Consumer Debt Accumulation Soars!

Chuck Butler’s: A Pfennig For Your Thoughts 

January 10, 2018 

* Currencies drift on Tuesday…

* Chuck gets on his soapbox today! 

Good day… And a Wonderful Wednesday to you… My travel day yesterday went along like clockwork, which was a welcome thing in m book. That’s not high on anyone’s list of fun days, when your travel is disrupted, delayed, cancelled, and all the other things that CAN go wrong, does! But, like I said, it all went just fine. YAHOO! It was a bad night for St. louis sports, as both our Blues and SLU Billikens lost their games. UGH! I’ve got some stepping up on the soapbox to do today, so get ready for that… The band Missouri greets me this morning with their song: Moven’ On…  

Well, when i left you Monday traders were having an opposite day with the currencies and metals, after the very disappointing job report for November printed on Friday. And that trading mentality remained in the currencies and metal yesterday, as the euro slipped further down in the 1.19 handle, and Gold lost $7.10 on the day. 

The price of Oil was the only anti-dollar asset to gain yesterday, and this morning Oil trades with a $63 handle… Seems there was what was called a “monster draw” of Oil supplies last week, and that has given the Oil traders a reason to believe that Oil can return to $70… That may take some time to achieve, but from the looks of things that could very well happen, eventually. 

The Petrol Currencies didn’t exactly celebrate the price of Oil’s move to $63 yesterday, and for the most part they lost ground, with the Canadian dollar / loonie remaining well bid above 80-cents!  The Russian ruble saw a dip blow $57 on Monday, but has traded back above that figure as there had to be some profit taking going on. 

The Norwegian krone continue to trade with a double edged sword. With one side tied to the price of Oil, and the other side tied to the performance of the euro.  And since yesterday saw one side go up and the other go down, the krone just can’t get any traction, and seems to be stuck in the mud around 8.08. 

The Aussie dollar (A$) and its kissin’ cousin across the Tasman, kiwi, have been very stealth-like with their moves higher VS the green/peachback  It was under the cover of darkness that kiwi moved past the 72-cents figure, and the A$ looks like it want to take out 79-cents… So, I’m hoping these two can remain stealth-like, and the short paper traders don’t catch on to what they are doing! 

Alrighty then, I’ve been champing on the bit this morning waiting to get up on my soapbox, and it appears that now is as good a time as any… So, give me a minute here to get up on the soapbox and test the microphone…  Testing 1,2…   OK, here we go!  

Well, I told you Monday that the Consumer Credit (read debt) for Nov. was printing and while it should be a doozy, I thought it would be just a precursor to what I expected to be a blow out month of December deficit spending… November’s headline went like this: Consumer Borrowing Grows At Its Fastest pace in 16 years! The total was $28 Trillion, or an increase of 8.8% annually! According to MarketWatch: Credit-card borrowing powered the increase. Revolving credit, which is mostly made up of credit-card loans, accelerated to an annual rate of 13.3% in November, the fastest pace since last December and well above the 9.9% gain in October. Nonrevolving credit, which covers loans for education and cars, rose at an annual rate of 7.2% in November, the fastest pace since October 2016 and above the 5.3% rate in October. The data excludes mortgage debt.

OMG! We can’t be that hmmm… my grandkids go ape on me whenever I use the word “stupid”, But hey! I got it from watching the Charlie Brown movies! So, I won’t use “stupid”, or any of the other descriptors we “used to use” to say someone wasn’t very smart…

I’m writing this week’s DTL letter and have some very scary data in there. It’s about household net worth VS income… Take this with the debt numbers we just saw from November, and well, something’s gonna explode! In the early years of the great band Chicago, they sang a song titled: It Better End Soon My Friend… That song was about what they felt was social injustice (back in the 70’s, and today’s millennials thought they were the first to protest this!) Oh, well, I’m going to borrow that song title, and use it to describe this accumulation of debt that U.S. consumers are going through right now… It had better end soon, my friend.

I’ll stepdown now, and give someone else an opportunity to dispute my thoughts on the accumulation of debt…  I welcome that! 

Well, we arrived here yesterday and it was a rainy day, which from the weathercast it will continue to be rainy for the next two days… Oh, well, the temps are warm and the sun will eventually come out again, it’s not like I’m only here for a couple of days and have to leave! 

I told you above that Gold lost $7.10 yesterday to close around $1,313… But not to fret! Gold has recovered that lost ground in the early morning trading today, gaining $8 to 1,321 and change! The short Gold paper traders had their fun with Gold yesterday, but once again the shiny metal proves that you can’t keep a good metal down!  Palladium has climbed back over the $1,100 figure, as it maintains its position on the pole as the start performer in the metals for the past year. 

Palladium has supply problems, the same with Silver, but Silver can’t get on the rally tracks like Palladium, because of all the short positions that have been taken in Silver.  Ed Steer always puts the charts for number of days of production to meet the short positions’ total in his Saturday letter, and this past week shows the following: 188 days of Silver production is needed to cover the short positions…  This is just ridiculous to me! 

The Hunt brothers were prosecuted for attempting to corner the Silver Market back in the 70’s… So, why aren’t these bullion banks that have all these short positions not be prosecuted?  Well, according to the Silver guru, Ted Butler (no relation that I know of), he believes that immunity from the law was given to JP Morgan back in 2007 for buying Bear Stearns, who used to have a fledging short silver business…  Ted Butler believes it was a 10-year deal, which would mean that it’s now up, and what did I tell you on Monday that the COT showed last week? That the short positions had dropped… Hmm…  Maybe, just maybe, because you never know for sure, Ted Butler is on to something?   

The U.S. Data Cupboard is basically empty today, so unless something crazy happens, we’re stuck with what’s going on right now to continue the rest of the day.   

 For What It’s Worth…  longtime reader, Bob, sent me this link yesterday and I immediately thought it to be FWIW worth, after reading it! it’s about how the Fed deals with foreign intelligence, and can be found on Reuters, here:   

Or, here’s your snippet:”The Federal Reserve’s little-known role housing the assets of other central banks comes with a unique benefit to the United States: It serves as a source of foreign intelligence for Washington. Senior officials from the U.S. Treasury and other government departments have turned to these otherwise confidential accounts several times a year to analyze the asset holdings of the central banks of Russia, China, Iraq, Turkey, Yemen, Libya and others, according to more than a dozen current and former senior Fed and Treasury officials. The U.S. central bank keeps a tight lid on information contained in these accounts. But according to the officials interviewed by Reuters, U.S. authorities regularly use a “need to know” confidentiality exception in the Fed’s service contracts with foreign central banks. Some 250 foreign central banks and governments keep $3.3 trillion of their assets at the Federal Reserve Bank of New York, about half of the world’s official dollar reserves, using a service advertised in a 2015 slide presentation as “safe and confidential.” Other major central banks and some commercial banks offer similar services. But only the Fed offers direct access to U.S. debt markets and to the world’s reserve currency, the dollar. In all, the people interviewed by Reuters identified seven instances in the last 15 years in which the accounts gave U.S. authorities insights into the actions of foreign counterparts or market movements, at times leading to a specific U.S. response.”  

Chuck Again… And you thought our Fed was only concerned with inflation, employment and asset valuation!   Notice I slipped that asset valuation in there? Pretty coy of me, eh?  

Currencies today 1/10/18… American Style: A$ .7860, kiwi .7225, C$ .8042, euro 1.1987, sterling 1.3537, Swiss $ 1.0223, … European Style: rand 12.4927, krone 8.0880, SEK 8.1924, forint 258.51, zloty 3.4840, koruna 21.3226, RUB 57.01, yen 111.34, sing 1.3320, HKD 7.8229, INR 63.51, China 6.5167, peso 19.27, BRL 3.2415, Dollar Index 92.32, Oil $63.40, 10yr 2.59%, Silver $17.10, Platinum $966.57, Palladium $1,101.02, and Gold… $1,321.70

That’s it for today… no sunrise to watch today, as it’s blocked by the cloudy skies… UGH!  Oh well, it’s days like this that make you appreciate the sunny days that will come! I heard from our little Christine the other day, and she informed me that January was her second most disliked month, following November. I thought, Yeah, I used to be with you on that, but no any longer! It’s nice when my former colleagues contact me, for I spent many hours by their side through the years, and to just walk away, was difficult for me… So, keep those cards and letters coming!  Marcy Playground takes us to the finish line today with their song: Sex and Candy…  Threw that one at you from left field, eh?  You never know what’s going to come up on my shuffle play list!  And with that, it’s time to go! I hope you have a Wonderful Wednesday, and Be Good To Yourself! 

Chuck Butler