Author: admin

January 14, 2020

* Currencies move sideways throughout the day and night… 

* Gold gets whacked again! UGH! 

Good Day… And a Tom Terrific Tuesday to you! A not so great night, as LSU beat Clemson in the NCAA National Championship Game last night. I say that because my good friend, Rick B. is a diehard Clemson fan… But our Blues won! And extended their new winning streak to 4 games, all at home, with one more home game in this 5-game homestand… I got to my wound center appointment with a few minutes to spare yesterday, and was in and out in record time! Thursday’s visit won’t be like greased tracks but at least I know what to look forward to! So… What’s on your mind today? Mine is blank because of staying up too late to watch the football game. UGH! This is when I wish I had a radio show and could open up the lines for questions… Oh well, The Counting Crows greet me this morning with their song: Mr. Jones…

There wasn’t much movement in the currencies yesterday, and any that existed were moves higher VS the dollar… Gold got clobbered as nothing got better as the day went on for the shiny metal… And since the Data Cupboard was basically empty, there just wasn’t anything new under the sun for the markets to hang their hats on and trade from. And there’s really nothing to see in the Data Cupboard today either… We were supposed to at least see the Federal Budget Deficit, but that print got delayed…

Overnight has seen the trading go sideways, with what little gains the currencies mustarded yesterday being wiped out.. So, we start today in the same clothes as yesterday, with some currencies showing additional slippage..  

I said yesterday that the Pfennig would be short-n-sweet, and then went on and on and on… But not today, this WILL be short-n-sweet, because, well, when the markets don’t move, and there’s no news in the markets to talk about, there’s nothing for me to write about… Of course, I could tell you story from my past in trading, or from my past in Operations, or from my past as a musician, or, and I could go on, but I really don’t want to go there on any of those today, so… short-n-sweet it is…

We have seen the Chinese renminbi rally in recent days, as they must have gotten word there that part of the trade negotiation, was that the U.S. would drop the “currency manipulator” tag that they had placed on China previously… This is a BIG deal folks… And for China to get this clean bill of health was more than a good reason to allow appreciation in the renminbi!

The thing I always like to see when the renminbi rallies is that it give the Sing dollar an opportunity to rally too… I’ve explained this before, but I’ll do it one more time! You see, Singapore and China are in competition for exports, and so Singapore allows China to take the lead, and they will gladly follow… so when the renminbi is losing ground, the sing dollar does too, and vice versa…

And if the safe haven Gold is getting sold, because of people that should know better that Save Havens should never get sold, are selling it because the markets think that safe havens aren’t needed any longer.. Well, if Gold gets treated like a rented mule, then so does the Japanese yen… I’ll always contend that yen should not be considered a Safe Haven, but it is… and brother has it been getting sold in the past few sessions…

The U.S. Data Cupboard will have the stupid CPI for December to print today… Besides that there are some Fed Head speakers, and nothing else… UGH! Where has all the data gone?  Long time passing… 

To recap… Not much went on with the currencies yesterday, they moved higher during the day, and sold off those small gains in the overnight markets. Gold got whacked again, and all the talk is about how there’s no need for Safe Havens, and with that thought, yen gets sold too…  The renminbi has been on an appreciation tear, as the “currency manipulator” tag has been removed from the country as a part of the trade negotiation. 

For What It’s Worth…  I found this while perusing Reuters this morning looking for anything that would catch my eye… And this is what I found, it’s an interesting story at least, about a Gold bar found on the streets of Mexico… you can check it out here: https://www.reuters.com/article/us-mexico-archeology/gold-bar-found-beneath-mexico-city-street-was-part-of-moctezumas-treasure-idUSKBN1Z90ED

Or, here’s your snippet: “A new scientific analysis of a large gold bar found decades ago in downtown Mexico City reveals it was part of the plunder Spanish conquerors tried to carry away as they fled the Aztec capital after native warriors forced a hasty retreat.    

Mexico’s National Institute of Anthropology and History (INAH) announced the findings of new tests of the bar in a statement on Thursday, a few months before the 500-year anniversary of the battle that forced Hernan Cortes and his soldiers to temporarily flee the city on June 30, 1520.

A day earlier, Aztec Emperor Moctezuma was killed, or possibly assassinated, according to the native informants of one Spanish chronicler, which promoted a frenzied battle that forced Cortes, his fellow Spaniards as well as their native allies to flee for their lives.

A year later, Cortes would return and lay siege to the city, which was already weakened with supply lines cut and diseases introduced by the Spanish invaders taking a toll.

The bar was originally discovered in 1981 during a construction project some 16 feet (5 meters) underground in downtown Mexico City – which was built on the ruins of the Aztec capital Tenochtitlan – where a canal that would have been used by the fleeing Spaniards was once located.”

Chuck again…  Pretty cool story, eh?  I remember as kids we used to dig up the back yard thinking we would find buried treasure, only to get our rear ends smacked for digging up the yard!  There was always a “treasure map” being produced, and our anticipation of being “rich” was always fun thing to experience on a hot, hazy, lazy day of summer!  OK… Andrew and Rachel sent us a quick video of granddaughter, Evie, making baby noises… So, cute! She’s 3 months old now…  It’s been windy down here, but yesterday the wind died down a bit, and we sat outside for hours enjoying the sun, and warmth…  Gladys Knight & the Pips take us to the finish line with their version of the song: Heard It Through The Grapevine. I always liked her version better, for the tempo it had…  I hope you have a Tom Terrific Tuesday and will Be Good To Yourself! 

Chuck Butler

 

January 13, 2020 

* The dollar comes back with a flurry of punches! 

* 2020 begins with the same “Opposites trading pattern”… UGH! 

Good Day… And a Marvelous Monday to you! Did you watch the Kansas City / Houston playoff game yesterday? WOW! Down 24-0 the K.C. Chiefs came back to win and score 51 points! What a turn around! Before that one, the only one that compares was the old Buffalo / Houston playoff game with Buffalo using their second string quarterback to comeback from a large deficit to win… That was quite a few years ago now… Well, did you hear that the Iranians were blaming the U.S. for them shooting down that passenger plane last week? Strange, but true… Grasping at straws… Oh, I have a correction to something I typed last week, I said that the airstrikes were in Iran, but actually were in Iraq… the late great, and beautiful Dusty Springfield greets me this morning with her song: Son of a Preacher Man…

Well, all the euphoria of Monday last week, that the euro was trading over 1.12, Gold had leaped forward by $28 at the end of the week, and the price of Oil was $63, is all in the past now…

Longtime readers will know what I’m about to say here…. It sure looks as though the Plunge Protection Team (PPT) was out in force last week… For the Economic Data didn’t look good, but the dollar still rallied… Yes, the threat of WWIII faded, and long with it so did the lofty price of Gold and Silver, but still… from what I read, the physical buying of Gold is off the charts these days… The uber rich are storing it in secret bunkers, and Central Banks sans the Fed, are lining up to buy as much physical Gold as they can… But still the price of Gold gets yanked back every time it begins to move upward again… Don’t tell me… I’ve got nothing to do… Counting flowers on the wall that don’t bother me at all… But Gold price manipulation does bother me!

So, there’s my rant/ whine for the day… This will be short-n-sweet today, for I have to drive 50 minutes north this morning to the wound center in Port St. Lucie, as soon as I hit send… I first visited this wound center last Thursday, appt. at 9am, and didn’t get back to home base until after noon! The place was a madhouse! So… well, at least I know the ground rules, and will be prepared for the waits! It was very much like waiting at M.D. Anderson Cancer Center… I’m surprised most people that I talk to that have cancer, have never heard of M.D. Anderson, in Houston Texas… They save my jaw, and have been a great sounding board for me when the current chemo I take begins to lose its effectiveness…

OK.. back to the markets… In the overnight markets last night, and this morning, the euro has held the 1.11 handle, but Gold has been sold off by $10 to trade this morning at $1.551…   The price of oil trades with a $59 handle, barely, that is….  So, the markets had their tizzy fit, and that was it?  It sure appears to be that way…   

But I just don’t get the damage being done to Gold…  And Silver hasn’t escaped unscathed either.  January has been good to Gold the past few years, and so I’m a little concerned that the trading pattern of the past few years isn’t playing out this year…  

Countries all over the world are making their loads of dollars held in reserve, lighter, and we’ve had the Fed printing dollars by the cruise ship loads, and still the dollar remains well bid…  Doesn’t makes sense to me, but then we are in the day of “opposites” right?    I read last week that in 1970 the percent of dollars held around the world was 70%, and in today’s world that percentage has slipped to 62%… Of course in that time we had the introduction of the euro, and the trading ability of the Chinese renminbi added to the mix, but still that’s quite a slip in dollars held, right? 

And these days..  I sit on cornerstones and count the time in quarter tones to ten… No wait!  These days, the U.S. has basically ticked off just about everybody, with our insistence of keeping the dollar the reserve currency, that even the Saudi’s are thinking of pricing their Oil in something other than dollar… 

I used to give presentations around the country and then some, and I would talk about how the Chinese renminbi was signing all these currency swap agreements with countries and that there were talks of them signing one with the OPEC countries, and would say if that happened that would for sure signal the end of the dollar’s reserve status… Well… skip forward to today, it sure appears that it could be coming to fruition, don’t you think?  I do… and to me that’s all that matters! HA! 

OK, let’s do a little math here… You know how I’m always saying that the markets should use the ADP Employment numbers instead of the BLS mumbo jumbo? So, get this… Last week the ADP report said there were 202,000 jobs added in December. The BLS said there were 145,000… But because of their previous month’s indulgences with hedonic adjustments, they had backed out 60,000 that were over reported in previous months… So, add back that 60,000 and the BLS is right in line with the ADP! So, since I always take away the “added jobs” I have to add back the “taken away jobs”, which means the December month, known for added employment saw 205,000 jobs added…

The thing that I still say is not a good thing for these labor reports is that there is no deciphering of what is a good paying job and what is a low paying job… So, the total numbers don’t really mean much to me, nor should they you, but apparently, the markets swallow them hook, line and sinker!

I’ve got to get a better job! This one is driving me crazy folks… OK, I’m kidding… But I do have to admit that there are times that I just want to throw my hands up over my head and say, “I quit!” I can’t keep writing about all these bad things I see and not go crazy! And that leads me to this:

OK… remember last month when I told you that I didn’t think the Christmas shopping season went too well? OK, I came across this Tweet from fave economist, David Rosenberg on Saturday… Let’s listen in to what the econoguy has to say on Twitter: “I keep hearing how wonderful the holiday shopping season was and yet we see the likes of J.C. Penney, Kohl’s and L Brands all report lower sales action for the November-December time frame. Not to mention Macy’s, Urban Outfitters and Bed Bath & Beyond.”

Yes, the real facts, and not the ones that get spewed on the TV / cable/ news… The term “fake news” became something we all talked about in recent years, but…. Longtime readers will recall me talking about fake news with regards to economic reports for years!

The fires are still burning out of control in Australia… I sure hope any readers I have down under are safe, as well as anyone else that lives there! There’s a slew of economic data that will print this morning in the U.K., but will most of it be forgotten about as the country comes to grip with the latest news from the royal family? I kid, but it all fairness, this royal family thing is big news in the U.K.

Here in the U.S. the Data Cupboard is basically void of any “real economic data” until Thursday when December Retail Sales will print… It will include the Christmas sales season, and from what I saw getting left on our front porch last month, the BHI tells me that we should see a mediocre Retail Sales print for December, which the “spin doctors” and not the ones that sang Two Princes, but the ones that put their spin on things, will be out in force saying that the Retail Sales figures shows that there will be no recession in 2020…

I don’t believe it…. Not for a minute… You’re under the gun so you take it on the run! No wait! What? You have a problem with a little REO Speedwagon this morning? But basically what I’m saying is that everyone that reads the letter knows that I said last year that we would be in a recession before year-end… And maybe we would have been had the Fed not decided to start pumping 100’s of Billions of dollars into the banking system…

I’m still miffed and mad as all hell, that the Fed doesn’t have to tell us to whom they are giving these funds away to, and for what purpose… And you should be too! So, pick up a pen and a piece of paper, or better yet write to your representative in an email, and tell them that you as a citizen of the U.S. demand that the Fed come clean on this ponzi scheme they’re running…

To recap… The euphoria of the currencies, metals and Oil last Monday has faded away, and we’re right back to where we were before everyone was on the edge of their collective seats waiting for Iran to retaliate… There’s not a lot of data this week that’s worth looking at until we get to Thursday, but in the U.K. today they will print a slew of data, but Chuck wonders if anyone will notice?

For What It’s Worth… Last week I talked about the Baltic Dry Index dropping like a rock, and that had followed up the Cass Freight index also dropping quickly… Well this week it’s the truck orders data that’s falling out of the sky, and that article can be found here: https://www.zerohedge.com/economics/truck-manufacturing-orders-plunge-decade-low-2019

Or, here’s your snippet: “The painful decline in Class 8 orders that we have been documenting on a month-by-month basis has resulted in truck manufacturing orders hitting a decade low in 2019, according to Americas Commercial Transportation (ACT) Research Co., a leading publisher of commercial vehicle industry data, market analysis, and forecasting services for the North American market.
Full year volume for Class 8 orders was 181,000 for the year, compared to 490,100 units in 2018.

Sales in December followed the year’s trend, ticking lower on a year over year basis despite showing a 14% sequential rise.

Federal tax rate cuts in 2018 encouraged carriers to expand their fleets, resulting in major backlogs and tough comparable numbers for 2019, according to the Triad Business Journal.
In addition to the tough comps, ACT President and Senior Analyst Kenny Vieth also blamed the issues on “lower freight demand” in 2019.

Vieth said: “Overbuying through 2019 and insufficient freight to absorb the ensuing capacity overhang continued to weigh on the front end of the Class 8 demand cycle in December. Recalling July and August, orders were down 80% from the corresponding months in 2018.”

As we have documented throughout the year, some truck manufacturers, like Mack Trucks and Volvo Trucks, announced layoffs. Volvo announced last year that it would lay off 700 people at its Dublin, Virginia plant. Daimler laid off 900 workers in October 2019 and Navistar will lay off 1,300 workers this month.

Some trucking companies that we have profiled, like Terrill Transportation, have closed down entirely.”

Chuck again… I want to thank friend, Ed Steer, for pointing me to this article in his Saturday letter at www.edsteergoldsilver.com But isn’t it interesting that you didn’t hear about this news on the TV or radio? Does the fact that you didn’t hear it make it any less true? It had better not! I’m just saying!

Currencies today 1/13/20 American Style: A$ .6900, kiwi .6630, C$ .7660, euro 1.1122, sterling 1.2988, Swiss $1.0282, European Style: rand 14.3580, krone 8.9070, SEK 9.5176, forint 300.90, zloty 3.8107,    koruna 22.6991, RUB 61.00, yen 109.89, sing 1.3471, HKD 7.7220, INR 70.76, China 6.9183, peso 18.78, BRL 4.0934, Dollar Index 97.51, Oil $59.09, 10-year 1.84%, Silver $17.97, Platinum $969.70, Palladium $2,133.50, and Gold… $1,551.29

That’s it for today, as discussed last week, I believe I’ll be getting back to my regularly scheduled programming this week, as my appt. at the wound center is an hour later in the morning, which gives me time to write before I go…  So… I’m here all week… Try the veal and tip the waitresses! HA! It was a “full moon” weekend… I always get a kick out of watching the full moon rise over the ocean… Cool beans in my book!  Happy Birthday to my oldest son, Andrew, who celebrated his day yesterday in N. Carolina coaching water polo… I’m so proud of both my boys, as they work diligently at “giving back to their game”…  In Alex’s spare time, he coaches the pre-high school kids…   I always told them to “give back to the game they love”…  OK… got to get going, the traffic in Stuart, Fla. is a real bear to get through… Tod Rundgren takes us to the finish line with his song: It Wouldn’t Have Made Any Difference…  I hope you have a Marvelous Monday, and will Be Good To Yourself! 

Chuck Butler

 

 

January 8, 2020

* Currencies fall back as the dollar rebounds… 

* Gold soars with the eagles but gets grounded with the turkeys! 

Good day… And a Wonderful Wednesday to you! My travel day yesterday went along OK, until… my stomach began to revolt on me… UGH! But we made it here, to S. Florida, to our 2nd home… And I’ll be here until April… I was a happy camper again once we got outside here, and it was sunny and 75… I love warm weather! Well, Gold soared briefly yesterday, as the Iranian retaliated for the airstrike on them last week. Not that I want to see war escalating, but this is one of the reasons you own Gold! So, more on that today, and talk about what happened to the short-lived currency rally… So, pull up a chair, grab a cup of joe… and let’s go! The local St. Louis band, Mama’s Pride, greets me this morning with their song: Blue Mist…

OK, first things first… The war trigger fingers are getting itchy folks… I do not want to see the U.S. in another war, unless of course, God forbid, we are attacked first. But late yesterday, news came across that the Iranians has retaliated and fired some land to air missiles at a base in Iraq, that housed American Soldiers… As I went to bed last night, I had not heard of any loss of American lives, but one would have to think that to be tenuous… Bottom line to all this saber rattling, is the price of Gold has seen some wild and crazy trading… At one point yesterday, I checked the prices and Gold was $1,604….  But that didn’t last, as I’m sure the JPMorgan’s etal, were there to make sure that they threw up a roadblock, and Gold ended the day up $10, and not the $28 it had briefly touched on. 

As I said above, this is one of the reasons why you own Gold… Geopolitical problems… I said on Monday this week that I thought this saber rattling would continue and that it would keep the bid constant and rising for the price of Gold. And Silver was not chopped liver these past few days too and closed yesterday at $18.35 (after venturing higher on the day to $18.55… so, the price manipulators are attempting to stop a runaway train… I have this feeling they’re going to be run over, but then that’s just me… 

There was an article Monday about how Gold was “overbought”…  And I thought, well that may be, but the figures they were using were based on a belief by them that mom and pops here in the U.S. are all-in on Gold buying, when the actual truth is that many don’t even know that Gold exists as an investment option!  The GATA folks think that 95% of the number is incorrect, and I would agree!  

And while the precious metals moved down the rally tracks at a steady speed, the currencies gave back their gains from last week. The Plunge Protection Team (PPT) had to choose their battles, and they chose to battle the falling dollar… The euro, which was 1.1205 on Monday morning, has seen its recent mini-rally falter, and when the Big Dog falters the rest of the currencies (the little dogs) can’t get out of their own way!

The price of Oil slipped a little yesterday, which didn’t do the  Petrol Currencies any favors as they were waiting for either the euro to gain, or the price of Oil to gain, and since neither happened, the Petrol Currencies that include: Rubles, krone, real, loonies, pesos and others, got sold on the day… UGH! 

In the U.S. Data Cupboard on Monday, was the Markit ISM (manufacturing index)… The Markit folks say there’s nothing contracting in manufacturing, but the ISM did say that not only was the manufacturing sector contracting it had contracted more than the previous month! Where’s the disconnect here? I mean do the Markit people now get their numbers from the BLS? HA! Because the BLS sure knows how to massage the numbers each month, so more and more sheeple go to market and buy stocks, don’t they? And now the Markit report on manufacturing says everything is hunky dory, and the real ISM report says, not so fast their Markit boys! So, anyway, the thing is simply that one’s telling the truth, and other is telling the not so truth… And I’ll bet a shiny quarter that you know which one is which in my book!

Yesterday in the Data Cupboard, we saw November Factory Orders, which placed the odds of a good 4th QTR GDP here in the U.S. very low, as Factory Orders were negative -0.7%…  Along with the negative print in Durable Good Orders, and the Baltic Dry Index, and Cass Freight indexes both dropping like rocks from a cliff, the picture that’s being painted for 4th QTR GDP is not a pretty one, folks…   I’m just saying…

The Data Cupboard today has the ADP Jobs report for December…  The ADP report forecast is for only 67,000 jobs to have been created in December. Last month we had a low number on the ADP report, only to see the BLS blow that out of the water two days later… So, I guess I’ll have to wait-n-see what the BLS has up its sleeve on Friday, eh?  

Before I head to the Big Finish today, I want to talk a bit about the Russian economy…  I read last week that they had a bumper crop in 2019 (their year-end is in July)  and that they are fully expecting a repeat if not a better than 2019 for 2020…   The economic sanctions continue to hold a grip on the Russian economy, folks, but so far they are doing everything possible to ignore them and move ahead.  

I know, and realize that I spend a lot of time and words talking about Russia, and ruble… But longtime readers know that there are times when countries go front and center and need to be talked about… In the early 2000’s it was the euro… then the Aussie and kiwi dollars,  and then the dollar, and now it’s rubles…  The ruble is so weak, compared to where it was before the conflict with Ukraine began… And that’s another reason I think it needs to be looked at, for shouldn’t it return to its previous level? I believe so…  And so… 

To recap… I know, shorter than usual today, just getting my bearings adjusted that’s all…  OK… well all the euphoria in the currencies and metals have been brought back to earth, as the saber rattling notched higher yesterday and then faded…  The Markit and ISM reports on Manufacturing seem to have a disconnect, are the Markit folks getting their numbers from the BLS? HA!  Gold soared with the eagles for a while yesterday, but ended the day grounded with the turkeys…  UGH!   Oh, well, can’t move too fast upward or there will be a correction!  

For What It’s Worth… I always love to find stuff in my local paper that I can use… The St. Louis Post Dispatch, doesn’t really have too many original story writers left, so most of the time they are simply reprinting stories found on the newswires… But every now and then, economy writer, David Niclaus writes a real good one, and I have to make sure I find a way to use it! So, this article is about the tariffs and how they’re destroying manufacturing, and the so on, and can be found here: https://www.stltoday.com/business/columns/david-nicklaus/tariffs-were-supposed-to-save-american-manufacturing-they-re-destroying/article_0ff11533-3744-5411-8741-bdda614a9d6e.html#tracking-source=home-top-story-1

Or, here’s your snippet: “resident Donald Trump’s tariffs were supposed to make American factories great again.

Instead, a new Federal Reserve study says, they’ve harmed American manufacturing, destroyed jobs and raised prices for consumers.
Moreover, the damage won’t be undone by the president’s phase one trade deal with China. The 25% tariffs he imposed in 2018 on a wide range of components and other manufacturing inputs will remain in place.

Aaron Flaaen and Justin Pierce say their study provides the first comprehensive look at how the tariffs affect U.S. manufacturers. That’s important because tariff advocates sometimes argue that any pain caused to consumers, financial markets or even the economy as a whole is necessary to maintain a robust manufacturing sector.

Trouble is, the tariffs clearly are hurting the sector they were supposed to help.”

Chuck again… Well, here’s one that I’ll slap myself on the back for… You see when the tariffs were first talked about, I told you, dear reader, that the economy would suffer… I’m just saying… I can hear you now… “Yeah, Chuck, even a blind squirrel can find an acorn!” HA!

Currencies today 1/8/20 American Style: A$ .6870, kiwi .6647, C$ .7686, euro 1.1130, sterling 1.3107, Swiss $1.0290, European Style: rand 14.2060, krone 8.8540, SEK 9.4407, forint 297.45, zloty 3.8115,    koruna 22.6841, RUB 61.86, yen 108.71, sing 1.3503, HKD 7.7772, INR 71.66, China 6.9473, peso 18.84, BRL 4.0657, Dollar Index 97.11, Oil $62.90, 10-year 1.81%, Silver $18.36, Platinum $969.72, Palladium $2,099.60, and Gold… $1,578.43

That’s it for today, and this week… Next week we get back to a regular schedule, I think! Tomorrow I will drive north 30 mile to Port St. Lucie to a wound center there, and see what they think of my leg… And then weekly I’ll head back there, but don’t know the schedule they’ll keep for me, so for now, we’re back to regularly scheduled programming next week…   I heading south this morning for a breakfast meeting with my good friend Rick, who’s down here for a conference. The last time I met someone for breakfast while down here was a couple of years ago, when I met my former marketing person Suzanne for breakfast… Back then I was having problems with the tumor in my mouth, and during breakfast I began to bleed, and so I rushed off to the bathroom where I stayed for the next 1/2 hour attempting to get it stopped… Poor Suzanne…  well, that was a bad memory!  But no more…  Robert Plant takes us to the finish line today with his song: Big Log…    I hope you have a Wonderful Wednesday, and will continue to Be Good To Yourself!

Chuck butler

 

 

January 6, 2020  

* Airstrike in Iran sends the dollar to the woodshed!

* And send Gold soaring higher! 

Good Day…. And a Marvelous Monday to you! Welcome to January and 2020! The Roaring 20’s are back! Well, at least in as far as decades go… How was your Christmas and New Year celebrations? I had a fabulous time through it all, even though most days I was feeling like death warmed over… The currencies and metals sure rallied strongly in that time. Tomorrow is a “travel day” for me, so by the time I get to the airport, you’ll still be sleeping, which means no Pfennig tomorrow, but I’ll be back in my home in the south to write on Wednesday… There’s been quite a bit of news since I last talked to you last Monday, so, we’ll talk about some of that, and other things this morning… Steely Dan greets me this morning with their song: Peg…

In the last week, we saw the euro trade in the upper numbers of an 1.18 handle… We saw Gold trade to a multi year high, and Silver get to trade over $18 once again, and the price of Oil shoot higher…. Most of the movement that related to these moves came from the air strike that was ordered by the U.S. Chief of Command and resulted in the top General in Iran being taken down. And now there are stories out there that more strikes could be in the offing… So, the pressure on the dollar will remain in tact for now… The thing I think we could very well see if these continue much longer, is that the strong dollar trend comes to an end… Remember last week I told you that Euro traders are calling for a rallying euro in 2020.

And I think the proof in the pudding of that statement is the fact that in the overnight markets, the euro has climbed past 1.12!  

The Petrol Currencies led by the Russian ruble, have really taken the Oil price rally to heart. The next move for the ruble will be to fall below 62. The Norwegian krone is firmly on the rally tracks, as it gets the double dose of rally medicine from the euro’s rise, and the Oil price rise.  

In last weeks flurry of activity in the currencies we saw the Aussie dollar (A$) climb to 70-cents… But, that gain was short-lived, as the Australian country is experiencing raging wild fires, and it has taken the focus off financials and what not there…  The fires are widespread, from what I read about them, and don’t look to be anything that will be put out any time soon… 

Cruising through Twitter yesterday, I came across some tweets that I’ll highlight here that tell a story about the U.S. Economy, folks… Ignore them if you choose… but if you do, I think you’ll end up being sorry…

The fist one is s tweet from a former colleague and longtime friend, Sean Hyman. Who posted: “Sales of Manhattan’s priciest apartments plunge almost 40% in fourth quarter”

The next tweet is from David Rosenberg, one of my fave economists, who responded to a article by Goldman Sachs that said the economy was fine…. “Someone forgot to tell the Baltic Dry Index, which has collapsed 60% from the nearby peak, about this “growth stabilization” narrative. Not as if the Cass Freight Index hasn’t been flashing the same signpost, which is tougher times ahead for the over-levered global economy.”

And finally, the next one is from Danielle Di Martino Booth, another of my fave economists, who posted:” Does ANYONE look at charts any more? Step 1. Yield curve inverts Step 2. Yield curve steepens Step 3. With an average 10-month lag post 3-month/10-year inversion (which occurred in March 2019), economy enters recession. Powell printing maniacally should push out lag time.”

OK… So, the rich are losing their shirts in Manhattan…. And the markets are oblivious to key indicators that the economy is going downhill fast… Like a snowball going down a steep hill, it gains more snow and size as it rolls downhill…

The things that get me all riled up folks, is…. When I hear people that should know better, but apparently don’t, say things like: This economic expansion is going to be like the Energizer Bunny and go on and on and on… That’s just not the way that economies work, folks… But then all past economies didn’t have a mingling Fed… Printing money as if it was their only job to do… Funny thing here… On Saturday, we celebrated my oldest son, Andrew’s, birthday, for he’ll be in N. Carolina next week when his birthday comes around, coaching water polo… And my two grandsons, Everett, and Braden were sitting downstairs watching football with me, when a commercial came on, and it was a presidential ad… And one of the boys said, “oh he’s the worst there has ever been”…. And I couldn’t let that one slip… I explained to them that Woodrow Wilson was the all-time worst president, and then told them the 3 reasons why, culminating with, he ushered in the Federal Reserve, who’s made a real mess of the economy, and the dollar through time… Then ½ hour later I asked them, OK, who’s the worst president, and the both shouted back at me. Woodrow Wilson!

OK, sorry for that tangent… This is going to be PMI week all over the globe… The U.S. jumped the gun last week with their print of December ISM, which used to be called the PMI, and is the same as the PMI’s that print in every other country in the world. The U.S. ISM (manufacturing index) slipped further below the 50 figure that separates expansion (above 50) and contraction (below 50)…. The November print was 48.1%, and the so-called experts said that we would see a bit of a recovery to 49%… But… instead, the index slipped further to 47.2%… I was taught many years ago now, that when a country’s manufacturing index slips to 45 and remains there for at least two consecutive months, that a country is in recession… So, 47.2 is not exactly a world away from 45, folks…. I’m just saying…

I don’t expect any of the PMI’s from around the world to show any kind of strength, as this is a Global event, with all economies suffering from the hangover of too much punch being served by their collective Central Bankers…. Too much punch is the same as too much easy credit,a nd too much money printing… $4.1 Trillion of Corporate Debt will come due in 2020, folks… What will happen with all that? I guess we’ll have to wait-n-see, eh?

I was doing some thinking yesterday about something that a dear reader asked me many years ago… I had told him that currencies move in big sweeping moves that take years to play out, and he asked, “Why then do you write every day?” Sometimes… folks… I would like to tear my hair out, but…. I don’t have much to tear out, just little stubble… I got to thinking about things I say, and how some people take them to be something that will happen right here, right now… That’s not how the bubbles were created, they took years to develop… and so on… the Debt problem here in the U.S. has been developing since Nixon removed the Gold backing from the dollar… So, when I say that’s unsustainable, I’m not saying that it’s going to implode today, or tomorrow or any time soon… but given the fact that most Americans are procrastinators, I figure if I continue to harp on having a diversified investment portfolio that includes currencies and metals that eventually they’ll get around to do doing so, and hopefully before the you know what hits the fan, so to speak!

Well the Gold bugs sure have been shaken out of their doldrums in the past week, with Gold closing last week on a real strong note closing up $25 for the day, to close the week at $1,578…  With more saber rattling going on between the U.S. and Iran I fully expect Gold to remain front and center of any conversation about safe havens…   

2019 was a good year for Gold, which was interesting, in that usually, we only see Gold rally when the dollar is getting sold… But last year, the dollar hung pretty strongly as its strong dollar trend wanes.. If my numbers are correct, I think Gold pretty much equaled the rise of the stock market last year, which is also a very interesting thought, given that most moms and pops don’t buy Gold, but do buy stocks… 

But like I said above, I expect Gold to continue its rise from 2019 throughout 2020… 

That wild and crazy Palladium traded past $2,000 late last week, and sits this morning at $2,025…   And Silver finally moved past $18 and looks like it wants to not be sent to the woodshed for a trip back below $18!  

We already talked about the U.S. Data Cupboard’s print if ISM last week, above. So, a quick look at the economic calendar shows that this will be a week where we will see December Factory Orders, the ADP report, and finish the week with the Jobs Jamboree, which because of all the holidays at year end, and the way the days worked out, got pushed to the second Friday in January, instead of its normally scheduled first Friday of a month schedule.

Right now, the so-called experts have the Jobs report showing a gain of 155,000 jobs in December, which would include part time, seasonal, help… As in the past, I’ll remind you that the BLS’s version of a jobs report is so ignorantly wrong that I just don’t care about it any longer…   I prefer to get my jobs data from either the ADP report, or John Williams at Shadowstats.com

To Recap… The airstrike in Iran last week, sent the U.S. dollar to the woodshed, and the currencies along with the metals have been rallying very strongly since.  More saber rattling has Chuck thinking that this could be the snowflake that causes the avalanche to fall on the dollar… We’ll have to wait-n-see…  Gold finished the year in line with stocks, in regards to performance for the year, and Chuck thinks that this is just the beginning for a strong 2020 for Gold and Silver…

For What It’s Worth…  Well, I read a lot of articles on different things last week, and one of them hit a nerve with me… It was from the duo of Russ and Pam Martens, of www.wallstreetonparade.com  This article is about how Citicorp, which was nearly a thing of the past back in 2008, is at it again with credit default swaps (CDS) which were front and center of the financial meltdown. The article can be found in its entirety here:  https://wallstreetonparade.com/2020/01/the-doomsday-machine-returns-citibank-has-sold-protection-on-858-billion-of-credit-default-swaps/

Or, here’s your snippet: “Lily Tomlin is credited with the quote: “No matter how cynical you get, it is impossible to keep up.” Wall Street regularly brings that message home.

According to the latest derivatives report from the Office of the Comptroller of the Currency (OCC), Citibank, the federally-insured, taxpayer-backstopped bank owned by Citigroup, has sold protection to other banks, hedge funds, insurance companies or corporations on a staggering $858 billion of credit default swaps. When a federally-insured bank sells protection to others on credit default swaps, it is effectively taking on the risk of a default event. At a time of unprecedented levels of debt in the system and growing warnings about leveraged loans, that seems like a very unwise move by Citigroup.

The OCC notes that Citibank has bought protection via a larger amount of credit default swaps — a total of $898.8 billion. (See Table 12 in the appendix of the report.) There is no guarantee, however, that these bets are properly aligned and will not, once again, blow up this bank along with a chunk of Wall Street firms or insurance companies that may be its counterparties.

Credit default swaps played a central role in the 2008 financial collapse on Wall Street, as did Citigroup. It is an indictment of every federal banking regulator in the United States, as well as Congress, that Citigroup has been allowed to return as a major player in this market while using its federally-insured Citibank once again as a pawn in this game.

Adding to the outrage, it was Citigroup that was responsible for overturning the portion of the Dodd-Frank financial reform legislation of 2010 that would have pushed these derivatives out of federally-insured banks.

It may also help to explain why the New York Fed continues to fling hundreds of billions of dollars each week at the trading houses on Wall Street while the Federal Reserve Chairman, Jerome Powell, insists that everything is just fine on Wall Street.”

Chuck again…  We just never learn from the past do we?  Where this all goes is anyone’s guess, but if we simply review 2007-08, we’ll know where all this headed then, and well… I’m just saying… 

Currencies today 1/6/2020, American Style: A$.6948, kiwi .6675, C$ .7710, euro 1.1203, sterling 1.3161, Swiss $1.0320, European Style: rand 14.2619, krone 8.7915, SEK 9.3885, forint 294.14, zloty 3.7840,   koruna 22.6115, RUB 62.01, yen 108.07, sing 1.3490, HKD 7.7691, INR 71.84, China 6.9645, peso 18.86, BRL 4.0657, Dollar Index 96.56, Oil $63.84, 10-year 1.78%, Silver $18.40, Platinum $986.96, Palladium $2,025.44, and Gold… $1,578.30

That’s it for today…  and tomorrow, since I’ll be traveling during writing time, but I’ll pick it up from my home down south on Wednesday morning… My beloved Cardinals did very little at the winter meetings, which means they are prepared to go into the season with an offense that uses noodles instead of bats… UGH!  Our Blues were on a very long winning streak that ended New Year’s Eve, and now they can’t shake loose of the losing streak… They head home to play on home ice for the next 5 games so that losing should come to a quick end! I have a busy day today, so I need to get this out the door and get moving!  Ambrosia takes us to the finish line today with their song: Holdin’ On To Yesterday…   I hope you have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler

 

December 30, 2019 

* Silver tries to move higher, but was stopped!

* Chuck offers an idea to help the economy…. 

Good Day… And a Marvelous Monday to you. Well, I’m back… if only for two days this week… Today and Thursday… As tomorrow we will put a bow on 2019, and pack it away, and tradition calls for me to sleep in to prepare for the night ahead… And then Wednesday, is recovery day, as we start the New Year…. So… How was your Christmas holiday? Mine was fine… My grandkids were so darn excited and happy… We celebrated Kathy’s birthday… Well she did, I was stuck at home with a flare up of the gout… OUCH! Man that stuff is painful! Al Stewart greets me this morning with his song: On the Border…

I was swamped with news articles while on vacation… I tried to read them all, but my heart just wasn’t into it… The Currencies had their normal, Chuck is away, rally, going for them, as the dollar was getting sold on a daily basis… I did read one article last week that said that European traders are betting that the euro has a good 2020… That would mean that they truly believe the dollar’s long running strong trend had come to an end… Because if that was to happen in 2020, and I don’t see why it wouldn’t, then that would mean the dollar is getting sold like funnel cakes at a State Fair!

Remember last year around Christmas when the stock market got whacked one day, and the next day it rebounded? Well, this year in the “year of opposites” that we’ve discussed previously, Silver took a flyer on the day after Christmas and rose 38-cents, before the boys in the band showed up, late per their agreements with the boss, and took Silver back down by 23-cents so that Silver showed a 15-cent hike on the day, which in any normal day would be great, but had the price manipulators not shown up imagine where Silver would have ended the day…. Come on, John Lennon, told us in song that to imagine it’s not hard to do! And then on Friday, with all the boys in the band back at their desks, they brought silver back below $18.00… Phooey! Why couldn’t these dirty devils had just stayed home to finish the holiday week like everyone else did?

Gold saw the same kind of action… rising furiously on Thursday, but then getting sold to make the day not look so good. And on Friday it lost more ground to bring it back to $1,510… Nothing like finding large price increases as your gifts, under the tree, and then have them taken back later in the day as you try every other new toy you received…. I’m just saying…

Speaking of Gold… There was a report late last week that Russia is considering allowing their Wealth Fund to invest in Gold… Now that would be another buyer of physical Gold in large quantities, folks… And That just has to have the price manipulators shaking in their collective boots!  Now, we’re not talking about a sovereign wealth fund the size of Norway’s, which is the largest in the world… But $124 Billion is nothing to turn your nose up, folks… And this is not to say that the entire $124 Billion would be going to Gold… but a conservative allocation to Gold would be anywhere around 15-20%… So, being conservative (my training I can’t help it!) that would indicate that it’s certainly possible that the Wealth Fund could be allocating up to $18 Billion in physical Gold….  again… Got Gold? 

I read last week that Sweden is giving up on their experiment with negative rates… Seems they weren’t the cure-all for the Swedish economy that they had though they would be… If they had only read the Pfennig, and listened to me! As if! Right? Keeping in the region… with the price of Oil rallying last week, due to supply concerns, the Norwegian krone has picked up some speed on the rally tracks… With the euro looking perkier, these days, along with the price of Oil, the krone has a stream of green lights to fly through… And it’s doing so!

Speaking of the price of Oil…  As I said, supply concerns, and rumors that the shale Producers in the U.S. are dropping like flies, really has pushed the price of Oil higher and this morning it trades with a $62 handle…  The thing I like about this move is twofold… 1. I filled my gas tank in my car a week ago, before the Oil price rally started, which should keep me good until I leave for Florida next week.  and 2. more importantly, the Petrol Currencies, led by the Russian ruble have really taken the Oil Price rally to heart…  The ruble, loonie, krone, real, and shoot Rudy, even the peso have boarded the rally train… 

If I read one article on how badly Americans are saving money last week, I read a dozen of them… Seems it’s on everyone’s mind these days… these days I sit on cornerstones, and count the time in quarter tones to ten… Sorry, but whenever I type “these days”, the old Jackson Browne song pops into my head, and then to my fat fingers! So… I digress… (what else is new, eh? Nice to know some things don’t change, right? HA) I won’t bore you with all the details, but a very large number of Americans don’t have savings at all, and another large number don’t have enough for a $1,000 emergency… And if you lived in my house, those things would be going on all the time!

I only tell you these things about Americans because we’re supposed to be doing fine, right? Because… We are Americans, it’s our right to be prosperous! As if! We all certainly have an opportunity to be prosperous, but somewhere along the line, we get off track,… And then I have to explain to people how this situation does not help our economy one iota…

Because we, as a country depend so much on consumption… In other words, people spending money… But they can only spend what they don’t have for so long, before the collectors begin to knock on the door… So, they stop spending, and the economy goes to hell in a hand basket…

I’ve told this story before, so if it’s not your thing, go ahead and skip ahead, you won’t hurt my feelings, and Lordy that’s an important thing these days, eh?   OK, here we go… My longtime friend, and former Big Boss, Frank Trotter, and Chuck were in Bermuda for a conference, and in Frank’s presentation, he talked about walking through a graveyard in Bermuda and seeing that the reason for death for many on the tombstones was the word: “Consumption”…     So, what way should we be looking at Consumption? A Good thing, or bad thing? 

When I wrote for the now defunct, Dow Theory Letters, Wait! Come to think of it, I’ve written for two publications other than the Pfennig, in the past, and both of them went belly up… You don’t think me being a part of the editorial group had anything to do with that do you? Nah… couldn’t be, must be a co-inki-dink! So, meanwhile back at the ranch… I wrote a piece that went into great detail how the U.S. stock market gets very weak during recessions… And I read last week that Doug Casey (old time friend) said that he believed that this next downturn would turn to a depression… And since we’ve had 1 and one-half depressions here in the U.S. to use as historic markers, stocks get shellacked during depressions!

OK, so I don’t think you woke up this morning, turned on your computer, or your smart phone, or tablet, to read the Pfennig, to get all depressed right from the get-go… So, I’ll stop there… And talk about something else…

The U.S. Data Cupboard sure was on holiday last week, like the rest of us, but did yield another piece of negative data, when Durable Goods Orders printed negative -2.0% for November, and the all important Capital Goods Orders failed to meet the Roctober print of 1.1% and gain only .1%…. I’ve gone over CAPEX (Capital expenditures) many times in the past so I won’t linger here too long, but just to remind everyone that when the tax reform act went into place I said that it would not help the economy as it was not about you and me, but about Corporations who would NOT use the tax savings on CAPEX, but instead use it to buy back shares to guarantee large year-end bonuses…   I sure did nail that one, eh?

Before we head to the Big Finish today… and the last time this year… I wanted to talk a bit about something I’ve talked about previously, and that is the Fed’s interest rate that they pay for excess reserves that the banks hold at the Fed…  In other words, the Fed is in competition for these funds, and they guarantee return of capital…  So, the banks pile cash into the Fed, instead of putting the money to good use in the economy, where the risks certainly are greater, but with increased risk come increase interest rate spread, right?  So, what’s going on here, have bankers lost their collective appetites’ for risk?  Or do the scars of 2007-08 run too deep and remain on the minds of these bankers?  Either way, the way that David Stockman, figures the numbers are interesting he says that the Fed pays and interest rate of 1.55% right now. There’s about $1.5 trillion of excess reserves in the banking system. That computes to about $23 Billion the Fed pays out annually…

So, think about that for a minute…  That’s a very large sum of cash that could be in the economy instead of sitting idly at the Fed…  In my humble opinion, the Fed should cease this operation, or at least pay an interest rate that doesn’t make sense for bankers to hold $1.5 at the Fed! 

I know no one asked Chuck what he would do first to help the economy, but I thought I would throw that out there and see if it sticks! HA! 

To Recap…  The currencies had their usual “When Chuck is away rallY” last week, and are looking toward ending the year on a high note… Gold & Silver had an interesting couple of days after Chirstmas… It’a a year of “opposites” for sure, and i’m hoping that it ends tomorrow night!  Sweden is going to end their negative rates experiment, and that’s a good thing to Chuck’s way of thinking… 

For What It’s Worth…. OK… I’ve been writing about how inflation is much higher than the stupid CPI / Gov’t index shows… And while I was on vacation, I came across this website, that takes out all the hedonic adjustments and calculates inflation based on what people need and buy… And guess what? They proved me correct! (as if there was any question! HA!) So, today’s FWIW is simply a trip to that website to see that inflation in the U.S. has been running 10.5% in the 10 largest cities of the country… Now that sounds correct to me, I don’t know about you, but if you live a normal life and buy things, you know darn well that inflation isn’t the stupid CPI’s 2% figure! So, with all due respect (none from where I sit) to the folks at the BLS, I’m going to footnote this website and refer to it in 6 months because that’s the next time they’ll issue the report… So… you can see for yourself what I’ve been talking about for years right here: https://chapwoodindex.com/

Chuck again… Not that I went anywhere… but… here I am… beaming like a ray of sun, because after all this time, I’ve been proven correct…. I knew it in my heart of hearts, but… everyone likes to laugh at me and say I’m wrong, because the BLS says so… Well, not any longer!

Currencies today 12/30/19 American Style: A$.6997, kiwi .6722, C$ .7650, euro 1.1191, sterling 1.3135, Swiss $1.0291, European Style: rand 14.0630, krone 8.8005, SEK 9.3182, forint 295.63, zloty 3.8030,   koruna 22.7250, RUB 62.01, yen 109.18, sing 1.3485, HKD 7.7863, INR 71.31, China 6.9947, peso 18.83, BRL 4.0437, Dollar Index 96.81, Oil $62.10, 10-year 2.92%, Silver $17.86, Platinum $950.50, Palladium $1,909.51, and Gold… $1,512.06

That’s it for today, and this year!   The next time we talk it will be the “roaring 20’s”! I can’t believe how quickly December went along!  But here we are, closing another year, which brings me to January, and… my annual sojourn to S. Florida for the winter!  I leave next Tuesday, and brother it can’t get here fast enough!  My leg wound continues to get better albeit very sloth-like!  I found a wound center in S. Florida, so I can continue to get it treated, which was going to present me with a real problem if I hadn’t found one!  Thanks to all you dear readers who sent along notes last week, wishing me a Merry Christmas… Very appreciative, indeed!  My granddaughter, little Evie, sure was in demand on Christmas, everyone wanted to hold that little bundle of sweetness!  OK… well, it’s time to get this out the door…  The Michael Stanley Band takes us to the finish line today with their song: The Rosewood Bitters…  I hope you have a Marvelous Monday, and please Be Good To Yourself!   

PS… Please be careful tomorrow night…  Kathy’s Dad used to call it “Amateur’s Night”…   Be careful, stay near your hood, and live to see 2020!  Please! 

Chuck Butler

 

December 24, 2019

Good day…. And the Merriest Christmas ever to you!

Pfennig tradition says this is what’s in store, so here you go!

Twas the night before Christmas
And Chuck’s feeling low…
He’s stuck in St. louis,
With all the ice and snow!
To warmer climates he wishes he was…
And then looks at the calendar
To see when he leaves for the cause…

 

The stockings are hung by the Chimney with care
In hopes that St. Nick would soon be there….
In Chuck’s stocking he’s hoping for austerity
From Congressmen who have no propensity
To stop deficit spending, it’s really a shame
And one day, something will stop this game. ..

So, I sneak down the stairway to attempt to get a glimpse
Of the real St. Nicolaus, I’ve hears he’s as big as two blimps!
But that’s unkind, so I take it back…
And hope he doesn’t do the same with his great big sack!

Ahhh, the sack of toys for all good girls and boys…
That will fill them with happiness and joy!
For Chuck’s grandkids we will leave something cool
For his darling Delaney, who just simply loves school,
I stuff her stocking with song books and such
Because she’s become a great dancer and singer
It’s really become so much!

To Everett, you’re second in line, but number one
In the hearts of the fans!
A guitar is what I’ve hear you want
Maybe your uncle Alex will teach you to play
Or maybe even me, some fine day!

To Braden, you love your Nintendo Switch
I can’t wait for your little sister to snitch
On you for playing too much
I hear video gaming is a big business,
So maybe you’re onto such…

And that brings us to my newest granddaughter
Little Miss Evie!
You’re cute as a button, and your smile endearing,
Your General promises to sing to you without tearing…

To my former colleagues on the trading desk
I’ll send them one weak dollar trend
And maybe they’re business will be on the mend!

To my friends, who are too many to name…
But I’d like to single out a few, just the same:
Two Mike K’s… Yanks, and Rick, and my longtime
Spring training buddy, Duane…
I’ll stuff their stockings with cold ones all around
They’ll all be so happy, I didn’t let them down!

To the rest of my family… I give them love…
You are my support system, I couldn’t have
Made it these 12 years without you…
Please don’t ever change!

And finally, to you dear reader…
You’re really the best!
You read and come back, you passed the test!
I do not know how much longer I’ll continue to write
But for now, it just all feels right!

So, I sneak back up the stairs having not seen St. Nick
And jump back into bed, and then hear the jingling of…
His sleigh bells ringing! He’s here! I shout, and then cover my mouth!
He can’t know I’m awake…

Please Santa, austerity, that’s what we as a country need…
Not al the silly stuff that goes on each day
But if you can’t deliver what I ‘ve asked for
I’ll be just as happy with a Gold Bar!

Then I heard him exclaim as he flew out of sight
Merry Christmas to all…
And to all a Goodnight!

Chuck Butler Dec. 2019

PS… I’ve put an additional message on these each year, that’s the same one, and decided to switch it up this year… so… MERRY BE YOUR CHRISTMAS, PEACEFUL BE YOUR HOME, JOYFUL BE YOUR FAMILY, BLESSED BE EACH ONE…

 

December 16, 2019

* Currencies lose a little ground on Friday

* Rubles are best performing currency in 2019

Good Day… And a Marvelous Monday to you! Well, we’ve come to that time of year, when Chuck goes on his annual Winter Vacation… That will start tomorrow and go through the 26th… When I used to work for a living, I always wanted to be away from the desk at Christmas, because I didn’t want to have to be the guy that made them work and not frolic and be giddy about Christmas! So, my annual Christmas vacation is a tradition, and even though I don’t have a crew any longer… I still honor traditions! So… I know, I know, you’ll miss me… HA! Longtime readers know that there’s a special Pfennig that will come on Christmas Eve… I’m already putting some thoughts into that one! The late, Great Marvin Gaye greets me this morning with his song: Mercy, Mercy Me…

Well… the currencies lost a little ground on Friday, and I’m trying to find out the reason for that given the poor print of Retail Sales here in the U.S. Gold found a way to fight through all the short Gold paper trades and eke out a profit of over $6 on Friday. Given the normal trading in Gold, I’m expecting the JPMorgans of the world to show up with arms full of short Gold Paper traders today… 

Oh, I know what all the pundits that go to the NY Times for their news will say about the dollar rebound on Friday, and that is, that the U.S. and China agreed to Phase One of the Trade Agreement… So, when did trade agreements get done in phases? I’m curious… Because, to me, this has all the inklings of a “one and done” with regards to the Trade Agreement. So, will it be a “one and done”? I’m betting a dollar to a Krispy Kreme that it will turn out to be just that!

Speaking of China… I keep reading about bond defaults in China… Well, that’s a good and bad sign… the Bad sign is that it’s not a good Omen for the economy, but on the other hand, it’s a good sign that Communist China is allowing these bad deals to fail… In a way, they’ve become more Capitalistic than we are! I can hear you saying… Yeah, Chuck, China still manages their currency, so put that in your oatmeal and stir! Ahhh, grasshopper, sit, listen to what I have to say…. China manages their currency in plan view of the world… The U.S. keeps a handle on the dollar in the shadows of the dark alleys!

You see, this dollar management began with Paul Volcker… This story begins in 1971, Richard Nixon, removed the Gold backing from the dollar, and the dollar began to float. It also began to fall in value VS other currencies and Gold… In 1977 the dollar was about to fall off a cliff, never to be seen again. But eventually, along came a white knight to save the dollar, and his name was Paul Volcker… And in his quiver were more rate hikes than any country had ever seen before, and soon interest rates were 18%, and when you’re the U.S. and you have yields above 18%, Countries all over the world were stumbling over themselves to buy U.S. assets with those high yields, and the dollar weakness ended…. Then in 1987, the Plunge Protection Team (PPT) was formed by then President Reagan, and the rest is history… The dollar has been under semi-management since. That’s my story and I’m sticking to it! HA!

So, I read where the Fed is going to inject a HUGE amount of dollars into the repo market at year-end so that there are no liquidity problems… The amount? Well, for those of you keeping score at home, it’s going to be around $500 Billion! But, I thought it wasn’t a “liquidity crisis”? That’s what the Fed Heads keep telling us, that it was just a one-day mess up… That now has gone on 3 months! And to end the year, the Fed will inject $75 Billion on 12/30, and $200 Billion on 12/31… With a total of $500 Billion in guarantees for 12/31… 

Isn’t it nice that the Fed can just print money when it wants to? I know I throw a lot of shade at Woodrow Wilson who allowed the Fed to be shoved down U.S. citizens’ throats back in 1913, but I doubt that he even knew back then that the Fed would simply trash the Constitution, and print dollars out the wazzoo! Yes, for all of you who don’t know this, but probably should… The Constitution, Article 1, Section 8, Par. 5) does NOT authorize Congress to circulate currency. Article 1, Section 10, Par. 1) prohibits the States from coining money, circulating currency, or making anything but Gold & Silver coin a tender in payment debts.

The Folks at Hillsdale College, gave me a pocket Constitution years ago, and I’ve kept that near me at all times… You know, the one thing that I can’t let pass by here… I’ve been through the Constitution a few times now, and I’ve never come across a passage in it that says, “When times get tough, you can scrap these articles, and start willy nilly printing money”…

Why has this gone this far? Because We The People, didn’t do a damn thing about it, we let Wilson shove the Fed down our throats in 1913, and we’ve let every variance from the Constitution be implemented without even a whimper from us… I’m just saying…

Well… as we come to the end of the year, and barring any major moves… The number one currency VS the dollar for 2019, is…. Drum roll please…. The Russian ruble… It’s up over 10% y-t-d. And then you add in the fact that it pays 4-5% interest APY, you’ve got a 14-15% total return in 2019… Not too shabby for a a currency that’s saddled with economic sanctions! And the fact that most U.S. investors still have that “I hate the Russians’” thing, and forget that in investing, the idea is to make money, or at least preserve what you have… And, oh there’s no need to go on with this… Either you “get it, or you don’t….  The Eagles sang a song titled: Get Over It! 

Gold had a good 2019, but Palladium had a “spectacular” 2019!  The Dollar Index has basically been flat for the year. On 12/17/19 it traded at 97.10, and today it is trading at 96.97…  That was a strange view for me, as I was under the assumption that the dollar had kicked tail all year and taken names later…  And leads me to believe that this is the “Capitulation” we’ve been waiting for with the strong dollar trend…  IF that’s correct, then the next step is for a reversal to begin of the strong dollar trend…  I’m just saying… 

The U.S. Data Cupboard last Friday, was a read dud! November Retail Sales only increased 0.2%, not the 0.5% that was forecast. And when you only look at core Retail Sales, they were only up 0.1%… I said last week, that this report would have the Black Friday Christmas sales… Well, what does this report tell you then? Right! It tells us that the Christmas shopping season didn’t get off to a good start, and I can’t believe that this isn’t an omen, for the rest of the shopping season, which in reality only has 8 more days… Or….. will cyber Monday (Dec 2nd) pull the season numbers to more respectability? From what I carry in from the front porch each day, that’s a real possibility!  But, I have a sneaky feeling that it won’t, and that will be a clear indicator that the U.S. Consumer is “tapped out”…  

The Data Cupboard this week, has a few real economic prints spread out through the week… Tomorrow, we will see Industrial Production, and Capacity Utilization, and on Friday, we’ll see Personal Income and Spending… The other prints this week are not that important… And certainly won’t move markets… But then with everything in “opposites” these days, who knows?

To recap… Phase One of the Trade Agreement was put to bed on Friday last week, and that led to a rebound in the dollar, which should have been on the ropes from a weaker than expected Retail Sales print for Nov.  Rubles are the best performing currency in 2019,  Chuck gives a mini-lesson on the Constitution regarding the Fed printing money…  And the Fed is going “all-in” in liquidity for 12/31… 

For What It’s Worth… OK, every now and then I throw something at the FWIW wall and see if it sticks… It may be something 180 degrees from what I think, but it’s a think piece, so it gets played here… This is an article about how a guy on Wall Street thinks that his clients should throw caution to the wind and back up the truck for stocks… And it can be found here: https://www.marketwatch.com/story/back-up-the-truck-and-buy-buy-buy-because-there-is-no-risk-says-mufg-economist-2019-12-13?mod=MW_section_top_stories

Or, here’s your snippet: “Back up the truck and buy, buy, buy.”

That was the advice from Chris Rupkey, chief financial economist at MUFG Union Bank, who sent a rousing note to clients late Thursday, on the heels of trade optimism that is lifting global equities at the week’s end and a decisive election outcome in the U.K. “All over the world, markets are falling love. Buy it. Buy it all,” reads the headline of that note.
Rupkey said a pair of geopolitical risks — an elusive U.S.-China trade deal and yearslong wrangling over Brexit — “thought to be strangling world economic growth” incredibly look to be getting resolved in a “big, big way.”

“There is some smoke and mirrors here, but it looks like this is the time for investors around the world to throw months of caution to the winds and take risk off the table, and they are, buying stocks and selling bonds with abandon, as the economic outlook brightens and central banks shelve their plans to cut interest rates further,” he writes.

Investors were waiting for more news on a trade deal after reports surfaced Thursday that the U.S. could trim existing import tariffs on Chinese goods, as well as delaying those set to kick in on Sunday. Notably though, China has remained silent on any deal progress in the wake of those developments.”

Chuck again… well like I said, there are times when the FWIW article will be 180 degrees away from what I think… I think I should forward my Dow Theory Letters article from a year or so ago, when I went through the historic numbers of stock market performance during a recession, to this guy, eh?

Currencies today 12/16/19 American Style: A$.6888, kiwi .6612, C$ .7619, euro 1.1142, sterling 1.3366, Swiss $1.0174, European Style: rand 14.4738, krone 9.0037, SEK 9.3632, forint 295.21, zloty 3.8664,   koruna 22.8773, RUB 62.80, yen 109.47, sing 1.3545, HKD 7.7899, INR 70.94, China 6.9719, peso 19.03, BRL 4.1068, Dollar Index 96.98, Oil $60.07, 10-year 1.84%, Silver $17.04, Platinum $930.81, Palladium $1,961.00, and Gold… $1,476.45

That’s it for today, and for the next 10 days until the 27th of December, when I’ll return… Twitter followers keep in tune, for with all the stuff going on these days, I’ll probably tweet something while I’m on vacation. Last Saturday, I went downtown to the Broadway Oyster Bar for a muffuletta sandwich and some great live music being played by “All Roostered Up”… It was a noon thing, so I was back home by late afternoon! In time to watch the Army / Navy football game, and then watch our Blues make a 3rd period comeback, scoring 4 times in the final period of the game, to beat the Blackhawks! What an exciting game! Yesterday, the snow began to fall around noon, and that initial blast of winter was then followed by some freezing rain… Oh, brother am I glad I don’t have to go out in that this morning! OK, time to wind this down… Jefferson Starship takes us to the finish line today with their song: Miracles…. If only you’d believe in miracles, baby, like I do, we’d get by… I hope you have a Marvelous Monday, and a very Merry, and Blessed Christmas… Oh, and please Be Good To Yourself! Bye~

Chuck Butler

December 12, 2019

* Currencies & metals rally on Wednesday

* First ECB meeting for Lagarde today… Chuck’s watching… 

Good Day… And a Tub Thumpin’ Thursday to you… On our triple T-day, we will attempt to unravel the mystery of What The Hell the Fed Is Up to! OK, I’m just kidding… I doubt anyone can figure those guys and girls out! Least of all little old me, down here in my basement, at my writing desk, in my little river town outside of St. Louis, Mo! Although I still try to figure them out… My 2nd day being alone… I kept busy… and the day went by fast! With two men in the house for dinner, I made steak and potatoes… I thought about a salad, but… then I unthought about it! HA! I sautéed some mushrooms, for the steak, and Alex and I ate like Kings! The original band Journey, (sans Steve Perry) greet me this morning with their song: Of A Lifetime…  That’s one of those, classic rock songs, that you might have heard, and wondered who is that? Well, now you know! 

Well, the Fed didn’t pull any surprises yesterday, and left rates unchanged… As far as the word on the street that I told you about yesterday, that a couple of Fed Heads were clamoring for a rate hike, Fed Chair, Powell, said, that “ he’d prefer to let inflation rise and hold above the central bank’s target before considering future interest rate hikes.” So, the dollar bulls were sent to the woodshed for the day for thinking that a rate hike would be discussed… Of course we won’t know for sure for a few weeks what was actually said by whom… But for now, the Fed is on hold, with 1.75% Fed Funds rate…

Like I said above, the dollar bulls got sent to the woodshed, and the euro rallied all the way up to 1.1135… For those of you new to class, the euro is the offset currency to the dollar, so if the dollar gets sold, it shows up first with euro strength… I call the euro the Big Dog that sits on the porch, and the other currencies the little dogs that sit there too, but are ready and willing to chase the dollar down the street, but the Big Dog has to get up from its prone position on the porch, first… The little dogs may outrun the Big Dog, once they get going, but they don’t dare move off the porch until the Big Dog does first….

And yesterday, the Big Dog got up and moved off the porch… Now it will be interesting to see if the Plunge Protection Team steps in and limits the dollar’s fall… Which they have been doing lately…

The strong dollar trend has to end one of these days folks, it might as well be now, right? The trends started in 1971… and have been 7, 7, 7, 9, and now 8 years… Seems a little long in the tooth, doesn’t it? By the way it goes like this… Weak dollar, strong dollar, weak dollar, strong dollar, weak dollar, and now strong dollar, so guess what’s next?

Gold took yesterday morning’s $1.75 gain, and said, to hell with that! And gained $9 on the day to end the day at $1,477… Good day… I guess the Fed’s press conference afterward didn’t help the dollar any, and why should it have?  I read an article this morning that said that Central Banks around the world are buying physical Gold and ditching the dollar… This, of course is not new news to us, right? I’ve been telling you this was going on for some time now… But it’s always nice to see someone else notice it, eh? 

OK, enough on the Fed’s meeting yesterday… They are all somewhat suspect if you ask me… I was asked the other night if I like the St. Louis Fed President, James Bullard, and I said, “yes, I think he’s a smart man, but as far as the rest of those guys and gals, I’m not so sure”….

The European Central Bank (ECB) is meeting while I my fat fingers are flying across the keyboard this morning… This will be Christine Lagarde’s first meeting as the head of the ECB…  So, here’s the thing to look for today… Will Lagarde follow in Mario Draghi’s footsteps and throw the euro under a bus this morning, thus knocking it back down? Or… will she begin to carve out her own identity?  I guess we’ll know in an hour or two this morning…

In the meantime, back at the ranch…  the day for reckoning is coming quickly folks… And that day is the one I talked about yesterday, with all the things that could go wrong for the dollar…  Or better yet, go right for Gold! 

Here around St. Louis, BJC, the health conglomerate, announced that they would cut 200 jobs… I understand that to be 200 jobs in their tech area, as BJC is ready to move their IT jobs to oursourcing… Oh great! So, you have kids that went to college to learn IT and thought, “when I get out of college I’ll be inundated with job requests, and then find a job at BJC, only to find out that they are going to cut your job and replace your job with outsourcing… Lucky you… right? I know this stuff has been going on for years, but never in IT…

I was not upset by my youngest son, Alex’s, choice to go to Physical Therapy School, and not IT school, but I was, at the time, thinking that IT was the future… I guess I was wrong, because, Alex, who will graduate in May with a doctorate degree in PT, will also graduate with a pocket full of job offers! I guess he was smarter than his old man, eh?

The recent runup of pound sterling has been interesting, given the roadblocks ahead on the road for sterling… but yesterday saw some selling of sterling, bringing its price back down below 1.32.  The U.K. has seen a rash of rotten economic data this week, things like Industrial Production and manufacturing production… they were not what you would call, economic prints that would garner a stronger currency…  

In the Eurozone today, besides the ECB meeting, the German think tank ZEW printed their Business Sentiment index, and it was a mixed bag-0-nuts, with the outlook picking up, but the current view being negative…  Usually, the ZEW can be blamed for a slight move in the euro, but with it being printed on the same day as an ECB meeting, it was moved to the back burner this morning… 

The U.S. Data Cupboard still is leaving the markets “wanting” real economic data, that it won’t get until tomorrow, when Nov. Retail Sales will print… I think I said this earlier this week, but this Retail Sales report will include the Black Friday Christmas shopping, so we’ll be able to see if the reports of a great day were really bang on…  The BHI (Butler Household Index) indicates to me that this could be a good strong print…  But that’s tomorrow… 

First… today we’ll have to sit through PPI (wholesale inflation) and the Household net Worth numbers…  Yesterday, the stupid CPI printed, and it showed that there was little inflation…  That’s nice… I just received Alex’s last term tuition payment… And the Gov’t is telling me that there’s no inflation there?  Yeah, that thought and a quarter still won’t buy you a cup of coffee! HA!

My darling daughter Dawn stopped by to see me last night… We talked for a bit, and then I asked if she still wanted me to read to her class… Tradition, has always been that the week before Christmas I would go to her kindergarten class and read: The Night Before Christmas… And she gave me the time to be there! So, once again, I’ll be reading to her class… I absolutely love doing this… I put everything I can into reading it, believe me on that!  And the faces of the kids as my voice grows louder, and I say “to the top of the porch, to the top of the wall, now dash away, dash away, all”  I don’t know how Dawn gets them settled down after I’m there, but that’s her problem! HA! 

To recap…  The Fed did as promised and left rates unchanged yesterday, and Fed Chairman Powell, quieted those rumors that a couple of Fed Heads were talking about a rate hike… This news was not taken as good news for the dollar bugs, and soon the dollar was getting sold…  The euro climbed back over 1.11, and Gold gained $9 on the day.   Central Banks are ditching the dollar and buying Gold instead…  That thought is really catching on these days… 

For What It’s Worth…  OK, I’ve beaten this dead horse (no animals were actually hurt here! ) quite a bit through time, and I’m going to go back and beat the dead horse again. I’m talking about the fact that so many jobs that have been created in the last 10 years have been low wage jobs, and that doesn’t help the economy… And this article talks about that very thought, and can be found here: http://www.informationclearinghouse.info/52686.htm

Or, here’s your snippet: “A Brookings Institution study shows 44 percent of all American workers toil in “low-wage” jobs, with median earnings of $18,000 a year. Most of them are adults in their prime working years, whose paychecks provide the main sustenance for their families, 20 percent of which live at below 150 percent of the poverty line. Blacks and Latinos are overrepresented in low-paid employment, but more than half of these bad jobs are held by whites.

The corporate consensus, shared by its monopolized media, is that the economy is booming – which only confirms that the Race to the Bottom is ruling class policy, no matter how much the “liberals” at places like Brookings bemoan the hardships inflicted on the working poor.

Working class precarity is built into the system, by design. Another study, measuring the Job Quality Index , shows that the proliferation of low-paid work isn’t a hangover from the 2008 meltdown, but a characteristic of late stage capitalism. “In 1990, the jobs were pretty much evenly divided” said one of the creators of the index.

“We discovered that 63% of all jobs that were created since 1990 were low-wage, low-hour jobs.” The data show the Race to the Bottom has accelerated for U.S. workers under both Republican and Democratic administrations: the elder and younger Bushes, Clinton, Obama, and now Trump, who is running for re-election on the strength of the economy.
“Precarity is built into the system.”

The duopoly system is a magnificent mechanism of corporate rule and working class ruin. When only corporate parties are permitted to govern, and corporate mouthpieces monopolize the media, capitalist-inflicted misery is made to seem natural and inevitable. The highly-educated researchers at Brookings can imagine only one way out of the downward spiral for those localities where bad jobs are the norm: “attract and grow more high-wage jobs by drawing new companies in and helping existing companies grow and increase their productivity.” In other words, more capitalism, of the more socially-conscious kind. But clearly, the stock market favors precarity capitalism, which it rewards with high returns, and punishes capitalists that don’t immiserate their employees or farm them out to low-wage contractors.”

Chuck again…  Yes, when Chuck says these things not too many people pay attention, but when the Brookings Institute says them, people sit up and listen…  Sort of like that old EF Hutton Commercial… HA! 

Currencies today 12/12/19 American Style: A$ .6892, kiwi .6588, C$ .7587, euro 1.1133, sterling 1.3282, Swiss $1.0175, European Style: rand 14.6523, krone 9.0932, SEK 9.3795, forint 295.87, zloty 3.8450,   koruna 22.9247, RUB 63.48, yen 108.63, sing 1.3566, HKD 7.8055, INR 70.80, China 7.0357, peso 19.12, BRL 4.1323, Dollar Index 97.13, Oil $59.03, 10-year 1.80%, Silver $16.87, Platinum $942.92, Palladium $1,934.90, and Gold… $1,474.73

That’s it for today and tomorrow…  The Big Army / Navy Football game is Saturday… I always take time to watch that game… It’s not the most exciting brand of football, but pageantry, tradition, and all the other stuff make it all worth watching!  I’ll be by myself this weekend, hopefully, I can rest for long periods of time! HA!  Our Blues get back on the ice tonight VS Vegas, and a BIG Saturday Night Special will have the Blackhawks in town… Those games used to be real barn burners…  My beloved Missouri Tigers have a new football head coach… (It’s not who I thought would be good for the program, but I’m sure the AD knows more than I do!)  And there’s just 65 days until pitchers and catchers report to Spring Training! Def Leppard takes us to the finish line today with their song: Bringin’ On the Heartbreak…   I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow… and Please Be Good To Yourself!

Chuck Butler

December 11, 2019

* Currencies drift up and down on Wednesday… 

* Next week could be BIG…. 

Good Day… And a Wonderful Wednesday to you! Well… I attended a holiday party last night that basically is an old Mark Twain Bank reunion, hosted by Frank Trotter, John Dubinsky, and Chris Lissner… I get a kick out of going when I can, because there’s always somebody new to catch up with, and last night it was a former colleague, Janet Rogers! The Usual suspects were also there, with appearances from the wily old veteran, Jack Milner, and too many others to name them all! It was an early evening, and I was able to get home to watch the Blues hockey game, which they lost. UGH! I just can’t stand in one spot very long, and so it was time for me to go! Right off the get-go this morning I must apologize for an error I made yesterday… I said the name of the band was the “Heaters”, and I meant the “Hooters”… Today, The Cure greets me this morning with their song: Almost Heaven…

Well… Today is the day that the Fed’s FOMC meeting will end, and they will announce what it is they are going to do with rates. (spoiler alert, it’s nothing!) And then Fed Chairman, Powell, will have a press conference following the announcement… I mentioned to someone last night that asked me, for I don’t go around parties talking about this kind of stuff without someone asking me, but what they asked was, “do you believe we’ll see negative rates here in the U.S.” Well, at first I was hurt, because IF this person was a Pfennig reader, they would already know that I do believe our deposit rates will be negative in the next year to two years… I pointed out that the Fed, just last week, said they are willing to allow inflation to run up beyond their 2% target… To me that’s greasing the tracks for negative rates… And when that happens, we should see Gold soar!

OK, the currencies, for the most part, saw some buying during the day yesterday… The euro was back to within spittin’ distance of 1.11…  But things in China continue to look weaker and weaker, and those thoughts weighed heavily on the Global Growth currencies, led by what I call the “proxy for Global Gowth, the Aussie dollar (A$).

In the overnight markets we’ve seen some slippage from the levels of yesterday… There was a report last night that the Chinese feel as though the tariffs scheduled to set in on 12/16, will be delayed…  And that gets the dollar bugs all excited… 

When I left you yesterday, Gold was up $5 in the early trading, but much like the day before, when Gold couldn’t hold all of its early gains, it closed up yesterday only $2.50…  So, let’s see, on Tuesday, Gold was up $3 in the early trading and ended the day up $1.50… On Wednesday Gold was up $5 and ended the day up $2.50… today, Gold is up $1.75 in the early trading, what does that mean for the closing price today?  

How much longer can the dollar bugs be on top and have the conn? Well, we could look to next week, when a few things will come together at or about the same time… They include: The Impeachment vote, The new round of tariffs due to kick in, and Quarterly tax payments due… If the banks thought they had a liquidity problem before… just wait for the quarterly tax payments to remove liquid cash from their coffers…

Those all kick in next week folks… So… what are you waiting for? I strongly suggest you call my good friend, and former colleague, whom I call the metals guru, Tim Smith@1-800-926-4922, back up the truck and buy some Gold… or Silver… or Platinum… but I would not be interested in buying Palladium while it’s near $1,900…

The banking situation is unsustainable folks… In 2007-08, the Gov’t had to bail out the banks, and then take on all their toxic debt they had accumulated that no longer had a value worth recording… What will be the flavor of ice cream, I mean bail out, the Gov’t offers up this time around? 

I read a report the other day where the author, an economist, believes that this next downturn will turn into something worse than 2007-08… And while I was reading it, I wondered if, the economist had been handed a printout of the Pfennig, where I said the same thing months ago? Oh, well, nice to see someone side with me… That gets printed!

Well, it seems that everyone that goes before the Banking & Finance folks on Capital Hill, have the same story to tell… When asked about the repo crisis, they say it was a one-time event, and not anything to worry about… But I say differently…  And so do a lot of other people that are following this mess. I have a piece on the repo crisis in the FWIW section today, so you’ll not want to skip over that!  I’m just saying… 

The U.S. Data Cupboard had revisions to the 3rd QTR prints of Productivity and Unit Labor Costs, and both of them got downward revisions! Productivity is now negative at -0.2%, and the Unit Labor Costs, which I told you yesterday that I thought would be revised downward, saw it’s previous figure of 3.6% get revised downward to 2.5%…   these aren’t market moving numbers per se, but…. the Fed Heads have to be wondering where they are going to get the inflation they want to see, if the Unit Labor Costs are falling….   

Today’s Data Cupboard has the stupid CPI report that’s about a useful as a pay toilet in a diarrhea ward!  In addition, the Federal Budget will print. I read a piece the other day that said the Office of Management Budget (OMB) leaked this report and were scared out of their wits, by the size of the Deficit in the first two months of our Fiscal Year…  Our annual Budget Deficit will be more than $1 Trillion this year folks, you can bet your sweet bippie on that! 

And then after those prints, the Fed’s FOMC Meeting will start and end… Bloomberg ran an article this morning that said, that there are a couple of Fed Heads calling for a rate hike… Really?  With the economic data falling down all around us? I shake my head in disgust at their doltness! 

To recap…  Another day of drifting for the currencies, who did move up a bit during the day, only to slip back in the overnight markets… Chuck talks about how much longer can the dollar bugs have the conn…  The Chinese believe the next round of tariffs scheduled for implementation next week, will be delayed…  Hmmm….   The Fed’s FOMC meeting starts and ends this afternoon… no drama is expected, but Bloomberg seems to think that a couple of Fed Heads are thinking that rates need to rise… 

For What It’s Worth… a month or so ago, I received an email from a reader who requested that I keep on top of the repo crisis… And so with that in mind, today’s FWIW is an article on Wallstreetonparade.com and they have done a fabulous job of keeping on top of the repo crisis, and so I’m happy to be able to have them in the FWIW section today, and that article can be found here: https://wallstreetonparade.com/2019/12/congress-held-a-hearing-on-the-feds-bailout-of-the-repo-market-heres-why-you-havent-heard-about-it/

Or, here’s your snippet: “Last Thursday, U.S. Treasury Secretary Steve Mnuchin was the sole witness called before the House Financial Services Committee to answer questions on the state of financial stability in the U.S. Under the Dodd-Frank financial reform legislation of 2010, the U.S. Treasury Secretary also heads the Financial Stability Oversight Council (F-SOC) which is charged with monitoring any threats to the stability of the U.S. financial system in order to prevent a replay of the epic financial crash of 2008 and attendant devastation to the U.S. economy.

During the hearing, Mnuchin was grilled time and again by numerous Republicans and Democrats on what is necessitating the Federal Reserve Bank of New York (New York Fed) to be pumping out hundreds of billions of dollars per week to Wall Street trading houses via the repurchase agreement (repo loan) market.

During last Thursday’s hearing, Mnuchin attempted to pass off the repo loan crisis as a two-day event that occurred on September 16 and 17. The lack of reporting on the matter by the New York Times would tend to support that narrative in the public’s mind.

The reality is that the New York Fed has now pumped a cumulative total of more than $4 trillion into this black lending hole on Wall Street and has been making upwards of $100 billion a day in loans to Wall Street trading houses every business day since September 17.

During the almost three months that the New York Times has not reported on this flashing red sign of a new crisis on Wall Street, the Federal Reserve has dramatically increased its original level of support to the repo market. It has expanded its overnight loans to include loans of up to 43 days; it has increased the dollar amount of overnight loans to as much as $120 billion available daily; and it has announced that it will be buying $60 billion a month in U.S. Treasury Bills, effectively creating a new round of Quantitative Easing (QE-4) – a tactic it has not used since the financial crisis.”

Chuck again… There’s a lot more in the article to read here folks… so, if you’re interested in this ongoing crisis, then I suggest you click the link above.

Currencies today 12/11/19 American Style: A$.6840, kiwi .6548, C$ .7555, euro 1.1077, sterling 1.3238, Swiss $1.0148, European Style: rand 14.7695, krone 9.1683, SEK 9.4395, forint 298.28, zloty 3.8668,   koruna 23.0320, RUB 63.52, yen 108.71, sing 1.3598, HKD 7.8120, INR 70.77, China 7.0354, peso 19.22, BRL 4.1418, Dollar Index 97.53, Oil $58.87, 10-year 1.82%, Silver $16.65, Platinum $922.86, Palladium $1,899.85, and Gold… $1,466.16

That’s it for today…  Billy Joel sang… Mama Leone left a note on the door, said Sonny move out to the country….  I was singing that yesterday late afternoon, when I was leaving a note for Alex, that he was on his own for dinner…  I arrived home last night to see a pizza box on the island in the kitchen, and thought… “Yeah, he’s my son, alright!”  Pizza is the answer to all questions about what to have for dinner in my book!  I’ll have to think of something to make tonight…   OK, I got lost in thought there for a moment, but I’m back now… I was intently listening to the Allman Brothers as they take us to the finish line with their song: Statesboro Blues… I hope you have a Wonderful Wednesday and will Be Good To Yourself! 

Chuck Butler

December 10, 2019

*Currencies & metals drift throughout the day on Monday

* RIP… Paul Volcker… 

Good Day… and a Tom Terrific Tuesday to you! Well… How are you today? Good I hope! I watched a 30 for 30 last night, and it was about the 1983 N.C. State Basketball team. Longtime basketball folks will recall that the late Jim Valvano coached that team with a 10 loss season, to not only the ACC Tournament Championship, but also the NCAA Championship… Jim Valvano died of cancer 10 years after winning it all, and I’ve used his words at the 1993 ESPY Awards as my guiding light through my ordeal with cancer… “To me, there are three things we all should do every day. We should do this every day of our lives. Number one is laugh. You should laugh every day. Number two is think. You should spend some time in thought. And number three is, you should have your emotions moved to tears, could be happiness or joy. But think about it. If you laugh, you think, and you cry, that’s a full day. That’s a heck of a day. You do that seven days a week, you’re going to have something special.

Cancer can take away all my physical abilities. It cannot touch my mind, it cannot touch my heart, and it cannot touch my soul. Those three things are going to carry on forever.”

OK… a long intro today… I’m always touched when I hear or see him make that speech, don’t give up, don’t give up, don’t ever give up… Alrighty then… A band called Romeo Void greets me this morning with their high intensity song: Never Say Never

The currencies and metals did very little yesterday… No data, no Fed Head speeches, and no movement in the currency and metals markets yesterday… That’s fine with me, because that meant that everyone had already forgotten the hype and hysteria regarding the BLS Jobs Jamboree last Friday… All the focus has been redirected to the Fed’s FOMC meeting that will take place tomorrow. There’s no drama surrounding this meeting, as Fed Chairman Powell, told us all 6 weeks ago, that the Fed was taking a pause for the cause with rate cuts… And that further rate cuts would be data dependent…

Let’s see, we saw the Manufacturing Index remain below 50 since they last met… Factory Orders print negative, Durable and Capital Goods print negative, and a whole lot of other data prints come across as not so pretty… The only one that stands out, is the Job report last Friday… Man-o-Man was that a doozie… But, as I explained to some folks yesterday… It doesn’t matter how many jobs you add, if they are for the most part low paying jobs! Part time jobs… and what have you… These types of low paying jobs won’t fuel an economy… And what you get, is people running up their credit cards, because they’re sure they’re going to be able to pay them down, but when the bills arrive, there’s no money to pay them off… And now they’ve done spent what they had, and what will suffer from that besides their losing their self respect? The economy… Because once the card is maxed out… There’s no more spending, and the U.S. economy needs consumer spending to function and grow… I needn’t say more…

Well, I received some strange looks after something I said yesterday… There I was at lunch, and I was asked what my forecast is… Of course, I went into a 5 minute dissertation on debt, and the funny reports out of the Gov’t, and derivatives, and repo markets, and so on and so forth… It was then that I realized something… that I was a dinosaur… I don’t get the fact that video gaming, and having someone watch you play the video game; are big business, nor do I get the idea that to deal with debt your must spend more. Has time passed me by? Does the world no longer work the way I was taught, in school, or at the private lessons from Hy Minsky? I get it… I really do, for what seems to be so darn stupid to me, turns out to be brilliant! So, maybe I am a dinosaur… I still believe that you need to make more than you spend, that economies need recessions to clean out the excesses, that having money is not wealth, that Corporations need to invest in Capital goods, or go bust, and that when you’ve dug yourself into a debt hole, you do not keep digging to get out!

I still believe in the magic of Christmas, spring training, and birthdays ARE to be celebrated! I’ve become more emotional about things since my first cancer surgery, and I truly believe in how family needs to be together, and of course My belief of God…

So… call me T-Rex if you want to, but I’m still going to spout off about debt, bad data, and an economy that can’t seem to get out its own way, and how we’re destined to relive the past… Again, and again, and again… I wanted to get this out there today, because from the look I got at the lunch table, from people younger than me, I realized I had gotten old… Old in my ways, old in my thinking, but I’m too old now to change…

We received word yesterday that Morgan Stanley is going to cut 1,500 jobs from their New York and London locations… Hmmm… Maybe if they had announced that last week, before Fed Head Quarles spoke so glowing about the banks, that maybe he would have backed off a bit with the glow… I’m just saying…

I’m going to remember those two days of talks by Fed Head Quarles as the time goes on and we continue to see the rot on banking’s vine… Speaking of banks… The 5 Minute Forecast, said it pretty good yesterday, I’ll let Dave Gonigam from the 5 tell you… “Lately we’ve been hear an alternative explanation with the certain financial circles: The Biggest banks are refusing to lend because they want looser regulations. In other words, they’re holding the repo market hostage until the Fed and other regulators ease up on their lending rules”…

Chuck again… I have to say that this throw a spanner in the works as far as I’m concerned, because I have thought that it was the Biggest Banks refusing to lend to some bank or banks that were viewed as risky…

As I said yesterday there just isn’t much in the U.S. Data Cupboard until Friday of this week. We will see the FOMC meeting results tomorrow afternoon, but first in a line of 2nd and 3rd Tier data reports, today, we’ll see the 3rd QTR revision of Productivity, and the 3rd QTR revision of the Labor Cost Index… Not too much attention is paid to these two, even though Productivity in the U.S. is down big in the past few years… And judging from the Jobs Jamboree data last week, I would expect the Labor Cost Index to be revised downward…

So, the FOMC tomorrow is the big kahuna for this week…  The Fed Heads are put on hold with their speeches ahed of the FOMC meeting this week. Speaking of Fed Heads… A true Fed Head… RIP… Paul Volcker, the Fed Chief that slayed inflation…  

Longtime reader, Bob, sent me an article last night that talked about the best performing currencies for the past 15 years…  And do you know which one was the top performer for that period?  Well… if you guessed the Thai Baht, you would get a Gold star today!  But seeing the Thai baht being mentioned brought back very bad memories of being on my annual Christmas vacation, and receiving a phone call from the trade desk telling me that that there had been a leadership coup in Thailand, and that all trading of the baht was cut off…  So, for weeks following the coup we had to work our tails off to get rid of the baht that our clients owned, but could no longer hold due to the restrictions on the currency…  The interesting thing about selling the baht after the coup was that it was stronger!  Stranger than fiction, and probably the start of the “opposites rule” stuff we see everywhere today! 

Gold was up $3 in the early trading yesterday, but closed the day with only a gain of $1.50…  The shiny metal is up another $5 in the early trading today, so let’s see if it can hold and add to that early gain today, eh?  I must say that one has to be quite impressed with the price action in Palladium these days… As I look at the metals, Palladium is a hop, skip and a small jump from trading through $1,900… WOW!   As I’ve explained a couple times in the past, this run upward in Palladium is all about a shortage of the metal…  

The U.S. Data Cupboard is still lacking data today, although we will see the 3rd QTR revision of Productivity, along with the 3rd QTR revision of the Unit Labor Costs…  Unless one of those is so far off base it could get picked off by a right hander, they’ll make no difference in the market’s direction today…  When you think about the Jobs Jamboree last Friday, it had some very distressing hourly wage numbers in it, which makes me think the unit Labor Cost Index will be revised weaker today, in case that floats your boat!

To recap…  the currencies and metals moved very little yesterday, which tells Chuck that the markets have already forgotten the hype and hysteria over the Jobs Jamboree last Friday.  It appears that the markets’ focus has been redirected to the Fed’s FOMC meeting tomorrow. Chuck believes that there will be no drama at this meeting, because the Big Cheese, Powell, told us so in the last meeting 6 weeks ago!  RIP… Paul Volcker…   And Chuck realizes that he’s become a dinosaur…  T-Rex…  the most feared dinosaur at that! HA! 

For What It’s Worth…  This morning we have a special treat because you rarely get an interview with John Williams of Shadowstats.com. But that’s what we have for today…  For new readers that don’t know who John Williams is… Quickly, he’s a former gov’t accountant that recalculates data using the old formulas before the hedonic adjustments…  I found this on Zerohedge.com and you will be able to find it there too by clicking here: https://www.zerohedge.com/markets/williams-theyve-effectively-lost-control-system

Or, here’s your snippet: “What the Fed has done with their easing, according to the Fed, is they created a circumstance of sustainable moderate economic growth. So, they don’t need to cut rates anymore. That’s nonsense. You don’t have sustainable moderate growth. For example, look at this last month, industrial production is in a state of collapse… Manufacturing is negative… Oil production is collapsing year to year as oil and gas exploration has plunged. . . . Retail sales have been overstated in employment… That’s going to be revised lower… We have been getting better numbers as of late, and the economy is still falling off a cliff.”

Maybe that explains the Fed’s panic moves with $60 billion a month QE, which it says is not QE, and extreme intervention in the repo market where the Fed routinely pumps out tens of billions of dollars in liquidity a night. Williams says, “The system is not stable, and it probably is insolvent…”

“They blew the system back in 2007. They gave up on the domestic economy to save the banking system…

They spent all their resources propping up the banks, and they are still doing the same thing, and it’s still costing us in terms of economic growth.”

So, the Fed is pumping out billions of dollars every month, and yet, the economy keeps sinking. What does this tell Williams?

“The system is not operating properly. These are stopgap measures, stopgap liquidity that the Fed is putting into the system. If they understood what was going on, they would not be doing that. They wouldn’t have to do it. They have lost control of the system effectively,” says Williams.

Williams goes on to say, “It tells you the underlying system is unstable…”

Chuck again…  yes… John Williams goes on to say, “don’t put too much faith in the good employment numbers that came out last week because “It’s not as happy of a picture as it looks.”   Sounds a lot like me, eh? 

Currencies today 12/10/19 American Style: A$ .6815, kiwi .6545, C$ .7553, euro 1.1080, sterling 1.3240, Swiss $1.0144, European Style: rand 14.7620, krone 9.1877, SEK 9.5289, forint 298.41, zloty 3.8680,   koruna 23.0312, RUB 63.63, yen 108.56, sing 1.3596, HKD 7.8254, INR 70.84, China 7.0370, peso 19.20, BRL 4.1399, Dollar Index 97.57, Oil $58.69, 10-year 1.80%, Silver $16.67, Platinum $907.25, Palladium $1,894.46, and Gold… $1,466.73

That’s it for today…  Back to being alone during the day for the next 10 days… Oh well, worse things could happen! Our Blues get back on the ice tonight in Buffalo in hopes of putting a stop to their 2 game losing streak…  You know… I’ve explained this before, but by writing desk has a board in front of it, that has a ton of pictures through the years, pinned to it… One big one that I see every time is sit down here is a picture of my dad, my younger brother, David, and me sitting on our dilapidated back porch on a summer’s night… I’m probably about 10 in the picture…  My dad looks great…  OK…  The Heaters take us to the finish line with their song: All You Zombies…  My good friend, Rick B. will get a kick out of that 80’s song, and the one that started out day today!   I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself! 

Chuck Butler