Author: admin

November 4, 2019

* Currencies react favorably to the suspect Jobs report

* Gold trades in the same clothes Thursday & Friday… 

Good day… And a Marvelous Monday to you! And Welcome to November… Brovember, for some… A couple of years ago, I was in S. Florida for the first 3 weeks of November, and decided to go along with the growing of a mustache during November… But after two weeks, it was coming in so white, that I said to heck with this! I shouldn’t have been surprised, as each week when I buzz the remaining hair I do have, I’ve noticed that once it was all dark hair, then mixed, and now all gray… UGH! Oh, well, if I had the patience I would shave my head, but I barely can get through the 5 minutes of buzzing before being bored! I guess I could find a barbershop to hang out in? I don’t think there are many of those around any longer though… The Average White Band greets me this morning with their song: Picking Up The Pieces…

Well, Friday’s Jobs Jamboree, had a lot to be desired if you asked me! And apparently, the currency traders thought so too! Now, mind you, the Jobs Data showed that 128,000 jobs were created in Rocktober… And that should have gotten everyone all lathered up, given that the estimate had called for only 75,000 jobs in Rocktober… Ahhh, but what do we have here grasshopper? 274,000 jobs were added by the BLS after the surveys? That would mean that when the survey came back, they showed a loss of 146,000 jobs… And there was no way that the BLS and their band of thieves could allow that figure to be shown, so they decided that, for instance, “professional and business services” needed to have 95,000 jobs added… And so on until they got to a total of 274,000 jobs from thin air!

No wonder the dollar bugs couldn’t muster up a rally! The currencies didn’t exactly beat the band with a rally, but they did inch higher on the day.. For instance the Aussie dollar (A$) moved past the 69-cent handle, and kiwi moved higher in the 64-cent handle. The U.S. Unemployment Rate actually ticked higher, but I don’t think that had anything to do with the non-reaction from the dollar bugs.

Was it the news that China mentioned that they didn’t think a Trade settlement with the U.S. was going to ever happen? So much for that “Tentative Agreement” that we supposedly had in our back pockets a couple of weeks ago, eh? I warned you then to not get all lathered up by this announcement, as Tentative Agreements aren’t worth the cocktail napkins they’re printed on!

Or, was it the news on Friday that Rocktober’s ISM (manufacturing Index) remained below 50 at 48%… That’s two consecutive months below 50 folks… The manufacturing sector is telling us , those of us that want to listen, that is, that manufacturing is in a recession…

In the end it could have one or all of these negative things that caused the dollar bugs to go home… They didn’t need to go home mad, just go home! I don’t know what other proof the markets need to stop this incessant stock buying… But I have enough proof for me that’s certainly for sure!

One of the best performing currencies in recent days has been the Chinese renminbi… It wasn’t that long ago, that it looked as though the Peoples Bank of China (PBOC) was going to push the renminbi so low it would have to look up to an ant… But that was then, and this is now… Why the Chinese have allowed this turnaround is something I’ll have to look more closely at, but… for now the thing I like about the strong move is that the Singapore dollar (Sing) has moved along with the renminbi…  

Longtime readers will or may recall me pointing out how these two move together, because Singapore can’t allow the renminbi to get too weak or too expensive due to competition with exports.   So, if you’ve forgotten that I said that years ago, there it is again for your edification! HA! 

Of course the stock jockeys got lathered up by the rate cut… But what about the Pause for the Cause? I guess they ran out of the room before Jerome Powell could utter those words! But that’s OK. Remember in 2009, when stocks, metals and currencies were all tied together as the “risk on” trade? And when they got sold it was “risk off”… That always reminded me of the Karate Kid movie… Wax on, wax off… But that all changed a few years ago, and now we’re back to different asset classes providing pricing that’s derived from different price mechanisms, with no recognition, as any other asset class!

You might have suspected that Gold would either take off for higher ground on the rate cut news, or be subjected to selling while using the excuse the Fed is going to pause… But in reality neither of those happened… Gold on Friday, closed at $1,512, same as it closed on Thursday… I would imagine that the price manipulators made sure that the price of Gold didn’t go higher after the rate cut announcement… And so we traded in the same clothes for two days… You know that with the Fed rate cut to 1.50%, we, here in the U.S., are not that far from zero interest rates… Remember what I told you over a year ago… That historically, during a recession, the Fed cuts rates a total of 400 Basis Points, or 4%… We’re not at 4%, not even close to it, so…

Where was I? Oh, that’s right, since most of the world has seen record levels of Gold when priced in their respective home base currencies, because they have interest rates even lower than in the U.S. that pretty soon, you won’t earn any money on your deposits, so what are you waiting for with regards to buying Gold? As always, I ask… Got Gold?

The U.S. national debt went over $23 Trillion last week… It wasn’t that long ago in reality that is, (12 months!) that we crossed the $22 Trillion figure… The Debt is acting like it’s going higher at a compound rate! Debts, derivatives, are going to be the death knell for this economy yet… And no, it’s not happening tomorrow or this week, and probably not this year, but it’s coming folks…

That $23 Trillion, per tax payer is equal to $186,500… Who’s going to be the first one on your block to write a check to the Gov’t for $186,500? Not me! They would come put me in debtor’s jail! Speaking of debt… I keep receiving emails telling me that they have the solution for getting me out of debt… (I have no debt) so I laugh, and then think, why aren’t these people sending these emails to the Gov’t? They sure could use some non-painful debt solutions!

The U.S. Data Cupboard will be quite the non-market moving event this week, with lots to report, and none to really cause us to want to get on a roller coaster, throw our hands in the air, and say we don’t care!

I’m currently reading the 5 volume of Murray Rothbard’s book: Conceived In Liberty…  it overs years 1784-1791…  Doesn’t seem as though 7 years would be enough to write about… Oh, but in those 7 years, we became a republic… Since those days, we’ve become an Empire…  Sort of like the Roman Empire… I’m just saying… 

To recap… The Jobs Jamboree on Friday was suspect at best… Sure for the mass media and stock jockeys they were touting the 128,000 jobs the BLS says were created in Rocktober. But with a closer look we find that the BLS added 274,000 jobs after they received the surveys, and they reported a negative 146,000 jobs!  The dollar bugs went and hid, and the currencies rallied, although it wasn’t like a “old school” rally by them.  Gold traded in the same clothes on Thursday & Friday…  And the week of data looks pretty lacking this week, so we could drift along… 

For What It’s Worth… Well, to me, the total debt in this country is a HUGE problem that’s more importantly worked on than the current direction of the lawmakers…  $23 Trillion in debt folks…  So, here’s an article that goes through the debt number and can be found here: https://thehill.com/policy/finance/468600-us-debt-surpasses-23-trillion-for-first-time

Or, here’s your snippet: “The federal government’s outstanding public debt has surpassed $23 trillion for the first time in history, according to data from the Treasury Department released on Friday.

Growing budget deficits have added to the nation’s debt at a speedy rate since President Trump took office. The debt has grown some 16 percent since Trump’s inauguration, when it stood at $19.9 trillion. It passed $22 trillion for the first time just 10 months ago.

Of the $23 trillion figure, just under $17 trillion was in the category of debt held by the public, which is a more useful gauge of the debt the government has to pay down, and the number typically used in calculating the nation’s debt burden. The other $6 trillion comes from loans within government bodies.

Still, the $23 trillion figure marks a milestone.

“Reaching $23 trillion in debt on Halloween is a scary milestone for our economy and the next generation, but Washington shows no fear,” said Michael A. Peterson, CEO of the fiscally conservative Peter G. Peterson Foundation.

“Piling on debt like this is especially unwise and unnecessary in a strong economy,” he added.

High levels of debt can push up borrowing costs and interest rates, “crowd out” private borrowing and weigh down budgets. In the 2019 fiscal year, for example, the government had to devote $376 billion just to pay the interest on the debt, equivalent to nearly half the defense budget, and more than the amount spent on the combined costs of education, agriculture, transportation and housing.

Chuck Again….  I’ve always contended that having such a large debt takes up all the time for lawmakers, and what have you, that need to tend to growing the economy…  Look at Japan…  I’m just saying… 

Currencies today 11/4/19 American Style: A$.6917, kiwi .6430, C$ .7605, euro 1.1160, sterling 1.2917, Swiss $1.0124, European Style: rand 14.7975, krone 9.1062, SEK 9.5835, forint 294.25, zloty 3.8156, koruna 22.8537, RUB 63.49, yen 108.40, sing 1.3572, HKD 7.8380, INR 70.46, China 7.0364, peso 19.08, BRL 3.9893, Dollar Index 97.30, Oil $56.88, 10-year 1.75%, Silver $18.14, Platinum $953.04, Palladium $1,812.01, and Gold… $1,513.23

That’s it for today… Well, my beloved Missouri Tigers couldn’t lose this past weekend, as they were on bye… Back in the football depths of the 90’s I used to say the Tigers couldn’t beat bye! It was a dark time for Tiger lovers back then… Now, we get all lathered up about the team with so much potential, only to see them fritter and waste it away each year… UGH! I still wear my black and gold though, for that’ s my state’s team! We, as a family, celebrated Rachel’s birthday on Saturday night, which meant I got to hold my darling granddaughter, Evie, for a long time. I sang her to sleep, although at her age (3 weeks) she was probably going to sleep without my singing! She’s so tiny… especially when I hold her! So, happy birthday tomorrow to Rachel… She believes all of November is her birthday month, and tends to celebrate it each and every day! Good for her! The Blue Jays, (Justin Heyward, and John Lodge formerly with the Moody Blues, take us to the finish line today, with one of my all-time fave songs… I Dreamed Last Night… a simply beautiful song! I hope you have a Marvelous Monday, and please remember To Be Good To Yourself!

Chuck Butler

Rocktober 31, 2019 

* Currencies & metals both rally on the rate cut news!

* Chinese PMI’s sink further into contraction territory… 

Good Day… And a Tub Thumpin’ Thursday to you! And Boo! It’s Halloween! I remember quite a few years ago now, when I was in New Orleans for a Conference, and was having dinner at the Commander’s Palace with Frank Trotter, and David Galland, when we decided that we should join the partiers on Bourbon Street. The problem was the partiers would all have on costumes, and we had none… So, undaunted,  we proceeded to walk down Bourbon Street with all the other crazily costumed partiers! Oh, what a night! So, I hope your little Trick-r-Treaters are ready to go tonight. Here it’s going to be cold, so we won’t actually get to see most of the costumes, and a lot of the real little ones will remain at home… The weather people were actually calling for snow this morning! YIKES! Carlos Santana greets me this morning with his song: Evil Ways, which is kind of apropos for today, eh?

I told you, I told you, I double, double told you! I told you that despite some dissenting voters in the FOMC, that the Fed would cut rates yesterday… The third rate cut this year, and brings our Fed Funds rate to 1.75%… The Fed did leave out some wording that led the Fed Watchers to believe that the Fed Heads will pause now with the rate cuts… Their announcement of a rate cut came less than a few hours after it was announced that the 3rd QTR GDP was 1.9%, as I reported yesterday… I think it’s wise at this point for the Fed to pause, because now the next meeting would come in the middle of December, and I don’t think they want to drive the markets further into bubble-land right before Christmas… Not that it won’t happen, I just think that pausing right now, and seeing what the previous 3 cuts have gotten you, is a wise thing to do…

The dollar bugs went and hid in the wall boards as soon as the rate cut was announced yesterday, but the upward movement, especially from the currencies that currently employ even lower rates than the U.S., saw a muted effort to rise… But rise they did, just not like it “used to be” when a country debased their currency… Of course back “in the day” fundamentals played a HUGE part in determining a currency’s value, and also back “in the day” the markets were not manipulated like they are today… So, given those things one doesn’t exist any longer and one does exist I was happy with the move the currencies made…

Somewhere along the line economists began being rock stars (in their own minds that is) and got the markets to believe that a rate cut was a “good thing”… It no longer was a signal to the markets that the economy was weakening, but rather that the economy just needed a new rocket launch stage if you will… And the markets with their gullibility bought it hook, line and sinker… And so here we are now with the Fed having cut rates at three consecutive meetings, and the dollar moves along as if nothing happened, and the stock jockeys are dancing in the streets…

Why wouldn’t the markets question the Fed’s announcement that the repo operations and liquidity operations will continue through the 2nd half of 2020? Wouldn’t that tell you that there’s something rotten in Denmark? Well, maybe I just have a sensitive nose, that can pick out the sour smells in an economy… The Fed Heads were actually slapping themselves on the back when the 3rd QTR initial print of GDP came out at 1.9%… The markets were expecting 1.6%… So, in a weird way, GDP outperformed its underperformance! HA!

And now, other than Personal Income and Spending and the ADP Employment report, we’ll wait a day for the Rocktober Jobs Jamboree… I told you earlier this week that the so-called experts have called for a print of just 75,000 jobs created in Rocktober… That would be below the 109,000 jobs needed each month to maintain the unemployment rate, according the Fed Atlanta…

I’m going to say that for today, Personal Income will be flat to unchanged, and Personal Spending will see a bump, due to the spending on Halloween costumes, candy, etc. But then Retail Sales last week showed that September was a negative print… Month to month, I guess we go, and when it will stop, no one knows!

Gold had a good day yesterday climbing $8 and is up another nearly $10 this morning, to trade right now at $1,505.  The World Gold Council (WGC) issued a report yesterday on Gold, and said that “maybe it’s time to switch from bonds to Gold”…   Their premise is that with more than $13 Trillion now outstanding in negative yielding Gov’t Bonds from around the world, that at least Gold competes with those bonds… 

I was talking to someone the other day, who had a pile of cash and wanted to know where to put it…  Do you know how many times through the years, that I’ve been asked that?  I always cringe, but then I tell them what I do, that way, I won’t tell them to do something I won’t do…   There are people out there in the investment world that get paid the big bucks to make those calls, and I would rather refer to them!  For I’m just a country bumpkin, sitting in his basement at a writing desk…  I’m just saying… 

But you can bet your sweet bippie that I said, “you should look into allocating a portion of your investments into Gold or Silver or both. Not 100% of your cash, not 50% of your cash, just an allocation that feels right to you..” 

OK…  So, the Fed has cut rates at 3 consecutive meetings, but were quite adamant about pausing… So, what would the Fed need to see in the economy for them to continue the with the rate cuts?  I guess we would need to ask them, but longtime readers know that I like to tap into the Fed Heads minds and tell you what they’re thinking, so let me get out my séance materials and get to work… 

Spirit, will you talk to me?  Good! I was wondering what the Fed Heads will need to see in the economy before cutting rates again, can you tap into their minds and tell me?  Of course!  “I see the Fed Heads needing to see Armageddon  in the economy before cutting rates again, for their leader, Mr. Powell, is hell bound and whiskey bent to not be mentioned with the zero rate leaders, Bernanke and Yelllen:”      

Oh thank you spirit…  OK, so if they need to see Armageddon, then that’s what they’ll see!  Yesterday, I said that I thought it was wise to pause the rate cuts right now, but come January, the Fed Heads need to get back on the rate cut horse and ride it fast! For Armageddon is coming folks…  I know I sound like the boy who cried wolf… And I’ve been wrong before, but this is something that’s been building for a long time now, and with all the derivatives, debt, manipulation and whatever else causes ill wills it’s going to be a doozy! 

I feel like the guy in the Big Short, who went short the housing market long before the collapse, for he saw the rot on the vine in housing, but he did it so soon, that everyone just about walked out on him, but then the collapse came, and he walked away with billions of dollars of profit…  OK, I won’t walk away with anything but the two nickels I rub together in my pocket, I’m talking about how he was out in front of the housing collapse, just I’ve been out in front of this awful recession that’s coming… 

The Chinese PMI’s printed last night, and they fell for the 6th consecutive month, and now sit at 49.3…  I told you, I told you, I double double told you that the Trade War would end up hurting both the U.S. and China…  Here in the U.S. it was reported last night that U.S. Farm bankruptcies surged 24% in their latest report.  And the Trade war was blamed for these bankruptcies…   

So, remember months ago, when economists were taking sides with some saying that the U.S. would in the Trade War, and others saying China would win the Trade War, and Chuck said, they’ll both lose the Trade War! 

I already talked about the Data Cupboard today… So, To Recap, the Fed Heads cut rates for a 3rd consecutive meeting, but indicated that they will pause now… The currencies and metals both rallied on the rate cut news, but the currency moves were held back by “the new trading” , and not the way things used to be…  Chuck talks to a spirit, since it’s Halloween, and found out what the Fed Heads will need to see in the economy before they cut rates again… You won’t want to have missed that! 

Errors and omissions…  Yesterday, I said that Amazon and Facebook would announce earnings, but I meant to say Apple, not Amazon… My mistake…  And I also said that the BREXIT extension was to December 12, but it’s really January 31st.    Silly me… sorry for those errors… 

For What It’s Worth…  Well, the timing on this couldn’t be worse, but it’s here and we get to deal with it… The “it” I’m talking about is a Trucking slowdown…  It’s all in the article on zerohedge.com and can be found here: https://www.zerohedge.com/economics/trucking-slowdown-ahead-holiday-season-suggests-consumer-faltering

Or, here’s your snippet: “The trucking industry continues to decelerate into year-end at a time when it should be rocketing higher ahead of the holiday season.

Old Dominion Freight Line reported 3Q/19 earnings last Thursday and warned the domestic economy is slowing. The freight company reported revenue declines Y/Y for the quarter, which was the first drop since 2016.

The rare decline in revenue from Old Dominion is a sign that the domestic economy is faltering, and it’s likely being led lower by deteriorating consumer demand. This means the manufacturing recession has successfully transmitted weakness into the consumer segment of the economy, which accounts for 70% of GDP.

This comes at a time when Wall Street is betting on Federal Reserve easing and a healthy consumer to rebound the economy between 4Q/19 and 1Q/20.

FreightWaves published a new report Thursday that detailed how trucking “load volumes continue to decelerate into the peak holiday shopping season.”

The DHL Supply Chain/FreightWaves Pricing Power Index, a real-time demand and supply indicator of the trucking industry, recorded 25 late last week, less than 50 means demand is lackluster and overcapacity plagues the industry. A score above 50 means demand is higher than capacity.

And for more color on consumer trends, not just in the U.S. but perhaps on a global view, the global shipping container industry is sounding an alarm.

Shipping rates for 40′ containers have taken another leg lower in the last several months. This means retailers are ordering fewer consumer goods from China and other emerging markets, a clear indication the consumer is weakening.

Last week, Amazon guided its forecast for the holiday season lower. Analysts were absolutely shocked, but it marks the beginning of a new trend where the consumer is expected to come under financial stress, pull back on spending, and could start saving as the next recession nears.
Tracking freight rates and volumes of various forms of transportation in domestic and global supply chains have given us perhaps an idea of what’s to come, that is, an underwhelming holiday season for retailers.”

Chuck again…  Capital Expenditures haven’t grown in years, and now a Trucking slowdown?  Got Gold? 

Currencies today 10/31/19 American Style: A$.6897, kiwi .6405, C$ .7595, euro 1.1162, sterling 1.2952, Swiss $1.0124, European Style: rand 15.0882, krone 9.1957, SEK 9.6490, forint 294.97, zloty 3.8155,    koruna 22.8556, RUB 63.88, yen 108.27, sing 1.3613, HKD 7.8356, INR 70.76, China 7.0571, peso 19.13, BRL 4.0001, Dollar Index 97.26, Oil $54.94,  10-year 1.74%, Silver $18.05.31, Platinum $928.76, Palladium $1,805.31, and Gold… $1,505.50

That’s it for today, and tomorrow…  Boo!  OK, what did the fish say when he swam into a wall?   Dam!  I remember when my older kids would always come to me before Halloween and ask me for jokes that they could tell while Trick-r-Treating…  Sometimes I got in trouble, because the jokes were a little in the gray… All in good fun!   Congratulations to the Washington Nationals, who won their franchise’s first World Series! No home team won on their own turf during this Series, which was very strange!  But St. Louisan and former Mizzou pitcher, Max Scherzer is now a World Series Champion! I laughed last night when Joe Buck said, “the Astros and Nationals share their spring training complex” I laughed because my spring training buddies talked about this 10 days ago, and the TV guys just got wind of it! HA!   OK… all good things must come to an end, and so it is with this Pfennig! Looking Glass takes us to the finish line today with their song: Brandy….  got that song in your head now? HA! I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and will Be Good To Yourself! 

Chuck Butler

 

Rocktober 30, 2019

* Currencies trade steady Eddie on Tuesday… 

* Gold & Silver keep their back and forth pattern in place… 

Good Day… And a Wonderful Wednesday to you! I went through a battery of tests yesterday, and still have one more next week before I know the real story with the blood flow to my lower extremities. Yesterday was all good news though, and the doctor said that we’re going in a new direction with the treatment of my leg wound… The bad news is that I had planned to go a mini-vacation starting the 9th, just like last year to get away from November, here, but…. I may not be able to go, now. I guess I’ll find out for sure next week… They’re going to have to hogtie me to my house to get me to stay here this winter, I can assure you that! I’ve gotta go where it’s warm! The Beatles greet me this morning with their love song: And I Love Her…

Well, from the looks of things when I got home yesterday around noon, the currencies were treading water, and certainly not gaining nor losing ground VS the dollar. Gold on the other had saw another engineered takedown on Monday, brining it back below $1,500, but like I’ve said a couple times now, this is to be expected, with every move above $1,500 countered with a move back below it the following day… And even though the boys in the band keep getting taken to court, and called names that are usually reserved for gangsters, they just keep doing what they’ve been told to do… keep Gold from moving higher too quickly…

But what’s a Gold bug like me going to do when we’re back to the back and forth between a level again? It’s no use for me to get all lathered up one day, and have to back track the next day… Eventually, this $1,500 level will be left behind, just like the $1,300 level was a couple of months ago…

Oh, and Palladium traded, briefly, over the $1,800 figure overnight… The experts say that a shortage of Palladium has caused this huge move in the metal’s price…  I always then have a follow up question for these guys, and ask why then hasn’t the shortage in Silver caused the same explosive upward move?     Crickets… 

Longtime readers know my affection for Lola (aka Goldman Sachs) NOT! But shoot, Rudy, right now they look like a choir boy when compared to JPMorgan… I’m going to go for the jugular this morning, so if this doesn’t suit your needs, then skip ahead… OK… I’ve quoted the folks, Pam and Russ Martens of www.wallstreetonparade.com before, and they seem to be the new “go to” folks for the GATA folks… And that suits me just fine, because I agree with nearly all that these two say… So, with no beating around the bush, let’s go to what really set me off yelling at the walls yesterday…

“JPMorgan Chase is the largest bank in the United States with $1.6 trillion in deposits from more than 5,000 retail bank branches spread across the country. When it withdraws liquidity from the U.S. financial system, that has a reverberating impact.

According to the filings that JPMorgan Chase makes annually with the Securities and Exchange Commission (SEC), since 2013 JPMorgan Chase has spent $77 billion buying back its own stock. That includes the whopping $17.01 billion it has spent in just the first nine months of this year buying back its stock.” – wall street on parade

Chuck again, and you do you want to know what really ticked me off? JPMorgan/ Chase admitted that they had “partly used customer deposits for their shares buybacks”… Well, if there was any question before as to whether or not the money you have on deposit in a back was yours or the bank’s… That’s been answered now!

So, a year ago, when the tax cut was put into place I said, “this will not be a boon for moms and pops, but for Corporations, and they will not use it to expand their businesses, or Banks to make loans, but to buy back their company stocks… And look where we are a year or so later?

I saw that coming like a hanging curveball back then folks… I’m shocked that most economists didn’t see it that way!

OK, let’s get back to the markets…. I had a dear reader send me a note the other day asking me to please continue to write about the mess in the repo market… Well, first of all, I didn’t get one reader to agree with me on my tin foil hat comment the other day… Which means that you all agree with me on this! WOW ! Yesterday’s repo action saw the lowest amount used in about a month…  But still… that’s $47 Billion worth, folks… 

So… The Fed keeps the “newly created electronic funds” coming, to support the lack of liquidity in the repo market… They’ve gone to buying bills to help banks with their liquidity, and all this to plug the holes in the  dam  (economy) one more time… Pretty soon, those plugs are going to begin to pop, and once one does, they all will follow, and then we’ll see just how much the Fed is going to keep the “newly created electronic funds” coming… My guess is they will open up the spigot, and let them flow!

And all that should be bad news for the dollar… Well, wait a minute, let me restate that… It COULD be bad news for the dollar… IF… the markets behave the way they should, when a Central Bank is debasing the country’s currency by adding truck loads of new currency to the mix… The reason I hesitated here, is that for the last month the dollar has been getting debased just about every day, and all we’ve seen from it as far as dollar weakness is a 1-cent move in the euro… I shake my head in disbelief, folks… but it is what it is!

Well, let’s see… Mario Draghi, the European Central Bank (ECB) President steps down this week, and former IMF head, Christine Legarde takes over… I’m sure that some pundits will be heaping praise on Draghi for “saving the euro” (back in 2011), but for me, I don’t think he did such a good job. He added over $3 Trillion euros to the ECB’s balance sheet among other crimes of passion… And publishing guru, and writer extraordinaire, Bill Bonner, in his daily letter, had this to say about Draghi’s time at the head of the ECB…

“First, they haven’t produced real prosperity. That can be seen by looking at the growth rate. In the eight years before Draghi took the helm, European GDP growth averaged a limp 1.2%. Over the Draghi years, the growth rate was exactly the same, 1.2%. In other words, that $3 trillion added to the euro economy bought nothing.

Second, the money didn’t stop the business cycle either. For example, Germany’s manufacturing sector just registered its 10th straight month of decline. (Germany is Europe’s biggest economy by GDP.)

Third, Mr. Draghi saw his mission as getting consumer prices to rise by 2% per year. Two percent is the totem of almost all modern economists; less than 2% is a threat to prosperity, they believe.”

Chuck again… I like that he said, “they believe”… He’s talking about the dolt economists… Because,  is less than 2% CPI (consumer inflation) really that big of a deal? I mean come on! Think about that… with no rising prices, an economy can move along nicely… Think further from 1980 when CPI was 14% to 2000 when it was 3%, the economy was growing… And CPI wasn’t below 2%, then was it? NO!

OK, the BREXIT deadline of 10/31 has been extended to December 12… So, just like the Fed, Treasury and Congress, that keep kicking the debt can down the road, the BREXIT negotiations have been kicked down the road… The U.K. will be going to the polls soon, all these unknowns about the future should be putting pressure on pound sterling.  But in that same perverse mentality that has taken over currency traders, the pound is on the rally tracks…  go figure! 

The Petrol Currencies aren’t getting any help from the stuck in the mud price of Oil these days…  There is one Petrol Currencies though that has, very stealthily moved stronger each day for the past 10 days, and that is the Brazilian real…  Things have calmed down here, and traders are booking gains on their short trades, it appears to me…  

Brazil still has positive interest rates to the dollar, euro, yen and sterling, so that could be beneficial to the real should their political problems continue to calm down. 

So, today’s the day the Fed Heads will put away the board games they’ve been playing since yesterday… I just got this mental picture of the Fed Heads sitting around a table and playing Dungeons and Dragons… Yeah, that’s the picture!   Any way, the Fed Heads will come out of their “green room” and announce what they are doing with interest rates…  

I read a piece yesterday that talked about how the rate decision isn’t a layup for another rate cut, as there were too many dissenters at the last rate cut meeting…  Well, that may be, but since the last rate cut meeting, 6 weeks ago, we’ve seen economic data go to hell in a hand basket, and if they hold to their words, about rate movements being tied to the economic data, then a rate cut will be announced this afternoon… 

Before we get there, the stock jockeys will see earnings from two of the “FANGS” companies… Amazon and Facebook…  will they overshadow what the Fed is going to do later in the day?   

The U.S. Data Cupboard saw the Case/ Shiller Home Price Index, reverse the recent trend of monthly declines in prices, when their August report showed an uptick in home prices…  You are aware that mortgage rates have fallen by leaps and bounds again, right?  But still home sales aren’t what you would consider to be great, given the rate environment… What gives here?  

Before I head to the Big Finish today, I wanted to mention something that I saw yesterday that sent shivers down my spine…   Have you heard of “Online Installment Loans”?   Well, that’s the new thing with the young folks, who don’t see the problems with these things…  I had been seeing these silly commercials on TV for Cashnet USA, and didn’t think anything of them, because I would have thought that everyone learned their lessons with “pay day loans”….   Mark my words on this folks…  At some point we will begin to see the defaults in these “online installment loans”…  I’m just saying… 

To recap…  The currencies held steady Eddie yesterday, but Gold & Silver saw downward movements that began with another engineered take down on Monday. Back and forth, over and below the $1,500 figure, is the new game for the price manipulators with Gold, and with Silver the figure is $18…  What’s JPMorgan up to now, that makes Lola look like a choir boy? Brexit gets an extension, and there will be an election in the U.K.  All this and more today! 

For What It’s Worth…  Well, I mentioned Lola (aka Goldman Sachs) earlier this morning, and now here I am talking about them in the FWIW! Lola has slashed their economic forecasts, and that article can be found here: https://www.zerohedge.com/economics/wholesale-inventories-tumble-september-confirm-gdp-growth-slowdown

Or, here’s your snippet: “As we warned, the drop in wholesale inventories has sparked concern on U.S. economic growth in Q3. Goldman has slashed its forecast:

“While the advance trade report had positive implications for net exports in September and Q4, the inventory data was weaker than our previous assumptions. We lowered our Q3 GDP tracking estimate by two tenths to +1.4%, ahead of Wednesday’s advance release.”

And The Atlanta Fed has just cut its forecast too:

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2019 is 1.7 percent on October 28, down from 1.8 percent on October 24.”

Indeed, since President Trump’s election we’ve only seen one quarter of growth at a rate below 2%, and analysts will be looking out for what this might mean for the economy heading into next year’s election.

Thanks to a plunge in inventory stacking for non-durable goods (which sounds admittedly oxymoronic), wholesale inventories slumped 0.7% MoM in September – the biggest decline since Nov 2017.”

Chuck again… Well the first report, with many revisions till to come, on 3rd QTR GDP was that it fell to 1.9%…  I’m sure it will see downward revisions as we go along…  

Currencies today 10/30/19 American Style: A$ .6860, kiwi .6350, C$ .7642, euro 1.1113, sterling 1.2890, Swiss $1.0079, European Style: rand 14.6085, krone 9.2132, SEK 9.7144, forint 296.33, zloty 3.8356,    koruna 22.9477, RUB 63.83, yen 108.85, sing 1.3620, HKD 7.8402, INR 70.68, China 7.0594, peso 19.11, BRL 3.9920, Dollar Index 97.64, Oil $55.61, 10-year 1.82%,  Silver $17.95, Platinum $923.59, Palladium $1,788.53, and Gold… $1,493.85

That’s it for today…  Well, I have what they call a Uni-boot on my left leg now…  This is the fourth different treatment for the leg wound…  Fingers crossed on this one, for sure!  Well, there’ll be a Game 7 in the World Series, as neither team been able to win at home!  St. Louisan and former Mizzou pitcher, Max Scherzer will pitch for the Nationals tonight…  I’m doing better on my new medicine, so hopefully my body has adjusted to it… Well, I’m really late today, so for that, I apologize…  Tomorrow is the end of Rocktober, and Halloween!  Will the Fed spook us early with a no rate cut announcement this afternoon?    Jackson Browne takes us to the finish line today with his song, that always brings a tear to my eye: Late For The Sky…  I hope you have a Wonderful Wednesday, and please Be Good To Yourself! 

Chuck Butler

 

 

Rocktober 28, 2019

* Currencies and metals rally on Thursday… 

* But fail to add to gains on Friday! 

Good day… And a Marvelous Monday to you! A weekend that went so fast, that I kept thinking yesterday was Monday already! Friday I started a fire in our outdoor fire pit, and stayed out by it until my cooler went dry. We had company, and some ventured outside for a moment or two, only to retreat back inside where the talk was fast and loud, and the food warm. Saturday, I attended a fund raiser, for a watering hole acquaintance, who recently suffered his second stroke… And then Sunday I spent most of the day in a haze… My new thyroid medicine doesn’t seem to want to be calm in my stomach… I begin my next round of daily chemo this morning, so mixing the two, ought to bring me some very interesting days… UGH! The Outlaws greet me this morning with their very long song titled: Green Grass And High Tides…

Well… Thursday last week saw the currencies gain on the day, with the euro climbing to 1.1170, but by Friday afternoon, after the London Markets had closed and the Pubs were full, the dollar bugs fought back… And this is where I’m having a really difficult time believing this was just “trading as normal”… You see, the U.S. Data Cupboard had a couple of really ugly Sept. Durable and Capital Goods Orders prints… Both were negative, and that should have sent the dollar to the woodshed, with traders thinking that taken along with negative Retail Sales, and Factory Orders, and manufacturing now in a contraction place on the index meter, that the Fed would be cutting rates again this week… Which is going to put the U.S. yield closer inline with yields around the world…

So, why the dollar buying on Friday? I’m telling you this now, so you can listen to me later… All markets these days are manipulated… Need I say more? You see, I wouldn’t put it past those in this country that want to see us come to our collective knees in the next recession, from keeping the dollar from weakening, thus putting pressure on the Trade Balance, and building the bubble even more…

OK, there! I said it! Really didn’t want to go there, because I know it makes me look like a wear a tin foil hat… Sort of like Tom Terrific, and his funnel hat! But seriously… this is deep thought stuff, that I’ve had more than the allotted time to think about… So, in the end…. I’m just saying…

Gold & Silver both had good days, also, on Thursday, with Gold popping back over the $1,500 figure and Silver over the $18 figure. But Friday brought about some afterthought of the rallies, and Gold was only allowed to gain 40-cents on the day… 

If the Fed does cut rates this week, I would have to think that it would give Gold & Silver the chutzpah to move higher still…  You see, Gold & Silver got ripped when the Fed was hiking rates for 3 years… And now that they’re back to cutting them, and bringing deposit rates and yields on bonds very low once again, that should be good for the metals…  

The price of Oil is stuck in the mud again, after rallying last week on the news that the U.S. Oil supplies had shrunk, the Oil price has remained within a couple of cents of each previous day’s range.  I read a report this weekend about the U.S. Shale production, and in the report the writer was saying that the U.S. is “awash” of Shale production… That’s quite opposite of everything else I’ve been reading, and I’m going to put that thought of Shale Production being good, on the side for now… 

The U.S. Budget Office released the total debt that was accumulated in fiscal year 2019 that ended on September 30th… The total added to the national debt was $984 Billion… Now, I have a question I would ask of the Fed heads who kept saying over and over again that this dance is gonna be a drag… No wait! They kept saying over and over that the economy was strong and robust, right? Well, then don’t you think, because I do, for sure, that this is an unusually high Deficit when an economy is “strong and robust” right?

Don’t forget the OMB (Accounting gurus) says that the deficit going forward will be more than $1 Trillion each year, and that’s if economy continues its pallid pace of 2% growth! Should we have a prolonged period of greatly reduced growth, the Budget Deficit will explode higher… What? You mean to tell me you don’t think the Gov’t will start throwing money around like they have a Treasure Chest of reserves like China? OH, OK… I see You just don’t think we’ll have a prolonged period of greatly reduced growth… Well, here’s where I’ll bet you a dollar to a Krispy Kreme, that we do!

I haven’t touched on the massive amounts of derivatives in the markets these days in a while, and then I saw this from Ainslie Bullion… “the idea that derivatives are not a source of systemic risk because the open (netted) position may seem small is one of the great misconceptions about derivatives. Derivatives fund nothing, but serve to shift exposures from one party to another and work through margins (collateral), yet they carry all the bankruptcy characteristics of debt for the out-of-the-money party. A sudden move on volatility can shift the Gross Market Value quickly, and netting provides no protection for this. Netting is about settlement amounts using prices at the point of close out. Netting does not protect any financial firm from market risk.”

In 2008, we were within an eyelash of a catastrophic moment in derivatives… Did we learn anything then? No… The number of derivatives in the markets place today far exceeds where we were in 2008… I just don’t know how to explain this any further to you folks, other than to say that The debt has grown by so much that it seems impossible for it not to eventually trigger the kind of uncontrolled or ‘disorderly’ market event that sees the derivative ‘worst case’ issue playing out. And once again I ask… Got Gold?

OK… let’s get back to the Fed… Their FOMC group meets this week on Tuesday and Wednesday, it’s a two-day meeting, so you know my standard line for times like these… Get the board games out, and see who can sink Jerome’s Powell’s battleship! I’m of the belief that the Fed will cut rates again this month, otherwise, they lied to us, when they said that further rate cuts would be data dependent… The economic data here in the U.S. as chronicled here in the Pfennig has been downright awful, and very weak… So… Jerome, what’s it gonna be boy?

Thursday morning, the morning of all Hallow’s Eve… we’ll know what the Fed has on their minds, and if they held to their words… It’s not like they would have to go to Jail and not pass Go and not collect $200 if they decide to hold back on a rate cut… But in the minds of traders, the Fed Heads credibility will have taken another hit…

Well… The Data around the world is sporadic these days… Lots of individual countries that make up the Eurozone, will have prints, but until they’re all crunched together, there’s no telling what they say about the Eurozone as a whole… The U.K. will get some good data this week, but by the time they get around to printing it, the markets will be focusing on the FOMC meeting.

Speaking of the U.K. there was not 24th hour save for the BREXIT deal over the weekend, and now the clock is ticking as the 10/31 deadline comes Thursday… And all that buying of sterling is really going to look silly if this BREXIT deal collapses, instead of being passed…

The U.S. Data Cupboard has the Case/Shiller Home Price Index for August to print today… The last ½ year’s prints here have shown Home Prices to be falling each month, I don’t expect that to change in August.. On Wednesday, the day the FOMC will make their announcement, after putting away all the board games that is, we’ll see Personal Income and Spending… and then on Friday, it’ll be a Jobs Jamboree Friday! Right now, the experts are forecasting job growth in Rocktober of only 70,000…. WOW! Now that will knock the “economy is strong “ campers to their knees!

Before I head to the Big Finish today, I wanted to highlight someone that I used to read all the time, Jim Willie, but then he just kind of fell of the edge of the earth, and I didn’t hear from him until this weekend, when longtime reader, Bob, sent me a note from Jim Willie…

Jim Willie is now of the belief that the Fed is going to have to go to “Infinite QE” or else the financial system collapses… “The smoke is coming from the REPO market because it’s concealing infinite QE. They have to go to infinite QE or the system breaks,” so says Jim Willie who also warns that the Dutch Central Banks says GOLD will be the only fix after the collapse.”

To recap…  the currencies and metals had good days of rallying on Thursday, and on Friday when it appeared they would add to those gains after awful economic prints in the U.S., they fumbled, bumbled and stumbled, and Chuck is convinced there’s something at play here with the dollar bugs…  BREXIT is a no-go at this point, and Chuck brings up to date with derivatives… 

For What It’s Worth…. OK, since I talked so much about derivatives this morning… I saw this article on Reuters and thought, well now, this certainly plays nicely in the sand box with what I was talking about earlier… This is a continuation on derivatives and can be found here: https://www.reuters.com/article/us-derivatives-regulation-clearinghouses/global-banks-funds-call-for-more-capital-from-derivatives-clearinghouses-idUSKBN1X31VD

Or, here’s your snippet: “Four global banks and five big fund managers called on international regulators on Thursday to require for-profit derivatives clearinghouses to put up more of their own capital to protect against cascading losses that could rock the world financial system.
Members of the group, including Citigroup Inc, (C.N) JPMorgan Chase & Co (JPM.N) and BlackRock Inc (BLK.N), published their views to try to shift in their favor prolonged policy debates over how clearinghouses should be fortified.

Regulators put clearinghouses at the center of trading in over-the-counter credit derivatives and interest rate swaps after the 2008 financial crisis. But the regulators have yet to agree on detailed protocols for shoring up, or safely winding down, clearinghouses wounded by customer defaults.

The task is arguably the biggest unfinished post-crisis reform and has become important as large clearing houses have become, like banks, too big to fail.

“We believe current capital requirements are insufficient,” the group said in the white paper.

The clearinghouses, known as central counterparties, stand between both sides of trades and ensure their completion even if one side goes bust. “

Chuck again… So, even the clearing houses are getting scared about the number and size of these derivatives they’re safekeeping, and want more collateral for their risk… Got Gold?

Currencies today 10/28/19 American Style: A$.6833, kiwi .6360, C$ .7662, euro 1.1105, sterling 1.2837, Swiss $1.0052, European Style: rand 14.5496, krone 9.2050, SEK 9.6714, forint 295.50, zloty 3.8486,   koruna 22.9717, RUB 63.84, yen 108.70, sing 1.3620, HKD 7.8390, INR 70.50, China 7.0647, peso 19.03, BRL 4.0054, Dollar Index 97.75, Oil $56.40, 10-year 1.83%, Silver $18.10, Platinum $933.02, Palladium $1,789.34, and Gold… $1,505.99

That’s it for today… And tomorrow… Yes, no Pfennig tomorrow, as I’ll be reporting to the vascular center bright and early tomorrow morning. The wound center doctor has sent me there to make sure the blood flow to my lower leg is good. If so, then they will wrap my leg and place it in a boot… Fun times at Ridgemont High for me then, eh? But at this point, I’ll try anything to get this healed! I already wear doubled up tubi grips on each leg every day… As the Blood clots I had from cancer, in my legs has caused negative reflux… Man, I’m full of all kinds of fun facts today, hey, boys and girls? HA! Last year, my campaign to get Bryce Harper to sign with the Cardinals failed, but that’s not going to deter me from starting another campaign to get Garret Cole to sign with the Cardinals! Jimmy Buffett greets me this morning with his song, and one that I adhere to: Changes in Latitude changes in attitude… I hope you have a Marvelous Monday, and will miss me tomorrow, HA! Please remember to Be Good To Yourself!

Chuck Butler

 

Rocktober 24, 2019

* Currencies and metals drift again on Wednesday… 

* German employment drops! 

Good Day… and a Tub Thumpin’ Thursday to you! Well, I was off on my thought yesterday that the Blues would play again on Wednesday night… They play tonight! But good friend, Mike K., saw that mistake I made and decided to drive to my house and drop off a Blues Calendar! Thanks Mike! Hopefully I won’t make that mistake again! I found out yesterday, that the chemo I take has made my Thyroid go haywire, so, now to add to the rest of the medicines that take up all of my sink space, I’ll be taking a thyroid med. UGH! Oh, well, it’s just another pill… But in researching this problem I found something I can blame my 1. Weight gain these past two years, 2. Hair loss, 3. Dry skin, 4. Increased sensitivity to cold temperatures… Well, hopefully, I’ll be able to stop scratching, and not have to wear a hoodie while watching TV at night! The Rolling Stones greet me this morning with their song: Dead Flowers… (another song from their Sticky Fingers album, which I, in my humble opinion, believe to be their very best work)

Well, another dull day in the currencies and metals yesterday… No data just about put every trader on the sidelines awaiting today’s Durable and Capital Good Orders data… The recent U.S. data has been very weak and negative and I don’t see how today’s prints will be any better… I personally feel that the U.S. economy is already in a recession, but we won’t know that for sure for months… I know, I know it’s not a technical recession, where we have two consecutive quarters of negative growth, but I would argue that without Govt. Spending, we would be in negative territory… I’m just saying…

The currencies drifted all day and night, once again, but this time they drifted higher… Gold finished the day in the same spot it closed the day before, and Oil… well oil saw its biggest one day gain in quite a while after it was reported that U.S. supplies aren’t as staunch as previously thought… That news helped the Petrol Currencies, and this time the Russian ruble was the leader of the pack… this time it was the Norwegian krone! One of my fave currencies!

OK… I brought it up, so I might as well go through with this… I have a handful of currencies that I believe are best to hold… They are: Russian rubles, Norwegian krone, Canadian dollars, Sing dollars, Swiss francs, and euros… But, the most fave currency of all to hold is…. Physical Gold!

And why not? Negative yielding Gov’t bonds around the world have grown to over $13 Trillion! I’ve said this before, I don’t doubt one iota that we, here in the U.S. , will see negative yields on our bonds before this all over… Can you imagine that? Sure people that own bonds now, will love to see negative yields on bonds, so they can sell them to some other sucker… But what would they do with the money/ principal they received? Invest it more bonds? Hardly, given they would now have negative rates… how about stocks? Only if the Gold / Dow ratio has fallen to below 5… A’’nd right now that ratio is very near 18 at 17.98… So keep buying physical Gold is all I can tell anyone that will listen to me… Or how about cash in the bank? Well, if bonds have negative yields, then deposit rates will have negative rates, so you’ll have to pay the bank to safekeep your money… Momma said there’d be days like this, there’d be days like this my momma said!

Actually, my mom would not believe what the world has become these days… She passed in 1997, and my dad in 1995, and they both would be beside themselves looking at the world today, and the amount of debt that’s been accumulated… Actually, I wish they were still here, but on the other hand I’m glad they aren’t, so they don’t have to see what’s happened to the U.S.

And it’s not just the U.S. folks… Debt is a problem in Japan, the Eurozone, China, the U.K.
And so on… And negative rates have already been implemented in a lot of these countries, and if they haven’t been, they will shortly…

So, I get this question all the time… if all these other countries are doing badly, where do we put our money these days? I always look at them and say… “You’re kidding me right?, have you not read anything I’ve written for years now about how they should be buying pysical Gold?” In 2011, at my local watering hole, someone said, “what should we have bought?” and my friend, Duane, said, “if you had listened to Chuck 6 year ago, you would be sitting here with a big smile on your face, because you would own Gold”…

OK.. enough on debts, deficits, negative rates and Gold… Do you all recall what happened in 2008 when the financial meltdown was in full swing? Everything and I mean everything got sold… Stocks were losing ground faster than a speeding bullet, and margin calls were going out just as fast, that would require margin account holders to add more money to their account or sell stocks… Well, they wouldn’t see their beloved stocks, and so they sold other assets, like the currencies they held, and Gold, in an attempt to keep the margin calls at bay… And it looked bleak for the alternative assets, like currencies and metals… That is until it was announced that the U.S. would begin a bond buying program, and call it Quantitative easing… By the middle of 2009, the currencies had recovered their losses, and Gold was soaring…

Now, I’m not saying that this same thing will happen again… But, isn’t it worth it to stop and think about what the Fed reaction will be to a financial mess will be before you sell your diversified holdings? I sure hope it does, for if 2009 teaches us anything it’s that when the it looks the darkest, the bright light shines once again… I’m just saying…

OK, we finally get some data today to trade off of, and right out of the starter’s blocks this morning, the Eurozone printed their latest PMI… Their preliminary Rocktober manufacturing index (PMI) rose to 50.2, from 50.1, so not a drop, that all the experts were predicting… But it wasn’t all wine and roses for the euro, as a factory report showed the first drop in employment in over a decade… Uh-oh…. 

Traders didn’t seemed fazed by this print, and the euro remained above 1.11. If we get to tomorrow’s close, and the euro remains above 1.11, it will be one week of trading above that figure, which would be a good sign for the single unit, not that 1.11 is any psycological level or anything like that, it’s just something that I’ve noticed, which is out of the ordinary in these times of manipulated markets, and dollar strength… 

Next up will be the U.S. Data Cupboard with its print of September Durable and Capital Goods Orders…  As I said yesterday, I don’t see how these could be strong with all the other economic data printing weak and negative…  The lone wolf real economic data prints today for this week… I was beginning to think that the U.S. Data Cupboard had gone on strike!  

The Fed increased their injections to the repo market yesterday…  I pulled this from zerohedge.com… “In a statement issued at 1515ET, The New York Fed confirmed it would dramatically increase both its overnight and term liquidity provisions beginning tomorrow through November 14th.
That is a massive 60% increase in the overnight repo liquidity availability (from $75 billion to $120 billion) and a 28% surge in the term repo provision (from $35 billion to $45 billion).”

Well, JPMorgan was correct when they said this problem would get worse! I think the Fed NY, the flagship Fed Reserve bank, has panicked… In fact I think most Central Banks panic when it comes to problems, that the Central Bank, themselves, created!  And the Fed is not innocent here… they opened the flood gates a few weeks ago, and flood of requests to supply liquidity has been strong and swift!  

I just don’t get the fact that the major media doesn’t report this ongoing problem…  But then again, I haven’t watched a network news show in years, so I really don’t know what it is they do report, but I know in my heart of hearts, that it isn’t this! 

To recap…  The currencies and metals drifted again yesterday with no economic data to use as a guide in trading.  Midday, the Fed announced an increase to their repo injections, and stocks went wild with that news… So, somebody likes the fact that the Fed is providing liquidity to banks, with newly created electronic funds…  Eurozone PMI was OK, but the employment section of their Factory data, saw a drop of employment, and that’s the first there in over a decade!   

For What It’s Worth…  Long ago, in a galaxy far away, I began talking about the Underfunded Pensions here in the U.S.  After years of low rates, and yields of the same weakness, the Pension funds are worse off than they were all those years ago, when I first noticed there was a problem… This article is about GE, who took steps to alleviate their Underfunded Pension problem and it can be found here: https://www.marketwatch.com/story/ge-freezes-its-pension-plans-and-offers-former-employees-lump-sum-buyouts-2019-10-23?mod=MW_section_top_stories

Or, here’s your snippet: “In the face of declining profits, General Electric GE, -0.11% recently announced three pension actions to help reduce the company’s debts.

1. Freeze its pension plan for about 20,000 salaried employees and for about 700 employees in a supplementary plan.

2. Offer lump-sums to about 100,000 former employees who have not started benefits.

3. Pre-fund $4-5 billion of estimated required funding for 2021 and 2022.
Freezing GE’s plan means that 20,000 salaried employees will not be able to accrue any new benefits under the plan beginning in 2021. (The plan had already been closed to new entrants in 2012.) When these employees retire, they claim the benefits they have already accrued, but those benefits will be based on their current earnings rather than the higher earnings they were likely to have had in the future. In this way, the employee pension benefits will be lower than expected, and the company saves some money. The freeze also applies to about 700 workers who became executives before 2011 and had a supplementary pension. “

Chuck again…  This is just the start of many reports from Corporations that have to deal with Underfunded Pensions, folks…   And as always I ask…  Got Gold?

Currencies today 10/24/19 American Style: A$.6840, kiwi .6397, C$ .7650, euro 1.1130, sterling 1.2893, Swiss $1.0098, European Style: rand 14.5890, krone 9.1086, SEK 9.6185, forint 296.05, zloty 3.8428,    koruna 23.0125, RUB 63.83, yen 108.65, sing 1.3628, HKD 7.8391, INR 70.72, China 7.0719, peso 19.09, BRL 4.0643, Dollar Index 97.50, Oil $55.56, 10-year 1.76%, Silver $17.53, Platinum $919.28, Palladium $1,746.38, and Gold… $1,490.11

That’s it for today and tomorrow…  Next week at this time, we’ll be getting ready for Halloween! And then my least fave month, November will begin…  I’m really not a fan of November, and so I’ll slip away to S. Florida for a couple of weeks and get back for Thanksgiving…  Yes, that’s right, Thanksgiving is only a month away!  Where on earth does the time go? OK, Nationals are up 2-0,in the best of 7 World Series…  They are a real buzzsaw right now, and the 1924 Yankees probably couldn’t beat them! Unless you’re an old coot like me, you probably have no idea what or whom I’m talking about when I mention the 1924 Yankees…  Well, if you’re too young to know… Google it!  HA!  That’s what everyone does these days, as soon as something comes up, they immediately go to their phone and Google it…  I saw a sign the other day that made me laugh… it said, ” Be kind to your parents… They graduated H.S. without Google”!  HAHAHAHA, but it’s true, right?  Modern English takes us to the finish line today with their song: I Melt With You…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and please Be Good To Yourself!

Chuck Butler

 

 

 

Rocktober 23, 2019

* Currencies give back more of their Friday gains… 

* Fed interjects nearly $100 Billion…  this is getting crazy! 

Good Day… And a Wonderful Wednesday to you! The World Series began last night, and the Nationals did something that few teams have been able to do… they hit Astros pitcher, Garret Cole…. I’ve always been a “National League Guy”, but I did pick the Astros to win it all… I just thought they would be playing the Dodgers… UGH! I received a few emails and notes from readers and friends, saying they were glad that my granddaughter, Evie, was OK… Thank you… One of my all-time fave bands greeted me with back-to-back, belly-to-belly songs this morning… When I turned it on Marshall Tucker Band was playing 24 Hours, and that was followed up with Heard It In A Love Song…. (It can’t be wrong!)

With no data to trade off of yesterday, the currencies drifted, albeit a bit lower, but drifted all through the day & overnight market… Gold eked out a $3 gain on the day, So, all-in-all a big nothing day here…  Gold is up another $4 in the early trading today…

I wanted to point something out to those of you who scour the currency roundup with a fine tooth comb each day… The Dollar Index on 10/9/19 looked unbeatable and had just popped over the 99 handle, and traded that day at 99.04…  On Monday this week (the 21st), the Dollar Index was trading at 97.24… And briefly on that day, it fell below it’s 50-day moving average… But recovered and has remained above it’s 50-day moving avg. since. 

I wanted to point out something I learned a long time ago from a very wise trader… When assets are falling and go through their 50-day moving avg. , they normally go through it initially, then recover, and go through it again, and recover, and this may go on for a bit, before the asset finally falls through the avg. and keeps falling…   

So, is this in store for the Dollar, which is represented by the Dollar Index? I guess we’ll all find out…  But I would think that if that’s what usually happens then we could be seeing the beginning of a weak dollar trend…. I’m just saying… 

The BIG NEWS came from the U.K. where the U.K. Parliament voted down the BREXIT plan presented to them by PM Johnson… I had a feeling that this would happen, and now it appears that unless someone can hit a 9th inning walk off home run, that the deadline of 10/31, to have a deal, will not be met… Recall that I warned you all who got giddy about the recent runup of pound sterling, to be careful here… And well, pound sterling got taken to the woodshed yesterday after the Parliament announcement.

From the looks of yesterday’s repo market action, JPMorgan was correct, at least for one day that is, the illiquidity got worse!  The Fed had to interject nearly $100 Billion in newly created electronic funds (actual $99.8 Billion) and the Fed’s buying of T-Bills was oversubscribed by 5 times… 

That means that there were requests from the banks to offer T-Bills to the Fed at 5 times the amount the Fed stated they would buy…  So, do you think that the banks are really that bad off? I have to question the need for all this bond buying by the Fed… Seems to me, that the banks are seeing this as an opportunity to turn their T-Bill holdings to cash too easily. You see, a bank can make more lending money than they can owning a T-Bill… 

Not that I think there isn’t an illiquidity problem… I’m just questioning by how much, and think the banks are taking advantage of the Fed’s panic… 

I read this morning that China, too, is injecting money into their repo market… This news didn’t surprise me one iota, because the Chinese banks have been having illiquidity problems for months. You may recall that not that long ago, China lowered their reserve ratio for banks, thus freeing up cash…  

When I was writing for the Dow Theory Letters (now defunct) I wrote an article that was written when the first of the Trade War tariffs were announced… I had a great cartoon in the letter, about Tariffs, showing a bulldozer with the world’s economy in its bucket, being carted off, and the name of the bulldozer was “tariffs”…   I wrote then that a Trade War was not what the Global economy needed, and to this day, I was bang on with that statement…  

I pointed out that the Great Depression had a lot of contributors and that the Smoot-Hawley Tariffs were at the scene of the crime…  I doubt they teach that stuff in school any longer, but that’s a discussion for the Butler Patio, not here…   The point I’m making is that it doesn’t surprise me that both the U.S. and China are experiencing illiquidity problems… The Trade War has upset the apple cart…  I’m just saying… 

Things were so slow yesterday, that I have two FWIW articles for you today! And here’s the first one… By now most people have watched the movie: The Big Short… In the movie they pointed out how the ratings agencies were as much to blame for the financial meltdown, as anyone was. And the question is being asked as to whether or not they can be blamed again…. Well, this article in the WSJ, but can be found on zerohedge.com (in case you don’t have a subscription to the WSJ) and it can be found here: https://www.zerohedge.com/markets/are-rating-agencies-complicit-another-massive-ratings-scandal-wsj-investigation-leads

Or, here’s your snippet: “Over the past two years, a key event many bears have cited as a potential catalyst for the next market crash, is the systematic downgrade of billions of lowest-rated investment grade bonds to junk as a result of debt leverage creeping ever high, coupled with the inevitable slowdown of the economy, which would lead to an avalanche of “fallen angels” – newly downgraded junk bonds which institutional managers have to sell as a result of limitations on their mandate, in the process sending prices across the corporate sector sharply lower.

As we discussed in July, the scope of this potential problem is massive, with the the lowest-rated, BBB sector now nearly 60% of all investment grade bonds, and more than double the size of the entire junk bond market in the US, and 3.4x bigger than the European junk bond universe.

Yet after waiting patiently for years for the inevitable downgrade avalanche which would unleash a zombie army of fallen angels and potentially spark the next crash, with the occasional exception of a few notable downgrades such as PG&E and Ford, this wholesale event has failed to materialize so far, something which the bulls have frequently paraded as an indication that the economy is far stronger than the bears suggest.

But is it? And instead of the economy being stronger, are we just reliving the past where rating agencies pretended everything was ok until the very end, only to admit they were wrong all along, and then slash their rating retrospectively, too late however as the next financial crisis is already raging.

Well, according to a must-read expose by the WSJ, it appears that we are indeed doomed to repeat the mistakes of the past, because as the Journal’s Gunjan Banerji and Cezary Podkul observe, what was supposed to be a 2015 downgrade has dragged on for over 4 years… while the rating agencies appear to be purposefully looking elsewhere.”

Chuck again… this my friends is an excellent article, and after watching the Big Short, I can see this all happening again, but only this time with ratings on Corporate bonds…

The U.S. Data Cupboard is empty again today… Yesterday we saw Existing Home Sales for September, and they were down from August’s print. I don’t see a problem here yet…   Mortgage applications though are falling each month, and here’s where the rubber meets the road with housing, folks…  Mortgage rates have to be much lower than they previously were, so what’s holding people back?  Could it be they are afraid to with all that’s going on in the economy?  Hmmm….. 

To recap…  It was a real slow day on Tuesday, Gold found a way to eke out a $3 gain, but the currencies gave back some of their Friday gains…  The U.K. Parliament voted down the BREXIT deal, and sterling got taken to the woodshed. The Fed interjected nearly $100 Billion into the repo market, and things here continue to get worse with each passing day!

For What It’s Worth… A week ago, everyone was euphoric about the news that the Trade Ward between the U.S. and China had reached a “Tentative Agreement” I warned everyone then that this “Tentative Agreement” could still fall through, and that it was a far cry from an Ironclad agreement. As time has come and gone, those that didn’t listen to me, learned the hard way… And now… There’s news that China is going to retaliate VS the U.S. with the WTO… That article was in Forbes, and it can be found here: https://www.forbes.com/sites/panosmourdoukoutas/2019/10/22/trade-war-china-uses-wto-to-get-even-with-the-us/#15e780dd50ae

Or, here’s your snippet: “China is using the World Trade Organization (WTO), an American-made institution, to get even with the US.

Beijing is seeking $2.4 billion in retaliatory sanctions against Washington for non-compliance with a WTO ruling in a tariff dispute against the US tracing back in the Obama era.

That’s according to a Reuters report, which states that America could face Chinese sanctions if it does not lift certain tariffs that violate WTO rules.”

Chuck again… I don’t see how this news is going to heal the Trade War negotiations… I also don’t see President Trump taking this news lightly… Oh, and the stock jockeys scrambled to find a bid for their stocks yesterday, once this news hit the wires…

Currencies today 10/23/19 American Style: A$.6842, kiwi .6407, C$ .7635, euro 1.1120, sterling 1.2869, Swiss $1.0104, European Style: rand 14.6830, krone 9.1605, SEK 9.6617, forint 296.02, zloty 3.8476,   koruna 23.0620, RUB 63.67, yen 108.45, sing 1.3633, HKD 7.8424, INR 70.67, China 7.0760, peso 19.16, BRL 4.1030, Dollar Index 97.58, Oil $53.93, 10-year 1.73%, Silver $17.54, Platinum $891.05, Palladium $1,749.15, and Gold… $1,492.40

That’s it for today…  Another pretty, but crisp day here yesterday… Again, fall is the best weather we get here… The only problem with fall is that Winter follows it! UGH! And longtime readers know me… I’ve got to go where it’s warm! Our Blues play tonight, it will be interesting to see if they can show they’ve overcome the Stanley Cup hangover, by having two consecutive good games…  The hockey season is a very long one, so it’s not the utmost importance for the Blues to play good now, they have a long season to work it out, I just want to see if they can put the hangover behind them…  Big Head Todd and the Monsters takes us to the finish line today with their song: Bittersweet…   I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

Rocktober 22, 2019

* Currencies can’t hold or add to their Friday gains… 

* The growth of Treasury Issuance is to blame… 

Good Day… And a Tom Terrific Tuesday to you! Well, little Evie, my darling granddaughter came home on Sunday, and made a trip to the doc on Monday, and she’s fine! Newborn babies are so fragile, on the outside and the inside… And she reminded me of that! I’m going to go bananas over the Fed again today, and the government for not implementing spending cuts, so buckle up… I’m just saying…. The late great, Leon Russell greets me this morning with his song: Delta Lady…

Where do I start? Where do I start? OK, maybe I’ll start with the same old song and dance about how deficits do matter, and that the explosion of debt this past decade, has really put a damper on the ability of the Government to issue Treasuries to finance the debt… Budget deficits turn into national debt… just so we have that down… Before we turn the calendar on 2019, our national current debt will be $23 Trillion… Hey!

Didn’t we just recently pass $22 Trillion? Well, not that long ago, yes we did, it just illustrates how much we as a country are spending money we don’t have… Did you know that Social Security and Medicare, basically take up a large portion of our debt? Then you throw in all the Trillions we’ve spent on the military, and then welfare, and so on and son… So, as long as Congress doesn’t have the cajones to cut spending, much less take a long hard look at the retirement system in this country… The debt will continue to grow… And that’s bad news, as I said for the issuance of Treasuries….

Last week, I told you about the Banks that are in need of liquidity… We aren’t allowed to find out who these banks are, but that’s a story for another day. Well, this lack of liquidity simply continues… And you would have to think that the Primary Dealers, you know, the ones that have to buy any of the auction of Treasuries that foreigners don’t buy? Well, you would have to think that by now they are up to their eyeballs in Treasuries… It’s simple math folks… The gov’t spends more, so they have to issue even more Treasuries, and then you have Central Banks around the world not showing up at the auction window, which means the Primary Dealers have to buy even more, taking even more cash out of the economy, and thus creating this illiquidity…

Fed Dallas President, Robert Kaplan, told an audience: “The dramatic increase in Treasury issuance takes liquidity out of the system.” Oh, and JPMorgan says this mess in illiquidity is just going to get worse!  I know, I know they’re not Lola, but they still carry lots of weight… 

In my best church lady voice, “Now isn’t that special?” And then you wonder why, the Fed has no choice but to cut rates, to keep the bond servicing costs down? And you see why the Fed, has no choice but to keep up the creation of newly created electronic funds…. And now that I’ve brought this all home… Now you see why you need to have a diversified investment portfolio, which includes, 2 asset classes that probably your stock jockey doesn’t know exist… Currencies and metals… I’m just saying…

And then the Fed… They keep allowing this all to happen… If they were truly independent, and lived here in the U.S. and bought their gas, groceries and giggles with dollars, they would step up and tell congress “no mas”! Because if they keep this up, the flood of dollars in the system is only going to dilute the present stock of money that’s being used… And by dilute, I mean, cause it to weaken…

The Fed Heads may tell you that they’re not responsible for limiting the debts of Congress… And I say hogwash! They take on new responsibilities and mandates all the time, it’s kind of a shoot from the hip kind of mandate for the Fed, so buck up, act like adults, and do something!

That’s wishful thinking folks… noting but wishful thinking…

OKBEE… Before I go on… I must go through the currencies and metals from yesterday… The currencies traded in a tight range, but could not add to their gains from Friday… The lack of more negative data prints in the U.S. probably gave the dollar bugs a reprieve from the selling… Gold didn’t fare too well either on Monday, losing about $5.50 on the day, and moving toward what I told a dear reader yesterday…. The chartists tell me that Gold’s correction could take it down to $1,425… And then we would see a dramatic turnaround… I say, well, ok, but let’s get moving on this, because I still believe Gold will be much higher by year end!

Well, one day I’m thinking after hearing the news that President Trump was planning on hosting the next G-7 meeting at his Florida place, that maybe just maybe, this could be a meeting to reset the price of Gold… But then a day later, he cancelled those plans, because of all the flak he got from… well, from the usual suspects… So, there goes my conspiracy plan to get the price of Gold reset, so that our debts could be dealt with. Recall that a few months ago, I said that “if the price of Gold was reset at $10,000 oz. that a lot of our problems with debt could be more easily managed. The way I saw this working was the Gov’ts of the world would have to agree (thus the meeting of G-7) and then further to G-20, and these gov’ts would guarantee the price of Gold bid and ask… Hey! Don’t shoot the messenger! This was just a plan that would work, and I thought, what the heck? Why not?

So, the best laid plans of mice and men, go to the wayside, and get forgotten about… Hmmm… Crazy, I’m crazy for crying, crazy for trying, I’m crazy for loving in you (gold) … (Ahhhh, Patsy Cline) A little cocktail trivia for you here… What song is the most played song on jukeboxes of all time? Crazy, sung by Patsy Cline, and written by Willie Nelson!

Did you hear last week that Japan printed the lowest inflation in their history?  And what have they been doing for over 20 years now? The Bank of Japan (BOJ) has been stimulating (they think) their economy with all sorts of programs, but the most thing they’ve depended on is bond buying, and stock buying (yes, the BOJ is now the largest shareholder in Japan!) 

The point I’m getting to here is that… shouldn’t the Fed be watching what’s going on in Japan and say, “we want no part of that, for their economy has been slow as molasses for 2 decades!”  They’ve tried to stimulate the economy so many times I’ve lost track of them, and for what? Their economy is a basket case and inflation is nowhere to be found… 

Oh, and this came across my screen this morning while my fat fingers were flying around the keyboard…  JPMorgan, the bank that has had a couple of run ins with the Federal Authorities, have announced that they are going to implement a plan to hire more applicants with criminal backgrounds… 

While that may be a noble thing to do… In JPMorgan’s position right now, you would think they would be towing the line…  I’m just saying…  You would think that they would avoid this kind of publicity as you can hear people mumbling something like, That makes sense since they already employ traders that are being tried for fraud…  Crazy stuff folks… 

The U.S. Data Cupboard is empty again today… no prints are scheduled for today, which gives the dollar bugs another chance to scatter about the floor with no negative data prints stomping on them…  I think yesterday, I said that we’ll get Durable and Capital Goods Orders on Wednesday, but actually they’ll print on Thursday… One of these days I’ll learn how to read a calendar! HA! 

There’s nothing on the global economic calendar either… It’s a very slow week for data, for sure! 

To recap…  The currencies couldn’t add to their Friday gains on Monday, as the no data print on Monday, gave the dollar bugs a chance to scatter…  Chuck takes Congress to the carpet, and the Fed for abetting their deficit spending sprees… And JPMorgan thinks this current mess in illiquidity is only going to get worse, and Fed Head Kaplan, says the growth of Treasury issuance is to blame…  

For What It’s Worth… Scandals, Scandals everywhere there’s scandals, ruining investor confidence, and shaking my mind… Traders being taken to court for manipulating metals, Banks receiving massive fines for their hand in the manipulating. And more… Reminds me a lot of 2001-2002, when all those Corporate scandals created a world of mistrust in U.S. Corporations… Well, this article is in that same vein and it can be found here: https://www.bbc.com/news/business-50089887?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Tuesday+22+October+2019

Or, here’s your snippet: “One of the world’s leading fund managers has been forced to resign after the BBC discovered he had broken investment rules.

Mark Denning helped to manage more than $300bn (£229bn; €265bn) of investors’ money at Capital Group.
BBC One’s Panorama uncovered evidence that suggests he was secretly acquiring shares for his own benefit in some of the same companies as his funds.

Mr Denning, who had worked at the firm for 36 years, denies any wrongdoing.

The 62-year-old fund manager left his job five days after Panorama wrote to Capital Group about the findings of its investigation.

Capital Group – which manages almost $2 trillion of assets – said Mr Denning was no longer with the firm.

“We have a Code of Ethics and personal investing disclosure requirements that hold our associates to the highest standards of conduct. When we learned of this matter, we took immediate action,” it said.

Fund managers are not supposed to invest in the same companies as their funds, because they could potentially profit at the expense of investors.”

Chuck Again… Are we back in 2000, 2001? Do you recall Enron? WorldCom? Tyco? Freddie Mac? Or how about Healthsouth? Just to name a few… See? I have a memory like a steel trap!  HA!

Currencies today 10/22/19 American Style: A$.6860, kiwi .6416, C$ .7634, euro 1.1136, sterling 1.2955, Swiss $1.0114, European Style: rand 14,6762, krone 9.1414, SEK 9.6338, forint 296.36, zloty 3.8424,   koruna 22.9518, RUB 63.73, yen 108.60, sing 1.3623, HKD 7.8430, INR 70.74, China 7.0733, peso 19.10, BRL 4.1229, Dollar Index 97.38, Oil $53.54, 10-year 1.77%, Silver $17.63, Platinum $889.42, Palladium $1,758.56, and Gold… $1,486.83

That’s it for today… Well the Stanley Cup hangover seems to have hit the Blues… But I won’t complain, they did win the STANLEY CUP last year! And they played a very good game last night… Thanks to all who sent along emails telling me they were hoping my scans were good… So, here’s the official news… I still have the lesion on my right mandible, it’s been there so long now that part of my mandible gone… It’s been eaten away… I can’t chew food on that side of my mouth, so I guess as long as I don’t end up in a fist fight! I’ll be OK…They found two very small spots on my lung, same place as before. So, they came back, but… They won’t even qualify them as anything but small spots… And besides that, no new cancers! The chemo I take by mouth every day, seems to be doing the trick, and now that I get to take a week off of it every two weeks, I can tolerate it even more! So, now you know what I know… Isn’t that great? I had the doctor in the Wound Center ask me if my original cancer diagnosis was really in 2007… I said, yes it was, and why do you ask? He said, “I’m amazed that you’re still alive”… And with that, The Yardbirds take us to the finish line today with their song: For Your Love… I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself! 

Chuck Butler

 

 

 

 

Rocktober 21, 2019

* No ironed out BREXIT Deal yet, but sterling keeps rallying!

* Have traders decided to sell dollars outright? 

Good Day… And a Marvelous Monday to you! Oh, woe is me… What a horrible weekend, sports wise, for me this past weekend… Both my Missouri Tigers and St. Louis Blues lost on Saturday… And both losses were very ugly… I had quite a few texts and emails from people wanting to know what happened to MIZZOU… I came up with this: There are coaches who have mastered the art of keeping 18-20 year olds playing at a high level… Barry Odom isn’t one of those… at least not yet… When a team comes out uninspired, that’s the coaches fault… I’ll say no more… We had a very scary incident on Thursday night… My granddaughter, Evie, (1 week old) had to be taken to the hospital for a breathing problem, then to the world famous Children’s Hospital ICU for the next 3 days… She’s doing well, and back home… But nerves were shaken, to say the least! Neil Young greets me this morning with his song: Southern Man… (which then got Lynyrd Skynyrd to write Sweet Home Alabama)

Well… I left you last Thursday with hope that the BREXIT deal that PM Johnson came up with would pass Parliament this past weekend… But, hopes for a passing were dashed when a Johnson ally, the Northern Irish, voted no to the deal… Uh-oh… I wonder if PM Johnson thought about not counting his chickens before they were hatched? It might still get done before 10/31… Currency traders seem to believe that will happen, as the keep marking up pound sterling…

The Currencies, as a whole, were better bid on Friday, the euro kept moving higher in the 1.11 handle, sterling is within spittin’ distance of 1.30, and so on… Gold, lost $2 on Friday (actually $1.90) And still remains threatened by a correction to the run up in price in September. But, that may be, and may come along, and if it does, it will present itself as an excellent buying opportunity… For that will be all it is… a correction… And corrections, soon get turned around quickly, and harshly… That’s not a good thing for Treasuries, or the financing of our ever-growing debt, for which Treasuries are used, but it sure is good news for Gold holders…

I saw a graph last week that showed the chart direction for World Treasury Holdings, and World Gold Holdings… The Treasury holdings look like they are digging a hole to China they are sinking that quickly, while the Gold holdings look like they are a moon shot higher!

The Fed keeps pumping money into the repo market… I saw last week that the Fed doesn’t care to have their newly created money, be referred to as: “created out of thin air”… They prefer “newly created electronic funds”… Ahhh, nothing like Fed speak, in an attempt to confuse people into not know what the hell the Fed is doing, right?

I’ve had quite a few readers ask me to explain the repo market…
OK… so here goes…. Let’s say we have Bank A, and on any given day, may need cash to make certain that they have the proper reserve requirements, or whatever… They can go to the repo market and there, find another Bank to lend them the cash for that day, and in return Bank A sends them collateral, which is usually Treasuries, since they can move so easily through the Fed system that every bank that has a bond dept. has in their back office.

And then the next day the lending bank, sends the bonds back to Bank A, VS the principal plus interest and the trade is done… Bank A “repurchases their bonds”, thus the shortened “repo market”

You may say to yourself, how does Chuck know repos too? Ahhh, grasshopper, at one time in the early 80’s I was on the repo desk at Mark Twain Bank! I did repos all day long! Just another notch in the belt of jobs I’ve held in the investment industry through the years!

What happened last month was that a few banks came to the repo market and found no one would lend them money at the usual 2% rate… The lenders wanted 5, 6, 7,8, 9, and 10% for these overnight loans, and the banks that needed the cash took them…

Well, this freaked out the Fed, and the next day they interjected liquidity in the form of tens of Billions of dollars… This had gone on for 2 weeks, when last week the Fed announced that they would buy Treasury Bills from these banks that needed cash… Now, grant you this isn’t all-out Quantitative Easing (QE), but it sure is QE, Jr. And that’s where we are today… The Fed is back in the bond buying business, but we’re not allowed to call it QE!

Since September 4, 2019, the Fed’s balance sheet has grown by $253 Billion, and is back to bumping into the high the balance sheet was before Quantitative Tightening began… All this increase is due to the Fed adding liquidity to banks that remain unnamed… Which I feel is a crime!

So, you may recall me questioning the idea that Banks were supposedly flush with cash… And if that was the case, why has the Fed had to start buying bonds again to give these banks cash? Tell me lies, tell me sweet little lies… Tell me lies… (Stevie Nicks) I would have to think that these banks were not flush with cash to begin with, and this strong and robust economy has been nothing but a pack of lies!

How dare the Fed to tell us lies! I just can’t get over this folks… I know the government twists the data prints in their favor, and I know the Fed manipulated yields lower at one time, but lie to us? As I said last week either the Fed is lying to us or they are being very disingenuous…

And then I have one more question… When did the Fed’s mandate change to providing liquidity for Wall Street’s largest banks? Did I miss the memo? I do have a stack of paper on my writing desk that I haven’t gone through yet… Maybe the memo is there? Let me check…. (can you hear the jeopardy theme music playing?) OK, back now, and no it wasn’t there! I’m beside myself right now at the brazen attitude the Fed is taking… They go “off road” to help Wall Street, and they don’t have to tell us who received help, nor will they let us call it Quantitative Easing… I’m sorry if I seem to bent out of shape this morning over this, but quite frankly, someone needs to be, and I take it upon myself to be that person, because if I wait for someone else to call them out like this, it won’t get done! 

So… the rally in pound sterling sure has been quite impressive, but it’s built on rocky ground folks… So be careful here… This move is similar to the moves we’ve seen previously with the Indian rupee and Brazilian real, when they rallied because a political campaign was going the way currency traders thought best. Those rallies were short lived, after the campaign was over…  Like I said above, the BREXIT deal could still get done before 10/31, and thus the sterling rally…  

Recall last week when I talked about how traders were torn between needing the dollar to go down, which would cause the euro to go higher…  They didn’t want to reward either currency right now.  Well, for the last 5 days, the dollar buying has pretty much stopped. At this point I don’t think there’s any real amount of dollar selling, but there’s been some, which has the euro looking healthier…  Oh, and just to follow up from last Thursday, the euro wannabes continue their stealth-like rally…  

One of the reasons for the dollar to be sold the last 5 days, was the weak Data… The U.S. Data Cupboard was not kind to the dollar bugs last week, as we saw negative prints of Retail Sales and Industrial Production!  Not just weaker, but negative prints!   The Fed heads have to have seen this data and set about shaking in their collective boots! 

This week’s Data Cupboard is pretty barren until Wednesday, when we’ll see the color of September Durable and Capital Goods Orders… I won’t go all in on my views of CAPEX (Capital expenditures) again… I’ll just mention once again that you can’t have a strong and robust economy without CAPEX being strong…  And it hasn’t been strong in a couple of years!

Before I head to the Big Finish today… I’ve received quite a few emails from readers asking me my opinion of MMT (modern monetary theory)… Or as most people with half a brain call it… “magic money tree”… I struggled with talking about this because it could become quite political, and you know me I try to stay away from talks about politics… But… since this, which was once though of as ridiculous, now is being taken more seriously… Why? I have no idea… So, my good longtime friend, John Mauldin was talking about MMT this past week, and I thought, why should I bash my head against a wall, when I can just tell you how John explained it?

Here’s John…. “MMT is a revival of an early 1900s idea called chartalism. It states that monetarily sovereign countries like the US, the UK, and Japan aren’t constrained by revenues when it comes to federal government spending.

In other words, governments don’t need to tax or borrow because they can print as much currency as they want.”

Chuck again… Well, I know, it certainly feels as though we’re already doing that, but trust me on this, we’re nowhere close to the amounts of debt we would incur, under magic money tree!

To recap…  The data last week was just downright awful, and that sent the dollar to the woodshed for the past 5 days. Gold is fighting to keep the “correction” from happening, but Chuck is afraid that a correction is on the way.  BREXIT was supposed to have been put to bed by today, after a Parliament vote this past weekend, but there was a fly in the ointment, and it’s delayed once more… Pound sterling traders have their hands in the air, and just don’t care!  

For What It’s Worth… Well, I spent a lot of time today on the Fed, and the lack of liquidity problem, and so forth, so when I saw this article it only made sense that today, it’s FWIW worthy… It’s an interview with Fed NY Head, the Fed region that’s providing the “newly created electronic funds” and it can be found here: https://www.marketwatch.com/story/feds-williams-says-central-bank-would-adjust-plan-to-soothe-funding-markets-as-appropriate-2019-10-17

Or, here’s your snippet: “New York Fed President John Williams said Thursday that the central bank was closely monitoring its measures to soothe pressures in funding markets, and could adjust its plans.

Since funding markets seized up last month, the U.S. central bank has regularly intervened to provide liquidity, offering daily repurchasing agreements to lend out funds to market participants thirsty for cash and announcing $60 billion of bill purchases at least through the second half of 2020.

The New York Fed has come under fire recently for not acting swiftly to calm down short-term funding markets, with the so-called overnight repo rate shooting as high as 10%, four to five times above its usual levels. The repo market is where hedge funds and banks lend funds in return for collateral such as Treasurys or government-sponsored mortgage bonds.

The surge in repo rates briefly tugged the central bank’s benchmark interest rate above its preferred range, raising questions as to whether the Fed was losing its grip on monetary policy.

Williams said the central bank had anticipated some strains, but that “the size of the reaction in the repo markets were well outside the range of recent experience.”

Chuck Again…. Well, if Mr. Williams thinks that this little speech by him will put my mind at ease, he’s got another thing coming… ala Judas Priest!

Currencies today 10/21/19 American Style: A$.6875, kiwi .6410, C$ .7630, euro 1.1165, sterling 1.2980, Swiss $1.0152, European Style: rand 14.7832, krone 9.1075, SEK 9.6112, forint 295.67, zloty 3.8332,   koruna 22.9683, RUB 63.73, yen 108.57, sing 1.3610, HKD 7.8431, INR 70.63, China 7.0807, peso 19.13, BRL 4.1109, Dollar Index 97.24, Oil $53.40, 10-year 1.77%, Silver $17.72, Platinum $895.77, Palladium $1,768.76, and Gold… $1,491.62

That’s it for today…  Saturday night was our neighborhood block party, but it was spoiled by rain… too bad…  So… little Evie is back home after a nerve shattering night Thursday night, and then the rest of the weekend…  She’s so tiny… I can’t wait to hold her again, and tell her everything is OK…  I got a kick (pun intended) out of Braden at his soccer game on Saturday afternoon…  I’m going to see my oncologist this morning, after I hit send… I saw the radiologist’s report on my scans, but I want to hear my oncologist’s explanation of what I think was a no change report…  The Rolling Stones take us to the finish line today with their song: Wild Horses…   I hope you have a Marvelous Monday and please remember to Be Good To Yourself!

Chuck Butler

 

 

Rocktober 16, 2019

* Dollar gets sold, currencies rally… 

* There’s a BREXIT deal on the table! 

Good Day… And a Tub Thumpin’ Thursday to you! Congratulations to the Washington Nationals, who will play in their very first World Series… They swept my Cardinals on Tuesday night, and ran them out of the stadium… It was a pretty good year for my beloved Cardinals, but in the end, they showed what I had said all along in the season… They just couldn’t hit, as a team… The thing that drove me crazy though was all the errors… This WAS the best fielding team in the NL this past year, until they got to the playoffs… Errors equal bad baseball… And that’s that for this year! Our Blues have a good start to the year going so far, but it’s a very long season for them, no reason to get too excited about a good start! The Ozark Mountain Daredevils greet me this morning with their song: If You Wanna Get To Heaven… (You’ve got to raise a little hell!)

Oh, and I’m loaded for bear this morning… So, you had better strap yourself in, put away the sharp objects, and get ready for today’s Pfennig! Here we go! 

On Tuesday of this week, I talked about how the Fed was back to buying bonds (T-Bills at this point) and Fed Chairman Powell, told us not to call it QE… WOW! What a pack of lies! I guess he would point at the fact that it’s not an all-out bond buying program right now, as his defense… But like I said the other day, if it quacks like QE, it is QE, period… I don’t care what the Fed wants to call this new bond buying program, but to me, they’re being very disingenuous to the American public… And historians will mark this occasion as one of the things that caused the Fed to lose its credibility…

I’ll get back to the Fed in a minute, but first, I want to point out that the currencies have been on a strong rally since Tuesday, and really got rolling yesterday, after there was a negative print in Retail Sales for September. When you add in the fact that the ISM fell to 47.8, the economy may already be in a recession… But what caused the dollar to get sold, is the idea that rate cuts will be coming and probably as soon as this month! 

Gold found a way to add $9 to its price yesterday…  But sit down and take this news calmly, please…  Jeff Clark is a metals guy that I’ve know for years, and yesterday he said that the recent weakness in the price of Gold was due to a correction, and that the correction could take Gold back to $1,425… But then it would take off for higher ground then… 

All the time I was reading his article, I kept thinking, the smart investors will use this drop, if it does come that is, as an excellent buying point to start their Gold investment, or to add to their Gold investment… The “I bought Gold because the taxi guy said it was rallying, people” will panic and sell…   I’m just saying… 

Speaking of a recession…  longtime readers have heard me go on and on like a broken record about how I think the next recession is going to be a real doozy for numerous reasons that I’ve talked about… So, when I read this article yesterday my jaw dropped, for if what the IMF is saying about what could happen IF we experience a recession 1/2 as serious as the one a decade ago… I found this article here: https://www.theguardian.com/business/2019/oct/16/global-economy-faces-19tn-corporate-debt-timebomb-warns-imf

And basically the IMF is saying, “Low interest rates are encouraging companies to take on a level of debt that risks becoming a $19tn (£15tn) timebomb in the event of another global recession, the International Monetary Fund has said.

In its half-yearly update on the state of the world’s financial markets, the IMF said that almost 40% of the corporate debt in eight leading countries – the US, China, Japan, Germany, Britain, France, Italy and Spain – would be impossible to service if there was a downturn half as serious as that of a decade ago.”

Chuck again… OK, so I’ve never really been a fan of the IMF and their programs when they go into a country and try to revive it… But be it as it may, I think they are bang on with this warning… But will anyone besides my readers hear about it?  That was kind of like a FWIW article already this morning…  Don’t worry, I’ve got more! 

So, did you hear? The Fed’s T-Bill buying program was oversubscribed x4! Hearing that news got me thinking…

OK… I’ve been thinking long and diligently on this repo problem here in the U.S. All this time we had been getting told that the banks were flush with cash, and that they were earning a nice interest rate having them on deposit at the Fed… And then suddenly, they weren’t flush with cash, and the Fed had to step in with Billions of funds, to keep the repo rates from soaring… So, now the question would be, where did all the cash go that was supposedly in the banks?

Ahhh grasshopper, this is what you pay me for, no wait, you don’t pay me… Hmmm… This is where I shine! HA! But seriously… Basically, remember when I told you the tax cut from a couple of years ago, would only be good for the corporations, and those corporations wouldn’t use the tax cut on Capital expenditures, but instead use to buy back their company stock, which makes the stock price go up, and then allows them to rake in huge bonuses at the end of the year…

Well, a funny (not funny ha-ha) thing happened to these Corporations, which includes banks… The stock market has been flat for the last year… so no gains there… And then a couple of weeks ago, I saw a blurb about how CEO’s were selling their company stocks faster than you can shake a stick at… Why would they do that? They needed the cash! So, this whole bug-a-boo with the repo illiquidity is their own faults… But… and here’s were it isn’t so funny any longer, guess who’ll have to bail them out of this mess if it implodes on them? That’s right, you, me, and other taxpayers…

And if you think we’ve had to bail out Corporations and their bad decisions, well we have… And will have to again… but it’s not just bad decisions by Corporations that we’ve had to bail out… The Gov’t gets into this business of bad decisions too… And that’s what the FWIW section is all about today, so don’t go away too soon, without reading that one! 

Well bust my buttons! The European Union and the U.K. have a BREXIT deal… But first it must be approved by the U.K. Parliament…  Last week we began hearing rumors of a deal, and those rumors placed the pound sterling firmly on the rally tracks… And On 10/8 pound sterling was 1.2222….  this morning it’s trading 1.2865…   I would say that qualifies as a strong rally…  So, let’s hope the U.K. Parliament isn’t a party pooper! 

I was doing some reading yesterday, and came across a discussion of how traders are viewing the euro/ dollar cross  as a real bug-a-boo…  You see, they want to mark down the dollar for all the weak data that’s been printing, and the Fed’s rate cuts, but if they mark down the dollar, the euro goes up… And they don’t want it to look like they’re rewarding the euro, especially since the Eurozone is probably already in a recession…  I couldn’t help thinking while I read this piece…. “That why they pay you guys the big bucks”… So, make a call and go with it for crying out loud! 

Right now, and I know these things can be false dawns, but the dollar IS getting sold, and the euro is trading with a 1.11 handle… That’s a far cry from where the euro looked like it was going last week!    With the Big Dog euro on the rally tracks, the other currencies get to rally too… And for longtime readers who know what I’ve told them many times in the past, I wanted to mention that the Euro-wannabes are also rallying… hint, hint… 

OK, the U.S. Data Cupboard had the September Retail Sales yesterday, and it wasn’t a pretty sight… Sept. Retail Sales were negative -0.3%…  No spending really takes a bite out of the economy’s ability to grow, folks… And like I said above, this and other bad prints recently, will most like move the Fed to cut rates later this month… 

Today’s Data Cupboard will have more disappointing data, I believe… Sept. Industrial Production and Capacity Utilization, will print… And I’m sure that they will only add to the Fed’s rate cut fuel…  Of course I might be incorrect, but we’ll have to wait-n-see!

To recap…  Negative Retail Sales for September, got the traders thinking that another rate cut is soming, and that started dollar selling that we haven’t seen in a while…  Chuck want’s the Fed to come clean on their QE, and he also has figured out why the Banks are in need of so much cash these days…  He was loaded for bear today… 

For What It’s Worth… By now all longtime readers know that I’ve touted the book “The Creature from Jekyll Island” by G. Edward Griffin… It’s the story of how the Fed was shoved down our throats by the banking regime here in the U.S. And how Woodrow Wilson allowed himself to be connived by these bankers into thinking that this would be the end of “recessions”… OK, well, I signed up for G. Edward Griffin’s newsletter quite a few years ago, after reading his book, and most weeks he has interesting articles in there, but this week he had a doozy, and I couldn’t pass it up for the FWIW article today… This is about the costs of insuring illegals here in the U.S., and as a taxpayer, you should be making this a timely read! And you can find it here: https://needtoknow.news/2019/10/study-shows-obamacare-for-illegal-immigrants-could-cost-taxpayers-23-billion-a-year/

Or, here’s your snippet: “A new study shows that taxpayers could have to pay out as much as $23-billion a year to give “Obamacare” health coverage to illegal immigrants. The Center for Immigration Studies estimates that there are nearly 5-million illegals who would receive subsidies through the so-called Affordable Care Act. Cities already are paying back-breaking costs for immigrants. Los Angeles County paid nearly $1.3-billion in welfare during 2015 and 2016 to families of illegal immigrants.

he federal government is running a nearly trillion-dollar deficit this fiscal year. The reason (and this isn’t complex): It spends more than it brings in.
When households go into the red, couples usually take a simple step — stop spending so much.

But not our government.

Case in point: A new study shows that taxpayers could have to pay out as much as $23 billion a year to give “Obamacare” health coverage to illegal aliens.

The Center for Immigration Studies (CIS) calculates that there are nearly 5 million illegals who would qualify for subsidies through the health care system created under the Affordable Care Act (ACA) by former president Barack Obama. The average cost would be about $4,500, so if all of them took the subsidies, it’d cost $22.5 billion.”

Chuck Again… And the question I always ask when people say this or that should be free, I ask them, “And who’s going to pay for it?”

Currencies today 10/16/19 American Style: A$.6830, kiwi .6332, C$ .7595, euro 1.1120, sterling 1.2865, Swiss $1.0104, European Style: rand 14.8243, krone 9.1546, SEK 9.7122, forint 298.40, zloty 3.8526,  koruna 23.0826, RUB 64.21, yen 108.77, sing 1.3642, HKD 7.8441, INR 70.88, China 7.0912, peso 19.18, BRL 4.1693, Dollar Index 97.66, Oil $53.07, 10-year 1.77%, Silver $17.49, Platinum $881.56, Palladium $1,766.05, and Gold… $1,487.96

That’s it for today and tomorrow…   Well, I went straight from my scans yesterday to the second floor of the building to see my heart doctor… A regular 6-month visit… He says I’m doing well…  I don’t believe the scans will reveal anyting (at least that’s what I’m hoping!)  I’ll see the report on the portal today…  I received some sad news yesterday, our good friend from Long Island, was just diagnosed with cancer… She won’t be ablt to come to Florida this winter, as she’ll be dealing with all that nasty stuff, that I’ve been through for 12 years…  I totally dislike this disease and what it does to families and friends…  This country cured polio.. small pox… TB…  and others, but we’re still at a loss with cancer…  I don’t get it… Oh well… Weezer will put me in a lighter mood as they takes us to the finish line with their song: Island In The Sun…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday, and please Be Good To Yourself! 

Chuck Butler

 

Rocktober 15, 2019

* All the euphoria on Friday, turns to gloom on Monday!

* If it quacks like QE, walks like QE, and talks like QE, well…. 

Good Day… And a Tom Terrific Tuesday to you! Another beautiful fall day here yesterday… I’ve always contended that autumn was the best weather we experience here in the Midwest…. And this year is not proving me incorrect, now is it? Had lunch yesterday with a dear friend, and one I haven’t seen in a very long time… Thanks to Ann for picking up lunch, and bringing me up to date with everything in her life, including all about her new beau! We had a reversal for the stock jockeys yesterday, China said, “not so fast there!”, and much more in store for us to discuss today… The Pretenders greet me this morning with their song: Back On The Chain Gang…

Front and Center this morning, we saw a reversal of fortune with the stock jockeys yesterday, as the Chinese said, “not so fast there!” On Friday, the President told us we had a “tentative Agreement”, and on Monday, the Chinese said, “well, we need some more information, and negotiations before we agree that a “Tentative Agreement” has been struck”! I told you yesterday that I wasn’t going to be fooled into thinking that a “Tentative Agreement” was the same as an ironclad agreement! And so the rest of the world learned that lesson yesterday…

The currencies didn’t move much on the latest development on the Trade War, but they did keep their gains from Friday last week, so they had that going for them, eh? And Gold tried to hold to its early gains of nearly $7, but all the plans of mice and men, couldn’t keep Gold well bid throughout the day… But it did manage to eke out a $3 gain on the day… So, not all was lost! 

I read a report from the GATA folks on Monday, that carried a quote from Metals guru, Egon Von Greyerz, who had this to say about the growth in Gold ETF’s… “while exchange-traded funds are reporting big inflows of gold, demand for real metal from Swiss refineries is not increasing. So he concludes that the ETFs are obtaining only paper claims to gold, and likely claims to gold that is already at least double counted in the bullion banking system.”

Very Interesting, don’t you think? You see the way the ETF works, is there is a trustee, who’ responsible for obtaining the Gold (or Silver) that is represented in the ETF buys for a particular day… But if the demand from the real refineries doesn’t match the growth that the ETF’s are reporting, well, then Houston, we have a problem…

Of course, I’ve always argued that I doubted that the physical Gold actually exists to match the ETF’s volume… But that’s always been just me, being the cynic that I am about that kind of stuff… And back in the day when I used to appear at just about every conference there was in the U.S. Canada and Panama, I would tell people that I didn’t care if they thought the ETF was safe… I didn’t think it was, and…. And this is the BIG BUT…. I would tell them to try and get their Gold out of an ETF! Oh, I’m certain that the Trustee would tell me that it would be no problem…. But what if a large number of people decided they wanted their Gold out of an ETF at the same time?

Anyway… physical Gold is the way to go in my humble opinion… I still receive many emails from readers asking me where they can obtain physical Gold and be sure they won’t be taken advantage of… I always tell them to call 1-800-926-4922, and ask for Tim Smith… Tim was my metals guru and still holds that position now that I’ve retired… So, there! Call Tim!

I had to chuckle a bit yesterday, when I saw a headline on Bloomberg… Now tell me where you’ve heard this line before… “The recession train has left the station”… Yes, that wasn’t me that said that in the Bloomberg article, but I had to wonder, who was reading whom? There’s more from the Bloomberg.com article and here it is: “honestly, even a truce of the sort Trump claimed on Friday won’t help the economic outlook much, writes Tim Duy. The global economy seems headed for a recession, which the U.S. will struggle to avoid. So the Federal Reserve will probably cut rates again this month. It has already started buying bonds to fix technical problems in the overnight repo market. (It doesn’t want to call this quantitative easing, notes Mohamed El-Erian, but for all practical purposes, that’s what it is.)” – Bloomberg.com

Chuck again… There we go, they’re calling for a rate cut again this month… Last week it was reported that Greece had joined the roster of countries issuing negative yielding bonds… Wait! What? You mean to tell me Greece issued negative yielding bonds, and sold them? As the late Harry Cary used to say, “Holy Cow”!

So, that makes Sweden, Switzerland, Japan, Germany, Spain, Italy, Greece, and more… that are on the list, receiving funds for you holding their debt… Now, I get it that there are some large entities, like pension funds, States, Cities, etc. that have in their rules that they have to own Gov’t Debt… As Mr. T used to say… “I pity the fool”… But anyone else stepping to the plate to take a piece of these bonds has to have their heads examined!

And getting back to the rate cut this month… The question now arises, when will the U.S. be back to zero? And then from there, to negative rates? To the Gov’t it’s no big deal, folks… it just means they get to finance their debt easily, with no burden on the future expenses of the country… But for you, me, and everyone else, not named Gates, or Buffett, or Zuckerberg, or whomever else has more money then God, we will be left holding the bag… And it will be much like the bag of dog pooh that was left on your front porch and set on fire… I’m just saying…

Oh, and one more thing on the Trade War…  I don’t know if you noticed this or not in past 10 days, but the U.S. Trade Deficit widened… And yesterday China printed an increase to their Trade Surplus…   Apparently the tariffs haven’t hurt China as much as everyone one have them believe, but they certainly did hurt our Trade Balance….  And before we go any further, I was explaining this to some friend the other night, about how our wages are still 5 to 1  with China…  So, they can continue to make their goods much cheaper than we can… I’m just saying… 

Yesterday, in the Eurozone, we saw August Industrial Production, reverse a negative print in July, with a 0.4% gain… But… the year on year figure remains negative at -2.8%… And that news didn’t help the euro to add to its gains from Friday, and in fact has pushed it down to just a few Bips from the 1.10 figure…   

OK, I read this morning that Sears is going to close 100 more stores, as their turnaround is failing…   I also read that GM’s car sales in China have collapsed…  The quarterly earnings begin to get reported for U.S. Corporations today, and first up is JPMorgan…. there’s been 3 straight quarters of reduced earnings from the U.S. Corporations, and I truly believe that when all is said and done that this will be the 4th consecutive quarter that sees reduced earnings…  Yes, they’re still making money, but… no wonder the stock market hasn’t really moved much year on year, eh? 

OK, I’ve got this for you this morning….  Yesterday I was reading my daily dose of the great publishing guru, and writer extraordinaire, Bill Bonner, and daily diary, which can be found at www.bonnerandpartners.com and he featured this…. Charlie Bilello, a former hedge fund analyst, tweets:
Total Returns, last 20 years…
International Stocks: +110%
US Stocks (S&P 500): +221%
Long-Term US Bonds: +329%
Gold: +365%

Got Gold?  I’m just saying…  

OK… The U.S. Data Cupboard has  just the Empire Region Index (manufactory Index for NY region)  We found out long ago that the regional reports never play into the National ISM, so why bother giving them the time of day?   Tomorrow, we’ll get September Retail Sales for our viewing enjoyment… The Butler Household Index indicates to me that the Retail Sales report will be positive, but nothing to write home about…  

I have to go over the Data Cupboard for tomorrow, because…. I won’t be writing tomorrow…  I have to show up early to the hospital for scans day. Last week I said it would be on Thursday, but I was wrong… So, no Pfennig tomorrow, but I’ll be back in the saddle on Thursday! 

To recap…  The Chinese say “not so fast there Tim!”  to the “Tentative Agreement” and all the euphoria on Friday, was thrown to the curb on Monday…  The currencies held steady Eddie, but couldn’t add to their Friday gains… And Gold started the day up $7, but ended the day only up $3…  Still positive though, so I can’t complain too much! 

For What It’s Worth…  I told you last week, the Fed Chairman Powell, had reversed his rhetoric about how the economy was strong and robust, and had begun talking about how the Fed will begin to buy bonds again to improve liquidity… They won’t call it QE… But if it quacks like QE, walks like QE, and looks like QE… Then that’s what it is!  this article on Zerohedge.com tells it like is and it can be found here: https://www.zerohedge.com/markets/not-qe-begins-fed-start-buying-60bn-bills-month-starting-oct-15

Or, here’s your snippet: “Just one day after we laid out what Goldman’s revised forecast for the Fed’s “NOT A QE” will look like, which for those who missed it predicted that the Fed would announce “monthly purchases of about $60BN for four months, split across Treasury bills and short maturity coupon Treasuries, in order to replenish the roughly $200bn reserve shortfall and support the pace of growth in non-reserve liabilities”, the Fed has done just that and moments ago – well ahead of consensus expectations which saw the Fed making this announcement some time in November – the U.S. central bank announced it would start purchasing $60BN in Bills per month starting October 15. This will be in addition to rolling over “all principal payments from the Federal Reserve’s holdings of Treasury securities and the continued reinvestment all principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities received during each calendar month.”

In short, the proposed schedule is virtually identical to the one Goldman “proposed” yesterday, one which sees the Fed purchase a grand total of $100BN or so in TSYs the near term, and one which is meant to “engineer a one-off level shift of roughly $200bn over the course of four months.”

But wait there’s more, because just as today’s surprising spike in repo use suggested, mere “NOT A QE” may not cut it, and just in case, in order to provide an “ample supply of reserves”, the Fed will continue with $75BN in overnight repos and $35 billion in term repos twice per week, “at least through January of next year.”

The Fed’s proposal indicates that between the continuation of repo operations, and the net $60BN balance sheet expansion, the Fed’s balance sheet will reach roughly $4.2-$4.3 trillion some time in Q2 2020.”

Chuck again…  I was in Vancouver quite a few years ago, sitting in the lobby bar with good friend John Mauldin, and John told me that he had been at a dinner with high ranking Senators, who told him that they had instructed the Fed to never use the term Quantitative Easing (QE) again, that they had to call it something different…    This conversation came back to me when I read the zerohedge.com piece…  

Currencies today 10/15/19 American Style: A$ .6755, kiwi .6270, C$ .7558, euro 1.1005, sterling 1.2647, Swiss $1.0023, European Style: rand 14.8392, krone 9.1504, SEK 9.8345, forint 301.95, zloty 3.9015,   koruna 23.4527, RUB 64.23, yen 108.31, sing 1.3707, HKD 7.8452, INR 71.33, China 7.0665, peso 19.24, BRL 4.1150, Dollar Index 98.50, Oil $53.01, 10-year 1.69%, Silver $17.63, Platinum $897.56, Palladium $1,726.75, and Gold… $1,494.32

That’s it for today and tomorrow, back on Thursday…  Well, my beloved Cardinals have their backs against the wall after losing again last night… I have a question for the writers that vote on Gold Gloves… What in the world were you smoking when you have Marcell Ozuna a Gold Glove a couple of years ago?  UGH!… double UGH! The Red Sox came back from an 0-3 hole in 2004, so I guess it can be done…  but the reality of this 0-3 hole is that the Cardinals need to be making Tee times…   Our Blues didn’t play well in the 3rd Period yesterday, and ended up with a tie, and a loss in OT… My Missouri Tigers have moved into the top 25!  Fight Tigers!   Earth Wind and Fire takes us to the finish line today with their song: After The Love Has Gone…   And with that I hope you have a Tom Terrific Tuesday, and please Be Good to Yourself! 

Chuck Butler