Chuck Talks Debt…

February 5, 2018    

* An Engineered takedown of Silver on Friday… 

* The PPT stops the dollar’s slide… for now! 

 Good Day… and a Marvelous Monday to you… I didn’t have the best of weekends, but Sunday made a turn for the better, and my beloved Missouri Tigers upset the mighty Kentucky Wildcats in basketball on Saturday, while I was all rolled up in ball in my chair. Our Blues won Saturday night too, so that was a good day sports-wise, but not physically healthy-wise for me!   Congratulations to the Philadelphia Eagles, who upset the Patriots in the Super Bowl last night… After years of duds for games in the Super Bowl, we’ve been entertained by some good games recently. The guys in Rockapella greet me this morning with their song: Zombie Jamboree…  Back to back, belly to belly… 

What do we have here this early Monday morning?    Recall last week when I told you that I questioned the pound sterling rally because of the facts that the U.K. had too much Debt, and that there were still questions and unknowns about the BREXIT negotiations?  Well, I turned on my laptop this morning and straight away I saw that the pound sterling rally had fallen on difficult times, and so I checked it out, and there it was in black and white…  The pound was on the slippery slope because the BREXIT negotiations may not meet their deadline…   

The Currencies today are a mixed bag-o-nuts, with the Big Dog euro gaining back some ground that it lost on Friday, and Aussie dollar trying to once again mount a run at 80-cents. And then we have the opposite side of the spectrum with the pound, rand, ruble, and rupee all taking on water this morning.  Gold got whacked, so badly on Friday, that the whacking left a mark!  And there was another engineered take down of Silver on Friday… This stuff so disgusts me that I find that I don’t want to talk about it because it gets my blood pressure boiling, and I’ve got enough problems going on without having blood pressure problems!

But I have to, so I’ll try to remain calm as I explain what happened to Gold & Silver on Friday.  So, there we were on Friday morning with the Dollar Index below 89, and falling to mark the 8th consecutive week of losses for the dollar. The Dollar Index looked as though it was ready for a steep ride on the slippery slope, and then in a wink of an eye, it didn’t look like that any longer! Somebody started buying in huge lots, and soon the Dollar Index was back above 89 and moving higher…  I put this down to the PPT (Plunge Protection Team) 

Well it didn’t take “the boys in the band” to see their cue to piggy back on the rise in the Dollar Index to engineer a take down of Silver…  Now, think about this for a minute, we rarely see Silver trade more than 10-cents on a day, but for a while on Friday, Silver was down 70-cents! We began Friday morning with Silver trading at $17.14, and until the shenanigans with the Dollar Index began, Silver was adding to the $17.14 opening price, but then it wasn’t any longer, and fell to $16.52, before settling higher…  It’s a real shame and criminal in my mind that these “boys in the band” continue to get away with this…   

You see, they buy at those cheaper levels that they drove the price of Silver to, after selling it all day… They’ll get everyone to buy in again and then the engineered take down happens again so they can book gains..  Gold saw the same type of trash trading and it ended up losing $16 on the day…  I shake my head in disgust and dismay, and wonder when these guys the PPT and the boys in the band end up “getting theirs”?  

OK, I’ve got to calm down now…  Oh, this ought to do the trick… talk about debt! NOT! I was doing some writing this weekend about Debt levels here in the U.S. but I could have talked about them around the globe. But what would be the point? You live here, you get your gas, groceries and giggles here, so you probably would prefer to know what’s going on with Debt here in the U.S. rather than in, say… France.  Of course that’s just me making that decision for you, sorry if I chose incorrectly!   

But don’t you want to know what these forecasted rate hikes are going to do to the debt servicing levels here in the U.S. not just with the Government who can borrow at much, much lower interest rates, but also U.S. Households, who have been ratcheting up the debt faster than you can say lickety-split! One credit card maxes out, no problem, just apply for another one, Woo-Hoo honey, put on your red dress, we’re going out to eat tonight, I’ve got a brand new credit card with $0 dollars on it yet! I’ve got money I haven’t spent yet! But wait until our friend here receives the first bill in the mail and learns that U.S. Households have to pay WAY MORE in interest rates on their Debt than the Government! 

Well the math was done, and to see it, you’ll have to go to and sign up… And it will print on Thursday this week.  That’s funny, and I do believe every time I’ve thought about it through the years I get a chuckle from the idea that one of my worst subjects in school when I was growing up was math… And then I got into a business where I had to use math every day! I can tell you though, that I’ve never used any y=x stuff in my life!  Any way, the thing to remember here is that the Government has a blank check (sure there’s a debt ceiling, but why? Every time we get close to breaching it, the lawmakers just raise it! )Yes, they’ve raised it 74 times, since 1962…  

But dear Householder has no blank check, except for the ability to keep applying for new credit cards… But one thing remains the same, you create debt, and you have to pay it back with interest, and circling back to my initial thought, as the Fed hikes interest rates… the cost to servicing one’s debt goes higher, and higher, and higher until no one including our Gov’t. is able to pay the interest alone, much less the principal!   And people thought that I’ve been the boy who cried Debt all these years…  And now its staring us in the face, like looking down the barrels of a shotgun! 

And you think the tax cuts will help these debt ridden individuals? Think again my friend… The rise in the debt servicing of their Student loan, Mortgages, Equity loans, and revolving credit, is going to eat that tax savings for lunch! Now, what’s for dinner?  

Oh, and for the Government? Guess what? They cut taxes when the Fed was hiking rates…  President Bush tried that, and it sent the dollar to the woodshed for the next 4 years.  Let’s see… lower your receivables from the taxpayers and increase your need to borrow… Doesn’t anyone else see that this is a recipe for disaster?    OMG!    I need to move along, I’ve sufficiently got my blood pressure on the rise this morning! UGH!   

The U.S. Data Cupboard on Friday had the Jobs Jamboree, and it was a little better than expected at 200,000 jobs created in January (forecast was between 185,000 and 190,000) The Unemployment Rate remained the same at 4.1% (but in true/ reality it’s probably closer to 23% than it is to 4.1%)  The Average Hourly Earnings showed wages going higher, and that got people excited, as wages grew 2.9% Year-on-Year…  Remember, I said that inflation was ready to take off this year, and this increase in wages in proof in the pudding!  And a downward revision to Capital Goods shipments couldn’t hold back Factory Order from rising 1.7% in December…   

Today’s Data Cupboard just has the ISM Non-Manufacturing (servicing) Index for January. The ISM Non-Manufacturing index has been cooling noticeably, moving down from the 60 area in October to what was a lower-than-expected 56.0 in December (revised from an initial 55.9). And I expect January’s index number to be in the mid-50’s, still well above the 50 level that denotes whether the sector is contracting or expanding. 

To Recap…  Well, the Jobs Jamboree was really only good for the Avg. Hourly Earnings data which showed wages rising… finally!  The currencies started Friday on the rally tracks and ended the day derailed at the station, as Chuck thinks the PPT stepped in to stop the dollar’s ride on the slippery slope. And that brought out “the boys in the band” for an engineered take down of Silver and carry over to Gold.  

For What It’s Worth…  Well, did you ever wonder if someone was peeking over your shoulder when you were writing? I sure did when I saw this article highlighted on Ed Steer’s letter ( this morning… So recall last week when I told you that the U.S. was in a Cold War with the other countries over how weak the dollar should be?  And then this article on appeared, and can be found here:        

Or, here’s your snippet: “The dollar is at its weakest level in years against other major currencies.

Experts say the drop is being driven, at least in part, by the U.S. government. And some suggest it’s a deliberate campaign aimed at boosting the American economy at the expense of major trading partners like Europe and Japan.

The Trump administration is engaged in “a cold currency war — and it’s winning,” Joachim Fels, an economist at investment firm Pimco, said this week.

Rather than an open conflict, which would involve direct intervention in currency markets, the hostilities come in the form of words and “covert” actions, he wrote in a blog post.

Fels points to the Trump administration’s moves to slash taxes and boost spending, which he says are coming at “the wrong time”. The measures will pile on more government debt, making investors less eager to own dollar assets, like U.S. Treasury bonds.

Policies like that “are sending an implicit but very clear signal to markets: A weaker dollar is the goal,” Fels wrote. “Markets have understood the signal.”  

Chuck again… Nothing more to add to this, that I haven’t already said… 

Currencies today 2/5/18… American Style: A$ .7937, kiwi .7306, C$ .8048, euro 1.2457, sterling 1.4097, Swiss $1.0748… European Style: rand 12.0434, krone 7.7163, SEK 7.9007, forint 248.55, zloty 3.3351, koruna 20.2235, RUB 56.47, yen 109.85, sing 1.3168, HKD 7.8201, INR 64.20, China 6.3014, peso 18.57, BRL 3.2172, Dollar Index 89.16, Oil $65.18, 10yr 2.85%, Silver $16.84, Platinum $993.20, Palladium $1,035.73, and Gold… $1,339.10  

That’s it for today… How about those Missouri Tigers! Kentucky might be beatable now, but I doubt they will be in March!  I wasn’t going to watch the Super Bowl last night, but friends Jack and Lorraine invited me up to their unit to watch it with some other friends here, so I went, stayed until halftime, and then wobbled back to my place… My friends, here, Jack and Gus, keep checking on me each day. Gus wants to cook me breakfast, and so on… It’s great to have friends like that, eh? I’m on the BRAT diet, for stomach reasons… Bananas, rice, applesauce and toast… Talk about bland! Oh well., hopefully it works and gets me back to normal… Stomach problems are not fun, folks… OK…  Motley Crue take us to the finish line today with their song: Same Old Situation (SOS)  And with that it’s time to get this our the door, I hope you have a Marvelous Monday and remember to always Be Good To Yourself!  

Chuck Butler