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Wholesale Inflation Soars, Gold Gets Sold?

Summary:
A Pfennig For Your Thoughts September 13, 2021 * PPI soars, indicating that inflation continues…  * The dollar gets bought in the overnight markets…  Good Day… And a Marvelous Monday to you… Did you have a nice weekend? Mine was great! It started with a driveway happy hour on Friday, where I got to catch up with neighbors and former colleagues at EverBank. From there, the rest of the weekend was filled with absolutely fabulous weather, and two Cardinals victories, and being outside with my good friend Duane. The only bummer of the weekend was the loss by my beloved Missouri Tigers… UGH! I’m greeted this morning with a song by a 70’s band that didn’t last too long… Lobo greets me this morning with their song: I’d Love You To Love Me Well, did you get a chance to check out that

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A Pfennig For Your Thoughts
September 13, 2021
* PPI soars, indicating that inflation continues… 
* The dollar gets bought in the overnight markets… 
Good Day… And a Marvelous Monday to you… Did you have a nice weekend? Mine was great! It started with a driveway happy hour on Friday, where I got to catch up with neighbors and former colleagues at EverBank. From there, the rest of the weekend was filled with absolutely fabulous weather, and two Cardinals victories, and being outside with my good friend Duane. The only bummer of the weekend was the loss by my beloved Missouri Tigers… UGH! I’m greeted this morning with a song by a 70’s band that didn’t last too long… Lobo greets me this morning with their song: I’d Love You To Love Me
Well, did you get a chance to check out that Producer Price Index (PPI) that printed on Friday last week? The producer price index increased 0.7% in August from a month ago, above the 0.6% Dow Jones estimate. Prices rose 8.3% from a year ago, the biggest increase on record going back to 2010. That’s right… wholesale inflation or PPI, is up 8.3% from a year ago, which means that the pipeline to consumer inflation is chock-full-o-inflation, and it’s coming to a product that you want to buy, near you! 
So.. I have to wonder what the Cartel heads are thinking these days, for they have stood steady Eddie with their thoughts that the current inflation would wane by year end… But this PPI print says that a waning is not going to happen… The Cartel has been so wrong on this inflation that they can’t change horses in the middle of the stream now… But, it would be far better for the economy and you and me, if the Cartel just began to fight inflation, and didn’t mention their previous error in forecasting… 
So, with all this inflation pressure in the docket just waiting to explode on the consumer inflation scene, one would think that the dollar would be be sold… But that wasn’t the case on Friday… The dollar wasn’t sold or bought on Friday, and that had me scratching my bald head… The BBDXY ended the week at 1,145.53, up just a tiny bit from Thursday’s 1,145.49… 
And Gold? The all-time leader in inflation hedges, couldn’t find a bid all day, and ended the day on Friday down $7.40 to close at $1,787.80, and Silver lost 32-cents on the day and ended the week at $23.78… What on earth is going on here? Is the opposites trading that we’ve seen in the past few years, spilling over to Gold? Now that would be the icing on the cake for opposites, now wouldn’t it?
In the overnight markets last night, the Asian and European Traders have bought dollars by the bushel full… The BBDXY has risen from 1,145.53 to 1.147.93, and the euro has been pushed below the 1.18 handle.. I’m not seeing what caused this dollar buying in the overnight markets, but I’m sure it doesn’t make much sense any-old-way!  
As I look at the currency landscape this morning, the only currency that has held its ground VS the dollar, and found a way to move higher, is the pound sterling… I’ve been watching the pound the last couple of weeks, as it bounced around 1.3775 and held its ground, but now it’s moved higher into the 1.38 handle… I’ve never been swayed by these moves higher by the pound, so be careful here, don’t get swayed by the strong move higher… 
Well, the Cartel made a Big Deal out of talking about Tapering in their last meeting, and they said they wanted to Taper by year-end… I just don’t see that happening, do you? Let’s see now… The Reserve Bank of New Zealand (RBNZ) began tapering their bond purchases back in May, The Bank of Japan (BOJ) began tapering, the European Central Bank (ECB) announced at last week’s meeting that they too would begin to taper their bond purchases, and other European Central Banks will most likely follow the ECB…  
I find this to be something that’s very interesting… These Central Banks around the world have seen the writing on the wall with regards to rising inflation and see tapering as a means to tightening rates, without having to actually hike rates… Makes you wonder, doesn’t it, what the Cartel is going to do? 
Adding to inflation fears… The price of Oil is trading with a $70 handle this morning… I guess the fears of a slower economy because of the variants of the virus, aren’t scaring Oil traders… 
I’m going to repeat something I was talking about last week, because this topic came up a couple of times this past weekend… And that is that there are 10.9 Million job openings in the U.D. and 8.4 Million unemployed folks… And restaurants can’t stay open because they can’t find help, department stores have to shorten hours because they can’t find help, and so on… This is a real dilemma here in the U.S., and there’s no real way to fix it other than to get people out there to go find a job… 
But the pandemic shutdown has brought on a new thought process when it comes to thinking about a job for Americans… Right or wrong, it has changed how people look at jobs, and they have decided that they aren’t going back to their old jobs… So 10.9 Million job openings will remain a problem, and 8.4 Unemployed will also remain a problem, and apparently the two shall never meet!
Well, the old Debt Ceiling is coming upon us once again… Treasury Secretary Janet Yellen warned last week, that if Congress doesn’t act, it will be The End of The World As We Have Known It. She must have been listening to R.E.M.’s greatest hits, because that’s all drama that’s not needed! The Debt Ceiling is just a number that has been breached so many times in the past, that it’s become a non-factor… The Democrats blame the Republicans, and the Republicans blame the Democrats… It’s a new version of “Who Did It”?  They both did! 
So why get all Chicken Little on us about this Debt Ceiling, Janet?  This Drama Queen act is not becoming of you!
After last week’s Data Cupboard that has very little in the way of data prints for us, this week’s offerings will be plentiful… Data prints like the stupid CPI tomorrow, and Industrial Production and Capacity Utilization, along with Retail Sales, and other prints will come our way this week… 
Just one more thing to say about the rising inflation and the dollar rallying… What on earth are traders thinking? That the Cartel is going to have to raise rates? Well, in my book, that’ll be the day, when you say goodbye, no wait! That’ll be the day that changes the world as we know it, because of the debt that the U.S. has amassed that has to financed… think about that for a minute, and then tell me that the Cartel will hike rates… 
To recap… The PPI on Friday soared to a record high, with an 8.3% increase from last year, for wholesale inflation, that will filter through to consumer inflation, and with consumer inflation on the docket to move higher, Gold was sold on Friday… Wait, what? Yes, Gold lost $7.40 on Friday in the face to rising inflation… Opposites trading? And Janet Yellen goes all drama queen on us with regards to the debt ceiling… 
Or, here’s your snippet: “Earlier this week, when recapping the latest bearish outlooks from most large Wall Street banks, we touched on Deutsche Bank’s latest House View take in which the bank – along with most of its peers – said that its strategists expects an “imminent correction” without giving much context for the bank’s gloomy take.
So fast forwarding to today, the bank’s chief equity strategist Binky Chadha expounded on this bearish take, and in a note pointing out that “equity valuations are extremely rich”, he first explains “what’s keeping equity valuations high”, and then goes on to warn that “the risk the correction is hard is growing” adding that “there has been a clear negative relationship between initial valuations and subsequent forward returns, with the relationship strengthening as the return horizon is increased from 1 to 3 to 5 years out. For the highest decile of initial valuations, which is where we currently are, 5-year forward returns have on average been slightly negative.”
Starting at the top, Chadha lays out what everyone – even the NY Fed president – is aware of, namely that equity market valuations are “historically extreme” on almost any metric: “trailing and forward price to earnings (P/E), enterprise value to EBIT, EBITDA or operating cash flow are all well into the 90s in percentile terms. High valuations are broad based across sectors and median company valuations are high.”
Furthermore, he notes that “equities are very expensive (36%) relative to the drivers of valuation which have explained the bulk (70%) of historical variation in them.” As a result, the cyclically adjusted P/E at 26.2x is well outside its historical 10-20x range “and easily the highest outside of the Tech bubble.”
Chuck again… Well, this is nothing new regarding warning clients about the stock bubble… But the Cartel just keeps blowing air into the bubble, folks… It’s been very amazing to me just how stretched the bubble can get, but it does… 
Market prices 9/13/2021: American Style: A$ .7351, kiwi .7106, C$ .7886, euro 1.1775, sterling 1.3820, Swiss $1.0825, European Style: rand 14.2070, krone 8.6517, SEK 8.6462, forint 296.48, zloty 3.8576, koruna 21.5103, RUB 73.14, yen 110.12, sing 1.3434, HKD 7.7791, INR 73.66, China 6.4433, peso 19.90, BRL 5.2448, BBDXY 1,147.93, Dollar Index 92.84, Oil $70.54, 10-year 1.32%, Silver $23.68, Platinum $956.00, Palladium $2,228.00, Copper $4.30, and Gold… $1,789.20
That’s it for today… not was wordy today… I’m really draggin’ the line this morning, and I need something to get me revved up! HA! Saturday was the 20th remembrance of our 2nd day of infamy… It’s good that we have big productions of remembering this day so that people never forget how we were attacked… I used to have a small 9-inch tv behind my desk at EverBank and on that day the whole office staff were crowded around that tv watching the events. I’ll always remember that… So, my beloved Missouri Tigers hired an NFL defensive coordinator, to fix the defense… Well either he’s not the answer or the players are lacking… Because the Tigers’ defense is really bad… The NFL’s season got going yesterday. I don’t watch much NFL any longer, and I dropped out of the fantasy football league I participated in for years… David Bowe takes us to the finish line today with his song: Waiting For The Man… I hope you have a Marvelous Monday and please Be Good To Yourself!
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts

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