January 30, 2020
* Currencies attempt to climb up on the rally tracks!
* FOMC and BOE leave rates unchanged…
Good day… and a Tub Thumpin’ Thursday to you! Did you miss me yesterday? HA! Well, I’m just conditioning you for the week of March 2 thru March 6, when I will be out of the writing business and having a good time with my Spring Training buddies on my annual spring vacation. I know, I know, it gets earlier every year, but I think I’ll draw the line in the sand here…. I had a better day yesterday after my wound center visit, but I was still in pain, just much more manageable… I told the doctor that I would not allow them to put the pasty medicine on my wound again! I put my foot down, and it worked! Billy Joel greets me this morning with his song: Stranger…
Man did it storm here last night! The Thunder echoed through our building, and sounded like it was a tank moving in downstairs! That’s one thing about Florida that I’ve figured out… When it rains…. IT RAINS! But yesterday was sunny and 80… little wind… a day that people come to Florida for in the winter up north.
Not that you clicked on the letter today to read a weather report! The Currencies haven’t moved one way or the other for the past couple of days, although the bias remains to buy dollars, and that hangs over the currencies like the Sword of Damocles… And it remains this morning, as the currencies are still searching for a rainbow… a white knight… a lifesaver thrown to them… This latest run of dollar strength, in the face of weakening economic data, and low interest rates, reminds me of a star right before it burns out… It burns the brightest…
The Coronavirus remains a real problem in China… The U.S. stopped all flights to China, after stopping them from entering the country last week. Well, Unless all the other countries stop the flights from China, who’s to say that someone in China couldn’t say fly to Switzerland and then to the U.S. a couple of days later? This virus is shutting down the world’s number 1 or 2 depending on what data you use, Largest GDP nation… So, let’s take the conservative path and say China is # 2… That means they buy tons of commodities, and gas from Russia, and so on, that’s going to get the brakes applied to them soon…
And those safe haven buys are back, as Gold gained some yesterday and is up about $4 in the early trading today to trade at $1,580… The Coronavirus has the stock jockey running for exits in fear what it’s going to do here in the U.S. and bonds/ Treasuries on firmly on the rally tracks… The 10-year’s yield has dropped to 1.56%… The price of Oil slid again after an abundant oil supply number in the U.S. printed… And Gold… well, it’s on the rally tracks too, but it’s not sitting on them firmly, as the price manipulators are still around, and working… I’m just saying…
Gold, which at the end of last week and the start of this week looked like it was heading to $1,600… just has not been able to add to those gains, which took it as high as $1,584, and has slid back to the $1,576… Not a large spread, but… when one looks like it will go to the stars but can’t get out of the earth’s atmosphere, there’s something going on… And to me it’s simply either the ESF (exchange stabilization fund) or the PPT (plunge protection team) that’s doing whatever they can do to keep Gold out of the headlines, and TV news, so that it doesn’t get mom and pop America, wanting to buy Gold… It’s that simple folks… Yes, Gold gained 19% last year, but that was after a few years of not being able to mount a meaningful charge… It was due… I’m just saying…
In reading Ed Steer’s letter yesterday, he highlighted that Palladium had been taken down by the price manipulators of whom he calls “da boyz” I gave you the wrong website address for Ed’s daily letter last week, so let’s try this again… www.edsteergoldsilver.com I had been wondering when that would happen given Palladium’s huge run up in price that was unencumbered one iota…
Sanctions? What sanctions? The Russians reported yesterday that their economic growth had hit a 6-year high… and despite the slippage of the Oil price, the ruble had a decent day of rallying VS the dollar… I simply find this news to be amazing… What shepherding of the Russian economy the Central Bank has done!
The Bank of England (BOE) met this morning, and have already announced their intentions to keep rates unchanged… Outgoing BOE Gov. Mark Carney, will leave without fulfilling his goal of raising rates, just like he left the Bank of Canada… But don’t worry about old Mark, he’ll find a cushy job soon, and then write memoirs about his time as a Central Bank Gov. and people will buy them! UGH!
The antipodean currencies of A$’s and kiwi can’t seem to find a bid these days, as their very big trading partner, China, is seeing its economy go to hell in a hand basket, which means that the two island nations’ exports to China will suffer.
One currency that baffles me on how it is able to rally is the Hong Kong dollar (HKD), aka the honker… Talk about a trading partner of China! And then add in all the protests that take away from economic development, and Hong Kong has the ingredients to slow its economy, but the currency keeps ratcheting higher… go figure…
The U.S. Data Cupboard will have a revision to the 4th QTR GDP, which originally printed at 2.1%, but I’m as sure as I can be about this one, it will be revised downward… I’m thinking 1.8% probably is where it will fall to.
Tuesday, the Data Cupboard had the December prints of Durable and Capital Goods Orders, and while Durable Good Orders were up in the positive territory there is something you’ll find if you look under the hood at the 3.1% gain… Don’t want to get your hands dirty? Ok… I’ll tell you, if you take out the military spending, Durable Goods Orders would have been negative 2.5% !!!!! Capital Good Orders were negative 0-.9% , so both of these are in the negative as far as I’m concerned!
Tomorrow’s data will have the Personal Income and Spending for December… The ECI (Employment Cost Index) which will probably remain at the same level as November’s .7%… this is where you would find wage increases folks, which would drive inflation higher…
To recap… the currencies tried to climb up on the rally tracks but were thrown back down by the dollar bugs… A return to the safe havens was on the table on Wednesday, as Gold, & bonds rallied nicely, while stocks got trashed for the day… The Coronavirus is the reason for the fears growing all over the globe that the virus will spread… The BOE left rates unchanged this morning, and we’ll see the color of the 4th QTR GDP revision later this morning…
For What It’s Worth… I totally skipped talking about the FOMC meeting yesterday because I knew I had this in my back pocket… It’s Zerohedge.com’ s view on what the FOMC announced yesterday, and it can be found here: https://www.zerohedge.com/markets/fed-extends-temporary-repo-operations-january-least-april-hikes-ioer
Or, here’s your snippet: “While the Fed’s January statement was a snoozer, with the only difference from the December statement being the downgrade in the pace of household spending rising at a “moderate” vs “strong” pace, there were far more notable changes in the latest monetary policy implementation note, which – as many expected – saw the rate which the Fed is paying on excess reserves (IOER) hiked by 5bps to 1.6% , or “10 basis points above the bottom of the target range for the federal funds rate” which currently is at 1.50%.
The other notable change from the December meeting is that the Fed is now extending its duration of its repo operations, which in December were supposed to conclude in January 2020, to “at least” April 2020.
And while there was no comment or change to the Fed’s QE4, it was this extension to the deadline of repo that boosted stocks in kneejerk reaction, as it means the Fed continues to believe the crisis situation that emerged after the September repo crisis will continue through at least April, even though repo rates have long ago stabilized.
The Committee also directs the Desk to continue conducting term and overnight repurchase agreement operations at least through April 2020 to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation.”
Chuck again… Yes, it looks like the meaning of “temporary” is being abused again… The Fed has greased the tracks to do more repos and bong buying through April… That would mean that over 6 months of “temporary” had been done… I get so riled up about these repos that I can’t see straight, so …
Currencies today 1/30/20 American Style: A$.6727, kiwi .6505, C$ .7565, euro 1.1025, sterling 1.3069, Swiss $1.0369, European Style: rand 14.6789, krone 9.2193, SEK 9.6424, forint 306.62, zloty 3.8856, koruna 22.8791, RUB 62.47, yen 109.87, sing 1.3525, HKD 7.7679, INR 71.62, China 6.9357, peso 18.75, BRL 4.2032, Dollar Index 97.92, Oil $52.16, 10-year 1.56%, Silver $17.76, Platinum $975.49, Palladium $2,280.17, and Gold… $1,580.49
That’s it for today… Well, when we next talk it will be February, the Ground Hog will have had its day, as will the Super Bowl! And next Monday will point out that there a two weeks until pitchers and catchers report! YAHOO! That sure was sad news from Sunday about the 9 passengers on the helicopter that crashed, that included Kobe Bryant… I just want to say that this brings about something that I feel everyone should embrace… To make sure you don’t leave unsaid words until it’s too late… If you love someone, tell them… If they are your best friend, tell them, and so on… And with that… Toad The Wet Sprocket takes us to the finish line with their song: Walk On The Water… I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday! And please! Be Good To Yourself!
Chuck Butler