Vince Lanci: Janet Yellen Not Happy With Yen-tervention | Arcadia Economics
Summary
Transcript
The yen did move quite a bit in relatively short period of time. We would expect these interventions to be rare and consultation to take place. Those are harsh words. In short, Yellen is not happy with how Japan is handling its currency and likely wishes Japan had acted sooner to avoid the shorts. The guys who are driving it higher on this chart getting too comfortable with their positioning. Welcome to the morning markets and metals with Vince Lancy, where each day he brings you the precious metals and financial news to get you ready for your day. And now, here’s Vince.
Good morning. I’m Vince Lancey. And in today’s market rundown, we’re going to talk about Yellen and the yen, or yelling at the yen. I don’t know what you would call it, but we’re also going to talk about bank of America, CTA report on precious metals. We’ll talk about the news as well. Before we do all that, let’s take a look at the dollar, which is down 410 year. Yields are 448, down almost three pips. The s and P 500 is up eleven at 5145. The VIX is 1381. Gold is 23.18, up 16, near its highs for the evening.
Morning silver is 2708, up $0.53. Copper is 458, up $0.06 strong. WTI is bouncing up $0.84 after getting, I think, annihilated last week, 79.23 is the price. Natural gases, $2. So we are now above the range that we were in. And I think this is european concerns spilling over into Henry Hub. Speculation. They’re not tied together day to day, but they are tied together longer term. Crypto. Bitcoin is 64,000 and change after a steep decline last week has bounced significantly. I think is. I think it’s like up 10% from the lows last week. It’s crazy, right? Ethereum is 31.46, up nine.
Palladium and platinum both up. Palladium. Playing catch up today. It’s a little bit of a race for me in my mind. Playing is 957, up $10 and change. Platinum is up four and change at 960. Grains are all down, I think. Let me see. Grains are all down. A little bit of a hangover after last week. Soy down three at twelve spot. Even corn, 445, pretty much unchanged. And wheat down almost ten cents at six thirteen. Six hundred and fourteen caught. Okay, so let’s get to the main events. There’s the homepage. We put out some stuff over the weekend, most of it focusing on with regards to precious metals.
Focusing on that a bullion bank definitely got hurt last week or last month over the last two months. And moving forward from there, you have a situation that I think they covered and that the market may, in fact, start to retrace as a result of that now. Okay. And much of that was also about the data that came out last week on jobs. Let’s move to the stories that matter the most to us. Yellen loses face over Japan. Breadwinner three is a process, not an event. And there’s more coming on that over the rest of the week.
All right, premium bank of America CTA analysis and commentary on the yen and Yellen. So let’s get to that. The CTA analysis is light this week, but we have two nice reports at the bottom. One is bank of America CTA commentary, which comments on the flows of the market, precious metals as well. Some nice graphics there. There’s another report from an investment firm that goes through the cross assets or the assets that trade, how they interact with each other over the week. So let me just read this quickly. In commodities, our models long oil position was also stopped out as higher than expected.
Inventories data pushed the commodity lower, although oil trend strength is still elevated. Our model projects that it will continue to fall next week, meaning that actual trend followers could continue offloading next week. This will have a dampening effect on gold, though not known if it will be significant. Okay, the main event, Japan. And that’s at the bottom. That continues at the bottom. Just going to read this. This is an opinion, okay? It’s an informed opinion from experience and information, but it’s an opinion. You’re never going to get confirmation on these stories. So let’s go through it.
Last week was a horrendously volatile week for the yen. The yen weakened all week. Now, it’s been weakening for over a year now, precipitously, but it really accelerated last week. And it should not be accelerating this late in the game based on their monetary policy actions. As a result of that, they denied it, but there was a knee jerk intervention where they came in and they basically bought the yen. In chart terms, that looks like this, buying the yen drives it lower. So this is yen per dollar, not dollars per yen. So these two big yellow arrows going down, that’s the yen getting purchased against dollars.
So it drives the yen lower. But this is. Look, this is the yen. This is what it’s supposed to be in terms of volatility. You’re supposed to wake up in the morning and say, what’s my yen worth? What’s my dollar worth? And it’s supposed to be like this. This is a disaster. This is a reaction to a disaster that’s getting out of control. This is a central bank stepping in more than it normally would. And here they are again. And here they are again. Now, this is typical of intervention, but these two things here, they should never happen.
This yellow rectangle here, that yellow rectangle is when our jobs number actually came out. Now, that’s the graphic representation for it. Let me just tell you the story, what happened, what it implied, and what it means for us down the road. So Japan. Japan intervened to defend the yen last week from debasing too fast. Again, this is opinion. Here is Yellen referring to the violent reversal in the yen in its aftermath. After a pronounced unattended weakening, the yen did move quite a bit. In relatively short period of time. We would expect these interventions to be rare and consultation to take place.
Those are harsh words. In short, Yellen is not happy with how Japan is handling its currency and likely wishes Japan had acted sooner to avoid the shorts. The guys who are driving it higher on this chart getting too comfortable with their positioning. My expression, an ounce of prevention concept applies here. She was commenting on the fact that they had to be so aggressive in their handling of the situation. Now, as an aside to complicate the matter a little bit more, it was likely Yellen who gave the bank of Japan the go ahead to do what they did by tipping to them.
See those three arrows before the jobs number came out, that the jobs number would be soft. A weak us jobs number is bearish for the US dollar, bullish for the end. So they got ahead of it and front ran the data, which you’d expect them to do anyway. If they have this information, they get this information, they talk to each other. Yellen gave them the information and basically said, this is what’s going to happen. Be careful. Just do what you got to do, but don’t make it obvious. It’s like a hit. Or if you’re the movie Wall street, give a taste of some of your friends.
Let them know a little bit. Be careful. Well, they’re not very careful how they handled it. So just to read that, it was likely Yellen who gave the bank of Japan go ahead to do what they did by tipping that the jobs number would be weak. She did not expect them to come in ham fisted about it. It does not reflect on her well, okay. It does not reflect on her politically or geopolitically well, because she didn’t convey what needed to be conveyed to them. Or they’re too dumb to do it the right way. And it’s probably a little bit of a combination of the two.
Now, while debasement is the plan for the end, meaning they expect it to get weaker by rallying the speed at which it has come is not good. This made the bank of Japan reaction even more pronounced and drew unwanted attention to the situation. And what does that mean? Well, this is the yen. The yen has been doing this since the beginning of 24. And before that, it had been weak as well. This is what happens in yield curve control, when yield curve control is when yield curve control is stopped. So yield curve control, well, talk about it again some other time.
But yield curve control is supposed to ultimately make your currency weak. That’s financial repression. And the yield curve control did do that. This is all yield curve control going all the way back. But in March of this year, yield curve control is supposed to end. And it ended. And that’s supposed to make the end chart go all the way back down because it’s strengthening at the end. But it didn’t. Because the world doesn’t trust the bank of Japan to actually know what they’re doing. They really might not be very good at what they’re doing. Now. I’m late to the game on this, but that’s the bottom line.
So what it means the basement is bad enough, but violent reversals either way, when it gets weaker or when it gets stronger. When they acted with those yellow arrows, as if to show the central bank means business only creates more uncertainty. Volatility is the killer of confidence in a fiat currency. You want to wake up and say, this is what my yen is worth. Instability in either direction, let alone in both, makes normal people run for the hills. Now here’s the three stories. Here’s three stories that’ll give you an idea of how Yellen is losing face amongst her peers.
Yellen counsels caution on the intervention. In the end, Yellen, asked on yen, says that she didn’t know of any intervention. And then later on she’s asked, did Japan intervene to boost the yen? So, of course they did. And of course she told them. This is opinion, right? Of course they intervened, and of course they did it before the jobs number, knowing the jobs number would be weak. Of course they got it from her. And the reason that she reacted is because Wall street pinned it on her, because she’s the one doing this. I’m not saying that pal doesn’t.
But in this instance, Yellen went over and she screwed up. She didn’t tell them what to do exactly. Or put it this way, they’re too dumb to take the rules anyway. Why it ultimately matters. Right. Coming back to the US out of the drama. The US is headed down the same path. That path is yield curve control, financial repression, excuse my spelling, and a declining dollar. So as the treasury gets weaker or more volatile, we’re going to step in to stop the treasury from getting too weak. And when we stop the treasury from getting too weak, you’re going to see the dollar dive.
But they expect it to be more orderly than the yen has been. So the yen has been like the Keystone cops are the gang that couldnt shoot straight handling their currency. So theyre not happy about that. So Japan bringing undue attention to the process does not help those in power affect their own plan. Thats it. Thats whats going on. Some decent news in here. Job growth stumbled in April. We’re starting to attack Japan. More Japan’s export surge. You’re selling too much stuff. How dare you? And consumers are not buying stuff anymore. Geopolitically. There’s several things in there, but the one I want to notice was that AI is flying fighter jets now and it’s better than pilots.
In many instances. Russia took control of another village in the Ukraine. And Israel, this is actually important. Israel said two things. Pay attention to the second one here. Israel. PM Netanyahu said they cannot accept Hamas demands for an end of the war and withdrawal of forces from Gaza. Then he noted that ending the Gaza war now would keep Hamas in power and Israel would not accept terms that amount to a capitulation with Israel to keep fighting until its war aims are achieved. Meaning were negotiating with you, but there is no negotiation that will stop this because we intend to eliminate Hamas altogether.
So my conclusion from that is they will go in very soon. There you go. We’ll see. Iraq is now attacking Israel, et cetera, et cetera, this week in terms of data, not a lot of data. It’s the week before CPI. But a lot of speakers, none of them, I think, crucially important, but all of them are going to be out there testing how the market, how the market reacts to news. They’ll talk to, talk soft, and there’s the research at the bottom. Vince, have a great day. Let’s see. Gold is 20 317. I’m not very bullish on gold right now, given the news items I saw last week, short term, but this is encouraging.
It’s encouraging. I think the gets above 23 20. I mean, it’s stabilized above 23 20 in futures terms right now. You should be long. You should be long. You should be long right here, right now. Stop yourself out $5 lower and run with it and only take home a winner basically. But that’s not advice. That’s my advice to myself. Have a great day. I’m Vince. Thanks for watching this morning’s markets and metals update with Vince Lancy, brought to you each day by Miles Franklin precious metals, where this week’s special is 1oz gold australian kangaroos for only $59 over spot.
Gold australian kangaroos are one of the coins coming from one of the six sovereign mints, and with the gold price pulling back recently, you can get your australian kangaroos at only $59 over spot by emailing arcadialesfranklin.com or calling 833-326-4653 please note that this video is not intended as legal licensed financial trading advice and is to be used for informational purposes only. Please contact your financial advisor before making any decisions. And thanks for watching..
See more of Arcadia Economics on their Public Channel and the MPN Arcadia Economics channel.
