Whether It’s Inflation Or Stagflation, They’re Both Bad…

A Pfennig For Your Thoughts
 
May 27, 2021
 
* Dollar gets bought on Wednesday… 
* Chuck takes us back to the 70’s… 
 
Good Day… And a Tub Thumpin’ Thursday to you… I won’t be joining anyone doing any Tub Thumpin’ today, as I’m still weak, but… getting stronger each day, which means my blood loss is being restored, or at least that’s what I’m hoping it’s doing! My beloved Cardinals got out of Dodge (Chicago) with just one win in three games, and head to Arizona for 4 games now… Maybe they can get well (hitting and fielding) in Arizona… They played rotten defense for 2 games in Chi-Town, but finally had a good game yesterday… It was a beautiful, Chamber of Commerce, day here yesterday, and I sat outside watching the game… Ahhhh, day baseball! Our Blues are all playing golf now, as they were eliminated in 4 games.. Swept if you will… UGH! So, now I can concentrate on baseball! I have the perfect storm going for me that makes me sleep during the day… Chemo effects, and blood loss… I might sleep 3-4 hours during the day, and still not have a problem getting to sleep at night! My dad would have called me “lazy bones”… So, I had better get stronger fast I wouldn’t want anyone to think that way about me! Loggins & Messina greet me this morning with their 21 Minute song: Vahevala… Some real good tropical sounds in this song… Makes me think of sitting on the beach under a palm tree or umbrella, with a tropical beverage in my hand…
 
Well, it was bound to happen sooner or later. I would rather get it over with, and move on to higher grounds… What am I talking about this morning? Another engineered takedown of Gold & Silver yesterday, by the price manipulators… Gold was adding up the days of positive moves, when here come the price manipulators showing up at the COMEX with arms full of short Gold paper trades… (And Silver paper trades too!) Gold buyers yesterday, were adamant about keeping Gold’s run of positive days going, but at the end of the day, the short paper trades were just too much, and Gold closed down just $2.00, but given the fact it was up more than $7 during the day, that was the turnaround… Gold Closed Wednesday at $1,897.80, and Silver lost 32-cents to close at $27.76…
 
The dollar was also bought yesterday, out of the blue… Currency traders were happy with their short dollar trades until yesterday when dollars were the belle of the ball… Maybe, just maybe there was some PPT participation, but right now I’m not sure, so I won’t say for sure that the PPT was in defending the dollar like it has every time things look bad for the green/peachback, in the past…
 
The BBDXY closed yesterday at 1,118.23/ Dollar index at 90.04… The euro fell back below the 1.22 handle, and all the other currencies fell into line with losses of their own. It was a day to commemorate Chuck’s Return! Yeah, that’s the ticket, that’s my story and I’m sticking to it! HA!
 
Of course manipulated markets are nothing to laugh about, and I used to get so darn upset when days like yesterday happened, but these days… These days I sit on cornerstones, and count the time in quarter tones to ten… And when I’m finished, I just go on with life because there’s nothing I can do about the price manipulation, nothing, absolutely nothing, say it again! The Treasury’s Exchange Stabilization Fund (ESF) was created and funded just to manipulate the currency markets…
 
Now we hear about different trading units that get their hands slapped when they are found to be manipulating prices in currencies, but it’s just peachy dandy for the U.S. Treasury to step in whenever they see things getting sketchy, just find and dandy indeed! Do, you find that to be somewhat immoral? I do… And it’s also not fair… But life’s not fair, so you move along, and hope they don’t get in your way very often…
 
In the overnight markets last night… It was back to the business at hand, which was the continuation of the dollar erosion… the overnight markets were not influenced in any way by the goings on in the U.S. markets on Wednesday, and so the dollar got sold some more. The euro is back above 1.22 this morning, the BBDXY had dropped to 1116.80/ 89.97, and things look about right again this morning. Gold & Silver were not allowed to participate in the dollar selling overnight, and Gold starts today, down $3, and Silver is down 6-cents… Neither of those two negative amounts have me concerned this morning… 
 
On the Central Bank Digital Currency watch… The Bank of Canada (BOC) yesterday decided and announced that they don’t see the need to develop a digital currency… Really? So, the rest of the world is going to develop their own digital currency, including your neighbor to the south, and you don’t feel the need to have your own digital currency? I found this to be outrageous… And very stupid… like the little guy used to say on the Laugh-In Show… “Very interesting, but stupid”…
 
Or, and I’m being very, very, very facetious here when I say this… But maybe all those folks that said that the Amero was a real currency (The U.S., Mexico and Canada) will get their dreams come true, when the digitial currency that’s being developed by the U.S. envelops both Mexico and Canada and the digital currency will be call the Amero!  Please do not think I’m being serious here one iota, only having some fun with these stupid digital currencies…
 
Is it me, or doesn’t everyone question how something that has no backing, no intrinsic value, no real money uses, be worth $38,000?  Do you see the effects of free money at play here? I’m going to stop here because I know I’ve ticked some people off with that thought, and I want us all to be friends…
 
Longtime acquaintance, Rich Checken of Asset Strategies, did a video presentation titled: Whip Inflation Now! It was good and you can find it on YouTube… But hearing that phrase took me back to the 70’s… Come along with me to a visit to the 70’s…  Let’s see, we started the 70’s off with our army in Vietnam, a place most people couldn’t point to on a map, then Richard Nixon closed the Gold window, and soon afterward he resigned. Then we had a replacement president who once played football at Michigan, and had a problem with falling down. But it was in the early to mid-70’s that the removal of Gold from the dollar, began to show its ugly side…Oh, but first we had an Oil embargo, from our friends, NOT!, at OPEC, which caused long lines at gas stations and the price of gas to go from 30-cents to more than a dollar overnight! And then inflation came along, and President Ford, who had a propensity to fall down a lot, started wearing a WIN button… Whip Inflation Now!  But that didn’t do the trick, and it wasn’t until Paul Volcker took interest rates to new heights in the late 70’s that we finally did whip inflation…
 
OK, now we’re back in current times, and inflation is soaring once again… Some say it will only be transitory, but I’m one that while, I do see that we had come from a shutdown economy (who’s Idea that was to do that should be, oh never mind), but supply chain deliveries are all whacked out, demand is very strong, given the low interest rates, and the all the free money, inflation is here to stay until we beat it back with higher interest rates again… I’m just saying…
 
So… for investor to whip inflation now, they have to have an inflation hedge, and TIPS are not the answer… TIPS (Treasury Inflation Protection Securities) are Treasury bonds tied to inflation, but that’s only going to get you help VS inflation in that security, unless that’s all you own! No, the real inflation hedges are Gold, Silver, and land… And if the inflation is only rampant in one country, you need to sell that country’s currency and buy some other non-inflationary country’s currency! Those countries will be difficult to find, given all the run up in debt these past years, but countries that have Central Banks that mandate inflation be no more than 2%, like Australia and New Zealand, would be pieces to the puzzle, along with the Russian ruble, which has virtually little debt to speak of…  
 
The U.S. Data Cupboard today finally has some real economic data to print… First we’ll see the color of the Weekly Initial Jobless Claims, and then comes the real meat… Durable Goods and Capital Goods Orders… these two will bring the bacon home on the economy folks…
 
To recap… everything was going along nicely with the erosion of the dollar, until yesterday, when it appeared to Chuck that there was an all-out effort to defend the dollar on both fronts, VS currencies and metals… Chuck refuses to get too upset about these days any longer, and just accepts that they will happen from time to time… In the overnight markets, the erosion of the dollar continued, despite what happened in the U.S. on Wednesday… And then Chuck goes back in time to the 70’s, and not to listen to any stupid disco songs! To describe what led up to the inflationary times of the 70’s… And he explains how to Whip Inflation Now!
 
For What It’s Worth… I got this from Ed Steer’s letter yesterday…. It’s an article on Zero hedge.com about how all the stimmy checks have been spent, and now the crash in buying appliances comes, because everyone’s stimmy money has been spent! And it can be found here: Here Comes The Hangover: Soaring Prices Result In Record Crash In Home, Appliance Buying Plans | ZeroHedge
 
Or, here’s your snippet: “For the past several months we have warned about the pernicious effects soaring prices are having on both corporations (“Buckle Up! Inflation Is Here!”) and consumers (“”This Is Not Transitory”: Hyperinflation Fears Are Soaring Across America”), prompting even otherwise boring sell side research to get (hyper) exciting, with Bank of America predicting that “Transitory Hyperinflation Lies Ahead.”
 
But none of this has spooked the Fed into conceding – or believing – that inflation is anything more than transitory. And maybe just this once, the Fed has a point because all else equal, by which we mean lack of rising wages, the best cure to higher prices is, well… higher prices.
 
Presenting Exhibit A: understanding that Biden’s stimmy bonanza is about to end and that soon they will have to live again within their means, Americans’ buying intentions (6 months from today) as measured by the Conference Board, have cratered across the 3 major spending categories: homes, automobiles and major household appliances.
 
The drop was so massive, it amounted to the biggest one-month drop in intentions to purchase appliances…
 
This confirms what we noted earlier, namely a record divergence between crashing home buyer confidence (due to record home prices) and soaring home builder confidence (also due to record home prices). Guess which one will matter in the end.
 
This, for better or worse, screams stagflation: as Lynn Franco, senior director of economic indicators at the Conference Board, said while consumers’ assessment of present-day conditions improved, “consumers’ short-term optimism retreated, prompted by expectations of decelerating growth and softening labor market conditions in the months ahead.”
 
While it’s clear why stagflation will be “worse”, we say better because if nothing else these data confirm that U.S. consumers are now tapped out, if not today, then certainly 6 months from today when Biden’s trillions in stimmys will have been long spent, and the spending spree will be over.”
Chuck again… This is something that I’ve said long before there was stimmy check 1… That U.S. Consumers are tapped out… This is all crazy folks… will it lead to more stimmy checks? I bet it does…. Oh, and this one last thought… Whether it’s inflation or Stagflation, it’s all bad! 
 
Market Prices 5/27/2021: American Style: A$ .7750, Kiwi .7305, C$ .8266, euro 1.2207, sterling 1.4135, Swiss $1.1132, European Style: rand 13.7157, krone 8.3577, SEK 8.2971, forint 285.07, zloty 3.6731, koruna 20.8478, RUB 73.47, yen 109.15, sing 1.3228, HKD 7.7613, INR 72.48, China 6.3935. peso 19.84, BRL 5.3206, BBDX 1,116.80, Dollar Index 89.97, Oil $65.72, 10-year 1.59%, Silver $27.71, Platinum $1,195.00, Palladium $2,824.00, Copper $4.52, and Gold… $1,894.80
 
That’s it for today… and this week of course… I now have a couple of days to rest up… We’ll all be busy this weekend as Kathy’s niece is getting married… Good luck to Brian and Lauren… Some of my kids are participating in the wedding, with little Evie probably stealing the bride’s thunder, when she waddles down the aisle! HA! This will be the unofficial start to the summer, Memorial Day… Memorial Day is an American holiday, observed on the last Monday of May, honoring the men and women who died while serving in the U.S. military. May God Bless those men and women who died protecting our freedom.. So Memorial Day is more than the local pools opening… So stop to think about the real reason for the holiday on Monday… Next time we talk it will be June 1… And I’ll be all by myself once again for two weeks… All by myself, don’t want to be all by myself any more… (Nilson) Ok, I nerd a real rockin’ song to send us to the finish line today, and Deep Purple will do the trick with their song: Space Truckin’ don’t know that one? Google it, or YouTube it, you’ll like it, I’m sure! So, please be careful this weekend, and Be Good To Yourself!
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts