Traders Finally Pick A Lane, But They Pick The Wrong One!

A Pfennig For Your Thoughts
 
October 14, 2020
 
* Currencies, metals, Oil, stocks all get sold yesterday
* If inflation rises, how does a Central Bank Combat that? 
 
Good Day… And a Wonderful Wednesday to you! We’re in our second day of warmer than usual weather today, and then the bottom falls out tomorrow… So, I’ll need to get outside today to soak up some warm sun before the cold front comes through… I’ve always said that the Fall weather was the best weather we get here in the St. Louis area… And so far, I’ve been bang on with that thought once again! But… even though the weather is nice now, I would rather be in a warm climate, so I can go outside each day, read a book, or listen to music, or nature, and enjoy not having to have a jacket or sweatshirt on… But If I were away, I would miss things like my granddaughter, Evie’s first birthday! So, I tough it out here until I go to Florida for the winter…. The Guess Who greet mee this morning with their song: No Time….  I think I’ve said this before, but in case I didn’t… Burton Cummings the lead singer of the Guess Who, is one of my all time favorite singers!
 
OK… I guess when I kept harping at traders to “pick a lane” I should have stipulated that I wanted them to move ahead, and not drop back, after they picked their lane… In case the coffee hasn’t tricked your mind into believing you are awake… I’m talking about the up one day, down the next, trading we saw for over two weeks, and I said that I would tell the traders to pick a lane, if reference to me commenting on drivers that can’t decide what lane to choose… 
 
The reason I should have stipulated which way they should go after finally choosing their lane is that yesterday should have been an up day, that is, if we were keeping with the trading trend of the last two weeks… But something not too funny, happened on the way to the forum, and the trend ended, just like that! Gold lost $30 on the day, Silver lost nearly $1 (at .98-cents), the euro dropped further downward, and stocks got sold…
 
The price of Oil slipped downward, but…. U.S. treasuries rallied! But I have to say, that I really don’t want to seed yields go any lower… There are over $15 trillion of government bonds worldwide, or 25% of the market, now trading at negative yields, I don’t want to see that being the case here… But in reality, our Treasuries are trading with negative “real yields” that arrived by taking the rate and subtracting inflation…
 
Speaking of inflation… The stupid CPI printed yesterday, and it only showed a .2% gain in September, bringing the YTD figure for inflation to 1.4%… Which is below where we were last year at this time, when inflation was 1.7%…  And that WAS BEFORE THE FED ANNOUNCED THAT THEY WERE TARGETING HIGHER INFLATION….   
 
Yesterday, I made big deal out of the increases in inflation that I’ve already seen… As always I say that you may not have experienced these same inflation increases… But overall… this is very interesting as it is the beginning of higher inflation… but is it really the case of too many dollars chasing too few goods, or… it it just a case of a lack of supply, without the spending demand? Recall that at last check, Personal Spending was not so hot…
 
So… What’s it going to take to get inflation going higher the way the Fed Wants it to go? Because if this all we get in terms of higher inflation, from all the money printing the cartel, I mean the Fed, has done, then, we need to go back to square one…. So, will the next stimulus, whenever it does get passed create greater inflation? I doubt it…. We will see it blip higher, but it’s not sustainable, until there’s a message sent to consumers that this is not a one and done deal, that more stimulus is coming…. And to me that’s a real slippery slope folks…
 
Because once you get consumers primed for a regular stimulus check, bad things can happen… And one of them is the Universal Basic Income (UBI)…. Tax receipts are already falling very short for this year, like they did last year, which means that the difference goes to the national debt… And if our leaders, whomever they might be, decide to go with the UBI, who’s going to pay for that? Not taxpayers because they’ve already paid… Just more debt will be added, and added, and added, until the weight of the debt causes the financial system to collapse… 
 
And upon further review… the offense was offside… No wait! I’m going to be very serious here so don’t let that little ditty confuse you! I was thinking yesterday, about the cartel’s, I mean the Fed’s desire to get inflation rising… But there’s a caveat here that I don’t think they’ve thought about, or maybe they have and they are just playing with fire, like little kids, and you know what they say when you play with fire, right? You get burned!  OK… so we’ve established that they want inflation rising, but… what does a Central Bank need to do to combat inflation that begins to get out of hand? Yes, they need to raise interest rates, right?  
 
Well this is where it gets really ugly folks… for if the interest rates are brought higher, so does the cost of servicing the debt, paying interest on bonds, and issuing new bonds with higher rates… Uh-Oh! I’m dead serious here folks! This is not a good scenario… And brings me back to the question of, Did they think about this before they began their campaign to increase inflation? Because, to me, it sure looks as though they didn’t… I’m just saying… 
 
And readers of both the Pfennig, and Dennis Miller’s newsletter, will know that we both feel that the repeal of the Glass-Steagal Act is the root cause of the casino banks needing bail out after bail out… Well, I received news yesterday that there’s a new book out, titled: Taming The Megabanks, and is about why we need to reinstate the Glass-Steagal laws that prohibit the Banks and Brokerage Houses to merge… I think that this will be my Prime Day purchase! 
 
Boy, I’m sure full of good news for happy times ahead aren’t I? NOT! All my education, in school and on my own has never covered what we’re doing as a country with our fiscal and monetary policies… So, we are in uncharted waters folks… Better put your lifejackets on and hold on for dear mercy, because this is going to be rough waters ahead, and it’s not going to be clear sailing like it has been for sometime now…
 
OK, I’ve got to move on to something else before I blow a gasket! So…
 
The euro has seen better days, and worse days as a matter of fact, but for this thought we’ll just focus on recent times… Can you believe they are still going through BREXIT negotiations? I think that having those negotiations hanging over the Eurozone like the Sword of Damocles, is playing into the euro not being ready for prime time and move forward… Because I know in my heart of hearts that Traders want to sell dollars right now, they know that they should be selling dollars right now, but they aren’t…. But, I believe they will eventually come around to doing so… Economist, Stephen Roach believes that too, you may recall me highlighting a thought by Roach regarding the dollar collapsing …
 
In the overnight and early trading markets today, we see that Gold is up $11, and Silver is up a quarter (25-cents)… Maybe the traders got their up, down days mixed up yesterday? HA! The aforementioned, euro, is inching higher this morning, but sterling has lost the 1.30 handle, and is looking peeked…  The Japanese yen, which last week looked as though currency traders had finally come back to thinking straight, and were selling yen, has returned to the 105 handle, and has fallen back in favor with traders… I just can’t get the song by Leslie Gore out of my head… Cause now it’s Judy’s turn to cry, cause Johnny’s come back… to me… 
 
Now see if you can get that little melody out of your head today! 
 
And what do we have here? Lola, aka Goldman Sachs, has issued a buy for its clients… They say buy Silver…  Well for once, I’m not going to punch holes in one of their buy signals… And remember, what Lola wants, Lola gets…. I’m just saying… 
 
The U.S. Data Cupboard is still wanting economic data prints today, as only the PPI (wholesale inflation ) will print… taking the stupid CPI into consideration, tells me that PPI will be weak…  
 
To recap… The traders finally picked a lane, but it was the wrong one! As everything but Treasuries got sold yesterday… In the overnight markets Gold, Silver and euros have rallied, so we’ll see what happens the rest of the day today.. Maybe traders just got their up, down days mixed up? You think? HA! Did you know that the Eurozone and UK are still in BREXIT negotiations? No wonder the euro is tethered to the 1.18 handle! And Chuck goes all nuclear on the cartel, I mean the Fed, regarding their desire to see inflation rising… 
 
For What it’s Worth… Well, first longtime reader Bob, sent me the link for this article, and then another reader sent it to me, so apparently its something that everyone needs to see! And I believe it is! This is an article about the real unemployment numbers, and it can be found here: https://www.axios.com/unemployment-numbers-doubts-claims-backlog-california-5c9621d2-d285-4626-8657-655b43052b11.html 
 
Or, here’s your snippet: “More than 25.5 million people were collecting unemployment benefits as of mid-September, and nearly 1.3 million people filed first-time jobless claims last week — more than 800,000 for traditional unemployment and 464,000 for the Pandemic Unemployment Assistance program.
 
The state of play: That number excluded any new claims from the largest state in the country, California, which paused its program to implement fraud prevention technology and comb through a backlog of claims that had reached nearly 600,000 and was growing by 10,000 a day.
The big picture: California isn’t the only place where issues with unemployment claims are rising.
 
  • The persistently high number of claims drive an uneasy contrast with the continued decline in the unemployment rate and improving numbers on the Job Opening and Labor Turnover Survey to the point that University of Oregon economist Tim Duy says, “We should be more skeptical about the initial claims data. If the claims data is deeply corrupted, the conventional wisdom is just plain wrong. I keep saying the same thing: This isn’t the 2007-09 recession or the 2009-2020 recovery. It’s something different.”
  •  
Chuck again… Ok, first things first… did you know that California’s jobless numbers weren’t included, because I didn’t until reading this article…That’s a real game changer there, folks… But then I wouldn’t expect things to be transparent and fully explained to us by the BLS would you? 
 
Market Prices 10/14/20: American Style: A$ .7175, kiwi .6664, C$ .7614, euro 1.1750, sterling 1.2998, Swiss $1.0941, European Style: rand 16.4996, krone 9.2090, SEK 8.8203, forint 309.30, zloty 3.8850, koruna 23.2382, RUB 76.92, yen 105.29, sing 1.3570, HKD 7.7497, INR 73.20, China 6.7220, peso 21.36, BRL 5.5428, Dollar Index 93.46, Oil $40.05, 10-year .71%, Silver $24.47, Platinum $879.00, Palladium $2,404.00, and Gold … $1,904.00
 
That’s it for today… Well, I have another appt. today, this time it’s with my cardiologist or heart doctor is easier for me to say and type! You know, I never in all my years prior to 2017, ever thought that I would have a “heart doctor”… The doctors would listen to my heart and tell me that my heart was not something I needed to worry about… Now I have AFIB, and a Pacemaker, and a monitor that reads my heart numbers and transmits them to the doctor… I still can’t believe that me… Chuck Butler, has this problem… but it is what it is… I like my heart doc… but he is a Cubs fan, and always likes to rub their success against the Cardinals, in to me… But he’s good… So, I’m hearing that a lot of places are cancelling Halloween… Wait, What? That’s not right! Don’t do that authorities! You’ve already taken away nearly a year of their childhood social growth! Ok, Emerson , Lake and Palmer (ELP) take us to the finish line today with their song: Lucky Man… Which is what they used to call me… “Lucky”… HAHAHA, I hope you have a Wonderful Wednesday, and will Be Good To Yourself!
 

Chuck Butler

Creator & Editor of:
A Pfennig For Your Thoughts