Trader’s Dilemma, To Sell Dollars, Or Not To Sell Dollars….

April 2, 2020

* Currencies drift again on Wednesday…. 

* Tomorrow is a Jobs Jamboree Friday! 

Good Day… And a Tub Thumpin’ Thursday to you! WOW! This is the first time I’ve written on a Tub Thumpin’ Thursday in a month of Sundays! Well, I guess I didn’t tick too many people off yesterday, as the responses in the Pfennig Replies box were more supportive than anything… Thanks to all who sent along well wishes for getting home safely…. I’ve always been someone that you could put behind the wheel of an auto and drive all day or all night… years ago, in a trip to the west coast, I got in the car in Rolla Mo. 100 miles from St. Louis, about 6 o’clock at night, and the next morning when everyone else woke up, I was pulling into Flagstaff Arizona…. So, the 17 hours from Juno Beach, Fla to Fenton, Mo, was no big deal! Jonathan Edwards greets me this morning with his rock classic song: Shanty…. We’re going to hang around the Shanty momma and put a good buzz on!

Another day, and another day of boring moves in the currencies.. I have to think that right now traders are trying to figure out which direction they want to go with the dollar…. They have the idea that it’s going to the dumpster on one hand, and on the other hand, they’re hoping that all this mess is going to be short-lived, and shorting the dollar outright, right now might not be a good thing… Of course they could ask me, and I would tell them that there’s no way that all these measures that are being put in place are going to be short-lived…. And shorting the dollar right now while it still is pretty strong (99 handle in the Dollar Index) would be the trade of the decade…. But then that’s just me, and see things before they actually happen…

The financial world that we knew before all this, will never be the same… I’m set in stone on that thought… To me, the Covid-19 virus has really just been the Black Swan event that has made the popping of the Fed’s credit bubble even worse…. The Covid-19 virus will abate at some point this summer, and then we’ll be left with the same problems in the markets that we had before, but only this time, inflation will be rising, the bond market rally will be a thing of the past, with yields rising to combat the inflation, and the Fed’s Balance Sheet will be north of $10 Trillion dollars! And again I need someone to tell me how all that doesn’t end up in tears….

OK… Well, after the one-day whacking that Gold had to deal with on Tuesday, the shiny metal attempted to gain some ground back yesterday…. Gold posted a near $17 gain for the day yesterday, to close at $1,593, and this morning there is more love coming Gold’s way, as it is up a buck or two early…  

You know… above I talked about how traders should sell the dollar and it would be the trade of the decade… the problem for these traders is what to buy after they’ve sold the dollar… You see, currencies trade in pairs, so you sell dollars and buy “x”….  And therein lies the problem…. there is no real alternative in the fiat currencies… I’ve told you since 2000 that the euro is the offset currency to the dollar, but the euro has negative interest rates, and a truck load of their own problems right now. So. to automatically go into euros wouldn’t be prudent….

Of course in a natural sell off of the dollar that’s exactly where a large part of the money would go, to the euro, that is…  But there is an alternative that  doesn’t pay interest, but at least you can hold it without being charged for doing so, like is done in the countries with negative interest rates….  By now, you’ve figured out that I’m talking about Gold…. 

You, see… if the financial system is exposed for the house of cards that it is during this Global economic shutdown, then the safe havens will be bought… Japanese yen, Swiss francs, euros, and Gold…  Notice I didn’t add Treasuries. Well, as I said above, the bond market rally is going to be over when this is all said and done, and yields will be rising to combat rising inflation….  So, there!  

Dear readers send me notes all the time, and say, “I know you don’t want to give investment advice, but I need to know where to go with my money”, and  So, this will be the one time that I put these things down in the Pfennig….  First of all you can’t sell all your dollars, because you need some for gas, groceries and giggles (not that we get to have many giggles these days!), so for a good part of your investment portfolio, you should allocate to cash, short term CD’s…. while you can still get some yield, as paltry as it may be….  Then the tried and true combo of: yen, francs, and euros with at least 20% of your allocation, and then Gold & Silver, with another 20% of your allocation, maybe even more in this day of craziness! 

That leaves us with a large portion of one’s investment portfolio that hasn’t had an allocation yet…. And this is where you have your pet investments….   I currently own some Treasuries, but they were purchased some time ago, so I’m still receiving yield on them…. But when they mature, they will be rolled into cash…..  

So…. there you go… I don’t like doing that, as you’re all adults, and can make decisions on your own….  But sometimes a nudge toward an idea is all we need…. So, there’s your nudge…. 

Yesterday, I really laid into the Central Banks, and their Central Planning… I just don’t know where they all made the turn to the dark side… But they have, and there’s no stopping them now until they blow everything up, and we have to start over….   In which case…. The countries that have enough Gold to build a new financial system are: Russia, China, Germany and the U.S. (maybe, we have no idea if there’s really enough Gold in Ft. Knox!) 

Quite a few years ago, when I was in my previous life, I created a Combo CD that was titled: The Prudent Central Bank Index CD…. It consisted of euros, sterling, A$’s and kiwi, and probably francs, but I don’t recall now…. But how silly does that title sound now? For all these central banks that the currencies represent, have gone to the dark side…. Shoot Rudy, even the Reserve Bank of New Zealand (RBNZ) just introduced a TLF…. Term Lending Facility to go along with their TAF Term Auction Facility…. Here’s the plan of the Central Banks folks…. Dazzle the citizens with acronyms, letters that don’t mean much, but disguise what’s really going on….

Oh, and according to Reserve Bank Governor Adrian Orr who said:.

“New Zealand’s financial system remains sound, with strong capital and liquidity buffers. We are confident that the financial system is well placed to respond to the impacts of coronavirus.”

Ok, call me jaded, but if your financial system is sound, as you say, why then change things and begin following the FED. BOE, BOJ, ECB and others? I’m just saying!

Alrighty back to normal programming….

In a very obvious case of being late to the party…. The IMF yesterday, announced that the Global Economy was in a recession…. Great! That’s like someone yelling that the bank was robbed, after the robbers are 10 miles away! Boy, these folks at the IMF are a real help aren’t they? Couldn’t they have been a little more proactive and warn us about this coming Global recession a long time ago, like say that guy that writes a letter titled: A Pfennig For Your Thoughts? 

OK, the U.S. Data Cupboard had the March ISM for us yesterday, and just like I thought it would do, it fell below 50 at 49.1…. But as I said yesterday, the first part of March was normal, it wasn’t until the 12th of March that everything started getting shutdown….  So, the April print will be a real disappointment for sure!  

With the change in location, for me, and all the craziness going on, I completely forgot that we were in a new month, which means the first Friday is a Jobs Jamboree Friday!  The ADP Employment Report for March printed yesterday and showed -27,000 jobs created in March…. I would have thought that to be a bigger number, but, as I keep telling myself, the April numbers of everything are going to be the problem…. 

We’ll also see Feb. Factory Orders today, which again is before the COVID-19 virus hit our shores…. So, it will be weak but not the kind of weakness that’s coming for this data set, that’s for sure! 

To Recap… The currencies drifted again on Wednesday, and really have no direction right now, as traders attempt to figure out if they want to sell dollars, or if all this craziness will be short-lived….  Chuck would help them along, but they won’t listen to him! Gold gained back $17 on Wednesday, after getting whacked by $44 on Tuesday.  Quick test…. What countries have enough Gold?  Come on, the answer is above! HA! 

For What It’s Worth….  I talked about Bill Gates’ Pandemic plan earlier this week, so when the folks at MarketWatch sent me a link to an article about what Bill Gates sees now, I knew it had to be a FWIW article…. And that’s what we have Bill Gates’ view on the Pandemic, and it can be found here:

Or, here’s your snippet: “That’s Microsoft MSFT, -3.55% founder Bill Gates urging the government to enforce a nationwide shutdown in an op-ed in the Washington Post on Tuesday.

“Despite urging from public health experts, some states and counties haven’t shut down completely,” he said. “In some states, beaches are still open; in others, restaurants still serve sit-down meals. This is a recipe for disaster. Because people can travel freely across state lines, so can the virus.”

He explained that until the numbers start to go down across the country — which he says could take at least 10 weeks — the shutdown should be in play everywhere. He also stepped up his call for more testing and was hopeful a vaccine will be developed in less than 18 months.
As it stands now, at least 30 states have stay-at-home orders in place with some 250 million Americans told to remain sheltered and maintain social-distancing measures.

Gates latest comments echo those made in a recent TED interview.
‘There really is no middle ground, and it’s very tough to say to people, “Hey, keep going to restaurants, go buy new houses, [and] ignore that pile of bodies over in the corner,’” he said, taking aim at politicians who seem to think GDP growth is all that counts.

The Gates Foundation ponied up $100 million to assist in the battle against the spread of coronavirus in February after committing to $10 million in January when the outbreak started.

President Trump warned Americans on Tuesday to brace for a “rough two-week period” as the White House released grim new projections for as many as 240,000 deaths even if current social distancing guidelines are maintained. “I want every American to be prepared for the hard days that lie ahead,” he said. “We’re going to go through a very tough two weeks.”

Chuck again…  10 more weeks of not going anywhere? Oh well, if that’s what it takes… But I don’t see most Americans abiding to that too well… We’re a country of people that are “social”, and on the go….  And if I, who’s pretty sedentary these days, am champing at the bit to get out and go, I can only imagine what the go-getters are doing!  It’ll be tough, but…. We’re Americans, we pull together when the going gets tough, and if we need to stay home for 10 more weeks, so be it!  We CAN DO THIS! 

Currencies today 4/2/20 American Style: A$.6093, kiwi .5955, C$ .7065, euro 1.0922, sterling 1.2445, Swiss $1.0348, European Style: rand 18.4635, krone 10.2965, SEK 10.0284, forint 331.95, zloty 4.1844,    koruna 25.2351, RUB 78.75, yen 107.31, sing 1.4318, HKD 7.7516, INR 75.95, China 7.0942, peso 24.30, BRL 5.2261, Dollar Index 99.56,  Oil $22.21,   10-year .60%, Silver $14.16, Platinum $723.50, Palladium $2,275.85, and Gold… $1,594.21

That’s it for today and tomorrow…. A dear reader sent me a funny yesterday… He said, “he washed his hands so much that the answers from his 8th grade test began to show!”   HAHAHAHA! So, that’s my new saying, “wash your hands until the answers from an 8th grade test show”!  I exchanged belated birthday greetings with my former publisher, Erika Nolan yesterday… I told her that life has no meaning without baseball…. Of course I was kidding, but that sure tells a lot about how I feel that there’s no baseball as the weather warms…. And yesterday, should have been home Opening Day here for my beloved Cardinals….  UGH!  Next week is the Holy Week…  I’ll need to be nicer than I have been in the Pfennig next week! The Allman Brothers take us to the finish line today with an instrumental song: In Memory Of Elizabeth Reed…   (I have a story to tell about that song, but I’ve gone on too long already today, so I’ll save it for another day) I hope you have a Tub Thumpin’ Thursday, and Please Be Good To Yourself!   

Chuck Butler