Author: admin

May 21, 2019 

* Dollar bugs continue to rule the roost… 

* What’s a nuclear option? Chuck explains… 

Good Day… And a Tom Terrific Tuesday to you! Tom Terrific and his wonder dog, Mighty Manfred, need to pull Crabby Appleton ( me ) out of his crabby mood this morning… My leg was screaming at me all night, and I just couldn’t get comfortable without pain… UGH! I’ve lived with pain somewhere in my body since I was 21, when I first threw my back out, only to find out a few years later, that I had ruptured the disk and no amount of pain pills, acupuncture, chiropractic work was going to relieve it… It’s been one thing after another year after year, something else hurts me… Pain is part of my life I guess… if I had known I would live this long, I would have taken better care of myself in my youth, instead of hurling my body in football games… But what’s done is done… As my mom would say, “you made your bed, now lay in it”… Big Head Todd and the Monsters greet me this morning with their song: Bittersweet…

But I don’t let it get me down, or hold me back from doing what I want to do… Although I am very limited with what I can do physically these days, since my 2nd major cancer surgery in 2007… Next month is an anniversary for me that I rejoice in observing… In June it will be 12 years since I was diagnosed with Stage 4 cancer… I know, I’m lucky to have lived this long, but the one thing I always had in my mind, was that I wanted to see my kids grow, and I thought that my work in writing had not been complete, that investors needed me… I was kind of full of myself back then, but cancer took care of that!

I’m sorry that I’ve turned today’s letter into some Chuck info… Sorry… But in reality, there’s nothing really to talk about, as the dollar bugs still rule the roost…. The currencies and metals can’t find bids… There was more talk about tariffs yesterday, but in reality the cat is out of the bag with regards to the Trade War… It’s here… And the only thing we can hope doesn’t happen, is that the Chinese who can’t match the U.S. tariff dollar for tariff dollar ( in other words we import more of their goods than they import of ours), that they don’t invoke the nuclear option… What’s that I hear you asking? Well, it would be to either begin to sell Treasuries, or just not show up at the auction window any longer… That would require the Fed to step in and begin buying Treasuries again… only this time it wouldn’t be called, Quantitative Easing, for it would be the for survival of our economy! Because, as I’ve explained many times in the past, we as a country use the sale of Treasuries to finance out deficit spending…  And you don’t see a major cut in deficit spending do you?  Well then, somebody would have to buy the Treasuries! 

And the Data Cupboard has basically nothing to help us make decisions… Yesterday, today and tomorrow are jam packed with Fed Head speakers…. You know, I really don’t care what they have to say any longer, because they don’t have any idea what’s going on in our economy… Tomorrow we will see the Fed’s FOMC Meeting Minutes to see if they did talk about rate cuts, or was Powell’s press conference after the last meeting, where they left rates unchanged, but changed their verbiage, was just a providing cover for the stock market… Speaking of the stock market, a slow burn seems to be taking place folks… Sort of like the old adage that if you put a frog in boiling water it will jump out, but if you put him in water in a pot, and slowly turn up the heat, he’ll never notice until it’s too late…. Consider yourself warned… for the markets seem to want to turn up the heat on stocks very slowly…

The price of Oil seems to be the only anti-dollar asset that’s on the rise these days… But we’ve seen the game played before… The price of Oil rises, and brings back all the players again, and they then proceed to ramp up supply, which brings the price of Oil back down, and all the players go home again, and we rinse, lather and repeat…

And with the price of Oil rising again, that means the Russian ruble is also on the rally tracks… But the ruble’s daily moves are so minimal that they are hardly noticed, except for someone with a keen eye on rubles like me! HA! There! I finally had some feeling for what I was writing this morning…  I knew it was there, it was just playing hard to get to this morning! 

We will see 1st QTR Retail Sales from New Zealand today… But like I’ve been talking about in recent letters, it matters not, right now that is, that foreign data prints strong or expectantly… Not with the sentiment toward the U.S. green/peachback going on in the markets right now…  Maybe the Fed’s FOMC Meeting Minutes will shake the tree and cause some dollar bugs to fall off the limbs today…

 The U.S. Data Cupboard does have Existing Home Sales for us today, but since this data has been on the slippery slope downward in recent months, traders just shrug it off, so there you have it… I believe the data will disappoint once again, but who’s counting, besides me? 

To recap…  The dollar bugs still have the conn, and no amount of bad stuff going on in the U.S. (Maybe a slow burn in stocks, among other things) will change the sentiment of dollar traders…  Chuck talks about the nuclear option that China holds… But doubts that it comes to that…  Gold can’t find a bid, but the price of Oil continues to ratchet higher daily… 

For What It’s Worth… I was looking through Reuters yesterday, just perusing articles that were the re when I cam across this one, about GDP and Debt… When an article has a title that goes like this: U.S. growth would have contracted without trillions in government, consumer debt: It’s bound to catch my eye… I think it’s a good one, and it can be found here: https://www.reuters.com/article/us-funds-doubleline-gundlach/u-s-growth-would-have-contracted-without-trillions-in-government-consumer-debt-gundlach-idUSKCN1SK2KW

Or, here’s your snippet: “U.S. growth appears to be based “exclusively” on government, corporate and mortgage debt and the economy would have contracted if the United States had not added trillions in debt, Jeffrey Gundlach, chief executive of DoubleLine Capital, said in an investor webcast on Tuesday.

“Nominal GDP growth over the past five years would have been negative if U.S. public debt had not increased,” said Gundlach. “One thing everybody seems to miss when they look at these GDP numbers … they seem to not understand that the growth in the GDP it looks pretty good on the screen is really based exclusively on debt – government debt, also corporate debt and even now some growth in mortgage debt.”

If the U.S. Treasury had avoided increasing its debt then nominal GDP would have been negative in three of the last five years, “even with all of the exact mortgage, corporate, and student loan growth that occurred,” Gundlach told Reuters in an email, following the webcast.

“If those non-Treasury debt categories had not grown, either, GDP would have been very negative.”

Chuck again… You tell ‘em Jeff! The article goes on to explain his position on this, so like I said I think it’s a good one…  

Currencies today 5/21/19 American Style: A$.6875, kiwi .6504, C$ .7456, euro 1.1146, sterling 1.2692, Swiss $.9898, European Style: rand 14.4353, krone 8.7857, SEK 9.6699, forint 293.12, zloty 3.8646, koruna 23.1284, RUB 64.54, yen 110.27, sing 1.3793, HKD 7.8492, INR 69.70, China 6.9138, peso 19.08, BRL 4.0980, Dollar Index 98.10, Oil $63.60, 10-year 2.42%, Silver $14.43, Platinum $814.98, Palladium $1,330.15, and Gold… $1,275.38

That’s it for today…  Again, sorry about all my whining above… Our Blues are back on home ice tonight for Game 6, which could be the deciding game in the series if they win… Come on Boys, win it in front of your home crowd!  The K.C. Royals come to town for 2 quick games starting tonight, that is if the torrential rain that’s being predicted stays away for the game. Every time the Cardinals play the Royals, I have bad memories of a World Series being stolen from us by Don Denkinger…  The Umpire that called a runner safe at first, but was out by 2 feet!  No replay in 1985, so that was that…   Sort of like the 5th down play at Missouri when they had beaten the eventual national champions that year, Colorado, but the refs forgot how to count…  And then in game 3 of the hockey series, the NHL stole a game from the Blues…   Why does this stuff happen to my fave teams?  AC/DC takes us to the finish line today with their song: You Shook Me All Night Long…  Which is exactly what that cellulitis pain in my leg did to me last night! UGH!  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

Chuck Butler

 

May 20, 2019 

* Dollar bugs continue to hold the conn on the currencies & metals!

* Blues Win! Blues Win! Blues Win! 

Good Day… And a Marvelous Monday! What a great weekend for our Blues, after having game 3 stolen from them by the NHL, the Blues bounced back to win the next two, and go up 3-2 in the best of 7 series, with game 6 on home ice… Friday night was a real nail biter, but yesterday, the Blues dominated the Sharks on their way to 5-0 win in San Jose! So, the Blues are one win away from facing the Bruins in the Stanley Cup Finals… Pretty amazing considering where this team was in December! My beloved Cardinals limp home from an awful road trip last week… We will celebrate grandson, Braden’s birthday this coming weekend, and find out the gender of his baby sibling to be! I was outside all day on Saturday and Sunday this past weekend, and I was plum tired come Sunday night! Live greets me this morning with their song: All Over You…

Well, the dollar bugs continued to take liberties with the currencies and metals on Friday, with the Dollar Index moving as high as 97.97 to end the day, starting the day on Thursday at 97.59… With the euro so heavily weighted in the Index this price move indicates the euro lost a lot of ground on Friday, which it did… And proves once again that as long a currency is in a strong trend, bad data doesn’t upset it, and good data from other countries don’t do it any harm, and the foreign currency with the good data doesn’t get any love… A year or so, I wrote that I had read that Traders’ sentiment toward the euro was changing. At that time, it was looking as if the European Central Bank (ECB) was going to be able to remove all stimulus, including negative deposit rates, very soon… And at that time I said that it appeared the strong dollar trend was over… But just as soon as sentiment changed to favorable to the euro, it changed back… And the euro and other currencies haven’t been able to shake the confidence of the dollar bugs…

Remember last week, when I told you that Eurozone 1st QTR GDP had proved resilient and didn’t lose any ground from the 4th QTR print? The euro received no love for that data… which was another sign to me that the strong dollar trend was still in place… UGH!

And then on Friday, the Italian PM said some things like “The euro harms his country”…  Really? Come on Mr. You should get down on your knees and thank the Good Lord above that you were included in the Euro…  Otherwise Mr., your borrowing costs would have been through the roof this past decade, as you dealt with your debt buildup… Think about that before you make stupid comments like that, that will end up causing damage to the euro’s value…  What a knucklehead! 

Gold got whacked to the tune of $9.20 on Friday… Someone has to explain to me, why? The world is a tinder box looking for a match… The debt of the world is unsustainable… The Data here in the U.S. continues to point to a downturn in the economy, and the Fed doesn’t have enough arrows in their quivers to combat a deep recession… Need I go on, because I will, don’t tempt me! HA! Seriously though… Gold gets sold because someone shows up at the COMEX with an armful of short Gold trades… There isn’t one thing going on in the world today that would signal to me that Gold needs to get sold… Not one thing!

To add to the world’s miseries, this past weekend the U.S. began a verbal assault on Iran…  Saber rattling if you will… of which, saber rattling that is, usually gives Gold a boost…  

Before I say something I’m sorry for later… I had better move on to other things… The foreign Data Cupboard this week is pretty barren, as there will just be some Industrial Production data from Japan, and Current Account data from the Eurozone this week…

The price of Oil continued to ratchet higher and now trades with a $63 handle this morning, as our friends at OPEC (NOT!) are talking about further cuts in production, and the then there’s the saber rattling that we just talked about as another reason for the boost to the price of Oil…  Hmmm…  Now there’s a real, if the great writer, Grant Williams, doesn’t mind me borrowing his tag line… Things that make you go Hmmm…. 

The U.S. Data cupboard this week will be interesting, in that we won’t get any real economic data until Friday this week, but in the meantime, on Wednesday, the Fed’s FOMC meeting minutes will print… I read a piece sent to me from longtime Reader, Bob, yesterday, that was all about how over ½ the families in this country are one paycheck missing from an economic calamity…

And that reminded me of a cartoon that I copied and sent to my friends, and said: “This Is Kathy in a few years”… Here’s the cartoon:

Late last week, Non-Sequitor, in the comic strips had a very funny to me that is, comic strip that day… it was Titled: Post Economic Apocalypse Campfire Stories: And it had a family that was living in a cave, and the woman was cooking something over an open fire, and she says: OK, kids, gather around to hear your father tell us again how he tried to warn everyone this was coming, but no one would listen….

I even had a dear reader send me a note and tell me that the cartoon strip had reminded him of me that day! So…. Got Gold?

In India this past week, they held elections (Yes it was that time again) and PM Modi was reelected to another term… Longtime readers will recall me talking about Modi during his first campaign was someone that India needed, as his reforms would unlock the economy of India and set the country up for a decade of economic growth… And that the rupee would rally on his election… And it did for about 9 months, and it was at that time that all the euphoria of a Modi win was fading, as he was unable to get his reforms through in a timely fashion… So, I’m not putting a lot of sugar on his reelection, but just hope that his second term is better than his first…

In China, the renminbi continues its slow march to a deep dark abyss… I just can’t get past the comments by the Chinese official who stated months ago, that the Chinese would not weaken the renminbi to offset the tariffs… HOGWASH! I know, I know, you kept your fingers crossed behind your back when you made that statement, eh? Well, how much weaker will the renminbi get? The renminbi has already fallen to a 6.91 and change figure… 6.95 is next, and then 7.00… But what’s a country to do to offset the tariffs being placed on their goods for delivery to the U.S. ? I mean, besides admitting that they HAD been stealing our intellectual property, and promise to stop? Countries have learned a popular way to deal with economic problems… Allow their currency to weaken… The Chinese are no different, folks… And one day we’ll be having this discussion about the U.S. and the dollar… THAT I’m sure of!

And in Australia, they held an election that created a majority for the current PM’s, Morrison, conservative coalition had secured 77 seats, with 76 needed for a majority… So, now there’s a real gov’t. in place in Australia, and no hodge podge makeup of a government…  This news should have pushed the Aussie dollar (A$) a bit higher, but any attempt to do that, was pushed back by the U.S. dollar bugs… 

To Recap…  The dollar bugs are in complete control this morning, and it all started late last week… Weak U.S. Data won’t budge the dollar from its lofty perch, and good foreign data doesn’t help the respective currency related to the good data… As Chuck reminds us, these are typical signs of a strong dollar trend… One that he thought had ended a year or so ago, but with sentiment ruling the roost these days, instead of fundamentals, the changes happen so fast…  Oil is up, Gold is down, India and Australia held elections, and the Blues are one win away from the Stanley Cup Finals! 

For What It’s Worth…  Well, I first saw this on Zerohedge.com and then Ed Steer highlighted it in his letter on Saturday, and since I talked about this above, I thought what the heck let’s talk about it… This is an op-ed by Pat Buchannan about Who Wants a War with Iran?  and it can be found here: https://buchanan.org/blog/who-wants-this-war-with-iran-137040

Or, here’s your snippet: “What would such a war mean for the United States?
It would not bring about “regime change” or bring down Iran’s government that survived eight years of ground war with Saddam Hussein’s Iraq.

If we wish to impose a regime more to our liking in Tehran, we will have to do it the way we did it with Germany and Japan after 1945, or with Iraq in 2003. We would have to invade and occupy Iran.

But in World War II, we had 12 million men under arms. And unlike Iraq in 2003, which is one-third the size and population of Iran, we do not have the hundreds of thousands of troops to call up and send to the Gulf.
Nor would Americans support such an invasion, as President Donald Trump knows from his 2016 campaign. Outside a few precincts, America has no enthusiasm for a new Mideast war, no stomach for any occupation of Iran.

Moreover, war with Iran would involve firefights in the Gulf that would cause at least a temporary shutdown in oil traffic through the Strait of Hormuz — and a worldwide recession.”

Chuck again… Mr. Buchannan does a good job of explaining why Iran doesn’t want the fight, and why the U.S. shouldn’t want the fight either, of which I agree with… 

Currencies today 5/20/19 American Style: A$.6917, kiwi .6537, C$ .7442, euro 1.1158, sterling 1.2743, Swiss $.9907, European Style: rand 14.3855, krone 8.7826, SEK 9.6478, forint 292.26, zloty 3.8522, koruna 23.0895, RUB 64.70, yen 109.90, sing 1.3762, HKD 7.8494, INR 69.68, China 6.9176, peso 19.13, BRL 4.0959, Dollar Index 97.96, Oil $63.01, 10-year 2.39%, Silver $14.48, Platinum $823.00, Palladium $1,328.00 and Gold… $1,276.70

That’s it for today…  Crazy stuff going on in the world, eh?  Man, the cellulitis in my leg just won’t heal, and brother is it painful! When you take chemo, you subject yourself to slow healing of cuts, wounds, etc.  And when you have something as strong as cellulitis, it’s going to take a long time! UGH!  But I don’t let it stop me from what I want to do!  So, did you all read last week, that my darling granddaughter, Delaney Grace is going to sing the national anthem before a baseball game this coming weekend?  We have a wagon full of people all signed up to attend… OK… Nazareth takes us to the finish line today with their song: Holiday…  A classic rock song for sure!  I hope you have a Marvelous Monday, and please remember to Be Good To Yourself!

Chuck Butler

 

 

May 16, 2019

* Currencies rebound, for the most part… 

* Ruble leads Petrol Currencies higher… 

Good Day… And a Tub Thumpin’ Thursday to you! I head to my oncologist as soon as I’m finished writing this morning, for her to tell me the results of my scans last week… Spoiler alert, I already know that they were clean as a whistle, and all that remains is the lesion on my mandible ( jaw) that remains in check at this time… She’s going to tell me the virtues of keeping up my regimen of daily chemo, to keep the wolf from knocking on my door… Why am I going again? HA! Well, our Blues had a rough night, as well as my beloved Cardinals… UGH! And I had a great lunch yesterday with one of my fave people in the world… Kathy’s cousin, Kristin, who used to work for me at EverBank… She’s so darling! The Doobie Brothers greet me this morning with their song: China Grove… At an EverBank function quite a few years ago now, they had a karaoke machine, and no one would step forward, until Vinnie Amato, our head of bank operations, took the mic and sang this song, and did a better than the average bear job with it too!

Pouring salt in the wound… That’s what I was thinking that President Trump was doing yesterday to China… He just keeps pouring salt in their economy’s wound… But they deserve it… They’ve been stealing our intellectual Property for years, and well now it’s time to pay the piper, who’s got salt to pour in your wound…. That’s all fine and good, but… Tariffs are not good for anyone’s economy folks… I know that a lot of you believe that all that China sends us is junk, that we don’t need… but try going without the stuff that China sends us… I totally dislike Tariffs, there’s no place for them in today’s global economy… But we have them, we know what they do to economies, so we’ve had time enough to prepare for them…. Got Gold?

In a delayed reaction yesterday, the euro finally got some love from traders for posting a better than expected 1st QTR GDP… But the love the euro received had limits… Traders weren’t going all-in on this love for the euro, that’s for sure!  

The British pound sterling is really sinking once again, and this is like deja vu all over again, for the currency, as the reason traders are stating as the key to this selling is the fear that the BREXIT negotiations will lead to a dismissal of PM May, and a disorderly BREXIT in the end… 

Gold didn’t do much yesterday, only moving 20-cents on the day. But, as Ed Steer likes to point out… It remained above its 50-day moving avg.  One of these days that’s going to be something to hang Gold’s hat on, but for now, Gold can’t seem to get past $1,300, and from there the resistance if very heavy around $,1320 and $1,350…  So, it’s like a gauntlet for Gold, but one that I believe will be gone through, eventually, without a problem!

The Russian ruble made a nice upward move in the past 24 hours, as the price of Oil rebounded from the supplies print reveal game of the previous day.  You know… I’ve said this before, but it bears repeating… The ruble has been quite steady this past year, trading between 63 and 66…  When you have a stable currency, with higher interest rates than you can find anywhere in the developed world, you have a “goldilocks currency”… And I just don’t get it that investors don’t have a  taste for the ruble…  You have to remove the history of a cold war, and what have you, and look to what this currency can do for one’s portfolio… I’m just saying… 

Well, The Aussie dollar (A$) continues to slide further down the slippery slope. As the proxy for Global Growth, the A$ is telling us that Global Growth is just a small image of what it once was…  The Trade War with China and the U.S. is spilling over to other countries… For instance, this morning I read a report about how the Eurozone was relieved that the tariff on autos hasn’t been implemented yet…  And WalMart issued a report this morning that warned customers that Chinese tariffs are going to increase the price of goods at their outlets…  When WalMart sees the tariffs as a problem, then Houston…. We’ve got a problem… 

Well, I have an article on the decline of Global Growth in the FWIW section today, so I’ll end that discussion here… don’t miss it! 

The Data Cupboard yesterday was as I thought it would be… Recall, I said yesterday that, “I fully expect April Retail Sales to be weak and disappointing, and I fully expect Industrial production in April to be negative… and I was not disappointed, as Retail Sales for April printed negative -0.2% (-0.1% ex-autos), and Industrial Production also printed negative for April at -0.5%… Capacity Utilization, one of the few, forward looking pieces of data, dropped from 78.5% in March, to 77.9% in April… (that’s a big one-month drop for this data) And then something not on my radar printed and was quite curious…

Remember when the trumped up 1st QTR GDP printed so strongly and it was attributed to Government Spending, and Business Inventories, correct?… Well, if that was so… Then why did Business Inventories for March, which printed yesterday, show no growth in the month? Zero, nada, zilch, a big fat goose egg! Curious and Curiouser… for sure!

To recap… The currencies fought back on Wednesday, as there was more rhetoric about the strength of the tariffs on Chinese goods, as Chuck said it was like pouring salt in China’s wound… The dollar should be getting sold like funnel cakes at a state fair, because of this Trade War, but so far it’s been bits and pieces…  Gold only gained 20-cents yesterday, and is down a buck or two in the early trading today…  

For What It’s Worth…   Well, I’m so concerned about Global Growth, suffering a long illness that stems from the Trade War, and then I read this article, and was even more convinced that this is going to happen!  This is from zerohedge.com and can be found here:https://www.zerohedge.com/news/2019-05-15/global-trade-collapsing-depression-levels

Or, here’s your snippet: ” With the trade war between the U.S. and China re-escalating once more, investors are again casting frightened glances at declining global trade volumes, which as Bloomberg writes today, “threaten to upend the global economy’s much-anticipated rebound and could even throw its decade-long expansion into doubt if the conflict spirals out of control.”

“Just as tentative signs appeared that a recovery is taking hold, trade tensions have re-emerged as a credible and significant threat to the business cycle,” said Morgan Stanley’s chief economist, Chetan Ahya, highlighting a “serious impact on corporate confidence” from the tariff feud.  

A similar deterioration was observed in the US, where retail sales unexpectedly declined in April while factory production fell for the third time in four months. Meanwhile, over in Europe even though Germany’s economy emerged from stagnation to grow by 0.4% in the first quarter, “the outlook remains fragile amid a manufacturing slump that will be challenged anew by the trade war.” As a result, investor confidence in Europe’s largest economy unexpectedly weakened this month for the first time since October.

Framing the threat, a study by Bloomberg Economics calculated that about 1% of global economic activity is at stake in goods and services traded between the US and China. Almost 4% of Chinese output is exported to the U.S. and any hit to its manufacturers would reverberate through regional supply chains with Taiwan and South Korea among those at risk.
U.S. shipments to China are more limited, though 5.1% of its agricultural production heads there as does 3.3% of its manufactured goods.”

Chuck again…  I hope you get to the article at the link above, because it goes really deep into the problems for Global Growth, and the chart/ graph included really illustrates what’s going on… 

Currencies today 5/16/19 American Style: A$.6921, kiwi .6575, C$ .7450, euro 1.1205, sterling 1.2813, Swiss $.9909, European Style: rand 14.1412, krone 8.6978, SEK 9.5967, forint 289.32, zloty 3.8340, koruna 22.9330, RUB 64.73, yen 109.65, sing 1.3689, HKD 7.8489, INR 70.08, China 6.8743, peso 19.02, BRL 3.9854, Dollar Index 97.59, Oil $62.79, 10-year 2.38%, Silver $14.79, Platinum $846.43, Palladium $1,338.98, and Gold… $1,294.27

That’s it for today…  What a awful loss for our Blues last night, as the Sharks scored a goal with just seconds remaining in regular time, and then won in overtime… A real heartbreaker, for sure! Darn the luck! Oh well, that’s why they play 7 game series! Let’s Go Blues!  Well, I’m a little later than usual this morning, as I just couldn’t answer the bell this morning when I was supposed to! UGH!  Well, I received the news the other day, that my darling granddaughter, Delaney Grace, will be singing the National Anthem at a River City Rascals baseball game on May 26! WOW! (she’s not even 12 yet!) That’s Memorial Day Weekend, so if you are in the area, come out and support that darling little girl!  The Marshall Tucker Band takes us to the finish line with their great driving song: 24 Hours At A time…  I hope you have a Tub Thumpin’ Thursday, a Fantastico Friday and Wonderful Weekend, and you remember to please Be Good To Yourself!

• Chuck Butler

 

May 15, 2019

* Dollar returns to the head of the class on Tuesday…

* Eurozone receives some good 1st QTR GDP, but the euro can’t find a bid… 

Good Day… And a Wonderful Wednesday to you! My beloved Cardinals opened up in Hot-lanta last night with a convincing win, which is a good way to start a road trip! They’ve scored lots of runs in the opening games of the last two series, with this now making 3, and then in the previous 2 series, they put away their bats, thinking their job was done… Unfortunately, it wasn’t… I told you yesterday, that the stock jockeys didn’t need to worry that the PPT would be there yesterday to save them, and that’s exactly, what, in my mind, happened… Consumer debt is rising again… This and more to talk about today… Peter Gabriel greets me this morning with his song: In Your Eyes…

Well, our nothing day on Monday turned to a dollar bounces back on Tuesday… Turnaround Tuesday, I guess… Why would the dollar bounce back, when it got sold on the Trade War news of Friday? Sell the fact, and buy the rumor? Or… did the PPT help out here too? Now, I have you wondering if what I’m saying is all making sense, right? The Aussie dollar (A$) was the worst performing currency of the day as the pain in China is causing a pain in the A$… The rain in Spain is mainly on the plain… Stuff like that!

This morning, earlier, the Eurozone printed their 1st QTR GDP, which was better than expectations at 0.4% for the QTR, and 1.2% year on year, which is exactly where it stood in the 4th QTR of 2018… So, no increase in growth, but…. no weakness either, which is what everyone and their brother was looking for… But still the euro can’t find a bid this morning, and is well below the 1.12 figure… again!  

I do believe that the euro is getting caught in the crosshairs of the Trade War between the U.S. and China… I hope it can shake its way out of those crosshairs soon, before things get ugly… 

Speaking of China… The posted their recent Retail Sales and Industrial Production for April both showed weakness already…  The renminbi continues to post weaker levels just about daily now, and all the euphoria that used to hang out over China, has now moved on, and black clouds have taken the place of euphoria here…  Is it time for China to begin to use some of their reserves to stimulate the markets like they have done in the past when things got dark?  

I’m going to spend some time this morning talking about consumer debt… So… if you don’t want to hear it, too bad! HA! No, seriously, if you don’t want to hear it, then skip ahead… OK, all that want to hear what I have to say about consumer debt are here, that want to be here, so let’s go!

The Center for Microeconomic Data put out their latest report on Consumer Debt… And to start this off I’ll let them tell you the results… it WAS their report after all! “The CMD’s latest Quarterly Report on Household Debt and Credit reveals that total household debt rose by $124 billion to reach $13.67 trillion in the first quarter of 2019—an increase of 0.9 percent, compared to a rise of 0.2 percent in the fourth quarter of 2018. This past quarter, balances climbed by 1.3 percent on mortgages, 0.5 percent on auto loans, and 2.0 percent on student loans, while total credit card balances fell by 2.5 percent.”

And now Chuck’s viewpoint on this… We, as a country now have more consumer debt than what was on the books prior to the financial meltdown in 2007/08… Wait! What? Yes, that’s right! Remember when consumers said, We’ve learned our lesson, and we’re going to cut back our deficit spending? Well, they did that for about a year, and then the spending more than we make began to build again, and now, like I said, the consumer debt totals more now than in 2007/08… Here’s the difference between Consumer Debt and Gov’t Debt folks… Gov’t debt can be defaulted on, and Consumer Debt while it can be defaulted on, can’t be washed off the books without someone going to debtors’ jail… Well, at least that’s the way it used to be, we problably have changed all that because we wouldn’t want to hurt someone’s feelings by making a public spectacle of them… So, here’s a cookie, and a gold star, for “trying to pay off your debts”….

And it’s not just housing related debt… The report also showed that: Non-housing balances increased by $10 billion in the first quarter, with a $6 billion increase in auto loan balances and a $29 billion increase in student loan balances. Credit Card balances at least narrowed in the quarter!

There’s no way this all turns out peachy folks… There’s just no way… Sooner or later the bill collector is coming to the door… And he won’t take “go away” for an answer… The repo guys will come for the car, and when you’re away from home, they’ll come for that big screen tv, all the Alexa’s and dots you have and other things…

OK, that’s all I’m going to say about that today… Gold couldn’t take that next step to trade past $1,300 yesterday, and fell back by $4 on the day… And the price of Oil rebounded when it was reported that drones had attacked gas outlets in Saudi Arabia… Now, who would do something like that? Hmmm…. Well, I guess you have to figure out who in the world has the capability to direct drones to do something like that… Hmmm… That’s all I have to say about that!  

And right when the price of Oil was ready to make a big move forward, once again out came the supplies report from the U.S. that put the road block on Oil’s move forward!  Funny, not funny ha-ha, that the last two times the price of Oil began to more forward, the supplies report seems to show up… Oh well, it is what it is… 

Yesterday, I mentioned my trip to the dark alley, where I checked on the status of the Gov’t demanding holders of IRA’s and 401k’s to own nothing but Treasuries… And here’s what my good friend Dennis Miller, the Retirementor, who’s also now going though chemo and radiation, and can be found at www.milleronthemoney.com… Had to say about that: “If the government forces people to put treasuries in their retirement accounts, it will be followed by the greatest theft of wealth in human history. Once the money is in, all it takes is another five year period like the Carter years and the value of their nest egg will drop by 60%.

Savvy investors would probably cash out their IRA’s to avoid that.”

Yes, I agree… I actually know some people that closed out their IRA’s took the tax hit, when this was first talked about years ago… And then it was just talk, as it is now, but imagine if you will if talk becomes reality… YIKES!

OK, let’s talk about something else… 

The U.S. Data Cupboard finally gets some real economic data prints to show us today…  Every channel I turn to (just for grins) has a talking head telling me that the U.S. economy is strong and robust…  Well, I wonder what they’ll say when they see today’s data prints… I fully expect April Retail Sales to be weak and disappointing, and I fully expect Industrial production in April to be negative…   But if these prints do show the weakness I expect, it won’t be discussed at all… Like water off a duck’s back… 

To recap… Our nothing day on Monday, switched to a turnaround Tuesday for the dollar, and all the currencies’ gains from Friday, have been reversed… UGH!  Consumer Debt is soaring once again, and Chuck says it won’t turn out peachy… The Eurozone 1st QTR GDP was bang on the same figure as the 4th QTR 2018, which means all the gloom and doom that was expected for the Eurozone isn’t happening, yet, that is… 

For What It’s Worth… this will look different this morning but, hey! Just go with it! HAH!

Well, I mentioned this a couple of weeks ago, that Bart Chilton, the former CFTC regulator had died, but before he did, he gave an interview in which he said that the CFTC had told JPMorgan to cease their short silver operations, but that JPMorgan had ignored them. Well, the GATA folks sent me a link to an interview with Ed Steer where he talks about this new found information regarding price manipulation… here’s what the GATA folks said: “GATA Board of Directors member Ed Steer, editor of Ed Steer’s Gold & Silver Digest letter, was interviewed the other day by James Anderson for Silver Doctors. They discussed former U.S. Commodity Futures Trading Commission member Bart Chilton’s confirmation that the commission allowed JPMorganChase to manipulate the silver market. They also discussed the use of derivatives by central banks and their agents to control commodity prices.

The interview is 20 minutes long and can be heard at Silver Doctors here:
https://www.silverdoctors.com/headlines/world-news/ed-steer-gold-silver-…

Chuck again… I hope you get the opportunity to listen to this interview… All those naysayers out there that continue to say that the Gov’t has nothing to do with price manipulation of Gold & Silver have to be feeling a bit less confident right now… As this revelation ties to my theory that yes, the regulators know that JP Morgan et al, are manipulating the prices of Gold & Silver, but they have the wink and nod from the Gov’t that they will not be persecuted… Bart Chilton was telling us that in so many words, when he said that the CFTC told JPMorgan to cease their shorting operations, and they ignored the CFTC…

Currencies today 5/15/19 American Style: A$.6917, kiwi .6553, C$ .7420, euro 1.1180, sterling 1.2880, Swiss $.9918, European Style: rand 14.2778, krone 8.7583, SEK 9.6316, forint 290.73, zloty 3.8540, koruna 23.0450, RUB 65.13, yen 109.31, sing 1.3695, HKD 7.8495, INR 70.40, China 6.8759, peso 19.20, BRL 3.9828, Dollar Index 97.64, Oil $61.11, 10-year 2.37%, Silver $14.81, Platinum $851.61, Palladium $1,318.04, and Gold… $1,298.32

That’s it for today…  The Las Vegas Money Show is going on this week… Chris sent me a text last night with a picture from the show, telling me that people keep asking about me…  Well, that’s nice isn’t it? To have made an impression on strangers, that 2 years after I’m gone, they keep asking about me? I’m very proud of myself this morning… Don’t let that go to your head, Chuck!  HA!  Our Blues get back on the ice tonight, but this time they’ll be on home ice… Let’s Go Blues!  So, hockey and baseball on at the same time tonight… Get the TV out of Alex’s room to make this happen! Earth, Wind and Fire takes us to the finish line today with their song: After The Loving Is Gone…   I hope you have a wonderful Wednesday, and continue to Be Good To Yourself!

Chuck Butler

May 14, 2019 

*Currencies get stuck in the mud, and don’t move on Monday… 

* Chuck gets a call from the Fed Chairman! (not really..)

 

Good day… And a Tom Terrific Tuesday to you! Oh what a night! All of St. Louis’ attention was on their Blues hockey game in San Jose, as the Cardinals were traveling to Atlanta… It was “one of those days” for me yesterday… Every now and then, all the cancer drugs sneak up on me, and all I want to do all day is sleep… And sleep I did yesterday! I tried to stay up for the end of the game last night, but the hour later start than when in St. Louis, made that difficult for me… And so, in the middle of the night, when I usually wake up, to take my chemo, and then go back to sleep, I checked the score to find out the Blues had won! … Our Blues come home now for the next two games, that they’ve got to win on home ice! The Blues were up 2-0 one minute and the next it was tied 2-2, UGH! And then the Blues went ahead 3-2, and I went to bed! I’m greeted this morning with the Killers song: Somebody Told Me…

Well, it was a nothing day in the currencies yesterday… Last night when I checked the currencies before heading off to bed, the euro was trading in the same clothes as it did all day at 1.1233… But the stock jockeys sure couldn’t say it was a “nothing day” in the stock markets… That was ugly, and it will leave a mark for sure, but at some point the Plunge Protection Team will step in, and well, stop the bleeding, the stock jockeys have that to look forward to! The stock investors sure don’t like the idea of increased tariffs not only on exported goods but on imported goods, making goods much more expensive, thus reducing the disposable income of consumers…

One currency that did move some on Monday was the Aussie dollar (A$), as it slid further back into the 69-cent handle. As I told you yesterday, this is all in response to the tariff thing escalating, for traders know all too well how this Trade War is going to hurt both the Chinese and U.S. economies, and probably spread around the world…

Gold pushed higher on the day by $13 and closed just under $1,300, at 1,299 and change… Tariffs are taxes folks… Think of your taxes going higher and inflation stepping into the picture once more, and the Fed? Well, like I said last week, they’ve painted themselves into a corner, and will be damned if the cut rates and invite inflation to soar, or damned if they don’t cut rates, and allow the economy to sink further into the recession abyss…

Remember, what I’ve been telling you folks, that this next recession might not be your garden variety recession… First of all, the U.S. has never had so much debt to deal with in past recessions… They’ve never had so many derivatives on the books of financial companies… They’ve always were able to cut interest rates at least 5% during recession, but with the Fed Funds Rate at 2.5%, that’s not happening this time… Oh, and we’ve never had the level of leveraged Corporate loans on the books, that could be like a keg of dynamite if set off…

I’m thinking that the Fed should risk inflation rising and worry about the short term of a recession and what it might bring… But then nobody asked me… Hello? Yes, this is Chuck Butler, who’s calling? Oh, hello, Jerome Powell, Fed chairman! What may I help you with? Well, Chuck, I’ve been reading the Pfennig for some time now, and I know you’re not one of our fans, but you made sense the other day when you said that you thought the Fed should risk inflation and cut rates… Did you really mean that, for I trust your opinion to the bitter ends of the earth! Well, yes, Mr. Chairman, that’s what I believe, because IF you’ve been reading religiously then you know about the black clouds that would circle the U.S. in a recession… So, go back and tell the other Fed Heads, what I’m saying, and I’m sure you’ll get them all to agree with me! Bye~…… As if!

Getting back to Gold…  No early morning shenanigans today, so Gold starts the day at $1,299…  Regarding Gold…. I’ve often wondered why the U.S. Gov’t doesn’t come out and make an appeal to U.S. citizens to buy Gold… Why not? I’ve talked about this graph before, but I thought I would pull it out again, dust it off, and tell you the results of investment returns in the past 20 years… REITS are number 1 with an average annual return of 9.9%… And Gold is second at 7.7%… You would have to go all the way down the 4% return range to find the developed markets of the U.S. (stocks & bonds)… Gold kicks their Behind the refrigerator there was a piece of glass, Lulu sat upon it and broke  her little… ask me no more questions, I’ll tell you no more lies… And so on! Gold kicks rear and takes names later, and still individual investors, who are on the chart, all the way down at the bottom with an average annual return the past 20 years of just 1.9%, don’t buy Gold…  And I sit here and wonder why? 

Well, I heard that the recent 10-year Treasury auction didn’t go so well… Do you think it was because of the drop in yield? Or, was it the fact that investors are getting pretty wary about the debt situation here in the U.S.? Remember a very large portion of our Treasury auctions needs to be picked up by foreigners… And what did I tell you yesterday about what foreign Central Banks are doing with their reserves? That’s right, they’re buying physical Gold, and not Treasuries…. Uh-Oh, spaghetti-o’s….

And that brings me to very dark alley, where things are talked about outside of the media… Here, I get to listen to many  theories and rumors… The rumor I’m concentrating on now is the one that floated around about 10 years ago, and I warned then that it would come back at some point in the future, and it has, that’s why I’m checking it out today… The rumor I’m talking about is the Gov’t requiring U.S. citizens with 401’s and IRA’s to buy Treasuries, since the foreigners aren’t buying them… While I don’t care for the idea, think about it for a minute… If all the moms and pops of the U.S. held Treasuries in their retirement account, they wouldn’t give two hoots about a stock selloff, now would they?  So… checking on it, I find it’s way back in the dark alley, so it appears to be a back burner things right now…

In a side bar… The State of Illinois’ finances are in such shambles that they’re looking for new sources of income… This from the Chicago Tribune…. “ Illinois might start charging $1,000 a year to own an electric car”…. Hey, you can’t make this stuff up folks!

The U.S. Data Cupboard still doesn’t have much to offer us today, same as yesterday, when only Fed Heads speaking were counted as offerings… One Fed Head Neal Kashkari, really made a point of how he believes interest rates need to be lower, which caught the ear of a few Traders… 

The Price of Oil can’t find a bid these days, and that’s really put a crimper on the Petrol Currencies, led by the Russian ruble, which continued to receive good news about the Russian economy, but with the price of Oil wallowing in the mud, the ruble isn’t going anywhere for now…  And neither is the Canadian dollar / loonie, Brazilian real, Norwegian krone, and a few others… 

To recap…  It was a “nothing day” in the currencies as they didn’t move up or down on the day, except the A$ which saw more selling because of the problems in China.  China announced that they would retaliate with tariffs on U.S. goods, and the stock jockeys got their rear ends handed to the them yesterday…  But not to worry, just yet, as the PPT should be in the stock market today to save Polly purebread…  Oil can’t find a bid… But Gold moved higher on the day by $13.80! And sits just below $1,300… 

For What It’s Worth…. For years I’ve written about all the attempts to end the use of cash… I gave you my reasons for being against this effort. Sweden is the posterchild for a cashless society, but here in the U.S. we have more forward thinking people that see what the world would be like with no cash… And I saw this article and though, this is a good follow up, for it talks about plans to fine businesses that only accept credit cards… And it can be found here: https://needtoknow.news/2019/05/cash-is-still-king-san-francisco-bans-cashless-stores-that-require-patrons-to-pay-via-credit-card/

Or, here’s your snippet: “San Francisco officials voted Tuesday to require brick-and-mortar retailers accept cash for goods as payment, joining Philadelphia and New Jersey in banning a growing cashless system that discriminates against low-income people who may not have access to credit cards. Cashless systems can be used to control people and their finances.

San Francisco officials voted Tuesday to require brick-and-mortar retailers to take cash as payment, joining Philadelphia and New Jersey in banning a growing paperless practice that critics say discriminates against low-income people who may not have access to credit cards.

The vote by the Board of Supervisors was unanimous.

Supervisor Vallie Brown, who introduced the legislation, said it “will go far in ensuring all San Franciscans have equitable access to the city’s economy.”

Chuck again… I sure hope this catches on elsewhere, because I was beginning to feel the pressure of no cash being used… Whew! And with all that’s going on in the world today, we certainly don’t need to deal with this stuff right now! (Or never in my opinion!)

Currencies today 5/14/19 American Style: A$.6947, kiwi .6582, C$ .7425, euro 1.1233, sterling 1.2948, Swiss $.9927, European Style: rand 14.2350, krone 8.7246, SEK 9.5970, forint 288.68, zloty 3.8350, koruna 22.9260, RUB 65.33, yen 109.62, sing 1.3686, HKD 7.8487, INR 70.51, China 6.8666, peso 19.18, BRL 3.9717, Dollar Index 97.34, Oil $61.77, 10-year 2.41%, Silver $14.80, Platinum $862.15, Palladium $1,332.46, and Gold… $1,299.04

That’s it for today…  So, the Blues won, the series is tied 1-1… Our Blues played in the Stanley Cup Finals their first 3 years in the league, and never won a game in the finals, getting swept each year.  I have no idea why I went there… But there you go, if you ever wondered! HA!  I forgot to mention yesterday, that last Friday, former colleague and friend, Chris Gaffney came to visit me at my local watering hole!  Thanks Chris! I try to remain on the minds of my former colleagues, but I think I’m losing, as “out of sight, out of mind” seems to rule…  Oh well… I tried…  Cardinals are in hot-lanta for the next 3 days, and then down to Texas for the weekend…  The Great Smokey Robinson takes us to the finish line today with his song: Ooo Baby, Baby…   After I was an old man I was told that this is the best “make out” song… too late for me, but for you youngsters, there you go! HA!  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

Chuck Butler

 

 

 

May 13, 2019

* The dollar bugs finally retreat… 

* FX traders on trial, but as usual no one will go to jail… 

Good Day… And a Marvelous Monday to you! I trust all the mothers out there had a grand day… I texted Alex yesterday morning (he’s in Montgomery Al. ) and asked him if he had talked to his mother yet… He finally called last night after all the other kids and grandkids left… You don’t know what you’ve got until it’s gone… Just remember that… An awful weekend for my beloved Cardinals, when they hit, they don’t pitch, and when they pitch they don’t hit… That’s a bad combination for a baseball team, for sure! And Our Blues got the Western Conference Finals started on the wrong foot, on Saturday… UGH! 10CC greets me this morning with their song: The Things We Do For Love… Like walking in the rain and the snow and there’s no place to go…

Well, Friday, came and went, and there was no Trade Agreement with China ironed out, and so a new phase of tariffs went into effect at midnight, Friday night… Have I mentioned before how much I dislike tariffs? Now, I’m not the sharpest tool in the shed, and neither are the knuckleheads at the Fed, but at least they know that tariffs aren’t good for an economy, and there were reports all over the news wires on Friday & Saturday about how the Fed will now be forced to cut rates to help offset the bad stuff that will happen to our economy…

China has already announced their retaliation and that’s tariffs on $60 Billion of U.S. goods starting June 1…. 

Have I told you lately how Sanctions don’t work either? All you do, as a country, is tick off people in other countries, that you might need to help you at some point in the future… Good luck with that!

So… the dollar finally gave up the conn on Friday, after the news of a non-agreement, and the stupid CPI printed… CPI (consumer inflation) only gained 0.3% in April, and it was forecast to grow at a 0.4% clip… So, another one bites the dust! And that’s not all! Core CPI, which takes out food and energy (as if we don’t use them every single day of our lives!) only grew at 0.1% and was expected to grow at 0.2%… The Fed Heads aren’t dumb enough to use CPI as their main inflation tool… For that they use the PCE (Personal Consumption Expenditures), which, I’m pretty sure is going to show that inflation is no longer at DEFCON 4, here in the U.S. and that will also give the dollar bugs reason to go hide…

My good Friend, Mike, always gives me trouble about how I make a big deal out of small moves in Currencies… I tell him all the time that the currency markets is a $5 Trillion a-day market, and that there are very large sums of money that can make even larger sums of money in the Currencies if they move just a few cents, much less the types of moves we’ve seen in the past where the dollar was in the middle of a weak dollar trend…

So, with that thought in mind… The euro gained about ½-cent on Friday… The move brought the euro back above the 1.12 handle. And the Aussie dollar (A$) gained back to 70-cents on the day… And all the currencies fell in behind these two leaders… We’re following the leader, the leader, the leader…. 

In the overnight markets there was some change though, as traders rethought their buying of A$’s with China ready to receive more tariffs, and the they reversed the buying and brought the A$ back to .6968 this morning. 

Speaking of China…  Remember when their leader stated that the Chinese wouldn’t use the renminbi as a tool to offset the tariffs? Well, even at that time of his talk, I questioned it, and was sure he was speaking with his fingers crossed behind his back… The renminbi this morning is the weakest it has been since the last time China wanted to shock the world, and allowed the renminbi to weaken to 6.81… that was 2016… And of course now…  No wonder the A$ got taken to the woodshed in the overnight markets, after China posted this price for their currency! 

Gold was allowed to book at $2.40 gain on Friday… to close at $1,285.80… I had a dear reader write me last week, and ask me this: “if there were no price manipulators, what do you see as the price of Gold today, and where would it go?” Well, IF there were no price games played with Gold, I would think it would be around $2,000… And once there, who knows how high it could go?! Silver would be in the same boat… Silver should be trading around $50 and once there, who knows?

I’m just one of those people that believe “the powers that be” in our country, which excludes the White House, would prefer to print money like there’s no tomorrow, deficit spend until it hurts, and basically allow the dollar to go to hell in a hand basket… At which time, Gold (&Silver) would certainly be better alternatives to the dollar, right?

And you know how I always tell you to “follow the money”? Well, since the beginning of 2018, Central Banks around the world (not the U.S. though) have been picking up large chunks of Gold, so much so that in the first QTR of this year, the buying of physical Gold by Central Banks has reached a level not seen since 2013! These wily Central Bankers know that they need something solid for their reserves, and owning dollars doesn’t seem to be what’s on their minds… I’m just saying…

OK… onto other things… The British pound sterling rose above the 1.30 level on Friday, after an upbeat GDP report, albeit very stale, printed… 4th QTR 2018 GDP grew at 1.8%, VS 1.4% in the 3rd QTR… I read a report that talked about how U.K. GDP got a boost in the 4th QTR because people thought there would be a BREXIT deal… But seeing no sign of a deal, I would have to think that the 4th QTR boost will be reversed… Be careful here…

I told you last week that the Japanese yen was seeing some so-called safe haven buying that brought yen from near 112 to just below 110 last week… Well, yen is still below 110 which is a good thing for yen holders, as it’s called a European Priced currency… It takes less of the currency to make up a dollar… These Safe haven trades are usually fleeting and don’t have the legs for a long run, so I wouldn’t put too much into the positive move that yen has made recently… Remember they have Debt up to their eyeballs, a HUGE demographics problem, and a stock market that has been in a fund for 25 years!

Well, how about that? Or Bust my buttons! But, the U.S. actually booked a surplus for the month of April! WOW! Well, shouldn’t they book one that month? (Taxes are due in April) There have been some years recently where we wouldn’t even book a surplus in April! But we did this year, but don’t let that go to your heads, Congress… it doesn’t mean that you get to add more pork and fat to the next spending bill!

On Wednesday of this week, we’re be treated to 3 real pieces of economics … April Retail Sales , and Industrial Production with Capacity Utilization… I’ll bet a dollar to a Krispy Kreme that April Retail Sales will disappoint big time, VS the blow out in March… The Butler Household Index (BHI) indicated that to me…

Until then (Wednesday that is) There’s not much in the gas tank of the U.S. Data Cupboard… So, let’s all take tomorrow off and come back on Wednesday! Sounds like a plan… And you know me… I love it when a plan comes together! HA!

To recap… No Trade Agreement means more tariffs, and the markets are backing off their feeling that an agreement was going to take place. That means the dollar is weaker this morning, as witnessed by the Dollar Index, which on Thursday last week was 97.62, and this morning it’s 97.29…  

Before I head to the Big Finish today, I wanted to talk about this email I received from the GATA folks, telling me that the mega banks that had been caught with their hands in the cookie jar, regarding FX manipulation were going to trial… 

I remember when this story first hit the streets a few years ago, I was still the President of EverBank World Markets, and our legal guy, Tom, called and wanted to talk to Frank and Chuck about this story that the foreign exchange (FX) markets were rigged… We assured him that we were free and clear of this, and since the FX market was a $5 Trillion a day market, we doubted that the rigging would turn out to be much… Well… skip forward to yesterday, when the GATA folks sent me this clip from a news story: BRUSSELS, Belgium — Barclays, Citigroup, HSBC, JPMorgan, and three other banks are set to be fined by European Union antitrust regulators in coming weeks for rigging the multi-trillion dollar foreign exchange market, two people familiar with the matter said.

The other three lenders are Royal Bank of Scotland, UBS, and a small Japanese bank, the people said. The banks will see a 10 percent cut in their fines for admitting wrongdoing.

WOW! And then not wow! Wow that they got caught and will have to pay a fine, but not wow, because no one, and I repeat no one, will go to jail… Shame, shame, shame…

For What It’s Worth… Well, I’ve been the boy who called wolf many times, only to eventually see that wolf… In this case it’s the leveraged Corp loans that I’ve been pounding on the desk about for over a year. And now, the guy that was made famous by the movie: The Big Short, Steve Eisman, was heard talking about these leveraged loans, and you should here what he has to say about them. And you can read it here: https://www.marketwatch.com/story/a-us-recession-will-knock-this-asset-class-hard-says-steve-eisman-of-the-big-short-fame-2019-05-09?mod=MW_section_top_stories

Or, here’s your snippet: “We’re switching gears this morning with our call of the day, from Steve Eisman, a hedge-fund trader who gained prominence for his successful mortgage bets during the 2008 financial crisis. He’s back with more advice in a Bloomberg interview where he pounds the table over corporate debt, which has been a popular subject lately.

In the interview, Eisman says the center of pain for the next U.S. recession will trigger “massive losses” for high-yield or junk bonds, and those rated triple-BBB corporate bonds — just one step higher from those low-grade bonds.

Eisman says the problem is there isn’t enough liquidity — that is, how fast an investor can sell that bond and at a decent price. Traditionally, high-yield bonds tend to be less liquid because they are a riskier securities, with fewer investors willing to take on that risk.”

Chuck again… Do you know how many people thought this guys was nuts, leading up to the housing debacle of 2007/08? No one would listen to him that the mortgage backed bonds were not as solvent as the ratings agencies would have you believe they were, and he was eventually proven to be correct… He also made Semi Truck loads of profits on the shorts he placed on the housing industry…

Currencies today 5/13/19 American Style: A$.6968, kiwi .6580, C$ .7437, euro 1.1233, sterling 1.3015, Swiss $.9923, European Style: rand 14.2815, krone 8.7317, SEK 9.6390, forint 288.09, zloty 3.8315,  koruna 22.9417, RUB 65.04, yen 109.63, sing 1.3685, HKD 7.8486, INR 70.60, China 6.8183, peso 19.20, BRL 3.9557, Dollar Index 97.29, Oil $62.33, 10-year 2.41%, Silver $14.66, Platinum $855.10, Palladium $1,3333.55, and Gold… $1,286.00

That’s it for today…  A real nasty weather-wise weekend here in the St. Louis area, nothing but chilly air that was full of rain! UGH! Braden spent the night with us Saturday night. He’s into playing chess… But he wants to play it by himself… You’ve got to be pretty sharp to do that! Braden is very excited that he’s going to be a Big Brother in Rocktober…  We’ll find out the gender  in two weeks, as the new way to find these things out is a gender reveal party…  Hey, I’m just the messenger here!    Our Blues are back on the ice tonight, hopefully they find their skates in time for the game, because in Game in, they sure didn’t have them on!  The Electric Light Orchestra (ELO) takes us to the finish line today with their song: Can’t Get It Out Of My Head…   I hope you have a Marvelous Monday, and please Be Good To Yourself!   Let’s Go Blues! 

 

Mary 9, 2018 

* The dollar is back in charge this morning… 

* Trade Talks are failing miserably… 

Good Day… And a Tub Thumpin’ Thursday to you! I’m laying low for a couple of days to make certain my problems with my stomach don’t return… By tomorrow, if all goes well, I should be ready and champing on the bit to do some Tub Thumpin’! Cardinals got shut out again yesterday… UGH! For many that were at the game the old saying that a bad day at the ballpark is better than a good day at work, fell into play. Or, maybe that’s just a saying that my good friend Duane and I have used for years! And now that we’re both retired… It just doesn’t have the same ring to it. The band Heartsfield greets me this morning with their rock classic song: Shine On…

Well, that pinch the dollar felt on Tuesday when President Trump announced that he would implement new Tariffs on Chinese goods, went away quickly, and the dollar was back to moving stronger VS the currencies yesterday. The euro dropped below 1.12 again, the A$, which was closing in on 70-cents on Tuesday, fell back into the 69-cent handle… I had a reader ask me why I always highlight those two currencies, euros and A$’s… And I replied… Because the euro is the offset currency to the dollar, and the A$ is the proxy for Global Growth… By knowing what those two are doing, can pretty much tell you the direction of the other currencies.

I have another dear reader that always asks me why I don’t talk about the Swiss franc very much… Well, my mother always taught me that if I didn’t have anything nice to say about someone I should not say it… HA!  Seriously…  There’s just not that much going on in Switzerland these days, and every time I do see something going on to talk about, it’s not very good… The franc has really sunk in value the past couple of month, but that’s all tied to the euro’s fortunes… 

And I’m sure some followers of the currency roundup will be asking what the heck has gotten into Japanese yen?  Well, here we go again with the Safe Haven buying, and for some crazy notion/ idea the yen is thought of as a Safe Haven currency…   Personally, I would prefer to own Gold, as my safe haven currency! 

Gold’s two-day rally came to screeching halt yesterday… In the early morning, Gold had risen by more than $4, and by the end of the day, Gold was down nearly $9… I’m sure when I get around to reading Ed Steer’s letter (www.edsteergoldandsilver.com) I’ll read about how the “Da Boyz” as he calls the price manipulators, unloaded arms full of short Gold trades at the COMEX…

I have to point out the  price plunge of Palladium though…  I guess the thought that Car Dealers have so much inventory these days, that the production of autos has to be slowing down, and thus a  hit to the need of Palladium… 

From what I read, the Trade Talks between China / U.S. are not going very well… Again, I might add… I know, I know, the Chinese have taken advantage of the good will of the U.S. for years, but, negotiations, that are worked out amiably, are the way to go… Not implementing tariffs! As my dad taught me years ago… “Money talks… B.S. walks”…  And I guess the U.S. negotiators are tied of hears B.S. so, they’re walking! 

Well, first I was reading about Modern Monetary Theory or MMT… And brother, you don’t want to read this stuff for it will make you go yell at the wall, find something to kick, and cause you to drink heavily in the middle of the day, (not that there’s anything wrong with that! HA!) I just shake my head in disgust and try to walk away and hope it dies an ugly death…

And now… I’m reading about how the Fed is dusting off a form of Quantitative Easing that was used during World War II…. And get this… Fed heads, Brainard, and Clarida agree that this “new/ old policy is what we need, and that it’s been used in Japan… Wait! What? That’s their reference… it’s Japan? The country that has been an economic funk for over two decades? That’s who were going to reference on this policy? I’m at wits end, trying to remain civil here… I started the week calling out the Fed heads and saying that they had painted themselves into a corner, and now I end the week with them telling the American public that this policy has been used in Japan? Ok, the full story is in the FWIW section today…. You can go there now to read it, or you can read when you get there! See there? See how easy I am to work with?

We as a country, continue to go down the same paths worn down by the Japanese, who could write the book on How To Ruin Your Economy…  Well, we’re turning Japanese, yes, I really think so! 

The U.S. Data Cupboard doesn’t have a lot for us today, just the Trade Deficit for March, and April PPI (wholesale inflation)…  Yesterday, we saw March Consumer Credit (read debt), and it was very interesting, as it was weaker at $10 Billion, VS $15 Billion the previous month… There are a couple of ways you could take this data, and the way I’m going to take it is that the U.S. Consumer not only has run out of disposable income, but also have run out of credit cards that have any room on them…  

And here’s where I’ll remind everyone that Consumption is about 2/3rds of our GDP… So, consumer Spending is important… Of course you shouldn’t spend more than you make, over and over again, but spending is important, and without it, the economy dries up and dies… I’m just saying… 

To recap…  The pinch the dollar was feeling on Tuesday, went away quickly, and the green/peachback is back to gaining VS the currencies today. The China/ U.S. Trade Talks are failing miserably, and new tariffs have been announced by the U.S. and China says they’ll retaliate… So, here we go…  Gold couldn’t hold its early morning gains yesterday, and ended up down about $9… And you’ll not want to miss today’s FWIW, it’s next up, so let’s not dawdle around any longer and go there! 

For What It’s Worth… Well, I teased you with this article above today, so here it is in all its glory, the article on how the Fed is dusting off a policy last used during WWII and it can be found here: https://www.marketwatch.com/story/the-fed-is-dusting-off-a-qe-replacement-last-used-during-world-war-ii-2019-05-08

Or, here’s your snippet: “Federal Reserve Governor Lael Brainard on Wednesday became the second U.S. central banker to talk about the possibility of targeting longer-term interest rates as a “new” tool to combat the next recession.
It’s actually not so new. The last time the Fed conducted such a policy was during World War II to keep down the costs of funding the war.
The concept is relatively simple. If the Fed’s benchmark interest rate fell to zero and the two-year Treasury yield was at 2%, the Fed could announce it intends to use its balance sheet to peg the 2-year TMUBMUSD02Y, -1.06% rate at 1%. The general idea is that lower long-term rates spur activity.

Fed Vice Chairman Richard Clarida floated the idea in a speech earlier this year, and has done research on its use in Japan.”

Chuck again… Recall me telling you that during recessions in our history that the Fed, on average, have cut interest rates 5%… But with interest rates not even 3% in the U.S. how would the Fed combat the next recession? I told you that more Quantitative Easing would come, even if it weren’t named that, and then next would be negative interest rates…

Well, the Fed Heads are trying to do an end run, and get involved in the Bond market, but as a price determinate, not a buyer… Why, oh why must these Central Banks feel that they have to “do something” why can’t they just let economies do what economies need to do, and let interest rates be determined by the economy? Why, oh why?

Currencies today 5/9/19 American Style: A$.6975, kiwi .6575, C$ .7416, euro 1.1191, sterling 1.2989, Swiss $.9824, European Style: rand 14.3279, krone 8.7607, SEK 9.6458, forint 288.91, zloty 3.8360, koruna 22.9742, RUB 65.15, yen 109.84, sing 1.3637, HKD 7.8479, INR 70.04, China 6.7768, peso 19.14, BRL 3.9503, Dollar Index 97.62, Oil $61.62, 10-year 2.44%, Silver $14.76, Platinum $851.94, Palladium $1,288.96, and Gold… $1,281.41

That’s it for today…  Well, this weekend we’ll celebrate Moms, and it will be Mother’s Day on Sunday… As I typed the word Mom, I got a chill down my spine, because I thought of my mom, who I miss terribly, especially since I’ve had cancer, because I know if she had been alive she would have made me feel better during some rough times…  Last year,  daughter, Rachel asked me to tell her a story about my mom… And by the time I got half way through it my eyes were filled with tears, and voice was cracking…  I loved my mom, and miss her dearly… So… if your mom is still around, make sure you hug her and tell her you love her…   Happy Mother’s Day to all the Moms out there!  Chicago takes us to the finish line today with one of their early songs: In The Country…  I hope you have a Tub Thumpin’ Thursday… A Fantastico Friday tomorrow, and a Wonderful Mother’s Day Weekend!  And please Be Good To Yourself!

Chuck Butler

May 8, 2019

* the dollar begins to feel the pinch of failed Trade Talks… 

* Chuck talks about how Gold is a Store of Wealth… 

Good Day.. And a Wonderful Wednesday to you! Blues win, Blues Win… Blues Win! Ok, in case you didn’t catch that, our Blues won Game 7 of their series with Dallas, and now move onto the Western Conference Finals… It took 2 overtimes to get the win, but there it was, and we took it! And a St. Louis born player scored the winning goal! It wasn’t such a happy night for my beloved Cardinals or the Lindbergh High School Flyers Water Polo team, who lost in triple overtime to a private school… My son Andrew has built a program at a public school that rivals those of private schools and everyone associated with the team is very proud of him… I know I am! Little Feat greet me this morning with their song: Fat Man In the Bathtub…

Well, with little data to go on yesterday, other than Consumer Credit, which I’ll talk about later, the currencies were allowed to gain a bit on the dollar yesterday. The dollar bugs are feeling the pinch from the Trade Talks between China and the U.S. In case you’ve been living under a rock, these talks aren’t going to peachy… And that has pushed President Trump to announce that he will raise the tariffs on Chinese goods, because no deal has taken place.

The stock jockeys were feeling that pinch too… But Gold & Silver sure didn’t… As Gold was able to sneak past the manipulators and gain more than $6 on the day!  And is up more than $4 in the early trading today… The price of Gold is still below $1,300, and well below the maginot line of $1,350 that some Gold analysts said that it would be be flying past soon… Well, I’m waiting… and so are tons of Gold holders… Not that they want to sell, but they want their Gold holdings to have a more representative price!

This is an important discussion right here, right now so your complete attention is required, please…   Gold (& Silver) are stores of wealth, they’ve never been worthless, and are a hedge VS a falling dollar and inflation… Once you own Gold, you put it away, and forget about it… You’ve stored your wealth…  In the East they get it… And that’s how they treat their Gold holdings… Here in the U.S. for the most part, we treat Gold as a commodity to buy and sell on a whim…  I would love for the West to take on more of an Asian attitude with regards to Gold…  

So… these Trade Talks seem to be a real bugaboo for the dollar… And it should be! I’m telling you now, so you can listen to me later… These trade tariffs are going to bring the Global economies to their knees… It matters not if a country is a part of the China/ U.S. talks, they will be effected negatively… You can bank on that! And the consumer gets caught with their guard down, and when they look up, the cost of just about everything they buy, is more expensive, because of tariffs…

The reporting of inflation in this country is a joke… it really is folks… later this week the stupid CPI will print and it will show that consumer inflation is well below the Fed’s 2.00% target rate… But that’s not reality, folks… Inflation is all around us and we just don’t take the time to figure these things out… For instance, the other night I went to the Panera Bread Co. (We call it Bread co) and bought some broccoli cheddar soup and and sandwich… When I got it home, and took out the container that held my soup, I noticed right away how much smaller it was compared to a few years ago… But the cost was even more… But where’s the inflation there? Not much, unless you could put a measurement on the size of contatiners… It’s like that all over the grocery store folks… And that’s inflation, because, you may spend the same, but you’re buying less in quantity, and you’ll have to go back to the story more often thean you did before… Got Gold?

And then you come across the piece of information that I shared with you on Monday… That 73% of Americans die with debt of more than $60,000… And you start to shiver… And think is that someone I know? It has to be, because we don’t insulate ourselves completely from Debt… I’ve said this before, and I don’t take this lightly, but I read a book many years ago, that has the title: Debt is Slavery…

Of course not all debt is bad, but that’s old school… For in days past, if a consumer bought something on credit, it was always paid off… But then we began to realize that lenders would lend us much more money for just about anything, and we went to town on spending with money we don’t have, with no ability or will to ever pay it all back…  Shame, shame…

To recap…  No data, and nothing but Trade Talk failures to trade on, has the dollar feeling the pinch… Not the hurting kind of pinch that the stock jockeys felt yesterday, and in fact the currencies are trading in the same clothes as yesterday today…  This is shorter than usual today, as Chuck was up all night with a stomach problem… 

For What It’s Worth…  Well, since I was so adamant about debt today, this article came at me from the MarketWatch people and is about how lenders are going to be able to apply pressure to debt holders and it can be found here: https://www.marketwatch.com/story/debt-collectors-could-be-allowed-to-call-text-and-email-you-every-day-2019-05-08

Or, here’s your snippet: “Debt collectors could soon be making a comeback.

Delinquent consumers could get phone calls up to seven times a week, and an unlimited number of texts and emails from debt collectors under the rule proposed by the Consumer Financial Protection Bureau released this week, making it the first major update in more than 40 years.

The new proposal states that once a debt collector speaks to a consumer, however, they’re not allowed to call again for a week. There is no limit to how many emails or text messages they can send under the proposed rule. Consumers will have to opt out or unsubscribe to texts and emails. 

This rule opens the door to increased contact by debt collectors to new channels or existing channels that they haven’t utilized to date like emails and text messages. That’s very dangerous to consumers,” Joanna Darcus, a debt attorney at the National Consumer Law Center in Boston.”

Chuck again…  Well, the article goes further to explain that consumers will be able to push back, but how many will?  

Currencies today 5/8/19 American Style: A$.7006, kiwi .6591, C$.7428, euro 1.1202, sterling 1.3013, Swiss $.9825, European Style: rand 14.3550, krone 8.7716, SEK 9.5941, forint 289.32, zloty 3.8295, koruna 22.9585, RUB 65.25, yen 110.08, sing 1.3620, HKD 7.8486, INR 69.75, China 6.7710, peso 19.08, BRL 3.9721, Dollar Index 97.52, Oil $61.40, 10-year 2.43%, Silver $14.92, Platinum $867.32, Palladium $1,320.11, and Gold… $1,289.10

That’s it for today…  Sorry the letter is shorter than usual, I was up all night with a stomach problem… The first one I’ve had in a long time, so I’m not complaining, but… I was supposed to be going to the day game at Busch stadium to see my beloved Cardinals today, and this stomach problem is not going to allow me to do that… UGH!  In fact, as soon as I hit “send” I’m going back to sleep, to recover the sleep I lost last night!  My darling granddaughter, Delaney Grace, is in Alabama at Space Camp… Pretty cool for her…  Rod Stewart takes us to the finish line today with his rock classic song: Maggie May…   And I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

May 7, 2019  

* The dollar continues to be bought after the jobs report last week… 

* It’s Game 7 tonight! 

Good day… And a Tom Terrific Tuesday to you… Well, as Rod Stewart sang first… Tonight’s the night… and hopeful for our Blues, everything is gonna be alright… And here’s my take on the lyrics, Cause we love you Blues, and there ain’t no stopping us now… In Sports… There’s nothing like a Game 7… Stress, anxiety, and all those things will be weighing on me and all Blues fans tonight! My beloved Cardinals sure like home cooking! They erupted offensively last night and beat the Phillies, with Bryce Harper! Well, the National College Football Champion, Clemson, had their coach Dabo Sweeney visit the ball park last night and take batting practice… This is his second visit to St. Louis… I hope he’s not stealing any recruits from Mizzou! HA! Jimmy Buffett greets me this morning with his song: The Weather Is Here, Wish You Were Beautiful… I’ve seen Jimmy Buffett two different times in concert, and thoroughly enjoyed myself at both concerts!

Well, economists that know the score, have been taking to Twitter and their blogs to blast the BLS’s Jobs Jamboree for April… So, I’m no longer the lone wolf, pointing out the BLS for what they are… But, I sure wish I could keep my thought from months ago that I didn’t care about the BLS any longer… I don’t care what they print, for it’s all rubbish… But you know me well enough to know that I’m going to point out dolts any chance I get!

I have one example of what I’m talking about, and although she doesn’t call out the BLS, it’s the same as doing so when you point out problems with the report… Here’s Danielle Di Martino Booth from here Twitter page:

“While the unemployment rate hit a 50-year low in April, the labor force has contracted for four straight months while household employment has fallen in three out of the last four months driving the labor participation rate down to a seven-month low…” -Danielle Di Martino Booth from Twitter… 

The Currencies were slipping a little more to the dollar yesterday, but last night when I turned on the screen, the euro had recovered as was back to 1.12… This morning, the euro  has slipped back below 1.12..  There seems to be this magic spell cast on currency traders at the moment that prevents them from selling dollars… Yeah! That’s the Ticket!

The pound sterling is still in rally mode, albeit small rally mode, but rally mode nonetheless, as it appears that their BREXIT talks are going much better than the China/U.S. talks… So, why isn’t the dollar getting taken to the woodshed as long as their talks go on unproductive, and cause more tariffs to be implemented? Beats me, folks… I guess the “powers that be” aren’t ready for the dollar to begin a long trend move downward…

Remember when Chinese officials said that they would not allow the renminbi to weaken to offset the tariffs, and I said, hogwash?  Well, don’t look now but the renminbi is sitting at a 2 1/2 month low this morning after a night when the Peoples Bank of China (PBOC) allowed the renminbi to weaken to this new level of weakness.  I believe the Chinese official that said that had his fingers crossed behind his back…  yeah, that’s it, that’s the ticket!  HA!  

Speaking of China… They posted their April currency reserves this morning, and there wasn’t much movement from March’s number of 3.099 Trillion, with April coming in at 3.095 Trillion…  And they didn’t have any positive currency revaluations propping up the numbers either, so this was a good thing for China, in that they haven’t dipped into their reserves, as of yet, to help out the floundering economy. 

The Trade Talks with China / U.S. have not gone swimmingly… in fact they’ve swam like I do… Like a rock!  This morning there’s news that a Chinese negotiator is coming to the U.S.  Well, the markets are all lathered up about this development, but in my mind, this is just another stall junket for someone in China that was next on the list of people that were rewarded a trip to the U.S.  This is NOT an indication that the talks are nearing an end, and I wish the markets would see this for what it is, and not what they want it to be!

I read an article this morning on Ed Steer’s letter (www.edsteergoldandsilver.com)  That the U.S. mint has halted minting of Silver Eagle coins, as they have sold out of supply…  And yet, the price of Silver can’t find a bid anywhere?  Robin Trower is singing his song, Bridge of Sighs, as I write this, and I think its very apropos, given that I just keep the sighs of exasperation coming…  Robin Trower was the guitar player for Procol Harum and this is his solo effort…

Gold was able to eke out a $2.80 gain yesterday, but is down a buck or so in early trading today…   I have an interesting article for you in the FWIW section today, and then I list some of the things that should be weighing on the dollar right now, and yet none of them are doing anything, but how long will that last?  Got Gold?

One Currency that seems to be able to hold onto its level is the Canadian dollar/ loonie… It’s been 74-cents and change for sometime now… There aren’t a whole lot of good economic things to say about Canada right now, but they will print their April PMI (manufacturing index) today, so this will give us something to work with… Getting economic reports from Canada is like pulling teeth with no Novocain! I have a few friends, and Pfennig Readers, north of the border who send me notes from time to time giving me the update, of which I’m very appreciative of!  

Last month I was talking about how the price of Oil just kept ratcheting upward, and this month the price of Oil has just been ratcheting back down… like the Frank Sinatra song>>> Flying high in April, shot down in May…  I can’t believe that the report that officials pulled out from up their Bullwinkle sleeves a couple of weeks ago, showing that supplies were larger than previously reported, is still keeping the price of Oil down…

Don’t get me wrong, I don’t want to see the price of Oil higher, but… I also don’t want to see manipulations going on…

Not too many notes in the Pfennig Replies box yesterday that disagreed with me on my take of the Fed…  I took that as a sign that the major majority agreed with me…  Or, should I take that as a sign, that people are tiered of telling me differently?  I know I’m a hard headed Irishman, but come on… I can take a different point of view, without throwing rocks at someone! HA! Yeah, and I have some land to sell you in the desert, and my first wife was a young Elizabeth Taylor, yeah, that’s the ticket!

There isn’t much in the U.S. data Cupboard this week… Today we’ll see Consumer Credit (read debt) which will be huge… Thursday we’ll see PPI (wholesale inflation) for April, and then on Friday we’ll see the stupid CPI (consumer inflation)… In between there will be several Fed Head talks, that won’t move markets unless they say some rouge comment…

I’m expected that the Consumer Debt skyrocketed in March, given all the hoopla of the other data from March…  

For What It’s Worth… A dear Pfennig Reader sent me this link and all the time I was reading the article that it took me too, I was thinking, Oh no, not again! It’s about the HELOC loans and what problems they possess for the economy and can be found here: https://www.msn.com/en-us/money/markets/easy-equity-loans-threaten-homeowners-and-the-economy/ar-AAAY6Ge

Or, here’s your snippet: “According to Equifax, between 2013 and the third quarter of 2018, close to 12 million new home equity loans were originated in the U.S. with a total of nearly $1 trillion in new installment loans or HELOC credit limits. Roughly two-thirds of these loans were HELOCs.
Three or four years ago, the standard HELOC had a combined loan-to-value (CLTV) limit of 80%. This meant that together, your first and second mortgages could not exceed 80% of the current value of the property. The restriction gave the lender a 20% equity cushion against another price downturn. A few lenders would go as high as 90% only if you had an extremely high credit score.

Standards have loosened up a lot since then. If you go online, you will see dozens of ads offering tantalizing deals for a new HELOC. In doing a quick search, I found at least 10 lenders that offer a 100% CLTV HELOC if you have a high FICO score and clean credit history. They must be highly confident that home prices will not go down again. Sounds much like 2005 and 2006.

Why are HELOCs and home equity installment loans a cause for concern? That is a reasonable question. After all, haven’t the worst of them been washed out of the system through foreclosures and refinancing?

One big problem is that we don’t even know how many of these second liens are still outstanding. Despite the Equifax report showing 12 million new HELOCs and home equity installment loans, they asserted that there were 3.2 million fewer home equity loans outstanding at the end of this period than at the beginning.”

Chuck Again… As I said above… Oh no… not again! Gov’t Debt… Student Loan Debt… Corporate Debt… States Debt… underfunded pensions… and bubble-mania in stocks…  This will all work out just peachy, right?  

Currencies today 5/7/19 American Style: A$.7017, kiwi .6598, C$ .7425, euro 1.1180, sterling 1.3062, Swiss $.9796, European Style: rand 14.4101, krone 8.7261, SEK 9.5776, forint 290.03, zloty 3.8340, koruna 23.0105, RUB 65.25, yen 110.60, sing 1.3626, HKD 7.8477, INR 69.46, China 6.7542, peso 19.01, BRL 3.9489, Dollar Index 97.57, Oil $61.72, 10-year 2.47%, Silver $14.82, Platinum $872.76, Palladium $1,336.32, and Gold… $1,280.36

That’s it for today… Let’s Go Blues!  I joked with my buddies the other day, when one of them said, “we need to get together to watch Game 7” and I said, “no, we all need to be exactly where we were when we watched them win Game 6” HA!  Superstitions… I have them I know…  And I know they are malarkey, but I have them nonetheless…  We’ve had 2 1/2 days of sunshine, and now the rain returns today, and will be around for the next few days… UGH!  Aren’t all these rainy days supposed to have come in April?  Living in a little river town, we don’t like to see all this rain… I’m just saying…   OK… got your Blues jersey on? It’s Game 7!  The Blues have had nothing but disappointments in their history, so, I’m hoping that this year will change all that!   R.E.M. takes us to the finish line today with their song: Losing My Religion… Which is what I’ll be doing tonight! HA! I hope you have a Tom Terrific Tuesday, and continue to Be Good To Yourself!

Chuck Butler

 

May 6, 2019

* Jobs Jamboree sends dollar higher on Friday… 

* Gold gains and bond boys aren’t buying the jobs report… 

Good Day… And a Marvelous Monday to you! The rain finally stopped on Saturday afternoon, and on Sunday it was just beautiful outside… Good for me, because I need to be outside! Did you have a great Cinco de Mayo yesterday? I write about this every year, on this day, because it’s funny… Years ago, I was writing about how I had stopped to sing in a sidewalk setting while in Cancun, and a Pfennig reader sent me a note and called me a MAK… (you can figure it out) We laughed about that on the trade desk for years! My Cardinals ran into a buzz saw in Chicago this past weekend…. And the Blues… Well, they survived game 6 to play a Game 7, otherwise they would had to get the golf clubs out. So, Let’s Go Blues! The Outlaws greet me this morning with their 10 minute song, with tons of great guitar playing: Green Grass And High Tides…

Well… I’m going to start the day, talking about the Fed, because they’ve been on my mind since they left rates unchanged last Wednesday, and reversed their previous statement that the economy was weakening to “It’s solid”… Lots of people like me, were writing about this last week, and so I’ll give you my version of what I’m seeing from the Fed right now… They’ve backed themselves into a corner… Yes, there they are with the paint bucket, and paint brush all dripping with wet paint, and they’ve painted themselves into a corner… What to do? Oh my, the humanity! These bunch of knuckleheads have done this to themselves… They try and try to micro-manage the economy, and it never works!

They have no idea what’s going to happen, and so they stumble, fumble, rumble along with all their “talk”… In their March meeting they talked about how the economy was showing strains and that no further rate hikes would happen… Of course that came after stocks appeared to be ready to drive off a cliff, Thelma and Louise style. So, stocks rallied… But in the meantime, we’ve had two consecutive months of strong jobs gains (I guess I won’t argue with that any longer, right here for this discussion anyway, as it does me no good to get all lathered up over it) and now it appears the Fed is going to have to hike rates to calm any potential wage inflation from this strong jobs growth… And you can bet your bottom dollar that stocks won’t like that at all… Then what will the Fed do, or say?

They did this to themselves, folks… if they had just shut up, stayed in the Eccles Building and not tried to be the Knight in Shining Armor, and save the stock market, and just let the economy do what economies are supposed to do, we wouldn’t have all these gyrations going on back and forth, will they, or won’t they? Etc. etc.

OK, that felt good to get off my chest!  Well, the currencies didn’t fare too well, with the Fed back on the rate hike path… But the slippage hasn’t been the all-out of the water kind of slippage, the euro is trading around 1.12, and pound sterling is near to 1.31… The Aussie dollar (A$) has really lost some ground, as just last month it was trading around 72-cents, and now it has fallen to a 69-cent handle…  Global Growth, or lack of I should say, is the cause of the A$’s problems, as China is in some deep dookie… 

Speaking of China, the Trade Talks have gone on and one, and while last week there was hope that they would end soon, (recall I said, they’ll have to show me?) they aren’t ending any time in the near future, and President Trump has called for additional tariffs on Chinese goods because his patience with the Talks has grown thin… 

Tariffs are NOT what the Chinese need right now, and their retaliation will NOT be what the U.S. needs right now either…  I totally dislike tariffs folks…  And when all is said and done, everyone will come to totally dislike them for they will be the  snowflake that caused the avalanche on the financial system… mark my words… I’m dead serious here… 

Well, you knew I wouldn’t pass on the opportunity to throw some shade on the BLS and their Jobs number right? For all you not in touch with today’s lingo, throwing shade on someone is like criticizing them… OK… So, the BLS said 283,000 jobs were created in April, beating the estimate of 213,000 by a very wide margin… Guess what the BLS added to the Jobs total after they received the surveys… go ahead, make a guess… If you guessed 281,000 then you would be correct… Wait! What? 281,000 of the 284,000 were added by the BLS after the surveys? Yes, Virgina,  there is a Santa Clause and he works at the BLS! The BLS  were, so how about that for organizing a “manufactured report”? I have to hand it the BLS they don’t care what others think, they’re going to push that envelope of manufactured reports as far out there as they can before someone, other than me, calls them on the carpet and demands an explanation… And that my friends is NOT going to happen! So… we live with the BLS and just say to ourselves each month… It’s only a made up report, it’s only a made up report, it’s only a made up report…

Too bad the markets don’t think like me, eh? Because stocks were flying high on the report… along with the dollar… Gold was able to gain some ground because well, if the labor gains are what they are reported to be, then wage inflation won’t be far behind… But the bond guys didn’t care what the BLS had up their sleeve… The yield on the 10-year only moved 1 Basis Point on the day… And in the overnight markets the 10-year’s yield has dropped to 2.48%…

But just don’t take my word for this jobs report being a debacle that isn’t being reported as such… Famous economist, David Rosenberg, had this to say on his Twitter feed yesterday…. “The main feature of the payroll data was aggregate hours worked, which declined 0.1% in April. When you factor in the workweek falloff, it’s akin to a 110k employment slide!”

Chuck again… I love this guy! He points out things that everyone seems to pass up, but not David Rosenberg!

The U.S. Data Cupboard, last week, had some interesting data prints and on Thursday they printed 1st QTR Productivity… Now long time readers know I usually call this report stupid, because it measures how productive or how hard people work… But get this… 1st QTR Productivity was up 3.6%, which would be good, except…. Unit Labor Costs for the 1st QTR also printed and it was negative -0.9%…  What that tells me folks, is that workers aren’t getting paid for their productivity gains… Work harder, make less…  That’s not a good combination for the worker, but more importantly, it’s not good for the economy…   

In addition, last week, March Factory Orders rebounded and rose 1.9%… Recall I had told you that given the other data prints from March, that I expected the Factory Orders to rise… And that’s just what they did… But the 2nd QTR has started out very differently than what apparently was going on in March, so let’s put a mark on this data and make sure we check the April number when it prints… 

Well, rising debt is everywhere folks… Gov’t’s, States, Corporations, and individuals…  I read a piece of information this past weekend that made me stop and say, Whoa, there partner!  Let me spell it out for you and see if you have the same reaction…  Apparently 73% of Americans die with debt of more than $60,000…   Let me repeat that… 73% of American die with debt of more than $60,000…   See? crazy, eh?  Debt is everywhere… 

To recap… The Jobs Jamboree was a trumped up report of 283,000 new jobs in April… (281,000 were added after the surveys were received) and the dollar got renewed strength VS the currencies, but it’s not an all-out of the water kind of strength VS the currencies… And Gold gained $8.50 because IF jobs are that strong, wage inflation not far behind… The Bond guys aren’t buying any of this, and the 10-year’s yield fell to 2.48% (from 2.52% last week) And Chuck has a lot to get off his chest today regarding the Fed, so don’t miss any of today’s Pfennig!

For What It’s Worth…  Well, since I went off on the Fed this morning, I thought that this piece on zerohedge.com played nicely in the sandbox with my thoughts, and it can be found here: https://www.zerohedge.com/news/2019-05-03/fed-has-lost-control-rates-technical-tweak-fails

Or, here’s your snippet: “

While the rest of the world is distracted by the plummeting unemployment rates and trade deal hype, a funny (well not so funny) thing happened in the short-term funding markets in the world’s reserve currency.

As we noted previously, something unexpected has been going on in overnight funding markets: ever since March 20, the Effective Fed Funds rate has been trading above the IOER. This is not supposed to happen.

This week, The Fed tried to do something about it by cutting the IOER. It has failed!
In other words, as one veteran funding market trader exclaimed, “it’s getting worse!”
Simply put, this is front and center a dollar liquidity shortage signal that The Fed is unable to solve… for now.

As Barclays’ Joseph Abate recently ominously concluded:

The large move also suggests that the banking sector is “nearing the steeply sloping part of the reserve demand curve” which means that “bank reserves are now significantly closer to what individual banks consider their ‘least comfortable level of reserves’ and thus banks are more willing to pay higher rates to retain these balances.”

In other words, some $1.5 trillion in excess liquidity created by the Fed is no longer enough for banks which are starting to scramble to obtain additional liquidity, which needless to say, is very troubling for a banking system which is supposedly “fortress” and “much more stable” than it was before the financial crisis. If anything, this means that even a modest liquidity draining crisis at any point in the future could have vastly more dire consequences than even the pessimists.”

Chuck again…  Well, this is not good folks… and the only way out of this is to cut rates aggressively, or have a coordinated effort to weaken the dollar…  I’m just saying…

Currencies today 5/6/19 American Style: A$.6989, kiwi .6613, C$ .7423, euro 1.1200, sterling 1.3097, Swiss $.9818, European Style: rand 14.5095, krone 8.7448, SEK 9.5804, forint 288.73, zloty 3.8240, koruna 22.9595, RUB 65.05, yen 110.83, sing 1.3631, HKD 7.8461, INR 69.42, China 6.7336, peso 19.06, BRL 3.9375, Dollar Index 97.53, Oil $61.94, 10-year 2.48%, Silver $14.92, Platinum $870.00, Palladium $1,353.00 and Gold… $1,281.30

That’s it for today…  Well, that was something at the Kentucky Derby on Saturday… I put my money on the winning horse, but then he was disqualified in a historic decision… UGH! I said then to anyone that would listen to me at the Watch Party I attended, that this is a bad precedence for horse racing because now every race is going to have a challenge… Why not? who knows what these knuckleheads will do, and a 65-1 odds horse may win?   OK… Cubs sweep the Cardinals, which is bad…  Our Blues come home for Game 7, and will play it on home ice, which has not been kind to them this year in the playoffs, they’ve been a better road team… Let’s hope the hockey gods are kind to them this time! Let’s Go Blues!  I get my scans results today, so fingers crossed… other than that I’m out of things to say! HA!  The Moody Blues take us to the finish line today with their song from the Seventh Sojourn album (one of my top 10 fave albums): When You’re A Free Man…   I hope you have a Marvelous Monday, and will be Good To Yourself!

Chuck Butler