June 12, 2019
*Currencies trade flat on the day with little to no movement
* What will the next recession bring us? spoiler alert… Chuck’s scared…
Good Day… And a Wonderful Wednesday to you… If I heard the announcer correctly last night he said that 6,308 people were in the stadium for a major league ball game last night in Miami… Shoot Rudy, we get more than that for a Spring Training game! The Cardinals finally bunched some hits together, late in the game and won last night… Whew! Our Blues are on the ice for Game 7 tonight… Game 7 folks, it doesn’t get any more tense than that! Let’s Go Blues! If the Blues don’t come through tonight, I won’t be writing tomorrow, because I’ll be crying in my beer… But if they do come through, I’ll be here to talk about it! I went to Horse Hookey yesterday, and man was that fun! And I got to eat some fried Chicken, which happens to be my fave meal on earth, good juicy, crispy, fried Chicken… it doesn’t get any better than that in my book! Well… today is the wedding anniversary of Chuck & Kathy… Our 43rd year of marriage… I can tell you right now that she’s forgotten about it… And that she received the raw end of the deal when they said, do you take him in sickness and health… Little did she know in 1976, that I would be diagnosed with Stage 4 metastatic cancer 30 year later… Tomorrow is the 12th anniversary of my first major cancer surgery… I’ll be sure to rub my side in remembrance, of what I used to look like before they cut me from stern to spine… James Taylor greets me this morning with his song: Carolina In My Mind…
Whew! That was some intro today, eh? Well… I need to write about something to fill the page, for there wasn’t that much going on in the currencies and metals yesterday… The dollar is hanging on for dear life these days… Reminds me of the song by the Guess Who: Hang On To Your Life… Don’t recall that one? Well, it’s for real… I have the 8-track tape to prove it! HAHAHAHAHA! Seriously, the dollar is in trouble folks… While the Fed might not cut rates next week, they’re going to talk about how they may have to soon, which will be the same as an actual rate cut… And another chink in the Fed’s armor will fall off!
Gold was able to push back and rally through the $5 it was down in the early trading to close up $5… That’s a $10 move folks… now don’t tell me…. I’ve got nothing to do… Counting flowers on the wall that don’t bother me at all… No Wait! What I really meant to say was Gold investors are seeing this rate picture come into focus… And all the time the price manipulators could point to higher interest rates here in the U.S. as their reason to sell Gold Short… They won’t have that in their back pocket any longer!
And the dollar didn’t get any help from the Data Cupboard yesterday either… Producer Price Index (PPI) was only up 0.1%… And today we’ll see the stupid CPI (consumer inflation) for May… That too will show nascent inflation forces at work… And that will bring about more calls for rate cuts by the markets…
But don’t just take my word on what’s going on with the dollar right now… The GATA folks sent me a note that they pulled from MarketWatch yesterday that included this snippet: “A growing chorus of analysts has started to pencil in expectations for a weaker dollar in 2019, particularly as expectations grow for Federal Reserve rate cuts. Fed-funds futures, which six months ago were forecasting official interest rates to continue rising this year, now reflect trader expectations for as many as three cuts before year-end amid fears rising trade tensions could amplify a global economic slowdown.”
I read a piece yesterday where the writer was calling for the euro to be at 1.17 in 2020… Well, I’ve got news for him… IF, the dollar goes into a weak trend, the euro will find itself pushing 1.20 once again… and from there who knows? But it will all be about the dollar weakness and not euro strength… But holders of euros won’t care what they call it, as long as the euro is kicking some dollar rear and taking names later!
First it was too much debt that weighed on pound sterling, then along came BREXIT, and the then the BREXIT Talks, and then the stepping down of their Prime Minister, and now we have what I’ll call the battle Royale! This is the goings on to pick a new Prime Minister, one that the people will like, and that’s going to be difficult, because the population feels as if they’ve been let down by politics and that they voted for BREXIT two years ago, and still nothing has happened…
So, sterling will bounce higher and then dip lower on any political news these days, which leaves me to say, that I would rather look elsewhere for a currency to invest in… I’m just saying…
On Monday this week (2 days ago) I told you that Consumer Debt had risen last month to $17.5 BLN for the month, and that it was not going to be a good thing for the economy… Sean Hyman and I used to write a letter for the Sovereign Society, so I’ve known him a long time, and he’s my “go-to” guy when it comes to technicals… He had this to say about consumer debt yesterday on his Twitter handle: “ Wow!: Auto debt is $1.27 Trillion… And Auto delinquency rates are at a 19-year high! OMG! Consumers now have more debt than they had before the Financial Meltdown…”
But don’t worry about that stuff folks, it’s all going to work out to the sunny side of the street, right? I’m kidding, as I’m sure you’re aware… So grab your coat and grab your hat, leave your worries on the doorstep, Just direct your feet to the sunny side of the street! Because that’s where all the “strong and robust economy” campers are hanging out… Go ahead and join them if you dare… I’ll be over here on the dark side of the street, warning people about how the next recession is going to be a doozy…
Speaking of the next recession… I also read a piece yesterday from a writer that believes that a recession is just that the U.S. economy needs… Well, if that had been written 19 years ago, I would agree, for we didn’t have all the debt, derivatives, and people who didn’t care about anything but themselves… We had built up access that needed to be wiped out and started again… But now? I can’t think of anything that could be worse for us right now than a recession… yes, it’s needed, but I’m telling you now, so you will listen to me later, the next recession is going to be a doozy…
I’ve given you these facts before but it seems appropriate to give them to you again here… The average Fed Funds rate cuts that the Fed makes during past recessions is 5%…. Our current Fed Funds rate is 2.50%… Uh-Oh! And the average level of where rates were at the beginning of past recessions is around 6%… I’m now wondering just how many people went to the sunny side of the street… For I’m worried about them!
To Recap… There really wasn’t much movement in the currencies yesterday, but the dollar, in Chuck’s opinion, is hanging on for dear life right now, and the Fed’s FOMC meeting is next week, and the Fed will either cut rates or talk about cutting rates, which in Chuck’s opinion is the same… And today is Chuck and Kathy’s 43rd wedding anniversary…
For What It’s Worth…. Well… this is my last free article from Bloomberg.com… So sad, but since I do this letter for free, I would have a difficult time reconciling paying for a news source… So, this article, my last free one, is about Corporate Debt, of which I’ve been warning you about for some time now, and it can be found here: https://www.bloomberg.com/news/articles/2019-06-11/regulators-alarmed-by-risky-loans-but-don-t-know-who-holds-them?srnd=premium
Or, here’s your snippet: “The steady drumbeat of warnings over the surge in risky corporate borrowing is growing louder and louder. Time and again, regulators in the U.S. and Europe have pointed to the hazards of businesses taking on too much debt.
At issue is the $1.3 trillion leveraged lending market, composed of high-yield loans from firms with some of the weakest finances. While Federal Reserve and European Central Bank officials have drawn attention to these heavily indebted companies and the deteriorating standards of loans bundled into securities called CLOs, most regulators are careful to say a repeat of 2008 is unlikely because investors, rather than the banks they oversee, hold most of the debt.
Yet that’s created a new, and potentially more dangerous, kind of risk. Precisely because roughly 85% of leveraged loans are held by non-banks, regulators are largely in the dark when it comes to pinpointing where the risks lie and how they’ll ripple through the financial system when the economy turns. More and more, critics are questioning whether regulators like the Fed have a handle on the problem or the right tools to contain the fallout. A big worry is highly leveraged businesses employing thousands could face severe financial stress and, in some cases, insolvency, deepening the next downturn.”
Chuck Again… Once again, I’ve seen these dark clouds forming over Corporate Debt long before the market and media get a clue… Not that I’m patting myself on the back, but my dad told me many years ago, Son, sometimes you have to toot your own horn”…
Currencies today 6/12/19 American Style: A$.6952, kiwi .6580, C$ .7521, euro 1.1325, sterling 1.2738, Swiss $.9936, European Style: rand 14.7674, krone 8.6395, SEK 9.4439, forint 283.82, zloty 3.7634, koruna 22.6150, RUB 64.54, yen 108.35, sing 1.3642, HKD 7.8222, INR 69.31, China 6.9137, peso 19.14, BRL 3.8708, Dollar Index 96.70, Oil $51.77, 10-year 2.12%, Silver $14.80, Platinum $816.60, Palladium $1,395.36, and Gold… $1,335.81
That’s it for today… The U.S. Women’s Soccer team got the World Cup off on the right foot yesterday with a 14-0 score VS Thailand… OK, when did they start to give 7 points for a goal in soccer? HA! Or, seriously, how did the authorities think that Thailand would be good competition for the U.S? I shake my head in amazement… OK… Game 7 of the Stanley Cup Finals is tonight… I can barely type that without thinking about what it would mean to this city for the Blues to win the Stanley Cup after 50 years of waiting, and being faithful fans… So… Let’s Go Blues! Jimi Hendrix takes us to the finish line today with his remake of the song: All Along The Watchtower… Extra credit for those that know who originally did this song? I hope you have a Wonderful Wednesday, and will Be Good To Yourself!
Chuck Butler