- currencies & metals rally on Friday
- Bank of Japan finally hikes rates again…
Good Day… And a Marvelous Monday to you… Glinda the good witch was singing to us S. Floridians on Saturday.. She was singing, come outside, Come outside, it’s all clear, winter is now over…. i was out of it, on Saturday… I slept all day… There’s something that’s not right here, and I’ll have a conversation with my doctor about that, when I see her on 2/6…. Besides sleeping all the time, I feel pretty good, considering… My stomach is so messed up, that I intentionally don’t eat to give it fuel… I’m one messed up dude, folks… But at least I’m still here! The Allman Brothers greet me this morning with their great song: Whipping Post… That’s how I feel each and every day…. “Sometimes I feel… Like I’ve been tied to the whipping post”…
Well, the dollar ran into a buzzsaw last Friday and saw selling throughout the day. The BBDXY lost 7 index points to close the week at 1,295… The beleaguered euro, which a few weeks ago, was heading to its original price, has taken the weakness in the dollar and run with it, like I always say, whatever is going on in the Eurozone, doesn’t really matter when the dollar gets sold like that, the euro, which is the offset to the dollar, benefits….
So, why was the dollar sold I hear you asking? It seems that the markets were anticipating the new POTUS to come out swinging with is tariffs… First, he announced that he would delay the tariffs on China for further discussion, and then last week he announced that he was delaying the tariffs on Canada and Mexico…. I’m not sure that the markets have their heads screwed on correctly, because these tariffs would cause harm to the U.S. economy… And wouldn’t come close to covering the deficit spending in Gov’t
But “they” always say the markets are always right…. So, we’ll see who’s right when the tariffs finally get implemented…
Gold had a good day on Friday, but not as good as it could have been if not for the short paper traders… Gold gained $17 on Friday, to close at $2,771, and Silver gained 16-cent to close the week at $30.59… The short paper traders made sure that neither of these two metals trading without interference. Gold ending price was $15 off its high… And Silver’s ending price was a whopping 51-cents off its high…. I still can’t believe that there are those out there that can’t believe that the metals are manipulated…. C”MON do you have to be force fed? I shake my head and wonder….
The price of Oil is slipping almost daily now that the new POTUS in in office and has a mantra of “Drill baby Drill”… The price of Oil lost a buck on Friday and ended the week trading with a $74 handle… While the 10-year Treasury’s yield slipped a bit and ended the week with a 4.63% yield… Here’s Ed Steer’s thought on the 10-year “The ten-year closed up 17.0 basis points on the week — but about 4 basis points off its mid-week high tick on Thursday morning…thanks to the massive intervention by the Fed once again.” You can find Ed at www.edsteergoldsilver.com
In the overnight markets last night…. Well, there was a little follow through of Friday selloff of the dollar, as the BBDXY lost 1 index point overnight. The euro is back above 1.05… Swiss francs are back over 1.11, sterling is 1.25 and so on…. The rest of the currencies are not sure whether to test the water or not at this point, but if the dollar selling continues, they’ll join in the party for sure… Gold starts today and this week down $14, and Silver is down 16-cents… No explanation as to why… so, i believe the short paper traders are getting a head start, on their attempt to keep the metals from soaring…. You see, this week there will be Central Bank meetings in the U.S. and Canada on Wednesday, and the European Central Bank of Thursday… If all three were to cut rates, it would send a message to Gold that these Central Banks have chosen to live with inflation…
The Fed Heads must have worked overtime in brining the 10-year Treasury’s yield back to 4.53% this morning…. Why can’t these dolts leave markets to fend for themselves? The price of Oil starts the week trading with a $74 handle.
I have a couple of numbers that might help explain what I’m saying this morning,…
$900B: The amount Americans spend on goods from Mexico and Canada.
> 7,325: The number of stores major US retailers closed last year—the highest level since 2020.
Yes… Bankruptcies… Corporate bankruptcies soared to a 14-year high in 2024, underscoring the Catch-22 facing the Federal Reserve as it wrestles with interest rate policy to battle sticky price inflation.
According to data gathered by S&P Global Market Intelligence, 61 corporate bankruptcy filings were made in December, bringing the total for 2024 to 694.
I’ve explained this problem for Corporations before but here I go again….. During the decade of loose money, cheap loans, and all the other bad things that went on in our economy, Corporations lined up to take on as much debt as they could at these cheap rates…. But now and last year, and next year and so on when these bonds come due, they will have to be rolled… For the Corprations don’t have the funds to pay them off… And when they see the new lending rates, they will genuflect… They will wet their pants, and they will fall to their knees begging the lender to give them a break… And after not receiving a break, because there is no break that can be had, the Corporation sees the writing on the wall, an announces bankruptcy….
That’s why the Fed/ Cabal/ Cartel lowered interest rates by 100 Basis Points since last September…. But I don’t think that’s enough to help the Corporations… And that’s the Catch-22 I mentioned above…. And as Bill Bonner always says… “Inflate or die”
The Fed Heads can keep cutting rates and allow inflation to soar again, or they could fight inflation and watch the Corporations fall one by one….
OK… Let’s talk about something else….
Well, one of the things I want to talk about this morning is the National debt,,,, It was at $36,401, 870,505,790…. It was only 16 or so weeks ago that we turned to $36 Trillion… We add so much to the daily amount of debt every darn day that the debt clock tells us that if kept going at this pace, we’ll be at $48 Trillion in 4 short years! I know that many people don’t care about the debt, for they see this as “no problem”… But to me, this is the reason for our economic slow growth, our GDP averaging about 2% for the last decade.
And now the reasons have grown… There’s a chance that the U.S. could default… Because you see, the Gov’t sells its debt in the form of Treasury Bonds to foreigners (And us) and those foreigners just might begin to see the creditworthiness of the U.S. as not being worth a hill of beans… And any new deficit spending has to be financed with new bonds…. At some point the foreigners that still buy our bonds, will boycott the auction window until the yield on the bonds is ratcheted upward to give them a risk premium…. And….
That leads us to the next reason… For 10 years The U.S. Gov’t got away from having to issuing bonds with high interest rates, but those days are over, and when the bonds that were issued with very low yields/ interest rates, will have to rolled into new bonds that will have the higher yields/ interest rates…. and that will require the U.S. Treasury to pay out larger sums of dollars to service the bonds…. Even with some of the bond servicing being done at lower rates, the amount of interest the U.S. had to pay in 2024 was greater than the budget for defense…. Soon it will overtake Social Security and Medicare…. And you know how Elon Musk is supposed to find inefficient debt that he can cut? Well, in few short years, that will all be done for him, as there won’t be any money to pass around after paying the debt servicing!
And… None of this is good for the dollar folks…. It’s a sad state of affairs in this web that we weave, is it not?
On a side bar.. Did you know that every President since Calvin Coolidge has left the U.S. National Debt larger than when he was elected?
Well, the Bank of Japan finally hike rates last week… 25 basis points to bring their internal rate to .50%… Recall when they first hike rates bringing them out of negative back in July, I had thought that if the BOJ kept hike rates, while the U.S. was cutting rate, that it would be a boon for yen… But then, all we got from the BOJ was crickets…. The BOJ are such odd fellas, they hike rates and then say nothing, nada, nil, zero about future rate hikes or even a clue about their thoughts going forward.. It was like the BOJ threw the markets a bone and left the building…. With the dollar weakness on Friday, and overnight, yen is strutting around like a 20-game winner…
The U.S. Data Cupboard will be dominated this week by the FOMC meeting on interest rates… That happens on Wednesday, but first, tomorrow we get the Dec. Print on Durable Goods…. And the Case/ Shiller Home Price Index for November…. I’ll talk more about the FOMC meeting tomorrow…. I promise….
To recap… The dollar ran into a buzzsaw on Friday, and got sold like funnel cakes at a State Fair… It could be just a correction, or it could be the start of a weak trend… We’ll have to wait-n-see… Gold & Silver had good days with the short paper traders keeping from having great days! Chuck has some interesting numbers for you this morning, and Chuck also goes into great detail on what’s going to bring the dollar to its knees….
For What It’s Worth…. Well, I’ve seen too many false dawns with the thought that the dollar’s bull market was nearing an end, in the past couple of years… But… The boys and girls at Morgan Stanley are willing to step up the plate and call out ,the need to short the dollar… All this and more can be found here: USD: Traders Waiting for Chance to Sell Dollar, Morgan Stanley Says – Bloomberg
Or, here’s your snippet: “Traders looking to sell the world’s reserve currency are far more common than thought even as the dollar’s dominance rips across markets, according to Morgan Stanley.
“While dollar bulls are numerous and perhaps most vocal in expressing their views, there seems to be a more ‘silent’ plurality of investors looking to sell the dollar instead,” strategists including David Adams wrote in a note. “Many have dry powder and are waiting for a sign to enter shorts.”
The catalysts may be near: inflation data leading into March may bolster the chance of a Federal Reserve rate cut, while lengthier fiscal negotiations by Congress could disappoint dollar bulls, the team said. The strategists expect a more benign outcome in trade policy, which could also weigh on the dollar, according to the note.
Morgan Stanley’s forecast for the greenback is one of the most bearish among strategists surveyed by Bloomberg. Adams sees the US Dollar Index sliding to 105 by the end of the first quarter and 101 by year-end, compared with the median forecasts of 108.7 and 106.9.
Investors including hedge funds have piled into bullish dollar positions on views President Donald Trump’s policies would smack peer currencies, fuel price pressures and keep US interest rates elevated. That raises the risk of large market swings should the greenback reverse course.
“There is quite a lot of dollar-positive risk premium in the market that has scope to unwind,” Adams said in an interview.
He recommends shorting the greenback against the euro, yen and sterling in anticipation of a weaker US currency. Adams forecasts EUR/USD at 1.06, USD/JPY at 140 and GBP/USD at 1.28 by the end of the first quarter.
Yet selling the US currency has consistently proven to be a painful trade across the $7.5 trillion-a-day foreign-exchange market in recent months.”
Chuck again…. Don’t you worry one iota I’ll be all over the dollars fate when it comes that time… Just like I was in Jan 2002, when i wrot the White Paper titled: The Demise of the Dollar….. And in Feb, the dollar embarked on a weak dollar trend that lasted 10 years!
Market Prices 1/27/2025: American Style: A$.6291, kiwi .5692, C$ .6968, euro 1.0510, sterling 1.2504, Swiss 1..1117,
European Style: rand 18.6849, krone 11.2328, SEK 10.9370, forint 389.09, zloty 4.0146, koruna 23.8818, RUB 97.20, yen 155.51, sing 1.3439, HKD 7.7876, INR 86.23, China 7.2465, peso 20.54, BRL 5.9194, Dollar index 107.15, Oil $74.12, 10-year 4.53%, Silver $30.46, Platinum $943.00, Palladium $976, Copper $4.28, and Gold… $2,767.65
That’s it for today…. Congrats to the Philly Eagles, and the KC Chiefs, who won their respective league championships yesterday, to send them to NOLA to play in the Super Bowl! I came out of my funk on Saturday, to have a good day on Sunday… And tomorrow afternoon is happy hour on the deck with our Condo friends, and others… So, today, I’m going to sit outside, soak up some Vitamin D, and try to let the sun heal me a bit…. Yesterday was my youngest sister’s birthday… Happy Birthday Joanie…. Joanie was what I always called her when I lived at home before getting married. She’s a little old now for everyone to call her that, but she somehow allows me to get away with it…. Thank you, Joanie, I hope your day was grand! My youngest brother’s birthday is/ was this week… I always forget the day, but not the night my mom went to the hospital to have him! I was a freshman in High School and was in the basement where my room was listening to Chicago Transit Authority’s album… OK… The Doobie Brothers take us to the finish line today with their song from the great album The Captain & Me: Ukiah….. I hope you have a Marvelous Monday today, and please Be Good To Yourself!
Chuck Butler