I Can Feel It In The Air Tonight…

currencies & metals rally in the overnight markets
Chuck talks about the ECB…

Good Day… And a Wonderful Wednesday to you! Another day here, and another day of overcast but warm weather… I need the sun, darn it! I need my vitamin D! It’s supposed to make an appearance today, and then every day through Sunday, so I’ve got to hope the weather people got it right… They never do, but I can still hope! Checking this morning, because the games were on too late for me last night, I see that my beloved Mizzou Tigers, lost their Basketball game, and the Blues eked out a win VS the Flames… There wasn’t that much going on yesterday, other than the NH Primary, that dominated the news networks… So… no sense in beating around the bush! Jonathan Edwards greets me this morning with his classic 70’s song: Shanty…

Speaking of the network news… I read yesterday that 38% of adults do not trust radio, newspaper, TV news, AT ALL! Where are you when we need to most Walter Cronkite? I know, I know, he’s long gone, but you get my gist here, right?

Well, the dollar continued to get bought during the day yesterday, not frenzied buying, but buying that added 2 index points to the BBDXY… The euro which began the week at 1.0890, ended yesterday at 1.0856… The ECB rate meeting tomorrow, is holding the euro hostage right now… euro traders want the ECB to hike rates again, while everyone else is saying, no mas! The Japanese yen saw a brief and short-lived rally yesterday, after a Bank of Japan official talked about rate hikes in April of this year… But then calmer heads prevailed as most yen traders remembered how the BOJ continues to disappoint the markets, and the air went out of the yen rally…. quickly!

Gold, which spent most of the day on the positive side of the ledger… saw the short paper traders take a hunk of flesh from Gold’s price late in the day, and Gold ended up trading down -$3.80… Silver saw the same trading pattern and ended up trading down -7-cents… Gold closed at $2,026.10, and Silver closed at $22.44… I read yesterday that some guy said that Gold needed a new reason to buy it… And I said hogwash! An escalating war in the Middle East isn’t enough? A all-time high debt in the U.S. isn’t enough? An inflation rate that just won’t go away….isn’t enough? I could go on and on, but won’t… you’re welcome! HA!

The price of Oil bumped higher by a buck yesterday and ended the day trading with a $74 handle… And bonds didn’t move yesterday when looking at the 10-year’s yield as it remained at 4.13%

In the overnight markets last night…. The dollar’s buying stopped… And quickly it began to get sold, and this morning the BBDXY index has lost 4 index points. The euro is bumping up against the 1.09 figure again… 1.09 is so close for the euro, the euro could spit in 1.09’s backyard! Gol begins the day up $4 in the early trading, let’s see if the short paper traders will allow this small gain for Gold today… Silver is really on the rally horse this morning, and whipping it to go faster, Silver is up 30-cents to start the day today, and ditto on my thoughts for Silver and the short paper traders…

The dollar has been overbought by a large amount, and this selloff seems to be normal profit taking and correction for the dollar, if the selling continues, then it would become something else… We’ve seen these “something else” patterns quite a few times in the past 5 years… and each time the dollar appears to be heading for the cliff, the PPT (Plunge Protection Team) steps in and buys dollars to keep it from going into a long weak trend. I don’t know how much longer the PPT will be able to do this, given they use the Exchange Stabilization Funds to do their buys… When the well runs dry, it will be Sayanora for the dollar, folks… And that’s when, as I told you a couple of years ago, that the U.S. will implement their digitial dollar… Yes, you’ll wake up one Monday morning, and as your habit dictates, you check you bank balance, and are shocked to beyond belief! Your dollars are gone, and in their place are digits… as Phil Collins sang: I can feel it in the air tonight…

The price of Oil remained in the $74 handle overnight, and the 10-year slipped a little with it’s yield now at 4.11% this morning. You know, that higher yields, help the dollar, but in the end, it will be the albatross around the dollar’s neck, in that it causes the U.S. to pay more in bond servicing costs, or interest payments… The total now is around $1 Trillion in annual payments, and costs more to service bonds than it does to fund our Defense, and the problem here is that it will begin to multiply, and soon will take over Social Security payments… What will be the first cut by lawmakers so that bond payments don’t default, will it be Defense spending or Social Security payments? You and I know which one that will be, and we didn’t even have to think about it for very long!

Well, like I said above, the ECB will meet tomorrow to discuss rates… The markets in Europe, have aped what the markets here in the U.S. did, after a Central Bank pause in rate hikes… They got ahead of the themselves, and started pricing in a rate cut… ECB members have done their best to diffuse this situation, but to no avail… For the record the ECB sees a chance of a rate cut by the end of summer, and that’s only if inflation continues to come down in the Eurozone. If I were on the rate board at the ECB, I would be banging the table to either hike rates one more time just to put the strong nail in inflation, or jawbone a longer than expected wait on the rate cut… I would bet a shiny quarter that the Bundesbank (Germany’s Central Bank) members of the ECB will be doing what I just described… But they’ll be outvoted by the Club Med countries who need lower interest rates, soon…

When the ECB first began, Wim Duisenberg was the ECB President, he of the Dutch Central Bank, and a hawk like his buddies at the Bundesbank… The next ECB President Trichet was from France, and at the time I held my breath that the ECB would turn dovish and turn into the French Central Bank… But that didn’t happen and Trichet turned out to be a good President for the ECB… And then If I thought all hell was going to break loose with a French ECB Head, the next leader was Draghi, from Italy… Now, I thought, oh heavens, Club Med is running the rate board, but during most of his time at the head, he was OK… Christine LaGarde who is also from France, is now the leader, and I’m just not impressed… one iota! I’m sure she’ll side with the Club Med countries at this next rate meeting…

In the meantime, the euro seems to be running into a roadblock at 1.09… So… that’s the next price level that needs to be taken out… OF course 95% of the euro’s moves come from being the offset currency of the dollar.

I mentioned yesterday that China had introduced another stimulus package to boost the economy and then vis-a-vie the Chinese stock market… I would have thought that the Chinese would have watched Japan at its height, and then subsequent drop, apply stimulus package after stimulus package after, well, you get the picture, and learned that it’s just like giving money to people that have no money… They’re not going to boost the economy with it… And after time it’s all wasted money… I mean the Chinese have been doing this banking thing a lot longer than anyone else has, that’s for sure!

The U.S. Data Cupboard is empty today… no data prints are on the docket to print… So, we’ll move along here, for these are not the droids we’re looking for…

Yesterday’s Data Cupboard had a regional Manufacturing Index… Oh-no! Recall that the both the Empire & Philly Manufacturing Indexes had plummeted, what would the Richmond Index show? Well, it showed a negative -15, which was far worse than expected (-8)… So, the flashing red lights that were going off because of the Empire & Philly reports, are really going off now… One of the components of the Richmond report was Employment, which it reported to be negative too… Uh-oh….

To recap… The dollar continued to get bought yesterday, even though the buying was muted at best… The BBDXY gained 2 index points yesterday, and in the overnight markets last night… the dollar buying stopped! Chuck gives us a run down on the ECB and the prospects for a rate move tomorrow… And Chuck wishes China would look at Japan for guidance… And an update on his call of 3 years ago, that a digital dollar is coming…

For What It’s Worth… the pickings for a FWIW article this morning were slim.. Even Ed Steer only had 3 articles this morning… But I did find this article that talks about the thing I’ve been pointing out that the Red Sea gauntlet has caused shipped goods to be priced higher because of the risks, and the routes the ships must take… You can find this article here: European, US retailers absorb Red Sea shock, wary of hiking prices | Reuters

Or, here’s your snippet:” Carrying more stock, switching to suppliers nearer to consumers and reducing dependence on China are tactics European and U.S. retailers used to build more resilient supply chains following disruptions during the COVID-19 pandemic.

Faced now with transport delays of two weeks or more as cargo ships are rerouted from the Red Sea, they have limited financial wiggle room to splurge on workarounds like air freight that would get products into stores faster.

A surge in inflation since the pandemic has also caused shoppers around the world to cut back on spending, putting retailers’ focus squarely back on reducing their costs, industry experts said. Many are simply opting to take the hit from higher transport costs rather than risk hiking prices.

The rapid growth of China-founded e-commerce companies like Shein and Temu that deliver huge amounts of low-priced clothes and accessories from China to Europe and the United States by air has also increased the pressure on competing retailers to make their supply chains as lean as possible.

“If supply chain resilience means paying more for your goods, then that isn’t going to wash,” said Matt Clark, who leads the EMEA retail practice at consultancy AlixPartners in London.

Retailers’ “need to drive profitability is trumping the intent around supply chain resilience”, he added.

Some fashion retailers are working around the Red Sea by using sea-air freight, which involves shipping products to Dubai and then flying them from there, but they are being highly selective.

Air freighting goods is around 10 to 12 times more expensive than shipping by sea, according to Sunandan Ray, CEO of U.S.-based Unique Logistics. For budget fashion retailer Primark, air freight would not be economical, the finance director at parent company Associated British Foods (ABF.L), opens new tab said on Tuesday.”

Chuck again… Well, tricks won’t work for too long, and I stand by my original thought that prices will not be going down anytime soon…

Market Prices 1/24/2024: American Style: A$ .6597, kiwi .6126, C$ .7435, euro 1.0898, sterling 1.2743, Swiss $1.1563, European Style: rand 18.8563, krone 10.4748, SEK 10.4374, forint 354.50, zloty 4.0216, koruna 22.7732, RUB 88.53, yen 147.50, sing 1.3381, HKD 7.8189, INR 83.13, China 7.1575, peso 17.24, BRL 4.9510, BBDXY 1,234.16, Dollar Index 103.10, Oil $74.22, 10-year 4.11%, Silver $22.80, Platinum $911.00, Palladium $954.00, Copper $3.81, and Gold… $2,034.20

That’s it for today… I still can’t believe that this country can’t get two people to run for President that aren’t 80-year codgers! And a Re-run of 2020… YIKES! Nothing against 80-year people, I sure hope to be there some day, but I doubt seriously if I do make it that long, I won’t be in any mental condition to run the largest economy country in the world.. Or have the strength to get through each day without a nap! I’m just saying… Well, our Blues looked pretty good last night from the highlights in winning on the Calgary Flames’ home ice… There haven’t been many wins that the Blues have taken away through the years in Calgary… The Billikens get back on the hardwood tonight VS Davidson… It’s been an awful year for the Billikens, but maybe they can find something tonight to build on? Don Mclean takes us to the finish line today with his song: American Pie… I hope you have a wonderful Wednesday today, and please Be Good To Yourself!

Chuck Butler