Is the Fed Lying to us, or… Just being Disingenuous?

Rocktober 16, 2019

* Dollar gets sold, currencies rally… 

* There’s a BREXIT deal on the table! 

Good Day… And a Tub Thumpin’ Thursday to you! Congratulations to the Washington Nationals, who will play in their very first World Series… They swept my Cardinals on Tuesday night, and ran them out of the stadium… It was a pretty good year for my beloved Cardinals, but in the end, they showed what I had said all along in the season… They just couldn’t hit, as a team… The thing that drove me crazy though was all the errors… This WAS the best fielding team in the NL this past year, until they got to the playoffs… Errors equal bad baseball… And that’s that for this year! Our Blues have a good start to the year going so far, but it’s a very long season for them, no reason to get too excited about a good start! The Ozark Mountain Daredevils greet me this morning with their song: If You Wanna Get To Heaven… (You’ve got to raise a little hell!)

Oh, and I’m loaded for bear this morning… So, you had better strap yourself in, put away the sharp objects, and get ready for today’s Pfennig! Here we go! 

On Tuesday of this week, I talked about how the Fed was back to buying bonds (T-Bills at this point) and Fed Chairman Powell, told us not to call it QE… WOW! What a pack of lies! I guess he would point at the fact that it’s not an all-out bond buying program right now, as his defense… But like I said the other day, if it quacks like QE, it is QE, period… I don’t care what the Fed wants to call this new bond buying program, but to me, they’re being very disingenuous to the American public… And historians will mark this occasion as one of the things that caused the Fed to lose its credibility…

I’ll get back to the Fed in a minute, but first, I want to point out that the currencies have been on a strong rally since Tuesday, and really got rolling yesterday, after there was a negative print in Retail Sales for September. When you add in the fact that the ISM fell to 47.8, the economy may already be in a recession… But what caused the dollar to get sold, is the idea that rate cuts will be coming and probably as soon as this month! 

Gold found a way to add $9 to its price yesterday…  But sit down and take this news calmly, please…  Jeff Clark is a metals guy that I’ve know for years, and yesterday he said that the recent weakness in the price of Gold was due to a correction, and that the correction could take Gold back to $1,425… But then it would take off for higher ground then… 

All the time I was reading his article, I kept thinking, the smart investors will use this drop, if it does come that is, as an excellent buying point to start their Gold investment, or to add to their Gold investment… The “I bought Gold because the taxi guy said it was rallying, people” will panic and sell…   I’m just saying… 

Speaking of a recession…  longtime readers have heard me go on and on like a broken record about how I think the next recession is going to be a real doozy for numerous reasons that I’ve talked about… So, when I read this article yesterday my jaw dropped, for if what the IMF is saying about what could happen IF we experience a recession 1/2 as serious as the one a decade ago… I found this article here:

And basically the IMF is saying, “Low interest rates are encouraging companies to take on a level of debt that risks becoming a $19tn (£15tn) timebomb in the event of another global recession, the International Monetary Fund has said.

In its half-yearly update on the state of the world’s financial markets, the IMF said that almost 40% of the corporate debt in eight leading countries – the US, China, Japan, Germany, Britain, France, Italy and Spain – would be impossible to service if there was a downturn half as serious as that of a decade ago.”

Chuck again… OK, so I’ve never really been a fan of the IMF and their programs when they go into a country and try to revive it… But be it as it may, I think they are bang on with this warning… But will anyone besides my readers hear about it?  That was kind of like a FWIW article already this morning…  Don’t worry, I’ve got more! 

So, did you hear? The Fed’s T-Bill buying program was oversubscribed x4! Hearing that news got me thinking…

OK… I’ve been thinking long and diligently on this repo problem here in the U.S. All this time we had been getting told that the banks were flush with cash, and that they were earning a nice interest rate having them on deposit at the Fed… And then suddenly, they weren’t flush with cash, and the Fed had to step in with Billions of funds, to keep the repo rates from soaring… So, now the question would be, where did all the cash go that was supposedly in the banks?

Ahhh grasshopper, this is what you pay me for, no wait, you don’t pay me… Hmmm… This is where I shine! HA! But seriously… Basically, remember when I told you the tax cut from a couple of years ago, would only be good for the corporations, and those corporations wouldn’t use the tax cut on Capital expenditures, but instead use to buy back their company stock, which makes the stock price go up, and then allows them to rake in huge bonuses at the end of the year…

Well, a funny (not funny ha-ha) thing happened to these Corporations, which includes banks… The stock market has been flat for the last year… so no gains there… And then a couple of weeks ago, I saw a blurb about how CEO’s were selling their company stocks faster than you can shake a stick at… Why would they do that? They needed the cash! So, this whole bug-a-boo with the repo illiquidity is their own faults… But… and here’s were it isn’t so funny any longer, guess who’ll have to bail them out of this mess if it implodes on them? That’s right, you, me, and other taxpayers…

And if you think we’ve had to bail out Corporations and their bad decisions, well we have… And will have to again… but it’s not just bad decisions by Corporations that we’ve had to bail out… The Gov’t gets into this business of bad decisions too… And that’s what the FWIW section is all about today, so don’t go away too soon, without reading that one! 

Well bust my buttons! The European Union and the U.K. have a BREXIT deal… But first it must be approved by the U.K. Parliament…  Last week we began hearing rumors of a deal, and those rumors placed the pound sterling firmly on the rally tracks… And On 10/8 pound sterling was 1.2222….  this morning it’s trading 1.2865…   I would say that qualifies as a strong rally…  So, let’s hope the U.K. Parliament isn’t a party pooper! 

I was doing some reading yesterday, and came across a discussion of how traders are viewing the euro/ dollar cross  as a real bug-a-boo…  You see, they want to mark down the dollar for all the weak data that’s been printing, and the Fed’s rate cuts, but if they mark down the dollar, the euro goes up… And they don’t want it to look like they’re rewarding the euro, especially since the Eurozone is probably already in a recession…  I couldn’t help thinking while I read this piece…. “That why they pay you guys the big bucks”… So, make a call and go with it for crying out loud! 

Right now, and I know these things can be false dawns, but the dollar IS getting sold, and the euro is trading with a 1.11 handle… That’s a far cry from where the euro looked like it was going last week!    With the Big Dog euro on the rally tracks, the other currencies get to rally too… And for longtime readers who know what I’ve told them many times in the past, I wanted to mention that the Euro-wannabes are also rallying… hint, hint… 

OK, the U.S. Data Cupboard had the September Retail Sales yesterday, and it wasn’t a pretty sight… Sept. Retail Sales were negative -0.3%…  No spending really takes a bite out of the economy’s ability to grow, folks… And like I said above, this and other bad prints recently, will most like move the Fed to cut rates later this month… 

Today’s Data Cupboard will have more disappointing data, I believe… Sept. Industrial Production and Capacity Utilization, will print… And I’m sure that they will only add to the Fed’s rate cut fuel…  Of course I might be incorrect, but we’ll have to wait-n-see!

To recap…  Negative Retail Sales for September, got the traders thinking that another rate cut is soming, and that started dollar selling that we haven’t seen in a while…  Chuck want’s the Fed to come clean on their QE, and he also has figured out why the Banks are in need of so much cash these days…  He was loaded for bear today… 

For What It’s Worth… By now all longtime readers know that I’ve touted the book “The Creature from Jekyll Island” by G. Edward Griffin… It’s the story of how the Fed was shoved down our throats by the banking regime here in the U.S. And how Woodrow Wilson allowed himself to be connived by these bankers into thinking that this would be the end of “recessions”… OK, well, I signed up for G. Edward Griffin’s newsletter quite a few years ago, after reading his book, and most weeks he has interesting articles in there, but this week he had a doozy, and I couldn’t pass it up for the FWIW article today… This is about the costs of insuring illegals here in the U.S., and as a taxpayer, you should be making this a timely read! And you can find it here:

Or, here’s your snippet: “A new study shows that taxpayers could have to pay out as much as $23-billion a year to give “Obamacare” health coverage to illegal immigrants. The Center for Immigration Studies estimates that there are nearly 5-million illegals who would receive subsidies through the so-called Affordable Care Act. Cities already are paying back-breaking costs for immigrants. Los Angeles County paid nearly $1.3-billion in welfare during 2015 and 2016 to families of illegal immigrants.

he federal government is running a nearly trillion-dollar deficit this fiscal year. The reason (and this isn’t complex): It spends more than it brings in.
When households go into the red, couples usually take a simple step — stop spending so much.

But not our government.

Case in point: A new study shows that taxpayers could have to pay out as much as $23 billion a year to give “Obamacare” health coverage to illegal aliens.

The Center for Immigration Studies (CIS) calculates that there are nearly 5 million illegals who would qualify for subsidies through the health care system created under the Affordable Care Act (ACA) by former president Barack Obama. The average cost would be about $4,500, so if all of them took the subsidies, it’d cost $22.5 billion.”

Chuck Again… And the question I always ask when people say this or that should be free, I ask them, “And who’s going to pay for it?”

Currencies today 10/16/19 American Style: A$.6830, kiwi .6332, C$ .7595, euro 1.1120, sterling 1.2865, Swiss $1.0104, European Style: rand 14.8243, krone 9.1546, SEK 9.7122, forint 298.40, zloty 3.8526,  koruna 23.0826, RUB 64.21, yen 108.77, sing 1.3642, HKD 7.8441, INR 70.88, China 7.0912, peso 19.18, BRL 4.1693, Dollar Index 97.66, Oil $53.07, 10-year 1.77%, Silver $17.49, Platinum $881.56, Palladium $1,766.05, and Gold… $1,487.96

That’s it for today and tomorrow…   Well, I went straight from my scans yesterday to the second floor of the building to see my heart doctor… A regular 6-month visit… He says I’m doing well…  I don’t believe the scans will reveal anyting (at least that’s what I’m hoping!)  I’ll see the report on the portal today…  I received some sad news yesterday, our good friend from Long Island, was just diagnosed with cancer… She won’t be ablt to come to Florida this winter, as she’ll be dealing with all that nasty stuff, that I’ve been through for 12 years…  I totally dislike this disease and what it does to families and friends…  This country cured polio.. small pox… TB…  and others, but we’re still at a loss with cancer…  I don’t get it… Oh well… Weezer will put me in a lighter mood as they takes us to the finish line with their song: Island In The Sun…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday, and please Be Good To Yourself! 

Chuck Butler