- the dollar rallies on Tuesday, and in the overnight markets
- Consumers are tapping out…
Good Day… And a Wonderful Wednesday to you! Another absolutely beautiful day here yesterday… Long ago I had a friend, Jay, that would come to spring training with us, and he was say each morning, “Sunny and 80 here today, like every day” In those days we would come to spring training the last week of March… But now, the boys come here the first week of March, and sometimes the weather isn’t cooperating at that time of year… Blood Sweat & Tears greet me this morning with their great 60’s song: Spinning Wheel… I always thought that David Clayton Thomas, the singer for BS&T was great!
Well… Yesterday turned into a buy the dollar day, with the BBDXY gaining 3 index points on the day.. The dollar didn’t move much at all until late in the day, when it popped higher… And the currencies didn’t really take on the chin, so the euro remained trading with a 1.07 handle, and all the rest of the currencies fell into place behind the Big Dog euro… The two currencies that had stealth-like moves higher VS the dollar in recent trading, the Russian ruble and Chinese renminbi didn’t fare to well yesterday…
It was thought that with the renminbi rally to start their return week from their Labor Day Holiday week, could be the start of something good for the currency, but those hopes were dashed yesterday…
Gold started the day down $9 and ended the day down $10… It was good to see that just because Gold was down a bit, that the short paper traders didn’t pile on and make matter worse! Silver started the day down 25-cents, and ended the day down 26-cents… And the same as Gold applies here for Silver…
It was said yesterday that the reason Gold was getting sold in the early trading was that the fears of a widespread Middle East war had subsided… You may recall me expressing my fear that when Israel and Iran were trading missile attacks, that it could lead to some bad things… I’m glad, for the moment, that my fears were realized…
The price of Oil remained in the $78 handle, while the 10-year’ yield stayed at 4.46%, all day…
In the overnight markets last night… the dollar rallied again… So, in the last 48 hours the dollar has gained back all that it had lost last week… The BBDXY gained 3 index point overnight, and starts today at 1,257. Gold is up a buck to start the day, and Silver is up 10-cents… So, nothing going on there to start the day. The Oil inventories came out and the price of Oil slid another buck to trade in the $77 handle. This is getting a little strange, in that the inventories report stated that the outlook for the price of Oil is not favorable… I have a question for the folks that put together that report… “have you never heard of a summer driving season?”
The 10-year’s yield blipped higher to 4.48%, no great move there to start the day today, so something’s got to burst, don’t you think ?
When pressed for an answer on rates, Jerome Powell, replied, “I think it is unlikely that the next policy rate move will be a hike.” Well, prepare to be surprised Jay… Because inflation isn’t going anywhere, until you hike rates to a level above the inflation rate… And I’m not talking about the Stupid CPI, or any other inflation measure the Fed Heads chose to use… I’m talking about John Williams shadowstats.com inflation calculator that calcs inflation the way it was done before the likes of Greenspan, Clinton, an the Boston Commission, added all their hedonic adjustments…
Bill Bonner stated in his letter yesterday, “But why? The U.S. inflation is running about 100% above the Fed’s supposed target. Why cut rates rather than raise them?” well, he knows (Bonner) and I know and you know… Because the Fed just needs to give the appearance that they are fighting inflation without actually doing the deed… And they can’t hike rates too much more, because right now the servicing costs on the $34 Trillion debt is already causing some tough decisions on what gets paid and what doesn’t!
I promise, I’m not going to spend the whole letter today on inflation and the Fed Heads, but I do want to make one more point, and that is… It’s all a vicious cycle, what I’m talking bout is how wages are barely high enough to make ends meet for a majority of families… But if Companies raise wages, then wage inflation kicks in… And if they don’t raise wages, then the economy suffers, because there’ll be no more Big Screen TV’s bought, no more Lexus’s, no more latest and greatest cell phone, etc. and then the tax revenues don’t meet the need… I’m just saying…
Some might say that the U.S. Fed was soooooo Close to their target rate of 2.0%… But I would argue that the last leg on inflation fighting comes from Monetary Policy… Sure if the lawmakers would stop deficit spending, we could get a nice leg down in inflation… Fat chance of that happening, right?
So, after reading all that I have just one question for you… Got Gold?
Have you ever thought about or figured out why every Central Bank not named The Fed, Bank of England, Bank of Canada, is buying physical Gold and those countries named aren’t? Because, if they were seen to be buying physical Gold their constituents would think they are doing so because they themselves see trouble ahead… And they CAN NOT or WiLL NOT fall into that trap…
You what I think is the biggest dumbheaded move by a Central Bank was? it was in 1998, when the Bank of England sold tons of their Gold reserves, and why did they do that? Because they needed to make their balance sheet look better to gain entry into the Eurozone/ euro… And then less then 20 years later they paid dearly to get out of the Eurozone/ euro! Remember BREXIT? What was second? NIRP… negative interest rate policy, and in third was ZIRP… zero interest rate policy…
Ok, so now that we’ve gone through that history lesson, let’s move onto something else!
The U.S. Data Cupboard yesterday had the Consumer Credit (read debt) report, and if there was ever a report that showed that the U.S. Consumer is tapping out, this was that report, as Consumer only racked up $6 Billion in debt, and their credit card use was down Big Time! here’s Kitco.com with their take on the credit card use: “Revolving credit, which includes credit cards, rose $152 million in March, the smallest rise since credit card debt declined in 2021. Non-revolving credit, including school and vehicle loans, rose by $6.1 billion.
In quarterly terms, consumer credit increased at a seasonally adjusted annual rate of 3.2% during Q1 2024. Revolving credit increased at an annual rate of 5.7 percent, while nonrevolving credit increased at an annual rate of 2.2 percent during the quarter.”
Chuck again… As I just stated, this shows that the U.S. Consumer is saying no mas… The folks at Kitco.com thought that this report was a “good sign for consumers”… I beg to differ, and I’ll let that stay right there, for now…
To recap… The weakness in the dollar has subsided, and now the dollar has gained back all that it had lost late last week… It’s as if currency traders finally had the light bulb illuminate above their heads, and they finally figured out that the Fed Heads are NOT going to cut rates any time soon, and therefore they needed to buy dollars! Hey! they may not have your vote for valedictorians, nor or they the sharpest tool in the tool box, but they get it eventually… Oil inventories are bubbling, and the outlook for Oil is glum… Chuck begs to differ…
For What It’s Worth… this article I found on the internet yesterday, talks about how the Fed has painted themselves into a corner, and it’s pretty much like what I talked about above, but just to show you that other people besides me are saying these things you can read it here: Fed Finds Itself Between a Rock and a Hard Place – TheStreet Pro
Or, here’s your snippet: “Before the jobs report hit Friday morning, BofA’s chief strategist said that a weaker than expected BLS jobs number could set up a sell-off in the market as it would increase fears of stagflation. Obviously, that did not happen, at least not on Friday. That said, the observation bears consideration as the Federal Reserve finds itself increasingly between a rock and a hard place.
On one hand, economic growth is clearly slowing. After a print of 4.9% in the third quarter, GDP growth fell to 3.4% in fourth quarter and a preliminary reading of just 1.6% in the first quarter of this job. The jobs markets also seem to be losing attitude. Friday’s BLS report was weak and March JOLTs report showed the fewest job openings in three years. I am sure in a different economic environment that the Fed would already be cutting rates.
Unfortunately, inflation has become quite ‘sticky’ in the last few months. The central bank has had a dual mandate since 1977 of both ensuring sound money and maintaining full employment. This mandate was one of many poorly thought-out and reactionary policies that happened in the 70s in the time of bell bottom jeans and 8-track tapes.
Government institutions have a poor historical record of being able to deliver against their primary directive, giving them an additional key mission is just asking for trouble. Along with abandoning the last vestiges of a gold-based currency system in 1971, these two policies have been significant contributors to the dollar losing more than 98% of its buying power over the past half century.
The dilemma for the central bank is if it starts to cut rates, it could easily put additional upward pressure on inflation levels. If it doesn’t, the economy could stall further. Many investors are going to be laser like focused on this dynamic in the months ahead and financial pundits will engage in many ‘will they or won’t they’ discussions. Then there will be the additional political pressure put upon the ‘independent’ Fed as this is an election year to boot.”
Chuck again… Well tomorrow’s FWIW is already lined up and ready for print, and it’s about the stupid BLS Jobs report… So, come back tomorrow for that article…
Market Prices 5/8/2024: American Style: A$.6562, kiwi .5987, C$ .7274, euro 1.0750, sterling 1.2480, Swiss $1.1009, European Stye: rand 18.6534, krone 10.9235, SEK 10.8958, forint 361.96, zloty 4.0098, koruna 23.2835, RUB 92.11, yen 155.60, sing 1.3564, HKD 7.8184, INR 83.51, China 7.2281, peso 16.96, BRL 5.10348, BBDXY 1,257.13, Dollar Index 105.53, Oil $77.52, 10-year 4.48%, Silver $27.34, Platinum $966.00, Palladium $952.00, Copper $4.52, and Gold… $2,315.26
That’s it for today… Well, the fooled me last night… My beloved Cardinals scored 3 runs in the first inning, and I thought, “finally, a high scoring game from these guys”… That was not to be and they lost again to the Mets… UGH! Day game today, so no chance for me to get sunburned today! One of these days, Alice! I only have two more days down here, I’m already missing being here! HA! When will I be coming back? Well, I go to Ireland first, and then back here! Bill Withers takes us to the finish line today with his song: Lovely Day… I hope you have a Wonderful Wednesday today, and please, or please Be Good To Yourself!
Chuck Butler