The Trade War Goes Into A Higher Gear…

September 3, 2019

* But dollar bugs won’t be distracted, they keep buying dollars!

* Chuck takes us back to his days as a cashier in Des Moines, Iowa! 

Good Day… And a Tom Terrific Tuesday to you! What a great weekend here in my home town… The rain stayed away for the BBQ on Saturday, after coming down in buckets on Friday night, and then Sunday and Monday were just absolutely beautiful… I know that’s not fair, to the folks in the SouthEast, getting hammered by wind and rain from the hurricane Dorian. But, as Annie sang… The sun will come out tomorrow… So, hang in there, be careful, and don’t take any chances with mother nature! We ended the week yesterday with our neighbors, Paul and Lenore, sitting out back watching the Cardinals win again, and then had a wonderful dinner out on the deck… Marvin Gaye greets me this morning with his song: Inner City Blues… “makes you wanna holler, the way they do my life”…

Well, another round of tariffs went through on Chinese goods this past weekend… They had had been held back awaiting for any signs of progress in the negotiations, but since that didn’t happen, the tariffs went into place, and the stock jockeys, who last week bought tons of stocks on the thought that the Trade War might end, are not so much thinking that today, as stock futures are down big this morning…

And through all of these gyrations with stocks, the dollar continues to be bought… The dollar has now pushed the euro down below the 1.10 level, and it’s falling fast folks… (my English teacher would be proud of me using that alliteration! ) But that’s not going to save the euro… And right now I don’t know what can, besides a fall in the dollar, which doesn’t appear to be on anyone’s docket right now…

Longtime readers know that when the euro is getting sold, there’s not a currency in the world that can survive not being sold too… The Chinese kept the renminbi steady Eddie during the 2007-2008 financial meltdown, but once the first round of Quantitative Easing was announced, in March 2009, the Chinese let the dogs out to run VS the dollar… And soon the dollar was getting sold like Funnel Cakes at a State Fair! But… that’s not happening now… so we have to live with a stronger dollar… And that’s bound to make the President madder than a we hen! But so far, the dollar bugs have given the President the deaf ear treatment…

In addition, longtime readers, know that I believe the next recession is going to be a doozy! The Fed normally cuts 5% in interest rate cuts during a recession… We’re not even 1/2 the way to 5%… So, where will the extra arrows come from to stop the recession this time? Negative rates? More Quantitative Easing? Or how about both? That’s what I’m betting a shiny quarter on… Both of those being used by the Fed to stop the recession… But, by the time the Fed gets around to admitting they were wrong about the economy, and begin to deal with the recession, it’ll be too late, baby, now, it’s too late, though we really did try and make it!

Will the recession come still this year, or will it come in 2020? I doubt that it’ll be stubborn and wait any longer than 2020… And at the end of last year, I told you that by the end of this year, we would be in a recession… So, I’m still keeping a light on for that forecast!

Oh, and don’t look now, but there are some glaring signs that a recession is closer than we think… 1. The Bond curve inverted, 2. GDP is shrinking, 3. Corporate Earnings growth has slowed to 2.3% (was above 7%) 4. Remember last month when I told you that the Manufacturing Index was very close to going below 50, which would mean manufacturing is contracting? Well, the August ISM (manufacturing index ) will print today, and I expect it to fall below 50 at 49.9… 5. About a month ago I told you that Cass Freight shipments were dropping like flies, well, May they were down 6%, June they were down 5.3%, and now July they were down another 5.9%… Do you see a trend here? I thought you would! 6. CAPEX (capital expenditures) are way down, folks… There’s no economic recovery without CAPEX rising… So, there you go… I’m sure there are more… like the economic data, even the data that’s hedonically adjusted, continues to look weaker with every print…

Not that I want to see another financial meltdown… But a recession is something that should be welcomed by economies, for they clear out the excesses, and allow economies to come back stronger than ever… But the Fed has insisted on making sure we all know that they are smarter than the rest of us, and have tried to limit the effects of a recession, before the excesses were cleared out, and we’ve kicked that can down the road, since the Big Al Greenspan days!

Well, I got to see former colleagues, Jen and Chris at the BBQ last Saturday, and we all agreed that this current situation is bad, and can’t keep going like it is… But does that mean the economy will collapse today? No! Tomorrow? No! Next week? No! I think you get the picture… There’s not one person on the God’s green earth that can pinpoint exactly when the economy will collapse… I call events that could lead to the beginning of a collapse, snowflakes… You know like a snowflake can be the final snowflake on a mountain of snow that causes an avalanche… We’ll have our “snowflake moment”, but by the time we wake up or come back to work one day after a 3-day weekend, or whatever, it’ll be too late… Sorry, game over, take your ball and go home, stuff… I’m just saying…

My neighbor asked me if he could still buy Gold… I said, why not? I asked him, does your bank pay you much on your deposits, whether they be demand deposits, savings deposits or CD’s? So, let’s look at it this way… At least with Gold, you may not receive interest, but… You have a store of wealth, that has never gone to zero! The dollar has lost 95% of its value since the Fed took over in 1913… I just thought I would throw that tidbit out there… to compare…

Gold was getting any love on Thursday and Friday last week, but it’s difficult to keep a good currency/ metal down… And It recovered by $7, yesterday, as the Trade War ratchets upward… Just so you know… Central Banks around the world, sans the U.S., U.K., Japan, and Europe, are buying physical Gold by the truck loads each month… Are the Central Banks in Russia and China smarter than those in the U.S, U.K. Japan and Europe? Well, I do believe they are! Sorry Jerome Powell, Mario Draghi, Mark Carney, and Mr. Kuroda, with all respect, I would have to put my money on the Central Bankers of Russia and China… But then I would think that most people that read this letter would know that by now!

While on the subject of Gold & silver, Ed Steer printed his latest graph showing the number of days of production it would take to equal the amount of ounces of Gold & silver that are sold short… The reason I bring this up, is that Silver has now moved to 200 days of production needed, and Gold 130 days… As these two metals rise, don’t you think things get a little hairy for those bullion banks holding all those short positions? I personally hope that it gets so hairy that a few of them have to go into receivership! That would teach them!

Wouldn’t that drive you crazy? knowing you held all these short positions while the asset was moving higher each week?  I’ll tell you a story that relates to this… A long time ago, I was working in a brokerage/ commodity house in Des Moines, Iowa, And we had broker that made huge bets with commodity trades on something I won’t talk about… I being the cashier, kept issuing his clients margin calls, but he persuaded the management team that he was right, and it would be be right on the night, eventually… Well, one Monday morning, I arrived to hear that the project had fallen through, and the broker had checked himself into a mental facility… I then had to make all these calls to the clients telling them their positions were being sold out, and they needed to supply additional funds…  

That led to SEC investigations and depositions being taken… I had an SEC regulator, take me into a hallway, and start poking me in the chest, and telling me to start remembering the events better…  I told him to keep his hands off me, and that I would never forget the events! And I still haven’t! 

So will we hear about some Bullion Bank traders checking themselves into mental facilities?  Now, that would make this whole thing go full circle wouldn’t it?  

OK, the U.S. Data Cupboard today has the ISM manufacturing index that I’ve said would go below 50…  Then we’ll go along through the week with some various data prints tht don’t mean too much, until we get to Friday’s Jobs Jamboree for August…   I had a little back and forth with a writer last week that sent me a note that said, Chuck, you’re wrong about the U.S. consumer being tapped out, did you see how strong Personal Spending was In July? (it printed last week) …  I responded it, Haven’t we already talked about this before? July Retail Sales were strong, because of the back-to-school sales, and therefore Personal Spending would also be strong in July for the sale reason!  Besides, it wasn’t cash being spent, it was for the most part credit card purchases! 

To Recap…  The Trade Ward kicking into a higher gear this past weekend, as a new round of tariffs began… The Southeast it getting whipped around by Hurricane Dorian.   The dollar continues to get bought, despite all the goings on…  Chuck talks about the next recession, and has a flashback to the 70’s and a situation in Des Moines… 

For What It’s Worth… Last week, I received an email from my longtime friend, and former boss, Frank Trotter… He sent me a link to an article that I think I could have written… It’s about the Budget Deficits and how no one seem to care about them any longer (except me of course!) and it an be found here: https://www.washingtonpost.com/opinions/were-making-a-high-stakes-gamble-on-the-deficit/2019/08/25/82b0494e-c5c5-11e9-b5e4-54aa56d5b7ce_story.html?noredirect=on

Or, here’s your snippet: “It’s getting harder and harder to write these budget columns, because it must be obvious to almost everyone by now that hardly anyone in Washington (or perhaps any place) cares about the budget deficits. The assumption is that we can raise spending and cut taxes forever — or until some crisis occurs that forces us to do involuntarily what we won’t do voluntarily.

There is a bipartisan consensus of sorts that the presumed discipline of balancing the budget — discarding the least useful programs and increasing the least burdensome taxes — has been overtaken by expediency. Why bother to curb budget deficits when there seem to have been few, if any, damaging consequences in letting them continue? Worse, deficit reduction now might raise the risk of recession.

Just for the record, it’s worth reciting the basic facts in the latest report from the Congressional Budget Office. It demonstrates the nonchalance with which the budget is now treated by both parties.

According to CBO estimates, massive deficits stretch as far as the eye can see. Between 2020 and 2029, the projected deficits total $12.2 trillion, which is nearly $1 trillion more than was estimated in May. In every year after 2020, the deficit exceeds $1 trillion and is more than 4 percent of gross domestic product (GDP). By 2028, the projected deficit will be 5 percent of GDP.”

Chuck, and here’s the important part… The writer goes on to say: “This is a high-stakes gamble. The possible ways in which a world sated with dollar securities could trigger a financial or economic crisis are many. The consequences of a run on the dollar — the currency most held by multinational firms, international banks, investors and traders — would clearly destabilize the world economy. A prudent society would recognize this and take preventive steps.

We are not prudent. We are just raising the risks, seemingly determined to learn how much we can test the bounds of our ignorance.”
W have become… Perfectly Numb… 

Currencies today 9/3/19 American Style: A$.6732, kiwi .6293, C$ .7483, euro 1.0933, sterling 1.2037, Swiss $.9906, European Style: rand 15.1340, krone 9.1554, SEK 9.8823, forint 302.55, zloty 3.9940, koruna 23.6838, RUB 66.71, yen 106.12, sing 1.3929, HKD 7.8435, INR 72.36, China 7.1666, peso 20.09, BRL 4.1567, Dollar Index 99.28, Oil $54.07, 10-year 1.48%, Silver $18.46, Platinum $940.06, Palladium $1,545.87, and Gold… $1,529.88

That’s it for today…  I really don’t want to place the kiss of death on my beloved Cardinals, so I’ll just say they had a good 3 day weekend of 5 games! We had a blast at the Annual Butler Labor Day BBQ & Pool Party! A great time was had by all (I think!) I guess I estimated the amount of meat to cook as there was very little leftover, after everyone had eaten…  Good job Chuck!  I really didn’t want to wake up this morning… But I did, and then I thought to myself… Chuck you don’t get any gold stars for waking up early! HA!   Emerson, Lake & Palmer (ELP) take us to the finish line today with their song: Lucky Man…    Hey! they must be talking about me! Whenever I meet a new nurse, who wants to know my medical history, even though she could look it up, I tell her the history, and then add… And my friends call me “Lucky”!  HAHAHAHAHA    I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

Have I Got A Treat For You Today!

August 30, 2019

Good day… And a Fantastico Friday to you! This is out of the ordinary, me writing on a Friday, but I’m going to do very little of the writing. Instead, I have a special treat for you today… 

A very long time ago, my longtime good friend, and former boss, Frank Trotter, introduced me to one of his colleagues. His name…. Michael Checkan. Michael and I struck up a conversation, and he told me of sitting in audience in San Diego, and listening to me speak about currencies and metals, and was quite impressed, and wanted to meet me… I can’t tell you how embarrassed I was, but happy that I had done well… Through the years, we’ve stayed in touch, Michael is a cancer survivor too… So, we have a bond… When I was speaking a lot, we ran into each other all the time. Good times with Michael… He was the person that introduced me to Rob Vrijhof, of whom I spoke of two weeks ago…

Ok, now we have that background… Late last week, Michael sent me an email, and in it was a letter that he had written about Gold back in 2007… But it’s even more in touch with what’s going on today than ever! And he asked me to share it with my readers, and I’m so happy to do just that… Enjoy!

T H E T  TALE OF THE TAELS
By Michael Checkan

A Hard Lesson about Hard Money Gold protects wealth. This lesson isn’t new. But we do have to rediscover it from time to time. Back in 1975, I was a senior officer with the world’s oldest and largest dealer in precious metals and foreign currencies, Deak-Perera. I learned a lesson first-hand that taught me about the importance of the “barbaric relic” … GOLD! Deak-Perera was one of the few financial institutions in the U.S. with a combined expertise in precious metals, foreign currencies, and international banking. As a result of this knowledge, they were invited by the U.S. State Department in April 1975 to assist the South Vietnamese refugees that were being air-evacuated into Guam and the U.S. as Saigon fell. Deak-Perera would soon be catapulted into the national limelight. Their role was the exclusive “money changer” for all five of the Vietnamese Refugee Camps. Y ou m ay recall , it was only as of J a n u a r y 1 , 1 9 7 5 t h a t American c i t i z e n s w e r e o n c e a g a i n permitted to legally own bullion gold. It had bee n illegal to own gold since 1 9 3 3 w h e n P r e s i d e n t R o o s e v e l t t o o k t h e U.S. o f f t h e g o l d s t a n d a r d a n d c o n f i s c a t e d gold. Unaccustomed as we were to handling displaced persons, it was nonetheless clear that even the most prominent of these refugees would be arriving at the camps with little more than the clothes on their backs and whatever valuables they were able to carry. Who knew what those valuables would be … but one thing was certain, they wouldn’t be drawing checks on their local banks. All banks in that impoverished country had been nationalized along with the rest of the economy. The cruel joke you heard was that Vietnam was a true cash and carry economy.

A Day That Changed My life May 1975 found me at Eglin Air Force Base, Florida, one of the 5 refugee camps. Two particular families are burned in my mind … Wearing what had once been an expensively tailored suit was a middle-aged man, trim and well spoken. He obviously cared deeply about his bedraggled family. He had been a businessman in Vietnam, in fact, a banker. But now his family’s total fortune was contained in the small dingy canvas bag that he hung on to for dear life. Even through all the adversity he and his family had recently experienced, there was still a glimmer of hope in his eyes. Despite losing his job, his home and his country, what he gazed upon in that canvas bag caused an expression of relief on his face. It was his golden anchor! It was his key to a new life in a new country. I was about to learn the role of gold in a crisis. He poured the contents of the bag onto the table. There, gleaming in the sun, were 24Karat gold TAELs … a form of gold bullion indigenous to South East Asia. Each weighed 1.2 ounces. (37.5 grams) of pure .9999 fine gold. They looked like wafers … thin sheets delicately wrapped in paper. It was Deak-Perera’s job to buy the gold Taels from the refugees, and, with the proceeds, issue traveler’s checks.

Further back in line, there was another refugee who was less fortunate than the banker carrying gold Taels. Much like the banker, he was a successful businessman before being uprooted with his family by war. He approached my table with two suitcases in-hand. Like his countryman with the Taels, he had worked very hard, saved extremely well, and carried all his worldly wealth in those satchels. But, there was one major difference. His wealth was in the form of Piasters, paper money issued by the Republic of Vietnam. These paper promises of a government that no longer existed were worthless. Can you imagine … a lifetime of toil for two suitcases filled with worthless paper? Worthless as well were the U.S. issued Military Payment Certificates (MPC) which carried the likeness of movie stars. Other items, even valuable diamonds, jade and loose gems, were hard to exchange on the spot for a fair price. Only gold had a quick and ready market. Before that day, I always knew that precious metals were an important asset.

But, after looking into the eyes of these two men and their families, I knew first-hand the value of gold and other precious metals—they held their value when nothing else did. Is the TALE of the TAEL still relevant today?

Does gold in 2007 offer the same peace of mind and protection to Americans that it has through 5,000 years of history? Absolutely! As an American, there are many threats to your hard-earned wealth. The most insidious is not military in nature. It is the weakening of the U.S. dollar.

For the United States, the invoices are piling up. The costs of military conflicts, out-of-control government spending, rising healthcare, and entitlement programs for the vast number of emerging baby boomers add up to a number well in excess of revenue. The only politically acceptable
solution is to print more money and devalue the dollar. A good friend of mine, Don MackayCoghill, the “Father of the Krugerrand,” and respected figure in the precious metals industry for nearly half a century, recently had the following to say on the subject of the weakening dollar and the future of precious metals … “Because the action that needs to be taken to begin to turn the ship around is politically untenable, the only way out for the politicians on both sides of the house is the well worn track of devaluing the dollar by dramatically increasing the money supply—what used to be reported as M3. Having been fairly bearish on precious metal prices for a long period, I have over the past eighteen months turned into a full-blown bull. For the past five years or so the gold price has, in my opinion, simply reflected the weakness of the US dollar. Over the next five years the driver is going to revert to the same driver that pushed gold to $850 per ounce in January 1980—INFLATION—and this time around it is my view that the forthcoming bull run is going to dwarf anything that has gone before it. It is not going to happen overnight, but all the building blocks are in place, and I expect the fireworks to begin in the next three to five years.” So, when gold prices go to the moon, and the dollar falls off the abyss, which would you rather hold as a fair representation of a lifetime of toil? Would you rather be holding two suitcases full of dollar bills, or a canvas sack full of gold?

Chuck Again… I hope you enjoyed the Tale of Taels…  and I’ll leave you with one question…. Got Gold?   Have a Fantastico Friday, and a lovely Labor Day weekend! 

Mnuchin Gives No Intervention A Vote Of Confidence….

August 29, 2019

* The dollar continues to rule the roost

* Gold fights the dollar bugs, and wins! 

Good Day… And a Tub Thumpin’ Thursday to you! Well… one of my good friends (Kevin) said to me last night… “Well, your short-n-sweet, didn’t turn out to be so short”… And we all had a laugh, because they know as you probably do too dear reader, that once I get going… The fat fingers start flying over this keyboard, and the next thing you know… It’s long, once again! But not today… I really truly am going to make this short-n-sweet, because… Well, there’s just not that much new to talk about… It’s all a lather, rinse, repeat, of the yesterday and so on… With last Friday being the only blip in the daily goings on in the currencies, and order was restored on Monday… Quicksilver Messenger Service greets me this morning with their classic rock song: What About Me?

OK… Well, like I just said above, yesterday was no different than the previous days (except last Friday) The Trade War is getting uglier by the day, The Global economy is going to hell in a hand basket, followed by the U.S. economy, The Fed has backed themselves into a damned if the do and damned if they don’t situation… The President is still trying to get his way with the Fed and get them to cut rates big… The dollar bugs continue to rule the roost, and Gold, while it didn’t gain yesterday, is doing just fine… So… that’s the wrap up… talk to you next Tuesday! – Just kidding… 

Regarding any new news on coordinated intervention in the dollar… The GATA folks sent me this: “The Treasury Department has no intention of intervention at this time. Situations could change in the future but right now we are not contemplating an intervention, Mnuchin said Wednesday in an interview with Bloomberg News in Washington.”

OK… does that sound sort of like a team owner giving his coach a vote of confidence right before showing his the door soon after? Well, it does to me… And therefore I’m going to say that intervention to weaken the dollar is on the table to discuss right now…

The U.S. Data Cupboard had nothing for us to see yesterday, and today the big kahuna is the next revision of 2nd QTR GDP, which after the last downward revision it was 2.1%, and if you’ve been reading this week, you already know that I think it will be downgraded to 1.8%… And finally down to 1.5% when the final revision comes along…

To recap… nothing new has come to light this week, other than the stuff we’ve already discussed… Chuck smells a coordinated intervention coming to weaken the dollar, even though the Treasury Sec. said “not at this time” And this one is a real McCoy, short-n-sweet letter today…

For What It’s Worth… OK, you didn’t think I would leave for a 4 day weekend, and not have a FWIW article for you did you? This one came to be from the good folks at GATA, and they supplied a link to the article… Coming GATA you can figure that it’s about Gold… which it is… and it can be found here: http://petergrandich.com/2019/08/27/gold-the-easy-part-is-now-behind-us/

Or, here’s your snippet: “Back in late summer of 2018, I made a decision that gold, and related investment vehicles, was a much better choice for capital gains opportunity than both general equities and the overall U.S. stock market going forward. I chose to hold just one general equity and to instead own gold, numerous gold ETFs and one individual mining stocks as my personal portfolio. Gold was on either side of $1,200 during that timeframe.

Since then, I continued to suggest gold, and those related items, as my personal choice over the U.S. stock market. As of now, it has proven to be a much better choice with gold up 30% and with gold-related vehicles up an average 100% or more. This contrasts, in the same period, with the flat-to-down general stock market. Gold and gold-related items have even outperformed general equities just in 2019.

While many of the remaining ‘gold bears’ and those who claim that “gold’s rise is basically behind us”, they are mostly the same folks who said the same at $1,200 and who also claimed that gold was going under a $1,000 too. Words like “relic” were common in their description of gold, and many of them even claimed that bitcoin and cryptocurrencies were the ‘new gold’. How’s that working out for them?

While I had a bias in favor of gold for the first 30 or so years of my career in and around the financial arena, I have had no such bias now for the last 5+ years. I neither promote investment vehicles that benefit from my stance nor am I employed by anyone who would benefit from my bullish talk on gold. My motivation has simply been 100% for personal profit motives that have led my viewpoints.

Believe it or not, the easy part is now over. While gold still has hundreds of dollars more of upside potential, it’s going to be more volatile and harder to hold on to, then it was the last 12 months.”

Chuck again…. This is a very long article, so make sure you have a few minutes to devote to reading it… Mr. Grandich makes some wonderful points that I’ve alluded to through the past couple of years…

Currencies today 8/29/19 American Style: A$.6745, kiwi .6344, C$ .7528, euro 1.1070, sterling 1.2209, Swiss $.9827, European Style: rand 15.3075, krone 9.0580, SEK 9.7417, forint 298.13, zloty 3.9584, koruna 23.3445, RUB 66.60, yen 106.25, sing 1.3875, HKD 7.8462, INR 71.71, China 7.1612, peso 20.10, BRL 4.1394, Dollar Index 98.26, Oil $56.18, 10-year 1.50%, Silver $18.51, Platinum $925.16, Palladium $1,484.46, and Gold… $1,535.56

That’s it for today… Another beautiful day here… I had to check the calendar, and yes we ARE in August! WOW! It looks like my home away from home in the South is going to be getting hit with some very bad weather, right now Dorian is looking like it will hit Palm Beach, which is not far from my place… UGH! Let’s hope it takes a wide turn and goes back out to sea! I’ll be cooking all day tomorrow, and then again on Saturday morning… It should be a good and fun crowd as usual and hopefully the rain stays away… Leon Russell takes us to the finish line today with his song: Queen Of The Roller Derby… I hope you enjoyed your short-n-sweet Pfennig today… and that you have a Tub Thumpin’ Thursday, and a Fantastico Friday, and fabulous weekend… If you’re on the East Coast in the South, please take precautions… And please Be Good To Yourself! I’ll see you… In September… see you when the summer’s through… 

Chuck Butler

U.K. PM Johnson To Suspend Parliament…

August 28, 2019

* Back to the dollar bugs ruling the roost… 

* But the dollar can’t hold Gold in check! 

Good Day… And a Wonderful Wednesday to you… A Chamber of Commerce Day here in the St. Louis region yesterday… And I failed to spend much of the day outside… I’ve told you before that sometimes I get whacked out, and all I want to do is sleep all day… Well, I didn’t sleep ALL day, just a good piece of it! I would be fired in a minute the first time I fell asleep at a job! So, I guess it’s a good thing I was shown the door a few years ago! Pink Floyd greets me this morning with my fave Pink Floyd song: Comfortably Numb…. Remember when I used to say that the U.S. had become comfortably numb with debt accumulation? I gave up on that, because it just keeps getting worse and worse! 

This should be short and sweet today, as I just don’t have that much to say in addition to what I’ve already said about the markets, manipulation, dots and twits…  But I’ll give it that old college try!

The dollar is back in the driver’s seat this morning, pushing the currencies down to levels that look very ugly… The Norwegian krone, which a couple of weeks ago, I said I was worried about, finally gave up the ship and fell into the 9 handle… UGH!    The Euro Wannabes, forints, zlotys and korunas, have hit the skids, and just keep sliding downward… Remember what I’ve said in the past, that when these three currencies get on the rally tracks then you know it’s a good currency rally… 

Even the Russian ruble which has been Steady Eddie through all of this dollar strength, gave up some ground in the trading yesterday and overnight. And this is doubly interesting because the price of Oil rose to above $55 in the past 24 hours… So no love for the Petrol Currencies, all the love is being given to the dollar right now…  So, we might as well embrace that…  I mean it… Shoot Rudy, you can’t fight city hall, you don’t pull on Superman’s cape, and you can’t fight the dollar bugs once they’re entrenched in their bunkers… 

But what if all this dollar strength isn’t good for the world,  including the U.S.?  Well, I have some thoughts on that subject, that I’ll let the folks at Bloomberg explain to you this morning…  “Not only does the U.S. currency’s climb tend to erode the profits of American multinationals, but it also raises the costs of foreign corporations with trillions of dollar-denominated debt. The pressure from greenback strength on other economies could even encourage those countries to join a U.S. attempt to weaken it.

“If you start to see the U.S. economy really begin to decelerate and the dollar continue to strengthen, that would suggest a dislocation with fundamentals that is unsustainable and will get the attention of policy makers,” Bank of America senior foreign-exchange strategist Ben Randol said in a phone interview. “If the U.S. can make its concerns heard with its international counterparts, it can potentially get some support for a coordinated intervention that suppresses the strength of the dollar.”

There’s that “intervention” word again…  There sure seems to a lot of talk about that possibility suddenly… So, I found a good article on it for the FWIW section today, you won’t want to miss that! 

OK, U.K. PM Boris Johnson, threw a cat among the pigeons in the past 24 hours, as he  announced that he was going to suspend Parliament at the end of September… Why? Because that way they would not be in session to vote down a BREXIT Deal…  That’s Tricky, isn’t it?  Imagine if you would, that the U.S. was a parliamentary gov’t. and Trump could just suspend parliament (the house and senate) and do what he wanted?  See? Young people are always wanting to change the Gov’t… To what? Checks and balances folks… that’s what it’s all about in governing a country… 

Sterling traders didn’t like the message that Johnson sent, and they began to mark down the currency immediately…  

But all this talk of bad things happening to currencies and all the love given to the dollar doesn’t apply when we switch gears and head over to the Gold window…  The dollar may be the cat’s meow VS the currencies, but it’s not cutting the mustard when it comes to keeping Gold in check… 

Gold gained $18 yesterday…  And Silver? OMG! it rose above $18 for the first time in what seems like a lifetime!  I had just read a traders comments on Silver this past weekend, and he talked about the $18.50 level as key, for he thought that once Silver went through $18.50 it’s next stop would be $20… And if history is to come into play here with Silver, the last time Silver went on a run  and got to $20, it was clear sailing all the way to $50…

OK, I’m not shouting from a rooftop that Silver is going to $50… I’m just pointing out that the last time that’s what it did…  And you know me, I love it when history gets repeated!

The U.S. Data Cupboard had the Case/Shiller Home Price Index (HPI) yesterday, and like I said yesterday, “Home prices in preceding months had fallen, and I didn’t see any reason why the June report wouldn’t show the same, and it did… It showed Home Prices only grew 3.1%, VS 3.3% in May…. Oh, and get this… I’m going to pause a minute here so you can get the real sarcasm of this…. The Consumer Confidence Index rose from 128 to 135 this month…   Really?  With all the talk of the Trade War getting really ugly, and a recession coming, the Fed backed into a corner, Consumers are Confident?  Well, bust my buttons!  Oh, that’s right, Consumers believe the stock market is the economy, shoot Rudy, even the Fed believes that now, judging from their statement last week, So, I guess Consumers aren’t wrong for being confident…  NOT!

For What It’s Worth… OK, yesterday, I painted a picture for you of how two countries and maybe three could be joining forces to get what they want out of their respective currencies via intervention… The U.S. / Japan and maybe even the Eurozone… And then I find this article on MarketWatch that just blew me away… They must be Pfennig readers because that’s what they were talking about! All the while you read this, remember what I was talking about yesterday, and say… “How’d he know”? HA! OK, you can find the article here: https://www.marketwatch.com/story/heres-how-currency-intervention-works-2019-07-12

Or, here’s your snippet: “Intervention occurs when a central bank buys or sells its own currency in an effort to influence the exchange rate.
A government might take action to halt a precipitous slide or a sharp runup in its currency following a shock. It could also act in concert with or on behalf of other countries in an effort to stabilize a particular currency. In fact, the last time the U.S. intervened in the currency market was in March 2011, as part of a coordinated effort by the Group of Seven nations to arrest a surge in the Japanese yen following a devastating earthquake and tsunami.

According to the New York Fed, the foreign currencies used to intervene by the U.S. usually come equally from Federal Reserve holdings and the Treasury’s Exchange Stabilization Fund. Those holding consist of euros and Japanese yen.

The New York Fed’s trading desk does the buying and selling, often dealing simultaneously with several large interbank dealers in the spot market. The New York Fed, in a 2007 note, observed that it historically hasn’t engaged in the forward market or other derivative transactions.

The process is also meant to be transparent, the New York Fed says, with the U.S. Treasury secretary typically confirming the move while the Fed is conducting the operation or shortly thereafter. After all, authorities are attempting to send market participants a message, so there’s little incentive for them to cover their tracks.”

Chuck Again… OK, also to the point… I’m not in favor of intervention… I’ve always said that the markets have deeper pockets than any Central Bank… But that comment came to me years ago, before there was carte blanche printing of currencies… Think about that one for a moment… So combined intervention may work, short term, but it’s not always a given that it will continue to work… And then all those countries lose money and currency traders are the only ones that come out on top!

Currencies today 8/28/19 American Style: A$ .6745, kiwi .6347, C$ .7511, euro 1.1086, sterling 1.2207, Swiss $.9812, European Style: rand 15.3690, krone 9.0334, SEK 9.7058, forint 297.70, zloty 3.9584, koruna 23.3170, RUB 66.32, yen 105.72, sing 1.38, HKD 7.8462, INR 71.81, China 7.1595, peso 20.00, BRL 4.1467, Dollar Index 98.15, Oil $55.64, 10-year 1.46%, Silver $18.43, Platinum $877.35, Palladium $1,472.54, and Gold $1,543.19

That’s it for today…  Another Chamber of Commerce day here for today, and today, even if I do feel like sleeping I’ll do it outside!  No, I’ve got things to do today, to prepare for the big BBQ this weekend!  Well, college Football really kicks off this weekend as everyone plays! And that includes my Mizzou Tigers… Good luck Tigers, I’m expecting a very good year! This morning we’re being taken to the finish line by the Outfield and their song: Your Love…  I always think of my good friend Rick when an 80’s song plays…  I hope you have a Wonderful Weekend, and please Be Good To Yourself!

Chuck Butler

 

Why Can’t The Powers That Be Allow Markets To Be Markets?

August 27, 2019 

* Currencies, Gold, bonds all are none events on Monday

* Japan’s Fin Min is worried about the yens latest move…. 

Good Day… And a Tom Terrific Tuesday to you… Back to regular programming today… I drove through what felt and looked like a Tropical Storm yesterday on my way to the doc’s office. I know what I’m talking about because about 8 years ago, I did just that in Florida on my way to the Ft. Lauderdale Airport… Cars were pulled off on the side of the highway, and I’ve got to say, at least the water didn’t build up on the highway like it did on the streets yesterday… And, by the time I got to the doc’s office, it had stopped raining, and by the time I came back out, the sun was shining! Crazy weather! I hope none of that’s in store for this coming Labor Day Holiday Weekend… The Doobie Brothers greet me this morning with a song from their great Captain and Me album…. Natural Thing…

Well, the Plunge Protection Team must have been out in force yesterday, as the stock bounced back, along with the dollar… Hmmm… One day it’s armegeddon and the next day, it’s all sunshine, lollipops and rainbows and everything… Oh, well, their day will come… (as opposed to Our Day Will Come) And they’ll get their rears handed to them! But that’s for another day… As they say!

But for all of you keeping score at home… Let me paint this picture so you get my drift here…  Yesterday morning stock futures were down big, which is a strong indication that stocks will open up in the red…  But then almost magically, they didn’t… How’d that happen?  Ahhh grasshopper, the Plunge Protection Team (PPT) had to have been there with arms full of contracts to buy, otherwise things would have looked differently yesterday…  Another case of market manipulation..

So… the world is talking about the Trade War… The markets all over the world are screaming for help, along with their respective economies.. And we sit here, with a Fed that has its hands tied… I don’t blame Powell, for having the Fed backed into a corner… I blame all the years that Big Ben Bernanke and Janet Yellen left rates at zero… That’s who I blame! One side is trying everything they can to make things look bad come reelection time, and the other side is lying through their collective teeth on how good things are… It’s crazy out there, and you, me and the guy down the street that cuts his grass with his shirt off, all know it!

The currencies were all back to where the started on Friday morning, having given back their mini-gains… That really ticks me off, because why can’t we let markets be markets, and not fiddle with them all the time? So, did you get to read the piece yesterday, from the late Bart Chilton, who on his deathbed, basically said, “yes, JPMorgan was too big, and they exceeded their positions limits, and yes, we saw price manipulation, but we didn’t do anything about it”… Thanks Bart Chilton, for coming clean, but… You left out why, the CFTC didn’t go after JPMorgan… OK, this is where I get out tin foil hat and talk conspiracy… But I do have those Wilileaks memos from back in the 70’s to stand behind me when I say this… The CFTC didn’t go after JPMorgan because, JPMorgan had a Get Out of Jail Free Card, from the U.S. Gov’t… The Gov’t needed to keep the price of Gold down so that people wouldn’t shun the dollar, and so they can’t be found in the markets, but they can give the wink and nod to JPM to do their bidding… And so, that’s the reason, as far as I’m concerned why the CFTC never slapped JPM’s hands, never issued a cease and desist order on them. And so on…

So, the currencies gave back their mini-gains, and Gold remained in the previous day’s clothes on the day, nothing to write home about… And the Bond yields didn’t really move, with the 10-year remaining at 1.53%… But Stocks rallied…

You know I mentioned this yesterday, and I thought it was a big deal, but apparently the only article I could find on it was the one I used yesterday. And in that one they talked about how the Bank of England (BOE) Gov. Mark Carney called for a global currency to replace the dollar… Did you hear what I just said? Isn’t that crazy, that an ally as staunch as the U.K. has always been (well since the 1800’s) would not chastise their Central Bank Gov. for making a statement like that…

OK, so I’m sure you’ve been noticing that the Japanese yen, which rallied a couple of months ago, then weakened , is back on the rally tracks, and this latest move into the 105 handle has the Japanese leaders worried…  Japanese Finance Minister Taro Aso said on Tuesday that he was observing the currency moves “with a sense of urgency” after this latest move to the 105 handle in yen.  This phrase Aso used is usually reserved for currencies getting far out of whack with what the leaders want to see… Stability is the word most often used…  

So, here’s where I’m going with this…  President Trump has repeatedly called for a weaker dollar, and now the Japanese leaders are concerned with yen’s strength… Sounds like a case of combined intervention to me, could be in works…  More market manipulation! 

I read where the U.S. and China might be getting together again to talk about the Trade War…  I was laughing hysterically, when the media was all bent out of shape when the President said that China had called him twice about meetings, and then China denied making any calls…  Come on Media, this is the Big Leagues! These statements are used to get countries to get moving…  My goodness, go find something else to write about! 

Things are quiet in the Eurozone…  Not a peep out the leaders there with what’s going on in Italy… Hmmm…  No news is good news, right?  I wonder if the European Central Bank (ECB) would be interested in getting in on the combined intervention that I talked about being a possibility between Japan and the U.S.?  Maybe a smidgen, but then when the euro rose in value, outgoing ECB President, Draghi, would get to throw it under a bus one last time before he departs!  That would be funny if it weren’t true! 

Quite frankly, the euro doesn’t deserve to be stronger right now… The economic data from the region just doesn’t warrant a much stronger currency… But remember what I’ve always told you… If the dollar went into a weak trend, it wouldn’t matter what the Eurozone fundamentals were doing the euro would rally…   Because….  here we go with a statement that I’ve made a thousand times through the years, The euro is the offset currency to the dollar!

And what the heck are the Chinese doing with the renminbi… Recently we saw them devalue the renminbi and now they’ve been allowing it to weaken the max amount almost daily… 7.14 is the level this morning… I don’t know what it is, but I’m sure some propeller heads there have figured out how cheap the renminbi needs to get to offset the tariffs… I would think a lot cheaper…  I’m just saying… 

The Petrol Currencies led by the Russian ruble, just can’t buy a bid these days… The ruble and the Canadian dollar/ loonie seem to be stuck in the mud, and the Norwegian krone and Brazilian real have been getting cut off at the knees…  And that leads me to talk about the real… It was just a couple of months ago that I mentioned that the new government in Brazil was responsible for the recent rally, but that we should be careful there, because, as we found out with the Modi rally in India a few years ago, those political rallies are short lived…  And well, the real’s slide down the slippery slope pretty much seals that idea!

The U.S. Data cupboard has the Case/Shiller Home Price Index (HPI) for June today… Home prices have been slipping in the preceding  months, I see no reason to believe they didn’t continue doing that in June…  We’ll also see the stupid Consumer Confidence Index, which last month took a big fall in the index number, but it had the same effect as removing a bucket of sand from a beach! 

To recap…  The PPT must have come to rescue, for the stock futures yesterday were down big, but the stock market rallied on the day…  the currencies, Gold, bonds, all were none events on the day…  Japan’s leaders are concerned with the yen’s recent rally…  And President Trump is always saying that he wants a weaker dollar, seems like a match made on one of those dating sites! 

For What It’s Worth…  So, I’ve talked about this for two days now, and when I saw this on Reuters I just had to circle it for the FWIW section today… It’s about the BOE’s Mark Carney and his call to replace the dollar and it can be found here: https://www.reuters.com/article/us-usa-fed-jacksonhole-carney/world-needs-to-end-risky-reliance-on-u-s-dollar-boes-carney-idUSKCN1VD28C

Or, here’s your snippet: “Bank of England Governor Mark Carney took aim at the U.S. dollar’s “destabilizing” role in the world economy on Friday and said central banks might need to join together to create their own replacement reserve currency.  

The dollar’s dominance of the global financial system increased the risks of a liquidity trap of ultra-low interest rates and weak growth, Carney told central bankers from around the world gathered in Jackson Hole, Wyoming, in the United States.

“While the world economy is being reordered, the U.S. dollar remains as important as when Bretton Woods collapsed,” Carney said, referring to the end of the dollar’s peg to gold in the early 1970s.

Carney – who was considered a candidate to be the next head of the International Monetary Fund but failed to secure backing from Europe’s governments – said the problems in financial system were encouraging protectionist and populist policies. “

Chuck again…  Again I say,,, why on earth is our staunchest ally having one of their leaders talk about replacing the dollar?  There’s something here that I’m not seeing right now, but I will, and when I do… You’ll know!

Currencies today 8/27/19 American Style: A$.6763, kiwi .6375, C$ .7558, euro 1.1108, sterling 1.2268, Swiss $.9801, European Style: rand 15.2726, krone 8.9926, SEK 9.6322, forint 295.90, zloty 3.9293, koruna 23.2277, RUB 66.06 yen 105.73, sing 1.3880, HKD 7.8447, INR 71.54, China 7.1427, peso 19.95, BRL 4.1327, Dollar Index 97.91, Oil $54.31, 10-year 1.50%, Silver $17.82, Platinum $862.64, Palladium $1,485.43, and Gold… $1.529.89

That’s it for today…  Another win last night for my beloved Cardinals, who suddenly look like a team on a mission… Gotta keep the pedal to the metal boys!  Well, maybe the rain has stopped, even though it still looks like rain any minute outside…  My visit to the oncologist was good… She loves me, and thinks I’m Superman…  I told her, that chemo was my kryptonite!  HA!  I added three pictures to my wall that faces me at my writing desk… One of my darling daughter Dawn from about 20 years ago (she looks the same!) One of Son Andrew handing his brother Alex, his high school diploma on stage, and the last one is my fave picture of all time… It’s Kathy’s senior year picture… (but don’t tell her I talked about her!)   Donnie Iris takes us to the finish line today with his song: Ah! Leah!  (a one hit wonder!) I hope you have a Tom Terrific Tuesday, and Please Be Good To Yourself!

Chuck Butler

Trade War Begins To Get Real Ugly…

August 26, 2019

* Gold soars on Fed’s waffling… 

* Trump Practices singing a Brenda Lee song…  

Good Day… And a Marvelous Monday to you…. I know, I told you no Pfennig this morning… But I had so many thoughts this weekend I didn’t want them to have to wait… So, this will be quick and dirty, just some of my thoughts this weekend…. A pretty darn fantabulous weekend, weather-wise, and baseball wise here in the Midwest, even if we did get some rain yesterday… Where did the historical heat from the dog days of August go? It sure wasn’t around this past weekend, or from the forecasts for the week, not this week either! Something strange is going on here… But not as strange as what went on in Jackson Hole, Wy. This past weekend… I have a quick question… Would you like to be in Fed Chairman, Jerome Powell’s shoes, right now? He’s getting calls from Central Banks around the world that they are in trouble, The Trade War with China just went into super drive, The economic data for your country is faltering, and the President is claiming it’s your fault! You’re damned if you do cut rates, because critics will say you knelt down and kissed the ring of the President, and if you don’t cuts rates, you fear you’ll be so far behind the recession 8-ball… Food for thought this Marvelous Monday! Jefferson Airplane greets me this morning with their song: Volunteers…

With kudos to the great Brenda Lee…. I’m sorry… So sorry… That I was such a fool… I didn’t know that (Trade Wars) could be so cruel… Yes, I changed it to meet my needs… But I can hear President Trump humming the music to the great Brenda Lee song… For this past weekend, he was asked about if he had regrets with the Trade War with China, and he answered, “Yeah, sure why not. Might as well. Might as well. I have second thoughts about everything.”

In case you’ve been living under a rock… China slapped another round of tariffs on the U.S. and our timing couldn’t have been worse, as 3 tanker ships filled to the brim with Oil have already set sail for China… and the U.S. President sent out a message to U.S. Companies that moved their businesses to China, to “get out”… I doubt that he can make these companies leave China, but I’m sure things could get pretty difficult for them if they decide to stay… I’m just saying…

The currencies finally made a mini-move on Friday VS the dollar, as the winds of change were blowing in from Jackson Hole Wyoming… Bank of England Gov. Mark Carney, with his bag o’ promises, called for a global money to be used instead of the dollar… Wait? What? Our most trusted ally, (the U.K.) has their central banker calling for a replacement for the dollar? My O My… things really do begin to change here, huh?

And Gold? It rallied about $32 on the day to $1, 526… WOW! So, as I painted in the opening paragraph, the markets now see Powell’s dilemma and feel for him, by whacking a chunk out of the dollar’s armor on Friday… Oh and in the overnight markets, Gold was up another $18 last night, to 1,544, but things have settled down as the overnight sessions went along, and Gold is only up a buck or two this morning… 

More and more, economists, writers, observers, pundits, etc. are getting on my bandwagon that a recession is near… It’s so close I could spit in its backyard! And so all those that thought the Fed was wrong about their rate cut in July, are taking back their words and saying that the Fed needs to get out in front of the recession and cut again soon! And all this talk sure has the dollar bugs on the run to safer wall boards since Thursday when we last talked… So, maybe, just maybe, cause you never know (famous words of Joaquin Andujar), the President will get his wish and see a cheaper dollar…

Of course, what happens most of the time is that once the tracks are greased for a short trip down the slippery slope, the train keeps going… and before you know it, we’re in a weak dollar mulit-year trend once again! I say once again, and use the term to mean the 4th weak dollar trend, since 1971, when President Nixon, took us off the gold standard. 1971-78, 1985-95, 2002-2010, and the next one would be the weak dollar trend periods… How long the next one lasts is anyone’s guess, but if you had me surrounded by people at a campfire, I might say it would never recover, and the financial system that we all know and love (well, not everyone, but they don’t have a clue anyway) will be replaced by something new and shiny…

Of course, I can’t remember the last time I sat around a campfire… So, getting me there would take some gargantuan feat! HA!

Did you hear what France’s PM did at the G7 meeting his country hosted? If not… Guess who came to dinner? Unbelievable! The Iran leader was there, as Macron’s guest, unbeknownst to Trump, or anyone else… Sort of like sneaking Elvis through the back door! If I were the President, I would have stood up, and made a big deal out of walking out of the room… But that’s just me and temper showing!

OK, so the currencies rallied on Friday, but they couldn’t hold onto those moves in the overnight markets…  (profit taking? Or the PPT at work?) This Trade War has got to stop before somebody loses and eye! It’s all fun and games until that happens right? And I for one know it’s no picnic in the park to be minus one eye!

I was asked to answer some questions on a survey… And I said, “STOP THE TARIFFS, THEY ARE CAUSING A GLOBAL RECESSION! I’m sure the folks that put those things together, cut that out of my reply! Oh, and just read that the stock futures are down big this morning, which doesn’t bode well for a recovery in the stock market today, after losing 623 points on Friday… Hey, with what I’ve told you previously about historically speaking stocks perform miserably during a recession, maybe, we’re already in the recession?

New Home Sales last month dropped like the stock market, a very ugly day for New Home Sales… And later this week, we’ll see another revision in the 2nd QTR GDP… I expect this revision to be yet another cut in the previous figure of 2.1%… It might even be as large of a cut as -0.3%, to 1.8%… The final revision should end up around 1.5%…

To Recap…So, that’s all I have for you today… Gold is soaring, the currencies have gotten up off the canvas, and doing some rope a dope with the dollar this morning… The Trade War has gone ballistic, The Fed didn’t feel the need to come to the economy’s aid, just to prove they aren’t under Trump’s orders… And the data continues to be bad…

For What It’s Worth…. OK… this article came to me via my friends at GATA… The people that have made it their worthwhile to prove price manipulation in metals… Them, along with Ted Butler (no relation that I know of), Ed Steer, Chuck Butler, and others have long been thought of as “Conspiracy Theorists” and that we wore tin foil hats… But no longer folks! These following words are from the death bed of Bart Chilton, form regulator for the CFTC, the folks that should be shutting down the like of JPMorgan et al, for their blatant manipulation of metals, but never got around to it… So, here’s what Bart had to say in the end…

“They did ultimately get down to the position [limit],” he recalled. “But it was at that time that they were so large, that I made the comment about how large a particular bank was in the market. Which sort of shocked people. And it shocked me, quite frankly, that it was so large.”

In the end, the evidence was compelling, but not enough to nail anyone to the wall.

“We just didn’t have the traders, and we didn’t have the market participants dead to rights. But we had lots of stuff. And we had real stuff that would have played really well in court… But the damning part had to be backed up by other requirements of evidence under the law. And we didn’t get all of that.” _ the late Bart Chilton, of the CFTC… from the GATA folks…

Chuck Again… I can’t begin to tell you how many times I was called to a lecturing to me about writing about conspiracy theories….. I wonder what those people think now… Oh, I don’t care, I’m happy doing what I’m doing, but I wonder what it will be like when one day our paths cross again, and they have to say… “Chuck, you were right, we were wrong”

Currencies today 8/26/19 American Style: A$ .6766, kiwi .6380, C$ .7518, euro 1.1115, sterling 1.2234, Swiss $.9805, European Style: rand 15.2593, krone 8.9848, SEK 9.6696, forint 296.00, zloty 3.9250, koruna 23.2063, RUB 65.97, yen 105.90, sing 1.3878, HKD 7.8440, INR 72.05, China 7.0949, peso 19.90, BRL 4.1229, Dollar Index 97.96, Oil $54.81, 10-year 1.53%, Silver $17.59, Platinum $863.51, Palladium $1,476.26, and Gold… $1,528.64

That’s it for today… A sweep of the Rockies by the Cardinals this past weekend, along with a sweep of the Cubs by the Nationals, has my beloved Cardinals in first place by 2.5 games over the Cubs… There’s still plenty of games to be played, so come on boys, keep your foot on the gas! I see my oncologist this morning, bright and early. I haven’t seen her for 2 months, I’m still here! Some things never change, like the small tumor in my jaw… or the wound on my leg… She’ll take one look at me and have déjà vu from two months ago! I’ll start this week sprucing up the backyard, and get ready for a day of BBQing on Friday, and Saturday! We thought our friends from New Jersey, were going to join us this year for the BBQ, but they had to change plans, so that’s not going to happen… UGH! OK… The Ozark Mountain Daredevils takes us to the finish line today with their song: If You Wanna Get To Heaven…. You’ve got to raise a little Hell! (And brother have I been doing that most of my life! HA) I hope you have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler

Fed’s Meeting Minutes Disappoint The Rate Cut Campers…

August 22, 2019

* Currencies remained stuck in the mud yesterday

* Eurozone PMI’s remain below 50… 

Good Day… And a Tub Thumpin’ Thursday to you! I was with a few of my good friends at my fave watering hole yesterday afternoon, and one of them said, “Wainwright is due for a game that looks like he’s throwing underhanded to hitters”, and I replied, “oh, no, not at home, he’s usually at the top of his game before the home crowd”… And then the Brewers went out and scored 4 on him in the first inning… OUCH! That’s going to hurt! But as my mom used to tell me, it’s only a game, Chuck and someone has to lose… And so it was for my beloved Cardinals last night! Yes, greets me this morning with their song: Owner Of A Broken Heart… Yes, was one of my favorite groups back in the 70’s and then they went on to be huge in the 80’s and 90’s! WOW!

Well, it was another dull day for the currencies yesterday… nothing to write about, other than it was just another day, when the dollar kept the currencies clamped down, but didn’t rally either! I don’t know if I can keep writing each day if this continues… I’m really bored with the currencies lately, and the only thing that keeps me interested is the price action in Gold… So… let’s go see what Gold did yesterday!

And just when I say that, guess what Gold did yesterday? Nothing, absolutely nothing, say it again! OK, well maybe it gained a buck or two, but in reality, that’s nothing, absolutely nothing, say it again! Thanks to the great Edwin Starr for the lyrics I borrowed today… I think all the traders are waiting for the Fed Heads to begin talking at the Jackson Hole Boondoggle, that stars in earnest tomorrow… Fed Chairman Jerome Powell, will be the headline speaker at the boondoggle, so, if there’s going to be any fireworks at the boondoggle they will come when Powell speaks…

Do You recall back a few years ago, at this boondoggle when St. Louis Fed President, James Bullard called for the next round of Quantitative Easing/ QE? That sent the dollar to the woodshed, and created a mini-rally in the currencies… I believe it was 2009… But I could be wrong, I’ve been wrong before, and I’m not ashamed to admit it… The Fed heads should take a cue from what I just said, for they’ve been wrong so many times in the past, that I’ve stopped keeping score!

The Fed’s meeting minutes that printed yesterday, seemed to me to be more of a mea culpa than anything… They characterized their rate cut in July to be a “recalibration of their rate hikes”… and that Fed officials who voted to lower interest rates three weeks ago agreed that the move shouldn’t be viewed as part of a “pre-set course” for future cuts….

Well, you would have thought that would take the starch out of the stock jockeys, who thought for sure they were going to get thrown a bone, in the meeting minutes…  But the stock jockeys will not be disappointed! And Stocks  gained over 200 points yesterday. So, what happens if the Jackson Hole Boondoggle doesn’t throw them a bone, as I told you yesterday, the markets were front running the Fed, in my opinion that is, and thought they would get news of more rate cuts… So, it could get nasty for the stock jockeys for sure… But right now they seem to no care! 

Well, Fed Chairman Powell, may still give the stock jockeys something to cheer about, at this point, I’m thinking that he won’t… And that won’t be taken well by the markets… And it will be cheered in loud voice by the dollar bugs… for no future rate cuts, right now that is, is like manna from heaven for them…  I read a report on Bloomberg this morning where the writer said that Fed Chairman Powell, “needs to give the markets what they want”… Really?  So, that’s what the Fed is there to do, cow tow to the markets?  I know it sure seems that they have done that since the days of Big Al Greenspan, but as a mandate?  I shake my head in disbelief that we’ve gone here… 

And that has me questioning why the dollar didn’t gain a lot of ground yesterday, after the meeting minutes were printed… Has the dollar gone about as far it will go? Like the song from the musical Okahoma… Everything’s up to date in Kansas City, They’ve gone about as far that can go… They went and built a skyscraper seven stories high, About as high as a buildin’ orta grow.

Yes, besides being a long time rock-n-roller, I have a love for the musicals too… I was in the high school production of Carousel, but it got canceled when the teachers went on strike my senior year…

OK, back to the markets… I don’t know if you all have gotten the drift I’ve been sending your way the past couple years of about how the Russian ruble is my new fave currency to own… Back in 2002, it was the euro, then in 2005, it was the Norwegian krone, then the Aussie and kiwi dollars, and now it’s the Russian ruble…

I recall being on the trading desk and having clients accuse me of being unpatriotic because I talked glowingly about the ruble… I would simply explain to them that, 1. I’m probably the most patriotic person they’ll ever know, and 2. That investment opportunities have nothing to do with patriotism…

How can you not be a fan of the ruble? It has the highest interest payable to depositors in the industrialized world… They’ve taken everything the U.S. and Europe has throw at them and said, “is that all you’ve got?” And their economy grows even with economic sanctions… And that they have the most intelligent Central Bank head than any country has… She was the one that decided years ago that instead of buying other currencies with their reserves they would instead buy physical Gold… And that decision has paid off brilliantly for the country, folks… So go ahead and throw stones at the ruble and me… But we’ll be laughing one day,  I’ll bet a shiny quarter on that one!

Ahh… The shiny quarter bet… I can hear you saying, OK Chuck, you really went overboard with that bet! NOT! Well, this goes back quite a few years, but anytime we had two opposite opinions on the currency trade desk, we would bet a shiny quarter… yes, we could have bet hundreds of dollars. But instead we chose a shiny quarter, for it wasn’t the money that was important, it was WHO WAS RIGHT!

OK This morning the dollar is getting a move on as the euro has dropped to a 3 week low, after their PMI (manufacturing index) remained below 50 at 47, but it was better than the previous month’s 46.5, but as long as it remains below the line in the sand that is 50, the markets view the Eurozone manufacturing contracting, and that’s not a good thing!  

The Eurozone can take some pride in the fact that their Composite PMI increased to 51.8 from 51.5… The Composite print includes Services… So, the Eurozone Services were quite strong last month. 

Right now, as I write, we’re waiting for the European Central Banks’ (ECB) meeting minutes from their last meeting… I don’t expect any bombshells to explode here, for the comment that sent the euro to the woodshed came from an out of meeting interview with ECB outgoing President, Draghi, who talked about the need to go back to the bond buying business… 

The U.S. Data Cupboard has nothing for us to see that’s worth the paper it’s printed on… But yesterday, there was a surprise data print that wasn’t on the docket…  The annual payroll revision….   And it was interesting in that it took over 500,000 jobs away from the previous reports!  I’ve got the MarketWatch article about this in the FWIW section today, so we have that going for us today! HA!

To recap…  Another day of no movement, yesterday in the currencies, but there’s something brewing this morning, so maybe the stuck in the mud currencies will actually move today!  The Fed’s Meeting Minutes were more of a mea culpa for the July rate cut, and didn’t give anyone reading them a warm and fuzzy about future rate cuts… That didn’t bother the stock jockeys, as they still have the Jackson Hole Boondoggle speech by Fed Chair Powell that might still throw them the bone they are looking for… 

For What It’s Worth…  OK, this is a first for yours truly, I was never aware that the Gov’t did this payroll revision before… But they did it now, and that’s what this article explains and it can be found here: https://www.marketwatch.com/story/us-created-500000-fewer-jobs-since-2018-than-previously-reported-new-figures-show-2019-08-21

Or, here’s your snippet: “Turns out hiring wasn’t nearly as strong in 2018 and early 2019 as the government initially reported — by about a half-million jobs.

The economy had about 501,000 fewer jobs as of March 2019 than the Bureau of Labor Statistics initially calculated in its survey of business establishments. That’s the largest revision since the waning stages of the Great Recession in 2009.

The newly revised figures indicate the economy didn’t get a huge boost last year from President Trump’s tax cuts and higher federal spending. They also signal the economy is a bit weaker than previously believed and could give the Federal Reserve even greater reason to cut interest rates in September.

“This makes some sense, as the 223,000 average monthly increase in 2018 seemed too good to be true in light of how tight the labor market has become and how much trouble firms are said to be having finding qualified workers,” said chief economist Stephen Stanley of Amherst Pierpont Securities.

The average 223,000 monthly increase in employment in 2018 — the strongest in three years — could be trimmed to 180,000 to 185,000, economists estimate.”

Chuck Again…  OK, who among you are going to say that you doubted me each month when I said that the jobs reports were artificially bumped up? Come on, I know some of you did, and just let it slide because it was just me crying wolf once again… Ahhh, grasshopper, but the wolf showed up didn’t it?  Now tell me this, would the dollar have enjoyed such a strong run through those months if the jobs reports were 180,000 a month and not 225,000 and more?  

Currencies today 8/22/19 American Style: A$.6768, kiwi .6378, C$ .7530, euro 1.1080, sterling 1.2164, Swiss $.9840, European Style: rand 15.1677, krone 8.9640, SEK 9.6685, forint 295.76, zloty 3.9380, koruna 23.2650, RUB 66.03, yen 106.60, sing 1.3862, HKD 7.8395, INR 71.81, China 7.0601, peso 19.73, BRL 4.0382, Dollar Index 98.31, Oil $56.17, 10-year 1.62%, Silver $17.04, Platinum $854.02, Palladium $1,473.36, and Gold… $1,494.66

That’s it for today…  I truly believe the Cardinals would have come back to win that game last night, but the monsoons came and the game was called with the Brewers ahead… UGH!  That was some monstrous rain last night! My little granddaughter, Delaney Grace will be singing the national anthem at the Gateway Grizzlies Independent League stadium tomorrow night… Good Luck little d!  OK… don’t forget no Pfennig on Monday, that’ll give me two weeks in a row with 4 day weekends! YAHOO!  When I finally got into the Pfennig Replies box this week, I noticed quite a few emails from readers wanting to know why the Pfennig stopped at the end of July…  Ahem… I was on vacation, I only wrote about it 100 times before I actually took off! HA!   Maroon 5 takes us to the finish line today with their song: Harder To Breathe…   Alrighty then, I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday! And please Be Good To Yourself!

Chuck Butler

The Fed’s Jackson Hole Boondoggle Takes Center Stage…

August 21, 2019

* Currencies are held in check by the dollar bugs once again!

* Will we finally see a markets manipulator go to jail? 

Good Day… And a Wonderful Wednesday to you!  What’s gotten into my beloved Cardinals? They’re playing like a real baseball team! Errors are down, base running snafus have gone away, the pitching is good, and the hitting is nascent… (I’ve said all along that this team can’t hit consistently) And they’re winning the close games…  What’s going on here? HA!  I got a late start today, so this is later than usual…  Hey! I’m retired! The Pousette-Dart Band greets me this morning with their song: Amnesia…  I hope that it’s only amnesia, believe me I’m sick but not insane! 

Well, Tuesday was much like Monday, which was much like Friday, and so on, for the currencies… The dollar bugs have a tight clamp on them…  There was some upward movement in a handful of currencies yesterday, but their gains were limited and held in check.  I don’t like having to write about no action to speak of, but what’s a bear to do when there’s no honey?  

Gold on the other hand has movement every day, sometimes it’s not on the right side of the ledger, but then volatility is what makes the grass grow green! And yesterday, Gold found a way to gain $11 on the day… But this morning it’s down $6 in early trading…   Remember when the price manipulators kept Gold below $1,300, and every time it blipped higher than the figure, they took it back down?  Well, it appears their new figure is $1,500…  I’m of the opinion that the physical demand is making the price manipulators with their short Gold (& Silver ) paper trades, just don’t have the effect on the metals like they used to…  

I saw a report last week where the writer was having a hissy fit over the fact that China had banned Gold imports. The writer was convinced that this meant that China was no longer adding Gold to their reserves, and that would be a bad thing for the price of Gold…  Well, Ahem…  let me clear my throat here, before I explain this…  China doesn’t need the imports… They produce tons of Gold each year, so they can continue to add to their reserves with their production…  What they do need are the dollars they hold to pay their dollar denominated debt… So, they made a wise decision to stop spending dollars on Gold imports…   No need to have a hissy fit, no need to run for the hills, because things in Gold (& Silver) are going to hell in a hand basket…  Just calm down…   

Furthermore, in Gold…  I just found a great piece on traders getting caught with their hands in the cookie jar, with commodities (that includes Gold & Silver) , so I’ll feature that in the FWIW section today… You won’t want to skip over that one! Spoiler alert… Someone’s finally going to jail!

Well, the Fed’s Jackson Hole Boondoggle begins today, and gets hot and heavy tomorrow…  The stock jockeys seem to be front running the Fed, right now, anticipating that the Boondoggle will bring them what they want to hear, and that’s confirmation that the Fed will be cutting rates at their next meeting in September.  I’m wondering why the dollar bugs seem to be ignoring what could be coming from the Jackson Hole Boondoggle…  

Publishing guru, and writer extraordinaire, Bill Bonner, had a very funny article yesterday, when he talked about how President Trump had said that What the Fed needs to do is to cut rates 100 Basis Points and get back in the Quantitative Easing business, for if the Fed did those things that all would be right in the world…   Bill Bonner took exception to that comment, and said, “Who knew? , Who knew that’s all we needed to do to save the world?”  I just chuckled my way through his sarcasm, and if you want to read it you can find it here: https://bonnerandpartners.com/the-president-will-do-whatever-it-takes-to-get-the-fed-to-further-cut-rates/

In the Eurozone today, they’re dealing with some bad news from Italy… Let’s go to the tape… Italy’s Prime Minister Giuseppe Conte has resigned, plunging the country into fresh political turmoil.  Uh-oh!  I told you a week or so ago that Italy had shown up at the ECB’s door with a basket full of problems, and this is one of those problems…  Look, in the “old days” PM’s in Italy came and went like rashes… Remember Silvio Berlusconi?  He was in, he was out, he was in jail, and he was back in, and then out, and so on… So, in reality, the loss of a PM is not that big of a deal, except that Italy is no longer on its own, and it’s part of BIG family now, and these types of things really cause problems… 

A new PM in the UK, hasn’t brought about any progress in the BREXIT negotiations… They have no BREXIT deal… I saw where companies were stockpiling goods from the European Union countries, in the event they are shut down from being able to access those markets…  I find this all very unnecessary…  Get the BREXIT deal done, and move on!  For Heaven’s Sake, do it!

Today, the Big Deal is not Jackson Hole, but the Fed’s meeting minutes from their last meeting where they reversed their rate cycle with a rate cut…  I think the markets are willing to accept that the meeting minutes not have what they are looking for, but are holding out hope that they can get a double dose of rate cut talk, from both the minutes and the Jackson Hole Boondoggle…  

What happens if they are disappointed? Oh, Heaven I don’t want to think about that! In fact, I’m in agreement with the stock jockeys here that the Fed will give some very good hints of their rate cut position at the Jackson Hole Boondoggle…  

OK, well, like I said above, the Fed’s Meeting Minutes will print this afternoon, and along with Existing Home Sales here in the U.S. that’s all the U.S. Data Cupboard has for us today…  It’s been slim pickings in the Data Cupboard so far this week, and the rest of the week doesn’t look that exciting with the Flash Markit ISM (manufacturing index) to print tomorrow, along with Leading Indicators and that’s it!  

So, it’s all about Jackson Hole this week…  UGH!

To recap… it was another day just like the previous days with the dollar bugs keeping the currencies clamped down, and any gains VS the dollar are limited to keep them in check… But the lack of volatility in currencies is made up for in the pricing in Gold… Gold gained $11 yesterday, but is down $6 in early trading today…  The Fed’s Jackson Hole Boondoggle gets going today… Chuck talks about how the stock jockeys seem to be front running the Fed… Hmmm….

For What It’s Worth… OK, I told you above that I had this article about Price Manipulators getting caught, and so with no further adieu… You can find it here: https://www.zerohedge.com/news/2019-08-20/jpmorgan-spoofer-pleads-guilty-gold-manipulation-faces-11-years-jail

Or, here’s your snippet: “There was a time when the merest mention of gold manipulation in “reputable” media was enough to have one branded a perpetual conspiracy theorist with a tinfoil farm out back. That was roughly coincident with a time when Libor, FX, mortgage, and bond market manipulation was also considered unthinkable, when High Frequency Traders were believed to “provide liquidity”, when the stock market was said to not be manipulated by the Fed, and when the ever-confused media, always eager to take “complicated” financial concepts at the face value set by a self-serving establishment, never dared to question anything.

All that changed last November when a former JPMorgan precious-metals trader admitted he engaged in a six-year spoofing scheme that defrauded investors in gold, silver, platinum, and palladium futures contracts. John Edmonds, then 36, pled guilty under seal in the District of Connecticut to commodities fraud, conspiracy to commit wire fraud, commodities price manipulation, and spoofing. As FBI Assistant Director in Charge Sweeney explained that “with his guilty plea, Edmonds admitted he intended to introduce materially false and misleading information into the commodities markets.”

“The Criminal Division is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets through spoofing or any other illegal conduct.”
“By conspiring with his trading partners to place spoof orders, he blatantly attempted to profit off of an unfair market that he helped create. The FBI will continue to work with our partners to insure financial markets remain a level playing field for all investors.”

Then, one month ago, Corey Flaum, who worked as a trader at Bear Stearns and Bank of Nova Scotia, also admitted to precious metals manipulation, saying he placed thousands of bogus orders for futures contracts over a nine-year period.

Now it’s #3.

Christiaan Trunz, another former JPMorgan metals trader, pleaded guilty on Tuesday to conspiracy and to manipulating prices in the precious-metals market as part of the U.S. government’s continuing crackdown on bogus spoofing trades. 

Trunz, 34, admitted during a hearing in federal court in Brooklyn, New York, that he also used spoofing to manipulate precious metal prices and to extract a profit while he worked at Bear Stearns and at JPMorgan between 2007 to 2016. He pleaded guilty to in connection with a specific spoofing incident in June 2016.

While Trunz could face a maximum prison term of as long as 135 months when U.S. District Judge Pamela Chen sentences him in February, he will likely get away with a fine and a warning never to rig the precious metals market again.”

Chuck Again…  Oh, all those years, that I kept getting told to stop talking about Price manipulation because it wasn’t real…  I wish I were still there to show them this… No wait… I don’t wish that either! I’m just happy as a lark here where I am! 

Currencies today 8/21/19 American Style: A$.6795, kiwi .6415, C$ .7521, euro 1.1105, sterling 1.2141, Swiss $.9792, European Style: rand 15.2040, krone 8.9401, SEK 9.6402, forint 294.70, zloty 3.8155, koruna 23.2240, RUB 66.67, yen 106.46, sing 1.3828, HKD 7.8414, INR 71.50, China 7.0565, peso 19.69, BRL 4.0588, Dollar Index 98.17, Oil $56.82, 10-year 1.58%, Silver $17.09, Platinum $846.82, Palladium $1,491.01, and Gold… $1,500.46

That’s it for today…  I just found out that I have a doctor’s appt very early on Monday, so there won’t be a Pfennig on Monday….  OK, this just got to be much later today, because I just received a call from a friend in Switzerland, Rob Vrijhof, called to chat about the world, and markets. He calls me about once a quarter, and we solve the problems of the world!  So, I’m back now, and will get this out the door immediately! The Righteous Brothers take us to the finish line today with their song: Soul & Inspiration…   I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

 

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

August 20, 2019 

* Gold get whacked yesterday, but rebounds this morning… 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

 

Gold Gets Whacked, So What Are You Waiting For?

August 19, 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler