Author: admin

Rocktober 1, 2019

* Currencies get sold again in the overnight markets… 

* Apparently Investors don’t really like negative yielding bonds! 

 

Good Day… And a Tom Terrific Tuesday to you!  And welcome to Rocktober! No baseball for me last night, so I read, but not research stuff, I’m currently in the middle of the last of the existing Jack Reacher books, (I’ve preordered the new one out for delivery, later this month) and it had my attention for most of the night. I even skipped dinner, because I was captivated… Well, my choice for Cy Young winner in the NL this year is Jack Flaherty, of the Cardinals, and yesterday he was named pitcher of the month of Sept. You may recall that he was also named pitcher of the month in August! And .091 ERA since the All-Star break, folks… I haven’t seen pitching dominance like this since Bob Gibson… And don’t get me wrong I’m not comparing him to the Great Bob Gibson! OK… It’s Indian summer here in the Midwest, as temps will be hot again today, but the cooling off is coming… And Jimmy Cliff greets me this morning with his song: Hello Sunshine… not familiar with that one? It’s a catchy tune, for sure!

OK, before we get into the goings on in the markets this morning, what a year it’s been for Deutsche Bank (DB) they were raided for a second time this year, just last week… And as I put on my conspiracy hat… And think back to what was going on last week… The banks weren’t lending to each other, and the Fed has to step in with cash liquidity… But… if we look under the hood, here would we find that the banks just weren’t lending to DB? A couple of years ago, in the old defunct, Review & Focus, I spent a whole month’s work on talking about DB’s problems… bad loans, derivatives, etc. etc. Old customers of the now defunct EverBank might still have that copy hanging around… I would reprint it be I wasn’t allowed to take any of that stuff with me when I “retired”….

OK… conspiracy hat is off… but I guess you can read what you want into what I just discussed… The dollar bugs took a breather the rest of Monday after pulling an all-nighter on Sunday night into Monday morning… The euro crept back to the 1.09 handle, and then lost it again in the overnight moves… What’s up with these overnight moves? Or do I say… no, wait! I don’t want to say that, oh, yes you do Chuck, you just don’t know how to say it politely! OK, here’s goes, bluntly as usual because I have no bedside manner…. While things around the world don’t look very stable economically wise, they do seem to be more stable than the currency traders are giving them credit for… And quite frankly, I truly believe that the Plunge Protection Team (PPT) is working the sidelines and sending in plays, to beef up the dollar’s value, ahead of the coming dark clouds for the economy…

So, call what you will… But the dollar bugs sure have had their way with the currencies in the last month… And Henry Kissinger is getting his wish that he made back in 1971, when he warned people in the Nixon administration of the fear of Gold becoming more popular than the dollar… This is in a Wikileaks memo on State Dept letterhead folks… I don’t, and haven’t made this stuff up!

Gold closed down $25 yesterday, and is down another $4 this morning… I don’t want to spoil your appetite for the FWIW article today, which will help explain what’s going on in Gold these past few days… So, I’ll just give you a teaser…  Did you know it’s Golden Week in China?  And besides Russia, who among the major countries in the world has been buying physical Gold by the boat loads?   That’s right, it’s China!  And that’s I’ll I’m going to say, for now about that, but you be thinking about how those two things go together, and then when you get to the FWIW article you’ll give yourself a head slap and say, Wow! I could’ve had a V-8! HA!

OK…  Well, Japan held a bond auction overnight, and well, it didn’t go to well, and that send bond’s around the world down, thus raising the yields and stopping the bond rally that had brought bond yields to their recent lows. I don’t think this will continue and be the absolute end of the bond rally, for the bond boys & girls here in the U.S. are hell bound and whiskey bent to show the stock jockeys that a recession is coming…  But so far, the stock jockeys have their hands in the air and just don’t care! 

In the Eurozone this morning, we saw the September print of their PMI (manufacturing Index) actually moved upward during the month VS August… The move was miniscule, and doesn’t prove anything other than the Eurozone manufacturing is contracting….  For those of you keeping score at home today, the Sept PMI was 45.7, and the August PMI was 45.6…

The Eurozone also saw their core Consumer Inflation figure bump higher by a smidgen too. September Core Inflation was 1.0% VS an August print of 0.9%…   This too doesn’t prove anything other than the fact remains that all the negative interest rates, and bond buying isn’t spurring any inflation here, so why go through all those gyrations?  

I had a dear reader ask me a question the other day, that I thought I would discuss here…  He asked me why the dollar isn’t considered a Petrol Currency, since they now produce so much Oil?   Hmmm, I thought… and thought, and finally came to an answer…  The U.S. shale fracking producers are relatively new to the Oil production game… And the countries that are considered Petrol Currencies have been doing this a long time…  But given the fact that the U.S. does produce more Oil these days, although given my recent claims that shale producers are drying up, and it could be added at some point in the future… 

Later this morning, we’ll finally see some data from our neighbors to the north, Canada…  Canadian GDP for July, will print today…  And here’s where I believe we could see a crack in the 75-cent plus armor that the loonie is wearing these days… I don’t expect the GDP print to be anything to get all lathered up about, and therefore it will bring questions of when the Bank of Canada is going to follow the Fed and cut rates again… That kind of talk won’t be good for the loonie…  But then the loonie has been quite resilient lately… So, it should be interesting today… 

The U.S. Data Cupboard will also have our form of a manufacturing index, which we call the ISM, print today for September… Recall that August saw the multi-month fall of this index number come to rest at 51, just a shade over the line in the sand figure of 50…  So, will the multi-month fall of the number continue in September?  The Eurozone’s index number is 45.7, and they’re in a heap of trouble there, when does that heap of trouble come to our shores?  This month? could be check back tomorrow, for a recap I guess… 

To recap…  Gold is getting hammered this week, while China is on holiday, more on that in the FWIW coming up next! The currencies keep getting sold in the overnight markets, and Chuck thinks that somethings going on there that doesn’t smell right…  Japan held a bond auction overnight that didn’t go to well, apparently investors don’t want negative yielding bonds…  And that caused some worries abroad, but Chuck doesn’t think that the bond rally in the U.S. is over, as the bond boys & girls are attempting to show the stock jockeys that a recession is coming…. 

For What It’s Worth… Well, thanks to the folks at GATA for sending me this link to an article on Zerohedge.com that talks about how China is on it’s Golden Week holiday, which could be the reason the price manipulators are going guns a blazin’ on Gold & Silver… The article can be found here: https://www.zerohedge.com/commodities/gold-prices-plunge-right-cue-china-golden-week-begins

Or, here’s your snippet: “ight on cue, as we detailed here, precious metals prices have been pummeled as China Golden Week begins…
Silver futures have accelerated lower since losing $18… as of today, China will be on vacation for its Golden Week National Holiday and this weakness appears to be traders front-running the traditional chaos that the rest of the world plays when China leaves the playing field.

China will be back in business on October 9th, and that means the Shanghai Gold Exchange, which opened in 2015 to counter Western manipulation of precious metals, will likely help re-balance prices to where they were before this recent takedown.

We could be wrong, but something tells us gold and silver prices won’t stay this low for much longer and that they could well see a complete turnaround when China reopens on October 9th.”

Chuck again… yes in the website article you can see each year the downward movement in the price of Gold during the Chinese Golden Week holiday… So, it makes sense that this is the week to look to buy more or an new position in Gold… I’m just saying…

Currencies today 10/1/19 American Style: A$.6699, kiwi .6225, C$ .7535, euro 1.0905, sterling 1.2280, Swiss $1.0008, European Style: rand 15.2870, krone 9.1160, SEK 9.9040, forint 306.84, zloty 4.0140, koruna 23.6093, RUB 64.77, yen 108.28, sing 1.3860, HKD 7.8403, INR 70.87, China 7.1359, peso 19.77, BRL 4.1567, Dollar Index 99.43, Oil $54.73, 10-year 1.73%, Silver $17.13, Platinum $886.73, Palladium $1,665.70, and Gold… $1,468.53

That’s it for today… This is going to be a short week for me, as I will be heading to the wound center bright and early on Thursday morning, which means there won’t be a Pfennig that day…  No biggie… A few years ago, the tumor in my mouth was so bad, that I contemplated going to Mexico for treatment, for they used the hyperbaric treatment. They’ve come a long way here in the U.S. with the use of hyperbaric treatments for wounds. I’m hoping that this is what’s used on my leg… It’s just been to damn long! sorry for the swear word, but I wanted to emphasize just how long it’s been!  Well, it’s Rocktober…  The air will begin to cool down, and it’ll be time to get the woolies out, and we’ll begin to smell the aromas of bonfires…  Fall is the best weather we have here in the St. Louis area, and Rocktober is the pick month of the fall!  Ok, Neil Young takes us to the finish line today with his song: Out On The Weekend…  It’s from the great Harvest album from the early 70’s…   I hope you have a Tom Terrific Tuesday and please Be Good To Yourself!

Chuck Butler

 

 

 

September 30, 2019

* Currencies and Gold get sold in the overnight markets

* Will the Administration put a choke hold on Capital Flows to China? 

Good Day…. And a Marvelous Monday to you… A Monday that brings us the new Central Division Champions in the NL this year…. My beloved St. Louis Cardinals… They may not make it very much further, although I think they will, but they’ll be forever loved for winning the division on the last day of the season, in style, with a 9-0 win… I sat outside to watch the game on TV, with my neighbor Paul, who was very interested in what was going on… He’s a tennis buff, but still follows the game of baseball, when he’s with me! I smoked some, hand made rub, rubbed Pork Tenderloins yesterday, that I have to say were the absolute best ones I’ve ever made! Everyone wanted my recipe for the rub! I said it has a little bit of this, and a little bit of that, and so on… The Marshall Tucker Band greets me this morning with their song: Searching For A Rainbow… Back in the 70’s, I only loved 2 other bands more than the Marshall Tucker Band…

Well, I have a question for everyone today, so bear with me here… But I want to know, does the rule of law really matter any longer? It sure seems to me that it’s a rule by the seat of our pants kind of situation, and that’s all I’m going to say about that!

The currencies flattened out VS the dollar on Friday… The U.S. data didn’t give the dollar bugs any additional fuel to fire their assault on the currencies… So, they traded in a very tight range on Friday. But… last night was a different story!

Throughout last night, in the overnight markets, the currencies led by the Big Dog, euro, got beaten down by large amounts… But why?  The dollar bugs have no reason to party any longer, folks… The data on Friday was interesting, with Personal Income up 0.4% in August, but Personal Spending was down from 0.5% in July to 0.1% in August… Durable Goods Orders were unchanged from July, but Capital Goods (CAPEX) was negative once again -0.2%… I’m telling you this for the umpteenth time folks… Capital spending is the lifeblood of an economy… Why would I say that I hear you asking? Well, if Corporations aren’t spending money on expanding their businesses with furniture, computers, quarters, etc. then they don’t think the economy is going to be strong enough to support their moves in the future…

A couple of years ago, I made a big deal out of how CAPEX was trending downward, which wasn’t a good sign for the economy, and I had a longtime colleague, Jack Stapleton, yell to me across the trade desk, that I need to keep harping on CAPEX because I was absolutely right!

Stocks were down here in the U.S. on Friday, as they see the writing on the wall too… At least I think they do… Remember, most of the buying in the stock market these past few years has been Corporations doing buy backs of their stock… Well, guess what I read last week? The buybacks have slowed to a snail’s pace… Uh-0h!

But I’m not stock jockey, so I’ll move on… Just wanted to point that out… Gold was only able to eke out a 70-cent gain on Friday… and spent the weekend trading below its 50-day moving avg.  And in the early trading this morning it’s not so good, as the shiny metal is down $13 as I write…

So, the week of engineered takedowns were successful for the price manipulators, but… as I always point out, they are doing procrastinators a favor, but bringing the price back to a cheaper level to buy! So? What are you waiting for?

OK… the week ahead ought to be a really doozy… We have the Impeachment proceedings going on… On the Butler Patio, I would tell you what I think of all this… But not here, sorry…. But I can’t see any of this enticing investors to buy dollars, do you? I’m just saying…

On the Trade War front… have you heard the latest idea to hurt China? The Administration is thinking of limiting investments in China… In other words they would really put the vise grips on capital flows into China, and that WOULD be far worse that any tariffs, folks…  This could be a game changer, and I sure hope the boys and girls that make these decisions think this one out all the way through…  I’m just saying… 

Well, last week, European Central Bank President (outgoing!) (ECB) Mario Draghi, gave a farewell speech if you will, as his reign ends at the end of Rocktober… Which starts tomorrow!    And last week I told you prior to his speech, what I thought he might talk about… And lo and behold, that’s what he did…  Check out this quote from his speech…. 

“At the start of my term in 2011, Europe was still dealing with the aftermath of the global financial crisis. Other financial stability risks – notably those associated with the sovereign debt crisis – were also crystallising. The costs to society from the crisis were substantial.1 By 2013, unemployment had risen by 10 million and EU GDP was some 13% below its pre-crisis trend.” – Mario Draghi, 9/26/19

So, he really went through his term and pointed out the highlights and left the problems, like the continuing systemic risk in the markets, negative rates and bond buying on the sidelines, only mentioning them slightly… 

I have to say that I do believe that Claude Trichet was a better steward for the Eurozone economy than was Draghi… And now the new President will be former IMF head, Christine Le Garde…  Given what I know about how the IMF basically kills a country’s economy when they arrive to help, this can’t be a good thing for the Eurozone economy… But then she hasn’t even sat in “the chair” yet… So, I guess I’ll give her a pass for now, but that background of the IMF will forever hang over her like the Sword of Damocles! 

OK… have you been watching the Chinese renminbi lately… About a month ago, when the Trade War negotiations were hot and heavy, the renminbi was allowed to appreciate, and stop the daily beatings it took previously… But since those negotiations stopped being so hot and heavy, the Chinese have gone back to the daily beatings of the renminbi…  

Of course longtime readers here know that I said that this would be the case as the Chinese attempt to offset the Trade War tariffs.  I didn’t say I thought it was the best idea, and it sure does hurt the other currencies in the Asian region… The Singapore dollar, for instance, is so tied to the performance of the renminbi, that a month ago the Sing dollar was on the rally tracks, and now, it’s been derailed once again…  

The Aussie and kiwi dollars get all caught up in what happens in China too, and their currencies are sinking long with renminbi… 

The price of Oil has really slipped in the last 10 days, and this morning it is trading with a $55 handle… That has really knocked the stuffing out of the Petrol Currencies, folks…  Even the Steady Eddie Russian ruble has seen some weakness in the past week…  The Norwegian krone is back above the 9 handle, and that’s not a good thing, either!  

But… as I always say…. When the dollar bugs take a big bite out of the currencies’ values, that this just allows you to buy more of the currency at a cheaper price!  And there are always investors out there, that realize that they need to diversify their investment portfolios, with currencies and metals, and will look back at their entry points and smile like the Cheshire Cat… 

The U.S. Data Cupboard gets busy this week, with the monthly ISM (manufacturing index) for Sept. tomorrow… Recall that in August this data fell below the line in the sand 50…  So, it will be interesting to see if the index number continues to fall, or, if by some “miracle” it rises back above 50…   On Wednesday we’ll see August Factory Orders, and on Thursday the ADP Employment Report, and finishing up the week with the Jobs Jamboree for September on Friday…   

I spent a lot of time last week talking about the perils the Fed was undertaking in injecting funds into the repo market… I had a dear reader ask me how the repo rate could be higher than the Fed Funds rate? Easily… stay with me here… You see a repo is a loan of funds… The lender can charge whatever he feels is the market rate for the funds… When funds are in short supply, the rate will go up, and vice versa when it’s not… With repo rates hitting 10% at one point, the Fed felt they needed to step in, because, well they know best, right? …. And I saw this written this weekend:

The third quarter ends Monday. So, for the past two days, the New York Fed has run $100 billion overnight repo operations — bigger than the $75 billion daily liquidity injections that began early last week — plus separate 14-day operations. Neither of Friday’s actions were fully subscribed and short-term lending rates are well below the peak seen last week, a sign order has been restored for now.

But on Monday, that larger $100 billion size will be repeated and the overnight operation will run from 7:45 a.m. to 8 a.m. New York time, earlier than prior morning actions. Both signal the Fed is girding for rates to spike again.”

I saw that in an article that you can find it on Bloomberg.com with this heading: The Fed Is Girding for Repo Trouble Monday Even as Market Calms 

OK, before we head to the Big Finish today… I saw a cartoon that absolutely made me laugh so strongly that my ribs hurt! Yes, even someone my size can still feel my ribs! OK… The cartoon was of the 3 blind mice… All wearing shades ala Ray Charles, and each one had a shirt with a single letter on it… The First one was “F”, followed by “E” and then “D”… which spells… FED! Inferring that the Fed are the 3 blind mice! Talk about cracking me up! I sent it off to all the people on my old currency and metals desk. But talk about hitting the nail on the head! 

To recap… The currencies traded flat on Friday, but in the overnight markets they have been beaten down and big bite has been taken from their values by the dollar bugs… Gold has followed the currencies this time too, only gaining 70-cent on Friday, but trading down $13 this morning. The price of Oil has continued to slip causing major pains to the Petrol Currencies. And the Chinese are back to giving daily beatings to the renminbi, which isn’t good for the rest of the region’s currencies… UGH! 

For What It’s Worth… Longtime readers know my affection for publishing guru, and writer extraordinaire, Bill Bonner. Well, last week in his daily letter, he wrote about being ill, and thinking about what he should think about if this were his deathbed… I thought, this is very well written, and I want to highlight it here…. So, you can find the article here: https://bonnerandpartners.com/reflecting-on-our-legacy-before-we-die/

Or, here’s your snippet: “Some people believe there are things they should do before they die. Magazines offer lazy copy about how it is essential to visit the Taj Mahal or the Pyramids.

But what kind of life can be given real meaning by the travel industry? Who really cares whether you’ve been to the top of the Eiffel Tower? Nobody. Not even you.

And who wants to travel, anyway? It is tiring. And you end up in the company of other tourists, all hoping to snatch a peek at staged authenticity without ever really finding out what it is all about. (Unless you are traveling off the beaten path like our colleague Tom Dyson, who writes to you below.)

Or how about big public events? Should you go to the Olympics? The Venice Film Festival? The Rolling Stones’ last concert? Why not? But we doubt it is something you’ll recall on your deathbed.”

Chuck Again… Bill talks about his call back in 2000 when he told his readers to buy Gold and sell the Dow… What a call that was, eh? Well, he’s doing it again, in case you’ve missed class the day I talked about the Gold to the Dow ratio…. Guess you had better check out the archives at www.dailypfennig.com, eh?

Currencies today 9/30/19 American Style: A$ .6755, kiwi .6268, C$ .7548, euro 1.0890, sterling 1.2294, Swiss $1.0039, European Style: rand 15.1983, krone 9.0875, SEK 9.8234, forint 307.44, zloty 4.0195, koruna 23.7003, RUB 64.62, yen 108.00, sing 1.3828, HKD 7.8396, INR 70.61, China 7.1217, peso 19.70, BRL 4.1576, Dollar Index 99.28, Oil $55.40, 10-year 1.69%, Silver $17.24, Platinum $913.58, Palladium $1,692.59, and Gold… $1,485.03

That’s it for today…  A long one today, but I had plenty of stuff to talk about given the 3-day weekend, and really nothing else to do, except go to grandson Braden’s soccer game on Saturday… So, I read, and read, and read… which is a dangerous thing for me… and you I guess! HA! So, my beloved Cardinals head to Atlanta to play the 1st game of a best of 5 series with the Braves… What about our young pitcher, Jack Flaherty? Is he not worthy of the Cy Young this year? If not then you had better already scratch his name on the trophy for next year!  I’m just saying!  The band Live takes us to the finish line today with their song: Sellin’ The Drama… And with that I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler

 

September 26, 2019

* The dollar climbs back into the lead chair… 

* Draghi to give farewell speech… One more chance to diss the euro! 

Good Day… And a Tub Thumpin’ Thursday to you! I did a 180 yesterday, and came back around to feeling human again… And just in time for the weekend, YAHOO! My beloved Cardinals are in a bind, with just 3 more games to play, they still haven’t tied up the National League Central Division… After the 19 inning marathon Tuesday night, into Wednesday morning, they didn’t have any pitchers that hadn’t been used the night before… and on top of that, it was a day game, not a night game with a few extra hours of rest! I’m not happy about this trip to Arizona… and I doubt the Cardinals are either! The Four Tops greet me this morning with their song: Reach Out, I’ll Be There…

So… with me feeling more alive yesterday, I got to do more reading… and researching… and looking under hoods, etc. I did see something, and wondered what caused it… I saw a blurb about how the markets are finally looking at the Fed’s injection of cash nearly every day now for a week, and their re-introducing term repos, as it should be looked at…. Like it’s a different form of Quantitative Easing…

So, lets’ see… In Quantitative Easing / QE, the Fed printed new money and bought bonds…. They did this, so they say, so that the banks would have ample liquidity to make loans, etc. and at the same time get rid of their bonds that had bad loans attached to them… Or just plain Treasuries… So, now let’s look at this repo thing… The Fed is printing new money again, and taking bonds for collateral in short term deals…. Not much different than QE, right? The thing that gets my goat is this…

Long ago, when currencies first were floating, it was thought, and rightly so, that when a country’s Central Bank printed new money to add to the existing money supply, they were diluting the existing money supply’s value… And that would hurt the value of the respective country’s currency… Remember a few years ago when the Fed was printing so much money that they sopped reporting was the money supply number was?

Now, why do you think they did that? Was it because they were narrowing the money supply? HA! So, why doesn’t all this money printing and adding to existing money supply not hurt the dollar? It should be but it’s not! Not one iota of dollar weakness has come about because of this explosion of money supply… You see, I don’t care if the Fed doesn’t report Money Supply numbers any longer… All I have to do is look at the daily injections of cash to the repo market, to know just how much the Fed has added in the last week!

Oh, by the way… The Fed has a $400 Billion plan to rescue the repo market… $400 Billion people! That a Billion with a Capital B, as Ronald Reagan used to say! Hey! I don’t make this stuff up folks! Go ahead and Google $400 Billion Fed plan to rescue the repo market and see what you get, if you think I’m making this stuff up!

So, what happens when they’ve spent all $400 Billion and the banks still need cash? Well, in the old days you would say, they’d just turn on the printing presses again… In today’s digital world, it’ll be numbers entered into a computer that says, Bank A, gets $100 Billion, and so on… The money supply will simply go parabolic, if you will!

OK, enough on that… The dollar still holds the conn over the currencies, but not the metals… The Bond boys are still keeping the 10-year’s yield very low… And oh, remember last week when I have you all that I know about the Oil sector? And I told you that the rig counts here in the U.S. had dropped dramatically? According to the Dallas Fed Reserve’s Oil survey… “Activity in the oil and gas sector declined in third quarter 2019, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—fell to -7.4 in the third quarter from -0.6 in the second quarter. Oilfield services firms drove the decline, with their business activity index slumping to -21.8 from 6.6.”

Hey partner! You don’t have to call me Mr. Tex… Just Tex will do just fine! HA And soon the price of Oil is going to be ratcheting higher, as the heating oil season draws nearer and nearer…

OK, I don’t want to stir up my bursitis so I’ll stop slapping myself on the back for seeing that one before everyone else did! See? Like I said, I did a 180 yesterday!

In another engineered take down of Gold yesterday, the price manipulators said, “neener, neener, neener, we don’t care what the Courts do to us we get a get out of jail free card as long as we keep the support for the dollar going” And they took Gold down by $27.90 on the day… Remember a couple of years ago, when I said I don’t care what the price manipulators do any longer, I’m sick of their blatant moves, and I’m just not going to give them the time of day any longer… For maybe if everyone stopped writing about them, they would stop!

Well, I’ve lost my way again, due to new developments with metals traders getting taken to court, and so on… I really don’t want to have to write about the price manipulation going on… trust me on that one!

I had to laugh this morning at two headlines for articles  One dated 9/24 said, “Impeachment talk sends dollar down”… Then on 9/25 the same site, said, “Impeachment causes safe haven flows to dollar”…    OK, which one should investors pay attention to?   Well, the first one is correct, but they should have said, the dollar should go down…   And the second is also correct in that there are safe haven flows, but there’s only one safe haven that’s being bought… It’s dollars…  

Shoot Rudy, not even U.S. Treasuries are being bought as safe havens, as witnessed by the jump in the 10-year’s yield yesterday from 1.65% on Wednesday morning to 1.72% today… Remember, with bonds, as the yield goes higher the price of the bond goes lower… representing selling… 

We have outgoing European Central Bank (ECB) President Mario Draghi on the speaker circuit today… I would bet a dollar to a Krispy Kreme that he gives us a historical look at his leadership of the ECB, and talk about how he guided the PIIGS through their darkets hours, and kept the light on for more growth from the other Eurozone countries not named Germany. I doubt he’ll talk about how every chance he got he threw the euro under a bus… Or anything else that went bad, choosing to point out his successes only… It’ll be a short speech, if that happens… if you get my drift… OK, Mario, one final chance to make amends with the euro? Can you do that?

The U.S. Data Cupboard doesn’t have much for us today, but what it does have will be interesting, in that the final revision of 2nd QTR GDP will print today… Recall that the last revision was downward, as was the revision prior to that… The most recent revision took 2nd QTR GDP down to 2.0%… Recall, that I said that I thought it should be more like 1.5%? Well, I guess we won’t see it down that low for the 2nd QTR, as it looks like this 2% level is about right… The 3rd QTR will be the one that will end up being 1.5% or lower…. That’s my thought on that!

To recap… The dollar is back with the conn over the currencies… And it makes no sense to Chuck, who once again, proves how old he is, with his take on money supply and the dollar… Gold got taken down by $28 on the day, not by any change in attitude about owning Gold, just a regular engineered take down by the price manipulators, who chanted taunts at the regulators and courts!

For What It’s Worth… Well, I’ve spent quite a bit of time this week talking about the Fed and their injecting liquidity (cash) into the repo market, and how what they are doing is very similar to QE…. Well, this article on Zerohedge.com talks about all that and thought it was FWIW worthy this mroning… You can find it here: https://www.zerohedge.com/economics/dollar-liquidity-crisis-accelerates-month-end-nears-record-92-billion-demand

Or, here’s your snippet: “Following the major ‘over-subscription’ for liquidity this morning, NYFed has decided to dramatically increase the scale of its bailout for both overnight and term repo:

The 14-day term repo operation will have an aggregate limit of $60b (prior similar operation Tuesday had a $30b limit).

The overnight repo operation will have an aggregate limit of $100b (most recent such operation Wednesday had a limit of $75b).

This big increase comes just minutes after Fed Governor Lael Brainard tried to clam nerves by claiming that the recent spike in overnight lending rates, which prompted the central bank to inject billions of dollars of liquidity into the market, was the result of a “simple imbalance” of supply and demand — and not a sign of deeper distress in credit markets.

“It may simply be that we’re close to the lowest level of reserves that are necessary for the conduct of monetary policy,” Brainard said Wednesday in testimony before the House Financial Services Subcommittee on Consumer Protection and Financial Institutions.

“It does pose questions about whether reserves in the system do need to be allowed to grow again.” — Lael Brainard.

In 2008, “counter parties pulled away fromeach other,” Brainard added. “Today we’re in a different environment.”   

As we noted previously, some banks appear to have been simply waiting to get closer to the quarter end before tipping their cards: after all, just like the Discount Window, the repo operation has become the modern “stigmatizing” equivalent, and if reporters or clients get a whiff that a bank is in a dire liquidity state, the consequences could be dramatic.

Never mind though, it’s probably all transitory.”

Chuck Again…  I loved that last line…  Yeah, according to Brainard we should just forget about it and move long for these are not the droids we’re looking for…   And her making that statement just makes me worry about this liquidity crunch even more! 

Currencies today 9/26/19 American Style: A$ .6762, kiwi .6308 , C$.7543, euro 1.0930, sterling 1.2338, Swiss $1.0058, European Style: rand 14.9791, krone 9.0763, SEK 9.7538, forint 305.95, zloty 4.0130, koruna 23.6487, RUB 64.12, yen 107.67, sing 1.3812, HKD 7.8382, INR 70.71, China 7.1233, peso 19.55, BRL 4.1638, Dollar Index 99.08, Oil $56.41, 10-year 1.72%, Silver $17.91, Platinum $931.01, Palladium $1,658.26, and Gold… $1,507.26

That’s it for today…  and tomorrow…  The Cardinals are in a very tight race, so tight, Tupperware would be proud!  Only 3 games to go… Can they hold on?  The next time we talk on Monday we should know!  Ok, I saw my regular doctor yesterday, and he told me that I must have done something right in my life because I have lived for 12 years with Stage 4 cancer… I told him that he wouldn’t believe the number of people throughout the world that pray for me…  and  then  I cracked him up when I said, “I call it better living through chemistry”…  I’ll be seeing a wound specialist in two weeks, for my leg… Finally!  Billy Paul takes us to the finish line today with his great song: Me & Mrs. Jones…  I hope you have a Tub Thumpin’ Thursday today and Fantastico Friday tomorrow, and please Be Good To YOURSELF! 

Chuck Butler

September 25, 2019

* RBNZ leaves rates unchanged… 

* Russian ruble isn’t intimidated by the dollar bugs… 

 

Good Day… And a Wonderful Wednesday to you… Still a bit under the weather yesterday, and ended up sleeping most of the day… I really don’t like wasting days like that, but when the body needs to sleep. You have to let it sleep! I have no answer as to why, suddenly, I’m having trouble dealing with my chemo… But, it’ll have to change soon, or else, it’ll become another search for a new chemo… I had a reader send me a note the other day, and say, that he was unaware that I had cancer… I put that down to being a new reader, and I thank him for his concern… But I’ve been dealing with my Stage 4 metastatic cancer for over 12 years now… I’m proud of myself for conducting myself in a strong willed, manner, to beat back this dreadful disease, but as I grow older, I do believe all the years of taking one form of chemo after another has mad me age faster than I want to… Oh, well, it is what it is, no time to sit and wonder… right? Elton John greets me this morning with a song from his early career, when I thought his music was great… Mona Lisas and Mad Hatters…

Well, it was another non-eventful day for the currencies yesterday, as try as they might to fight back VS the dollar, they just couldn’t get out of the mud they’re stuck in. Gold was back on the rally tracks following Friday’s big gain with a $9.90 gain on Monday. The Dow to Gold ratio that I told you about a couple of weeks ago, is still at more than 17 ounces of Gold to buy the Dow… That means there’s still time to buy before the explosive phase in price that is, begins to work for Gold & Silver… I’m stepping out on a limb here, no worries, a big fat one to support me, and say that when we look back on the Gold & Silver rally, we’ll see that Silver outperformed Gold on a percentage basis…

In the overnight markets, the currencies have lost  a little ground to the dollar, but the Russian ruble remains steady at the wheel, and is not intimidated by the dollar bugs…  You’ve gotta like that in a currency! 

I keep reading about Silver mines shutting down, and the supply for Silver waning, and I keep thinking that one morning I’ll wake up and turn on the laptop, and go to the metals pricing screen, and see that Silver has gapped up to $25… And from there, it continues to soar… Because doesn’t a lack of supply equal a higher price? Don’t tell me that even this adage that has been around since the dawn of time, doesn’t matter any longer! No! I won’t hear about that! Crazy traders that no longer use fundamentals to value assets… What on earth are they smoking?

Whoa, there Partner! You had better slow down here… You were THAT CLOSE to saying something you shouldn’t! I certainly don’t want strangers showing up at my door, asking me to get the car with them and go for a ride!

OK… Well the Reserve Bank of New Zealand (RBNZ ) left their OCR (official cash rate) at 1% yesterday, and in doing so they commented about how Employment is around its maximum sustainable level, and inflation remains within their target range but below the 2 percent mid-point.
Global trade and other political tensions remain elevated and continue to subdue the global growth outlook, dampening demand for New Zealand’s goods and services.

Well… I’m still mad at the RBNZ for their switcheroo on their monetary policy last year, but as time goes on doesn’t all wounds heal? I have one that won’t heal, if that tells you anything! 

Well, it looks as though we’re going to go through the 90’s once again… Remember back then Slick Willy Clinton was our president, and Congress tried to impeach him… but they didn’t have the votes, and now President Trump is going to face an impeachment vote… I doubt that the votes are there to impeach him, but if they are, it would throw the U.S. into political calamity, and currency markets don’t like Political Calamity, just check the most recent bout of this in the U.K. when the people voted for BREXIT, and the PM resigned, and so on… I’m just saying…

OK I’m no political writer, but, this thing seems to be screaming to me that it won’t be good for the dollar… And so I mentioned it…  Other than that, I tap out on political talk… 

The U.S. Data Cupboard today is completely emptied out… Not even a 3rd tier piece of data to offer us today. But yesterday the Markit PMI’s (manufacturing Index) report finally printed, and showed that in August the index rose to 51, from 50.3 in July… I really expected this to show that it dipped below the line in the sand figure of 50, but I guess not… Consumer Confidence also printed and showed a drop from 134.1 to 125.4…  This is for September, so it’s current…   

I’m not one to get all lathered up or sad about what the stupid Consumer Confidence report shows each month, due to the fact that it’s really a check on the pulse of the stock market…  The people they check with to see if they are confident or not, are so hung up on the stock market that if they’ve experienced stock losses, they report that they aren’t confident… 

To recap…  It was a non-eventful day in the currencies, but Gold added nearly $10 to its figure, that’s becoming quite shapely! HA  Chuck goes all high-0 Silver on us this morning. The RBNZ left rates the unchanged, which surprised no one, for they are only 1%…  In the overnight markets the currencies have lost a little ground, but the Russian ruble stands strong against the dollar bulls… 

For What it’s Worth… You know me folks, I’m not going to let these problems for JPMorgan be swept under a rug… The U.S. Regulators called their metals desk “A Criminal Enterprise”… And yet the major media outlets don’t report on this? Tell me why? Oh, I know why, and that’s what this FWIS article is all about today, and it can be found here: https://www.rt.com/business/469340-jp-morgan-spoofing-keiser/

Or, here’s your snippet: “The U.S. authorities were aware that three JP Morgan traders were manipulating precious metals markets from the start and intentionally “looked the other way,” Max Keiser believes.

“Eric Holder, who was attorney general under [former US President Barack] Obama when this first came to light, said that market manipulation and fraud were important for the American economy and that he, as the attorney general, could not prosecute,” the host of RT’s Keiser Report says, calling the JP Morgan fraudsters and the likes “too big to jail.”

“And that too-big-to-jail was part of the legal landscape for America, and bankers were getting a green light to commit massive fraud.”

The fact that precious metals traders at JP Morgan made millions through fraudulent trades, operating a criminal conspiracy to manipulate prices called ‘spoofing’, has been an open secret for years, with Max himself describing the scheme back in 2011.

However, not until this week did the Justice Department charge the traders with fraud, as well as “conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity” – a charge normally reserved for members of an organized crime ring. Max Keiser says the near decade of neglect towards this major case has actually been somewhat of an official agenda for the authorities.

“That was the message from the Justice Department – commit all the fraud you need as long as you support the U.S. dollar.”

“If you need to manipulate the markets and break laws, then we’re going to look the other way because the Justice Department believes that defrauding the markets is sacrosanct with the American way.” Keiser believes the U.S. authorities have always “equated Americanism and capitalism with fraud.”

Chuck again… I know, I know it’s a long FWIW snippet today, but I really wanted to print even more of it! But I think I got the message across… and that is, the message that I wrote about all those years ago, regarding how the price manipulation works, is all coming to roost… I wonder what all those people that doubted me are thinking now? 

Currencies today 9/25/19 American Style: A$ .6763, kiwi .6298, C$ .7532, euro 1.0981, sterling 1.2381, Swiss $1.0131, European Style: rand 15.0258, krone 9.0419, SEK 9.7274, forint 304.94, zloty 3.9991, koruna 23.5513, RUB 63.79, yen 107.44, sing 1.3778, HKD 7.8361, INR 70.89, China 7.1118, peso 19.58, BRL 4.1640, Dollar Index 98.76, Oil $56.21, 10-year 1.65%, Silver $18.49, Platinum $951.42, Palladium $1,662.50, and Gold… $1,526.83

That’s it for today… Still not a good night and morning for yours truly, but I do feel that I’m turning the corner today… I do go see my regular doctor today about my leg… Something’s got to change, this is ridiculous!  What a heartbreaking loss last night for my beloved Cardinals! Their pitcher nearly had a no-hitter, but when that didn’t happen, the game ended up going 19 innings! A marathon game, and then they have to turn around and play a day game today… That’ll be shown on YOUTUBE!  UGH!  I guess I had better get used to this kind of stuff, as streaming games on other outlets seems to be the method of delivery that’s trending upward… Three Dog Night takes us to the finish line today with their song: Mama Told Me Not To Come…   A song that explains what parties were like in the 70’s… I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler

 

September 24, 2019

* Currencies and metals are little moved today

*Chinese give out waivers to U.S. soybean importers… 

Good day… And a Tom Terrific Tuesday to you! I do believe that the Pfennig today will be short-n-sweet, as I spent yesterday, in a shell, as it was one of those days where the chemo gets a hold of me wrings me out. So, I slept a lot to keep from having to face the day!  I think I’m better today, but I really just want to go back to sleep…  Just win baby! The famous line by the Oakland Raiders owner, has been adopted by my beloved Cardinals…  Which is a good thing for them considering the Brewers have adopted it too!  James Brown greets me this morning with his song: Get Up ….  This is a typical James Brown song with great music and a lot of Agggggghhhhh!  

Well, after a quick perusal of the currencies and metals this morning and any corresponding stories, I’ve quickly come to the conclusion that today there’s little going on, no real movement in the currencies and metals, no data, and very little to talk about… That is unless you want me to reiterate what I’ve already said about things…  I know no one wants that, so … short-n-sweet it is! 

My quick perusal of the currencies and metals tells me that the there’s little movement here… The currencies look a little perky, while Gold is down $2 bucks in the early trading…  And the news in the markets is all centered on 2 things…  1. The Chinese have decided to issue waivers to companies importing U.S. soybeans… It’s sort of a get out of jail free card, as they won’t have to pay the tariffs as long as they hold the waiver… 

The markets in Asia saw this as a sign that China may be backing off the full ahead on Tariff and the Trade War.  I guess if I stretch my imagination I can see that too…   

The other thing on the markets collective minds this morning is the news that U.K. PM Boris Johnson was told by the Supreme Court in the U.K. that his suspension of Parliament was done illegally…  Uh-Oh…  That really kicks you in the gut doesn’t it Boris? You just found out that the title of PM doesn’t mean dictator!   

Any-old-way, pound sterling , shrugged off the mess in Parliament, and gained a small amount VS the dollar…  I’m telling you this now, so you’ll listen to me later, the trading in currencies is so strange these days that what’s up is down, and what’s down is up…  There’s no fundamentals used in trading sentiment…  It’s a good thing I’m no longer in charge of a currency trading desk, because I don’t know what I would tell the boys and girls on the desk…  

I received an email from the folks at GATA yesterday that quoted metals guru Egon Von Greyerz, who said, “We have just entered the explosive phase in Gold & Silver”….  He’s talking about an upward move that would “explosive”… I hope he’s right…  I can see it happening, but then I see alot of things that don’t every come to be… 

Like me looking again like I’m 30 years old, and not crippled by Cancer… I dream about that all the time… What’s that telling me?  That I should have never gotten older?  HA!  

The U.S. Data Cupboard yesterday was supposed to yield the Markit PMI numbers but those didn’t print and I’m wondering why? Where they that bad that the propeller heads at Markit were told to “got back and sharpen their pencils?”  Oh well, whatever, it’ll print when it prints…  Today’s Data Cupboard has the July Case/ Shiller Home Price Index (HPI), which has shown price decreases in Homes month after month, and I can’t see how July will be any different… 

The HPI is nice to know, but it’s not a market moving piece of data, and so I truly expect the rest of the day to be like the first part… A non-event… 

To recap… The markets are stuck in the mud, with currencies and metals showing small moves, and nothing else going on…  The Chinese are issuing waivers to soybean importers to waive the tariffs, so good for them. And Boris Johnson found out that being PM isn’t like being a dictator…  The Data Cupboard failed to produce the Markit PMI’s yesterday, and Chuck has a snarky comment about that… 

For What It’s Worth…  I’ve been talking quite a bit about the Repo cash crunch that was going on last week… And so when I saw this article I knew it was FWIW worthy… it’s about The Fed’s Market Operations, and how Goldman believes bond buying is going to be reintroduced in November, and it can be found here: https://www.zerohedge.com/markets/liquidity-scramble-fed-announces-overnight-repos-every-day-next-week-introduces-term-repos

Or, here’s your snippet: “Yesterday we reported that Goldman now expects the Fed to restart Permanent Open Market Operations, i.e., bond purchases, i.e., QE some time in November. For those who missed it, Goldman assumes a roughly $15bn/month rate of permanent OMOs, “enough to support trend growth of the balance sheet plus some additional padding over the first two years to increase the size of the balance sheet by $150bn”, in the process restoring the reserve buffer and eliminating the current need for temporary OMOs.

That strategy would result in balance sheet growth of roughly $180bn/year and net UST purchases by the Fed of roughly $375bn/year over the next couple of years.

However, assuming Goldman is correct, there would be a little over a month before such POMO returned to permanently increase the size of the Fed’s balance sheet, potentially resulting in a continued liquidity shortage for the next 6 or so weeks.

Which probably explains why moments ago, the Fed surprised market watchers who were expecting the Fed to continue conducting only overnight repos, but announcing that not only would it conduct overnight $75 Billion repos every day from Monday until Thursday, October 10, but it would also introduce 2 week term repos with a total size of “at least $30 billion” for the first time since the financial crisis.”

Chuck again… Yes, the Fed is going to introduce 14 day repos and then eventually, they’ll be buying bonds again to give the banks the liquidity they supposedly need… 

Currencies today 9/24/19 American Style: A$ .6792, kiwi .6303, C$ .7542, euro 1.0998, sterling 1.2475, Swiss $1.0114, European Style: rand 14.8843, krone 9.0261, SEK 9.7189, forint 304.78, zloty 3.9872, koruna 23.5052, RUB 63.89, yen 107.70, sing 1.3767, HKD 7.8398, INR 70.77, China 7.1069, peso 19.43, BRL 4.1576, Dollar Index 98.59, Oil $58.09, 10-year 1.71%, Silver $18.54, Platinum $955.97, Palladium $1,658.28, and Gold… $1,520.64

That’s it for today…  I saw my oncologist yesterday, and I must have looked so weak and fragile that she felt sorry for me, and told me to change the way I take my chemo…  In how much, etc.   So, I’ve got that going for me, eh?  5 games to play and the magic number is down to 3, for my beloved Cardinals… Gotta keep going, no time to slack off now!   Head East takes us to the finish line today, with their song: Never Been Any Reason…  My good buddy, Duane, and I go to breakfast from time to time at the Olivette Diner, where the picture for the Album by Head East was taken… Just some cocktail trivia for you…  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

September 23, 2019 

*  Dollar bugs regain the conn on the currencies

* Chinese Trade Delegation cancels trip to the U.S. … 

Good Day… And a Marvelous Monday to you! Exciting weekend for yours truly, as my beloved Cardinals swept the Cubs in Wrigley, four games! All four games were 1-run victories, so a lot of hand wringing was done… Good thing good friend, Duane, came down to watch the games with me, who knows what I might have done without company! 6 regular season games to go, and their magic number to win the division is 4… The division win is the goal because you don’t want to have to play that one and done game for the Wild Card… Melvin and the Blue Notes greet me this morning with their song: if You don’t know me by now….. I few years ago, Dane Moody, a young guy on the currency desk said, “I think I’ve got you stumped on this one Chuck, who sang If You don’t know me by now?” And I replied, “Melvin and the Blue Notes”… He was shocked! He thought he had stumped me! Little did he know that it was one of the many songs on my iPod!

OK… The currencies didn’t have a good day on Friday, and couldn’t hold their small gains they had garnered throughout the week, but Gold showed them how it was done, and gained $18 on the day… I continue to find it quite interesting that even with the dollar gaining ground, it’s basically getting sold to buy Gold… 

Gold’s rise began when it was learned that a Chinese trade delegation cancelled a visit to the U.S. So… just when the markets thought everything was hunky dory regarding the Trade War, they have this thrown at them from left field… Gold is still well bid this morning and has added an additional $2.50 to the $18 it gained on Friday. 

Speaking of Gold… I realized late last week that I had been pretty tough on the Beaver, I mean JPMorgan last week, as the prosecutors called their metals desk was “A Criminal Enterprise”… Well, so that I’m not put down as a JPM hater, let’s just say that they aren’t the only one to blame for Price fixing and manipulation… How about the metals exchanges? They allowed these traders to blatantly rig the metals markets for how long? How about the regulators? The CFTC continually said they saw no sign of price manipulation or fixing…. But remember former CFTC head, Bart Chilton, on his deathbed said that the CFTC did find things, but couldn’t nail down one person responsible… Trust me on this one, JPM was not the only pawn in this chess game to keep the dollar A-number-one in investor’s minds… And that’s all I have to say today about that!

What caused the turnaround in the dollar and currencies has got me a bit by the tail this morning.  All last week, the currencies would book small gains VS the dollar, and then when the Chinese announcement became news, the dollar bugs came out from their wall boards, and began scurrying across the floor, as if the lights were turned on…   

There is a very strange thing going on in the repo market folks, and just knowing this I would have thought that the dollar bugs would be hiding, not scurrying across the floor!  

The cash liquidity crunch continued throughout the week last week, as the Fed had to come to the rescue every day from Tuesday to Friday such is the liquidity squeeze being experienced. Wait! What? I thought that U.S. banks were supposed to be flush with cash? So, how in the world is it that the Fed has had to step in and provide cash liquidity in the repo market every day, except Monday, last week? Something’s rotten in Denmark, as they used to say… And I’m afraid that this isn’t going to turn out to be something that just runs off a duck back! 

Well, what do we have here? It appears that St. Louis Fed Reserve President, James Bullard, called for a deep rate cut last week, and told the local newspaper here, the Post-Dispatch, that to him, “it appears the manufacturing sector is already in recession”… Here’s the link to that article in case you want to read what else he had to say: https://www.stltoday.com/business/local/st-louis-fed-president-explaining-dissent-says-u-s-manufacturing/article_c941d06b-0f28-52a2-8b9c-465ba944e4b6.html#utm_source=stltoday.com&utm_campaign=BusinessNewsletter&utm_medium=PostUp&utm_content=a12874506a3b5805dded6c95af30d7173df7c77a

I have to wonder if Bullard is a Pfennig Reader? I mean, haven’t I already been saying that I think we could already be in a recession? Quite a few years ago now, I attended a breakfast meeting that the CFA people were sponsoring that featured a speech by James Bullard… I wanted to badly to ask him a question or two, but I had a problem with my throat, strep, I believe it was called, and could barely speak out loud, so I had to sit there like a lump on a log, and not participate… It was my one and only chance to confront a Fed Head, and once again my body didn’t allow that!

The price of Oil slipped from Friday, and this morning is trading with a $57 handle… The reason for the slippage is tied to the news that there’s just too many questions about the Saudi’s ability to restore their destroyed by drone attack, Oil production… The Saudi’s claim it’ll be no problem, and observers are saying otherwise…  I think I would side with the observers here… 

Well, things around the world, sans Russia, aren’t looking so bright economically either… This is unofficially PMI week… The week where most countries print their monthly PMI (manufacturing Index)… last night Australia was first to print and their monthly PMI fell below 50… Uh-oh! The Eurozone is next on the docket… Recall their PMI last month, fell below 50… I would expect this number to fall further… The U.S. and other countries will print their PMI’s as we go through the week, but other than that, it’s pretty darn quiet abroad and here in the U.S., that is until we get to Friday, when we’ll see a plethora of data here in the U.S. that really matters… Like Durable and Capital Goods Orders, Personal Income and Spending.

Friday’s U.S. Data Cupboard had the August Leading Indicators, and they weren’t good folks… They prints 0.0%, for not a good economic outlook… I’ve long said that this data and Capacity Utilization are the only forward pieces of data we get… So, we need to pay attention to these two… And both are telling us that things don’t look good going forward…

To Recap… the currencies week of small gains was wiped out in one fell swoop on Friday when the dollar bugs came scurrying out on the floor… The Chinese Trade delegation cancelled their trip to the U.S., and that got Gold on the rally tracks to gain $18 on the day…   Bullard says he wanted a 50 Basis Points rate cut, and that the manufacturing sector is already in recession, And Chuck points out that the goings on in the repo markets sure are strange… 

For What it’s Worth… Some time ago, I told you that the Russians were selling their Treasuries, and allowing them to mature without replacing them, right? Well, this is an article that talks about how they continue to rid themselves of U.S. debt… And you can find it here: https://www.rt.com/business/469064-russia-dumps-us-treasuries/amp/

Or, here’s your snippet: “Moscow has continued to sell off US Treasury securities, cutting its stockpile by $2.35 billion in July, according to the latest US Department of the Treasury data released on Tuesday.
Russia’s holdings of US state debt amounted to $8.5 billion in July, with long-term US Treasury securities standing at $6.2 billion and short-term at $2.2 billion. In June, Russian investment in Treasury bills was around $10.8 billion.

Japan remains the biggest holder of US Treasury securities for the second month in a row. In June, Tokyo held Treasury bills worth of $1.13 trillion, around 8 billion more than it had a month earlier. Japan is followed by China with $1.11 trillion.

Russia used to be one of the major holders of US Treasuries, but since last year it has been steadily cutting the investment in US debt in line with the nation’s de-dollarization policy. Russia is now on par with countries like Oman and New Zealand, which are at the bottom of the list of US Treasury holders.

As a matter of state policy, Moscow has also been diversifying its reserves, increasing bullion purchases to record levels and earning the title of the world’s most committed purchaser of gold. As of September, Russia held the fourth largest gold reserves in the world worth $109.5 billion, according to the country’s central bank.”

Chuck again… not earth shattering news, all stuff we already knew, but just a confirmation that it continues is all… But all you boys and girls new to class, let me explain that the deficit spending by the U.S. Congress has to be financed, and the financing tool they use is the distribution and sale of U.S. Treasuries…  In borrow a quote from Blanch DuBois, “We have always depended on the kindness of strangers”….   so, if there is a problem at the auction window when Treasuries are sold, and not enough buyers show up…  Then what we have here is a major breakdown of the financial system! so, think about that and then re-read the FWIW section again… 

Currencies today 9/23/19 American Style: A$.6772, kiwi .6271, ,C$ .7523, euro 1.0978, sterling 1.2443, Swiss $1.0085, European Style: rand 14.8884, krone 9.0796, SEK 9.7621, forint 304.84, zloty 3.9850, koruna 23. 5724, RUB 63.98, yen 107.47, sing 1.3732, HKD 7.8394, INR 70.78, China 7.0906, peso 19.40, BRL 4.1456, Dollar Index 98.72, Oil $57.89, 10-year 1.69%, Silver $18.40, Platinum $1958.11, Palladium $1,665.11, and Gold… $1,519.48

That’s it for today… A very strong win for my Missouri Tigers Vs S. Carolina on Saturday… Other than the hiccup in their very first game, they’ve looked good to me… Go Tigers! Saturday night I attended a community theater production of Oklahoma! Delaney Grace was a dancer and singer in the production, and she did great! Next for her is the Gateway Production of Matilda, for which she’s excited about doing! Oklahoma was always one of my faves… But, man did the production take forever to get to the end! It was near midnight when we got home! Can you believe the Blues are playing exhibition hockey games already? Pink Floyd takes us to the finish line today with their song: Mother…. I have a poster, that my former colleague, Danielle, bought for me that had a line from the song… Mother should we trust the government? I hope you have a Marvelous Monday and please Be Good To Yourself!

 

 

September 19, 2019

* Currencies continue to inch higher VS the dollar

* BOE meets today, but don’t expect any fireworks… 

Good day… And a Tub Thumpin’ Thursday to you! Well… I brought home a winner yesterday, as anyone that knew I was going to game instructed me to do! Not that I had anything to do with the Cardinals win in the day game yesterday! What a great day I had and all my buds that attended the game with me… We got to see a real pitcher’s duel, with Wainwright, VS Scherzer… You’ve got to love the little guys… The guys that everyone says are too small to play pro ball, no matter what sport. And then go out and prove everyone wrong! The Cardinals have two of those type players… Keep going boys!, keep going! Def Leopard greets me this morning with their song: Pour Some Sugar On Me… In the 80’s when people like me wanted to hear real rock-n-roll and not electric music that was so prevalent in the 80’s, there was Def Leopard, to fill the void!

Well, I was wrong, let’s just get that out there front and center… The Fed’s FOMC did cut rates 25 Basis Point (1/4%) yesterday, bringing our Fed Funds rate to 2%… The Fed then said that they were Not in a rate cut cycle… And that scared the bejeebers out of the stock jockeys, who not only saw the rate cut as a response to slower growth, but also maybe the last for a while… I have to say that I just didn’t think the Fed Heads had it in them to cut rates two consecutive months/ meetings…

But did lower rates hurt the dollar? Not yesterday, as both the currencies and metals couldn’t find a bid to drive their prices higher… Usually, when the Fed cuts rates, Gold would go on a strong rally, and the euro wouldn’t be far behind it… I don’t see why this didn’t happen this time, but… we always have to remember that the Plunge Protection Team (PPT) is always lurking in the hallways and could have been the reason the dollar remained in charge on the day…

So, the Fed is reacting to the weak economic data that I’ve been talking about, but is not going all-in on rate cuts going forward… What they heck do they need? An invitation! I just don’t have any faith in our Fed Reserve folks… they’ve been wrong more than you can shake a stick at, their economic policies are a laughing stock in the markets, and they just don’t seem to see the trees in the forest!

But what Central bank does these days?… Oh, that’s right, there is one… The Central Bank of Russia! And I don’t care what that writer talked about the other day as to why he doesn’t like Central Bank of Russia’s Gov. Elvira Nabiullina, I do like her and her policies, and that’s that!

I have to say right here, that I talk a lot about Russian rubles… and Gold… and just to set the bar straight, I own both… But I don’t talk about rubles because I own them… I talk about rubles because they have the best Central Bank, and current fundamentals of any one in the world… And I talk about Gold, because… well… Got Gold?

Even though the Fed injected newly printed dollars into the Repo market the other day, the lack of dollars continues to be a problem here… It’s a real credit crunch going on and will soon turn to an all-out Liquidity Crisis… The Fed could step in at any time and calm the markets, but other than injecting a large sum of dollars late last week, they haven’t done a thing… But they will… you can count the chickens on that thought, because the Fed always knows best, right? 

My old CFO used to say… “Liquidity is not a problem, until it is”… I think it’s become one folks… and once it sets in… it could very likely be the snowflake that causes an avalanche for the economy… I’m just saying…

Enough of that, eh? No reason to end the week for me on a sour note! So, with that on my mind…  The Bank of England (BOE) is meeting while I write this morning, but once again, I don’t see anything going on here… The data from the U.K. has been patchy… with a couple of better than the average bear prints, and mostly worse than expected prints…  But not enough bad ones to push the BOE to cut rates, which currently stand at 0.75%…  

The Aussie and kiwi dollars both have seen some selling this week, which doesn’t make sense… Sure their rates are still below the Fed’s 2%, but the difference has narrowed, and that should have given some love to the to antipodean currencies… Most of these two currencies weakness comes from the slowdown in China… Other than that, I would think that both have economies that are just muddling onward. Remember I’ve said that the Aussie dollar (A$) is the proxy currency for Global Growth, and the OECD just downgraded their forecast for Global Growth!  

Yes, a global recession seems to be in line, don’t you agree? And the point that I think most Fed Heads miss, here is that there’s no way the U.S. will avoid being pulled into the Global recession mess…   

OK… Gold was up then down, then sideways and then back down yesterday, and ended the day down $6… But it’s up more than $8 this morning, so we’ll have to wait-n-see if there are any more engineered take downs of Gold like yesterday’s….  But none of this surprises me… Remember….  I told you when Gold went over $1,500 that the $1,500 level was the “new $1,300” … And that we would see this back and forth, lathered, rinsed and repeated for some time, until that line broke, and we finished the year at $1,600…   

You know… I was really surprised to see that the Fed Chairman, Jerome Powell, didn’t mention the cash liquidity in the repo market, not once during his press conference following the rate announcement…  What’s up with that? This is a real problem folks, and he doesn’t even mention it? I shake my head in disbelief… 

The Chinese renminbi continues to inch stronger VS the dollar… A couple of weeks ago, it appeared that the renminbi was falling off a cliff, and today, it appears to be on terra firma, still weak, but not as weak… And that doesn’t get lost to the folks at the Monetary Authority of Singapore (MAS) who keep the Singapore dollar in line with the renminbi, as to not lose any competitive advantage in exports…  This has gone on since the renminbi began to be available to the world, I do believe it was 2003…  Or some time around then… I recall because we were the first U.S. bank to allow U.S. investors the opportunity to hold renminbi…  

The euro has been through the wringer lately, but is still standing, and this morning it’s trading a bit stronger VS the dollar…   The eurozone economy is a real mess folks… Shoot Rudy, even Germany is seeing problems, and that’s the largest economy in the Eurozone!  Too much debt in the Eurozone, folks… It’s a real problem for any country to deal with, and also find ways to promote growth… Japan had the problem first, then the U.S., then the U.K. and then the Eurozone… 

The U.S. Data Cupboard doesn’t have too much for us going into the weekend… Leading Indicators is about the only real piece of economic data that is on the docket for tomorrow…   There is one other piece that always catches my attention… and that is Household Debt…   This will be a revision of an earlier print of 2nd QTR Household Debt…  I’ve written a lot about Household debt, and am convinced its a house of cards that will come crashing down on those holding debt  that they can’t afford to have, at sometime in the future… 

To recap… The currencies continue to inch higher VS the dollar, Gold got sold by $6 yesterday, but is up more than $8 this morning.  The Fed failed to mention the cash crunch in the repo markets yesterday? Do you think that they did that on purpose?  I do…  

For What It’s Worth…  Well, I’ve talked a lot about the cash crunch that’s going on in the repo market, and then saw this article that explains what’s going on, and thought why not use it as my FWIW?  So, anyway, here’s the link to the article: https://www.economist.com/finance-and-economics/2019/09/18/why-the-fed-was-forced-to-intervene-in-short-term-money-markets?cid1=cust/dailypicks1/n/bl/n/20190918n/owned/n/n/dailypicks1/n/n/NA/310979/n

Or, here’s your snippet: “THE FEDERAL RESERVE had plenty to fret about as it prepared to discuss policy interest rates on September 17th and 18th. Trade tensions and wilting global growth have led businesses to cut back investment in the second quarter of the year. In manufacturing, production and capacity utilisation have been falling since the end of 2018.

Though the Fed has described jobs growth as “solid”, some analysts worry that the labour market is wobbling. As expected, these concerns prompted the central bank to lower rates for the second time this year, by 0.25 percentage points, to a target of 1.75-2%. But the meeting was overshadowed by turmoil in money markets.

On September 17th, for the first time in a decade, the Fed injected cash into the short-term money market. The intervention was needed after the federal funds rate, at which banks can borrow from each other, climbed above the level targeted by the Fed. It rose as the “repo” rate—the price at which high-quality securities such as American government bonds can be temporarily swapped for cash—hit an intra-day peak of over 10%. On September 17th the Fed offered $75bn-worth of overnight funding, of which banks took up $53bn. The following day it again offered $75bn-worth. The amount demanded by banks rose to $80bn.”

Chuck again…  liquidity is real Bear when it’s no longer present in a market…  And so far the Fed’s reaction is akin to having the same effect as removing a bucket of sand from a beach!

Currencies today 9/19/19 American Style: A$.6795, kiwi .6313, C$ .7531, euro 1.1070, sterling 1.2463, Swiss $1.0070, European Style: rand 14.6693, krone 8.9377, SEK 9.6885, forint 300.50, zloty 3.9208, koruna 23.3873, RUB 64.30, yen 107.95, sing 1.3770, HKD 7.8290, INR 71.17, China 7.0863, peso 19.38, BRL 4.0868, Dollar Index 98.26, Oil $59.15, 10-year 1.77%, Silver $17.87, Platinum $933.30, Palladium $1,591.85, and Gold… $1,502.16

That’s it for today and tomorrow, talk to you again on Monday… And we’ll begin the last week of September… What a pleasant surprise yesterday we sat in the shade all day at the stadium, so no sweating bullets for me!  It’ll be a wild and wacky weekend in Chicago starting tonight…  Just 10 games left in the regular season, and 7 of those games are with the Cubs! YIKES… Supertramp takes us to the finish line today with their song: Hide In Your Shell…   one of my all-time fave songs….  I hope you have a Tub Thumpin’ Thursday and a Fantastico Friday tomorrow, and please Be Good To Yourself! 

Chuck Butler

September 18, 2019 

*Currencies get off the mat, but the gains were small!

* Chuck dives into his knowledge of Oil…  (it won’t take long! HA!)

Good day… And a Wonderful Wednesday to you! Well, the team that can’t hit, proved once again last night that their lack of hitting causes losses! UGH!, But another day off the calendar, and my beloved Cardinals still hold a 2 game lead on both the Cubs and Brewers… The Cardinals, and their inability to hit the ball, will face St. Louis native, Max Scherzer in the day game today, of which I’m going to be in attendance, sweating pounds off me, because it’s been hotter than hades here the past week! But that’s OK with me, I’ll be at a day game, and longtime readers know I love day games! The Stone Temple Pilots greet me this morning with their song: Interstate Love Song…

Well, it was another day of ups and downs in Gold, the price of Oil slipped, and the currencies moved upward just a smidgen… Today is the day the Fed’s FOMC meets… I truly don’t believe the Fed heads have it in them to cut rates at two consecutive meetings, and so it’ll be up to them to prove me wrong! But like I’ve said a couple of times now, the important thing will be the Fed Chairman, Jerome Powell’s, press conference following the announcement… And since I did so good at mind reading what Mario Draghi was going to say last week, I’ll give Powell a shot here…. I think he’ll talk about how the economy is still strong in areas, and that the Fed just didn’t see the need to cut rates again, but will be watching for signs of weakness, and will be ready at the wheel, to cut rates if needed in the future…

If that’s basically what he says, then it won’t make the stock jockeys happy, or the bond boys happy, or the markets as a whole… It will make the dollar bugs happy though, as it should be enough to send the dollar higher… the dollar did see some selling, not much, but some yesterday, as we get closer to the Fed decision announcement. The Price of Oil slid a couple of bucks, as the Oil shock fears have subsided… And this I have to question… This attack on the Saudi Oil reserves is going to disrupt the supply line of Oil for a long time before it is restored to normal… And I’m telling you this now, so you can listen to me later… The U.S. Shale Oil Producers are hurting…

I do not vision myself as an expert on Oil… Folks, but I do read about it all the time, and think that Shale oil production has gone flat, the rig-count is down, companies are going bankrupt, and financing for these debt-dependent operations because, as you know, new banking regs require a loan to an entity to be repaid, and these entities are having a difficult time booking profits, much less paying back loans… . Add to that the fact that these Shale Oil fields dry up in about 2 years…

Then there’s a difference between Shale Oil and traditional Oil at the refineries, which is a long drawn out explanation, that for this letter is not going to happen, so just know that there are differences and causes Shale Oil to be more expensive to refine… 

So, inflation rising with higher gas prices could be in the future, as well as we are entering the heating Oil season… I’m just saying…

OK… Well, speaking of inflation… In the U.K. this morning their August retail price inflation figure was 2.6%, down from 2.8% in July, and that has the pound sterling trading sideways this morning…  Yesterday, the German business Confidence as measured by the think tank ZEW was better than expected  and experienced a sharp rise in September 2019, making up for the significant decline we saw in August…  

The Better than the average bear ZEW helped the euro off the matt yesterday, but today it too is trading sideways VS the dollar…  It’s funny, not funny ha-ha, that I keep seeing articles this morning that say the dollar is weaker going into the Fed’s FOMC meeting today… but you wouldn’t really know that to be the truth if you checked the Dollar Index, which today is trading at 98.42, and yesterday morning it was 98.59… So, weaker yes, but by a significant amount… I don’t think so! 

The price slippage in Oil pushed the Russian ruble weaker overnight and it is trading back over the 64 handle…   But I believe this move to be only temporary, folks… There’s just too many unknowns in the Oil sector right now, for this leading Petrol Currency to be sitting on the sidelines… 

Have you noticed in the currency roundup that the Swiss franc is back above parity with the dollar?  I go back once again to my conversation with Rob Vrhijof, last month when he said that he thought that going forward the franc would be a better currency than most…  You may recall that I questioned that thought because of the negative deposit rates in Switzerland, but lo and behold, the franc is pushing higher…  Go figure!

Here in the U.S. there’s been a BIG Problem going on in the Repo market…  For those of you not aware what REPO is, it’s simply the short version of the Repurchase market, where an entity, mostly banks, lend cash to another entity and the receiver of the cash , delivers U.S. Treasuries to the lender… It’s really a riskless business, unless, of course there isn’t enough cash, or Treasuries to accommodate the Repo Market…

Well, last week, the Repo market saw a spike in the repo rate of interest that’s paid for the loan..  As you would suspect, usually the Repo Market is in line with Fed Funds, with a little wiggle room… But last week rates spiked! The graph shows a straight line that seemed to go to the moon!

So, what’s going on here? Well, remember my conversation last week that I said years ago, a good friend asked me what the next problems were for the U.S. and I said, “1. liquidity crisis, and 2. Underfunded Pensions?  And what we have here is a good (really bad) old Liquidity problem…  There wasn’t enough cash around to accommodate the market… The Fed immediately saw this as a HUGE problem and stepped in with a cash infusion of $75 Billion…  

I have a problem with this action by the Fed… You see, where does the Fed get its money?  Oh, that’s right, it doesn’t have money, and when it needs money it prints it… OK, there’s no actual printing that goes on these days, it’s an entry on a computer, but we still say “print” because they produced dollars out of air…  Did they ask you, or me if we thought this was a good idea?  HAHAHAHAHAHAHA! As if!

The price of GOLD gained a measly $3 yesterday… It seems lately that in the overnight markets Gold rallies, and in the U.S. market it gets sold… Dare I say that this makes sense given the price manipulators are here in the U.S. ?  

Well, most of the articles on the internet this morning say that they expect the Fed to cut rates today…  I just don’t see that as something they are prepared to do…  Now, when the calendar turns over to 2020, there will be a few hawks leave the FOMC and a few doves will take their place…  This may seem like a no big deal, right? But… think about that… The recession will likely be in full metal in 2020, and the FOMC members will be mostly doves, who like to cut rates… Is this when we go negative?  YIKES!

 Speaking of the next recession (that may already be here!) I was reading yesterday and came across this quote… check this out…  I just loved the quote from publishing guru, and writer extraordinaire, Bill Bonner yesterday in his daily letter… “Many parts of America are already in recession. As for the country as a whole, the geriatric expansion is still dangerously tottering along – like a senile man with a valid driver’s license. We don’t know what ditch it will end up in… or when… but readers are cautioned to stay off the road.” – Bill Bonner

Many years ago, I used the phrase that the economy was like a car traveling on an icy road, the only question was not if but when was the car going to meet a guardrail…    I think that’s apropos now, eh? 

The U.S. Data Cupboard saw the August print of Industrial Production rise better than expected, which was a BIG surprise to me… But then this data can be volatile at times with Airplane purchases and stuff… So, I’ll just write this off as a blip, and get ready for another negative print in Sept.

Today’s Data Cupboar is really just about the FOMC Meeting… So, we have that going for us, eh?  

To recap, The BIG news today is that the Fed’s FOMC will meet and according to Chuck they’ll bypass a rate cut, but according to most pundits on the internet, the Fed will cut rates today…  So, what’s it gonna be boy? HA! Gold gained a measly $3 yesterday… The currencies got up off the mat VS the dollar, but the gains were very small, and the price of Oil slid downward, and Chuck has lots to say about Oil this morning… 

For What It’s Worth…  Yesterday, I told you about the 3 JPMorgan metals traders that were being charged with price fixing and manipulation of Gold & Silver…  And that news caused some people to think that JPMorgan CEO, Jamie Dimon might be in trouble…  And then the GAT folks sent me a note from Pam and Russ Martens about this, and I said, now that’s FWIW! So, here’s the article: https://wallstreetonparade.com/2019/09/will-jamie-dimon-finally-lose-his-job-over-racketeering-charges/

Or, here’s your snippet: “Yesterday, three traders at JPMorgan Chase, the bank headed by Jamie Dimon, got smacked with the same kind of criminal felony charge that was used to indict members of the Gambino crime family in 2017. The charge is racketeering and falls under the Racketeer Influenced and Corrupt Organizations Act or RICO. According to the Justice Department, the traders engaged in a pattern of rigging the gold, silver and other precious metals markets from approximately May 2008 to August 2016.

One of the traders, Michael Nowak, was actually a Managing Director at the bank and the head of its Global Precious Metals Desk. The other two traders are Gregg Smith and Christopher Jordan.

RICO is typically used to indict mobsters – which makes its use against employees of the largest bank in America a very disquieting event. But even more disquieting is that two trial lawyers compared JPMorgan Chase to the Gambino crime family five long years ago and recommended in their 2016 book that the bank’s officers be prosecuted under the RICO statute. “

Chuck Again… Wow!  Ok, yesterday, I made the point that until one of these guys goes to jail the dirty deeds will continue… but IF the head honcho got dragged into the proceedings, that would cause some major disruption in the price manipulation business, don’t you think? 

Currencies today 9/18/18 American Style: A$.6833, kiwi .6334, C$ .7540, euro 1.1046, sterling 1.2463, Swiss $1.0043, European Style: rand 14.6367, krone 8.9606, SEK 9.7123, forint 301.27, zloty 3.9277, koruna 23.4364, RUB 64.17, yen 108.20, sing 1.3744, HKD 7.8299, INR 71.14, China 7.0885, peso 19.35, BRL 4.0829, Dollar Index 98.42, Oil $59.00, 10-year 1.77%, Silver $17.85, Platinum $936.21, Palladium $1,597.32, and Gold… $1,501.55

That’s it for today…  Well, I’m excited to get to go to the day game today… I’ll be with some good friends, and if the sun doesn’t get to us, a grand time will be had by all! I just know it! OK… Yesterday, I made an error when I said that my darling granddaughter was in the final 7 for a the Madeline play, but it was the Matilda play! Hey! I don’t know these things, Madeline, Matilda, crazy!  I’ll go see her in a local production of Okalhoma this weekend…  So, I’m getting unindated with literature about Medicare and Medicare supplements… Crazy, like the credit card companies that are relentless when  kid turns 18, and so on…  I look forward to the process of choosing the right company…  And with that… The Who, takes us to the finsish line today with their song: Behind Blue Eyes…  I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler 

September 17, 3019 

* It’s all about the dollar again this week… 

* Is the Fed about to disappoint the markets? 

Good Day… And a Tom Terrific Tuesday to you! My beloved Cardinals got back on the winning side last night, but the problem remains the same… They don’t hit very much! 12 games to go in the regulars season… And The Cards have only a 2 game lead on the Cubs… with 7 of our last 12 games VS the Cubs, it’ll be a showdown at OK Corral! I promise that today’s letter won’t be as long as yesterday’s, as I had woken up around 4 am, took my chemo, as usual, and instead of going back to sleep for a couple of hours, found I couldn’t sleep, so I went downstairs to write… And write I did, my poor fat fingers were plum tired! HA! Golden Earring greets me this morning with their song: Radar Love… Which happened to be one of the best driving songs there is! But if it come on, while driving, make sure you set the cruise, otherwise you might find yourself going way too fast!

The currencies didn’t have a very good day VS the dollar yesterday, and neither did Gold, as it couldn’t hold the $1,500 figure once again…  We started the day with Gold up $20, then it slipped to $16 while I was writing, and then to end the day it held only a $10 gain…  Back and forth, back and forth, Gold goes… The price manipulators are feeling the heat these days with more charges being brought on JPMorgan traders for price fixing and manipulation, more on that in the FWIW section today, but that’s not stopping them from their brazen attacks on Gold & Silver on a daily basis… I love seeing the stories being printed about price fixing and manipulation being handled by the courts… But as I told a dear reader who emailed me: “These findings and fines on the price manipulators aren’t going to stop them… Not until somebody goes to jail, will a dirty trader think twice about what he’s about to do…”

Throw them all in Jail, as far as I’m concerned! I would be a very mean judge, folks… You did the savers wrong? Go to jail!, you lied to investors?, Go to Jail, you tried to make other people look bad, for your own leverage? Go to jail! I’m telling you, the Gov’t would have to build new jails, because these guys wouldn’t be going to The Hilton! No about 50 years of hard labor will make them think twice about all the money they cost investors over the years!

OK… I’m back now… sorry, but got all up in my craw, about these price manipulators! Again, I have a good article on the latest developments for you in the FWIW section today, so don’t skip through it! That is unless you’re one of those naysayers that still say there’s no price manipulation going on in the metals…

Recall yesterday, I said that there were reports that the Saudi’s had asked the U.S. for some of their Oil reserves to make deliveries after their Oil supply took a hit late last week by drone attacks. Well, President Trump has allowed the Saudis to tap the reserves, to even out the price of Oil, but instead, the price of Oil continued to rise throughout the day. The dollar got it’s wings from this announcement that the Saudis would have to buy U.S. Oil… And that’s what sent the currencies to the woodshed yesterday…

The only Petrol Currency to keep the Oil Price jump rally for its respective currency is the Russian ruble…  The ruble went below the 64 figure last night. Again, this is still a far way from the 35 it used to trade with, but baby steps are what’s called for… I’m just saying… 

I read an article from a guy last week who wasn’t as big of a fan of Elvira Nabiullina, the CBR’s Gov. His biggest complaint was that she was keeping rates too high, and holding back the economy… Even though she’s been behind all the rate cuts that took rates from 10%, down to 5%… (retail rates) He just wasn’t happy with her… I quickly deleted the article, and thought, well to each their own opinion, but I would much rather have a Central Bank that didn’t debase their currency with rates cuts that go to zero!

Yesterday, I gave my usual epistle on the euro being the offset currency to the dollar… And a recent report from the BIS (Bank for International Settlements) (you know the guys that do all the Gold swaps that hurt Gold’s price too!) , and the euro remains the number 2 traded currency, with the dollar holding on most of the percentage numbers… The yen came in 3rd… But I’ll give you a gold star if you can tell who came in 10th place! Give up? It’s kiwi… WOW! I said when I read the report… Little old New Zealand, playing on the same field as the BIG Boys in the world! And then I thought, it’s too bad that kiwi doesn’t have a strong & prudent Central Bank like it used to have… Those days are long gone, along with every other Central Bank in the world, except…. The CBR… Central Bank of Russia… And I’m just saying…

In the foreign markets… The economic data continues to dribble in a piece here and a piece there, but we will see the latest Confidence reports from the think tank ZEW today, and in New Zealand, later they will print their Current Account Balance… Should be good!

So, once again this week, we’re looking at it all being about the dollar… The Fed meets on Wednesday, and it’s all centered on where rates will go, and what the dollar bugs will do when the announcement is made… I said yesterday, that I’m not of the belief that the Fed will go back-to-back, belly-to-belly, with rate cuts… But then you never know, right? Jerome Powell’s press conference following the rate announcement will have the most attention paid to it, on the day…

The U.S. Data Cupboard today will have the August prints of Industrial Production and Capacity Utilization, both on my list of real economic data…  You may recall that July’s prints for these two were not good, with IP printing negative -0.2%, and CAPU falling…  The bear in me says that these two will remain disappointing at best… But I doubt the markets will pay much attention to them, as they are all grearing up for the Fed’s FOMC meeting tomorrow… 

Further on… I read where the GM employees are going on strike…  We have a spike in the price of Oil…   What is this 1973?  I laugh, because in 1973, I was starting out my career in the investment arena… Leisure suits, and bell bottoms were the rage, so, I’m hoping that the Oil price spike and the GM strike are the only two things that come back from the 70’s! HA! 

To recap… Gold rallied then got sold… the price of Oil rose some more… And the currencies lost ground to the dollar on the day… The President said the Saudis can tap the Oil reserves, and that got the dollar bugs all lathered up… And then there’s some other stuff that Chuck talked about today, but that’s the gist of today’s letter!

For What It’s Worth… OK, as promised here’s an article about 3 more JPMorgan metals traders being brought to court to face charges of price fixing and manipulation… And it can be found here: https://www.cnn.com/2019/09/16/investing/jpmorgan-precious-metals-price-manipulation/index.html

Or, here’s your snippet: “Three JPMorgan Chase traders in gold and other precious metals have been charged with alleged market manipulation by the US Department of Justice.

The alleged conduct spanned eight years, the Justice Department said Monday.

The government charged Gregg Smith, an executive director, and Michael Nowak, a managing director and head of the bank’s global precious metals desk. Both were current employees as of Monday morning, government officials said.

The third person charged is Christopher Jordan, a former JPMorgan employee.

JPMorgan declined to comment on Monday. Instead it referred to a previous public filing in which it said it “is responding to and cooperating with these investigations.”

Between 2008 and 2016, Smith, Nowak and Jordan allegedly manipulated prices of gold, silver, platinum and palladium futures traded on the New York Mercantile Exchange and the CME Commodity Exchange.

“Smith, Nowak, Jordan, and their co-conspirators allegedly engaged in a complex scheme to trade precious metals in a way that negatively affected the natural balance of supply-and-demand,” William F. Sweeney Jr., FBI assistant director in charge of the FBI’s New York field office, said in a statement.

The government claims the defendants engaged in “widespread spoofing, market manipulation and fraud” by placing trade orders they planned to cancel before executing them, according to a Justice Department statement. The aim “was to trick” other traders into buying and selling futures contracts at prices and at times they wouldn’t have otherwise done, the Justice Department alleges.

“We will follow the facts wherever they lead, whether further up in the banks or to other institutions,” said Assistant Attorney General Brian A. Benczkowski in a call with reporters.

The US Commodity Futures Trading Commission also filed a civil enforcement action against Smith and Nowak on Monday.”

Chuck again… Yeah, of course they are innocent until proven guilty, but like I said, until someone goes to jail this will all continue…

Currencies today 9/17/19 American Style: A$ .6840, kiwi .6330, C$ .7542, euro 1.1023, sterling 1.2417, Swiss $1.0055, European Style: rand 14.7652, krone 8.9567, SEK 9.7075, forint 302.84, zloty 3.9375, koruna 23.4976, RUB 63.93, yen 108.12, sing 1.3760, HKD 7.8234, INR 71.72, China 7.0677, peso 19.48, BRL 4.0841, Dollar Index 98.59, Oil $62.05, 10-year 1.81%, Silver $17.88, Platinum $935.41, Palladium $1,596.57, and Gold… $1,504.37

That’s it for today… See? I can keep a promise to keep today’s letter shorter! Good luck to my darling granddaughter, Delaney Grace, who is in the final 7 in the audtions for Madeline, the play…  Daughter Dawn sent me a picture of her all dressed up for the school dance team last week… I can’t for the life of me believe that she’s in middle school !  I must be getting older than Methuselah! Can you believe that hockey has started their exhibition games schedule? Didn’t we just have a parade here for the Stanley Cup Champion Blues?  Or did I dream that?  HA!  Firefall takes us to the finish line today with their song: Just Remember I Love You…  Something that you should say to your loved ones every day!  I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

 

 

September 16, 2019

* Saudi Oil supplies take a hit from a drone attack!

* Oil soars, the Petrol Currencies follow, and Gold soars… 

Good day… And a Marvelous Monday to you! What started out to be a great weekend for my beloved Cardinals turned into a dud… UGH! But the weather here was absolutely fantabulous, with plenty of warm sunshine to go around to everyone! My Missouri Tigers won their 2nd of 3 games so far this year on Saturday, with a win over an early season cupcake… The BIG News from this weekend, is the report from Saudi Arabia that drones attacked their pipeline and knocked out a huge chunk of the Saudi’s Oil supply… So, more on that, and other things as we start the week today with the Allman Brothers greeting me with their song: Ramblin’ Man… This was the Allman Brothers first hit song, that got played on the radio… Of course FM listeners like I was back then had heard plenty of Allman Brothers songs by the time this song was a hit!

OK… Well, I can tell you that there are lots of blame fingers being pointed at the perpetrators of the drone attack… I can also tell you that the Saudi’s are thinking about asking the U.S. to release some of their reserves so that the Saudi’s can make deliveries… So, it’s a BIG deal folks… And the price of Oil has soared to a $61 handle, after trading last Thursday morning with a $55 handle! Now, the Saudi’s calmed things down a bit, by saying they could have their production back on line by Monday, and the price of Oil slide back to a $59 handle, but still a strong move since last week! 

And the thing that I really care about, is the Petrol Currencies, led by the Russian ruble and followed up the ladder by the Norwegian krone, Brazilian real, and a few more… The Canadian dollar/ loonie didn’t see any gains on the day Friday, as the recent data from Canada is beginning to become iffy…

But I don’t see how this jump in the price of Oil won’t eventually help all the Petrol Currencies gains VS the dollar… I just don’t’ see it as something that won’t happen… Not with the price of Oil spiking, and fears of an all out war in the Middle East, that could disrupt Oil production , could come of all of this… I did say “could come” Maybe calmer heads will prevail… But since when does that get in the way of a reason to fire guns, drop bombs, etc. ?    Got Gold? 

I left you last Thursday morning, right after Mario Draghi, European Central Bank (ECB) President made his announcement that the ECB was going deeper into negative rates, and opening up the coffers once again to buy bonds… Boy, did he tick off the Germans with these announcements! I have a good article on the reaction by the Germans in the FWIW section today, so you won’t want to miss that!

After all that on last Thursday, the euro rallied… Wait! What? Oh, yeah, the euro traders began to mark up the euro as soon as Draghi announced that more stimulus would be needed for the Eurozone economy. I don’t get it… and probably never will, why a currency would rally when their interest rate has been debased into negative territory, and the bond buying program you ended at the end of 2018, is back on the table… But, it is what it is…

You know the Fed is going down the same road is the ECB… First the Fed announced their Quantitative Tightening (QT) And even laid out how much they would be allowing to mature each month and not replace the bonds that matured… But then, things got sticky… And they, just like their kissin cousins over at the ECB, stopped the QT…. You, me, and guy down the street know that the next step, folks is for the Fed to announce they were back in the bond business too…

Now this won’t come until we hit the recession that’s looming… But I do believe in my heart of hearts that interest rates will go back to zero, and maybe even negative, and QE, or bond buying will resume… Talk about losing the rest of the credibility that the Fed has when this happens!

Gold got sold by $10.80 on Friday, but is up almost $16 in the overnight trading… And it’s back to being above $1,500… Of course now the question arises and asks when do the price manipulators show up with an armful of short Gold paper trades again? It was fun while it lasted this summer as Gold ratcheted higher and higher every day, without any interference from the boys in the band… But all that stopped being so lovey, dovey, pumpkin pie, smoochie, smoochie, once Gold traded past $1,500… I don’t know what it’s going to take for Gold to move forward to $1,600, but I do believe it will be there before year-end… 

Usually the key to a good move in Gold is geopolitical problems, like we have in the middleeast right now…  I heard that U.S. President Trump told reporters that, “the U.S. is locked and loaded, if it was Iran behind the Saudi Oil attacks”… YIKES! , but as I asked above and will also do here for it does seem appropriate! Got Gold? 

So, the Eurozone is already in recession… it’s not official yet, but trust me on this one, they are in a recession… But as I’ve explained many times in the past… It matters, not too much, what the Eurozone does… It matters what the dollar’s doing… We can go back to the turn of the century, when the euro was introduced at 51.14, and it traded as high as $1.17, and then fell through the floor all the way down to 92-cents… but then problems with the U.S. and the dollar began to take shape, the euro rebounded… while they were in a recession, no less!  And didn’t stop until it reached $1.50 a few years later… The euro is the offset currency to the dollar, so when the dollar gets sold, the euro will benefit from those dollar sales… It’s just the way it is, folks…

Negative rates around the world seem to be the “thing to do” for central banks… And they’re probably on their way here too… Negative yielding Gov’t Bonds… Negative yielding mortgages… It’s all the rage… You see, these inept gov’t officials just don’t get it… Taking your yield curve into negative territory is NOT the way to get people to spend money… You see, the people are smarter than you think they are… And if you as a Central Bank are taking rates negative, it tells the people that things are really bad, and we had better hunker down…

If negative rates were so darn good, why then is Japan, who’s had them for several years now, is still mired in an economic abyss? And why hasn’t the Swedes gotten their economic growth going again? Or the Swiss?  And negative rates aren’t helping the Eurozone econmy either, so what does Draghi do? He goes deeper!  What’s the old saying about digging a ditch? 

The writing is on the wall folks… So, let’s hope and cross our fingers that the U.S. Fed doesn’t go this route… I doubt seriously if that’s going to stop them, but Shoot Rudy! It’s worth a try! And this just in… The Japanese want to play a game of “How Low Can You Go?” and are contemplating going even deeper negative with rates!

Damn the savers! Right? That’s what a Central Bank is telling people like me that have saved all my life and now get little to no income from those savings… to hell with the savers! They’ve punished the Senior circuit of savers for years now, and now they’re punishing the likes of me! But they can’t make me spend, I don’t care how badly, the rates go negative!

Now, here’s where the rubber meets the road folks… IF the U.S. implements negative rates, they most likey would institute a penalty for withdrawing cash… And if that didn’t work, they would then outlaw cash! I wrote a very long article on the coming cashless society here in the U.S., for the now defunct, Dow Theory Letters a year or so ago… One of these days I should pull that out and post it as a Pfennig article… It’s scary, and If I do decide to print it again, I’ll give you a warning up front to remove all the sharp objects from your reading area!

The U.S. Data Cupboard last Friday had a better than the average bear August Retail Sales print… U.S. August Retail Sales were up 0.5% and like I had told you last week, there had to be some more back to school sales in there for the states that wait until after Labor Day to go back to school.  After looking under the hood here, I came away with two thoughts…  1. When you took out the vehicle sales, Retail Sales were flat, with no growth at all, and 2. now this gets really technical so stay with me here…  Dining out… Restaruants showed a decline in August of -1.2%, which brought the Year on year figure to a cycle low… This indicator is usually a Bellweather for disposable income spending…  Doesn’t look too good for this does it? 

Now that’s a completely different spin on the Retail Sales than what you heard or read about isn’t it? Well, as usual, you can depend on me to show you the real numbers…   

What the heck happened to the bond rally? One day it looked like bond yields were going to keep falling toward their record lows, and then the next day they weren’t falling any longer, and now are rising again…  Stranger than fiction, is this bond market folks…  but let’s not get too upset here the 10-year Treasury’s yield is still well below 2% at 1.83%… 

The bond guys are still telling us that the economy is in bad shape, they’re just not so sure of it being so bad right now!  Of course this Wednesday, the Fed’s FOMC will meet to discuss rates…  I was previously on board with the idea that while rates would get cut again this year, that a back-to-back rate cut wouldn’t be in the cards…  And I’m still of that opinion, while I think that there’s more of a chance of another rate cut than I had previously thought…   

Fed Chairman, Jerome Powell, the guy that no one wishes they were in his shoes, will hold a press conference after the rate announcement, whatever it may be… And the markets will have their collective ears on the ground, hoping to hear news of more rate cuts…  The markets are wierd folks…  but then if savers have nowhere else to go to earn a little yield, then they will be forced to resort to buying stocks with hopes of more upward movement in stocks…  And that’s why the markets want to see more rate cuts… 

The U.S. Data Cupboard has more for us this week than it did last week, with Industrial Production and Capacity Utilization on the docket for tomorrow, to highlight the week, for me that is…  I’m not going to be sitting by the radio or my laptop on Wednesday afternoon, to check what the Fed did… In fact, I’ll be at the ballpark on Wednesday afternoon!  The last “businessman’s special” And I’ll be with some of my best buds! And the last thing on my mind will be what the hell the Fed is doing!  HA! 

To recap… The Saudi Oil supplies took a BIG hit from a drone attack late last week, and the price of Oil is soaring, while the Petrol Currencies react favorably. Gold is also soaring once again on this geopolitical news, which isn’t good folks.. It could be the snowflake that causes WWIII, or it could be dealt with by calmer heads… But just in case… Got Gold?   

OK, here’s the aforementioned article about how the Germans aren’t too happy with outgoing ECB President Mario Draghi… I love the name the Germans have for him, so with no further adieu… 

For What It’s Worth… Well, I got the title for today’s Pfennig, from this article that showed up on Zerohedge.com, late last week… The Germans are not too enamored with outgoing European Central Bank (ECB) President, Mario Draghi… The Germans, for the record book, experienced runaway inflation in their history, and each generation since has pledged to be inflation hawks… What Mario Draghi introduced last week wasn’t even in the ballpark’s parking lot of an inflation hawk… So, here’s the article: https://www.zerohedge.com/economics/count-draghila-furious-germany-reacts-draghis-monetary-horror

Or, here’s your snippet: “When it comes to Mario Draghi’s relationship with Germany’s notoriously fiscally (and monetarily) conservative public, it tends to be a love-hate affair. Actually, scrap the love part.
Back in March 2016, when the ECB cut rates and expanded its QE (in an operation that just like Thursday left market’s underwhelmed, and sent the EUR surging), Germany’s press responded not too kindly to Draghi’s monetary largesse with Handelsblatt, in an article titled “The dangerous game with the money of the German savers”

Fast forward three and a half years later, when Mario Draghi, one foot out of the ECB’s Frankfurt HQ on his way to retirement, doubled down in what appeared to be the final push in European monetary policy, when the central banker cut interest rates deeper into negative territory and promised bond purchases with no end-date to push borrowing costs even lower.

The fact that it was left open-ended (or until the ECB starts raising rates) was perhaps the biggest takeaway, and as Deutsche Bank’s Jim Reid noted “QE infinity is back if that’s not an oxymoron.” That said, there were some complications when Bloomberg reported that Europe’s top central bankers – the French, German and Dutch governors – all opposed more QE, as did Coeure and Lautenschlaeger and a couple of others. “So this was a contentious move and rightly so.”

But an even bigger surprise was Draghi’s veiled admission that the ECB is now out of ammo and that to boost the economy, Europe will need fiscal stimulus, i.e., issue more debt.

Specifically, Draghi referred being “very concerned about the pension industry” and also suggested that the answer to speeding up positive side effects was fiscal policy. As Reid concluded, “it’s hard to therefore get away from feeling that even the ECB feel we’re nearing the end game in terms of the limits of monetary policy. Something that has been obvious to the outside world for sometime.”

And nowhere was this mood represented better than by Germany’s most popular tabloid, Bild, which on Friday accused Draghi of “sucking dry” the bank accounts of Germany’s savers, a day after the ECB cut interest rates deeper into negative territory. Next to a Dracula photomontage of Draghi, Bild’s headline read: “Count Draghila is sucking our accounts dry.”

“The horror for German savers goes on and on,” Bild wrote.”

Chuck Again… Like I said last Thursday… Don’t laugh at these shenanigans that the ECB is pulling once again, for the U.S. Fed is right behind them… They’ve been greasing the tracks for negative rates for sometime now, even drafting Big Al Greenspan to say that negative rates is no big deal… The next recession, will bring them about folks… Remember I’ve said this many times, but to make sure you hear me now and listen to me later… Historically, in the U.S., the Fed Funds rate was 6% when we entered a recession, and it would take at least 4% of rate cuts to end the recession… Our current Fed Funds rate is 2.25%… See where that’s going to lead us? I’m just saying…

Currencies today 9/16/19 American Style: A$.6880, kiwi .6385, C$ .7540, euro 1.1050, sterling 1.2455, Swiss $1.0095, European Style: rand 14.6617, krone 8.9775, SEK 9.6509, forint 300.45, zloty 3.9176, koruna 23.4295, RUB 64.34, yen 107.75, sing 1.3735, HKD 7.8206, INR 71.46, China 7.0785, peso 19.43, BRL 4.0804, Dollar Index 98.32, Oil $59.45, 10-year 1.83%, Silver $17.85, Platinum $1,627.10, Palladium $1,627.10, and Gold… $1,503.85

That’s it for today… Well some sad news came across the screens yesterday, when it was announced that Rick Ocasek, the former lead singer for the Cars had died at 75…  There was a period in the 80’s when the Cars were HUGE… OK..  Things have settled down here, after the Big Labor Day BBQ, and it’s about time to start thinking about closing the pool for the year… When the trees start dropping leaves by the boat load, it’s time to close the pool… UGH!, I just don’t like the cover on the pool!  Robert Plant takes us to the finish line today with his song: Big Log….  a really haunting guitar lick to start the song is really good…  I hope you have a Marvelous Monday, and please Be Good To Yourself!  Whew! that was a long one today! 

Chuck Butler