July 5, 2023
* lots of short paper trading late last week
* Sweden hike rates…
Good Day… And a Wonderful Wednesday to you! And even though it’s already the 5th of July… Welcome to July… Pfennig tradition calls for this:
There I was… on a July Morning… Looking for love, with a new day dawning, and a beautiful sun… (Uriah Heap)
Well, how was your Independence Day Celebration? I spent the day at good friends, Rick & Laura’s, we barbequed, played games, and had great conversations with other neighbors and friends… I would say it was a Blast, but then you might think we endeavored in fireworks… But with everything so dry around here, that would be wrong… Speaking of dry… I knew that I would change the weather from over 100 and sunny on Friday, when I watered Kathy’s flowers, and turned the irrigation system on for a cycle… Not long after it competed its cycle, the storm clouds formed, and it rained so hard and long that they had to postpone the Cardinals / Yankees game. Saturday, the two teams played a double-header that was split… Where’s Ernie Banks? Lots of rain over the weekend, so now I won’t have to hear people saying, “We could sure use some rain!” Well, I always say, that you have to experience the rainy days, to fully enjoy the sunny days… Firefall greets me this morning with their song: You Are The Woman…
Well, more intervention, and support for the dollar late last week, was the tune the markets were humming along with as we headed into the weekend. It all started on Thursday, when the dollar was getting sold, and then suddenly, it was getting sold any longer… Gold & Silver were booking some small gains, but then saw the short paper traders arrive, and the gains in Gold & Silver were cut down… Gold ended the day on Thursday up 70-cents, at $1,922, and Silver closed up 12-cents to $22.95… The BBDXY Index saw a seesaw effect of trading, but the up side was in the afternoon, and allowed the index to come in flat on the day at 1,232…
I don’t know if it was the trumped up revision to 1st Qtr GDP or the sudden drop in the weekly Initial jobless Claims that the dollar bugs hung their hats on, but whatever it was the dollar was pulled out of the fire once again… Then on Friday, with the markets barely open, and not for long, the dollar was pushed around back and forth, and finished the day at 1,232 again… Gold gained $11.70 on Friday, but at one point in the day it was up more, and looking like it was going to run higher, but that’s when the sort paper traders entered, and Gold was left to pick up the scraps of a $11.70 gain… Silver was traded in the same fashion, but after all the short paper trading, Silver gained 22-cents on the day to close at $23.05
The price of Oil jumped higher by $2 late last week, and has held onto the gains throughout the weekend. Oil trades this morning with a handle of $71… And talk about rates rising… The 10-year Treasury’s yield has seen some major selling and rate adjustments, and trades this morning with a 3.85% yield… There’s a flood of Treasury issuance that the markets have to choke down, and the way they’re going to do that is with more attractive yields… The first of the flood gates to open was in the short end, in Treasury Bills… But eventually the Treasury Dept will get around to opening all of the flood gates across the yield curve… I’m just saying…
In the overnight markets last night, the dollar received a little love, and the BBDXY is up 1 index point to start the day today…I was looking at the BBDXY charts and noticed that the dollar is down 3.0% this year… Now, does it feel like that to you? I mean it’s been hanging from the cliff quite a few times in recent days, and each time it gets pulled from the cliff to terra firma… a 3% Loss is small potatoes, and isn’t going to get people all lathered up to get into euros, etc.
Speaking of euros, the single unit dropped below 1.09 late last week… Just 10 days ago, it was sniffing around 1.10… You can see the moves that the dollar bugs cause with their buying of the dollar right here…
Sweden’s central bank on Thursday raised its key interest rate to its highest level in nearly 15 year and warned another hike was likely to combat stubbornly high inflation.
Riksbank increased the rate by 0.25 percentage points to 3.75 percent, its sixth hike in a row.
The bank said in a statement that its “policy rate increases are having an effect, but for inflation to return to the target of 2 percent within a reasonable period of time, monetary policy needs to be tightened further.”
Consumer prices in Sweden rose by 9.7 percent in May year-on-year, down from 10.5 percent in April, the first time inflation came in under 10 percent in over six months. And to end the year 2022, inflation in Sweden was over 12%! So, they have seen some correction, but they are a far way from 2.%… In the good old days, a rate hike from a Central Bank would bring about a currency rally, but not any longer… I’m just saying…
And in yesterday’s low volume trading… Gold gained $4, and Silver gained 7-cents… The dollar drifted throughout the day, but ended the day with the BBDXY at 1,232.10…
Gold & Silver are trading in different directions early this morning… Gold is up $1, and Silver is down 24-cents… The markets aren’t even waking up yet, so I don’t get why Silver is taking on the chin so early today… Hopefully, that will all change once all the traders are in thie places with bright shiny faces!
I mentioned the BRICS last week, and then late in the week I saw this information on BRICS members and wannabes… existing members, those who have applied to join, and those expressing an interest total 36 nations, with over 60% of the world’s population and a third of global GDP. It’s “the thing to do” join the BRICS, and why not? Most of these countries saw what the U.S. did to Russia when they shut them out of SWIFT (the universal clearing firm) and said, “if they can do that to Russia, they sure in hell can do it to us too”, and have opted to step away from dollar hegemony, and the weaponization of dollars… I would do the same if I were a leader of a country… wouldn’t you?
Well, the talk above about Treasury issuance had former Head of Fed New York, Bill Dudley, speaking about high yields in the 10-year could go, and that got the folks at Morgan Stanley all up in arms… Dudley pointed out the real federal funds rate, inflation and term premium, saying that the 10-year’s yield could rise to 4.85%… The folks at Morgan Stanley, who have to sell Treasuries and point out to their buyers of the bond that it would be profitable, with yields falling to 2%… Typical of a dealer who’s long to make up scenarios that favor their selling what they are long… I’m with Bill Dudley on this, that is, as long as his former colleagues at the Fed/ Cabal/ Cartel, keep their hands out of the cookie jar! In other words, no bond buying from the Fed Heads…
And I can’t go on to the Big Finish today without talking about this article that has Paul Ryan talking about how our debt is going to cause us to lose the reserve status of the dollar… Here’s a snippet of his article: “former House Speaker Paul Ryan says the US dollar’s position as the world’s reserve currency is in jeopardy as the US government accumulates massive amounts of debt.
In a new CNBC interview, Ryan says US President Joe Biden is not proactively taking steps to stop the country’s hemorrhaging debt.
According to the former Wisconsin representative, the country is barreling toward a debt crisis, one that could negatively impact the dollar’s status as the world’s most dominant reserve currency.
“So we have these leaders who are saying I am not going to do anything to stop a debt crisis in this country. And we know we have a debt crisis coming. So he’s courting disaster on that front. He’s basically harming our ability to stay as a reserve currency. He is moving us closer to a debt crisis by basically committing not to tackle this.”
Chuck again… if you would be interested in reading the entire article if can be found here: US Dollar’s Status As Global Reserve Currency at Risk As America Hurtles Towards Debt Crisis: Paul Ryan – The Daily Hodl
The U.S. Data Cupboard last Friday has some interesting data prints… First of all the revised GDP for the 1st QTR showed an upward revision from 1.6% to 2.0%… Take with that as many grains of salt as you wish… I, for one, am not buying it… period. Then we had the Personal Income, which showed wages are gaining, and Personal Spending, which showed that consumers aren’t supporting the economy… We also saw that Consumer Confidence gained last month… Well, what else could it have done, it’s nothing but a pulse on the stock market…
Fed/ Cabal/ Cartel Chairman, Jerome Powell spoke again, and he lathered, rinsed and repeated his previous talks, where he said that while inflation has softened, it’s still too high, and that will require more rate hikes… And even though the dollar has rallied on his initial forray into honesty, the dollar bugs once again rallied on his oft repeated words… Unbelievable, is the word that came to my lips…
To recap… late last week we saw the dollar in trouble once again, and then we didn’t… More intervention and support for the dollar came to its rescue… Sweden hiked rates last week, and talked of the need to hike some more… Everybody (Central Banks) are hiking rates, except: the Fed/ Cabal/ Cartel, and Bank of Japan… Now there’s some company I would not like to be associated with… The Bank of Japan… Gold & Silver have seen their fair share of short paper trades coming their way since we last talked, as the short paper traders have kept Gold & Silver in check, not allowing them to go much higher…
For What It’s Worth… Well, for the most part through the years, I have steered my ship away from talking about the stock market… It’s just not my bag, baby… (Austin Powers) But this article caught my eye, and I thought it to worthy because it talks about something not talked about much, and it can be found here: U.S. Money Supply Is Doing Something Not Seen Since the Great Depression, and It May Signal a Big Move to Come for Stocks | The Motley Fool
Or, here’s your snippet: “Though there are a few variations of money supply, most economists tend to focus on M1 and M2. The former takes into account cash and coins in circulation, as well as demand deposits in checking accounts and traveler’s checks. In other words, money that’s either in your hand or can be accessed very easily.
Meanwhile, M2 accounts for everything in M1 and adds savings accounts, money market funds, and certificates of deposit (CDs) below $100,000. It’s money you have access to, but it takes a little extra effort to put this capital to work. It’s M2 money supply that’s raising eyebrows on Wall Street and making history.
During the COVID-19 pandemic, M2 soared by 26% on a year-over-year basis, which represents the steepest increase in U.S. money supply when back-tested to 1870. The issuance of multiple rounds of stimulus checks to the American public, along with pandemic-based programs for businesses, pumped capital into the U.S. economy at an extraordinary pace. Unsurprisingly, historically high inflation — 9.1% at the peak in June 2022 — soon followed.
What’s of interest is what’s happened to M2 money supply over the trailing year. Following a peak of $21.7 trillion in July 2022, M2 has fallen to a fresh reading of $20.81 trillion, as of May 2023. Although the May reading was higher than April and broke a nine-month downtrend, we’ve still witnessed a 4.1% aggregate drop in M2 from its all-time high.
Considering that M2 enjoyed a historic expansion during the pandemic, it’s certainly possible that a 4.1% decline can be shrugged off as nothing more than money supply reverting back to the mean. But history suggests otherwise.
Though history rarely repeats itself on Wall Street, it often rhymes. We haven’t seen a meaningful year-over-year decline in M2 money supply since the Great Depression in 1933.”
Chuck again… They go on to explain how this could lead to bad times for stocks…
Market Prices 7/5/2023: American Style: A$ .6660, kiwi .6181, C$ .7523, euro 1.0878, sterling 1.2701, Swiss $1.1129, European Style: rand 18.7752, krone 10.6938, SEK 10.8728, forint 347.70, zloty 4.0959, koruna 21.8539, RUB 90.82, yen 144.26, sing 1.3824, HKD 7.8239, INR 82.22, China 7.2444, peso 17.05, BRL 4.8405, BBDXY 1,33.63, Dollar Index 103.16, Oil $71.13, 10-year 3.85%, Silver $22.81, Platinum $920.00, Palladium $1,243.00, Copper $3.75, and Gold… $1,927.40
That’s it for today… It seems like a long time since I last wrote to you, so this was strange for me at first… waking up early, sitting down and staring at a blank template… But soon it all came back to me, and my fat fingers began flying across the keyboard! I’m so thouroughly disgusted with the front office and manager of my beloved Cardinals… It’s as if they make moves to ensure the team loses! I guess we, as Cardinals fans, will have to tear a page out of the Cubs fans book… There’s always next year! (I didn’t mean that a shot at the Cubs, just making a point) Congrats to Nolan Arenado, who is the National League’s All-Star at 3rd Base… The only Cardinals representative… That pretty much tells you how the season has gone for the team… The Strawbs take us to the finish line today with their song: Autumn… (hold on to me, I’ll hold on to you, yeah that song) I hope you have a Wonderful Wednesday today, and please, Be Good To Yourself!
Chuck Butler