The Dollar Returns To Ascend…

November 3, 2022

* Currencies & Metals get sold yesterday and last night!

* India introduces its Central Bank digital Currency… 

Good Day… And a Tub Thumpin’ Thursday to one and all! Ok, all you Phillies fans out there that are blaming me for jinxing their team, when I said yesterday that they were on a roll, and could end up winning the World Series at home… I had nothing to do with their loss last night! Another Beautiful day here in the MidWest yesterday, and I took full advantage of it! My good friend, Dennis Miller called me while I was outside reading, and I told him my thoughts on the Fed Heads’ rate hike… Well, no worries, I plan to do that here for you dear reader, today! Deep Purple greets me this morning with their song: Space Truckin’  It’s a real foot stomper that needs to be played LOUD… But I won’t this morning, because, 1. I don’t like loud noises in the morning, and 2. Kathy is still sleeping!  I would think #2 would be more important to my health… HA!

Well as AC/DC sang… Dirty Deeds, done Dirt Cheap…  The folks that are out there screaming about the Fed rate hike yesterday, are the folks in the stock market that are getting their rear ends handed to them. You see they have money, and inflation doesn’t bother them… But for me, and everyone else out there that isn’t swimming in cash, we need these rate hikes to combat inflation before it runs away from us.  So, the Fed did hike rates 75 Basis Points yesterday bringing their Fed Funds rate to 4%, the highest it’s been in 15 years… The dollar rallied on the announcement, and the BBDXY ended the day up 4 index points from the day before at 1,336…  You may recall that it was down to 1,325 in the early morning… But the rate hike did the trick for the dollar bulls.

Gold got taken to the woodshed after the announcement, and ended the day down $13, to close the day at $1,636.10…  And Silver lost 39-cents to close the day at $19.30…   One of these days, these folks out there that are calling for a stock market collapse, will get see it actually happen, and when it does, they’ll be all “See I told you so!” The end of the world, didn’t come yesterday at 2pm, and Armageddon was avoided… On to what Powell said, and then my take on it…

After telling the audience in his press conference yesterday that the Fed was not going to pause, and that they had more work to do with rate hikes. The audience kept asking him about when the Fed is going to pivot, and he stressed the following:

 “What I’m trying to do is make sure that our message is clear, which is that we think we have a ways to go. We have some ground to cover with interest rates before we get to that level of interest rates that is sufficiently restrictive. Putting that in [our] statement and identifying that as a goal is an important step, and it’s meant to put that question as the important one going forward.

I’ve also said that we think the level of rates that we estimated in September… the incoming data suggests that’s going to be higher… and that’s been the pattern… That will end when it ends, but there’s no sense that inflation is coming down. I have a table of the last 12 months of 12-month readings and there’s really no pattern. We’re exactly where we were a year ago.

I would also say it’s premature to discuss pausing, and it’s not something that we’re thinking about. The last thing is, I would want people to understand our commitment to getting this done and not making the mistake of not doing enough or withdrawing our strong policy too soon.” – Jerome Powell

Chuck’s take on this… I could sense that Powell was getting annoyed with the crybabies, that want the Fed to Pivot… Dare I say that he was the only adult in the room?

Oh, yes, these rate hikes are going to eventually slow the economy so much that a long recession and not your garden variety recession takes place… But that same thing happened in 1980, after Paul Volcker hiked rates to more than 5% over the inflation rate…  We not only experienced a recession, as I point out today, we experienced a double dip recession! 

Ok… So, I got that off my chest for today… Yesterday, told you that the Japanese yen was probably getting bought through intervention by the Bank of Japan (BOJ), and it occurred to me yesterday right after sending the letter out that this intervention by the BOJ was probably the reason we saw the dollar get sold in the previous two overnight sessions… And then watch the dollar come back during the U.S. Session…

It looks like it’s my day to explain stuff! HA! 

In the overnight markets last night…  things got even uglier for the currencies and metals in the overnight markets. The BBDXY is up 8 index points this morning, the euro has slipped another cent, the Aussie & Kiwi currencies have  lost their gains from two days ago, and the yen is back to getting sold this morning. With Oil perking up again, the Petrol Currencies are the only currencies that have any life to them right now. The ruble, real, peso  have at least held their ground, if not gained a bit VS the dollar, while the krone and sterling have other problems, namely their association with the euro, to worry about right now.

Gold is down $19 to start the day, and Silver is down 47-cents… The price of Oil is trading with an $88 handle again this morning, down $2 from yesterday’s figure. And Bonds…. The 10-year’s yield has risen to 4.18%, thus making all those buyers of the bond last week at less than 4% yield, losers right out of the starting blocks… Serves them right… Last week was NOT the time to buy bonds, a week before the FOMC was all but guaranteed to hike rates. There WILL be a time to buy bonds… It’s just not now, or next week… hold your horses…

Late last week we saw 3rd QTR GDP come in positive at +2.6%, and everyone in the Gov’t was pointing to it and saying, “see? We told you we weren’t in a recession” …  I say hogwash!  Did these people never hear of a double dip recession?  The first two quarters of this year were negative, and that’s a historical description of a recession… So, that’s the first dip… And as we turn the calendar to next year, we’ll see the 2nd dip…  Oh, and by the way, the 3rd QTR GDP was boosted by exports of energy… Hmmm… Does that sound like something that’s going to continue, especially with the strong dollar?  I just wanted to get that off my chest, this morning.. That 3rd QTR GDP print last week has been gnawing at me all week, and finally I figured it out… 

In the early 80’s, Then Fed Chairman Paul Volcker, was going crazy with rate hikes, shoot Rudy, one time he even hiked rates on a Saturday night, calling it the Saturday Night Special! He, like Jerome Powell now, was hiking rates to combat inflation that had ripped through the U.S. economy. The U.S. economy, had a double dip recession at that time, and it will again soon… I’m just saying, you either learn from history, or you suffer the consequences…

Yesterday, I left the price manipulators alone and really just alluded to them as to the reason Gold didn’t have any follow through…But not today!  I ran across this from Matthew Piepenburg of Matterhorn Asset Management…  I’ve quoted Matthew several times through the years, and used some of his writings in the FWIW section. Here, I think he corners the price manipulators and draws the perfect picture of them and what they are doing, Here’s Matthew: “There’s a specific interest in keeping the gold and silver price down because gold is a middle finger and an embarrassment to currencies that are failing. If gold were to go to 4,000 or 5, 6,000 an ounce Jay Powell and the Fed and Biden at the White House would be looking pretty embarrassed.” 

Well, India is the first across the digital currency finish line… here’s the skinny on that whey they did: India’s first digital rupee pilot project has been rolled out by the Reserve Bank of India. Digital rupee (e₹) will be used for issuing virtual currency for transactions in government securities. It’s not to be used, initially that is, as money by individuals…

I’ll keep an eye on this to see what develops…  You may recall a couple of years ago, when Sweden tried to use digital currency and then scrapped it months later…  

The U.S. Data Cupboard yesterday had the ADP Employment Report for Rocktober, and it came in stronger than anticipated at +239,000… Stores still have “help wanted” signs in their windows… And just the other day it was reported that nearly 11 Million job openings were there in Rocktober…  The economy still hasn’t recovered from being shut down 2 weeks, no wait, that’s wrong, It turned out to be a couple of months, not two weeks like we were promised…  Oh, well that’s water under the bridge now, and in our past, so far back now that I bet you had forgotten about that 2 weeks thing…

Today’s Data Cupboard has 3rd QTR productivity, and Sept Factory Orders… Both of these were negative in their most recent prints, so maybe they turned things around, eh?

To recap… The Fed did hike rates 75 Basis Points yesterday, and disappointed all those still on the fence calling for a Fed Pivot. The dollar rallied on the news, of the current rate hike, and the rates still to come. Gold lost $13 on the day… The price of Oil gained $2 yesterday, and bonds added yield.  Chuck tells us what Jerome Powell had to say, emphatically no less, and then goes on to explain about how we’re probably going to see a double dip recession..

For What It’s Worth…  Well, let’s see… We’ve got a rail strike going to happen, we have less than 25 days of diesel fuel on reserve, and now this… Container giant Maersk is warning about next year… This article can be found here: “Dark Clouds On Horizon”: Maersk Warns About Rapid Economic Deterioration | ZeroHedge

Or, here’s your snippet: “A.P. Moller-Maersk A/S, the world’s largest owner of container ships and one of the best bellwethers for global trade, lowered its outlook for the growth of 2022 global container demand and warned next year could be worse.

Maersk’s warning about a slowdown in container demand and economic turmoil ahead was conveyed in a third-quarter earnings report released today and in an interview by the company’s top executive on Bloomberg.

The Copenhagen-based company lowered its outlook for the growth of 2022 global container demand to decline 2-4% from the previous estimate of plus or minus 1%. The forecast sent Maersk’s shares tumbling nearly 6%.

“However, it is clear that freight rates have peaked and started to normalize during the quarter, driven by both decreasing demand and easing of supply chain congestion. As anticipated all year, earnings in Ocean will come down in the coming periods,” Maersk wrote in the earnings report.

“There are plenty of dark clouds on the horizon,” the company continued, adding, “this weighs on consumer purchasing power which in turn impacts global transportation and logistics demand.”

It then warned: “With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession.”

Maersk CEO Soren Skou joined Bloomberg TV this morning for an interview where he said, “it’s really hard to be very optimistic with a war on our doorstep and a bigger energy crisis this winter so that is impacting consumer confidence and therefore also demand.” He added:

“Global trade is moving backward this year.”

The company expects the global container market to be “broadly flat to negative” as risks in 2023 are “skewed to the downside” due to the macroeconomic headwinds. Skou noted in the interview that it is “clearly better for the economy and for our customers” to have lower freight rates.”

Chuck again… Uh-Oh…  There’s one more thing to talk about today… I read this morning that POTUS plans to tax the windfall profits of the energy companies… And that reminded me of this passage of lyrics from the Beatles song: Taxman:  “I’ll tax the street (If you try to sit, sit) I’ll tax your seat(If you get too cold, cold) I’ll tax the heat (If you take a walk, walk) I’ll tax your feet ‘Cause I’m the taxman”

Market Prices 11/3/2022: American Style: A$ .6254, kiwi .5754, C$ .7252, euro .9736, sterling 1.1236, Swiss $.9863, European Style: rand 18.4855, krone 10.6349, SEK 11.2344, forint 419.48, zloty 4.8416, koruna 25.2047, RUB 61.92, yen 148.25, sing 1.4234, HKD 7.8499, INR 82.88, China 7.3163, peso 19.73, BRL 5.1465, BBDXY 1,344.51, Dollar Index 113.05, Oil $88.71, 10-year 4.18%, Silver $18.89, Platinum $919.00, Palladium $1,801.00, Copper $3.45, and Gold… $1,617.86

That’s it for today and tomorrow of course… I forgot to put my glasses on before I came downstairs to write this morning, so if there are some misspelled words, we can blame that on my bad eyesight! HA! The Astros’ pitchers last night NO-HIT the Phillies… WOW! The night after the Phillies hit 5 home runs, they got no-hit! It was a combined no-hitter, so Don Larsen’s record is still intact. Larsen is the only pitcher in World Series history to pitch a complete game no-hitter that was also a PERFECT GAME! So, I have a question for Dusty Baker, Astros mgr. Why wasn’t last night’s pitcher the Game 1 pitcher?  Our Blues get back on the home ice tonight VS the Islanders… Their games lately have been unwatchable, even for the staunchest of fans… Ugly hockey… But there’s nowhere to go but up from here… so they have that going for them!  Mizzou and Kentucky this Saturday… Fight Tigers, Fight!  Modern English takes us to the finish line today with their song: I Melt With You… a classic 80’s song for sure! I hope you have a Tub Thumpin’ Thursday today, a Fantastico Friday tomorrow, and will continue to Be Good To Yourself!

Chuck Butler