The Needle Finally Gets Lifted From The Broken Record!

September 28, 2023

* currencies & metals rally in the overnight markets

* Should I wear my Mizzou or Clemson sweatshirt to work today? 

Good Day… And a Tub Thumpin’ Thursday to one and all!  Well, that good clutch hitting, good defense, and strong pitching didn’t last but one game for my beloved Cardinals, who started what looked like a Spring Training lineup last night, and lost…  Oh well, the season is over for them anyway, I just like seeing them spoil the run to the playoffs for the other teams… Good friend, Duane, repaired the gate to our fence that surrounds the pool, yesterday… Dewey, was a tool and die engineer, and the job isn’t finished until it’s done perferctly…  So, now I don’t have to deal with a bad gate any more! Procol Harum greets me this morning with their mega hit song: Whiter Shade of Pale… 
The Broken record is now stuck on song 3… The dollar continued to be bought yesterday, and when the dust settled on the day, the BBDXY had gained 4 index points. The euro was hanging by the skin of its teeth to the 1.05 handle when the day ended, and the rest of the currencies are looking very sickly…  The dollar is a runaway train, and Ol’ Charley stole the handle, and the train, it won’t stop, no way to slow it down… (Jethro Tull) And Gold? Well, after taking Gold below its 200-day moving avg, the short paper traders decided to take more than a slab of Gold flesh… had an article that started: Gold gets hammered by high bond yields, and strong dollar….  I thought they forgot something, … And the short paper traders! 
Yes, I believe that the higher bond yields, and the strong dollar could be playing hell with Gold, but not to tune of a $25.40 that Gold suffered yesterday… That extra push of Gold downward came curtesy of the short paper traders… Silver too was sold short, and lost 31-cents… Gold ended the day at $1,876.00, and Silver at $22.63… 
Did you hear that Costco is selling Gold bars, and they report that they can’t keep them in stock, that the Gold bars are selling out every time they restock?   I wonder why that is? Because normal people that shop at Costco, see what’s going on in the world and want to retain something when it all comes crashing down!  That why! 
Bonds got sold yesterday again and the yield on the 10-year treasury rose to 4.60%… And the price of Oil added $2 to its price and ended the day trading with a $94 handle. 
And speaking of Oil… this was in today’s “The US oil benchmark briefly surged to $95 a barrel as dwindling stockpiles at a key storage hub fanned fears about falling crude supplies globally.”  
You know, I just don’t get it… The country is being buried under mountains of debt, and the cost of financing that debt is rising all the time, and the future looks bleak, but traders are just ignoring all this, and buying dollars by the truck load…   Oh, well, when it all come crashing down, you won’t be able to say that I didn’t warn you… And if you thought that the prices in Gold were cheap last week, this weeks’ prices are ever cheaper!  
In the overnight markets last night…  Well, someone finally took the needle off the broken record! The dollar got sold in the overnight markets, and the BBDXY has lost 4 index points to start today. Gold is not down this morning… It’s not up much, a buck at most, but it’s not down! Silver is up 19-cents to start the day, and for the first time in two weeks, you can feel that things have changed… But then that’s just a feeling, and the reality is this…  The dollar bugs have control of the direction of the dollar, and they are not going to relinquish that control any time soon! 
I had a dear reader ask me once, why I call dollar holders, dollar bugs…  I responded as: “Well, they always call us Gold lovers, Gold Bugs, so I just reverse it and call them Dollar Bugs..” 
I have to think that the overnight markets finally came to the realization that we only have two more days of normality in the U.S.  The financial year comes to an end 9/30… And on Rocktober 1st, the Gov’t could shutdown because they don’t have a spending accord… Here’s USA Today with their thought on this: “Congress has two days to cut a deal and prevent a government shutdown that would impact millions of Americans. While it wouldn’t be as far reaching as the debt ceiling threat in late May, a shutdown would deeply impact those who need the most help: newborns who rely on WIC for infant formula, children who need nutrition assistance, low-income families who rely on Head Start programs for preschool, college students who receive federal grants to pay for their education, people who receive food stamps and more.”
I just keep reading reports like this one and wonder when the walls begin to crumble…  new home sales hit a wall in August, crashing 8.7% MoM – the biggest drop since Sept 2022 (and four times worse than the -2.2% MoM expected) …  Yes, even the medium price of a house dropped to 430,000…  But that didn’t help new home sales, because mortgage rates are too high for them to buy at those levels…  2008, is still in the rear-view mirror… I’m just saying… 
Good friend, Dennis Miller, sent me a note yesterday, and it was a quote from Abe Lincoln… yes, honest Abe… And it the quote Lincoln talked about how he feared for his country because of the powers of the country would become corrupt, and work until all the wealth of the country is in a few hands and ruin the republic….  Dennis asked me if this was a case of history repeating itself?   I thought for a minute, and then said to myself, this has already happened, our republic turned into an Empire, and now the Empire is crumbling, just like all previous Empires in the history of the World…  So, yes, the answer to the question! 
And in a sign of the times… And this has nothing to do with markets, so if you’re not interested skip ahead… But this from the Senate floor, have recently announced that there are no longer any requirements regarding attire. The business look that has dominated the scene since inception is out – hoodies, sweatshirts, and those controversial calf showing shorts – are now permissible in the US capitol. 
Now, you know me, and I love traditions, right? OK, a dressed-up legislature is something that goes back to the Roman Empire, where the emperor was the sole person to show off a purple toga, while senators could wear a white toga with a broad purple stripe along the edge, a distinctive badge of the senatorial order called the latus clavus.   (info from the Classic Wisdom site) 
Where will this lead us? Only the shadow knows, folks… But in my eye, I see chaos… 
The U.S. Data Cupboard yesterday had the August Durable Goods Orders, which surprised everyone by not being negative once again, and instead grew .2%…  That’s not a lot, folks, but it’s not negative and that’s saying something in this day and age… 
Today’s Data Cupboard has the usual Weekly Initial Jobless Claims, a revision of 2nd QTR GDP… Hmm, you have to wonder what kind a hedonic adjustment will be made after all this time that they’ve had to adjust the GDP?
To recap… The dollar continued to get bought all day yesterday, and the broken record is now stuck on song 3… But in the overnight markets last night, someone finally took the needle off the broken record, and the dollar got sold… There are a lot of thoughts to why this began to happen last night, only time will tell…  Senators can now show up for work in shorts an tees… And people wonder what happened to our country?  Gold got hammered yesterday, and got taken below its 200-day moving avg.  Does that signal an end to the short Gold Paper Trading?  
For What It’s Worth… This is an interesting article on zero hedge that talks about credit cards losses… Is this the beginning of the end?  it can be read here: Credit Card Losses Are Surging At The Fastest Pace Since The Global Financial Crisis | ZeroHedge
Or, here’s your snippet: ” One month ago we warned that the toxic cocktail of Volcker-esque rates which have pushed the average credit card APR to a nose bleeding 21%…

… and surging credit card balances would lead to a catastrophic surge in consumer (and corporate) defaults (see “Credit Card Balances Hit Record Above $1 Trillion, Suffer “Pronounced Worsening” Amid Surge In New Delinquencies”) it is now Goldman’s turn.
As Goldman analyst Ryan Nash writes in his latest note, after bottoming in September 2021, credit card losses have risen for the past 24 months. While the initial increases were likely reversals from stimulus, “since 1Q22 outside of the GFC losses are rising at their fastest pace in almost 30 years.” Nash is concerned because “it is unusual for losses to rise outside of an economic downturn. In fact, of the prior five credit card loss cycles, three were characterized by recessions (early 90s, early 2000s and the great recession of 2008), while only two cycles (mid 90s and ’15 to ’19) the economy was not in a recession.”
Given this backdrop, Ryan’s did a deep dive comparing this cycle to the two prior non-recession credit loss increase / normalization cycles – 1) the mid-90s cycle and 2) the prior credit cycle (2015-2019) to asses where losses could be headed over the course of this cycle and the timing of it.

Losses currently stand at 3.63% (up ~150bps from the bottom) and based on Goldman’s analysis, the losses will rise at least another ~130ps from current levels (to ~4.93%), implying we are roughly halfway through the credit loss increase cycle. He also thinks delinquencies could continue to underperform seasonality through the middle of next year and don’t see losses peaking until late 2024 / early 2025 for most issuers. Relative to expectations, Goldman sees losses rising the most at COF, followed by DFS, which is hardly surprising following the credit card company’s own charge-off rate forecast .”

Chuck again… credit cards is how the economy is functioning these days, as consumers use them over and over again, building balances that can’t be paid off at month-end, and carried forward with these outrageous interest rates… This only has a chance to end in tears… 
Market Price 9/28/ 2023: American Style: A$ .6391, kiwi .5955, C$ .7413, euro 1.0546, sterling 1.2205, Swiss $1.0888, European Style: rand 19.1358, krone 10.7338, SEK 11.0191, forint 372.61, zloty 4.3955, koruna 23.1169, RUB 96.93, yen 149.30, sing 1.3692, HKD 7.8270, INR 83.19, China 7.3056, peso 17.64, BRL 5.0450, BBDXY 1,267.84, Dollar Index 106.28, OIl $93.29, 10-year 4.64%, Silver $22.81, Platinum $896.00, Palladium $1,232.00, Copper $3.66, and Gold… $1,876.70
That’s it for today and this week of course… The end of the regular season in baseball, will take place this coming weekend… UGH!  IF your a new reader this letter, you are bound to have figured out that I LOVE BASEBALL!  I do thoroughly enjoy all sports, but baseball is number 1 with me… Well, my time alone at home will come to an end on Saturday… Saturday night, I’ll be going to the StL City game at City Park… They only have two home games left… And I have tickets to both of them! StL! StL!  The last Super Moon of 2023 will take place this coming weekend, it will be the Harvest Moon… I love it when I’m at my place in S. Florida that looks out at the ocean, and the full moon comes up out of the ocean as an big orange ball… But I’m not there now, so I’ll have to search the sky here… The Who take us to the finish line today with their song: Behind Blue Eyes…  I hope you have a Tub Thumpin’ Thursday today, and will Be Good To Yourself!
Chuck Butler