Bank of Canada Hikes Rates 100 Basis Points!

A Pfennig For Your Thoughts
 
July 14, 2022
 
* U.S. inflation hit a 40 year high in June… 
* The dollar soars in the overnight trading! 
 
Good day… and a Tub Thumpin’ Thursday to one and all! A real Chamber of Commerce here yesterday and it was hotter back in St. Louis than it was here in S Florida! What the heck went on with my beloved Cardinals last night? I went to bed with them leading 6-2, only to see that they lost 7-6 when I checked the score in the middle of the night. UGH! The rubber game is tonight… I have quite a few things to talk about this morning, I hope I remember to include them all! Steve Winwood greets me this morning with his song: Roll With It
 
Where to start, where to start? OK, let’s start with the stupid CPI report yesterday… CNBC reported that “Shoppers paid sharply higher prices for a variety of goods in June as inflation kept its hold on a slowing U.S. economy, the Bureau of Labor Statistics reported Wednesday.
 
The consumer price index, a broad measure of everyday goods and services related to the cost of living, soared 9.1% from a year ago, above the 8.8% Dow Jones estimate. That marked the fastest pace for inflation going back to November 1981.”  
 
The inflation number that the stupid CPI reported yesterday ( 9.1%) was scary for the price manipulators yesterday and Gold turned around a day that saw it in the red, to a positive day, gaining $6.70 on the day. Gold closed at $1,733.70 yesterday… Silver gained 27-cents on the day, and closed at $19.20… (That’s the good news… the overnight markets are ugly!)
 
With inflation soaring still, apparently not at “peak inflation” yet, the dollar rallied. The mental giants that are trading dollars these days, apparently think that high inflation is a good thing for the dollar… They reason that with inflation high, that the Fed Heads will have to keep the pedal to the metal, with regards to rate hikes, thus giving the dollar, on the outside, a higher yield… But when you take into consideration the real yield, that subtracts inflation from the gross yield number, our interest rates in the U.S. are still negative… Other countries are getting whacked because of negative interest rates… I’m just saying…
 
The Bank of Canada (BOC) surprised the markets yesterday by hiking their internal rate a full 1%, or 100 Basis Points. The BOC said that even with this front loaded rate hike that they still believe more rate hikes will be needed… The Canadian internal rate is now 2.5%… But did this news help the loonie? Fat chance of that happening, the green/peachback has the ‘con’ right now… 
 
OK, I’ve stalled enough from starting the overnight markets roundup, gotta go there eventually… 
 
In the overnight markets last night, the dollar exploded upward, with the BBDXY gaining 7 index points and trading at 1,297 this morning… Gold is down $14 in the early trading, and Silver is back below $19 having lost 14-cents to start the day. I’m shocked that the dollar was bought like that overnight, as it just doesn’t make any sense to me… But, it is, what it is… and there’s nothing I can do to change that! 
 
Even the Russian ruble lost some ground overnight… This currency has been the one shining light for non-dollar investors… I don’t see this slippage overnight as a trend for the ruble. Probably just some profit taking. 
 
Well, did you hear about, oh, allow me to get Bloomberg.com to tell you about the bankruptcy of a cryptocurrency. “Cryptocurrency lender Celsius Network Ltd. filed for Chapter 11 bankruptcy, the latest casualty of a $2 trillion crash that has wiped out some of the industry’s biggest names and exposed hundreds of thousands of individual investors to steep losses.”
 
I’ve got more on the crashing of cryptocurrencies, in the FWIW section today, so don’t miss that! 
 
Well, I was doing some reading yesterday, and as always I check out what the folks at www.goldswitzerland.com are saying… This week they talked about Gold price manipulation, why and how it’s done… Here’s a snippet of their article: “In essence, a handful of 7-8 LBMA institutions creates an almost limitless amount of synthetic paper representing unallocated gold (i.e., gold they don’t actually own) to short the paper gold market.
 
Why?
 
Again, because the central bankers mouse-clicking and hence destroying trillions worth of sovereign currencies (since Nixon took the gold chaperone away in 1971) are utterly terrified of a neutral and relatively fixed/scarce monetary metal like gold—i.e., real money.
 
Indeed, gold is money, the rest is just debt and toilet paper masquerading as currency.
 
Furthermore, the policy makers (or central controllers) are embarrassed to confess the inflationary consequences of their absurd money printing, and nothing reveals those consequences more than a naturally rising gold price.
 
Solution?
 
Easy: Lie about inflation and rig the paper gold price with leverage, derivatives and a greenlight from the BIS, aka: “Big Brother.” This whole article can be found here: Paper Gold Price Manipulation—Rigged to Fail – Matterhorn – GoldSwitzerland
 
 Chuck Again… Nothing new here, just good to know that what I’ve been saying for over 20 years now, is on the minds of other people that must be as smart as I am! HA!
 
Good friend, Dennis Miller, called me yesterday, and was up in arms about something that he read, and wanted my take on it… That “something” was a statement by a writer that interest rates had returned to normal… I sense an upcoming article from Dennis that dives deep into this statement that things have returned to normal… You can always read what’s on Dennis’ mind by clicking here: www.milleronthemoney.com  
 
I came across this article on the kitco.com site yesterday, and I’ve got a snippet of it here for you: “
 
 
 
(Kitco News) ARK Invest’s CEO and CIO Cathie Wood sees the Federal Reserve as making a mistake by raising rates too fast.
 
Inflation is still a short-term problem, according to Wood. And this becomes clear when investors start paying closer attention to how gold, the U.S. dollar, and yields have been trading, Wood said during her webinar Tuesday.
 
“We believe the Fed has been making a mistake, a policy mistake … We are getting all kinds of catalysts … which should give the Fed a pause,” Wood said. “If not pause, it should cause an entire pivot and reversal in policy. They are making a mistake. The markets are telling us they are making a mistake. I think something will break that matters to them if they keep following the lagging indicator called the CPI.”
 
However, Wood argued that the Fed should be worried about deflationary forces. “There are all kinds of deflationary signals, which are going to force the Fed, we think, to pivot and reverse its policy,” Wood noted.
 
Chuck again… this is a discussion that needs to take place in a separate issue… Basically the idea is that inflation gets so high, and prices get so high that people stop buying, and that will bring about falling prices and deflation… Maybe I’ll write about this while I’m on vacation and send out a special Pfennig… Or Maybe I won’t… UGH! 
 
The U.S. Data Cupboard today doesn’t have much for us other than the Weekly Initial Jobless Claims. Tomorrow, we’ll see June Retail Sales, of which I’m thinking that the BHI indicates that Retail Sales will be better than May’s negative -.3%… We’ll also see June Industrial Production and Capacity Utilization. The Data Cupboard has been lacking lately, and I think I know why… The data that’s getting printed isn’t good and doesn’t show a strong economy, so why announce a printing? Of course, I know that isn’t what’s happening, but it was fun thinking about it! HA! 
 
To recap… The stupid CPI printed for June yesterday, and showed that inflation was still rising, with June’s number at 9.1%, the fastest growth in inflation month to month since Nov. 1981! Gold gained on the day, but in the overnight markets there was a bloodletting by the dollar on all non-dollar assets… The Bank of Canada front loaded a rate hike yesterday, hiking their internal rate by 100 Basis Points (1%)! And a cryptocurrency filed for bankruptcy yesterday… 
 
For What It’s Worth… Ok, I teased you a bit above about this article, and it’s a doozy, so sit back, refill that cup of coffee, and get to reading the article that can be found here: Over 1,600 of the Brightest Scientific Minds in Technology Have Signed a Letter Calling Both Crypto and Blockchain a Sham (wallstreetonparade.com)
 
Or, here’s your snippet: “The letter is a punch in the gut to the Wall Street underwriters who have brought billions of dollars of crypto related companies to the public markets, most of which have now collapsed in price. It makes the billionaire venture capitalists who have invested billions in crypto startups look like fools. And it renders the big-name celebrities who have promoted this garbage in TV commercials look like the shills that they are.
 
The letter was sent to key members of Congress and to the Chairs of the Senate Banking and House Financial Services Committees. It is signed by more than 1,600 computer scientists, software engineers and technologists from around the world. There are 45 signatories who currently work at Google; 19 who work at Microsoft; 11 employed at Apple. (Those three companies currently have a collective market capitalization of more than $5.75 trillion; they can afford to hire the best and the brightest.) There are signatories that are Ph.Ds from the most prestigious universities in the world, including the University of Oxford and MIT. And all 1,600 have signed a letter that says this about crypto and blockchain:
 
“We strongly disagree with the narrative—peddled by those with a financial stake in the crypto-asset industry—that these technologies represent a positive financial innovation and are in any way suited to solving the financial problems facing ordinary Americans…
 
“As software engineers and technologists with deep expertise in our fields, we dispute the claims made in recent years about the novelty and potential of blockchain technology. Blockchain technology cannot, and will not, have transaction reversal or data privacy mechanisms because they are antithetical to its base design. Financial technologies that serve the public must always have mechanisms for fraud mitigation and allow a human-in-the-loop to reverse transactions; blockchain permits neither.”
 
Chuck again… this is just a snippet of the whole article, that I must insist everyone goes to read it in its entirety! Pam and Russ Martens have really dug deep on this one, and I can’t say that I don’t agree with the findings either! 
 
Market Prices 7/14/2022: American Style: A$ .6735, kiwi .6095, C$ .7629, euro 1.0023, sterling 1.1845, Swiss $1.0116, European Style: rand 17.0849, krone 10.2876, SEK 10.5647 forint 407.49, zloty 4.8146, koruna 24.3603, RUB 59.22, yen 138.94, sing 1.4026, HKD 7.8499, INR 79.87, China 6.7430, peso 20.87, BRL 5.3924, BBDXY 1,297.06, Dollar Index 108.58, Oil $93.62, 10-year 2.96%, Silver $18.85, Platinum $837.00, Palladium $1,943.00, Copper $3.29, and Gold… $1,713.37
 
That’s it for today… And for this week, and the next two weeks! I start my annual summer vacation tomorrow! The next time I talk to you, God willing, will be August 1st, and by then the Fed will have hiked rates again, and the euro will probably be below parity… Son, Andrew, and his family, of Rachel, Braden, and little Evie will be joining us here. I can’t wait to see little Evie on the beach! Braden took to the beach and ocean at a very young age (he’s now 11)… One of my fave bands The Beach Boys take us to the finish line today with their song: I Get Around…  Now if that song doesn’t remind you of summer days of your youth… Well…  I hope you have a Tub Thumpin’ Thursday today, and please remember to Be Good To Yourself! You won’t have me reminding you to Be Good To Yourself, every day for two weeks, so it’ll be up to you to remember! 
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts