ATurnaround Tuesday For The Dollar…

May 15, 2019

* Dollar returns to the head of the class on Tuesday…

* Eurozone receives some good 1st QTR GDP, but the euro can’t find a bid… 

Good Day… And a Wonderful Wednesday to you! My beloved Cardinals opened up in Hot-lanta last night with a convincing win, which is a good way to start a road trip! They’ve scored lots of runs in the opening games of the last two series, with this now making 3, and then in the previous 2 series, they put away their bats, thinking their job was done… Unfortunately, it wasn’t… I told you yesterday, that the stock jockeys didn’t need to worry that the PPT would be there yesterday to save them, and that’s exactly, what, in my mind, happened… Consumer debt is rising again… This and more to talk about today… Peter Gabriel greets me this morning with his song: In Your Eyes…

Well, our nothing day on Monday turned to a dollar bounces back on Tuesday… Turnaround Tuesday, I guess… Why would the dollar bounce back, when it got sold on the Trade War news of Friday? Sell the fact, and buy the rumor? Or… did the PPT help out here too? Now, I have you wondering if what I’m saying is all making sense, right? The Aussie dollar (A$) was the worst performing currency of the day as the pain in China is causing a pain in the A$… The rain in Spain is mainly on the plain… Stuff like that!

This morning, earlier, the Eurozone printed their 1st QTR GDP, which was better than expectations at 0.4% for the QTR, and 1.2% year on year, which is exactly where it stood in the 4th QTR of 2018… So, no increase in growth, but…. no weakness either, which is what everyone and their brother was looking for… But still the euro can’t find a bid this morning, and is well below the 1.12 figure… again!  

I do believe that the euro is getting caught in the crosshairs of the Trade War between the U.S. and China… I hope it can shake its way out of those crosshairs soon, before things get ugly… 

Speaking of China… The posted their recent Retail Sales and Industrial Production for April both showed weakness already…  The renminbi continues to post weaker levels just about daily now, and all the euphoria that used to hang out over China, has now moved on, and black clouds have taken the place of euphoria here…  Is it time for China to begin to use some of their reserves to stimulate the markets like they have done in the past when things got dark?  

I’m going to spend some time this morning talking about consumer debt… So… if you don’t want to hear it, too bad! HA! No, seriously, if you don’t want to hear it, then skip ahead… OK, all that want to hear what I have to say about consumer debt are here, that want to be here, so let’s go!

The Center for Microeconomic Data put out their latest report on Consumer Debt… And to start this off I’ll let them tell you the results… it WAS their report after all! “The CMD’s latest Quarterly Report on Household Debt and Credit reveals that total household debt rose by $124 billion to reach $13.67 trillion in the first quarter of 2019—an increase of 0.9 percent, compared to a rise of 0.2 percent in the fourth quarter of 2018. This past quarter, balances climbed by 1.3 percent on mortgages, 0.5 percent on auto loans, and 2.0 percent on student loans, while total credit card balances fell by 2.5 percent.”

And now Chuck’s viewpoint on this… We, as a country now have more consumer debt than what was on the books prior to the financial meltdown in 2007/08… Wait! What? Yes, that’s right! Remember when consumers said, We’ve learned our lesson, and we’re going to cut back our deficit spending? Well, they did that for about a year, and then the spending more than we make began to build again, and now, like I said, the consumer debt totals more now than in 2007/08… Here’s the difference between Consumer Debt and Gov’t Debt folks… Gov’t debt can be defaulted on, and Consumer Debt while it can be defaulted on, can’t be washed off the books without someone going to debtors’ jail… Well, at least that’s the way it used to be, we problably have changed all that because we wouldn’t want to hurt someone’s feelings by making a public spectacle of them… So, here’s a cookie, and a gold star, for “trying to pay off your debts”….

And it’s not just housing related debt… The report also showed that: Non-housing balances increased by $10 billion in the first quarter, with a $6 billion increase in auto loan balances and a $29 billion increase in student loan balances. Credit Card balances at least narrowed in the quarter!

There’s no way this all turns out peachy folks… There’s just no way… Sooner or later the bill collector is coming to the door… And he won’t take “go away” for an answer… The repo guys will come for the car, and when you’re away from home, they’ll come for that big screen tv, all the Alexa’s and dots you have and other things…

OK, that’s all I’m going to say about that today… Gold couldn’t take that next step to trade past $1,300 yesterday, and fell back by $4 on the day… And the price of Oil rebounded when it was reported that drones had attacked gas outlets in Saudi Arabia… Now, who would do something like that? Hmmm…. Well, I guess you have to figure out who in the world has the capability to direct drones to do something like that… Hmmm… That’s all I have to say about that!  

And right when the price of Oil was ready to make a big move forward, once again out came the supplies report from the U.S. that put the road block on Oil’s move forward!  Funny, not funny ha-ha, that the last two times the price of Oil began to more forward, the supplies report seems to show up… Oh well, it is what it is… 

Yesterday, I mentioned my trip to the dark alley, where I checked on the status of the Gov’t demanding holders of IRA’s and 401k’s to own nothing but Treasuries… And here’s what my good friend Dennis Miller, the Retirementor, who’s also now going though chemo and radiation, and can be found at www.milleronthemoney.com… Had to say about that: “If the government forces people to put treasuries in their retirement accounts, it will be followed by the greatest theft of wealth in human history. Once the money is in, all it takes is another five year period like the Carter years and the value of their nest egg will drop by 60%.

Savvy investors would probably cash out their IRA’s to avoid that.”

Yes, I agree… I actually know some people that closed out their IRA’s took the tax hit, when this was first talked about years ago… And then it was just talk, as it is now, but imagine if you will if talk becomes reality… YIKES!

OK, let’s talk about something else… 

The U.S. Data Cupboard finally gets some real economic data prints to show us today…  Every channel I turn to (just for grins) has a talking head telling me that the U.S. economy is strong and robust…  Well, I wonder what they’ll say when they see today’s data prints… I fully expect April Retail Sales to be weak and disappointing, and I fully expect Industrial production in April to be negative…   But if these prints do show the weakness I expect, it won’t be discussed at all… Like water off a duck’s back… 

To recap… Our nothing day on Monday, switched to a turnaround Tuesday for the dollar, and all the currencies’ gains from Friday, have been reversed… UGH!  Consumer Debt is soaring once again, and Chuck says it won’t turn out peachy… The Eurozone 1st QTR GDP was bang on the same figure as the 4th QTR 2018, which means all the gloom and doom that was expected for the Eurozone isn’t happening, yet, that is… 

For What It’s Worth… this will look different this morning but, hey! Just go with it! HAH!

Well, I mentioned this a couple of weeks ago, that Bart Chilton, the former CFTC regulator had died, but before he did, he gave an interview in which he said that the CFTC had told JPMorgan to cease their short silver operations, but that JPMorgan had ignored them. Well, the GATA folks sent me a link to an interview with Ed Steer where he talks about this new found information regarding price manipulation… here’s what the GATA folks said: “GATA Board of Directors member Ed Steer, editor of Ed Steer’s Gold & Silver Digest letter, was interviewed the other day by James Anderson for Silver Doctors. They discussed former U.S. Commodity Futures Trading Commission member Bart Chilton’s confirmation that the commission allowed JPMorganChase to manipulate the silver market. They also discussed the use of derivatives by central banks and their agents to control commodity prices.

The interview is 20 minutes long and can be heard at Silver Doctors here:
https://www.silverdoctors.com/headlines/world-news/ed-steer-gold-silver-…

Chuck again… I hope you get the opportunity to listen to this interview… All those naysayers out there that continue to say that the Gov’t has nothing to do with price manipulation of Gold & Silver have to be feeling a bit less confident right now… As this revelation ties to my theory that yes, the regulators know that JP Morgan et al, are manipulating the prices of Gold & Silver, but they have the wink and nod from the Gov’t that they will not be persecuted… Bart Chilton was telling us that in so many words, when he said that the CFTC told JPMorgan to cease their shorting operations, and they ignored the CFTC…

Currencies today 5/15/19 American Style: A$.6917, kiwi .6553, C$ .7420, euro 1.1180, sterling 1.2880, Swiss $.9918, European Style: rand 14.2778, krone 8.7583, SEK 9.6316, forint 290.73, zloty 3.8540, koruna 23.0450, RUB 65.13, yen 109.31, sing 1.3695, HKD 7.8495, INR 70.40, China 6.8759, peso 19.20, BRL 3.9828, Dollar Index 97.64, Oil $61.11, 10-year 2.37%, Silver $14.81, Platinum $851.61, Palladium $1,318.04, and Gold… $1,298.32

That’s it for today…  The Las Vegas Money Show is going on this week… Chris sent me a text last night with a picture from the show, telling me that people keep asking about me…  Well, that’s nice isn’t it? To have made an impression on strangers, that 2 years after I’m gone, they keep asking about me? I’m very proud of myself this morning… Don’t let that go to your head, Chuck!  HA!  Our Blues get back on the ice tonight, but this time they’ll be on home ice… Let’s Go Blues!  So, hockey and baseball on at the same time tonight… Get the TV out of Alex’s room to make this happen! Earth, Wind and Fire takes us to the finish line today with their song: After The Loving Is Gone…   I hope you have a wonderful Wednesday, and continue to Be Good To Yourself!

Chuck Butler

Don’t Worry Stock Jockeys, The PPT Will Save The Day!

May 14, 2019 

*Currencies get stuck in the mud, and don’t move on Monday… 

* Chuck gets a call from the Fed Chairman! (not really..)

 

Good day… And a Tom Terrific Tuesday to you! Oh what a night! All of St. Louis’ attention was on their Blues hockey game in San Jose, as the Cardinals were traveling to Atlanta… It was “one of those days” for me yesterday… Every now and then, all the cancer drugs sneak up on me, and all I want to do all day is sleep… And sleep I did yesterday! I tried to stay up for the end of the game last night, but the hour later start than when in St. Louis, made that difficult for me… And so, in the middle of the night, when I usually wake up, to take my chemo, and then go back to sleep, I checked the score to find out the Blues had won! … Our Blues come home now for the next two games, that they’ve got to win on home ice! The Blues were up 2-0 one minute and the next it was tied 2-2, UGH! And then the Blues went ahead 3-2, and I went to bed! I’m greeted this morning with the Killers song: Somebody Told Me…

Well, it was a nothing day in the currencies yesterday… Last night when I checked the currencies before heading off to bed, the euro was trading in the same clothes as it did all day at 1.1233… But the stock jockeys sure couldn’t say it was a “nothing day” in the stock markets… That was ugly, and it will leave a mark for sure, but at some point the Plunge Protection Team will step in, and well, stop the bleeding, the stock jockeys have that to look forward to! The stock investors sure don’t like the idea of increased tariffs not only on exported goods but on imported goods, making goods much more expensive, thus reducing the disposable income of consumers…

One currency that did move some on Monday was the Aussie dollar (A$), as it slid further back into the 69-cent handle. As I told you yesterday, this is all in response to the tariff thing escalating, for traders know all too well how this Trade War is going to hurt both the Chinese and U.S. economies, and probably spread around the world…

Gold pushed higher on the day by $13 and closed just under $1,300, at 1,299 and change… Tariffs are taxes folks… Think of your taxes going higher and inflation stepping into the picture once more, and the Fed? Well, like I said last week, they’ve painted themselves into a corner, and will be damned if the cut rates and invite inflation to soar, or damned if they don’t cut rates, and allow the economy to sink further into the recession abyss…

Remember, what I’ve been telling you folks, that this next recession might not be your garden variety recession… First of all, the U.S. has never had so much debt to deal with in past recessions… They’ve never had so many derivatives on the books of financial companies… They’ve always were able to cut interest rates at least 5% during recession, but with the Fed Funds Rate at 2.5%, that’s not happening this time… Oh, and we’ve never had the level of leveraged Corporate loans on the books, that could be like a keg of dynamite if set off…

I’m thinking that the Fed should risk inflation rising and worry about the short term of a recession and what it might bring… But then nobody asked me… Hello? Yes, this is Chuck Butler, who’s calling? Oh, hello, Jerome Powell, Fed chairman! What may I help you with? Well, Chuck, I’ve been reading the Pfennig for some time now, and I know you’re not one of our fans, but you made sense the other day when you said that you thought the Fed should risk inflation and cut rates… Did you really mean that, for I trust your opinion to the bitter ends of the earth! Well, yes, Mr. Chairman, that’s what I believe, because IF you’ve been reading religiously then you know about the black clouds that would circle the U.S. in a recession… So, go back and tell the other Fed Heads, what I’m saying, and I’m sure you’ll get them all to agree with me! Bye~…… As if!

Getting back to Gold…  No early morning shenanigans today, so Gold starts the day at $1,299…  Regarding Gold…. I’ve often wondered why the U.S. Gov’t doesn’t come out and make an appeal to U.S. citizens to buy Gold… Why not? I’ve talked about this graph before, but I thought I would pull it out again, dust it off, and tell you the results of investment returns in the past 20 years… REITS are number 1 with an average annual return of 9.9%… And Gold is second at 7.7%… You would have to go all the way down the 4% return range to find the developed markets of the U.S. (stocks & bonds)… Gold kicks their Behind the refrigerator there was a piece of glass, Lulu sat upon it and broke  her little… ask me no more questions, I’ll tell you no more lies… And so on! Gold kicks rear and takes names later, and still individual investors, who are on the chart, all the way down at the bottom with an average annual return the past 20 years of just 1.9%, don’t buy Gold…  And I sit here and wonder why? 

Well, I heard that the recent 10-year Treasury auction didn’t go so well… Do you think it was because of the drop in yield? Or, was it the fact that investors are getting pretty wary about the debt situation here in the U.S.? Remember a very large portion of our Treasury auctions needs to be picked up by foreigners… And what did I tell you yesterday about what foreign Central Banks are doing with their reserves? That’s right, they’re buying physical Gold, and not Treasuries…. Uh-Oh, spaghetti-o’s….

And that brings me to very dark alley, where things are talked about outside of the media… Here, I get to listen to many  theories and rumors… The rumor I’m concentrating on now is the one that floated around about 10 years ago, and I warned then that it would come back at some point in the future, and it has, that’s why I’m checking it out today… The rumor I’m talking about is the Gov’t requiring U.S. citizens with 401’s and IRA’s to buy Treasuries, since the foreigners aren’t buying them… While I don’t care for the idea, think about it for a minute… If all the moms and pops of the U.S. held Treasuries in their retirement account, they wouldn’t give two hoots about a stock selloff, now would they?  So… checking on it, I find it’s way back in the dark alley, so it appears to be a back burner things right now…

In a side bar… The State of Illinois’ finances are in such shambles that they’re looking for new sources of income… This from the Chicago Tribune…. “ Illinois might start charging $1,000 a year to own an electric car”…. Hey, you can’t make this stuff up folks!

The U.S. Data Cupboard still doesn’t have much to offer us today, same as yesterday, when only Fed Heads speaking were counted as offerings… One Fed Head Neal Kashkari, really made a point of how he believes interest rates need to be lower, which caught the ear of a few Traders… 

The Price of Oil can’t find a bid these days, and that’s really put a crimper on the Petrol Currencies, led by the Russian ruble, which continued to receive good news about the Russian economy, but with the price of Oil wallowing in the mud, the ruble isn’t going anywhere for now…  And neither is the Canadian dollar / loonie, Brazilian real, Norwegian krone, and a few others… 

To recap…  It was a “nothing day” in the currencies as they didn’t move up or down on the day, except the A$ which saw more selling because of the problems in China.  China announced that they would retaliate with tariffs on U.S. goods, and the stock jockeys got their rear ends handed to the them yesterday…  But not to worry, just yet, as the PPT should be in the stock market today to save Polly purebread…  Oil can’t find a bid… But Gold moved higher on the day by $13.80! And sits just below $1,300… 

For What It’s Worth…. For years I’ve written about all the attempts to end the use of cash… I gave you my reasons for being against this effort. Sweden is the posterchild for a cashless society, but here in the U.S. we have more forward thinking people that see what the world would be like with no cash… And I saw this article and though, this is a good follow up, for it talks about plans to fine businesses that only accept credit cards… And it can be found here: https://needtoknow.news/2019/05/cash-is-still-king-san-francisco-bans-cashless-stores-that-require-patrons-to-pay-via-credit-card/

Or, here’s your snippet: “San Francisco officials voted Tuesday to require brick-and-mortar retailers accept cash for goods as payment, joining Philadelphia and New Jersey in banning a growing cashless system that discriminates against low-income people who may not have access to credit cards. Cashless systems can be used to control people and their finances.

San Francisco officials voted Tuesday to require brick-and-mortar retailers to take cash as payment, joining Philadelphia and New Jersey in banning a growing paperless practice that critics say discriminates against low-income people who may not have access to credit cards.

The vote by the Board of Supervisors was unanimous.

Supervisor Vallie Brown, who introduced the legislation, said it “will go far in ensuring all San Franciscans have equitable access to the city’s economy.”

Chuck again… I sure hope this catches on elsewhere, because I was beginning to feel the pressure of no cash being used… Whew! And with all that’s going on in the world today, we certainly don’t need to deal with this stuff right now! (Or never in my opinion!)

Currencies today 5/14/19 American Style: A$.6947, kiwi .6582, C$ .7425, euro 1.1233, sterling 1.2948, Swiss $.9927, European Style: rand 14.2350, krone 8.7246, SEK 9.5970, forint 288.68, zloty 3.8350, koruna 22.9260, RUB 65.33, yen 109.62, sing 1.3686, HKD 7.8487, INR 70.51, China 6.8666, peso 19.18, BRL 3.9717, Dollar Index 97.34, Oil $61.77, 10-year 2.41%, Silver $14.80, Platinum $862.15, Palladium $1,332.46, and Gold… $1,299.04

That’s it for today…  So, the Blues won, the series is tied 1-1… Our Blues played in the Stanley Cup Finals their first 3 years in the league, and never won a game in the finals, getting swept each year.  I have no idea why I went there… But there you go, if you ever wondered! HA!  I forgot to mention yesterday, that last Friday, former colleague and friend, Chris Gaffney came to visit me at my local watering hole!  Thanks Chris! I try to remain on the minds of my former colleagues, but I think I’m losing, as “out of sight, out of mind” seems to rule…  Oh well… I tried…  Cardinals are in hot-lanta for the next 3 days, and then down to Texas for the weekend…  The Great Smokey Robinson takes us to the finish line today with his song: Ooo Baby, Baby…   After I was an old man I was told that this is the best “make out” song… too late for me, but for you youngsters, there you go! HA!  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

Chuck Butler

 

 

 

The Trade War Begins…

May 13, 2019

* The dollar bugs finally retreat… 

* FX traders on trial, but as usual no one will go to jail… 

Good Day… And a Marvelous Monday to you! I trust all the mothers out there had a grand day… I texted Alex yesterday morning (he’s in Montgomery Al. ) and asked him if he had talked to his mother yet… He finally called last night after all the other kids and grandkids left… You don’t know what you’ve got until it’s gone… Just remember that… An awful weekend for my beloved Cardinals, when they hit, they don’t pitch, and when they pitch they don’t hit… That’s a bad combination for a baseball team, for sure! And Our Blues got the Western Conference Finals started on the wrong foot, on Saturday… UGH! 10CC greets me this morning with their song: The Things We Do For Love… Like walking in the rain and the snow and there’s no place to go…

Well, Friday, came and went, and there was no Trade Agreement with China ironed out, and so a new phase of tariffs went into effect at midnight, Friday night… Have I mentioned before how much I dislike tariffs? Now, I’m not the sharpest tool in the shed, and neither are the knuckleheads at the Fed, but at least they know that tariffs aren’t good for an economy, and there were reports all over the news wires on Friday & Saturday about how the Fed will now be forced to cut rates to help offset the bad stuff that will happen to our economy…

China has already announced their retaliation and that’s tariffs on $60 Billion of U.S. goods starting June 1…. 

Have I told you lately how Sanctions don’t work either? All you do, as a country, is tick off people in other countries, that you might need to help you at some point in the future… Good luck with that!

So… the dollar finally gave up the conn on Friday, after the news of a non-agreement, and the stupid CPI printed… CPI (consumer inflation) only gained 0.3% in April, and it was forecast to grow at a 0.4% clip… So, another one bites the dust! And that’s not all! Core CPI, which takes out food and energy (as if we don’t use them every single day of our lives!) only grew at 0.1% and was expected to grow at 0.2%… The Fed Heads aren’t dumb enough to use CPI as their main inflation tool… For that they use the PCE (Personal Consumption Expenditures), which, I’m pretty sure is going to show that inflation is no longer at DEFCON 4, here in the U.S. and that will also give the dollar bugs reason to go hide…

My good Friend, Mike, always gives me trouble about how I make a big deal out of small moves in Currencies… I tell him all the time that the currency markets is a $5 Trillion a-day market, and that there are very large sums of money that can make even larger sums of money in the Currencies if they move just a few cents, much less the types of moves we’ve seen in the past where the dollar was in the middle of a weak dollar trend…

So, with that thought in mind… The euro gained about ½-cent on Friday… The move brought the euro back above the 1.12 handle. And the Aussie dollar (A$) gained back to 70-cents on the day… And all the currencies fell in behind these two leaders… We’re following the leader, the leader, the leader…. 

In the overnight markets there was some change though, as traders rethought their buying of A$’s with China ready to receive more tariffs, and the they reversed the buying and brought the A$ back to .6968 this morning. 

Speaking of China…  Remember when their leader stated that the Chinese wouldn’t use the renminbi as a tool to offset the tariffs? Well, even at that time of his talk, I questioned it, and was sure he was speaking with his fingers crossed behind his back… The renminbi this morning is the weakest it has been since the last time China wanted to shock the world, and allowed the renminbi to weaken to 6.81… that was 2016… And of course now…  No wonder the A$ got taken to the woodshed in the overnight markets, after China posted this price for their currency! 

Gold was allowed to book at $2.40 gain on Friday… to close at $1,285.80… I had a dear reader write me last week, and ask me this: “if there were no price manipulators, what do you see as the price of Gold today, and where would it go?” Well, IF there were no price games played with Gold, I would think it would be around $2,000… And once there, who knows how high it could go?! Silver would be in the same boat… Silver should be trading around $50 and once there, who knows?

I’m just one of those people that believe “the powers that be” in our country, which excludes the White House, would prefer to print money like there’s no tomorrow, deficit spend until it hurts, and basically allow the dollar to go to hell in a hand basket… At which time, Gold (&Silver) would certainly be better alternatives to the dollar, right?

And you know how I always tell you to “follow the money”? Well, since the beginning of 2018, Central Banks around the world (not the U.S. though) have been picking up large chunks of Gold, so much so that in the first QTR of this year, the buying of physical Gold by Central Banks has reached a level not seen since 2013! These wily Central Bankers know that they need something solid for their reserves, and owning dollars doesn’t seem to be what’s on their minds… I’m just saying…

OK… onto other things… The British pound sterling rose above the 1.30 level on Friday, after an upbeat GDP report, albeit very stale, printed… 4th QTR 2018 GDP grew at 1.8%, VS 1.4% in the 3rd QTR… I read a report that talked about how U.K. GDP got a boost in the 4th QTR because people thought there would be a BREXIT deal… But seeing no sign of a deal, I would have to think that the 4th QTR boost will be reversed… Be careful here…

I told you last week that the Japanese yen was seeing some so-called safe haven buying that brought yen from near 112 to just below 110 last week… Well, yen is still below 110 which is a good thing for yen holders, as it’s called a European Priced currency… It takes less of the currency to make up a dollar… These Safe haven trades are usually fleeting and don’t have the legs for a long run, so I wouldn’t put too much into the positive move that yen has made recently… Remember they have Debt up to their eyeballs, a HUGE demographics problem, and a stock market that has been in a fund for 25 years!

Well, how about that? Or Bust my buttons! But, the U.S. actually booked a surplus for the month of April! WOW! Well, shouldn’t they book one that month? (Taxes are due in April) There have been some years recently where we wouldn’t even book a surplus in April! But we did this year, but don’t let that go to your heads, Congress… it doesn’t mean that you get to add more pork and fat to the next spending bill!

On Wednesday of this week, we’re be treated to 3 real pieces of economics … April Retail Sales , and Industrial Production with Capacity Utilization… I’ll bet a dollar to a Krispy Kreme that April Retail Sales will disappoint big time, VS the blow out in March… The Butler Household Index (BHI) indicated that to me…

Until then (Wednesday that is) There’s not much in the gas tank of the U.S. Data Cupboard… So, let’s all take tomorrow off and come back on Wednesday! Sounds like a plan… And you know me… I love it when a plan comes together! HA!

To recap… No Trade Agreement means more tariffs, and the markets are backing off their feeling that an agreement was going to take place. That means the dollar is weaker this morning, as witnessed by the Dollar Index, which on Thursday last week was 97.62, and this morning it’s 97.29…  

Before I head to the Big Finish today, I wanted to talk about this email I received from the GATA folks, telling me that the mega banks that had been caught with their hands in the cookie jar, regarding FX manipulation were going to trial… 

I remember when this story first hit the streets a few years ago, I was still the President of EverBank World Markets, and our legal guy, Tom, called and wanted to talk to Frank and Chuck about this story that the foreign exchange (FX) markets were rigged… We assured him that we were free and clear of this, and since the FX market was a $5 Trillion a day market, we doubted that the rigging would turn out to be much… Well… skip forward to yesterday, when the GATA folks sent me this clip from a news story: BRUSSELS, Belgium — Barclays, Citigroup, HSBC, JPMorgan, and three other banks are set to be fined by European Union antitrust regulators in coming weeks for rigging the multi-trillion dollar foreign exchange market, two people familiar with the matter said.

The other three lenders are Royal Bank of Scotland, UBS, and a small Japanese bank, the people said. The banks will see a 10 percent cut in their fines for admitting wrongdoing.

WOW! And then not wow! Wow that they got caught and will have to pay a fine, but not wow, because no one, and I repeat no one, will go to jail… Shame, shame, shame…

For What It’s Worth… Well, I’ve been the boy who called wolf many times, only to eventually see that wolf… In this case it’s the leveraged Corp loans that I’ve been pounding on the desk about for over a year. And now, the guy that was made famous by the movie: The Big Short, Steve Eisman, was heard talking about these leveraged loans, and you should here what he has to say about them. And you can read it here: https://www.marketwatch.com/story/a-us-recession-will-knock-this-asset-class-hard-says-steve-eisman-of-the-big-short-fame-2019-05-09?mod=MW_section_top_stories

Or, here’s your snippet: “We’re switching gears this morning with our call of the day, from Steve Eisman, a hedge-fund trader who gained prominence for his successful mortgage bets during the 2008 financial crisis. He’s back with more advice in a Bloomberg interview where he pounds the table over corporate debt, which has been a popular subject lately.

In the interview, Eisman says the center of pain for the next U.S. recession will trigger “massive losses” for high-yield or junk bonds, and those rated triple-BBB corporate bonds — just one step higher from those low-grade bonds.

Eisman says the problem is there isn’t enough liquidity — that is, how fast an investor can sell that bond and at a decent price. Traditionally, high-yield bonds tend to be less liquid because they are a riskier securities, with fewer investors willing to take on that risk.”

Chuck again… Do you know how many people thought this guys was nuts, leading up to the housing debacle of 2007/08? No one would listen to him that the mortgage backed bonds were not as solvent as the ratings agencies would have you believe they were, and he was eventually proven to be correct… He also made Semi Truck loads of profits on the shorts he placed on the housing industry…

Currencies today 5/13/19 American Style: A$.6968, kiwi .6580, C$ .7437, euro 1.1233, sterling 1.3015, Swiss $.9923, European Style: rand 14.2815, krone 8.7317, SEK 9.6390, forint 288.09, zloty 3.8315,  koruna 22.9417, RUB 65.04, yen 109.63, sing 1.3685, HKD 7.8486, INR 70.60, China 6.8183, peso 19.20, BRL 3.9557, Dollar Index 97.29, Oil $62.33, 10-year 2.41%, Silver $14.66, Platinum $855.10, Palladium $1,3333.55, and Gold… $1,286.00

That’s it for today…  A real nasty weather-wise weekend here in the St. Louis area, nothing but chilly air that was full of rain! UGH! Braden spent the night with us Saturday night. He’s into playing chess… But he wants to play it by himself… You’ve got to be pretty sharp to do that! Braden is very excited that he’s going to be a Big Brother in Rocktober…  We’ll find out the gender  in two weeks, as the new way to find these things out is a gender reveal party…  Hey, I’m just the messenger here!    Our Blues are back on the ice tonight, hopefully they find their skates in time for the game, because in Game in, they sure didn’t have them on!  The Electric Light Orchestra (ELO) takes us to the finish line today with their song: Can’t Get It Out Of My Head…   I hope you have a Marvelous Monday, and please Be Good To Yourself!   Let’s Go Blues! 

 

Money Talks… B.S. Walks…

Mary 9, 2018 

* The dollar is back in charge this morning… 

* Trade Talks are failing miserably… 

Good Day… And a Tub Thumpin’ Thursday to you! I’m laying low for a couple of days to make certain my problems with my stomach don’t return… By tomorrow, if all goes well, I should be ready and champing on the bit to do some Tub Thumpin’! Cardinals got shut out again yesterday… UGH! For many that were at the game the old saying that a bad day at the ballpark is better than a good day at work, fell into play. Or, maybe that’s just a saying that my good friend Duane and I have used for years! And now that we’re both retired… It just doesn’t have the same ring to it. The band Heartsfield greets me this morning with their rock classic song: Shine On…

Well, that pinch the dollar felt on Tuesday when President Trump announced that he would implement new Tariffs on Chinese goods, went away quickly, and the dollar was back to moving stronger VS the currencies yesterday. The euro dropped below 1.12 again, the A$, which was closing in on 70-cents on Tuesday, fell back into the 69-cent handle… I had a reader ask me why I always highlight those two currencies, euros and A$’s… And I replied… Because the euro is the offset currency to the dollar, and the A$ is the proxy for Global Growth… By knowing what those two are doing, can pretty much tell you the direction of the other currencies.

I have another dear reader that always asks me why I don’t talk about the Swiss franc very much… Well, my mother always taught me that if I didn’t have anything nice to say about someone I should not say it… HA!  Seriously…  There’s just not that much going on in Switzerland these days, and every time I do see something going on to talk about, it’s not very good… The franc has really sunk in value the past couple of month, but that’s all tied to the euro’s fortunes… 

And I’m sure some followers of the currency roundup will be asking what the heck has gotten into Japanese yen?  Well, here we go again with the Safe Haven buying, and for some crazy notion/ idea the yen is thought of as a Safe Haven currency…   Personally, I would prefer to own Gold, as my safe haven currency! 

Gold’s two-day rally came to screeching halt yesterday… In the early morning, Gold had risen by more than $4, and by the end of the day, Gold was down nearly $9… I’m sure when I get around to reading Ed Steer’s letter (www.edsteergoldandsilver.com) I’ll read about how the “Da Boyz” as he calls the price manipulators, unloaded arms full of short Gold trades at the COMEX…

I have to point out the  price plunge of Palladium though…  I guess the thought that Car Dealers have so much inventory these days, that the production of autos has to be slowing down, and thus a  hit to the need of Palladium… 

From what I read, the Trade Talks between China / U.S. are not going very well… Again, I might add… I know, I know, the Chinese have taken advantage of the good will of the U.S. for years, but, negotiations, that are worked out amiably, are the way to go… Not implementing tariffs! As my dad taught me years ago… “Money talks… B.S. walks”…  And I guess the U.S. negotiators are tied of hears B.S. so, they’re walking! 

Well, first I was reading about Modern Monetary Theory or MMT… And brother, you don’t want to read this stuff for it will make you go yell at the wall, find something to kick, and cause you to drink heavily in the middle of the day, (not that there’s anything wrong with that! HA!) I just shake my head in disgust and try to walk away and hope it dies an ugly death…

And now… I’m reading about how the Fed is dusting off a form of Quantitative Easing that was used during World War II…. And get this… Fed heads, Brainard, and Clarida agree that this “new/ old policy is what we need, and that it’s been used in Japan… Wait! What? That’s their reference… it’s Japan? The country that has been an economic funk for over two decades? That’s who were going to reference on this policy? I’m at wits end, trying to remain civil here… I started the week calling out the Fed heads and saying that they had painted themselves into a corner, and now I end the week with them telling the American public that this policy has been used in Japan? Ok, the full story is in the FWIW section today…. You can go there now to read it, or you can read when you get there! See there? See how easy I am to work with?

We as a country, continue to go down the same paths worn down by the Japanese, who could write the book on How To Ruin Your Economy…  Well, we’re turning Japanese, yes, I really think so! 

The U.S. Data Cupboard doesn’t have a lot for us today, just the Trade Deficit for March, and April PPI (wholesale inflation)…  Yesterday, we saw March Consumer Credit (read debt), and it was very interesting, as it was weaker at $10 Billion, VS $15 Billion the previous month… There are a couple of ways you could take this data, and the way I’m going to take it is that the U.S. Consumer not only has run out of disposable income, but also have run out of credit cards that have any room on them…  

And here’s where I’ll remind everyone that Consumption is about 2/3rds of our GDP… So, consumer Spending is important… Of course you shouldn’t spend more than you make, over and over again, but spending is important, and without it, the economy dries up and dies… I’m just saying… 

To recap…  The pinch the dollar was feeling on Tuesday, went away quickly, and the green/peachback is back to gaining VS the currencies today. The China/ U.S. Trade Talks are failing miserably, and new tariffs have been announced by the U.S. and China says they’ll retaliate… So, here we go…  Gold couldn’t hold its early morning gains yesterday, and ended up down about $9… And you’ll not want to miss today’s FWIW, it’s next up, so let’s not dawdle around any longer and go there! 

For What It’s Worth… Well, I teased you with this article above today, so here it is in all its glory, the article on how the Fed is dusting off a policy last used during WWII and it can be found here: https://www.marketwatch.com/story/the-fed-is-dusting-off-a-qe-replacement-last-used-during-world-war-ii-2019-05-08

Or, here’s your snippet: “Federal Reserve Governor Lael Brainard on Wednesday became the second U.S. central banker to talk about the possibility of targeting longer-term interest rates as a “new” tool to combat the next recession.
It’s actually not so new. The last time the Fed conducted such a policy was during World War II to keep down the costs of funding the war.
The concept is relatively simple. If the Fed’s benchmark interest rate fell to zero and the two-year Treasury yield was at 2%, the Fed could announce it intends to use its balance sheet to peg the 2-year TMUBMUSD02Y, -1.06% rate at 1%. The general idea is that lower long-term rates spur activity.

Fed Vice Chairman Richard Clarida floated the idea in a speech earlier this year, and has done research on its use in Japan.”

Chuck again… Recall me telling you that during recessions in our history that the Fed, on average, have cut interest rates 5%… But with interest rates not even 3% in the U.S. how would the Fed combat the next recession? I told you that more Quantitative Easing would come, even if it weren’t named that, and then next would be negative interest rates…

Well, the Fed Heads are trying to do an end run, and get involved in the Bond market, but as a price determinate, not a buyer… Why, oh why must these Central Banks feel that they have to “do something” why can’t they just let economies do what economies need to do, and let interest rates be determined by the economy? Why, oh why?

Currencies today 5/9/19 American Style: A$.6975, kiwi .6575, C$ .7416, euro 1.1191, sterling 1.2989, Swiss $.9824, European Style: rand 14.3279, krone 8.7607, SEK 9.6458, forint 288.91, zloty 3.8360, koruna 22.9742, RUB 65.15, yen 109.84, sing 1.3637, HKD 7.8479, INR 70.04, China 6.7768, peso 19.14, BRL 3.9503, Dollar Index 97.62, Oil $61.62, 10-year 2.44%, Silver $14.76, Platinum $851.94, Palladium $1,288.96, and Gold… $1,281.41

That’s it for today…  Well, this weekend we’ll celebrate Moms, and it will be Mother’s Day on Sunday… As I typed the word Mom, I got a chill down my spine, because I thought of my mom, who I miss terribly, especially since I’ve had cancer, because I know if she had been alive she would have made me feel better during some rough times…  Last year,  daughter, Rachel asked me to tell her a story about my mom… And by the time I got half way through it my eyes were filled with tears, and voice was cracking…  I loved my mom, and miss her dearly… So… if your mom is still around, make sure you hug her and tell her you love her…   Happy Mother’s Day to all the Moms out there!  Chicago takes us to the finish line today with one of their early songs: In The Country…  I hope you have a Tub Thumpin’ Thursday… A Fantastico Friday tomorrow, and a Wonderful Mother’s Day Weekend!  And please Be Good To Yourself!

Chuck Butler

How Much Smaller Is That Soup Container These Days?

May 8, 2019

* the dollar begins to feel the pinch of failed Trade Talks… 

* Chuck talks about how Gold is a Store of Wealth… 

Good Day.. And a Wonderful Wednesday to you! Blues win, Blues Win… Blues Win! Ok, in case you didn’t catch that, our Blues won Game 7 of their series with Dallas, and now move onto the Western Conference Finals… It took 2 overtimes to get the win, but there it was, and we took it! And a St. Louis born player scored the winning goal! It wasn’t such a happy night for my beloved Cardinals or the Lindbergh High School Flyers Water Polo team, who lost in triple overtime to a private school… My son Andrew has built a program at a public school that rivals those of private schools and everyone associated with the team is very proud of him… I know I am! Little Feat greet me this morning with their song: Fat Man In the Bathtub…

Well, with little data to go on yesterday, other than Consumer Credit, which I’ll talk about later, the currencies were allowed to gain a bit on the dollar yesterday. The dollar bugs are feeling the pinch from the Trade Talks between China and the U.S. In case you’ve been living under a rock, these talks aren’t going to peachy… And that has pushed President Trump to announce that he will raise the tariffs on Chinese goods, because no deal has taken place.

The stock jockeys were feeling that pinch too… But Gold & Silver sure didn’t… As Gold was able to sneak past the manipulators and gain more than $6 on the day!  And is up more than $4 in the early trading today… The price of Gold is still below $1,300, and well below the maginot line of $1,350 that some Gold analysts said that it would be be flying past soon… Well, I’m waiting… and so are tons of Gold holders… Not that they want to sell, but they want their Gold holdings to have a more representative price!

This is an important discussion right here, right now so your complete attention is required, please…   Gold (& Silver) are stores of wealth, they’ve never been worthless, and are a hedge VS a falling dollar and inflation… Once you own Gold, you put it away, and forget about it… You’ve stored your wealth…  In the East they get it… And that’s how they treat their Gold holdings… Here in the U.S. for the most part, we treat Gold as a commodity to buy and sell on a whim…  I would love for the West to take on more of an Asian attitude with regards to Gold…  

So… these Trade Talks seem to be a real bugaboo for the dollar… And it should be! I’m telling you now, so you can listen to me later… These trade tariffs are going to bring the Global economies to their knees… It matters not if a country is a part of the China/ U.S. talks, they will be effected negatively… You can bank on that! And the consumer gets caught with their guard down, and when they look up, the cost of just about everything they buy, is more expensive, because of tariffs…

The reporting of inflation in this country is a joke… it really is folks… later this week the stupid CPI will print and it will show that consumer inflation is well below the Fed’s 2.00% target rate… But that’s not reality, folks… Inflation is all around us and we just don’t take the time to figure these things out… For instance, the other night I went to the Panera Bread Co. (We call it Bread co) and bought some broccoli cheddar soup and and sandwich… When I got it home, and took out the container that held my soup, I noticed right away how much smaller it was compared to a few years ago… But the cost was even more… But where’s the inflation there? Not much, unless you could put a measurement on the size of contatiners… It’s like that all over the grocery store folks… And that’s inflation, because, you may spend the same, but you’re buying less in quantity, and you’ll have to go back to the story more often thean you did before… Got Gold?

And then you come across the piece of information that I shared with you on Monday… That 73% of Americans die with debt of more than $60,000… And you start to shiver… And think is that someone I know? It has to be, because we don’t insulate ourselves completely from Debt… I’ve said this before, and I don’t take this lightly, but I read a book many years ago, that has the title: Debt is Slavery…

Of course not all debt is bad, but that’s old school… For in days past, if a consumer bought something on credit, it was always paid off… But then we began to realize that lenders would lend us much more money for just about anything, and we went to town on spending with money we don’t have, with no ability or will to ever pay it all back…  Shame, shame…

To recap…  No data, and nothing but Trade Talk failures to trade on, has the dollar feeling the pinch… Not the hurting kind of pinch that the stock jockeys felt yesterday, and in fact the currencies are trading in the same clothes as yesterday today…  This is shorter than usual today, as Chuck was up all night with a stomach problem… 

For What It’s Worth…  Well, since I was so adamant about debt today, this article came at me from the MarketWatch people and is about how lenders are going to be able to apply pressure to debt holders and it can be found here: https://www.marketwatch.com/story/debt-collectors-could-be-allowed-to-call-text-and-email-you-every-day-2019-05-08

Or, here’s your snippet: “Debt collectors could soon be making a comeback.

Delinquent consumers could get phone calls up to seven times a week, and an unlimited number of texts and emails from debt collectors under the rule proposed by the Consumer Financial Protection Bureau released this week, making it the first major update in more than 40 years.

The new proposal states that once a debt collector speaks to a consumer, however, they’re not allowed to call again for a week. There is no limit to how many emails or text messages they can send under the proposed rule. Consumers will have to opt out or unsubscribe to texts and emails. 

This rule opens the door to increased contact by debt collectors to new channels or existing channels that they haven’t utilized to date like emails and text messages. That’s very dangerous to consumers,” Joanna Darcus, a debt attorney at the National Consumer Law Center in Boston.”

Chuck again…  Well, the article goes further to explain that consumers will be able to push back, but how many will?  

Currencies today 5/8/19 American Style: A$.7006, kiwi .6591, C$.7428, euro 1.1202, sterling 1.3013, Swiss $.9825, European Style: rand 14.3550, krone 8.7716, SEK 9.5941, forint 289.32, zloty 3.8295, koruna 22.9585, RUB 65.25, yen 110.08, sing 1.3620, HKD 7.8486, INR 69.75, China 6.7710, peso 19.08, BRL 3.9721, Dollar Index 97.52, Oil $61.40, 10-year 2.43%, Silver $14.92, Platinum $867.32, Palladium $1,320.11, and Gold… $1,289.10

That’s it for today…  Sorry the letter is shorter than usual, I was up all night with a stomach problem… The first one I’ve had in a long time, so I’m not complaining, but… I was supposed to be going to the day game at Busch stadium to see my beloved Cardinals today, and this stomach problem is not going to allow me to do that… UGH!  In fact, as soon as I hit “send” I’m going back to sleep, to recover the sleep I lost last night!  My darling granddaughter, Delaney Grace, is in Alabama at Space Camp… Pretty cool for her…  Rod Stewart takes us to the finish line today with his rock classic song: Maggie May…   And I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

This Month’s Winner Of An Expenses Paid Trip To The U.S. Is….

May 7, 2019  

* The dollar continues to be bought after the jobs report last week… 

* It’s Game 7 tonight! 

Good day… And a Tom Terrific Tuesday to you… Well, as Rod Stewart sang first… Tonight’s the night… and hopeful for our Blues, everything is gonna be alright… And here’s my take on the lyrics, Cause we love you Blues, and there ain’t no stopping us now… In Sports… There’s nothing like a Game 7… Stress, anxiety, and all those things will be weighing on me and all Blues fans tonight! My beloved Cardinals sure like home cooking! They erupted offensively last night and beat the Phillies, with Bryce Harper! Well, the National College Football Champion, Clemson, had their coach Dabo Sweeney visit the ball park last night and take batting practice… This is his second visit to St. Louis… I hope he’s not stealing any recruits from Mizzou! HA! Jimmy Buffett greets me this morning with his song: The Weather Is Here, Wish You Were Beautiful… I’ve seen Jimmy Buffett two different times in concert, and thoroughly enjoyed myself at both concerts!

Well, economists that know the score, have been taking to Twitter and their blogs to blast the BLS’s Jobs Jamboree for April… So, I’m no longer the lone wolf, pointing out the BLS for what they are… But, I sure wish I could keep my thought from months ago that I didn’t care about the BLS any longer… I don’t care what they print, for it’s all rubbish… But you know me well enough to know that I’m going to point out dolts any chance I get!

I have one example of what I’m talking about, and although she doesn’t call out the BLS, it’s the same as doing so when you point out problems with the report… Here’s Danielle Di Martino Booth from here Twitter page:

“While the unemployment rate hit a 50-year low in April, the labor force has contracted for four straight months while household employment has fallen in three out of the last four months driving the labor participation rate down to a seven-month low…” -Danielle Di Martino Booth from Twitter… 

The Currencies were slipping a little more to the dollar yesterday, but last night when I turned on the screen, the euro had recovered as was back to 1.12… This morning, the euro  has slipped back below 1.12..  There seems to be this magic spell cast on currency traders at the moment that prevents them from selling dollars… Yeah! That’s the Ticket!

The pound sterling is still in rally mode, albeit small rally mode, but rally mode nonetheless, as it appears that their BREXIT talks are going much better than the China/U.S. talks… So, why isn’t the dollar getting taken to the woodshed as long as their talks go on unproductive, and cause more tariffs to be implemented? Beats me, folks… I guess the “powers that be” aren’t ready for the dollar to begin a long trend move downward…

Remember when Chinese officials said that they would not allow the renminbi to weaken to offset the tariffs, and I said, hogwash?  Well, don’t look now but the renminbi is sitting at a 2 1/2 month low this morning after a night when the Peoples Bank of China (PBOC) allowed the renminbi to weaken to this new level of weakness.  I believe the Chinese official that said that had his fingers crossed behind his back…  yeah, that’s it, that’s the ticket!  HA!  

Speaking of China… They posted their April currency reserves this morning, and there wasn’t much movement from March’s number of 3.099 Trillion, with April coming in at 3.095 Trillion…  And they didn’t have any positive currency revaluations propping up the numbers either, so this was a good thing for China, in that they haven’t dipped into their reserves, as of yet, to help out the floundering economy. 

The Trade Talks with China / U.S. have not gone swimmingly… in fact they’ve swam like I do… Like a rock!  This morning there’s news that a Chinese negotiator is coming to the U.S.  Well, the markets are all lathered up about this development, but in my mind, this is just another stall junket for someone in China that was next on the list of people that were rewarded a trip to the U.S.  This is NOT an indication that the talks are nearing an end, and I wish the markets would see this for what it is, and not what they want it to be!

I read an article this morning on Ed Steer’s letter (www.edsteergoldandsilver.com)  That the U.S. mint has halted minting of Silver Eagle coins, as they have sold out of supply…  And yet, the price of Silver can’t find a bid anywhere?  Robin Trower is singing his song, Bridge of Sighs, as I write this, and I think its very apropos, given that I just keep the sighs of exasperation coming…  Robin Trower was the guitar player for Procol Harum and this is his solo effort…

Gold was able to eke out a $2.80 gain yesterday, but is down a buck or so in early trading today…   I have an interesting article for you in the FWIW section today, and then I list some of the things that should be weighing on the dollar right now, and yet none of them are doing anything, but how long will that last?  Got Gold?

One Currency that seems to be able to hold onto its level is the Canadian dollar/ loonie… It’s been 74-cents and change for sometime now… There aren’t a whole lot of good economic things to say about Canada right now, but they will print their April PMI (manufacturing index) today, so this will give us something to work with… Getting economic reports from Canada is like pulling teeth with no Novocain! I have a few friends, and Pfennig Readers, north of the border who send me notes from time to time giving me the update, of which I’m very appreciative of!  

Last month I was talking about how the price of Oil just kept ratcheting upward, and this month the price of Oil has just been ratcheting back down… like the Frank Sinatra song>>> Flying high in April, shot down in May…  I can’t believe that the report that officials pulled out from up their Bullwinkle sleeves a couple of weeks ago, showing that supplies were larger than previously reported, is still keeping the price of Oil down…

Don’t get me wrong, I don’t want to see the price of Oil higher, but… I also don’t want to see manipulations going on…

Not too many notes in the Pfennig Replies box yesterday that disagreed with me on my take of the Fed…  I took that as a sign that the major majority agreed with me…  Or, should I take that as a sign, that people are tiered of telling me differently?  I know I’m a hard headed Irishman, but come on… I can take a different point of view, without throwing rocks at someone! HA! Yeah, and I have some land to sell you in the desert, and my first wife was a young Elizabeth Taylor, yeah, that’s the ticket!

There isn’t much in the U.S. data Cupboard this week… Today we’ll see Consumer Credit (read debt) which will be huge… Thursday we’ll see PPI (wholesale inflation) for April, and then on Friday we’ll see the stupid CPI (consumer inflation)… In between there will be several Fed Head talks, that won’t move markets unless they say some rouge comment…

I’m expected that the Consumer Debt skyrocketed in March, given all the hoopla of the other data from March…  

For What It’s Worth… A dear Pfennig Reader sent me this link and all the time I was reading the article that it took me too, I was thinking, Oh no, not again! It’s about the HELOC loans and what problems they possess for the economy and can be found here: https://www.msn.com/en-us/money/markets/easy-equity-loans-threaten-homeowners-and-the-economy/ar-AAAY6Ge

Or, here’s your snippet: “According to Equifax, between 2013 and the third quarter of 2018, close to 12 million new home equity loans were originated in the U.S. with a total of nearly $1 trillion in new installment loans or HELOC credit limits. Roughly two-thirds of these loans were HELOCs.
Three or four years ago, the standard HELOC had a combined loan-to-value (CLTV) limit of 80%. This meant that together, your first and second mortgages could not exceed 80% of the current value of the property. The restriction gave the lender a 20% equity cushion against another price downturn. A few lenders would go as high as 90% only if you had an extremely high credit score.

Standards have loosened up a lot since then. If you go online, you will see dozens of ads offering tantalizing deals for a new HELOC. In doing a quick search, I found at least 10 lenders that offer a 100% CLTV HELOC if you have a high FICO score and clean credit history. They must be highly confident that home prices will not go down again. Sounds much like 2005 and 2006.

Why are HELOCs and home equity installment loans a cause for concern? That is a reasonable question. After all, haven’t the worst of them been washed out of the system through foreclosures and refinancing?

One big problem is that we don’t even know how many of these second liens are still outstanding. Despite the Equifax report showing 12 million new HELOCs and home equity installment loans, they asserted that there were 3.2 million fewer home equity loans outstanding at the end of this period than at the beginning.”

Chuck Again… As I said above… Oh no… not again! Gov’t Debt… Student Loan Debt… Corporate Debt… States Debt… underfunded pensions… and bubble-mania in stocks…  This will all work out just peachy, right?  

Currencies today 5/7/19 American Style: A$.7017, kiwi .6598, C$ .7425, euro 1.1180, sterling 1.3062, Swiss $.9796, European Style: rand 14.4101, krone 8.7261, SEK 9.5776, forint 290.03, zloty 3.8340, koruna 23.0105, RUB 65.25, yen 110.60, sing 1.3626, HKD 7.8477, INR 69.46, China 6.7542, peso 19.01, BRL 3.9489, Dollar Index 97.57, Oil $61.72, 10-year 2.47%, Silver $14.82, Platinum $872.76, Palladium $1,336.32, and Gold… $1,280.36

That’s it for today… Let’s Go Blues!  I joked with my buddies the other day, when one of them said, “we need to get together to watch Game 7” and I said, “no, we all need to be exactly where we were when we watched them win Game 6” HA!  Superstitions… I have them I know…  And I know they are malarkey, but I have them nonetheless…  We’ve had 2 1/2 days of sunshine, and now the rain returns today, and will be around for the next few days… UGH!  Aren’t all these rainy days supposed to have come in April?  Living in a little river town, we don’t like to see all this rain… I’m just saying…   OK… got your Blues jersey on? It’s Game 7!  The Blues have had nothing but disappointments in their history, so, I’m hoping that this year will change all that!   R.E.M. takes us to the finish line today with their song: Losing My Religion… Which is what I’ll be doing tonight! HA! I hope you have a Tom Terrific Tuesday, and continue to Be Good To Yourself!

Chuck Butler

 

What’s The Fed Going To Do Now?

May 6, 2019

* Jobs Jamboree sends dollar higher on Friday… 

* Gold gains and bond boys aren’t buying the jobs report… 

Good Day… And a Marvelous Monday to you! The rain finally stopped on Saturday afternoon, and on Sunday it was just beautiful outside… Good for me, because I need to be outside! Did you have a great Cinco de Mayo yesterday? I write about this every year, on this day, because it’s funny… Years ago, I was writing about how I had stopped to sing in a sidewalk setting while in Cancun, and a Pfennig reader sent me a note and called me a MAK… (you can figure it out) We laughed about that on the trade desk for years! My Cardinals ran into a buzz saw in Chicago this past weekend…. And the Blues… Well, they survived game 6 to play a Game 7, otherwise they would had to get the golf clubs out. So, Let’s Go Blues! The Outlaws greet me this morning with their 10 minute song, with tons of great guitar playing: Green Grass And High Tides…

Well… I’m going to start the day, talking about the Fed, because they’ve been on my mind since they left rates unchanged last Wednesday, and reversed their previous statement that the economy was weakening to “It’s solid”… Lots of people like me, were writing about this last week, and so I’ll give you my version of what I’m seeing from the Fed right now… They’ve backed themselves into a corner… Yes, there they are with the paint bucket, and paint brush all dripping with wet paint, and they’ve painted themselves into a corner… What to do? Oh my, the humanity! These bunch of knuckleheads have done this to themselves… They try and try to micro-manage the economy, and it never works!

They have no idea what’s going to happen, and so they stumble, fumble, rumble along with all their “talk”… In their March meeting they talked about how the economy was showing strains and that no further rate hikes would happen… Of course that came after stocks appeared to be ready to drive off a cliff, Thelma and Louise style. So, stocks rallied… But in the meantime, we’ve had two consecutive months of strong jobs gains (I guess I won’t argue with that any longer, right here for this discussion anyway, as it does me no good to get all lathered up over it) and now it appears the Fed is going to have to hike rates to calm any potential wage inflation from this strong jobs growth… And you can bet your bottom dollar that stocks won’t like that at all… Then what will the Fed do, or say?

They did this to themselves, folks… if they had just shut up, stayed in the Eccles Building and not tried to be the Knight in Shining Armor, and save the stock market, and just let the economy do what economies are supposed to do, we wouldn’t have all these gyrations going on back and forth, will they, or won’t they? Etc. etc.

OK, that felt good to get off my chest!  Well, the currencies didn’t fare too well, with the Fed back on the rate hike path… But the slippage hasn’t been the all-out of the water kind of slippage, the euro is trading around 1.12, and pound sterling is near to 1.31… The Aussie dollar (A$) has really lost some ground, as just last month it was trading around 72-cents, and now it has fallen to a 69-cent handle…  Global Growth, or lack of I should say, is the cause of the A$’s problems, as China is in some deep dookie… 

Speaking of China, the Trade Talks have gone on and one, and while last week there was hope that they would end soon, (recall I said, they’ll have to show me?) they aren’t ending any time in the near future, and President Trump has called for additional tariffs on Chinese goods because his patience with the Talks has grown thin… 

Tariffs are NOT what the Chinese need right now, and their retaliation will NOT be what the U.S. needs right now either…  I totally dislike tariffs folks…  And when all is said and done, everyone will come to totally dislike them for they will be the  snowflake that caused the avalanche on the financial system… mark my words… I’m dead serious here… 

Well, you knew I wouldn’t pass on the opportunity to throw some shade on the BLS and their Jobs number right? For all you not in touch with today’s lingo, throwing shade on someone is like criticizing them… OK… So, the BLS said 283,000 jobs were created in April, beating the estimate of 213,000 by a very wide margin… Guess what the BLS added to the Jobs total after they received the surveys… go ahead, make a guess… If you guessed 281,000 then you would be correct… Wait! What? 281,000 of the 284,000 were added by the BLS after the surveys? Yes, Virgina,  there is a Santa Clause and he works at the BLS! The BLS  were, so how about that for organizing a “manufactured report”? I have to hand it the BLS they don’t care what others think, they’re going to push that envelope of manufactured reports as far out there as they can before someone, other than me, calls them on the carpet and demands an explanation… And that my friends is NOT going to happen! So… we live with the BLS and just say to ourselves each month… It’s only a made up report, it’s only a made up report, it’s only a made up report…

Too bad the markets don’t think like me, eh? Because stocks were flying high on the report… along with the dollar… Gold was able to gain some ground because well, if the labor gains are what they are reported to be, then wage inflation won’t be far behind… But the bond guys didn’t care what the BLS had up their sleeve… The yield on the 10-year only moved 1 Basis Point on the day… And in the overnight markets the 10-year’s yield has dropped to 2.48%…

But just don’t take my word for this jobs report being a debacle that isn’t being reported as such… Famous economist, David Rosenberg, had this to say on his Twitter feed yesterday…. “The main feature of the payroll data was aggregate hours worked, which declined 0.1% in April. When you factor in the workweek falloff, it’s akin to a 110k employment slide!”

Chuck again… I love this guy! He points out things that everyone seems to pass up, but not David Rosenberg!

The U.S. Data Cupboard, last week, had some interesting data prints and on Thursday they printed 1st QTR Productivity… Now long time readers know I usually call this report stupid, because it measures how productive or how hard people work… But get this… 1st QTR Productivity was up 3.6%, which would be good, except…. Unit Labor Costs for the 1st QTR also printed and it was negative -0.9%…  What that tells me folks, is that workers aren’t getting paid for their productivity gains… Work harder, make less…  That’s not a good combination for the worker, but more importantly, it’s not good for the economy…   

In addition, last week, March Factory Orders rebounded and rose 1.9%… Recall I had told you that given the other data prints from March, that I expected the Factory Orders to rise… And that’s just what they did… But the 2nd QTR has started out very differently than what apparently was going on in March, so let’s put a mark on this data and make sure we check the April number when it prints… 

Well, rising debt is everywhere folks… Gov’t’s, States, Corporations, and individuals…  I read a piece of information this past weekend that made me stop and say, Whoa, there partner!  Let me spell it out for you and see if you have the same reaction…  Apparently 73% of Americans die with debt of more than $60,000…   Let me repeat that… 73% of American die with debt of more than $60,000…   See? crazy, eh?  Debt is everywhere… 

To recap… The Jobs Jamboree was a trumped up report of 283,000 new jobs in April… (281,000 were added after the surveys were received) and the dollar got renewed strength VS the currencies, but it’s not an all-out of the water kind of strength VS the currencies… And Gold gained $8.50 because IF jobs are that strong, wage inflation not far behind… The Bond guys aren’t buying any of this, and the 10-year’s yield fell to 2.48% (from 2.52% last week) And Chuck has a lot to get off his chest today regarding the Fed, so don’t miss any of today’s Pfennig!

For What It’s Worth…  Well, since I went off on the Fed this morning, I thought that this piece on zerohedge.com played nicely in the sandbox with my thoughts, and it can be found here: https://www.zerohedge.com/news/2019-05-03/fed-has-lost-control-rates-technical-tweak-fails

Or, here’s your snippet: “

While the rest of the world is distracted by the plummeting unemployment rates and trade deal hype, a funny (well not so funny) thing happened in the short-term funding markets in the world’s reserve currency.

As we noted previously, something unexpected has been going on in overnight funding markets: ever since March 20, the Effective Fed Funds rate has been trading above the IOER. This is not supposed to happen.

This week, The Fed tried to do something about it by cutting the IOER. It has failed!
In other words, as one veteran funding market trader exclaimed, “it’s getting worse!”
Simply put, this is front and center a dollar liquidity shortage signal that The Fed is unable to solve… for now.

As Barclays’ Joseph Abate recently ominously concluded:

The large move also suggests that the banking sector is “nearing the steeply sloping part of the reserve demand curve” which means that “bank reserves are now significantly closer to what individual banks consider their ‘least comfortable level of reserves’ and thus banks are more willing to pay higher rates to retain these balances.”

In other words, some $1.5 trillion in excess liquidity created by the Fed is no longer enough for banks which are starting to scramble to obtain additional liquidity, which needless to say, is very troubling for a banking system which is supposedly “fortress” and “much more stable” than it was before the financial crisis. If anything, this means that even a modest liquidity draining crisis at any point in the future could have vastly more dire consequences than even the pessimists.”

Chuck again…  Well, this is not good folks… and the only way out of this is to cut rates aggressively, or have a coordinated effort to weaken the dollar…  I’m just saying…

Currencies today 5/6/19 American Style: A$.6989, kiwi .6613, C$ .7423, euro 1.1200, sterling 1.3097, Swiss $.9818, European Style: rand 14.5095, krone 8.7448, SEK 9.5804, forint 288.73, zloty 3.8240, koruna 22.9595, RUB 65.05, yen 110.83, sing 1.3631, HKD 7.8461, INR 69.42, China 6.7336, peso 19.06, BRL 3.9375, Dollar Index 97.53, Oil $61.94, 10-year 2.48%, Silver $14.92, Platinum $870.00, Palladium $1,353.00 and Gold… $1,281.30

That’s it for today…  Well, that was something at the Kentucky Derby on Saturday… I put my money on the winning horse, but then he was disqualified in a historic decision… UGH! I said then to anyone that would listen to me at the Watch Party I attended, that this is a bad precedence for horse racing because now every race is going to have a challenge… Why not? who knows what these knuckleheads will do, and a 65-1 odds horse may win?   OK… Cubs sweep the Cardinals, which is bad…  Our Blues come home for Game 7, and will play it on home ice, which has not been kind to them this year in the playoffs, they’ve been a better road team… Let’s hope the hockey gods are kind to them this time! Let’s Go Blues!  I get my scans results today, so fingers crossed… other than that I’m out of things to say! HA!  The Moody Blues take us to the finish line today with their song from the Seventh Sojourn album (one of my top 10 fave albums): When You’re A Free Man…   I hope you have a Marvelous Monday, and will be Good To Yourself!

Chuck Butler

 

 

The Markets Didn’t Get What They Wanted From The Fed…

May 2, 2019 

* The Fed says the U.S. economy is “solid”… Really? 

* Chuck talks economics, and brings Hy Minsky into the conversation today! 

Good Day and a Tub Thumpin’ Thursday to you! I had a nice evening as son, Andrew stopped by to return something to me, and asked if I wanted to go get a bite to eat… We proceeded to run into some neighborhood friends, and there was lively chatter… My beloved Cardinals found a way to get to Max Scherzer last night, and won again… They just finished April with a franchise best record for April… That’s all good, but the season is 6 months long… But as I always say… “Games you win in April, are games you don’t HAVE to win in September”… In other words, they’re just as important to win! Faces greets me this morning with their song: Ooh La Laa… I wish I knew what I know now, when I was younger…

Well, the BIG Hoopla yesterday was the FOMC’s press conference following their two days of playing board games… The Fed surprised the markets, not by keeping rates unchanged, but by talking about how inflation had fallen below their target rate, but… The central bank’s statement walked back its March view that the economy had “slowed” from the end of last 2018, noting that recent developments show that economic activity “rose at a solid rate.”

See what massaging a GDP report will do for you? Just when you thought the Fed would give the markets the wink and nod that a rate cut was coming this year, that rogue GDP revision changes things… Not to worry though… The Fed Heads will rue the day they didn’t jump at the chance to breath life into the economy that they believe is “solid”… They’ll be proven wrong once again… But no one will hold their feet to the fire… President Trump tried to put some pressure on the Fed Heads by saying they needed to cut rates by 1 full percentage point, and begin bond buying again…

Love him or hate him, it matters not to me, but… at least he’s seeing the economy for what it’s becoming, and sure doesn’t want to see a full blown economic recession while he’s campaigning for 2020…

So, the currencies lost ground they had gained earlier this week after the Fed’s statement… Gold didn’t move and everyone was quite shocked by the Fed’s announcement that the economy is “solid”… I am surprised though that the selling of the euro and other currencies didn’t got as deep as usual, and to me, it appears the Currency Traders are hemming and hawing about what direction they want to take the dollar now, and from what I can see in the markets this morning, it’s downward… 

The Bank of England (BOE) met this morning already, and left rates unchanged and cited BREXIT problems to the economy as their reason for keeping rates unchanged. The pound got sold on this news, but then it’s all kind of mixed up as the reason for the weakness, was it the BOE news, or was it the Fed news? 

Well, yesterday, I told you how China’s Manufacturing index was hovering just over the line in the sand that marks whether a manufacturing sector is contracting (below 50) or expanding (50 and above)… And told you that the both the Markit version of U.S. manufacturing and the Gov’t’s version of it, called ISM, would print on Wednesday… And they did, and guess what? They are slip, sliding away, slip sliding away… The Markit print was 52.6, and the ISM was 52.8, but that was down from 55.3 in March… I told you all that the trade war would hurt both economies, and then eventually hurt all economies, didn’t I!

In addition, the U.S. Data Cupboard yesterday had April Construction spending, which went negative by -0.9%, and in March it was a positive 0.9%… So that’s a 2 point negative move in a month folks… No wonder the Atlanta Fed is forecasting a very weak, 2nd QTR GDP… Yes, the Atlanta Fed’s GDP Now system has 2nd QTR GDP at 1.2%… Of course that’s before all the massaging  by the BLS gets done!

And let’s not forget that I’m still buzzing mad about the revision to QTR1 GDP… But economist Paul Rosenberg tried to explain some of it by showing that Business Inventories and Gov’t spending made up a huge portion of it… So… let’s dive further into those things… Business Inventories according to Kudlow was autos… But he told us not to worry, because consumers would be opening up their wallets soon…. And the Gov’t spending was mostly on highways and bridges… Hmmm, you can’t build a bridge or highway twice can you (unless you screwed it up the first time!)? Well, no, so, that’s why we’re in a world of hurt, folks… But the window dressing isn’t saying that, and that’s too bad, because stocks keep going higher, and people keep getting sucked in…

OK… Longtime readers know all about what I’m about to say about me, and my background and who formed the foundation of my economic theories, but there are new readers, and so I thought today would be a good day to go through some of this…   Have you ever heard of Hyman Minsky?  Well if you are a longtime reader of this letter, his name has come up a few times though the years, right?  Well, the late great, Hy Minsky, was the catalyst behind my wanting to learn about economics…  He was well known in his time, as someone that new how the markets worked…  So, today, let’s highlight Hy Minsky… 

First of all let me set the table here… Minsky spent his life, as an economist, on the margins of economics, but after the 2007-2008 financial meltdown, to many, it seemed to offer one of the best explanations as to why it had happened… And Minsky died in 1996!

His book, Stabilizing an Unstable Economy was in high demand after 2008… Imagine that! So, here is Hyman Minsky’s idea about the three stages of debt… 

 There Are 3 Stages of Debt… Minsky believed in a theory called: “financial instability hypothesis” which says that lending goes through three distinct stages. He called them: The Hedge, The Speculative, and the Ponzi stages. You won’t believe how similar this is to now… for the first stage, after the crisis, banks and borrowers are cautious. Loans are made in modest amounts and amounts that the borrower is known to be able to repay both the principal and interest.

As confidence grows, banks begin to make loans in which the borrower can only afford to pay the interest. And the collateral on the loan is usually an asset that’s rising in value. And then when the memory of the past crisis is faded, and forgotten…

The Ponzi stage begins. At this point banks make loans to firms and households that can afford to pay neither the interest nor the principal. And this is done under the idea that the asset that’s used as collateral will continue to rise in value. But when the asset held as collateral doesn’t continue to rise… The loan is called, and begins a very bad circle of foreclosures, failures, and bailouts.

This begins the Ponzi stage… And that’s where I believe we are now… Can you believe that Minsky’s thoughts on debt, were written many years ago? Shoot Rudy, he’s been gone since 1996!  And once again I’ll say that if you don’t know about history, or learn about history, it’s going to come back and bite you in the you know what!  And all those young energetic traders on Wall Street have now idea who Hy Minsky was… And they are about to learn, the hard way! 

OK… enough of that today…  I dedicated an entire article on the Minsky Moment when I was writing weekly articles for the Dow Theory Letters, on January 24, 2018…  I was a good article, I hope you had the opportunity to read it, for you would have a better understanding of where I come from with my thoughts…  Of course there are others that have helped shape my economics background…  Frank Trotter is a key, so is Ed Bonawitz, and Roy Fischer, along with guys like Bill Bonner, Doug Casey, David Rosenberg, etc. It takes a village to teach a country bumpkin like me! HA!

Gold lost nearly $7 bucks yesterday, and all of the loss came after the Fed announcement, as someone (you can guess who) showed up at the COMEX with an armful of short Gold contracts…  How in the world can the Fed Heads be fooled by the head fake upward revised GDP report?  That’s all it was in my opinion was a head fake… And the Fed Heads went for it and came up with air, as the economy runs past them to the other end zone that is for team recession… 

Today’s Data Cupboard here in the U.S. will have some conflicting data prints… One of those will be Factory Orders for March… I say conflicting because, apparently March was a blip on the radar screen for stronger growth… So the negative Factory orders for Jan and Feb will be forgotten by the markets when today’s positive number prints… In addition, today we’ll see 1st QTR reports for Productivity and Unit Labor Costs… Should be interesting… 

To recap… The Fed left rates unchanged and talked about how inflation was no longer their concern, but… then they changed horses in the middle of the stream, and talked about how the economy was “solid”….  The currencies and Gold got sold on the news, for it wasn’t what the markets were expecting to hear… Recall, they, in the least, wanted a wink and nod that rates will be going lower soon, and they didn’t get that at all!  Chuck talks economics and even brings Hy Minsky into the conversation today… 

For What It’s Worth…  Well, I spent a good portion of today’s letter talking about debt… And guess what the lawmakers in D.C. did yesterday? The Senate passed a Huge Deficit / spending bill, and sent it to the House… I found this in my email box this morning and it can be found here: https://www.washingtonpost.com/powerpost/house-leaders-scramble-to-win-support-for-budget-deal-ahead-of-midnight-deadline/2018/02/08/4812e996-0cd9-11e8-8b0d-891602206fb7_story.html?utm_term=.49c7b81a5a2d&wpisrc=al_news__alert-politics–alert-national&wpmk=1

Or, here’s your snippet: “The Senate passed a sweeping bipartisan spending bill Friday morning, but not before the federal government shut down when Sen. Rand Paul (R-Ky.) delayed the vote past midnight to complain about the budget deficit. It was the second government shutdown in less than three weeks.

The spending legislation passed 71-28, with wide bipartisan support. The bill would reopen the government while showering hundreds of billions of dollars on defense and domestic priorities, speeding disaster aid to hurricane-hit regions, and lifting the federal borrowing limit for a year. But first it must pass the House, where opposition from the left and the right made the outcome uncertain.

House votes were expected later Friday morning.

The shutdown was so unanticipated that the Office of Management and Budget didn’t tell federal agencies to prepare for it until Thursday evening.”

Chuck again… wait! What? The OMB didn’t tell anyone that the Gov’t could shutdown until last night, and that it could happen starting today? What the heck is going on in D.C.?  But more importantly, more debt folks… When will it stop?

Currencies today 5/2/19 American Style: A$.7020, kiwi .6626, C$ .7440, euro 1.1205, sterling 1.3047, Swiss $.9814, European Style: rand 14.4570, krone 8.6896, SEK 9.5297, forint 289.12, zloty 3.8185, koruna 22.8770, RUB 64.63, yen 111.50, sing 1.3610, HKD 7.8444, INR 69.43, China 6.7339, peso 18.95, BRL 3.9187, Dollar Index 97.62, Oil $62.76, 10-year 2.52%, Silver $14.67, Platinum $860.98, Palladium $1,357.42, and Gold… $1,271.14

That’s it for today… I’m late, I’m late, to a very important date! I guess that’s what I get for attempting to stay up to watch our Blues last night… Our Blues were attempting to go undefeated on the road this year, but ran into a buzz saw last night, and lost… The series is tied 2-2…   Back to St. Louis for Friday night… Let’s Go Blues!   Well, I have more doctor things to do tomorrow and Saturday morning… Hopefully I’ll be finished on Saturday morning in time to go to the water polo game at the high school to watch my son’s team in the state playoffs…  OK… the great Johnny Rivers takes us to the finish line today with his song: Secret Agent Man… Now there’s an oldie!  I hope you have a Tub Thumpin’ Thursday, and well Be Good To Yourself!   

Chuck Butler

 

 

 

 

 

It’s FOMC Day… Is There A Wink & Nod Coming?

May 1, 2019 

* Euro and Sterling are only real movers yesterday… 

* Big Data Day with the FOMC announcement to finish it off… 

Good Day… And a Wonderful Wednesday to you!  And Welcome to May! it’s May Day! Where’s the Maypole? What was in the water yesterday that caused a few of my longtime acquaintances to contact me? First it was my longest time known friend, Robin who I met in kindergarten! Then it was longtime colleague Chris, and followed up by Christine, and then former Mark Twain Bank colleague, Neil… I had just heard the previous day while driving around making stops, because that’s what I do when I’m by myself! And I heard the oldie by Bobby Vinton, Mr. Lonely… And while he was singing it from a soldier’s point of view, I related to the line… Letters, never a letter, I get no letters in the mail… And then the next day, POP! Van Morrison greets me this morning with his song: Brown Eyed Girl… Whenever I hear that song, I think of my friend, Jennifer, who used to say it was her song, as he was singing to her!

Well… I told you yesterday morning that the Eurozone had just printed a better than expected GDP report, which dispelled some of the thoughts that the Eurozone was heading to a recession, and that it was helping the euro push higher… And that was the thought of the day for Currency Traders who got caught short the euro, on the recession bet…

Pound sterling was also on the move higher VS the dollar yesterday, as there were positive signs coming from the BREXIT talks… Again, like I said with the China / U.S. Trade Talks… I’m from Missouri, I’ll have to be shown… But for now, traders are happy to think that it will all right on the night for sterling with the BREXIT talks nearing an end…

The rest of the currencies didn’t really see much movement yesterday… My spider sense was tingling last week, and I’ve been waiting to see what happened afterward to talk about it… I’m talking about the price of Oil, which was on daily move higher 10 days ago, and then right when analysts were talking about it going to $70… it got the rug pulled from under the rally, as if from up the sleeve of Bullwinkle, the U.S. produced a report showing that Oil supplies were greater than previously thought… Boy my spider sence was tingling and working over time, with all kinds of thought about how reports are manipulated to make us feel good, and this one falls right there, right? Don’t get me wrong here I don’t want to have to pay $4 for a gallon of gas, but why can’t the manipulators just let markets be markets, and see what happens?

And my main concern here is the Petrol Currencies… They aren’t allowed to get off the porch with the Big Dog euro, and chase the dollar down the street, when the price of Oil is floundering like it has since the supplies report was pulled from Bullwinkle’s sleeve last week…

Speaking of manipulations… Recall yesterday morning I told you that Gold had lost $6.50 the previous day, but was up the same amount in the early morning trading? Well, that early morning gain got wiped out during the day… and in a day or two, I’ll read about how “X” number of contracts to sell all hit the market at the same time… No manipulation here folks, just move along for these are not the droids we’re looking for…. NOT! NOT! NOT! Last week I printed a piece in the FWIW section about how a trader talked of how when trade desk has a large position to sell, they do it in drabs and bits, to keep the price pretty steady while they sell… Not got all-in with arms full of short contracts to throw at the market at once…

I get so worked up over this stuff, that it takes me a minute or two to calm down before I can write more….

OK…  Yesterday, Canada printed their Q1 GDP and it was not pretty…  What the heck is going on in Canada?  The Bank of Canada (BOC) last year hiked rates, but it sure looks as though they are going to have to reverse that hike… Recall that the hike was made to water down the hot housing markets of Toronto and Vancouver…  Well, what are you going to do now?

In other data… China printed a very scary PMI for April…  The CAIXEN PMI, which is a private company that tracks manufacturing strength with a manufacturing index called the PMI, it’s NOT the official Gov’t report on manufacturing but it’s widely respected, so the markets react to it… And yesterday the CAIXEN PMI for April fell to 50.2 from 50.8 in March… 50.2 is within spittin’ distance of going into contraction folks…  Remember, I told you that the Trade War would hurt both countries? Well, it’s doing a number on China right now…

And here in the U.S. we had one of the regional PMI prints yesterday from Chicago, and in it’s latest check on the pulse of manufacturing for the region showed a HUGE drop in the index price from 58.7 in March to 52.6 in April, the lowest level for this data since January 2017…    So, it appears the Trade War is doing a number on the U.S. right now too…  

And remember the Chinese saying that the wouldn’t allow the renminbi to weaken to offset the effects of the Trade War? Well, don’t look now but the renminbi has been on a one-way move downward recently… 

It’s Labor Day Holiday in several countries around the world but mostly centered in Europe. China also observes this day as their Labor Day…  

The U.S. Data Cupboard had some interesting, but certainly not real pieces of economic data, prints yesterday, so let’s go through them with some thoughts on each… First the Case/Shiller Home Price Index for Feb, printed and showed once again that home prices continue to fall…  Then we saw Consumer Confidence’s index drop from 129 to 126… Still too high if you asked me, but they don’t ask me, so it is what it is! 

Today’s Cupboard has the monthly ADP Employment Report, the precursor to Friday’s BLS Jobs Jamboree…  We’ll also see prints from both outfits that measure manufacturing here in the U.S.  The Markit PMI Index, and the National ISM Index…  Don’t look for major drops like we say in the Chicago region yesterday from these two, because for some reason the regional prints never really factor into the National prints… Hmmm…  But don’t worry about it, there’s nothing fishy going on here…  fingers crossed! 

And the biggest thing today is the conclusion of the two-day FOMC meeting by our Fed Heads…  Like I said yesterday, I don’t expect any rate changes today, but IF and that’s a BIG IF, Fed Chairman Powell, gives us the wink and nod of a rate cut coming soon to a theater near you, then to the markets that will be as good an actual rate cut now…  So, watch for that because usually when the U.S. signals rate cuts, Gold reacts favorably… 

Yes, the Fed Heads have to put away all the board games they had to finish all the board games they had out and get them put away before rolling their sleeves back down, putting their jackets back on and checking themselves in the mirror before making their announcement this afternoon… So, finish your game of Battleship! By, Joe you’ve sunk my battleship! HA!

To recap…   A better than the average bear GPD report in the Eurozone yesterday put to bed, for now at least, the thoughts of a recession in the region, and the euro has responded favorably to the report. Pound sterling is rallying on news that the BREXIT Talks are going smoothly… And the Trade Talks between China and the U.S. are sending signals that they may be completed soon… Chuck says, he’s from Missouri, they’ll have to show him!  The rest of the currencies didn’t get much movement yesterday, and Gold struggled throughout the day, but that could all change if Fed Chairman Powell gives the wink and nod for a future rate cut this afternoon… 

For What It’s Worth… Well, I’ve been talking about a liquidity crisis for a few years now,,, And every now and then there are alarms going off about how it’s becoming a problem, only for them to be proven to be false dawns… But this time… This is JPMorgan talking about a liquidity problem, and since they are so big, and into just about every market there is, maybe we should at least listen to them and see if what they’re talking about makes sense, eh? You can find the article here: https://www.zerohedge.com/news/2019-04-27/jpmorgan-we-are-approaching-point-again-where-us-banks-run-out-liquidity

Or, here’s your snippet: “Now it’s the turn of everyone’s JPMorgan contrarian, Nick Panigirtzoglou – the author of the popular “Flows and Liquidity” report, and a lone skeptical voice amid an otherwise permabullish landscape dominated by Marko Kolanovic – to warn that despite some $1.4 trillion in excess reserves sloshing around, “the liquidity conditions in the US banking system are perhaps close to decade lows” which in turn is manifesting itself in the breakout of the effective Fed Funds rate above the IOER, which as Morgan Stanley suggested last week, the Fed may have no choice but to cut by another 5 bps at the next Fed meeting just to “normalize” the fed funds rate and restore some temporary control to the most important interest rate in the world.

In his latest weekly note, JPM’s flows strategist recaps what we said previously, noting that “the liquidity effects from the Fed’s balance sheet resurfaced over the past week following a spike in overnight interbank rates. While a previous spike in both the median and 75th volume-weighted percentiles of the Fed funds rate to 3bp above the Interest rate on Excess Reserves (IOER) around quarter-end was quickly unwound, these rates spiked again over the past week to 4bp and 5bp above IOER creating a more persistent and concerning up move.”

Chuck again… I feel somewhat vindicated that someone besides me is talking about a liquidity problem here in the U.S. I guess we’ll all have to wait-n-see, but in the meantime… Got Gold?

Currencies today 5/1/19 American Style: A$.7058, kiwi .6665, C$ .7468, euro 1.1238, sterling 1.3070, Swiss $.9849, European Style: rand 14.2918, krone 8.6260, SEK 9.4957, forint 288.52, zloty 3.8067, koruna 22.7767, RUB 64.52, yen 111.30, sing 1.3586, HKD 7.8447, INR 69.55, China 6.7346, peso 18.92, BRL 3.9359, Dollar Index 97.36, Oil $63.50, 10-year 2.51%, Silver $14.89, Platinum $886.00, Palladium $1,372.00, and Gold… $1,282.80

That’s it for today… I remember when I was younger, that May Day meant that the communist countries would get their respective military all dressed up and have a parade, with tanks and other stuff… Quite the spectacle…  Ok, sad stuff from the University of North Carolina yesterday, as there was a shooting and some deaths… UGH! Please be safe out there folks!  My beloved Cardinals won again last night, but now they have to face two of the best pitchers in the game the next two days… This will be interesting… And our Blues will be back on the ice tonight, with yet another very late start time! UGH!  But, so be it… Let’s Go Blues!  Gerry Rafferty takes us to the finish line today with his song: Get It Right Next Time…  I hope you have a Wonderful Wednesday, May Day to boot! And will continue to Be Good To Yourself!

Chuck Butler

 

Eurozone GDP Beats Expectations…

April 30, 2019 

* Currencies continue to inch higher VS the dollar…

* Are the Big Boy new outlets seeing things Chuck’s way? 

Good Day… And a Tom Terrific Tuesday to you! What a night for me, as both St. Louis teams were playing on the road… The Cardinals in Washington, D.C. and the Blues in Dallas… I had both on, trying to pay attention to one or the other at various times… And both teams won! WOW! Oh, What a night… I saw yesterday, that Wall Street broke a record… See? What I mean about putting out trumped up economic reports? Investors swallow them hook, line and sinker and buy, buy, buy… And when the following month’s downward revision comes through, it’ll be done under the darkness of night, and no one will make a Big Deal out of it, except me! OK, more on that later… Right now… Jimmy Cliff greets me this morning with a very apropos song… Hello Sunshine… With all the rain we’ve been getting we need some sunshine.

The currencies continue to move higher in small moves though, but higher nonetheless… Yesterday I told you how the Dollar Index had dropped in price from 98.30 to 98.02… Well this morning the Dollar Index is trading at 97.58… I know, I know I’ve told you through the years that the Dollar Index isn’t the best way to follow the currencies, but for this time, it’s been a good indicator to me, that is, that the currencies, led by the Big Dog euro, have been inching higher VS the dollar. 

Speaking of the euro… In the Eurozone this morning we had a check on Eurozone 1st QTR GDP, which beat the expectations of 1.1%, the same as the 4th QTR 2018, and printed at 1.2% instead… That’s not a great report card, but… it’s far better than the reports that the Eurozone was going into a recession…  Of course, 1.2% isn’t that much of a cushion… 

Gold had a bad day yesterday, but not as bad as Palladium! Gold lost $6.50 yesterday, but has gained that amount right back in the early morning trading today…  But poor Palladium, it lost $95 yesterday! That’s right, I said $95… OUCH! Now that’s going to leave a mark! 

Getting back to my tirade yesterday… The Fed will meet today and tomorrow (time to get the board games out again!), and while I believe they will keep rates on hold for now… I do believe that when Fed Chairman Powell gives his press conference on Wednesday afternoon, he’ll probably casually mention that the Fed Heads are teeing up a rate cut for later this year… Of course later could technically mean at their next meeting, but I digress…

So, while I was just sitting here thinking about the hold the Fed has on the economy these days, I came across a thought that all Central Banks around the world have an equal footing on the way their respective economies run, too… And that got me thinking ( you know the thigh bone is connected to the knee bone, etc. ) that what we have in the world today is not what we used to have, which was free markets… We now have managed economies by each country’s Central Bank… Oh, heaven help us, for we do not know of the things that we have allowed to happen…

I say that because… These Fed Heads are not out in the real world, they have no idea what’s going on from day to day in the economy. Sure they get their regional reports, but those are written by underlings to the Fed Heads, what do you expect them to say… That the whole economy is crashing around us?… it’s a Mad, Mad, World out there, and you had better be street wise and savvy to be a Fed head in my opinion… Take this reversal of their previous thoughts that they would be hiking rates all this year and some more next year… That certainly has been throw to the curb, now hasn’t it? The problem here is that what happens if they “went too far” with consecutive rate hikes? And then when they panic and begin to cut rates again, do they go “too far” that way too?

The thing is, that we have to live with these moves… We have to adjust things, our spending habits, our savings, our investments, etc. Because the Fed managed the economy too much? That’s crazy folks… And I’m going to stop there because… Well, because…

Well, it’s almost all out of my system, except I keep seeing more and more looks under the hood of that dangblasted  U.S. GDP revision last week… This one is from David Rosenberg, once again, who looks under hoods as much as I do, or even more! This is from his Twitter feed… “The weak surprise in Q1 GDP was the consumer – a 5.3% annualized plunge in big-ticket spending! The bulls were telling everyone to expect a consumer boom based on surging tax refunds. But guess what? The average refund was 2% lower this year than it was last!”- David Rosenberg on Twitter.. 

On Bloomberg this morning that have three charts that they say are very good indicators that the economy is headed downward… They talk about the lack of Industrial production, Capital spending, and that gasoline prices are within 10-cents of last year’s peak, and are up 30% since the start of the year…  There was nothing new here to regular Pfennig readers, as I’ve talked about all these things, including how gas prices were going up now, as we near the start of the summer driving season… 

The reason I brought these things up from Bloomberg this morning is that the major media outlets are beginning to “see the light”… And come around to Chuck’s way of seeing things for what they are, and not pulling any punches! 

I just saw a news flash that in Venezuela this morning, the opposition is attempting to overthrow the Maduro Gov’t with a military uprising…  This will be something to watch today… 

Well, I haven’t talked about the Trade talks lately… And I’m here to correct that! HA!  The U.S. negotiators are in China and there’s word that a trade deal might be close to being done.  Well, I’m from Missouri… You’ll have to show me… I’ll believe it when I see it! 

To Recap…  The Currencies continue to inch higher VS the dollar with the euro leading the charge. Eurozone GDP beat expectations but those expectations were watered down, so the beating of them wasn’t exactly a moon shot… But the euro rallied nonetheless.  Hey! Bloomberg is coming around to Chuck’s way of seeing the economy for what it is and not what the Fed Heads and Gov’t think it is…  That’s a big step for Bloomberg, folks…  Because most outlets don’t want to be associated with the likes of Chuck! HA!

For What It’s Worth… Well this article plays well in the sandbox with my thought earlier this morning regarding the Fed overacting with rate cuts/ hikes. And this article talks about a new program that the Fed is thinking about and can be found here: https://www.cnbc.com/2019/04/29/fed-looking-at-a-program-that-could-be-version-of-quantitative-easing.html

Or, here’s your snippet: “Federal Reserve officials are considering a new program that would allow banks to exchange Treasuries for reserves, a move aimed at ensuring liquidity during difficult times that also would help the central bank decrease the size of its nearly $4 trillion balance sheet.

The so-called standing repo facility is in its early discussion phases. Respected St. Louis Fed economists David Andolfatto and Jane Ihrig have authored two papers on the plan, which they say would ease the regulatory burden for banks that feel pressured into holding ultra-safe assets.

In some quarters, the idea is viewed as a natural extension of current Fed policy. Others, though, think it in essence could be a repackaged form of quantitative easing and thus yet another iteration of the Fed’s decade-long tinkering in financial markets.

The idea comes as central bank policymakers look for ways to cut the bond holdings on its balance sheet without being disruptive to markets.”

Chuck again…  There they go trying to improve things that were bad to begin with… I mean wouldn’t it be a good idea to see if the markets could function without intervention/ manipulation? I’m just saying…

Currencies today 4/30/19 American Style: A$.7057, kiwi .6677, C$ .7440, euro 1.1212, sterling 1.3009, Swiss $.9808, European Style: rand 14.3143, krone 8.6210,  SEK 9.4825, forint 287.97, zloty 3.8216, koruna 22.8817, RUB 64.57, yen 111.25, sing 1.3603, HKD 7.8450, INR 69.64, China 6.7312, peso 18.90, BRL 3.9324, Dollar Index 97.58, Oil $63.30, 10-year 2.53%, Silver $15.07, Platinum $903.00, Palladium $1,377.00, and Gold… $1,286.60

That’s it for today… A late night for me, but I couldn’t turn the hockey game off, the Stars kept scoring to tie the game and the Blues would storm back and move ahead, until the horn sounded and the Blues had won!  My beloved Cardinals are on a roll, but the gauntlet of good pitchers is lining up to face them the next 3 games… Their work will be cut out for them for sure! My darling daughter, Dawn, called me last night to see if I was OK… She always checks on me when I’m all by myself… And I truly appreciate that!  Son, Andrew tells me that the State playoffs begin this Saturday, and I think I’ll attempt to get to the game. His team is the 3rd seeded team in the state, Good luck to the Flyers!  Good luck to the Cardinals, and Let’s Go Blues! Stevie Nicks (old heart throb!) and Fleetwood Mac take us to the finish line today with their song: Landslide…  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

Chuck Butler