What Do We Have Here? A Hawkish Fed Head?

November 22, 2021

* Currencies, metals and Oil all get sold on Friday…

* The Gov’t’s $2 Trillion Spendalooza gets through the House… 


Good Day… And a Marvelous Monday to you! How about my beloved Missouri Tigers football team? What a great win Saturday VS Florida!  Also on Saturday I got to see my darling granddaughter, Delaney Grace, perform in Annie, for the Gateway Center for Performing Arts… She’s really into acting, singing and dancing… I just love her to pieces!  And Kathy came home, finally… My kids always ask, “How are you doing without mom around”… And I reply, “it sure is quiet”… HA! Well, there’s a lot to talk about today, so, let’s get it going… The Stephen Kummer Trio greets me this morning with their version of: I’ll Be Home For Christmas…

Friday was an all-out ugly day in the markets that we like to follow… Currencies got sold, metals got sold, and Oil got sold… Bonds on the other hand were bought, but that just means that lower rates, on the bonds,  are going more negative… So, that’s ugly, there folks… There was no news to speak of besides the spendalooza being passed (more on that in a minute)… The euro fell below 1.13 for the first time July 2020…  But while we’re talking about currencies, the two rebel currencies that aren’t being bullied by the dollar in recent trading days, the Indian rupee, and Chinese renminbi, both rallied a bit on Friday… So, there you go!  

We did have a Fed/ Cabal/ Cartel member, Waller, speak and he threw a grenade from left field onto the markets…  First of all, Waller is a voting member of the Fed/ Cabal. Cartel, and he expressed a more hawkish tone than any Fed member has in the past few months. While acknowledging that the spiraling level of inflation is much less transitory than first believed and will remain much longer than assumed.

Federal Reserve Governor Waller addressed the current level of inflation and described it as a “big snowfall that will stay on the ground for a while, rather than a one-inch dusting.” His statements highlighted the intrinsic and mounting concern by Federal Reserve members that inflationary rates have gotten way out of hand and added, “When snow is expected to be on the ground for a week, you may want to act sooner and shovel the sidewalks and plow the streets.”

OK, so he is a voting member, but… so far he is the just one vote and there have been no other members speaking as hawkish has Waller did… But his comments did stir the pot that was the markets on Friday… 

Well… let’s see, the House passed their $2 Trillion spendalooza bill, which just means that the Gov’t is going to throw more fake money at the economy, which entails printing more currency to pay for the Treasuries that will be up for sale that no one wants, because the yields are so low.  Before this spendalooza bill was passed, the U.S. had printed more than $5 Trillion in new currency since 2019…  And then there are economists out there that still say this inflation isn’t going to last… Well, as long as the Gov’t keeps stoking the inflation fire, the embers will burn hot for a long time…

But did this memo of more deficit spending and currency printing get Gold going on the day? Hardly… Gold lost more than $13 on Friday, and Silver lost 21-cents…  Now, how could that have happened?  Well, let’s go through the motions on this… The markets saw the spendalooza bill and decided that this just what the economy needs…  Yeah Right, as if the previous $5 Trillion was working and just needed an additional jolt!   Think about that for a minute, folks.. .My dad used to tell me about businesses that threw good money at bad programs…  Well, in this case we, as a country are throwing bad/ fake money at bad programs…  That’s even worse!

No… the reason Gold & Silver got sold on Friday, was the boys in the band decided to take a pound of flesh from these two metals, and walk away at the close on Friday, to the local pub/ bar, and buy a round of drinks, for they had just made a killing in the markets!  Why did they decide to take a pound of flesh?  Because they can… And no regulatory agency is going to come after them for rigging the price lower…  Sure the Bullion banks have paid $55 Million in fines for rigging the price in London, but that was easy to find… The kind of price rigging that the boys in the band use is more difficult to pin down… Shoot ask Gary Gensler, the present SEC head, for he said that he personally investigated the Silver price rigging claims when he was head of the CFTC (Commodities regulator) and said that he saw nothing…     I doubt seriously that he saw nothing, folks… I do believe that he was told to say that… and for that, we’ll remember you the next time a good job comes along, and voila, he’s the head of the SEC!

I’m sure that the powers that be, didn’t think anyone would be on top of that whole scenario, but they didn’t account for little old country bumpkin me…. 

So, like I said, Gold lost $13.50, and closed the week at $1,846.00, and silver lost 24-cents to close at $24.66… Friday marked two days in a row that these two metals got sold… And again, it makes no sense to me, but it does give lower/ cheaper prices to those that are just letting the fact that inflation is rising enter their hard heads!

In the overnight markets last night… There has been little to no movement in the currencies, and  Gold is down $3, while Silver is up 14-cents. The price of Oil was sold further down the river, and Bonds are flat to down a bit this morning.  There’s nothing in the Data Cupboard to get the markets going today, so we’ll have to see what the Trader sentiment is registering, ahead of a long holiday weekend at the tail end of this week…  The BBDXY is 1,179.41 to start the day… 

I guess I should be happy that Gold gained more than $110 in the last 10 days… And I read where Institutional interest in Gold is picking up again, and that’s a good sign for Gold to move even higher… I’m just saying

So… the dollar just keeps gaining momentum… What’s up with that?  Just two weeks ago, it appeared that the dollar was ready for a long trip to the woodshed, but then…  Well, I don’t need to tell you that the dollar mysteriously rallied…  I think that traders and investors are still under the thinking that this rising inflation is going to bring about higher interest rates here in the U.S. to fight the rising inflation…  (see previous discussion about Fed/ Cabal/ Cartel  head Waller) And that higher interest rates would allow the dollar to be more sought after… I wish these traders and investors would read this letter because I’ve explained several times now that the U.S. can’t hike rates (well not to the tune to more than inflation!)  because of the debt servicing requirements. (paying bond interest)

In the 1970’s inflation rose to 13%… And then Fed Chairman Paul Volcker raised interest rates to 20% to slay the rising inflation… So, to take that to today’s mess of inflation that we have, which, just for today’s lesson we’ll use the Gov’t’s claim that inflation is 6.2%… If you would want to slay that rising inflation you would have to hike rates north of 10%… And that’s not going to happen, not on my watch!  

I had a question last week when speaking on the Webinar that was hosted by Rich Checkan at Asset Strategies. (ASI) that centered on the thought of the U.S. not being able to hike rates, because of bond servicing costs… And the attendee to the webinar said, “but doesn’t the Fed pay the interest earned on bonds they bought back to the Treasury?”    And the answer to that question is yes, but that doesn’t take into consideration that the Fed owns a little more than 1/3rd of the existing Treasuries, So that’s still 2/3rds of Trillions that needs to be serviced….

And you shouldn’t worry about the existing stock of Treasuries, it’s the new ones that will be issued on a “roll”  when the existing stock comes to maturity… The new bonds would carry the new “higher interest rate”, and that’s when the problems occur for the government…

OK.. onto other things…  I’ve not spent a lot of time talking about inflation this morning, I know I’ve been like a broken record lately with inflation, so in lieu of me talking about it, I thought it to best to have someone else talk about it… And in that case I have Ayn Rand talking about inflation… Take it away Ayn:  “inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people’s savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist governments.” – Ayn Rand

I would think that she nailed it Governor!  And like I said above, more than $5 Trillion of new currency has been printed since 2019, and that’s before the latest spendalooza by the Government!  Got Gold?

Speaking of Gold, I read this weekend that demand for physical Gold in China has soared once again and is the strongest it has been in 3 years!  

The U.S Data Cupboard doesn’t have much for us today and tomorrow, but on Wednesday, it will be the datapalooza! I guess the folks that put together these reports wanted to fill traders and investors with as much data as they could put on their collective plates,  to stretch their stomachs prior to sending them off to Thanksgiving!  We’ll have Personal Income and Spending, Durable and Capital Goods, GDP, Core Inflation, and Weekly Initial Jobless Claims… All in one day!

But like I said there’s really nothing to see the first two days of this week…  And that usually means the dollar gets to breathe easier… But Wednesday’s prints could sent it reeling into the 4 day holiday for some…  

To recap… it was an ugly day on Friday for the currencies, metals and Oil… The anti-dollar assets were all on sale throughout Friday, and ended the week on a sour note. Gold had gained more than $110 in the previous 10 days, and a day of profit taking was due… But that’s not what happened, instead it was a day for the boys in the band…  Inflation is a real problem for bonds, folks… They are selling with negative real yields… Who wants some of that?   Chuck spends a lot of time talking about Gold today, Ayn Rand gives us her thoughts on inflation, and Chuck points out that Wednesday’s Data Cupboard will be a datapalooza!

For What It’s Worth…  Well, since I mentioned the boys in the band above today, I might as well tell you that more bullion banks have been found guilty of price rigging of Gold… This article appeared in a note that the good folks at GATA sent me…  Which means you can’t see the article, unless you are a GATA member, so I have the whole article here, so don’t you worry! 

Here’s your snippet: “Barclays Bank PLC, Scotiabank, Societe Generale, and the London Gold Market Fixing Ltd. agreed to pay $50 million to end claims that they illegally fixed prices on the gold market, the putative class of gold traders told a New York federal court Friday.

The deal, if approved, would be the third and final settlement in the putative class action and would bring the total take for the plaintiffs to $152 million, according to the gold traders’ motion for preliminary approval.

The motion also seeks certification of a class of “many thousands” who traded gold or financial instruments with gold as their underlying asset between January 2004 through June 2013.

“Studies have found that the median full-case antitrust recovery is 19% of single damages,” the plaintiffs said. “Thus, co-lead counsel would have to establish at trial a recoverable single damages figure of $800 million before the combined recovery from the three proposed settlements fall behind the pace of a median antitrust recovery rate.”

“Considering the risks and costs of continued litigation, both the combined result of all three settlements and this third settlement agreement even when viewed in isolation provide excellent results for the settlement class.”

The March 2014 putative antitrust class action represents 18 consolidated suits claiming that several banks were involved in a wide-ranging conspiracy to fix prices on the gold market.

London Gold Market Fixing members held secret meetings to share information on the real-time price of gold to set a rate beneficial to them, including Barclays, HSBC, and Deutsche Bank, according to the suit.”

Chuck again…  Like Ed Steer had to say about this article:” But regardless of any lawsuits, successful or otherwise, the price rigging continues, dear reader.” 

Market Prices 11/22/2021: American Style: A$ .7223,  kiwi .7009, C$ .7915, euro 1.1283, sterling 1.3451, Swiss $1.0787, European Style: rand 15.6712, krone 8.9008, SEK 8.9347,  forint 324.26,  zloty 4.1475,  koruna 22.4950, RUB 73.37, yen 114.04, sing 1.3603, HKD 7.7896, INR 74.16, China 6.3862, peso 20.80, BRL 5.6122,  BBDXY 1,179.41, Dollar Index 96.11,  Oil $75.73, 10-year 1.57%, Silver $24.80, Platinum $1,042.00, Palladium $2,126.00, Copper $4.35, and Gold… $1,846.70

That’s it for today…  A Big Congrats to my former colleague, Chris Gaffney, who was quoted in the Wall Street Journal last week!  That brought back memories of when the WSJ writer came to St. Louis to interview me many years ago, and when the article showed up, I went to the newsstand and bought 10 copies! In typical response from my wife, she said, “what are we going to do with all these copies?”  I had a blast last Wednesday night at the Sports On Tap Event… And even got an opportunity to spend a few minutes with childhood friend, Jim Thomas, who is the beat writer for the Blues! And my doctor visit was a non-event… except that my A1C was 5.7!!!! The doctor said I could have some pie on Thanksgiving! HA!  My Billikens Basketball team won again Saturday night, but the Blues lost! UGH! I really lounged around the house yesterday, it was well after noon before I changed clothes and got moving!  This is Thanksgiving week!  I just get so upset with all those people that try to take away the traditions of this country… And that’s all I’m going to say about that! The Count Basie Orchestra takes us to the finish line today with their song: Good SWING Wenceslas…   I hope you have a Marvelous Monday today, and please Be Good To Yourself!

Chuck Butler