Venezuela Defaults on Swap With Deutsche Bank…

June 5, 2019 

* Currencies and metals take a pause for the cause Tues.

* Jeopardy James, loses!!!! How’d that happen? 

Good Day… And a Wonderful Wednesday to you! A day of catching breaths was the order of the day on our Tom Terrific Tuesday… The Blues had won on Monday night, so all the people that stayed up late to party into the wee hours Monday night, were basically out of it yesterday… And last night, after another lengthy rain delay, Cardinals fans were at the ballpark very late… For a loss! UGH!  But that’s just here, not the center of financial activity, such is New York City… And brother am I glad that’s the way it is, there’s no way I would want to live in that area… It’s a nice place to visit, but not live… in my book. However, having said that, tens of millions of people would disagree! INXS greets me this morning with their song: What You Need

Well, I can tell you straight up that what I need is to go back to sleep this morning… After a couple of days of my leg feeling better, it let me know it still have cellulitis last night, and I was up half the night with tremendous pain… UGH! Much better now so I have to stop complaining! HA!

The currencies took a pause for the cause yesterday, as the dollar’s plunge from last Thursday to this morning is quite evident in the Dollar Index, which last Thursday morning sat at 98.11, and this morning it sits at 97.10… ( and was down to 97.02 last night) But I’m of the opinion that we’ll see more dollar selling as the week goes on, due to the data prints that are scheduled, of which haven’t been kind to the dollar lately…

Gold didn’t do much either yesterday, so it was a full-on, pause for the cause… But… But.. But… Gold is up over $9 in the early morning trading today…  As we draw nearer to the so-called maginot line of $1,350, I worry about the boys in the band gearing up for a good whacking…  I’ve got my fingers crossed in hope that the boys in the band keep tuning their instruments, and don’t begin to play… 

In another case of “boy you missed the sign again, Chuck”… Yesterday, I talked about how Fed St. Louis president, James Bullard, had signaled for rate cuts, and how that had put the kyboshes on the dollar rally… But I missed the sign! Oh, the third base coach is going to be mad at me again! The sign was a simple…. This was a case of the Fed coming to the rescue of the failing stock market, who had seen a number of down days… The proof is in the pudding folks… U.S. stocks rallied over 500 points yesterday… And to add on, Fed Chairman Powell, said yesterday that he’s “open to rate cuts”… How did I miss that sign? I do only have one eye, but even someone more blind than me could have seen the Bullard comments for what there were… A life preserver thrown to the stock jockeys… Hey! The Fed’s got your back, Jack!

I’ve had my eye on the Singapore dollar lately… late last month, the Sing dollar (S$) started getting sold, and it weakened very quickly… I noticed it and thought, well, it has for over 10 years now been following the performance of the Chinese renminbi, which I had told you was being marked down almost daily, even though we were told the Chinese wouldn’t do that in reaction to the Trade War. But then the S$ turned around and started getting bought again, and just like that… it was right back to where it was before the selling began!

Longtime readers know my affection for the Singapore way of fighting inflation… They allow the Currency to go up and down a in a band to fight inflation, and not depend on willy nilly rate moves… The Monetary Authority of Singapore (MAS) sets the band width, and they use the old currency axiom that a strong currency holds down inflation… So, if the MAS is allowing the S$ to strengthen like this again, then maybe they’re seeing inflation coming out of the Global economy that won’t pass them by… I’m just saying…

Speaking of a Global slowdown… and higher global inflation… There sure seem to be quite a few analysts, economists, and market observers jumping on my “the economy is weak” bandwagon these days… A dear Pfennig reader sent me a note yesterday with a list of new warnings made by different people… Amazing… But when other people see it, it’s usually too late folks… I’m just saying once again…

Last week there was a shocking Deutsche Bank report that showed global equity fund outflows over the last 6 months in dollar terms have now been larger than over any prior 6-month period. Uh-oh…  And I just thought of something… the global equity funds are seeing large outflows, just as Gold has begun its upward move…  Co-inki-dink?  I don’t believe so… I guess my message of “Got Gold” is taking hold… 

Speaking again of Gold… I’ve got a related story in the FWIW section today, that is quite interesting… So, don’t skip over it! I’m warning you, don’t do it, you’ll be sorry! HA!

The U.S. Data Cupboard never printed the May Factory Orders report that was due yesterday…  Hmmm…  Ok, you know me, I  immediately go to the idea that there’s a reason that it hasn’t printed, and it’s not good!  Today, we’ll see the ADP Employment report for May, the precursor to the Jobs Jamboree on Friday this week.  

There’s also a Fed Economic Conference going on in Chicago, and we might get a verbal grenade tossed from left field or maybe we won’t, but it’s there, so I thought you should know the risks… 

Last week I went the whole 9 yards on the guy that paid the college expenses for a graduating class at a college… And I had a dear reader send me a note that made me think of something else this does… It reinforces what these knucklehead college students have been taught, and that is… someone else will pay… Whenever a lawmaking group comes up with some new plan/ policy, I always ask the same question… “Who’s going to pay for that?” Of course knowing all the time that taxpayers like me and you, will be the payers of the bill… But don’t tell that to those college grads, that just had all their irresponsible spending for 4, 5, 6 however many years it took them to graduate, paid for… A very bad precedence was set that day, and I can’t believe I’m the only one that thinks it was a very bad thing to do!

To Recap… It was a “take a pause for the cause” day of trading in the currencies and metals yesterday… But Gold has jumped the gun on trading today and is already up more than $9 this morning…   No new news on Tariffs, except President Trump says they’ll start next week with Mexico, and the congress says, “not so fast”…  This will be interesting, no? 

For What It’s Worth…   I saw a headline story on the Bloomberg pate this morning about how Deutsche Bank had taken a large chunk of Venezuela’s Gold, and you know me, that got my spider sense tingling, and I had to find out more… So for the rest of the story, you can find it here:

Or, here’s your snippet: “Somewhere Hugo Chavez, who several years ago successfully repatriated much of Venezuela’s gold, is spinning in his grave.

It started in March, when Venezuela’s embattled leader Nicolas Maduro defaulted on a $1.1 billion gold-backed loan with Citi, in the process losing several tonnes of gold placed as collateral by Venezuela’s central bank after the deadline for repurchasing them expired. Now, Bloomberg reports that Venezuela has also defaulted on a gold swap agreement valued at $750 million with Deutsche Bank, prompting the German bank to seize the precious metal which was used as collateral, and close out the contract.

As part of a financing agreement signed in 2016 which we profiled here, Venezuela received a cash loan from Deutsche Bank and put up 20 tonnes of gold as collateral. The agreement, which was set to expire in 2021, was settled early due to missed interest payments as Venezuela has now effectively run out of foreign reserves.”

Chuck again….  Whoa! 20 Tons of Gold was the collateral? That means Deutsche Bank gets to keep the 20 tons of Gold!  That’s crazy folks, and I would think that Venezuela’s Gold holdings were the last financial asset worth anything in that country…  And now they’re losing large chunks of that?  Not good folks… not good. 

Currencies today 6/5/19  American Style: A$.6986, C$ .6640, C$ .7474, euro 1.1256, sterling 1.2705, Swiss $.9923, European Style: rand 14.7195, krone 8.6833, SEK 9.4370, forint 285.46, zloty 3.8013, koruna 22.7949, RUB 65.21, yen 108.32, sing 1.3653, HKD 7.8397, INR 69.27, China 6.9070, peso 19.56, BRL 3.8724 (this currency sure has turned around! ) Dollar Index 97.10, Oil $53.01, 10-year 2.12%, Silver $14.85, Platinum $831.43, Palladium $1,342.75, and Gold… $1,334.81

That’s it for today…   Well, the weather people weren’t wrong about the rain storms last night! I sure hope they’re wrong about the next 6 days, especially tomorrow, as I have tickets to the day game at Busch!  The Stanley Cup Finals have gone to 2 full days of rest between games… Nothing like dragging this thing out to July! UGH!  I’m torn between going up stairs and getting a cup of coffee or going back to sleep! I’m awake now, might as well stay that way, until I can’t! HA!  How about Jeopardy James? He finally lost! after 80+ days of being Jeopardy Champion! Amazing!  He was astute with every topic they threw up on the board!  Well, he’s got some winnings that he gets to share with the U.S. Gov’t, but after that, he’ll have good base of savings!   The Rolling Stones take us to the finish line today with their song from the Sticky Fingers album: Bitch…  great song, for the Stones, if I’m allowed to say so myself!  I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

Chuck Butler