Traders Hide Under A Shell Ahead Of The FOMC

A Pfennig For Your Thoughts

April 27, 2021

* Currencies & metals gain small amounts on Monday
* Palladium reaches $3,000! 

Good Day… And a Tom Terrific Tuesday to you! 85 degrees in Florida is not the same as 85 degrees in Missouri… I know it took me quite a few years to figure that one out, but I did, and yesterday was a prime example of that… My Accuweather app told me it was 85, but, I was tempted to go inside and grab a sweatshirt! In another month, once the earth turns on its axis, I’ll be sweating in 85 degree weather here… Just not now… Thanks to all who sent along a note about the Money Show Panel I was on last Thursday.. My good friend, Dennis Miller, called to tell me he compared my picture that appears on the www.dailypfennig.com site, and a picture he took from the zoom screen and he said, “holy cow, you have lost a ton of weight!” Ok, the group Gallery greets me this morning with their 70’s hit song: I Believe In Music… “I believe in song..” 

And I do believe in music, it can soothe your sorrows, or lift you up, or make you wanna dance, and sing along… I bet I didn’t have to tell you that about me did I? HA!

Well, my fears about Traders taking a siesta to begin this week, until they see the color of the FOMC’s meeting, looks to be coming to fruition… The currencies gained a little bit yesterday, the Dollar Index began the day at 90.88, and it closed at 90.83… The euro continues to knock at the door of 1.21, and a true test of weather or not this is beginning to look like a long ride down the slippery slope for the dollar, would bring about the euro charging into the 1.21 handle…

Before I get to Gold & Silver… I wanted to point out that the Chinese renminbi / yuan has really been on an appreciation move lately… From all I read, China’s economy is working on all 8 cylinders these days, a far cry from their shutdown last spring. They’re back, and with all the commodities that they produce, rising in price, I believe good times are back for China’s economy, and in the next couple of years, I expect them to revisit 10%+ GDP growth! 

With the renminbi / yuan on a roll, guess what other Asian currency is tagging along with its own rally? OK, longtime readers will recall me telling them that when the renminbi rises VS the dollar, so does the Singapore dollar, and that’s what we’re seeing take place once again… I was beginning to think that the renminbi / yuan would never rally strongly again… Good thing I didn’t say it out loud! HA!

The other currency that has seen deep dark depression, excessive misery, is the Russian ruble. I talked about how the ruble was getting punished for the perceived troubles rising between Russian and Ukraine… Well, I don’t know what caused traders to forget about those troubles, and start buying rubles, but they did, and I’m happy about that!

OK… Gold & Silver didn’t move that much yesterday either, but at least their moves were positive as opposed to the two day spanking they got Thursday & Friday last week… Gold ended the day up $4.10 to close at $1,781.00, and Silver ended the day up 21-cents to close at $26.28…

And in the overnight markets, the traders there have gone into hiding too, and there was little to no movement in the currencies and metals… What movement there was tended to be positive for these two asset classes… The Dollar Index begins the day at 90.81, and Gold & Silver are flat to begin the day.  

I did notice that Palladium reached $3,000 today… J recall a few years ago when Palladium lagged the price of Platinum, and a Palladium mining owner said that Palladium would bypass Platinum that year, and he was correct, and Palladium hasn’t looked back since!  

I just keep thinking about all those home builders and remodelers that are having to buy lumber these days… Remember that I told you that in the last year lumber is up 251%, and that was as of two weeks ago, it’s probably even higher now! So, let’s say you contract with a builder to build you a home a year ago, and he quotes a price based on lumber prices then… About 2 months later he calls you up and says, Ahem… the cost of a 2×4 is skyrocketing, along with a sheet of plywood, I’m going to have to adjust your price… And you stubbornly say, “but we had a contract”, and he smugly points out that the fine print says, building materials’ prices are subject to change…  Uh-oh!

And here’s the thing that really will get you later on, when inflation comes back down and things get priced normally again… Your house cost basis will be extremely overpriced… I’m just saying…

The reason I got to thinking about all that, is Commodity prices are going through the roof, and Gold is still lollygagging below $1,800… I’m going down to see the witch with the gold capped tooth, and bring her some eye of newt, and other strange things, to see if she can mix something up right there in the sink to put a hex/ spell, on the price manipulators… A curse on your houses!

Patience, Chuck, patience… Your time will come… You know it in your heart of hears, but patience, while maybe being a virtue, is not one of my strong points!

On a sidebar… the price of Copper keeps rising, and this morning trades with a price of $4.48! I’ve said all along that Copper is a good inflation indicator… Now, I heard David Rosenberg, the well followed economist, say that “he had never seen someone walking down an aisle in a store asking for a ton of copper”… thus refuting the claim that Copper was an inflation indicator… Hmmm, longtime readers know that I simply adore David Rosenberg, so here’s where the relationship gets a spanner thrown in the works… (I’m sure he doesn’t even know I exist!) 

OK, the folks at www.Wallstreetonparade.com , Russ and Pam Martens, really did some research on the Banks and their derivative positions yesterday… They contend that the Fed is lying to us about the strength of the banks, by way of the Fed’s “Stress tests”…  They point out that the Fed should no longer be the regulator for these banks since they also act as those banks’ sugar daddy… And I agree! It’s time there’s a 3rd party regulators for the banks… I’ll give you the link to the article, it’s very good and will have you wondering when these derivatives will all implode… The Fed Has Misled the Public about the “Strength” of the Wall Street Mega Banks: This Chart Shows the True Picture (wallstreetonparade.com)

Ok, it’s earning season once again… This should turn out to be quite interesting… But even if the Corporations report horrid earnings, it won’t stop this stock market’s mania phase…

The U.S. Data Cupboard finally had some worthy prints yesterday, with Industrial Production and Capacity Utilization… Well, they both improved in March, from their rotten negative prints in Feb, but they failed to meet expectations… Industrial Production gained 0.5% in March, VS the -negative -0.9% in Feb, but didn’t meet expectations which were to gain 2.2%… Hmmm… And Capacity Utilization basically brought the Feb/ March months to flat, with a March gain of 0.9%, reversing Feb’s negative 0.8%… So, nothing that makes you wanna shout, throw your hands up and Shout, no wait! Not now Chuck…

Today’s Data Cupboard as the Case/ Shiller Home Price Index, which will tell us how much home prices have gained in the last year… I’m thinking that they have gone up quite a bit! In addition today, we’ll see the stupid Consumer Confidence report for this month… Everyone has the stimmy checks, the stock market is still setting records, what’s there to be worried about? Of course I jest… There’s plenty to be worried about! And Bank holdings of derivatives is just one of them!

To recap… The currencies did gain VS the dollar on Monday, but their gains were very small, as Chuck’s fear that traders are in a wait-n-see mode to what the FOMC will do on Wednesday… Gold & Silver also gained VS the dollar, or the dollar lost VS the metals, either way, the moves were muted as well, and that leaves Chuck wondering why if Commodity prices are soaring, what’s holding Gold back? Oh, that’s right price manipulators, of which Chuck has contracted a witch to place a hex on price manipulators! Chuck points out the rallies in Chinese renminbi/ yuan, Singapore dollars, and Russian Rubles… And as always he ventures out into uncharted waters…

For What It’s Worth… OK… since I spent some time this morning talking about building costs rising, this article talks about how while the Fed may brush this off as temporary, the mindset of people is that inflation is rising, and will act accordingly, and it can be found here: Forget 2% Inflation. With Margins Forcefully Squeezed, Big Companies Raise Prices, Point at Massive Inflation Overshoot | Wolf Street

Or, here’s your snippet: “Big companies, such as Procter & Gamble, have used their earnings calls to prepare investors, customers, and consumers for what is coming: Surging input costs are creating hefty margin pressures, and companies are confident they can regain their margins by passing on those surging costs by implementing large price increases. Smaller companies face the same scenario of surging input cost and margin pressures.

Todd Miller, President of Classic Metal Roofing Systems, which manufactures metal shingles in the US, sent me an email today where he goes into detail as to what his industry, and the broader home remodeling industry, is facing, in terms of surging costs, shipping issues, and supply constraints. This is Todd Miller, a long-time reader and supporter of Wolf Street:

“Our industry is dealing with supply chain shortages as well as rapidly increasing prices. While we have not had to go to this extreme yet on the types of specialized products we produce, I have seen the selling prices of “commodity-based” metal roofs increase by 30% over the last six months, with additional increases projected.

“We’re also seeing the industry-leading asphalt shingle market in a pickle. Prices are going up, manufacturers have distributors and contractors on allocation, and lead times of 30 weeks are being reported. We’re also seeing the industry cut back on product offerings.

“The end result is we have a very robust remodeling and construction market, with limited product availability and spiraling prices. Everyone is aware of the lumber issues, but we’re also hearing of major issues with windows, doors, and siding products.

“As a metal roofing manufacturer, here are some of the raw material increases we have experienced over the past six months:

  • Unpainted aluminum: up 15%
  • Unpainted galvanized steel: up 57%
  • Coatings used on our products: up 10%
  • Corrugated packaging: up 15% on average
  • Lumber for packaging: up 34%
  • Fasteners: up 5 to 8%.

“Typically, the metals and coatings make up about 85% of our product costs.”

Chuck again… that’s crazy folks… and while it may only last a while, it also may last longer than your houseguest that likes to make his eggs with his shirt off! And I’m afraid that once that the Fed acknowledges that inflation is running hot, it’ll be too late, too late baby… 

Market Prices 4/27/2021: American Style: A$ .7784, kiwi .7227, C$ .8059, euro 1.2087, sterling 1.3905, Swiss $1.0954, European Style: rand 14.3331, krone 8.2830, SEK 8.3874, forint 299.96, zloty 3.7757,  koruna 21.4156, RUB 74.89, yen 108.26, sing 1.3256, HKD 7.7616, INR 74.59, China 6.4842, peso 19.92, BRL 5.4608, Dollar Index 90.81, Oil $62.32, 10-year 1.58%, Silver $26.32, Platinum $1,250.00, Palladium $3,000.00, Copper 4.48, and Gold… $1,782.30

That’s it for today… Well I was the star of the show yesterday at the Oncology office! Everyone there wanted to know my secret to losing so much weight… I told them… when you can’t eat sweets, you can’t add salt, and you cut out white bread carbs, there’s not much point to eating… I do eat, folks, just not like I used to eat… Our Blues were very impressive in their win last night, playing all three periods. My beloved Cardinals found the going tough to hit the ball last night, and lost… UGH! I had the baseball game on the TV, and the hockey game on my phone… Well, my heart doctor, my primary doctor, and my oncologist have all given me the thumbs up and to keep doing what I’m doing… So, there you have it! At least for another month! HA! Tom Petty, whom we lost way too soon, and the Heartbreakers takes us to the finish line today with their song: I Won’t Bank Down… “you can stand me up at the gates of hell, but I, won’t, back, down” OK… so now it’s up to you, to go out and make this a Tom Terrific Tuesday, and while you’re at it, you might want to Be Good To Yourself!

Chuck Butler

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A Pfennig For Your Thoughts