Rocktober 7, 2020
* The up one day down the next trend continues…
* Chuck goes through his thoughts on the Credit Markets…
Good Day… And a Wonderful Wednesday to you! I said yesterday that an “Indian Summer” would be very welcome here in the Midwest, where quite chilly temps had ruled for the last week. And much to my surprise it warmed up yesterday, and now we’re set to have temps in the mid 80’s for the next week… I know that technically, it’s too early for an Indian Summer, but I’m going to call this week that, because…. I want to! We are in the U.S. right? Freedom of Speech and all that! Sad news last night that cancer had taken the life of guitar great, Eddie Van Halen, at age 65… he had throat cancer, which is different from my cancer, but this one still hit home… RIP Eddie…. The Cure greets me this morning with their song: Friday, I’m In Love… I do believe that this was one of my former colleague Jenn’s fave songs! HA!
I don’t know what I was thinking yesterday, thinking that maybe, just maybe the recent trend of one day up the next day down for the currencies and metals had come to an end… The day began on a good note, but that soon turned sour… And the currencies and metals took one on the chin all day long… The euro was 1.1802 yesterday morning, and by the end of the day here in the U.S. the single unit was 1.1735…. And Gold was up $4 in the early trading yesterday, only to see the dollar gain back $36.80 to see Gold close at $1,877.30. Silver too got the stuffing knocked out of it during the day, and the dollar gained back $1.12 to see Silver close at $23.12…. A whole $1 move in Silver is HUGE folks, and showed that the price manipulators weren’t fazed by the findings that their ringleader (JPMorgan) had gotten its wrists slapped once again…
In the overnight markets… Well, let’s see yesterday was a down day, today should be an up day… And if the overnight markets are any indication, it will be… Gold is up $10 in early trading, and the euro is moving higher once again…
I know this up one day and down the next day is pretty silly as it actually tells investors when to buy and when to sell… Sorta like those computer programs that light up green when it’s time to buy, and light up red when it’s time to sell… For years, at the Money Shows our booth was near the booth where those programs were sold… I had their sales schtick down at one point I had heard it so much…
Well, there was all this talk over the weekend that a new stimulus bill was nearing the end of negotiations, and that had Gold pushing higher on Monday, but then yesterday, they let the air out of the stimulus bill’s balloon, when it was Tweeted that there would be no stimulus until after the election… You should have seen everyone run to the exits after that Tweet…. Stocks, bonds, currencies, metals, there were no safe harbors….
And that put the idea in the price manipulator’s minds that Gold would see some selling, and they decided to pile on… And pile on they did… In fact if they played in the NFL, they would have gotten a flag for Unnecessary Roughness…. I told you all before about my football playing days, and about the time I ended up on the other team’s sideline, after driving a runner out of bounds. I feared for my life and a steered away from that sideline the rest of the game. I was piled on, out of bounds mind you by, the opposing team, and the refs had to come and pull the opposing team off me… I was a tough sonofagun in those days, but even that made me think twice about going into another team’s sideline!
So… what’s the lack of another stimulus check in consumer’s mailbox or direct deposit into their bank account going to do to the election? Better than that question is what will it do to the economy that can’t get started after being neglected for 5 month? I see the economy as being akin to when you haven’t driven your car for months… What happens? The Batter dies. (unless you’re smart like me and have a solar battery tender)
You know, I’ve talked to you before about all these moratoriums and what they will eventually do to the bond holder… But… I thought it best to talk about it again… We currently have moratoriums on eviction and foreclosures, because people can’t or wont’ pay their rent or home loan…
While that’s a nice thing to do for these people it does nothing for the bond servicing… You may be renting, but there’s a home owner with a loan, and if you don’t pay your rent, he can’t make his home loan payment. And all those home loans get packaged into bonds, folks… Now Banks do cherry pick some of the home loans to have on their books and not present them for packaging, but those cherry picked loans are small compared to the size of the mortgage backed bond market…
Eventually, these bonds don’t pay P&I to the bond holder, and now the bond holder has a non-performing asset… And the bond’s value is going down the tubes, so he can’t sell the bond without taking a huge loss… Pretty soon the bond defaults, and one default, begets another one, and pretty soon the credit market as a whole collapses… Uh-Oh, did I just say that out loud? Oh well it has to be explained and said so that investors can take appropriate measures before all hell breaks loose… .I’m just saying…
The Whole financial system is built around the credit markets, and without proper running credit markets the financial system that we all know and love will collapse… And let me tell you something that you won’t hear anywhere else… The Credit Markets began to collapse last September, when the repo market had to be bailed out by the Fed…. Remember me telling you that this was going to be a bid deal? Well, in my opinion, it’s still a problem, but… The Pandemic slowed the process…. You see if people aren’t getting loans, banks don’t have a need to for extra capital and the place they would get that is the repo market… And so the need for the Fed to keep bailing out the repo market slowed to a snail’s pace, but it still needs to be bailed out, and to me, that was the beginning of the end of the credit markets….
And no one is talking about this…. Crickets…. Makes you wonder if the powers in charge want to spring the whole collapse on you in one fell swoop… I’m just asking….
Well, the U.S. Data Cupboard still is in need of a restocking, but for today, we will see the minutes of the Fed’s last FOMC meeting… And Consumer Credit (read debt) for August… We just saw late last week that August Personal Spending, while not huge, was larger than expected, and out paced Personal Income… So, put two and two together and you get…. A larger Consumer debt number for August… Yes, grasshopper… you figured it out… Credit Card purchases…
OK, yesterday, I told you I didn’t know how to get a cartoon on the email server and so I wrote out the verbiage for you… But my associate at Adenresearch saw what I wrote, and said, I can do that for you! And so, Here it is for those of you who read the email, it won’t be here on the website version….
Before we head to the Big Finish today I wanted to tell you about this bit of news that showed up yesterday… “U.S. commercial bankruptcy filings are up 33% so far this year with new cases in September surging by 78% from a year earlier as the recession triggered by the COVID-19 pandemic hits small businesses, data released on Monday showed.
Filings by individuals, however, are lower so far this year courtesy of government relief efforts.
Chapter 11 bankruptcy filings totaled 747 last month, up from 420 a year earlier and from 525 in August, legal services firm Epiq said in a monthly report. Year-to-date filings total 5,529, a third higher than in the first three quarters of 2019.” I found that on Reuters… w
To recap… Everything was going along smoothly yesterday, and then a Tweet from the White House that said , “no stimulus until after the election” and you should have seen the players run for the exits… There were no safe harbors as, stocks, bonds, currencies, Oil, and metals all took a shot to the midsection… . The overnight markets show a rebound is building, but we’ll have to see what the NY traders have to say about that!
For What It’s Worth… Well, I was up all night last night, couldn’t sleep, don’t know why, but an hour here and an hour there was it.. .So, I got up and went to my writing desk, opened my email and there was Ed Steer’s letter, so there I was a 4 in the morning reading his letter and found this article that he highlighted about how the Fed keeps asking Congress for another stimulus package, and it can be found here: https://www.zerohedge.com/markets/watch-fed-chair-powell-ask-congress-more-fiscal-stimulus
Or, here’s your snippet: “Fed chair Powell is holding a virtual conference with National Association for Business Economics. As previewed earlier, there were no notable surprises in his prepared remarks in which he emphasizes that the outlook remains highly uncertain, the expansion is far from complete, and in keeping with the Fed’s recent appeals to Congress, Powell asks Congress to quickly vote through more fiscal stimulus, assuring lawmakers that providing too much stimulus wouldn’t be a problem.
Powell’s remarks come amid continued gridlock in Congress and Republican opposition to a larger relief package that’s kept talks with Democrats at a stalemate in Congress since aid to jobless Americans and small businesses expired in July and August.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said in the text of a speech for a virtual conference hosted by the National Association for Business Economics. “By contrast, the risks of overdoing it seem, for now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they will not go to waste.”
While Powell didn’t explicitly reference either party’s position in his prepared remarks, he said that the “recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods.”
Meanwhile, the Fed chair confirmed what we said last week, namely that U.S. consumer are rapidly burning through their savings, something which has so far allowed U.S. consumption to remain stable, however at the current rate of spending, savings would will likely return to pre-covid levels in 2-3 months”
Chuck again… Well, you know why Powell is so hell bent and whiskey bound to get Congress to pass another stimulus don’t you? The stock market…The Fed’s baby… It’s losing ground every day it seems that a new stimulus doesn’t get passed, and now with the Tweet yesterday… We won’t be seeing on any time soon….
Market Prices 10/7/20: American Style: A$ .7123, kiwi .6586, C$ .7515, euro 1.1757, sterling 1.2867, Swiss $1.0893, European Style: rand 16.6978, krone 9.3305, SEK 8.9367, forint 305.93, zloty 3.8170, koruna 23.0574, RUB 78.16, yen 106.08, sing 1.3590, HKD 7.7498, INR 73.24, China 6.7882, peso 21.56, BRL 5.5659, Dollar Index 93.81, Oil $39.54, 10-year .78%, Silver $23.66, Platinum $864.00, Palladium $2,411.00, and Gold… $1,887.50
That’s it for today, and this week… recall that I have my monthly oncologist appt tomorrow bright and early… And Friday will not be a sleep in day, as I have a bright and early appt at the Wound Center… yes, I have to go back to them…. UGH! Monday morning at this time it was 36 degrees outside, and this morning it’s 56 degrees… I told my wife that she did a good job bringing back the warmer weather from Florida! Now that my beloved Cardinals have been ousted from the playoffs, I try to watch the remaining teams play, but they can’t hold my interest very long… The Allman Brothers take us to the finish line today with their song: Statesboro Blues… “I woke up this morning, I had them Statesboro Blues”… I hope you have a Wonderful Wednesday and rest of the week, and please Be Good To Yourself!
Chuck Butler