Good morning. The Dollar is up 8 bps against western currencies. Bonds are slightly weaker. Stocks are dancing around unchanged but calm so far. The world of commodities is crumbling. Gold is down $14 from Spot close. Silver is down 38 cents. Oil is down $4.00 but climbing back off the lows made an hour ago. ( Michael Moor said 2 days ago that the next 48 hours may determine the direction for the next big push) Natural Gas is down 27 cents. Crypto is down and even grains are wholesale down.
There are several ancillary stories circulating of interest and some wild opinions. They involve Silver, Bitcoin, Italian politics, and the ECB rate hike. Here are reliable summaries.
Silver Eagle Whale Story
There is a story circulating of a Texas, female, billionaire who has purchased a large amount of Silver Eagles, and intends to buy more. This was disclosed by coin dealer Andy Schechtman of Miles Franklin Precious Metals who reportedly filled her order. No-one has as of this writing yet ascertained the veracity of the claim.
As market participants in the space for some time, We assume there is truth to the recent buys as stated by the speaker with a touch of hyperbole on the potential future buys as relayed from the customer. Otherwise, who can know?
The key statements for us were:
“The client wants us to tell the world that she placed this order”
“She claims this is the first of several, up to a Billion dollars of orders she wants to place”
We have seen this before, and chances are so have you. The order was likely real and had probably distorted silver premiums for months due to the supply crunch. Subsequent orders are not a given but may happen. The two phrases listed above are very specific and designed to make a genuine statement without putting the speaker at risk. The speaker to our knowledge is a reputable professional with a keen understanding of the implications.
Historically, you announce after you are filled, not before. Therefore this order could be a legit explanation for the premium stickiness over the last several months. But we know of noone who ever stated they may buy a $billion more after buying “only” $50 million of something. First time for everything maybe. If the coins were in fact purchased and any amount more are bought in the future, then this "whale" did us all a public service by letting the dealer disclose.
Assume the order was real, the order has been source-filled, and premiums will continue to remain hi until through August. If she buys more, they have to go higher. If not, they will collapse. That’s the way we will watch this. The black swan is if others get the fever to buy. The future will tell us more.
Which brings us to the last time a person announced their bullishness, only to, as of yesterday, exit his buys while last telling people he would not sell, and that his asset was the future of money.
Elon Musk Sold Bitcoin
Despite claims of having diamond hands, assurances post his SNL appearance he was a “pumper but no dumper”; Tesla did in fact sell much of its bitcoin (75% of the initial purchase after selling 10% last report). This was ostensibly because they needed the cash for operations. Here is one of many instances where Musk proclaimed himself not a seller of Bitcoin.
Speculation is he had a put option struck at the purchase price from early on and exercised it to exit the position or had hedged the risk with CME futures earlier on. The richest guy in the world couldn't stomach less than a billion in Bitcoin risk.
ECB Hiking into a Major Stagflationary Recession
The ECB policy meeting is today and it seems they will begin a rate hiking cycle very belatedly following in the Fed’s footsteps. Hard to believe but the ECB has not had a rate hiking cycle for over 10 years. And back then it was soon aborted in favor of rate drops.
The last time the ECB hiked rates was July 2011. It sparked a sovereign debt crisis and cut rates three months later - Zerohedge
On top of that risk, Russian Gas supplies are in danger as winter comes, inflation is still raging, and now Italian politics are threatening EU fragmentation even more so.
Italian Political Dance Party In the Nutshell
Draghi, after ‘winning’ the confidence vote (again) in which 3 major political parties abstained, offered to resign1 (again) anyway. The Italian President does not want that.
This indicated he has lost support of the majority of the Senate, but it is still a macabre political dance. Draghi submit his resignation again. President Mattarella will likely ask Draghi to see if he can form a new coalition government.- BannockBurn FX
There is still strong pressure to avoid an early election until three objectives are accomplished in Italy: electoral reform, next year's budget, and the reform needed to secure EU funds. So he wants Draghi to stay on with a new coalition.
Draghi, who is a competent bank financier for Italy, is viewed as a Davos WEF ally.2
Research Excerpts
Goldman on Housing:
BOTTOM LINE: Existing home sales declined by 5.4% to a seasonally-adjusted annualized rate of 5.12 million units in the June report, below consensus expectations for a more modest decline. The imbalance between housing supply and demand remained severe but improved meaningfully…
More at Bottom…
Goldman on Consumer Slowdown:
US Consumer Dashboard: July 2022: The Necessary Slowdown Continues
