U.S. Is taking Debt Higher and Higher!

April 16, 2018    

* Gold experiences Mr. Toad’s Wild Ride!    

* Russian sanctions begin to spread elsewhere… 

 Good Day… And a Marvelous Monday to you! I have no idea where the last 3 days went… The new chemo drug has done the heavy lifting on my tumors, but has put me in a tailspin energy wise, and the new drug is causing skin rashes that are driving me crazy!  But not doing anything to speak of the past 3 days was OK, because it was too cold and rainy to go outside! UGH!Tom Petty and the Heartbreakers greet me this morning with their song: I Won’t Back Down…  I guess that could be my theme song, as I won’t back down from pointing out the debt accumulation in the U.S.   

Speaking of the debt accumulation in the U.S. The Federal Gov’t recorded a budget deficit of $208.7 Billion in March, and increase of more than $32 Billion from a year ago, as revenues slipped and expenditures climbed… The Treasury Dept. said last Wednesday that the February Deficit was 18.4% higher than a year ago… You see where this is going don’t you? OK, for the first 5 months of this budget/ fiscal year the deficit has totaled $599.7 Billion, and increase of 13.8% from the same period of a year ago…

And… using my new math skills, if we totaled nearly $600 Billion in 5 months, guess what our deficit would be in 12 months, if nothing changes, that is… give up? I’ll do the math for you… Can you believe it would be $1.44 TRILLION? YIKES! Where are the people that projected our deficit this year to be $540 Billion? We’ve already passed that figure in 5 months! I’ll just point out that I told you that whatever the Gov’t was telling us the deficit would be, it would be too conservative, and I said it would be much higher… And looky there! That’s exactly what’s going on!  

This is the fifth year in a row in which household debt growth has been seen in all four major consumer debt categories: mortgage, student loan, auto loan and credit card.”
The eye-opening stats:

• Total mortgage debt has reached $8.8 trillion
• Student loan debt, seemingly ever-increasing, has hit $1.4 trillion
• Auto loans are at a record-setting $1.2 trillion at a time when subprime auto debt is booming
• Americans hold $834 billion of credit card debt.
“More sobering is that the household debt increase in the last quarter of 2017 was at its fastest pace since 2007.”  I thank longtime reader Bob, for sending me this info… Crazy, eh?  Debt everywhere…  

I put to bed my weekly DTL (Dow Theory Letters) last night so be sure to look for it this Thursday, when I’ll be back in S. Florida and away from all this chilly St. Louis weather, and I’m not coming back until May!  Oh, sorry for that, but what I wanted to say before I was so rudely interrupted, was that I really do a deep dive into the Retail Apocalypse which is only going to make Corporate Debt even larger…  This debt accumulation just keeps growing like a weed that is getting ignored by the owner of the ground, but not by the neighbors (like me) that see it growing and point it out to anyone that walks by!   

OK, enough of that before my Blood Pressure rises, which is not something that I need to have going on, as I have a Doc appt. early this morning…  So, let’s switch gears here and talk about the currencies and metals…  The currencies had a day where they attempted to recover their two-day loses to the dollar, on Friday.  If you just follow the Dollar Index then that’s fine, and the Index was trading around 90.20 in the middle of last week, and this morning it has rallied to 89.57… 

So, the euro is doing some of the heavy lifting, but currencies like the Aussie dollar (A$), kiwi, pound sterling, Norwegian krone, and the Chinese renminbi are looking healthier with each passing day.  I was doing some reading this morning (I bet your wondering what time of the day do I wake up to do reading before writing this letter?, it’s a good thing I’m a quick reader!)  and I came across an article on Bloomberg that highlights a fund manager at BNY Mellon , who  beat global peers over the past year is shorting the dollar   Here’s a piece of the article that can be found here, should you want to read more…https://www.bloomberg.com/news/articles/2018-04-15/fund-that-beats-98-of-peers-shorts-dollar-buys-japan-linkers     “The U.S. dollar still looks expensive to us — we’re in the early stages of a U.S. dollar-depreciating trend”   And the fund manager goes on to say that he likes Japanese yen and Norwegian krone… 

Ok I was with him until he said he liked Japanese yen… Although, if the dollar is in the beginning stages of a weak dollar trend, that I called for more than 6 months ago… Most currencies will gain VS the dollar, including yen… I just don’t like it, fundamentally…    

I also read this morning that the Sanctions on Russia are beginning to show up with slower growth in the Eurozone and Switzerland. The Swiss franc has surprised me with its weakness lately, while most of the other currencies have rallied VS the dollar.  And the sanctions on Russia makes sense to me…  

The price of Gold went for spin on Mr. Toad’s Wild Ride last week… Up $13 Wednesday, down $18 Thursday, and up $11 on Friday…  If I hadn’t been such a wimp and was still writing on Fridays, I would have been in a  tizzy about the $18 selloff of Gold on Thursday…  But by the end of the week, the shiny metal had still gained some ground after the ride was over.  

The U.S  talked the U.K. and France into joining them in bombing of Syria on Friday morning, and that news sent Gold on its recovery path that only saw 240,000 contracts traded. When the contracts traded are in the lower range like on Friday, it indicates to me that the price manipulators were absent that day…  So, Gold closed at $1345.40 on Friday, and is basically flat in the early morning trading today.  The shiny metal is closing in on the line drawn in the sand at $1,350 by the price manipulators… Or as I affectionately (NOT!) call them, The Boys in the Band…   

The price of Oil has held steady Eddie from last Thursday, at $66.70 give or take some pennies…  The bombing in Syria pushed the price of Oil so that it could avoid a selloff..  And here’s Bloomberg with their thought on the price rise in Oil… “Rising geopolitical tensions in the Middle East have already boosted oil prices and there is plenty of scope for them to move higher still. That an oil price spike would follow Western missiles launched at Syria seems a foregone conclusion. But for prices to really keep moving higher, the U.S. would have to take serious action against Syria’s key sponsors: Russia and Iran.”    

The U.S. Data Cupboard was taking a breather last week, and the dollar lost ground. This week, we’ll get three real economic data prints, starting today with Retail Sales…  The good Old Butler Household Index or BHI for you new readers, indicates to me that with Easter falling on April 1st, that the buying for the holiday came in March, which means we could see an uptick in Retail Sales… But if we do, remember that it was a one and done… We’ll also see Industrial Production and Capacity Utilization tomorrow, so get prepared for that weaker print.   

To recap… Chuck goes all MMA on debt and what the U.S. is doing about it today, and he also points out that the economy is going to suffer from all this debt accumulation. The currencies are attempting to recover the ground they lost last week, and so far are doing a good job of recovering! The Russian sanctions are beginning to show up elsewhere, and Gold took a spin on Mr. Toad’s Wild Ride last week, but ended the week higher… 

For What It’s Worth… I used up some good stories in the body of today’s letter that could have been FWIW articles but those don’t compare to this one, which is about the crazy pension news and can be found here: https://dollarcollapse.com/pension-funds/more-absolutely-crazy-pension-news-2/   

Or, here’s your snippet: “A public university president in Oregon gives new meaning to the idea of a pensioner.

Joseph Robertson, an eye surgeon who retired as head of the Oregon Health & Science University last fall, receives the state’s largest government pension.

It is $76,111.

Per month.

That is considerably more than the average Oregon family earns in a year.
Oregon — like many other states and cities, including New Jersey, Kentucky and Connecticut — is caught in a fiscal squeeze of its own making. Its economy is growing, but the cost of its state-run pension system is growing faster. More government workers are retiring, including more than 2,000, like Dr. Robertson, who get pensions exceeding $100,000 a year.

The state is not the most profligate pension payer in America, but its spiraling costs are notable in part because Oregon enjoys a reputation for fiscal discipline. Its experience shows how faulty financial decisions by states can eventually swamp local communities. 

What happens next is also predictable: A growing number of pension plans will blow up as states and cities run out of cash, and the resulting chaos will lead the federal government to bail them out with another five-or-so trillion dollars of taxpayer money. Only this time around – with debt at every level of society twice or more as high as when the banks got their bailout — the result, especially in the currency markets, might be a lot less reassuring. ” 

Chuck Again…  That’s a very interesting article and in the end their thought that the result, especially in the currency markets might be a lot less reassuring, is parlance for. The dollar is going to get creamed!

Currencies today 4/16/18… American Style: A$ .7770, kiwi .7340, C$ .7933, euro 1.2365, sterling 1.43, Swiss $1.0411, … European Style: rand 12.0695, krone 7.76, SEK 8.4143, forint 250.83, zloty 3.3636, koruna 20.43o5, RUB 62.07, yen 107.28, sing 1.3113, HKD 7.8598, INR 65.40, China 6.2744, peso 18.05, BRL 3.4233, Dollar Index 89.57, Oil $66.67, 10-year 2.86z%, Silver $16.59, Platinum $927.12, Palladium $992, and Gold… $1,345.70  

That’s it for today…  Well, it was a good weekend for my beloved Cardinals, and proves that they can beat the lowly teams… Hey! You’ve got to start somewhere! It’s really cold outside here, and now the Cardinals go to Chicago where it will be even colder!  Well tomorrow is Tax Day… I wrote my checks last night to mail today. UGH!  When I was a young man and didn’t make enough money to amount to a hill of beans, I used to say… “Give me the income and I’ll gladly pay the taxes” And then when I began to earn some money, well, I wish I hadn’t said that when I was younger!  And with that… Grand Funk Railroad takes us to the finish line today with their classic rock song: I’m Your Captain…  I hope you have a Marvelous Monday, and remember to Be Good To Yourself!  

Chuck Butler