May 11, 2020
* Currencies rally on Friday, give back ground today
* Neal Kashkari: “The Worst Is Yet To Come”….
Good Day… And a Marvelous Monday to you! A fairly nice weekend, with some very chilly air being blown around yesterday, for Mother’s Day. Speaking of which, I hope all the mothers out there had a grand day. I know all too well, that this Mother’s Day was not anywhere near normal, and hopefully it’s that last time we have to go through that! If my mom was still alive I would have gone to see her, and still given her a hug…. I’m just saying…. I just don’t know what’s going on in the markets these days folks, so I’ll just keep giving you my opinions on what “should be Happening” VS what is Happening…. Like Friday’s markets reaction to an awful jobs jamboree…. So I have that and more to talk about today…. Don Henley greets me this morning with his song: In A New York Minute….
I learned something new about rock history this past weekend when my fave newsletter writer, Grant Williams wrote about it in his weekly letter titled: Things That Go Hmmm…. Grant wrote about how the singer/ songwriter, Johnny Nash (I can see clearly now) spent some time in Jamaica years ago, and hired a small group of locals to back him up and write songs for him…. The band? None other than Bob Marley and the Whalers…. See, even an old rock-n-roller like me still can learn something new all the time!
I’m beating around the bush today, before getting started because I know that once I do get started I’m going to be getting very mad, and upset with all that’s going on… And the stupidity of it all! Yes, that’s right, I said the “S” word….. I guess you’ll have to deal with it!
Before we get to the data… The dollar bugs went into hiding on Friday, with regards to their relationship with the currencies, and the currencies rallied all day on Friday, that’ is, after the Jobs Jamboree printed. But Gold couldn’t find a bid all day and ended the week with a down day on Friday to the tune of $15 to close at $1.702…. This was after rising more than $33 on Thursday! Up one day down the next, that’s the story for Gold since it hit $1,700…. And I have to tell you that I’ve finally figured out why this is happening, and its’ because….. No, wait…. I can’t go there yet, I’m still feeling spry this morning, and I’m not ready to get down in the dumps!
That was Friday, and in the overnight markets leading to this morning, I’m seeing the dollar bugs fight back, and Gold starting the day down $2… Two weeks ago, it was the opposite going on, with the dollar getting sold in the overnight markets, and bought in the U.S. time… And now the tables have been switched…. Strange stuff for sure, but leads me back to my thought that traders don’t have a clue, about what’s going to happen next, and so they dabble here and there, to keep their jobs…
OK… are you ready? Yes, I’m ready…. So, let’s go down the dark alley way, and see what’s behind the curtains….. Well, well, well, what have we here? The BLS version of a jobs report printed on Friday, and believe it or don’t, but the BLS did not offer up an hedonic adjustments to the figure, instead they printed a long explanation of what they’re looking at during the pandemic. So…. The April total unemployed printed at 20.2 Million, and the Unemployment Rates was 14.7%…. Which were both better than feared….
On Thursday, last week, the Weekly Jobless Claims printed its lowest figure in 8 weeks, but…. Before we rejoice that this is all over, the total was 3.17 Million new claims filed in the week ending 5/2, bringing the total jobs shred in the past 7 weeks to 33.4 Million! OK… so I’ve got some numbers for you to look through here…. First of all the last week of March had the largest Weekly Claims number of 6.8667 Million… Then the April weekly totals were 4/4 6.615 Million, 4/12 5.237 Million, 4/19 4.441 Million, 4/26 4.846, and 5/2 3,169
OK add up all the April numbers and you get 23.309 Million… So, somewhere the BLS forgot to add over 3 Million jobs lost in April…. And that would get you close to the 18% Unemployment rate that I talked about a week ago…. Let’s also keep in mind that the weekly reports cross months, so there’s some give and take there, but on the back of cocktail napkin, I figure we’re probably closer to 18% Unemployment in April than what the BLS had for us….
Oh, and one more thing on the jobs report, from what I understand, the cut-off date for the reporting numbers was April 15th…. So, does that mean the May Jobs Report is going to have the last two weeks of April’s unemployment additions? This was all news to me, folks, for even in all my studies on the BLS and the jobs report, I was unaware that they cut of the previous month 1/2 of the way through the month! But leave it to the BLS to try and throw us all off the scent of what a real unemployment number is….
Here’s my take on all this…. I would venture to say that at least 1/4 to 1/3rd of those lost jobs aren’t coming back…. I hate to be the bearer of bad news but it is what it is folks….
Shoot Rudy, even Fed Head, Neal Kashkari agrees with me…. Yesterday, speaking in an interview he said that He believed that “The Worst is yet to come”…. And he went further to explain when asked if the economy would bounce back in the 2nd QTR like some economists are calling for, he said, “You know, I wish it were. What I’ve learned in the last few months, unfortunately, this is more likely to be a slow, more gradual recovery.”
So, why is the stock market still rallying in the face of all this bad economic reporting? Well, I really don’t know the answer to that question, but I will offer up what I see going on, and that is investors are drinking the Kool-Aid and believing what some of the Brokerage houses and economists are saying and that is, that…. The economy will turn around quickly once we get through this, and they believe it’s in the 2nd 1/2 of the year… This year, that is… The second half of THIS YEAR! And investors not wanting to miss the boat on getting in on the bottom, are jumping in with both feet…. I could go on to explain how this type of mentality caused major losses after the Great Depression’s stock market drop…. The stock market rallied…. And within 18 months they were looking at another drop that was worse than the first one!
OK, but I don’t want to pull away the punch bowl from all those folks that are drinking the Kool-Aid…. So, I’ll stop there… But to me, this appears to be a classic “Bear Trap”…. And that’s all I have to say about that!
But, this mind set in traders is also what’s causing Gold to run hot and cold on alternating days…. Why buy the safe haven metal when there will be no reason to, in the second half of this year? I shake my head in disgust, because the people that say these things, can’t see the forest from the trees…. Did they not pay attention to the weakening data that was printing month-by-month before the COVID-19 virus came ashore? Do they not know about all of the derivatives that are out there, and all it would take is for one snowflake to fall to cause an avalanche…. The THREAT of an all out collapse is out there folks…. And those that choose to ignore it will be brought to tears in the future…. At least that’s how I see it playing out….
I have a song going through my mind right now it goes like this: Why does the sun go on shining? Why does the sea brush the shore? Don’t they know, it’s the end of the world? And so on….
OK, I got through that without having my blood pressure rise… I’m serious, here folks, I keep my blood pressure machine right here on my writing desk to check it first thing in the morning and record the numbers, but there are times I get so riled, that I check it again to see what damage I’ve done to it! Actually, I have to do that because the chemo I take causes high blood pressure….
I’ve been reading a book lately titled: Make America Healthy Again… There’s a chapter on cancer, but all the cancers discussed left out my cancer…. But I got the gist, cancer in some people is preventable… Mine? I believe it was genetically given to me…. And that’s all I have to say about that!
The U.S. Data Cupboard is empty today, and besides the stupid CPI (consumer inflation) which will be negative, showing the deflation that’s among us right now, and the Weekly Jobless Claims, we’ll have to wait until Friday to see the April print of Retail Sales…. The April Retail Sales will most likely be just plain awful, as the March print, you may recall was already at negative -8.7%…. And that only had 1 week of shutdown included in that data print…. But that’s Friday….
To Recap…. The currencies found a way to rally on Friday after a better than feared Jobs Jamboree number… Gold couldn’t back up its $33 gain on Thursday, and lost $15 on Friday, and is down $2 in the early trading today. Chuck goes through why he believes the markets aren’t reacting to the awful data prints… Of course he doesn’t really know the answer to why this is happening, he’s just offering up his opinion as to why it is what it is….
For What It’s Worth…. Well, some of the brokerage houses, I mean, Casino Banks and economists may believe that this is all an illusion that will be wiped clean in a New York Minute, and that’s all fine and good, but I prefer to look at things as they really are… And this article about Freight deliveries crashing is what I’m talking about, I found it on zerohedge.com and it can be found here: https://www.zerohedge.com/economics/everything-has-been-cancelled-class-8-heavy-duty-truck-orders-crash-25-year-low-april
Or, here’s your snippet: “The misery in Class 8 heavy duty truck orders continues. Still struggling with the remnants of an order backlog that started almost two years ago with record orders in August 2018, the industry was unable to find an equilibrium prior to the coronavirus pandemic. Orders were sluggish and we noted numerous trucking companies that closed up shop altogether in 2019.
Post-pandemic, things look even more helpless. In April, the industry posted its worst order number on record as the economy ground to a halt as a result of the nationwide lockdown. Only 4,000 Class 8 orders were made last month, which is down 73% year over year and 44% from March.
It was the lowest reading since FTR began tracking orders in 1996. Many companies canceled or delayed new orders as demand, measured by the ratio of loads to trucks, fell 66% in April, according to the Wall Street Journal.
The uncertain outlook going forward has prompted many companies that would normally be shelling out for new infrastructure to rein in their spending. For example, logistics company TFI’s Chief Executive Alain Bédard said in an April 22 call: “Everything has been canceled.”
Chuck again… Well…. Everything has been canceled…. And there are no timelines as to when they will be put back on the docket…. I’m just saying… .
Currencies today 5/11/20 American Style: A$.6472, kiwi .6072, C$ .7140, euro 1.0816, sterling 1.2303, Swiss $1.0284, European Style: rand 18.4206, krone 10.2365, SEK 9.7979, forint 323.58, zloty 4.2144, koruna 25.4736, RUB 73.35, yen 107.35, sing 1.4273, HKD 7.7502, INR 75.20, China 7.0734, peso 23.87, BRL 5.7249, Dollar Index 100.09, Oil $23.95, 10-year .69%, Silver $15.41, Platinum $879.81, Palladium $1,879.81, and Gold …. $1,700.19
That’s it for today…. The family got together late last week on Zoom, to celebrate a big occasion…. My youngest son, Alex, has now completed his 6 years and has graduated from St. Louis University with a doctorate in Physical Therapy. We all wanted to know if we were to call him Dr. Butler going forward! My chest is puffing out right now, because I’m so darn proud of him…. And he already has a job that he’s supposed to start on June 1, if they are open by then… Real longtime readers will recall when Alex used to sit on my lap and help me write the Pfennig from home when he was 3, and I was “retired” for the first time…. If you don’t recall seeing his typing, no biggie, it was all a jumbled mess…. So, Congratulations Alex! Now , go and earn a living, be a part of society, and have a great “after college life”! No Pfennig On Thursday this week, as I’m scheduled to visit my oncologist bright and early in the morning… I’ll remind you again Wednesday… The Ozark Mountain Daredevils take us to the finish line today with their song: Jackie Blue…. I hope you have a Marvelous Monday today, and will Be Good To Yourself!
Chuck Butler