He’s Baaaaacccckkk… Again!

August 8, 2019

* Gold soars, while currencies fade… 

* What a hissy fit by the stock jockeys last week! 

Good Day… And a Tub Thumpin’ Thursday to you! Well… I’m back… a couple days later than originally thought, but here nonetheless! What a couple of weeks it has been for Gold! WOW! The currencies didn’t rally while I was gone, but Gold and Silver sure did! It does feel a bit weird writing this morning, as I’m out of practice. My summer vacation was grand, a great time spent with son Andrew, his wife Rachel and my grandson Braden… the newest guest to our family time is Evelyn, who is still waiting to be born (Rocktober), but she was there, I could feel it! Braden loves the beach, or should I say the ocean, and would spend every minute of every day, in it if he could! I love that the the kids and grandkids get to do this with us each year… We came home last night to Alex messing with the garage door opener… I think he messed it up for everyone else but him! Oh well, kids… they never grow up, right? Steely Dan greets me this morning with their song: Kid Charlemagne… Is there gas in the car? Yes, there’ gas in the car, I think the people down the street know who we are!

During my vacation, I kept seeing emails telling me about this that and the other thing, and some of it I really wanted to remember to talk about… But… a funny thing happened on the way to the forum… I forgot all of it! I do know that the Fed cut rates ¼%, and the stock market had a hissy fit over the size of the cut… President Trump also didn’t like the small cut, and said that the Fed had let us down again… And on the other side of the rate cut coin… Bill Bonner of Agora fame, said that the Fed had made a BIG mistake… And all the while the dollar grew stronger, along with Gold & Silver… Gold traded over $1,500 yesterday, up to $1,510, before profit taking ( to put it nicely) brought it back just below the $1,500 figure… I texted a friend of mine who I had talked into buying Gold a couple of years ago, and said, that Gold sure was on a run, and that I believed that it would hit $1,700 in the next year… WOW!

Well, look how quickly, Gold went from wallowing around $1,300 to $1,500… I’m just saying…

The dollar continues to ride the crest of the wave that has it above all the other currencies… The Reserve Bank of New Zealand cut rate 50 basis points just to show the Fed how it’s done… And kiwi got smacked! The Aussie dollar too traded down big time since I left… There’s been too many articles about how Australia’s run of years without a recession is coming to an end… And now the currency traders are reading them and trading the A$ accordingly. And just for grins… Gold is at a record high price VS the Aussie dollar… 

Oh, and I gues the biggest news of the two weeks is that China has devalued the renminbi… No surprise from me or anyone else that actually reads my letters, for I told them a few months ago that I thought that China would move the renminbi to above the 7 figure… I told you that their rhetoric that they would keep the renminbi strong and not use it as a weapon in the trade war, as hogwash, and it sure has turned out to be just that!

The Chinese move with the renminbi had the markets shaking in their collective boots… But last night the renminbi was allowed to appreciate a little, thus calming the markets a bit…  

Long ago in a galaxy far away, I wrote about how the Sing dollar trades with the renminbi, at the time it was an easy thing to pick out as currency returns were +29% for the renminbi and +27% for the Sing dollar…  As the years have gone by, the relationship between the two currencies has remained in tact, and so with the renminbi slip sliding away these days, so too is the Sing dollar…  which is a crying shame because Singapore is a model city/ country, that has their ducks in a row… But because of export competition with China, the Singapore officials can’t allow the Sing dollar to get too far out of whack with the renminbi…  UGH! 

But I want to get back to Gold (and Silver) before I forget… A couple of years ago, in the old Review & Focus I told customers that there was going to be a shortage of Silver, and that we could eventually see Silver rise in price… (I also pointed out that Solar Panels were demanding tons of silver) Well, I received a note from my friends at GATA and one of their contributors wrote that deliveries of physical Silver are taking a long time to take place… Doesn’t that sound like there’s a shortage? It does to me, and it has a lot to do with Silver’s rise in price recently!

It was long written about how once Gold got past the so-called Maginot Line of ($1,350) that it would sail onward and upward… I talked about it talked about it talked about it until I was blue in the face, which is difficult for me to achieve since I have a red face most of the time!

How many times in the past year have I asked this question….. Got Gold? Don’t you wish you would have listened to me then, and heard me later?

OK… So, why’s the dollar so darn strong? The President doesn’t like it… But what’s he going to do? He’s done what usually takes the legs out from under the dollar, by cutting taxes, increasing spending, starting a Trade War with our biggest creditor… And pounding his fist on the table asking for Fed Chairman, Jerome Powell’s head on a platter…. But still the dollar holds on… Well… remember a couple of months ago, when Powell, said that the rate hikes were on hold? Then the rhetoric changed to cutting rates instead of just being on hold… Somewhere in there the markets began to believe that the Fed would cut 50 Basis Points (1/2%)…. And when they didn’t… Well, the dollar was saved! Long live Jerome Powell! Were the cries from the dollar bulls…

But what happens when…. A whispering campaign begins to take hold that talks about more rate cuts? Well, for that to happen we would have to see more of the type of hissy fit that the stock jockeys had last week… The Plunge Protection Team (PPT) was working overtime to correct that plus 700 point drop last week after the 1/% rate cut was announced…

On the recession watch… We received word here in St. Louis that 25 Sears and Kmart stores will close for good this Rocktober… The Service industry index fell last month to the lowest it’s been since the Great Recession…. When President Trump announced new Tariffs on Chinese goods, China retaliated with a “we’re not buying U.S. agriculture any longer”… to which the President promised farmers that he would help them… Which in layman’s terms is to say that “we’re going to throw billions of dollars at you , and from where we get it don’t ask”… But we all know who pays for that don’t we? And at a time when disposable income is falling faster than gravity, no one and I mean no one (that’s not a 1%er) can afford more taxes…. 

The price of Oil took a big tumble while I was gone… it was teetering right before I left, but while I was gone it fell $4 in price and trades with a $52 handle this morning…  Fill ’em up! Go get your gas cans, old autos that don’t run very well any longer and fill ’em up! Get your gas at cheaper prices while you can! HA! I guess those production cuts by our friends at OPEC (NOT!) aren’t working out for them to nicely, eh?  This is all about reduced demand for Oil in dollars folks… 

All over the world, countries are waking up to find that they don’t have to buy dollars or hold them as a reserve currency to pay for their Oil… And that puts a big fat Cheshire Cat smile on them…   What comes next? A war to prevent this from going further? I sure hope not, but that was always the answer before… 

The U.S. Data Cupboard today only has one print for us, and that’s the latest pulse check on Consumer Credit, (read debt)…   Last month the number has exploded higher to $18 Billion…  I’m thinking that it will back off a bit this month, and then rev back upward next month when all the “back to school” spending takes place…  While I was gone, I noticed the TV advertising a “tax free weekend” for back to school sales…  I thought for a moment… and said to myself in my best Church Lady voice: Well, now, isn’t that nice….    I guess the states that run these things have a treasure chest of tax receipts and therefore can afford to do these things, eh? 

To Recap… Chuck’s back…  Gold is soaring, Silver is right behind, and the dollar continues to be strong, as Chuck explains because the Fed didn’t cut rates 50 Basis Points…   That was some hissy fit that the stock jockeys had last week when the Fed cut rates only 25 Basis Points wasn’t it?  China devalues the renminbi, no surprise to Chuck… he saw it coming all along, as retaliation for the Trade tariffs… 

For What It’s Worth… Well I saw and read many articles while on vacation that would be FWIW worthy, but they’ve all passed under the bridge with the river flow, so I had to look though my usual hunts this morning and came up with this one from zerohedge.com. It’s about the President banging on Jerome Powell… and it can be found here: https://www.zerohedge.com/news/2019-08-07/trump-renews-powell-attack-i-was-right-fed-must-cut-rates-bigger-and-faster

Or, here’s your snippet: “The ink on the Fed’s latest rate cut – the first in a decade – still hasn’t dried, and here comes the president demanding, drum-roll…more.

As we expected earlier, when we noted the not one, not two, but three surprise rate cuts by Asian central banks, and said that it’s only a matter of time for Trump to chime in, Donald Trump did just that when in a trio of tweets, the president once again lashed out at Powell for not only not cutting more than just 25 bps – because it is “too proud to admit their mistake of acting too fast and tightening too much (and that I was right!)” – but also because the rest of the world is now winning the race to the bottom: “They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW” Trump boomed, even though the Fed ended their “ridiculous quantitative tightening” LAST WEEK.

Trump also unveiled that he is now a yield curve expert, although what he means by “yield curve is at too wide a margin” is not exactly clear since the 3M-10Y curve just hit a new 12 year low of -40bps as the entire yield curve now screams recession.

Trump’s rant, of course begs the question: why is he desperately trying the Fed to panic into more rate cuts in what Trump has repeatedly dubbed the ‘greatest economy ever.’

And just in case Powell gets an angry phone call this morning, don’t be surprised if we get an emergency rate cut from the Fed one of these days: and why not — [as] the Fed’s credibility is now almost entirely gone.”

Chuck again…  Yes, the Fed’s credibility, or what’s left of it… They’ve sure done a bang up job of ruining it haven’t they? 

Currencies today 8/8/19 American Style: A$.6793, kiwi .6470, C$ .7522, euro 1.1193, sterling 1.2147, Swiss $.9760, European Style: rand 15.1533, krone 8.9463, SEK 9.6077, forint 290.31, zloty 3.8617, koruna 23.0468, RUB 65.27, yen 105.97, sing 1.3832, HKD 7.8412, INR 70.73, China 7.0484, peso 19.62, BRL 3.9668, Dollar Index 97.64, Oil $52.13, 10-year 1.72%, Silver $16.99, Platinum $855.38, Palladium $1,498.26, and Gold… $1,498.26

That’s it for today…  I do want to send a Big Shout Out to my long time friend (since 2nd grade) and brother… Mike Karvas… Today is his birthday…  While I was gone my darling granddaughter, Delaney Grace sang the national anthem at another stadium and celebrated her 12th birthday! And yesterday would have been my Mom’s birthday…  Ok, what’s going on with my beloved Cardinals… Last week they were in first place, and this week they’re not even in the wild card mix?  UGH! (the team can’t hit, has been my thought since spring training and it sure has held true throughout the year!)  The Temptations take us to the finish line today with their song: Papa Was A Rolling Stone…  Wherever he laid his hat was his home!   I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday tomorrow, and will Be Good To Yourself!

Chuck Butler