Former NY Fed Bank Regulator Blows A Whistle!

Rocktober 23, 2018 

* The dollar continues to hammer on the currencies

* Gold rallies in the early morning trading on Asian fears… 

Good Day… And a Tom Terrific Tuesday to you! I forgot to mention this yesterday, so here goes… 36 years ago, this past weekend, I witnessed a Game 7 World Series victory for my St. Louis Cardinals… The night is strong in my memories of the evening. We drew tickets out of hat, and I got Game 1 and Game 7, the other ticket went to a young lady that worked for me at the time, named Kate… So, we bundled up and went to the game… There’s a picture of me and Andrew (he was a baby) at the victory parade the next day, that I proudly display on my writing desk’s pin up board… I was quite a bit smaller in size, and had hair! So, there you go! Blood Sweat & Tears, greet me this morning with their song: You’ve Made Me So Very Happy… I sing this all the time, but I get ignored… HA!

Alrighty then… I’ve got a bombshell to talk to you about this morning, but first, we need to get you the info on the currencies and metals… Yesterday, the euro kept sliding downward in the 1.14 handle, as I watched on OAN News, Italy is prepared to present their deficit laden budget to the European Commission today… What’s will the Eurozone leaders say about this budget? Well, if I were king, I would tell them to go back, sharpen their pencils, and to not return until they’ve cut the deficit in half!

The Eurozone leaders probably will be more diplomatic than old “shoot from the hip, Chuck” But that’s just leaves the door open for negotiation, and in things like budgets, getting hard numbers to meet is a better process… I know, I went through 39 years of “Budget negotiations”…

So, that’s what’s weighing down the euro right now… Italy is the 3rd largest economy of the Eurozone, so it would be like the state of New York, which is 3rd in GDP size behind Texas and the leader California, having major budget problems… The good news from the press conference in Italy was that the Italian leaders were emphasizing their intent to remain in the Eurozone and with the euro…

OK,  who did it? Who shined the light on the Aussie & kiwi dollars and brought the markets focus to their recent stealth rises? Remember I told you to be Shhh… not to wake up the markets?… But somebody had to be the loud mouth. HA!  But here’s the thing I want to say about these two currencies… They are known as Commodity Currencies… Now we all know that commodities do well in a rising inflationary environment… They also do well, when Commodities enter a bull market like they did in the early aughts… So… if inflation, (and I know all to well it’s affecting me!) is affecting everyone, and is rising again, which is why the Fed claims it is hiking rates every 3 months, then Commodities and the Commodity Currencies would be looked at to rally… I’m just saying… 

OK, I’ve held this back for this long, but I’m like a horse champing at the bit… So, here goes!

I wrote a long piece for the DTL group on derivatives a couple of months ago… And I’ve talked about it here… But, In the piece, I explained that no one, and I mean no one, fully understands the delivery method of when all these derivatives begin to get executed…  The systemic risk is off the charts folks… I’m serious about this!   And then yesterday, I saw a video clip of a former NY Fed Banking Regulator basically say the same thing, and made the point that, “Ex-bank regulator: We don’t understand ‘how systemically broken the system is.”

OMG! Pack the bags, turn out the lights the party is over folks… Here’s a link to the video, and then come back and read the rest, you’ll be fuming out the ears at that time…

It’s not a question of IF another financial crisis is going to hit us, it’s more a question of “when”, in my mind… Oh, and I do recall that former Fed Chair, Janet Yellen told us that there were no chances of another financial crisis… So, we should all feel free to throw more money into stocks, and forget about Gold… right? Well, I’m not buying that one… And while I feel like Frank the Tank in the movie when he thinks everyone is following him and his streaking, only to find out he was alone… It’s not going to deter my fears of this whole thing blowing up, right… before… your… eyes…

And guess who the Ex NY Fed Bank Regulator’s main bank was that she was assigned to?  Yes, Goldman Sachs…  Figures, right?  Lola doesn’t want to calculate or even acknowledge the systemic risk of these derivatives, and The Fed allows them to do this.. I’m so mad, right now that I’m going to go yell at the walls!   I’ve had to deal with Bank regulators for years on years, and they never gave an inch! But for Lola… they get the whole darn yardstick! 

OK, move along Chuck before you say something that gets you into hot water!  I really didn’t have to say much at all, just point people toward the link of the interview on YAHOO…   But I had to throw my two cents in, and get my blood pressure all worked up and I have to go to the doctor this morning. That’s not going to look good when they check my blood pressure! 

Well, Gold lost $4.80 yesterday, but is up nearly $13 in the early morning trading today… The turnaround’s reason is pointed at the Asian stock markets, led by China… After a two-day rally in this region’s stock markets, Traders began to question, China’s ability to provide enough Global Growth to push the other countries along, and that question, got the stock markets in Asia selling stocks and buying Gold… 

It’ll be interesting to see if this fear carries over to the U.S. markets today, as of right now, the stock futures here in the U.S. are down significantly…  Remember in January 2016, when there were HUGE fears in the markets about China? Capital flows out of China were hinging on having very negative affects on the Chinese economy, and the stock jockeys got scared, and stocks dropped for a few weeks?  This could be the snow flake that causes an avalanche in stocks… But then that’s not my cup o’ tea, so I’ll just leave that there, and say to the stock sellers, welcome to Gold… 

To recap…  The dollar bugs have the hammer and they keep swinging it at the currencies…  Gold lost $4.80 yesterday, but is up nearly $13 this morning on Asian fears…  Chuck found an interesting interview on YAHOO, with a former NY Fed Banking Regulator, who says, that we don’t know the systemic risk of derivatives… Hmmm, I’ve heard that somewhere before, where was it? …. Oh, that’s right I said that plenty of times before! 

For What It’s Worth…  I’ve talked a lot about the exits of countries all over the world from the use of dollars as a main currency in their system, and this article talks more about that, and it’s relationship with Gold… And it can be found here:

Or, here’s your snippet: “In the near future we can witness a big change in the rules of the game. At the beginning of the year, developing countries were the first to feel investor panic. If a crisis in Latin America and South Asia doesn’t surprise anybody, now is the time to worry about the largest economies of the world,” Mikhail Mashchenko, an analyst at the social network for investors eToro in Russia and CIS told RT.

“The aggressive U.S. policy in recent years has forced some countries to look for an alternative to the dollar and replenish their gold reserves. Worries about the future growth of global economy are an additional incentive for purchases. Many question Donald Trump’s protectionism,” the analyst added.

There are signs that the global financial system dominated by the U.S. dollar could collapse, says financial institute FinIst analyst Denis Lisitsyn. These signs include the uncontrolled emission of money from different countries, an increase in U.S. interest rates, trade wars, the rapid rise in energy prices, geopolitical tensions in Syria, Iraq, the war in Yemen, he says.

“Many countries are buying gold in advance. They understand that paper money is constantly eaten up by inflation, equities will sharply fall in price in case of a crisis, and foreign deposits can be arrested, confiscated or frozen,” he said.”

Chuck Again… I have to thank the RT for sending me their headlines each day, they sure look different from the headlines here…  And they’re in English, so it’s not the language that’s different! 

Currencies today 10/23/18… American Style: A$ .7071, kiwi .6555, C$ .7630, euro 1.1460, sterling 1.2980, Swiss $1.0042, European Style: rand 14.3672, krone 8.2803, SEK 9.0250, forint 281.57, zloty 3.7485, koruna 22.5278, RUB 65.33, yen 112.32, sing 1.3790, HKD 7.8390, INR 73.43, China 6.9378, peso 19.36, BRL 3.7002, Dollar Index 95.98, Oil $68.18, 10-year 3.15%, Silver $14.73, Platinum $826.58, Palladium $1,136.49, and Gold… $1,234.80

That’s it for today… recall I told you yesterday that today’s letter would be shorter, and it is!  Our Blues blew another game last night after having a lead late in the game, this time in overtime… UGH! It’s been a slow start for our Blues, but… in my opinion, I would rather see that and build on the season, than to start fast and fade, like they have the last couple of years… Well, will this be the oncologist meeting where she tells me I don’t have to take chemo any longer, at least for now? Because I’m fully aware that the wolf is always at the door!  My body needs a break… I’m just saying…  Ok, here’s a twist today… Chris Stapleton takes us to the finish line today with his song: Tennessee Whiskey… (I loved that song!)  Now, go out and make this a Tom Terrific Tuesday, and Be Good To Yourself!

Chuck Butler