December 30, 2019
* Silver tries to move higher, but was stopped!
* Chuck offers an idea to help the economy….
Good Day… And a Marvelous Monday to you. Well, I’m back… if only for two days this week… Today and Thursday… As tomorrow we will put a bow on 2019, and pack it away, and tradition calls for me to sleep in to prepare for the night ahead… And then Wednesday, is recovery day, as we start the New Year…. So… How was your Christmas holiday? Mine was fine… My grandkids were so darn excited and happy… We celebrated Kathy’s birthday… Well she did, I was stuck at home with a flare up of the gout… OUCH! Man that stuff is painful! Al Stewart greets me this morning with his song: On the Border…
I was swamped with news articles while on vacation… I tried to read them all, but my heart just wasn’t into it… The Currencies had their normal, Chuck is away, rally, going for them, as the dollar was getting sold on a daily basis… I did read one article last week that said that European traders are betting that the euro has a good 2020… That would mean that they truly believe the dollar’s long running strong trend had come to an end… Because if that was to happen in 2020, and I don’t see why it wouldn’t, then that would mean the dollar is getting sold like funnel cakes at a State Fair!
Remember last year around Christmas when the stock market got whacked one day, and the next day it rebounded? Well, this year in the “year of opposites” that we’ve discussed previously, Silver took a flyer on the day after Christmas and rose 38-cents, before the boys in the band showed up, late per their agreements with the boss, and took Silver back down by 23-cents so that Silver showed a 15-cent hike on the day, which in any normal day would be great, but had the price manipulators not shown up imagine where Silver would have ended the day…. Come on, John Lennon, told us in song that to imagine it’s not hard to do! And then on Friday, with all the boys in the band back at their desks, they brought silver back below $18.00… Phooey! Why couldn’t these dirty devils had just stayed home to finish the holiday week like everyone else did?
Gold saw the same kind of action… rising furiously on Thursday, but then getting sold to make the day not look so good. And on Friday it lost more ground to bring it back to $1,510… Nothing like finding large price increases as your gifts, under the tree, and then have them taken back later in the day as you try every other new toy you received…. I’m just saying…
Speaking of Gold… There was a report late last week that Russia is considering allowing their Wealth Fund to invest in Gold… Now that would be another buyer of physical Gold in large quantities, folks… And That just has to have the price manipulators shaking in their collective boots! Now, we’re not talking about a sovereign wealth fund the size of Norway’s, which is the largest in the world… But $124 Billion is nothing to turn your nose up, folks… And this is not to say that the entire $124 Billion would be going to Gold… but a conservative allocation to Gold would be anywhere around 15-20%… So, being conservative (my training I can’t help it!) that would indicate that it’s certainly possible that the Wealth Fund could be allocating up to $18 Billion in physical Gold…. again… Got Gold?
I read last week that Sweden is giving up on their experiment with negative rates… Seems they weren’t the cure-all for the Swedish economy that they had though they would be… If they had only read the Pfennig, and listened to me! As if! Right? Keeping in the region… with the price of Oil rallying last week, due to supply concerns, the Norwegian krone has picked up some speed on the rally tracks… With the euro looking perkier, these days, along with the price of Oil, the krone has a stream of green lights to fly through… And it’s doing so!
Speaking of the price of Oil… As I said, supply concerns, and rumors that the shale Producers in the U.S. are dropping like flies, really has pushed the price of Oil higher and this morning it trades with a $62 handle… The thing I like about this move is twofold… 1. I filled my gas tank in my car a week ago, before the Oil price rally started, which should keep me good until I leave for Florida next week. and 2. more importantly, the Petrol Currencies, led by the Russian ruble have really taken the Oil Price rally to heart… The ruble, loonie, krone, real, and shoot Rudy, even the peso have boarded the rally train…
If I read one article on how badly Americans are saving money last week, I read a dozen of them… Seems it’s on everyone’s mind these days… these days I sit on cornerstones, and count the time in quarter tones to ten… Sorry, but whenever I type “these days”, the old Jackson Browne song pops into my head, and then to my fat fingers! So… I digress… (what else is new, eh? Nice to know some things don’t change, right? HA) I won’t bore you with all the details, but a very large number of Americans don’t have savings at all, and another large number don’t have enough for a $1,000 emergency… And if you lived in my house, those things would be going on all the time!
I only tell you these things about Americans because we’re supposed to be doing fine, right? Because… We are Americans, it’s our right to be prosperous! As if! We all certainly have an opportunity to be prosperous, but somewhere along the line, we get off track,… And then I have to explain to people how this situation does not help our economy one iota…
Because we, as a country depend so much on consumption… In other words, people spending money… But they can only spend what they don’t have for so long, before the collectors begin to knock on the door… So, they stop spending, and the economy goes to hell in a hand basket…
I’ve told this story before, so if it’s not your thing, go ahead and skip ahead, you won’t hurt my feelings, and Lordy that’s an important thing these days, eh? OK, here we go… My longtime friend, and former Big Boss, Frank Trotter, and Chuck were in Bermuda for a conference, and in Frank’s presentation, he talked about walking through a graveyard in Bermuda and seeing that the reason for death for many on the tombstones was the word: “Consumption”… So, what way should we be looking at Consumption? A Good thing, or bad thing?
When I wrote for the now defunct, Dow Theory Letters, Wait! Come to think of it, I’ve written for two publications other than the Pfennig, in the past, and both of them went belly up… You don’t think me being a part of the editorial group had anything to do with that do you? Nah… couldn’t be, must be a co-inki-dink! So, meanwhile back at the ranch… I wrote a piece that went into great detail how the U.S. stock market gets very weak during recessions… And I read last week that Doug Casey (old time friend) said that he believed that this next downturn would turn to a depression… And since we’ve had 1 and one-half depressions here in the U.S. to use as historic markers, stocks get shellacked during depressions!
OK, so I don’t think you woke up this morning, turned on your computer, or your smart phone, or tablet, to read the Pfennig, to get all depressed right from the get-go… So, I’ll stop there… And talk about something else…
The U.S. Data Cupboard sure was on holiday last week, like the rest of us, but did yield another piece of negative data, when Durable Goods Orders printed negative -2.0% for November, and the all important Capital Goods Orders failed to meet the Roctober print of 1.1% and gain only .1%…. I’ve gone over CAPEX (Capital expenditures) many times in the past so I won’t linger here too long, but just to remind everyone that when the tax reform act went into place I said that it would not help the economy as it was not about you and me, but about Corporations who would NOT use the tax savings on CAPEX, but instead use it to buy back shares to guarantee large year-end bonuses… I sure did nail that one, eh?
Before we head to the Big Finish today… and the last time this year… I wanted to talk a bit about something I’ve talked about previously, and that is the Fed’s interest rate that they pay for excess reserves that the banks hold at the Fed… In other words, the Fed is in competition for these funds, and they guarantee return of capital… So, the banks pile cash into the Fed, instead of putting the money to good use in the economy, where the risks certainly are greater, but with increased risk come increase interest rate spread, right? So, what’s going on here, have bankers lost their collective appetites’ for risk? Or do the scars of 2007-08 run too deep and remain on the minds of these bankers? Either way, the way that David Stockman, figures the numbers are interesting he says that the Fed pays and interest rate of 1.55% right now. There’s about $1.5 trillion of excess reserves in the banking system. That computes to about $23 Billion the Fed pays out annually…
So, think about that for a minute… That’s a very large sum of cash that could be in the economy instead of sitting idly at the Fed… In my humble opinion, the Fed should cease this operation, or at least pay an interest rate that doesn’t make sense for bankers to hold $1.5 at the Fed!
I know no one asked Chuck what he would do first to help the economy, but I thought I would throw that out there and see if it sticks! HA!
To Recap… The currencies had their usual “When Chuck is away rallY” last week, and are looking toward ending the year on a high note… Gold & Silver had an interesting couple of days after Chirstmas… It’a a year of “opposites” for sure, and i’m hoping that it ends tomorrow night! Sweden is going to end their negative rates experiment, and that’s a good thing to Chuck’s way of thinking…
For What It’s Worth…. OK… I’ve been writing about how inflation is much higher than the stupid CPI / Gov’t index shows… And while I was on vacation, I came across this website, that takes out all the hedonic adjustments and calculates inflation based on what people need and buy… And guess what? They proved me correct! (as if there was any question! HA!) So, today’s FWIW is simply a trip to that website to see that inflation in the U.S. has been running 10.5% in the 10 largest cities of the country… Now that sounds correct to me, I don’t know about you, but if you live a normal life and buy things, you know darn well that inflation isn’t the stupid CPI’s 2% figure! So, with all due respect (none from where I sit) to the folks at the BLS, I’m going to footnote this website and refer to it in 6 months because that’s the next time they’ll issue the report… So… you can see for yourself what I’ve been talking about for years right here: https://chapwoodindex.com/
Chuck again… Not that I went anywhere… but… here I am… beaming like a ray of sun, because after all this time, I’ve been proven correct…. I knew it in my heart of hearts, but… everyone likes to laugh at me and say I’m wrong, because the BLS says so… Well, not any longer!
Currencies today 12/30/19 American Style: A$.6997, kiwi .6722, C$ .7650, euro 1.1191, sterling 1.3135, Swiss $1.0291, European Style: rand 14.0630, krone 8.8005, SEK 9.3182, forint 295.63, zloty 3.8030, koruna 22.7250, RUB 62.01, yen 109.18, sing 1.3485, HKD 7.7863, INR 71.31, China 6.9947, peso 18.83, BRL 4.0437, Dollar Index 96.81, Oil $62.10, 10-year 2.92%, Silver $17.86, Platinum $950.50, Palladium $1,909.51, and Gold… $1,512.06
That’s it for today, and this year! The next time we talk it will be the “roaring 20’s”! I can’t believe how quickly December went along! But here we are, closing another year, which brings me to January, and… my annual sojourn to S. Florida for the winter! I leave next Tuesday, and brother it can’t get here fast enough! My leg wound continues to get better albeit very sloth-like! I found a wound center in S. Florida, so I can continue to get it treated, which was going to present me with a real problem if I hadn’t found one! Thanks to all you dear readers who sent along notes last week, wishing me a Merry Christmas… Very appreciative, indeed! My granddaughter, little Evie, sure was in demand on Christmas, everyone wanted to hold that little bundle of sweetness! OK… well, it’s time to get this out the door… The Michael Stanley Band takes us to the finish line today with their song: The Rosewood Bitters… I hope you have a Marvelous Monday, and please Be Good To Yourself!
PS… Please be careful tomorrow night… Kathy’s Dad used to call it “Amateur’s Night”… Be careful, stay near your hood, and live to see 2020! Please!
Chuck Butler