September 12, 2019
* Currencies remain in tight ranges…
* Trump & Xi decide to not go all-in with tariffs… right now that is!
Good Day… And a Tub Thumpin’ Thursday to you! I’m not going to participate today in any Tub Thumpin’, so I hope you help pick up the slack. In fact, I feel like death warmed over this morning, and I can’t believe I got up to write! I should just “mail it in” and live for another day… But I won’t, that’s not who I am… I’ve never given up in a fight in my life… And the Good Lord knows I’ve had my share of not only fisticuffs, and health fights to last 10 people’s lifetimes! Maybe I’m down and out in Beverly Hills today because my beloved Cardinals lost again in Colorado last night! UGH! Go ahead and give the Cy Young (best pitcher) to the Rockies rotation, for they’ve held the Cardinals to two runs in two games in Coor’s Field! That’s unheard of! Well, until now… UGH! The Rascals greet me this morning with their song: A Beautiful Morning… I hope it turns out to be just that!
Today’s the day… the day the European Central Bank (ECB) will meet and ECB President, Mario Draghi’s, last “real meeting”. Yesterday, I explained what would go on next month at his official last meeting… I told you yesterday that I thought the euro traders were frontrunning the ECB… And the evidence is there for us to see… During the Asian session there was no movement, during the European session, the euro got sold, and after Europe closed, the selling stopped…
So, for the euro’s sake, let’s hope that it’s a case of sell the rumor buy the fact… But with the dollar bugs in control, I doubt that will happen…
Remember when politicians (recall Dick Cheney?) said that deficits don’t matter? Well, I wonder if he has the same opinion these days, when after over a decade since the financial meltdown, the U.S. annual GDP has averaged 2.1%… Little to no growth, when you take out the Government spending… But to make matters worse, the OMB (Budget office which is non-partisan) says that we’ll see our debt rise to 125% of GDP in the next ten years… Really? I don’t believe we’ve ever had that much debt before… Even after WWII… But here’s a different way of looking at it from the folks at Misis…
“So what is the national debt as a percentage of the federal governments income? Income, in this case is the federal government’s tax revenue. And it turns out by this measure, we’re in uncharted waters.
In fact, the national debt is now eleven times annual federal revenue. And as far as I can tell, that’s the highest it’s ever been. (In 1945, the national debt was $251 billion, and tax receipts were $45 billion, meaning the national debt was 5.6 times tax revenue that year.)”
Chuck again… Thanks to longtime reader Bob for sending me this info…
So, the national debt continues to go higher and higher, and so does Corporate, Sate, and individual… One of these days, Alice…. One of these days, this debt foundation house of cards is going to come crashing down upon us… But eleven times income? OMG! Got Gold?
Speaking of Gold… The shiny metal eked out an $11 gain yesterday, and is up $7 in the early trading today… Ed Steer said it best this morning when he said, “The Gold price was on it’s way above $1,500 in the after markets, but was kept from doing that by the “da boyz”… The price manipulators seem to have put a line in the sand at $1,500, like they did at $1,300. Of course the line at $1,300 finally fell to all the demand for physical Gold, and that’s what it’s going to take once again to get us past this $1,500 level for good… Tons of physical Gold buying, and not just from the usual suspects of Russia and China, and even India… I mean the moms and pops of the world need to step and make their first purchases of physical Gold… Are you ready? Alright then, go do your stuff!
The markets are all waiting for Draghi, to come out of the ECB meeting, so I’ll stay on line until that happens so I can be sure to see what he has on his mind… I’ll play mind reader here and say that he goes deeper into negative deposit rates, and says the ECB will begin bond buying again…
The Asian markets were in a good mood last night, as there seems to be a crack in the tough-guy act of both Trump and Xi. As both have backed off plans to go all-in on tariffs, in the Trade War. It’s nice to see the both of them playing nicely in sand box, eh? Actually, I had thought that it would never come to all-in tariffs… I really didn’t think the two of them would be that dense to do that… I respect both of them for what they’ve done, but that respect only goes so far because of this stupid Trade War… I’m just saying…
OK… looks like my mind reading was bang on! For that’s what Bloomberg says Draghi just announced… Deeper negative rates, and a return to bond buying… Talk about losing credibility for the ECB…
But don’t laugh at them, for we’re next… Especially if President Trump has anything to say about it… Here are samples of two of his Tweets yesterday: “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.”
And…. “The USA should always be paying the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”
No inflation? Really? Don’t be fooled by the stupid CPI (consumer inflation)…. Maybe we have little to no wage inflation, but other than that inflation is all around us… I had better stop there before I say something I’ll be sorry about later…
In other data from the Eurozone… Well, Industrial Production for July was negative -0.4%, but that was better than June’s -1.4%, and year on year was negative -2.0% but again it was better than June’s -2.4%… So, it’s bad news but not as bad as June… Which is why the euro was holding its own until Draghi just talked…
I have no idea what’s on the minds of euro traders these days… The euro is on the rally track after the rate and bond buying announcement! OK, there’s still the Draghi press conference, where he can throw the euro under a bus… so, hold on boys, it’s too soon…
Speaking of the stupid CPI, that’s what’s on the docket to print today… The August stupid CPI will print today, and all the lemmings will point to it and say, “see there’s no inflation to speak of”… We’ll also see the Federal Budget, which should be a doozy… maybe over $200 Billion for August… Let’s see do some simple math and you’ve got a $2.4 Trillion annual Deficit, that gets added to our National Debt that is already $22.556 Trillion… And growing every minute…
On a sidebar, have you ever just pulled up the Debt Clock at: https://www.usdebtclock.org/ and sat there for 10 minutes and watched the numbers? It’s amazing folks… Really, to think that the debt per taxpayer is $183,137… Hey, that’s chump change, right, just fire off a check to the Gov’t and hope they don’t cash it!
Further down on the Debt Clock’s web site, they have something called: Personal Debt to Income… OK, no biggie right? I mean we should be making more than we spend, right? Ahem… No actually the debt to income ration is 1.724… And that’s the part that scares the bejeebers out of me, for it consumers can no longer go deeper into debt, then who’s going to support the economy?
To recap… yes, I’ll finally give up on the debt talk, sorry for all that today! The currencies have pretty much been trading in a very tight range, for weeks now, and yesterday was no different. Gold finally had a good day, after about 5 bad ones… Draghi announced that the ECB will cut rates and go deeper into negative rates, and reintroduce bond buying… Pretty much bang on, with what Chuck said he would do… don’t laugh at the ECB, because the U.S. will follow them eventually…
For What It’s Worth… I recall a conversation I had with a friend many years ago, and he asked me what the next big thing was going to be, and I told him… I thought that Lack of Liquidity was number one, and number two was the lack of funding the Corporate Pensions… And then yesterday, I saw this on Bloomberg, and well, it appears that my Number two is coming to a screen near you sooner than imagined, and it can be found here: https://www.bloomberg.com/news/articles/2019-09-09/corporate-pension-funding-moves-closer-to-worrisome-80-level
Or, here’s your snippet: “U.S. corporate pensions felt the pain of low bond yields in August.
The retirement funds for U.S. corporations had just 82% of the money they expect to need over time for pensioners as of August, down four percentage points from July, according to a statement from consulting firm Mercer on Monday. The steep drop stemmed from long-term bond yields plunging to record lows, which effectively increases the current value of companies’ future obligations. Declines in U.S. equities didn’t help either.
When companies have more than about 80% of the funding they expect to need for pensions, they tend to cut their investments in riskier assets like stocks and increase safer holdings like bonds to lock in gains and reduce risk. Companies closer to that level or below it are less likely to make those shifts, and more likely to contribute more of their cash flow toward their pensions, JPMorgan Chase & Co. strategists wrote last month.
The 1,500 publicly listed companies that Mercer looked at controlled around $2.05 trillion of pension assets at the end of August, compared with liabilities estimated at $2.51 trillion, and their investment decisions can have big impacts on markets. Their underfunded pensions could result in their buying fewer stocks and corporate bonds and more Treasuries.
“Funded status dropped sharply in August with interest rates now at their lowest point in modern history,” said Matt McDaniel, a partner in Mercer’s wealth business. “The current environment leaves us with a puzzling dilemma: where to invest when most asset classes look expensive.”
Chuck Again… You know that sometimes I don’t like to be right… Sort of like the old song, If loving you is wrong, I don’t wanna be right….
That’s it for today, and tomorrow… Don’t forget that tomorrow the August Retail Sales will print… With all this debt accumulation by consumers, I don’t see how that the report will be disappointing. Talked to my good friend, Dennis Miller yesterday… He sounds better and better every time I talk to him… Fingers crossed that he continues on that path! Well, what’s up with my beloved Cardinals… They can’t hit even in Coor’s Field? I was talking with Alex last night, and I told him the thing that’s the silver lining when the Cardinals lose, is that if the Cubs also lose, then it’s another game off the schedule of games left, which means 1 less game for them to catch us… But we had better get off the schnide quickly! Heartsfield takes us to the finish line today with their song: Pass Me By… A great song, that I’m sure if you listened to it, you would say, “I remember that one!” I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday, and please Be Good To Yourself!
Chuck Butler