The Fed Slashes Rates To Near Zero!

March 16, 2020

* The Fed also implements a bond buying program!

* And Morgan Stanley says, “it’s Time to sell dollars!” 

Good Day… And a Marvelous Monday to you! Well, everything is shutting down, schools, baseball, all sports for that matter, social groups of 250 or more, it’s beginning to look very ugly folks… Is this the turning point where the Gov’t declares Marshall Law, and the National Guard moves in to make sure we all stay at home? It’s beginning to look that way to me… I don’t want to be a gloom and doom guy, but this is all very frightening to me… I’m trying to remain calm and keep doing normal things, but… I see big black cloud moving toward our country from China, and it’s quite ugly! Shoot, I’m so worried now that I really am having thoughts about shutting down writing until this whole thing ends… I certainly don’t want any law enforcement guys knocking on my door, because I’ve ruffled a few Gov’t and Casino Bank feathers! So, each day, go to your email box, and if you see an email from the Pfennig, then I’m still writing… If you don’t… well, that means that brains were the better part of valor for me…. Percy Sledge greets me this morning with his song: When A Man Loves A Woman

Do you want to know what got me all thinking creepy stuff? The Fed! Yesterday, in their second out of meeting rate cut, they cut their Fed Funds rate 100 Basis Points, or 1%, down to nearly zero!  They couldn’t even wait until their meetings this Tuesday and Wednesday!   The Fed also announced a new bond buying program of $700 Billion to help the banks with liquidity…. So, in my mind, if the Fed is panicking , and  this would surely qualify as a “panic attack” by the Fed…  We had better get under our mattresses and wait for the nuclear fallout!    Oh, and, stock futures are down limit early this morning, that this is going to get really ugly fast, folks…   

Oh, and don’t forget about this little ditty that’s hanging over the U.S…. I’ve been talking about the Corporate Debt maturities that will come due this year… $19 Trillion worth of maturities, folks… On what amounts to a bunch of really bad debt…   Will banks have the liquidity to make new loans to these Corporations?  I doubt it, as a run on banks is in the future, in my mind… 

What a difference a week makes with the currencies and metals, or the safe havens too! Gold, which last Monday hit $1,704, is trading this morning around $1,517…. The euro which last Monday traded with a 1.14 handle, is trading this morning with a 1.11 handle… The 10-year Treasury’s yield was 0.41% last Monday and it’s around 0.67% a week later… I read something this week on Gold, and that it’s showing its true safe haven colors, as it is getting sold to pay for all the margin calls on stocks… If you didn’t have Gold, what would you be selling to pay for those margin calls? I’m just saying… And no, you’re first born male doesn’t qualify as a payment! (Look, I’m so scared at what’s going to happen next, that I had to try to lighten the feeling of the letter so far today!)

In a hastily assembled conference call yesterday, Fed Chairman Jerome Powell, made some comments about how the 2nd QTR GEP is going to be very weak… And then he said this: “We do know that the virus will run its course.”  Really? You know this to be the truth, do you now, Jerome?   I too believe that once the earth turns on its axis and points the northern hemisphere closer to the sun that the sun will bake the virus dead… But can we wait for that to happen?  And what if I’m wrong on that assumption that the sun will be our vaccine? 

Speaking of vaccines….  I read last night from a trusted site, that Merk has pushed through a vaccine  to combat the Coronavirus and that everyone will be required to received the shot….  Of course that could only be accomplished under Marshall Law… is reporting this morning that Morgan Stanley issued a communique stating that their clients should be looking to sell dollars at these levels….   Interesting…  Don’t you think?  And why not? The Fed just cut rates to near zero, and implemented a bond buying program that they’re not calling QE…. The next rate cut will take us below zero, and then we would be in the same boat as the Eurozone, Switzerland, Sweden, and Japan…  Oh, Boy! Where do I sign up for that? NOT! 

There I was on a beautiful Sunday morning yesterday, and I received an email from the GATA folks… In the email they had included a link to a YOUTUBE that was a satire on Central Banking… So, of course I had to check it out… It is so good, that I decided that I would share it with you all…. So here is the link: enjoy!

I’m not feeling up to continuing writing this morning, as all of this has me depressed… So, I’ll go to the Data recap, from here and end their early today…  I hope you don’t mind…

The U.S. Data Cupboard didn’t have much for us last week, and ended the week with a weaker Consumer Sentiment report  that feel to 95 from 101… Tomorrow we finally get back on the Data Cupboard tracks with quite a few prints this week. Starting tomorrow with Feb. Retail Sales… which was before the virus hit the U.S. hard, so this report should be OK, not great, but OK…..  Industrial Production and Capacity Utilization though will tell a different story in their Feb prints, with Industrial Production printing negative, again…. And Capacity Utilization falling further…  

I read this morning that one analyst is calling for a drop of 5% in GDP for the 2nd QTR!   Now that would be really nasty, and one can only guess what the Fed will be doing then?  

To recap…. Chuck is worried, folks…  That all sorts of nasty things could be coming our way here in the U.S.A.   The Fed made its second out of meeting “emergency” rate cut yesterday. They couldn’t even wait for their scheduled meetings tomorrow and Wednesday to cut rates. The Fed also announced a Bond Buying Program…  Chuck believes the Fed is panicking, and that’s causing him to shudder! 

For What It’s Worth….  In my current state of shock it was not a good thing that I started reading emails last night… But one caught my eye, when it came from longtime reader Bob, who sent me an article that I’ll share with you this morning about the end of the U.S. Empire, and it can be read here 

Or, here’s your snippet:” Dramatic, perhaps historic events are shaking the world today.

After an unprecedented display of national unity, resolve and courage, China has essentially expelled COVID-19 from its territory. But the virus has traveled worldwide, invading other nations and wreaking extensive havoc. Given its leaders’ denial of the danger and its unpreparedness to deal with a major outbreak, the United States looks especially vulnerable, a disaster in waiting.

Just at this moment, Russia has detonated a nuclear weapon (tactical, if not strategic) in the global financial markets. Its refusal to cut oil production, in defiance of US and Saudi Arabian pressure, has devastated asset prices everywhere.

Like a chess grandmaster, Russian President Vladimir Putin has long put up with assaults from the American Empire, waiting for the right moment to strike back and inflict maximum damage. He has just done so, leaving Washington and its allies/vassals reeling from the shock.

Astute analysts have long speculated that the end of the US Empire might come not through war or politics, but some cataclysm in the financial markets. Is that watershed process now underway? With a plague, unrepayable and still-growing debt, a fragile and inflated economy, financial implosion, severe imperial overstretch, and too-obvious government incompetence, is the American Empire facing the perfect storm?

Like Russia, China has been putting up with relentless US hostility and persecution. Will Beijing, like Moscow, seize the moment to force payback time, especially on core Chinese interests?

Global instability is always a big concern for the Communist Party of China, so it will act cautiously. But along with the danger is a rare opportunity to downsize the US imperium and cut its capacity to continue preying in the world.

Success in doing so would benefit not only China, Russia, and other nations that Washington considers its enemies. It would also lead to a more stable, prosperous, and peaceful world, one driven by win-win cooperation instead of zero-sum competition and conflict.

We live in interesting times, indeed.”

Chuck again….  Interesting times, indeed, I do agree… 

Currencies today 3/16/20 American Style: A$ .6172, kiwi .6043, C$ .7193, euro 1.1168, sterling 1.2273, Swiss $1.0585, European Style: rand 16.2140, krone 10.2140, SEK 9.7096, forint 304.58, zloty 3.9260,    koruna 23.9772, RUB 72.49, yen 105.32, sing 1.4212, HKD 7.7671, INR 74.03, China 7.0072, peso 22.42, BRL 4.8577, Dollar Index 97.74,   Oil $30.09,    10-year 0.76%, Silver $13.09, Platinum $689.66, Palladium $1,689.06, and Gold… $1,517.63

That’s it for today, and who knows about what’s going to happen going further?  I’m sorry if I caused you to worry about all this stuff this morning, but I had some things I had to get off my chest….  On a lighter note…  My darling granddaughter, Delaney Grace, is here with us and she asked me to mention this morning, that we all watched Frozen II last night together…  So, there!  I don’t think she really thought I would do that!  Well, Baseball is cancelled… I’m depressed with that…  But I still have chamber of commerce weather, and the beach, so, if this is where they quarantine me, then so be it!  Think about this thought folks… With all the sports and other venues closing, along with schools, and Disneyworld to boot, how are these people that work going to get paid while their respective businesses are closed?   I’m just saying…. And with that, Little Feat takes us to the finish line today with the live version of their rock Classic song: Dixie Chicken…  I hope you remain safe, and healthy, and have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler