June 15, 2020
* The Fed and PPT were out in force late last week…
* Another false dawn for the currencies…
Good day… And a Marvelous Monday to you! OMGosh! Yesterday couldn’t have been a more beautiful day here in the St. Louis area, than it was… Warm, no make that very warm in the sun, but with a cool breeze blowing all day, made the day as delightful as it could be yesterday! Friday night had just me, Alex, and good friend Kevin sitting out and avoiding the rain… It was just like old times, when Kevin and Chuck sat outside listening to baseball games.. Only this time there were no baseball games to listen to, so Chuck tried to fill the air with stories of his past… Alex seemed to enjoy them, as he never knew about his dad as a young man… Spoiler alert here, I was wild and crazy! But look how I turned out! I’m still a believer that a young man needs to go out and push the envelope before he settles down to a life of marriage, and kids… It worked for me, that’s all I have to say about that! Gerry and the Pacemakers greet me this morning with their song: Ferry Cross The Mersey… This song played Friday night and I said, “I used to sing Alex sleep every night singing this song, and friend Kevin, said, “And he still went to sleep? “ Ha, as If my voice wasn’t good enough!
Well.. The Plunge Protection Team (PPT) came upon the scene Friday, and said, “ I heard that the stock market lost 1,800 points on Thursday, and we’re here to correct that” And stocks recovered 477 points of their 1,800 points lost on Thursday… The stock jockeys were rejoicing in the streets once again, but a quick reminder to them would have brought them back from embarrassing themselves, but that’s for another day, eh? I would have to think that the PPT will be hard at work from here on out, because, the American public isn’t a bunch of idiots… They too can see the writing on the wall, that Corporations, that issue these stocks, aren’t going to have the earnings to support their lofty stock prices… But one day of rebound does not make a bull market, folks… This is a Bear Market, and it’s going to take the Fed spending like they’ve never done before to support the stocks… I’m just saying…
Maybe, the PPT, or the Fed hasn’t gotten the memo yet, that we are in the middle of a deep recession… Wait! Surely the Fed has gotten word that we are in the middle of a deep recession, but that’s not going to stop them from spending money they haven’t got to buy ETF’s of corporations that would have folded if not for the Fed’s bailout program.
Alrighty time to move on… the currencies proved what I talked about last week, was real… And that is that it had been another false Dawn, to think that the dollar was going to succumb to a multi-year selling scene… Why, just last week, early, the Aussie dollar (A$) had moved above 70-cents, and this morning it is trading with a 68-cent handle, and the euro , which last week had traded over 1.14 briefly is trading with a 1.12 handle this morning. The sentiment of traders can change in a heartbeat, or NY Minute, if you will, and never think about who they may have hurt with their sudden change of sentiment. Luckily, you have me to point out these false dawns!
Last week had seen Gold climb close to the $1,750 level and got brought back down, and Friday was no different… Gold actually climbed to 1,746, before setting in at $1,730., up$3 on the day… I had a dear reader send me a note last week, and said that they agreed with the $1,750 as the launching point for Gold… But wanted to know what that price would be for Silver… And I responded, that I just didn’t know what figure to put down for Silver, as there are too many inputs that make up the Silver price, and then add in the over 180 days of production it would take to equal the ounces of Silver sold short… So, don’t expect Silver to follow Gold move higher, dollar for dollar… It’s going to move higher, and on a percentage basis, probably outperform Gold, but the spotlight will remain on Gold, folks…
Ok, le’s move on… Ok… Long ago and far away in a galaxy a million light years from now, I used to get the 5 Minute Forecast every day, and just loved the way Dave Gonigam would compress the news into an easy to read 5 minute format. Then one day the 5 stopped showing up… I contacted Dave, and asked him if I had become persona non gratis. He assured me it was his system.. And now the folks at Agora, have changed their delivery system, and I get the 5 once again! YAHOO! And that means more pfodder for the Pfennig! YAHOO! And every now and then, Dave will quote me from the Pfennig, which is always a hoot! So, with that long intro… I have this ditty for you today from Friday’s 5…
“For the first time on record, Fed Money Printing exceeds U.S. Treasury Tax Receipts over a 12-month period.”
Ok, I don’t know about you, but… Those words sent chills down my spine… We’ve basically gone to MMT without anyone noticing… Modern Monetary Theory, or the Magical Money Tree, is upon us, and it seems as though no one is noticing? I’m shocked and awed that the dollar is still strong… OK, I guess it’s going to take dumb as box of rocks, traders to get the message, and figure out what’s happening with all this, before they take action… I’ll give them a break on that, but… should the dollar remain strong, I would have to then question their intelligence or motives…
Well, the U.S. Data Cupboard was a mixed bag-o-nuts late last week. First on Thursday, the Weekly Unemployment figures printed… There was another 1.5 Million people filing Initial claims, but the thing I want to point out is that the continuing claims were 29.5 Million, that means that even with the states opening up again, and the slow slog to bring back employees, there were still 29.5 Million people out there that are unemployed…
Of course, no talk about the total unemployed would take place under my watch, if we didn’t talk about how the total unemployed is still a fake number… You see if a person in unemployed and their unemployment benefits run out, they are no longer counted as “unemployed”… So, the Labor Participation Rate would be better to look at here… And at around 63%, that’s quite a low number of people actually working, folks… So, let’s see here we all know that the labor total number of people working was around 150 Million… so, only 63% of that number are actually working… Which is 94.5 Million… I don’t think the economy can be that strong when only 63% of its work force is actually working… I’m just saying…
There were other prints, but they didn’t make a hill of beans difference to the markets, so I’ll let them slide… One thing I noticed late last week that wasn’t a part of the economic calendar was the fact that Caterpillar posted their worst monthly return in profits since 2010… North America sales plunged 36% on a rolling three-month basis, the most since January 2010 and far worse than the 27% drop posted in April… Caterpillar is an iconic American Company, folks… I’m just saying…
And for all you folks that like to go to gyms to workout… First it was Gold’s Gym that closed, and now there’s word that 24 Hour Fitness is about to file for bankruptcy… I get this feeling that once the all-clear horn has sounded that many folks are going to need to get to a gym, after being held under house arrest for the last 3 months…
There is one thing that’s gone on under the House Arrest, and it is that Americans have slowed their intake of sugar… I know, for me, that’s a fact, because, I have Alex and Grace here to eat all the sweet stuff before I get a chance to! HA!
Take all those bad things going on in the U.S. economy, and tell me it wasn’t the PPT that had to come in to save stocks late last week, and the dollar while they were at it…. I’m not buying it, as a correction… I’m thinking that it was a case of the PPT, and Fed buying stocks and dollars with your tax dollars, folks… Think about that for a minute and tell me it doesn’t make you angry… I get it… tax dollars pay for those items that the local authorities and the Gov’t provide us to ensure our safety and way of like… But when the money doesn’t go there, and instead is used to bail out Wall Street, I get just a little wound up! And you should too!
Most of the people see the Fed and the PPT jumping in to save Wall Street, and think, well that’s Ok, they’ve got my back! And it comes for free! Ahhhh, grasshopper, come sit, and learn… There’s no free lunch… And the sooner you come to believe that the better of you’ll be and not take the Fed’s buying stocks as a way to help your investment portfolio…
The Data Cupboard for this week, gets back to business, starting tomorrow, with May Retail Sales, and that’s followed in the same day with Industrial Production and Capacity Utilization… So, a BIG DATA day tomorrow… But the markets don’t pay attention to data any longer, They’ve all become “Comfortably Numb” with the negative prints. They see them, shrug them off, and get back to buying stocks and dollars…
To Recap… The rallies that the currencies and metals were booking VS the dollar got derailed once again late last week… Chuck is convinced that it was the PPT and the Fed in buying and spending money they don’t have once again to save Wall Street… Chuck also came across some very chilling words in the 5 last week… “For the first time on record Fed money creation has exceeded U.S. Treasury Tax Receipts in a 12 month period”… Think about that and see if raises the hair on the back of your neck like it did mine.. And Gold is down $20 this morning… What gives?
For What It’s Worth… Ok, remember last week when I talked about how the Fed will eventually put a cap on interest rates, and the Treasury yield curve? Well, the good folks at GATA sent me this article on how the capping of the yield curve would be bullish for Gold, and it can be found here: https://www.voimagold.com/insight/why-yield-curve-control-by-the-fed-will-be-bullish-for-gold
Or, here’s your snippet: “On Wednesday, Fed Chair Jerome Powell stated he is considering “yield curve control.” Previously, in the 1940s, when the Federal Reserve controlled the yield curve, it created deeply negative real interest rates. If repeated today, this would cause the gold price to sky-rocket.
Due to the current economic crisis, the U.S. federal deficit is reaching “unprecedented” levels. Preliminary data suggests the federal deficit will be $4 trillion dollars this year, which is more than 15% of GDP. Although, as the crisis unravels, it’s likely these numbers will be even worse by year end. Throughout history, only in the First and Second World War deficits of this magnitude have occurred.
As GDP is declining and the federal deficit rising, the “public debt to GDP ratio” is escalating rapidly. According to usdebtclock.org, U.S. public debt to GDP is 130% at the time of writing. Just a few months ago this ratio printed 110%. In the chart below, you can see public debt to GDP rising at a pace comparable to when the Second World War broke out.
What many people don’t know is that at the start of World WarII, the Federal Reserve implemented “yield curve control.” The central bank of Japan wasn’t a pioneer when it embarked managing the curve in 2016.
Starting in 1942, the Fed put a cap on yields of government bonds across the curve. From that moment on “the Fed effectively abdicated its responsibility for monetary policy despite its concern about inflation and focused instead on helping the Treasury finance the conflict” (Humpage, 2016). “
Chuck again… Very interesting thought, that yield curve capping would create deep negative rates (when you factor in inflation) and that would be a real feather in the cap of Gold… Very interesting…
Market Prices today 6/15/20 American Style: A$.6817, kiwi .6436, C$.7328, euro 1.1255, sterling 1.2520, Swiss $1.0522, European Style: rand 17.2080, krone 9.6823, SEK 9.3610, forint 308.33, zloty 3.9425, koruna 23.7330, RUB 69.68, yen 107.34, sing 1.3945, HKD 7.7498, INR 75.76, China 7.0824, peso 22.59, BRL 5.0481, Dollar Index 97.15, Oil $35.43, 10-year .67%, Silver $17.18, Platinum $815.00, Palladium $1,927.91, and Gold… $1,711.20
That’s it for today… Well, thanks to all who sent along congrats to the Butlers… Yesterday was Flag Day… Did you fly your flag? Yesterday was also a day of remembrance for me, as it was 13 years ago yesterday, that I had my first cancer surgery… On the 27th of June it will be 13 years since I had my second cancer surgery… Yes, less than two weeks apart… 13 years I’ve been on some kind of chemo… some pills, some infusions, and other medicines to keep me going… As my friend, Ty says, “better living through chemistry”… I would be the poster child for that! Bob Marley takes us to the finish line today with his song: 3 Little Birds… “don’t worry, about a thing, ’cause every little thing is going to be alright”… And with that thought, I hope you have a Marvelous Monday, and will continue to Be Good To Yourself!
Chuck Butler