September 25, 2023
* Currencies drift lower to end the week…
* Japanese yen continues to get sold…
Good Day… And a Marvelous Monday to you! Whew! What an action packed, fun filled weekend it was for yours truly… Friday I went out to dinner with friends… And Saturday was the BEST! I witnessed my beloved Mizzou Tigers win, and then got home in time to watch the end of the StL City team’s win in Minnesnowta… Our Blues won on Saturday in their first exhibition game, and the Cardinals won in San Diego! A grand day for St. Louis sports fans! And the weather has been fantastico! Can’t beat it with a stick! I was worn out on Sunday, and couldn’t get the engine revved up… I’m getting too old to have that much fun! The Babys greet me this morning with their song: Back On My Feet Again…
Well… The stronghold that the dollar has had on the currencies and Gold continued on Friday last week, with the BBDXY moving up to 1,258… Not a huge move from the 1,257 it held on Thursday, but still upward movement for the dollar. It’ll take some time for the traders to get their arms around the fact that they should be selling dollars, like they were prior to the PPT’s intervention last week… They will be scared to go out on a limb, with the PPT standing there with loppers…
Gold found a way to gain $5.30 on Friday, but… Gold was much higher during the session, but was pared down by the short paper traders… Gold ended the week at $1,925.80… Silver too, was going along quite nicely, and then, it wasn’t, and only gained 14-cents on the day, to end the week at $23.62… You know me, right? I just finished reading Ed Steer’s Saturday letter, and in it he has a lot of thought from silver guru, Ted Butler, (no relation that I know of) And Ted believes that the short paper traders are going to rue the day they decided to get into the shorting business… This is based on the fact that there is a shortage of physical Silver… And sooner or later, probably sooner, this will all come to a head, and then the shorts will have to buy back to cover their positions, and that will create a mass exodus from short positions… This could spill over to Gold, and Copper and all the commodities for that fact… So… what will you do?
The price of Oil bumped back to $90 to end the week, the brief dip below $90 lasted just 1 day… The 10-year Treasury ended the week with a 4.43% yield… This yield has really been moving upward since the FOMC meeting last week, when the Chairman Powell, said that rates would remain high for longer than anticipated previously… Shoot Rudy, the 1-year Treasury Bill is 5.45%… And mortgage rates? Well, they’re heading for 8% folks… watch them rise, I’m just warning you now, so lock in those mortgage loan rates!
So… stocks haven’t been so hot lately, and that’s a direct result of the higher yields in Treasuries… And while I’m not even your last pick to play right field, I mean, to play a stock jockey I will point out something that I wrote for the Adens letter a few years ago, and that is that it is a proven fact that stocks do not perform well in a recession… I’m just saying…
In the overnight markets last night… There was more of the same last night, as the dollar drifted higher, by 1 index point in the BBDXY. The real mover overnight was the 10-year’s yield… The U.S. Treasury note 10-year’s yield has risen to 4.50%, for the first time since 2007… The rout is on in bonds, and it’s all tied to the “higher, longer mantra”… The price of Gold is down a buck this morning, and Silver is down 4-cents to start the day and week. Those are levels that are easily turned around, so let’s get to work!
The price of Oil remained trading with a $90 handle overnight… The stories about a shortages continues here, and should keep the price of Oil elevated…
I read a ton of news articles this past weekend, and one that really caught my eye, came from longtime reader, Bob, who sent me an article that talked about Norway’s wealth and Scandanavia’s wealth… That reminded me of an article that I wrote for Forbes magazine many years ago, when they asked me to write about something other than the euro… That was easy for me, as the currencies of Norway and Sweden had always been at the top of my parade list… It seems that through the years, nothing has changed in these two countries, as well as Finland, who gets the crown for happiest people country… That award has been traded between Norway, Sweden, Finland and Switzerland for years now.
For years, I’ve pointed out the Sovereign Wealth Fund of Norway, and it still is something to behold… Norway has $250k+ in a pot for every single man, woman and child in their entire country, and wonders… how do theu spend it? That’s a problem most would love to have — which is why more and more countries are setting up their own versions, with the Philippines’ launching one in July. All that wealth fund has been supplied with cash from the Oil industry… And a country that doesn’t deficit spend… Sound like a great place to live? Where you didn’t have to worry about excess debt collapsing your country’s economy, or wars, or civil destruction?
I’ve always pointed out the difference between the Norwegian krone, and the Swedish krona, and that is Norway has the benefit of both being associated with the euro, and… it being a petrol currency, that benefits from the rise in the price of Oil… Sweden only has the association with the euro in its favor…
So… what I’m saying here is that Norway has always been an alternative to the euro, and should be an integral part of one’s investment portfolio… I’m just saying…
And one other thing I want to mention is that how Sweden had abandoned their digital currency test a couple of years ago, and haven’t tried to implement it again… For that alone, I would own Swedish krona…
Oh, and remember in 2020, when it was reported that Sweden remained open and didn’t adhere to the policies that were implement around the world? And everyone that was trying to sell the Kool-Aide, said that Sweden would rue the day that they decided to not follow the CDC rules? Well, they outperformed every other country on earth and never had mass deaths like it was reported that they would have… So… again, for that alone, I would own Swedish krona…
Switching gears here… Those folks that didn’t read the Pfennig or heed my warnings that the Bank of Japan is known to disappoint the markets, are feeling the pinch of their positions in yen this morning, as the BOJ has not even given a head fake on a rate hike more, and the yen continues to lose ground… While most of the countries of the world that matter, have reached or will reach their rate hike cycle heights, The BOJ is scared to death to take the plunge into rate hikes, and that has hurt yen as much as anything… I’m just saying…
The U.S. Data Cupboard last week, had the Leading Indicators for the U.S. economy, and for the 17th month in a row, the Leading Indicators were negative… But still no recession? Well, the yield curve is still inverted, the Leading Indicators are still negative, and there is other data that tells us that we should be in a recession right now… But, I say patience… it’s a virtue you know… They say that “good things come to those who wait”… Well, I doubt a recession is a good thing for a lot of people, but it will be a good thing for the economy to clean out the excesses of the previous boom… I’m just saying…
The Philly Fed Index (manufacturing in the region) went from a plus 12 to a negative 13.5 in one month! Things can go to hell in a hand basket in the blink of an eye, so, stay tuned, don’t turn the dial, and keep watching this Empire crumble…
The Data Cupboard this week starts out with nothing on the docket for today, and then throughout the week the Data Cupboard will have pieces of data that should tell a story at least, like Wednesday’s Durable Goods Orders, which have been negative lately… And Personal Income and Spending that will print on Friday this week…
To recap… The dollar continued to get bought on Friday, albeit at a slower pace than earlier in the week. Gold started out up big time on Friday, but ended the day up only $5.30, and the same for Silver which ended up 14-cents after spending most of the day up more than 14-cents! Chuck goes into a long explanation of why he has always given the Norwegian krone and Swedish krona special thoughts…
For What It’s Worth… I talked briefly above about how the FOMC signalled that rates would be higher, longer above this morning, and then ai came across this article that talks about that and what it signals for us as a country, and it can be found here: Credit Bubble Bulletin : Weekly Commentary: Higher for Longer
Or, here’s your snippet: “I had no major issues with Powell’s press conference. We’d prefer to see the head of the Federal Reserve, the world’s preeminent central bank, decisive and exuding confidence. Powell was instead notably humble and cautious, attributes befitting today’s extraordinary backdrop (not to mention recent Fed forecasting lapses). Significant revisions to the committee’s Survey of Economic Projections (“dot plot”) only elevated Powell’s communications challenge.
Ten-year Treasury yields jumped nine bps Wednesday to 4.41%, and then Thursday traded above 4.50% for the first time since October 2007. Benchmark MBS yields traded as high as 6.33% intraday Wednesday – matching the high back to July 2007 – before closing the week 12 bps higher at 6.17%.
Surging yields were not limited to Treasury and agency securities. Sovereign yields hit at least decade highs this week in countries including Canada, Germany, France, Spain, Sweden, Belgium, Austria, Netherlands, Australia, New Zealand, and Japan.
Markets have been in denial. Perhaps it was just seeing reality codified in the Fed’s “dot plot” that forced a reality check. Economic momentum has persisted in the face of sharply higher policy rates, tempering labor market cooling while reinforcing inflation dynamics. The bullish Goldilocks narrative of rapidly declining inflation, comfy economic deceleration, and an impending easing cycle was just too farfetched (and so previous cycle). “Higher for Longer” is real and needs to be factored into analyses and asset prices.
But “Higher for Longer” is a big problem. It’s a problem for our federal government’s massive debt load, with ballooning debt service costs at the cusp of spiraling out of control. It’s a problem for risky corporate borrowers with a Trillion of debt to refinance over the next two years. It’s a problem for a banking system sitting on enormous underwater “held to maturity” bond portfolios, along with an equities market dominated by over-valued growth stocks. It’s a problem for millions of households who have loaded up on debt. It is a big problem for an over-indebted world.”
Chuck again… Yes, it will become a real problem, but what would you rather have, high inflation, or high interest rates? I’m just asking… It’s the same old question once again… Inflate or die… Got Gold?
Market Prices 9/25/2023: American Style: A$ .6426, kiwi .5967, C$ .7440, euro 1.0630, sterling 1.2234, Swiss $1.1123, European Style: rand 18.7398, krone 10.74444, SEK 11.0252, forint 367.72, zloty 4.3123, koruna 22.9163, RUB 96.09, yen 148.64, sing 1.3658, HKD 7.8176, INR 83.14 China 7.3098, peso 17.20, BRL 4.9363, BBDXY 1,259.60, Dollar Index 105.65, Oil $90.03, 10-year 4.50%, Silver $23.58, Platinum $924.00, Palladium $1,250.00, Copper $3.70, and Gold… $1,924.58
That’s it for today… Well they say that all good plan today is better than a good plan tomorrow… And for me that’s how it worked yesterday, as I had planned to take it easy and relax and try to recover from two nights of play… But then I moved that plan to today, because I got an invitation to go watch the Chiefs game… on a deck, at a watering hole, and those plans were thrown out the window! Last week when I was at the oncologist’s office they had me get on the scale, like they always do, and I was shocked at my weight.. I had reached a weight that i had not been at in 30 years! YAHOO! Hey! Did I tell you that I’m looking forward to my high school’s 50 year reunion? I don’t believe that there will be many of us that attend, but those that do, will have a grand time! The band Doucette takes us to the finish line today with their song: Mama Let Him Play… (great solo guitar work in this song!) I hope you have a Marvelous Monday today, and will please remember to Be Good To Yourself!
Chuck Butler