Waiting on the ECB

• Currencies & metals rally again on Wednesday.

• Dollar selling ends in the overnight markets last night.

Good Day… And a Tub Thumpin’ Thursday to one and all! Heading into this last weekend of Rocktober, the weather is near normal here, a little chilly, but still full of sunshine. Well, at least that’s what we had yesterday.. Today, is a new day… Good friend, Duane and I had a great lunch yesterday, and at one point of the day, he said, “This is how retired folks spend their Wednesdays”… I responded, “and Tuesdays, and Thursdays!” We’re drawing closer to Halloween… I saw more Halloween decorations out in Florida than I’ve seen here… UGH! When Alex was a young lad, we used to go all out on decorating the house with Halloween stuff, but now that it’s just me & Kathy, well… that doesn’t happen any longer! Kathy sewed/ made little Evie’s Anna outfit, I can’t wait to see her in it! Kansas greets me this morning with their song: The Wall.

Well, yesterday’s dollar action, wasn’t as harsh as the previous two days, but the dollar still got sold yesterday, and the BBDXY lost 3 more index points. The euro climbed higher above parity, and even the Japanese yen rallied VS the dollar. I’m thinking that all of the dollar selling by Chinese banks that I told you about last week, and the $50 Billion that the Bank of Japan spent last week selling dollars, and buying yen, have accumulated to a massive problem for the dollar rally. Yes, the free fall that the dollar was in the first two days of this week, ended yesterday, but the selling continued.

Gold, gained $12.40 yesterday to close the day at $1,666.50, and Silver gained 24-cents to close the day at $19.67… Ahhh, 1967, the year of The Summer of Love, when Scott Mackenzie sang, “if you’re going to San Francisco, be sure to wear some flowers in your hair”… Sorry, I digress.

The price of Oil bumped higher and traded at the end of the day with an $88 handle… Maybe, just maybe, because you never know, people are starting to realize how dour the oil supply situation is here in the U.S. maybe, eh? I know someone who has noticed it… Check this out.

“ Saudi Oil Minister Abdulaziz bin Salman said Yesterday when telling a conference that, ‘People are depleting their emergency stocks, had depleted it, using it as a mechanism to manipulate markets while its profound purpose was to mitigate shortage of supply. However, it is my profound duty to make it clear to the world that losing emergency stock may become painful in the months to come.”

Man, when I read that, my spider sense was not only tingling it was flashing red that I fear a problem going forward getting needed Oil from OPEC… I hope I’m wrong about that, but if you read what he had to say, you have to have the hairs on the back of you neck to stand up!

In The overnight markets last night… Well, the rumors of the dollar’s demise have been greatly exaggerated. The dollar rallied in the overnight markets last night, with the BBDXY gaining 4 index points, which sent Gold down $6 in the early trading today, with Silver following Gold, and is down 32-cents as we start our day. The folks at Morgan Stanley issued a report saying that “It’s too soon to write off the dollar’s dominance as the US rate-hike cycle may not be near its peak.” Well, that may be the fact, but there’s something behind the free fall the dollar was in to start the week, I’m just saying.

The price of Oil was steady Eddie overnight, and trades this morning with an $88 handle. Bonds, too, were steady, and the drop in the 10-year’s yield was halted… Just last week the 10-yr’s yield was 4.17%, and today it’s 4.07%. this drop of in yield, represents buying by the truckload and hints of Central Bank buying, but that can’t be our Central Bank because they are out of the bond buying business, right? Wink, wink.

The European Central Bank (ECB) is meeting this morning, and will wrap it up probably right as I’m hitting the send button… I’m sure that the ECB will hike rates again at this meeting, to get them going on their fight with inflation that is actually higher in the Eurozone than it is here, that is, as long you believe that inflation is only 8.2%... The idea that the ECB will hike rates, has helped the euro climb back above parity.

The Fed Heads will have their FOMC meeting next week, it’s one of those 2-day meetings, where on the first day the Fed Heads get out the board games, and play them… By Jerome, you’ve sunk my battleship!

I kid there, but what I’m about to tell you is dead serious… I’ve told you before that Bill Bonner says that the Fed Heads can either “inflate or die”… And that is a trap… A great Big TRAP, you see, that the Fed Heads can continue to hike rates to fight inflation, but they’ll never get to an interest rate that’s higher than the inflation rate, so they’re really fighting a war with rubber bullets… But by hiking rates they are slowing down the economy, which was really slow to begin with, and had been for the last decade… Most observers think the U.S. will be dragged into a deep recession, by these rate hikes.

But what’s a Fed Head to do? For if they decide to begin to cut rates again, and print currency again, then the inflation will be stronger and much more difficult to bring under control. So, the Fed Heads can either choose to inflation, and watch the economy slowly die from weight of inflation, or they can continue to hike rates to combat inflation, and bring the economy to its death… Either way, we’re up the creek without a paddle.

And knowing that, you now know why I have not understood the buying of dollars to the hilt like traders and investors were doing.. Sure interest rates are higher here than in the Eurozone, and Japan, but not in New Zealand, Russia, the U.K. and others…

Remember the game “Mousetrap”… no matter what went on, the mouse always got trapped! Think of the Fed Heads as the “mouse”…

OK… Reuters reported this yesterday: “U.S. students have suffered historic learning setbacks with math and reading scores falling to their lowest levels since before the COVID pandemic, national exam results showed, the latest sign of the damage school closures wrought on children”

Hmmm… I’m glad my kids are grown and out of school, but my grandkids are not and will have to make up major ground to catch up with the rest of the world…  

Back to markets… The U.K. has a new Prime Minister, and it appears that the U.K. is taking notes on putting people in high positions in Gov’t from the U.S…. As the new PM is an alum from Goldman Sachs!  “The newly installed U.K. Prime Minister, Rishi Sunak, (the third P.M. in seven weeks) has scrubbed his Goldman Sachs and hedge fund career from his LinkedIn profile and from his official government bio. But, unfortunately for Sunak, those careers have been assiduously chronicled in countless newspaper articles for more than a decade – and not in a good way.”

Good luck to the new PM… he’ll need it in a BIG WAY! Pound sterling has really rallied this week, as the dollar sank, and a lot of that upward move can be attributed to the news that a new PM was to be named… 

The U.S. Data Cupboard yesterday had Sept New Home Sales, here’s the skinny on that: September home sales tumbled 10.9% vs August. This leaves new home sales down 17.6% YoY which is in line with the trough of the COVID lock-downs (and unchanged since July 2016)... I think that the Sept data is the beginning point of the rot in Housing… I guess we’ll see as we go along.

Today’s Data Cupboard is chock-full-o-data… First up is the first reading of 3rd QTR GDP… After two consecutive quarters of negative growth, we couldn’t possibly have a 3rd QTR of negative growth, now could we? Don’t put too much thought into the first print though, because they’ll be at least 3 revisions of the data going forward. Next up is the usual Tub Thumpin’ Thursday fare of Weekly Initial jobless Claims, and following that print will be Durable Goods and Capital Goods Orders for Sept. August’s Durable Goods Orders were negative, so I’m looking for some kind of improvement there, if not, then it feeds the thought that the recession is getting worse…

For What It’s Worth… Ok, thanks to longtime reader, Bob, for sending this to me, this is an article that’s on zerohedge.com and it’s title is: It’s Just Not Right” And it can be found here: "It's Just Not Right" - One Trader's Rage Spills Over At "Incompetent, Untrustworthy, Unaccountable" Fed | ZeroHedge.

Here’s your snippet: “Less than a month ago, no lesser member of the cognoscenti than Mohamed El-Erian unleashed his latest tirade at The Federal Reserve's "challenged credibility", warning that:

"The Fed’s latest moves are consistent with a central bank that is continuously scrambling to catch up with realities on the ground. It is the kind of thing that one typically finds in developing countries with weak institutions, not in the issuer of the world’s reserve currency and the custodian of the world’s most sophisticated financial markets – where many other countries and companies entrust their savings...

The comparison is even more troubling when one considers what the recent market turmoil implies."

As he explained even more recently, most economists, investors and traders have by now largely internalized that the global economy and financial markets are navigating three regime changes:

Predictable injections of central bank liquidity and floored interest rates have been replaced by a generalized global tightening of monetary policy.

Economic growth is slowing significantly as the three most systemically important regions of the global economy lose momentum at the same time.

The nature of globalization is shifting from the presumption of ever closer economic and financial integration to greater fragmentation in part because of persistent geopolitical tensions.

Both by themselves and collectively, these three changes involve increased economic and financial volatility.”

Chuck again… Like I said earlier this morning, the Fed Heads are in a trap… On one side, you have economists that are more worried about inflation , and on the other side you have economists that are more worried about what the rate hikes will do to the economy… I guess the latter of the two groups, aren’t concerned with what inflation will do to the economy!

Market Price 10/27/2022: American Style A$ .6452, kiwi .5802, C$ .7349, euro 1.0036, sterling 1.1560, Swiss $1.0097, European Style: rand 18.0880, krone 10.2945, SEK 10.8965, forint 408.20, zloty 4.7333, koruna 24.4489, RUB 61.67, yen 146.29, sing 1.4090, HKD 7.8491, INR 82.50, China 7.2362, peso 19.98, BRL 5.3818, BBDXY 1,321.78, Dollar Index 110.11, Oil $88.34, 10-year 4.07%, Silver $19.35, Platinum $946.00, Palladium $1,958.00, Copper $3.49, and Gold… $1,660.78.

That’s it for today… Geez, Louise, I must have really jinxed our Blues, because ever since I talked about them starting the season on the right skate, they’ve scored 2 goals in 3 games! YIKES! Our Goalie had to stand on his head to keep the Blues in the game last night… Memo to coach Berube: I’m sorry, I won’t talk nice about them again! Adam Wainwright is returning for his 18th season, for my beloved Cardinals, it was announced yesterday. The Cardinals have had 3 coaches leave the team, hitting, pitching and bench coaches are needed… Let’s see, we just had some players retire, let’s get Albert Pujols to be the hitting coach, Adam Wainwright to be the pitching coach, and Yadier Molina to be the bench coach! There! That’s done, and taken care of! Next? Mathew Sweet takes us to the finish line today with his song: Girlfriend… Mathew Sweet was big in the 90’s, but I haven’t heard anything from him in some time… UGH! I hope you have a Tub Thumpin’ Thursday today, and a Fantastico Friday tomorrow… Monday is Halloween! BOO I hope you remember to Be Good To Yourself!