Will This Be 1999 All Over Again?

Jan 23, 2020 

* Currencies and metals have little movement on Wednesday

* Ray Dalio, Paul Tudor Jones, and Jan Nieuwenhuijs  talk to us today! 

Good Day… And a Tub Thumpin’ Thursday to you! I’m headed north 50 minutes from here after I get this out the door, to the wound center. My Billikens played an awful game last night at Davidson, a team they should have beaten by 10. Old Man Winter is now gone from down here… 3 days at we’re back to sun and near 80 today… I received an email from a dear reader yesterday… He told me that I had “knocked the ball out of the park” with yesterday’s letter… Now that made me feel good! But now I have pressure to do it again! And much like baseball players, I’ll be doing good to get it to that level 3 out of 10 times, but shoot Rudy, that’ll still make me eligible for the Hall of Fame! The Amazing Rhythm Aces greet me this morning with their song from the 70’s: Third Rate Romance….

The damage that was done to the currencies, metals and Oil on Tuesday, didn’t return for an encore on Wednesday, so in the end the day the currencies & metals wallowed around in the mud all day… The price of Oil lost more ground and this morning is trading with a $55 handle… I wonder where all those folks that were calling for 2020 to be the year of Oil have gone? Probably to the same place I go to whenever I call something wrong…. I’ll give you a hint… Hello bartender… I kid of course…

Come on Chuck, it’s only January give the guys a break here!  OK, you’re right… I guess I’m just upset with the way the price of Oil has beaten down the Petrol Currencies… Two weeks ago, the Russian ruble was ready to trade below 60, and now it’s getting ready to trade above 62! The Norwegian krone was making its way through the 8 handle and now it looks like it might trade back to a 9 handle, and even the Canadian dollar/ loonie, which had resisted all the downward movements previously, with the price of Oil, finally gave up and dropped below 76-cents… 

So, while I’m writing today, the European Central Bank (ECB) is meeting to discuss rates. I told you my opinion of ECB President Lagarde yesterday, so I won’t get into again today. Let’s just say I’m not expecting anything…. Overnight, the Aussie employment numbers came through, and Australia’s December Employment Change beat the 15,000 forecast with an increase of 28,900! Unemployment Rate slipped below 5.2% expected and prior to 5.1%. And this surprised move in employment brought about a ½-cent rise in the Aussie dollar (A$) overnight…

Gold had an OK day, and as opposed to ATT&T’s commercials, OK is OK when one day it gets sold and the next day it gets bought… Gold posted a 70-cents gain on Wednesday… And in Davos, Switzerland, Ray Dalio had this to say about Gold… “You have to have balance … and I think you have to have a certain amount of gold in your portfolio,” Dalio said, adding that gold will be a top asset to own in the years ahead as central banks will fail to normalize in the next downturn, which could’ve already started.” Ray Dalio at zerohedge.com

Longtime readers have heard me carry on about owning physical Gold VS paper Gold before, so I’ll just touch on it right now and then bring you the opinion of a well known Gold researcher on the subject… I’ve always contended that if things come to a grinding halt try getting your Gold out of a paper trade… And now with no further ado… here’s Jan Nieuwenhuijs who used to go by Koos Jensen on owning physical Gold VS an ETF…

“Sure, it offers exposure to the spot gold price. But when things go haywire, GLD exposes you to many counterparties, which would be BNY Mellon Asset Servicing (Trustee), which is a division of The Bank of New York Mellon, HSBC (Custodian), potential sub-custodians (The Bank of England, ICBC Standard Bank, JPMorgan, Scotiabank, and UBS), NYSE Arca, and the Authorized Participants. Owning GLD is like owning a gold derivative with as much counterparty risk as possible.”

Chuck again… That was Jan Nieuwenhuijs from Voima Gold and his whole article can be found here: https://www.voimagold.com/insight/gld-a-crash-course

OK… enough today on Gold, eh? The reason I keep harping on it is because from all reports I read, Gold is still not a part of a very large percentage of investment portfolios… Why is that? What else do I have to say or show you to convince you that the next downturn in the economy is going to take to hell in a handbasket, and you’ll need a diversified portfolio that includes Gold or Silver or any precious metal…

I had a dear reader send me a note and ask me to say a few words about rhodium… I did… And for those of you keeping score at home, I basically said that rhodium had outperformed the other metals, but… And this is a BIG BUT! When I was on the trading desk I inquired to many dealers about buying rhodium… And they all said nyet! So basically, if you can find someone to sell it to you, then go ahead and own some, but I doubt you’ll find someone, that is unless things have changed since I left the trading desk 3 years ago… I guess I should have checked with my old trading desk, metals guru, Tim Smith, before I wrote this…  Oh well… if I’m wrong, I’m sure I’ll receive 1,000 emails telling me that I was wrong… 

OK…  looking around the globe today, I already mentioned the ECB meeting going on right now. In addition to that the Eurozone Consumer Confidence for the current month will print… Smart that they took the poll before the ECB meeting, eh?  In New Zealand, they’ll print their latest CPI (consumer inflation)  which should be OK…  Kiwi has been playing follow the leader (A$) for a very long time now. There’s a spread between the two currencies, and currency traders are very careful to make certain that the spread is not altered. 

Here in the U.S. the Data Cupboard continues to be in need of real economic data to print, and there just isn’t any on the docket. Today we will see the Leading Indicators Index, as of December… You may recall that the November report here was 0%…  The markets don’t really pay much attention to this, one of the two forward looking economic prints, with the other being Capacity Utilization…  I wonder if the bond boys make a big deal out of Leading Indicators, as they, the bond boys, used to be all about looking out to the future…  I’m just saying… 

To recap… The dollar bugs crawled back behind their wall boards yesterday, and left the currencies and metals to wallow in the mud all day with little movement. The price of Oil however, lost a lot of ground again and is down again this morning and is trading with a $55 handle… The Petrol Currencies are getting pushed down because of this free-fall for the price of Oil.  No real economic data today, and overseas the ECB is meeting while Chuck types… 

For What It’s Worth…. Paul Tudor Jones checks in for the FWIW section today, with his quote about this time period reminding him of early 1999… Those of us old enough to recall that time, the dot.com’s were flying high, one day, and the next they weren’t, and then all the corporate scandals came about and so on… I found this on zerohedge.com and you can too by clicking here: https://www.zerohedge.com/markets/reminds-me-1999-paul-tudor-jones-warns-craziest-policy-mix-history

Or, here’s your snippet:” Billionaire investor Paul Tudor Jones sat down with CNBC’s Squawk Box at the conference and warned: “We are in the craziest monetary fiscal mix in history. It’s so explosive. It defines imagination.”

“We are in the craziest monetary fiscal mix in history. It’s so explosive. It defines imagination,” says Paul Tudor Jones. “It reminds me of early 1999.” 

Jones went onto say, “it reminds me a lot of the early ’99. Early ’99 we had 1.6% PCE, 2.3% CPI. We have the exact same metrics today. The difference is fed funds rate 4.75% today 1.62%, and back then we had budget surplus and we’ve got a 5% budget deficit … Crazy times.”

“Crazy times” indeed – if Tudor Jones is right, the market is in the final blow-off stage as ‘Not QE’ propels markets to new highs. It will only be when the Federal Reserve winds down its unprecedented monetary accommodations that will trigger a top in the market (just as it did in 1999 after supplying liquidity to tamp down Y2K anxieties).

As we’ve discussed before, the deviation of the stock market from corporate profitability is the widest since 1999 – it seems that Jones’ warning should grab the attention of bulls as the economy continues to stagnate.

And in Jones’ view – this will end very badly.”

Chuck Again… I also saw this on Ed Steer’s goldandsilver.com letter so, as I always say, if Ed thinks the article is worthy, then I have no reason to quarrel with him! And besides this guy talks like I do! I mean all the while I was reading the note, I was thinking, “did I write this already?”  Of course I did, but….  it always helps when someone else tells your kids what to do, right? 

Currencies today 1/23/20 American Style: A$.6868, kiwi .6593, C$ .7598, euro 1.1090, sterling 1.3125, Swiss $1.0323, European Style: rand 14.3658, krone 8.9827, SEK 9.5043, forint 303.87, zloty 3.8281,    koruna 22.6050, RUB 61.88, yen 109.58, sing 1.3492, HKD 7.7722, INR 71.20, China 6.9034, peso 18.72, BRL 4.1973, Dollar Index 97.49, Oil $55.87, 10-year 1.75%, Silver $17.68, Platinum $1,005.52, Palladium $2,473.77, and Gold… $1,554.14

That’s it for today…  Somehow I get the feeling that this one was as good as yesterday’s letter… Oh, well,  carry on, Chuck…  Come on Coach Ford, I would think that free throw shooting practice would be the only thing on the Billikens’ agenda each day! They would have beaten highly ranked Dayton last Friday night if they had hit 75% of their free throws!  And my beloved Missouri Tigers haven’t had a real bonafide “big man” since Arthur Johnson and that was many years ago now… their lack of a big man shows up consistently in their games…  I understand there’s  big man coming next year… OK, so I have to wait till next year?  UGH!   The NHL All-Star Game is in St. Louis, which is going to go through 2 days of rain, sleet and snow, which should make getting around very interesting for the fans who want to see the game…  Mathew Sweet takes us to the finish line today with his song: Girlfriend….    I hope you have a Tub Thumpin’ Thursday and will Be Good To Yourself! 

Chuck Butler

 

A Bad Day For Currencies, Metals and Oil…

January 22, 2020

* Dollar bugs tear off the scab once again… 

* Retail Sales revisions tell a different story… 

Good day… And a Wonderful Wednesday to you! Old man winter came this way on Monday night, and will exit tomorrow… In the meantime I spent most of yesterday outside in the sun, soaking up vitamin D, and reading… I know I’ve said this before, but I love to be outside! Congratulations to Derek Jeter, and Larry Walker who will join Ted Simmons in Cooperstown this summer. Ted Simmons spent most of his career as a Cardinal and is already a Cardinals Hall of Famer, and Larry Walker spent his last two years in baseball with the Cardinals… You know, back when the Cardinals’ GM had the intestinal fortitude to make a mid-year trade to better the club… I’m just saying… The Black Crowes greet me this morning with their version of the original Otis Redding song: Hard To Handle…

Well, it was back to the markets buying dollars again yesterday, after the overnight markets had stopped the bleeding from last week, the scab was torn off the currencies again yesterday and they began to bleed once again… This continued dollar strength is really building to a crescendo, and from there… Well, it won’t be a good time for the dollar, but then every trend has to end sometime, to be replaced with a different trend… It’s been that way since Nixon removed the dollar from Gold backing in August of 1971, and it’ll continue to be that way until we have a new financial system… I’ll talk about that more in a minute…

The dollar bugs had a good day as just about everything other than stocks and Treasuries got sold…  The price of Oil fell below $58, and that added to the weakness of the Petrol Currencies, while Gold, Silver, Platinum and Palladium all saw selling…  It was “one of those days” folks, where you just turn the TV off, the radio off, and plug in our earphones and listen to music, because nothing you did could change the direction, and we all know that this is fake money chasing stocks… And that’s all I’m going to say about that, today… 

But first, Gold had an other bad day yesterday, while the runaway train that Palladium was riding on, left the tracks for the day… We’ll have to see where this one day of selling takes us, but it was as wild a day of selling as the buying had recently been in Palladium. Good Old Gold remains in the forefront of important people’s minds as their safety component of their investment portfolio… Shoot Rudy, one of my fave economists, David Rosenberg, thinks that Gold is a “no brainer” for one’s investment portfolio…

And one of the reasons I believe we’re headed for trouble in the economy is the fact that there are so many low-wage earners in the country… Now that’s not a shot at the earners, it’s a shot at the wages they are earning… The Brookings Institution’s Metropolitan Policy Program found 44% of U.S. workers between the ages of 18 and 64 are in jobs that pay median annual wages of $18,000.

Are you going to argue with the Brookings Institute? I didn’t think so… I love when I can pull things like this and show them to you, to prove what I’ve been telling you is true….

Another thing I’ve been telling you is that the Oil producers here in the U.S. are having difficulties, and the proof in the pudding of that thought was shown to us yesterday, when a Houston Oil Production Company, McDermott Oil, filed for bankruptcy… It is what it is, folks, but I’m afraid we’re doing to see more of this, from all sectors in the coming weeks and months, as they’ve built up too much debt… 

I’ve been doing a lot of thinking recently, given all the time I have on my hands down here with little to no distractions, and one of the things I keep reading about is how the next recession will be the “mother of all recessions” and some even believe that it will cause a collapse of the financial system that we know of, which would mean a reset… With Gold being the central figure in this reset… I just keep going back and forth with myself on whether this “reset” would be a good thing to experience or not… For a collapse of the financial system would mean chaos in the streets, folks… it could get very ugly, but… once calm has been restored, and the parameters of the “reset” begin to leak out, I don’t think Gold Bugs would be too upset with the price reset that’s being bandied about for Gold…

Speaking of a return to a Gold Standard… President Trump has just nominated Dr. Judy Shelton to fill a vacancy on the Fed Board of Governors. Shelton is a longstanding Fed critic and an advocate for using Gold as a reference point in setting monetary policy. Did you get that last point? An advocate for using Gold as a reference point in setting monetary policy… That’s central bank parlance for: A new Gold Standard!

OK, let’s not let that idea go to our heads… She will be only one vote on a board that’s not too keen to change their ways… But having her there will give the Gold Standard idea the opportunity to be beaten into their brains! I’m just saying…

The economic  data abroad continue to trickle in with none of it being of much importance… Today will yield nothing, absolutely nothing, say it again! But tomorrow,  in Australia, their employment data will print, and in the Eurozone, the European Central Bank (ECB) will meet to discuss rates… Yeah, like they are going to hike rates, right?  New ECB President Christine Lagarde isn’t ready to take the fight to the rest of the ECB members, and besides I really don’t think she has it in her to do so either, so rates in the Eurozone, which were thought to be ready to come out of negative territory a few months ago, will remain in the red…  UGH!  

Today’s U.S. Data Cupboard is pretty barren with only the Chicago region manufacturing index, and the Existing Home Sales data for December on the docket…  I said yesterday that I don’t like weeks like this when the data is void of showing us anything meaningful…  

Longtime Pfennig readers will recall how I’ve gone through the “revisions” of economic data before. I’ve talked about how the powers that be don’t care if the first report is correct or not, it will tell the story they want told, and by the time the revisions to that report are made… Too much time has passed, and everyone is focused on what’s coming, not what has happened, and therefore the revision doesn’t carry the weight that it should. And so it was with Retail Sales last week… The headline number from December was strong and everyone hooted and hollered about how it showed the economy was nowhere near a recession. But oh, for those revisions… The Rocktober and November prints were downgraded in the revisions to where the growth in retail sales for those months were negative! That’s right I said negative! But that revelation just skipped on past the markets folks… And by the time they get around to revising the December strong print, no one will notice that either, except me and a few others that look around corners and under hoods!

To Recap…  the dollar bugs won the day yesterday, as currencies, and metals all lost ground to the almighty dollar.  The overseas markets have been void of any real economic data, lately, so everything is hinged on what the dollar bugs do…  That lack of data ends tomorrow for the non-dollar countries….   Chuck talks about a reset, an Oil company bankruptcy, and other things tomorrow, make sure you go back and reread it  if you scanned it first! 

For what it’s worth… I’ve been writing about the annual winter boondoggle at Davos, Switzerland for years now… Usually there are a couple of good quotes that come from the boondoggle, but in recent years, it’s been more of a back slapping meeting as key financial figures congratulate each other over their conquests… So, when I saw this quote from the head of Guggenheim investments it hit a nerve that someone would speak out against the back slapping going on… So, here’s the link to that article, that I hope you enjoy: https://www.bloombergquint.com/onweb/guggenheim-says-central-bank-driven-ponzi-scheme-must-collapse

Or, here’s your snippet: “Scott Minerd has a message for his fellows at Davos who are applauding rallying markets: Things aren’t as good as they seem. The Guggenheim Partners investment chief likened the inflation of asset prices caused by the loose money policies of central banks to a “Ponzi scheme” that eventually must collapse.

Minerd cited rising defaults despite a rally in riskier assets, and reiterated a warning that BBB-rated bonds risk further downgrades. He said that type of debt is at a greater risk of deterioration than it was in 2007.

Anne Walsh, Guggenheim’s fixed-income chief, said in an interview that 15% of the U.S. economy is already in recession. She said the Federal Reserve’s efforts to pump liquidity into markets has created “zombie companies” that may see an outflow of capital as the utility of that money continues to diminish, she said.

The longer that this market runs, the harder the fall will be when it ends, she said.”

Chuck again… you may recall me calling what the Fed is doing a Ponzi scheme last week, right? And now this guy is associating what the Fed is doing as a Ponzi Scheme too… You think? Nah, that couldn’t be, oh, but maybe just maybe cause you never know, right? OK… I’ll take the bait on that, and say that maybe he’s a Pfennig Reader!

Currencies today 1/22/20 American Style: A$.6845, kiwi .6595, C$ .7655, euro 1.1082, sterling 1.3063, Swiss $1.0295, European Style: rand 14.4513, krone 8.9761, SEK 9.5116, forint 302.62, zloty 3.8218,    koruna 22.6806, RUB 61.75, yen 109.96, sing 1.3492, HKD 7.7711, INR 70.07, China 6.8967, peso 18.75, BRL 4.1949, Dollar Index 97.57, Oil $57.99, 10-year 1.77%, Silver $17.80, Platinum $1.004.21, Palladium $2,406.02, and Gold… $1,556.11

That’s it for today…  I don’t know what’s happened to my likes, but there was a time when I could turn on any two teams playing college basketball, and it would hold my attention. Not any longer, if it’s not my Tigers or Billikens playing, I have no interest…  And in the winter, that pretty much is all that’s on cable sports. That, and hockey, which I’m also tied to my Blues, and no other games…  So, that means I read a lot at night which could be a good thing or bad thing with regards to what I say the next day, if you get my drift….  Old man winter has stirred up the ocean, and waves outside are larger than I remember them being… It was 42 degrees outside when I woke up this morning… It’ll get up to the mid 60’s with lots of sun so no biggie, for me!  The Moody Blues take us to the finish line today with their song: Story In Your Eyes…    I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

 

 

 

Palladium Is On A Runaway Train!

January 21, 2020

* Currencies rebound from selling last week

* Gold continues to have good days and bad days… 

Good day… And a Tom Terrific Tuesday to you! Seems like it’s been eons since I last wrote to you dear reader, but it’s really only since last Thursday! Since then, the two teams that will play in the Super Bowl were determined (K.C. and S.F.), and all I can say about that is Go Chiefs! Hey! They’re a Missouri Team… And wouldn’t it be cool if they won the Super Bowl 50 years after last winning it, after the Blues won their first Stanley Cup 50 years after last playing in the final? Our Blues have shut down for the All-Star Week, and they have 4 members that will be on the All-Star Team! My son, Andrew and I attended the skills competition, the last time the All-Star Game was in St. Louis… It was at the old Arena then.. Our former neighbor, Jill, worked for the Blues, and got us primo tickets for the skills competition… Earth Wind and Fire greets me this morning with their song: After The Love Has Gone… “After the love has gone, How could you lead me on? “

Well… After signing off on Thursday morning and heading to the wound center, the currencies began to give back their gains they had worked so diligently to achieve earlier in the week. And by Friday’s close, the euro was back to trading with a 1.10 handle, the Aussie dollar (A$) was back below 69-cents, and the rest fell in behind, the Big Dog and the Proxy for Global Growth…

The overnight markets last night were much kinder to the currencies, as the dollar got sold and the currencies tried to recover…  The euro is back above 1.11 and so on in the overnight markets, so back and forth we go, where we stop nobody knows! 

Palladium is on a runway train folks… Every day I look at the price and say to myself, ” This is amazing!” There’s no stopping it right now, so either jump on board or get out of the way, would be my suggestion…  Gold on the other hand continues to have good days and bad days, with the bad days outnumbering the good days right now.  Yesterday, Gold gained $3 as the New York price manipulators weren’t at their desks or showing up at the COMEX with arms full of short Gold paper trades…  but in this morning’s trading Gold has given back that $3 gain…  Back and forth… 

I mentioned Global Growth above, and so Speaking of Global Growth, the IMF lowered their outlook for Economic Growth in 2020 this past week, claiming that they see major slowdowns around the world. And since the U.S. economy is the growth engine of the world, the IMF must then see that the U.S. economy is going to slow down… Basically, in my mind, I don’t see how the economy could slow down from its already snail’s pace, but there’s always a lower number, folks… And that’s what I see for the U.S. economy, once the Fed gets told to cease and desist their propping up the economy with debt monetization…

Oh, by the way, the Fed Heads still will not call what they are doing Quantitative Easing (QE) But they are doing their “not QE” by the hundreds of Billions each week… And now there’s a rumor going round, someone is underground, no wait! There’s a rumor going around that the Fed is not bailing out the Repo system, that instead they’re bailing out the Hedge Funds… OK, if that’s the case then they should send down more SWAT members than you can shake a stick at and arrest the Fed Heads for lying to the public! Their “not QE” going toward private companies’ coffers? To keep them afloat? OK… I must remind you that these are rumors, not fact… So before I blow a gasket, I’ll move on from here… 

And I found another thing these past 4 days… that answers the question I had about whom was buying the Treasuries that we need to sell to finance the debt. The Treasuries that were being printed and sent out as fast as the ink could dry on them, because the debt was exploding higher and higher! I pulled this from Russ & Pam Martens at their www.wallstreetonparade.com web site, regarding the excess Treasuries and where they were going….. “The New York Fed not only crowded out other counterparties but they also crowded out other forms of repo collateral according to OFR data. The repo collateral at Money Market Funds went from 33 percent U.S. Treasuries on January 31, 2011 to 63 percent on August 31, 2019 according to OFR data, making obligations of Wall Street and foreign banks less and less desirable.”

Chuck again… yes, the Fed is knocking at your door, you answer it, and they sound just like a NY Mafia man, saying, “ You need some treasuries” and you decline saying I don’t need any such thing, and they step inside the door, and in a deep accented voice, say, “you need some treasuries”…

OK, before I really get into trouble… I also read an additional report on wall street on parade.com and came away with these thoughts…

The Jobs Jamboree a week ago or so, was very interesting in that it never, and I mean never really counts true employment… There are so many tricks to the trade, and if you ever have time simply go to the BLS website and read about what the BLS considers to be “employed”… It’s crazy folks, simply crazy, as crazy as the guy who took a pig on a plane and said it was his emotional support animal! Now stay with me here for a minute… I’ve told you all that for the past decade we’ve averaged about 2.1% (some say 1.8%), GDP… Right? Well, how does a weak GDP like that garner an all-time low in unemployment? The two don’t match folks… I have to tell you that you have to have strong GDP to garner such unemployment numbers, and we don’t have that, haven’t had it, and probably won’t ever have it again!

And a dear reader reminded me last week of something that I’ve forgotten about, that I shouldn’t have, so shame on me! But a few years ago, the Gov’t moved the goal posts for computing GDP, and added stupid things that don’t really add to GDP, but they added them anyway, and it was supposed to have meant an additional 3% to GDP…  So think about this before we go on… If GDP has only been around 2% for the last decade, that means that without the hedonic adjustments, we would be in negative territory for GDP, right?  I’m just saying…    OK, back to the GDP and unemployment discussion.. 

Pam and Russ Martens of www.wallstreetonparade.com wrote about this recently, and went so far as to quote Big Ben Bernanke describing Okun’s Law, which I’m going to give you now from their letter: “Okun noted that, because of ongoing increases in the size of the labor force and in the level of productivity, real GDP growth close to the rate of growth of its potential is normally required just to hold the unemployment rate steady. To reduce the unemployment rate, therefore, the economy must grow at a pace above its potential. More specifically, according to currently accepted versions of Okun’s law, to achieve a 1 percentage point decline in the unemployment rate in the course of a year, real GDP must grow approximately 2 percentage points faster than the rate of growth of potential GDP over that period. So, for illustration, if the potential rate of GDP growth is 2 percent, Okun’s law says that GDP must grow at about a 4 percent rate for one year to achieve a 1 percentage point reduction in the rate of unemployment.”

If apples were counted as apples, oranges counted as oranges, we would have true totals of each, right? So, it points to the need to have a real accounting of unemployment, doesn’t it? I mean we can’t have these two things (slow GDP and low unemployment) out there bouncing off each other and not making any sense… So, since we KNOW that unemployment has a multitude of hedonic adjustments, why don’t we just take the hedonic adjustments out of the unemployment calculation, and come up with a “true unemployment rate?”

I’m just saying… that would be nice, eh? Just like the Chapwood calcs that I showed you a couple of weeks ago, pulling the wool away from our eyes on inflation… We need a Chapwood employment index!

Last week, early on I told you that the U.K. had a slew of data to print for the week, and after the dust settled on the economic prints, the outlook was dreary, as all the prints surprised the markets with how weak they were. No surprise on my part… Well, now the thought in the U.K. is that the economic data set the Bank of England on the path to a rate cut… and sterling rallied on that thought…  Really? debase the currency, but let’s rally the sucker! Opposites still reign… 

The U.S. Data Cupboard is on holiday this week, folks…  There are no economic prints scheduled for today, and the only print that makes any sense in following won’t come until our Tub Thumpin’ Thursday, when Leading Indicators print…  The Data Cupboard is a Big zero this week folks…  I don’t like weeks like this because the markets can be moved by things that don’t have anything to do with fundamentals… 

To recap… The currencies got sold going into the weekend, but in the overnight markets last night they rallied and won back some lost ground. Gold continues to have good days and bad days (reminds me of me!)  There’s no data this week, to speak of, so the markets are on their own to come up with why they should continue to buy dollars…  Looks like a rate cut will be coming from the BOE soon, as recent economic data was very weak… 

For What It’s Worth… Well, since I made a big deal out of the rumor regarding the repo market funding, I thought it would be a good thing to show you the article that brought this all forward, front and center to see… And that article can be found here: https://www.blacklistednews.com/article/76027/944-trillion-reasons-why-the-fed-is-quietly-bailing-out-hedge.html

Or, here’s your snippet:”

For What It’s Worth… Well, since I made a big deal out of the rumor regarding the repo market funding, I thought it would be a good thing to show you the article that brought this all forward, front and center to see… And that article can be found here: https://www.blacklistednews.com/article/76027/944-trillion-reasons-why-the-fed-is-quietly-bailing-out-hedge.html

Or, here’s your snippet:”On Friday, Minneapolis Fed president Neel Kashkari, who just two months earlier made a stunning proposal when he said that it was time for the Fed to pick up where the USSR left off and start redistributing wealth (at least Kashkari chose the proper entity: since the Fed has launched central planning across US capital markets, it would also be proper in the banana republic that the US has become, that the same Fed also decides who gets how much and the entire democracy/free enterprise/free market farce be skipped altogether) issued a challenge to “QE conspiracists” which apparently now also includes his FOMC colleague (and former Goldman Sachs co-worker), Robert Kaplan, in which he said “QE conspiracists can say this is all about balance sheet growth. Someone explain how swapping one short term risk free instrument (reserves) for another short term risk free instrument (t-bills) leads to equity repricing. I don’t see it.”

To the delight of Kashkari, who this year gets to vote and decide the future of US monetary policy yet is completely unaware of how the plumbing underneath US capital markets actually works, we did so for his benefit on Friday, although we certainly did not have to: after all, the “central banks’ central bank”, the Bank for International Settlements, did a far better job than we ever could in its December 8 report, “September stress in dollar repo markets: passing or structural?”, which explained not just why the Septem but also on the demand side, which as Claudo Borio, head of the monetary and economic department at the BIS, explained was the result “high demand for secured (repo) funding from non-bank financial institutions, such as hedge funds heavily engaged in leveraging up relative value trades.”

Incidentally, we harbor a slight suspicion that Kashkari, who also admitted to “finding amusement in needling critics calling them conspiracists or goldbugs” (which is a delightfully ironic statement for a person responsible for the biggest asset bubble in history, and one which we are confident in 1-2 years time he would love to retract), was being disingenuous and knows exactly how the Fed is impacting markets, because in what was perhaps the most important news last week which flew under the radar, the WSJ reported that the Fed was considering lending cash directly to – i.e., bailing out – hedge funds, or as we put it, “Fed officials are considering a new tool to ease repo market stress: namely bypassing the existing system entirely, and lending cash directly to smaller banks, securities dealers and hedge funds through the repo market’s clearinghouse, the Fixed Income Clearing Corp., or FICC.”

And so we once again get to the real issue at hand, namely the bailout of those hedge funds which even the BIS said were on the verge of failure had the repo market not been unfrozen – and which the Fed was all too aware of – and had the massive leverage that some hedge funds operate under collapsed, forcing an unprecedented liquidation cascade.

Sep repo disaster took place on the supply side (i.e., the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo market)…”

Chuck again… OK, so you can’t believe everything you read on the internet, right? But you can choose to believe what you want to believe, and this rumor makes as much sense to me as to why this is all happening, than that the Repo market was in trouble… Think about that for a minute… But don’t let it get to you, for it’s just an opinion, educated that is, as to what is going on…  take with as many grains of salt that you wish!

Currencies today 1/21/20 American Style: A$.6888, kiwi .6605, C$ .7654, euro 1.1106, sterling 1.3060, Swiss $1.0337, European Style: rand 14.4644, krone 8.9416, SEK 9.5030, forint 301.15, zloty 3.8196,    koruna 22.5120, RUB 61.54, yen 110.07, sing 1.3491, HKD 7.7704, INR 71.08, China 6.8627, peso 18.01, BRL 4.1724, Dollar Index 97.48, Oil $57.81, 10-year 1.80%, Silver $18.01, Platinum $1,013.58, Palladium $2,467, 42, and Gold… $1,556.80

That’s it for today…  Happy Birthday to my good friend, Kevin, aka Webbie…  Yesterday was his birthday, you’re getting old my good friend! OK, I had to call out the folks down here for being soft when it comes to weather… Last night the weatherman said that the shelters were being opened because of the expected “cold” overnight temps…  the overnight temp was forecast to be 55 degrees!  Wait, What?  They think 55 degrees is cold?  I don’t know, I just find that all to be very funny… I guess it’s my sense of humor?  Winter comes tonight here, as the temps will fall below 50, and then begin to warm back up and winter will have come and gone! OK, I’ve got to go!  Steely Dan takes us to the finish line today with their song: Rikki Don’t Lose That Number…   I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler

 

Where’s The Mousetrap?

January 16, 2020

* Currencies continue to inch upward on Wednesday…

* Chuck & Dennis talk…  that’s not a good thing for the Fed! 

Good day… And a Tub Thumpin’ Thursday to you! It’s been awhile, with the holidays and vacations, since I wished you a Tub Thumpin’ Thursday! But here I am… I’m ready to rock you like a hurricane! I could get in trouble down here saying that “h” word… They’re very sensitive about that here on the east coast! Well, I made my way to the barber yesterday for a head and face shave… It was not what I expected the experience to be, but I got what I came for, so no problemos! I had never had a barber shave my face before… I like it and will return on a regular basis! The band Montrose greets me this morning with their song: Rock Candy…

The currencies continued to inch higher during the day yesterday, taking Gold & Silver along for the ride that featured selling of dollars. Not by a huge amount, but the rally in the currencies was something that hadn’t been seen in over a week… The euro pushed past 1.1150, and the Aussie dollar (A$) found itself ahead of the 69-cent handle…

Gold’s rally yesterday stopped the bleeding that was caused by a removal of the threat of a WWIII. I was really thinking that Gold could give back all the gains it made while geopolitical tensions were raised by all the saber rattling. But it didn’t stopping $20 short of giving them all back, so bully for Gold! Besides, the U.S. and China can sign a trade treaty, the saber rattling my die down, but is the need for a safe haven no longer in vogue? I don’t think so folks… Before I get into a discussion about the state of banking here in the U.S. I want to set down a challenge… Go out and buy some physical Gold (or Silver) and then demand immediate delivery of your metals… This would go a long way toward shutting down the paper trading operations…

Palladium continues to move higher and higher. Palladium is in rarefied air at this point trading this morning at $2,380!  WOW!  Every day, I look at Palladium with wonder, and think… “That should be Gold making those moves”… I’m just saying… 

I had a long conversation with good friend, Dennis Miller, yesterday… For those of you wondering how he’s faring with his cancer treatments, he’ doing just fine! Dennis and I were trading stories on JP Morgan… Yes, the same firm that’s already had 3 felony charges go against them, and a RICO investigation ongoing! So, with that kind of history, they sure seem to be an easy target, right? Well, I’ve always had a thing against them for being at the head of the table of price manipulators in Silver and Gold… They weren’t always the biggest price manipulator on the street, but back about 16 years ago, Bear Stearns held that title… But when Bear Stearns went under, JP Morgan/ Chase bought their trade books, and a monster was created…

And the problems go much deeper folks… this from Wall Street on Parade (www.wallstreetonparade.com) “For starters, JPMorgan Chase is one of the largest shareholders in the New York Fed. Yes, each regional bank of the Federal Reserve is privately owned by their member banks, the same banks being “supervised” by that regional bank. If that sounds like an insurmountable conflict of interest, it is.”

And then this is the biggest incestuous thing I’ve ever heard of… Sit down for this one folks… “While the public outrage was playing out, William (Bill) Dudley was the President of the New York Fed. Wall Street On Parade broke the story that Dudley’s wife, Ann Darby, was receiving approximately $190,000 per year in deferred compensation from JPMorgan Chase, an amount she was scheduled to receive each year until 2021.”

Chuck again… I just shake my head in total disgust folks… Longtime readers may recall me going bananas about how blame was being thrown about by the different parties, but in my opinion, it was the lack of supervision of the banks that the NY Fed is responsible for that allowed things to get so far out of whack that we had to go through the Financial Meltdown, in which Trillions of dollars were funneled from the Fed to the Banks, secretly I must add….

I bet at this point, you’re wondering, what on earth is stopping Congress from stripping the Fed of this ability to print dollars and bail out whom they choose to bail out? I don’t know the answer to that question, as it remains a very BIG unknown in our lives, that’s for sure! I think I know, but will let that sink in and massage my brain for a few days, and see if it comes to me… 

OK. I’ve got to stop there! I could feel my blood pressure rising, and I can’t have that before I head to the doctor! So, let’s take a look at the U.S. Data Cupboard, eh? The Producer Price Index (PPI) (wholesale inflation) for December printed yesterday, and it was as ridiculous as the CPI was the day before… PPI for December only grew 0.1%…. So, that tells us there’s no inflation coming in the form of price increases… And that may be technically, but if you really inspect the package of what it is you’re buying you will notice that the size has decreased… You may be paying the same price for the item, but you’re receiving less… and less…. And less all the time…

Today’s  Data Cupboard will finally have something for us, as December Retail Sales will print… I think I began the week by telling you that the BHI (Butler Household Index) would indicate that the December print will be better than the average bear… So, the markets have that going for them today, but in reality, shouldn’t December Retail Sales be strong?

Overseas this morning the European Central Bank (ECB) is meeting, but I doubt any thing of significance comes from that meeting… So at this time I’m just going to put a black magic marker line through it on the calendar and move along…  

Hey! before we head to the Big Finish, I have this to throw against the wall and see how it lands… OK, the markets are all euphoric over the Trade deal getting signed this week, right? Well, already there are some questions about a major piece of the deal…  China is supposed to be buying $95 Billion of stuff from the U.S.  But… there was no mousetrap built to monitor the shipments!  There’s no way of telling if China toes the line of the trade deal!   And knowing what we know about China, that sounds like a way out for them doesn’t it?   

I guess we’ll just have to wait-n-see if the trade deal is as big of an impact to the economy that it’s billed to be… UGH! 

To recap… The currencies continued inching higher VS the dollar yesterday, and took Gold & Silver along for the ride on dollar selling… The U.S. Data Cupboard hasn’t helped the markets with any real economic reports to direct them one way or the other this week, but all that changes tomorrow with December Retail Sales… Gold broke the downward spiral it had been in since the saber rattling stopped last week, but has held onto $20 of those gains made then, and so it starts its next move at a higher price than it did the last time it began a rally… think about that one for a minute folks…

For What It’s Worth… Ok… Here’s our lesson for today, Temporary is not temporary… It’s permanent! I take us back to 1971 when Nixon closed the Gold window, he was quoted then as saying this was “Only temporary”… Guess he was wrong, eh? Why did I bring this up today? Because the Fed told us at year end that the large year-end injection of liquidity was supposed to a “one time-year end thing”… But the folks at zerohedge.com have different thoughts on that! And that can be found here: https://www.zerohedge.com/markets/fed-injects-82bn-liquidity-term-repo-most-oversubscribed-one-month

Or, here’s your snippet: ‘t was supposed to be a one-time, year-end “liquidity event.” Instead, it has transformed into the latest liquidity addiction within the financial community.

Just days after we reported that yet another disturbance appears to be brewing below the calm surface of the repo market again, we got another indication just how strong the market’s addition to the Fed’s easy repo money has become, when moments ago the Fed announced that its latest 2-week term repo operation was also the most oversubscribed since December 16, as $34.3BN in securities ($27.65BN in TSYs, $15.5BN in MBS) were submitted for today’s $35 billion operation, as dealers continue to scramble to the Fed for liquidity which they are no longer using for “regulatory” year-end purposes (since it is no longer year-end obviously), but are instead using it to pump markets directly.

And just in case there was any doubt that the liquidity shortage isn’t getting better, moments later the Fed announced that in its daily Overnight repo operation, it also accepted $47BN in securities ($22.5BN TSYs, $24.5BN in MBS) for a total liquidity injection of $82 billion.

he latest repo operations also confirmed what we discussed overnight in “Top Repo Expert Warns Fed Is Now Trapped: “It Will Take Pain To Wean The Repo Market Off Easy Cash”” in which we noted that according to Curvature Securities’ repo expert Scott Skyrm, something appears amiss as recently the total overnight and term Fed RP operations were greater than on year end! On year-end, the Fed had pumped a total of $255.95 billion into the market verses $258.9 billion last week.. “

Chuck again… here’s the thing I don’t see being discussed much anywhere, and that is just how addicted the investment houses / banks are getting at the easy credit injections…. What would happen if they were told to go “cold turkey”? I think you know…

Currencies today 1/16/20 American Style: A$.6926, kiwi .6615, C$ .7653, euro 1.1160, sterling 1.3686, Swiss $1.0486, European Style: rand 14.3586, krone 8.8730, SEK 9.4722, forint 299.02, zloty 3.7920,   koruna 22.1522, RUB 61.43, yen 109.97, sing 1.3457, HKD 7.7735, INR 70.83, China 6.8895, peso 18.78, BRL 4.1498, Dollar Index 97.15, Oil $57.62,  10-year 1.78%, Silver $18.00, Platinum $1,035.18, Palladium $2,380.39, and Gold… $1,555.58

That’s it for today, tomorrow and Monday… Talk to you again next Tuesday.  Our Blues were going for an all-time win record at home last night, but lost the game in overtime. UGH! They were going for their 10 th consecutive win at home. But hey! they got a point for the tie in regulation, and that puts them ahead of all other teams in points so far this year! WOW! I sure hope they aren’t peaking too early…  A Chamber of Commerce day here yesterday, and I was enjoying it immensely!  From the looks of it out my sliding door it’s going to be another day just like yesterday, and that, has me smiling like the Cheshire Cat, folks!   Pink Floyd takes us to the finish line today with their song: Time….   I hope you have a Tub Thumpin’ Thursday today, and please Be Good To Yourself!

Chuck Butler

What Did China Give Up To Get The Currency Manipulator Tag Dropped?

January 15, 2020  

* Another day of no movement, but overnight changed that! 

*Jim Rogers joins us for our daily discussion this morning! 

Good day… And a Wonderful Wednesday to you! Another day, another day of nothing happening in the currencies… We’re at a standstill here, just like we were a couple of weeks ago, when I told you that traders are thinking that they shouldn’t be holding dollars, but they can’t think of a currency they would want to own instead, right now… It was at that time that I suggested the Russian ruble, but apparently, they are still stuck in the cold war era when it comes to Russia… So, with that out of the way for today… The band Nazareth greets me this morning with their song: Holiday… Momma, momma please no more facelifts, I don’t know which one is you… 

OK… So, the currencies didn’t move very much yesterday. That’s it, thank you for coming, Johnny, tell them what they will go home with! Nah… just kidding… Gold continued to get sold, this time the downward move was less than previous downward moves, but still it was downward, and that’s not a good thing, except for those of you, and there are very many of you by the way, and you know who you are, that still need to buy some physical Gold. Before the mines run out! OK, I made that last part up, just for general effect! But shoot Rudy, if you think that (mines running out of Gold) can’t happen, I’m sure someone said that about Palladium in mines too…

Palladium continues to push upward and onward, and its upward move is a result of a shortage in Palladium… Of course I’ve said this before, so it won’t be new but, they use Palladium in the catalytic converters in cars… So, what happens to car sales when the economy goes bust? And from what I’m reading and seeing in pictures these days, the car sales business may be in big trouble, given all the supply they have sitting on car lots that can’t be moved… I’m just saying…

In the overnight markets we’ve seen some minor moves upward for the currencies, led by the Big Dog, euro… But the upward move is so small at this time, it’s difficult to detect, that is unless you’re a bonafide, super sleuth like me! HA! 

And getting back to Gold for a minute, I had this thought yesterday after signing off and seeing the title of the letter yesterday one more time… The U.S. had dropped the “currency manipulator” tag from China in the trade negotiations… Quid pro Quo, right? But for how long, before the U.S. government gets back to blaming China for our woes, and calls them a currency manipulator again?

Besides, China is a currency manipulator… Just calling a duck a duck… But, what if China pulled the old “switcheroo” and turned the tables and called the U.S. a Gold & Silver Price manipulator? I’m sure it wouldn’t be the same as having the currency manipulator tag and having to explain that to World Trade Organization. But, I would find it so entertaining! And would write about it every single day! HA!

But it’s not really funny… The U.S. is a metals price manipulator. There’s no amount of telling me that this isn’t true, can’t be true, never will be true, or whatever… This is what I believe… Just like I believe that you don’t live forever (I think that one has been proven for a few thousand years now!) … Just like I believe that if you put your head down at work, do your job, and don’t get caught up in company gossip, you’ll do fine… Like I believe that any amount of long term debt, should always be paid on and reduced as quickly as it can… Like I believe, oh, you get the message…

And getting back to the U.S. dropping the “Currency manipulator” tag, what do you think China agreed to do? I doubt that they would agree to stop with their plans to issue a gold backed-digital currency…. But I would bet a dollar to a Krispy Kreme that it was discussed… Because in my humble opinion, if China does eventually issue a Gold-backed digital currency, that it would be the end of the dollar’s reserve status… And that’s not anything to sneeze at folks…

In my presentations I used to tell people that when I was a young boy, I watched the Ed Sullivan Show the night the Beatles first performed… And I recall the TV showing pictures of Liverpool, where the band came from, and how depressing those pictures were… And that was because the U.K. economy was in a very long downtrend, that began when they lost the reserve currency status that the pound sterling once held… Gov’t loans are more expensive, taking up needed funds from other economic projects… Commodities are much more expensive… think about that one for a minute, have you have seen the gas prices in the U.K. VS what they are here?

OK, let’s talk about something else… but before I go on, I have one question for you… Got Gold?

Hey Switzerland, you had better toe the line! The U.S. is watching you! It was announced yesterday that Switzerland had been added to the “list” of countries the U.S. thinks is manipulating their currency. 

In the meantime, the Swiss franc just hit a 3 year high VS the euro… So… on what basis does the U.S. Gov’t think Switzerland is a currency manipulator? I mean why now and not back 5 years or so ago, when the Swiss National Bank (SNB) tied the franc to the euro cross at 1.20? The SNB would then have to sell francs whenever the cross neared that level… Now, THAT’s currency manipulation!

Well, the Fed’s repo madness continues… The Fed’s balance sheet is near the top it help a few years ago, and our elected representatives are avoiding  forcing the Fed to come clean on who’s getting the funds and for what purpose… The Fed is monetizing the debt folks…. Plain and simple, I don’t care what they want to call it, it’s monetizing the debt, plain and simple.

For those of you that skipped economics classes… If government bonds that have come due are held by the central bank, the central bank will return any funds paid to it back to the treasury. Thus, the treasury may “borrow” money without needing to repay it. This process of financing government spending is called “monetizing the debt”.

The difference between Debt Monetization and Quantitative Easing, according to Wikipedia is: Monetization enriches the Gov’t, and QE enriches the Gov’t and the banks…

Because what if… after all this, we find out no bank was in need of the money, and that it was simply a need of the Gov’t to receive free funding? All at the expense of the seniors and savers… I’ll say no more at this time, because I’m getting all riled up! Some very astute economists believe, and I agree with them, that the Fed is simply keeping the economy from collapsing, and collapsing with a bang!  

But should the Fed be getting involved with economy woes, such as the end of an economic expansion, albeit a slow expansion?  Well, theoretically, the answer is no…  But this “we saved the economy” flag has been waved by the Fed since Big Al Greenspan…  It has become the norm, what’s expected… “What’ s the Fed going to do to save the economy?”   Remember all the hype of a “Greenspan put?”  I could go on and on how this is all wrong, that economies should be allowed to boom and bust, but you’re heard me go through all that previously, no need to pull it out of the closet, dust it off and repeat myself… 

The U.S. Data Cupboard had the stupid CPI (consumer inflation) yesterday, and it produced, yet another stupid print of a 0.2% gain in December, down from November’s 0.3% gain… Core inflation was up just 0.1%…  These numbers are preposterous!  Inflation in the major cities around the U.S. has been running around 10% for the last  decade… Remember? I showed you the website from the folks that really count inflation the way it should be counted?   I just hope to heaven and the stars that the Fed Heads don’t pay attention to this stupid data print… Because I wouldn’t if I didn’t write a letter! 

To recap…  Another day of no movement in the currencies, and this time, Gold didn’t get whacked, it closed down a bit, but nothing like in previous sessions, and this morning, Gold is back on the rally tracks…  In the overnight markets the currencies have all filed in behind the euro and moved upward just a bit…  The start of something?  You never know, when that will be folks, which is why your diversified investment portfolio needs to be in place…. yesterday! 

For What It’s Worth….  Longtime readers will recall me telling them about how the world renowned analyst and investor, Jim Rogers, had stopped by the office to talk to me a quite a few years ago now… We had lunch at the trade desk, and discussed the markets… He’s a very astute investor folks, and when he talks, people should listen… And that’s why when I saw this article this morning from dear reader Bob, I said I’ve got to use this in the FWIW section today… So, with no further ado…  you can find the article here: https://www.zerohedge.com/markets/insanity-jim-rogers-warns-horrible-time-ahead?utm_campaign=&utm_content=ZeroHedge%3A+The+Durden+Dispatch&utm_medium=email&utm_source=zh_newsletter 

Or, here’s your snippet: “The Fed has increased its balance sheet over 500% in the past decade; The Bank of Japan is printing money to buy bonds and stock ETFs; and The European Central Bank is mired in insane negative interests. And, according to legendary investor Jim Rogers, they will continue this “madness” as long as its necessary.

n 2008, Rogers notes that we had problems because of too much debt, however, “since then the debt has skyrocketed everywhere and it’s going higher and higher. We are going to have a horrible time when this all comes to an end… eventually, the market is going to say: ‘We don’t want this, we don’t want to play this game anymore, and we don’t want your garbage paper anymore’.”

And when that happens, Rogers warns that central banks will print even more and buy even more assets.

“And that’s when we will have very serious problems… We all are going to pay a horrible price someday but in the meantime it’s a lot of fun for a lot of people.”

When it comes to an end, Rogers laments, “it will be the worst of my lifetime.” – Jim Rogers

Chuck again…  I know, I know I’ve said that many times, but sometimes kids need to hear from another authority figure for the lesson to sink in… If you get my drift… HA! 

Currencies today 1/15/20 American Style: A$.6895, kiwi .6614, C$ .7653, euro 1.1150, sterling 1.3013, Swiss $1.0356, European Style: rand 14.3940, krone 8.8720, SEK 9.4619, forint 298.01, zloty 3.7873,    koruna 22.5316, RUB 61.32, yen 109.85, sing 1.3464, HKD 7.7713, INR 70.72, China 6.8978, peso 18.79, BRL 4.1405, Dollar Index 97.28, Oil $58.18, 10-year 1.79%, Silver $17.87, Platinum $1,003.58, Palladium $2,217.00, and Gold… $1,552.50

That’s it for today… I’m pretty sure I’ll be able to get the letter out tomorrow before I head 50 minutes north to the wound center, so I’ll should be back tomorrow… But guess what Monday is? It’s a holiday! So, a 4-day weekend for me! YAHOO!  Most days I get up before the alarm goes off so it’s not like I’m getting up when I’m tired!  I heard from my friends, and publishers, Pam and Mary Anne Aden yesterday. They had been fighting the flu before Christmas, but they’re all good to go now, and that was good news! I don’t know if I’ve said this lately, but I simply love writing under their umbrella…  This is the way it should be done!  Not with all the roadblocks that were associated to the letter in a previous life… I’m just saying… Thanks Pam and Mary Anne!   OK.. time to go…  The Allman Brothers take us to the finish line with my fave song by them: Melissa… I hope you have a Wonderful Wednesday and will Be Good To Yourself!

Chuck Butler

U.S. Removes “Currency Manipulator” Tag From China…

January 14, 2020

* Currencies move sideways throughout the day and night… 

* Gold gets whacked again! UGH! 

Good Day… And a Tom Terrific Tuesday to you! A not so great night, as LSU beat Clemson in the NCAA National Championship Game last night. I say that because my good friend, Rick B. is a diehard Clemson fan… But our Blues won! And extended their new winning streak to 4 games, all at home, with one more home game in this 5-game homestand… I got to my wound center appointment with a few minutes to spare yesterday, and was in and out in record time! Thursday’s visit won’t be like greased tracks but at least I know what to look forward to! So… What’s on your mind today? Mine is blank because of staying up too late to watch the football game. UGH! This is when I wish I had a radio show and could open up the lines for questions… Oh well, The Counting Crows greet me this morning with their song: Mr. Jones…

There wasn’t much movement in the currencies yesterday, and any that existed were moves higher VS the dollar… Gold got clobbered as nothing got better as the day went on for the shiny metal… And since the Data Cupboard was basically empty, there just wasn’t anything new under the sun for the markets to hang their hats on and trade from. And there’s really nothing to see in the Data Cupboard today either… We were supposed to at least see the Federal Budget Deficit, but that print got delayed…

Overnight has seen the trading go sideways, with what little gains the currencies mustarded yesterday being wiped out.. So, we start today in the same clothes as yesterday, with some currencies showing additional slippage..  

I said yesterday that the Pfennig would be short-n-sweet, and then went on and on and on… But not today, this WILL be short-n-sweet, because, well, when the markets don’t move, and there’s no news in the markets to talk about, there’s nothing for me to write about… Of course, I could tell you story from my past in trading, or from my past in Operations, or from my past as a musician, or, and I could go on, but I really don’t want to go there on any of those today, so… short-n-sweet it is…

We have seen the Chinese renminbi rally in recent days, as they must have gotten word there that part of the trade negotiation, was that the U.S. would drop the “currency manipulator” tag that they had placed on China previously… This is a BIG deal folks… And for China to get this clean bill of health was more than a good reason to allow appreciation in the renminbi!

The thing I always like to see when the renminbi rallies is that it give the Sing dollar an opportunity to rally too… I’ve explained this before, but I’ll do it one more time! You see, Singapore and China are in competition for exports, and so Singapore allows China to take the lead, and they will gladly follow… so when the renminbi is losing ground, the sing dollar does too, and vice versa…

And if the safe haven Gold is getting sold, because of people that should know better that Save Havens should never get sold, are selling it because the markets think that safe havens aren’t needed any longer.. Well, if Gold gets treated like a rented mule, then so does the Japanese yen… I’ll always contend that yen should not be considered a Safe Haven, but it is… and brother has it been getting sold in the past few sessions…

The U.S. Data Cupboard will have the stupid CPI for December to print today… Besides that there are some Fed Head speakers, and nothing else… UGH! Where has all the data gone?  Long time passing… 

To recap… Not much went on with the currencies yesterday, they moved higher during the day, and sold off those small gains in the overnight markets. Gold got whacked again, and all the talk is about how there’s no need for Safe Havens, and with that thought, yen gets sold too…  The renminbi has been on an appreciation tear, as the “currency manipulator” tag has been removed from the country as a part of the trade negotiation. 

For What It’s Worth…  I found this while perusing Reuters this morning looking for anything that would catch my eye… And this is what I found, it’s an interesting story at least, about a Gold bar found on the streets of Mexico… you can check it out here: https://www.reuters.com/article/us-mexico-archeology/gold-bar-found-beneath-mexico-city-street-was-part-of-moctezumas-treasure-idUSKBN1Z90ED

Or, here’s your snippet: “A new scientific analysis of a large gold bar found decades ago in downtown Mexico City reveals it was part of the plunder Spanish conquerors tried to carry away as they fled the Aztec capital after native warriors forced a hasty retreat.    

Mexico’s National Institute of Anthropology and History (INAH) announced the findings of new tests of the bar in a statement on Thursday, a few months before the 500-year anniversary of the battle that forced Hernan Cortes and his soldiers to temporarily flee the city on June 30, 1520.

A day earlier, Aztec Emperor Moctezuma was killed, or possibly assassinated, according to the native informants of one Spanish chronicler, which promoted a frenzied battle that forced Cortes, his fellow Spaniards as well as their native allies to flee for their lives.

A year later, Cortes would return and lay siege to the city, which was already weakened with supply lines cut and diseases introduced by the Spanish invaders taking a toll.

The bar was originally discovered in 1981 during a construction project some 16 feet (5 meters) underground in downtown Mexico City – which was built on the ruins of the Aztec capital Tenochtitlan – where a canal that would have been used by the fleeing Spaniards was once located.”

Chuck again…  Pretty cool story, eh?  I remember as kids we used to dig up the back yard thinking we would find buried treasure, only to get our rear ends smacked for digging up the yard!  There was always a “treasure map” being produced, and our anticipation of being “rich” was always fun thing to experience on a hot, hazy, lazy day of summer!  OK… Andrew and Rachel sent us a quick video of granddaughter, Evie, making baby noises… So, cute! She’s 3 months old now…  It’s been windy down here, but yesterday the wind died down a bit, and we sat outside for hours enjoying the sun, and warmth…  Gladys Knight & the Pips take us to the finish line with their version of the song: Heard It Through The Grapevine. I always liked her version better, for the tempo it had…  I hope you have a Tom Terrific Tuesday and will Be Good To Yourself! 

Chuck Butler

 

Last Monday’s Eurphoria Has Faded Away….

January 13, 2020 

* The dollar comes back with a flurry of punches! 

* 2020 begins with the same “Opposites trading pattern”… UGH! 

Good Day… And a Marvelous Monday to you! Did you watch the Kansas City / Houston playoff game yesterday? WOW! Down 24-0 the K.C. Chiefs came back to win and score 51 points! What a turn around! Before that one, the only one that compares was the old Buffalo / Houston playoff game with Buffalo using their second string quarterback to comeback from a large deficit to win… That was quite a few years ago now… Well, did you hear that the Iranians were blaming the U.S. for them shooting down that passenger plane last week? Strange, but true… Grasping at straws… Oh, I have a correction to something I typed last week, I said that the airstrikes were in Iran, but actually were in Iraq… the late great, and beautiful Dusty Springfield greets me this morning with her song: Son of a Preacher Man…

Well, all the euphoria of Monday last week, that the euro was trading over 1.12, Gold had leaped forward by $28 at the end of the week, and the price of Oil was $63, is all in the past now…

Longtime readers will know what I’m about to say here…. It sure looks as though the Plunge Protection Team (PPT) was out in force last week… For the Economic Data didn’t look good, but the dollar still rallied… Yes, the threat of WWIII faded, and long with it so did the lofty price of Gold and Silver, but still… from what I read, the physical buying of Gold is off the charts these days… The uber rich are storing it in secret bunkers, and Central Banks sans the Fed, are lining up to buy as much physical Gold as they can… But still the price of Gold gets yanked back every time it begins to move upward again… Don’t tell me… I’ve got nothing to do… Counting flowers on the wall that don’t bother me at all… But Gold price manipulation does bother me!

So, there’s my rant/ whine for the day… This will be short-n-sweet today, for I have to drive 50 minutes north this morning to the wound center in Port St. Lucie, as soon as I hit send… I first visited this wound center last Thursday, appt. at 9am, and didn’t get back to home base until after noon! The place was a madhouse! So… well, at least I know the ground rules, and will be prepared for the waits! It was very much like waiting at M.D. Anderson Cancer Center… I’m surprised most people that I talk to that have cancer, have never heard of M.D. Anderson, in Houston Texas… They save my jaw, and have been a great sounding board for me when the current chemo I take begins to lose its effectiveness…

OK.. back to the markets… In the overnight markets last night, and this morning, the euro has held the 1.11 handle, but Gold has been sold off by $10 to trade this morning at $1.551…   The price of oil trades with a $59 handle, barely, that is….  So, the markets had their tizzy fit, and that was it?  It sure appears to be that way…   

But I just don’t get the damage being done to Gold…  And Silver hasn’t escaped unscathed either.  January has been good to Gold the past few years, and so I’m a little concerned that the trading pattern of the past few years isn’t playing out this year…  

Countries all over the world are making their loads of dollars held in reserve, lighter, and we’ve had the Fed printing dollars by the cruise ship loads, and still the dollar remains well bid…  Doesn’t makes sense to me, but then we are in the day of “opposites” right?    I read last week that in 1970 the percent of dollars held around the world was 70%, and in today’s world that percentage has slipped to 62%… Of course in that time we had the introduction of the euro, and the trading ability of the Chinese renminbi added to the mix, but still that’s quite a slip in dollars held, right? 

And these days..  I sit on cornerstones and count the time in quarter tones to ten… No wait!  These days, the U.S. has basically ticked off just about everybody, with our insistence of keeping the dollar the reserve currency, that even the Saudi’s are thinking of pricing their Oil in something other than dollar… 

I used to give presentations around the country and then some, and I would talk about how the Chinese renminbi was signing all these currency swap agreements with countries and that there were talks of them signing one with the OPEC countries, and would say if that happened that would for sure signal the end of the dollar’s reserve status… Well… skip forward to today, it sure appears that it could be coming to fruition, don’t you think?  I do… and to me that’s all that matters! HA! 

OK, let’s do a little math here… You know how I’m always saying that the markets should use the ADP Employment numbers instead of the BLS mumbo jumbo? So, get this… Last week the ADP report said there were 202,000 jobs added in December. The BLS said there were 145,000… But because of their previous month’s indulgences with hedonic adjustments, they had backed out 60,000 that were over reported in previous months… So, add back that 60,000 and the BLS is right in line with the ADP! So, since I always take away the “added jobs” I have to add back the “taken away jobs”, which means the December month, known for added employment saw 205,000 jobs added…

The thing that I still say is not a good thing for these labor reports is that there is no deciphering of what is a good paying job and what is a low paying job… So, the total numbers don’t really mean much to me, nor should they you, but apparently, the markets swallow them hook, line and sinker!

I’ve got to get a better job! This one is driving me crazy folks… OK, I’m kidding… But I do have to admit that there are times that I just want to throw my hands up over my head and say, “I quit!” I can’t keep writing about all these bad things I see and not go crazy! And that leads me to this:

OK… remember last month when I told you that I didn’t think the Christmas shopping season went too well? OK, I came across this Tweet from fave economist, David Rosenberg on Saturday… Let’s listen in to what the econoguy has to say on Twitter: “I keep hearing how wonderful the holiday shopping season was and yet we see the likes of J.C. Penney, Kohl’s and L Brands all report lower sales action for the November-December time frame. Not to mention Macy’s, Urban Outfitters and Bed Bath & Beyond.”

Yes, the real facts, and not the ones that get spewed on the TV / cable/ news… The term “fake news” became something we all talked about in recent years, but…. Longtime readers will recall me talking about fake news with regards to economic reports for years!

The fires are still burning out of control in Australia… I sure hope any readers I have down under are safe, as well as anyone else that lives there! There’s a slew of economic data that will print this morning in the U.K., but will most of it be forgotten about as the country comes to grip with the latest news from the royal family? I kid, but it all fairness, this royal family thing is big news in the U.K.

Here in the U.S. the Data Cupboard is basically void of any “real economic data” until Thursday when December Retail Sales will print… It will include the Christmas sales season, and from what I saw getting left on our front porch last month, the BHI tells me that we should see a mediocre Retail Sales print for December, which the “spin doctors” and not the ones that sang Two Princes, but the ones that put their spin on things, will be out in force saying that the Retail Sales figures shows that there will be no recession in 2020…

I don’t believe it…. Not for a minute… You’re under the gun so you take it on the run! No wait! What? You have a problem with a little REO Speedwagon this morning? But basically what I’m saying is that everyone that reads the letter knows that I said last year that we would be in a recession before year-end… And maybe we would have been had the Fed not decided to start pumping 100’s of Billions of dollars into the banking system…

I’m still miffed and mad as all hell, that the Fed doesn’t have to tell us to whom they are giving these funds away to, and for what purpose… And you should be too! So, pick up a pen and a piece of paper, or better yet write to your representative in an email, and tell them that you as a citizen of the U.S. demand that the Fed come clean on this ponzi scheme they’re running…

To recap… The euphoria of the currencies, metals and Oil last Monday has faded away, and we’re right back to where we were before everyone was on the edge of their collective seats waiting for Iran to retaliate… There’s not a lot of data this week that’s worth looking at until we get to Thursday, but in the U.K. today they will print a slew of data, but Chuck wonders if anyone will notice?

For What It’s Worth… Last week I talked about the Baltic Dry Index dropping like a rock, and that had followed up the Cass Freight index also dropping quickly… Well this week it’s the truck orders data that’s falling out of the sky, and that article can be found here: https://www.zerohedge.com/economics/truck-manufacturing-orders-plunge-decade-low-2019

Or, here’s your snippet: “The painful decline in Class 8 orders that we have been documenting on a month-by-month basis has resulted in truck manufacturing orders hitting a decade low in 2019, according to Americas Commercial Transportation (ACT) Research Co., a leading publisher of commercial vehicle industry data, market analysis, and forecasting services for the North American market.
Full year volume for Class 8 orders was 181,000 for the year, compared to 490,100 units in 2018.

Sales in December followed the year’s trend, ticking lower on a year over year basis despite showing a 14% sequential rise.

Federal tax rate cuts in 2018 encouraged carriers to expand their fleets, resulting in major backlogs and tough comparable numbers for 2019, according to the Triad Business Journal.
In addition to the tough comps, ACT President and Senior Analyst Kenny Vieth also blamed the issues on “lower freight demand” in 2019.

Vieth said: “Overbuying through 2019 and insufficient freight to absorb the ensuing capacity overhang continued to weigh on the front end of the Class 8 demand cycle in December. Recalling July and August, orders were down 80% from the corresponding months in 2018.”

As we have documented throughout the year, some truck manufacturers, like Mack Trucks and Volvo Trucks, announced layoffs. Volvo announced last year that it would lay off 700 people at its Dublin, Virginia plant. Daimler laid off 900 workers in October 2019 and Navistar will lay off 1,300 workers this month.

Some trucking companies that we have profiled, like Terrill Transportation, have closed down entirely.”

Chuck again… I want to thank friend, Ed Steer, for pointing me to this article in his Saturday letter at www.edsteergoldsilver.com But isn’t it interesting that you didn’t hear about this news on the TV or radio? Does the fact that you didn’t hear it make it any less true? It had better not! I’m just saying!

Currencies today 1/13/20 American Style: A$ .6900, kiwi .6630, C$ .7660, euro 1.1122, sterling 1.2988, Swiss $1.0282, European Style: rand 14.3580, krone 8.9070, SEK 9.5176, forint 300.90, zloty 3.8107,    koruna 22.6991, RUB 61.00, yen 109.89, sing 1.3471, HKD 7.7220, INR 70.76, China 6.9183, peso 18.78, BRL 4.0934, Dollar Index 97.51, Oil $59.09, 10-year 1.84%, Silver $17.97, Platinum $969.70, Palladium $2,133.50, and Gold… $1,551.29

That’s it for today, as discussed last week, I believe I’ll be getting back to my regularly scheduled programming this week, as my appt. at the wound center is an hour later in the morning, which gives me time to write before I go…  So… I’m here all week… Try the veal and tip the waitresses! HA! It was a “full moon” weekend… I always get a kick out of watching the full moon rise over the ocean… Cool beans in my book!  Happy Birthday to my oldest son, Andrew, who celebrated his day yesterday in N. Carolina coaching water polo… I’m so proud of both my boys, as they work diligently at “giving back to their game”…  In Alex’s spare time, he coaches the pre-high school kids…   I always told them to “give back to the game they love”…  OK… got to get going, the traffic in Stuart, Fla. is a real bear to get through… Tod Rundgren takes us to the finish line with his song: It Wouldn’t Have Made Any Difference…  I hope you have a Marvelous Monday, and will Be Good To Yourself! 

Chuck Butler

 

 

Geopolitical Problems Arise, One Of The Reasons To Own Gold…

January 8, 2020

* Currencies fall back as the dollar rebounds… 

* Gold soars with the eagles but gets grounded with the turkeys! 

Good day… And a Wonderful Wednesday to you! My travel day yesterday went along OK, until… my stomach began to revolt on me… UGH! But we made it here, to S. Florida, to our 2nd home… And I’ll be here until April… I was a happy camper again once we got outside here, and it was sunny and 75… I love warm weather! Well, Gold soared briefly yesterday, as the Iranian retaliated for the airstrike on them last week. Not that I want to see war escalating, but this is one of the reasons you own Gold! So, more on that today, and talk about what happened to the short-lived currency rally… So, pull up a chair, grab a cup of joe… and let’s go! The local St. Louis band, Mama’s Pride, greets me this morning with their song: Blue Mist…

OK, first things first… The war trigger fingers are getting itchy folks… I do not want to see the U.S. in another war, unless of course, God forbid, we are attacked first. But late yesterday, news came across that the Iranians has retaliated and fired some land to air missiles at a base in Iraq, that housed American Soldiers… As I went to bed last night, I had not heard of any loss of American lives, but one would have to think that to be tenuous… Bottom line to all this saber rattling, is the price of Gold has seen some wild and crazy trading… At one point yesterday, I checked the prices and Gold was $1,604….  But that didn’t last, as I’m sure the JPMorgan’s etal, were there to make sure that they threw up a roadblock, and Gold ended the day up $10, and not the $28 it had briefly touched on. 

As I said above, this is one of the reasons why you own Gold… Geopolitical problems… I said on Monday this week that I thought this saber rattling would continue and that it would keep the bid constant and rising for the price of Gold. And Silver was not chopped liver these past few days too and closed yesterday at $18.35 (after venturing higher on the day to $18.55… so, the price manipulators are attempting to stop a runaway train… I have this feeling they’re going to be run over, but then that’s just me… 

There was an article Monday about how Gold was “overbought”…  And I thought, well that may be, but the figures they were using were based on a belief by them that mom and pops here in the U.S. are all-in on Gold buying, when the actual truth is that many don’t even know that Gold exists as an investment option!  The GATA folks think that 95% of the number is incorrect, and I would agree!  

And while the precious metals moved down the rally tracks at a steady speed, the currencies gave back their gains from last week. The Plunge Protection Team (PPT) had to choose their battles, and they chose to battle the falling dollar… The euro, which was 1.1205 on Monday morning, has seen its recent mini-rally falter, and when the Big Dog falters the rest of the currencies (the little dogs) can’t get out of their own way!

The price of Oil slipped a little yesterday, which didn’t do the  Petrol Currencies any favors as they were waiting for either the euro to gain, or the price of Oil to gain, and since neither happened, the Petrol Currencies that include: Rubles, krone, real, loonies, pesos and others, got sold on the day… UGH! 

In the U.S. Data Cupboard on Monday, was the Markit ISM (manufacturing index)… The Markit folks say there’s nothing contracting in manufacturing, but the ISM did say that not only was the manufacturing sector contracting it had contracted more than the previous month! Where’s the disconnect here? I mean do the Markit people now get their numbers from the BLS? HA! Because the BLS sure knows how to massage the numbers each month, so more and more sheeple go to market and buy stocks, don’t they? And now the Markit report on manufacturing says everything is hunky dory, and the real ISM report says, not so fast their Markit boys! So, anyway, the thing is simply that one’s telling the truth, and other is telling the not so truth… And I’ll bet a shiny quarter that you know which one is which in my book!

Yesterday in the Data Cupboard, we saw November Factory Orders, which placed the odds of a good 4th QTR GDP here in the U.S. very low, as Factory Orders were negative -0.7%…  Along with the negative print in Durable Good Orders, and the Baltic Dry Index, and Cass Freight indexes both dropping like rocks from a cliff, the picture that’s being painted for 4th QTR GDP is not a pretty one, folks…   I’m just saying…

The Data Cupboard today has the ADP Jobs report for December…  The ADP report forecast is for only 67,000 jobs to have been created in December. Last month we had a low number on the ADP report, only to see the BLS blow that out of the water two days later… So, I guess I’ll have to wait-n-see what the BLS has up its sleeve on Friday, eh?  

Before I head to the Big Finish today, I want to talk a bit about the Russian economy…  I read last week that they had a bumper crop in 2019 (their year-end is in July)  and that they are fully expecting a repeat if not a better than 2019 for 2020…   The economic sanctions continue to hold a grip on the Russian economy, folks, but so far they are doing everything possible to ignore them and move ahead.  

I know, and realize that I spend a lot of time and words talking about Russia, and ruble… But longtime readers know that there are times when countries go front and center and need to be talked about… In the early 2000’s it was the euro… then the Aussie and kiwi dollars,  and then the dollar, and now it’s rubles…  The ruble is so weak, compared to where it was before the conflict with Ukraine began… And that’s another reason I think it needs to be looked at, for shouldn’t it return to its previous level? I believe so…  And so… 

To recap… I know, shorter than usual today, just getting my bearings adjusted that’s all…  OK… well all the euphoria in the currencies and metals have been brought back to earth, as the saber rattling notched higher yesterday and then faded…  The Markit and ISM reports on Manufacturing seem to have a disconnect, are the Markit folks getting their numbers from the BLS? HA!  Gold soared with the eagles for a while yesterday, but ended the day grounded with the turkeys…  UGH!   Oh, well, can’t move too fast upward or there will be a correction!  

For What It’s Worth… I always love to find stuff in my local paper that I can use… The St. Louis Post Dispatch, doesn’t really have too many original story writers left, so most of the time they are simply reprinting stories found on the newswires… But every now and then, economy writer, David Niclaus writes a real good one, and I have to make sure I find a way to use it! So, this article is about the tariffs and how they’re destroying manufacturing, and the so on, and can be found here: https://www.stltoday.com/business/columns/david-nicklaus/tariffs-were-supposed-to-save-american-manufacturing-they-re-destroying/article_0ff11533-3744-5411-8741-bdda614a9d6e.html#tracking-source=home-top-story-1

Or, here’s your snippet: “resident Donald Trump’s tariffs were supposed to make American factories great again.

Instead, a new Federal Reserve study says, they’ve harmed American manufacturing, destroyed jobs and raised prices for consumers.
Moreover, the damage won’t be undone by the president’s phase one trade deal with China. The 25% tariffs he imposed in 2018 on a wide range of components and other manufacturing inputs will remain in place.

Aaron Flaaen and Justin Pierce say their study provides the first comprehensive look at how the tariffs affect U.S. manufacturers. That’s important because tariff advocates sometimes argue that any pain caused to consumers, financial markets or even the economy as a whole is necessary to maintain a robust manufacturing sector.

Trouble is, the tariffs clearly are hurting the sector they were supposed to help.”

Chuck again… Well, here’s one that I’ll slap myself on the back for… You see when the tariffs were first talked about, I told you, dear reader, that the economy would suffer… I’m just saying… I can hear you now… “Yeah, Chuck, even a blind squirrel can find an acorn!” HA!

Currencies today 1/8/20 American Style: A$ .6870, kiwi .6647, C$ .7686, euro 1.1130, sterling 1.3107, Swiss $1.0290, European Style: rand 14.2060, krone 8.8540, SEK 9.4407, forint 297.45, zloty 3.8115,    koruna 22.6841, RUB 61.86, yen 108.71, sing 1.3503, HKD 7.7772, INR 71.66, China 6.9473, peso 18.84, BRL 4.0657, Dollar Index 97.11, Oil $62.90, 10-year 1.81%, Silver $18.36, Platinum $969.72, Palladium $2,099.60, and Gold… $1,578.43

That’s it for today, and this week… Next week we get back to a regular schedule, I think! Tomorrow I will drive north 30 mile to Port St. Lucie to a wound center there, and see what they think of my leg… And then weekly I’ll head back there, but don’t know the schedule they’ll keep for me, so for now, we’re back to regularly scheduled programming next week…   I heading south this morning for a breakfast meeting with my good friend Rick, who’s down here for a conference. The last time I met someone for breakfast while down here was a couple of years ago, when I met my former marketing person Suzanne for breakfast… Back then I was having problems with the tumor in my mouth, and during breakfast I began to bleed, and so I rushed off to the bathroom where I stayed for the next 1/2 hour attempting to get it stopped… Poor Suzanne…  well, that was a bad memory!  But no more…  Robert Plant takes us to the finish line today with his song: Big Log…    I hope you have a Wonderful Wednesday, and will continue to Be Good To Yourself!

Chuck butler

 

 

We Simply Refuse To Learn From History!

January 6, 2020  

* Airstrike in Iran sends the dollar to the woodshed!

* And send Gold soaring higher! 

Good Day…. And a Marvelous Monday to you! Welcome to January and 2020! The Roaring 20’s are back! Well, at least in as far as decades go… How was your Christmas and New Year celebrations? I had a fabulous time through it all, even though most days I was feeling like death warmed over… The currencies and metals sure rallied strongly in that time. Tomorrow is a “travel day” for me, so by the time I get to the airport, you’ll still be sleeping, which means no Pfennig tomorrow, but I’ll be back in my home in the south to write on Wednesday… There’s been quite a bit of news since I last talked to you last Monday, so, we’ll talk about some of that, and other things this morning… Steely Dan greets me this morning with their song: Peg…

In the last week, we saw the euro trade in the upper numbers of an 1.18 handle… We saw Gold trade to a multi year high, and Silver get to trade over $18 once again, and the price of Oil shoot higher…. Most of the movement that related to these moves came from the air strike that was ordered by the U.S. Chief of Command and resulted in the top General in Iran being taken down. And now there are stories out there that more strikes could be in the offing… So, the pressure on the dollar will remain in tact for now… The thing I think we could very well see if these continue much longer, is that the strong dollar trend comes to an end… Remember last week I told you that Euro traders are calling for a rallying euro in 2020.

And I think the proof in the pudding of that statement is the fact that in the overnight markets, the euro has climbed past 1.12!  

The Petrol Currencies led by the Russian ruble, have really taken the Oil price rally to heart. The next move for the ruble will be to fall below 62. The Norwegian krone is firmly on the rally tracks, as it gets the double dose of rally medicine from the euro’s rise, and the Oil price rise.  

In last weeks flurry of activity in the currencies we saw the Aussie dollar (A$) climb to 70-cents… But, that gain was short-lived, as the Australian country is experiencing raging wild fires, and it has taken the focus off financials and what not there…  The fires are widespread, from what I read about them, and don’t look to be anything that will be put out any time soon… 

Cruising through Twitter yesterday, I came across some tweets that I’ll highlight here that tell a story about the U.S. Economy, folks… Ignore them if you choose… but if you do, I think you’ll end up being sorry…

The fist one is s tweet from a former colleague and longtime friend, Sean Hyman. Who posted: “Sales of Manhattan’s priciest apartments plunge almost 40% in fourth quarter”

The next tweet is from David Rosenberg, one of my fave economists, who responded to a article by Goldman Sachs that said the economy was fine…. “Someone forgot to tell the Baltic Dry Index, which has collapsed 60% from the nearby peak, about this “growth stabilization” narrative. Not as if the Cass Freight Index hasn’t been flashing the same signpost, which is tougher times ahead for the over-levered global economy.”

And finally, the next one is from Danielle Di Martino Booth, another of my fave economists, who posted:” Does ANYONE look at charts any more? Step 1. Yield curve inverts Step 2. Yield curve steepens Step 3. With an average 10-month lag post 3-month/10-year inversion (which occurred in March 2019), economy enters recession. Powell printing maniacally should push out lag time.”

OK… So, the rich are losing their shirts in Manhattan…. And the markets are oblivious to key indicators that the economy is going downhill fast… Like a snowball going down a steep hill, it gains more snow and size as it rolls downhill…

The things that get me all riled up folks, is…. When I hear people that should know better, but apparently don’t, say things like: This economic expansion is going to be like the Energizer Bunny and go on and on and on… That’s just not the way that economies work, folks… But then all past economies didn’t have a mingling Fed… Printing money as if it was their only job to do… Funny thing here… On Saturday, we celebrated my oldest son, Andrew’s, birthday, for he’ll be in N. Carolina next week when his birthday comes around, coaching water polo… And my two grandsons, Everett, and Braden were sitting downstairs watching football with me, when a commercial came on, and it was a presidential ad… And one of the boys said, “oh he’s the worst there has ever been”…. And I couldn’t let that one slip… I explained to them that Woodrow Wilson was the all-time worst president, and then told them the 3 reasons why, culminating with, he ushered in the Federal Reserve, who’s made a real mess of the economy, and the dollar through time… Then ½ hour later I asked them, OK, who’s the worst president, and the both shouted back at me. Woodrow Wilson!

OK, sorry for that tangent… This is going to be PMI week all over the globe… The U.S. jumped the gun last week with their print of December ISM, which used to be called the PMI, and is the same as the PMI’s that print in every other country in the world. The U.S. ISM (manufacturing index) slipped further below the 50 figure that separates expansion (above 50) and contraction (below 50)…. The November print was 48.1%, and the so-called experts said that we would see a bit of a recovery to 49%… But… instead, the index slipped further to 47.2%… I was taught many years ago now, that when a country’s manufacturing index slips to 45 and remains there for at least two consecutive months, that a country is in recession… So, 47.2 is not exactly a world away from 45, folks…. I’m just saying…

I don’t expect any of the PMI’s from around the world to show any kind of strength, as this is a Global event, with all economies suffering from the hangover of too much punch being served by their collective Central Bankers…. Too much punch is the same as too much easy credit,a nd too much money printing… $4.1 Trillion of Corporate Debt will come due in 2020, folks… What will happen with all that? I guess we’ll have to wait-n-see, eh?

I was doing some thinking yesterday about something that a dear reader asked me many years ago… I had told him that currencies move in big sweeping moves that take years to play out, and he asked, “Why then do you write every day?” Sometimes… folks… I would like to tear my hair out, but…. I don’t have much to tear out, just little stubble… I got to thinking about things I say, and how some people take them to be something that will happen right here, right now… That’s not how the bubbles were created, they took years to develop… and so on… the Debt problem here in the U.S. has been developing since Nixon removed the Gold backing from the dollar… So, when I say that’s unsustainable, I’m not saying that it’s going to implode today, or tomorrow or any time soon… but given the fact that most Americans are procrastinators, I figure if I continue to harp on having a diversified investment portfolio that includes currencies and metals that eventually they’ll get around to do doing so, and hopefully before the you know what hits the fan, so to speak!

Well the Gold bugs sure have been shaken out of their doldrums in the past week, with Gold closing last week on a real strong note closing up $25 for the day, to close the week at $1,578…  With more saber rattling going on between the U.S. and Iran I fully expect Gold to remain front and center of any conversation about safe havens…   

2019 was a good year for Gold, which was interesting, in that usually, we only see Gold rally when the dollar is getting sold… But last year, the dollar hung pretty strongly as its strong dollar trend wanes.. If my numbers are correct, I think Gold pretty much equaled the rise of the stock market last year, which is also a very interesting thought, given that most moms and pops don’t buy Gold, but do buy stocks… 

But like I said above, I expect Gold to continue its rise from 2019 throughout 2020… 

That wild and crazy Palladium traded past $2,000 late last week, and sits this morning at $2,025…   And Silver finally moved past $18 and looks like it wants to not be sent to the woodshed for a trip back below $18!  

We already talked about the U.S. Data Cupboard’s print if ISM last week, above. So, a quick look at the economic calendar shows that this will be a week where we will see December Factory Orders, the ADP report, and finish the week with the Jobs Jamboree, which because of all the holidays at year end, and the way the days worked out, got pushed to the second Friday in January, instead of its normally scheduled first Friday of a month schedule.

Right now, the so-called experts have the Jobs report showing a gain of 155,000 jobs in December, which would include part time, seasonal, help… As in the past, I’ll remind you that the BLS’s version of a jobs report is so ignorantly wrong that I just don’t care about it any longer…   I prefer to get my jobs data from either the ADP report, or John Williams at Shadowstats.com

To Recap… The airstrike in Iran last week, sent the U.S. dollar to the woodshed, and the currencies along with the metals have been rallying very strongly since.  More saber rattling has Chuck thinking that this could be the snowflake that causes the avalanche to fall on the dollar… We’ll have to wait-n-see…  Gold finished the year in line with stocks, in regards to performance for the year, and Chuck thinks that this is just the beginning for a strong 2020 for Gold and Silver…

For What It’s Worth…  Well, I read a lot of articles on different things last week, and one of them hit a nerve with me… It was from the duo of Russ and Pam Martens, of www.wallstreetonparade.com  This article is about how Citicorp, which was nearly a thing of the past back in 2008, is at it again with credit default swaps (CDS) which were front and center of the financial meltdown. The article can be found in its entirety here:  https://wallstreetonparade.com/2020/01/the-doomsday-machine-returns-citibank-has-sold-protection-on-858-billion-of-credit-default-swaps/

Or, here’s your snippet: “Lily Tomlin is credited with the quote: “No matter how cynical you get, it is impossible to keep up.” Wall Street regularly brings that message home.

According to the latest derivatives report from the Office of the Comptroller of the Currency (OCC), Citibank, the federally-insured, taxpayer-backstopped bank owned by Citigroup, has sold protection to other banks, hedge funds, insurance companies or corporations on a staggering $858 billion of credit default swaps. When a federally-insured bank sells protection to others on credit default swaps, it is effectively taking on the risk of a default event. At a time of unprecedented levels of debt in the system and growing warnings about leveraged loans, that seems like a very unwise move by Citigroup.

The OCC notes that Citibank has bought protection via a larger amount of credit default swaps — a total of $898.8 billion. (See Table 12 in the appendix of the report.) There is no guarantee, however, that these bets are properly aligned and will not, once again, blow up this bank along with a chunk of Wall Street firms or insurance companies that may be its counterparties.

Credit default swaps played a central role in the 2008 financial collapse on Wall Street, as did Citigroup. It is an indictment of every federal banking regulator in the United States, as well as Congress, that Citigroup has been allowed to return as a major player in this market while using its federally-insured Citibank once again as a pawn in this game.

Adding to the outrage, it was Citigroup that was responsible for overturning the portion of the Dodd-Frank financial reform legislation of 2010 that would have pushed these derivatives out of federally-insured banks.

It may also help to explain why the New York Fed continues to fling hundreds of billions of dollars each week at the trading houses on Wall Street while the Federal Reserve Chairman, Jerome Powell, insists that everything is just fine on Wall Street.”

Chuck again…  We just never learn from the past do we?  Where this all goes is anyone’s guess, but if we simply review 2007-08, we’ll know where all this headed then, and well… I’m just saying… 

Currencies today 1/6/2020, American Style: A$.6948, kiwi .6675, C$ .7710, euro 1.1203, sterling 1.3161, Swiss $1.0320, European Style: rand 14.2619, krone 8.7915, SEK 9.3885, forint 294.14, zloty 3.7840,   koruna 22.6115, RUB 62.01, yen 108.07, sing 1.3490, HKD 7.7691, INR 71.84, China 6.9645, peso 18.86, BRL 4.0657, Dollar Index 96.56, Oil $63.84, 10-year 1.78%, Silver $18.40, Platinum $986.96, Palladium $2,025.44, and Gold… $1,578.30

That’s it for today…  and tomorrow, since I’ll be traveling during writing time, but I’ll pick it up from my home down south on Wednesday morning… My beloved Cardinals did very little at the winter meetings, which means they are prepared to go into the season with an offense that uses noodles instead of bats… UGH!  Our Blues were on a very long winning streak that ended New Year’s Eve, and now they can’t shake loose of the losing streak… They head home to play on home ice for the next 5 games so that losing should come to a quick end! I have a busy day today, so I need to get this out the door and get moving!  Ambrosia takes us to the finish line today with their song: Holdin’ On To Yesterday…   I hope you have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler

 

A Chuck Was Away Rally For The Currencies!

December 30, 2019 

* Silver tries to move higher, but was stopped!

* Chuck offers an idea to help the economy…. 

Good Day… And a Marvelous Monday to you. Well, I’m back… if only for two days this week… Today and Thursday… As tomorrow we will put a bow on 2019, and pack it away, and tradition calls for me to sleep in to prepare for the night ahead… And then Wednesday, is recovery day, as we start the New Year…. So… How was your Christmas holiday? Mine was fine… My grandkids were so darn excited and happy… We celebrated Kathy’s birthday… Well she did, I was stuck at home with a flare up of the gout… OUCH! Man that stuff is painful! Al Stewart greets me this morning with his song: On the Border…

I was swamped with news articles while on vacation… I tried to read them all, but my heart just wasn’t into it… The Currencies had their normal, Chuck is away, rally, going for them, as the dollar was getting sold on a daily basis… I did read one article last week that said that European traders are betting that the euro has a good 2020… That would mean that they truly believe the dollar’s long running strong trend had come to an end… Because if that was to happen in 2020, and I don’t see why it wouldn’t, then that would mean the dollar is getting sold like funnel cakes at a State Fair!

Remember last year around Christmas when the stock market got whacked one day, and the next day it rebounded? Well, this year in the “year of opposites” that we’ve discussed previously, Silver took a flyer on the day after Christmas and rose 38-cents, before the boys in the band showed up, late per their agreements with the boss, and took Silver back down by 23-cents so that Silver showed a 15-cent hike on the day, which in any normal day would be great, but had the price manipulators not shown up imagine where Silver would have ended the day…. Come on, John Lennon, told us in song that to imagine it’s not hard to do! And then on Friday, with all the boys in the band back at their desks, they brought silver back below $18.00… Phooey! Why couldn’t these dirty devils had just stayed home to finish the holiday week like everyone else did?

Gold saw the same kind of action… rising furiously on Thursday, but then getting sold to make the day not look so good. And on Friday it lost more ground to bring it back to $1,510… Nothing like finding large price increases as your gifts, under the tree, and then have them taken back later in the day as you try every other new toy you received…. I’m just saying…

Speaking of Gold… There was a report late last week that Russia is considering allowing their Wealth Fund to invest in Gold… Now that would be another buyer of physical Gold in large quantities, folks… And That just has to have the price manipulators shaking in their collective boots!  Now, we’re not talking about a sovereign wealth fund the size of Norway’s, which is the largest in the world… But $124 Billion is nothing to turn your nose up, folks… And this is not to say that the entire $124 Billion would be going to Gold… but a conservative allocation to Gold would be anywhere around 15-20%… So, being conservative (my training I can’t help it!) that would indicate that it’s certainly possible that the Wealth Fund could be allocating up to $18 Billion in physical Gold….  again… Got Gold? 

I read last week that Sweden is giving up on their experiment with negative rates… Seems they weren’t the cure-all for the Swedish economy that they had though they would be… If they had only read the Pfennig, and listened to me! As if! Right? Keeping in the region… with the price of Oil rallying last week, due to supply concerns, the Norwegian krone has picked up some speed on the rally tracks… With the euro looking perkier, these days, along with the price of Oil, the krone has a stream of green lights to fly through… And it’s doing so!

Speaking of the price of Oil…  As I said, supply concerns, and rumors that the shale Producers in the U.S. are dropping like flies, really has pushed the price of Oil higher and this morning it trades with a $62 handle…  The thing I like about this move is twofold… 1. I filled my gas tank in my car a week ago, before the Oil price rally started, which should keep me good until I leave for Florida next week.  and 2. more importantly, the Petrol Currencies, led by the Russian ruble have really taken the Oil Price rally to heart…  The ruble, loonie, krone, real, and shoot Rudy, even the peso have boarded the rally train… 

If I read one article on how badly Americans are saving money last week, I read a dozen of them… Seems it’s on everyone’s mind these days… these days I sit on cornerstones, and count the time in quarter tones to ten… Sorry, but whenever I type “these days”, the old Jackson Browne song pops into my head, and then to my fat fingers! So… I digress… (what else is new, eh? Nice to know some things don’t change, right? HA) I won’t bore you with all the details, but a very large number of Americans don’t have savings at all, and another large number don’t have enough for a $1,000 emergency… And if you lived in my house, those things would be going on all the time!

I only tell you these things about Americans because we’re supposed to be doing fine, right? Because… We are Americans, it’s our right to be prosperous! As if! We all certainly have an opportunity to be prosperous, but somewhere along the line, we get off track,… And then I have to explain to people how this situation does not help our economy one iota…

Because we, as a country depend so much on consumption… In other words, people spending money… But they can only spend what they don’t have for so long, before the collectors begin to knock on the door… So, they stop spending, and the economy goes to hell in a hand basket…

I’ve told this story before, so if it’s not your thing, go ahead and skip ahead, you won’t hurt my feelings, and Lordy that’s an important thing these days, eh?   OK, here we go… My longtime friend, and former Big Boss, Frank Trotter, and Chuck were in Bermuda for a conference, and in Frank’s presentation, he talked about walking through a graveyard in Bermuda and seeing that the reason for death for many on the tombstones was the word: “Consumption”…     So, what way should we be looking at Consumption? A Good thing, or bad thing? 

When I wrote for the now defunct, Dow Theory Letters, Wait! Come to think of it, I’ve written for two publications other than the Pfennig, in the past, and both of them went belly up… You don’t think me being a part of the editorial group had anything to do with that do you? Nah… couldn’t be, must be a co-inki-dink! So, meanwhile back at the ranch… I wrote a piece that went into great detail how the U.S. stock market gets very weak during recessions… And I read last week that Doug Casey (old time friend) said that he believed that this next downturn would turn to a depression… And since we’ve had 1 and one-half depressions here in the U.S. to use as historic markers, stocks get shellacked during depressions!

OK, so I don’t think you woke up this morning, turned on your computer, or your smart phone, or tablet, to read the Pfennig, to get all depressed right from the get-go… So, I’ll stop there… And talk about something else…

The U.S. Data Cupboard sure was on holiday last week, like the rest of us, but did yield another piece of negative data, when Durable Goods Orders printed negative -2.0% for November, and the all important Capital Goods Orders failed to meet the Roctober print of 1.1% and gain only .1%…. I’ve gone over CAPEX (Capital expenditures) many times in the past so I won’t linger here too long, but just to remind everyone that when the tax reform act went into place I said that it would not help the economy as it was not about you and me, but about Corporations who would NOT use the tax savings on CAPEX, but instead use it to buy back shares to guarantee large year-end bonuses…   I sure did nail that one, eh?

Before we head to the Big Finish today… and the last time this year… I wanted to talk a bit about something I’ve talked about previously, and that is the Fed’s interest rate that they pay for excess reserves that the banks hold at the Fed…  In other words, the Fed is in competition for these funds, and they guarantee return of capital…  So, the banks pile cash into the Fed, instead of putting the money to good use in the economy, where the risks certainly are greater, but with increased risk come increase interest rate spread, right?  So, what’s going on here, have bankers lost their collective appetites’ for risk?  Or do the scars of 2007-08 run too deep and remain on the minds of these bankers?  Either way, the way that David Stockman, figures the numbers are interesting he says that the Fed pays and interest rate of 1.55% right now. There’s about $1.5 trillion of excess reserves in the banking system. That computes to about $23 Billion the Fed pays out annually…

So, think about that for a minute…  That’s a very large sum of cash that could be in the economy instead of sitting idly at the Fed…  In my humble opinion, the Fed should cease this operation, or at least pay an interest rate that doesn’t make sense for bankers to hold $1.5 at the Fed! 

I know no one asked Chuck what he would do first to help the economy, but I thought I would throw that out there and see if it sticks! HA! 

To Recap…  The currencies had their usual “When Chuck is away rallY” last week, and are looking toward ending the year on a high note… Gold & Silver had an interesting couple of days after Chirstmas… It’a a year of “opposites” for sure, and i’m hoping that it ends tomorrow night!  Sweden is going to end their negative rates experiment, and that’s a good thing to Chuck’s way of thinking… 

For What It’s Worth…. OK… I’ve been writing about how inflation is much higher than the stupid CPI / Gov’t index shows… And while I was on vacation, I came across this website, that takes out all the hedonic adjustments and calculates inflation based on what people need and buy… And guess what? They proved me correct! (as if there was any question! HA!) So, today’s FWIW is simply a trip to that website to see that inflation in the U.S. has been running 10.5% in the 10 largest cities of the country… Now that sounds correct to me, I don’t know about you, but if you live a normal life and buy things, you know darn well that inflation isn’t the stupid CPI’s 2% figure! So, with all due respect (none from where I sit) to the folks at the BLS, I’m going to footnote this website and refer to it in 6 months because that’s the next time they’ll issue the report… So… you can see for yourself what I’ve been talking about for years right here: https://chapwoodindex.com/

Chuck again… Not that I went anywhere… but… here I am… beaming like a ray of sun, because after all this time, I’ve been proven correct…. I knew it in my heart of hearts, but… everyone likes to laugh at me and say I’m wrong, because the BLS says so… Well, not any longer!

Currencies today 12/30/19 American Style: A$.6997, kiwi .6722, C$ .7650, euro 1.1191, sterling 1.3135, Swiss $1.0291, European Style: rand 14.0630, krone 8.8005, SEK 9.3182, forint 295.63, zloty 3.8030,   koruna 22.7250, RUB 62.01, yen 109.18, sing 1.3485, HKD 7.7863, INR 71.31, China 6.9947, peso 18.83, BRL 4.0437, Dollar Index 96.81, Oil $62.10, 10-year 2.92%, Silver $17.86, Platinum $950.50, Palladium $1,909.51, and Gold… $1,512.06

That’s it for today, and this year!   The next time we talk it will be the “roaring 20’s”! I can’t believe how quickly December went along!  But here we are, closing another year, which brings me to January, and… my annual sojourn to S. Florida for the winter!  I leave next Tuesday, and brother it can’t get here fast enough!  My leg wound continues to get better albeit very sloth-like!  I found a wound center in S. Florida, so I can continue to get it treated, which was going to present me with a real problem if I hadn’t found one!  Thanks to all you dear readers who sent along notes last week, wishing me a Merry Christmas… Very appreciative, indeed!  My granddaughter, little Evie, sure was in demand on Christmas, everyone wanted to hold that little bundle of sweetness!  OK… well, it’s time to get this out the door…  The Michael Stanley Band takes us to the finish line today with their song: The Rosewood Bitters…  I hope you have a Marvelous Monday, and please Be Good To Yourself!   

PS… Please be careful tomorrow night…  Kathy’s Dad used to call it “Amateur’s Night”…   Be careful, stay near your hood, and live to see 2020!  Please! 

Chuck Butler