Author: admin

November 7, 2019

* Currencies lose more ground to the dollar on Wed.

* Bank of England meets today, and the EC didn’t have nice things to say! 

Good Day… And a Tub Thumpin’ Thursday to you! I got to say that the old saying of “the squeaky wheel gets the grease” came to fruition, as I reviewed the emails in the Pfennig Replies box yesterday… Several readers have sent forward their thoughts on my never healing leg wound, and I can’t wait for tomorrow when I see the wound center doctor again to express some of their thoughts to him… He’s going to wonder where I got all that information! The J. Geils Band greets me this morning with their song: Must Have Gotten Lost… Which is what I feel most mornings when I stare at the blank screen!

OK… Another day went by, and there was another day of Trade War negotiations, which apparently didn’t go so swimmingly well, as we were told they were going to be…. As I’ve said before, I’m from Missouri, they’re going to have to show me the Trade Agreement, and stop talking about how they’re close! I started today’s missive with this topic because both Reuters and Bloomberg have articles this morning saying the dollar weakened on Wednesday because of the outlook for the Trade War negotiations. A quick look at the currencies, which I do first thing every morning, and onto the metals, bond rates, and Oil, before anything else, told me that I didn’t see an weakening in the dollar… In fact from what I was able to see, the euro lost ground, the A$ lost ground, just about every currency on the face of the earth lost ground to the dollar yesterday… So, the folks at Reuters and Bloomberg must be doing a J. Geils Band number this morning and Must Have Gotten Lost!

The Chinese renminbi was the one shining light in the currency roundup again today, as the renminbi was allowed to appreciate below the 7 figure for the first time since before the Trade Tariffs began to take a bit out of Chinese exports…  I’m wondering here, if the direction of the renminbi is a better indicator of whether or not a Trade Agreement is going to get done?  I could be onto something here, eh? 

Gold did recover some of the $25 loss on Tuesday, yesterday, gaining about $7 on the day, to close the day at $1,490…. But the shiny metal remains below $1,500 and Silver below $18, which represent the current levels of back and forth trading… The buyers drive the price up and the sellers with their paper trades drive them back down…  In the early trading this morning, Gold has given back that $7 gain…  back and forth… I see more and more writers writing about how they believe Gold is a buy at these levels… Where did all these guys come from? It’s sort of like back in the day, I used to be the only speaker at the Money Shows that talked about currencies and metals, and certainly there were only a handful of writers that talked about currencies and metals… Then one day, that all changed, and the guy that drove me in his taxi from the airport to the Conference setting in Kissimmee, Fla, was seen giving a presentation on currencies at the Conference! In other words everybody and their brother were talking about the weak dollar…

I used to talk about the history of currency trends in my presentations… And since August 1971, when President Nixon removed the Gold backing from the dollar, there have been 5 completed currency trends… The first one was a weak dollar trend that began in 1971 and ended in 1978… A strong dollar trend then took over and lasted until the Plaza Accord in 1985. The next weak dollar trend then was in place until 1995, and the strong dollar trend that started in 1995 lasted until 2002… From 2002 to 2011, the weak dollar trend was in place, and since 2011 to today the strong dollar has been in place, and remains in a strong trend for now…

As you can see from this historical data that a trend lasts the shortest amount of time at 7 years, and the longest amount of time at 10 years… Since we’re currently in the 8th year of the strong dollar trend, one has to wonder how much longer in the tooth this trend will last… If it were up to President Trump, it would have been over last year! But that hasn’t happened, much to his chagrin… In 2001, I wrote a white paper titled: The Decline of the dollar, not to be confused with the book that came out a few years later, that I wrote the foreword for: The Demise of the dollar… Was I just lucky back in 2001, that I thought the end of that trend was near? Or did I have a ton a research that led me to that call? Which do you believe it was? HA! Longtime readers know the answer to that! 

I tell you all this to remind everyone that you never know what will push a current currency trend to its end, and start a new one. But… I would say that investors that listened to me back in 2001 were sure happy they diversified their investment portfolios… And so now I’m going to go out on a big fat limb and say that it’s that time again… Time to make sure you have a fully diversified investment portfolio using currencies and metals… And that’s all I’m going to say about that now…

One of the reasons I’m getting that feeling again about the dollar is the moves the Fed is making to support the repo market… You know… that in the financial meltdown of 2007/08, that a lot of that mess could be blamed on the NY Fed who was supposed to regulating and auditing the banks that ran into problems… And when everyone found out that NY Fed had created $29 Trillion in newly created electronic funds to bail out the banks, they were appalled… But did Congress do anything about the Fed’s actions? Well, we all know they didn’t… And now the Fed NY is bailing out banks again with their injection of liquidity each day… And their buying of T-Bills from the banks… Tell me in your calmest voice how this is all going to come out peachy? Please, someone tell me, because I don’t see how this doesn’t create chaos…. 

Rot on the vine doesn’t just exist here though folks… The European Commission gave their outlook on the economy’s future earlier this morning, and they didn’t have nice things to say… They warned the European Banks that, “risks, including the possibility of a disorderly Brexit, remain “decidedly to the downside.”

Recall me telling you that the Hungarian Central Bank Gov. dissed the euro earlier this week, right?  Well the forint has seen nothing but selling since that statement…  Take shots at the big Dog, and you get bitten…  I’m just saying… 

Today overseas… The Bank of England (BOE) meets to discuss rates… The current internal rate there is just 75 Basis Points (3/4%). And I don’t think rates are going anywhere right now, not with all the unknowns hanging over the BOE like the Sword of Damocles… upcoming elections, and continued BREXIT talks lead the list of unknowns… I read a report yesterday where the economist in the U.K. said that if the election in the U.K. goes the wrong way, that sterling will get punished…

Here in the U.S. there’s not much to see in the U.S. Data Cupboard either… However, having said that we will see the September print of Consumer Credit (read debt)… The August print was $18 Billion, and I’m thinking that consumer debt just got worse in September… But we shall see, eh? This data doesn’t really move the markets, it’s really more for the nerds like me to pick at…

Yesterday in the U.S. Data Cupboard we saw the color of 3rd QTR Productivity, and the color is red… As the data printed negative -.3%, which was the lowest productivity report since 2015… In addition, we saw the color of 3rd QTR Unit Labor Costs, which were much stronger at 3.6% up from 2nd QTR’s 2.4%… So, let me see here if I’ve got this correct…. Our productivity has gone to hell in a handbasket, but the cost of that lack of productivity is soaring? Are people getting paid for a lack of production? Is this a case of one guy digging a hole and 5 other guys standing around critiquing his digging?

And as far as the Unit Labor Costs rising, how much would you be willing to bet that major piece of this move higher comes from insurance costs?

To recap… The currencies lost additional ground to the dollar yesterday, even though Reuters and Bloomberg don’t agree… Gold was able to recover a small amount $5 of its $25 loss on Tuesday… The Trade War negotiations seem to be going sour, once again, even though we were assured earlier this week that they would be good! The BOE meets this morning, but Chuck thinks there are too many unknowns in the U.K. right now for the BOE to move rates… And Chuck goes through the currency trends for the 100th time in the history of the Pfennig!

For What It’s Worth… When I began reading this article, all I could think about was Enron… OK, this is an article about how an accounting firm & the company they audited obscured an accounting error. And my mind just keeps going back to the early 2000’s and all the Company scandals… Oh well this article can be found here: https://www.cnbc.com/2019/11/06/mattel-pricewaterhousecoopers-buried-accounting-issues.html

Or, here’s your snippet: “ Mattel stock slumped more than 3% Wednesday after a report surfaced purporting that the toy company and its auditor PricewaterhouseCoopers obscured an accounting error.

The toymaker was forced to shelve the sale of senior notes in August when a whistleblower letter was made public, claiming the company had made accounting errors in historical periods. In late October, Mattel said auditors had completed their investigation and had determined that income tax expense was understated by $109 million in the third quarter of 2017 and overstated by $109 million in the fourth quarter of 2017, with no impact for the full year.

However, it appears that the “honest mistake” may have been buried by PwC and senior finance executives in an effort to save face, according to The Wall Street Journal.

The accounting error had to do with Mattel’s ownership of “Thomas & Friends,” an animated children’s show. The error was tied to a $562 million valuation allowance that Mattel created against its deferred tax assets in September 2017. Ultimately, the allowance was reduced by $109 million, which came from deferred tax liabilities related to Mattel’s acquisition of HIT Entertainment in 2011. Reducing this allowance lowered Mattel’s loss during the quarter.”

Chuck again… Sure it’s just one example of problems… But could it be the first of many to be revealed going forward? Only the shadow knows…

Currencies today 11/7/19 American Style: A$.6905, kiwi .6376, C$ .7595, euro 1.1083, sterling 1.2856, Swiss $1.0086, European Style: rand 14.7311, krone 9.0964, SEK 9.5955, forint 300.14, zloty 3.8484, koruna 23.0201, RUB 63.67, yen 109.13, sing 1.3568, HKD 7.8239, INR 70.66, China 6.9994, peso 19.09, BRL 4.0234, Dollar Index 97.82, Oil $57.06, 10-year 1.87%, Silver $17.54, Platinum $930.74, Palladium $1,797.55, and Gold… $1,483.18

That’s it for today… Well, our Blues has another back-to-back game last night, this time in Edmonton.. Too late of a start for me to watch the game, for sure!  But I see this morning that the Blues didn’t need overtime to win this time, as they pulled out a 5-2 win!  Let’s Go Blues! Little Evie was here last night for a short time, I kept giggling at the little noises she made while taking her bottle… So darn cute! Ok the cold front moved through here last night, and it’s downright cold outside this morning! It was 82 in S. Florida yesterday… UGH! This afternoon, I’ll get all bundled up and head to the Vascular Testing Center, for a test of the veins in my leg, to see if they could be the problem with me not healing… The streets dept. is repaving the roads in my little river town. Unfortunately there’s only one road in and out of my subdivision to the outside world, and it’s getting repaved! YIKES! Oh well better to bothered by this than to not be around to be bothered! Keeping with the thought today that we’re lost… The Moody Blues take us to the finish line today with their song: Lost In A Lost World…   I’m thinking that this describes the Fed, folks…  Lost in a lost world, of debt creation and negative yields…. I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and please Be Good To Yourself!

Chuck Butler

November 6, 2019

* Currencies have given back, all gained ground from Friday…

* Gold & Silver both get taken down on Tuesday… 

Good day… And a Wonderful Wednesday to you! After experiencing a cold front going through our region last week, and then warming up again, the cold front is coming back again tonight! UGH! I totally despise having to put on a winter coat, hat, scarf and gloves just to go outside! But this is one of the things my mom loved about St. Louis, we get to experience all 4 seasons… It’s just that spring and fall always seem to be short compared to winter and summer… Oh well, it is what it is… I had to cut the Uni-boot off yesterday, as the problems arose with it… My leg wound is NOT getting any better, and this is after 1 month of being seen by a wound specialist doctor… I get very discouraged about things that move along in a timely manner, so you maybe you can imagine just how discouraged I am right now! The Ozark Mountain Daredevils greet me this morning with their song: Jackie Blue…

Well, the currencies didn’t live up to the challenge I laid before them yesterday, and instead of adding to their Friday gains, they lost more ground to the dollar, with the euro falling back below 1.11 and the Aussie dollar falling back below 69-cents… It was a good day, however, for the Chinese renminbi, which saw another appreciation that has taken the onshore currency to the brink of falling below the 7 figure… The offshore version of the renminbi did fall below 7 yesterday… That currency is more a market driven currency and not the State controlled version that I usually quote and talk about.

An old friend from his Agora days, Tom Dyson, is back writing again, as he and his family are traveling the world, and for the past 3 weeks they’ve been in China, and he sends his daily postcard each day, that chronicles his travels, and what he sees going on in economies of countries he visits… His latest postcard mentioned all the building that’s going on in China, of infrastructure, bridges, roads, and most of all apartment buildings…

Many years ago at a Conference a dear reader cornered me and plead his case that he thought that the Chinese were overbuilding and it would end up in ruins for their economy… I pointed out to him then and even more so now, that there are hundreds of Millions of people throughout China that I saw eventually moving into these apartments… Maybe not the mom and pops but the kids when they grow up, and China’s Capitalist economy matures more… That’s how I see it… period. Oh, and did I mention their Treasure chest of reserves, that need to have some spending out of it each year? 

Reuters says that the dollar rally is buoyed by strong data…. OK, am I missing something here? Did we not just print a second month of negative Factory Orders? Maybe they’re referring to the uptick in the services index… OK, big deal, we have become a servicing country, and we suck at service! Or the Trade Deficit, which narrowed in September, and could be viewed as a good thing, but when you get right down to it, U.S. consumers cause the Trade Deficit as they buy hand over fist goods from China and elsewhere… Well, this narrowing only indicates, to me that is, that Consumers aren’t spending what they normally do… And this is a very bad thing for our economy folks… We are a consumer based economy, and without the consumer contributing, there will be no economic growth!

I’m waiting for the results of the Retail Sales data in the Eurozone this morning, and it looks like it might not be out before I hit send… I guess there’s always tomorrow… No wait, we are only promided today… Oh, well if we’re not here tomorrow, we won’t care what the data was!  But much to my surprise, there they are! And they aren’t as bad as I expected them to be! For September, Eurozone Retail Sales were up 0.1%, but on a year on year basis, they were up 3.1%.

Not the results that would say that the Eurozone is out of the woods… No way, no how, just plain no!  But better than the average bear Retail Sales for the Eurozone… but the euro can’t find a bid this morning… hmmm?

Gold got taken back below the $1,500 figure once again, this time by $25 on the day, closing at $1,483….. Back and forth over and below the $1,500 figure was my call when Gold finally went over $1,500 a couple of months ago… And that’s exactly what we’ve seen… Back and forth, back and forth, until one day… When it makes a definitive move either way… I keep thinking about the Gold chartists told me a month ago, and that is that Gold could very well see a correction back to $1,425… Before beginning it’s move higher once again… There’s an old saying by traders about these kinds of moves… And it is that the asset needs to go back and fill in the prices it skipped over on the way up…

Ahhhh, trader talk… It used to be something you had to be pretty good at doing, each day as you bought and sold currencies… But it’s a dead art, folks… Currency traders now a days, simply put their trades into a computer and they get back their prices… no horse trading, no bidding back on the price. The new way is obviously quicker, more efficient, as the computer then generates the tickets for the back office so they can settle the trade. But… no trader talk, any longer… Old time traders like me, have been put out to pasture…

OK… history lesson for the day is over with… Let’s move on… The Trade War negotiations continue to make progress or so says the media… China’s president, Xi, seems to want to get this done, so maybe, just maybe, because you never know… it will get done… The euphoria over the idea that it could get done is what has Gold at the selling window the past couple of days. 

I read where Xi wants Trump to drop the Tariffs and never use them again…  I’m guessing here that Xi is speaking for the rest of the world, like Europe, who has suffered from the Trump Tariffs as well.  Isn’t that what the knight in shiny armor does as he rides in on his white stallion?  He speaks for the “little people”…  Whoda Thunk it… “Xi, a man for the people of the world”… 

The U.S. Data Cupboard has the stupid Productivity report for the 3rd QTR today. In addition we’ll also see the Unit Labor Costs for the 3rd QTR…  I would only be half interested in the latter of the two, but it will be interesting to see how the markets view them. 

To Recap… The dollar bugs have taken back all the ground they lost on Friday, and we’re back to the currencies trading with levels seen before last Friday.  Gold got taken down by $25 yesterday… That along with Silver which also got taken down, are seen to be caught up in the Trade Talk euphoria, but Chuck thinks that’s just an excuse the price manipulators throw out there to confuse us…  

For What It’s Worth… I wanted to print this yesterday, when I mentioned Christine Lagarde’s comments to the Germans, but I already had my FWIW article all cued up. So here it is today, Lagarde says something that I bet she’ll eventually wish she hadn’t said, and more is all chronicled here: https://www.zerohedge.com/economics/lagarde-we-should-be-happier-have-job-have-savings

Or, here’s your snippet: “ Any hopes that the replacement of Mario Draghi, who on Halloween left the ECB more polarized than ever, as the core European nations revolted against the Italian’s profligately loose monetary policy in an unprecedented public demonstration of discord within the European Central Bank…

… with the ECB’s new head, former IMF Director and convicted criminal, Christine Lagarde would result in some easing of tensions, were promptly crushed when Lagarde picked up where Draghi left off, calling on Germany and the Netherlands to use their budget surpluses to fund investments that would help stimulate the economy, in a sharp rebuke that will not win the former French finance minister any friends in fiscally conservative Germany.

In an appeal to Germany’s sense of solidarity, and in hopes that Germany’s memory of hyperinflation has faded enough, Lagarde said that there “isn’t enough solidarity” in the single currency area, adding: “We share a currency, but we don’t share much budgetary policy for now.”
“Those that have the room for manoeuvre, those that have a budget surplus, that’s to say Germany, the Netherlands, why not use that budget surplus and invest in infrastructure? Why not invest in education? Why not invest in innovation, to allow for a better rebalancing?” asked Lagarde, blaming Germany and the Netherlands for living within their means, and demanding they should no longer do so, just because most other Europeans decided to pull a page out of the American playbook, and live exorbitantly outside of their means.

Lagarde’s direct attempt at shaming Europe’s fiscal conservatives was nothing short of shocking: normally ECB officials avoid naming individual countries in public statements, because their mandate is to act in the interests of the eurozone as a whole. But when Lagarde made her speech she had not yet officially taken over at the Frankfurt-based institution – she succeeds Mario Draghi on Friday.

And just to guarantee she is as resented by Germany as was Mario Draghi, she said that the German and Dutch governments, which last year had budget surpluses of 2% and 1.5% respectively, “have not really made the necessary efforts,” she added, referring to establishment’s increasing desperation to force anyone with an even remotely normal balance sheet to sink to the same level as their insolvent peers.

As for the punchline, Lagarde defended the negative interest rates introduced by her predecessor Draghi, arguing that people should be happier to have a job than a higher savings rate. This, as a reminder, comes at a time when virtually everyone who is not named “Draghi” or “Lagarde” thinks that negative rates are catastrophic, and assure doom for the Eurozone.”

Chuck again… Zerohedge.com said it best when they called her comment “ We should be happier to have a job than to have savings” The new Marie Antionette quote about letting them eat cake! What a, now wait a minute Chuck no need to go to calling her names… Remember what you mother taught you!

Currencies today 11/6/19 American Style: A$.6898, kiwi .6377, C$ .7595, euro 1.1085, sterling 1.2885, Swiss $1.o085, European Style: rand 14.7924, krone 9.1556, SEK 9.6105, forint 298.97, zloty 3.8501, koruna 22.9996, RUB 63.41, yen 109.02, sing 1.3585, HKD 7.8238, INR 70.78, China 7.0069, peso 19.21, BRL 4.0030, Dollar Index 97.83, Oil $57.21, 10-year 1.84%, Silver $17.54, Platinum $926.19, Palladium $1,784.70, and Gold… $1,485.57

That’s it for today…  I’ve not been getting my full night’s sleep the last two nights, as the pain in my leg acts up when I lay down… UGH!  I’ve got a high tolerance of pain, but this is getting ridiculous! I don’t like it when I don’t get a full night’s sleep!  Well, our Blues sure are on another roll, winning their 5th straight game last night in Vancouver in overtime. In fact, a good number of their wins this year have come in overtime…  Which is far better than losing or having to go to a shootout! The Blues are finding a way to win without their star player, who will be out for 5 months! UGH!  I have another test tomorrow, this one to see if I have a perforated vein in my leg… The doc hasn’t told me yet what it means if I do have one… Oh, boy, I get another conversation with a doctor! Where do I sign up for that one?  Oh well, it is what it is, and life goes on, right?  The Late great Dan Fogelberg takes us to the finish line with his song: The Last Nail… (I used to play this one on my guitar!)  I hope you have a Wonderful Wednesday, and will Be Good To Yourself!

Chuck Butler

November 5, 2019 

* Currencies couldn’t add to their Friday gains on Monday

* Christine Lagarde steps into the bucket… 

Good Day… And a Tom Terrific Tuesday to you! No baseball! What’s baseball rat like me to do? Well, I continued reading the two books I’m into right now, and I watched a little TV, but there wasn’t much on… The raw, steel gray, barren days of November have started… My longtime friend, and former colleague, Ty Keough, stopped by to see me last Friday… It was great to catch up with him, who’s now retired like me! Ty mentioned the sunny day on the 1st of November, and I said, “that won’t last!” And it didn’t! The late, great, (greatest guitar player in my mind) Alvin Lee greets me this morning with a live version of his song: Goin’ Home… When I played in the last band I played with, we ended every gig with that song…

Well… The currencies couldn’t add to their Friday gains yesterday, instead, giving back some of their Friday gains… And that frustrates me, as a currency holder, because there has to be something in the shadows at work here… The U.S. Data Cupboard printed a negative report, and yet the dollar bugs were able to gain back some lost ground… What gives with that? Oh well, nothing and I mean nothing actually surprises me any longer, not in this day of all markets being manipulated in some manner…

So, be it as it may… The currencies start today with a new challenge, which is to add to their Friday gains, in a meaningful way! I know this sounds like I’m rooting against the dollar, but in reality I’m not, I’m just seeing things the way they should be given the fundamentals, and when things go the way I see them, that’s good, and when they don’t, I don’t like to talk about it! HA!

The official wording on the dollar rebound yesterday was something like: “dollar rebounds as investors book profits on short sales”… Really? That’s what the media found to be the reason for the dollar rally yesterday? Where have all the real financial journalists gone, long time passing… I’m just saying…

Gold saw selling yesterday, that caused the shiny metal to lose $4 on the day, which was bad enough, but this morning it’s down another $8, all on the thought that the U.S. and China WILL get somewhere with a Trade Agreement…  I find this reason to just be an excuse for the price manipulators to rationalize their moves…  

I was caught off guard by an article On CNBC, yesterday that quoted the Gov. of the Central Bank of Hungary saying that, “The euro is a ‘trap’ and countries should be allowed to ditch it.” I found this article interesting in that it was just 15 years ago, that Hungary was lining up their ducks in a row to join the euro… I guess they’re glad they didn’t meet the criteria back then or since, right? So, I guess I can’t call Hungary, a “Eurowannabe” any longer… For they sure don’t sound like they would touch the euro with your ten foot pole!

And in European Central Bank’s (ECB) President, Christine Lagarde’s first speech since taking over the reins from Mario Draghi, she didn’t come out with any euro saving comments, and instead, decided to tick off the Germans and Hollanders… She chastised them for not using their budget surpluses for things like infrastructure, and stuff like that…  That’s no way to get to know your largest economic state, now is it Christine?   

Nothing like stepping in the bucket while a pitch is coming toward the plate, eh?

After hearing the Chinese say they didn’t think a Trade deal with the U.S. would ever take place, they met again with U.S. negotiators, and talked about a pact that could be worked out… I’m from Missouri, so they’re going to have to show that to me! Pessimistic? Well, I told you right from the get-go that the so-called “Tentative Agreement” announced a few weeks ago, wasn’t for real… Hey! That’s my job, to point out these things so that investors don’t get hung out to dry by them! If investors choose not to listen, well… you know…

We will see 3 different Fed Heads out speaking today… One of them is Dallas Fed President Robert Kaplan, and another one is Neel Kashkari, Minneapolis Fed President… Both will speak from the same songsheet, I presume… And that is that the Fed is on Hold, and that’s that! The third speaker is Tom Barkin, President of the Richmond Fed. He’s too knew to the Fed Head scene, having been appointed this year, so I have no idea what he will be talking about, but if I were a betting man, I would say he too will sing from the same songsheet, as Kaplan and Kashari…

Well, looky there! The U.S. Data Cupboard yesterday had the September Factory Orders data for us, and it printed, for a second consecutive month, at a negative! Negative -0.6% in Sept. following August’s -0.1%… That’s going in the wrong direction folks! And what did the currencies do? Well, I guess I already told you… They lost ground on the day… Why?, would be the better question? And for the answer to that, you might as well, get on the horn and call the PPT… The Plunge Protection Team… I’m just saying… 

The U.S. Data Cupboard has the September Trade Deficit for us today… This is where you can really see that the Trade War has failed miserably…  For there has been no improvement in this data. 

We’ll have to wait until tomorrow before we see any real economic data from the Eurozone, as Retail Sales, and more will print tomorrow. 

To recap… The U.S. printed a negative Factory Orders report and the dollar rallied…  that’s right, I’m not kidding you!  Sept Factory Orders were negative -0.6%, which was the second consecutive month with a negative print here…  But the currencies couldn’t add to their gains from Friday, and instead lost ground…  Gold lost $4 yesterday, and is down $8 this morning… 

For What It’s Worth… One of my best articles, if I say so myself, for the now defunct Dow Theory Letters, was one I wrote on the threat of a cashless society… I wrote that one on 6/14/18… Well, this article is a upon further review with Sweden, the poster child, for cashless societies, and touches on what’s going on here in the U.S. with regards to eliminating cash… And it can be found here: https://www.latimes.com/business/story/2019-10-27/cash-is-more-popular-than-ever 

Or, here’s your snippet: “Modern finance requires a lot of trust, and its digital future will demand still more. If, for example, electronic payments are to replace cash, people must be willing to believe that the bits of data traveling among phones, cards, terminals and blockchains actually represent something of value.

So, will people believe? Judging from their growing predilection for physical currency, maybe not.

At first glance, cash would appear to be on its way out.

Sweden has almost eliminated its use for payments. In America, home of the almighty dollar, almost a third of the population gets through a typical week without using a single banknote.

Businesses are experimenting with going cashless, hoping to speed up transactions, combat theft and create a safer environment for their employees.

Actually, though, physical currency is experiencing a resurgence.
People in many of the world’s most advanced nations — including the United States, the euro area and Japan — are holding more of it than ever.
In the U.S., for example, currency in circulation stood at an estimated $1.76 trillion as of late September, according to the Federal Reserve. That’s about 8.2% of gross domestic product, up from just 5.6% before the 2008 financial crisis and close to the highest level in at least 36 years.

If people need less cash to pay for stuff, why do they want to hold so much of it? The answer, it seems, is that they’re turning to currency as a store of value.

Chuck again… Can you believe that Swedes actually get a chip implanted in their hands so that they can pay at a register with a wave of their hand? Never mind that the Gov’t now knows what you spend you money on, and pay to whom, and everything else about you, as you give away your civil liberties… but, as long as it appears to be being delayed, I guess I shouldn’t complain… 

Currencies today 11/5/19 American Style: A$.6915, kiwi .6416, C$ .7615, euro 1.1109, sterling 1.2906, Swiss $1.0082, European Style: rand 14.7255, krone 9.1426, SEK 9.6241, forint 296.80, zloty 3.8430,  koruna 22.9780, RUB 63.34, yen 108.86, sing 1.3572, HKD 7.8341, INR 70.45, China 7.0248, peso 19.14, BRL 3.9944, Dollar Index 97.61, Oil $56.89, 10-year 1.82%, Silver $17.99, Platinum $934.65, Palladium $1,784.23, and Gold… $1,501.48

That’s it for today… Another day, another different treatment for my leg wound… The wound doctor is baffled as to why he can’t get this thing to heal… And once again, I remind him that I’m taking a chemo medicine daily….. hint… hint… So, maybe this new treatment will open up a window that allows me to get out of here and go south for a couple of weeks to get away from the dreariness of November in the Midwest… One never really knows, as each week they seem to have a different plan, and I go this Friday, to see them… The plane leaves Saturday, I guess I’ll find out Friday if I’ll be on the plane, or not! Our Blues get back on the ice tonight, this time in Vancouver… Have I ever told you that Vancouver in July is one of my fave cities? The Moody Blues take us to the finish line today with their song: I’m Just A Singer (In A Rock And Roll Band) I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler

November 4, 2019

* Currencies react favorably to the suspect Jobs report

* Gold trades in the same clothes Thursday & Friday… 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Still, the $23 trillion figure marks a milestone.

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

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

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

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

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

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

Chuck Butler

Rocktober 31, 2019 

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

* Chinese PMI’s sink further into contraction territory… 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

 

Rocktober 30, 2019

* Currencies trade steady Eddie on Tuesday… 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And The Atlanta Fed has just cut its forecast too:

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

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

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

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

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

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

Chuck Butler

 

 

Rocktober 28, 2019

* Currencies and metals rally on Thursday… 

* But fail to add to gains on Friday! 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

 

Rocktober 24, 2019

* Currencies and metals drift again on Wednesday… 

* German employment drops! 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

 

 

 

Rocktober 23, 2019

* Currencies give back more of their Friday gains… 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

Rocktober 22, 2019

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

* The growth of Treasury Issuance is to blame… 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler