A Pfennig For Your Thoughts
June 15, 2021
* The powers that be have said the dollar rules…
* Gold & Silver can’t find a bid…
Good Day… And a Tom Terrific Tuesday to you! Well, I told you last week that there would be no Pfennig yesterday, as I had a dr. appt. scheduled. I realized over the weekend that I did not have an appt. That I had read my calendar wrong. What a dolt, right? But so I planned on surprising you with a Monday Pfennig… But it was one of those days… When the chemo catches up with me, and causes me to want to sleep all day… I finally woke up around noon… And the rest of the day, I kept thinking, I sure could use a nap! So, I guess I have to put that down as a day I couldn’t answer the bell… If you’ve never been on a chemo treatment plan, and you should thank God for that if you haven’t, you get what I’m talking about… I don’t use Chemo as an excuse for many things in life, I could… but I don’t… The Eagles greet me this morning with their song: Seven Bridges Road…
Well… Last Thursday, we saw the stupid CPI print for May gain more than expected, and on an annual basis, consumer inflation is up 5%, a figure not seen here in the U.S. since 2008, and that’s when the price of Oil was $150.00!!! John Williams over at Shadowstats.com reports that if we calculated inflation without the hedonic adjustments it would reflect a 13% inflation rate… Now I ask you this, doesn’t what you’re experiencing reflect more on the 13%, rather than the 5%? I thought so… A dear reader send me a note last week telling me that his local grocery store sold a lb of bananas for 39-cents a month ago, and now they sell for 69-cents… That looks like a greater than 5% move to me!
And still crickets from the Fed Heads about what they are going to do to put a halt to these rising prices… Do you recall that early in the 70’s after Nixon closed the Gold window, that inflation was beginning to rise rapidly, while the dollar went to hell in a hand basket, and Nixon implemented price controls? Good try Dick, but it didn’t work! So, what can the Fed Heads do to stop these rising prices?
Good friend, Dennis Miller sent me an article over the weekend from Zerohedge.com that was very interesting: “Denying that the current inflation cycle is nothing more than a base effect and is, therefore, “transitory” brings back memories of the 1970s. In the 1970s, Federal Reserve Chair Arthur Burns denied that monetary policy played a role in the inflation cycle. Mr. Burns argued that higher inflation was due to idiosyncratic factors, such as food shortages and the OPEC oil embargo.
Chuck again… Talk about a delusional man! I wonder what he thought by 1978?
OK, now back to the question at hand, of how can the Fed Heads stop these rising prices? Well, first of all they would have to WANT TO TAME INFLATION… And right now they, the Fed Heads, are allowing inflation to run hot… And secondly, they can’t do a damn thing to stop them! I’ve told you previously a few times that raising interest rates to combat inflation is out of the question for the Fed, that is unless they want to bring the economy to a screeching collapse!
Famous author and analyst, James Rickards, believes that inflation is NOT a 2021 story, but a 2022 story… Hmmm… Well, whether he’s right or wrong on that, mom and pops still need to deal with the rising costs of food, health care, insurance, autos, tuitions, you name it, NOW!
And reading all that, you might be thinking to yourself… Chuck has told us that inflation is the dollar’s kryptonite, and Gold’s steroids, so the dollar must be down and Gold soaring on this news… Well, you would be wrong… Because… The powers that be have decided that this is NOT going to be the way things go with this inflation… This can only go on for so long folks…
But for now the powers that be are winning the battles, as the dollar rallied strongly on Thursday, and Gold got whacked once again. The exact opposites of what you would have expected to see, or at least what I would have expected to see! But I do not expect them to win the war… Sooner or later, this will all be reversed… Be it now, next year (according to Rickards), or whenever… I believe in my heart of hearts that this will be reversed… So hang on Sloopy, Sloopy, hang on… I love that song!
So, last week was a disaster for the currencies and metals… And yesterday didn’t seem to hold any elixir either, as Gold lost more ground… Gold started the day at $1,870.00, and at one point in the day was down to $1,844.00, before mounting a rally that left it down $12.00 on the day to close at $1,866.90, down $11.90 on the day.
Silver didn’t see the major selling that Gold did last week, and has stayed right around the $28 figure that I say is the line drawn in the sand by the price manipulators… To show you what I’m talking about, at one point yesterday, Silver was up to $28.10, but was forced back below $28 to close at $27.93, down 10-cents on the day…
The currencies saw most of the selling and losses late last week, as yesterday, they drifted along all day… The Dollar Index began Monday at 90.55, and ended the day at 90.52… Why on earth would anyone besides the government buy dollars in the face of the highest level of inflation in 13 years last week? So the only person, place or thing that would buy dollars is the Exchange Stabilization Fund (ESF) or the Plunge Protection Team, which is basically the same unit…
So, don’t doubt yourself for owning currencies to diversify your investment portfolio… Things in this country are very weird right now, and you have to be honest with yourself and admit that in your gut you know something is wrong in this country… I borrowed this next paragraph from Tom Woods, of whom I read daily…
“Whether it’s economic trends, or the debt, or Big Tech suppression of dissident voices, or a school system that is somehow managing to get even more propagandistic, we have to figure out what we’re going to do.”
Chuck Again… I would say that it’s not a question of whether, but all of these things! And what are we going to do? Got Gold?
In the overnight markets last night… there was more dollar buying, which is just stupid in my opinion… The Dollar Index is 90.61, so the dollar buying wasn’t of major proportions but… it WAS dollar buying… Gold & Silver just can’t find a bid and have given away more ground in the early trading today… Gold is down $1.80, and Silver is down 24-cents… Ed Steer, of whom I read daily, and his letter: www.edsteergoldsilver.com, calls what’s going on in Gold “Ground Hog Day”…
The U.S. Data Cupboard was empty yesterday, but will be restocked today, with Retail Sales for May, which the BHI indicates to me will be negative… And Industrial Production and Capacity Utilization, which should be pretty steady with the previous month. I said last week that I just don’t trust government reports and you shouldn’t either… For instance: I told you last week that you can never tell what will be the outcome of the CPI print beforehand because of all the hedonic adjustments that are made to it… Even with that in mind, the May print of CPI was .7%, which was greater than expected, with annual inflation hitting 5%!!!! That’s up from 4.2% in April… 5%… and it’s only just begun, to live… and grow taller, and hungrier… I told you last year when the Fed said that they were going to allow inflation to run hot, that they had better be careful, because once inflation gets going, it will be too late to put the kyboshes on it! And look where we’re going now?
Inflation is the scourge of the economy, and a little inflation begets more inflation and more and more until everything costs so much, no one can afford to buy it any longer. The reason this occurs is that once Mabel hears that inflation is rising, and tells Josephine, who confirms it by saying how much more she just paid at the grocery store. Then Mabel rushes out to buy what she wanted before the prices get to high, and that causes more inflation to happen… Now think of this, Mabel is 1 Million people, and Josephine is 5 Million people, and they tell 10 Million people, and well, I think you get the picture here…
But in the end… Shadow Stats has inflation at 13%… So, who’s report on inflation are you going to side with, the government’s or Shadow Stats’…. I know who I pinned my colors to!
One more thing regarding the Data Cupboard, tomorrow is a FOMC Day… The Fed Heads will meet and say that inflation is “transitory”, to move long for this is not the inflation that we’re looking for… If I were there I would ask them, “What inflation ARE you looking for? , Wages are rising, food has risen, along with a myriad of other items, so please tell me and the rest of the U.S. just what inflation you ARE looking for?”
To recap… Chuck is beside himself this morning, as he rants and rants some more about inflation. You must forgive him because he lived through the 70’s and remembers what inflation did to the U.S. economy and mom and pops’ buying power… And with soaring inflation Gold & Currencies got sold like funnel cakes at a State Fair! And he can’t believe that happened, but it did, and then he returns to talking about inflation some more…
One more thing today before we head to the Big Finish… The price of Oil continues to rise and this morning it trades with a $71 handle… I had to fill up my gas tank last week and paid $3.25 for gas… And said to myself, “I’m sure glad I don’t have to drive to work every day any longer”… But I imagined people that do have to drive to work, and pay these inflated prices for gas, and how that has to put a HUGE dent in their disposable income, if they had any at al to begin with!
For What It’s Worth… One more thing that didn’t make any sense to me as a long time investment analyst, bond trader, and currency trader, and that is the way that Treasuries reacted to the inflation news… The yield on the 10-year Treasury fell to 1.49%, instead of people selling bonds to not be locked in on low yields when rates rise to combat inflation, these knuckleheads bought bonds! And the Fed Heads are all pointing to the bond market saying that this proves their “Transitory” mantra… Well, there are other problems going on in bonds right now, and this article from zerohedge.com talks about those problems and it can be found here: “We Are Building Up To A Big Accident” – Gap Between 10Y Yields And CPI Is The Highest Since 1980 | ZeroHedge
Or, here’s your snippet: “Even though US CPI smashed expectations again, Deustche Bank’s chief credit strategist Jim Reid correctly points out that “the data isn’t going to change anyone’s mind of whether inflation is transitory or not.”
Still, as an aside for those who still care about fundamentals, he notes that the current gap between 10yr US yields (c.1.5%) and US CPI (5.0%) is a whopping 3.5%, the highest since 1980. In fact, the gap has only been more negative for 10 months in the last 70 years, all of which were in 1974, 1975 or 1980.
While such a deeply negative (albeit crude) proxy for real yields (as opposed to the manipulated ones where the Fed is implicitly setting real rates with its purchases of TIPS) is great for financial conditions today, the DB credit strategist asks, rhetorically, if “we are building up to a big accident with such a mismatch between inflation and bond yields?”
And just as rhetorically, Reid concludes that despite this stunning observation, “no-one is going to have a different opinion to what they had yesterday though”
Chuck again… Yes, that’s right… It’s all a matter of what you are experiencing VS what the Fed Heads are telling us… And I’m here to tell you that the Fed Heads are wrong… So wrong they’re almost right…
Market Prices 6/15/2021: American Style: A$ .7690, kiwi .7125, C$ .8198, euro 1.2111, sterling 1.4048, Swiss $1.1112, European Style: rand 13.7899, krone 8.3205, SEK 8.3232, forint 291.06, zloty 3.7381, koruna 21.0118, RUB 72.10, yen 110.10, sing 1.3265, HKD 7.7623, INR 73.29, China 6.3967, peso 19.96, BRL 5.0919, BBDXY 1,124.91, Dollar Index 90.61, Oil $71.52, 10-year 1.49%, Silver $27.69, Platinum $1,162.00, Palladium $2,842.00, Copper $4.38, and Gold… $1,865.10
That’s it for today… Sorry for my rant about inflation… but someone has to be the adult in the room here and admit that prices are soaring and something needs to be done about it… Maybe Rickards is right that inflation is a 2022 story, well if that’s true can you even imagine what prices will be then? I’m also sorry for not answering the bell yesterday… Sunday was a Chamber of Commerce Day here in the Midwest, we had warm temps, and a lovely breeze that blew all day… But Monday was right back to high 90’s temps… Oh, it’s a hot one, like seven inches from the midday sun! Summer is here, and it’s not even the Summer Solstice yet! The young grandkids were all here on Sunday, only Delaney Grace had other plans (she’s going to be 14 this summer, I always knew this day was coming!) I didn’t get up until noon yesterday, and then had clothes to clean, and dishes to wash and forgot to put my flag out for Flag Day… see like I said, what a dolt, eh? Hang in there folks, things can only get worse… I mean better… at least that’s what I ALWAYS hold out hope for! Dave Loggins takes us to the finish line today with his 70’s hit song: Please Come To Boston… I hope you have a Tom Terrific Tuesday, and Please Be Good To Yourself!
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A Pfennig For Your Thoughts