What The Heck Is Ken Rogoff Talking About Now?

May 6, 2020 

* The dollar bugs rule the roost again on Tuesday night

* Did U.S. citizens spend their stimulus checks? 

Good Day… And a Wonderful Wednesday to you! Well, by now I’ve climbed down from my roof, where I had gone to yesterday so that everyone could hear me screaming about Ken Rogoff… But there was no one out to hear me…. So I came inside and wrote some nasty things about his latest proposal, and by the middle of the day, I was calmed back down…. Then I hear the song Ohio playing on my iPod and I began to get all riled up again, like I was yesterday morning when I wrote about the Kent State slayings of 4 students… Finally by late afternoon, I was calmed and in control of my emotions once again… So, it took me some time… And now this morning, I’m just peachy, and ready to write! But first, Melvin & the Blue Notes greet me this morning with their song: If You Don’t Know Me By Now….

The currencies traded in the same clothes all day yesterday, with little to no movement at all and at the end of the day, the euro was 1.0845, and in the morning it had been 1.0840…. So, see what I’m talking about? Gold found a bid or two and climbed back above $1,700, to close at $1,706 on the day. In the overnight markets it was a change from the trading pattern we saw last week, as the dollar bugs ruled the roost in the overnight markets, and brought the Dollar Index back to 100, after spending a week below that figure.  And Gold has given back $5 of gain yesterday in the early trading today… 

The Reserve Bank of Australia (RBA) left rates unchanged on Tuesday and they remain at a paltry 25 Basis Points, or .25%….   I shake my head in disbelief that interest rates in this part of the world, where we used to be able to depend on much higher rates than anywhere else in the Industrialized world.  But times change…. I guess… 

One of the few places where you can still receive interest on your deposit is Russia… Longtime reader, Bob, send me a link to an article that talked about how 70% of Russians have savings to help them in times like this, and 70% of Americans live paycheck to paycheck, with no rainy day savings…  That information must be good for some positive movement in the ruble, doesn’t it?  

I don’t know if you’ve been keeping track recently, but since going negative a couple of weeks ago, the price of Oil has recovered and is trading this morning with a $25 handle!  Apparently, from what I read, the glut of supply is being drained off as the production cuts begin to filter through….  I’ll still put that event, the price of Oil going negative, as one of the strangest things I’ve ever seen! 

It’s these kinds of headlines that make my skin crawl….  And UBS Wealth Manager, commented to Bloomberg.com that he believes “Americans are wrong to Pile up cash”….    It’s guys like that whom give Wealth Managers a bad name…  First of all he needs to do more homework, and in doing so, he’ll find that Americans aren’t piling up cash, for they don’t have the cash to Pile up…   I’m just saying…. And, the other thing he’ll find out that holding cash right now isn’t that bad of a thing to do!

Of course, maybe he’s talking about the data that came in this week about how Americans spent their stimulus checks from the Gov’t….  The survey shows that of those who received IRS stimulus checks, 38% added to savings, 26% paid off debt, and 18% planned to spend but not yet.  OK, I’ve got to inject this here…. Didn’t I tell you that the so-called stimulus checks weren’t really stimulus, and they wouldn’t do a thing to help the economy?  I’m just saying…. 

I keep receiving emails from readers that want to know where to go with money these days, if the currencies aren’t moving, and the U.S. economy is in the dumps? Well, I’m not an investment advisor, although all my old licenses should have allowed me to answer the questions in a way that wouldn’t get anyone trouble.

So, let me just say, this is NOT investment advice…. I’m going to tell you what I’ve been doing, as I’ve had some large Treasuries come due lately…. 1. Buy bank CD’s, within the FDIC limits, you may have to go to several different banks, but they’re out there folks, and at least it’s FDIC insured…. 2. Right now I like Gold stocks…. And 3. Of course if you haven’t filled your asset allocation with Gold & Silver yet, now is a good time to do just that…. 4. Hold cash…. I understand that the dollars I hold are going to be worth much less in a few months, but… If I have cash, I have liquidity, to buy something that comes along that looks cheap…. So, that’s what I’m doing… Notice I didn’t tell you any Gold stock names? Can’t do that here… but if you wanna meet me on the Butler patio, or at my local watering hole, once they open up again, I’ll share those with you!

Remember the Wendy’s TV commercials, with the three old ladies, yelling, “Where’s the Beef?” I have this eerie feeling that somebody is going to pull that one off YOUTUBE, like I just did, to make a BIG Deal out of it, with the meat shortage that’s coming…. Here’s the link if you want to laugh again: https://www.youtube.com/watch?v=riH5EsGcmTw

OK… now that I’ve gotten that silliness out of me, it’s time to get serious…. I received an note from longtime reader, Bob, yesterday with a link to a Wolf Street.com  article… I don’t want to talk about the whole article, just a brief piece of data that it supplied…. “The ISM Business Activity Index plunged to 26%.”…. This is the lowest on record folks… and we’re still putzing around with opening up the economy again…. And I don’t care to have to read any emails from people who think I’m trying to kill their grandparents, by saying the economy should open again….

Did you know that in 1968 we had a different pandemic that was called the H3N2 virus, and that it killed 100,000 Americans, and over 1 million people worldwide? The Americans that lost their lives totaled more than those that lost their lives in the combined Vietnam and Korean Wars! And nothing was ever closed, schools remained open, movies remained open, and so did restaurants and bars…. Shoot Rudy, most people should remember this pandemic…. Have we become big babies?

I only bring this up because of the damage the “cure for COVID-19-virus” is doing to our economy, and economies all over the world… That is except in Sweden and Brazil, where they dealt with it like we did the H3N2 virus in 1968-69, and their death rates are basically the same as ours, and maybe even less…. Shoot, we even held the Woodstock music festival in 1969…. Think that could happen this time?

OK, I’m going to be in big dookie now, with my wife… She doesn’t remember the H3N2 virus, and thinks that this economic shutdown is warranted. Hey! I still think that people need to be careful, wash their hands, no hugging, and keep a safe distance, and wear masks outside, but…. There has to be someone that can think outside the box here, and think of a way to reopen the economy while using these parameters! Come on Bill Gates, come on Jeff Bezos, come on whomever! Put those thinking caps on, now! 

The U.S. Data Cupboard had the aforementioned ISM Business Index, which I’ll say again, is a major proof item for the rot on the economy’s vine….   We also had a speech by St. Louis Fed President, James Bullard, who has really gone soft in my book….  Bullard thinks that the economy should open up in the 2nd half of the year…. So, at the earliest that would mean July….  Does he really think that the economy can survive on this lifeline for two more months?  I don’t think so…. And I’m saying so! 

Today’s Data Cupboard just has the Monthly ADP Employment report, which was created to give investors a heads up on the BLS’s Jobs Jamboree that will print on Friday this week….  Longtime readers know my thoughts on the BLS and their hedonic adjustments, therefore I’ve always mantained that the ADP report should be used as the “go-to” for employment reports and data, as ADP is the payroll system that’s used by just about everybody and their brother, and should know when a business comes on board or a business dies, and their data would reflect that without making “assumptions” like the BLS does….  

So, anyway…. The ADP Employment Report for April doesn’t even have a forecast on record, as everyone is holding their breath to see just how far the Unemployment rate has risen, here in the U.S. 

For What It’s Worth…. I was going through Twitter yesterday and came across an article written by economist, Ken Rogoff. Now, first I’m going to tell you that I’ve never agreed with Ken Rogoff and his economic principals before and now I know I never will…. Here’s Mr. Rogoff telling us the case for negative rates is here and that he wants deep negative rates, and it can be found here: https://www.project-syndicate.org/commentary/advanced-economies-need-deeply-negative-interest-rates-by-kenneth-rogoff-2020-05

Or, in case you haven’t recently been sick to your stomach, here’s your snippet: “Only monetary policy addresses credit throughout the economy. Until inflation and real interest rates rise from the grave, only a policy of effective deep negative interest rates, backed up by measures to prevent cash hoarding by financial firms, can do the job.

CAMBRIDGE – For those who viewed negative interest rates as a bridge too far for central banks, it might be time to think again. Right now, in the United States, the Federal Reserve – supported both implicitly and explicitly by the Treasury – is on track to backstop virtually every private, state, and city credit in the economy. Many other governments have felt compelled to take similar steps. A once-in-a-century (we hope) crisis calls for massive government intervention, but does that have to mean dispensing with market-based allocation mechanisms?

Now, imagine that, rather than shoring up markets solely via guarantees, the Fed could push most short-term interest rates across the economy to near or below zero. Europe and Japan already have tiptoed into negative rate territory. Suppose central banks pushed back against today’s flight into government debt by going further, cutting short-term policy rates to, say, -3% or lower.

For starters, just like cuts in the good old days of positive interest rates, negative rates would lift many firms, states, and cities from default. If done correctly – and recent empirical evidence increasingly supports this – negative rates would operate similarly to normal monetary policy, boosting aggregate demand and raising employment. So, before carrying out debt-restructuring surgery on everything, wouldn’t it better to try a dose of normal monetary stimulus?”

Chuck Again…. This guy needs to find a closet and go hide in it as far as I’m concerned…. Basically, folks, he’s saying that it’s time for you to lose all of your civil rights…. UGH! And, there is more to the article so be sure to click on the link above, should you want more fodder to raise your heart rate! 

Currencies today 5/6/20 American Style: A$.6436, kiwi .6052, C$ .7113, euro 1.0807, sterling 1.2371, Swiss $1.0265, European Style: rand 18.5315, krone 10.2560, SEK 9.8376, forint 323.31,  zloty 4.1985,  koruna 24.9635, RUB 74.11, yen 106.20, sing 1.4186, HKD 7.7505, INR 75.12, Chin 7.0615, peso 24.05, BRL 5.5507, Dollar Index 100.01,  Oil $25.36,   10-year .68%, Silver $15.06, Platinum $762.71, Palladium $1,797.22, and Gold… $1,701.22

That’s it for today….  I was watching Game 4 of the 2019 NLDS series between my beloved Cardinals and the Braves last night, and even though I knew how the game ended, I was still on pins and needles in the 10th inning!  The best way to watch those old games is to forget about what you remember about them, or just put what you recall in the back of your mind….  Game 5 is tonight, and I know that the Cardinals romp, so I might not even watch it….  The sun came out for a bit yesterday, but the temp was only in the low 60’s…. Looks like it’s raining out right now to start the day…. UGH!  Loggins and Messina take us to the finish line today with a song from the live album, Nobody But You….   Jim Messina, is a name a lot of people might not recognize… He was an instrumental member of such rock classic bands as Buffalo Springfield, and Poco… Nowadays he’s gone out as the Jim Messina Band….  A little rock history for you this morning to use at cocktail parties! HA  I hope you have a Wonderful Wednesday, and will continue to Be Good To Yourself! 

Chuck Butler