Rocktober 28, 2019
* Currencies and metals rally on Thursday…
* But fail to add to gains on Friday!
Good day… And a Marvelous Monday to you! A weekend that went so fast, that I kept thinking yesterday was Monday already! Friday I started a fire in our outdoor fire pit, and stayed out by it until my cooler went dry. We had company, and some ventured outside for a moment or two, only to retreat back inside where the talk was fast and loud, and the food warm. Saturday, I attended a fund raiser, for a watering hole acquaintance, who recently suffered his second stroke… And then Sunday I spent most of the day in a haze… My new thyroid medicine doesn’t seem to want to be calm in my stomach… I begin my next round of daily chemo this morning, so mixing the two, ought to bring me some very interesting days… UGH! The Outlaws greet me this morning with their very long song titled: Green Grass And High Tides…
Well… Thursday last week saw the currencies gain on the day, with the euro climbing to 1.1170, but by Friday afternoon, after the London Markets had closed and the Pubs were full, the dollar bugs fought back… And this is where I’m having a really difficult time believing this was just “trading as normal”… You see, the U.S. Data Cupboard had a couple of really ugly Sept. Durable and Capital Goods Orders prints… Both were negative, and that should have sent the dollar to the woodshed, with traders thinking that taken along with negative Retail Sales, and Factory Orders, and manufacturing now in a contraction place on the index meter, that the Fed would be cutting rates again this week… Which is going to put the U.S. yield closer inline with yields around the world…
So, why the dollar buying on Friday? I’m telling you this now, so you can listen to me later… All markets these days are manipulated… Need I say more? You see, I wouldn’t put it past those in this country that want to see us come to our collective knees in the next recession, from keeping the dollar from weakening, thus putting pressure on the Trade Balance, and building the bubble even more…
OK, there! I said it! Really didn’t want to go there, because I know it makes me look like a wear a tin foil hat… Sort of like Tom Terrific, and his funnel hat! But seriously… this is deep thought stuff, that I’ve had more than the allotted time to think about… So, in the end…. I’m just saying…
Gold & Silver both had good days, also, on Thursday, with Gold popping back over the $1,500 figure and Silver over the $18 figure. But Friday brought about some afterthought of the rallies, and Gold was only allowed to gain 40-cents on the day…
If the Fed does cut rates this week, I would have to think that it would give Gold & Silver the chutzpah to move higher still… You see, Gold & Silver got ripped when the Fed was hiking rates for 3 years… And now that they’re back to cutting them, and bringing deposit rates and yields on bonds very low once again, that should be good for the metals…
The price of Oil is stuck in the mud again, after rallying last week on the news that the U.S. Oil supplies had shrunk, the Oil price has remained within a couple of cents of each previous day’s range. I read a report this weekend about the U.S. Shale production, and in the report the writer was saying that the U.S. is “awash” of Shale production… That’s quite opposite of everything else I’ve been reading, and I’m going to put that thought of Shale Production being good, on the side for now…
The U.S. Budget Office released the total debt that was accumulated in fiscal year 2019 that ended on September 30th… The total added to the national debt was $984 Billion… Now, I have a question I would ask of the Fed heads who kept saying over and over again that this dance is gonna be a drag… No wait! They kept saying over and over that the economy was strong and robust, right? Well, then don’t you think, because I do, for sure, that this is an unusually high Deficit when an economy is “strong and robust” right?
Don’t forget the OMB (Accounting gurus) says that the deficit going forward will be more than $1 Trillion each year, and that’s if economy continues its pallid pace of 2% growth! Should we have a prolonged period of greatly reduced growth, the Budget Deficit will explode higher… What? You mean to tell me you don’t think the Gov’t will start throwing money around like they have a Treasure Chest of reserves like China? OH, OK… I see You just don’t think we’ll have a prolonged period of greatly reduced growth… Well, here’s where I’ll bet you a dollar to a Krispy Kreme, that we do!
I haven’t touched on the massive amounts of derivatives in the markets these days in a while, and then I saw this from Ainslie Bullion… “the idea that derivatives are not a source of systemic risk because the open (netted) position may seem small is one of the great misconceptions about derivatives. Derivatives fund nothing, but serve to shift exposures from one party to another and work through margins (collateral), yet they carry all the bankruptcy characteristics of debt for the out-of-the-money party. A sudden move on volatility can shift the Gross Market Value quickly, and netting provides no protection for this. Netting is about settlement amounts using prices at the point of close out. Netting does not protect any financial firm from market risk.”
In 2008, we were within an eyelash of a catastrophic moment in derivatives… Did we learn anything then? No… The number of derivatives in the markets place today far exceeds where we were in 2008… I just don’t know how to explain this any further to you folks, other than to say that The debt has grown by so much that it seems impossible for it not to eventually trigger the kind of uncontrolled or ‘disorderly’ market event that sees the derivative ‘worst case’ issue playing out. And once again I ask… Got Gold?
OK… let’s get back to the Fed… Their FOMC group meets this week on Tuesday and Wednesday, it’s a two-day meeting, so you know my standard line for times like these… Get the board games out, and see who can sink Jerome’s Powell’s battleship! I’m of the belief that the Fed will cut rates again this month, otherwise, they lied to us, when they said that further rate cuts would be data dependent… The economic data here in the U.S. as chronicled here in the Pfennig has been downright awful, and very weak… So… Jerome, what’s it gonna be boy?
Thursday morning, the morning of all Hallow’s Eve… we’ll know what the Fed has on their minds, and if they held to their words… It’s not like they would have to go to Jail and not pass Go and not collect $200 if they decide to hold back on a rate cut… But in the minds of traders, the Fed Heads credibility will have taken another hit…
Well… The Data around the world is sporadic these days… Lots of individual countries that make up the Eurozone, will have prints, but until they’re all crunched together, there’s no telling what they say about the Eurozone as a whole… The U.K. will get some good data this week, but by the time they get around to printing it, the markets will be focusing on the FOMC meeting.
Speaking of the U.K. there was not 24th hour save for the BREXIT deal over the weekend, and now the clock is ticking as the 10/31 deadline comes Thursday… And all that buying of sterling is really going to look silly if this BREXIT deal collapses, instead of being passed…
The U.S. Data Cupboard has the Case/Shiller Home Price Index for August to print today… The last ½ year’s prints here have shown Home Prices to be falling each month, I don’t expect that to change in August.. On Wednesday, the day the FOMC will make their announcement, after putting away all the board games that is, we’ll see Personal Income and Spending… and then on Friday, it’ll be a Jobs Jamboree Friday! Right now, the experts are forecasting job growth in Rocktober of only 70,000…. WOW! Now that will knock the “economy is strong “ campers to their knees!
Before I head to the Big Finish today, I wanted to highlight someone that I used to read all the time, Jim Willie, but then he just kind of fell of the edge of the earth, and I didn’t hear from him until this weekend, when longtime reader, Bob, sent me a note from Jim Willie…
Jim Willie is now of the belief that the Fed is going to have to go to “Infinite QE” or else the financial system collapses… “The smoke is coming from the REPO market because it’s concealing infinite QE. They have to go to infinite QE or the system breaks,” so says Jim Willie who also warns that the Dutch Central Banks says GOLD will be the only fix after the collapse.”
To recap… the currencies and metals had good days of rallying on Thursday, and on Friday when it appeared they would add to those gains after awful economic prints in the U.S., they fumbled, bumbled and stumbled, and Chuck is convinced there’s something at play here with the dollar bugs… BREXIT is a no-go at this point, and Chuck brings up to date with derivatives…
For What It’s Worth…. OK, since I talked so much about derivatives this morning… I saw this article on Reuters and thought, well now, this certainly plays nicely in the sand box with what I was talking about earlier… This is a continuation on derivatives and can be found here: https://www.reuters.com/article/us-derivatives-regulation-clearinghouses/global-banks-funds-call-for-more-capital-from-derivatives-clearinghouses-idUSKBN1X31VD
Or, here’s your snippet: “Four global banks and five big fund managers called on international regulators on Thursday to require for-profit derivatives clearinghouses to put up more of their own capital to protect against cascading losses that could rock the world financial system.
Members of the group, including Citigroup Inc, (C.N) JPMorgan Chase & Co (JPM.N) and BlackRock Inc (BLK.N), published their views to try to shift in their favor prolonged policy debates over how clearinghouses should be fortified.
Regulators put clearinghouses at the center of trading in over-the-counter credit derivatives and interest rate swaps after the 2008 financial crisis. But the regulators have yet to agree on detailed protocols for shoring up, or safely winding down, clearinghouses wounded by customer defaults.
The task is arguably the biggest unfinished post-crisis reform and has become important as large clearing houses have become, like banks, too big to fail.
“We believe current capital requirements are insufficient,” the group said in the white paper.
The clearinghouses, known as central counterparties, stand between both sides of trades and ensure their completion even if one side goes bust. “
Chuck again… So, even the clearing houses are getting scared about the number and size of these derivatives they’re safekeeping, and want more collateral for their risk… Got Gold?
Currencies today 10/28/19 American Style: A$.6833, kiwi .6360, C$ .7662, euro 1.1105, sterling 1.2837, Swiss $1.0052, European Style: rand 14.5496, krone 9.2050, SEK 9.6714, forint 295.50, zloty 3.8486, koruna 22.9717, RUB 63.84, yen 108.70, sing 1.3620, HKD 7.8390, INR 70.50, China 7.0647, peso 19.03, BRL 4.0054, Dollar Index 97.75, Oil $56.40, 10-year 1.83%, Silver $18.10, Platinum $933.02, Palladium $1,789.34, and Gold… $1,505.99
That’s it for today… And tomorrow… Yes, no Pfennig tomorrow, as I’ll be reporting to the vascular center bright and early tomorrow morning. The wound center doctor has sent me there to make sure the blood flow to my lower leg is good. If so, then they will wrap my leg and place it in a boot… Fun times at Ridgemont High for me then, eh? But at this point, I’ll try anything to get this healed! I already wear doubled up tubi grips on each leg every day… As the Blood clots I had from cancer, in my legs has caused negative reflux… Man, I’m full of all kinds of fun facts today, hey, boys and girls? HA! Last year, my campaign to get Bryce Harper to sign with the Cardinals failed, but that’s not going to deter me from starting another campaign to get Garret Cole to sign with the Cardinals! Jimmy Buffett greets me this morning with his song, and one that I adhere to: Changes in Latitude changes in attitude… I hope you have a Marvelous Monday, and will miss me tomorrow, HA! Please remember to Be Good To Yourself!
Chuck Butler