The 10-year Treasury Yield Moves Past 2%

February 16, 2022

* Currencies and metals rally in the overnight markets

* Martial Law for Canada… 

Good Day… And a Wonderful Wednesday to you! What a windy day here yesterday, I was thinking that maybe some of the Palm trees would blow over, but that didn’t happen, thankfully! Went to dinner last night with some friends that used to be here every year in January, and didn’t make it last year (who did besides us?) and are only here for about a week this year… Went to a fun place with good food, named Twisted Tuna…  Our Blues won last night on away ice, which is always a good win… And I’m still somewhat depressed about the news regarding the Great Mogambo Guru… I know we all go at some time, I just felt I had more years to share stories with him… You never know when the last time will be to see someone, to talk to someone, to hug someone, to tell someone you love them… So… in this week that includes Valentine’s Day, make sure you tell the people you love that you love them, dearly… Billy Joe Royal greets me this morning with his song: I Knew You When… 

Well… another strong PPI (Wholesale inflation) print yesterday, had the markets in a tizzy… PPI for January was up 1% for the month, but up 9.7% year on year… That’s just below the all-time record high for PPI… And as I’ve explained many times in the past, PPI is an indication of what consumer inflation will be in a month or two… For if Producers are seeing price increases, they are sure to pass those onto the retailer, who will in turn pass them onto you and me…  And with PPI up 1% in just the last month, we can expect to see CPI up probably to 7.9 or 8% in its next print.

So, the dollar couldn’t rally on that news, for once! And traders didn’t want to sell it either… The BBDXY dropped just a bit from 1,1177.07 to 1,176.90 to end the day yesterday. The currencies couldn’t really find any real traction, but did finish the day higher than they were to start the day, and that’s something, eh?  And Gold, which began the day down $20 ended the day down $17.20 to close at $1,855.10, and Silver which began the day down 59-cents, ended the day down 47-cents to close at $23.45…  The price of Oil wrapped a tourniquet around the bleeding from the day before, and gained about 30-cents on the day, while Bonds saw their losses early and then never recovered to get worse, as the day went on…

I read some very interesting news yesterday, regarding Treasury yields… Recall the other day when the 10-year’s yield dropped a bit and I said, “Who’s buying these bonds?” Well, I got my answer to that question yesterday in an article won  Here’s the skinny from that article: “The Fed’s Federal Open Market Committee (FOMC) made its first announcement that it would begin “tapering” the amount of its purchases of Treasuries and Mortgage-Backed Securities (MBS) on November 3 of last year. On that date, according to the Fed’s own H.4.1 filing, it held $8.063 trillion in debt securities. As of last Wednesday, that figure had risen to $8.395 trillion or an increase (not decrease) of $332 billion in the span of just three months.”

Chuck again… Really? Now the Fed/ Cabal/ Cartel are lying to us about tapering?  C’Mon Congress grow some hair on your chests and beat these Fed Heads about the head and shoulders and get them to admit they lied to the public! No, wait… I have a better idea…  Let’s take them all down to the river and get John the Baptist to dunk them in the river, then they’ll never be able to lie again!  Yeah, that’s the ticket! 

In the Overnight Markets last night…. the dollar got sold and the move wasn’t just a token downward move that we usually see in the overnight markets. This one had the BBDXY falling to 1,174.73, from its close last night at 1,176.90… The Petrol Currencies are perky this morning as the price of Oil recovers some of its losses yesterday and trades with a $93 handle this morning.  Bonds were stuck in the mud overnight, and I believe that the overseas bond traders were scratching their collective heads, wondering what it was they were seeing with the 10-year’s yield at 2.03%… They probably can’t believe it, or don’t remember what it looked like! HA! 

Gold and Silver are in the plus column this morning, with Gold up a buck or two and Silver up 14-cents…  The Retail Sales data today should be a report that moves the markets, so keep an eye on that one. 

So, inflation is still soaring, and the Fed/ Cabal/ Cartel is still snoring…  They’re still buying bonds, which they said they weren’t, but the numbers don’t lie, and if they’re still buying bonds, they’re still printing counterfeit currency to pay for the bonds…  Don’ know if you noticed or not, but I’ve changed how I describe currency printing to counterfeit currency printing…  Because that’s what, it is to me! It’s not currency that was earned by anyone, it’s not currency that was handed down generation to generation. It’s currency that was printed with nothing behind it… counterfeit!

I have an article for you in the FWIW section today that deals with someone else’s view on inflation. This way you just don’t hear me shouting from the rooftops, like the Beatles singing Get Back… 

For years I read the annual World Gold Council reports, until I realized that they weren’t doing Gold any favors… But this year’s report is interesting in that they talk about how Gold is more than an inflation hedge, and I thought it would behoove me to give you a snippet of this report that can be found here: Gold is more than just a safe-haven asset and can fit in all portfolios – WGC’s John Reade | Kitco News

“On Monday editor Neils Christensen recorded a podcast with Phillip Streible, chief market strategist at Blue Line Futures. The guest was John Reade, chief market strategist of the World Gold Council. The three talked about the health of the global marketplace.

Reade said safe-haven demand is positive for gold, but prices could see a sharp correction if the conflict is quickly resolved.

Instead of looking at short-term price volatility, Reade said that the World Gold Council’s research shows that gold plays a vital diversification role for any type of portfolio.

“We’ve issued various editions of the strategic case for gold in the U.K. and Europe and Australia, Russia, Singapore. Looking at the benchmark of assets that might be in a typical portfolio for each of those countries, you find very similar result,” he said. “Somewhere between 4% and maybe the higher 10%, of gold in your portfolio seems to be optimal for increasing the risk-adjusted returns,” he said.

Chuck again… See what I mean about this WGC? They don’t do Gold any favors, a 4% allocation of Gold in an investment portfolio, makes no sense whatsoever!  The allocation should be 10%, and when Gold is really moving higher that allocation could be raised to 20%… 

OK, Chuck, move along there’s nothing to see here, or to get your blood pressure boiling! 

A Dear Reader from Canada sent me a note yesterday, and asked me why I didn’t mention the Marial Law that’s been put in place in Canada… He said something that makes you think, he said, “Enjoy your freedom because it can be taken away easily, and then it’s gone”… 

For those of you not following what’s going on Canada, here’s the skinny: Canadian Prime Minister Justin Trudeau invoked the Emergencies Act, which is essentially martial law and has never been used before. It is allowed only in emergencies, in critical situations that seriously endanger the lives, health or safety of Canadians.”

I guess Trudeau thought that the peaceful protests that are going on were  “emergencies”…  So, any-old-way, that’s what’s happening, but the Canadian dollar/ loonie is above all that, and continues to be strong alongside the other Petrol Currencies. 

I got a new iPhone last night, and activated it on the site, and while I got everything transferred over, I can’t make a call, or have no record of texts! UGH! Now I’ll have to sit on hold for an hour today until I get a tech help… UGH!

We already talked about what the U.S. Data Cupboard had for us yesterday… And today’s Data Cupboard is chock-full-o-data, starting with Jan Retail Sales… The Butler Household Index (BHI) tells me that this report will be disappointing…  In addition to Retail Sales, we’ll also see the color of Industrial Production and Capacity Utilization. We’ll also see some 3rd tier data prints, that won’t mean a hill of beans to the markets. And to finish the day, the FOMC Meeting Minutes from the last meeting will print…

To recap… PPI was strong again last month, and came within a hair of meeting the all-time high level… Jan’s PPI was 9.7 yoy, and Chuck explained how this will filter through to consumer inflation in a month or two.  The dollar was stopped from gaining any more ground yesterday, but didn’t get sold, so to speak… The BBDXY lost 15 BPS on the day, so that meant that the currencies were allowed to gain a bit, but not much… Gold lost big time on the day, but not as badly as it was getting sold earlier in the day… The need for Safe havens was thought to be over, but Chuck just can’t see that happening, and believes Putin is doing a head fake… So, don’t let those safe havens get too far away from your reach!

For What It’s Worth… ok, I did a little teaser above about this article… It’s not long so you have that going for you! But this is Doug Casey answering questions about inflation, and it can be found here:

Or, here’s your snippet: The Consumer Price Index (CPI) itself has been totally corrupted over the years, mainly by changing definitions of what it entails. That’s why it’s interesting to follow the work of a website called Shadow Statistics, where John Williams calculates the CPI and other government statistics using the parameters of 40 years ago.

He’s found that if the CPI was calculated the way it was in the Reagan era, that the actual reported CPI wouldn’t be 7%, but 15%. That makes intuitive sense to me. For over a year, I’ve asked people whether they believe their lying eyes or the government statistics regarding the CPI. The general price level is easily up 15%. That’s conservative. In my view, the US CPI is only marginally more reliable than its equivalent in Argentina—a country whose index is completely political and laughably inaccurate.

I think consumer prices are going much higher. Even Powell has dropped his dishonest and idiotic use of the word “transitory” in regard to it. That’s because the Fed, the US central bank, continues to monetize $120 billion a month of government deficits. The money supply is skyrocketing upwards. At the same time, the Biden regime is enforcing loads of new regulations which act to decrease production.

Meanwhile, free handouts continue to discourage millions of Americans from working. The massive drops of helicopter money during the Covid hysteria has actually crystallized a change in the culture—it now seems socially acceptable to live on the dole. In some parts of society, the ability to consume without producing has become proof not of how worthless, but of how clever you are.

The money supply is up while actual production is down. Of course, inflation is higher. And that’s just part of the cancer growing in the economy. We’re looking at a wholesale disaster over the next three years. And likely over the rest of the decade. Even if the Democrats are replaced in 2024, it will only be because a Republican will promise even “bolder”—“more stupid and destructive”— new solutions.”

Chuck Again…  The article goes on with thoughts on what you can do to protect your investment portfolio from this raging inflation…  But as the Great Mogambo used to say, “this investing stuff is easy… wheeeeee” 

Market Prices 2/16/2022: American Style A$ .7177,  kiwi .6662, C$ .7885, euro 1.1387, sterling 1.3588, Swiss $1.0814, European Style: rand 15.0619, krone 8.8904, SEK 9.2644,  forint 312.30,  zloty 3.9431,  koruna 21.3497, RUB 74.94, yen 115.67, sing 1.3437, HKD 7.8004, INR 74.96, China 6.3404, peso 20.35, BRL 5.1696,  BBDXY 1,174.73, Dollar Index 95.80,  Oil $93.14, 10-year 2.03%, Silver $23.59, Platinum $1,042.00, Palladium $2,354.00, Copper $4.56, and Gold… $1,856.60

That’s it for today… Well, my beloved Mizzou Tigers just don’t cut it this year with regards to Basketball… They lost again last night to Arkansas, at COMO! UGH!  Well, pitchers and catchers should be starting to arrive today to spring training camps, but NOOOOOOO! This stupid lockout and bad negotiations for a new Collective Bargaining Agreement, are going nowhere!  So, spring training isn’t going to start on time, and that ticks me off to no end! Both the Union and the Owners are to blame for this delay to spring training… And both had better get to an agreement soon, or their sport is in danger of becoming persona non gratis with fans… The Rascals take us to the finish line today with their song: It’s A Beautiful Morning… Ahhh… I think I’ll go outside for a while…  I hope you have a Wonderful Wednesday, and Please Be Good To Yourself, while Being Positive and testing Negative!

Chuck Butler