Traders Don’t Believe What The Fed Is Saying…

A Pfennig For Your Thoughts
 
August 18, 2022
 
* currencies & Metals don’t get ambused last night! 
* Retail Sales were flat, so what are consumers spending money on now? 
 
Good Day… And a Tub Thumpin’ Thursday to you! I probably had the most to eat at a sitting in a couple of years, last night, as we took the grandkids to a Mexican restaurant for dinner. The kids love chips and salsa, so we let them go at them! Little Evie even got into eating chips and salsa… Everett was the only grandkid that couldn’t make it, as he had football practice. My darling granddaughter, Delaney, (I call her little d) is starting high school in a week, and she’s all excited about that. Yes, it’s been 15 years since she was born… YIKES! My beloved Cardinals won again last night VS the Rockies, and the Cards and Rockies go at again today, in a day game… I couldn’t find anyone that wanted to go to the game with me, so… I’ll sit out back and watch the game at home… R.E.M. greets me this morning with their mega hit song: Losing My Religion
 
Well… for the second day in a row, the dollar didn’t gain anything during the U.S. session, but gains a bushelful in the overnight markets… Yesterday, the dollar was stuck in the mud, and the BBDXY lost 1 index point. So, that meant that before the trading books were handed over to the Asian and then the European traders, the currencies traded in the same clothes that they had on all day… Gold & Silver got smacked around, and suffered large losses yesterday… Gold lost $14, and closed at $1,762.60, and Silver lost 38-cents, to close at $19.88… Gold & Silver started the day in the dumps, and never recovered, and before you knew it the day came to a close and they had worse losses than they started the day with!
 
It’s all about this mantra that “inflation has peaked”… or “peak inflation”… I’ve told you that I just don’t see it playing out that way, that July’s drop in inflation, was just a blip on the record books… August might also reflect a narrowing in inflation continuing, but then watch out! You know, I was always taught when I came on the trading desk, that traders are always looking ahead, and they trade based on what they see ahead… So, apparently, traders these days, are thinking that inflation has peaked… Because that’s how their trading…
 
The price of Oil gained $2 yesterday, and closed the day trading with a $88 handle. And Bonds were bought bringing the 10-year’s yield down to 2.87% at the end of the day…
 
In The overnight markets last night… there was no ambush last night as there was the previous two nights. The BBDXY gained 1 index point overnight, and the currencies appear to be stuck in a rut this morning. Gold is up $7 in the early trading this morning, and Silver is down 4-cents, so a mixed bag of results so far for the metals this morning. 
 
The price of Oil gained a buck overnight, and trades this morning with a $89 handle. This Oil pricing is really getting to me folks… Up, down, up , down, and then sideways and upside down! Is there lack of demand or there isn’t lack of demand, someone please make a decision and trade from it, please? 
 
I would have thought that with the price of gas falling, that consumers would have more dollars in their respective pockets to spend on other things, but from the looks of Retail Sales in July, that wasn’t the case, and that leads me to believe that consumers have just taken a blow to the midsection, and are still reeling from that blow… And will they come back to the stores once the sting of the blow abates? In other words, will they forget the pain? I’m thinking that they will, but then the wolf is always at the door, folks, and other things might cause another round of blows to the midsection.. 
 
Like the pricing of food… for instance, last month food prices were up 1.1%.. and just a look at some of the items, eggs were up 4.3%, and other things like shelter was up .5%… So, what I’m saying here is that there are other things to spend one’s money on that are basic needs… 
 
Yesterday was one of those “no where to run, no place to hide days” in the markets… Stocks were down, bonds were down, currencies were down, metals were down, and it was just plain ugly anywhere you looked yesterday… (The price of Oil was up marginally throughout the day yesterday) Was it the disappointing July Retail Sales that brought about all this selling yesterday? Retail Sales for July were flat as a pancake( Head East ), and when you take out food and energy, as if we could actually do that in practice not just on paper, Real Retail Sales were up just 0.01%… So, the BHI was bang on once again…
 
Well, maybe in stocks and bonds, but as far as the currencies are concerned, it should be been a watershed report for them, as this report would indicate that the economy is slowing, and that could sway the Fed Heads in the amount of a rate hike they want to announce in September…And the metals should have never been on the chopping block yesterday, or any day before it for that matter!
 
The Fed Heads FOMC Meeting Minutes were out yesterday and they sure painted a different picture than what the markets are trading on… I found this on CNBC this morning: “Federal Reserve officials at their July meeting indicated they likely would not consider pulling back on interest rate hikes until inflation came down substantially, according to minutes from the session released Wednesday.
 
During a meeting in which the central bank approved a 0.75 percentage point rate hike, policymakers expressed resolve to bring down inflation that is running well above the Fed’s desired 2% level.
 
They did not provide specific guidance for future increases and said they would be watching data closely before making that decision. Market pricing is for a half-point rate hike at the September meeting, though that remains a close call.”
 
Chuck again… Well doesn’t that just take the cake? The Fed Heads spell out what they are thinking, and the markets trade as if they don’t believe them… Hmmm… I know, I know, I wouldn’t believe them either, but there’s an old saying about not fighting the Fed…
 
In an article I found on Bloomberg yesterday, the secrets of JP Morgan’s Metals Trading came to everyone’s attention… Check this out from Bloomberg.com “The trial of JPMorgan Chase & Co.’s former head of precious metals has offered unprecedented insights into the trading desk that dominates the global gold market. 
 
The proceedings have already shone a new light on the inner workings of the business, from its profitability and market share to its largest clients.
 
In summary: the business is a consistent moneymaker for JPMorgan, notching up annual profits between $109 million and $234 million a year between 2008 and 2018. The lion’s share of that comes from trading in financial markets, but the bank does plenty of physical business as well. Trading and transporting physical precious metals makes the bank about $30 million a year on average.
 
Still, the profits disclosed in the trial have been overshadowed more recently: in 2020, JPMorgan made $1 billion in precious metals as the pandemic created unprecedented arbitrage opportunities, according to people familiar with the matter.”
 
Chuck again… I have no problem with a business making profits that seem out of the ordinary, as long as they aren’t cheating the customers or the markets, doing fraudulent things, and underhanded dealings… 
 
We’ll see the usual fare for a Tub Thumpin’ Thursday today with the printing of the latest Weekly Initial Jobless Claims… these reports have shown a marked increase in the number of claims in recent weeks, which contradicts the BLS trumped up jobs creation report… We’ll also see the leading indicators which last month printed negative… And finally Fed Minnesnowta, Neal Kashkari will be speaking, and as has been his habit of opening mouth and inserting foot, I’ll be interested to see if he decides to keep his trap shut…  
 
My dad taught me that it is far better to allow people to think you are a fool , than to open your mouth and remove all doubt…. 
 
To recap… The currencies and metals didn’t get ambushed last night, and that’s a good thing. Gold is up $7 early this morning, so we have that going for us! Chuck talks about all kinds of things this morning, so if you passed over something, go back and read it again! HA! 
 
For What It’s Worth… I’ve said this before, but I really like Matthew Piepenburg’s writing for Swiss America… His latest article was picked up by the Dollar Collapse web site, and it’s here that I’ll send you to find Matthew’s article title: Modern American Policy: Stupid or Sinister? And that article can be found here: Matthew Piepenburg: Modern American Policy: Stupid or Sinister? – DollarCollapse.com
 
Or, here’s your snippet: “American policy has been acting in ways which suggest either a desperate ignorance or a sinister restructuring of the national narrative.
 
Surveying the Senseless
 
The USA is now staring down the barrel of four-decade high inflation, an inverted yield curve and the highest debt levels in its history as Wall Street recently enjoyed the strongest relief rally since 2020 on the bad news of yet another Fed rate hike (75bp) into a percolating liquidity crisis.
 
Huh?
 
In a Fed-led dystopia marked by years of printed rather than earned liquidity, bad news is now good news to markets who nervously seek pretexts for central bank stimulus rather than actual earnings or GDP.
 
In such distorted landscapes, positive jobs data creates sell offs and crippling rate hikes induce rising stocks.
 
For almost 2 years, while we and other candid market observers were warning of crippling inflation, our central bankers were describing it as “transitory” with a dishonesty similar to the current recession is not a recession meme.
 
Huh?
 
Meanwhile in DC, we see growing signs of a political culture less about public service and more about self-service.
 
Wealth disparity in the home of the brave has passed the highest levels ever recorded and points directly to the slow and empirical death of the American middle class.”
 
Chuck… oh, the article is longer as Matthew goes through more steps that just make U.S. policy questionable, so take the time to do to the website provided above, and read the whole article…
 
Market Prices 8/18/2022: American Style: A$ .6957, kiwi .6287, C$ .7758, euro 1.0167, sterling 1.2062, Swiss $1.0489, European Style: rand 16.7130, krone 9.6616, SEK 10.4048, forint 397.75, zloty 4.6459, koruna 24, 1767, RUB 60.13, yen 135.20, sing 1.3816, HKD 7.8448, INR 79.68, China 6.7903, peso 19.98, BRL 5.1662, BBDXY 1,272.98, Dollar Index 106.69, Oil $89.31, 10-year 2.88%, Silver $19.84, Platinum $930.00, Palladium $2,176.00, Copper $3.63, and Gold… $1,769.95
 
That’s it for today, and this week of course… Saturday will be my darling daughter Dawn’s Birthday… I won’t tell you how old she will be, that wouldn’t be nice of me. But it doesn’t matter, because she doesn’t appear to be that age… She’s tiny, and petite and built just like my grandma… She is still a kindergarten teacher in the school district that she grew up in. So Happy Birthday Boo! When Dawn was a little girl, about 2 or 3, I started calling her Boo Boo (Yogi’s bear partner) and she still has an uncle that refers to her as “the Boo”… Cardinals won last night 5-1, so no dramatics like the night before… The Cards go for the sweep today… Journey takes us to the finish line today, with my fave song from them titled: The Girl Can’t Help It… I hope you have a Tub Thumpin’ Thursday today, and a Fantastico Friday tomorrow, and that you don’t forget to Be Good To Yourself!
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts