Bullard’s Comments Sends The Dollar To The Woodshed!

June 4, 2019

* Currencies and metals continue to move higher VS the dollar

* A hedge fund refuses redemptions… Got Gold? 

Good day… and a Tom Terrific Tuesday to you! Another beautiful day here yesterday, too bad they weren’t playing baseball here last night! For tonight the weather people say that we’ll see T-Storms that won’t stop for 7 days! OUCH! The rivers crest today, and then we’ll go through all the pain and angst about flooding again in a few days… UGH! Our Blues were back on the ice last night, here in a very loud St. Louis Arena… And despite dominating the game the Blues had to score a late goal to be a winner and tie the series at 2-2.  Whew!   We have a few things to talk about today, so let’s not beat around the bush and get to them! Maroon 5 greets me today with their song: This Love…

Well, well, well, what do we have here? A very influential Fed Head, St. Louis Fed President, James Bullard, saying yesterday that with inflation running under the Fed’s targets, and the inversion of the Treasury yield curve, that the Fed’s current rate may be too high, and in need of a rate cut soon…

Well, that sent whatever dollar bugs that were still running around, for a run to the wall boards for protection, for the dollar selling was coming hard and fast… Wasn’t I just a week ago, complaining that I just didn’t get why traders were so gung-ho on the dollar? Well, Bullard put an end of that gung-ho for buying and shifted it to a gung-ho for selling!

The euro is trading well into the 1.12 handle this morning, and the Japanese yen is trading with a 107 handle… I had also just talked last week about how the flight to safehavens had historically included euros, but not this time… Well, no more… Now it’s dollars that are being left at home and not allowed to go to the party! I have no idea if this is the start of something that could last years, shoot Rudy, I have no idea if this will continue today! There should be some additional buying, but one never knows, until we are well entrenched in a trend… Then and only then will you be able to wake up each day knowing that the dollar was losing ground to some currency overnight…

Ok, the other thing I want to talk about today is Silver…. Yes, I know, I talk all the time about Gold, but believe me I have the same interest in Silver… And yesterday, it was announced that the price of Silver had dropped when compared to Gold, to its lowest level since 1993… OK, longtime readers of mine know that a few years ago, I wrote about how Silver demand was going to be going higher because of its use in Solar Panels… But that didn’t fan out… And then there were articles going around that there was a shortage of Silver… And I said, my usual, “there’s no such thing as a shortage, it’s simply something that’s in need of a price adjustment”… Which in Silver’s case should have been higher… But that didn’t fan out… But now….

Now, that we’ve reached a low for Silver VS Gold… I’m getting my spider sense tingling again… which means that Silver could very well be ready for a moon shot! I say that knowing all too well that JPMorgan has truck loads of short silver trades ready to unload on the COMEX, when they feel it necessary to do so… I have to think that JPMorgan et, al. are going to be on the sidelines this time, just like there were in 2009-2011, when Silver rose to $50 an ounce… In 2010, I wrote an article for a publication titled: Is Silver The New Gold? I wish I could find that article and reprint it!

OK… There’s just no civil place to have a discussion about the economy any longer, except here in the Pfennig, because, if someone gets snotty with me, I simply delete their response to me! But check out Twitter sometime, and follow the threads of arguments that go on and on about who’s responsible for this, and how someone doesn’t agree with them! I’m just so happy that I don’t have to deal with that stuff when I point the finger of blame at a policy or Fed heads, or whatever! So, let’s keep it at that, and we’ll have a good relationship!

I have a good friend, who is retired as a shop foreman in a tool & die shop… I tell you this because I, for years, while he worked, would ask him about the business etc, to help me determine if the economy was slowing or booming…  So, I have to turn to someone else now…  And he doesn’t know it but he’s being asked about the pace of business to help me determine the direction for the economy…  

See? I use real physical economics in my studies on the economy… I just don’t depend on data, because these days, who knows if the data has been massaged and had hedonic adjustments before it prints…  And then you have guys like White House economist Navarro saying, “the U.S. economy is expanding at an “unprecedented” rate. Really? Well, I’m a monkey’s uncle if that’s true… 

Yesterday, when I was looking up the currency prices, I came to the Swiss franc, and thought, well, the franc should be pushing the envelope to get back to parity with the dollar, only to see that it had fallen from the previous day’s trading figure…  So, I set out to find the real story here… And there it was!  The Swiss National Bank (SNB) announced that they were considering moving their current negative rate even lower!  YIKES! 

No wonder the franc can’t find a bid while the rest of the currencies are moving higher VS the dollar.  Even lower negative rates? Really SNB, you can’t think of something else to….. No wait! I’ve got it! The SNB doesn’t want the franc back at parity, they want to see it cheaper…  That’s been their MO for sometime now, and I’m surprised I didn’t see it for what it was from the get-go! 

The U.S. Data Cupboard had some data prints yesterday of importance… First there was the ISM (manufacturing index) which continued to show slippage in the manufacturing sector, as the index fell to 52.1 VS 52.6 in April.  The private firm, Market, also printed their version of the manufacturing index and their number was 50.5, oh so close to falling below 50… Uh-oh!   There was also a check of the pulse of Construction Spending, which was flat as a pancake (Head East!)    

This economy has no legs folks… and the White House economist, is way off base with his comments…  OK, what do these economic prints say about where interest rates are going?  Well, if you ask me, I think they would already be going lower, but Fed Chairman Powell, doesn’t want to look like he was ordered to do so by the President…  Powell, will cut rates soon enough folks, he’s just waiting for the right time, which means… he’ll be too late to the party, and the Fed will be behind once again…   

Recall last week, when I told you that I believed China was selling Treasuries and buying Gold?  Well, do you think that explains why Gold has been on a one-way move higher since then? I do!  I had a longtime reader send me a note yesterday that said he had read that other Central Banks around the world are following China’s lead on this… If that’s so… I’ve got one question for you…. Got Gold? 

To recap…  That wild and crazy guy, Fed St. Louis President, James Bullard, is calling for rate cuts, and that got the dollar bugs scared to come out of the wall boards… The currencies and metals rallied strongly throughout the day, and through the overnight markets too. Chuck gets into his thoughts for Silver… Spoiler alert… he’s talking about a Silver rally… 

For What It’s Worth…  Well, this is something that should scare the bejeebers out of everyone…  A hedge fund blocked redemptions! The skinny on that and more can be found here:https://www.zerohedge.com/news/2019-06-03/it-begins-multi-billion-hedge-fund-blocks-redemptions

Or, here’s your snippet: “

In a moment of financial serendipity, earlier today we tweeted that as a result of the sudden collapse in the market’s most crowded positions (which as we noted over the weekend, now face the biggest risk of a wipe out), “hedge fund redemption requests re-emerge.”

It turns out we were very much spot on, because just a few hours later, the Financial Times reported that Neil Woodford, the U.K.’s equivalent of David Tepper, has blocked redemptions from his £3.7bn equity income fund after serial underperformance led to an investor exodus, “inflicting a serious blow to the reputation of the UK’s highest-profile fund manager.”

The freeze on redemptions, exactly five years after Woodford opened his eponymous fund management group, underlines his increasingly precarious position. It follows a steady stream of investor outflows, which have occurred each month for two years, with the fund shrinking by two-thirds to £3.7bn since a peak of £10.2bn in May 2017.

The severity of this latest hit to the hedge fund industry can not be underscored enough. The FT quoted a veteran fund manager who has known Woodford for more than 20 years, who said that “this is one of the bigger events for the U.K. asset management industry of the last decade. A bonfire of reputation and a terrible moment for investor confidence.”

Chuck Again…  How would you like to call your hedge fund manager, and ask for a redemption of your investment in his fund, and he tells you, sorry, no can do?  YIKES!  I will bet a dollar to a Krispy Kreme that this is just the tip of the iceberg on these stories, to come, folks… 

Currencies today 6/4/19 American Style: A$.6984, kiwi .6598, C$ .7444, euro 1.1260, sterling 1.2686, Swiss $.9926, European Style: rand 14.6282, krone 8.6976, SEK 9.4370, forint 286.17, zloty 3.8015, koruna 22.8675, RUB 65.36, yen 107.98, sing 1.3681, HKD 7.8391, INR 69.21, China 6.9031, peso 19.75, BRL 3.9077, Dollar Index 97.12, Oil $52.61, 10-year 2.10%, Silver $14.71, Platinum $821.82, Palladium $1,332.30, and Gold… $1,325.27

That’s it for today…. I wonder how many folks will actually be able to get up this morning and go to work after partying went well into the night after the Blues victory last night…  It was the first time in over 50 years of hockey in this city, that the home ice crowd saw a winner!  What a complete domination too!   A lot of “firsts” this year for the Blues… About time if you ask me! HA!  Well, my doctor visit yesterday, had him gushing about my weight loss… I go to my oncologist next week, I’m betting she’s not going to be so “gushing” about it… But it had to be done… my weight was inching higher and higher, and getting bad…  The Cellulitis in my leg is still hurting like a son-of-a gun, but I think I’m finally on the winning side of the ledger with it, and that would be a good thing!  Brian Setzer takes us to the finish line today with his remake of the Santo and Johnny song: Sleepwalk…   Man, he’s a good guitar player!  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

Chuck Butler