To Taper, Or Not To Taper… That Is The Question!

A Pfennig For Your Thoughts

November 3, 2021

* Currencies & metals get sold on Tuesday… 
* Who’s counting the beans at the Treasury? 

Good day… And a Wonderful Wednesday to you! And Congratulations to the Atlanta Braves, this year’s World Series Champions! Well, I went out to lunch yesterday with good friend, Duane, and ran into two of my fave people… Laura and Allison road were having lunch at the same place we were! I’ve known Allison road since she was born, and now she towers over me! And so darn darling! With a smile that will capture your heart, I bet her dad, good friend Rick, has to beat the boys down at the door! And for a change, the November day was bright and sunny, but still at least 10 -15 degrees below normal! Allison road is now a senior in High School, and contemplating where she will go to college… My advice to her was to go south where’s it’s warm! Well, I’ve switched over to Pandora’s Smooth Jazz Christmas station already, and this morning I’m greeted by The Stephen Kummer Trio and their jazzy version of The Christmas Waltz… I loved his music so much that I bought the CD of all his trio’s Christmas renditions…

Well, yesterday wasn’t a good day for the currencies or the metals… It wasn’t an awful day, just not a good day… For some reason, traders sold Aussie dollars (A$) after the Reserve Bank of Australia said they were ready to hike rates… Go figure.. .Opposites are still in play I guess… The BBDXY gained on the day from 1,160.17 in the morning to 1, 162.49 at the end of the day… The euro which on Friday morning was within spittin distance of 1.17, ended the U.S. session yesterday at 1.1582… And that drop is reflected in the BBDXY, for sure… And when the Big Dog euro, gets whipped, the rest of the little dogs (currencies) get taken to the woodshed too… It’s been that way since the early 2000’s, when the euro became the offset currency to the dollar, taking that away from the yen and sterling who volleyed that title back and forth for years prior to the euro’s existence. But for the most part it was sterling… 

When I began trading currencies, my counterparts would always pair the currencies with sterling, and then convert them to dollars… It was very strange to me, but then I was just a country bumpkin in a world market… 

Gold never found a bid after the early trading had it up $1.10, and ended the day down $5.80, and Silver ended the day down 52-cents to drop back below $24, at $23.64… It does appear that a line has been drawn in the sand by the price manipulators, and with Gold it’s $1,800, and with Silver it’s $24… Only massive physical buying of the two metals will break through that line in the sand… And that appears to be something that will take a change of heart with investors, as I read the other day that the GOLD ETF had seen an outflow of holdings in the 3rd QTR…

I think that was bound to happen, given that an ETF is simply a trading vehicle, and when the asset that it tracks doesn’t take off to the moon, investors panic and sell… As I’ve said many times in the past, Gold & Silver are traded like stocks, commodities, etc. here in the Western part of the world, and not like a store of wealth, which it is in the East… In the East investors guy physical Gold & Silver and hold it for ages… pass it down to their heirs, and their heirs pass it down to their heirs, and so on…

I’ve taken to the Eastern way of holding my Gold & Silver… As a store of wealth, that has never gone to zero, like all currencies have throughout history, eventually… And I won’t sell no matter what the price rises, or drops to… It’s all something my kids will have to deal with when I’m gone… But at least I will leave them instructions to never sell, to pass it on to their kids… And THAT’s how I believe Gold & Silver should be dealt with… and not as a trading vehicle…

In the overnight markets last night… there’s been some kickback by the currencies as traders prepare for the Fed’s/ Cabal’s/ Cartel’s message today about tapering… The BBDXY has slipped overnight from 1,162.49 where it closed yesterday to this morning’s 1,161.34… Gold, isn’t taking part in the currency kickback on the dollar… Gold is down $3.40 in the early trading today, and Silver is down 4-cents… 

The price of Oil slipped back to a $82 handle in the past 24 hours, and with all this talk of tapering, guess what bond yields did? Ok, I’ll tell you, they rallied… Wait, What? Yes, with all the upcoming debt, and more bond issuance, and with the threat that the Fed won’t be buying the bonds to keep yields down, what did bonds do? they rallied… Go figure! 

I just had to sit back and admire Bill Bonner’s take on the $2 Trillion cut in the $3.5 Trillion Spendalooza… So, let’s take a moment and listen to what Bill had to say about it… here’s Bill: “The Biden Administration is doing its part… busily trying to keep the jig up by coming out with a huge spending bill – originally $3.5 trillion (with an ultimate $5.5 trillion price tag over 10 years)…

Then, under pressure from its own party, the Biden group decided it didn’t really need to spend $2 trillion of that… so the proposal was shaved down to $1.5 trillion (likely to be far more, as the sun never sets on “sunset” provisions).”

If you don’t already subscribe to Bill Bonner’s letter, I would say that you’ve missed a lot, but there’s always time to subscribe at https://www.rogueeconomics.com/bill-bonner-diary/ Or, you could just simply depend on me to give you snippets of his writings!

Ok, onto other things… Any day now, the Fed/ Cabal/ Cartel will begin to taper their bond buying that now totals $120 Billion of Treasuries every month… Longtime readers of this letter know that I don’t believe the Fed/ Cabal/ Cartel can risk tapering too long.. .Sure they may start, but then realize that they are making a HUGE mistake… And stop!  You see, when the Central Bank buys Treasuries, they keep the yields down, but with inflation rising how will they be able to keep yields down when they are no longer the main buyer of the bonds?

And when yields on Treasuries begin to rise… You had better either hide out beneath your front steps or lock all your doors and pretend no one lives there… Because, all hell is going to cut loose folks… Or… you could have invested in Gold and sat back and watched it all collapse, and think… Man am I a smart devil!

This is a BIG DEAL today to the markets folks… So, all eyes, and ears will be on the chairman, Jerome Powell, this afternoon, when he appears before the microphone, and begins his string of lies, I mean, explanations… 

To follow that discussion up with some sobering news… The U.S. Treasury announced that they will borrow $1 Trillion this quarter, up from their earlier estimate of $742 Billion…  And then these same knuckleheads that forecast that their spending needs would be ¼ of a Trillion less than they turned out to be, have the gall to forecast that in the first quarter of next year they will only need to borrow $450 Billion… As If!  Who’s counting the beans at the Treasury, are they a recent graduate of the new math school? What a bunch of dolts! And that’s all I can add to that!

Oh, and wait until you get to the FWIW article today… You won’t believe what you’re reading, but in all seriousness this is what I was talking about yesterday, when I talked about how all markets are manipulated… So, don’t rush into reading it, as it will be there for you below when you get to it…

The U.S. Data Cupboard today has the ADP Employment Report and if the forecasts are any where close to being correct, the dollar will get a boost today… Yesterday, we only saw the Home Owner Participation, and it remained the same in the 3rd QTR as it was in the 2nd QTR at 65.4%…

You may be asking the same question I was asking when I saw that data… All the reports show that home buying is off the charts, but the ownership is still the same? Riddle me this Batman, how does that happen?

We’ll also see Sept Factory Orders which should be a big drop from August, and then last on my list but number one in the hearts of the fans… The Fed/ Cabal/ Cartel will meet and then announce their plans to taper, that is if the do that… .

But the biggest thing to hit the U.S. Data Cupboard is the Fed/ Cabal/ Cartel announcement this afternoon on tapering… 

To recap… The currencies lost some ground on Tuesday, along with the metals, and Oil… Traders are under the impression that a taper by the Fed is going to be a good thing… One would have thought that traders were smarter than that, but then again I was once a trader.. Maybe I wasn’t as smart as I thought I was! 

For What It’s Worth… This is the doozy report you’ve all been waiting for… So, go refresh your coffee, and then sit down and take this in… This is a report on Bloomberg.com that the Fed pulls all the strings on Treasury issuance, etc. And it can be found here: Stock Market: Jerome Powell, Federal Reserve Dominate Treasury Bond Trades – Bloomberg

Or, here’s your snippet: “At 10:10 a.m. most work days on Wall Street, officials at the Federal Reserve wade into the Treasury bond market. For the next 20 minutes, they proceed to snap up bonds of all shapes and sizes. They’re impervious to price moves, and they never sell. An indiscriminate bond-buying machine, they’ve now amassed a $5.5 trillion stockpile of the debt.

This is a staggering sum, equal to more than 10 times the amount the Fed owned before the Great Recession and quadruple the amount held by any other investor. All of this buying comes in the name of injecting money into the economy and driving down interest rates to ward off collapse, first in 2009 and again after the pandemic hit. Which is a reasonable and noble endeavor central bankers all over the world have pursued similar policies but in the process, the Fed has come to dominate the bond market to such a degree that no other voice seems to matter nowadays.

At less than 1.6%, the yield on the 10-year Treasury bond, a key benchmark for borrowing costs across the globe, is detached from reality. The U.S. economy is growing at a clip of almost 6% this year, inflation is running above 5%, and the Biden administration posted a budget deficit of more than 13% of gross domestic product. The only bigger deficit recorded in the past seven decades was the one the Trump administration delivered last year.

The bond traders of yesteryear would never have accepted such a paltry return in this kind of environment. In the 1980s, as the U.S. was coming out of a prolonged bout of unusually high inflation, they earned the moniker bond vigilantes for the way they’d react to any sign of incipient inflation by selling bonds and driving up interest rates. Tom Wolfe ironically dubbed them Masters of the Universe in “The Bonfire of the Vanities,” while Michael Lewis turned them into cult heroes in “Liar’s Poker.”

The vigilantes caused a stir in Washington a few years later when they dumped bonds at such a frenetic pace triggering a huge surge in government borrowing costs that they bullied the Clinton administration into overhauling its budget plans. The episode so shocked the president’s political adviser, James Carville, that he famously quipped at the time that he wanted to be reincarnated as the bond market, because you can intimidate everybody.

That moment turned out to be the high point of the vigilantes’ power. Slowly and steadily, they’ve lost influence to the point that today they find themselves outgunned by the bond pacifists at the Fed, says Jared Gross, head of institutional portfolio strategy at JPMorgan Asset Management.

This creates a risk for the economy. The bond market, for all its imperfections, acted as an important check on government fiscal and monetary excesses. That power now rests almost exclusively with Fed Chair Jay Powell the man who, along with his fellow board members, tells the Fed’s traders how many bonds to purchase each day.”

Chuck again… I request that you click on the link above and read the whole article… The same article could be written about the dollar, metals, and just about everything else that’s manipulated these days… But that won’t happen, because the Gov’t can’t let everyone know that they behind Gold manipulation, etc.   I’m just saying

Market prices 11/3/2021: American Style: A$ .7442, kiwi .7141, C$ .8058, euro 1.1592, sterling 1.3648, Swiss $1.0982, European Style: rand 15.4083, krone 8.5075, SEK 8.5508, forint 309.53, zloty 3.9622, koruna 22.0553, RUB 71.60, yen 113.77, sing 1.3487, HKD 7.7824, INR 74.43, China 6.3978, peso 20.77, BRL 5.6785, BBDXY 1,161.34, Dollar Index 93.99, Oil $82.10, 10-year 1.53%, Silver $23.66, Platinum $1,051.00, Palladium $2,088.00, Copper $4.49, and Gold… $1,785.00

That’s it for today… And I found out yesterday that this will be a shortened week also, as my dentist called to tell me they had an opening for Thursday morning that she urged me to take, so I did… When I had the huge tumor in my jaw a couple of years ago, I refused to go to the dentist, but now that it’s not being a problem as long as I take my daily chemo pill, I go like everyone should for a checkup… I love my dentist… Her name is Holly, and she always makes me feel like I’m at home getting my teeth looked at… Well day one of being alone, wasn’t too bad… I love smooth jazz Christmas and right now I’m listening to a a Bossa Nova Christmas… I guess I’m just an old fart, that loves to recreate the sounds that came from my parents record player… Yesterday, I had an old Hank Williams song in my head that I couldn’t get rid of… Why don’t you love me like you used to do, why do you treat me alike a worn out shoe, my hair is still curly and my eyes are still Blue, why don’t you love me like you used to do? My dad always sang Hank Williams songs all around the house… And I have no idea why that one came to me yesterday, but it brought back great memories of my dad singing Hank Williams’ songs.. Ok… enough nostalgia for one day, I hope you have a Wonderful Wednesday, and please Be Good To Yourself?

Chuck Butler

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A Pfennig For Your Thoughts