April 28, 2020
* Currencies lose ground on Monday, but rebound overnight!
* Gold can’t find a bid on Monday….
Good Day… And a Tom Terrific Tuesday to you! Well, yesterday, was a blur to me…. I did some reading, did some crossword puzzles, and then fell asleep around 2 pm and didn’t wake up until after 6 pm! I guess it was my body telling me I missed some sleep the night before! I had a nice conversation with my tax guy yesterday. He said that I had depressed him with the letter yesterday… So, I thought that I would look at things differently today…. HA! I almost had you, didn’t I? HA! That would be like me changing horses in the middle of the stream, and that can’t be a good thing to do, so I won’t attempt to do it! But I think I’ll allow the Fed Reserve to be the bearer of bad news this week…. Pure Prairie League greets me this morning with their song: Amy…. I used to play that song on my guitar, which I haven’t touched during my stay at home order…. Hmmm….
Well, the currencies just can’t stand the prosperity, that’s all I can say about that! The dollar bugs fought back yesterday around midday, and while the moves weren’t life threatening, the moves did prove that a multi-day currency rally was not going to be in the offing…. Nobody really wants to get in the way of the Fed’s FOMC meeting this week…. Makes sense to me, as this meeting will be a BIG ONE, because of the rotten data that keeps printing, as if anyone thought the data would continue to be so-so with the economy shut down….
That was yesterday, however, in the overnight markets, the currencies won back the ground they lost yesterday, and a few currencies, like the A$, even gained more ground. For illustration purpose only, the Dollar Index was well over 100 last week (100.30), but has dropped back to a 99 handle. Not a HUGE move but a downward move nonetheless!
Gold, continuing to trade alongside the dollar, was unable to move with the currencies, and lost $17, to close at $1,712 yesterday. The shiny metal is down another $2 bucks in the early trading today. There are so many opinions out there these days about which way Gold is going to go. This is normally what happens when an asset begins to run higher, everybody and their brother has an opinion on the assets future…
There are also still a lot of economists that don’t see the writing on the wall with regards to this economic shutdown, and are still calling for a V shaped recovery once the shutdown is over… So, don’t be confused! I say that in my best Steve Mizerany voice… Only St. Louis readers will get the humor in that… A former colleague, Ann Hopkins, used to get the biggest kick out of me impersonating Steve Mizerany. She would say over and over again, “Come on Chuck, do some Steve”…. Good memories, for sure!
Ok, this is the stuff I have to deal with folks…. This writer wrote an article titled: 10 Reasons the U.S. Economy won’t collapse… here’s a snippet of that article: “Before you run out to buy gold or stock up on canned goods, do two things. Read the articles linked in the 10 points above. They will give you the facts the naysayers ignore. Or read “How the U.S. Economy Works.”
Second, see what a real economic collapse looks like. On Sept.17, 2008, the U.S. economy almost collapsed. That’s when companies pulled out trillions of dollars from money market accounts. It would have created a severe cash crunch had it continued.
The nation’s trucking industry would have ground to a halt. Gas stations would have gone dry. Grocery stores shelves would have gone empty. Shortages didn’t happen because the Federal Reserve prevented the collapse. It guaranteed money market accounts and restored confidence.”
My response to this? Well, you can pull rabbits out of your hat to keep the economy running for only so long…. Got Gold?
Oh, and here’s a White House economic advisor giving his two cents on where we’re going here, let’s listen in… He says,” that a lot of the unemployment insurance claims occurred after they were included in the survey for official unemployment data, and so “the really bad news that we’ve been seeing in initial claims will be spread over a couple of months.”
And that’s a White House advisor folks, they’re the ones that need to paint pretty pictures so the people remain calm….
And I can always depend on longtime friend, and publishing guru, Bill Bonner to set the thinking straight again. This was taken from his site: bonnerpartners.com and he says, “
Y]esterday in the Spanish-language publication Abordajes, mathematician Felipe Noguera put two and two together. The conclusion: The likely death rate is more like 0.1%… not the 6.9% widely estimated.
In other words… the C-virus is a nasty bug, with a particular grudge against people who are in bad shape.
Is that a good reason to lock down the whole economy and prevent young, healthy people from going about their lives?
Probably not.
But while the feds’ shutdown might be an honest mistake, their “bailout” is a crime. It is the grandest larceny in the history of the world…” – Bill Bonner
OK… for every article out there that touts a quick turnaround for the economy, I can find 10 that say it won’t be a quick turnaround…. I’ve never been someone that goes with the flow when it comes to thoughts on the economy, but in this case it’s nice that so many agree with my thoughts!
The U.S. Data Cupboard didn’t have anything for us yesterday, and today all they have is housing data… the Case/ Shiller Home Price Index will print, but it’s so far behind as it will give us the number for February, which is before the Covid-19 virus crashed the U.S. economy, but… Even still I would bet a shiny quarter that this data shows a drop in the price of Home for Feb…. That had been the trend before the economic shutdown, so no reason to think things changed….
Tomorrow, we’ll see the first print of 1st QTR GDP, which is expected to be a negative -3.5%…. I’m thinking that it will be worse, but then that’s just me, thinking out loud… And then tomorrow is the Fed’s FOMC Meeting announcement, which as I explained yesterday, is being waited for with baited breath by the stock jockeys, who need something BIG from the Fed to prove the Fed has their backs…
The data distribution not in the U.S. has the same schedule as the U.S., with the real data coming tomorrow, and the next day for most countries… The Eurozone has a ton of data prints the next two days, which will only tell us how badly the Eurozone economy has suffered with an economic shutdown.
Well, after recovering a bit last week, the price of Oil is under siege again, as the proof is being illustrated all over the world with Oil tankers sitting off the coasts of countries waiting to deliver their respective loads, but being told to remain where they are…. From California to Singapore, this is happening folks… the Oil glut is upon us, with no place for it to be stored….
Here’s a thought that might make some sense, but these people never listen to me, so why waste the time? Because! Maybe, just maybe, ’cause you never know, they will! So, here’s my thought… Why not have the U.S. buy this Oil at these cheap prices and store in the salt mines, and then sell it later at a profit? It could end up being the one thing that brings in money to the U.S.’s coffers in the next year!
I’ve told you over and over again that this economic shutdown is going to bring about deflation, and then as the Fed’s monetary polices take over, the chance of inflation goes higher…. Well, as I talked about recently, a reset in the price of Gold to a higher level, is in the plans…. And if it’s not then it should be! Because a higher reset price of Gold would get us out of this deflation trap and get inflation soaring, which is exactly what the Feds need to inflate away the debt…. That…. is the reason they are so anti-deflation!
And, well respected analyst, and author, Jim Rickards thinks this is the way to go about defeating deflation too! Let’s listen in to what Jim had to say in a recent interview, “Averting deflation as the United States falls into a virus quarantine-induced economic depression is the urgent objective of the U.S. government and Federal Reserve, financial newsletter editor and author James G. Rickards tells Hedgeye Risk Management CEO Keith McCullough in a fascinating interview posted on YouTube three weeks ago.
Rickards contends that the simplest and most effective way of accomplishing that objective would be the substantial upward revaluation of gold by the U.S. government, similar to what was done by President Franklin D. Roosevelt in 1933 — after, of course, the government ordered the public’s monetary gold to be confiscated.
Rickards imagines the U.S. government’s revaluation of gold to be a matter of daily market making, buying and selling gold at a fixed price.”
To recap… The currencies lost ground yesterday, but gained it right back in the overnight markets, led by the A$, which really sounds strange…. Gold couldn’t participate in the currencies upward move VS the dollar, and lost $17 yesterday, along with another $2 loss this morning… There are still economists out there thinking that the economic recovery, when it comes, will be V shaped… Chuck tries to point out that is not how this will all work out, and attempts to do it nicely, and leave the harsh words for the economy to the Fed, which will talk tomorrow afternoon.
For What It’s Worth…. OK, I told you about the oil tankers sitting of the coasts of countries with no place to go, but thought that an article that outlines the problem might be needed to back up what I told you, and this article does just that, and can be found here: https://www.dailymail.co.uk/news/article-8255559/Dozens-oil-tankers-float-coast-Southern-California-global-lockdown-sees-demand-plummet.html:
Or, here’s your snippet: “More than 25 tankers are sitting off the coast of California as the economic shutdown reduces the demand for Oil.
The U.S. Coast Guard filmed video that shows 27 tankers anchored in waters just off the coast by the Port of Los Angeles and Long Beach as of Thursday afternoon.
Stay-at-home orders across the country have led to a dramatic reduction in the demand for crude oil and now the tankers have no place to deliver the product and instead have become floating storage tanks.
The suppy chain is being backed up, and tankers are now being used to store product that would have originally gone out to the supply chain,’ Scott Lauermann from the a spokesman for the American Petroleum Institute told the LA Times. “
Chuck again…. And there are a number of stories first seen on Bloomberg.com about how the same sencario is being played out in Singapore… I’ll just revert back to my thought above on how to deal with this storage shortage problem…
Currencies today 4/28/20 American Style: A$.6510, kiwi .6065, C$.7168, euro 1.0888, sterling 1.2515, Swiss $1.0280, European Style: rand 18.5762, krone 10.3582, SEK 9.9826, forint 325.92, zloty 4.1705, koruna 24.9820, RUB 74.44, yen 106.56, sing 1.4152, HKD 7.7500, INR 75.10, China 7.0818, peso 24.33, BRL 5.6218, Dollar Index 99.49, Oil $11.52, 10-year .66%, Silver $15.15, Platinum $764.33, Palladium $1,944.71, and Gold… $1,710.00
That’s it for today… I went to the Pfennig Replies box last night and found about 100 emails from a day last week when I guess I forgot to include the currency roundup… and about 100 readers thought that I needed to be made aware of that…. Sorry! I didn’t mean to leave it out! The first thing I do each day is record the prices, so I have no idea why they were left out! In the 70’s there was a song: You Can Go Your Own Way… Which is what I see each state doing with regards to dropping the shelter rules… Georgia went first, and Texas is joining them, which leads me to ask, “Is the South going to truly rise again?” Missouri will open up next week, and I still don’t see this as the medicine the cures all what ails the U.S. economy, but then that’s just me…. Humble Pie takes us to the finish line today with their song: I Don’t Need No Doctor…. Did you know that the great Peter Frampton started out in the group Humble Pie? There you go, some rock trivia for your next cocktail party! HA! I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!
Chuck Butler