March 11, 2020
* safe haven reversals continued on Tuesday…
* Shale Producers are having problems…
Good Day… And a Wonderful Wednesday to you! Well, I can say that it’s been real, and it’s been fun, being back in the saddle, but… it hasn’t been real fun! HAHAHAHAHA! Just kidding, I love what I do here, with this letter, and hope you love reading it as much as I love writing it! Of course there are “those days” when I wish I didn’t have to wake up when I do, but to do it, tells me that I’m still alive and kicking! I’ll get going on the letter now…. Supertramp greets me this morning with their song: Babaji Not exactly a top Billboard hit, but one of my fave Supertramp songs…
Tell me if you’ve heard this before…. The Bank of Japan (BOJ) is going to introduce yet another stimulus plan for their economy…. Heard it, read the book, bought the t-shirt, right? Well, like the song Respect says, take out TCP, if we take out the BOJ and insert the USA… Then we’ve got a story, right? But come on don’t tell me you think this would be the first stimulus plan for the U.S. economy…. What about the year, not so long ago, when tax payers got a check from the Gov’t? or not long after that one, how about “cash for clunkers?”, and those were aimed at individuals, the banks on the other hand received TARP money, and the really Big Casino Banks they took in so much cash from the Fed that they had to take it in the back door, under the cover of night, so no one knew they were receiving it!
So… That’s where we are once again folks… talking about stimulus for the U.S. economy that’s been stuck at 2.1%
And…. This stimulus for the Casino Banks continues today… Yes, that’s what all the fuss about the repo market is about… Just the other day the Fed announced that they would increase the amount of money that’s would be available each day from $100 Billion to $150 Billion, a 50% increase folks… But there’s a problem Houston… the Banks requested a total of $216 Billion!!!! So there was $66 Billion that didn’t get a dispersed… Oh the humanity! What’s a Casino Bank to do when it doesn’t get their allocation of cocaine? I say that because that’s what this repo market stuff has become… An addiction to the Casino Banks… And it’s a very sad thing… I mean not as sad as learning that a longtime former colleague, Mary Vance, had died, but sad for the markets, economy and this country…
So, there was more unwinding of the safe havens that had been bought late last week… The euro lost a little ground, the same with francs and yen, bonds didn’t move, but Gold got Whacked by $30…. Like I asked yesterday, have the fears of the Coronavirus subsided? Because that’s what the trading from the first two days this week is saying… I find this to be utterly ridiculous, colleges across the country are cancelling personal classes, Shoot Rudy, even the SEC told their employees to work from home… But traders don’t see this apparently… That’s all I’m saying about that!
And like always when Gold gets whacked like that, I say, that there’s always a silver lining here, and that is that the cheaper price gives investors an excellent opportunity to buy it cheaper than it was!
Did you hear last week when our friends at OPEC (NOT!) decided to cut production again, but this time Russia said “nyet”? Well, that probably stuck in Saudi Arabia’s craw, don’t you think? Because now there’s a price war in Oil going on… And that’s not “just what we need right now!” But it is what it is…. I saw a great display of this price war going on the other day, as I traveled on route 76 down here in Florida. One gas station had regular at $2.55, and another just down the street, had regular at $2.19, which is where I would think the price of gas should have been given the drop in the price of Oil… I know there are lots of costs and taxes that go into refining oil to gas, but just thought that this was a good example…
Speaking of Oil…. Recall how I’ve told you that above $50 for Oil the Shale producers would jump in with more rigs and so on, and below $50 they got back out? Well… yesterday I saw a blurb on Bloomberg where they mentioned that “the new reality for shale producers is that almost all wells dug now lose money”… With the price of Oil around $33 I would suspect that the “almost” is really an “all”…
The thing that scares the bejeebers out of me here with the Shale Producers having to deal with losses is that they have accumulated debt up to their collective eyeballs… And how will they pay the debt servicing when they are losing their shirts daily? I would say to look for some bankruptcies to be announced in this sector soon…
And you know the song, the hip bone is connected to the thigh bone, which is connected to the knee bone, etc.? So, think about these Shale Producers folks… They don’t make the rigs that they use, they buy them, and all the equipment needed to frack Oil from shale rocks… So, guess who will be next in line at the bankruptcy court after the Shale Producers? The Rig makers and fracking equipment folks, that’s who! And then their producers get stuck with stuff, and so on…
And regarding all of this going on right now… Well respected Investment Analyst Kyle Bass said in a MarketWatch.com interview that “if you think this is bad, wait a month”…. I shudder to think but it will come and there’s nothing we can do to stop it… I’m just saying…
The U.S. Data Cupboard is still empty in my mind… We will see the color of the Feb. CPI (consumer inflation) that’s about as reliable as a Nigerian Prince email! HAHAHAHA! The Federal Budget for Feb. is also supposed to print, but no one really pays attention to it any longer, as in the end of the fiscal year it will total more than $1 Trillion…
To recap… The reversal of safe havens continued on Tuesday, and Gold got Whacked by $30! Seems to Chuck that this presents an excellent buying opportunity… Chuck talks about the repo mess going on, stimulus that’s being talked about, and other things this morning…
For What It’s Worth… It’s been some time since I used a letter by my longtime friend, Bill Bonner, and today seems like a good day to revisit what he’s talking about these days… This time he’s talking about the Fed’s misdoings, and other things and can be found here: https://www.bonnerandpartners.com/bill-bonner-diary/feds-to-pump-more-fake-money-into-inflated-financial-system/
Or, here’s your snippet: “In 16th-century England, a performer warmed up the crowd for a Shakespeare play by eating a live chicken – feathers and all.
Now before us is an even more appalling act. The feds are swallowing the entire economy.
This is the story we’ve been watching for two decades.
The Federal Reserve’s grifters swallowed the academic claptrap. They claimed they could manage the economy by falsifying interest rates… and “stimulate” it with fake money. And the public was ready to swallow anything, if there was free money involved.
Then, each time the economy or the markets tried to correct, the feds intervened with more “stimulus.”
This inevitably caused more wriggling and jiggling inside the economy… and then they had to swallow something even bigger to try to stop it.
Let’s look at the oil industry as an example…
We reported more than a year ago that the U.S. shale oil industry was a bubble created by the Fed’s ultra-low interest rates. Producers borrowed huge amounts of capital, fracked the hell out of vast areas of the U.S., and consistently lost money!
In effect, the U.S. oil industry was swallowed by the Fed’s fake-money/fake-interest-rates policies.
As long as they could borrow money cheaply enough… it didn’t seem to matter that they lost money. Like tech companies Tesla, Uber, Twitter, and Snapchat, the frackers were able to keep fracking.
Finally, last year, OilPrice.com reported that the industry might soon turn a profit:”
Chuck Again…. Oh there’s more to this snippet, so go to the web link above and click it to read the whole message, nobody and I mean nobody can weave a story together like Bill Bonner…
Currencies today 3/11/20 American Style: A$.6526, kiwi .6326, C$ .7282, euro 1.1330, sterling 1.2918, Swiss $1.0697, European Style: rand 16.0688, krone 9.5816, SEK 9.4670, forint 295.66, zloty 3.8152, koruna 22.7070, RUB 72.17, yen 104.70, sing 1.3892, HKD 7.7693, INR 73.78, China 6.9492, peso 20.97, BRL 4.6897, Dollar Index 96.11, Oil $33.16, 10-year 0.71%, Silver $17.03, Platinum $882.10, Palladium $2,354.00, and Gold…. $1,667.16
That’s it for today… As I look outside the wind appears to have finally slowed down, as the palm trees don’t look like their bending over this morning! That’s a good thing! The ocean is much calmer, and not as angry… Well, tomorrow I go to have the “apligrapf” applied to my wound, I have no idea what this will entail, so I will be there bright an early in the morning to make sure if it takes more time than expected, I can get out of there and get back here in time for the baseball game! I have my priorities, right? HA! So, that’s it for today, tomorrow and Friday… Grand Funk Railroad takes us to the finish line today with their song: Mean Mistreater… I hope you have a Wonderful Wednesday, Tub Thumpin’ Thursday and Fantastico Friday, and will please Be Good To Yourself!
Chuck Butler