The Selling Of Bonds Continues…

August 17, 2023

* currencies & metals get sold on Wednesday

* But rally in the overnight session… 

Good Day… And a Tub Thumpin’ Thursday to one and all! While I AM a bit better this week, I’m going to have to beg off celebrating a Tub Thumpin’ Thursday today, as I’m stil not ready for prime time!  But having said that… why wallow in the mud, and complain? I’ll just take my lumps and move on, as that’s what I’ve done for over 16 years now…  Speaking of the last 16 years, I had my 50th scan yesterday… This time without the contrasting dye, that caused my anaphylaxis shock last December… So, it was in-and-out in a NY minute yesterday morning… So I had that going for me, eh? MY beloved Cardinals couldn’t seal the deal of a sweep last night, and lost to the A’s, but winning 2 of 3, and now the pond scum come to St. Louis… I kind when I say that, as in the 80’s the Cardinals and Mets were in the same division and had a heated rivalry… So, I’m not being mean with that statement, it’s just a throwback to the 80’s…  Jackson  Browne greets me this morning with his song; Doctor My Eyes… 
The Fed Heads threw a Cat among the pigeons yesterday, when their meeting minutes printed, and stated that the Fed Hea saw significant inflation risk, that merits more hikes… Boy did that light up the day for dollar traders, who then went about marking up dollars, and seeing them bought like funnel cakes at a State Fair… The BBDXY gained 5 index point on the day, and the euro lost another cent, and now trades with a 1.08 handle… Yes, it wasn’t that long ago that the BBDXY was trading at 1,220, and the ruo was at 1.10 heading higher… And then it wasn’t…  
Gold took one to the chin yesterday, and got knocked out! Gold lost $10 on the day to close below $1,900, closing at $1,892… Silver lost 14-cents, so the damage there was not as strong… I love it when Ed Steers calls the short paper trading as “slicing the salami”… They take a little off the roll of salami… a little bit at a time, but they keep coming back and taking more… i already sent all those responsible for the slicing of the salami, to the woodshed earlier this week, so apparently, they didn’t learn anything from their trip there!  
The price of Oil has slipped again by $2 yesterday, and ended the day ttrading with a $79 handle… Inventories are low, but when the powers that be want to take down an asset, there’s no stopping them … And Bonds just keep getting sold folks… The 10-year’s yield ended yesterday at 4.28%… Like i said yesterday, you can’t say I didn’t warn you about this selloff, just based on all the new bonds coming to the market, and no one to buy them… 
In the overnight markets last night… some saneness has returned to traders as they sold dollars overnight. The BBDXY starts today down 3 index points from yesterday’s close.. The euro remains below $1,900, but just barely… The surprise currency rally this week has been the Russian ruble. After hiking rates 350 Basis Points earlier this week, the ruble has responded in a good way, and trades this morning with a 93 handle, after going over 100 late last week… Gold is up $7 in the early trading today, and Silver has added 38-cents… The question for the day is whether the salami slicers decide to take Gold’s gains and slice them up, or will they sit on the sidelines today, and watch Gold gain some ground?   Make your bets…  All ready? Then roll the dice!  
The price of Oil has steadied with an $80 handle this morning… And there was no movement in bonds overnight, so the 10-year is still trading with a 4.28% yield this morning… Where is the yield on the 10-year going to stop rising? I have a thought on that, that I’ll share with you next week… See, if I learned one thing in the show business it is to “leave the crowd wanting”…   HA!   
Well, some of you longtime readers will recall me making a big deal out of the start up of the Shanghai Gold Exchange, because they would not allow short paper trades… I thought, that this would allow Gold to reach its true price level without interference… But that didn’t happen… I often wonder why, but it is what it is… 

But now we have a situation where the Gold spot price in China is $40 higher than it is in London… Here’s with the report: “China’s gold price is rising against levels in London, a trend that local traders say is due to government curbs on imports of the precious metal.

The Shanghai spot price was more than $40 an ounce higher than that in London on Aug. 14, according to Bloomberg calculations based on exchange data. That’s the biggest premium in more than five months, with the gap steadily widening from late June even as consumer demand in China remained sluggish.

Authorities moving to limit gold imports appears to be a major driver behind the growing gap, according to traders and importers.”

Chuck again… I doubt this is the breakout that I expected years ago in China, but more of a short-term phenomenon… 
News from down under the other day, the Reserve Bank of New Zealand (RBNZ) left their Official Cash Rate at 5.5% Tuesday… They want to see the effects of their climb in interest rates have had on the economy, before undertaking any additional moves… Kiwi didn’t move on the news, which is a good sign…  As the recent downward move in kiwi had come from traders who speculated that the RBNZ would pivot at this meeting…  The question now, is whether these same traders double down, or leave with their collective tails between their legs?  
I can’t save this for the Data Cupboard roundup… The NY Empire Manufacturing Index printed for this month yesterday, and it came in at -19… That’s a negative 19! For those of you new to class… The Empire Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, and below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state… So, if any number below 0 is bad, then negative 19 is real bad!  I would think that this regional report will lead the rest of the regionals down the same path… I’m just saying… 
But the dollar shrugged off the Empire data, and went with the Fed’s Meeting Minutes, comment about the need for additional rate hikes… That’s just crazy folks… yes interest rates may be going higher, but from the raging economy? No, more like raging inflation… no matter what the stupid CPI says… We all know in our heart of hearts that inflation is running higher than what the stupid CPI says… has inflation running at 12% when compared to 1980’s formulas that were done before all the hedonic adjustments that are allowed now in computing inflation… So… do the math folks… we still have negative interest rates in the U.S. And… Treasuries are also paying negative yields…  So, put that in your pipe and smoke it Janet Yellen!  And dollar traders that keep buying the lie that the U.S. economy is strong and vibrant… 

The U.S. Data Cupboard yesterday, had the July Retail Sales, and they, like the BHI indicated were strong… Thus showing that the U.S. consumer still has room on their credit cards to keep spending… I pulled this from “July’s numbers were boosted by a 1.9% jump in spending at online retailers, while sporting goods and related stores increased 1.5% and food service and drinking places rose 1.4%.

On the downside, furniture sales slumped 1.8% and electronics and appliance stores reported a 1.3% drop.”

Chuck again… Well, here we go again… with traders taking the viewpoint that this report proves that the U.S. consumer will be able to withstand a recession… I say, balderdash!  We’ll just see how far all these conumers with less than $5,300 in savings comes out… I think it will be in tears… but we’ll just have to wait-n-see, eh? 
To recap… The dollar got bought hand over fist yesterday, after the FOMC Meeting Minutes from their last meeting where they hiked rates 25 Basis Points, said that they are seeing “significant inflation signs” and my merit more rate hikes… That got the dollar bugs are fired up… of course Chuck tells us that they really don’t have anything to be lathered up about, but don’t tell them when they’re on a roll that is over… It wasn’t over when the Germans bombed Pearl Harbor was it?   (ok that’s from Animal House , and its a shame that I have to explain that for in the past, I’ve had people write me and tell me how wrong I was that it was the Japanese that bombed Pearl Harbor!
For What It’s Worth… I’ve been to the cinema to watch 1 movie in the last 10 years, and that movie was: The Big Short… I loved the movie because it was about Michael Burry that shorted the housing market, and made out like a bandit when the housing market collapsed. I loved it because I was on top of that whole collapse, having warned of a Housing Bubble in 2003, 4 years before it collapsed. So, this article is about how Michael Burry is now shorting the stock market…  Warning signals are going off all over the world, on this news, so take it with as many grains of salt that you wish…  And it can be found here; Infamous “Big Short” Burry – Places $1.6b Bet US Market about to Tank | Ainslie Bullion

Or, here’s your snippet: “ Chances are, we’re all familiar with “The Big Short,” whether through the film or the book.

Similarly, most of us are likely familiar with Michael Burry, the finance genius who made a bold move by betting against the US housing market by persuading investment banks to provide him with credit default swaps linked to risky subprime mortgages.
Now, he’s back in the spotlight, this time targeting the US equity market.
According to recent documents filed with the SEC (Securities and Exchange Commission), Burry has actively taken on put options involving two ETFs that mirror the performance of the S&P 500 and the Nasdaq 100. The combined value of these options adds up to an impressive $1.6 billion.
The question of whether Burry’s actions are a “BIG SHORT” or a “BIG HEDGE” is up for interpretation. However, the central theme remains the same: he’s placing a bet against the current state of the market.
Burry is known as a value investor, someone who excels at spotting overpriced stocks and sectors and then making short trades to capitalize on their decline.
Interestingly, Burry’s talent for short-selling actually precedes his well-known bet against the subprime market in the US.
As author Michael Lewis recounts in “The Big Short”:
“Back in 2001, while the S&P 500 dropped by 11.88%, Scion, under Burry’s guidance, surged by 55%. The following year, as the S&P 500 fell again, this time by 22.1%, Scion once more outperformed with a 16% increase. In 2003, despite the stock market’s recovery with a 28.69% rise, Burry still managed a remarkable 50% return. By the end of 2004, his assets under management had reached a hefty $600 million, and he was even forced to turn down additional investments.”
Then came his most impressive achievement – Burry’s calculated bet against the US housing market resulted in a personal profit of around $100 million and hefty returns of $700 million for his investors.
However, perfection wasn’t always on his side. While the exact timing of his short positions being exercised remains uncertain, he boldly announced in 2022 that he had taken substantial short positions in anticipation of an impending drop in earnings. As history has shown, that thesis has not quite panned out yet.
As disclosed in a 13F filing with the U.S. Securities and Exchange Commission, Burry acquired put options worth $890 million for SPDR S&P 500 ETF and $740 million for INVESCO QQQ ETF.
Twitter reacted with amazement, labeling this move a $1.6 billion short.
Irrespective of the specifics, Burry’s evident concern about the market is palpable, and his actions echo that sentiment. If his foresight proves accurate once again, we might find ourselves witnessing another debilitating economic crisis.”
Chuck again… While I’m no stock jockey, don’t play one on TV, or stayed at a Holiday Inn last night, I think it would behoove all to at least make sure your “stop losses” are up to date…  And that’s all I can say about stocks, otherwise, the gestapo will take me away in a paddy wagon… 
Market Prices 8/16, 2023: American Style: A$.6433, kiwi .5953, C$ .7405, euro 1.0895, sterling 1.2763, Swiss $1.1397, European Style: rand 19.0439, krone 10.5337, SEK 10.8969, forint 353.40, zloty 4.1053, koruna 22.0988, RUB 93.06, yen 145.83, sing 1.3579, HKD 7.8273, INR 83.15, China 7.2832, peso 17.07, BRL 4.9676, BBDXY 1,239.15, Dollar Index 103.25, Oil $80.10, 10-year 4.28%, Silver $22.82, Platinum $912.00, Palladium $1,237.00, Copper $3.72, and Gold… $1,899.97
That’s it for today, and this week of course!  My scan results didn’t show any new cancer, only the lesion that remains in my jaw… And that my sinuses are inflamed!  Well, the old man, Adam Wainwright take the hill tonight against the Mets… Maybe he can get out of the 1st inning tonight, without putting his team back a half dozen runs! I get it, he’s a longtime Cardinal and has been the ACE of staff for years… But father time caught up with him… I’ve been really tired lately, and needing to take an afternoon nap… Fatigue is an effect of chemo… And i’ve fought it for 16 years now…   The NFL pre-season games are under way, and fantasy leagues are drafting their teams. i used to play fantasy football, but then I went through that stage where I didn’t watch the NFL, they ticked me off and I turned them off… But now, I watch what games I think are worth watching… But still don’t want to play fantasty football!  Mark Knopfler and his band Dire Straits take us to the finish line today with his song: Sultans of Swing… Some real good guitar work in this song by Mark…  I hope you have a Tub Thumpin’ Thursday today, and Fantastico Friday tomorrow, and won’t forget to Be Good To Yourself!
Chuck Butler