What Happened Yesterday?

June 16, 2022

* Currencies, and metals rally on Wednesday

* Atlanta Fed’s GDP forecast a zero % 2nd QTR GDP! 

Good day, and a Tub Thumpin’ Thursday to one and all! Well, if you were James Rickards and you had cried wolf 3 previous times about the stock market collapsing, and now you cried wolf again, and things didn’t work out in your favor, where would you hide? I’m not knocking Jim, just pointing out something I keep pointing out and that is that it is very difficult to actually pick a day that the stock market will collapse… For those of you keeping score at home… Stocks rallied yesterday, after the Fed announced their 75 Basis Points Rate hike… Now, I still believe, as James Rickards does, that the stock, housing, and everything bubbles are going to get popped, it just didn’t happen yesterday. Marvin Gaye greets me this morning with his great song: Inner City Blues…

The dollar actually got sold after the rate announcement, so… as I said yesterday, it appeared that there was a case of buy the rumor of a rate hike, and sell the fact, in place… The BBDXY lost 8 index points yesterday, the first time the dollar has been sold like that in a month of Sundays! Here’s MarketWatch’s view of yesterday: “After a muted initial reaction that saw the Treasury yield curve briefly invert, prices of bonds, stocks and even cryptocurrency prices rallied as Powell left enough wiggle room on the size of the hike that investors can expect at the July meeting, with Powell saying that he could go with 75 basis points or 50 basis points — and that the Fed would, as always, remain data dependent.”

Chuck again… yes… and believe it or don’t, Gold & Silver also rallied on the day! Gold gained $26, to close the day at $1,835.50, and Silver gained 65-cents to close the day at $21.77… There was no sight of the price manipulators yesterday, so Gold & Silver were free to move about the country! I wonder just what traders are thinking these days…. Like I proposed, in an earlier Pfennig… I suspect the Fed Heads will feel as though they’ve done all they can to combat Inflation, and revert to smaller rate hikes, if any… And judging from what the MarketWatch article says… “Powell left enough wiggle room on the size of the next rate hike”…

In the overnight markets last night…. The dollar fought back and rallied nearly 3 index points in the BBDXY. The euro has dropped below 1.04, and even the Norwegian krone is getting sold, as it trades this morning with a 10 handle…  The Russian ruble saw a little slippage overnight, but is still the best performing currency VS the dollar. 

Gold & Silver can’t stand their profitable day yesterday, and are getting sold in the early trading today, with Gold down $10, and Silver down 26-cents.  The price of Oil has really stumbled on a fear of lack of demand, and trades this morning with at $113 handle.  Bonds, have really gotten sold, and the 10-year’s yield has risen to 3.54%!    The yield curve is stil inverted with higher yields in shorter dated bonds… 

Where do we go from here? Now that all of the children have grown up? How do we spend our time, knowing nobody gives us a damn? (Alan Parsons) if the markets aren’t impressed with the 75 Basis Points rate hike, then why should we be impressed? The markets had this pie in the sky idea that Jerome Powell would turn into Paul Volcker, and hike rates 100 Basis Points and then come out emphatically saying that another one just like that one will come next month… I can tell you this now, it is my impression that Jerome Powell didn’t want to hike rates 75 Basis Points, but he was out voted, but now he has 6 weeks to convince his fellow Fed Heads that they do not need to hike rates 75 Basis Points more, that they need the usual time period that it takes for a rate hike or cut to take effect in the economy…

The other thing I see here with the markets and the Fed Heads, is that the markets have now come to the realization that the Fed Heads are so far behind the inflation 8-ball that they can’t even see it any longer… The People of this country are also finally realizing this… The U of Michigan Consumer Confidence report started in 1951, and in all that time it has never been as low as it was last month… And in a recent poll, the POTUS’ approval rating was lower than Jimmy Carter’s was in 1979, when inflation was lower than it is now! And we all know what happened to Jimmy Carter’s reelection bid, right?

I’m not a political person… Shoot Rudy, if you want to tick off half the people that are in a room, just give your views on Politics… I just that this data comparing him to Jimmy Carter was interesting…

Oh, and even with the rally in Bitcoin yesterday, the cryptocurrency is down over 70% since last November… I’m going to put to bed a lot of people’s FOMO (fear of missing out) with that information, I know… You can thank me by sending me a donation… HA! Just kidding…

Want some more interesting data? Ok, here goes: The 10 year Treasury yield now exceeds the levels of 2018 that markets couldn’t handle then forcing the Fed to flip flop on rate hikes & Tapering, and began cutting rates 3 times in 2019.

The difference between now and then… The 2018, levels are being exceeded with over $8 trillion in additional debt added in less than 4 years. WOW! That’s very interesting, eh?

And here’s Dave Gonigam at the 5 minute Forecast yesterday with his input on interesting points:
“By the time you read this, the Fed will have raised short-term interest rates by three-quarters of a percentage point — something it hasn’t done since 1994.

We’ll unpack the nuances tomorrow… but in a way, they don’t really matter. What matters is that this is the third increase in three consecutive Fed meetings — a sequence that’s preceded nearly every market crash since 1919.” – Dave Gonigam from the 5 Minute Forecast

So, as you can see, there’s a reason for calling for a stock market collapse… But it will take more than one day for that to happen, in my humble opinion!

The U.S. Data Cupboard yesterday, had the May Retail Sales for our viewing, and what we saw was not good… May Retail Sales, printed negative -.3%… Things are costing too much apparently, and there just wasn’t enough Mother’s Day Sales to help the Retail Sales data… And of course, we’ve already gone over the Fed Heads’ rate hike with a fine tooth comb…

To recap… The Fed hiked rates 75 Basis Points, but left the door open for a smaller size rate hike next month… This news shocked the market, and instead of buying dollars, they sold dollars, and instead of selling stocks, they bought stocks, and instead of selling Gold, they bought Gold… Crazy days, indeed, but a case of buying the rumor and selling the fact, for sure! In the overnight markets, the dollar got bought, and recovered some of its losses yesterday, which totaled 8 Index points in the BBDXY dollar index… Gold & Silver are giving back some of their gains yesterday in the early trading, and the price of Oil has dropped $5 overnight… 

For What It’s Worth… OK, you all recall the Atlanta Fed’s GDP Now program, that shocked the markets at the start of the year, claiming that 1st QTR GDP would be zero, right? Well, they were right, in fact the 1st QTR GDP was -1.6%… Well, guess who’s claiming 2nd QTR GDP will be zero again? Oh, you guessed it, there’s no fooling you! This article can be found here: Atlanta Fed Slashes Q2 GDP Forecast To Zero Confirming Technical Recession | ZeroHedge

Or, here’s your snippet:” Curious why stocks are soaring today ahead of an expected 75bps rate-hike by The Fed (further tightening financial conditions as QT starts shrinking the Fed’s balance sheet)?

The answer comes courtesy of the Atlanta Fed which just confirmed the economy is in technical recession.

After a week of rampant jawboning to adjust the market’s expectation for The Fed’s actions later today (after last Friday’s unexpected resurgence in CPI), the continued erosion in economic data (most notably retail sales this morning) has prompted The Atlanta Fed to slash its forecast for Q2 GDP growth from +0.9% to 0.0%, meaning the US is now right on the verge of a technical recession (after Q1’s contraction).

According to the Atlanta Fed’s GDPNow model estimate for real GDP, growth in the second quarter of 2022 has been cut to just 0.0%, down from +0.9% on June 6, down from 1.3% on June 1, and down from 1.9% on May 27.

As the AtlantaFed notes, “After recent releases from the U.S. Bureau of Labor Statistics, the U.S. Census Bureau, and the U.S. Department of the Treasury’s Bureau of the Fiscal Service, the nowcasts of second-quarter real personal consumption expenditures growth, second-quarter real gross private domestic investment growth, and second-quarter real government spending growth decreased from 3.7 percent to 2.6 percent, -8.5 percent to -9.2 percent, and 1.3 percent to 0.9 percent, respectively.”

In short: the U.S. consumer is getting tapped out, just as we have been warning repeatedly.

Which also fits with Jamie Dimon’s recent “downgrade” of the economy from “storm clouds” to “hurricane”… and also makes some sense given the recent collapse in macro data relative to expectations…

Chuck again….  Ooh, may I have another one of those technical recessions? Oh don’t worry, you’re going to get them in the coming quarters… I’m actually surprised that the powers that be don’t squelch the Atlanta Fed’s GDP Now folks, and their reports!  

Market Prices 6/16/2022: American Style: A$ .6951,  kiwi .6250,  C$ .7726, euro 1.0387, sterling 1.2138, Swiss $1.0207, European Style: rand 15.9902, krone 10.0744, SEK 10.2966,  forint 383.47,  zloty 4.5372,  koruna 23.8078, RUB 57.24, yen 132.84, sing 1.3907, HKD 7.8499, INR 78.07, China 6.7183, peso 20.58, BRL 5.0569,  BBDXY 1,263.37,  Dollar Index 105.00, Oil $113.39, 10-year 3.45%, Silver $21.43, Platinum $934.00, $Palladium $1,862.00, Copper $4.13, and Gold… $1,823.90

That’s it for today… Well, my beloved Cardinals couldn’t make it a 4 game sweep last night VS the Pirates, but finished the home stand 5-2, which is pretty darn good… I stayed up to watch the Tampa Bay / Colorado Stanly Cup finals game 1 last night… and it went into overtime!  So, once again I’m dragging the line this morning… Sat outside with good friend, Duane, to watch the baseball game last night, he bagged me around the 6th inning, and I had to sit through a game that saw the Cardinals have runners on base just about every inning, and fail to score… UGH! Well, I’m back to the weight I was a year ago, when I was at my lowest level in over 15 years! Now, if I can only go lower! This Sunday is Father’s Day… I won’t bore you with tales about my dad, like I’ve done in past years… I do want to say that Father’s are so important in a child’s life, just like a Mother is, I look at my 3 kids and think that they have carved out nice lives for themselves, and hopefully I had something to do with that! So hug your dad! Tell him you love him! Make him feel good!  And there will be no Pfennig on Monday… I have a tooth problem, and I get to go see my Dentist,  Holly….. Sniff-N-The Tears takes us to the finish line today with their song: Driver’s Seat… Years ago, I highlighted this song, and soon I was talking on the phone with the bass player from the band! I hope he’s still a reader! I also hope that you have a Tub Thumpin’ Thursday today, and will please remember to Be Good To Yourself!

Chuck Butler