Bullard Says The Manufacturing Sector Is Already In Recession!

September 23, 2019 

*  Dollar bugs regain the conn on the currencies

* Chinese Trade Delegation cancels trip to the U.S. … 

Good Day… And a Marvelous Monday to you! Exciting weekend for yours truly, as my beloved Cardinals swept the Cubs in Wrigley, four games! All four games were 1-run victories, so a lot of hand wringing was done… Good thing good friend, Duane, came down to watch the games with me, who knows what I might have done without company! 6 regular season games to go, and their magic number to win the division is 4… The division win is the goal because you don’t want to have to play that one and done game for the Wild Card… Melvin and the Blue Notes greet me this morning with their song: if You don’t know me by now….. I few years ago, Dane Moody, a young guy on the currency desk said, “I think I’ve got you stumped on this one Chuck, who sang If You don’t know me by now?” And I replied, “Melvin and the Blue Notes”… He was shocked! He thought he had stumped me! Little did he know that it was one of the many songs on my iPod!

OK… The currencies didn’t have a good day on Friday, and couldn’t hold their small gains they had garnered throughout the week, but Gold showed them how it was done, and gained $18 on the day… I continue to find it quite interesting that even with the dollar gaining ground, it’s basically getting sold to buy Gold… 

Gold’s rise began when it was learned that a Chinese trade delegation cancelled a visit to the U.S. So… just when the markets thought everything was hunky dory regarding the Trade War, they have this thrown at them from left field… Gold is still well bid this morning and has added an additional $2.50 to the $18 it gained on Friday. 

Speaking of Gold… I realized late last week that I had been pretty tough on the Beaver, I mean JPMorgan last week, as the prosecutors called their metals desk was “A Criminal Enterprise”… Well, so that I’m not put down as a JPM hater, let’s just say that they aren’t the only one to blame for Price fixing and manipulation… How about the metals exchanges? They allowed these traders to blatantly rig the metals markets for how long? How about the regulators? The CFTC continually said they saw no sign of price manipulation or fixing…. But remember former CFTC head, Bart Chilton, on his deathbed said that the CFTC did find things, but couldn’t nail down one person responsible… Trust me on this one, JPM was not the only pawn in this chess game to keep the dollar A-number-one in investor’s minds… And that’s all I have to say today about that!

What caused the turnaround in the dollar and currencies has got me a bit by the tail this morning.  All last week, the currencies would book small gains VS the dollar, and then when the Chinese announcement became news, the dollar bugs came out from their wall boards, and began scurrying across the floor, as if the lights were turned on…   

There is a very strange thing going on in the repo market folks, and just knowing this I would have thought that the dollar bugs would be hiding, not scurrying across the floor!  

The cash liquidity crunch continued throughout the week last week, as the Fed had to come to the rescue every day from Tuesday to Friday such is the liquidity squeeze being experienced. Wait! What? I thought that U.S. banks were supposed to be flush with cash? So, how in the world is it that the Fed has had to step in and provide cash liquidity in the repo market every day, except Monday, last week? Something’s rotten in Denmark, as they used to say… And I’m afraid that this isn’t going to turn out to be something that just runs off a duck back! 

Well, what do we have here? It appears that St. Louis Fed Reserve President, James Bullard, called for a deep rate cut last week, and told the local newspaper here, the Post-Dispatch, that to him, “it appears the manufacturing sector is already in recession”… Here’s the link to that article in case you want to read what else he had to say: https://www.stltoday.com/business/local/st-louis-fed-president-explaining-dissent-says-u-s-manufacturing/article_c941d06b-0f28-52a2-8b9c-465ba944e4b6.html#utm_source=stltoday.com&utm_campaign=BusinessNewsletter&utm_medium=PostUp&utm_content=a12874506a3b5805dded6c95af30d7173df7c77a

I have to wonder if Bullard is a Pfennig Reader? I mean, haven’t I already been saying that I think we could already be in a recession? Quite a few years ago now, I attended a breakfast meeting that the CFA people were sponsoring that featured a speech by James Bullard… I wanted to badly to ask him a question or two, but I had a problem with my throat, strep, I believe it was called, and could barely speak out loud, so I had to sit there like a lump on a log, and not participate… It was my one and only chance to confront a Fed Head, and once again my body didn’t allow that!

The price of Oil slipped from Friday, and this morning is trading with a $57 handle… The reason for the slippage is tied to the news that there’s just too many questions about the Saudi’s ability to restore their destroyed by drone attack, Oil production… The Saudi’s claim it’ll be no problem, and observers are saying otherwise…  I think I would side with the observers here… 

Well, things around the world, sans Russia, aren’t looking so bright economically either… This is unofficially PMI week… The week where most countries print their monthly PMI (manufacturing Index)… last night Australia was first to print and their monthly PMI fell below 50… Uh-oh! The Eurozone is next on the docket… Recall their PMI last month, fell below 50… I would expect this number to fall further… The U.S. and other countries will print their PMI’s as we go through the week, but other than that, it’s pretty darn quiet abroad and here in the U.S., that is until we get to Friday, when we’ll see a plethora of data here in the U.S. that really matters… Like Durable and Capital Goods Orders, Personal Income and Spending.

Friday’s U.S. Data Cupboard had the August Leading Indicators, and they weren’t good folks… They prints 0.0%, for not a good economic outlook… I’ve long said that this data and Capacity Utilization are the only forward pieces of data we get… So, we need to pay attention to these two… And both are telling us that things don’t look good going forward…

To Recap… the currencies week of small gains was wiped out in one fell swoop on Friday when the dollar bugs came scurrying out on the floor… The Chinese Trade delegation cancelled their trip to the U.S., and that got Gold on the rally tracks to gain $18 on the day…   Bullard says he wanted a 50 Basis Points rate cut, and that the manufacturing sector is already in recession, And Chuck points out that the goings on in the repo markets sure are strange… 

For What it’s Worth… Some time ago, I told you that the Russians were selling their Treasuries, and allowing them to mature without replacing them, right? Well, this is an article that talks about how they continue to rid themselves of U.S. debt… And you can find it here: https://www.rt.com/business/469064-russia-dumps-us-treasuries/amp/

Or, here’s your snippet: “Moscow has continued to sell off US Treasury securities, cutting its stockpile by $2.35 billion in July, according to the latest US Department of the Treasury data released on Tuesday.
Russia’s holdings of US state debt amounted to $8.5 billion in July, with long-term US Treasury securities standing at $6.2 billion and short-term at $2.2 billion. In June, Russian investment in Treasury bills was around $10.8 billion.

Japan remains the biggest holder of US Treasury securities for the second month in a row. In June, Tokyo held Treasury bills worth of $1.13 trillion, around 8 billion more than it had a month earlier. Japan is followed by China with $1.11 trillion.

Russia used to be one of the major holders of US Treasuries, but since last year it has been steadily cutting the investment in US debt in line with the nation’s de-dollarization policy. Russia is now on par with countries like Oman and New Zealand, which are at the bottom of the list of US Treasury holders.

As a matter of state policy, Moscow has also been diversifying its reserves, increasing bullion purchases to record levels and earning the title of the world’s most committed purchaser of gold. As of September, Russia held the fourth largest gold reserves in the world worth $109.5 billion, according to the country’s central bank.”

Chuck again… not earth shattering news, all stuff we already knew, but just a confirmation that it continues is all… But all you boys and girls new to class, let me explain that the deficit spending by the U.S. Congress has to be financed, and the financing tool they use is the distribution and sale of U.S. Treasuries…  In borrow a quote from Blanch DuBois, “We have always depended on the kindness of strangers”….   so, if there is a problem at the auction window when Treasuries are sold, and not enough buyers show up…  Then what we have here is a major breakdown of the financial system! so, think about that and then re-read the FWIW section again… 

Currencies today 9/23/19 American Style: A$.6772, kiwi .6271, ,C$ .7523, euro 1.0978, sterling 1.2443, Swiss $1.0085, European Style: rand 14.8884, krone 9.0796, SEK 9.7621, forint 304.84, zloty 3.9850, koruna 23. 5724, RUB 63.98, yen 107.47, sing 1.3732, HKD 7.8394, INR 70.78, China 7.0906, peso 19.40, BRL 4.1456, Dollar Index 98.72, Oil $57.89, 10-year 1.69%, Silver $18.40, Platinum $1958.11, Palladium $1,665.11, and Gold… $1,519.48

That’s it for today… A very strong win for my Missouri Tigers Vs S. Carolina on Saturday… Other than the hiccup in their very first game, they’ve looked good to me… Go Tigers! Saturday night I attended a community theater production of Oklahoma! Delaney Grace was a dancer and singer in the production, and she did great! Next for her is the Gateway Production of Matilda, for which she’s excited about doing! Oklahoma was always one of my faves… But, man did the production take forever to get to the end! It was near midnight when we got home! Can you believe the Blues are playing exhibition hockey games already? Pink Floyd takes us to the finish line today with their song: Mother…. I have a poster, that my former colleague, Danielle, bought for me that had a line from the song… Mother should we trust the government? I hope you have a Marvelous Monday and please Be Good To Yourself!

 

 

Fed Cuts Rates, But… What’s Next?

September 19, 2019

* Currencies continue to inch higher VS the dollar

* BOE meets today, but don’t expect any fireworks… 

Good day… And a Tub Thumpin’ Thursday to you! Well… I brought home a winner yesterday, as anyone that knew I was going to game instructed me to do! Not that I had anything to do with the Cardinals win in the day game yesterday! What a great day I had and all my buds that attended the game with me… We got to see a real pitcher’s duel, with Wainwright, VS Scherzer… You’ve got to love the little guys… The guys that everyone says are too small to play pro ball, no matter what sport. And then go out and prove everyone wrong! The Cardinals have two of those type players… Keep going boys!, keep going! Def Leopard greets me this morning with their song: Pour Some Sugar On Me… In the 80’s when people like me wanted to hear real rock-n-roll and not electric music that was so prevalent in the 80’s, there was Def Leopard, to fill the void!

Well, I was wrong, let’s just get that out there front and center… The Fed’s FOMC did cut rates 25 Basis Point (1/4%) yesterday, bringing our Fed Funds rate to 2%… The Fed then said that they were Not in a rate cut cycle… And that scared the bejeebers out of the stock jockeys, who not only saw the rate cut as a response to slower growth, but also maybe the last for a while… I have to say that I just didn’t think the Fed Heads had it in them to cut rates two consecutive months/ meetings…

But did lower rates hurt the dollar? Not yesterday, as both the currencies and metals couldn’t find a bid to drive their prices higher… Usually, when the Fed cuts rates, Gold would go on a strong rally, and the euro wouldn’t be far behind it… I don’t see why this didn’t happen this time, but… we always have to remember that the Plunge Protection Team (PPT) is always lurking in the hallways and could have been the reason the dollar remained in charge on the day…

So, the Fed is reacting to the weak economic data that I’ve been talking about, but is not going all-in on rate cuts going forward… What they heck do they need? An invitation! I just don’t have any faith in our Fed Reserve folks… they’ve been wrong more than you can shake a stick at, their economic policies are a laughing stock in the markets, and they just don’t seem to see the trees in the forest!

But what Central bank does these days?… Oh, that’s right, there is one… The Central Bank of Russia! And I don’t care what that writer talked about the other day as to why he doesn’t like Central Bank of Russia’s Gov. Elvira Nabiullina, I do like her and her policies, and that’s that!

I have to say right here, that I talk a lot about Russian rubles… and Gold… and just to set the bar straight, I own both… But I don’t talk about rubles because I own them… I talk about rubles because they have the best Central Bank, and current fundamentals of any one in the world… And I talk about Gold, because… well… Got Gold?

Even though the Fed injected newly printed dollars into the Repo market the other day, the lack of dollars continues to be a problem here… It’s a real credit crunch going on and will soon turn to an all-out Liquidity Crisis… The Fed could step in at any time and calm the markets, but other than injecting a large sum of dollars late last week, they haven’t done a thing… But they will… you can count the chickens on that thought, because the Fed always knows best, right? 

My old CFO used to say… “Liquidity is not a problem, until it is”… I think it’s become one folks… and once it sets in… it could very likely be the snowflake that causes an avalanche for the economy… I’m just saying…

Enough of that, eh? No reason to end the week for me on a sour note! So, with that on my mind…  The Bank of England (BOE) is meeting while I write this morning, but once again, I don’t see anything going on here… The data from the U.K. has been patchy… with a couple of better than the average bear prints, and mostly worse than expected prints…  But not enough bad ones to push the BOE to cut rates, which currently stand at 0.75%…  

The Aussie and kiwi dollars both have seen some selling this week, which doesn’t make sense… Sure their rates are still below the Fed’s 2%, but the difference has narrowed, and that should have given some love to the to antipodean currencies… Most of these two currencies weakness comes from the slowdown in China… Other than that, I would think that both have economies that are just muddling onward. Remember I’ve said that the Aussie dollar (A$) is the proxy currency for Global Growth, and the OECD just downgraded their forecast for Global Growth!  

Yes, a global recession seems to be in line, don’t you agree? And the point that I think most Fed Heads miss, here is that there’s no way the U.S. will avoid being pulled into the Global recession mess…   

OK… Gold was up then down, then sideways and then back down yesterday, and ended the day down $6… But it’s up more than $8 this morning, so we’ll have to wait-n-see if there are any more engineered take downs of Gold like yesterday’s….  But none of this surprises me… Remember….  I told you when Gold went over $1,500 that the $1,500 level was the “new $1,300” … And that we would see this back and forth, lathered, rinsed and repeated for some time, until that line broke, and we finished the year at $1,600…   

You know… I was really surprised to see that the Fed Chairman, Jerome Powell, didn’t mention the cash liquidity in the repo market, not once during his press conference following the rate announcement…  What’s up with that? This is a real problem folks, and he doesn’t even mention it? I shake my head in disbelief… 

The Chinese renminbi continues to inch stronger VS the dollar… A couple of weeks ago, it appeared that the renminbi was falling off a cliff, and today, it appears to be on terra firma, still weak, but not as weak… And that doesn’t get lost to the folks at the Monetary Authority of Singapore (MAS) who keep the Singapore dollar in line with the renminbi, as to not lose any competitive advantage in exports…  This has gone on since the renminbi began to be available to the world, I do believe it was 2003…  Or some time around then… I recall because we were the first U.S. bank to allow U.S. investors the opportunity to hold renminbi…  

The euro has been through the wringer lately, but is still standing, and this morning it’s trading a bit stronger VS the dollar…   The eurozone economy is a real mess folks… Shoot Rudy, even Germany is seeing problems, and that’s the largest economy in the Eurozone!  Too much debt in the Eurozone, folks… It’s a real problem for any country to deal with, and also find ways to promote growth… Japan had the problem first, then the U.S., then the U.K. and then the Eurozone… 

The U.S. Data Cupboard doesn’t have too much for us going into the weekend… Leading Indicators is about the only real piece of economic data that is on the docket for tomorrow…   There is one other piece that always catches my attention… and that is Household Debt…   This will be a revision of an earlier print of 2nd QTR Household Debt…  I’ve written a lot about Household debt, and am convinced its a house of cards that will come crashing down on those holding debt  that they can’t afford to have, at sometime in the future… 

To recap… The currencies continue to inch higher VS the dollar, Gold got sold by $6 yesterday, but is up more than $8 this morning.  The Fed failed to mention the cash crunch in the repo markets yesterday? Do you think that they did that on purpose?  I do…  

For What It’s Worth…  Well, I’ve talked a lot about the cash crunch that’s going on in the repo market, and then saw this article that explains what’s going on, and thought why not use it as my FWIW?  So, anyway, here’s the link to the article: https://www.economist.com/finance-and-economics/2019/09/18/why-the-fed-was-forced-to-intervene-in-short-term-money-markets?cid1=cust/dailypicks1/n/bl/n/20190918n/owned/n/n/dailypicks1/n/n/NA/310979/n

Or, here’s your snippet: “THE FEDERAL RESERVE had plenty to fret about as it prepared to discuss policy interest rates on September 17th and 18th. Trade tensions and wilting global growth have led businesses to cut back investment in the second quarter of the year. In manufacturing, production and capacity utilisation have been falling since the end of 2018.

Though the Fed has described jobs growth as “solid”, some analysts worry that the labour market is wobbling. As expected, these concerns prompted the central bank to lower rates for the second time this year, by 0.25 percentage points, to a target of 1.75-2%. But the meeting was overshadowed by turmoil in money markets.

On September 17th, for the first time in a decade, the Fed injected cash into the short-term money market. The intervention was needed after the federal funds rate, at which banks can borrow from each other, climbed above the level targeted by the Fed. It rose as the “repo” rate—the price at which high-quality securities such as American government bonds can be temporarily swapped for cash—hit an intra-day peak of over 10%. On September 17th the Fed offered $75bn-worth of overnight funding, of which banks took up $53bn. The following day it again offered $75bn-worth. The amount demanded by banks rose to $80bn.”

Chuck again…  liquidity is real Bear when it’s no longer present in a market…  And so far the Fed’s reaction is akin to having the same effect as removing a bucket of sand from a beach!

Currencies today 9/19/19 American Style: A$.6795, kiwi .6313, C$ .7531, euro 1.1070, sterling 1.2463, Swiss $1.0070, European Style: rand 14.6693, krone 8.9377, SEK 9.6885, forint 300.50, zloty 3.9208, koruna 23.3873, RUB 64.30, yen 107.95, sing 1.3770, HKD 7.8290, INR 71.17, China 7.0863, peso 19.38, BRL 4.0868, Dollar Index 98.26, Oil $59.15, 10-year 1.77%, Silver $17.87, Platinum $933.30, Palladium $1,591.85, and Gold… $1,502.16

That’s it for today and tomorrow, talk to you again on Monday… And we’ll begin the last week of September… What a pleasant surprise yesterday we sat in the shade all day at the stadium, so no sweating bullets for me!  It’ll be a wild and wacky weekend in Chicago starting tonight…  Just 10 games left in the regular season, and 7 of those games are with the Cubs! YIKES… Supertramp takes us to the finish line today with their song: Hide In Your Shell…   one of my all-time fave songs….  I hope you have a Tub Thumpin’ Thursday and a Fantastico Friday tomorrow, and please Be Good To Yourself! 

Chuck Butler

It’s A FOMC Day!

September 18, 2019 

*Currencies get off the mat, but the gains were small!

* Chuck dives into his knowledge of Oil…  (it won’t take long! HA!)

Good day… And a Wonderful Wednesday to you! Well, the team that can’t hit, proved once again last night that their lack of hitting causes losses! UGH!, But another day off the calendar, and my beloved Cardinals still hold a 2 game lead on both the Cubs and Brewers… The Cardinals, and their inability to hit the ball, will face St. Louis native, Max Scherzer in the day game today, of which I’m going to be in attendance, sweating pounds off me, because it’s been hotter than hades here the past week! But that’s OK with me, I’ll be at a day game, and longtime readers know I love day games! The Stone Temple Pilots greet me this morning with their song: Interstate Love Song…

Well, it was another day of ups and downs in Gold, the price of Oil slipped, and the currencies moved upward just a smidgen… Today is the day the Fed’s FOMC meets… I truly don’t believe the Fed heads have it in them to cut rates at two consecutive meetings, and so it’ll be up to them to prove me wrong! But like I’ve said a couple of times now, the important thing will be the Fed Chairman, Jerome Powell’s, press conference following the announcement… And since I did so good at mind reading what Mario Draghi was going to say last week, I’ll give Powell a shot here…. I think he’ll talk about how the economy is still strong in areas, and that the Fed just didn’t see the need to cut rates again, but will be watching for signs of weakness, and will be ready at the wheel, to cut rates if needed in the future…

If that’s basically what he says, then it won’t make the stock jockeys happy, or the bond boys happy, or the markets as a whole… It will make the dollar bugs happy though, as it should be enough to send the dollar higher… the dollar did see some selling, not much, but some yesterday, as we get closer to the Fed decision announcement. The Price of Oil slid a couple of bucks, as the Oil shock fears have subsided… And this I have to question… This attack on the Saudi Oil reserves is going to disrupt the supply line of Oil for a long time before it is restored to normal… And I’m telling you this now, so you can listen to me later… The U.S. Shale Oil Producers are hurting…

I do not vision myself as an expert on Oil… Folks, but I do read about it all the time, and think that Shale oil production has gone flat, the rig-count is down, companies are going bankrupt, and financing for these debt-dependent operations because, as you know, new banking regs require a loan to an entity to be repaid, and these entities are having a difficult time booking profits, much less paying back loans… . Add to that the fact that these Shale Oil fields dry up in about 2 years…

Then there’s a difference between Shale Oil and traditional Oil at the refineries, which is a long drawn out explanation, that for this letter is not going to happen, so just know that there are differences and causes Shale Oil to be more expensive to refine… 

So, inflation rising with higher gas prices could be in the future, as well as we are entering the heating Oil season… I’m just saying…

OK… Well, speaking of inflation… In the U.K. this morning their August retail price inflation figure was 2.6%, down from 2.8% in July, and that has the pound sterling trading sideways this morning…  Yesterday, the German business Confidence as measured by the think tank ZEW was better than expected  and experienced a sharp rise in September 2019, making up for the significant decline we saw in August…  

The Better than the average bear ZEW helped the euro off the matt yesterday, but today it too is trading sideways VS the dollar…  It’s funny, not funny ha-ha, that I keep seeing articles this morning that say the dollar is weaker going into the Fed’s FOMC meeting today… but you wouldn’t really know that to be the truth if you checked the Dollar Index, which today is trading at 98.42, and yesterday morning it was 98.59… So, weaker yes, but by a significant amount… I don’t think so! 

The price slippage in Oil pushed the Russian ruble weaker overnight and it is trading back over the 64 handle…   But I believe this move to be only temporary, folks… There’s just too many unknowns in the Oil sector right now, for this leading Petrol Currency to be sitting on the sidelines… 

Have you noticed in the currency roundup that the Swiss franc is back above parity with the dollar?  I go back once again to my conversation with Rob Vrhijof, last month when he said that he thought that going forward the franc would be a better currency than most…  You may recall that I questioned that thought because of the negative deposit rates in Switzerland, but lo and behold, the franc is pushing higher…  Go figure!

Here in the U.S. there’s been a BIG Problem going on in the Repo market…  For those of you not aware what REPO is, it’s simply the short version of the Repurchase market, where an entity, mostly banks, lend cash to another entity and the receiver of the cash , delivers U.S. Treasuries to the lender… It’s really a riskless business, unless, of course there isn’t enough cash, or Treasuries to accommodate the Repo Market…

Well, last week, the Repo market saw a spike in the repo rate of interest that’s paid for the loan..  As you would suspect, usually the Repo Market is in line with Fed Funds, with a little wiggle room… But last week rates spiked! The graph shows a straight line that seemed to go to the moon!

So, what’s going on here? Well, remember my conversation last week that I said years ago, a good friend asked me what the next problems were for the U.S. and I said, “1. liquidity crisis, and 2. Underfunded Pensions?  And what we have here is a good (really bad) old Liquidity problem…  There wasn’t enough cash around to accommodate the market… The Fed immediately saw this as a HUGE problem and stepped in with a cash infusion of $75 Billion…  

I have a problem with this action by the Fed… You see, where does the Fed get its money?  Oh, that’s right, it doesn’t have money, and when it needs money it prints it… OK, there’s no actual printing that goes on these days, it’s an entry on a computer, but we still say “print” because they produced dollars out of air…  Did they ask you, or me if we thought this was a good idea?  HAHAHAHAHAHAHA! As if!

The price of GOLD gained a measly $3 yesterday… It seems lately that in the overnight markets Gold rallies, and in the U.S. market it gets sold… Dare I say that this makes sense given the price manipulators are here in the U.S. ?  

Well, most of the articles on the internet this morning say that they expect the Fed to cut rates today…  I just don’t see that as something they are prepared to do…  Now, when the calendar turns over to 2020, there will be a few hawks leave the FOMC and a few doves will take their place…  This may seem like a no big deal, right? But… think about that… The recession will likely be in full metal in 2020, and the FOMC members will be mostly doves, who like to cut rates… Is this when we go negative?  YIKES!

 Speaking of the next recession (that may already be here!) I was reading yesterday and came across this quote… check this out…  I just loved the quote from publishing guru, and writer extraordinaire, Bill Bonner yesterday in his daily letter… “Many parts of America are already in recession. As for the country as a whole, the geriatric expansion is still dangerously tottering along – like a senile man with a valid driver’s license. We don’t know what ditch it will end up in… or when… but readers are cautioned to stay off the road.” – Bill Bonner

Many years ago, I used the phrase that the economy was like a car traveling on an icy road, the only question was not if but when was the car going to meet a guardrail…    I think that’s apropos now, eh? 

The U.S. Data Cupboard saw the August print of Industrial Production rise better than expected, which was a BIG surprise to me… But then this data can be volatile at times with Airplane purchases and stuff… So, I’ll just write this off as a blip, and get ready for another negative print in Sept.

Today’s Data Cupboar is really just about the FOMC Meeting… So, we have that going for us, eh?  

To recap, The BIG news today is that the Fed’s FOMC will meet and according to Chuck they’ll bypass a rate cut, but according to most pundits on the internet, the Fed will cut rates today…  So, what’s it gonna be boy? HA! Gold gained a measly $3 yesterday… The currencies got up off the mat VS the dollar, but the gains were very small, and the price of Oil slid downward, and Chuck has lots to say about Oil this morning… 

For What It’s Worth…  Yesterday, I told you about the 3 JPMorgan metals traders that were being charged with price fixing and manipulation of Gold & Silver…  And that news caused some people to think that JPMorgan CEO, Jamie Dimon might be in trouble…  And then the GAT folks sent me a note from Pam and Russ Martens about this, and I said, now that’s FWIW! So, here’s the article: https://wallstreetonparade.com/2019/09/will-jamie-dimon-finally-lose-his-job-over-racketeering-charges/

Or, here’s your snippet: “Yesterday, three traders at JPMorgan Chase, the bank headed by Jamie Dimon, got smacked with the same kind of criminal felony charge that was used to indict members of the Gambino crime family in 2017. The charge is racketeering and falls under the Racketeer Influenced and Corrupt Organizations Act or RICO. According to the Justice Department, the traders engaged in a pattern of rigging the gold, silver and other precious metals markets from approximately May 2008 to August 2016.

One of the traders, Michael Nowak, was actually a Managing Director at the bank and the head of its Global Precious Metals Desk. The other two traders are Gregg Smith and Christopher Jordan.

RICO is typically used to indict mobsters – which makes its use against employees of the largest bank in America a very disquieting event. But even more disquieting is that two trial lawyers compared JPMorgan Chase to the Gambino crime family five long years ago and recommended in their 2016 book that the bank’s officers be prosecuted under the RICO statute. “

Chuck Again… Wow!  Ok, yesterday, I made the point that until one of these guys goes to jail the dirty deeds will continue… but IF the head honcho got dragged into the proceedings, that would cause some major disruption in the price manipulation business, don’t you think? 

Currencies today 9/18/18 American Style: A$.6833, kiwi .6334, C$ .7540, euro 1.1046, sterling 1.2463, Swiss $1.0043, European Style: rand 14.6367, krone 8.9606, SEK 9.7123, forint 301.27, zloty 3.9277, koruna 23.4364, RUB 64.17, yen 108.20, sing 1.3744, HKD 7.8299, INR 71.14, China 7.0885, peso 19.35, BRL 4.0829, Dollar Index 98.42, Oil $59.00, 10-year 1.77%, Silver $17.85, Platinum $936.21, Palladium $1,597.32, and Gold… $1,501.55

That’s it for today…  Well, I’m excited to get to go to the day game today… I’ll be with some good friends, and if the sun doesn’t get to us, a grand time will be had by all! I just know it! OK… Yesterday, I made an error when I said that my darling granddaughter was in the final 7 for a the Madeline play, but it was the Matilda play! Hey! I don’t know these things, Madeline, Matilda, crazy!  I’ll go see her in a local production of Okalhoma this weekend…  So, I’m getting unindated with literature about Medicare and Medicare supplements… Crazy, like the credit card companies that are relentless when  kid turns 18, and so on…  I look forward to the process of choosing the right company…  And with that… The Who, takes us to the finsish line today with their song: Behind Blue Eyes…  I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler 

Are We Revisiting 1973?

September 17, 3019 

* It’s all about the dollar again this week… 

* Is the Fed about to disappoint the markets? 

Good Day… And a Tom Terrific Tuesday to you! My beloved Cardinals got back on the winning side last night, but the problem remains the same… They don’t hit very much! 12 games to go in the regulars season… And The Cards have only a 2 game lead on the Cubs… with 7 of our last 12 games VS the Cubs, it’ll be a showdown at OK Corral! I promise that today’s letter won’t be as long as yesterday’s, as I had woken up around 4 am, took my chemo, as usual, and instead of going back to sleep for a couple of hours, found I couldn’t sleep, so I went downstairs to write… And write I did, my poor fat fingers were plum tired! HA! Golden Earring greets me this morning with their song: Radar Love… Which happened to be one of the best driving songs there is! But if it come on, while driving, make sure you set the cruise, otherwise you might find yourself going way too fast!

The currencies didn’t have a very good day VS the dollar yesterday, and neither did Gold, as it couldn’t hold the $1,500 figure once again…  We started the day with Gold up $20, then it slipped to $16 while I was writing, and then to end the day it held only a $10 gain…  Back and forth, back and forth, Gold goes… The price manipulators are feeling the heat these days with more charges being brought on JPMorgan traders for price fixing and manipulation, more on that in the FWIW section today, but that’s not stopping them from their brazen attacks on Gold & Silver on a daily basis… I love seeing the stories being printed about price fixing and manipulation being handled by the courts… But as I told a dear reader who emailed me: “These findings and fines on the price manipulators aren’t going to stop them… Not until somebody goes to jail, will a dirty trader think twice about what he’s about to do…”

Throw them all in Jail, as far as I’m concerned! I would be a very mean judge, folks… You did the savers wrong? Go to jail!, you lied to investors?, Go to Jail, you tried to make other people look bad, for your own leverage? Go to jail! I’m telling you, the Gov’t would have to build new jails, because these guys wouldn’t be going to The Hilton! No about 50 years of hard labor will make them think twice about all the money they cost investors over the years!

OK… I’m back now… sorry, but got all up in my craw, about these price manipulators! Again, I have a good article on the latest developments for you in the FWIW section today, so don’t skip through it! That is unless you’re one of those naysayers that still say there’s no price manipulation going on in the metals…

Recall yesterday, I said that there were reports that the Saudi’s had asked the U.S. for some of their Oil reserves to make deliveries after their Oil supply took a hit late last week by drone attacks. Well, President Trump has allowed the Saudis to tap the reserves, to even out the price of Oil, but instead, the price of Oil continued to rise throughout the day. The dollar got it’s wings from this announcement that the Saudis would have to buy U.S. Oil… And that’s what sent the currencies to the woodshed yesterday…

The only Petrol Currency to keep the Oil Price jump rally for its respective currency is the Russian ruble…  The ruble went below the 64 figure last night. Again, this is still a far way from the 35 it used to trade with, but baby steps are what’s called for… I’m just saying… 

I read an article from a guy last week who wasn’t as big of a fan of Elvira Nabiullina, the CBR’s Gov. His biggest complaint was that she was keeping rates too high, and holding back the economy… Even though she’s been behind all the rate cuts that took rates from 10%, down to 5%… (retail rates) He just wasn’t happy with her… I quickly deleted the article, and thought, well to each their own opinion, but I would much rather have a Central Bank that didn’t debase their currency with rates cuts that go to zero!

Yesterday, I gave my usual epistle on the euro being the offset currency to the dollar… And a recent report from the BIS (Bank for International Settlements) (you know the guys that do all the Gold swaps that hurt Gold’s price too!) , and the euro remains the number 2 traded currency, with the dollar holding on most of the percentage numbers… The yen came in 3rd… But I’ll give you a gold star if you can tell who came in 10th place! Give up? It’s kiwi… WOW! I said when I read the report… Little old New Zealand, playing on the same field as the BIG Boys in the world! And then I thought, it’s too bad that kiwi doesn’t have a strong & prudent Central Bank like it used to have… Those days are long gone, along with every other Central Bank in the world, except…. The CBR… Central Bank of Russia… And I’m just saying…

In the foreign markets… The economic data continues to dribble in a piece here and a piece there, but we will see the latest Confidence reports from the think tank ZEW today, and in New Zealand, later they will print their Current Account Balance… Should be good!

So, once again this week, we’re looking at it all being about the dollar… The Fed meets on Wednesday, and it’s all centered on where rates will go, and what the dollar bugs will do when the announcement is made… I said yesterday, that I’m not of the belief that the Fed will go back-to-back, belly-to-belly, with rate cuts… But then you never know, right? Jerome Powell’s press conference following the rate announcement will have the most attention paid to it, on the day…

The U.S. Data Cupboard today will have the August prints of Industrial Production and Capacity Utilization, both on my list of real economic data…  You may recall that July’s prints for these two were not good, with IP printing negative -0.2%, and CAPU falling…  The bear in me says that these two will remain disappointing at best… But I doubt the markets will pay much attention to them, as they are all grearing up for the Fed’s FOMC meeting tomorrow… 

Further on… I read where the GM employees are going on strike…  We have a spike in the price of Oil…   What is this 1973?  I laugh, because in 1973, I was starting out my career in the investment arena… Leisure suits, and bell bottoms were the rage, so, I’m hoping that the Oil price spike and the GM strike are the only two things that come back from the 70’s! HA! 

To recap… Gold rallied then got sold… the price of Oil rose some more… And the currencies lost ground to the dollar on the day… The President said the Saudis can tap the Oil reserves, and that got the dollar bugs all lathered up… And then there’s some other stuff that Chuck talked about today, but that’s the gist of today’s letter!

For What It’s Worth… OK, as promised here’s an article about 3 more JPMorgan metals traders being brought to court to face charges of price fixing and manipulation… And it can be found here: https://www.cnn.com/2019/09/16/investing/jpmorgan-precious-metals-price-manipulation/index.html

Or, here’s your snippet: “Three JPMorgan Chase traders in gold and other precious metals have been charged with alleged market manipulation by the US Department of Justice.

The alleged conduct spanned eight years, the Justice Department said Monday.

The government charged Gregg Smith, an executive director, and Michael Nowak, a managing director and head of the bank’s global precious metals desk. Both were current employees as of Monday morning, government officials said.

The third person charged is Christopher Jordan, a former JPMorgan employee.

JPMorgan declined to comment on Monday. Instead it referred to a previous public filing in which it said it “is responding to and cooperating with these investigations.”

Between 2008 and 2016, Smith, Nowak and Jordan allegedly manipulated prices of gold, silver, platinum and palladium futures traded on the New York Mercantile Exchange and the CME Commodity Exchange.

“Smith, Nowak, Jordan, and their co-conspirators allegedly engaged in a complex scheme to trade precious metals in a way that negatively affected the natural balance of supply-and-demand,” William F. Sweeney Jr., FBI assistant director in charge of the FBI’s New York field office, said in a statement.

The government claims the defendants engaged in “widespread spoofing, market manipulation and fraud” by placing trade orders they planned to cancel before executing them, according to a Justice Department statement. The aim “was to trick” other traders into buying and selling futures contracts at prices and at times they wouldn’t have otherwise done, the Justice Department alleges.

“We will follow the facts wherever they lead, whether further up in the banks or to other institutions,” said Assistant Attorney General Brian A. Benczkowski in a call with reporters.

The US Commodity Futures Trading Commission also filed a civil enforcement action against Smith and Nowak on Monday.”

Chuck again… Yeah, of course they are innocent until proven guilty, but like I said, until someone goes to jail this will all continue…

Currencies today 9/17/19 American Style: A$ .6840, kiwi .6330, C$ .7542, euro 1.1023, sterling 1.2417, Swiss $1.0055, European Style: rand 14.7652, krone 8.9567, SEK 9.7075, forint 302.84, zloty 3.9375, koruna 23.4976, RUB 63.93, yen 108.12, sing 1.3760, HKD 7.8234, INR 71.72, China 7.0677, peso 19.48, BRL 4.0841, Dollar Index 98.59, Oil $62.05, 10-year 1.81%, Silver $17.88, Platinum $935.41, Palladium $1,596.57, and Gold… $1,504.37

That’s it for today… See? I can keep a promise to keep today’s letter shorter! Good luck to my darling granddaughter, Delaney Grace, who is in the final 7 in the audtions for Madeline, the play…  Daughter Dawn sent me a picture of her all dressed up for the school dance team last week… I can’t for the life of me believe that she’s in middle school !  I must be getting older than Methuselah! Can you believe that hockey has started their exhibition games schedule? Didn’t we just have a parade here for the Stanley Cup Champion Blues?  Or did I dream that?  HA!  Firefall takes us to the finish line today with their song: Just Remember I Love You…  Something that you should say to your loved ones every day!  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

 

 

Count Draghilia Strikes!

September 16, 2019

* Saudi Oil supplies take a hit from a drone attack!

* Oil soars, the Petrol Currencies follow, and Gold soars… 

Good day… And a Marvelous Monday to you! What started out to be a great weekend for my beloved Cardinals turned into a dud… UGH! But the weather here was absolutely fantabulous, with plenty of warm sunshine to go around to everyone! My Missouri Tigers won their 2nd of 3 games so far this year on Saturday, with a win over an early season cupcake… The BIG News from this weekend, is the report from Saudi Arabia that drones attacked their pipeline and knocked out a huge chunk of the Saudi’s Oil supply… So, more on that, and other things as we start the week today with the Allman Brothers greeting me with their song: Ramblin’ Man… This was the Allman Brothers first hit song, that got played on the radio… Of course FM listeners like I was back then had heard plenty of Allman Brothers songs by the time this song was a hit!

OK… Well, I can tell you that there are lots of blame fingers being pointed at the perpetrators of the drone attack… I can also tell you that the Saudi’s are thinking about asking the U.S. to release some of their reserves so that the Saudi’s can make deliveries… So, it’s a BIG deal folks… And the price of Oil has soared to a $61 handle, after trading last Thursday morning with a $55 handle! Now, the Saudi’s calmed things down a bit, by saying they could have their production back on line by Monday, and the price of Oil slide back to a $59 handle, but still a strong move since last week! 

And the thing that I really care about, is the Petrol Currencies, led by the Russian ruble and followed up the ladder by the Norwegian krone, Brazilian real, and a few more… The Canadian dollar/ loonie didn’t see any gains on the day Friday, as the recent data from Canada is beginning to become iffy…

But I don’t see how this jump in the price of Oil won’t eventually help all the Petrol Currencies gains VS the dollar… I just don’t’ see it as something that won’t happen… Not with the price of Oil spiking, and fears of an all out war in the Middle East, that could disrupt Oil production , could come of all of this… I did say “could come” Maybe calmer heads will prevail… But since when does that get in the way of a reason to fire guns, drop bombs, etc. ?    Got Gold? 

I left you last Thursday morning, right after Mario Draghi, European Central Bank (ECB) President made his announcement that the ECB was going deeper into negative rates, and opening up the coffers once again to buy bonds… Boy, did he tick off the Germans with these announcements! I have a good article on the reaction by the Germans in the FWIW section today, so you won’t want to miss that!

After all that on last Thursday, the euro rallied… Wait! What? Oh, yeah, the euro traders began to mark up the euro as soon as Draghi announced that more stimulus would be needed for the Eurozone economy. I don’t get it… and probably never will, why a currency would rally when their interest rate has been debased into negative territory, and the bond buying program you ended at the end of 2018, is back on the table… But, it is what it is…

You know the Fed is going down the same road is the ECB… First the Fed announced their Quantitative Tightening (QT) And even laid out how much they would be allowing to mature each month and not replace the bonds that matured… But then, things got sticky… And they, just like their kissin cousins over at the ECB, stopped the QT…. You, me, and guy down the street know that the next step, folks is for the Fed to announce they were back in the bond business too…

Now this won’t come until we hit the recession that’s looming… But I do believe in my heart of hearts that interest rates will go back to zero, and maybe even negative, and QE, or bond buying will resume… Talk about losing the rest of the credibility that the Fed has when this happens!

Gold got sold by $10.80 on Friday, but is up almost $16 in the overnight trading… And it’s back to being above $1,500… Of course now the question arises and asks when do the price manipulators show up with an armful of short Gold paper trades again? It was fun while it lasted this summer as Gold ratcheted higher and higher every day, without any interference from the boys in the band… But all that stopped being so lovey, dovey, pumpkin pie, smoochie, smoochie, once Gold traded past $1,500… I don’t know what it’s going to take for Gold to move forward to $1,600, but I do believe it will be there before year-end… 

Usually the key to a good move in Gold is geopolitical problems, like we have in the middleeast right now…  I heard that U.S. President Trump told reporters that, “the U.S. is locked and loaded, if it was Iran behind the Saudi Oil attacks”… YIKES! , but as I asked above and will also do here for it does seem appropriate! Got Gold? 

So, the Eurozone is already in recession… it’s not official yet, but trust me on this one, they are in a recession… But as I’ve explained many times in the past… It matters, not too much, what the Eurozone does… It matters what the dollar’s doing… We can go back to the turn of the century, when the euro was introduced at 51.14, and it traded as high as $1.17, and then fell through the floor all the way down to 92-cents… but then problems with the U.S. and the dollar began to take shape, the euro rebounded… while they were in a recession, no less!  And didn’t stop until it reached $1.50 a few years later… The euro is the offset currency to the dollar, so when the dollar gets sold, the euro will benefit from those dollar sales… It’s just the way it is, folks…

Negative rates around the world seem to be the “thing to do” for central banks… And they’re probably on their way here too… Negative yielding Gov’t Bonds… Negative yielding mortgages… It’s all the rage… You see, these inept gov’t officials just don’t get it… Taking your yield curve into negative territory is NOT the way to get people to spend money… You see, the people are smarter than you think they are… And if you as a Central Bank are taking rates negative, it tells the people that things are really bad, and we had better hunker down…

If negative rates were so darn good, why then is Japan, who’s had them for several years now, is still mired in an economic abyss? And why hasn’t the Swedes gotten their economic growth going again? Or the Swiss?  And negative rates aren’t helping the Eurozone econmy either, so what does Draghi do? He goes deeper!  What’s the old saying about digging a ditch? 

The writing is on the wall folks… So, let’s hope and cross our fingers that the U.S. Fed doesn’t go this route… I doubt seriously if that’s going to stop them, but Shoot Rudy! It’s worth a try! And this just in… The Japanese want to play a game of “How Low Can You Go?” and are contemplating going even deeper negative with rates!

Damn the savers! Right? That’s what a Central Bank is telling people like me that have saved all my life and now get little to no income from those savings… to hell with the savers! They’ve punished the Senior circuit of savers for years now, and now they’re punishing the likes of me! But they can’t make me spend, I don’t care how badly, the rates go negative!

Now, here’s where the rubber meets the road folks… IF the U.S. implements negative rates, they most likey would institute a penalty for withdrawing cash… And if that didn’t work, they would then outlaw cash! I wrote a very long article on the coming cashless society here in the U.S., for the now defunct, Dow Theory Letters a year or so ago… One of these days I should pull that out and post it as a Pfennig article… It’s scary, and If I do decide to print it again, I’ll give you a warning up front to remove all the sharp objects from your reading area!

The U.S. Data Cupboard last Friday had a better than the average bear August Retail Sales print… U.S. August Retail Sales were up 0.5% and like I had told you last week, there had to be some more back to school sales in there for the states that wait until after Labor Day to go back to school.  After looking under the hood here, I came away with two thoughts…  1. When you took out the vehicle sales, Retail Sales were flat, with no growth at all, and 2. now this gets really technical so stay with me here…  Dining out… Restaruants showed a decline in August of -1.2%, which brought the Year on year figure to a cycle low… This indicator is usually a Bellweather for disposable income spending…  Doesn’t look too good for this does it? 

Now that’s a completely different spin on the Retail Sales than what you heard or read about isn’t it? Well, as usual, you can depend on me to show you the real numbers…   

What the heck happened to the bond rally? One day it looked like bond yields were going to keep falling toward their record lows, and then the next day they weren’t falling any longer, and now are rising again…  Stranger than fiction, is this bond market folks…  but let’s not get too upset here the 10-year Treasury’s yield is still well below 2% at 1.83%… 

The bond guys are still telling us that the economy is in bad shape, they’re just not so sure of it being so bad right now!  Of course this Wednesday, the Fed’s FOMC will meet to discuss rates…  I was previously on board with the idea that while rates would get cut again this year, that a back-to-back rate cut wouldn’t be in the cards…  And I’m still of that opinion, while I think that there’s more of a chance of another rate cut than I had previously thought…   

Fed Chairman, Jerome Powell, the guy that no one wishes they were in his shoes, will hold a press conference after the rate announcement, whatever it may be… And the markets will have their collective ears on the ground, hoping to hear news of more rate cuts…  The markets are wierd folks…  but then if savers have nowhere else to go to earn a little yield, then they will be forced to resort to buying stocks with hopes of more upward movement in stocks…  And that’s why the markets want to see more rate cuts… 

The U.S. Data Cupboard has more for us this week than it did last week, with Industrial Production and Capacity Utilization on the docket for tomorrow, to highlight the week, for me that is…  I’m not going to be sitting by the radio or my laptop on Wednesday afternoon, to check what the Fed did… In fact, I’ll be at the ballpark on Wednesday afternoon!  The last “businessman’s special” And I’ll be with some of my best buds! And the last thing on my mind will be what the hell the Fed is doing!  HA! 

To recap… The Saudi Oil supplies took a BIG hit from a drone attack late last week, and the price of Oil is soaring, while the Petrol Currencies react favorably. Gold is also soaring once again on this geopolitical news, which isn’t good folks.. It could be the snowflake that causes WWIII, or it could be dealt with by calmer heads… But just in case… Got Gold?   

OK, here’s the aforementioned article about how the Germans aren’t too happy with outgoing ECB President Mario Draghi… I love the name the Germans have for him, so with no further adieu… 

For What It’s Worth… Well, I got the title for today’s Pfennig, from this article that showed up on Zerohedge.com, late last week… The Germans are not too enamored with outgoing European Central Bank (ECB) President, Mario Draghi… The Germans, for the record book, experienced runaway inflation in their history, and each generation since has pledged to be inflation hawks… What Mario Draghi introduced last week wasn’t even in the ballpark’s parking lot of an inflation hawk… So, here’s the article: https://www.zerohedge.com/economics/count-draghila-furious-germany-reacts-draghis-monetary-horror

Or, here’s your snippet: “When it comes to Mario Draghi’s relationship with Germany’s notoriously fiscally (and monetarily) conservative public, it tends to be a love-hate affair. Actually, scrap the love part.
Back in March 2016, when the ECB cut rates and expanded its QE (in an operation that just like Thursday left market’s underwhelmed, and sent the EUR surging), Germany’s press responded not too kindly to Draghi’s monetary largesse with Handelsblatt, in an article titled “The dangerous game with the money of the German savers”

Fast forward three and a half years later, when Mario Draghi, one foot out of the ECB’s Frankfurt HQ on his way to retirement, doubled down in what appeared to be the final push in European monetary policy, when the central banker cut interest rates deeper into negative territory and promised bond purchases with no end-date to push borrowing costs even lower.

The fact that it was left open-ended (or until the ECB starts raising rates) was perhaps the biggest takeaway, and as Deutsche Bank’s Jim Reid noted “QE infinity is back if that’s not an oxymoron.” That said, there were some complications when Bloomberg reported that Europe’s top central bankers – the French, German and Dutch governors – all opposed more QE, as did Coeure and Lautenschlaeger and a couple of others. “So this was a contentious move and rightly so.”

But an even bigger surprise was Draghi’s veiled admission that the ECB is now out of ammo and that to boost the economy, Europe will need fiscal stimulus, i.e., issue more debt.

Specifically, Draghi referred being “very concerned about the pension industry” and also suggested that the answer to speeding up positive side effects was fiscal policy. As Reid concluded, “it’s hard to therefore get away from feeling that even the ECB feel we’re nearing the end game in terms of the limits of monetary policy. Something that has been obvious to the outside world for sometime.”

And nowhere was this mood represented better than by Germany’s most popular tabloid, Bild, which on Friday accused Draghi of “sucking dry” the bank accounts of Germany’s savers, a day after the ECB cut interest rates deeper into negative territory. Next to a Dracula photomontage of Draghi, Bild’s headline read: “Count Draghila is sucking our accounts dry.”

“The horror for German savers goes on and on,” Bild wrote.”

Chuck Again… Like I said last Thursday… Don’t laugh at these shenanigans that the ECB is pulling once again, for the U.S. Fed is right behind them… They’ve been greasing the tracks for negative rates for sometime now, even drafting Big Al Greenspan to say that negative rates is no big deal… The next recession, will bring them about folks… Remember I’ve said this many times, but to make sure you hear me now and listen to me later… Historically, in the U.S., the Fed Funds rate was 6% when we entered a recession, and it would take at least 4% of rate cuts to end the recession… Our current Fed Funds rate is 2.25%… See where that’s going to lead us? I’m just saying…

Currencies today 9/16/19 American Style: A$.6880, kiwi .6385, C$ .7540, euro 1.1050, sterling 1.2455, Swiss $1.0095, European Style: rand 14.6617, krone 8.9775, SEK 9.6509, forint 300.45, zloty 3.9176, koruna 23.4295, RUB 64.34, yen 107.75, sing 1.3735, HKD 7.8206, INR 71.46, China 7.0785, peso 19.43, BRL 4.0804, Dollar Index 98.32, Oil $59.45, 10-year 1.83%, Silver $17.85, Platinum $1,627.10, Palladium $1,627.10, and Gold… $1,503.85

That’s it for today… Well some sad news came across the screens yesterday, when it was announced that Rick Ocasek, the former lead singer for the Cars had died at 75…  There was a period in the 80’s when the Cars were HUGE… OK..  Things have settled down here, after the Big Labor Day BBQ, and it’s about time to start thinking about closing the pool for the year… When the trees start dropping leaves by the boat load, it’s time to close the pool… UGH!, I just don’t like the cover on the pool!  Robert Plant takes us to the finish line today with his song: Big Log….  a really haunting guitar lick to start the song is really good…  I hope you have a Marvelous Monday, and please Be Good To Yourself!  Whew! that was a long one today! 

Chuck Butler

 

 

Chuck Reads Draghi’s Mind!

September 12, 2019 

* Currencies remain in tight ranges…  

* Trump & Xi decide to not go all-in with tariffs… right now that is! 

Good Day… And a Tub Thumpin’ Thursday to you! I’m not going to participate today in any Tub Thumpin’, so I hope you help pick up the slack. In fact, I feel like death warmed over this morning, and I can’t believe I got up to write! I should just “mail it in” and live for another day… But I won’t, that’s not who I am… I’ve never given up in a fight in my life… And the Good Lord knows I’ve had my share of not only fisticuffs, and health fights to last 10 people’s lifetimes! Maybe I’m down and out in Beverly Hills today because my beloved Cardinals lost again in Colorado last night! UGH! Go ahead and give the Cy Young (best pitcher) to the Rockies rotation, for they’ve held the Cardinals to two runs in two games in Coor’s Field! That’s unheard of! Well, until now… UGH! The Rascals greet me this morning with their song: A Beautiful Morning… I hope it turns out to be just that!

Today’s the day… the day the European Central Bank (ECB) will meet and  ECB President, Mario Draghi’s, last “real meeting”. Yesterday, I explained what would go on next month at his official last meeting… I told you yesterday that I thought the euro traders were frontrunning the ECB… And the evidence is there for us to see… During the Asian session there was no movement, during the European session, the euro got sold, and after Europe closed, the selling stopped…

So, for the euro’s sake, let’s hope that it’s a case of sell the rumor buy the fact… But with the dollar bugs in control, I doubt that will happen…

Remember when politicians (recall Dick Cheney?) said that deficits don’t matter? Well, I wonder if he has the same opinion these days, when after over a decade since the financial meltdown, the U.S. annual GDP has averaged 2.1%… Little to no growth, when you take out the Government spending… But to make matters worse, the OMB (Budget office which is non-partisan) says that we’ll see our debt rise to 125% of GDP in the next ten years… Really? I don’t believe we’ve ever had that much debt before… Even after WWII… But here’s a different way of looking at it from the folks at Misis…

“So what is the national debt as a percentage of the federal governments income? Income, in this case is the federal government’s tax revenue. And it turns out by this measure, we’re in uncharted waters.

In fact, the national debt is now eleven times annual federal revenue. And as far as I can tell, that’s the highest it’s ever been. (In 1945, the national debt was $251 billion, and tax receipts were $45 billion, meaning the national debt was 5.6 times tax revenue that year.)”

Chuck again… Thanks to longtime reader Bob for sending me this info…
So, the national debt continues to go higher and higher, and so does Corporate, Sate, and individual… One of these days, Alice…. One of these days, this debt foundation house of cards is going to come crashing down upon us…   But eleven times income? OMG!  Got Gold?

Speaking of Gold… The shiny metal eked out an $11 gain yesterday,  and is up $7 in the early trading today…  Ed Steer said it best this morning when he said, “The Gold price was on it’s way above $1,500 in the after markets, but was kept from doing that by the “da boyz”… The price manipulators seem to have put a line in the sand at $1,500, like they did at $1,300. Of course the line at $1,300 finally fell to all the demand for physical Gold, and that’s what it’s going to take once again to get us past this $1,500 level for good… Tons of physical Gold buying, and not just from the usual suspects of Russia and China, and even India… I mean the moms and pops of the world need to step and make their first purchases of physical Gold… Are you ready? Alright then, go do your stuff!

The markets are all waiting for Draghi, to come out of the ECB meeting, so I’ll stay on line until that happens so I can be sure to see what he has on his mind… I’ll play mind reader here and say that he goes deeper into negative deposit rates, and says the ECB will begin bond buying again… 

The Asian markets were in a good mood last night, as there seems to be a crack in the tough-guy act of both Trump and Xi. As both have backed off plans to go all-in on tariffs, in the Trade War. It’s nice to see the both of them playing nicely in sand box, eh?  Actually, I had thought that it would never come to all-in tariffs… I really didn’t think the two of them would be that dense to do that… I respect both of them for what they’ve done, but that respect only goes so far because of this stupid Trade War…  I’m just saying… 

OK… looks like my mind reading was bang on! For that’s what Bloomberg says Draghi just announced… Deeper negative rates, and a return to bond buying…  Talk about losing credibility for the ECB…  

But don’t laugh at them, for we’re next…  Especially if President Trump has anything to say about it…  Here are samples of two of his Tweets yesterday: “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.”   

And…. “The USA should always be paying the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”

No inflation?  Really? Don’t be fooled by the  stupid CPI (consumer inflation)…. Maybe we have little to no wage inflation, but other than that inflation is all around us…  I had better stop there before I say something I’ll be sorry about later…  

In other data from the Eurozone…  Well, Industrial Production for July was negative -0.4%, but that was better than June’s -1.4%, and year on year was negative -2.0% but again it was better than June’s -2.4%… So, it’s bad news but not as bad as June… Which is why the euro was holding its own until Draghi just talked…   

I have no idea what’s on the minds of euro traders these days…  The euro is on the rally track after the rate and bond buying announcement! OK, there’s still the Draghi press conference, where he can throw the euro under a bus… so, hold on boys, it’s too soon…  

Speaking of the stupid CPI, that’s what’s on the docket to print today… The August stupid CPI will print today, and all the lemmings will point to it and say, “see there’s no inflation to speak of”…   We’ll also see the Federal Budget, which should be a doozy… maybe over $200 Billion for August… Let’s see do some simple math and you’ve got a $2.4 Trillion annual Deficit, that gets added to our National Debt that is already $22.556 Trillion…   And growing every minute…  

On a sidebar, have you ever just pulled up the Debt Clock at: https://www.usdebtclock.org/  and sat there for 10 minutes and watched the numbers?  It’s amazing folks… Really, to think that the debt per taxpayer is $183,137…   Hey, that’s chump change, right, just fire off a check to the Gov’t and hope they don’t cash it! 

Further down on the Debt Clock’s web site, they have something called: Personal Debt to Income…  OK, no biggie right? I mean we should be making more than we spend, right? Ahem… No actually the debt to income ration is 1.724…   And that’s the part that scares the bejeebers out of me, for it consumers can no longer go deeper into debt, then who’s going to support the economy?   

To recap… yes, I’ll finally give up on the debt talk, sorry for all that today! The currencies have pretty much been trading in a very tight range, for weeks now, and yesterday was no different. Gold finally had a good day, after about 5 bad ones…  Draghi announced that the ECB will cut rates and go deeper into negative rates, and reintroduce bond buying… Pretty much bang on, with what Chuck said he would do…  don’t laugh at the ECB, because the U.S. will follow them eventually… 

For What It’s Worth… I recall a conversation I had with a friend many years ago, and he asked me what the next big thing was going to be, and I told him… I thought that Lack of Liquidity was number one, and number two was the lack of funding the Corporate Pensions… And then yesterday, I saw this on Bloomberg, and well, it appears that my Number two is coming to a screen near you sooner than imagined, and it can be found here: https://www.bloomberg.com/news/articles/2019-09-09/corporate-pension-funding-moves-closer-to-worrisome-80-level

Or, here’s your snippet: “U.S. corporate pensions felt the pain of low bond yields in August.

The retirement funds for U.S. corporations had just 82% of the money they expect to need over time for pensioners as of August, down four percentage points from July, according to a statement from consulting firm Mercer on Monday. The steep drop stemmed from long-term bond yields plunging to record lows, which effectively increases the current value of companies’ future obligations. Declines in U.S. equities didn’t help either.

When companies have more than about 80% of the funding they expect to need for pensions, they tend to cut their investments in riskier assets like stocks and increase safer holdings like bonds to lock in gains and reduce risk. Companies closer to that level or below it are less likely to make those shifts, and more likely to contribute more of their cash flow toward their pensions, JPMorgan Chase & Co. strategists wrote last month.

The 1,500 publicly listed companies that Mercer looked at controlled around $2.05 trillion of pension assets at the end of August, compared with liabilities estimated at $2.51 trillion, and their investment decisions can have big impacts on markets. Their underfunded pensions could result in their buying fewer stocks and corporate bonds and more Treasuries.

“Funded status dropped sharply in August with interest rates now at their lowest point in modern history,” said Matt McDaniel, a partner in Mercer’s wealth business. “The current environment leaves us with a puzzling dilemma: where to invest when most asset classes look expensive.”

Chuck Again… You know that sometimes I don’t like to be right… Sort of like the old song, If loving you is wrong, I don’t wanna be right….

That’s it for today, and tomorrow…  Don’t forget that tomorrow the August Retail Sales will print…  With all this debt accumulation by consumers, I don’t see how that the report will be disappointing.  Talked to my good friend, Dennis Miller yesterday… He sounds better and better every time I talk to him…  Fingers crossed that he continues on that path! Well, what’s up with my beloved Cardinals… They can’t hit even in Coor’s Field? I was talking with Alex last night, and I told him the thing that’s the silver lining when the Cardinals lose, is that if the Cubs also lose, then it’s another game off the schedule of games left, which means 1 less game for them to catch us… But we had better get off the schnide quickly!  Heartsfield takes us to the finish line today with their song: Pass Me By… A great song, that I’m sure if you listened to it, you would say, “I remember that one!”   I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday, and please Be Good To Yourself!

Chuck Butler

 

 

 

Euro Traders Seem To Be Frontrunning The ECB…

September 11, 2019

* Currencies trade in tight range, except euros… 

* Russia believes that the Oil price will fall to $40… 

Good Day… And a Wonderful Wednesday to you…  Well, today is the we observe our 2nd day of infamy…  To this day, I still can’t believe we as a nation were attacked like that…  Not a good night for my Beloved Cardinals, who proved once again that they have problems hitting the ball when a runner is on third, and less than two outs… Got to get back on the rally tracks boys! Alex has completed 2 of his clinicals and has two left next spring, in the meantime, he’s back at home, going to class again. He’s on the docket to graduate with his doctorate in Physical Therapy, next May… It’s seems like an eternity to him, but I keep telling him that May will be here before he knows it! Cat Stevens greets me this morning with his song: Moonshadow… I’m being followed by a moonshadow, moonshadow, moonshadow… It basically means that the moon is shining on someone…

OK… Another dull day in the currencies folks… I know, I know, I’m beginning to sound like a broken record, of which I’m glad vinyl records are back in style, because for a while I had to amend that statement with I’m beginning to sound like a damaged digital recording… It just doesn’t sound the same, eh? OK, getting back to the currencies… A dull day is a good day, when were mired in the dregs of a strong dollar trend that refuses to give up the conn… But as sure as day follows night, and night follows day, the strong dollar trend will eventually end… I believe it will end in the next year…

But don’t set your watch on my calls… Yes, I’m right most of the time, but take the call I made in February 2010, at the Orlando Money Show, I told the audience that was overflowing, with people lined and standing against the wall, and people sitting in the main aisle on the floor… That the dollar would not be the reserve currency of the world by the end of the decade (2020) and that the Chinee renminbi would be the new reserve currency… Well, I got have of it right… The Chinese renminbi was added to the IMF Special Drawing Rights a couple of years ago, thus making it a “reserve currency” along with dollars, yen, and other currencies that make up the SDR’s… But I will end up being very wrong about the dollar… I realize the decade isn’t over just yet, but… Time waits for no one, and it won’t wait for the dollar’s strong trend to end!

As we went through the overnight markets, first Asia, there was little movement in the currencies, but as the books were handed over to Europe, the European traders began to sell euros. Maybe it’s going to be one of those sell the rumor buy the fact things, because most traders say they are frontrunning the European Central Bank (ECB).  

You see, the ECB meets tomorrow, in one of the last two ECB meetings that outgoing ECB President Mario Dragi, will make the final decisions…  And it is thought that Draghi will leave the ECB and the European Economy with a journey further into negative deposit rates, and a return of bond buying, as the Eurozone economy, as a whole, seems to be already in a recession.  And then there’s the presss conference following the meeting, and in these press conferences, in that past that is, Draghi, has not been kind to the euro… 

So, traders are frontrunning that whole scenario that tomorrow holds… And selling euros seems to be the trade du jour today…  Because, well, the final meeting before Draghi steps down and former IMF chief Christine Lagarde takes over at the ECB, will be full of back slaps for a job well done, a cake, cards, balloons, and a going away party… So, the real job will be done in tomorrow’s meeting… 

I read a report yesterday, that talked about how the writer believes that we are already in a recession here in the U.S. Of course we won’t know for sure until we get the wink and nod from the NBER the folks responsible for calling the recessions, which they normally do after the recession is about over! Can you believe they still have a job? HA!

Don’t forget that I’ve said that this next recession will be a doozy… for a number of reasons of which I’ve already talked about so I won’t go there again, I’m sure I’ll more chances to bore you later on in the letter! HA!

The price of Oil has been on a nice jump higher in price this past week, but the Russians don’t believe it will last. They cite the lack of demand, because of the slowing economies of the world. That’s good news for SUV drivers! Gas guzzlers was what they used to be called, but I’m sure that the car unions, got together, and decided that being called a Gas Guzzler was demeaning and hurt their feelings, so it became politically correct to not say gas guzzler… But then I’ve never been one to be politically correct, so gas guzzler, gas guzzler, gas guzzler!

But it won’t be good for the Russian economy who depends on Oil sales as a large part of their economy… But they’ve weathered the storm there before, and they’ll weather it again… They have little to no debt, and Their interest rates are higher than the rest of the world, and can be cut during a recession without have to worry about going into negative deposit rates…

It might put on hold the stronger moves in the ruble, but I trust the Bank of Russia’s Gov. and I’m sure she’ll do the right thing to keep their heads above water. And for now the ruble seems to be appreciating nicely each day… 

Gold had a decent day going, and then the price manipulators showed up at the COMEX and in the end Gold lost $13 on the day… I had to laugh yesterday when I saw a report that said that Citicorp, was calling for Gold to rally to $2,000… What have I always told you when these Big trading Banks and Brokerages make calls like this? That they are probably trading their book… In other words, they are long a large position in Gold, and need for it go higher, so they “ talk it up” … Now, I’m not saying that can’t happen… I’m just leery of these guys… and not just Citicorp… All of them! Remember I did say that I thought that Gold would revisit its previous higher of around $1,965… So, what’s $35 more?

The shiny metal and it’s kissin cousin, Silver, are trading upward early this morning, so Let’s see if that continues, or if they’ll be another showing at the COMEX by the Price manipulators…  I’ve got a great article on Gold manipulation in the FWIW section today, do you won’t want to miss that! 

The U.S. Data Cupboard is still bare of real economic reports… Yesterday we saw the median Income number for 2018, increase to $63,179, from $62,626 in 2017… This is so backward looking that you see why the markets don’t pay much attention to it…  

In other data news…. It was reported yesterday that the poverty rate in the U.S. fell last year… That’s the good news… The bad news is that the number of Americans without health insurance rose by nearly 2 Million people… OK, so when those uninsured people go to the hospital, who pays for their visit? Look in the mirror… 

To recap…  The currencies were stuck in the mud yesterday, but the overnight markets, in Europe that is, brought some selling in euros ahead of the ECB meeting tomorrow…  Because Chuck thinks that the final meeting in Rocktober will be a going away party for ECB President Draghi, so look for rockets at tomorrow’s meeting…  Gold got whipped around by the price manipulators yesterday, but is up $6 in the early trading, along with its kissin cousin, Silver, which is back above $18…  

For What It’s Worth… Well, this article came to me via my friends at GATA, so there is no link to an article for you today, but…. Since it’s about Gold and price manipulation, I thought I would include the entire article for you, so, here’s your snippet from GATA…

“U.S. Rep. Alex X. Mooney, R-West Virginia, is continuing his efforts to get answers from the U.S. Treasury Department, Federal Reserve, and Commodity Futures Trading Commission about surreptitious interventions by the U.S. government in the financial and commodity markets and particularly the gold and silver markets.
Mooney’s efforts began with letters sent to the Federal Reserve chairman and treasury secretary in April 2018:

In July 2018 the Fed and Treasury responded to Mooney but only incompletely, the Fed denying that it was trading in gold but refusing to say whether it is trading in other markets, the Treasury giving a partial denial of gold trading but failing to answer about the government’s policy toward gold:

In February this year Mooney asked the CFTC, as GATA already had done, if it has jurisdiction over manipulative trading undertaken by the U.S. government or brokers acting for the U.S. government, or if such manipulative trading is authorized by federal law:

The CFTC has never responded to GATA or to Mooney.

Summarizing the major questions that remain unanswered:
1) What is U.S. government policy toward gold? Is the policy still to drive gold out of the world financial system in favor of the U.S. dollar, as State Department records show the policy was in the 1970s?
2) Is the Treasury Department’s Exchange Stabilization Fund transacting in gold?
3) What markets are the Fed and Treasury trading in, through what mechanisms, and for what purposes?
4) Does the CFTC have jurisdiction over manipulative trading by the U.S. government or its agents?
5) Has the U.S. gold reserve ever been audited for any encumbrances? If so, what were the findings?

Of course the refusal of the Fed, Treasury, and CFTC to answer the congressman’s questions promptly and fully is strong evidence that the U.S. government is deeply and comprehensively involved in market manipulation.

If only mainstream financial news organizations and financial market analysts had the courage and integrity to pose Mooney’s questions on their own behalf. Then the world might enjoy some actual financial journalism — and the market rigging and the imperialism the rigging represents might be defeated and free and transparent markets restored along with limited and accountable government.”

Chuck Again…. Don’t you just love this guy Alex Mooney? His state has taken away the taxes on Gold & silver profits, and at the same time fires off letters asking for answers, that nobody, other than the usual suspects, lie the folks at GATA and Ted Butler have done! Maybe, one day, we’ll know the truth, the whole truth, and nothing but the truth… And don’t believe the Gov’t if they say, “you can’t handle the truth!”

Currencies today 9/11/19 American Style: A$.6866, kiwi .6417, C$ .7607, euro 1.1007, sterling 1.2352, Swiss $1.0082, European style: rand 14.6927, krone 8.9723, SEK 9.6867, forint 301.84, zloty 3.9366, koruna 23.4991, RUB 65.42, yen 107.71, sing 1.3784, HKD 7.8395, INR 71.63, China 7.1108, peso 19.51, BRL 4.0941, Dollar Index 98.57, Oil $58.02, 10-year 1.71%, Silver $18.10, Platinum $938.29, Palladium $1,562.11, and Gold… $1,491.97

That’s it for today… A somber day ahead, as we observe our 2nd day of infamy…  I recall the day after the 9/11 catastrophe, sitting in the office and trying to write something about the markets, which didn’t make much sense to me to do, but an astute pfennig reader sent me a note that day, telling me it was important that we attempt to continue as we did before the day…  And that turned me around! I came out of my funk, and began to write like I had before 9/11….   When baseball returned our adored announcer, Jack Buck, recited a poem, that you should Google, and read… The Jefferson Starship takes us to the finish line today with Marty Balin doing the lead singing of their song: Count On Me    I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

 

 

Credit Card Debt Piles Higher In The U.S.!

September 10, 2019

* It took a day, but rubles finally get bought! 

* Currencies trade in tight range yesterday, but slip overnight

Good Day… And a Tom Terrific Tuesday to you… No baseball for me last night, and I really don’t get excited any longer about watching an NFL football game… So, I turned the volume on whatever was on down low, and began to read… I really shouldn’t do that, because what it does is it gets me all riled up and yelling at the wall, and then I try to go to sleep… Doesn’t work! But anyway… It just keeps getting more difficult every day, to wake up… I have no idea what’s going on, I have always been a morning person, able to get up whenever, and be ready to take on the world… But not any longer… Is it age? Or years of accumulation of Chemo? Or do I know in the back of my mind that, in reality, I no longer HAVE to get up so early? Probably a bit of all three, don’t you think? Oh, well… I carry on despite my short comings! A St. Louis band, Mama’s Pride, greets me this morning with their song: Blue Mist…

Well, the price we pay for making sure our kids have everything they desire, because… You don’t want to upset them! Oh, the humanity if we did! That price I’m talking about is the run up of Consumer Debt… It’s crazy folks… But remember when the July Retail Sales were so strong, and I said that it was inflated with back-to-school sales, and wondered what the credit card bills would show when they arrived in the mail? Well, the report card is out, and here are the numbers, read ‘em and weep! For the month of July, consumer credit increased at a seasonally adjusted annual rate of 6.75%. Revolving credit, which are credit cards increased at an annual rate of 11.25% while non-revolving credit increased at an annual rate of 5.25%.

That’s over 11% increase in July from June in credit card debt…. What on earth are these people thinking about? Do they think they’ll come a day when all is forgiven, and the Gov’t will step up and take all their debts away? What was the old TV commercial? Calgon… take my troubles away… or something like that! I’m telling you now, so please make sure you listen to me later, but not too much later… That a situation like I just thought of, would be devastating to you and me… People that pay their taxes, save, and trying to invest… (I have a doozy for you on investing in 2020 in the FWIW section today) Because, who’s going to pay for all this debt forgiveness? Ahem… are you looking in a mirror?

Oh, and for those of you keeping score at home…. Longtime readers will recall me saying several times though the years, that debt levels like we have in the U.S. are hurting our economy’s ability to grow… And then I came across this yesterday, and thought… Hmmm, I wonder where they got this idea… Hmmm… “Debt owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis to $246.6 trillion at the beginning of March, according to the Institute of International Finance, an association of global financial firms. And the high debt levels are weighing heavily on economies….”

So, hopefully we don’t ever come to that… What we might be coming to however, is negative rates… and I read this past weekend that Big Al Greenspan said that negative rates were no big deal… Wait! What? Oh, brother, have we gone, no wait Chuck, don’t say it, for it wouldn’t be nice, and your mother always told you to hold your tongue if you didn’t have anything nice to say about someone…

Well, just as a sidebar… The University of Bath, did some research and found that negative interest rates aren’t doing what they were supposed to be doing… Look, at Japan… Their economy is still in the dumpster, and now Europe’s economy just headed into a recession… So, while I believe that’s where we will eventually be with negative rates, I certainly hope we don’t ever get there!

OK, I’ve started this morning off full of you know what and vinegar! The currencies on the other hand had little to no upward movement yesterday VS the dollar… Gold on the other hand was not able to hold to the early morning gains, and ended up in the red once again, falling almost $8 on the day, and closing below $1,500… I somewhat expected this to happen, as I explained a couple of weeks ago, I viewed the $1,500 level as the new $1,300 level… Recall how we would bump up higher over $1,300 and then get sold back below it again, and we played that game for over a year!

So, like I said yesterday, I would look to buy Gold on the dips… And anytime it falls under $1,500 would seem like a “dip” to me… I’m just saying…

In the overnight markets, the currencies have slipped a little (except the Russian ruble), and Gold is down another $6 in early trading.  The real BIG mover to the positive side yesterday was the price of Oil, which bumped up to trade with a $58 handle, and that got traders and investor excited about buying the leading Petrol Currency, the Russian ruble… The ruble saw a strong rally on the day, and in my opinion, it’s about time! I saw a blurb on the Bloomberg this morning that traders are questioning the size of the Oil reserves in Saudi Arabia… Uh-Oh…  this has the potential to be a very damaging piece of news, should it turn to be the truth… 

Sure, as I’ve been saying, the ruble was trading very steady Eddie for a long time, but after the news I brought to you yesterday, about how Russia’s economy was still growing, even after 5 years of economic sanctions, finally impressed someone, or group of someones…  You can still get an interest rate above 4.75% in Rubles, folks… I’m just pointing these things out, it’s up to you to do something! HA!

The Peoples Bank of China (PBOC) allowed another increase in the value of their currency, the renminbi, VS the dollar last night… That marks 3 days of allowing gains… What’s up with that?  Not that I’m complaining about this move in the renminbi, it’s just that it doesn’t make any sense… I guess the fact that there are still negotiations going on with regards to the Trade War with the U.S., there’s no reason to keep marking the renminbi down… 

Remember when I asked the question, and said that I was sure that some propeller heads in China probably had already figured out at what level the renminbi needed to fall in order to make up the losses from the Tariffs… Well, I guess they figured it out! HA! 

Well, the mess in politics in the U.K. continues… PM Boris Johnson failed once again to get his call for elections passed.  BREXIT looks like its dead in the water, and the deadline is looming… I believe it’s Rocktober 31st, which is also Halloween, will it be the bewitching hour for BREXIT? The U.K.? Boris Johnson?  I know it sounds far off, 10/31 that is, but it’ll be here before we know it, as time waits for no one and it won’t wait for the U.K. to come up with a BREXIT deal…  I’m just saying… 

I told you yesterday that the U.S. Data Cupboard was going to be a disappointment this week until we get to Friday, and Retail Sales prints… And so that means yesterday, we had the Consumer Credit data that we already talked about, and today we get the Median Household Income number… No biggie, but it will be interesting to see if we continue to lose ground with regards to wages… 

To recap… The currencies played in the mud yesterday, and are a little weaker in the overnight markets. Except the Russian ruble, and the Chinese renminbi, these two have rallied once again. There are rumors going around that the Oil reserves aren’t what they were thought to be in Saudi Arabia… Hmmm….  Gold lost $8 yesterday, and is down another $6 in the early trading today…  As I’ve already explained but repeated once again today, $1,500 is the new $1,300…   Got it? Get it! 

For What It’s Worth… I saw this article last night on MarketWatch, and thought, this is going to be a humdinger of an article… It’s about investing in 2020, and I’m sure you’ll want to take a look at it and if so, it can be found here: https://www.marketwatch.com/story/why-investors-risk-major-damage-ahead-of-the-most-volatile-year-in-history-2019-09-09?mod=MW_section_top_stories

Or, here’s your snippet: “Think 2019 has been hectic? You ain’t seen nothing yet.

According to our call of the day from John Mauldin of Mauldin Economics, 2020 “will be the most volatile year in history” for investors
“The last few weeks marked a turning point in the global economy. It’s more than the trade war. A sense of vulnerability is replacing the previous confidence — and with good reason,” he wrote in his latest market update. “We are vulnerable, and we’ll be lucky to get through the 2020s without major damage.”

Mauldin pointed to supply shocks, the trade war, interest rates, unproductive debt and Europe’s mess as some of the factors set to create the perfect storm, but it’s one volatility bomb, in particular, that could blow up best-laid plans.

“Remember when experts said to keep politics out of your investment strategy?” he asked. “We no longer have that choice. Political decisions and election results around the globe now have direct, immediate market consequences.”

Of course, the most consequential of all: The 2020 U.S. election. And Mauldin doesn’t sound too hopeful about any of the scenarios.

“None of the possible outcomes are particularly good. I think the best we can hope for is continued gridlock,” he said. “But between now and November 2020, none of us will know the outcome. Instead, a never-ending stream of poll results will show one side or the other has the upper hand.”

Markets will be a mess, bouncing up and down with each headline, Mauldin warned, and that will inspire politicians and central bankers to react. To “do something.” That something, he said, will probably be the wrong thing.”

Chuck Again… Yes… and it brings to my brain the question I keep asking…. Got Gold?

Currencies today 9/10/19 American Style: A$.6868, kiwi .6423, C$ .7587, euro 1.1037, sterling 1.2348, Swiss $.9916, European Style: rand 14.6770, krone 8.9784, SEK 9.7357, forint 300.32, zloty 3.9260, koruna 23.4322, RUB 65.53, yen 107.45, sing 1.3798, HKD 7.8406, INR 71.88, China 7.1217, peso 19.55, BRL 4.0737, Dollar Index 98.44, Oil $58.25, 10-year 1.64%, Silver $17.92, Platinum $940.50, Palladium $1,554.56, and Gold… $1,493.36

That’s it for today…  I just caught myself looking at one of the pictures I have on my wall at my writing desk, and while doing that I inadvertenly held down a key, and I had a whole page of that one key on my screen! What a dolt! OK, I got rid of all that…  the picture I was looking at, is a picture of me and my oldest sister, Brenda. She was battling cancer at that time and had wig on, but smile on her face, which is how I’ll always remember her…  My beloved Cardinals head out west for 3 games starting tonight, which will start later, because, well… they’re out west!  So, when I get up at 4 in the morning to take my chemo, I’ll be checking on the final scores….  Journey takes us to the finish line today with their song: Who’s Crying Now?  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

Russian Economy Continues To Grow, 5 Years After Sanctions!

September 9, 2019

*China cuts reserve requirement ratio 50 basis points!

* U.K. surprises with a 0.3% GDP growth print for July! 

Good Day… And a Marvelous Monday to you… Well, my beloved Cardinals have taken over 1st place in the Central Division, and widened their lead with the Cubs all weekend long, thanks the the Brewers who beat the Cubs while the Cards won their games… I sure hope we can hang onto that 4.5 game lead with 19 games remaining… Another beautifully pitched game by Cardinals pitcher Jack Flaherty, and then it was onto to other things on my Sunday… I’m all alone again, for 4 more days… We had beautiful weather on Saturday, and my beloved Missouri Tigers won their home opener, at which Alex, Andrew and Grace were in attendance… Jimmy Buffett greets me this morning with this song: Boat Drinks… “The boys in the band ordered boat drinks”…

Well, the BIG news from this weekend as far as currencies are concerned came from Russia, where after 5 years of economic sanctions, the Russian economy continues to grow! Industrial output is on the rise, the Russians believe they will have a record harvest this year, their Current Account is in surplus by $500 Billion… and… Inflation, which has always been a bugaboo for the Russians, has been falling for the past couple of years, and while it was expected to fall to 4.3% this year, it appears that it will be more likely around 3%… With deposit rates still above inflation, that means that Russia, as opposed to most countries, the U.S. included, do not have real negative rates…

The currency, the ruble, rallied big time on the news… And I can say that I’m vindicated! I remember when I first wanted to offer the ruble… And the all the pushback I received… Well, the ruble still have a quite a ways to go to reach the levels it traded at back then, but it has slowly but surely, chopped away at the currency price that the ruble fell to after the conflict in Ukraine, now 5 years ago…

Coming in second place for the currency news was China’s announcement that they would cut their Reserve Ratio percentage by 50 Basis Points (1/2%). A Reserve Ration cut is akin to an interest rate cut, as it frees up more money to use to support the economy… This news was welcomed by the Asian and Pan Asian Currencies and followed by a rally in this region’s currencies. 

And just when it appeared that the Chinese renminbi would slip off the ledge and fall into a deep dark abyss, this reserve ratio cut allowed the renminbi to rally for what seems like the first time in month of Sundays! 

it’s not all gloom and doom news coming from the U.K. these days, although I do have to say that this one caught me by surprise… U.K. GDP saw a 0.3% growth print for July, after June’s 0.0% print, there were, and I among them, economists that thought the U.K. was already in recession… 

This news was welcomed in the European region, and allowed pound sterling to rally, but left the euro stuck in the mud…  

When we last talked I told you that the price of Oil had rallied nicely and that was helping the Petrol Currencies… Well, the price of Oil continues to trade with a $56 handle this morning, and the best performing Petrol Currency is the Ruble, followed by the Canadian dollar/ loonie, and the Norwegian krone… 

Well, it was not a good week for Gold, as the price manipulators took back the conn from the physical Gold buyers, and Gold lost a good chunk of its value late in the week… Maybe this week will be better, and it’s off to a good start in the early trading today… And along with the engineered price taken down in Gold, they also showed up at the COMEX with an armful of short Silver paper trades too!

Longtime readers already know what I’m about to say, right? Buy the dips in Gold… well, that would be what I should say… But it’s not advice I’m giving, it’s merely a thought… and to that thought lies another one so let’s go there!

Longtime friend, publishing guru, and writer extraordinaire, Bill Bonner said it best the other day in his diary writings… I’ll let Bill explain, “a very simple Capital Loss Avoidance System, which proved to be very effective for long-term capital preservation: Any time you can buy the Dow for less than 5 ounces of gold, you should buy all the stocks you can. Then, when the Dow goes over 15 ounces of gold, you should sell stocks, buy gold, and sit tight until stocks fall again.

The real beauty of it is that it doesn’t require any research or any pretense of knowledge.” – Bill Bonner
Chuck again…. OK… doing some simple math is all that’s required to know when to sell stocks and buy Gold… And using my trusty calculator on the iPhone, I see that it takes more than 17 ounces of Gold to buy the DOW these days… Hmmm…..

OK, I’m not saying that you could bet the farm on the sell the DOW buy Gold trade right now… But it certainly does make for some interesting conversation, doesn’t it? And why not give it whirl? As Bill says, it has been proven to be very effective for along-term capital preservation.

Here in the U.S. things were interesting last Friday… Well, looky there…. The Jobs Jamboree was a disappointment to the dollar bugs camp out! The BLS reported that only 130,000 jobs were created in August, and of the 130,000 what the BLS didn’t report was that they had added 93,000 jobs after the surveys were completed… Of course that wasn’t as bad as the previous month when the BLS reported 160,000 jobs created, but had added 148,000 after the surveys!

Remember about a month ago, when I told you that the BLS had to eat all those extra jobs that they had added in the past year? Well, not all of them, but most of them! Which goes to prove what I’ve been saying all along… The BLS is full of their name minus the “L”…. Their numbers are worthless! But yet the markets still react to them like they were words from the Bible! I just don’t get it, do you? They’ve been proven wrong, and yet, people still listen to them… One of these days, folks, someone with far greater gray matter than I, will come up with a way to count jobs correctly… Right now, I believe the ADP folks, who are responsible for setting up payroll systems for just about every company in the country, would have a better count of who’s getting a paycheck this month, that wasn’t getting one last month!

But does anyone in the markets listen to me? HAHAHAHAHAHAHAHAHAHAHAHAHA! Now that was worth a great big-o-belly laugh!

So, stocks rallied, the dollar rallied, on Friday, and the Jobs number wasn’t even close to the 170,000 that were forecast for the month…. Now you tell me, why that was? And I’ll give you a Gold star! OK, not really… but you get what I’m trying to say… It’s preposterous! A Royal Scam (sorry Steely Dan), and so forth… I had better go on to something else before I blow my top!

The U.S. Data Cupboard this week, will be a real bummer for those looking for data that really counts…. In fact, we won’t see anything “worthy” printing until Friday, when Retail sales will print… This will be from August, which might still have some residual back-to-school spending in it, as I guess not all states go back to school as early as we do in Missouri… But other than that, it should be disappointing, when it does get around to printing on Friday. Today we will see the color of the Consumer Credit (read debt) for July… But like I said, not too much to bank on the rest of the week…

Before I head to the Big Finish today… I wanted to share with you a cartoon… Well, it’s a link to a cartoon… My fave cartoon, Pearls Before Swine, this one really hit home with me, and explains our political system with humor… So here’s the link, click it if you want to : https://www.stltoday.com/entertainment/comics/go-comics/?amu=/pearlsbeforeswine

To Recap…  The Jobs Jamboree was a real big disappointment, but the markets didn’t care… Stranger than fiction… But China cut it’s reserve requirement ratio by 50 Basis Points, and allowed the renminbi to rally… The U.K. surprised the markets with a 0.3% growth in GDP for July, and it’s all coming up roses for Russia and the ruble… 

For What It’s Worth… Well, we all know, by now that is, that former Fed Chairman, Big Al Greenspan, was a Gold bug before he took over the reins at the Fed, and all the while he was there, nary a word about Gold was spoken by Big Al… But since he’s been retired from the Fed Reserve, he’s back to extolling the virtues of owning Gold…   And this article is Big Al talking about Gold, and it can be found here: https://www.zerohedge.com/news/2019-09-06/greenspan-rising-gold-price-shows-investors-want-hard-assets-will-increase-value

Or, here’s your snippet: “During a CNBC interview, former Federal Reserve Chairman Alan Greenspan said gold prices are surging because investors are looking for hard assets that they know will have value in 20 or 30 years.

Gold is up more than 21% on the year and is trading at levels not seen since 2013.

During the interview, Greenspan focused on an interesting fundamental he thinks is driving both the bond and gold markets – the aging population. He said there has been a shift in time preferences as people recognize they will likely live longer and they will need to finance those longer lives. This, he says, is increasing the demand for hard assets like gold.

“One of the reasons that the gold price is rising as fast as it is … that’s telling us essentially that people are hard resources which they know are going to have a value 20 years from now, or 30 years from now as they age, and they want to make sure they have the resources to keep themselves in place. That is a clearly fundamental force that is driving this.”

Historically, gold has served as an inflation hedge and a wealth preserver. It makes sense that investors concerned about maintaining their savings well into the future would turn to gold. This is especially true given the likelihood of increasing inflation as the Federal Reserve continues to try to prop up the economy with low interest rates and quantitative easing.”

Chuck again… Well there’s something there in the idea that Big Al is once again talking about owning Gold… Was he told to keep his trap shut about Gold while running the Fed Reserve? It sure appears to be the reason to me… 

Currencies today 9/9/19 American Style: A$.6866, kiwi .6438, C$ .7601, euro 1.1026, sterling 1.2365, Swiss $.9911, European Style: rand 14.6992, krone 8.9411, SEK 9.6620, forint 298.97, zloty 3.9335, koruna 23.4593, RUB 66.70, yen 106.99, sing 1.3795, HKD 7.8409, INR 71.64, China 7.1147, peso 19.53, BRL 4.0606, Dollar Index 98.37, Oil $56.94, 10-year 1.59%, Silver $18.18, Platinum $955.91, Palladium $1,552.53, and Gold… $1,509.74

That’s it for today… Things continue to be quite strange in the markets, to an old markets person that have been around them for 46 years… But, it is what it is… and I can’t do a thing to change it, so…   Well…  I treated myself to some great smoked chicken thighs yesterday… Son Andrew and his family (Rachel and Braden) joined me for dinner…  Good friend, Dennis Miller, is doing better these days, and he sent me a video of a guy giving his recipe for chicken thighs, and I responded to him saying “I already do that!”  So, we’re down to the proverbial cheese that binds with my beloved Cardinals… They’ve gotta keep the pedal to the metal…  The Blue Jays take us to the finish line today with their song: Maybe…. “maybe, I’m wrong” I do believe I’ve used that line many times through the years!  I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler

Currencies Stay Off The Mat!

September 5, 2019

* The price of Oil jumps higher, delighting the Petrol Currencies!

* The BRICS GPD outpaces the combined GDP’s of the U.S. and Eurozone!

Good day… And a Tub Thumpin’ Thursday to you! I get to go to the day game at Busch Stadium today, so I’m geeked about that this morning… Man a crazy game last night, back and forth with lead changes, but in the end, my beloved Cardinals lost… UGH!  Have I got some articles for you today… I feel like I should stop writing and just provide articles to read… Nah, just kidding, but that’s what today is going to seem like… So, grab a cup of coffee, and let’s go! The Babys greet me this morning with their song: Back On My Feed Again… 

Well bust my buttons! The currencies stayed off the mat yesterday, and added to their small gains from Tuesday… Very interesting, eh? Has the dollar run its course? Or is this just a correction, and we’ll see the dollar bugs again soon enough?  Well, that’s always the question, you would think that a currency guy would be able to come to the right answer every now and then don’t you? HA!  It’s always an educated guess… that’s just the way it is…  And when you get caught up in Traders’ talk, they can steer you wrong, for sure! 

For us currency investors, I’m just happy that the currencies got up off the mat that they had been knocked to in recent weeks by the dollar bugs. For those of you keeping score at home, the Dollar Index has fallen from 99.28 on Tuesday morning, to 98.18 this morning… That pretty much tells you the dollar has been slipping… How long this will last, is the $64 question. I’m thinking that tomorrow’s Jobs Jamboree holds the key…  For the rate cut campers will be looking for a weak number that would help sway the Fed Heads to cut rates later this month, and that would not be good for the dollar…  A good strong print? that would turn this dollar weakness around on a dime… That’s my story and I’m sticking to it! 

The price of Oil has bumped higher to a $56 handle in the past 24 hours, and I think the move higher is tied to two things… 1. The U.S. announced additional sanctions on Iran, and 2. The Russians decided to join the Saudis and cut Oil production…  This move higher in the price of Oil has the Petrol Currencies looking perky this morning… 

OK, in the movie the Big Short, Michael Burry was the star investor who bet against the mortgage bubble, and won, in the end…  Well, he’s been pretty quiet lately, but this week he talked about what he feels is the next bubble to blow up, and that is the stock index funds…  Let’s listen to what Michael has to say about that, and this was taken from here: https://capital.com/michael-burry-compares-index-funds-to-subprime-cdos   

“passive investments such as index funds and exchange-traded funds are inflating stock and bond prices in a similar way debt obligations did for subprime mortgages more than 10 years ago.
The flows will reverse at some point, he said, and “it will be ugly” when they do.
“Like most bubbles, the longer it goes on, the worse the crash will be.” – Michael Burry  

Chuck again…  Wow! if you watched the movie the Big Short, you know how hard he worked and researched to come to his decision that the mortgage sector was a bubble… And he was correct, then… I’m just saying… 

Well, when they were formed, I knew in my heart of hearts that it wouldn’t take long for them to be bigger than most people thought they would be. And it’s with that, that I have for you today some news about the BRICS remember, the BRICS (Brazil, Russia, India, China, S. Africa)? Of course you do, for you are an astute person that reads the Pfennig! So, it happens to be that the BRICS combined GDP now outpaces the combined GDP of both the U.S. and Eurozone! WOW! And if things continue on path, they should be larger in GDP than the combined countries of G-7 by 2020! Who’da thunk?

OK, this thought came to mind when I read that yesterday… Remember when I told you that China suspended rare earth minerals to the U.S.? (we discussed then what rate earth minerals are used for), and caused the U.S. to find other sources… Like South Africa and Brazil…. What would happen, say, should the other countries of the BRICS vote and decide that S. Africa and Brazil cannot sent their rare earth minerals to the U.S. ?

• Just for fun… I feel like Wikipedia here, but here goes… here is a list of the rare minerals: Neodymium. This is used to make powerful magnets used in loudspeakers and computer hard drives to enable them to be smaller and more efficient. …
• Lanthanum. …
• Cerium. …
• Praseodymium. …
• Gadolinium. …
• Yttrium, terbium, europium.

And here his a list of things that use these rare earth minerals: many modern technologies, including consumer electronics, computers and networks, communications, clean energy, advanced transportation, health care, environmental mitigation, national defense, and you guessed it… that all important… many more!

Just food for thought on this Tub Thumpin’ Thursday…

Boy, I’m on a roll today… Better not stop me! He’s on a roll… better not stop him… It’s like when the German bombed Pearl Harbor! HAHAHAHA… That famous line from the Animal House movie, as been used by me several times through the years, and each time, I swear, I receive one or more emails informing me that the Germans didn’t bomb Pearl Harbor, the Japanese did!  Just shows to go ya that people read what they want to read, and pass over the other stuff… 

Gold had another wild and wacky day, with the price manipulators, but in the end it gained to $1,552 on the day… But this morning it’s starting out on the downside, with an $8 loss so far… That has time to correct, so let’s see how it unfolds today, eh? 

The U.S. Data Cupboard, yesterday, had the Fed’s Beige Book for the markets to read yesterday, and in it the majority of the Fed regions were reporting slower economic growth… the markets took this as an indication that the Fed will cut rates at the next meeting…  I’m not sure how they got that from what I read, but they’re on a roll, better not stop them!  

The U.S. Data Cupboard today, has some stupid prints, and a good one… July Factory Orders will print… I expect this print to be somewhat weak… which would go along with the Durable & Capital Goods Orders weakness that was reported previously… On Friday, the Jobs Jamboree for August will print…  Right now the so-called experts are calling for job growth at 170,000, Recall that June’s number was 164,000…  but those are BLS numbers, which are not worth a wooden nickel!  

To Recap…  The currencies stayed off the mat that had been knocked to in recent weeks by the dollar bugs, and added to their gains from Tuesday. Is this the end of the dollar’s run? or is just a correction?  The $64 question, for sure! Chuck highlights stories about stock index futures, and BRICS and poses a question that could lead to real problems… 

For What It’s Worth… Yesteday, I received a note from a longtime reader, Bernard, who sent me a link to an article on Wall Street On Parade, it’s written by Pam Martens, someone that I’ve long admired for her intellect, and ability to explain things to people… This week she was writing about how the 1-year Treasury Bill outperformed the DOW… And it can be found here: https://wallstreetonparade.com/2019/09/a-one-year-treasury-bill-beat-the-stock-market-over-the-past-year/

Or, here’s your snippet: “One year ago, investors could have purchased a one-year U.S. Treasury Bill with a yield of 2.47 percent. As of this past Friday’s closing price of the Dow Jones Industrial Average, the Treasury Bill would have beaten the performance of the Dow over the past year by more than three-quarters of a point (not taking into account dividends on the Dow stocks).

On Friday, August 31, 2018, the Dow closed at 25,964.82. This past Friday, August 30, 2019, the Dow closed at 26,403.28 That’s a gain of 438.46 points in a year or a return of 1.68 percent versus earning 2.47 percent on a T-bill.

You would have been saved yourself the agony of living through the 800-point market plunge on August 14 and the 3746-point rout in the Dow from the close of trading on November 30, 2018 until Christmas eve – marking the worst December performance since the Great Depression.”

Chuck again… And don’t forget, as Pam won’t let you in her article, that stock performances were aided by a HUGE tax cut, during that year! Oh, have I told you that publishing guru, and writer extraordinaire, Bill Bonner, has another trade for us? Buy Gold, sell the DOW… Hmmmm… Sounds like a good plan to me, and you know me, I love it when a plan comes together!

Currencies today 9/5/19 American Style: A$.6820, kiwi .6390, C$ .7577, euro 1.1060, sterling 1.2337, Swiss $.9834, European Style: rand 14.8060, krone 8.9787, SEK 9.6563, forint 297.86, zloty 3.9240, koruna 23.7438, RUB 66.38, yen 106.65, sing 1.3834, HKD 7.8392, INR 71.78, China 7.1546, peso 19.65, BRL 4.1366, Dollar Index 98.18, Oil $56.17, 10-year 1.50%, Silver $19.25, Platinum $981.94 (nice to see Platinum finally joining the metals rally, eh?) Palladium $1,558.67, and Gold…. $1,542.66

That’s it for today and this week…  Short week, but those things happen all the time, no biggie…  Cardinals need to get back on the winning track today, this is no time to go on a losing streak!  I was talking with my good friend Dennis Miller, a lifelong Cubs fan, the other day, and he was not happy that the Cubs had fallen 3 games back of the Cardinals… I told him, not to worry there were 7 games left between the two teams, plenty of games to make up the ground…  Not that I want to see that… But it’s possible! Hope for the best, plan for the worst!  AC/DC takes us to the finish line today with their song: Rock And Roll Ain’t Noise Pollution…  I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday, and please Be Good To Yourself!

Chuck Butler