The Dollar Rally Get Stopped In The Overnight Markets…

A Pfennig For Your Thoughts
 
May 17, 2022
 
* Powell backs off his claim of being able to deliever a “soft landing”
* Gold & Silver start the week on a good foot… 
 
Good Day… And a Tom Terrific Tuesday to you! How dare Mother Nature rain out the mighty NY Mets last night… Doesn’t Mother Nature know that the Mets have a king’s ransom for payroll? OK, I’m having some fun here… The Cardinals and Mets were rained out last night, and they’ll play a double header today… As the great Ernie Banks used to say, “hey, let’s play two!” Our Blues start the second round of the Stanley Cup Playoffs tonight in Denver…. Let’s Go Blues! The Cornelious Brothers & Sister Rose greet me this morning with their song: Too Late To Turn Back Now…
 
Well… I think I upset the hornet’s nest yesterday, when I talked about the POTUS signing a document that we are at war with Russia… I know that it takes a vote of congress to commit the country to a war with bullets and bombs… But, I think what this document was referring to is that the U.S. is at war with Russia, and therefore will continue all sanctions, financial and otherwise going forward… And to the person that wrote me and told me to keep politics out of the Pfennig, I want to say, I do keep politics out of the Pfennig… I didn’t see the statement yesterday as political, period!
 
Ok… well, the dollar paused for the cause yesterday, and didn’t gain for once! We’ve really only had a couple of days in the past two months, where the dollar didn’t gain on the day… We began yesterday with the BBDXY at 1,257, and we ended the day with the index at 1,256…. The euro moved higher in the 104 handle, and Gold found a way to gain $11.70 yesterday to close the day at $1,824.90, and Silver gained 48-cents to close at $21.70… So, a good day for the metals…
 
I read two articles from different sources this past weekend that claimed that Gold was on the launching pad, and would soon be moving higher once again… Well, we can all hope so, eh? The price of oil gained $5 yesterday, and trades this morning with a $114 handle… And Bonds are stuck in the mud… and there’s no reason for anyone to get al mucky, wallowing around in the mud with bonds!
 
In the overnight markets last night… The dollar rally was halted! The BBDXY lost 3 index points, and the euro rose above 1.05… I won’t put too much stock into this brief sell off of the dollar, but it did come after Jerome Powell’s NPR interview yesterday. I have something on that in a bit, so hold your horses! Gold and Silver are trading up this morning, with Gold up $12, and Silver up 12-cents. The price of Oil rose another buck to trade with a $115 handle this morning, and bonds continue to be stuck in the mud.
 
Did you see the latest in wholesale inflation, aka pipeline inflation? Well, for April it was up 11%… That tells us that consumer inflation, while dropping a ibt in April, isn’t going to drop any more… And on top of that, well, I’ll let Bill Bonner tell you what’s on his mind regarding inflation: “Food, shelter, transportation – those are the ones that drain the family checking account. As for food, actual price increases are far above the BLS’s index. Beef is up 14%, chicken 15%, wheat flour 33%, orange juice 17%, coffee 70%.
 
Shelter, too, is much more pricey than the BLS says. Zillow computes the average rent people actually pay. It’s up 17% over a year ago, it says. The average price paid to buy a house is also 16% higher than a year ago.
 
And fuel? A gallon a gas averaged $3.11 last May. Now, it’s up 40%”
 
Chuck again… people that live on the margin… they calling Houston right now to report a problem! And wouldn’t you know it, the first summer in the last 3 that people can get in their cars and go on vacation, and the cost of gas is going through the roof… Ed Steer, had a cartoon in his letter the other day, of a man sitting at a bank, and the banker tells him he can get a home, auto, personal, loan, and what kind of loan was he looking for, and the man replied “ I need a loan to fill my gas tank”…
 
Every time Kathy goes to Costco, I ask her if she saw the loan officer giving out loans near the meat counter? All joking aside, the thing that really gets me is that most people believe that by hiking rates 50 Basis Points at a time, is going to squelch inflation… You see, this time inflation was caused by money supply, and sure the distribution chain problems added to the inflation that was caused by over $4 Trillion in new money supply since 2020… And so like the old saying that someone let the cat out of the bag, or the cows out of the barn, money supply allowed inflation out of the box it had been held in for a very long time…
 
And now, like water under the bridge, or spilled milk, the money has been printed and sent out, it’s out there, and you can’t call it back! Therefore I believe we’ll see the Fed/ Cabal/ Cartel attempt to hike rates at successive meetings, and all they’re going to do is cause a very deep recession, that could last over a year! Shoot Rudy, Elon Musk said that he saw the recession lasting 18 months! Now, I don’t know what kind of economics training Elon has had in his past, so I say we should take his 18 months with a grain of salt…
 
The Fed/ Cabal/ Cartel had an open window for a very short time to be proactive in combating inflation, and instead used that time to deny inflation existed! They should all be fired, and star anew! Did you know that Jerome Powell still hasn’t been confirmed for his second term? So, in reality his the Chairman pro-tempor, or something like that! So now, we not only have this group of Fed lifers, making the decisions about our economy without ever having lived and worked in it, but we also have their spokesperson not confirmed for his next term!
 
And remember when the Fed/ Cabal/ Cartel finally began to admit that there was inflation in the economy, and chairman Powell, said that the Fed would deliver a “soft landing”? And I immediately called him out on that, because of the fed’s history… Well… yesterday, Powell was being interviewed on NPR radio, and he has changed his tune about delivering a soft landing… Let’s listen in to some of the talk: “But in an interview on NPR’s “Marketplace,” Powell conceded that that balancing act — which many economists have said they doubt the Fed can achieve — could be undercut by economic slowdowns in Europe and China.
 
“The question whether we can execute a soft landing or not — it may actually depend on factors that we don’t control,” the Fed chair said. “There are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so.”
 
Chuck again… Oh boy, here we go again, always blaming your problems that you created on someone else… First it was the distribution chain problems, then it was China, and now it’s the slowdowns in Europe and China that will prevent him from delivering on his call of a “soft landing”… Tsk, tsk, tsk… and in my best Gomer Pyle voice, Shame, Shame, Shame….
 
Ok, let’s talk about something other than the dolts at the Eccles Bldg. and the inflation they caused… And just to remind you, that… inflation is everywhere… The good folks at GATA sent me this note yesterday regarding the Bank of England (BOE), “The governor of the Bank of England has claimed that policy makers have been left helpless in the face of surging inflation.
 
Appearing in front of MPs today, Andrew Bailey admitted he had felt helpless to control soaring prices amid an energy market shock and the war in Ukraine, adding: “It’s a very, very difficult place for us to be in.”
 
Yes, the BOE is in the same corner as their cousin in the U.S. and once again their inflation was caused by money supply, and too much debt, that prevented the BOE was acting proactively with rate hikes… You know, remember about year ago, when pound sterling was performing like the best currency? And I said that, “the U.K. has too much debt, and it will come home to roost for them soon enough, I would be careful jumping on the pound sterling bandwagon”…
 
And while we’re in Europe… Remember when the EU announced that no country in the Union would be buying Russian Oil, since they had to use rubles or Gold to buy it? Check out this headline: European Sanctions Blown To Bits: Draghi Says “Most Gas Importers” Have Opened Ruble Accounts With Gazprom”
 
Hehehehehe… Sanctions, Smanktions… When you need Oil, you need Oil, or like me going down to Columbia, Mo over this past weekend, I needed to fill up my gas tank… and paid $4.80 a gallon… I needed gas, and I paid for it…
 
No wonder highway 70 that cuts through Mo. Has 100’s of trucks, big rigs, traveling, had the gas stops packed with trucks… I’m sure these guys drove until they were on fumes and then had to pull in for fuel, and then paid over $5 for diesel fuel…
 
And the truckers’ rising costs to travel, soon become the grocers and other retailers rising cost, and that becomes the consumer’s rising cost! Oh, come on Chuck, that’s elementary! Yes, I agree it is, but… sometimes you have to start anew to refresh memories!
 
Yesterday, I told you that the today’s Data Cupboard would be chock-full-o-data today, and so it will! April Retail Sales, Industrial Production and Capacity Utilization will all print this morning… And then later today, Jerome Powell will be interviewed by the WSJ… I wonder what lies he’ll tell them?
 
To recap… The dollar took a pause for the cause yesterday, and actually dropped 1 index point on the day! Gold & Silver gained on the day, Oil pushed higher by $5 and bonds were stuck in the mud. Chuck talks a lot about inflation today, and not just in the U.S…. And in the overnight markets… The dollar rally was stopped, and Gold & Silver are both trading up this morning, Chuck won’t put too much into the dollar rally being stopped, as we all will have to wait-n-see where it goes from here. 
 
For What It’s Worth… Well there were many candidates for this space this morning, but when it came to the cheese that binds, I thought that this one was best as it describes the fall in manufacturing in the NY region, and it can be found here: Empire Fed Manufacturing Survey Unexpectedly Crashes To Post-COVID Lows | ZeroHedge
 
Or, here’s your snippet: “Empire Fed Manufacturing Survey Unexpectedly Crashes to Post-COVID Lows
 
As Goldman lowers its U.S. growth forecasts for 2022 and 2023, the N.Y. Fed’s survey of manufacturers surprised with a drastic plunge into contraction in May, for the second time in 3 months. general business conditions index dropped over 36 points to -11.6 (against expectation of a +15 print)…Click to enlarge.
 
That -11.6 print is lower than the lowest forecast from analysts (-10) – an 8 sigma miss from expectations…
 
Under the hood, new orders dropped nearly 34 points in May to -8.8, and the shipments measure fell at the fastest pace since early in the pandemic, sinking about 50 points.
 
As in April, firms expressed less optimism about the six-month outlook than they did earlier this year. The index for future business conditions was little changed at 18.0. Increases in prices and employment are expected to continue in the months ahead.
The capital expenditures index fell to its lowest level in several months.
 
This is the first of several regional Fed manufacturing numbers set for release over the coming weeks. Is this the start of ‘weakness’ that offers Powell his ‘out’ from uber-hawkishness?
 
Or is this yet more signals that stagflation is becoming embedded… the central bankers’ nemesis.”
 
Chuck again… I’ve explained this before, but here we go again… I stopped reporting the regional manufacturing reports because they never, and I mean never had any indication of what the National ISM manufacturing index would show… But this one kind of made me sit up and notice it…
 
Market Prices 5/17/2022: American Style: A$.7035, kiwi .6370, C$ .7800,
euro 1.0541, sterling 1.2823, Swiss $1.0077, European Style: rand 15.9966, krone 9.6556, SEK 9.8888, forint 366.67, zloty 4.4065, koruna 23.4383,
RUB 65.12, yen 129.31, sing 1.3838, HKD 7.8495, INR 77.31, China 6.7259,
peso 19.96, BRL 5.0604, BBDXY 1,253.22, Dollar Index 103.30, Oil $115.51,
10-year 2.91%, Silver $21.84, Platinum $956.00, Palladium $2, 036.00,
Copper $4.24, and Gold… $1,835.42
 
That’s it for today… A Chamber of Commerce Day here yesterday! I sat outside to read for too long, as my allergies were acting up last night. Pollen is so thick around here, especially since my property is surrounded with trees! Our rose bushes really busted out all over these past few days… Spring has finally arrived! The days are warm, and nights are cool… April and the first two weeks of May had to be the coldest and rainiest start to spring I can ever remember! I’m so glad that’s over! OK, it’s the 2nd round of the playoff, Blues… Go to work, gotta skate, and gotta check! Paul Revere and the Raiders take us to the finish line today with their 60’s song: Kicks… . This song has lyrics that are so appropriate for now… “Kicks just keep getting harder to find”… I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts