I Guess When You’re The Former Fed Chair, You Can Backtrack…

December 12, 2018 

* Currencies get derailed again on Tuesday

* Chuck smells something fishy with the Palladium trading… 

Good day… And a Wonderful Wednesday to you! The sun finally came out yesterday and warmed the air a little bit… It’s too late in the year for it to be warm here, but the air did feel warmer while in the sun, and that’s a good thing to me, who’s stuck here until the end of this month! Good luck to Alex today, as he takes an important big test that he’s studied for the last two days and nights… Our Blues tried to skate out of the rut they’ve been in with a spirited 3rd period rally to win last night.. And The Charlie Daniels Band greets me this morning with their song: The Devil Went Down To Georgia…

Well, once again yesterday, the currencies were on the rally tracks in the morning, and by mid morning they are derailed by the dollar bugs… UGH! I really have no idea what moves these dollar bugs to derail the currencies, because there was nothing in the data reports to get them all lathered up… The NFIB Small Business Index for Nov. fell from 107.4 to 104.8, and the Producer Price Index (PPI) fell from .6% in Rocktober to just .1% in November… So, tell me what on earth did the dollar bugs see that made them derail the currencies?

The only thing I can think of is that the dollar bugs want a higher starting point for the dollar when the walls come crashing down on the economy, and the dollar gets sold… That’s a stretch, I know, but my goodness, what else is there?

They can’t be pinning their hopes on the Plunge Protection Team to keep rescuing them or the stock market for that matter. Bond yields are dropping, the President has now decided to call out the Fed by saying “it would be a mistake if the Fed hikes rates next week”… Of course that doesn’t mean the Fed is going to stop their rate hikes now, and rates will be hiked when they meet next week, but… Could that be the last one in this rate hike cycle? You know the song, It’s beginning to look a lot like Christmas? Well, it’s beginning to look like the rate hike cycle is coming to an end…

I have the Reuters news article that highlights the President’s feelings about the Fed’s rate hikes in the FWIW section today… So, hold on, we’ll get to it sooner or later…

Alright then… Well, longtime readers will remember when I kept harping at the Reserve Bank of Australia (RBA) for not hiking rates as they had housing bubbles popping up in the major cities. This was the mistake of the Fed back in the mid 2000’s, ignoring the warning signals of a housing bubble, and then well, we all know how that worked out for us… And the same could be in store for Australia, as housing prices are starting to tumble… It’s a start of bad things to come, and all because the Central Bank failed to heed the warning signs… I get it… Central Bankers think that what happened to the U.S. in 2007/08, couldn’t happen to them… So, they ignored the warning signals, but now they aren’t just signals they are flashing Red lights with sirens and Tornado warnings!

You know, the world would be a better place and a whole lot safer, investment wise, if I were king… I would outlaw Central Banks, except if they wanted emulate the Central Bank of Russia (CBR)… But all interest rate settings would be taken away from the Central Banks if they remained, and interest rates would be set by the bond market. This way there would be no more housing bubbles, stock market bubbles, and bubbles of any kind, because the markets would adjust immediately to the goings on in economies. I would outlaw all QE and negative interest rates… And I would outlaw any requirement to go to a cashless society. And that would just be the start of my changes! Oh, and any banker, investment officer, what ever, that breaks the law would be sent to jail! No more slaps on the wrists, as they walk off with billions in fees earned…

OK… I had better get back to reality here before I begin to talk about fairy dust, and pots o’ gold!

So, there I was last night going through news articles and researching what I might want to talk about this morning, and there it was! It was flashing lights and waving signs at me to look at it… So, I did… But, it couldn’t have been true, for the article talked about how former Fed Chair, Janet Yellen was quoted as saying that she feared a new potential financial crisis, saying that there were “holes in the system”… Wait! What? I thought that she told us before she left the Fed Reserve that she didn’t see a chance of another financial crisis… 

But, just like Big Al Greenspan who finally saw the light after being away from the deep state in the Fed Reserve, now Yellen too sees the light…  Why, oh why, can’t these people that are chosen to lead the Central Bank see the light while they are making decisions that affect all of us? 

I just shake my head in disgust at this stuff…  Yes, technically, she’s right, there is potential for another financial crisis, I’ve been talking about that for months, but I guess too much water has passed under the bridge now and she feels that if the financial crisis does hit, that she won’t be blamed for it…   shame, shame, shame, Janet Yellen…  And that’s all I have to say about that, now… 

Once again in the metals, Palladium shines the brightest… but something interesting happened in Palladium trading yesterday… And it reminded me of the trading first of Silver, and then Gold through the years…  I’ll tell you what happened and let you decide what you think was in play here… Palladium ended up $18 on the day, which looks good, right?  Well, it was up $30 at one point in the day… 

Gold lost 90-cents on the day, so no big move, and it’s up about 2 bucks in the early morning trading today.  I had a dear reader send me a note the other day, telling me that he had bought some Silver, and the dealer had told me that supplies were dwindling… He asked me how the price of Silver was so cheap, with supplies falling?  That’s when I went to Ed Steer’s letter (www.edsteergoldandsilver.com) to get the production numbers that he posts every Saturday. And then I replied to the dear reader that right now it takes 185 days of Silver production to match the number of ounces that are represented in short paper trades… And that’s why Silver can’t find an everlasting bid…    

And I’ve talked about this supply problem for Silver many times in the past… And how Solar Panels should have depleted the Silver supplies, and yadda, yadda, yadda, but Silver can’t get up off the canvas…  I’m just saying… 

The U.S. Data Cupboard had the aforementioned two pieces of data yesterday, and today we’re supposed to see the color of the Federal Budget, which you might recall I made a big deal out of last month, because in the first month of the new fiscal year for the U.S. the Deficit had an annualized number of more than $1 Trillion…  So, Let’s strap ourselves in for this print that might print today, or tomorrow, one never knows, as it’s up to the issuers’ fancy… 

The stupid CPI (consumer inflation) for November will print… I can’t see why anyone even cares about this data any longer, as it has been hedonically adjusted so much over the years, that it no longer resembles the simple basket of goods used to price and calculate inflation… 

To Recap…  Once again, the currencies were on the rally tracks in the morning only to be derailed by the dollar bugs mid morning, and seeing no need to go through the motions of climbing on the rally tracks only  to be derailed each day, the currencies are drifting this morning.  Janet Yellen, yes, that former Fed Chair, Janet Yellen, backtracks on her earlier statements about not seeing another financial crisis… I guess when you’re the former Fed Chair, you get to backtrack your statements, and no one holds your feet to the fire… 

For What It’s Worth… Well, as previously advertised, this is an article from Reuters that highlights how the President really feels about rate hikes… And it can be found here: https://www.reuters.com/article/us-usa-trump-fed-exclusive/exclusive-trump-says-it-would-be-foolish-for-fed-to-raise-rates-next-week-idUSKBN1OB02Y

Or, here’s your snippet: “President Donald Trump said on Tuesday it would be a mistake if the Federal Reserve raises interest rates when it meets next week, as it is expected to do, continuing his criticism of the U.S. central bank.

“I think that would be foolish, but what can I say?” Trump told Reuters in an interview.

Trump added that he needed the flexibility of lower interest rates to support the broader U.S. economy as he fights a growing trade battle against China, and potentially other countries.

“You have to understand, we’re fighting some trade battles and we’re winning. But I need accommodation too,” he said.

Trump named Jerome Powell as Fed chairman, but has repeatedly railed against him since he took over as head of the U.S. central bank last February. Trump in August told Reuters that he was not “thrilled” with Powell’s raising interest rates.”

Chuck again… I characterized this relationship last week, as Trump having “buyers remorse” over nominated Jerome Powell…

Currencies today 12/12/18: American Style: A$.7210, kiwi .6852, C$ .7477, euro 1.1335, sterling 1.2540, Swiss $1.0060, European Style: rand 14.3310, krone 8.5817, SEK 9.1455, forint 285.40, zloty 3.7945, koruna 22.8323, RUB 66.45, yen 113.43, sing 1.3730, HKD 7.8161, INR 71.92, China 6.8989, peso 20.13, BRL 3.9115, Dollar Index 97.37, Oil $52.59, 10-year 2.89%, Silver $14.65, Platinum $789.25, Palladium $1,261.79, and Gold… $1,245.00

That’s it for today…  I wonder what lit the fire under the Blues’ skates last night? 4 goals in the 3rd period! I had turned the game and tv off before the 3rd period and gone to bed with them losing 0-3… Now, if they can only win two in a row and not fall off the bus!  Baby steps…  Well, I see the calendar and it tells me that tomorrow’s Pfennig is the last one before my annual Christmas vacation! WOW! Time goes fast!  Baseball’s Winter meetings are going on in Las Vegas right now… I have expected the Cardinals to announce a few more signings of name players… But so far, just crickets…  UGH!   Don Henley takes us to the finish line today with his song: End of the Innocence…  I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself! 

Chuck Butler