A Pfennig For Your Thoughts
August 25, 2021
* Currencies & Metals have small rallies on Tuesday
* But Currencies & Metals get sold in the overnight markets…
Good day… And a Wonderful Wednesday to you! Man-o-man, my beloved Cardinals can’t seem to stop stepping on their on toes… I sit there watching them and shaking my head in disbelief that my once proud and ever present team in the playoffs, can’t seem to hit their way out of a wet paper sack… Injuries, which all teams have, have definitely played a part in their demise this year, but I don’t get how other teams, work their next man up, to win, and we can’t… Oh, well, as the Chicago Cubs fans said for years, “wait till next year”…. I’m heading to SW Missouri, NW Arkansas this weekend to spend a weekend with good friends on Bull Shoals Lake… There’s a picture out there somewhere of me at age 5 holding a hangar of fish that my dad had caught while fishing in Bull Shoals Lake… Joanie? Terri? Do you have that picture? Oh, well… time to move on… The Marshall Tucker Band greets me this morning with their song: Can’t You See?
Well, the ambush of the dollar on Monday had little follow up that night in the overnight markets, and yesterday, while the dollar slipped more, the intensity of the selling of dollars has waned from Monday, and that has me concerned… OK, I’m not THAT concerned, but a little concerned… The BBDXY started the day yesterday at 1,151.18 and ended the day at 1,149.79, so there had to be some currencies that were rallying VS the dollar. For what it’s worth, I really couldn’t find them… The euro seems to be a tight trading range since rallying on Monday, and the Petrol Currencies have had muted rallies to go along with the recent run up in the price of Oil… The old Dollar Index which I still chart in the Market prices roundup, started the day yesterday at 92.96, it’s first dip below 93, in about 10 days, and the Index ended the day at 92.89, so… this index tells us more of what really went on yesterday, and that was there was some dollar selling, but not a lot…
Gold lost $2.50 on the day yesterday. At one point in the day Gold had rallied to $1.810.00, but then profit taking set in and it ended the day down $2.50, at $1,804.00. Silver had a better day than Gold, and gained 24-cents to close the day at $23.97… I’ve not talked about inflation in a while… It’s still strong here in the U.S., and one of the things keeping inflation at its current level, is the strong dollar… I’ve explained this many times in the past, but what the heck, here we go again… Robert Rubin back in the 80’s used to remind the markets all the time that “A strong dollar was in the best interest of the U.S.” He wasn’t saying that to help our manufacturers that sell overseas, he was saying that to remind traders that inflation can’t get into the country, with a strong dollar… You see, with a strong currency, a country doesn’t import another country’s inflation…
I went through all that to talk about how prices of just about everything are higher than they were at this time last year… And just for fun… I’ll show you some of these price increases. These numbers were as of the end of June…. Year on year price increases… Car Rental +87.7%, Used Cars +45.2%, Gas +45.1%, Hotels +16.9%, Bacon +8.4%, Fruit +7.3%, Fresh Fish +6.4%, and Milk +5.8%… Now how’s that for an update on inflation? Crazy to think that inflation is so strong, but the price movement upward for Gold is being held back…
In the overnight markets last night…. the dollar buying returned, as represented by the BBDXY, which closed yesterday at 1,149.79, and is trading at 1,151.64 this morning… Only the Petrol Currencies have held their ground VS the dollar, as the Russian ruble is trading back below 74, and ever since the Norwegian krone rose above 9, it has rallied to trade below that figure… The Canadian dollar/ loonie isn’t participating in this Petrol Currency rally, as I believe traders are punishing the loonie for the country’s Covid problems…
More signs of dollar buying last night is shown in the the price of Gold, which has dropped by $9.20, and Silver is down 12-cents in the early trading today… Yesterday, as I said above, Gold had rallied to $1,810, and then it closed at its 200-day moving avg. Obviously, the early trading loss this morning has take Gold back below its 200-day moving avg. Oh well, the price of Gold doesn’t really matter to me, as I’m not looking to sell my Gold! I just like to see it trade at its true value, without manipulation…
Long time reader, Bob, sent me an article that I want to highlight, it’s about how Russia’s economy has nearly recovered to pre-pandemic levels… Let’s listen in to what their leader is saying about this report: “The Russian economy is nearing its pre-Covid-19 pandemic level, President Vladimir Putin said on Sunday at a meeting with representatives of the United Russia party.
“Practically, with the exception of some things that specialists should pay attention to, [Russia’s economy] has generally been restored to the pre-crisis level,” Putin stated.
The thing that has Putin concerned though, is the high rate of inflation, which is 6.5% in Russia… So, even a country like Russia has the same problem as the U.S. and that is with inflation so high, their respective central banks need to hike rates, but that could hurt the nascent economic growth of the two countries… I’ve long said that the Russian Central Bank Gov. is the best in the world, and I have faith that she’ll do the right thing, which to me is to raise interest rates…
OK… In recent days, I’ve wanted to talk about something that kept alluding me… I would sit for a time and try to think about what I wanted to talk about, but it just wouldn’t come to me… Until… I was reading Bill Bonner’s daily diary and he mentioned something that triggered my mind into actually coming up with what I wanted to talk about… For the record this is what Bill had to say on 8/23: “This new souped-up “stimulus” program will have no better success than the previous ones. More zombified than ever, by fake money and real debt, the economy will slow.
And this “stagflation” will bring more discontent… more spending… and more inflation.”
And now for what I wanted to talk about… And that is how the U.S. keeps coming up with these stimulus plans, like they are on a shelf and they can just take them off the shelf and use them… Now, I’m going to call on all the long time readers of the Pfennig to confirm this, but back in the 90’s and even into the 2000’s, I used to write about how Japan had issued another Budget adjustment, and stimulus plan for their economy that was mired in a long drought… And none of them worked! And then remember when I used to use the lyrics by the Vapors, “I’m turning Japanese, yes, I really think so”… But only instead of the word, “I’m”, would change it to We’re… And now here we are at least 20 years later, and we, as a country are still following the Japanese to an economy that has no chance of growth…
Oh I hear you saying, but Chuck, the U.S. has a 6% GDP this year…. And to that I will point to the fact that the 6% GDP is like a castle built on sand… One good crashing wave, and the castle is wiped out, just like the 6% GDP… It’s built on fake money, fake stimulus, fake illusions about our future, and fake banking institutions….
And then this headline article that appeared on Bloomberg.com, talked about how the Fed was decrying the wealth gap that they helped perpetuate… Here’s a snippet from the article: “Federal Reserve officials often decry the unprecedented disparity between the wealthy and poor. But they usually avoid mentioning the direct role they have played in widening these financial disparities over the past few decades.”
That’s our Central Bank,,, drawing attention to something, but not doing a darn thing about it… I was surprised that in the article that the Cartel didn’t say that the wealth gap was “transitory”… HA!
Long time readers know that I’m no fan of our Central Bank… It is my contention that they should not be in charge of setting interest rates, that the markets be responsible for that. We would have more markets driven interest rates, and not interest rates that are arbitrarily set by a group of economists that we don’t vote on to sit on the FOMC…. I’m just saying…
So.. this Friday is the day that Cartel Chairman Jerome Powell will speak virtually I might remind you. And in recent days, I’ve read many opinions that think that this is the day that Powell, will lay out the framework of Tapering the Cartel’s bond buying… I’m still of the opinion that I don’t believe he’ll do that on a virtual network, as it loses its emphasis… and to add to that, was this Tweet from David Rosenberg…. “FOMC… In discussing the uncertainty and risks associated with the economic outlook, many participants remarked that uncertainty was quite high, with slowing in progress on vaccinations and developments surrounding the Delta variant posing downside risks to the economic outlook.”
Now if that sounds like a unified Central Bank in announcing Tapering, I’m not seeing it… or as the old time saying goes… I’m a monkey’s uncle!
The U.S. Data Cupboard yesterday, had Existing Home Sales, and for the info on that print I turn to Dave Gonigam of the 5 Minute Forecast: “new home sales — which rose 1% from June to July, more or less as expected. Year over year, that’s down 27.2%; gone is the pandemic buying frenzy that began when 30-year fixed mortgage rates fell below 3% for the first time.”
Today’s Data Cupboard has the Durable & Capital Goods Orders for July… And in the frame of what I talked about yesterday, regarding recent data prints disappointing the markets, I would think that Durable Goods Orders will keep the disappointing prints going… As far as Capital Goods Orders, this data has been changed so much, that I can’t get a reading on what’s going on here…
Or, here’s your snippet: “Billionaire investor Jeffrey Gundlach told Yahoo Finance in a video interview on Monday that the US is running its economy like it doesn’t care if the dollar loses its global reserve currency status.
The DoubleLine Capital founder and CEO reiterated his long-held view that the dollar is going to go depreciate further versus peers the next few years, blaming the US’s current economic policies for the situation.
“We’re running our economy in a way that is almost like we’re not interested in maintaining global reserve currency status,” Gundlach said.
The investor – who has been nicknamed the “Bond King” from calls he’s made on the US fixed-income market – explained that in the aftermath of the pandemic, the strongest economy “by far” has been China, not the US.
While the US economy rebounded by consumption, a lot of the consumption went straight to China, he said. In fact, Gundlach said China’s economy is growing at such a rapid pace some economists are estimating it will become the largest in the world by as early as 2028.
“China’s made no secret of the fact that they want to be a global player and have at least a seat at the table of global reserve currency status,” he said, adding that China has “made no secret of the fact that they want their military to be dominant, maybe the biggest in the world.”
Combine this with the fact that the US is “growing debt like crazy,” and it’s clear the dollar is headed towards losing its reserve currency status, Gundlach said.
In a July interview, the investor said the dollar is “doomed” in the long term, but it will be stronger in the short-term.”
Chuck again…. Man, Mr. Gundlach sure got that last call. at least the first part, bang on! I’ve said that the U.S. doesn’t value the dollar like it should be. considering its used all over the world… They keep debasing the dollar, by keeping interest rates below inflation rates, and they keep printing more dollars thus rendering the existing stock of dollars, less valuable…
Market prices 8/25/2021: American Style: A$ .7250, kiwi .6947, C$ .7938, euro 1.1738, sterling 1.3718, Swiss 1.0935, European Style: rand 14.9587, krone 8.8496, SEK 8.7087, forint 296.88, zloty 3.8941, koruna 21.7348, RUB 73.87, yen 109.90, sing 1.3542, HKD 7.7842, INR 74.15, China 6.4331, peso 20.24, BRL 5.5352, BBDXY 1,151.64, Dollar Index 93.05, Oil $67.75, 10-year 1.30%, Silver $23.85, Platinum $1,003.00, Palladium $ 2,528.00, Copper $4.23, and Gold… $1,794.80
That’s it for today… It’s a hot one…. Like seven inches from the midday sun… A heat wave has taken over the Midwest, but as I think about this, it IS August, and it IS supposed to be hot! I recall a week when I was a young man where the temp went over 100 every day… And we didn’t have Air Conditioning to stay inside and play video games… In fact, I was a catcher in my early days of playing baseball, and we wore the old wool baseball uniforms… And we played a game during that week where temps went over 100… I remember being just fine, during the game… I would pay good money to watch some young kids do that today without all their whining, and complaining! OK… enough of that! Soft Cell takes us to the finish line today with their song: Tainted Love… “sometimes, I feel, I’ve got run away, I’ve got to get away, from the pain you drive into the heart of me”… I hope you have a Wonderful Wednesday, and please Be Good To Yourself!
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A Pfennig For Your Thoughts