February 11, 2020
* Dollar bugs take a pound of flesh from the euro
* Oil countries are talking about more production cuts…
Good Day… And a Tom Terrific Tuesday to you! Another night of watching the Super Moon rise up over the ocean, last night… Only this time there was a thick marine layer of clouds and we didn’t see the moon until it was higher in the sky… No sports from my teams that I follow, was on TV last night, so I tried to watch shows that really could not hold my interest… Silly and not real, would be my description of them. I read last night that the St. Louis Battlehawks, the XFL team that played on Sunday, received the highest TV rating among XFL teams… The game was on here, and I watched some of it… Reminds me of what I would call, “graduates of college football”… Midnight Oil greets me this morning with their song: Beds Are Burning…
For the most part yesterday, the currencies suffered more lost ground to the dollar bugs, as there was no economic data here in the U.S. to bring the ongoing problems with the economy to trader’s minds. So, for another day, traders decided to keep the dollar bugs dancing in the streets. And today, I would think we could expect more dollar bugs with the conn… For the only data due in the U.S. is Consumer debt for the 4th QTR… We all know it’s going to be HUGE, so no real surprise there…
In the overnight markets, more flesh was skinned from the euro and it trades with a 1.09 handle this morning. What did the euro do to deserve being treated like a rented mule? Nothing… but when the dollar rallies like it has, the euro suffers, as a result of being the offset currency of the dollar…
The price of Oil actually slipped below $50 yesterday, and caused all kinds of negative reaction from the Petrol Currencies led by the Russian ruble. Our friends (NOT!) at OPEC are talking another production cut to help the price of Oil before it slips to a deep abyss… At first, the Russians balked at another production cut, but have seemed to come around in recent days… Well boys what’s it gonna be? You had better make a call soon, before the bottom drops on the price of Oil!
In the U.K. this morning, they unload a truck load of data prints all in one day! There are too many to name/ list them all, so I won’t try, just know that there’s a truck load of them! The European Commission will issue their economic outlook for the Eurozone… This should either help or hurt the euro… Outlooks, to me, are like opinions, and rear-ends, everyone one has one… But traders like to think that they look forward, even though they are the worst knee-jerk reaction sector there is!
Gold held ground yesterday, which was interesting, to me that is, and maybe to you, which is why I’m telling you this… The World Health Organization Chief, issued a statement that said that news of the Coronavirus spreading to other countries is just the “tip of the iceberg”… Uh-oh! THAT… was an Uh-Oh moment folks, and one that should have sent Gold soaring like it did last month when it skipped a lot of levels and traded above $1,600 for a day… In the early trading this morning, Gold has lost $3, so the WHO Chief’s statement hasn’t registered with traders… hmmm…. Gold closed yesterday up $1.80 at $1.572…
JP Morgan might be having to deal with its 4th indictment for Gold & Silver manipulation, but it sure isn’t stopping them from doing what they are being accused of, that we all know they are guilty of… That’s a lot of Chutzpah in my book folks… My former colleague, Chris Gaffney used to have a saying, “its easier to ask forgiveness, than it is to ask for permission” I think the boys in the band at JPMorgan have changed that to, “it’s easier to keep doing wrong, than to try to correct it”…
Remember last week when I said that the ISM Manufacturing Index , which had risen back above 50, didn’t make any sense to me, and I was sure there was some fidgeting with the data? I had a dear reader send me a note and tell me that his son is in the equipment manufacturing business and he said that there was no such thing as a bump in manufacturing in December… So, take that with as many grains of salt you wish, but remember this about all future data prints… We’re less than 9 months from the Presidential election… I’m just saying…
So, the biggie on the U.S. Data Cupboard docket this morning is the visit to Congress by Fed Chairman Jerome Powell… He repeat this tomorrow in his two day visit to capital hill… this is formerly called the Humphrey-Hawkins bill, that required the Fed Chairman to testify to both the House and Senate. The bill expired many years ago, but Fed Chairs have kept the tradition going. I’ll give them that!
What I won’t give them is their lack of transparency and the scam they are running with the repos… and bond buying, that’s not QE… If I were an elected official either in the House or Senate, I would be raising my hand, doing my very best Arnold Horshack, “me, me, call on me!” And I would ask him to explain what the heck is the gist of the repo market, and then follow up with why on earth does the Fed NY feel the need to fund the casino banks? And when the Fed Chairman hemmed and hawed and tried his hand a Greenspeak (former Fed Chairman Al Greenspan) to confuse the lawmakers, I would clap my hands and break the spell, and bring everyone back to the question at hand! That’s what I would do folks… So, who wants to vote for me to go to Washington, D.C.?
Ha! As if! I wouldn’t even think about running for office, much less get elected! I don’t have the patience to deal with this ship of fools that is our Congress… I’m just saying…
St. Louis Fed President, James Bullard is also speaking today… Bullard is a dove, and it will be interesting to see if he gives any indication of what the Fed might be doing with interest rates… For a Fed Head, I like James Bullard, but I don’t think that hearing that I like him, would make his day, do you? HA!
To recap… The euro dropped one cent in the overnight markets, as the dollar bugs are really dancing in the street, due to no data being printed in the data cupboard. Gold gained $1.80 yesterday, but is down $3 in the overnight markets, and the price of Oil fell below $50 briefly yesterday, and is back above the figure this morning, as our friends (NOT!) at OPEC are discussing another production cut. And Fed Chairman Powell, makes his first of two visits to Capital Hill today… What will be asked of him will be what I’m looking to hear…
For What It’s Worth… I found this on Ed Steer’s letter this morning, so thanks to Ed for finding it! This article questions the ability of the IMF to be the lender of last resort and it can be found here: https://www.telegraph.co.uk/business/2020/02/09/global-task-force-sounds-alarm-dangerous-dollar-crunch/
Or, here’s your snippet: “Central banks have lost control of global liquidity. The dollarised international financial system has become treacherously unstable and vulnerable to a sudden reversal in capital flows.
Yet the International Monetary Fund is a diminished force and no longer has the firepower to act as the world’s lender of last resort in an emergency. That is the stark conclusion of a G20 task-force of leading currency experts.
A surge in offshore dollar lending — increasingly through opaque security markets — has exploded to $18 trillion and has overwhelmed the safety buffers of the existing financial architecture. The concern is that a continued surge in the value of the US dollar — potentially triggered by the coronavirus epidemic, or any other black swan catalyst — could bring this to a head.
“The risk of an unexpected and unplanned reversal of abundant global liquidity hangs over the world economy. Strong contagion across markets could make the endogenous dynamics of global liquidity very dangerous,” the panel warned in an advisory report for G20 ministers, the Financial Stability Board and the IMF.
A decade of ultra-low interest rates and quantitative easing has flooded the globe with highly unstable forms of funding denominated in dollars, with no guarantor standing behind them. Glaring currency and maturity mismatches have accumulated.
This structure is prone to an abrupt “dollar crunch” should borrowers in China, east Asia, emerging markets, or even parts of Europe suddenly start scrambling for scarce U.S. currency to repay bonds and loans in a crisis.”
Chuck again… One might wonder why I decided that this article was FWIW worthy… Well, if Central Banks have lost their ability to control liquidity, then the Fed is the biggest Central bank and the one that we care about the most, and that’s why its here…
Currencies today 2/11/20 American Style: A$.6707, kiwi .6394, C$ .7522, euro 1.0916, sterling 1.2923, Swiss $1.0227, European Style: rand 14.8773, krone 9.2472, SEK 9.6516, forint 309.76, zloty 3.9021, koruna 22.8246, RUB 64.01, yen 109.85, sing 1.3871, HKD 7.7644, INR 71.20, China 6.9842, peso 18.67, BRL 4.3191, Dollar Index 98.80, Oil $50.48, 10-year 1.58%, Silver $17.73, Platinum $969.01, Palladium $2,328.65, and Gold… $1,569.28
That’s it for today… The wind appears to have died down here, which means the ocean isn’t as angry as it has been the last two days. I received an email message from one of my fave analysts/ writers, Grant Williams, who thanked me for mentioning him in the Pfennig! WOW! That’s two days in a row of surprises for me… First it was Barron’s and now Grant Williams that reads the Pfennig! WOW! I guess I had better sharpen my writing skills, eh? The Righteous Brothers take us to the finish line today with their song: Just Once In My Life… I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!
Chuck Butler