November 3, 2020
* Currencies, metals and Oil all rally overnight…
* It’s election day! Make sure you make a plan to go vote!
Good day… And a Tom Terrific Tuesday to you! Well, baseball is over for this year, and now we head to the hot stove league… The Cardinals are in dire need of a heavy bat to hit behind Paul Goldschmidt… There will be plenty of free agents out there, but who knows what any team can afford after a year with no ticket revenue… And there’s a chance that next year could be the same, or with maybe 25 or 50% ticket revenue… I’m still waiting for the folks at Roger Dean Stadium to contact me about next years Spring Training games… They don’t know, I’m sure… But I do have, I think 4 more games to credit to next year’s games… I always get excited when I see the envelope from Roger Dean Stadium in my mail box… That means that Spring Training is only 3.5 months away! YAHOO! The Ryan Street band greets me this morning with their song: When The Lights Go Down…
And that’s what will happen tonight at 7pm… The lights will go down at the voting venues… Except if there are people that arrived to vote before 7, the venues have to let you vote! But don’t wait that long, and you won’t have to worry about it! I sure hope the rioting and chaos that is expected if one team loses, doesn’t happen, and that it was all talk and no walk… fingers crossed!
Well… The dollar bugs didn’t come out to play yesterday, and the currencies drifted but stayed pretty Steady Eddie all day. Yesterday morning the Dollar Index was 94.04, and when I looked at things yesterday afternoon, the Index was still 94.04… no change on the day! Gold however, continued to add to the early morning gains and ended up gaining $17.20 to end the day at $1,896.80, and Silver gained 44-cents to $24.18…
The price of oil dropping to $35 this week, really has the Petrol Currencies on tented hooks… I’m really frustrated with how the Russian ruble is being treated these days… The price of Oil may be down significantly, but it doesn’t mean the revenue from Oil has seen the spigot shut off! The ruble is one of the few currencies that still pays interest on deposits… Longtime reader, Bob, knows how much I like the ruble as a currency to hold, but when it loses 23% of its value in one year to the dollar, one has to scratch his balding head to be talked into holding it further… So, Bob, sent me this note from Tass, the Russian news agency… Check it out…
“The Russian authorities are managing to minimize the volatility of the ruble exchange rate and to maintain macroeconomic stability, Kremlin spokesman Dmitry Peskov told reporters on Monday.
“The ruble is breaching psychological thresholds, but volatility is minimized by the efforts of our regulator,” a Kremlin spokesman said, commenting on the depreciation of the ruble.
He drew attention to the fact that “now any world currency is under serious negative pressure from a number of circumstances in the global economy.”
“This includes the dynamics of energy consumption and changes in prices for petroleum products and oil – of course, all this has an impact,” the official noted.
“But in general, if we talk about macroeconomic stability, it is being maintained, as the president [Vladimir Putin] stressed.”
Chuck again… Sounds to me like the is need of some intervention… buy rubles, sell dollars… Come on Russian Finance Ministry, you can do it! There are other fears in traders’ collective minds these days that are causing this downward movement in the ruble… And those fears include the thought that if Biden won the election, that he would introduce more economic sanctions on Russia… (I don’t make this stuff up folk, so contact the FT if you don’t like it)
In the overnight markets, all the non-dollar assets are rallying… Currencies are stronger VS the dollar, Gold is up another $5 in early trading, and the price of Oil soared overnight to $38. OK, first the currencies… I do believe that this could be short-lived, in that it depends on who is the winner in the presidential election today. Then, Gold & Silver, are just fulfilling the prophecy of Chuck… HAHAHAHAHA! As if! And then the price of Oil… Well it appears that the Russians did have something up their sleeve, ala Bullwinkle, as they announced that they will delay the output reductions that our friends at OPEC (NOT!) had scheduled to start… So, now you know why we’re seeing the dollar dissed by the non-dollar assets…
OK… I’ll move on… Yesterday, I talked about how the European Central Bank (ECB) was probably going to go more negative with deposit rates at their next meeting, and that would weigh heavily on the euro, unless the dollar is getting sold like funnel cakes at a state fair.
Then later yesterday morning, my attention was directed to Twitter, where there was quite a bit of space given to the story that ECB President, LaGarde was recently talking about how the ECB was developing a digital euro… Some thought that this would be good news for the euro… I’m not seeing it that way, but I guess in this world of opposites going on, that would qualify! I did get a chuckle out of one person’s view in relation to the announcement… He said, “I would think that before you can issue a digital currency, you would have to prove that you can deal with positive rates”…. HAHA!
An article on CNBC.com is titled: “Out-of-work Americans are outraged that Congress has yet to pass another coronavirus stimulus deal”…
The article is filled with tear-jerker stories about people who’ve lost their jobs and angry with congress for not shelling out more stimulus… While I feel sorry for these people, I also want to point out that this is the slippery slope that I talked about months ago… Once you provide free cash to people, they’re going to want more, and then more, and more… Once people figure out that they can make more and do nothing, than when they were working, they’ve gone down the slippery slope…
But then there are those that believe that money grows on trees, and that if they pick the money off, more will grow back… There really are those people, folks… It’s called the Magic Money Tree… To them it matters not what the deficit numbers are… or what the free money does to a society… It’s human nature that if you get something without effort, you’re going to see if you can get more… And that’s all I have to say about that… today that is… So, I’ll move on…
The U.S. Data Cupboard had a big surprise for us yesterday… The ISM Manufacturing Index soared in Rocktober to 59.3 from 55.4 in September! WOW! Where’s all this manufacturing being done? Half the country is dealing with riots and chaos, and so forth… Oh well, they say manufacturing is going full steam, so we might as well go with it, eh? Construction spending in Sept. fell from .8% gain in August to a .3% gain in Sept. So, that wasn’t that great….
Today, we’ll see the Rocktober print of Factory Orders… Now, if this data is weak, then you’ll have to come to the conclusion that I have and that is the ISM is full of dookie! We’ll see soon enough… The experts think it will have risen in Rocktober from Sept…
To recap… The currencies didn’t move very much at all on Monday, with the Dollar Index remaining at 94.04 all day… But Gold & Sliver added to their early morning gains throughout the day on Monday, and ended up the day with gains of $17.20 and 44-cents respectively… I want you all to remember that I told you on Monday that I expected Gold to have a good week, considering the election outcome delays that are forecast.
For What It’s Worth… I was at a loss this morning for a FWIW article, and then it came to me… and then it was there in front of me… An article about Bank strength or lack of strength, its title is: Biggest U.S. Banks Aren’t as Strong as They Appear, says Group… and it was here all the time, now click your heals together and say There’s no place like home three times! Longtime reader, Bob, sent me this and you can find it on Bloomberg.com
Or, here’s your snippet: “The largest U.S. banks are less healthy than they appear, boosted by temporary accounting and capital-relief measures as well as massive market support from the Federal Reserve, an advocacy group said.
Although the six biggest banks’ leverage ratios reported at the end of June averaged almost 2 percentage points above the regulatory minimums, the actual average would have been only 0.84 percentage points above without the relief measures, Americans for Financial Reform said in a report Monday.
Regulators have allowed banks to delay the hit to their capital ratios from billions of dollars in loan-loss provisions they’ve put aside this year. Massive increases in their holdings of cash and Treasuries are also temporarily excluded from the calculation of the leverage ratio, which has become the binding constraint for the largest banks during the pandemic.
Even if firms wouldn’t be on the precipice of insolvency without the support measures, the allowances have let most banks continue paying dividends, according to the advocacy group.
“We’re not in a 2008 situation where major banks are facing collapse, but we’re going into an uncertain future due to the pandemic, and the big banks aren’t in as good a shape as they appear,” Marcus Stanley, policy director at Americans for Financial Reform, said in an interview.
In addition to the accounting and capital-relief measures, the banks have also benefited from the Federal Reserve’s unprecedented intervention in capital markets, the organization said. That boosted their trading income by at least $19.6 billion in the first half of 2020, which has also helped them appear healthier than they actually are, according to the report.”
Chuck again… I really think that the casino banks have been in trouble since September of 2019… Remember me going all ballistic on the Fed for not announcing who was receiving the daily injections of billions of dollars? That began last year, and has continued on throughout the year… I’m just saying…
That’s it for today, and unfortunately this week… I did have a dear reader, ask me to write a Pfennig On Friday with my take on the elections outcomes… But that’ll be a hard pass on that… sorry… I think it’ll be better for me if I don’t comment on the election outcomes, until Monday when I’ve had plenty of time to think about them… I’ve already tuned in my SXM radio to the smooth jazz Christmas station… Probably the earliest I’ve even done something like that! I love this station! And if people didn’t make fun of me, I would listen to it all year round! Just kidding, I’ve never really cared what people think of my choices! I would think I would grow tired of it by March… Make sure you get your “I voted” sticker today and wear it proudly! I wore mine for a couple of days, then decided to stick it up on my writing desk pictures display… Youngest son Alex just went to vote, and he came right back saying the line went around the building! He’ll try again later… Modern English takes us to the finish line today with their song: I Melt With You… A classic 80’s song for sure! I hope you have a Tom Terrific Day, and please get out and Vote, and while you’re voting, please think about Being Good To Yourself!
Chuck Butler