Even Bonds Get Sold Yesterday!

March 18, 2020

* No reserve ratio required at banks any longer…. 

* Gold continues to get manipulated in price… 

Good Day… And a Wonderful Wednesday to you… I hope that everyone is staying healthy, washing their hands all the time, and keeping distance from other people that you don’t know. Everything is closing around us, as I told you yesterday, we even have a curfew down here in S. Florida! But that didn’t keep me from sitting out on my balcony with my Bose wireless speaker blasting Sirius XM 60’s on 6 last night until everyone else went to bed! I know the words to most of those 60’s songs, and I sing along at the top of my lungs to them! I’m sure the other condo occupants were wondering what sick cat was singing last night, but I don’t care! It was a great St. Patrick’s Day for yours truly, more on that at the end today, but first, The Doobie Brothers greet me this morning with my fave song from them: South City Midnight Lady…

OK… I know I sound like a broken record (on a sidebar I’m glad vinyl records have made a comeback so I no longer have to explain that comment to youngsters!) when I tell you that the dollar bugs continue to kick sand in the faces of the currencies, with the difference yesterday being in the pricing of Gold, which found a bid, and kept it all day, with some interference from the price manipulators…

Gold was able to push higher on the day for the first time in a week, after experiencing its worst week in over 4 decades, last week… OUCH! That really hurt me! Come on price manipulators tell me your sorry! Come on, tell me your sorry or I’ll tell your moms! HA!

Well at least for one day, the sale on the price of Gold was over…. However, this morning’s early trading as Gold down $27!   OUCH!  OK, I said above “some interference by the price manipulators”…. Gold has reached $1,554, at one point yesterday, but then was only able to close at $1,527….  I just find this price manipulation so frustrating, but at the same time giving buyers who had procrastinated buying Gold or Silver the opportunity to buy where they should have bought previously!

We began this week with talk about stimulus plan for individuals here in the U.S…. And yesterday it was announced… $1,000 checks being mailed our beginning next week to tax payers…  Wait! What?   What numbskull thought that one up? The same guy that thought up the tax rebates during the last administration?  As if a $1,000 check is going to stop this global recession that’s raging right now!  I have an opinion on the global recession in today’s FWIW section that was sent to me by my friends at GATA… So, don’t miss it!  

 It was brought to my attention yesterday, and how I missed this, I have no idea, but I did, and that was that when the Fed slashed rates to near zero on Sunday, and announced a new $700 Billion bond buying program that’s not called QE, they also… and get ready for this one folks…. The Fed also lowered the reserve ratio for nearly all banks to zero! Banks don’t have to hold reserves any longer! OK, so how many of you have seen the movie: “It’s A Wonderful Life”? Remember the scene when the town folk all ran to the savings and loan and demanded their money? Well, if it hadn’t been a good sales job by George Bailey, they would bankrupted the S&L… When interest rates in this country go negative, will there be a run on deposits at banks to get money out before it begins to get charged for being there? You bet there will! And Banks won’t have reserves to fall back on any longer…. So… just stop and think about this no reserve ratio at banks any longer plan…. And then tell me this doesn’t all end up in tears?

And that brings me to Gold & Silver…. I had a couple of readers send me notes telling me their local metals dealers had seen their supply go to zero…. So I asked my metals guru, Tim Smith @1-800-926-4922, if he was seeing the same thing… And his answer was yes, supply is thin, for coins and bars, right now, and instead he’s seeing a ton of activity in non-allocated or pooled Gold & Silver…. This product has always, in my humble opinion, been the best and most affordable way to own physical Gold & Silver…. You basically pay about 1% over the spot price of your metal, and it’s bought in your name and held with other owners’ purchases. It’s held free of safekeeping charges, and you have it just like it’s in your bank safe deposit… Should you want to sell it, it’s liquid, and can be sold on any day that the market is open, and if you decide at some point in the future that you want to hold your Gold in the form of coins and bars, you simply call up Tim and tell him to start the process of getting your coins and bars to you…

At this point you’ll have to pay the minting charges, and delivery charges, but you don’t have to rebuy the Gold or Silver! And these minting and delivery charges would have been added to your original price IF you had opted for coins or bars when you first bought your Gold or Silver… And remember, this is important, that any time you buy or sell, there’s a mark up or down of about 1%….  

So, this public service announcement has been brought to you free of charge…. I don’t receive a wooden nickel for sharing this info with you…. Not from you, not from Tim’s company, not from the dealer, not from anyone!

In other markets… stock futures are down limit again this morning…  The price of Oil has dropped by a large margin again, down to a $25 handle, and looking like it’s heading to $15….  And Bonds… hmmm…  there had to be some profit taking in bonds, for the yields rose yesterday… The 10-year’s yield is back above 1%… (remember with bonds, as yield rises the bond price goes down, and vice versa) This bond market has me wondering what the heck is going on here? 

Well, are you all staying healthy, and keeping inside? I don’t stay inside, I love to be outside, even more down here when the days warm to 80, with the sun shining and a sea breeze blowing to keep you comfortable… The beaches here are pretty barren, but still in use… My wife, our daughter, and my wife’s sister, could sit on that beach for hours and good for them for doing so! I go out in the early morning on the deck and take my cap off and allow me to soak up plenty of Vitamin D from the sun, but before it gets too high in the sky to make that sit uncomfortable!

So, it looks to me like the POTUS has gotten his wish that the U.S. lowered their rates like the rest of the world… But a wise man, (my dad!) once told me to be careful what you wished for… In another thought, I was thinking what all this going on could be the end of the debt cycle here in the U.S. As we’ve been piling on debt ever since Nixon took us off the Gold standard in August of 1971…

Speaking of which, where you aware at the time what Nixon was doing? I wasn’t, as I was in high school, and only came to find out what this move to take us off the Gold standard meant, when I  began to study economics… I’ve told you all before how I learned a lot of my economic principles from the great economist Hyman Minsky… In 1981 he told me that “one day, the U.S. would rue the day they went off the Gold Standard” … I thought at the time that he was just longing for the good old days, but after a few years I realized what he was saying….

Speaking of Minsky, could this Covid-19 virus be akin to a Minsky Moment?

And with that thought, we’ll head to the Big Finish! 

The U.S. Data Cupboard had a couple of surprises for yesterday, and two of the three major economic prints were reversed as to how I expected them to print… Retail Sales for Feb. collapsed… instead of being just OK, as I had thought… And Industrial Production was up and not negative as I thought it would be… I know, I know, head scratching time, eh?  Capacity Utilization was weaker as I thought it would be, but not by much…  But like I said yesterday, this is all a picture of what was going on before the COVID-19 virus hit our shores…. This month’s data will be very interesting….

The Big Thing that was scheduled for today’s Data Cupboard was the FOMC Meeting adjornment and rate decision…  That’s been cancelled, of course, since the Fed has done 2 “emergency out of market rate cuts” in the last two weeks…  There’s some housing data to print today, if that’s your bag, baby!

To recap…. The dollar bugs continue to kick sand in the face of the currencies, the Dollar Index is nearing 100!  Gold had a day in the sun yesterday, but is back to getting sold this morning! OUCH!  The Dow Futures are limit down again this morning, so look for a very ugly open today…  No reserve requirements for banks? Really? Yes, that was in the details of the Fed’s announcement Sunday, that Chuck missed!  

For What’s It’s Worth….  I told you above that I had an article from the GATA folks on the global recession, but I didn’t tell you that the article was written by Ambrose Evans Pritchard, of the U.K. Telegraph… When Mr. Pritchard speaks, everyone listens… I’m just saying… So, here’s the link:https://www.telegraph.co.uk/business/2020/03/17/moment-monetary-shock-awe-finally-fails-has-arrived-do-do-next/

Now, you won’t get too far with that link because it’s a subscriber site, but…. The kind folks at GATA gave me the gist of the article, and I’ll share that with you here: ” Central banks have exhausted almost all their usable ammunition under existing rules yet still failed to calm markets or to unfreeze critical parts of the global financial system.

This moment what we all feared. The danger now is that global recession — it is no longer “if,” as we are weeks into it already — will morph into something more intractable: a deflationary depression with a wave of defaults that breaks the capitalist system as we know it.

So what can be done? Let me take an instant stab. Either the rules are changed fast or we risk uncontrolled global liquidation. The Federal Reserve must be unshackled to act as a buyer-of-last-resort for the corporate debt markets, for great swaths of the credit system, and for Wall Street equity indexes.

The European Central Bank must acquire powers to act as a genuine lender-of-last resort for eurozone sovereign states. It must do exactly what Christine Lagarde refused to do when she blurted out last week that “the ECB is not here to close bond spreads” — an expression lifted word for word from the German board member, Isabel Schnabel, which tells us who is in charge of that institution in the post Draghi era.

This must be backed by a fiscal blitz even greater than in 2008-09, with pledges to “socialize” the drastic losses faced by industry and private firms. What was done for banks last time despite misconduct must now be done for others.

There must be tax holidays, sweeping state guarantees for firms, credit forbearance, a temporary suspension of mortgage payments (pushing out the maturity), and moral hazard be damned — all under the umbrella of financial repression.”

Chuck Again….  You know, I sit here and think about all this, and then say, “Chuck, you’ve tried to warn them…. You’ve tried to point out that all that debt was going to bring the financial system crashing down… You’ve… Ah never mind…. Let’s just say, I tried!

Currencies today 3/18/20 American Style: A$.5919, kiwi .5858, C$ .6980, euro 1.0975, sterling 1.1930, Swiss $1.0401, European Style: rand 16.9807, krone 10.5057, SEK 9.9896, forint 318.42, zloty 3.9897,    koruna 24.6633, RUB 74.75, yen 107.45, sing 1.4322, HKD 7.7653, INR 74.21, China 7.0048, peso 23.87, BRL 5.0068, Dollar Index 99.78,  Oil $25.37,   10-year 1.10%, Silver $12.27, Platinum $652.20, Palladium $1,584.21, and Gold… $1,500.88

That’s it for today… and this week, of course as tomorrow, I’ll be on the road bright and early. They actually called me from the wound center yesterday, to ask me if I was still coming on Thursday!  I guess they’re seeing a lot of no-shows…. But not me!  I had a great conversation with grandson Everett yesterday, we talked about all kinds of things, I even explained fractions to him! Smart kid!  Ok… here’s a good trivia question for rock and rollers… Who sang: Mama Let Him Play?  If your answer was Doucette, then you win the prize of a free year’s subscription to the Pfennig! HA!  I hope you have a Wonderful Wednesday…. Please be conscience of what’s going on around you, and who is around you! And Be Good To Yourself!

Chuck Butler