December 5, 2019
* Currencies drift higher on Wednesday…
* Gold backs off by $3, and starts today in the red…
Good day… And a Tub Thumpin’ Thursday to you! Another day, another day of weak data… what else is new here in the U.S.? These are strange days, because everyone, and I mean everyone has this feeling, whether they want to admit it or not, that something awful is about to happen to the U.S. economy… Our Blues played in Pittsburgh last night, after beating the Penguins at home last week, convincingly, they lost….. Home ice in hockey used to be a BIG DEAL But now-a-days teams go on the road and win all the time… It’s all good though… The Blues are playing better now than they were last spring on their way to their first Stanley Cup Championship! So, watch out NHL! Baseball’s winter meetings are going on, and I just don’t think the Cardinals have it in them to make a deal this year… That’s sad, because we’re one hitter, from taking the league by the horns! Pink Floyd greets me this morning with their song: Us and Them…
OK… It was another day of drifting for the currencies… Dollar traders really want to sell the dollar, folks, but can’t find it in themselves to part with their beloved green/peachbacks… But they eventually will… There’s smoke coming from the data folks, and you know what I’ve always said… Where there’s smoke, there’s fire… And the fire may just be burning embers right now, but we all know what burning embers can turn in to… there’s going to be armegeddon in the streets… I hate to be the messenger on this, but there’s no two ways around it… the U.S. economy is going into a funk that it won’t come out of for over a decade… And when all that happens, will people remember the famous line that Deficits don’t matter? I doubt it…. I’m just saying…
I hate being Mr. Gloom and doom… I’m a very upbeat kind of guy for someone that has lost part of a femur, and kidney, and eye, and almost his right mandible to cancer… But I would rather be Mr. Sunshine… Sunshine lollipops and rainbows everything that’s wonderful when ever we’re together! But I just can’t close my eye to what’s going on here folks… I’ve never really written about the “Deep State” that’s trying everything in their power to remove the President of this country… This is not a political letter, and I won’t let it slip into one either, but what’s going on in this country is a tectonic shift from Capitalism to Collectiveism… And removing the President is their way of achieving this goal…
And that’s all I say about that today… Get me on the Butler Patio, which would be quite difficult given the cold days now, and I’ll go into this with proof that this is happening right before out eyes… But not here, for this is not the place for that discussion… All I’ll say here is…. Got Gold?
And don’t look to hear these things from any Fed Heads… One of which, Randall Quarles, appeared before Congress yesterday, and… now keep in mind while you’re reading this, that for two months now the Fed NY had been providing Billions of dollars to Banks in the repo market… OK, got that?
Here’s what Fed Head Quarles had to say yesterday, ““The Board’s latest Supervision and Regulation Report, which we published last week, confirms the current health of the banking system. It depicts a stable, healthy, and resilient banking sector, with robust capital and liquidity positions… It describes steady improvements in safety and soundness, with a gradual decline in outstanding supervisory actions at both the largest and smallest organizations.”
Wait! What? How can banks need hundreds of Billions of dollars in loans each day, when they are “stable, healthy, safe, and sound? Why didn’t someone on Capitol Hill ask him this? Were they afraid of the answer they might get? But you know what else I think is even more important here? Who’s doing the examining and auditing of these banks? For they sure aren’t doing a very good job now are they? No! I’ve chronicled the 3 felony charges that JPMorgan has accepted, and the racketeering charge that is yet to be tried. We had Goldman Sachs get caught with their hands in the cookie jar in Malaysia… And just last week during Thanksgiving dinner, Morgan Stanley announced a huge loss in currency trading… Who’s in charge of keeping these banks in line?
When I was at much smaller banks than these behemoths, we were dragged over hot coals by the examiners and auditors, made to change the way we did business, and…. And this is the biggest sham I was ever around, they charged us over $1million dollars for a technicality in the way we did business! These regulators were all over us like a cheap suit, but they turn their eyes away from what the Big Banks are doing? I wonder why that is? No seriously, I don’t wonder, because I know!
So, here we are, as in olden days, happy golden days of yore… faithful friends who are dear to us, gather near to us, once more…. You have no idea what that last phrase is going to mean in a year or two from now… But you’ll find out…
I’m just being Mr. Bear today, ain’t I? But I’m not bearish on all things… Gold for instance will be a saving grace, in my opinion, which could be wrong, for holders of the shiny metal… I was with a few friends last night at our local watering hole, and my good friend, Kevin, aka webbie, was making fun of me for being a Gold Bug… Well, we’ll see who laughs last… I’m just saying…
I know that I’ve spent an inordinate amount of time talking about the U.S. lately, but in reality, with the state of the currencies, bowing to the dollar bugs it’s going to take something here in the U.S. to change all that, so that’s why I’m watching the U.S. more these days… Have no fears, I’ve got my eye on the goings on elsewhere, it’s just that they don’t carry the weight right now…
For instance, I’m watching pound sterling ratchet higher every day for the last two weeks and I’m wondering what’s going on here… Just the other day the U.K. printed a virtual collapse of their Retail Sales, and the currency rallied? And then I’m reminded of the “opposites” thing that’s going on these days… UGH!
And I’ve gone this far into the letter today, and not mentioned Gold! What’s up with that, Chuck? You know me, when I get on a roll, I’m like the guy in the movie Animal House! So, Gold lost $3 yesterday, and is down another buck or two in the early trading today… I think gold is doing a very good job of holding on and not falling further and falling victim to the price manipulators’ boatloads of short Gold paper trades…
The U.S. Data Cupboard didn’t have much for us yesterday, but what it did have was ugly… The ADP Employment Report for November, which I told you yesterday morning was forecast to show 125,000 jobs added in November, actually printed at just 67,000!!! That’s right, just 67,000 jobs added in November… Now, I don’t know what kind of shenanigans the BLS will play with their version and the one the markets follow, of the jobs report for November, but I’m sure they will NOT accept a 67,000 number to print… No way, No how… So, put that in your pipe and smoke it, BLS! We know what you’re up to, and we just don’t care any longer what BS you put out each month!
Today’s Data Cupboard has Rocktober Factory Orders, which in September were a negative -0.6%… the forecasters think there will be some healing here and gain 0.2% for Rocktober… Again, I’m from Missouri, and I’m going to have to be shown that, because I don’t believe it all! We’ll also see the Trade Deficit for Rocktober… In September’s report, we saw a narrowing of the Trade Deficit from $52 Billion to $48 Billion, which was probably a direct sign of the Trade War… It’ll be interesting to see what kind of movement this data has on it today… Another large narrowing, and I’m sure the President’s will to turn on more tariffs on 12/15, will be even stronger…
Before we head to the Big Finish today… I received an email from good friend, the retirementor, Dennis Miller yesterday, who by the way, is progressing nicely from his 9 month ordeal with cancer. Dennis said to me, “You sounded pretty upbeat today” (talking about yesterday’s Pfennig) And I replied to him: “Yes, I’ve been off chemo for two weeks… they sent me home two weeks ago, and told me allow my stomach to heal, before beginning to take it again… I was so happy to be off it during Thanksgiving and now, well it’s been two weeks, and I need to go back on… But I think I’ll wait until Monday next week, I like this feeling of a clear head, no running to the bathroom every half hour, and not needing to nap each day… but as they say… All good things must come to an end… and so it will end on Monday next week!
To Recap… Not much went on with the currencies yesterday, they did drift higher VS the dollar, but the move saw slight… Chuck thinks that the dollar Traders think they should be selling their dollars, but just can’t part with their green/peachbacks…. Chuck wants to know who’s in charge of watching the Big Banks, because whomever it is, if there is anyone at all, they’re doing an awful job! And Chuck picks apart Fed Head Randal Quarles speech yesterday, you won’t want to miss this…
For What It’s Worth… The Threat of the U.S. having to go to negative deposit rates is hanging over us like the Sword of Damocles… I said in an interview recently that I believed that deposit rates would, in the next recession, go negative, but didn’t think Treasury yields would go negative, unless the recession is very deep…. And I’ve sounded like a broken record with the thought that negative rates don’t help an economy… So, I’m on board with the discussion that will take place in this article on negative rates that can be found here: https://wolfstreet.com/2019/11/20/fear-of-reversal-rates-sets-in-says-the-fed/
Or, here’s your snippet: “There is now a new theory cropping up in Fed-speak and more generally in central-bank speak. It’s not actually a new theory. I have been saying the same thing for years. In fact, it’s not even a theory, but reality. But it’s newly cropping up in reports from the Fed and the ECB. It’s the concept of what is now called “reversal rates.”
It’s an official admission that “reversal rates” exist. The term crops up alongside the fear that countries with negative interest rates are at, or are already beyond, those “reversal rates.”
The idea of interest rate repression is to induce businesses to borrow and invest, and to induce consumers to borrow and spend, and the hope is that all this will crank up the overall economy as measured by GDP.
“Reversal rates” is the term for a situation where interest rates are so low that they’re doing more harm than good to the overall economy, and that lowering rates further will screw up the economy rather than boost it.
Central bank monetary policy, such as cutting interest rates and doing QE, takes wealth and income from one group of people and delivers it to another group of people. This is how monetary policy works. It’s not a secret. In central-bank speak, it’s called the “distributive effects of monetary policy.” The idea is that for the overall economy, this income and wealth transfer from these people over here to those people over there translates into more overall economic activity that adds to GDP.
The problem for central banks arises when too many people and businesses get screwed by these policies and when they alter decision-making in absurd ways – which is what low and negative interest rates do – to where the overall economy actually takes a hit when rates drop further.”
Chuck Again… the article talks about how the Fed fears that a reversal rates scenario could come into play if they continue to cut rates… And that’s a bunch of hogwash! the fed doesn’t fear going negative with deposit rates, it’s what they’re destined to do, they know it… Shoot Rudy, back when Janet Yellen was the Fed Chair, she brought up negative rates when no one had asked her about them, and told Congress that she checked and that negative deposit rates are legal… As I said then… Just greasing the tracks…
Currencies today 12/5/19 American Style: A$ .6827, kiwi .6425, C$ .7589, euro 1.1098, sterling 1.3135, Swiss $1.0121, European Style: rand 14.6486, krone 9.1505, SEK 9.4996, forint 298.03, zloty 3.8523, koruna 22.9993, RUB 63.98, yen 108.87, sing 1.3613, HKD 7.8284, INR 71.07, China 7.0554, peso 19.38, BRL 4.1996, Dollar Index 97.47, Oil $58.58, 10-year 1.78%, Silver $16.90, Platinum $896.05, Palladium $1,868.50, and Gold… $1,476.29
That’s it for today and tomorrow… I’ll go back to the wound treatment center tomorrow morning, to see what’s gone on with my leg wound in the past 10 days… They wrap it up in what’s called a Una-boot each week, so when they cut it off the next week, is the only time I see what’s going on… The pain has been bearable this week, so maybe… fingers crossed… more healing has taken place. Alrighty then! I got to get together with a former Mark Twain Bank colleague last night… It was great to see Ellie once again! She never ages! I was telling her about my darling daughter Dawn, and how she never seems to age, and all the while I’m thinking the same thing about Ellie! The Youngbloods, led by Jessie Colin Young, take us to the finish line today with their iconic rock classic song: Let’s Get Together… We used to play that song, and did a good job with it, if I recall correctly! I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow… I Hope you will Be Good To Yourself!
Chuck Butler