Gold Gets Whacked, So What Are You Waiting For?

August 19, 2019

* The Fed’s Jackson Hole Boondoggle is next week… 

* U.S. Retail Sales are strong, and that has the dollar bugs dancing! 

Good Day… And a Marvelous Monday to you! Brother! I guess I need to go back to school to learn how to read a calendar, eh? Last Thursday, I erroneously said, that next week (this week now) would lead us to the Labor Day weekend.. Nothing like skipping a week, eh, Chuck? What a dolt I am at times, eh? My wife hosted a baby sprinkle here on Saturday, for Rachel… That meant I had to get out of the house! So, I went with son Andrew (Rachel is his wife) to my favorite watering hole for lunch! Good stuff! Cardinals come home from a road trip in first place… Does anybody want to win the Central Division this year? Johnny Nash greets me this morning with his song: I Can See Clearly Now… Good song for optimistic people!

I’m going to start the letter a little differently this morning… here goes… Well, last week, on Thursday… August 15…. In 1969, on that day, they began the Woodstock music festival. It ended 3 days later, but not before over 450,000 music lovers saw so many groups. Many years ago, I had the movie on VCR tape, and would hand it to any new person that was going to be working for me and would tell them that it was required viewing… I doubt anyone ever really took it home to view, but it became a tradition… My favorite performer of Woodstock was Alvin Lee and Ten Years After… I said in a Tweet on Thursday last week, that this was an important event in our lives in 1969… 50 years ago!

So… how’s that history? I’ve spoken to a lot of people through the years, and if everyone of them that said that they were at Woodstock, were actually there, then 450,000 was a too small of an estimate! OK… I have some bones to pick with some people this morning, so stick around for that, it should be good… The dollar bugs still have control… It’s a game of chicken to see who blinks first… The dollar bugs or the Gold bugs… Shoot Rudy, even Gold lost $10 on Friday! I read a report this weekend where the writer was saying that he was of the opinion that Gold will fall back to $1,450 before taking off for $1,600… I hope he’s wrong, I would prefer to see Gold continue its march to $1,600 uninterrupted!

Unfortunately though, Gold is down $18 in the early trading today, bringing the shiny metal back below $1,500… Hey! I look at this like… For all you procrastinators that thought you missed out on Gold’s big move upward, the shiny metal is giving you a second chance opportunity to buy it! 

Things in the Eurozone continue to unravel… And now the European Central Bank (ECB) is talking about getting back into the bond buying business… In other words, more stimulation, as if negative rates weren’t enough already! I don’t know about you, but I really don’t see how this will help the euro… The ECB is no different than the Fed, or the Bank of England, or the Bank of Japan, these Central Banks all believe they can avert a recession by applying stimulus… But the damage they do to their balance sheets while averting the recession, is unrepairable… I have a novel idea for them all… Why don’t you all just allow your economies to do what they want to do… Clean out the excesses and start over, instead of this kicking the can down the road, and thinking you’re smarter than everyone else!

I read a piece from the an old friend that resides in Switzerland, where he runs a managed money firm… And he’s of the opinion that when all the world’s major economies go into recession in 2020, that the Swiss franc will be the currency of choice to run to… hmmm… he may be right… I may be crazy… but I just don’t see negative yields in Switzerland being a buying point… But that’s not my bone to pick, as I truly respect this guy’s opinion…And looky there, the best performing currency this morning is the Swiss franc! 

Here we go… somebody better hold me back from saying something here that I shouldn’t… But… I’m going with a devil may care attitude! OK… I read a piece this weekend that made my skin creep up on me! The writer believed the Fed was incorrect in cutting rates last month, because, in their opinion, the unemployment rate was 4%, and GDP was 3%…. Alright, I’ll give her that… BUT… That’s only if you believe the Unemployment rates is 4%… with all the hedonic adjustments to employment figures, who really knows what the Unemployment rate is? I would rather look to the Participation Rate… which has been falling for two years now…. And GDP? Come on… How’d you get a degree in economics if you can’t tell when a GDP is bloated by Gov’t Spending? Real GDP is probably 2%… that same that it has been for a decade, on average that is…

Just shows to go ya, that you have to be careful with who you read… I was shocked and horrified that this article that I’m referring to, made it to print! But then, it’s just an opinion, of which everyone has one, and it could be wrong!

Oh, and here’s another article that I didn’t agree with… This fellow wrote a long article about how we should not use the inverted yield curve as an indication that a Recession is coming… I about fired off an email to him, but then saw my fave economist, David Rosenberg, post something on Twitter that said it all… Take it away Rosey! “Hey, if you don’t like the yield curve as a recession gauge, how about the -5.9% YoY trend in the Cass Freight Index, the -9.7% plunge in Port of Long Beach cargo traffic and the 3.9% slide in US railway carloadings? – David Rosenberg on Twitter

Or the negative print in Manufacturing Output last month? This is not data for the weak at heart, folks… Things are really unraveling here too… Shoot, I even saw an blurb this weekend that said that the President was worried about a recession… Mr. Optimism himself, becoming a worry wort with the economy… hmmm…. Things that make you think, right?

Well, when the black clouds finally form overhead and the daylight turns to darkness, like a Midwestern summer storm, people will say, “but nobody warned me and now I have huge losses in my stocks”…. And I’ll say… “Wait! What? You’ve got to be kidding me! I’ve been talking about a coming recession for months, and even showed at one point how historically speaking stocks perform badly in a recession… So, don’t come crying to me!

Going back to last week’s Data Cupboard… On our Tub Thumpin’ Thursday last week, Retail Sales for July did exactly what I said they would doo… They jumped higher, and it was all on back-to-school sales… However, also printing (negative) like I said they would, were Industrial Production, and Manufacturing output. Capacity Utilization dropped, and so did Productivity… So, we’re not working as hard as we were before apparently…

But the dollar bugs took the Retail Sales and ran with it… pushing the euro below the 1.11 figure, going into the weekend. Late last week, Australia printed their lasted Employment Data and it surprised observers to the upside, thus now giving those with some optimism that the rest of 2019 could be much better than previously thought… That optimism allowed the Aussie dollar (A$) to rally going into the weekend.

But any moves by the currencies VS the green/peachback will be muted, and held in check until further information can come to the traders. So, small moves are in the future for any currency that gets to rally VS the dollar.

OK… The Russian ruble got whacked good or bad depending on how you view it… But it lost some major ground on Friday, apparently there are few traders that fear the new sanctions placed on Russia by the U.S. with even stronger measures feared for later this year,  will hurt the economy, and that caused the ruble to sink on Friday… Add to those fears, a stumbling, fumbling, bumbling price of Oil, and a strong dollar, and you have a recipe for one of the most steady currencies to weaken…

The U.S. Data Cupboard had a very strage Housing number on Friday… I’m surprised that housing hasn’t rebounded with the drop in mortgage rates… But then who knows? I did see that the Consumer Sentiment Index fell from 98 to 92 on Friday… Really? These people are finally seeing some dark clouds?

This week, the Data Cupboard is empty until we get to Wednesday, and even then the only thing to print that day will be the Fed’s Meeting Minutes from their last meeting where they cut rates…. Should be an interesting read to see just how many Fed Heads were calling for a 50 Basis Points to be cut instead of just 25…

To recap…  Gold got whacked by $10 on Friday, and is down $18 this morning, bringing it back below $1,500… Retail Sales in the U.S. were jacked up from back-to-school sales, but that didn’t stop the dollar bugs from pushing the dollar higher, and causing the euro to drop below 1.11… The Aussie dollar saw a little love come its way when they printed a surprising strong Employment Report…  

For What It’s Worth…  Well, I’ve long said that I recalled when we didn’t even know who the Fed Heads were… But now they think they’re all rock stars, and everyone is entitled to hear that they don’t know what they’re talking about! HA!  Well, there’s gag order on them now… Check this out from :

Or, here’s your snippet: “Following the recent dismal communication failures first by NY Fed president John Williams, and following that, Powell’s own notorious July 31 “mid-cycle adjustment” press conference, a recurring lament among the investment community has been for the Fed to just keep its mouth shut, instead of continuing to yap and confirming that it is absolutely clueless about the economy and the future.
In a surprising twist, the Fed may actually be listening.

According to the Spectator, chair Powell has banned any public appearances by any Fed Board member, noting that “appearances at conferences have been canceled, all scheduled interviews have been abandoned and any comments on or off the record are outlawed.”
This unprecedented action, the Spectator reports, is a reflection of two pressures.

First, economic indicators increasingly suggest the US is heading into a recession with the Dow plunging 800 points on Wednesday.

Second, relations with the White House have reached a new low, with president Trump pinning the success of his presidency upon a strong economy as a recession – Trump believes – would destroy his reputation and kill his reelection chances. As a result, Trump has – correctly – blamed the current woeful state of the global economy on the Fed. The problem is that Trump also “owned” the same state of both the economy and the market for the past two years, so any recession will be entirely his, just as Yellen (and Bernanke) intended, and shift attention away from the Fed.

Continuing a series of outbursts aimed at the Fed, Trump again lashed out at Powell (and the Fed) claiming they are responsible for the slide in the stock market. To be sure, Trump has been doing this for a long time, realizing he will need a foil if when the market and economy crash, and has – for better or worse – picked the Fed as the scapegoat.  

Meanwhile, a hapless Powell believes that the Fed, which cut interest rates by a quarter point at the end of last month, has very little left in its armory and that even a cut in interest rates would do nothing to combat growing international economic pressures.”

Chuck Again…   Well, this “gag order” is going to be tough to enforce, given that next week will be the Fed’s Boondoggle at Jackson Hole, Wyoming… I’m just saying…

Currencies today 8/19/19 American Style: A$.6777, kiwi .6416, C$ .7544, euro 1.1098, sterling 1.2106, Swiss $.9808, European Style: rand 15.3483, krone 8.9845, SEK 9.6630, forint 293.37, zloty 3.9379, koruna 23.2246, RUB 66.48, yen 106.66, sing 1.3749, HKD 7.8436, INR 71.42 China 7.0419, peso 19.66, BRL 4.0035, Dollar Index 98.22, Oil $55.03, 10-year 1.62%, Silver $16.88, Platinum $848.00, Palladium $1,459.00, and Gold.. $1,495.70

That’s it for today…  As I mentioned above, my beloved Cardinals are in first place this morning in the Central Division, but only by percentage points over the Cubs… And the Brewers are only 2 games behind the top two… It’s a tight race to the finish… My darling granddaughter, Delaney Grace will be singing the national anthem at a different venue this week. I get goose bumps when I hear her sing the national anthem… Thin Lizzy takes us to the finish line today with their song: The Boys Are Back In Town…  I saw Thin Lizzy open up for Queen many years ago, and on that particular night, I thought the boys in Thin Lizzy sounded better than Queen, who I was a big fan of their…  I hope you have a Marvelous Monday, and that you will promise to Be Good To Yourself!

Chuck Butler