Where Have All The Savings Gone?

November 29, 2022

* currencies & metals get sold on Monday

* How useful was QE? 

Good Day… And a Tom Terrific Tuesday to you! Man, are our Blues streaky? I think if you look the word, streaky, in the dictionary, there will be a picture of the Blue Note! The team just can’t figure out who they really are, but the good news is… It’s a long season! Back to the drawing board for the team, as they prepare to take the ice again tomorrow night. Well, today is supposed to kind-of alright, weather wise, but then it gets cold again… UGH! I just have about 32 days before I head south for the winter, so I have to rough it out until then… Beegie Adair greets me this morning with her version of the song: Snowfall…

Well, we started the week off yesterday morning with the dollar having a problem last week, but shrugging it off to return to kicking sand in the currencies and metals faces on Monday. The BBDXY gaines 8 index points on the day and ended the day at 1,280. The euro just can’t handle any prosperity that comes its way, and after climbing to 1.0450 to end the week, it dropped 1/2-cent yesterday. Gold lost $14 on the day to close at $ 1,742.10, and Silver lost 52-cents to close just above $21, at $21.02… The price of Oil wrapped a tourniquet around its bleeding, and found a way to rally $3 yesterday and end the day trading with a $77 handle.

And bonds got sold yesterday, well that is the 10-year Treasury got sold, and saw its yield rise to 3.71%… I had a dear read send me a note yesterday, that I’ll share a snippet of the note with you here: “beginning to think that the tables may have turned. We may be heading for a significant global slowdown. That would cool inflation and probably have central banks of the world back off on raising short term interest rates. It, therefore, may be that folks are buying the longer bonds figuring that locking in the current rates may be as good as it will get for some time. If we go deflationary because of a regression to the mean from all the money printing, the current long bond rates may look pretty good.”

Now, that, my friends is a well thought, intelligent response to my carping about people thinking rates have peaked… I thank, dear reader, Jim, for that note… I had just read a note yesterday about the global slowdown that the IMF had come out with a report on. Yes, but I do believe that the global slowdown will take much longer to come to realization, that it will take for the Fed and other Central Banks to slow their rate hikes, wanting to prove to the world that they too, can defeat inflation, just Paul Volcker did!

In The overnight markets last night… The dollar got sold… The BBDXY is down 5 index points to start the day today. I think the dollar bulls got slammed yesterday when St. Louis Fed President, James Bullard, repeated his statement about interest rates needed to be in the 5 to 7% range to tamp down inflation. He said that the markets are “too dovish”… Hey! At least he’s trying to get the message across to the markets, if they don’t want to listen to him, then fine… The old saying here about leading a horse to water, seems to fit, eh? The euro is still trying to recalibrate where it’s going. I read a report yesterday that talked about how the euro will not continue to gain on the dollar… Well, my friend, that’s wrong… as long as the dollar is getting sold, the euro will benefit, for it is the offset currency to the dollar…

Gold is up $9 in the early trading this morning, and Silver has added 14-cents to start the day to day, here in the U.S. Oil is up another buck to trade at $78 this morning, and bonds are bonds… 3.71% is the yield on the 10-year to start the day today.

OK, Well, last week we saw the dollar drift towards the end the week, and the previous week’s end saw the dollar get whacked! So, what’s up with that? I found this next bit on Bloomberg.com and I’ll let you read it before commenting… “Former bulls including JPMorgan Asset Management and Morgan Stanley say the era of dollar strength is ending as cooling prices spur markets to trim bets on further Federal Reserve tightening. That may spell buying opportunities for the currencies of Europe, Japan and emerging markets.

“Markets now have a better grasp of the Fed’s trajectory,” said Kerry Craig, a strategist in Melbourne at JPMorgan Asset, which oversees $2.5 trillion. “The dollar is no longer the straight, one-way buy we’ve seen this year. There’s room for currencies like the euro and yen to recover.”

Chuck again… Maybe they’re reading the Pfennig these days? Ha! Yes, I do believe that the shine has been taken off of the dollar, and now we have to go back and forth for awhile in trading before the next phase of revealing the dollar’s rot comes along…

OK, did you hear about the protests in China on their Zero Covid Policy? Here’s Reuters with the skinny on that; “Police patrolled the scenes of weekend protests in Shanghai and Beijing after crowds there and in other cities across China demonstrated against stringent COVID measures disrupting lives three years into the pandemic.” Whenever I hear the words “protest in China” my mind flashes back to the one Chinese man in China staring down Tank… I don’t believe that ended well… But I digress here, sorry

In a follow up to previous Pfennig talks about the potential Rail Strike, I saw this news yesterday regarding the POTUS… “Monday asked Congress to intervene and block a railroad strike before next month’s deadline in the stalled contract talks, following pressure by business groups on the stalled negotiations.

“Let me be clear: a rail shutdown would devastate our economy,” Biden said in a statement. “Without freight rail, many U.S. industries would shut down.”

Chuck again…. Yes, yes it would be devastating Mr POTUS… I’ve been trying to say that for a couple of months now, but finally someone decided to listen, and do something about this… I don’t like the Gov’t getting involved in stuff like this, or anything actually, but like this, I think I can get around my dislike to see it work for the people for once!

Geez Louise… Have you all received your personal property taxes for this year yet? I have to say that the State Gov’t of Missouri and Florida didn’t waste any time increasing their rates of taxes this year… Oh well, it is what it is… UGH!

Before I head to the Big Finish today, I wanted to mention something I saw on Yahoo Finance.com over the weekend, here’s the title to the article: The personal savings of Americans have plunged to a shockingly low $626 billion — from $4.85 trillion in 2020.

Chuck again… Now that’s some drawdown eh? Reaching for that credit card has been popular in spending numbers lately, and apparently then when the bill comes… Cash out the door… But run those numbers one more time in your head and see that this is going to end up in tears for many a consumer… I hope you’re not one… I don’t think you are, but I don’t know all the readers!  This article made me think of the 60’s folk song: Where have all the Flowers gone?  Instead, it’s: Where have all the savings gone? Long time passing… 

The U.S. Data Cupboard today, still is lacking real economic data. We will see the color of the latest Case/ Shiller Home Price Index (HPI), which has been on a downward spiral for months now, and I doubt September’s HPI will show a different path… We’ll also see the stupid Consumer Confidence report for November… Stocks are in a bear market rally so…

To recap… The dollar’s drifting last week was replaced with dollar buying starting Monday. The currencies & metals found themselves in the red for the day, along with bonds. Oil actually gained a few bucks on Monday! China protests fill the news wires… Chuck doesn’t think that will end up well, for anyone doing the protests in China… And American savings rates are plummeting…

For What It’s Worth… Ok, finally some real economic journalism, someone looking under the hood, and shouting out about the dolts and twits… This article is about how Quantitative Easing was NOT a good thing that the Gov’t will tell you it was and it can be found here: https://www.bloomberg.com/opinion/articles/2022-11-22/fed-s-qe-was-a-colossal-monetary-policy-mistake

Or, here’s your snippet: “The great quantitative easing experiment was a mistake. It’s time central banks acknowledge it for the failure it was and retire it from their policy arsenal as soon as they’re able.

Since the global financial crisis of 2008, an integral part of central banks’ play book in the US, the UK and the European Union has been QE — the practice of buying up long-term bonds and mortgage-backed securities. QE is supposed to work by lowering long-term interest rates, which boosts demand and increases lending and risk-taking.

There is little to show in terms of the economic benefits of QE, but there are plenty of costs. Now central banks find their hands tied as they try to curb inflation with interest rate increases and quantitative tightening, which means no more purchases of long-term bonds and mortgage-backed securities. But they’re finding that ending QE can itself be a threat to financial stability.

During the 2008 financial crisis, central banks were desperate to inject liquidity into the financial system. With the policy interest rate at zero, it needed to figure out another mechanism, so it bought long-term bonds and mortgage-backed securities, ballooning its balance sheet. That was supposed to be an emergency measure, but it went on for years. QE was followed by QE2 and then QE3 as the Fed became fearful that stopping would crash the bond markets.

Looking objectively at the evidence, it’s still not clear that all this bond buying ever did much for the economy.”

Chuck again… No not much for the economy in the long run… But it did fuel the “All Everything Bubble” and for that we must be thankful… NOT!

Market prices 11/29/2022: American Style: A$ .6695, kiwi .6217, C$ .7388, euro 1.0362, sterling 1.2012, Swiss $1.0506, European Style: rand 16.9955, krone 9.9686, SEK 10.0506, forint 393.57, zloty 4.5273, koruna 23.4991, RUB 61.10, yen 138.48, sing 1.3740, HKD 7.8107, INR 81.72, China 7.1696, peso 19.12, BRL 5.3097, BBDXY 1,275.71, Dollar Index 106.43, Oil $78.74, 10-year 3.71%, Silver $21.16,
Platinum $994.00, Palladium $1,848.00, Copper $3.66, and Gold… $1,751.63

That’s it for today… Strange day here yesterday, it was very quiet, and unlike the days last week leading up to Thanksgiving and afterward. I ran across an article in our local paper last night, that had a poll going for the best “weather songs” of all time… I could think of a few like: I can See Clearly Now, and Riding the Storm out, and Let it snow, Stormy weather, and others, so there are quite a few when you think about it… I’m very excited about November coming to an end tomorrow, the house will begin to look like its starting to look like Christmas, and I can turn the volume up on the Christmas music I play all the time… Kathy says no to Christmas music before Thanksgiving… So, I keep the volume turned down! I found out last week at the DR’s office that I had lost 9 more pounds from the previous month. I am now at the same weight I was after my second major cancer surgery in June of 2007… Now if I could only lose 50 more lbs! That’ll be like trying to run a marathon for me… But I’ll keep trying! Vince Guaraldi and his trio take us to the finish line today with their version of the song: Christmas Time Is Here…   I hope you have a Tom Terrific Tuesday today, and remember to Be Good To Yourself!

Chuck Butler