Currencies & Metals Get Whacked!

A Pfennig For Your Thoughts
 
March 1, 2021
 
*Dollar buying is strong once again… 
* The markets say no-mas on Treasuries! 
 
Good Day, and a Marvelous Monday to you! And Welcome to March! Well, I attended my first spring training game of 2021 yesterday, and my beloved Cardinals tied the game 4-4. In spring training they don’t play extra innings… I don’t want to jinx my beloved Cardinals, and I know it was only the first game of the year, but… It’s the same old thing with this team.. They can’t hit with runners on base… There! I said it out loud I sure hope they prove me wrong on that! It’s been a fun weekend with our guests here… Lots of good conversation and laughs to go all around! Los Bravos greet me this morning with their song: Black and Black… “I want my baby back… It’s grey it’s grey, since she went away,”
A great 60’s song no doubt! 
 
OK… well Friday was a very nasty day for the currencies and metals… Gold lost $34 and the Dollar Index rose to 90.76 from a low of 89.90 on Thursday. What the heck happened? Can you say, Manipulation? I thought you could… Not that you wanted to , for you know that any manipulation is bad for your non-dollar investment portfolio holdings…
 
It all began with some stronger than expected data and that got the price manipulators thinking that this would be a great time to lay it on… So, let’s get to the stronger than expected data… First of all the Weekly Initial Jobless Claims for the previous week saw a drop from 841,000 to 730,000.. and you could hear the spin doctors screaming from the roof tops that this was a great number! I even hear a dolt on the TV say, this drop represents a huge improvement in the jobs picture… Really? Ahem, let me point out that the previous week was short one day, due to the President’s Day holiday… And that, alone was probably responsible for the drop in the figure… But the reporter that was telling us that it was a great number, failed to report the fact that the numbers were a day short! No, he decided that the numbers being one day short wasn’t important!  What a dolt!
 
Then on Friday, Personal Income soared in January soared higher by 10%… Really? Because if that’s really what happened, then there was reason to celebrate! And Personal Spending also soared in the month by 2.4%…  What a bunch of B.S.!  December was negative Consumer Spending, and the gov’t is telling me that it rebounded in January? I’m not buying this data on iota!
 
So, the data got the dollar Traders to get all lathered up and buy boat loads of dollars, when just last week they were willing and ready to sell dollars by the boat loads… But it is what it is… and just because I don’t’ agree with it, doesn’t mean it didn’t happen! So, as I said above, Gold last $34 dollars on Friday to close the week at $1,736.60… And Silver lost 73-cents to close at $26.80… And the euro which last Thursday was pushing higher lost a ton of ground and closed the week at 1.2080… It was all about the data on Friday… with no one looking ahead to the weekend…
 
For on this past weekend the long awaited $1.9 Trillion stimulus bill was passed by the House and therefore it is ready to go forward, which means you can expect your stimmy checks soon… And the Gov’t will soon be printing another Trillion dollars out of the blue! But nooooooooo, currency traders couldn’t be looking ahead to what was going on this past weekend, and not get all entangled with the data from Friday!
 
In the overnight markets the currencies continue to get whacked, but Gold is up $7.80 in the early trading this morning, so we have that going for us, eh? Remember last week when I told you that currency traders wanted to sell dollars, but were fearful of the PPT and their ability to dump large sums of money in the markets and buy dollars to protect the dollar from a steep fall?  Well, that’s exactly what happened last week, and now the fear of the PPT is fresh on every currency trader’s collective minds…  
 
And so now the currencies have to pick them selves up by the boot straps, and try to build some momentum that would put the Dollar Index back to sub-90, where it stood on Thursday morning last week… The Dollar Index is stronger again this morning from the currency selling overnight, and the Index sits at 91.06… Even the 3 currencies that had been kicking the dollar’s tail and taking names later, (sterling, kiwi, and A$’s) got whacked and will have to get up off the canvas and fight back… 
I get part of the idea behind the dollar buying… It’s due to the idea that the stimulus bill will invigorate the U.S. economy… But I’m not buying that idea one iota… The previous 2 stimmy checks didn’t do the job, what makes them think that this one will?  
 
The U.S. Data Cupboard is a non-event again this week, with only a few scattered about data prints that move markets, like today’s ISM (manufacturing index). We will end the week with the BLS’s Jobs Jamboree for January… This will be an important data print, but it won’t be correct, as you can bet your sweet bippie that the BLS will add tens of thousands of jobs from thin air, because well, they think the stimulus money is going to get businesses to hire people… As a reminder, December’s Jobs numbers were just 49,000 jobs created that month… And with the deep freeze, snow, and ice that presided over most of the country during January, I don’t see the 210,000 jobs created that the so-called experts are calling for…  
 
To recap… The currencies and metals got whacked with a large switch to end last week, and in the overnight markets there’s more dollar buying pushing the currencies even lower… Gold is up $7 in the early trading, but after Friday’s $34 loss, $7 looks like a pittance of a recovery…  Chuck thinks that it was the PPT protecting the dollar from a steep fall… And the strong Personal Income and Spending data for January is really suspect in Chuck’s eye… 
 
Before I head to the Big Finish today, I wanted to talk about something and that is all these bubbles that exist today in the markets… And it includes residential real estate… The Fed has pushed the bubble machine to the edge of a cliff, if you ask me… This last Stimulus check and I don’t mean the “last one ever” I mean the latest one, I believe will be the straw that breaks the camel’s back, meaning the dollar… the stock market bubble, the real estate bubble, the bond bubble, I could come up with other bubbles but these are the major ones… I find that these bubbles are inexcusable for a country like the U.S. with all the propeller heads we have you would think that someone would have stood up and questioned the Fed’s moves to blow more air in the bubbles… But NOOOOOOOOO!  I’m just saying… 
 
For What It’s Worth… Well… I just mentioned that I thought the new stimulus bill would be the straw that breaks the camel’s back, and in bonds especially… Here’s the deal.. you are the Fed and Treasury, and you flood the markets with your Treasury bonds, right? Well, there comes a time that the markets become unsaturated with these bonds, right? Well, that time could be now, and that’s the article this morning that talks about this scenario, and it can be found here: Wall Street Sends a Message to the Fed: We Have Run Out of Places to Stuff Your Treasuries (wallstreetonparade.com)
 
Or, here’s your snippet: “The action in the U.S. Treasury market yesterday reminded us of the classic “I Love Lucy” episode at the chocolate factory. As the conveyor belt churns out chocolate balls faster than Lucy and Ethel can handle them, they resort to stuffing them in their mouths, their hats, and their shirts. Lucy remarks: “I think we’re fighting a losing game.”
 
That was the scene in the Treasury market yesterday – too much supply and no where to stuff it, causing a sharp spike in yields which set off a stock market selloff that left the Dow down 559.8 points or 1.75 percent on the day, while the tech-heavy NASDAQ fared far worse, losing 478.5 points or 3.52 percent.
 
That the Treasury market is now projectile vomiting T-notes should come as a surprise to no one. As the chart above indicates, yields on the 10-year note have been rising sharply since early August, with the yield more than tripling from 0.50 percent to an intraday spike yesterday of 1.61 percent. The 10-year note opened this morning at 1.52 percent.
 
The sharp and persistent rise in yields have left those who bought the T-notes at dramatically lower yields licking their wounds from heavy losses. (Prices of notes and bonds move inversely to their yields.) That has also dramatically lessened the appetite to buy more Treasuries at the current yields when the supply is expected to continue to increase as a result of rising government deficits and stimulus spending.
 
Another catalyst for yesterday’s selloff in Treasuries was a very sloppy Treasury auction where the government attempted to stuff $62 billion of a 7-year Treasury note into an already over-supplied market.”
 
Chuck again… you see… when the markets can’t take anymore of an asset, they demand a higher yield to stretch their holdings… And that’s what’s been going on in bonds, as the yield on the 10-year Treasury has gone from .50 to 1.43% Almost a tripling of the yield in a matter of months… Well, if bond yields keep rising, the end of the bond rally will be nigh… I’m just saying…
 
Market Prices March 1, 2021: American Style: A$ .7726, kiwi .7233,C$ .7876,euro 1.2044, sterling 13954, Swiss $1.0957, European Style: rand 15.0269, krone 8.6441, SEK 8.4885, forint 301.48, zloty 3.7571, koruna 21.6732, RUB 74.52, yen 106.70, sing 1.3316, HKD 7.7570, INR 573.55, China 6.4760, peso 20.86, BRL 5.5974, Dollar Index 91.06, Oil $62.06, 10-year 1.43%, Silver $26.91, Platinum $1,216.00, Palladium $2,401.00, Copper $4.17, and Gold… $1,744.32
 
That’s it for today… shorter than usual, but I wasn’t on my laptop all weekend reading and making notes… I’m of the belief that this week’s letters will all be of the shorter variety… I’m busy! HA! Well, my St. Louis U. Billikens won their game yesterday, which should put them in good standing with the NCAA selection committee… At least I would hope so! No baseball for me today, and none until Wednesday… Yesterday, was full sun and heat to start the game, but eventually there was some cloud cover and a pleasant breeze that made the day even more enjoyable… Well, it’s Happy Birthday to Dianne Schuette, who’s here with us for a few days! March is my second fave month… And don’t forget that I’ll be on my annual spring vacation in a two weeks… Seals & Crofts take us to the finish line today with their song: Summer Breeze…  I hope you have a Marvelous Monday, and please Be Good To Yourself! 
Chuck Butler
 
 
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts