- Currencies & metals rally on Tuesday
- Ray Dalio stops by the Pfennig today!
Good Day… And a Wonderful Wednesday to you! Well, my doctor appt yesterday, my semi-annual well check, was spent mostly talking about my last trip to the hospital and my diagnosis there… But in the end, the doc said I’m doing well, considering, and that I should keep my slow rehab going… He was very surprised when he walked into the room, and said, “Nurse, have I got the wrong room? This isn’t Chuck Butler”… He then talked and talked about my weight loss, and at the end of the discussion, he said, “Don’t lose any more, you’ve lost enough” I laughed and said, “but I’m still overweight according to the weight chart folks.” He replied, ” forget them!”… A Very interesting doctor’s visit, indeed! The Guess Who greets me this morning with their great 60’s song: These Eyes…
Well, I have two days of catch up to do here this morning, so I’ll start with Monday’s dollar performance, which was not good, and the BBDXY lost 5 index points on the day. This was a reaction to the U.S. losing its last AAA rating from Moody’s… Yesterday, the dollar continued to get sold, but at a slower pace, with the BBDXY losing 2 index points to end the day at 1,222… I’m surprised at the watered-down dollar selling that’s going on right now, after a week (last) where economic data was awful at best, and again, the U.S. lost its last AAA rating…
Gold rallied on Monday, but the rally was cooled down by the short paper traders… Here’s what I’m talking about, Gold reached a price that was $30 higher than the closing price of $3,230… Up $29 on the day… You may recall me saying on Monday that we needed to keep an eye out for the short paper traders, for they would be attempting to keep Gold from going to the moon… OK, $30 more is not “to the moon”, but you get the gist of what I’m saying…
Silver gained just a plug nickel on Monday… Yes, Silver was higher by 26-cents, until it wasn’t… The short paper traders made sure of that! Silver gained another 5-cents yesterday, to close at $32.50…
The price of Oil remained trading with a $62 handle Monday and Tuesday, so no movement there… And the 10-year Treasury bond, has seen some volatility in the past two days, with Monday seeing some buying, and Tuesday back to selling. In the end yesterday, the 10-year closed trading with a 4.49% yield… Who was doing the buying on Monday? Well, no other than the Fed Heads.. Wait, What? I thought they were “out of the bond buying business?” Well, apparently not… Here was the article headline on MarketWatch.com: “Why Is the Ded Quietly billions of bonds, in hopes that nobody notices?”
In the article it was opined by someone that what the Fed Heads are doing is simply buying new bonds with the proceeds of maturing bonds that they hold… But… Bond buying, is bond buying, because if the Fed Heads buy the bonds, then they aren’t for sale for anyone else… I’m just saying…
So, all this time, I’ve been accusing the Fed Heads of buying bonds stealth-like, and I was bang on!
In the overnight markets last night…. Well, the dollar got sold down the river… The BBDXY is down 4 index points to start our day today, and the old Dollar Index has fallen below 100… The euro is back above the 1.13 handle, and the rest of the currencies are following the euro’s lead this morning. I actually was smiling like the Chesshire Cat when recording the currencies for the currency round-up this morning. Gold is up $20 to start the day today, and silver is up 9-cents… Gold has steadily risen without major gains since the ratings announcement last Friday. The price of Oil remains trading with a $62 handle, and the 10-year Treasury continues to see its yield rise, with the yield on the bond at 4.54% this morning.
I came across this quote from Ray Dalio, of whom I truly respect his opinion on the markets and economy, and he had this to say about the ratings cur on CNBC.com : “Bridgewater Associates founder and billionaire Ray Dalio warned Monday that Moody’s downgrade of the U.S. sovereign credit rating understates the threat to U.S. Treasurys, saying the credit agency isn’t taking into account the risk of the federal government simply printing money to pay its debt.
“You should know that credit ratings understate credit risks because they only rate the risk of the government not paying its debt,” Dalio said in a post on social media platform X.
“They don’t include the greater risk that the countries in debt will print money to pay their debts thus causing holders of the bonds to suffer losses from the decreased value of the money they’re getting (rather than from the decreased quantity of money they’re getting),” the Bridgewater founder said.”
Chuck again… Yes, I think that this ratings cut goes deeper in hurting the economy and fiscal status of the U.S. than the markets are treating it. And the next 20-year Treasury auction will be “must-see TV”, as it will be the first auction to take place since the U.S’s credit rating was cut to Aa1… And even if the auction goes off without a hitch, the water from this rating cut goes deeper than the markets are treating it, in my humble country boy opinion..
And since I’ve opined there, I might as well, keep going with what’s on my mind this morning, right? Longtime readers will recall me saying that Japan is a basket case and that I wouldn’t touch the yen with your ten-foot pole… And here something on Japan that keeps that thought of mine fresh… Last week it was reported that Japan’s GDP for the March quarter contracted by 0.7 per cent as against the median market forecast of 0.2 per cent… And to top that off the Japanese PM came out and said that Japan’s financial condition was in worse shape than Greece’s… WOW! That’s a very low bar to compare yourself to , and then to say you’re below that low bar? I rest my case that Japan is a basket case…
And one more thing that proves what I’m saying to be true, The recent auction of Japanese Gov’t Bonds was a complete mess, with yields rising again… The 40-year Japanese Gov’t bond has gained 100 Basis points since April 30th… Can you believe a Japanese Gov’t Bond yields 3.60%? Well, I can’t help but think that this is just a harbinger for the U.S. 20-year Treasury auction that’s coming up…
The U.S. Data Cupboard didn’t have anything but 4 Fed Heads speakers out on circuit, spreading their lies as usual… Today, we get 2 more speakers out spreading lies about how the economy is so resilient.. Oh, did you see the other day, that Leading Indicators were a negative -1.0% This data has printed negativefi for so long now that I just figure it will print negative when I see it listed on the docket… There’s not much in the Data Cupboard today, just w Fed Head speakers, so the dollar gets a break from all the awful data prints that have come into our view in recent days….
To recap… Well, the dollar has been getting sold since it was announced last Friday that the U.S. had lost its last AAA Rating… The dollar selling at first was heavy, but since then has backed off and was at a slower pace… Gold had taken the ratings news to heart, and a return of the safe haven buyers have been prevalent… And it’s proof that the Fed Heads are buying bonds again… Without any flashing signs that they are doing so…
For What It’s Worth… This article is about what a Deutsche Bank economist is scared of with the dollar going forward, and it can be found here: Dollar ‘Fiscal Frown’ Theory Has Deutsche Bank Warning of Losses – Bloomberg
Or, here’s your snippet: “The dollar is at risk of losses whether the US government lands in a fiscal crisis or a recession, according to George Saravelos, Deutsche Bank’s global head of FX strategy.
“A dollar fiscal frown is the best way to picture things,” Saravelos wrote in a note on Monday, riffing off the so-called “dollar smile” framework Stephen Jen put forward more than two decades ago. Upcoming budget negotiations will determine where the dollar lands on that curve.
“At one extreme on the left is a fiscal stance that is too easy,” Saravelos wrote in a note on Monday. “This leads to a combined drop in US bonds and the dollar — as we are once again witnessing this morning.”
The 30-year Treasury yield climbed to its highest since November 2023 on Monday, following Moody’s Ratings downgrade. Meanwhile, a dollar gauge fell as much as 0.7%, with the greenback weakening against all of its peers in the Group of 10. If this pattern continues, it signals the market is “losing its appetite to fund America’s deficits and rising financial stability risks,” Saravelos said.”
Chuck Again… And IF the market is losing its appetite to fund our Deficits, that will require the Fed Heads to buy more bonds than they are currently buying…
Market Prices 5/21/2025: American Style: A$ .6448, kiwi .5943, C$ .7206, euro 1.1343, sterling 1.3443, Swiss $1.2135, European Style: rand 17.8899, krone 10.1587, SEK 9.5780, forint 354.73, zloty 3.7434, koruna 21.9306, RUB 80.00, yen 143.60, sing 1.2890, HKD 7.8301, INR 86.64, China 7.2040, peso 19.24, BRL 5.6680, BBDXY 1,218, Dollar Index 99.58, Oil $62.57, 10-year 4.54%, Silver $ 33.14, Platinum $ 1,055..00, Palladium $1,016.00, Copper $4.66, and Gold… $3,310.
That’s it for today, and this week, as there will be no Pfennig tomorrow.. I will be in the infusion center at the hospital, a very depression room I must say, for my monthly infusion… Hey! My cataract surgery finally got scheduled, and it will be Monday June 9th… Kathy leaves for Florida the next day, so I’ll have to get one of my retired friends to take me to the eye doctor the next day… My beloved Cardinals won Monday night and lost last night, in a hard-fought game that was tied going into the 9th… UGH! The rubber game of the series with the Tigers is a day game today at Busch! I recall when I would not miss any midday games at Busch! Oh, well, que sera sera…. Little Feat takes us to the finish line today with a live version of their hit song: Dixie Chicken… I hope you have a Wonderful Wednesday today, and PLEASE Be Good To Yourself!
Chuck Butler