Is the Fed Lying to us, or… Just being Disingenuous?

Rocktober 16, 2019

* Dollar gets sold, currencies rally… 

* There’s a BREXIT deal on the table! 

Good Day… And a Tub Thumpin’ Thursday to you! Congratulations to the Washington Nationals, who will play in their very first World Series… They swept my Cardinals on Tuesday night, and ran them out of the stadium… It was a pretty good year for my beloved Cardinals, but in the end, they showed what I had said all along in the season… They just couldn’t hit, as a team… The thing that drove me crazy though was all the errors… This WAS the best fielding team in the NL this past year, until they got to the playoffs… Errors equal bad baseball… And that’s that for this year! Our Blues have a good start to the year going so far, but it’s a very long season for them, no reason to get too excited about a good start! The Ozark Mountain Daredevils greet me this morning with their song: If You Wanna Get To Heaven… (You’ve got to raise a little hell!)

Oh, and I’m loaded for bear this morning… So, you had better strap yourself in, put away the sharp objects, and get ready for today’s Pfennig! Here we go! 

On Tuesday of this week, I talked about how the Fed was back to buying bonds (T-Bills at this point) and Fed Chairman Powell, told us not to call it QE… WOW! What a pack of lies! I guess he would point at the fact that it’s not an all-out bond buying program right now, as his defense… But like I said the other day, if it quacks like QE, it is QE, period… I don’t care what the Fed wants to call this new bond buying program, but to me, they’re being very disingenuous to the American public… And historians will mark this occasion as one of the things that caused the Fed to lose its credibility…

I’ll get back to the Fed in a minute, but first, I want to point out that the currencies have been on a strong rally since Tuesday, and really got rolling yesterday, after there was a negative print in Retail Sales for September. When you add in the fact that the ISM fell to 47.8, the economy may already be in a recession… But what caused the dollar to get sold, is the idea that rate cuts will be coming and probably as soon as this month! 

Gold found a way to add $9 to its price yesterday…  But sit down and take this news calmly, please…  Jeff Clark is a metals guy that I’ve know for years, and yesterday he said that the recent weakness in the price of Gold was due to a correction, and that the correction could take Gold back to $1,425… But then it would take off for higher ground then… 

All the time I was reading his article, I kept thinking, the smart investors will use this drop, if it does come that is, as an excellent buying point to start their Gold investment, or to add to their Gold investment… The “I bought Gold because the taxi guy said it was rallying, people” will panic and sell…   I’m just saying… 

Speaking of a recession…  longtime readers have heard me go on and on like a broken record about how I think the next recession is going to be a real doozy for numerous reasons that I’ve talked about… So, when I read this article yesterday my jaw dropped, for if what the IMF is saying about what could happen IF we experience a recession 1/2 as serious as the one a decade ago… I found this article here: https://www.theguardian.com/business/2019/oct/16/global-economy-faces-19tn-corporate-debt-timebomb-warns-imf

And basically the IMF is saying, “Low interest rates are encouraging companies to take on a level of debt that risks becoming a $19tn (£15tn) timebomb in the event of another global recession, the International Monetary Fund has said.

In its half-yearly update on the state of the world’s financial markets, the IMF said that almost 40% of the corporate debt in eight leading countries – the US, China, Japan, Germany, Britain, France, Italy and Spain – would be impossible to service if there was a downturn half as serious as that of a decade ago.”

Chuck again… OK, so I’ve never really been a fan of the IMF and their programs when they go into a country and try to revive it… But be it as it may, I think they are bang on with this warning… But will anyone besides my readers hear about it?  That was kind of like a FWIW article already this morning…  Don’t worry, I’ve got more! 

So, did you hear? The Fed’s T-Bill buying program was oversubscribed x4! Hearing that news got me thinking…

OK… I’ve been thinking long and diligently on this repo problem here in the U.S. All this time we had been getting told that the banks were flush with cash, and that they were earning a nice interest rate having them on deposit at the Fed… And then suddenly, they weren’t flush with cash, and the Fed had to step in with Billions of funds, to keep the repo rates from soaring… So, now the question would be, where did all the cash go that was supposedly in the banks?

Ahhh grasshopper, this is what you pay me for, no wait, you don’t pay me… Hmmm… This is where I shine! HA! But seriously… Basically, remember when I told you the tax cut from a couple of years ago, would only be good for the corporations, and those corporations wouldn’t use the tax cut on Capital expenditures, but instead use to buy back their company stock, which makes the stock price go up, and then allows them to rake in huge bonuses at the end of the year…

Well, a funny (not funny ha-ha) thing happened to these Corporations, which includes banks… The stock market has been flat for the last year… so no gains there… And then a couple of weeks ago, I saw a blurb about how CEO’s were selling their company stocks faster than you can shake a stick at… Why would they do that? They needed the cash! So, this whole bug-a-boo with the repo illiquidity is their own faults… But… and here’s were it isn’t so funny any longer, guess who’ll have to bail them out of this mess if it implodes on them? That’s right, you, me, and other taxpayers…

And if you think we’ve had to bail out Corporations and their bad decisions, well we have… And will have to again… but it’s not just bad decisions by Corporations that we’ve had to bail out… The Gov’t gets into this business of bad decisions too… And that’s what the FWIW section is all about today, so don’t go away too soon, without reading that one! 

Well bust my buttons! The European Union and the U.K. have a BREXIT deal… But first it must be approved by the U.K. Parliament…  Last week we began hearing rumors of a deal, and those rumors placed the pound sterling firmly on the rally tracks… And On 10/8 pound sterling was 1.2222….  this morning it’s trading 1.2865…   I would say that qualifies as a strong rally…  So, let’s hope the U.K. Parliament isn’t a party pooper! 

I was doing some reading yesterday, and came across a discussion of how traders are viewing the euro/ dollar cross  as a real bug-a-boo…  You see, they want to mark down the dollar for all the weak data that’s been printing, and the Fed’s rate cuts, but if they mark down the dollar, the euro goes up… And they don’t want it to look like they’re rewarding the euro, especially since the Eurozone is probably already in a recession…  I couldn’t help thinking while I read this piece…. “That why they pay you guys the big bucks”… So, make a call and go with it for crying out loud! 

Right now, and I know these things can be false dawns, but the dollar IS getting sold, and the euro is trading with a 1.11 handle… That’s a far cry from where the euro looked like it was going last week!    With the Big Dog euro on the rally tracks, the other currencies get to rally too… And for longtime readers who know what I’ve told them many times in the past, I wanted to mention that the Euro-wannabes are also rallying… hint, hint… 

OK, the U.S. Data Cupboard had the September Retail Sales yesterday, and it wasn’t a pretty sight… Sept. Retail Sales were negative -0.3%…  No spending really takes a bite out of the economy’s ability to grow, folks… And like I said above, this and other bad prints recently, will most like move the Fed to cut rates later this month… 

Today’s Data Cupboard will have more disappointing data, I believe… Sept. Industrial Production and Capacity Utilization, will print… And I’m sure that they will only add to the Fed’s rate cut fuel…  Of course I might be incorrect, but we’ll have to wait-n-see!

To recap…  Negative Retail Sales for September, got the traders thinking that another rate cut is soming, and that started dollar selling that we haven’t seen in a while…  Chuck want’s the Fed to come clean on their QE, and he also has figured out why the Banks are in need of so much cash these days…  He was loaded for bear today… 

For What It’s Worth… By now all longtime readers know that I’ve touted the book “The Creature from Jekyll Island” by G. Edward Griffin… It’s the story of how the Fed was shoved down our throats by the banking regime here in the U.S. And how Woodrow Wilson allowed himself to be connived by these bankers into thinking that this would be the end of “recessions”… OK, well, I signed up for G. Edward Griffin’s newsletter quite a few years ago, after reading his book, and most weeks he has interesting articles in there, but this week he had a doozy, and I couldn’t pass it up for the FWIW article today… This is about the costs of insuring illegals here in the U.S., and as a taxpayer, you should be making this a timely read! And you can find it here: https://needtoknow.news/2019/10/study-shows-obamacare-for-illegal-immigrants-could-cost-taxpayers-23-billion-a-year/

Or, here’s your snippet: “A new study shows that taxpayers could have to pay out as much as $23-billion a year to give “Obamacare” health coverage to illegal immigrants. The Center for Immigration Studies estimates that there are nearly 5-million illegals who would receive subsidies through the so-called Affordable Care Act. Cities already are paying back-breaking costs for immigrants. Los Angeles County paid nearly $1.3-billion in welfare during 2015 and 2016 to families of illegal immigrants.

he federal government is running a nearly trillion-dollar deficit this fiscal year. The reason (and this isn’t complex): It spends more than it brings in.
When households go into the red, couples usually take a simple step — stop spending so much.

But not our government.

Case in point: A new study shows that taxpayers could have to pay out as much as $23 billion a year to give “Obamacare” health coverage to illegal aliens.

The Center for Immigration Studies (CIS) calculates that there are nearly 5 million illegals who would qualify for subsidies through the health care system created under the Affordable Care Act (ACA) by former president Barack Obama. The average cost would be about $4,500, so if all of them took the subsidies, it’d cost $22.5 billion.”

Chuck Again… And the question I always ask when people say this or that should be free, I ask them, “And who’s going to pay for it?”

Currencies today 10/16/19 American Style: A$.6830, kiwi .6332, C$ .7595, euro 1.1120, sterling 1.2865, Swiss $1.0104, European Style: rand 14.8243, krone 9.1546, SEK 9.7122, forint 298.40, zloty 3.8526,  koruna 23.0826, RUB 64.21, yen 108.77, sing 1.3642, HKD 7.8441, INR 70.88, China 7.0912, peso 19.18, BRL 4.1693, Dollar Index 97.66, Oil $53.07, 10-year 1.77%, Silver $17.49, Platinum $881.56, Palladium $1,766.05, and Gold… $1,487.96

That’s it for today and tomorrow…   Well, I went straight from my scans yesterday to the second floor of the building to see my heart doctor… A regular 6-month visit… He says I’m doing well…  I don’t believe the scans will reveal anyting (at least that’s what I’m hoping!)  I’ll see the report on the portal today…  I received some sad news yesterday, our good friend from Long Island, was just diagnosed with cancer… She won’t be ablt to come to Florida this winter, as she’ll be dealing with all that nasty stuff, that I’ve been through for 12 years…  I totally dislike this disease and what it does to families and friends…  This country cured polio.. small pox… TB…  and others, but we’re still at a loss with cancer…  I don’t get it… Oh well… Weezer will put me in a lighter mood as they takes us to the finish line with their song: Island In The Sun…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday, and please Be Good To Yourself! 

Chuck Butler

 

China Says, “Not So Fast Tim!” To The Tentative Agreement…

Rocktober 15, 2019

* All the euphoria on Friday, turns to gloom on Monday!

* If it quacks like QE, walks like QE, and talks like QE, well…. 

Good Day… And a Tom Terrific Tuesday to you! Another beautiful fall day here yesterday… I’ve always contended that autumn was the best weather we experience here in the Midwest…. And this year is not proving me incorrect, now is it? Had lunch yesterday with a dear friend, and one I haven’t seen in a very long time… Thanks to Ann for picking up lunch, and bringing me up to date with everything in her life, including all about her new beau! We had a reversal for the stock jockeys yesterday, China said, “not so fast there!”, and much more in store for us to discuss today… The Pretenders greet me this morning with their song: Back On The Chain Gang…

Front and Center this morning, we saw a reversal of fortune with the stock jockeys yesterday, as the Chinese said, “not so fast there!” On Friday, the President told us we had a “tentative Agreement”, and on Monday, the Chinese said, “well, we need some more information, and negotiations before we agree that a “Tentative Agreement” has been struck”! I told you yesterday that I wasn’t going to be fooled into thinking that a “Tentative Agreement” was the same as an ironclad agreement! And so the rest of the world learned that lesson yesterday…

The currencies didn’t move much on the latest development on the Trade War, but they did keep their gains from Friday last week, so they had that going for them, eh? And Gold tried to hold to its early gains of nearly $7, but all the plans of mice and men, couldn’t keep Gold well bid throughout the day… But it did manage to eke out a $3 gain on the day… So, not all was lost! 

I read a report from the GATA folks on Monday, that carried a quote from Metals guru, Egon Von Greyerz, who had this to say about the growth in Gold ETF’s… “while exchange-traded funds are reporting big inflows of gold, demand for real metal from Swiss refineries is not increasing. So he concludes that the ETFs are obtaining only paper claims to gold, and likely claims to gold that is already at least double counted in the bullion banking system.”

Very Interesting, don’t you think? You see the way the ETF works, is there is a trustee, who’ responsible for obtaining the Gold (or Silver) that is represented in the ETF buys for a particular day… But if the demand from the real refineries doesn’t match the growth that the ETF’s are reporting, well, then Houston, we have a problem…

Of course, I’ve always argued that I doubted that the physical Gold actually exists to match the ETF’s volume… But that’s always been just me, being the cynic that I am about that kind of stuff… And back in the day when I used to appear at just about every conference there was in the U.S. Canada and Panama, I would tell people that I didn’t care if they thought the ETF was safe… I didn’t think it was, and…. And this is the BIG BUT…. I would tell them to try and get their Gold out of an ETF! Oh, I’m certain that the Trustee would tell me that it would be no problem…. But what if a large number of people decided they wanted their Gold out of an ETF at the same time?

Anyway… physical Gold is the way to go in my humble opinion… I still receive many emails from readers asking me where they can obtain physical Gold and be sure they won’t be taken advantage of… I always tell them to call 1-800-926-4922, and ask for Tim Smith… Tim was my metals guru and still holds that position now that I’ve retired… So, there! Call Tim!

I had to chuckle a bit yesterday, when I saw a headline on Bloomberg… Now tell me where you’ve heard this line before… “The recession train has left the station”… Yes, that wasn’t me that said that in the Bloomberg article, but I had to wonder, who was reading whom? There’s more from the Bloomberg.com article and here it is: “honestly, even a truce of the sort Trump claimed on Friday won’t help the economic outlook much, writes Tim Duy. The global economy seems headed for a recession, which the U.S. will struggle to avoid. So the Federal Reserve will probably cut rates again this month. It has already started buying bonds to fix technical problems in the overnight repo market. (It doesn’t want to call this quantitative easing, notes Mohamed El-Erian, but for all practical purposes, that’s what it is.)” – Bloomberg.com

Chuck again… There we go, they’re calling for a rate cut again this month… Last week it was reported that Greece had joined the roster of countries issuing negative yielding bonds… Wait! What? You mean to tell me Greece issued negative yielding bonds, and sold them? As the late Harry Cary used to say, “Holy Cow”!

So, that makes Sweden, Switzerland, Japan, Germany, Spain, Italy, Greece, and more… that are on the list, receiving funds for you holding their debt… Now, I get it that there are some large entities, like pension funds, States, Cities, etc. that have in their rules that they have to own Gov’t Debt… As Mr. T used to say… “I pity the fool”… But anyone else stepping to the plate to take a piece of these bonds has to have their heads examined!

And getting back to the rate cut this month… The question now arises, when will the U.S. be back to zero? And then from there, to negative rates? To the Gov’t it’s no big deal, folks… it just means they get to finance their debt easily, with no burden on the future expenses of the country… But for you, me, and everyone else, not named Gates, or Buffett, or Zuckerberg, or whomever else has more money then God, we will be left holding the bag… And it will be much like the bag of dog pooh that was left on your front porch and set on fire… I’m just saying…

Oh, and one more thing on the Trade War…  I don’t know if you noticed this or not in past 10 days, but the U.S. Trade Deficit widened… And yesterday China printed an increase to their Trade Surplus…   Apparently the tariffs haven’t hurt China as much as everyone one have them believe, but they certainly did hurt our Trade Balance….  And before we go any further, I was explaining this to some friend the other night, about how our wages are still 5 to 1  with China…  So, they can continue to make their goods much cheaper than we can… I’m just saying… 

Yesterday, in the Eurozone, we saw August Industrial Production, reverse a negative print in July, with a 0.4% gain… But… the year on year figure remains negative at -2.8%… And that news didn’t help the euro to add to its gains from Friday, and in fact has pushed it down to just a few Bips from the 1.10 figure…   

OK, I read this morning that Sears is going to close 100 more stores, as their turnaround is failing…   I also read that GM’s car sales in China have collapsed…  The quarterly earnings begin to get reported for U.S. Corporations today, and first up is JPMorgan…. there’s been 3 straight quarters of reduced earnings from the U.S. Corporations, and I truly believe that when all is said and done that this will be the 4th consecutive quarter that sees reduced earnings…  Yes, they’re still making money, but… no wonder the stock market hasn’t really moved much year on year, eh? 

OK, I’ve got this for you this morning….  Yesterday I was reading my daily dose of the great publishing guru, and writer extraordinaire, Bill Bonner, and daily diary, which can be found at www.bonnerandpartners.com and he featured this…. Charlie Bilello, a former hedge fund analyst, tweets:
Total Returns, last 20 years…
International Stocks: +110%
US Stocks (S&P 500): +221%
Long-Term US Bonds: +329%
Gold: +365%

Got Gold?  I’m just saying…  

OK… The U.S. Data Cupboard has  just the Empire Region Index (manufactory Index for NY region)  We found out long ago that the regional reports never play into the National ISM, so why bother giving them the time of day?   Tomorrow, we’ll get September Retail Sales for our viewing enjoyment… The Butler Household Index indicates to me that the Retail Sales report will be positive, but nothing to write home about…  

I have to go over the Data Cupboard for tomorrow, because…. I won’t be writing tomorrow…  I have to show up early to the hospital for scans day. Last week I said it would be on Thursday, but I was wrong… So, no Pfennig tomorrow, but I’ll be back in the saddle on Thursday! 

To recap…  The Chinese say “not so fast there Tim!”  to the “Tentative Agreement” and all the euphoria on Friday, was thrown to the curb on Monday…  The currencies held steady Eddie, but couldn’t add to their Friday gains… And Gold started the day up $7, but ended the day only up $3…  Still positive though, so I can’t complain too much! 

For What It’s Worth…  I told you last week, the Fed Chairman Powell, had reversed his rhetoric about how the economy was strong and robust, and had begun talking about how the Fed will begin to buy bonds again to improve liquidity… They won’t call it QE… But if it quacks like QE, walks like QE, and looks like QE… Then that’s what it is!  this article on Zerohedge.com tells it like is and it can be found here: https://www.zerohedge.com/markets/not-qe-begins-fed-start-buying-60bn-bills-month-starting-oct-15

Or, here’s your snippet: “Just one day after we laid out what Goldman’s revised forecast for the Fed’s “NOT A QE” will look like, which for those who missed it predicted that the Fed would announce “monthly purchases of about $60BN for four months, split across Treasury bills and short maturity coupon Treasuries, in order to replenish the roughly $200bn reserve shortfall and support the pace of growth in non-reserve liabilities”, the Fed has done just that and moments ago – well ahead of consensus expectations which saw the Fed making this announcement some time in November – the U.S. central bank announced it would start purchasing $60BN in Bills per month starting October 15. This will be in addition to rolling over “all principal payments from the Federal Reserve’s holdings of Treasury securities and the continued reinvestment all principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities received during each calendar month.”

In short, the proposed schedule is virtually identical to the one Goldman “proposed” yesterday, one which sees the Fed purchase a grand total of $100BN or so in TSYs the near term, and one which is meant to “engineer a one-off level shift of roughly $200bn over the course of four months.”

But wait there’s more, because just as today’s surprising spike in repo use suggested, mere “NOT A QE” may not cut it, and just in case, in order to provide an “ample supply of reserves”, the Fed will continue with $75BN in overnight repos and $35 billion in term repos twice per week, “at least through January of next year.”

The Fed’s proposal indicates that between the continuation of repo operations, and the net $60BN balance sheet expansion, the Fed’s balance sheet will reach roughly $4.2-$4.3 trillion some time in Q2 2020.”

Chuck again…  I was in Vancouver quite a few years ago, sitting in the lobby bar with good friend John Mauldin, and John told me that he had been at a dinner with high ranking Senators, who told him that they had instructed the Fed to never use the term Quantitative Easing (QE) again, that they had to call it something different…    This conversation came back to me when I read the zerohedge.com piece…  

Currencies today 10/15/19 American Style: A$ .6755, kiwi .6270, C$ .7558, euro 1.1005, sterling 1.2647, Swiss $1.0023, European Style: rand 14.8392, krone 9.1504, SEK 9.8345, forint 301.95, zloty 3.9015,   koruna 23.4527, RUB 64.23, yen 108.31, sing 1.3707, HKD 7.8452, INR 71.33, China 7.0665, peso 19.24, BRL 4.1150, Dollar Index 98.50, Oil $53.01, 10-year 1.69%, Silver $17.63, Platinum $897.56, Palladium $1,726.75, and Gold… $1,494.32

That’s it for today and tomorrow, back on Thursday…  Well, my beloved Cardinals have their backs against the wall after losing again last night… I have a question for the writers that vote on Gold Gloves… What in the world were you smoking when you have Marcell Ozuna a Gold Glove a couple of years ago?  UGH!… double UGH! The Red Sox came back from an 0-3 hole in 2004, so I guess it can be done…  but the reality of this 0-3 hole is that the Cardinals need to be making Tee times…   Our Blues didn’t play well in the 3rd Period yesterday, and ended up with a tie, and a loss in OT… My Missouri Tigers have moved into the top 25!  Fight Tigers!   Earth Wind and Fire takes us to the finish line today with their song: After The Love Has Gone…   And with that I hope you have a Tom Terrific Tuesday, and please Be Good to Yourself! 

Chuck Butler

 

A Trade War “Tentative Agreement”!

Rocktober 14, 2019

* Currencies fight back to gain VS the dollar… 

* Gold takes a spin on Mr. Toad’s Wild Ride… 

Good day… And a Marvelous Monday to you! Today is a holiday for a lot of the U.S. as we celebrate Columbus’s discovery of the West Indies… (SIC) So, this will be shorter than usual, since normally, I would be off work today! What an absolutely, fantabulous, weekend, weather wise here where I live! The sky was cloudless, blue umbrella skies, the sun was full on, but just warm with a bit of a chill in the air.. Great bonfire weather… My beloved Cardinals on the other hand are in a deep dark hole, that their inability to hit, has put them in, as they travel to Washington D.C. for three (if needed) games… They are down 0-2, in games and it’s a best of 7 series, so today’s game is a must win, if they are to extend the series… Lots of teams through the years, have been down 0-2 and come back to win, but… most of those were with the team down 0-2, coming home to play, not the other way around… UGH! The group Madness greets me this morning with their song: Our House…

Well, since we last talked, last Wednesday, we had a number of things take place… Including: A Tentative agreement in the Trade War, and brighter outlook claimed by the BREXIT negotiators, an Iranian oil tanker get blown up in the Red Sea, the stock jockeys dancing in the street, CPI Core Inflation staying Steady Eddie, the gloom and doom of the citizenry, remaining in place, and I became a grandfather again! … The writing is on the wall that we’re heading to a recession, and by now even the naysayers are starting to believe it…

The dollar remained well bid as we ended the week, but the currencies were doing their best to keep up and the euro did trade back over the 1.10 figure, thus signaling a little dollar weakness… A little that is, not the much in reality…

Gold had a wild an crazy ride on Mr. Toad’s Wild Ride on Friday… First it traded upward to $1,508, then it saw another engineered take down, which brought it down to $1,478, and then it rallied to close at $1,488, down $4.90 on the day… That’s a wild swing in prices for one day, eh? Let’s hope there’s a line waiting to take a spin on Mr. Toad’s Wild Ride so that Gold doesn’t get to “go again”, today!  In the early trading today, Gold is up nearly $7, so it has that going for it, so far! 

Speaking of Gold… I have a dear friend in Florida, that sent me a link to an interview that’s about 6 minutes long, with the Econoguy, David Rosenberg… Longtime readers know that I love this David Rosenberg guy, for we think alike most of the time… The link has Rosenberg talking about Gold, and I think it’s a very good piece, in that he says he “wouldn’t be surprised to see Gold rise to $3,000… I thank my good friend Sharon, for sending this to me, and now I give it to you! https://www.youtube.com/watch?v=0XFWot87A2Q

And finally on Gold… the good folks at GATA sent me this note, and it’s a doozy if you ask me… “De Nederlandsche Bank (DNB) holds more than 600 tonnes of gold. A bar of gold always retains its value, crisis or no crisis. This creates a sense of security. A central bank’s gold stock is therefore regarded as a symbol of solidity.”

That is a message that can be found on the Central Bank’s website! They also say there that, “Gold is ‘the perfect piggy bank’ and can rebuild a financial system.”

OK, do you think they got this idea from the Central Bank of Russia, that decided years ago, that instead of adding to their currency reserves with other countries’ currencies, that they would instead buy physical Gold… And now all these years later, Russia’s balance sheet is one of the best looking balance sheets in the world!

So, as I’ve been telling you for years now… “follow the money”… And the money continues to find itself being spent on physical Gold… And when Central Banks tout the buying of physical Gold… Well, do you know of any other entity that has deeper pockets than a Central Bank that can turn the printing presses on at any time?    Got Gold?

OK… I heard from good friend, and former colleague, Chris Gaffney, last week… He said he was heading to Dallas for the Money Show, and was getting ready to answer the question, “How’s Chuck?” I told him to tell people that I was still kicking! Chris made it to the Butler Labor Day BBQ this year, so I had just seen him last month, so he can tell them the truth, that I look old, broken down, and barely able to get around, but still with a smile on my face when I see friends!

I have no idea why I went down that rabbit hole, but I did, and now I’m back out… See Government? When you find you’ve dug yourself a hole, you don’t keep digging, you work yourself out of the hole! Speaking of a hole…

A BIG BLACK HOLE is where we keep throwing down the newly created money! I made a big stink last week about knowing who the Fed was giving the cash to in their daily injections of newly created dollars to the repo market… They won’t release the names of the recipients, and I find that to be a crock of &$%#! But the currency traders don’t care, that hundreds of Billions of newly created dollars have entered the economy, thus in the “old days” of currency trading, it would mean a trip to the woodshed for the dollar… But not any longer… Print all you want, Fed… The currency traders don’t care any longer! UGH! Well, I say that but at the same time I know that at some point, they will care… And that’s when the wholesale signs get hung on the dollar…

So, there was elation, and dancing in the street, here in the U.S. when it was announced late last week that a “tentative agreement” has been signed between China and the U.S. I love it when people get all lathered up over something that has not been proven to exist… A “Tentative Agreement” is better than “no agreement”, but far worse than an “ironclad agreement”… And will we ever really, truly find out what was in the “Tentative Agreement”? Did the President get the Chinese to agree to stop stealing our “intelligence”? I find this to be interesting in that why didn’t we build a mousetrap to protect this stuff if it was so important”? Oh, well, we have a “Tentative Agreement” and we should be happy…. And the stock jockeys sure were on Friday! 

Maybe the “tentative Agreement” will be like the “Temporary” move to remove the Gold backing of the dollar, back in 1971?  

Any-old-way, the news got the Chinese to allow a good appreciation of the renminbi, which gave the Monetary Authority of Singapore (MAS) the giddy up to allow their version of a dollar to rally strongly…  

In the U.K. the news from the negotiations on BREXIT were promising, and that’s the best sign they’ve had from those negotiations in a month of Sundays! They have two weeks to iron out a BREXIT deal before the deadline of 10/31… I’m still of the opinion that they won’t make it… But then they could always come out on 10/31 and say that they have a “tentative Agreement” and everyone would be happy! I’m just saying…

But my negativism hasn’t hurt the pound sterling, as the currency went for a ride on the rally tracks that went quite far! This is the best rally in sterling I’ve seen in a month of Sundays! 

The price of Oil rose on Friday, for the first time in a quite a few trading sessions, as news spread that an Iranian Oil Tanker blew up in the Red Sea… The Petrol Currencies, led by the Russian ruble, were on the rally tracks following the news of the Oil Tanker… I have to tell you that every time I hear about something like this news from the Middle East, I think will this spark WWIII? And each time I’m calmed down when nothing of the sort happens… but they scare the bejeebers out of me, especially when I hear that Saudi Arabia has announced that they will allow U.S. miltary to be deployed on their border… I can’t for the life of me think that that would be a lot of fun…   

But like I said, the Petrol currencies really moved higher, led by the Russian ruble, but not just the ruble, the Norwegian krone got up off the mat, along with the Canadian dollar… The Brazilian real wasn’t allowed to come to play with the other Petrol Currencies… 

Last week’s Data Cupboard had Core CPI unchanged, and that caused the bond boys to pause, and pull their foot off the accelerator with regards to sending yields lower… The 10-year Treasury’s yield a week ago was trending downward around 1.55%, and today the yield is 1.73%… That’s a huge move folks, for bonds that is…  But… the 10-year’s yield is still down 17 Basis Points in the last month, and down 143 Basis Points year on year! 

The U.S. Data Cupboard will have a few real economic prints for us this week, starting tomorrow with Retail Sales for Sept.  And then on Wednesday we get the Industrial Production and Capacity Utilization duo, and finish the week with Leading Indicators…   The economic data hasn’t been kind to the “the economy is the strongest in history” folks… And I doubt that this week’s contributions will not get them to change their collective minds…  

But if you cornered me, and asked, I would say that I think the data this week will point to another rate cut, before year-end. 

To recap…  A Trade War “Tentative Agreement” has the stock jockeys dancing in the street, Core CPI sent bond yields higher, brighter news from the BREXIT negotiations sent pound sterling on the ride higher of its life, and an Iranian Oil Tanker was destroyed in the Red Sea, sending the price of Oil higher, and putting the Petrol Currencies on the rally tracks… Gold had a spin on Mr. Toad’s Wild Ride… And today is a holiday… 

For What It’s Worth…  Well, this is something that I want to see more of and to see that they find stuff…  Reuters is reporting that regulators are at JPMorgan in the U.K. to go over their metals trading, and it can be found here: https://www.reuters.com/article/us-britain-metals-jpmorgan/british-regulator-reviews-jpmorgan-metals-trading-amid-u-s-probe-sources-idUSKBN1WQ26Q

Or, here’s your snippet: “The UK Financial Conduct Authority (FCA) is one of the various authorities that JPMorgan has previously said were investigating its metals trading, according to one of the people, who declined to be named due to the sensitivity of the matter. The watchdog has requested documents and other information from JPMorgan, the source said.

The exact scope of the FCA scrutiny or whether it will result in any charges was unclear.

The U.S. Department of Justice (DOJ) has charged five current and former JPMorgan metals traders, who worked in New York, London and Singapore, with alleged price manipulation between 2007 and 2016. Two of them have been charged in parallel by the Commodity Futures Trading Commission (CFTC). The joint investigation is ongoing, a DOJ official has said.

One of the traders was charged in 2018, and four this year. Two have pleaded guilty to manipulating prices. The lawyers for the three most recently charged, in September, said their clients would contest the allegations against them. “

Chuck Again….  All these charges, and still no one goes to jail…  And like I’ve said before, until someone big goes to jail, these guys will continue to do what they do and not give a hoot who regulates them! 

Currencies today 10/14/19 American Style: A$ .6753, kiwi .6287, C$ .7570, euro 1.1028, sterling 1.2553, Swiss $1.0046, European Style: rand 14.8125, krone 9.1130, SEK 9.8443,  forint 300.31, zloty 3.8915, koruna 23.4090, RUB 64.17, yen 108.20, sing 1.3692, HKD 7.8439, INR 70.99, China 7.0872, peso 19.31, BRL 4.1087, Dollar Index 98.45, Oil $53.61, 10-year 1.73%, Silver $17.62, Platinum $895.74, Palladium $1,698.78, and Gold… $1,495.86

That’s it for today…  Well… On Friday morning, last week, we got the word that our new granddaughter had arrived…  And it was a few hours later that I sat there in the hospital room holding, little Evelyn, Evie, and we will call her,  and thinking about all the days and nights that I was as sick as a dog, and thought, that it was all worth it, to get to hold that little girl in my arms…  Big brother, Braden,  who was staying with us while mom and dad were in the hospital, couldn’t stop giving his sister kisses on her head…  So, welcome to the world, Evie…  And congratulations Andrew and Rachel…  As Braden said, “now it’s all even, 2 girls, and 2 boys”…  The Main Ingredient takes us to the finish line today with their song: Everybody Plays The Fool… So, see… not so short… but there was a lot to talk about today! I hope you have a Marvelous Monday, and please Be Good To Yourself! 

Chuck Butler

Markets Are Finding Out That Deficits Do Matter!

Rocktober 9, 2019

* Currencies remain in tight ranges once again… 

* More talk about Repos and interest rates… 

Good Day… And a Wonderful Wednesday to you… Well, they finally got around to shipping me my new meds for treating my leg wound yesterday… I had lost patience waiting, and called to check on it, and 10 minutes later it showed up at the door… If I had just had a bit more patience, eh? Well, later this afternoon, into the evening, my beloved Cardinals will play Game 5… The winner of the game moves onto the National League Championship Series (NLCS), which will be a best of 7 games series… Good luck Redbirds! I don’t know what I’ll do before game time of 4 pm CT… I’ll try to take a nap, but… I’ll have that game on mind, so I doubt I’ll be able to sleep! The late great, Dan Fogelberg, greets me this morning with his song: False Faces…. Oh, false faces and meaningless chases, I travel alone…. Dan Fogelberg’s lyrics were the absolute best… I’m just saying…

BTW, patience is not something I’m good at…  Unless I’m in a hospital, pun intended…  Kathy always asks me why I’m so patient and nice to people in the hospital, and I say, “It’s because they have the needles!!!!”

OK, another day of tight ranges for the currencies… I think I’ve figured this all out… Basically, no trader wants to push the dollar higher, nor do they want to reward any of the currencies… So, it’s a push, each day… And that makes for a boring time in currencies… I’m glad they showed me the door a few years ago, so I’m not sitting there twiddling my thumbs each day, because with nothing moving in either direction,  I would think that there are no phones ringing, with investors that want to take advantage of the moves…

Gold on the other hand had a nice day… Yesterday morning I told you that Gold was up over $12 in the early trading, and bust my buttons, that’s what it closed up on the day, at $1,505! It’s up a couple of bucks in the early trading today, so it’ll be interesting to see if Gold can add to the gains yesterday, or if the price manipulators show up at the COMEX with an armful of short Gold paper trades….

Gold is already on the downside of trading this morning with it down $3.50 as I write…. Back and forth, back and forth… UGH! 

Before I go on this morning let me say that I absolutely agree with President Trump’s decision to bring home the soldiers that were in Syria… We should NOT be the policeman in the Middle East… We no longer need their Oil, so let them take care of themselves! And next on the agenda should be the end of the war in Afghanistan. Too many lives, too many tax dollars, and too much time has gone into being there, and like I said many years ago now, in my Sunday Pfennig, titled: Chuck’s Debt Solutions, I talked about how we needed to end all wars… not just foreign but ones at home… Like the war on poverty (how’s that working?), the war on drugs (how’s that working), and the war on the President…

One of the reasons I called for the ends of those wars was to attempt to get our Deficit Spending back in the ballpark… But look how many years have gone on now since I wrote that article… And look at the debt we’ve accumulated since then! Absolutely amazing!

OK, so I went from talking about agreeing with the President on calling the soldiers home from Syria, to my debt solutions, and ending it with the accumulation of debt since I wrote the article… Now that encompassed a few years!

You know… I truly believe that the markets have finally taken notice of the cash liquidity going on in the repo market… And while they aren’t as scared as I am about what’s going on, they are noticing it, and businesses are hunkering down, because they too see what’s going on…

Remember when they used to say that Deficit don’t matter? Well, they’re beginning to matter to the markets… They see the need to issue Treasuries to  finance this every growing debt, and with that issuance comes the need for entities to buy them without forcing up the yield…  Well, as I’ve been chronicling for some time now, the foreign countries have begun to be no-shows at the auction window, which then requires the Primary Dealers to step up and buy the remaining  bonds that haven’t been sold.  

This process used to be NBD (no big deal) because the foreign buying was sufficient… But that was then and this is now, and The Primary Dealers, which are very large banks are picking up the tab at each auction of Treasuries…  And that puts a crimp in their ability to loan money in the repo market, and that’s one of the main reasons the Fed has had to inject Billions of newly created dollars to keep the  banks that are lending, to place higher rates and cause the whole repo market to not function… 

I had a dear reader send me a note and ask me how the repo rate could be higher than the interest rates….  So, I’m guessing he means Fed Funds rate…  Well, that’s an easy on, so I’ll be glad to answer….  You see the repo market consists of loans between banks, so they can charge whatever interest rate the bank receiving the loan will pay…  Think of Credit Cards… Banks charge huge rates over normal rates to lend money on Credit Cards, right?  OK… now that we’ve iron that all out, let’s move along… 

Well, as I said yesterday, it doesn’t look like a BREXIT deal will be in place when the deadline comes 10/31…  I keep reading where observers are almost sure that no BREXIT plan will be in place…  And sterling just continues to get sold under the dark shadow cast by the no BREXIT  idea….

And here in the U.S. there’s just no thought from the markets, especially the stock jockeys, and bond boys, that the Trade War negotiations between China and the U.S. will get us anywhere…   I read last night that last year at this time that the Dow was trading about bang on where it is today…   So, a year’s worth of trading for no gains?  No wonder Gold has had such a great year so far!  

But the Gold to Dow ratio is still above 17, so there’s still time to participate in Gold’s next rush to the top….  I’ve talked about this Gold/ Dow ratio before… And basically the way it goes is when it still takes 17 ounces of Gold to buy the Dow, it represents a buy and should be bought until the ration goes down to 5…   So, it’s not too late folks! 

I heard this morning that a foot of snow is forecast to fall on the plains in Canada, and that would be disastrously bad for the crops in the fields…  So, look for food prices to rise in Canada in the future…   

The U.S. Data Cupboard yesterday had the Producer Price Index (PPI), which is a check on the pulse of wholesale inflation, and for Sept. it was down a negative -0.3%, from 0.1% in August… There was something on Monday that I forgot to talk about yesterday, and that is Consumer Credit (read debt) which was $18 Billion for August, VS $23 Billion for July… Recall I told you that the back-to-school spending took place in July, as schools start so darn early these days…

Today’s Data Cupboard has the Fed’s FOMC meeting minutes from their last meeting, when they cut rates… The markets will be looking for any signals of more rate cuts in the future…

To recap… It was another day of no real moves in the currencies, as they continue to trade in very tight ranges… Chuck believes that its’ come to an impasse  with traders not wanting to take on more dollars, but to them everything else looks bad too…  Gold gained $12 yesterday…  but is down a few bucks in the early trading today… Chuck gives kudos to the President for removing soldiers from Syria, and then goes the whole nine yards in explaining how deficits do matter now to the Primary Dealers… 

For What It’s Worth…. Well, I’ve long thought that the local St. Louis Post Dispatch had fallen on difficult times, and that the only real reporting they did was in the Sports Dept. Everything else is usually copied from API or other news source… they do have a good Business and economics writer, but rarely does an original idea come from him… I had to drop the paper being delivered to me last year, and now view all the local stuff on line…. UGH! But yesterday they sent me a link to an article about Businesses thinking a recession is coming, so that’s what I have for you today, and the article can be found here: https://www.stltoday.com/business/local/business-economists-foresee-slowdown-in-u-s-growth/article_2a886f1e-90c9-5c5b-bc28-c5fc32fba977.html#utm_source=stltoday.com&utm_campaign=3OclockStirNewsletter&utm_medium=PostUp&utm_content=a12874506a3b5805dded6c95af30d7173df7c77a

Or, here’s Your snippet: “WASHINGTON — The nation’s business economists think President Donald Trump’s trade war with China will contribute to a sharp slowdown in economic growth this year and next, raising concerns about a possible recession starting late next year.
The latest survey by a panel of 51 forecasters with the National Association for Business Economics shows they expect growth, as measured by the gross domestic product, to slow to 2.3% this year from 2.9% in 2018. The new forecast marks a downgrade from the 2.6% estimate for 2019 economic growth that the NABE panel had made in June.

For 2020, the forecasters expect GDP growth to fall to 1.8%. They see little likelihood of a recession over the next 12 months but expect the risk to increase by late next year.

Gregory Daco, chief U.S. economist at Oxford Economics, said the forecasting panel turned more pessimistic over the summer, with 80% of the economists now saying the risks are pointed to the downside.

“The rise in protectionism, pervasive trade policy uncertainty and slower global growth are considered key downside risks,” Daco said.”

Chuck Again…And I think these guys are still being too optimistic! If they turned more pessimistic this past summer, wait until they close out the year! I’m just saying…..

Currencies today 10/9/19 American Style: A$.6742, kiwi .6316, C$ .7512, euro 1.0975, sterling 1.2222, Swiss $1.0046, European Style: rand 15.1482, krone 9.1613, SEK 9.9447,  forint 304.30, zloty 3.9372, koruna 23.5144, RUB 65.06, yen 107.38, sing 1.3801, HKD 7.8445, INR 70.87, China 7.1442, peso 19.5 (What a great year!), BRL 4.0964, Dollar Index 99.04, Oil $53.13, 10-year 1.55%, Silver $17.78, Platinum $885.98, Palladium $1,677.89, and Gold… $1,501.54

That’s it for today…  Well, no Pfennig tomorrow folks… Sorry but I have to be at the wound center bright and early… And next Thursday I’ll have to at the hospital for scans bright and early, so, short weeks for me two weeks in a row… Whenever they need to schedule me for scans I always say, I want to be the first one of the day. I say that because, there will be no delays, or backup of appointments that way…  Alrighty then… Let’s Go Cardinals! I’m already getting nervous….  UGH!  The late great Otis Redding takes us to the finish line today with a recording from a live at the Whiskey A G0-Go…  Can’t Turn You Loose….   I got to meet a fellow trader once at the Whiskey A Go-Go and all I could think of was that Otis Redding was there back in the 60’s…   I hope you have a Wonderful Wednesday, and rest of the week, and please Be Good To Yourself! 

Chuck Butler

 

Hello, Angela? This is Boris… And We Have No Deal!

Rocktober 8, 2019 

* Currencies trade in tight ranges on Monday… 

* Fed keeps pumping Billions into the repo market… 

Good Day… And a Tom Terrific Tuesday to one and all! I’m a little giddy today, because my beloved Cardinals came back late, tied the game and then won it in the 10th, with a walk-off sac. Fly from their longest tenured player, Yadier Molina…. Who had tied the game in his previous at bat! It was a thrilling game back and forth, and I was able to watch it outside on an absolutely beautiful fall afternoon in St. Louis… A very high sky that was painted blue, with not a cloud in sight! And I got to share my outside viewing area with 3 good friends, and youngest son Alex… A great day indeed! Steely Dan greets me this morning with their song: My Old School…

Well, it was a nothing day for the currencies yesterday… And I’m still perplexed why the dollar bugs are so strong, when the U.S. economy is grinding to a halt. But be that as it may, life goes on… And yesterday, saw the currencies trade like they were stuck in the mud… And Gold lost $10 on the day to close below $1,500… I have to wonder just how long this using $1,500 as the new $1,300 will last, because I said that Gold would be $1,600 by year end, and every day we get closer to year end, is another day lost to that thought!

One of these days, Gold is going to be singing the old Nancy Sinatra song…. One of these days, these boots are going to walk all over you…. But they’ll be singing it to the dollar bugs… and the price manipulators, and all the people that call Gold a barbaric relic (Yes you heard me Warren Buffett), and so on…   Maybe today is the day, although I doubt it… But in the early trading this morning Gold is up more than $12 to put it back above $1,500… back and forth, back and forth… 

OK, back to the dollar bugs, and their reluctance to give up the conn to the currencies… I hear what a lot of readers reply to me in the Pfennig Replies Box, have to say about how the dollar is the dirtiest shirt in the laundry…. But… as I counter, that might be, but not all the countries out there are doing poorly, and in fact in Russia things are looking better there than here, at least they’re not heading to a recession! And China? Well, China has slowed down, but their economy is so strong, that they’re keeping their heads above water… I would also like to point out that in New Zealand, the economy remains pretty resilient and is not being dragged down by the slowness going on in Australia… But the Reserve Bank of New Zealand (RBNZ) is keeping a tight grip on interest rates, which makes sense for them being that they are an island nation, and they depend on imports for so much… They can’t afford to have kiwi soaring while their trading partner currencies are lagging…

Their imports would suffer, and their exports would become to overvalued… Remember, New Zealand exports, Wool, Dairy, and Lunber… All three Commodities, and why, kiwi is considered a commodity currency… So, think about that for a minute… Inflation around the world is somewhat subdued… But… how much longer can that go on? And a rising global inflation would get commodities up off the mat, and the Commodity Currencies as well!

In 2002, I was asked by a well known investment analyst, if our bank had an investment vehicle that would be like a hedge to inflation…. I said, yes! We have the Commodity Currency Index CD… And from that moment on, it was our most requested CD and it soon became the most profitable one, as the Commodity Currencies of: Australia, New Zealand, Canada, and S. Africa, would soon go the warpath VS the dollar, and rest, as they say, is history!

February 2002, is considered to be the start of the last weak dollar trend, and it lasted until 2010, when the debts of Greece and other Club Med Countries were uncovered, leading the European Central Bank (ECB) down this road of large debts, large amounts of stimulus, like negative rates and bond buying… But from 2002 to 2010, the Commodity Currencies that I highlighted above were the best performing of the currencies VS the dollar… Once the current strong dollar trend ends, we should look for these same currencies to outperform as they did just a few year ago during the last weak dollar trend…

The price of Oil slid further downward in the past 24 hours and this morning is trading with a $51 handle…  this downward slide has really been a tough row to hoe for the Petrol Currencies, led by the Russian ruble…   They say that the reason for this continuing drop in the price of Oil is  lack of demand…   Consumers have really cut back in their gas consumption… And it has nothing to do with the introduction of electric cars… They are so far down on the ownership scale they haven’t even registered yet!  I saw a headline blurb the other day that I wish I had copied it, so I could use it, but the idea was that this country they were talking about had this very HUGE number of drivers, but only 8,000 of them were interested in an electric car… 

I find it interesting that the markets can pinpoint the downward movement of Oil being caused by lack of demand, but the lack of demand isn’t hurting the dollar…  And the Fed keeps pumping newly created dollars into the repo market…  

I read a report last night that talked about the reasons the Fed is having to interject so much cash/ liquidity into the repo market…  None of them made much sense to me, but add them all together and you might have something…   The list included:  1. the Fed’s stopping to buy bonds from banks, and then stopping to buy more… 2. The Treasury’s massive Treasury bond sales to finance the deficit…  You see, when foreign countries don’t show up at the auction window, the Primary Dealers, here in the U.S. have to step in to buy the bonds that don’t get sold…  and that has reduced their working capital….   And some others ideas that didn’t make much sense to me…  But add those two together you might have something…   

I can tell you that this is a prime example of the Fed losing control over the price of money…  They had to resort to injecting billions of dollars to keep rates from exploding higher…  I’m just saying… 

In the BREXIT negotiations, U.K. PM Boris Johnson has told the Eurozone that there could possibly be on deal….  Remember the deadline is 10/31…  And it will be here before you know it… So, Johnson is probably correct! 

And in our own Trade War negotiations… Yesterday I said that I did not believe that the upcoming China / U.S. Trade War negotiations would yield anything… And last night I saw this on Bloomberg: “Chinese officials signaled they’re increasingly reluctant to agree to a broad trade deal with the U.S. ahead of negotiations this week.”….

I wonder who was reading whom?

And now the Trade War the U.S. is waging is expanding from China to the Eurozone…  As tariffs were announced last week on Eurozone imports… Well there goes the deal you thought you had for that Beemer! HA! 

Not much happening today in the U.S. Data Cupboard… We will see the color of PPI (wholesale inflation)  but other than that… zippo!  So, the markets are on their own….  But… I would caution the stock jockeys that the news that GE is going to freeze the pensions on 20,000 employees might not be  shaken off so easily, like the disappointing jobs number last Friday!  I’m just saying… 

To recap… The currencies are trading in a tight range, and yesterday saw Gold lose $10, but is up more than $12 in early trading today… Back and forth through the $1,500 figure, how much longer this will last is anybody’s guess, but Chuck still believes Gold will be $1,600 by year end… The Fed is still pumping Billions of dollars into the repo market, and the price of Oil continues to move downward… 

For What It’s Worth….  thanks to Ed Steer who highlighted this article in his daily letter today… If Ed thinks its worthy, then I do too!  It’s an article about how the recession is beginning to see the large dollar items going for sale, and it can be found here: https://internationalman.com/articles/following-the-greater-depression-on-ebay/

Or, here’s your snippet: “Although careful research into an economy can result in a relatively accurate prognostication, the timing is always the most difficult aspect to pinpoint.

However, a good indicator is to track how others within the economy are surviving the situation. This tells us much more than their questionable claims that they’re doing just fine.

One very telling way to do this is to follow their extravagances. In prosperous times, they’re likely to buy expensive toys. Then, as they increasingly feel the pinch, they’ll sell off those toys first, before resorting to selling their more essential possessions. For example, someone will sell off his beloved sports car before he sells the more essential family SUV. Or he’ll get rid of the vacation house before he puts his primary home on the market.

Therefore, an early warning that a people are facing financial difficulty is that they begin to offer such big toys for sale in order to continue to pay the bills. And an early warning that an entire economy is in trouble is when tens of thousands of people engage in such a sell-off. This is particularly true for those who bought their big toys with a bank loan.

Yachts are the first toy that most people will sell, since it’s pure luxury and a liability. A yacht has been defined as “a hole in the ocean that you shovel money into.” Quite so. They’re costly to maintain. And, of course, that’s why it’s prestigious to own one. Many people buy them to impress others, even if they can’t really afford them.”

Chuck again… Yes, I thought this was a very good way to show that even the high money people are experiencing cash problems, and when the selling of other items hits the main street… Then… Houston, we’ll have a problem! 

Currencies today 10/8/19 American Style: A$.6745, kiwi .6320, C$ .7510, euro 1.0987, sterling 1.2221, Swiss $1.0087, European Style: rand 15.2758, krone 9.1387, SEK 9.8913, forint 304.29, zloty 3.9403,  koruna 23.5734, RUB 64.82, yen 106.88, sing 1.3805, HKD 7.8444, INR 70.83, China 7.1475, peso 19.57, BRL 4.0537, Dollar Index 98.84, Oil $51.98, 10-year 1.53%, Silver $17.57, Platinum $886.01, Palladium $1,650.50, and Gold… $1,505.72

That’s it for today… A little later than usual, sorry…  I slept through the alarm… I have to say that when I get up at 4 am to take my chemo, on an empty stomach, that when I go back to sleep, I really sleep…  So, that’s my story, and I’m sticking to it!  Like my first wife was a young Elizabeth Taylor, yeah, that’s the ticket! HA!  So, my beloved Cardinals go to a deciding Game 5 on Wednesday… I like our chances… but it’s baseball, you never know!   Our Blues won again last night, this time in Toronto, which is a big deal, if you ask me!  The Dodgers and Nats are going to a Game 5 too, which is surprising to me, as I picked the Dodgers and Astros to play in the World Series….  OK…  today were treated with a song to take us to the finish line from Mr. Excitement, Jackie Wilson, who sings: Your Love Keeps Lifting Me Higher…  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

U.S. Jobs Jamboree Disappoints, But The Markets Don’t Care….

Rocktober 7, 2019

* Currencies try to rally but it gets stalled out!

* Chuck takes issue with elected officials, so what else is new? 

Good Day… And a Marvelous Monday to you! A good weekend for yours truly, event wise, unfortunately though, not so good for my beloved Cardinals, who are down to the cheese that binds this afternoon in their playoff series. If they lose, it was good morning, good afternoon, and good night. If they somehow figure out how to hit the ball, and win, then they’ll play a winner take the series 5th game on Wednesday… My Missouri Tigers won, but their quarterback took a very cheap hit and had to leave the game… I sure hope he’s going to be OK… But that player that committed that cheap hit should have been ejected from the game and the season! The New Radicals greet me this morning with their song: You Get What You Give….

Well, I really blew that call on last Wednesday didn’t I? I had so many emails telling me I was wrong, etc. about the NL Wild Card Game ending… I made a big mistake and didn’t check the score that morning as I was rushed to get out the door, early… I thought that once the Brewers’ big time reliever, Hader came in it was like when Bruce Sutter used to pitch for the Cardinals, the other team would start packing up their bats! For the game was about to be over… But that’s wasn’t the case, so all I had said about the game was wrong…. I apologize for that if I got anyone’s dander up!

The Jobs Jamboree on Friday was a real disappointment, but only to me, I guess… As the markets just shrugged it off once again…. Only 136,000 jobs were created in September, and… believe it or don’t, but the BLS took away 71,000 jobs… How’d that happen? Beats me… But for once in blue moon, the BLS too jobs away instead of adding them…. So… maybe that’s why the markets didn’t get all loopy when the jobs number came out, but if that’s the case, then every month when the BLS adds numbers they should be taking issue with that too! So, I’m doubting that the BLS’s hedonic adjustments had anything to do with the markets… The markets are so much like being able to count the cards at a 21 table in Vegas, without anyone noticing, you just keep winning…

So, the currencies tried to rally, but they were stalled… Gold tried to rally, but it too stalled out… The Bond boys kept the pressure on yields though, and the price of Oil spent another day getting marked down. I have a real issue with the currency traders… Don’t they see that the economy is grinding to a halt? Or, maybe they won’t allow themselves to think that way, for this so-called expansion just keeps going like the Energizer Bunny…So, to them, why would that all end?  Dolts, all of them, eh? 

In the overnight markets, Gold is getting sold and is back below $1,500 …  Wait! What? You mean to tell me that the U.S. economy is grinding to a halt, and Gold is getting sold?  That makes about as much sense as… Well, fill in whatever is stupid to you there…  Because if I say something it won’t be nice! Gold getting sold with the U.S. economy grinding to a halt, while all other countries, sans Russia, seem to be already have grinded to a halt…

But why on earth am I getting all worked up over this selling of Gold this morning?  Wasn’t it me that said that $1,500 was the new $1,300 a month or so ago? So, listen to yourself Chuck!  And not that devilish guy on your left shoulder, who tells you all the time that you need to rail about price manipulators…  OK, so in essence this is just normal trading right now, because we are set to watch Gold go past $1,500 and then slide back below it until…. drum roll please…..  until it doesn’t any  longer!  See, what a genius I am? HAHAHAHAHAHA!  

Well, today, I’m going to take issue with our elected officials… This is not a political hack at them, just strictly, a “what in the hell are you thinking question to them”…. OK, this all stems from an email I received from the GATA folks, who quoted Russ and Pam Martens saying, “Yesterday the House Financial Services Committee released its hearing schedule for October. There is not a peep about holding a hearing on the unprecedented hundreds of billions of dollars that the Federal Reserve Bank of New York is pumping into unnamed banks on Wall Street at a time when there is no public acknowledgement of any kind of financial crisis taking place.” – Russ and Pam Martens from wall street on parade

Wait! What? You mean to tell me that no one except the Fed, and the banks receiving the cash flows, know who is getting it? And the politicians, who we voted for, and put into office to make sure they protected us against this kind of thing, are going to do nothing? OMG! That’s it! I’m giving up on these boys and girls… I used to have that Polly Anna viewpoint that by contacting your representative you could effect change… But that idea has been shot down… Like the April Wine song of the 70’s…. Shot Down!

Now, you can tell me that this kind of stuff doesn’t bother you, because you no longer allow things you have no control over to bother you… And that’s fine… I wish I could accept that idea for myself, but I can’t! I can’t because that’s not who I am! So, in the “it doesn’t bother me world”, You’re ok that the Fed is pumping newly created money, which in essence should debase the current stock of money, and you’re OK with that, because you still have your pocket full of dead presidents and they still buy you gas, groceries and giggles… Geez, I wish I could take that kind of laisse fair attitude…

Just the other day, I heard a young woman say, that she got back her DNA test, and that she’s 10% this and that and so on, and I just had to speak to it… I said, “ OK, but now the government knows more about you than you do.” And she replied, “So, I haven’t done anything wrong”… To which I replied, “Well, when your civil liberties have all been taken away, don’t come crying to me”…. See? I can’t keep my mouth shut!

In a quick trip around the world, I see that there’s not much in data or events this week that would help the currencies gain a bid.  On Wednesday, we’ll see a whole truck load of data prints from Japan…  But Japan is a basket case, and I don’t care about their data any longer!  Thursday, will bring a European Central Bank (ECB) meeting… This will be ECB President, Mario Draghi’s, last meeting…  Look for him to leave with both guns blazin’…   which won’t be good for the euro, of course…  And then the rest of the week has some prints from various places, that we’ll talk about when we get there… 

The U.S. Data Cupboard last week had a bad week, what with the ISM falling below 50, and Factory Orders for August printing negative at -0.1%, and the rally in wages, seeing a real hit to the solarplexes, as they were flat in September, and then the icing on the cake was the very disappointing Jobs number for September…

This week’s Cupboard gets a reprieve of sorts, as there’s not a whole heck of a lot to speak of on the docket… There is Consumer Credit (read debt) for August that prints this morning. And then on Wednesday the Fed’s FOMC Meeting Minutes will print from their last meeting when they cut rates… And then there are a bunch of non-market-moving prints to fill in the rest of the week.

And finally, the Trade War negotiations will begin again this week, as a high ranking Chinese diplomat will arrive in the U.S.  I would look for two things this week here…. 1. that the Chinese renminbi would drift stronger as the week goes on, just as window dressing if you will, and 2. that the negotiators get nowhere… 

To recap…  The jobs Jamboree last Friday was very dissapointing, but the markets shrugged it off and went about their daily chores… The dollar didn’t get sold, Gold was flat, Oil got sold, and Bond gave away more yield, which means they were rallying…  Chuck has an issue with the elected officials, what else is new?  

For What It’s Worth… I’ve been telling you all for some time now that Russia and China are trying to rid themselves of dollars and to do this, they’ll stop trading in dollars… this article from the Russia Times, talks about how Russia’s largest Oil Company is doing just that… And it can be found here: https://www.rt.com/business/470192-russia-dumps-dollar-oil/amp/
Or, here’s your snippet: “Russia’s largest oil company Rosneft has set the euro as the default currency for all new exports of crude oil and refined products.

As of September, Rosneft is seeking euros as the default option of payment for its crude oil and products, Reuters reported on Thursday, quoting tender documents the Russian firm has published.

“Rosneft has recently adjusted all the new contracts for export supplies to euros,” a trader at a company that regularly procures oil from Rosneft told Reuters, adding that buyers have already been notified of the change.

The United States has not ruled out imposing sanctions on Rosneft over its involvement in trading oil from Venezuela. Rosneft has been reselling the oil from the Latin American country to buyers in China and India and thus helping buyers hesitant to approach Venezuela and its state oil firm PDVSA because of the U.S. sanctions on Caracas, and, at the same time, helping Venezuela to continue selling its oil despite stricter U.S. sanctions.

Rosneft’s move was seen by traders and analysts as a future hedge against potential new U.S. sanctions on Russia and/or its oil industry.”

Chuck Again…. I always told my audiences after 2010, that with China adding country after country to their roster of countries that do currency swap agreements with them, that it wouldn’t take that much to add the Oil producing countries and when they took the dollar away from Oil trading, it would be bye bye dollar… Well, this is not the Chinese swap agreement, but it’s the same thing. Now, we just sit and watch as oil producing country after oil producing country drops settling in dollars…. I’m just saying…. Oh, and Got Gold?

Currencies today 10/7/19 American Style: A$.6738, kiwi .6290, C$ .7511, euro 1.0981, sterling 1.2328, Swiss $1.0052, European Style: rand 15.1430, krone 9.1355, SEK 9.9152, forint 303.77, zloty 3.9439,  koruna 23.4745, RUB 64.62, yen 106.85, sing 1.3805, HKD 7.8443, INR 70.83, China 7.1475, peso 19.57, BRL 4.0537, Dollar Index 98.84, Oil $53.37, 10-year 1.54%, Silver $17.45, Platinum $877.26, Palladium $1,662.07, and Gold…. $1,499.10

That’s it for today…  Ok, since last Wednesday, I went to see the wound center and they went crazy over the looks of the wound on my leg… I spent over 2 hours there, and they think they have the magic potions to heal it… I hope so….  On Saturday, a group of friends got togher for a bite to eat and then go enjoy the music and fireworks of our City’s celebration…  Fun times for sure, and our Blues won on Saturday night!  So, let’s hope the Cardinals find their bats today, and that there is a game 5 on Wednesday, eh?  Stevie, guitar, Miller, and the Steve Miller band takes us to the finish line today with their song: Serenade…    A great chords riff to start that song….  I hope you have a Marvelous Monday, and please Be Good To Yourself! 

Chuck Butler

 

 

 

The Markets Get A Glimpse Of The Recession Train…

Rocktober 2, 2019

*dollar gets sold, gold gains, bonds rally… 

* RBA cuts rate below 1% for first time in history! 

Good Day… And a Wonderful Wednesday to you! I would bet that the good money was on the Washington Nationals last night to win the wild card game… And they would be out a lot of money this morning, as the Brewers won the game, and head to Los Angeles to play the powerful Dodgers… I half watched the game and half read throughout the night… This will be short-n-sweet this morning due to me having an appt. early today. No biggie… Just a lot of sitting around waiting! One of my all-time fave songs from one of my all-time fave groups greets me this morning, as Chicago sings their song: Hard Habit To Break…

Well… the dollar bugs finally backed off yesterday, and being a longtime reader you know that I don’t like going to the Data Cupboard right from the get-go, but…. Today we’ll do things differently…

Well, looky there, once again I have proven that even a blind squirrel can find an acorn… Recall yesterday I said that I thought the ISM (manufacturing index) would continue its monthly decline? Well that’s exactly what it did, but first there was a revision to the August number which originally printed at 50.5. It was revised downward to 49.1… (Below 50!) And the September number printed at 47.8… I also said yesterday that I wondered when Europe’s manufacturing slowdown was going to come to our shores… Well, like the 60’s movie: The Russians are coming… This was like the European manufacturing slowdown is coming!

Well… so… the data brought the dollar bugs to red carpet and scolded them for being so strong with the dollar… And the currencies, led by the euro rallied…  But…  In the overnight markets we received some news that sobered up the currencies….  The Reserve Bank of Australia (RBA) surprised the markets with a rate cut of their own, and this time is quite significant, as Australia’s official cash rate has fallen below 1.0%  for the first time in history with some economists saying it will stay down for at least another two years.

And the RBA wasn’t mincing words, when they talked about the need for further rate cuts…  This news sent the Aussie dollar to the woodshed early this morning…   I do want to mention though that Kiwi didn’t see any sympathy selling, yet, that is…  

Gold even got an opportunity to get back on the positive side of the ledger… It’s still China’s Golden Week Holiday, so keep that in mind for the rest of this week’s opportunities to buy Gold… The shiny metal gained $7 on the day, but remained below the $1,500 figure once again.

The price of Oil slid further downward in the past 24 hours and this morning is trading with a $53 handle…  I would have to think that the lack of demand is really causing this downward slide…  The lack of demand will continue to get worse, if you asked me, due to the Consumers being tapped out, with no disposable income to spend on a trip to the Grand Canyon… 

The Three Blind Mice, Ahem, I mean, The Fed was out trying to smooth the edges on its tarnished reputation yesterday, when the St. Louis Fed issued a paper on Countercyclical Capital Buffers… Sounds pretty intriguing, eh? Well, it wasn’t… it was just fluff that explained the role of Banking reserve requirements…. But then it did get interesting when the Fed decided that they has taken too many hits lately on their monetary policy… And went on to describe the mess the Bank of Japan and the European Central Banks are in… Thus making them look better, if you will… I can see them saying, “Mirror, mirror, on the wall, who’s the best central bank of all?” And if I were the mirror, I would answer…. “Certainly not you!”

Yesterday, Canada printed a better than expected Industrial Production number. The August IP was up +0.2% VS the negative -0.3% in July… So, a nice improvement there, and we saw loonie traders reward the currency with a small increase in its value. I have to say, and knowing all too well, that whenever I do this, it’s usually a signal that the kiss of death has been laid on the currency, but… It’s resiliency IS the story right now in the currencies, so I have to take the chance that maybe this time I won’t kill the currency’s rally…

But the loonie has been quite resilient in the past few months, remaining above 75-cents and inching higher from time to time… The price of Oil has slipped by a lot, and the other Petrol Currencies are taking a hit to the abs… But not the loonie… And one reason is the fact that Bank of Canada hasn’t gone down the road of keeping up with the Joneses, or the Fed per se… It took so long for the Bank of Canada (BOC) to react to the housing bubbles in Toronto and Vancouver, that they just can’t see themselves cutting rates so soon… Eventually though, with the rest of the world having a debase the currency with a rate cut party, they’ll have to join in…

An interesting article on Zerohedge.com yesterday had the World Trade Order (WTO) talking about the global slowdown, so much so, they had to lower their global growth outlooks for this year and next year…  And then they threw this grenade from left field…. check this out… “WTO confirms that the economic rebound or “green shoots” Wall Street was predicting for 2H19 is fake news. A growth scare for stocks is nearing; determining the trigger for the next stock market plunge is currently what every concerned money manager is trying to figure out.” – WTO

OK, after yesterday’s debacle at the Data Cupboard (ISM’s print) we come back today to see the color of the ADP Employment Report for September, which last month showed 195,000 new jobs in August…  I doubt this month’s figure will be so stout… September just seemed to be digging deeper into a hole, to me… I’m just saying…

To recap… The U.S. recession train just keeps rolling into the station and we go a real glimpse of it yesterday, when the ISM for August was revised downward to below the 50 figure, and the September figure was 47.8, just slip sliding away…  That sent shock waves through the markets, and the dollar got sold, Gold gained, Bonds rallied, and the price of Oil slid further downward…  And Chuck thinks it’s all due to a lack of demand…   The RBA cut their official rate below 1% for the first time in their history!  And sounded like there could be more coming…  

For What It’s Worth…. Well, for the longest time now I’ve said over and over again, that a recession is coming and when it does it’s going to be a doozy… The folks at the Telegraph in the U.K. see it for what it will be and have this article to talk about it… And it can be found here: https://www.telegraph.co.uk/business/2019/09/29/helicopter-money-may-weapon-confront-next-recession/

Or, here’s your snippet: “A radical world of helicopter money – where central banks fund government spending – is inevitable as policymakers run out of ammunition ahead of the next recession, top economists have warned.

Central banks are likely to explore more unconventional policies in the next downturn and blur the lines between fiscal and monetary policy with radical new tools, such as monetary financing, Deutsche Bank argued.

Recession fears are mounting but central banks have very little firepower remaining with traditional monetary policy — the control of the money supply and interest rates — blunted.

Helicopter money to stimulate the economy therefore “seems inevitable over the medium to longer term,” said Jim Reid, a Deutsche analyst. He argued that central banks “effectively invited governments to experiment with more unconventional policies” with ultra-low interest rates on debt.

Helicopter money is when central banks finance government spending through money printing but can also refer to cash transfers into individuals’ bank accounts and haircuts to debt already held by central banks.

“If the post global financial crisis decade has all been about printing money to buy financial assets, we think the next decade will be more about printing money and injecting it into the real economy,” Mr. Reid said.

The German bank’s analysis found that the world is already drenched in debt in the wake of the financial crisis. Total debt has tripled since the turn of the century to $247 trillion while government debt as a percentage of GDP in advanced economies is at a record peacetime high”

Chuck Again…. A not so very long time ago, but some time at least, I used to have a presentation slide that showed former Fed Chairman Ben Bernanke hanging out of a helicopter throwing wads of cash to the skies… Of course this was all fun and games as I took exception to his helicopter money quote … Eventually, “they” made me take that slide out of my presentation… I replaced it by getting everyone in Vancouver at the Agora Symposium, to sing Lemon Tree with me… You should have been there, we had some fun!

Currencies today 10/2/19 American Style: A$.6682, kiwi .6240, C$ .7551, euro 1.0928, sterling 1.2269, Swiss $1.0001, European Style: rand 15.2505, krone 9.1372, SEK 9.9013, forint 305.65, zloty 3.9977,  koruna 23.5525, RUB 65.07, yen 107.55, sing 1.3853, HKD 7.8416, INR 71.07, China 7.1449, peso 19.82, BRL 4.1583, Dollar Index 99.22, Oil $53.87, 10-year 1.62%, Silver $17.28, Platinum $880.10, Palladium $1,666.90, and Gold… $1,486.19

That’s it for today, and this week… Recall I have an early doctor’s appt tomorrow morning, as I’m finally going to a wound center for my leg! Next Monday I’ll be all lathered up to talk about the Sept. Jobs Jamboree…  And next Monday, I’ll have a good grasp on what’s going on with my beloved Cardinals in their playoff series…. And tonight…. Tonight marks the opening game for the defending Stanley Cup Champions, St. Louis Blues! Yes, the hockey season is here…  So, here we go again, Let’s Go Blues! And finally my beloved Missouri Tigers come off their bye week, and play this Saturday again… Go Tigers!   The Cure takes us to the finish line today with their song: Just Like Heaven…    I hope you have a wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

Is China’s Golden Week To Blame For The Gold Selling?

Rocktober 1, 2019

* Currencies get sold again in the overnight markets… 

* Apparently Investors don’t really like negative yielding bonds! 

 

Good Day… And a Tom Terrific Tuesday to you!  And welcome to Rocktober! No baseball for me last night, so I read, but not research stuff, I’m currently in the middle of the last of the existing Jack Reacher books, (I’ve preordered the new one out for delivery, later this month) and it had my attention for most of the night. I even skipped dinner, because I was captivated… Well, my choice for Cy Young winner in the NL this year is Jack Flaherty, of the Cardinals, and yesterday he was named pitcher of the month of Sept. You may recall that he was also named pitcher of the month in August! And .091 ERA since the All-Star break, folks… I haven’t seen pitching dominance like this since Bob Gibson… And don’t get me wrong I’m not comparing him to the Great Bob Gibson! OK… It’s Indian summer here in the Midwest, as temps will be hot again today, but the cooling off is coming… And Jimmy Cliff greets me this morning with his song: Hello Sunshine… not familiar with that one? It’s a catchy tune, for sure!

OK, before we get into the goings on in the markets this morning, what a year it’s been for Deutsche Bank (DB) they were raided for a second time this year, just last week… And as I put on my conspiracy hat… And think back to what was going on last week… The banks weren’t lending to each other, and the Fed has to step in with cash liquidity… But… if we look under the hood, here would we find that the banks just weren’t lending to DB? A couple of years ago, in the old defunct, Review & Focus, I spent a whole month’s work on talking about DB’s problems… bad loans, derivatives, etc. etc. Old customers of the now defunct EverBank might still have that copy hanging around… I would reprint it be I wasn’t allowed to take any of that stuff with me when I “retired”….

OK… conspiracy hat is off… but I guess you can read what you want into what I just discussed… The dollar bugs took a breather the rest of Monday after pulling an all-nighter on Sunday night into Monday morning… The euro crept back to the 1.09 handle, and then lost it again in the overnight moves… What’s up with these overnight moves? Or do I say… no, wait! I don’t want to say that, oh, yes you do Chuck, you just don’t know how to say it politely! OK, here’s goes, bluntly as usual because I have no bedside manner…. While things around the world don’t look very stable economically wise, they do seem to be more stable than the currency traders are giving them credit for… And quite frankly, I truly believe that the Plunge Protection Team (PPT) is working the sidelines and sending in plays, to beef up the dollar’s value, ahead of the coming dark clouds for the economy…

So, call what you will… But the dollar bugs sure have had their way with the currencies in the last month… And Henry Kissinger is getting his wish that he made back in 1971, when he warned people in the Nixon administration of the fear of Gold becoming more popular than the dollar… This is in a Wikileaks memo on State Dept letterhead folks… I don’t, and haven’t made this stuff up!

Gold closed down $25 yesterday, and is down another $4 this morning… I don’t want to spoil your appetite for the FWIW article today, which will help explain what’s going on in Gold these past few days… So, I’ll just give you a teaser…  Did you know it’s Golden Week in China?  And besides Russia, who among the major countries in the world has been buying physical Gold by the boat loads?   That’s right, it’s China!  And that’s I’ll I’m going to say, for now about that, but you be thinking about how those two things go together, and then when you get to the FWIW article you’ll give yourself a head slap and say, Wow! I could’ve had a V-8! HA!

OK…  Well, Japan held a bond auction overnight, and well, it didn’t go to well, and that send bond’s around the world down, thus raising the yields and stopping the bond rally that had brought bond yields to their recent lows. I don’t think this will continue and be the absolute end of the bond rally, for the bond boys & girls here in the U.S. are hell bound and whiskey bent to show the stock jockeys that a recession is coming…  But so far, the stock jockeys have their hands in the air and just don’t care! 

In the Eurozone this morning, we saw the September print of their PMI (manufacturing Index) actually moved upward during the month VS August… The move was miniscule, and doesn’t prove anything other than the Eurozone manufacturing is contracting….  For those of you keeping score at home today, the Sept PMI was 45.7, and the August PMI was 45.6…

The Eurozone also saw their core Consumer Inflation figure bump higher by a smidgen too. September Core Inflation was 1.0% VS an August print of 0.9%…   This too doesn’t prove anything other than the fact remains that all the negative interest rates, and bond buying isn’t spurring any inflation here, so why go through all those gyrations?  

I had a dear reader ask me a question the other day, that I thought I would discuss here…  He asked me why the dollar isn’t considered a Petrol Currency, since they now produce so much Oil?   Hmmm, I thought… and thought, and finally came to an answer…  The U.S. shale fracking producers are relatively new to the Oil production game… And the countries that are considered Petrol Currencies have been doing this a long time…  But given the fact that the U.S. does produce more Oil these days, although given my recent claims that shale producers are drying up, and it could be added at some point in the future… 

Later this morning, we’ll finally see some data from our neighbors to the north, Canada…  Canadian GDP for July, will print today…  And here’s where I believe we could see a crack in the 75-cent plus armor that the loonie is wearing these days… I don’t expect the GDP print to be anything to get all lathered up about, and therefore it will bring questions of when the Bank of Canada is going to follow the Fed and cut rates again… That kind of talk won’t be good for the loonie…  But then the loonie has been quite resilient lately… So, it should be interesting today… 

The U.S. Data Cupboard will also have our form of a manufacturing index, which we call the ISM, print today for September… Recall that August saw the multi-month fall of this index number come to rest at 51, just a shade over the line in the sand figure of 50…  So, will the multi-month fall of the number continue in September?  The Eurozone’s index number is 45.7, and they’re in a heap of trouble there, when does that heap of trouble come to our shores?  This month? could be check back tomorrow, for a recap I guess… 

To recap…  Gold is getting hammered this week, while China is on holiday, more on that in the FWIW coming up next! The currencies keep getting sold in the overnight markets, and Chuck thinks that somethings going on there that doesn’t smell right…  Japan held a bond auction overnight that didn’t go to well, apparently investors don’t want negative yielding bonds…  And that caused some worries abroad, but Chuck doesn’t think that the bond rally in the U.S. is over, as the bond boys & girls are attempting to show the stock jockeys that a recession is coming…. 

For What It’s Worth… Well, thanks to the folks at GATA for sending me this link to an article on Zerohedge.com that talks about how China is on it’s Golden Week holiday, which could be the reason the price manipulators are going guns a blazin’ on Gold & Silver… The article can be found here: https://www.zerohedge.com/commodities/gold-prices-plunge-right-cue-china-golden-week-begins

Or, here’s your snippet: “ight on cue, as we detailed here, precious metals prices have been pummeled as China Golden Week begins…
Silver futures have accelerated lower since losing $18… as of today, China will be on vacation for its Golden Week National Holiday and this weakness appears to be traders front-running the traditional chaos that the rest of the world plays when China leaves the playing field.

China will be back in business on October 9th, and that means the Shanghai Gold Exchange, which opened in 2015 to counter Western manipulation of precious metals, will likely help re-balance prices to where they were before this recent takedown.

We could be wrong, but something tells us gold and silver prices won’t stay this low for much longer and that they could well see a complete turnaround when China reopens on October 9th.”

Chuck again… yes in the website article you can see each year the downward movement in the price of Gold during the Chinese Golden Week holiday… So, it makes sense that this is the week to look to buy more or an new position in Gold… I’m just saying…

Currencies today 10/1/19 American Style: A$.6699, kiwi .6225, C$ .7535, euro 1.0905, sterling 1.2280, Swiss $1.0008, European Style: rand 15.2870, krone 9.1160, SEK 9.9040, forint 306.84, zloty 4.0140, koruna 23.6093, RUB 64.77, yen 108.28, sing 1.3860, HKD 7.8403, INR 70.87, China 7.1359, peso 19.77, BRL 4.1567, Dollar Index 99.43, Oil $54.73, 10-year 1.73%, Silver $17.13, Platinum $886.73, Palladium $1,665.70, and Gold… $1,468.53

That’s it for today… This is going to be a short week for me, as I will be heading to the wound center bright and early on Thursday morning, which means there won’t be a Pfennig that day…  No biggie… A few years ago, the tumor in my mouth was so bad, that I contemplated going to Mexico for treatment, for they used the hyperbaric treatment. They’ve come a long way here in the U.S. with the use of hyperbaric treatments for wounds. I’m hoping that this is what’s used on my leg… It’s just been to damn long! sorry for the swear word, but I wanted to emphasize just how long it’s been!  Well, it’s Rocktober…  The air will begin to cool down, and it’ll be time to get the woolies out, and we’ll begin to smell the aromas of bonfires…  Fall is the best weather we have here in the St. Louis area, and Rocktober is the pick month of the fall!  Ok, Neil Young takes us to the finish line today with his song: Out On The Weekend…  It’s from the great Harvest album from the early 70’s…   I hope you have a Tom Terrific Tuesday and please Be Good To Yourself!

Chuck Butler

 

 

 

U.S. Data Prints Bad… Dollar Rallies… What Gives?

September 30, 2019

* Currencies and Gold get sold in the overnight markets

* Will the Administration put a choke hold on Capital Flows to China? 

Good Day…. And a Marvelous Monday to you… A Monday that brings us the new Central Division Champions in the NL this year…. My beloved St. Louis Cardinals… They may not make it very much further, although I think they will, but they’ll be forever loved for winning the division on the last day of the season, in style, with a 9-0 win… I sat outside to watch the game on TV, with my neighbor Paul, who was very interested in what was going on… He’s a tennis buff, but still follows the game of baseball, when he’s with me! I smoked some, hand made rub, rubbed Pork Tenderloins yesterday, that I have to say were the absolute best ones I’ve ever made! Everyone wanted my recipe for the rub! I said it has a little bit of this, and a little bit of that, and so on… The Marshall Tucker Band greets me this morning with their song: Searching For A Rainbow… Back in the 70’s, I only loved 2 other bands more than the Marshall Tucker Band…

Well, I have a question for everyone today, so bear with me here… But I want to know, does the rule of law really matter any longer? It sure seems to me that it’s a rule by the seat of our pants kind of situation, and that’s all I’m going to say about that!

The currencies flattened out VS the dollar on Friday… The U.S. data didn’t give the dollar bugs any additional fuel to fire their assault on the currencies… So, they traded in a very tight range on Friday. But… last night was a different story!

Throughout last night, in the overnight markets, the currencies led by the Big Dog, euro, got beaten down by large amounts… But why?  The dollar bugs have no reason to party any longer, folks… The data on Friday was interesting, with Personal Income up 0.4% in August, but Personal Spending was down from 0.5% in July to 0.1% in August… Durable Goods Orders were unchanged from July, but Capital Goods (CAPEX) was negative once again -0.2%… I’m telling you this for the umpteenth time folks… Capital spending is the lifeblood of an economy… Why would I say that I hear you asking? Well, if Corporations aren’t spending money on expanding their businesses with furniture, computers, quarters, etc. then they don’t think the economy is going to be strong enough to support their moves in the future…

A couple of years ago, I made a big deal out of how CAPEX was trending downward, which wasn’t a good sign for the economy, and I had a longtime colleague, Jack Stapleton, yell to me across the trade desk, that I need to keep harping on CAPEX because I was absolutely right!

Stocks were down here in the U.S. on Friday, as they see the writing on the wall too… At least I think they do… Remember, most of the buying in the stock market these past few years has been Corporations doing buy backs of their stock… Well, guess what I read last week? The buybacks have slowed to a snail’s pace… Uh-0h!

But I’m not stock jockey, so I’ll move on… Just wanted to point that out… Gold was only able to eke out a 70-cent gain on Friday… and spent the weekend trading below its 50-day moving avg.  And in the early trading this morning it’s not so good, as the shiny metal is down $13 as I write…

So, the week of engineered takedowns were successful for the price manipulators, but… as I always point out, they are doing procrastinators a favor, but bringing the price back to a cheaper level to buy! So? What are you waiting for?

OK… the week ahead ought to be a really doozy… We have the Impeachment proceedings going on… On the Butler Patio, I would tell you what I think of all this… But not here, sorry…. But I can’t see any of this enticing investors to buy dollars, do you? I’m just saying…

On the Trade War front… have you heard the latest idea to hurt China? The Administration is thinking of limiting investments in China… In other words they would really put the vise grips on capital flows into China, and that WOULD be far worse that any tariffs, folks…  This could be a game changer, and I sure hope the boys and girls that make these decisions think this one out all the way through…  I’m just saying… 

Well, last week, European Central Bank President (outgoing!) (ECB) Mario Draghi, gave a farewell speech if you will, as his reign ends at the end of Rocktober… Which starts tomorrow!    And last week I told you prior to his speech, what I thought he might talk about… And lo and behold, that’s what he did…  Check out this quote from his speech…. 

“At the start of my term in 2011, Europe was still dealing with the aftermath of the global financial crisis. Other financial stability risks – notably those associated with the sovereign debt crisis – were also crystallising. The costs to society from the crisis were substantial.1 By 2013, unemployment had risen by 10 million and EU GDP was some 13% below its pre-crisis trend.” – Mario Draghi, 9/26/19

So, he really went through his term and pointed out the highlights and left the problems, like the continuing systemic risk in the markets, negative rates and bond buying on the sidelines, only mentioning them slightly… 

I have to say that I do believe that Claude Trichet was a better steward for the Eurozone economy than was Draghi… And now the new President will be former IMF head, Christine Le Garde…  Given what I know about how the IMF basically kills a country’s economy when they arrive to help, this can’t be a good thing for the Eurozone economy… But then she hasn’t even sat in “the chair” yet… So, I guess I’ll give her a pass for now, but that background of the IMF will forever hang over her like the Sword of Damocles! 

OK… have you been watching the Chinese renminbi lately… About a month ago, when the Trade War negotiations were hot and heavy, the renminbi was allowed to appreciate, and stop the daily beatings it took previously… But since those negotiations stopped being so hot and heavy, the Chinese have gone back to the daily beatings of the renminbi…  

Of course longtime readers here know that I said that this would be the case as the Chinese attempt to offset the Trade War tariffs.  I didn’t say I thought it was the best idea, and it sure does hurt the other currencies in the Asian region… The Singapore dollar, for instance, is so tied to the performance of the renminbi, that a month ago the Sing dollar was on the rally tracks, and now, it’s been derailed once again…  

The Aussie and kiwi dollars get all caught up in what happens in China too, and their currencies are sinking long with renminbi… 

The price of Oil has really slipped in the last 10 days, and this morning it is trading with a $55 handle… That has really knocked the stuffing out of the Petrol Currencies, folks…  Even the Steady Eddie Russian ruble has seen some weakness in the past week…  The Norwegian krone is back above the 9 handle, and that’s not a good thing, either!  

But… as I always say…. When the dollar bugs take a big bite out of the currencies’ values, that this just allows you to buy more of the currency at a cheaper price!  And there are always investors out there, that realize that they need to diversify their investment portfolios, with currencies and metals, and will look back at their entry points and smile like the Cheshire Cat… 

The U.S. Data Cupboard gets busy this week, with the monthly ISM (manufacturing index) for Sept. tomorrow… Recall that in August this data fell below the line in the sand 50…  So, it will be interesting to see if the index number continues to fall, or, if by some “miracle” it rises back above 50…   On Wednesday we’ll see August Factory Orders, and on Thursday the ADP Employment Report, and finishing up the week with the Jobs Jamboree for September on Friday…   

I spent a lot of time last week talking about the perils the Fed was undertaking in injecting funds into the repo market… I had a dear reader ask me how the repo rate could be higher than the Fed Funds rate? Easily… stay with me here… You see a repo is a loan of funds… The lender can charge whatever he feels is the market rate for the funds… When funds are in short supply, the rate will go up, and vice versa when it’s not… With repo rates hitting 10% at one point, the Fed felt they needed to step in, because, well they know best, right? …. And I saw this written this weekend:

The third quarter ends Monday. So, for the past two days, the New York Fed has run $100 billion overnight repo operations — bigger than the $75 billion daily liquidity injections that began early last week — plus separate 14-day operations. Neither of Friday’s actions were fully subscribed and short-term lending rates are well below the peak seen last week, a sign order has been restored for now.

But on Monday, that larger $100 billion size will be repeated and the overnight operation will run from 7:45 a.m. to 8 a.m. New York time, earlier than prior morning actions. Both signal the Fed is girding for rates to spike again.”

I saw that in an article that you can find it on Bloomberg.com with this heading: The Fed Is Girding for Repo Trouble Monday Even as Market Calms 

OK, before we head to the Big Finish today… I saw a cartoon that absolutely made me laugh so strongly that my ribs hurt! Yes, even someone my size can still feel my ribs! OK… The cartoon was of the 3 blind mice… All wearing shades ala Ray Charles, and each one had a shirt with a single letter on it… The First one was “F”, followed by “E” and then “D”… which spells… FED! Inferring that the Fed are the 3 blind mice! Talk about cracking me up! I sent it off to all the people on my old currency and metals desk. But talk about hitting the nail on the head! 

To recap… The currencies traded flat on Friday, but in the overnight markets they have been beaten down and big bite has been taken from their values by the dollar bugs… Gold has followed the currencies this time too, only gaining 70-cent on Friday, but trading down $13 this morning. The price of Oil has continued to slip causing major pains to the Petrol Currencies. And the Chinese are back to giving daily beatings to the renminbi, which isn’t good for the rest of the region’s currencies… UGH! 

For What It’s Worth… Longtime readers know my affection for publishing guru, and writer extraordinaire, Bill Bonner. Well, last week in his daily letter, he wrote about being ill, and thinking about what he should think about if this were his deathbed… I thought, this is very well written, and I want to highlight it here…. So, you can find the article here: https://bonnerandpartners.com/reflecting-on-our-legacy-before-we-die/

Or, here’s your snippet: “Some people believe there are things they should do before they die. Magazines offer lazy copy about how it is essential to visit the Taj Mahal or the Pyramids.

But what kind of life can be given real meaning by the travel industry? Who really cares whether you’ve been to the top of the Eiffel Tower? Nobody. Not even you.

And who wants to travel, anyway? It is tiring. And you end up in the company of other tourists, all hoping to snatch a peek at staged authenticity without ever really finding out what it is all about. (Unless you are traveling off the beaten path like our colleague Tom Dyson, who writes to you below.)

Or how about big public events? Should you go to the Olympics? The Venice Film Festival? The Rolling Stones’ last concert? Why not? But we doubt it is something you’ll recall on your deathbed.”

Chuck Again… Bill talks about his call back in 2000 when he told his readers to buy Gold and sell the Dow… What a call that was, eh? Well, he’s doing it again, in case you’ve missed class the day I talked about the Gold to the Dow ratio…. Guess you had better check out the archives at www.dailypfennig.com, eh?

Currencies today 9/30/19 American Style: A$ .6755, kiwi .6268, C$ .7548, euro 1.0890, sterling 1.2294, Swiss $1.0039, European Style: rand 15.1983, krone 9.0875, SEK 9.8234, forint 307.44, zloty 4.0195, koruna 23.7003, RUB 64.62, yen 108.00, sing 1.3828, HKD 7.8396, INR 70.61, China 7.1217, peso 19.70, BRL 4.1576, Dollar Index 99.28, Oil $55.40, 10-year 1.69%, Silver $17.24, Platinum $913.58, Palladium $1,692.59, and Gold… $1,485.03

That’s it for today…  A long one today, but I had plenty of stuff to talk about given the 3-day weekend, and really nothing else to do, except go to grandson Braden’s soccer game on Saturday… So, I read, and read, and read… which is a dangerous thing for me… and you I guess! HA! So, my beloved Cardinals head to Atlanta to play the 1st game of a best of 5 series with the Braves… What about our young pitcher, Jack Flaherty? Is he not worthy of the Cy Young this year? If not then you had better already scratch his name on the trophy for next year!  I’m just saying!  The band Live takes us to the finish line today with their song: Sellin’ The Drama… And with that I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler

 

Fed Head Brainard Says, “It’s Just A Simple Imbalance”…

September 26, 2019

* The dollar climbs back into the lead chair… 

* Draghi to give farewell speech… One more chance to diss the euro! 

Good Day… And a Tub Thumpin’ Thursday to you! I did a 180 yesterday, and came back around to feeling human again… And just in time for the weekend, YAHOO! My beloved Cardinals are in a bind, with just 3 more games to play, they still haven’t tied up the National League Central Division… After the 19 inning marathon Tuesday night, into Wednesday morning, they didn’t have any pitchers that hadn’t been used the night before… and on top of that, it was a day game, not a night game with a few extra hours of rest! I’m not happy about this trip to Arizona… and I doubt the Cardinals are either! The Four Tops greet me this morning with their song: Reach Out, I’ll Be There…

So… with me feeling more alive yesterday, I got to do more reading… and researching… and looking under hoods, etc. I did see something, and wondered what caused it… I saw a blurb about how the markets are finally looking at the Fed’s injection of cash nearly every day now for a week, and their re-introducing term repos, as it should be looked at…. Like it’s a different form of Quantitative Easing…

So, lets’ see… In Quantitative Easing / QE, the Fed printed new money and bought bonds…. They did this, so they say, so that the banks would have ample liquidity to make loans, etc. and at the same time get rid of their bonds that had bad loans attached to them… Or just plain Treasuries… So, now let’s look at this repo thing… The Fed is printing new money again, and taking bonds for collateral in short term deals…. Not much different than QE, right? The thing that gets my goat is this…

Long ago, when currencies first were floating, it was thought, and rightly so, that when a country’s Central Bank printed new money to add to the existing money supply, they were diluting the existing money supply’s value… And that would hurt the value of the respective country’s currency… Remember a few years ago when the Fed was printing so much money that they sopped reporting was the money supply number was?

Now, why do you think they did that? Was it because they were narrowing the money supply? HA! So, why doesn’t all this money printing and adding to existing money supply not hurt the dollar? It should be but it’s not! Not one iota of dollar weakness has come about because of this explosion of money supply… You see, I don’t care if the Fed doesn’t report Money Supply numbers any longer… All I have to do is look at the daily injections of cash to the repo market, to know just how much the Fed has added in the last week!

Oh, by the way… The Fed has a $400 Billion plan to rescue the repo market… $400 Billion people! That a Billion with a Capital B, as Ronald Reagan used to say! Hey! I don’t make this stuff up folks! Go ahead and Google $400 Billion Fed plan to rescue the repo market and see what you get, if you think I’m making this stuff up!

So, what happens when they’ve spent all $400 Billion and the banks still need cash? Well, in the old days you would say, they’d just turn on the printing presses again… In today’s digital world, it’ll be numbers entered into a computer that says, Bank A, gets $100 Billion, and so on… The money supply will simply go parabolic, if you will!

OK, enough on that… The dollar still holds the conn over the currencies, but not the metals… The Bond boys are still keeping the 10-year’s yield very low… And oh, remember last week when I have you all that I know about the Oil sector? And I told you that the rig counts here in the U.S. had dropped dramatically? According to the Dallas Fed Reserve’s Oil survey… “Activity in the oil and gas sector declined in third quarter 2019, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—fell to -7.4 in the third quarter from -0.6 in the second quarter. Oilfield services firms drove the decline, with their business activity index slumping to -21.8 from 6.6.”

Hey partner! You don’t have to call me Mr. Tex… Just Tex will do just fine! HA And soon the price of Oil is going to be ratcheting higher, as the heating oil season draws nearer and nearer…

OK, I don’t want to stir up my bursitis so I’ll stop slapping myself on the back for seeing that one before everyone else did! See? Like I said, I did a 180 yesterday!

In another engineered take down of Gold yesterday, the price manipulators said, “neener, neener, neener, we don’t care what the Courts do to us we get a get out of jail free card as long as we keep the support for the dollar going” And they took Gold down by $27.90 on the day… Remember a couple of years ago, when I said I don’t care what the price manipulators do any longer, I’m sick of their blatant moves, and I’m just not going to give them the time of day any longer… For maybe if everyone stopped writing about them, they would stop!

Well, I’ve lost my way again, due to new developments with metals traders getting taken to court, and so on… I really don’t want to have to write about the price manipulation going on… trust me on that one!

I had to laugh this morning at two headlines for articles  One dated 9/24 said, “Impeachment talk sends dollar down”… Then on 9/25 the same site, said, “Impeachment causes safe haven flows to dollar”…    OK, which one should investors pay attention to?   Well, the first one is correct, but they should have said, the dollar should go down…   And the second is also correct in that there are safe haven flows, but there’s only one safe haven that’s being bought… It’s dollars…  

Shoot Rudy, not even U.S. Treasuries are being bought as safe havens, as witnessed by the jump in the 10-year’s yield yesterday from 1.65% on Wednesday morning to 1.72% today… Remember, with bonds, as the yield goes higher the price of the bond goes lower… representing selling… 

We have outgoing European Central Bank (ECB) President Mario Draghi on the speaker circuit today… I would bet a dollar to a Krispy Kreme that he gives us a historical look at his leadership of the ECB, and talk about how he guided the PIIGS through their darkets hours, and kept the light on for more growth from the other Eurozone countries not named Germany. I doubt he’ll talk about how every chance he got he threw the euro under a bus… Or anything else that went bad, choosing to point out his successes only… It’ll be a short speech, if that happens… if you get my drift… OK, Mario, one final chance to make amends with the euro? Can you do that?

The U.S. Data Cupboard doesn’t have much for us today, but what it does have will be interesting, in that the final revision of 2nd QTR GDP will print today… Recall that the last revision was downward, as was the revision prior to that… The most recent revision took 2nd QTR GDP down to 2.0%… Recall, that I said that I thought it should be more like 1.5%? Well, I guess we won’t see it down that low for the 2nd QTR, as it looks like this 2% level is about right… The 3rd QTR will be the one that will end up being 1.5% or lower…. That’s my thought on that!

To recap… The dollar is back with the conn over the currencies… And it makes no sense to Chuck, who once again, proves how old he is, with his take on money supply and the dollar… Gold got taken down by $28 on the day, not by any change in attitude about owning Gold, just a regular engineered take down by the price manipulators, who chanted taunts at the regulators and courts!

For What It’s Worth… Well, I’ve spent quite a bit of time this week talking about the Fed and their injecting liquidity (cash) into the repo market, and how what they are doing is very similar to QE…. Well, this article on Zerohedge.com talks about all that and thought it was FWIW worthy this mroning… You can find it here: https://www.zerohedge.com/economics/dollar-liquidity-crisis-accelerates-month-end-nears-record-92-billion-demand

Or, here’s your snippet: “Following the major ‘over-subscription’ for liquidity this morning, NYFed has decided to dramatically increase the scale of its bailout for both overnight and term repo:

The 14-day term repo operation will have an aggregate limit of $60b (prior similar operation Tuesday had a $30b limit).

The overnight repo operation will have an aggregate limit of $100b (most recent such operation Wednesday had a limit of $75b).

This big increase comes just minutes after Fed Governor Lael Brainard tried to clam nerves by claiming that the recent spike in overnight lending rates, which prompted the central bank to inject billions of dollars of liquidity into the market, was the result of a “simple imbalance” of supply and demand — and not a sign of deeper distress in credit markets.

“It may simply be that we’re close to the lowest level of reserves that are necessary for the conduct of monetary policy,” Brainard said Wednesday in testimony before the House Financial Services Subcommittee on Consumer Protection and Financial Institutions.

“It does pose questions about whether reserves in the system do need to be allowed to grow again.” — Lael Brainard.

In 2008, “counter parties pulled away fromeach other,” Brainard added. “Today we’re in a different environment.”   

As we noted previously, some banks appear to have been simply waiting to get closer to the quarter end before tipping their cards: after all, just like the Discount Window, the repo operation has become the modern “stigmatizing” equivalent, and if reporters or clients get a whiff that a bank is in a dire liquidity state, the consequences could be dramatic.

Never mind though, it’s probably all transitory.”

Chuck Again…  I loved that last line…  Yeah, according to Brainard we should just forget about it and move long for these are not the droids we’re looking for…   And her making that statement just makes me worry about this liquidity crunch even more! 

Currencies today 9/26/19 American Style: A$ .6762, kiwi .6308 , C$.7543, euro 1.0930, sterling 1.2338, Swiss $1.0058, European Style: rand 14.9791, krone 9.0763, SEK 9.7538, forint 305.95, zloty 4.0130, koruna 23.6487, RUB 64.12, yen 107.67, sing 1.3812, HKD 7.8382, INR 70.71, China 7.1233, peso 19.55, BRL 4.1638, Dollar Index 99.08, Oil $56.41, 10-year 1.72%, Silver $17.91, Platinum $931.01, Palladium $1,658.26, and Gold… $1,507.26

That’s it for today…  and tomorrow…  The Cardinals are in a very tight race, so tight, Tupperware would be proud!  Only 3 games to go… Can they hold on?  The next time we talk on Monday we should know!  Ok, I saw my regular doctor yesterday, and he told me that I must have done something right in my life because I have lived for 12 years with Stage 4 cancer… I told him that he wouldn’t believe the number of people throughout the world that pray for me…  and  then  I cracked him up when I said, “I call it better living through chemistry”…  I’ll be seeing a wound specialist in two weeks, for my leg… Finally!  Billy Paul takes us to the finish line today with his great song: Me & Mrs. Jones…  I hope you have a Tub Thumpin’ Thursday today and Fantastico Friday tomorrow, and please Be Good To YOURSELF! 

Chuck Butler