December 6, 2022
* Currencies & metals get sold on Monday…
* The Exchange Stabilization Fund Gets a workout on Monday…
Good Day… And a Tom Terrific Tuesday to you! Woes continue for our Blues… UGH! Another day, and another day toward being free of this nasty cold. I guess that since I have no immune system any longer after 15 years of chemo, that when I get a cold, it’s nastier than it is for a healthy person… So, there’s that… At least I’m not sleeping throughout the day and night any longer… The money the MLB ballplayers are making in free agency is crazy money… But as long as we continue to buy tickets to games, that won’t change… I don’t think having $300 Million would change me, but… I’m sure it would… I’m just saying… Sam Whitmore greets me this morning with his version of the song: I Heard The Bells On Christmas Day…
Well, proving once again that a trend is not a One Way Street, yesterday, the dollar rallied all day, and by the end of the day the BBDXY had gained 10 index points, and the perky look the currencies had on Friday, was no longer on their respective faces, and instead there was a frown… The way the dollar took off suddenly yesterday morning, it looked to me like the Plunge Protection Team (PPT) had put some of their treasure chest of money to use, buying dollars and selling whatever currency they had on hand. At some point the Exchange Stabilization Fund will run out of money… I can’t wait for that to happen, because it has been used as a prop for the dollar, instead of letting the dollar trade on its own merit.. But that’s the way the cookie crumbles these days with every market being manipulated…
And some of that dollar buying was used to fund the price manipulators who sold Gold & Silver short in the paper market, causing Gold to lose $28 on the day, and Silver to lose 86-cents! UGH! Just when you thought it was safe to get back into the water, along comes a shark fin, in the water… EEEEEKKKK!!
Gold closed the day at $1,770.10, and Silver closed at $22.34… The price of Oil got slammed yesterday, losing $4 on the day, and ending up trading with a $77 handle. Bonds saw some selling, as the yield on the 10-year Treasury rose a few bps…
There was no rhyme or reason that the dollar got bought yesterday, which fuels my position that the PPT was in propping up the dollar… So, now it’s back to the drawing board for the non-dollar traders, who thought coming into this week that it was going to be all sunshine and balloons…
In the overnight markets last night… The dollar slipped a bit, with the BBDXY losing 2+ index points and sits at 1,263 as we start the day. The euro has climbed back above 1.05, and is taking all the other currencies along for the ride. Gold is up $9 to start the day today, and Silver is up 18-cents. The price of Oil has slipped another $2 bucks and trades with a $75 handle this morning. I read a piece this morning that talked about how Gold saw profit taking yesterday… Really? To move it downward by $28? I doubt it seriously… This was the work of the PPT… I’m so sure of that, I could be moved to place a wager on that, but then I’m not a betting kind of guy… so we move on…
I ran out of time and space to give you any more things that were on my mind that could lead to disaster, chaos, and other forms of disaster… So, I’ll continue with my work here… Did you hear about? “On November 15, the Pentagon revealed that it had failed yet another audit. The Defense Department only managed to account for 39 percent of its $3.5 trillion in assets, leaving more than $2.1 trillion unaccounted for.
The news came as no surprise to seasoned Pentagon watchers. Indeed, the Defense Department is the only U.S. government agency to have never passed a comprehensive audit. But what did raise some eyebrows was the fact that the Pentagon made almost no progress in this year’s bookkeeping, unlike the slow progress it made over the prior 4 years. Of the 27 areas investigated, only seven earned a clean bill of financial health, which Pentagon Comptroller Mike McCord described as “basically the same picture as last year.”
This accounting disaster echoes the Pentagon’s bad math. It is very bad at estimating the cost of weapons programs.”
Chuck again… How on earth have we allowed this to go on and on year after year, decade after decade? And here’s the thing that gets me, on this… They won’t allow the Fed to be audited… Doesn’t that make you want to question what’s going on at the Fed?
Or, did you hear about:? “With no suspects or motive announced, the FBI is joining the investigation into power outages in a North Carolina county believed to have been caused by “intentional” and “targeted” attacks on substations that left around 40,000 customers in the dark Saturday night, prompting a curfew and emergency declaration.
The mass outage in Moore County turned into a criminal investigation when responding utility crews found signs of potential vandalism of equipment at different sites – including two substations that had been damaged by gunfire, according to the Moore County Sheriff’s Office.”
Chuck again… Well, it sure is getting a little late in the season for this to happen… I got this blurb from CNN.com
And finally, I do believe I’ve listed everything that had me concerned this past weekend… But this news is really concerning: “Average hourly earnings picked up by 5.1 percent in the year through June, moderating slightly from 5.3 percent in the year through May. Economists in a Bloomberg survey had expected a slightly bigger cool-down, to 5 percent.”
Chuck again… no, that’s not the concerning part… What I’m concerned about is that while everyone pointed out how great it was that wages were rising, they forgot to mention that they are still below the inflation rate… So, you may bring home more in the way of wages, but those wages are worth less all the time with inflation even if I use the watered down CPI at 7.7%… Go on, do the math… inflation is still higher than wages…
The Fed heads are on sabbatical this week as they get blocked out of speaking the week before the Fed Heads meet to discuss rates… And that will happen next Wednesday. Speaking of next Wednesday, I suspect that the Fed Heads will hike rates 50 Basis Points, but I’m still holding out hope for a 75 Basis Points hike… That will bring their internal rate to 4.5%, still far below inflation, so there’s still more work to do for the Fed Heads… And I hope Chairman Powell, will be just as adamant about making sure the markets are not pricing in a pivot this time like he did 5 weeks ago…
The U.S. Data Cupboard yesterday, had Factory Orders and Capital equipment Orders for Rocktober. Both were better in Rocktober than they were in Sept, with Factory Orders gaining 1%… And CAPEX gaining .6%… Today’s Data Cupboard will have just have the Trade Deficit for us… Tomorrow’s Data Cupboard will be the datapalooza day… So, get ready, get set, and here comes the cooked, massaged and rigged Gov’t economic data reports for you tomorrow…
To recap… The dollar rebounded yesterday, big time… The BBDXY gained 10 index points, Gold lost $28, and Oil lost $4, so our Monday didn’t start the week off right, now did it? Chuck’s concerned about people and their wages not keeping up with inflation… Somebody shot holes in the N.C. substation, and cause 40,000 people to be without water and power… And Chuck is still leaving the light on for a 75 Basis Points hike next week although he’s consigned to 50… UGH!
For What It’s Worth… This article is about the honker, that I talked yesterday… It comes to me via Reuters and it can be found here: Improbable bets on break of Hong Kong dollar peg adding up | Reuters
Or, here’s your snippet: “It’s what is known in the markets as a “tail risk”: a highly unlikely scenario in which Hong Kong’s currency peg suddenly snaps. Yet market pricing suggests bets on such a shock are building in the hedge fund world, and some traders say it makes a lot of sense.
Billionaire money manager Bill Ackman went public last month with his wager that the days of the Hong Kong dollar’s 39-year-old peg to the U.S. dollar are numbered.
Ripples in the derivatives market imply he is not alone, as “macro” trading – or betting on big global shifts – swings back into vogue and the prospect of reaping a huge reward for relatively little risk revives a perennially unsuccessful trade.
Most fundamental analysts say such bets are foolish, pointing to the city’s still massive reserves and China’s backing.
But they can be relatively cheap and even profitable regardless of the peg staying intact, and it buys insurance against unlikely but not impossible chains of events, such as a sudden blow-up in China, devaluation or a geopolitical chill.
“For me, the Hong Kong dollar peg is like a delayed, or lagging bet against China,” said Diego Parrilla, who runs Quadriga Igneo, a $240 million fund designed to profit from market turmoil.
“You are taking advantage of the extreme complacency of the market,” he said. “The downside is limited to the premium spent…I’m risking very little and can make a lot.”
A measure of the spread, or skew, between puts and calls in the options market has hit its widest in about three years in favour of U.S. dollar calls, suggesting bets against the Hong Kong dollar are becoming a little more crowded.
The Hong Kong dollar has been pegged in a tight band between 7.75 and 7.85 per greenback for nearly four decades. Its stability and fungibility have been major foundations for Hong Kong’s success as a financial centre and a hub for money moving into and out of China.
China rarely comments on the peg, but in 2014 its cabinet said the government would “firmly support” Hong Kong in maintaining the peg and the stability of the city. The Hong Kong Monetary Authority (HKMA) says it has “no need and no intention” to change the system, and sufficient reserves to defend the peg.
Chuck again… Yes, this has gone on before several times… And the peg has aways prevailed… But there comes a time when all pegs come to an end, and maybe, just maybe this is that tie for the honker… I guess well have to wait-n-see…
Market Prices 12/6/2002: American Style: A$ .6737, kiwi .6346, C$ .7345, euro 1.0545, sterling 1.2231, Swiss $1.0647, European Style: rand 17.2928, krone 9.9202, SEK 10.3317, forint 393.97, zloty 4.4648, koruna 23.1024, RUB 63.08, yen 136.10, sing 1.3554, HKD 7.7782, INR 82.61, China 6.9882, peso 19.63, BRL 5.2346, BBDXY 1,263.98, Dollar Index 105.03, Oil $75.76, 10-year 3.55%, Silver $23.53, Platinum $1,000.00, Palladium $1,884.00, Copper $3.79, and Gold… $1,779.59
That’s it for today… Another strange and quiet day here at my house… I think my wife is just leaving me alone to get rest and not make noise… I’m plum out of books to read… I’ve read everything that I have here… OK… I’ve got some news for you… You know that the week before Christmas and Christmas week, I usually take off for my annual winter vacation. But this year, I’ll only be gone for Christmas week. To start the year 2023, I’m going to be gone the first 10 days of January… I’ll be going where it’s even warmer than it is in S Florida! YAHOO! I might write you every now and then during that time, if something comes up that needs attention. I’ll take my laptop with me, but I truly hope to not even open it up! So, there, that’s the news, I know that’ll be different this year, but it is what it is… Jack Jezzro takes us to the finish line today with his bossa nova beat version of the song: Home For The Holidays… I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!
Chuck Butler