Author: admin

May 18, 2020

* Currencies lose ground last week… 

* Gold & Silver are gapping higher… 

* And Chuck changes his mind…. 

Good Day… And a Marvelous Monday to you! It was a long weekend for me, but then weekends are meaningless to me these days, as all days seem the same to me… At least before COVID-19, I could look forward to Fridays, when I would meet my friends at my local watering hole… We’ve tried to hold happy hour on Zoom, but it’s just not the same… So…. How was your weekend? HA! We’ve had nothing but rainy weather in the past couple of days, and hopefully this run of rainy weather will end soon!  The Rolling Stones greet me this morning with their song: Can’t You Hear Me Knocking…

Really quick here… the currencies lost ground on Friday, even in the face of worsening data here in the U.S.  But Gold and Silver are firmly on the rally tracks and not only had good days late last week, but Gold is up another $19 in the early trading today… And Silver has gapped higher and trades with a $17 handle this morning…    And, the price of Oil has jumped higher and trades with a $31 handle this morning. The Shale Producers are opening up wells again… 

Well…. This is going to be tough for me to spit out this morning, so please do not have a knee-jerk reaction, and fire me off an email. Please read what I’m saying and see where I’m going here… That’s all I ask…

Global debt is at levels that it should never have reached in a million years, but it’s there, and there’s no paying back, in the traditional sense of paying off a debt…. So, how are the countries around the world (except Russia, who’s debt IS manageable) going to deal with this ever-growing debt? I’ve thought long and hard about this folks, and in my heart of hearts, I know what the answer is, and I’ve fought saying it, for so long, because, well, I just didn’t want to believe it could happen…. And it’s not just because of the virus that this is the way it is… At the end of 2019, Global Debt stood at $255 Trillion… Once the dust settles on all the debt accumulated during the economic shutdowns, the Global debt will be greater than $300 Trillion… With no ability to pay it down….

A month or so, I talked about the IMF’s SDR’s (special Drawing Rights), and how they used by Central Banks, and not suitable for individual use…. I almost went down the rabbit hole then that I’m ready to go down now….

I truly feel that with all this debt, and Central Banks going nuts with one alphabet plan after another, that they’ve all backed themselves into a corner… 

To me, it seems, the only way out of this debt mess is for countries, including the U.S. to take haircuts, in other words, default on some of their debt…. What this will do, is have every trader in the book, out to sell the currency of a country taking the haircut, and buy the currency of a country that hasn’t announced they would be taking a haircut. But soon, they will all have announced it, and at that point is when I believe currencies, as we know them today, will no longer be…

I thought I would be long gone by the time this all unfolded, for it’s been in the cards for years. I never would have thought that during my time on earth, that would see these kinds of debt levels… I always thought that somewhere, someone with their head screwed on right, would figure out that we kept accumulating debt, that a default had to come eventually… I always figured, Japan was first, then Greece, then the U.S. But instead, what I view happening is there would be a meeting of finance ministers where the coordinated announcement was made….

Things have gotten so bad overseas that they’re selling their Treasury bond reserves. Here was a news headline from late last week: “Foreign holdings of Treasuries slumped in March by the most this century, falling $256.6 billion to $6.81 trillion. This likely stemmed from nations liquidating US debt positions to defend their currencies amid huge capital outflows.”

That just means the Fed will have to up the ante on the amount of Treasuries they buy, since foreigners aren’t buying them like they used to. The Fed’s Balance Sheet will begin to show signs of stress, and the whole shootin’ match (the financial system) would feel the weight of the world on it, and that would be just another reason to call off the ballgame….

And the next downward move in stocks, which is coming,  the Central Banks will run to the rescue, and those Countries that already don’t have negative rates, will be reaching in their quivers, and finding no arrows, and will then have to go negative with interest rates…. I laughed until I cried last week, when Jerome Powell, the Fed Chairman, denied that negative rates are being discussed…. Or that he thinks there will be a need for them…. To me, that’s akin to when the General Manager or Owner gives a vote a confidence to the manager…. We all know what comes next, right?

The going negative with interest rates is going to set off a chain of events that will change the world and the global financial systems…. Here’s the playbook on how I believe with will all play out…. The Fed goes negative with rates, and banks begin to charge account holders for holding their balances. Being the hotblooded Americans that we are, we won’t sit still while the bank charges us for holding our money, and soon there will be runs on banks for withdrawal of cash holdings…

Well, seeing this, the Gov’t won’t stand for the banks being run on for cash withdrawals, and a plan that’s probably already in the works. And that plan will be to pass a bill that prohibits cash in the hands of individuals…

And the next day, when you check your bank account, the dollars will have been replace with digits…. Or a Gov’t crypto-currency, but dollars will cease to exist…. And other Countries will follow suit…. Thus eliminating the currencies of the world that we know of…

The IMF will increase distribution of their SDR’s, and banks around the world will revert to using SDR’s to settle trade balances…

You see, I’ve through this through, and I see no other alternative…. The good news in all of this is that Gold will be soaring and probably gapping higher each day by $100 or so….

So, with no currencies in the world to talk about…. An end of the Pfennig is near… But…. At the request of the Aden Sisters, I will continue to write about economies, mainly the U.S., Gold, The Fed and other things that come to my mind, and the letter will be renamed…. And it might not be done ever day…. But that’s all secondary, folks…. The main thing is that your last civil right will have been taken from you in the blink of an eye, and now banks can charge you for everything under the sun and moon….

I know that for over 25 years, I’ve told people that the way to diversify their investment portfolios is with currencies and metals… But the situation has changed, and I will also have to change…. But Gold will still be viable, and like I said will most likely be gapping higher each and every day, and the price manipulators will have been sent home with HUGE losses, and never to be seen again!

What should you do if you own currencies? Well, nothing…. You could sell them and buy Gold/ Silver, but to do nothing would be like when you owned Spanish Pesetas, or German D-Marks, etc. They were all converted to a different form at a set conversion price… Your current euro balance will be converted to whatever replaces the dollar, and that’s that….

12 years ago, a fellow by the name of Aaron Stevenson, interviewed to work in St. Louis on the EverBank World Markets Desk, that I was the President of, He asked me the about the future of the currency business, and I told him, “ Eventually, Aaron, the currencies will all go away, but I hope that happens years from now when I’m retired”….  Well, I’m retired now….  I’m just saying… 

And with all this debt accumulation how’s it going to get paid? More money printing all over the world, thus debasing each and every currency that has debt as its partner. Central Banks, like the Fed are going to keep printing currency to pay for Sovereign bonds (treasuries in the case of the Fed) and soon, with all this debt accumulation, no one will be willing to buy our debt, or Germany’s debt, or Japan’s debt, you see where I’m going with this? All that currency printing, and still the only entity to step forward to buy bonds will be the Central Bank…. And when each Central Bank’s balance sheet begins to overstay its welcome, that’s when things will change folks….

So, I’m just not in the mood to keep talking about diversification with currencies… There’s only one or two countries that makes sense any longer, rubles and Singapore dollars. And their markets are not big enough to weather this storm that all these other countries have stirred up… Gold & Silver will still be great diversification tools…. Silver has industrial uses (solar panels, wiring etc. ) and Gold has intrinsic values. Both are a store of wealth, and should be held as such….

Just keep in mind this quote from Winston Churchill… “When the facts change, I change my mind. What do you do?”   Yes, the countries have done this to their currencies, and so I’m changing horses in the middle of the stream… I don’t see a future for the currencies, including the dollar… 

Well…. I’ll head to the Big Finish today, as today’s letter was like no other before, and I want to return to some normalcy….

OK, here’s a rundown on the data from late last week…. Leading off, on Thursday, for the week ending 5/9, another 3.46 Million former workers signed up for Unemployment Benefits, which brings the total for the last 8 weeks to 33 Million… The U.S. normally employs 120 Million people… That’s an Unemployment Rate of 27.5% folks… And then on Friday, we saw April Retail Sales print -16/4%. And without auto sales, Retail Sales were negative -17.25%… The print for April was worse than the experts had forecast which was -12.5%… Industrial Production for April was negative -11.2% Vs the -4.5% in March, and Capacity Utilization fell from 73.2 in March to 64.9% in April…. And to top off all this negative data, the preliminary May Consumer Sentiment rose, yes, I said rose, to 73.7 from 71.8 in April…. Don’t ask me how the folks that were polled could feel more confident, unless, they’ve been glued to MSNBC where they keep telling people that this is not going to last, and it will be over with soon…. (I don’t watch MSNBC, so I’m just imagining what they are saying… )

So, not a good week for data last week… And, there’s really not much in the data Cupboard to look at this week, except for Leading Indicators which will print on Friday, and of course the Weekly Jobless Claims on Thursday…

For What It’s Worth…. You really didn’t think I would skip out on this part of the letter did you? HA! Well, my local paper, has gone to the place where newspapers go to die… They basically reprint API articles, and have a few writers on hand… One of those few remaining writers, is the business writer, David Nicklaus, and he wrote a very good article late last week, regarding how the pandemic is basically causing struggling businesses to call it quits…. Well, this article can be found here in its entirely by clicking here: https://www.stltoday.com/business/columns/david-nicklaus/nicklaus-retail-apocalypse-coronavirus-is-pushing-struggling-stores-over-the-edge/article_f243ca05-574f-5d79-bafe-bd5968abd1ba.html#utm_source=stltoday.com&utm_campaign=%2Fnewsletter-templates%2Fbusiness-briefing&utm_medium=PostUp&utm_content=a12874506a3b5805dded6c95af30d7173df7c77a

Or, here’s your snippet: “Even as retailers begin reopening in much of the country, a dark cloud hangs over much of the industry.

Simply put, the U.S. already had far more stores than it needed, and the coronavirus pandemic accelerated a shift toward online shopping. Rather than don a facemask to go to the mall, many consumers will open a web browser instead.

Add in the heavy debt load carried by many national chains, often the result of buyouts by private equity firms, and you have a recipe for a retail apocalypse.

“When we come out of this you are going to have fewer players, fewer square feet of retail space, and the strong are going to gain market share from the weak players,” says Brian Yarbrough, a retail analyst at Edward Jones.

Three prominent retailers — J. Crew, Neiman Marcus and Stage Stores, owner of Gordman’s — have filed for bankruptcy this month and the venerable J.C. Penney reportedly may join them soon.”

Chuck again… A retail apocalypse is what Mr. Nicklaus is calling this, and I couldn’t agree with him more!

Prices today: American Style: A$.6455, kiwi .5965, C$ .7111, euro 1.0811, sterling 1.2125, Swiss $1.0286,  And  European Style: rand 18.4606, krone 10.1563, SEK 9.8329, forint 326.91, zloty 4.2191, koruna 25.5361, RUB 73.52, yen 107.28, sing 1.4260, HKD 7.7514, INR 75.44,   China 7.1010,    peso 13.76, BRL 5.8553, Dollar Index 100.34,  Oil $31.87,   10-year .65%, Silver $17.36, Platinum $825.12, Palladium $1,963.02, and Gold… $1,762.99

That’s it for today…  I know this hit you like a ton of bricks, so I’ll just end this for today, and give you time to reread it  Things are going to change folks… And a wise man that once worked for told me many years ago, Chuck, in change lies opportunity…   I guess we’ll have to see where that opportunity exists when it comes, eh?   REO Speedwagon takes us to the finish line today with their song: Golden Country….  Golden country your face is so red, with all of your money, you’re poor can’t be fed.  Gary Richrath is a very underrated guitar player….  I hope you have a Marvelous Monday, and well please go out there and Be Good To Yourself!

Chuck Butler

 

 

May 13, 2020

* Currencies rally on Monday and throughout the night!

* Gold gets off its seat to the do the stroll today…. 

Good day… And a Wonderful Wednesday to you! Sorry for the tardiness of the letter this morning, it was one of those mornings when I just couldn’t convince myself that I needed to wake up!  I’ve been thinking about that a lot lately, and have decided that going forward, I’m not going to set an alarm, and I’ll write when my body tells me it’s time to wake up….  I would imagine that in the beginning the letter will get to your email box around the same time as always, but as time goes on it will be later, and later…  That’s it… times change, and I do too….    Pink Floyd greets me this morning with their song: Wish You Were Here…. 

The dollar bugs went back into the wall boards yesterday, and allowed the currencies to romp and play all day and through the overnight markets as well. One has to wonder, what changed yesterday?  I mean, on Friday, we had seen a week’s worth of bad, no make that awful economic data here in the U.S. culminating with a better than feared Jobs Jamboree, and the dollar bugs held onto the conn, much to my amazement…  But then on Monday, things changed… And the dollar bugs were chased all over the room by the currencies…. 

Gold didn’t join in the romping around yesterday, with the currencies, but has gotten off its chair and is doing the stroll with its girlfriend, Silver this morning….  Remember “the stroll”?  Sorry youngsters, you’ll have to YOUTUBE that and see what I’m talking about…. But at the St. Pius teen town dance every Friday night, there was always one song that the kids would line up for and do the stroll… 

II just had a flash back to when I was much younger, but had kids, and I would line them and their neighborhood friends, in the driveway and have them do the stroll!  They loved it, and would do silly dances, and we had a blast!  

OK… last week I told you the European Constitution Court (ECC) was going to meet, and I was waiting to hear what they would were going to say about the European Central Bank’s (ECB) exorbitant bond purchases…. It took a few days for this to be public news, and thanks to Grant Williams in his Things That Make You Go Hmmm….. letter last week, he had the public news, so let’s listen in on what the European Commission had to say, “ German constitutional court ruled that the ECB had exceeded its legal mandate and “manifestly” breached the principle of proportionality with mass bond purchases, now topping €2.2 trillion and set to rise dramatically. The bank had strayed from the monetary realm into broad economic policy-making.

The court said the German Bundesbank may continue to buy bonds during a three-month transition but must then desist from any further role in the “implementation and execution” of the offending measures, until the ECB can justify its actions and meet the court’s objections. It also said the Bundesbank must clarify how it is going to sell the bonds it already owns…”

Well, well, well…. What’s Christine Lagarde, President of the ECB, going to say about this? I mean shoot Rudy, she just took the job a couple of months ago, and now she’s in the middle of a saber rattling contest, of which the it appears she’s on the losing side…. Well, look who thinks that she’s high and mightier than the European Constitution Court! Let’s go to the tape once more courtesy of Grant Williams to see what she had to say, “We are an independent institution, answerable to the European Parliament, and driven by our mandate,” she said in a webinar organized by Bloomberg. “We will continue to do whatever is needed, whatever is necessary, to deliver on that mandate. Undeterred.”.. – Christine Lagarde

Well, well, well… It’s as if she stuck her nose up in the air and said, Neener, neener, neener, I’m rubber and you’re glue, whatever you say to me bounces off me and sticks to you….. In my favorite cartoon voice, I can here the ECC saying, “Why…. The nerve of her!”

But who can blame her, she’s just taking her cues from the Fed, who yesterday began buying Corporate ETF’s through Blackrock, when the Fed’s bylaws prohibit them from doing just that! Any thing you can do I can do better! Man this is all getting crazier by the day, isn’t it? What’s become of our financial system, and what will remain of it when this is finished?

And again, I laugh, when I hear people say, that these changes are “only temporary”…. Yeah, like Payroll taxes were supposed to be? And the Gold backing dollar system ending was supposed to be? Tell me again, what temporary means, because using these two examples, I have a different meaning in my head!

Back here in the U.S….Yesterday, I talked about the scenario that I think will bring about negative rates here in the U.S. And then later in the day, I received a note from the GATA folks, where they were quoting an article that appeared on Reuters that said, “Rate options, which gauge monetary policy expectations, on Monday implied a 23% probability that the key federal funds rate will go below zero by the end of December, according to BofA Securities data, which cited short expiry options on one-year U.S. swap rates. That compares with a 9-10% probability last week.”

So, what was once TABOO, is now being considered…. What was once things that tin foil hat wearers (like me) were laughed at for even mentioning, now has a 23% probability of becoming real…. I’d say at this point, that’s a significant level of probability…. Now, watch that percentage grow, when stocks begin to have problems again like they did in March…. I’m just saying…

Well, I hate to have to bring this kind of stuff up, but a dear reader sent me a link to a video and asked me to explain it…. It was a guy that had reported finding that the U.S. Gov’t Bill 748, (you know the Coronavirus stimulus bill) was first introduced in Congress…. Are you ready for this? ….. On January 24, 2019…. I’ll let that sink in a bit…. January 24, 2019…. That’s over a year before the first case of the pandemic came on our shores….

Now, I’m sure you’re saying, “Come on Chuck you can’t believe everything you see on videos”, and you’re right…. But this man on the video showed me how to go to the U.S. Congress.gov site and pull up Bill 748’s history, and see it there in black and white…. So, go ahead and prove this wrong….

In the meantime, I want to know what they (congress) knew over one year ahead of time! Hello? Congress, anyone out there read the Pfennig? Come on, I know an “aide” up there in Washington D.C. has to have come across the Pfennig a time or two! I don’t really expect anyone in D.C. to answer me, I’m fully expecting to hear nothing but crickets…. 

And here’s where investigating journalism had died… Because back in the day, a good investigating journalist would be looking at this and not turn to look the other way…  I’m just saying…

Sorry, I got a little off track there, but I thought it was important to talk about, and so I did just that!  

Yesterday, the stupid CPI (consumer inflation) printed for April, and only showed a negative -0.4%….  Yeah, I believe that like I believe that pigs fly! but it is what it is, and we move on… PPI (wholesale inflation) printed already this morning for April and it showed a negative -1.4% print… Now, that’s more like it!   Remember Retail Sales will print on Friday, and the Weekly Jobless Claims will print tomorrow… 

Before we head to the Big Finish today, I wanted to give a shout out to my fave newsletter writer, Grant Williams. Grant and the great Stephanie Pomboy, are doing a podcast once a week, titled: The First Super Happy Hour podcast…. When you put two minds like these two have, together, you get great conversations, and thought provoking ideas…. And so to celebrate their breaking a champagne bottle on their new podcast, I thought I would give you the link to a sample, and it will give you an opportunity to download the whole podcast…. So click here and enjoy! https://ttmygh.podbean.com/e/sthh_0101/

To Recap… The currencies rallied on Monday, and have carried through the overnight markets into this morning. Gold finally moved higher this morning adding $14  and is trading $1,715 this morning.  The European Commission Court didn’t have nice things to say about the ECB’s bond buying, but ECB President, stuck her nose up at the court and said Neener, neener, neener…    And Chuck talks about some strange thing he found, that he hopes isn’t real….  But it is, it’s right there on the www.uscongress.gov site! 

For What It’s Worth…. I don’t know if see what I see in this article…. It’s about how U.S. bank regulators were investigating Scotiabank’s metals business, before Scotiabank made the announcement two weeks ago that they were going to close their metals business down at the end of this year…. This article on Reuters can be found here: https://uk.reuters.com/article/us-metals-bank-of-nova-scotia/us-regulators-started-scotiabank-probe-before-metals-closure-filings-idUKKBN22K1Q7

Or, here’s your snippet:” U.S. regulators were investigating Bank of Nova Scotia’s (Scotiabank’s) (BNS.TO) metals trading activities several months before it told staff it would wind down the unit, according to its most recent earnings report.

Scotia told staff in a global call on April 28 that it would wind down its metals business by around the start of 2021, two sources familiar with the matter told Reuters at the time.

Scotia has declined to comment on the report.

In its first quarter earnings statement in February, Scotia said its metals business was under investigation by U.S. regulators.

“The Commodity Futures Trading Commission (CFTC) and the Department of Justice’s Criminal Division are conducting investigations into (Scotiabank’s) activities and trading practices in the metals markets and related conduct,” it said.

It said it was “responding to requests for information related to these investigations.”

Scotia did not respond to a Reuters request for comment on the investigation. The DoJ and CFTC declined to comment.”

Chuck again… Ok, is your spider sense tingling? Because mine is, and don’t tell me it was just a co-ink-ee-dink that Scotia decided to close their business after the regulators were there…. My spider sense is tingling so intense right now, that there’s more to this story, and the problem is… We’ll probably never know the real truth…. And that’s sad….

Currencies today 5/13/20, American Style: A$.6514, kiwi .6045, C$.7128, euro 1.0876, sterling 1.2318, Swiss $1.0332, European Style: rand 18.2739, krone 10.0472, SEK 9.7282, forint 324.92, zloty 4.1945,    koruna 25.1715, RUB 73.40,  yen 106.91, sing 1.4143, HKD 7.7502, INR 74.60, China 7.0864, peso 24.05, BRL 5.8219, Dollar Index 99.70,   oil $25.96,   10-year .65%, Silver $15.60, Platinum $770.68, Palladium $1,716.58, and Gold… $1,716.58

That’s it for today, and the rest of the week, remember no Pfennig tomorrow, as I will reporting to the oncologist for blood work and the rest of stuff…  Blues beat Dallas 4-3 last night!  HA, I watched the replay of Game 3 of their playoff series last night….   I read last night that the proposal that the owners submitted to the player’s union for approval to start the baseball season, has hit a road bump…  You see, the owners want to split the profits with the players this year, since most games won’t have any fans paying to get in…. And the players have a problem with that… Come on! Be Big Boys and make some compromises so you can get back to playing the kids game!   I guess I wouldn’t make a good negotiator! HA!  OK, Journey takes us to the finish line with my favorite song by them: Who’s Crying Now….   And with that, I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

 

 

May 12, 2020

* Currencies trade in a very tight range on Monday

* But currencies and Gold are both on the rally tracks today! 

Good Day… And a Tom Terrific Tuesday to you! While the sun was out, the sky was blue, the day was beautiful, until you stepped outside, and found that the temperature was 50 degrees! YIKES! Like I said last week, I find it ridiculous to try to get Vitamin D with a jacket and hat on! But I sat outside with a jacket and hat on for over two hours yesterday, reading, and working crossword puzzles, which have become a daily thing for me…. I think they keep my mind sharp…. I’m probably whistling up the wrong tree here, but that’s what I think, and that’s all that matters! HA! Well, Major League Baseball has announced that they will take a proposal to start the season on July 4th to the Players union today, for acceptance…. That means that we could be watching, no fans in the seats, baseball by mid summer! YAHOO! That’s the best news I’ve heard in 2 months! John Lennon greets me this morning with his song: Whatever Gets You Through The Night…. Say what you want about Lennon, but in the end he was a prolific song writer….

Front and center today I want to apologize for the format of yesterday’s letter. I was so ready to get it out that I forgot to break it all up into paragraphs for you…. I can’t say it won’t happen again, but I doubt it will, as it’s never happened before now…. Again, sorry, for the awful presentation of the letter yesterday…. You would think that if you did something repeatedly for years, that it would be second nature to you, and there’s no way you would forget to do it…. You would think….

The currencies traded in a very tight range yesterday, and Gold lost $7 on the day, to close at $1,697… There’s just nothing to talk about with the currencies folks… They are following the dollar bugs’ lead, and will react based on the sentiment of traders and how they want to take the dollar for the day. Never mind thinking about any long-term trading trends, for now…. This is almost as boring to watch as night time TV without baseball, or hockey!

And this back and forth trade of Gold around the $1,700 figure, is beginning to give me rash… But it is what it is, and there’s nothing I can do about it, so I just sit here and wonder each day what’s it gonna be, above $1,700 or below $1,700? It’s lollygagging around $1,700 sure has given the procrastinators an opportunity to buy before Gold makes another $400 gap upward, like it did late last year…. For those of you who have missed class when I talked about this last week…. $1,700 has become the new $1,300 for Gold….

I just crack up at people that say, “Hey, I hear what you’re saying and it all makes sense, but when the walls begin to crumble, that’s when I’ll go out and buy some Gold.” I always respond to these thoughts with a thought of my own, and I say, “The problem with that is that you won’t be able to find Gold to buy, as everyone that saw all this coming already bought it up”….. I always get a “Oh!” on that thought, and an effort to change the subject….

OK… longtime readers know that I love to find other people that think like I do…. But I have to draw the line with the Fed coming on board with my thought that 1/4 to 1/3rd of the 33 Million jobs that have been shed through last week, will never come back…. The Fed said, “the results of recent Federal Reserve surveys suggesting 24.9% of all job losses amid the corona-crash will be permanent.

One of my fave reads each day, is the 5 Minute Forecast, put together by Dave Gonigam at Agora Financial…. So, let’s listen in to what Dave had on his mind regarding these permanent job losses in his “5” letter yesterday…

“Translation: A lot of people who’ve been booted out of the labor force these last two months won’t ever return.
And they won’t show up in the official unemployment figures.
In a recent interview with our executive publisher Addison Wiggin, Jim Rickards draws the distinction: “Unemployed doesn’t mean you don’t have a job. It means you don’t have a job and you’re looking for a job. You’re trying to get a job and you can’t find it.

“But if you drop out of the labor force, you say, well, good time to retire. I’m now retired. Or I’m going to sit on the couch and eat Doritos and watch, I don’t even know, Japanese baseball, maybe. You’re not counted as unemployed because you’re not looking for a job.”

Bottom line: “A lot of people are dropping out of the labor force. They’re not coming back.”

Sounds like a depression? Jim says that’s exactly what it is.”

Chuck again…. You know, there’s something to be said, for people that go out on a limb, and talk with logic and history…. I like those kind of people… I’m just saying…

I want to go in a different direction now, and talk about the debt here in the U.S. Did you know that last week we crossed $25 Trillion in our current debt? It wasn’t that long ago that we crossed $24 Trillion, but when you’re racking up Trillions in bail outs and stimulus, that really isn’t stimulus, you begin to climb the debt ladder that leads to tears….

Of course, if you’re a backer of the MMT folks… Modern Monetary Theory, then you don’t think of this climbing debt as a big deal…. What the heck, according to the MMT folks, we could just spend whatever amount we needed to, and sell Treasuries to finance the debt, and when the markets won’t buy all the Treasuries, the Fed will just print new dollars and buy them…. Yeah, that’s what MMT is all about folks, right there in a nutshell… Sound good? Well, everything has merit and will work, for awhile….

And then it doesn’t…. The dollar becomes a problem because there have been so many of them printed…. And that’s when the wheels come off that wagon, folks… Gold soars, and the dollar loses credibility…. In listening to an interview yesterday with Addison Wiggin of Agora Financial, and James Rickards, brought about something that I had forgotten about…. In 1977, you may remember this…. The U.S. dollar was getting sold like funnel cakes at a state fair, nobody wanted them, and Gold was soaring to new heights every day…. The U.S. Treasury tried to sell Treasury bonds denominated in dollars, but that went over like a lead balloon, and instead they had to issue them denominated in Swiss francs! Those were called “Carter Bonds”… Ring a bell?

We could see that happen again folks…. I’m just saying, it happened once, it can happen again!

Ok… as if there aren’t enough things to think about with the economy, etc. There’s this… Why on earth is the stock market rallying and the bond market telling us that we should be hunkering down? There’s a divergence here that’s difficult to explain, but I’ll give it the old college try! Oh, and by the by, did you see the earnings results from the 1st QTR last week?

Earnings were down BIG TIME in the first QTR, which leads me to believe that the stock jockeys are looking way beyond the current data… Because on top of all that you have consumers hunkering down. We’ll get April Retail Sales on Friday of this week, but since this is only Tuesday, let’s just take a stab at what they might show…. And let’s say Retail Sales were down 15% in April… Add that to the drop in credit card debt we saw last week, which was a 31% drop on an annual basis, from the previous month, and you’ve got the consumer-led U.S. economy gasping for air….

But…. The stock jockeys all think they’re smarter than the rest of us, and that we need to look to the future too…. I just can’t get my arms around the idea that the U.S. economy is going to spring forward like being shot out of a cannon when it’s opened up again…. So, I’m with the bond guys…. I always have been, having spent a good portion of my early career in a bond dept. And the bond boys say, that deflation is upon us, and most likely negative rates are on their way…. I think we’ll need to see a stock market sell off to set this deflationary / negative rates thought in play…. Because, once stocks start showing weakness again, the Fed will jump to its rescue, once again, but only this time they’ll find their quiver doesn’t have any arrows….. And that’s when we’ll see negative rates…. So, you can make a choice, isn’t that great? I mean really, isn’t that great that you’ll get to make a choice.? You can sit there and wait, or you can get up and groove…

No wait, that’s a different choice, this choice is between pinning your colors on the stock jockeys mast, or pinning your colors on the bond boys mast…. I think I’ve make it clear which mast my colors will be flying from!

Longtime readers know that this is where I bring in a Big Gun to back up what I just said about the economy not rebounding big time like the stock jockeys think…. And you would be right! I have the best economist going, in my book that is, David Rosenberg, giving us his two-cents on where the U.S. economy is headed….  

“ With the global economy grinding to a halt because of the COVID-19 pandemic, economic conditions can’t get much worse than they already are, according to famed economist David Rosenberg, chief economic strategist at Rosenberg Research and Associates.

However, Rosenberg added that investors shouldn’t expect to see a significant recovery anytime soon. He said that they should position their long-term portfolio to reflect an environment of long-term stagflation.

“We’re going to be into a prolonged period of very soft economic growth. There is no rebound that is taking us back to where the economy was,” he said. “The new normal is going to be very constrained.” – David Rosenberg

Chuck again….  I pulled that from Ed Steer’s letter this morning that can be found here: www.edsteergoldsilver.com 

OK, I told you yesterday that the Data Cupboard was basically empty until Friday, but we do have the stupid CPI (consumer inflation) report for April to print today, so it will be interesting to see what rot has formed on this data’s vine…. 

To recap…. The currencies traded in a very tight range yesterday, and Gold lost $7 on the day to close below $1,700. However Gold is back above $1,700 early this morning… Back and forth, is beginning to give Chuck a rash…. Chuck paints a picture of what it’s going to happen to move the Fed to go negative with rates…  And I know where here at the place where the FWIW article is, but I just wanted to say that this is a BIG DEAL so make sure you read it today! 

For What It’s Worth….  This is where I draw the line with the Fed’s activities folks…. Their bylaws say that they can’t buy Corp. Debt, and yet here we are…. This article on zerohedge.com talks about the Fed’s entry into the Corp. ETF’s market today, and it can be found here: https://www.zerohedge.com/markets/fed-will-start-buying-bond-etfs-tomorrow-blackrock-make-over-10-billion-fees

Or, here’s your snippet: “

Last Monday, in response to a Gundlach tweet in which the bond king said “I am told the Fed has not actually bought any Corporate Bonds via the shell company set up to circumvent the restrictions of the Federal Reserve Act of 1913” the New York Fed announced on its website that it expects to begin purchasing eligible ETFs – most notably the LQD and JNK – as part of its emergency lending programs in “early May.”

And yet, day passed, and then another, and another, and suddenly early May turned into mid May and… still nothing.

Until today when the Fed announced late in the day that the facility designed to purchase eligible corporate debt from investors will launch on May 12, bringing the most controversial part of the U.S. central bank’s emergency coronavirus lending program – one which not even Bernanke dared to activate at the depths of the financial crisis perhaps realizing that there would be no extrication from that particular moral hazard – online following weeks of anticipation.

The Fed’s Secondary Market Corporate Credit Facility “will begin purchases of exchange-traded funds (ETFs) on May 12” the New York Fed website said, nearly two months after it was was first announced in late March, and served a key role in keeping financial markets relatively calm since then.

And speaking of Blackrock, the Fed also posted to its website the 66-page investment management agreement with BlackRock, the world’s biggest manager, which is incidentally also the world’s biggest manager of ETFs, and which last month said explicitly that it would front-run the Fed’s bond purchases, layering conflicts of interest upon conflict of interest, but who cares any more.

Blackrock’s compensation for doing something the N.Y. Fed’s desk is perfectly capable of doing itself (furthermore, since it only has to buy and never has to sell, the Fed can just hire any millennial on TweetDeck – they have precisely the required skill set; now if selling is ever required the Fed may have trouble finding traders that actually are familiar with that particular skill, but we digress).

Since such a role has neither custody risk nor transaction risk, we look forward to the Congressional hearings in which Larry Fink, that noble crusader for the common man, explains why US taxpayers had to pay him billions and billions for doing, well, pretty much nothing.”

Chuck Again….  And one more thing that I read this past weekend that ties in here… Guess who is a major stock holder of Black Rock?  None other than Fed Chairman Jerome Powell…. Now, if that’s true, and I have no doubts about the source I read that from, then  this whole program already has a 5-day old fish smell to it….  

Currencies today 5/12/20 American Style: A$.6511, kiwi .6102, C$ .7150, euro 1.0835, sterling 1.2347, Swiss $1.0299, European Style: rand 18.2870, krone 10.2263, SEK 9.8022, forint 323.57, zloty 4.2016,    koruna 25.4112, RUB 73.54, yen 107.43, sing 1.4156, HKD 7.7501, INR 74.75, China 7.0891, peso 23.94, BRL 5.7680, Dollar Index 99.97,   Oil $25.31,   10-year .72%, Silver $15.51, Platinum $772.39, Palladium $1,885.38, and Gold… $1.704.05

That’s it for today…  Well, I had lots to say today, so it was a good thing I got up early to write! HA! Seriously though… there are plenty of things to write about these days, so if the letter gets a little long, just remember it could be longer! Not much on my mind this morning, other than I sure hope the player’s union and the baseball owners can get together and come up with a plan to get baseball going again this year!  I sure hope they keep this in mind….  It’s far better to compromise and play than to be hard headed and not play….   Modern English takes us to the finish line today with their song: I Melt With You….   And with that… I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself! 

Chuck Butler

May 11, 2020 

* Currencies rally on Friday, give back ground today

* Neal Kashkari: “The Worst Is Yet To Come”…. 

Good Day… And a Marvelous Monday to you! A fairly nice weekend, with some very chilly air being blown around yesterday, for Mother’s Day. Speaking of which, I hope all the mothers out there had a grand day. I know all too well, that this Mother’s Day was not anywhere near normal, and hopefully it’s that last time we have to go through that! If my mom was still alive I would have gone to see her, and still given her a hug…. I’m just saying…. I just don’t know what’s going on in the markets these days folks, so I’ll just keep giving you my opinions on what “should be Happening” VS what is Happening…. Like Friday’s markets reaction to an awful jobs jamboree…. So I have that and more to talk about today…. Don Henley greets me this morning with his song: In A New York Minute….

I learned something new about rock history this past weekend when my fave newsletter writer, Grant Williams wrote about it in his weekly letter titled: Things That Go Hmmm…. Grant wrote about how the singer/ songwriter, Johnny Nash (I can see clearly now) spent some time in Jamaica years ago, and hired a small group of locals to back him up and write songs for him…. The band? None other than Bob Marley and the Whalers…. See, even an old rock-n-roller like me still can learn something new all the time!

I’m beating around the bush today, before getting started because I know that once I do get started I’m going to be getting very mad, and upset with all that’s going on… And the stupidity of it all! Yes, that’s right, I said the “S” word….. I guess you’ll have to deal with it!

Before we get to the data… The dollar bugs went into hiding on Friday, with regards to their relationship with the currencies, and the currencies rallied all day on Friday, that’ is, after the Jobs Jamboree printed. But Gold couldn’t find a bid all day and ended the week with a down day on Friday to the tune of $15 to close at $1.702…. This was after rising more than $33 on Thursday! Up one day down the next, that’s the story for Gold since it hit $1,700…. And I have to tell you that I’ve finally figured out why this is happening, and its’ because….. No, wait…. I can’t go there yet, I’m still feeling spry this morning, and I’m not ready to get down in the dumps!

That was Friday, and in the overnight markets leading to this morning, I’m seeing the dollar bugs fight back, and Gold starting the day down $2… Two weeks ago, it was the opposite going on, with the dollar getting sold in the overnight markets, and bought in the U.S. time…  And now the tables have been switched…. Strange stuff for sure, but leads me back to my thought that traders don’t have a clue, about what’s going to happen next, and so they dabble here and there, to keep their jobs… 

OK… are you ready? Yes, I’m ready…. So, let’s go down the dark alley way, and see what’s behind the curtains….. Well, well, well, what have we here? The BLS version of a jobs report printed on Friday, and believe it or don’t, but the BLS did not offer up an hedonic adjustments to the figure, instead they printed a long explanation of what they’re looking at during the pandemic. So…. The April total unemployed printed at 20.2 Million, and the Unemployment Rates was 14.7%…. Which were both better than feared….

On Thursday, last week, the Weekly Jobless Claims printed its lowest figure in 8 weeks, but…. Before we rejoice that this is all over, the total was 3.17 Million new claims filed in the week ending 5/2, bringing the total jobs shred in the past 7 weeks to 33.4 Million! OK… so I’ve got some numbers for you to look through here…. First of all the last week of March had the largest Weekly Claims number of 6.8667 Million… Then the April weekly totals were 4/4 6.615 Million, 4/12 5.237 Million, 4/19 4.441 Million, 4/26 4.846, and 5/2 3,169

OK add up all the April numbers and you get 23.309 Million… So, somewhere the BLS forgot to add over 3 Million jobs lost in April…. And that would get you close to the 18% Unemployment rate that I talked about a week ago…. Let’s also keep in mind that the weekly reports cross months, so there’s some give and take there, but on the back of cocktail napkin, I figure we’re probably closer to 18% Unemployment in April than what the BLS had for us….

Oh, and one more thing on the jobs report, from what I understand, the cut-off date for the reporting numbers was April 15th…. So, does that mean the May Jobs Report is going to have the last two weeks of April’s unemployment additions? This was all news to me, folks, for even in all my studies on the BLS and the jobs report, I was unaware that they cut of the previous month 1/2 of the way through the month! But leave it to the BLS to try and throw us all off the scent of what a real unemployment number is…. 

Here’s my take on all this…. I would venture to say that at least 1/4 to 1/3rd of those lost jobs aren’t coming back…. I hate to be the bearer of bad news but it is what it is folks….

Shoot Rudy, even Fed Head, Neal Kashkari agrees with me…. Yesterday, speaking in an interview he said that He believed that “The Worst is yet to come”…. And he went further to explain when asked if the economy would bounce back in the 2nd QTR like some economists are calling for, he said, “You know, I wish it were. What I’ve learned in the last few months, unfortunately, this is more likely to be a slow, more gradual recovery.”

So, why is the stock market still rallying in the face of all this bad economic reporting? Well, I really don’t know the answer to that question, but I will offer up what I see going on, and that is investors are drinking the Kool-Aid and believing what some of the Brokerage houses and economists are saying and that is, that…. The economy will turn around quickly once we get through this, and they believe it’s in the 2nd 1/2 of the year… This year, that is… The second half of THIS YEAR! And investors not wanting to miss the boat on getting in on the bottom, are jumping in with both feet…. I could go on to explain how this type of mentality caused major losses after the Great Depression’s stock market drop…. The stock market rallied…. And within 18 months they were looking at another drop that was worse than the first one!

OK, but I don’t want to pull away the punch bowl from all those folks that are drinking the Kool-Aid…. So, I’ll stop there… But to me, this appears to be a classic “Bear Trap”….  And that’s all I have to say about that! 

But, this mind set in traders is also what’s causing Gold to run hot and cold on alternating days…. Why buy the safe haven metal when there will be no reason to, in the second half of this year? I shake my head in disgust, because the people that say these things, can’t see the forest from the trees…. Did they not pay attention to the weakening data that was printing month-by-month before the COVID-19 virus came ashore? Do they not know about all of the derivatives that are out there, and all it would take is for one snowflake to fall to cause an avalanche…. The THREAT of an all out collapse is out there folks…. And those that choose to ignore it will be brought to tears in the future…. At least that’s how I see it playing out….

I have a song going through my mind right now it goes like this: Why does the sun go on shining? Why does the sea brush the shore? Don’t they know, it’s the end of the world?  And so on…. 

OK, I got through that without having my blood pressure rise… I’m serious, here folks, I keep my blood pressure machine right here on my writing desk to check it first thing in the morning and record the numbers, but there are times I get so riled, that I check it again to see what damage I’ve done to it!   Actually, I have to do that because the chemo I take causes high blood pressure….   

I’ve been reading a book lately titled: Make America Healthy Again… There’s a chapter on cancer, but all the cancers discussed left out my cancer….  But I got the gist, cancer in some people is preventable… Mine? I believe it was genetically given to me…. And that’s all I have to say about that!

The U.S. Data Cupboard is empty today, and besides the stupid CPI (consumer inflation) which will be negative, showing the deflation that’s among us right now, and the Weekly Jobless Claims, we’ll have to wait until Friday to see the April print of Retail Sales….   The April Retail Sales will most likely be just plain awful, as the March print, you may recall was already at negative -8.7%…. And that only had 1 week of shutdown included in that data print….  But that’s Friday…. 

To Recap…. The currencies found a way to rally on Friday after a better than feared Jobs Jamboree number… Gold couldn’t back up its $33 gain on Thursday, and lost $15 on Friday, and is down $2 in the early trading today. Chuck goes through why he believes the markets aren’t reacting to the awful data prints… Of course he doesn’t really know the answer to why this is happening, he’s just offering up his opinion as to why it is what it is…. 

For What It’s Worth….  Well, some of the brokerage houses, I mean, Casino Banks and economists may believe that this is all an illusion that will be wiped clean in a New York Minute, and that’s all fine and good, but I prefer to look at things as they really are… And this article about Freight deliveries crashing is what I’m talking about, I found it on zerohedge.com and it can be found here: https://www.zerohedge.com/economics/everything-has-been-cancelled-class-8-heavy-duty-truck-orders-crash-25-year-low-april

Or, here’s your snippet: “The misery in Class 8 heavy duty truck orders continues. Still struggling with the remnants of an order backlog that started almost two years ago with record orders in August 2018, the industry was unable to find an equilibrium prior to the coronavirus pandemic. Orders were sluggish and we noted numerous trucking companies that closed up shop altogether in 2019.

Post-pandemic, things look even more helpless. In April, the industry posted its worst order number on record as the economy ground to a halt as a result of the nationwide lockdown. Only 4,000 Class 8 orders were made last month, which is down 73% year over year and 44% from March.

It was the lowest reading since FTR began tracking orders in 1996. Many companies canceled or delayed new orders as demand, measured by the ratio of loads to trucks, fell 66% in April, according to the Wall Street Journal.

The uncertain outlook going forward has prompted many companies that would normally be shelling out for new infrastructure to rein in their spending. For example, logistics company TFI’s Chief Executive Alain Bédard said in an April 22 call: “Everything has been canceled.”

Chuck again…  Well…. Everything has been canceled….  And there are no timelines as to when they will be put back on the docket….  I’m just saying… .

Currencies today 5/11/20 American Style: A$.6472, kiwi .6072, C$ .7140, euro 1.0816, sterling 1.2303, Swiss $1.0284, European Style: rand 18.4206, krone 10.2365, SEK 9.7979, forint 323.58, zloty 4.2144,    koruna 25.4736, RUB 73.35, yen 107.35, sing 1.4273, HKD 7.7502, INR 75.20, China 7.0734, peso 23.87, BRL 5.7249, Dollar Index 100.09,  Oil $23.95,   10-year .69%, Silver $15.41, Platinum $879.81, Palladium $1,879.81, and Gold …. $1,700.19

That’s it for today…. The family got together late last week on Zoom, to celebrate a big occasion…. My youngest son, Alex, has now completed his 6 years and has graduated from St. Louis University with a doctorate in Physical Therapy.  We all wanted to know if we were to call him Dr. Butler going forward!   My chest is puffing out right now, because I’m so darn proud of him…. And he already has a job that he’s supposed to start on June 1, if they are open by then… Real longtime readers will recall when Alex used to sit on my lap and help me write the Pfennig from home when he was 3, and I was “retired” for the first time…. If you don’t recall seeing his typing, no biggie, it was all a jumbled mess…. So, Congratulations Alex! Now , go and earn a living, be a part of society, and have a great “after college life”!  No Pfennig On Thursday this week, as I’m scheduled to visit my oncologist bright and early in the morning…  I’ll remind you again Wednesday…  The Ozark Mountain Daredevils take us to the finish line today with their song: Jackie Blue….   I hope you have a Marvelous Monday today, and will Be Good To Yourself!

Chuck Butler

May 7, 2020

* The dollar bugs rule the roost once again…. 

* Gold gets bashed on Wednesday, Chuck says it’s a “sign”… 

Good Day, and a Tub Thumpin’ Thursday to you! In honor of Tub Thumpin’… I get knocked down, but I get up again, you’re never going to keep me down…. Story of my life since June 2007, for sure! Well, the rain stopped yesterday morning, and the sun came out, but it was still just a little too chilly for yours truly. I did sit outside in the sun to eat my lunch, but that was it… I see no reason to be out trying to get some Vitamin D, with a jacket on! And with my bald head, a baseball cap needs to be worn any time the temps dip below 70! Well, I didn’t get much flack for my stance on the thought that the economy needed to be opened up… Thank you for holding back! 10cc greets me this morning with their song: The Things We Do For Love…. 

There is one other thing that I left out of yesterday’s thought on opening up the economy, and that is, something we should have done in the beginning to avoid all this mess…. And that is, we all know who’s most at risk, right? (yes, I’m one of those most at risk, but… I’m retired, so I don’t have a job to go to!) We should have, and could still do it, quarantine all the folks “at risk”, and allow the rest of the people that want to work, go to work! Of course, then there’s the fact that as Americans we’ve become so lazy, and would prefer to sit at home and receive payments from the Gov’t instead of going to work…. If I were younger, and not have cancer, and congestive heart disease, I would be champing at the bit to go to work! But then that’s just me…. I guess…

OK… The currencies lost more ground but not that much in all, yesterday, with the euro falling below 1.08… Shoot Rudy, just last week the euro was above 1.10… UGH! There was something else  that I missed talking about yesterday, and so… here goes…. After reaching its smallest deficit since September 2016 in February, the U.S. trade balance rose again in March. The overall gap in goods and services trade widened to $44.4 billion from a revised $39.8 billion in February. They say it was a “crash” in exports…. Well… other countries around the world have shut down their economies too, so they don’t need our exports, especially with as high a price that they have on them, due to dollar strength!

Another thing I talked about yesterday, I left out a very important caveat…. When I said hold cash, I left out this… “hold cash until the bank begins charging you for deposits”…. I can’t believe I forgot to say that…. Because, once the bank begins charging you for depositing cash into your account, there’s no reason for them to hold anything more than the amounts you need there to pay online bills or write checks against….

Of course, that’s when we get to the scenario I painted for you a couple of weeks ago, when I pulled out a Dow Theory Letters piece, and told you how I believed that getting to negative rates was “in the cards”, and that when consumers began to pull their funds, the Gov’t would implement a new low, forbidding physical cash, and that your bank balance was just digital units, and a whole bucket of bad things that go along with that…. So… in the end we had better hope that we never go to negative rates here in the U.S.

Let those countries that have no sense do that… Like Switzerland and Japan, and the Eurozone, and Sweden (although Sweden has said they are through with negative rates) Oh me-o-my…. What a tangled web we live in, eh?

The Bank of England (BOE) is meeting this morning, while my fat fingers are flying around on the keyboard…. I suspect that they’ll leave rates unchanged, and then talk about all the horror that the COVID-19 virus has brought to their economy, and the need to do more stimulus work, which means more debt, and so on…. I would think that traders would listen to the BOE’s cries of despair, and sell pound sterling accordingly… But we do live in a world of opposites these days, so you never really know, now do you?

While I’m talking about England, they haven’t been in the news too much lately, as this crazy news media have focused on China, the U.S. and Russia…. Did you know that Israel bombed Syria the other day? And why didn’t that news be front and center, and cause a rash of buying in Gold? Because the media chose not to highlight it…. Ch, ch, chain, chain of fools…

One day, the Oil traders are high fiving each other because they think that the production cuts are working as the price of Oil rises…. And then the next day the story on the production cuts isn’t as rosy, and Traders sell Oil again, after 5 days of rallying… What changed? Ahhh Grasshopper, come sit, and listen…. Traders began to realize that no matter how much production is cut, the supply of Oil is still getting added to, because, at this time, there’s JUST NO DEMAND for Oil…. I knew they’d figure that out sooner or later…. They don’t have brains like a box of rocks, but, sometimes it takes some fracking to get a thought through to them! HA!

Well, Gold got hit yesterday to the tune of $22 bucks and brought the shiny metal back below the $1,700 figure, to close at $1,686… This is a sign folks…. A sign that’s telling you, if you’ve procrastinated buying Gold before, you need to get on the Magic Bus…. Every day I get in the queue (too much, Magic Bus), To get on the bus that takes me to you (too much, Magic Bus) Ahh, a little vintage Who for you this morning… This “sign” has been brought to you by the Aden Research Team…. And main sponsor, Chuck Butler!

Gold is attempting to win back that lost ground yesterday, as it is up $8 in the early trading today…  Back and forth, back and forth… But eventually, this will stop and when it does, it’ll be a lot like musical chairs… When the music stops… Will you find an empty chair? Will you be able to buy physical Gold when the music stops? You see, I’m thinking the answer to that question is a “hard no”!  You see, I believe that Gold will be in such high demand, that getting it in your hands is going to take Superman getting it for you…. 

I recall a joke that goes something like this…. A man is praying to God, and asking him why he can’t win the Lottery… And finally God has had enough, and talks to the man and says, “Why don’t you buy a Lottery Ticket?”  I rest my case on the drop in price of Gold being a “sign”….. 

The U.S. Data Cupboard yesterday had some very frightening data… The ADP Employment Report for April showed that 20.2 Million jobs were shed in April….  That’s right I said 20.2 Million jobs were shed in April… I’ll let that sink in and then you’ll see why I’m so confused as to why Gold lost $22 and the dollar got bought yesterday… 

We were also to see the color of the Quarterly  Treasury Refunding number, but something happened and it didn’t get printed… You don’t think that…. Nah, that couldn’t be, the Gov’t wouldn’t dare try to print this under the cover of darkness so everyone can’t see just how much money they’ve spent?  Nah… that could never happen in this day and age… right? 

To recap…. The currencies got sold, along with Gold yesterday, and all this back and forth stuff is really beginning to give Chuck a rash!  The BOE is meeting this morning, and Chuck thinks that the BOE will leave rates unchanged and talk of all the horrors that the COVID-19 virus has brought to their economy…  And Chuck gets caught up on all the things he’s forgotten to talk about this week…. 

For What It’s Worth…. Well, this coming Friday will be the BLS version of a Jobs report here in the U.S. for April… I always refer to the monthly print as the “Jobs Jamboree”, because long ago in a galaxy far from here, Traders used to gather around their Telerate or Bloomberg screens and hold monthly bets on the Jobs number that would show up on their screens, and then the markets would trade accordingly. Yesterday, the ADP Employment Report showed that employers shed 20.2 Million jobs in April…. Now, a couple of Fed Heads from Chicago, have built a new method of coming up with the Unemployment Rate, which will be quite different than the hedonically adjusted BLS version on Friday, the story of their new method and such can be found here: https://news.trust.org/item/20200505121915-v51r0

Or, here’s your snippet: “The official U.S. unemployment rate for April, due out this Friday, will likely vastly understate job destruction from the coronavirus pandemic, so a pair of economists at the Federal Reserve Bank of Chicago set out to create a measure that captures the true extent of labor market losses.

Their estimate: a ‘U-Cov’ rate in April of somewhere between 25.1% and 34.6%. That’s compared to the 16% rate forecast by economists polled by Reuters, who also estimate American employers shed more than 20 million jobs last month.

“The official unemployment rate may only capture a fraction of these losses,” Chicago Fed economists Jason Faberman and Aastha Rajan wrote in a blog released Tuesday, describing their proposed U-Cov measure of labor market under-utilization.

Many of those newly out of work will not be captured in the traditional U.S. unemployment measure, which counts only those who are out of a job and actively looking for work.

The Labor Department also publishes broader measures to include those working fewer hours than they want to, and people who have looked for work in the past but not recently.

But even such broader measures may miss those who are on unpaid leave and expect to return to their jobs once the crisis has passed, or people who are not searching for jobs because of stay-at-home orders, the Chicago Fed researchers wrote.”

Chuck again… I like Ed Steer’s comment about the BLS report that will print on Friday, he said, “I’m sure that Friday’s jobs report will be massaged to perfection.” I’m sure that it will be too! And we won’t have to wait long for the BLS report as it will print tomorrow!  And you can be sure I’ll talk about it until the cows come home on Monday!

Currencies today 5/7/20 American Style: A$.6466, kiwi .6060, C$ .7105, euro 1.0790, sterling 1.2360, Swiss $1.0244, European Style: rand 18.5607, krone 10.2380, SEK 9.8345, forint 324.30, zloty 4.2105,    koruna 25.1324, Silver $15.02, Platinum $755.22, Palladium $1,694.19, and Gold… $1,696.19

That’s it for today….  HEY!  Sunday is Mothers Day!  There are times during the year when I truly miss my mom, but on Mothers Day, it always hits me like a brick wall, that she won’t be there to hug, and tell her I Love her… So, do me a BIG favor, make sure you tell your mom your love her, I know we can’t hug right now, so the statement of Love will be enough…  My mom used make a BIG deal out of my birthday…. She used to come down to the basement and sit and listen to the band practice songs…  She was my biggest backer…. OK… I’ll have a little poem about moms following this finale….  Three Dog Night takes us to the finish line today with their apropos song: Mama Told Me Not To Come….   (Live at the Forum, which was one of the first albums I ever bought with my own money!) I hope you have a Tub Thumpin’ Thursday, and will Be Good To Yourself!

Chuck Butler

 

May 6, 2020 

* The dollar bugs rule the roost again on Tuesday night

* Did U.S. citizens spend their stimulus checks? 

Good Day… And a Wonderful Wednesday to you! Well, by now I’ve climbed down from my roof, where I had gone to yesterday so that everyone could hear me screaming about Ken Rogoff… But there was no one out to hear me…. So I came inside and wrote some nasty things about his latest proposal, and by the middle of the day, I was calmed back down…. Then I hear the song Ohio playing on my iPod and I began to get all riled up again, like I was yesterday morning when I wrote about the Kent State slayings of 4 students… Finally by late afternoon, I was calmed and in control of my emotions once again… So, it took me some time… And now this morning, I’m just peachy, and ready to write! But first, Melvin & the Blue Notes greet me this morning with their song: If You Don’t Know Me By Now….

The currencies traded in the same clothes all day yesterday, with little to no movement at all and at the end of the day, the euro was 1.0845, and in the morning it had been 1.0840…. So, see what I’m talking about? Gold found a bid or two and climbed back above $1,700, to close at $1,706 on the day. In the overnight markets it was a change from the trading pattern we saw last week, as the dollar bugs ruled the roost in the overnight markets, and brought the Dollar Index back to 100, after spending a week below that figure.  And Gold has given back $5 of gain yesterday in the early trading today… 

The Reserve Bank of Australia (RBA) left rates unchanged on Tuesday and they remain at a paltry 25 Basis Points, or .25%….   I shake my head in disbelief that interest rates in this part of the world, where we used to be able to depend on much higher rates than anywhere else in the Industrialized world.  But times change…. I guess… 

One of the few places where you can still receive interest on your deposit is Russia… Longtime reader, Bob, send me a link to an article that talked about how 70% of Russians have savings to help them in times like this, and 70% of Americans live paycheck to paycheck, with no rainy day savings…  That information must be good for some positive movement in the ruble, doesn’t it?  

I don’t know if you’ve been keeping track recently, but since going negative a couple of weeks ago, the price of Oil has recovered and is trading this morning with a $25 handle!  Apparently, from what I read, the glut of supply is being drained off as the production cuts begin to filter through….  I’ll still put that event, the price of Oil going negative, as one of the strangest things I’ve ever seen! 

It’s these kinds of headlines that make my skin crawl….  And UBS Wealth Manager, commented to Bloomberg.com that he believes “Americans are wrong to Pile up cash”….    It’s guys like that whom give Wealth Managers a bad name…  First of all he needs to do more homework, and in doing so, he’ll find that Americans aren’t piling up cash, for they don’t have the cash to Pile up…   I’m just saying…. And, the other thing he’ll find out that holding cash right now isn’t that bad of a thing to do!

Of course, maybe he’s talking about the data that came in this week about how Americans spent their stimulus checks from the Gov’t….  The survey shows that of those who received IRS stimulus checks, 38% added to savings, 26% paid off debt, and 18% planned to spend but not yet.  OK, I’ve got to inject this here…. Didn’t I tell you that the so-called stimulus checks weren’t really stimulus, and they wouldn’t do a thing to help the economy?  I’m just saying…. 

I keep receiving emails from readers that want to know where to go with money these days, if the currencies aren’t moving, and the U.S. economy is in the dumps? Well, I’m not an investment advisor, although all my old licenses should have allowed me to answer the questions in a way that wouldn’t get anyone trouble.

So, let me just say, this is NOT investment advice…. I’m going to tell you what I’ve been doing, as I’ve had some large Treasuries come due lately…. 1. Buy bank CD’s, within the FDIC limits, you may have to go to several different banks, but they’re out there folks, and at least it’s FDIC insured…. 2. Right now I like Gold stocks…. And 3. Of course if you haven’t filled your asset allocation with Gold & Silver yet, now is a good time to do just that…. 4. Hold cash…. I understand that the dollars I hold are going to be worth much less in a few months, but… If I have cash, I have liquidity, to buy something that comes along that looks cheap…. So, that’s what I’m doing… Notice I didn’t tell you any Gold stock names? Can’t do that here… but if you wanna meet me on the Butler patio, or at my local watering hole, once they open up again, I’ll share those with you!

Remember the Wendy’s TV commercials, with the three old ladies, yelling, “Where’s the Beef?” I have this eerie feeling that somebody is going to pull that one off YOUTUBE, like I just did, to make a BIG Deal out of it, with the meat shortage that’s coming…. Here’s the link if you want to laugh again: https://www.youtube.com/watch?v=riH5EsGcmTw

OK… now that I’ve gotten that silliness out of me, it’s time to get serious…. I received an note from longtime reader, Bob, yesterday with a link to a Wolf Street.com  article… I don’t want to talk about the whole article, just a brief piece of data that it supplied…. “The ISM Business Activity Index plunged to 26%.”…. This is the lowest on record folks… and we’re still putzing around with opening up the economy again…. And I don’t care to have to read any emails from people who think I’m trying to kill their grandparents, by saying the economy should open again….

Did you know that in 1968 we had a different pandemic that was called the H3N2 virus, and that it killed 100,000 Americans, and over 1 million people worldwide? The Americans that lost their lives totaled more than those that lost their lives in the combined Vietnam and Korean Wars! And nothing was ever closed, schools remained open, movies remained open, and so did restaurants and bars…. Shoot Rudy, most people should remember this pandemic…. Have we become big babies?

I only bring this up because of the damage the “cure for COVID-19-virus” is doing to our economy, and economies all over the world… That is except in Sweden and Brazil, where they dealt with it like we did the H3N2 virus in 1968-69, and their death rates are basically the same as ours, and maybe even less…. Shoot, we even held the Woodstock music festival in 1969…. Think that could happen this time?

OK, I’m going to be in big dookie now, with my wife… She doesn’t remember the H3N2 virus, and thinks that this economic shutdown is warranted. Hey! I still think that people need to be careful, wash their hands, no hugging, and keep a safe distance, and wear masks outside, but…. There has to be someone that can think outside the box here, and think of a way to reopen the economy while using these parameters! Come on Bill Gates, come on Jeff Bezos, come on whomever! Put those thinking caps on, now! 

The U.S. Data Cupboard had the aforementioned ISM Business Index, which I’ll say again, is a major proof item for the rot on the economy’s vine….   We also had a speech by St. Louis Fed President, James Bullard, who has really gone soft in my book….  Bullard thinks that the economy should open up in the 2nd half of the year…. So, at the earliest that would mean July….  Does he really think that the economy can survive on this lifeline for two more months?  I don’t think so…. And I’m saying so! 

Today’s Data Cupboard just has the Monthly ADP Employment report, which was created to give investors a heads up on the BLS’s Jobs Jamboree that will print on Friday this week….  Longtime readers know my thoughts on the BLS and their hedonic adjustments, therefore I’ve always mantained that the ADP report should be used as the “go-to” for employment reports and data, as ADP is the payroll system that’s used by just about everybody and their brother, and should know when a business comes on board or a business dies, and their data would reflect that without making “assumptions” like the BLS does….  

So, anyway…. The ADP Employment Report for April doesn’t even have a forecast on record, as everyone is holding their breath to see just how far the Unemployment rate has risen, here in the U.S. 

For What It’s Worth…. I was going through Twitter yesterday and came across an article written by economist, Ken Rogoff. Now, first I’m going to tell you that I’ve never agreed with Ken Rogoff and his economic principals before and now I know I never will…. Here’s Mr. Rogoff telling us the case for negative rates is here and that he wants deep negative rates, and it can be found here: https://www.project-syndicate.org/commentary/advanced-economies-need-deeply-negative-interest-rates-by-kenneth-rogoff-2020-05

Or, in case you haven’t recently been sick to your stomach, here’s your snippet: “Only monetary policy addresses credit throughout the economy. Until inflation and real interest rates rise from the grave, only a policy of effective deep negative interest rates, backed up by measures to prevent cash hoarding by financial firms, can do the job.

CAMBRIDGE – For those who viewed negative interest rates as a bridge too far for central banks, it might be time to think again. Right now, in the United States, the Federal Reserve – supported both implicitly and explicitly by the Treasury – is on track to backstop virtually every private, state, and city credit in the economy. Many other governments have felt compelled to take similar steps. A once-in-a-century (we hope) crisis calls for massive government intervention, but does that have to mean dispensing with market-based allocation mechanisms?

Now, imagine that, rather than shoring up markets solely via guarantees, the Fed could push most short-term interest rates across the economy to near or below zero. Europe and Japan already have tiptoed into negative rate territory. Suppose central banks pushed back against today’s flight into government debt by going further, cutting short-term policy rates to, say, -3% or lower.

For starters, just like cuts in the good old days of positive interest rates, negative rates would lift many firms, states, and cities from default. If done correctly – and recent empirical evidence increasingly supports this – negative rates would operate similarly to normal monetary policy, boosting aggregate demand and raising employment. So, before carrying out debt-restructuring surgery on everything, wouldn’t it better to try a dose of normal monetary stimulus?”

Chuck Again…. This guy needs to find a closet and go hide in it as far as I’m concerned…. Basically, folks, he’s saying that it’s time for you to lose all of your civil rights…. UGH! And, there is more to the article so be sure to click on the link above, should you want more fodder to raise your heart rate! 

Currencies today 5/6/20 American Style: A$.6436, kiwi .6052, C$ .7113, euro 1.0807, sterling 1.2371, Swiss $1.0265, European Style: rand 18.5315, krone 10.2560, SEK 9.8376, forint 323.31,  zloty 4.1985,  koruna 24.9635, RUB 74.11, yen 106.20, sing 1.4186, HKD 7.7505, INR 75.12, Chin 7.0615, peso 24.05, BRL 5.5507, Dollar Index 100.01,  Oil $25.36,   10-year .68%, Silver $15.06, Platinum $762.71, Palladium $1,797.22, and Gold… $1,701.22

That’s it for today….  I was watching Game 4 of the 2019 NLDS series between my beloved Cardinals and the Braves last night, and even though I knew how the game ended, I was still on pins and needles in the 10th inning!  The best way to watch those old games is to forget about what you remember about them, or just put what you recall in the back of your mind….  Game 5 is tonight, and I know that the Cardinals romp, so I might not even watch it….  The sun came out for a bit yesterday, but the temp was only in the low 60’s…. Looks like it’s raining out right now to start the day…. UGH!  Loggins and Messina take us to the finish line today with a song from the live album, Nobody But You….   Jim Messina, is a name a lot of people might not recognize… He was an instrumental member of such rock classic bands as Buffalo Springfield, and Poco… Nowadays he’s gone out as the Jim Messina Band….  A little rock history for you this morning to use at cocktail parties! HA  I hope you have a Wonderful Wednesday, and will continue to Be Good To Yourself! 

Chuck Butler

 

 

May 5, 2020

* Traders can’t figure out which way they want to go…. 

* Gold is stuck in the muck around $1,700… 

Good Day… And a Tom Terrific Tuesday to you! Rainy days and Mondays always get me down…. Years and years ago, when I was a young man working downtown, in my suit and tie, there was an old bank that turned into a restaurant, and on Rainy days and Mondays, sandwiches were ½ price, and beers were 50-cents…. I used to stop there after work whenever it rained… wink, wink…. Yesterday, was a rainy day, and a Monday, so the Carpenters would be down…. HA! After 90 degrees on Saturday, I had to get my Blues hoodie back out yesterday, for it got chilly once again! UGH! OK, I have an additional thought on yesterday, a correction to make, and more this morning, so why don’t we get to getting it done! The Pousette Dart Band greets me this morning with their song: Amnesia…. Don’t recall that one? I hope that it’s only amnesia, believe me, I’m sick but not insane!

Well, in all my excitement about it being May the 4th with you, yesterday, the real event in history on that day totally slipped my mind, until later in the morning, when I realized that it was also the day in 1970 that 4 students were shot down at Kent State University, by the Ohio National Guard… The students were merely protesting the Vietnam War…. As a young man at that time, I thought, Oh no, they’re coming for me next… Because I was not a fan of the Vietnam War, and protested any time I got the chance. Thankfully, my lottery number for the draft was a high one, the one year I was eligible for the draft…

OK, there’s one task out of the way today! The currencies just can’t stand a day in the sun! The beat on the dollar bugs most of the day on Friday, and then proceeded to give back  all of their gains since then…. I’m telling you this for probably the 3rd time, but sometimes we have classmates that skip class and then try to catch up, this is for them…. I do believe that Traders are in a funk right now, they don’t know which way the wind is going to blow… They know that they should be selling dollars right now, but then in their heart of hearts they think, but what other currency is worthy? I can see sterling and yen, and reals, and a host of others down on their knees, like Wayne and Garth, bowing repeatedly and saying, “We’re not worthy, we’re not worthy”….

And Gold spent the day going up and down, up and down throughout the day, until finally finishing down a buck from Friday’s close at $1,701…. I’m sticking with my story that the $1,700 level for Gold is going to be a sticky point for a while, before the next upward move… But just like the sticky point used to be $1,300, when Gold finally made the upward move it was like was shot from a slingshot, and BOING! There it was at $1,700…. I do believe the next upward move will be just like that slingshot from $1,300….

And in the early markets, Gold is down $3 to $1,698 this morning…  And in the fave of 3 major operations here in the U.S. announcing bankruptcy yesterday…  Makes no sense to me, but it is, what it is…. 

Speaking of Gold, this is where I do my correction from yesterday… I misquoted something I thought I had read in Ed Steer’s Saturday letter about how the short trades in Gold were down from the week before… When that’s not what he said, and so I apologize…. I have no idea what happened, as when I read things I make notes so I don’t forget to talk about them… So, sorry Ed! And if you want to know what he really says each day, click here and sign up! www.edsteergoldsilver.com 

I was going through Twitter yesterday, and came across something that pretty much tells us all we need to know about the prospects of a quick turnaround in the economy…. Get this… 40% of small businesses plan to skip their rental payment again this month, and that 84% of them are only going to pay 50% of what’s due…. Here I go again with the knee bone being connected to the shin bone, and so on… The people that own the buildings where these small business people set up shop, most of the time own them with a loan…. And they use the rents to help pay the loan…. No rents, no loan payment, no loan payment, no loan…. End of story…

And then the cleaners that clean the building, can’t work… The vending guy that supplies the coffee, and candy machine, can’t work… The landscaper, can’t work, and so on and so forth…. This is getting really ugly folks, and the deeper/ longer we remain like this, the more difficult it is going to be to get out of it…. Yes, I know some states have opened up…. But how’s that going? I would bet a shiny quarter, that the pickup in business is barely above being shut down, and people just don’t trust going out and being around other people, just yet!

Well, today is a BIG day for the euro, and Eurozone going forward, as the European Constitution Committee is supposed to be meeting today, to discuss the legality of everything the European Central Bank (ECB) is doing right now (Bond buying, negative rates, and wanting to buy Corporate bonds)…  But with the COVID-19 virus still hanging around causing Committee’s like this to resort to Zoom meetings are something like that, the meetings just lose their edge….  So, it will be interesting, to me that is, just how this all works out today…. More, hopefully, on this tomorrow.

In the U.S. Data Cupboard yesterday, we saw the rot on the vine of Factory Orders… The March print for this data was a negative -10.3%, down from the already negative -0.1% in February…  This data really represents what I’ve been talking about and that is that the economy was already headed in this direction, and just needed a little push, which it got from the reaction to the COVID-19 virus… 

We had 3 operations announce bankruptcy plans yesterday…  J. Crew, Gold’s Gym, and Neiman Marcus… This will become a daily occurrence folks, so prepare to hear the name of your favorite operation to go to, to file for Chapter 11….  I’m just saying….  Oh, and Got Gold?

I saw some data yesterday that showed the Fed has already pulled back on the helicopter money reins…. They had better be careful…. They can’t supply the economy with the cocaine it needs to continue, and then go cold turkey on it….  Of course, in my humble opinion, the Fed should have never tried to save the economy… They should have just allowed it to bust, suffer through the short-lived period of a recession, and then watched as it recovered without a helping hand, and this time it would really recover, and not that 2.1% GDP we’ve seen here in the U.S. for the last 10 years! 

Well, did you get a kick out of my reprints of thoughts on the Butler Patio, which was the name of my letter with the Dow Theory Folks?  I thought they were so darn bang on, to what’s happening today…  And, the fact that they were written 3 years ago, just blows my mind!  How did I know that the Fed would be entertaining buying Corporate bonds, and extension of Corporate stocks?  

Here’s the thing most people don’t think about, when they think, “the Fed’s got my back with stocks”… And that is simply, the Fed can’t buy every stock… And look, we’ve already seen three Big Name operations file for bankruptcy….  So, the Fed may have your back with Facebook, Amazon, Netflix, and Google (The FANGs) but for how much longer?  I’m telling you this so you will enter it into your journals….  If the Fed does pull out and stops stick handling through all this mess, the house of cards comes tumbling down….  I’m just saying

To Recap…  The currencies can’t stand to stay in the sun very long, and after taking liberties with the dollar on Friday, they gave back all their gains yesterday… Back and forth we go, as traders can’t figure out which way they want / should go….  Gold did the same type of trading, back and forth, through $1,700, and Chuck thinks that we’ll continue to see this go on until it doesn’t and Gold makes its next upward move…. 

For What It’s Worth….  Speaking of the Fed, and what they are doing now… Yes, as I said they’ve pulled back on the reins, of the helicopter money, but their initial go at helicopter money was quite a scene…. And this article talks about that and more, and can be found here: https://www.zerohedge.com/markets/us-treasury-borrow-record-3-trillion-quarter

Or, here’s your snippet: “So much can change in three months.

Back on February 3, the Treasury in its quarterly announcement of marketable borrowing estimates was delighted to announce that “During the April – June 2020 quarter, Treasury expects to pay down $56 billion in privately-held net marketable debt, assuming an end-of-June cash balance of $400 billion.”

Well, oops.

Fast forward to today, when one global (still ongoing) coronavirus pandemic, and one global economic crisis later, the Treasury now expects to boost the net amount of marketable Treasury debt outstanding by an unprecedented $3 trillion in the April-to-June quarter in order to fund the trillions in stimulus and bailout payments.

This is what the Treasury said about its latest borrowing needs:

“During the April – June 2020 quarter, Treasury expects to borrow $2,999 billion in privately-held net marketable debt, assuming an end-of-June cash balance of $800 billion. The borrowing estimate is $3,055 billion higher than announced in February 2020.”

But wait there’s more because looking at the next quarter (July though September) the Treasury now expects to borrow an additional $677 billion in privately-held net marketable debt, assuming an end-of-September cash balance of $800 billion.

In other words, the Treasury will borrow a record $3.7 trillion in the 6 month interval from April to September. This also explains why the Fed – which has already purchased $2.5 trillion in securities in the past 6 weeks – is currently monetizing double the total Treasury net issuance: because it is preparing for precisely this eventuality.

Summarizing this data, Reuters’ Jeoff Hall writes that US marketable debt borrowing is more than the previous five fiscal years combined and almost 2.5x the previous record high borrowing for any fiscal year (FY’09$1.786 tn).”

Chuck again…  Yes, as I told you last week, the national current debt will be more than $30 Trillion at fiscal year end (Sept)….  And the debt to GDP will continue to grow larger and larger, folks…. This can’t end in nothing but tears… 

Currencies today 5/5/20 American Style: A$.6445, kiwi .6055, C$.7120, euro 1.0840, sterling 1. 2460, Swiss $1.0300, European Style: rand 18.3195, krone 10.3085, SEK 9.8675, forint 323.65, zloty 4.1797,   koruna 24.8745, RUB 75.15, sing 106.70, sing 1.4160, HKD 7.7520, INR 75.06, China 7.0614, peso 23.90, BRL 5.5203, Dollar Index 99.85,  Oil $22.42,  10-year .65%, Silver $14.77, Platinum $767.09, Palladium $1,845.68, and Gold… $1.698.41

That’s it for today…  It’s Cinco de Mayo! And the celebrations will be put on hold this year…  Each year on the 5th of May, I retell a story from many years ago (1998 I believe)… I was on vacation in Cancun, with my wife and friends, and we came across a guy playing his guitar and hawking his CD’s, he began to play a song that rang a bell with me, so I grabbed his microphone and began singing Dust In the Wind, in front of about 250-300 people gathered in the square….  One year that I wrote about this, a reader got mad and sent me a note and called me a Big MAK…  You’ll have to figure that one out, and so now I retell the story just to make him more mad! HAHAHAHAHA!  Faces takes us to the finish line today with their song: Ooh La La…  (love that song!)  I wish that I knew what I know now when I was younger…. .  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

Chuck Butler

 

May 4, 2020

* Currencies rally on Friday, but give back some gains

* Gold rallies back to $1,700, which Chuck thinks is the new $1,300… 

Good day… And a Marvelous Monday to you! May the 4th Be With You…. HA! Well, it finally warmed up here! And our spring lasted 2 days, before it turned to summer heat! Oh, come on Chuck, it’s only the beginning of May… Calm down…. I decided last Friday that I needed to see my friends, and since it was a beautiful day, I thought we could sit outside, 6-feet apart, and swap stories, face to face, and not on a Zoom screen… It turned out to be a great night! My iPod and Bose revolve speaker got a great workout! And the grandkids came over to swim so I finally got to see them again too… Now, this 6-feet thing has got to go soon! I miss my hugs from my Delaney Grace! OK… The great band, Yes, greets me this morning with their song: Owner of a Lonely Heart….

Speaking of my iPod… I had a dear reader ask me if I could share my song library with her…. And then came up with an idea, that I could charge for it, but the money would go to the charity of my choice, which would be the MS people…. I’m not even sharpest tool in the tool box, when it comes to technology, and that means I have no idea how to go about all that, but I’m going to look into it… for sure!

OK… The currencies finally had a upward run VS the dollar on Friday, with the euro trading over the 1.10 level, briefly… The dollar bugs fought back at the end of the day, brining the euro back below 1.10, but the upward move in the euro was strong and kept the dollar bugs from making too big of a stride… And Gold had a good day as it tried to reverse the engineered take down from Thursday, when it lost $29 bringing it back below $1,700… But on Friday, Gold found a way to move higher by nearly $18, and closed Friday at $1,702.90….

In reading Ed Steer’s Saturday letter (www.edsteergoldsilver.com) He explained that the short contracts in Gold had dropped last week… The drop wasn’t a HUGE number, but was significant enough to be highlighted by Ed….

It appears to me that $1,700 is the new $1,300 for Gold… Recall last year, when Gold would move up through $1,300 and then be brought back down? This happened so many times that I was beginning to think we wouldn’t see higher prices for a while in Gold, and then suddenly, it all stopped, and Gold headed higher, and went through $1,400, $1,500, and $1,600 in the last 9 months! But not it has stalled out around $1,700…. I do believe that we’ll see this trading pattern for a short time, before the next upward move comes…. This gives the procrastinators the opportunity to jump in before the next upward move, in my opinion…

Speaking of Gold…. I told you all last week that Scotiabank had announced that they were going to close their metals business soon… That got me thinking of the reasons why a 300 year old business decided to close their metals business doors…. And then I came across this from Gata Folks…

Read this over and over again to get gist of price manipulation… “In the past, it was often a profitable venture to manipulate the price of gold with an avalanche of paper gold contracts dumped into the futures markets. When those contracts came due, ample gold was readily available at lower prices, for the bank to satisfy their obligations to deliver gold. But in the last couple of years, there has been a shortage of gold available (at the paper price) to meet delivery obligations. Gold is still available, mind you, but at a price independent from, and often higher than, the manipulated paper price.

If you can sell something for $1500 on the one hand, and manipulate/purchase it tomorrow for $1400 – to deliver to those who purchased it for $1500 yesterday, that is a business model that is hard to beat. But when gold ignores the manipulation, and you have to pay $1600 to deliver what you sold yesterday for $1500, it is no longer fun or profitable. This is a simplified explanation about why some that have played the precious metals manipulation game for over 300 years are now exiting the business. It is no longer fun, and no longer profitable.”

I found this here: https://www.usgoldbureau.com/news/gold-vs-paper

And I think this answers the question as to why Scotiabank had to close their metals business…  But like I said the other day, it in essence represents one less dealer with an arm full of short paper trades at the COMEX…. 

OK… last week I said I would go back through my Dow Theory Letters and find the one where I talk about how stocks perform during a recession…. This conversation was centered on the Swiss National Bank buying so many stocks, and the BOJ, but mostly about the SNB…. So, get this…. It’s from June of 2017! And here it is….

6/27/17… Dow Theory Letters… “Now, what could be the cause of this stock market momentum that appears to be like the Energizer Bunny, and keep going and going, and going? Ahhh, again grasshoppers, come sit… You see stocks don’t like recessions… And fund managers don’t sell stocks just because a recession is on the horizon, but they do begin to unload stocks when they see other institutions doing so. And if I’m aware of this fact then I’m sure institutions are too… The average drawdown in U.S. equities since 1980 during a recession has been 37%, and none of those recessions started the equities at extreme valuation levels such as we have now!

And the U.S. Fed? Well, we don’t really know for sure if they buy equities, but just because equities don’t show up on their balance sheet, doesn’t mean they wouldn’t / couldn’t have a secret account at say, Goldman, where the equities are held… I’m not saying that’s for real, I’m just asking, what if they did?

Here’s a snippet of Fed Chair Janet Yellen talking about this very subject… “Well, the Federal Reserve is not permitted to purchase equities. We can only purchase U.S. Treasuries and agency securities. I did mention in a speech in Jackson Hole, though, where I discussed longer term issues and difficulties we could have in providing adequate monetary policy . Accomodation may be somewhere in the future, down the line that this is the kind of thing that Congress might consider, but if you were to do so, it’s not something the Federal Reserve is asking for”

OK, that pretty much rules out my scenario, but, opens Pandora’s Box of ideas that I had reading this quote… With the main one as “did the Fed just give Congress a hint that they could keep the stock market propped up with a wink and a nod from Congress?” Oh, well, I digress here…

Because in the end what I want to say above everything else is that Central Banks around the world including our own Fed, have gotten out of control… The folks over at Zero Hedge said it best when they said, “Being able to print your own money, and buy stocks at any price sure can be fun” And in the U.S. we printed money to buy bonds during our 3 tours of QE…

If things begin to unravel in stocks, remember, the SNB & will have to unwind their trades, which means they sell dollars and buy francs to bring the money home… That, and watch Gold, because everyone will be scrambling for safe havens, which means Gold, Treasuries, yen, euros and francs…

OK, back to 2020…. Well that was quite a ramble wasn’t it… While I was looking through the DTL’s I also found this from 9/28/17, I said this in the Dow theory Letters….

“And when the recession finally kicks in, we could very well see Negative Rates here in the U.S… We most certainly, would see another round of QE… So much for their Quantitative Tightening, eh? Of course this is all my opinion and I could be wrong… In fact it would be good if I were wrong, because we certainly don’t want to see negative rates or another round of QE here in the U.S. !”

Man, did I nail that on the head or what? OK., what do I see now that all this stuff has happened? Well, it goes without saying that the tax revenues of the Gov’t and States, and cities are going to be taking a HUGE hit from this economic shutdown…. But… Wanna know what I saw looking under the hood? I saw Social Security also taking a HUGE hit because of the payroll deductions that go to fill the coffers of Social Security are not happening folks…. So, you know that I’m going to tell you how this will all get fixed right?

It’s the same-o, same-o…. Higher taxes… You want something for free? Well, you may get it for free, but then have to pay 50% taxes the rest of your life, so how free was that? And for Social Security…. Well, it was fun while it lasted! There will be changes to it, for sure…

Alrighty then, my good friend Mike, chastised me on Friday night that on Mondays I get too wordy. I said, “well of course, I’ve had all weekend to read and think of things to talk about” But that got me thinking that maybe I should lighten the load on Monday and spread it out during the week…. Oh well, it is what it is….

The U.S. Data Cupboard last week on Thursday had the awaited for, Weekly Jobless Claims report for the previous week… The number of applications were down from the previous week, but were still 3.8 Million, thus bringing the total of unemployment applications filed in the last 6 weeks to…. 30.3 Million…. OK, my long time friend, Dave Gonigam of the 5 Minute Forecast, at Agora Financial, gave me this stat that I think really brings home the rot on employment’s vine…. “That’s 30.3 million claims over the last six weeks, out of a labor force of 162.9 million. That translates loosely to an unemployment rate of 18.6%.” -Dave Gonigam

We had more damaging data print last week, so let’s not stop with the Jobs data…. I told you on Thursday last week that there were two important prints on Thursday, Jobs data, and the ISM (manufacturing index) for April, which was an awful 41.5 down from 49.0 in March, and get this…. A year ago, the index at this same time stood at 52.8… April’s figure was a drop of 21% from a year ago…. We also saw the stupid CPI (consumer inflation) which fell to negative -.1% , can you say deflationary? I knew you could!

And finally, Personal Income was down -2.0% in March, and Personal Spending was down -7.5%, and this was for March! We were only closed down for the last week of March, you can imagine, if you want to that is, what the rotting numbers will be for April… Alcoholic beverages are the only things selling like hotcakes at a State Fair these days… (besides T.P. which you can’t find, along with hand sanitizers)

So… a long winded U.S. Data Cupboard recap… There sure were a bag o’ bones last week, in the Data Cupboard last week, eh?

This week’s Data Cupboard starts today with March Factory Orders, then begins to build for the end of the week when the Job Jamboree for April will print… Remember the unemployment rate that was rougly figured above? What will the BLS do to soften the blow?  Before we get to Friday, we’ll also see the monthly Trade Deficits, which should be the lowest it’s been in a month of Sundays, because, well, nobody is importing anything! And the ADP Employment Report will also print this week…  Enough on Data! 

To recap…. The currencies went hog wild on the dollar bugs on Friday, but since around midday on Friday, the tables have been turned, and the currencies had to give back some of their earlier gains…. Gold has a good day on Friday, and climbed back above $1,700 and is up another $7 in the early trading today.  The data last week was just downright awful, and the ISM Index indicated that we are already in a recession.  And Chuck pulls out some DTL’s that he wrote 3 years ago, and they are quite interesting in today’s environment! So, you won’t want to miss that! 

For What It’s Worth….  I went on record a month ago when I said that when this economic shutdown was over, we would be looking at a different financial system…. And this article that I found on Ed Steer’s letter on Saturday is from Zerohedge.com and talks about how the system is already broken, and can be found here: https://www.zerohedge.com/markets/broken-system-trader-warns-fed-has-poisoned-everything  

Or, here’s your snippet: “The Fed poisons everything, and I mean everything. From markets, the economy, and I will even go as far as politics. Sounds far fetched? Let me make my case below. But as much as the Fed poisons everything, this crisis here again reveals a larger issue: The system is completely broken, it can’t sustain itself without the Fed’s ever more monumental interventions.

These interventions are absolutely necessary or the system collapses under its own broken facade. And this conflict, a Fed poisoning the economy’s growth prospects on the one hand, and its needed presence and actions to keep the broken system afloat on the other, has the economy and society on a mission to circle a perpetual drain.

So how does the Fed poison everything?

Let’s start with the Fed actual process of working towards its stated mission: Full employment and price stability.

How does it do that? Well, for the last 20 years mainly by extremely low interest rates and balance sheet expansion sprinkled with an enormous amount of jawboning. The principle effect: Asset price inflation.

It’s not a side effect, it’s the true mission. The Fed has been managing the economy via asset prices even though Jay Powell again insisted on saying the Fed is not targeting asset prices.”

Chuck again….  Yes, that darn old Fed Reserve…  As I went through my list of Dow Theory Letters last week, I came across a cartoon I had on one of the letters about the Fed… It was the three blind mice with their shades on and carrying canes, with shirts that said Fed Reserve…. Pretty funny, if it weren’t true!

Currencies today 5/4/20 American Style: A$.6415, kiwi .6046, C$ .7095, euro 1.0940, sterling 1.2431, Swiss $1.0369, European Style: rand 18.7058, krone 10.3857, SEK 9.8917, forint 322.81, zloty 4.1763,   koruna 24.7702, RUB 75.31, yen 106.82, sing 1.4164, HKD 7.7533, INR 75.01, China 7.0613, pesos 24.73, BRL 5.4858, Dollar Index 99.38,   Oil $18.78,  10-year .60%, Silver $15.00, Platinum $769.83, Palladium $1,911.51, and Gold… $1,707.50

That’s it for today….  Well, I finally got to see the baby that’s now 6 months old on Saturday… I didn’t get to hold her, but I saw her in person, which was better than on a Zoom screen! Little Evie, is so darn cute! It was good to see the other grandkids too, Little d (Delaney Grace), Everett, and Braden… Everett is already 9, and Braden will turn 9 this month, while my darling Delaney will be 13 in August. How did that happen?  Oh my goodness! OK… gotta go…  The Youngbloods, with Jesse Colin Young, take us to the finish line today with their song: Let’s Get Together…  which is something everybody is thinking of doing! HA   I hope you have a Marvelous Monday, and May the 4th Be With You!  I guess today is a day to watch all those Star Wars Movies! Please Be Good To Yourself! 

Chuck Butler

 

April 30, 2020

* Currencies and dollar bugs continue to play their game!

* 1st QTR GDP’s first print… -4.8%….  A recession is here! 

Good Day… And a Tub Thumpin’ Thursday to you! T-minus 5 days until the stay at home rule will be lifted here in Missouri… Good news across the board on treatments for COVID-19… No vaccine yet, but treatments that have proven, so far, to be quite effective… That’s great news folks… And since I’ve been so negative all week, I thought I would lead off with that bit of great news today, as we tie the loose ends of the week… Watched Game 4 of the 2015-16 Playoffs between the Blues and Blackhawks last night… I’m sure I watched it when it originally was played, but for some reason I’m not remembering any of it, so it was all new to me! I think that’s a sign, but I’ll let it pass for now…. It’s the last day of April… And tomorrow is May Day! I guess children don’t parade around a May Pole any longer, like we did, but I did see that on this day in history, Citizen Kane premiered in 1941, and in 1931 Kate Smith first sang on CBS radio, and in 1967 Elvis Marries, and 1962 the first K-Mart opened… So, we have that going for us tomorrow! Redbone greets me this morning with their song: Come And Get Your Love…. A great 70’s song!

Well, the currencies played around with the dollar bugs yesterday, and ended up flat as a pancake (Head East), but, as soon as the books were handed over to Asia, the currencies began to move upward VS the dollar once again, as our game of U.S. VS Europe/ Asia Traders continues…. Gold found a way to gain a buck or two and closed the day at $1,714… Same level it closed on Monday… So, Gold has gone nowhere this week, which is fine with me, as nothing should move in a linear upward move without some pauses for the causes…. Gold has joined in on the move VS the dollar in the early morning trading as has added $3 so far today… 

And that reminds me a chart I saw the other day… Which, in case you haven’t figured this out yet, but when I say, “the other day”, it could mean any where from 2 days to 15 years! HA! Any way… the chart showed the straight up the elevator shaft for the U.S. national Current Debt…. And the this upward movement went to the moon! That’s because the numbers are all over the board right now, but from best guestimates, the U.S. current debt will grow over $6 Trillion this year and top out the year over $30 Trillion…. I now feel somewhat ridiculous for things I said long ago about when we crossed $5 Trillion, and then $7 Trillion, and so on…. We’re going to be over $30 Trillion at the end of this fiscal year, folks…. I shake my head in disgust….

And that’s not all! According to the Debt Clock, that you can find here www.usdebtclock.org (but I don’t suggest you do that unless you put away all sharp objects first!) , the total Unfunded Liabiltities, are greater than $147 Trillion!!!! And let me also remind you that Professor Lawrence Kotlikoff told us a few years ago that if everything is counted our debt is well over $200 Trillion…

Now that changes the picture on the Debt to GDP number now doesn’t it! Right now just using the current debt of $24 Trillion, our Debt / GDP ratio is 105%… The amount of debt around the world is just staggering. Recall I told you a day or two ago that economist Danielle Di Martino Booth, had said that at the end of 2019 Total Global Debt was $255 Trillion…. And that’s before all the newly created debt around the world gets added to the 2019 total! That number will be oh, so, close to $300 Trillion at year end this year…. Wanna know the total debt of Russia? It’s less than $250 Billion… That’s right I said Billion! Remember when someone said Billion years ago, you sat up and listened? Well those are bygone days now… but not in Russia!

The poor Russian ruble… economic sanctions, and now collapse of their main product of the the price of Oil…. I sat on a panel in Westin Florida about 5 years ago, with, get this group I sat with… Grant Williams…. James Rickards… a couple of other guys, and little old me! David Galland, the former marketing guru at EverBank, asked the panel what about Russia and the ruble…. When no one else spoke, I said, “to me, Russia is an Oil play… if you think the price of Oil will be steady, or on an upward move, then rubles are for you, because they pay a very nice interest rate. However, if you think the price of Oil has nowhere to go but down, then you might not want to be in rubles.”

In the past 5 years, we had the conflict between Russia and Ukraine, and that took the starch out of the ruble and it has never recovered. The ruble was moving toward recovery, when this collapse of the Oil market began… And now they have another hill to climb…. But I don’t doubt they will, given their perseverance with dealing with the economic sanctions….

OK, I’ve spent way too much time here…. Let’s move on to something else, eh?  Like how the Fed’s FOMC met and didn’t change anything, as I suspected they wouldn’t. Well, I should say they didn’t change rates, but Mr. Powell, the Fed Chairman, talked to the press afterwards, and let’s just say he didn’t overwhelm anyone….  

I had to laugh, and laugh until I cried, 1. Because what he said was funny (to me) 2. Because I’m scared for my kids and grandkids futures…. OK, what’s he talking about now? I hear you asking…. Ahhh grasshopper, you’ve come to the right place. What I’m talking about is a comment that Fed Chairman Powell made yesterday, and instead of me telling you what he said, I’ll let him tell you to see you have the same reaction as me….

Here’s Powell, “I’m ready to put the pedal to the metal to help the economy.” Ok, I’ll wait while you let that sink in…. For those of you who have not had a cup of coffee yet this morning, you might need some help…

So, my initial reaction to this was, “Oh, so NOW, you’re going to get aggressive?” Now, after 9 new money creation programs to take bad bonds and loans off the streets? Now, after it appears the economy is circling the bowl? And then my mind went straight to, what he’s doing is ruining the capitalist economy that served this country so well for over 200 years… What will be left for my kids and grandkids? And then I cried…. 

I told you all yesterday that I had asked Ed Steer, what his thoughts were regarding the closing of the doors on the metals business at Scotiabank, one of the major metal dealers around.  Well, just like the professional writer he is, Ed promptly responded to me…. So, I’ll let his take the conn on the Pfennig for a moment… Here’s Ed! 

“One wonders what will happen to their current short positions in both gold and silver, as they’re certainly a member of the Big 8 traders in my opinion — and most likely Ted’s. Ted and I were also discussing what they would do with their vaulting services — and their position as market maker and member of the daily ‘price fixing’ in London. I guess we’ll find out over time.”

Chuck again….  Yes, and Oh, the Ted that he’s talking about above is the Silver guru, Ted Butler, no relation that  I know of!  Thanks Ed! And welcome to contributing to the Pfennig! (I can’t imagine he’s doing cartwheels over that news! HA!) The thing I was thinking about with this closing notices, you touched on, but I’ll take if from there, and that is the Scotiabank short positions in Gold & Silver… To me, that’s one less arm full of short positions at the COMEX to worry about…. And that’s all I have to say for now… 

The U.S. Data Cupboard came out with a bang yesterday, and gave us the first read of 1st QTR GDP, which was negative -4.8% (I told you the forecasts for -3.6% were too low, didn’t I?), and that’s just the first print of the data, there will be a few revisions, down the road, that most likely will be revised downward even more….   The markets weren’t too shaken by the data, stocks lost some ground, but not much, as the markets carried on despite the fact that the with this print, the U.S. is officially in a recession, folks…  

A few years ago, I wrote an article for the Dow Theory Letters, and in it I did tons of research with charts and everything a good article should have, and it was about the stock market performances during recessions…. Don’t look know folks, but it’s awful!  I’m going to spend the day looking for that old article to pull it out and talk about it next week…. 

Today, we’ll see the Weekly Initial Jobless Claims once again, and once again we’ll see that this Economic shutdown has wiped out all of the job gains in the last 10 years!  YIKES!  I’ve already beat the dead horse (no animals were harmed!) over how 100% of these jobs aren’t coming back, so I won’t go there again today…  

Tomorrow, we’ll see two important pieces of data… First, the April ISM (manufacturing index) and it will show a collapse from an already below the 50 figure at 49.1 in March, to…. drum roll please….  OK! I just told you it will print tomorrow! But my best guess is it will collapse to around 35…. The other piece of data tomorrow will be the auto sales… this number has to have fallen from the sky, folks… 

To recap….  Same old trading pattern yesterday, with the U.S. traders buying dollars, and then in the overnight markets the Asian and then European traders selling dollars…. We’ll start today with the dollar being sold, but I doubt that will last too much longer this morning.  Gold found a way to add a buck or two yesterday, and is up another $3 in the early trading. Powell says that he’s ready to get aggressive to save the economy, and Chuck says, “get aggressive now?” You mean the 9 monetary programs you’ve already announced are just chopped liver? 

For What It’s Worth…. Well, I went all week without highlighting an article in the Wall Street On Parade site… But this one talks about something that just has me about as ticked as when KU would be my beloved Mizzou! And that’s ticked! So, the title of the article is How the Fed manipulated junk bonds to help the Dow… Now, you know you can’t pass this one up! And it can be found here: https://wallstreetonparade.com/2020/04/this-chart-shows-how-the-fed-manipulated-junk-bonds-to-help-the-dow/

Or, here’s your snippet: “Thus far, the highly controversial corporate bond buying programs that the Federal Reserve first announced on March 23 have yet to spend a dime according to a spokesperson for the New York Fed, the regional Fed bank that is overseeing almost all of Wall Street’s emergency bailout programs today as well as during the financial crash of 2007 to 2010.

But as the above chart indicates, just a promise from the Fed to spend billions removing toxic waste from Wall Street’s mega banks is enough to put a bid back in the junk bond market.

Here’s the skinny on how the Fed propped up both the Dow and the junk bond market with its well-timed announcements on March 23 and April 9.
From the close on March 4 to the close on March 23, the junk bond exchange traded fund (ETF) which goes by the fancy title of “iShares iBoxx High Yield Corporate Bond ETF,” or symbol HYG, lost 21 percent of its value. But that weakness in the junk bond market did even worse damage to the Dow Jones Industrial Average. Over those same trading days, the Dow lost 8,498.93 points or a stunning 31 percent of its value in just 14 trading sessions. (See chart below.) That had apocalyptic overtones for what lie ahead for the balance of the year.

There are two key reasons for the correlations between the junk bond market and the Dow. The first is that two of the Wall Street banks that were a regular presence in the Wall Street syndicate that underwrote these junk bond offerings are components of the Dow’s 30 stocks. Those two banks are Goldman Sachs and JPMorgan Chase. The second key reason is that if Goldman Sachs and JPMorgan Chase are tanking, they will inevitably bring down the share price of every other major Wall Street bank because of their heavy interconnections as derivative counterparties to each other. (If all of those banks enter a serious selloff, the Fed could be looking at another 2008 financial crash after assuring Americans for years that these banks are “well capitalized.”)

In short, thanks to the repeal of the Glass-Steagall Act in 1999, which allowed Wall Street casinos to merge with the largest federally-insured, deposit-taking banks in the country, we now have a central bank (the Fed) that believes its job is to throw money at any market that pulls down the Dow. Because damage to the Dow might damage consumer confidence which might damage the wealth effect which might damage consumer spending which might damage the next GDP report which might damage the vision of American exceptionalism. In other words, we’re all just Labradoodles now in fealty to Wall Street.”

Chuck again… Man would I love to include the whole article here, but I can’t, and therefore you need to hit the link above and read it in full, if this snippet whets your whistle! Oh, and one more thing, circling back to my comment above about how the stock market performs during recessions….  I guess the Fed is going to have to pull out all of the stops, throw in the kitchen sink, and anything else they can find to help stocks, going forward…. 

Currencies today 4/30/20 American Style: A$.6558, kiwi .6143, C$ .7215, euro 1.0882, sterling 1.2530, Swiss $1.0305, European Style: rand 18.0421, krone 10.2764, SEK 9.8026, forint 323.71, zloty 4.1630,    koruna 24,8727, RUB 73.49, yen 106.50, sing 1.4085, HKD 7.7508, INR 74.14, China 7.0759, peso 23.65, BRL 5.4408, Dollar Index 99.36,  Oil $17.47,   10-year .61%, Silver $15.33, Platinum $784.01, Palladium $1,985.90, and Gold… $1,717.00

That’s it for today…  And tomorrow of course!  Yuck!  What a rotten day yesterday for going outside! I had to wear my hoodie sweatshirt, inside, I would have had to broken out the winter coat to go outside! UGH!  It appears the sun is back today… I love the sunshine!  Man, would you like to have had stake in the ground on Zoom before the COVID-19 came around? Everybody’s doing Zoom meetings… They’re pretty cool, and I think will replace Corp. Travel for years! Shoot Rudy, even my friend, John Mauldin, is going to do his annual Big Time Strategic Investment conference via the teleconference route…. Like Grant Williams did his Hummmminars….  It’s a new dawn, it’s a new day, it’s a new life (Michael Buble’) So we had better get used to it….  Jefferson Airplane takes us to the finish line today with their song: Miracles….    I hope you have a Tub Thumpin’ Thursday today, and a Fantastico Friday tomorrow, and will Be Good To Yourself!

Chuck Butler

April 29, 2020

* currencies lose ground during the day

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler