- Currencies get sold down the river on Friday
- Gold kicks tail on Friday but gets sold overnight….
Good Day… And a Marvelous Monday to you… It’s Thanksgiving Week! I used to not enjoy Thanksgiving because every year Kathy and I would argue about which parents’ house we would eat at… It was our only argument all year, and therefore I didn’t enjoy Thanksgiving…. (because she always won!) My parents were smokers, and so, the argument would go, to how our kids shouldn’t be exposed to the smoke….. But now, everyone comes to my house on Thanksgiving, and I enjoy that much more! Especially in 2020, when it was just Chuck, Kathy, and our kids, and grandkids…. I made each person say what they were Thankful for… When it was my turn, I simply said, “I’m thankful for the Good Lord who allowed me to be here with you all today.” The tears were flowing…. Marion Meadows greets me this morning with her version of the song: Jingle Bells….
Well, The dollar took no prisoners on Friday, last week…. It was a siege like I hadn’t seen in a while… And do you want to know what turned the dollar bugs on so much on Friday? Well, You’ll have to stay tuned until we get to the FWIW article today, which will explain it all…. The Readers’ Digest version of it is simply, Europe had a plan to deal with Trump’s proposed tariffs, and it involves devaluing the euro…. So, with the euro the offset currency to the dollar, and the dollar bugs hearing that news, they took the dollar to a 2-year high… The BBDXY gained over 5 index points, the Dollar Index gained over 50 basis points, and the currencies look torn and tattered once again….
Gold didn’t let the dollar’s rally get in the way of its own rally…. Gold gained $47 on Friday to close the day and week at $2,716.90… Back to $2,700 and looking like it wants to move even higher again…. Silver, too, got into the rally and gained 55-cents on the day to close the week at $31.41… There was no line in the sand at $31 this time, so the buying of Silver must have been very strong, eh? Didn’t I tell you last week that once the short paper trading was completed, that the metals would be back on the rally tracks? I know, it was difficult to imagine after all that short selling, but…. History shows us that this is the trend……
The price of Oil bumped higher on Friday and ended the week trading with a $71 handle…. So, much for the rumor that there was a glut of Oil supply, eh? The goings on in Ukraine, Russia, Middle East got traders all worried that they were going to escalate and that got them marking up the price of Oil…. And the 10-year Treasury saw its yield stay steady Eddie at 4.41% to end the week.
In the overnight markets last night…. Well, the announcement that the hedge fund guy, Bessent, was going to be nominated to be Treasury Sec really scared up the markets last night…. Right now, the markets are of the belief that Bessent will be the one that can get the U.S. economic growth back to 3%, and a 3% Budget Deficit (Budget? What Budget?) is the question that will be answered as we go along, but for now, the markets are giddy with this nomination, and that has Gold running for safety from the short paper traders this morning, The dollar getting sold, and bonds getting bought…. All opposites of what was going on before his name appeared on the docket….
The BBDXY has given back the 5 index points it gained on Friday, and added another index point to the downside move this morning…. Gold has given back $36 of its $47 gain on Friday, in the early trading, and Silver’s line in the sand is evident again, as it falls below $31 again…. Silver is down 36-cents this morning… This is redonkulous! Just because this guy (Bessent) is a hedge fund guru, and has made a Billion dollars, doesn’t mean he knows squat about running The Treasury, or bringing the U.S. Budget deficit down to 3%, but… Right now, the markets are all-in on this guy… So, there’s that….
The price of Oil slipped back to the $70 handle overnight, and the 10-year Treasury, as I just said, bonds are getting bought, and the 10-year is no exception, as its yield falls to 4.35% this morning, to start our day and week.
So, what happened on Friday gets thrown out the window, and the markets start over again… I was taught early in my trading careeet that “The markets are never wrong”…. I know that I’ve tried to prove them wrong on several occasions through the years but have never succeeded…. I gave up…. I didn’t want anyone to think I was insane, trying the same thing over and over again…. I have to question the markets here though…. Really…. Throwing all your eggs in the Bessent basket just doesn’t seem to be the correct move…. to me that is…. I guess we’ll have to wait-n-see, but in the meantime, batten down the hatches and hold on to your hat!
Well, we all know by now that the U.S. National Debt is over $36 Trillion… But the public debt is rising too…. Here’s David Stockman talking about just that: “Thereafter, however, soaring interest expense will ignite a veritable fiscal wildfire. On paper the public debt would power upward unabated to $150 trillion by mid-century under CBO’s latest projection. Yet even the latter is based on a Rosy Scenario budget model that assumes Congress never again adopts a single new tax cut or spending program and that the U.S. economy steams along without a recession, inflation recurrence, interest flare-up or other economic crisis during the entirety of the next quarter-century!
Of course, long before the public debt actually hits $150 trillion or 166% of GDP per CBO’s current long-term projection, the whole system would implode. Every remnant of America as we now know it would go down the tubes.”
That can be found on Ed Steer’s Saturday letter here: www.edsteergoldsilver.com
Chuck again…. This is in line with my thoughts that the whole financial system will collapse under the weight of all this debt, the Gov’t and public…. The FWIW article is long today, so this part of the letter will end now…
The U.S. Data Cupboard has nothing, nada, nil, zero, a big goose egg, for us today, and tomorrow it will only have the STUPID Consumer Confidence….
To recap… The dollar soared on Friday, along with Gold & Silver… But most of those gains were given back in the overnight markets last night and early this morning…. All because of the giddiness of the markets over the nomination of Scott Bessent, a huge hedge fund manager for Treasury Sec. The markets are all-in on this guy, of which Chuck things there should be calmer heads right now, in a wait-n-see if he’s as good as the markets think…
For What It’s Worth…. This article was sent to me by long-time readers, Bob, and it talks about the proposal of tariffs, and what Europe will do about them, and it can be found here: German Industrialists Very Worried About Trump’s Return – German Economists Say ‘Relax, We’ll Just Devalue the Euro’ – The Last Refuge
Or, here’s your snippet: “Germany is the largest economy in the E.U. However, due to a confluence of horrible events, most of them self-created as an outcome of ridiculous energy production decisions, the German industrial economy has been contracting since 2022.
Into this downward spiral of negative economic events within Germany, now comes the problem of President Trump eager to eliminate the Marshal Plan of one-way tariffs and start dealing with the trade inequities. The German industrial manufacturing companies who make up the majority of the economic output are concerned, very concerned.
Within the discussion suddenly something appears that all Western financial pundits have yet to accept. Leo Barincou, a senior economist at Oxford Economics in Paris says:
[…] limited tariffs on selected products, such as cars, chemicals and agricultural products, may not be too much of a problem, Barincou says. A rising dollar, and hence a falling value of the euro, would offset some of the harm caused by the tariffs. “At a macro level, the impact would be limited,” he says. (read more)
Yep, here we go again.
We saw this play out in 2017 through 2019. China first responded to tariffs by subsidizing their targeted industries and later devaluing their currency. We began importing deflation because Chinese products arrived with lower, subsidized, prices, and we paid for them with higher value dollars.
The downside for the rest of the world was China pulling back from purchases of large industrial products from Europe. This made the EU furious at Trump, and subsequently the EU central banks lowered the euro as an offset. For Americans we started importing deflation from Asia and Europe. Everything was arriving at a lower price and being paid using higher value dollars.
I find it a little humorous that Germany openly admits they will offset Trump tariffs, devalue their currency, and ship goods without tax impacts. Meanwhile the gaslighting U.S. financial pundits will keep pretending this is not happening.
The names have changed, but the cause & effect outcomes remain the same.”
Chuck again… Yes, a little longer than the usual FWIW but, it was important for you to know what’s going through Europe’s mind right now regarding the proposed tariffs….
Market Prices 11/25/2024: American Style: A$ .6512, kiwi .5853, C$ .7163, euro 1.0487, sterling 1.2580, Swiss $1.1243, European Style: rand 18.0674, krone 11.0492, SEK 10.9790, forint 392.44, zloty 4.1257, koruna 24.1429, RUB 103.90, yen 154.50, sing 1.3463, HD 7.7808, INR 84.30, China 7.2443, peso 20.37, BRL 5.8068, BBDXY 1,285.71, Dollar Index 107.66, Oil $70.86, 10-year 4.35%, Silver $30.82, Platinum $955.00, Palladium $1,004.00, Copper $4.15, and Gold…. $2,680.30
That’s it for today…. Well, my beloved Mizzou Tigers won in Starkville, Miss Saturday in a convincing way, and now come home to play their rivalry game VS Arkansas this coming Saturday… They used to play this game on Black Friday, but I guess that changed…. A BIG game for Mizzou… The Border Rivalry game and bragging rights for another year…. Sunday was a nice day here, but that warmer weather won’t last long…. College Basketball has started, and the Mizzou Tigers basketball team is doing much better so far this year than last…. Next weekend will be the College Football Conference Champinonship games…. And then the final issuance of the top 12 teams to make the playoffs…. I still can’t believe that my belovoed Tigers aren’t a part of the CFP playoffs…. UGH! Beegie Adair takes us to the finish line today with he version of the song: Winter Wonderland…. I hope you have a Marvelous Monday today, and please Be Good To Yourself!
Chuck Butler