Powell Heads To The Hill Today…

June 17, 2020

* Currencies couldn’t hold their Monday gains on Tuesday

* Is Hong Kong really in a tight spot? 

Good Day… And a Wonderful Wednesday to you! I don’t know what we did to deserve this run of beautiful weather, but I’m not complaining! And I know that all good things must come to an end, and eventually that will happen here… The mornings are so pleasant that I can sit out on our deck and drink some coffee while listening to classical music… Soon the mornings will already be hot, and I won’t be able to do that any longer, but for now, it’s just a peaceful and pleasant way to begin the day! 3 of the 4 grandkids were here yesterday to swim. My sons helped me do a Big Job in our Tiki hut out back, so thanks to Andrew and Alex, with a helping hand from Grace… Graham Nash and David Crosby greet me this morning with their song: Southbound Train…

Well… I really don’t want to start the letter today with this HUGE story, but, with little else going on that’s new, I don’t have a choice… So, sit down, because this story is going to rock your socks! OK, remember back in September of 2019, when I kept asking the question about why did the Fed need to inject Billions of dollars of liquidity into the repo market? And these injections didn’t just stop in September, or Rocktober, or November, or December, oh, Chuck, stop it, they are still going on!

I kept saying that there was something up, with the banks that needed this liquidity… And then we learned that JP Morgan/ Chase (JPM) had withdrawn their funding, out of the blue, and that brought about the question as to why did JPM need their allocated repo money? Something was awry with the banks and nobody, except Chuck, was making a Big Deal Out of it…

When the economic shutdown came along, I would say at a very opportune time for the Fed, because now the Fed could blame the pandemic for all their money creation… Oh, did I tell you that the Fed’s Money creation has exceeded U.S. Treasury Tax Receipts in the last 12 months? So, where was I? Oh, they could blame all their money creation on the pandemic, to keep Congress from asking questions about why we needed to bail out banks again 12 years later?

But what If I told you that the Fed Heads were planning for a bailout of the economy before the Pandemic even showed up in China? You would say, “no way Chuck, that’s false news”! How could the Fed know they would need a bailout from a pandemic, before there was even a pandemic? Well, this is where this gets good, folks… The Fed planned a bailout because they knew the banks were hurting, and would need another bailout, and the timing of the pandemic was like manna from heaven for the Fed Heads…. Ok, I hear you saying, where’d you hear that?

Well, remember G. Edward Griffin, the author of the book The Creature From Jekyll Island? He sent me a note yesterday that said, “BlackRock, an investment manager of $7- trillion in stock and bond funds, revealed plans by the Federal Reserve for a bail out of financial institutions and corporations in August 2019, months before COVID-19 appeared and long before the public was aware of any financial crisis.”

You can read the entire article at: https://needtoknow.news/2020/06/blackrock-authored-the-federal-reserves-bailout-plan-before-there-was-a-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=blackrock-authored-the-federal-reserves-bailout-plan-before-there-was-a-crisis

Now, if I were a Congressman, I would be hopping mad right now, and couldn’t wait to get Fed Chairman Powell back in front of the finance committee! But I’m not, instead I’m just a little old economics writer from a little river town southwest of St. Louis, Mo. And I’m still Hopping mad about this, that the Fed Chairman basically lied to us all for months, telling us that the repo problem was nothing to look at, and that the banks were solid…. Oh, wait, guess who’s going to Capitol Hill today to testify? None other than Jerome Powell himself!

OK, boys and girls, this is your opportunity to grill the Fed Chairman, will you do that, or just cow-tow to his fed speak, and throw him softballs? This is it… this is your Big chance, what will you make of it?  Your reelection depends on your performance today…  (wouldn’t that be great, if their reelection did depend on their performance today?) 

OK… no FWIW story today as this has to qualify for that, but only at the top instead of the bottom! The currencies lost ground to the dollar bugs again yesterday, one day up, next day down… Traders can’t make up their minds… Did you ever have to finally decide? Say yes to one and let the other one ride? There’s so many changes and tears you must hide, did ever have to finally decide? A little Lovin’ Spoonful for you this morning!

Gold couldn’t hold its early morning $5 gain, and ended up closing flat to up a buck or two on the day VS Monday… One of my fave economists, David Rosenberg, was speaking recently, and said that his number one investment is Gold… So there you have it! Rosenberg likes Gold above all other investment choices, what else is there to know? Nothing, absolutely nothing, say it again!

Gold is down $7.70 in the early trading today, so let’s see if Gold can buck the trend recently of wiping out the early morning performance… 

OK, yesterday’s dollar rally was fueled by the absolutely stronger than the man of steel, Retail Sales, Industrial Production and Capacity Utilization reports for May… Now I know that there is no such thing as a “real honest to goodness economic report” any longer… The Economy was shutdown in May, but somehow Retail Sales grew 18%, Industrial Production grew 1.4%, after 2 previous months negative reports, and so on… But Retail Sales grew 18% (actually 17.7%) well, bust my buttons! I told you yesterday that the Butler Household Index (BHI) had indicated that a rebound in Retail Sales would exist, but not to the tune of 18%!!!!!!!

And furthermore… David Rosenberg had this to say about the rebound in Retail Sales for May, on Twitter, “As we get today’s reflexive bounce in May retail sales, keep in mind at as of June 6th, the Johnson Rebook survey shows a -9.7% trend in chain-store receipts as of the first week of June. How’s that for (i) sustainability and (ii) the pent-up demand fairy tale?” – David Rosenberg…

There’s not much coming from the Data Cupboard after yesterday’s explosion of data… So, we’ll just move along now for these are not the droids we’re looking for.

The price of Oil is stuck in the mud around $35-$38, and can’t seem to push through the $40 handle… The Saudi’s announced new production cuts, and even those don’t carry the same weight as they used to.. Maybe when demand gets stronger with the reopening of economies, but I guess we’ll have to wait-n-see, eh? 

The Petrol Currencies that include: Russian rubles, Norwegian krone, Canadian dollars, Brazilian real, and others, are champing at the bit to get stronger, but the lollygagging of the euro and the price of Oil is just disappointing them.  Not that I want to pay more for gas, but these poor Petrol currencies need some love, folks…  

OK, a dear reader sent me a link to a YOUTUBE video of an interview of Kyle Bass. Kyle Bass is someone that you stop to listen to whenever he speaks, so I stopped to listen to what he had to say… And in the interview, he talks about the trouble Hong Kong is in, with their leveraged debt, leveraged currency, and falling housing prices… 

After watching the interview, I remembered that many years ago I wrote about how I believed the Chinese would have the honker go from a pegged currency to the dollar, to a free floating currency, so that they could get their feet wet, with regards to whenever they decided to float the renminbi. And then just fold the honker into the renminbi, and voila, one big happy family with one big floating currency…  Of course I use the term “floating” loosely, as we all know the renminbi is a very manipulated currency! 

I found this interview to be quite interesting in that nobody is talking about Hong Kong’s problem (except for Kyle Bass), most analysts have been focusing on the housing / prices problems in Australia and Canada… Well, now we have another country to add to our “Worry Wall”… 

Speaking of a “Worry Wall”… things are heating up in Korea, as N. Korea’s leader said that he was going to send troops into the demilitarized zone (DMZ)…  I’m no fan of wars, or conflicts or anything with guns, but don’t you think that N. Korea’s leader (Kim Jong Un) has stayed around too long? I can tell he never got spanked as a child, for he’s still a spoiled brat….  But we have to be careful here, because Un’s sister, is reportedly more brutal than her brother!   I don’t believe that this is anything more than a tempest in a teapot, but, one never knows, now do they? 

And meanwhile, back at the ranch, Japan continues to go their own way, which is a prudent thing to do right now. No reason to bulk up and show your hand to the N. Koreans at this time…   I’m just saying… 

Well, that rounds out our trip to Asia..  The World to me is a powder keg just waiting for its fuse to be lit… it will get lit, eventually, but what sets it off is the question… There are a ton of things that could light the fuse, and in the end, the one question that everyone will be asking is: Got Gold? 

To recap… The currencies couldn’t hold their ground on Tuesday, and gave way to the dollar bugs who also wiped out Gold’s early morning gain of $5. Powell, heads to the Hill today to testify… I would pay good money to be able to grill him, wouldn’t you? Oh, and Blackrock revealed that they were given plans for a bailout of banks last August, which if you check the calendar, was WAY before the pandemic, that is being blamed for all the money creation, and the bailout, was even a simple flu!

Market Prices today 6/17/20 American Style A$.6900, kiwi .6463, C$.7393, euro 1.1250, sterling 1.2569, Swiss $1.0540, European Style: rand 17.1187, krone 9.5206, SEK 9.3418, forint 306.03,  zloty 3.9513,    koruna 23.6010, RUB 69.55, yen 107.35, sing 1.3928, HKD 7.7499, INR 75.91, China 7.0808, peso 22.20, BRL 5.1660, Dollar Index 97.06,   Oil $37.72,   10-year .76%, Silver $17.48, Platinum $818.89, Palladium $1,937.94, and Gold… $1,718.81

That’s it for today… A little different letter today, but… in the end it’s all the same… I did a ton of reading last night, as the only thing I could find on TV that was interesting was a replay of the Braves/ Cardinals NDS Game 1 from last year… So, I started reading… I learned something last week, in my book Sam Houston, and the Alamo Avengers… That beloved American pioneer, Davy Crockett, who as I learned in school was killed at the Alamo, but in reality he survived the Mexican onslaught of the Alamo, and Santa Ana had him killed after the fighting was done. That made me very sad to learn that he lost his life that way… OK… this has gone on long enough this morning… Al Wilson takes us to the finish line today with his great song: Show And Tell… And with that, I hope you have a Wonderful Wednesday, and will Be Good To Yourself!

Chuck Butler