June 23, 2020
* Currencies rebound on Monday!
* Chuck explains that the stock market is NOT the economy…
Good Day… And a Tom Terrific Tuesday to you! Last night they replayed Game 1 of the 1968 World Series, in which Bob Gibson set the World Series record for strikeouts in a game, at 17… I recalled watching the game somewhat in school, on a TV that they rolled into the room. The game was in black and white, which still puzzles me, because color TV was around then… Some classic baseball names were in that game: Gibson, McCarver, Maris, Cepeda, Brock, and flood for the Cardinals , and McClain, Lolich, Cash and Kaline for the tigers. 1968 was the year of the pitcher, and the year that Gibson set the all-time record low for ERA at 1.12…. That record still stands strong today. Baseball lowered the mound after 1968, and in 1969, baseball introduced the divisions with a league championship series to determine who would play in the World Series. Before then to win a pennant meant a whole lot, because you had to beat out 14 other teams in a 6 month marathon… Most youngsters only know the current set up with wild card teams and an extra round of playoffs. Paul Revere and the Raiders greet me this morning with their song: Kicks…. Kicks just keep getting harder to find, you know those kicks aren’t bringing you piece of mind….
Well, with no baseball or little hope of baseball this year, I felt compelled to carry on about 1968 in the intro this morning… And the song to greet us was very appropriate, too! So, let’s get down to work, eh?
The Currencies had a decent day VS the dollar yesterday, as they found a way to move higher VS the dollar in small doses. The euro climbed along with the Aussie dollar (AS) and all others fell in behind these two leaders, one from Europe, and one from Pan Asia… Gold pushed past $1,750 yesterday and closed the day at $1,754…. Ok, now, Gold needs to be able to hold the figure and not play this game of back and forth, for if it does hold on , then I foresee a major upward move in Gold from here… And with everyone talking about a reboot of the virus, Gold has no reason to be looking around for a bid…
For the record, Gold was $11 higher yesterday, and the price manipulators tried like hell to get the price back below $1,750, but they failed and Gold closed at $1,754… The early morning trading in Gold has the shiny metal up another $5, so my spider sense is tingling again folks… I think the train is leaving the station, if you get my drift… time to get on board, or be left standing on the station platform, with your hat in your hands…
I told you yesterday that Lola had changed their forecast for Gold upward, to $2,000 in the next 12 months… And what Lola wants, Lola gets! I had to explain that to a younger reader one day, because he had no idea that the Lola I talk about is from the movie Damn Yankees… played by Bebe Neuwirth, very well, I might add…. And not the Lola from the Copa Cabana song by Barry Manilow…
You know… most people, like me included, that own Gold don’t really check its price every day, or really care if it moves up or down…. I only get upset with the price manipulators taking chunks out of the price of Gold, because that’s not natural movements on fundamentals… If the fundamentals called for Gold to get sold, then so be it, but the fundamentals have been in Gold’s favor for some time now, folks… I’m just saying…
Well, it appears that another one is going to bite the dust… I’m talking about Central Banks that have resorted to going negative with rates…. The Central Bank I’m talking about this time is the Reserve Bank of New Zealand (RBNZ)… They really have no more rate to cut. In New Zealand they refer to their internal rate as the Official Cash Rate (OCR) which currently stands at 25 Basis Points, or 1/4 %… There have been rumbling from the RBNZ that they will need to go negative soon… And wouldn’t you know it, the RBNZ will meet tomorrow (tonight for us)…. They may go negative and then they may just go to zero first, before going negative… The New Zealand dollar/ kiwi has been hanging on the coattails of its kissin’ cousin across the Tasman, A$, but with a gloomy outlook from the RBNZ, I would suspect that kiwi would get hit…
Speaking of going negative… I’m still a believer that the U.S. Fed will have to resort to going negative with deposit rates probably before the year is out…. Think about that for a minute… Even with or without a reboot of the virus, the U.S. economy is going nowhere, and even Fed St. Louis President, Bullard, admitted that there was a deflation problem brewing… I had a dear sweet friend call me last week and ask me this question, “if I have three bank accounts, and all banks go negative with rates, thus charging me for holding my money in that bank, wouldn’t it be better for me to combine the three bank accounts into one, and only get 1 charge instead of 3? I said, of course that makes sense, but be careful of the FDIC limits….
Speaking of James Bullard, he must really be in demand as he is on the docket to speak 3 more times this week, starting today… Unless he’s going to give a different speech, I don’t see the need for 4 speaking engagements in the span of a week… But it is what it is….
The U.S. Data Cupboard today has the Markit version of PMI, their flash version of how June is doing so far… This will be interesting to see if the reopening has influenced manufacturing any…. Yesterday, the Chicago regional manufacturing pulse showed a revival of sorts in that area, but nothing to write home about…
I received an email from longtime reader Bob, who forwarded me an article that is really scary, in that it shows that Government Revenues that were used for spending so far this year have dropped from the usual 80-something percent, to just 51% this year… Jackson Brown said it best when he sang, “Someone’s gonna have to explain it to me,” You see… for the last 10 years, we have averaged 80-ish% of spending being covered by tax revenues… But this year, after a corporate tax cut last year, the revenues are only covering 51% of the spending… That drops the U.S. on the economic health meter….
If you cut taxes, but don’t cut spending, you’re asking for Big Trouble, and that’s what we have here and now folks… Congress failed to cut their deficit spending, and now with all the white knights being passed out to help with the pandemic, it’s really gotten out of hand… And don’t forget what I told you a few weeks ago, that put shivers down my spine, that for the first time on record in a 12-month period, money creation exceeded Tax Revenues…. If that doesn’t spell trouble for the dollar, and the U.S. economy, I’ll eat my hat! No wait! I don’t want to eat my hat… But I’ll be thinking about it!
I have another thought this morning that’s not going to make a lot of people happy… But here it is… The bull-market rally in the stock market does NOT mean the economy is doing well! Come-on! We’ve been through this before, the stock market is NOT the economy! I’m still waiting for the bear trap door to spring, and I still believe it will come when the earnings season hits and everyone does the V-8 head slap and realizes that they were wrong about all these corporations that the stocks come from…. There! I said it!
So, in my humble opinion, if you are hell bent and whiskey bound to play with the stocks, please make certain that your stop-losses are in place, and that at the first sign of trouble, you will get out of Dodge, you will not pass Go, or collect your $200!
And then before I head to the Big Finish today… Have you heard of the company, Wirecard? Well, in the tradition of the S&L meltdown of the 80’s, Enron in 2001, and Madoff in 2008, we have Wirecard in 2020… This company had auditors arrive and not be able to account for or find $2.1 Billion that the Company’s books said was there… Now the folks at this company admitted that the $2.1 Billion was never really there! Could this be the snowflake that causes the avalanche?
To recap… The currencies rebounded on Monday from late last week’s drubbing by the dollar bugs, and are stronger in the overnight markets too… Gold made its move above $1,750, and closed at $1,754, after the price manipulators knocked $11 off Gold’s high for the day. Gold is up $5 in the early trading today, so is the train pulling away from the station? Chuck thinks so… Chuck also points out that the stock market is NOT the economy, and that the economy is going nowhere, and that the bear trap door will be sprung on the stocks…
For What It’s Worth… OK, yesterday I told the bad news of all those home owners that weren’t making their payments, and then this crossed my screen, an article on Zerohedge.com that details the failure to make home loan payments for far in June… And it can be found here: https://www.zerohedge.com/personal-finance/30-americans-didnt-make-their-housing-payment-june
Or, here’s your snippet: “A stunning 30% of Americans didn’t make their housing payment for June – a figure that is likely going to ripple through the housing industry in coming months. According to a new survey by Apartment List, the rate is similar to May and shows that even though other industries are rebounding, the situation has not yet improved meaningfully in housing.
These figures stood at 24% in April and 31% in May, before falling slightly to 30% in June. One third of the 30% in June made a partial payment, while two thirds made no payment at all.
Despite the trend of missing payments at the beginning of the month, households have been able to play catch-up later in the month and “narrow the gap” by making payments in the middle of the month. This was the case in May, where the missed payment rate “dropped from 31 percent at the beginning of the month to 11 percent at the end.”
We’ll see how long people can play catch up.
Meanwhile, as the survey notes, delayed payments in one month are a strong indicator for coming months. 83% of those who paid on time in May did so in June. Meanwhile, only 30% of those who were late in May have made their payment in full for June.
This means the data for the beginning of July is likely to be just as ugly as June.
Recall, just days ago we wrote that Americans had already skipped payments on more than 100 million loans while, at the same time, job losses continue to accelerate.
To put this in perspective, let me once again remind my readers that prior to this year the all-time record for a single week was just 695,000. So even though more than 44 million Americans had already filed initial claims for unemployment benefits before this latest report, there were still enough new people losing jobs to more than double that old record from 1982.
That is just astounding. We were told that the economy would be regaining huge amounts of jobs by now, but instead job losses remain at a catastrophic level that is unlike anything that we have ever seen before in all of U.S. history.”
Chuck Again… OK, I pasted the whole article in for the snippet, because this is important stuff folks… The economy is NOT recovering as quickly as we were all told it would do… But you never heard that B.S. from me!
Market Prices 6/23/20: American Style: A$.6930, kiwi $.6487, C$.7392, euro 1.1288, sterling 1.2447, Swiss $1.0575, European Style: rand 17.2851, krone 9.5085, SEK 9.3015, forint 309.26, zloty 3.9280, koruna 23.5667, RUB 69.31, yen 107.07, sing 1.3919, HKD 7.7498, INR 75.33, China 7.0699, peso 22.57, BRL 5.2467, Dollar Index 96.85, Oil $37.23, 10-year .72%, Silver $17.82, Platinum $813.00, Palladium $1,858.00, and Gold… $1,759.10
That’s it for today… I have no idea what happened to yesterday! I sent the letter out, and then the next thing I recall is that I woke up from a nap, and it was time to think about dinner! WOW! Crazy , eh? I think that all the activity of the weekend finally caught up with me! Last night I was singing, rain, rain, go away… And it did! The sun is coming up and the sky is blue! YAHOO! I had been having wifi problems, and yesterday, with the help of Grace, we worked it all out, and everything is back to where it was before… Double YAHOO! In today’s world, a wonky wifi is not a good thing to have! OK… time to get my feet up, so Carlos Santana takes us to the finish line today with his band’s song: Europa this is an instrumental song, no words, and it’s one of Carlos Santana’s best guitar work… With that, I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!
Chuck Butler