Inflation Proves To Be Quite Sticky!

March 6, 2023

* currencies & metals rally on Friday last week

* What’s this about ERA? 

Good Day… And a Marvelous Monday to you! Well, at first, last weekend was going great for our sports teams… The Billikens won Friday night, Mizzou won Saturday, the Cardinals won on Saturday, our brand spanking new soccer team STL City SC won their historic home opener on Saturday, and then… The Blues lost on Saturday night.  But how about that expansion team STL City SC?  They are 2-0 for an expansion team that’s almost non heard of previously! The city the stadium, were rockin’ and rollin’ all day and night long… I watched it on TV, as I’m not in St. Louis right now… and I’m sad I missed the historic night in the city I grew up in… R.E.M. greets me this morning with their song: The One I Love

Well, I started a string of short-n-sweet Pfennigs last Wednesday, and I’m afraid that today will make 3-in-a-row… But what’s a country boy to do, when he’s beaten the debt horse, the inflation horse, and the bad economy horse enough all ready? There’s always a Fed Head dolt to beat on, but then even that gets old, and stale… So, here goes nothing…

The dollar ended last week looking like it was getting very tired… You know, like Big Lee Smith, a former Cardinals’ relief pitcher, used to come into the game… “I’m so tired”… he would slog onto the field, looking as if he was not supposed to be buying any green bananas, and then he would wind up and pitch a fastball that, for that time, was pretty darn fast!  The BBDXY lost 1 index point on Friday, in some very range based trading… The only currency of note was the Mexican peso… more on the peso later…  

Gold ended the week on Friday, up $20.60, and Silver was up 36-cents… So, it was a good day for the metals, with Gold ending the week at $1,857.50, and Silver at $21.36..  There were reports of yet more short covering in both metals… Now wouldn’t it be nice (Beach Boys) if all the short positions got covered? Well, yes, we can all dream of seashells and balloons, but they don’t pay the bills… C’mon Chuck, get with the program here! Wake up!

The price of Oil, which had bumped higher to the $79 handle earlier last week, saw some selling  on Friday, and ended the week trading with a $78 handle. Bonds, which had appeared to turn the corner and were heading in the right direction, last week, ended the week with buying, and yield on the 10-year Treasury, fell to 3.94%… Recall that it had finally, moved past 4.0% last week.. So, there had to be some major buying to reverse this move higher in the yield… Can you say, bond manipulation? I knew you could!

You see, the powers that be, can’t have bonds getting out of hand, with their rising yields, because that would take away from the stock jockeys… Uh-Oh! What are we going to do now? Well, if you ask me I would only be buying short term Treasuries, and live for another day… But then that’s just me, C’mon Chuck, they already know that! Sorry…

In the overnight markets last night, the dollar fought back, and regained the 1 index point it had lost Friday, and trades this morning at 1,248…  And like I said above, the only currency that looks like it came out of the fight with the dollar without a black eye, is the Mexican peso…  Well, I’ve beaten this peso “risk premium being back” to death too, so… let’s kept moving along…

Gold is down $8 in the early trading today.. So the start of the week isn’t a good one for Gold, unless things turn around quickly today. Silver is also giving back some gains in the early trading with it being down 26-cents…  Blood, Sweat & Tears, used to sing about how “what goes up, must come down”, and while it’s a very true statement, it just doesn’t seem to be in effect for the dollar, not as long as the PPT has their treasure chest of Exchange Stabilization Funds to protect the dollar each and every time it begins to fall off a cliff…  I’m just saying..

The price of Oil has slipped further down in the $78 handle this morning, and the 10-year’s yield continued to drop.. Stranger things have happened in Bonds, folks… But the bond yield performance is stranger than fiction to me…

So… I was perusing the USA Today yesterday before heading the ballpark, and cam across something that I was unaware of… Did you know that the ERA Amendment wasn’t a law?  Here’s the skinny from USA Today: “What is the ERA? The Equal Rights Amendment states: “Equality of rights under the law shall not be denied or abridged by the United States or by any state on account of sex.”

  • This isn’t already law? Nope. Congress first approved a resolution formally proposing the amendment in 1972, triggering the requirement that 38 states ratify it before enshrinement to the U.S. Constitution. Lawmakers set a seven-year deadline for the ratification process, then extended it by another three years.
  • Only 35 states adopted the amendment by the extended 10-year deadline. But in 2020, Virginia became the 38th state to ratify the amendment, meeting the threshold required but doing so nearly four decades after the deadline lapsed.’

Chuck again…  How’d that happen? All this time everyone worked under the idea that it was a law, and now we find out it really isn’t?  Aye, Aye, Aye…

Last week, the eurozone reported their January Inflation number, and while it was less (8.5% VS 8.6%), and the spin doctors tried to make it sound like inflation was under control, it wasn’t… Inflation in the Eurozone is sticky, and in Germany inflation actually was higher… But there were other countries in the Union  that had reported drops in inflation…  This report will not change the direction of interest rates in the Eurozone… The European Central Bank (ECB) will mostly like hike rates 50 Basis Points again at their next meeting, and that should continue to support the euro, but then, it really shouldn’t, but it will, because that’s the way traders think about currencies these days…  These days, I sit on cornerstones, and count the time in quarter tones… (Jackson Browne)

The thing that keeps dragging the euro downward, beyond dollar strength, is the Club Med countries, of Italy, Spain, Greece, all have debt up to their eyeballs and little to no economic growth… Germany keeps pulling the rest of the Union out of the gutter, but, how much longer will they be able to do that? That’s the $64 dollar question… And if you know the answer to that, you win the Big Floppy Teddy Bear!

Speaking of sticky inflation… In the U.K. inflation continues to rise… despite the Bank of England’s(BOE) rate hikes… memo to BOE…  you’ve got to get ahead of inflation to get control of it… you’re just like the U.S. Fed Heads, and ECB… you’re coming to a gun fight with inflation with a pea shooter…

The Russian ruble continues to show weakness, and has given back over 5 points in price since we turned the calendar to 2023… I still say that the ruble is an oil play, nothing more, nothing less, and if you believe that Oil is undervalued right now, then you see why the ruble has been having trouble getting a bid each day…

The U.S. Data Cupboard, last week, had the productivity for the 4th QTR and it was awful… The report showed a gain of just 1.7% VS a gain of 3.0% the previous quarter… And then the icing on the cake was the Unit Labor Costs, and they soared in the 4th QTR by 3.2% VS just a gain of 1.1% in the previous quarter… So, the skinny here is that employees are not working as hard, but getting paid more for doing less… And isn’t that the way we, as humans, do things these days?  Actually, most youngsters want to get paid for doing nothing! 

These two reports are a very telling picture of the what’s going on in the U.S. folks…  I’m just saying..

The Data Cupboard today, just has Factory Orders for Jan, and they will most likely be negative again, following February’s -1.8% print…

To recap… The dollar gets sold one day, it gets bought the next day…  Friday’s price action looked to Chuck like the dollar was getting to be a very tired trade… and then in the overnight markets, that’s all wiped out, and we start the week on the wrong foot… UGH!  Gold has given back ½ of its Friday’s gains in the early markets today. Did you know that ERA isn’t a law?  Well, you’ll have to go back and read that part of the Pfennig this morning, for Chuck has the skinny on all of it!  Inflation is sticky… and the ECB, BOE and Fed/ Cabal/ Cartel are all finding out about that!

For What It’s Worth… A couple of weeks ago, I wrote about the troubles of Credit Suisse… And now this past weekend had some info on the problems with Credit Suisse and that’s what this article is about, and it can be found here:  Credit Suisse Crashes To All Time Low After Boosting Deposit Rates To Reverse Bank Run | ZeroHedge

Or, here’s your snippet: “Fast forward another two weeks to today, as CS stock craters 7% to a fresh all-time low, after reports from Reuters and Bloomberg that in hopes of reversing the seemingly endless bank run – and who can blame depositors from pulling their money from a company whose stock is less than $3 from zero – Credit Suisse is now offering aggressively higher deposit rates to attract new funds from wealthy clients in Asia.

Citing sources, Reuters notes that the Swiss bank is offering a 6.5% annual rate on new three-month deposits of $5 million or above – and a rate as high as 7% for one-year deposits – far above matched maturity Bills, and suggesting that to attract a client, the bank is forced to eat a loss. The hope, of course, is that after it attracts enough new clients, the bank will then be able to quietly lower the rates and make the new accounts profitable, however as the various DeFi blow ups of 2022 showed, it never quite works out that way.

“The banking sector has been responding to global rate hikes with higher rates and Credit Suisse is fully focused on providing our clients with differentiated advice and competitive solutions,” a Credit Suisse spokesperson said.

Credit Suisse’s generous offers are not only well above risk-free rates, but also about 100 to 200 basis points higher than those of major rivals in the region such as JPMorgan, UBS and Citi Group.

Hilariously, the new deposit rates are higher than Credit Suisse’s lending rates in Asia, a Reuters source said, adding that “it raises concerns about how the business can sustain such a funding gap.” Spoiler alert: it can’t, and as explained above, the bank is willing to eat a short-term loss in hopes of attracting enough sticky money before it flees again once the teaser rates are cut. Sure enough, another source said the offers are valid until the end of this quarter and only apply to new cash deposits, not to existing portfolios.

Asked about the lender’s pricing to win back money during Credit Suisse’s earnings call last month, CEO Ullrich Koerner said the bank is trying to be “competitive” like many rivals: “But we are not buying assets, just to be clear, because that would not be very smart going forward,” he said, which is ironic because buying assets – and at a very high price – is precisely what he is doing… and it’s not working: the bank’s assets managed for wealthy clients, excluding the Swiss bank, tumbled to 540.5 billion Swiss francs ($574 billion) at the end of December, from 742.6 billion francs a year ago, contributing to a second consecutive annual loss, according to Bloomberg.”

Chuck again… so, why is this important to us here in the U.S., I hear you asking? Well, the thigh bone is connected to the knee bone, and the knee bone is connected to the shin bone, etc.  All of these major banks have deals with each other, and when one is affected, they all get affected… I’m just saying…

Market Prices 3/6/2023: American Style: A$ .6722, kiwi .6180, C$ .7344, euro 1.0631, sterling 1.2006, Swiss $1.0692, European Style: rand 18.2041, krone 10.4593, SEK 10.4873, forint 355.36, zloty 4.4287, koruna 22.1516, RUB 75.34, yen 136.04, sing 1.3462, HKD 7.8495, INR 81.92, China 6.9338, peso 17.96, BRL 5.1961, BBDXY 1,248.69, Dollar Index 105.66, Oil $78.44, 10-year 3.91%, Silver $21.10, Platinum $965.00, Palladium $1,427.00, Copper $4.03, and Gold… $1,849.47

That’s it for today…  Well, the college basketball conference championships start this week, this is when basketball begins to get really interesting! Cardinals play the Cheaters, I mean the Astros today… The weather for the games has been terrific, and today should be no different!  Things have been really nice down here this winter… And that’s the reason I come here for the winter! Ok… Chuck’s annual spring vacation starts in 12 days… So, mark your calendars accordingly! HA!  You never know, I might chime in on something that’s crazy or completely out of line, and then again, I might not… Mama’s Pride (a St. Louis band) take us to the finish line today with their song: Blue Mist…   I hope you have a Marvelous Monday today, and please, please, please, with sugar on top, Be Good To Yourself!

Chuck Butler