The Dollar Returns To The Chopping Block

A Pfennig For Your Thoughts

December 22, 2020

* One and done for dollar strength… 
* It’s the same-o, same-o, trade with China… 

Good Day… And a Tom Terrific Tuesday To You! Well, yesterday was… Monday, Monday, can’t trust that day… And it proved to be just that! More on that in a minute… I don’t know about you, but the Big Build Up of Christmas this year, just isn’t there for me… I love the Christmas season, and what it does to people, but, without being out and about with people, I can’t tell if the Christmas spirit has touched them or not… Did you hear that some dimwit on CNN said that we should cancel Christmas? Man, it is a good thing I don’t watch CNN, or else I would have been screaming at the TV, and the neighbors would be calling the gendarmes, and the men in white suits to come take me away! They’re coming to take me away a-ha, they’re coming to take me away! Somehow, I get the feeling that the scenario I just described will be in my future, as my brain finally explodes from being right about all these dirty deeds done dirt cheap! The Stephen Kummer Trio is playing their version of the song: I’ll Be Home For Christmas… It’s almost as good as The Celtic Woman Lisa, and her version of the song…  

Everybody is talking about change… and how this is going to change and how that’s going to change, and so on… And it reminds me of a saying I once heard, here goes… “Change is inevitable, except from a vending machine”…   My dad used to tell me, that “In change lies opportunity”… And I guess that’s right… But do we have to have so much change so quickly? I’ll leave that right there and get to the markets, but we’ll be talking about a lot of change in the coming months folks, so look for those opportunities…

So, when I left you yesterday, the dollar bugs were fighting back… But that ended in the U.S. markets, and soon the dollar was back on the chopping block VS the currencies, as the day went along… Gold kept trying to get its head above water, but was unable to and end the day down $4… and closed at: $1,8 76.70…  It wasn’t economic data that turned the dollar’s fortunes around on a dime, there was only one piece of data that printed yesterday, and it was one of those regionals that I’m boycotting, and besides those normally aren’t market moving prints… So, what was a one full day of dollar buying, considering that the dollar buying started Friday afternoon, and went through to most of the U.S. morning, before getting stopped at the border, I’m going to say that my suspicions were validated, and it was a bout of Central Bank intervention… Who’s Central Bank would be the next question… And I’m going out on a limb here and say it was a joint effort by the Fed/Treasury and ECB… The reason behind this has many items, but one that I’ll share with you is this… Did you notice that the Japanese yen hardly moved? Well, that tells me that the BOJ either wasn’t invited to the party, or refused to go because of Covid concerns…

I had laid the scenario of why the ECB was sweating bullets about the euro getting so strong previously, right? So… I’m sure the PPT, of which the Fed Chairman is part of, said, “hey, ECB, we’ll throw you a bone, here, and see what happens, maybe traders will get scared and not push the euro so high going forward”…  But, guess what happened instead? Well, I guess you don’t have to guess, since I just told you above what happened! DUH!  

The Dollar Index at the end of the day yesterday was 90.10, after hitting a high of 90.63 earlier in the day…  And this morning the Dollar Index is trading at: 90.14… So, little movement in the currencies overnight, and Gold is down a buck or two this morning early, so we’ll see where that takes us today… 

And any further moves upward in the currencies after this brief and small recovery of the dollar, will all but seal the deal that the dollar is in a new weak dollar trend… It could be multi year, because previous currency trends have been as short as 7 years and as long as 10 years… Or, with the new way that everything trades, we could have a shorter than normal trend length… There are no “free markets” any longer, just manipulations… But if the U.S. is signing off on a new weak dollar trend, as I believe they are, for what better way to invite inflation into an economy than with a very weak currency, then who knows how long it will be, maybe until that elusive inflation rate is where the Fed’s want it to be? Probably, but it will take some time to stop the run-away train that is a short dollar trade.

The price of oil has slipped by about 1/2-dollar as it trades this morning, and the Russian ruble has too slipped, but on just a 50-cent downward move in Oil? The Brazilian real too has slipped in price, but the Norwegian krone is stronger (due to the euro’s gains), and the Canadian dollar/ loonie is holding steady Eddie… So, it’s a mixed up world for the currencies this morning… 

In the overnight markets, as I said above the currencies saw little movement, and Gold is drifting. You know, something that’s on my mind this morning is all the news from the U.K. and I’m not talking about the Brexit negotiations, which aren’t going anywhere in my opinion, but that’s not what I’m talking about. I’m talking about how the virus has taken a turn for the worse there… Sure it takes about two weeks for a vaccine to take effect, and they haven’t had two weeks since being the first to receive the vaccine, so the spread of the virus is getting its foot in the door before the vaccine can stop it… Or… here’s a scary thought, what if, the virus has a new strain already, and the vaccine is worthless against it? 

OK, Chuck step away from the cliff son… Come on down, there’s no reason to jump just yet… Come on you can do it… There… now sit back down in your chair, and tell people that you were just thinking out loud and didn’t mean to go down that rabbit hole…  OK? You’re good now? Let’s talk about something else… 

I feel so bad about missing something important last week… I forgot to say Happy Birthday to two former colleagues: Jen McLean, and Ty Keough… I hope they still love me! I worked with Jen since she was right out of college… I saw her get married, and gained weight during her pregnancies! I had grown up following the soccer career of my friend, Ty Keough… I recall him during his playing days with the St. Louis Steamers, having a big afro hair do! Ty was a customer before he came to work with us, so he always had a customer’s best interest at heart… So, Happy Belated Birthday to these two…

I sure hope I didn’t miss any others recently, as my mind hasn’t been on personal stuff, just all the changes, and goings on in the markets…  You know, in 2001 when I wrote the White Paper titled: The Decline of the Dollar, I was thought to be going crazy, and that there was no way the all-mighty dollar was about to go into a weak dollar trend… Well, all the facts I had about why that was to be, came to fruition and by Feb of 2002, the weak dollar trend was in full swing…    I don’t have press coverage like I used to have, thanks to David Galland, and Peter our Press Agent…  And so my call for a new weak dollar trend is kept to you dear readers, and with the FX Street, who still, to this day, post my Pfennig letter to their site, and tweet it out, to anyone that follows them on Twitter.

And I can’t forget the great work done by my publishers, the Aden Sisters, Pam and Mary Anne, who decided last year that their readers of the Aden Research letter should also receive the Pfennig each day… So, those folks also know about the call for a new weak dollar trend… 

The timing of a new weak dollar trend is in order here… The strong dollar trend started in 2011, and so that makes it almost 10 years, which is normally, and historically the longest a weak or strong dollar trend has lasted. Then you add in that in 2001 the U.S. National Debt was “just” $5.8 Trillion… Today it’s over $27 Trillion… In the first 10 years after 2001, we added nearly $9 Trillion ($8.99 Tr.) And in these last 10 years we’ve added $ 12.72 Trillion… Crazy I know, but as I use to say, that citizens of this country had grown Comfortably Numb to these amounts, that now sit at $27.51 Trillion!

Then you toss in the fact that the Fed/ Treasury’s printing press for dollars has been working overtime in recent years, and you’ve got more dollars chasing goods in this country… yes, the plandemic has caused some severe supply chain problems and lack of funds of people to spend, but Personal Spending is still going strong… (We’ll find out more on that tomorrow)

Ok… enough of all that… in the U.S. Data Cupboard, we’ll see a final revision to 3rd QTR GDP, which you may recall was plus 32%, but I had debunked the numbers and showed you how we were still behind the 8-ball when it came to a full recovery of what was lost in the economic shutdown of the 2nd QTR… In addition, the always stupid Consumer Confidence report, which is only a pulse of how the stock market is doing, will also print today… 

Tomorrow’s Data Cupboard is going to be chock-full-o-data, with a good number of market moving data prints on the docket… I for one do not see tomorrow’s data prints working out nicely for the dollar, but we’ll have to wait-n-see, eh?

And you recall all the name calling and blusterous talk about hurting China’s trade in the past couple of years? The trade tariffs, etc.? Well, the numbers are in for last year’s trade with China, and our exports there didn’t amount to 1/3 rd of our imports from China… So, in the end it’s the same-0, same-o, with China and their trade surplus with the U.S. For the first 11 months of 2020 is $460 billion, up 21.4% from this time last year, already one of the highest ever recorded.  

To recap… The short-lived bounce in the dollar ended yesterday afternoon, with the currencies staging a rally, which led Chuck to believe that the short term move was Central Bank intervention. He went further to say that it looked like a coordinated intervention between the Fed/ Treasury (they are just one now, right? HA!) and the ECB… Chuck talks about the beginning of the last weak dollar trend, and thinks that Gold & Silver are digging in their heels and ready to make a move to higher ground…

For What It’s Worth…. Here’s an article that takes us to a site that sells Gold so keep that in mind when reading this article, about Gold. I think it’s a good article, and it can be found here: LAWRIE WILLIAMS: Gold, lies and statistics. (sharpspixley.com)

Or, here’s your snippet: “Gold is, or should be, the ultimate economic bellwether if it was given free rein, but governments, central banks and their allies in the financial sector seem to be doing their utmost to keep the metal’s price under control for fear of unleashing Pandora’s box and bring the whole global financial system to its knees. A rising gold price is seen as a devaluation of the mighty dollar – the cornerstone of the global financial system for now – so gold price appreciation should go hand in hand with a declining dollar, or vice versa. The latter is seeing a weakening almost by the day in view of the U.S.’s enormous debt position. Go figure!

Paul Volcker, who died nearly two years ago was perhaps the most outspoken, and arguably the most successful U.S. Fed chairman – a position he held from 1979 – 1987 under both Democratic and Republican Administrations – in recent years. He has been seen as the Fed chairman responsible for vanquishing runaway U.S. inflation and was an outspoken critic of gold’s role in global financial markets. Indeed he is seen as the architect of President Nixon’s gold window closure when he was in the Treasury Department and before his stint as Fed chairman. He set forth the mantra that the gold price should be controlled through central bank influence – a policy which looks logically to have continued to the current day, although vehemently denied by those who have the ability to implement such programs. But then who believes such denials?

There are almost certainly continuing moves by governments and central banks to keep gold price rises under control in order to protect their fiat currencies from total collapse in the light of a stratospheric increase in the gold price. However a steady currency value erosion and a controlled gold price increase may well be on the cards. Certainly continuing interest rate suppression policies by the major central banks, leading to negative ‘real’ interest rates suggest that this is probably the case. This does not mean that price suppression by central bank allies in the major futures markets will cease, but it will possibly continue at perhaps a less extreme level than in the past and allow a slow, and relatively steady gold price increase and corresponding ‘stealth’ currency devaluation. If some increase was not allowed then the dam could eventually burst under pent-up pressure and gold might rise out of control bringing the whole financial system crashing down. Volcker once described gold as ‘the enemy’ and provided one keeps one’s enemy close, and thus under control, matters are unlikely to deteriorate too far.”

Chuck again… the writer then goes to show some statistics provided by John Williams of shadowstats.com of whom I’ve relied on for data for years! John Williams is quoted as saying this about Gold… “Holding physical gold protects the purchasing power of dollar assets, irrespective of any near-term volatility in, or manipulation of, gold prices.”  Very well said, I must say!

Market Prices 12/22/20: American Style: A$ .7562, kiwi .7075, C$ .7773, euro 1.2242, sterling 1.3425, Swiss $ 1.1299, European Style: rand 14.5824, krone 8.6423, SEK 8.2617, forint 295.86, zloty 3.6845,  koruna 21.5014, RUB 74.60, yen 103.37, sing 1.3336, HKD 7.7524, INR 73.81, China 6.5485, peso 20.01, BRL 5.1213, Dollar Index 90.14, Oil $47.35, 10-year .93%, Silver $25.97, Platinum $1,022.00, Palladium $2,358.00, and Gold… $1,875.40

That’s it for today… So… are you ready to stand in line for your virus vaccine? Like I said last week, I’m not getting one until my oncologist tells me that there are no side effects on cancer patients… And I figure that won’t happen until spring… And even then I’ll still be very leery of this drug, that was rushed through testing (I know they’ve had the groundwork on this drug done previously) and is the first drug to use messenger RNA (mRNA)… We don’t know just yet, how that will effect someone’s system going forward… Call me crazy, but… this is all mad science to me… I’m waiting for someone at one of these labs to look up and say, “It’s Alive”! After thinking about what I said above regarding gaining weight during Jen’s pregnancies, I also gained weight during our little Christine’s 3 pregnancies, I sat right between those two, so I blame my obesity on them! HAHAHAHAHA! It had nothing to do with the Budweisers and burgers, pizza, and fries! HA! Just kidding of course! I blame it all on the fact that I have not been able to be active in any way for over 13 years… On Rocktober 15th, I stepped on the scale at the doctor’s office and was blown away at how much weight I had gained… I decided then that I had to slow down my intake, then I was told that I needed to cut out sugar, from my diet, which is also carbs… I’ve lost 45 lbs since that day in Rocktober… But that’s as noticeable on me as removing a bucket of sand from the beach, so I have lots more work to do there! The Vince Guaraldi Trio takes us to the finish line today, with his version of: The Christmas Song… I always loved hearing Johnny Mathis sing this song…  I hope you have a Tom Terrific Day today, and will do your very best to Be Good To Yourself! 

Chuck Butler

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A Pfennig For Your Thoughts