All Heck Breaks Loose!

March 3o, 2020

* Currencies finish the week on a high note!

* Chuck tries to make heads or tails of what’s going on… 

Good Day… And a Marvelous Monday to you! Well, after visiting the Port St. Lucie Wound Center on Thursday, and seeing that the graph they had put on my leg wound, had taken, and they were happy as a lark about it, but then learned that they were shutting down the center, and I would have no where to go from there, I decided to rent a car and drive home…. So, we rented a large SUV and carted back tons of stuff that we would need in our little river town home. It took 17 hours of driving but I was up to the task! I did 14 hours on Friday, and finished it up with 3 hours on Saturday morning. We then dropped off the rental, and hunkered down in our house, for the next couple of weeks… Saturday was gray, chilly, rainy, and an overall ugly day, and I immediately missed the sunshine of Florida! But, now I’m home, close to my doctors should something go awry, and Kathy is much more at ease…. Steely Dan greets me this morning with their song: Do It Again…. Which I would drive the distance again, no biggie!

Well, well, well, where do I start? There’s been so many things that have happened since we last talked last Wednesday… I really don’t know the best place to start, so I’ll just go with my normal start and see where it takes us today… I have the feeling that I’ll be writing a very long one today, with all the c— I’ve read since Wednesday! So, fill the coffee cup, and get settled this is gonna be a long one!

The currencies had a good week last week, for sure! The euro, which a week ago looked like it was headed down an ugly road, as it traded with a 1.07 handle, rallied throughout the week and ended the week with a 1.11 handle! The Aussie dollar, which last Monday was trading with a 59-cent handle is now trading with a 61-cent handle, and so on….  In the overnight markets, the euro has given back some of those gains from last week, and is back to a 1.10 handle….  But, inquiring minds want to know…. What caused this major selling of the dollar?

Well, that’s where things begin to get a jumbled up, folks, because there have been so many announcements of new measures, that I just don’t know where to start, so….. This is where I’ll start, and then move on….

OK, late Friday afternoon, the so-called Stimulus Bill, was signed by President Trump… This was no time to mess around with vetoes and such, but was the Bill, that was supposed to bring relief to American citizens that needed cash because they were out of work due to the Coronavirus measures, really going to do just that? Oh my goodness no! There were so many “pork bills” added to the Stimulus measure that it brought it up to $2 Trillion…. Let’s see now $2 Trillion divided by every citizen 330 Million, wait! I cant’ even get my phone’s calculator to go that high! So, let’s just say for good measure that, if the stimulus bill was ONLY for stimulus we’d all be getting a big fat check in the mail… But wait, when the beans have all been counted, there’s only $290 Billion allocated for checks to citizens…. Oh, you want to know what the other stuff was? Well, let me break it down for you…. $538 Billion for Big Businesses, banks etc. , of which $61 Billion is specific to the airlines….. $290 Billion for checks to citizens, and another $290 Billion in tax cuts, and then $385 Billion for “miscellaneous, and here’s where it gets dicey folks…. Oh, but wait, there is $25 Million allocated to the Kennedy Center…. What the hell does that have to do with the Coronavirus Pandemic? I shake my head in disgust, folks….

OK, on top of the $2 Trillion in extra debt that we’ll be adding this year… Did you hear about what the Fed has been given? Ok, hold onto to your seats here….. First of all the Fed was granted a waiver to suspend the Sunshine Law for their meetings…. Not familiar with the Sunshine Law? I as a former Alderman for my river town, know all about the Sunshine Law! Basically, the Fed can now hold meetings to discuss who’s getting what, in private, and not have to report who gets what, in the terms of bailouts, to the public! Ok, I hear you saying, that’s bad, but what amount are we talking about here? How about $4.5 Trillion?

So, by my back of the napkin calculations…. The Debt in this country is headed to $30 Trillion by the end of this year…. That’s $23.6 Trillion now on the books, plus $6.5 Trillion that’s going to be used to pay off the people from rioting, and that’s exactly what that $290 Billion is all about folks, there’s no two ways about it!

So, a representative from Kentucky, who tried to delay the vote on the Stimulus bill to ask questions about it, but failed, did say if we’re going into debt by $6.5 Trillion why not make it $350 Trillion, and then send a check for a $1 Million to each citizen?

You know, I believe that Japan has showed us that debt doesn’t matter until it does…. And that’s where we are here in the U.S. We have become comfortably numb with the numbers that are spewed out nearly every single day now, that up the ante on our debt… But one day, sons and daughters this is going to become a very BIG DEAL… And when it does… Got Gold?

Yes, I believe that there are some in Congress that want to do the right thing here, but they are so far and few in between that it just doesn’t mean anything any longer…. What happened to the Tea Party?

So, that’s the beginning strokes on what has happened since last Wednesday, should I go on? Isn’t that enough, to make your dander stand up? OK twist my arm…. I’ll continue….

I really got angry when I heard/ read this piece the other day…. “These are all temporary measures, that will abate once the pandemic is gone”…. Really? You mean you hadn’t been watching the Fed’s moves before the COVID-19 virus was still a China “thing”? The Fed was pumping Billions of dollars into the repo market on a daily basis, and no one but me, was asking what the heck was going on? The Fed’s bubbles that they had been blowing since 2000, were already leaking air, and they were ready to pop, folks…. Trust me on that statement…. I kept telling you that things were going awry, just watch the Fed’s actions and the bond market moves, and then asking if you had Gold….

I bet some of you were thinking, “Oh that’s just Chuck carrying on again about debt, and making mountains out of mole hills” And that’s fine…. But now you’ve got to see the writing on the wall, right? Chuck wasn’t just carrying on again! He was warning you of all this, and this COVID-19 virus has just added to the air leaking out of the Fed’s latest bubble…. Stocks were so overvalued that it bordered being ridiculous…. All markets are manipulated now, and still they can’t get the results from stocks if they came in with…. a bazooka and blew away the sellers!

Another thing I kept harping about being bad for the markets is the stock buybacks by Corporations… They have helped pump air into the stock market’s bubble, to the tune of $4.5 Trillion…. Imagine, ( a great song) if you will that instead of buying back their corporation’s stock, that the $4.5 Trillion was put into their Corporations, buying equipment, production lines, paying workers, expanding their trademark, etc. Wouldn’t we be far better off at this point in the proceedings that we are? I sure think we would be! But Bubble blowing has been our favorite thing to do since the’s …. 

This coming Blowup was as noticeable as a man with a hatchet in his forehead, but people just kept buying…. Thinking the Fed had their backs, and the Fed tried, but just like Humpty Dumpty, All the Fed’s men and all the Fed’s plans couldn’t put the stock market back together again….

Did you know that Bill Gates, held a conference last year, and mapped out the steps that would be taken in a pandemic situation? Each step has been taken up to the “blame Trump” step, with the next two being, no wait, let’s first go through the steps…. 1. Fear…. 2. Information censorship… 3. Shut down and social distancing… 4. Blame Trump… and now the next two… 5. Martial Law and checkpoints… and 6. Vaccines….

Now, I could very well put on my tin foil cap right now and talk about all the things that could go wrong with Vaccines, but let’s try to keep this a family letter, and say that it won’t get that far….

Speaking of tin foil caps…. Here’s a rumor that was going around on Twitter this past weekend, that has my spider sense tingling, and it was taken from an article posted on check this out if you dare….

“According to the Bloomberg piece, the Fed will finance a special purpose vehicle (SPV) to allow them to buy commercial paper, asset-backed securities, corporate bonds and bond ETFs in the secondary market:

“The Treasury, using the Exchange Stabilization Fund, will make an equity investment in each SPV and be in a ‘first loss’ position. What does this mean? In essence, the Treasury, not the Fed, is buying all these securities and backstopping of loans; the Fed is acting as banker and providing financing. The Fed hired BlackRock Inc. to purchase these securities and handle the administration of the SPVs on behalf of the owner, the Treasury.

“In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades.”

Chuck again… this would basically merge the Fed and Treasury together, thus ending the Fed as we know it… But even the Fed as we knew it would be better than a merged Fed and Treasury, folks! Trust me on that one…. At least the way it is now, we can see what the Fed does, and trade off of it…. I’m just saying….

OK…. Back to our normal programming…. I told you this would be a long one! Gold had a good week last week, and looks to be heading higher from the looks of things… And why wouldn’t Gold be heading higher? Debt is exploding higher, there are so many “unknowns” that Gold is the only real thing out there these days…. Of course I also mean Silver, but longtime readers know that I include Silver when I say, “Gold”….

The one thing I do feel best describes where we are right now in this country, is that… it’s impossible to keep up with who’s getting what, when and by how much… The important thing for us to recognize, is that we’re only just getting started… I mean that truly! We’re just getting started, even with the huge bazooka the Fed used last week! 

I read this past weekend that the Gold mines have reopened, but the lack of supply in Gold & Silver has to be so behind, that it’s almost ahead! HA! So, it will take some time to iron out the supply chain problems here…. That should keep Gold & Silver well bid, in my book any way!

OK, another reason for the dollar’s plunge last week was the weak economic data…. For instance, remember the U of Michigan Consumer Confidence index? That’s a blast from the past, right? I had thought they stopped printing it! But apparently not, because the report showed the largest one-month drop in March! This data set hadn’t seen a one-month drop like the one this month since Rocktober 2008!!!!!! That should just about tell you where the consumer’s thought are….

Also, the Moody’s Upgrades and Downgrades report last week showed the downgrades going from 0 to 69 in one week! Now that Has to tell you something, right?

The Data Cupboard also had the first week’s effects of the Covid-19 business shutdown…. 3.28 Million people filed for unemployment in one week! That’s 5 time, let me say that again 5 times the previous 1 week record! That was amazingly quick, eh? What’s in store for us this week? I saw where a Fed Head said that he saw unemployment reaching 20% here in the U.S.!!!! And once again the mantra is that “this is only temporary”…. Would that be the same “temporary” as the announced moved from a Gold Standard was supposed to be? I’m just saying…

To recap…. It’s a crazy mixed up world we live in… as they say “may you live in interesting times”…. But the world’s financing is changing right before our eyes folks… Have you gotten your journal to keep track of things daily like I suggested last week?  The currencies have shown some life in the last week, along with Gold…  And all these things going on are weighing heavily on the dollar….

For What It’s Worth…. OK, with all that’s going on, this article will only add to the madness….. It’s a well respected analyst, Ray Dalio, and his report on LinkedIn,  It’s quite long… and it can be found here:

Or, here’s your snippet: “I believe that the times ahead will be radically different from the times we have experienced so far in our lifetimes, though similar to many other times in history.

I believe this because about 18 months ago I undertook a study of the rises and declines of empires, their reserve currencies, and their markets, prompted by my seeing a number of unusual developments that hadn’t happened before in my lifetime but that I knew had occurred numerous times in history. Most importantly, I was seeing the confluence of 1) high levels of indebtedness and extremely low interest rates, which limits central banks’ powers to stimulate the economy, 2) large wealth gaps and political divisions within countries, which leads to increased social and political conflicts, and 3) a rising world power (China) challenging the overextended existing world power (the US), which causes external conflict. The most recent analogous time was the period from 1930 to 1945. This was very concerning to me.

As I studied history, I saw that this confluence of events was typical of periods that existed as roughly 10- to 20-year transition phases between big economic and political cycles that occurred over many years (e.g., 50-100 years). These big cycles were comprised of swings between 1) happy and prosperous periods in which wealth is pursued and created productively and those with power work harmoniously to facilitate this and 2) miserable, depressing periods in which there are fights over wealth and power that disrupt harmony and productivity and sometimes lead to revolutions/wars. These bad periods were like cleansing storms that got rid of weaknesses and excesses, such as too much debt, and returned the fundamentals to a sounder footing, albeit painfully. They eventually caused adaptations that made the whole stronger, though they typically changed who was on top and the prevailing world order.

The answers to this question can only be found by studying the mechanics behind similar cases in history—the 1930-45 period but also the rise and fall of the British and Dutch empires, the rise and fall of Chinese dynasties, and others—to unlock an understanding of what is happening and what is likely to happen.[1] That was the purpose of this study. Then the pandemic came along, which was another one of those big events that never happened to me but happened many times before my lifetime that I needed to understand better.

While it might seem odd that an investment manager who is required to make investment decisions on short time frames would pay so much attention to long-term history, through my experiences I have learned that I need this perspective to do my job well. My biggest mistakes in my career came from missing big market moves that hadn’t happened in my lifetime but had happened many times before. These mistakes taught me that I needed to understand how economies and markets have worked throughout history and in faraway placesso that I could learn the timeless and universal mechanics underlying them and develop timeless and universal principles for dealing with them well.

The first of these big surprises for me came in 1971 when I was 22 years old and clerking on the floor of the New York Stock Exchange as a summer job. On a Sunday night, August 15, 1971, President Nixon announced that the US would renege on its promise to allow paper dollars to be turned in for gold. This led the dollar to plummet. As I listened to Nixon speak, I realized that the US government had defaulted on a promise and that money as we knew it had ceased to exist. That couldn’t be good, I thought. So on Monday morning I walked onto the floor of the exchange expecting pandemonium as stocks took a dive. There was pandemonium all right, but not the sort I expected. Instead of falling, the stock market jumped about 4 percent. I was shocked. That is because I hadn’t experienced a currency devaluation before. In the days that followed, I dug into history and saw that there were many cases of currency devaluations that had similar effects on stock markets. By studying further, I figured out why, and I learned something valuable that would help me many times in my future. It took a few more of those painful surprises to beat into my head the realization that I needed to understand all the big economic and market moves that had happened in the last 100+ years and in all major countries.”

Chuck again…. OK, this is very long article but well worth the time it takes to read it, believe me, on that one! I hope you have the time to get through it all, Ray Dalio is very good at what he does and says…

Currencies today 3/30/20 American Style: A$.6130, kiwi .6007, C$ .7070, euro 1.1058, sterling 1.2433, Swiss $1.0455, European Style: rand 17.8212, krone 10.5808, SEK 9.9754, forint 324.28, zloty 4.1076,    koruna 24.6508, RUB 78.71, yen 108.00, sing 1.4244, HKD 7.7539, INR 75.00, China 7.0853, peso 23.82, BRL 5.0965, Dollar Index 98.96,  Oil $20.33,   10-year .64%, Silver $14.05, Platinum $731.18, Palladium $2,240.13, and Gold… $1,621.73

That’s it for today… I told you I was going to get carried away this morning!  The thing that I think gets lost among the stock jockeys and non-Gold holders is this…. All these bailouts, and it certainly seems as though everyone under the sun and moon is going to receive a bailout, the only way this gets done, is to create dollars out of thin air…. That’s right the dollar creation machine is going to be doing some heavy lifting…. So, think about that for a minute… What did they teach you in high school? That when you have a lot of something that the price drops, right? Well, so a “lot of dollars” are going to be created from thin air…. Just what do you think that’s going to do the dollar’s value? A fave saying of mine when we’re out and spending money is that, “not to worry it’s only money”…. But in this case, we had better begin worrying, folks, because… our currency is about to get sent to the currency woodshed….   I just had to finish with that… sorry about that for all of you who just read the first and last paragraphs!  Jimmy Buffett takes us to the finish line today with his song: Stars Fell On Alabama….   I great “morning song”…  I hope you have a Marvelous Monday, and please Be Good To Yourself… And Practice social distancing!  and keep your hands washed! and be healthy! 

Chuck Butler