U.S. Federal Budget Deficit Hits $863 Billion For June!

July 14, 2020 

* Currencies, led by the euro , continue to add to gains

* The Wolf is always at the door for Gold & Silver…. 

Good Day… And a Tom Terrific Tuesday to you! Another nice very warm day here yesterday, with nothing but blue skies and sunshine…. I love days like that! I tried to work a crossword on my iPad outside, but the iPad got too hot! Sensitive little bugger I guess…  So, I had to find some shade, which is easy to find in my backyard, as we have large Trees all around us!  Well, tonight I finally get to see some live baseball, albeit an intrasquad game, but live pitching and hitting nonetheless! It seems like a year ago, I was sitting in the warm sun, in my primo seat at Roger Dean Stadium, watching Spring Training games… And it was 4 months ago! Kansas greets me this morning with their song: Play That Game Tonight…  For a couple of years there in the 70’s Kansas was as hot as a firecracker…

Well, it was another “nothing” day in the currencies and metals yesterday… Traders have got to be the most confused people on earth right now, and they have no idea what’s around the corner, or behind the wood shed… they want to push the dollar downward, but just can’t come to grips with the actual decision to do so… They know in their heart of hearts, because they learned all these things while training to be a trader, that money printing equals currency debasing, that zero interest rates equals currency debasing, and no concern for debt levels equals currency debasing…  But they just won’t pull the trigger… 

The euro was one of the few currencies that inched higher on Monday, gaining about 1/4 of a cent, but most of the currencies lost an inch or two on the day to the dollar. But since the euro is so dominant of a component of the Dollar Index, the Index dropped from 96.61 at the start of the day to 96.52, and that drop in the dollar helped Gold to offset sellers, and the shiny metal closed down 40-cents… 

Silver found a way to hold onto the $19 handle that looked so good yesterday morning, and brought about images of sugarplums that were dancing in my head, in anticipation of even higher levels for Silver, but then I was awoken by a bad dream of monsters showing up at the COMEX with their arms full of short Silver trades….  The wolf is always at the door for Silver… that’s for sure!

Speaking of the wolf always being at the door….  I was remiss yesterday in not telling you what the oncologist told me last Thursday… After reviewing my bloodwork, and climbing all over me, she said that I was doing well, and that I should keep doing whatever it is that I’m doing…. She talked to me about my jaw, and wants me to contact a surgeon to find out the procedure to removing a jaw, for she believes that the process has to be better than what was described to me back in 2011…  

OK, back to the markets…  There is something I want to point out with Gold…  According to Kitco, Gold climbed to 1,841.00 yesterday before coming face to face with arms full of short Gold trades…  The Boys in the band were very active yesterday, and brought Gold back to 1,803 to close on the day, up $3 on the day…  Well, I hope these short Gold trades get huge margin calls, and have to be closed out ahead of time with HUGE losses! 

Longtime commodity guru, and friend, Rick Rule, told Kitco that he thought that Gold had run up in price too quickly, and that a return to fill in the gaps would probably happen, but then Gold would take off again… 

And then you had longtime analyst, Peter Schiff, tell an audience that the Gold chart looks great…  So… I know that you don’t read my letter to get information from other folks, and with that in mind, I’ll just say, once again, that I think $1,800 is the launching pad to higher prices for Gold… 

Well, the Federal Monthly Budget Deficit printed yesterday for June…  Sit down, folks, this is incredible!  The June Federal Budget deficit was $863 Billion! A new record amount to boot!  Now if I were in math class, circa 1972, the instructor would as me what the annualized deficit would be given the June number…. And I would have multiplied 863 x 12 and gotten….  are you ready for this?  $10,356,000 Trillion!  

OK, I know all too well that annualizing numbers can be deceiving, so let’s just say that $863 Billion is HUGE, and that we can’t continue to go on like this, can we?  Well, if there’s one thing that I’ve learned in my 47 years in “markets” it is that something may be evident, but it’s not imminent, until it is….    

You know, I just did that math on how long I’ve been associated with the markets, and even I was surprised at how long I’ve been at this… Shoot Rudy, I’ve been writing the Pfennig, since 1992…  that’s 28 years for those of you keeping score at home…  I have T-shirts that are older than 28 years, not that they would come close to fitting me any longer! HA! 

So, when I say that “I remember how things were long ago” I mean “long ago!” I’m just saying… 

Well, I was looking at the stock market yesterday, and noticed that it was up big, until it wasn’t yesterday… And this thought crossed my mind… I guess the idea that the Fed has your back, only works when the Fed does… I really don’t get the stock jockeys… The U.S. prints a record high Budget Deficit for June, and the number of cases of infected people with the virus, here in the U.S. continues to rise, and stocks just keep going higher… 

Oh, and maybe the stock jockeys haven’t gotten the message yet, but the Fed has begun to pull the punchbowl away from the table… Yes, their last 4 weeks of data have them reducing the Bond buying…   It’s been a real stealth move by the Fed, but one that t.hey told us would be the case… Remember them saying that they would go the full nine yards with Bond buying and then pull back when things looked better…   

It’s a crazy, mixed up world, folks…  And at the end of each day, I only have one question for you…  Got Gold? 

The U.S. Data Cupboard today has the stupid CPI for June… I would find it difficult to believe that anyone in the world would pay much attention to what CPI says….  This data has a long history of being massaged and cooked. So long now that the CPI chefs, couldn’t change now to save their lives!  

We’ll also have two speeches by Fed Heads,  first up is Lael Brainard, who is a dove, inside and out, and then St. Louis Fed President, James Bullard will speak… Bullard carries a bigger stick than Brainard these days, as it was once thought that Brainard had the ear of former Fed Chair Janet Yellen…   Yes, it was the Fed’s three headed monster, of Dudley, Yellen and Brainard…  That’s all changed now… thank goodness! 

I had a dear reader ask me to rethink what I said yesterday, in regards to talking about the state representative from W. Virginia, who wants to remove the taxation from sales of Gold & Silver…   He asked me if I thought it was a good idea to reduce taxes received in a time when tax receipts are way down to begin with, due to the economic shutdown.  

I would think that there could be some give and take here…  If you reduce tax receipts from one place, then you have to increase them in another place… And that place, in my mind, would reducing the loop holes in Corporate taxation…  There! See?  Now why can’t our elected representatives think like that? 

To recap… The currencies led by the euro pushed the envelope VS the dollar yesterday and overnight. Gold was following suit, until it wasn’t… and finished the day up just $3….  Silver held on to the $19 handle, and visions of sugarplums danced in Chuck’s head….  The Fed Budget Deficit for June was $863 Billion!!!!  COVID-19 infections are rising , the Budget Deficit is soaring, and yet, the stock jockeys are still dancing in the street…  It’s a crazy, mixed up world, folks…  Got Gold?

For What It’s Worth…  This past weekend, it was announced that Wells Fargo is laying off 10,000 workers…. I was talking to a good friend who works at a Big Bank, and I said that it won’t be long before the other banks follow suit, as its a game of monkey see, monkey doo with the banks….  and then… I read this article in my local paper about the GM plant here and that’s the gist of the FWIW article today… You can find that article here: https://www.stltoday.com/business/local/gm-lays-off-third-shift-at-wentzville-plant-citing-workers-covid-19-concerns/article_0731934b-1002-5c49-8628-737c52434827.html#utm_source=stltoday.com&utm_campaign=%2Fnewsletter-templates%2Fbreaking&utm_medium=PostUp&utm_content=a12874506a3b5805dded6c95af30d7173df7c77a 

Or, here’s your snippet: “General Motors will temporarily lay off a shift of workers at the company’s Wentzville Assembly Plant.

Darin Gilley, financial secretary for the United Auto Workers Local 2250 in Wentzville, said there are about 1,200 workers on the third shift. The plant employs about 3,750 hourly workers in total.

Dave Barnas, a GM spokesman, said the layoffs are scheduled to begin July 20. They are temporary, he said, but it is too early to give a definitive timeline.

 “We believe, in the short term, a two-shift operating plan will allow us to operate as efficiently as possible and accommodate team members who are not reporting to work due to concerns about COVID-19 in the community,” Barnas said.
 Gilley, of the UAW, said some third-shift workers may be able to work on the first or second shift during the layoff period if they so choose. Gilley said some workers have stayed home due to concerns about COVID-19, and that there have been at least 23 cases at the plant.
 GM did not confirm the number of cases, citing employee privacy concerns.”
Chuck again…  Remember the talk after the 2008 financial meltdown about “green shoots”?  Well, those “green shoots” turned brown and wilted, and so will all the talk of signs of recovery…. I’m just saying… 
Market Prices  7/14/20: American Style: A$ .6955, kiwi .6532, C$ .7340, euro 1.1371, sterling 1.2520, Swiss $1.0642, European Style: rand 16.7980, krone 9.4235, SEK 9.1402,  forint 312.37,  zloty 3.9414,   koruna 23.4679, RUB 70.75, yen 107.40, sing 1.3932, HKD 7.7509, INR 75.17, China 6.9974, peso 22.60, BRL 5.3462,  Dollar Index 96.46,  Oil $39.88,  10-year .62%, Silver $19.11, Platinum $832.00, Palladium $2,043.00, and Gold… $1,803.00
That’s it for today…  A little shorter than usual, but still chock-full-o-the info you crave! HA! So, are you getting excited about the start of Baseball? I am! We’ll  have the dash to the pennant going on in Baseball, the rigged up playoff system for hockey going on, and the NBA’s experiment with a bubble… After 4 months of no live competitions on TV other than Golf, we’ll be inundated with games, and I can’t wait!  My beloved Cardinals will play an exhibition game VS the Royals next week…  Chicago takes us to the finish line today with their iconic rock classic song: Does Anybody Know What Time It Is?  This is one of few songs that my old band allowed me to sing…  And with that… I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself! 
Chuck Butler