February 11, 2019
* Dollar continues to hammer the currencies…
* Will Gold’s Maginot line of $1,350 be taken out soon?
Good Day… And a Marvelous Monday to you! I can tell you right now that I’m looking forward to this coming weekend, when it’ll be another 4-day weekend for yours truly… And that would mean that it would only be one more week till my spring training buddies arrive and we start attending baseball games! The month of January always seemed to be the longest month to me, and the month of February always seems to fly by, which is good, because March follows! I’m really in a foul mood this morning though, having gone through the latest report from the socialists… And no I’m not talking about the Russians, or the Chinese, or even Greece… I’m talking about here in these United States of America… Now, longtime readers know I don’t like to talk politics here, so before I go further down that rabbit hole, let me just repeat something that I used to have on a presentation slide… It’s a Quote from Margaret Thatcher, who said, “The problem with socialism, is that eventually you run out of other people’s money”… There, that’s as far as I’ll go down that rabbit hole, but you should have heard me on the Juno Beach patio yesterday! 10cc greets me today wit their song: The Things We Do For Love… Like walking in the rain and the snow when there’s nowhere to go, and you feel like a part of you is dying…
OK… Well, I sure love my steaks… And peaceful settings… But that’s not what You came to read about in this letter today… So, we’ll talk about the currency markets, economies, and some other things as we go through today’s letter… Ready? Let’s go!
On Friday, last week, we had no data prints on the docket, but the dollar buying that began on Wednesday last week continued through to the weekend… And continued to continue through the overnight trading too, bringing the currencies down even further VS the dollar… You know, what? I see where the dollar bugs are thinking that this is the right thing to do, because, it sure looks to me, as I stated last week, that the Eurozone is heading to a recession, and China is heading to a recession… And then along came Mary… I mean along came Australia, who had their Central Bank come out and lower the growth forecast, and then talk about the possible need for a rate cut…
What we have here is a case of not being able to look at oneself in the mirror… The dollar bugs can’t bring themselves to look in the mirror, and everyone else’s problems get the spotlight, but theirs do not… I’m just saying…
There’s one economy in the world right now, that is kicking tail and taking names later, and it’s Russia… Tass reported this past weekend that the ratings agency Moody’s has upgraded Russia’s Global rating and placed their economic outlook at “stable”… The Russian ruble rallied on the news, but is still being handled with kid gloves, if you will, by traders and investors, hedge funds, etc. These guys can’t seem to figure out how Russia is doing this with the economic sanctions still in place on their economy. I think these guys all think that Russia is doing it with smoke and mirrors…
When the smoke and mirrors are what’s in play here in the U.S. Just one economic report after another, save for the trumped up jobs report, is pointing toward a recession here in the U.S. And when this one comes, it will have pent up frustrations of not being able to run the course and clean out the excesses of previous recessions… So, the Fed had better act quickly, or they will be behind the recession 8-ball, and if that happens, everyone will be waiting for the Fed to “Scratch”, and lose the game, for as I’ve told you before, historically, at the start of a recession interest rates on average have been above 6%, and the total rate cuts administered during a recession have averaged 400 Basis Points or 4%… And where are rates right here, right now, as Jesus Jones sang in the 90’s? Well, by Joe they’re at 250 Basis Points or 2.5%… There sure won’t be enough rate to cut to stop the recession in its tracks, now will there?
That’s when, I believe we’ll see another round of Quantitative Easing, (QE), and or negative deposit rates… I told you last week that the Fed propeller heads had come up with a report that said that if the U.S. had opted for negative interest rates in 2009, instead of QE, that the economy would be further long in the growth cycle… Of, course being the smart Alec that I am… Yes, negative despost rates have done wonders for Japan, Sweden, the Eurozone, and Switzerland, haven’t they?
So, it would be a case of: What fails there, can’t possibly fail here, because we’ll do it better… Now where have I heard that line before… You that’s right, never mind…
This week we will see a lot of small economic reports, both here in the U.S. and abroad… With the Reserve Bank of New Zealand (RBNZ) meeting on Wednesday probably the biggest item on the docket this week, abroad, that is… Here in the U.S., we’ll finally get to see the color of December Retail Sales! This report was delayed because of the Gov’t shutdown, but then once the shutdown was over, it was delayed more… And last week, I mentioned or questioned, if you will, what the report was going to show us, and if the Gov’t was attempting to put it out under the cover of darkness because it was so bad? We’ll finally get to see this report on Thursday this week, and I’m betting a dollar to a Krispy Kreme, that the report will be awful… show no growth in the month that houses the Christmas shopping season, and when they take out auto sales, it will be negative…
I can’t wait to hear what the Spin Doctors, and not the ones that sang Two Princes, spin this report to the public, because they’ll have some explanin’ to do Lucy!
Ok.. The BREXIT Negotiations are begun again… Back to the drawing board as they used to say… Then it was a “white board”, then it was a template on the computer screen… now it’s probably housed on somebody’s watch… This is Dick Tracy… I just don’t see how this is going to get done with the U.K. coming out smelling like roses… So, I would steer clear of pound sterling until we know just what’s the negotiators sleeves…
Gold was able to gain a bit on Friday, with a move higher by $4.20… I saw a line on Twitter yesterday that talked about how the Central Banks that have been buying Gold ahead of a Global shutdown, are looking pretty, while the Central Banks that have not been buying Gold, will be doing the crying… Well, it’s crying time again, you’re gonna leave me… I can see that far away look in your eyes…
And skipping backwards today, to Russia… I firmly believe that this is one of the reasons that they have been on the recovery tracks while everyone else is fumbling, bumbling, stumbling along… They increased their buying of Gold using foreign currencies that they took in that would normally have sat in their foreign exchange reserves…. So, while Rome burns, Russia, China Turkey, Brazil, India, all play the fiddle…
The GATA folks sent me a note last night from Swiss Gold guru, Egon Von Greyerz, who believes that what he calls the Maginot line of $1,350 that Gold has been held under for 5.5 years, will be taken out soon… Well, soon doesn’t mean today, because in the early morning trading Gold is getting sold and is down $9…
Greyerz believes that, “the West is almost out of metal, having sent much of it to Asia, and Greyerz predicts that $1,350 will be penetrated soon, upending the financial system.”
Chuck again… I have to think that he’s correct, but then I’ve been saying this since the end of spring last year… UGH!
Can you tell I’m hopping mad this morning, or just more upbeat than I was Wednesday and Thursday last week? I’ve had the gout before in my big toe joint… Very painful and lasts about 10 days, steroids can shorten that time… But last week, I began noticing swelling in my left elbow and soon after, sharp piercing pain shooting in my elbow when I tried to move my arm… I finally broke down on Friday and went to see a doctor about it, and they confirmed it to be gout in my left elbow… Hello, am I on the air? Ok, I’m a first time caller, and want to say that gout in the elbow was the first I had heard of that, I’ll hang up and listen to your answer… Yes, it’s very common…
The U.S. Data Cupboard is empty again today, no data reports, even small ones are on the docket today, bu when we come back to the Cupboard tomorrow, things will be different… You know, I used to say that when there was no data that it would probably be bad for the dollar, but these days with one data report after another pointing to a recession, the days without data are good for the dollar, because the rot on the economy’s vine isn’t being expose for everyone to see…
Oh, and the elephant in the room this morning is the return of the Gov’t shutdown that doesn’t appear to be going in a direction that would lead one to believe that it could be averted… UGH!
To Recap… The dollar bugs have the conn and don’t want to look in the mirror… Russia’s credit rating was upgraded by Moody’s along with their economic outlook… Is Russia doing this with smoke and mirrors? Chuck doesn’t think so, but apparently the rest of the world’s investors do… The economic data prints here and abroad pick up steam this week, with the RBNZ rate decision on Wednesday a highlight for sure, along with the double-delayed December Retail Sales here in the U.S.
For What It’s Worth… Well… Debt is everywhere folks… Gov’t, Corp and individual debt levels are unprecedented, but don’t just take my word for it… The folks at zerohedge.com Did a great job of explaining it all, with graphs and everything and that can be found here: https://www.zerohedge.com/news/2019-02-10/debt-trifecta-all-time-highs-billionaires-panic
Or, here’s your snippet, sans graphs!: “The “trifecta” of national, corporate, and consumer debt has reached all-time highs, and could prove to be catastrophic if a recession hits.
In just the short decade since 2008, the debt has jumped from $10.6 trillion to $22 trillion. It also comes with a deficit that’s currently over $1 trillion currently. The interest payments alone may be forming a “black hole” from which the U.S. may never escape.
These facts alone should raise concern in any interested observer.
The total amount of corporate debt has never stopped rising since 1950. Corporations have taken on a record level of debt since 2007. One of the main problems with this type of debt, aside from getting repaid, is that some corporations are using it to buy back shares of stock. Instead of this “sleight of hand,” you’d think that they should be using it to fund growth and create jobs.
But one thing is certain, the piper will need to be paid at some point. When that happens, who knows what can happen to the economy.
Total consumer debt is near $4 trillion, and has been rising steadily since 1975. But it has risen a staggering 47%since 2008, and shows no signs of stopping. “
Chuck again, and the one thing that is like kryptonite to large debt loads is rising interest rates, which is exactly the scenario that has been in place for the last 3 years, albeit a very slow Chinese water torture drip-like… None of this is going to end up with Sunshine, lollipops and rainbows, folks… I’m just saying… Got Gold?
Currencies today 2/11/19 American Style: A$ .7085, kiwi .6750, C$ .7534, euro 1.1310, sterling 1.2927, Swiss $.9973, European Style: rand 13.7917, krone 8.6818, SEK 9.2686, forint 2822.64, zloty 3.8175, koruna 22.8306, RUB 65.41, yen 110.18, sing 1.3582, HKD 7.8476, INR 71.12, China 6.7431, peso 19.12, BRL 3.7272, Dollar Index 96.79, Oil $52.28, 10-year 2.64%, Silver $15.73, Platinum $792.20, Palladium $1,395.10, and Gold,,, $1,307.48
That’s it for today… A little longer than usual but that’s OK… Not a good weekend on the hardwood floors for both Mizzou and St.Louis U this past weekend… UGH! I mentioned last week that our Blues had seemed to have found something… And they won their 5th consecutive game over the weekend with back to back wins over Nashville… Skate boys, skate! A beautiful weekend, weather-wise here… I had better button this up here as I’ve talked way too much today! The Eagles take us to the finish line today with their version of the song: Seven Bridges Road… And with that, I hope you have a Marvelous Monday, and continue to Be Good To Yourself!
Chuck Butler