Boo! Trick-or-Treat!

Rocktober 31, 2018

* Currencies and metals take on more water… 

* Chuck explains his dislike of the Fed… 

Good Day… Boo! And a Wonderful Wednesday to you! And a Happy Halloween to one and all! I recall going to New Orleans on Halloween for a conference years ago… They sure do get into Halloween in New Orleans! No baseball, no football, no hockey to watch, what’s a guy to do? HA! Our Blues don’t play again until tomorrow night… I sure liked the strike-shortened season of a few years ago, when they crammed as many games as they could into a short time, it seemed like there was a game every other day! I don’t live each night on sports watching alone, if that’s what you think, but it does help the night go by, and keep me from sitting at my writing desk, reading and researching for the next day’s Pfennig… I do so much of that already, I don’t need to be doing it at night too! The late, great, Tom Petty, greets me this morning with his song: You Got Lucky…

And don’t you feel you got lucky so many years ago, when you found this letter? HA! I’m feeling better today, as my one-week trip on steroids ended yesterday morning… So, if there’s a dolt out there, I’ll find them for sure! Whoa, there Partner, what on earth do you mean, If there’s a dolt out there, You know darn good and well that there are plenty of dolts out there!

One guy who’s not a dolt, and is a very well respected and admired economist, David Rosenberg, likes to use Twitter, which is pretty cool for me, because I get to see his quotes for free! Yesterday, he posted the following to his Twitter Account: “Best economy of all time generated the first decline in real per capita disposable personal income last month since June 2017!” – David Rosenberg

He does have a way of using a pointed stick, doesn’t he?

OK… Well, the dollar’s spell over the currencies remains, and the euro took on more water yesterday. The Trading Ranges so far this week have been quite muted/ small… But the overall depreciation of the currencies remains in place… The euro, is still above the 1.09 level it was 18 months ago, but it’s also far below the 1.25 it reached last spring. And there’s just not that much going on overseas to talk about… In Australia today, they will print their latest CPI (consumer inflation) for the 3rd QTR… The experts are forecasting an unchanged level from the 2nd QTR of 0.4% growth.. That won’t get annual CPI above 2%, so you can see why the Reserve Bank of Australia (RBA) has disappointed the markets so far this year with no rate hike.

Gold never could recover from its early morning selling yesterday, and closed the day down $7… UGH! No forward momentum can be found with Gold, folks… it’s up one day, down the next two, up two days, down the next one, and so on, and so on… Just bumping along, picking up passengers … That’s right, buyers at these reduced levels seem to be ganging up, but right now, they’re just not making any difference… But they will…

Have you ever held a one-ounce Gold coin in your hand? The Maple Leaf is the shiniest, and the Gold Eagle is pretty shiny too… Once you hold a Gold coin in your hand, you get this feeling of being wealthy… Well, you may not be wealthy, but you’ve provided yourself a store of wealth, with the Gold coin… I’m just saying…

There was more evidence overnight that the Trade War with China is hurting both countries, but this time it’s China’s manufacturing… China’s official manufacturing Purchasing Managers’ Index (PMI) was 50.2 — lower than the 50.6 analysts expected in a Reuters poll and down from 50.8 in September. Gloom, despair, and agony on both economies in this Trade War… If it weren’t for bad luck, I’d have no luck at all… Gloom, despair, and agony on me..  

I made a big deal out of the increase in debt to our country yesterday, and one of the things I was all set to talk about that was related to that, escaped my mind at the time of writing… About an hour later, I realized that I had completely forgotten to talk about what was related to the spending! UGH! (A Senior moment?) Anyway… let’s look at this from another angle… Military spending is soaring, folks… And when you get down to the cheese that binds… Gov’t. spending is making up most of the gist of GDP these days… yes, if it weren’t for the Gov’t spending like there’s no tomorrow, GPD would be much lower… So, there! I finally said it! Aren’t you glad I remembered? HA! 

One of my “go-to’s” with economics questions through the years, Lisa, used to tell me, that it’s the role of government to fill in the gaps of consumer consumption…  I used to argue, why? We rarely saw eye-to-eye with things, but she made me think, and I adored her for that! 

OK… I told you yesterday that was going to talk about my dislike of the Fed today… Many of you will recall when I used to make a big deal out of a saying that I coined… Repeal 1913!  For it was 1913 that Woodrow Wilson crammed the idea of a Central Bank down the throats of Americans, and we ended up with the Federal Reserve, which by name alone is a bunk of malarkey, for there’s nothing Federal about it! 

I was asked a question the other day, that I had to really think about the answer, not that I didn’t know what to say, but more how to say it so that there were no follow-up questions… So, the question was… “Chuck, you’re always being negative of the Fed, why is that, is there some risk that they’ve added that we, the public don’t’ know about?”

Then I saw this quote and thought this says it all!  “The greatest threat to the central bank’s existence is the tendency of Fed governors and economists to pursue abstract economic theories that make no sense in real world terms and often do more harm than good. “I have written at length about how the radical policies followed by the FOMC, first under Bernanke and then Yellen, have distorted asset allocations, and the term structure of interest rates and credit spreads.

I went on to say, “think about what easy money the past 10 years has done to asset allocations and valuations? Think about about what easy money has done to the yield curve of Treasuries bonds? And think about what easy money has done to the retired people’s savings… Was all that necessary? The answer is an emphatic NO! Operation Twist, doesn’t get its due, but when the dust settles on this coming financial mess, people will look back and examine the damage that Operation Twist did to the yield curve… And ask the question… “What on earth was the Fed thinking?”

Yes, there’s risk that no one talks about… That’s why I’m 100% behind an “audit the Fed” bill… Sort of like the health care act, we won’t know what’s in there until we pass it…  

So, there it is in a nutshell, folks… My take on the Fed, and what they’ve done to our economy and our future… I really got a kick out of a recent article I read that quoted former Fed Chairman, Paul Volcker, with him really calling out Bernanke and Yellen over their complete lack of knowledge regarding deflation, and the stupid 2% inflation target…

The U.S. Data Cupboard saw the Case/Shiller Home Price Index for August fall to 5.8% from 6% in July… I told you yesterday that the big move in home prices probably hadn’t occurred yet for the August report, but that we could still see some weakness, and that’s exactly what we saw… I sure hope the Fed Heads are watching all this rot being exposed on Housing’s vine… If not, what are they watching? I heard it’s reruns of WKRP In Cincinnati… HAHAHAHAHAHA! Just kidding… Baby, if you’ve ever wondered, wondered whatever became of me… I’m living on the air in Cincinnati, Cincinnati WKRP…

In addition to the HPI… This piece of data falls under the heading of… Believe It or Don’t! Consumer Confidence for this month… Let me make that clear, this month… increased from an index number of 135 last month to 137.9 this month! And they say that most of the Consumer Confidence Index is derived from stock market performance? Well, that can’t be the case any longer, because the stock market has really pushed the exit button this month, and Confidence rose? Go figure that one!

If Consumer Confidence is so darn strong I have to ask the question, Why then are the mid-term elections next week so “up in the air?” I’m just saying, and that’s as far as I’ll go with politics…  Ask a question and then retreat… Throw a grenade, and retreat…

Today’s Data Cupboard will have the ADP Employment Change report… Which signals to me that this Friday will be a Jobs Jamboree Friday! We’ll also see the Employment Cost Index (ECI), which I bet is increasing… Unless the ADP report falls out of bed, I doubt that either of these will cause too much disturbance in the currencies’ atmosphere…

To Recap… The dollar’s spell cast over the currencies and metals remains in place this morning, with bot asset classes taking on more water this morning. Chuck is concerned with debt, as usual, but looks at it from a different angle today, which should be interesting! The Trade War with China is having negative effects to their manufacturing, as evidenced by the latest PMI print from China.  And the rot on housing’s vine is being exposed more and more with every housing report… Are you watching, Fed? 

For What It’s Worth…  Ok, I haven’t talked much about Gold price manipulation lately, so when I saw this article highlighted on Ed Steer’s letter this morning, I just had to use it for my FWIW today… So, that’s what it’s about and it can be found here:

Or, here’s your snippet: “Behind the scenes, the dynamics steering the gold price are undergoing some fundamental changes that could lead to this breakout, Eric Strand of Swedish Pacific Fonder suggests. One indication, he believes, came when the CFTC (Commodity Futures Trading Commission) reported in early September 2018, that for the first time in 17 years, commercial participants in gold futures flipped their COMEX positioning from short, to being net long. Retail, and technical funds, however, now have big short positions, “which could lead to a big short squeeze”, Strand adds.

“The price of gold has been suppressed artificially for too long, Strand believes, and now may be the time for a change”.

Strand refers to Silver expert Ted Butler who has monitored the market every single day for over 30 years and describes it as follows: “Every time we’ve had a rally in the last 10 years, ever since J.P. Morgan took over the investment bank Bear Stearns, J.P. Morgan has added aggressively to its paper short division on the COMEX as retail speculators and technical funds come in to chase rallies higher. J.P. Morgan has always been the seller of last resort, and they sell whatever is required to satisfy all buying. And, ultimately, after that buying is satisfied, the prices roll over and come back down. J.P. Morgan adding short positions has stopped every rally in silver – and gold, for that matter – over the last 10 years.

J.P. Morgan never sells on the way down. They only sell and add short positions on the way up. And, when J.P. Morgan adds short positions, once they’re done selling and the buyers are done buying, the price stops going up and people turn to sell. That’s when J.P. Morgan rings the cash register and buys back all the shorts that they’ve added at lower prices than where they sold, meaning they always make a profit.”

Chuck Again…  I think this plays well in the sandbox with what I talked about earlier this morning, with regards to Gold… So there you go!

Currencies today 10/31/18.. American Style: A$.7095, kiwi .6540, C$ .7614, euro 1.1338, sterling 1.2740, Swiss $1.0060, European Style: rand 14.7025, krone 8.4295, SEK 9.1780, forint 286.36, zloty 3.8190, koruna 22.8448, RUB 65.66, yen 113.14, sing 1.3858, HKD 7.8450, INR 73.79, China 6.9629, peso 20.01, BRL 3.7104, Dollar Index 97.03, Oil $66.41, 10-year 3.14%, Silver $14.35, Platinum $836.12, Palladium $1,073.15, and Gold… $1,217.78

That’s it for today…  Except… I hear that talks with China regarding Trade/ tariffs are going on, and if they don’t come up with something, the U.S. is ready to add more tariffs to China’s bill… I shake my head , and wonder when this will all go away…  It’s raining cats and dogs outside right now, I sure hope it ends before the Trick or Treaters go out tonight!  I’ve become a candy lover, and having all this candy here waiting for tonight, is driving me crazy! I got caught stealing some Starburst yesterday…  I said, Oh, come on, we’ve got more candy here than there are kids in the neighborhood, can’t I have a piece?  OK, enough of that… I can’t wait to see the little ones tonight, as each year, I sit on the front porch, and give out candy to the Trick-or-Treaters…  Why did the mushroom get invited to the party?  Because he was a fungi! HAHAHAHA! Happy Halloween! The late great Alvin Lee and his band Ten Years After take us to the finish line today with their song: I’d Love To Change The World…  Now, it’s your responsibility to go out and make this a Wonder Wednesday, a Happy Halloween, and remember to Be Good To Yourself!

Chuck Butler