The ECB’s LaGarde Turns Her Nose Up At The ECC!

May 13, 2020

* Currencies rally on Monday and throughout the night!

* Gold gets off its seat to the do the stroll today…. 

Good day… And a Wonderful Wednesday to you! Sorry for the tardiness of the letter this morning, it was one of those mornings when I just couldn’t convince myself that I needed to wake up!  I’ve been thinking about that a lot lately, and have decided that going forward, I’m not going to set an alarm, and I’ll write when my body tells me it’s time to wake up….  I would imagine that in the beginning the letter will get to your email box around the same time as always, but as time goes on it will be later, and later…  That’s it… times change, and I do too….    Pink Floyd greets me this morning with their song: Wish You Were Here…. 

The dollar bugs went back into the wall boards yesterday, and allowed the currencies to romp and play all day and through the overnight markets as well. One has to wonder, what changed yesterday?  I mean, on Friday, we had seen a week’s worth of bad, no make that awful economic data here in the U.S. culminating with a better than feared Jobs Jamboree, and the dollar bugs held onto the conn, much to my amazement…  But then on Monday, things changed… And the dollar bugs were chased all over the room by the currencies…. 

Gold didn’t join in the romping around yesterday, with the currencies, but has gotten off its chair and is doing the stroll with its girlfriend, Silver this morning….  Remember “the stroll”?  Sorry youngsters, you’ll have to YOUTUBE that and see what I’m talking about…. But at the St. Pius teen town dance every Friday night, there was always one song that the kids would line up for and do the stroll… 

II just had a flash back to when I was much younger, but had kids, and I would line them and their neighborhood friends, in the driveway and have them do the stroll!  They loved it, and would do silly dances, and we had a blast!  

OK… last week I told you the European Constitution Court (ECC) was going to meet, and I was waiting to hear what they would were going to say about the European Central Bank’s (ECB) exorbitant bond purchases…. It took a few days for this to be public news, and thanks to Grant Williams in his Things That Make You Go Hmmm….. letter last week, he had the public news, so let’s listen in on what the European Commission had to say, “ German constitutional court ruled that the ECB had exceeded its legal mandate and “manifestly” breached the principle of proportionality with mass bond purchases, now topping €2.2 trillion and set to rise dramatically. The bank had strayed from the monetary realm into broad economic policy-making.

The court said the German Bundesbank may continue to buy bonds during a three-month transition but must then desist from any further role in the “implementation and execution” of the offending measures, until the ECB can justify its actions and meet the court’s objections. It also said the Bundesbank must clarify how it is going to sell the bonds it already owns…”

Well, well, well…. What’s Christine Lagarde, President of the ECB, going to say about this? I mean shoot Rudy, she just took the job a couple of months ago, and now she’s in the middle of a saber rattling contest, of which the it appears she’s on the losing side…. Well, look who thinks that she’s high and mightier than the European Constitution Court! Let’s go to the tape once more courtesy of Grant Williams to see what she had to say, “We are an independent institution, answerable to the European Parliament, and driven by our mandate,” she said in a webinar organized by Bloomberg. “We will continue to do whatever is needed, whatever is necessary, to deliver on that mandate. Undeterred.”.. – Christine Lagarde

Well, well, well… It’s as if she stuck her nose up in the air and said, Neener, neener, neener, I’m rubber and you’re glue, whatever you say to me bounces off me and sticks to you….. In my favorite cartoon voice, I can here the ECC saying, “Why…. The nerve of her!”

But who can blame her, she’s just taking her cues from the Fed, who yesterday began buying Corporate ETF’s through Blackrock, when the Fed’s bylaws prohibit them from doing just that! Any thing you can do I can do better! Man this is all getting crazier by the day, isn’t it? What’s become of our financial system, and what will remain of it when this is finished?

And again, I laugh, when I hear people say, that these changes are “only temporary”…. Yeah, like Payroll taxes were supposed to be? And the Gold backing dollar system ending was supposed to be? Tell me again, what temporary means, because using these two examples, I have a different meaning in my head!

Back here in the U.S….Yesterday, I talked about the scenario that I think will bring about negative rates here in the U.S. And then later in the day, I received a note from the GATA folks, where they were quoting an article that appeared on Reuters that said, “Rate options, which gauge monetary policy expectations, on Monday implied a 23% probability that the key federal funds rate will go below zero by the end of December, according to BofA Securities data, which cited short expiry options on one-year U.S. swap rates. That compares with a 9-10% probability last week.”

So, what was once TABOO, is now being considered…. What was once things that tin foil hat wearers (like me) were laughed at for even mentioning, now has a 23% probability of becoming real…. I’d say at this point, that’s a significant level of probability…. Now, watch that percentage grow, when stocks begin to have problems again like they did in March…. I’m just saying…

Well, I hate to have to bring this kind of stuff up, but a dear reader sent me a link to a video and asked me to explain it…. It was a guy that had reported finding that the U.S. Gov’t Bill 748, (you know the Coronavirus stimulus bill) was first introduced in Congress…. Are you ready for this? ….. On January 24, 2019…. I’ll let that sink in a bit…. January 24, 2019…. That’s over a year before the first case of the pandemic came on our shores….

Now, I’m sure you’re saying, “Come on Chuck you can’t believe everything you see on videos”, and you’re right…. But this man on the video showed me how to go to the U.S. site and pull up Bill 748’s history, and see it there in black and white…. So, go ahead and prove this wrong….

In the meantime, I want to know what they (congress) knew over one year ahead of time! Hello? Congress, anyone out there read the Pfennig? Come on, I know an “aide” up there in Washington D.C. has to have come across the Pfennig a time or two! I don’t really expect anyone in D.C. to answer me, I’m fully expecting to hear nothing but crickets…. 

And here’s where investigating journalism had died… Because back in the day, a good investigating journalist would be looking at this and not turn to look the other way…  I’m just saying…

Sorry, I got a little off track there, but I thought it was important to talk about, and so I did just that!  

Yesterday, the stupid CPI (consumer inflation) printed for April, and only showed a negative -0.4%….  Yeah, I believe that like I believe that pigs fly! but it is what it is, and we move on… PPI (wholesale inflation) printed already this morning for April and it showed a negative -1.4% print… Now, that’s more like it!   Remember Retail Sales will print on Friday, and the Weekly Jobless Claims will print tomorrow… 

Before we head to the Big Finish today, I wanted to give a shout out to my fave newsletter writer, Grant Williams. Grant and the great Stephanie Pomboy, are doing a podcast once a week, titled: The First Super Happy Hour podcast…. When you put two minds like these two have, together, you get great conversations, and thought provoking ideas…. And so to celebrate their breaking a champagne bottle on their new podcast, I thought I would give you the link to a sample, and it will give you an opportunity to download the whole podcast…. So click here and enjoy!

To Recap… The currencies rallied on Monday, and have carried through the overnight markets into this morning. Gold finally moved higher this morning adding $14  and is trading $1,715 this morning.  The European Commission Court didn’t have nice things to say about the ECB’s bond buying, but ECB President, stuck her nose up at the court and said Neener, neener, neener…    And Chuck talks about some strange thing he found, that he hopes isn’t real….  But it is, it’s right there on the site! 

For What It’s Worth…. I don’t know if see what I see in this article…. It’s about how U.S. bank regulators were investigating Scotiabank’s metals business, before Scotiabank made the announcement two weeks ago that they were going to close their metals business down at the end of this year…. This article on Reuters can be found here:

Or, here’s your snippet:” U.S. regulators were investigating Bank of Nova Scotia’s (Scotiabank’s) (BNS.TO) metals trading activities several months before it told staff it would wind down the unit, according to its most recent earnings report.

Scotia told staff in a global call on April 28 that it would wind down its metals business by around the start of 2021, two sources familiar with the matter told Reuters at the time.

Scotia has declined to comment on the report.

In its first quarter earnings statement in February, Scotia said its metals business was under investigation by U.S. regulators.

“The Commodity Futures Trading Commission (CFTC) and the Department of Justice’s Criminal Division are conducting investigations into (Scotiabank’s) activities and trading practices in the metals markets and related conduct,” it said.

It said it was “responding to requests for information related to these investigations.”

Scotia did not respond to a Reuters request for comment on the investigation. The DoJ and CFTC declined to comment.”

Chuck again… Ok, is your spider sense tingling? Because mine is, and don’t tell me it was just a co-ink-ee-dink that Scotia decided to close their business after the regulators were there…. My spider sense is tingling so intense right now, that there’s more to this story, and the problem is… We’ll probably never know the real truth…. And that’s sad….

Currencies today 5/13/20, American Style: A$.6514, kiwi .6045, C$.7128, euro 1.0876, sterling 1.2318, Swiss $1.0332, European Style: rand 18.2739, krone 10.0472, SEK 9.7282, forint 324.92, zloty 4.1945,    koruna 25.1715, RUB 73.40,  yen 106.91, sing 1.4143, HKD 7.7502, INR 74.60, China 7.0864, peso 24.05, BRL 5.8219, Dollar Index 99.70,   oil $25.96,   10-year .65%, Silver $15.60, Platinum $770.68, Palladium $1,716.58, and Gold… $1,716.58

That’s it for today, and the rest of the week, remember no Pfennig tomorrow, as I will reporting to the oncologist for blood work and the rest of stuff…  Blues beat Dallas 4-3 last night!  HA, I watched the replay of Game 3 of their playoff series last night….   I read last night that the proposal that the owners submitted to the player’s union for approval to start the baseball season, has hit a road bump…  You see, the owners want to split the profits with the players this year, since most games won’t have any fans paying to get in…. And the players have a problem with that… Come on! Be Big Boys and make some compromises so you can get back to playing the kids game!   I guess I wouldn’t make a good negotiator! HA!  OK, Journey takes us to the finish line with my favorite song by them: Who’s Crying Now….   And with that, I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler