The Fed Begins Its Illegal Corporate Bond Buying…

May 28, 2020

* The dollar bugs fight back on Wednesday… 

* Gold fights back to recover early Wednesday loss… 

Good day… And a Tub Thumpin’ Thursday to you! In case you were ever wondering… Tub Thumpin’ is the title of a song by Chumbawamba… It was around in the 90’s, and I liked it! So, there you go! The song had some words that I think apply to me…. I get knocked down, but I get up again, nothing’s gonna keep me down…. I did get to sit outside late yesterday afternoon, after the morning rain finally ended. This new book, by Peter Zeihan, DisUnited Nations… I’m telling you this now, so you’ll listen to me later, I’m loving this book so far! And the writer is just laying the groundwork, if you will, for the rest of the book… I’m greeted this morning with Chris Gaffney’s fave song: It’s a song by Styx, titled: Come Sail Away….

Many of you know Chris Gaffney, he took over the World Markets Desk when they showed me the door to the pasture. Chris & I worked together off an on going back to 1992… And Chris is now attending Conferences and speaking at them, so you know who I’m talking about. I didn’t want to just drop a name on you, and leave you hanging!

OK… Well, the currencies’ daily inching higher VS the dollar, came to an end yesterday, as the dollar bugs fought back, but the move backward was as small as the moves forward had been on a daily basis…. And Gold investors finally fought back and turned that early morning drop of $11, into a very small drop and close back above $1,700 at $1,709.  I told you I had been listening to the podcasts of Grant Williams and all his different guests for two weeks now, and none of them have an answer, other than the one I’ve been talking about, for Gold’s lackluster performance in this time of questionable unknowns!

And of course the one I’ve been talking about is that U.S. investors see no need for a safe haven right now the Fed has stepped in, and provided liquidity, and rate cuts, and a general feeling among investors that the Fed has their back, so let’s go hog wild on stocks! As a regular reader, you know that my feeling on this is hogwash! And I truly believe that this stock rally is a bear trap, and when the backside of the hurricane comes onshore…. There will be crocodile tears…. But not by me!

The Folks at, Russ and Pam Martens, had yet another good piece on the Fed yesterday…. I wanna be like the Martens when I grow up! Seriously, these people step into the batter’s box, swinging a BIG Stick, and swing for the fences! Yesterday, they were talking about the Fed’s announcement that they will be buying Corp bonds, and Corp bond ETFs… As I told my friend, Dennis Miller, “Yes, it’s illegal…. I’ve pointed that out a few times since the announcement that they would be doing this last month…. It burns my britches as they used to say, back in the day when the rule of law meant something… Of course if I were to go out and do something unlawful, and claim I was going to help feed the poor, I would still go to jail…. But not the Fed…. And Congress is too yellow to do anything about it….

And yes, taxpayers are on the hook for any losses you can bet your sweet bippie on that one! “

And the folks at Blackrock get to do all the actual buying, so their profit margins are going higher by the minute! The folks at did mention that Blackrock is going to be able to buy their own bonds, and pass them off to the Fed…. Now that sure does sweeten the pot for Blackrock, now doesn’t it? They made commissions when they sold them, and now they’ll make commissions when they buy them back, but won’t have to own them! I can hear the folks at Blackrock singing to the Fed…. How Sweet It Is To Be Loved By You!

I’m about as ticked off about something the Fed has done as I’ve ever been folks…. So forgive me if I sound a little cynical or sarcastic, or just plain ticked off!

Why are members of Congress turning a deaf ear on the complaining about how buying Corp bonds is illegal for the Fed? Because they are too soft hearted, and they might get their feelings hurt, if they spoke up and then someone across the aisle accused them of wanting to kill his grandma….

It’s a shame the way the U.S. was hit by a pandemic, and our elected leaders can’t work together for solutions without name calling and grandstanding! Our republic, ahem, I mean our Empire, is being led down an alley that’s dark and dangerous, and all we’ve got are some yellow-bellied, too afraid of getting their feelings hurt, leaders…. Oh Brother, is this a real problem or what!

OK, Chuck, settle down… you’re only half way through the letter and you’ve gotten yourself really worked up!

So… did you hear the news that a Japanese Bank announced that they are leaving the CLO market, of risky U.S. investments after taking a $3.7 Billion loss in those securities… That’s right I said Billion, with a capital B…. here’s Wiki’s explanation of what a CLO is: A collateralized loan obligation (CLO) is a single security backed by a pool of debt. Often these are corporate loans that have a low credit rating or leveraged buyouts made by a private equity firm to take a controlling interest in an existing company.

Man, I would hate to be the guy at that Japanese Bank that had to go into the boss’ office and tell him he just lost in dollar terms, $3.7 Billion…. I can’t even work the number to how much yen that is! HA! I would imagine that the boss told the employee that he would have to “fall on a sword”… YIKES!

In my daily spin through Twitter I found this quite interesting. It was a Tweet by Dan Hedl, (to give him credit!) and it goes like this: The game “Monopoly” sold for $2 in 1935. In the box, you got monopoly money. That original stack of monopoly money from 1935 is worth $50 as a collectors item. Monopoly money literally holds more value than your fiat currency.”

I’ve always kidded about how the Fed was trying its darndest to make our dollars, Monopoly Money…. But here I am again talking about the Fed…. There’s just no getting away from them and their box of rocks ideas…

Yesterday, St. Louis Fed President, James Bullard, spoke, and he too said that the Fed’s Balance Sheet would be quickly unwound once the Pandemic was over…. And once again, I’ll say that I’m going to call him on that, and say it will take more than 7 years to unwind…. I’m just saying…

Well, like I told you yesterday, China continues to weaken their currency, and much like last year when it appeared to be going to 8, but along came the trade agreement negotiations, and the Chinese decided to give the renminbi some curb appeal…. But that’s all over now, and the Peoples Bank of China (PBOC) is back to daily weakenings of the value….

And have you been following what’s going on in Hong Kong? I’m going to say that I have always thought that China would only allow Hong Kong to remain autonomous as long as they didn’t cause trouble…. Well, trouble has been a real problem, and now China has stripped Hong Kong of its autonomy…. I would think that the next move for the Chinese is to take away the honker (Hong Kong dollar) and replace it with the renminbi…. That would be quite radical folks, but nothing surprises me any longer with China….

You know I used to come home from school and tell my dad about how we had to crawl under our desks in our prep for a nuclear war…. My dad used to tell me not to worry about a nuclear war with the Soviets…. That his eye was on the sleeping giant, China… He would tell me that if the sleeping giant was ever to awake, that the whole world would end up knowing about it…

My dad was one of the smartest people I encountered through my years, and he only had a high school education. But being raised on a Farm, and learning about money, economics, trends and all kinds of things, prepared him well for his adult life…

OK… enough reminiscing…. You know what? I’m going to go off the tracks here and talk about something that the discussion of China had my mind going around and around…. No wait… I had better save that for a day when I start with it and see how long the discussion goes! So, you’ll have to wait…. But that should keep you coming back! I learned one thing in my days of playing in the band, and traveling around the U.S. and that is…. Always leave the audience…. Wanting….

The price of Oil found that it wasn’t on terra firma, and instead slipped lower from earlier this week. It seems that there was this AHA moment when it was discovered that the U.S. has HUGE stockpiles of supply, and that my friends is the reason why the price of Oil has slipped lower this week.  

But the Petrol Currencies are still benefitting from the price of Oil’s recent rise… Hey! when the Mexican peso can rally on Oil news, then you know it’s all good for the likes of rubles, krone, loonies, and real…. 

The U.S. Data Cupboard didn’t have much for us yesterday, except two Fed Head speeches (Bullard and Williams) and the Fed’s Beige Book, which gathers the heartbeat of each of the regions… And in it the overall theme of this month’s Beige Book was that Business Leaders Are Pessimistic About The Pace Of The Recovery…  Really? I guess these guys and with their cupboards filled with their stock buybacks, were of the opinion that the recover would be quick, and swift.. And why not? Didn’t the Fed tell us that’s how it would be in the beginning? Well, don’t feel sorry for the Business Leaders, they’ll make Millions either way the cookie crumbles…. 

Today’s Data Cupboard has a few important pieces of data to print, starting with the Weekly Jobless Claims, for last week, and that will be followed up with the April prints of Durable and Capital Goods Orders, you may recall that even the March prints were already negative, the April prints here should be very ugly….  Then the second estimate of 1st QTR GDP, which originally printed at negative -4.8%, and that quarter only had 1 week of shutdown, the 2nd QTR GDP will be really negative, and have a long way to go to dig itself out of that mess….   I’m just saying… 

To recap… The currencies’ daily inching higher VS the dollar came to a stop yesterday, but the move backwards was as small and the moves upward had been… Gold fought back and turned around the early morning loss to end the day basically flat, but is up $11 in the early morning trading today. China is flexing its muscles, folks… beware…  And Fed St. Louis President, Bullard, has gone to the dark side….  

For What It’s Worth…  OK, this is an interesting story about how a major amount of Gold was found in Poland, that was formerly the property of the Nazi’s….  I thank the GATA folks for sending me this article, because I found it to be so interesting, and it can be found here:

Or, here’s your snippet: “

Twenty eight tonnes of Nazi gold worth more than £1 billion may have been traced to the grounds of a palace in Poland after the location was mentioned in an SS diary.

The stash of gold bars, jewellery and coins is believed to be sitting 200 ft. down at the bottom of a destroyed well shaft in the grounds of the Hochberg Palace, near the city of Wroclaw.

Researchers from the Polish-German Silesian Bridge Foundation, who claim to have acquired the diary from a masonic lodge, say the treasure was buried in the final days of the Second World War along with the corpses of several witnesses.

The treasure is said to include deposits from the Reichsbank in what was then the German city of Breslau but is now Wroclaw.

It is also said to include valuables from wealthy locals who handed them over to SS soldiers in the region for safekeeping as the Red Army advanced in 1945.”

Chuck again….  Ed Steer said he saw this coming out as an Indiana Jones type movie…. And the best line was from the GATA folks who said: “Nazi gold said buried near palace in Poland — will LBMA hypothecate it by Friday?  Ok, you’ve got to admit that’s funny!  but sad… funny, but sad… 

Prices for May 28, 2020: American Style: A$.6626, kiwi .6198, C$ .7270, euro 1.1017, sterling 1.2265, Swiss $1.0312, European Style: rand 17.4067, krone 9.8552, SEK 9.5798, forint 317.35, zloty 4.0129,   koruna 24.5062, RUB 70.93, yen 107.72, sing 1.4184, HKD 7.7529, INR 75.29, China 7.1591, peso 22.27, BRL 5.3174, Dollar Index 98.98,  Oil $32.47,    10-year .68%, Silver $17.34, Platinum $841.24, Palladium $1,950.32, and Gold… $1,723.64

That’s it for today…  A couple of years ago a posse of friends went to a gathering of sports writers for a question and answer session with them. I got to catch up with a guy that I grew up with, and played high school sports against, and a good time was had by all… Well, because of the Pandemic, they can’t do that again, so last night they had a Zoom with the sports writers in town… It was interesting but not as much fun as the previous set up…   OK… got to get going this morning, for blood work at one hospital and a dressing change at another hospital… That’ll amount to the most driving I’ve done since I drove back from Florida at the end of March! The Charlie Daniels Band takes us to the finish line today with their song: The Devil Went Down To Georgia…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and well continue to Be Good To Yourself!  

Chuck Butler