Ouch! That Engineered Takedown Has Left A Mark!

A Pfennig For Your Thoughts

August 12, 2020

* Gold & Silver are taken down by HUGE amounts… 
* The dollar bugs fight back! 

Good Day… And a Wonderful Wednesday to you! Well, no reason what-so-ever to beat around a bush today… I’ve never, ever seen a one day move like I saw yesterday in Gold… It’s a real shame folks… For this move was downward, and at one point in the day it totaled $100!!! One sale begot another one, and so on… But as Neil Young sang, I won’t let it bring me down, for it’s only castles burning…. There! I got that off my chest! Now back to regular programming…. Day one of Chuck and Alex being on our own, went fabulously… A very damaging storm had come through the night before, and some people in Missouri were still without power… And our pool was covered with small twigs and leaves… I’m just beside myself today, still reeling from the onslaught of selling that Gold had to go through yesterday… In the meantime, Seals and Crofts greet me this morning with a song from my high school years: We May Never Pass This Way Again…

So… what on heaven and earth brought about the massive selling of Gold yesterday? I told you in the morning that it was already down $48, and the sellers were pointing to the idea that the infection numbers for the COVID virus were coming down, and that Russia was reporting that they had a vaccine ready to administer. But come on! I can tell you that some of Gold’s rise in price was generated by the second wave, or first wave that we never got through… But not all of it, and as I explained yesterday, all the reasons for Gold’s rise were still in place… zero to negative interest rates, negative yielding bonds, money printing out the yahoo, and an economy teetering on collapsing…

The Kitco.com website has an interesting chart each day, they show what the price of Gold that was affected by the dollar trading, and then they show the amount of movement that was affected by “sellers”…  Yesterday, the move in Gold that was caused by dollar strength, was $1.00… That alone should tell you that the boys in the band backed up their truck full-o-short trades, and unloaded them…. 575,000 contracts were traded in Gold yesterday… That’s unbelievable to me… But then when the boys in the band want to take something down, they don’t mess around! 

The total damage done to Gold at the close of the day, was $117.90!!!! Leaving Gold at $1,910…. The good news is that maybe the boys in the band used up all their bullets yesterday, as Gold is up $25 in the early trading today… 

And Silver was treated as badly as Gold, but Silver’s loss of around $4.00 was a larger percentage downward move. And Silver closed at $24.76, with around 350,000 total contracts traded… 

And during all this engineered takedown of both Gold & Silver, there was not a peep from the CFTC, or the COMEX, or any other entity that should have been saying things like, “we’re going to investigate how this happened”… So, as Ed Steer said in his letter today, “a pox on them all”… 

Silver, like Gold has bounced this morning and is up a dollar to $25.92…. 

Well, Gold & Silver weren’t the only investments to fall to the dollar bugs yesterday…. The currencies, which in the early morning were looking very perky, gave back their gains as the day went along…. This, to me, just looks like a PPT effort to keep the dollar from falling off the cliff… The PPT for all of you new to class is the Plunge Protection Team, which was created in 1987, to prevent another October stock market crash…. But over the years, the PPT has expanded their protection to the dollar…. And since they have currency they can easily print and use to buy dollars, when moves as strong as the one yesterday occurs, I just have to believe that it’s the PPT once again….

Hey, how about some good news? Did you see where the Gov. of S. Dakota, made a video telling people to move there to regain their freedoms, liberties, lives, and livelihoods? School will open in S. Dakota on time, and even with the 4th of July Mt. Rushmore fireworks gathering, the Covid-19 virus is under control…. So…. There! Good news!

I did want to talk about the currencies rising VS the dollar yesterday, but totally forgot what I was going to say, but not now! I’m loaded for bear!  In the past few weeks, while the dollar got sold, and the currencies got bought, I kept thinking that there was going to be “something” that stopped this trend, at least for the near term, because the countries with rising currencies, don’t need their currency getting too strong, while they attempt to bring back their lost economies…. It was going to be a pull and then be pulled by outside forces, and yesterday, I think it all came to a head….

Before I went on vacation, I threw an idea against the wall to see if it stuck, and it’s still be bandied about, so for all intent and purpose, the traders were rewarding the currencies of the countries that appeared to have the COVID-19 virus under control… Sweden, Australia, New Zealand, Norway, and a few others were joining the offset to the dollar, the euro, in gaining VS the dollar… But, as fate would have it… the rewarding for controlling the virus went the dollar’s way, once again…. Who’d a thought that would happen? Not me… that’s for sure! If, we in the U.S. have this virus under control, I’ll gladly say I was wrong about how I didn’t see us forgetting about the virus until 2025! 

But if we have it under control, why are states closing up businesses again… I’m just asking a question that traders aren’t going to answer, because they know the answer!

Recall yesterday, I went through the exercise of explaining why I thought PPI (wholesale inflation) was going to rise…. And lo-and behold it did! I thought I saw a putty tat, I did, I did! PPI was up 0.6% in July, which was a large increase from June’s negative -0.2%…. Today, we’ll see the color of the stupid CPI (consumer inflation)…. It’s too early for the increase in PPI to show up here, so who knows that the powers that be, will allow CPI to show…

This whole scenario has to be a real conundrum for the Fed heads… And just like a two handed economist… The Fed Heads want inflation, but…. They can’t have it spiraling our of control right out of the starter’s gate, so you can expect that the CPI next month won’t begin to show the increase in Wholesale prices… I’m just saying… 

The U.S. Data Cupboard is still “wanting”… We will see the stupid CPI for July print today, along with the July Federal Budget deficit…  The moronic negotiations to come up with another deficit spending stimulus bill are still going on…  Moronic meetings are run by….  fill in the blank, but I know what I would put down! But just to keep it softer, I’ll say “dolts”… So, if you have a moronic meeting, run by …..  you get moronic results!… Again… I’m just saying… 

To recap…. There was an engineered takedown of both Gold & Silver yesterday, the like that I’ve never seen before! Chuck goes through the gyrations, and calls for a pox on the CFTC and COMEX… The dollar bulls were backed by the PPT (in Chuck’s opinion) and the perky levels for the currencies yesterday morning were wiped out… it was an overall very ugly day for non-dollar investors! 

For What It’s Worth…. Well… as the days go by, I always try to remember to check out what Russ and Pam Martens are saying on their website: www.wallstreetonparade.com. And yesterday they had a perfect FWIW article that talks about how the “too big to fail banks” are rigging their stress tests, and it can be found here: https://wallstreetonparade.com/2020/08/bombshell-report-fed-is-aware-that-big-banks-are-rigging-their-stress-tests-and-letting-them-get-away-with-it/ 

Or, here’s your snippet: “On January 31 of this year, researchers for the Federal Reserve released a study that showed that the largest banks operating in the U.S. have been gaming their stress test results by intentionally dropping their exposure to over-the-counter derivatives in the fourth quarter. The fourth quarter data is the information used by the Federal Reserve to determine surcharges on capital for Global Systemically Important Banks, or G-SIBs.

The report, “How Do U.S. Global Systemically Important Banks Lower Their Capital Surcharges?,” was written by Jared Berry, Akber Khan, and Marcelo Rezende.

We decided to evaluate this claim for ourselves, using the quarterly derivative reports provided by the Office of the Comptroller of the Currency (OCC), the regulator of national banks. The data was appalling. The largest Wall Street banks not only dropped their level of derivatives by trillions of dollars in the fourth quarter, but they restored those derivatives by the end of the following first quarter. (See first OCC chart below which shows the largest of the top 25 banks by derivative exposure.)

In the case of JPMorgan Chase, it dropped its total derivatives from $55 trillion notional (face amount) in the third quarter to $46.9 trillion in the fourth quarter of 2019, a decline of $8 trillion in one quarter or 15 percent. But by the end of the first quarter of 2020, JPMorgan had pushed those derivatives back up to $59.6 trillion.

The Federal Reserve seems to be accepting this behavior from JPMorgan Chase as a legitimate means of reducing its capital requirements. Yesterday, the Federal Reserve announced the new capital requirements for the largest, Global Systemically Important Banks, or G-SIBs. We fully expected JPMorgan Chase to be slapped with the highest capital requirement since its Systemic Risk Report last year showed it to be the riskiest bank in the U.S. and, clearly, based on the above research that appears on the Fed’s own website, it’s aware of JPMorgan’s “window dressing,” the term used by its own researchers.

All of this is just further evidence that Congress needs to take away the supervisory powers over banks from the Federal Reserve; strip it of its ability to bail them out; and restrict the Fed to setting monetary policy. Those restrictions can’t arrive soon enough.”

Chuck again… stress test, mess tests! What a crock! why give them the stress test if they are going to just rig it to make them look strong? And why hasn’t someone at the Fed regulatory division looked into this and made suggestions as to how to stop it from happening? Well, that’s a question that’s easy to answer… Because they are lazy! And have no intention or interest in coming down on the banks they regulate…. Let that sink in… 

Market Prices 8/12/20: American Style: A$ .7127, kiwi .6540, C$ .7523, euro 1.1763, sterling 1.3016, Swiss $1.0939, European Style: rand 17.4260, krone 8.9722, SEK 8.7201, forint 293.41,  zloty 3.7457,  koruna 22.2177, RUB 73.10, yen 106.96, sing 1.3738, HKD 7.7507, INR 74.65, China 6.9467, peso 22.36, BRL 5.4416, Dollar Index 93.59, Oil $42.19, 10-year .67%, Silver $25.92, Platinum $934.00, Palladium $2,048.00, and Gold… $1,935.40

That’s it for today, and this week… my monthly oncologist appt. is tomorrow morning… I made dinner last night, and then I couldn’t eat it, as my stomach turned on me… I was treated to an old favorite sandwich yesterday for lunch… Good friend, Duane, stopped by and brought me a pastrami sandwich from Carl’s Deli… Talk about yummy! I used to go to my oncologist at St. Mary’s Hospital and Carl’s Deli was right across the street, so there were lots of times I would stop and get two Pastrami with pepper cheese sandwiches. One for me, one for Duane… But now I go to the oncologist right around the corner from me… So, yesterday’s surprise was truly appreciated! No birthdays this weekend that I know of… And the second day of being alone during the day went just fine… Jimmy Buffett takes us to the finish line today with his song: A Pirate Looks At Forty… I always like the line in the song: “I made enough money to buy Miami, but I pissed it away too fast” I always tried to make sure that didn’t happen to me! Not that I made enough money to buy Miami! I hope you have a Wonderful Wednesday, and please Be Good To Yourself! 

Chuck Butler

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A Pfennig For Your Thoughts