December 11, 2019
* Currencies drift up and down on Wednesday…
* Next week could be BIG….
Good Day… And a Wonderful Wednesday to you! Well… I attended a holiday party last night that basically is an old Mark Twain Bank reunion, hosted by Frank Trotter, John Dubinsky, and Chris Lissner… I get a kick out of going when I can, because there’s always somebody new to catch up with, and last night it was a former colleague, Janet Rogers! The Usual suspects were also there, with appearances from the wily old veteran, Jack Milner, and too many others to name them all! It was an early evening, and I was able to get home to watch the Blues hockey game, which they lost. UGH! I just can’t stand in one spot very long, and so it was time for me to go! Right off the get-go this morning I must apologize for an error I made yesterday… I said the name of the band was the “Heaters”, and I meant the “Hooters”… Today, The Cure greets me this morning with their song: Almost Heaven…
Well… Today is the day that the Fed’s FOMC meeting will end, and they will announce what it is they are going to do with rates. (spoiler alert, it’s nothing!) And then Fed Chairman, Powell, will have a press conference following the announcement… I mentioned to someone last night that asked me, for I don’t go around parties talking about this kind of stuff without someone asking me, but what they asked was, “do you believe we’ll see negative rates here in the U.S.” Well, at first I was hurt, because IF this person was a Pfennig reader, they would already know that I do believe our deposit rates will be negative in the next year to two years… I pointed out that the Fed, just last week, said they are willing to allow inflation to run up beyond their 2% target… To me that’s greasing the tracks for negative rates… And when that happens, we should see Gold soar!
OK, the currencies, for the most part, saw some buying during the day yesterday… The euro was back to within spittin’ distance of 1.11… But things in China continue to look weaker and weaker, and those thoughts weighed heavily on the Global Growth currencies, led by what I call the “proxy for Global Gowth, the Aussie dollar (A$).
In the overnight markets we’ve seen some slippage from the levels of yesterday… There was a report last night that the Chinese feel as though the tariffs scheduled to set in on 12/16, will be delayed… And that gets the dollar bugs all excited…
When I left you yesterday, Gold was up $5 in the early trading, but much like the day before, when Gold couldn’t hold all of its early gains, it closed up yesterday only $2.50… So, let’s see, on Tuesday, Gold was up $3 in the early trading and ended the day up $1.50… On Wednesday Gold was up $5 and ended the day up $2.50… today, Gold is up $1.75 in the early trading, what does that mean for the closing price today?
How much longer can the dollar bugs be on top and have the conn? Well, we could look to next week, when a few things will come together at or about the same time… They include: The Impeachment vote, The new round of tariffs due to kick in, and Quarterly tax payments due… If the banks thought they had a liquidity problem before… just wait for the quarterly tax payments to remove liquid cash from their coffers…
Those all kick in next week folks… So… what are you waiting for? I strongly suggest you call my good friend, and former colleague, whom I call the metals guru, Tim Smith@1-800-926-4922, back up the truck and buy some Gold… or Silver… or Platinum… but I would not be interested in buying Palladium while it’s near $1,900…
The banking situation is unsustainable folks… In 2007-08, the Gov’t had to bail out the banks, and then take on all their toxic debt they had accumulated that no longer had a value worth recording… What will be the flavor of ice cream, I mean bail out, the Gov’t offers up this time around?
I read a report the other day where the author, an economist, believes that this next downturn will turn into something worse than 2007-08… And while I was reading it, I wondered if, the economist had been handed a printout of the Pfennig, where I said the same thing months ago? Oh, well, nice to see someone side with me… That gets printed!
Well, it seems that everyone that goes before the Banking & Finance folks on Capital Hill, have the same story to tell… When asked about the repo crisis, they say it was a one-time event, and not anything to worry about… But I say differently… And so do a lot of other people that are following this mess. I have a piece on the repo crisis in the FWIW section today, so you’ll not want to skip over that! I’m just saying…
The U.S. Data Cupboard had revisions to the 3rd QTR prints of Productivity and Unit Labor Costs, and both of them got downward revisions! Productivity is now negative at -0.2%, and the Unit Labor Costs, which I told you yesterday that I thought would be revised downward, saw it’s previous figure of 3.6% get revised downward to 2.5%… these aren’t market moving numbers per se, but…. the Fed Heads have to be wondering where they are going to get the inflation they want to see, if the Unit Labor Costs are falling….
Today’s Data Cupboard has the stupid CPI report that’s about a useful as a pay toilet in a diarrhea ward! In addition, the Federal Budget will print. I read a piece the other day that said the Office of Management Budget (OMB) leaked this report and were scared out of their wits, by the size of the Deficit in the first two months of our Fiscal Year… Our annual Budget Deficit will be more than $1 Trillion this year folks, you can bet your sweet bippie on that!
And then after those prints, the Fed’s FOMC Meeting will start and end… Bloomberg ran an article this morning that said, that there are a couple of Fed Heads calling for a rate hike… Really? With the economic data falling down all around us? I shake my head in disgust at their doltness!
To recap… Another day of drifting for the currencies, who did move up a bit during the day, only to slip back in the overnight markets… Chuck talks about how much longer can the dollar bugs have the conn… The Chinese believe the next round of tariffs scheduled for implementation next week, will be delayed… Hmmm…. The Fed’s FOMC meeting starts and ends this afternoon… no drama is expected, but Bloomberg seems to think that a couple of Fed Heads are thinking that rates need to rise…
For What It’s Worth… a month or so ago, I received an email from a reader who requested that I keep on top of the repo crisis… And so with that in mind, today’s FWIW is an article on Wallstreetonparade.com and they have done a fabulous job of keeping on top of the repo crisis, and so I’m happy to be able to have them in the FWIW section today, and that article can be found here: https://wallstreetonparade.com/2019/12/congress-held-a-hearing-on-the-feds-bailout-of-the-repo-market-heres-why-you-havent-heard-about-it/
Or, here’s your snippet: “Last Thursday, U.S. Treasury Secretary Steve Mnuchin was the sole witness called before the House Financial Services Committee to answer questions on the state of financial stability in the U.S. Under the Dodd-Frank financial reform legislation of 2010, the U.S. Treasury Secretary also heads the Financial Stability Oversight Council (F-SOC) which is charged with monitoring any threats to the stability of the U.S. financial system in order to prevent a replay of the epic financial crash of 2008 and attendant devastation to the U.S. economy.
During the hearing, Mnuchin was grilled time and again by numerous Republicans and Democrats on what is necessitating the Federal Reserve Bank of New York (New York Fed) to be pumping out hundreds of billions of dollars per week to Wall Street trading houses via the repurchase agreement (repo loan) market.
During last Thursday’s hearing, Mnuchin attempted to pass off the repo loan crisis as a two-day event that occurred on September 16 and 17. The lack of reporting on the matter by the New York Times would tend to support that narrative in the public’s mind.
The reality is that the New York Fed has now pumped a cumulative total of more than $4 trillion into this black lending hole on Wall Street and has been making upwards of $100 billion a day in loans to Wall Street trading houses every business day since September 17.
During the almost three months that the New York Times has not reported on this flashing red sign of a new crisis on Wall Street, the Federal Reserve has dramatically increased its original level of support to the repo market. It has expanded its overnight loans to include loans of up to 43 days; it has increased the dollar amount of overnight loans to as much as $120 billion available daily; and it has announced that it will be buying $60 billion a month in U.S. Treasury Bills, effectively creating a new round of Quantitative Easing (QE-4) – a tactic it has not used since the financial crisis.”
Chuck again… There’s a lot more in the article to read here folks… so, if you’re interested in this ongoing crisis, then I suggest you click the link above.
Currencies today 12/11/19 American Style: A$.6840, kiwi .6548, C$ .7555, euro 1.1077, sterling 1.3238, Swiss $1.0148, European Style: rand 14.7695, krone 9.1683, SEK 9.4395, forint 298.28, zloty 3.8668, koruna 23.0320, RUB 63.52, yen 108.71, sing 1.3598, HKD 7.8120, INR 70.77, China 7.0354, peso 19.22, BRL 4.1418, Dollar Index 97.53, Oil $58.87, 10-year 1.82%, Silver $16.65, Platinum $922.86, Palladium $1,899.85, and Gold… $1,466.16
That’s it for today… Billy Joel sang… Mama Leone left a note on the door, said Sonny move out to the country…. I was singing that yesterday late afternoon, when I was leaving a note for Alex, that he was on his own for dinner… I arrived home last night to see a pizza box on the island in the kitchen, and thought… “Yeah, he’s my son, alright!” Pizza is the answer to all questions about what to have for dinner in my book! I’ll have to think of something to make tonight… OK, I got lost in thought there for a moment, but I’m back now… I was intently listening to the Allman Brothers as they take us to the finish line with their song: Statesboro Blues… I hope you have a Wonderful Wednesday and will Be Good To Yourself!