Waiting To Hear About The Stimulus Package…

March 23, 2020 

* Dollar bugs continue to hold the conn… 

* Chuck’s spider sense is tingling…. 

Good Day… And a Marvelous Monday to you… Yes, I’m still here, writing to you from S. Florida, where we haven’t seen anything other than sunny, blue skies with temps in the 80’s for 10 days, and the forecast for the next 10 days, doesn’t change! Unfortunately, I may be going home sooner than I had planned (April 4). My wife is very concerned about me and my health right now and wants to get me home asap…. I’m fighting her tooth and nail, to remain here where the sun is raining down on us daily… But, I see her logic, as I don’t really have any doctors down here, other than the wound center doctor, and if I were to get sick with this virus, it would be better for me at home…. Neil Young and Crazy Horse greets me this morning with their song from the live at Filmore East album: Cowgirl In The Sand… On a sidebar I was singing this song to my darling granddaughter, Delaney Grace, last week, and she just gave me one of those, “ General, did you know you were singing out loud , looks”….

Another day, another dollar rally last Friday, and this morning the euro is trading with a 1.07 handle, barely that is, it hasn’t been this low since the days when it was going upward! The Dollar Index is trading with a 102 handle, and is looking like it will test the highs on the dollar index that were created during the last strong dollar trend, at 111! And in the 80’s during the strong dollar trend then, the Dollar Index climbed to 126! So… what I’m telling you folks, is that we could very well see this play out to those previous level, which if it did, would take the euro below parity to the dollar, something it hasn’t done in 20 years….

Has anyone that’s been buying dollars seen the Fed’s Balance Sheet lately? Remember the one everyone fretted about when it was $4.5 Trillion? Well, don’t look now but the Fed’s Balance Sheet is 4.67 Trillion, and the Fed just got started on buying bonds last week!

So everyone is on pins and needles this morning waiting for the announcements from Central Banks around the world, including the Fed, and their respective gov’t’s, regarding their plans to combat each country’s economy shutting down to combat the COVID-19 virus. What’s it gonna be boys?   I’ll tell you right here, right now, that my spider sense is tingling, and we could very well see, in the next days to week, an announcement of a coordinated currency intervention, ala the Plaza Accord from 1985…  

You see, the dollar’s strength right now is not a good thing for the countries of the world, and that’s a discussion for another day… but just be good with the idea that countries around the world are suffering greatly, with their respective economies in the dumps and the dollar soaring….  I’m just saying…  

So, have you heard the news about the senators that sold stock right after being briefed on the Coronavirus, and therefore got out when the getting was good? That news just makes me madder than a wet hen, folks! The senators were being asked to step down… Step down? Shoot Rudy, in my book that’s what called “insider trading”, and they should be being fitted for an orange jumpsuit right now!  But we all know that won’t happen in today’s world….  Just for grins I Googled Senators and Representatives that were sent to jail…. And the list is very, very long!   But that was back in the day, before the swamp got so deep! 

Last week I left you with my scratching my balding head over the rise in bond yields, when it looked for all intents and purposes that those yields would continue to drop, with a the flight to safety…. Well, scratch no more…. It didn’t take me long after hitting send on Wednesday, to figure out what’s going on…. I had a head slap V-8 moment! OUCH! (I slapped too hard!) Remember when I used to tell you all that the only way to get on top of all the debt the U.S. was accumulating, was to inflate the debt away? So, all I had to do was go back in time, and think about what I was saying back in the day… You know long before we hit $23 Trillion in National Debt, with our country’s contribution to the Debt pile most likely being over $2 Trillion this year, given the costs of the Covid-19 virus stimulation. So, first we’re going to go down the deflation rabbit hole, of which we’ve been in for some time now, and next, we’ll see inflation spiraling higher….

Why do I think that? Because that’s what it has to be! The Fed is going to be printing dollars at break-neck pace going forward, and while inflation (according to the gov’t, but proven otherwise by the folks at the Chapwood group) has stayed in control, this will be more than we’ve ever seen before, folks… Shoot Rudy… Former Fed Chairs, Big Ben Bernanke and Janet Yellen both sent an oped to the NYT last week calling for the Fed to begin to buy Corporate debt, and stocks….

OK, it’s against the law for the Fed to begin those projects without Congressional approval… But what’s going to stop them from asking for that? And what’s going to stop the lawmakers from saying NO!? Nothing, absolutely nothing, say it again!

In other news, I’m going to lay this off to the folks at Wall Street On Parade… Who had this to say, “The Federal Reserve Board of Governors announced at 6 P.M. last evening that it is following the direction of Steve Mnuchin, the former foreclosure king who now serves as U.S. Treasury Secretary, and authorizing the reinstatement of a hideously operated, multi-trillion dollar bailout program for Wall Street’s trading houses known as the Primary Dealer Credit Facility (PDCF). Veterans on Wall Street think of it as the cash-for-trash facility, where Wall Street’s toxic waste from a decade of irresponsible trading and lending, will be purged from the balance sheets of the Wall Street firms and handed over to the balance sheet of the Federal Reserve – just as it was during the last financial crisis on Wall Street.” – Wallstreetonparade.com 

Cash-for-Trash Oh boy, I can’t wait for my Central Bank to begin this program! I think you should call your representative and tell him/ her, that you do NOT approve of this program! And then be prepared for a list of B.S. from your lawmaker!

I also like this passage from the folks at wallstreetonparade.com, “Only in some alternative universe from hell that exists in the likes of the brains of Lloyd Blankfein (the former CEO of Goldman Sachs who famously said he thought he was doing “God’s work”) could funneling $5.7 trillion to Citigroup, Morgan Stanley and Merrill Lynch be construed as helping American workers and businesses. During the financial crisis Citigroup was foreclosing on families using an alias and illegally holding homes off the market; Merrill Lynch, a retail brokerage firm and investment bank, was such a basket case that it had to be taken over by Bank of America; and Morgan Stanley was leveraged 40 to 1 “meaning for every $40 in assets, there was only $1 in capital to cover losses. Less than a 3% drop in asset values could wipe out a firm,” according to the Financial Crisis Inquiry Commission report that investigated the crash for Congress.”

 Chuck Again… Yes, and only in some alternative universe from hell could the U.S. be handing over the reins of the watchdog to the Fed NY, once again…. I shudder from this news, folks… I really do… I feel for our kids and grandkids more than ever before, and longtime readers know that I’ve been shuddering for them for years as the debt grew and grew and grew!

The U.S. Data Cupboard last week had some very disheartening data. Last week I told you about how the Empire region (manufacturing index) had fallen out of bed, and then to follow that regional up, the Philly Index also saw a HUGE drop to -12.7 from 36.7! And then Leading Indicators for February, which was before the COVID-19 breakout here in the U.S., dropped from .7 to just .1%…. Obviously, things were looking pretty shaky to the boys and girls that compile this data before the virus breakout!

The U.S. Data Cupboard this week will have a couple of real economic prints to look at as we go through the week starting Wednesday with Industrial Production….  

Get this! Goldman’s Jan Hatzius now sees 2Q US GDP decline of -24% but then two large GDP gains in Q3 and Q4. They now see: qtr-on-qtr annualized growth rates —

Q1: -6% —

Q2: -24% —

Q3: +12% and —

Q4: +10%

So full-yr growth at -3.8% annual avg, -3.1% on Q4/Q4.”

I’m going to go out on a limb right here, right now, and say there’s no way the economy will turn around that fast in the 3rd QTR…. Restaurants and bars might not ever be able to rebound, in my opinion! So, don’t get all loopy with this forecast of 12% 3rd QTR Growth, folks… I’m not buying it!

I do understand economics folks…. It’s been my bag for a long time, and in saying that I want you to feel comfortable with the idea that I fully understand that once this virus gets burned out, the inventories will have to be restocked, and that will created some strong economic winds, but I’m afraid that they won’t be as strong as they would normally be, because of….  All the debt that was created to combat this virus’s effect on the economy… 

This debt creation is going to be the biggest we’ve ever seen in the U.S. folks… Inflation will finally take off to higher ground, and Commodities will recover…. But that will take awhile to work itself through, so batten down the hatches, and hold on… 

Gold finally had a good day on Friday, climbing $27 back to $1,500 but it’s down $5 in the early trading today, so it looks as if this was a one and done for Gold…   So, how many of you were paying attention when I mentioned above that Commodities will recover?   I’m of the opinion that the inflation spriraling higher will be the catalyst for Gold to soar higher once again, just like it did in 2009, when the first round of QE was announced…  

To recap….  The dollar continued to kick sand in the face of the currencies, and it’s beginning to look very, very ugly out there for the currencies, which has Chuck thinking that we could be seeing some sort of coordinated currency intervention ala the Plaza Accord in 1985… We’ll have to wait-n-see….   Chuck is all upset about what’s going on with the casino banks, which will have their old friend, Fed NY, watching them once again…. UGH!   

For What It’s Worth….  Well there’s more bad news for the U.S. economy folks, get ready for this one, it’s an article about bonds in distress increasing and it can be found here: https://www.zerohedge.com/markets/distressed-debt-us-doubles-2-weeks-500bn-bofa-expects-surge-defaults

Or, here’s your snippet: “Last week, in the aftermath of the historic oil price collapse, we warned that the long-awaited “fallen angel” day has arrived, as $140 billion in oil producer (and up to $360 if one includes the mid-stream companies) investment grade debt was on the verge of being downgraded to junk and throwing the entire high yield market in turmoil.
Fast forward to today when Bloomberg calculates that since we published out article, the amount of distressed debt – a term that describes borrowings likely to default – in the U.S. alone has doubled to a half-trillion dollars as the collapse of oil prices and the fallout from the coronavirus shutters entire industries.

While rating agencies have been slow to respond to the total collapse in cash flow generation across most US industries as long as the US economy remains paralyzed due to the spreading lock downs across the nation, markets have been far faster, and the result has been a plunge in the price of countless bonds. As a result, corporate bonds – which according to BofA are no longer properly functioning – that yield at least 10% points above Treasuries, as well as loans that trade for less than 80 cents on the dollar, have swelled to $533 billion. This is more than double from the March 6 total of only $214 billion. And, according to UBS, if one adds across all company debt globally, including loans to small- and mid-sized companies that rarely if ever trade, the distressed pile could top $1 trillion.

And yes, that number is only going to surge.

An analysis via Trace shows that the amount of distressed bonds has surged to the highest level since the financial crisis, surpassing the oil/manufacturing recession of 2016.”

Chuck again….  Corporate debt problems, distressed bond problems, where does a person that wants some return on their money go?  I bet you all know how I would answer that question….  

Currencies today 3/23/20 American style: A$ .5735, kiwi .5630, C$ .6903, euro 1.0700, sterling 1.1568, Swiss $1.0134, European Style: rand 17.7510, krone 11.6107, SEK 10.4344, forint 329.43, zloty 4.2819,    koruna 25.8348, RUB 79.94, yen 110.60, sing 1.4634, HKD 7.7556,  INR 76.18, China 7.0948, peso 24.94, BRL 5.0613, Dollar Index 102.58,   Oil $22.34,   10-year .81%, Silver $12.59, Platinum $621.84, Palladium $1,625.61, and Gold…. $1,494.60

That’s it for today…. Well, yesterday was the absolute most beautiful day I’ve ever experienced down here… I sat outside on our deck reading a book for over 3 hours. It’s very eerie down here, as there is no one on the beach, no one in the ocean… It’s very quiet, and peaceful…   I just watched the sun rise up out of the ocean…. It appears to be another day today like yesterday…  My grandkids went home on Saturday… Yesterday, had to be the most subdued Birthday I’ve ever had…  But, I need to get this out the door and get on down the road… I had my Apligraph on Thursday, and today they will see how it worked….  Chicago takes us to the finish line today with their song: Stay The Night….  I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler

 

 

 

 

Even Bonds Get Sold Yesterday!

March 18, 2020

* No reserve ratio required at banks any longer…. 

* Gold continues to get manipulated in price… 

Good Day… And a Wonderful Wednesday to you… I hope that everyone is staying healthy, washing their hands all the time, and keeping distance from other people that you don’t know. Everything is closing around us, as I told you yesterday, we even have a curfew down here in S. Florida! But that didn’t keep me from sitting out on my balcony with my Bose wireless speaker blasting Sirius XM 60’s on 6 last night until everyone else went to bed! I know the words to most of those 60’s songs, and I sing along at the top of my lungs to them! I’m sure the other condo occupants were wondering what sick cat was singing last night, but I don’t care! It was a great St. Patrick’s Day for yours truly, more on that at the end today, but first, The Doobie Brothers greet me this morning with my fave song from them: South City Midnight Lady…

OK… I know I sound like a broken record (on a sidebar I’m glad vinyl records have made a comeback so I no longer have to explain that comment to youngsters!) when I tell you that the dollar bugs continue to kick sand in the faces of the currencies, with the difference yesterday being in the pricing of Gold, which found a bid, and kept it all day, with some interference from the price manipulators…

Gold was able to push higher on the day for the first time in a week, after experiencing its worst week in over 4 decades, last week… OUCH! That really hurt me! Come on price manipulators tell me your sorry! Come on, tell me your sorry or I’ll tell your moms! HA!

Well at least for one day, the sale on the price of Gold was over…. However, this morning’s early trading as Gold down $27!   OUCH!  OK, I said above “some interference by the price manipulators”…. Gold has reached $1,554, at one point yesterday, but then was only able to close at $1,527….  I just find this price manipulation so frustrating, but at the same time giving buyers who had procrastinated buying Gold or Silver the opportunity to buy where they should have bought previously!

We began this week with talk about stimulus plan for individuals here in the U.S…. And yesterday it was announced… $1,000 checks being mailed our beginning next week to tax payers…  Wait! What?   What numbskull thought that one up? The same guy that thought up the tax rebates during the last administration?  As if a $1,000 check is going to stop this global recession that’s raging right now!  I have an opinion on the global recession in today’s FWIW section that was sent to me by my friends at GATA… So, don’t miss it!  

 It was brought to my attention yesterday, and how I missed this, I have no idea, but I did, and that was that when the Fed slashed rates to near zero on Sunday, and announced a new $700 Billion bond buying program that’s not called QE, they also… and get ready for this one folks…. The Fed also lowered the reserve ratio for nearly all banks to zero! Banks don’t have to hold reserves any longer! OK, so how many of you have seen the movie: “It’s A Wonderful Life”? Remember the scene when the town folk all ran to the savings and loan and demanded their money? Well, if it hadn’t been a good sales job by George Bailey, they would bankrupted the S&L… When interest rates in this country go negative, will there be a run on deposits at banks to get money out before it begins to get charged for being there? You bet there will! And Banks won’t have reserves to fall back on any longer…. So… just stop and think about this no reserve ratio at banks any longer plan…. And then tell me this doesn’t all end up in tears?

And that brings me to Gold & Silver…. I had a couple of readers send me notes telling me their local metals dealers had seen their supply go to zero…. So I asked my metals guru, Tim Smith @1-800-926-4922, if he was seeing the same thing… And his answer was yes, supply is thin, for coins and bars, right now, and instead he’s seeing a ton of activity in non-allocated or pooled Gold & Silver…. This product has always, in my humble opinion, been the best and most affordable way to own physical Gold & Silver…. You basically pay about 1% over the spot price of your metal, and it’s bought in your name and held with other owners’ purchases. It’s held free of safekeeping charges, and you have it just like it’s in your bank safe deposit… Should you want to sell it, it’s liquid, and can be sold on any day that the market is open, and if you decide at some point in the future that you want to hold your Gold in the form of coins and bars, you simply call up Tim and tell him to start the process of getting your coins and bars to you…

At this point you’ll have to pay the minting charges, and delivery charges, but you don’t have to rebuy the Gold or Silver! And these minting and delivery charges would have been added to your original price IF you had opted for coins or bars when you first bought your Gold or Silver… And remember, this is important, that any time you buy or sell, there’s a mark up or down of about 1%….  

So, this public service announcement has been brought to you free of charge…. I don’t receive a wooden nickel for sharing this info with you…. Not from you, not from Tim’s company, not from the dealer, not from anyone!

In other markets… stock futures are down limit again this morning…  The price of Oil has dropped by a large margin again, down to a $25 handle, and looking like it’s heading to $15….  And Bonds… hmmm…  there had to be some profit taking in bonds, for the yields rose yesterday… The 10-year’s yield is back above 1%… (remember with bonds, as yield rises the bond price goes down, and vice versa) This bond market has me wondering what the heck is going on here? 

Well, are you all staying healthy, and keeping inside? I don’t stay inside, I love to be outside, even more down here when the days warm to 80, with the sun shining and a sea breeze blowing to keep you comfortable… The beaches here are pretty barren, but still in use… My wife, our daughter, and my wife’s sister, could sit on that beach for hours and good for them for doing so! I go out in the early morning on the deck and take my cap off and allow me to soak up plenty of Vitamin D from the sun, but before it gets too high in the sky to make that sit uncomfortable!

So, it looks to me like the POTUS has gotten his wish that the U.S. lowered their rates like the rest of the world… But a wise man, (my dad!) once told me to be careful what you wished for… In another thought, I was thinking what all this going on could be the end of the debt cycle here in the U.S. As we’ve been piling on debt ever since Nixon took us off the Gold standard in August of 1971…

Speaking of which, where you aware at the time what Nixon was doing? I wasn’t, as I was in high school, and only came to find out what this move to take us off the Gold standard meant, when I  began to study economics… I’ve told you all before how I learned a lot of my economic principles from the great economist Hyman Minsky… In 1981 he told me that “one day, the U.S. would rue the day they went off the Gold Standard” … I thought at the time that he was just longing for the good old days, but after a few years I realized what he was saying….

Speaking of Minsky, could this Covid-19 virus be akin to a Minsky Moment?

And with that thought, we’ll head to the Big Finish! 

The U.S. Data Cupboard had a couple of surprises for yesterday, and two of the three major economic prints were reversed as to how I expected them to print… Retail Sales for Feb. collapsed… instead of being just OK, as I had thought… And Industrial Production was up and not negative as I thought it would be… I know, I know, head scratching time, eh?  Capacity Utilization was weaker as I thought it would be, but not by much…  But like I said yesterday, this is all a picture of what was going on before the COVID-19 virus hit our shores…. This month’s data will be very interesting….

The Big Thing that was scheduled for today’s Data Cupboard was the FOMC Meeting adjornment and rate decision…  That’s been cancelled, of course, since the Fed has done 2 “emergency out of market rate cuts” in the last two weeks…  There’s some housing data to print today, if that’s your bag, baby!

To recap…. The dollar bugs continue to kick sand in the face of the currencies, the Dollar Index is nearing 100!  Gold had a day in the sun yesterday, but is back to getting sold this morning! OUCH!  The Dow Futures are limit down again this morning, so look for a very ugly open today…  No reserve requirements for banks? Really? Yes, that was in the details of the Fed’s announcement Sunday, that Chuck missed!  

For What’s It’s Worth….  I told you above that I had an article from the GATA folks on the global recession, but I didn’t tell you that the article was written by Ambrose Evans Pritchard, of the U.K. Telegraph… When Mr. Pritchard speaks, everyone listens… I’m just saying… So, here’s the link:https://www.telegraph.co.uk/business/2020/03/17/moment-monetary-shock-awe-finally-fails-has-arrived-do-do-next/

Now, you won’t get too far with that link because it’s a subscriber site, but…. The kind folks at GATA gave me the gist of the article, and I’ll share that with you here: ” Central banks have exhausted almost all their usable ammunition under existing rules yet still failed to calm markets or to unfreeze critical parts of the global financial system.

This moment what we all feared. The danger now is that global recession — it is no longer “if,” as we are weeks into it already — will morph into something more intractable: a deflationary depression with a wave of defaults that breaks the capitalist system as we know it.

So what can be done? Let me take an instant stab. Either the rules are changed fast or we risk uncontrolled global liquidation. The Federal Reserve must be unshackled to act as a buyer-of-last-resort for the corporate debt markets, for great swaths of the credit system, and for Wall Street equity indexes.

The European Central Bank must acquire powers to act as a genuine lender-of-last resort for eurozone sovereign states. It must do exactly what Christine Lagarde refused to do when she blurted out last week that “the ECB is not here to close bond spreads” — an expression lifted word for word from the German board member, Isabel Schnabel, which tells us who is in charge of that institution in the post Draghi era.

This must be backed by a fiscal blitz even greater than in 2008-09, with pledges to “socialize” the drastic losses faced by industry and private firms. What was done for banks last time despite misconduct must now be done for others.

There must be tax holidays, sweeping state guarantees for firms, credit forbearance, a temporary suspension of mortgage payments (pushing out the maturity), and moral hazard be damned — all under the umbrella of financial repression.”

Chuck Again….  You know, I sit here and think about all this, and then say, “Chuck, you’ve tried to warn them…. You’ve tried to point out that all that debt was going to bring the financial system crashing down… You’ve… Ah never mind…. Let’s just say, I tried!

Currencies today 3/18/20 American Style: A$.5919, kiwi .5858, C$ .6980, euro 1.0975, sterling 1.1930, Swiss $1.0401, European Style: rand 16.9807, krone 10.5057, SEK 9.9896, forint 318.42, zloty 3.9897,    koruna 24.6633, RUB 74.75, yen 107.45, sing 1.4322, HKD 7.7653, INR 74.21, China 7.0048, peso 23.87, BRL 5.0068, Dollar Index 99.78,  Oil $25.37,   10-year 1.10%, Silver $12.27, Platinum $652.20, Palladium $1,584.21, and Gold… $1,500.88

That’s it for today… and this week, of course as tomorrow, I’ll be on the road bright and early. They actually called me from the wound center yesterday, to ask me if I was still coming on Thursday!  I guess they’re seeing a lot of no-shows…. But not me!  I had a great conversation with grandson Everett yesterday, we talked about all kinds of things, I even explained fractions to him! Smart kid!  Ok… here’s a good trivia question for rock and rollers… Who sang: Mama Let Him Play?  If your answer was Doucette, then you win the prize of a free year’s subscription to the Pfennig! HA!  I hope you have a Wonderful Wednesday…. Please be conscience of what’s going on around you, and who is around you! And Be Good To Yourself!

Chuck Butler

 

 

 

 

The Dollar Bugs Keep Kicking Sand In The Faces of Currencies & Metals!

March 17, 2020

* The Coronavirus has basically shut down the Chinese economy!

* Another engineered price takedown of Gold yesterday… 

 

Good Day… And a Tom Terrific Tuesday to you! And a Top o’ the mornin’ to ya, as it’s St. Patrick’s Day!  I was talked down from the ledge yesterday, but I’m still of the opinion that the National Guard is going to have to mobilized in order to keep us in our houses to stop the spread of this disease. I’m down in S. Florida, and have the feeling that domestic travel is going to be out of the question as I am scheduled to go home to St. Louis on April 4… At that time we’ll have to make a family decision on whether we want to remain here, or drive home. I do keep a car here all the time, so we wouldn’t have to rent one to drive back. But that decision doesn’t need to be made today… But staying away from people is the main thing, along with washing your hands over and over again during a day, and sunshine… I’m thinking that in my current health situation, that should I get infected, it would be deadly for me… So… there’s a lot to think about in the next days… OK… now back to our regularly scheduled programing… The Eagles greet me this morning with their song: On The Border…

I would talk about the near 3,000 point loss in the Dow yesterday, but since I’m not a stock jockey, it’s not my bag baby! But all those losses in stocks is causing a real problem for Gold, as Gold is getting sold to cover all the margin calls that are being made… Remember when I used to tell you about the size of the margin loans that kept growing? I did that to point out that when the stock market turned, these margin accounts are the first ones to feel the pain… And the holders of these margin accounts begin to receive calls from the Margin Dept. telling them their min. requirement of equity has been breached and they need to deposit fulling paid for stock, or cash to bring it up to the Min. And then the stock market loses nearly 3,000 points, and another margin call goes out, and margin account holder needs liquid assets to sell to get cash… Enter Gold…

Speaking of Gold…. Well there was yet another “engineered price takedown of Gold” of Gold yesterday…   Gold has gained quite a bit on the day, only to have the trap door sprung on it once again, and end up losing $20 on the day, which was more than $80 off its high of the day…  UGH!, I guess as long as the regulators and the Gov’t continue to look the other way, when these engineered price takedowns happen, there’s nothing we can do about them, but make things difficult by buying more physical Gold! 

A quick look at the currencies this morning tells me that while the euro saw a little love, yesterday,  not much, but a little, the rest of the currencies continues to have sand kicked in their collective faces by the dollar bugs… 

In the overnight markets, the euro gave back what it gained yesterday, and more as it now trades with a 1.10 handle….   And former stalwarts in gov’t. finance like Norway, just can’t find a bid…  Australia seems to be in a complete fall and taking its kissin’ cousin across the Tasman with it. And the Poor Russian ruble, just keeps getting stomped on by the dollar bugs, rather than the other way around… 

One has to wonder just how much longer this can be, given what the Fed has been up to the last two week, with their back-to-back, belly-to-belly, out of meeting “emergency” rate cuts, that have brought short term rates to near zero… I looked at a 3 month TBill last night and the yield on it was just 14 Basis Points or 0.14%… That’s about as close to zero as you can get!

A couple of months ago, I was interviewed by good friend, Dennis Miller, at www.milleronthemoney.com and was asked whether the U.S. would see negative rates….

At that time I said, “yes, we will see negative deposit rates, but I doubt that our Treasuries will carry negative yields” There’s more Government debt out there from around the world that have negative yields, and I just didn’t think we would be that stupid… All the elementary kids would be pointing at me and saying, “we’re not supposed to say the “s” word”…. And when my grandkids do that to me, I tell them, “I’m the General, and I can say anything I want!” So there! So, any way, I’m going to change my answer now, given what I now know… I mean when times change, opinions change, that’s a given… And when the 10-year Treasury’s yield dropped by 100 basis points last week, in one fell swoop… I did my best Bob Dylan impression, and said, “The times they are a changin’”

Longtime readers know that I don’t get into the regional manufacturing indexes because they normally don’t give us a heads up to what the national ISM manufacturing index will be… However, yesterday, the Empire Region (NY) manufacturing index for March printed at it showed the largest one-month drop ever, falling to negative =21.5 , from a previous reading of 12.9… This regional HAS to be an indication of how far the national ISM Index will fall when it prints for the same period…

Yesterday, I said that an economic analysts had called for U.S. GDP to drop 5% in the 2nd QTR. A dear reader sent in a note telling me that he didn’t know what the economic analyst was smoking but if the U.S. economy only lost 5% in the 2nd QTR, he was a monkey’s uncle! And I tend to agree with him, the way everything is getting shut down, and I mean everything, with the only things still open for business are grocery stores, and Pharmacies… Restaurants can only have 10 customers down here, so they’re just closing… Big Box items for GDP down here are Disney World and Universal, and they’ve been shut down almost a week now… We even have a curfew down here now… Wait! What? Did I hear that right? Has Marshal Law been declared and I didn’t hear about it? No… not yet, but the Florida Gov’t decided on its own to impose a curfew… We can be out from 6am to 9pm….

OK… enough on that… I think I probably scared ½ of my readers yesterday! But in reality, they need to be scared into staying home and away from crowds of people… Shoot Rudy, I heard that the city of Palm Beach closed their public beaches yesterday! The Beach had become quite the popular place to go, given 1. The weather is beautiful, and 2. There’s no place else to go…. And in the Gov’t’s defense whatever gov’t it is, state, local, national, the more alluring places they remove from people having the ability to go to the more chance they have of having people stay home! But the beach? Really? I sure hope they don’t close my beach… But if they do I still have our deck, where I can go to get my daily dose of vitamin D….

I can’t believe that I allow myself to get caught up in all of this virus stuff… But one minute I’m thinking about economies, and markets, and the next thing I’m typing is about a beach getting closed! UGH!    Well, hopefully, everyone is taking steps to remain healthy…  And staying home and reading the Pfennig is a great way to pass the time while staying at home! HA! 

OK… The U.S. Data Cupboard is finally getting back in business today with prints of Retail Sales, Industrial Production, and Capacity Utilization today. All three will be for February, which was before the Armageddon began here in the U.S.  I don’t say that lightly folks, as this is what it all feels like to me…  So, as I said yesterday, Retail Sales should be OK, not great, but OK, with the other two continuing to drop.  The March prints of all U.S. Data should end up dropping a lot… I’m just saying…

 I think we can look to China’s mess of economics since they’ve been fighting the virus longer than we have… And yesterday this is what the Chinese economic data looked like: 

 

• Chinese Retail Sales crashed 20.5% YTD YoY – the first annual drop on record and four times worse than the -4.0% expectation

• Chinese Industrial Production collapsed 13.5% YTD YOY – the first annual drop on record and more than four times worse than the -3.0% expectation

• Fixed Asset Investment plunged 24.5% YTD YoY – the first annual drop and more than twelve times worse than the expected 2.% contraction.

OH boy! Can’t wait for that to happen here! NOT!  but I think it’s a very good indication of what will happen here as this to our economy, as this virus continues to spread…. 

To recap….  Sand continues to get kicked in the face of the currencies and metals by the dollar bugs, folks… it’s getting very ugly out there!  Why on earth would investors look to dollars, when interest rates here are getting ready to drop to negative territory, along with Treasury yields?  But they are, and as long as the Gov’t continues to look the other way, when the price manipulators engineer another major take down of Gold, we have to deal with cheaper Gold prices every day…. 

On a sidebar, I know that inquiring minds are wanting to know what’s going on with me, so in the vein…. Last week, I was supposed to be getting an “apligraph” on my leg wound, but the doctor decided that he would give it one more week with collagen, so this Thursday… That is if the Wound Center is still open, I’m supposed to get my apligraph…. Patience is a virtue, and if that’s the case, then I should have my picture beside the word “virtue” in the dictionary, because it’s now been 1 year since my leg opened up, and I’m still dealing with this!

For What It’s Worth….  Since I spent some time talking about negative rates today, this article from longtime reader Bernard, really hit a nerve, and seemed to FWIW worthy for sure! It’s well respected analyst, Ray Dalio, talking about negative rates…  You’ll want to click the link and read the whole article, as I won’t be able to give it all to you in the snippet! You can find it here: https://www.linkedin.com/pulse/implications-hitting-hard-0-interest-rate-floor-ray-dalio/

Or, here’s your snippet: “While I’m going to pass along my thoughts to you, I want to emphasize that I wasn’t, and still am not, able to anticipate the most important things happening in the markets because of the extremely rare nature of the circumstances. While what I don’t know is much greater than what I know, I will tell you what I think for you to take or leave as you like.

As you know, for some time now I have been concerned that when the next economic downturn would come it would lead to hitting the 0% interest rate floor with a lot of debt outstanding and big wealth and political gaps in the same way that configuration of events happened in the 1930s. The coronavirus was the thing to cause the downturn, which surprised me. While it is an extremely serious infectious disease that will produce many harmful economic impacts, these things alone don’t scare me; however, when combined with long-term interest rates hitting the 0% floor, it really worries me.

Long-term interest rates hitting the hard 0% floor means that virtually all asset classes go down because the positive effects of interest rates falling won’t exist (at least not much). Hitting this 0% floor also means that virtually all the reserve country central banks’ interest rate stimulation tools (including cutting rates and yield curve guidance) won’t work. The printing of money and buying of debt assets that central banks are now allowed to buy almost certainly won’t work much (because bonds can’t be pushed much higher and they are also less likely to be sold to buy other assets of entities that are in financial trouble). Further, with this hard 0% interest rate floor, real interest rates will likely rise because there will be disinflation or deflation resulting from lower oil and other commodity prices, economic weakness, and more credit problems. If that plays out in the typical way, rising credit spreads will raise debt service payments to weaker credits at the same time as credit lending shrinks, which will intensify the credit tightening, deflationary pressures, and negative growth forces. God help those countries that have these things and a rising currency, too.”

Chuck again, this snippet is just an appetizer to what the whole article talks about, be sure to click the link above…  Hey! we’re stuck inside, what else is there to do? HA! (sort of!)

Currencies today 3/17/20 American Style: A$.6001, kiwi .5952, C$ .7086, euro 1.1010, sterling 1.2086, Swiss $1.0402, European Style: rand 16.6456, krone 10.4020, SEK 9.9392, forint 315.02, zloty 3.9396,   koruna 24.6995, RUB 74.05, yen 107.09, sing 1.4279, HKD 7.7661, INR 74.10, China 7.0051, peso 22.98, BRL 4.9185, Dollar Index 99.21,   Oil $29.28,   10-year 0.81%, Silver $12.20, Platinum $631.64, Palladium $1,582.80, and Gold… $1,471.33

That’s it for today…  Yesterday, was one of those days where I just can’t stay awake… After going north for a nurse visit to change my dressing, I came home ate some lunch and retired to my chair, and then proceeded to sleep all day!  Maybe it was my body telling me to rest up for today, which is St. Patrick’s Day!  I think I’ll start the day with some Bailey’s in my coffee and see where the day takes me!  HA!  We couldn’t really find anything interesting to watch on TV as a family last night, so Delaney was not a happy camper!  The boys ended up watching American Ninja Warrior! UGH!  Ok, it’s time to go… Be careful out there today, for there will be lots of Irish people celebrating, and lots of non-Irish people celebrating!  Happy St. Patrick’s Day to you! The Buckinghams take us to the finish line today with their song: Don’t You Care….     I hope you have a Tom Terrific Tuesday, and St. Patrick’s Day, and will Be Good To Yourself! 

Chuck Butler

The Fed Slashes Rates To Near Zero!

March 16, 2020

* The Fed also implements a bond buying program!

* And Morgan Stanley says, “it’s Time to sell dollars!” 

Good Day… And a Marvelous Monday to you! Well, everything is shutting down, schools, baseball, all sports for that matter, social groups of 250 or more, it’s beginning to look very ugly folks… Is this the turning point where the Gov’t declares Marshall Law, and the National Guard moves in to make sure we all stay at home? It’s beginning to look that way to me… I don’t want to be a gloom and doom guy, but this is all very frightening to me… I’m trying to remain calm and keep doing normal things, but… I see big black cloud moving toward our country from China, and it’s quite ugly! Shoot, I’m so worried now that I really am having thoughts about shutting down writing until this whole thing ends… I certainly don’t want any law enforcement guys knocking on my door, because I’ve ruffled a few Gov’t and Casino Bank feathers! So, each day, go to your email box, and if you see an email from the Pfennig, then I’m still writing… If you don’t… well, that means that brains were the better part of valor for me…. Percy Sledge greets me this morning with his song: When A Man Loves A Woman

Do you want to know what got me all thinking creepy stuff? The Fed! Yesterday, in their second out of meeting rate cut, they cut their Fed Funds rate 100 Basis Points, or 1%, down to nearly zero!  They couldn’t even wait until their meetings this Tuesday and Wednesday!   The Fed also announced a new bond buying program of $700 Billion to help the banks with liquidity…. So, in my mind, if the Fed is panicking , and  this would surely qualify as a “panic attack” by the Fed…  We had better get under our mattresses and wait for the nuclear fallout!    Oh, and, stock futures are down limit early this morning, that this is going to get really ugly fast, folks…   

Oh, and don’t forget about this little ditty that’s hanging over the U.S…. I’ve been talking about the Corporate Debt maturities that will come due this year… $19 Trillion worth of maturities, folks… On what amounts to a bunch of really bad debt…   Will banks have the liquidity to make new loans to these Corporations?  I doubt it, as a run on banks is in the future, in my mind… 

What a difference a week makes with the currencies and metals, or the safe havens too! Gold, which last Monday hit $1,704, is trading this morning around $1,517…. The euro which last Monday traded with a 1.14 handle, is trading this morning with a 1.11 handle… The 10-year Treasury’s yield was 0.41% last Monday and it’s around 0.67% a week later… I read something this week on Gold, and that it’s showing its true safe haven colors, as it is getting sold to pay for all the margin calls on stocks… If you didn’t have Gold, what would you be selling to pay for those margin calls? I’m just saying… And no, you’re first born male doesn’t qualify as a payment! (Look, I’m so scared at what’s going to happen next, that I had to try to lighten the feeling of the letter so far today!)

In a hastily assembled conference call yesterday, Fed Chairman Jerome Powell, made some comments about how the 2nd QTR GEP is going to be very weak… And then he said this: “We do know that the virus will run its course.”  Really? You know this to be the truth, do you now, Jerome?   I too believe that once the earth turns on its axis and points the northern hemisphere closer to the sun that the sun will bake the virus dead… But can we wait for that to happen?  And what if I’m wrong on that assumption that the sun will be our vaccine? 

Speaking of vaccines….  I read last night from a trusted site, that Merk has pushed through a vaccine  to combat the Coronavirus and that everyone will be required to received the shot….  Of course that could only be accomplished under Marshall Law…  

Bloomberg.com is reporting this morning that Morgan Stanley issued a communique stating that their clients should be looking to sell dollars at these levels….   Interesting…  Don’t you think?  And why not? The Fed just cut rates to near zero, and implemented a bond buying program that they’re not calling QE…. The next rate cut will take us below zero, and then we would be in the same boat as the Eurozone, Switzerland, Sweden, and Japan…  Oh, Boy! Where do I sign up for that? NOT! 

There I was on a beautiful Sunday morning yesterday, and I received an email from the GATA folks… In the email they had included a link to a YOUTUBE that was a satire on Central Banking… So, of course I had to check it out… It is so good, that I decided that I would share it with you all…. So here is the link: http://www.youtube.com/watch?v=NIfH0vY2ANA enjoy!

I’m not feeling up to continuing writing this morning, as all of this has me depressed… So, I’ll go to the Data recap, from here and end their early today…  I hope you don’t mind…

The U.S. Data Cupboard didn’t have much for us last week, and ended the week with a weaker Consumer Sentiment report  that feel to 95 from 101… Tomorrow we finally get back on the Data Cupboard tracks with quite a few prints this week. Starting tomorrow with Feb. Retail Sales… which was before the virus hit the U.S. hard, so this report should be OK, not great, but OK…..  Industrial Production and Capacity Utilization though will tell a different story in their Feb prints, with Industrial Production printing negative, again…. And Capacity Utilization falling further…  

I read this morning that one analyst is calling for a drop of 5% in GDP for the 2nd QTR!   Now that would be really nasty, and one can only guess what the Fed will be doing then?  

To recap…. Chuck is worried, folks…  That all sorts of nasty things could be coming our way here in the U.S.A.   The Fed made its second out of meeting “emergency” rate cut yesterday. They couldn’t even wait for their scheduled meetings tomorrow and Wednesday to cut rates. The Fed also announced a Bond Buying Program…  Chuck believes the Fed is panicking, and that’s causing him to shudder! 

For What It’s Worth….  In my current state of shock it was not a good thing that I started reading emails last night… But one caught my eye, when it came from longtime reader Bob, who sent me an article that I’ll share with you this morning about the end of the U.S. Empire, and it can be read herehttps://www.dotdotnews.com/2020/03/11/english/opinion%EF%BD%9Chistorys-pivot-american-empire-under-siege: 

Or, here’s your snippet:” Dramatic, perhaps historic events are shaking the world today.

After an unprecedented display of national unity, resolve and courage, China has essentially expelled COVID-19 from its territory. But the virus has traveled worldwide, invading other nations and wreaking extensive havoc. Given its leaders’ denial of the danger and its unpreparedness to deal with a major outbreak, the United States looks especially vulnerable, a disaster in waiting.

Just at this moment, Russia has detonated a nuclear weapon (tactical, if not strategic) in the global financial markets. Its refusal to cut oil production, in defiance of US and Saudi Arabian pressure, has devastated asset prices everywhere.

Like a chess grandmaster, Russian President Vladimir Putin has long put up with assaults from the American Empire, waiting for the right moment to strike back and inflict maximum damage. He has just done so, leaving Washington and its allies/vassals reeling from the shock.

Astute analysts have long speculated that the end of the US Empire might come not through war or politics, but some cataclysm in the financial markets. Is that watershed process now underway? With a plague, unrepayable and still-growing debt, a fragile and inflated economy, financial implosion, severe imperial overstretch, and too-obvious government incompetence, is the American Empire facing the perfect storm?

Like Russia, China has been putting up with relentless US hostility and persecution. Will Beijing, like Moscow, seize the moment to force payback time, especially on core Chinese interests?

Global instability is always a big concern for the Communist Party of China, so it will act cautiously. But along with the danger is a rare opportunity to downsize the US imperium and cut its capacity to continue preying in the world.

Success in doing so would benefit not only China, Russia, and other nations that Washington considers its enemies. It would also lead to a more stable, prosperous, and peaceful world, one driven by win-win cooperation instead of zero-sum competition and conflict.

We live in interesting times, indeed.”

Chuck again….  Interesting times, indeed, I do agree… 

Currencies today 3/16/20 American Style: A$ .6172, kiwi .6043, C$ .7193, euro 1.1168, sterling 1.2273, Swiss $1.0585, European Style: rand 16.2140, krone 10.2140, SEK 9.7096, forint 304.58, zloty 3.9260,    koruna 23.9772, RUB 72.49, yen 105.32, sing 1.4212, HKD 7.7671, INR 74.03, China 7.0072, peso 22.42, BRL 4.8577, Dollar Index 97.74,   Oil $30.09,    10-year 0.76%, Silver $13.09, Platinum $689.66, Palladium $1,689.06, and Gold… $1,517.63

That’s it for today, and who knows about what’s going to happen going further?  I’m sorry if I caused you to worry about all this stuff this morning, but I had some things I had to get off my chest….  On a lighter note…  My darling granddaughter, Delaney Grace, is here with us and she asked me to mention this morning, that we all watched Frozen II last night together…  So, there!  I don’t think she really thought I would do that!  Well, Baseball is cancelled… I’m depressed with that…  But I still have chamber of commerce weather, and the beach, so, if this is where they quarantine me, then so be it!  Think about this thought folks… With all the sports and other venues closing, along with schools, and Disneyworld to boot, how are these people that work going to get paid while their respective businesses are closed?   I’m just saying…. And with that, Little Feat takes us to the finish line today with the live version of their rock Classic song: Dixie Chicken…  I hope you remain safe, and healthy, and have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler 

The U.S. Talks About A Stimulus Package…

March 11, 2020

* safe haven reversals continued on Tuesday… 

* Shale Producers are having problems… 

Good Day… And a Wonderful Wednesday to you! Well, I can say that it’s been real, and it’s been fun, being back in the saddle, but… it hasn’t been real fun! HAHAHAHAHA! Just kidding, I love what I do here, with this letter, and hope you love reading it as much as I love writing it! Of course there are “those days” when I wish I didn’t have to wake up when I do, but to do it, tells me that I’m still alive and kicking! I’ll get going on the letter now…. Supertramp greets me this morning with their song: Babaji Not exactly a top Billboard hit, but one of my fave Supertramp songs…

Tell me if you’ve heard this before…. The Bank of Japan (BOJ) is going to introduce yet another stimulus plan for their economy…. Heard it, read the book, bought the t-shirt, right? Well, like the song Respect says, take out TCP, if we take out the BOJ and insert the USA… Then we’ve got a story, right? But come on don’t tell me you think this would be the first stimulus plan for the U.S. economy…. What about the year, not so long ago, when tax payers got a check from the Gov’t? or not long after that one, how about “cash for clunkers?”, and those were aimed at individuals, the banks on the other hand received TARP money, and the really Big Casino Banks they took in so much cash from the Fed that they had to take it in the back door, under the cover of night,  so no one knew they were receiving it!

So… That’s where we are once again folks… talking about stimulus for the U.S. economy that’s been stuck at 2.1%

And….  This stimulus for the Casino Banks continues today…  Yes, that’s what all the fuss about the repo market is about…  Just the other day the Fed announced that they would increase the amount of money that’s would be available each day from $100 Billion to $150 Billion, a 50% increase folks… But there’s a problem Houston…  the Banks requested a total of $216 Billion!!!!    So there was $66 Billion that didn’t get a dispersed…  Oh the humanity!  What’s a Casino Bank to do when it doesn’t get their allocation of cocaine?  I say that because that’s what this repo market stuff has become… An addiction to the Casino Banks…  And it’s a very sad thing…  I mean not as sad as learning that a longtime former colleague, Mary Vance, had died, but sad for the markets, economy and this country… 

So, there was more unwinding of the safe havens that had been bought late last week… The euro lost a little ground, the same with francs and yen, bonds didn’t move, but Gold got Whacked by $30….  Like I asked yesterday, have the fears of the Coronavirus subsided? Because that’s what the trading from the first two days this week is saying…  I find this to be utterly ridiculous, colleges across the country are cancelling personal classes, Shoot Rudy, even the SEC told their employees to work from home…  But traders don’t see this apparently… That’s all I’m saying about that!

And like always when Gold gets whacked like that, I say, that there’s always a silver lining here, and that is that the cheaper price gives investors an excellent opportunity to buy it cheaper than it was! 

Did you hear last week when our friends at OPEC (NOT!) decided to cut production again, but this time Russia said “nyet”? Well, that probably stuck in Saudi Arabia’s craw, don’t you think? Because now there’s a price war in Oil going on… And that’s not “just what we need right now!” But it is what it is…. I saw a great display of this price war going on the other day, as I traveled on route 76 down here in Florida. One gas station had regular at $2.55, and another just down the street, had regular at $2.19, which is where I would think the price of gas should have been given the drop in the price of Oil… I know there are lots of costs and taxes that go into refining oil to gas, but just thought that this was a good example…

Speaking of Oil…. Recall how I’ve told you that above $50 for Oil the Shale producers would jump in with more rigs and so on, and below $50 they got back out? Well… yesterday I saw a blurb on Bloomberg where they mentioned that “the new reality for shale producers is that almost all wells dug now lose money”…  With the price of Oil around $33 I would suspect that the “almost” is really an “all”… 

The thing that scares the bejeebers out of me here with the Shale Producers having to deal with losses is that they have accumulated debt up to their collective eyeballs… And how will they pay the debt servicing when they are losing their shirts daily?  I would say to look for some bankruptcies to be announced in this sector soon…  

And you know the song, the hip bone is connected to the thigh bone, which is connected to the knee bone, etc.?    So, think about these Shale Producers folks… They don’t make the rigs that they use, they buy them, and all the equipment needed to frack Oil from shale rocks… So, guess who will be next in line at the bankruptcy court after the Shale Producers? The Rig makers and fracking equipment folks, that’s who!  And then their producers get stuck with stuff, and so on… 

And regarding all of this going on right now… Well respected Investment Analyst Kyle Bass said in a MarketWatch.com interview that “if you think this is bad, wait a month”….    I shudder to think but it will come and there’s nothing we can do to stop it…  I’m just saying…  

The U.S. Data Cupboard is still empty in my mind… We will see the color of the Feb. CPI (consumer inflation) that’s about as reliable as a Nigerian Prince email!  HAHAHAHA!  The Federal Budget for Feb. is also supposed to print, but no one really pays attention to it any longer, as in the end of the fiscal year it will total more than $1 Trillion… 

To recap… The reversal of safe havens continued on Tuesday, and Gold got Whacked by $30!  Seems to Chuck that this presents an excellent buying opportunity…  Chuck talks about the repo mess going on, stimulus that’s being talked about, and other things this morning… 

For What It’s Worth… It’s been some time since I used a letter by my longtime friend, Bill Bonner, and today seems like a good day to revisit what he’s talking about these days… This time he’s talking about the Fed’s misdoings, and other things and can be found here: https://www.bonnerandpartners.com/bill-bonner-diary/feds-to-pump-more-fake-money-into-inflated-financial-system/

Or, here’s your snippet: “In 16th-century England, a performer warmed up the crowd for a Shakespeare play by eating a live chicken – feathers and all.

Now before us is an even more appalling act. The feds are swallowing the entire economy.

This is the story we’ve been watching for two decades.

The Federal Reserve’s grifters swallowed the academic claptrap. They claimed they could manage the economy by falsifying interest rates… and “stimulate” it with fake money. And the public was ready to swallow anything, if there was free money involved.

Then, each time the economy or the markets tried to correct, the feds intervened with more “stimulus.”

This inevitably caused more wriggling and jiggling inside the economy… and then they had to swallow something even bigger to try to stop it.
Let’s look at the oil industry as an example…

We reported more than a year ago that the U.S. shale oil industry was a bubble created by the Fed’s ultra-low interest rates. Producers borrowed huge amounts of capital, fracked the hell out of vast areas of the U.S., and consistently lost money!

In effect, the U.S. oil industry was swallowed by the Fed’s fake-money/fake-interest-rates policies.

As long as they could borrow money cheaply enough… it didn’t seem to matter that they lost money. Like tech companies Tesla, Uber, Twitter, and Snapchat, the frackers were able to keep fracking.

Finally, last year, OilPrice.com reported that the industry might soon turn a profit:”

Chuck Again…. Oh there’s more to this snippet, so go to the web link above and click it to read the whole message, nobody and I mean nobody can weave a story together like Bill Bonner… 

Currencies today 3/11/20 American Style: A$.6526, kiwi .6326, C$ .7282, euro 1.1330, sterling 1.2918, Swiss $1.0697, European Style: rand 16.0688, krone 9.5816, SEK 9.4670, forint 295.66, zloty 3.8152,    koruna 22.7070, RUB 72.17, yen 104.70, sing 1.3892, HKD 7.7693, INR 73.78, China 6.9492, peso 20.97, BRL 4.6897, Dollar Index 96.11,   Oil $33.16,   10-year 0.71%, Silver $17.03, Platinum $882.10, Palladium $2,354.00, and Gold…. $1,667.16

That’s it for today…  As I look outside the wind appears to have finally slowed down, as the palm trees don’t look like their bending over this morning! That’s a good thing!  The ocean is much calmer, and not as angry…  Well, tomorrow I go to have the “apligrapf” applied to my wound, I have no idea what this will entail, so I will be there bright an early in the morning to make sure if it takes more time than expected, I can get out of there and get back here in time for the baseball game!  I have my priorities, right? HA!   So, that’s it for today, tomorrow and Friday…  Grand Funk Railroad takes us to the finish line today with their song: Mean Mistreater…  I hope you have a Wonderful Wednesday, Tub Thumpin’ Thursday and Fantastico Friday, and will please Be Good To Yourself!

Chuck Butler

 

The PPT Does Some Heavy Lifting!

March 10, 2020

* Traders reverse Friday’s trading on Monday… 

* Last week’s “emergency rate cut” to be followed up next week… 

Good day… And a Tom Terrific Tuesday to you! Another day in the markets, and another day on a roller coaster! That and other thoughts will be discussed this morning, but first…. I want to send out a BIG Happy Birthday note to my good friend, Rick Baur…  Happy Birthday, young man, may your day be grand!  I used to invite Rick into the office and we would share a veggie-pizza… You know back when I had an office that is! Justin Hayward and John Lodge (The Blue Jays) greet me this morning with their song: Who Are You Now… 

Well… Apparently, traders had second thoughts about marking down stocks, Oil, and dollars, and buying euros, yen, francs, and bonds, because at a point yesterday that trade pattern stopped on a dime, and began to get reversed…  So, the Coronavirus scare must be over, right?  I shake my head in disbelief that anyone would think that, much less traders who are supposed to be looking ahead… 

The Plunge Protection Team (PPT), must be in total physical exhaustion today from all the heavy lifting they dad to do yesterday… I commend them on a job well done, and now invite them to crawl back into the holes they came out of and leave the markets alone… Do go away mad…. just go away! 

So… I had a fellow send me a note yesterday, chastising me and questioning my intelligence regarding the Coronavirus…  As I said something like if the virus got too bad that pro and college games would be played in empty arenas and stadiums.  He alluded that I wasn’t taking the virus seriously… Really?  I definitely recall telling you all yesterday that this was serious, and that it called for serious people… But, then I used skim through things when reading them too! 

Alrighty then… So, the euro lost a full cent in trading yesterday, Oil gained a full dollar, and bonds gave back 30 Basis Points, and the Dollar Index gained 65 ticks…  So, from that you can see exactly what I was taking about above with the reversal that went on…  And this morning, it appears it will continue, as stock index futures are up, and Gold is down $17 in early trading… 

OK… There were a lot of things that went on last week and yesterday, and apparently we need to be ready for more things to go on today, but one thing that happened last week, seems to have been forgotten about, and that is the Fed’s “emergency” rate cut of 50 Basis Point (1/2%)…  This was an “out of meeting” rate cut folks, which should have sent shudders down the spines of everyone and their brothers!  

The Fed’s FOMC will meet again next week on St. Patrick’s Day and follow it up with a rate announcement on 3/18…  I’m going to go out on a big fat limb and say the Fed cuts another 50 Basis Points from their Fed Funds rate, next week, bringing their internal rate to 0.75%. Wait! What? isn’t that nearly back to ZIRP (zero interest rate policy)?  Why, yes it is young grasshopper, that was very astute of you to recognize that!  

While I do believe that we are already in a recession (basically in my mind we never left the recession of 11 years ago), the rest of the markets and economists don’t see that along with me, so for their benefit, I’ll say that when the next recession hits, where does that take interest rates? Oh My! The Fed has nowhere to go with rates, but to go negative…  I’m just saying….  We’re almost there now… I’m also just saying… 

I just looked up and watched the sun rise out of the ocean… What a beautiful sight… And before some smart alec fires off a note to me telling me the sun doesn’t rise out of the ocean…  I’m fully away of that, but from my viewpoint, it sure does look like that’s what’s happening! So there! The ocean here has been very angry for days now, as the wind has really whipped up the waters…  I think the wind is suppose to die down today, so maybe we can get back to normal around here! 

I deliberately took that tangent to get away from what I was thinking about talking about…  So, to our former media folks that gave me media training back in the day, you can be proud of your former student for his “deflection”… 

OK… So, we start today with Gold down $17….  This after the shiny metal had climbed above $1700 to $1,704 yesterday… But then the boys in the band arrived and took Gold down to $1,679, just up $6 on the day, when it was up over $25 bucks at one point in the day…  I simply find this kind of price action to be lawless… with a lack of regulation… and outright brazen, given the way the metals dealers are being brought to court these days… 

OK… I will admit that the stock market selloff has caused some margin calls to be made, and sometimes we see other things sold to meet those margin calls… Other things being liquid assets, like Gold, Silver and Bonds…   Because for Heaven’s Sake you can’t just dissolve the margin account and walk away can you?  

Longtime readers may recall me telling you that at one point in my life in the markets I was the Manager of the Margin Dept in a regional brokerage house…  And while we never saw price action like this, we did see some times when we had to be on the phones all day calling clients and telling them their margin account had a BIG Hole that needed to get filled in the next 24 hours…  

I’ve been telling you the size of the margin debt here in the U.S. for years now, and pointing out that when the stock market finally faltered that those margin accounts with all that debt would be in Big Trouble…  Well, that time is now… 

As I said yesterday, the U.S. Data Cupboard is basically bare this week, and that means that there is only the small business index to print today, which nobody pays attention to, except the small businesses!  There’s really nothing else to talk about or deal with today here, so we move along… 

To recap…  The markets traders began a reversal of their selling of stocks, dollars and Oil last week, and instead sold euros, yen, francs, Gold and bonds…  Chuck asks the question, did the Coronavirus go away? Because that’s what the trading yesterday suggested!  The PPT must be totally exhausted from all that heavy lifting yesterday… now go back to the hole you climbed out of! Please! 

For What It’s Worth…  Before the PPT go to work yesterday, there was gloom and doom in the markets, and it appeared that the stock jockeys had walked off a cliff, but like Wiley Coyote, they found a way to remain suspended in air until the next frame…  But while that was going on, people in the markets were scared of a liquidity crisis… And this is what that looked like: https://www.zerohedge.com/markets/there-no-liquidity-market-paralyzed-fraois-explodes

Or, here’s your snippet: “Over the weekend, we discussed the latest analysis by JPMorgan’s Nick Panigirtzoglou according to which in addition to the literal lock up in equity markets (where S&P futures were halted limit down for hours overnight), credit and funding markets were starting to show signs of extreme stress, not only as a result of the sudden plunge in energy credits but due to a violent return of what appears to be systemic issues within the inter-bank funding market.

As the JPM quant summarized, “we see initial signs of emerging credit and funding stress. If these shifts in credit and funding markets are sustained over the coming weeks and months, especially in the issuance space, credit channels might start amplifying the economic fallout from the COVID-19 crisis.”

To prove his point that the credit bubble was cracking, Panigirtzoglou highlighted the recent spike in the dollar fx basis, the latest burst of repo activity by the Fed, the spike in the SOFR rate and the SOFR-IOER spread, and last but perhaps most notably, the sudden blow out in the notorious FRA/OIS spread.

Commenting on the sudden liquidity air pockets, Bloomberg Chief Global Derivatives Strategist Tanvir Sandhu wrote that “liquidity holes and the unleashing of suppressed volatility has seen convexity options outperform given the acceleration in volatility gains as tail risks reprice. For example, VIX calls funded by SPX puts would work for those looking for long convexity exposure. Now, extracting vol premium should come into play while managing the further deterioration of risk.”

Yet while traders are looking at indications the financial collapse of 2008 may repeat, there is one novel wrinkle: the unprecedented proliferation of ETFs and passive investing. For Nomura’s Hodges, the problem is exacerbated by the proliferation of exchange-traded funds, something we discussed in “Market Crash Reveals The “Liquidity Problem” of Passive Investing”. The problem with passive investing is that while it propels market dutifully higher, when stocks crash, ETFs reverse, and a painful selling liquidation commences, one which takes a long time to stop, or as Bloomberg puts it, “when the market goes into free-fall, they are required to sell the underlying asset, prompting a frantic search for anyone who will buy it.”

In the end, Aberdeen Investment money manager Luke Hickmore put it best: “People are asking for bids — and then dealing when they see them. You can definitely sell for sure, you just might not like the price.”

He’s right, for now. A few more days of liquidation panic, and there won’t be a price at all: the market will simply be halted indefinitely, and nobody will know when (and if) they reopen, something we first discussed almost 6 years ago in “How The Market Is Like CYNK (Which Was Just Halted)”

Chuck Again…  Yes, when it actually does go down the drain, liquidity that is, the PPT won’t be able to stop it…  Got Gold? 

Currencies today 3/10/20 American Style: A$.6556, kiwi .6314, C$ .7324, euro 1.1351, sterling 1.3027, Swiss $1.0716, European Style: rand 15.8207, krone 9.4608, SEK 9.4617, forint 295.88, zloty 3.8037,    koruna 22.5216, RUB 73.87, yen 104.80, sing 1.3912, HKD 7.7697, INR 73.95, China 6.9422, peso 20.40, BRL 4.6808, Dollar Index 95.86,  Oil $33.88,   10-year 0.71%, Silver $17.12, Platinum $880.72, Palladium $2,462.64, and Gold… $1,662.80

That’s it for today…  No doctor appt., no baseball game, today, what am I to do? UGH!  Yesterday what the first day in two weeks that I got my feet up for the 3 hours a day that I’m supposed to get them up for…  Psst, don’t tell my doctor!  Daughter Dawn, and her family of Jerry, Delaney, and Everett, will arrive on Saturday down here for their Spring Break…  So, things will pick up again soon enough! I can’t wait to see my darling little d, and E!  Well, we sent all our “tax stuff” to our accountant last week… Now I sit here and worry about payments to the Gov’t! UGH!  Last year I received a return, that this year I have to report as income!  So, hopefully it all comes out as a net zero!  Now wouldn’t that be wonderful? YES!  Steely Dan takes us to the finish line today with their song: Kid Charlemagne…  I hope you have a Tom Terrific Tuesday, and will please Be Good To Yourself!

Chuck Butler

Coronavirus Takes Front And Center Of Traders’ Minds…

March 9, 2020

* Gold, bonds, and safe haven currencies rally… 

* The Fed St. Louis talks about negative interest rates…. 

Good Day… And a Marvelous Monday to you! Well…. I’m back! Back from a great week of spending time with good friends, going to baseball games, and going out to dinner! My beloved Cardinals, which began spring training with the same no-hitting ability, they had last year,  began to heat up as the weather did too… And there’s hope in Mudville! There’s also joy at the wound center, as I’m finally ready to have the soft cast removed for good (on Thursday this week) and have, what’s called an “Apligraph” applied… What all that means is there is finally major healing going on, and the pain has subsided greatly! YAHOO! But the greatest joy has been Gold’s best performing week since 2016, last week! WOW! The danger that appears to be spreading, is the Coronavirus… Keep safe and keep your hands washed! The band America greets me this morning with their song: Sandman…

So, the Coronavirus, is on everyone’s minds now, and on every news stations, tv and radio, and so on… There are even thoughts about major sports venues playing games without fans attending… I sure hope it doesn’t come to that, because if it does, it means the virus is out of control here in the U.S. Overseas travel is a no-go right now, and it seems to me that anyone coming home from overseas would be kept in quarantine until they can prove they’re not carrying the virus.

While gold had its best week since 2016, stocks did not… The roller coaster ride that is the stock market has really taken a deep dive with lots of selling…. The price of Oil didn’t have a good week either, as the price took a deep dive, and our friends at OPEC (NOT!) decided to make huge cuts in production, but even that announcement couldn’t help the price of Oil…

The Oil price drop has caused major collateral damage to the Petrol Currencies, led by the Russian ruble, who saw a muliti-figure drop last week to a 68 handle, and the Mexican peso fall to a 20 handle once again, and even the Canadian dollar/ loonie, which had seemed to be inoculated from this illness, gave up the 75-cent handle and trades this morning down two full cents from a week ago… And the Norwegian krone has weakened to a price that’s weaker than its kissin cousin, Swedish krona, which I really don’t every remember seeing in the past before now. 

The other big winner, besides Gold last week, was the euro… And in a very different trading pattern than what we normally see, when the euro rallies it takes all the other currencies along for the ride… But not this time… Stranger than fiction folks, but it’s what is happening… But there are a few currencies going along with the euro for a ride higher VS the dollar. The “safe haven” currencies of Swiss francs, Japanese yen, and euros have been bought like funnel cakes at a state fair… 

Everyone and their brother know the Fed cut rates ½ point or 50 Basis Points last week, as they pointed to the Coronavirus disrupting economic development around the world as their reason for the “emergency cut” Of course the POTUS didn’t think ½ point was enough, and once again pointed to countries with negative interest rates, as if they are doing well with them, while they are not!

While I was on vacation, I received an email from the Fed St. Louis, (they call it FRED) and it was an explanation of negative interest rates… My initial reaction to it was that they didn’t just “happen to write an article on negative rates” This has to be a planned action, as far as I’m concerned, and the Fed is greasing the tracks for negative rates right here in the good Old USA!

OH! and don’t look now but the 10-year Treasury’s yield has dropped to just 45 basis points!  This is crazy folks… and Serious, and serious times call for serious people, of which I’m usually not one, but I can be as a serious as a heart attack when I need to be… So, serious it’ll be… 

Remember a couple of weeks ago when I told you about how famous economist, David Rosenberg, had talked about (on Twitter) how bonds had outperformed stocks?  He had said, ” Bonds have more fun”…  Well, he was back on Twitter this past weekend talking about how bonds continue to outperform stocks…   Oh, and this just flashed across my screen… Stock index futures are trading at max down this morning, indicating a very nasty start of the day and week for stocks… 

I had a discussion with my wife last night about a person that had come from Italy back to St. Louis, and now she has the virus… I have some serious thoughts on this situation, that I’m not going to get into now, and the Butler patio is not open yet, but my deck down here is… so join me if you can and I’ll impart my opinions on this situation! 

So, getting back to the negative interest rates discussion…   I truly believe that negative interest rates will appear here in the U.S. during the next recession, that should be the recession of all recessions… I said that in an interview with Dennis Miller of: Milleronthemoney.com  for his weekly letter a couple of months ago… Why did I think that then?  Well, I’ve explained this all before folks… I see things that are coming for the markets… Sometimes I’m way ahead of the crowd or the event if you will, but eventually my calls are bang on…  And I truly believe that my call for negative interest rates here in the U.S. will also be bang on… 

Is there danger in negative interest rates? Ahhh grasshopper, I’m glad you asked, for the answer is a simple: Yes there are dangers in negative interest rates…  Think about that for a minute, if the savings you have in the bank account, which aren’t getting paid diddley-squat, begin to have charges on these balances, thus reducing your savings holdings, would you continue to keep your funds there?  

What would happen to banks if there were runs on deposits?  Armegeddon, that’s what!  And the Fed would begin with helicopter money and attempt to head off the depositors before they reach the bank, and then the whole shooting match, the big enchilada, the economy comes to screeching halt, and the financial system collapses, and new system has to be thought of…

Now, how’s that for being serious? Wouldn’t you rather have fun-loving, Chuck back?  

The U.S. Data Cupboard last week had us looking at a negative print for Factory Orders in January, and a Markit ISM (manufacturing index) print below 50 at 49.4, and finally a Jobs Jamboree where the BLS claims that 273,000 jobs were created in February…  Nevermind that 143,000 jobs were added out of thin air by the BLS after the surveys were received!  

There’s not much for us to see in the Data Cupboard this week, so the markets will be on their own, which doesn’t bode well for the dollar, Oil, the Petrol Currencies and stocks….

To recap… It was a wild trading week last week, as the Coronavirus has taken over the minds of traders, who have exited dollars, bought the safe haven currencies, led by the euro, and bonds, and have sold stocks, Oil and Petrol Currencies…  Oil saw its largest 1week drop since 1991…  The 10-year Treasury’s yield has dropped by a HUGE margin to just 45 basis points folks…  That alone should tell you just how serious this virus has become…

 For What It’s Worth….  Longtime readers of this letter will recall me going ballistic on Janet Yellen a few years ago, when I said she was greasing the tracks for the Fed to buy stocks… Well, here we are a few years later, and the Fed’s Rosengren believes that the Fed will have to buy stocks… That article can be found hehttps://www.zerohedge.com/markets/boston-feds-rosengren-says-fed-may-soon-have-buy-stocksre: 

Or, here’s your snippet: “Three weeks ago, former Fed Chair Janet Yellen incepted the idea that during the next crisis, the Fed should consider expanding the range of assets it would purchase, most notably buying stocks. Our comment to this was that “thanks to Janet Yellen, we now we know that before the current fiat regime of central banks finally ends and before stocks go limits up as the revolution starts, the Fed will order a POMO of, well, everything in one final, last ditch effort to keep social stability by creating the impression that stocks are stable and rising even as society implodes.”

Well, thanks to experiments conducted in a Chinese P-4 bio-lab, the next crisis appears to have arrived in the form of the coronavirus pandemic, and the idea of the Fed buying stocks is now on the agenda, case in point Boston President Eric Rosengren, who echoed Yellen, and said the Fed should be allowed to buy a broader range of assets – either by change of mandate or through a facility that allows it to buy stocks – if it lacks sufficient ammunition to fight off a recession with interest-rate cuts and bond purchases. In such a scenario, the U.S. Treasury should indemnify the Fed against losses, Rosengren said in the text of remarks scheduled for delivery Friday in New York.

“In a situation where both short-term interest rates and 10-year Treasury rates approach the zero lower bound, allowing the Federal Reserve to purchase a broader range of assets could be important.”

Excerpt: “In such a case, as Marvin highlighted in his 1999 article, we should allow the central bank to purchase a broader range of securities or assets. Such a policy, however, would require a change in the Federal Reserve Act. … Alternatively, the Federal Reserve could consider a facility that could buy a broader set of assets, provided the Treasury agreed to provide indemnification.”

Rosengren also warned the Fed would face greater challenge than in 2008 crisis when Fed’s benchmark rate was cut to nearly zero, because yields on longer-run Treasuries have fallen below 1%.

Chuck Again…  Ask the Japanese and Swiss just how great it is that their Central Banks own a majority percentage of their stock markets…. I’m just saying…

Currencies today 3/9/20 American Style: A$.6604, kiwi .6334, C$ .7341, euro 1.1415, sterling 1.3090, Swiss $1.0780, European Style: rand 15.9330, krone 9.5232, SEK 9.3730, forint 294.57, zloty 3.7828,    koruna 22.3650, RUB 68.77, yen 102.40, sing 1.3829, HKD 7.7690, INR 74.35, China 6.9310, peso 21.53, BRL 4.6249, Dollar Index 95.21, Oil $32.55,   10-year 0.45%, Silver $16.96, Platinum $875.54, Palladium $2, 425.45, and Gold… $1,.677.65

That’s it for today….  I’m heading north again this morning, so I’ve got to get this out the door and get on the road! Our Blues won a good game in Chicago last night VS the Blackhawks! Always a “good game” when the Blues beat the Blackhawks!  And the NCAA major conference championships will go on later this week, with “selection Sunday” scheduled for this coming Sunday, and then the brackets get printed and office production goes to the wayside… HA!    Thanks to good friends Kevin, Lisa, Gus, Diane, Duane and Rick for their visits down here these past couple of weeks… We love to have company! And with that, I’ve got to go, so The Searchers take us to the finish line today with their song: Love Potion #9… I hope you have a Marvelous Monday, and will be Good To Yourself!

Chuck Butler

 

Gold Gets Whacked!

February 26, 2020

* The price Manipulators weren’t finished selling Gold Short on Monday

* The dollar bugs continue to hold the conn over the currencies… 

 

Good Day… And a Wonderful Wednesday to you! The last Pfennig until March 9th… I know you all will not like the fact that I won’t be writing until then, so take the time to enjoy this last one until the 9th! I will miss you too… But hopefully I will be having so much fun that I forget that I miss you! A bad game for my beloved Cardinals yesterday, but the day was fabulous! And a grand time was had by all… After the game we went to a nearby place to have some dinner, and while my stomach wasn’t participating, I went next door and got my head shaved at a cool barber shop that I’ll be sure to return to in a week to ten days when I’m ready for a re-shave! Two sets of friends that used to be neighbors of ours are here to go to games with us… Great company, great memories, great times! Loggins and Messina greet me this morning with their song: Your Momma Don’t Dance… And you Daddy don’t rock and roll! When my darling daughter Dawn was a young girl, she would get confused by the words, and so I told her to sing it the way she knew the words should be… And she would sing; My momma does dance and my daddy does Rock and Roll!

Poor Gold… The price manipulators just can’t bear to see us Gold bugs celebrate, now can they? Gold sufferered though a day where the price manipulators had the conn, and brought Gold’s price back down to $1,635… This after seeing gold reach $1,691 the previous day… So, there’s been no cure for the Coronavirus, no vaccine that can be administered, and so the same fears of spreading are still on the minds of traders, but… the price manipulators can’t have Gold taking off to higher ground without a fight…

In fact, the CDC just issued a note that talked about a “pending outbreak of the Coronavirus in the U.S.”  And then right after they issued that statement, it was reported that a U.S. soldier had been tested positive for the virus… Uh-oh…    So, on that news, Gold has recovered some of its loss yesterday, and is up $12.85 in the early trading…. 

Remember, and I’ll go though this once again for those that are new to class…. The U.S. Gov’t has been fighting a rise in the price of Gold since the early 70’s … I’ve seen communiques released by Wikileaks that have the words of Henry Kissinger, Paul Volcker, and others talking about how they couldn’t allow Gold’s price to rise, which would bring it forefront to the minds of investors around the world, who thought about substituting dollars for Gold… Palladium can climb to the moon, and the price manipulators don’t care… But give Gold a day or two of rally, and the price manipulators are allover Gold like a cheap suit!

OK, I had better stop there… before I hear a knock on my door, and two square jawed young men with sunglasses on, are asking me to go with them! But I figure as long as the folks over at Wall Street On Parade, continue to expose the truths about what the U.S. Gov’t is doing through the banks, etc, then I should be OK… But if they get shut down, by the Government, then I guess I will be worried at that time!

The Dollar Bugs are finding it difficult to keep the euro down, while there are finding it easiy to remain well bid VS the other currencies… The Dollar Index has risen to above 99… this is the highest it’s been in a long time folks…  Just goes to show-ya that dollar bugs are stranger than fiction… But what do I always tell you when it appears that something has gone about as far as it will go?  That to remember that a star shines brightest right before it burns out…  I’m just saying.. 

In the Eurozone this morning, the European Central Bank President, Christine Lagarde will speak. This will be her first run at continuing the legacy of Mario Draghi, who at any opportunity would throw the euro under a bus… I’m wishin’ and hopin’ and thinkin’ and prayin’ that Lagarde goes in a different direction, and begins to take ownership of the euro, which as the President of the Central Bank she should do automatically! 

The euro has slowly moved higher VS the dollar this week, and I would not like to see it get trashed because Lagarde throws it under a bus… 

Tonight in New Zealand, they will print their latest Trade data… Remember New Zealand is an island country so their Trade data should be a Deficit, but… this time this report will be affected by the Coronavirus in China… I’ll keep an eye (because that’s all I have!) on this data to see if the virus has started to filter into the economic reports.  This will be a good thing to go on down there, to take their minds off the way their respective currencies (A$’s and kiwi) are being treated these days… 

You know I totally forgot to gloat yesterday… What on earth am I talking about now?  Well, some time ago I told you that the U.S. 10-year Treasury’s yield would go lower than the previous low of 1.38% from several years ago, and yesterday it did just that!  I know, I know, I hear you saying that this only proves that even a blind squirrel can find an acorn…  But hey! At least I made a call that come to fruition, didn’t I?  And because of that I’m gloating this morning! 

In other things, the price of Oil has slide back below $50 in the past 24 hours, and that has simply piled on, without a 15-year penalty, the dollar’s strength on the Petrol Currencies, led by the Russian ruble… UGH! 

The U.S. Data Cupboard just has some new housing sales data for us today. Not real economic data… We won’t see any of that until tomorrow when the January Durable and Capital Goods Orders print…  I’ve really become jaded toward the U.S. Data Cupboard, and its data prints… For they don’t see to be taken into the value of the dollar, the way they once were…  

To recap… Gold hot whacked badly by over $24 yesterday, and it was all the paper short Gold trades doing the trick…  But a CDC statement yesterday has Gold trying to recover its losses yesterday in the early morning trading today.  The euro continues to inch higher VS the dollar, while the other currencies are getting taken to the woodshed on a daily basis. The Dollar Index has gone over the 99 handle, Treasuries have breached their previous low of 1.38%, and the price of Oil has slid back below $50…

For What It’s Worth…  Like I said above the bad and weak data prints don’t seem to be worthy of weakening the dollar these days, and here’s another example of that statement, as subprime credit delinquencies are rising and it’s as if no one cares… this article can be found here:  https://wolfstreet.com/2020/02/22/subprime-credit-card-delinquencies-spike-to-record-high-past-financial-crisis-peak-as-other-consumers-relish-the-good-times-why/

Or, here’s your snippet: “The rate of credit card balances that are 30 days or more delinquent at the 4,500 or so commercial banks that are smaller than the top 100 banks spiked to 7.05% in the fourth quarter, the highest delinquency rate in the data going back to the 1980s (red line).

But at the largest 100 banks, the credit-card delinquency rate was 2.48%, which kept the overall credit-card delinquency rate at all commercial banks at 2.7% (blue line), though it was the highest since 2012, according to the Federal Reserve. What’s going on here, with this bifurcation of the delinquency rates and what does that tell us about consumers?

Clearly, those consumers that have obtained credit cards at the smaller banks are in a heap of trouble and are falling behind at a historically high rate. But consumers that got their credit cards at the big banks – lured by 2% cash-back offers and other benefits that are being heavily promoted to consumers with top credit scores – do not feel the pain.

A similarly disturbing trend is going on with auto loans. Seriously delinquent auto loans jumped to 4.94% of total auto loans and leases outstanding. This is higher than the delinquency rate in Q3 2010 amid the worst unemployment crisis since the Great Depression. On closer inspection, there was that bifurcation again; prime-rated loans had historically low delinquency rates; but a shocking 23% of all subprime loans were 90+ days delinquent.

During the Financial Crisis, delinquencies on credit cards and auto loans were soaring because over 10 million people had lost their jobs and they couldn’t make their payments.”

Chuck again… and to think that supposedly we’re in “good times” economics wise, right, I mean that’s what we just keep hearing, but then we have all these problems, what gives? 

Currencies today 2/26/20  American Style: A$ .6591, kiwi .6298, C$ .7521, euro 1.0876, sterling 1.2936, Swiss $1.0250, European Style: rand 15.2602, krone 9.3808, SEK 9.7372, forint 312.20, zloty 3.9603,    koruna 23.2495, RUB 65.21, yen 110.55, sing 1.3974, HKD 7.7917, INR 71.62, China 7.0335, peso 19.13, BRL 4.3866, Dollar Index 99.12,   Oil $49.47,   10-year 1.37%, Silver $18.09, Platinum $928.82, Palladium $2,729.00 and Gold…. $1.647.84

That’s it for today and until March 9….   I’m really excited to have my spring training buddie showing up on Friday…  They will probably be ready for some warmer weather, it’s snowing in St. Louis this morning!  It was 85 and hot at times here yesterday, I even had to go underneath the stands for a short time to get out of the sun…   Maybe the next time we talk, I will have good news regarding my leg wound, as it appears to finally be on the mend…  Friday would have been my sister Barbara’s birthday. We lost her way too early to ALS a couple of years ago…  Many years ago, Barbara and I were very tight, but then she got married, and had kids, and life went on… OK… Blues beat the Blackhawks last night 6-5, that must have been a wild and wooly game like the one’s in the past!  Both my college basketball teams will play tonight at the same time… Mizzou will play at Vanderbilt, and St. Joes will visit out St. Louis U. Billikens…  Jefferson Starship takes us to the finish line today with their song: Count On Me…   I hope you have a Wonderful Wednesday, and please Be Good To Yourself, while I’m gone! 

Chuck Butler

The Boys In The Band, Show Up…. UGH!

February 25, 2020 

* Gold gives back $30 of its Monday gains, but still records a profit!

* The dollar bugs still have the conn over the currencies… 

Good day… And a Tom Terrific Tuesday to you! Another chamber of commerce day, weather wise, here yesterday.. I hear word of a cold front moving through this coming weekend. UGH!  It’ll be sunny and 84 for the baseball game today, so I’ll be getting out the SPF!  We received some sad news yesterday, our friends from Houston, that were here, learned that his mom had died. So that ended their Spring Training trip for this year, and brought back sad memories for me from 2017, when I had to leave Spring Training to fly home for my sister’s memorial service. (I still miss you Barbie doll 🙁 )  Def Leopard greets me this morning with their song: Bringin’ On the Heartbreak… 

Well, Gold took a spin on Mr. Toad’s Wild Ride yesterday…  After I signed off and headed north, Gold added $10 more dollars to its overnight price, which put it at $1,691… But then the boys in the band showed up and at the end of the day, Gold had given back $30 of its early morning gain, to only close up $16 on the day…  I had a dear reader send me a note and asked me why I thought the boys in the bank had failed to keep Gold in check…  

I guess I spoke too soon, because I told him that I thought that the price manipulators had been told to “back off”…   but that was not the case yesterday, as they showed up with arms full of short Gold paper trades…  But when I think about Gold’s actual move since last week, it has risen from $1608 to $1,650… so, not a shabby move, I would say… but, still not the icing on the cake move that was there for us yesterday, before the boys in the band decided that enough was enough.

The Coronavirus is still on everyone’s minds, folks… As well it should be, but the safe haven buys of Gold have backed off a bit… But not the safe haven buys of Treasuries! The 10-year’s yield is 1.35% this morning, down from 1.40% yesterday…  The bond boys see what I’m seeing folks, and that is this Coronavirus is spreading, even though the Chinese say they have it under control. And….  using my best Pinocchio voice… “When I look around the room today, I see great potential. You have potential, and you have….    HA!

The dollar bugs still have the con with the currencies…  This latest surge in the dollar really has me scratching my bald head…  It defies logic, and I hate it when that happens! For I’m all about logic, folks… But as the old saying goes, the markets can remain irrational longer than you can stay solvent…  Not that we’re completely all in on that saying, it does play well in the sandbox right now.  

Shoot Rudy, even the Russian ruble is mixed up in this dollar strength move, and the price of Oil has steadied a bit, which should provide some support for the ruble, but noooooooooooo!  The dollar bugs really have all the answers right now, so like I said last week, we had better batten down the hatches, or look for bargains, because when the currencies are cheaper VS the dollar, is the time to buy, because…. You can buy more of them!

 The Aussie dollar (A$) is getting whacked due to its relationship with China, and when the A$ gets whacked its kissin cousin across the Tasman, the New Zealand dollar / kiwi, sells off in sympathy  with what’s happening to the A$. 

We are coming up on Summer, and the summer vacation time, right? Well, this will be a good time to travel to Europe or the S. Pacific as things in these countries will be much cheaper!  And no… I’m not starting a vacation travel service company in my retirement! HA! 

Yesterday in the Eurozone, we saw the color of some economic prints from the German Think Tank, IFO…   And their Business Climate and Outlook reports didn’t show any major moves downward, and to me they looked pretty flat, so  the euro did manage to eke out a small gain VS the dollar yesterday.  

And one has to question just what the heck is going on over in Japan these days… First, last week they get some very damaging / weak economic reports, and this week, they print some that show strength! Wait, What? The Japanese really think they can pull the wool over our eyes?  Japan and the yen is a basket case, has been, is still and will remain one, folks… So, don’t be confused, like the chameleon in the box of Skittles yesterday! 

Here in the U.S. the Data Cupboard is still lacking any real economic reports, but we will see the latest Case/ Shiller Home Price Index (HPI) today… For about 5 months, previous, and up until two months ago, Home prices were dropping each month, but then there was a reversal, and now we’ll see which direction they are really headed… ‘

To recap… The dollar bugs still have the conn with the currencies, and even a strong currency like the ruble has succumbed to the dollar bugs’ pull…  Gold had a great day going yesterday climbing up to $1,691, that is until the boys in the band showed up, and by day’s end Gold had only booked a $16 gain, and is down another $8 this morning…   But the pressure on the bond yields remains strong, with the 10-year Treasury’s yield falling to 1.35% this morning… 

For What It’s Worth…  I think it was yesterday, or lest it was recently, that I said that the stock jockeys think the Fed has their backs…  I questioned their thinking, but realized it was what was supporting the stocks… Well, this article on Zerohedge.com talks about how the Fed won’t be able to support stocks, and it can be found here: https://www.zerohedge.com/markets/no-fed-wont-save-market-heres-why

Or, here’s your snippet: “The greater the excesses, speculative euphoria and moral hazard, the greater the reversal.

A very convenient conviction is rising in the panicked financial netherworld that the Federal Reserve and its fellow dark lords will “save the market” from COVID-19 collapse. They won’t. I already explained why in The Fed Has Created a Monster Bubble It Can No Longer Control (February 16, 2020) but it bears repeating.

Contrary to naive expectations, the Fed’s primary job isn’t inflating stock market and housing bubbles, though punters are forgiven for assuming that, given the Fed has inflated three gargantuan bubbles in a row, each of which burst (1999-2000, 2007-08 and now 2019-2020).

The Fed’s real job is protecting the banking/financial sector from a richly deserved and long overdue implosion. Blowing speculative asset bubbles is a two-fer, enabling rapacious, parasitic financiers and banks to profit from debt-serfs borrowing and gambling in rigged casinos (take your pick: student loan casino, housing casino, stock market casino, commodities casino, currency casino, etc.).

Blowing guaranteed-to-burst bubbles also generates a bogus PR cover, the Fed’s beloved “wealth effect,” an idiots’ delight belief that the greater the speculative bubble, the more tax donkeys and debt serfs will spend, spend, spend on defective junk and low-value services they don’t need–in essence, speeding up the global supply chain from China et al. to the local landfill, all in service of Corporate America profits.”

Chuck Again… Yes on the web site there’s a picture of Fed Chairman in a Superman outfit, pretty funny…  I thank Ed Steer for posting this article this morning, so I could check it out!

Currencies today 2/25/20 American Style: A$ .6594, kiwi .6320, C$ .7519, euro 1.0834, sterling 1.2965, Swiss $1.0221, European Style: rand 15.2231, krone 9.3686, SEK 9.7477, forint 311.73, zloty 3.9725,    koruna 23.3116, Silver $18.41, Platinum $966.25, Palladium $2,657.37, and Gold… $1,650.46

That’s it for today…  Now, mark you calendars… I’m going to be on my annual spring Training vacation next week… So no Pfennigs all week!  A day game today at Roger Dean! The defending World Series Champion Washington Nationals will be there…  Blues and Blackhawks tonight! There was a time when getting a ticket to that game would have near impossible!  The Blackhawks are still a rival that the Blues fans love to see lose…  And then there’s our XFL Battlehawks! I read yesterday that their first home game is a sellout, and resale tickets are being offered at $200 a ducat! Do you think that folks in St. Louis miss their football team?  HA! OK,  Eric Burdon and the Animals take us to the finish line today with their rock classic: We Gotta Get Out Of This Place…  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself! 

Chuck Butler

A Global Flight To Gold & Treasuries Is Among Us!

February 24, 2020

* Gold soars on Friday and this morning!

* Dollar is still well bid VS most currencies… 

Good Day… and a Marvelous Monday… Next week, I’ll be on vacation, my annual spring vacation from writing, so this is just a warning! Well, Spring Training games finally began for me on Saturday. I had my annual emotional moment when I come up the stairs onto the concourse level and see the plush green field for the first time each year. I know in my heart of hearts that it’s only by the grace of God that I get to attend spring training each year, and so it was on Saturday, that I got to smell the hot dogs grilling, the popcorn popping and the beer guy selling his beer. And I thought to myself, Man, you are a lucky person, Chuck… My beloved Cardinals won their first spring training game VS the Mets, who back in the 80’s we referred to as “pond scum” And with that bit of history, The Killers greet me this morning with their song: Somebody Told Me…

Well, gold stole the show on Friday last week, soaring higher by $23 on the day, and  when I looked at the shiny metal, this morning, it was up another $37… So Gold has gapped higher by huge chunks in the past few days, folks… and trades this morning with a $1,681 handle… It’s all about the fears pf the Coronavirus spreading… Now there are reported death from the virus in Italy… It’s spreading folks… and the safe havens like Gold & Treasuries are the place to be… Gold is soaring and Treasury yields are dropping like flies… Just last week the 10-year’s yield was 1.56% and this morning it is 1.40%… Just a public service announcement here folks… that when bond yields go down, the price of the bond goes up, and vice versa… So with the yield on the 10-year dropping, that means that the price of the bond is soaring… just like Gold!

The currencies rebounded from last week’s selling on Friday, and the euro regained the 1.08 handle and beyond… I really, in my heart of hearts knew that last week’s selling of the euro was overdone, and the recovery proves that. The Safe haven currencies that used to be in play when things like this happened were yen, francs, euros. Gold and Treasuries have been changed to: Gold and Treasuries, and somewhat dollars… Although on Friday the dollar bugs got their rears ends handed to them! 

Why have euros, francs and yen all been omitted this time in safe haven buys? Well, they all three have negative deposit rates and yields, and last week Japan’s GDP got trashed! So… Gold and Treasuries are the picks to be the real safe havens right now, and why not? Gold doesn’t have yield, but it also doesn’t have negative yield, and Treasuries are in rally mode… So, what are you waiting for?

This is a “global flight to Gold and Treasuries” folks… and you will notice that I didn’t mention stocks… To me, the stock phenomenon has run its course, Yes, there are famous analysts out there that will tell you that as long as the Fed has the stock markets’ back then everything will be seashells and balloons…  But…. I disagree with them, this virus thing seems to be the black swan that has been hovering over the markets and economies like the Sword of Damocles for years, has finally swam into our lake… 

I hear you brother… Gold and Treasuries have taken off and now you feel it’s too late to back up the truck and buy them… Ahhh, grasshopper, all I’ll say to that is, if you read this letter, you’ve been warned for months, so I have no sympathy for your plight, but… I  do believe there’s more to go, in this global flight to Gold and Treasuries, so it’s not the absolute too late time, it’s just late, but like the old saying goes, “it’s better to be late than never”… I’m just saying.. 

The other currencies than the euro, have been taken down in the overnight markets, with the Canadian dollar/ loonie, and to a lesser extent, the  Russian ruble, have maintained their respective prices, but currencies like the Mexican peso, Hungarian forint, Czech koruna, and especially the Aussie dollar (A$) have lost a lot of ground to the dollar bugs…  So, in essence the dollar remains well bid, except against Gold… 

There’s not much in the way of real economic data in the U.S. Data Cupboard this week folks…  We’ll have to wait until Thursday before we see Durable and Capital Good Orders, which have been negative to poor performances for months now, and I don’t see them changing colors like a chameleon…   

On a sidebar, my good friend Dennis Miller sent me a note last week with some great sayings on them, and one of them said, “I’m as confused as a Chameleon in a bag of Skittles”    HAHAHAHAHAHA! 

OK, to recap, and yes, I know this is short, but I have my weekly visit to the St. Lucie wound center this morning, so this has got to get out the door with me following it to make it on time!  But the recap is simply that there’s a Global Flight to Gold & Treasuries that’s going on folks, and Gold and Treasuries are soaring higher! Gold is up $37 already today!  Chuck believes that the Coronavirus is the proverbial Black Swan for the markets and economies, that doesn’t bode well for anything other than Gold and Treasuries… 

For What It’s Worth…  OK, I forgot to mention in the U.S. Data Cupboard discussion that the Markit version of the PMI (manufacturing index) dropped like a rock in January to below 50!  and the folks at Zerohedge.com picked up the commentary on it, and that article can be found here: https://www.zerohedge.com/economics/treasury-yields-plunge-record-lows-us-pmi-collapses-contraction

Or, here’s your snippet: “Markit’s U.S. Manufacturing bucked the surprising surge in ISM Manufacturing in January and preliminary February data was expected to confirm this slowing trend (with Services steadily expanding).
• U.S. Feb. Services Flash PMI 49.4; Est. 53.4
• U.S. Feb. Flash Manufacturing PMI 50.8; Est 51.5
• U.S. Feb. Flash Composite PMI 49.6 vs 53.3

‘hard’ data – actual economic flows – has been weakening for 4 months, and February appears to have been catch-down time!  

New orders received by private sector firms fell for the first time since data collection began in October 2009. The fractional decline in new business stemmed from weak client demand across the service sector and the slowest rise in manufacturing new order volumes for nine months. Private sector companies continued to struggle to attract foreign client demand as new export orders fell for the second month running.

Finally, we note that the composite output at factories and service providers fell by 3.7 points to 49.6, the lowest level since October 2013, when the U.S. government shut down.”

Chuck Again… Well this poor performing data helped to send Treasury yields down, but the Global flight to Gold and Treasuries is what’s driving the yield drop… But poor PMI data doesn’t hurt, that’s for sure!

Currencies today 2/24/20 American Style: A$ .6606, kiwi .6327, C$ .7626, euro 1.0821, sterling 1.2903, Swiss $1.0201, European Style: rand 15.1282, krone 9.3672, SEK 9.7861, forint 312.34, zloty 3.9752,    koruna 23.2882, RUB 64.04, yen 111.33, sing 1.4017, HKD 7.7947, INR 72.00, China 7.0262, peso 19.12, BRL 4.3878, Dollar Index 99.57, Oil $51.25,    10-year 1.40%, Silver $18.81, Platinum $968.41, Palladium $2,670.65, and Gold… $1,681.16

That’s it for today…  Watched two baseball games this weekend, back in my favorite place to be Roger Dean Stadium for a day game!  Our Blues had a good game last night and now that’s 3 wins in row after their “rough spot”…   Can you believe that February is almost over? Next week is March, my fave month!  Friends all gathered around the pool here last night, and some great conversations were had… The good thing with my friends is that they never ask me my opinion about the markets or economies, for they know I would go into a rant that would leave them speechless! HA! OK, time to get going… Grand Funk Railroad takes us to the finish line today with their song: We’re An American Band…  I hope you have a Marvelous Monday and please be Gold To Yourself! 

Chuck Butler