The Overnight Markets Buy Dollars!

September 21, 2020

* Currencies & metals rally on Friday… 

* But give back gains in the overnight markets last night… 

Good Day… And a Marvelous Monday to you! What an absolute beauty of a weekend, weather-wise these past few days…  The harsh hot weather that was still with us a week ago, has given way to days with full sun, but high temps of 72-75… I find I can sit outside to read much longer when the temps are in the 60’s!  I hosted a good crowd of neighbors on Friday, and some of us watched both games of the double header! We ordered pizza for dinner, and a good time was had by all!  On Saturday morning, I drove Kathy to the airport, and yes, she’s left me home along for the most part, once again….  Alex is here at night, but he works 10 hour days during the week, so I’ll be in a very quiet house during the days….  And… in my opinion, the great, Al Stewart greets me this morning with his song: Time Passages…

Well, when I last wrote to you, last Thursday, we had seen some very strange reactions to the Fed’s Press Conference the day before… I whined and whined about how traders didn’t see the forest for the trees, and maybe, just maybe, cause you never know, some trader, read my whining and did something about it, for on Friday all the dollar buying on Thursday was reversed…. The currencies rallied, and Gold & Silver finished the week on a good note! 

Last night when I looked at the currencies the euro had recovered back above the 1.18 handle and was looking as if it would only take a trader eating another biscuit this morning, to push it over 1.19, which has been a real bug-a-boo for the euro…. About  a month or so ago, it was trading well into the 1.19 handle, and I really thought that 1.20 was next, and then, well…  I’ve said so many times that I sound like a broken record, but I believe the PPT stepped to buy dollars…  You see, from my view in the cheap seats, I believe the Gov’t, the Fed, the Treasury, and everyone else associated with them want the dollar to be much weaker, but….. And here’s there the PPT steps in… They don’t want it just fall off a cliff, for that would scare everyone into selling their dollars….

So, in the overnight markets… The dollar bugs went back to work on buying dollars and selling everything else! The euro slipped back below 1.18, and Gold is down $18 from its close on Friday of $1,949. Silver is getting caught up in the selling too and is down 43-cents from its close on Friday of $26.82…   The price of Oil had climbed to $41.51 before getting caught up in the dollar buying last night, and has given back $1 of its gains…. I haven’t seen any rhyme or reason for the overnight markets to be in the dollar buying mood, so maybe its a case of not getting the memo from the U.S. on Friday? 

I’m so totally confused by the rally in Japanese yen…  What on earth are the buyers of that currency seeing that would tempt them to buy the currency of the most indebted country in the world, with negative interest rates, and a country that has to dodge ballistic missiles being lobbed at them from N. Korea?   But don’t get in front of this bus…. you’ll get run over, for when traders get a wild hair, you never know what will become of it!  

I read so many articles this weekend that my mind is clogged up with all those articles! So, I’ll try to recall them, but first…  I found this on Twitter this weekend, and it was a post by the National, and it said, “At the Kansas City Federal Reserve’s virtual Jackson Hole economic-policy symposium, Fed chairman Jerome Powell drove a final stake into the legendary inflation fighter Paul Volcker’s Fed. The new orthodoxy promises easy money as far as the eye can see and holds that inflation is good — not Venezuelan and Zimbabwean hyperinflation of course, just a moderate dose — thus ensuring that a dollar every year is worth less. Americans should be afraid.”

Yes, Americans should be afraid, because as I said last week, if and when the Fed gets their inflation, it will bring about a decline in the dollar, which is teetering on that decline right now. (The dollar has lost 10% of its value since April) And that will be akin to a double whammy!  The cost of things will be rising, and your dollar’s value won’t buy as much…. All at the same time… That’s going to lead to some very scary times, folks, and through it all you’ll be darn shootin’ happy if you own Gold & Silver…. I’m just saying…

I’ll tell you this straight from the Butler Patio… what the Fed is doing keeping rates at near zero for nearly two decades now, is bring about the stock market bubble, keep zombie corporations alive, which does nothing but weaken the economy, and society…. And worst of all, they have caused retired people to have to invest in the stock market, thus taking on more risk than they ever had to previously!

I can’t count on my fingers and toes the number of emails I receive each day with this guy telling me I can make 1,000% in 3 days, or this guy saying they have the absolute best stock picking algorithm, or this guy saying that they have the absolute best stock buying program, etc. etc. I find this all to be a real shame on the stock industry… Because it just draws in the folks that are on fixed income to supplement their fixed income, and all they’re going to find is that they spent money they couldn’t afford to spend….  

I shake my head when I think of the Fed, and their antics…. I really do. And I don’t understand why people aren’t screaming bloody threats from the streets in front of the Eccles Building!   The article I highlighted above is titled: “It’s Time To Rein In The Fed”….    Well, in my opinion, that would be way to late to take place, because the damage to the economy is done, like a Turkey!  The only way we’re going to get out of this mess of currency printing, zero interest rates, and debt accumulation is to default on our debt….   Now that’s something that’s not discussed at the Eccles Building or the White House or even at the NY Fed…. But somebody must be running proformas on what they would entail and end up looking like…. And when that day comes…

You’ll wake up like you normally do, and take your shower, shave, or what have you, and while you’re getting dressed you notice that your phone is lighting up, with text after text from people that are wondering what they should do, now that the U.S. had defaulted on their debt…. Your heart will sink, and then you turn on the TV and see that Gold has gapped higher by $200, and that’s when it will hit you, that you never got around to buying Gold…. And they tell you on the TV , good luck trying to get some Gold….. 

Don’t let this be you!   Remember the old commercial, of a frying pan with hot grease, and an egg gets cracked, and they say, This your brain (the egg) and this is your brain on drugs, as they drop the egg into the frying pan….   That’s what You’ll feel like if….  You haven’t bought at least 20% of your investment portfolio’s value in Gold…. (Silver)   

I used to believe that everyone wanted inflation to run higher because they thought that it would help bring down the price of the debt….  But now that our debt to GDP is 117%,  I don’t know how high the inflation rate would need to be to help this amount of debt, but I can tell you that it would an inflation rate north of 10%….

OK, before I go on, the previous was a dramatization and in no way was it real….  It was just Chuck thinking of what things might look like in the future… 

Do you remember what it was like in the 70’s when inflation was 13% and higher? And that was for a relatively short time, given time and history… I do…. I also remember the Oil embargo, and either getting up a 4 in the morning (I didn’t write back then) to find a gas station that I wouldn’t have to wait an hour in line to get a fill up…. I do believe that we have seen the best of times for the shale oil producers folks, they’re falling like the leaves right now, and our once very proud Oil Independence could come to and end… I hope not…. But it could happen again….   In my retired state, I’m currently getting about 4 weeks to a gallon of gas…  but it still won’t be a good thing…. I’m just saying… 

Good friend, Dennis Miller, sent me an email with some numbers on what it takes to make up for the the low interest rates in the U.S.   So take it away Dennis the floor is all yours! “When I retired in 2005, interest rates were 6%.  $2.5 million put you in the top 1% of the world.  Buy 6% CDs and they would garner $150,000 in income.  At today’s rates it would earn $12,500.

Looking at the five year CD’s and treasuries….

For someone in the private sector to fund a $150,000 guaranteed income in CD’s, they would need to accumulate $30 million

To do so with treasuries, paying .29%, they would need $51,724,125.”

OMG!  I don’t think I had ever thought about it like that! Thank you Dennis for sharing that info and data with us! 

OK…. I know that I’m beginning to sound like the grim reaper…. But things are what they are folks…. And  me and a few others out there, are the only people you’ll hear about this stuff from….  

The U.S. Data Cupboard last week had the Weekly Initial Jobless Claims for the previous week, and while there are some that will celebrate that an 860,000 claims filed, was a number below 1 Million for the 3rd week in a row, these knuckleheads fail to realize that 860,000 is still twice the size of the previous (to the pandemic) high print for Claims…. And you know me, I look at other things too, besides the weekly number of claims….  For instance the Continuing Claims moved higher again to 29.76 Million, so for rounding we’ll call it 30 Million continuing to receive unemployment checks, which means they are unemployed!

These Unemployment numbers print every week, and every week they get ignored by the Robinhood crowd, and the stock jockeys….  And Consumer Confidence folks… Who continue to amaze me….

The Data Cupboard this week is chock-full-o- Fed Head speeches… There are so many of these Fed Heads on the speaking circuit this week, that there’s more than I care to mention each one!  So, just take my word on that, there are a lot of Fed Head speeches this week!  And it won’t be until Friday that we get a real piece of economic data, when Durable Goods and Capital Goods Orders print for August…

To recap… The currencies and metals rebounded on Friday, but have given back most of those gains in the overnight and early morning trading today… Chuck can’t find a rhyme or reason why the overnight markets were buying dollars, but that doesn’t mean it didn’t happen! Chuck goes on a long tirade about the Fed…. And the Continuing Unemployment Claims moved higher last week again to now be within’ spittin’ distance of 30 Million! 

For What It’s Worth….  Well, like I said above, I read many articles this past weekend, and in the end, I settled on this one from, about the JP Morgan metals trader who was on trial for manipulating the Gold & Silver markets, and it can be found here: 

Or here’s your snippet: “Two years after former HSBC head of currency trading, Mark Johnson, because the first person to be convicted in a global crackdown of currency rigging and was sentenced to two years in a U.S. prison, moments ago a former JPMorgan trader became the second person to be sentenced to eight months in prison for his role in a foreign-exchange bid-rigging scheme.

Bloomberg reports that Akshay Aiyer was sentenced Wednesday by Manhattan District Judge John Koeltl. Last November, Aiyer was found guilty of conspiring with traders at other banks in chat rooms, on telephone calls and at social gatherings to coordinate bids and fix prices of African, European and Middle Eastern currencies while leading customers to believe they were competing with each other.

In 2017, Johnson was convicted of front-running a $3.5 billion client order, but as Bloomberg reminds us, a U.K. court declined to extradite Johnson’s underling, Stuart Scott, and three British traders accused of similar conduct were acquitted by a jury in New York in 2018. U.K. investigators dropped a criminal probe into individual traders after determining they didn’t have enough evidence.

Even though Aiyer’s sentence was lower than that sought by prosecutors, the conviction was a victory for the government, which has a mixed record of prosecuting foreign-exchange traders. In addition to the prison term, Aiyer was also sentenced to two years of supervised release and a $150,000 fine.”

Chuck again….  And once again I’ll say this to all those that tried to tell me years ago that the Gold price wasn’t manipulated… Neener, neener, neener!  I read about another case that’s going on where the defendant said he learned to manipulate Gold prices from his bosses… Seems this guy is willing to spill the beans and take down everyone else with him…. 

Market  Prices 9/21/20: American Style: A$ .7262, kiwi .6707, C$ .7555, euro 1.1792, sterling 1.2860, Swiss $1.0958, European Style: rand 16.6702, krone 9.2280,  SEK 8.8230,  forint 307.40,  zloty 3.7983,  koruna 22.8698, RUB 75.66, yen 104.10, sing 1.3585, HKD 7.7498, INR 73.50, China 6.7680, peso 21.43,  BRL 5.3895,  Dollar Index 93.29,  Oil $40.48,  10-year .66%, Silver $26.39, Platinum $922.00, Palladium $2,354.00, and Gold… $1,931.80

That’s it for today…  My beloved Cardinals took 4 of 5 from the Pirates, with all the games being nail biters!  I have my Mizzou flag flying in anticipation of their opening game this Saturday VS Alabama!  Hey, don’t write off the Tigers… Stranger things have happened in college football! I think I’ll have a tailgate in my driveway for the Tigers on Saturday night! I have a new picture for my wall… My sister, sent me a picture of my dad at probably 16 years old… Man, the resemblance of him and me when I was 16 is eerie….  All I can say is that it makes me feel good, to know that I look like my dad! OK… Come on Cardinals beat those Royals!  And with that, the Animals take us to the finish line today with their song: We Gotta Get Out Of This Place….  I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler