The Dollar Bugs Are Ushered Back To Their Wallboards!

A Pfennig For Your Thoughts

December 15, 2020

* IP in the U.S. drops like a rock! 
* Gold gets sold on Monday, rallies back today! 

Good Day… And a Tom Terrific Tuesday to you… I was looking at the calendar yesterday trying to figure out when I will be taking my annual winter vacation. I believe I’ll start it on Dec. 22nd, and return on Dec. 31st.. I know, I know, I’m retired, there’s no such thing as “vaction” any longer… But, by now, you should have figured out that I’m BIG on Tradition… And I’ve always taken a winter vacation at Christmas, so I’ll keep calling it that for as long as I continue to write. People are getting their virus vaccines already… I said yesterday, that I thought that the drug companies rushed the drug through testing. But I had read, and should have believed it, that the drug companies had already done the bulk of the leg work on this new drug, since Corona viruses have been around for some time now… Oh, and then there’s this… in the Swine Flu of 1976, more people died from the vaccine than the flu, according to Twitter… Hmm….. I’m back to the Smooth Jazz Christmas station this morning, and this morning I’m listening to: Getting Ready, by David Benoit (it’s from a Charlie Brown movie!)

OK… we’ve already talked about two very important topics… my winter vacation, and how I’m not lining up for the vaccine, just now… If my oncologist tells me that they have run tons of testing on people with cancer, and it’s OK, then I’ll offer an arm… But only then!

The dollar rallied back a bit yesterday, as the currencies had reached some levels they hadn’t seen in years, and I’m sure it triggered some profit taking… The Dollar Index, which yesterday morning was 90.50, ended the day at 90.70…. It was a day for the dollar, folks… Gold ended up losing $12.30 and Silver lost 8-cents on the day. The price of Oil gave up the $47 handle, and the Aussie dollar (A$) gave back about ½-cent… So… the dollar bugs have inched out from the wall board, and tested the markets, and they couldn’t have gotten this urge to test the markets, from the Data Cupboard… Industrial Production saw a huge drop in November, as I said it would, so it wasn’t data that gave the dollar bugs any reason to test the markets…  

But maybe the dollar bugs were kicking their heels together and celebrating the electoral college’s announcement that they had confirmed a victory for Joe Biden… Funny, thing, I don’t hear anyone crying about the electoral college this year….  And that’s all I have to say about that!

The price action in Gold was something… Every time Gold began to rise it would be hit with a ton of short sells, and bring the price back down. Gold actually climbed to $1,841 (up $14) before finally giving in to the “sellers”, to close at $1,827.20…  

In the overnight markets… The dollar bugs have been ushered back behind their wall boards and we’re back to pushing the dollar down, with the currencies, metals and Oil… Gold is up $18.80 this morning, and Silver is up 50-cents… And the Dollar Index, which yesterday morning was 90.70, has weakened to 90.56 this morning… So, forget about yesterday, that’s was water under the bridge…Today is going to be a good day for the asset classes that are anti-dollars! 

I had a dear reader ask me to say something about the Swiss franc… So here goes… The franc has gotten in line behind the euro, to take liberties against the dollar… Safe havens are out these days, and so that label on currencies like euros, francs and yen, aren’t involved with their respective rises VS the dollar… As long as this is a real bonafide weak dollar trend that’s beginning, I believe we’ll continue to see the franc perform nicely… 

Oh, and one more thing regarding the currencies… I read yesterday that the investment flows into China are soaring once again, and that’s the reason the Chinese renminbi is seeing its price get pushed higher on a regular basis by the PBOC… Something to think about! 

Well… what have we here? This was taken from the folks at www.wallstreetonparade.com And I’ll let them go first before I comment. Take it away Pam & Russ Martens! “Using the New York Fed’s own annual reports to obtain the data, we can report that the New York Fed’s Trading Desk has grown from $576 billion in holdings of domestic securities as of December 31, 2008 (at the peak of the last financial crisis) to $6.59 trillion as of December 9, 2020. And according to the New York Fed’s most recent financial statement, its Trading Desk’s domestic securities holdings have spiked by $15.9 billion in just the past week.”

Chuck again… So, let me see if I’ve got this right… The NY Fed, is supposed to be the regulatory arm of the Fed, but now they’ve got a trading desk, that trades with the Casino Banks the NY Fed is supposed to regulating? Tell me that’s not true, Chuck! Please tell me that’s not true Chuck! Well, I hate to spoil your ham and eggs, but it is true, and I believe that this is all going to end up in tears… This arrangement can’t possibly work out to everyone’s satisfaction… Either the NY Fed goes all in on their trading desk, which it appears they have already, and forgets about regulation… Or.. .they bulk up their regulation and forget about trading… Guess which one you think is going to be head and shoulders above the other one? 

Let me take you back to 2007/ 08…. The NY fed was supposed to regulating the Casino Banks back then too… And look what happened…  These Casino Banks need a new sheriff in town, one that kicks some rear and takes names later! I really don’t know why our elected representatives allow this stuff to go on. Either they are aware but feel they are helpless to do anything, or… they don’t understand what’s going on… Wanna bet, it’s the latter of the two?  

OK… I was going through Twitter yesterday and came across this post by Sven Heinrich. Check this out!

“M1 money supply has increased yet another $210B in the week between Nov 23 and Nov 30 on top of the $500B the week prior, that’s over $700B in 2 weeks.

M1 Money supply of the United States has increased by 64.5% since the beginning of 2020.”

Chuck again… Are you kidding me? And where’s all that money going? Not to me! Not one red cent! So, who does it go to? Well, if you would have guessed: Zombie Corps you would have one piece of the puzzle… I you would have guessed: The Casino Banks, you would have another piece of the puzzle, and the list would go on.. But you see other than the first stimulus checks that were sent months ago, and then were used to buy stocks by a good number of recipients, There’s been little for the regular people, like you and me, the middle class, to scrape from the barrel…

The cartel, I mean the Fed is trying their darndest to get inflation rising, folks… They have over 400 number crunchers and they can’t figure out how to get inflation rising… The Money Supply used to be a given for a rising inflation… But no longer, because the bulk of the money doesn’t get spent the way it used to causing the velocity of money to rise, which IS the cause of inflation… memo to the 400 number crunchers at the cartel, I mean the Fed…. “find a way to get money in the hands of spenders, and require them to spend it and not put it in their Robinhood account, to buy stocks.”

There’s got to be something of significance that you can talk about this morning Chuck that doesn’t involve you taking cheap shots at the Gov’t, the Treasury, or the Fed…   Wait! What? You want me to be nice to these people that have ruined the Goose that laid the golden eggs? Give me a Break!

OK.. The U.S. Data Cupboard this morning will have Retail Sales for November, and I explained my dilemma to you yesterday, in that I just t don’t see how this data could be good, but the BHI tells me otherwise… So, I’m going to go against my own BHI, because I’m thinking that it’s just my wife’s spending and not the norm…. We shall see… in just a few minutes…

Yesterday’s Data Cupboard offering had Industrial production which went from 1.1% in Rocktober, to just .2% in Nov.  Capacity Utilization surprised on the upside and improved to 73% from 72.8% previously… This data set CAPU is really weak considering where it used to be… This data hit an all-time high in 1973 of 89… and last touched an 80 number in 2008… 

And do you know why this has gone the way it has through the years? I do, I do, I do, call on me Mr. Kotter! CEO’s of big businesses started making BIG BUCKS, and to ensure they continued receiving the BIG BUCKS , they began to take profits that used to go toward buying new equipment, buying new desks, or expanding their footprint, to buying their company stock… And until we ever get back to the way it used to be, if ever that is, our economy will never be what it was…  

Of course the amount of debt is also responsible for the weakness in our economy, and this was before there was a plandemic! We as a country had only averaged 2.1% GDP for the last 10 years…. So, there you go…  No CAPEX (Capital spending) and too much debt… And now stupid Govs. Of states that lockdown their economies! 

To recap… It appeared to be a profit taking day in the currencies, as the dollar bugs inched out of the Wall boards to test the markets… Gold never found a bid all day, and ended up down $12.30… Oil lost its hold on the $47 handle, and nothing, absolutely nothing, say it again, rallied on Monday, but dollars… The Data Cupboard wasn’t kind to the markets, and probably won’t be today either!

For What It’s Worth… well… we haven’t heard from James Rickards in some time, so I thought it would be good to hear from him again. In this article he blasts MMT… You know the “Magic Money Tree” or as Jimmy Rogers calls it “More Money Tree”… Whatever it is that we call it, it spells disaster for our economy going forward. This article can be found here: Good News and Bad News – The Daily Reckoning

Or, here’s your snippet: “MMT has three basic tenets. The first is to treat the Treasury and the Fed as a single entity with a single balance sheet. Legally the two institutions are completely separate, but MMT insists that government can operate as if it were. This means merging Treasury and Fed operations into a single engine for spending, borrowing and printing.

The second idea is that citizens must accept dollars (whether they like it or not) because you need dollars to pay taxes, and if you don’t pay taxes, you’ll go to jail. In effect, the dollar is supported by the barrel of a gun, to paraphrase Mao Zedong.

The third idea is that there is no practical limit to how much debt the U.S. can issue. The U.S. debt-to-GDP ratio today is about 130% (up from 106% last year). But, MMT cheerleaders point to Japan’s ratio, which is over 250%, as proof that the U.S. can borrow a lot more.

These ideas are all badly flawed. Japan is not a good test case because the Japanese buy their own debt (the U.S. relies on foreign investors), and the Japanese economy has barely grown for 30 years (try that in the U.S.).

You can operationally merge the Fed and Treasury, but once it becomes apparent to markets that you are monetizing all the new debt, confidence will erode, rates will climb and this pyramid scheme will collapse.”

Chuck again… Longtime readers already know about how Japan finances their debt, as I’ve written about that for years now… Many times! And like Rickards says, “do we want to be like Japan?” I hardly think so, folks… 

Market Prices 12/15/20: American Style: A$ .7536, kiwi .7072, C$ .7847, euro 1.2160, sterling 1.3392, Swiss $1.1289, European Style: rand 14.9650, krone 8.7286, SEK 8.3778, forint 292.59, zloty 3.6578, koruna 21.6744, RUB 73.29, yen 103.90, sing 1.3337, HKD 7.7521, INR 73.48, China 6.5438, peso 20.16, BRL 5.0784, Dollar Index 90.56, Oil $47.19, 10-year .90%, Silver $24.42, Platinum $1,028.00, Palladium $2,373.00, and Gold… $1,847.00

That’s it for today… Today is the day that my dad would always bring home the Christmas tree… I have a younger sister, Terri, and today is her birthday, and as a young girl she thought that the Christmas tree was her birthday present! So.. Happy Birthday Terri!  There are only 4 Butler siblings left of the original 7… Rachel brought me a picture for my wall board of pictures, of me holding Evie when she was just hours old… I proudly pinned it up the next day! Man did I suffer some sticker shock when I went to check the price of those Tregar pellet smokers… I was going to buy one for a house warming gift for Alex, but decided to get him a gift card to put toward one when HE can afford to buy one! I forget what I paid for my Big Green Egg smoker, but that was for me! HA! And I was working back then and had cash flowing in… not just out! Well, Christmas is only 10 days away, have you gotten everything for everyone you wanted? I have… neener, neener, neener! HA! I used to take a day during my Christmas vacation and go shopping alone… but that was back when getting around wasn’t a chore for me, now I do it all online… just like the deep state wants me to!  Come to think of it I had better get to thinking about this year’s Christmas letter that a traditionally send out on Christmas Eve… Beegie Adair is playing on her piano, Rudolph the Red Nosed Reindeer as we head to the finish line today… I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler

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A Pfennig For Your Thoughts