Powell throws a cat among the pigeons

• Currencies and metals get sold BIG TIME on Wed.

• Bonds, currencies, metals, and even Bitcoin got sold on Wed!

Good Day… And a Tub Thumpin’ Thursday to one and all! Well, yesterday was ugly here, and honestly I can’t imagine what it would be like to live in the Great Northwest, where they go days at a time without seeing the sun! It was ugly in the currencies and metals yesterday too… more on that in a bit… But first I want to give great Big Birthday wishes for my former colleagues… Chris Gaffney, who’s birthday is tomorrow, and Christine Peplow, who’s birthday is Sunday this week… I had worked, off and on, with Chris Gaffney since 1992, when I was shown the door, and Christine was my second hire at EverBank, so we go way back too! I hired Christine when she was a just a young, single woman, fresh out of college, and had been with her through a marriage, and 3 boys! Well, I was somewhat surprised and disappointed to see 40-game Jeopardy Champion, Amy Schneider, lose yesterday… Dire Straits greets me this morning with their song: Brothers In Arms… (I love the way Mark Knopfler plays the guitar)

Well, it was a day that I feared was coming for the currencies and dollar. A day where the Fed/Cabal/Cartel/ announced their plans for rate hikes, and traders overreacted to the announcement, and immediately bought dollars, and sold Gold… It got ugly for the currencies and metals yesterday afternoon, and quite frankly it was all way overdone… I don’t think that Powell gave us any information that hadn’t already been conveyed to the markets… But that didn’t stop traders and investors from going all-in…

I found this quote on Bloomberg.com regarding what this economist/ analyst saw in the FOMC press conference:

This from Mohamed A. El-Erian.

“The Fed delivered what I expected but not what I think is needed for sustainable economic well-being. It should have stopped purchasing assets immediately and given a clearer signal on rate increases. Instead, the central bank doubled down on its 2021 trade-off of trying to please financial markets at the cost of increasing the challenges ahead for the economy, sound policy making and its own credibility.”

Recall that I wrote yesterday what David Rosenberg said about him keeping his options open, until the time came, but Powell, didn’t, and now it’s a done deal… A March rate hike of 25 BPS, and another one right after that one… But… and I’m going to sound a bit wishy-washy here, but while he needs to hike rates now, and not wait 6 more weeks before doing so, he’ll also be pushing the economy what’s left of it, to the brink… Damned if he does, damned if he doesn’t…

But that’s what happens when 1. You inflate the all everything bubble with all your currency printing, and zero interest rates, and 2. Wait too long to react to the inflation that you brought on…

So… I guess I should tell you that the euro lost a ton of ground yesterday, as did the other currencies not named rubles and krone. The BDDXY started the day at 1,176 and ended the day at 1,181, and at one point was at 1,183… Gold lost $28.50, to close at $1,820.40, and Silver lost 30-cents to close at $23.60… Bonds lost a ton of ground, with the yield on the 10-year Treasury rising to 1.85%... The price of Oil remained strong though, and didn’t get mixed up with all the selling of everything not named the dollar…

And by everything getting sold, I mean everything… Stocks, Bitcoin, bonds, currencies, metals… Crazy day, eh?

The price of Oil bumped higher yesterday with all that selling going on, and this morning it trades with an $88 handle... And that my friends is the reason the ruble and krone are not getting sold... the other petrol currencies, tried to hold on to recent upward moves, but just were not able...

In the overnight markets last night… The overnight traders decided that if the U.S. was going to overreact to the FOMC, that they too would do the same, and the dollar continued to be bought... The BBDXY is trading at 1,186.43, this morning, up BIG TIME from yesterday's close of 1,181.87... The price of Gold is down $6 in the early trading, as is Silver who's damage includes a 30-cent sell off...

Somewhere along the way Bonds got bought, and brought the 10-year's yield back to 1.82%...

Ok, so where do we go from here? Does the dollar keep flying high on the fumes of a proposed rate hike? Does Gold keep falling? How about everyone’s beloved Bitcoin? Well, in my humble opinion, first… Gold will have some problems in the near future, but eventually it will get over it, and get back to rising… I do believe that while rate hikes normally help a currency, attract investors, the dollar is coming from zero… So, even after the Fed/ Cabal/ Cartel is finished with their rate hikes, the U.S. rate will still be negative taking in inflation… And eventually, investors are going to see the trees in the forest… They're blinded by the light, right now…

And Inflation? Well, I doubt seriously that it will be put to pasture, the way that Paul Volcker did it in 1981… What’s 1.25% interest going to do to inflation that’s running at 15%? That’s a lot like the difference it would make to remove a bucket of sand from a beach! It took Volcker 4 years, and a final interest rate of 20% to squelch 13% inflation, and Powell thinks and investors think that he’s going to squelch 15% inflation with 1.25% in one year? Give me a Break!

I’m going to stop here because…. There’s nothing else I can add to this bizarre market reaction to the FOMC yesterday, who let me remind you, didn’t hike rates, didn’t take steps to reduce their balance sheet, and didn’t talk about squelching inflation… But…. Well I’ve told you what happened, so I won’t bore you any longer…

The U.S. Data Cupboard today will have the usual Tub Thumpin’ Thursday fare with the Weekly Initial Jobless Claims, which have been rising again in recent weeks… We’ll also see the color of Durable Goods and Capital Goods Orders, which last months showed negative… I would think that negative prints are in order again for this month…

And tomorrow’s Data Cupboard has Personal Income and Spending, along with a new economic print titled: Real Disposable Income… That should be interesting… Last month is showed no gain from the previous month, and I would expect this one to be the same if not worse, given the effects of inflation on disposable Income!

I've made this statement so many times in the past, but this is good place to remind everyone that inflation is "a Tax", that robs you of your wage gains...

Just as an example of how taxing inflation can be... As you know I spend my winters in Florida, and Florida is known for their oranges... Well, I overheard a person talking yesterday, saying that they paid $9 a lb for oranges! That's crazy folks!

To recap… The FOMC left rates unchanged, but in the press conference following the meeting, Jerome Powell told the markets that he was ready to hike rates next month and a multiple times in 2022, and that the Fed/ Cabal/ Cartel was going to reduce their balance sheet… This sent the markets into a tizzy, and everything not titled the U.S. dollar, and Oil, got sold BIG TIME! Currencies got sold, unless you have Russian rubles, and Norwegian krone, you didn’t see losses yesterday, and Gold got sold by $28.

In the overnight markets last night… it was more of the same, dollar buying and selling everything else. The price of Oil has bumped up to an $88 handle, and that has the Russian ruble and Norwegian krone on the rally tracks, but all the other currencies are looking pretty sickly...

For What It’s Worth…. Well, longtime readers know that I love Danielle Di Martino Booth's writings... I read her book Fed Up, and used to subscribe to her newsletter before she took it being a paid subscriber newsletter. So, when I saw this brief interview on Kitco.com I wanted to use it for the FWIW article today. Mrs. Booth talks about the Fed's actions yesterday, and it can be found here: Fed tanks markets with bombshell announcement; Is a recession next?

Here's your snippet: "Stock markets slid sharply after 2:00 pm ET on Wednesday following an announcement from the Federal Reserve.

The Fed kept interest rates unchanged but markets reacted negatively on comments from Fed Chair Jerome Powell, said Danielle DiMartino Booth, CEO of Quill Intelligence.

“What really triggered it was some commentary that [Fed Chair Jerome] Powell made during the press conference where he said that the balance sheet run-off would be ‘in the background.’ Those three words, in the background, he repeated several times and they’re akin to what Janet Yellen originally said the balance sheet running off would be like watching paint dry. It also indicated that the rate hikes were going to be coming as well,” Booth told David Lin, anchor for Kitco News.

The last time the Fed attempted to “double tighten” monetary policy was in 2018, and markets reacted negatively to that policy, Booth noted.

Double tightening refers to monetary policy where the balance sheet run-off occurs at the same time as hiking interest rates.

Importantly, three rate hikes would be enough to invert the yield curve, Booth said.

The yield curve, or the difference between a long-maturity Treasury bond yield and a short-maturity yield, signifies economic strength. A positive sloping yield curve shows economic growth ahead, while an inverted or zero yield curve has historically been followed by a recession within 12 months.

“I think that [a recession] could happen in a very compressed way because we have seen, as opposed to an economic recovery that stretches out over ten or 11 years, we’ve seen a very compressed economic cycle this time and the Fed has shifted from a loosening stance to a tightening stance in what feels like record time, so there’s absolutely no reason to think that the market will not start to anticipate the inversion of the yield curve and even more up expectations for when the economy slides into recession,” she said."

Chuck Again… Well, it was bound to happen, the stock market bubble had been floating around a room looking for Pinto pop it for a couple of years now, and I said, last month that the Fed/Cabal/Cartel, could very well be that pin... Oh, well, inflation is the #1 concern for the boys and girls at the Eccles Building... It's just a real shame that they waited so long to address the soaring inflation...

Market Prices 1/27/2022: American Style: A$ .7080, kiwi .6620, C$ .7876, euro 1.1166, sterling 1.3392, Swiss $1.0751, European Style: rand 15.2440, krone 8.9507, SEK 9.3468, forint 3.2056, zloty 4.0863, koruna 21.8924, RUB 78.68, yen 115.18, sing 1.3522, HKD 7.7904, INR 75.16, China 6.3674, peso 20.68, BRL 5.4180, BBDXY 1,186.93, Dollar Index 97.07, Oil $88.26, 10-year 1.82%, Silver $23.30, Platinum $1,036.00, Palladium $2,444.00, Copper $4.47, and Gold... $1,813.90.

That’s it for today and this week… I think I need to go on another vacation to get away from the markets, don’t you agree? This is really beginning to get to me… The way these markets move on bizarre happenings, and the financial media write that everything is peachy! I’m going to think long and hard about going on vacation again soon, this weekend, and I’ll have my answer for you on Monday… My St. Louis U. Billikens won their basketball game last night, and a kid from South St. Louis, where I grew up, set the all-time assists record at St. Louis U.! The NFC and AFC Championship Games are this weekend… Go Chiefs! The Ides of March take us to the finish line today with their song: Vehicle… “I’m your vehicle baby, I’ll take you anywhere you want to go” I hope you have a Tub Thumpin’ Thursday, and Please Be Good To Yourself! And remember to Be Positive, Test Negative!