*currencies & metals rally on Friday
*renters are paying through the nose…
Good Day… And a Marvelous Monday to you… Well, I got half of the Super Bowl teams I thought would make it to the game right… Congrats to the Chiefs, and 49er’s who will play in the Super Bowl in two weeks… No football this coming weekend, whatever will we do? 17 days till pitchers and catchers report to Spring Training, that’ll keep me filled with anticipation of the new season… I’ll be going to the first spring game all by myself, as Kathy will have gone home again… So… who wants to go with me? HA! Well, another cold front moved through here last night, and our sunny and 80 days are over for this week… And Our Blues are on a hot streak! They won a 5th game in a row Saturday night… Go Blues! The Guess Who greet me this morning with their song: Share The Land…
Well, Thursday and Friday of last week didn’t have much movement from the dollar… On Thursday morning last week, the BBDXY index was 1,236… And it ended Friday at the close at 1,236… Intraday trading saw it gain and lose, but each day come right back to 1,236… Gold was able to book a gain on Friday, after a very disappointing performance on Thursday. Thursday saw Gold lose $15, and Friday saw Gold gain $6.70… Silver was able to book gains both days, with Thursday’s gain at 23-cents, and Friday’s gain at 24-cents… Gold closed the week at $2.020.74, and Silver at $22.91… I have to say that I’ve read quite a bit about how a lot of pundits are saying that Silver will soar in 2024… I hope they’re right!
There was something strange on the news wires yesterday, there was a story about how JPMorgan had lifted their previous forecast for Gold in 2024, due to inflation coming back, (really? I never knew it went away!) and interest rate cuts…
Now, that’s not that unusual for a Big Casino Bank / Brokerage to come out with a call on an asset, like Gold… But think about this for a moment, does this mean that JPMorgan’s short paper trading business will take a break for Gold to gain in 2024? Or will this be the battle of the profit areas… One side of JPM says Gold will Soar, and the other side of JPM says we’re still going to short it… Interesting, don’t you think?
In the overnight markets last night… The dollar has finally moved off of 1,236… But only to 1,237… So, still, no real big shakes on dollar movement… Gold is up in the early trading by $8, and Silver has moved above 23-cents this morning with a 15-cent gain so far. Last week I talked about how the 10-year’s yield was ratcheting higher daily, and it had reached 4.16% on Thursday last week… But from there, there’s been some buying… and the 10-year’s yield has dropped back to 4.10%… I read something from a writer this past weekend, where he said that, “There’s no way the Fed Heads will allow this rise in the 10-year’s yield to continue”… Maybe he was on to something, eh?
The price of Oil is really bubbling higher folks… The Price of Oil trades this morning with a $78-handel… The terrorists fired another missile at a U.S. tanker this past weekend… UGH!
James Rickards was ranting on Friday last week about the Fed’s so-called “terminal rate”… Let’s listen in on his rant: “In the first place, a terminal rate is an invention by the Fed. There is no discussion of terminal rates in economic literature, and it’s not something the Fed has used before as a policy tool. The Fed just made it up.
It’s not even clear that any terminal rate even exists. Inflation can go up on its own for reasons that have nothing to do with Fed policy. Supply chain disruptions, economic sanctions, pandemics and demographics are all examples of factors that can drive rates higher or lower regardless of the Fed.
So let’s not put too much stock in the idea of terminal rates. They may not even exist except in Jay Powell’s imagination.” – James Rickards from the dailyreckoning.com
Chuck again… I’ve got news for the Fed Heads, that they aren’t going to want to hear, but here it is anyway…. You only think you’re at the terminal rate (high rate for the cycle), but with the price of gas returning to higher levels, and prices not going anywhere, inflation is going to be making you sweat… I’m just saying…
Long time reader, Bob, sent me a note yesterday, showing that China’s Treasury bonds have out performed the U.S.’s Treasury bonds, and the gap is widening…
I have included a great chart showing the performances of the two bond markets, but…
The chart will go over to the letter, because…. well, because the list server is so far behind the curve of technology… I’ll say no more…
China has their problems… The U.S. has their problems… both are in need of a war…
Let’s hope that they don’t attempt to wage war on each other!
And from the nether regions of the world, comes a report on rentals… Ok, so much of the country doesn’t own their own homes, and rent a home, apartment, etc. to live in… The report said that “Since 2001, median rents have risen by 21 percent — while renters’ incomes have only increased by 2 percent.” Wait, What? No wonder Bloomberg ran an article about how the majority of savers in this country have less than $500 in their savings… And Credit Card debt went over $1 Trillion last month… This is NOT how things are supposed to work, folks… And one day, they will all come to a head… Got Gold?
And keeping up with the rest of the world… The Monetary Authority of Singapore (MAS) kept their monetary policy unchanged at the first meeting of the year last week… Singapore, as I’ve described here in this letter previously, is very different in the way they compute their interest rates, and is far better suited, in my opinion, than the way we do it here…
The U.S. Data Cupboard late last week, had Durable Good Orders, for Dec, that saw 0% growth… And the Weekly Initial Jobless Claims saw a jump in claims from 189,000 the previous week to 214,000 last week. The Fed Heads’ preferred inflation calculator the PCE (Personal Consumption Expenditures) saw a .2% gain in Dec. Showing, once again, that inflation isn’t going away any time soon…
The U.S. Data Cupboard is empty today, so nothing here for us to see… On Wednesday this week it will be a FOMC Meeting day, and rate announcement… The markets will be so keyed in on the wording of the rate announcement, and there will be at least two different versions of what the listener thought he hear Jay Powell say… And then on Friday, we get the first Jobs Jamboree of the year…
To recap… The dollar was stuck in the mud for the ending of last week, and has not broken out of its dull and boring trading yet in the overnight markets. Gold is up early this morning, as is Silver… Chuck is concerned about renters, and their financial situation… And China’s bond market is out performing the U.S. Treasury bonds… Well, isn’t that just peachy? And there could be a conundrum at JPMorgan, regarding Gold… don’t know what I’m talking about? Go back to the top and reread it!
For What It’s Worth… This is an article about how the Fed Heads are digging a deep hole for themselves, and it’s from the Mises Inst. so you know it’s well worth a reading! And it can be found here: The Fed Prepares for a Bank Crisis While Telling Americans the Economy is Strong | Mises Wire
Or, here’s your snippet: “Last Thursday, Bloomberg reported that federal regulators are preparing a proposal to force US banks to utilize the Federal Reserve’s discount window in preparation for future bank crises. The aim, notes Katanga Johnson, is to remove the stigma around tapping into this financial lifeline, part of the continuing fallout from the failures of several significant regional banks last year.
This new policy is reminiscent of the Fed’s actions during the 2007 financial crisis, where financial authorities encouraged large banks to tap into the discount window, taking loans directly from the Federal Reserve, to make it easier for distressed banks to do the same. The hesitancy from financial institutions to tap into this source of liquidity is justified. If the public believes a bank needs support from the Fed, it is rational for depositors to flee the bank. The Fed’s explicit aim is to provide cover from at-risk banks, trying to hold off bank runs that are an inherent risk in our modern fractional reserve banking system.
By strong-arming healthy banks to comply, the Fed is escalating moral hazard and leaving customers more vulnerable. They are deliberately trying to remove a signal of institutional risk.
The regulator’s concerns about bank fragility are justified. The Fed’s low-interest rate environment meant financial institutions seeking low-risk assets bought up US treasuries with very low yields. As inflationary pressures forced rates upward, the market value of these bonds decreased in favor of new, higher-yield bonds. It was this pressure that sparked the failure of Silicon Valley Bank last year.
Additionally, the state of commercial real estate is a further stress for regional banks, which are responsible for 80 percent of such mortgages. In the previous low-interest rate environment, investors viewed commercial real estate as “a haven for investors in need of reliable returns.” Unfortunately, this same period experienced major changes in consumer behavior. Online shopping, remote work, and shared office space increased at the expense of traditional brick-and-mortar locations. Covid lockdowns only further amplified these trends.
As a result, commercial real estate debt is viewed as one of the most dangerous financial assets out there today, sitting right on the balance sheets of regional banks across the country.”
Chuck again… Well, isn’t that special? The Gov’t tells us everything is hunky dory, but the Fed Heads are telling banks to start borrowing from them to strengthen themselves… Hmmm…
Market Prices 1/29/2024: American Style: A$ .6603, kiwi .6120, C$ .7444, euro 1.0819, sterling 1.2701, Swiss $1.1600, European Style: rand 18.7731, krone 10.4309, SEK 10.4944, forint 360.34, zloty 4.0400, koruna 22.8904, RUB 89.68, yen 147.87, sing 1.3417, HKD 7.8124, INR 83.14, China 7.1816, peso 17.15, BRL 4.9127, BBDXY 1,237.15, Dollar Index 103.64, Oil $78.10, 10-year 4.10%, Silver $23.06, Platinum $917.00, Palladium $970.00, Copper $3.85, and Gold… $2,028.80
That’s it for today… I know, I know pretty short, but chock-full-o-info… As usual, I must say! HA! The sun is out early this morning, I watched it rise out of the ocean, and it was as usual very beautiful… our temps will only be in the 60’s today… but with full sunshine it will still be warm… Well, that was some meltdown by the Detroit Lions last night, wasn’t it? The Lions held a 24-7 halftime lead, and lost the game 34-31… The first half the Lions offense could do no wrong, and the vice versa in the 2nd half… UGH! I know I picked the 49er’s to win, but I was rooting for the Lions, since it had been ages since they last won anything! Don Henley takes us to the finish line today with his song: Not Enough Love In The World… I’d have to agree with him on that! I hope you have a Marvelous Monday today, and please Be Good To Yourself!
Chuck Butler