What Was Powell Really Telling Us?

February 12, 2020

* Currencies, except for a few, can’t find a bid… 

* Gold is struggling to maintain its level this week… 

Good Day… And a Wonderful Wednesday to you! I can’t even begin to describe how serious it was last night in Anaheim, when Blues defenseman, Jay Boumeister collapsed on the bench, and had to have medical attention and then carried off on a stretcher.. It happened during a TV time out, so the announcers didn’t know what was going on… I went to bed right afterward, saying a prayer for the Blues defenseman. The game was cancelled… On a lighter note… It was a real Chamber of Commerce day here yesterday, as we grow nearer to Spring Training games, where a friend of ours and former Spring Training buddy, used to always say, that every day here is sunny and 80… Back then we used to only go for a week and would plan it late in March so that all the minor leaguers would be sent down and only the starting players would be playing the Spring Training games. Nowadays, the Spring Training season is over in the 3rd week of March! UGH! Marvin Gaye greets me this morning with his song, which is something I continually ask the Fed: What’s Going On?

Yesterday’s Big Event was the first of two visits to Capital Hill by Fed Chairman Jerome Powell… Powell expressed concern that the risks to the economy, while eased from late last year, remain a concern, and then he said something that hit a nerve with me, let’s see if it does with you… Powell then said, “We are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy,”

Chuck again, OK, here’s what I heard when Powell said what he said… “The Coronavirus could lead to the Fed doling out trillions of dollars around the world once again, like they did, secretly, I might add, to foreign countries”…. That’s my take on what he said, call me crazy, but there is precedence folks… Of course, it’s not what he said, but… I’ve gotten pretty good at reading between the lines of Fedspeak…  

Oh! And Powell did mention that he didn’t think the Fed has the arrows in their quiver to combat another deep recession…  Great! Isn’t that like warning someone you’re going to punch them in the nose, before you really do it?  

A reader in Queensland, Australia, sent me a note yesterday because there was an article in his newspaper claiming that the Aussie Gov’t doesn’t have enough tax dollars to pay for their expenses… I told him that’s the problem with most countries right now, as I’ve been talking about this Global slowdown with only Russia and Singapore as countries not included in the Global slowdown… I said then that there might be smaller countries that could be included, but their respective GDPs didn’t amount to much…

In the meantime, the currencies didn’t move much yesterday, the Aussie dollar (A$) had the biggest move of the day, riising about 1/2-cent. The Chinese renminbi has been receiving daily appreciations, and I’ve got to find out why…  And the Russian ruble recovered after a brief bout of selling… I kept thinking the euro was going to rally, as it would get some upward movement, only to be knocked back down. Whenever I see trading like that my mind immediately goes to dollar protection…

Speaking of dollar protection, it’s long been a tradition of the (ESF) Exchange Stabilization Fund to keep a lid on dollar depreciation, or weakness… Even during weak dollar periods, the ESF was there to keep the dollar from falling off a cliff to a land of no return… I recall in the middle of the last weak dollar trend, that the dollar index was nearing a level that many analysts thought that if the dollar fell below the level it would be the end of the dollar… And we came oh-so close to that level, only to see dollar buying by someone, somewhere to prevent the fall into the deep dark abysss, from happening…

I also recall back in 2011, when it appeared that the weak dollar trend would go on for many more years, since none of the fundamental reasons it went into the weak dollar trend were corrected, but suddenly, the hidden debts of Greece became a story. Now it’s not like the hidden debts had just popped up on everyone’s radar, for years, the Greeks were able to borrow funds in the markets with bond issuance at the same yield as a German bond! Now you can’t tell me that the markets weren’t aware of some funny business going on here, but they let it go until… And this is where I adlib the story, the ESF pointed out to the Wall Street Journal that Greece’s debts were way beyond their ability to pay them off.

And then the debts of Italy, Portugal, Ireland and Spain all came to light, and the new strong dollar trend was born… thanks to the ESF, I might add… Oh, and the fact that a major U.S. bank had shown the PIGS (Portugal, Ireland, Greece, Spain) how to hide their debts…

OK, enough of that! Gold is the centerpiece of Manipulation to keep it in check… Former Fed Chairman, Paul Volcker even said at one point that Gold was his adversary at the Fed… Really? His adversary? Why not just come out and say, that if Gold rises that it reduces the desire to hold dollars, and the U.S. can’t have that, period.?   Again the book I talked about a couple of weeks ago, titled: Rigged,  written by Stuart Englert, will explain all this and more! 

The U.S. Data Cupboard has a case of shyness going for it, as it really doesn’t have anything for us today, and yesterday’s scheduled 4th QTR Consumer Debt, had a case of stage freight and failed to make an appearance, so maybe it’ll print today…  Tomorrow’s Data Cupboard has much of the same, nothingness, but Friday’s offering will have Retail Sales and Industrial Production, so we get to finish the week with a bang! 

Getting back to my statement above about a Global slowdown, you may recall me telling you yesterday that the U.K. had a ton of data printing on Tuesday. Well, the main piece of data was Industrial Production, which was a modest 0.1%. And in the Eurozone this morning their version of Industrial Production was a negative -4.1% for December…  YIKES! Well, at least this backs up my call of a Global Slowdown, eh? 

To Recap…  The euro kept trying to move higher yesterday, only to be knocked back down at every attempt. Chuck goes into a tirade about dollar protection…  Gold lost $3 yesterday, and this morning it’s down another $1.25…   The A$ is the best performer this week, so far, as the Coronavirus seems to have maxed out…  The Chinese renminbi has been receiving daily appreciations from the PBOC which tells us something…  I’ve got to figure out what that “something” is! HA! 

For What It’s Worth…  Well, well, well, what have we here?  Good friend, Dennis Miller, the Retirementor, sent me a note last night, that had a link to an article that immediately went to the front of the class for a FWIW article today… This article is about auto loan delinquencies and it can be found here: https://wolfstreet.com/2020/02/11/subprime-auto-loans-explode-serious-delinquencies-spike-to-record-but-theres-no-jobs-crisis-these-are-the-good-times/

Or, here’s your snippet: “Auto loan and lease balances have surged to a new record of $1.33 trillion. Delinquencies of auto loans to borrowers with prime credit rates hover near historic lows. But subprime loans (borrowers with a credit score below 620) are exploding at a breath-taking rate, and they’re driving up the overall delinquency rates to Financial Crisis levels. Yet, these are the good times, and there is no employment crisis where millions of people have lost their jobs.

All combined, prime and subprime auto-loan delinquencies that are 90 days or more past due – “serious” delinquencies – in the fourth quarter 2019, surged by 15.5% from a year ago to a breath-taking historic high of $66 billion, according to data from the New York Fed released today:

Seriously delinquent auto loans jumped to 4.94% of the $1.33 trillion in total loans and leases outstanding, above where the delinquency rate had been in Q3 2010 as the auto industry was collapsing, with GM and Chrysler already in bankruptcy, and with the worst unemployment crisis since the Great Depression approaching its peak. But this time, there is no unemployment crisis; these are the good times:

But demand for subprime auto loan ABS remains high. And as long as there is demand from investors for the ABS, there will be supply, and losses will continue to get scattered around until a decline in investor demand imposes some discipline.”

Chuck again… Yes, the article also explains that these delinquencies aren’t happening because the economy has gone into the dumpster, this is all a function of giving loans to people have no ability to pay them back… Sounds like the mortgage mess from 2007 doesn’t it? 

Currencies today 2/12/20 American Style: A$.6747, kiwi .6483, C$ .7537, euro 1.0914, sterling 1.2984, Swiss $1.0261, European Style: rand 14.7960, krone 9.2182, SEK 9.6203, forint 310.67, zloty 3.9038,   koruna 22.8198, RUB 63.63, yen 109.95, sing 1.3861, HKD 7.7684, INR 71.24, China 6.9707, peso 18.63, BRL 4.3228, Dollar Index 98.74,  Oil $50.77,  10-year 1.61%, Silver $17.58, Platinum $964.72, Palladium $2,337.00, and Gold… $1,566.64

That’s for today, and this week…  I told you last week for the time being that my Thursday mornings were going to be driving north to the wound center early in the morning, and that will be the case for the time being…  I want to send out a BIG HAPPY Birthday to two of my fave people in the world…  First up today, is… Lisa Yanker!   And tomorrow, my good buddy, Duane will be celebrating his birthday, so Happy Birthday, Duane!  Happy Birthday to you, happy birthday to you…. And then Friday will be Valentine’s Day… for you young lovers you’re running out of time… I’m just saying…   Elvis Presley takes us to the finish line with his song: One Night….  One night with you, is what I’m now praying for….   I hope you have a Wonderful Wednesday and will Be Good To Yourself!