The Pfennig Hits The Big Time!

September 14, 2020

* Thursday & Friday last week trading was Meh… 

* Velocity of currency is what the Fed needs to get their inflation! 

Good Day… And a Marvelous Monday to you! A strange weekend weather-wise here, with clouds, and sun, and cooler temps than are normal for this time of year…  Saturday morning, I got a big surprise, and it made me smile like the Cheshire Cat!  Former colleague at Mark Twain Bank, Neil George, sent me an email letting me now that a piece of my Sept. 9, Pfennig, had been picked up by Barron’s!  That’s right I said Barron’s! Years ago, Alan Ableson, quoted me in Barron’s, and that was also a highlight in my career…   I guess there’s hope for the media, if they think the Pfennig is worthy of being printed in their publication!  It costs currency to subscribe to Barron’s… So, being the tightwad that I am, I had Neil send me the publication… Can’t wait to see it!  The Marshal Tucker Bank greets me this morning with their song: Searchin’ For A Rainbow…

Thursday and Friday of last week were really NBD’s… (No Big Deals)  Gold for instance was up 40-cents on Thursday and down $6.50 on Friday…  Silver had the same kind of move… The currencies, however, held their gains from earlier in the week as the dollar bugs had nothing to buy on… The economic data from Thursday was the Initial Jobless Claims and they once again ticked higher than the previous week, and the Continuing Claims also ticked up from 29.21 Million last week to 29.61 Million the following week…  Nothing to get excited about there, right?  

Then on Friday, the stupid CPI (consumer inflation) printed for August and showed that inflation had dipped in August to .4% from .6% in July… So, that’s going the wrong way, eh?  (for the Fed Heads that is)….  You would think that after all these years of hedonically adjusting CPI that the Fed, needing to show that their efforts to get inflation rising was working, would send a memo to the bean counters, and tell them “no mas” on the adjustments, let’r rip!  For as long as the hedonic adjustments continue, The Fed is never going to see their target met….

Besides, as I’ve explained before…  the kind of inflation the Fed Heads are looking for won’t be gained until the velocity of currency begins to spiral higher… And until the currency grabs that the Fed holds goes to main street instead of Wall Street, we won’t see the velocity of currency rise… 

Things are so screwed up in this country when it comes to real, honest-to-goodness economic reports…. I’m just saying…  And have been saying for many a year now….  I’ve been writing the Pfennig for 28 years, now….  And I’m sure in those 28 years, I’ve pointed out the goofiness of economic reporting here in the U.S. a time or two… Do you think?

This week the Data Cupboard has a plethora of data to print, Like Industrial Production, Retail Sales, and so on… But none today…. So we could see more sideways movements in the currencies and metals today… This is a Fed Meeting Week though!  And that meeting will conclude on Wednesday afternoon, with their announcement, and then follow that up with a press conference for Jerome Powell…  I don’t expect anything of importance to be discussed at the Press conference, other than Powell, reiterating what he’s already said about leaving rates near zero for many years going forward….

I can always count on a good quote from economist David Rosenberg when it comes to the Fed, and I pulled this from his Twitter feed;” I realize who Powell actually is: the doctor with the blood pressure monitor at the hot dog eating competition! Investors gorge, get obese, but won’t die. The S&P 500 market cap/GDP ratio, at 132%, just took out the 2000 peak. We know how this ends, we just don’t know when.” – David Rosenberg on Twitter…

The price of Oil didn’t move much the last 4 days either, as those in the Oil business, are finding out, there’s just not enough demand for Oil…. (gas)  I read last week that the Oil tankers/ ships have reverted to storing their Oil offshore…. In the ship…. At sea…. Where there aren’t things like hurricanes and tropic storms brewing all the time this time of year!   You have to scratch your collective heads on that one and wonder, just what they’re thinking…. 

In the overnight markets last night and early this morning… The currencies are pushing higher VS the dollar, with the euro trading 1.1872 early this morning, things are looking like the dollar bugs will be on the run, or, the PPT will need to step in to curb the appeal for the euro, and other currencies…

The Russian ruble sure has been through hell and high water the last couple of months, with the price of Oil dropping, and their continued struggle to get past the gauntlet of economic sanctions from both the U.S. and the European Union, is turning out to be quite the difficult thing to do these days….  I’m still a believer of the ruble, as a viable alternative to the dollar…. But my beliefs are being shaken to the core these days….  I’m just saying… 

OK… Well, I had a lot of time to read this past week…. I’m almost finished with my book on Thomas Jefferson….  You know, I guess I learned this in school, but Jefferson was no fan of Hamilton….  As it was Hamilton that pushed Washington to sign the bill for a national Bank….   Then again, I doubt I ever came across the stuff I’ve learned in this book before in my life!   My new Cormoran Strike book is set to be shipped on the 16th of this week, so by week’s end, I’ll be set once again with a  3 inch thick book!

Oh, Come on Chuck, who cares about that stuff but you?  OK, sorry, for the detour from the markets, which to me are very boring right now, unless you’re a Robinhood trader,  a zombie Corporation, or some big wheel on Wall Street….    I really get upset when I think about all those zombie corporations that have been given second, third, and fourth chance to turn things around, and they’ve done nothing but stumble, fumble, and have to punt….   But they’re still around….  Taking up space, that some new corporation might use to better the economy, jobs, and CAPEX….

Both longtime reader, Bob, and good friend, Dennis Miller sent me an article this weekend on’s site…. The article talks about how for many years, it was the goal of children to out earn their parents… But since 1980, that idea is being slowly shot down, and in the middle class, the chance that kids will out earn their parents has gone from 93% in 1940, to 45%….   This was a very telling chart that showed that stagnated wages for the last 40 years have been the culprit…. 

And in the end pointed out that the “upward mobility” of younger folks is going to be a difficult hurdle to clear… But Shoot Rudy, it was not seashells and balloons for us!

OK… well this could become a real problem, especially if Gold continues higher, which I believe it will… The Insurance companies are moving the goalposts on what they will insure….  Longtime friend, David Gonigam, who does an excellent job at the 5 Minute Forecast, pulled this from Bloomerg: “based on a $100 million insurance cap and 400-ounce gold bars,” investors are restricted to storing 127 bars of gold, down from 165 bars at the end of 2019…”   Not that I know of anyone that has that much in Gold Bars, but, the idea here is that once the insurance company reduces their coverage once, they’ll do it a second time, and third, etc.  

On a sidebar…. Remember the couple in St. Louis that brandished firearms to get protesters off their property, and their so-called private street?  They were charged with, oh who cares, what they’re charged for protecting their property?  The news that came through last week was that at least 9 of those protesters are being charged for trespassing…. What took authorities that long to get around to doing that?  My goodness, me…. I just don’t know what to think about what’s going on this country… What happened to “sit ins” ….   Now, I know I’ve gotten old, cranky, and not afraid to say what’s on my mind!

To Recap…  The trading late last week was a big MEH…  But overnight the currencies have the dollar bugs on the run, so it will be interesting to see if this continues or will the PPT step in once again to save the dollar? The data late last week was so-so… But the data on the docket for this week is hefty! So we have that to look forward to, eh?   Insurers are reducing the coverage on insuring Gold held in vaults…  Will this become something that we talk about every 6 months or so?  Chuck thinks so….  

For What It’s Worth….  I first read this on and then saw it on Ed Steer’s Friday letter, so I new then that it was FWIW worthy!  You can find Ed Steer at , which I highly recommend… This article I’m talking about, is one that talks about how the Fed didn’t buy any Corp. Bond ETF’s in August, and why that might be, and it can be found here:

Or, here’s your snippet: “Is Powell Sending a Message: The Fed Bought No Bond ETFs in the Entire Month of August

For much of the past six months, the biggest story was the Fed’s Blackrock-mediated purchases of corporate bonds, either in the primary or secondary market, or via ETFs. As a reminder, while the Fed pre-announced its intention to purchase up to $750BN in corporate bond (including certain fallen-angel junk bonds) in March, it started purchasing bonds in May, and bond ETFs in June (among which such mainstays as LQD and HYG). By directly entering the corporate bond market – something none of his predecessors dared to do even at the depths of the financial crisis  – Powell created what many believe, as GLJ’s Gordon Johnson writes, “the biggest corporate bond bubble, and junk bond bubble, in history (and that all happened before the Fed even started buying).” And, as expected, bond prices, stocks, and ETFs all surged – completely disconnected from fundamentals – while yields plunged, as everyone was trying to front-run the Fed’s pending massive purchases. In other words, by jawboning alone, the Fed accomplished its handiwork.

Yet something odd happened in the month of August when during the peak summer doldrums it was SoftBank’s turn to steal the spotlight with its now infamous gamma melt up – the Fed did not buy a single ETF.

The fact that the Fed effectively stopped supporting the corporate bond market during August, and did not buy a single bond ETF last month, “seems to us to be a stark, yet surreptitious, shift in Fed policy stance” according to Gordon Johnson.

Furthermore, it seems to have gone completely under the radar – i.e., given all the brouhaha surrounding the Fed’s jawboning about massive bond purchases, we would argue, at best, this is pocket change. When the market figures out the “Fed put” is no longer in place, with the Fed’s bond ETF holdings actually falling by -$64mn in August, the willingness to buy stocks at “ridiculous” valuations may quickly abate.

Could it be that the Fed is starting to telegraph to the market that it moved too far, too fast? As Wolf Richter writes, “Jerome Powell has explained this many times – that the Fed has succeeded in achieving its objective of creating loose credit market conditions. It has in fact succeeded in blowing this bubble in the shortest amount of time, and the Fed itself is perhaps stunned by the magnitude of the bubble and its own success.”

As Johnson concludes, it suddenly seems “that for now the Fed does NOT have “your back” if you’re buying overvalued companies that lose money with no end in sight” and furthermore with CPI starting to run hot “it seems the Fed may be seeing the “fruits” of its recent jawboning (i.e., creating a bond bubble and bailing out asset holders during the worst economy in our lifetime, despite not taking any real action) souring a bit.”

Chuck Again….  Yeah, that’s all fine and dandy, but what will the Fed do when the next major sell off of the stocks comes?  I would bet the farm  (if I had a farm!) that they would reach into their bag-o-tricks and begin buying ETF’s again….  I’m just saying…

Market  prices 9/14/20: American Style: A$ .7273,  kiwi .6692,  C$ .7590, euro 1.1872, sterling 1.3177, Swiss $1.1027, European Style: rand 16.6887, krone 8.9884, SEK 8.7626, forint 301.15,  zloty 3.7466,    koruna 22.4216, RUB 74.87, yen 105.97, sing 1.3651, HKD 7.7499, INR 73.42, China 6.8319, peso 21.22, BRL 5.3170,  Dollar Index 93.03,  Oil $37.12,   10-year .67%, Silver $26.81, Platinum $931.00, Palladium $2,349.00, and Gold… $1,940.00

That’s it for today….  Well, it appears to me that the weather has turned…. The mornings are cooler, and days warm, and  the evenings are cooler….  I’ve said this before but In my opinion, the best weather we get here in this region is the fall weather….  Fall begins next week, and the only thing bad about fall is that winter follows it! UGH!  But since I retired, and now spend winters in S. Florida, I guess I can’t complain about the cold weather, except when I’m here in December!   My poor beloved Cardinals are now on the road in Milwaukee where they will play 5 games in 3 days…. Then go to Pittsburgh where they will play 5 games in 4 days, then 3 in Kansas City, before they come back home to the sea of red…. The Cardinals have also had a rash of pitcher injuries of late, which doesn’t bode well for their performances in the upcoming double headers! UGH!  I’ll hang with them through it all though….  Just like you dear readers have done with me through the years, of being out with cancer, surgeries, infusion confusion, and all the rest….  REO Speedwagon takes us to the finish line today with their song: Golden Country….  Golden Country your face is so red, with all of your money your poor can’t be fed….  (remember that was a mid 70’s song)  and with that, I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler