Dollar Bugs Pick Up Where They Left Off Last Week…

November 12, 2019

* Currencies and metals see early morning selling… 

* A special Treat as Chuck has Grant Williams in the FWIW section! 

Good Day… And a Tom Terrific Tuesday to you! Well, what do you know? The weathercast was correct yesterday, we did just get about 1 inch of snow! You would have thought we got 2 feet by the scores of closings on the TV… Wimps! Well, did you like my Veteran’s Day edition yesterday? It was strange writing on that day, but I guess I had better get used to it, now that I no longer work at a bank! I’ve had a stomach bug since Friday night. Now, this is the way to lose weight folks! Just don’t eat anything for 3 days, other than some saltines… And sleep is difficult to get these days, with all the stuff I’m throwing at my system each day! UGH! Oh well, they tell me I’ll be good to go, soon… Well, as always I tell them, I’m from Missouri, I’m going to have to be shown! The Byrds greet me this morning with their classic rock song: Eight Mile High…

Well, with most of the U.S. on holiday yesterday, the currencies didn’t do much after the London pubs began to fill up. But Gold, which was up more than $5 in the early trading yesterday morning, ended the day down $2… That’s a $7 swing folks, and one that just doesn’t make sense to me… I know, I know, everyone is talking about a Trade Deal being worked out between the U.S. and China… But I’m not so sure that’s going to reach a satisfactory conclusion, folks… so, why sell all your save haven assets, like Gold and Treasuries on a rumor that a Trade Deal will be worked out? This potentially will be a classic case of sell the rumor buy the fact. Or at least that’s what I’m hoping it turns out to be!

Already this morning the dollar bugs are back to buying dollars and selling currencies… And the currencies have slipped further in the European markets.  

Well, Gold got whacked yesterday, after it was learned that 3 million ounces of Gold were sold in one fell swoop… On Monday morning, we saw a large dip based on the equivalent of 3 million ounces of gold trading hands in a very short time. More than 33,500 gold contracts traded hands, three times larger than the average during the ups and downs seen in the past three months when gold was already volatile. We don’t know who it was that offered up those contracts, but I have to believe that JPMorgan was near the scene of the crime… I’m just saying…

So, Gold lost $2 on the day, and at one point was down even more… I’m not too concerned about this, unless this trade begets more large holders to sell too… Oh, that’s right, Chuck! You told us yesterday that JPMorgan had told their clients to sell their Gold! How could I have forgotten so soon? Well, like I said, I’m not concerned, as this could all be part of the correction for Gold to go back and fill in the gaps… Remember in August, Gold was $1,325, and then by the end of September it was $1,550… There have to be gaps there on the way up that need to bill filled before Gold can move on… So, I’m OK, with the price movement, I just wish it hadn’t come by virtue of a large one-off trade…

The price of Oil too, has slipped since last Friday, as Iran Claims to Discover 53 Billion Barrels in New Oil Reserves… Now that’s another of those, I won’t believe it until I see it things… But they say they did, so the price of Oil slips…

Debt here in the U.S. is bad… But realistically, debt all over the world is bad too… This past weekend the new IMF chief, talked about Global Debt… Let’s listen in to what she had to say… “IMF’s new chief, Kristalina Georgieva, warned over the weekend that “Global debt—both public and private—has reached an all-time high of $188 trillion. This amounts to about 230 percent of world output.”

Aye, Aye, Aye…. 230% of the worlds output? The IMF chief went on to say, “Leverage in the system has increased some 50%-60% since the financial crisis a decade ago, with debt now worth some 230% of economic output globally” This immense pile of debt – particularly the debt held by governments known as sovereign debt – poses a terrible risk to the world”

This is not going to end without a lot of tears, folks… And we, in the U.S., should not in any form or manner believe that we are better than the rest of Globe when it comes to our Financial Balance sheet… We get thrown right in the mix with the Greece’s, and others that we’ve talked about through the years… In fact… I would bet a dollar to a Krispy Kreme that when you consider all the derivatives that exist here in the U.S., our balance sheet is probably more at risk than others!

Since we’re talking about Gov’t or sovereign debt, let’s touch on U.S. Treasury issuance, which is off the charts these days, because of the Huge gap between Gov’t expenditures and tax receipts…  OK, this is where I really go down a rabbit hole folks… So, stick with me if you will or skip ahead, come on, you have to make a choice here… Should I stay or should I go now, If I stay there will be trouble… If I leave it will be double! 

So, think about this for a minute… What happens to tax receipts of a country when they go through a recession that lasts longer than the average bear recession? If you said they go to hell in a handbasket, then you would be correct!  And if the debt in the U.S. is jumping higher by the minute now, what’s it going to do when the recession/ depression hits?  You’ve got it!  the debt explodes higher and higher, doing a Sly Stone at Woodstock, and taking debt higher…. 

What’s it going to take to get some debt relief? Well, we could have a Debt Jubilee… Where all debt is forgiven, and you start over again… Oh, my, what an awful thing to think about doing, Chuck? Are you nuts? NO… I’m not, I was just throwing it out there… Because, besides printing enough money to pay down your debts, and debasing your currency and probably causing runaway inflation, I can’t think of any others… Tax receipts would help… But when I country is in recession/ depression, those tax receipts are going to be akin to removing a bucket of sand from a beach… They won’t be noticed! 

I think we as a country are beyond Austerity Measures…  There’s no one in Congress that has the intestinal fortitude to even offer up Austerity Measures, they don’t have the stomach for what that would bring their reelection hopes!  So, we just keep going down this debt hole, and never attempting to dig our way out of it…  Memo to Congress, Fed, and Treasury: You can keep digging but you’ll never reach China!  HA!  

The U.S. Data Cupboard is still pretty much emptied out for today, and won’t get restocked until tomorrow, when the stupid CPI will print…  I have a question for the propeller heads that print the CPI…  How do you come up with just 2% inflation when here in the U.S. we are experiencing soaring inflation in medicine, insurance, food,  tuitions, and other things? 

I pointed out to my wife a couple of weeks ago, the rise of inflation in food, as we discussed our purchases of a 50 wings and a pitcher of beer from our favorite watering hole…  That used to cost us $20…  It now costs us more than $35!  But don’t worry about that folks, the Gov’t keeps telling us there’s no inflation! 

Before we head to the Big Finish today, I wanted to mention this information that came to me in my local St. Louis Post Dispatch… I’m sure they got the gist of the article from some other news source, but I saw it here: And this was the headline of the story… “Google, St. Louis-based Ascension teamed up in secret project to gather health data of millions of Americans”… it goes on to say, “Wall Street Journal says the data involved in ‘Project Nightingale’ includes lab results, doctor diagnoses and hospitalization records, among other categories.”

Remember last week I talked about Corporate scandals and how rampart they were back in the early 2000’s? This is the second one in today’s world that I’ve come across now… My spider sense is tingling on this one folks, and it’s telling me that we’re going to see a score more of Corporate scandals… I’m just saying! 

To Recap…  The currencies and metals had little to no movement in yesterday’s holiday shortened trading day, but this morning the dollar bugs have picked up where the left off on Friday, buying dollars and selling the currencies…  Gold saw a drop after an early gain was wiped out, a large trade equaling 3 million ounces of Gold showed up ready to sell…  Chuck goes deep into the debt discussion, and are Corporate Scandals just beginning? 

For What It’s Worth… Longtime readers know that I’ve followed the writings of Grant Williams and his TTMYGH letter for years… This past weekend he was quoted on which then makes it public material and something I can use here! So, this is Grant Williams and his take on current conditions and where we’re headed, and it can be found here:

Or, here’s your very long snippet: “When the 2008 crisis hit, we were “at the brink”. Guys like Jamie Dimon will tell you that we were *this* close to the banking system not functioning, people being unable to get cash out of the ATMs.

If you live in Cyprus, if you live in Greece, you’ve seen this movie play out in real-time over the last few years. You’ve had your savings confiscated by the government or a bail-in.

It may not happen here in the US until the very end, but to say “it couldn’t happen here” is clearly wrong. There’s nothing that says the United States is exempt from the laws of finance and thousands of years of historical precedent. Even though it happens to be in the ascendancy globally at the moment, those things change.

Ask Portugal who used to be the holders of the world’s reserve currency centuries ago. Today they’re just one part of the euro. These things ebb and flow. They rise and fall.

A true systemic crisis is what we saw in 1929 -1933. It is to a large extent what we saw in 1971 when Nixon closed the gold window although didn’t have the same outcome and it didn’t look the same. But we had the punishing massive period of inflation afterwards, so it was a systemic crisis.

2008 was a systemic crisis, too. In 1929 and 1971, the answer was dealt with through the gold standard and through the pressure valve of the gold price. In 2008 they tried a different route. They tried printing money and throwing as much fake money at the whole thing as they possibly could. The worst thing that I think happened, was it did stop it. It was enough to arrest the slide. Did it fix it? No. And that’s the problem. Nixon’s move in ‘71 fixed the system for a while. It was a massive one-off reset that allowed the world to rebuild from a much more solid base.

The same thing in 1929. We went through tremendous unemployment and all the problems that came with The Great Depression, but that gave markets a clearing price. It allowed society to reset.

That’s what we didn’t get in 2008. We had an investment bank go down. We had a lot of people lose their homes. But in many cases, they were homes that they simply couldn’t afford anyway. So being told that you’ve lost your third condo that you’ve bought with leverage, that’s not a great depression-type event. That’s the financial gods coming back and saying, “this is not how it’s supposed to work”. If you’re a dancer in Florida and you own 13 condos all with leverage, don’t start crying when it doesn’t work out.

So what’s likely to happen is another reset of the system. They’re fighting tooth and nail against it and that’s their job. Frankly, if you say to them, what are you trying to do? They’re trying to avoid these outcomes, which is fine.

But these outcomes unfortunately are only truly avoided by not letting them build up in the first place. That’s the problem. Because man has unquenchable thirst for leverage, once the system resets and leverage is cheap again and we’re no longer overindebted, we will do the same thing again. Because that’s how society has become conditioned to grow, through the use of credit. Credit is a fantastic thing in the right circumstances; but it always ends up to be the thing that brings these cycles to an end. And we’re there again unfortunately.”

Chuck again… In sum it up… “the distortion of today’s excessive asset prices will require a systemic reset to fix. Either by a deflationary event that destroys the malinvestment, or by an inflationary event that destroys the currency.” – Grant Williams

Currencies today 11/12/19 American Style: A$.6842, kiwi .6337, C$ .7550, euro 1.1018, sterling 1.2833, Swiss 1.0042, European Style: rand 14.8279, krone 9.1580, SEK 9.7168, forint 303.36, zloty 3.8795,  koruna 23.1483, RUB 63.98, yen 109.21, sing 1.3613, HKD 7.8259, INR 71.46, China 7.0070, peso 19.11, BRL 4.1592, Dollar Index 98.36, Oil $57.09, 10-year 1.95%, Silver $16.79, Platinum $877.55, Palladium $1,706.78, and Gold… $1,453.31

That’s it for today… The FWIW article was a long one, yes, but it was something I rarely get to share with you, so it was worth the risk!  Our Blues get back on the ice tonight VS Phoenix, but at home this time, with a start time that will allow me to watch most of the game. With two major players out for an extended amount of time, will the Blues make a move to make up the scoring loss?  Things that I think about!   Hey! they’ve won 7 in a row! Let’s go Blues!  OK… time to go… Poco takes us the finish line today with their song: Good Feeling To Know….   I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler