Investors Begin To Think There’s No Need For A Safe Haven!

May 27, 2020 

* Currencies continue inch higher VS the dollar

* The ECB throws Germany to the curb? 

Good Day… And a Wonderful Wednesday to you! A beautiful day yesterday, without rain! YAHOO! The rivers are rising, the creeks are rising, and the lake and dam system in S. W. Missouri is under siege, with water rising in the lakes to levels not seen in a long time. Usually around here, we see these daily storms rise up in June, not May… Hmmmm…. And another day of rain is on the docket today… UGH! The NHL announced their lame brained idea to start their playoffs and finish their season yesterday… I just think the whole plan is as dumb as a box of rocks… But the one good thing is that I’ll finally have some live sports to watch at night! HA! Seals and Crofts greet me this morning with their song: We May Never Pass This Way Again… Dash Crofts and Jim Seals were quite the duo of songwriters in the 70’s, and then music turned ugly with disco first and then electric drum music in the 80’s and they disbanded… A few years ago a dear reader sent me pictures of Jim Seals on his horse ranch in Texas…

Well, another day, and more bad stuff being reported… I have a question about all this crazy awful data being printed currently… Will we just strike a line through March-April and probably May and say they never existed? Otherwise in a year or two when we begin to grow the economy again, the year on year comparisons will be really skewered…. I’m just asking…. I’ll have more on the bad reports later in the letter today…

But first we have to pay homage to the dead men walking…. The currencies found a way to inch upward VS the dollar again yesterday. But Gold, starting the day down $6 never could recover and ended up losing $16 on the day, and closing at $1,710… The shiny metal is down another $11 this morning, bringing it below $1,700 once again…  The thing that really gets to me is this thought going around that the states are opening up again, and everything is going to be all hunky dory! And that’s just not the case I’m seeing going on here folks…. I told you yesterday about the hurricane that’s hitting the U.S. economy right now, and that we’re currently in the eye of the storm, the calm if you will, and that’s why a lot of people are singing “we’re in the money, we’re in the money, we’ve got a lot of what it takes to get along” I get it, I do, but why on earth would you buy the thought hook, line and sinker when there are so many things that are still to come at us?

In news from the Eurozone, where the euro is inching higher, and is trading above 1.10 once again…. Ok, yesterday, I told you I was starting a new book by Peter Zeihan, titled: DisUnited Nations… And one of the first things I read in the book was a short blurb to be gotten into much deeper as to why, about how France was going to take over the Eurozone lead from Germany in the years to come, and then I put the book down, took a short nap, and then checked out notifications on Twitter… And came across this… The ECB (European Central Bank) is drafting a plan to do a bond buyback program without Germany, in case the German court declares the bond buying program to be unconstitutional… Wow! I said! This plays right into that idea! Germany being thrown to the curb, while France takes over…. I know that all sounds strange, but these two thoughts play together in the sand nicely…. I’m just saying…

You know, that I’ve always thought that Germany would have been better off without the weak sisters of the Eurozone, their debt would be much lower, the Bundesbank’s participation in the bond buying would have been nil… And they would still have their exports going full throttle all over the world, but…. Helmut Schimdt shoved the “Union” idea down the throats of the German people, and now they’re stuck with the likes of Greece, Italy, and Spain…. I told you all how in the beginning I was opposed to the concept of the euro… I sat in a conference room in London, and they asked to see a show of hands of those that didn’t believe the euro would get off the ground… And I raised my hand…. That was February 1998….

I remember that trip to London so vividly, first it was a direct flight from St. louis to London on TWA, where the hub used to be St. louis! After the conference concluded we did all the touristy things that people do while in London… Sat in a pub…. Had them fish a Budweiser from the back of their fridge for me… Oh well, not a tourist book here, Chuck, get back to work!

So… did you hear the latest from our esteemed Fed Chairman (NOT!), Jerome Powell? He said that the unwinding of the balance sheet bloat that is now, would take little time to accomplish…. So, I’m going to call him on that statement, and take the over if you will… I’m going to say that it’ll take him longer to unwind the balance sheet bloat than 7 years! That’s it Jerome, I’m giving you 7 years, and I still don’t think you’ll have unwound your balance sheet bloat all the way!

OK… this came across Twitter yesterday, check it out: “Russia Proposes Law That Criminalizes Buying Bitcoin With Cash, Offenders Face 7 Years in Jail. People that already hold digital assets will be forced to register them with Russia’s tax agency & EXPLAIN how they acquired them.”

I read that and it occurred to me that this could very well be the beginning of the end for digital currencies, not Gov’t backed digital currencies, but all the other one’s that a guy with a propeller hat created on his laptop… And could have something to do with the scenario that I laid out last week. Gov’t’s can’t have competing digital currencies when they are trying to get people to use their digital currency… . There’s a lot to think about with this note on Twitter, so put your thinking caps on…. And when do you think the U.S. will follow Russia’s lead on this? I’m just asking…

And in this example of the economy rotting away… but not just the companies, but their morals rotting away too… It was discovered that before Hertz filed for bankruptcy last week, that they doled out over $16 Million in bonuses to executives… And if that wasn’t bad enough, they did this after they had laid off thousands of workers… What the hell has happened to ethics, morals, and just overall doing the right thing? Greedy b’s. I’m just so furious that CEO’s have come to this, could this be the beginning of the end of Corporations as we know them? Well, if it is, it’s nobody’s fault but the leadership of the Corporations’…. And that’s all I have to say about that before I go the whole 9 yards and get too riled up!

OK, while we’re on the subject of the U.S. economy, let’s listen in to my fave economist, David Rosenberg, as he posted this on Twitter: “Open Table says 25% of US restaurants won’t survive. That’s 3 million jobs lost permanently; closer to 10 million when you include all sectors affected.”

And then add in a report from my local newspaper, the St. Louis Post Dispatch, that Ameristar casino here in Missouri will not bring back up to 947 furloughed employees, after it reopens this week… I can imagine this happening at casinos all over the country… And finally, at least for today, Mercy Hospital here in St. Louis Co. just announced that they are going to lay off “hundreds of workers around the region”…. Every day there are more reports like the ones I’ve just given you that prove that economy is not going to just bounce back like a superball, and still, the stock market rises, and Gold doesn’t…. A world of opposites for sure!

The U.S. Data Cupboard had some not so worthy data prints for us yesterday, so let’s go through them… First was the Case/ Shiller Home Price Index for March, and it showed an price increase of 4.4%, VS the 4.2% in Feb. Then we had the Chicago Fed Index (manufacturing for the Chicago region) and it fell to -16.74 in April from -4.97 in March… And then finally the stupid Consumer Confidence index which gained this month to 86.6 from 85.7… See? See, what I’m talking about with the people wearing rose colored glasses? Remember Arthur Brown and his song, Fire? Fire… I take you to burn… Fire… I take you to learn… I’ll see you burn…. That’s what’s going through my head right now!

You may be scratching your head and asking, how can home prices rise during a pandemic?  Well, let’s first say that just the last week of March was affected by the pandemic, so let’s toss that last week out, and get to the gist of how home prices can rise at this time… Low mortgage rates, folks…. Think about what the Case/ Shiller people will find when they begin putting together the April report?  They won’t see home prices collapse like other data, because zero interest rates will bring people to buy….  And the idea that lots of people will be buying will drive home prices higher…. See? 

Today’s Data Cupboard doesn’t have much except for the Fed’s Beige book, which contains reports from all the regions, but not too many people even pay attention to it any longer… So, we have that, and… a speech by St. Louis Fed President James Bullard… I wonder if he is being sent out to spread the word that the Fed is not interested in negative rates? I say this because, Bullard has always been known as a dove… But has the “syndicate” gotten to him?

Before I head to the Big Finish today I have one more thought: Well it seems that Missouri’s Lake of the Ozarks, that has more shoreline than the state of California, will be the Litmus Test for the U.S. Did you see the pictures of the young people celebrating the Memorial Day Holiday weekend? They were doing what every young person has done through the years, partied at the Lake of the Ozarks, but only this time, they will be scrutinized closely… I laughed until I cried yesterday, when I heard the St. louis Co. Commissioner say that he would require all that attended the party this past weekend to self quarantine…. I said, “he couldn’t get them to wear masks, or self distance, so what makes him think they’ll listen to him now and self quarantine? Wouldn’t he have…. well let me say it like this… “it far better to keep your mouth shut and let people think you are a fool, than to open it and remove all doubt”

To recap… The currencies inched higher once again vs the dollar, but Gold was sold lower on the day, as a lot of investors are thinking that we have no need for a safe haven… The words of Arthur Brown are still in my head! France is putting together a bond buying program without Germany, in case the German court rules bond buying unconstitutional… That would be a very interesting development for the Eurozone, and Chuck tells you why…. And the employment reports and data continue to print worse and worse with every print! Chuck just doesn’t get it… he sees it, but doesn’t get why investors are reacting the way the are…

For What It’s Worth… I have to thank the GATA folks for brining this article to my attention… It’s about new tools the Gov’t will use to catch price manipulators, and it can be found on Reuters by clicking here:

Or, here’s your snippet: “When the U.S. Department of Justice charged a handful of JP Morgan Chase & Co. traders in 2018 and 2019 with commodities futures manipulation, it wasn’t the first time the government had probed the bank’s metals trading activities.

The Commodity Futures Trading Commission (CFTC) investigated the same business as part of a similar probe of the silver market years earlier, but it was not able to build a case with the data it had at the time, according to U.S. court filings and a person with knowledge of the aborted probe.

Since then, leaps in the agencies’ data analysis capabilities have enabled them to detect and prosecute increasingly sophisticated forms of manipulation in the commodities futures markets which for decades have gone under-surveilled, according to ten officials and industry experts.

The Justice Department fraud division is beefing up with the creation of a sub-unit specializing in combating commodities fraud overseen by Avi Perry, a trial attorney who has prosecuted high-profile cases involving trading powerhouse Tower Research Capital, Merrill Lynch Commodities Inc., and the ongoing JPMorgan probe, according to two sources.

The unit is also hiring a handful of additional trial attorneys, according to the sources and online job postings. A Justice Department spokesman said the agency intends to fill the positions “promptly.”

The unit is part of a broader Justice Department initiative to dramatically expand the scope of market manipulation the agency targets for criminal prosecutions, beyond traditional insider trading and futures manipulation into a range of asset classes, sources told Reuters.

Around 2017, the fraud unit began developing those tools to spot known suspicious trading patterns and learn new ones by scanning a range of exchange data on bids and offers and trades, he said.

That led the agency to charge about more than a dozen current and former traders at banks including Deutsche Bank (DBKGn.DE), UBS UBSAG.UL and Bank of Nova Scotia (BNS.TO) from 2017 to 2019.

Chuck again…. I think they forgot a very big contributor to the price shenanigans that the DOJ is currently investigating… JPMorgan… And as the article points out, it’ll take a lot of educating the public of these markets before anyone heads to jail….

Prices today May 27, 2020: American Style: A$.6645, kiwi .6213, C$.7280, euro 1.1016, sterling 1.2292, Swiss 1.0316, European Style: rand 17.3746, krone 9.8315, SEK 9.5823, forint 316.75, zloty 4.0269,   koruna 24.5774, RUB 71.01, yen 107.85, sing 1.4173, HKD 7.7517, INR 75.25, China 7.1321, peso 22.22, BRL 5.3996, Dollar Index 98.93,  Oil $33.92   10-year .70%, Silver $17.03, Platinum $831.08, Palladium $1,956.89, and Gold… $1,699.75

That’s it for today… I’ll be back tomorrow, no early DR appts for me tomorrow, I do have to go for blood work and get my dressing changed, but that’s later in the morning, so I’m good to go tomorrow! I know how happy that news must make all of you! HAHAHAHAHA! On Monday, the holiday, son Andrew pulled up a chair closer to me than any time before, and said, “I figure if cancer couldn’t  kill you, nothing will”… That made me laugh out loud!  As family, we had practiced distancing, but as time has gone on the distances have narrowed…  I still haven’t held my granddaughter Evie yet, but I’ve had a blast watching her and getting her to make noises with me! Ahhhh, is all I can get from her right now, but that’s good enough! She’s so darn darling!  The McCoys takes us to the finish line today with their song: Hang On Sloopy…  And with that I hope you have a Wonderful Wednesday, and will Be Good To Yourself! 

Chuck Butler