U.S. Recession Began In February!

June 9, 2020

* Currencies and metals rest on Monday… 

* The BLS points out a footnote that was a part of their jobs report… 

Good Day… And a Tom Terrific Tuesday to you! Another day in paradise, is what it seemed to be yesterday, with Blue umbrella skies, very warm sunshine, and it was the end of our run of warm, dry days, as the remnants of the Tropical Storm Christobal has come our way… But with the sun you have to have a little rain sometime! Rainy days make you appreciate, the sunny days even more! Much like Glenda told the munchkins, it’s safe to come out now… For all of you who thought maybe I had gone over the edge with my reporting of the BLS Jobs report last Friday, yesterday, can calm down, because I’ve gotten over it. Besides there’s not a single thing I can do about it, and if there’s one thing I’ve learned through the years, it’s that there’s no sense getting all worked up about something you have no control over… Besides, there was a voice speaking to me yesterday, and that voice is now gone, except in the morning song… The Moody Blues greet me this morning with their song: The Voice

The morning after the chaos created by the BLS and their “made up” jobs report, had traders looking around and saying, that was too much… That and the fact that the BLS actually came out and pointed out a small print footnote in their report, that said, there was a glitch in the system, and that the Unemployment rate “could be 3 percental points higher”, thus brining it to 16.3%… OK, I get it, but why print anything if you know it’s not honestly correct? The markets depend on correct reporting to make trades, and after Friday’s sell, bonds, currencies and Gold, you now want to come out and say that what you reported on Friday, was underreported?

Back in the day, I used to prepare the monthly income statements for the Bond Division at Mark Twain Bank… I shudder to think of how quickly I would have been shown the door, if I had presented the income report, and said, “But it could be higher or lower, I’ll need more time to figure that one out”… But that’s exactly what the BLS did yesterday… OK… enough of that, I’ve said what I’ve said, and I can’t says no more! – Popeye!

Besides, we’re still light years away from what I believe the Unemployment Rate should be (27%), and the made up number of the BLS, even using their footnote number (16%)… So, what difference does their footnote really mean to me? Nothing, nada, nil, zilch, a big fat goose egg! 

Yesterday’s action in the currencies and metals were very muted… There may have been some volume but the movements either way, just weren’t there! The euro inched a bit higher, and Gold found a way to hold on to $5 of its early $8 gain, as the day went along. It was more like the currencies and metals were licking their respective wounds from Friday’s action, all day on Monday, and they weren’t ablt to get back into the game while still nursing their wounds…

The overnight markets didn’t bring any changed either, so we star this morning in the U.S. just about where we were with the currencies yesterday morning, and Gold is down 98-cents so far this morning, so basically unchanged… 

You know… There just aren’t any real markets any longer… Everything, and I mean everything is manipulated…. What? You don’t think stocks are manipulated? Ok, I guess the fact that the Fed is spending Trillions to buy ETF’s (basically buying stocks) is manipulation? Come on…. Don’t be like “that” guy… You know the guy who turns a blind eye toward anything he doesn’t agree with or believe…. But Shoot Rudy, I would think that as long as the Fed’s spending their hard earned money, no wait, their newly printed dollars, on stocks, then everyone should join in… You put your left hand in you take your left hand out, and you shake it all about…. Come on, let’s do the Hokey Pokey! Because buying stocks is what it’s all about! Until it won’t be…

How many of you remember the dot.com stock market rally that seemed to go on and on, until one days somebody said, “Hey these dot.com stocks don’t have any earnings” and that was the end of the dot.com rally, and soon all those gains were wiped out…. Come on, it was only 20 years ago! And what do you think will be the straw that breaks the stock market’s back? The same thing, ok, I’ve got to say this here, this is my opinion, and I could be wrong… but it think what  the end of the dot.com rally, will be the same thing…. After being shutdown totally for 2 months, and half-shutdown another month, when the earnings season for this period prints…. Someone is going to say, “These corporations don’t have any income”

Did you hear the news, there’s good rockin’ at midnight? Well, besides that, the BIG news yesterday was the we have been in a recession since February… And this is where I start acting like a spoiled brat, and saying, I told you so, I told you so, I double, double told you so! Remember last month when I kept reporting the March numbers, and kept saying, “see the economy was having problems before the pandemic hit our shores”

And also a month ago, I gave you a piece of research I had done when writing the Dow Theory Letters, about how stocks perform during a recession…. And it’s historically not good… So, if you want to follow the herd, and buy stocks, you have better do so quickly, before there’s this wall of rain that will fall on the Fed’s stock market buying parade…

The U.S. debt accumulation continues unfettered…. We’re about to go over $26 Trillion in Current Debt and we’ve got more than 3 more months to go till we get to the fiscal year-end for the U.S. Our debt to GDP ratio is now at 130.05%… Years ago, not thinking that we would cross the rubicon with debt like this for years, there were some economists that said when an economy has a debt to GDP ratio of 90% their economy will suffer… Hmmm… I know they’ve changed how kids learn match these days, but I would like for them to explain how if 90% is bad, then 130% isn’t that bad…. BECAUSE IT IS VERY BAD!

What’s it gonna take to stop all this debt creation? A war? A debt jubilee? Or a debt default? I’ll take what’s behind curtain #3, Monty, because, we have experience in dealing with a debt default, the other two I don’t want any part of…. A war speaks for itself… and debt Jubilee, is fraught with devastation for the dollar….  Just like a debt default , but with a debt jubilee, there are too many unknowns. And with either of them the question would be who’s going to trust anyone selling debt ever again?

Aren’t I just a bundle of good news this morning, eh? HA! Wait till you get to the FWIW article today….

I watched and listened to a zoom meeting presentation by Grant Williams, and Egon Greyerz, of whom I’ve quoted and cited their thoughts several times through the years. They really didn’t tell me anything I didn’t already know, except this little ditty….  OK… remember a week or so ago, me telling you that Hertz had filed bankruptcy? Well that indeed did happen, and since that filing, the stock of the company has soared? Who knew that buying the stock of a company in bankruptcy was the thing to do?  

And that right there my friends, is another HUGE reason that the stock market dead cat bounce is about over…  The stock jockeys have gone off the deep edge, they’re being ridiculous with their buying. They’re probably using the old dart method, where you throw a dart at a target made up of stock names, and wherever the dart lands is the stock you buy… 

I don’t travel any longer like I used to… But if I were still traveling, I’m sure that in these times, that when getting into a cab, the driver would ask me what I did, and then proceed to tell me about a stock tip he had received… 

A thing or two that I want to mention this morning, is one… I had a fat finger incident yesterday, and had the wrong price for loonies… The correct one is posted today… And have you noticed the Brazilian real lately? Yesterday, it slipped below the 5 handle for the first time in, well, what do I aways say, “A month of Sundays!”  With the Russian ruble leading the Petrol Currencies they sure have a revived look about them, don’t they? 

The U.S. Data Cupboard is basically empty again today with some 3rd tier reports on the docket… The only piece of data today that is a bit interesting is the April print of Job openings… Besides that… forgetaboutit! 

Don’t forget though that tomorrow will bring us the FOMC meeting and a press conference from Fed Chairman, Jerome Powell…  As I said yesterday, that I don’t care for what he’ll have to say, because it will be full of lies, and Fed Speak…. 

To recap…  The day after the chaos created by the BLS and their made up Unemployment Report, was a day where traders, took a breather, and said, that was too much!  The currencies and metals are starting today with the same clothes that they wore yesterday.  The Recession actully began in February, folks… Hate to tell you but I was right once more!  

For what It’s Worth…. A former neighbor of mine, sent me a link to this article last night, and after reading it I thought, this is ripe for the FWIW article on Tuesday! So, thanks Brad, for sending that along… The title of article is: A Crash In The Dollar is Coming… and it can be found here: https://finance.yahoo.com/news/crash-dollar-coming-210024166.html?.tsrc=fin-srch

Or, here’s you snippet: “ The era of the U.S. dollar’s “exorbitant privilege” as the world’s primary reserve currency is coming to an end. Then French Finance Minister Valery Giscard d’Estaing coined that phrase in the 1960s largely out of frustration, bemoaning a U.S. that drew freely on the rest of the world to support its over-extended standard of living. For almost 60 years, the world complained but did nothing about it. Those days are over.

Already stressed by the impact of the Covid-19 pandemic, U.S. living standards are about to be squeezed as never before. At the same time, the world is having serious doubts about the once widely accepted presumption of American exceptionalism. Currencies set the equilibrium between these two forces — domestic economic fundamentals and foreign perceptions of a nation’s strength or weakness. The balance is shifting, and a crash in the dollar could well be in the offing.

The seeds of this problem were sown by a profound shortfall in domestic U.S. savings that was glaringly apparent before the pandemic. In the first quarter of 2020, net national saving, which includes depreciation-adjusted saving of households, businesses and the government sector, fell to 1.4% of national income. This was the lowest reading since late 2011 and one-fifth the average of 7% from 1960 to 2005.

Lacking in domestic saving, and wanting to invest and grow, the U.S. has taken great advantage of the dollar’s role as the world’s primary reserve currency and drawn heavily on surplus savings from abroad to square the circle. But not without a price. In order to attract foreign capital, the U.S. has run a deficit in its current account — which is the broadest measure of trade because it includes investment — every year since 1982.
Covid-19, and the economic crisis it has triggered, is stretching this tension between saving and the current-account to the breaking point.

The culprit: exploding government budget deficits. According to the bi-partisan Congressional Budget Office, the federal budget deficit is likely to soar to a peacetime record of 17.9% of gross domestic product in 2020 before hopefully receding to 9.8% in 2021.”

Chuck again… OK… tell me when you’ve seen this, because I never have… The gov’t starts spending money on something, and when the problem is on its way to being solved, the Gov’t pulls back its funding…. It’s never happened and it probably never will!

Market prices today 6/9/20 American Style A$.6945, kiwi .6498, C$ .7435, euro 1.1275, sterling 1.2663, Swiss $1.04.82, European Style: rand 16.7228, krone 9.3436, SEK 9.2389, forint 305.72,   zloty 3.9420,   koruna 236105, RUB 68.27, yen 108.20, sing 1.3912, HKD 7.7499, INR 75.36, China 7.0742, peso 21.70, BRL 4.9190, Dollar Index 96.88,   Oil $38.12,   10-year .83%, Silver $17.65, Platinum $839.50, Palladium $2.021.03, and Gold… $1,697.55

That’s it for today…  What will it be today for Gold? I know that I seem to be fixated on the price of Gold, but in reality I’m not… I bought it years ago, own it, and don’t really care what the price is because I’m not selling it!  And basically, I don’t want to see Gold soar higher all at once, because then investors won’t be able to get any Gold… Gold is a store of wealth, period. Eric Clapton’s love song to George Harrison’s wife, takes us to the finish line today… Layla, the rock classic, was in the middle of a messy love situation, when Eric was being a low-down polecat, and that’s all I have to day about that!  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself! 

Chuck Butler