Has The Fed Painted Itself Into A Corner?

September 3, 2020

* Another day of “suspicious” dollar buying… 

* Bill Bonner gives us his thoughts on the eviction moratorium… 

Good Day…. And a Tub Thumpin’ Thursday to you! Another yucky day weather wise here where I live in the summer and fall months… I don’t know that it ever really rained, it just looked like it was going to do that all day… That marked 3 days without sunshine… Jimmy Cliff sings a song that goes: Hello Sunshine, won’t  you please come around? Hello Sunshine don’t let me down….   After a night when the Cardinals got 23 hits, and scored 16 runs….  They were only able to muster up 6 hits last night, left the bases loaded in the top of the ninth, and lost in the bottom of the inning…. UGH!  As Tony LaRussa used to always remind Cardinals fans, that winning the series was good… So, the Cardinals took 2 of 3 from the Red, and now go Wrigley for the weekend, after getting their first day off in 19 days in which they played 23 games! Now it’s makeup time with several double headers this month… UGH!  OK…  The Beatles greet me this morning with their song from the Sgt. Pepper’s Album: With A Little Help From My friends…. Joe Cocker did a bang up job doing that song at Woodstock, too….

OK, well, yesterday I gave the idea of simple profit taking with a dash of short paper trades thrown in, a run up the flag pole…. But when I threw it against the wall, it slide right down… So once again the PPT has stepped in to save the dollar….  We can’t have two days where the dollar gets sold any longer without the PPT stepping to throw the dollar a life saver…. You know the kind that saves you from drowning, not the kind that comes in multiple flavors in a role with a hold in the middle of them!

The euro lost more ground, and now their lofty level of earlier this week seems like a distant memory….  The Aussie dollar (A$) also got sold, but at least there was a fundamental reason to do so….  Yesterday, it was announced that Australia had entered into a recession last quarter, their first recession in 29 years!  I was beginning to wonder if the folks that call the recession down under, had forgotten what the parameters were, as it had been so long since they were called on to calculate a recession!

This darn, I really wanted to say the other word there, pandemic is really beginning to get under my skin… Yes, lots of people have died from it…. But haven’t we carried things a little too far too long with this virus? I’m just saying…

Gold lost $26 and ended the day at $1,943.10….  Simply amazing that these guys get away with what they get away with…. My dad always told me, Chuck, be patient, your opportunity or time will come, and when it does you had better be prepared to act….    My dad was the smartest man I ever met… He had such logic about things, and I guess that’s where I learned that from….

Ok, sorry about that… Silver also lost 64-cents on the day to close at $27.54….  Platinum was down, Palladium was down, but Rhodium was up… Go figure, right? All three of them are used in catalytic converters for cars, so why would one be up while the other 2 are down, is beyond my thought process, folks…. So, let’s move along to talk about something I do understand!

And the overnight markets haven’t been kind to both the currencies and metals once again….  Gold has given up $9 in the early morning trading, and the euro looks like it would only take a couple more sell orders to bring it back below 1.18…  I just don’t get it… The Chairman of the most powerful Central Bank in the world, just told the world last week that he doesn’t care about anything else but to get inflation rising…. and that doesn’t get traders selling dollars like funnel cakes at a state fair? Gimme a break! 

Ok, remember last week when I talked about the moratorium on evictions, and expressed my concern about everyone else that’s involved in a mortgage loan, spending most of the time talking about the harm to the mortgage bond, and bond holder.  And then yesterday, longtime friend, publishing guru, and author, Bill Bonner gave us his thoughts on the eviction moratorium….. Take it away Bill!

“And what about the landlords? Will there be a moratorium on mortgage defaults? And what about the banks that hold the mortgages? Will there be a moratorium on bank failures?

And what about real estate prices? If landlords can’t collect rents… and can’t pay their mortgages… won’t real estate prices fall? Should there be a moratorium to stop them?

Maybe Mr. Trump should declare a moratorium on all bankruptcies, defaults, sales shortfalls, profit slumps, crashes, and repossessions… and knuckle-breaking loan shark collections.

And why not put a moratorium on weight gain and COVID deaths, too?” – Bill Bonner

OK… yesterday I told you about how the Fed would keep rates low to be able to keep the bond servicing costs down (interest costs)…. And while perusing Twitter, I found this ditty that plays well in the sandbox with what I told you… (Paying less interest while borrowing more is how we got into this mess in the first place: “Net interest costs on the debt have declined 12% during the first 10 mos. of the fiscal year compared with the same period a year earlier, despite rising red ink.”) – Twitter

So, am I right, well, am I right, well?  Of course I am! Not patting myself on the back here folks, just making the point that even little old me (HA!) can figure that one out all by himself!

Well…. I’ve been out walking…. I don’t do that much talking, these days…. These days I sit on cornerstones and count the time in quarter tones to ten, my friend. Don’t remind me of my failures, I have not forgotten them….  (one of my fave Jackson Browne songs, These Days) The reason I  began this part of the letter with the lyrics to that song is that I began to write about how I was thinking, about…. And the next thing I knew, I was singing that song in my head, and my fat fingers were following along! 

So, what I was really thinking about is what the Fed is doing buying all these Corporate bonds, and bond fund ETF’s….  I’ve come to the conclusion that they’ve painted themselves into a corner, and can’t stop buying now, because doing so would cause a major calamity in the markets, and the Fed Heads don’t want to be pointed to as the reason the bubble burst….  

Longtime trader, and active Twitter supplier, Sven Henrich, had this to say about the Fed and their bond buying: “so rather the attitude is: let the bubble run, hope it sorts itself out, rather than be blamed for pricking the bubble they created. imho.”- Sven Henrich on Twitter…

OK, I had two FWIW stories lined up today, and decided to go with the one that’s below, and save the other one for Tuesday next week (remember Monday is a holiday) and it’s from Pam and Russ Martens of wallstreetonparade.com, so that’ll give you something to look forward to….  Another thing my dad taught me when I began my career in the music industry, he told me, “Chuck, always leave your audience wanting…”  So, that’s what I’m doing today giving you a teaser for Monday….  Pretty suave of me, eh? HAHAHAHA!

The U.S. Data Cupboard yesterday had the ADP Employment report for August, and from what they reported the number blew away the forecast of 162,000, and came in at 428,000 jobs added in August! Well, as the late Great Charlie Daniels said, “Well, you’re pretty good old son, but sit down on that stump and let me show you how it’s done”…. We as a country have laid off over 30 Million people and that doesn’t count the “gig workers”, so when the economy began to open up, shouldn’t the jobs added be blowout numbers? Of course they should!

But short-sighted people don’t see it that way… They see the blowout number, and start singing, we’re in the money, we’re in the money, and clicking their heels way up high!

Today’s Data Cupboard has the Weekly Initial Jobless Claims which two weeks ago was 1 Million on the dot… The experts thing that last week’s number will drop below 1 Million….  I guess we’ll find out very soon, eh?  We’ll also see the stupid Productivity report for August, The ISM Services index for August, and the Trade deficit for July…

To recap…. So much for profit taking, this has turned into another PPT-like rout on the currencies and metals by buying dollars, and delivering short Gold paper trades to the COMEX…  Every time it appears that the dollar is going down a deep rabbit hole, it gets pulled out by its ears, and put on Terra Firma once again….  Bill Bonner asks some good questions about the eviction moratorium…  Chuck talks some more about how the Fed can’t raise rates….  And there was lots of singing going on this morning…. Good thing no one is around at this hour of the morning!

For What It’s Worth….  Well, I’ve been telling you that this feels as though we’re in the beginning stages of a new weak dollar trend for a couple of weeks now…. So, when I saw this article featured on Ed Steer’s letter yesterday, I just knew it had to be our FWIW to end the week!  This about the dollar going into a long multi-year weak trend, and it isn’t me talking! It’s someone else, and it can be found here: https://in.reuters.com/article/usa-markets-dollar-analysis/u-s-dollars-woes-are-only-beginning-some-bears-say-idINKBN25S3KN

Or, here’s your snippet: “ The chief investment officer of currency manager A.G. Bisset believes the U.S. currency will plunge 36% against the euro over the next year or so, taking it to levels it has not seen in more than a decade.

The greenback’s recent weakness “is the beginning of a very large move” that could hurt the droves of investors exposed to it through their holdings in U.S. stocks and bonds, Lindahl said.

Wall Street is swarming with bearish dollar forecasts, though few are as extreme as Lindahl’s.

The U.S. currency is near its lowest level in 27 months and is down about 11% from its 2020 peak against a basket of its peers, with Goldman Sachs, UBS and Société Générale among the banks forecasting more losses.

Hedge fund bets against the dollar in futures markets are at their highest level in about a decade, according to data from the Commodity Futures Trading Commission, while 36% of fund managers in a recent Bank of America Global Research survey named shorting the dollar as their top currency trade for the second half of the year.”

Chuck again… Well, this reminds me of 2001, when I wrote the Decline of the Dollar white paper, and our PR people couldn’t get me an interview to talk about it, until…. Everyone else in the industry began to see the writing on the wall…. And then It was like, “how did you know this was going to happen?”  I would tell them, well, if you line up the tea leaves correctly, they tell the story”… And then I would laugh, and say, no, seriously, all you had to look at were the fundamentals….  These days, what you have to look at are the tea leaves! Seriously, it’s all about sentiment… And if everyone begins to have a sentiment change toward being long the dollar, then Katy Bar The Door!

Market  prices 9/3/20: American Style:  A$ .7292,  kiwi .6730,  C$ .7626, euro 1.1810, sterling 1.3250, Swiss $1.0954, European Style: rand 16.7707, krone 8.9171, SEK 8.7568,  forint 303.28,  zloty 3.7469,    koruna 22.3316, RUB 74.48, yen 106.48, sing 1.3658, HKD 7.7501, INR 73.45, China 6.8310, peso 21.78, BRL 5.3781,  Dollar Index 93.01,  Oil $40.40,  10-year .65%, Silver $27.22, Platinum $908.00, Palladium $2,350.00, and Gold… $1,934.10

That’s it for today…. And tomorrow, and Monday, and while I’m at it…. Next Thursday is my monthly appt with my oncologist, to go over the scans results, which I already know what they are…. So, only two Pfennigs next week, but like I said above, you’re not going to want to miss Tuesday’s FWIW! So, do you have BIG plans for this holiday weekend, the last holiday weekend of the summer?  I don’t, and as I’ve already told you, I’m really bummed out about it…. The Cards and Cubs this weekend with a double header on Saturday, so as long as the weather is nice, I’ll be outside watching them play ball!  I hope to see my kids and grandkids this weekend…  I’ll fire up the Big Green Egg on Friday, and cook all day, so that I don’t have to cook any more thru the weekend!  Supertramp takes us to the finish line today with their song, and my fave Supertramp song: Hide In Your Shell…. ( Hide in your shell, ’cause the world is out to bleed you for a ride…What will you gain, making your life a little longer?)   I simply love this song! I hope you have a Tub Thumpin’ Thursday, and please remember to Be Good To Yourself!

Chuck Butler

Will You Make Your Mortgage Payment To The Fed?

September 2, 2020 

* The dollar bugs fought back yesterday and overnight

* Chuck talks more about the Fed’s inflation averaging…. 

Good Day… And a Wonderful Wednesday to you!  WOW! I don’t know what my beloved Cardinals had for lunch yesterday, but they came out swinging against one of the better pitchers in the league, last night and racked up 6 runs in the first inning!  I can hear all of my friends, laughing and saying, “Hey Chuck, I thought you said the Cardinals couldn’t hit?” Ahhh grasshoppers, I said they couldn’t hit the ball consistently….  So, let’s see what they have up their sleeves in tonight’s game before we knight them as Murderer’s Row! Not much going on around here, I can’t even go out and sit in the sun to read during the day, as it’s been  nothing but cloudy and rainy the last two days, and from the looks of it this morning, we could be in for more… UGH!  David Bowie greets me this morning with his song: I’m Waiting For The Man….

Well, yesterday saw the dollar bugs fight back, and the dollar buying went on all day. It was a good morning, good afternoon, good night for the currencies and metals…  But hey! A little profit taking does an asset class some good, as it cleans out the old longs and gets set to move higher….  Gold did eke out a $2.40 gain on the day, to close at $1,970, but… That was nearly $22 below the morning high of $1,991.90…  I’m sure some short Gold paper trades made their way to the COMEX, but all in all it was a day when the dollar bugs fought back. That’s my story, and I’m sticking to it!

In the overnight markets… it was more of the same regarding dollar buying, so this morning we’re looking at much lower prices in both the currencies and metals…. Ed Steer of www.edsteergoldsilver.com says this morning that Silver was really sold in the after markets yesterday…. Now that’s something that really gets in my craw…  After hours trading….  Seems they’re doing something illegal doesn’t it?  In college after the bars closed they would go back to the house and have “after bars”…  Nothing good came from that, and nothing good ever comes from after hours trading… It’s something that I think should be outlawed! And those choosing to continue to trade after hours, if caught would be publicly flogged and put on display for all to shame as they pass by! 

OK… back to the markets….   So, get this…. I went online last night to see if there was any news regarding the dollar rally yesterday, and there were two back to back, belly to belly, articles from CNBC that had one saying: “The U.S. dollar will trend weaker on the Fed’s new strategy:” and then the next one right underneath the first one said: “A U.S. dollar rally might be in the cards.”   Ok, got it?

Those poor investors that go to Google and find garbage like that and have to make heads or tails of it, when they could sign up to read the Pfennig, and find out what’s really happening!  And I’m still sticking to my story of profit taking, and a little short paper Gold Trades thrown in to boot….

Yesterday, I talked briefly about how Russia was getting through with their economy with not only the COVID-19 virus slowing its economy, but also remember there are still economic sanctions on Russia from the U.S. and Europe….   I recall hearing people say that the pandemic would bring the Russian economy to its knees and cause the ouster of Putin….  But they were wrong weren’t they?  And now from the RT I see this: www.rt.com: Russia on course to replace Germany as Europe’s leading economy & enter global top five this year – Putin’s economic advisor.

Now that’s a far cry from collapsing don’t you think?  And last night, the ruble along with the Chinese renminbi were the only two currencies to rally VS the dollar… That’s quite significant to me, folks… but that’s a discussion for another day… That is, as long as I remember to talk about it!  HA!

There’s a country that’s been stealth like with its moves VS the dollar…. And that’s India and its rupee….  Good friend, Dennis Miller, sent me a link to a video of a woman giving 5 reasons why India will pass up China and the U.S. to be the number 1 economy in the world….   Ok, we’re not talking about right this minute, month, year, or decade…. But it was interesting to say the least…. For instance did you know that a large number of the Tech giants are run by Indian CEO’s?   if they could ever figure out how to unlock their consumer led economy….  I’m just saying…

But the rupee, which has lazed around and was happy with trading with a 74 handle VS the dollar, has recently been awaken and got itself on the rally tracks and last night it was trading  with a 72 handle…. It’s nice to see the rupee moving without the sugar fed euphoria of a PM election….  The dollar buying in the overnight markets brought the rupee back to 73 this morning…. 

And talk about a currency, that has been bruised and battered along with the other Petrol Currencies, the Norwegian krone, iwas finding solace and protection being associated with the euro….  that is until yesterday and last night!  A few years ago  the krone had the soaring price of oil and the lofty pricing of the euro going in its favor, but since those two bubbles burst, it’s been famine without the feast for the krone….   Hey, throw the krone a bone will ya, markets? 

I told you longtime readers a long time ago that when the weak dollar trend was real, we would see the Euro-Wannabes, zloty, forint and koruna  on the rally tracks….  And guess which three currencies were stealthily moving higher?  You are so darn smart! Yes, the Euro-Wannabes….   How’d you figure that one out, did I give you too good of a hint?  Oh, well, that’s what was going on, but it has to be sustained and not a false dawn, which we’ve seen a few times in the past couple of years….I want to say…. But for now, it’s game on Garth! Game on Wayne!

The other day I made a Big Deal out of the Ohio Fire & Police pension fund increasing their allocation to Gold by 5%…. And that got me thinking about how other pensions across the country will see this, and think that they should do the same thing?  That could mean large purchases of Gold, coming in the future, folks….  And when push comes to shove, the bullion dealers will look to fill the large orders before they worry about the small ones…. So, why wait to get in line ahead of the big buyers?

This also plays well with what I’m talking about here : Billionaire investor Ray Dalio’s hedge fund  (Bridgewater Assoc.) poured more than $400 million into gold in the second quarter of this year, as the price rallied towards record highs, luring in high-profile and amateur investors alike.

The Big Orders may just be coming fast and furious….  So again, I implore you to get your investments diversified with allocations to metals and currencies, ahead of the Big orders!

Well… talk about reacting to a speech….  There are people on both sides of the fence thinking that they understood Fed Chairman Powell’s speech last week for the virtual crowd at the Jackson Hole Fed Boondoggle….  But I think I laid it out for you in yesterday’s Pfennig, exactly how I view it, and so therefore, we’ll go with that….  That the Fed is going to a average inflation rate target of 2%, which means, if inflation is below the 2% level as it is now, then when it finally rises, the Fed will allow it to go higher than 2%, to average out the rate….  The thing I want to be able to see is them put the brakes on the rising inflation when or if it ever comes….

Paul Volcker tamed inflation with rate hike after rate hike all the way up to 18.39% in June 1980… Remember he even hiked rates out of meeting on a Saturday night? It was called Volcker’s Saturday Night Special….  But… the difference between then and now, was that the U.S. debt that had to be financed was chicken feed…. $900 Billion…  And most of that had been already issued at lower rates….  For the Fed to go on the attack VS inflation with rate hikes, would increase the financing costs tremendously, folks…. So, they, the Fed, are stuck with jawboning rate hikes, and after the initial positive action to the jawboning, the markets will figure out that it was just that, Jawboning, with no rate hikes to follow…. And then inflation will have no predators….  Uh-oh!

The U.S. Data Cupboard yesterday, had the ISM (manufacturing Index) and Construction Spending with both of them coming in as expected…. Today’s Data Cupboard has the ADP Employment Report, which the experts say will show a 167,000 new jobs in August….   Sounds good, eh? Well, not when you consider how many people are still looking for jobs….   And tomorrow we’ll see just how many people filed for new unemployment claims last week….

To recap….  the two-day rally in the currencies and metals came to abrupt halt yesterday, and the dollar buying went into the overnight markets and came out this morning on the upside of most currencies, and especially the metals…  Chuck thought the graceful downward move yesterday was just profit taking with a few short paper trades thrown in… but this morning this has a different taste to it than just profit taking….  And Chuck’s hoping that we were not witnessing another false dawn… 

Before we head to the Big Finish today…. I’m getting gun-shy, about giving out my thoughts on things…. I know, I should just stick to the markets, but if you’ve read me long enough, you know that I have a difficult time keeping everything about the markets…. Because in the end, all things come back to center, and can be the root cause of a market reaction…. I’m just saying….   

For What It’s Worth….  I saw this headline on Twitter, and it talked about how the Fed has bought $1 Trillion in Mortgage bonds since March…. It’s on Bloomberg.com, and it can be found here: https://www.bloomberg.com/news/articles/2020-09-01/fed-s-mortgage-buying-spree-at-1-trillion-with-no-end-in-sight

Or, here’s your snippet:” The Federal Reserve has snapped up $1 trillion of mortgage bonds since March, a record pace of purchasing, as the U.S. central bank tries to blunt the impact of the Covid-19 recession on American homeowners.

The Fed bought around $300 billion of the bonds in each of March and April, and since then has been buying about $100 billion a month. It now owns almost a third of bonds backed by home loans in the U.S. Buying the securities has pushed mortgage rates lower, with the average 30-year rate falling to 2.91% as of last week from 3.3% in early February.

That drop has allowed homeowners to refinance their mortgages, tantamount to giving them a raise by cutting their monthly loan payments. It’s also helped consumers buy homes. But the Fed’s efforts are causing its balance sheet to balloon, and with the central bank owning so many U.S. home loans, it has unusually high power over setting mortgage rates.

The latest statement from the Fed has promised to keep buying “at least at the current pace.” If the central bank does so, by year’s end it will have purchased about $1.4 trillion in mortgage bonds — and added around $900 billion net to its holdings.”

Chuck again….  You know the line that really caught my eye, don’t you?  “with the Central bank owning so many U.S. home loans, it has unusually high power over setting mortgage rates”…. Yeah, that’s the one that kind of sticks in my craw…. Can you imagine this… Please make your mortgage payment check out to: the Federal Reserve….  That opens doors to all sort of things that’s not good…. think about it…. 

Market  prices 9/2/20: American Style: A$ .7338,  kiwi .6758,  C$ .7651, euro 1.1860, sterling 1.3351, Swiss $1.0978, European Style: rand 16.8220, krone 8.7736, SEK 8.6776,  forint 302.21,  zloty 3.7245,   koruna 22.2023, RUB 73.64, yen 106.25, sing 1.3675, HKD 7.7499, INR 73.08, China 6.8252, peso 21.83, BRL 5.4354,  Dollar Index 92.59,  Oil $43.01,  10-year .68%, Silver $27.63, Platinum $940.00, Palladium $2,290.00, and Gold… $1,962.00

That’s it for today…. Man, I had just finished watching the 16-2 bashing of the Reds by my beloved Cardinals last night, when I heard a hissing sound that kept going, and when I found where it was coming from, our hot water tank’s reserve tank had sprung a leak…. And our furnace room was soaked with water…. Good thing I was still awake to hear that, before it went on all night, and flooded our basement!  Now, today, I have to call a plumber… UGH!   It’s always something, right?  Well, I hope the plumber comes soon…. Wink, wink….  This coming weekend is Labor Day Weekend, which means there’s a three day holiday, that for many will become a 4 day holiday….  I won’t be hosting the Annual Butler Labor Day BBQ & Pool Party this year, for the first time since 2001, when I began to do this. I’ll still be smoking some pork butts, and Turkey Breasts, but just not as much as usual, for it’ll only be my family that I’m feeding this weekend! Labor Day marks the end of summer, technically it doesn’t end for a couple of weeks, but when I was younger the day after Labor Day meant the first day of school….  I have two kids, Dawn and Andrew that are teachers, my heart goes out to them attempting to hold something like school these days…. Smokey Robinson and the Miracles take us to the finish line today with their song: Ooo Baby Baby… Which I’m told was the best “make-out” song…. I have no idea if that’s correct, but it’s what I was told….   I get it though with the silky soulful voice of Smokey Robinson singing to you! I hope you have a Wonderful Wednesday, and I ask you to please Be Good To Yourself!

Chuck Butler

Is JC Penney Headed To Liquidation?

September 1, 2020

* Currencies & Metals both rally on Monday… 

* Chuck’s thoughts on The Fed’s Inflation averaging… 

Good Day… And a Tom Terrific Tuesday to you! A real downer day here yesterday with clouds and rain, but by dinner time the sun was out, and it was a nice evening…. I wasn’t feeling up to sitting outside to watch the game last night, as my stomach was questioning the gumbo I ate for dinner…. But I got through it unscathed and was able  to watch the whole game that the Cardinals won…. A dear reader sent me a note yesterday, and said that I failed to mention the 3-2-8 double play the Cardinals pulled off this past weekend….  Now that combination doesn’t happen every day folks!    The Eagles greet me this morning with their big song: Desperado…. Why don’t you come to your senses, come down from your fences, oh renegade….

After last Friday’s Valentine’s Day Massacre for the dollar, it regained its footing, and held ground for the most part on Monday…. The euro inched higher in the 1.19 handle, and the A$ moved upward toward the 74-cent handle…. Gold gained $3 in the morning, and held it the rest of the day, to close at $1,968.40… And Silver at $28.24…. So, all-in-all not a bad day for the currencies and metals, and in the end it’s really the kind days you would like to see take place on a daily basis…. Not too strong, not too weak, just right….  The Baby Bear would love days like yesterday….

In the overnight markets…. The currencies haven’t moved much, but…. but the metals have pushed higher once again with Gold gaining $23 and is up to $1,991 this morning, and Silver has added 70-cents to bring it to $28.94…   We’ll have to see how that sits with the price manipulators today…   Speaking of the price manipulators, don’t you wish they would go away… They don’t have to go away mad, just go away….. 

Speaking of the aforementioned Gold….  I was sitting in my recliner, having finished my book, Sirens ot Titan, and thinking about the Fed’s new “hard 2% Average Inflation Target”  And do you know what I came up with?  That since they announced that they are going to average 2% inflation  and as we all know their version of “inflation” hasn’t been to 2% for some time, so if they are really going to average the inflation target, then they’re going to HAVE to allow inflation to run above 2%, to achieve their goal….  Hey! They said it, they were the ones that put the “average inflation target at 2%”  in stone, and now comes the difficult part…. How to get their version of inflation rising….

Well… if they would simply ask me, I would tell them they their inflation measures aren’t worth the paper they’re printed on, and to go back to computing inflation like they did before the 90’s and the Clinton Administration, who along with Big Al Greenspan worked on a way to get inflation down, so that interest rates could be lowered, and housing could become more affordable to the masses….

I’ve told you all this before… But Clinton put the onus on Greenspan to come up with a plan to lower inflation… Greenspan hired the Boston Commission, who came up with hedonic adjustments to the inflation calculator, and voila! Inflation was lower, and so were interest rates….   The biggest change was to allow substitutions for the items in the basket that were used previously , when their prices got too high…. For instance, if steak got too expensive, they would say that mom’s would substitute hamburger, so that’s what they did, they substituted by taking steak out of the basket of goods, and adding hamburger….  And so on through the years….  They took out housing and substituted rents, they played these games with the Inflation Calculator… So, if they want to figure out to get inflation going again, calculate it like it was pre 1995….

John Williams at Shadowstats.com does a fantastic job of calculating inflation the way it was calculated Pre 1995… Right now, he’s showing that CPI (consumer inflation) is above 4%….  While the CPI that is hedonically adjusted is just .3%….   And don’t forget what I showed you a couple of months ago where the Chapwood Index…. They show the real price increases in goods & services for the top 50 cities, and just for the top 10 their 2020 inflation average is 10.8%….

So, which one feels like the one you live with?  .3%, or 4%, or 10.8%?   As I’ve ALWAYS said, “inflation is a personal thing and will be different among people, but the overall feel will be the same….  For example, I spend currency on baseball tickets, there are those of you who wouldn’t think of spending currency on a ball game, so when baseball tickets keep going up, I feel that inflation and you don’t!

OK, so… in my opinion, of which I could be wrong, but, we’ll have to see about that!  I think that The Fed’s statement last Thursday should have opened the door for Gold & Silver to push higher without speed bumps….  Man I guess I could have just said that instead of spending all morning talking about inflation calculators!

Of course, the decision to allow housing to be more affordable to the masses, was the root cause of the 2008 financial meltdown….  Think about that for a minute, and then you’ll say, “May, he’s right, I should have never questioned him”! HAHAHAHA!  

To believe or not to believe that’s the question that keeps nagging at me, and I’m not talking about religion, I’m talking about the Gov’t’s data prints….  I just don’t see how anyone could trade with 100% surety that the numbers that just printed were real, true representations of the economy….  I’m just saying…

Well, I told you the other day about the Iron Ore prices that were rising, which was because of the nascent recovery in China, which was also responsible for the rise in the Aussie dollar (A$) , for it’s the Aussies that supply the majority of those raw materials to China….  Well, just so you have an idea of the rise…. Yesterday, Iron ore prices surged above $125 per ton for the first time since February of 2014. Just for grins, I went to 10-year chart for the A$, and in August 2014, the last time iron ore prices were above 125, the A$ was 92-cents….  Hmmmm…..

And longtime reader, Bob, sent me a link to an article about the Russian economy, and how it was not going to drop as much as first believed due to the short-term economic shutdown for the COVID-19 virus…. And that got me thinking of just what the heck currency traders want to see from Russia to get the ruble on the rally tracks?  

The U.S. Data Cupboard needed a breather yesterday after the Data Deluge late last week, and so today’s Data Cupboard gets back to printing data releases such as, the ISM (Manufacturing Index) for July, which to tell you the truth, I was absolutely shocked In June when this Index went from the sub 50 number to one that was above 50…. Remember 50 is the line in the sand that decides expansion (over 50) and contraction (under 50)  And the July print is expected to rise even higher than June’s 54.2%….

Later this week, on Friday, that is, it will be a Jobs Jamboree Friday, of which I decided after watching the BLS destroy accounting for the Unemployment rate for the last time, last month, that I’m not paying attention to it any longer…. Oh, sure I’ll report on it, but I’m not going to allow the BLS to get under my skin any longer…. It is what it is… and that’s that!

We’ll also see Construction spending for July today…. June’s print was a negative -.7%….  With all that’s going on I would expect this data to have risen in July… but by how much will decided by the powers that be… 

And in my never ending attempt to show that the economy is not recovering… This word from Zerohedge.com that J.C. Penney, who filed for bankruptcy previously, is most likely headed to liquidation, which would cost 70,000 jobs….   

To recap…. Currencies and metals both had “just right” or a baby bears day yesterday, which is just fine with Chuck, who would rather see Traders take their time with these asset classes, but having said that, Gold is up $23 this morning, and Silver is up 70-cents!  Chuck goes through a long and tedious explanation of how the CPI data gets manipulated, massaged and cooked each month….   And JCP looks like it’s headed to liquidation…. 

For What It’s Worth….   Well, I think that this article’s gist is the reason why Gold is soaring this morning…. This is an article about China and India rattling sabers again, and it can be found here: https://www.zerohedge.com/geopolitical/fresh-tensions-erupt-along-sino-indian-border-causing-financial-tremors

Or, here’s your snippet: “Fresh clashes between Indian and Chinese troops were reported along the heavily contested Himalayan border this past weekend.

India’s Defense Ministry accused Chinese troops of “provocative military movements” late on Saturday night. Here’s the Indian Army’s full statement of their account of what happened:

On the Night of 29/30 August 2020, PLA troops violated the previous consensus arrived at during military and diplomatic engagements during the ongoing standoff in Eastern Ladakh and carried out provocative military movements to change the status quo.

Indian troops pre-empted this PLA activity on the Southern Bank of Pangong Tso Lake, undertook measures to strengthen our positions and thwart Chinese intentions to unilaterally change facts on the ground. The Indian Army is committed to maintaining peace and tranquility through dialogue but is also equally determined to protect its territorial integrity. A Brigade Commander level Flag Meeting is in progress at Chushul to resolve the issues.”

The latest skirmish between both sides took place in the Southern bank of the Pangong Tso, a glacial lake at 14,000 feet elevation along the Line of Actual Control, a 2,162-mile Sino-Indian border. Both countries have moved troops, tanks, artillery guns, helicopters, fighter jets, and other reinforcements as hostilities continue into the fifth month this week.

 

As for the actual skirmish, Asian News International (ANI), an Indian news agency in New Delhi, reported that Indian sources said Chinese troops tried to ‘infringe‘ on Indian land using a ‘sizeable number of troops‘ but Indian forces were able to thwart the move. The number of casualties or captured troops has yet to be reported by either country.

Indian forces told ANI that Chinese stealth aircraft (Chengdu J-20) have been patrolling the Sino-Indian border as tensions continue to increase. 

Indian Congress chief spokesperson Randeep Surjewala tweeted: “Our armed forces are standing fearlessly to protect Mother India. But, when will Modi ji show his red eyes.” 

Chuck again….  this could end up being a big deal folks… but one has to weigh it against the fact that these two nations have had several skirmishes through the years over border lines….  I guess we’ll have to wait-n-see with this one, eh? 

Market   prices 9/1/20: American Style: A$ .7385,  kiwi .6767, C$ .7688, euro 1.1992, sterling 1.3475, Swiss $1.1046, European Style: rand 16.6534, krone 8.7080, SEK 8.6421,   forint 295.33,  zloty 3. 6618,   koruna 21.8621, RUB 74.02, yen 105.83, sing 1.3575, HKD 7.7498, INR 72.85, China 6.8491, peso 21.76,  BRL 5.4311,  Dollar Index 91.81,  Oil $43.12,  10-year .72%,  Silver $28.94, Platinum $961.00, Palladium $2,327.00, and Gold… $1,991.90

That’s it for today….  A little shorter this morning, and for that you can thank my shaky stomach last night…. UGH!  I just didn’t read that much…  Well, I have  something for you to look forward to…. I do believe that next week, good friend, Dennis Miller (www.milleronthemoney.com) is going to print an interview he did with me…. I don’t hold back any punches with answers to his questions, so you’ll want to be sure you’re already on the list of subscribers before the letter comes out, and you can do that by going to the web address above, and remember… It’s Free!  Looks like another dud day outside right now, UGH! Aliota Haynes and Jeremiah takes us to the finish line today with their rock classic song: Lake Shore Drive….  I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself! 

Chuck Butler

 

 

 

Powell Does His Best Imitation of Big Al Greenspan!

August 31, 2020

* Currencies & Metals both rallied strongly on Friday… 

* Chuck questions just what the heck did Powell say? 

Good day… And a Marvelous Monday to you! Ok, front and center this morning… I had my scans on Thursday morning, and one Friday morning I received the results…  No new cancer was found…. Of course I still have the lesion in my jaw, but right now it’s behaving…. So, I’m good to go cancer-wise for another 3 months…  What has happened to my beloved Cardinals? Well, if you recall me talking about their lack of ability to hit the ball in spring training, then you know the answer to my question!  Now they did find a way to win 1 game yesterday, but that hardly makes up for the 4 previous losses!  I had a visit from a dear reader this weekend, and we had our picture taken together…  You know when I used to travel to trade shows, etc. to speak, I would always have a reader ask to have their picture with me…. I always found that to be quite amazing, and fun!  Graham Nash greets me this morning with his song: Simple Man…  I am a simple man, and I sing a simple song,….  In that beautiful Graham Nash voice!

OK… Well, You can say that I was technically “away” on Thursday and Friday, because the currencies and metals took some frustrations out on the dollar bugs. Yesterday (Sunday) I checked the markets, just for grins to see where we were…. And I was surprised by the strength in the Aussie dollar (A$) . The A$ had blown through the 72-cents handle and is trading with a 73-cent handle this morning. National Australia Bank (NAB) issued a report that their currency team came up with that said that the A$ was rallying on the fact that the U.S. Fed was printing more currency than the Reserve Bank of Australia (RBA) and that Iron Ore prices were rising, which in their opinion was a good thing for the A$, of which I would agree!  NAB went on to say that they saw the A$ rallying to 74-cents by year-end, and trading as high as 75-cents in 2021, but averaging 74.25-cents for the year. 

One thing they forgot to mention was the revival of the Chinese economy , of which we talked about briefly last week, and that’s probably why Iron Ore prices are rising again!  Remember the glory days for the Aussie economy, when China was running on all 6, and they demanded the raw commodities from Australia?  Recall how that scenario pushed the A$ to $1.05 VS the U.S. dollar?  Well, the Chinese recovery is nascent at best at this point, so there’s no reason to think that scenario will return, but… if things keep going in this direction…. You never know!

The euro too, has taken the high road VS the dollar lately…. And this rise all stems from the news that the Eurozone will begin to issue Eurozone Bonds…. Federalization of bonds is what it’s being called, and it’s something I’ve called for the Eurozone to implement for a long time now…  They have a single currency, they should have a single bond….  A couple of weeks ago the euro had reached 1.19 VS the dollar, and then the PPT stepped in a bought dollars, and brought the euro back down, but this morning the euro has moved higher VS the dollar to 1.1936… And inching toward 1.20, which would be the next psychological level for the single unit… 

Gold had a good day on Friday, rising $35 to $1,965… But at one point in the day it was up $44 and had to go through the short sellers’ gauntlet at the end of the day. Silver rallied by 52-cents to $27.57… The Fed was responsible for this move, as Fed Chairman Powell, laid out the Fed’s plans to generate inflation….  I have to tell you, that this all backasswards in my book….  The economy generates inflation , not the central band….  But I guess in this world of opposites that this just plays nicely in the sand box with the other things that not right….

In the early markets trading for Gold & Silver they are both inching higher VS the dollar. The two metals seem to be attempting to sneak around the short sellers this morning, so we’ll see who wins the day, eh? 

Here’s a snippet of Powell’s talk on generating inflation… “In seeking to achieve inflation that averages 2 percent over time, we are not tying ourselves to a particular mathematical formula that defines the average. Thus, our approach could be viewed as a flexible form of average inflation targeting.26 Our decisions about appropriate monetary policy will continue to reflect a broad array of considerations and will not be dictated by any formula. Of course, if excessive inflationary pressures were to build or inflation expectations were to ratchet above levels consistent with our goal, we would not hesitate to act.”

OK… what the hell did he just say?  Did he just say that the Fed Heads will just shoot from the hip on inflation?  Ok, before I go the whole 9 yards on Powell and the Fed Heads, I’m going to walk away for a minute….  Ok, I’m back now, and have decided to not go the whole 9 yards at this time, because the Fed Heads haven’t proven that they can generate inflation, and at this time I doubt that they could find their rear-ends with both hands! 

And all that confusion over what he DID or DIDN’T say was the reason the dollar lost $35 of value to Gold on Friday…. Now we’ve had a full weekend to digest what the Fed was telling us, and if I’m still in tune with what traders think, I would be that they’re still confused….

Oh!, and one more thing! The thing that really gets my goat is that all the Fed Heads were in agreement to this idea… Not one dissenting vote….  Ok, if they all agree then you don’t need all of them!  Even more of a reason to confirm Judy Shelton for a Fed job….  One of my first bosses in the investment arena was a man named Dave Wren…. In a small meeting he asked who agreed, and then he said something that I’ll always remember…. “Don’t you all agree with me, for if that happens I don’t need all of you!”  So, me being the new guy, was scared to death, and I disagreed…. 

Circling back to when I used to give presentations all over the U.S., Canada, and Panama, I used to tell people that a proper diversification of their investment portfolio should include a 15-20% allocation to Gold & Silver….  And when the metals were in rally mode you would want to increase your allocation to 25%  This past weekend I read where the Ohio firefighters and policemen pension fund had approved an additional 5% allocation to Gold…  That moves their total allocation to Gold to 25%…. You don’t think someone on that pension board attended one of my presentations do you?  HA!  I loved the comment the pension board made after the additional allocation was approved: “OP&F believe that the addition of gold will give the portfolio a strong diversifier to its growth-oriented investments as well as provide an effective hedge against inflation.”

So…. What are you doing with your portfolio allocation?  Well, if you depend on the likes of Scwab, and any other large investment houses, they certainly won’t allow you to have gold as a part of your allocation… So, you’ll have to do it on the side….  And as always, I would prefer you call my metals guru, Tim Smith at 1-800-926-4922, to increase or even start your allocation to Gold / Silver….  And… as always I don’t get paid for telling you to call him…. I do that out of the kindness of my heart! But please tell whomever answers the phone that I told you call!

I received my latest issue of Grant Wiliams’ Things That Make You Go Hmmm. Last night, and so I quickly opened it to read as much as I could before it was time for bed…  Grant was talking about how the stock market has gone crazy, and that if we go back to the time period just before the stock market crash in 1929, Business Week had just printed their first issue… Now tell me if you think this was from then or now?  ““For five years at least,” they wrote, American business has been in the grips of an apocalyptic, holy-rolling exaltation over the unparalleled prosperity of the ‘new era’ upon which we, or it, or somebody has entered.” It had carried the country “into a cloud land of fantasy.”

 

“As the fall begins,” they warned, “there is a tenseness in Wall Street… a general feeling that

something is going to happen during the present season… stock prices are generally out of

line with safe earnings expectations, and the market is now almost wholly ‘psychological.” – snippet taken from Things That Make You Go Hmmm… by Grant Williams…

 

OK, I’m sure you guessed the answer to my question since I set it up the way I did…. But doesn’t that sound eerily like someone could write that today about the stock market?

And it’s not that I’ve become totally interested in talking about the stock market, but right after I read that quote in TTMYGH, I saw this on Twitter from David Rosenberg…. “I realize who Powell actually is: the doctor with the blood pressure monitor at the hot dog eating competition! Investors gorge, get obese, but won’t die. The S&P 500 market cap/GDP ratio, at 132%, just took out the 2000 peak. We know how this ends, we just don’t know when.” – David Rosenberg on his Twitter feed.

OK, I kept telling you that the back end of last week was chock-full-o-data, and so, this is going to be a long report on that data, so either skip ahead, or go along with me through the Data Barn….  First and foremost, the Weekly Initial Jobless Claims remained above 1 Million, making 23 of the last 24 weeks at 1 Million or above…   We received a surprise on Thursday when July Durable Goods Order rose %11.2%. But Capital Goods Orders were only 1.9% which wasn’t anything near what was expected… then we saw the 2nd QTR GDP revision which printed at negative -31.7%!!! 

On Friday the data deluge continued, and Personal Income and Spending printed for July…. Income was .4% but was better than June’s -1.01%, Spending was just 1.9% VS the 6.2% In June….  So, income was nascent and spending hit the skids…. Hmmm… Corporate Profits were down in July to $1.81 Trillion VS $2.04 Trillion in June. And finally, Core Inflation saw a .3% rise in July. 

All-in-all, the Data deluge wasn’t as bad as I expected it to be, but then one never knows who’s driving these data prints to the corral…  right? 

To recap…. The currencies and metals fought back on Friday, as it took a day for traders to attempt to figure out what Fed Head Powell was talking about… Gold was up $35, and the euro and A$ are leading the currencies to higher ground VS the dollar.  Chuck borrows a quote from Grant Williams, and then David Rosenberg adds his two cents in a Twitter comment. 

For What It’s Worth…  Ok, this may be a little long, but it’s well worth reading, as it’s Doug Noland talking about the Fed…. He does a good job of getting to the point here folks, so… you can find it here: http://creditbubblebulletin.blogspot.com/2020/08/weekly-commentary-its-about-jobs-jobs.html

Or, here’s your snippet: “For the most part, equities took Powell’s Jackson Hole speech in stride. Stocks rose – but they pretty much rise whenever markets are trading. Understandably, bonds were a little edgy. Ten-year Treasury yields rose six bps on the announcement to 0.75%, a 10-week high. Investment-grade corporate debt was under notable pressure. The iShares Investment Grade Corporate Bond ETF declined 0.8%, trading to the low since July 1st (down 1.1% for the week).

There is certainly an element of “the emperor has no clothes” in all this. We know from experiences in Japan, the U.S. and elsewhere that central banks don’t control the inflation rate. The shift to an “inflation targeting” regime was ill-conceived from the start. Rather than admit to mistakes, the global central bank community will continue frantically digging ever deeper holes.

Can we at least admit that inflation dynamics have evolved momentously over recent decades? Could we accept that technology innovation has led to a proliferation of new types of products and related services – profoundly boosting supplies of high-tech, digitized and myriad online products? There has also been the seismic shift to services-based output, altering inflation dynamics throughout economies. Moreover, “globalization” – especially the capacity to manufacture endless low-cost technology components and products globally – has fundamentally changed the inflation axiom “too much money chasing too few goods.”

For now, damage wrought to Fed credibility is masked by record equities and bond prices. In the wanting eyes of the marketplace, the “inflation targeting” regime is mere pretense. Bernanke didn’t punt on the Fed’s “exit strategy” due to consumer prices. Below target CPI was not behind Yellen’s postponing of policy normalization in the face of strengthening booms in both the markets and real economy. And Powell didn’t abruptly reverse course in December 2018 because of lagging consumer price pressure, just as CPI had nothing to do with last fall’s “insurance” stimulus measures.

Any lingering doubt the Federal Reserve has adopted a regime specifically targeting the securities markets was quashed with the $3 TN of liquidity response to March’s downside market dislocation.

Earth to former New York Fed President Bill Dudley: We’re today confronting a deviant financial structure unrecognizable to that from 1987. Have you already forgotten March’s near global financial meltdown? Why did a panicked Fed expand its balance sheet by an unprecedented $3 TN? Why has it capitulated and basically signaled to highly speculative markets that they are committed to looking the other way and just letting things run their course?”

Chuck Again….  You tell ’em Doug!  I’m so frustrated with our Fed Reserve, and if it weren’t for the craziness of the stock market, I believe that people would be throwing eggs in the faces of the Fed Heads….  I’m just saying… 

Market Prices   8/31/20: American Style: A$ .7356, kiwi .6733,  C$ .7650, euro 1.1936, sterling 1.3332, Swiss $1.1083, European Style: rand 16.7102, krone 8.7493, SEK 8.6180,  forint 296.75,   zloty 3.6826,   koruna 21.9907, RUB 74.04, yen 105.95, sing 1.3600, HKD 7.7498, INR 73.20, China 6.8603, peso 21.81, BRL 5.3869,  Dollar Index 92.22,  Oil $43.50,  10-year .72%, Silver $28.04, Platinum $934.00, Platinum $2,233.00, and Gold… $1,968.47

That’s it for today…. I know I went in several directions this morning, but I had all these thoughts in my head from the weekend of reading that I had to let them out, or my head would explode!   Had another driveway happy hour on Friday afternoon, this one was just neighbors, and we had a great crowd, with some rare appearances by folks that are usually at their lake houses! Little Evie was with us, spending the night and stuff over the weekend. Man, I become a blithering idiot when she’s around me. She makes sounds but no words yet, I can’t wait for her to tell me everything she’s talking about now…  I’m here all week, try the veal! Yes, no doctor or hospital visits for me this week… YAHOO!   I hope you have a Marvelous Monday, and please Be Good To Yourself!  I’ll see you… In September, See You when the summer’s through….  

Chuck Butler

 

 

Neil Barofsky Tells Us How The TARP Money Was Used…

August 26, 2020

* A nothing day in currencies and metals yesterday

* Traders wait for Powell’s talk on generating inflation tomorrow… 

Good Day… And a Wonderful Wednesday to you! I had a good day yesterday, and didn’t require a long nap during the day! There are days when I wake up and know that it’s going to “one of those days”, and then there are days that I wake up and say, “I’m ready!”.  Tomorrow morning I’ll have to be on the ball early, to report to the hospital for my quarterly scans… I don’t believe the scans will reveal anything I’m not aware of… So that’s how I’ll get through today and tomorrow until they post my results…  I used to have to wait a few days for results, but not any longer, they post them and send me note that they are on my account to be viewed, the same day….  I’m 2/3rd’s through the book The Sirens of Titan, which means I’m reading it too quickly! I’m not a reader that can’t put down a book, for when it’s time to quit reading, I quit… And I like to make a book last… Stevie Wonder greets me this morning with his song: Superstition…. Stevie Ray Vaughn also did a good rendition of this classic rock song…

Well… yesterday was a real nothing day in the currencies and metals… The currencies didn’t move much, and the Dollar Index went from 93.07 to 93.04, so some slippage in the dollar but nothing to write home about.  Gold lost 20-cents on the day, and Silver lost a nickel….  You know I look at the Rhodium price every day, and it always amazes me the spread in the Bid/Ask price…. For example last night the bid price was $9,700 and the Ask price was $11,700….  That’s crazy! But we are talking about a rare asset, eh?

OK… Well I’m sure that the traders are pretty well entrenched with their positions until after Fed Head Chairman Powell, will speak. Now, if you read the FWIW article on Monday this week, you’ll already know what he’s scheduled to talk about, and if you skipped over it (don’t tell me!) I can tell you that he’s expected to talk about how the Fed is going to generate inflation….  I believe he’s walking on a thin line here folks…  For if he just talks about generating inflation, and says that the Fed will allow it run hotter than the 2%, that WAS their previous target… I think it’s game on for the metals once again, and the dollar selling….  

But…. If he says something to the tune of: “We’re going to attempt to get inflation rising, but we’ll average its rise”  which would mean they’ll keep a lid on it, then l don’t think we’ll see the doors wide open for a run in Gold and Silver and the euro….  It’ll depend on how confident he makes Traders feel that the Fed can control inflation….

I think what traders should be looking at questioning him just how the Fed is going to generate this inflation? For if I were the one asking him this question, I would add a smart alec comment about “does the Fed have a private tapper in the Eccles building that allows them to turn on inflation when they want it?”  Look they’ve printed more currency than you can shake a stick at, in recent months, but…. And that’s a BIG BUT, the currency has gone to the zombie Corporations, and the Casino Banks, and that’s no way to get inflation going!

I was reading Bill Bonner’s Diary yesterday, and he was talking about something that really gets me fired up, and that is how personal people take being called a name…. When I was a kid, every kid had a name that wasn’t their Christian name!  Shoot, I had a friend in grade school that was a little overweight, and we called him Moby!  Did he bring a gun to school to shoot us?  No…. because everyone had a name! Mine was “butman”….  Did I cry and run home to mommy because someone called me a name?  Hell no, I laughed just like every young boy does when he hears the word, “butt” or “fart”….  Anyway, I don’t know how we got to where we are, but we’re here…. And while you still might be called a name, they aren’t given with heart, they’re given with hate….  I’m just saying…

OK… So the overnight markets didn’t give any indication that they are ready to trade ahead of the Fed….  So, for the most part, we’re trading in the same clothes as yesterday, so nothing ventured, nothing gained…. There was some slippage in the euro which saw Germany print a decline in their economy that’s not been seen before. And the A$ climbed back above 72-cents overnight, and this morning… The Dollar Index is the same level as yesterday… 93.07

I wrote yesterday about how the Chinese renminbi had been on the rally tracks for about a month now, which was opposite of what I thought would be going on given the so-called cold war going on between the U.S. and China….  And then later in the morning in the Greg Gonigam’s 5 Minute Forecast, he highlighted economist Nomi Prins, and her view on the recovering Chinese economy…  So, it was good timing on my part to point out the currency gains….  I’m just saying….  You know my dad told me once to make sure you blow your own horn, because you can’t depend on other people to do so…. 

I sure hope you all are paying attention at this point, because you’re sure going to be glad you were as I explain what I’m talking about here: I really don’t know where to start with this quote….  So, I’ll just blurt it out, but first I want to thank good friend Dennis Miller, for sending me this from the Burning Platform.com   OK, for years now I’ve said that QE, TARP, whatever, only helped the Casino Banks…. And instead of them breaking up the Casino Banks, they’ve become even more Too Large To Fail….  OK, now that I’ve said that, let’s get to the quote…. This quote is by Neil Barofsky, who is according to Wikipedia: a partner in the Litigation Department of national law firm Jenner & Block LLP, focuses his practice on white collar investigations, complex commercial litigation, monitorships and examinerships. And at one time was the head regulator for the TARP money….  So, take in what he’s saying here folks…. And then re-read it for this is very telling about what’s going on these days…

“”The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true. It really happened. These suspicions are valid.”

Neil Barofsky, TARP Inspector General

Well, they sure aren’t suspicions any longer now are they!  This is where if I were still under the thumb of the legal and marketing people, when I was at EverBank. I would have to explain how I had been right in saying this, but couldn’t have told you  about the suspicion in the first place because I was not allowed to talk suspicions, or conspiracies…

But those days are over…. And while I hated leaving all the folks I worked with for so many years, I welcomed the opportunity to write, free and easy, once again, like I did before they decided to put the shackles on my writing!

Well, I’m minus one shiny quarter! The Current print of Consumer Confidence did not rise! It dropped from 91.7 to 84.8….  As Paul Mccartney sang with Wings, “Baby I’m amazed, Baby I’m amazed”  Wonders never cease, eh? But that didn’t stop the stock market from rising on the day….  Hmm…. The Case/ Shiller Home Price Index was flat with regards to a year on year basis…. 

Today’s Data Cupboard will begin to build to its crescendo with July prints of Durable Goods and Capital Goods Orders (CAPEX) And once again I’ll repeat what I always point out here, is that without CAPEX (capital expenditures) the economy won’t go anywhere…. Period!  I know it’s an old-timer’s look at things but these days, that’s what I am, “an old timer”….

Yesterday, I talked about the mounting delinquencies in mortgages, and the voila! Zerohedge.com prints an article with numbers! So, in July, financial firm, Black Knight reported the following: 

The number of homes with mortgage payments past due by 90 days or more rose by 376,000 in July to a total of 2.25 million. Serious mortgage delinquencies have jumped by 1.8 million since July 2019, a decade high, not seen since the last financial crisis.

I’m telling you know so maybe you’ll listen to me later, that this housing mess is going to get really ugly…  These delinquent mortgage payments are going to cause ripples that turn into huge waves…. 

To Recap… it’s as if the markets I follow, currencies and metals came to abrupt stop yesterday, when they realized that Fed Head Chairman Powell will speak tomorrow at the Jackson Hole Boondoggle, and they want to know what he has to say about inflation before they make their next moves….   So, the currencies and metals are trading in the same clothes today as yesterday, and probably tomorrow too, given Powell won’t speak until late afternoon, for us, as he’ll be on Mountain Time.  And Chuck has a time bomb that he set off with a quote from Neil Barofsky….

For What It’s Worth…  Yesterday, I went on about the Zombie Corporations, and the fact that so far in 2020 Corporate bankruptcies were mounting in numbers, and then longtime reader, Bob, sent me a link to this article on Zerohedge.com that talks about the bankruptcies, and it can be found here: https://www.zerohedge.com/markets/us-default-bomb-goes-2020-will-have-record-number-large-corporate-bankruptcies

Or, here’s your snippet: “The disconnect between the all time highs in the stock market and the broader economy has never been greater (with even Janet Yellen, one of the main architects of this disconnect, agreeing), and one of the places where this chasm is most glaring, is in the staggering number of major corporations filing for bankruptcy in 2020. Indeed, this year large US corporate bankruptcy filings are running at a record pace and are set to surpass levels reached during the financial crisis in 2009 (when the S&P was far from an all time high).

According to FT calculations, as of August 17, a record 45 companies each with more than $1 billion in assets has filed for Chapter 11 this year; this compares with 38 for the same period of 2009 during the depths of the financial crisis and is more than double last year’s figure of 18 over the comparable period.

In total, 157 companies with liabilities over $50 million have filed for Chapter 11 bankruptcy this year and as we warned several months ago, many more are coming.

“We are in the first innings of this bankruptcy cycle. It will spread far across industries as we get deeper into the crisis. It’s going to be a bumpy ride,” said Ben Schlafman, chief operating officer at New Generation Research.

The spike in bankruptcies comes despite trillions of dollars in government aid to mitigate the fallout of the coronavirus pandemic on businesses, highlighting the catastrophic and lasting impact Covid-19 is having on the US economy. Or perhaps those trillions in government aid are going to the wrong recipients, and as a result companies that stand to benefit from mass defaults are now sporting record market caps. In fact, the irony is that in its pursuit to crush monopolies such as Amazon and Google, the government has made them bigger and stronger than they have ever been.”

Chuck again…  this all says the same things I’ve been saying about the status of Corporations and the Gov’t payments that went to the wrong places…. 

That’s it for today….  Well, a very boring, long game last night for my beloved Cardinals, who scored 4 runs in the 3rd inning and then never scored again and then blew the lead to lose….  I was trading emails with former Big Boss Frank Trotter this week, he is a new grandpa…. And loving it from what I could gather in the emails…  I also was trading emails with former colleague going back to Mark Twain Bank, Kathy Glowski/ Butcher….  Back in the day, when I was getting radiation on my jaw, and it was tearing up the inside of my mouth, the only thing I could put in my mouth were shakes/ malts…. And Kathy would go our of her way to bring me a Chocolate shake each day….  What a sweetheart!  Man those were some dark days, but the radiation was taking place while the Cardinals were playing in the 2011 World Series, and all that pain in my mouth didn’t stop me from going to Game 7 with my sons, and watching our beloved Cardinals win the World Series!  I forgot all about the pain in my mouth while we were hugging and jumping up and down after the win! Led Zeppelin takes us to the finish line today with their song, and Mike Meyer’s fave LZ song: Kashmir….   I hope you have a Wonderful Wednesday, and I’ll talke to you again next Monday… Please continue to Be Good To Yourself!

Chuck Butler

 

Powell To Talk Up Inflation At Jackson Hole Boondoggle…

August 25, 2020

* The dollar bugs were back in control yesterday

* We have Powell talking up inflation and Gold can’t find a bid? 

Good day… And a Tom Terrific Tuesday to you! I received a surprise yesterday afternoon, while I was out back cooking some chicken breasts on my Big Green Egg….  My good friend, Duane stopped by to say hi… I hadn’t seen him since he dropped off that pastrami sandwich to me a couple of weeks ago… I sat out back to watch the Cardinals game, as I have for the last week, but this game was  VS the Royals last night. I will go to my grave never forgiving Don Denkinger for his, I still don’t know how he saw it the way he called it, massively bad call in Game 6 of the 1985 World Series between the Cardinals and the Royals… Instead of wining the series in Game 6, they lost the series in Game 7, which everybody and their brother knew they would lose, going into the game….   So, whenever the Royals play the Cardinals I’m always reminded of that totally blown call at first base by Denkinger… . Simon and Garfunkel greet me this morning with their song: America, which was also featured in the Almost Famous movie and soundtrack….

Another day, and another day when the overnight and early morning rallies for the currencies and metals fizzle out and end up going the wrong way…. And the end of the day yesterday, the euro was barely holding onto the 1.18 handle, and Gold had given back its early $9 gain to lose $13 on the day and close at $1,928.60…. There was nothing in the data cupboard that would want the dollar bugs to go so heavy into the buying dollars…. There also was no headway made on another currency printing stimulus package…. 

Yesterday, I told you about the 1.1 Million more Jobless Claims that were filed the week before… You may recall me telling when this whole economic shutdown began that people were going to find that their jobs weren’t waiting for them to return, and that many companies would not longer be in business…  Well, the Unemployment numbers keep rising, and so too do the number of Corporate bankruptcies… 

I read yesterday, that another large petrol company here in the U.S. has filed for bankruptcy… That’s makes 3 so far this year… That can’t be good for the economy, for it’s not just the Oil Company, it’s all the suppliers that supply them the rigs, and so on that will be affected…. I’m just saying… 

Longtime friend, and publishing guru, and author, Bill Bonner, quoted The Washington Post wit this ditty, that should be scaring the bejeebers out of the dollar bugs….. So, here we go!

“If the unemployment rate stays around 10 percent and no new stimulus is delivered, said Zach Parolin, a researcher at Columbia University, “we can expect poverty rates to rise and climb higher than those observed in the Great Recession.” The poverty threshold for a family of four is $26,200, according to the U.S. Department of Health and Human Services.

Data collected by the Census Bureau capture the financial pain. For the week that ended July 21, the most recent numbers available, roughly 29 million U.S. adults – about 12.1 percent – said their household sometimes or often didn’t have enough to eat the preceding seven days, according to the Center on Budget and Policy Priorities. Nearly 15 million renters said they were behind on rent during the same period.” – from Bill Bonner’s Diary…

OK… back to me….  I can’t understand why traders are so influenced by the PPT, who last week got this whole dollar buying debacle started.  Yes, they can cause harm one day, but so far they haven’t gone as far as coming in on back-tp-back, belly-to-belly, days….  It was a zombie jamboree,…. And they sang, Back to back, belly to belly, I don’t give a damn cause I’m cold stone already….

Pretty soon we’ll be having zombie Corporations having a jamboree, in hopes to stir up more support for their failing company that, is only still here today because of the Fed, buying their over leveraged bonds, and ETF’s….   Ah, yes, it’s all done under the guise of: “The pandemic caused our problems”, and the Fed took that bait, hook, line and sinker!   Of course these Corporations were wearing zombie clothes long before the Plandemic came along!  Yes, I call it the plandemic, for my own person reasons that I won’t get into here….

But a corporation collapse won’t cause the Robinhood crowd from buying the collapsing Corporation’s stocks….  Recall the Hertz ordeal? ….  I’m just saying!

The overnight and early morning markets haven’t provided any help to the battered asset classes of currencies and metals today.  I can see their thinking that why should they go long these two asset classes only to have their gains wiped out by the U.S market….  but this is no time to surrender, Dorothy! Come on…. you can do it! Don’t let the big bad bully U.S. traders push you around, steal your lunch, and give you a wedgie!  

Well, guess what’s going on in Jackson Hole, Wyoming?  Yes, it’s the Fed’s annual boondoggle where finance ministers and economist meet to discuss the economies of the world. Of course we really only care about what the Fed has to say about our economy, and for that, I direct your attention to the FWIW  article today…. 

Speaking of the Jackson Hole boondoggle…  It is here that QE2 was announced by St. Louis Fed President, James Bullard, years ago… So, there are times that actual work is done here…. But most of the time, I can see the fin mins hobnobbing with each other and the economists being like yapping little dogs biting at the ankles of the fin mins for them to stop and listen to what they have to say… 

As I told you yesterday, the U.S. Data Cupboard builds to a crescendo this week, so on Monday there was just The Chicago regional index, which dropped, just like the other regionals, but since they don’t give us any indication of what the National report will show, I’m boycotting these regionals from here on out! 

Today’s Data Cupboard, has the Case/Shiller Home Price Index, and we’ll see the stupid Consumer Confidence….  There’s more than 30 Million people out of jobs, and I’ll betcha a shiny quarter that the Confidence will have risen for this report….   I would bet that the people putting together this index didn’t contact any of those 30 Million unemployed consumers!  I also know that they have never contacted me to ask me if I’m confident…. 

I’m really frustrated with what the price manipulators have been doing to Gold & Silver….  Just last week I had sent a note to good friend Rick, letting him know that Gold had returned to $2,000, but since then it’s been all one way… and that one way is downward….  I also have been following the trial involving the JPMorgan metals trader, for spoofing and other crimes…. There has been little to new news about the trial, and that leads me to believe that there’s some sort of plea deal being made, so that this doesn’t go to trial, and everyone finds out how JPMorgan manipulates metals prices….

Before we head to the Big Finish today, I wanted to mention that  I’ve been watching the Chinese renminbi rally for a month now, and nearly every day there’s a inching up of the value of the renminbi VS the dollar… I find this very interesting in that, what’s being talked about now is that we’ve entered into a cold war with China… I would think if that were truly the case, then the Chinese would be marking down their currency to spite the U.S.  There’s more to this story with the renminbi and intend to research it, that’s for sure, because this rally just doesn’t make sense to me, at this point of our history… 

To recap… The Currencies & Metals lost their early morning gains yesterday, and ended the day with losses…. Chuck just doesn’t get it that traders are so spooked by the PPT…. Come on boys & girls get some intestinal fortitude and stand up to the PPT! The Data Cupboard was basically empty yesterday with only a regional manufacturing report, that Chuck’s boycotting these days! 

For What It’s Worth…. Not as smart alecky as yesterday’s FWIW, but one that needs to be printed. This is an article about what to expect from the Fed’s Chairman Jerome Powell, as he speaks on Thursday this week, and it can be found here: https://www.cnbc.com/2020/08/24/powell-set-to-deliver-profoundly-consequential-speech-changing-how-the-fed-views-inflation.html 

Or, here’s your snippet: “History will remember Paul Volcker and Jerome Powell as standing on the opposite ends of the inflation canyon, with the former taking desperate actions to try to tamp it down and the latter expected this week to announce an unprecedented effort to crank it back up.

Volcker, the Federal Reserve chairman from 1979-87, ushered through a series of inflation-busting interest rate hikes that dragged the country into recession but won the fight against pricing pressures and spurred a powerful economic recovery. 

 

Powell, the central bank chief since 2018, is likely to detail a set of measures aimed at pushing inflation higher amid a coronavirus pandemic that has dragged the U.S. economy into one of its darkest hours.

While the average consumer might find it absurd to want to raise the cost of living, central bankers and economists see too little inflation also as a problem. It often reflects a slow-moving economy with a low standard of living. On top of that, the accompanying low interest rates give policymakers little wiggle room when crises happen and there’s a need to loosen policy.

That’s why Powell, who will speak Thursday during a virtual version of the Fed’s annual Jackson Hole, Wyoming, conference, will outline what could be the central bank’s most active efforts ever to spur inflation back to a healthy level. The speech is titled “Monetary Policy Framework Review” and wraps up a yearlong examination both among central banks officials and with the public, during a series of open events, on what policy should look like in the future. 

“The expectations are pretty high to get something meaningful on Thursday,” said Tom Graff, head of fixed income at Brown Advisory. “This is probably a historic speech.”

One phrase Powell is likely to use is “average inflation” targeting.

 Simply, it means that the Fed, which has pegged 2% as a healthy level, will let inflation run higher than that for a while if it has spent a considerable time beneath that level. The Fed’s preferred inflation gauge has stayed below that level for all but two years since the Great Recession ended in mid-2009.
It’s a mirror-image reversal to Volcker’s inflation-busting and sets the stage for a pivotal policy move.”

 

Chuck again…. See? haven’t I told you over and over again about Powell’s need for inflation?  And Gold can’t find a bid these days?  Now, that’s stranger than fiction folks…. stranger than fiction… 

Market  prices 8/25/20: American Style: A$ .7177, kiwi .6542, C$ .7576, euro 1.1830, sterling 1.3139, Swiss $1.003, European Style: rand 16.7825, krone 8.9292, SEK 8.7330,  forint 298.76,   zloty 3.7153,   koruna 22.0595, RUB 74.53, yen 106.45, sing 1.3684, HKD 7.7501, INR 74.12, China 6.9166, peso 21.90, BRL 5.6086,  Dollar Index 93.07,   Oil $46.76,   10-year .65%, Silver $26.58, Platinum $919.00, Palladium $2,209.00, and Gold… $1,929.19

That’s it for today….  A real thumpin’ put on the Royals last night, by my beloved Cardinals…. I forgot to mention yesterday that our Blues, bowed out of the Stanley Cup Playoffs in the first round this year, even with the delayed start of the playoffs, I think the Blues had a Stanley Cup hangover this year… I only saw them play one game in the series like they played last year on their way to the Stanley Cup Championship…. Probably very frustrating for the coaching staff….  Oh, well, time to get the golf clubs out! I also forgot to bring to your attention that there will only be 3 Pfennigs this week, as on my Tub Thumpin’ Thursday, I’ll be getting scanned once again….  I always ask for the first scan of the day, that way they can’t get behind….  But that means I have to be at the hospital at 6:30 AM, to drink my barium…. Oh boy! (That stuff always upsets my stomach!)  The late, great George Harrison takes us to the finish line today with his song: I Got My Mind Set On You….  I loved his solo stuff, and with the Traveling Wilburys, and we lost him way too soon….  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

The Dollar Begins To Get Sold Once Again Overnight…

August 24, 2020

* Currencies, and metals are both on the rally tracks

* Weekly Initial Claims climb back above 1 Million! 

Good day…. And a Marvelous Monday to you! Another Chamber of Commerce weekend, weather-wise for us here in God’s Country….  And the Cardinals took 3of 4 from the Reds, so baseball-wise it was also a good weekend!  Most of my buddies were off to their respective lakes and lake homes this past weekend, which meant I sat out back watching the baseball games by my lonesome…. Oh woe is me… HA! I was watching a bit of TV last night, and the news was on, which usually turns me off, but they were discussing how the police chase method called PIT had caused 30 deaths this past year… And I yelled at the TV… “if the dolts weren’t running from the police, they wouldn’t have had to use the method”…  Of course, all the bleeding hearts will argue with me on that, and I don’t care, because I’m right, and I know it!  Don’t run from the police, period!   The Music Explosion greets me this morning with their song: Little Bit of Soul….  This is one of the first songs I learned to play on the guitar, with Hey There Little Red Riding Hood being the first!

Well, Friday was an interesting day in the markets…. The dollar bugs continued to pile on the dollar buying, thus following up what the PPT started on Wednesday…  The euro really took it on the chin, and Gold dropped $4 on the day to close at $1,943.40…  And once again I have to put my tail between my legs and take my ball and bat and go home….  The beginning of the weak dollar trend that I talked about last week, failed to launch…. That doesn’t mean that it won’t, it just means that it didn’t when I thought it would….  Blame it all on the Plunge Protection Team (PPT) for they got the ball rolling on buying dollars on Wednesday, and it carried on through to the weekend…  

I can hear the Fed Heads when they gather and talk though their masks…  They are kicking the cobble stones and wondering what they have to do to make the dollar less desirable?  You see, the Fed does want Gold to be on everyone’s minds these days, because….  Are you ready for this?  What does a rising Gold price in most cases tell you about inflation? It tells you that inflation is moving higher, and thus the Gold price moves higher….  So, the Fed Heads think that if they cut rates to zero, print currency like there’s no tomorrow, and talk down the economy, that they can get the Gold price to rise, and in their respective minds, they believe that this would indicate to consumers that inflation is rising, and finally, after all that heavy toiling the Fed would have their inflation! 

But it doesn’t work that way, folks…. That’s like putting the horse before the cart…. I’m just saying…

In the overnight markets last night and early this morning, Gold, Silver and the currencies are attempting to run their respective rallies up the flag pole one more time to see if they can do so without interference… Gold is up $9 this morning, Silver is up $1, and the euro is pushing through the 1.18 handle once again…   So, the week is starting out on a good foot…  And like James Brown sang, years ago…  “I gotta get on the good foot”…. 

And the Data late last week was as confusing as it is for a blind dog in a meat packing plant!  Now, that’s confusing, eh?  Well, how do you have the regional manufacturing indexes all come in weaker than the previous month, but then the national manufacturing index rises?  Now, riddle me this Batman… How does that happen?  Well, if you have people that meddle in the data to make it look better, that’s how that happens, Robin…. And it’s time you learned that fact!  I shake my head in disgust that this goes on, but as long as we all know that’s the case, we won’t be fooled by these rogue reports, now will we?

The Initial Weekly Jobless Claims did just as I suspected they would, they climbed back over 1 Million for the week, which makes now 22 of 23 weeks above 1 Million…  The total came in at 1.1 Million, and the Continuing Claims were above 28 Million…  And don’t forget about the contract or “gig workers” that aren’t counted in these numbers… That could add quite a few more to the Unemployed Category, now don’t you think?    Imagine if you were what was considered to be a “gig worker”, and you were unemployed, you get no unemployment benefits, and the Gov’t doesn’t even count you as unemployed…  Now that would disheartening to me…. 

Oh, but the housing market is soaring! Good for that! I saw on TV the other night that you can get mortgage rates in the 2’s….  Now, wouldn’t that have been nice for me when in 1984, I bought my first house with an interest rate tied to T-Bills, which meant it was 13.5% at that time….  I’ve read a lot of stuff about the young crowd doesn’t believe in owning a home (probably because they can’t fix a darn thing, except to change a lightbulb)  and that they felt that it was not worth it to have that much responsibility…. But Come On! You might never see mortgage rates this low again! And if you are someone that has an interest rate that’s much higher than 2%, you had better be finding out how to refi that loan! Like the TV commercial, “What are you waiting for, John Stamos to knit you a scarf?”  Those are funny! 

Yes, I’m sorry to anyone that takes offense at what I just said about the younger crowd, but seriously… Ask one of them if they know how to change a tire on a car… Or ask one of them if they can replace a toilet’s float, and so on…  

And while new and existing houses are getting sold…. The homes that are already semi-owned by Americans, are seeing the largest amount of delinquencies ever….  Sure the Gov’t said that the bank can’t foreclose on these delinquent home owners, but…. That doesn’t just close the book on this, and allow us to walk away worry free….   You see, most mortgages are sold and put into mortgage backed bonds…. Those bonds have payments that need to be made to the bond holders each month….  After a few months of no payments, I would think that these bonds will have to go into default….  Uh-oh… But don’t let that upset your rose garden!  It’s all a part of the financial system breaking down…. Don’t worry, be happy!

I’m feeling quite sarcastic this morning, if you hadn’t noticed! 

I’ve had quite a few dear readers send me notes recently asking me the same basic question… Of should they fabricate their pooled Gold & Silver now, or continue holding it in the pooled account….  So, I thought I would address that here for all to read….  Basically, I would say to pay for and get your metals minted and shipped to you, buy a safe, put them in there and don’t’ tell anyone you have them in your house….

But, the premiums for fabricating/ minting are through the roof right now… So, I do believe it would be prudent to hold on to your pooled metals at this time, and wait for the minting fees to come down, and when they do, then revert to what I said above….  

OK… got that? Good!   Oh! And also I misspoke last week, when I said that Australian Banks were closing their ATMS’s and some branches…. I should have said the 4 Biggest Aussie Banks are doing that…. So, just a minor correction, but one that one of my Aussie readers pointed out to me!

Did you know that the folks at FXStreet post my Pfennig every day that I write it?  Follow them on Twitter, and you’ll see what I get the biggest kick out of, and that is seeing my Pfennig on Twitter each day…. Now, if we can get it on Parler, then well, it will be wider spread!  If you do follow FXStreet on Twitter, make you click the heart on my Pfennig posting!  That would be greatly appreciated!

This week in the U.S. Data Cupboard starts out slow, but as the week hits hump day… Mike, Mike, Mike what day is it? (I still think that’s the funniest  TV commercial I’ve ever seen!)  The data prints will be coming in hot and heavy, with major economic data prints by the boat load , so we’ve got that going for us this week, eh?

The Data Cupboard today only has one of the regional indexes (Chicago), but what good are they, if they can’t be depended on to indicate what to expect in the National report?  So, I’m boycotting the regionals for now on….  They’re useless to me! 

To recap…. Friday was another day of the dollar bugs having the conn…. It all started on Wednesday last week, when the PPT began to buy dollars to keep the dollar from going down a rabbit hole…. That put the idea in traders’ heads that it was too dangerous to sell dollars, with the PPT lingering…. And so the currency rally that was beginning to get noticed, was stopped in its tracks…. Gold lost $4 on Friday, and is still attempting to pull itself up the boot straps and get on the rally tracks again…

For What It’s Worth….  Ok, there I was working on my crossword puzzles on Saturday morning, and I see an email from the GATA folks. So I stop what I’m doing to see what they have to say, and in the email was a snippet for an article on Bloomberg.com that was made for the FWIW section! It’s a letter to the Fed from the stock market, and it can be found here: https://www.bloomberg.com/news/features/2020-08-21/a-love-letter-to-the-federal-reserve-from-the-adoring-stock-market

 

Or, here’s Your snippet: “ Dear Fed,

Hey there! It’s me, the stock market. I know it’s weird to write you like this, but I felt like I needed to drop a quick thank-you note for everything you’ve done for me this year. I mean, your big ol’ balance sheet is almost $3 trillion larger since early March! You’re backing up the truck and loading it with Treasuries and corporate bonds and bond ETFs, all to keep the competition to stocks from fixed-income yields as limited as Jim Cramer’s understanding of me. It’s been a dream come true, honestly. I mean, fess up: Have you been reading my diary?!

Maybe you’ve noticed, but everything else is a royal mess. Covid-19 is still killing people. Parents are dreading the beginning of “school.” U.S. unemployment is still above 10%, higher than it’s been since the 1980s. The country is facing the biggest economic contraction in its history. Corporate profits are plunging. The recession is forecast to continue at least through the first quarter of next year. And me? I’m soaring! Have you seen these record highs I’ve been setting?

To be honest with you, it’s getting kind of wild—and I’ve seen plenty of weirdness before. I’m more popular with sports fans than March Madness! Of course, there was no March Madness this year, so that’s not really a fair comparison—kind of like comparing my dividend payouts to yields in the bond market. Amirite, or amirite? LOL!

But I’m not kidding when I say things are getting REALLY weird. Have you heard of Dave Portnoy, aka Davey Day Trader, yet? He was just some middling internet celebrity until suddenly he’s going viral for using Scrabble tiles to pick stock ticker symbols. The Robinhood set thinks he’s smarter than Warren Buffett! This probably isn’t going to end well, I’ll tell you that much.

Speaking of Robinhood, that whole Hertz saga was about as weird as it gets. A rental car company was trying to sell new shares while in bankruptcy court, because its stock price was on a tear? Let me repeat that: Hertz. Sold. Shares. While. In. Bankruptcy. I can’t even! You’re sure keeping your pals over at the SEC busy! I mean, it’s so weird out there, Bloomberg Businessweek is resorting to cringeworthy satire to make sense of it all.”

Chuck again… this is one of those articles that I wished I could put here in its entirety! This was fantastic! Especially for a a sarcastic, smart alec like me!

Market  prices 8/24/20: American Style: A$ .7197, kiwi .6560,  C$ .7609, euro 1.1842, sterling 1.3130, Swiss $1.1010, European Style: rand 16.9575, krone 8.9609, SEK 8.7500,  forint 296.42,  zloty 3.7136,   koruna 22.0270, RUB 74.77, yen 105.75, sing 1.3674, HKD 7.7500, INR 73.98, China 6.9143, peso 21.89, BRL 5.6176, Dollar Index 92.93,  Oil $42.73,   10-year .63%, Silver $26.96, Platinum $926.00, Palladium $2,078.00, and Gold… $1,952.77

That’s it for today….  You know I had a dear reader ask me how I did what I do under the circumstances of chemo and cancer…. I told him I knew of no other way other than to soldier on, it was how I was brought up, watching my dad go to work every day, with back problem that would stop most men in their tracks…. If he could do that, I can do this….  I did tell him that there are days I wonder how I get out of bed….  I have to commend the SEC, Big 12, and the ACC for at least attempting to have a college football season this fall!  They may get shut down, but then they may get to play, which is what those college athletes want… a chance to play….  I can’t wait to hear Every True Son, played by Marching Mizzou!  In 2008, I was 1 year removed from the cancer diagnosis, two major cancer surgeries, when I attended the Mizzou/ Illinois football game, and when I heard Marching Mizzou, I began to cry, for at one point in the past year I had wondered if I would ever hear them again….  It was like when I walk out of the concourse at Roger Dean Stadium and see the lush green baseball field once again….   Ok… enough of that!  I’m supposed to be a big strong man that doesn’t get sappy!  The McCoys take us to the finish line today with their song: Hang On Sloopy…. And with that I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler

Lying, Cheating, That’s All They Ever Do!

August 20, 2020

* Traders buy dollars on Wednesday… 

* Another engineered takedown of the currencies & metals… 

Good Day… And a Tub Thumpin’ Thursday to you!  The weather here has reverted back to late May-like temps… I was able to sit outside, in the sun, soaking up Vitamin D, for almost 2 hours before I succumbed to my daily call for a nap….  Well, I flipped a coin and it came up that I would continue reading Kurt Vonnegut’s Slaughter House 5, I’ve got his book: The Sirens of Titan queued up too!  And by the time I get through those, it’ll be September, and  the new C.B. Strike book will be getting delivered to me!  Someone asked me the other day why I never mentioned that I read economics books or investment books… I replied: “I read for enjoyment”….   Not exactly a “morning song” except if you can’t wake up…. But AC/DC greets me this morning with their song: Back In Black…

Well… 2 steps forward, and then a step backward….  Wednesday saw the currencies and metals drift most of the day until the afternoon, after the Fed’s Meeting Minutes were printed….  And then for some unknown reason, currency traders all bought dollars…. The euro which had climbed to 1.1935 saw a full figure taken from its value, and so on for the currencies. Gold got sold like funnel cakes at a state fair once again, and finished the day at 1,929….  Yeah, that’s a far way’s down from the early morning price of $2.006….

And all because something spooked the markets…. I can tell you everything that was in the Fed’s meeting minutes wasn’t what spooked the markets, for they had nothing but gloom to say about the economy… They did mention that further monetary stimulus might be needed, and that could have been what queued the boys in the band to strike up a chord… But, The Fed Heads, said that their staff had lowered the previous economic outlook….  Did you read that? The Fed has lowered their previous economic outlook…. And traders bought dollars because of that?  What did someone put a pistol to their heads and demand they buy dollars? Well, we all know that didn’t happen, but metaphorically it could have very well happened….  I’m just saying…

Ed Steer, in his letter this morning, thinks that, as he calls them, ‘da boyz, bought dollars to rally the Dollar Index, and then that just carried over to their selling of Gold & Silver…  you can check out Ed Steer’s letter by clicking here: www.edsteergoldsilver.com 

In the overnight markets and early this morning, traders are selling dollars again… I know, I know, it makes no sense to me either!  But that’s what’s happening, right now, and Gold has gained $18 and Silver has gained back $48 cents in the early trading… So, it’s a one day event for the price manipulators, eh? 

OK, my rant is over…. What else is there in their quiver to use to kill rallies?  Or will they simply continue to go back and use the same arrow? You know the one where the PPT comes in buys dollars, spooks traders, and they end up following along….   The Fed Heads said what I thought they would say, and that is that the “economy is vulnerable”….  They didn’t report seeing any “green shoots”, and they basically sounded pretty dejected….  Oh, poor, poor Fed Heads, all the Kings men and and all the King’s horses couldn’t put the economy together again…

Sooner or later, it’ll all collapse under the weight of debt, and currency printing, but for now, we have to live with these weekly engineered takedowns of the currencies and metals….  

Well, did you hear that the Bank of Nova Scotia has agreed to pay a fine of $127 Million  after it was found that they had lied to regulators a couple of years ago….  Spoofing Gold & Silver futures was their crime…. I’m reminded of a Led Zeppelin song, that goes like this: Lyin’ cheatin’ hurtin that’s all you seem to do…. And then the chorus is: Your Time is Going To Come….   Oh how apropos for this bullion bank that decided a couple of months ago to get out the bullion business….  

But…. Think about this for a minute because this rings true with every one of these “fines” that these casino banks receive for doing something unlawful…..  I’m sure that the Bank of Novia Scotia booked 5 to 10 times that amount of profit through the years, and this fine was “just a cost of doing business”….  That’s their mantra, folks…. Do it until you get caught, then lie, through your teeth, until proof is provided, and then agree to a fine….  And, I’ll say this once more…. Until one of these dudes goes to jail, this will continue….  Move onto the next casino bank, because if you really want to you could find them with their hands in the cookie jar too… and so on…

For A Tub Thumpin’ Thursday, I’m sure fired up today, eh?  First I see the markets getting spooked, and then I read about another casino bank receiving a fine, instead of going to jail….  I throw my hand in the air, and scream, Serenity Now!

So, why don’t we follow the guidelines in the Constitution any longer? Because we’ve grown into an Empire…. The world’s strongest military, the reserve currency, and the ability to print said currency until the cows come home….

For you history buffs… Don’t these things remind you of the Roman Empire? …. I’m just saying…

The Difference is that the Romans didn’t have currency to print… Instead they kept reducing the amount of Silver in their coins…. Same concept…. Debase their currency…. And do it, and at first, it seems to work, so you debase it a little more, and little more, and pretty soon, no one wants it for they have no confidence in its worth…  We’ll find this out sooner or later….

OK…  So, how many know or aware of the Libertarian Tom Woods? I read his stuff all the time, and listen to his podcasts…. Yesterday he had a podcast with Rep. Robert Massie, who I found is no fan of the Fauci/ Birx tandem, and for a special treat today, I have the link to that podcast right here in my pocket….  Click here: https://tomwoods.com/ep-1711-rep-thomas-massie-against-the-fact-free-covid-19-hysterics/

So, now you know…. I listen to podcasts from Grant Williams, Tom Woods, and Candance Owens, and Dennis Prager….  And that’s it….

U.S. Corporate Debt, which 5 months ago was teetering on the cliff, and was soon to do their best imitation of Wiley Coyote…. Couldn’t have known that the pandemic was going to be their savior…. But is was, and now they can go back to issuing more debt, because the Fed will just buy it if the sheeple don’t…. 

At the end of the first Quarter… Corporate debt issuance was up 9%, but those same corporations showed that Corporate pre tax profits were down 8.5%…  And going into the 2nd QTR they upped the ante, and now have issued more debt than at any time in the past. And… The gap between corporate debt and profit growth grows even wider ….

 But do our friendly neighborhood Fed Head give this two thoughts? I doubt it…  They’ve ruined the price discovery in the markets, and all they’ve done is kick the can down the road with these Corporations and their debt…. They, the Fed and Corporations, have gone “all in” on their thoughts the economy is going to comeback strong… 

 Well, I don’t think that’s ever going to happen as long as we have so much debt as a country…  I went through the debt and its relation to the economy the other day, so I won’t go through that again…. But this is a big risky bet, folks… And the Fed just keeps the Corporate bond window open… They should have a sign: “you issue them, we buy and hold them”…. 

 And in an attempt to keep you up to date regarding the plan to have us go to a cashless society…  It was reported yesterday, that 4 Australian Banks have removed their ATMs….  And closed branches….  Man I have to tell you that I really feel for my Aussie mates….  When the bank down the street closed, the one that I had used as my personal ATM for years, I had to find a new ATM….  What a pain in the shoulder!  Ha! You thought I was going to say something else, didn’t you?

 Might as well just put a sign where the ATMs were that says, “ No cash to distribute, digital currency is on the way!”

Well, it’s a Tub Thumpin’ Thursday, which means it’s the day the Weekly Jobless Claims print for the previous week… It’ll be interesting if we start to see the numbers climb again with all the re-closings….  We’ll also see the regional report from the Philly Index, which should have backed off the previous month’s number…. And the Leading Indicators…. And that’s it!

 To recap….  The Fed released their meeting minutes yesterday, and something spooked the markets…. Chuck believes it was the PPT buying dollars, and that spooked traders into thinking that that’s what they should be doing too… So, both currencies and metals lost a lot of ground yesterday afternoon, after the minutes were seen by everyone…. Chuck doesn’t see anything in them that would give you a warm a fuzzy about owning dollars, but that never stops a price manipulator like the PPT….

 Before we head to the Big Finish today, I wanted to spread some chuckles…. Good friend, Dennis Miller sent me a picture of NY Gov. Andrew Cuomo and the caption reads: U-Haul’s Number 1 Salesman….  4 years in a row!   Now that’s funny…. Not for the folks in the state of NY…

 For What It’s Worth…  While I was reading Ed Steer’s letter this morning I came across a FWIW article that he had highlighted… It’s an article about what supposedly spooked the markets yesterday, and it can be found here:https://www.zerohedge.com/markets/key-takeaways-fomc-minutes-market-spooked-lack-fed-commitment-more-qe-twist-or-curve

Or, here’s your snippet: “As we noted earlier, treasuries erased gains and fell to session lows after minutes of the FOMC’s July 29 meeting for several reasons: first, the Fed’s assessment of the economy was more downbeat than many had expected; second, the fact that the Fed appeared to cool substantially on any imminent (or even medium-term) implementation of yield curve control; third, the FOMC was silent on the prospect of changes to the size or composition of the central bank’s purchases of Treasury securities. As Bank of America’s Marc Cabana pointed out, “Notable that the minutes had no discussion of extending the duration of asset purchases, i.e. “twist”. This narrative had built considerably via media & Dudley speech leading into the meeting.

Cabana is referring to the fact that in news conference that followed the July 29 meeting, Fed Chair Powell said the Fed’s asset purchases – running at an $80 billion a month pace in Treasuries – can be adjusted to increase support for the economy, leading to speculation that an increase in size or duration was discussed.

Tom Roth, head of rates trading at SMBC Nikko Securities echoed Cabana’s reservations, saying that market reaction to the minutes is to “what is not there,” adding that the minutes also revealed widespread reservations among officials about the use of yield caps and targets.

Following the disappointment from the lack of commitment to more QE, YCC or Twist, yields across the curve reached session highs, led by the long end, steepening the curve; 10-year yield erased what remained of an earlier decline of as much as 2.4bp and climbed as much as 1.8bp on the day to reach 0.687% before stabilizing.

The disappointment also propped up the dollar, which extended gains as the minutes revealed that the FOMC saw only a modest benefit from yield caps and plans to keep securities purchases at their current rate.”

Chuck Again… yeah, yeah, yeah, excuses, excuses… The old football coach used to say, “Excuses never won a ball game for anybody”…   Have the markets become so addicted to stimulus?  SERENITY NOW!

Market  prices 8/20/20: American Style: A$ .7168,  kiwi .6532, C$ .7607, euro 1.1847, sterling 1.3145, Swiss $1.0984, European Style: rand 17.1875, krone 8.9337, SEK 8.7344,  forint 295.21,  zloty 3.7020,   koruna 21.9722, RUB 73.20, yen 105.88, sing 1.3685, HKD 7.7500, INR 74.94, China 6.9148, peso 22.17, BRL 5.4896,   Dollar Index 92.92,  Oil $45.50,  10-year .65%, Silver $27.19, Platinum $922.00, Palladium $2,032.00, and Gold… $1,947.80

That’s it for today, except…. A GREAT BIG HAPPY BIRTHDAY to my darling daughter, Dawn…  I won’t say how old she is, but… she sure makes me feel old when she celebrates a birthday!  Dawn is a kindergarten teacher, and probably is the best at doing that there is!  Last Friday, when I saw my former assist. Christine, she reminded me that her oldest son was born on Dawn’s birthday, so happy birthday to him too! Well, the beautiful weather pattern we are currently in, looks like it will hold through the weekend. So I’ve got that going for me!  The late great, Leon Russell takes us to the finish line today with his version of the song: This Masquerade….  I always did enjoy the work of Leon Russell….  Just saying…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and Please Be Good To Yourself!

Chuck Butler

The Modern Day Gold Rush Is Here!

August 19, 2020 

* Currencies & Metals both rally VS the dollar on Tuesday

* Warren Buffett dips his toe in the Gold Market… 

Good day… And a Wonderful Wednesday to you!  Another beautiful day here in the Midwest yesterday, and today is supposed to be even better! So I’ve got that going for me today, eh?  I start today with a loss of thoughts, words, and whatever it takes to write a daily letter… It’s all just a big blank screen for me this morning… So, I hope I have think of something quickly, before you dear reader decide to hit “delete”….  Steely Dan greets me this morning with their song; Deacon Blues… I love this song, and pretty much anything Donald Fagin and the late Walter Becker did….  

Well, the currencies and metals rallied VS the dollar another day on Tuesday. This marks two consecutive days of gains for Gold, that brought it back over the $2,000 figure…  On Monday this week I wrote, about taking One step forward, and two steps back, and so it is with Gold that I await the boys in the band to come play their instruments once again, for it’s time for a step back. Wouldn’t it be nice we could wake up when the morning is new, and not have to worry about price manipulators?  This way when fundamentals said Gold should be sold, that would be when we would see it drop in price, but at least we would have fair warning!  

There was an event that took place late last week that I’ve been remiss in not mentioning, not that I haven’t wanted to, but other things go in the way… The event I’m talking about was the fact that Warren Buffett, who has referred to Gold, and a barbaric relic, bought a large load of Gold futures….  

Now, this is the first time Buffett’s Berkshire group have dipped their toes into the metals market…. Oh, about 30 years ago, they bought a HUGE position in Silver….   But sold it after not holding it very long….  I just thought that it was significant that the “Oracle of Omaha” that has dissed the idea of diversification, and owning Gold, has tried to under the cover of darkness, dip his toe into the the Gold market…. 

Doesn’t that just take the cake?  And doesn’t it just tell you in so many words that diversification of an investment portfolio, using currencies and metals makes abundant sense?  I’m just saying….

I had a few dear readers send me notes yesterday, and question my call that a new weak dollar trend began in July….  I can assure I didn’t nilly willy make that call yesterday…. The sentiment toward the U.S. dollar with all the currency printing going on has made currency traders double think about owning dollars… Is inflation around the corner?  That’s what usually follows all this currency printing, and let me remind you that rising inflation is the Fed Head’s collective wish, which is one of the reasons they keep interests rates on the verge of going negative…. 

The other reason and it’s one that outweighs all other reasons for interest rates being near zero, and that is that for every piece of currency that’s printed, that’s one more dollar of debt, and with all debt it has to be financed with the sales of Treasuries….  A few years ago, I used to follow the TIC data which gave us the numbers on how much foreigner’s bought of the Treasuries that were issued the previous month. But then the TIC data went away, and it’s very difficult to find these days, and there’s no wonder why, because China has basically not shown up at the Treasury auctions….  That means the primary casino banks have to step up and buy what’s not sold in the auction…. But these days, those rules have changed, and instead of the primary casino banks buying up what’s not sold, the Fed steps in a buys….  The Fed will not admit to this, but basically, they are monetizing the debt…. 

And I think that is a big fly in the ointment of the currency traders that want to own dollars….

And all the while Gold & Silver are bought as alternatives to owning dollars, for Gold & its cheaper brother, Silver, have never gone to zero folks…. Therefore as I’ve always said, Gold is a store of wealth….  In my daily journey through Twitter & Parler, I found a quote on Gold that I think says it all so with no further beating around the bush…  This is from Grant Williams of Things That Make You Go Hmmm…. Fame, so let’s listen to what Grant has to say….

“Gold has stood the test of time, provide a stable store of wealth to mankind for millennia. And as we look to an increasingly uncertain future, with fiat currencies across the globe under siege from rising debt levels, it remains the only money guaranteed to survive.” – Grant Williams

Nothing new here for you dear reader, but just like I found with kids through the years, you can preach to them every day about something, but when some other adult says it, the light goes on and the kid gets it….  So, I thought for those of you not on board with owning physical Gold, that hearing it from Grant Williams might do the trick!

I know that I’ve said this many times in the past, but just to regurgitate it once more…. While Gold gets all the headlines, Silver silently outperforms its big brother percentage wise….  In the last bull market for the metals, Silver outperformed Gold on a percentage basis 7 of the 10 years….   So, if $2,000 Gold seems a bit pricey for you…. There’s always $28 Silver…. 

Well, in the foreign Data Cupboards today, we have some CPI data that’ll print in both the Eurozone and Canada…  But there’s nothing there that’s going to stick out like a man with a hatchet in his forehead, so we’ll just move along for these are not the droids we’re looking for!

So, basically, if the Dollar Index would suddenly rise today for no apparent reason, we’ll know the Plunge Protection Team is behind the wheel of the truck that carries a load of long dollar buys to the market…  The drivers of this truck will run right over you, if you are in their way, so always beware that we could see 1-day “corrections”…. wink, wink… 

In the U.S. Data Cupboard, it’s about a dry as the Sahara…. But we will see the Fed’s meeting minutes from their last meeting this afternoon… And therefore I don’t believe we’ll see any major moves in both the currencies & metals today, until we get what the Fed Heads had to say behind closed doors 6 weeks ago…  If anything I would expect that the Fed Heads will have discussed allowing inflation to run a bit….  And that could be the springboard to more dollar selling…

To recap… The currencies and metals both had good days rallying VS the dollar on Tuesday. One wonders what we’ll see today, given what we know about the powers that be and their bag-0-tricks….  The euro has climbed above the 1.19 figure, and all other currencies fall in behind the offset currency to the dollar.  Other than that news, Chuck was at a loss as to what to talk about today… 

For What It’s Worth….  In my never ending attempt to show you dear readers that the U.S. economy is in shambles and not coming back soon I have today’s FWIW article that came to me via longtime reader Bob. It’s about the amount of auto loans that U.S. consumers now hold…. And it can be found here: https://www.blacklistednews.com/article/77745/subprime-auto-nation-american-households-now-carry-134-trillion-in-auto-loans-on-an-asset-that.html

Or, here’s your snippet: “America is literally driving itself into debt. US households now carry a stunning $1.34 trillion in automotive debt. What is troubling about this is the amount of driving taking place has plunged courtesy of Covid-19 and much of our economy is built around driving. People take the morning and evening commute, and this was seen as simply normal – but now with many working from home, that may not be the case. Also, the notion of buying cars (a depreciating asset) every few years is just a bad financial move. The buying would not be so bad but the level of debt being taken on to finance a car purchase is. Not too long ago a three- or four-year term on an auto loan was standard. Now we have loans of six to seven years! You also have billions of dollars going to subprime borrowers and in this climate, a large number of Americans are financially on the edge. Where do we go from here when it comes to auto debt?

The state of auto loan financing

It is astonishing how much debt is used to finance car purchases. When you look at companies like Tesla, a large portion of purchases come with financing. And you also have this for every other traditional car maker like Ford, Chevy, Honda, Toyota, and many other makers. At the end of the day, many Americans are only able to purchase a car by going into significant debt.

The numbers are clear:

There is $1.34 trillion in auto loans outstanding and part of this is now in subprime auto loans. If we go back to 2011 we had $710 billion in auto loans. In nine years auto debt has grown by 88%. That is astonishing given that household incomes have been largely stagnant over that period.

And if you look at some of the ads, you can see how easy it is to finance a purchase:

$0 down payment, $0 security deposit, $0 first month’s payment. And this is for a lease! So you don’t even get to keep the car after the lease is over. People are now fully conditioned to think that it is normal to go into deep debt to purchase a car. They are also programmed to think that you should be buying or leasing a new car every three to five years. Why? Cars can last a lot longer with basic maintenance but our debt-based system has conditioned people to always be buying and thinking utilizing heavy debt to purchase a depreciating asset is totally fine.”

Chuck again….   7, 8 year loans on autos that won’t be worth a dime when that time comes around, just doesn’t seem to be a smart financial move to me… But then…. I think differently about finances than most people… I use logic!

You know… I get it…. Cars have ALWAYS been the sort of status symbol for Americans…  But in this day of economic shutdown, 30 Million people looking for jobs, New York City basically becoming a ghost town,  and a lack of savings by Americans, does it really makes sense to have a bright shiny new Beemer sitting inside your garage, as you work from home?  

Now… if it were a goat…. (A GTO) of yesteryear, that would be a different story… Nah… just kidding… .But that was always my dream car…  a few years ago, I attended a classic car show in Jupiter, Fla. and there was a GTO, you have no idea how difficult it was for me not to walk up to the guy and say, “I’ll buy this from you, how much will it cost?”  

Market   prices 8/19/20: American Style: A$ .7263, kiwi .6641, C$ .7605, euro 1.1933, sterling 1.3120, Swiss $1.1034, European Style: rand 17.1888, krone 8.8359, SEK 8.6395, forint 292.97,   zloty 3.6817,   koruna 21.8775, RUB 73.27, yen 105.33, sing 1.3639, HKD 7.7498, INR 74.73, China 6.9232, peso 22.10, BRL 5.4883,  Dollar Index 92.33,  Oil $42.56,   10-year .64%, Silver $27.44, Platinum $978.00, Palladium $2,225.00, and Gold… $2,006.00

That’s it for today…  And I have nothing going on tomorrow, so I’ll be back tomorrow for our Tub Thumpin’ Thursday!  I’ve told you all before about the pictures that I have on the board that faces me at my writing desk. One picture always makes me smile…  Many years ago, the local journal newspaper sent out a photographer on a snow day… And they captured a picture of me playing in the snow with Dawn 7, and Andrew 5, and then put in the paper!  I was pretty thin back in those days, and had hair!  I think of how life was back in those days… We barely had two nickels to rub together, but we had lots of fun… OK, now back to 2020, the year we would all like to see end tomorrow…  My good friend Rick will get a kick out this song…. Crowded House takes us to the finish line today with their song: Don’t Dream It’s Over….   I guess they’re telling me to not dream 2020 is over just yet! HAHAHAHA!  I hope you have a Wonderful Wednesday, and please Be Good To Yourself! 

Chuck Butler

 

The Beginning Of A New Weak Dollar Trend?

August 18, 2020 

* Currencies & Metals both rally VS the dollar on Monday

* Chuck takes us back to 2002…. 

Good day… And a Tom Terrific Tuesday to you!  Another beautiful day yesterday was spoiled around dinner time with a rain shower…. Oh well, at least the day was great! My darling granddaughter, Delaney Grace celebrated her 13th birthday (which was last week) with some of her friends in our pool…  She made sure she sought me out when it was over, to come inside and give me a great big hug, ask me how I’m feeling, and tell me she loves me…  Ever since the day about 7 years ago, I sat her down and explained cancer and what it does to people to her, she has always made sure she stops to give me a hug, and ask me how I’m feeling….  I just love her to pieces! The Cards and Cubs split their doubleheader yesterday, with the Cardinals giving away the 2nd game late….   Our Blues  won 3-1 and evened their playoff series at 2-2…  Paul Carrac and the Squeeze greet me this morning with their 80’s song: Tempted….

The day in the markets yesterday was a good one for non-dollar holders, as both the metals and currencies took liberal swings at the dollar bugs all day long!  Gold ended up $38 on the day, but was up to a $44 gain at one point in the day… And the Dollar Index dropped a chunk on the day of its value, which means the euro continued to rise through the 1.18 handle, and the A$ traded over 72-cents, while the Swiss franc continued to defy the Swiss National Bank (SNB) and moved higher once again… 

In the overnight markets, the euro has been lifted to the 1.19 handle, and the Dollar Index fell further….  While I’ve been crushed by so many false dawns in the past couple of years, I’m hesitant to call this the beginning of a weak dollar trend. We saw last week that the Plunge Protection Team (PPT) can be formidable foe, and squash many a rally. So that has to remain in the back of my mind, but the euro passed 1.16 a while ago…. Which was supposedly a psychological level, and even with the Aussies closing down their opened economy again, and issuing a warning that anyone caught not adhering to the protocols, will be fined, the A$ still moved higher on the day….

We will know for sure that it’s the beginning of a weak dollar trend, when we keep hearing stories like the one from Australia yesterday, but still see the respective currency rally….  Like we saw yesterday, but… as I always used to say, one swallow doesn’t make a summer,  and one bad apple won’t spoil the whole bunch, so we’ll have to see more of these types of stories, that will etch in stone that it’s a new weak dollar trend…  If I were a betting man, I would put money on the call that it IS a new weak dollar trend….  I’m just saying…

So… how many of you recall the beginnings of the last weak dollar trend that began in February 2002? It too, had humble beginnings, and there were questions of whether or not it was real…. But since I had written a white paper at the end of 2001, titled: The Decline of the Dollar…  I was on board early with the call that this was the new weak dollar trend…  But that was 2002, and this is 2020… A year that I think everyone would just as well forget about, but…. I do believe that we’ll look back and see that the weak dollar trend began in July 2020, which means 202o will have something other than a pandemic to be talked about! 

OK…  So the U.S. economy was shut down for a couple of months, after it was originally supposed to be 2 weeks, that were extended to 2 more weeks, and so on…  A lot of jobs that were there when the economy shut down didn’t come back… And now people of all sorts of training and jobs, are looking for work to support their families, or maybe just themselves…  The $600 per week in unemployment benefits was nice while it lasted…. 

On a sidebar here, what mental genius (NOT!) thought up the idea to pay people more in unemployment than they made in their regular jobs?   Hey! Don’t look at me!

I still chuckle when I think of the Gov’t sending out stimulus checks to dead people….  What a bunch of dolts in the government, eh?   Ok, back to the point I was about to make before I got sidetracked….  It’s going to take some time before we get back to where we were before the shutdown, and even that wasn’t great!  But 2.1% economic growth is better than a sharp stick in the eye, right?  Especially now that our GDP in the 2nd QTR was negative! 

I was talking to some of my family a while back, and we were talking about McMansions, and I said, “aren’t you kids glad that I didn’t go for a McMansion back in the day, and instead saved my money so we could have this nice beach place in Florida?”  Save for a rainy day…. OR when you want to buy something, make sure you’ve saved the money to do so…. Those are a couple of lessons I learned many years ago from my dad….  And while I don’t believe I’ll make many friends, by telling them they don’t need that latest iPhone, or 80-inch Smart TV, if they have to borrow to buy them…. So, I write in the Pfennig, and hope that they get the message!

Wanna know what I’m really bummed about these days?  We had to cancel the Butler Annual Labor Day BBQ, this year….  We’ve been hosting this BBQ since 2001….  Even in the year of my cancer surgeries of 2007….  I’m still going to put the Big Green Egg to work that weekend, but it will be cooking for my family mostly, and not the 50-60 people that are usually here! UGH!

Well, in La-La Land, where….  Stop Chuck, you don’t want to say that!   Ok, in California, they have come up with an idea to impose a Wealth Tax on the Ultra rich….  I hear some of you saying, “it’s about time!” but wait…. Once California does this, other states will follow, and when those states find that taxing the Ultra rich isn’t as lucrative as they thought it to be, guess who’ll they’ll come after next?  Yes, the good old Middle Class, and what’s left of it, will be called on to do their patriotic duty and buck up…. 

Back in 2011, when the debts of Greece were discovered, I kept harping on the fact that Greece’s economy was about the size of Kentucky’s and that California, being the 8th largest economy in the world, had bigger debt problems, and wondered why no one was looking at California, New York, or Illinois, for they all have debt problems up to their eyeballs, and no way other than increasing taxes to help them from defaulting….  Remember when I broke the news to you that it had been Goldman Sachs, aka Lola, that had shown the Greeks how to hide their debts, and got them to issue even more bonds ….   But did Lola get called to the carpet for that? No….  

And thus we began the cycle of these casino banks getting into hot water, and the tax payers bailing them out….  And the regulators looking the other way, and no one goes to jail…. 

The U.S. Data Cupboard is still in a “wanting” mode, for real economic data, but until we get there later this week, we can see other lower tiered prints, like yesterday’s Empire Index, which is the NY region’s manufacturing index, and remember last month when it reversed the rot on the vine that was seen in the index during April and May, and came in with a 17 .2 print?  The markets and the dollar bugs rejoiced that the economy was reversing its downward course….  Well, I hate to be the one to buts their balloons or step on their seashells, but…. The July print was only 3.7…. A Big drop, and what do we hear from these same rejoicers now? Crickets….. 

So, when I began to write this morning, I said, “There’s no way the letter will as long as yesterday’s was” And so with that, we’ll head to the Big Finish from here… 

To Recap…. The day for the dollar bugs yesterday was one they would like to forget, as bot the currencies and metals took some pent up frustrations out on the dollar bugs. And both have continued their rallies in the overnight markets so we start today with the dollar reeling, stumbling, fumbling and about to fall on its face. Chuck thinks that this will be looked back on as the beginning of the new weak dollar trend…. A bold statement from someone that has been wrong about this a few times already, eh? 

For What It’s Worth….  So, I began to talk about how badly the economy is doing since the shutdown earlier this morning, and I went off on another tangent. So, I’m picking it up here with this article on Zerohedge.com about Mortgage delinquencies and it can be found here: https://www.zerohedge.com/markets/fha-mortgage-delinquencies-soar-record-60-q2-hit-all-time-high-157

Or, here’s your snippet: “Last month we quoted from Wolf Richter to remind readers of something we discussed several months ago when we went over the details of the forbearance process and why so many banks have chosen to use it instead of rushing to admit their balance sheets are hammered with a record surge in delinquencies and defaults. As a reminder, “mortgages that are in forbearance and have not missed a payment before going into forbearance don’t count as delinquent. They’re reported as “current.” And 8.2% of all mortgages in the US, some 4.1 million loans, are currently in forbearance according to the Mortgage Bankers Association. But if they did not miss a payment before entering forbearance, they don’t count in the suddenly spiking delinquency data.”

Everything changed in April when there was a sudden onslaught of delinquencies according to CoreLogic, which came after 27 months in a row of declining delinquency rates. These delinquency rates move in stages – and the early stages are now getting hit, with the Transition from “Current” to 30-days past due suddenly soaring.

To wit, in April, the share of all mortgages that were past due, but less than 30 days, soared to 3.4% of all mortgages, the highest in the data going back to 1999. This was up from 0.7% in April last year. During the Housing Bust, this rate peaked in November 2008 at 2% (chart via CoreLogic):

Fast forward to today, when the dam of pent up mortgage delinquencies cracked some more, with the Federal Housing Administration reporting that its mortgages which represent the affordable path to homeownership for many first-time buyers, minorities and low-income Americans, now have the highest delinquency rate in at least four decades.

The share of delinquent FHA loans rose to 15.7% in the second quarter, up a whopping 60% from about 9.7% in the previous three months and the highest level in records dating back to 1979, the Mortgage Bankers Association said Monday. The delinquency rate for conventional loans, by comparison, was 6.7%.”

Chuck again… Yes, folks… the bank are in trouble… for they carry most of these delinquent loans…  I just don’t get the beating around the bush and the cover up of these numbers…. Call an elephant and elephant and go on with your day! 

Market  Prices 8/18/20: American Style: A$ .7235, kiwi .6561, C$ .7598, euro 1.1902, sterling 1.3161, Swiss $1.1050, European Style: rand 17.3993, krone 8.8248, SEK 8.6760, forint 293.78,  zloty 3.6876,    koruna 21.9543, RUB 73.31, yen 105.82, sing 1.3652, HKD 7.7500, INR 74.52, China 6.9365, peso 22.05, BRL 5.4511, Dollar Index 92.55,   Oil $42.60,   10-year .67%, Silver $28.23, Platinum $963.00, Palladium $2,161.00, and Gold… $1,982.00

That’s it for today…  Well on Friday night things looked bad for our Blues, as they were down 0-2 in games in their playoff series. But fast forward to today, and they are back in the hunt at 2-2!  They finally played “Blues hockey” last night, and so we can hope that they continue that play that was so crucial to their Stanley Cup Win last year… Looks like another chamber of commerce day outside this morning… I can’t wait to get out there! I just finished reading Book 4 of the C.B. Strike series. Book 5 will be coming to me next month… These are 350 page books, and it takes me a week or so to get through them! I have two books that I’ve also started: Thomas Jefferson, and Kurt Vonnegut’s Slaughter House 5… So, I’ll flip a coin as to which one I continue reading!  So, apparently, I didn’t tick off too many of you yesterday, so that’s a good thing!  Blackfoot takes us to the finish line today with their song: Highway Song….  A good song to have playing when you’re on a long drive!  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler