March 16, 2021
* dollar sees some selling in the overnight markets
* Rickards says the U.S. is in a liquidity trap…
Good day… And a Tom Terrific Tuesday to you! Well, it was a hot one yesterday at the ballpark, but not too hot… The real problem in the heat is wearing that damn face mask, except when seated and eating or drinking… So, guess what I try to do all game? For the last year, I’ve worn compression wraps on my lower legs to keep them from swelling… And when you watch a baseball game, on TV, from Roger Dean Stadium, you see my black compression wraps… To someone not knowing what I’m wearing, they might think that I’ve gone full Cleveland on the world with knee high black socks! I really don’t know what baseball is thinking making people, who are already in pods, and more than 6 feet away from anyone else, sitting in the sun, wear masks… Makes no sense to me, but then the economic shutdown and the lockdowns don’t make much sense to me either… The Guess Who greets me this morning with their song: These Eyes…. “These eyes cry every night for you”…
Well… I was right! I was right! There was little to no movement in the currencies yesterday, and in the metals, Silver was the top performer… So, let me take you back to yesterday when I said, “So, I really don’t think we’ll see much movement in the currencies and metals today, as traders want to see the color of these reports before making may definitive moves…”… And I was right when I said this about Silver yesterday, “Silver is up 18-cents, so a good day so far for Silver…”… So, just to prove what I’ve been crowing about this morning, The Dollar Index was 91.77 yesterday morning, and 91.82 at the end of the day… And Silver was up 16-cents and ended the day up 31-cents, or up 1.20% on the day…
Ok, that was yesterday, and yesterday’s gone… But I did want to point out that Gold gained $3.10 yesterday to close at $1,732.00, and as previously stated, Silver gained 31-cents to close at $26.34…
I was reading an article by James Rickards that really made a lot of sense, especially given the scenario I wrote about a week or so ago, about a dear reader who saw the price his coin dealer was offering for Gold was much higher than the stated price for spot Gold… I was taught a very long time ago, by my dad, that the “stated price” isn’t really the correct price… Because the correct price is agreed upon by two parties, one buying and the other one selling… And that goes for land, houses, cars, pencils, erasers, etc. etc…. I heard from my former colleague, Chris Gaffney last week, who thanked me for the mention of where to go to get physical Gold & Silver… So, I’m going to mention this one more time… If you want to buy physical metals, you need to call my metals guru, Tim Smith @1-800-926-4922…
On a sidebar, 926-4922, was created by the Mark Twain Bank Bond Dept… the numbers spell out WAM 4 WAC…. Weighted Average Maturity 4 Weighted Average Coupon… And old bond swap, that was heard many times across the office on the Bond Dept. … When Frank Trotter started up the Foreign Exchange Desk, which would become the World Markets Dept. The Bond guys threw him a bone, and handed him this 800# for his new startup… And so… the history of the 926-4922, 800#… Aren’t you glad you asked? No Wait, What? You didn’t ask? Then I’m sorry I went off on this sidebar… (not really, just being the nice gentleman that I am)
In the overnight markets last night… There was some slippage in the Dollar Index as we start today with it trading at 91.75… The movements in the currencies lately have been really muted, and nothing to call home about… Gold is up this morning $3.10, but Silver is down 16-cents… Up one day, down the next… Crazy price action of Silver will cause you to claim you saw UFO’s if you allow it… The price of Oil slipped a bit in the last 24 hours, and trades with a $64 handle this morning.
Speaking of up one day and down the next… The 10-year Treasury’s yield seems to be tied to a yo-yo these days… You know, I’ve discussed this before, but it’s worth it to discuss it again… And that is… with every dollar of deficit spending, the U.S. issues Treasuries to finance the deficit spending… So, basically the Debt Clock tells us the current national debt is more than $28 Trillion… That means that $28 Trillion in Treasuries have been issued and bought… Recently the primary banks, those responsible for buying whatever is left at a Treasury Auction, told the Fed that they are at their max for owning Treasuries… And now… with the help of Congress, another $1.9 Trillion will be issued in Treasuries to finance the Stimulus bill… Who’s going to step up and buy these bonds? There’s your major problem for you right there! Need me to explain any other major problems?
You know, I’ve spent a lot of time talking about the latest deficit spending, currency printing, $1.9 Trillion stimulus bill… Have you ever had a good friend, or relative, come to you and ask you for financial help, and you were in no position to dole out cash to them? What did you do, go into the back room and print some counterfeit dollars to make sure they got the cash they needed? Probably not… Because there are rules, right? But those rules that apply to you and me, don’t apply to the Fed Reserve, Congress, and the Treasury… Their constituents came to them with their hands out in need of cash… The Gov’t doesn’t have any cash to give them so they went into the back room and printed up some currency in the form of 1.9 Trillion, which will probably end up being more than 2.5Trillion in the end… Now Millions of people will get their Stimmy Checks, and rush to deposit them to their Robinhood brokerage account to buy stocks…
All the while the taxpayer will have to foot the bill… Robbing Peter to pay Paul… Seems like a losing deal to me, but then I think with logic and reason… I know for a fact that Congress doesn’t!
And I just couldn’t pass this quote up from the Economist magazine… “Yet, though today’s policymakers have a guaranteed place in economic history, they may not come to be seen as heroes. That is because America is running an unpredictable three-pronged economic experiment that features historic levels of fiscal stimulus, a more tolerant attitude at the Federal Reserve towards temporary overshoots in inflation, and huge pent-up savings which no one knows if consumers will hoard or spend. This experiment has no parallel since the second world war. The danger for America and the world is that the economy overheats…
Mr. Biden’s stimulus is a big gamble. If it pays off, America will avoid the miserable low-inflation, low-rate trap in which Japan and Europe look stuck. Other central banks may copy the Fed’s new target. Massive fiscal stimulus may become the normal response to recessions. The risk, however, is that America is left with rising debts, an inflation problem and a central bank facing a test of its credibility.” – the Economist…
So, today should be a lot more active given the three pieces of real economic data that will print this morning… First up is Retail Sales, and I have to say that the Butler Household Index (BHI( indicates to me that Retail Sales for February will be disappointing… With the only thing I bought last month was my baseball tickets… no other deliveries were made throughout the month, and that usually means that Retail Sales will disappoint… Then Industrial Production and Capacity Utilization, will be hard pressed to match or better January’s numbers, which were +-.9% and 75.6% respectively… if these were the old days, when fundamentals mattered, soft numbers printed today would mean a soft dollar… But we’ve discussed how fundamentals no longer mean a hill of beans, and it’s all about Trader Sentiment now…
To recap… The currencies didn’t move much yesterday, with the Dollar Index only gaining 5 points… Gold found enough buyers to close up and so did Silver… In the overnight markets… the slippage was in the dollar, and Gold is up and Silver is down this morning… Chuck talks about how the stated price in Gold is NOT the real price… Chuck also talks about the stimulus Bill, and includes a quote from the Economist… The Data cupboard should provide more action in the currencies today, so get ready for that!
For What It’s Worth… Well, I mentioned James Rickards above, so when I saw this on the Daily Reckoning, I thought it would be best to use it for our FWIW article today… Mr. Rickards is talking about the stimulus and what it’s going to take to get the economy moving again, and that discussion can be found here: The “Bros” Are Preparing Their Next Attack – The Daily Reckoning
Or, here’s your snippet: “What is not as well-known is that a lot of the money for the Bro’s trading came from the $1,200 COVID relief check the government handed out last spring and the $600 checks handed out at the end of December.
Many Bros were tech-savvy, unemployed and stuck-at-home, so using the government’s “free money” to have fun trading stocks was a great form of entertainment during the lockdowns. Now it’s happening again!
Young retail investors plan to use their new $1,400 government checks from the $1.9 trillion Biden bailout bill to engage in a new round of speculative trading.
The U.S. economy is about 70% dependent on consumption; savings and investment are essential, which can be beneficial in the long-run but do nothing to expand GDP in the short-run.
Biden has said that we need the massive spending package “to grow the economy.” But it will only slow the economy because the added debt causes Americans to save more and spend less in anticipation of higher taxes down the road.
The “stimulus” actually keeps people from looking for jobs because the handouts are often more than they could be making at work. Meanwhile, the higher taxes needed to pay for the handouts also slow the creation of jobs because businesses have less money to invest or hire workers.
The only sustainable way out of the COVID recession is real growth, which comes from getting people back to work and reinvesting corporate profits. It doesn’t come from the printing press or its electronic equivalent.
Whether Americans save the money, pay down debt or invest in stocks (even as speculation), they are not spending. That’s more evidence that the U.S. is in a liquidity trap, and the Biden bailout will not help economic growth.”
Chuck Again… Another analyst on my bandwagon of dissing the stimmy checks…
Market Prices 3/16/21: American Style: A$ .7737, kiwi .7186, C$ .8020, euro 1.1945, sterling 1.3850, Swiss $1.0810, European Style: rand 14.8139, krone 8.4466, SEK 8.4851, forint 307.20, zloty 3.8470, koruna 21.9242, RUB 73.08, yen 109.14, sing 1.3455, HKD 7.7660, INR 72.58, China 6.5000, peso 20.63, BRL 5.5687, Dollar Index 91.75, Oil $64.55, 10-year 1.60%, Silver $26.18, Platinum $1,213.00, Palladium $2,442.00, Copper $4.09, and Gold… $1,735.10
That’s it for today… I can feel my vacation growing nearer and nearer, it’s so near I can almost taste it! HA! I watched my beloved Cardinals win their game yesterday VS the Nationals… Max Scherzer, a St. Louis and Univ. of Missouri Pitcher that pitches for the Nationals (why he doesn’t pitch for the Cardinals is a long very disappointing story) and he looked great for 4 innings yesterday, But with it being spring training and pitchers building their arm strength he was taken out after 4 innings, and that’s when the Cardinals attacked! Back to the normal regimen today and tomorrow… Tomorrow is St. Patrick’s Day! I’ll maybe change things up a bit tomorrow… maybe… Oh, shoot, I know darn well and good that I will, for I’ve got that Irish blood in me! Stevie, guitar, Miller takes us to the finish line today with his song: Serenade (one of good friend Kevin’s faves) I hope you have a Tom Terrific Tuesday and will Be Good To Yourself!
Chuck Butler