The Overnight Markets Send The Dollar To The Woodshed!

A Pfennig For Your Thoughts
 
December 17, 2020
 
* Currencies, led by the euro, on pushing higher
* The U.S. names Switzerland a currency manipulator? 
 
Good Day… And a Tub Thumpin’ Thursday to you! What a day yesterday… Congress is closer to a stimulus deal, The dollar weakened, Gold & Silver had good days, and Chuck received a Christmas Card from a longtime friend, Michael Checkin! I was pleasantly surprised upon opening the card to see who it was from… I also got one from Tim and Nicole Smith, with their baby boy! It’s that time of year again when we reconnect with long lost friends… I reconnected with one yesterday, and what a treat it was catching up! Melvin and the Blue Notes greet me this morning with their song: If You Don’t Know Me By Now… (I’m sure any younger readers would recall Simply red doing that song, but the original was my Melvin and the Blue Notes)! \
 
Well, I took all the suspense out of reading the Pfennig this morning by telling you upfront what I was going to talk about, but in case you didn’t catch it… The dollar continued to weaken yesterday… I lot of the movement didn’t come until later in the day, after the Cartel’s, I mean the Fed’s press conference, where Chairman Jerome Powell, told an audience that the Cartel, I mean the Fed will continue with Quantitative Easing/ QE4…. That sent the dollar down, and the currencies up…
 
The euro, which had given back a little bit of its gains in the early trading, recovered the lost ground, and even went higher closing the day t 1.2192… I say closing the day, but, in reality, you all know that the Asian markets start the day, hand it over to the European Markets, who then hand it over to the U.S. markets, and then back to Asia… That all happens except on Fridays… When the U.S. market closes on Friday afternoon, it doesn’t open again until Sunday night in Asia…   
 
Gold & Sliver also took the cue from the falling dollar and rallied going into their close, with Gold gaining 11.30 to close at $1,866.10, and Silver outperforming Gold again on a percentage basis, gained 86-cents, a major move for Silver, and closed at $25.41…  The dollar weakness is because, what currency traders hear when they read that a stimulus agreement is near… They hear “more currency printing, thus debasing the current supply of dollars”… Never mind that it might be needed by the masses, they deal with reality for the dollar…
 
It was surprising yesterday that Bonds didn’t budge after the November Retail Sales number printed… Boy was I glad that a deep sixed the BHI this month and went with what I’ve been telling you was going to happen to Nov. prints… Nov. Retail Sales were negative -1.1%… Which was far worse than the so-called experts had forecast (-.4%) … And this print sure does bode unkindly to the Christmas Shopping Season, and that shopping season does get started in November! 
 
Retail Sales for 2020, are forecast to be down 10.5%, which is equal to $4.894 Trillion, and hadn’t been this low since 2016… Of course the lockdowns are negatively affecting Retail Sales, but… only to a degree, for as the Amazon Prime driver that comes to my house every day with a package or two or three, knows, most shopping is being done online…
 
You know I miss shopping for presents… At least when I did that, I had the present in my bag and didn’t have to wonder when it was going to be delivered! I’m still waiting on two deliveries that I was told when I bought them that they would be here in time…  
OK, so the overnight markets all hell has broken loose! The dollar is on the chopping block! The Dollar Index has fallen to 89.86, the euro is pushing higher in the 1.22 handle, Gold is up $14, and the rest of the currencies are following the lead of the euro… Apparently, the Asian markets participants didn’t like the Cartel, I mean Fed’s song and dance yesterday! But this move has the markings of what I’m going to be talking about with regards to the weak dollar trend, in a minute… 
 
The price of Oil rallied in the last 24 hours and is trading with a $48 handle this morning… See that? The Vaccine get approved, and shipped out, and medical people are getting shot up, and Oil begins to perk up… Just like I said it would, but if you want to see the price of Oil go back to $45 or lower, then you’ll have to call your congressman and tell him no stimulus please! Yeah, like that’s going to happen!
 
The new weak dollar trend that I talked about last month beginning, is really becoming something that I’ve seen before… When just about every day that I arrived at my desk at the old EverBank World Markets, and turned on my Bloomberg, I would see that the euro had gained again… We’re not exactly there just yet, but getting there…
 
Remember when you were a kid and played a game where you hid something and other kids would have to find it, and you would say “getting hotter”, “your burning up”, when they were close to the object? Or say, you’re “getting cold, then colder, then you’re ice cold” when moving away from the object?  Well, I do believe we’re getting warmer to those days when the dollar is sold daily..
 
Regarding Gold… The good folks at GATA sent me a note yesterday that started like this: “Gold and silver in the form of coins and bars are experiencing an enormous surge in demand at German precious metals dealers.” Now I would put that down as good news for Gold & Silver…
 
Let me remind you that a weak dollar is a loss of buying power for dollar holders, which happens to be all of us! I’ve always viewed the loss of buying power like a tax, that you certainly didn’t vote to have charged to you! 
 
So, have you heard the news that Lola, aka Goldman Sachs, bought the Perth Mint’s Gold ETF business? This all sounds very strange to me folks… Lola bought the ETF biz. And is having the physical Gold shipped to London… And Lola’s new Gold ETF won’tt have the convertibility that the Perth Mint had… The Perth Mint was only place you could convert your GOLD ETF into physical Gold, but that’s gone, and Goldman won’t allow that… . Makes you wonder why, doesn’t it?
 
I don’t know this to be a fact or anything, but I would think that Lola will lease out the Gold, and therefore couldn’t chance a run on convertibility of the ETF… I would also think that the regulators would have a problem with that, but… As we’ve seen with metals regulators, they aren’t worth a hill of beans when it comes to regulating these Bullion dealers…
 
I’m sure no one at Lola reads this letter, so they won’t get mad at me for telling stories out of school on them… At least I would think that to be the case! And the other thing that the new Goldman Gold ETF won’t have and that is the ETF’s unique guarantee from the government of the State of Western Australia. But them Lola supplies most people to Gov’t posts, so maybe they’ll work out a deal…
 
I was reading the 5 Minute Forecast on Tuesday, and read where the new guy at Agora, was touting Bitcoin, and talking about how it’s better than Gold… Well, I decided to let that go, because that’s just his opinion, and opinions are like… you know the rest…  I went back to the 5 yesterday to see what readers had to say, about that claim, and poor Dave Gonigam, the editor of the 5, was inundated with replies telling his new colleague how wrong he was, and so on… So, it was then that I decided to cheer up Dave’s day, and I sent him the link to that YOUTUBE that I had put in the Pfennig a week or so ago… Missed it? Ok, here it is: bitcoin billionaire – YouTube
 
And wouldn’t you know it I received a note from a dear reader yesterday with news about a possible solar flare! I quickly went to the source, and the guy had concluded that there may be as much as a 12% chance of such an event occurring. But not saying when! But did you know that the last Solar Flare to hit earth hit near Quebec and put out power there for days?  And there have been 7 Solar Flares hit Earth since first recorded in the 1800’s…  
 
Ok, back to regular programming… The Big Piece of data today from the Data Cupboard is the Weekly Initial Jobless Claims, which last week showed that the week following Thanksgiving saw 818,000 claims flied… Recall that there were two less day to fil the week of Thanksgiving, so there were in effect 2 extra days in last week’s report. So, one would think that this week’s report will be less than 818,000, butt… what happens if the number of claims is great than last week’s 818,000? I would think that the dollar would get hit, and Gold & Silver would potentially have good days…
 
There are some other prints today, but none that get me all lathered up… Including one of those regional manufacturing indexes, that I am boycotting, reporting on, since they don’t ever feed into the National ISM numbers… So, why report them? 
 
To recap… Congress is apparently close to a stimulus deal and that news sent the dollar to the wood shed for the day, the currencies, Gold, Silver and Oil all rallied on the day… Chuck talks about previous weak dollar trends and how the dollar traded inside those trends, and how we’re not quite there yet… And then he discusses the Lola purchase of the Perth Mint’s Gold ETF Biz…. And he touches on Solar Flares, just for the fun of it… for his Bitcoin buddies!
 
Oh, and before we head to the Big Finish… get ahold of this… The U.S. has named Switzerland a “currency manipulator”…. Now that may be true, but isn’t this a case of the pot calling the kettle black?  
 
For What It’s Worth… Ok, since I had said yesterday that didn’t expect any market moving comments from Cartel, I mean Fed Chairman Powell, and then we went out to prove me wrong, I thought I would give you an article that explains what he said, and it came from our local paper! The St. Louis Post Dispatch… and it cvan be found here: Fed vows to buy bonds until it sees ‘substantial progress’ in economic recovery | Local Business | stltoday.com
 
Or, here’s your snippet: “The Federal Reserve on Wednesday promised to keep funneling cash into financial markets further into the future to fight the recession, even as policymakers’ outlook for next year improved following initial rollout of a coronavirus vaccine.
Repeating a pledge to keep its benchmark overnight interest rate near zero until an economic recovery is complete, the U.S. central bank said it would also now tie its program of monthly government bond purchases to that same goal.
 
“Together, these measures will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete,” Fed Chair Jerome Powell said in a news conference after the end of the central bank’s latest policy meeting.
 
The bond purchases would continue “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals,” the Fed’s rate-setting committee said in its unanimous policy statement.
 
It was the more incremental step of the options the Fed was weighing, taken as policymakers boosted their outlook for U.S. economic growth next year to 4.2% from 4% at the median, and lowered the expected year-end unemployment rate to 5% from 5.5%.
 
With the economic landscape in 2021 brightening, the Fed did not change the type or pace of assets being purchased, a step many analysts had expected as a way for it to provide more immediate help to the economy in the months that it will take for the impact of vaccines to be felt.”
 
Chuck again… 4.2% next year, when we haven’t even booked a 3% gain since 1985!!!!!! What’s Powell been smoking? And no thank you I don’t want some! I like that he said, “we’ll keep funneling cash into “financial markets” into the future… He didn’t specify what asset classes he included in his term “financial markets”… So… take that to mean, Treasuries, Corp and Mortgage bonds, and ETF’s, gotta keep that stock market going strong Jerome… But while you’re doing that Jerome, could you find in the Fed’s mission statement where it says you are the stock markets’ buyer of last resort?
 
Market Prices 12/17/20: American Style: A$ .7629, kiwi .7167, C$ .7871, euro 1.2246, sterling 1.3588, Swiss $1.1318, European Style: rand 14.6868, krone 8.5800, SEK 8.2760, forint 290.01, zloty 3.6250,  koruna 21.3757, RUB 73.38, yen 103.02, sing 1.3249, HKD 7.7525, INR 73.52, China 6.5325, peso 19.79, BRL 5.0921, Dollar Index 89.86, Oil $48.07, 10-year .92%, Silver $25.91, Platinum $1,058.00, Palladium $2,358.00, and Gold… $1,880.30
 
That’s it for today and tomorrow… I know it wasn’t a popular decision that I made last year about me not writing on Friday’s any longer, but it has been a God send to me! Like Manna from Heaven, as I roll over on Friday mornings and realize that I can go back to sleep! So, my Missouri Tigers football team will end their season on Saturday in Starkville Miss. VS Miss. St. It would be much nicer to end the year at 6-4, and not 5-5, although they were only forecast to win 2 this year! The reports yesterday of the high school seniors who have signed to play at Mizzou, was very impressive… I used to always complain about kids in the state that went to different schools other than their state school… I would have given my first born to be able to play football at Mizzou! But, the new coach Eli Drinkwitz, seems to have the message that young men want to hear! So, bully for Eli! Or Coach Drink!  I’ll be here to write Monday through Wednesday next week, and then my winter vacation begins… 12/21 though12/30, and back on 12/31… I might tweet something that comes up that’s important to know, but I doubt it…. Billy Joe Royal takes up to the finish line today with his song: I Knew You When… “you were lonely…. A girl all alone without love”… The Human League did a song similar to this one in the 80’s called: “don’t you want me baby”…   And with that, I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday tomorrow! And please Be Good To Yourself!
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts