January 30, 2019…
* Currencies hold gains, ahead of Fed announcement
* U.S. data that does print is not good…
Good Day… And a Wonderful Wednesday to you! I can’t go a sentence further without wishing my old colleague, which I called “my little Christine”… Later, when I realized she wasn’t there just to help me each day, I changed it to “our little Christine”… A Happy Birthday! Christine came on board when it was just me doing World Markets sales and trading, and Cheryl Harper doing the operations side. Jen Evans (now McClean) was doing brokerage, and helping with currencies when I needed some help… So… our little Christine was a very young lady when I hired her. I watched her get married, have 3 kids, and now she plays Uber driver for her boys’ sporting events… So… Happy Birthday Christine… I miss seeing your smiling face each day… The Marshall Tucker Band greets me this morning with their song: Heard It In A Love Song… It can’t be wrong!
Well, on our Tom Terrific Tuesday, the currencies decided to take a breather, a pause for the cause, if you will… Gold though added more than $6 to its price from the morning gain of $4… In other words, Gold had a good day… I said yesterday that the about face that Fed Chairman, Jerome Powell has made was just sinking in to traders and investors… The Fed’s FOMC ties a bow on a two-day meeting this afternoon, with an announcement around 1 pm… Like I said yesterday, we’ll know for sure just how many Fed heads are shaking in their boots, when the meeting’s minutes get released in a few weeks… But I wouldn’t rule out a statement by Powell, that doubles down his previous dovish comments…
If only, all those PHD’s in economics from Ivy League schools that work at the Fed, had just signed up for the Pfennig, where they would have learned that the Fed picked a bad time to start a rate hike cycle, so late in an expansion cycle. They would have learned that the economic data did NOT warrant rate hikes… And that inflation has been beaten down, so no need to keep hiking rates, and finally, they would have learned that Chuck knows all! HA!
I was talking on the phone with good firend, and the Retirementor, Dennis Miller, of www.milleronthemoney.com yesterday, and he said that he know that I’ve said that historically we need at least 4% in rate cuts to make during a recession, and that since we’re only at 2.5%, when the recession hits, what will the Fed do? I said… well, they’ll cut rates down to zero again, and then either implement negative interest rates (like they have in Switzerland, Sweden, Eurozone and Japan) or they will implement another round of Quantitative Easing, which won’t be called that but it will be the same thing… And Dennis replied, or we might see both! And I agreed saying that may heaven help us if we get that far deep in the rabbit hole…
I had a dear reader the other day send me a note, and ask me why the euro was valued higher than the dollar, and did I think the euro had better fundamentals than the U.S. … Good Question! Well, I responded by saying, it’s not a euro story, it’s a dollar story. And since the U.S. currently posses the largest economy in the world, their bad fundamentals get a brighter light shown on them… And then don’ forget what I’ve said for years now… And that is the euro is the offset to the dollar, and dollar weakness will show up in euro strength… With or without Eurozone good fundamentals…
Got it? Good!
I should say that about Gold too… Got it? Good! Because if things go like I believe they are going to go these next two years, A lot of investors are going to be turning to Gold… That’s my opinion, and I could be wrong, but think about it… When the recession comes, this year or next year, interest rates are going to get cut, right? And Gold will have removed that governor from its ability to gain value VS the dollar…
And I don’t see the appetite for Gold from Central Banks being satisfied this year… Take Russia for instance… They’ve been taking their Oil revenues, which are in dollars, and exchanging those dollars for physical Gold… Now take the article I highlighted the other day about how the shale oil producers are slowing down, and then come back to Russia, and their Oil production. They’re going to be seeing lots of dollars coming in, and I don’t see them stopping their dollars for Gold exchange…
There were 2 pieces of data that printed yesterday… First, the Case/Shiller Home Price Index printed for November, and like I said I thought it would the price index grew at 5.2%, down from 5.3%, which means home prices dropped more in November… The other piece of data was the stupid Consumer Confidence report for this month, and the index fell from 124.6 in December to 120.2 in January… That’s quite a drop folks… If it keeps dropping, then watch…. Out… below!
This morning, earlier, the Eurozone printed their latest version of Consumer Confidence, and well… it was ugly… It was so ugly I would have touched it with YOUR ten foot pole! But the data didn’t budge the euro… Traders seem to be focused on the Fed’s announcement on rates that will be made this afternoon, after the European markets go home… I don’t think the European traders will be sitting on the edges of their respective seats waiting for the Fed’s announcement, because there’s nothing expected to happen here… Move along, these are not the droids we’re looking for!
OK, I’m stepping up on the soap box now, I have something to get off my chest… I hope I don’t make anyone mad, but if I do, I’m sorry… But this is my letter, and I need to get this off my chest… So, testing, one, two, is this mic on? OK, can you hear me in the back? Alright then, let’s get to this…
Oh, what a wicked web we weave…. I’ve read so many articles in the past month about tax rates going higher, and how a group of people believe that affixing high tax rates on the wealthy will help things… I’ve got a memo for all those that think that’s the way to go… 1. Either the wealthy will simply just find ways to skirt the higher taxes, and 2. Think about this for a moment if you will… If we pooled all the money of the richest Americans to pay down the deficit, It wouldn’t make a dent in the total, now near $22 Trillion! And after you took their money, they wouldn’t have any more to add to it the following year, so you’re back to square one!
Taxing to get out of debt, worked after WWII, but only because the country went to work after the war, and the soon the debt was paid off… with nominal tax rates I might add… There was a time in our past that the top tax rate was 90%… But the mental giants that implemented that tax rate, soon figured out that the wealthy had found ways around paying the tax rate, and so, it was dropped… And out debt back then wasn’t near what we have as a yearly deficit now… and we didn’t have nearly 1/2 -the population receiving assistance like we do now… So, it’s all kind of apples and oranges… But I wanted to throw that out there, for anyone that believes this malarkey…
Margaret Thatcher said it best when she said, “The problem with socialism is that eventually you run our of other people’s money”… I’ll drop the mic there, and let that sink in…
To recap… The currencies took a day to catch their breath but Gold had a good day, gaining about $12 total on the day. The overnight markets didn’t move things much either, it as if Traders are too focused on the Fed’s FOMC meeting that will end this afternoon with a rate announcement. I don’t expect anything to come from the meeting, and think the real meat of the meeting will come when the minutes are printed in a few weeks. The Eurozone’s consumer confidence is negative, and so awful, Chuck said he wouldn’t touch it with YOUR ten foot pole!
For What It’s Worth… Well, I’ve always said, we would see pigs fly before we saw spending cuts in the U.S. But bust my buttons, this report I found on Reuters tells me that there’s a chance we could see spending cuts in the next budget… That is, if the Democrat controlled House of Representatives approves it, which right now seems very unlikely… This article can be found here: https://www.reuters.com/article/us-usa-shutdown-budget/white-house-to-seek-big-domestic-spending-cuts-budget-will-be-late-idUSKCN1PN2QP
Or, here’s your snippet: “The White House will propose significant non-defense spending cuts in its 2020 budget proposal, officials said on Tuesday, but it will miss the Monday, Feb. 4 deadline for submitting its plan to U.S. Congress, where the new Democratic majority in the House of Representatives plans to oppose it.
White House National Economic Council director Larry Kudlow told Fox Business Network that the administration would propose a “very tough spending” budget “in a few weeks” and call for at least 5 percent across-the-board cuts in domestic spending. “Let’s minimize government where possible,” Kudlow said.
A senior White House budget official who asked not to be named cited the 35-day partial government shutdown as the reason for the delay in submitting its 2020 budget proposal.
The administration’s proposal will face stiff resistance from Democrats who have repeatedly opposed across the board spending cuts, congressional aides said.
Chuck again… Well… I was beginning to send some blueprints to D.C. that would show them how to affix wings to pigs, and then aero-training to show them how to fly… Oh well, back to the drawing board…
Currencies today 1/30/18: American Style: A$.7200, kiwi .6840, C$ .7558, euro 1.1435, sterling 1.3100, Swiss $1.0030, European Style: rand 13.5822, krone 8.4822, SEK 9.0882, forint 276.81, zloty 3.7510, koruna 22.5290, RUB 66.16, yen 109.40, sing 1.3506, HKD 7.8442, INR 71.08, China 6.7344, peso 19.14, BRL 3.7432, Dollar Index 95.80, Oil $53.84, 10-year 2.72%, Silver $15.92, Platinum $818.55, Palladium $1,344.94, and Gold… $1,313.34
That’s it today… I sure hope Christine has a grand day! Happy Birthday to you… I’d sing, but then people would leave… Another night of nothing, sports-wise that I want to watch, on TV… So, I spent the night reading my new book… I’ve read 4 books this month… All murder mysteries, as that seems to be my bag baby… I like the Harry Bosch books, and C.B Strike books, and so on… I’m venturing away from my normal authors with a book written by David Baldacci… So far, so good… What a beautiful day yesterday here… I know the arctic polar vortex has the Midwest in its ice cold grips right now, and I’m so happy to not be there! Redbone takes us to the finish line today with their great 70’s song: Come And Get Your Love… That about does it today… I hope you have a Wonderful Wednesday, and you remember to Be Good To Yourself!
Chuck Butler