Global Debt Reaches $313 Trillion…

  • Currencies and metals rally in the overnight markets
  • Why do the dollar bugs ignore all the bad data?

Good Day… And a Tub Thumpin’ Thursday to one and all! Well, the oh-woe-is-me days for my basketball teams continued, with Mizzou losing Tuesday night, and St. Louis U losing Wednesday night… I’m so down on college basketball this year, that I can’t even get myself to watch other teams play! I sure hope that changes by the time the NCAA Tournament starts! Another cold front came through earlier this week, and the temps are struggling to get back to normal here… This has been the strangest winter weather down here that I’ve experienced… I was still able to sit outside and read yesterday, for a couple of hours… The great Percy Sledge greets me this morning with his mega hit song: When A Man Loves A Woman… 

I saw Percy Sledge sing just a year ago, and he sounded as good in his 70’s as he did in his youth… 

Well, the started with the dollar getting sold yesterday, and the BBDXY was down 2 index points, that is until the FOMC meeting minutes printed in the afternoon, and in them the Fed Heads talked about how they were concerned that inflation could come back, and therefore, they weren’t going to discuss rate cuts, just yet…  And with that announcement, the dollar turned around and ended up pretty much flat on the day…  Gold was up $5 when the FOMC minutes printed and then it slid to a negative before rallying at the end of the day to show a gain of $1.70… Silver didn’t have it so good, and lost 10-cents to close at $22.96, while Gold closed at $2,026.70

The price of Oil remained in the $76 handle yesterday, while the 10-year’s yield went up again this time to 4.30%… I know I’ve been a little hard on the Beaver, as Ward Cleaver would say, and in this case I’m talking about bonds…  I’ve always thought that when you buy bonds you need to stay short… 2-3 years and in… That way if interest rates move, they affect the long end more than the short -end… And you’re not locked in for 10 years!  So… if you feel the need to buy bonds, stay short term…  I’m just saying

In the overnight markets last night… Well, the dollar luck ran out last night, as the BBDXY has lost 3 index points to start the day today. The euro is climbing in the 1.08 handle, and the rest of the currencies all look a bit healthier this morning.. I haven’t found anything to tell me what caused the dollar to get sold overnight. So, now, we’ll have to wait-n-see what the U.S. dollar bugs do with it as New York opens up…  

Gold is up $3 to start the day today, and Silver is up 18-cents… The Short paper traders sure had Gold & Silver by the short hairs yesterday, and wouldn’t let go… I’m hoping that they go away for today… My last day before vacation, I want to leave on a good note!  The price of Oil gained a buck overnight and trades this morning with a $77 handle… I read this morning that it seems that the Oil market is getting very tight… that could be good for the price of Oil, so keep that in mind…  And the  10-year inched higher with its yield and trades this morning with a 4.31% yield. 

Man I was full-o-gloomy-news yesterday wasn’t I ?   Well, if you listen the lies the Gov’t including the Treasury Sec. are spouting about the soft landing and so forth, you might well , begin to believe their lies… The Gov’t accountants are full of lies, and whenever I see more lies being spewed by these folks, I think of something my dad used to say to me… “figures lie, and liars figure”… That’s quite appropriate here eh? 

One has to wonder what it’s going to take to pull the reins in on the stock market, right?  Here’s something I found here:Adam Taggart’s Thoughtful Money | Substack, where Adam talks about that… let’s listen in: “The S&P 500 is now solidly above 5,000.

Stocks have shrugged off “bad” data like higher inflation numbers & disappointing retail sales — nothing at the moment seems able to dampen Wall Street’s euphoria.

And little surprise, retail investors are now piling into the markets, eager not to miss the party.

These are classic late-stage signs of a topping market.

Portfolio manager Lance Roberts calculates that a pullback is now highly likely, though he warns he would not be surprised if the S&P ran up another 100 points from here before it arrives. Animal spirits (i.e., investor emotions) are now fully in the driver’s seat.”

Chuck again…  I’m no stock jockey and I don’t play one on TV or did I stay at a Holiday Inn Express last night, so I don’t normally talk about the stock market, but today… Just seems to be on my mind, since this has reached a level of ridiculousness’ that’s unmatched…  Bill Bonner had a quote from John Hussman, “John Hussman predicts, with 99.9% certainty, a big drop in stock prices…particularly the Magnificent 7.”

Well, we all know just how reliant we can be on predictions and forecasts, right… So, I offer that information to you for you to use with how ever many grains of salt you wish to use… 

The 1440 Digest reported yesterday that: “Ford Motor Co. slashes price of 2023 Mustang Mach-E by up to $8,100; company reports US sales fell 51% in January after the Mach-E became ineligible for a federal tax credit” WOW! Obviously the car was overpriced to begin with, but leave it up to the spin doctors to spin this as the loss of sales were a result of the tax credit ending…  I’m just saying… 

The thing I wanted to point out with the Adam Taggart quote above, is that the same holds true for the dollar… Retail Sales were awful, PPI pointed to higher inflation, and there’s been a parade of bad data prints in the past few months, but still the dollar bugs are in control… Something has to give here, and soon! 

But that’s more pfodder for the Pfennig, in that it shows in a way, that is, that consumers are running out of money for Big Purchases, and loan rates have got to be higher… 

On a separate note, I read yesterday that the 30-year mortgage rate is back above 7%… Now that’s going to lay some pain on the housing market that already saw Housing Starts last month fall to pre-scandemic levels… 

The total Global Debt reached a new all-time high of $313 Trillion at year-end 2023…  So, as you see, it’s not just the U.S., Japan, U.K, and Eurozone that has debt up to their eyeballs… Everyone around the world has significant debt levels, except: Singapore and Russia… And with a war going on that Russia is involved in, their debt levels will begin to show some strain, if the war continues much longer. 

All it takes is for one country to announce they are defaulting and won’t pay off their loans, for the ripple effect to begin, going from country to country, and not stopping until everyone’s slate is clean, and we can start all over again… Yes, that means this includes the U.S. of A… So, think about that for a moment, and I’ll ask you my usual question: Got Gold?   or Got Silver? 

You know earlier this week, I told you that all signs pointed to a German recession at the end of the year… Let’s see what could have caused that recession to start, ok? Hmmm… put my thinking cap on, and… I come up with the blowing up of the Nordstream pipeline as the main culprit… So, the German people can thank the U.S. for their recession… Boy, that’s how you treat your allies, I hate to be your enemy! The euro doesn’t seem too concerned about the recession, as it hangs our around 1.08 and change… I’ve told you before, but in case you’ve forgotten, but the euro is the offset currency of the dollar… Dollar weakness or strength will determine how the euro trades for the most part… So.. there you have it, in a nutshell! 

The U.S. Data Cupboard finally has something for us today, and it’s the usual Weekly Initial Jobless Claims… I await to see how many lies this report will have in it…  Yesterday, we had 3 Fed Head speakers, and today will have 3 more Fed Head speakers… I know I’ve said it before, but life was easier and simper when we didn’t know who the Fed Heads were!  How many of you remember Arthur Burns?  Ahhh… a name from the past! 

To recap… The dollar was getting sold yesterday, not by a lot, but sold nonetheless, until the Fed Head’s FOMC Meeting Minutes printed, and the markets got another shot of realization that rates are getting cut any time soon, and the dollar rallied late in the day to end up basically flat on the day… Gold did the same rodeo dance with it up in the morning, and down after the FOMC Minutes, and then a brief rally at the close… Silver did all the same sans the rally at the close… $313 Trillion in Global Debt at the end of 2023… Chuck explains that at some time, it’ll take just one small country to default, and then the ripple effect will take place with everyone wiping the slate clean… It’ll be very ugly folks, and can’t ask this enough: Got Gold? Got Silver?

For What It’s Worth… Longtime reader, Bob, sent me this, and well, it’s darn good pfodder for the FWIW article today… this is about derivatives, and while I can’t print it all maybe the snippet will whet your whistle to go to the web site and read it all… It can be found here: Defusing the Derivatives Time Bomb: Some Proposed Solutions. Ellen Brown – Global ResearchGlobal Research – Centre for Research on Globalization

Or, here’s your snippet: “

The “protected class” is granted “safe harbor” only because their bets are so risky that to let them fail could crash the economy. But why let them bet at all?

This is a sequel to a Jan. 15 article titled “Casino Capitalism and the \ Market: Time for Another ‘Lehman Moment’?”, discussing the threat of a 2024 “black swan” event that could pop the derivatives bubble.

That bubble is now over ten times the GDP of the world and is so interconnected and fragile that an unanticipated crisis could trigger the collapse not just of the bubble but of the economy. To avoid that result, in the event of the bankruptcy of a major financial institution, derivative claimants are put first in line to grab the assets — not just the deposits of customers but their stocks and bonds. This is made possible by the Uniform Commercial Code, under which all assets held by brokers, banks and “central clearing parties” have been “dematerialized” into fungible pools and are held in “street name.”

This article will consider several proposed alternatives for diffusing what Warren Buffett called a time bomb waiting to go off. That sort of bomb just detonated in the Chinese stock market, contributing to its fall; and the result could be much worse in the U.S., where the stock market plays a much larger role in the economy.

The Chinese Derivative Crisis

A Jan. 30 article on Bloomberg News notes that “Chinese stocks’ brutal start to the year is being at least partly blamed on the impact of a relatively new financial derivative known as a snowball. The products are tied to indexes, and a key feature is that when the gauges fall below built-in levels, brokerages will sell their related futures positions.” 

Further details are in a Jan. 23rd article titled “’Snowball’ Derivatives Feed China’s Stock Market Avalanche.” It states, “China’s plunging stock market is leading to losses on billions of dollars worth of derivatives linked to the country’s equity indexes, fuelling further selling as retail investors offload their positions…. Snowball products are similar to the index-linked products sold in the 2008 financial crisis, with investors betting that U.S. equities would not fall more than 25% or 30%,” which they did. 

Chinese shares rose on Feb. 6, as officials took measures to prop up the ailing market, including imposing new “zero tolerance” curbs for malicious short selling

The Greater U.S. Threat

The Chinese stock market is much younger and smaller than that in the U.S., with a much smaller role in the economy. Thus China’s economy remains relatively protected from disruptive ups and downs in the stock market. Not so in the U.S., where speculating in the derivatives casino brought down international insurer AIG and investment bank Lehman Brothers in 2008, triggering the global financial crisis of 2008-09. AIG had to be bailed out by the taxpayers to prevent collapse of the too-big-to-fail derivative banks, and Lehman Brothers went through a messy bankruptcy that took years to resolve. 

In a December 2010 article on Seeking Alpha titled “Derivatives: The Big Banks’ Quadrillion-Dollar Financial Casino,” attorney Michael Snyder wrote,

“derivatives were at the heart of the financial crisis of 2007 and 2008, and whenever the next financial crisis happens, derivatives will undoubtedly play a huge role once again…. Today, the world financial system has been turned into a giant casino where bets are made on just about anything you can possibly imagine, and the major Wall Street banks make a ton of money from it. The system … is totally dominated by the big international banks.”  

Chuck again… I sure hope you go to the link above and read the whole article… I’ve adored Ellen Brown’s work through the years, and she does a great job with this report…

Market Prices 2/22/2024: American Style: A$.6581, kiwi .6205, C$ .7432, euro 1.0858, sterling 1.2682, Swiss $1.1393, European Style: rand 18.9660, krone 10.4512, SEK 10.2982, forint 356.33, zloty 3.9754, koruna 23.2845, RUB 92.40, yen 150.22, sing 1.3411, HKD 7.8213, INR 82.05, China 7.1908, peso 17.03, BRL 4.9379, BBDXY 1,239.17, Dollar Index 103.69, Oil $77.82, 10-year 4.31%, Silver $23.14, Platinum $893.00, Palladium $949.00, Copper $3.89, and Gold… $2,029.83

That’s it for today… and tomorrow, and next week! I’m going on vacation, I’m going on vacation, and you’re not! Neener, neener, neener! HA!  Now that was quite sophomoric of me to do, but I did it, and now it’s done!  My first game of the Spring is Saturday! I always tell you this each year, so here goes, whenever I climb the last step into the stadium and I can see the field for the first time each year, I get a chill down my spine, and I get teary eyed…. the reason? Well, 17 years ago I was told that I had a 5% chance to live past 5 years… So, every time I see that baseball field again, I get this feeling that I’ve lived another year, and now I get to see the game I love, played by the team I love, on the field I love… The Guess Who take us to the finish line today with their song: Share The Land… I hope you have a Tub Thumpin’ Thursday today, a Fantastico Friday, and a wonderful week next week while I’m gone… And please remember to Be Good To Yourself!

Chuck Butler