It’s A FOMC Day!

A Pfennig For Your Thoughts
 
January 27, 2021
 
* Currencies gain on Tues, but give back gains overnight
* Gold can’t find terra firma since last Wednesday… 
 
Good day, and a Wonderful Wednesday to you! After the double win by the Tigers and Blues on Saturday night, they weren’t able to duplicate that last night with a win by the Blues VS Vegas and a loss on the road by the Tigers, VS Auburn… It was another night of watching one game on the TV and the other on my phone… The NHL is playing a condensed schedule this year to cut down on travel, So the Blues will play Vegas again tomorrow night… Strange season so far, with all these back-to-back games VS the same opponent. But, at least they are playing! Another beautiful day here with a high of 83… Another one of those is in store today, before another cold front comes down from the north… Crosby and Nash greet me this morning with their song: Wind On The Water… It’s about saving the whales…
 
Well… The currencies sure didn’t exactly take liberties with the dollar yesterday, but, they did gain small amounts. To me watching this unfold yesterday, I saw a pattern of traders not willing to take a hard position of being short dollars ahead of the FOMC meeting and press conference that follows the no rate change announcement… In their heart of hearts, traders know that Cartel, I mean Fed Chairman Jerome Powell, will most likely sound very dovish in his press conference… He has to, for you see that Powell, has whined and cried about the need for more stimulus, and so he has to play the part of the poor Cartel, I mean Fed Chairman, with no tools at his disposal to stir the economy… 
 
How could he say one day that the economy needs more stimulus, and then the next day talk about how strong the economy is? If anything, other than being really dovish, is I see a chance of calling the economy uneven, but still with problems, and downside risks…   He has to sound like there’s a little bit of growth, or else the dollar will be sent to the currency woodshed. Traders wanted to take the dollar to the currency woodshed yesterday, but just didn’t have the intestinal fortitude to do so ahead of the FOMC meeting…
 
So, the FOMC meeting is today, and we’ll know more about what is on the mind of the Cartel, I mean Fed Heads this afternoon… I tell you I bet I could write the monologue for the press conference this afternoon… But I’ll be too busy! HA!
 
Gold lost ground yesterday, while the currencies moved higher VS the dollar… Gold closed down $5.60 on the day to close at $1,851.60, and Silver lost 9-cents to close at $25.55…  What’s up with Gold lately? Last Wednesday Gold rose by $32, and then didn’t see any follow up and have been down by small amounts each successive day… As I said a week or so ago, the price manipulators did their job, of scaring away potential buyers, and getting short term holders to sell their Gold… And I think that fear of more price manipulation is scaring away potential buyers still… 
 
I think what Jerome Powell says this afternoon will weigh in for the direction of Gold going forward… I’m thinking that Gold traders are waiting for confirmation of the $1.9 Trillion stimulus package by Congress, before moving Gold higher… Memo to Gold Traders: Ahem, Congress and the purse strings of deficit spending are no longer going to be held up by the Senate, the liberals have control of the whole shootin’ match, so go ahead and make your bets on more deficit spending and currency printing…
 
The same goes for the currencies… And it’s time to get past the fears of a China virus outbreak, and get those commodity prices rising again… One of the Commodity Currencies, the Aussie dollar (A$) has recently gone through some consolidation, and correction, and moved back to 77-cents, but from that the A$ is moving higher again… The Good Folks at FXSTREET believe the fundamentals are in the A$’s favor, and could climb as high as 80-cents… I agree with them, that the cards are stacked in the A$’s favor, that is as long as traders can get past the fears…
 
In the overnight markets, we’re right back to where we started the day yesterday, as the currencies gave back their small gains in overnight markets, and Gold is down $12 in the early trading today… To illustrate what I’m taking about with the currencies… The Dollar Index was trading at 90.46 yesterday morning, and it closed down at 90.40, but this morning it’s back up to 90.47…  UGH, no traction, no direction, no nothing from these traders who seem to be afraid of the big bad Cartel, I mean Fed… 
 
Remember what I told you last week that new Treasury Sec. Janet Yellen had said about the Exchange Stabilization Fund (ESF), and intervening in the currency markets… Basically she said that she didn’t believe in intervention and currencies should be left alone to set their own market rates… This means that one fear factor has been removed, and Currency Traders should be trading the dollar accordingly… In my opinion that is…
 
Longtime reader, Bob, sent me a very interesting article yesterday, that talked about how $7 Trillion of U.S. Debt held by investors, is coming due in 2021… These maturities will have to be paid out unless of course they are “rolled over”… And here’s where things could get quite sticky… So, what happens if ½ of those maturities don’t want to be rolled over, and demand payment of principal? That would mean that an additional $3.5 Trillion of debt will have to be refinanced… And with no buyers, the Fed will have to step up to buy the bonds, and print new currency to pay for them… Got Gold?
 
The U.S. Data Cupboard finally gets back in the real economic reports printing game today, with the printing of the December Durable & Capital Goods Orders… I suspect these both will be weaker than the already weak prints of November… We’ve all become Comfortably Numb regarding bad economic prints… They get shrugged off each time they print, and you have to wonder out loud, just how bad does a print have to be before the market reacts?  
 
I used to say that we had become Comfortably Numb with the debt numbers, and now we’re way past them, and no one seems to care or give two hoots that we’ve run up $27.8 Trillion in Current Debt, and $159 Trillion in Unfunded Liabilities… that means our real debt is $ 186.8 Trillion! The mental giants (NOT!) believe that the size of debt doesn’t matter any longer, for now that we’ve learned that the currency printing press can be turned on whenever they feel the need… And I think that kind of thinking is dangerous… Very dangerous…  
 
But in reality, they are correct they could print enough money to bring down the debt or pay for any new deficit spending boondoggle… What they aren’t considering that every time you go to the well to print more currency, the current stock of currency gets debased… And well, that means your personal buying power goes to hell in a handbasket… When your personal buying power loses ground, it’s like a big fat TAX… And that my friends is what the problem with this new thought process by the mental giants (NOT!)… 
 
To recap… The currencies gained VS the dollar on Tuesday, but the gains were limited and were held back by traders not wanting to go too far ahead of the FOMC meeting this afternoon. And those gains were given back in the overnight markets last night… Gold lost a small amount again on Tuesday, marking small mark downs since last Wednesday when gold gained $32… Chuck thinks that everyone is holding back until they get confirmation of the $1.9 Trillion deficit spending, currency printing plan that’s being billed as a stimulus package… 
 
Before I head to the big finish today, there was a story that came into my email box yesterday from the good folks at GATA. The article told a story about a Treasure Trove of Gold that was found in a corn field in Poland that had been buried for over 900 years! After hearing a priest tell of the legend of the Treasure, the locals began to excavate and the legend was fact… Pretty cool story if you ask me! 
 
For What it’s Worth… Ever since the economy was shut down and locked down last spring, for a few months for some, and still for other states, the rot on the U.S.’s economy vine just keeps getting exposed more and more.. Sure the plandemic had a lot to with this, but… I could go back to Pfennigs last year pre-Covid where I pointed out the weakness that was already evident… So, any way, this article talks about how the poverty rate in the U.S. which had hit a low pre-Covid is soaring again, and it can be found here: U.S. Suffers Sharpest Rise in Poverty Rate in More Than 50 Years (msn.com)
 
Or, here’s your snippet: “The end of 2020 brought the sharpest rise in the U.S. poverty rate since the 1960s, according to a study released Monday.
Economists Bruce Meyer, from the University of Chicago, and James Sullivan of the University of Notre Dame found that the poverty rate increased by 2.4 percentage points during the latter half of 2020 as the U.S. continued to suffer the economic impacts from Covid-19.
 
That percentage-point rise is nearly double the largest annual increase in poverty since the 1960s. This means an additional 8 million people nationwide are now considered poor. Moreover, the poverty rate for Black Americans is estimated to have jumped by 5.4 percentage points, or by 2.4 million individuals.
 
The scholars’ findings put the rate at 11.8% in December. While poverty is down from readings of more than 15% a decade earlier, the new estimates suggest that the annual Census Bureau tally due in September will be higher than the last official, pre-pandemic level of 10.5% in 2019.”
 
Chuck Again.. yes, the wealth of a nation depends on how weak the poverty rate is… And accordingly the poverty levels are falling, and that’s a bad thing… But shoot, nothing that weekly or monthly stimmy checks won’t fix! I say in jest!
 
Market Price 1/27/21: American Style: A$ .7705, kiwi .7208, C$ .7846, euro 1.2111, sterling 1.3703, Swiss $1.1252, European Style; rand 15.2345, krone 8.6212, SEK 8.3443, forint 297.48, zloty 3.7582,  koruna 21.4690, RUB 75.26, yen 103.86, sing 1.3275, HKD 7.7519, INR 72.99, China 6.4666, peso 20.17, BRL 5.4172, Dollar Index 90.47, Oil $52.65, 10-year 1.02%, Silver $25.23, Platinum $1,081.00, Palladium $2,393.00, Copper $3.57, and Gold… $1,839.00
 
That’s it for today… Day 6 alone, had me thinking that for the first time I realized I was really alone. I went out to the deck that overlooks the beach and ocean, and looked out on the beach for Kathy, and then realized that she’s not here… In the words of the Zombies, “Don’t bother trying to look for her, she’s not there”…  Santana also did that song, but you know me, I like the originals! The St. Louis U. Billikens lost their return to hardcourt game last night. They hadn’t played in this calendar year, due to an outbreak on the team… A pretty good game for a team that hadn’t played in 3 weeks… Yesterday, I mentioned a book I’m reading that’s weird, but failed to mention the name of the book… It’s an oldie but goodie, Fahrenheit 451… Fireman that burns down houses instead of saving houses that are on fire… I’ll be 1/2 of the way through it after my reading session on the deck this afternoon… The Main Ingredient takes us to the finish line today with their song: Everybody Plays The Fool…  “it may be factual, maybe cruel, but everybody plays the fool.” I hope you have a Wonderful Wednesday, and Please Be Good To Yourself!
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts