat the expectation of 177,000, and was better than July’s 157,000…
The other thing about the Jobs Jamboree is the Hourly Wages, and I’ve always told you that this piece of the print was the more important piece of data than the jobs created… And There was some good news in the Hourly Wages data, which showed an annual basis being up 4.3%… With “real inflation” running around 8%, that means wages aren’t keeping up with inflation… And should be a downer for the markets, but… they refuse to let the “real inflation “enter their sweet imaginations, and so to them, wages are above the stupid CPI inflation…
And then there was this… from zerohedge.com; “Inside Today’s Disastrous Jobs Report: 670K Full-Time Jobs Lost in 2 Months vs. 1 Million Part-Time Surge; Worst Unadjusted August Payrolls Since Great Recession”
Then there was the ISM Manufacturing Index, where it has been hanging out below 50 for months now… It remained below 50 at 47.6%, which was better than July’s 46%… But still below 50, which is the indicator that decides whether manufacturing is expanding or contracting…
And finally, there was some bad news for those who believe that the Fed Heads have defeated inflation… The Fed Heads preferred inflation calculator the PCE showed that inflation rose in August to 4.3%, from 4.1%… See? I told you that our inflation was going to be sticky… and will also be difficult to rope in… as long as the Fed Heads keep interest rates below the rate of “real inflation”…
So, that was quite the datapalooza, eh? And from all of that nonsense the dollar bugs saw the dollar gain ground like an Oklahoma land rush!
I really don’t get it folks, why the dollar was such a buy last Friday… The data was NOT that good, in fact it was sketchy in parts, and certainly not something that would get me all lathered up if I were still a currency trader.
So… Moving on… I found this on Twitter yesterday: The Kobeissi Letter
@KobeissiLetter
“Excess household savings in the US have fallen for 23 STRAIGHT months.
Since 2022, excess savings in the US have been falling by $100 billion per MONTH on average.
The San Francisco Fed estimates that remaining household savings will be depleted this quarter.
Just over 2 years ago, Americans had a record $2.1 TRILLION in excess savings.
Current estimates put savings at a mere $190 billion.
Debt will soon be the answer for many more people.”
Ok, Chuck again… now that’s something that, if I were still a currency trader I would be using to sell dollars… I’m just saying…
Now, I’m not saying that all of that spending of savings cash went toward who knows what? I do realize that a ton of cash has been moving to money market accounts and CD’s… But most of that money that was moved to those accounts was reportedly coming from stocks… So… I still say this is dangerous for the dollar…
OK… so around the world, sees that most central banks are weighing the end of their rate hike cycle… I would hope not, given how inflation will come back to bite them in the rear… But that’s another reason for the dollar bugs to be doing jumping Jacks in the street these days… Shoot Rudy, even the Reserve Bank of New Zealand (RBNZ( has taken a pause for the cause, and that really bothers me, because the RBNZ has long had a reputation of being ahead of inflation… I know I’ve told you this story before, but long ago in a far away time, I met the Gov. of the RBNZ in LA… We talked at end, and then he gave me his card with his personal line at the RBNZ on it and told me to call him if I ever had a question about the RBNZ’s monetary policy… After a few months I finally got the chance to call him when the RBNZ had left rates unchanged, when it appeared that they would be hiking rates… I called his line, and lo and behold, it was Don Brash, Gov. of the RBNZ on the other end of the phone!
years ago, when I turned 60, my good friend, and boss at the time, Frank Trotter, reached out ot the many contacts I had amassed through the years, and asked them to send me a note on birthday… I was suprised to see one from Don Brash!
Alrighty then, I’ve got a million of them! A million stories about my time in the markets… And maybe one day, when I’m really feeling like it, I’ll sit down and write them all down, and into a book… Now, that would be something, eh?
The U.S. Data Cupboard last week was gone through with a fine tooth comb above today… And the data the rest of the week is sparse… Today we will see the latest color of the Factory Orders, for July, and given the Durable Goods Orders negative print last week, I’ll say that Factory Orders too will be negative for July… The rest of the week will be hit and miss on diferent data prints, but none of them are market moving, so we have that going for us!
To recap… The dollar bugs went on the warpath on Friday, after the day’s datapalooza printed… The BBDXY gained over 5 index points on the day, and Chuck doesn’t see the reason for all that excitement… But it is what it is, and the dollar kicked some tail and took names later on Friday… Chuck tells us a story about his old days as a currency trader, and his new found friend from down under…
For What It’s Worth… This article had me scratching my bald head, and you’ll be scratching your head too after reading it… I don’t get it… first we allowed Brokerage Co’s to bank, and now this? The article is about how the agencies are looking to give more banking powers to institutions not considered to be banks, and it can be found here: US officials weigh pathway to let more firms tap Federal Home Loan Banks – Bloomberg News (yahoo.com)
Or, here’s your snippet: “U.S. officials are exploring ways to allow a broader base of financial firms, including nonbank mortgage lenders, to borrow from Federal Home Loan Banks, Bloomberg News reported on Wednesday, citing people familiar with the matter.
Any expansion would, however, ultimately need congressional action, and would also likely require firms to agree to more government oversight, the report said.
U.S. FHL Banks have been beefing up their lending war chests to provide more liquidity to banks amid higher-than-usual demand for funds following the collapse of Silicon Valley Bank (SVB) and Signature Bank (SBNY) in the United States and the emergency takeover of Credit Suisse.
FHL Banks are 11 regional government-chartered institutions that raise money for low-cost lending to their members. They are a vital source of funding to regional banks and often a preferred final stop for cash before banks in need turn to the Federal Reserve itself as a last resort.
The U.S. Federal Housing Finance Agency did not immediately respond to a Reuters request for comment.”
Chuck again… The old folk song said it best… “When will they ever learn?, When, will, they, ever, learn?”
Market Prices 9/4/2023: American Style: A$ 6368, kiwi .5868, C$ .7328, euro 1.0736, sterling 1.2555, Swiss $1.1251, European Style: rand 19.1808, krone 10.7306, SEK 11.0920, forint 369.26, zloty 4.1802, koruna 22.5067, RUB 97.41, yen 1.4738, sing 1.3615, HKD 7.8400, INR 83.03, China 7.3040, peso 17.26, BRL 4.9567, BBDXY 1,252.48, Dollar Index 104.70, Oil $85.35, 10-year 4.22%, Silver $22.60, Platinum $945.00, Palladium $1,209.00, Copper $3.82, and Gold… $1,931.14
That’s it for today… A very nice weather-wise weekend was on the docket for us here in the Midwest this past holiday weekend… On Friday night, a young lady asked me why I looked so bummed… I told her that usually on that Friday before Labor Day, I was busy cooking all day, preparing for the Annual Butler Family Labor Day BBQ & Pool Party… And then I had to tell her why it was cancelled this year… UGH! I was not aware that I was wearing my displeasure on my face! Oh well… time goes on… My beloved Cardinals won 2-3 from the Padres, and lost 2-3 to the Pirates… one step forward, two steps back… And my super beloved Mizzou Tigers won their opener in fine fashion last Thursday night… Go Tigers! Our StL City team went 1-1 last week… The losing game was a real gut wrencher though, as a referee’s call proved to be the difference… UGH! Wednesday night last week, I spent the night at the ER… my jaw, where the mass is, was bleeding and I couldn’t get it to stop! So, I went to the hospital thinking they would get it to stop… But after 2 hours they threw their hand up in the air! It finally stopped and I went home and it hasn’t bled since… Very strange ordeal, I must say! Ok… The band Outkast takes us to the finish line today with their song: Hey YA… (A good way to get going for me this morning!) I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!
Chuck Butler