Rocktober 17, 2022
* Currencies and metals get sold on Friday last week
* Retail Sales are flat for Sept…
Good day… And a Marvelous Monday to you! The National League Playoffs have a had a twist to them with major upsets of the Braves and Dodgers. Congrats to the Phillies and Padres for continuing their seasons… It took the Astros 18 innings to run the Mariners out of the Playoffs, and the Yankees / and Indians/ no I mean the Guardians will go to a fifth and deciding game tonight… I made it back home on Saturday without a major hitch, a lot of waiting though, which is not a good use of my day, when all those college football games were being played! Back to the cooler weather, which I find to be annoying at this point, after spending 10 days down south… Last week was my little Evie’s 3rd birthday, and I was a total bad grandpa, by forgetting to mention it in the Pfennig! UGH! She’s 3 going on 13… I’m just saying! The Allman Brothers greet me this morning with their song: Statesboro Blues…
I woke up this morning, had those Statesboro Blues… Is how the song opens, and it aptly applies to my state of mind this morning… Gold got whacked again on Friday last week, and once again the price manipulators blamed their wreckage on the fact the 10-year Treasury traded with a 4% yield on Friday… I say hogwash! You price manipulators are making sure Gold doesn’t get a strong footing before it turns on a dime and heads higher, you might as well come out and admit that one, since your shorting has become so brazen…
Alrighty then, I got that off my chest! The dollar rallied on Friday, and even though the economic data was bad, it doesn’t mean anything any longer. More on the bad economic data later this morning, but first the wrap up from Friday… The BBDXY gained 9 index points on Friday. The Swiss franc fell below 1.00, for the first time, and the Russian ruble regained its recent lost ground. Gold lost $21.30, and Silver lost 58-cents on the day, which proves once more that the fundamentals don’t have anything to do with the performance of Gold & Silver, as long as the price manipulators have free reign…
All the Fed Heads are singing from the same song sheet these days, and St. Louis Fed President, James Bullard was no exception last week, saying that he supports two more large rate hikes, of 75 Basis Points each in Nov. and Dec. , which is a variance from the markets’ view that the Fed Heads would hike rates 75 Basis Points in Nov. but then opt for 50 Basis points in Dec. Either way, the Fed Heads are keeping to their word that they will not let up the rate hikes until inflation is defeated.
In the overnight markets last night… The dollar got sold, figures, the overnight markets see the rotten Retail Sales data, and the strong, stupid CPI and say, “We’re selling dollars”… It’ll be interesting to see if that carries over to the U.S. trading… The BBDXY is down 4 index points to start the day. Gold is up $13 in the early trading, and Silver has added 21-cents to its price to start the day. The price of Oil has slipped to trade with a $85 handle, and the 10-year’s yield is 3.94% this morning, after having touched above 4.00% on Friday.
So, why is everyone thinking of selling their Gold these days? I just don’t get it… You buy Gold as a hedge VS a dollar problem, and you buy Gold as a store of wealth… When stocks look like they are getting ready to jump off a cliff, without PPT intervention, that is, that’s the time you want to back the truck up and buy Gold for a new purchase, or to add to your portfolio.. I’m just saying…
I don’t say things flippantly folks… When I say that things are so rotten right now, that you should be adding to your Gold position, I say that with a lot of thought… One of these days, the price manipulators will be put out of business, I don’t know when, or I don’t know how, but they will, as my grandmother used to say, “All good things must come to an end”… I truly believe that in the future, we will have a run on physical Gold, and when that happens, there won’t be enough physical Gold to fill all the orders, then the premiums will explode higher, and if you want to buy Gold then, it’ll be too late… It’s too late baby, now it’s too late, though I really did try and tell you…
Well, G-7 met last week… This from Reuters.com: “Japan and other countries facing the fallout from a soaring U.S. dollar found little comfort from last week’s meetings of global finance officials, with no sign that joint intervention along the lines of the 1985 “Plaza Accord” was on the horizon.
With a strong push from Japan, finance leaders of the Group of Seven advanced economies included a phrase in a statement on Wednesday saying they will closely monitor “recent volatility” in markets.”
Chuck again… Nope, no new “Plaza Accord” on the docket… but the statement was quite ominous, when they said they will “closely monitor volatility in markets”… Well, that’s nice and all, but the volatility is already there, they should be on top of it now!
It was reported last week that the Asian Central Banks spent a lot of currency to stop dollar strength… this from Bloomberg.com “Asian governments spent about $50 billion in foreign-exchange reserves last month — the highest level since March 2020 — to defend their currencies from a relentless advance in the US dollar.” You know that this is where I say something that I haven’t said in a long time because there’s been really no real intervention in the currency markets, and that is: “The markets have way deeper pockets than any Central Bank”… And in this case it says that “Asian Central Banks” were intervening, but in my humble country boy opinion, it was Japan and China… doing the heavy lifting…
Speaking of Japan, and the yen… The yen fell to a 24-year low on Friday, last week… 148 is the handle of the yen at the close of business on Friday… Now I’m not saying that yen will fall to levels not seen since 1971 (350) but a weak yen is in the cards for some time folks… The Bank of Japan (BOJ) President, Kuroda, recently told his audience that he favors and will implement a “very easy monetary policy”… Wait, What? You mean negative rates and bond buying isn’t already “a very weak monetary policy?” Well, bust my buttons, now I’ve heard it all!
I read a lot of articles this past weekend about how the “U.S. is poking the bear”, and hoping for a confrontation with Russia… Man, I hope that never happens in my lifetime, for it would lead to nuclear annihilation… That’s not a good thing, and I’m hoping this is all just saber rattling…
So, I’ve been telling you about how tough it is going to be for the U.S. to continue to issue Treasuries, when no one shows up at the auction window… Well, the Fed Heads must be reading the Pfennig, because, they issued a questionnaire last week to the Primary Dealers asking them “should the Fed buy bonds”? Here’s a snippet on Reuters: “The U.S. Treasury Department is asking primary dealers of U.S. Treasuries whether the government should buy back some of its bonds to improve liquidity in the $24 trillion market.
Liquidity in the world’s largest bond market has deteriorated this year partly because of rising volatility as the Federal Reserve rapidly raises interest rates to bring down inflation.
The Treasuries market has swelled from $5 trillion in 2007 and $17 trillion in early 2020, while banks are facing more regulatory constraints that they say make it more difficult to intermediate trades.
The Treasury is asking dealers about the specifics of how buybacks could work “in order to better assess the merits and limitations of implementing a buyback program.”
These include how much it would need to buy in so-called off-the-run Treasuries, which are older and less liquid issues, in order to “meaningfully” improve liquidity in these securities.”
Chuck Again… Well, if this is going on now, we can expect a full-blown rate cutting, bond buying experience once the Fed Heads Pivot… And then we get to start the mess all over again! Whoopeee, where do I sign up for some of that? NOT!
The U.S. Data Cupboard late last week, first saw the stupid CPI report show inflation not letting up in September, and actually ran hotter than expected… We also saw the Weekly Initial Jobless Claims bump higher the previous week, and the continuing Jobless Claims remain high at 1.37 Million… Then on Friday, was the piece de resistance… Retail Sales, which I had told you last week, that the BHI indicated that they would be flat, came in exactly at that, flat! Or, as our illustrious POTUS would say, “we didn’t have ANY Retail Sales last month”… No, wait, he wouldn’t say that because that would be bad… Anyway, I just wanted to point out that he had said that there was no inflation in August, when the August report was flat…. Fun memories, huh?
The Retail Sales figures had some interesting tidbits, like how most of the purchases were made with credit cards… OK, I get it, credit cards are easier to carry around than cash, but if the credit card balance doesn’t get paid off at the end of each month, that’s a bad thing, folks… I’m just saying…
Oh! I just had a thought about why people are running up credit card debt… They aren’t thinking that the Gov’t will bail them out an pay their debts at some point in the future are they? Nah… people aren’t that smart… Or, maybe they are… They saw the Student Debts get bailed out, why not credit card debts? I’m from the gov’t and I’m here to help you… Help you into servitude to the gov’t is what they should be saying! But that’s another discussion for another time…
This week’s Data Cupboard gets off to a slow start today, with only the Empire Region PMI (manufacturing index)…
To recap… The dollar rallied on Friday last week, But got sold in the overnight markets last night… Gold is getting sold nearly every day now, and Chuck is of the belief that the price manipulators will one day be put out to pasture… And then that happens, it’ll be too late baby, now it’s too late (Carol King) to buy physical Gold… And U.S. Fed is asking banks if the fed should be buying bonds? I know, I know, that sounds ridiculous, because what are the banks going to say, “No, we will take the bonds off your hands and limit our ability to lend people money?” I say no more…
Before we head to the Big Finish, I wanted to mention how sad I was hearing the news that Cardinals’ all-time best, relief pitcher, Bruce Sutter, had passed at just 69 years of age…. I remember that during his 4 years with the Cardinals, that the other team would begin to pack up their bats whenever he came in the game!
RIP Bruce Sutter…
For What It’s Worth… well… things are getting very weird out there folks… I know, most of you have your lives to live, and don’t need to be worrying about all these weird things… But for those of us that do… Here’s an article that talks about a lot of it… and it can be found here: Banking crisis — the Great Unwind – Research – Goldmoney
Or, here’s your snippet: “There is a growing feeling in markets that a financial crisis of some sort is now on the cards. Credit Suisse’s very public struggles to refinance itself is proving to be a wake-up call for markets, alerting investors to the parlous state of global banking.
This article identifies the principal elements leading us into a global financial crisis. Behind it all is the threat from a new trend of rising interest rates, and the natural desire of commercial banks everywhere to reduce their exposure to falling financial asset values both on their balance sheets and held as loan collateral. And there are specific problems areas, which we can identify:
It should be noted that the phenomenal growth of OTC derivatives and regulated futures has been against a background of generally declining interest rates since the mid-eighties. That trend is now reversing, so we must expect the $600 trillion of global OTC derivatives and a further $100 trillion of futures to contract as banks reduce their derivative exposure. In the last two weeks, we have seen the consequences for the gilt market in London, warning us of other problem areas to come.
Commercial banks are over-leveraged, with notable weak spots in the Eurozone, Japan, and the UK. It will be something of a miracle if banks in these jurisdictions manage to survive contracting bank credit and derivative blow-ups. If they are not prevented, even the better capitalised American banks might not be safe.
Central banks are mandated to rescue the financial system in troubled times. However, we find that the ECB and its entire euro system of national central banks, the Bank of Japan, and the U.S. Fed are all deeply in negative equity and in no condition to underwrite the financial system in this rising interest rate environment.”
Chuck again… As Ed Steer said in his Saturday letter, Alasdair has more to say in addition to this snippet, so if you have the time, click the link above, and have at it!
Market Prices 10/17/ 2022: American Style: A$ .6247, kiwi .5601, C$ .7243, euro .9757, sterling 1.1306, Swiss .9986, European Style: rand 18.1318, krone 10.5991, SEK 11.2736, forint 429.15, zloty 4.9353, koruna 25.1788, RUB 61.95, yen 148.82, sing 1.4261, HKD 7.8499, INR 82.35, China 7.2009, peso 20.01, BRL 5.3260, BBDXY 1,345.75, Dollar Index 112.92, Oil $85.73, 10-year 3.94%, Silver $18.60, Platinum $914.00, Palladium $2,017.00, Copper $3.46, and Gold… $1,658.18
That’s it for today… I’m so excited now that I’ve finished the letter today! I’m excited because for lunch today I will be sharing notes, thoughts, ideas, with Dennis Miller, and Frank Trotter! Dennis is driving to St. Louis from Evansville Indiana, so he gets the prize for coming the furthest! This will be a very good meeting, and one that’s long overdue! It’s really cold outside this morning! YIKES! Where did Fall weather go, we’re already in winter! YUCK! I thoroughly despise cold weather… I’ve gotta go where it’s warm (Jimmy Buffett) I’m really excited about this coming weekend, as me and my oldest son, Andrew, will return to his alma mater, the U. of Missouri (Mizzou) for the homecoming football game! At least it won’t be freezing when I go this year! Elton John takes us to the finish line today with his song: Honky Cat… I hope you have a Marvelous Monday today, and will continue to Be Good To Yourself!
Chuck Butler