Author: admin

May 11, 2020 

* Currencies rally on Friday, give back ground today

* Neal Kashkari: “The Worst Is Yet To Come”…. 

Good Day… And a Marvelous Monday to you! A fairly nice weekend, with some very chilly air being blown around yesterday, for Mother’s Day. Speaking of which, I hope all the mothers out there had a grand day. I know all too well, that this Mother’s Day was not anywhere near normal, and hopefully it’s that last time we have to go through that! If my mom was still alive I would have gone to see her, and still given her a hug…. I’m just saying…. I just don’t know what’s going on in the markets these days folks, so I’ll just keep giving you my opinions on what “should be Happening” VS what is Happening…. Like Friday’s markets reaction to an awful jobs jamboree…. So I have that and more to talk about today…. Don Henley greets me this morning with his song: In A New York Minute….

I learned something new about rock history this past weekend when my fave newsletter writer, Grant Williams wrote about it in his weekly letter titled: Things That Go Hmmm…. Grant wrote about how the singer/ songwriter, Johnny Nash (I can see clearly now) spent some time in Jamaica years ago, and hired a small group of locals to back him up and write songs for him…. The band? None other than Bob Marley and the Whalers…. See, even an old rock-n-roller like me still can learn something new all the time!

I’m beating around the bush today, before getting started because I know that once I do get started I’m going to be getting very mad, and upset with all that’s going on… And the stupidity of it all! Yes, that’s right, I said the “S” word….. I guess you’ll have to deal with it!

Before we get to the data… The dollar bugs went into hiding on Friday, with regards to their relationship with the currencies, and the currencies rallied all day on Friday, that’ is, after the Jobs Jamboree printed. But Gold couldn’t find a bid all day and ended the week with a down day on Friday to the tune of $15 to close at $1.702…. This was after rising more than $33 on Thursday! Up one day down the next, that’s the story for Gold since it hit $1,700…. And I have to tell you that I’ve finally figured out why this is happening, and its’ because….. No, wait…. I can’t go there yet, I’m still feeling spry this morning, and I’m not ready to get down in the dumps!

That was Friday, and in the overnight markets leading to this morning, I’m seeing the dollar bugs fight back, and Gold starting the day down $2… Two weeks ago, it was the opposite going on, with the dollar getting sold in the overnight markets, and bought in the U.S. time…  And now the tables have been switched…. Strange stuff for sure, but leads me back to my thought that traders don’t have a clue, about what’s going to happen next, and so they dabble here and there, to keep their jobs… 

OK… are you ready? Yes, I’m ready…. So, let’s go down the dark alley way, and see what’s behind the curtains….. Well, well, well, what have we here? The BLS version of a jobs report printed on Friday, and believe it or don’t, but the BLS did not offer up an hedonic adjustments to the figure, instead they printed a long explanation of what they’re looking at during the pandemic. So…. The April total unemployed printed at 20.2 Million, and the Unemployment Rates was 14.7%…. Which were both better than feared….

On Thursday, last week, the Weekly Jobless Claims printed its lowest figure in 8 weeks, but…. Before we rejoice that this is all over, the total was 3.17 Million new claims filed in the week ending 5/2, bringing the total jobs shred in the past 7 weeks to 33.4 Million! OK… so I’ve got some numbers for you to look through here…. First of all the last week of March had the largest Weekly Claims number of 6.8667 Million… Then the April weekly totals were 4/4 6.615 Million, 4/12 5.237 Million, 4/19 4.441 Million, 4/26 4.846, and 5/2 3,169

OK add up all the April numbers and you get 23.309 Million… So, somewhere the BLS forgot to add over 3 Million jobs lost in April…. And that would get you close to the 18% Unemployment rate that I talked about a week ago…. Let’s also keep in mind that the weekly reports cross months, so there’s some give and take there, but on the back of cocktail napkin, I figure we’re probably closer to 18% Unemployment in April than what the BLS had for us….

Oh, and one more thing on the jobs report, from what I understand, the cut-off date for the reporting numbers was April 15th…. So, does that mean the May Jobs Report is going to have the last two weeks of April’s unemployment additions? This was all news to me, folks, for even in all my studies on the BLS and the jobs report, I was unaware that they cut of the previous month 1/2 of the way through the month! But leave it to the BLS to try and throw us all off the scent of what a real unemployment number is…. 

Here’s my take on all this…. I would venture to say that at least 1/4 to 1/3rd of those lost jobs aren’t coming back…. I hate to be the bearer of bad news but it is what it is folks….

Shoot Rudy, even Fed Head, Neal Kashkari agrees with me…. Yesterday, speaking in an interview he said that He believed that “The Worst is yet to come”…. And he went further to explain when asked if the economy would bounce back in the 2nd QTR like some economists are calling for, he said, “You know, I wish it were. What I’ve learned in the last few months, unfortunately, this is more likely to be a slow, more gradual recovery.”

So, why is the stock market still rallying in the face of all this bad economic reporting? Well, I really don’t know the answer to that question, but I will offer up what I see going on, and that is investors are drinking the Kool-Aid and believing what some of the Brokerage houses and economists are saying and that is, that…. The economy will turn around quickly once we get through this, and they believe it’s in the 2nd 1/2 of the year… This year, that is… The second half of THIS YEAR! And investors not wanting to miss the boat on getting in on the bottom, are jumping in with both feet…. I could go on to explain how this type of mentality caused major losses after the Great Depression’s stock market drop…. The stock market rallied…. And within 18 months they were looking at another drop that was worse than the first one!

OK, but I don’t want to pull away the punch bowl from all those folks that are drinking the Kool-Aid…. So, I’ll stop there… But to me, this appears to be a classic “Bear Trap”….  And that’s all I have to say about that! 

But, this mind set in traders is also what’s causing Gold to run hot and cold on alternating days…. Why buy the safe haven metal when there will be no reason to, in the second half of this year? I shake my head in disgust, because the people that say these things, can’t see the forest from the trees…. Did they not pay attention to the weakening data that was printing month-by-month before the COVID-19 virus came ashore? Do they not know about all of the derivatives that are out there, and all it would take is for one snowflake to fall to cause an avalanche…. The THREAT of an all out collapse is out there folks…. And those that choose to ignore it will be brought to tears in the future…. At least that’s how I see it playing out….

I have a song going through my mind right now it goes like this: Why does the sun go on shining? Why does the sea brush the shore? Don’t they know, it’s the end of the world?  And so on…. 

OK, I got through that without having my blood pressure rise… I’m serious, here folks, I keep my blood pressure machine right here on my writing desk to check it first thing in the morning and record the numbers, but there are times I get so riled, that I check it again to see what damage I’ve done to it!   Actually, I have to do that because the chemo I take causes high blood pressure….   

I’ve been reading a book lately titled: Make America Healthy Again… There’s a chapter on cancer, but all the cancers discussed left out my cancer….  But I got the gist, cancer in some people is preventable… Mine? I believe it was genetically given to me…. And that’s all I have to say about that!

The U.S. Data Cupboard is empty today, and besides the stupid CPI (consumer inflation) which will be negative, showing the deflation that’s among us right now, and the Weekly Jobless Claims, we’ll have to wait until Friday to see the April print of Retail Sales….   The April Retail Sales will most likely be just plain awful, as the March print, you may recall was already at negative -8.7%…. And that only had 1 week of shutdown included in that data print….  But that’s Friday…. 

To Recap…. The currencies found a way to rally on Friday after a better than feared Jobs Jamboree number… Gold couldn’t back up its $33 gain on Thursday, and lost $15 on Friday, and is down $2 in the early trading today. Chuck goes through why he believes the markets aren’t reacting to the awful data prints… Of course he doesn’t really know the answer to why this is happening, he’s just offering up his opinion as to why it is what it is…. 

For What It’s Worth….  Well, some of the brokerage houses, I mean, Casino Banks and economists may believe that this is all an illusion that will be wiped clean in a New York Minute, and that’s all fine and good, but I prefer to look at things as they really are… And this article about Freight deliveries crashing is what I’m talking about, I found it on zerohedge.com and it can be found here: https://www.zerohedge.com/economics/everything-has-been-cancelled-class-8-heavy-duty-truck-orders-crash-25-year-low-april

Or, here’s your snippet: “The misery in Class 8 heavy duty truck orders continues. Still struggling with the remnants of an order backlog that started almost two years ago with record orders in August 2018, the industry was unable to find an equilibrium prior to the coronavirus pandemic. Orders were sluggish and we noted numerous trucking companies that closed up shop altogether in 2019.

Post-pandemic, things look even more helpless. In April, the industry posted its worst order number on record as the economy ground to a halt as a result of the nationwide lockdown. Only 4,000 Class 8 orders were made last month, which is down 73% year over year and 44% from March.

It was the lowest reading since FTR began tracking orders in 1996. Many companies canceled or delayed new orders as demand, measured by the ratio of loads to trucks, fell 66% in April, according to the Wall Street Journal.

The uncertain outlook going forward has prompted many companies that would normally be shelling out for new infrastructure to rein in their spending. For example, logistics company TFI’s Chief Executive Alain Bédard said in an April 22 call: “Everything has been canceled.”

Chuck again…  Well…. Everything has been canceled….  And there are no timelines as to when they will be put back on the docket….  I’m just saying… .

Currencies today 5/11/20 American Style: A$.6472, kiwi .6072, C$ .7140, euro 1.0816, sterling 1.2303, Swiss $1.0284, European Style: rand 18.4206, krone 10.2365, SEK 9.7979, forint 323.58, zloty 4.2144,    koruna 25.4736, RUB 73.35, yen 107.35, sing 1.4273, HKD 7.7502, INR 75.20, China 7.0734, peso 23.87, BRL 5.7249, Dollar Index 100.09,  Oil $23.95,   10-year .69%, Silver $15.41, Platinum $879.81, Palladium $1,879.81, and Gold …. $1,700.19

That’s it for today…. The family got together late last week on Zoom, to celebrate a big occasion…. My youngest son, Alex, has now completed his 6 years and has graduated from St. Louis University with a doctorate in Physical Therapy.  We all wanted to know if we were to call him Dr. Butler going forward!   My chest is puffing out right now, because I’m so darn proud of him…. And he already has a job that he’s supposed to start on June 1, if they are open by then… Real longtime readers will recall when Alex used to sit on my lap and help me write the Pfennig from home when he was 3, and I was “retired” for the first time…. If you don’t recall seeing his typing, no biggie, it was all a jumbled mess…. So, Congratulations Alex! Now , go and earn a living, be a part of society, and have a great “after college life”!  No Pfennig On Thursday this week, as I’m scheduled to visit my oncologist bright and early in the morning…  I’ll remind you again Wednesday…  The Ozark Mountain Daredevils take us to the finish line today with their song: Jackie Blue….   I hope you have a Marvelous Monday today, and will Be Good To Yourself!

Chuck Butler

May 7, 2020

* The dollar bugs rule the roost once again…. 

* Gold gets bashed on Wednesday, Chuck says it’s a “sign”… 

Good Day, and a Tub Thumpin’ Thursday to you! In honor of Tub Thumpin’… I get knocked down, but I get up again, you’re never going to keep me down…. Story of my life since June 2007, for sure! Well, the rain stopped yesterday morning, and the sun came out, but it was still just a little too chilly for yours truly. I did sit outside in the sun to eat my lunch, but that was it… I see no reason to be out trying to get some Vitamin D, with a jacket on! And with my bald head, a baseball cap needs to be worn any time the temps dip below 70! Well, I didn’t get much flack for my stance on the thought that the economy needed to be opened up… Thank you for holding back! 10cc greets me this morning with their song: The Things We Do For Love…. 

There is one other thing that I left out of yesterday’s thought on opening up the economy, and that is, something we should have done in the beginning to avoid all this mess…. And that is, we all know who’s most at risk, right? (yes, I’m one of those most at risk, but… I’m retired, so I don’t have a job to go to!) We should have, and could still do it, quarantine all the folks “at risk”, and allow the rest of the people that want to work, go to work! Of course, then there’s the fact that as Americans we’ve become so lazy, and would prefer to sit at home and receive payments from the Gov’t instead of going to work…. If I were younger, and not have cancer, and congestive heart disease, I would be champing at the bit to go to work! But then that’s just me…. I guess…

OK… The currencies lost more ground but not that much in all, yesterday, with the euro falling below 1.08… Shoot Rudy, just last week the euro was above 1.10… UGH! There was something else  that I missed talking about yesterday, and so… here goes…. After reaching its smallest deficit since September 2016 in February, the U.S. trade balance rose again in March. The overall gap in goods and services trade widened to $44.4 billion from a revised $39.8 billion in February. They say it was a “crash” in exports…. Well… other countries around the world have shut down their economies too, so they don’t need our exports, especially with as high a price that they have on them, due to dollar strength!

Another thing I talked about yesterday, I left out a very important caveat…. When I said hold cash, I left out this… “hold cash until the bank begins charging you for deposits”…. I can’t believe I forgot to say that…. Because, once the bank begins charging you for depositing cash into your account, there’s no reason for them to hold anything more than the amounts you need there to pay online bills or write checks against….

Of course, that’s when we get to the scenario I painted for you a couple of weeks ago, when I pulled out a Dow Theory Letters piece, and told you how I believed that getting to negative rates was “in the cards”, and that when consumers began to pull their funds, the Gov’t would implement a new low, forbidding physical cash, and that your bank balance was just digital units, and a whole bucket of bad things that go along with that…. So… in the end we had better hope that we never go to negative rates here in the U.S.

Let those countries that have no sense do that… Like Switzerland and Japan, and the Eurozone, and Sweden (although Sweden has said they are through with negative rates) Oh me-o-my…. What a tangled web we live in, eh?

The Bank of England (BOE) is meeting this morning, while my fat fingers are flying around on the keyboard…. I suspect that they’ll leave rates unchanged, and then talk about all the horror that the COVID-19 virus has brought to their economy, and the need to do more stimulus work, which means more debt, and so on…. I would think that traders would listen to the BOE’s cries of despair, and sell pound sterling accordingly… But we do live in a world of opposites these days, so you never really know, now do you?

While I’m talking about England, they haven’t been in the news too much lately, as this crazy news media have focused on China, the U.S. and Russia…. Did you know that Israel bombed Syria the other day? And why didn’t that news be front and center, and cause a rash of buying in Gold? Because the media chose not to highlight it…. Ch, ch, chain, chain of fools…

One day, the Oil traders are high fiving each other because they think that the production cuts are working as the price of Oil rises…. And then the next day the story on the production cuts isn’t as rosy, and Traders sell Oil again, after 5 days of rallying… What changed? Ahhh Grasshopper, come sit, and listen…. Traders began to realize that no matter how much production is cut, the supply of Oil is still getting added to, because, at this time, there’s JUST NO DEMAND for Oil…. I knew they’d figure that out sooner or later…. They don’t have brains like a box of rocks, but, sometimes it takes some fracking to get a thought through to them! HA!

Well, Gold got hit yesterday to the tune of $22 bucks and brought the shiny metal back below the $1,700 figure, to close at $1,686… This is a sign folks…. A sign that’s telling you, if you’ve procrastinated buying Gold before, you need to get on the Magic Bus…. Every day I get in the queue (too much, Magic Bus), To get on the bus that takes me to you (too much, Magic Bus) Ahh, a little vintage Who for you this morning… This “sign” has been brought to you by the Aden Research Team…. And main sponsor, Chuck Butler!

Gold is attempting to win back that lost ground yesterday, as it is up $8 in the early trading today…  Back and forth, back and forth… But eventually, this will stop and when it does, it’ll be a lot like musical chairs… When the music stops… Will you find an empty chair? Will you be able to buy physical Gold when the music stops? You see, I’m thinking the answer to that question is a “hard no”!  You see, I believe that Gold will be in such high demand, that getting it in your hands is going to take Superman getting it for you…. 

I recall a joke that goes something like this…. A man is praying to God, and asking him why he can’t win the Lottery… And finally God has had enough, and talks to the man and says, “Why don’t you buy a Lottery Ticket?”  I rest my case on the drop in price of Gold being a “sign”….. 

The U.S. Data Cupboard yesterday had some very frightening data… The ADP Employment Report for April showed that 20.2 Million jobs were shed in April….  That’s right I said 20.2 Million jobs were shed in April… I’ll let that sink in and then you’ll see why I’m so confused as to why Gold lost $22 and the dollar got bought yesterday… 

We were also to see the color of the Quarterly  Treasury Refunding number, but something happened and it didn’t get printed… You don’t think that…. Nah, that couldn’t be, the Gov’t wouldn’t dare try to print this under the cover of darkness so everyone can’t see just how much money they’ve spent?  Nah… that could never happen in this day and age… right? 

To recap…. The currencies got sold, along with Gold yesterday, and all this back and forth stuff is really beginning to give Chuck a rash!  The BOE is meeting this morning, and Chuck thinks that the BOE will leave rates unchanged and talk of all the horrors that the COVID-19 virus has brought to their economy…  And Chuck gets caught up on all the things he’s forgotten to talk about this week…. 

For What It’s Worth…. Well, this coming Friday will be the BLS version of a Jobs report here in the U.S. for April… I always refer to the monthly print as the “Jobs Jamboree”, because long ago in a galaxy far from here, Traders used to gather around their Telerate or Bloomberg screens and hold monthly bets on the Jobs number that would show up on their screens, and then the markets would trade accordingly. Yesterday, the ADP Employment Report showed that employers shed 20.2 Million jobs in April…. Now, a couple of Fed Heads from Chicago, have built a new method of coming up with the Unemployment Rate, which will be quite different than the hedonically adjusted BLS version on Friday, the story of their new method and such can be found here: https://news.trust.org/item/20200505121915-v51r0

Or, here’s your snippet: “The official U.S. unemployment rate for April, due out this Friday, will likely vastly understate job destruction from the coronavirus pandemic, so a pair of economists at the Federal Reserve Bank of Chicago set out to create a measure that captures the true extent of labor market losses.

Their estimate: a ‘U-Cov’ rate in April of somewhere between 25.1% and 34.6%. That’s compared to the 16% rate forecast by economists polled by Reuters, who also estimate American employers shed more than 20 million jobs last month.

“The official unemployment rate may only capture a fraction of these losses,” Chicago Fed economists Jason Faberman and Aastha Rajan wrote in a blog released Tuesday, describing their proposed U-Cov measure of labor market under-utilization.

Many of those newly out of work will not be captured in the traditional U.S. unemployment measure, which counts only those who are out of a job and actively looking for work.

The Labor Department also publishes broader measures to include those working fewer hours than they want to, and people who have looked for work in the past but not recently.

But even such broader measures may miss those who are on unpaid leave and expect to return to their jobs once the crisis has passed, or people who are not searching for jobs because of stay-at-home orders, the Chicago Fed researchers wrote.”

Chuck again… I like Ed Steer’s comment about the BLS report that will print on Friday, he said, “I’m sure that Friday’s jobs report will be massaged to perfection.” I’m sure that it will be too! And we won’t have to wait long for the BLS report as it will print tomorrow!  And you can be sure I’ll talk about it until the cows come home on Monday!

Currencies today 5/7/20 American Style: A$.6466, kiwi .6060, C$ .7105, euro 1.0790, sterling 1.2360, Swiss $1.0244, European Style: rand 18.5607, krone 10.2380, SEK 9.8345, forint 324.30, zloty 4.2105,    koruna 25.1324, Silver $15.02, Platinum $755.22, Palladium $1,694.19, and Gold… $1,696.19

That’s it for today….  HEY!  Sunday is Mothers Day!  There are times during the year when I truly miss my mom, but on Mothers Day, it always hits me like a brick wall, that she won’t be there to hug, and tell her I Love her… So, do me a BIG favor, make sure you tell your mom your love her, I know we can’t hug right now, so the statement of Love will be enough…  My mom used make a BIG deal out of my birthday…. She used to come down to the basement and sit and listen to the band practice songs…  She was my biggest backer…. OK… I’ll have a little poem about moms following this finale….  Three Dog Night takes us to the finish line today with their apropos song: Mama Told Me Not To Come….   (Live at the Forum, which was one of the first albums I ever bought with my own money!) I hope you have a Tub Thumpin’ Thursday, and will Be Good To Yourself!

Chuck Butler

 

May 6, 2020 

* The dollar bugs rule the roost again on Tuesday night

* Did U.S. citizens spend their stimulus checks? 

Good Day… And a Wonderful Wednesday to you! Well, by now I’ve climbed down from my roof, where I had gone to yesterday so that everyone could hear me screaming about Ken Rogoff… But there was no one out to hear me…. So I came inside and wrote some nasty things about his latest proposal, and by the middle of the day, I was calmed back down…. Then I hear the song Ohio playing on my iPod and I began to get all riled up again, like I was yesterday morning when I wrote about the Kent State slayings of 4 students… Finally by late afternoon, I was calmed and in control of my emotions once again… So, it took me some time… And now this morning, I’m just peachy, and ready to write! But first, Melvin & the Blue Notes greet me this morning with their song: If You Don’t Know Me By Now….

The currencies traded in the same clothes all day yesterday, with little to no movement at all and at the end of the day, the euro was 1.0845, and in the morning it had been 1.0840…. So, see what I’m talking about? Gold found a bid or two and climbed back above $1,700, to close at $1,706 on the day. In the overnight markets it was a change from the trading pattern we saw last week, as the dollar bugs ruled the roost in the overnight markets, and brought the Dollar Index back to 100, after spending a week below that figure.  And Gold has given back $5 of gain yesterday in the early trading today… 

The Reserve Bank of Australia (RBA) left rates unchanged on Tuesday and they remain at a paltry 25 Basis Points, or .25%….   I shake my head in disbelief that interest rates in this part of the world, where we used to be able to depend on much higher rates than anywhere else in the Industrialized world.  But times change…. I guess… 

One of the few places where you can still receive interest on your deposit is Russia… Longtime reader, Bob, send me a link to an article that talked about how 70% of Russians have savings to help them in times like this, and 70% of Americans live paycheck to paycheck, with no rainy day savings…  That information must be good for some positive movement in the ruble, doesn’t it?  

I don’t know if you’ve been keeping track recently, but since going negative a couple of weeks ago, the price of Oil has recovered and is trading this morning with a $25 handle!  Apparently, from what I read, the glut of supply is being drained off as the production cuts begin to filter through….  I’ll still put that event, the price of Oil going negative, as one of the strangest things I’ve ever seen! 

It’s these kinds of headlines that make my skin crawl….  And UBS Wealth Manager, commented to Bloomberg.com that he believes “Americans are wrong to Pile up cash”….    It’s guys like that whom give Wealth Managers a bad name…  First of all he needs to do more homework, and in doing so, he’ll find that Americans aren’t piling up cash, for they don’t have the cash to Pile up…   I’m just saying…. And, the other thing he’ll find out that holding cash right now isn’t that bad of a thing to do!

Of course, maybe he’s talking about the data that came in this week about how Americans spent their stimulus checks from the Gov’t….  The survey shows that of those who received IRS stimulus checks, 38% added to savings, 26% paid off debt, and 18% planned to spend but not yet.  OK, I’ve got to inject this here…. Didn’t I tell you that the so-called stimulus checks weren’t really stimulus, and they wouldn’t do a thing to help the economy?  I’m just saying…. 

I keep receiving emails from readers that want to know where to go with money these days, if the currencies aren’t moving, and the U.S. economy is in the dumps? Well, I’m not an investment advisor, although all my old licenses should have allowed me to answer the questions in a way that wouldn’t get anyone trouble.

So, let me just say, this is NOT investment advice…. I’m going to tell you what I’ve been doing, as I’ve had some large Treasuries come due lately…. 1. Buy bank CD’s, within the FDIC limits, you may have to go to several different banks, but they’re out there folks, and at least it’s FDIC insured…. 2. Right now I like Gold stocks…. And 3. Of course if you haven’t filled your asset allocation with Gold & Silver yet, now is a good time to do just that…. 4. Hold cash…. I understand that the dollars I hold are going to be worth much less in a few months, but… If I have cash, I have liquidity, to buy something that comes along that looks cheap…. So, that’s what I’m doing… Notice I didn’t tell you any Gold stock names? Can’t do that here… but if you wanna meet me on the Butler patio, or at my local watering hole, once they open up again, I’ll share those with you!

Remember the Wendy’s TV commercials, with the three old ladies, yelling, “Where’s the Beef?” I have this eerie feeling that somebody is going to pull that one off YOUTUBE, like I just did, to make a BIG Deal out of it, with the meat shortage that’s coming…. Here’s the link if you want to laugh again: https://www.youtube.com/watch?v=riH5EsGcmTw

OK… now that I’ve gotten that silliness out of me, it’s time to get serious…. I received an note from longtime reader, Bob, yesterday with a link to a Wolf Street.com  article… I don’t want to talk about the whole article, just a brief piece of data that it supplied…. “The ISM Business Activity Index plunged to 26%.”…. This is the lowest on record folks… and we’re still putzing around with opening up the economy again…. And I don’t care to have to read any emails from people who think I’m trying to kill their grandparents, by saying the economy should open again….

Did you know that in 1968 we had a different pandemic that was called the H3N2 virus, and that it killed 100,000 Americans, and over 1 million people worldwide? The Americans that lost their lives totaled more than those that lost their lives in the combined Vietnam and Korean Wars! And nothing was ever closed, schools remained open, movies remained open, and so did restaurants and bars…. Shoot Rudy, most people should remember this pandemic…. Have we become big babies?

I only bring this up because of the damage the “cure for COVID-19-virus” is doing to our economy, and economies all over the world… That is except in Sweden and Brazil, where they dealt with it like we did the H3N2 virus in 1968-69, and their death rates are basically the same as ours, and maybe even less…. Shoot, we even held the Woodstock music festival in 1969…. Think that could happen this time?

OK, I’m going to be in big dookie now, with my wife… She doesn’t remember the H3N2 virus, and thinks that this economic shutdown is warranted. Hey! I still think that people need to be careful, wash their hands, no hugging, and keep a safe distance, and wear masks outside, but…. There has to be someone that can think outside the box here, and think of a way to reopen the economy while using these parameters! Come on Bill Gates, come on Jeff Bezos, come on whomever! Put those thinking caps on, now! 

The U.S. Data Cupboard had the aforementioned ISM Business Index, which I’ll say again, is a major proof item for the rot on the economy’s vine….   We also had a speech by St. Louis Fed President, James Bullard, who has really gone soft in my book….  Bullard thinks that the economy should open up in the 2nd half of the year…. So, at the earliest that would mean July….  Does he really think that the economy can survive on this lifeline for two more months?  I don’t think so…. And I’m saying so! 

Today’s Data Cupboard just has the Monthly ADP Employment report, which was created to give investors a heads up on the BLS’s Jobs Jamboree that will print on Friday this week….  Longtime readers know my thoughts on the BLS and their hedonic adjustments, therefore I’ve always mantained that the ADP report should be used as the “go-to” for employment reports and data, as ADP is the payroll system that’s used by just about everybody and their brother, and should know when a business comes on board or a business dies, and their data would reflect that without making “assumptions” like the BLS does….  

So, anyway…. The ADP Employment Report for April doesn’t even have a forecast on record, as everyone is holding their breath to see just how far the Unemployment rate has risen, here in the U.S. 

For What It’s Worth…. I was going through Twitter yesterday and came across an article written by economist, Ken Rogoff. Now, first I’m going to tell you that I’ve never agreed with Ken Rogoff and his economic principals before and now I know I never will…. Here’s Mr. Rogoff telling us the case for negative rates is here and that he wants deep negative rates, and it can be found here: https://www.project-syndicate.org/commentary/advanced-economies-need-deeply-negative-interest-rates-by-kenneth-rogoff-2020-05

Or, in case you haven’t recently been sick to your stomach, here’s your snippet: “Only monetary policy addresses credit throughout the economy. Until inflation and real interest rates rise from the grave, only a policy of effective deep negative interest rates, backed up by measures to prevent cash hoarding by financial firms, can do the job.

CAMBRIDGE – For those who viewed negative interest rates as a bridge too far for central banks, it might be time to think again. Right now, in the United States, the Federal Reserve – supported both implicitly and explicitly by the Treasury – is on track to backstop virtually every private, state, and city credit in the economy. Many other governments have felt compelled to take similar steps. A once-in-a-century (we hope) crisis calls for massive government intervention, but does that have to mean dispensing with market-based allocation mechanisms?

Now, imagine that, rather than shoring up markets solely via guarantees, the Fed could push most short-term interest rates across the economy to near or below zero. Europe and Japan already have tiptoed into negative rate territory. Suppose central banks pushed back against today’s flight into government debt by going further, cutting short-term policy rates to, say, -3% or lower.

For starters, just like cuts in the good old days of positive interest rates, negative rates would lift many firms, states, and cities from default. If done correctly – and recent empirical evidence increasingly supports this – negative rates would operate similarly to normal monetary policy, boosting aggregate demand and raising employment. So, before carrying out debt-restructuring surgery on everything, wouldn’t it better to try a dose of normal monetary stimulus?”

Chuck Again…. This guy needs to find a closet and go hide in it as far as I’m concerned…. Basically, folks, he’s saying that it’s time for you to lose all of your civil rights…. UGH! And, there is more to the article so be sure to click on the link above, should you want more fodder to raise your heart rate! 

Currencies today 5/6/20 American Style: A$.6436, kiwi .6052, C$ .7113, euro 1.0807, sterling 1.2371, Swiss $1.0265, European Style: rand 18.5315, krone 10.2560, SEK 9.8376, forint 323.31,  zloty 4.1985,  koruna 24.9635, RUB 74.11, yen 106.20, sing 1.4186, HKD 7.7505, INR 75.12, Chin 7.0615, peso 24.05, BRL 5.5507, Dollar Index 100.01,  Oil $25.36,   10-year .68%, Silver $15.06, Platinum $762.71, Palladium $1,797.22, and Gold… $1,701.22

That’s it for today….  I was watching Game 4 of the 2019 NLDS series between my beloved Cardinals and the Braves last night, and even though I knew how the game ended, I was still on pins and needles in the 10th inning!  The best way to watch those old games is to forget about what you remember about them, or just put what you recall in the back of your mind….  Game 5 is tonight, and I know that the Cardinals romp, so I might not even watch it….  The sun came out for a bit yesterday, but the temp was only in the low 60’s…. Looks like it’s raining out right now to start the day…. UGH!  Loggins and Messina take us to the finish line today with a song from the live album, Nobody But You….   Jim Messina, is a name a lot of people might not recognize… He was an instrumental member of such rock classic bands as Buffalo Springfield, and Poco… Nowadays he’s gone out as the Jim Messina Band….  A little rock history for you this morning to use at cocktail parties! HA  I hope you have a Wonderful Wednesday, and will continue to Be Good To Yourself! 

Chuck Butler

 

 

May 5, 2020

* Traders can’t figure out which way they want to go…. 

* Gold is stuck in the muck around $1,700… 

Good Day… And a Tom Terrific Tuesday to you! Rainy days and Mondays always get me down…. Years and years ago, when I was a young man working downtown, in my suit and tie, there was an old bank that turned into a restaurant, and on Rainy days and Mondays, sandwiches were ½ price, and beers were 50-cents…. I used to stop there after work whenever it rained… wink, wink…. Yesterday, was a rainy day, and a Monday, so the Carpenters would be down…. HA! After 90 degrees on Saturday, I had to get my Blues hoodie back out yesterday, for it got chilly once again! UGH! OK, I have an additional thought on yesterday, a correction to make, and more this morning, so why don’t we get to getting it done! The Pousette Dart Band greets me this morning with their song: Amnesia…. Don’t recall that one? I hope that it’s only amnesia, believe me, I’m sick but not insane!

Well, in all my excitement about it being May the 4th with you, yesterday, the real event in history on that day totally slipped my mind, until later in the morning, when I realized that it was also the day in 1970 that 4 students were shot down at Kent State University, by the Ohio National Guard… The students were merely protesting the Vietnam War…. As a young man at that time, I thought, Oh no, they’re coming for me next… Because I was not a fan of the Vietnam War, and protested any time I got the chance. Thankfully, my lottery number for the draft was a high one, the one year I was eligible for the draft…

OK, there’s one task out of the way today! The currencies just can’t stand a day in the sun! The beat on the dollar bugs most of the day on Friday, and then proceeded to give back  all of their gains since then…. I’m telling you this for probably the 3rd time, but sometimes we have classmates that skip class and then try to catch up, this is for them…. I do believe that Traders are in a funk right now, they don’t know which way the wind is going to blow… They know that they should be selling dollars right now, but then in their heart of hearts they think, but what other currency is worthy? I can see sterling and yen, and reals, and a host of others down on their knees, like Wayne and Garth, bowing repeatedly and saying, “We’re not worthy, we’re not worthy”….

And Gold spent the day going up and down, up and down throughout the day, until finally finishing down a buck from Friday’s close at $1,701…. I’m sticking with my story that the $1,700 level for Gold is going to be a sticky point for a while, before the next upward move… But just like the sticky point used to be $1,300, when Gold finally made the upward move it was like was shot from a slingshot, and BOING! There it was at $1,700…. I do believe the next upward move will be just like that slingshot from $1,300….

And in the early markets, Gold is down $3 to $1,698 this morning…  And in the fave of 3 major operations here in the U.S. announcing bankruptcy yesterday…  Makes no sense to me, but it is, what it is…. 

Speaking of Gold, this is where I do my correction from yesterday… I misquoted something I thought I had read in Ed Steer’s Saturday letter about how the short trades in Gold were down from the week before… When that’s not what he said, and so I apologize…. I have no idea what happened, as when I read things I make notes so I don’t forget to talk about them… So, sorry Ed! And if you want to know what he really says each day, click here and sign up! www.edsteergoldsilver.com 

I was going through Twitter yesterday, and came across something that pretty much tells us all we need to know about the prospects of a quick turnaround in the economy…. Get this… 40% of small businesses plan to skip their rental payment again this month, and that 84% of them are only going to pay 50% of what’s due…. Here I go again with the knee bone being connected to the shin bone, and so on… The people that own the buildings where these small business people set up shop, most of the time own them with a loan…. And they use the rents to help pay the loan…. No rents, no loan payment, no loan payment, no loan…. End of story…

And then the cleaners that clean the building, can’t work… The vending guy that supplies the coffee, and candy machine, can’t work… The landscaper, can’t work, and so on and so forth…. This is getting really ugly folks, and the deeper/ longer we remain like this, the more difficult it is going to be to get out of it…. Yes, I know some states have opened up…. But how’s that going? I would bet a shiny quarter, that the pickup in business is barely above being shut down, and people just don’t trust going out and being around other people, just yet!

Well, today is a BIG day for the euro, and Eurozone going forward, as the European Constitution Committee is supposed to be meeting today, to discuss the legality of everything the European Central Bank (ECB) is doing right now (Bond buying, negative rates, and wanting to buy Corporate bonds)…  But with the COVID-19 virus still hanging around causing Committee’s like this to resort to Zoom meetings are something like that, the meetings just lose their edge….  So, it will be interesting, to me that is, just how this all works out today…. More, hopefully, on this tomorrow.

In the U.S. Data Cupboard yesterday, we saw the rot on the vine of Factory Orders… The March print for this data was a negative -10.3%, down from the already negative -0.1% in February…  This data really represents what I’ve been talking about and that is that the economy was already headed in this direction, and just needed a little push, which it got from the reaction to the COVID-19 virus… 

We had 3 operations announce bankruptcy plans yesterday…  J. Crew, Gold’s Gym, and Neiman Marcus… This will become a daily occurrence folks, so prepare to hear the name of your favorite operation to go to, to file for Chapter 11….  I’m just saying….  Oh, and Got Gold?

I saw some data yesterday that showed the Fed has already pulled back on the helicopter money reins…. They had better be careful…. They can’t supply the economy with the cocaine it needs to continue, and then go cold turkey on it….  Of course, in my humble opinion, the Fed should have never tried to save the economy… They should have just allowed it to bust, suffer through the short-lived period of a recession, and then watched as it recovered without a helping hand, and this time it would really recover, and not that 2.1% GDP we’ve seen here in the U.S. for the last 10 years! 

Well, did you get a kick out of my reprints of thoughts on the Butler Patio, which was the name of my letter with the Dow Theory Folks?  I thought they were so darn bang on, to what’s happening today…  And, the fact that they were written 3 years ago, just blows my mind!  How did I know that the Fed would be entertaining buying Corporate bonds, and extension of Corporate stocks?  

Here’s the thing most people don’t think about, when they think, “the Fed’s got my back with stocks”… And that is simply, the Fed can’t buy every stock… And look, we’ve already seen three Big Name operations file for bankruptcy….  So, the Fed may have your back with Facebook, Amazon, Netflix, and Google (The FANGs) but for how much longer?  I’m telling you this so you will enter it into your journals….  If the Fed does pull out and stops stick handling through all this mess, the house of cards comes tumbling down….  I’m just saying

To Recap…  The currencies can’t stand to stay in the sun very long, and after taking liberties with the dollar on Friday, they gave back all their gains yesterday… Back and forth we go, as traders can’t figure out which way they want / should go….  Gold did the same type of trading, back and forth, through $1,700, and Chuck thinks that we’ll continue to see this go on until it doesn’t and Gold makes its next upward move…. 

For What It’s Worth….  Speaking of the Fed, and what they are doing now… Yes, as I said they’ve pulled back on the reins, of the helicopter money, but their initial go at helicopter money was quite a scene…. And this article talks about that and more, and can be found here: https://www.zerohedge.com/markets/us-treasury-borrow-record-3-trillion-quarter

Or, here’s your snippet: “So much can change in three months.

Back on February 3, the Treasury in its quarterly announcement of marketable borrowing estimates was delighted to announce that “During the April – June 2020 quarter, Treasury expects to pay down $56 billion in privately-held net marketable debt, assuming an end-of-June cash balance of $400 billion.”

Well, oops.

Fast forward to today, when one global (still ongoing) coronavirus pandemic, and one global economic crisis later, the Treasury now expects to boost the net amount of marketable Treasury debt outstanding by an unprecedented $3 trillion in the April-to-June quarter in order to fund the trillions in stimulus and bailout payments.

This is what the Treasury said about its latest borrowing needs:

“During the April – June 2020 quarter, Treasury expects to borrow $2,999 billion in privately-held net marketable debt, assuming an end-of-June cash balance of $800 billion. The borrowing estimate is $3,055 billion higher than announced in February 2020.”

But wait there’s more because looking at the next quarter (July though September) the Treasury now expects to borrow an additional $677 billion in privately-held net marketable debt, assuming an end-of-September cash balance of $800 billion.

In other words, the Treasury will borrow a record $3.7 trillion in the 6 month interval from April to September. This also explains why the Fed – which has already purchased $2.5 trillion in securities in the past 6 weeks – is currently monetizing double the total Treasury net issuance: because it is preparing for precisely this eventuality.

Summarizing this data, Reuters’ Jeoff Hall writes that US marketable debt borrowing is more than the previous five fiscal years combined and almost 2.5x the previous record high borrowing for any fiscal year (FY’09$1.786 tn).”

Chuck again…  Yes, as I told you last week, the national current debt will be more than $30 Trillion at fiscal year end (Sept)….  And the debt to GDP will continue to grow larger and larger, folks…. This can’t end in nothing but tears… 

Currencies today 5/5/20 American Style: A$.6445, kiwi .6055, C$.7120, euro 1.0840, sterling 1. 2460, Swiss $1.0300, European Style: rand 18.3195, krone 10.3085, SEK 9.8675, forint 323.65, zloty 4.1797,   koruna 24.8745, RUB 75.15, sing 106.70, sing 1.4160, HKD 7.7520, INR 75.06, China 7.0614, peso 23.90, BRL 5.5203, Dollar Index 99.85,  Oil $22.42,  10-year .65%, Silver $14.77, Platinum $767.09, Palladium $1,845.68, and Gold… $1.698.41

That’s it for today…  It’s Cinco de Mayo! And the celebrations will be put on hold this year…  Each year on the 5th of May, I retell a story from many years ago (1998 I believe)… I was on vacation in Cancun, with my wife and friends, and we came across a guy playing his guitar and hawking his CD’s, he began to play a song that rang a bell with me, so I grabbed his microphone and began singing Dust In the Wind, in front of about 250-300 people gathered in the square….  One year that I wrote about this, a reader got mad and sent me a note and called me a Big MAK…  You’ll have to figure that one out, and so now I retell the story just to make him more mad! HAHAHAHAHA!  Faces takes us to the finish line today with their song: Ooh La La…  (love that song!)  I wish that I knew what I know now when I was younger…. .  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

Chuck Butler

 

May 4, 2020

* Currencies rally on Friday, but give back some gains

* Gold rallies back to $1,700, which Chuck thinks is the new $1,300… 

Good day… And a Marvelous Monday to you! May the 4th Be With You…. HA! Well, it finally warmed up here! And our spring lasted 2 days, before it turned to summer heat! Oh, come on Chuck, it’s only the beginning of May… Calm down…. I decided last Friday that I needed to see my friends, and since it was a beautiful day, I thought we could sit outside, 6-feet apart, and swap stories, face to face, and not on a Zoom screen… It turned out to be a great night! My iPod and Bose revolve speaker got a great workout! And the grandkids came over to swim so I finally got to see them again too… Now, this 6-feet thing has got to go soon! I miss my hugs from my Delaney Grace! OK… The great band, Yes, greets me this morning with their song: Owner of a Lonely Heart….

Speaking of my iPod… I had a dear reader ask me if I could share my song library with her…. And then came up with an idea, that I could charge for it, but the money would go to the charity of my choice, which would be the MS people…. I’m not even sharpest tool in the tool box, when it comes to technology, and that means I have no idea how to go about all that, but I’m going to look into it… for sure!

OK… The currencies finally had a upward run VS the dollar on Friday, with the euro trading over the 1.10 level, briefly… The dollar bugs fought back at the end of the day, brining the euro back below 1.10, but the upward move in the euro was strong and kept the dollar bugs from making too big of a stride… And Gold had a good day as it tried to reverse the engineered take down from Thursday, when it lost $29 bringing it back below $1,700… But on Friday, Gold found a way to move higher by nearly $18, and closed Friday at $1,702.90….

In reading Ed Steer’s Saturday letter (www.edsteergoldsilver.com) He explained that the short contracts in Gold had dropped last week… The drop wasn’t a HUGE number, but was significant enough to be highlighted by Ed….

It appears to me that $1,700 is the new $1,300 for Gold… Recall last year, when Gold would move up through $1,300 and then be brought back down? This happened so many times that I was beginning to think we wouldn’t see higher prices for a while in Gold, and then suddenly, it all stopped, and Gold headed higher, and went through $1,400, $1,500, and $1,600 in the last 9 months! But not it has stalled out around $1,700…. I do believe that we’ll see this trading pattern for a short time, before the next upward move comes…. This gives the procrastinators the opportunity to jump in before the next upward move, in my opinion…

Speaking of Gold…. I told you all last week that Scotiabank had announced that they were going to close their metals business soon… That got me thinking of the reasons why a 300 year old business decided to close their metals business doors…. And then I came across this from Gata Folks…

Read this over and over again to get gist of price manipulation… “In the past, it was often a profitable venture to manipulate the price of gold with an avalanche of paper gold contracts dumped into the futures markets. When those contracts came due, ample gold was readily available at lower prices, for the bank to satisfy their obligations to deliver gold. But in the last couple of years, there has been a shortage of gold available (at the paper price) to meet delivery obligations. Gold is still available, mind you, but at a price independent from, and often higher than, the manipulated paper price.

If you can sell something for $1500 on the one hand, and manipulate/purchase it tomorrow for $1400 – to deliver to those who purchased it for $1500 yesterday, that is a business model that is hard to beat. But when gold ignores the manipulation, and you have to pay $1600 to deliver what you sold yesterday for $1500, it is no longer fun or profitable. This is a simplified explanation about why some that have played the precious metals manipulation game for over 300 years are now exiting the business. It is no longer fun, and no longer profitable.”

I found this here: https://www.usgoldbureau.com/news/gold-vs-paper

And I think this answers the question as to why Scotiabank had to close their metals business…  But like I said the other day, it in essence represents one less dealer with an arm full of short paper trades at the COMEX…. 

OK… last week I said I would go back through my Dow Theory Letters and find the one where I talk about how stocks perform during a recession…. This conversation was centered on the Swiss National Bank buying so many stocks, and the BOJ, but mostly about the SNB…. So, get this…. It’s from June of 2017! And here it is….

6/27/17… Dow Theory Letters… “Now, what could be the cause of this stock market momentum that appears to be like the Energizer Bunny, and keep going and going, and going? Ahhh, again grasshoppers, come sit… You see stocks don’t like recessions… And fund managers don’t sell stocks just because a recession is on the horizon, but they do begin to unload stocks when they see other institutions doing so. And if I’m aware of this fact then I’m sure institutions are too… The average drawdown in U.S. equities since 1980 during a recession has been 37%, and none of those recessions started the equities at extreme valuation levels such as we have now!

And the U.S. Fed? Well, we don’t really know for sure if they buy equities, but just because equities don’t show up on their balance sheet, doesn’t mean they wouldn’t / couldn’t have a secret account at say, Goldman, where the equities are held… I’m not saying that’s for real, I’m just asking, what if they did?

Here’s a snippet of Fed Chair Janet Yellen talking about this very subject… “Well, the Federal Reserve is not permitted to purchase equities. We can only purchase U.S. Treasuries and agency securities. I did mention in a speech in Jackson Hole, though, where I discussed longer term issues and difficulties we could have in providing adequate monetary policy . Accomodation may be somewhere in the future, down the line that this is the kind of thing that Congress might consider, but if you were to do so, it’s not something the Federal Reserve is asking for”

OK, that pretty much rules out my scenario, but, opens Pandora’s Box of ideas that I had reading this quote… With the main one as “did the Fed just give Congress a hint that they could keep the stock market propped up with a wink and a nod from Congress?” Oh, well, I digress here…

Because in the end what I want to say above everything else is that Central Banks around the world including our own Fed, have gotten out of control… The folks over at Zero Hedge said it best when they said, “Being able to print your own money, and buy stocks at any price sure can be fun” And in the U.S. we printed money to buy bonds during our 3 tours of QE…

If things begin to unravel in stocks, remember, the SNB & will have to unwind their trades, which means they sell dollars and buy francs to bring the money home… That, and watch Gold, because everyone will be scrambling for safe havens, which means Gold, Treasuries, yen, euros and francs…

OK, back to 2020…. Well that was quite a ramble wasn’t it… While I was looking through the DTL’s I also found this from 9/28/17, I said this in the Dow theory Letters….

“And when the recession finally kicks in, we could very well see Negative Rates here in the U.S… We most certainly, would see another round of QE… So much for their Quantitative Tightening, eh? Of course this is all my opinion and I could be wrong… In fact it would be good if I were wrong, because we certainly don’t want to see negative rates or another round of QE here in the U.S. !”

Man, did I nail that on the head or what? OK., what do I see now that all this stuff has happened? Well, it goes without saying that the tax revenues of the Gov’t and States, and cities are going to be taking a HUGE hit from this economic shutdown…. But… Wanna know what I saw looking under the hood? I saw Social Security also taking a HUGE hit because of the payroll deductions that go to fill the coffers of Social Security are not happening folks…. So, you know that I’m going to tell you how this will all get fixed right?

It’s the same-o, same-o…. Higher taxes… You want something for free? Well, you may get it for free, but then have to pay 50% taxes the rest of your life, so how free was that? And for Social Security…. Well, it was fun while it lasted! There will be changes to it, for sure…

Alrighty then, my good friend Mike, chastised me on Friday night that on Mondays I get too wordy. I said, “well of course, I’ve had all weekend to read and think of things to talk about” But that got me thinking that maybe I should lighten the load on Monday and spread it out during the week…. Oh well, it is what it is….

The U.S. Data Cupboard last week on Thursday had the awaited for, Weekly Jobless Claims report for the previous week… The number of applications were down from the previous week, but were still 3.8 Million, thus bringing the total of unemployment applications filed in the last 6 weeks to…. 30.3 Million…. OK, my long time friend, Dave Gonigam of the 5 Minute Forecast, at Agora Financial, gave me this stat that I think really brings home the rot on employment’s vine…. “That’s 30.3 million claims over the last six weeks, out of a labor force of 162.9 million. That translates loosely to an unemployment rate of 18.6%.” -Dave Gonigam

We had more damaging data print last week, so let’s not stop with the Jobs data…. I told you on Thursday last week that there were two important prints on Thursday, Jobs data, and the ISM (manufacturing index) for April, which was an awful 41.5 down from 49.0 in March, and get this…. A year ago, the index at this same time stood at 52.8… April’s figure was a drop of 21% from a year ago…. We also saw the stupid CPI (consumer inflation) which fell to negative -.1% , can you say deflationary? I knew you could!

And finally, Personal Income was down -2.0% in March, and Personal Spending was down -7.5%, and this was for March! We were only closed down for the last week of March, you can imagine, if you want to that is, what the rotting numbers will be for April… Alcoholic beverages are the only things selling like hotcakes at a State Fair these days… (besides T.P. which you can’t find, along with hand sanitizers)

So… a long winded U.S. Data Cupboard recap… There sure were a bag o’ bones last week, in the Data Cupboard last week, eh?

This week’s Data Cupboard starts today with March Factory Orders, then begins to build for the end of the week when the Job Jamboree for April will print… Remember the unemployment rate that was rougly figured above? What will the BLS do to soften the blow?  Before we get to Friday, we’ll also see the monthly Trade Deficits, which should be the lowest it’s been in a month of Sundays, because, well, nobody is importing anything! And the ADP Employment Report will also print this week…  Enough on Data! 

To recap…. The currencies went hog wild on the dollar bugs on Friday, but since around midday on Friday, the tables have been turned, and the currencies had to give back some of their earlier gains…. Gold has a good day on Friday, and climbed back above $1,700 and is up another $7 in the early trading today.  The data last week was just downright awful, and the ISM Index indicated that we are already in a recession.  And Chuck pulls out some DTL’s that he wrote 3 years ago, and they are quite interesting in today’s environment! So, you won’t want to miss that! 

For What It’s Worth….  I went on record a month ago when I said that when this economic shutdown was over, we would be looking at a different financial system…. And this article that I found on Ed Steer’s letter on Saturday is from Zerohedge.com and talks about how the system is already broken, and can be found here: https://www.zerohedge.com/markets/broken-system-trader-warns-fed-has-poisoned-everything  

Or, here’s your snippet: “The Fed poisons everything, and I mean everything. From markets, the economy, and I will even go as far as politics. Sounds far fetched? Let me make my case below. But as much as the Fed poisons everything, this crisis here again reveals a larger issue: The system is completely broken, it can’t sustain itself without the Fed’s ever more monumental interventions.

These interventions are absolutely necessary or the system collapses under its own broken facade. And this conflict, a Fed poisoning the economy’s growth prospects on the one hand, and its needed presence and actions to keep the broken system afloat on the other, has the economy and society on a mission to circle a perpetual drain.

So how does the Fed poison everything?

Let’s start with the Fed actual process of working towards its stated mission: Full employment and price stability.

How does it do that? Well, for the last 20 years mainly by extremely low interest rates and balance sheet expansion sprinkled with an enormous amount of jawboning. The principle effect: Asset price inflation.

It’s not a side effect, it’s the true mission. The Fed has been managing the economy via asset prices even though Jay Powell again insisted on saying the Fed is not targeting asset prices.”

Chuck again….  Yes, that darn old Fed Reserve…  As I went through my list of Dow Theory Letters last week, I came across a cartoon I had on one of the letters about the Fed… It was the three blind mice with their shades on and carrying canes, with shirts that said Fed Reserve…. Pretty funny, if it weren’t true!

Currencies today 5/4/20 American Style: A$.6415, kiwi .6046, C$ .7095, euro 1.0940, sterling 1.2431, Swiss $1.0369, European Style: rand 18.7058, krone 10.3857, SEK 9.8917, forint 322.81, zloty 4.1763,   koruna 24.7702, RUB 75.31, yen 106.82, sing 1.4164, HKD 7.7533, INR 75.01, China 7.0613, pesos 24.73, BRL 5.4858, Dollar Index 99.38,   Oil $18.78,  10-year .60%, Silver $15.00, Platinum $769.83, Palladium $1,911.51, and Gold… $1,707.50

That’s it for today….  Well, I finally got to see the baby that’s now 6 months old on Saturday… I didn’t get to hold her, but I saw her in person, which was better than on a Zoom screen! Little Evie, is so darn cute! It was good to see the other grandkids too, Little d (Delaney Grace), Everett, and Braden… Everett is already 9, and Braden will turn 9 this month, while my darling Delaney will be 13 in August. How did that happen?  Oh my goodness! OK… gotta go…  The Youngbloods, with Jesse Colin Young, take us to the finish line today with their song: Let’s Get Together…  which is something everybody is thinking of doing! HA   I hope you have a Marvelous Monday, and May the 4th Be With You!  I guess today is a day to watch all those Star Wars Movies! Please Be Good To Yourself! 

Chuck Butler

 

April 30, 2020

* Currencies and dollar bugs continue to play their game!

* 1st QTR GDP’s first print… -4.8%….  A recession is here! 

Good Day… And a Tub Thumpin’ Thursday to you! T-minus 5 days until the stay at home rule will be lifted here in Missouri… Good news across the board on treatments for COVID-19… No vaccine yet, but treatments that have proven, so far, to be quite effective… That’s great news folks… And since I’ve been so negative all week, I thought I would lead off with that bit of great news today, as we tie the loose ends of the week… Watched Game 4 of the 2015-16 Playoffs between the Blues and Blackhawks last night… I’m sure I watched it when it originally was played, but for some reason I’m not remembering any of it, so it was all new to me! I think that’s a sign, but I’ll let it pass for now…. It’s the last day of April… And tomorrow is May Day! I guess children don’t parade around a May Pole any longer, like we did, but I did see that on this day in history, Citizen Kane premiered in 1941, and in 1931 Kate Smith first sang on CBS radio, and in 1967 Elvis Marries, and 1962 the first K-Mart opened… So, we have that going for us tomorrow! Redbone greets me this morning with their song: Come And Get Your Love…. A great 70’s song!

Well, the currencies played around with the dollar bugs yesterday, and ended up flat as a pancake (Head East), but, as soon as the books were handed over to Asia, the currencies began to move upward VS the dollar once again, as our game of U.S. VS Europe/ Asia Traders continues…. Gold found a way to gain a buck or two and closed the day at $1,714… Same level it closed on Monday… So, Gold has gone nowhere this week, which is fine with me, as nothing should move in a linear upward move without some pauses for the causes…. Gold has joined in on the move VS the dollar in the early morning trading as has added $3 so far today… 

And that reminds me a chart I saw the other day… Which, in case you haven’t figured this out yet, but when I say, “the other day”, it could mean any where from 2 days to 15 years! HA! Any way… the chart showed the straight up the elevator shaft for the U.S. national Current Debt…. And the this upward movement went to the moon! That’s because the numbers are all over the board right now, but from best guestimates, the U.S. current debt will grow over $6 Trillion this year and top out the year over $30 Trillion…. I now feel somewhat ridiculous for things I said long ago about when we crossed $5 Trillion, and then $7 Trillion, and so on…. We’re going to be over $30 Trillion at the end of this fiscal year, folks…. I shake my head in disgust….

And that’s not all! According to the Debt Clock, that you can find here www.usdebtclock.org (but I don’t suggest you do that unless you put away all sharp objects first!) , the total Unfunded Liabiltities, are greater than $147 Trillion!!!! And let me also remind you that Professor Lawrence Kotlikoff told us a few years ago that if everything is counted our debt is well over $200 Trillion…

Now that changes the picture on the Debt to GDP number now doesn’t it! Right now just using the current debt of $24 Trillion, our Debt / GDP ratio is 105%… The amount of debt around the world is just staggering. Recall I told you a day or two ago that economist Danielle Di Martino Booth, had said that at the end of 2019 Total Global Debt was $255 Trillion…. And that’s before all the newly created debt around the world gets added to the 2019 total! That number will be oh, so, close to $300 Trillion at year end this year…. Wanna know the total debt of Russia? It’s less than $250 Billion… That’s right I said Billion! Remember when someone said Billion years ago, you sat up and listened? Well those are bygone days now… but not in Russia!

The poor Russian ruble… economic sanctions, and now collapse of their main product of the the price of Oil…. I sat on a panel in Westin Florida about 5 years ago, with, get this group I sat with… Grant Williams…. James Rickards… a couple of other guys, and little old me! David Galland, the former marketing guru at EverBank, asked the panel what about Russia and the ruble…. When no one else spoke, I said, “to me, Russia is an Oil play… if you think the price of Oil will be steady, or on an upward move, then rubles are for you, because they pay a very nice interest rate. However, if you think the price of Oil has nowhere to go but down, then you might not want to be in rubles.”

In the past 5 years, we had the conflict between Russia and Ukraine, and that took the starch out of the ruble and it has never recovered. The ruble was moving toward recovery, when this collapse of the Oil market began… And now they have another hill to climb…. But I don’t doubt they will, given their perseverance with dealing with the economic sanctions….

OK, I’ve spent way too much time here…. Let’s move on to something else, eh?  Like how the Fed’s FOMC met and didn’t change anything, as I suspected they wouldn’t. Well, I should say they didn’t change rates, but Mr. Powell, the Fed Chairman, talked to the press afterwards, and let’s just say he didn’t overwhelm anyone….  

I had to laugh, and laugh until I cried, 1. Because what he said was funny (to me) 2. Because I’m scared for my kids and grandkids futures…. OK, what’s he talking about now? I hear you asking…. Ahhh grasshopper, you’ve come to the right place. What I’m talking about is a comment that Fed Chairman Powell made yesterday, and instead of me telling you what he said, I’ll let him tell you to see you have the same reaction as me….

Here’s Powell, “I’m ready to put the pedal to the metal to help the economy.” Ok, I’ll wait while you let that sink in…. For those of you who have not had a cup of coffee yet this morning, you might need some help…

So, my initial reaction to this was, “Oh, so NOW, you’re going to get aggressive?” Now, after 9 new money creation programs to take bad bonds and loans off the streets? Now, after it appears the economy is circling the bowl? And then my mind went straight to, what he’s doing is ruining the capitalist economy that served this country so well for over 200 years… What will be left for my kids and grandkids? And then I cried…. 

I told you all yesterday that I had asked Ed Steer, what his thoughts were regarding the closing of the doors on the metals business at Scotiabank, one of the major metal dealers around.  Well, just like the professional writer he is, Ed promptly responded to me…. So, I’ll let his take the conn on the Pfennig for a moment… Here’s Ed! 

“One wonders what will happen to their current short positions in both gold and silver, as they’re certainly a member of the Big 8 traders in my opinion — and most likely Ted’s. Ted and I were also discussing what they would do with their vaulting services — and their position as market maker and member of the daily ‘price fixing’ in London. I guess we’ll find out over time.”

Chuck again….  Yes, and Oh, the Ted that he’s talking about above is the Silver guru, Ted Butler, no relation that  I know of!  Thanks Ed! And welcome to contributing to the Pfennig! (I can’t imagine he’s doing cartwheels over that news! HA!) The thing I was thinking about with this closing notices, you touched on, but I’ll take if from there, and that is the Scotiabank short positions in Gold & Silver… To me, that’s one less arm full of short positions at the COMEX to worry about…. And that’s all I have to say for now… 

The U.S. Data Cupboard came out with a bang yesterday, and gave us the first read of 1st QTR GDP, which was negative -4.8% (I told you the forecasts for -3.6% were too low, didn’t I?), and that’s just the first print of the data, there will be a few revisions, down the road, that most likely will be revised downward even more….   The markets weren’t too shaken by the data, stocks lost some ground, but not much, as the markets carried on despite the fact that the with this print, the U.S. is officially in a recession, folks…  

A few years ago, I wrote an article for the Dow Theory Letters, and in it I did tons of research with charts and everything a good article should have, and it was about the stock market performances during recessions…. Don’t look know folks, but it’s awful!  I’m going to spend the day looking for that old article to pull it out and talk about it next week…. 

Today, we’ll see the Weekly Initial Jobless Claims once again, and once again we’ll see that this Economic shutdown has wiped out all of the job gains in the last 10 years!  YIKES!  I’ve already beat the dead horse (no animals were harmed!) over how 100% of these jobs aren’t coming back, so I won’t go there again today…  

Tomorrow, we’ll see two important pieces of data… First, the April ISM (manufacturing index) and it will show a collapse from an already below the 50 figure at 49.1 in March, to…. drum roll please….  OK! I just told you it will print tomorrow! But my best guess is it will collapse to around 35…. The other piece of data tomorrow will be the auto sales… this number has to have fallen from the sky, folks… 

To recap….  Same old trading pattern yesterday, with the U.S. traders buying dollars, and then in the overnight markets the Asian and then European traders selling dollars…. We’ll start today with the dollar being sold, but I doubt that will last too much longer this morning.  Gold found a way to add a buck or two yesterday, and is up another $3 in the early trading. Powell says that he’s ready to get aggressive to save the economy, and Chuck says, “get aggressive now?” You mean the 9 monetary programs you’ve already announced are just chopped liver? 

For What It’s Worth…. Well, I went all week without highlighting an article in the Wall Street On Parade site… But this one talks about something that just has me about as ticked as when KU would be my beloved Mizzou! And that’s ticked! So, the title of the article is How the Fed manipulated junk bonds to help the Dow… Now, you know you can’t pass this one up! And it can be found here: https://wallstreetonparade.com/2020/04/this-chart-shows-how-the-fed-manipulated-junk-bonds-to-help-the-dow/

Or, here’s your snippet: “Thus far, the highly controversial corporate bond buying programs that the Federal Reserve first announced on March 23 have yet to spend a dime according to a spokesperson for the New York Fed, the regional Fed bank that is overseeing almost all of Wall Street’s emergency bailout programs today as well as during the financial crash of 2007 to 2010.

But as the above chart indicates, just a promise from the Fed to spend billions removing toxic waste from Wall Street’s mega banks is enough to put a bid back in the junk bond market.

Here’s the skinny on how the Fed propped up both the Dow and the junk bond market with its well-timed announcements on March 23 and April 9.
From the close on March 4 to the close on March 23, the junk bond exchange traded fund (ETF) which goes by the fancy title of “iShares iBoxx High Yield Corporate Bond ETF,” or symbol HYG, lost 21 percent of its value. But that weakness in the junk bond market did even worse damage to the Dow Jones Industrial Average. Over those same trading days, the Dow lost 8,498.93 points or a stunning 31 percent of its value in just 14 trading sessions. (See chart below.) That had apocalyptic overtones for what lie ahead for the balance of the year.

There are two key reasons for the correlations between the junk bond market and the Dow. The first is that two of the Wall Street banks that were a regular presence in the Wall Street syndicate that underwrote these junk bond offerings are components of the Dow’s 30 stocks. Those two banks are Goldman Sachs and JPMorgan Chase. The second key reason is that if Goldman Sachs and JPMorgan Chase are tanking, they will inevitably bring down the share price of every other major Wall Street bank because of their heavy interconnections as derivative counterparties to each other. (If all of those banks enter a serious selloff, the Fed could be looking at another 2008 financial crash after assuring Americans for years that these banks are “well capitalized.”)

In short, thanks to the repeal of the Glass-Steagall Act in 1999, which allowed Wall Street casinos to merge with the largest federally-insured, deposit-taking banks in the country, we now have a central bank (the Fed) that believes its job is to throw money at any market that pulls down the Dow. Because damage to the Dow might damage consumer confidence which might damage the wealth effect which might damage consumer spending which might damage the next GDP report which might damage the vision of American exceptionalism. In other words, we’re all just Labradoodles now in fealty to Wall Street.”

Chuck again… Man would I love to include the whole article here, but I can’t, and therefore you need to hit the link above and read it in full, if this snippet whets your whistle! Oh, and one more thing, circling back to my comment above about how the stock market performs during recessions….  I guess the Fed is going to have to pull out all of the stops, throw in the kitchen sink, and anything else they can find to help stocks, going forward…. 

Currencies today 4/30/20 American Style: A$.6558, kiwi .6143, C$ .7215, euro 1.0882, sterling 1.2530, Swiss $1.0305, European Style: rand 18.0421, krone 10.2764, SEK 9.8026, forint 323.71, zloty 4.1630,    koruna 24,8727, RUB 73.49, yen 106.50, sing 1.4085, HKD 7.7508, INR 74.14, China 7.0759, peso 23.65, BRL 5.4408, Dollar Index 99.36,  Oil $17.47,   10-year .61%, Silver $15.33, Platinum $784.01, Palladium $1,985.90, and Gold… $1,717.00

That’s it for today…  And tomorrow of course!  Yuck!  What a rotten day yesterday for going outside! I had to wear my hoodie sweatshirt, inside, I would have had to broken out the winter coat to go outside! UGH!  It appears the sun is back today… I love the sunshine!  Man, would you like to have had stake in the ground on Zoom before the COVID-19 came around? Everybody’s doing Zoom meetings… They’re pretty cool, and I think will replace Corp. Travel for years! Shoot Rudy, even my friend, John Mauldin, is going to do his annual Big Time Strategic Investment conference via the teleconference route…. Like Grant Williams did his Hummmminars….  It’s a new dawn, it’s a new day, it’s a new life (Michael Buble’) So we had better get used to it….  Jefferson Airplane takes us to the finish line today with their song: Miracles….    I hope you have a Tub Thumpin’ Thursday today, and a Fantastico Friday tomorrow, and will Be Good To Yourself!

Chuck Butler

April 29, 2020

* currencies lose ground during the day

* Has this become a Europe / Asia VS U.S. Traders thing? 

Good Day… And a Wonderful Wednesday to you! I guess that serves me right, to depend on the weather forecast this week, that over the weekend said that each day would have some rain. That would be very difficult to explain as I sat outside reading for a few hours yesterday, in full blue, sunny skies with the temps that touched 80… The Rolling Stones fave an old song: This could be the last time… But I doubt it will be the last time for me to pay attention to a weather forecast! I like being pleasantly surprised, so yesterday was right up my alley! And hey! The new chemo drugs I’m taking are shrinking the tumor in my mouth, which is awesome as far as I’m concerned… They are strong doses and they are playing hell with the rest of my body, but…. I really needed that tumor shrunk, and fast, and that’s what’s happening! So, bully for the chemo drugs! Billy Paul greets me this morning with his big hit song: Me & Mrs Jones… We got a thing…. Going on…. We both know that it’s wrong…. And so on…

Well, once again the currencies couldn’t hold the gains they had made overnight yesterday…. So, has this become a battle of continents? The Eurozone, and Asia sells the dollar…. And the U.S. traders buy it back…. That’s been the pattern this week, and so it was again last night… so, we’ll have to keep an eye on this to see if this continues.

Today’s the day the Fed’s FOMC will finish their two day meeting, and Fed Chairman Powell will speak to the press afterwards, but not before all the board games have been picked up and stowed away until the next meeting 6 weeks from now. I still believe that Powell will hold off the Indians at the FOMC that want to cut rates into negative territory… I always try to get into the minds of the Fed Chairs…. I think I used to have Big Al Greenspan down pat…. Then Big Ben Bernanke was easy to figure out, along with Janet Yellen…. Powell on the other hand has been a real challenge for me…. But if he does delay going negative with rates at this meeting, then I’ll be puffing out my chest, and saying I told you! So you can look forward to that in tomorrow’s Pfennig…. HA!

But I do believe negative interest rates are in the cards, and coming to a bank near you, very soon, which has me thinking more about going digital units for your cash, like I’ve been talking about…. You know, right now with everyone having germaphobia, having our cash become digital currency doesn’t sound all that bad, for who want’s to exchange bills who have been in the hands of who knows? However, this is not a permanent thing, folks, so be careful what you wish for… Because as I’ve explained in the past, going digital will remove the last of our civil liberties that last took a HUHE hit with the Patriot Act…. I’m just saying….

Gold, once again couldn’t find enough bids yesterday, but did find enough to keep it flat on the day… Actually Gold lost 70-cents from Monday’s close of $1,712, so the close on Tuesday was $1,711…. Speaking of Gold…. Did you hear the news that Bank of Nova Scotia, or Scotiabank, will be closing the doors on their metals business? They were once a very large enterprise with offices around the world, and helped with liquidity in the metals markets…. With that liquidity gone, how will the other bullion dealers make up for it? I need to get Ed Steer’s opinion on this, before I go any further…. Ed? 

So…. How’s the meat supply in the grocery store you go to?  Good? That’s a good thing because there are thoughts that it could become a real problem, as the food chain gets disrupted… I told you last week about the food chain disruptions, and how the food supply chain was in serious danger of shutting down, which would lead to empty shelves in grocery stores, etc.

Well, I read yesterday, that President Trump is attempting to head of the food supply shut down, as he sent out an order to U.S. Meat plants to remain open… Now, you may ask how can a President demand a meat plant remain open? Think about that, you may have a meat plant where everyone there has contracted the virus, and are at home or worse. How, can the meat plant function without employees?

OK, so for general practice here, let’s just say there are employees not affected and the plant can function, the Trump plan could go as far as increasing liability protection for the Company, if they remain open, which as you and I all know that once a Gov’t plan is enacted, it will take all the kings men and all the kings horses to get it reversed…. So, to a meat plant, this could be a good thing for the future for them….

You know for serious times, it takes serious thinkers to come up with plans that other haven’t thought of for the better mankind…. This falls under that heading in my book… The unions won’t like it, but this kind of reminds me of the 80’s when then President Reagan broke the air controllers strike, and the union didn’t care for that either!  

Longtime reader, Bob, sent me a note yesterday from Wolf Street, that talked about the companies eliminating or nearly eliminating their dividends… Gm was at the top of the list, with Harley Davidson falling behind, along with all the Mortgage REITS…. There will be more folks… so if you depend on dividends, there’s going to be a lack of them for awhile… I told this news to my good friend, Dennis Miller, who chuckled and said, “I wonder if the companies dropping their dividends will use the savings to buy more of their own stock”…. I believe in my heart of hearts that any Corporation CEO found doing that should be metaphorically hung from the highest tree…. I’m just saying… ( I don’t want to see anyone harmed, but something akin to that would do… like say…. Jail time?)

I know I’ve been pretty harsh on the Beaver…. And I’m talking about my attacks on the Reserve Bank of New Zealand (RBNZ)…. But…. In a round about way, I’m going to give New Zealand a round of applause, for they announced yesterday that they have no new cases of COVID-19…. Now it’s up to the RBNZ to begin to unwind their monetary policies… Come on, don’t make me come back and dis on you again in the future because you dragged your feet with these policies…. 

And don’t think traders haven’t noticed this development as kiwi has had a real stealth-like upward move in the last few days… I just think it’s a real shame that a country like New Zealand which used to always have one of the best interest rates in the world, has been brought to the land of no returns….  You know what I mean, low to zero interest rates…. 

The U.S. Data Cupboard finally breaks out of the chains of no, to little data, today! Well, there’s still not much, but what’s here should be good enough to keep the markets interested…. Like I said above, the Fed’s FOMC will conclude today, and Fed Chairman Powell, will speak afterwards to tell us what the Committee had to say….  (he won’t really tell us what was talked about, but it’ll be a good attempt)  

In Addition to the FOMC announcement, we’ll also see the first go at 1st QTR GDP, which is forecast to be -3.6%, but I think it will be worse than that… I say that because we were already seeing negative prints in Factory Orders, and Durable Goods before the COVID-19 virus took hold in the middle of March…. 

So, as I said yesterday, the overseas data prints will begin to come in by the boatload today and really build tomorrow…. So far this morning, we’ve seen Aussie CPI (consumer inflation) on a year-on-year basis and it grew to 2.2% from a previous print of 1.89%…  Well, the Reserve Bank of Australia (RBA) must be happy, for they’ve wanted to get CPI to their target rate of 2% for a long time now….  I think this print is a precursor to other countries also seeing their inflation ramping higher…. 

In the Eurozone this morning, the Consumer Confidence for April was a negative -22.7, but that was flat from the March print, so no further negative move here…. But the Eurozone Industrial Confidence printed at negative -30 Vs the previous -11.2….  This is not good, folks… for the Industrial Confidence will filter through to Consumer Confidence…  And shows that even the GREAT Industrial Complex of Germany is having problems…. UGH!  

To recap…. The currencies got sold again during the day on Tuesday, but rallied overnight once again too… Chuck sees it as a Europe & Asia VS the U.S. traders…  Gold was flat to down a buck yesterday, and is down $4 in the early trading this morning…  Chuck is waiting for an email from Ed Steer with his thoughts on the Scotiabank closing….   Trump orders meat plants to remain open, to avoid a complete shutdown of the food supply chain….  I read this morning that out local grocery store announced that they are buying perishables from local farmers direct, so the food doesn’t rot on the vines or in the ground…. Good for them! 

For What It’s Worth…. Well, the folks at GATA sent me this note yesterday, and I immediately copied it for the FWIW article today…. This is an article about how the Chinese believe there should be a new reserve currency, and it can be found here: https://www.reuters.com/article/us-china-gold-currency/shanghai-gold-boss-wants-super-sovereign-currency-for-post-crisis-times-idUSKCN22A1FY

Or, here’s your snippet: “The president of the Shanghai Gold Exchange (SGE) called for a new super-sovereign currency to offset the global dominance of the U.S. dollar, which he predicted would decline long term, while gold prices rally.

Concern has mounted among some market participants over the dollar-denominated system as the U.S. Federal Reserve cut interest rates to near-zero and embarked on unlimited quantitative easing to contain the economic damage of the coronavirus pandemic.

The measures have helped to drive gold prices to more than seven-year-highs this month, while the dollar has been range-bound. Wang Zhenying, who heads the world’s largest physical spot gold exchange, said in an interview the gold gains should be sustained, but ultimately a new kind of currency was needed.

“Future global trade needs a super-sovereign currency system under which no single country has the power to freeze the international assets of another country,” said Wang, who held senior roles at China’s central bank, which supervises the SGE.

Wang foresaw a decline in the U.S. currency, triggered by the Fed’s monetary policies.

“When the Fed turns on the liquidity tap, the U.S. dollar will, in theory, be in a long-term depreciatory trend,” he said, even though the panic of the current crisis could trigger a temporary scramble for the greenback. “

Chuck Again…. Well, well, well… do you think that Mr. Zhenying has been reading the Pfennig? I do! HA!

Currencies today 4/29/20 American Style: A$.6515, kiwi .6086, C$ .7173, euro 1.0855, sterling 1.2410, Swiss $1.0267, European Style: rand 18.4615, krone 10.3646, SEK 9.8811, forint 327.20, zloty 4.1835,    koruna 24.9750, RUB 74.23, yen 106.48, sing 1.4141, HKD 7.7502, INR 74.84, China 7.0805, peso 24.08, BRL 5.5907, Dollar Index 99.76,   Oil $14.24,    10-year .58%, Silver $15.27, Platinum $780.75, Palladium $1,963.27, and Gold… $1,707.52

That’s it for today…  There really hasn’t been much going on overseas lately, and that’s the reason I don’t spend a lot of time there, but that’ll all change as time goes by, so stay tuned! Man did the nice day turn to a very stormy night last night! The black clouds moved in before sunset, and the skies opened up and it rained, and rained, and rained! Crazy night for sure! T-minus 6 days until the stay at home order ends here in Missouri…  One of the things I find interesting in watching old baseball and hockey games is that there are players in those games that I had forgotten about that were integral parts of the teams!  Well, one place I’ll need to go as soon as they open their doors again is the dentist! the tumor has ruined another tooth. UGH!  When spring training was going on before getting shut down, my dentist, Holly, stopped by my seat to say hi!  What a real sweetheart! So, I guess I’ll be seeing her again, soon….   The great Stevie Nicks, and the band Fleetwood Mac takes us to the finish line today with their song: Landslide….   I hope you have a Wonderful Wednesday, and will Be Good To Yourself!

Chuck Butler

 

 

 

April 28, 2020

* Currencies lose ground on Monday, but rebound overnight!

* Gold can’t find a bid on Monday…. 

Good Day… And a Tom Terrific Tuesday to you! Well, yesterday, was a blur to me…. I did some reading, did some crossword puzzles, and then fell asleep around 2 pm and didn’t wake up until after 6 pm! I guess it was my body telling me I missed some sleep the night before! I had a nice conversation with my tax guy yesterday. He said that I had depressed him with the letter yesterday… So, I thought that I would look at things differently today…. HA! I almost had you, didn’t I? HA! That would be like me changing horses in the middle of the stream, and that can’t be a good thing to do, so I won’t attempt to do it! But I think I’ll allow the Fed Reserve to be the bearer of bad news this week…. Pure Prairie League greets me this morning with their song: Amy…. I used to play that song on my guitar, which I haven’t touched during my stay at home order…. Hmmm….

Well, the currencies just can’t stand the prosperity, that’s all I can say about that! The dollar bugs fought back yesterday around midday, and while the moves weren’t life threatening, the moves did prove that a multi-day currency rally was not going to be in the offing…. Nobody really wants to get in the way of the Fed’s FOMC meeting this week…. Makes sense to me, as this meeting will be a BIG ONE, because of the rotten data that keeps printing, as if anyone thought the data would continue to be so-so with the economy shut down….

That was yesterday, however, in the overnight markets, the currencies won back the ground they lost yesterday, and a few currencies, like the A$, even gained more ground.  For illustration purpose only, the Dollar Index was well over 100 last week (100.30), but has dropped back to a 99 handle. Not a HUGE move but a downward move nonetheless! 

Gold, continuing to trade alongside the dollar, was unable to move with the currencies, and lost $17, to close at $1,712 yesterday. The shiny metal is down another $2 bucks in the early trading today.  There are so many opinions out there these days about which way Gold is going to go. This is normally what happens when an asset begins to run higher, everybody and their brother has an opinion on the assets future…  

There are also still a lot of economists that don’t see the writing on the wall with regards to this economic shutdown, and are still calling for a V shaped recovery once the shutdown is over…  So, don’t be confused! I say that in my best Steve Mizerany voice… Only St. Louis readers will get the humor in that…  A former colleague, Ann Hopkins, used to get the biggest kick out of me impersonating Steve Mizerany. She would say over and over again, “Come on Chuck, do some Steve”….  Good memories, for sure!

Ok, this is the stuff I have to deal with folks…. This writer wrote an article titled: 10 Reasons the U.S. Economy won’t collapse… here’s a snippet of that article: “Before you run out to buy gold or stock up on canned goods, do two things. Read the articles linked in the 10 points above. They will give you the facts the naysayers ignore. Or read “How the U.S. Economy Works.”

Second, see what a real economic collapse looks like. On Sept.17, 2008, the U.S. economy almost collapsed. That’s when companies pulled out trillions of dollars from money market accounts. It would have created a severe cash crunch had it continued.

The nation’s trucking industry would have ground to a halt. Gas stations would have gone dry. Grocery stores shelves would have gone empty. Shortages didn’t happen because the Federal Reserve prevented the collapse. It guaranteed money market accounts and restored confidence.”

My response to this? Well, you can pull rabbits out of your hat to keep the economy running for only so long…. Got Gold? 

Oh, and here’s a White House economic advisor giving his two cents on where we’re going here, let’s listen in… He says,” that a lot of the unemployment insurance claims occurred after they were included in the survey for official unemployment data, and so “the really bad news that we’ve been seeing in initial claims will be spread over a couple of months.”

And that’s a White House advisor folks, they’re the ones that need to paint pretty pictures so the people remain calm…. 

And I can always depend on longtime friend, and publishing guru, Bill Bonner to set the thinking straight again. This was taken from his site: bonnerpartners.com and he says, “

Y]esterday in the Spanish-language publication Abordajes, mathematician Felipe Noguera put two and two together. The conclusion: The likely death rate is more like 0.1%… not the 6.9% widely estimated.

In other words… the C-virus is a nasty bug, with a particular grudge against people who are in bad shape.

Is that a good reason to lock down the whole economy and prevent young, healthy people from going about their lives?

Probably not.

But while the feds’ shutdown might be an honest mistake, their “bailout” is a crime. It is the grandest larceny in the history of the world…” – Bill Bonner

OK… for every article out there that touts a quick turnaround for the economy, I can find 10 that say it won’t be a quick turnaround….  I’ve never been someone that goes with the flow when it comes to thoughts on the economy, but in this case it’s nice that so many agree with my thoughts! 

The U.S. Data Cupboard didn’t have anything for us yesterday, and today all they have is housing data… the Case/ Shiller Home Price Index will print, but it’s so far behind as it will give us the number for February, which is before the Covid-19 virus crashed the U.S. economy, but… Even still I would bet a shiny quarter that this data shows a drop in the price of Home for Feb…. That had been the trend before the economic shutdown, so no reason to think things changed…. 

Tomorrow, we’ll see the first print of 1st QTR GDP, which is expected to be a negative -3.5%….  I’m thinking that it will be worse, but then that’s just me, thinking out loud…  And then tomorrow is the Fed’s FOMC Meeting announcement, which as I explained yesterday, is being waited for with baited breath by the stock jockeys, who need something BIG from the Fed to prove the Fed has their backs… 

The data distribution not in the U.S. has the same schedule as the U.S., with the real data coming tomorrow,  and the next day for most countries… The Eurozone has a ton of data prints the next two days, which will only tell us how badly the Eurozone economy has suffered with an economic shutdown. 

Well, after recovering a bit last week, the price of Oil is under siege again, as the proof is being illustrated all over the world with Oil tankers sitting off the coasts of countries waiting to deliver their respective loads, but being told to remain where they are….  From California to Singapore, this is happening folks… the Oil glut is upon us, with no place for it to be stored….  

Here’s a thought that might make some sense, but these people never listen to me, so why waste the time? Because! Maybe, just maybe, ’cause you never know, they will!   So, here’s my thought… Why not have the U.S. buy this Oil at these cheap prices and store in the salt mines, and then sell it later at a profit? It could end up being the one thing that brings in money to the U.S.’s coffers in the next year! 

I’ve told you over and over again that this economic shutdown is going to bring about deflation, and then as the Fed’s monetary polices take over, the chance of inflation goes higher….  Well, as I talked about recently, a reset in the price of Gold to a higher level, is in the plans…. And if it’s not then it should be! Because a higher reset price of Gold would get us out of this deflation trap and get inflation soaring, which is exactly what the Feds need to inflate away the debt….   That…. is the reason they are so anti-deflation!  

And, well respected analyst, and author, Jim Rickards thinks this is the way to go about defeating deflation too!  Let’s listen in to what Jim had to say in a recent interview, “Averting deflation as the United States falls into a virus quarantine-induced economic depression is the urgent objective of the U.S. government and Federal Reserve, financial newsletter editor and author James G. Rickards tells Hedgeye Risk Management CEO Keith McCullough in a fascinating interview posted on YouTube three weeks ago.

Rickards contends that the simplest and most effective way of accomplishing that objective would be the substantial upward revaluation of gold by the U.S. government, similar to what was done by President Franklin D. Roosevelt in 1933 — after, of course, the government ordered the public’s monetary gold to be confiscated.

Rickards imagines the U.S. government’s revaluation of gold to be a matter of daily market making, buying and selling gold at a fixed price.”

To recap…  The currencies lost ground yesterday, but gained it right back in the overnight markets, led by the A$, which really sounds strange…. Gold couldn’t participate in the currencies upward move VS the dollar, and lost $17 yesterday, along with another $2 loss this morning…  There are still economists out there thinking that the economic recovery, when it comes, will be V shaped… Chuck tries to point out that is not how this will all work out, and attempts to do it nicely, and leave the harsh words for the economy to the Fed, which will talk tomorrow afternoon. 

For What It’s Worth….  OK, I told you about the oil tankers sitting of the coasts of countries with no place to go, but thought that an article that outlines the problem might be needed to back up what I told you, and this article does just that, and can be found here: https://www.dailymail.co.uk/news/article-8255559/Dozens-oil-tankers-float-coast-Southern-California-global-lockdown-sees-demand-plummet.html:

Or, here’s your snippet: “More than 25 tankers are sitting off the coast of California as the economic shutdown reduces the demand for Oil. 

The U.S. Coast Guard filmed video that shows 27 tankers anchored in waters just off the coast by the Port of Los Angeles and Long Beach as of Thursday afternoon.

Stay-at-home orders across the country have led to a dramatic reduction in the demand for crude oil and now the tankers have no place to deliver the product and instead have become floating storage tanks. 

The suppy chain is being backed up, and tankers are now being used to store product that would have originally gone out to the supply chain,’ Scott Lauermann from the a spokesman for the American Petroleum Institute told the LA Times. “

Chuck again….  And there are a number of stories first seen on Bloomberg.com about how the same sencario is being played out in Singapore…  I’ll just revert back to my thought above on how to deal with this storage shortage problem… 

Currencies today 4/28/20 American Style: A$.6510, kiwi .6065, C$.7168, euro 1.0888, sterling 1.2515, Swiss $1.0280, European Style: rand 18.5762, krone 10.3582, SEK 9.9826, forint 325.92, zloty 4.1705,   koruna 24.9820, RUB 74.44, yen 106.56, sing 1.4152, HKD 7.7500, INR 75.10, China 7.0818, peso 24.33, BRL 5.6218, Dollar Index 99.49,  Oil $11.52,   10-year .66%, Silver $15.15, Platinum $764.33, Palladium $1,944.71, and Gold… $1,710.00

That’s it for today… I went to the Pfennig Replies box last night and found about 100 emails from a day last week when I guess I forgot to include the currency roundup… and about 100 readers thought that I needed to be made aware of that….  Sorry! I didn’t mean to leave it out!  The first thing I do each day is record the prices, so I have no idea why they were left out!  In the 70’s there was a song: You Can Go Your Own Way…  Which is what I see each state doing with regards to dropping the shelter rules… Georgia went first, and Texas is joining them, which leads me to ask, “Is the South going to truly rise again?”  Missouri will open up next week, and I still don’t see this as the medicine the cures all what ails the U.S. economy, but then that’s just me….  Humble Pie takes us to the finish line today with their song: I Don’t Need No Doctor….   Did you know that the great Peter Frampton started out in the group Humble Pie?  There you go, some rock trivia for your next cocktail party! HA!   I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler

 

April 27, 2020

* Currencies rally on Friday and through to today… 

* Templeton closes 6 bond funds in India! 

Good day…. And a Marvelous Monday to you! Well, after two rotten to the core days here with chilly rain, and gray skies, the sun came out yesterday, and it was an absolutely beautiful day! I went outside early and began singing, “It’s a beautiful morning, I think I’ll go outside for awhile… and just smile, I think I take in some clean fresh air”…. Yes, it was a day to be outside…. Finally! I miss my morning walks to the deck that overlooks the ocean, to watch the ocean movements, and soak up early morning sun… But soon the earth will turn on its axis and the warmer days here will become the norm…. And I won’t have to wait days to go back outside! I was listening off and on, all weekend to Sirius XM’s top 1,000 classic rock songs…. I didn’t vote on any of these songs, but I would argue with how low in the standings (400-500) some of my fave rock songs ended up…. Oh, well, it’s all something I have no control over, so I just listened and enjoyed! John Lennon greets me this morning with his song: Nobody Told me…..

I fear that one day in in the near future, many investor is going to sing that same thing, “Nobody told me”…. When if they had just listened to me, and not some talking head stock jockey, they would have been told! I have friends that are stock jockeys and I doubt they like me talking about them negatively like I do, so I’ll move on… But don’t worry, I’ll have more for them when we talk about the data prints last week later….

I also know that I’ve been very centered on the U.S. economy and things that will change here, but at the same time I also know that this is not confined to the U.S. every country, but the ones with little debt, like Russia, and Singapore, will have the same problems as the U.S. but on a smaller scale, so that’s why I focus on the U.S. because, well, that’s where I live, buy gas, groceries and giggles, (although not a lot of those giggles lately!) And take them to the woodshed because we should have known better, we should have done better, and now we have a big mess on our hands….

So… the dollar bugs backed off on Friday, and allowed the currencies to run a little, with the euro climbing back above 1.08 on the day… But Gold, which had put in two very good up days, gave back $3 on Friday, but closed at $1,729.00 so, overall it was a good week for the shiny metal…. The Gold and dollar relationship has been very strange in the past year, as Gold has rallied while the dollar rallied, and sold off when the dollar has sold off… Hmmm…. Opposites are still in play here, but makes you wonder, doesn’t it? I mean for the nearly 50 years that the Gold and the dollar have floated ( a dirty float if you will) they were always moving opposite each other, until 2019….. Does this mean that Gold has moved into a new trading relationship with the dollar that will become the new norm? That’s one of those “unknowns” that I don’t have an answer to folks…. Let’s just enjoy Gold’s upward moves and take them any which way they come, eh?

Last week I said a lot of things and one of them that I tried to point out was that the Fed, in my opinion, has been behind the main manipulations of Gold…. They give the wink and nod to the JPMorgans, who if they played their cards straight, would stay out of trouble, but instead, they got greedy, and now find themselves fighting off legal suits against their trading practices…. The Fed is on record as saying they can’t allow Gold to go to its true price, because that would ben that inflation was running fast, and that’s one thing the Fed can’t have, inflation running upward quickly…. Slow, sloth-like moves of inflation to the upside what the Fed needs and wants…. Unfortunately, they haven’t gotten what they’ve worked so hard to get… But that’s not going to stop them for trying to bring about rising inflation to inflate away the debt….

OK…. Back to things that are known by all…. Well, nothing like some recent data to wake us up, and get our blood flowing…. I watched an interview with one of my fave economists, Danielle Di Martino Booth on Friday, and in a YouTube video from 4/20, she said, “it really grates on me when I hear this called the “COVID Crisis”…. Global debt levels at the end of 2019 were $255 Trillion. These were accidents waiting to happen. There could have been any outside event to start this”

Yes, like I’ve been saying since the Middle of March, this economic shutdown, thus bringing about all the Fed moves to help Corporations may have come sooner due to the COVID virus but it was bound to happen sooner or later, because you have Corporations that have been BAD with their respective money, folks…. They just kept going into debt that they weren’t ever going to be able to pay back, and a lot of that debt was coming due this year, so we were about to get to the proverbial “cheese that binds”, but then along came a spider and sat down beside her, and the Fed came to their rescue….

But why? Weren’t we all taught in economics classes (I’m talking to the older folks here, because the economics young kids takes is nowhere near what I learned!) that when a Corporation does bad, that you jus allow them to file bankruptcy, and see if they can work out a deal to comeback, otherwise it’s a case “see ya, wouldn’t want to be ya”? But in 2008 we got a taste of the how the Gov’t. either the White House, Treasury or Fed, got to choose who survived and who failed…. Does the name Bear Stearns ring a bell, or how about Lehman Bros.? And now we’re back to allowing the powers that be decide his all over again… Who will it be this time that brings armegeddon to the streets?

In news from abroad, there was some big news from India over the weekend, as Templeton closed 6 bond funds in the country, claiming that it was due to a lack of liquidity…  I don’t live in India, so I don’t know how this was viewed by the people there. I do know that if that happened here in the U.S. investors would be panicking… 

Late Friday night, longtime reader Bob, sent me this link, and so now I’ll share it with you, but…. To me the last paragraph says it all, and it says: “The Fed has printed $2.26 trillion since March 11 to inflate asset prices and bail out asset holders and Wall Street. If the Fed had spread that $2.26 trillion equally over the 130 million households in the US, each would have received $17,380. But this was helicopter money for Wall Street and the wealthy that were losing part their wealth in the sell-off. Those are the folks that matter to the Fed.”
And you can find it all here: https://wolfstreet.com/2020/04/23/fed-slashed-qe-further-still-hasnt-bought-junk-bonds-or-etfs/

OK, let’s get to the actual prints last week…  Batting lead off is the Weekly Unemployment claims, which added another 4.43 million in the Easter shortened week, to put the total in the last 4 weeks over 26 Million! That’s basically all the jobs that were created in the last 10 years of tepid expansion….  I know, I know, you’re saying, but once businesses open up all these people will go back to work….  Really? After all I’ve talked about with the change in people’s outlook on things you still believe that is going to happen?  Not a snowball’s chance in hell that happens, folks….

In addition, we also saw rot on the vin in Durable Goods Orders, which fell from 1.1% in Feb. to -14.4% in March…. Remember, March was only shutdown the last two weeks of the month, April was a full-on month of the shutdown…. I’m just saying…. 

The Markit PMI which is a good indicator of what the national ISM (manufacturing index) will look like, fell this month to a very recession revealing 36.9, from the 48.5 in March… This is bad folks…  Oh, and I can’t forget the rot on the housing market either…. New Home Sales in March fell to 627,000 down from a Feb number of 742,000…. That’s a HUGE drop…. 

And finally,  finally I say, Consumer Sentiment hit the skids….  The April number was 71.8 down from a March number of 89.1….  Another HUGE drop, for sure! 

And circling back to Industrial Production…. The Washington Post had this to say about Industrial Production: “The falloff in activity — which includes output from factories, utilities and oil and gas producers — “dwarfs any decline during the Great Recession,” Ryan Sweet of Moody’s Analytics writes in a note.

Oh, my! When is everyone in the stock market arena going to stop believing that this rot on the economy’s vine will be removed immediately, after the economy starts up again? Because it’s not going to folks! People are NOT going to rush out and start spending again once the all-clear horn is sounded…. They won’t trust who they’re standing next to in lines, so let’s not go to the line! They aren’t going to see this as something that’s gone forever, and therefore those that still have paying jobs, will be saving to replenish their reserves…. And I could go on, but this is not going to be “alright by the night” folks… bank on it!

Oh, and the Fed’s FOMC Meets this week…. I’m of the opinion that the stock jockeys are all holding their collective breaths in anticipation of Fed Chairman Jay Powell, having something up his sleeve, like maybe “negative interest rates?” But Powell made it clear in March that he doesn’t see the U.S. needing negative interest rates… He said, then: “We do not see negative policy rates as likely to be an appropriate policy response here in the United States…” So, that something up his sleeve, is going to look more like Bullwinkle and his pronouncement that he had nothing up his sleeve! So, what can he announce to bring the stock jockeys back? Well, just for grins, he could announce that the Fed is going to buy equities….

Why not? They’ve going to buy Corp junk bonds, the next step is to buy that corporation’s stock too…. But he might have to save that for somewhere down the line…. 

I’ll just say this about what’s going on right now…. Do you think that Japanese investors thought back in 1990 that their stock market sell off was going to last 3 decades, and that the Bank Of Japan would be buying more stocks than investors, but the stock market is still 50% off its highs of 1990? I don’t think you could have had one Japanese stock jockey think that, and the same goes for here in the U.S., they just don’t see that happening…. Why? Because every stock jockey this side of Eden have been busy telling their clients that the Fed has their back, and not to worry…. I bet if they made a movie of the Japanese stock market circa 1990, that the Japanese stock jockeys had the same conversations with their clients….

To recap…. The dollar bugs finally backed off on Friday last week, and the currencies rallied, and are still on the rally tracks this morning, as I write….  Gold didn’t see the dollar weakness as an opportunity to gain alongside currencies on Friday, and lost $3 on the day. Gold is down another $14 in early trading this morning, as the Dollar Index has slipped back below 100….  Templeton closed their bond index funds in India over the weekend…  A lack of liquidity was the reason for the closing of the 6 funds…. 

For What It’s Worth….  Well, I mentioned this above that the avenue for U.S. zombie Corporations is clear… The go into bankruptcy and see if they can find investors that will reorganize the company…. Before going bust….  Well, the former Big retailer, J.C. Penny has done just that, filed for bankruptcy, or I mean is going to…. And you can find that article here: https://www.zerohedge.com/markets/jcpenney-prepares-file-bankruptcy

Or, here’s your snippet: “It’s finally here. After a decade of management turnover, near misses, last minute rescues, and one valiant (sic) if disastrous attempt at an activist turnaround, one of the most iconic U.S. retailers and mall anchors, J.C. Penney, is preparing to file for bankruptcy.

According to the Journal, J.C. Penney is in advanced talks for bankruptcy funding with a group of lenders, a sign the troubled retailer about to make a visit to 1 Bowling Green. JCP is in discussions with existing lenders including Wells Fargo, Bank of America and JPMorgan for a debtor-in-possession loan that would keep the department-store chain’s operations funded during a court-supervised bankruptcy, according to people familiar with the matter.

The DIP loan would be roughly $800 million to $1 billion, with some of that money potentially including existing debt, and priming all the other unsecured creditors who will end up with a chunk of the post-petition equity, assuming of course it is not a Chapter 7.

The Journal sources said that a bankruptcy filing could take place within the next few weeks, and certainly before May 15 as JCP entered into a 30-day grace period after missing an interest payment due to bondholders on April 15. It is possible creditors enter into a forbearance agreement if the company needs additional time to iron out negotiations before filing, but the endgame is clear.

Should the shutdown of the economy last for several more months, or should a second wave of coronavirus infection strike the U.S., companies in all other industries are expected to follow suit.”

Chuck again….  Man, I have to tell you, back in the 70’s I went to J.C. Penny for just about everything….  I haven’t set foot in the J.C. Penny store in 20 years….   

Currencies today 4/27/20 American Style: A$.6460, kiwi .6055, C$ .7107, euro 1.0848, sterling 1.2428, Swiss $1.0256, European Style: rand 18.8136, krone 10.5722, SEK 10.0385, forint 326.42, zloty 4.1743,   koruna 25.1333, RUB 74.54, yen 107.05, sing 1.4187, HKD 7.7498, INR 75.62, China 7.0809, peso 24.82, BRL 5.5893, Dollar Index 99.90,  Oil $12.23,    10-year .62%, Silver $15.16, Platinum $759.48, Palladium $1,969.05, and Gold… $1,715.32

That’s it for today…  I apologize for the tardiness of the letter this morning… I had a bad night, and didn’t get much sleep, so when I finally got to sleep at 4:30am this morning, I turned off my alarm and said, I’ll write the letter when I wake up…. So, sorry… but I just had to sleep!  Well, I gushed about the day in the intro, but now I see that it’s going to rain just about every day this week! UGH! April showers bring May flowers, right? What do May Flowers bring? …. wait for it…. Pilgrims!  One of the oldest jokes in my book! Well, next week, here in Missouri, our stay at home order will expire… Where will people go first? I probably won’t go anywhere, for I never went anywhere before the stay at home order, except to the doctors, and my local watering hole…  And I doubt I head there for a long time…. I’m just saying….  Soft Cell takes us to the finish line today with their song: Tainted Love….  I hope you have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler

 

April 23, 2020

* dollar bugs return to the top of the hill…. 

* Gold gets back above $1,700…. 

Good Day… And a Tub Thumpin’ Thursday to you! My memory came back to me last night, as I remembered what I was doing during the actual Game 4 of the World Series in 2006…. My good friend Rick took his lovely wife Laura to the game, and I was drafted to watch his girls, of whom I referred as: Madison Avenue, and Allison road…. They tried to play games with me regarding going to bed, until I finally told them, “This is not my first rodeo, girls…. I’ve been putting kids to bed longer than you’ve been alive” And never heard another peep out of them! HA! My wife was deathly sick having picked up a parasite from our trip to Panama, so she was no help to me that night… But as I recall, we played games, and had fun…. Allison Road still calls me once in a while to say hi! Love those kids! Romeo Void greets me this morning with their 80’s song : Never Say Never… It’s a strange song, but I like it….

Before I get into the markets, economies, etc. I wanted to share an idea with you that a dear reader had…. In reading the Pfennig and learning that the Oil glut has problems because there’s no storage available, the dear reader wrote: “wouldn’t it make sense for the U.S. Gov’t to offer up their storage facilities at least for the time being”…. And that got me to thinking, because, I didn’t know the answer to the question I would ask here and that is: Does the Gov’t use different storage facilities than the Oil Industry uses? And the answer is yes! The U.S. Gov’t uses caverns in Texas that were old salt mines to store their Oil… So, it would makes sense for the Gov’t to step up to the plate and make a gesture that doesn’t cost tax payer Billions of dollars!

OK…. The currencies lost ground to the dollar bugs again yesterday, after trading flat all day on Tuesday… At one point after the overnight markets handed their trading books over to the U.S. the dollar was not faring so well VS the currencies, but as the day wore on, the dollar bugs were relentless in their pressure on the currencies…. However, is a twist that had me scratching my balding head when it first began, but now it’s old hat…. And I’m talking about the dollar having strength VS the currencies but not against Gold….

The shiny metal had a very good day yesterday rallying VS the dollar…. Gold found its way higher to close the day at $1, 714… And…. the shiny metal is up another $17 in the early trading today…  Things are looking up for Gold, folks… Record deficit spending, money printing to beat the band, and a shutdown economy, giving the prospects for a deep recession a lot of merit these days….  So….

Well…. Well… well…. What have we here? I was perusing through Twitter last night, and came across a graph that was posted by commodities guru, Marin Katusa, and it showed the amount of Gold being mined each year for the last 30 years. The last 6 years are really telling, to me that is, for they show a dwindling amount of Gold being mined each year…. Which means supply is a problem for physical Gold, folks…. Oh, and the graph had a note from Marin…. (again, I took this from his Twitter feed) He titled it: Who’s Finding The Gold?

“ Bullion dealers, mints are all out. And it seems the earth is too. Or at least where companies are looking… Discoveries have dried up the last decade.”

Now, I know I too was around when there was all this talk of “peak Oil”…. And that didn’t fan out, as the Shale Producers took up the slack. But from what I read the “fracking” phenomenon is fading fast, and with this shut down, and all that glut of Oil that’s already been pumped out of the ground sitting around waiting for a home, the amount of debt these Shale producers took on to buy the expensive equipment they needed to extract the Oil from rocks, is hanging over the Shale Producers right now like a Big Black Cloud…. I’m just saying…

Of course that’s one way to get rid of the glut going forward, is to have the Shale Producers pull a Puff The Magic Dragon, and never be seen again…. But we sure don’t want that! So, they’ll have to figure out something else!

Oh! And then there’s this…. Did you hear that Bank of America (my friend Aaron’s fave bank, NOT!) sent out a report on Gold saying that they believed that due to central bank currency printing, the price of Gold will reach $3,000 in the next 18 months…. That’s an 80% move from here folks…. Now let me hear you all who can ask this, ask it together…. Got Gold?

I’m not trying to throw cold water on the COVID-19 deaths and near deaths, but since cancer is a disease that I find out about as much as I can, this snippet from Tom Woods email yesterday really struck a chord with me…. “The UK’s Sunday Express reports that increased cancer fatalities will result from the redeployment of health resources caused by COVID hysteria. In fact, says Richard Sullivan, a professor of cancer and global health at King’s College London and director of its Institute of Cancer Policy, “The number of deaths due to the disruption of cancer services is likely to outweigh the number of deaths from the coronavirus itself.”

“The cessation and delay of cancer care will cause considerable avoidable suffering. Cancer screening services have stopped, which means we will miss our chance to catch many cancers when they are treatable and curable, such as cervical, bowel and breast.”

Chuck again…. And when the all clear horn is sounded, the backlog of all those needing cancer screening, will put quite a strain on the healthcare system folks…. On a sidebar…. I was able to get in to have a scan last week, and I think my oncologist stomped her foot and threw a tantrum when the hospital first called to cancel the scan…. I truly appreciate her going to bat for me! In addition the insurance person at the hospital has been a shining star for me in getting the new chemo drugs….

OK, not sure how that all got into this letter, but it did, so we’ll move on from here…. This item really ticks me off, and shows the idiocy of the gov’t’s programs…. So let me set this up…. The Gov’t set up a small business loan program (which I pointed out at the time didn’t have enough money allocated to it) and took applications, which were requests for more money than the program had…. But there was one application that did get approved…. OK, get this… Harvard, which has a $40 Billion endowment fund, received $9 Billion from the gov’t.  I have a family member that has a small business, and he didn’t get squat from the Gov’t….  Brother! were there not any requirements like show us your balance sheet?  I find this to be typical of Gov’t programs… feed the rich, and leave the middle class bread crumbs…. 

I also like (not!) that fundamentals get thrown to the curbside most every day, but when the traders want to use them they sure do pull them out for everyone to see why they are selling an asset…. And so it was yesterday, and overnight with the euro….  Yesterday, the European Central Bank (ECB) says it will “grandfather until September 2021 eligibility of marketable assets used as collateral in Eurosystem credit operations falling below current minimum credit quality requirements.”  

In Central Bank parlance, that’s saying, that they are going to be buying junk bonds….  Now when the ECB announced that they are going to be buying junk bonds, the euro gets taken to the woodshed, but when the Fed Reserve announced they were buying junk bonds, the dollar got bought, because traders thought it was best for the economy…. 

And I’ve been beating on the Reserve Bank of New Zealand (RBNZ) quite a bit lately for all their implementations of monetary hoopla…. Well, as I looked at the RBNZ the other day, I came to the realization that the only thing left for the RBNZ to do is to monetize their debt…. You know like the Fed’s been doing….  And that thought had me thinking…. I wonder what the former, long time ago, RBNZ Gov. Don Brash would be doing during this global shutdown?   Don Brash was my fave Central Banker of all time, and not just because I met him in person, and he gave me his card with his telephone number on it and told me to call him anytime….  I put that to work one day and dialed his number, and he picked up the phone and talked to me for 1/2 hour!

When I turned 60 (5 years ago) Frank Trotter had gotten all kinds of people in the industry to write a quick Happy Birthday line to me, then Frank bundled them all up and sent them to me…. One of the entries was from Don Brash!  How about that?  After all these years! 

I laugh now when I think that once upon a time, I created an index CD at EverBank titled : The Prudent Central Bank CD….  it consisted of what were considered Prudent Central Banks at that time, and included: New Zealand, Australia, the U.K. and Eurozone.  Now, all these years later look at these Central Banks, they aren’t even close to what they used to be…. Goes to show ya what can happen when greed…. and a misunderstanding of what it takes to make a dollar or euro, whatever, in the real world, become the Central Bank… 

Longtime readers know that I have no love for the Fed…. And its mainly for this reason that they are a bunch of propeller heads that have never run a business, worked making widgets, or selling ice to an Eskimo.  So, they have no idea what it takes to have a real economy working….  I’ll stand by that statement until they show me….  I am from Missouri! 

The U.S. Data Cupboard finally gets some data to look at today! Leading off will be The Weekly Jobless Claims, which have been very ugly the last 3 weeks….  And batting second will be the Markit versions of PMI (manufacturing index), which is current, and the April print will show just how the rot on manufacturing’s vine has grown….  Again, it’s not the National version of PMI, which we changed to ISM a few years ago, but the Markit version will be a good indication of what’s to follow…. 

Tomorrow’s Data Cupboard has the March prints of Durable and Capital Goods Orders… These two had already turned negative before the COVID-19 virus shut down the economy, so just for GP we’ll need to look had badly these two were doing before the shut down…. 

OK…. To recap….  The dollar bugs are back on top of the hill again VS the currencies but not Gold…. Gold had a good day gaining $14 yesterday, and is up another $17 in the early trading today… BOA says that Gold will reach $3,000 in the next 18 months….  I sure hope they are correct! The RBNZ is close to monetizing their debt, and the ECB will be buying junk bonds, all reasons to sell the respective currencies and buy dollars….  to traders that is…. 

For What It’s Worth….  Well I have a treat for you today…. This is hot off the press, and will be going out to his readers this morning!  This is an article that I contributed to, for good friend Dennis Miller, it’s about negative interest rates, and it can be found here: www.milleronthemoney.com 

Or, here’s your snippet: “In our recent article, “What The Heck Is Going On?”, our guru friend Chuck Butler remarked:
“There’s no harm in holding cash, as long as your bank isn’t charging you to do so, which is probably coming down the road, so be prepared!”

Chuck’s remark did not go unnoticed. Subscriber Rikk M. asked, “IF we go “negative” what is your thought on the solvency of the banks at that point in time with people pulling out their funds…it sounds frightening!”

Rikk, you are correct, it is frightening!

What are negative interest rates?
Investopedia offers this definition:
“This unusual scenario is most likely to occur during a deep economic recession….
• With negative interest rates, banks charge you interest to keep cash with them, rather than paying you interest.
• Negative interest rates might be seen during deflationary periods when people or institutions are inclined to hoard money, rather than spend or lend it.
• The negative interest rate is meant to be an incentive for banks to make loans during a period in which they would rather hang on to funds.”

In early 2016, Chuck warned us, sharing some quotes:
• “We’re taking a look at them (negative interest rates). I wouldn’t take those off the table.”
– Janet Yellen, Chairman, Federal Reserve, February 11, 2016
• “[Negative interest rates are] working more than I can say I expected.”
– Stanley Fischer, Vice-Chairman, Federal Reserve
• “I think negative rates are something the Fed will and probably should consider if the situation arises.”
– Ben Bernanke, former Chairman, Federal Reserve

Chuck again….  A very good article and one that people should be reading in that I do believe negative interest rates are on their way to banks in your region!  Here’s another thought that goes along with all that was printed here….  What if going to negative interest rates was a plan by the gov’t?  Stay with me here…. If the bank was charging you for your deposit, wouldn’t you go to the bank withdraw it and take it home with you? Or would you just allow the bank to charge you for your money?  Remember, the Oil contracts the other day? Who would have thought that it would ever come to you have to pay to have your oil taken from you?  Well, that happened and so will negative interest rates…. 

But that’s not the real reason the gov’t wants negative interest rates…. All that new debt that’s coming down the pike wouldn’t have any bond servicing costs!  Can you imagine that, the U.S. issues Treasuries and you have to pay the U.S. to hold them?   

OK, I know I’m going long here, but, I’m on a roll! …. the other reason for negative interest rates would be when the sheeple begin to pull their cash out of the bank , the gov’t issues a decree that prohibits cash, and that all your cash balances have been turned into digital money, which the Gov’t can now track what you spend your money on, etc.  The bank then can start charging new fees that you won’t even know existed!    OK, this last part is all my imagination, folks…. but don’t you see the possibility of this happening?  

Fleetwood Mac takes us to the finish line today with their song: Gypsy… I was a HUGE Stevie Nicks fan…  Still am, but less than before, as we all get older…. HA!  I hope you have a Tub Thumpin’ Thursday, and will Be Good To Yourself! 

Chuck Butler