The Fed Increases Their Injections Into The Repo Market!

Rocktober 24, 2019

* Currencies and metals drift again on Wednesday… 

* German employment drops! 

Good Day… and a Tub Thumpin’ Thursday to you! Well, I was off on my thought yesterday that the Blues would play again on Wednesday night… They play tonight! But good friend, Mike K., saw that mistake I made and decided to drive to my house and drop off a Blues Calendar! Thanks Mike! Hopefully I won’t make that mistake again! I found out yesterday, that the chemo I take has made my Thyroid go haywire, so, now to add to the rest of the medicines that take up all of my sink space, I’ll be taking a thyroid med. UGH! Oh, well, it’s just another pill… But in researching this problem I found something I can blame my 1. Weight gain these past two years, 2. Hair loss, 3. Dry skin, 4. Increased sensitivity to cold temperatures… Well, hopefully, I’ll be able to stop scratching, and not have to wear a hoodie while watching TV at night! The Rolling Stones greet me this morning with their song: Dead Flowers… (another song from their Sticky Fingers album, which I, in my humble opinion, believe to be their very best work)

Well, another dull day in the currencies and metals yesterday… No data just about put every trader on the sidelines awaiting today’s Durable and Capital Good Orders data… The recent U.S. data has been very weak and negative and I don’t see how today’s prints will be any better… I personally feel that the U.S. economy is already in a recession, but we won’t know that for sure for months… I know, I know it’s not a technical recession, where we have two consecutive quarters of negative growth, but I would argue that without Govt. Spending, we would be in negative territory… I’m just saying…

The currencies drifted all day and night, once again, but this time they drifted higher… Gold finished the day in the same spot it closed the day before, and Oil… well oil saw its biggest one day gain in quite a while after it was reported that U.S. supplies aren’t as staunch as previously thought… That news helped the Petrol Currencies, and this time the Russian ruble was the leader of the pack… this time it was the Norwegian krone! One of my fave currencies!

OK… I brought it up, so I might as well go through with this… I have a handful of currencies that I believe are best to hold… They are: Russian rubles, Norwegian krone, Canadian dollars, Sing dollars, Swiss francs, and euros… But, the most fave currency of all to hold is…. Physical Gold!

And why not? Negative yielding Gov’t bonds around the world have grown to over $13 Trillion! I’ve said this before, I don’t doubt one iota that we, here in the U.S. , will see negative yields on our bonds before this all over… Can you imagine that? Sure people that own bonds now, will love to see negative yields on bonds, so they can sell them to some other sucker… But what would they do with the money/ principal they received? Invest it more bonds? Hardly, given they would now have negative rates… how about stocks? Only if the Gold / Dow ratio has fallen to below 5… A’’nd right now that ratio is very near 18 at 17.98… So keep buying physical Gold is all I can tell anyone that will listen to me… Or how about cash in the bank? Well, if bonds have negative yields, then deposit rates will have negative rates, so you’ll have to pay the bank to safekeep your money… Momma said there’d be days like this, there’d be days like this my momma said!

Actually, my mom would not believe what the world has become these days… She passed in 1997, and my dad in 1995, and they both would be beside themselves looking at the world today, and the amount of debt that’s been accumulated… Actually, I wish they were still here, but on the other hand I’m glad they aren’t, so they don’t have to see what’s happened to the U.S.

And it’s not just the U.S. folks… Debt is a problem in Japan, the Eurozone, China, the U.K.
And so on… And negative rates have already been implemented in a lot of these countries, and if they haven’t been, they will shortly…

So, I get this question all the time… if all these other countries are doing badly, where do we put our money these days? I always look at them and say… “You’re kidding me right?, have you not read anything I’ve written for years now about how they should be buying pysical Gold?” In 2011, at my local watering hole, someone said, “what should we have bought?” and my friend, Duane, said, “if you had listened to Chuck 6 year ago, you would be sitting here with a big smile on your face, because you would own Gold”…

OK.. enough on debts, deficits, negative rates and Gold… Do you all recall what happened in 2008 when the financial meltdown was in full swing? Everything and I mean everything got sold… Stocks were losing ground faster than a speeding bullet, and margin calls were going out just as fast, that would require margin account holders to add more money to their account or sell stocks… Well, they wouldn’t see their beloved stocks, and so they sold other assets, like the currencies they held, and Gold, in an attempt to keep the margin calls at bay… And it looked bleak for the alternative assets, like currencies and metals… That is until it was announced that the U.S. would begin a bond buying program, and call it Quantitative easing… By the middle of 2009, the currencies had recovered their losses, and Gold was soaring…

Now, I’m not saying that this same thing will happen again… But, isn’t it worth it to stop and think about what the Fed reaction will be to a financial mess will be before you sell your diversified holdings? I sure hope it does, for if 2009 teaches us anything it’s that when the it looks the darkest, the bright light shines once again… I’m just saying…

OK, we finally get some data today to trade off of, and right out of the starter’s blocks this morning, the Eurozone printed their latest PMI… Their preliminary Rocktober manufacturing index (PMI) rose to 50.2, from 50.1, so not a drop, that all the experts were predicting… But it wasn’t all wine and roses for the euro, as a factory report showed the first drop in employment in over a decade… Uh-oh…. 

Traders didn’t seemed fazed by this print, and the euro remained above 1.11. If we get to tomorrow’s close, and the euro remains above 1.11, it will be one week of trading above that figure, which would be a good sign for the single unit, not that 1.11 is any psycological level or anything like that, it’s just something that I’ve noticed, which is out of the ordinary in these times of manipulated markets, and dollar strength… 

Next up will be the U.S. Data Cupboard with its print of September Durable and Capital Goods Orders…  As I said yesterday, I don’t see how these could be strong with all the other economic data printing weak and negative…  The lone wolf real economic data prints today for this week… I was beginning to think that the U.S. Data Cupboard had gone on strike!  

The Fed increased their injections to the repo market yesterday…  I pulled this from… “In a statement issued at 1515ET, The New York Fed confirmed it would dramatically increase both its overnight and term liquidity provisions beginning tomorrow through November 14th.
That is a massive 60% increase in the overnight repo liquidity availability (from $75 billion to $120 billion) and a 28% surge in the term repo provision (from $35 billion to $45 billion).”

Well, JPMorgan was correct when they said this problem would get worse! I think the Fed NY, the flagship Fed Reserve bank, has panicked… In fact I think most Central Banks panic when it comes to problems, that the Central Bank, themselves, created!  And the Fed is not innocent here… they opened the flood gates a few weeks ago, and flood of requests to supply liquidity has been strong and swift!  

I just don’t get the fact that the major media doesn’t report this ongoing problem…  But then again, I haven’t watched a network news show in years, so I really don’t know what it is they do report, but I know in my heart of hearts, that it isn’t this! 

To recap…  The currencies and metals drifted again yesterday with no economic data to use as a guide in trading.  Midday, the Fed announced an increase to their repo injections, and stocks went wild with that news… So, somebody likes the fact that the Fed is providing liquidity to banks, with newly created electronic funds…  Eurozone PMI was OK, but the employment section of their Factory data, saw a drop of employment, and that’s the first there in over a decade!   

For What It’s Worth…  Long ago, in a galaxy far away, I began talking about the Underfunded Pensions here in the U.S.  After years of low rates, and yields of the same weakness, the Pension funds are worse off than they were all those years ago, when I first noticed there was a problem… This article is about GE, who took steps to alleviate their Underfunded Pension problem and it can be found here:

Or, here’s your snippet: “In the face of declining profits, General Electric GE, -0.11% recently announced three pension actions to help reduce the company’s debts.

1. Freeze its pension plan for about 20,000 salaried employees and for about 700 employees in a supplementary plan.

2. Offer lump-sums to about 100,000 former employees who have not started benefits.

3. Pre-fund $4-5 billion of estimated required funding for 2021 and 2022.
Freezing GE’s plan means that 20,000 salaried employees will not be able to accrue any new benefits under the plan beginning in 2021. (The plan had already been closed to new entrants in 2012.) When these employees retire, they claim the benefits they have already accrued, but those benefits will be based on their current earnings rather than the higher earnings they were likely to have had in the future. In this way, the employee pension benefits will be lower than expected, and the company saves some money. The freeze also applies to about 700 workers who became executives before 2011 and had a supplementary pension. “

Chuck again…  This is just the start of many reports from Corporations that have to deal with Underfunded Pensions, folks…   And as always I ask…  Got Gold?

Currencies today 10/24/19 American Style: A$.6840, kiwi .6397, C$ .7650, euro 1.1130, sterling 1.2893, Swiss $1.0098, European Style: rand 14.5890, krone 9.1086, SEK 9.6185, forint 296.05, zloty 3.8428,    koruna 23.0125, RUB 63.83, yen 108.65, sing 1.3628, HKD 7.8391, INR 70.72, China 7.0719, peso 19.09, BRL 4.0643, Dollar Index 97.50, Oil $55.56, 10-year 1.76%, Silver $17.53, Platinum $919.28, Palladium $1,746.38, and Gold… $1,490.11

That’s it for today and tomorrow…  Next week at this time, we’ll be getting ready for Halloween! And then my least fave month, November will begin…  I’m really not a fan of November, and so I’ll slip away to S. Florida for a couple of weeks and get back for Thanksgiving…  Yes, that’s right, Thanksgiving is only a month away!  Where on earth does the time go? OK, Nationals are up 2-0,in the best of 7 World Series…  They are a real buzzsaw right now, and the 1924 Yankees probably couldn’t beat them! Unless you’re an old coot like me, you probably have no idea what or whom I’m talking about when I mention the 1924 Yankees…  Well, if you’re too young to know… Google it!  HA!  That’s what everyone does these days, as soon as something comes up, they immediately go to their phone and Google it…  I saw a sign the other day that made me laugh… it said, ” Be kind to your parents… They graduated H.S. without Google”!  HAHAHAHA, but it’s true, right?  Modern English takes us to the finish line today with their song: I Melt With You…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and please Be Good To Yourself!

Chuck Butler