April 13, 2020
* Dollar gets sold on Friday, as currencies & Gold rally!
* 2006 revisited Saturday night!
Good Day… And a Marvelous Monday to you… I originally came back from Florida because I had a scan scheduled for last week. But then they called and told me they had to cancel it… And then on Thursday last week, they called and said they had an opening for very early Friday morning, and I said I’m good with that… So, I went, with my mask that Kathy made…. I also received a call on Thursday from my heart doctor’s office. They wanted to set up a Zoom meeting with him for Monday, which is today, and will take place right after I send the letter out! My heart doctor is a Cubs fan, so I don’t hold it against him. HA! We always have a nice chat about baseball when I visit, I have to think that these Zoom meetings will be short and to the point, which is fine with me anyway! Canned Heat greets me this morning with their song (that was made famous because of the Woodstock album): Going To The Country….
OK, riddle me this Batman…. 16.7 Million people have filed for unemployment in the last 3 weeks, but stocks have their best week in a month of Sundays, last week… how can that be? Ahhh, grasshopper, as I keep telling you, we are in an era of “opposites”….
The dollar, and Gold traded the way they should have hearing the unemployment news… The dollar got sold most of the day on Friday, and Gold gained nearly $40, and touched $1.700 in the intraday trading… With the dollar getting sold, the euro, and Aussie dollar (A$), led the currencies on their charge back up the hill that the dollar has been king of for so long now….
As I said last week, the stuff the Fed, Treasury, and Gov’t are doing is simply a replay of 2008, but only this is 2008 on steroids…. And while the folks behind all this mess, keep saying, that “it’s only temporary”… I’ve heard that one before, haven’t you? I guess what I’m trying to say here is that the Fed/ Treasury/ Gov’t’s definition of the word Temporary is different from mine….
I’ve been watching videos that one of my fave analysts, Grant Williams put together, and calls them Hmmmminars…. I told you about the one with Pipa Malmgren early last week, and to end the week he had the great analyst and chartist, Stephanie Pomboy on…. Ms. Pomboy didn’t hold any punches, and really said what was on her mind…. Sort of like Bill Gates did for a MarketWatch article when he said, “No one should think the government can wave a wand and all of sudden the economy is anything like it was before this happened.”
And that’s what I’ve been telling you over and over again, that this shutdown of the economy is going to change things drastically when it’s all started up again….
Ok, I thought of this late last week, when I saw this on Twitter: MNUCHIN SAYS NO TALKS RIGHT NOW ABOUT POTENTIAL TO HAVE FED BUY STOCKS….
My mind went immediately to an owner or GM telling everyone that “the manager’s job is safe”…. I bet there were no talks yet to buy stocks! NOT! Who are they trying to pull the wool over their eyes? Oh, that’s right… The sheeple…. The people that can’t see the forest from the trees, or can’t get out of the way of a moving bus, or… oh, stop it Chuck, not everyone has the economics background you have! Why would these sheeple see that the Fed has taken the playbook for 2008, and just replicated it, but only this time it’s on steroids? And that this is the precursor to the end of the debt cycle that began in 1971, when Nixon took us off the Gold standard? It’s all going to end up in tears, folks…. So, you can decide now if you want to go along with the rest of the sheeple that pretend they don’t know any better, or….. You can decide today that you need to own some Gold / Silver…. You know, JP Morgan said it all those years ago that, “Gold is Money, and nothing else”….
I know that there’s been a lot of things happening and new programs being introduced by the Gov’t / Fed/ Treasury, and I’ve tried to keep on top of them…. But one that I did miss last week, was the announcement of the Fed buying Corporate Dept…. I like that they think that just because, from their point of view, the Corporation was downgraded recently due to the COVID-19 Virus, that there’s nothing wrong with this debt….. Really?
Haven’t I been telling you for a couple of years now that Corporate Debt was leveraged to the max, and all coming due in 2020? Oh, and in a sign of the times… I learned last week that Corporate downgrades grew from around 10 in February to 1,044 in the last two months! But don’t let the fact that the economy is shut-down right now, blur your picture of Corporations that were in trouble….
Well, the Fed saw this and decided that “it just wasn’t fair” that the corporations had to go through this virus shutdown, and decided to set up a line of credit for them…. OK, here’s the problem as I see it… not only is this junk the Fed is buying, with newly created dollars, but that the size of the Corp. bonds is around $2.5 Trillion, and the Fed only allotted $750 Billion of this program…. Once again, unless the Fed goes back to up the ante, if you will, they will be doing the deciding on who lives and who dies… corporation wise….
Well, reading through my emails this past weekend, had me spending a lot of time on an article by David Stockman (you know the former budget director for Reagan) , he was good enough to go line by line the pork filled bailout that was passed a week or so ago… One of the first things he details is an allocation of $25,000,000 for additional salary for House of Representatives… Wait! What? The House of Representatives got a raise, and threw it in the COVID-19 bail out? Really? I find this to be so irresponsible, and self-centered, and just plain wrong! A raise? For what? Oh, I see, they get a raise for properly identifying a rising debt problem and choosing to deal with the debt problem by doubling down on the debt! Instead of a raise, they should all be fired, and sent home! But since that’s not going to happen, I guess you and I, you know the taxpayers, get to rejoice this expenditure, the best way we know… And that brings me to a tale of the past… Dan Devine was a great football coach for the Missouri Tigers, and their hated rival was the Kansas Jayhawks, and their coach at the time was Pepper Rogers, who after a game gave Dane Devine the peace sign… When asked about it Devine replied, “I returned a one fingered peace sign to him”…. So we can rejoice the raise in the House with a Dan Devine special!
The U.S. Data Cupboard is once again as barren as the moon today, and won’t really have anything for us again until Wednesday, when March Retail Sales will print, along with Industrial Production and Capacity Utilization. In addition, on Wednesday, there will be other prints but none as important as those three…
So… the these aren’t part of the U.S. Data Cupboard, but… On Thursday last week 6.6 Million more people filed for unemployment, that totals, in just the last 3 weeks: 16.7 Million people filing for unemployment… When will these type numbers begin to show up in the Unemployment Numbers? Well, I believe we’ll see some of it in the April #’s that will be reported the first Friday in May.
In addition to that, I also want to make an amendment to my previous call of the Fed’s Balance Sheet being above $10 Trillion by year end…. Just last week, the Fed’s Balance sheet rose over $2 Trillion, so if we extrapolate that out to the year, we would be over $20 Trillion at year’s end…. And trust me on this one folks, the Fed Heads are just getting started with buying junk….
Oh… and this little ditty is pretty telling…. For the first time the Fed now owns more Treasuries than foreigners own…. The U.S. has depended on the kindness of strangers for years to finance our deficit spending, but apparently, that’s not needed any longer, not from a result of reduced deficit spending, but as a result of the Fed now monetizing all debt of the U.S., and apparently can print as many dollars as the U.S. Treasury issues bonds to finance our debt….
I saw an article this weekend where the writer said that the Fed had gone the MMonTy…. Remember the talk about MMT (Modern Monetary Theory), which is print all the money you won’t, debts don’t matter… I thought the writer had thought of a real funny line…
For years, when people would ask me if debt is so bad, how come Japan is still in working order? Well, the answer is that the Japanese own most of their debt, making their debt “self financed”, and the U.S. always depended on the kindness of strangers, which makes the latter of the two the most risky, because your debt is held by people that could decide not to hold it any longer….
And before we go on any further there…. Japan in working order? Really? Well, if you think that being in a deflationary funk for over 2 decades is “working order” then Ok…. But to me Japan is a poster child for what happens when debts grow too big….
Well, since we are creating dollars to pay for debt, it’s still worse than the self financed scenario. Why? you may be asking…. Well, This is not a “good look” to the rest of the world, folks…. And the shepherd of the reserve currency of the world, needs to be taking better care of their balance sheet to deserve such a title…. I’m just saying…. .Got Gold?
Last week I gave you the “insurance talk with regards to Gold”…. And the other day I heard this line, which will relate to people crashing the gates to buy Gold when the time comes…. “You can’t buy fire insurance when you house is already on fire”….
OK, one more thing on the Debt and the Treasury issuance…. About 8-10 years ago, there was an idea floating around the Gov’t that the way to make running up the debt and having to issue tons of Treasuries, easier, was to….. Require all IRA’s, 401K’s, SEP’s whatever, to have to buy Treasuries ONLY! This is how I believe the Gov’t could get around the fact that the Fed is owning more Treasuries than foreigners…. Instead of the Fed owning the Treasuries, U.S. taxpayers will own them whether they want them or not! (probably not, given the yield)
And while we’re on the yield…. When inflation beings to stir, the Fed will want to hike rates, but by doing so the bond servicing costs of ALL THOSE TREASURIES would go higher, and with yields low, the bond servicing costs still take up a very large piece of the tax revenues…. And that inability of the Fed to react to the rising inflation is only going to allow inflation to run wild…… Again, I’m just saying…. Got Gold?
And don’t think for one minute, that Gold hasn’t noticed what the Fed, Treasury, etal are doing…. Look, I know that other countries are in the same boat, but their fiscal reaction to their bout of COVID-19 has been miniscule compared to the steroid induced U.S. Version of this… And besides Gold has already booked all-time highs VS all those currencies in the last year, and now it’s the dollar’s turn to see an all-time high in Gold be booked against it!
To recap…. 16.7 Million people have filed for unemployment the last 3 weeks, and that news sent the dollar down VS the currencies and Gold. the euro and A$’s were the main beneficiaries of dollar selling, along with Gold which gained nearly $40 on the day… Gold is giving back $7 in the early trading today…. The Fed is going to be buying Corp Bonds, are stocks next? You bet your sweet bippie they are!
For What It’s Worth…. I had two different dear readers send me the link to this article that be found on wallstreetonparade.com…. If this one doesn’t make your blood boil and want to demand a recall of your representative and Senators to ask them how or why they game the store away, then you had better hook yourself up to a blood pressure machine and see if the heart’s ticking correctly! I’m serious here folks, this article has information in it that will make your skin crawl…. And it can be found here: https://wallstreetonparade.com/2020/04/the-new-york-fed-owned-by-multinational-banks-is-nationalizing-capital-markets/
Or, here’s your snippet:” This is exactly what happened during the last financial crisis: the New York Fed was put in charge of the bailout programs and then farmed them out to multinational banks like Goldman Sachs and JPMorgan Chase – who are among the largest shareowner owners of the New York Fed. In fact, JPMorgan Chase, while Dimon was sitting on the Board of the New York Fed, signed a highly lucrative contract to serve as custodian for the New York Fed’s purchases of agency mortgage-backed securities, which currently total $1.45 trillion. That contract has now been in effect for more than 11 years as the Fed promised to unwind that program, but never did, and is now doubling down on it.
During the more than 11 years that the New York Fed has allowed JPMorgan Chase to hold $1.45 trillion of Fed assets, it has pleaded guilty to three criminal felony charges and is currently under another criminal probe by the U.S. Department of Justice for turning its precious metals desk into a racketeering enterprise. One of JPMorgan Chase’s primary regulators is (wait for it) the New York Fed. One of the former bank examiners for the New York Fed, Carmen Segarra, was pressured by the “relationship managers” at the New York Fed to change her review of Goldman Sachs. The pressure was so intense that she went to the Spy Store, bought a tiny microphone, and taped the internal conversations. When she wouldn’t change her review, she was fired.
Let’s remember where all of these bad debts came from on which the U.S. taxpayer is now going to eat the losses. These multinational corporations and multinational banks issued debt in order to buy back trillions of dollars of their own shares to inflate their profits so that their CEOs and other top executives could claim great stock performance and get paid 200 to 400 times what their average workers were getting paid. According to the Economic Policy Institute, CEO compensation has grown 940 percent since 1978 while the typical worker’s compensation has risen by just 12 percent during that span of time. Jamie Dimon has become a billionaire as a result of stock options at his bank.
Today’s unprecedented nationalization of capital markets is the end result of the moral hazard Congress created by allowing the New York Fed, owned by multinational banks, to oversee the bulk of $29 trillion that the New York Fed created out of thin air during the last financial crisis and used to bail out its own shareholder banks and foreign global banks that were interconnected via derivative contracts that were blowing up.”
Chuck Again…. There was so much to talk about in this article, I had to decide what part to put in as your snippet… In this case I think it would better to click on the link above and read the article in its entirety….
Currencies today 4/13/20 American Style: A$.6335, kiwi .6065, C$ .7160, euro 1.0915, sterling 1.2478, Swiss $1.0335, European Style: rand 18.0740, krone 10.2573, SEK 9.9525, forint 323.77, zloty 4.1757, koruna 24.6156, RUB 73.74, yen 108.03, sing 1.4155, HKD 7.7522, INR 75.69, China 7.0351, peso 23.45, BRL 5.1055, Dollar Index 99.56, Oil $23.13, 10-year .72%, Silver $15.30, Platinum $746.54, Palladium $2,227.40, and Gold… $1,689.26
That’s it for today…. A pretty long one this morning… .That’s what happens when I have nothing else to do all weekend but read and write down notes about what to say today! In 2006, I was traveling to Panama during Game 7 of the NLCS (Cards Vs Mets)… And didn’t know the outcome until arriving at my hotel! Saturday night I watched a replay of the game, that I had never seen all the way through! Pretty cool! After that trip to Panama, I said, “I’m never going back there”… but ended up having to go 2 more times! UGH! OK… Seals and Crofts takes us to the finish line today with their song: Diamond Girl…. I hope you have a Marvelous Monday, and will Be Good To Yourself!
Chuck Butler