He’s Baaaaacccckkkk!

August 10, 2020

* Currencies & metals rally while Chuck was gone… 

* What’s China & Russia up to? 

Good Day… And a Marvelous Monday to you!  Well, I’m came back… I didn’t want to, but all my doctors are here, so I came back…  What a wonderful time it was, my vacation, spending it with my son Andrew’s family. I really got close to granddaughter, little Evie… What a darling little girl… We laughed, we clapped for each other, we danced, and she just kept getting more darling as the week went on…  Grandson Braden loved the ocean, and didn’t really want to get out of it! Braden is 9 now, and getting to me quite the little man… We didn’t want to experience a cat 1 hurricane, so we left our beach location for a day to drove to Lakeland Fla… It was a new “adventure”, I kept telling Braden… but the hurricane stayed out to sea, and we only got some rain and wind. The ocean sure was angry though! The Gin Blossoms greet me this morning with their song, Allison Road…  I’ve told you before about my former neighbor and good friends Rick & Laura’s daughter, Ally, that I dubbed Allison Road, and still call her that, even though she’s 16 now!

Well… The old saying they used to have on the trade desk, that “The Currencies rally while Chuck is away” held true these past couple of weeks, eh?  Remember that I told you before I left that the euro was thought to be on its way to 1.16, and once that figure was held, it would signal a new weak dollar trend?  Well, not only was the 1.16 figure held, it kept going up to the 1.18 figure before things began to get unwound on Friday last week.  The spin doctors, and not the ones that sang, Two Princes, were out in force on Friday, after the Jobs Jamboree printed… They were working very diligently, and swaying the markets to see things their way, which worked, but for how long? More on the Jobs Jamboree and the spin doctors later….

Before we get there, we HAVE to talk about Gold & Silver…  There are reasons that I’ll get into as the week goes on for this run to higher ground for Gold & Silver, but the one that really keeps coming back to haunt the dollar, is the fact that when you factor in inflation, the 10-year Treasury is trading with a negative yield…  And keeping that in mind, you’ll understand why Gold reached a new record high VS the dollar, or the dollar reached a new record low VS Gold, it’s all the same…  The Folks at Goldman Sacks, aka Lola, upped the ante on their forecast for the price of Gold from $2,000 to $2,300, but in my mind that’s still conservative as to where I think Gold is headed….

And with Silver kicking tail and taking names later, there’s renewed talk of the old Gold/ Silver ratio… There are some pundits that believe that the old ratio will come into play once again, and Gold’s price to Silver will be 15/1…  I can’t see that happening… It would be great for my Silver holdings if it did, but we have to remember this… there are short positions in Silver that are equal to 180 days of Silver production….  And that’s down from where they used to be….   Silver Guru Ted Butler, no relation that I know of,  says that wen the September delivery date comes around there won’t be enough Silver to meet all the delivery requirements…. And that’s when Silver not only jumps but leaps to new highs…

While I was on vacation, I received my weekly letter from Grant Williams, Things That Make You Go Hmmm….  It was, as usual, very good, and chock-full-o-information.  Grant spent a good part of his weekly letter going through the reasons that Gold (&Silver) have taken off to higher ground.  The Deficit spending, the money supply soaring, and other things were at the top of his list…  And then he had this to say, that I have to say is ingenious… “As June turned to July, however, the realization began to dawn on more people that the only way forward, not just for the Fed and the U.S. government, but all central banks and lawmakers around the world, was is to deficit fund the recovery. (That’s a polite way of saying print money until their eye sockets bleed). Not only is that path highly likely guaranteed to lead to currency debasement, but also inflation and, when the conversation turns to inflation, things get even more interesting for the precious metals.”

Chuck again…  I really enjoy reading and listening to Grant Williams, he thinks like I do, that this is all going to end up in tears, but he has this unique way of saying it that doesn’t feel like someone punching you in the nose, like I do….

OK…  So, this weekend I read that the President signed an executive order that would provide economic relief to millions of Americans by deferring taxes and, temporary unemployment benefits. More deficit spending, I might add… 

I saw that and immediately thought… Uh-oh! Not only does this fall right into what I told good friend, Dennis Miller is one of my interviews with him for his letter: Miller on The Money, that with each stimulus action the number grow larger….  For instance, remember the $750 Billion stimulus in 2008? We choked on that number then, but now we’re talking Trillions and Trillions….  

The other thing that hit me was  that these measures would take away some of Congress’s most fundamental, constitutionally mandated powers — tax and spending policy. Uh-oh… looks like a big White House/ Congress battle is about to begin….   

While I believe that something needed to be done, I won’t agree with deficit spending….  There have been 20 consecutive weeks of more than 1 Million people filing for unemployment benefits… Think about that for a minute…  The Continuing Claims are 31.8 Million….  That’s 31.8 Million people in this country looking for jobs… Then when you add in the Gig workers, who don’t get unemployment benefits, you could be adding up to 10 Million more…. 

And that leads me to the BLS’s Jobs Jamboree last Friday…  They claimed that 1.76 Million jobs were created in July… Really? I’m from Missouri, I’ll have to be shown that if you don’t mind!  Well, right off the bat I see that 241,000 jobs were added by the BLS…  But that doesn’t make up for 1.76 Million…  Just think about that for a minute folks… None of the BLS’s numbers make any sense to me….

So, if we know we have 31.8 Million continuing claims, which means they are out of work, and another 10 Million in Gig Workers…  that’ s roughly 42 Million…  which would mean that the Unemployment Rate should be 12.7%….  The BLS says the unemployment rate is only 10.2%…  Which would mean that they don’t count the Gig Workers/ Contract workers, etc.  Now why is it that they don’t count these workers?  I guess we’ll never find out, but the point I’m making here is that in July, when businesses began to open up only to find that they had to close back down again, The BLS is still lying through their teeth about the unemployment situation in the U.S.  I’m just saying….

I know, I know I said a few months ago that I just didn’t care what the BLS was printing any longer, but folks… This is serious stuff…  And quite frankly, I’m fed up with this bunk!  So, I’ll move along here now, for these are not the droids we’re looking for!

So, getting back to the dollar and its recent weakness…  It sure seems like everyone and their brother, have come to the conclusion that with all the debt…  and yields that are now negative…  and the vast amounts of money that is being printed, that the dollar’s days are numbered as the reserve currency of the world…  China and Russia are joining forces to eliminate the dollar from the middle of their trade…  I read somewhere (I read so much that sometimes it’s difficult for me to remember where I saw something)  this past weekend, that the percentage of transactions that were denominated in dollars between China and Russia had dropped to levels that have never been seen before…  Uh-Oh…

So, many of you are wondering what’s going on with me, regarding the currencies… For it was just a couple of months ago that I wrote about how with so much debt in the world, that a default on that debt was very likely, in my mind that is, and that would take down the currencies…. Well, I never said that the currencies couldn’t muster another run at the dollar before all that happens, and that’s what we’re seeing right now. The currencies, led by the euro, have mounted a rally VS the dollar, and this one doesn’t appear to be yet another false dawn… This rally looks like the beginning of a long term trend to sell dollars…

And one more thought on Gold & Silver, from what I read, the demand for physical metals has reached a fever pitch, and the problem with that is simply that there’s not enough supply to fill all those orders for physical Gold & Silver…  And for once, we are dealing with fundamentals… low supply, high demand equals strong price…  So, the tailwinds for Gold & Silver are in place…  Are you ready? Yes I’m ready….

It’s times like we are experiencing now that point to the need to be diversified in your investment portfolio, using all asset classes, including currencies and metals…  I used to give presentations on diversification, and would show how even in times when the currencies and metals weren’t in rally mode, that the inclusion of these asset classes reduced the overall risk in the investment portfolio…  An in these days of no yields, and tensions everywhere, risk is something you probably want to avoid…  I’m just saying… 

OK… I was going through some old Pfennigs last week, looking for something, and came across this discussion that I had on January 15, 2010….  That’s right I said 2010….  “I want to talk briefly about something I said yesterday about Gold… When I said that I laughed at a comment on the newswire that called for Gold at $5,000, I did not mean that I was laughing at the thought that Gold could get to $5,000… I was trying to make the point that pundits are calling this, that, and the other thing for Gold… That’s all… Shoot Rudy, I own Gold, I would be one happy camper if Gold reached 1/2 of that call of $5,000! But again, I must point out that 1. the Gold price manipulators would probably be dead if Gold were to reach $5,000, and 2. the state of the economy would be in shambles… “

Interesting, isn’t it that the economy is in shambles, and Gold is moving toward that 1/2 of $5,000 price… 

Well, after a chock-full-o-data week that was last week, the U.S. Data Cupboard will take a pause for the cause this week, with little to no real economic data to print, until we get to Friday, when Retail Sales, Capacity Utilization and Industrial Production will all print…  Circling back to last week’s data, one print that caught my attention was the Consumer Credit (read debt) print…  For the first time in 4 months Consumers were back to racking up debt…  I’m thinking that at this point that this is not a good thing, as I see it, Consumers have used up all their savings, that is if they had any, and now are resorting to buying things they need on credit cards… 

I’ll relate something that I heard my grandma say long ago…  now mind you she lived through the depression, and when later in life credit cards were introduced to the masses, She told me that a person should never buy groceries on credit, for it’s a slippery slope to really bad things…  Times have changed, but for some reason those words have stuck with me like glue…. 

To Recap….  it’s been a whirlwind couple of weeks while Chuck was on vacation. The currencies have mounted a charge VS the dollar, and a lot of folks are now calling for an end to the dollar strength. Gold & Silver kicked the dollar’s tail and took names later, that is until Friday of last week, when the BLS and the spin doctors, spun a tale of a improving employment, which is bunch of bunk… But the “spin” stopped the daily rallies in Gold & Silver… I’m thinking this should only be a temporary move downward…. 

For What It’s Worth…  Ok, I mentioned above about the de-dollarization plans of China and Russia, and this article on ZeroHedge.com spells it out for you, and it can be found here: https://www.zerohedge.com/economics/russia-china-dedollarization-reaches-breakthrough-moment-countries-ditch-greenback

Or, here’s your snippet: “Late last year, data released by the PBOC and the Russian Central Bank shone a light on a disturbing – at least, for the U.S. – trend: As the Trump Administration ratcheted up sanctions pressure on Russia and China, both countries and their central banks have substantially “diversified” their foreign-currency reserves, dumping dollars and buying up gold and each other’s currencies.

Back in September, we wrote about the PBOC and RCB building their reserves of gold bullion to levels not seen in years. The Russian Central Bank became one of the world’s largest buyers of bullion last year (at least among the world’s central banks). At the time, we also introduced this chart. 

We’ve been writing about the impending demise of the greenback for years now, and of course we’re not alone. Some well-regarded economists have theorized that the fall of the greenback could be a good thing for humanity – it could open the door to a multi-currency basket, or better yet, a global current (bitcoin perhaps?) – by allowing us to transition to a global monetary system with with less endemic instability.”

Chuck again…  Well stranger things have happened through the years with reserve currencies, folks… And just about the time that you think that this can’t happen to our dollar… Well, be careful here, and keep your diversifications… 

Market  prices 8/10/20: American Style: A$ .7145, kiwi .6585, C$ .7471, euro 1.1750, sterling 1.3036, Swiss $1.0895, European Style: rand 17.7638, krone 9.0490, SEK 8.7454, forint 293.78,   zloty 3.7454,   koruna 22.3018, RUB 73.64, yen 106.15, sing 1.3743, HKD 7.7500, INR 74.79, China 6.9667, peso 22.43, BRL 5.4363,  Dollar Index 93.66,  Oil $41.78,   10-year .55%, Silver $28.28, Platinum $970.00, Palladium $2,201.00, and Gold… $2,030.01

That’s it for today…. nice to be back home, but….  Ok, last week, my darling granddaughter, Delaney Grace, turned 13!!!!   How did that happen? I remember sitting at the booth in Vancouver, and readers coming up and asking me to see pictures of the “baby girl”…  So, happy belated Birthday, little d… I love you to pieces!   13! aye, aye, aye….  man am I getting older by the minute! And I don’t like it! So, stop all these birthdays! Ok, only three Pfennigs this week, as the folks from my oncologist’s office called me to change the time of my monthly appt on Thursday to bright and early in the morning…  They said they knew I like those times, so they changed me… You know doing me a favor….  Oh well… At least I’m back… I know you missed me! HAHAHAHAHAHA!  The great voice of Dionne Warwick takes us to the finish line today with her song: Walk On By…  I hope you have a Marvelous Monday, and will be Good To Yourself! 

Chuck Butler