The Fed To Begin To Buy Corporate Bonds!

June 16, 2020

* Currencies win back some lost ground from last week

* Gold fights back! 

Good day… And a Tom Terrific Tuesday to you! Another Chamber of Commerce day here where I live the summer and fall… Before I go ballistic today, I want send a great BIG Shout Out to my former colleague, and the guy I consider to be my metals guru, Tim Smith, who along with his wife Nicole, welcomed their first born into the world on June 3rd… Tim and Nicole are very happy with their strapping young man, named Jason… So, congrats to you two! May you get a lot of sleep in the coming weeks…. HA! I got to see all 4 of my grandkids on Sunday, and the highlight of the day went to little Evie, who is now 9 months old! She’s going to be walking soon, I would bet! Chicago greets me this morning with their song: Stay The Night… Hey! Remember when the radio stations wouldn’t play the Rolling Stones song: Let’s Spend The Night Together? The FCC has come a very long way, haven’t they?

Well, well. Well. What have we here? Longtime readers, Bob, sent me an article yesterday that made me sit up in straighter in my chair… The article states a passage from the OECD ( Office for Economic Cooperation and Development) where they believe that U.S. banks that are the custodians for many Corporate and Gov. pensions, were in deep dookie in February, and to prevent them from going negative with their returns, the Fed bailed out those banks…. And we were wondering how the picking of who got what, was going to take place… now we know!

Look, I don’t want pensions to have problems… But the Fed comes in on their White horse and saves them, when it was the Fed’s actions that caused them to have problems! So, don’t be getting out the bouquets of flowers for your favorite Fed Head… They caused the problem in the first place!

Another thing that crossed my writing desk was Dallas Fed Chairman, Robert Kaplan spoke yesterday, and told his audience that he didn’t think capping the yield curve was a good idea, because he didn’t feel as though there was a way to control it…. But Kaplan could just be the straw horse here, to lead us away from what the Fed is really going to do… And like I said last week, before Powell spoke I might remind you, I believe not only interest rates are going to capped, but also the Treasury yield curve…

Alrighty then we have those two thing out of the way and off my chest…. Well, the currencies, led by the euro, fought back yesterday, and won back some ground they had lost late last week. I left you yesterday, with Gold down $20 in the early trading, but the shiny metal fought back to only close down $5, on the day at $1,728….  And that mini-rally in Gold yesterday, rolled over to this morning, and Gold is up $5 in the early trading today.  

Speaking of Gold, there is a little story here to lighten the mood… Seems a rider on a Swiss train, got off at his stop and forgot his Gold haul…  The Swiss authorities have attempted to find the owner of $191,000 worth of Gold, but nobody has turned up, so the authorities have decided to go public with the information… There were no details on what the authorities would do to confirm the owner…  I left my phone on plane once… And thought it to be a catastrophe! Imagine this guy…. 

Longtime readers will recall a Sunday Pfennig, when I gave readers: Chuck’s Debt Solutions… And one of the main things in the letter was to close all foreign military bases, those countries don’t want us there anyway…. The Threat of Russia running all over these European countries is null and void these days, so they don’t need the U.S. military there to protect them, any longer… Talk about HUGE money savings! Look, I told you all last week that “the order” is no longer a thing… Each country is going to have to look out for themselves, and as the Order winds down, I believe we’ll see more news like the one yesterday where it was reported that of the 52,000 troops in Germany, we’re bringing home 27,000 which will leave them with just 25,000… (see that new math I just used? Amazing! )

I always thought that the protection of Europe against  Russia was a bunk, but “the order” allowed countries to grow their exports and thus their collective economies, and that’s a BIG DEAL folks!  Without “the order” The seas would have been chaotic, never knowing if your shipment would get to where it was going or not…  So… here’s where the rubber meets the road, folks… with no protection, what’s the new situation with exports going to look like?  And with every country having to defend themselves, who’s going to look around and say, “hey! we still have a big military, it’s time we used it?” 

No looking to the U.S. for help… We’re out of that game…  We got tired of being taken for granted and advantage of…  Here’s an instance… Germany, wanted protection from Russia, but then signed a trade agreement with them to import Russian Oil…   Now, the U.S. is paying huge bucks to defend Germany, you would think that Germany would buy their Oil from the U.S., right?  Just one of many instances where the U.S. was taken advantage of…

 OK… time for something else… let’s see…. Oh, the rally in the Aussie dollar (A$) in recent weeks was something to behold, given that there was no global growth to feed the A$ rally. I even pointed that out a couple of times in the Pfennig. And then last week there were reports of a 2nd Wave of the virus, and the rug was pulled out from under the A$…  Remember me telling you to be careful there? 

The selling of the dollar is building steam… I saw where one of my former fave economists, Stephen Roach, gave a long dissertation on how the U.S. dollar is going to collapse…  I used to hang on every word that Stephen Roach said, but then he disappeared and I lost track of him…  But if he’s back now, that’s a good thing!  I’ll attempt to get through his latest writeup on the dollar, but I can tell from scanning it, he really does believe that the dollar is in deep dookie… 

I’m going to repeat this every day until it sinks into Traders’ collective minds that this is a very bad thing….  “The Fed’s Money Creation Has Exceeded U.S. Treasury Tax Receipts”…. 

The U.S. Data Cupboard gets back in business today with their prints of May Retain Sales, which the Butler Household Index, indicates will be better than the April report which saw a negative -16.4%, but the forecasters believe that May’s report will be far better than April’s and have Retail Sales growing 8%…  I’m thinking that’s a bunch of bunk, so we’ll have to wait-n-see in a bit… 

The Data Cupboard also has the May prints of Industrial Production and Capacity Utilization, two BIG “real economic reports” for us to view today…  But I somehow keep getting this feeling that I’m the only one that worries about these economic prints…  Oh well… It is what it is… 

To recap…  The currencies won back some ground lost late last week to the dollar bugs, yesterday… And Gold found some terra firma and recovered from an early morning $20 loss to just a $5 loss on the day, and is up $5 in the early trading today!  The fears of a 2nd wave of the pandemic sent the A$ to the woodshed late last week…  And Dallas Fed Head, Kaplan, doesn’t see how the Fed could control a Treasury yield cap…  Come on Rob… You can do it, if you really try!  HA!

For What It’s Worth…  OK… up to now, the Fed has only broken their rules by buying ETF’s… but it seems they are lining up another rule to be broken, as they announced that they are ready to buy Corporate Bonds… I do not like it when the main story is carried by CNBC ( I have a long running grudge against them!) But if that’s what it takes, then so be it, and you can find the article here: https://www.cnbc.com/2020/06/15/the-fed-says-it-is-going-to-start-buying-individual-corporate-bonds.html?

Or, here’s your snippet: “The Federal Reserve is expanding its foray into corporate credit to now buy individual corporate bonds, on top of the exchange-traded funds it already is purchasing, the central bank announced Monday.

As part of a continuing effort to support market functioning and ease credit conditions, the Fed added functions to its Secondary Market Corporate Credit Facility.

The program has the ability to buy up to $750 billion worth of corporate credit. Its March 23 initial announcement is largely considered a watershed moment for the financial markets, reeling from the coronavirus threat spread.

“The decision to buy a broad portfolio of corporate bonds represents a shift to a more active strategy for the secondary market corporate credit facility, rather than the passive approach originally envisioned,” said Steven Friedman, senior macroeconomist at MacKay Shields.

Under the latest guidelines, the Fed said it will buy, on the secondary market, individual bonds that have remaining maturities of five years or less. Those purchases will go along with the ETFs the Fed already has been buying, which are balanced toward investment-grade indexes but also include some junk bond funds that track debt which had been investment grade before the crisis but had been downgraded after.

The intent of the individual debt purchases will be “to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds,” the Fed said in a news release.”

Chuck again… All the Fed is doing here folks, is creating a zombie economy, with zombie corporations, and fake money… But here I am pointing this out, and no one on the outside world thinks this is a bad thing… Am I the crazy one here?  No, wait! don’t answer that, for I fear what you’ll say! HA!   And old Fleetwood Mac song had lyrics that went like this, “don’t ask me what I think of you, I might not give the answer that you want me to”… 

Market Prices Today 6/16/20 American Style A$.6917, kiwi .6465, C$.7376, euro 1.1312, sterling 1.2650, Swiss $1.0557, European Style: rand 17.0945, krone 9.5086, SEK 9.3102, forint 305.34,   zloty 3.9165,   koruna 23.4842, RUB 69.94, yen 107.28, sing 1.3905, HKD 7.7498, INR 75.86, China 7.0908, peso 22.11, BRL 5.1049, Dollar Index 96.66,  Oil $37.84,   10-year .74%, Silver $17.40, Platinum $814.16, Palladium $1,949.09, and Gold… $1,730.63

That’s it for today…  Ok, last night on TV, they showed the replay of Game 7 of the 1982 World Series… I was at that game 38 years ago, it was a very cold night, but as I recall I didn’t feel the cold after the 6th inning…  Bruce Sutter came in to start the 8th inning, and in the end it was 6 up, 6 down, for Sutter…  I’ve always said that whenever Sutter came into a game, that the opposing team would start to pack up their bats! We used to park for the games at the old Mark Twain Bank downtown across the street from the ballpark. After the game we went back to the car to find a slew of Bank employees and customers standing around celebrating. It was a long night, and I recall it was an ugly morning..  But I got to see a Game 7 win… James Taylor takes us to the finish line today with his song: Don’t Let Me Be Lonely Tonight…  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself! 

Chuck Butler

Fed Money Creation Exceeds Tax Receipts….

June 15, 2020

* The Fed and PPT were out in force late last week… 

* Another false dawn for the currencies… 

Good day… And a Marvelous Monday to you! OMGosh! Yesterday couldn’t have been a more beautiful day here in the St. Louis area, than it was… Warm, no make that very warm in the sun, but with a cool breeze blowing all day, made the day as delightful as it could be yesterday! Friday night had just me, Alex, and good friend Kevin sitting out and avoiding the rain… It was just like old times, when Kevin and Chuck sat outside listening to baseball games.. Only this time there were no baseball games to listen to, so Chuck tried to fill the air with stories of his past… Alex seemed to enjoy them, as he never knew about his dad as a young man… Spoiler alert here, I was wild and crazy! But look how I turned out! I’m still a believer that a young man needs to go out and push the envelope before he settles down to a life of marriage, and kids… It worked for me, that’s all I have to say about that! Gerry and the Pacemakers greet me this morning with their song: Ferry Cross The Mersey… This song played Friday night and I said, “I used to sing Alex sleep every night singing this song, and friend Kevin, said, “And he still went to sleep? “ Ha, as If my voice wasn’t good enough!

Well.. The Plunge Protection Team (PPT) came upon the scene Friday, and said, “ I heard that the stock market lost 1,800 points on Thursday, and we’re here to correct that” And stocks recovered 477 points of their 1,800 points lost on Thursday… The stock jockeys were rejoicing in the streets once again, but a quick reminder to them would have brought them back from embarrassing themselves, but that’s for another day, eh? I would have to think that the PPT will be hard at work from here on out, because, the American public isn’t a bunch of idiots… They too can see the writing on the wall, that Corporations, that issue these stocks, aren’t going to have the earnings to support their lofty stock prices… But one day of rebound does not make a bull market, folks… This is a Bear Market, and it’s going to take the Fed spending like they’ve never done before to support the stocks… I’m just saying…

Maybe, the PPT, or the Fed hasn’t gotten the memo yet, that we are in the middle of a deep recession… Wait! Surely the Fed has gotten word that we are in the middle of a deep recession, but that’s not going to stop them from spending money they haven’t got to buy ETF’s of corporations that would have folded if not for the Fed’s bailout program. 

Alrighty time to move on… the currencies proved what I talked about last week, was real… And that is that it had been another false Dawn, to think that the dollar was going to succumb to a multi-year selling scene… Why, just last week, early, the Aussie dollar (A$) had moved above 70-cents, and this morning it is trading with a 68-cent handle, and the euro , which last week had traded over 1.14 briefly is trading with a 1.12 handle this morning. The sentiment of traders can change in a heartbeat, or NY Minute, if you will, and never think about who they may have hurt with their sudden change of sentiment. Luckily, you have me to point out these false dawns!

Last week had seen Gold climb close to the $1,750 level and got brought back down, and Friday was no different… Gold actually climbed to 1,746, before setting in at $1,730., up$3 on the day… I had a dear reader send me a note last week, and said that they agreed with the $1,750 as the launching point for Gold… But wanted to know what that price would be for Silver… And I responded, that I just didn’t know what figure to put down for Silver, as there are too many inputs that make up the Silver price, and then add in the over 180 days of production it would take to equal the ounces of Silver sold short… So, don’t expect Silver to follow Gold move higher, dollar for dollar… It’s going to move higher, and on a percentage basis, probably outperform Gold, but the spotlight will remain on Gold, folks… 

Ok, le’s move on… Ok… Long ago and far away in a galaxy a million light years from now, I used to get the 5 Minute Forecast every day, and just loved the way Dave Gonigam would compress the news into an easy to read 5 minute format. Then one day the 5 stopped showing up… I contacted Dave, and asked him if I had become persona non gratis. He assured me it was his system.. And now the folks at Agora, have changed their delivery system, and I get the 5 once again! YAHOO! And that means more pfodder for the Pfennig! YAHOO! And every now and then, Dave will quote me from the Pfennig, which is always a hoot! So, with that long intro… I have this ditty for you today from Friday’s 5…

“For the first time on record, Fed Money Printing exceeds U.S. Treasury Tax Receipts over a 12-month period.”

Ok, I don’t know about you, but… Those words sent chills down my spine… We’ve basically gone to MMT without anyone noticing… Modern Monetary Theory, or the Magical Money Tree, is upon us, and it seems as though no one is noticing? I’m shocked and awed that the dollar is still strong… OK, I guess it’s going to take dumb as box of rocks, traders to get the message, and figure out what’s happening with all this, before they take action… I’ll give them a break on that, but… should the dollar remain strong, I would have to then question their intelligence or motives…

Well, the U.S. Data Cupboard was a mixed bag-o-nuts late last week. First on Thursday, the Weekly Unemployment figures printed… There was another 1.5 Million people filing Initial claims, but the thing I want to point out is that the continuing claims were 29.5 Million, that means that even with the states opening up again, and the slow slog to bring back employees, there were still 29.5 Million people out there that are unemployed…

Of course, no talk about the total unemployed would take place under my watch, if we didn’t talk about how the total unemployed is still a fake number… You see if a person in unemployed and their unemployment benefits run out, they are no longer counted as “unemployed”… So, the Labor Participation Rate would be better to look at here… And at around 63%, that’s quite a low number of people actually working, folks… So, let’s see here we all know that the labor total number of people working was around 150 Million… so, only 63% of that number are actually working… Which is 94.5 Million… I don’t think the economy can be that strong when only 63% of its work force is actually working… I’m just saying…

There were other prints, but they didn’t make a hill of beans difference to the markets, so I’ll let them slide… One thing I noticed late last week that wasn’t a part of the economic calendar was the fact that Caterpillar posted their worst monthly return in profits since 2010… North America sales plunged 36% on a rolling three-month basis, the most since January 2010 and far worse than the 27% drop posted in April… Caterpillar is an iconic American Company, folks… I’m just saying…

And for all you folks that like to go to gyms to workout… First it was Gold’s Gym that closed, and now there’s word that 24 Hour Fitness is about to file for bankruptcy…  I get this feeling that once the all-clear horn has sounded that many folks are going to need to get to a gym, after being held under house arrest for the last 3 months…  

There is one thing that’s gone on under the House Arrest, and it is that Americans have slowed their intake of sugar…  I know, for me, that’s a fact, because, I have Alex and Grace here to eat all the sweet stuff before I get a chance to! HA! 

Take all those bad things going on in the U.S. economy, and tell me it wasn’t the PPT that had to come in to save stocks late last week, and the dollar while they were at it…. I’m not buying it, as a correction… I’m thinking that it was a case of the PPT, and Fed buying stocks and dollars with your tax dollars, folks… Think about that for a minute and tell me it doesn’t make you angry… I get it… tax dollars pay for those items that the local authorities and the Gov’t provide us to ensure our safety and way of like… But when the money doesn’t go there, and instead is used to bail out Wall Street, I get just a little wound up! And you should too!

Most of the people see the Fed and the PPT jumping in to save Wall Street, and think, well that’s Ok, they’ve got my back! And it comes for free! Ahhhh, grasshopper, come sit, and learn… There’s no free lunch… And the sooner you come to believe that the better of you’ll be and not take the Fed’s buying stocks as a way to help your investment portfolio… 

The Data Cupboard for this week, gets back to business, starting tomorrow, with May Retail Sales, and that’s followed in the same day with Industrial Production and Capacity Utilization…  So, a BIG DATA day tomorrow… But the markets don’t pay attention to data any longer, They’ve all become “Comfortably Numb” with the negative prints. They see them, shrug them off, and get back to buying stocks and dollars… 

To Recap…  The rallies that the currencies and metals were booking VS the dollar got derailed once again late last week… Chuck is convinced that it was the PPT and the Fed in buying and spending money they don’t have once again to save Wall Street…  Chuck also came across some very chilling words in the 5 last week… “For the first time on record Fed money creation has exceeded U.S. Treasury Tax Receipts in a 12 month period”…  Think about that and see if raises the hair on the back of your neck like it did mine.. And Gold is down $20 this morning… What gives? 

For What It’s Worth…  Ok, remember last week when I talked about how the Fed will eventually put a cap on interest rates, and the Treasury yield curve?  Well, the good folks at GATA sent me this article on how the capping of the yield curve would be bullish for Gold, and it can be found here: https://www.voimagold.com/insight/why-yield-curve-control-by-the-fed-will-be-bullish-for-gold

Or, here’s your snippet: “On Wednesday, Fed Chair Jerome Powell stated he is considering “yield curve control.” Previously, in the 1940s, when the Federal Reserve controlled the yield curve, it created deeply negative real interest rates. If repeated today, this would cause the gold price to sky-rocket. 

Due to the current economic crisis, the U.S. federal deficit is reaching “unprecedented” levels. Preliminary data suggests the federal deficit will be $4 trillion dollars this year, which is more than 15% of GDP. Although, as the crisis unravels, it’s likely these numbers will be even worse by year end. Throughout history, only in the First and Second World War deficits of this magnitude have occurred.

As GDP is declining and the federal deficit rising, the “public debt to GDP ratio” is escalating rapidly. According to usdebtclock.org, U.S. public debt to GDP is 130% at the time of writing. Just a few months ago this ratio printed 110%. In the chart below, you can see public debt to GDP rising at a pace comparable to when the Second World War broke out. 

What many people don’t know is that at the start of World WarII, the Federal Reserve implemented “yield curve control.” The central bank of Japan wasn’t a pioneer when it embarked managing the curve in 2016.
Starting in 1942, the Fed put a cap on yields of government bonds across the curve. From that moment on “the Fed effectively abdicated its responsibility for monetary policy despite its concern about inflation and focused instead on helping the Treasury finance the conflict” (Humpage, 2016). “

Chuck again… Very interesting thought, that yield curve capping would create deep negative rates (when you factor in inflation) and that would be a real feather in the cap of Gold…  Very interesting… 

Market Prices today 6/15/20 American Style: A$.6817, kiwi .6436, C$.7328, euro 1.1255, sterling 1.2520, Swiss $1.0522, European Style: rand 17.2080, krone 9.6823, SEK 9.3610, forint 308.33,   zloty 3.9425,    koruna 23.7330, RUB 69.68, yen 107.34, sing 1.3945, HKD 7.7498, INR 75.76, China 7.0824, peso 22.59, BRL 5.0481, Dollar Index 97.15,   Oil $35.43,   10-year .67%, Silver $17.18, Platinum $815.00, Palladium $1,927.91, and Gold… $1,711.20

That’s it for today…  Well, thanks to all who sent along congrats to the Butlers… Yesterday was Flag Day… Did you fly your flag?  Yesterday was also a day of remembrance for me, as it was 13 years ago yesterday, that I had my first cancer surgery…  On the 27th of June it will be 13 years since I had my second cancer surgery…  Yes, less than two weeks apart… 13 years I’ve been on some kind of chemo… some pills, some infusions, and other medicines to keep me going… As my friend, Ty says, “better living through chemistry”… I would be the poster child for that! Bob Marley takes us to the finish line today with his song: 3 Little Birds…  “don’t worry, about a thing, ’cause every little thing is going to be alright”…   And with that thought, I hope you have a Marvelous Monday, and will continue to Be Good To Yourself!  

Chuck Butler

Powell Takes The Air Out Of The Dollar…

June 11, 2020

* Currencies rally strongly on Wed. but soften overnight

* Gold soars on news that interest rates will remain near zero! 

Good Day… And a Tub Thumpin’ Thursday to you… This should be shorter than usual this morning, as I need to get ready to go see my oncologist this morning. Here’s something I doubt you’ll ever hear from any other cancer patient… “ I love to go see my oncologist” I’ve had 4, counting my M.D. Anderson doc, so I should have a pretty good idea as to who’s good and so on… Two of my former oncologists have retired… So, you know you’ve done a good job of surviving when you outlast your oncologist! HA! My allergies have really been beating on me this spring… Every time I go out to the back yard, everything has an inch of pollen accumulated on it… Yellow in color, and monstrous to my sinuses! The Beach Boys greet me this morning with their song: Wouldn’t It Be Nice… here’s Chuck’s version.. Wouldn’t it be nice if we could wake up, in the morning when the day is new, and never have to worry about the economy, because it hurts the whole day through…

Well, well, well… What did I tell you yesterday about how zero interest rates aren’t going anywhere and that eventually they will be capped off to prevent the markets from pushing them higher… And then about 6 hours later… Fed Chairman Jerome Powell, told reporters at his press conference, that “zero interest rates are here to stay through 2022”… Powell made sure the reporters were clear on the fact that the Fed will keep rates near zero until they are confident that the economy has weathered the storm, successfully….

He then went on to talk about GDP… And here’s where I believe he made a big mistake… He said that GDP for 2021 will be 5%, and in 2022 3.5%… I’m not buying it with YOUR MONEY! Or as I used to say about the S. African rand, I wouldn’t touch that with YOUR TEN FOOT POLE!

So, the bullets the dollar bugs were sweating yesterday morning ahead of the FOMC meeting adjournment were bonafide, and for goo cause… Because you can’t defend the dollar when the Fed Chairman says interest rates are staying near zero, not just the rest of this year, and not thought next year, but into 2022!

The Currencies, led by the euro, took off for higher ground VS the dollar, and Gold kicked some tail too. So, all you naysayers that wouldn’t buy Gold because it’s a non interest bearing investment… Well, where are you getting your interest on your investment now? I’m just asking…

Gold closed the day up $24 with Silver tagging along.  But something happened overnight, because the currencies and their lofty levels of yesterday afternoon, have had the wind taken out of their collective sails, and Gold is down a couple of bucks early this morning.  I’m in a good mood this morning, so I’m just going to put this pullback in the overnight markets down to profit taking…  And then move on… 

OK… now this really rankles me… There’s an economist out there by the name of Stephanie Kelton, who wrote an article in the NYTimes, (go figure, right? ) saying “Why I’m not worried about America’s Trillion dollar deficits”… Go ahead and google it and read it, that is if you want to get sick to your stomach, and lose today’s lunch… What a looney tunes! Apparently she never took an economics class, I Mean a real economics class, where you learn about Adam Smith, etc. And she obviously never studied the economics theories of Misys… But a stray here… Here’s the main fact that she seems to forget, or probably never learned, is that the larger the deficit the harder it is for a country’s economy to thrive… I don’t think we need any more proof of that than just looking at Japan… They’ve taken the deficits spending to heart, and for over 20 years their economy is… well, there is no economic growth to speak of…

Today’s analysts, I guess that’s what they call them, have no idea what looking under the hood, is all about… The get fixated on a something and soon it’s the “call of the month” and they want everyone to read about what they’ve come up with… It embarrassing to me, someone who learned economics at the knee of the great Hy Minsky, to see this going on… But it is what it is, and hopefully not too many people think much about what she had to say…

Well, another one bites the dust…. I read yesterday that Shale pioneer, Chesapeake Energy had their shares stopped on the NYSE, due to rumors that they will file bankruptcy… Remember when I told you months ago that the shutdown was going to really put some stress on the shale producers, because, they had loaded up on debt, and with no income coming in, to pay on that debt, things get really sticky… Well, fast forward to yesterday, and this was the news article that printed: “Shale gas pioneer Chesapeake Energy, once worth $37.5 billion, has warned of a possible Chapter 11 bankruptcy filing in order to restructure some $9 billion in debts.”

Just another sign that the economy isn’t going up… instead, it’s going down…. 

The U.S. Data Cupboard had the stupid CPI report for May yesterday… The consumer price index (CPI) showed that deflation wasn’t as bad in May as it was in April, as May printed at -0.1%, VS the April print of -0.8%… John Williams over at www.shadowstats.com shows inflation, calculated using pre 1990 methods, i.e. before hedonic adjustments, shows CPI at just below 4%… I mean what does it take to get people upset with the CPI’s version, when the real cost of living is near 4%, and that’s after the drop in April because of the lockdown.

There was also a reveal of the Federal Budget for May… The Federal Budget had a deficit of $399 Billion, which blew April’s deficit of $208 Billion out of the water! A couple hundred Billion here, and a couple of hundred Billion there and pretty soon you have a multi Trillion annual deficit! Take the average of these last two months, and get $303 Billion deficit per month, and then multiply that by 12 and you get an annualized deficit of $3,642 Trillion… Then add that to the current debt, and you see why / how we’ve gone from a current deficit of $5.7 Trillion in 2000, to $7.2 Trillion in 04,  to $10.2 Trillion in 08, to 15.3 Trillion in 12, to 19.6 Trillion in 16, to $25.9 Trillion today… All of these numbers come curtesy of the www.usdebtclock.org…. Oh, and just for grins, they let me go forward, based on the trend in deficit spending now… In 4 years, 2024… The current U.S. Deficit will be $46 Trillion!!!! And our Unfunded Liabilities will be $188 Trillion…

Of course, I don’t believe we’ll get to those numbers… Because this is all becoming just too much for the financial system to bear… It might be different if, say the second largest economy, China, ran a surplus, but no, they too have gone down the deficit spending road that leads to dead man’s curve… And the 3rd largest economy, Japan, is up to their eyeballs in debt, and the 4th largest economy, ah, never mind, I think you get the picture…

To recap… The Fed left rates unchanged, and Fed Chairman, Powell, told reporters that the Fed plans to keep rates near zero into 2022…  Not just the rest of this year, and not all through 2021, but into two years from now!  This news sent Gold higher on the day (by $24), and the currencies kicked some sand in the dollar’s face… But in the overnight markets there must have been some profit taking, (Chuck’s in a good mood this morning) because the currencies have backed off their levels of yesterday afternoon.  And another one bites the dust, as another Shale producer has filed for bankruptcy… 

For What It’s Worth… Well, this article is all over the internet, so you don’t need me to give you the link to the story, simply Google it… But for those of you wanting to know more, this is an article about U.S. Pensions running out of money in 8 years… And it can be found here: https://burypensions.wordpress.com/2020/06/10/ft-seven-major-us-public-pensions-to-run-out-of-money-by-2028/

• Or, here’s your snippet: “Over 320,000 members of the New Jersey Teachers and Chicago Municipal public pension plans: “A slow recovery for the US stock market could result in Chicago Municipal’s funded position falling from 21 per cent this year to just 3.6 per cent by 2025. This would leave assets to cover just three months of the fund’s retirement payments…”

• New Jersey Teachers: “…funded position projected to decline from 39.2 per cent to 23.2 per cent over the next five years. By that time, New Jersey Teachers would have assets to cover 19 months of retirement payments.”

• Police and fire departments: “public pension plans of Kentucky and Providence along with Dallas Police and Fire, Charleston Fire and Chicago Police could all end up with less than three years of retirement benefit payments saved as assets.”

• “Chicago has particularly high pension risks. The city has built up very large unfunded liabilities through years of very weak pension contributions,” a senior credit officer at Moody’s.”

Chuck again… I’ve been talking about a problem for pension plans for years folks, have you been listening? There’s another bailout from the Government in the offing… I mean we bail out Corporations now, why not Pension Pans?

Market prices 6/11/19: American Style: A$ .6915,  kiwi .6477,  C$ .7408, euro 1.1360, sterling 1.2660, Swiss $1.0606, European Style: rand 16.8413, krone 9.4146, SEK 9.2360, forint 303.10,  zloty 3.9356,   koruna 23.4358, RUB 68.56, yen 107.08, sing 1.3880, HKD 7.7500, INR 75.61, China 7.0634, peso 22.39, BRL 4.9098, Dollar Index 96.23,   Oil $37.96,  10-year .70%, Silver $17.96, Platinum $834.18, Palladium $1,933.60, and Gold… $1,732.96

That’s it for today… See? I can keep it shorter, when time is of the essence! HA! Well… On Wednesday this week, it was the Birthday for  one of my fave people on earth … Laura Baur…  Then last night was the Birthday of good friend… Mike Kettler…  Happy Birthday!  Tomorrow is Chuck & Kathy’s anniversary… This will be 44 years…  I know I’ve told you all how the two of us met in 1972…  but I’m going to tell it again…  I was a what you would call a country strong football player, and in the summer I would run the track at the high school to keep in shape for the upcoming season. One day, I was running the track, and the cheerleaders were having a practice, and my eye immediately went to the beautiful young lady with red hair. I stopped, called a friend of mine over to ask her what that young lady’s name was… And we met… And the rest, they say, is in the books…  Blood, Sweat & Tears take us to the finish line today with a song that’s very appropriate after the story I just told you… You’ve Made Me So Very Happy…  Ok, with that, I need to get going, so please go out and have a Tub Thumpin’ Thursday, and Be Good To Yourself! 

Chuck Butler

 

Dollar Bugs Are Sweating Bullets….

June 10, 2020

* Currencies continue to move higher VS the dollar

* Gold gets back on the rally horse! 

Good Day… And a Wonderful Wednesday to you! Well, the reports of a heavy rain for yesterday, turned out to be wrong, as usual… Have you ever encountered a profession that could be so wrong all the time, and still be employed? Not that I’m complaining about the lack of rain, the sun did make a late afternoon appearance that allowed me to go outside for some reading… I’m into my new book on the history of Sam Houston… You know the Avengers of the Alamo? Where iconic American heroes of the day, Jim Bowie, and Davy Crockett both died defending the Alamo… I love American history, the real history, not the stuff they teach in schools these days…. OOOPs did I say that out loud? I guess I did! Oh well, we’ll just carry on as if I didn’t say that out loud! HA! Neil Young greets me this morning with his song: When You Dance, I Can Really Love….

Well, it looks as though the dollar bugs are sweating bullets ahead of the Fed’s FOMC meeting that will adjourn this afternoon with a rate announcement and a Press Conference, featuring Fed Chairman Jerome Powell… I say that because for no other reason than that, the euro rallied on Tuesday, and climbed above the 1.13 handle, to close the U.S. market side, at 1.1340… What have I always told you since 2002? That the euro is the second most traded currency in the world, behind the dollar, and therefore is the offset currency to dollar crosses… So, when the dollar bugs are running scared, and the dollar is getting sold, the euro will rise, whether things in the Eurozone warrant the rise or not…

The overnight markets had more sweating by traders, as the euro continued to move higher, and the A$ moved past 70-cents!  I’ve talked about the A$ quite a bit lately, but more on the line of I didn’t believe the rally was solid…  I’m still not completely sold, but this all has a familiar feeling to it, and that feeling is a loss of confidence in the dollar..  We’ll have to see more of these kinds of moves to say for sure this is what we’re seeing, but it sure does feel like it is… 

The European Central Bank (ECB) can always jawbone the euro back down, much like former ECB President Mario Draghi used to do at every opportunity, throwing the euro under a bus… But that’s really all they can do… They’ve already cut interest rates into negative territory, they’ve already implemented a bond buying program, and their economy is in a state of muck… But the dollar bugs are running scared, and so the euro rallies….

The reason I chose 2002, as my year above, is because that was when I wrote the white paper titled: 2003, The Year of the Euro… And it well became just that! But back then there were compelling reasons to buy the euro, not like today when all we’ve got is it being the offset currency to the dollar. That White Paper brought in so many new investors to the World Markets Desk, with them all wanting to buy euros… And soon the euro would rise to levels not even seen as available to me… The euro would rise to a high of 1.56 in June of 2008… And it hasn’t seen or sniffed a 1.50 level since 2008…

In 2011 the hidden debts of Greece, Italy and Spain were uncovered, and all hell broke loose with the euro, and it went into a deep slide that it has never really recovered from… Why? Well, those debts were made worse with more debts, and there’s been nothing done to reduce them… The grand austerity plans that Germany made the countries with the outrageous debts agree to abide by, have been burned and all that remains are the ashes…

Ok… time to talk about something else beside the euro, Eurozone, and so forth… Well, this isn’t that far away from a discussion about the euro, but I’m going to talk about it any way! 

About 4 maybe 5 years ago, when I was still with EverBank and I wrote a monthly newsletter to clients only, called The Review & Focus, I highlighted what I saw as the problems that were being laid at the doorstep of German Banking Giant, Deutsche Bank… I had to fight to get that letter through the review process, because it wasn’t really about what the clients were wanting to read… But I proposed that it did, in that, if this Banking Giant collapsed, then all those derivatives that I had been warning about would be coming home to roost, which would damage not only the euro, but the dollar, for not only did Deutsche Bank have its tentacles in Germany, but also all over the world, including here in the U.S. If any longtime clients still have a copy of that particular R&F, I would love to see it and read it again, because…. Longtime reader, Bob, sent me an article that said that Deutsche Bank was nearing filing Bankruptcy…

Or maybe they’re not really going to close, but instead, using the Hertz playbook, to  see if filing  bankruptcy as a means to get their stock price to rise! I know, I know, this is serious stuff, and here I am having fun with it… Well, if you read what I had to say about this bank 4 years ago, this announced bankruptcy would be coming to you as no surprise!

Gold got back on the rally horse yesterday, gaining $17 on the day and closing at $1,716, and the shiny metal is up another $3 this morning. Silver on the other hand was not allowed to rally yesterday along with Gold. Silver lost 21-cents to close at $17.55, but Silver has erased that loss yesterday in the early trading this morning…  

Well… Yesterday I did the spoiled brat thing and reminded you that I kept telling you that the problems in the economy were already happening before the COVID-19 virus showed up in the U.S. and then I saw this from Russ and Pam Martens of www.wallstreetonparade.com and thought I would rub it a little more, because… well, that’s what spoiled brats do! So, lets’ listen in on what Russ and Pam Martens have to say… “Wall Street On Parade has previously written that a financial crisis was already well under way before the first case of COVID-19 was reported anywhere in the world. This should matter greatly to Americans because the Federal Reserve is attempting to blame the financial crisis on the virus to avoid Congressional investigations of its second epic failure in a dozen years at regulating the behemoth Wall Street banks.

America needs a comprehensive investigation of what really triggered this financial crisis in order to restructure the U.S. financial system away from a casino culture into one that doesn’t regularly need massive Federal Reserve and government bailouts. These bailouts are piling more and more debt on the shoulders of taxpayers and becoming a crushing drag on the U.S. economy, notwithstanding Fed Chairman Jerome Powell’s dismissive remark to Congress that we’ll worry about the debt later.”

I love the way the folks a WSOP put things… They put things into prospective, so that everyone understands what they are talking about… And do so with a punch to the gut!

Well, just when the demand for Oil began to increase, Libya announced that they were shutting down their largest Oil rig…  Could this bring about a huge spike in the price of Oil? Maybe… There are so many inputs to the price of Oil, that I hesitate to make any call on Oil…    But…  just for grins, I was searching through the Pfennig Archives yesterday, and saw that I had talked about the direction of the price of Oil several times in the past… I must have been sleep typing because I sure don’t recall those times! 

I read the other day that the Fed had pumped more money into the repo market… I find this to be interesting in that with all the COVID -19 stuff going on, and the Trillions of dollars the Fed poured into the economy, that the problems in the repo market seems to have moved to the back page…  But remember, this is what I said back in September when the problem first arose… ” How can Jerome Powell keep telling us that the banks are solid, when they have to bail out the repo markets each and every day?”   I point back to that time, to remind everyone that the problems in the economy were around long before the pandemic showed up on our shores….  I’m just saying… 

The U.S. Data Cupboard has the stupid CPI (consumer inflation) report for May…  And the Federal Budget deficit for May, and that’s all before the Fed adjourns their meeting this afternoon…  I read on Bloomberg this morning that they wonder how long the Fed will keep rates at zero… I laughed and said to myself, “How long have you got?”  

You see… I’ve thought long hours on this subject, and see the Fed having to cap interest rates in the future, to keep them from rising too much, given the amount of debt servicing that’s on the docket. I also think that a yield cap on Treasuries will be implemented. yes… take the “free markets” out of bonds would be the result of that, but a Fed has to do what it has to do to keep the economy from imploding… 

And now we turn to Chuck Butler for “deep thoughts”….   Yikes!  I had better return to the lighter side here before everything turns dark, eh? 

To recap…  The dollar bugs are sweating bullets wondering what Fed Chairman Powell will say this afternoon about rates and the economy…. Will Powell speak with a forked tongue, or a true tongue?   So, with the dollar bugs running for the hills, the currencies, led by the euro have really gone on a run, moving higher VS the dollar. So, is this a short-live move in the currencies, or a change in sentiment toward the dollar?  That has to be the question of the day, and one that cannot be answered today, but in the days to come… 

For What It’s Worth…  Well, I’ve talked about Jeffrey Gundlach many times in the past, for he’s the new Bond King, and when he talks, people listen. It’s that simple… So, when Jeff talks, I highlight it and put it in the FWIW section!  Today’s Gundlach talk is about, the stock market, the Fed, and Gold…  (sounds like a Pfennig! )   And it can be found here:https://www.zerohedge.com/markets/superman-jeffrey-gundlach-live-webcast

Or, here’s your snippet: “Gundlach Warns Stock Market Likely to Fall From “Lofty Perch” Despite “Superman” Powell, Says Buy Gold” 

Chuck again… Nah… I’m just kidding… I have more for you from Mr. Gundlach… I’ve listed the take aways from his webcast here for you:

The stock market is likely to fall from its “lofty” perch. “The big, experienced smart money is skeptical of this little-guy created, epic rally.”

The Fed violated the Federal Reserve Act of 1913 by buying high-yield bonds and ETFs. Gundlach expects Fed Chair Jerome Powell to follow through on controlling the yield curve should the 30-year rate come unhinged.

Traders think that Powell is Superman, and that the chairman will keep the fed funds rate at zero for the next two years.

Quantitative easing and zero rates don’t work, otherwise “we wouldn’t be back at them on steroids 10 years later.”

Negative rates are the biggest kryptonite of all, given that they’re “fatal” for the banking system, he said.

In the long term, the bond manager is bullish on gold, saying it will reach new highs. Alternatively, he’s sticking to his weak-dollar call, saying the greenback can devalue against most other currencies.

Coming in waves: Gundlach sees waves of corporate credit downgrades and white-collar unemployment. He said the lockdown has him questioning the usefulness of middle-management, supervisor-types and that he could “easily see” layoffs hitting people earning $100,000 a year.”

Chuck again… And you think I’ve turned to the dark side?  Boy this Jeff Gundlach is a hoot to talk to at a cocktail party don’t you think?   I can see Chuck and Jeff in a corner talking economics, and people all standing around waiting to hear something good… 

That scenario happened somewhat in the past… I was in San Diego attending the memorial service for the great, legendary Richard Russell, and there were three seats with a table outside, and I sat down. Soon, friends, John Mauldin, and Bill Bonner sat down too, and we began to talk about this and that, and then when I got up to leave, I saw this huge crowd of people standing around us, listening to whatever we had to say… 

Market prices today 6/10/20 American Style $.7007, kiwi .6555, C$.7471, euro 1.1373, sterling 1.2772, Swiss $1.0574, European Style: rand 16.5411, krone 9.2512, SEK 9.1825, forint 302.00,  zloty 3.9166,    koruna 23.4075, RUB 68.50, yen 107.32, sing 1.3842, HKD 7.7498, INR 75.32, China 7.0780, peso 21.78, BRL 4.8585, Dollar Index 96.09,  Oil $37.96,   10-year .80%, Silver $17.73, Platinum $832.05, Palladium $1,958.73, and Gold… $1,719.08

That’s it for today…  Well, I don’t know about tomorrow at this point… if I get up early enough, there will be a pfennig before I head to the oncologist, if I don’t, there won’t be one…  The Baseball draft will take place today… They cut the number of rounds down from 40 to 5…  So there will be a lot of graduated either from college or high school players that will be wondering what they are going to do if they don’t get drafted…  the minor leagues will be cut, and baseball is in trouble….   The players and owners better get their collective heads out of their sit upons and work something out so they can play this year… I’m just saying….  Robert Plant takes us to the finish line with one of his best solo songs: In the Mood… And with that I hope you have a wonderful Wednesday, and please continue to Be Good To Yourself! 

Chuck Butler

 

 

 

 

 

 

U.S. Recession Began In February!

June 9, 2020

* Currencies and metals rest on Monday… 

* The BLS points out a footnote that was a part of their jobs report… 

Good Day… And a Tom Terrific Tuesday to you! Another day in paradise, is what it seemed to be yesterday, with Blue umbrella skies, very warm sunshine, and it was the end of our run of warm, dry days, as the remnants of the Tropical Storm Christobal has come our way… But with the sun you have to have a little rain sometime! Rainy days make you appreciate, the sunny days even more! Much like Glenda told the munchkins, it’s safe to come out now… For all of you who thought maybe I had gone over the edge with my reporting of the BLS Jobs report last Friday, yesterday, can calm down, because I’ve gotten over it. Besides there’s not a single thing I can do about it, and if there’s one thing I’ve learned through the years, it’s that there’s no sense getting all worked up about something you have no control over… Besides, there was a voice speaking to me yesterday, and that voice is now gone, except in the morning song… The Moody Blues greet me this morning with their song: The Voice

The morning after the chaos created by the BLS and their “made up” jobs report, had traders looking around and saying, that was too much… That and the fact that the BLS actually came out and pointed out a small print footnote in their report, that said, there was a glitch in the system, and that the Unemployment rate “could be 3 percental points higher”, thus brining it to 16.3%… OK, I get it, but why print anything if you know it’s not honestly correct? The markets depend on correct reporting to make trades, and after Friday’s sell, bonds, currencies and Gold, you now want to come out and say that what you reported on Friday, was underreported?

Back in the day, I used to prepare the monthly income statements for the Bond Division at Mark Twain Bank… I shudder to think of how quickly I would have been shown the door, if I had presented the income report, and said, “But it could be higher or lower, I’ll need more time to figure that one out”… But that’s exactly what the BLS did yesterday… OK… enough of that, I’ve said what I’ve said, and I can’t says no more! – Popeye!

Besides, we’re still light years away from what I believe the Unemployment Rate should be (27%), and the made up number of the BLS, even using their footnote number (16%)… So, what difference does their footnote really mean to me? Nothing, nada, nil, zilch, a big fat goose egg! 

Yesterday’s action in the currencies and metals were very muted… There may have been some volume but the movements either way, just weren’t there! The euro inched a bit higher, and Gold found a way to hold on to $5 of its early $8 gain, as the day went along. It was more like the currencies and metals were licking their respective wounds from Friday’s action, all day on Monday, and they weren’t ablt to get back into the game while still nursing their wounds…

The overnight markets didn’t bring any changed either, so we star this morning in the U.S. just about where we were with the currencies yesterday morning, and Gold is down 98-cents so far this morning, so basically unchanged… 

You know… There just aren’t any real markets any longer… Everything, and I mean everything is manipulated…. What? You don’t think stocks are manipulated? Ok, I guess the fact that the Fed is spending Trillions to buy ETF’s (basically buying stocks) is manipulation? Come on…. Don’t be like “that” guy… You know the guy who turns a blind eye toward anything he doesn’t agree with or believe…. But Shoot Rudy, I would think that as long as the Fed’s spending their hard earned money, no wait, their newly printed dollars, on stocks, then everyone should join in… You put your left hand in you take your left hand out, and you shake it all about…. Come on, let’s do the Hokey Pokey! Because buying stocks is what it’s all about! Until it won’t be…

How many of you remember the dot.com stock market rally that seemed to go on and on, until one days somebody said, “Hey these dot.com stocks don’t have any earnings” and that was the end of the dot.com rally, and soon all those gains were wiped out…. Come on, it was only 20 years ago! And what do you think will be the straw that breaks the stock market’s back? The same thing, ok, I’ve got to say this here, this is my opinion, and I could be wrong… but it think what  the end of the dot.com rally, will be the same thing…. After being shutdown totally for 2 months, and half-shutdown another month, when the earnings season for this period prints…. Someone is going to say, “These corporations don’t have any income”

Did you hear the news, there’s good rockin’ at midnight? Well, besides that, the BIG news yesterday was the we have been in a recession since February… And this is where I start acting like a spoiled brat, and saying, I told you so, I told you so, I double, double told you so! Remember last month when I kept reporting the March numbers, and kept saying, “see the economy was having problems before the pandemic hit our shores”

And also a month ago, I gave you a piece of research I had done when writing the Dow Theory Letters, about how stocks perform during a recession…. And it’s historically not good… So, if you want to follow the herd, and buy stocks, you have better do so quickly, before there’s this wall of rain that will fall on the Fed’s stock market buying parade…

The U.S. debt accumulation continues unfettered…. We’re about to go over $26 Trillion in Current Debt and we’ve got more than 3 more months to go till we get to the fiscal year-end for the U.S. Our debt to GDP ratio is now at 130.05%… Years ago, not thinking that we would cross the rubicon with debt like this for years, there were some economists that said when an economy has a debt to GDP ratio of 90% their economy will suffer… Hmmm… I know they’ve changed how kids learn match these days, but I would like for them to explain how if 90% is bad, then 130% isn’t that bad…. BECAUSE IT IS VERY BAD!

What’s it gonna take to stop all this debt creation? A war? A debt jubilee? Or a debt default? I’ll take what’s behind curtain #3, Monty, because, we have experience in dealing with a debt default, the other two I don’t want any part of…. A war speaks for itself… and debt Jubilee, is fraught with devastation for the dollar….  Just like a debt default , but with a debt jubilee, there are too many unknowns. And with either of them the question would be who’s going to trust anyone selling debt ever again?

Aren’t I just a bundle of good news this morning, eh? HA! Wait till you get to the FWIW article today….

I watched and listened to a zoom meeting presentation by Grant Williams, and Egon Greyerz, of whom I’ve quoted and cited their thoughts several times through the years. They really didn’t tell me anything I didn’t already know, except this little ditty….  OK… remember a week or so ago, me telling you that Hertz had filed bankruptcy? Well that indeed did happen, and since that filing, the stock of the company has soared? Who knew that buying the stock of a company in bankruptcy was the thing to do?  

And that right there my friends, is another HUGE reason that the stock market dead cat bounce is about over…  The stock jockeys have gone off the deep edge, they’re being ridiculous with their buying. They’re probably using the old dart method, where you throw a dart at a target made up of stock names, and wherever the dart lands is the stock you buy… 

I don’t travel any longer like I used to… But if I were still traveling, I’m sure that in these times, that when getting into a cab, the driver would ask me what I did, and then proceed to tell me about a stock tip he had received… 

A thing or two that I want to mention this morning, is one… I had a fat finger incident yesterday, and had the wrong price for loonies… The correct one is posted today… And have you noticed the Brazilian real lately? Yesterday, it slipped below the 5 handle for the first time in, well, what do I aways say, “A month of Sundays!”  With the Russian ruble leading the Petrol Currencies they sure have a revived look about them, don’t they? 

The U.S. Data Cupboard is basically empty again today with some 3rd tier reports on the docket… The only piece of data today that is a bit interesting is the April print of Job openings… Besides that… forgetaboutit! 

Don’t forget though that tomorrow will bring us the FOMC meeting and a press conference from Fed Chairman, Jerome Powell…  As I said yesterday, that I don’t care for what he’ll have to say, because it will be full of lies, and Fed Speak…. 

To recap…  The day after the chaos created by the BLS and their made up Unemployment Report, was a day where traders, took a breather, and said, that was too much!  The currencies and metals are starting today with the same clothes that they wore yesterday.  The Recession actully began in February, folks… Hate to tell you but I was right once more!  

For what It’s Worth…. A former neighbor of mine, sent me a link to this article last night, and after reading it I thought, this is ripe for the FWIW article on Tuesday! So, thanks Brad, for sending that along… The title of article is: A Crash In The Dollar is Coming… and it can be found here: https://finance.yahoo.com/news/crash-dollar-coming-210024166.html?.tsrc=fin-srch

Or, here’s you snippet: “ The era of the U.S. dollar’s “exorbitant privilege” as the world’s primary reserve currency is coming to an end. Then French Finance Minister Valery Giscard d’Estaing coined that phrase in the 1960s largely out of frustration, bemoaning a U.S. that drew freely on the rest of the world to support its over-extended standard of living. For almost 60 years, the world complained but did nothing about it. Those days are over.

Already stressed by the impact of the Covid-19 pandemic, U.S. living standards are about to be squeezed as never before. At the same time, the world is having serious doubts about the once widely accepted presumption of American exceptionalism. Currencies set the equilibrium between these two forces — domestic economic fundamentals and foreign perceptions of a nation’s strength or weakness. The balance is shifting, and a crash in the dollar could well be in the offing.

The seeds of this problem were sown by a profound shortfall in domestic U.S. savings that was glaringly apparent before the pandemic. In the first quarter of 2020, net national saving, which includes depreciation-adjusted saving of households, businesses and the government sector, fell to 1.4% of national income. This was the lowest reading since late 2011 and one-fifth the average of 7% from 1960 to 2005.

Lacking in domestic saving, and wanting to invest and grow, the U.S. has taken great advantage of the dollar’s role as the world’s primary reserve currency and drawn heavily on surplus savings from abroad to square the circle. But not without a price. In order to attract foreign capital, the U.S. has run a deficit in its current account — which is the broadest measure of trade because it includes investment — every year since 1982.
Covid-19, and the economic crisis it has triggered, is stretching this tension between saving and the current-account to the breaking point.

The culprit: exploding government budget deficits. According to the bi-partisan Congressional Budget Office, the federal budget deficit is likely to soar to a peacetime record of 17.9% of gross domestic product in 2020 before hopefully receding to 9.8% in 2021.”

Chuck again… OK… tell me when you’ve seen this, because I never have… The gov’t starts spending money on something, and when the problem is on its way to being solved, the Gov’t pulls back its funding…. It’s never happened and it probably never will!

Market prices today 6/9/20 American Style A$.6945, kiwi .6498, C$ .7435, euro 1.1275, sterling 1.2663, Swiss $1.04.82, European Style: rand 16.7228, krone 9.3436, SEK 9.2389, forint 305.72,   zloty 3.9420,   koruna 236105, RUB 68.27, yen 108.20, sing 1.3912, HKD 7.7499, INR 75.36, China 7.0742, peso 21.70, BRL 4.9190, Dollar Index 96.88,   Oil $38.12,   10-year .83%, Silver $17.65, Platinum $839.50, Palladium $2.021.03, and Gold… $1,697.55

That’s it for today…  What will it be today for Gold? I know that I seem to be fixated on the price of Gold, but in reality I’m not… I bought it years ago, own it, and don’t really care what the price is because I’m not selling it!  And basically, I don’t want to see Gold soar higher all at once, because then investors won’t be able to get any Gold… Gold is a store of wealth, period. Eric Clapton’s love song to George Harrison’s wife, takes us to the finish line today… Layla, the rock classic, was in the middle of a messy love situation, when Eric was being a low-down polecat, and that’s all I have to day about that!  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself! 

Chuck Butler

 

 

The BLS Upsets The Applecart!

June 8, 2020

* Gold & Silver get whacked on Friday… 

* The Recent currency rally gets derailed on Friday… 

Good Day… And a Marvelous Monday to you! What a wonderful chamber of commerce weekend for us here in the Midwest!! We had all kinds of different people here to swim this week, but none made my heart open up and sing joyous songs, than my 8 month old granddaughter, Evie May… That child’s smile can make a mean old man wilt… Not that I’m a mean old man, but if there was one around he would be wilting! Like I said last week, this little girl will be able to call me whatever she wants, and she’ll get whatever it is that she wants. Not that I want a spoiled granddaughter, but I’m afraid that she’ll have me wrapped around her finger… The Allman Brothers greet me this morning with their song titled: In Memory of Elizabeth Reed… There’s a story behind this song if you ever have the time to be on the Butler Patio, I’ll share it with you!

Well, Friday, was a day for the ages… The BLS’ version of a jobs report was something to write home about, and that pushed the markets to believe that the worst of the pandemic shutdown is over, and up went Bond yields, up went stocks, and down went the currencies, and metals, which got whacked as if they had done something bad… So, since Friday’s markets reaction was in response to the BLS jobs report, let’s go to it and pick apart with a fine tooth comb!

Well, weren’t you happy as a lark that the Unemployment Rate here in the U.S. dropped in May from 19% in April to 13% in May? Remember last week when I showed you the numbers? Didn’t I say then that I doubted that the BLS would show the same Unemployment Rate as the numbers should have shown? I showed that the number should be 27% Unemployment, but the BLS and their bag-o-tricks said it was just 13%…. Now, here’s a real kicker… The BLS added 345,000 jobs out of thin air for their report… Of course 345,000 jobs won’t make up the difference between 27% and 13%, but it gets us on the road of discovery… The numbers are what they are, folks… My dad used to tell me that “figures lie, and liars figure”.. I would have to put the BLS in the category of “liars figure”…

Now, you may ask why I get so frustrated with the BLS’s bag-o-tricks? Basically it comes down to honesty, and real markets…. We haven’t had “real markets” in so long now that I’ve forgotten what a real market is…. And when you have dishonest people issuing reports that gets people all wound up and they begin to forget about what’s real and what isn’t real, you get days like we had on Friday, when Gold was sold like funnel cakes at a state fair, and the dollar bugs danced in the streets…. That’s what you get when reality gets chucked to the road, and fantasy takes its place!

The Bureau of Lying Statistics… That’s my name for the BLS… They are as worthless as pay toilet in a diarrhea ward! I’m sorry but I’m so fed up with their B.S. that I have to call them out for what they are! And that’s a lying bunch of Government accountants! What a farce! And to have the markets take that hook, line and sinker, is just what I’ve been talking about all these years with these BLS reports, and how they move the markets so falsely…

So,, the currencies rally was derailed for a day, and the dollar bugs were dancing in the streets once again… Gold hot wacked! Along with Silver, but let just focus on Gold right now… Gold lost $28.90 on Friday, and closed at $1,684 on Friday… It’s so sad to me that these price manipulators keep getting away with murder, because that, to me, is exactly what they are doing… Of course, on Friday, the BLS was an accomplice to the murder, but they won’t be anywhere around the body when the CSI guys show up….

On Thursday last week, pre BLS, the currencies were the ones dancing in the streets, as the euro traded through the 1.13 handle, the A$ through the 69-cent handle and so on…  This misrepresentation of reality even fooled the bond boys, who are usually on top of things and act coolly during times like this, but this time they suckered into the cry of the day…  The 10-year Treasury’s yield rose from .69% to .91% in one day! That’s a huge move for bonds folks.

In the early morning trading today, Gold is up $8, and things seemed to have calmed down. I guess we’ll have to get through today to know for sure! 

The price of Oil has risen to a $39 handle, and that has the Petrol Currencies all lathered up and ready for the dance! Shoot Rudy, this morning is the first time I’ve seen the Brazilian real trading below 5! And the Mexican peso is trading with a 21 handle… These are number that we haven’t see in a month of Sundays, folks.. 

In my usual review of what’s being said on Twitter, I came across this excellent, albeit sarcastic, quote from my fave economist, David Rosenberg, who said on Twitter: “Americans pay $2T of taxes yearly. Equal to 9 weeks of Fed balance sheet expansion. So as Dr. Powell medicates the patient with unprecedented machinations, why not print the money and pay the IRS our taxes? Surely taxpayers deserve as much support as HY bond fund managers, right?”

I read that and said, OMG! What a great idea! If the Fed really wants to help the economy, get back on its feet…. Why don’t they offer to the Treasury to pay the taxes of the citizens of this country? Why not? He, Jerome Powell, has paid for the bad decisions, bad loans, bad everything of these Companies, thinking that’s the way to help the economy… Why not pay us for our having to deal with no savings rates, no real markets any longer, and being on house arrest for the last 3 months!

Ok, I’ve said enough there… no reason to continue, right? Oh, darn it, I’m on a roll let’s keep the ball rolling, keep the ball rolling, girl the name of the game is love… Wait!, no time for Jay and the Techniques this morning, I’m tring my best to be serious here!

So… what we have here is a bunch of liars, cheaters, and just all around bad guys and gals… I still can’t believe the gullibility of Traders, and how they took this data hook, line and sinker… And since I’m so upset by all this maybe I had better head to the Big Finish, eh?

The U.S. Data Cupboard has nothing for us today… and as the week goes on, there’s not much, but on Wednesday, there will be a FOMC Meeting Announcement… I truly don’t believe that the Fed heads have a rate movement on their minds at this time… We will get a press conference by Fed Chairman Jerome Powell on Wednesday, but if he has anything to say about this meeting it will all be lies, and make believe scenarios…

We’re in the middle of a recession, when will Powell and his merry band of Fed Heads realize this, and call a recession a recession?

To recap… The currencies got smacked, Gold & Silver got whacked, and it was tied to a erroneous Jobs Jamboree report that print last Friday… I went out of my way to explain how erroneous this report by the Bureau of Lying Statistics tried to throw out there to see how the markets would react… And they reacted by swallowing the BLS BS hook, line and sinker… Chuck is so upset by this misrepresentation by the BLS that he’s beside himself today!

For What It’s Worth…. I just talked about how ridiculous the BLS jobs report was, but Dave Kranzler, who used to bust my chops for stuff I wrote about nearly every day, is still writing, just like me, and he has some choice words for the BLS and it can be found here: https://investmentresearchdynamics.com/through-the-looking-glass-employment-report-fraud/

Or, here’s your snippet: “ The employment report is a complete fraud. But as long as the market and it’s army of mainstream story-tellers focus just on the headline number, unicorns do exist. But the Devil is in the details:
However, there was also a large number of workers who were classified as employed but absent from work. As was the case in March and April, household survey interviewers were instructed to classify employed persons absent from work due to coronavirus-related business closures as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified. BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue.

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded.

To Beyond that, there’s not much to say about this report. The numbers as presented are astonishingly implausible. It’s an insult to everyone’s intelligence for the Government and the main stream reporters and analysts to think that anyone with two brain cells to rub together would find this report believable. Ultimately, this attempt by Trump to stuff the ballot boxes early in the election cycle will back-fire – badly. maintain data integrity, no ad hoc actions are taken to reclassify survey responses.”

Chuck again… Dave had a great line for the BLS… Bureau of Lying Statistics… So I’m sticking with that from now on! I just can’t get over how suckered the markets were taken by this BLS report, but it is what it is, and now Gold needs to work to comeback from a large selloff because of the false number!

Market prices today 6/8/20: American Style: A$.6984, kiwi .6526, C$.7901, euro 1.1275, sterling 1.2660, Swiss $1.0386, European Style: rand 16.8038, krone 9.2674, SEK 9.2226, forint 304.93,   zloty 3.9290,   koruna 23.5610, RUB 68.64, yen 109.45, sing 1.3913, HKD 7.7498, INR 75.31, China 7.0809, peso 21.55, BRL 4.9575, Dollar Index 97.05,  Oil $39.31,   10-year .91%, Silver $17.66, Platinum $837.31, Palladium $1,955.43, and Gold… $1,693.86

That’s it for today… Not as long and wordy for Monday as usual… You can tell that I spent most of the weekend outside and not at my computer, reading and researching! I’m almost finished reading my book “Dis United Nations”… Man, Peter Zeihan, sure put some research into this book, and I guess it won’t be too much of a spoiler alert, to say that in the future, he sees The U.S., Argentina, France, Turkey, and Japan as the major countries in their respective regions…  Notice he didn’t say China, but said Japan instead? He thinks China has a real BIG problem that can’t be fixed…  My new book should arrive today, which is the history of Sam Houston…  With no new Harry Bosch, or Jack Reacher books, I’ve had to diversify my reading! HA   The Alan Parsons Project takes us to the finish line today with their song: I wouldn’t Want To Be Like You… And with that, I’ll say that I hope you have a Marvelous Monday, and well continue to Be Good To Yourself! 

Chuck Butler

 

Australia’s Run Of Years Without A Recession Are Over….

June 3, 2020

* Currencies inch higher VS the dollar… 

* A$’s get the rug pulled out from under them…. 

Good Day… And a Wonderful Wednesday to you… As I sat there last night changing channels by the second, because I didn’t want to watch any more buildings afire, I thought… You know, this country has more good people that are nice, are fun to be with, and care about each other, than those that want to do harm to the country… Good, will eventually win out, I know it in my heart of hearts! June has brought us some very warm days to start the month, and after the cold wet spring we had, I’m all for very warm days! I can’t sit out in the sun as long as I could previously, but, I still get a good amount of Vitamin D each day…. The grandkids, all four of them, were here to swim yesterday. I guess with the local pools shutdown this summer, that I’ll be seeing those four rascals a lot! YAHOO! Journey, pre Steve Perry, as lead singer, greets me this morning with their rock classic: Of A Lifetime…. Now there’s a song that I’ll be that not too many people have on their iPods!

Another day…. Another day of the currencies pushing higher VS the dollar… I told you yesterday that the Aussie dollar (A$) and kiwi had both gained a full cent VS the dollar on Monday, and on Tuesday they repeated that Monday performance… The A$ was trading with a 69-cent handle yesterday… In April, the A$ was dropping daily, and reached a 63-cent handle, before turning things around… Once again, I’m happy for the A$ and kiwi to be rallying, but shoot Rudy, they have nothing to be rallying about! China is in a deep recession, and the rest of Asia is following China down the broken glass littered alley… So, be careful here, folks…. One of these days a trader is going to wake up and say, “Hey! How’d this happen?”  

And that may have happened in the overnight markets, as it was reported that Australia’s record run of 9 years without a recession, look to be coming to an end, as the 1st QTR GDP was negative -.3%, and with the second QTR forecast to be even worse, that would make a technical recession, of two consecutive quarters of negative growth…  And heaven forbid, but traders actually sold A$’s on this fundamental news!  Sure,  traders go ahead and pull out the fundamentals when they work for you, I see how you guys work! 

I just find that a currency getting sold or bought on Fundamentals is a rate occurrence these days, as it’s all about trader sentiment… 

There are only a handful of currencies these days, that pay interest on deposits… They include the Russian ruble… And as long as that’s the case, I’m going to hold on to my rubles, and keep rolling them over so that the interest that’s paid gets added to principal…. But after reading Peter Zeihan’s chapter on Russia’s future, in his book Dis United Nations, I’ll be watching them closely, that’s for sure!

Peter Zeihan believes that Russia along with Germany are in deep dookie going forward… And no I won’t give you a spoiler alert, as to what he sees these two doing in an attempt to revive their countries… 

Gold & Silver don’t pay any interest, but, to me their retention of wealth is important to me… I guess I woke up the boys in the band yesterday, when I asked the question of whether or not they had turned in their instruments… And as gold neared the $1,750 level, the boys in the band made sure it didn’t reach that price, and knocked Gold back by $12 on the day, with Gold closing at $1,727… And Silver, which had outperformed Gold, on a percentage basis, recently, got whacked, and finished the day below the $18 handle, which if held for a bout 4 days…

And both metals are still on the selling blocks this morning, with Gold down $7 and Silver flailing away…  What gives here? Oh, it’s just the same-0, same-0 with the price manipulators, folks, nothing new here, nothing to see, move along for these are not the droids we’re looking for… 

My good friend, Dennis Miller, the Retirementor, sent me a chart of the deposit yields on CD’s and Treasuries at his brokerage company…. Man, you talk about depressing! You would have to go out 10 years with a CD to get 1.%… You would have to go out 30 years with a Treasury to get 1.45%, and you would have to go out 30 years to get 2.4% in Agency bonds, (Gnma’s and the sort)…. And there are still people out there that would rather lock up their money in Treasuries, that may or may not have defaulted by ½-way through to maturity, instead of buying Gold & Silver… I’m just saying… that doesn’t make sense to me…

You know if I could have all Pfennig readers in a room, and ask to see a show of hands of those that own Gold or Silver or both, I’m quite certain that 90% of the people in the room would raise their hands… I guess when I bang on people about buying Gold & Silver I’m preaching to the choir… But I figure if I give them enough fodder, they’ll feel confident to talk to their neighbors or friends, or family about the subject of Gold & Silver as a store of wealth…

Well the price of Oil shot higher yesterday and traded with a $37 handle, yesterday. And just as I suspected, the Shale producers are sniffing around once again, getting ready to go full throttle on fracking , once the price guarantees them a profit…. And our friends at OPEC (NOT!) were just talking about extending their production cuts… Hmmm… You know, as I said the other day, the Saudis are looking to put the Shale Producers out of business for good, as they, the Saudis, can deal with a cheaper Oil price, than a lot of their competitors… But somebody should have explained to them that less supply equals a higher price, and vice versa… And a higher price brings the shale producers back into the mix…. I’m just saying…

Nearly 40 Million people out of work in the U.S. in the last 8 weeks, and the stock jockeys keep keepin’ on… Nothing seems to bother them, no awful economic data will stop them, no people working will stop them, no corporations  not making profits will stop them… What?, the stock you own is from a company that can’t keep their lights on, and it keeps going higher? What does that remind you of? Come on, it wasn’t that long ago… Yes… The Dot.com bust…. Remember all those dot.com companies that never turned a profit, but their stocks were soaring higher, until one day, someone with an ounce of gray matter, said, “you know there’s something that’s not right about this” And soon trillions of dollars were lost, a lot of those dot.com companies were never to be heard from again, and here we are 20 years later, and investors are falling into the same trap…

Well… The currencies just can’t stand prosperity….  While the euro is nearing 1.12 this morning, the rest are just wallowing in the mud.  The Russian ruble is back to moving in the right direction. The Japanese yen, has finally moved past the 107 handle! It sure seemed that yen was going to remain in that 107 handle for-ever!  Reminded me of when I first began trading foreign bonds, and writing the Pfennig… Everyday it seemed that the yen was trading with a 130 handle…  And then one day, it wasn’t any longer! 

The U.S. Data Cupboard today has the ADP Employment Report for May, and I think they’ll say that in the month of May the U.S. lost 10 Million jobs… As I’ve explained before, this ADP report is supposed to be the precursor to the BLS report that will print Friday morning. As it turns out the ADP report is probably more reliable than the BLS report… But then it’s another case of Apples and oranges… with the BLS cutting off mid month to mid month for their report, and the ADP using the actual numbers from the previous month… So, don’t get your hopes up that just because the ADP report shows less lost jobs in May, because the BSL will have something up their sleeves… right Bullwinkle?

U.S. car sales have fallen into a deep dark hole… But what did anyone expect, people were told to stay home, and that meant not going out to buy a new car! I know they have those new apps for your phone that allow you to buy a car and have it delivered to you…  Well, when all cars are made infallible that might work, but for now, a buyer has to go out a “kick the tires”…  So, car sales take a major hit in May, but at least they were better than April’s numbers!  

I’m still getting 3 weeks to a gallon of gas with my car….  Besides June of 2007 after my cancer surgeries, I’ve haven’t had a period of time when I drove my car less….  I love to drive, that’s the problem… I remember the first time I drove my car, when I was 16… I had bought a 1964 Ford Falcon, that barely ran, but it was mine, and the first time I took it out, that feeling of freedom, with the wind blowing through my hair… I still get those feelings sometime when I drive…  I have a funny story about that car if you have a minute to spare I’ll tell it to you…

The girl next door, Ann, needed to go to work one day, and me being the ever-helpful young man, decided to offer to drive her to work.  So, we left, and I made the first right turn, hit a pot hole, and the gear shift, fell off and into my lap… She said, “Does that happen all the time?”  Well, it never happened again after I got the duct tape out! 

To recap… Well, the currencies inched higher yesterday, once again, but have backed off a bit this morning. Gold  is still on the selling blocks after losing $12 yesterday, the shiny metal is down another $7 this morning. Chuck talks about rubles, euros and A$’s this morning, and then talks about how the current stock market reminds him of the dot.com market of 20 years ago… 

Before I go to the Big Finish, I wanted to mention that my good friend, Dennis Miller, will be printing his interview with yours truly, tomorrow, for those of you who still don’t receive Dennis’ letter (for free!), you’ll still be able to see what I said, by clicking www.milleronthemoney.com 

For What It’s Worth… When I find myself in times of trouble, I turn to longtime friend, and publishing guru, Bill Bonner, to show me the light, and that’s where I was yesterday… So, I pulled up his website to see what he had to say, and, well, he had a lot to say!  So, if you want some Bonner this morning, click here: https://www.rogueeconomics.com/bill-bonner-diary/america-is-marked-by-health-emergency-economic-recession-social-unrest/

Or, here’s your snippet:” You’ll remember our dictum: “When the money goes, everything goes.”

Huh? You wonder. What’s this got to do with money? Isn’t this just about racism and police brutality? In short, we wish.

The monetary foundation of the U.S. (the Federal Reserve balance sheet) began the century at only $674 billion. That is where it had gotten since the Fed was set up in 1913. Now, it is $7.1 trillion, and it’s headed to $10 trillion by the end of the year.

And now, every crisis, every calamity, and every disaster, caused by the feds themselves, will be met with more money-printing… and more war. The war on terror… the Mortgage Finance Crisis of ’08-’09… the war on COVID-19 …

Each time, the feds go back to doing the only thing they know how to do… the only thing that increases their power and enriches their friends – running the printing press.

And each time, they make the situation worse.

The current round of riots and lawlessness, for example, are probably not just a reaction to another killing by the police… not just the work of a few subversive groups… and not caused by the Russians (as Susan Rice claims), nor by our “foreign adversaries” (whoever they are) as suggested by Donald Trump.

Instead, they are an inchoate reaction by millions of Americans to an inherently corrupt and unfair system.

“Racism” is something they understand. They were indoctrinated about it in school.

But “racism” may be just a rallying cry… a trigger… a focal point… for deeper bitterness and resentment.

Money represents time… and life. And when people can’t trust it, they lose faith in their institutions, in the system, and in each other.

The center cannot hold. The masses become more extreme in their opinions… some wanting to tear down the “capitalistic” system… others wanting to protect it at all cost.”

Chuck again… OK, you’ve got to… or as Otis Redding would say, you gotta, you gotta, check out the whole piece by Bill…. He ties it all together in a nice bow that makes sense! 

Market Prices today 6/3/20: American Style: A$.6871, kiwi .6381, C$ .7380, euro 1.1197, sterling 1.2570, Swiss $1.0376, European Style: rand 17.0509, krone 9.5425, SEK 9.3411, forint 309.02, zloty 3.9393,   koruna 23.7878, RUB 68.82, yen 108.58, sing 1.3984, HKD 7.7500, INR 75.17, China 7.1063, peso 21.65, BRL 5.2972, Dollar Index 97.59,  Oil $36.02,   10-year .69%, Silver $17.90, Platinum $840.66, Palladium $1,950.11, and Gold… $1,720.11

That’s it for today…  I’m so upset by the low road that both the MLB players and owners have taken in regards to a deal to play this year… I guess I should have known this would happen, given their history, but I thought in this time of a pandemic, and people needing an outlet so badly, that they would see this almost like a relief effort, but Nooooooo!  This week will be the go/ no go decider, so hopefully they can get their acts together!  Kansas takes us to the finish line today with their song: Carry On Wayward Son… Kansas was HUGE in the 70’s…  But then Steve Walsh, went solo, and well the rest is history… And with that, I hope you have a Wonderful Wednesday and rest of the week…. Yes, no Pfennig tomorrow, as an early trip to the wound center is on the docket for me… But please, Be Good To Yourself! 

Chuck Butler

 

India’s Bond Rating Gets Cut To Just Above Junk….

June 2, 2020 

* Currencies again rally VS the dollar on Monday!

* Gold & Silver continue to move toward Breakout levels… 

Good Day… And a Tom Terrific Tuesday to you… I sure hope you’re safe wherever you may be… I simply can’t stand to watch TV for more than a small amount of time, or peruse through Twitter, or check out the new items on Bloomberg… They all contain somebody’s viewpoint on something that I’ll never understand. And I’ll just leave that there… Another beautiful day here in the Midwest… I sat outside for lunch and reading my book for about 2 hours, and then had to take a nap! HA! We had a birthday parade last night for Jerry McCoy, who I told you yesterday turned 40. These birthday parades are a good thought, but they really don’t do it for me… People need to be together to celebrate birthdays, etc. Marvin Gaye greets me this morning with his song: Mercy, Mercy, Me, which is very apropos for today, and exactly how I feel regarding throwing my hands up in the air!

Another day, and another day of dollar selling, not by the boatload, but selling nonetheless. You know, all I had to do is say they were dead men walking, and they begin to rally VS the dollar. OK, let me make this clear, I never said that my playbook was going to happen in the next week or month. So, just as long as we’re clear on that…. We’ve seen these false dawns a few times in the past couple of years, when the currencies look as though they are going to go on a multi-year rally VS the dollar, and then just as fast as the rally started, it ends… So, you can never tell when trader sentiment is going to change for good…. It’s not like the countries that these currencies are from are performing better than the U.S., They all have debt up to their eyeballs, they all have mingling central banks that have come up with more alphabet lettered programs than you can shake a stick at!

I do have to admit though that things here in the U.S., because we are the largest economy in the world, and have the reserve currency, just aren’t going as planned…. The U.S. economy has never, and let me repeat that for those of you trying to scan this, the U.S. economy has NEVER been in a recession / depression as deep as this one! Let’s see what the economists / analysts on Twitter have to say about what’s going on.

In my daily perusal of Twitter, I found this Tweet by Egon Von Greyerz, “Big Mac was .65 cents in 1973, in 2020 it is $5.30, an 88% drop in the dollar… Gold in 1973, was $90, and today it’s $1,735, which is a 95% drop in the dollar… And while I was watching the stock jockeys continue to move the stock market higher in the ozone, James Rickards had this to say on Twitter: “American cities are burning, there’s a lethal pandemic, and we’re in a new Great Depression. Of course, the stock market is up. Why do we persist in calling it a “market?” S&P 500 is really the S&P 6, stocks are traded by robots and financed by $5 trillion of printed money at 0%.”

My thoughts exactly, as I watched the markets recap…. UGH! But I won’t let it bring me down, it’s only castles burning – Neil Young…. Or how about, “how do we sleep when the beds are burning?” – Midnight Oil… Oh there’s so many song lyrics that fit here, but the sad part is that this is all going to end up in tears….

My oh my what have we here?  The Ratings agencies have cut India’s bond rating to just one notch above junk.. OUCH!  Did you have to hit me that badly? That’s going to leave a mark, for sure!  But don’t worry India, investors love junk bonds, the pensions, insurance companies, etc. they line up to buy them, because they know that they will not default, as long as the Fed has a printing press, or a laptop computer to create digits, bonds are the Fed’s darlings…  

What? I hear you saying, “But Chuck, the Fed doesn’t buy foreign bonds.” Ahhh grasshopper, are you sure about that? What do you think those Trillions of dollars that were secretly sent to foreign banks in 2008 were for? It sure wasn’t so they could have a blow out party! So, in the end the foreign bonds don’t show up on the Fed’s balance sheet, but the debt is there… off balance sheet that is… 

I was being diligent and going through the Pfennig Replies email box yesterday, and came across an email from a reader telling me that I’m right that there isn’t a Gov’t economic report that doesn’t have some kind of “adjustment” to make it look better… I thought about that for awhile, and then agreed, that I don’t think I’ve come across any Gov’t reports that don’t have “adjustments” in them, which made me even more mad! You think that I was wound up yesterday morning? That was nothing compared to how wound up I am about not seeing real unadulterated Gov’t economic reports!  I’m going out to the Butler Patio, to scream a bit, I’ll be back soon… 

Apples and Oranges…  count them separately and do not mix them, would be my first decree as King… Don’t bring me “seasonally adjusted, B.S., or hedonic adjusted reports, or you’ll find yourself hung from a dungeon wall by the ankles!   Too harsh? I don’t think so… 

OK, no more role playing for me today, I’m worn out! HA!  OK… Gold was up $10 yesterday, and closed the day at $1,738, and is up a buck or two this morning. Silver, which has really outperformed Gold in the last week, on a percentage basis, continued to move higher throughout the day yesterday, and again this morning.  It’s about time for an engineered takedown, don’t you think? Or…. have the boys in the band finally turned in their instruments?  Well, it appears that the boys in the band have given up, at least for now…  I wouldn’t be surprised if they came back strong, as Gold nears the launching pad of $1,750 that I talked about yesterday…  I hope they don’t, but I get this feeling that they will… 

The Aussie dollar (A$) and kiwi have really moved higher in the last week VS the dollar…  The A$ was up over 1 full cent yesterday, and kiwi was close to that feat…  What gives with these two? The Proxies for Global Growth are attempting to tell us something, but I don’t see what they’re telling us coming true, so I question their moves…  

The Petrol Currencies, led by Russian ruble have really taken to this rebound in the price of Oil… I read yesterday that our friends at OPEC (NOT!) are thinking that their production cuts in Oil would last through the summer….  I guess they’re thinking that the summer months equal increased driving, especially here in the U.S. And they’re hoping that the demand will take up the slack in Oil reserves… Take this message to OPEC…  We know what you’re trying to do, and we don’t think it will make a hill of beans difference! So, there! 

One Petrol Currency that gets double input from Oil and the rising euro, is the Norwegian krone… When both of the inputs are rising, the krone get more love than it can handle at once.. 

I have to also point out that the Euro-Wannabes of: Polish zloty, Czech koruna, and the Hungarian forint, have been on the rally tracks… And here’s a question to see if you’ve paid attention in class all this time…. What does Chuck always tell us about the Euro-Wannabes?  Give up? OK… I always tell you that when the Euro-Wannabes are on the rally tracks, that sentiment toward the dollar is nearing a low… 

The U.S. Data Cupboard yesterday had the ISM Manufacturing Index for May, and it was not as bad as I would have thought it to be… The May ISM was 43.1%… And that makes two consecutive months of the index that printed below 45%… April was 41.1%…  A very long time ago, I read that the Royal Bank of Canada, (RBC) had come up with an indicator for U.S. recessions, and that it was two consecutive months of the index printing below 45%….   So, I think that it’s official now, even though the folks here in the U.S. that tell us we were in a recession long after it was over, haven’t put their seal of approval on this recession thing yet….  But to me it’s official! 

And once again, there is discrepancy… The aforementioned ISM was 43.1%, and the Markit PMI (same manufacturing report, just a different name) was 39.8%….  So, pick your poison, either one was below 45, but just have these two with such a wide difference is more fodder for the fire that I’m burning for Gov’t Economic reports!  Oh… and one more thing, Construction spending for April was negative – 2.9%, VS a flat print for March…  Once again, I’ll point out that things were already going badly for the economy before the pandemic reached our shores… 

To recap…  Another day, another day of the currencies moving higher VS the dollar, when will this stop? Gold & Silver are pushing the envelope for a breakout move higher… Chuck wonders where the boys in the band are? And what are the stock jockeys thinking? Cities are on fire, we have a pandemic amongst us, and we’re in the deepest recession we’ve ever been, and yet the stock jockeys party on….  Party on Wayne, Party on Garth! 

For What It’s Worth…  Well… remember when I told you that when the end of currencies comes around, that your bank balances would be either just digits or a Gov’t backed crypto currency? Well, it appears that China is one step ahead  in developing a Gov’t backed crypto currency, so when the time comes they already have that box checked!  This is an article about China’s cryptocurrency and you can find it here: https://www.rt.com/business/489880-china-digital-yuan-olympics/

Or, here’s your snippet: “The People’s Bank of China has revealed plans to have its sovereign digital currency ready in time for the 2022 Winter Olympics. The announcement comes as the Covid-19 pandemic has accelerated a shift away from paper money.

Limited trials are already underway in Shenzhen, Suzhou, Chengdu and the Xiongan New Area in the northern province of Hebei, said the central bank’s governor Yi Gang. He told reporters that China’s government plans to run pilot tests at Olympic venues, though there remains no official timetable for a release.

An unnamed member of the State Council with knowledge of the project told the Nikkei Asia Review that If the government is satisfied with the results of this year’s tests, the currency “will be issued next year.” Otherwise, “more tests will be conducted next year,” he said.

The digital yuan will be linked to the holder’s smartphone number, with transactions taking place through an app. Users will be able to transfer money between accounts by tapping phones, much like having physical cash change hands. The currency will be legal tender, so it could be exchanged without needing a bank as an intermediary.

The size of transactions would be limited based on identity verification. A phone number alone would permit only small transactions, while providing proof of identity or a photo of a debit card would raise the limit. Speaking with a bank representative in person could allow for the cap to be removed entirely. Suspected criminal activity will be uncovered via transaction histories.”

Chuck again…  hackers… that’s all I can think of when I think of cryptocurrency… wake up one morning, turn on your laptop and find that someone has wiped out your balance of cryptocurrency….  If I ever get my arms around the hacking thing, then maybe, just maybe, because you never know, I might warm up to cryptocurrency…

Market Prices today 6/2/20: American Style: A$.6850, kiwi .6315, C$ .7391, euro 1.1165, sterling 1.2550, Swiss $1.0395, European Style: rand 17.2294, krone 9.5665, SEK 9.3535, forint 309.46, zloty 3.9363,  koruna 23.8335, RUB 69.61, yen 107.82, sing 1.4021, HKD 7.7507, INR 74.79, China 7.1269, peso 21.86, BRL 5.3581, Dollar Index 97.62,   Oil $36.26,   10-year .67%, Silver $18.28, Platinum $850.24, Palladium $1,974.49, and Gold… $1,740.88

That’s it for today….  I’ll say one thing for the replays of old Cardinals games at least doesn’t have interruptions showing another building burning…  The Times they are a changing, eh?  I shake my head and wonder about all this…  OK… I’m back now!  I found out this weekend that we’re going to have a food truck come to our subdivision on Friday night! YAHOO! Something different!  The Times they are a changing… for sure! A few years ago, the farm where my dad grew up, and we spent our summers, was for sale, and I said, “let’s buy it”!  I was shot down with that Idea, but now…. It sure would be good to be out in the country, away from all of this…   I’m just saying…  OK, Badfinger takes us to the finish line today with their song: Come And Get It….  And, with that, I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

Chuck Butler

 

China Turns Back U.S. Cargo Ships….

June 1, 2020

* Currencies add another day of advancement VS the dollar..

* Silver trades above $18!!!  After a  strong move late last week! 

Good Day… And a Marvelous Monday to you! And Welcome to June! What a wonderful weekend it was here, as the rain finally went away, and we were left with warm days, blue skies and plenty of sunshine! We had another driveway happy hour with my friends, on Friday. And yes, we kept safe distancing from each other! Today, is my darling daughter, Dawn’s husband, Jerry’s birthday! So, happy birthday to Jerry… He turns 40 today, so it’s a big one to him…. I’m sure his mom is thinking, “how’d he get to 40?” It just means we all keep getting older… Pfennig tradition calls for this: June is busting out all over, all over the meadow and meadow and the hill Buds’re bustin’ outa bushes, And the rompin’ river pushes. Ev’ry little wheel that wheels beside the mill… From the great musical, Carousel… There’s nothing in my iPod that can beat that song, so I’ll say that it greeted me today! Longtime readers know that I’m not must a “rocker”, that I love a wide range of music…

Well, just when I talked about how the currencies that we know would no longer be around in future years, they’ve begun their march higher VS the dollar… The euro is trading with a 1.11 handle this morning, and it doesn’t make a hill of beans of sense to me, and the Eurozone has as many debt problems as the U.S. but right now the sentiment is against the dollar, and we’ve seen this before. The sentiment goes sour VS the dollar, and then right when it looks like the dollar will fall in value, it rebounds and the sentiment changes…

Shoot Rudy, even the Proxies for Global growth have turned the tables and rallied VS the dollar… Of course I’m talking about Australian and New Zealand dollars. I’m mean, come’on traders! What the hell is going on here? There is no Global Growth, and there wont be any for some time… But my dad always told me, “Chuck, don’t look a gift horse in the mouth”… And so I won’t and I’ll just say the currencies are rising VS the dollar, even thought their respective fundamentals are no better than that of the U.S. they are rallying….

It’s not that I’m not rooting for the currencies to rally, it’s just that things don’t appear to be in their favor right now, and it’s the last thing that exporting countries need right now is for thei currencies to be rallying…

One asset class that should be rallying is doing just that! Gold & Silver both had monster days to end last week… Take Silver… On Thursday morning when I left you, Silver was trading at $17.34… Silver ended the week on Friday afternoon at $17.84, up 50 cents! That’s a BIG move for Silver folks, and shoot, Silver actually traded as high at $18.04 during the day, before profit taking set in and moved it back to $17.84… But is back above $18 this morning! 

And Gold joined in on Silver’s new found love, and closed the week at @$1,728, and was as high as $1.740 at one point in the day… To me, folks, I see $1,750, as the level that the will finally break out of the back and forth around $1,700… I see Gold reaching $1750 and then flying higher, and leaving the $1,700 level in its rear view mirror!

Of course I could be wrong… it’s just my opinion…. In the old EverBank days, no matter what I said, I had to say, “it’s my opinion, and I could be wrong”… Man I’m I glad that I don’t have to say that all the time now, as I used to tell them… “Come on, these are all adults reading this letter, and they know it’s my opinion and they don’t need be to remind of them of that”, but that fell on deaf ears… Basically the folks in Jacksonville thought I was a loony toons, and that I made stuff up, and thought that I shot from the hip… But as longtime readers you know better, right? I really disliked being treated or thought of like that… if they had ever stayed at my side for a day they would know of all the conversations I had with traders, and the amount of reading I did… But no one ever bothered… it was far easier to just call and label me with names… And that’s all I have to say about that!

OK, I’m back now… Thanks to my good friend, Frank Trotter, for standing up for me all those years… And in this corner… HA!

The stock jockeys keep pushing the stock market higher, on the thoughts that everying is going to be just hunky dory… In my opinion they are going to get their you know what’s handed to them when the bears finally get control of this market….

Regarding the stock market… My publishers, Mary Anne and Pamela Aden, had this to say in their Aden Forecast on Thursday last week, so let’s listen in… “The stock market is surging. The general feeling is that the worst is over and the health and economic situations are going to improve from here. And while that may prove to be true, we’re not that optimistic.

In times like this, it’s best to stand back and look at the big picture in perspective…

Most important, the overall situation remains uncertain and unprecedented. We’re in uncharted territory and this alone means we have to stay cautious. No one knows what’s going to happen next, but we can make some assumptions…”

Chuck again… I love the Aden sisters, and their Aden forecast, which you can find at www.adenforecast.com where you can subscribe to their letter!

OK… This is what I was going to talk about last week, but ran out of time…. I’m really worried about the status of the petro-dollar… Besides all the debt, and Fed shenanigans, and the yellow-bellied leaders, weighing on the dollar, now there is this potential risk out there that the petro-dollar may be nearing an end… For those of you not familiar with how the dollar became the petro-dollar, let me take you back to the early 70’s, and Nixon had just removed the Gold backing from the dollar, and the dollar was sinking like a rock… Nixon sent Henry Kissinger to Saudi Arabia to broker a deal… Basically, it went like this: You promise to price all Oil sales in dollars, and we promise to protect you, militarily. And take a percentage of your profits and buy U.S. Treasuries….

That’s the history in a nutshell, and now let’s fast forward to today… 1. The U.S. doesn’t need Saudi oil any longer.. 2. The Saudis aren’t happy about that, and have made them look elsewhere for the love they used to receive from the U.S. 3. Enter China…. Now, remember back in 2009, when I first told you about the currency swap agreements that China was signing with everyone? And in my presentations I would say, “And when the Oil Producing Countries sign a currency swap agreement with China, that will signal the end of the dollar’s reserve status….

Well, guess what’s going on? China is taking steps to take the dollar away from Oil sales, and replace it with renminbi or yuan (their both the same). Shoot Rudy, they could be in the midst of getting this done as I write! This would throw the whole shootin’ match in the trash, folks… .the chaos would be frightening! I’m reminded of this line: Hell hath no fury like a woman scorned. And Saudi Arabia would be the woman scorned here…. Will the Saudis do something to upset the applecart? No one knows the answer to that… but the Saudis sure do sound like they are quite upset….

I had a dear reader ask me to give some highlights from the book I’m reading, by Peter Zeihan, Dis United Nations…. Well, in a nutshell, he believes that the U.S. also brokered a “new Order” deal that would protect every country safe passages through the open seas, and that now that “new Order” may be teetering… Trump has made it clear that he’s all about America First… And I’m all about that, but at what cost? Putting shipments from China to the U.S. at risk? Or How about shipments of pharmaceuticals from Singapore at risk? That’s as far as I’ve gotten, so more later, but that’s enough to make you feel leery about the future, eh?

The news this morning is that China, in retaliation for Trump’s comments on Hong Kong, have refused ships with cargo from the U.S….  I’m really concerned about this, as if you recall when the Trade Agreement Phase 1 was first announced, I said then that there are no guarantees that China will honor this agreement, and there’s nothing we can do about it… And here we are… Hmmmm….. 

The Data Cupboard at the end of last week was quite busy… First of all we had the 1st QTR GDP 2nd revision, and it got worse moving to -5.0% (from -4.8%) And let me remind you that the 1st QTR only had 1 week fo shutdown… So, things were already going south before the pandemic… Then we had Durable and Capital Goods Orders… the Durables were negative -17.2% for April, and the CAPEX was negative -5.8%… Personal Income was up +10.5%, but that was all those government checks going out… And Personal Spending was negative -13.6%…

So, it appears to me that consumers are back to saving once again like they did after the 2007-08 financial meltdown. Of course that didn’t last too long as U. S. consumers are born to spend… But for now, it appears that savings rates are higher… That’s good for the consumer, but bad for the economy, folks… The U.S. economy is centered on Consumption/ consumer spending… And without it… Well, things don’t look so good for the corporations that the stock jockeys are buying up their stocks, and it won’t bode well for the economy and the Fed’s wishes for rising inflation… no major spending, means deflation will remain with us for now… 

This is when the Fed looks to go negative with interest rates in an effort to get consumers to spend… And when that doesn’t happen… Well, I gave you the playbook a couple of weeks ago…

OK… One more thought before we head to the Big Finish…  Get your calculators out and follow along with me…. HA!   Well, last Thursday we had the Weekly Jobless claims for the week ending 5/16… Last month I learned that the BLS cuts off each month in the middle of the month… So… I said, don’t try and fool me, with these shenanigans…. So, I did my figures from 4/15 to 5/16…. And that total of unemployment claims was 13,000.262 Million… then add the previous month from 3/21 to 4/15, (20,108, 957 Million) and you get the total of unemployment claims during the pandemic, and that total is… drum roll please…. 33,118,219, Million…. Now divide that number by the total American workers 120,000,000  Million and you get a 27% Unemployment Rate…. The BLS will print their 4/15 to 5/16 jobs report this Friday, Do you want to bet me that their number isn’t anywhere close to my number?

And did you know that there is a different total that’s being reported these days? It’s called the NSA version, which is “non-seasonally adjusted” and the difference between the two is significant, with the NSA version much higher each week… But the official number is the seasonally adjusted number. Now doesn’t that just make you want to go yell at a wall? Why, in this country, can we NOT, deal with any kind of data without adding hedonic adjustments? This just gets me so riled up, I can’t speak… so, let me calm down and I’ll be back in a minute….

The Jeopardy Final music plays…. And… OK, I’m back! 

To recap… the currencies continue to inch higher with the euro now trading with a 1.11 handle, Norwegian krone sinking deeper into the 9 handle, and Silver trading above $18! The economic data last week was just awful…  I have a quick comment from my publishers The Aden sisters, and China seems to be reneging on the Trade Agreement, just like Chuck feared they would do when the Agreement was signed… 

For What It’s Worth…  While we’re still revising 1st QTR GDP numbers, the folks at the Fed Atlanta, are busy forecasting the current QTR, and that’s what I have for you today, in the FWIW section… You’re going to be shocked when you see what the Fed Atlanta says GPD will fall to in the 2nd QTR, and you can find it here: https://www.zerohedge.com/markets/atlanta-fed-now-sees-q2-gdp-collapsing-staggering-51

Or, here’s your snippet: “Two months ago, St. Louis Fed president James Bullard triggered a market plunge when he predicted that unemployment may soar to 30% and GDP plunge by an unprecedented 50%, vastly eclipsing the collapse observed during the Great Depression.

Sure enough, moments ago the Atlanta Fed’s closely followed GDPNow tracker confirmed this worst case scenario, when the latest model estimate for real GDP growth in the second quarter of 2020 crashed to -51.2% on May 29, down from -40.4% on May 28, which would be the biggest drop on record.

How did the U.S. just lose 10% (annualized) in GDP growth in 1 day? Here is the explanation:

“After this morning’s Advance Economic Indicators report from the U.S. Census Bureau and personal income and outlays release from the U.S. Bureau of Economic Analysis, the nowcast of second-quarter real personal consumption expenditures growth decreased from -43.3 percent to -56.5 percent and the nowcast of the contribution of change in real net exports to second-quarter real GDP growth decreased from 2.07 percentage points to 0.73 percentage points.”

Chuck again…  But don’t worry about that very deep hole the economy will have fallen into, because as soon as we open the economy fully, all will be wine and roses, right?  NOT!  I don’t see it that way, not one iota of evidence has come across my desk that makes me think otherwise! 

Prices today 6/1/20: American Style: A$ .6735, kiwi .6234, C$ .7295, euro 1.1111, sterling 1.2386, Swiss 1.0403, European Style:   rand 17.4570, krone 9.6993, SEK 9.4212, forint 310.41, zloty 3.9792,  koruna 24.1845, RUB 70.13 , yen 107.75, sing 1.4095, HKD 7.7511, INR 75.16, China 7.1363, peso 22.02, BRL 5.3361, Dollar Index 98.16,  Oil $35.36,   10-year .66%, Silver $18.12, Platinum $844.35, Palladium $1,956.95, and Gold… $1,732.29

That’s it for today… Quite a few things to think about today, as we start the week and month of June…. And there will be more as the days go by… Hey! I heard that a Money Market fund is waiving their fees, so that the depositors aren’t seeing their balances go down, since there’s no interest to be added….  A brief sight of things to come….  Little Evie came to see me yesterday, with her big brother Braden… I was talking on the phone with my longtime good friend, Mike, and he asked me if the grandkids still called me General, and I said, yes, but this little girl is going to be able to call me whatever she wants!  So… Happy Birthday, Jerry! I hope your day is grand! Neil Young takes us to the finish line today with his song: The Needle and the Damage… I used to play this song, but I don’t think I remember how any longer! UGH! I hope you have a Marvelous Monday, and please remember to Be Good To Yourself!   

Chuck Butler

 

 

The Fed Begins Its Illegal Corporate Bond Buying…

May 28, 2020

* The dollar bugs fight back on Wednesday… 

* Gold fights back to recover early Wednesday loss… 

Good day… And a Tub Thumpin’ Thursday to you! In case you were ever wondering… Tub Thumpin’ is the title of a song by Chumbawamba… It was around in the 90’s, and I liked it! So, there you go! The song had some words that I think apply to me…. I get knocked down, but I get up again, nothing’s gonna keep me down…. I did get to sit outside late yesterday afternoon, after the morning rain finally ended. This new book, by Peter Zeihan, DisUnited Nations… I’m telling you this now, so you’ll listen to me later, I’m loving this book so far! And the writer is just laying the groundwork, if you will, for the rest of the book… I’m greeted this morning with Chris Gaffney’s fave song: It’s a song by Styx, titled: Come Sail Away….

Many of you know Chris Gaffney, he took over the World Markets Desk when they showed me the door to the pasture. Chris & I worked together off an on going back to 1992… And Chris is now attending Conferences and speaking at them, so you know who I’m talking about. I didn’t want to just drop a name on you, and leave you hanging!

OK… Well, the currencies’ daily inching higher VS the dollar, came to an end yesterday, as the dollar bugs fought back, but the move backward was as small as the moves forward had been on a daily basis…. And Gold investors finally fought back and turned that early morning drop of $11, into a very small drop and close back above $1,700 at $1,709.  I told you I had been listening to the podcasts of Grant Williams and all his different guests for two weeks now, and none of them have an answer, other than the one I’ve been talking about, for Gold’s lackluster performance in this time of questionable unknowns!

And of course the one I’ve been talking about is that U.S. investors see no need for a safe haven right now the Fed has stepped in, and provided liquidity, and rate cuts, and a general feeling among investors that the Fed has their back, so let’s go hog wild on stocks! As a regular reader, you know that my feeling on this is hogwash! And I truly believe that this stock rally is a bear trap, and when the backside of the hurricane comes onshore…. There will be crocodile tears…. But not by me!

The Folks at Wallstreetonparade.com, Russ and Pam Martens, had yet another good piece on the Fed yesterday…. I wanna be like the Martens when I grow up! Seriously, these people step into the batter’s box, swinging a BIG Stick, and swing for the fences! Yesterday, they were talking about the Fed’s announcement that they will be buying Corp bonds, and Corp bond ETFs… As I told my friend, Dennis Miller, “Yes, it’s illegal…. I’ve pointed that out a few times since the announcement that they would be doing this last month…. It burns my britches as they used to say, back in the day when the rule of law meant something… Of course if I were to go out and do something unlawful, and claim I was going to help feed the poor, I would still go to jail…. But not the Fed…. And Congress is too yellow to do anything about it….

And yes, taxpayers are on the hook for any losses you can bet your sweet bippie on that one! “

And the folks at Blackrock get to do all the actual buying, so their profit margins are going higher by the minute! The folks at Wallstreetonparade.com did mention that Blackrock is going to be able to buy their own bonds, and pass them off to the Fed…. Now that sure does sweeten the pot for Blackrock, now doesn’t it? They made commissions when they sold them, and now they’ll make commissions when they buy them back, but won’t have to own them! I can hear the folks at Blackrock singing to the Fed…. How Sweet It Is To Be Loved By You!

I’m about as ticked off about something the Fed has done as I’ve ever been folks…. So forgive me if I sound a little cynical or sarcastic, or just plain ticked off!

Why are members of Congress turning a deaf ear on the complaining about how buying Corp bonds is illegal for the Fed? Because they are too soft hearted, and they might get their feelings hurt, if they spoke up and then someone across the aisle accused them of wanting to kill his grandma….

It’s a shame the way the U.S. was hit by a pandemic, and our elected leaders can’t work together for solutions without name calling and grandstanding! Our republic, ahem, I mean our Empire, is being led down an alley that’s dark and dangerous, and all we’ve got are some yellow-bellied, too afraid of getting their feelings hurt, leaders…. Oh Brother, is this a real problem or what!

OK, Chuck, settle down… you’re only half way through the letter and you’ve gotten yourself really worked up!

So… did you hear the news that a Japanese Bank announced that they are leaving the CLO market, of risky U.S. investments after taking a $3.7 Billion loss in those securities… That’s right I said Billion, with a capital B…. here’s Wiki’s explanation of what a CLO is: A collateralized loan obligation (CLO) is a single security backed by a pool of debt. Often these are corporate loans that have a low credit rating or leveraged buyouts made by a private equity firm to take a controlling interest in an existing company.

Man, I would hate to be the guy at that Japanese Bank that had to go into the boss’ office and tell him he just lost in dollar terms, $3.7 Billion…. I can’t even work the number to how much yen that is! HA! I would imagine that the boss told the employee that he would have to “fall on a sword”… YIKES!

In my daily spin through Twitter I found this quite interesting. It was a Tweet by Dan Hedl, (to give him credit!) and it goes like this: The game “Monopoly” sold for $2 in 1935. In the box, you got monopoly money. That original stack of monopoly money from 1935 is worth $50 as a collectors item. Monopoly money literally holds more value than your fiat currency.”

I’ve always kidded about how the Fed was trying its darndest to make our dollars, Monopoly Money…. But here I am again talking about the Fed…. There’s just no getting away from them and their box of rocks ideas…

Yesterday, St. Louis Fed President, James Bullard, spoke, and he too said that the Fed’s Balance Sheet would be quickly unwound once the Pandemic was over…. And once again, I’ll say that I’m going to call him on that, and say it will take more than 7 years to unwind…. I’m just saying…

Well, like I told you yesterday, China continues to weaken their currency, and much like last year when it appeared to be going to 8, but along came the trade agreement negotiations, and the Chinese decided to give the renminbi some curb appeal…. But that’s all over now, and the Peoples Bank of China (PBOC) is back to daily weakenings of the value….

And have you been following what’s going on in Hong Kong? I’m going to say that I have always thought that China would only allow Hong Kong to remain autonomous as long as they didn’t cause trouble…. Well, trouble has been a real problem, and now China has stripped Hong Kong of its autonomy…. I would think that the next move for the Chinese is to take away the honker (Hong Kong dollar) and replace it with the renminbi…. That would be quite radical folks, but nothing surprises me any longer with China….

You know I used to come home from school and tell my dad about how we had to crawl under our desks in our prep for a nuclear war…. My dad used to tell me not to worry about a nuclear war with the Soviets…. That his eye was on the sleeping giant, China… He would tell me that if the sleeping giant was ever to awake, that the whole world would end up knowing about it…

My dad was one of the smartest people I encountered through my years, and he only had a high school education. But being raised on a Farm, and learning about money, economics, trends and all kinds of things, prepared him well for his adult life…

OK… enough reminiscing…. You know what? I’m going to go off the tracks here and talk about something that the discussion of China had my mind going around and around…. No wait… I had better save that for a day when I start with it and see how long the discussion goes! So, you’ll have to wait…. But that should keep you coming back! I learned one thing in my days of playing in the band, and traveling around the U.S. and that is…. Always leave the audience…. Wanting….

The price of Oil found that it wasn’t on terra firma, and instead slipped lower from earlier this week. It seems that there was this AHA moment when it was discovered that the U.S. has HUGE stockpiles of supply, and that my friends is the reason why the price of Oil has slipped lower this week.  

But the Petrol Currencies are still benefitting from the price of Oil’s recent rise… Hey! when the Mexican peso can rally on Oil news, then you know it’s all good for the likes of rubles, krone, loonies, and real…. 

The U.S. Data Cupboard didn’t have much for us yesterday, except two Fed Head speeches (Bullard and Williams) and the Fed’s Beige Book, which gathers the heartbeat of each of the regions… And in it the overall theme of this month’s Beige Book was that Business Leaders Are Pessimistic About The Pace Of The Recovery…  Really? I guess these guys and with their cupboards filled with their stock buybacks, were of the opinion that the recover would be quick, and swift.. And why not? Didn’t the Fed tell us that’s how it would be in the beginning? Well, don’t feel sorry for the Business Leaders, they’ll make Millions either way the cookie crumbles…. 

Today’s Data Cupboard has a few important pieces of data to print, starting with the Weekly Jobless Claims, for last week, and that will be followed up with the April prints of Durable and Capital Goods Orders, you may recall that even the March prints were already negative, the April prints here should be very ugly….  Then the second estimate of 1st QTR GDP, which originally printed at negative -4.8%, and that quarter only had 1 week of shutdown, the 2nd QTR GDP will be really negative, and have a long way to go to dig itself out of that mess….   I’m just saying… 

To recap… The currencies’ daily inching higher VS the dollar came to a stop yesterday, but the move backwards was as small and the moves upward had been… Gold fought back and turned around the early morning loss to end the day basically flat, but is up $11 in the early morning trading today. China is flexing its muscles, folks… beware…  And Fed St. Louis President, Bullard, has gone to the dark side….  

For What It’s Worth…  OK, this is an interesting story about how a major amount of Gold was found in Poland, that was formerly the property of the Nazi’s….  I thank the GATA folks for sending me this article, because I found it to be so interesting, and it can be found here: https://www.dailymail.co.uk/news/article-8361037/28-tonnes-Nazi-gold-hidden-palace-Poland.html

Or, here’s your snippet: “

Twenty eight tonnes of Nazi gold worth more than £1 billion may have been traced to the grounds of a palace in Poland after the location was mentioned in an SS diary.

The stash of gold bars, jewellery and coins is believed to be sitting 200 ft. down at the bottom of a destroyed well shaft in the grounds of the Hochberg Palace, near the city of Wroclaw.

Researchers from the Polish-German Silesian Bridge Foundation, who claim to have acquired the diary from a masonic lodge, say the treasure was buried in the final days of the Second World War along with the corpses of several witnesses.

The treasure is said to include deposits from the Reichsbank in what was then the German city of Breslau but is now Wroclaw.

It is also said to include valuables from wealthy locals who handed them over to SS soldiers in the region for safekeeping as the Red Army advanced in 1945.”

Chuck again….  Ed Steer said he saw this coming out as an Indiana Jones type movie…. And the best line was from the GATA folks who said: “Nazi gold said buried near palace in Poland — will LBMA hypothecate it by Friday?  Ok, you’ve got to admit that’s funny!  but sad… funny, but sad… 

Prices for May 28, 2020: American Style: A$.6626, kiwi .6198, C$ .7270, euro 1.1017, sterling 1.2265, Swiss $1.0312, European Style: rand 17.4067, krone 9.8552, SEK 9.5798, forint 317.35, zloty 4.0129,   koruna 24.5062, RUB 70.93, yen 107.72, sing 1.4184, HKD 7.7529, INR 75.29, China 7.1591, peso 22.27, BRL 5.3174, Dollar Index 98.98,  Oil $32.47,    10-year .68%, Silver $17.34, Platinum $841.24, Palladium $1,950.32, and Gold… $1,723.64

That’s it for today…  A couple of years ago a posse of friends went to a gathering of sports writers for a question and answer session with them. I got to catch up with a guy that I grew up with, and played high school sports against, and a good time was had by all… Well, because of the Pandemic, they can’t do that again, so last night they had a Zoom with the sports writers in town… It was interesting but not as much fun as the previous set up…   OK… got to get going this morning, for blood work at one hospital and a dressing change at another hospital… That’ll amount to the most driving I’ve done since I drove back from Florida at the end of March! The Charlie Daniels Band takes us to the finish line today with their song: The Devil Went Down To Georgia…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and well continue to Be Good To Yourself!  

Chuck Butler