February 27, 2023
* currencies & metals get whacked on Friday!
* PCE rises in January, showing inflation isn’t going away…
Good Day… And a Marvelous Monday to you! What a fantastic weekend I just had! Baseball started again, and to me, that signals a new year! I was treated on Saturday for the first game of Spring, with a visit from a former colleague, Suzanne Lee, and her son Riley, went to the game with me… The weather this past weekend was the weather that people come to Florida for… My Beloved Mizzou Tigers won a road game on Saturday, while the St. Louis U. Billikens won at home, and… our brand spanking new soccer team, City SC, won their inaugural game! That’s only the 2nd time in the history of the league that and expansion team won its first game! I’m excited about going to see them play when I return home in April… Marvin Gaye, and Tammy Terrel, greet me this morning with their song: Ain’t Nothing Like The Real Thing…
Whoa, there partner! What the heck happened on Friday, last week? The dollar bugs went on a buying spree, and the BBDXY rose 8 index points! The currencies got walloped Big Time, with the euro falling into the 1.05 handle… It was just a couple of weeks ago, when the euro was nearing 1.10… But it wasn’t just the euro that got taken to the woodshed on Friday, pound sterling was tagging along. In addition, the Japanese yen, Aussie dollar, and kiwi, also got sent there… It was an absolute ugly day for the currencies… Even the Mexican peso that had recently seen some love once again, lost some ground to the dollar on Friday…
So, what was the all the dollar buying about? Well, recall that I’ve told you that the markets are in what I call “opposites”? On Friday, the Fed/ Cabal/ Cartel’s preferred inflation report the PCE (personal consumption expenditures) surprised the forecasters, and the inflation gage gained .6%, in January, thus proving that inflation isn’t going away. The annual gain was 5.4%, so even using this gage, the Fed Funds Rate is still below inflation, and that’s not going to do the trick, folks…
So, with inflation rising once again, the markets now believe that the Fed Heads will indeed continue to hike rates, and the higher rates, even though they are killing the U.S. debt servicing, are what got the dollar bugs all excited… I’ll just say this… The debt servicing of the U.S. on their outstanding Treasuries, just went past our Military expenditures… That’s incredible isn’t it? And…it’s just going to get worse, and that’s going to require lawmakers to make some very difficult decisions, in the future, about what CAN get paid and what CAN’T get paid… And the CAN’T get paid category will have more items in it than the CAN get paid category… I’m just saying…
But what’s a Fed Head supposed to do? Inflation is here, and it’s being very sticky, and the only tool the Fed Heads have to combat it, is with rate hikes… So, here, I’m not blaming them, for this… I have blamed them for allowing all the deficit spending that required money printing… And that’s what got us into this mess…
In the overnight markets last night… There wasn’t much movement, and no further buying of the dollar to follow up Friday’s mash up by the dollar bugs. The BBDXY is down just 2 index points this morning, as it appears that the foreign markets decided to take a step back and review the damage… Gold is up $2 in the early trading this morning, while Silver has given back 11-cents… These are some really interesting buying opportunities for Gold & Silver folks… wink, wink…
Well, remember when the 4th QTR GDP printed at 2.9%, and I said, well, we’ll see what the future revisions bring us? Well, one of those revisions last week, showed that 4th QTR GDP was revised down to 2.7%… And by the time all the revisions are made, I suspect we’ll see GDP at 2.5%… And then we’ll move on to the 1st QTR’s GDP, which in my opinion will be down even more… And mainly because Gov’t spending has been cut back in this QTR… So… I guess we’ll have to wait-n-see… eh? The price of Oil has hung onto the $76 handle, and bonds are really unmoved through all this… It looks like a week that will be filled with attempts to move the dollar higher, that will be thwarted by those not looking through rose colored glasses… I’m just saying…
You know the Fed Heads aren’t the only Central Bankers getting hell for hiking rates and making things look gloomy for their economy… Down under, the Reserve Bank of Australia (RBA) is under a lot of criticism, for their rate hikes, and how the economy there is looking shaky… These are the times that Central Bankers earn their respective livings… And in a case of what’s good for the dollar (rate hikes, and a shaky economy, isn’t good for the other currencies, this is where we are today with the dollar and the currencies…
One of these days, traders will see the writing on the wall, that they seem to be ignoring right now… And when they do… We will begin to see a multi-year decline in the dollar, and not one of those 1-3 months declines that are reversed by the PPT, and their treasure chest of Exchange Stabilization Funds…
I remember writing in the Decline of the Dollar, white paper, written in 2001, that it was at that time that I pointed out the Housing Bubble that was getting blown up in the U.S. The Bubble didn’t find the pin in the room until 2007, but there I was talking about how we had a housing bubble in 2001, and everyone, even the mortgage people in our own bank, didn’t believe me, said it wasn’t real, and thought I had lost my mind… Needless to say, in a few years, they were rooting me on, to make as much in earnings for the bank as I could, since they were losing their collective shirts!
Like, 2001, today’s pricing action reminds me of all that.. .I’m just saying…
What’s it going to take for the traders and investors to see the writing on the wall for the U.S. economy, and thus the dollar? That’s the $64 question, folks… I would have thought that housing losing over $2.3 Trillion in values would do the trick, I would have thought that the stock market going into a bear market would do the trick, and I thought the Fed losing any credibility that was left would do the trick, and still here we are, waiting for the sentiment toward the dollar to change… The economy is moving slowly toward extinction, we’ll have to wait awhile for that to happen… but then, maybe not!
Can you believe that southern California is getting whacked with snow? In the mountains 50 miles from Los Angeles they received 7 feet of snow! While here in S. Florida, the weather is chamber of Commerce like… While back home in St. Louis, they have been enjoying the mildest February… Strange weather patterns, eh? It appears that for most of the country, March will come in like a lamb… My mom used to always say, March comes in like lamb and goes out like a lion… Hmm…
Last Friday’s U.S. Data Cupboard also had Personal Spending and Income for January… Personal Spending rebounded in January after faltering in December, by gaining 1.8%… But Personal Income was up only .6%, following December’s .3% gain… So, wages aren’t keeping up with inflation, and that’s how the whole shootin’ match goes up in flames…
Today’s Data Cupboard has the Durable Goods orders for January… I’m expecting this data set to be positive, as if Personal Spending was up, then they were buying durable goods! See how that works?
To recap… The dollar buying on Friday, was off the charts, with the BBDXY gaining 8.5 index points on the day… Gold lost $10.70, and Silver lost 56-cents… and lost the $21 handle! The dollar buying was something to behold… it was swift, it was strong, it was taking no prisoners… Chuck thinks that this is a case of what’s bad for the dollar is also good for the dollar… And that won’t continue forever… The RBA is experiencing the same criticism as the Fed/ Cabal, Cartel is for hiking rates and putting their respective economies in peril… In the overnight markets last night…
For What It’s Worth… I found this article on Bloomberg.com yesterday, and it sounded as if I was the one that wrote it… It’s about the future of the dollar strength we’re seeing right now, and it can be found here: USD: Dollar Strength Peaks, Bringing Relief for Global Inflation, Trade – Bloomberg
Or, here’s your snippet: “Some of the world’s top investors are betting the worst of the dollar’s rampage is over after the surge upended the global economy in ways that had few parallels in modern history.
Having skyrocketed to generational highs last year — deepening poverty and turbocharging inflation from Pakistan to Ghana — the currency has now entered what some forecasters are calling the start of a multi-year decline.
Investors say the dollar is on the way down because the bulk of Federal Reserve rate increases is over, and virtually every other currency will strengthen as their central banks keep tightening. While recent data have led traders to rethink how high US rates will go, a shift to risk assets from equities to emerging markets is already underway on bets that the greenback’s strength will ease. Many investors are sticking with these bets, even after the greenback recently recouped its losses for the year, raising the stakes for dollar bears.
“The dollar’s peak is behind us for sure and a structurally weaker dollar lies ahead,” said George Boubouras, a three-decade market veteran and head of research at hedge fund K2 Asset Management. “Yes inflation in the US is stubborn, yes the rates market is signaling higher-for-longer US rates but that doesn’t take away the fact that other economies in the world are catching up with the US.”
A stronger-than-expected reading in a key US inflation gauge Friday, showed just how painful the US dollar’s strength can be. The greenback climbed near year-to-date highs, while riskier assets such as emerging market currencies and stocks slumped across the board. The Australian dollar and the Japanese yen fell more than 1%.
The relief that a weaker dollar would bring to the world economy cannot be overstated. Import prices for developing nations will fall, helping to lower global inflation. It’s also likely to boost the price of everything from gold to as equities and cryptocurrencies as sentiment improves.”
Chuck again… or was that really Chuck in the FWIW snippet? HA! You know, at one time in the early 2000’s I was about the only person on the earth that wrote about the currencies, the dollar, Gold, etc. I used to be the only person at the Money Shows, the Conferences I attended that talked about these things… Whenever a news outlet wanted to know what was happening with the dollar, Gold, etc. they would contact me! So, when this person wrote the FWIW article, and it sounded like me, I had to think that maybe, just maybe they heard me speak somewhere along the line, or read an article or white paper that I had written, and liked my style of writing… Or, maybe I’m just imagining things… Hey! It’s happened before! Don’t laugh! HA!
Market Prices 2/27/ 2023: American Style: A$ .6713, kiwi .6146, C$ .7353, euro 1.0563, sterling 1.1984, Swiss $1.0639, European Style: rand 18.4023, krone 10.3799, SEK 10.4701, forint 359.84, zloty 4.4655, koruna 22.3766, RUB 75.25, yen 136.23, sing 1.3491, HKD 7.8476, INR 82.84, China 6.9508, peso 18.35, BRL 5.1789, BBDXY 1, 255.76, Dollar Index 104.44, Oil $76.19, 10-year 3.95%, Silver $20.75, Platinum $927.00, Palladium $1,419.00, Copper $4.02, and Gold… $1,813.13
That’s it for today… Well, today and tomorrow, and then we’re finished with February, and March begins, and March is one of my fave months! Baseball begins, the weather turns better, St. Pat’s Day, the Ides of March, my birthday ,March Madness, The Honda Open, and everything begins to turn green again! The moon is in the right place, the stars are in alignment, and that means Baseball is back! Did I tell you that I’m so happy that Baseball is back? Oh, I did? Sorry about that! HA! Our Blues are circling the bowl… The coach even says his players are not giving effort… UGH! Time to get out the golf clubs… The Allman Brothers take us to the finish line this morning with their song: Ramblin’ Man That was their first radio hit song… Though the Allman Brothers weren’t made for radio play… I hope you have a Marvelous Monday, and will remember to Be Good To Yourself!
Chuck Butler