Japanese Yen Falls Off The Cliff!

September 6, 2022

* currencies & metals continued to get sold on Friday

* The U.S. Oil reserves are being wasted!

Good Day… and a Tom Terrific Tuesday to you! What a grand time that was had at the Butler Labor Day BBQ & Pool Party on Saturday. It rained all Saturday morning, but by noon, the sun was out, and it became an absolutely fantabulous day! My beloved Cardinals beat the Cubs, with a whole backyard of people watching… My also beloved Missouri Tigers won their opener on Thursday night last week, and this week travel to K-State… An old Big 12 foe… I hope the Tigers got all the jitteriness and mistakes out of their system and are ready to show a Big 12 team some SEC football! Sat outside with good friends, Duane and Rick last night to watch the Clemson game… Rick graduated from Clemson, and bleeds orange!  Johnny Nash greets me this morning with his song: I Can See Clearly Now…

I wish I could say that about the markets right now, that I can see clearly that is… None of this fiasco makes one iota of sense to me, but I carry on despite my shortcomings! When I left you on Thursday morning, the dollar was still being bought, and Gold & Silver were still being treated like a red headed stepchild…  (Ok no comments on that old saying, it’s just what it is, an old saying!)  Thursday wasn’t any different in that way, trading wise, and Friday, well, Friday was something… The BLS’s Jobs Jamboree, showed 315,000 jobs created in August… Well, they did create some of those jobs, adding 109,000 of the 315,000 jobs the markets believed were added…

Of course, if the press was actually covering the jobs jamboree they would has reported the 315,000 jobs added by the BLS this way: “Job creation dropped in August from 528,000 in July, to 315,000 in August” but they didn’t, because saying it that way, doesn’t paint the picture that the Gov’t wants you to believe…  In reality there were only 206,000 jobs reported by the surveys of the Companies in the U.S. ADP said last week that the number of jobs added was 132,000, so that’s what’s really happening with labor in the U.S. For if so many jobs were actually being added each month, as the BLS would have us to believe, then there wouldn’t be so many “help wanted” signs, everywhere you look, or there wouldn’t be businesses closing for lack of workers…  I’m just saying…

So, the dollar traders took the news of the trumped-up jobs report and thought, “The Fed will have to hike rates more to calm this down” And they bought dollars… The BBDXY on Friday closed up 6 index points, to 1,305…  I’m telling you this now, so maybe you’ll listen to me later, that the dollar is so overbought, it’s getting ridiculous… The euro dropped back below 1.00, and all the other currencies, not named rubles, followed the Big Dog, euro down the drain…  They’re circling the bowl folks… it’s a sad thing to say and see each day, but it is what it is…

Gold lost $1.70 on Friday to close the week at $1,711.80, and Silver gained 9-cents to close the week at $18.25… The price manipulators just couldn’t let Gold close in the positive and they saw to it that there was some red in Gold’l number… You know, the thing that all this Gold selling is causing, don’t you? Well, if I must tell you… It’s causing the price of Gold & Silver to be much cheaper than previously… So, back up the truck! And if Chuck is right, one day soon, all this dollar buying will end, and Gold & Silver selling will end… And that will be that!

Our friends, (NOT!) at OPEC decided this last weekend to cut production of Oil, to help boost the price higher once again… It was also reported last week that the U.S. has been shipping out Oil to foreign countries from our Oil reserves…  It’s time to contact your representative and tell them the Oil reserves are for U.S. citizens so that they never have to sit on gas lines again… not for foreigners! Meanwhile the price of Oil lingers below $90, and the lack of demand is what’s causing this price decline in Oil… Once it gets to a price where gas that’s refined from Oil, is relatively cheaper at the pump, the lack of demand will go away… 

The other thing to think about with oil and gas, is that Russia has basically turned off the spigot of Oil and gas to Europe, and the U.S. is frantically attempting to replace the Oil and gas that Russia has stopped delivering to Europe… But here’s the dilemma, The U.S. can’t supply both Europe and its own citizens with enough Oil and gas to get us through a winter… Then what do we do? 

Bonds are getting sold and seeing their yields rise just about every day now, albeit small increases, but over time they seem to add up… The 10-year Treasury’s yield is now 3.21%…  That’s a far cry from the sub 1% yields the 10-year used to sport!  I would have to say that the multi-decade long Bond Rally, has come to an end… And with the Fed Heads hell bent and whisky bound to hike rates higher, the yields on bonds will continue to rise, and that’s a good thing for investors seeking yield… I’m not even going to mention that unless the Fed Heads start hiking rates really aggressively, then inflation is going to remain higher than the bond yields, and that in essence makes them negative returns!

In The overnight markets last night, the dollar continued to be overbought as the BBDXY gained 2 more index points and trades this morning at 1,307… The euro remains below 1.00, and the two currencies that look the sickest are the pound sterling, and yen… The Japanese yen is trading above 140 for the first time since 1998…  And still, the BOJ sits on its collective hands and keeps their negative yields and bond buying monetary policy in place… 

Gold is flat to up a buck this morning, and Silver is moving higher with at 19-cents gain this morning. But as we’ve known for some time now, these early morning gains in Gold & Silver can be wiped out in a NY Minute by the price manipulators… I’m just saying… 

Bonds got sold again last night, the yield on the 10-year rose a few more bips to 3.25%… The bond yield curve is still inverted, with the 3-year Treasury sporting a 3.50% yield! 

OK, my first item to talk about after the markets roundup is this story I read about this past weekend that talked about how Factory Orders here in the U.S. were supposed to gain in July only to find out that they were way off as July factory orders tumbled 1.0% MoM and June was revised down from +2.0% to +1.8% MoM.  It seems the rate hikes are already causing a slower economy, just wait until the Fed Heads are finished with their rate hikes, what will the economy look like then?

Longtime friend, and publishing guru, and bestselling book author, Bill Bonner, is always reminding his readers that the Fed Heads have no other option than to “inflate or die” …  In other words, the Fed Heads could stop hiking rates and allow inflation to take over the economy worse than it already does, and thus bring the economy to its knees with little consumer spending, or… The Fed Heads could continue to hike rates, and bring the economy to its knees, and die…  I agree with Bill on this, wholeheartedly,  While I would love to see inflation defeated, it’s going to require interest rates rising to above the inflation rate, and I always keep in the back of my mind, the words that Donald Trump said when he was running for President… “5% rates, and we’re screwed” …

Think about that for a moment, and forget about the language he used… with Billions of bonds abroad, held by foreigners, they will not sit around and hold their low yielding bond until maturity, they will sell it and buy the higher yielding bond, that comes with a much higher yield, because the Fed Heads hiked rates to combat inflation, and therefore hiked up the bond servicing costs (yield payments) And when all the tax receipts in the country go toward bond servicing costs, how will the Gov’t decide what Gov’t program goes first to the trash heap?

And who said that “deficits don’t matter?” If he were still around, I wonder if he would have a different song to sing now?

Ok, and here’s the second Item to talk about today that was printed last week “Average Credit-Card Debt Soars by 13%, Largest Increase Since 1999

The average credit card debt held by households in the United States surged by 13 percent in the second quarter, the largest increase in such debt since 1999, according to an August 30 report from the Federal Reserve Bank of New York.

More consumers are increasingly relying on credit amid sky-high inflation in order to pay their bills.

Credit card balances increased by $46 billion from last year, becoming the second-biggest source of overall debt last quarter, though it is below pre-pandemic levels.

Meanwhile, the current credit card interest rate is now at a record high of 17.96 percent, according to Bankrate, a financial advice website.

Total American household debt rose by $312 billion from the second quarter of 2021 for a total of $16.15 trillion at the end of June 2022.”

Chuck again… this is a very scary thing folks… I’m just saying! Oh, by the way, I got most of that stuff on credit cards from zerohedge.com   

The U.S. Data Cupboard is lacking this week for any real economic data, and that should be a good thing for the dollar, not having to worry about data showing the economy is slowing down…

To recap… The dollar just keeps rollin’ folks… Chuck believes that the dollar is very much overbought right now, and wonders how much longer can this go?  Gold & silver continue to be on the chopping block each and every day. And the euro fell back to below 1.0 late last week, and brought the other currencies, no named, rubles, down VS the dollar.

For What It’s Worth….  I’ve said this before, but here goes again… Every now and then our local paper, The St. Louis Post Dispatch, actually writes something original, and Sunday morning, was one of those days… this article is about the new Student Loan Payoff Plan, and quite frankly I was surprised that David Nicklaus of the Post Dispatch, agreed with me on this. Of course he puts it much nicer, and not confrontational like I do… it can be found here: Nicklaus: Student loan forgiveness may be popular, but it’s likely to make inflation worse | David Nicklaus | stltoday.com

Or, here’s your snippet: “here’s no question that our costly higher education system saddles some students with too much debt. President Joe Biden’s loan forgiveness plan, however, is the wrong solution at the wrong time.

For one thing, it’s likely to contribute to inflation. The nonpartisan Committee for a Responsible Federal Budget estimates that the plan will create $500 billion in new deficit spending, adding to demand in an economy that the Federal Reserve is desperately trying to cool down.

The committee projects that the spending will produce between 0.2 and 0.3 percentage points of extra inflation next year. That may not sound like a lot, but it makes the Fed’s job harder and increases the chances that we’ll have a recession before the central bank can cut inflation down to size.

Such worries aren’t just coming from fusty think tanks. Two prominent Democratic economists, Larry Summers and Jason Furman, also argue that loan forgiveness will make inflation worse. “Pouring roughly half a trillion dollars of gasoline on an inflationary fire that is already burning is reckless,” Furman wrote on Twitter.

Debt forgiveness raises fairness issues too. The White House argues that most of the plan’s benefits go to low- and middle-income Americans, but Biden is forgiving up to $20,000 in debt for households earning as much as $250,000 a year.

Speaking of fairness, why do college graduates deserve help at the expense of other hard-working taxpayers who have already paid off their debt, or who didn’t attend college at all?

While Biden’s plan fulfills a campaign promise and clearly helps some people, it does nothing to address higher education’s underlying affordability problem.”

Chuck again… Yes, finance-wise, this is another deficit causing problem, but moral-wise, it’s just plain wrong, to wipe out people’s debts, that never had a gun at their heads and told to take the loan…. I’m just saying…

Market Prices 9/6/2022: American Style: A$ .6770,  kiwi .6081, C$ .7615, euro .9924, sterling 1.1516, Swiss $1.0182, European Style: rand 17.2215, krone 9.9235, SEK 10.7697,  forint 405.82,  zloty 4.7471, koruna 24.7378, RUB 61.41, yen 142.02, sing 1.4044, HKD 7.8497, INR 79.83, China 6.9599, peso 19.99, BRL 5.1542,  BBDXY 1,307.53, Dollar Index 109.90,  Oil $86.50, 10-year 3.25%, Silver $18.44, Platinum $850.00, Palladium $2,036.00, Copper $4.47, and Gold… $1,712.46

That’s it for today… Quite wordy this morning… See what happens when I get a few days to read?   HA!  Cardinals got shut out yesterday by the Nationals. UGH! Back at it tonight…  My oncologist is happy with me these days, so that’s a good thing. I go to see my heart doctor tomorrow, it’s not an early appt, so I’ll still be in the saddle writing tomorrow morning before I take off for the heart doc. I’ll find out how many more years I have left with the battery in my pacemaker…  Another day of rain in the forecast today… I hope all this rain moves out today! The late great Marvin Gaye takes us to the finish line today with his song: Mercy, Mercy, Mercy… I hope you have a Tom Terrific Tuesday today, and please remember to Be Good TO Yourself! 

Chuck Butler