If Negative Rates Were The End All, Then Why Isn’t Japan On Top Of The World?

November 14, 2019

* Currencies slide further, Gold nets out a $7 gain

* Eddie George talks Gold price manipulation… Seriously! 

Good Day… And a Tub Thumpin’ Thursday to you! I’m still feeling the queasy stomach but I’m better… I’ve just been so darn cold… I put layers on, including a sweatshirt/ hoodie, throw a blanket over me while I watch TV, and my hands are still like ice, and I’ve got the chills all the time… If I don’t get out of this Cold area soon, I’m going to turn to a pop-cycle! Man, have I got a doozy of a piece of a quote on Gold manipulation from the Gov. of the Bank of England today… All the naysayers will be needed to find to get some salt on the crow they’re going to have eat! The Moody Blues greet me this morning with their song: The Voice…

Well, I contemplated opening with the major story I have for you today regarding Gold manipulation, but then thought, it would be better to have you wanting to get to it… I learned something back when I was in the show business if you will, playing on stages with the band, “Leave them wanting”… So… with no further adieu, here we go….

The currencies and metals barely moved on Wednesday, as the markets focused on the Impeachment proceedings, and looking for any word on the Trade Negotiations… The dollar bugs still have the conn, and Gold couldn’t hold to its early gains over $9 but still closed better on Wednesday at $1,463 than on Tuesday at $1,455. When you add in the pennies that was a net $7 gain on the day… But like I said, since the bulk of Gold’s gain on teh day was in the early trading, it didn’t move much while we were all awake!  I get emails from readers that remind me to put the closing price of Gold in when I’m talking about the shiny metal… And I’m happy to do it… but I do print the current price of Gold in the currency roundup each day… I’m just saying…

Yesterday in the Eurozone, they printed their September Industrial Production and while it was negative it was far better than anticipated and the print from August… September’s IP was -1.7%, VS -2.8% in August… Things must really be slowing down here, as even Germany can’t pull the rest of the laggards out of the red like they used to each month… If I’ve said this one I’ve said it 100 times in the past, and that is that it would nice if we could just buy Germany right? And not have the German numbers pulled down by the likes of Italy, Spain, Greece and so on…

But we can’t, so you have to take the bad with the good, with the euro… And right now the European Central Bank (ECB) is under the belief that negative rates will spur spending and economic growth… I ask, when will they ever learn, when will they ever learn?

Today in Canada, we’ll see the latest Jobs report… Last month’s surprise to the upside was well taken by the currency guys, and they rewarded the loonie… The forecast for today’s print is for an even strong number than last month’s print… And if that happens, that certainly would be a feather in the cap of the loonie, eh?

And Russia printed their 3rd QTR GDP which was double the 2nd QTR print at 1.7%…  The Central Bank of Russia (CBR) has a target for GDP for the year at 1.9%, but unless the 4th QTR GDP going gangbusters they won’t make it, as that 2nd QTR poor performance did them in…  You must remember here that Russia has a boatload of economic sanctions placed on them by the U.S. and Eurozone, so look at the 1.7% GDP as really like 2.5 or 3%…  

OK, before I get into this comment by Eddie George, former Gov. of the Bank of England, I’ve got another special treat for you today… When you have time, and can carve out 30 minutes to watch and listen to a presentation, I have Grant Williams speaking on Gold in Switzerland, and you can get to that by clicking here: https://www.gowebcasting.com/events/precious-metals-summit-conferences-l…

Alright… hold tight… fasten your seatbelt and keep all arms and legs inside the vehicle while reading this next piece…. May the force be with you!
Regarding Gold and price manipulators… My good friend, the Retirementor, Dennis Miller, is back to writing and today, he sent out his letter, that includes an interview with yours truly! Check it out at www.milleronthemoney.com Dennis also sent me a quote that appeared on the Burning Platform site… read this first and then we’ll discuss, ok?

“We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.”
Eddie George, Governor Bank of England, in a conversation with the CEO of Lonmin, September 1999

OK, now I want to have a discussion with all those naysayers through the years that said the U.S. Gov’t had nothing to do with Gold price manipulation…. Are they going to say that Eddie George, BOE Gov. was lying back in 1999? This is like the icing on the proverbial cake to me folks… All those years researching and following the Gold movements, and what have you, finding the wiki link with the conversation between Greenspan and a noted Senator about keeping the price of Gold down so that investors don’t shun the dollar and other things, and now this… I feel like I should be rubbing noses in this… But I won’t… I carry on despite their shortcomings in seeing the writing on the wall…

Back to our regularly scheduled programming… The Good folks at GATA sent me this note yesterday regarding China and I thought that since I’ve been telling you this was going on in China now for years, that it would be good to see the China newspaper reporting it….

“Beijing sends corporate China a €4 billion message: diversify away from US dollar debt

• China has capitalized on a low-yield environment in Europe to issue euro-denominated government bonds cheaply. It is also setting an example to Chinese companies, in the hope of weaning them off dollar-denominated debt dependency.”

That’s something that’s been going on since 2007, whcn China first started signing up countries to their currency swap agreements. I’m not applauding this, I’m simply saying that when you as a country (U.S.) go about building debt like they have with no regard for the dollar’s value, why then should other countries hold dollars with losing values? 

Speaking of Debt…The U.S. Budget office printed the Rocktober Budget last night… The Budget Deficit for the first month of the U.S.’s fiscal year was a deficit of $134 Billion!!!!!   Annualized that would be an annual deficit of $1.6 Trillion!!!!  That would see us going past $24 Trillion in July…  Got Gold? 

The U.S. Data Cupboard yesterday had the stupid CPI, and the Rocktober print saw an increase in consumer inflation by 0.4%, VS September’s 0.0%… I guess, as long as you hang your hat on the CPI being the correct figure, then you would question the Fed’s rate cuts, right? I’m just saying…

The U.S. Data Cupboard still doesn’t really have anything for us to take a bite out of, but that will change tomorrow when Retail sales, Industrial Production and Capacity Utilization prints… But that’s tomorrow, and today all that’s there for us is PPI (wholesale inflation) and a roster full of Fed heads on the speaker’s circuit.

Before I head to the Big Finish today I wanted to share with you a quote from one of my fave economists, Dave Rosenberg, who like me is scratching his head over what the Fed is telling us these days… This is from Dave’s Twitter feed: “Chicago PMI comes in at 43.2 and the business sector is in recession but the Fed keeps talking about the economy and the state of monetary policy as being in “a good place”. Surely this is some sort of dark comedy routine.”

Chuck again… And the dollar bugs keep swallowing that bait, hook, line and sinker, folks…

To recap… not much movement in the currencies and metals yesterday… The dollar  continued to slip but not by much, and Gold was up a net $7 on the day… German Industrial production printed negative, but beat last month’s -2.8%, so that something, eh? China tells Corporations to ditch the dollar… Chuck knew this day was coming… And David Rosenberg treats us today …

For What It’s Worth… OK, lots of stuff to go through these days, but this is something I’ve talked about for some time now, and that is how the President keeps dissing the Fed and demanding lower rates… And it can be found here: https://www.cnbc.com/2019/11/12/trump-rails-on-fed-says-market-and-economy-would-be-doing-even-better-without-powell-mistakes.html

Or, here’s your snippet: “Instead of highlighting warmer relations with Beijing, Trump criticized the Fed for what he sees as its hesitation to lower interest rates and blamed the central bank for capping gains in the U.S. economy and stock market.

The president noted that since his election, the S&P 500 is up more than 45%, the Dow Jones Industrial Average is up over 50% and the Nasdaq Composite is up 60%. But those numbers could be way higher, Trump said, if it weren’t for the reluctance of the Fed.

“And if we had a Federal Reserve that worked with us, you could have added another 25% to each of those numbers, I guarantee you that,” Trump said.

“But we all make mistakes, don’t we?” the president added. “Not too often. We do make them on occasion.”

It wasn’t immediately clear which “mistake” Trump was referencing: His choice to nominate Fed Chair Jerome Powell to lead the central bank or Powell’s preferred course of monetary policy.”

Chuck Again… You know… Like I told Dennis Miller for his article that printed yesterday… if negative interest rates worked so well, then why isn’t Japan leading the world? They’ve had negative rates longer than any of the other countries, but still their economy is a basketcase… I’m just saying!

That’s it for today… and tomorrow… I go to the wound center again tomorrow morning bright and early… I’m thinking that when they cut the una-boot off me that I’ll see major improvement in my open wound… fingers crossed! In looking for something to watch last night, I came across our St. Louis University Billikens basketball game, so I settled in to watch them win by 22… Good game… Next Saturday, I’ll be in attendance for the St. Louis Gateway’s production of Madeline… My darling granddaughter, Delaney has a part in the production, and is the “stand in” for the lead of Madeline… So, that’s next week… On Saturday, my beloved, and dragging Missouri Tigers will face Florida, a highly ranked team comes to Columbia, MO. Should be a good game! Time to hit send… The Counting Crows take us to the finish line today with their song: Round Here… I saw the Counting Crows back in the 90’s… as they came through St. Louis on tour… I hope you have a Tub Thumpin’ Thursday and Fantastico Friday tomorrow, and will Be Good To Yourself!

Chuck Butler

 

 

 

Too Many Uncertainties These Days…

November 13, 2019

* Currencies continue to get sold… 

* RBNZ leaves rates unchanged… 

Good Day… And a Wonderful Wednesday to you! Brrr, it’s cold here… too cold for this time of year, that’s for sure! Where’s Al Gore? I would like to point out to him that these temperatures at this time of the year are very rare! I was finally able to eat something other than saltines yesterday, so I would think I’m over my stomach bug… That was no fun! But I’m glad it’s over! Our Blues finally lost a game  last night, this time on home ice… They did get a point for a tie, but lost the second point when they lost the shootout…  (You know I dislike this way of deciding a game vehemently!)  And somehow my beloved Cardinals are able to stay in the news, as they signed longtime pitcher, Adam Wainwright, to another 1 year contract yesterday… Baseball news, keeps me warm! HA! Billy Squier greets me this morning with his song: In The Dark…

I think that’s what the dollar bugs are doing right now… They’re trading In The Dark… While the selling wasn’t as harsh as on Friday last week, the dollar bugs did keep the conn and have the currencies crying “uncle” right now… I read a report on Bloomberg yesterday, and the writer must be a Pfennig Reader, for he went through the exercise of saying how the strong dollar trend was nearing an end, and that investors should look to the euro for a currency that will gain VS the dollar when the strong dollar trend ends… He then went on to explain that the euro is the offset currency to the dollar… Wow! I’ve been saying that for sometime now, and Bloomberg didn’t print my article! I’m hurt! Hey! Those mean people at Bloomberg.com hurt my feelings… Isn’t there some law now that I get to sue them for that? HAHAHAHAHAHAHAHA!

I have a high tolerance of pain, so I doubt anything like that would hurt my feelings, and beside if it did, that would be MY problem for being such a sap! I came up with that all by myself, and didn’t need a “safe room” to come up with it! I’m just saying….

Remember yesterday, when I told you that someone (we won’t know who for a while) showed up and sold 3 million ounces of Gold on Monday? I got to thinking about this more and more yesterday… You know in the past if someone was going to sell 3 million ounces of Gold they would do it in several different trades throughout the day, so that the markets don’t get wind of it, and to keep the price from dropping dramatically while the sell is being made….. The only reason to throw all 3 million ounces of Gold for sale at once is the manipulate the price lower… They wanted the markets to get wind of it, they wanted the price to drop dramatically… And still the CFTC doesn’t do anything about… Congress doesn’t do anything about it… The Fed doesn’t do anything about it…

OK… on to other things here before I get all riled up! What? Wait! I already was riled up! OK, then, before I go bananas! Better…. Don’t want people to get the wrong impression of my moods when writing stuff! I watched a video on YOUTUBE yesterday from Mike Maloney… Mike is a good guy, that normally talks Gold & Silver, but looks at what the Fed is doing too… And in his video yesterday, he talks about The Fed getting recession indicators… And it just so happens that 3 months before the recession in 2001, the Fed began cutting rates…. And it just so happens that 4 months before the recession in 2008 the Fed Began cutting rates… And… Didn’t the Fed begin cutting rates two months ago now? I’m just saying…

Last night, for us, today for New Zealand, The Reserve Bank of New Zealand (RBNZ) met today to discuss rates… The RBNZ left rates unchanged, which was no surprise to me, although, these days you never know what those Central Bankers are going to do, right?  In The Eurozone, today, we will see the color of September Industrial Production, which I can’t imagine won’t be negative, and in the U.K. where BREXIT seems to be tearing the country apart, they’ll see the color of Retail prices, which is a way of seeing inflation.

So, there are things going on outside of the U.S. today folks, and with the U.S. Data Cupboard only having the stupid CPI for us today, then the focus today will be…. No wait, I know better than to say the focus will be on the outside of the U.S. today, not with the Trade War negotiations going on still… Yesterday, the President was scheduled to talk at the economics club of New York, and most observers thought he would use this scenario to announce a Trade Agreement… But that didn’t happen, and now the markets are beginning to get that olde tyme feeling, once again that an agreement is not going to come of these negotiations, and all those that took their safe havens and sold them, thinking the deal was done, will be going back to them soon… Or, at least, that’s how I see it going…

And why wouldn’t they? There’s just too much uncertainty in the markets today folks… And haven’t I always told you that traders don’t like “unknowns”? So, far the dollar has withstood all this uncertainty, but one has to wonder for how much longer it can do that? I mean we have the aforementioned Trade Talks still going on… We have an impeachment process starting today… We have seen an inverted Treasury bond yield curve… We have the repo market in a huge mess, that has caused the Fed to reintroduce QE… We have a Fed Reserve that has cut rates at 3 consecutive meetings, and should I go on?

Well, yes, Chuck, if it pleases you… OK, then… We have exploding debt that no one other than Chuck cares about… We have a Trade War going on with our biggest Trade Partner (China), and outside of the U.S. we have BREXIT tearing the U.K. apart at the seams…

Is that enough uncertainty for you? Then throw in that the stock market is at all-time highs, but the stocks don’t have the earnings that would warrant the high stock price… And a dollar that’s been in a strong trend for 8 years, and you’ve got a recipe for chaos in the markets… And after all that I’ve said, here I ask this one question…. Got Gold?

 Talk about a BIG Unknown…. A few months ago, I wrote about the protests in Hong Kong, and wondered then just how badly they would affect the Hong Kong economy… The protests continue, and have turned quite ugly with violence, tear gas, all kinds of bad things, and all the while the economy continues to suffer… This is going to play hell with the peg that exists between the honker and the U.S. dollar… As capital flees the country, not wanting to be in a country that is at war basically with itself, the pressure on the Hong Kong Gov’t to come up with something to help the economy from sinking further. Just last week it was announced that the Hong Kong economy had slipped into recession. Chuck? You don’t think that China would opt to drop the peg in the honker do you?

No…. But in today’s environment, anything is possible folks… If capital flows continue to leave Hong Kong then anything’s possible, including a drop of the peg! Longtime readers might recall me saying this years ago… I thought then that once China took over Hong Kong from the Brits, that they would eventually drop the peg of the honker with the dollar, and then use their experience in how to manage a dirty float of a currency, to ready themselves for when they go to a non-managed currency, (the renminbi) in a dirty float… Remember me saying that then? Sometimes, not often, but sometimes, I have a mind like a steel trap! And other times its like oatmeal! Anyway… I think that even though these protests are happening around the world, that they are important to keep abreast of…

Gold hemmed and hawed yesterday and ended up gaining 30-cents on the day… That’s it, a lousy 30-cents!  Of course it’s all relative, for when I was a kid if I had 30-cents in my pocket I was able to buy a moonpie and a R.C. cola, and  have a dime left over for my piggy bank… I was on top of the world!  Geez, am I becoming an old man who only reminisces about the “good old days”?  Oh well, so what if I have? It’s far better to be an old man with good memories, than the alternative! 

OK, getting back to Gold, sorry about that tangent I just went on…  Gold is up over $9 in the early trading today to trade $1.465…   And I just noticed that the yield on the 10-year Treasury dropped from 1.95% to 1.87% in one day, which would tell me that what I just talked about above where investors that sold their safe havens are piling back into them is happening as I write! 

The U.S. Data Cupboard is still searching for real economic data to print, and they won’t find it today, as the only thing printing today is the stupid CPI (consumer inflation ).  Real economic data won’t print here until Friday… So, the focus, as I said above remains with the Trade negotiations, will they or won’t they come to an agreement? Only the Shadow Knows…. 

For What It’s Worth… Yesterday, I had a long FWIW article from Grant Williams, and today I have a quote from the same Grant Williams in this article about Gold that can be found here: https://www.sharpspixley.com/articles/lawrie-williams-central-banks-only-hold-gold-for-traditional-reasons-bs_297472.html

Or, here’s your snippet: “I append the following quote, which was accompanied by a chart, in the Charts that make you go hmm.. section from Grant Williams’ excellent latest ‘Things that make you go hmm…’ newsletter as it truly emphasizes a point I’ve been trying to make here several times over the past few months.

Grant’s observation was as follows: “Central Banks only hold gold because of tradition (if you believe their nonsense), so it probably comes as some surprise to many that, between them, they have bought more of this ‘traditional’ asset in the first half of 2019 than they have done in any other 1H on record. It’s enough to make the skeptics of the world think they might be concerned about something but… well that would be directly opposed to their assurances that everything is under control so… it’s probably nothing. Just tradition…” Do I detect a sharp degree of sarcasm here? Well one would be foolish not to!

It is apparent that the Powers That Be, not only speak with forked tongues, but are beginning to build their gold reserves in prospect of improving their positions ahead of any forthcoming global financial reset which seems to be approaching rapidly. For most of these central banks it is a case of ‘too little too late’ though.

It also makes the then U.K. Chancellor, Gordon Brown’s decision to sell off half the U.K.’s gold holdings at the bottom of the market some 20 years ago – a timing now irreverently known as ‘Brown’s bottom – a particularly abject move’. This was, in hindsight, a remarkable misjudgement by a U.K. political leader, and subsequent Prime Minister, who professed economic prudence and was the self-proclaimed ‘saviour of the world’s economy’ over his role in the implementation of quantitative easing post the 2008 great financial crisis. The U.K. now languishes as the world’s 18th largest national holder of gold as reported to the IMF with a holding hugely below many countries with considerably smaller GDPs. If the U.K. had held on to its gold it would currently be in around 9th place in this gold hierarchy, although still hugely behind some of its more prudent European neighbours like Germany, Italy and France, three of the E.U.’s economic powerhouses.”

Chuck Again…  Makes sense to me, right? You have Central Banks (other than China & Russia’s that have been buying Gold for years) stepping into the Gold buying arena, doesn’t that send us an omen of things that yet to come? I’m just saying… 

Currencies today 11/13/19 American Style: $.6830, kiwi .6396, C$ .7541, euro 1.1009, sterling 1.2837, Swiss $1.1009, European Style: rand 14.9394, krone 9.2141, SEK 9.7539, forint 304.05, zloty 3.8911,   koruna 23.2250, RUB 64.01, yen 108.89, sing 1.3626, HKD 7.8316, INR 71.89, China 7.0046, peso 19.38, BRL 4.1592, Dollar Index 98.38, Oil $56.48, 10-year 1.87%, Silver $16.97, Platinum $874.90, Palladium $1,720.18, and Gold… $1,465.51

That’s it for today…  While the cold temps outside try to sneak inside, I continue to think about the warm weather in S. Florida…  UGH!  So, how does a hockey team win 4 games in a row on the road trip, and then come home to lose on home ice?  They say, “it’s why you play the game” and I guess they would be correct!  I’m going to really test my stomach as soon as I hit send this morning, and drink some coffee! I really do enjoy a cup of hot coffee, especially when it’s cold outside! Remind me sometime to tell you about my former colleague of years ago, Art, who used to out due me with how strong the coffee was each day…  I wonder where Art is these days?  I guess I’ll check LinkedIn…  The Walker Brothers take us to the finish line today with their song: The Ain’t Gonna Shine…   the moon isn’t gonna rise in the sky, the tears are always found in your eyes…   great stuff! I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

 

 

Dollar Bugs Pick Up Where They Left Off Last Week…

November 12, 2019

* Currencies and metals see early morning selling… 

* A special Treat as Chuck has Grant Williams in the FWIW section! 

Good Day… And a Tom Terrific Tuesday to you! Well, what do you know? The weathercast was correct yesterday, we did just get about 1 inch of snow! You would have thought we got 2 feet by the scores of closings on the TV… Wimps! Well, did you like my Veteran’s Day edition yesterday? It was strange writing on that day, but I guess I had better get used to it, now that I no longer work at a bank! I’ve had a stomach bug since Friday night. Now, this is the way to lose weight folks! Just don’t eat anything for 3 days, other than some saltines… And sleep is difficult to get these days, with all the stuff I’m throwing at my system each day! UGH! Oh well, they tell me I’ll be good to go, soon… Well, as always I tell them, I’m from Missouri, I’m going to have to be shown! The Byrds greet me this morning with their classic rock song: Eight Mile High…

Well, with most of the U.S. on holiday yesterday, the currencies didn’t do much after the London pubs began to fill up. But Gold, which was up more than $5 in the early trading yesterday morning, ended the day down $2… That’s a $7 swing folks, and one that just doesn’t make sense to me… I know, I know, everyone is talking about a Trade Deal being worked out between the U.S. and China… But I’m not so sure that’s going to reach a satisfactory conclusion, folks… so, why sell all your save haven assets, like Gold and Treasuries on a rumor that a Trade Deal will be worked out? This potentially will be a classic case of sell the rumor buy the fact. Or at least that’s what I’m hoping it turns out to be!

Already this morning the dollar bugs are back to buying dollars and selling currencies… And the currencies have slipped further in the European markets.  

Well, Gold got whacked yesterday, after it was learned that 3 million ounces of Gold were sold in one fell swoop… On Monday morning, we saw a large dip based on the equivalent of 3 million ounces of gold trading hands in a very short time. More than 33,500 gold contracts traded hands, three times larger than the average during the ups and downs seen in the past three months when gold was already volatile. We don’t know who it was that offered up those contracts, but I have to believe that JPMorgan was near the scene of the crime… I’m just saying…

So, Gold lost $2 on the day, and at one point was down even more… I’m not too concerned about this, unless this trade begets more large holders to sell too… Oh, that’s right, Chuck! You told us yesterday that JPMorgan had told their clients to sell their Gold! How could I have forgotten so soon? Well, like I said, I’m not concerned, as this could all be part of the correction for Gold to go back and fill in the gaps… Remember in August, Gold was $1,325, and then by the end of September it was $1,550… There have to be gaps there on the way up that need to bill filled before Gold can move on… So, I’m OK, with the price movement, I just wish it hadn’t come by virtue of a large one-off trade…

The price of Oil too, has slipped since last Friday, as Iran Claims to Discover 53 Billion Barrels in New Oil Reserves… Now that’s another of those, I won’t believe it until I see it things… But they say they did, so the price of Oil slips…

Debt here in the U.S. is bad… But realistically, debt all over the world is bad too… This past weekend the new IMF chief, talked about Global Debt… Let’s listen in to what she had to say… “IMF’s new chief, Kristalina Georgieva, warned over the weekend that “Global debt—both public and private—has reached an all-time high of $188 trillion. This amounts to about 230 percent of world output.”

Aye, Aye, Aye…. 230% of the worlds output? The IMF chief went on to say, “Leverage in the system has increased some 50%-60% since the financial crisis a decade ago, with debt now worth some 230% of economic output globally” This immense pile of debt – particularly the debt held by governments known as sovereign debt – poses a terrible risk to the world”

This is not going to end without a lot of tears, folks… And we, in the U.S., should not in any form or manner believe that we are better than the rest of Globe when it comes to our Financial Balance sheet… We get thrown right in the mix with the Greece’s, and others that we’ve talked about through the years… In fact… I would bet a dollar to a Krispy Kreme that when you consider all the derivatives that exist here in the U.S., our balance sheet is probably more at risk than others!

Since we’re talking about Gov’t or sovereign debt, let’s touch on U.S. Treasury issuance, which is off the charts these days, because of the Huge gap between Gov’t expenditures and tax receipts…  OK, this is where I really go down a rabbit hole folks… So, stick with me if you will or skip ahead, come on, you have to make a choice here… Should I stay or should I go now, If I stay there will be trouble… If I leave it will be double! 

So, think about this for a minute… What happens to tax receipts of a country when they go through a recession that lasts longer than the average bear recession? If you said they go to hell in a handbasket, then you would be correct!  And if the debt in the U.S. is jumping higher by the minute now, what’s it going to do when the recession/ depression hits?  You’ve got it!  the debt explodes higher and higher, doing a Sly Stone at Woodstock, and taking debt higher…. 

What’s it going to take to get some debt relief? Well, we could have a Debt Jubilee… Where all debt is forgiven, and you start over again… Oh, my, what an awful thing to think about doing, Chuck? Are you nuts? NO… I’m not, I was just throwing it out there… Because, besides printing enough money to pay down your debts, and debasing your currency and probably causing runaway inflation, I can’t think of any others… Tax receipts would help… But when I country is in recession/ depression, those tax receipts are going to be akin to removing a bucket of sand from a beach… They won’t be noticed! 

I think we as a country are beyond Austerity Measures…  There’s no one in Congress that has the intestinal fortitude to even offer up Austerity Measures, they don’t have the stomach for what that would bring their reelection hopes!  So, we just keep going down this debt hole, and never attempting to dig our way out of it…  Memo to Congress, Fed, and Treasury: You can keep digging but you’ll never reach China!  HA!  

The U.S. Data Cupboard is still pretty much emptied out for today, and won’t get restocked until tomorrow, when the stupid CPI will print…  I have a question for the propeller heads that print the CPI…  How do you come up with just 2% inflation when here in the U.S. we are experiencing soaring inflation in medicine, insurance, food,  tuitions, and other things? 

I pointed out to my wife a couple of weeks ago, the rise of inflation in food, as we discussed our purchases of a 50 wings and a pitcher of beer from our favorite watering hole…  That used to cost us $20…  It now costs us more than $35!  But don’t worry about that folks, the Gov’t keeps telling us there’s no inflation! 

Before we head to the Big Finish today, I wanted to mention this information that came to me in my local St. Louis Post Dispatch… I’m sure they got the gist of the article from some other news source, but I saw it here: www.stltoday.com And this was the headline of the story… “Google, St. Louis-based Ascension teamed up in secret project to gather health data of millions of Americans”… it goes on to say, “Wall Street Journal says the data involved in ‘Project Nightingale’ includes lab results, doctor diagnoses and hospitalization records, among other categories.”

Remember last week I talked about Corporate scandals and how rampart they were back in the early 2000’s? This is the second one in today’s world that I’ve come across now… My spider sense is tingling on this one folks, and it’s telling me that we’re going to see a score more of Corporate scandals… I’m just saying! 

To Recap…  The currencies and metals had little to no movement in yesterday’s holiday shortened trading day, but this morning the dollar bugs have picked up where the left off on Friday, buying dollars and selling the currencies…  Gold saw a drop after an early gain was wiped out, a large trade equaling 3 million ounces of Gold showed up ready to sell…  Chuck goes deep into the debt discussion, and are Corporate Scandals just beginning? 

For What It’s Worth… Longtime readers know that I’ve followed the writings of Grant Williams and his TTMYGH letter for years… This past weekend he was quoted on zerohedge.com which then makes it public material and something I can use here! So, this is Grant Williams and his take on current conditions and where we’re headed, and it can be found here: https://www.zerohedge.com/markets/grant-williams-reset-system-inevitable

Or, here’s your very long snippet: “When the 2008 crisis hit, we were “at the brink”. Guys like Jamie Dimon will tell you that we were *this* close to the banking system not functioning, people being unable to get cash out of the ATMs.

If you live in Cyprus, if you live in Greece, you’ve seen this movie play out in real-time over the last few years. You’ve had your savings confiscated by the government or a bail-in.

It may not happen here in the US until the very end, but to say “it couldn’t happen here” is clearly wrong. There’s nothing that says the United States is exempt from the laws of finance and thousands of years of historical precedent. Even though it happens to be in the ascendancy globally at the moment, those things change.

Ask Portugal who used to be the holders of the world’s reserve currency centuries ago. Today they’re just one part of the euro. These things ebb and flow. They rise and fall.

A true systemic crisis is what we saw in 1929 -1933. It is to a large extent what we saw in 1971 when Nixon closed the gold window although didn’t have the same outcome and it didn’t look the same. But we had the punishing massive period of inflation afterwards, so it was a systemic crisis.

2008 was a systemic crisis, too. In 1929 and 1971, the answer was dealt with through the gold standard and through the pressure valve of the gold price. In 2008 they tried a different route. They tried printing money and throwing as much fake money at the whole thing as they possibly could. The worst thing that I think happened, was it did stop it. It was enough to arrest the slide. Did it fix it? No. And that’s the problem. Nixon’s move in ‘71 fixed the system for a while. It was a massive one-off reset that allowed the world to rebuild from a much more solid base.

The same thing in 1929. We went through tremendous unemployment and all the problems that came with The Great Depression, but that gave markets a clearing price. It allowed society to reset.

That’s what we didn’t get in 2008. We had an investment bank go down. We had a lot of people lose their homes. But in many cases, they were homes that they simply couldn’t afford anyway. So being told that you’ve lost your third condo that you’ve bought with leverage, that’s not a great depression-type event. That’s the financial gods coming back and saying, “this is not how it’s supposed to work”. If you’re a dancer in Florida and you own 13 condos all with leverage, don’t start crying when it doesn’t work out.

So what’s likely to happen is another reset of the system. They’re fighting tooth and nail against it and that’s their job. Frankly, if you say to them, what are you trying to do? They’re trying to avoid these outcomes, which is fine.

But these outcomes unfortunately are only truly avoided by not letting them build up in the first place. That’s the problem. Because man has unquenchable thirst for leverage, once the system resets and leverage is cheap again and we’re no longer overindebted, we will do the same thing again. Because that’s how society has become conditioned to grow, through the use of credit. Credit is a fantastic thing in the right circumstances; but it always ends up to be the thing that brings these cycles to an end. And we’re there again unfortunately.”

Chuck again… In sum it up… “the distortion of today’s excessive asset prices will require a systemic reset to fix. Either by a deflationary event that destroys the malinvestment, or by an inflationary event that destroys the currency.” – Grant Williams

Currencies today 11/12/19 American Style: A$.6842, kiwi .6337, C$ .7550, euro 1.1018, sterling 1.2833, Swiss 1.0042, European Style: rand 14.8279, krone 9.1580, SEK 9.7168, forint 303.36, zloty 3.8795,  koruna 23.1483, RUB 63.98, yen 109.21, sing 1.3613, HKD 7.8259, INR 71.46, China 7.0070, peso 19.11, BRL 4.1592, Dollar Index 98.36, Oil $57.09, 10-year 1.95%, Silver $16.79, Platinum $877.55, Palladium $1,706.78, and Gold… $1,453.31

That’s it for today… The FWIW article was a long one, yes, but it was something I rarely get to share with you, so it was worth the risk!  Our Blues get back on the ice tonight VS Phoenix, but at home this time, with a start time that will allow me to watch most of the game. With two major players out for an extended amount of time, will the Blues make a move to make up the scoring loss?  Things that I think about!   Hey! they’ve won 7 in a row! Let’s go Blues!  OK… time to go… Poco takes us the finish line today with their song: Good Feeling To Know….   I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler

 

 

 

 

Gold, Currencies, Treasuries Are All Getting Sold!

November 11, 2019

* Dollar bugs keep the pressure on the currencies

* Chuck celebrates Veterans Day! 

Good day… And a Marvelous Monday to you! A Veteran’s Day Monday to boot! The wound center doctor, last Friday, told me the wound was healing… I begged to differ with him and then he showed me the two pictures of the wound from 4 weeks ago to then… They also found an infection from the culture they took, and now I’m on an antibiotic to kill it… Fingers crossed! Well, our Blues sure are on a hot streak having won 7 games in a row! The just came home from a trip to the Canadian Northwest, and while suffering some major personnel losses, the wins kept piling up… OK, it’s Veteran’s Day, and when I was working in the bank, this was a holiday… So consider this a bonus Pfennig! HA! The Beau Brummels greet me this morning with their song: Just A Little…

Since this is Veteran’s Day, I have a Veteran’s Day Poem for you, and I’ll touch on a couple of things on my mind this morning, a FWIW section article, and tie it all up in a cute little bow…  But not so much on the markets… There are priorities…. So, let’s get to it!

The currencies continue to give up ground to the dollar bugs… Even with the rotten to the core economic data that’s been printing… There’s something else going on here folks, the masses should be sprinting to Gold, and instead they’re sprinting to stocks…  the currencies and Gold aren’t the only assets under fire right now, as Treasuries are getting sold too… The yield on the 10-year Treasury has risen to 1.94%…  Just so you don’t think I’m the only one crying wolf on our economy…. Publishing guru, and writer extraordinaire, Bill Bonner, had this to say the other day in his daily letter… “My doom meter is flashing 9… The last time it was here was 2008”…. Uh-oh spaghetti-o’s….

OK, longtime readers, remember when I used to talk about the jobs numbers and would say that (back then) that it didn’t matter what the numbers were, because we didn’t know what the makeup of the jobs created were, that if 100,000 jobs were created but all of them were minimum wage jobs, what good was that going to be for the economy? As time has gone by the BLS now breaks down the category of jobs, but…. And this is a BIG BUT… They still don’t tell us what kind of wages these jobs in the categories are being paid… And now, Bloomberg reports that “there’s a low wage crisis in the U.S.”… Yes, with the jobless rate at or near an all-time low, 44% of those age 18 to 64 are low-wage workers, according to a new report. That’s 53 million people who aren’t reaping the benefits of a supposedly booming economy.”

So, now you see that the jobs numbers are basically worthless, unless they tell us the wage make ups… And… for the last 10 years, we’ve worked hard at widening the job creation at services companies, but not in the manufacturing sector, and look what all those night hotel keeper jobs have done… The Economy has been running around 2.1% for the last decade, Consumer Debt is at an all-time high, and there are still millions of people out there that can’t find a job that pays them what they need to be paid to put a roof over the heads of their children, and food on the table, and clothes on their backs, much less pay for their insurance, medicines, etc.

The U.S. Data Cupboard is closed today, and will not have anything meaningful to show us until Friday this week. Tomorrow we’ll see the stupid CPI (consumer inflation) of which I just don’t care about any longer, given my views on how the index is derived, and how inflation is really personal in this day and age. On Friday we’ll get bombarded with meaningful data, as Rocktober prints of Retail Sales, Industrial Production and Capacity Utilization all print… More on those as we go through the week.

OK, here’s the Poem… I pulled this off www.aveteransday.com

Honor Our Veterans
we all love our freedom
yet we despise
the wars that have been fought
we say we love our Veterans,
but do we truly honor them?
is the concept of freedom
possible without the concept of war?
I honestly think not
contemplate that now and then
we all wish it could be so
but too naturally comes opposition
too many points of view
opposing ideals continuing to flow
one thing we must remember
our Veterans served our country
they did not start the wars
they answered the call of duty
so, if you love America
you must love our Veterans
for without them
we would have no freedom
God bless America!
And God bless our Veterans!

My dad was a veteran of WWII… I sometimes wish I had known him at that time, but then I realize how tough, rough, and strong of a man he was when I knew him, I think it’s better that I didn’t!  But thank you dad… 

Now… And after all that, here’s the FWIW article today…

For What It’s Worth… Well, the boys and girls at JPMorgan’s precious metals group finally decided that their activity in metals, of which the Justice Dept has filed RICO charges on, wasn’t enough, and they’ve gone to telling their clients to sell their Gold.. The article can be found here: https://www.crainsnewyork.com/finance/jpmorgan-and-citigroup-get-out-gold-tilt-toward-risk

Or, here’s your snippet: “Strategists at two giant Wall Street banks closed out their bets on gold as the traditional haven gets a hammering from investors shifting to risk-on mode.

JPMorgan Chase & Co.’s asset-allocation team including Marko Kolanovic, Nikolaos Panigirtzoglou and John Normand said it unwound its gold hedge, moving to an underweight recommendation from an overweight one. Citigroup Inc. strategists including Jeremy Hale abandoned a long position in gold, in their asset-allocation note Thursday.

The rejigging comes amid the worst week for gold since May 2017, when riskier assets were propelled by the story of synchronous global growth and havens were in little demand. Bonds have also been losers, and the two teams made adjustments there as well: Citigroup opened a short bet against German bunds, and JPMorgan went more deeply underweight on its government-bond position.”

Chuck again… For goodness sakes, don’t be fooled into thinking that a bank that has had three different charges filed on them by the Gov’t. would be giving good advice… of all the things I read this weekend about JPMorgan, you would think I had some vendetta against them… I don’t… But these actions they keep taking to reduce the price of Gold have really got me riled up…

The currencies today 11/11/19 American Style: A$.6864, kiwi .6336, C$ .7562, euro 1.1023, sterling 1.2783, Swiss $1.0036, European Style: rand 14.8317, krone 9.1195, SEK 9.6856, forint 302.43, zloty 3.8653, koruna  23.0943, RUB 63.74, yen 109.30, sing 1.3585, HKD 7.8264, INR 71.02, China 6.9949, peso 19.13, BRL 4.1619, Dollar Index 98.18, Oil $56.64, 10-year 1.94%, Silver $16.88, Platinum $888.68, Palladium $1.726.08, and Gold… $1,464.13

That’s it for today… Well, I should be writing this from S. Florida, but I’m not, as my trip had to be cancelled. I say that because as we will be in the teens here tonight, temperature wise, it will remain pleasant and warm there… No I’m not bitter… But I do hold a grudge! I hope today was a holiday for you, dear reader… The weatherperson is calling for an inch of snow this afternoon…  Ahhh, the , “just a dusting of snow” forecast… I’ll always remember February 1982… When the infamous forecast had to be changed to 2 feet of snow! OK, I’ve said enough today, this was supposed to be a quick and dirty one today, but… As usual I once get started, it’s difficult to stop me! Blind Faith takes us to the finish line today with their song: Can’t Find My Way Home… I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler

 

Is The Fed Lost In A Lost World?

November 7, 2019

* Currencies lose more ground to the dollar on Wed.

* Bank of England meets today, and the EC didn’t have nice things to say! 

Good Day… And a Tub Thumpin’ Thursday to you! I got to say that the old saying of “the squeaky wheel gets the grease” came to fruition, as I reviewed the emails in the Pfennig Replies box yesterday… Several readers have sent forward their thoughts on my never healing leg wound, and I can’t wait for tomorrow when I see the wound center doctor again to express some of their thoughts to him… He’s going to wonder where I got all that information! The J. Geils Band greets me this morning with their song: Must Have Gotten Lost… Which is what I feel most mornings when I stare at the blank screen!

OK… Another day went by, and there was another day of Trade War negotiations, which apparently didn’t go so swimmingly well, as we were told they were going to be…. As I’ve said before, I’m from Missouri, they’re going to have to show me the Trade Agreement, and stop talking about how they’re close! I started today’s missive with this topic because both Reuters and Bloomberg have articles this morning saying the dollar weakened on Wednesday because of the outlook for the Trade War negotiations. A quick look at the currencies, which I do first thing every morning, and onto the metals, bond rates, and Oil, before anything else, told me that I didn’t see an weakening in the dollar… In fact from what I was able to see, the euro lost ground, the A$ lost ground, just about every currency on the face of the earth lost ground to the dollar yesterday… So, the folks at Reuters and Bloomberg must be doing a J. Geils Band number this morning and Must Have Gotten Lost!

The Chinese renminbi was the one shining light in the currency roundup again today, as the renminbi was allowed to appreciate below the 7 figure for the first time since before the Trade Tariffs began to take a bit out of Chinese exports…  I’m wondering here, if the direction of the renminbi is a better indicator of whether or not a Trade Agreement is going to get done?  I could be onto something here, eh? 

Gold did recover some of the $25 loss on Tuesday, yesterday, gaining about $7 on the day, to close the day at $1,490…. But the shiny metal remains below $1,500 and Silver below $18, which represent the current levels of back and forth trading… The buyers drive the price up and the sellers with their paper trades drive them back down…  In the early trading this morning, Gold has given back that $7 gain…  back and forth… I see more and more writers writing about how they believe Gold is a buy at these levels… Where did all these guys come from? It’s sort of like back in the day, I used to be the only speaker at the Money Shows that talked about currencies and metals, and certainly there were only a handful of writers that talked about currencies and metals… Then one day, that all changed, and the guy that drove me in his taxi from the airport to the Conference setting in Kissimmee, Fla, was seen giving a presentation on currencies at the Conference! In other words everybody and their brother were talking about the weak dollar…

I used to talk about the history of currency trends in my presentations… And since August 1971, when President Nixon removed the Gold backing from the dollar, there have been 5 completed currency trends… The first one was a weak dollar trend that began in 1971 and ended in 1978… A strong dollar trend then took over and lasted until the Plaza Accord in 1985. The next weak dollar trend then was in place until 1995, and the strong dollar trend that started in 1995 lasted until 2002… From 2002 to 2011, the weak dollar trend was in place, and since 2011 to today the strong dollar has been in place, and remains in a strong trend for now…

As you can see from this historical data that a trend lasts the shortest amount of time at 7 years, and the longest amount of time at 10 years… Since we’re currently in the 8th year of the strong dollar trend, one has to wonder how much longer in the tooth this trend will last… If it were up to President Trump, it would have been over last year! But that hasn’t happened, much to his chagrin… In 2001, I wrote a white paper titled: The Decline of the dollar, not to be confused with the book that came out a few years later, that I wrote the foreword for: The Demise of the dollar… Was I just lucky back in 2001, that I thought the end of that trend was near? Or did I have a ton a research that led me to that call? Which do you believe it was? HA! Longtime readers know the answer to that! 

I tell you all this to remind everyone that you never know what will push a current currency trend to its end, and start a new one. But… I would say that investors that listened to me back in 2001 were sure happy they diversified their investment portfolios… And so now I’m going to go out on a big fat limb and say that it’s that time again… Time to make sure you have a fully diversified investment portfolio using currencies and metals… And that’s all I’m going to say about that now…

One of the reasons I’m getting that feeling again about the dollar is the moves the Fed is making to support the repo market… You know… that in the financial meltdown of 2007/08, that a lot of that mess could be blamed on the NY Fed who was supposed to regulating and auditing the banks that ran into problems… And when everyone found out that NY Fed had created $29 Trillion in newly created electronic funds to bail out the banks, they were appalled… But did Congress do anything about the Fed’s actions? Well, we all know they didn’t… And now the Fed NY is bailing out banks again with their injection of liquidity each day… And their buying of T-Bills from the banks… Tell me in your calmest voice how this is all going to come out peachy? Please, someone tell me, because I don’t see how this doesn’t create chaos…. 

Rot on the vine doesn’t just exist here though folks… The European Commission gave their outlook on the economy’s future earlier this morning, and they didn’t have nice things to say… They warned the European Banks that, “risks, including the possibility of a disorderly Brexit, remain “decidedly to the downside.”

Recall me telling you that the Hungarian Central Bank Gov. dissed the euro earlier this week, right?  Well the forint has seen nothing but selling since that statement…  Take shots at the big Dog, and you get bitten…  I’m just saying… 

Today overseas… The Bank of England (BOE) meets to discuss rates… The current internal rate there is just 75 Basis Points (3/4%). And I don’t think rates are going anywhere right now, not with all the unknowns hanging over the BOE like the Sword of Damocles… upcoming elections, and continued BREXIT talks lead the list of unknowns… I read a report yesterday where the economist in the U.K. said that if the election in the U.K. goes the wrong way, that sterling will get punished…

Here in the U.S. there’s not much to see in the U.S. Data Cupboard either… However, having said that we will see the September print of Consumer Credit (read debt)… The August print was $18 Billion, and I’m thinking that consumer debt just got worse in September… But we shall see, eh? This data doesn’t really move the markets, it’s really more for the nerds like me to pick at…

Yesterday in the U.S. Data Cupboard we saw the color of 3rd QTR Productivity, and the color is red… As the data printed negative -.3%, which was the lowest productivity report since 2015… In addition, we saw the color of 3rd QTR Unit Labor Costs, which were much stronger at 3.6% up from 2nd QTR’s 2.4%… So, let me see here if I’ve got this correct…. Our productivity has gone to hell in a handbasket, but the cost of that lack of productivity is soaring? Are people getting paid for a lack of production? Is this a case of one guy digging a hole and 5 other guys standing around critiquing his digging?

And as far as the Unit Labor Costs rising, how much would you be willing to bet that major piece of this move higher comes from insurance costs?

To recap… The currencies lost additional ground to the dollar yesterday, even though Reuters and Bloomberg don’t agree… Gold was able to recover a small amount $5 of its $25 loss on Tuesday… The Trade War negotiations seem to be going sour, once again, even though we were assured earlier this week that they would be good! The BOE meets this morning, but Chuck thinks there are too many unknowns in the U.K. right now for the BOE to move rates… And Chuck goes through the currency trends for the 100th time in the history of the Pfennig!

For What It’s Worth… When I began reading this article, all I could think about was Enron… OK, this is an article about how an accounting firm & the company they audited obscured an accounting error. And my mind just keeps going back to the early 2000’s and all the Company scandals… Oh well this article can be found here: https://www.cnbc.com/2019/11/06/mattel-pricewaterhousecoopers-buried-accounting-issues.html

Or, here’s your snippet: “ Mattel stock slumped more than 3% Wednesday after a report surfaced purporting that the toy company and its auditor PricewaterhouseCoopers obscured an accounting error.

The toymaker was forced to shelve the sale of senior notes in August when a whistleblower letter was made public, claiming the company had made accounting errors in historical periods. In late October, Mattel said auditors had completed their investigation and had determined that income tax expense was understated by $109 million in the third quarter of 2017 and overstated by $109 million in the fourth quarter of 2017, with no impact for the full year.

However, it appears that the “honest mistake” may have been buried by PwC and senior finance executives in an effort to save face, according to The Wall Street Journal.

The accounting error had to do with Mattel’s ownership of “Thomas & Friends,” an animated children’s show. The error was tied to a $562 million valuation allowance that Mattel created against its deferred tax assets in September 2017. Ultimately, the allowance was reduced by $109 million, which came from deferred tax liabilities related to Mattel’s acquisition of HIT Entertainment in 2011. Reducing this allowance lowered Mattel’s loss during the quarter.”

Chuck again… Sure it’s just one example of problems… But could it be the first of many to be revealed going forward? Only the shadow knows…

Currencies today 11/7/19 American Style: A$.6905, kiwi .6376, C$ .7595, euro 1.1083, sterling 1.2856, Swiss $1.0086, European Style: rand 14.7311, krone 9.0964, SEK 9.5955, forint 300.14, zloty 3.8484, koruna 23.0201, RUB 63.67, yen 109.13, sing 1.3568, HKD 7.8239, INR 70.66, China 6.9994, peso 19.09, BRL 4.0234, Dollar Index 97.82, Oil $57.06, 10-year 1.87%, Silver $17.54, Platinum $930.74, Palladium $1,797.55, and Gold… $1,483.18

That’s it for today… Well, our Blues has another back-to-back game last night, this time in Edmonton.. Too late of a start for me to watch the game, for sure!  But I see this morning that the Blues didn’t need overtime to win this time, as they pulled out a 5-2 win!  Let’s Go Blues! Little Evie was here last night for a short time, I kept giggling at the little noises she made while taking her bottle… So darn cute! Ok the cold front moved through here last night, and it’s downright cold outside this morning! It was 82 in S. Florida yesterday… UGH! This afternoon, I’ll get all bundled up and head to the Vascular Testing Center, for a test of the veins in my leg, to see if they could be the problem with me not healing… The streets dept. is repaving the roads in my little river town. Unfortunately there’s only one road in and out of my subdivision to the outside world, and it’s getting repaved! YIKES! Oh well better to bothered by this than to not be around to be bothered! Keeping with the thought today that we’re lost… The Moody Blues take us to the finish line today with their song: Lost In A Lost World…   I’m thinking that this describes the Fed, folks…  Lost in a lost world, of debt creation and negative yields…. I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and please Be Good To Yourself!

Chuck Butler

Christine LaGarde Said What?

November 6, 2019

* Currencies have given back, all gained ground from Friday…

* Gold & Silver both get taken down on Tuesday… 

Good day… And a Wonderful Wednesday to you! After experiencing a cold front going through our region last week, and then warming up again, the cold front is coming back again tonight! UGH! I totally despise having to put on a winter coat, hat, scarf and gloves just to go outside! But this is one of the things my mom loved about St. Louis, we get to experience all 4 seasons… It’s just that spring and fall always seem to be short compared to winter and summer… Oh well, it is what it is… I had to cut the Uni-boot off yesterday, as the problems arose with it… My leg wound is NOT getting any better, and this is after 1 month of being seen by a wound specialist doctor… I get very discouraged about things that move along in a timely manner, so you maybe you can imagine just how discouraged I am right now! The Ozark Mountain Daredevils greet me this morning with their song: Jackie Blue…

Well, the currencies didn’t live up to the challenge I laid before them yesterday, and instead of adding to their Friday gains, they lost more ground to the dollar, with the euro falling back below 1.11 and the Aussie dollar falling back below 69-cents… It was a good day, however, for the Chinese renminbi, which saw another appreciation that has taken the onshore currency to the brink of falling below the 7 figure… The offshore version of the renminbi did fall below 7 yesterday… That currency is more a market driven currency and not the State controlled version that I usually quote and talk about.

An old friend from his Agora days, Tom Dyson, is back writing again, as he and his family are traveling the world, and for the past 3 weeks they’ve been in China, and he sends his daily postcard each day, that chronicles his travels, and what he sees going on in economies of countries he visits… His latest postcard mentioned all the building that’s going on in China, of infrastructure, bridges, roads, and most of all apartment buildings…

Many years ago at a Conference a dear reader cornered me and plead his case that he thought that the Chinese were overbuilding and it would end up in ruins for their economy… I pointed out to him then and even more so now, that there are hundreds of Millions of people throughout China that I saw eventually moving into these apartments… Maybe not the mom and pops but the kids when they grow up, and China’s Capitalist economy matures more… That’s how I see it… period. Oh, and did I mention their Treasure chest of reserves, that need to have some spending out of it each year? 

Reuters says that the dollar rally is buoyed by strong data…. OK, am I missing something here? Did we not just print a second month of negative Factory Orders? Maybe they’re referring to the uptick in the services index… OK, big deal, we have become a servicing country, and we suck at service! Or the Trade Deficit, which narrowed in September, and could be viewed as a good thing, but when you get right down to it, U.S. consumers cause the Trade Deficit as they buy hand over fist goods from China and elsewhere… Well, this narrowing only indicates, to me that is, that Consumers aren’t spending what they normally do… And this is a very bad thing for our economy folks… We are a consumer based economy, and without the consumer contributing, there will be no economic growth!

I’m waiting for the results of the Retail Sales data in the Eurozone this morning, and it looks like it might not be out before I hit send… I guess there’s always tomorrow… No wait, we are only promided today… Oh, well if we’re not here tomorrow, we won’t care what the data was!  But much to my surprise, there they are! And they aren’t as bad as I expected them to be! For September, Eurozone Retail Sales were up 0.1%, but on a year on year basis, they were up 3.1%.

Not the results that would say that the Eurozone is out of the woods… No way, no how, just plain no!  But better than the average bear Retail Sales for the Eurozone… but the euro can’t find a bid this morning… hmmm?

Gold got taken back below the $1,500 figure once again, this time by $25 on the day, closing at $1,483….. Back and forth over and below the $1,500 figure was my call when Gold finally went over $1,500 a couple of months ago… And that’s exactly what we’ve seen… Back and forth, back and forth, until one day… When it makes a definitive move either way… I keep thinking about the Gold chartists told me a month ago, and that is that Gold could very well see a correction back to $1,425… Before beginning it’s move higher once again… There’s an old saying by traders about these kinds of moves… And it is that the asset needs to go back and fill in the prices it skipped over on the way up…

Ahhhh, trader talk… It used to be something you had to be pretty good at doing, each day as you bought and sold currencies… But it’s a dead art, folks… Currency traders now a days, simply put their trades into a computer and they get back their prices… no horse trading, no bidding back on the price. The new way is obviously quicker, more efficient, as the computer then generates the tickets for the back office so they can settle the trade. But… no trader talk, any longer… Old time traders like me, have been put out to pasture…

OK… history lesson for the day is over with… Let’s move on… The Trade War negotiations continue to make progress or so says the media… China’s president, Xi, seems to want to get this done, so maybe, just maybe, because you never know… it will get done… The euphoria over the idea that it could get done is what has Gold at the selling window the past couple of days. 

I read where Xi wants Trump to drop the Tariffs and never use them again…  I’m guessing here that Xi is speaking for the rest of the world, like Europe, who has suffered from the Trump Tariffs as well.  Isn’t that what the knight in shiny armor does as he rides in on his white stallion?  He speaks for the “little people”…  Whoda Thunk it… “Xi, a man for the people of the world”… 

The U.S. Data Cupboard has the stupid Productivity report for the 3rd QTR today. In addition we’ll also see the Unit Labor Costs for the 3rd QTR…  I would only be half interested in the latter of the two, but it will be interesting to see how the markets view them. 

To Recap… The dollar bugs have taken back all the ground they lost on Friday, and we’re back to the currencies trading with levels seen before last Friday.  Gold got taken down by $25 yesterday… That along with Silver which also got taken down, are seen to be caught up in the Trade Talk euphoria, but Chuck thinks that’s just an excuse the price manipulators throw out there to confuse us…  

For What It’s Worth… I wanted to print this yesterday, when I mentioned Christine Lagarde’s comments to the Germans, but I already had my FWIW article all cued up. So here it is today, Lagarde says something that I bet she’ll eventually wish she hadn’t said, and more is all chronicled here: https://www.zerohedge.com/economics/lagarde-we-should-be-happier-have-job-have-savings

Or, here’s your snippet: “ Any hopes that the replacement of Mario Draghi, who on Halloween left the ECB more polarized than ever, as the core European nations revolted against the Italian’s profligately loose monetary policy in an unprecedented public demonstration of discord within the European Central Bank…

… with the ECB’s new head, former IMF Director and convicted criminal, Christine Lagarde would result in some easing of tensions, were promptly crushed when Lagarde picked up where Draghi left off, calling on Germany and the Netherlands to use their budget surpluses to fund investments that would help stimulate the economy, in a sharp rebuke that will not win the former French finance minister any friends in fiscally conservative Germany.

In an appeal to Germany’s sense of solidarity, and in hopes that Germany’s memory of hyperinflation has faded enough, Lagarde said that there “isn’t enough solidarity” in the single currency area, adding: “We share a currency, but we don’t share much budgetary policy for now.”
“Those that have the room for manoeuvre, those that have a budget surplus, that’s to say Germany, the Netherlands, why not use that budget surplus and invest in infrastructure? Why not invest in education? Why not invest in innovation, to allow for a better rebalancing?” asked Lagarde, blaming Germany and the Netherlands for living within their means, and demanding they should no longer do so, just because most other Europeans decided to pull a page out of the American playbook, and live exorbitantly outside of their means.

Lagarde’s direct attempt at shaming Europe’s fiscal conservatives was nothing short of shocking: normally ECB officials avoid naming individual countries in public statements, because their mandate is to act in the interests of the eurozone as a whole. But when Lagarde made her speech she had not yet officially taken over at the Frankfurt-based institution – she succeeds Mario Draghi on Friday.

And just to guarantee she is as resented by Germany as was Mario Draghi, she said that the German and Dutch governments, which last year had budget surpluses of 2% and 1.5% respectively, “have not really made the necessary efforts,” she added, referring to establishment’s increasing desperation to force anyone with an even remotely normal balance sheet to sink to the same level as their insolvent peers.

As for the punchline, Lagarde defended the negative interest rates introduced by her predecessor Draghi, arguing that people should be happier to have a job than a higher savings rate. This, as a reminder, comes at a time when virtually everyone who is not named “Draghi” or “Lagarde” thinks that negative rates are catastrophic, and assure doom for the Eurozone.”

Chuck again… Zerohedge.com said it best when they called her comment “ We should be happier to have a job than to have savings” The new Marie Antionette quote about letting them eat cake! What a, now wait a minute Chuck no need to go to calling her names… Remember what you mother taught you!

Currencies today 11/6/19 American Style: A$.6898, kiwi .6377, C$ .7595, euro 1.1085, sterling 1.2885, Swiss $1.o085, European Style: rand 14.7924, krone 9.1556, SEK 9.6105, forint 298.97, zloty 3.8501, koruna 22.9996, RUB 63.41, yen 109.02, sing 1.3585, HKD 7.8238, INR 70.78, China 7.0069, peso 19.21, BRL 4.0030, Dollar Index 97.83, Oil $57.21, 10-year 1.84%, Silver $17.54, Platinum $926.19, Palladium $1,784.70, and Gold… $1,485.57

That’s it for today…  I’ve not been getting my full night’s sleep the last two nights, as the pain in my leg acts up when I lay down… UGH!  I’ve got a high tolerance of pain, but this is getting ridiculous! I don’t like it when I don’t get a full night’s sleep!  Well, our Blues sure are on another roll, winning their 5th straight game last night in Vancouver in overtime. In fact, a good number of their wins this year have come in overtime…  Which is far better than losing or having to go to a shootout! The Blues are finding a way to win without their star player, who will be out for 5 months! UGH!  I have another test tomorrow, this one to see if I have a perforated vein in my leg… The doc hasn’t told me yet what it means if I do have one… Oh, boy, I get another conversation with a doctor! Where do I sign up for that one?  Oh well, it is what it is, and life goes on, right?  The Late great Dan Fogelberg takes us to the finish line with his song: The Last Nail… (I used to play this one on my guitar!)  I hope you have a Wonderful Wednesday, and will Be Good To Yourself!

Chuck Butler

The U.S. Prints A Negative Factory Orders, But The Dollar Rallies?

November 5, 2019 

* Currencies couldn’t add to their Friday gains on Monday

* Christine Lagarde steps into the bucket… 

Good Day… And a Tom Terrific Tuesday to you! No baseball! What’s baseball rat like me to do? Well, I continued reading the two books I’m into right now, and I watched a little TV, but there wasn’t much on… The raw, steel gray, barren days of November have started… My longtime friend, and former colleague, Ty Keough, stopped by to see me last Friday… It was great to catch up with him, who’s now retired like me! Ty mentioned the sunny day on the 1st of November, and I said, “that won’t last!” And it didn’t! The late, great, (greatest guitar player in my mind) Alvin Lee greets me this morning with a live version of his song: Goin’ Home… When I played in the last band I played with, we ended every gig with that song…

Well… The currencies couldn’t add to their Friday gains yesterday, instead, giving back some of their Friday gains… And that frustrates me, as a currency holder, because there has to be something in the shadows at work here… The U.S. Data Cupboard printed a negative report, and yet the dollar bugs were able to gain back some lost ground… What gives with that? Oh well, nothing and I mean nothing actually surprises me any longer, not in this day of all markets being manipulated in some manner…

So, be it as it may… The currencies start today with a new challenge, which is to add to their Friday gains, in a meaningful way! I know this sounds like I’m rooting against the dollar, but in reality I’m not, I’m just seeing things the way they should be given the fundamentals, and when things go the way I see them, that’s good, and when they don’t, I don’t like to talk about it! HA!

The official wording on the dollar rebound yesterday was something like: “dollar rebounds as investors book profits on short sales”… Really? That’s what the media found to be the reason for the dollar rally yesterday? Where have all the real financial journalists gone, long time passing… I’m just saying…

Gold saw selling yesterday, that caused the shiny metal to lose $4 on the day, which was bad enough, but this morning it’s down another $8, all on the thought that the U.S. and China WILL get somewhere with a Trade Agreement…  I find this reason to just be an excuse for the price manipulators to rationalize their moves…  

I was caught off guard by an article On CNBC, yesterday that quoted the Gov. of the Central Bank of Hungary saying that, “The euro is a ‘trap’ and countries should be allowed to ditch it.” I found this article interesting in that it was just 15 years ago, that Hungary was lining up their ducks in a row to join the euro… I guess they’re glad they didn’t meet the criteria back then or since, right? So, I guess I can’t call Hungary, a “Eurowannabe” any longer… For they sure don’t sound like they would touch the euro with your ten foot pole!

And in European Central Bank’s (ECB) President, Christine Lagarde’s first speech since taking over the reins from Mario Draghi, she didn’t come out with any euro saving comments, and instead, decided to tick off the Germans and Hollanders… She chastised them for not using their budget surpluses for things like infrastructure, and stuff like that…  That’s no way to get to know your largest economic state, now is it Christine?   

Nothing like stepping in the bucket while a pitch is coming toward the plate, eh?

After hearing the Chinese say they didn’t think a Trade deal with the U.S. would ever take place, they met again with U.S. negotiators, and talked about a pact that could be worked out… I’m from Missouri, so they’re going to have to show that to me! Pessimistic? Well, I told you right from the get-go that the so-called “Tentative Agreement” announced a few weeks ago, wasn’t for real… Hey! That’s my job, to point out these things so that investors don’t get hung out to dry by them! If investors choose not to listen, well… you know…

We will see 3 different Fed Heads out speaking today… One of them is Dallas Fed President Robert Kaplan, and another one is Neel Kashkari, Minneapolis Fed President… Both will speak from the same songsheet, I presume… And that is that the Fed is on Hold, and that’s that! The third speaker is Tom Barkin, President of the Richmond Fed. He’s too knew to the Fed Head scene, having been appointed this year, so I have no idea what he will be talking about, but if I were a betting man, I would say he too will sing from the same songsheet, as Kaplan and Kashari…

Well, looky there! The U.S. Data Cupboard yesterday had the September Factory Orders data for us, and it printed, for a second consecutive month, at a negative! Negative -0.6% in Sept. following August’s -0.1%… That’s going in the wrong direction folks! And what did the currencies do? Well, I guess I already told you… They lost ground on the day… Why?, would be the better question? And for the answer to that, you might as well, get on the horn and call the PPT… The Plunge Protection Team… I’m just saying… 

The U.S. Data Cupboard has the September Trade Deficit for us today… This is where you can really see that the Trade War has failed miserably…  For there has been no improvement in this data. 

We’ll have to wait until tomorrow before we see any real economic data from the Eurozone, as Retail Sales, and more will print tomorrow. 

To recap… The U.S. printed a negative Factory Orders report and the dollar rallied…  that’s right, I’m not kidding you!  Sept Factory Orders were negative -0.6%, which was the second consecutive month with a negative print here…  But the currencies couldn’t add to their gains from Friday, and instead lost ground…  Gold lost $4 yesterday, and is down $8 this morning… 

For What It’s Worth… One of my best articles, if I say so myself, for the now defunct Dow Theory Letters, was one I wrote on the threat of a cashless society… I wrote that one on 6/14/18… Well, this article is a upon further review with Sweden, the poster child, for cashless societies, and touches on what’s going on here in the U.S. with regards to eliminating cash… And it can be found here: https://www.latimes.com/business/story/2019-10-27/cash-is-more-popular-than-ever 

Or, here’s your snippet: “Modern finance requires a lot of trust, and its digital future will demand still more. If, for example, electronic payments are to replace cash, people must be willing to believe that the bits of data traveling among phones, cards, terminals and blockchains actually represent something of value.

So, will people believe? Judging from their growing predilection for physical currency, maybe not.

At first glance, cash would appear to be on its way out.

Sweden has almost eliminated its use for payments. In America, home of the almighty dollar, almost a third of the population gets through a typical week without using a single banknote.

Businesses are experimenting with going cashless, hoping to speed up transactions, combat theft and create a safer environment for their employees.

Actually, though, physical currency is experiencing a resurgence.
People in many of the world’s most advanced nations — including the United States, the euro area and Japan — are holding more of it than ever.
In the U.S., for example, currency in circulation stood at an estimated $1.76 trillion as of late September, according to the Federal Reserve. That’s about 8.2% of gross domestic product, up from just 5.6% before the 2008 financial crisis and close to the highest level in at least 36 years.

If people need less cash to pay for stuff, why do they want to hold so much of it? The answer, it seems, is that they’re turning to currency as a store of value.

Chuck again… Can you believe that Swedes actually get a chip implanted in their hands so that they can pay at a register with a wave of their hand? Never mind that the Gov’t now knows what you spend you money on, and pay to whom, and everything else about you, as you give away your civil liberties… but, as long as it appears to be being delayed, I guess I shouldn’t complain… 

Currencies today 11/5/19 American Style: A$.6915, kiwi .6416, C$ .7615, euro 1.1109, sterling 1.2906, Swiss $1.0082, European Style: rand 14.7255, krone 9.1426, SEK 9.6241, forint 296.80, zloty 3.8430,  koruna 22.9780, RUB 63.34, yen 108.86, sing 1.3572, HKD 7.8341, INR 70.45, China 7.0248, peso 19.14, BRL 3.9944, Dollar Index 97.61, Oil $56.89, 10-year 1.82%, Silver $17.99, Platinum $934.65, Palladium $1,784.23, and Gold… $1,501.48

That’s it for today… Another day, another different treatment for my leg wound… The wound doctor is baffled as to why he can’t get this thing to heal… And once again, I remind him that I’m taking a chemo medicine daily….. hint… hint… So, maybe this new treatment will open up a window that allows me to get out of here and go south for a couple of weeks to get away from the dreariness of November in the Midwest… One never really knows, as each week they seem to have a different plan, and I go this Friday, to see them… The plane leaves Saturday, I guess I’ll find out Friday if I’ll be on the plane, or not! Our Blues get back on the ice tonight, this time in Vancouver… Have I ever told you that Vancouver in July is one of my fave cities? The Moody Blues take us to the finish line today with their song: I’m Just A Singer (In A Rock And Roll Band) I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler

Why Did The BLS Add So Many Jobs?

November 4, 2019

* Currencies react favorably to the suspect Jobs report

* Gold trades in the same clothes Thursday & Friday… 

Good day… And a Marvelous Monday to you! And Welcome to November… Brovember, for some… A couple of years ago, I was in S. Florida for the first 3 weeks of November, and decided to go along with the growing of a mustache during November… But after two weeks, it was coming in so white, that I said to heck with this! I shouldn’t have been surprised, as each week when I buzz the remaining hair I do have, I’ve noticed that once it was all dark hair, then mixed, and now all gray… UGH! Oh, well, if I had the patience I would shave my head, but I barely can get through the 5 minutes of buzzing before being bored! I guess I could find a barbershop to hang out in? I don’t think there are many of those around any longer though… The Average White Band greets me this morning with their song: Picking Up The Pieces…

Well, Friday’s Jobs Jamboree, had a lot to be desired if you asked me! And apparently, the currency traders thought so too! Now, mind you, the Jobs Data showed that 128,000 jobs were created in Rocktober… And that should have gotten everyone all lathered up, given that the estimate had called for only 75,000 jobs in Rocktober… Ahhh, but what do we have here grasshopper? 274,000 jobs were added by the BLS after the surveys? That would mean that when the survey came back, they showed a loss of 146,000 jobs… And there was no way that the BLS and their band of thieves could allow that figure to be shown, so they decided that, for instance, “professional and business services” needed to have 95,000 jobs added… And so on until they got to a total of 274,000 jobs from thin air!

No wonder the dollar bugs couldn’t muster up a rally! The currencies didn’t exactly beat the band with a rally, but they did inch higher on the day.. For instance the Aussie dollar (A$) moved past the 69-cent handle, and kiwi moved higher in the 64-cent handle. The U.S. Unemployment Rate actually ticked higher, but I don’t think that had anything to do with the non-reaction from the dollar bugs.

Was it the news that China mentioned that they didn’t think a Trade settlement with the U.S. was going to ever happen? So much for that “Tentative Agreement” that we supposedly had in our back pockets a couple of weeks ago, eh? I warned you then to not get all lathered up by this announcement, as Tentative Agreements aren’t worth the cocktail napkins they’re printed on!

Or, was it the news on Friday that Rocktober’s ISM (manufacturing Index) remained below 50 at 48%… That’s two consecutive months below 50 folks… The manufacturing sector is telling us , those of us that want to listen, that is, that manufacturing is in a recession…

In the end it could have one or all of these negative things that caused the dollar bugs to go home… They didn’t need to go home mad, just go home! I don’t know what other proof the markets need to stop this incessant stock buying… But I have enough proof for me that’s certainly for sure!

One of the best performing currencies in recent days has been the Chinese renminbi… It wasn’t that long ago, that it looked as though the Peoples Bank of China (PBOC) was going to push the renminbi so low it would have to look up to an ant… But that was then, and this is now… Why the Chinese have allowed this turnaround is something I’ll have to look more closely at, but… for now the thing I like about the strong move is that the Singapore dollar (Sing) has moved along with the renminbi…  

Longtime readers will or may recall me pointing out how these two move together, because Singapore can’t allow the renminbi to get too weak or too expensive due to competition with exports.   So, if you’ve forgotten that I said that years ago, there it is again for your edification! HA! 

Of course the stock jockeys got lathered up by the rate cut… But what about the Pause for the Cause? I guess they ran out of the room before Jerome Powell could utter those words! But that’s OK. Remember in 2009, when stocks, metals and currencies were all tied together as the “risk on” trade? And when they got sold it was “risk off”… That always reminded me of the Karate Kid movie… Wax on, wax off… But that all changed a few years ago, and now we’re back to different asset classes providing pricing that’s derived from different price mechanisms, with no recognition, as any other asset class!

You might have suspected that Gold would either take off for higher ground on the rate cut news, or be subjected to selling while using the excuse the Fed is going to pause… But in reality neither of those happened… Gold on Friday, closed at $1,512, same as it closed on Thursday… I would imagine that the price manipulators made sure that the price of Gold didn’t go higher after the rate cut announcement… And so we traded in the same clothes for two days… You know that with the Fed rate cut to 1.50%, we, here in the U.S., are not that far from zero interest rates… Remember what I told you over a year ago… That historically, during a recession, the Fed cuts rates a total of 400 Basis Points, or 4%… We’re not at 4%, not even close to it, so…

Where was I? Oh, that’s right, since most of the world has seen record levels of Gold when priced in their respective home base currencies, because they have interest rates even lower than in the U.S. that pretty soon, you won’t earn any money on your deposits, so what are you waiting for with regards to buying Gold? As always, I ask… Got Gold?

The U.S. national debt went over $23 Trillion last week… It wasn’t that long ago in reality that is, (12 months!) that we crossed the $22 Trillion figure… The Debt is acting like it’s going higher at a compound rate! Debts, derivatives, are going to be the death knell for this economy yet… And no, it’s not happening tomorrow or this week, and probably not this year, but it’s coming folks…

That $23 Trillion, per tax payer is equal to $186,500… Who’s going to be the first one on your block to write a check to the Gov’t for $186,500? Not me! They would come put me in debtor’s jail! Speaking of debt… I keep receiving emails telling me that they have the solution for getting me out of debt… (I have no debt) so I laugh, and then think, why aren’t these people sending these emails to the Gov’t? They sure could use some non-painful debt solutions!

The U.S. Data Cupboard will be quite the non-market moving event this week, with lots to report, and none to really cause us to want to get on a roller coaster, throw our hands in the air, and say we don’t care!

I’m currently reading the 5 volume of Murray Rothbard’s book: Conceived In Liberty…  it overs years 1784-1791…  Doesn’t seem as though 7 years would be enough to write about… Oh, but in those 7 years, we became a republic… Since those days, we’ve become an Empire…  Sort of like the Roman Empire… I’m just saying… 

To recap… The Jobs Jamboree on Friday was suspect at best… Sure for the mass media and stock jockeys they were touting the 128,000 jobs the BLS says were created in Rocktober. But with a closer look we find that the BLS added 274,000 jobs after they received the surveys, and they reported a negative 146,000 jobs!  The dollar bugs went and hid, and the currencies rallied, although it wasn’t like a “old school” rally by them.  Gold traded in the same clothes on Thursday & Friday…  And the week of data looks pretty lacking this week, so we could drift along… 

For What It’s Worth… Well, to me, the total debt in this country is a HUGE problem that’s more importantly worked on than the current direction of the lawmakers…  $23 Trillion in debt folks…  So, here’s an article that goes through the debt number and can be found here: https://thehill.com/policy/finance/468600-us-debt-surpasses-23-trillion-for-first-time

Or, here’s your snippet: “The federal government’s outstanding public debt has surpassed $23 trillion for the first time in history, according to data from the Treasury Department released on Friday.

Growing budget deficits have added to the nation’s debt at a speedy rate since President Trump took office. The debt has grown some 16 percent since Trump’s inauguration, when it stood at $19.9 trillion. It passed $22 trillion for the first time just 10 months ago.

Of the $23 trillion figure, just under $17 trillion was in the category of debt held by the public, which is a more useful gauge of the debt the government has to pay down, and the number typically used in calculating the nation’s debt burden. The other $6 trillion comes from loans within government bodies.

Still, the $23 trillion figure marks a milestone.

“Reaching $23 trillion in debt on Halloween is a scary milestone for our economy and the next generation, but Washington shows no fear,” said Michael A. Peterson, CEO of the fiscally conservative Peter G. Peterson Foundation.

“Piling on debt like this is especially unwise and unnecessary in a strong economy,” he added.

High levels of debt can push up borrowing costs and interest rates, “crowd out” private borrowing and weigh down budgets. In the 2019 fiscal year, for example, the government had to devote $376 billion just to pay the interest on the debt, equivalent to nearly half the defense budget, and more than the amount spent on the combined costs of education, agriculture, transportation and housing.

Chuck Again….  I’ve always contended that having such a large debt takes up all the time for lawmakers, and what have you, that need to tend to growing the economy…  Look at Japan…  I’m just saying… 

Currencies today 11/4/19 American Style: A$.6917, kiwi .6430, C$ .7605, euro 1.1160, sterling 1.2917, Swiss $1.0124, European Style: rand 14.7975, krone 9.1062, SEK 9.5835, forint 294.25, zloty 3.8156, koruna 22.8537, RUB 63.49, yen 108.40, sing 1.3572, HKD 7.8380, INR 70.46, China 7.0364, peso 19.08, BRL 3.9893, Dollar Index 97.30, Oil $56.88, 10-year 1.75%, Silver $18.14, Platinum $953.04, Palladium $1,812.01, and Gold… $1,513.23

That’s it for today… Well, my beloved Missouri Tigers couldn’t lose this past weekend, as they were on bye… Back in the football depths of the 90’s I used to say the Tigers couldn’t beat bye! It was a dark time for Tiger lovers back then… Now, we get all lathered up about the team with so much potential, only to see them fritter and waste it away each year… UGH! I still wear my black and gold though, for that’ s my state’s team! We, as a family, celebrated Rachel’s birthday on Saturday night, which meant I got to hold my darling granddaughter, Evie, for a long time. I sang her to sleep, although at her age (3 weeks) she was probably going to sleep without my singing! She’s so tiny… especially when I hold her! So, happy birthday tomorrow to Rachel… She believes all of November is her birthday month, and tends to celebrate it each and every day! Good for her! The Blue Jays, (Justin Heyward, and John Lodge formerly with the Moody Blues, take us to the finish line today, with one of my all-time fave songs… I Dreamed Last Night… a simply beautiful song! I hope you have a Marvelous Monday, and please remember To Be Good To Yourself!

Chuck Butler

Fed Cuts Rates, But Indicates It Will Pause Now…

Rocktober 31, 2019 

* Currencies & metals both rally on the rate cut news!

* Chinese PMI’s sink further into contraction territory… 

Good Day… And a Tub Thumpin’ Thursday to you! And Boo! It’s Halloween! I remember quite a few years ago now, when I was in New Orleans for a Conference, and was having dinner at the Commander’s Palace with Frank Trotter, and David Galland, when we decided that we should join the partiers on Bourbon Street. The problem was the partiers would all have on costumes, and we had none… So, undaunted,  we proceeded to walk down Bourbon Street with all the other crazily costumed partiers! Oh, what a night! So, I hope your little Trick-r-Treaters are ready to go tonight. Here it’s going to be cold, so we won’t actually get to see most of the costumes, and a lot of the real little ones will remain at home… The weather people were actually calling for snow this morning! YIKES! Carlos Santana greets me this morning with his song: Evil Ways, which is kind of apropos for today, eh?

I told you, I told you, I double, double told you! I told you that despite some dissenting voters in the FOMC, that the Fed would cut rates yesterday… The third rate cut this year, and brings our Fed Funds rate to 1.75%… The Fed did leave out some wording that led the Fed Watchers to believe that the Fed Heads will pause now with the rate cuts… Their announcement of a rate cut came less than a few hours after it was announced that the 3rd QTR GDP was 1.9%, as I reported yesterday… I think it’s wise at this point for the Fed to pause, because now the next meeting would come in the middle of December, and I don’t think they want to drive the markets further into bubble-land right before Christmas… Not that it won’t happen, I just think that pausing right now, and seeing what the previous 3 cuts have gotten you, is a wise thing to do…

The dollar bugs went and hid in the wall boards as soon as the rate cut was announced yesterday, but the upward movement, especially from the currencies that currently employ even lower rates than the U.S., saw a muted effort to rise… But rise they did, just not like it “used to be” when a country debased their currency… Of course back “in the day” fundamentals played a HUGE part in determining a currency’s value, and also back “in the day” the markets were not manipulated like they are today… So, given those things one doesn’t exist any longer and one does exist I was happy with the move the currencies made…

Somewhere along the line economists began being rock stars (in their own minds that is) and got the markets to believe that a rate cut was a “good thing”… It no longer was a signal to the markets that the economy was weakening, but rather that the economy just needed a new rocket launch stage if you will… And the markets with their gullibility bought it hook, line and sinker… And so here we are now with the Fed having cut rates at three consecutive meetings, and the dollar moves along as if nothing happened, and the stock jockeys are dancing in the streets…

Why wouldn’t the markets question the Fed’s announcement that the repo operations and liquidity operations will continue through the 2nd half of 2020? Wouldn’t that tell you that there’s something rotten in Denmark? Well, maybe I just have a sensitive nose, that can pick out the sour smells in an economy… The Fed Heads were actually slapping themselves on the back when the 3rd QTR initial print of GDP came out at 1.9%… The markets were expecting 1.6%… So, in a weird way, GDP outperformed its underperformance! HA!

And now, other than Personal Income and Spending and the ADP Employment report, we’ll wait a day for the Rocktober Jobs Jamboree… I told you earlier this week that the so-called experts have called for a print of just 75,000 jobs created in Rocktober… That would be below the 109,000 jobs needed each month to maintain the unemployment rate, according the Fed Atlanta…

I’m going to say that for today, Personal Income will be flat to unchanged, and Personal Spending will see a bump, due to the spending on Halloween costumes, candy, etc. But then Retail Sales last week showed that September was a negative print… Month to month, I guess we go, and when it will stop, no one knows!

Gold had a good day yesterday climbing $8 and is up another nearly $10 this morning, to trade right now at $1,505.  The World Gold Council (WGC) issued a report yesterday on Gold, and said that “maybe it’s time to switch from bonds to Gold”…   Their premise is that with more than $13 Trillion now outstanding in negative yielding Gov’t Bonds from around the world, that at least Gold competes with those bonds… 

I was talking to someone the other day, who had a pile of cash and wanted to know where to put it…  Do you know how many times through the years, that I’ve been asked that?  I always cringe, but then I tell them what I do, that way, I won’t tell them to do something I won’t do…   There are people out there in the investment world that get paid the big bucks to make those calls, and I would rather refer to them!  For I’m just a country bumpkin, sitting in his basement at a writing desk…  I’m just saying… 

But you can bet your sweet bippie that I said, “you should look into allocating a portion of your investments into Gold or Silver or both. Not 100% of your cash, not 50% of your cash, just an allocation that feels right to you..” 

OK…  So, the Fed has cut rates at 3 consecutive meetings, but were quite adamant about pausing… So, what would the Fed need to see in the economy for them to continue the with the rate cuts?  I guess we would need to ask them, but longtime readers know that I like to tap into the Fed Heads minds and tell you what they’re thinking, so let me get out my séance materials and get to work… 

Spirit, will you talk to me?  Good! I was wondering what the Fed Heads will need to see in the economy before cutting rates again, can you tap into their minds and tell me?  Of course!  “I see the Fed Heads needing to see Armageddon  in the economy before cutting rates again, for their leader, Mr. Powell, is hell bound and whiskey bent to not be mentioned with the zero rate leaders, Bernanke and Yelllen:”      

Oh thank you spirit…  OK, so if they need to see Armageddon, then that’s what they’ll see!  Yesterday, I said that I thought it was wise to pause the rate cuts right now, but come January, the Fed Heads need to get back on the rate cut horse and ride it fast! For Armageddon is coming folks…  I know I sound like the boy who cried wolf… And I’ve been wrong before, but this is something that’s been building for a long time now, and with all the derivatives, debt, manipulation and whatever else causes ill wills it’s going to be a doozy! 

I feel like the guy in the Big Short, who went short the housing market long before the collapse, for he saw the rot on the vine in housing, but he did it so soon, that everyone just about walked out on him, but then the collapse came, and he walked away with billions of dollars of profit…  OK, I won’t walk away with anything but the two nickels I rub together in my pocket, I’m talking about how he was out in front of the housing collapse, just I’ve been out in front of this awful recession that’s coming… 

The Chinese PMI’s printed last night, and they fell for the 6th consecutive month, and now sit at 49.3…  I told you, I told you, I double double told you that the Trade War would end up hurting both the U.S. and China…  Here in the U.S. it was reported last night that U.S. Farm bankruptcies surged 24% in their latest report.  And the Trade war was blamed for these bankruptcies…   

So, remember months ago, when economists were taking sides with some saying that the U.S. would in the Trade War, and others saying China would win the Trade War, and Chuck said, they’ll both lose the Trade War! 

I already talked about the Data Cupboard today… So, To Recap, the Fed Heads cut rates for a 3rd consecutive meeting, but indicated that they will pause now… The currencies and metals both rallied on the rate cut news, but the currency moves were held back by “the new trading” , and not the way things used to be…  Chuck talks to a spirit, since it’s Halloween, and found out what the Fed Heads will need to see in the economy before they cut rates again… You won’t want to have missed that! 

Errors and omissions…  Yesterday, I said that Amazon and Facebook would announce earnings, but I meant to say Apple, not Amazon… My mistake…  And I also said that the BREXIT extension was to December 12, but it’s really January 31st.    Silly me… sorry for those errors… 

For What It’s Worth…  Well, the timing on this couldn’t be worse, but it’s here and we get to deal with it… The “it” I’m talking about is a Trucking slowdown…  It’s all in the article on zerohedge.com and can be found here: https://www.zerohedge.com/economics/trucking-slowdown-ahead-holiday-season-suggests-consumer-faltering

Or, here’s your snippet: “The trucking industry continues to decelerate into year-end at a time when it should be rocketing higher ahead of the holiday season.

Old Dominion Freight Line reported 3Q/19 earnings last Thursday and warned the domestic economy is slowing. The freight company reported revenue declines Y/Y for the quarter, which was the first drop since 2016.

The rare decline in revenue from Old Dominion is a sign that the domestic economy is faltering, and it’s likely being led lower by deteriorating consumer demand. This means the manufacturing recession has successfully transmitted weakness into the consumer segment of the economy, which accounts for 70% of GDP.

This comes at a time when Wall Street is betting on Federal Reserve easing and a healthy consumer to rebound the economy between 4Q/19 and 1Q/20.

FreightWaves published a new report Thursday that detailed how trucking “load volumes continue to decelerate into the peak holiday shopping season.”

The DHL Supply Chain/FreightWaves Pricing Power Index, a real-time demand and supply indicator of the trucking industry, recorded 25 late last week, less than 50 means demand is lackluster and overcapacity plagues the industry. A score above 50 means demand is higher than capacity.

And for more color on consumer trends, not just in the U.S. but perhaps on a global view, the global shipping container industry is sounding an alarm.

Shipping rates for 40′ containers have taken another leg lower in the last several months. This means retailers are ordering fewer consumer goods from China and other emerging markets, a clear indication the consumer is weakening.

Last week, Amazon guided its forecast for the holiday season lower. Analysts were absolutely shocked, but it marks the beginning of a new trend where the consumer is expected to come under financial stress, pull back on spending, and could start saving as the next recession nears.
Tracking freight rates and volumes of various forms of transportation in domestic and global supply chains have given us perhaps an idea of what’s to come, that is, an underwhelming holiday season for retailers.”

Chuck again…  Capital Expenditures haven’t grown in years, and now a Trucking slowdown?  Got Gold? 

Currencies today 10/31/19 American Style: A$.6897, kiwi .6405, C$ .7595, euro 1.1162, sterling 1.2952, Swiss $1.0124, European Style: rand 15.0882, krone 9.1957, SEK 9.6490, forint 294.97, zloty 3.8155,    koruna 22.8556, RUB 63.88, yen 108.27, sing 1.3613, HKD 7.8356, INR 70.76, China 7.0571, peso 19.13, BRL 4.0001, Dollar Index 97.26, Oil $54.94,  10-year 1.74%, Silver $18.05.31, Platinum $928.76, Palladium $1,805.31, and Gold… $1,505.50

That’s it for today, and tomorrow…  Boo!  OK, what did the fish say when he swam into a wall?   Dam!  I remember when my older kids would always come to me before Halloween and ask me for jokes that they could tell while Trick-r-Treating…  Sometimes I got in trouble, because the jokes were a little in the gray… All in good fun!   Congratulations to the Washington Nationals, who won their franchise’s first World Series! No home team won on their own turf during this Series, which was very strange!  But St. Louisan and former Mizzou pitcher, Max Scherzer is now a World Series Champion! I laughed last night when Joe Buck said, “the Astros and Nationals share their spring training complex” I laughed because my spring training buddies talked about this 10 days ago, and the TV guys just got wind of it! HA!   OK… all good things must come to an end, and so it is with this Pfennig! Looking Glass takes us to the finish line today with their song: Brandy….  got that song in your head now? HA! I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and will Be Good To Yourself! 

Chuck Butler

 

It’s A FOMC Day!

Rocktober 30, 2019

* Currencies trade steady Eddie on Tuesday… 

* Gold & Silver keep their back and forth pattern in place… 

Good Day… And a Wonderful Wednesday to you! I went through a battery of tests yesterday, and still have one more next week before I know the real story with the blood flow to my lower extremities. Yesterday was all good news though, and the doctor said that we’re going in a new direction with the treatment of my leg wound… The bad news is that I had planned to go a mini-vacation starting the 9th, just like last year to get away from November, here, but…. I may not be able to go, now. I guess I’ll find out for sure next week… They’re going to have to hogtie me to my house to get me to stay here this winter, I can assure you that! I’ve gotta go where it’s warm! The Beatles greet me this morning with their love song: And I Love Her…

Well, from the looks of things when I got home yesterday around noon, the currencies were treading water, and certainly not gaining nor losing ground VS the dollar. Gold on the other had saw another engineered takedown on Monday, brining it back below $1,500, but like I’ve said a couple times now, this is to be expected, with every move above $1,500 countered with a move back below it the following day… And even though the boys in the band keep getting taken to court, and called names that are usually reserved for gangsters, they just keep doing what they’ve been told to do… keep Gold from moving higher too quickly…

But what’s a Gold bug like me going to do when we’re back to the back and forth between a level again? It’s no use for me to get all lathered up one day, and have to back track the next day… Eventually, this $1,500 level will be left behind, just like the $1,300 level was a couple of months ago…

Oh, and Palladium traded, briefly, over the $1,800 figure overnight… The experts say that a shortage of Palladium has caused this huge move in the metal’s price…  I always then have a follow up question for these guys, and ask why then hasn’t the shortage in Silver caused the same explosive upward move?     Crickets… 

Longtime readers know my affection for Lola (aka Goldman Sachs) NOT! But shoot, Rudy, right now they look like a choir boy when compared to JPMorgan… I’m going to go for the jugular this morning, so if this doesn’t suit your needs, then skip ahead… OK… I’ve quoted the folks, Pam and Russ Martens of www.wallstreetonparade.com before, and they seem to be the new “go to” folks for the GATA folks… And that suits me just fine, because I agree with nearly all that these two say… So, with no beating around the bush, let’s go to what really set me off yelling at the walls yesterday…

“JPMorgan Chase is the largest bank in the United States with $1.6 trillion in deposits from more than 5,000 retail bank branches spread across the country. When it withdraws liquidity from the U.S. financial system, that has a reverberating impact.

According to the filings that JPMorgan Chase makes annually with the Securities and Exchange Commission (SEC), since 2013 JPMorgan Chase has spent $77 billion buying back its own stock. That includes the whopping $17.01 billion it has spent in just the first nine months of this year buying back its stock.” – wall street on parade

Chuck again, and you do you want to know what really ticked me off? JPMorgan/ Chase admitted that they had “partly used customer deposits for their shares buybacks”… Well, if there was any question before as to whether or not the money you have on deposit in a back was yours or the bank’s… That’s been answered now!

So, a year ago, when the tax cut was put into place I said, “this will not be a boon for moms and pops, but for Corporations, and they will not use it to expand their businesses, or Banks to make loans, but to buy back their company stocks… And look where we are a year or so later?

I saw that coming like a hanging curveball back then folks… I’m shocked that most economists didn’t see it that way!

OK, let’s get back to the markets…. I had a dear reader send me a note the other day asking me to please continue to write about the mess in the repo market… Well, first of all, I didn’t get one reader to agree with me on my tin foil hat comment the other day… Which means that you all agree with me on this! WOW ! Yesterday’s repo action saw the lowest amount used in about a month…  But still… that’s $47 Billion worth, folks… 

So… The Fed keeps the “newly created electronic funds” coming, to support the lack of liquidity in the repo market… They’ve gone to buying bills to help banks with their liquidity, and all this to plug the holes in the  dam  (economy) one more time… Pretty soon, those plugs are going to begin to pop, and once one does, they all will follow, and then we’ll see just how much the Fed is going to keep the “newly created electronic funds” coming… My guess is they will open up the spigot, and let them flow!

And all that should be bad news for the dollar… Well, wait a minute, let me restate that… It COULD be bad news for the dollar… IF… the markets behave the way they should, when a Central Bank is debasing the country’s currency by adding truck loads of new currency to the mix… The reason I hesitated here, is that for the last month the dollar has been getting debased just about every day, and all we’ve seen from it as far as dollar weakness is a 1-cent move in the euro… I shake my head in disbelief, folks… but it is what it is!

Well, let’s see… Mario Draghi, the European Central Bank (ECB) President steps down this week, and former IMF head, Christine Legarde takes over… I’m sure that some pundits will be heaping praise on Draghi for “saving the euro” (back in 2011), but for me, I don’t think he did such a good job. He added over $3 Trillion euros to the ECB’s balance sheet among other crimes of passion… And publishing guru, and writer extraordinaire, Bill Bonner, in his daily letter, had this to say about Draghi’s time at the head of the ECB…

“First, they haven’t produced real prosperity. That can be seen by looking at the growth rate. In the eight years before Draghi took the helm, European GDP growth averaged a limp 1.2%. Over the Draghi years, the growth rate was exactly the same, 1.2%. In other words, that $3 trillion added to the euro economy bought nothing.

Second, the money didn’t stop the business cycle either. For example, Germany’s manufacturing sector just registered its 10th straight month of decline. (Germany is Europe’s biggest economy by GDP.)

Third, Mr. Draghi saw his mission as getting consumer prices to rise by 2% per year. Two percent is the totem of almost all modern economists; less than 2% is a threat to prosperity, they believe.”

Chuck again… I like that he said, “they believe”… He’s talking about the dolt economists… Because,  is less than 2% CPI (consumer inflation) really that big of a deal? I mean come on! Think about that… with no rising prices, an economy can move along nicely… Think further from 1980 when CPI was 14% to 2000 when it was 3%, the economy was growing… And CPI wasn’t below 2%, then was it? NO!

OK, the BREXIT deadline of 10/31 has been extended to December 12… So, just like the Fed, Treasury and Congress, that keep kicking the debt can down the road, the BREXIT negotiations have been kicked down the road… The U.K. will be going to the polls soon, all these unknowns about the future should be putting pressure on pound sterling.  But in that same perverse mentality that has taken over currency traders, the pound is on the rally tracks…  go figure! 

The Petrol Currencies aren’t getting any help from the stuck in the mud price of Oil these days…  There is one Petrol Currencies though that has, very stealthily moved stronger each day for the past 10 days, and that is the Brazilian real…  Things have calmed down here, and traders are booking gains on their short trades, it appears to me…  

Brazil still has positive interest rates to the dollar, euro, yen and sterling, so that could be beneficial to the real should their political problems continue to calm down. 

So, today’s the day the Fed Heads will put away the board games they’ve been playing since yesterday… I just got this mental picture of the Fed Heads sitting around a table and playing Dungeons and Dragons… Yeah, that’s the picture!   Any way, the Fed Heads will come out of their “green room” and announce what they are doing with interest rates…  

I read a piece yesterday that talked about how the rate decision isn’t a layup for another rate cut, as there were too many dissenters at the last rate cut meeting…  Well, that may be, but since the last rate cut meeting, 6 weeks ago, we’ve seen economic data go to hell in a hand basket, and if they hold to their words, about rate movements being tied to the economic data, then a rate cut will be announced this afternoon… 

Before we get there, the stock jockeys will see earnings from two of the “FANGS” companies… Amazon and Facebook…  will they overshadow what the Fed is going to do later in the day?   

The U.S. Data Cupboard saw the Case/ Shiller Home Price Index, reverse the recent trend of monthly declines in prices, when their August report showed an uptick in home prices…  You are aware that mortgage rates have fallen by leaps and bounds again, right?  But still home sales aren’t what you would consider to be great, given the rate environment… What gives here?  

Before I head to the Big Finish today, I wanted to mention something that I saw yesterday that sent shivers down my spine…   Have you heard of “Online Installment Loans”?   Well, that’s the new thing with the young folks, who don’t see the problems with these things…  I had been seeing these silly commercials on TV for Cashnet USA, and didn’t think anything of them, because I would have thought that everyone learned their lessons with “pay day loans”….   Mark my words on this folks…  At some point we will begin to see the defaults in these “online installment loans”…  I’m just saying… 

To recap…  The currencies held steady Eddie yesterday, but Gold & Silver saw downward movements that began with another engineered take down on Monday. Back and forth, over and below the $1,500 figure, is the new game for the price manipulators with Gold, and with Silver the figure is $18…  What’s JPMorgan up to now, that makes Lola look like a choir boy? Brexit gets an extension, and there will be an election in the U.K.  All this and more today! 

For What It’s Worth…  Well, I mentioned Lola (aka Goldman Sachs) earlier this morning, and now here I am talking about them in the FWIW! Lola has slashed their economic forecasts, and that article can be found here: https://www.zerohedge.com/economics/wholesale-inventories-tumble-september-confirm-gdp-growth-slowdown

Or, here’s your snippet: “As we warned, the drop in wholesale inventories has sparked concern on U.S. economic growth in Q3. Goldman has slashed its forecast:

“While the advance trade report had positive implications for net exports in September and Q4, the inventory data was weaker than our previous assumptions. We lowered our Q3 GDP tracking estimate by two tenths to +1.4%, ahead of Wednesday’s advance release.”

And The Atlanta Fed has just cut its forecast too:

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2019 is 1.7 percent on October 28, down from 1.8 percent on October 24.”

Indeed, since President Trump’s election we’ve only seen one quarter of growth at a rate below 2%, and analysts will be looking out for what this might mean for the economy heading into next year’s election.

Thanks to a plunge in inventory stacking for non-durable goods (which sounds admittedly oxymoronic), wholesale inventories slumped 0.7% MoM in September – the biggest decline since Nov 2017.”

Chuck again… Well the first report, with many revisions till to come, on 3rd QTR GDP was that it fell to 1.9%…  I’m sure it will see downward revisions as we go along…  

Currencies today 10/30/19 American Style: A$ .6860, kiwi .6350, C$ .7642, euro 1.1113, sterling 1.2890, Swiss $1.0079, European Style: rand 14.6085, krone 9.2132, SEK 9.7144, forint 296.33, zloty 3.8356,    koruna 22.9477, RUB 63.83, yen 108.85, sing 1.3620, HKD 7.8402, INR 70.68, China 7.0594, peso 19.11, BRL 3.9920, Dollar Index 97.64, Oil $55.61, 10-year 1.82%,  Silver $17.95, Platinum $923.59, Palladium $1,788.53, and Gold… $1,493.85

That’s it for today…  Well, I have what they call a Uni-boot on my left leg now…  This is the fourth different treatment for the leg wound…  Fingers crossed on this one, for sure!  Well, there’ll be a Game 7 in the World Series, as neither team been able to win at home!  St. Louisan and former Mizzou pitcher, Max Scherzer will pitch for the Nationals tonight…  I’m doing better on my new medicine, so hopefully my body has adjusted to it… Well, I’m really late today, so for that, I apologize…  Tomorrow is the end of Rocktober, and Halloween!  Will the Fed spook us early with a no rate cut announcement this afternoon?    Jackson Browne takes us to the finish line today with his song, that always brings a tear to my eye: Late For The Sky…  I hope you have a Wonderful Wednesday, and please Be Good To Yourself! 

Chuck Butler