President Trump Says It’s The Fed’s Fault…

August 20, 2019 

* Gold get whacked yesterday, but rebounds this morning… 

* Eric Rosengren was the lone dissenter at the rate cut vote…. 

Good Day…. And a Tom Terrific Tuesday to you… Well, Beelzebub is still wanting his weather back! It was downright hot yesterday, but it is August… Shoot Rudy, I remember as a kid, before we had air conditioning, it was over 100 for a week straight… And where were we as kids? Outside, playing, and probably drinking lots of water from the spigot on the side of the house! We didn’t need bottled water! We didn’t need air conditioning (although when we finally got one room cooled off with A/C it was nice to sleep in), we just needed each other to make it game! Bob Seeger greets me this morning with his song: Turn The Page… It’s about a rock band and their travels between shows… I identify with the words in this song, for sure!

Well, another day… Another pot shot taken at the Fed Heads from President Trump… This time he said that the Fed is responsible for the economic slowdown, and that he wants them to cut rates 100 Basis Points at their next meeting! And all the while Boston Fed President, Eric Rosengren, is holding fort on no rate cut… Who’s going to join him?

A Bad day at Round Rock for Gold yesterday, down $17, but it’s back on the rally tracks today!  There’s just no stopping it now… Are you under…. The Power of Gold? Because apparently the markets are… The markets must also be under the power of the dollar bugs, because the dollar can do no wrong right now… Bad data? Buy dollars, Negative data? Buy dollars… President says he wants a cheaper dollar? Buy dollars, Treasury Curve inverts? Buy dollars… It’s the answer to everything presented to the markets, from the dollar bugs…

Have you been following other countries that issue 100 year bonds? Why were people lining up to buy Argentina’s 100-year bond? Or Mexico’s? Man, oh man, talk about strange things that people do… And buying a 100 -year bond would be amongst them! I’m talking about this today, because there are reports out that the Treasury is thinking about issuing 50 and 100 year bonds, since yields are so low… I mean , if you’re a country, that needs financing why wouldn’t you issue a 100 year bond with a 1.5% yield or whatever? Who’s to say if the country will even exist in 100 years, or that the financial system will be the same? I’m just saying…

Well, the euro didn’t receive any good news yesterday… Eurozone CPI (consumer inflation ) for July was only 1.0%, VS 1.3% in June… Yes, it wasn’t that long ago (about a year) that the ECB was celebrating 2% inflation… But that didn’t last too long, and has been falling ever since. And with deposit rates being negative, and the ECB now talking about coming back to the stimulus table, the euro is on tenterhooks right now…

Other countries might be playing this “currency wars” game, that wen growth slows, they feel that the only way to regenerate growth is to cheapen their currency… But when everyone’s doing it, what does it prove? I don’t think the ECB is playing the currency wars game with the euro… for they know all too well that a cheap currency invites inflation into the economy… A strong currency goes a long way toward fighting inflation!

And that brings me back to the Fed Heads and their interest rate hike cycle that began in December 3 years ago… The Fed heads said then that they wanted an increase in inflation… And I went all bananas on them saying that if they wanted inflation they were going about it the wrong way! You don’t hike rates to invite inflation into your economy, you cut them! So, the Fed had a double whammy working against them… 1. Stronger interest rates than most countries in the world, and 2. A strong dollar… But they wouldn’t listen to me, or anyone else that would point this out to them, for they know better than us, right? HA As if!

This is crazy folks… The Fed has reversed their rate hike cycle, and have stopped saying that the Economy was strong and robust… Now they have a gag order not to talk about interest rates, because… Because what little credibility that they have remaining, is hanging there like a piece of chad, waiting to be knocked off, but that hasn’t done a darn thing to the dollar bugs… I just don’t get it… 

Sure, the other countries aren’t exactly shining knights in armor, but there are a few bright spots… The Russian ruble and the Russian economy seem to be holding their own… And I think people have China all wrong…  The masses believe that China’s economy is crumbling… But haven’t heard this before? I recall about 10 years ago, a prominent letter writer, of whom I won’t mention his name, told his million readers that China was heading to a recession/ collapse…   Well, I don’t need to tell you, dear reader, that he was wrong all those years…  But I guarantee you that IF China would  see it’s economy collapse, he would be shouting from the rooftops that he called it first!  

The point here is that we’ve heard these calls for China before… They got it all wrong then, and I have no other reason than they’ve been so wrong in the past, to believe they have it all wrong again…  Sure, things have slowed in China, Shoot Rudy, show me a country that hasn’t seen a slowing down of its economy…  But that’s not the same as a collapse… 

The U.S. Data Cupboard is empty again today, marking two days of emptiness!  Yesterday, we had Boston Fed President Eric Rosengren speak, and apparently the gag order doesn’t apply to him… I’ve got the highlights or lowlights in the FWIW section today, so don’t miss that!

To recap… Yes, the letter is shorter than usual today… Chuck is having problems waking up each day… I think retirement has really gotten to him!  But in the recap… it’s more of the same as the day before and the day before that, and so on… The dollar bugs have the conn, Gold gets whacked and rebounds, the Treasury yield keeps falling, and President Trump thinks all the blame for the economic slowdown should be on the Fed…  So, not a bevy of things to talk about that’s new each day, to wake him up!

For What It’s Worth…  Well, I mentioned Boston Fed President Eric Rosengren above, so I thought that having his thoughts in the FWIW section today was FWIW worthy… So, here’s Rosengren on MarketWatch, and you can find it here: https://www.marketwatch.com/story/feds-rosengren-says-cutting-interest-rates-now-would-make-next-recession-worse-2019-08-19

Or, here’s your snippet: “Boston Fed President Eric Rosengren on Monday said the U.S. central bank should be careful not to cut interest rates too much now because it would push U.S. homeowners and businesses to take on more debt, thus making any recession more painful.

Lower interest rates cut the cost of debt, making it more attractive to households and firms.

“And if they get leveraged right before the economy has significant problems, we’re actually in much worse shape,” Rosengren said.

“We have to think about…how much we want households and firms to be leveraged going into whenever we actually do have a significant downturn,” he added, in an interview on Bloomberg Television.

Rosengren was one of two dissenters from the Fed decision to cut interest rates in July. 

In his interview Monday, Rosengren downplayed fears of an imminent recession, saying he expected moderate GDP growth around a 2% rate over the rest of the year.

While global economies are weak, the answer is not for the Fed to ease, he said.

The cure for global weakness is for foreign countries to stimulate their own countries “rather than just the United States to be doing the easing,” Rosengren said.

Rosengren said he would make up his mind about monetary policy just before the September meeting.”

Chuck again… And then after all that hot air spoken by Rosengren he said that he would vote for a rate cut if consumer spending slows down…  What’s it gonna be boy? 

Currencies today 8/20/19 American Style: A$.6780, kiwi .6411, C$ .7510, euro 1.1080, sterling 1.2100, Swiss $.9806, European Style: rand 15.3416, krone 8.9870, SEK 9.7210, forint 294,97, zloty 3.9270, koruna 23.2801, RUB 66.69, yen 106.33, sing 1.3852, HKD 7.8426, INR 71.64, China 7.0470, peso 19.79, BRL 4.0254, Dollar Index 98.39, Oil $56.09, 10-year 1.56%, Silver $17.02, Platinum $851.07, Palladium $1,485.56, and Gold… $1,503.85

That’s it for today…  except that is to send a big shout out to my darling daughter, Dawn… It’s Dawn’s birthday today… She turns… No, wait, Chuck, you can’t do that! OK, it’s a big birthday number today, and I’m sitting here wondering how’d that happen? Dawn has the luck of the Irish as far as her health goes, and she’s built just like my grandma… Tiny!  No wonder her daughter Delaney Grace is so small for her age!   So, Happy Birthday Boo!  Dawn is the oldest of my children, so she was the first… I almost saw a no-hitter last night! WOW! Steely Dan takes us to the finish line today with their song: Black Cow…    I can’t cry anymore while you run around…    I love Steely Dan’s music, every album had a different sound… I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler

 

Gold Gets Whacked, So What Are You Waiting For?

August 19, 2019

* The Fed’s Jackson Hole Boondoggle is next week… 

* U.S. Retail Sales are strong, and that has the dollar bugs dancing! 

Good Day… And a Marvelous Monday to you! Brother! I guess I need to go back to school to learn how to read a calendar, eh? Last Thursday, I erroneously said, that next week (this week now) would lead us to the Labor Day weekend.. Nothing like skipping a week, eh, Chuck? What a dolt I am at times, eh? My wife hosted a baby sprinkle here on Saturday, for Rachel… That meant I had to get out of the house! So, I went with son Andrew (Rachel is his wife) to my favorite watering hole for lunch! Good stuff! Cardinals come home from a road trip in first place… Does anybody want to win the Central Division this year? Johnny Nash greets me this morning with his song: I Can See Clearly Now… Good song for optimistic people!

I’m going to start the letter a little differently this morning… here goes… Well, last week, on Thursday… August 15…. In 1969, on that day, they began the Woodstock music festival. It ended 3 days later, but not before over 450,000 music lovers saw so many groups. Many years ago, I had the movie on VCR tape, and would hand it to any new person that was going to be working for me and would tell them that it was required viewing… I doubt anyone ever really took it home to view, but it became a tradition… My favorite performer of Woodstock was Alvin Lee and Ten Years After… I said in a Tweet on Thursday last week, that this was an important event in our lives in 1969… 50 years ago!

So… how’s that history? I’ve spoken to a lot of people through the years, and if everyone of them that said that they were at Woodstock, were actually there, then 450,000 was a too small of an estimate! OK… I have some bones to pick with some people this morning, so stick around for that, it should be good… The dollar bugs still have control… It’s a game of chicken to see who blinks first… The dollar bugs or the Gold bugs… Shoot Rudy, even Gold lost $10 on Friday! I read a report this weekend where the writer was saying that he was of the opinion that Gold will fall back to $1,450 before taking off for $1,600… I hope he’s wrong, I would prefer to see Gold continue its march to $1,600 uninterrupted!

Unfortunately though, Gold is down $18 in the early trading today, bringing the shiny metal back below $1,500… Hey! I look at this like… For all you procrastinators that thought you missed out on Gold’s big move upward, the shiny metal is giving you a second chance opportunity to buy it! 

Things in the Eurozone continue to unravel… And now the European Central Bank (ECB) is talking about getting back into the bond buying business… In other words, more stimulation, as if negative rates weren’t enough already! I don’t know about you, but I really don’t see how this will help the euro… The ECB is no different than the Fed, or the Bank of England, or the Bank of Japan, these Central Banks all believe they can avert a recession by applying stimulus… But the damage they do to their balance sheets while averting the recession, is unrepairable… I have a novel idea for them all… Why don’t you all just allow your economies to do what they want to do… Clean out the excesses and start over, instead of this kicking the can down the road, and thinking you’re smarter than everyone else!

I read a piece from the an old friend that resides in Switzerland, where he runs a managed money firm… And he’s of the opinion that when all the world’s major economies go into recession in 2020, that the Swiss franc will be the currency of choice to run to… hmmm… he may be right… I may be crazy… but I just don’t see negative yields in Switzerland being a buying point… But that’s not my bone to pick, as I truly respect this guy’s opinion…And looky there, the best performing currency this morning is the Swiss franc! 

Here we go… somebody better hold me back from saying something here that I shouldn’t… But… I’m going with a devil may care attitude! OK… I read a piece this weekend that made my skin creep up on me! The writer believed the Fed was incorrect in cutting rates last month, because, in their opinion, the unemployment rate was 4%, and GDP was 3%…. Alright, I’ll give her that… BUT… That’s only if you believe the Unemployment rates is 4%… with all the hedonic adjustments to employment figures, who really knows what the Unemployment rate is? I would rather look to the Participation Rate… which has been falling for two years now…. And GDP? Come on… How’d you get a degree in economics if you can’t tell when a GDP is bloated by Gov’t Spending? Real GDP is probably 2%… that same that it has been for a decade, on average that is…

Just shows to go ya, that you have to be careful with who you read… I was shocked and horrified that this article that I’m referring to, made it to print! But then, it’s just an opinion, of which everyone has one, and it could be wrong!

Oh, and here’s another article that I didn’t agree with… This fellow wrote a long article about how we should not use the inverted yield curve as an indication that a Recession is coming… I about fired off an email to him, but then saw my fave economist, David Rosenberg, post something on Twitter that said it all… Take it away Rosey! “Hey, if you don’t like the yield curve as a recession gauge, how about the -5.9% YoY trend in the Cass Freight Index, the -9.7% plunge in Port of Long Beach cargo traffic and the 3.9% slide in US railway carloadings? – David Rosenberg on Twitter

Or the negative print in Manufacturing Output last month? This is not data for the weak at heart, folks… Things are really unraveling here too… Shoot, I even saw an blurb this weekend that said that the President was worried about a recession… Mr. Optimism himself, becoming a worry wort with the economy… hmmm…. Things that make you think, right?

Well, when the black clouds finally form overhead and the daylight turns to darkness, like a Midwestern summer storm, people will say, “but nobody warned me and now I have huge losses in my stocks”…. And I’ll say… “Wait! What? You’ve got to be kidding me! I’ve been talking about a coming recession for months, and even showed at one point how historically speaking stocks perform badly in a recession… So, don’t come crying to me!

Going back to last week’s Data Cupboard… On our Tub Thumpin’ Thursday last week, Retail Sales for July did exactly what I said they would doo… They jumped higher, and it was all on back-to-school sales… However, also printing (negative) like I said they would, were Industrial Production, and Manufacturing output. Capacity Utilization dropped, and so did Productivity… So, we’re not working as hard as we were before apparently…

But the dollar bugs took the Retail Sales and ran with it… pushing the euro below the 1.11 figure, going into the weekend. Late last week, Australia printed their lasted Employment Data and it surprised observers to the upside, thus now giving those with some optimism that the rest of 2019 could be much better than previously thought… That optimism allowed the Aussie dollar (A$) to rally going into the weekend.

But any moves by the currencies VS the green/peachback will be muted, and held in check until further information can come to the traders. So, small moves are in the future for any currency that gets to rally VS the dollar.

OK… The Russian ruble got whacked good or bad depending on how you view it… But it lost some major ground on Friday, apparently there are few traders that fear the new sanctions placed on Russia by the U.S. with even stronger measures feared for later this year,  will hurt the economy, and that caused the ruble to sink on Friday… Add to those fears, a stumbling, fumbling, bumbling price of Oil, and a strong dollar, and you have a recipe for one of the most steady currencies to weaken…

The U.S. Data Cupboard had a very strage Housing number on Friday… I’m surprised that housing hasn’t rebounded with the drop in mortgage rates… But then who knows? I did see that the Consumer Sentiment Index fell from 98 to 92 on Friday… Really? These people are finally seeing some dark clouds?

This week, the Data Cupboard is empty until we get to Wednesday, and even then the only thing to print that day will be the Fed’s Meeting Minutes from their last meeting where they cut rates…. Should be an interesting read to see just how many Fed Heads were calling for a 50 Basis Points to be cut instead of just 25…

To recap…  Gold got whacked by $10 on Friday, and is down $18 this morning, bringing it back below $1,500… Retail Sales in the U.S. were jacked up from back-to-school sales, but that didn’t stop the dollar bugs from pushing the dollar higher, and causing the euro to drop below 1.11… The Aussie dollar saw a little love come its way when they printed a surprising strong Employment Report…  

For What It’s Worth…  Well, I’ve long said that I recalled when we didn’t even know who the Fed Heads were… But now they think they’re all rock stars, and everyone is entitled to hear that they don’t know what they’re talking about! HA!  Well, there’s gag order on them now… Check this out from zerohedge.com : https://www.zerohedge.com/news/2019-08-16/powell-issues-gag-order-fed-presidents-report

Or, here’s your snippet: “Following the recent dismal communication failures first by NY Fed president John Williams, and following that, Powell’s own notorious July 31 “mid-cycle adjustment” press conference, a recurring lament among the investment community has been for the Fed to just keep its mouth shut, instead of continuing to yap and confirming that it is absolutely clueless about the economy and the future.
In a surprising twist, the Fed may actually be listening.

According to the Spectator, chair Powell has banned any public appearances by any Fed Board member, noting that “appearances at conferences have been canceled, all scheduled interviews have been abandoned and any comments on or off the record are outlawed.”
This unprecedented action, the Spectator reports, is a reflection of two pressures.

First, economic indicators increasingly suggest the US is heading into a recession with the Dow plunging 800 points on Wednesday.

Second, relations with the White House have reached a new low, with president Trump pinning the success of his presidency upon a strong economy as a recession – Trump believes – would destroy his reputation and kill his reelection chances. As a result, Trump has – correctly – blamed the current woeful state of the global economy on the Fed. The problem is that Trump also “owned” the same state of both the economy and the market for the past two years, so any recession will be entirely his, just as Yellen (and Bernanke) intended, and shift attention away from the Fed.

Continuing a series of outbursts aimed at the Fed, Trump again lashed out at Powell (and the Fed) claiming they are responsible for the slide in the stock market. To be sure, Trump has been doing this for a long time, realizing he will need a foil if when the market and economy crash, and has – for better or worse – picked the Fed as the scapegoat.  

Meanwhile, a hapless Powell believes that the Fed, which cut interest rates by a quarter point at the end of last month, has very little left in its armory and that even a cut in interest rates would do nothing to combat growing international economic pressures.”

Chuck Again…   Well, this “gag order” is going to be tough to enforce, given that next week will be the Fed’s Boondoggle at Jackson Hole, Wyoming… I’m just saying…

Currencies today 8/19/19 American Style: A$.6777, kiwi .6416, C$ .7544, euro 1.1098, sterling 1.2106, Swiss $.9808, European Style: rand 15.3483, krone 8.9845, SEK 9.6630, forint 293.37, zloty 3.9379, koruna 23.2246, RUB 66.48, yen 106.66, sing 1.3749, HKD 7.8436, INR 71.42 China 7.0419, peso 19.66, BRL 4.0035, Dollar Index 98.22, Oil $55.03, 10-year 1.62%, Silver $16.88, Platinum $848.00, Palladium $1,459.00, and Gold.. $1,495.70

That’s it for today…  As I mentioned above, my beloved Cardinals are in first place this morning in the Central Division, but only by percentage points over the Cubs… And the Brewers are only 2 games behind the top two… It’s a tight race to the finish… My darling granddaughter, Delaney Grace will be singing the national anthem at a different venue this week. I get goose bumps when I hear her sing the national anthem… Thin Lizzy takes us to the finish line today with their song: The Boys Are Back In Town…  I saw Thin Lizzy open up for Queen many years ago, and on that particular night, I thought the boys in Thin Lizzy sounded better than Queen, who I was a big fan of their…  I hope you have a Marvelous Monday, and that you will promise to Be Good To Yourself!

Chuck Butler

 

Where’s The PPT When You Need Them?

August 15, 2019

* Treasury yield curve inverts, causing mass stock selling

* Gold fights back after the Engineered selloff on Tuesday… 

Good Day… And a Tub Thumpin’ Thursday to you! I’m not sure I should be participating in any Tub Thumpin’ except from my chair… UGH! Well… well, well… what have we here? As Bloomberg put it yesterday, “U.S. stocks on Wednesday suffered one of the biggest sell-offs of the year. The S&P 500 sank almost 3% and the Dow plunged 800 points. The yield curve inverted for the first time since 2007, in an ominous sign of a looming recession. Even cryptocurrencies got clobbered.” Nothing like telling people one day that all’s well, and then the next day that all’s not so well, eh? Oh well, we have that to talk about today, along with some Data that your one-eyed writer, didn’t see as being printed on Thursday, but saw it printed on Wedensday… I goofed that one up! Oh well, life goes on… Edwyn Collins greets me this morning with his song: A Girl Like You…

OK… Why on earth were the TV commentators acting so surprised yesterday to hear that the stock were getting taken to the woodshed? Did I not tell them yesterday that the Fear / Greed Index had gone to “extreme fear”? they say it took the bond market yield curve to invert for the first time since 2007 to get everyone scrambling about… The yield curve had a small section inverted already, and now the whole shootin’ match is inverted! For those of you new to class, an inverted yield curve is a strong indication that a recession is coming… Or, Could be already here… 800 points? Yikes!

Do you recall 1987? Rocktober 1987 to be concise… And everyone thought the sky was falling? Well to take you back for comparison purposes… The Dow lost 528 points or 22% of the total Dow that day… Yesterday, the DOW lost 800 points, or 3.5% of the total Dow… Hmm… A Big difference, eh? So, in reality, yesterday’s plunge in stocks was not that Big of a deal, right? Ahhh, grasshopper, come sit by and listen to story about man named Jed… No wait! Not that story, but this one… the President’s Plunge Protection Team was organized after that 1987 “Crash”, and still exists today… They will attempt to stop this plunge right here, right now… But as 2007 showed us, the PPT’s finger in the dike didn’t hold back the flood of sellers, I’m just saying…

Gold didn’t have a bad day… Gold gained $15 on the day… after falling in the early part of trading yesterday, it soared back, and was the apple of everyone’s eye, for they sought safety… hey, Mark Cuban, bet you didn’t think of that did you? HA!

The currencies on the other hand didn’t fare so well VS the dollar… Ok, I have a question for you to ponder… Because I pondered this one all last night… Stocks got shot-gunned, the crypto-currencies got hammered, and yet currency traders bought dollars… As if the dollar would be considered a safe haven any longer, after the Fed lost the last of their credibility when they reversed their rate hikes last month… But, it is what it is… but that doesn’t mean I have to accept it! The only thing I’m thinking of here is that the currencies are cheap… Cheaper than they’ve been in a while… Beep, Beep Beep… You know the sound that a truck makes when it’s backing up?

Inflation in the U.K. shot higher (2.1%) in June, and that got the sterling traders all lathered up, to push sterling higher on the day… But folks, I doubt this can last… The euphoria of seeing inflation higher (I know that’s sure a perverse way of looking at it but that’s where we are these days)  will wear off soon, and then the traders will be looking at the no BREXIT deal  once again, and things will fall apart for sterling once again. 

The price of Oil slipped backwards again yesterday, and that really took a chunk out of the Petrol Currencies…  The Russian ruble didn’t get hit too badly, but the Norwegian krone did, and the Brazilian real did, and even the previously steady Eddie loonie did…  I’m worried about the krone, as it is within spitin’ distance of the 9 figure… A weak figure that the krone hasn’t seen since the sell off of the currencies in the 2011 discovery of the PIIGS’s debt…   But as long as the euro struggles, along with Oil, the krone will be at their mercy… 

Well, it’s a religious holiday in parts of Europe and South America today, as today is Assumption Day…  The Blessed Mary ascended into heaven… So, all the Catholics around the world I hope you have a Blessed day… 

OK, now back to our regular program! HA!   Well, as I mentioned above, Gold had a good day yesterday, after suffering though a engineered sell off on Tuesday…  I know one thing, folks… And that all this Trade War/ Tariffs, BS is going to push inflation higher… I can see it coming, it’s like  when I sit on the deck at my place in S. Florida. I can see the lights of an incoming plane for 20 minutes before the plane appears overhead, heading to PBI…   The first time I sat out on the deck at night, and saw the light, it appeared to stationary… And I joked that we were seeing a UFO… So, now when the lights appear, I say, “here comes another UFO”… 

Boy did I get off base there or what?  Sorry…  But higher inflation is going to help the price of Gold… Remember what I told you a couple of days ago, about what Lola, aka Goldman Sachs, was telling its clients… That Gold was going to be $1,575 in 3 months, and $1,600 in 6 months…  What do you think their researchers were seeing that made them make those forecasts?  Higher inflation… is the answer…  And for once Lola and Chuck are on the same page… 

The U.S. Treasury 10-year continues to slide down the slippery slope of yield, and trades this morning with a 1.54% yield…  As I’ve said many times before, so that I begin to sound like a broken record… The Bond Guys Know…  I’m not just saying this folks, I’m shouting it from the rooftops! 

OK, I’m positive about this! Today, is the Big Data print day for the U.S. Data Cupboard… I have no idea why I thought the data prints were listed under Wednesday… But I was wrong, E-Chuck…  So, today, is the day that we’ll see the color of the most recent Retail Sales, Industrial Production, Capacity Utilization, and Productivity… There will be some other not so important data prints there today, but our focus should remain on those 4 I just listed. 

I’m still of the opinion that Retail Sales will look healthier than it has recently, as the back-to-school sales will be in the July number, because… School starts so darn early these days… In fact, Delaney, and Everett start school today, and Braden started two days ago!  August 15th, when I was in school was the day we started football practice with our eyes on the Labor Day weekend, when we would start our season… Nowadays kids start school on August 15th… That’s crazy!  

To recap…  Stocks got whacked badly on Wednesday, but looking back it’s really not that big of a deal, as long as it’s confined to one day…  Gold has a spectacular day, gaining $15 after suffering through an engineered sell off on Tuesday.  Where’s the PPT? Aren’t they supposed to keep days, in stocks, like Wednesday from happening?  The currencies continue to be held under the spell of the dollar…  And today, is the day, the data prints will be spilled out on the table like a shrimp boil… I was so confused yesterday!

For What It’s Worth…  Subprime… Now that’s a not so favorable word from the financial meltdown, isn’t it?  Well, Subprime loans in Autos are the meat and potatoes of the Auto industry, and well, when they go bad, the Auto industry suffers… And well… you can find the article here: https://wolfstreet.com/2019/08/13/auto-loan-subprime-delinquencies-at-2009-level-biggest-12-month-surge-since-2010/

Or, here’s your snippet: “Serious auto-loan delinquencies – 90 days or more past due – in the second quarter, 2019, jumped 47 basis points year-over-year to 4.64% of all outstanding auto loans and leases, according to New York Fed data released today. This is about the same delinquency rate as in Q3 2009, just months after GM and Chrysler had filed for bankruptcy. The 47-basis-point jump in the delinquency rate was the largest year-over-year jump since Q1 2010:

But this time there is no economic crisis. The unemployment rate and unemployment claims are hovering near multi-decade lows, and employers are griping about how hard it is to hire qualified workers without having to raise wages. So, unlike during the Financial Crisis, this surge in the delinquency rate has not been caused by millions of people having lost their jobs. It’s not the economy that did it. It’s the industry.

Of those $1.3 trillion in auto loans, 4.64%, or a record of $60.2 billion, are 90+ days delinquent, which gives the chart below quite an amazing trajectory. But this is not an employment crisis, when millions of people lose their jobs and cannot make the payments on their auto loans. What will this chart look like when the economy turns, and unemployment surges again, and people cannot make their car payments?”

Chuck again…  The thing here is this… Subprime auto loans could all go bad, and it wouldn’t be but a blemish on the size economy that we have… But physocologically it would be bad, and if we think back to 2007, thinking bad about things caused more selling… I’m just saying…

Currencies today 8/15/19 American Style: A$.6772, kiwi .6435, C$ .7508, euro 1.1155, sterling 1.2111, Swiss $.9735, European Style: rand 15.3108, krone 8.9911, SEK 9.6171, forint 292.16,  zloty 3.9287,  koruna 23.1998, RUB 65.50, yen 105.85, sing 1.3898, HKD .7.8423, INR 71.72, China 7.0268, peso 19.62, BRL 3.9938, Dollar Index 97.85, Oil $54.28, 10-year 1.54%, Silver $17.23, Platinum $841.67, Palladium $1,434.25, and Gold… $1,519.91

That’s it for today, and this week…  I have to go see my heart doctor today, as a follow up to the hospital stay I had last month… I look like hell these days, I sure hope they’re nice to me… Well, my beloved Cardinals are back in 1st place after a beating up on the under .500 teams…  That’s what the Cardinals have in their favor the rest of the season, they play the majority of their games against under .500 teams…  And they have 7 games left with the Cubs… Those will be the deciders as to who wins the division…  Next week will be the lead-in to Labor Day Weekend… Wow! The summer went by in a heartbeat!  Time to gear up for the Annual Butler Labor Day BBQ!  Chris Stapleton takes us to the finish line with his song: Tennessee Whiskey…    I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday, and that you will please Be Good To Yourself!

Chuck Butler

 

 

It’s Data Day Here In The U.S. Today…

August 14, 2019 

* Da Boyz Are Back In Town, per Ed Steer

* The Strong dollar trend remains in place, but for how much longer? 

Good day… And a Wonderful Wednesday to you. I’m falling apart… I’ll just leave it at that, for you don’t want to hear about my latest malady…  My beloved Cardinals are like the bully that beats up on the weaklings, but as my dad used to tell me, “There will always be someone bigger and stronger”, and whenever the Cardinals play a team “bigger and stronger”, they get their hats handed to them…  While that kind of play might get you into the playoffs, the problem then becomes how do you beat the “bigger and stronger” teams?   Procol Harum greets me this morning with their rock classic song: A Whiter Shade of Pale… 

Longtime friend., Ed Steer, said it best this morning when he quoted a Thin Lizzy song, and said, “Da Boyz Are Back In Town”…  you only get one guess as to what he’s talking about…  Yes, the short Gold paper traders, or price manipulators, or the boys in the band, were back at the COMEX with their arms full of paper trades, that whacked Gold…   Gold officially lost $9.60 on the day, but a times it was much worse… I was wondering when they were going to show up, the price manipulators that is, and now I wonder no more! 

But not to worry… Gold is up in the early trading this morning, $7, so we have that going for us today!   There was no change in the rhetoric and saber rattling in the Trade War, except for President Trump announcing that some of the tariffs will be delayed…  Not that they were being dropped…  just delayed. I guess he did that to give negotiations an opportunity to work some magic…  But if they haven’t pulled a rabbit out of their hats by now, there will be no magic now…  That’s my opinion, and it could end up being wrong, but I truly doubt that!

The problems for the U.S. just keep getting swept under a rug… This Trade War is going to be the last shove the economy needs to send it over the cliff…  And all the while the dollar bugs continue to ignore all the dark clouds that are forming, and keep pushing the dollar to gain VS the currencies…  Interest rates here in the U.S. are going lower, maybe not in September, as of right now there’s a 66% chance of a rate cut at the September meeting. But… they will sooner or later, because the Fed Heads think they know best, and they think they know how to fix the economy when it ails…  And all that will be Armageddon for the dollar, and it’s a shame the dollar bugs can’t see that…  Party until they take the punch bowl away, is their motto I guess!

Well, it’s not all wine and roses for investors these days, that is unless they are buying Gold & Silver! I came across this Fear & Greed Meter on Zerohedge.com yesterday… Here’s what they show right now…

1 year ago, greed was at 73 on a scale from zero (extreme fear) and 100 (extreme greed)
1 month ago, it was still in the greed at 59…
1 week ago, it was neutral at 48…
And today, it’s at a 22, which is in the Extreme Fear range…

So, what’s happened to all the seashells and balloons for investors?
Reality, may have something to do with it…
The realization that trees don’t grow to the moon, the economic data recently hasn’t been good, and we’re in the middle of a Trade War… May have something to do with it…

And that’s a good indicator that Gold would be getting bought, which it is… Well bought by investors… The Gold ETF is a record levels of size (but try to get your physical Gold out of an ETF) I read a report yesterday that said ETF’s are nothing but a price indicator with extreme risks… But at least these investors realize that Gold is going to get stronger or else they wouldn’t be buying the Gold ETF…

And we all know that Central Banks like Russia and China continue to rack up huge amounts of physical Gold in their reserves… Fear & Greed Index… it pays to keep this on your radar, folks…

And things aren’t any better in the Eurozone… The Trade War is affecting them too, and the proof is in the pudding, as this morning they printed their June Industrial Production numbers, and they aren’t good folks…  A negative -1.6% for the month, and a negative -2.6% year on year…  The euro took a shot to the mid section after these numbers were printed, and rightly so, but here’s where I stop to question what the heck is going on, for we’ve seen negative numbers in Industrial Production here in the U.S. in the past prints, and the dollar never took a shot to the midsection because of the negative print… 

It just shows to go ya, that the strong dollar tend is till in place, although we’ve had a few false dawns the past couple of years, the trend is still in place, but, as I’ve said before, these false dawns are important to see because they tell me, (witness to all of the currency trends since 1971) that the trend is coming to an end… not today, tomorrow or next week or month, but…  when the Fed Heads get to cutting rates again, that will be the beginning of the end of the strong dollar trend… 

The price of Oil has rebounded further in the past 24 hours, and now trades with a $55 handle and is within spittin’ distance of $56… But the Petrol Currencies must be on a delayed reaction basis… for they haven’t moved along with the price of Oil… 

Yesterday I told you about the good news from Russia, and was upset that the ruble didn’t rally on the news… But, again, it must be on a delayed reaction basis, for it rallied last night…   And was the only currency to gain VS the dollar on Tuesday. Shoot Rudy, not even the Japanese yen rallied, and instead weakened on the day…  

For those of you new to class or just skipped over this thought from the other day, that the Japanese yen has been in rally mode for the last month, and fears in the markets have investors seeking safety…  Now, that brings us to the question as to why in the world they would buy yen ? Well, that’s beyond my ability to comprehend, for Japan is far ahead of the U.S. with all their problems… 

So, I read a report that quoted Big Al Greenspan, yes, he’s still around, and still thinks he needs to comment on things… And this time he was talking about The Fed and Negative Rates…  Big Al basically said if Treasury yields go negative, it’ll be no big deal….  let’s listen to what Big Al had to say: “There is international arbitrage going on in the bond market that is helping drive long-term Treasury yields lower,” Greenspan, who led the central bank from 1987 to 2006, said in a phone interview. “There is no barrier for U.S. Treasury yields going below zero. Zero has no meaning, beside being a certain level.” – Al Greenspan

OK… this is too good to not use… I was talking to my good friend, the Retirementor, Dennis Miller, the other day, and by the way he sounded pretty good, (he’s gone to hell and back with his cancer treatments, that are now on hold) And he said he had an idea…  His idea was that with all the countries of the world issuing negative yield bonds, Gov’t and Corporate, then if Sears and GE really want to get back into business they should move to Europe and issued bonds…  They wouldn’t have to pay interest! I said, “That’s awesome, Dennis”… and he said I could use it, but I said, I wouldn’t, but after Big Al’s comment on negative yield Treasuries, I thought I can’t let that go without giving Dennis his due! 

Oh, and about $15 Trillion have been issued as negative yield bonds to date…  it’s amazing what some people will buy, isn’t it? 

OK, the U.S. Data Cupboard gave us the stupid CPI (consumer inflation ) yesterday… it’s so stupid it’s not even worth quoting what it did…  But today, the Data Cupboard will spill out data prints all over the table, like they’re unloading a pot full of shrimp boil!  Retail Sales, Industrial Production, Capacity Utilization and Productivity are the data prints that I’ll be looking to…  Surely, (don’t call me Shirley!) the back-to-school sales have helped Retail Sales…  (The Butler Household Index can’t help with back-to-school sales, because we don’t have any kids going back to school!)  Yes, we still have Alex in his last year, of his 6 year PT program, but he doesn’t need pencils, crayons, markers, notebooks, laptops, and backpacks… 

To Recap…  The dollar is still in control, but for how much longer?  Gold gets whacked but rebounds in the early trading today. the Trade War rhetoric and saber rattling is on hold. And the Greed / Fear Index is showing that investors have gone from Greed a month ago, to extreme fear now… Chuck asks, has reality finally gotten to them? 

For What It’s Worth…  Since we spent so much time talking about negative yielding bonds this morning, this caught my eye… A Danish bank is the first to issue a negative yielding mortgage! And that story can be found here:https://www.marketwatch.com/story/a-danish-bank-is-offering-mortgages-with-negative-interest-rates-why-you-shouldnt-wish-for-that-to-happen-in-the-us-2019-08-12

Or, here’s your snippet: ” It’s safe to say that mortgage rates have never been lower in Denmark.

In fact, they’re now negative. Denmark’s Jyske Bank JYSKY, -20.24%, is now offering a 10-year fixed-rate mortgage at negative 0.5%. Additionally, Finland-based Nordea Bank announced Wednesday that it will offer a 20-year fixed-rate mortgage in Denmark that charges no interest, and the bank is preparing for the possibility of home loans up to 30 years in duration having negative rates. Currently, the rates on 30-year fixed mortgages average just 0.5% in Denmark.

When a mortgage rate is negative, a borrower still must make monthly payments toward their principal, but they ultimately pay back less than they originally borrowed. They would, of course, still have to pay other costs and fees.

 At the same time, other long-term rates now stand at or below 0% across the world. Thirty-year German bond yields TMBMKDE-10Y, +5.73% have dropped deep into negative territory, and central banks in Europe and Japan have toyed with 0% or negative rates for years now.

In the U.S., the situation is much different. Right now, the 30-year fixed-rate mortgage in the U.S. averages 3.6%. Nevertheless, the specter of a recession has some worrying about the trajectory of the interest rates in the U.S. and what negative rates could mean for Americans.”

Chuck again…  the poor “savers”…  there’s nowhere for us to go, and eventually the savers will be pushed to buy risky investments as they look for income…  It’s a same folks… a real shame… 

Currencies today 8/14/19 American Style: A$.6757, kiwi .6433, C$ .7526, euro 1.1167, sterling 1.2075, Swiss $.9734, European Style: rand 15.2380, krone 8.9380, SEK 9.6057, forint 290.57, zloty 3.9057, koruna 23.1637, RUB 65.26, yen 106.19, sing 1.3873, HKD 7.8445, INR 71.31, China 7.0532, peso 19.47, BRL 3.9741, Dollar Index 97.78, Oil $55.97, 10-year 1.61%, Silver $17.12, Platinum $852.59, Palladium $1,443.68, and Gold… $1,509.38

That’s it for today…  I forgot to mention yesterday that I was sorry for the delayed delivery of the Pfennig on Monday, there were technical problems, and I was frustrated as usual when that happens…  I’ve lost the ability to get to the Pfennig Replies box again, so if you’re  wondering why I haven’t answered your email, it’s because I haven’t seen it! I spent some time yesterday cleaning my writing desk of all the clutter I’ve accumulated… And added some pictures to my board. I need to organize that board too, but that’s for another day!  The Cardinals are playing the Royals for two games, and every time, through the years, that the Cardinals play the Royals, my mind drifts back to Game 6 of the 1985 World Series, when umpire Don Denkinger robbed Cardinals fans of another Series victory… I’ve forgotten the name of the referee that gave Colorado 5 downs to beat my Mizzou Tigers, but I’ll always remember the umpire’s name that robbed us of a World Series Championship…  The Cure takes us to the finish line today with their song: Close To Me…    I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

Italy Shows Up On The ECB’s Doorstep With A Bag Of Problems!

August 13, 2019 

* Gold rebounds, stocks get whacked, and currencies are dull

* Chuck gives us his thoughts on the Trade War… 

Good Day… And a Tom Terrific Tuesday to you! Geez I had a tough day yesterday… Every now and then the chemo I take gets to me and whacks me out for the day, and yesterday was one of those days… I never know when this will occur, and sometimes think that the chemo had more potency that day, but then it’s all in pills and those are regulated, right? This is why I wouldn’t be able to hold a job any longer, as I couldn’t be depended on to show up when the chemo whacks me out… I did that (worked while feeling bad) for 9 years, and I doubt that anyone ever really knew when I was having a bad day. But I’m just too worn out now to do that ever again, so… I’m retired! A little young to do that, but… it is what it is… Three Dog Night greets me this morning with their live version of their song: Easy To Say No…

Well, not much happened in the currencies  markets yesterday, but… The Dow was down almost $400 on the day… Gold gained $14, and the euro found its way back above 1.12… The 10-year’s yield slid further down the slippery slope to 1.65% from 1.68%… I see now that there are lots of writers climbing on my bandwagon that claims that the 10-year’s yield will revisit it’s low of 1.38% a few years ago… Welcome aboard, what took you so long to see this? Oh! You were drinking the Kool-Aid and refused to believe me? Oh well… better late than never!

It sure looks as though the Trade War between the U.S. and China is going nowhere but down a deep abyss… Here’s how I view all this saber rattling going on… Presidents before Trump where on a mission from God to give China everything they wanted, and now Trump thinks he can reverse all that in a few short years? You’re fighting a losing battle with the Chinese… They are a Communist Country that will have their leaders in place for years to come, at least until they die, and well, here in the U.S. the President has 4 years, and 8 if they’re lucky, or unlucky I must add… So, figure it out, this Trade War is going to end up hurting everyone but, the Chinese won’t allow it to change anything, they’ve been through worse, right? But here in the U.S. the time will come when the Trade War will have to be cancelled, because the American people are suffering… I’m just saying…

I told you yesterday that we were expecting a heat advisory for the day… The local newspaper had a great line… They said, “Beelzebub called… he wants his weather back”… Now that’s funny!

OK… The publishing guru and writer extraordinaire, Bill Bonner, had a great letter yesterday when he talked about Gold VS the Dow… After years of ultra-low interest rates, 3 rounds of Quantitative Easing, and a Fed hell bent and whiskey bound to keep the party going in stocks… “Over 20 years – 1999 to 2019 – and despite more stimulus than the world had ever seen, the Dow rose only 143%.

If you held gold, on the other hand, you multiplied your money more than five times. It was not U.S. industry that triumphed in the 21st century. It was gold… old, dumb, immobile gold.”

Man… way to put it out there Bill! I know people that know me, and know that I love Gold… And they will make little jokes from time to time… I don’t let them get to me… Thin Lizzy had a song with the lyrics that went like this, “if that girl doesn’t want to know, forget her”… And so I think, if they don’t want to know about wealth accumulation, and a hedge against inflation in both the economy and the dollar…  then forget them! HA!

Hey, speaking of Gold… Did you see that Lola, aka Goldman Sachs told their clients that Gold will hit $1,575 in 3 months and $1,600 in 6 months? Well, they did… and you know me and my feelings toward Lola… What Lola wants, Lola gets, right? So, you can usually bank on what Lola tells her clients what’s about to happen… I’m just saying…

Well, I’ve heard some downright stupid thoughts through my years, but none more stupid than those spoken by Mark Cuban… He recently said, that “Gold & Bitcoin are equally useless” Well, while I believe in the future of blockchain, and the need for A digital currency, I do not believe that Bitcoin will be that choice… But Gold is useless? Well, he is a younger guy and therefore he’s never experienced runaway inflation like we had here in the late 70’s and early 80’s… Oh, and what did Gold do during those years of runaway inflation? It soared in price… that’s what! So, I guess since he’s never experienced inflation he had no use for an inflation hedge… But what about an accumulation of wealth? He certainly has experienced wealth, during his years, and to not use Gold as a hedge or as a form of wealth, is just beyond me… You know that Shark Tank show he’s on? Well, I think he just jumped the shark tank….

OK, in case you’re wondering this hasn’t turned into a strictly Gold newsletter… So… Well, the hits keep coming and going straight to number 1 for Russia… Last night I received a note that Fitch had upgraded Russia’s Credit Rating to the highest level it has been since 2014 (before the sanctions!) And what did Fitch see that made them make this change? Well, I’m glad you asked! Russia posted a surplus with reserves at $600 Billion! The ruble should take this news and run for stronger levels VS the dollar, folks… I’m just saying… 

But guess what the ruble did overnight? You probably got this right… It weakened… Wait! What?  The forces of evil at work here folks. that’s all I can think of… 

Remember those great Vacation movies with Chevy Chase? In the Christmas Vacation movie the Griswalds have family members arrive for the holiday, and they cause many problems… Well, Germany being the largest economy in the Eurozone, has relatives like the Griswalds… This time, like many times in the past, it’s Italy… They’ve shown up on the European Central Bank’s doorstep with a basket full of problems… This stuff from the likes of Italy, Greece, Portugal, Spain, just keeps giving….

It’s a real shame, that a country like Germany can’t just say, forget you all! Go back to your devalued currencies and wham bam politics and Central Banks and see if we care! But they can’t, so they welcome their unruly relatives to dinner, and hope for the best, plan for the worst! – Jack Reacher!

The price of Oil recovered a bit to a $54 handle in the past 24-hours after the Saudi’s revealed that their production cuts have held steady…  The problem for the Saudi’s and the rest of the Oil producing countries, is not the production cuts they made, but the lack of demand for Oil… It seems that people all over the world decided to leave the station wagon or SUV at home and take a plane to their vacation destination this summer, or they did a staycation…  

The Petrol Currencies of Russia, Norway, Brazil, Canada have seen a mixed bag of performance since the drop in the price of Oil.  Rubles and loonies have held steady, while the krone and real have seen some major selling. In the krone’s case, as long as the euro is having problems obtaining a bid, the krone will be hit from both the euro weakness and the price of Oil weakness…   A double Whammy if you will! 

Here in the U.S. The Federal Budget printed, and I have something on that for you in the FWIW section today…   I do have something else to talk about that’s related to debt, and how it will all lead to disaster for the economy, so let’s do this…   

I was going through Twitter yesterday, and came across a map of the U.S. that the fabulous Danielle Di Martino Booth posted. The Map showed each state’s citizen’s average credit card debt… And the number of months it would take to pay off that debt using 15% each month of disposable income to make the payment… OK, Guess which state had the highest number? If you said Alaska, you would be correct! Remember now that’s the average… So, Alaska’s lack of population compared to other states, doesn’t help their average, unless the majority of the holders held less than $10,825 of credit card debt… And it would take 14 months to pay that off using 15% of income each month… Oh, and those credit cards always have very favorable interest rates that they charge on the balance each month, don’t they? NOT! How does one get ahead in life with a burden that requires 15% of their income each and every month? What about shelter? Clothes? Food? Insurance? A Car? I’m just saying…

And now I read that Truckers are having a difficult time paying on their gas cards… Uh-Oh…  

To recap… Gold rallied, stocks got dumped, the 10-year continues to slide downward with its yield, and the currencies continue to be dominated by the dollar… How much longer this can last is the $64 question today…  Mark Cuban is jumping the shark tank… And Credit Card debt here in the U.S. is getting out of hand… 

For What It’s Worth… A dull night led me to the laptop and to peruse stories that would be FWIW worthy, and then like clockwork, longtime reader Bob, sent me this… It’s about the U.S. Federal Budget and can be found here: https://www.cnsnews.com/news/article/terence-p-jeffrey/3727014000000-federal-spending-sets-record-through-july-treasury-runs

Or, here’s Your snippet: “The federal government spent a record $3,727,014,000,000 in the first ten months of fiscal 2019 (October through July), according to the Monthly Treasury Statement released today.
While spending that record $3,727,014,000,000, the government ran a deficit of $866,812,000,000.

Before this year, the most that the federal government had ever spent in the first ten months of a fiscal year was in fiscal 2009, when the Treasury spent $3,576,745,930,000 (in constant June 2019 dollars, adjusted using the Bureau of Labor Statistics inflation calculator).

Total federal revenues in the first ten months of fiscal 2019 equaled $2,860,202,000,000. That was less than the total revenues the federal government collected in the first ten months of fiscal 2017 ($2,866,978,570,000 in constant June 2019 dollars) and fiscal 2015 ($2,868,253,370,000 in constant June 2019 dollars).

Federal individual income tax revenues in the first ten months of fiscal 2019 equaled $1,428,904,000,000. That was less than the individual income taxes the federal government collected ($1,438,381,490,000 in constant June 2019 dollars) in the first ten months of fiscal 2018.”

Chuck Again… Remember when the Tax cut went through a year or so ago, and I said then, that for you and me we wouldn’t see much of a change, but for businesses they would use the reduced tax liability to purchase company stock and not put it back into their respective companies… And by doing so, they sidestepped additional taxes… How much longer can this debt accumulation go on?

Currencies today 8/13/19 American Style: A$.6770, kiwi .6450, C$ .7544, euro 1.1217, sterling 1.2086, Swiss $.9675, European Style: rand 15.3284, krone 8.9195, SEK 9.5444, forint 288.65, zloty 3.8634, koruna 23.0161, RUB 65.41, yen 105.17, sing 1.3880, HKD 7.8467, INR 71.35, China 7.0591, peso 19.62, BRL 3.9614, Dollar Index 97.39, Oil $54.77, 10-year 1.64%, Silver $17.43, Platinum $865.45, Palladium $1,435.64, and Gold… $1,526.14

That’s all for today…  Well… the dog days of August are here, for major league baseball players that is… They need to suck it up and get to work, if they are going to make the playoffs! I about lost my religion the other night when Dexter Fowler slid into second and was called out. The replay showed clearly that he was safe, but after reviewing it the umpires called him out… I immediately went on Twitter to complain… Why on earth would we waste our time with replay if it’s not going to reverse a call that was wrong?  I just don’t get it… Is it there to get the call right, or not?  As you can tell I’m still steaming mad!  OK, calm down Chuck, it’s only a game, right? HA! Well, Jefferson Starship takes us to the finish line today with their song: Count On Me…  (I find that the older I get the more I like the music of Marty Balin of the Starship)…  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

 

 

Gold Rebounds After Some Profit Taking!

August 12, 2019

* The dollar remains in control, and It just doesn’t seem right!

* The U.S. Data Cupboard is chock-full-o-data this week! 

Good Day… And a Marvelous Monday to you! What a good weekend for me, weather-wise, and so on… The Cardinals found some home cooking to their liking at the hands of the Pirates, we celebrated Delaney Grace’s 12-th birthday, and I tried a new, to me, BBQ restaurant last night that was pretty good… (I judge all BBQ Against my own, which I’ve been told is pretty darn good!) And that brings me to the time of year, when we attempt to get friends and family together for one last Shin-dig for the Summer, with the Annual Butler Labor Day BBQ & Pool Party… The Evites were sent out, and we’ve already had some “yeses” … Crowded House greets me this morning with their song: Don’t Dream It’s Over… My good friend Rick will be excited to hear that one!

Well… When we last talked last Thursday, Gold was in the driver’s seat, and not the one by Sniff-n-the-tears! The shiny metal was driving past the mike markets like they weren’t even there! Gold made it to $1,510, and has seen either some profit taking or engineered paper selling  bu through Friday, but Gold is back above $1,500 this morning, after ending the week below the figure… Physical demand for Gold is really strong right now, folks, and that has the paper short trades not having the whack-effect that they used to have… Central Banks around the world, sans the U.S., are buying as much physical Gold they can get their hands on each month, and like I’ve always said…. “follow the money”… And right now the money is going to Gold (& Silver)….

The dollar, with no help from the President, is still in control and keeping the currencies at arm’s length. The euro had fought back to the 1.12 handle, but has slipped back below the figure this morning…  Anyway, we would need so see something a bit stronger, than a blip above 1.12, eh? You know, the world of currencies is a fragile thing these days… Countries are cutting rates to zero and lower, in attempt to get their exports competitive… Germany posted an awful Trade number last week, and of course all I head from the region were cries that the euro was too strong… Hogwash I say! I’ve proven to you previously that the euro is very much undervalued VS the dollar on a Purchasing Power Parity (PPP) basis… And the Big Mac Index agrees! But as long as the European Central Bank (ECB) plays games with negative deposit rates, I don’t see how things can change for the euro…

Last week I told you that the Reserve Bank of New Zealand (RBNZ) cut rates 50 Basis Points, and are 180 degrees away from where they forecast they would be now when the forecast was made a couple of years ago… The RBNZ was hinting about rate hikes in 2018, and then 2018 came and went, with no rate hikes… And kiwi has suffered because of that, and the fact that now instead of hiking rates the RBNZ cut them and cut them deep… Cat Stevens wrote: The first cut is the deepest… And Rod Stewart and Cheryl Crow, both sang it…

The only currency on the rally tracks VS the dollar is the Japanese yen, and that alone should tell you just how strange the currencies are these days… The Russian ruble is stable, and that’s saying something given all the rot on the vine in Europe and Asia…  And the Canadian dollar / loonie remains above 75-cents, which is very good considering the drop in the price of Oil, and the goings on in Canada, which aren’t the kinds of things that would generate a strong currency… 

On the recession outlook front, here in the U.S. … I read this last week and about had a cow… 42,937 jobs were lost to bankruptcy in the first seven months of 2019, up 40% on the same period last year and 20% higher than all bankruptcy-related job losses last year.

“It is the highest seven-month total since 2009 when 50,258 cuts due to bankruptcy were announced… Dare we stir up the ghosts of recessions past! This has got to be on someone’s mind, right? Someone that makes decisions here in the U.S., right? Or am I barking up the wrong tree?

I was treated this past weekend with a special report from long time friend, John Mauldin. In the report he allowed Professor Lawrence Kotlikoff, of whom I’m quoted for years, to give his take on caused the Great Recession, and what’s still here among us to cause another one…

The great professor talked about Bank leverage… And how that was the main reason for the Great Recession… And that all that still remains in the banks… He talked about how the spread of not so true news about an entities’ ability to obtain loans, really was the downfall for the likes of Bear Stearns and Lehman Bros… Well, it opened my eye a little not that I this was new info for me, but that the great professor was able to get it out there for the millions of Mauldin readers…

According to Professor Kotlikoff, it wasn’t the subprime problems that caused the G.R. and it wasn’t the housing bubble, nor was it the ratings agencies not doing their due diligence. And it wasn’t the derivatives… It was simply the bad leverage that companies had gotten themselves into and then bad info hitting the streets… And all those dark clouds still are hovering over the U.S. economy… So, we’ve got that going for us, eh?

And yet the dollar continues to be stronger than other currencies… China sure hasn’t helped the currencies that represent Global Growth, or the Asian countries, with their devaluation of the renminbi last week… It’s got to be very difficult as a currency trader to say… “I think I’ll buy some currencies and sell dollars today” with that kind of stuff (a devaluation) going on… I’m just saying…

I don’t know if you’ve been checking the 10-year’s yield rate in the currency roundup each day, but if you haven’t The 10-year’s yield has dropped below 1.70%… How many of you recall me saying, not that long ago, that I fully expected the 10-year to revisit the 1.38% low level it hit a few years ago… Well, I’m standing by that comment and won’t be persuaded to change my mind one iota! The Bond guys “know”…. I’m just saying….

The U.S. Data Cupboard is really loaded for bear, but it won’t begin to unload data prints, that matter, until Wednesday, when we get Retail Sales, Industrial Production, Capacity Utilization, and Productivity… Oh, we’ll see the Federal Budget, and the stupid CPI (consumer inflation ) print before Wednesday, but those 4 I mentioned above are the cat’s meow of data prints that really matter… And by Thursday morning, we should have a better idea of when the recession train is going to be going full steam ahead…

To recap… Gold takes a pause for the cause, and the dollar is still in control of the currencies. The recession thought is really on Chuck’s mind this morning, and he even has Professor Lawrence Kotlikoff to talk about it… The 10-year’s yield is falling like a rock these days… Chuck still believes that it revisit the 1.38% low level it hit a few years ago…

For What it’s Worth… Well, how many of you, remember 1985? I’m sure most of you do… But do you recall, the most famous reindeer of all? No wait! I mean do you recall that 1985 was the year of the Plaza Accord? Where finance ministers from around the world met at the Plaza hotel in NYC, to iron our an agreement to weaken the dollar, because it had gotten too strong, and the U.S. debts were beginning to pile too high? Imagine that… These guys thought the U.S. Debt was too high back in 1985? They would be rolling over in their graves today, eh? Well, the reason I bring this up (1985) is that the folks at MarketWatch ran an article the other day written from a guy who believes that a Back to the Future visit to 1985 would be the best thing for the Trade Wars… And it can be found here: https://www.marketwatch.com/story/a-1985-global-deal-to-weaken-the-dollar-offers-a-road-map-to-ending-the-trade-war-2019-08-08

Or, here’s your snippet: “The fear that a deepening trade war could wreck the global economy has analysts and economists once again pining for the mid-1980s, when the U.S. and the world’s other major economic powers struck a deal, known as the Plaza Accord, to weaken the dollar.

An end to the present turmoil surrounding U.S.-China trade tensions “may require no less than a global grand bargain,” wrote Thierry Wizman, economist at Macquarie Group, in a Wednesday note. The best such grand bargain would see President Trump “ditching the protectionist mind-set” versus China, he said. In return, China, the European Union and Japan would agree to a depreciation of the U.S. dollar which on a trade-weighted basis stands near a three-year high.

The weakness of other currencies — particularly the euro EURUSD, +0.3847% and the Chinese yuan USDCNY, +0.2441% — have angered Trump, who has made such complaints part of the basis of his repeated criticism of the Federal Reserve. Trump contends the Fed should be moving to loosen monetary policy more quickly.

Trump tweeted on Thursday that he wasn’t “thrilled” with the strength of the U.S. dollar, taking yet another shot at the Fed.

Opinion: Trump’s war on the Fed could shatter the stock market

The U.S. dollar’s strength and Trump’s complaints have led traders and economists to contemplate the prospect of direct intervention in the currency markets by the U.S. to weaken the dollar, even though White House economic adviser Larry Kudlow last month said the administration had ruled out that option. Economists and currency watchers also hold doubts that a unilateral effort would prove effective, particularly against a global economic backdrop in which other major central banks are moving to loosen monetary policy in the face of subdued inflation pressures and growing worries over economic growth.”

Chuck Again… I don’t know why I hadn’t thought of that idea, for I’m a student of the history of the dollar, and know that the Plaza Accord sent the dollar into a weak trend that lasted 10 years! And it sure did help things… I’m just saying!

Currencies today 8/12/19 American Style: A$.6754, kiwi .6453, C$ .7554, euro 1.1190, sterling 1.2085, Swiss $.9727, European Style: rand 15.3999, krone 8.9396, SEK 9.5940, forint 290.23, zloty 3.8673, koruna 23.0872, RUB 65.22, yen 105.12, sing 1.3866, HKD 7.8450, INR 71.27, China 7.0614, peso 19.68, BRL 3.9409, Dollar Index 97.53, Oil $53.94, 10-year 1.68%, Silver $17.01, Platinum $860.58, Palladium $1,430.72, and Gold… $1,507.24

That’s it for today… After quite a few days of pleasant weather for July here in the area, we are expected to be under a heat advisory today… so, sorry, I brought that back from S. Florida with me! HA!  Braden was here on Saturday between soccer games. He looked so darn cute in his soccer uniform! I can’t believe that my darling granddaughter, Delaney Grace is 12, and that she’s going to start Middle School this year!  She’s just so small!  And kids can be so mean… I wish her the best this year… as it will be a tough one for her… The Moody Blues take us to the finish line today with their song: The Story In Your Eyes…  A different song for the Moody Blues, as this one is a real rocker!   I hope you have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler

He’s Baaaaacccckkk… Again!

August 8, 2019

* Gold soars, while currencies fade… 

* What a hissy fit by the stock jockeys last week! 

Good Day… And a Tub Thumpin’ Thursday to you! Well… I’m back… a couple days later than originally thought, but here nonetheless! What a couple of weeks it has been for Gold! WOW! The currencies didn’t rally while I was gone, but Gold and Silver sure did! It does feel a bit weird writing this morning, as I’m out of practice. My summer vacation was grand, a great time spent with son Andrew, his wife Rachel and my grandson Braden… the newest guest to our family time is Evelyn, who is still waiting to be born (Rocktober), but she was there, I could feel it! Braden loves the beach, or should I say the ocean, and would spend every minute of every day, in it if he could! I love that the the kids and grandkids get to do this with us each year… We came home last night to Alex messing with the garage door opener… I think he messed it up for everyone else but him! Oh well, kids… they never grow up, right? Steely Dan greets me this morning with their song: Kid Charlemagne… Is there gas in the car? Yes, there’ gas in the car, I think the people down the street know who we are!

During my vacation, I kept seeing emails telling me about this that and the other thing, and some of it I really wanted to remember to talk about… But… a funny thing happened on the way to the forum… I forgot all of it! I do know that the Fed cut rates ¼%, and the stock market had a hissy fit over the size of the cut… President Trump also didn’t like the small cut, and said that the Fed had let us down again… And on the other side of the rate cut coin… Bill Bonner of Agora fame, said that the Fed had made a BIG mistake… And all the while the dollar grew stronger, along with Gold & Silver… Gold traded over $1,500 yesterday, up to $1,510, before profit taking ( to put it nicely) brought it back just below the $1,500 figure… I texted a friend of mine who I had talked into buying Gold a couple of years ago, and said, that Gold sure was on a run, and that I believed that it would hit $1,700 in the next year… WOW!

Well, look how quickly, Gold went from wallowing around $1,300 to $1,500… I’m just saying…

The dollar continues to ride the crest of the wave that has it above all the other currencies… The Reserve Bank of New Zealand cut rate 50 basis points just to show the Fed how it’s done… And kiwi got smacked! The Aussie dollar too traded down big time since I left… There’s been too many articles about how Australia’s run of years without a recession is coming to an end… And now the currency traders are reading them and trading the A$ accordingly. And just for grins… Gold is at a record high price VS the Aussie dollar… 

Oh, and I gues the biggest news of the two weeks is that China has devalued the renminbi… No surprise from me or anyone else that actually reads my letters, for I told them a few months ago that I thought that China would move the renminbi to above the 7 figure… I told you that their rhetoric that they would keep the renminbi strong and not use it as a weapon in the trade war, as hogwash, and it sure has turned out to be just that!

The Chinese move with the renminbi had the markets shaking in their collective boots… But last night the renminbi was allowed to appreciate a little, thus calming the markets a bit…  

Long ago in a galaxy far away, I wrote about how the Sing dollar trades with the renminbi, at the time it was an easy thing to pick out as currency returns were +29% for the renminbi and +27% for the Sing dollar…  As the years have gone by, the relationship between the two currencies has remained in tact, and so with the renminbi slip sliding away these days, so too is the Sing dollar…  which is a crying shame because Singapore is a model city/ country, that has their ducks in a row… But because of export competition with China, the Singapore officials can’t allow the Sing dollar to get too far out of whack with the renminbi…  UGH! 

But I want to get back to Gold (and Silver) before I forget… A couple of years ago, in the old Review & Focus I told customers that there was going to be a shortage of Silver, and that we could eventually see Silver rise in price… (I also pointed out that Solar Panels were demanding tons of silver) Well, I received a note from my friends at GATA and one of their contributors wrote that deliveries of physical Silver are taking a long time to take place… Doesn’t that sound like there’s a shortage? It does to me, and it has a lot to do with Silver’s rise in price recently!

It was long written about how once Gold got past the so-called Maginot Line of ($1,350) that it would sail onward and upward… I talked about it talked about it talked about it until I was blue in the face, which is difficult for me to achieve since I have a red face most of the time!

How many times in the past year have I asked this question….. Got Gold? Don’t you wish you would have listened to me then, and heard me later?

OK… So, why’s the dollar so darn strong? The President doesn’t like it… But what’s he going to do? He’s done what usually takes the legs out from under the dollar, by cutting taxes, increasing spending, starting a Trade War with our biggest creditor… And pounding his fist on the table asking for Fed Chairman, Jerome Powell’s head on a platter…. But still the dollar holds on… Well… remember a couple of months ago, when Powell, said that the rate hikes were on hold? Then the rhetoric changed to cutting rates instead of just being on hold… Somewhere in there the markets began to believe that the Fed would cut 50 Basis Points (1/2%)…. And when they didn’t… Well, the dollar was saved! Long live Jerome Powell! Were the cries from the dollar bulls…

But what happens when…. A whispering campaign begins to take hold that talks about more rate cuts? Well, for that to happen we would have to see more of the type of hissy fit that the stock jockeys had last week… The Plunge Protection Team (PPT) was working overtime to correct that plus 700 point drop last week after the 1/% rate cut was announced…

On the recession watch… We received word here in St. Louis that 25 Sears and Kmart stores will close for good this Rocktober… The Service industry index fell last month to the lowest it’s been since the Great Recession…. When President Trump announced new Tariffs on Chinese goods, China retaliated with a “we’re not buying U.S. agriculture any longer”… to which the President promised farmers that he would help them… Which in layman’s terms is to say that “we’re going to throw billions of dollars at you , and from where we get it don’t ask”… But we all know who pays for that don’t we? And at a time when disposable income is falling faster than gravity, no one and I mean no one (that’s not a 1%er) can afford more taxes…. 

The price of Oil took a big tumble while I was gone… it was teetering right before I left, but while I was gone it fell $4 in price and trades with a $52 handle this morning…  Fill ’em up! Go get your gas cans, old autos that don’t run very well any longer and fill ’em up! Get your gas at cheaper prices while you can! HA! I guess those production cuts by our friends at OPEC (NOT!) aren’t working out for them to nicely, eh?  This is all about reduced demand for Oil in dollars folks… 

All over the world, countries are waking up to find that they don’t have to buy dollars or hold them as a reserve currency to pay for their Oil… And that puts a big fat Cheshire Cat smile on them…   What comes next? A war to prevent this from going further? I sure hope not, but that was always the answer before… 

The U.S. Data Cupboard today only has one print for us, and that’s the latest pulse check on Consumer Credit, (read debt)…   Last month the number has exploded higher to $18 Billion…  I’m thinking that it will back off a bit this month, and then rev back upward next month when all the “back to school” spending takes place…  While I was gone, I noticed the TV advertising a “tax free weekend” for back to school sales…  I thought for a moment… and said to myself in my best Church Lady voice: Well, now, isn’t that nice….    I guess the states that run these things have a treasure chest of tax receipts and therefore can afford to do these things, eh? 

To Recap… Chuck’s back…  Gold is soaring, Silver is right behind, and the dollar continues to be strong, as Chuck explains because the Fed didn’t cut rates 50 Basis Points…   That was some hissy fit that the stock jockeys had last week when the Fed cut rates only 25 Basis Points wasn’t it?  China devalues the renminbi, no surprise to Chuck… he saw it coming all along, as retaliation for the Trade tariffs… 

For What It’s Worth… Well I saw and read many articles while on vacation that would be FWIW worthy, but they’ve all passed under the bridge with the river flow, so I had to look though my usual hunts this morning and came up with this one from zerohedge.com. It’s about the President banging on Jerome Powell… and it can be found here: https://www.zerohedge.com/news/2019-08-07/trump-renews-powell-attack-i-was-right-fed-must-cut-rates-bigger-and-faster

Or, here’s your snippet: “The ink on the Fed’s latest rate cut – the first in a decade – still hasn’t dried, and here comes the president demanding, drum-roll…more.

As we expected earlier, when we noted the not one, not two, but three surprise rate cuts by Asian central banks, and said that it’s only a matter of time for Trump to chime in, Donald Trump did just that when in a trio of tweets, the president once again lashed out at Powell for not only not cutting more than just 25 bps – because it is “too proud to admit their mistake of acting too fast and tightening too much (and that I was right!)” – but also because the rest of the world is now winning the race to the bottom: “They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW” Trump boomed, even though the Fed ended their “ridiculous quantitative tightening” LAST WEEK.

Trump also unveiled that he is now a yield curve expert, although what he means by “yield curve is at too wide a margin” is not exactly clear since the 3M-10Y curve just hit a new 12 year low of -40bps as the entire yield curve now screams recession.

Trump’s rant, of course begs the question: why is he desperately trying the Fed to panic into more rate cuts in what Trump has repeatedly dubbed the ‘greatest economy ever.’

And just in case Powell gets an angry phone call this morning, don’t be surprised if we get an emergency rate cut from the Fed one of these days: and why not — [as] the Fed’s credibility is now almost entirely gone.”

Chuck again…  Yes, the Fed’s credibility, or what’s left of it… They’ve sure done a bang up job of ruining it haven’t they? 

Currencies today 8/8/19 American Style: A$.6793, kiwi .6470, C$ .7522, euro 1.1193, sterling 1.2147, Swiss $.9760, European Style: rand 15.1533, krone 8.9463, SEK 9.6077, forint 290.31, zloty 3.8617, koruna 23.0468, RUB 65.27, yen 105.97, sing 1.3832, HKD 7.8412, INR 70.73, China 7.0484, peso 19.62, BRL 3.9668, Dollar Index 97.64, Oil $52.13, 10-year 1.72%, Silver $16.99, Platinum $855.38, Palladium $1,498.26, and Gold… $1,498.26

That’s it for today…  I do want to send a Big Shout Out to my long time friend (since 2nd grade) and brother… Mike Karvas… Today is his birthday…  While I was gone my darling granddaughter, Delaney Grace sang the national anthem at another stadium and celebrated her 12th birthday! And yesterday would have been my Mom’s birthday…  Ok, what’s going on with my beloved Cardinals… Last week they were in first place, and this week they’re not even in the wild card mix?  UGH! (the team can’t hit, has been my thought since spring training and it sure has held true throughout the year!)  The Temptations take us to the finish line today with their song: Papa Was A Rolling Stone…  Wherever he laid his hat was his home!   I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday tomorrow, and will Be Good To Yourself!

Chuck Butler

 

Gold Continues To Ride The Roller Coaster!

July 22, 2019

* Currencies have been flat as a pancake this last week!

* The Fed meets this week… are you ready? 

Good Day… And a Marvelous Monday to you… Well, like all good plans of mice and men, my plan for a two-day simple procedure in the hospital turned into 4 days, with docs and nurses expressing concern for my cellulitis wound on my leg… Oh, and the simple procedure I went in for, it worked quite well, according to the docs… A wound specialist took a look at my leg, and had a cow! But we’ve got a program for healing it now, and hopefully her plan works, because the other plan wasn’t working! I came home Saturday afternoon, sick to my stomach from all the medicine they had given me, and then found I couldn’t hold anything down until Sunday evening… So… here I am… on this hot Monday morning, and King Crimson greets me this morning with their song: In The Court of the Crimson King… (a classic rock song, that’s about 8 minutes in length, and one that all who swear they love rock, should have in their collection!)

Well, well, well, look who finally got with the program…. Leading Indicators for June were negative, that’s right I said negative -0.3….. Guess I haven’t been off my rocker all these months saying that a recession was coming, eh?

And the Fed Heads who were out on the speaking circuit late last week (just before the cone of silence went over their heads) and sure were talking rate cuts… In fact, St. Louis Fed President, James Bullard said that he wanted a rate cut in June! Hmmm… I don’t recall seeing that in the Fed’s FOMC Meeting notes last week, do you? But it is what it is, and now he’s on record, saying that the Fed is behind… (notice I didn’t put an “a” in between is and behind? HA!)

So, the Consumer Confidence is soaring again, and it’s all based on rate cut talk… I wonder when the recession bells begin to ring, if these folks that are so confident remain as such…

I know, I know, I started today’s letter with a bunch of data, but in reality that’s about all that’s happened since I wrote you my surprise, surprise, surprise, Pfennig last Tuesday! The price of Gold got back on the roller coaster ride, but is still trading above $1,400. And Silver really took off last week… I told you all a month or so ago, about how Silver was really beat down, and with the supply problems and demand so strong, that I thought Silver would be taking off soon… Well, “soon” turned to a month or so, but it has come finally, to all those Silver holders that have been waiting patiently for this to happen…

The currencies, on the other hand, just aren’t performing well these days… The euro is lucky to be above 1.12, (when I checked it this morning it was 1.1222, basically the same price it held last Tuesday when I last wrote to you) The Chinese renminbi continues to weaken, as the Trade Talks continue, to no avail… So, the Chinese figure they’ll just keep weakening the renminbi to offset the current tariffs in place… The Aussie dollar (A$) is about the only currency to have eked out a gain VS the green/peachback since last Tuesday.  And has pulled kiwi along for the ride, so there two! Even the Brazilian real which had been a strong stealth-like move stronger, finally saw some weakness, along with the Russian ruble… So… given those two items, what do you think the price of Oil did in the past week? That’s right, it slid from a $59 handle to a $56 handle… OUCH! That’ll knock the stuffing out of the shale producers!

The price of Palladium finally saw a setback last week… On Tuesday last week it was soaring to the tune of $1,556.64, and this morning it’s $1,508… I read a piece last week, (the Good Lord knows I had ample time on my hands!) that said that Car Dealers are finding lots of inventory on their show room floors… Uh-Oh…

OK… so how about European Central Bank (ECB) President, Mario Draghi? He’s on his way out now folks… And guess who’s lined up to take his position as head of the ECB? Former IMF Chief, Christine LaGarde… Well, you can forget about any rate hikes coming to the Eurozone in the next, say, 2 years! And for all you who follow things like this, she’ll be the first female head of the ECB… Of course the ECB has only been around for about 20 years, it’s had Wim Duisenberg, Claude Trichet, and Mario Draghi… So, in my mind, she’ll be the 4th President of the ECB, with Wim Duisenberg still head and shoulders above the rest of them! Hey! I was here, I should know, right?

OK, it’s just my opinion, and I could be wrong, but… Wim brought stability to the ECB, when it was first open for business, and credibility in the ECB was what the euro needed to get off its derriere and get to rallying back in the day… Then came the issuance of coins and notes in the Eurozone, and Wim looked over that… Then along came a French banker named Claude Trichet, who saw the euro’s value rise to over 1.50 from around 1.10… He surprised me the most, as he also kept the programs of Duisenberg in place and the Eurozone flourished, and so did the currency… But… it was under his watch that the PIIGS (as they are known Portugal, Italy, Ireland, Greece and Spain) had their hidden debts revealed, and all hell broke loose when in 2011 after Mario Draghi came on board, that the markets took the euro to the woodshed for these debt ridden countries…

I will give Draghi a high five, and then use it to slap his forehead and ask him what he was thinking… First the high five, back in 2011, things looked bleak for the Eurozone and the euro, and it was falling like a rock, but Mario Draghi gave his, “We’re prepared to do anything to support the euro” speech, and the falling stopped on a dime…. But then every time the euro would reach a certain point, rising that is, he would speak and throw the euro under the bus… What was he thinking?

A currency is the stock of a country… And a strong currency means a strong country… Sure your exports take a hit, but only if the countries selling are selling cheap goods…. Just check out Germany’s export track record, they were still selling Beemers and Mercs, by the boatload to U.S. buyers when the euro was uber high….. Things that are quality made, manufactured, and sold, will always be in demand, in my opinion!

OK, will someone please stop this roller coaster? My stomach is in my throat and I’m going to hurl soon from all the drops, and twists, and then inclines… Where’s the Pepto?   All kidding aside, Gold is performing well, it’s just been subjected to lots of paper trading to keep the physical demand in check. I always say, that’s OK, buy the dip!   

I about fell out of my chair this weekend when I came across and read the latest email from the GATA folks… First let me set this up…. Ronan Manly is a reporter for Bullion Star the folks that also prints articles from one of my fave editors, Koos Jansen, of whom I used to quote all the time, but thought people had grown tired of hearing his views on manipulation… Well, Manly wrote a great article on Gold & Silver price manipulation, and someone by the name of Martin Wolf, who writes for the Financial Times (FT) had this to say… “Wolf replied derisively and dismissively: “This is a matter of absolutely no importance whatsoever. Who cares about the prices of useless metals?”

Are you kidding me Martin Wolf? What on earth are you smoking? Have you not been told of the history of these precious metals? Have you not been made aware that Silver is a key component of Solar Panels? Or any other industrial use? Have you never been told of how Gold is a Store of wealth? And that if you bought a suit of clothes 100 years ago, in 1919, you could do it with an ounce of Gold, and if you bought it now in 2019, you could still buy it with an ounce of Gold? What a dolt, what a twit, what a gooffus! I’m sorry mom, I know you always told me to not call people names, other than their own… But I just couldn’t help myself, this guy truly got under my skin!

The U.S. Data Cupboard  was busy since we last talked… And we saw the June prints of Retail Sales (0.4%), like the BHI said, not disappointing but not great. Industrial Production (0.0%) flat as a pancake… (Head East), Capacity Utilization (77.9%) was weaker than in May when it was 78.1%. I could go into a long dissertation about how Capacity Utilization is a very important piece of economic data, but I’ll spare you and just give you the Reader’s Digest version which is that it, along with leading indicators, (that we talked about above) are the really only forward looking pieces of data…  And with Capacity U. falling, and Leading Indicators in negative territory, these two are telling us to take cover folks… 

To Recap…  Nothing great has happened in the last week with the currencies, as the A$ and kiwi were the only two to gain VS the dollar. Gold got back on the roller coaster ride, and is making Chuck sick to his stomach, but it remains above $1,400 and looking like it wants to move higher.  And then there’s this knucklehead named Martin Wolf, that we have to talk about today… 

For What It’s Worth… Ok, I mentioned the Fed Heads out on the speaking circuit last week ahead of the Fed’s cone of silence being brought down on them, and this article talks about what they were saying, which is that a rate cut is needed, and it can be found here: https://www.bloomberg.com/news/articles/2019-07-18/clarida-says-fed-shouldn-t-delay-rate-cuts-until-economy-falters

Or, here’s your snippet: “Two senior Federal Reserve officials stressed the need to act quickly if the U.S. economy looked likely to stumble, reinforcing bets the central bank could cut interest rates by as much as half a percentage point later this month.

Fed Vice Chairman Richard Clarida and New York Fed chief John Williams buoyed stocks with their dovish remarks Thursday afternoon, in some of the final comments from central bankers before they enter their blackout period ahead of a July 30-31 policy meeting.

Equities rose in Asia on Friday along with European futures, lifted by the prospect of a more aggressive policy move by the Fed. S&P 500 Index futures also gained, building on the U.S. gains seen late on Thursday, despite the New York Fed trying to walk back the comments from Williams.

U.S. money markets priced in 41 basis points of easing in July after the two men spoke. Traders later wound that back after a New York Fed spokeswoman said that Williams’s comments had been in the context of an academic speech and were not about potential upcoming policy actions. Clarida was discussing the current economic outlook in a television interview.

“You don’t need to wait until things get so bad to have a dramatic series of rate cuts,” Clarida told Fox Business Network, citing economic research. “We need to make a decision based on where we think the economy may be heading and, importantly, where the risks to the economy are lined up.”

While the U.S. economy is “in a good place,” Clarida said recent global economic data have been softer than expected. “We’ve had mixed data, but I do think the global data has been disappointing on the downside,” he said. “Disinflationary pressures, if anything, are more intense than I thought six weeks ago.”

Chuck again…  Yes, we’ll see the color of the Fed’s decision this week but I can tell you right now that it’ll be a 25 Basis Point rate cut, and their tone will be dovish, leading the markets to believe this isn’t going to be a one and done… 

That’s it for today, and for the next two weeks! I swear, I don’t know how you’ll get through the day without me! HAHAHAHAHAHA!  Yes, it’s that time of year, when Chuck takes his annual summer vacation… And tomorrow I’ll be flying to my place in the south. (Hey it’s not as hot there as it is here right now!)  My good friend, Dennis Miller, tells me that he has been able to swallow little bits, which is progress! Way to Go Dennis!  While I’m gone we’ll celebrate Alex’s friend, Grace, and her birthday!   And My darling granddaughter, Delaney Grace will turn 12! WOW! OK, so I’ll be back on August 5…   are you ready for my Cardinals to go on a tear and be back in the division race by then? I am, but I have my doubts, as that’s not been their MO this year…  But we’ll see, Hey! The Blues came from last place to win the Stanley Cup, anything can happen in sports!  Eddie Money takes us to the finish line today with a very appropriate song, given my traveling tomorrow… Two Tickets To Paradise…  I hope you have a Marvelous Monday, and Promise that you’ll Be Good To Yourself these next weeks …. Bye~

Chuck Butler

Surprise, Surprise, Surprise!

July 16, 2019

* Eurozone Trade Surplus widens…  Uh-Oh! 

* Chuck Thinks this summer reminds him of 2007… 

Good Day… And a Tom Terrific Tuesday to you! I know that I said that I would be out today, but I got the word yesterday, that I needed show up until after noon… So… here I am… But when I looked at the currencies this morning, I saw little to no movement in them once again, and Gold saw little movement either, so now I’m wondering, why I decided to write today anyway! HA! There’s always something in the markets that we can choose to talk about… I was telling my wife yesterday that the 5th Trucking Company in the U.S. had folded, this year… And then I said, I guess we wouldn’t be able to confirm that given all the semi trucks we saw on the highway this weekend! Elvis Presley greets me this morning with his love ballad: Are You Lonesome tonight? Do you miss me tonight? Are you sorry we drifted apart?

Whenever I hear a song that Elvis is singing, I’m reminded of my good friend Frank Weiler, who passed away several years ago at too young of an age… Frank had a Twin sister, and the two of them loved Elvis, and owned every album he had made… Sorry for the trip down memory lane, but it’s what was on my mind, when hearing that song…

Another thing on my mind this morning is what the heck is going on with the dollar? 3 years ago, when the Fed began its rate hike cycle, the dollar rallied and kept rallying with every subsequent rate hike through those 3 years… And it should have given the old fundamental of the country with the highest paying yield gets the attention of everyone else… But now it appears that the rate hike cycle is over (The Fed said a couple of months ago that they were going to hold at the current rate) , and could very well begin to see a downward movement in rates… Not just a one-and done… And still the dollar holds the conn… Well, it doesn’t make sense to me, maybe it makes sense to the PPTers that keep the dollar well bid… I’m just saying…

Remember about a month ago, when I talked about purchasing power parity, and how people still use the Big Mac Index? Well, the latest Big Mac Index shows the dollar is very overvalued… But, when will it begin to correct with a weakening of the dollar? The dollar’s well bid status, certainly didn’t get any love from the data yesterday… because there wasn’t any… But that will change today with Retail Sales, Industrial Production and Capacity Utilization all on the docket today… 

But sometimes these things take much longer to develop than what we anticipate or even want… It’s really interesting to me that is, that the data continues to disappoint to the downside, We get news like the 5th Trucking Company this year, just folded… and other things that should be pushing the dollar downward, just are materializing… yet… that is…. Yes, even old Chuck, has gotten caught up in “wanting immediate movement” just like the youngsters…

So, like I said above, the currencies & metals didn’t see much action yesterday. Maybe today, we’ll see the upward movement we’re anticipating! The stock jockeys sure have taken the Powell speeches last week to heart, and are pushing the envelope once again… they are trading the way they should (except their way overpriced already!), but the currencies and metals are being held back…

In the Eurozone this morning, the euro is getting sold on the news that the Business Sentiment Index as measured by the think tank ZEW, had dropped, a noticeable amount… The euro, being the Big Dog, has been held back from getting off the porch to chase the dollar down the street, and the dollar is out there on the street taunting the Big Dog… sticking it’s tongue out, and sticking its thumbs in its ears and spreading its fingers out and waving them at the Big Dog, and saying, “You can’t beat me, you can’t touch me, I’m better than you are”…  

President Trump doesn’t like this taunting, for he wants the dollar cheaper…  And here’s something that will really light a fire under the President… The Eurozone’s Trade Balance increased in the latest print… Uh-Oh!  

Well, it does appear that the problems with getting a BREXIT deal done, is what’s weighing heavily on pound sterling… I say that because, this morning the U.K. printed an increase in wages that taken along with the low unemployment should bring about inflation, and that would bring about higher interest rates…  But pound sterling traders let that data slide off its back like water off a duck’s back, and kept the pressure on pound sterling. 

Gold lost $2 yesterday, as it appears that the roller coaster ride had come to an end…  A very long time ago, I told you, dear readers, that I was taught to “follow the money”  when it comes to investing… And when applied to Gold you would think that all the demand for physical Gold would lead Gold higher and higher and higher and higher… And maybe eventually it will… But until then, all this Central Bank buying isn’t pushing Gold like I think it should. 

But when I think about it a little more, maybe the Central Bank demand is offsetting the short Gold paper trades, and that’s the reason the Central Bank buying seems to be putting the price of Gold on mute…  In that case, I’m sure glad there’s physical demand to offset those damn paper trades!

The U.S. Data Cupboard today, has the aforementioned data prints of Retail Sales, Industrial Production and Capacity Utilization… Retail Sales, as I said yesterday will most likely be disappointing at best, as the BHI has indicated as such…  I’m looking for Industrial Production and Capacity Utilization to also be disappointing. These reports will all be for June, so recent stuff, which I like! 

There are a handful of Fed Heads that will be out on the speaking circuit today, led by Fed Chairman Powell, who will be in Paris to talk… I think it’s time for the Fed Heads to sing in concert with one another and talk about how great a rate cut will be next week! 

And before I head to the Big Finish today, I wanted to say that I’ve been getting a strange feeling lately that this summer reminds me of the summer of 2007…  We all remember that one right?  Could we be in a situation where the Fed is going to cut rates way too late?  Remember, I had told you last year that by December the Fed would be reversing their rate hike cycle, and so it has taken them 7 months to get around to doing so…  Too little, too late…   I’m just saying… 

Old friend, Jim Rogers had this to say about the resemblance to 2007… “In 2007, Iceland went bankrupt but nobody noticed or cared. Then Ireland went bankrupt. Then a few weeks later, Bear Sterns went bankrupt and a few weeks later Northern Rock, the English Bank, went bankrupt. Then eventually Lehman brothers went bankrupt and by then, everybody knew there was a problem. But it had been there for over a year and it has always worked that way. It starts when we are not watching. It has already started. Latvia collapsed. Argentina, Venezuela, Turkey, some banks in India are having problems, Indonesia has started having problems. It has not made to evening news yet.” – Jim Rogers

To recap…  the Currencies and metals continued to wallow around in the mud, with the Big Dog seeing the most damage, and the other currencies fairing OK, on the day… Gold lost $2 on the day, so the roller coaster ride has come to an end…  Chuck noticed that the Eurozone Trade Balance (positive)  has gotten stronger, and that’s bound to tick off President Trump…  And Brexit sure has both thumbs holding down pound sterling these days, as even good data doesn’t allow pound sterling to rally… 

For What It’s Worth…  Well, debt is everywhere folks… But since we’re U.S. citizens we give more emphasis on the U.S. Debt, which is completely out of control… but this is a report on Global debt… and it can be found here: https://www.zerohedge.com/news/2019-07-15/global-debt-hits-246-trillion-320-gdp-developing-debt-hit-all-time-high

Or, here’s your snippet: “

According to the latest IIF Global Debt Monitor released today, debt around the globe hit $246 trillion in Q1 2019, rising by $3 trillion in the quarter, and outpacing the rate of growth of the global economy as total debt/GDP rose to 320%.

This was the second-highest dollar number on record after the first three months of 2018, though debt was higher in 2016 and 2017 as a share of world GDP. Total debt was broken down as follows:
• Households: 60% of GDP
• Non-financial corporates: 91% of GDP
• Government 87% of GDP
• Financial Corporations: 81% of GDP

And while the developed world has some more to go before regaining the prior all time leverage high, with borrowing led by the U.S. federal government and by global non-financial business, total debt in emerging markets hit a new all time high, thanks almost entirely to China, which has been on such a debt issuance rampage, it would make even Uncle Sam blush, as Chinese corporations owed the equivalent of more than 155% of GDP in March, or nearly $21 trillion, up from about 100% of GDP, or $5 trillion, two decades ago.”

Chuck again…  I read last night that the U.S. Budget Office is forecasting a deficit for 2019 of more than $1 Trillion… I told you when the tax cut went into place last year that this would happen, and I also told you that eventually we’ll see $2 Trillion annual deficits!

Currencies today 7/16/19 American Style: A$.7027, kiwi .6720, C$ .7661, euro 1.1222, sterling 1.2427, Swiss $.9860, European Style: rand 13.8655, krone 8.5565, SEK 9.3952, forint 289.96, zloty 3.7933, koruna 22.7913, RUB 62.78, yen 107.98, sing 1.3576, HKD 7.8174, INR 68.59, China 6.8748, peso 18.95, BRL 3.7425, Dollar Index 97.24, Oil $59.67, 10-year 2.10%, Silver $15.41, Platinum $844.42, Palladium $1,556.64, and Gold … $1,414.17

That’s it for today…  A surprise Pfennig for you today, how about that? Cardinals won last night, making it 3 in a row for them… Got to keep winning!  Grandson, Braden was here yesterday… He likes to play chess now… I would have thought that he was too young to understand how to play chess, but I would have been wrong! Just shows to go you that I’m not in tune with the young kids!  I guess I’m just getting too old… UGH!  Good news from good friend Dennis Miller, his treatments ended and he’s slowing, and I mean turtle slow, feeling better… Small steps… I know all about them!   Cat Stevens takes us to the finish line today with his song: If You Want To Sing Out…    I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

Look Who’s Pounding The Drum For A Weaker Dollar!

July 15, 2019 

* Gold goes on a roller coaster ride… 

* Chinese data is pretty fair, no armageddon there yet… 

Good day… And a Marvelous Monday to you! Doesn’t it seem as though we just started July, and we’re already half way through it? The Rolling Stones sang oh, so many years ago… Time waits for no one and it won’t wait for me! All this means is that we’re getting closer by the minute to my annual summer vacation… I had a wonderful weekend fishing and visiting our good friends, Duane and Toni. Alex won the prize for the biggest fish caught, I won the prize for the first fish caught… The prize being that we could brag about it! The fishing was tough though, and so we just put back in the lake any fish we caught, for we wouldn’t have had enough to feed us! I was worn out when I arrived home yesterday late afternoon, and my age was showing… UGH! Steely Dan greets me this morning with their song: Don’t Take Me Alive…

Well… Last Wednesday, I wrote about how Gold was back on the rally tracks, but was leery of the short Gold paper trades… And on Thursday those arrived at the COMEX by the boat load. Gold was up $20 on Wednesday, down $14 on Thursday, and back up again on Friday… Rollercoaster… My Gold price is like a Rollercoaster baby! So, what will the short Gold paper traders do now… They tried to whack Gold but it didn’t last… What to do? What to do? I would like to suggest that they go home… They don’t have to go home mad, just go home!

OK… The currencies last week were stuck in the mud, for the most part… Not losing ground but not gaining any either…  the Dollar Index, last Thursday was 96.86, and today 4 days later it’s 96.80… The Aussie dollar, (A$) was an exception, as it moved past 70-cents once again, and the S. African rand is pushing the currency appreciation envelope across the desk… The Indian rupee has been very stealth-like with its stronger move, and the Brazilan real continues to recover a lot of lost ground. And the Russian ruble has gone back below 63 once again… So, it’s not a lost cause for the currencies at all, it’s just that the rest of the lot aren’t moving much these days… I thought last week that they were waiting for the Fed Chairman’s speeches to see if he’s really on board with a rate cut in July… And seeing that he was… Well… I said it all above… UGH!

The Treasury yield curve first inverted 3 months ago, and has remained inverted since, and now the yield curve has steepened by the most in the 3 months it has been inverted, telling us that a recession is on its way, and just to prove its point, the yield curve moved more and the inversion is steep now… There’s no question in my mind that this is as good as it gets as a recession indicator!

I got a kick out of the President’s tweet last week when he said that the U.S. should join in on Europe’s and Japan’s currency manipulation… I’ve heard and read that he’s really been reportedly asking aides to find a way to weaken the dollar in an effort to boost the economy ahead of the 2020 election. The strength of the dollar has proven a headache for Trump, who would really like to see a narrowing of the U.S. trade deficit.

 I would fire off a memo to him (he and I email each other! HA!) telling him to be careful with what you wish for… Because if you say something like that over and over again, eventually the markets will oblige you… Mark my words on that! Right now, I believe the dollar’s weakness is more of a result of it facing the firing squad, I mean, rate cuts, and not the President’s words…

Yesterday, in Europe it was Bastille Day… And today in China it’s economic print day… Today, we’ll see the color of 2nd QTR GDP (should be about 6.2%).in addition, we’ll also see June prints of Industrial Production and Retail Sales… And since China is hours ahead of us (it’s almost Tuesday there! HA!) We’ve seen these reports!  2nd QTR GDP was 6.2% (certainly not the plus 10% prints we used to see here, but better than a stick in the eye for sure!)  Retail Sales were stronger than expected, and so was Industrial Production.. So, the Trade War isn’t hitting China very much yet…  

The Global Growth currencies like the A$ liked the news from China this morning, so we have that going for us, eh? 

While we’re talking about data… Last week here in the U.S., we printed the June CPI data… (consumer inflation) , which bumped a bit higher at 0.1%, which is really nothing to write home about… Core Inflation, ex-autos, was stronger by 0.3% in June, which is something I would think the Fed Heads would be wary of… But then again, this is the stupid CPI that doesn’t even look like the CPI reports of 30 years ago…

I’ve long told you dear readers that if you want to know what the “real data” is, that you should go to www.shadowstats.com and apply… John Williams of Shadow Stats does a fantabulous job of going through the Gov’t reports like CPI, and then reprinting them using the methods we, as a country, used before the 90’s… And a Quick look at his report last week, tells me that CPI is actually around 6%… Now, doesn’t that seem more realistic than the sub-2% CPI the government keeps forcing down our throats? Why, yes, Chuck it does… But you taught us many years ago that inflation is a personal thing, and one person’s inflation rate will vary with someone else’s because of the different things they buy and use…
You are correct sir! And quite frankly, I wouldn’t give CPI the time of day, but the markets still do, for some unknown reason, and so we have to deal with it too!

Hey! That was sad news last week when I heard that Ross Perot had died… You know, if you asked me on a good day when my mind was clear, and not chemo fogged, what I thought of Ross Perot, I would tell you that if Americans would have stopped to listen to the man years ago when he ran for president, we would be in much better economic and financial position these days… And that’s all I have to say about that!

Anything you can do I can do better… neener, neener, neener!  That’s what the U.S. Gov’t data guys are saying to the Chinese this morning…  The U.S. Data Cupboard has June Retail Sales, Industrial Production and Capacity Utilization… I expect all three of the reports to show the wear and tear that that suffered through in June… The Butler Household Index, (BHI) tells me that Retail Sales will be disappointing at best… 

To recap…  The price of Gold has been on a rollercoaster ride, but is up over $1,400 today. The currencies have, for the most part, been stuck in the mud, but there have been some movers out there and Chuck goes through them. The President is tub thumpin’ for a weaker dollar, and Chuck believes that he should be careful with what he wishes for…   And China printed some pretty fair data prints today, so they aren’t going to hell in a hand basket, as most people have thought they would be doing… 

For What It’s Worth… I had this sent to me from my friends at GATA, and when I saw the brief description of the email and it said that they had an interview with John Hathaway, I immediately clicked on and read through… So, John Hathaway is the founder of Tocqueville Gold Fund, and someone that the markets usually pay attention to when he talks… This article can be found on his website and you can get there by clicking here: http://tocqueville.com/tocqueville-gold-strategy-second-quarter-2019-investor-letter/

Or, here’s your snippet: “Gold has broken out from a massive base formed over a six-year consolidation. The breakout has left most investors on the sidelines. The powerful rally from below $1,300 to over $1,400 and a 6 year high caught most either wrong-footed (short) or flat footed (no exposure at all.) That is why we believe substantial further upside lies ahead. Gold’s allure (and the explanations for it) should grow as the price advances in the months and years ahead.

Gold has disappointed since 2012, even though it has outperformed stocks and bonds since 2000, the dawn of radical monetary experimentation. However, financial market memories are short. Gold is a big macro idea that offers substantial reward for those with the requisite patience.

During golds six years in the penalty box, the underlying forces that have made the metal a superior strategic investment over centuries have not been idle. The extrapolation of current conditions into unrealistic expectations is a dependable flaw of human nature. The capacity of physical gold and precious metals mining shares to absorb inflows has greatly diminished because of the prolonged attrition of investment interest. Once capital market flows revive, there is real potential in our opinion for parabolic upside in the metal and the shares.”

Chuck again… John Hathaway goes on to talk about how he believes the financial system, as a whole may be due for substantial change… The only reason I see for him to mention that is that he’s tying Gold to that new financial system…

Currencies today 7/15/2019 American Style: A$.7033, kiwi .6731, C$ .7673, euro 1.1277, sterling 1.2550, Swiss $.9820, European Style: rand 13.8642, krone 8.5330, SEK 9.3647, forint 288.82, zloty 3.7787, koruna 22.6905, RUB 62.97, yen 107.88, sing 1.3560, HKD 7.8263, INR 68.40, China 6.8798, peso 18.92, BRL 3.7370, Dollar Index 96.80, Oil $60.44, 10-year 2.11%, Silver $15.33, Platinum $841.72, Palladium $1,560.82, and Gold… $1,416.19

That’s it for today…  And don’t forget about no Pfennig tomorrow or Wednesday. I’m pretty sure I’ll be back in the saddle on Thursday, but then one never knows!  Cards took 2 of 3 from the Diamondbacks, that’s a step in the right direction…  Took a ride through Missouri this past weekend… I’ve always said that Missouri is a very pretty state. With rolling hills, lots of greenspace, I just love driving through the state!  Triumph takes us to the finish line today, with their song: Lay It On The Line…  I hope you have a Marvelous Monday… And will Be Good To Yourself!

Chuck Butler