December 10, 2019
*Currencies & metals drift throughout the day on Monday
* RIP… Paul Volcker…
Good Day… and a Tom Terrific Tuesday to you! Well… How are you today? Good I hope! I watched a 30 for 30 last night, and it was about the 1983 N.C. State Basketball team. Longtime basketball folks will recall that the late Jim Valvano coached that team with a 10 loss season, to not only the ACC Tournament Championship, but also the NCAA Championship… Jim Valvano died of cancer 10 years after winning it all, and I’ve used his words at the 1993 ESPY Awards as my guiding light through my ordeal with cancer… “To me, there are three things we all should do every day. We should do this every day of our lives. Number one is laugh. You should laugh every day. Number two is think. You should spend some time in thought. And number three is, you should have your emotions moved to tears, could be happiness or joy. But think about it. If you laugh, you think, and you cry, that’s a full day. That’s a heck of a day. You do that seven days a week, you’re going to have something special.
Cancer can take away all my physical abilities. It cannot touch my mind, it cannot touch my heart, and it cannot touch my soul. Those three things are going to carry on forever.”
OK… a long intro today… I’m always touched when I hear or see him make that speech, don’t give up, don’t give up, don’t ever give up… Alrighty then… A band called Romeo Void greets me this morning with their high intensity song: Never Say Never
The currencies and metals did very little yesterday… No data, no Fed Head speeches, and no movement in the currency and metals markets yesterday… That’s fine with me, because that meant that everyone had already forgotten the hype and hysteria regarding the BLS Jobs Jamboree last Friday… All the focus has been redirected to the Fed’s FOMC meeting that will take place tomorrow. There’s no drama surrounding this meeting, as Fed Chairman Powell, told us all 6 weeks ago, that the Fed was taking a pause for the cause with rate cuts… And that further rate cuts would be data dependent…
Let’s see, we saw the Manufacturing Index remain below 50 since they last met… Factory Orders print negative, Durable and Capital Goods print negative, and a whole lot of other data prints come across as not so pretty… The only one that stands out, is the Job report last Friday… Man-o-Man was that a doozie… But, as I explained to some folks yesterday… It doesn’t matter how many jobs you add, if they are for the most part low paying jobs! Part time jobs… and what have you… These types of low paying jobs won’t fuel an economy… And what you get, is people running up their credit cards, because they’re sure they’re going to be able to pay them down, but when the bills arrive, there’s no money to pay them off… And now they’ve done spent what they had, and what will suffer from that besides their losing their self respect? The economy… Because once the card is maxed out… There’s no more spending, and the U.S. economy needs consumer spending to function and grow… I needn’t say more…
Well, I received some strange looks after something I said yesterday… There I was at lunch, and I was asked what my forecast is… Of course, I went into a 5 minute dissertation on debt, and the funny reports out of the Gov’t, and derivatives, and repo markets, and so on and so forth… It was then that I realized something… that I was a dinosaur… I don’t get the fact that video gaming, and having someone watch you play the video game; are big business, nor do I get the idea that to deal with debt your must spend more. Has time passed me by? Does the world no longer work the way I was taught, in school, or at the private lessons from Hy Minsky? I get it… I really do, for what seems to be so darn stupid to me, turns out to be brilliant! So, maybe I am a dinosaur… I still believe that you need to make more than you spend, that economies need recessions to clean out the excesses, that having money is not wealth, that Corporations need to invest in Capital goods, or go bust, and that when you’ve dug yourself into a debt hole, you do not keep digging to get out!
I still believe in the magic of Christmas, spring training, and birthdays ARE to be celebrated! I’ve become more emotional about things since my first cancer surgery, and I truly believe in how family needs to be together, and of course My belief of God…
So… call me T-Rex if you want to, but I’m still going to spout off about debt, bad data, and an economy that can’t seem to get out its own way, and how we’re destined to relive the past… Again, and again, and again… I wanted to get this out there today, because from the look I got at the lunch table, from people younger than me, I realized I had gotten old… Old in my ways, old in my thinking, but I’m too old now to change…
We received word yesterday that Morgan Stanley is going to cut 1,500 jobs from their New York and London locations… Hmmm… Maybe if they had announced that last week, before Fed Head Quarles spoke so glowing about the banks, that maybe he would have backed off a bit with the glow… I’m just saying…
I’m going to remember those two days of talks by Fed Head Quarles as the time goes on and we continue to see the rot on banking’s vine… Speaking of banks… The 5 Minute Forecast, said it pretty good yesterday, I’ll let Dave Gonigam from the 5 tell you… “Lately we’ve been hear an alternative explanation with the certain financial circles: The Biggest banks are refusing to lend because they want looser regulations. In other words, they’re holding the repo market hostage until the Fed and other regulators ease up on their lending rules”…
Chuck again… I have to say that this throw a spanner in the works as far as I’m concerned, because I have thought that it was the Biggest Banks refusing to lend to some bank or banks that were viewed as risky…
As I said yesterday there just isn’t much in the U.S. Data Cupboard until Friday of this week. We will see the FOMC meeting results tomorrow afternoon, but first in a line of 2nd and 3rd Tier data reports, today, we’ll see the 3rd QTR revision of Productivity, and the 3rd QTR revision of the Labor Cost Index… Not too much attention is paid to these two, even though Productivity in the U.S. is down big in the past few years… And judging from the Jobs Jamboree data last week, I would expect the Labor Cost Index to be revised downward…
So, the FOMC tomorrow is the big kahuna for this week… The Fed Heads are put on hold with their speeches ahed of the FOMC meeting this week. Speaking of Fed Heads… A true Fed Head… RIP… Paul Volcker, the Fed Chief that slayed inflation…
Longtime reader, Bob, sent me an article last night that talked about the best performing currencies for the past 15 years… And do you know which one was the top performer for that period? Well… if you guessed the Thai Baht, you would get a Gold star today! But seeing the Thai baht being mentioned brought back very bad memories of being on my annual Christmas vacation, and receiving a phone call from the trade desk telling me that that there had been a leadership coup in Thailand, and that all trading of the baht was cut off… So, for weeks following the coup we had to work our tails off to get rid of the baht that our clients owned, but could no longer hold due to the restrictions on the currency… The interesting thing about selling the baht after the coup was that it was stronger! Stranger than fiction, and probably the start of the “opposites rule” stuff we see everywhere today!
Gold was up $3 in the early trading yesterday, but closed the day with only a gain of $1.50… The shiny metal is up another $5 in the early trading today, so let’s see if it can hold and add to that early gain today, eh? I must say that one has to be quite impressed with the price action in Palladium these days… As I look at the metals, Palladium is a hop, skip and a small jump from trading through $1,900… WOW! As I’ve explained a couple times in the past, this run upward in Palladium is all about a shortage of the metal…
The U.S. Data Cupboard is still lacking data today, although we will see the 3rd QTR revision of Productivity, along with the 3rd QTR revision of the Unit Labor Costs… Unless one of those is so far off base it could get picked off by a right hander, they’ll make no difference in the market’s direction today… When you think about the Jobs Jamboree last Friday, it had some very distressing hourly wage numbers in it, which makes me think the unit Labor Cost Index will be revised weaker today, in case that floats your boat!
To recap… the currencies and metals moved very little yesterday, which tells Chuck that the markets have already forgotten the hype and hysteria over the Jobs Jamboree last Friday. It appears that the markets’ focus has been redirected to the Fed’s FOMC meeting tomorrow. Chuck believes that there will be no drama at this meeting, because the Big Cheese, Powell, told us so in the last meeting 6 weeks ago! RIP… Paul Volcker… And Chuck realizes that he’s become a dinosaur… T-Rex… the most feared dinosaur at that! HA!
For What It’s Worth… This morning we have a special treat because you rarely get an interview with John Williams of Shadowstats.com. But that’s what we have for today… For new readers that don’t know who John Williams is… Quickly, he’s a former gov’t accountant that recalculates data using the old formulas before the hedonic adjustments… I found this on Zerohedge.com and you will be able to find it there too by clicking here: https://www.zerohedge.com/markets/williams-theyve-effectively-lost-control-system
Or, here’s your snippet: “What the Fed has done with their easing, according to the Fed, is they created a circumstance of sustainable moderate economic growth. So, they don’t need to cut rates anymore. That’s nonsense. You don’t have sustainable moderate growth. For example, look at this last month, industrial production is in a state of collapse… Manufacturing is negative… Oil production is collapsing year to year as oil and gas exploration has plunged. . . . Retail sales have been overstated in employment… That’s going to be revised lower… We have been getting better numbers as of late, and the economy is still falling off a cliff.”
Maybe that explains the Fed’s panic moves with $60 billion a month QE, which it says is not QE, and extreme intervention in the repo market where the Fed routinely pumps out tens of billions of dollars in liquidity a night. Williams says, “The system is not stable, and it probably is insolvent…”
“They blew the system back in 2007. They gave up on the domestic economy to save the banking system…
They spent all their resources propping up the banks, and they are still doing the same thing, and it’s still costing us in terms of economic growth.”
So, the Fed is pumping out billions of dollars every month, and yet, the economy keeps sinking. What does this tell Williams?
“The system is not operating properly. These are stopgap measures, stopgap liquidity that the Fed is putting into the system. If they understood what was going on, they would not be doing that. They wouldn’t have to do it. They have lost control of the system effectively,” says Williams.
Williams goes on to say, “It tells you the underlying system is unstable…”
Chuck again… yes… John Williams goes on to say, “don’t put too much faith in the good employment numbers that came out last week because “It’s not as happy of a picture as it looks.” Sounds a lot like me, eh?
Currencies today 12/10/19 American Style: A$ .6815, kiwi .6545, C$ .7553, euro 1.1080, sterling 1.3240, Swiss $1.0144, European Style: rand 14.7620, krone 9.1877, SEK 9.5289, forint 298.41, zloty 3.8680, koruna 23.0312, RUB 63.63, yen 108.56, sing 1.3596, HKD 7.8254, INR 70.84, China 7.0370, peso 19.20, BRL 4.1399, Dollar Index 97.57, Oil $58.69, 10-year 1.80%, Silver $16.67, Platinum $907.25, Palladium $1,894.46, and Gold… $1,466.73
That’s it for today… Back to being alone during the day for the next 10 days… Oh well, worse things could happen! Our Blues get back on the ice tonight in Buffalo in hopes of putting a stop to their 2 game losing streak… You know… I’ve explained this before, but by writing desk has a board in front of it, that has a ton of pictures through the years, pinned to it… One big one that I see every time is sit down here is a picture of my dad, my younger brother, David, and me sitting on our dilapidated back porch on a summer’s night… I’m probably about 10 in the picture… My dad looks great… OK… The Heaters take us to the finish line with their song: All You Zombies… My good friend, Rick B. will get a kick out of that 80’s song, and the one that started out day today! I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!
Chuck Butler