The Dollar Bugs Fight Back!

December 21, 2020

* Dollar buying looks like CB intervention to Chuck

* Silver outperforms Gold, Platinum, and Palladium! 

Good Day… And a Marvelous Monday to you! I won’t say that again until Jan.4, 2021… (My dad’s birthday)… These last couple of Pfennigs going into Christmas will be chock-full-o- stuff, for you to read while I’m on my traditional winter vacation…  Well, my beloved Mizzou Tigers laid an egg in Starkville, MS. Last Saturday. UGH! But they impressed someone because they have accepted an offer to play in the Music City Bowl, In Nashville, Dec. 30th…  So, congrats to coach Drinkwitz and his team. I also watched my good friend Rick’s alma mater, Clemson, destroy Notre Dame, which was delightful for me! I have always rooted for whomever plays Notre Dame…  Little Evie and brother Braden came to spend the night with us Saturday night… Braden and I played a game of chess… He came close to beating me, and he’s only 9! The late great Leon Russell greets me this morning with his song: Delta Lady… 

On a sidebar, a different good friend named Rick, learned of my love of Leon Russell, and now he sends me links to concerts and other recordings that Leon Russell performed on. So, do you think if I told him I loved… oh never mind… that’s silly!

OK.. well, the dollar bugs fought back on Friday, with the euro losing about 1/4- of a cent, and Gold giving back $4.60 on the day… The Dollar Index, which when I left you on Thursday was 89.96,  recovered to 90.01. and had risen even further in the overnight markets to 90.63…. One could say that the currencies had shot up so fast, that they needed to go back and fill in the gaps…  Or, one could say that my thought of a new weak dollar trend beginning is hog-wash!  And that the dollar will come roaring back once the virus vaccine has been distributed to the masses… (of which people over 75, and essential workers are next in line for the vaccine, once medical people get theirs… Son Alex, who is Physical Therapist and is in contact with people all day, every day, says there are no plans in place for he and his colleagues to get the shot, yet… )

Whatever the reason, and I believe it to be the former of the two I presented, we’ll have to hold onto our horses, and not change them in the middle of the stream, until we know for sure.

In the overnight markets the dollar buying has increased its fervor, and now it’s beginning to look like Central Bank intervention to me, for the dollar has really pushed back with force against the currencies. The euro this morning has lost almost 1-cent since last Thursday. And like I said above the Dollar Index has recovered to 90.63…  Gold in the overnight markets has lost $3, but Silver has gained 36-cents to move over the $26 handle… This is quite impressive, given that both Platinum and Palladium have gotten the snot kicked out of them overnight, and Gold is fighting to keep its head above water, and we have Silver kicking tails and taking names later…  Pretty impressive… 

Well, there were lots of stories over the weekend about the direction that the President-elect is going to take us…  I have one of those articles in the FWIW section today, So keep it right here, and don’t touch that dial!  Another one is one I’m going to talk about now…  The long awaited 2nd Covid Relief Package was signed by Congress yesterday, and it is in the amount of $900 Billion…  Of course that’s $900 Billion that Congress doesn’t have to spend, so the currency will be printed out of thin air, with no backing, as it has since August 1971.  To use Bill Bonner’s term… This is nothing but fake money… Another feature of the Relief Package is extended unemployment benefits, which were scheduled to expire on 12/31/2020…  Yes, in 10 days…  they would have expired without being extended with this package…  I hate to be the bearer of bad news here folks…  But putting money into hands of people with no stipulations, could end up being a not-so-good-thing -to-do…  But I’m sure the government people behind this relief package know more than me, and so I’ll just move along here for these aren’t the droids we’re looking for!

Oh, and the free passes the renters and mortgage owners have been receiving were also extended, but only for 1 month…  I guess the negotiators thought the new President could handle that one! And, I’m sure shootin’ believin’  partna… that there will be no evictions on his watch…

$900 Billion added to our debt, in a keystroke on a computer keypad…   I read last week that Twenty-five percent (25% or 1/4 ) of all US Dollars to ever be in existence were created in the last nine months. And that’s before they added another $900 Billion!  You know, folks… I’ve been talking about the ill-effects of Deficit spending, and Debt Accumulation for about 20 years… Before that, It always seemed to me that the debt that we, as a country, had, could be dealt with, sanely…  But then I noticed that no one in Congress was ever talking sanely about debt, and it was then that I figured that we could allow the dollar to get very weak, thus inviting inflation into our economy and inflate away the dollars, or… we could raise taxes…  Notice I didn’t say stop deficit spending, because that had a snowball’s chance in hell of ever happening! 

Now, I believe that the accumulated debt (Over 27 Trillion) is too large to inflate away… I also believe that it’s too large to raise taxes to pay for it… That leaves one choice, and that is to default on the debt and start over…  I’ve gone on record saying that I believe that this will happen around the world because, except for Russia, the rest of the world has gone bonkers with debt accumulation too…  And if the new administration listens to their far left colleagues, we’ll get to the point of defaulting at a faster pace than we are on now.    I’m just saying…

I know, I sound insensitive about this Relief Package, and I apologize for that. I realize there are people and small businesses out there that need help…  But, I always remember what Ronald Reagan once said, about the scariest words spoken, are: “I’m from the government and I’m here to help”… And what good does saving a business now do, if in 6-month to a year, the whole shootin’ match collapses and folds like a cheap lawn chair?

Ok, let’s stop talking about debt accumulation!  I think that the numbers have gotten so large, that normal people can’t fathom what it takes to make $900 Billion…   So, let’s move on…

10 years ago, or so, we would get calls from people all the over the country asking us if we would sell them Iraqi dinar, for they had read that it was going to be revalued…  I had instructed the people on the trade desk that we should gently break the news to the callers that there were no plans for a currency revalue…  One time when I was in Panama at a conference, a gentleman came up to me and told that he had inherited his family business, and that he put all their cash into Iraqi Dinar, for he knew that it was going to be revalued, and wanted to know my thoughts about that… I said to him, “you did what? I believe that the dinar is a worthless , for investment, currency, and that there would be no revalue, and that he should see if he can get out of that trade”… He was not happy with me to say the least!   Oh… and there was this tidbit in the weekend’s news…  Iraq’s central bank increased the sale price of U.S. dollars to banks and currency exchanges to 1,460 dinars, from 1,182 dinars That a DEVALUATION folks!    Not a revaluation!  I wonder what all those folks that kept calling us and telling us the revaluation was real and was going to take place on “x-date”, are thinking now….  Should have listened to me… That’s I’m saying about that!

The U.S. Data Cupboard last week was very disheartening if you are a person that believes all is going along nicely here in the U.S. It was also disheartening for the dollar bugs who saw the dollar fall to its lowest level since 2018… And this is just the beginning in my opinion…  So… The Weekly Initial Jobless Claims blew away the expectations of 862,000 and came in at 885,000… When I left you last Thursday, I said, “what would happen if the claims were greater last week?” I said, I thought the dollar would get sold and that’s exactly what happened…  The Continuing Claims also rose from 19.04 Million to 20.64 Million… So, as usual I’ll give you MY Unemployment Rate of 13.76%…  For comparison purposes, the BLS says Unemployment is 6.7%…   And I would think my rate was conservative, given all the people that have fallen off the Unemployment roster, because their benefits ran out…

And that was Thursday, when the dollar got sold, and Gold was up $20.80, and the currencies moved higher VS the dollar, but, as I said above, on Friday, the dollar bugs fought back, and moved the dollar modestly upward against both the currencies and metals. And in the overnight markets the dollar bugs are back to having the conn…  I would think only for a day, because this is a Monday, Monday can’t trust that day! 

There wasn’t much else, in the way of economic data, reported last week, except for Leading Indicators, which were weaker than Rocktober’s indicators, coming in at .6% VS .7% previously….  Leading Indicators and Capacity Utilization are really the only two pieces of data that are forward looking, or tell you about the future… Everything else is in our rear view mirrors…

Before we head to the Big Finish…  I wanted to point out a link to an article on the Daily Reckoning, that’s a brief video, where the changing of folding cash to digital currency, is discussed in video format… If you don’t have time for the video, trust me on this one, I’m not the only person out there that’s now saying the U.S. Gov’t will be changing over to digital currencies… you’ll have to look for it, they post so many articles…. It’s by Nick Giambruno….  Shoot Rudy, I recall when they used to post my Pfennig the site and included me as one of their “writers”…  but that was then and this is now…

To recap…  The dollar bugs fought back on Friday, after seeing the dollar get sold down on Thursday, after the Initial Jobless Claims printed an 885,000. In case you’ve missed the last two weeks of Claims numbers, they happen to be going in the wrong direction, which is upward…  There wasn’t much else to deal with and so the Thursday gains got chopped a bit on Friday…  Chuck points out that after all these years, the Iraqi dinar is NOT getting revalued upward, instead it just got devalued downward! And of course Chuck opines on the Covid Relief Package… 

For What It’s Worth….  You know, I’ve heard some real dumb ideas come from politicians and economists over the years, but the Universal Basic Income idea is really stupid!   So, I just wanted to make certain that you knew I didn’t endorse this guy’s thought, but also thought that it was good to see who’s making these calls as if they went to Jupiter to get more stupider!  The link to the article is here: Former Goldman CFO Calls For Universal Basic Income “To Stave Off Revolution” | ZeroHedge

Or, here’s your snippet: “In an interview with The Business of Business, host Gregory Ugwi asked Chavez if he agrees with Rep. Alexandria Ocasio-Cortez (D-NY), who says “there should be no billionaires in the US as long as there are poor families,” adding that venture capitalist Paul Graham says that income inequality is a “natural part of capitalism, and a sign that the process is working.”

Chavez, a Democrat donor (most recently Pete Buttigieg’s presidential bid), agreed that the income gap is a consequence of capitalism, but said “at the same time, it isn’t an inevitable feature of capitalism that the inequality be as extreme as it’s getting. There have been long periods in American history where there was always inequality – but it wasn’t this kind of inequality.”

He also isn’t a fan of AOC, saying “I am not in AOC’s camp – at all. I didn’t vote for her, I wouldn’t vote for her. I hear her, and she’s just not saying anything that makes any sense to me.”

“At the same time, I’m a big proponent of a universal basic income.

My personal view is that if you’re just being pragmatic and looking at inequality – and not thinking about some abstract concept of justice – you don’t want the inequality to be so extreme that it leads to revolution. So you ought to be prepared to pay to decrease that probability.

This is what I say to, you know, friends who you might call ‘oligarchs,’ right? Why it would make sense for everybody to have some baseline income and why we should all pay for it.”

Chuck Again…  What a dolt… And he ran a business at Goldman Sachs?  Give me a Break!

Market Prices 12/21/20: American Style: A$ .7577, kiwi .7038, C$ .7762, euro 1.2172, sterling 1.3290, Swiss $1.1268, European Style: rand 14.8282, krone 8.7495, SEK 8.3182,  forint 296.38,  zloty 3.7087,   koruna 21.5802, RUB 73.40, yen 103.56, sing 1.3376, HKD 7.7528, INR 73.96, China 6.5360, peso 20.39, BRL 5.1010,  Dollar Index 90.63,  Oil $47.28,  10-year .90%, Silver $26.20, Platinum $993.00, Palladium $2,342.00, and Gold… $1,877.90

That’s it for today…  Well, our St. Louis U. Billikens are no longer unbeaten… They lost on the road in Minnesnowta, last night… UGH!  We had some sunny days this past weekend, but it really didn’t warm up as much as the bright sunshine would have you believe… But it was  “warmer” than normal this time of year, which is good because the cold is coming back this week… But no snow is forecast for Christmas. UGH! You know, I never missed a day of work because of weather, snow, ice, whatever. Even back in the day, long ago, when I used to take a bus downtown from 20 miles out! But I do have to say that now that I don’t HAVE to go anywhere when is snows, I like that much better! I sat down at the piano yesterday for the first time in ages, and I mean AGES!  The piano is need of a tuning, but I was still able to figure out the notes for a song I’ve been hearing a lot of lately… And after about 10-15 minutes, I walked away from the piano…  I still haven’t picked up my guitar in a couple of months! UGH!  Alex closed on his home on Thursday, and moved in on Friday… I went to his new place to see if there was something I could do to help, but they had it all under control!  So, Congrats Alex! The Searchers take us to the finish line today with their song: Love Potion No. 9…  That song always makes me happy to hear it…  I hope you have a Marvelous Monday, and please with all that’s going on, Be Good To Yourself!

Chuck Butler