The Barn Door Got Closed!

January 14, 2019

* Dollar fights back after awful Thursday

* Germany prints very weak IP, and China’s Trade numbers are awful! 

Good Day… And a Marvelous Monday to you! Well, thank goodness I’m not home in St. Louis, after Friday through Sunday’s snow storm that left more than a foot of snow on the ground back home! My wife is at home, and she texted me, “are you sad you’re missing this?” And of course I said, “no way! It’s sunny and 75 here today!” And that was that! I hope all my friends got home safely on Friday night… The St. Louis region hasn’t seen a foot of snow in a month of Sundays, so they had forgotten how to drive on slippery roads, I guess… While I can’t claim them for our City’s team, they are our State’s team, and the Chiefs moved on in the NFL playoffs this past weekend… Go Chiefs! Styx greets me this morning with my former colleague, Chris Gaffney’s, favorite song: Come Sail Away!   Or, was that favorite song: Come on Eileen? I get confused….  

Well, someone closed the barn door on Friday, after Thursday’s mass exodus from the dollar, and the green/peachback made a comeback… What fueled that turnaround, when for all intents and purposes looked like the dollar was going to go on a long ride on the slippery slope? Well, it could have been some rotten data from Germany, or could have been the PPT flexing their intervention muscles once again, or, it could have been profit taking…

I would give credence to those items in the order that I listed them. The data from Germany had the pundits all over the world calling for a recession in the Eurozone’s largest economy, which would spread like wildfire throughout the Eurozone… The data I’m talking about was Industrial Production, one of those, what I call, real pieces of economic data… Italy followed up with their own IP print that was negative, and this morning, the Eurozone, as a whole, will accumulate the individual countries reports and issue one for the total of the Eurozone. I have to say that I’m not going all in on this talk of a recession in Germany and thus the Eurozone, but I’ll play along with the pundits until I see this play out for sure.

But the data from the Eurozone was weak, and there’s no two ways about it, but it was just one month, so let’s remain calm and read on… 

The Eurozone still has negative deposit rates, and that’s a scary thing should they enter a recession, because the European Central Bank (ECB) wouldn’t have any interest rates to cut! This is pretty much the scenario for the U.S. too, but… with the U.S. being the larger economy, the hurt could be worse, but then that’s just my viewpoint from the cheap seats…

One of the first things I thought about when I heard this news that the Eurozone might be heading to a recession, was that they could certainly cancel the economic sanctions on Russia, in an effort to help stave off the recession… I think I’ll send ECB President Mario Draghi, a memo…

Here in the U.S. mortgage applications fell again in the past two weeks, and the thing that makes this even more compelling is that mortgage rates have actually dropped 20 BPS in the past couple of weeks… That’s a scary sign folks… think about that for a minute and then come back to me…

OK, back? Alrighty then, let’s get to the other things that are important this morning… The U.S. Gov’t is still shutdown, and this is now the longest shutdown on record… The economy here in the U.S. was already teetering on the edge of the recession cliff, and now the economic consumption is going to take a hit… Doing my best Steve McCroskey in the all-time great funny movie, Airplane, I picked a bad day to stop spending here in the U.S.!

I read this past weekend that one of my fave economists, Danielle Di Martino Booth, formerly of the Fed Dallas, and author of the best selling book, Fed Up, said on Twitter that she was disappointed in Fed Chairman Jerome Powell, in that the man that she once had faith in, had lost credibility with the markets… Well, if she read the Pfennig, she would have come to this realization long before now, as I’ve been all over Powell’s moves like a Cheap Suit!!

What she’s talking about is the fact that Powell, said in a speech long before he was nominated to be Fed Chairman, that he didn’t believe in a Central Bank being involved in markets…  But as the stock market was circling the bowl a couple of weeks ago, he began to back track, and talk like a dove, which settled the stocks down a bit…  Wait! What? He did what?  Yes, he said that he didn’t believe in helping the markets, and then turned right around as did just that!  No, he didn’t! Oh, yes he did! 

So, did Powell, get the tap on the shoulder from the deep state or whomever it is that makes the calls for the U.S. economy? Because from the looks of it, it can’t be Powell’s own decisions here… Nobody would purposely do something that brought down their credibility in one fell swoop, would they? 

OK, let’s move on…  Well, China’s December Trade Data showed a direct link to the Trade War, as Exports were down -4.4%, and Imports were down -7.6%…  WOW I knew China’s economy was slowing down, but I wasn’t aware until these data prints that it had ground to a stop!  OK… So let’s take a look around the world should we?

We’ve got the numbers 2 & 3 economies, (China & Eurozone) size wise, in the world on the tenterhooks of a recession, while the number one economy (U.S.) isn’t heading there, according to economists that continue to point out that the economy can’t go from a 3% GDP to a recession… 

You may recall, me pointing this out a couple of weeks ago, and also pointing out that there were quite a few times in the U.S.’s history that the economy has done just that, gone into a recession the quarter following a 3% GDP print.  What are these economists smoking any way?  When the U.S. does go deep into a recession, these guys will be saying that it was someone else’s fault that they said that. You know the sun got in their collective eyes, they tripped on a rock, they were called off, and all those other excuses…  But, as my old football coach used to say… “Excuses never won a ballgame for anyone”… 

Gold gained a whopping 80-cents on Friday, but is up more than $4 in the early trading this morning.  Did you see the news from the weekend that according to the records of the World Gold Council (WGC), Russia has moved ahead of China, with regards to the total of physical Gold they hold…  But seriously, the WGC isn’t the gatekeeper of the Gold data, because China doesn’t even report their Gold holdings… Shoot Rudy, China went two years before they reported some Gold activity…  China’s physical Gold reserve is probably, at least as large as that in the U.S. or most likely even larger at this point, given their massive imports and production of Gold. 

I tell you all this because it’s important to know…  What are the plans for these Gold accumulations in Russia and China? Do they have plans to issue  Gold backed currencies? Or, are they just preparing to be major players at the adults table,  when the financial system collapses from all the debt?   Well, you guessed it… I’m thinking that it’s what’s behind door number 2, but then that brings about what’s behind door # 1…    And that’s why they only accumulate physical Gold, and not paper Gold…  hint, hint!

The U.S. Data Cupboard is completely empty today, and we won’t get any real economic data until Wednesday, when December Retail Sales prints, which I’m afraid to say that the BHI indicates a weak number… And that would be a telling sign on the economy wouldn’t it, if in December, when Santa comes, Retail Sales are weak?  I would think so… And I did stay at a Holiday Inn Express last night! HA! 

To Recap… The barn door which everyone was exiting from on Thursday to get away from the dollar, was closed on Friday, and the dollar made a comeback… Chuck puts the recovery down to three things…  Rotten data in Germany, the PPT back protecting the dollar, and profit taking…  China printed some awful Trade Data for December, really revealing the effects of the Trade War are showing up, and Gold was flat on Friday, but up more than $4 today, so far… 

For What It’s Worth… Well, among all the other dastardly things going on in the world, we have the general trend toward a cashless society… I’ve written at length about this and this is just another step toward a cashless society, and the article can be found here:

Or, here’s your snippet: ” Seventeen of the 19 countries using the euro stopped issuing the €500 denomination as of Jan. 27, according to a statement on the website of the European Central Bank and reported by Agence France Press.

The statement added, “Austria and Germany will both continue printing the banknotes until April 26 in order to ensure a smooth transition and for logistical reasons.”

The highest-denomination note is being discontinued because the European Central Bank suspects that its high value makes it a payment method of choice for money laundering by criminals and for financing terrorist activities.

The ECB’s statistics show that €500 bills comprise only 2.4 percent of the total number of bank notes in circulation, and a little over 20 percent of the total value. At the end of November 521 million of them were in circulation.

The €500 notes remain legal tender, will continue to circulate, and can be used to as a method of payment. “

Chuck Again… Yeah, the euro 500 note may remain legal tender now, but eventually it will be wiped from the memories of the people…  I’m telling you now, so you can either listen me now or hear me later, but this is not a good thing folks… 

Currencies today 1/14/19: American Style: A$.7196, kiwi .6820, C$ .7530, euro 1.1467, sterling 1.2850, Swiss $1.0185, European Style: rand 13.9040, krone 8.5398, SEK 8.9342, forint 280.04, zloty 3.7425, koruna 22.2935, RUB 66.85, yen 108.00, sing 1.3540, HKD 7.8430, INR 70.73, China 6.7604, peso 19.15, BRL 3.7072, Dollar Index 95.61, Oil $50.74, 10-year 2.66%, Silver $15.61, Platinum $803.53, Palladium $1,322.42, and Gold… $1,295.22

That’s it for today…  Saturday was my son Andrew’s birthday… I reminded him that he was born during a snow storm, in 1982, and so it was appropriate that it snowed on his birthday!  Happy Birthday, Bud… Hope your day was grand! While my beloved Missouri Tigers fall flat, our other team the St. Louis U. Billikens are hot! I ran into a good friend yesterday, and I couldn’t believe what I told her…  I said, “for the first time in over 11 years, I can say that there are no cancer tumors in me”…  That’s the first time I’ve said that, not wanting to jinx myself… But there! I said it! Believe me when I say this though… I know the wolf is always at the door…   And on that note… here’s a goodie… Cornelius Brothers and Sister Rose take us to the finish line today with their song: Too Late To Turn Back Now…  That’s a goodie!  So, I hope you have a Marvelous Monday, and remember to Be Good To Yourself! 

Chuck Butler