It’s A FOMC Day!

A Pfennig For Your Thoughts

June 16, 2021

* Currencies gain tiny amounts on Tuesday… 
* It’s Groundhog Day again for Gold & Silver… 

Good day… And a Wonderful Wednesday… First of all I want to thank all of you who sent along messages to me yesterday regarding me not answering the bell… I do need to make one thing clear… I’ll be on chemo for the rest of my life… I have a kind of cancer that will just pop up anywhere, witness the eye cancer years ago… So, there will be no “end of treatments” for me, until they drop me down 6 feet… Or cremate me, whatever Kathy chooses to do… Not that I’m expecting that to happen any time in the near future, so I’ll keep truckin’, and have to call in sick once in a while… Fun stuff to start the day with, eh? That’s my life… Ok… well, we’ve passed the ½-way mark of June… Soon it will be the 4th of July before we know it! The Moody Blues greet me this morning with their song from the Seventh Sojourn Album (one of the albums I would take to the island with me!): Lost In A Lost World… Which is where I find myself these days… lost, in a lost world…

Yesterday’s rant about inflation, failed to point out something that I’ve talked about previously several times, and that is the supply chain disruptions causing shortages, and thus higher prices… That is just one of the things causing inflation folks… Government printing of currency, is the main one… And let me remind everyone that I kept pointing out the inching higher of the Producer Prices (wholesale inflation) and pointing out that PP feeds consumer inflation… And yesterday, the Producer price Index for May rose .7%, which doesn’t sound that bad… But… and you knew there would be a but here, the .7% gain pushes the annual Producer Prices to a 6.6% rate… For those of you keeping score at home that 6.6% surge was the biggest 12-month rise in the final demand index since the Bureau of Labor Statistics began tracking the data in November 2010. 

Ok… I knew someone would come up with something funny about all this inflation… so here goes: Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars’ worth of groceries. Today, a five-year-old can do it. That’s one of those funny lines that would be even more funny if it weren’t true! 

So last week we had the highest consumer inflation in 13 years, and this week we get the highest producer inflation in 11 years…  And the Fed Heads meet today to discuss all these rising prices and decide whether or not they want to backtrack on their “transitory” mantra… I don’t see them doing a mea culpa here, but maybe in some Fed-speak they come out and admit that prices are rising too quickly… Don’t bet the farm on that!

So, once again, and Ed Steer is right, this does feel like Groundhog Day, and the metals couldn’t find a bid all day, and the currencies couldn’t find one that lasted for more than an hour or two… So, we start today with some very ugly looking numbers, but we’ve seen uglier, so we shouldn’t let it get to us too much…  But I’ve got to say this… In all my years of following markets beginning in 1973, I know most of you who have met me in person, are saying there’s no way he’s that old! HA! But in all those years, I’ve never seen markets trade like this. Complete opposite of what should be going on… So, as I said yesterday, James Rickards, believes inflation is a 2022 story… So, if the markets are truly forward looking shouldn’t they be looking at that? And trading accordingly? Never mind the inflation now, they’ve missed the boat on that… 

For the record… The currencies ended the U.S. session with very tiny gains VS the dollar, it was as if currency traders were just not committed to selling dollars, which in my humble country boy opinion, they should be doing hand over fist… But they are not… at least not yet… For comparison purposes between the morning and night in the currencies, the BBDXY began the day at 1,124.91, and ended it at 1,124.18…  

Gold & Silver like I said above couldn’t find a bid all day, and ended the day with Gold down $7.20 to close at $1,859.70, and Silver down 16-cents to close at $27.76… Groundhog Day… 

The price of Oil is till rising and trades with a $72 handle this morning… This rise in the price of Oil has given the Petrol Currencies a little bit of comfort and they haven’t lost as much ground as the non-petrol currencies…

In the overnight markets… There’s been just a little more dollar selling, but not much, as the currencies try to push the gains higher, but are meeting major resistance. The BBDXY begins the day at 1,123.64, so some slippage from the end of the day yesterday, but the “some” is being liberally applied! 

The sad part is that it’s Groundhog Day once again for Gold, as the shiny metal is down $3.50 in the early trading, while Silver is up 4-cents, so both are not being traded a lot early this morning, which makes some sense as market participants await to hear what the Cabal Chairman has to say this afternoon about tapering… 

Well, I spoke of the Fed above, and while I was traversing through Twitter yesterday, I found this from Fred Hickey on his Twitter feed: “Years ago, the Federal Reserve Board was comprised of bankers & businessmen. Over time, it was taken over by economists, then by mostly “progressive” Ivy-league economists who care more about social activism than sound money & protecting the value of US$”

Man… that’s really doing an Aaron Neville and telling it like it is…

As I said above, the FOMC meeting is today, and is just a one day meeting, so no time to get the board games out, and hear Kashkari yell “you sunk my battleship”!  No, fun and games today, all serious business to be taken on, and then this afternoon they will announce what great plans they have to save the universe once again… OK, they may be serious, but I’m not… The markets kind of think that maybe, just maybe, cause you never know, the Fed will announce when they will begin tapering their bond purchases… I say, I’m from Missouri, and they’ll have to show me that this is what they are going to do, and then do it for me to believe that malarkey!

OK, after I said all that, watch, Jerome Powell get up in front of the press corps and tell them the Fed is going to start tapering in the 4th QTR… Just to spite me! Come on Jay, I know that someone at the Fed reads the Pfennig, and they tell you everything I say about the Cabal…

If I were one of the Press Corps there to ask a question of the Fed Chairman, Jerome Powell, I would say, “Hey Jay, did you hear the news?” What news is that?  That a company that owns more than 100 shopping centers across the US has filed for bankruptcy, citing “significant challenges” as a result of the Covid-19 pandemic. Washington Prime Group, which currently owns 102 shopping centers across the country, filed for Chapter 11 bankruptcy protection late on Sunday…. 

I would continue with, “don’t you think that if the economy is that fragile, that we need to begin tapering bond purchases?” To which he would probably respond with, “That’s only Transitory”… Because that’s his standard answer for everything these days… 

Speaking of currency printing… The POTUS was at the G7 meeting and telling the other member countries that they should continue their deficit spending, which means that he’s going to do that here at home…  I borrowed these numbers from Bill Bonner: $2.6 trillion in revenues through May. But $4.7 trillion in spending. You can do the math yourself, even using old school math where 2+2 = 4… And The deficit just keeps getting bigger and bigger… So, go ahead Magic Money Tree folks that include the POTUS, just keep spending money we don’t have… I shake my head in disgust, and say Tsk, Tsk…

The U.S. Data Cupboard yesterday, had May Retail Sales, and they were not a pretty sight to see, as they printed negative -1.3%, and when you just look at core sales, excluding Auto sales, the number was still negative at -.7%… No new stimmy checks, no Retail Sales…  And Industrial Production for May disappointed, and left the markets with a sour taste in their collective mouths… But it just won’t change their “buy dollars” mantra right now…. 

Today’s Data Cupboard is dominated by the Federal Open Market Committee (FOMC)… And I’m afraid that getting excited about the outcome of the meeting is akin to playing solitaire till dawn with a deck of 51…

To recap… The currencies traded back and forth all day yesterday, and ended the day with some tiny gains VS the dollar, with the Petrol Currencies holding steady Eddie with the continuing rise in the price of Oil, which is trading with a $72 handle this morning… for Gold & Silver it was truly Groundhog Day, as Ed Steer calls it, because once again the metals couldn’t find a bid all day long…

For What It’s Worth…. Ok, I played around with the FOMC meeting today, and while I don’t believe the CABAL is ready to do any tapering, they could begin discussions on how and when to do it, and if Jay Powell decides to let the press know that these discussions took place, the markets could react violently, so we’ll have to wait-n-see, but first… I have this article that talks about the Cabal and its need to taper, and it can be found here: Fed tiptoes towards the taper stage months before the curtain call | Reuters

Or, here’s your snippet: “For the second time in less than a decade, the Federal Reserve is getting ready to launch a thorny debate over how and when to sunset a massive asset-purchase program that helped cushion an economy battered by crisis but left it with a mountain of bonds that may linger on its balance sheet for years to come.

Officials’ opening discussion about how and when to taper the U.S. central bank’s $120 billion in monthly bond purchases looks set to occur at this week’s two-day policy meeting and will take place against a dramatically different backdrop than the last time around, when they were more skittish about owning such a substantial slice of the bond market.

“I think the discussion will start” at the Fed’s policy meeting on Tuesday and Wednesday, said Robin Brooks, chief economist at the Institute of International Finance. “I think it will start very, very cautiously,” he added, and Fed Chair Jerome Powell won’t be in any rush to conclude it.

The risk of another “taper tantrum” – the market ruckus that erupted eight years ago when Fed policymakers first broached the notion of scaling back their bond-buying after the 2007-2008 financial crisis – appears remote this time. Fed officials have posted plenty of trail markers for the path to tapering, and key officials have signaled the discussion is underway in the background. Markets so far have taken it all in stride.”

Chuck again… Like I said, we’ll have to just wait-n-see in a few hours from now the FOMC meeting will conclude, and the press conference will begin…

Market price 6/16/2021: American Style: A$ .7706, kiwi .7145, C$ .8210, euro 1.2117, sterling 1.4116, Swiss $1,1117, European Style: rand 13.7460, krone 8.3504, SEK 8.3584, forint 290.30, zloty 3.7276, koruna 21.0038, RUB 72.06, yen 109.95, sing 1.3262, HKD 7.7619, INR 73.27, China 6.4008, peso 19.99, BRL 5.0602, BBDXY 1,123.64, Dollar Index 90.54, Oil $72.34, 10-year 1.48%, Silver $27.80, Platinum $1,149.00, Palladium $2,856, Copper $4.31, and Gold… $1,856.20

That’s it for today…. Things are just so weird these days, that I have to stop myself from launching an all out attack on anyone that has anything to do with these days of opposites! There! That’s been said! Well, my beloved Cardinals have won two straight after last night’s 9th inning walk off home run by Paul Goldschmidt… The Cardinals have fallen from first place to 4th place with 2 weeks of shoddy baseball. Hopefully they’ve seen the light, and are ready to get back to playing baseball Cardinals style! As St. Louis fans, we don’t expect the Cardinals to win every game, but we do expect to see good fundamental baseball with tons of hustle, and grit at the plate every game…. There’s a day game at Busch today, and I’m going to go to the game! I hope I don’t feel like I need a nap during the game, so it’s up to you Cardinals to keep me entertained! HA! I love day baseball games… And then tonight I’ll welcome home my beautiful bride from her 16 day vacation away from me! While she was gone, our 45th wedding anniversary took place… 45 years… that’s a long time! OK… Midnight Oil takes us to the finish line today with their song: Beds Are Burning…. In the 90’s Midnight Oil was BIG, but then they faded away, like many of the other 90’s bands… I hope you have a Wonderful Wednesday, and Please Be Good To Yourself!

Chuck Butler

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A Pfennig For Your Thoughts