The Fed Tests Its Digital Currency…

November 7, 2022

* Currencies & metals have strong rallies on Friday

* The Bank of England tries to play catch up with Inflation… 

Good Day… And a Marvelous Monday to you! And Congratulations to the Houston Astros for winning baseball’s World Series, hopefully without cheating this time. I rooted for the National League team, the Phillies, because they were from the National League, but called the Astros as the winner before the Series started, based on what I had seen so far. My beloved Mizzou Tigers got “Mizzoued” again last Saturday… And lost to their kryptonite foe, Kentucky, yet again. It was a beautiful weekend here in the MidWest, and on Saturday, we sang Happy Birthday to my darling second daughter, Rachel… Then we brought Braden and Evie home with us, and I woke up yesterday to the sound of little feet running down the hallway… I love that sound! Well, I turned on my fave station for the rest of the year… Pandora’s Smooth Jazz Christmas on Saturday, and this morning I’m greeted by Beegie Adair, and her instrumental version of the song: Winter Romance…  Dean Martin sang that song the first time I heard it, and loved it!

Well, how about that day for Gold last Friday?  Gold hot higher and ended the day up $52.10 and closed the week at $1,683.70… Silver was not to be outdone, by Gold, and it outperformed Gold, on a percentage basis, as it is wont to do when the two rally like that. Silver ended the week up $1.39, at $20.95!  The dollar got sold, like I have rarely seen it get sold for one day, on Friday, with the BBDXY losing 23 index points from Thursday morning’s 1,344…   The Currencies were up VS the dollar, as the BBDXY indicated, but there were no major movers, all the currencies just rallied a bit, and combined to beat up on the dollar for once.  The price of Oil squirted higher by $4 to end the week with a $92 handle…Bonds saw a slight increase of the 10-year’s yield, to 4.15%, to end the week

So, to me, watching this dollar selloff had me thinking that it was a case of one major seller, begetting another major seller, and then before you knew it the dollar was in a free fall… So, I think that Gold benefitted from this dollar selling, but to me, it also appeared to be a lot of short covering…  But when Gold moves $52 in one day, there has to be a combination of things moving it…

So, do you think it took a couple of days for the Fed’s Jerome Powell’s message on “I don’t think this is any time to pause” message? That’s what it looked like to me, but there could also have been a major reaction to the Jobs jamboree number… If hiring is still strong, then that fuels the Fed Heads push to hike rates further, and that probably scared the bejeebers out of the naysayers… And since it is a “given” that the Fed Heads rate hikes are going to bring the economy to ground zero, that’s probably what got the dollar sold to begin with.

Speaking of the Jobs Jamboree, I found this to be quite amazing…The BLS said that there were 261,000 jobs created in Rocktober… A quick look at the Fed’s site to get their Birth/ Death additions, and I was flabbergasted to see that in Rocktober the BLS added 455,000 jobs to the surveys… Wait, What? Yes, that’s right 455,000 jobs were created out of thin air, so therefore the surveys showed a different result, and it would have been a negative – 194,000… So, for once, I was glad that the markets didn’t look under the Fed’s hood, and see that addition…

In The overnight markets last night… Well, at first, the rhetoric going around the markets was that Traders were taking back their bets of a huge China opening… but then things turned around and the dollar selling continued, with the BBDXY losing 2 more index points overnight, and the euro nearing parity with the dollar. Gold, however is not gaining in the early trading today, and is down $5 to start the day, while Silver is down 26-cents… Certainly not the kind of sell offs that can’t be turned around, so we can only hope that happens today. I really don’t believe that we’ll see much movement in the markets the next couple of days, as the mid term elections in the U.S. are tomorrow, and then it’ll take a day to sort out the madness, and chaos of elections outcomes. I don’t know what to expect in these elections, so I won’t offer a guess, but if I were voting for every American, I would be voting for change… Get the news buffoons in, and see if they can do any better than the previous buffoons…  That’s my take, and I’m sticking to it!

The Price of Oil slipped a bit, and then rebounded to remain trading with a $92 handle this morning. Our friends (NOT!) at OPEC, are happier, now that the price of Oil has reach the $90 handle, as that is what their goal was for Texas Tea, when they cut their production levels. I see Oil as something that is needed every day by everyone, and therefore, the demand is great, while the supplies are diminishing, with the OPEC production cuts, and the loss of Oil rigs here the U.S. producing Oil. So, where does that lead the price of Oil to? Well, without intervention, I would suspect it returns to plus $100…  But, that caveat that it trades without intervention is just wishin’, and hopin’ and prayin’ that it will happen… I’m just saying…

Under the heading of “you can’t make this stuff up”… I read yesterday that “Majority of Americans back new stimulus checks to combat inflation”… Really? Are you kidding me? I have a dear reader that always replies to the Pfennig, reminding me that “you can’t fix stupid”…   I agree 100%, and this is living proof! The Gov’t deficit spending is what got us in this inflation mess to begin with, and now you want them to create more inflation so you get a stimmy check?  OMG! I can’t believe this is happening…  If only these “majority of Americans” were required to read the Pfennig! They would know that money supply equals inflation, and to get a stimmy check you have to increase money supply… I say no more…

Well… in keeping you up to date with the call that I made two years ago, that the U.S. Gov’t will issue a digital currency, and your dollars will be replaced with digits… There was a report that I read, that can be found here:  

And in this article it explains that “An office within the Federal Reserve Bank of New York has completed a test of a central bank digital currency for wholesale, cross-border transactions, exchanging a U.S. digital dollar with experimental foreign currencies on separate blockchains.

The experiment known as Project Cedar: Phase One focused on the potential for central bank digital currencies to become viable options for large foreign currency transactions, though Federal Reserve Chair Jerome Powell and other board members of the U.S. central bank have made clear that the creation of a digital dollar is not a foregone conclusion.”

Chuck again… She’ll be coming around the mountain when she comes… And she’ll be spending digits! The Gov’t will know everything that you spend digits for, and they will be able to automatically deduct digits from your account if you fails to spend enough of them.. .And Bank fees?  They’ll be coming through like a hot knife through butter… And you won’t be able to do a darn thing about it!   Got Gold?

Sure, they’ll tell us that this is just for Gov’t spending, and then cross their fingers behind their backs!  Baby steps… Let’s just say that there are 5 steps to the next floor, and right now the Gov’t has moved up to the second step.. I’m just saying.

Oh, I almost forgot this… I have no idea why I just remembered it but, I did, so here goes… Some of the dollar’s problems on Friday came from rumors that China is going to open back up… China’s economy has been shut down for some time now with their ‘zero Covid” policy, but when it does open back up, it will be going like gangbusters to play catch up, and that knocked some the stuffing out of the dollar on Friday.

OK, this is something I rarely do…. I’m going to relay to you a note I received in the Pfennig Replies box last Friday… I think this person makes some real good points here…. I sure hope it’s not as dire as it appears though, for all of our sakes!  Here goes…

“I cannot find any hope no matter where I look. Everything is fake, overmanipulated, or lied about. And no one really cares. Everyone is describing the water while we are about to drown. Pick a subject, inflation, wealth disparity, plain ass lying elected misfits, fake fed counterfeiting, possible fake fed crypto planning, gazillions of bad bet derivatives, fuel supplies gone, Russia talking nukes, North and South Korea daring each other with missiles, everything happening at the same time.

I got a real bad feeling this is about to hit the fan big time. The majority really do not give a shit. They are all atwitter about the bullshit on social media instead. No one is taking any steps to solve even one of the problems. Unfortunately, it has to collapse first, everyone saying it was a black swan that no one could see coming, and more extend and pretend occurs. Until.

And if you expect any candidate elected after the election is going to even address the real problems, there is a certain bridge for sale again.”

Chuck again, now… if only traders would take this point of view… We could get to busting bubbles all over the place, and it wouldn’t take long.

I came across a website this past weekend that was titled: Stop Spending Money On The 4 Stupid Things…  #3. Was stop paying your Credit Card debt in monthly increments… I call that stating the obvious!

The U.S. Data Cupboard last Friday, had the aforementioned Jobs Jamboree… So nothing else to talk about there…  And this week’s data agenda, doesn’t really have anything to write home about until Thursday, when the stupid CPI for Rocktober is printed, of course after it has been massaged, basted and cooked…

To recap… The dollar got sold for a number of reasons on Friday, but when it all added up, the dollar went into a free fall! The BBDXY lost 23 index points, and Gold gained $52! China is rumored to be ready to open their economy again, the Jobs report was strong, that is if you take it on face value and don’t look under the hood. And there was a ton of short sells being bought back/ covered in Gold & Silver… and Chuck wants to know what the “majority of Americans” were taught in school?  

For What It’s Worth… OK, longtime readers know that I have a good relationship with my friend, Dennis Miller… Well, Dennis included my thoughts on his latest letter that came out last week, and can be found here: My Dad Was Dumb Like a Fox! – Miller on the Money

Or, here’s your snippet: “DENNIS: We read about people getting clobbered in the bond market. I continually remind readers that we are NOT bond traders.

Any bond you buy should be held until maturity. While interest rates fluctuate, when they mature, you will get your money back. The real threat is inflation, you can lose a lot of buying power along the way.

What is happening to those who bought trillions in bonds yielding 1-2%? I know you’ve mentioned that certain pensions, etc., were required to hold a certain amount in bonds.

CHUCK: Well, this is a two-pronged answer. First, let me explain that there are institutions that must buy Treasuries, no matter what the current yield is.

Pensions, Insurance Companies, State and City Gov’ts. They have investment mandates that require them to own only Treasuries… So, these folks are now holding some underwater bonds, meaning they could not currently resell them without taking a big loss. They are the “Big Boys” and can deal with losses much better than you and I.

Speculators who thought the Fed was going to pivot and begin to cut rates are looking at red ink in their bond holdings right now. That red ink will continue as long as they hold the bond.

If they sell before maturity, they will take a loss. If they hold on to maturity they will get their principal back, but the interest they receive will be well below the current market rates. They hope the Fed will panic and cut rates radically so they can resell the bonds for a profit, but that is a real gamble. It’s not a situation that I would want to be in.”

Chuck Again… yes, we talk about bonds, and when they should be bought, etc. so take a look at this letter of Dennis’ and then subscribe if you don’t already, it’s free, and he writes once a week, so it won’t fill up your email box every day, like someone else I know… HA!

Market Prices 11/7/ 2022: American Style: A$ .6263, kiwi .5920, C$ .7418, euro .9978, sterling 1.1444, Swiss $1.0102, European Style: rand 17.8405, krone 10.2508, SEK 10.8458, forint 401.23, zloty 4.6966, koruna 24.3905, RUB 61.02, yen 146.67, sing 1.4035, INR 81.91, China 7.2284, peso 19.48, BRL 5.0815, BBDXY 1,319.59, Dollar Index 110.52, Oil $92.16, 10-year 4.13%, Silver $20.69, Platinum $965.00, Palladium $1,865, Copper $3.55, and Gold… $1,677.73

That’s it for today… Oh! I almost forgot to add this morning that the Bank of England (BOE) hiked rates 75 Basis Points last Thursday!  Playing catch up with inflation is hell, isn’t it BOE?  OK, now onto the finish… Little Evie was a treat yesterday, she came downstairs with me, and talked to me for 20 minutes straight, and I only understood about ½ of what she was talking about, but… she was so darn cute doing it! Braden had said on Sat. night that he wanted to go to Wally’s Sunday morning, so I got ready to go, and he was online playing a game with one of his friends, and I guess he forgot about going to Wally’s!  Oh well…  I just finished reading a book that was different than my usual reading material… It’s a book about Clint Hill, Special Services Agent that served under 5 presidents!  The chaos of the Nixon Administration, brought back so many memories of that time… Steve Oliver and his acoustic guitar is playing God Rest Ye Merry Gentlemen as we head to the finish line today…  I hope you have a Marvelous Monday today, and please…. Be Good To Yourself

Chuck Butler