President Trump Says It’s The Fed’s Fault…

August 20, 2019 

* Gold get whacked yesterday, but rebounds this morning… 

* Eric Rosengren was the lone dissenter at the rate cut vote…. 

Good Day…. And a Tom Terrific Tuesday to you… Well, Beelzebub is still wanting his weather back! It was downright hot yesterday, but it is August… Shoot Rudy, I remember as a kid, before we had air conditioning, it was over 100 for a week straight… And where were we as kids? Outside, playing, and probably drinking lots of water from the spigot on the side of the house! We didn’t need bottled water! We didn’t need air conditioning (although when we finally got one room cooled off with A/C it was nice to sleep in), we just needed each other to make it game! Bob Seeger greets me this morning with his song: Turn The Page… It’s about a rock band and their travels between shows… I identify with the words in this song, for sure!

Well, another day… Another pot shot taken at the Fed Heads from President Trump… This time he said that the Fed is responsible for the economic slowdown, and that he wants them to cut rates 100 Basis Points at their next meeting! And all the while Boston Fed President, Eric Rosengren, is holding fort on no rate cut… Who’s going to join him?

A Bad day at Round Rock for Gold yesterday, down $17, but it’s back on the rally tracks today!  There’s just no stopping it now… Are you under…. The Power of Gold? Because apparently the markets are… The markets must also be under the power of the dollar bugs, because the dollar can do no wrong right now… Bad data? Buy dollars, Negative data? Buy dollars… President says he wants a cheaper dollar? Buy dollars, Treasury Curve inverts? Buy dollars… It’s the answer to everything presented to the markets, from the dollar bugs…

Have you been following other countries that issue 100 year bonds? Why were people lining up to buy Argentina’s 100-year bond? Or Mexico’s? Man, oh man, talk about strange things that people do… And buying a 100 -year bond would be amongst them! I’m talking about this today, because there are reports out that the Treasury is thinking about issuing 50 and 100 year bonds, since yields are so low… I mean , if you’re a country, that needs financing why wouldn’t you issue a 100 year bond with a 1.5% yield or whatever? Who’s to say if the country will even exist in 100 years, or that the financial system will be the same? I’m just saying…

Well, the euro didn’t receive any good news yesterday… Eurozone CPI (consumer inflation ) for July was only 1.0%, VS 1.3% in June… Yes, it wasn’t that long ago (about a year) that the ECB was celebrating 2% inflation… But that didn’t last too long, and has been falling ever since. And with deposit rates being negative, and the ECB now talking about coming back to the stimulus table, the euro is on tenterhooks right now…

Other countries might be playing this “currency wars” game, that wen growth slows, they feel that the only way to regenerate growth is to cheapen their currency… But when everyone’s doing it, what does it prove? I don’t think the ECB is playing the currency wars game with the euro… for they know all too well that a cheap currency invites inflation into the economy… A strong currency goes a long way toward fighting inflation!

And that brings me back to the Fed Heads and their interest rate hike cycle that began in December 3 years ago… The Fed heads said then that they wanted an increase in inflation… And I went all bananas on them saying that if they wanted inflation they were going about it the wrong way! You don’t hike rates to invite inflation into your economy, you cut them! So, the Fed had a double whammy working against them… 1. Stronger interest rates than most countries in the world, and 2. A strong dollar… But they wouldn’t listen to me, or anyone else that would point this out to them, for they know better than us, right? HA As if!

This is crazy folks… The Fed has reversed their rate hike cycle, and have stopped saying that the Economy was strong and robust… Now they have a gag order not to talk about interest rates, because… Because what little credibility that they have remaining, is hanging there like a piece of chad, waiting to be knocked off, but that hasn’t done a darn thing to the dollar bugs… I just don’t get it… 

Sure, the other countries aren’t exactly shining knights in armor, but there are a few bright spots… The Russian ruble and the Russian economy seem to be holding their own… And I think people have China all wrong…  The masses believe that China’s economy is crumbling… But haven’t heard this before? I recall about 10 years ago, a prominent letter writer, of whom I won’t mention his name, told his million readers that China was heading to a recession/ collapse…   Well, I don’t need to tell you, dear reader, that he was wrong all those years…  But I guarantee you that IF China would  see it’s economy collapse, he would be shouting from the rooftops that he called it first!  

The point here is that we’ve heard these calls for China before… They got it all wrong then, and I have no other reason than they’ve been so wrong in the past, to believe they have it all wrong again…  Sure, things have slowed in China, Shoot Rudy, show me a country that hasn’t seen a slowing down of its economy…  But that’s not the same as a collapse… 

The U.S. Data Cupboard is empty again today, marking two days of emptiness!  Yesterday, we had Boston Fed President Eric Rosengren speak, and apparently the gag order doesn’t apply to him… I’ve got the highlights or lowlights in the FWIW section today, so don’t miss that!

To recap… Yes, the letter is shorter than usual today… Chuck is having problems waking up each day… I think retirement has really gotten to him!  But in the recap… it’s more of the same as the day before and the day before that, and so on… The dollar bugs have the conn, Gold gets whacked and rebounds, the Treasury yield keeps falling, and President Trump thinks all the blame for the economic slowdown should be on the Fed…  So, not a bevy of things to talk about that’s new each day, to wake him up!

For What It’s Worth…  Well, I mentioned Boston Fed President Eric Rosengren above, so I thought that having his thoughts in the FWIW section today was FWIW worthy… So, here’s Rosengren on MarketWatch, and you can find it here:

Or, here’s your snippet: “Boston Fed President Eric Rosengren on Monday said the U.S. central bank should be careful not to cut interest rates too much now because it would push U.S. homeowners and businesses to take on more debt, thus making any recession more painful.

Lower interest rates cut the cost of debt, making it more attractive to households and firms.

“And if they get leveraged right before the economy has significant problems, we’re actually in much worse shape,” Rosengren said.

“We have to think about…how much we want households and firms to be leveraged going into whenever we actually do have a significant downturn,” he added, in an interview on Bloomberg Television.

Rosengren was one of two dissenters from the Fed decision to cut interest rates in July. 

In his interview Monday, Rosengren downplayed fears of an imminent recession, saying he expected moderate GDP growth around a 2% rate over the rest of the year.

While global economies are weak, the answer is not for the Fed to ease, he said.

The cure for global weakness is for foreign countries to stimulate their own countries “rather than just the United States to be doing the easing,” Rosengren said.

Rosengren said he would make up his mind about monetary policy just before the September meeting.”

Chuck again… And then after all that hot air spoken by Rosengren he said that he would vote for a rate cut if consumer spending slows down…  What’s it gonna be boy? 

Currencies today 8/20/19 American Style: A$.6780, kiwi .6411, C$ .7510, euro 1.1080, sterling 1.2100, Swiss $.9806, European Style: rand 15.3416, krone 8.9870, SEK 9.7210, forint 294,97, zloty 3.9270, koruna 23.2801, RUB 66.69, yen 106.33, sing 1.3852, HKD 7.8426, INR 71.64, China 7.0470, peso 19.79, BRL 4.0254, Dollar Index 98.39, Oil $56.09, 10-year 1.56%, Silver $17.02, Platinum $851.07, Palladium $1,485.56, and Gold… $1,503.85

That’s it for today…  except that is to send a big shout out to my darling daughter, Dawn… It’s Dawn’s birthday today… She turns… No, wait, Chuck, you can’t do that! OK, it’s a big birthday number today, and I’m sitting here wondering how’d that happen? Dawn has the luck of the Irish as far as her health goes, and she’s built just like my grandma… Tiny!  No wonder her daughter Delaney Grace is so small for her age!   So, Happy Birthday Boo!  Dawn is the oldest of my children, so she was the first… I almost saw a no-hitter last night! WOW! Steely Dan takes us to the finish line today with their song: Black Cow…    I can’t cry anymore while you run around…    I love Steely Dan’s music, every album had a different sound… I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler