January 22, 2020
* Dollar bugs tear off the scab once again…
* Retail Sales revisions tell a different story…
Good day… And a Wonderful Wednesday to you! Old man winter came this way on Monday night, and will exit tomorrow… In the meantime I spent most of yesterday outside in the sun, soaking up vitamin D, and reading… I know I’ve said this before, but I love to be outside! Congratulations to Derek Jeter, and Larry Walker who will join Ted Simmons in Cooperstown this summer. Ted Simmons spent most of his career as a Cardinal and is already a Cardinals Hall of Famer, and Larry Walker spent his last two years in baseball with the Cardinals… You know, back when the Cardinals’ GM had the intestinal fortitude to make a mid-year trade to better the club… I’m just saying… The Black Crowes greet me this morning with their version of the original Otis Redding song: Hard To Handle…
Well, it was back to the markets buying dollars again yesterday, after the overnight markets had stopped the bleeding from last week, the scab was torn off the currencies again yesterday and they began to bleed once again… This continued dollar strength is really building to a crescendo, and from there… Well, it won’t be a good time for the dollar, but then every trend has to end sometime, to be replaced with a different trend… It’s been that way since Nixon removed the dollar from Gold backing in August of 1971, and it’ll continue to be that way until we have a new financial system… I’ll talk about that more in a minute…
The dollar bugs had a good day as just about everything other than stocks and Treasuries got sold… The price of Oil fell below $58, and that added to the weakness of the Petrol Currencies, while Gold, Silver, Platinum and Palladium all saw selling… It was “one of those days” folks, where you just turn the TV off, the radio off, and plug in our earphones and listen to music, because nothing you did could change the direction, and we all know that this is fake money chasing stocks… And that’s all I’m going to say about that, today…
But first, Gold had an other bad day yesterday, while the runaway train that Palladium was riding on, left the tracks for the day… We’ll have to see where this one day of selling takes us, but it was as wild a day of selling as the buying had recently been in Palladium. Good Old Gold remains in the forefront of important people’s minds as their safety component of their investment portfolio… Shoot Rudy, one of my fave economists, David Rosenberg, thinks that Gold is a “no brainer” for one’s investment portfolio…
And one of the reasons I believe we’re headed for trouble in the economy is the fact that there are so many low-wage earners in the country… Now that’s not a shot at the earners, it’s a shot at the wages they are earning… The Brookings Institution’s Metropolitan Policy Program found 44% of U.S. workers between the ages of 18 and 64 are in jobs that pay median annual wages of $18,000.
Are you going to argue with the Brookings Institute? I didn’t think so… I love when I can pull things like this and show them to you, to prove what I’ve been telling you is true….
Another thing I’ve been telling you is that the Oil producers here in the U.S. are having difficulties, and the proof in the pudding of that thought was shown to us yesterday, when a Houston Oil Production Company, McDermott Oil, filed for bankruptcy… It is what it is, folks, but I’m afraid we’re doing to see more of this, from all sectors in the coming weeks and months, as they’ve built up too much debt…
I’ve been doing a lot of thinking recently, given all the time I have on my hands down here with little to no distractions, and one of the things I keep reading about is how the next recession will be the “mother of all recessions” and some even believe that it will cause a collapse of the financial system that we know of, which would mean a reset… With Gold being the central figure in this reset… I just keep going back and forth with myself on whether this “reset” would be a good thing to experience or not… For a collapse of the financial system would mean chaos in the streets, folks… it could get very ugly, but… once calm has been restored, and the parameters of the “reset” begin to leak out, I don’t think Gold Bugs would be too upset with the price reset that’s being bandied about for Gold…
Speaking of a return to a Gold Standard… President Trump has just nominated Dr. Judy Shelton to fill a vacancy on the Fed Board of Governors. Shelton is a longstanding Fed critic and an advocate for using Gold as a reference point in setting monetary policy. Did you get that last point? An advocate for using Gold as a reference point in setting monetary policy… That’s central bank parlance for: A new Gold Standard!
OK, let’s not let that idea go to our heads… She will be only one vote on a board that’s not too keen to change their ways… But having her there will give the Gold Standard idea the opportunity to be beaten into their brains! I’m just saying…
The economic data abroad continue to trickle in with none of it being of much importance… Today will yield nothing, absolutely nothing, say it again! But tomorrow, in Australia, their employment data will print, and in the Eurozone, the European Central Bank (ECB) will meet to discuss rates… Yeah, like they are going to hike rates, right? New ECB President Christine Lagarde isn’t ready to take the fight to the rest of the ECB members, and besides I really don’t think she has it in her to do so either, so rates in the Eurozone, which were thought to be ready to come out of negative territory a few months ago, will remain in the red… UGH!
Today’s U.S. Data Cupboard is pretty barren with only the Chicago region manufacturing index, and the Existing Home Sales data for December on the docket… I said yesterday that I don’t like weeks like this when the data is void of showing us anything meaningful…
Longtime Pfennig readers will recall how I’ve gone through the “revisions” of economic data before. I’ve talked about how the powers that be don’t care if the first report is correct or not, it will tell the story they want told, and by the time the revisions to that report are made… Too much time has passed, and everyone is focused on what’s coming, not what has happened, and therefore the revision doesn’t carry the weight that it should. And so it was with Retail Sales last week… The headline number from December was strong and everyone hooted and hollered about how it showed the economy was nowhere near a recession. But oh, for those revisions… The Rocktober and November prints were downgraded in the revisions to where the growth in retail sales for those months were negative! That’s right I said negative! But that revelation just skipped on past the markets folks… And by the time they get around to revising the December strong print, no one will notice that either, except me and a few others that look around corners and under hoods!
To Recap… the dollar bugs won the day yesterday, as currencies, and metals all lost ground to the almighty dollar. The overseas markets have been void of any real economic data, lately, so everything is hinged on what the dollar bugs do… That lack of data ends tomorrow for the non-dollar countries…. Chuck talks about a reset, an Oil company bankruptcy, and other things tomorrow, make sure you go back and reread it if you scanned it first!
For what it’s worth… I’ve been writing about the annual winter boondoggle at Davos, Switzerland for years now… Usually there are a couple of good quotes that come from the boondoggle, but in recent years, it’s been more of a back slapping meeting as key financial figures congratulate each other over their conquests… So, when I saw this quote from the head of Guggenheim investments it hit a nerve that someone would speak out against the back slapping going on… So, here’s the link to that article, that I hope you enjoy: https://www.bloombergquint.com/onweb/guggenheim-says-central-bank-driven-ponzi-scheme-must-collapse
Or, here’s your snippet: “Scott Minerd has a message for his fellows at Davos who are applauding rallying markets: Things aren’t as good as they seem. The Guggenheim Partners investment chief likened the inflation of asset prices caused by the loose money policies of central banks to a “Ponzi scheme” that eventually must collapse.
Minerd cited rising defaults despite a rally in riskier assets, and reiterated a warning that BBB-rated bonds risk further downgrades. He said that type of debt is at a greater risk of deterioration than it was in 2007.
Anne Walsh, Guggenheim’s fixed-income chief, said in an interview that 15% of the U.S. economy is already in recession. She said the Federal Reserve’s efforts to pump liquidity into markets has created “zombie companies” that may see an outflow of capital as the utility of that money continues to diminish, she said.
The longer that this market runs, the harder the fall will be when it ends, she said.”
Chuck again… you may recall me calling what the Fed is doing a Ponzi scheme last week, right? And now this guy is associating what the Fed is doing as a Ponzi Scheme too… You think? Nah, that couldn’t be, oh, but maybe just maybe cause you never know, right? OK… I’ll take the bait on that, and say that maybe he’s a Pfennig Reader!
Currencies today 1/22/20 American Style: A$.6845, kiwi .6595, C$ .7655, euro 1.1082, sterling 1.3063, Swiss $1.0295, European Style: rand 14.4513, krone 8.9761, SEK 9.5116, forint 302.62, zloty 3.8218, koruna 22.6806, RUB 61.75, yen 109.96, sing 1.3492, HKD 7.7711, INR 70.07, China 6.8967, peso 18.75, BRL 4.1949, Dollar Index 97.57, Oil $57.99, 10-year 1.77%, Silver $17.80, Platinum $1.004.21, Palladium $2,406.02, and Gold… $1,556.11
That’s it for today… I don’t know what’s happened to my likes, but there was a time when I could turn on any two teams playing college basketball, and it would hold my attention. Not any longer, if it’s not my Tigers or Billikens playing, I have no interest… And in the winter, that pretty much is all that’s on cable sports. That, and hockey, which I’m also tied to my Blues, and no other games… So, that means I read a lot at night which could be a good thing or bad thing with regards to what I say the next day, if you get my drift…. Old man winter has stirred up the ocean, and waves outside are larger than I remember them being… It was 42 degrees outside when I woke up this morning… It’ll get up to the mid 60’s with lots of sun so no biggie, for me! The Moody Blues take us to the finish line today with their song: Story In Your Eyes… I hope you have a Wonderful Wednesday, and please Be Good To Yourself!
Chuck Butler