Author: admin

April 29, 2020

* currencies lose ground during the day

* Has this become a Europe / Asia VS U.S. Traders thing? 

Good Day… And a Wonderful Wednesday to you! I guess that serves me right, to depend on the weather forecast this week, that over the weekend said that each day would have some rain. That would be very difficult to explain as I sat outside reading for a few hours yesterday, in full blue, sunny skies with the temps that touched 80… The Rolling Stones fave an old song: This could be the last time… But I doubt it will be the last time for me to pay attention to a weather forecast! I like being pleasantly surprised, so yesterday was right up my alley! And hey! The new chemo drugs I’m taking are shrinking the tumor in my mouth, which is awesome as far as I’m concerned… They are strong doses and they are playing hell with the rest of my body, but…. I really needed that tumor shrunk, and fast, and that’s what’s happening! So, bully for the chemo drugs! Billy Paul greets me this morning with his big hit song: Me & Mrs Jones… We got a thing…. Going on…. We both know that it’s wrong…. And so on…

Well, once again the currencies couldn’t hold the gains they had made overnight yesterday…. So, has this become a battle of continents? The Eurozone, and Asia sells the dollar…. And the U.S. traders buy it back…. That’s been the pattern this week, and so it was again last night… so, we’ll have to keep an eye on this to see if this continues.

Today’s the day the Fed’s FOMC will finish their two day meeting, and Fed Chairman Powell will speak to the press afterwards, but not before all the board games have been picked up and stowed away until the next meeting 6 weeks from now. I still believe that Powell will hold off the Indians at the FOMC that want to cut rates into negative territory… I always try to get into the minds of the Fed Chairs…. I think I used to have Big Al Greenspan down pat…. Then Big Ben Bernanke was easy to figure out, along with Janet Yellen…. Powell on the other hand has been a real challenge for me…. But if he does delay going negative with rates at this meeting, then I’ll be puffing out my chest, and saying I told you! So you can look forward to that in tomorrow’s Pfennig…. HA!

But I do believe negative interest rates are in the cards, and coming to a bank near you, very soon, which has me thinking more about going digital units for your cash, like I’ve been talking about…. You know, right now with everyone having germaphobia, having our cash become digital currency doesn’t sound all that bad, for who want’s to exchange bills who have been in the hands of who knows? However, this is not a permanent thing, folks, so be careful what you wish for… Because as I’ve explained in the past, going digital will remove the last of our civil liberties that last took a HUHE hit with the Patriot Act…. I’m just saying….

Gold, once again couldn’t find enough bids yesterday, but did find enough to keep it flat on the day… Actually Gold lost 70-cents from Monday’s close of $1,712, so the close on Tuesday was $1,711…. Speaking of Gold…. Did you hear the news that Bank of Nova Scotia, or Scotiabank, will be closing the doors on their metals business? They were once a very large enterprise with offices around the world, and helped with liquidity in the metals markets…. With that liquidity gone, how will the other bullion dealers make up for it? I need to get Ed Steer’s opinion on this, before I go any further…. Ed? 

So…. How’s the meat supply in the grocery store you go to?  Good? That’s a good thing because there are thoughts that it could become a real problem, as the food chain gets disrupted… I told you last week about the food chain disruptions, and how the food supply chain was in serious danger of shutting down, which would lead to empty shelves in grocery stores, etc.

Well, I read yesterday, that President Trump is attempting to head of the food supply shut down, as he sent out an order to U.S. Meat plants to remain open… Now, you may ask how can a President demand a meat plant remain open? Think about that, you may have a meat plant where everyone there has contracted the virus, and are at home or worse. How, can the meat plant function without employees?

OK, so for general practice here, let’s just say there are employees not affected and the plant can function, the Trump plan could go as far as increasing liability protection for the Company, if they remain open, which as you and I all know that once a Gov’t plan is enacted, it will take all the kings men and all the kings horses to get it reversed…. So, to a meat plant, this could be a good thing for the future for them….

You know for serious times, it takes serious thinkers to come up with plans that other haven’t thought of for the better mankind…. This falls under that heading in my book… The unions won’t like it, but this kind of reminds me of the 80’s when then President Reagan broke the air controllers strike, and the union didn’t care for that either!  

Longtime reader, Bob, sent me a note yesterday from Wolf Street, that talked about the companies eliminating or nearly eliminating their dividends… Gm was at the top of the list, with Harley Davidson falling behind, along with all the Mortgage REITS…. There will be more folks… so if you depend on dividends, there’s going to be a lack of them for awhile… I told this news to my good friend, Dennis Miller, who chuckled and said, “I wonder if the companies dropping their dividends will use the savings to buy more of their own stock”…. I believe in my heart of hearts that any Corporation CEO found doing that should be metaphorically hung from the highest tree…. I’m just saying… ( I don’t want to see anyone harmed, but something akin to that would do… like say…. Jail time?)

I know I’ve been pretty harsh on the Beaver…. And I’m talking about my attacks on the Reserve Bank of New Zealand (RBNZ)…. But…. In a round about way, I’m going to give New Zealand a round of applause, for they announced yesterday that they have no new cases of COVID-19…. Now it’s up to the RBNZ to begin to unwind their monetary policies… Come on, don’t make me come back and dis on you again in the future because you dragged your feet with these policies…. 

And don’t think traders haven’t noticed this development as kiwi has had a real stealth-like upward move in the last few days… I just think it’s a real shame that a country like New Zealand which used to always have one of the best interest rates in the world, has been brought to the land of no returns….  You know what I mean, low to zero interest rates…. 

The U.S. Data Cupboard finally breaks out of the chains of no, to little data, today! Well, there’s still not much, but what’s here should be good enough to keep the markets interested…. Like I said above, the Fed’s FOMC will conclude today, and Fed Chairman Powell, will speak afterwards to tell us what the Committee had to say….  (he won’t really tell us what was talked about, but it’ll be a good attempt)  

In Addition to the FOMC announcement, we’ll also see the first go at 1st QTR GDP, which is forecast to be -3.6%, but I think it will be worse than that… I say that because we were already seeing negative prints in Factory Orders, and Durable Goods before the COVID-19 virus took hold in the middle of March…. 

So, as I said yesterday, the overseas data prints will begin to come in by the boatload today and really build tomorrow…. So far this morning, we’ve seen Aussie CPI (consumer inflation) on a year-on-year basis and it grew to 2.2% from a previous print of 1.89%…  Well, the Reserve Bank of Australia (RBA) must be happy, for they’ve wanted to get CPI to their target rate of 2% for a long time now….  I think this print is a precursor to other countries also seeing their inflation ramping higher…. 

In the Eurozone this morning, the Consumer Confidence for April was a negative -22.7, but that was flat from the March print, so no further negative move here…. But the Eurozone Industrial Confidence printed at negative -30 Vs the previous -11.2….  This is not good, folks… for the Industrial Confidence will filter through to Consumer Confidence…  And shows that even the GREAT Industrial Complex of Germany is having problems…. UGH!  

To recap…. The currencies got sold again during the day on Tuesday, but rallied overnight once again too… Chuck sees it as a Europe & Asia VS the U.S. traders…  Gold was flat to down a buck yesterday, and is down $4 in the early trading this morning…  Chuck is waiting for an email from Ed Steer with his thoughts on the Scotiabank closing….   Trump orders meat plants to remain open, to avoid a complete shutdown of the food supply chain….  I read this morning that out local grocery store announced that they are buying perishables from local farmers direct, so the food doesn’t rot on the vines or in the ground…. Good for them! 

For What It’s Worth…. Well, the folks at GATA sent me this note yesterday, and I immediately copied it for the FWIW article today…. This is an article about how the Chinese believe there should be a new reserve currency, and it can be found here: https://www.reuters.com/article/us-china-gold-currency/shanghai-gold-boss-wants-super-sovereign-currency-for-post-crisis-times-idUSKCN22A1FY

Or, here’s your snippet: “The president of the Shanghai Gold Exchange (SGE) called for a new super-sovereign currency to offset the global dominance of the U.S. dollar, which he predicted would decline long term, while gold prices rally.

Concern has mounted among some market participants over the dollar-denominated system as the U.S. Federal Reserve cut interest rates to near-zero and embarked on unlimited quantitative easing to contain the economic damage of the coronavirus pandemic.

The measures have helped to drive gold prices to more than seven-year-highs this month, while the dollar has been range-bound. Wang Zhenying, who heads the world’s largest physical spot gold exchange, said in an interview the gold gains should be sustained, but ultimately a new kind of currency was needed.

“Future global trade needs a super-sovereign currency system under which no single country has the power to freeze the international assets of another country,” said Wang, who held senior roles at China’s central bank, which supervises the SGE.

Wang foresaw a decline in the U.S. currency, triggered by the Fed’s monetary policies.

“When the Fed turns on the liquidity tap, the U.S. dollar will, in theory, be in a long-term depreciatory trend,” he said, even though the panic of the current crisis could trigger a temporary scramble for the greenback. “

Chuck Again…. Well, well, well… do you think that Mr. Zhenying has been reading the Pfennig? I do! HA!

Currencies today 4/29/20 American Style: A$.6515, kiwi .6086, C$ .7173, euro 1.0855, sterling 1.2410, Swiss $1.0267, European Style: rand 18.4615, krone 10.3646, SEK 9.8811, forint 327.20, zloty 4.1835,    koruna 24.9750, RUB 74.23, yen 106.48, sing 1.4141, HKD 7.7502, INR 74.84, China 7.0805, peso 24.08, BRL 5.5907, Dollar Index 99.76,   Oil $14.24,    10-year .58%, Silver $15.27, Platinum $780.75, Palladium $1,963.27, and Gold… $1,707.52

That’s it for today…  There really hasn’t been much going on overseas lately, and that’s the reason I don’t spend a lot of time there, but that’ll all change as time goes by, so stay tuned! Man did the nice day turn to a very stormy night last night! The black clouds moved in before sunset, and the skies opened up and it rained, and rained, and rained! Crazy night for sure! T-minus 6 days until the stay at home order ends here in Missouri…  One of the things I find interesting in watching old baseball and hockey games is that there are players in those games that I had forgotten about that were integral parts of the teams!  Well, one place I’ll need to go as soon as they open their doors again is the dentist! the tumor has ruined another tooth. UGH!  When spring training was going on before getting shut down, my dentist, Holly, stopped by my seat to say hi!  What a real sweetheart! So, I guess I’ll be seeing her again, soon….   The great Stevie Nicks, and the band Fleetwood Mac takes us to the finish line today with their song: Landslide….   I hope you have a Wonderful Wednesday, and will Be Good To Yourself!

Chuck Butler

 

 

 

April 28, 2020

* Currencies lose ground on Monday, but rebound overnight!

* Gold can’t find a bid on Monday…. 

Good Day… And a Tom Terrific Tuesday to you! Well, yesterday, was a blur to me…. I did some reading, did some crossword puzzles, and then fell asleep around 2 pm and didn’t wake up until after 6 pm! I guess it was my body telling me I missed some sleep the night before! I had a nice conversation with my tax guy yesterday. He said that I had depressed him with the letter yesterday… So, I thought that I would look at things differently today…. HA! I almost had you, didn’t I? HA! That would be like me changing horses in the middle of the stream, and that can’t be a good thing to do, so I won’t attempt to do it! But I think I’ll allow the Fed Reserve to be the bearer of bad news this week…. Pure Prairie League greets me this morning with their song: Amy…. I used to play that song on my guitar, which I haven’t touched during my stay at home order…. Hmmm….

Well, the currencies just can’t stand the prosperity, that’s all I can say about that! The dollar bugs fought back yesterday around midday, and while the moves weren’t life threatening, the moves did prove that a multi-day currency rally was not going to be in the offing…. Nobody really wants to get in the way of the Fed’s FOMC meeting this week…. Makes sense to me, as this meeting will be a BIG ONE, because of the rotten data that keeps printing, as if anyone thought the data would continue to be so-so with the economy shut down….

That was yesterday, however, in the overnight markets, the currencies won back the ground they lost yesterday, and a few currencies, like the A$, even gained more ground.  For illustration purpose only, the Dollar Index was well over 100 last week (100.30), but has dropped back to a 99 handle. Not a HUGE move but a downward move nonetheless! 

Gold, continuing to trade alongside the dollar, was unable to move with the currencies, and lost $17, to close at $1,712 yesterday. The shiny metal is down another $2 bucks in the early trading today.  There are so many opinions out there these days about which way Gold is going to go. This is normally what happens when an asset begins to run higher, everybody and their brother has an opinion on the assets future…  

There are also still a lot of economists that don’t see the writing on the wall with regards to this economic shutdown, and are still calling for a V shaped recovery once the shutdown is over…  So, don’t be confused! I say that in my best Steve Mizerany voice… Only St. Louis readers will get the humor in that…  A former colleague, Ann Hopkins, used to get the biggest kick out of me impersonating Steve Mizerany. She would say over and over again, “Come on Chuck, do some Steve”….  Good memories, for sure!

Ok, this is the stuff I have to deal with folks…. This writer wrote an article titled: 10 Reasons the U.S. Economy won’t collapse… here’s a snippet of that article: “Before you run out to buy gold or stock up on canned goods, do two things. Read the articles linked in the 10 points above. They will give you the facts the naysayers ignore. Or read “How the U.S. Economy Works.”

Second, see what a real economic collapse looks like. On Sept.17, 2008, the U.S. economy almost collapsed. That’s when companies pulled out trillions of dollars from money market accounts. It would have created a severe cash crunch had it continued.

The nation’s trucking industry would have ground to a halt. Gas stations would have gone dry. Grocery stores shelves would have gone empty. Shortages didn’t happen because the Federal Reserve prevented the collapse. It guaranteed money market accounts and restored confidence.”

My response to this? Well, you can pull rabbits out of your hat to keep the economy running for only so long…. Got Gold? 

Oh, and here’s a White House economic advisor giving his two cents on where we’re going here, let’s listen in… He says,” that a lot of the unemployment insurance claims occurred after they were included in the survey for official unemployment data, and so “the really bad news that we’ve been seeing in initial claims will be spread over a couple of months.”

And that’s a White House advisor folks, they’re the ones that need to paint pretty pictures so the people remain calm…. 

And I can always depend on longtime friend, and publishing guru, Bill Bonner to set the thinking straight again. This was taken from his site: bonnerpartners.com and he says, “

Y]esterday in the Spanish-language publication Abordajes, mathematician Felipe Noguera put two and two together. The conclusion: The likely death rate is more like 0.1%… not the 6.9% widely estimated.

In other words… the C-virus is a nasty bug, with a particular grudge against people who are in bad shape.

Is that a good reason to lock down the whole economy and prevent young, healthy people from going about their lives?

Probably not.

But while the feds’ shutdown might be an honest mistake, their “bailout” is a crime. It is the grandest larceny in the history of the world…” – Bill Bonner

OK… for every article out there that touts a quick turnaround for the economy, I can find 10 that say it won’t be a quick turnaround….  I’ve never been someone that goes with the flow when it comes to thoughts on the economy, but in this case it’s nice that so many agree with my thoughts! 

The U.S. Data Cupboard didn’t have anything for us yesterday, and today all they have is housing data… the Case/ Shiller Home Price Index will print, but it’s so far behind as it will give us the number for February, which is before the Covid-19 virus crashed the U.S. economy, but… Even still I would bet a shiny quarter that this data shows a drop in the price of Home for Feb…. That had been the trend before the economic shutdown, so no reason to think things changed…. 

Tomorrow, we’ll see the first print of 1st QTR GDP, which is expected to be a negative -3.5%….  I’m thinking that it will be worse, but then that’s just me, thinking out loud…  And then tomorrow is the Fed’s FOMC Meeting announcement, which as I explained yesterday, is being waited for with baited breath by the stock jockeys, who need something BIG from the Fed to prove the Fed has their backs… 

The data distribution not in the U.S. has the same schedule as the U.S., with the real data coming tomorrow,  and the next day for most countries… The Eurozone has a ton of data prints the next two days, which will only tell us how badly the Eurozone economy has suffered with an economic shutdown. 

Well, after recovering a bit last week, the price of Oil is under siege again, as the proof is being illustrated all over the world with Oil tankers sitting off the coasts of countries waiting to deliver their respective loads, but being told to remain where they are….  From California to Singapore, this is happening folks… the Oil glut is upon us, with no place for it to be stored….  

Here’s a thought that might make some sense, but these people never listen to me, so why waste the time? Because! Maybe, just maybe, ’cause you never know, they will!   So, here’s my thought… Why not have the U.S. buy this Oil at these cheap prices and store in the salt mines, and then sell it later at a profit? It could end up being the one thing that brings in money to the U.S.’s coffers in the next year! 

I’ve told you over and over again that this economic shutdown is going to bring about deflation, and then as the Fed’s monetary polices take over, the chance of inflation goes higher….  Well, as I talked about recently, a reset in the price of Gold to a higher level, is in the plans…. And if it’s not then it should be! Because a higher reset price of Gold would get us out of this deflation trap and get inflation soaring, which is exactly what the Feds need to inflate away the debt….   That…. is the reason they are so anti-deflation!  

And, well respected analyst, and author, Jim Rickards thinks this is the way to go about defeating deflation too!  Let’s listen in to what Jim had to say in a recent interview, “Averting deflation as the United States falls into a virus quarantine-induced economic depression is the urgent objective of the U.S. government and Federal Reserve, financial newsletter editor and author James G. Rickards tells Hedgeye Risk Management CEO Keith McCullough in a fascinating interview posted on YouTube three weeks ago.

Rickards contends that the simplest and most effective way of accomplishing that objective would be the substantial upward revaluation of gold by the U.S. government, similar to what was done by President Franklin D. Roosevelt in 1933 — after, of course, the government ordered the public’s monetary gold to be confiscated.

Rickards imagines the U.S. government’s revaluation of gold to be a matter of daily market making, buying and selling gold at a fixed price.”

To recap…  The currencies lost ground yesterday, but gained it right back in the overnight markets, led by the A$, which really sounds strange…. Gold couldn’t participate in the currencies upward move VS the dollar, and lost $17 yesterday, along with another $2 loss this morning…  There are still economists out there thinking that the economic recovery, when it comes, will be V shaped… Chuck tries to point out that is not how this will all work out, and attempts to do it nicely, and leave the harsh words for the economy to the Fed, which will talk tomorrow afternoon. 

For What It’s Worth….  OK, I told you about the oil tankers sitting of the coasts of countries with no place to go, but thought that an article that outlines the problem might be needed to back up what I told you, and this article does just that, and can be found here: https://www.dailymail.co.uk/news/article-8255559/Dozens-oil-tankers-float-coast-Southern-California-global-lockdown-sees-demand-plummet.html:

Or, here’s your snippet: “More than 25 tankers are sitting off the coast of California as the economic shutdown reduces the demand for Oil. 

The U.S. Coast Guard filmed video that shows 27 tankers anchored in waters just off the coast by the Port of Los Angeles and Long Beach as of Thursday afternoon.

Stay-at-home orders across the country have led to a dramatic reduction in the demand for crude oil and now the tankers have no place to deliver the product and instead have become floating storage tanks. 

The suppy chain is being backed up, and tankers are now being used to store product that would have originally gone out to the supply chain,’ Scott Lauermann from the a spokesman for the American Petroleum Institute told the LA Times. “

Chuck again….  And there are a number of stories first seen on Bloomberg.com about how the same sencario is being played out in Singapore…  I’ll just revert back to my thought above on how to deal with this storage shortage problem… 

Currencies today 4/28/20 American Style: A$.6510, kiwi .6065, C$.7168, euro 1.0888, sterling 1.2515, Swiss $1.0280, European Style: rand 18.5762, krone 10.3582, SEK 9.9826, forint 325.92, zloty 4.1705,   koruna 24.9820, RUB 74.44, yen 106.56, sing 1.4152, HKD 7.7500, INR 75.10, China 7.0818, peso 24.33, BRL 5.6218, Dollar Index 99.49,  Oil $11.52,   10-year .66%, Silver $15.15, Platinum $764.33, Palladium $1,944.71, and Gold… $1,710.00

That’s it for today… I went to the Pfennig Replies box last night and found about 100 emails from a day last week when I guess I forgot to include the currency roundup… and about 100 readers thought that I needed to be made aware of that….  Sorry! I didn’t mean to leave it out!  The first thing I do each day is record the prices, so I have no idea why they were left out!  In the 70’s there was a song: You Can Go Your Own Way…  Which is what I see each state doing with regards to dropping the shelter rules… Georgia went first, and Texas is joining them, which leads me to ask, “Is the South going to truly rise again?”  Missouri will open up next week, and I still don’t see this as the medicine the cures all what ails the U.S. economy, but then that’s just me….  Humble Pie takes us to the finish line today with their song: I Don’t Need No Doctor….   Did you know that the great Peter Frampton started out in the group Humble Pie?  There you go, some rock trivia for your next cocktail party! HA!   I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler

 

April 27, 2020

* Currencies rally on Friday and through to today… 

* Templeton closes 6 bond funds in India! 

Good day…. And a Marvelous Monday to you! Well, after two rotten to the core days here with chilly rain, and gray skies, the sun came out yesterday, and it was an absolutely beautiful day! I went outside early and began singing, “It’s a beautiful morning, I think I’ll go outside for awhile… and just smile, I think I take in some clean fresh air”…. Yes, it was a day to be outside…. Finally! I miss my morning walks to the deck that overlooks the ocean, to watch the ocean movements, and soak up early morning sun… But soon the earth will turn on its axis and the warmer days here will become the norm…. And I won’t have to wait days to go back outside! I was listening off and on, all weekend to Sirius XM’s top 1,000 classic rock songs…. I didn’t vote on any of these songs, but I would argue with how low in the standings (400-500) some of my fave rock songs ended up…. Oh, well, it’s all something I have no control over, so I just listened and enjoyed! John Lennon greets me this morning with his song: Nobody Told me…..

I fear that one day in in the near future, many investor is going to sing that same thing, “Nobody told me”…. When if they had just listened to me, and not some talking head stock jockey, they would have been told! I have friends that are stock jockeys and I doubt they like me talking about them negatively like I do, so I’ll move on… But don’t worry, I’ll have more for them when we talk about the data prints last week later….

I also know that I’ve been very centered on the U.S. economy and things that will change here, but at the same time I also know that this is not confined to the U.S. every country, but the ones with little debt, like Russia, and Singapore, will have the same problems as the U.S. but on a smaller scale, so that’s why I focus on the U.S. because, well, that’s where I live, buy gas, groceries and giggles, (although not a lot of those giggles lately!) And take them to the woodshed because we should have known better, we should have done better, and now we have a big mess on our hands….

So… the dollar bugs backed off on Friday, and allowed the currencies to run a little, with the euro climbing back above 1.08 on the day… But Gold, which had put in two very good up days, gave back $3 on Friday, but closed at $1,729.00 so, overall it was a good week for the shiny metal…. The Gold and dollar relationship has been very strange in the past year, as Gold has rallied while the dollar rallied, and sold off when the dollar has sold off… Hmmm…. Opposites are still in play here, but makes you wonder, doesn’t it? I mean for the nearly 50 years that the Gold and the dollar have floated ( a dirty float if you will) they were always moving opposite each other, until 2019….. Does this mean that Gold has moved into a new trading relationship with the dollar that will become the new norm? That’s one of those “unknowns” that I don’t have an answer to folks…. Let’s just enjoy Gold’s upward moves and take them any which way they come, eh?

Last week I said a lot of things and one of them that I tried to point out was that the Fed, in my opinion, has been behind the main manipulations of Gold…. They give the wink and nod to the JPMorgans, who if they played their cards straight, would stay out of trouble, but instead, they got greedy, and now find themselves fighting off legal suits against their trading practices…. The Fed is on record as saying they can’t allow Gold to go to its true price, because that would ben that inflation was running fast, and that’s one thing the Fed can’t have, inflation running upward quickly…. Slow, sloth-like moves of inflation to the upside what the Fed needs and wants…. Unfortunately, they haven’t gotten what they’ve worked so hard to get… But that’s not going to stop them for trying to bring about rising inflation to inflate away the debt….

OK…. Back to things that are known by all…. Well, nothing like some recent data to wake us up, and get our blood flowing…. I watched an interview with one of my fave economists, Danielle Di Martino Booth on Friday, and in a YouTube video from 4/20, she said, “it really grates on me when I hear this called the “COVID Crisis”…. Global debt levels at the end of 2019 were $255 Trillion. These were accidents waiting to happen. There could have been any outside event to start this”

Yes, like I’ve been saying since the Middle of March, this economic shutdown, thus bringing about all the Fed moves to help Corporations may have come sooner due to the COVID virus but it was bound to happen sooner or later, because you have Corporations that have been BAD with their respective money, folks…. They just kept going into debt that they weren’t ever going to be able to pay back, and a lot of that debt was coming due this year, so we were about to get to the proverbial “cheese that binds”, but then along came a spider and sat down beside her, and the Fed came to their rescue….

But why? Weren’t we all taught in economics classes (I’m talking to the older folks here, because the economics young kids takes is nowhere near what I learned!) that when a Corporation does bad, that you jus allow them to file bankruptcy, and see if they can work out a deal to comeback, otherwise it’s a case “see ya, wouldn’t want to be ya”? But in 2008 we got a taste of the how the Gov’t. either the White House, Treasury or Fed, got to choose who survived and who failed…. Does the name Bear Stearns ring a bell, or how about Lehman Bros.? And now we’re back to allowing the powers that be decide his all over again… Who will it be this time that brings armegeddon to the streets?

In news from abroad, there was some big news from India over the weekend, as Templeton closed 6 bond funds in the country, claiming that it was due to a lack of liquidity…  I don’t live in India, so I don’t know how this was viewed by the people there. I do know that if that happened here in the U.S. investors would be panicking… 

Late Friday night, longtime reader Bob, sent me this link, and so now I’ll share it with you, but…. To me the last paragraph says it all, and it says: “The Fed has printed $2.26 trillion since March 11 to inflate asset prices and bail out asset holders and Wall Street. If the Fed had spread that $2.26 trillion equally over the 130 million households in the US, each would have received $17,380. But this was helicopter money for Wall Street and the wealthy that were losing part their wealth in the sell-off. Those are the folks that matter to the Fed.”
And you can find it all here: https://wolfstreet.com/2020/04/23/fed-slashed-qe-further-still-hasnt-bought-junk-bonds-or-etfs/

OK, let’s get to the actual prints last week…  Batting lead off is the Weekly Unemployment claims, which added another 4.43 million in the Easter shortened week, to put the total in the last 4 weeks over 26 Million! That’s basically all the jobs that were created in the last 10 years of tepid expansion….  I know, I know, you’re saying, but once businesses open up all these people will go back to work….  Really? After all I’ve talked about with the change in people’s outlook on things you still believe that is going to happen?  Not a snowball’s chance in hell that happens, folks….

In addition, we also saw rot on the vin in Durable Goods Orders, which fell from 1.1% in Feb. to -14.4% in March…. Remember, March was only shutdown the last two weeks of the month, April was a full-on month of the shutdown…. I’m just saying…. 

The Markit PMI which is a good indicator of what the national ISM (manufacturing index) will look like, fell this month to a very recession revealing 36.9, from the 48.5 in March… This is bad folks…  Oh, and I can’t forget the rot on the housing market either…. New Home Sales in March fell to 627,000 down from a Feb number of 742,000…. That’s a HUGE drop…. 

And finally,  finally I say, Consumer Sentiment hit the skids….  The April number was 71.8 down from a March number of 89.1….  Another HUGE drop, for sure! 

And circling back to Industrial Production…. The Washington Post had this to say about Industrial Production: “The falloff in activity — which includes output from factories, utilities and oil and gas producers — “dwarfs any decline during the Great Recession,” Ryan Sweet of Moody’s Analytics writes in a note.

Oh, my! When is everyone in the stock market arena going to stop believing that this rot on the economy’s vine will be removed immediately, after the economy starts up again? Because it’s not going to folks! People are NOT going to rush out and start spending again once the all-clear horn is sounded…. They won’t trust who they’re standing next to in lines, so let’s not go to the line! They aren’t going to see this as something that’s gone forever, and therefore those that still have paying jobs, will be saving to replenish their reserves…. And I could go on, but this is not going to be “alright by the night” folks… bank on it!

Oh, and the Fed’s FOMC Meets this week…. I’m of the opinion that the stock jockeys are all holding their collective breaths in anticipation of Fed Chairman Jay Powell, having something up his sleeve, like maybe “negative interest rates?” But Powell made it clear in March that he doesn’t see the U.S. needing negative interest rates… He said, then: “We do not see negative policy rates as likely to be an appropriate policy response here in the United States…” So, that something up his sleeve, is going to look more like Bullwinkle and his pronouncement that he had nothing up his sleeve! So, what can he announce to bring the stock jockeys back? Well, just for grins, he could announce that the Fed is going to buy equities….

Why not? They’ve going to buy Corp junk bonds, the next step is to buy that corporation’s stock too…. But he might have to save that for somewhere down the line…. 

I’ll just say this about what’s going on right now…. Do you think that Japanese investors thought back in 1990 that their stock market sell off was going to last 3 decades, and that the Bank Of Japan would be buying more stocks than investors, but the stock market is still 50% off its highs of 1990? I don’t think you could have had one Japanese stock jockey think that, and the same goes for here in the U.S., they just don’t see that happening…. Why? Because every stock jockey this side of Eden have been busy telling their clients that the Fed has their back, and not to worry…. I bet if they made a movie of the Japanese stock market circa 1990, that the Japanese stock jockeys had the same conversations with their clients….

To recap…. The dollar bugs finally backed off on Friday last week, and the currencies rallied, and are still on the rally tracks this morning, as I write….  Gold didn’t see the dollar weakness as an opportunity to gain alongside currencies on Friday, and lost $3 on the day. Gold is down another $14 in early trading this morning, as the Dollar Index has slipped back below 100….  Templeton closed their bond index funds in India over the weekend…  A lack of liquidity was the reason for the closing of the 6 funds…. 

For What It’s Worth….  Well, I mentioned this above that the avenue for U.S. zombie Corporations is clear… The go into bankruptcy and see if they can find investors that will reorganize the company…. Before going bust….  Well, the former Big retailer, J.C. Penny has done just that, filed for bankruptcy, or I mean is going to…. And you can find that article here: https://www.zerohedge.com/markets/jcpenney-prepares-file-bankruptcy

Or, here’s your snippet: “It’s finally here. After a decade of management turnover, near misses, last minute rescues, and one valiant (sic) if disastrous attempt at an activist turnaround, one of the most iconic U.S. retailers and mall anchors, J.C. Penney, is preparing to file for bankruptcy.

According to the Journal, J.C. Penney is in advanced talks for bankruptcy funding with a group of lenders, a sign the troubled retailer about to make a visit to 1 Bowling Green. JCP is in discussions with existing lenders including Wells Fargo, Bank of America and JPMorgan for a debtor-in-possession loan that would keep the department-store chain’s operations funded during a court-supervised bankruptcy, according to people familiar with the matter.

The DIP loan would be roughly $800 million to $1 billion, with some of that money potentially including existing debt, and priming all the other unsecured creditors who will end up with a chunk of the post-petition equity, assuming of course it is not a Chapter 7.

The Journal sources said that a bankruptcy filing could take place within the next few weeks, and certainly before May 15 as JCP entered into a 30-day grace period after missing an interest payment due to bondholders on April 15. It is possible creditors enter into a forbearance agreement if the company needs additional time to iron out negotiations before filing, but the endgame is clear.

Should the shutdown of the economy last for several more months, or should a second wave of coronavirus infection strike the U.S., companies in all other industries are expected to follow suit.”

Chuck again….  Man, I have to tell you, back in the 70’s I went to J.C. Penny for just about everything….  I haven’t set foot in the J.C. Penny store in 20 years….   

Currencies today 4/27/20 American Style: A$.6460, kiwi .6055, C$ .7107, euro 1.0848, sterling 1.2428, Swiss $1.0256, European Style: rand 18.8136, krone 10.5722, SEK 10.0385, forint 326.42, zloty 4.1743,   koruna 25.1333, RUB 74.54, yen 107.05, sing 1.4187, HKD 7.7498, INR 75.62, China 7.0809, peso 24.82, BRL 5.5893, Dollar Index 99.90,  Oil $12.23,    10-year .62%, Silver $15.16, Platinum $759.48, Palladium $1,969.05, and Gold… $1,715.32

That’s it for today…  I apologize for the tardiness of the letter this morning… I had a bad night, and didn’t get much sleep, so when I finally got to sleep at 4:30am this morning, I turned off my alarm and said, I’ll write the letter when I wake up…. So, sorry… but I just had to sleep!  Well, I gushed about the day in the intro, but now I see that it’s going to rain just about every day this week! UGH! April showers bring May flowers, right? What do May Flowers bring? …. wait for it…. Pilgrims!  One of the oldest jokes in my book! Well, next week, here in Missouri, our stay at home order will expire… Where will people go first? I probably won’t go anywhere, for I never went anywhere before the stay at home order, except to the doctors, and my local watering hole…  And I doubt I head there for a long time…. I’m just saying….  Soft Cell takes us to the finish line today with their song: Tainted Love….  I hope you have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler

 

April 23, 2020

* dollar bugs return to the top of the hill…. 

* Gold gets back above $1,700…. 

Good Day… And a Tub Thumpin’ Thursday to you! My memory came back to me last night, as I remembered what I was doing during the actual Game 4 of the World Series in 2006…. My good friend Rick took his lovely wife Laura to the game, and I was drafted to watch his girls, of whom I referred as: Madison Avenue, and Allison road…. They tried to play games with me regarding going to bed, until I finally told them, “This is not my first rodeo, girls…. I’ve been putting kids to bed longer than you’ve been alive” And never heard another peep out of them! HA! My wife was deathly sick having picked up a parasite from our trip to Panama, so she was no help to me that night… But as I recall, we played games, and had fun…. Allison Road still calls me once in a while to say hi! Love those kids! Romeo Void greets me this morning with their 80’s song : Never Say Never… It’s a strange song, but I like it….

Before I get into the markets, economies, etc. I wanted to share an idea with you that a dear reader had…. In reading the Pfennig and learning that the Oil glut has problems because there’s no storage available, the dear reader wrote: “wouldn’t it make sense for the U.S. Gov’t to offer up their storage facilities at least for the time being”…. And that got me to thinking, because, I didn’t know the answer to the question I would ask here and that is: Does the Gov’t use different storage facilities than the Oil Industry uses? And the answer is yes! The U.S. Gov’t uses caverns in Texas that were old salt mines to store their Oil… So, it would makes sense for the Gov’t to step up to the plate and make a gesture that doesn’t cost tax payer Billions of dollars!

OK…. The currencies lost ground to the dollar bugs again yesterday, after trading flat all day on Tuesday… At one point after the overnight markets handed their trading books over to the U.S. the dollar was not faring so well VS the currencies, but as the day wore on, the dollar bugs were relentless in their pressure on the currencies…. However, is a twist that had me scratching my balding head when it first began, but now it’s old hat…. And I’m talking about the dollar having strength VS the currencies but not against Gold….

The shiny metal had a very good day yesterday rallying VS the dollar…. Gold found its way higher to close the day at $1, 714… And…. the shiny metal is up another $17 in the early trading today…  Things are looking up for Gold, folks… Record deficit spending, money printing to beat the band, and a shutdown economy, giving the prospects for a deep recession a lot of merit these days….  So….

Well…. Well… well…. What have we here? I was perusing through Twitter last night, and came across a graph that was posted by commodities guru, Marin Katusa, and it showed the amount of Gold being mined each year for the last 30 years. The last 6 years are really telling, to me that is, for they show a dwindling amount of Gold being mined each year…. Which means supply is a problem for physical Gold, folks…. Oh, and the graph had a note from Marin…. (again, I took this from his Twitter feed) He titled it: Who’s Finding The Gold?

“ Bullion dealers, mints are all out. And it seems the earth is too. Or at least where companies are looking… Discoveries have dried up the last decade.”

Now, I know I too was around when there was all this talk of “peak Oil”…. And that didn’t fan out, as the Shale Producers took up the slack. But from what I read the “fracking” phenomenon is fading fast, and with this shut down, and all that glut of Oil that’s already been pumped out of the ground sitting around waiting for a home, the amount of debt these Shale producers took on to buy the expensive equipment they needed to extract the Oil from rocks, is hanging over the Shale Producers right now like a Big Black Cloud…. I’m just saying…

Of course that’s one way to get rid of the glut going forward, is to have the Shale Producers pull a Puff The Magic Dragon, and never be seen again…. But we sure don’t want that! So, they’ll have to figure out something else!

Oh! And then there’s this…. Did you hear that Bank of America (my friend Aaron’s fave bank, NOT!) sent out a report on Gold saying that they believed that due to central bank currency printing, the price of Gold will reach $3,000 in the next 18 months…. That’s an 80% move from here folks…. Now let me hear you all who can ask this, ask it together…. Got Gold?

I’m not trying to throw cold water on the COVID-19 deaths and near deaths, but since cancer is a disease that I find out about as much as I can, this snippet from Tom Woods email yesterday really struck a chord with me…. “The UK’s Sunday Express reports that increased cancer fatalities will result from the redeployment of health resources caused by COVID hysteria. In fact, says Richard Sullivan, a professor of cancer and global health at King’s College London and director of its Institute of Cancer Policy, “The number of deaths due to the disruption of cancer services is likely to outweigh the number of deaths from the coronavirus itself.”

“The cessation and delay of cancer care will cause considerable avoidable suffering. Cancer screening services have stopped, which means we will miss our chance to catch many cancers when they are treatable and curable, such as cervical, bowel and breast.”

Chuck again…. And when the all clear horn is sounded, the backlog of all those needing cancer screening, will put quite a strain on the healthcare system folks…. On a sidebar…. I was able to get in to have a scan last week, and I think my oncologist stomped her foot and threw a tantrum when the hospital first called to cancel the scan…. I truly appreciate her going to bat for me! In addition the insurance person at the hospital has been a shining star for me in getting the new chemo drugs….

OK, not sure how that all got into this letter, but it did, so we’ll move on from here…. This item really ticks me off, and shows the idiocy of the gov’t’s programs…. So let me set this up…. The Gov’t set up a small business loan program (which I pointed out at the time didn’t have enough money allocated to it) and took applications, which were requests for more money than the program had…. But there was one application that did get approved…. OK, get this… Harvard, which has a $40 Billion endowment fund, received $9 Billion from the gov’t.  I have a family member that has a small business, and he didn’t get squat from the Gov’t….  Brother! were there not any requirements like show us your balance sheet?  I find this to be typical of Gov’t programs… feed the rich, and leave the middle class bread crumbs…. 

I also like (not!) that fundamentals get thrown to the curbside most every day, but when the traders want to use them they sure do pull them out for everyone to see why they are selling an asset…. And so it was yesterday, and overnight with the euro….  Yesterday, the European Central Bank (ECB) says it will “grandfather until September 2021 eligibility of marketable assets used as collateral in Eurosystem credit operations falling below current minimum credit quality requirements.”  

In Central Bank parlance, that’s saying, that they are going to be buying junk bonds….  Now when the ECB announced that they are going to be buying junk bonds, the euro gets taken to the woodshed, but when the Fed Reserve announced they were buying junk bonds, the dollar got bought, because traders thought it was best for the economy…. 

And I’ve been beating on the Reserve Bank of New Zealand (RBNZ) quite a bit lately for all their implementations of monetary hoopla…. Well, as I looked at the RBNZ the other day, I came to the realization that the only thing left for the RBNZ to do is to monetize their debt…. You know like the Fed’s been doing….  And that thought had me thinking…. I wonder what the former, long time ago, RBNZ Gov. Don Brash would be doing during this global shutdown?   Don Brash was my fave Central Banker of all time, and not just because I met him in person, and he gave me his card with his telephone number on it and told me to call him anytime….  I put that to work one day and dialed his number, and he picked up the phone and talked to me for 1/2 hour!

When I turned 60 (5 years ago) Frank Trotter had gotten all kinds of people in the industry to write a quick Happy Birthday line to me, then Frank bundled them all up and sent them to me…. One of the entries was from Don Brash!  How about that?  After all these years! 

I laugh now when I think that once upon a time, I created an index CD at EverBank titled : The Prudent Central Bank CD….  it consisted of what were considered Prudent Central Banks at that time, and included: New Zealand, Australia, the U.K. and Eurozone.  Now, all these years later look at these Central Banks, they aren’t even close to what they used to be…. Goes to show ya what can happen when greed…. and a misunderstanding of what it takes to make a dollar or euro, whatever, in the real world, become the Central Bank… 

Longtime readers know that I have no love for the Fed…. And its mainly for this reason that they are a bunch of propeller heads that have never run a business, worked making widgets, or selling ice to an Eskimo.  So, they have no idea what it takes to have a real economy working….  I’ll stand by that statement until they show me….  I am from Missouri! 

The U.S. Data Cupboard finally gets some data to look at today! Leading off will be The Weekly Jobless Claims, which have been very ugly the last 3 weeks….  And batting second will be the Markit versions of PMI (manufacturing index), which is current, and the April print will show just how the rot on manufacturing’s vine has grown….  Again, it’s not the National version of PMI, which we changed to ISM a few years ago, but the Markit version will be a good indication of what’s to follow…. 

Tomorrow’s Data Cupboard has the March prints of Durable and Capital Goods Orders… These two had already turned negative before the COVID-19 virus shut down the economy, so just for GP we’ll need to look had badly these two were doing before the shut down…. 

OK…. To recap….  The dollar bugs are back on top of the hill again VS the currencies but not Gold…. Gold had a good day gaining $14 yesterday, and is up another $17 in the early trading today… BOA says that Gold will reach $3,000 in the next 18 months….  I sure hope they are correct! The RBNZ is close to monetizing their debt, and the ECB will be buying junk bonds, all reasons to sell the respective currencies and buy dollars….  to traders that is…. 

For What It’s Worth….  Well I have a treat for you today…. This is hot off the press, and will be going out to his readers this morning!  This is an article that I contributed to, for good friend Dennis Miller, it’s about negative interest rates, and it can be found here: www.milleronthemoney.com 

Or, here’s your snippet: “In our recent article, “What The Heck Is Going On?”, our guru friend Chuck Butler remarked:
“There’s no harm in holding cash, as long as your bank isn’t charging you to do so, which is probably coming down the road, so be prepared!”

Chuck’s remark did not go unnoticed. Subscriber Rikk M. asked, “IF we go “negative” what is your thought on the solvency of the banks at that point in time with people pulling out their funds…it sounds frightening!”

Rikk, you are correct, it is frightening!

What are negative interest rates?
Investopedia offers this definition:
“This unusual scenario is most likely to occur during a deep economic recession….
• With negative interest rates, banks charge you interest to keep cash with them, rather than paying you interest.
• Negative interest rates might be seen during deflationary periods when people or institutions are inclined to hoard money, rather than spend or lend it.
• The negative interest rate is meant to be an incentive for banks to make loans during a period in which they would rather hang on to funds.”

In early 2016, Chuck warned us, sharing some quotes:
• “We’re taking a look at them (negative interest rates). I wouldn’t take those off the table.”
– Janet Yellen, Chairman, Federal Reserve, February 11, 2016
• “[Negative interest rates are] working more than I can say I expected.”
– Stanley Fischer, Vice-Chairman, Federal Reserve
• “I think negative rates are something the Fed will and probably should consider if the situation arises.”
– Ben Bernanke, former Chairman, Federal Reserve

Chuck again….  A very good article and one that people should be reading in that I do believe negative interest rates are on their way to banks in your region!  Here’s another thought that goes along with all that was printed here….  What if going to negative interest rates was a plan by the gov’t?  Stay with me here…. If the bank was charging you for your deposit, wouldn’t you go to the bank withdraw it and take it home with you? Or would you just allow the bank to charge you for your money?  Remember, the Oil contracts the other day? Who would have thought that it would ever come to you have to pay to have your oil taken from you?  Well, that happened and so will negative interest rates…. 

But that’s not the real reason the gov’t wants negative interest rates…. All that new debt that’s coming down the pike wouldn’t have any bond servicing costs!  Can you imagine that, the U.S. issues Treasuries and you have to pay the U.S. to hold them?   

OK, I know I’m going long here, but, I’m on a roll! …. the other reason for negative interest rates would be when the sheeple begin to pull their cash out of the bank , the gov’t issues a decree that prohibits cash, and that all your cash balances have been turned into digital money, which the Gov’t can now track what you spend your money on, etc.  The bank then can start charging new fees that you won’t even know existed!    OK, this last part is all my imagination, folks…. but don’t you see the possibility of this happening?  

Fleetwood Mac takes us to the finish line today with their song: Gypsy… I was a HUGE Stevie Nicks fan…  Still am, but less than before, as we all get older…. HA!  I hope you have a Tub Thumpin’ Thursday, and will Be Good To Yourself! 

Chuck Butler

 

April 22, 2020

* Currencies were flat yesterday but have moved overnight!

* The price of Oil recovers to close above zero! 

Good Day… And a Wonderful Wednesday to you! Well, Monday will be a day I never forget, as I saw something that no one ever before saw, and it was an Oil price that was negative…. Well, the negative state of the price of Oil didn’t last long…. But from what I read, the June contract is already negative…. What an absolutely beautiful day here yesterday, after the last couple of weeks, being cold, gray, gloomy, the sun came out, the sky was umbrella blue, and I sat outside reading most of the day, that is, except for my daily afternoon nap! I know that longtime readers want to know this stuff, so here goes…. The tumor in my mouth is back, and this time instead of it growing taller, it’s growing wider, which is giving me all kinds of problems eating. I figure this is short-term, since I’ve only been on my new chemo drugs for 10 days, and this lack of eating is helping me lose some weight, and that can’t be a bad thing, eh? Roxy Music greets me this morning with their song: Love is the Drug….

Well, it was a “nothing day” in the currencies as they all traded sideways with the dollar. As I said the other day, this sure seem to be the way that the currencies should be trading right now, as everyone has problems, and the U.S. has them worst because of its size…. So, if you’re a currency trader, you don’t want to buy any more dollars, but you also don’t want to take on any of the currencies…. I would say Ahem to them right there and point to rubles, or Singapore dollars, but then that’s just me….

Gold had a very interesting day… As I sent the letter out yesterday morning, Gold was down $27 in the early trading, and sat at $1,668…. But when the day was over, Gold had a $2 gain, to $1,688, but…. That was a $29 turnaround! Show you can’t keep a good asset down!

OK… regarding Gold…. According to Ed Steer’s Saturday letter that can be found: www.edsteergoldsilver.com It would take 91 days of current production of physical Gold to equal the amount of short Gold contracts that exist…. But you know this thing with Oil not having any place to get it delivered because of all the supply, got me thinking about Gold…. So…. What would you think would happen IF everyone that bought Gold forward, would demand delivery of their contract? All those short positions would have to deliver Gold they don’t have…. That would mean they would have to go into the market and buy Gold at the current spot price, and all those buys would certainly drive the price higher, right? In Oil we have too much supply, and in Gold we don’t have enough…. Think about that for a while and then see if I made any sense!

Or…. What IF the CFTC (commodities regulator) got some cajones and decided to limit the short positions to the amount of Gold above ground? Now that would be a game changer right there folks, but as I’m going to explain a little later in the letter, the Fed has no intention of ending price manipulation, for now, that is….

Any-old-way….. Gold this morning is up $15 and is back above $1.700! Imagine, if you will, for a moment here…. that there were no engineered takedowns of Gold this past week, we would probably be looking at a Gold price of around $1,800…..    I’m just saying… 

And I don’t think I have to tell you this, but….  With the collapse of the price of Oil, the Petrol currencies of Russia, Brazil, Canada, Norway, Mexico and even the U.K.  have all been sold for a pack of cigarettes this past week….  And in a case of you live by the sword, you die by the sword…. The Russian ruble always leads the Petrol currencies higher when the price of Oil is climbing, and so it is to the ruble to also lead the Petrol currencies lower in times like this…. UGH! 

In other news, it’s earnings season, and with that might just come some major downgrades for the Corporations…. Just last Friday, Moody’s warned it may cut the ratings on $22 billion of U.S. collateralized loan obligations – a fifth of all such bonds it grades – as a result of the collapse in cash flows due to the Covid-19 pandemic. Uh-Oh…. Things just continue to get worse for the U.S. economy folks…. What’s next I hear you asking…. Well, I’m glad you asked, because….

Last night the Senate unanimously approved a nearly $500 Billion aid package Tuesday. The bill will replenish a small business payroll fund and provide new money for hospitals and testing. The bill will now go to the House for their approval…. OK, I’m on board for hospital money, and I guess small businesses that have remained open with little earnings but keeping on their payroll. Why’d it take so long for this to be done? Politics, folks… in our time of need, the damn politicians are still quibbling over ridiculous stuff…. Listen for the rhetoric from the House…. I’m ashamed of our political representatives…. I really am, they should be ashamed too!

I’ve been asked a lot lately to explain what’s going to happen with all these fiscal implementations, including money printing, bonds of all kinds buying, monetizing the debt, and so on…. So, I sat down an decided to just come out with what I  could see happening at the end of this COVID-19 economic shutdown….  But let’s get this straight… These are things I see COULD happen, I’m not saying they will!  Ready? Ok, no turning back now, folks…. And before I say these things…. These aren’t things I want to see happen, but they are things I see could be  happening…. Oh, and these aren’t things that will happen today, tomorrow, next week, but a sometime down the road…. 

First and foremost, The Fed needs inflation…. Keep that in mind as we go through this…. They need inflation to be orderly as it rises, not spike, which would get people all in a fuss…. But like the frog in the pot of boiling water…. The Fed needs for us to not realize what they are doing, which is simply inflating the debt away, but as inflation rises, it’s like a tax on you and me, and so they can’t have people seeing what they are doing.

And there we have a disconnect between the Fed’s need for inflation, and their need to manipulate the price of Gold to keep it from getting too inflationary…. OK… now the good stuff….

Basically, I see a plan to get the major countries of the world to have equal amounts of Gold, has been going on for a long time now…. And Russia’s announcement recently, that they were discontinuing their Gold purchases, led me to believe that they had met their goal and are now on par with China, the U.S. and Germany. Japan is so far outside of this group, they would have better luck finding a needle in a haystack than to find Japan in this group!  

In a further point about Russia. They said they were discontinuing their massive Gold purchases, but then it was reported yesterday that they had bought 9 Tonnes last month. You see it was a case of the gold miners having no place to sell their Gold, with the COVID-19 going on, so the Russian Gov’t stepped up and bought their supply from them to keep the ball rolling….  Ok, now back to our regularly scheduled programming…. 

The reset of the price of Gold couldn’t be accomplished until all major countries were ready to come to the negotiating table with equal negotiating tools…. And now we have the Fed Reserve either on the brink of, or already insolvent…. And the debt in this country has gotten to a point now that it’s beyond reckoning with…. We could see the Gov’t adopt austerity measures to get this back on track, but…. We all know that’s not going to happen! So, what’s left? Default on debt….  OR…. accept the IMF’s offer to back the debt with SDR’s….  Be careful when you invite the wolf into the hen house folks…. 

On another front, we have the IMF and their SDR’s (Special Drawing Rights)… Basically, the IMF would issue SDR’s that were Gold backed, which is why it was important for all major countries to be equal with Gold… We would still use dollars folks…. But…. They wouldn’t be worth a plug nickel, but the price of Gold would be reset in this scenario at or above $10,000….

This would bring about the inflation that the Fed needs to inflate away the debt…. And eventually, things would normalize, and most people won’t even know the change happened…. Except their inflation problem, and if inflation does soar, then other problems will come of it…. Social unrest, being the main problem…. So, there!

Longtime readers my recall my “Chuck’s Debt Solutions” that I came up with many years ago in a Sunday Pfennig. Yes, for all you new to class, we used to write a Sunday Pfennig that was more in-depth and had guest writers…. Well, consider this little voyage down the road, with me as another brain storm by Chuck!

The U.S. Data Cupboard is empty today… no data prints, even the 3rd tier data reports are nowhere to be found today….  Tomorrow the weekly Jobless Claims will show us how much more rot is on the employment vine….  And we’ll see the Markit PMI, which should be interesting…. not the national ISM but something to chew on for sure…. 

To recap…. The currencies were flat to a bit stronger on Tuesday, Gold had a turn on Mr. Toad’s Wild Ride, but ended up on the day… And the price of Oil in the current market rose above zero, but I see that the June futures market still has Oil in negative territory….   Chuck goes through things he sees could be coming down the road…. Are you ready for this? 

For What It’s Worth…. Longtime reader, Bernard, sent the link to this article last night, and in reading it I knew it was going to be the FWIW article today…. Its written by Michael Snyder, and posted at Zerohedge.com and is about how Americans won’t be able to handle what’s to come, and it can be found here: https://www.zerohedge.com/health/most-americans-are-not-going-be-able-handle-what-lies-ahead

Or, here’s your snippet; “Based on how Americans are handling the COVID-19 lockdowns, it is hard to be optimistic about what will happen when a really severe crisis hits us.

Yes, this pandemic is definitely a great tragedy. There are more than 700,000 confirmed cases in the U.S. and more than 40,000 Americans have died. But it isn’t the end of the world. I am sorry to tell you this, but COVID-19 is not the worst thing that we are going to face. In fact, it is not even close to the worst thing that we are going to face. So it is a bit disheartening to see so many Am About 40% of people say they’ve been eating more snack foods since the outbreak began, with 26% admitting they’re finding comfort in chocolate, specifically, according to a Harris Poll of 2,013 US adults conducted over the weekend.

If overeating was all that we had to worry about, I could live with that.
But it turns out that Americans are also indulging in a whole bunch of other self-destructive behaviors during this time. At a moment in our history when alcohol-related deaths in the U.S. are already at an all-time high, heavy drinkers have decided that this pandemic is a perfect opportunity to drink even more…

One in five said they are guzzling more alcohol, though that number was higher, at 30%, among those 18 to 35 — or millennials and Gen-Zers.
In areas that have been hit extremely hard by COVID-19, sales increases have been especially dramatic. In New York City, one liquor store owner says that it is “like New Year’s every day” during his city’s lockdown…
With the initial surge of panic buying over, wine and marijuana sales are still way up, presenting an opportunity — and a challenge — for the businesses scrambling to meet the demand spikes and shifts in consumer behavior.

“It’s like New Year’s every day,” said Mark Schwartz, the owner of Little Mo Wine and Spirits in the Crown Heights neighborhood of Brooklyn, New York, who has seen alcohol sales shoot up fourfold.

Of course while they are eating and drinking they need something to do, and so the average American is streaming approximately eight hours of shows and movies every single day…

The average American is passing the time amid the new coronavirus pandemic by streaming roughly eight hours of shows and movies every day, a recent survey shows.

OnePoll surveyed 2,000 Americans with access to at least one streaming service and found that not only was the average person watching eight hours’ worth of content but also likely went through three series in a week alone, StudyFinds reported.
Americans responding to this pandemic so poorly.”

Chuck Again… yes, and he gets into gambling on the rise too… Look, I know its boring at home with no neighbors over to talk to etc. but…. Read a book! There’s no reason why all these bad choices are being made…. Read books, learn how to play the guitar, or piano, listen to music (it’s really good for the soul), play gin rummy with your partner, learn a new language, there are so many other choices than the bad ones Mr. Snyder talks about in this article….  Not that I’m thinking that I’m the moral guidance counselor here, but there are times that people need to be taken by the shoulders and shaken to get thier attention…. 

Currencies today 4/22/20 American Style: A$.6340, kiwi .5997, C$ .7075, euro 1.0878, sterling 1.2383, Swiss $1.0336, European Style: rand 18.7835, krone 10.6660, SEK 10.0502, forint 326.30, zloty 4.1676,   koruna 25.2852, Silver $14.94, Platinum $753.95, Palladium $1,967.27, and Gold… $1.701.61

That’s it for today….  I find it to be fun to watch the old baseball games on TV at night… Last night it was Game 3 of the 2006 World Series…. Spoiler alert, the Cardinals won this World Series in 5 games, beating the heavily favored Tigers…. I guess it wasn’t a spoiler alert, since the series was played 14 years ago!  2006, if I remember was quite the year for me, as I spoke 35 times that year…. That means I was traveling and speaking a ton! Of course it wasn’t 35 trips, because some trips I had more than 1 speaking gig….  And then 2007 was rolling along with as much travel and requests from different organizations for me to speak, until…. June 2007, when I was told that I had Stage 4 Kidney Cancer….  things have never been the same for me since, and that’s what I think the COVID-19 virus problems are going to do for us now…. Things will never be the same…..  I leave you this morning with my second fave song by Chicago (Back when they were called the Chicago Transit Authority),  the song: Beginnings takes us to the finish line today….  OK, now go out there today and Be Good To Yourself! 

Chuck Butler

 

 

 

 

April 21, 2020

* Currencies ended the day flat VS the dollar on Monday

* Gold see another round of selling this morning… 

Good Day…. And a Tom Terrific Tuesday to you! Well I had my video meeting with my primary doc yesterday morning, and he told me that “You look good”…. I started to ask him what rose colored glasses he was looking through, but he’s always been an Optimistic and positive person in my life, and I like him for that! The first time I met him, I had been handed over to him, as my primary doc. Had retired or something like that. He walked into the exam room, and stopped and with this very surprised look, he was awed, he said, “you don’t look like someone that’s been through what your medical records say you’ve been through”… I told him that first visit, that Cancer may win in the end, but it will know that it has a hell-of-a-time doing it, because cancer hadn’t met Chuck Butler! He has told me through the years, that he uses my story to inspire his patients that are down about something…. He once told me he was going to put me on a poster, and I told him he would need a wide angled lens…. The Yardbirds greet me this morning with their song: For Your Love…. The 5 original Yardbirds were not household names, but through the years, guys like Eric Clapton, Jeff Beck and Jimmy Page, all were members of the band…

Front and Center this morning, the price of Oil fell into negative territory yesterday, closing down negative $16…. This simply means that a holder of an Oil contract would have to pay the contra-side $16 to take it off their hands…. This is crazy folks…. And certainly an entry into your journal, right? Because no one, and I mean no one has ever seen this before! You lived in a time when the price of Oil went negative…. And most likely you lived in a time when the price of Oil was greater than $100…. As I’ve been telling you for weeks now, the supply was too great, for the lack of demand from the COVID-19 virus economic shut down. But this? Even this negative price surprised me, or should I say “shocked me”? Is this the beginning of the end of the financial system? It sure looks it could most certainly be just that to me!

In other markets, Gold gained some of the lost ground on Friday, back yesterday, with a gain of $9…. But that’s a far cry from the $33 the price manipulators took Gold down by on Friday! But seeing the reversal gives me a good feeling…. That these engineered price takedowns can’t keep a good bull market asset down! The physical demand is still strong folks… I heard from my metals guru, Tim, who told me that people are paying the outlandishly high premiums for their Gold coins and bars! I find that to be crazy…. Like I’ve said before the cheapest and more affordable way to own physical Gold is in a non-allocated account…. Call Tim at 1-800-926-4922, and ask him to explain this method of buying physical Gold, without the premiums!

The currencies ran upward for about an hour or two yesterday, and then came back to where they started the day, to finish the day flat VS the dollar…. To me, in this time of “everybody has problems” no movement in currencies is what should be taking place each day…. That is unless you want to buy the currency from the country that has only $235 Billion in debt, pays interest on deposits, and has gone hog wild buying physical Gold these past few years…. The country is Russia, and the currency is rubles….

I read last week that officials from the U.S. and Europe were meeting to discuss the elimination of the economic sanctions on Russia, at least while this COVID-19 virus is causing major problems in economies all over the world…. If that were to happen, we would see Russia’s economy really have the potential to get stronger, even in the face of a negative price for Oil….

OK… I’ve mentioned the Reserve Bank of New Zealand (RBNZ) a couple of times recently as they continue to tell people their banks are strong, they also continue to make drastic changes in banking rules, to ease the ability to make a loan…. The newest change comes by way of a proposal that has 10 days to become real, with lots of feedback due during the waiting time. But the proposal is to drop, not lower, but drop the LVR (loan, valuation, ratio) Again the RBNZ states that they are doing this to allow banks to make easier loans to citizens in need of money…. As someone that spent a good portion of his career in banks, (First National Bank St. Louis, Mark Twain Bank, Mercantile Bank, EverBank) I cringe when I hear that this is going to be taken out…. Banks are going to end up being up to their eyeballs in debt that can’t be paid back, and then what’s going to happen? UGH!….

And don’t tell me kiwi traders didn’t notice this proposal…. Kiwi got a good body blow to the mid section yesterday….

OK… This Oil thing really has my attention this morning, as it did last night too…. I mentioned the negative Oil price to my wife, and then said, “I wonder when the gas stations are going to pay us to fill our tanks?” HA! While I doubt I ever see that day, I do believe that cheaper gas prices will come of this move in the price of Oil, and that gas price drop will go a long way toward helping families that need some help…. Not that they can go anywhere right now, but when they are able to, it won’t cost them an arm and leg to fill the gas tank!

Last night before I went to bed, I jotted down what Gold was doing overseas, and it wasn’t a good note…. Gold was down $6 last night overseas…. And this morning…. I see that the shiny metal is down $27… Again, I ask, why?  Has the all clear horn sounded and I had my Bose noise cancelling headphones on and didn’t hear it?  This economic shutdown here and everywhere else is going to cause major disruptions to the food chain, the everything chain, thus throwing the financial system under a bus…. And Gold gets sold by $27?  Say it ain’t so , Joe!  Oh well, I carry on despite this news…. 

When Gold was above $1,700 the folks at Kitco came out and put a target price of $1,900 on Gold that would be reached in 3 months time. That’s the problem with making a call…. Everything in these markets change daily, so you make a call, and then look pretty much like a numskull a day later….  But I don’t think the guys & girls at Kitco are too far off base here….  Which makes Gold a real nice buy at these levels today, eh? 

The U.S. Data Cupboard is still pretty barren, with only the March Existing Home Sales on the docket… Yesterday, we had another regional manufacturing index print negative, this time it was the Chicago print that came in at -4.19%…. There is no data on the docket for tomorrow, so the markets will have a go of it on their own, (not as if they’ve been paying attention to all these negative reports, right?)

To recap….  Well, Chuck has settled down from his Monday tirade against the Fed, and its accomplices…. And meanwhile, back at the ranch, the price of Oil went negative yesterday… That’s right negative, if I own an oil contract, you’ll have to pay me to take delivery…. Is that not the crazyest thing you’ve ever witnessed?  Make sure you get your journal out for that one, folks!  Gold recovered $9 on Monday after experiencing a $33 takedown on Friday. And in the overnight markets Gold is down another $27…. 

For What It’s Worth…. Well, didn’t I tell you that the initial $1,200 stimulus per tax payer, wouldn’t be enough? I mean once the floodgates on deficit spending opened, there was always this chance that someone would think of this…. And they did, wanting to send more money to the tax payers…. I have that article for you here: https://www.marketwatch.com/story/one-1200-stimulus-check-wont-cut-it-give-americans-2000-a-month-to-fire-up-the-economy-2020-04-20?mod=MW_section_top_stories

Or, here’s your snippet: “Ohio Rep. Ryan: Emergency Money for the People Act covers what the CARES Act missed. Since the coronavirus struck our shores, my focus has been on keeping Americans safe and ensuring working people don’t get left behind. Their struggles today are greater than ever. Too many have suffered job losses, shrinking income, isolation, and health issues — all while caring for children and other loved ones.
The one-time $1,200 stimulus check that many Americans are now receiving under the CARES Act was a good start, but it does not go far enough as this quarantine enters its second month. Rent is still due, credit card bills keep coming in, utilities still need to be paid, our phone plans haven’t gotten cheaper, we still need to buy groceries to feed our families. How far do politicians think one $1,200 check can stretch?

Every American age 16 and older who earns less $130,000 per year will receive this money.

That is why Representative Ro Khanna (D-CA) and I introduced the Emergency Money for the People Act, which will provide almost every American $2,000 per month until employment levels reach pre-coronavirus levels. Every American age 16 and older who earns less $130,000 per year will receive this money tax-free.”

Chuck again…. But Rep. Ryan, who’s going to pay for this? While the money will be tax-free as they say, it will eventually be paid in our taxes, folks…. Trust me on that one!

Currencies today 4/21/20 American Style: A$.6285, kiwi .5965, C$ .7027, euro 1.0835, sterling 1.2313, Swiss $1.0305, European Style: rand 18.9854, krone 10.6124, SEK 10.0970, forint 327.49, zloty 4.1795,    koruna 25.3560, RUB 74.62, yen 107.40, sing 1.4305, HKD 7.7499, INR 76.44, China 7.0727, peso 24.33, BRL 5.2673, Dollar Index 100.30,   Oil -$3.23,   10-year .56%, Silver $14.80, Platinum $734.58, Palladium $1,931.74, and Gold… $1,668.39

That’s it for today…. A little shorter today, thank goodness, my fat fingers were flying acrosss the keyboard yesterday morning, in an attempt to get everything that was on my mind in the letter! I watched Game 1 of the 2006 World Series last night… I was in a hotel bar in Panama watching the game on TV back in 2006… After the game that Anthony Reyes had Vs the Tigers that night, you would have thought his future was so bright he had to wear shades…. but the cruelty of baseball, found him a year or so later…. OK, I’ve been home almost a month now, this is getting to be a real pain. And it’s not that I get out all the time these days…. But the little I used to get out, I sure miss!   Creedence Clearwater Revival takes us to the finish line today with their song: I Put A Spell On You….  talk about holding on to a grudge a long time…. John Fogarty sure has against his mates in the CCR band…. Oh well that’s their business not mine….  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

Chuck Butler

April 20, 2020

* dollar bugs win back the conn, what gives? 

* Gold see another engineered takedown on Friday…. 

Good day… And a Marvelous Monday to you! Another week in the books on staying at home…. I did venture out to my scans and oncologist visit last week, but I practiced personal distancing, except with my oncologist, who had to examine me…. I’m telling you this now, so maybe you’ll listen to me later, but I still can’t believe Americans are abiding by the stay at home rule…. One has to think that sooner or later, they will spill out into the streets, and when they do, what will be on their minds? The news at night is all about COVID-19, so I’m not going any further on that right now…. I do want to point out that last week I made a bad judgement call on something, and 100’s of readers let me know about it. I had already made my mea culpa on the error, but still…. It was interesting to see so many readers let me know I had errored! Again, sorry, for that…. The great band Chicago, greets me this morning with their song: Feeling Stronger Every Day…. (from 1973!)

Well the data is awful, the news is awful, and the prospects for the future look awful, but the brazen boys in the band decided on an engineered takedown of both Gold & SILVER ON Friday, with Gold being brought down by $34, and Silver by 35-cents…. I have to tell you, that I really thought that these engineered takedowns were going to the curbside, but I guess I was wrong about that…. You would think that the regulators would be looking into this price drop, as suspicious, given all the things Gold has going for it right now…. But everyone’s mind is focused on the COVID-19 virus, and they’ve taken their eyes off the ball regarding regulation!

And don’t look now, but…. The price of Oil has dropped to an $11 handle! That’s right! I said $11!!!!  Lack of demand (like I told you ) and too much supply that hasn’t seen the effects of the production cuts yet, have Oil traders scrambling this morning to find a bid for the Black Gold, Texas Tea….  Don’t rush out to fill up your car, because it will take a day or two before the gas stations get the wink and nod from the refineries to drop the price of petrol…. 

And…. If the metals were getting sold on Friday, guess what else was getting sold? Well, since this is an economics / currencies/ metals letter, you probably already know that the currencies got sold on Friday too…. I’ll go through the data prints from Wednesday last week, and they were just down-right awful, and you’ll be just like me, scratching my head wondering how that can be? But like a conversation I heard this weekend between Grant Williams and Peter Atwater on the Hummmminars… Fundamentals are no longer used to figure price discovery…. It’s all about sentiment… And so using that thought, we must then think that traders think that everything bad in the U.S. is not going to last very long, and so they are just pushing it aside, like you would a bad poker hand!

This is where I could really make today’s letter very, very long, with all my reasons for a short lived recession not having a snowball’s chance in hell of happening, so I’ll just stick to a couple of thoughts….  I’m going on record now that we won’t be filling stadiums, music festivals, movie houses for another year or so….  Think about that for a minute folks, how important those things are to the economy, and will you go and trust that the person sitting next to you is not carrying the virus?  It’ll be a looooooonnnngggg time before all that becomes the norm again…. 

My good friend, Sharon, sent me a link to a YOUTUBE featuring a 1.5 hour interview with one of my fave economists, Danielle di Martino Booth…. I sat there listening to her, and I swear, she’s been reading the Pfennig! She talked about things I’ve said over and over again, about debt…. How the economy won’t come back the same, jobs will be lost, businesses will collapse, etc. Then she said something that I’ve alluded to but not outright said, so here it goes…. I told you all for the last couple of years that Corporate debt was too high, and leveraged…. So, when the Fed looked at these Corporations, they decided that them shutting down was not their fault, so they would get bailed out…. But basically what has happened here folks, is that these Corporations were in deep dookie with loads of debt, and the Fed didn’t allow them to fail, they simply kicked the debt can down the road, and allowed these bad corporations to continue to be in business! This really ticks me off folks…. Really ticks me off…. Did I tell you that this really ticks me off?

OK…. Quick Quiz…. True or False…. The Federal Reserve’s bylaws prohibit them from buying Corporate debt? OK… if you said True, then why on earth is the Fed buying Corporate debt? I’m besides myself right now thinking about this, illegal act…. The Mises org. said it best on Twitter this past weekend: “The Fed is, in effect, a lawless economic government unto itself. It is the lender of first resort, a kind of reverse pawnshop that pays top dollar for rapidly declining assets.”

I’m on a roll this morning folks, so don’t stop me…. Did you stop the Germans when they decided to bomb Pearl Harbor? HA! (from Animal House, folks, I know all too well the Germans didn’t bomb Pearl Harbor!)

Remember when I kept telling you last fall that the Fed Reserve wasn’t telling us the whole truth, and nothing but the truth about why these supposedly, “strong banks” needed to be lent money in the repo markets daily? I kept telling you that something was awry…. And then we found out that we wouldn’t get to know who was borrowing these funds daily, for years! And that news got my spider sense really tingling…. Who was it? Well…. After a few months of investigating, the folks at Wallstreetonparade.com found out that JPMorgan Chase, from September 30 of last year to September 30 of this year, the bank reduced its cash position that was predominantly held at Federal Reserve banks by $145 billion from $344.66 billion to $199.8 billion.

So… it was JPMorgan that withdrew the funds that other banks were using…. And now we have two questions 1. Still who are the banks that need the cash daily?, and 2. Why did JPM need to withdraw all that cash? In the FOIA (freedom of information act) Wall Street on Parade filed a petition for information, and received this… “It acknowledges that it has 233 documents that might shed light on why JPMorgan Chase was allowed to dramatically draw down its cash reserves at the Fed, but says it will not provide them to Wall Street On Parade.”

So much for the FOIA, eh? Oh… and in the Wallstreetonparade.com letter of last week, they pointed out that they obtained information that had JPMorgan Chase CEO Jamie Dimon and his CFO attending a meeting at the Eccles Building in Washington, D.C. with Fed Chairman Jerome Powell on February 19, 2020….

The reason I make a big deal out of all this folks, is look at the dates above…. JPM withdrew $145 Billion in September and the next thing we know is that the repo market has no liquidity, and the Fed has to step in to provide liquidity to the repo market…. And then JPM CEO Dimon is summoned to the Eccles Building on 2/19/20, long before the COVID-19 virus was becoming a problem here in the U.S. Which brings me back to my original thought back in September of last year…. Houston, we have a problem…. The Banks were having troubles long before the COVID-19 virus showed up, but not to worry…. They’ll all be bailed out by you and me folks….

And all you folks that follow the stocks… Have you looked at the stock performance of U.S. banks? Uh-oh…. I’m smelling something that’s cooking, and it’s sour….    

What has happened to the American Revolution spirit? There was once upon a time when Americans wouldn’t take this information and let it slide off their backs, like water off a duck’s back….

So, before I go any further here with this… JPM has filed for two “mixed shelf offerings” totaling $210 Billion…. A “mixed shelf offering” per Google is: The mixed shelf will include securities warrants, debt securities and purchase contracts. Under a shelf registration, a company may sell securities in one or more separate offerings with the size, price and terms to be determined at the time of sale.

Now, I wonder why the bank has to resort to something like this? Oh, and it just so happens that my fave (NOT!) bank Wells Fargo, filed for a mixed shelf offering of $66 Billion on Jan 29, 2020…. This after the CEO of Wells Fargo, announced that the bank had put aside $1.5 Billion for legal costs, in response to the scandals that Wells Fargo has been guilty of…

Don’t tell me that they will use these new found funds to purchase their respective stocks, to support them with the current rot on the vine in bank stocks?  Well, that’s what they’ve done with their excess cash and tax savings the past two years, so why would now be any different?  

And once again…. I’ll ask you this question….. Got Gold?

And still…. Fed Chairman Powell, continues to tell Americans that U.S. Banks are strong…. Yeah, I’ll believe that one when Pigs fly!

The U.S. Data Calendar for this week is pretty barren… There will be some housing reports, but those are behind in time, so they haven’t seen the rot on the vine from the COVID-19 yet…. And we’ll have to wait until mid-week to later to see anything really worth going through…. Last week was an awful week for U.S. Data…. First, Retail Sales for March were negative -8.7%, Industrial Production was negative – 5.4% in March, and Capacity Utilization fell out of bed in March seeing a drop from 77% to 72.7%…. Then the piece de’ resistance, of the week was the Weekly Jobless Claims, that added another 5.2 Million, bringing the total of Americans filing for unemployment in the past 4 weeks to 22 Million…. Oh, and that, along with the data prints we just talked about will be much worse in April…. I’m just saying….

On Thursday and Friday last week, we had Leading Indicators drop the most in one month than ever before going from -.2% to – 6.7%… But let me point something out, the forecasters were already negative before the COVID-19 virus… In addition last week, we saw two regional manufacturing Indexes print, The Empire (NY region) and Philly indexes both dropped out of the sky folks… Their numbers were so negative, it’s embarrassing to them to print them! But for those of you who twist my arm…. With both of these prints being for April, they are COVID-19 virus related, but for those of you who are keeping score at home, the Empire was negative -78.2% (from -2.1% in March) and the Philly was negative -56.6% (from -12.7% in March)….

I keep hearing people that should know better say that once the all-clear horn is sounded that the economy will get bank to normal in no time…. I disagree…. I believe being shutdown for so long, now, is going to keep some businesses from reopening, and some reopening but having a different business model… I also don’t believe that all jobs that were there when the shut down started will be recalled…. I’m not hoping for these things folks, but you need to hear someone else’s opinion on all of this….

And keep in the back of your minds, that in 2001 I called the drop in the dollar, when everyone and their brother was saying that the king dollar would go on forever…. And in 2003, I said it would be the Year of the Euro, and that was exactly what it was! In 2003, I talked about a housing bubble before anyone even knew there could be such a thing, and in 2007, I called for the successive rate cuts by the Fed before they made them, causing people at my bank to question my sanity…. Well, we all know how all that turned out, now don’t we?

To recap…. Gold got taken down by the boys in the band on Friday, and the currencies didn’t fare any better, and all because the U.S. Data was about as awful as it could be…. Trader sentiment has to be that they don’t see this lasting…. I think they have a Day of Reckoning coming…. Chuck goes all-in on the JPMorgan/ Chase sage with the repo market problems, and doesn’t hold back any punches for the bank that’s plead guilty to three criminal felony counts….. And then it takes some time to go through all the awful data prints….

And before I head to the Big Finish… I received a text yesterday from a friend in the business, that sounded like he was depressed, or ready to throw in the towel…. So, I wrote him back this….
What happened to all those people that claimed the dinar was going to be revalued upward?
What happened to all those people that claimed the Amero was real and our next currency?

I’m sure that cheered him up! 

For What It’s Worth…. Have you ever heard of a “dead cat bounce”? (no cats were hurt!) A couple of weeks ago, in a letter that my friend, Dennis Miller of www.milleronthemoney.com sent out he asked me to explain this…. So, you can either go to the website and read it, or suffer through it here…. Basically, a DCB (dead cat bounce) is when the markets rebound in the midst of a bear market…. Think about it like this… you drop a tennis ball off a high rise building, the ball will bounce really high once it hits the ground, but then, it falls again, and we repeat this until there is no more bounce…. I tell you all this because that’s the nature of today’s FWIW, which comes to us from the land down under…. And you can find it here: https://www.smh.com.au/business/markets/delusional-investors-are-underestimating-the-economic-shock-the-world-is-facing-20200416-p54kc3.html

Or, here’s your snippet: “Investors are repeating the mistake they made all through February and early March. They are again underestimating the immense economic shock of COVID-19.

Can there be any parallel in market history to the surreal clash of narratives we saw this week? Global bourses soared even as the International Monetary Fund painted a series of scenarios ranging from dire – the most violent slump since the Great Depression – to catastrophic, with all the potenti Yet Goldman Sachs tells us that COVID-19 is under control and the worst is over. “The number of new active cases looks to be peaking globally, projections of cumulative fatalities and peak healthcare usage are coming down,” it says.

From this breathtaking premise, Wall Street’s fashion leader argues that we should “look through” the Great Lockdown to sunlit uplands ahead, anticipating a further 8 per cent rise in the S&P 500 index by the end of the year.

We can disregard normal bear market rules. This time we will avoid the textbook sequence of events in recessions: a swift crash followed by a torrid buy-the-dip rebound, and then a slow downward grind over months as reality hits home, ending only in capitulation at far lower level. “
Authorities have spared us such a fate by rescuing everything immediately. “The Fed and Congress have precluded the prospect of a complete economic collapse,” it says.”

Chuck Again… I tell you think because I’m not short any stocks, or that I want the stock market to drop, but come on! This move has to be so obvious to everyone, but I see investors saying, “but this time will be different”…. I so dislike that phrase….

They say history repeats itself, or at least it’s very near to the scene of the crime…. And with that, I’ll move one…

Currencies today 4/20/20 American Style: A$.6358, kiwi .6050, C$ .7086, euro 1.0855, sterling 1.2444, Swiss $1.0323, European Style: rand 18.7625, krone 10.3776, SEK 10.0006, forint 326.54, zloty 4.1692,    koruna 25.1834, RUB 73.91, yen 107.80, sing 1.4231, HKD 7.7501, INR 75.96, China 7.0722, peso 24.11, BRL 5.2328, Dollar Index 99.96,   Oil $11.88,    10-year .63%, Silver $15.22, Platinum $783.70, Palladium $2,172.09 and Gold…. $1,686.31

That’s it for today…. When will it warm up again here? I’m sick and tired of this chilly weather, we’re almost to May, and we’ve had two warm days since I returned from Florida! A couple of years ago, we came home for Easter, and it was cold here, so we got right back on the plane and went back to Florida until mid-May! But we can’t do that this year… Well, I guess we could if we wanted to risk our health! Did another Zoom meeting with my happy hour friends on Friday afternoon, and I have another Zoom meeting with my primary doc this morning! Medicine in this day of personal distancing…. I went on a little too long this morning so I’ll end this here, and tell you that today, my good friend, Frank Trotter, celebrates his birthday! Happy Birthday Frank! You’re one year older than me again! HA! And for Frank’s Birthday, one of his fave artists, Jethro Tull takes us to the finish line with his song: Aqualung….. I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler

 

April 15, 2020

* the dollar fights back in the overnight markets

* The boys in the band come back to work….  UGH! 

Good day… And a Wonderful Wednesday to you… This’ll be the last Pfennig this week, as I have been summoned by my oncologist to her office tomorrow, bright and early…. I told you Monday that I had scans last week, and in those scans they saw the tumor in mouth had grown (I could have told them that!), but no other signs of cancer in me, which is good…. 7 weeks ago, I stopped taking my old chemo because it had come to its end of usefulness in me. And, the fact that I need 4 weeks without it to rid it from my system. On the 5th week, the tumor in my mouth began to grow again… And on the 6th week, with it getting big in my mouth once again, I began my new chemo drugs…. Hopefully these drugs have the same luck the previous 4 did, when they immediately shrunk the tumor down to nothing…. So, anyway, my oncologist wants to see me, since it’s been 4 months since she last saw me…. My fave Pink Floyd song greets me this morning: Comfortably Numb….

OK… What began yesterday, as a thought that the dollar’s days as the kind of the hill were nearing an end, were prolonged, but not buffeted in yesterday’s trading…. The currencies gained a little VS the dollar on the day, not giving up its overnight gains one iota, and Gold also gained VS the dollar closing up $3 on the day, to close at $1,725…. A nice strong number, eh?

However, in the overnight markets, the dollar climbed back up on the hill, and began kicking sand in the faces of the currencies and Gold.  This was a reaction to the big gains in the stocks here in the U.S. yesterday…. As if, everything is fine and the all-clear horn has sounded…. NOT!  So, In my opinion, we’ll have to go through these rallies even though, in my mind we have entered a bear market for stocks….  Don’t just take my word on that, let’s listen to what economist, Ken Rogoff of Harvard, had to say about the economy. 

“The short-term collapse… now underway already seems likely to rival or exceed that of any recession in the last 150 years.” – Ken Rogoff taken from the Daily Reckoning.com  

OK. let me see if I understand what Ken Rogoff is saying here….  That the economy is “likely” to rival or exceed any recession in the last 150 years… that would include the Great Depression, right?  Oh my! Say it ain’t so, Joe!

And Bill Bonner reminds us all the time about the Dow-to-Gold ratio. It shows us how much the Dow is worth as priced in real money – gold.

The ratio hit a peak over 40 in 1999. Since then, it has come down.

It’s now at 14. But it still has a long way to go before it reaches its historic “rendezvous with destiny” below 5. That’s where the real bottom will come. – Bill Bonner  

A couple of years ago, I wrote an article for the Dow Theory Letters, and in it I showed the numbers for stock market performance during recessions, and the outcome was not good folks… Which tells me that whenever we get around to agreeing that the economy is in a recession, that the stock jockeys will wake up to smell the coffee….

The reason I’m spending some time this morning talking about stocks is that when we saw stocks drop like a rock from a cliff last month, the Fed panicked and cut rates down to near zero… So, what will the Fed do when stocks slip again?  Well, if you ask me, and I know you didn’t, but you’re going to hear from me anyway….  The Fed will resort to cutting interest rates below zero, into negative territory…. 

And I just don’t see that being a good thing for inflation, stocks, or the dollar….  I’m just saying… I talked about it yesterday, the possible end of the strong dollar trend…  This is the scenario in which that could all take place. 

In talking about an end of the strong dollar trend, whenever that may be, and could be now, I know a lot of people will say, but everyone has an economic problem, why buy their currency? Well, you see I don’t see this as a sell dollar / weak economy VS buy “x”/ strong economy…. I see this simply as traders exiting the dollar and throwing a dart at the board of currencies to see which one they buy…. Of course the euro will get a lot of love being the offset currency to the dollar, but I doubt we’ll see the euro go on runs like it did in 2003, & 2004, when it began its climb to 1.53 in 2008… But, it will slowly add to its current levels…. That’s all IF the dollar is indeed ready to give up the strong dollar trend it has been sailing on for 9 years!

In the past you could use fundamentals and they would tell you where to go when selling the dollar…. The Aussie and Kiwi currencies were the darlings of the last weak dollar trend, when they both reached 100% gains, doubling their prices…. Both of these currencies had much higher interest rates than the dollar, and they had China booking 10% plus annual GDP’s so the raw materials to China were almost on a conveyer belt! That’s obviously not the case any longer, in China and the Antipodeans…. 

Back in the day, the price of Oil was also bumping higher as the dollar dropped…. Remember $105 Oil? Well, when Oil’s price was rising, so were the currencies of Norway, Canada, Brazil, Russia, Great Britain, and Mexico…. And in Mexico, Brazil and Russia, you also had a nice yield coming your way too boot! And again, that obviously isn’t the case any longer, but….  You can still find positive yields in Russia, Brazil and Mexico….    Oh!…. and the price of Oil has slipped below $20 to $19.62 this morning…. I said a couple of weeks ago that I thought the price of Oil appeared to be heading to $15….  

I was wondering the other day, just when the boys in the band were doing to show up… I realize that they had all been sent home for “home sheltering”…. For they had not been seen in days…. And I sure hope they were practicing personal distancing when coming back to work, but come back they did yesterday, as Gold went on a tear early and climbed to $1,769, only to be brought back down by the boys in the band….

And the shiny metal is down $7.50 in the early trading today…. Now, on Monday that early trading selling didn’t upset Gold’s applecart, and at the end of the day, the applecart was full of apples!!  So, if the boys in the band want to continue to tune up their instruments, maybe Gold can turn this around today too!  If not, mark it down to an asset going back to fill in the gaps….  That’s how I’m looking at it right now…. 

The U.S. Data Cupboard gets back into the data prints business today, with key reports like  March Retail Sales, and Industrial Production along with Capacity Utilization. I don’t believe any of these are going to be good, strong prints, although, March was split in half regarding the shutting down of the economy, as it really didn’t begin in earnest until  after the Ides of March… 

Hey, recall yesterday’s FWIW with the run on the credit union for their cash? Well, apparently it’s beginning to happen all over, as I read a report of banks in the U.K. seeing runs on cash…. Seems individuals are getting the message that this recession if Global, and will not be a “V-Shaped recession”…. 

And before we head to the Big Finish today…. I’ve got to say this about what happened yesterday regarding the COVID-19 virus…. I was 100% in favor of halting the payments to the World Health Organization (WHO)…. There’s some very serious charges being thrown out there against the WHO, and George Soros, and Bill Gates…. I would think we would want to know all the facts before any more money is sent their way….

Suggested reading in case you want to find out more would be: Google: Robert F Kennedy, Jr.  Bill Gates….  I don’t think you’ll like what you read, but it has to be read to know where I was going with my last statement…. 

To recap….  The currencies and Gold continued their upward moves VS the dollar yesterday, but in the overnight markets, the dollar has fought back, and we begin today with Gold down $7.50, and the currencies having given back some of their recent gains. Chuck reminisces about his days writing for the Dow Theory Letters…  And then throws a grenade from left field, regarding the World Health Organization….

For What It’s Worth…. While I don’t believe that I could be accuse of “going to the well too often” I have been using the Wallstreetonparade.com site quite a bit lately…. It’s because Pam & Russ Martens do a bang up job of telling like it is, without pulling any punches…. And today’s article from them does just that, once again, as they talk about Banks / off balance sheet items/ liquidity/ repos and more, and can be found here: https://wallstreetonparade.com/2020/04/three-of-the-biggest-banks-on-wall-street-have-7-4-trillion-in-off-balance-sheet-exposures/

Or, here’s your snippet: “In the past few weeks everyone from Fed Chair Jerome Powell to U.S. Treasury Secretary Steve Mnuchin to former Fed Chair Janet Yellen to bank analyst Mike Mayo have appeared on TV to tell the American people that the big banks on Wall Street are well capitalized. To put it in Janet Yellen’s exact words on CNBC last Thursday, “we have a strong, well capitalized banking system.”

These folks have to keep repeating this mantra to the public because the public is increasingly getting curious as to why the New York Fed has had to pump a cumulative $9 trillion in cash to these Wall Street banks, since September 17 of last year, if they are so well capitalized. Can big banks actually be well capitalized and have no liquid money to make loans – the key function of a bank? As we have regularly noted, the Fed’s trillions of dollars in cash infusions to the banks began months before there was any coronavirus COVID-19 outbreak anywhere in the world.

The reality is that the U.S. banking system only looks well capitalized if federal regulators, banking analysts, and the mainstream business press put blinders on and don’t look at what’s hiding in off-balance sheet items at the banking behemoths on Wall Street — the same fatal mistake they all made in the years leading up to the 2008 collapse.

Why are off-balance sheet items such a huge red flag on Wall Street? We’ll let the researchers who wrote the autopsy on the 2008 financial collapse for the Financial Crisis Inquiry Commission explain. They wrote:
“For example, as of 2007, the five major investment banks — Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley — were operating with extraordinarily thin capital. By one measure, their leverage ratios were as high as 40 to 1, meaning for every $40 in assets, there was only $1 in capital to cover losses. Less than a 3% drop in asset values could wipe out a firm. To make matters worse, much of their borrowing was short-term, in the overnight market—meaning the borrowing had to be renewed each and every day…And the leverage was often hidden—in derivatives positions, in off-balance-sheet entities, and through ‘window dressing’ of financial reports available to the investing public.”

That last sentence perfectly describes what is going on today – except that it’s worse today than it was in 2008.”

Chuck Again…. These folks at Wallstreetonparade.com are good, and they tell it like it is, Aaron Neville style…. And I totally appreciate that, for that’s my bag baby! 

Currencies today 4/15/20 American Style: A$.6337, kiwi .6020, C$ .7135, euro 1.0935, sterling 1.2510, Swiss $1.0375, European Style: rand 18.6605, krone 10.4755, SEK 9.9926, forint 321.00, zloty 4.1520,    koruna 24.6200, RUB 73.19, yen 107.38, sing 1.4222, HKD 7.7503, INR 75.88, China 7.0494, peso 23.86, BRL 5.1870, Dollar Index 99.37,   Oil $19.62,   10-year .68%, Silver $15.52, Platinum $780.65, Palladium $2,231.53, and Gold… $1,718.50

That’s it for today…. Not so wordy today, eh?   Well, Pfennig Tradition would have called for me starting the letter today with the song Tax Man by the Beatles, but…. Tax Day has been moved to July this year, so I’ll have to save that for when 2020’s Tax Day comes….  The heart doc’s office called me yesterday and apologized for failing to call on Monday, and set the Zoom meeting for this morning….  I bundled up in a hoodie and went outside to sit in the sun for a while yesterday…. The weather here has been so crappy lately, that even at 50 degrees the sun felt warm and good! Again, I’ll say that I’m amazed that Americans have all towed the line with this stay at home thing….  You  don’t think ….Nah, that couldn’t be behind this, Chuck!, Oh Shoot Rudy, I’m going to throw it out there to see if it sticks…. This has been good practice for civil obedience hasn’t it? And the National Guard didn’t even have to patrol the streets!   There! I said it!  Ok…. Steely Dan takes us to the finish line today with their song: Deacon Blues….  that’s one of those songs that you’ll have in your head all day now….  I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler 

 

 

April 14, 2020

* Gold has taken off for the stars…. 

* The Dollar Index drops from 102 to 99…. 

Good Day… And a Tom Terrific Tuesday to you! Well, my Zoom meeting with my heart doc. didn’t take place yesterday as planned… I guess no one showed up in his office to work! Sign of the times, I guess, they’ll call to reschedule at some point… I’ve been on my new chemo for 5 doses and I’m already wanting to sleep all the time…. UGH! I have a mea culpa today, some more thoughts on where all this is going, and more, so stay tuned! But first…. Alice In Chains greets me this morning with their “unplugged” version of their song: Down In A Hole….

Which is exactly where a lot of citizens of the U.S. are these days…. I got to thinking about those stimulus checks…. Like I told Dennis Miller’s (www.milleronthemoney.com) readers in an interview we recently did, “what are the citizen’s going to do with the money? Maybe pay some bills but that doesn’t really help the economy right now, they need to spend it, but who’s open?” Well, add to that my latest gloomy, put you in a bad mood, thought…. Citizens will get up to $1,200 each, so a household could see $2,400 (see that math I just did in my head? Amazing!), and that’s all well and good, but…. Think about the Corporations getting bailed out for their years of loading up on debt, and buying back their respective stocks, instead of putting the money into the corporation (CAPEX)…. And then the icing on my “gloomy, put you in a bad mood, thought” is the very idea that Wall Street Casino Banks are getting BILLIONS of dollars! That’s Billions with a Capital B!

Ok, how was that to start the day? Get your blood flowing, heart rate and pulse up, and now you’re ready to take on the world? I sure hope so, because mine is, just from thinking about that and typing it! Now, you’re wanting something good to read about, to balance this out, right?

Well, how about Gold turning the $7 downside in the early morning trading into a $18 gain on the day, which makes the total turnaround $25! Yes, Gold pushed past the short Gold paper trades yesterday, and traded through the $1,700 figure, to close the day at $1,717!!!!!! Onward and upward as my good friend, and new grandpa, Frank Trotter, would always tell me when I would enter his office in a foul mood, with something on my mind, only to leave forgetting what I had gone in there mad about! We called these Jedi Mind Tricks…. I could use some of those Jedi Mind Tricks right now with all this stuff going on….

Think about that for a minute before we go on…. Since March started, and came in like a lamb…. We had the Saudis and Russians bring their dispute on production cuts to a standstill, which caused a HUGE chunk of the Oil Price to slip away…. Then we had the beginnings of shut downs, Spring Training, then restaurants, bars, churches, the beach, and then pools, and any other place you can think where people gather, shut down…. Shoot, they even shut down tennis courts…. Now that’s a sport that practices social distancing, right? Didn’t matter, shut down! In the 70’s the band April Wine had a song where they would say… Shot…. down…. That’s what all this feels like… the economy is… Shot… Down!

The dollar was busy losing ground to Gold yesterday, and the currencies traded flat pretty much for the day, with the Aussie dollar (A$) getting in some body shots to the dollar bugs…. I was thinking about the A$’s move yesterday, and wondered what was behind this move, given that the Aussies have opened up their printing press too…. Well, again this goes back to the “look” that the U.S. has now and their pledge to shepherd the reserve currency of the world with care…. It’s not looking like they’re holding up their end of the bargain, for getting the ability to print at will, get commodities cheaper, have Oil priced in dollars, and so on….

In the overnight markets, the dollar was sold lower. It looks like a tag team wrestling match…. yesterday, it was Gold’s turn to blister the dollar, and then they tagged the currencies and overnight it was the currencies to blister the dollar…  This could very well turn out to yet another false dawn with regards to a sustained selling of the dollar, but, what if it isn’t? The Dollar Index which about 10 days ago was 102 and change, and this morning it’s barely hanging on to 99….  

I’ve been waiting for the strong dollar trend to end for good, for the last couple of years, and to wet my whistle, the currencies would go on these mini-rallies, VS the dollar, only to get everyone on board that the strong dollar trend was over, and then, poof! The rally was over, and the dollar bugs were back on top of the hill doing a dance to rub it in….  

I read this morning that our friends (NOT!) at OPEC plus, came to an agreement on production cuts for Oil, but does it really matter when there’s little to no demand right now worldwide? The Russians get it, they see there’s no demand, so why cut the production to hopefully raise the price when it doesn’t matter right now… They tried to make the Saudi’s see it their way, but that didn’t happen, and they finally gave in…  So the OPEC+ group of nations will cut oil production by 9.7 Million barrels a day…. The “plus” countries include: Russia, and Mexico, who by the way had been the last fly in the production cut plan’s ointment…. Mexico? Really? Oh well…. We carry on…

Speaking of Oil…. I was reading my weekly edition of Things That Make You Go Hmmmm…. From Grant Williams yesterday (it arrived Sunday night), www.ttmygm.com You have to pay for a subscription, but to me, it makes sense…. And in the group of letters he had in there was an article titled: CORONAVIRUS MAY KILL OUR FRACKING FEVER DREAM: BETHANY MCLEAN

Got your attention? Well, she goes into how the Shale Producing Companies were so badly in debt before the COVID-19 virus came along, and now they don’t have any production to help…. I read some things here that I always “felt were true” but now I know that they are! Our dream of being energy independent is floating out to see folks… Sort of like those Viking funerals where they set the boat on fire and send it out to sea… I’m just telling you these things to back up what I’ve told you about the how the Rig counts were falling, and the Shale Oil production was falling too, weren’t just me spouting off about something I had no business spouting off about!

Why does everything in this country have to have a Political slant to it? When the first stimulus bill, that was supposed to get money in the hands of people who had lost their jobs due to the economic shutdown of the economy, as the pandemic spread, we had Political fighting back and forth, name calling and finger pointing. The bill finally went through, but was packed with all kinds of Pork it’s crazy!  And now the thoughts that they didn’t do enough for the people with the first bill, they’ll have some political wrangling and wrestle with each other over it, before it comes out looking nothing like it was supposed to…. 

I’m going to harp on this thought over and over until the cows come home folks, but I just don’t see why Corporations get to be bailed out by taxpayers, after years of neglect to their own respective balance sheets…  Reminds me of the Aesop fable about the ant and the grasshopper…  the Ant is the taxpayer, saving and stretching their earnings, and the grasshopper is the Corporations, spending their earnings and then borrowing some more to buy back their stocks, and when the fit hits the shan, they come back with their tails between their respective legs, and beg for a bail out….  It’s downright shameful that 1. they do this, and 2. that we let them! 

I’ve said this for years, well since 2009, and I’ll say it again until they colonize Mars, and that is…. IF…. we had not meddled in the economy in 2008, with bailouts, but with support so that the financial system didn’t fail, that the years 2010, and 11 might have been pretty ugly, but, then all the excesses of the years that the Fed didn’t allow the economy to get rid of them, would be gone, and we would have been building an economy that was stronger, and without all the added debt…  

Then IF real smart people would have figured out that we needed to reintroduce the Glass Stegal Act and not allow the Large Brokerage Houses to buy Banks, and become Casino Banks, many would things be different today…. And the Covid-19 virus, shutdown wouldn’t look like it could damage the economy for years to come, like it does now….    I’m just saying…. 

As I told you yesterday, the U.S. Data Cupboard won’t have anything for us to really look to until tomorrow….  So, we can simply move along here for these aren’t the droids we’re looking for….. 

Well…. One of my first bosses in the banking business, Ed Bonawitz, sent me a note yesterday, with a link to the fact check organization that debunked the claim by David Stockman that the House gave themselves a $25 million raise in the stimulus bill…. So, now I’m at a loss as to whom I should believe, David Stockman, the former budget director for President Reagan, or the fact check folks? I guess the fact check folks don’t have a book to sell like Stockman does, so I’ll say sorry to the House folks for saying that they took a raise, but I won’t say I’m sorry for all the other things I said about them! 

To recap….  Gold took off for the stars yesterday, crossing the $1,700 figure on the way, then tagged the currencies in the overnight markets, where they took their turn blistering the dollar. The A$ is really moving higher these days, and that has Chuck scratching his bald head, but then when you think of what the U.S. has done to mar the dollar, he sees the light….  Remember the ant and the grasshopper?  Well, believe it or don’t, but Chuck weaves that fable into the letter this morning…. 

For What It’s Worth… I was going through my email box this past weekend, and noticed an email that I must have missed reading. It was from longtime reader Bob, who sends me stuff all the time, and this one was well worth the read, as it was about a run on a credit union in Baltimore a week ago, and it can be found here: https://www.zerohedge.com/markets/they-want-their-monies-out-baltimore-residents-storm-bank-amid-fears-social-unrest

Or, here’s your snippet: “The evolution of panic hoarding started with 3M N95 masks, then hand sanitizers, non-perishable foods, guns and ammo, and now cash?

A video surfaced on Instagram on Saturday, showing a possible bank run in Baltimore City at the MECU Credit Union, located at 2337 E Northern Pkwy.

The area is considered low/middle class working families (predominantly African American community). The video shows a large line of cars on Saturday afternoon and a line at the ATM. People weren’t cashing in their paychecks because many people were laid off, as we noted, more than 14 million people in the last several weeks have lost their jobs across the county, and what we could be looking at is the beginnings of a bank run.

As soon as the National Guard rolled into Baltimore City – many folks asked themselves – is this a revisit of the Freddy Gray unrest back in 2015,” said Teresa Davis, owner and operator of Teresa Davis Productions.

Davis said residents are going to the local banks because they fear banks are going to fail, and unrest could be nearing.
“They want their monies out,” Davis said, adding that some people in the community have been watching their 401ks crash, and others have been watching the news that a recession could be imminent.
Last month, the smart money in Mid-Town Manhattan and Hamptons were withdrawing as much cash as they could, with at least one bank running out of $100 bills.”

Chuck Again… Coming to a bank near you! As I said last week or sometime I don’t recall exactly when, “when the Fed cuts rates and they go negative, people will attempt to get their cash out of the bank rather than have it there for the bank to charge them for holding it…. This is just a precursor to what we will see soon…. Oh, and when that happens…. Pandora’s Box of digital currencies will be thrown at us…. More on that some other time….

Currencies today 4/14/20 American Style: A$.6405, kiwi .6095, C$ .7195, euro 1.0965, sterling 1.2565, Swiss $1.0395, European Style: rand 18.2478, krone 10.2878, SEK 9.5553, forint 319.45, zloty 4.1428,    koruna 24.4950, RUB 73.44, yen 107.30, sing 1.4155, HKD 7.7509, INR 75.67, China 7.0490, peso 23.55, BRL 5.1437, Dollar Index 99.07,   Oil $21.87,    10-year .75%, Silver $15.56, Platinum $775.76, Palladium $2,245.50, and Gold… $1,722.81

That’s it for today…. Lot’s of things to think about today, folks…. Things will never be the same, I’m afraid….  Your favorite restaurant? It might not come back… Your favorite Bar? It might not come back…  You don’t just shut down the biggest economy in the world, and then keep it shuttered too long, and expect it to come back to the way it was…. It just doesn’t happen like that… I’m just saying…  Game 7 of the 1982 World Series was on the TV last night…. I was at that game. One of my fave pictures on my wall at my writing desk is of me holding my son Andrew, at the World Series parade that took place the next day in 1982….  Great memories! OK…. it’s time to go, I’m late, I’m late! Cat Stevens takes to the finish line today with his song: Moonshadow….  I’m being followed by a moonshadow….   I hope you have a Tom Terrific Tuesday! And…. Please Be Good To Yourself! 

Chuck Butler

 

 

April 13, 2020

* Dollar gets sold on Friday, as currencies & Gold rally!

* 2006 revisited Saturday night! 

Good Day… And a Marvelous Monday to you… I originally came back from Florida because I had a scan scheduled for last week. But then they called and told me they had to cancel it… And then on Thursday last week, they called and said they had an opening for very early Friday morning, and I said I’m good with that… So, I went, with my mask that Kathy made…. I also received a call on Thursday from my heart doctor’s office. They wanted to set up a Zoom meeting with him for Monday, which is today, and will take place right after I send the letter out! My heart doctor is a Cubs fan, so I don’t hold it against him. HA! We always have a nice chat about baseball when I visit, I have to think that these Zoom meetings will be short and to the point, which is fine with me anyway! Canned Heat greets me this morning with their song (that was made famous because of the Woodstock album): Going To The Country….

OK, riddle me this Batman…. 16.7 Million people have filed for unemployment in the last 3 weeks, but stocks have their best week in a month of Sundays, last week… how can that be?  Ahhh, grasshopper, as I keep telling you, we are in an era of “opposites”….  

The dollar, and Gold traded the way they should have hearing the unemployment news… The dollar got sold most of the day on Friday, and Gold gained nearly $40, and touched $1.700 in the intraday trading…  With the dollar getting sold, the euro, and Aussie dollar (A$), led the currencies on their charge back up the hill that the dollar has been king of for so long now….   

As I said last week, the stuff the Fed, Treasury, and Gov’t are doing is simply a replay of 2008, but only this is 2008 on steroids…. And while the folks behind all this mess, keep saying, that “it’s only temporary”…  I’ve heard that one before, haven’t you? I guess what I’m trying to say here is that the Fed/ Treasury/ Gov’t’s definition of the word Temporary is different from mine…. 

I’ve been watching videos that one of my fave analysts, Grant Williams put together, and calls them Hmmmminars…. I told you about the one with Pipa Malmgren early last week, and to end the week he had the great analyst and chartist, Stephanie Pomboy on…. Ms. Pomboy didn’t hold any punches, and really said what was on her mind…. Sort of like Bill Gates did for a MarketWatch article when he said, “No one should think the government can wave a wand and all of sudden the economy is anything like it was before this happened.”

And that’s what I’ve been telling you over and over again, that this shutdown of the economy is going to change things drastically when it’s all started up again….

Ok, I thought of this late last week, when I saw this on Twitter: MNUCHIN SAYS NO TALKS RIGHT NOW ABOUT POTENTIAL TO HAVE FED BUY STOCKS….

My mind went immediately to an owner or GM telling everyone that “the manager’s job is safe”…. I bet there were no talks yet to buy stocks! NOT! Who are they trying to pull the wool over their eyes? Oh, that’s right… The sheeple…. The people that can’t see the forest from the trees, or can’t get out of the way of a moving bus, or… oh, stop it Chuck, not everyone has the economics background you have! Why would these sheeple see that the Fed has taken the playbook for 2008, and just replicated it, but only this time it’s on steroids? And that this is the precursor to the end of the debt cycle that began in 1971, when Nixon took us off the Gold standard? It’s all going to end up in tears, folks…. So, you can decide now if you want to go along with the rest of the sheeple that pretend they don’t know any better, or….. You can decide today that you need to own some Gold / Silver…. You know, JP Morgan said it all those years ago that, “Gold is Money, and nothing else”….

 

I know that there’s been a lot of things happening and new programs being introduced by the Gov’t / Fed/ Treasury, and I’ve tried to keep on top of them…. But one that I did miss last week, was the announcement of the Fed buying Corporate Dept…. I like that they think that just because, from their point of view, the Corporation was downgraded recently due to the COVID-19 Virus, that there’s nothing wrong with this debt….. Really?

Haven’t I been telling you for a couple of years now that Corporate Debt was leveraged to the max, and all coming due in 2020? Oh, and in a sign of the times… I learned last week that Corporate downgrades grew from around 10 in February to 1,044 in the last two months! But don’t let the fact that the economy is shut-down right now, blur your picture of Corporations that were in trouble….

Well, the Fed saw this and decided that “it just wasn’t fair” that the corporations had to go through this virus shutdown, and decided to set up a line of credit for them…. OK, here’s the problem as I see it… not only is this junk the Fed is buying, with newly created dollars, but that the size of the Corp. bonds is around $2.5 Trillion, and the Fed only allotted $750 Billion of this program…. Once again, unless the Fed goes back to up the ante, if you will, they will be doing the deciding on who lives and who dies… corporation wise….

Well, reading through my emails this past weekend, had me spending a lot of time on an article by David Stockman (you know the former budget director for Reagan) , he was good enough to go line by line the pork filled bailout that was passed a week or so ago… One of the first things he details is an allocation of $25,000,000 for additional salary for House of Representatives… Wait! What? The House of Representatives got a raise, and threw it in the COVID-19 bail out? Really? I find this to be so irresponsible, and self-centered, and just plain wrong! A raise? For what? Oh, I see, they get a raise for properly identifying a rising debt problem and choosing to deal with the debt problem by doubling down on the debt! Instead of a raise, they should all be fired, and sent home! But since that’s not going to happen, I guess you and I, you know the taxpayers, get to rejoice this expenditure, the best way we know…   And that brings me to a tale of the past… Dan Devine was a great football coach for the Missouri Tigers, and their hated rival was the Kansas Jayhawks, and their coach at the time was Pepper Rogers, who after a game gave Dane Devine the peace sign… When asked about it Devine replied, “I returned a one fingered peace sign to him”….  So we can rejoice the raise in the House with a Dan Devine special!

The U.S. Data Cupboard is once again as barren as the moon today, and won’t really have anything for us again until Wednesday, when March Retail Sales will print, along with Industrial Production and Capacity Utilization. In addition, on Wednesday, there will be other prints but none as important as those three…

So… the these aren’t part of the U.S. Data Cupboard, but… On Thursday last week 6.6 Million more people filed for unemployment, that totals, in just the last 3 weeks: 16.7 Million people filing for unemployment… When will these type numbers begin to show up in the Unemployment Numbers? Well, I believe we’ll see some of it in the April #’s that will be reported the first Friday in May.

In addition to that, I also want to make an amendment to my previous call of the Fed’s Balance Sheet being above $10 Trillion by year end…. Just last week, the Fed’s Balance sheet rose over $2 Trillion, so if we extrapolate that out to the year, we would be over $20 Trillion at year’s end…. And trust me on this one folks, the Fed Heads are just getting started with buying junk….

Oh… and this little ditty is pretty telling…. For the first time  the Fed now owns more Treasuries than foreigners own…. The U.S. has depended on the kindness of strangers for years to finance our deficit spending, but apparently, that’s not needed any longer, not from a result of reduced deficit spending, but as a result of the Fed now monetizing all debt of the U.S., and apparently can print as many dollars as the U.S. Treasury issues bonds to finance our debt….

I saw an article this weekend where the writer said that the Fed had gone the MMonTy….  Remember the talk about MMT (Modern Monetary Theory), which is print all the money you won’t, debts don’t matter…  I thought the writer had thought of a real funny line… 

For years, when people would ask me if debt is so bad, how come Japan is still in working order? Well, the answer is that the Japanese own most of their debt, making their debt “self financed”, and the U.S. always depended on the kindness of strangers, which makes the latter of the two the most risky, because your debt is held by people that could decide not to hold it any longer….

And before we go on any further there…. Japan in working order? Really? Well, if you think that being in a deflationary funk for over 2 decades is “working order” then Ok…. But to me Japan is a poster child for what happens when debts grow too big…. 

Well, since we are creating dollars to pay for debt, it’s still worse than the self financed scenario. Why? you may be asking…. Well, This is not a “good look” to the rest of the world, folks…. And the shepherd of the reserve currency of the world, needs to be taking better care of their balance sheet to deserve such a title…. I’m just saying…. .Got Gold?

Last week I gave you the “insurance talk with regards to Gold”…. And the other day I heard this line, which will relate to people crashing the gates to buy Gold when the time comes…. “You can’t buy fire insurance when you house is already on fire”….

OK, one more thing on the Debt and the Treasury issuance…. About 8-10 years ago, there was an idea floating around the Gov’t that the way to make running up the debt and having to issue tons of Treasuries, easier, was to….. Require all IRA’s, 401K’s, SEP’s whatever,  to have to buy Treasuries ONLY! This is how I believe the Gov’t could get around the fact that the Fed is owning more Treasuries than foreigners…. Instead of the Fed owning the Treasuries, U.S. taxpayers will own them whether they want them or not! (probably not, given the yield)

And while we’re on the yield…. When inflation beings to stir, the Fed will want to hike rates, but by doing so the bond servicing costs of ALL THOSE TREASURIES would go higher, and with yields low, the bond servicing costs still take up a very large piece of the tax revenues…. And that inability of the Fed to react to the rising inflation is only going to allow inflation to run wild…… Again, I’m just saying…. Got Gold?

And don’t think for one minute, that Gold hasn’t noticed what the Fed, Treasury, etal are doing…. Look, I know that other countries are in the same boat, but their fiscal reaction to their bout of COVID-19 has been miniscule compared to the steroid induced U.S. Version of this… And besides Gold has already booked all-time highs VS all those currencies in the last year, and now it’s the dollar’s turn to see an all-time high in Gold be booked against it! 

To recap…. 16.7 Million people have filed for unemployment the last 3 weeks, and that news sent the dollar down VS the currencies and Gold. the euro and A$’s were the main beneficiaries of dollar selling, along with Gold which gained nearly $40 on the day… Gold is giving back $7 in the early trading today….   The Fed is going to be buying Corp Bonds, are stocks next? You bet your sweet bippie they are! 

For What It’s Worth…. I had two different dear readers send me the link to this article that be found on wallstreetonparade.com…. If this one doesn’t make your blood boil and want to demand a recall of your representative and Senators to ask them how or why they game the store away, then you had better hook yourself up to a blood pressure machine and see if the heart’s ticking correctly! I’m serious here folks, this article has information in it that will make your skin crawl…. And it can be found here: https://wallstreetonparade.com/2020/04/the-new-york-fed-owned-by-multinational-banks-is-nationalizing-capital-markets/

Or, here’s your snippet:” This is exactly what happened during the last financial crisis: the New York Fed was put in charge of the bailout programs and then farmed them out to multinational banks like Goldman Sachs and JPMorgan Chase – who are among the largest shareowner owners of the New York Fed. In fact, JPMorgan Chase, while Dimon was sitting on the Board of the New York Fed, signed a highly lucrative contract to serve as custodian for the New York Fed’s purchases of agency mortgage-backed securities, which currently total $1.45 trillion. That contract has now been in effect for more than 11 years as the Fed promised to unwind that program, but never did, and is now doubling down on it.

During the more than 11 years that the New York Fed has allowed JPMorgan Chase to hold $1.45 trillion of Fed assets, it has pleaded guilty to three criminal felony charges and is currently under another criminal probe by the U.S. Department of Justice for turning its precious metals desk into a racketeering enterprise. One of JPMorgan Chase’s primary regulators is (wait for it) the New York Fed. One of the former bank examiners for the New York Fed, Carmen Segarra, was pressured by the “relationship managers” at the New York Fed to change her review of Goldman Sachs. The pressure was so intense that she went to the Spy Store, bought a tiny microphone, and taped the internal conversations. When she wouldn’t change her review, she was fired.

Let’s remember where all of these bad debts came from on which the U.S. taxpayer is now going to eat the losses. These multinational corporations and multinational banks issued debt in order to buy back trillions of dollars of their own shares to inflate their profits so that their CEOs and other top executives could claim great stock performance and get paid 200 to 400 times what their average workers were getting paid. According to the Economic Policy Institute, CEO compensation has grown 940 percent since 1978 while the typical worker’s compensation has risen by just 12 percent during that span of time. Jamie Dimon has become a billionaire as a result of stock options at his bank.

Today’s unprecedented nationalization of capital markets is the end result of the moral hazard Congress created by allowing the New York Fed, owned by multinational banks, to oversee the bulk of $29 trillion that the New York Fed created out of thin air during the last financial crisis and used to bail out its own shareholder banks and foreign global banks that were interconnected via derivative contracts that were blowing up.”

Chuck Again…. There was so much to talk about in this article, I had to decide what part to put in as your snippet… In this case I think it would better to click on the link above and read the article in its entirety….

Currencies today 4/13/20 American Style: A$.6335, kiwi .6065, C$ .7160, euro 1.0915, sterling 1.2478, Swiss $1.0335, European Style: rand 18.0740, krone 10.2573, SEK 9.9525, forint 323.77, zloty 4.1757,    koruna 24.6156, RUB 73.74, yen 108.03, sing 1.4155, HKD 7.7522, INR 75.69, China 7.0351, peso 23.45, BRL 5.1055, Dollar Index 99.56,   Oil $23.13,    10-year .72%, Silver $15.30, Platinum $746.54, Palladium $2,227.40, and Gold… $1,689.26

That’s it for today….  A pretty long one this morning… .That’s what happens when I have nothing else to do all weekend but read and write down notes about what to say today!  In 2006, I was traveling to Panama during Game 7 of the NLCS (Cards Vs Mets)… And didn’t know the outcome until arriving at my hotel! Saturday night I watched a replay of the game, that I had never seen all the way through! Pretty cool!  After that trip to Panama, I said, “I’m never going back there”… but ended up having to go 2 more times! UGH!   OK… Seals and Crofts takes us to the finish line today with their song: Diamond Girl….   I hope you have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler