March 25, 2020
* Currencies, can’t add to Tuesday’s gains…
* Chuck tells us the history of stimulus plans….
Good day… And a Wonderful Wednesday to you! I had a so-so day yesterday, having to remain inside for most of the morning to answer email, etc. But by noon, I was outside in the sun, soaking up Vitamin D, and baking any remnants of the Coronavirus out of me, that is if there were any to begin with! I figure a guy like me with my health history, I’m a walking time bomb for this virus…. It’ll get me sooner or later. I’m hoping for later as I read last night that Doctors are having great success treating COVID-19 patients with a drug called: Hydroxychloroquine used in combination with Zithromax. And some are having success with just the Hydroxychloroquine…. So, more power to them and the drug! I know you didn’t open up the letter today thinking that I would spend the day talking about what the TV news guys have been talking about non-stop for days… The Coronavirus! So, I’m going to stop right there! Before I go any further, will you love me…. HA! A little Paradise by the Dashboard Lights for us this morning! And that was right out of my head! The actual song that greeted me this morning was from Bad Finger singing their song: Come And Get It…. If you want it here it is come and get, but you better hurry ‘cause it’s going fast….
I did a lot of reading yesterday… and in my reading I came across an article that talked about how the Coronavirus has shut down many Gold / Silver mines, and that’s creating a real shortage of metals, as the Gold chunks are not getting mined and sent to the mints to be fabricated/ coined or made into bars. I touched on this last week when I gave you instructions on how to still obtain physical Gold and hold it free of safekeeping charges…. If you happened to miss class that day…. I suggest you call my favorite metals guru, Tim Smith at 1-800-026-4922, and let him explain the program that does what I just touched on….
Oh, and Gold had another great day yesterday, marking two great days in a row this week… Gold’s rise yesterday was $84!!!!!! So, if you did miss class last week, and missed out on buying Gold about $100 cheaper than it is this morning, well… what can I tell you, other than, “You snooze, you lose”…. But there’s still time, so don’t you fret, ‘cause you aint seen nothing yet! At least that’s what I’m thinking is going to happen here….
Well, Chuck’s thoughts that maybe we were seeing Coordinated Currency Intervention 2.0 on Monday, saw some damaging moves in the currencies yesterday, as they moved downward, after it was erroneously said that the Stimulus Deal was nearing passage… The markets bit on it and took the bait and ran… But like I said it was erroneously stated, the Stimulus bill stumbled, and fumbled once again as this time it was another “addon” that got questioned….
So, I hear the drums beating this morning that the lawmakers finally passed a stimulus bill…. I don’t think, in the end it will make a hill of beans difference in the recession that’s now upon us… But it supposedly will get some cash into some peoples’ collective hands that have been told to stay home and not work….
In my opinion, you’ll be able to look back upon this at some point in the future, and throw it in the heap pile that includes, tax rebates checks, cash for clunkers, and a few other misguided stimulus programs….
Why am I so negative about this working? Because since 1995, I’ve listened to the Japanese talk about their newest stimulus plan to help pull the Japanese economy out of the dumps…. They did this over and over again, to where I don’t even pay attention to them any longer… Japan became the Boy Who Cried Wolf! And where are they now 25 years later? Still in the dumps! And then add to that the fact that the previous stimulus plans by the U.S. Gov’t haven’t really amounted to much in the way of economic strength…. And mix it all together, and do the hokey-pokey and turn yourself around, that’s what it’s all a-bout!
I waded through a dozen or so emails from the Food Delivery companies, to restaurants trying to get get people to order food to be delivered or taken out…. They’re hurtin’ for certain folks…. This has go to get better for the restaurants soon, or they’ll be turning out the lights, ‘cause the party is over….
Longtime reader, Bob, sent me a link to an article about the Global economy. The article is very long, so it can’t be featured in the FWIW, today, but I can tell you that the guy was hitting on the same concept I was hitting on last week about the thigh bone connected to the knee bone, and the knee bone connected to the shin bone, when describing what it will be like if the Oil industry can’t make it…. We’ve already had one major Oil operation close shop… And there will be more, and all their suppliers, etc, down the line will be hurt too…. The same thing with the Global economy… A Tsnunami in Thailand can disrupt a sector, because of one item made there, and the shutting down of a pharmacy in the U.K. last year left the U.S. without a flu virus drug….
So, if you think about the global economy and how closely tied they are together, then you see what can happen, when the dominoes begin to fall in one area of the globe, but is felt in another area completely across the globe! How did we get to this point? Well the article does explain how U.S. Corporations years ago, saw the opportunity to run more cost effectively by offloading their production line, and instead work on their marketing of the product….
Ok, enough of that discussion, but it all ties in with what I’ve been saying for so long now it was beginning to grow hair, and that is that the next recession is going to be a doozy…. Worse than the Great Recession of 2007—8…. You do remember that don’t you? The collapse of Lehman Brothers, who weren’t dealt with the same way a collapsing Bear Stearns was earlier…. Then the giant brokerage house Merril Lynch had to be bought by Bank of America? How the Chrysler bond holders were left holding the bag, as they had to get in line behind the Unions, (a deal worked by the then President) And so on…. It was really ugly, and quite a few corporations were teetering and close to extinction…. Well, this time they may not be so lucky, but then The Fed has their Unlimited QE going now and they’re open for business even for Corporate bonds! And ETF’s… And outright stock purchases will be next, as the Fed will then be in the business of deciding who gets a helping hand and who doesn’t!
So, the news of the Stimulus Bill passing, finally I might add, has Gold Traders taking profits this morning, and Gold is down $21 in the early trading… But not to worry, folks…. as the FWIW article this morning will tell you… Use the dips in the Gold price as an opportunity to buy cheaper than it was….
OK, I told you above that my thoughts on the Currency Intervention 2.0 were derailed by the talk of the stimulus bill passing, and now it has…. Now, what? Can the currencies continue to improve with the dollar rally being halted, for now? I guess we’ll have to wait-n-see…. The Aussie dollar (A$) really rallied strongly yesterday and is trading with a 60-cent handle again…. I was really taken aback by the downward move in the A$ last week, when for a couple of days it traded at a cheaper price than its kissin’ cousin across the Tasman, kiwi…. But order has been restored, and these two are trading with the normal spread between them…. Whew!
Even the beaten down Russian ruble got on the rally tracks for a bit yesterday… But with the price of Oil now trading with a $23 handle, this rally may be short-lived…
The price of Palladium is back above $2,000 after getting the snot knocked out of it last week, the metal that is said to be in short supply, has returned to rallying…. But in reality this doesn’t play well in the sand with the thought that a very deep recession is upon us… but in this this day of opposites, maybe it does play well….
The U.S. Data Cupboard yesterday had some very disheartening data, that usually isn’t paid much attention to, as it’s the MARKIT version of the ISM (manufacturing and services sectors indexes)…. the MARKIT version of services dropped from the sky folks… I mean it dropped from a 49 figure in Feb. to a 39 figure this month! The actual manufacturing index from MARKIT also showed a drop below 50 to 49…. So, according to these folks, the economy is falling off a cliff… I’m just saying…
Today’s Data Cupboard will have the Durable & Capital Goods Orders for February, which was before the COVID-19 outbreak hit the shores here in the U.S. But that won’t help these two if they print the way I think they will, and that is both with a negative figure….
Before I head to the Big Finish today, I wanted to mention something that I’ve talked about before that’s being brought up again… And that is what’s called a Debt Jubilee…. I saw an article by Paul Craig Roberts yesterday where he believes that this is the only way we can get out of the mess we’re in today…. For everyone’s sake, let’s not even begin to harbor thoughts of a Debt Jubilee being something real…. I’m just saying…
To recap…. The euro wasn’t able to hold its gains yesterday, after it was rumored that the stimulus bill was getting ready to be passed… A couple of currencies did rally, the A$ and rubles, and others but not so much to be noticed… The Stimulus Bill DID pass last night and has caused some profit taking in Gold this morning, after the shiny metal gained $84 yesterday! Chuck explains why he doesn’t think the Stimulus Bill will much affect on the recession we’ve now entered….
For What It’s Worth…. OK…. longtime readers know that I have this great dislike for Lola… (aka Goldman Sachs) But there are times when Lola, who gets what Lola wants, says things that I agree with… And today’s FWIW, curtesy of the folks at MarketWatch, tells us that Lola is bullish on Gold…. And it can be found here: https://www.marketwatch.com/story/goldman-sachs-says-it-is-time-to-buy-gold-the-currency-of-last-resort-2020-03-24
Or, here’s your snippet: ” The current coronavirus-induced economic and financial market turmoil is seemingly the perfect environment for gold.
“We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policy makers act to accommodate shocks such as the one being experienced now,” said analysts at Goldman Sachs led by Jeffrey Currie.
Yet while the yellow metal GC00, 1.222% has done far better than other assets, it has slipped 2% over the last month.
The Goldman analysts, with a 12-month price target of $1800 an ounce, said that is about to change, thanks to the Federal Reserve’s aggressive bond purchase plan unveiled on Monday, in which the U.S. central bank said it would buy as many Treasurys and mortgage-backed securities as needed to keep financial markets running smoothly.
“We are beginning to see a similar pattern emerge as gold prices stabilized over the past week and rallied [Monday] as the Fed introduced new liquidity injection facilities with this morning’s announcement,” they said.
The analysts that said with the Fed easing funding stresses, focus will likely shift to the large size of the Fed balance sheet expansion, increase in developed market fiscal deficits and concerns about the sustainability of the European monetary union.
“We believe this will likely lead to debasement concerns similar to the post [Global Financial Crisis] period,” they said. “
Chuck Again…. The important thing to remember folks, is when a Big Investment House such as Lola says you need to buy something it tells you that they are long the “something”, and they need you to buy to make their investment more profitable….. But in this case, Lola is also helping investors who would normally not listen to anyone else but Lola…. I’m just saying…
Currencies today 3/25/20 American Style: A$.6005, kiwi .5835, C$ .6937, euro 1.1825, sterling 1.1825, Swiss $1.0202, European Style: rand 17.4208, krone 10.8512, SEK 10.0676, forint 327.12, zloty 4.2188, koruna 25.3050, RUB 78.76, yen 111.30, sing 1.4457, HKD 7.7537, INR 76.08, China 7.0694, peso 24.60, BRL 5.1113, Dollar Index 101.42, Oil $23.62, 10-year .82%, Silver $14.22, Platinum $716.30, Palladium $2,015.10, and Gold… $1,610.84
That’s it for today and this week…. I really dislike having to end the week on Wednesday for writing, but with my current situation, I have no other choice… When I go home in a couple of week, things might change, I don’t know my wound center schedule there yet… I had a discussion on the deck yesterday with a couple of “stock lovers”…. Who thought the selling was done and they were buying again…. I just shook my head and thought, that they were going to get taken to the cleaners…. But they wouldn’t listen to me explain history of these things to them, so I just stopped talking and let them carry on… So…. I’m excited to see what the Apligraph did in the last week, when I go to the wound center tomorrow…. Remember back in the day when you would get a CT scan or MRI and have to wait a couple days before they had the results? Well, this is sorta like that, as they wrap up my leg in 4 layers of wrap and then each week they cut it off and see what’s going on with my leg…. And tomorrow I get to see that the graph did! I’m so hoping that it took and has closed up the remaining two spots on my leg, so that this summer I can enjoy the pool once again, and stop having to wear this soft cast on my leg! OK… The Band ACE takes us to the finish line today with their song: How Long….. “how long has this been going on?” I hope you have a Wonderful Wednesday and will Be Good To Yourself!
Chuck Butler