The Fed Begins Its Illegal Corporate Bond Buying…

May 28, 2020

* The dollar bugs fight back on Wednesday… 

* Gold fights back to recover early Wednesday loss… 

Good day… And a Tub Thumpin’ Thursday to you! In case you were ever wondering… Tub Thumpin’ is the title of a song by Chumbawamba… It was around in the 90’s, and I liked it! So, there you go! The song had some words that I think apply to me…. I get knocked down, but I get up again, nothing’s gonna keep me down…. I did get to sit outside late yesterday afternoon, after the morning rain finally ended. This new book, by Peter Zeihan, DisUnited Nations… I’m telling you this now, so you’ll listen to me later, I’m loving this book so far! And the writer is just laying the groundwork, if you will, for the rest of the book… I’m greeted this morning with Chris Gaffney’s fave song: It’s a song by Styx, titled: Come Sail Away….

Many of you know Chris Gaffney, he took over the World Markets Desk when they showed me the door to the pasture. Chris & I worked together off an on going back to 1992… And Chris is now attending Conferences and speaking at them, so you know who I’m talking about. I didn’t want to just drop a name on you, and leave you hanging!

OK… Well, the currencies’ daily inching higher VS the dollar, came to an end yesterday, as the dollar bugs fought back, but the move backward was as small as the moves forward had been on a daily basis…. And Gold investors finally fought back and turned that early morning drop of $11, into a very small drop and close back above $1,700 at $1,709.  I told you I had been listening to the podcasts of Grant Williams and all his different guests for two weeks now, and none of them have an answer, other than the one I’ve been talking about, for Gold’s lackluster performance in this time of questionable unknowns!

And of course the one I’ve been talking about is that U.S. investors see no need for a safe haven right now the Fed has stepped in, and provided liquidity, and rate cuts, and a general feeling among investors that the Fed has their back, so let’s go hog wild on stocks! As a regular reader, you know that my feeling on this is hogwash! And I truly believe that this stock rally is a bear trap, and when the backside of the hurricane comes onshore…. There will be crocodile tears…. But not by me!

The Folks at Wallstreetonparade.com, Russ and Pam Martens, had yet another good piece on the Fed yesterday…. I wanna be like the Martens when I grow up! Seriously, these people step into the batter’s box, swinging a BIG Stick, and swing for the fences! Yesterday, they were talking about the Fed’s announcement that they will be buying Corp bonds, and Corp bond ETFs… As I told my friend, Dennis Miller, “Yes, it’s illegal…. I’ve pointed that out a few times since the announcement that they would be doing this last month…. It burns my britches as they used to say, back in the day when the rule of law meant something… Of course if I were to go out and do something unlawful, and claim I was going to help feed the poor, I would still go to jail…. But not the Fed…. And Congress is too yellow to do anything about it….

And yes, taxpayers are on the hook for any losses you can bet your sweet bippie on that one! “

And the folks at Blackrock get to do all the actual buying, so their profit margins are going higher by the minute! The folks at Wallstreetonparade.com did mention that Blackrock is going to be able to buy their own bonds, and pass them off to the Fed…. Now that sure does sweeten the pot for Blackrock, now doesn’t it? They made commissions when they sold them, and now they’ll make commissions when they buy them back, but won’t have to own them! I can hear the folks at Blackrock singing to the Fed…. How Sweet It Is To Be Loved By You!

I’m about as ticked off about something the Fed has done as I’ve ever been folks…. So forgive me if I sound a little cynical or sarcastic, or just plain ticked off!

Why are members of Congress turning a deaf ear on the complaining about how buying Corp bonds is illegal for the Fed? Because they are too soft hearted, and they might get their feelings hurt, if they spoke up and then someone across the aisle accused them of wanting to kill his grandma….

It’s a shame the way the U.S. was hit by a pandemic, and our elected leaders can’t work together for solutions without name calling and grandstanding! Our republic, ahem, I mean our Empire, is being led down an alley that’s dark and dangerous, and all we’ve got are some yellow-bellied, too afraid of getting their feelings hurt, leaders…. Oh Brother, is this a real problem or what!

OK, Chuck, settle down… you’re only half way through the letter and you’ve gotten yourself really worked up!

So… did you hear the news that a Japanese Bank announced that they are leaving the CLO market, of risky U.S. investments after taking a $3.7 Billion loss in those securities… That’s right I said Billion, with a capital B…. here’s Wiki’s explanation of what a CLO is: A collateralized loan obligation (CLO) is a single security backed by a pool of debt. Often these are corporate loans that have a low credit rating or leveraged buyouts made by a private equity firm to take a controlling interest in an existing company.

Man, I would hate to be the guy at that Japanese Bank that had to go into the boss’ office and tell him he just lost in dollar terms, $3.7 Billion…. I can’t even work the number to how much yen that is! HA! I would imagine that the boss told the employee that he would have to “fall on a sword”… YIKES!

In my daily spin through Twitter I found this quite interesting. It was a Tweet by Dan Hedl, (to give him credit!) and it goes like this: The game “Monopoly” sold for $2 in 1935. In the box, you got monopoly money. That original stack of monopoly money from 1935 is worth $50 as a collectors item. Monopoly money literally holds more value than your fiat currency.”

I’ve always kidded about how the Fed was trying its darndest to make our dollars, Monopoly Money…. But here I am again talking about the Fed…. There’s just no getting away from them and their box of rocks ideas…

Yesterday, St. Louis Fed President, James Bullard, spoke, and he too said that the Fed’s Balance Sheet would be quickly unwound once the Pandemic was over…. And once again, I’ll say that I’m going to call him on that, and say it will take more than 7 years to unwind…. I’m just saying…

Well, like I told you yesterday, China continues to weaken their currency, and much like last year when it appeared to be going to 8, but along came the trade agreement negotiations, and the Chinese decided to give the renminbi some curb appeal…. But that’s all over now, and the Peoples Bank of China (PBOC) is back to daily weakenings of the value….

And have you been following what’s going on in Hong Kong? I’m going to say that I have always thought that China would only allow Hong Kong to remain autonomous as long as they didn’t cause trouble…. Well, trouble has been a real problem, and now China has stripped Hong Kong of its autonomy…. I would think that the next move for the Chinese is to take away the honker (Hong Kong dollar) and replace it with the renminbi…. That would be quite radical folks, but nothing surprises me any longer with China….

You know I used to come home from school and tell my dad about how we had to crawl under our desks in our prep for a nuclear war…. My dad used to tell me not to worry about a nuclear war with the Soviets…. That his eye was on the sleeping giant, China… He would tell me that if the sleeping giant was ever to awake, that the whole world would end up knowing about it…

My dad was one of the smartest people I encountered through my years, and he only had a high school education. But being raised on a Farm, and learning about money, economics, trends and all kinds of things, prepared him well for his adult life…

OK… enough reminiscing…. You know what? I’m going to go off the tracks here and talk about something that the discussion of China had my mind going around and around…. No wait… I had better save that for a day when I start with it and see how long the discussion goes! So, you’ll have to wait…. But that should keep you coming back! I learned one thing in my days of playing in the band, and traveling around the U.S. and that is…. Always leave the audience…. Wanting….

The price of Oil found that it wasn’t on terra firma, and instead slipped lower from earlier this week. It seems that there was this AHA moment when it was discovered that the U.S. has HUGE stockpiles of supply, and that my friends is the reason why the price of Oil has slipped lower this week.  

But the Petrol Currencies are still benefitting from the price of Oil’s recent rise… Hey! when the Mexican peso can rally on Oil news, then you know it’s all good for the likes of rubles, krone, loonies, and real…. 

The U.S. Data Cupboard didn’t have much for us yesterday, except two Fed Head speeches (Bullard and Williams) and the Fed’s Beige Book, which gathers the heartbeat of each of the regions… And in it the overall theme of this month’s Beige Book was that Business Leaders Are Pessimistic About The Pace Of The Recovery…  Really? I guess these guys and with their cupboards filled with their stock buybacks, were of the opinion that the recover would be quick, and swift.. And why not? Didn’t the Fed tell us that’s how it would be in the beginning? Well, don’t feel sorry for the Business Leaders, they’ll make Millions either way the cookie crumbles…. 

Today’s Data Cupboard has a few important pieces of data to print, starting with the Weekly Jobless Claims, for last week, and that will be followed up with the April prints of Durable and Capital Goods Orders, you may recall that even the March prints were already negative, the April prints here should be very ugly….  Then the second estimate of 1st QTR GDP, which originally printed at negative -4.8%, and that quarter only had 1 week of shutdown, the 2nd QTR GDP will be really negative, and have a long way to go to dig itself out of that mess….   I’m just saying… 

To recap… The currencies’ daily inching higher VS the dollar came to a stop yesterday, but the move backwards was as small and the moves upward had been… Gold fought back and turned around the early morning loss to end the day basically flat, but is up $11 in the early morning trading today. China is flexing its muscles, folks… beware…  And Fed St. Louis President, Bullard, has gone to the dark side….  

For What It’s Worth…  OK, this is an interesting story about how a major amount of Gold was found in Poland, that was formerly the property of the Nazi’s….  I thank the GATA folks for sending me this article, because I found it to be so interesting, and it can be found here: https://www.dailymail.co.uk/news/article-8361037/28-tonnes-Nazi-gold-hidden-palace-Poland.html

Or, here’s your snippet: “

Twenty eight tonnes of Nazi gold worth more than £1 billion may have been traced to the grounds of a palace in Poland after the location was mentioned in an SS diary.

The stash of gold bars, jewellery and coins is believed to be sitting 200 ft. down at the bottom of a destroyed well shaft in the grounds of the Hochberg Palace, near the city of Wroclaw.

Researchers from the Polish-German Silesian Bridge Foundation, who claim to have acquired the diary from a masonic lodge, say the treasure was buried in the final days of the Second World War along with the corpses of several witnesses.

The treasure is said to include deposits from the Reichsbank in what was then the German city of Breslau but is now Wroclaw.

It is also said to include valuables from wealthy locals who handed them over to SS soldiers in the region for safekeeping as the Red Army advanced in 1945.”

Chuck again….  Ed Steer said he saw this coming out as an Indiana Jones type movie…. And the best line was from the GATA folks who said: “Nazi gold said buried near palace in Poland — will LBMA hypothecate it by Friday?  Ok, you’ve got to admit that’s funny!  but sad… funny, but sad… 

Prices for May 28, 2020: American Style: A$.6626, kiwi .6198, C$ .7270, euro 1.1017, sterling 1.2265, Swiss $1.0312, European Style: rand 17.4067, krone 9.8552, SEK 9.5798, forint 317.35, zloty 4.0129,   koruna 24.5062, RUB 70.93, yen 107.72, sing 1.4184, HKD 7.7529, INR 75.29, China 7.1591, peso 22.27, BRL 5.3174, Dollar Index 98.98,  Oil $32.47,    10-year .68%, Silver $17.34, Platinum $841.24, Palladium $1,950.32, and Gold… $1,723.64

That’s it for today…  A couple of years ago a posse of friends went to a gathering of sports writers for a question and answer session with them. I got to catch up with a guy that I grew up with, and played high school sports against, and a good time was had by all… Well, because of the Pandemic, they can’t do that again, so last night they had a Zoom with the sports writers in town… It was interesting but not as much fun as the previous set up…   OK… got to get going this morning, for blood work at one hospital and a dressing change at another hospital… That’ll amount to the most driving I’ve done since I drove back from Florida at the end of March! The Charlie Daniels Band takes us to the finish line today with their song: The Devil Went Down To Georgia…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and well continue to Be Good To Yourself!  

Chuck Butler

 

Investors Begin To Think There’s No Need For A Safe Haven!

May 27, 2020 

* Currencies continue inch higher VS the dollar

* The ECB throws Germany to the curb? 

Good Day… And a Wonderful Wednesday to you! A beautiful day yesterday, without rain! YAHOO! The rivers are rising, the creeks are rising, and the lake and dam system in S. W. Missouri is under siege, with water rising in the lakes to levels not seen in a long time. Usually around here, we see these daily storms rise up in June, not May… Hmmmm…. And another day of rain is on the docket today… UGH! The NHL announced their lame brained idea to start their playoffs and finish their season yesterday… I just think the whole plan is as dumb as a box of rocks… But the one good thing is that I’ll finally have some live sports to watch at night! HA! Seals and Crofts greet me this morning with their song: We May Never Pass This Way Again… Dash Crofts and Jim Seals were quite the duo of songwriters in the 70’s, and then music turned ugly with disco first and then electric drum music in the 80’s and they disbanded… A few years ago a dear reader sent me pictures of Jim Seals on his horse ranch in Texas…

Well, another day, and more bad stuff being reported… I have a question about all this crazy awful data being printed currently… Will we just strike a line through March-April and probably May and say they never existed? Otherwise in a year or two when we begin to grow the economy again, the year on year comparisons will be really skewered…. I’m just asking…. I’ll have more on the bad reports later in the letter today…

But first we have to pay homage to the dead men walking…. The currencies found a way to inch upward VS the dollar again yesterday. But Gold, starting the day down $6 never could recover and ended up losing $16 on the day, and closing at $1,710… The shiny metal is down another $11 this morning, bringing it below $1,700 once again…  The thing that really gets to me is this thought going around that the states are opening up again, and everything is going to be all hunky dory! And that’s just not the case I’m seeing going on here folks…. I told you yesterday about the hurricane that’s hitting the U.S. economy right now, and that we’re currently in the eye of the storm, the calm if you will, and that’s why a lot of people are singing “we’re in the money, we’re in the money, we’ve got a lot of what it takes to get along” I get it, I do, but why on earth would you buy the thought hook, line and sinker when there are so many things that are still to come at us?

In news from the Eurozone, where the euro is inching higher, and is trading above 1.10 once again…. Ok, yesterday, I told you I was starting a new book by Peter Zeihan, titled: DisUnited Nations… And one of the first things I read in the book was a short blurb to be gotten into much deeper as to why, about how France was going to take over the Eurozone lead from Germany in the years to come, and then I put the book down, took a short nap, and then checked out notifications on Twitter… And came across this… The ECB (European Central Bank) is drafting a plan to do a bond buyback program without Germany, in case the German court declares the bond buying program to be unconstitutional… Wow! I said! This plays right into that idea! Germany being thrown to the curb, while France takes over…. I know that all sounds strange, but these two thoughts play together in the sand nicely…. I’m just saying…

You know, that I’ve always thought that Germany would have been better off without the weak sisters of the Eurozone, their debt would be much lower, the Bundesbank’s participation in the bond buying would have been nil… And they would still have their exports going full throttle all over the world, but…. Helmut Schimdt shoved the “Union” idea down the throats of the German people, and now they’re stuck with the likes of Greece, Italy, and Spain…. I told you all how in the beginning I was opposed to the concept of the euro… I sat in a conference room in London, and they asked to see a show of hands of those that didn’t believe the euro would get off the ground… And I raised my hand…. That was February 1998….

I remember that trip to London so vividly, first it was a direct flight from St. louis to London on TWA, where the hub used to be St. louis! After the conference concluded we did all the touristy things that people do while in London… Sat in a pub…. Had them fish a Budweiser from the back of their fridge for me… Oh well, not a tourist book here, Chuck, get back to work!

So… did you hear the latest from our esteemed Fed Chairman (NOT!), Jerome Powell? He said that the unwinding of the balance sheet bloat that is now, would take little time to accomplish…. So, I’m going to call him on that statement, and take the over if you will… I’m going to say that it’ll take him longer to unwind the balance sheet bloat than 7 years! That’s it Jerome, I’m giving you 7 years, and I still don’t think you’ll have unwound your balance sheet bloat all the way!

OK… this came across Twitter yesterday, check it out: “Russia Proposes Law That Criminalizes Buying Bitcoin With Cash, Offenders Face 7 Years in Jail. People that already hold digital assets will be forced to register them with Russia’s tax agency & EXPLAIN how they acquired them.”

I read that and it occurred to me that this could very well be the beginning of the end for digital currencies, not Gov’t backed digital currencies, but all the other one’s that a guy with a propeller hat created on his laptop… And could have something to do with the scenario that I laid out last week. Gov’t’s can’t have competing digital currencies when they are trying to get people to use their digital currency… . There’s a lot to think about with this note on Twitter, so put your thinking caps on…. And when do you think the U.S. will follow Russia’s lead on this? I’m just asking…

And in this example of the economy rotting away… but not just the companies, but their morals rotting away too… It was discovered that before Hertz filed for bankruptcy last week, that they doled out over $16 Million in bonuses to executives… And if that wasn’t bad enough, they did this after they had laid off thousands of workers… What the hell has happened to ethics, morals, and just overall doing the right thing? Greedy b’s. I’m just so furious that CEO’s have come to this, could this be the beginning of the end of Corporations as we know them? Well, if it is, it’s nobody’s fault but the leadership of the Corporations’…. And that’s all I have to say about that before I go the whole 9 yards and get too riled up!

OK, while we’re on the subject of the U.S. economy, let’s listen in to my fave economist, David Rosenberg, as he posted this on Twitter: “Open Table says 25% of US restaurants won’t survive. That’s 3 million jobs lost permanently; closer to 10 million when you include all sectors affected.”

And then add in a report from my local newspaper, the St. Louis Post Dispatch, that Ameristar casino here in Missouri will not bring back up to 947 furloughed employees, after it reopens this week… I can imagine this happening at casinos all over the country… And finally, at least for today, Mercy Hospital here in St. Louis Co. just announced that they are going to lay off “hundreds of workers around the region”…. Every day there are more reports like the ones I’ve just given you that prove that economy is not going to just bounce back like a superball, and still, the stock market rises, and Gold doesn’t…. A world of opposites for sure!

The U.S. Data Cupboard had some not so worthy data prints for us yesterday, so let’s go through them… First was the Case/ Shiller Home Price Index for March, and it showed an price increase of 4.4%, VS the 4.2% in Feb. Then we had the Chicago Fed Index (manufacturing for the Chicago region) and it fell to -16.74 in April from -4.97 in March… And then finally the stupid Consumer Confidence index which gained this month to 86.6 from 85.7… See? See, what I’m talking about with the people wearing rose colored glasses? Remember Arthur Brown and his song, Fire? Fire… I take you to burn… Fire… I take you to learn… I’ll see you burn…. That’s what’s going through my head right now!

You may be scratching your head and asking, how can home prices rise during a pandemic?  Well, let’s first say that just the last week of March was affected by the pandemic, so let’s toss that last week out, and get to the gist of how home prices can rise at this time… Low mortgage rates, folks…. Think about what the Case/ Shiller people will find when they begin putting together the April report?  They won’t see home prices collapse like other data, because zero interest rates will bring people to buy….  And the idea that lots of people will be buying will drive home prices higher…. See? 

Today’s Data Cupboard doesn’t have much except for the Fed’s Beige book, which contains reports from all the regions, but not too many people even pay attention to it any longer… So, we have that, and… a speech by St. Louis Fed President James Bullard… I wonder if he is being sent out to spread the word that the Fed is not interested in negative rates? I say this because, Bullard has always been known as a dove… But has the “syndicate” gotten to him?

Before I head to the Big Finish today I have one more thought: Well it seems that Missouri’s Lake of the Ozarks, that has more shoreline than the state of California, will be the Litmus Test for the U.S. Did you see the pictures of the young people celebrating the Memorial Day Holiday weekend? They were doing what every young person has done through the years, partied at the Lake of the Ozarks, but only this time, they will be scrutinized closely… I laughed until I cried yesterday, when I heard the St. louis Co. Commissioner say that he would require all that attended the party this past weekend to self quarantine…. I said, “he couldn’t get them to wear masks, or self distance, so what makes him think they’ll listen to him now and self quarantine? Wouldn’t he have…. well let me say it like this… “it far better to keep your mouth shut and let people think you are a fool, than to open it and remove all doubt”

To recap… The currencies inched higher once again vs the dollar, but Gold was sold lower on the day, as a lot of investors are thinking that we have no need for a safe haven… The words of Arthur Brown are still in my head! France is putting together a bond buying program without Germany, in case the German court rules bond buying unconstitutional… That would be a very interesting development for the Eurozone, and Chuck tells you why…. And the employment reports and data continue to print worse and worse with every print! Chuck just doesn’t get it… he sees it, but doesn’t get why investors are reacting the way the are…

For What It’s Worth… I have to thank the GATA folks for brining this article to my attention… It’s about new tools the Gov’t will use to catch price manipulators, and it can be found on Reuters by clicking here: https://www.reuters.com/article/us-usa-doj-trading-insight/traders-beware-u-s-taps-new-tools-to-find-fraud-in-volatile-commodities-market-idUSKBN22X14E?il=0

Or, here’s your snippet: “When the U.S. Department of Justice charged a handful of JP Morgan Chase & Co. traders in 2018 and 2019 with commodities futures manipulation, it wasn’t the first time the government had probed the bank’s metals trading activities.

The Commodity Futures Trading Commission (CFTC) investigated the same business as part of a similar probe of the silver market years earlier, but it was not able to build a case with the data it had at the time, according to U.S. court filings and a person with knowledge of the aborted probe.

Since then, leaps in the agencies’ data analysis capabilities have enabled them to detect and prosecute increasingly sophisticated forms of manipulation in the commodities futures markets which for decades have gone under-surveilled, according to ten officials and industry experts.

The Justice Department fraud division is beefing up with the creation of a sub-unit specializing in combating commodities fraud overseen by Avi Perry, a trial attorney who has prosecuted high-profile cases involving trading powerhouse Tower Research Capital, Merrill Lynch Commodities Inc., and the ongoing JPMorgan probe, according to two sources.

The unit is also hiring a handful of additional trial attorneys, according to the sources and online job postings. A Justice Department spokesman said the agency intends to fill the positions “promptly.”

The unit is part of a broader Justice Department initiative to dramatically expand the scope of market manipulation the agency targets for criminal prosecutions, beyond traditional insider trading and futures manipulation into a range of asset classes, sources told Reuters.

Around 2017, the fraud unit began developing those tools to spot known suspicious trading patterns and learn new ones by scanning a range of exchange data on bids and offers and trades, he said.

That led the agency to charge about more than a dozen current and former traders at banks including Deutsche Bank (DBKGn.DE), UBS UBSAG.UL and Bank of Nova Scotia (BNS.TO) from 2017 to 2019.

Chuck again…. I think they forgot a very big contributor to the price shenanigans that the DOJ is currently investigating… JPMorgan… And as the article points out, it’ll take a lot of educating the public of these markets before anyone heads to jail….

Prices today May 27, 2020: American Style: A$.6645, kiwi .6213, C$.7280, euro 1.1016, sterling 1.2292, Swiss 1.0316, European Style: rand 17.3746, krone 9.8315, SEK 9.5823, forint 316.75, zloty 4.0269,   koruna 24.5774, RUB 71.01, yen 107.85, sing 1.4173, HKD 7.7517, INR 75.25, China 7.1321, peso 22.22, BRL 5.3996, Dollar Index 98.93,  Oil $33.92   10-year .70%, Silver $17.03, Platinum $831.08, Palladium $1,956.89, and Gold… $1,699.75

That’s it for today… I’ll be back tomorrow, no early DR appts for me tomorrow, I do have to go for blood work and get my dressing changed, but that’s later in the morning, so I’m good to go tomorrow! I know how happy that news must make all of you! HAHAHAHAHA! On Monday, the holiday, son Andrew pulled up a chair closer to me than any time before, and said, “I figure if cancer couldn’t  kill you, nothing will”… That made me laugh out loud!  As family, we had practiced distancing, but as time has gone on the distances have narrowed…  I still haven’t held my granddaughter Evie yet, but I’ve had a blast watching her and getting her to make noises with me! Ahhhh, is all I can get from her right now, but that’s good enough! She’s so darn darling!  The McCoys takes us to the finish line today with their song: Hang On Sloopy…  And with that I hope you have a Wonderful Wednesday, and will Be Good To Yourself! 

Chuck Butler

What On Earth Is China Doing Now?

May 26, 2020

* Currencies continue to inch higher VS the dollar

* Price Manipulators keep playing games with Gold… 

Good Day…. And a Tom Terrific Tuesday to you.. I can’t believe that Memorial Day snuck up on me like it did… Just last week I was saying that next week was Memorial Day… But there I was on Friday night, and my neighbor, Paul, said, Happy Memorial Day Weekend to you”… I was shocked that it had come up on me so quickly.. But there it was… Memorial Day… We had a weekend of rain, and sun, rain and sun… But we had a great weekend despite the rain at times! As I told you last Wednesday, Saturday was grandson , Braden’s , birthday, and we had a nice birthday celebration for him, with family only, but still a good day! And yesterday, son Andrew, and daughter, Rachel, were over with Braden and my fave new baby, Evie to swim, and it was a great day had by all! I listened to Sirius XM’s Top 1,000 rock hits this weekend, and nowhere was this song, one of my faves: Marshall Tucker with their song: Can’t You See…

Well, last week going into the long weekend, we had the Weekly Jobless Claims, which have continued to drop each week (why wouldn’t thaey!) But nevertheless they continue to add up , and after last week’s number the total out of work since the Gov’t began shutting down the economy, is now at 36 Million… Again, do the math… 36 million of the 120 Million people that are normally in the work force, and you have an Unemployment Rate of 30%… But you won’t hear or see that large of a number from the BLS, as they can’t bring themselves to tell you the truth… I’m just saying…

The currencies didn’t’ due much on Thursday and Friday last week… The euro ended the week around 109. Which continues to amaze me that with all that’s going on in the Eurozone, with Spain and Italy and their debt, that the euro can maintain a level above parity with the dollar… What this means folks, is that with all that’s wrong in the Eurozone, Traders think that the euro is still a better bet than the dollar.. Now, obviously not like they did when the euro rose to 1.50 VS the dollar, but still Traders believe that things are better in the Eurozone than in the U.S. Now that’s difficult to get may arms around, but it is what it is…

My good friend, and Retirementor, Dennis Miller of www.milleronthemoney.com asked me to present my thoughts on why I believe the currencies are basically, dead men walking… And I, of course, obliged, and that should be out for all to read in a couple of weeks… Not much has changed for me, even though I’m now retired… If someone in the investment writing world, asks me to give them something for their letter, I’m more than happy to obligize. Back in the day when I was the only person around that talked about currencies and metals, there were demands for my time all the day long, but now that they put me out to pasture, there are only a few people that even remember my name as someone that knows what he’s talking about… And that’s Ok with me, as I don’t want to spend my day talking to people that will only print 1/2 of what I say…

The Fed continues to embarrass me with their continued rhetoric about how they have the means to protect the markets… When did  it become the Fed’s responsibility to be the market’s Charles Atlas and not allow people to kick sand in the faces of the stock markets? OK, I know I’m talking to the folks that are at least as old as me on this, but do you remember those ads for Charles Atlas, with a skinny kid getting sand kicked in his face? Come on, think about it, you know you remember those ads…

The only two things the Fed has left in its bag-o-tricks is to go negative with interest rates, and to print more money, and by that I mean open the spigots wide open and print money until the cows come home… I know that we have a deflation problem going on right now folks… but inflation is right around the corner…

Remember when I told you about the supply chain disruptions, and how they would lead to higher prices? My youngest song, Alex, went to the grocery store for us on Saturday, and when he came come his mom was beside herself that he paid, $8 per lb of ground beef! I walked into the room and immediately came to his defense, explaining how I had told everyone that higher prices for meat was on its way, given what I knew about the supply chain disruptions… Ground Beef, Pork, and other meats are rising in price and there’s nothing we can do about it folks…

You know, maybe this is all temporary, and that things will be back to normal soon… And to that, I say, bunk!

Ok… well, the price of oil has rebounded from its negative price that it held for a day earlier this month, and it’s been a slow climb upward, that has the price of Oil trading with a $34 handle this morning. Oil Traders are under the thought that demand will rebound quickly, once the economy is opened up again… Well, the economy may open up again, but I have serious doubts about its ability to return to normal… And so I’m not buying what the oil traders are staying… The price of the Russian ruble has reacted favorably to the rise in the price of Oil, so too has the Norwegian krone, and Mexican peso and  the other Petrol Currencies are in on the thought that demand will increase soon!

But, as far as you and me and our cars and gasoline, I don’t see this current climb in the price of Oil to be something to worry about… I saw a funny cartoon the other day… it had two gentlemen filling up their respective cards at a gas station, and on the one says to the other, “Yes, I’m getting 1 week to a gallon these days!” Of course with the states opening up again, soon there will be more cars on the road, and those days of getting 1 week to a gallon of gas, will be long gone, but not forgotten!

Alrighty then… this is very serious stuff folks, so sit down, grab some coffee, and let’s go!  The relations between China and the U.S. are probably at about the worst state they’ve been in decades… Remember all that back slapping over the Trade Agreement with China? Well, they might as well wrap yesterday’s fish with that Agreement, because, China has used the excuse of the Pandemic to allow them to disregard the Agreement. But if you really look under the hood you would see that China has increased their trade to just about every country on the map!  

And now China is beginning to put the clamps on the Hong Kong demonstrations, much to the chagrin of the U.S.  These two things are small potatoes to what else has the relations on edge right now… The thing I’m talking about is the price of Oil…  As I’ve been telling you  recently, the Saudis have been behind the effort to cut Oil production, and that really rankles the U.S. shale producers, but not as much as the Saudi’s effort to cut prices of Oil enough to drive the shale producers out of business…  

Longtime readers will recall me talking about the shale producers and their level of price they need to make fracking profitable, and as that price drops the shale producers close the wells and take down the rigs, and go home… That drops the production of Oil, and soon the price begins to rise again, and the shale producers get their hopes up again, and round and round we go, where it stops nobody knows… 

And now that China has the world’s attention, and they will present the Piece of Resistance….  They will begin to take a thick slice of their currency’s value…  Cheapen their currency, and that should tick off the U.S. leaders to the max!  And help China continue to flood the world with their exports…. 

Man was ever treated to a great discussion between Grant Williams and Neil Howe, of the 4th Turning fame….  I was captivated by what Neil Howe had to say….  And, I just completed my reading of the Kurt Vonnegut book, Cat’s Cradle…  This is a very compelling book that tells the tale of “ice Nine”…  James Rickards uses the term “ice nine” to describe what debt is going to do in the world…  Now, I’m onto a book titled: Dis United Nations….  I wonder what ideas I’ll get from this book? 

The U.S. Data Cupboard just keeps printing reports that are worse than the reports from the previous day…  This week’s reports will include Durable Goods and Capital Goods Orders for April… This won’t be pretty folks, so you may want to turn your head or hide your eyes when these reports print on Thursday this week. The reports this week are pretty lame until we get to Thursday. Today for instance, we’ll see the color of the Case/ Shiller Home Price Index for March… yes, that’s right for March! Like who cares about what happened in March? Everything is about April and onward now, in my book!  

We’ll also see the current (May) print of Consumer Confidence, which will probably surprise you and reflect strong confidence. I’ll shake my head in disgust at this report, as usual, and then go on with what else I was doing, because I just don’t get this report… 

Well, June will bring about Hurricane season here in the U.S.  and that’s pretty much what I see with the U.S. economy and stock market right now…. Think about this… the first wave of the hurricane hits us in March and early April and devastates us, then the eye of the storm, the calm if you will, comes up on us and people begin to come out of their houses , much like the munchkins of Oz, fame did… But the backside of the hurricane is coming folks… I suspect that it will arrive in June… So, hold onto your hats because the ill winds that the backside of the storm will bring us will be quite strong…

This description of what’s going on and what’s coming is much like what happened during the Great Depression…  The devastation, the calm, and then more devastation…  I’m a firm believer of the idea that history repeats itself, and although the events might change a bit, they are surely at the scene of the crime!

To recap…  The Currencies continue to inch upward VS the dollar. The price manipulators keep playing their games with Gold. The shiny metal gains one day, and loses the next day… This will last until it doesn’t and Gold will then move higher!  China is getting the U.S. mad once again but what’s a mother to do with a bratty child?  The price of Oil is rebounding with every passing day, what gives with that?  And the Data Cupboard is left wanting most of this week…. 

For What It’s Worth….  So, there I was on Saturday reading email and I see the Saturday letter from Ed Steer, and I jump at the opportunity to read it, as always. It can be found here: www.edsteergoldsilver.com, and in this letter I found this little nugget from Egon Von Greyerz, someone you should get to know from his writings, for sure. But in this letter he’s talking about how everything is fake, and it can be found here: https://goldswitzerland.com/the-global-forest-fire-is-here/

Or, here’s your snippet: “It drives you absolutely mad to see a whole world living a lie. How can anyone believe that the fake world the Fed and their fellow central bankers have created has anything to do with reality.

We have fake money, fake markets, fake companies, fake banks, fake interest rates, fake income, fake pensions, fake social security, fake wealth, fake bail outs, fake buildings, fake holidays, fake cars etc which create false lives for most of us especially in the West.

So you might ask how can it all be fake when we can touch it, use it, or experience it. For people who don’t understand that it is all fake, let me say that we will all soon realize how fake it was. Because many of these things that we perceived as real were all an illusion.

An illusion is defined as “an act of deception” or “something that produces a false or misleading idea of reality. And that is exactly what we have been exposed to. The world had been deceived but we have all believed that it was real.

There is a perception in the world that things will continue as they are and that the Deep State is going to control us all in a totalitarian world. What few realize is that the Deep State or Powers That Be are going to lose control totally. They are totally dependent on the world in which they can control everything through debt and the fake monetary system they have created. But let me make it clear that this fake system is about to implode.”

Chuck again… A very good description of what’s going on and has been going on for some time now….  When the fake system implodes, that’s when Chuck’s vision for what’s going to happen begins to take place… I’m just saying…

Prices today 5/ 26 /20: American Style: A$ .6623, kiwi 6185, C$ .7207, euro 1.0956, sterling 1.2311, Swiss $1.0331,  European Style: rand 17.4148, krone 9.9491, SEK 9.6255, forint 319.03, zloty 4.0682, koruna 24.7215, RUB 71.56, yen 107.65, sing 1.4189, HKD 7.7521, INR 75.19, China 7.1357, peso 22.14, BRL 5.4954, Dollar Index 99.25,   Oil $34.04,   10-year .69%,   Silver $15.84, Platinum $842.04, Palladium $1,954.23, and Gold… $1,725.60

That’s it for today… Did you have a nice holiday weekend? The unofficial start of summer…  The wound center last week was interesting in that the doctor didn’t think I needed another skin graft, that the small opening was closing on its own. I told him I don’t think, that given the fact that I take chemo each day, that makes the healing process take longer, that it will heal on its own, but we’ll try it his way for a couple of weeks, and then I’ll demand another skin graft…  My grandson Braden keeps asking me why I can’t get in the pool… So that’s got to stop! Well, baseball isn’t any closer to an agreement to play this year… Tsk , Tsk…  If the players really think that the owners are asking them to take risks to play, then they should just say no, and be done with it, but instead we get all this saber rattling, which gets on my nerves!  Blood Sweat & Tears takes us to the finish line today with their song: Spinning Wheel…   I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!  

Chuck Butler

 

The BOE To Entertain Disucssions On Negative Rates!

May 20, 2020

* Currencies defy the odds and rally VS the dollar… 

* And after an engineered takedown, Gold fights back! 

Good Day… And a Wonderful Wednesday to you! Well… in a brief poll, it looks like: Thoughts From The Butler Patio is the winning new name for my letter… And I want to apologize for a pricing error in yesterday’s letter…. My darn fat fingers struck again, and had the Mexican peso with a 13 handle instead of a 23 handle… I’m very excited to get to this afternoon, when one of my fave economists, David Rosenberg, will be Grant Williams’ guest for an hour long discussion. David or Rosey, as he’s known to be called, is a lot like me, in that he doesn’t pull punches, and can’t understand why people can’t see what he’s seing…. It was the David Freese World Series Game 6 of 2011 on ESPN last night… It was still nerve wracking to me and I knew my beloved Cardinals had won the game! The Guess Who greets me this morning with their song: No Time…. I’ve long said that the singer for the Guess Who, Burton Cummings had golden pipes….

Well, not much in the way of movement in the currencies yesterday, Gold tried to win back friends and influence enemies by gaining $12 on the day, to close at $1,744…. That’s a 7 year high for Gold, and I don’t believe in my heart of hearts that Gold is stopping here…. Those brief engineered takedowns by the price manipulators certainly takes some of the starch out of Gold’s collar, for a day, but by early next morning, Gold is taking steps to regain the lost ground from the previous day. What I’m saying here is that their engineered takedowns, don’t have any lasting power any longer…. Could this be nearing the end for the price manipulators? Man I hope so, these guys gave given me rashes that won’t go away! HA!

Fed Chairman Powell spoke again yesterday, and this time to members of Congress, who were in no mood to hear any “fed speak”… he was expected to say, “All of us are affected, but the burdens are falling most heavily on those least able to carry them,” And he would have a recent Fed study that indicated that almost 40% of the households making less than $40,000 a year lost a job during the first month of the pandemic. And just like all the millennials that can’t ever seem to think they had anything to do with what went wrong, and are always looking to blame someone…. Powell, didn’t exactly blame Congress, but was quite adamant about the fact that they need to do more to help the economy…

What he should have said if he had the intestinal fortitude was, “ We tried, at the Fed, but all we seemed to do was run up our balance sheet, and keep the Casino Banks in business longer so they can continue to ratchet up the derivatives and sketchy lending practices… Now the general public needs help, and that’s not our bag, baby”

I’m really at a loss as to what to follow that up with…. I smacked around the Fed Chairman, and Congress in one fell swoop! Yes, it’s only words, that they’ll never see or read, but it made me feel better saying it out loud! HA!

Man, did the housing starts in April take a hit or what? Yikes! On an annualize basis, the Housing Starts for April fell to 891,000 from 1.276 Million in March! I guess construction workers find it difficult to stay 6 feet apart! Hey! If we don’t need all those new houses, why build them? I’m just saying…

My, my, my…. What have we here? Venezuela’s central bank has made a legal claim to try to force the Bank of England to hand over E930 million ($1.02 billion) of gold so President Nicolas Maduro’s government can fund its coronavirus response, according to the document submitted in a London court. I got that from the GATA folks… I find this interesting in that, there are a ton of rumors and innuendo out there right now that the COMEX and the LBMA don’t have enough Gold on hand to make these kinds of transfers…. I think that was quite evident when Venezuela first made this request and were turned down… Remember when Germany wanted their Gold back from the U.S. and they were told it would take 7 years for that to happen? It’s all a mirage folks, that these clearing houses for bullion have what they say they have… At least that’s how I see it given these two examples….

So, does that mean that the U.S. doesn’t have more than 8,000 tons of Gold? Well, if they do, they sure are going about things the wrong way…. And if they don’t… Well… I’m sure they’ve leased it out, and they hold a piece of paper saying just that, but…. Just  like beauty is only skin-deep, holding paper just isn’t as good as holding the actual Gold…

Another one bites the dust…. Another one bites the dust… And another one does, and another one does…. (Queen)…. Well, the Bank of England (BOE) announced yesterday that they too will entertain the idea of implementing negative rates…. There used to be a thing that I watched several years ago, and it went like this: Just about everything that happened in the U.K.., would show up here in the U.S. about 6 months later…. So… when, because it’s no longer a question of if, the BOE cuts rates into negative territory, I’m going to go out on a limb and say that within 6 months, we too shall see negative rates in the U.S. So… now go back to my playbook from Monday, and see where we are in the playbook. 

And yesterday it was announced that Germany and France had agreed on a Stimulus package for the Eurozone…. Basically, here, Germany has taken on the biggest share of this package, and it’s Germany that is attempting to keep the Eurozone afloat, (read the Club Med countries of Spain, Italy, and Greece)  Just another example of good money being spent on bad things….  I’ve long thought that the Eurozone would be much healthier, economy wise, if they cut the reins that tie the Club Med countries to the Eurozone charter…  Or, even better…. if Germany would just say, forget you guys, we tried, and tried, but you just don’t get it, and so we’re leaving!  But if raindrops were gumdrops…. 

And I mean to mention yesterday, but forgot, as usual… To point out that the Norwegian krone has dropped below 10 for the first time in a month of Sundays…  Remember the krone is a European price currency so as the number that reflects its exchange rate, goes down, that represents gains VS the dollar as it takes less currency to make a dollar.  Man if I had a shiny quarter for every time I’ve explained that through the last 28 years…. 

In keeping with the thought from Monday, the U.S. Data Cupboard just doesn’t have much in the way of reports this week…. We already talked about the Housing Starts collapse above, so all that’s left for today is to bring to everyone’s attention that we’ll see the color of the Fed’s Meeting Minutes from their last meeting.  I wonder if they will reveal any discussions of the need to move rates into negative territory?  I’ll be looking for any signs of that… for sure! 

To recap….  Well, since Monday when I announced that I thought the currencies were dead men walking, they have rallied…. The Dollar Index, on Monday morning was 100.34, and this morning its 99.31…  Not the largest move we’ve seen, but, a move nonetheless.  Gold got back on the rally tracks after being taken down by the price manipulators on Monday, and Chuck thinks this is quite significant…  The BOE is going to entertain discussions on negative rates…. And Chuck thinks that after the BOE goes negative, it will be within 6 months before the Fed goes negative… 

For What It’s Worth… I think after what I said on Monday, that today’s FWIW article was well timed! In times of darkness because of unknowns, it’s always good to refer to publishing guru, Bill Bonner. In his recent letter, he talked about losing our memory of what it took to get us to be the best country, and more and it can be found here: https://www.rogueeconomics.com/bill-bonner-diary/the-u-s-is-in-a-generational-economic-cycle/

Or, here’s your snippet: ““No pure-paper money has ever survived a complete interest rate cycle.”

We wrote that about 20 years ago. Now, we will see it put to the test.
In the Panic of 1857, the yield on the U.S. 10-Year Treasury Note rose to 6.6%. It took a lifetime for it to reach the next top, in 1920. Then, another 61 years passed before the next top came along.

In other words, these are generational trends. One generation learns. The next forgets. In a week, we can forget where we left the car keys. A couple weeks later, and we’ve forgotten where we left the car.

Forty years on, and we can scarcely remember – or even imagine – the 15% mortgage rates of 1980. And what has happened to the “bond vigilantes” who used to sell U.S. Treasury bonds at the first sign of runaway deficits? Surely, they are in wheelchairs, unable to recall their own names, much less how they lost their fortunes betting against the bond bubble.

And if the pattern holds, in a few years, we’ll regret not having locked in today’s low mortgage rates… if we can remember them!

After this downdraft has flattened the economy, interest rates (and consumer price inflation) should begin to rise. In another 20 years or so, rates should be reaching for another generational top. Perhaps you’ll have to pay 15% for a mortgage. Or maybe it will be more like 50%.

Or mortgage lenders could be almost out of business, as they already are in Argentina. If you want to buy a house there, you’ll have to pay cash.
Relearning the Lesson
Yes, it’s back to school. Now, we learn – again – why, for 180 years, U.S. dollars were linked to gold, rather than simply to promises from the U.S. government.

In a nutshell, it’s because the generation of 1791 (when the U.S. dollar first appeared) knew something the generation of 2020 has forgotten: Power corrupts. And the power to create “money” is so irresistible that no race, no nation, no genius, and no government official has ever resisted it for long.

Sooner or later, a “necessity” arrives… Usually, it is a “war”… or the threat of insurrection. (Rudolf von Havenstein, in charge of German money-printing in the Weimar Republic, said he had to do it to head off a Bolshevik Revolution. Instead, he got the Nazis!)

And now, it’s Rudolf von Powell who’s cranking hard on the printing press. In April, the federal government ran a deficit of more than $730 billion. That’s $1 billion every hour, Saturdays and Sundays, too.”

Chuck again… not much I can add to whatever Bill says whenever he says it, that’s for sure!   Back in the day, of the wild west, Bill used to have conversations with the Great Mogambo Guru… Now that was interesting reading for sure!  

Prices today 5/20/20 American Style: A$.6575, kiwi .6133, C$ .7200, euro 1.0950, sterling 1.2254, Swiss $1.0353, European Style: rand 18.0165, krone 9.9504, SEK 9.6350, forint 319.66, zloty 4.1470, koruna 25.0435, RUB 72.47, yen 107.58,  sing 1.4150,  HKD 7.7500,  INR 75.15,  China 7.1031,  peso 23.41, BRL 5.7256, Dollar Index 99.31,  Oil $32.56,  10-year .69%, Silver $17.36, Platinum $836.86, Palladium $2,042.00, and Gold… $1,746.57

That’s it for today and this week… Yes, I forgot to mention with all the goings on this week that I have a wound center appt. tomorrow morning, the last skin graft worked for the majority of the wound, but left one small opening that will need another  graft, and hopefully this time it’s closed for good, and I don’t have to mess with that any longer!  Saturday, this week, will be grandson Braden’s birthday…  He will turn 9 on Saturday…. Usually, we have a pool party here for his birthday, but not this year… UGH!  So Happy Birthday, buddy!  And then next week we’ll be heading into Memorial Day Weekend, the unofficial start of summer, and we can’t get out of the 60’s temp wise here…. Something is amiss here…. As 60’s with no sun is not warm! And as I’ve always told you dear readers, I need to go where it’s warm!  Styx takes us to the finish line today with their song: Too Much Time On My Hands, which is pretty much the anthem for people stuck at home these days….  I hope you have a Wonderful Wednesday, and rest of the week, and will Be Good To Yourself! 

Chuck Butler

 

 

How Does Thoughts From The Butler Patio, Sound?

May 19, 2020

* Currencies and stocks rally on antibody news… 

* Gold gets taken down after reaching $1,775…. 

Good day… And a Tom Terrific Tuesday to you…. Well, I sure did stir up a hornet’s nest with my letter yesterday… If today were April 2nd, I could have said today, April Fool’s! But it’s not April 2nd, and there is no April’s Food prank… I said what I said about the future of currencies as we know them today, and I’m not taking it back! Some of you were kind with your words, and some of you were having me fitted for a white coat! That’s ok… I’m sure the first guy to say that the earth was round, got those same kind of comments! And it’s not that I wanted to be “the first” to tell you about what debt is going to do to the currencies, I just wanted you to hear that from me! And with no one that I know of in the writing business calling for an end to the currencies, I don’t have to worry about being first! OK… The Allman Brothers greet me this morning with their first song played on the radio: Ramblin’ Man…. I remember my first Allman Brothers album, Eat a Peach, and it had on it my fave song by them…. Melissa…. There were so many great songs on that album, but Melissa is my fave!

OK, what a day, what a day…. Gold was up more than $20 in the early trading, but by the time the markets heard the news, “There could be a huge breakthrough on finding a possible treatment to help fight the coronavirus. An antibody cocktail is being tested that they have high hopes for…. The market reacted as if we had found a cure, like the small pox cure, and stocks rallied over 900 points, the currencies around the world rallied, and Gold got sold like funnel cakes at a state fair, dropping $10 on the day, from its previous close… However, at one point during the morning, Gold had climbed to $1,775, only to close at $1,732….   Tsk, tsk, tsk… 

Look folks, was simply another engineered takedown of Gold, that the price manipulators saw as opportunity with the drug news, to take down Gold…. What should we do with these price manipulators? I say, we hang ‘em, I say we shoot ‘em, then we hang ‘em, and in my best PeeWee Herman voice, I say, let ‘em go! Yes, I said let them go, because one of these days they are going to feel like that got their hand slammed in desk drawer, when all the losses mount on them having to close out their shorts…. But until then… buy your Gold on the dips…. That’s my sage advice to you…. Because one of these days, people are doing to see that they need Gold, and they won’t be able to get it, and that will cause Gold to gap up big time, on a daily basis!

So, tell everybody you know…. You’ve got some rock-n-roll soul… No wait! Tell everybody you know to go buy some Gold or Silver….

And regarding the antibody cocktail…. It still has quite a few rounds of testing to get through, so why wouldn’t prudent people wait until the test is through or at least near through? Everybody wants to be the first one on your block to buy, so at the next cocktail party, they can proudly say…. “I bought early, and got my rear end handed to me when the second wave of stock selling came”….

I listened in to another Grant Williams Hummmminars yesterday, this one with investment guru, Jesse Felders…. They talked a lot about what it’s going to take to bring people back to reality of what’s going on here in the U.S….. These broadcasts are free to listen to…. I would simply Google Grant Williams TTMYGH….

The economic data last week was just plain awful, but the stock jockeys didn’t care, and haven’t cared about fundamentals for a very long time, because why? Oh, I know you all know the answer to that, come on sing along with me… Because the Fed’s got your back! My Fed Head’s back and you’re going to be sorry, Hey now, Hey now, my Fed Head’s back!

Trying to stay on course here this morning, but Shoot Rudy… I’m a happy camper, as the tumor in my mouth has finally shrunk and is gone for all to see, that is if you want to look into my mouth! YUCK! I still have to take my chemo drugs, because, if we just go back 2 months ago, when I went off my old chemo for a few weeks to get it out of my system, before starting the new one, the tumor grew like weed! So… I get all the joys of Chemo, wrapped up in 4 different pills each night…. Lucky me!

Well, some restaurants re-opened yesterday in both the city and county here in St. Louis…. The film taken of the stores, with their “Open” signs, wasn’t encouraging…. I didn’t see people rushing to get in the doors…. I’m just saying…

It’s going to be a long difficult haul for businesses…. Because if your business plan is to have 3o tables turned over 3 times each night, with every stool at the bar taken, and you now have to spread people out at your bar, and only get to use 15 tables, how long are you going to remain in business? But hey! No worries, just go down to your local bank and get a loan… What? You already have a loan? Well then get another one, the bank won’t care, everybody’s borrowing at these low rates, right? Ahem… not so fast there Tim! Most businesses are borrowed up to their eyeballs now… I can’t see a bank giving them more money, and if the bank officer does give them more money, He’ll be hung out to dry when the business can’t make their payments!

But if enough of them go out of business and all complain to their representatives that this was a result of the COVID-19 virus, then they might see more “stimulus from the Gov’t” to remain open…. I’m telling you folks, this may all be make believe but it’s going to be reality very soon for a lot of these businesses, and we as a country and taxpayers, will buck up once more, instead of just letting the business file Chapter 11, and proceed with going out of business…

I’m not cold hearted, but…. Before 1971, and the whole credit system began, do you think businesses got Gov’t handouts when they couldn’t pay their bills? I don’t think so! Another business would just move in, and attempt to make a go of it… I think that way of doing business with businesses was far better, for the overall economy, than the way we do it now…. I’m just saying!

The U.S. Data Cupboard is a non-event today, with April Housing Starts, as if we don’t know that they are going to take a hit! Jerome Powell, will testify to the banking commission today…. I wonder which representative is going to ask him to explain what he meant when he said, “There’s more I can do to combat the recession”…. This could get interesting, very…. Or, the representatives can all bow in his honor and throw softball questions at him, like they usually do! I have the Powell 60 minutes snippet for you today in the FWIW section…

I had to chuckle a bit this morning. I saw a headline story on Booomberg.com that, well, I’ll just print it and see what you think… “Buy Aussie on U.S. recovery”…  Really? And when will that recovery be taking place? I just shake my head in disbelief that people in this country still believe this economic recession/ depression we’re in is going to be short-lived….  I say depression because the other day I saw a film clip on a local news program that showed a line of people around the local Food Bank building…  Reminded me of the soup kitchens, and the lines from the Great Depression… 

OK… one more thing… Youngest son Alex is back home for awhile… It would be nice to have him here to watch baseball games with, oh, that’s right, there are no baseball games! UGH! He starts his new job on June 1…. It’s funny, to hear him talk about all the things he’s going to buy with his first paycheck… I told him he had better hold off on the expenditures, as the Gov’t hadn’t taken out their “fair share” yet! HA! Thanks to everyone who sent along congratulation notes for Alex,  to me last week, I told him about them…

To recap…. Gold was up in the early morning, and got taken down as the day went on but especially after there was news of a possible antibody cocktail for the COVID-19 virus… Stocks soared closing up 900 points on the day…. And this all has Chuck scratching his bald head once again…. The Currencies and stock jockeys had the best days yesterday… Now, I’m really scratching! 

For What It’s Worth…. Ok. Did you see Fed Chairman, Jerome Powell on 60 Minutes Sunday night? I didn’t… I had forgotten that he was going to be on that show…. But the folks at MarketWatch.com saw to it that all that missed it didn’t miss anything, and so here is the link to that article: https://www.marketwatch.com/story/feds-powell-tells-60-minutes-hes-not-out-of-ammunition-to-fight-the-recession-2020-05-17?mod=the-fed

Or, here’s your snippet: “The chairman of the Federal Reserve on Sunday said the central bank has not exhausted its power to help the economy get through the coronavirus pandemic.

“We’re not out of ammunition by a long shot,” Powell said in a transcript of his interview aired on the CBS news magazine “60 Minutes.”

The Fed chairman said there was “no limit” to what the Fed can do to lend money to financial markets.

“So there’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to,” Powell said.
Powell said the Fed could enlarge existing lending programs or start new ones. The central bank’s balance sheet is already approaching $7 trillion.

The central bank could try to lower interest rates to make commitments about the future path of policy, a strategy called “forward guidance,” or could also “change our asset-purchase strategy,” Powell said. That’s a reference to the hundreds of billions of dollars of Treasurys and mortgage-backed securities the Fed has been buying.”

Chuck again…. I highlighted his statement about “the Fed could try to lower interest rates”… See? What did I tell you yesterday about Negative rates?

Also… notice that he said there was no limit to what the Fed can do to lend money to financial markets? When is he going to get it into his head that by giving money to financial markets doesn’t stir the economy? Probably never…. 

Prices today… American Style: A$.6535, kiwi .6080, C$ .7177, euro 1.0947, sterling 1.2236, Swiss $1.0294, European Style: rand 18.2315, krone 9.9728, SEK 9.6555, forint 320.07, zloty 4.1578, koruna 25.1086, RUB 72.94, yen 107.80, sing 1.4173, HKD 7.7504,  INR 75.13,     China 7.1091, peso 23.63, BRL 5.7618, Dollar Index 99.41, Oil $32.39,   10-year .73%, Silver $17.07, Platinum $814.71, Palladium $2,027.06, and Gold… $1,733.84

That’s if for today…. I think I’m going to pull an old name that I used to use for my Dow Theory Letters, and call the letter: Thoughts From The Butler Patio… what do you think about that? I hate to put the “Pfennig” to bed, after 28 years, but it’s time…. Yes, 1992, was when I began writing a short note to the salespeople of the happenings overseas, and they would fax them out to their clients…. I have a box that I brought home from Mark Twain Bank, that contains a lot of those hand written notes, maybe one day I’ll get them out and read them…. But probably not! Besides, knowing my better half, she probably already threw the box out! I went out to the Butler patio the other day, when it wasn’t raining, and down at my feet was about a foot and half long black snake, slithering along side me…. I simply used my cane as a stick and got him to wrap around it and pushed him the flower garden next to the pool…. I was surprised he wasn’t already in the pool! Now that’s one way to get “everybody out of the pool!” HA! James Taylor takes us to the finish line today with his song: Don’t Let Me Be Lonely Tonight….  So, go out and make this a Tom Terrific Tuesday, and remember to Be Good To Yourself! 

Chuck Butler

 

Debt Accumulation Is The Dagger For Currencies…

May 18, 2020

* Currencies lose ground last week… 

* Gold & Silver are gapping higher… 

* And Chuck changes his mind…. 

Good Day… And a Marvelous Monday to you! It was a long weekend for me, but then weekends are meaningless to me these days, as all days seem the same to me… At least before COVID-19, I could look forward to Fridays, when I would meet my friends at my local watering hole… We’ve tried to hold happy hour on Zoom, but it’s just not the same… So…. How was your weekend? HA! We’ve had nothing but rainy weather in the past couple of days, and hopefully this run of rainy weather will end soon!  The Rolling Stones greet me this morning with their song: Can’t You Hear Me Knocking…

Really quick here… the currencies lost ground on Friday, even in the face of worsening data here in the U.S.  But Gold and Silver are firmly on the rally tracks and not only had good days late last week, but Gold is up another $19 in the early trading today… And Silver has gapped higher and trades with a $17 handle this morning…    And, the price of Oil has jumped higher and trades with a $31 handle this morning. The Shale Producers are opening up wells again… 

Well…. This is going to be tough for me to spit out this morning, so please do not have a knee-jerk reaction, and fire me off an email. Please read what I’m saying and see where I’m going here… That’s all I ask…

Global debt is at levels that it should never have reached in a million years, but it’s there, and there’s no paying back, in the traditional sense of paying off a debt…. So, how are the countries around the world (except Russia, who’s debt IS manageable) going to deal with this ever-growing debt? I’ve thought long and hard about this folks, and in my heart of hearts, I know what the answer is, and I’ve fought saying it, for so long, because, well, I just didn’t want to believe it could happen…. And it’s not just because of the virus that this is the way it is… At the end of 2019, Global Debt stood at $255 Trillion… Once the dust settles on all the debt accumulated during the economic shutdowns, the Global debt will be greater than $300 Trillion… With no ability to pay it down….

A month or so, I talked about the IMF’s SDR’s (special Drawing Rights), and how they used by Central Banks, and not suitable for individual use…. I almost went down the rabbit hole then that I’m ready to go down now….

I truly feel that with all this debt, and Central Banks going nuts with one alphabet plan after another, that they’ve all backed themselves into a corner… 

To me, it seems, the only way out of this debt mess is for countries, including the U.S. to take haircuts, in other words, default on some of their debt…. What this will do, is have every trader in the book, out to sell the currency of a country taking the haircut, and buy the currency of a country that hasn’t announced they would be taking a haircut. But soon, they will all have announced it, and at that point is when I believe currencies, as we know them today, will no longer be…

I thought I would be long gone by the time this all unfolded, for it’s been in the cards for years. I never would have thought that during my time on earth, that would see these kinds of debt levels… I always thought that somewhere, someone with their head screwed on right, would figure out that we kept accumulating debt, that a default had to come eventually… I always figured, Japan was first, then Greece, then the U.S. But instead, what I view happening is there would be a meeting of finance ministers where the coordinated announcement was made….

Things have gotten so bad overseas that they’re selling their Treasury bond reserves. Here was a news headline from late last week: “Foreign holdings of Treasuries slumped in March by the most this century, falling $256.6 billion to $6.81 trillion. This likely stemmed from nations liquidating US debt positions to defend their currencies amid huge capital outflows.”

That just means the Fed will have to up the ante on the amount of Treasuries they buy, since foreigners aren’t buying them like they used to. The Fed’s Balance Sheet will begin to show signs of stress, and the whole shootin’ match (the financial system) would feel the weight of the world on it, and that would be just another reason to call off the ballgame….

And the next downward move in stocks, which is coming,  the Central Banks will run to the rescue, and those Countries that already don’t have negative rates, will be reaching in their quivers, and finding no arrows, and will then have to go negative with interest rates…. I laughed until I cried last week, when Jerome Powell, the Fed Chairman, denied that negative rates are being discussed…. Or that he thinks there will be a need for them…. To me, that’s akin to when the General Manager or Owner gives a vote a confidence to the manager…. We all know what comes next, right?

The going negative with interest rates is going to set off a chain of events that will change the world and the global financial systems…. Here’s the playbook on how I believe with will all play out…. The Fed goes negative with rates, and banks begin to charge account holders for holding their balances. Being the hotblooded Americans that we are, we won’t sit still while the bank charges us for holding our money, and soon there will be runs on banks for withdrawal of cash holdings…

Well, seeing this, the Gov’t won’t stand for the banks being run on for cash withdrawals, and a plan that’s probably already in the works. And that plan will be to pass a bill that prohibits cash in the hands of individuals…

And the next day, when you check your bank account, the dollars will have been replace with digits…. Or a Gov’t crypto-currency, but dollars will cease to exist…. And other Countries will follow suit…. Thus eliminating the currencies of the world that we know of…

The IMF will increase distribution of their SDR’s, and banks around the world will revert to using SDR’s to settle trade balances…

You see, I’ve through this through, and I see no other alternative…. The good news in all of this is that Gold will be soaring and probably gapping higher each day by $100 or so….

So, with no currencies in the world to talk about…. An end of the Pfennig is near… But…. At the request of the Aden Sisters, I will continue to write about economies, mainly the U.S., Gold, The Fed and other things that come to my mind, and the letter will be renamed…. And it might not be done ever day…. But that’s all secondary, folks…. The main thing is that your last civil right will have been taken from you in the blink of an eye, and now banks can charge you for everything under the sun and moon….

I know that for over 25 years, I’ve told people that the way to diversify their investment portfolios is with currencies and metals… But the situation has changed, and I will also have to change…. But Gold will still be viable, and like I said will most likely be gapping higher each and every day, and the price manipulators will have been sent home with HUGE losses, and never to be seen again!

What should you do if you own currencies? Well, nothing…. You could sell them and buy Gold/ Silver, but to do nothing would be like when you owned Spanish Pesetas, or German D-Marks, etc. They were all converted to a different form at a set conversion price… Your current euro balance will be converted to whatever replaces the dollar, and that’s that….

12 years ago, a fellow by the name of Aaron Stevenson, interviewed to work in St. Louis on the EverBank World Markets Desk, that I was the President of, He asked me the about the future of the currency business, and I told him, “ Eventually, Aaron, the currencies will all go away, but I hope that happens years from now when I’m retired”….  Well, I’m retired now….  I’m just saying… 

And with all this debt accumulation how’s it going to get paid? More money printing all over the world, thus debasing each and every currency that has debt as its partner. Central Banks, like the Fed are going to keep printing currency to pay for Sovereign bonds (treasuries in the case of the Fed) and soon, with all this debt accumulation, no one will be willing to buy our debt, or Germany’s debt, or Japan’s debt, you see where I’m going with this? All that currency printing, and still the only entity to step forward to buy bonds will be the Central Bank…. And when each Central Bank’s balance sheet begins to overstay its welcome, that’s when things will change folks….

So, I’m just not in the mood to keep talking about diversification with currencies… There’s only one or two countries that makes sense any longer, rubles and Singapore dollars. And their markets are not big enough to weather this storm that all these other countries have stirred up… Gold & Silver will still be great diversification tools…. Silver has industrial uses (solar panels, wiring etc. ) and Gold has intrinsic values. Both are a store of wealth, and should be held as such….

Just keep in mind this quote from Winston Churchill… “When the facts change, I change my mind. What do you do?”   Yes, the countries have done this to their currencies, and so I’m changing horses in the middle of the stream… I don’t see a future for the currencies, including the dollar… 

Well…. I’ll head to the Big Finish today, as today’s letter was like no other before, and I want to return to some normalcy….

OK, here’s a rundown on the data from late last week…. Leading off, on Thursday, for the week ending 5/9, another 3.46 Million former workers signed up for Unemployment Benefits, which brings the total for the last 8 weeks to 33 Million… The U.S. normally employs 120 Million people… That’s an Unemployment Rate of 27.5% folks… And then on Friday, we saw April Retail Sales print -16/4%. And without auto sales, Retail Sales were negative -17.25%… The print for April was worse than the experts had forecast which was -12.5%… Industrial Production for April was negative -11.2% Vs the -4.5% in March, and Capacity Utilization fell from 73.2 in March to 64.9% in April…. And to top off all this negative data, the preliminary May Consumer Sentiment rose, yes, I said rose, to 73.7 from 71.8 in April…. Don’t ask me how the folks that were polled could feel more confident, unless, they’ve been glued to MSNBC where they keep telling people that this is not going to last, and it will be over with soon…. (I don’t watch MSNBC, so I’m just imagining what they are saying… )

So, not a good week for data last week… And, there’s really not much in the data Cupboard to look at this week, except for Leading Indicators which will print on Friday, and of course the Weekly Jobless Claims on Thursday…

For What It’s Worth…. You really didn’t think I would skip out on this part of the letter did you? HA! Well, my local paper, has gone to the place where newspapers go to die… They basically reprint API articles, and have a few writers on hand… One of those few remaining writers, is the business writer, David Nicklaus, and he wrote a very good article late last week, regarding how the pandemic is basically causing struggling businesses to call it quits…. Well, this article can be found here in its entirely by clicking here: https://www.stltoday.com/business/columns/david-nicklaus/nicklaus-retail-apocalypse-coronavirus-is-pushing-struggling-stores-over-the-edge/article_f243ca05-574f-5d79-bafe-bd5968abd1ba.html#utm_source=stltoday.com&utm_campaign=%2Fnewsletter-templates%2Fbusiness-briefing&utm_medium=PostUp&utm_content=a12874506a3b5805dded6c95af30d7173df7c77a

Or, here’s your snippet: “Even as retailers begin reopening in much of the country, a dark cloud hangs over much of the industry.

Simply put, the U.S. already had far more stores than it needed, and the coronavirus pandemic accelerated a shift toward online shopping. Rather than don a facemask to go to the mall, many consumers will open a web browser instead.

Add in the heavy debt load carried by many national chains, often the result of buyouts by private equity firms, and you have a recipe for a retail apocalypse.

“When we come out of this you are going to have fewer players, fewer square feet of retail space, and the strong are going to gain market share from the weak players,” says Brian Yarbrough, a retail analyst at Edward Jones.

Three prominent retailers — J. Crew, Neiman Marcus and Stage Stores, owner of Gordman’s — have filed for bankruptcy this month and the venerable J.C. Penney reportedly may join them soon.”

Chuck again… A retail apocalypse is what Mr. Nicklaus is calling this, and I couldn’t agree with him more!

Prices today: American Style: A$.6455, kiwi .5965, C$ .7111, euro 1.0811, sterling 1.2125, Swiss $1.0286,  And  European Style: rand 18.4606, krone 10.1563, SEK 9.8329, forint 326.91, zloty 4.2191, koruna 25.5361, RUB 73.52, yen 107.28, sing 1.4260, HKD 7.7514, INR 75.44,   China 7.1010,    peso 13.76, BRL 5.8553, Dollar Index 100.34,  Oil $31.87,   10-year .65%, Silver $17.36, Platinum $825.12, Palladium $1,963.02, and Gold… $1,762.99

That’s it for today…  I know this hit you like a ton of bricks, so I’ll just end this for today, and give you time to reread it  Things are going to change folks… And a wise man that once worked for told me many years ago, Chuck, in change lies opportunity…   I guess we’ll have to see where that opportunity exists when it comes, eh?   REO Speedwagon takes us to the finish line today with their song: Golden Country….  Golden country your face is so red, with all of your money, you’re poor can’t be fed.  Gary Richrath is a very underrated guitar player….  I hope you have a Marvelous Monday, and well please go out there and Be Good To Yourself!

Chuck Butler

 

 

The ECB’s LaGarde Turns Her Nose Up At The ECC!

May 13, 2020

* Currencies rally on Monday and throughout the night!

* Gold gets off its seat to the do the stroll today…. 

Good day… And a Wonderful Wednesday to you! Sorry for the tardiness of the letter this morning, it was one of those mornings when I just couldn’t convince myself that I needed to wake up!  I’ve been thinking about that a lot lately, and have decided that going forward, I’m not going to set an alarm, and I’ll write when my body tells me it’s time to wake up….  I would imagine that in the beginning the letter will get to your email box around the same time as always, but as time goes on it will be later, and later…  That’s it… times change, and I do too….    Pink Floyd greets me this morning with their song: Wish You Were Here…. 

The dollar bugs went back into the wall boards yesterday, and allowed the currencies to romp and play all day and through the overnight markets as well. One has to wonder, what changed yesterday?  I mean, on Friday, we had seen a week’s worth of bad, no make that awful economic data here in the U.S. culminating with a better than feared Jobs Jamboree, and the dollar bugs held onto the conn, much to my amazement…  But then on Monday, things changed… And the dollar bugs were chased all over the room by the currencies…. 

Gold didn’t join in the romping around yesterday, with the currencies, but has gotten off its chair and is doing the stroll with its girlfriend, Silver this morning….  Remember “the stroll”?  Sorry youngsters, you’ll have to YOUTUBE that and see what I’m talking about…. But at the St. Pius teen town dance every Friday night, there was always one song that the kids would line up for and do the stroll… 

II just had a flash back to when I was much younger, but had kids, and I would line them and their neighborhood friends, in the driveway and have them do the stroll!  They loved it, and would do silly dances, and we had a blast!  

OK… last week I told you the European Constitution Court (ECC) was going to meet, and I was waiting to hear what they would were going to say about the European Central Bank’s (ECB) exorbitant bond purchases…. It took a few days for this to be public news, and thanks to Grant Williams in his Things That Make You Go Hmmm….. letter last week, he had the public news, so let’s listen in on what the European Commission had to say, “ German constitutional court ruled that the ECB had exceeded its legal mandate and “manifestly” breached the principle of proportionality with mass bond purchases, now topping €2.2 trillion and set to rise dramatically. The bank had strayed from the monetary realm into broad economic policy-making.

The court said the German Bundesbank may continue to buy bonds during a three-month transition but must then desist from any further role in the “implementation and execution” of the offending measures, until the ECB can justify its actions and meet the court’s objections. It also said the Bundesbank must clarify how it is going to sell the bonds it already owns…”

Well, well, well…. What’s Christine Lagarde, President of the ECB, going to say about this? I mean shoot Rudy, she just took the job a couple of months ago, and now she’s in the middle of a saber rattling contest, of which the it appears she’s on the losing side…. Well, look who thinks that she’s high and mightier than the European Constitution Court! Let’s go to the tape once more courtesy of Grant Williams to see what she had to say, “We are an independent institution, answerable to the European Parliament, and driven by our mandate,” she said in a webinar organized by Bloomberg. “We will continue to do whatever is needed, whatever is necessary, to deliver on that mandate. Undeterred.”.. – Christine Lagarde

Well, well, well… It’s as if she stuck her nose up in the air and said, Neener, neener, neener, I’m rubber and you’re glue, whatever you say to me bounces off me and sticks to you….. In my favorite cartoon voice, I can here the ECC saying, “Why…. The nerve of her!”

But who can blame her, she’s just taking her cues from the Fed, who yesterday began buying Corporate ETF’s through Blackrock, when the Fed’s bylaws prohibit them from doing just that! Any thing you can do I can do better! Man this is all getting crazier by the day, isn’t it? What’s become of our financial system, and what will remain of it when this is finished?

And again, I laugh, when I hear people say, that these changes are “only temporary”…. Yeah, like Payroll taxes were supposed to be? And the Gold backing dollar system ending was supposed to be? Tell me again, what temporary means, because using these two examples, I have a different meaning in my head!

Back here in the U.S….Yesterday, I talked about the scenario that I think will bring about negative rates here in the U.S. And then later in the day, I received a note from the GATA folks, where they were quoting an article that appeared on Reuters that said, “Rate options, which gauge monetary policy expectations, on Monday implied a 23% probability that the key federal funds rate will go below zero by the end of December, according to BofA Securities data, which cited short expiry options on one-year U.S. swap rates. That compares with a 9-10% probability last week.”

So, what was once TABOO, is now being considered…. What was once things that tin foil hat wearers (like me) were laughed at for even mentioning, now has a 23% probability of becoming real…. I’d say at this point, that’s a significant level of probability…. Now, watch that percentage grow, when stocks begin to have problems again like they did in March…. I’m just saying…

Well, I hate to have to bring this kind of stuff up, but a dear reader sent me a link to a video and asked me to explain it…. It was a guy that had reported finding that the U.S. Gov’t Bill 748, (you know the Coronavirus stimulus bill) was first introduced in Congress…. Are you ready for this? ….. On January 24, 2019…. I’ll let that sink in a bit…. January 24, 2019…. That’s over a year before the first case of the pandemic came on our shores….

Now, I’m sure you’re saying, “Come on Chuck you can’t believe everything you see on videos”, and you’re right…. But this man on the video showed me how to go to the U.S. Congress.gov site and pull up Bill 748’s history, and see it there in black and white…. So, go ahead and prove this wrong….

In the meantime, I want to know what they (congress) knew over one year ahead of time! Hello? Congress, anyone out there read the Pfennig? Come on, I know an “aide” up there in Washington D.C. has to have come across the Pfennig a time or two! I don’t really expect anyone in D.C. to answer me, I’m fully expecting to hear nothing but crickets…. 

And here’s where investigating journalism had died… Because back in the day, a good investigating journalist would be looking at this and not turn to look the other way…  I’m just saying…

Sorry, I got a little off track there, but I thought it was important to talk about, and so I did just that!  

Yesterday, the stupid CPI (consumer inflation) printed for April, and only showed a negative -0.4%….  Yeah, I believe that like I believe that pigs fly! but it is what it is, and we move on… PPI (wholesale inflation) printed already this morning for April and it showed a negative -1.4% print… Now, that’s more like it!   Remember Retail Sales will print on Friday, and the Weekly Jobless Claims will print tomorrow… 

Before we head to the Big Finish today, I wanted to give a shout out to my fave newsletter writer, Grant Williams. Grant and the great Stephanie Pomboy, are doing a podcast once a week, titled: The First Super Happy Hour podcast…. When you put two minds like these two have, together, you get great conversations, and thought provoking ideas…. And so to celebrate their breaking a champagne bottle on their new podcast, I thought I would give you the link to a sample, and it will give you an opportunity to download the whole podcast…. So click here and enjoy! https://ttmygh.podbean.com/e/sthh_0101/

To Recap… The currencies rallied on Monday, and have carried through the overnight markets into this morning. Gold finally moved higher this morning adding $14  and is trading $1,715 this morning.  The European Commission Court didn’t have nice things to say about the ECB’s bond buying, but ECB President, stuck her nose up at the court and said Neener, neener, neener…    And Chuck talks about some strange thing he found, that he hopes isn’t real….  But it is, it’s right there on the www.uscongress.gov site! 

For What It’s Worth…. I don’t know if see what I see in this article…. It’s about how U.S. bank regulators were investigating Scotiabank’s metals business, before Scotiabank made the announcement two weeks ago that they were going to close their metals business down at the end of this year…. This article on Reuters can be found here: https://uk.reuters.com/article/us-metals-bank-of-nova-scotia/us-regulators-started-scotiabank-probe-before-metals-closure-filings-idUKKBN22K1Q7

Or, here’s your snippet:” U.S. regulators were investigating Bank of Nova Scotia’s (Scotiabank’s) (BNS.TO) metals trading activities several months before it told staff it would wind down the unit, according to its most recent earnings report.

Scotia told staff in a global call on April 28 that it would wind down its metals business by around the start of 2021, two sources familiar with the matter told Reuters at the time.

Scotia has declined to comment on the report.

In its first quarter earnings statement in February, Scotia said its metals business was under investigation by U.S. regulators.

“The Commodity Futures Trading Commission (CFTC) and the Department of Justice’s Criminal Division are conducting investigations into (Scotiabank’s) activities and trading practices in the metals markets and related conduct,” it said.

It said it was “responding to requests for information related to these investigations.”

Scotia did not respond to a Reuters request for comment on the investigation. The DoJ and CFTC declined to comment.”

Chuck again… Ok, is your spider sense tingling? Because mine is, and don’t tell me it was just a co-ink-ee-dink that Scotia decided to close their business after the regulators were there…. My spider sense is tingling so intense right now, that there’s more to this story, and the problem is… We’ll probably never know the real truth…. And that’s sad….

Currencies today 5/13/20, American Style: A$.6514, kiwi .6045, C$.7128, euro 1.0876, sterling 1.2318, Swiss $1.0332, European Style: rand 18.2739, krone 10.0472, SEK 9.7282, forint 324.92, zloty 4.1945,    koruna 25.1715, RUB 73.40,  yen 106.91, sing 1.4143, HKD 7.7502, INR 74.60, China 7.0864, peso 24.05, BRL 5.8219, Dollar Index 99.70,   oil $25.96,   10-year .65%, Silver $15.60, Platinum $770.68, Palladium $1,716.58, and Gold… $1,716.58

That’s it for today, and the rest of the week, remember no Pfennig tomorrow, as I will reporting to the oncologist for blood work and the rest of stuff…  Blues beat Dallas 4-3 last night!  HA, I watched the replay of Game 3 of their playoff series last night….   I read last night that the proposal that the owners submitted to the player’s union for approval to start the baseball season, has hit a road bump…  You see, the owners want to split the profits with the players this year, since most games won’t have any fans paying to get in…. And the players have a problem with that… Come on! Be Big Boys and make some compromises so you can get back to playing the kids game!   I guess I wouldn’t make a good negotiator! HA!  OK, Journey takes us to the finish line with my favorite song by them: Who’s Crying Now….   And with that, I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

 

 

The Fed Will Begin Buying Corp. ETF’s Today….

May 12, 2020

* Currencies trade in a very tight range on Monday

* But currencies and Gold are both on the rally tracks today! 

Good Day… And a Tom Terrific Tuesday to you! While the sun was out, the sky was blue, the day was beautiful, until you stepped outside, and found that the temperature was 50 degrees! YIKES! Like I said last week, I find it ridiculous to try to get Vitamin D with a jacket and hat on! But I sat outside with a jacket and hat on for over two hours yesterday, reading, and working crossword puzzles, which have become a daily thing for me…. I think they keep my mind sharp…. I’m probably whistling up the wrong tree here, but that’s what I think, and that’s all that matters! HA! Well, Major League Baseball has announced that they will take a proposal to start the season on July 4th to the Players union today, for acceptance…. That means that we could be watching, no fans in the seats, baseball by mid summer! YAHOO! That’s the best news I’ve heard in 2 months! John Lennon greets me this morning with his song: Whatever Gets You Through The Night…. Say what you want about Lennon, but in the end he was a prolific song writer….

Front and center today I want to apologize for the format of yesterday’s letter. I was so ready to get it out that I forgot to break it all up into paragraphs for you…. I can’t say it won’t happen again, but I doubt it will, as it’s never happened before now…. Again, sorry, for the awful presentation of the letter yesterday…. You would think that if you did something repeatedly for years, that it would be second nature to you, and there’s no way you would forget to do it…. You would think….

The currencies traded in a very tight range yesterday, and Gold lost $7 on the day, to close at $1,697… There’s just nothing to talk about with the currencies folks… They are following the dollar bugs’ lead, and will react based on the sentiment of traders and how they want to take the dollar for the day. Never mind thinking about any long-term trading trends, for now…. This is almost as boring to watch as night time TV without baseball, or hockey!

And this back and forth trade of Gold around the $1,700 figure, is beginning to give me rash… But it is what it is, and there’s nothing I can do about it, so I just sit here and wonder each day what’s it gonna be, above $1,700 or below $1,700? It’s lollygagging around $1,700 sure has given the procrastinators an opportunity to buy before Gold makes another $400 gap upward, like it did late last year…. For those of you who have missed class when I talked about this last week…. $1,700 has become the new $1,300 for Gold….

I just crack up at people that say, “Hey, I hear what you’re saying and it all makes sense, but when the walls begin to crumble, that’s when I’ll go out and buy some Gold.” I always respond to these thoughts with a thought of my own, and I say, “The problem with that is that you won’t be able to find Gold to buy, as everyone that saw all this coming already bought it up”….. I always get a “Oh!” on that thought, and an effort to change the subject….

OK… longtime readers know that I love to find other people that think like I do…. But I have to draw the line with the Fed coming on board with my thought that 1/4 to 1/3rd of the 33 Million jobs that have been shed through last week, will never come back…. The Fed said, “the results of recent Federal Reserve surveys suggesting 24.9% of all job losses amid the corona-crash will be permanent.

One of my fave reads each day, is the 5 Minute Forecast, put together by Dave Gonigam at Agora Financial…. So, let’s listen in to what Dave had on his mind regarding these permanent job losses in his “5” letter yesterday…

“Translation: A lot of people who’ve been booted out of the labor force these last two months won’t ever return.
And they won’t show up in the official unemployment figures.
In a recent interview with our executive publisher Addison Wiggin, Jim Rickards draws the distinction: “Unemployed doesn’t mean you don’t have a job. It means you don’t have a job and you’re looking for a job. You’re trying to get a job and you can’t find it.

“But if you drop out of the labor force, you say, well, good time to retire. I’m now retired. Or I’m going to sit on the couch and eat Doritos and watch, I don’t even know, Japanese baseball, maybe. You’re not counted as unemployed because you’re not looking for a job.”

Bottom line: “A lot of people are dropping out of the labor force. They’re not coming back.”

Sounds like a depression? Jim says that’s exactly what it is.”

Chuck again…. You know, there’s something to be said, for people that go out on a limb, and talk with logic and history…. I like those kind of people… I’m just saying…

I want to go in a different direction now, and talk about the debt here in the U.S. Did you know that last week we crossed $25 Trillion in our current debt? It wasn’t that long ago that we crossed $24 Trillion, but when you’re racking up Trillions in bail outs and stimulus, that really isn’t stimulus, you begin to climb the debt ladder that leads to tears….

Of course, if you’re a backer of the MMT folks… Modern Monetary Theory, then you don’t think of this climbing debt as a big deal…. What the heck, according to the MMT folks, we could just spend whatever amount we needed to, and sell Treasuries to finance the debt, and when the markets won’t buy all the Treasuries, the Fed will just print new dollars and buy them…. Yeah, that’s what MMT is all about folks, right there in a nutshell… Sound good? Well, everything has merit and will work, for awhile….

And then it doesn’t…. The dollar becomes a problem because there have been so many of them printed…. And that’s when the wheels come off that wagon, folks… Gold soars, and the dollar loses credibility…. In listening to an interview yesterday with Addison Wiggin of Agora Financial, and James Rickards, brought about something that I had forgotten about…. In 1977, you may remember this…. The U.S. dollar was getting sold like funnel cakes at a state fair, nobody wanted them, and Gold was soaring to new heights every day…. The U.S. Treasury tried to sell Treasury bonds denominated in dollars, but that went over like a lead balloon, and instead they had to issue them denominated in Swiss francs! Those were called “Carter Bonds”… Ring a bell?

We could see that happen again folks…. I’m just saying, it happened once, it can happen again!

Ok… as if there aren’t enough things to think about with the economy, etc. There’s this… Why on earth is the stock market rallying and the bond market telling us that we should be hunkering down? There’s a divergence here that’s difficult to explain, but I’ll give it the old college try! Oh, and by the by, did you see the earnings results from the 1st QTR last week?

Earnings were down BIG TIME in the first QTR, which leads me to believe that the stock jockeys are looking way beyond the current data… Because on top of all that you have consumers hunkering down. We’ll get April Retail Sales on Friday of this week, but since this is only Tuesday, let’s just take a stab at what they might show…. And let’s say Retail Sales were down 15% in April… Add that to the drop in credit card debt we saw last week, which was a 31% drop on an annual basis, from the previous month, and you’ve got the consumer-led U.S. economy gasping for air….

But…. The stock jockeys all think they’re smarter than the rest of us, and that we need to look to the future too…. I just can’t get my arms around the idea that the U.S. economy is going to spring forward like being shot out of a cannon when it’s opened up again…. So, I’m with the bond guys…. I always have been, having spent a good portion of my early career in a bond dept. And the bond boys say, that deflation is upon us, and most likely negative rates are on their way…. I think we’ll need to see a stock market sell off to set this deflationary / negative rates thought in play…. Because, once stocks start showing weakness again, the Fed will jump to its rescue, once again, but only this time they’ll find their quiver doesn’t have any arrows….. And that’s when we’ll see negative rates…. So, you can make a choice, isn’t that great? I mean really, isn’t that great that you’ll get to make a choice.? You can sit there and wait, or you can get up and groove…

No wait, that’s a different choice, this choice is between pinning your colors on the stock jockeys mast, or pinning your colors on the bond boys mast…. I think I’ve make it clear which mast my colors will be flying from!

Longtime readers know that this is where I bring in a Big Gun to back up what I just said about the economy not rebounding big time like the stock jockeys think…. And you would be right! I have the best economist going, in my book that is, David Rosenberg, giving us his two-cents on where the U.S. economy is headed….  

 With the global economy grinding to a halt because of the COVID-19 pandemic, economic conditions can’t get much worse than they already are, according to famed economist David Rosenberg, chief economic strategist at Rosenberg Research and Associates.

However, Rosenberg added that investors shouldn’t expect to see a significant recovery anytime soon. He said that they should position their long-term portfolio to reflect an environment of long-term stagflation.

“We’re going to be into a prolonged period of very soft economic growth. There is no rebound that is taking us back to where the economy was,” he said. “The new normal is going to be very constrained.” – David Rosenberg

Chuck again….  I pulled that from Ed Steer’s letter this morning that can be found here: www.edsteergoldsilver.com 

OK, I told you yesterday that the Data Cupboard was basically empty until Friday, but we do have the stupid CPI (consumer inflation) report for April to print today, so it will be interesting to see what rot has formed on this data’s vine…. 

To recap…. The currencies traded in a very tight range yesterday, and Gold lost $7 on the day to close below $1,700. However Gold is back above $1,700 early this morning… Back and forth, is beginning to give Chuck a rash…. Chuck paints a picture of what it’s going to happen to move the Fed to go negative with rates…  And I know where here at the place where the FWIW article is, but I just wanted to say that this is a BIG DEAL so make sure you read it today! 

For What It’s Worth….  This is where I draw the line with the Fed’s activities folks…. Their bylaws say that they can’t buy Corp. Debt, and yet here we are…. This article on zerohedge.com talks about the Fed’s entry into the Corp. ETF’s market today, and it can be found here: https://www.zerohedge.com/markets/fed-will-start-buying-bond-etfs-tomorrow-blackrock-make-over-10-billion-fees

Or, here’s your snippet: “

Last Monday, in response to a Gundlach tweet in which the bond king said “I am told the Fed has not actually bought any Corporate Bonds via the shell company set up to circumvent the restrictions of the Federal Reserve Act of 1913” the New York Fed announced on its website that it expects to begin purchasing eligible ETFs – most notably the LQD and JNK – as part of its emergency lending programs in “early May.”

And yet, day passed, and then another, and another, and suddenly early May turned into mid May and… still nothing.

Until today when the Fed announced late in the day that the facility designed to purchase eligible corporate debt from investors will launch on May 12, bringing the most controversial part of the U.S. central bank’s emergency coronavirus lending program – one which not even Bernanke dared to activate at the depths of the financial crisis perhaps realizing that there would be no extrication from that particular moral hazard – online following weeks of anticipation.

The Fed’s Secondary Market Corporate Credit Facility “will begin purchases of exchange-traded funds (ETFs) on May 12” the New York Fed website said, nearly two months after it was was first announced in late March, and served a key role in keeping financial markets relatively calm since then.

And speaking of Blackrock, the Fed also posted to its website the 66-page investment management agreement with BlackRock, the world’s biggest manager, which is incidentally also the world’s biggest manager of ETFs, and which last month said explicitly that it would front-run the Fed’s bond purchases, layering conflicts of interest upon conflict of interest, but who cares any more.

Blackrock’s compensation for doing something the N.Y. Fed’s desk is perfectly capable of doing itself (furthermore, since it only has to buy and never has to sell, the Fed can just hire any millennial on TweetDeck – they have precisely the required skill set; now if selling is ever required the Fed may have trouble finding traders that actually are familiar with that particular skill, but we digress).

Since such a role has neither custody risk nor transaction risk, we look forward to the Congressional hearings in which Larry Fink, that noble crusader for the common man, explains why US taxpayers had to pay him billions and billions for doing, well, pretty much nothing.”

Chuck Again….  And one more thing that I read this past weekend that ties in here… Guess who is a major stock holder of Black Rock?  None other than Fed Chairman Jerome Powell…. Now, if that’s true, and I have no doubts about the source I read that from, then  this whole program already has a 5-day old fish smell to it….  

Currencies today 5/12/20 American Style: A$.6511, kiwi .6102, C$ .7150, euro 1.0835, sterling 1.2347, Swiss $1.0299, European Style: rand 18.2870, krone 10.2263, SEK 9.8022, forint 323.57, zloty 4.2016,    koruna 25.4112, RUB 73.54, yen 107.43, sing 1.4156, HKD 7.7501, INR 74.75, China 7.0891, peso 23.94, BRL 5.7680, Dollar Index 99.97,   Oil $25.31,   10-year .72%, Silver $15.51, Platinum $772.39, Palladium $1,885.38, and Gold… $1.704.05

That’s it for today…  Well, I had lots to say today, so it was a good thing I got up early to write! HA! Seriously though… there are plenty of things to write about these days, so if the letter gets a little long, just remember it could be longer! Not much on my mind this morning, other than I sure hope the player’s union and the baseball owners can get together and come up with a plan to get baseball going again this year!  I sure hope they keep this in mind….  It’s far better to compromise and play than to be hard headed and not play….   Modern English takes us to the finish line today with their song: I Melt With You….   And with that… I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself! 

Chuck Butler

Why Does The Market Rally In The Face Of Awful Data?

May 11, 2020 

* Currencies rally on Friday, give back ground today

* Neal Kashkari: “The Worst Is Yet To Come”…. 

Good Day… And a Marvelous Monday to you! A fairly nice weekend, with some very chilly air being blown around yesterday, for Mother’s Day. Speaking of which, I hope all the mothers out there had a grand day. I know all too well, that this Mother’s Day was not anywhere near normal, and hopefully it’s that last time we have to go through that! If my mom was still alive I would have gone to see her, and still given her a hug…. I’m just saying…. I just don’t know what’s going on in the markets these days folks, so I’ll just keep giving you my opinions on what “should be Happening” VS what is Happening…. Like Friday’s markets reaction to an awful jobs jamboree…. So I have that and more to talk about today…. Don Henley greets me this morning with his song: In A New York Minute….

I learned something new about rock history this past weekend when my fave newsletter writer, Grant Williams wrote about it in his weekly letter titled: Things That Go Hmmm…. Grant wrote about how the singer/ songwriter, Johnny Nash (I can see clearly now) spent some time in Jamaica years ago, and hired a small group of locals to back him up and write songs for him…. The band? None other than Bob Marley and the Whalers…. See, even an old rock-n-roller like me still can learn something new all the time!

I’m beating around the bush today, before getting started because I know that once I do get started I’m going to be getting very mad, and upset with all that’s going on… And the stupidity of it all! Yes, that’s right, I said the “S” word….. I guess you’ll have to deal with it!

Before we get to the data… The dollar bugs went into hiding on Friday, with regards to their relationship with the currencies, and the currencies rallied all day on Friday, that’ is, after the Jobs Jamboree printed. But Gold couldn’t find a bid all day and ended the week with a down day on Friday to the tune of $15 to close at $1.702…. This was after rising more than $33 on Thursday! Up one day down the next, that’s the story for Gold since it hit $1,700…. And I have to tell you that I’ve finally figured out why this is happening, and its’ because….. No, wait…. I can’t go there yet, I’m still feeling spry this morning, and I’m not ready to get down in the dumps!

That was Friday, and in the overnight markets leading to this morning, I’m seeing the dollar bugs fight back, and Gold starting the day down $2… Two weeks ago, it was the opposite going on, with the dollar getting sold in the overnight markets, and bought in the U.S. time…  And now the tables have been switched…. Strange stuff for sure, but leads me back to my thought that traders don’t have a clue, about what’s going to happen next, and so they dabble here and there, to keep their jobs… 

OK… are you ready? Yes, I’m ready…. So, let’s go down the dark alley way, and see what’s behind the curtains….. Well, well, well, what have we here? The BLS version of a jobs report printed on Friday, and believe it or don’t, but the BLS did not offer up an hedonic adjustments to the figure, instead they printed a long explanation of what they’re looking at during the pandemic. So…. The April total unemployed printed at 20.2 Million, and the Unemployment Rates was 14.7%…. Which were both better than feared….

On Thursday, last week, the Weekly Jobless Claims printed its lowest figure in 8 weeks, but…. Before we rejoice that this is all over, the total was 3.17 Million new claims filed in the week ending 5/2, bringing the total jobs shred in the past 7 weeks to 33.4 Million! OK… so I’ve got some numbers for you to look through here…. First of all the last week of March had the largest Weekly Claims number of 6.8667 Million… Then the April weekly totals were 4/4 6.615 Million, 4/12 5.237 Million, 4/19 4.441 Million, 4/26 4.846, and 5/2 3,169

OK add up all the April numbers and you get 23.309 Million… So, somewhere the BLS forgot to add over 3 Million jobs lost in April…. And that would get you close to the 18% Unemployment rate that I talked about a week ago…. Let’s also keep in mind that the weekly reports cross months, so there’s some give and take there, but on the back of cocktail napkin, I figure we’re probably closer to 18% Unemployment in April than what the BLS had for us….

Oh, and one more thing on the jobs report, from what I understand, the cut-off date for the reporting numbers was April 15th…. So, does that mean the May Jobs Report is going to have the last two weeks of April’s unemployment additions? This was all news to me, folks, for even in all my studies on the BLS and the jobs report, I was unaware that they cut of the previous month 1/2 of the way through the month! But leave it to the BLS to try and throw us all off the scent of what a real unemployment number is…. 

Here’s my take on all this…. I would venture to say that at least 1/4 to 1/3rd of those lost jobs aren’t coming back…. I hate to be the bearer of bad news but it is what it is folks….

Shoot Rudy, even Fed Head, Neal Kashkari agrees with me…. Yesterday, speaking in an interview he said that He believed that “The Worst is yet to come”…. And he went further to explain when asked if the economy would bounce back in the 2nd QTR like some economists are calling for, he said, “You know, I wish it were. What I’ve learned in the last few months, unfortunately, this is more likely to be a slow, more gradual recovery.”

So, why is the stock market still rallying in the face of all this bad economic reporting? Well, I really don’t know the answer to that question, but I will offer up what I see going on, and that is investors are drinking the Kool-Aid and believing what some of the Brokerage houses and economists are saying and that is, that…. The economy will turn around quickly once we get through this, and they believe it’s in the 2nd 1/2 of the year… This year, that is… The second half of THIS YEAR! And investors not wanting to miss the boat on getting in on the bottom, are jumping in with both feet…. I could go on to explain how this type of mentality caused major losses after the Great Depression’s stock market drop…. The stock market rallied…. And within 18 months they were looking at another drop that was worse than the first one!

OK, but I don’t want to pull away the punch bowl from all those folks that are drinking the Kool-Aid…. So, I’ll stop there… But to me, this appears to be a classic “Bear Trap”….  And that’s all I have to say about that! 

But, this mind set in traders is also what’s causing Gold to run hot and cold on alternating days…. Why buy the safe haven metal when there will be no reason to, in the second half of this year? I shake my head in disgust, because the people that say these things, can’t see the forest from the trees…. Did they not pay attention to the weakening data that was printing month-by-month before the COVID-19 virus came ashore? Do they not know about all of the derivatives that are out there, and all it would take is for one snowflake to fall to cause an avalanche…. The THREAT of an all out collapse is out there folks…. And those that choose to ignore it will be brought to tears in the future…. At least that’s how I see it playing out….

I have a song going through my mind right now it goes like this: Why does the sun go on shining? Why does the sea brush the shore? Don’t they know, it’s the end of the world?  And so on…. 

OK, I got through that without having my blood pressure rise… I’m serious, here folks, I keep my blood pressure machine right here on my writing desk to check it first thing in the morning and record the numbers, but there are times I get so riled, that I check it again to see what damage I’ve done to it!   Actually, I have to do that because the chemo I take causes high blood pressure….   

I’ve been reading a book lately titled: Make America Healthy Again… There’s a chapter on cancer, but all the cancers discussed left out my cancer….  But I got the gist, cancer in some people is preventable… Mine? I believe it was genetically given to me…. And that’s all I have to say about that!

The U.S. Data Cupboard is empty today, and besides the stupid CPI (consumer inflation) which will be negative, showing the deflation that’s among us right now, and the Weekly Jobless Claims, we’ll have to wait until Friday to see the April print of Retail Sales….   The April Retail Sales will most likely be just plain awful, as the March print, you may recall was already at negative -8.7%…. And that only had 1 week of shutdown included in that data print….  But that’s Friday…. 

To Recap…. The currencies found a way to rally on Friday after a better than feared Jobs Jamboree number… Gold couldn’t back up its $33 gain on Thursday, and lost $15 on Friday, and is down $2 in the early trading today. Chuck goes through why he believes the markets aren’t reacting to the awful data prints… Of course he doesn’t really know the answer to why this is happening, he’s just offering up his opinion as to why it is what it is…. 

For What It’s Worth….  Well, some of the brokerage houses, I mean, Casino Banks and economists may believe that this is all an illusion that will be wiped clean in a New York Minute, and that’s all fine and good, but I prefer to look at things as they really are… And this article about Freight deliveries crashing is what I’m talking about, I found it on zerohedge.com and it can be found here: https://www.zerohedge.com/economics/everything-has-been-cancelled-class-8-heavy-duty-truck-orders-crash-25-year-low-april

Or, here’s your snippet: “The misery in Class 8 heavy duty truck orders continues. Still struggling with the remnants of an order backlog that started almost two years ago with record orders in August 2018, the industry was unable to find an equilibrium prior to the coronavirus pandemic. Orders were sluggish and we noted numerous trucking companies that closed up shop altogether in 2019.

Post-pandemic, things look even more helpless. In April, the industry posted its worst order number on record as the economy ground to a halt as a result of the nationwide lockdown. Only 4,000 Class 8 orders were made last month, which is down 73% year over year and 44% from March.

It was the lowest reading since FTR began tracking orders in 1996. Many companies canceled or delayed new orders as demand, measured by the ratio of loads to trucks, fell 66% in April, according to the Wall Street Journal.

The uncertain outlook going forward has prompted many companies that would normally be shelling out for new infrastructure to rein in their spending. For example, logistics company TFI’s Chief Executive Alain Bédard said in an April 22 call: “Everything has been canceled.”

Chuck again…  Well…. Everything has been canceled….  And there are no timelines as to when they will be put back on the docket….  I’m just saying… .

Currencies today 5/11/20 American Style: A$.6472, kiwi .6072, C$ .7140, euro 1.0816, sterling 1.2303, Swiss $1.0284, European Style: rand 18.4206, krone 10.2365, SEK 9.7979, forint 323.58, zloty 4.2144,    koruna 25.4736, RUB 73.35, yen 107.35, sing 1.4273, HKD 7.7502, INR 75.20, China 7.0734, peso 23.87, BRL 5.7249, Dollar Index 100.09,  Oil $23.95,   10-year .69%, Silver $15.41, Platinum $879.81, Palladium $1,879.81, and Gold …. $1,700.19

That’s it for today…. The family got together late last week on Zoom, to celebrate a big occasion…. My youngest son, Alex, has now completed his 6 years and has graduated from St. Louis University with a doctorate in Physical Therapy.  We all wanted to know if we were to call him Dr. Butler going forward!   My chest is puffing out right now, because I’m so darn proud of him…. And he already has a job that he’s supposed to start on June 1, if they are open by then… Real longtime readers will recall when Alex used to sit on my lap and help me write the Pfennig from home when he was 3, and I was “retired” for the first time…. If you don’t recall seeing his typing, no biggie, it was all a jumbled mess…. So, Congratulations Alex! Now , go and earn a living, be a part of society, and have a great “after college life”!  No Pfennig On Thursday this week, as I’m scheduled to visit my oncologist bright and early in the morning…  I’ll remind you again Wednesday…  The Ozark Mountain Daredevils take us to the finish line today with their song: Jackie Blue….   I hope you have a Marvelous Monday today, and will Be Good To Yourself!

Chuck Butler

20.2 Million Jobs Shed In April….

May 7, 2020

* The dollar bugs rule the roost once again…. 

* Gold gets bashed on Wednesday, Chuck says it’s a “sign”… 

Good Day, and a Tub Thumpin’ Thursday to you! In honor of Tub Thumpin’… I get knocked down, but I get up again, you’re never going to keep me down…. Story of my life since June 2007, for sure! Well, the rain stopped yesterday morning, and the sun came out, but it was still just a little too chilly for yours truly. I did sit outside in the sun to eat my lunch, but that was it… I see no reason to be out trying to get some Vitamin D, with a jacket on! And with my bald head, a baseball cap needs to be worn any time the temps dip below 70! Well, I didn’t get much flack for my stance on the thought that the economy needed to be opened up… Thank you for holding back! 10cc greets me this morning with their song: The Things We Do For Love…. 

There is one other thing that I left out of yesterday’s thought on opening up the economy, and that is, something we should have done in the beginning to avoid all this mess…. And that is, we all know who’s most at risk, right? (yes, I’m one of those most at risk, but… I’m retired, so I don’t have a job to go to!) We should have, and could still do it, quarantine all the folks “at risk”, and allow the rest of the people that want to work, go to work! Of course, then there’s the fact that as Americans we’ve become so lazy, and would prefer to sit at home and receive payments from the Gov’t instead of going to work…. If I were younger, and not have cancer, and congestive heart disease, I would be champing at the bit to go to work! But then that’s just me…. I guess…

OK… The currencies lost more ground but not that much in all, yesterday, with the euro falling below 1.08… Shoot Rudy, just last week the euro was above 1.10… UGH! There was something else  that I missed talking about yesterday, and so… here goes…. After reaching its smallest deficit since September 2016 in February, the U.S. trade balance rose again in March. The overall gap in goods and services trade widened to $44.4 billion from a revised $39.8 billion in February. They say it was a “crash” in exports…. Well… other countries around the world have shut down their economies too, so they don’t need our exports, especially with as high a price that they have on them, due to dollar strength!

Another thing I talked about yesterday, I left out a very important caveat…. When I said hold cash, I left out this… “hold cash until the bank begins charging you for deposits”…. I can’t believe I forgot to say that…. Because, once the bank begins charging you for depositing cash into your account, there’s no reason for them to hold anything more than the amounts you need there to pay online bills or write checks against….

Of course, that’s when we get to the scenario I painted for you a couple of weeks ago, when I pulled out a Dow Theory Letters piece, and told you how I believed that getting to negative rates was “in the cards”, and that when consumers began to pull their funds, the Gov’t would implement a new low, forbidding physical cash, and that your bank balance was just digital units, and a whole bucket of bad things that go along with that…. So… in the end we had better hope that we never go to negative rates here in the U.S.

Let those countries that have no sense do that… Like Switzerland and Japan, and the Eurozone, and Sweden (although Sweden has said they are through with negative rates) Oh me-o-my…. What a tangled web we live in, eh?

The Bank of England (BOE) is meeting this morning, while my fat fingers are flying around on the keyboard…. I suspect that they’ll leave rates unchanged, and then talk about all the horror that the COVID-19 virus has brought to their economy, and the need to do more stimulus work, which means more debt, and so on…. I would think that traders would listen to the BOE’s cries of despair, and sell pound sterling accordingly… But we do live in a world of opposites these days, so you never really know, now do you?

While I’m talking about England, they haven’t been in the news too much lately, as this crazy news media have focused on China, the U.S. and Russia…. Did you know that Israel bombed Syria the other day? And why didn’t that news be front and center, and cause a rash of buying in Gold? Because the media chose not to highlight it…. Ch, ch, chain, chain of fools…

One day, the Oil traders are high fiving each other because they think that the production cuts are working as the price of Oil rises…. And then the next day the story on the production cuts isn’t as rosy, and Traders sell Oil again, after 5 days of rallying… What changed? Ahhh Grasshopper, come sit, and listen…. Traders began to realize that no matter how much production is cut, the supply of Oil is still getting added to, because, at this time, there’s JUST NO DEMAND for Oil…. I knew they’d figure that out sooner or later…. They don’t have brains like a box of rocks, but, sometimes it takes some fracking to get a thought through to them! HA!

Well, Gold got hit yesterday to the tune of $22 bucks and brought the shiny metal back below the $1,700 figure, to close at $1,686… This is a sign folks…. A sign that’s telling you, if you’ve procrastinated buying Gold before, you need to get on the Magic Bus…. Every day I get in the queue (too much, Magic Bus), To get on the bus that takes me to you (too much, Magic Bus) Ahh, a little vintage Who for you this morning… This “sign” has been brought to you by the Aden Research Team…. And main sponsor, Chuck Butler!

Gold is attempting to win back that lost ground yesterday, as it is up $8 in the early trading today…  Back and forth, back and forth… But eventually, this will stop and when it does, it’ll be a lot like musical chairs… When the music stops… Will you find an empty chair? Will you be able to buy physical Gold when the music stops? You see, I’m thinking the answer to that question is a “hard no”!  You see, I believe that Gold will be in such high demand, that getting it in your hands is going to take Superman getting it for you…. 

I recall a joke that goes something like this…. A man is praying to God, and asking him why he can’t win the Lottery… And finally God has had enough, and talks to the man and says, “Why don’t you buy a Lottery Ticket?”  I rest my case on the drop in price of Gold being a “sign”….. 

The U.S. Data Cupboard yesterday had some very frightening data… The ADP Employment Report for April showed that 20.2 Million jobs were shed in April….  That’s right I said 20.2 Million jobs were shed in April… I’ll let that sink in and then you’ll see why I’m so confused as to why Gold lost $22 and the dollar got bought yesterday… 

We were also to see the color of the Quarterly  Treasury Refunding number, but something happened and it didn’t get printed… You don’t think that…. Nah, that couldn’t be, the Gov’t wouldn’t dare try to print this under the cover of darkness so everyone can’t see just how much money they’ve spent?  Nah… that could never happen in this day and age… right? 

To recap…. The currencies got sold, along with Gold yesterday, and all this back and forth stuff is really beginning to give Chuck a rash!  The BOE is meeting this morning, and Chuck thinks that the BOE will leave rates unchanged and talk of all the horrors that the COVID-19 virus has brought to their economy…  And Chuck gets caught up on all the things he’s forgotten to talk about this week…. 

For What It’s Worth…. Well, this coming Friday will be the BLS version of a Jobs report here in the U.S. for April… I always refer to the monthly print as the “Jobs Jamboree”, because long ago in a galaxy far from here, Traders used to gather around their Telerate or Bloomberg screens and hold monthly bets on the Jobs number that would show up on their screens, and then the markets would trade accordingly. Yesterday, the ADP Employment Report showed that employers shed 20.2 Million jobs in April…. Now, a couple of Fed Heads from Chicago, have built a new method of coming up with the Unemployment Rate, which will be quite different than the hedonically adjusted BLS version on Friday, the story of their new method and such can be found here: https://news.trust.org/item/20200505121915-v51r0

Or, here’s your snippet: “The official U.S. unemployment rate for April, due out this Friday, will likely vastly understate job destruction from the coronavirus pandemic, so a pair of economists at the Federal Reserve Bank of Chicago set out to create a measure that captures the true extent of labor market losses.

Their estimate: a ‘U-Cov’ rate in April of somewhere between 25.1% and 34.6%. That’s compared to the 16% rate forecast by economists polled by Reuters, who also estimate American employers shed more than 20 million jobs last month.

“The official unemployment rate may only capture a fraction of these losses,” Chicago Fed economists Jason Faberman and Aastha Rajan wrote in a blog released Tuesday, describing their proposed U-Cov measure of labor market under-utilization.

Many of those newly out of work will not be captured in the traditional U.S. unemployment measure, which counts only those who are out of a job and actively looking for work.

The Labor Department also publishes broader measures to include those working fewer hours than they want to, and people who have looked for work in the past but not recently.

But even such broader measures may miss those who are on unpaid leave and expect to return to their jobs once the crisis has passed, or people who are not searching for jobs because of stay-at-home orders, the Chicago Fed researchers wrote.”

Chuck again… I like Ed Steer’s comment about the BLS report that will print on Friday, he said, “I’m sure that Friday’s jobs report will be massaged to perfection.” I’m sure that it will be too! And we won’t have to wait long for the BLS report as it will print tomorrow!  And you can be sure I’ll talk about it until the cows come home on Monday!

Currencies today 5/7/20 American Style: A$.6466, kiwi .6060, C$ .7105, euro 1.0790, sterling 1.2360, Swiss $1.0244, European Style: rand 18.5607, krone 10.2380, SEK 9.8345, forint 324.30, zloty 4.2105,    koruna 25.1324, Silver $15.02, Platinum $755.22, Palladium $1,694.19, and Gold… $1,696.19

That’s it for today….  HEY!  Sunday is Mothers Day!  There are times during the year when I truly miss my mom, but on Mothers Day, it always hits me like a brick wall, that she won’t be there to hug, and tell her I Love her… So, do me a BIG favor, make sure you tell your mom your love her, I know we can’t hug right now, so the statement of Love will be enough…  My mom used make a BIG deal out of my birthday…. She used to come down to the basement and sit and listen to the band practice songs…  She was my biggest backer…. OK… I’ll have a little poem about moms following this finale….  Three Dog Night takes us to the finish line today with their apropos song: Mama Told Me Not To Come….   (Live at the Forum, which was one of the first albums I ever bought with my own money!) I hope you have a Tub Thumpin’ Thursday, and will Be Good To Yourself!

Chuck Butler

Inspirational Happy Mothers Day Poems 2020 From Daughter & Son