What Will Powell Have To Say Today?

April 29, 2020

* currencies lose ground during the day

* Has this become a Europe / Asia VS U.S. Traders thing? 

Good Day… And a Wonderful Wednesday to you! I guess that serves me right, to depend on the weather forecast this week, that over the weekend said that each day would have some rain. That would be very difficult to explain as I sat outside reading for a few hours yesterday, in full blue, sunny skies with the temps that touched 80… The Rolling Stones fave an old song: This could be the last time… But I doubt it will be the last time for me to pay attention to a weather forecast! I like being pleasantly surprised, so yesterday was right up my alley! And hey! The new chemo drugs I’m taking are shrinking the tumor in my mouth, which is awesome as far as I’m concerned… They are strong doses and they are playing hell with the rest of my body, but…. I really needed that tumor shrunk, and fast, and that’s what’s happening! So, bully for the chemo drugs! Billy Paul greets me this morning with his big hit song: Me & Mrs Jones… We got a thing…. Going on…. We both know that it’s wrong…. And so on…

Well, once again the currencies couldn’t hold the gains they had made overnight yesterday…. So, has this become a battle of continents? The Eurozone, and Asia sells the dollar…. And the U.S. traders buy it back…. That’s been the pattern this week, and so it was again last night… so, we’ll have to keep an eye on this to see if this continues.

Today’s the day the Fed’s FOMC will finish their two day meeting, and Fed Chairman Powell will speak to the press afterwards, but not before all the board games have been picked up and stowed away until the next meeting 6 weeks from now. I still believe that Powell will hold off the Indians at the FOMC that want to cut rates into negative territory… I always try to get into the minds of the Fed Chairs…. I think I used to have Big Al Greenspan down pat…. Then Big Ben Bernanke was easy to figure out, along with Janet Yellen…. Powell on the other hand has been a real challenge for me…. But if he does delay going negative with rates at this meeting, then I’ll be puffing out my chest, and saying I told you! So you can look forward to that in tomorrow’s Pfennig…. HA!

But I do believe negative interest rates are in the cards, and coming to a bank near you, very soon, which has me thinking more about going digital units for your cash, like I’ve been talking about…. You know, right now with everyone having germaphobia, having our cash become digital currency doesn’t sound all that bad, for who want’s to exchange bills who have been in the hands of who knows? However, this is not a permanent thing, folks, so be careful what you wish for… Because as I’ve explained in the past, going digital will remove the last of our civil liberties that last took a HUHE hit with the Patriot Act…. I’m just saying….

Gold, once again couldn’t find enough bids yesterday, but did find enough to keep it flat on the day… Actually Gold lost 70-cents from Monday’s close of $1,712, so the close on Tuesday was $1,711…. Speaking of Gold…. Did you hear the news that Bank of Nova Scotia, or Scotiabank, will be closing the doors on their metals business? They were once a very large enterprise with offices around the world, and helped with liquidity in the metals markets…. With that liquidity gone, how will the other bullion dealers make up for it? I need to get Ed Steer’s opinion on this, before I go any further…. Ed? 

So…. How’s the meat supply in the grocery store you go to?  Good? That’s a good thing because there are thoughts that it could become a real problem, as the food chain gets disrupted… I told you last week about the food chain disruptions, and how the food supply chain was in serious danger of shutting down, which would lead to empty shelves in grocery stores, etc.

Well, I read yesterday, that President Trump is attempting to head of the food supply shut down, as he sent out an order to U.S. Meat plants to remain open… Now, you may ask how can a President demand a meat plant remain open? Think about that, you may have a meat plant where everyone there has contracted the virus, and are at home or worse. How, can the meat plant function without employees?

OK, so for general practice here, let’s just say there are employees not affected and the plant can function, the Trump plan could go as far as increasing liability protection for the Company, if they remain open, which as you and I all know that once a Gov’t plan is enacted, it will take all the kings men and all the kings horses to get it reversed…. So, to a meat plant, this could be a good thing for the future for them….

You know for serious times, it takes serious thinkers to come up with plans that other haven’t thought of for the better mankind…. This falls under that heading in my book… The unions won’t like it, but this kind of reminds me of the 80’s when then President Reagan broke the air controllers strike, and the union didn’t care for that either!  

Longtime reader, Bob, sent me a note yesterday from Wolf Street, that talked about the companies eliminating or nearly eliminating their dividends… Gm was at the top of the list, with Harley Davidson falling behind, along with all the Mortgage REITS…. There will be more folks… so if you depend on dividends, there’s going to be a lack of them for awhile… I told this news to my good friend, Dennis Miller, who chuckled and said, “I wonder if the companies dropping their dividends will use the savings to buy more of their own stock”…. I believe in my heart of hearts that any Corporation CEO found doing that should be metaphorically hung from the highest tree…. I’m just saying… ( I don’t want to see anyone harmed, but something akin to that would do… like say…. Jail time?)

I know I’ve been pretty harsh on the Beaver…. And I’m talking about my attacks on the Reserve Bank of New Zealand (RBNZ)…. But…. In a round about way, I’m going to give New Zealand a round of applause, for they announced yesterday that they have no new cases of COVID-19…. Now it’s up to the RBNZ to begin to unwind their monetary policies… Come on, don’t make me come back and dis on you again in the future because you dragged your feet with these policies…. 

And don’t think traders haven’t noticed this development as kiwi has had a real stealth-like upward move in the last few days… I just think it’s a real shame that a country like New Zealand which used to always have one of the best interest rates in the world, has been brought to the land of no returns….  You know what I mean, low to zero interest rates…. 

The U.S. Data Cupboard finally breaks out of the chains of no, to little data, today! Well, there’s still not much, but what’s here should be good enough to keep the markets interested…. Like I said above, the Fed’s FOMC will conclude today, and Fed Chairman Powell, will speak afterwards to tell us what the Committee had to say….  (he won’t really tell us what was talked about, but it’ll be a good attempt)  

In Addition to the FOMC announcement, we’ll also see the first go at 1st QTR GDP, which is forecast to be -3.6%, but I think it will be worse than that… I say that because we were already seeing negative prints in Factory Orders, and Durable Goods before the COVID-19 virus took hold in the middle of March…. 

So, as I said yesterday, the overseas data prints will begin to come in by the boatload today and really build tomorrow…. So far this morning, we’ve seen Aussie CPI (consumer inflation) on a year-on-year basis and it grew to 2.2% from a previous print of 1.89%…  Well, the Reserve Bank of Australia (RBA) must be happy, for they’ve wanted to get CPI to their target rate of 2% for a long time now….  I think this print is a precursor to other countries also seeing their inflation ramping higher…. 

In the Eurozone this morning, the Consumer Confidence for April was a negative -22.7, but that was flat from the March print, so no further negative move here…. But the Eurozone Industrial Confidence printed at negative -30 Vs the previous -11.2….  This is not good, folks… for the Industrial Confidence will filter through to Consumer Confidence…  And shows that even the GREAT Industrial Complex of Germany is having problems…. UGH!  

To recap…. The currencies got sold again during the day on Tuesday, but rallied overnight once again too… Chuck sees it as a Europe & Asia VS the U.S. traders…  Gold was flat to down a buck yesterday, and is down $4 in the early trading this morning…  Chuck is waiting for an email from Ed Steer with his thoughts on the Scotiabank closing….   Trump orders meat plants to remain open, to avoid a complete shutdown of the food supply chain….  I read this morning that out local grocery store announced that they are buying perishables from local farmers direct, so the food doesn’t rot on the vines or in the ground…. Good for them! 

For What It’s Worth…. Well, the folks at GATA sent me this note yesterday, and I immediately copied it for the FWIW article today…. This is an article about how the Chinese believe there should be a new reserve currency, and it can be found here: https://www.reuters.com/article/us-china-gold-currency/shanghai-gold-boss-wants-super-sovereign-currency-for-post-crisis-times-idUSKCN22A1FY

Or, here’s your snippet: “The president of the Shanghai Gold Exchange (SGE) called for a new super-sovereign currency to offset the global dominance of the U.S. dollar, which he predicted would decline long term, while gold prices rally.

Concern has mounted among some market participants over the dollar-denominated system as the U.S. Federal Reserve cut interest rates to near-zero and embarked on unlimited quantitative easing to contain the economic damage of the coronavirus pandemic.

The measures have helped to drive gold prices to more than seven-year-highs this month, while the dollar has been range-bound. Wang Zhenying, who heads the world’s largest physical spot gold exchange, said in an interview the gold gains should be sustained, but ultimately a new kind of currency was needed.

“Future global trade needs a super-sovereign currency system under which no single country has the power to freeze the international assets of another country,” said Wang, who held senior roles at China’s central bank, which supervises the SGE.

Wang foresaw a decline in the U.S. currency, triggered by the Fed’s monetary policies.

“When the Fed turns on the liquidity tap, the U.S. dollar will, in theory, be in a long-term depreciatory trend,” he said, even though the panic of the current crisis could trigger a temporary scramble for the greenback. “

Chuck Again…. Well, well, well… do you think that Mr. Zhenying has been reading the Pfennig? I do! HA!

Currencies today 4/29/20 American Style: A$.6515, kiwi .6086, C$ .7173, euro 1.0855, sterling 1.2410, Swiss $1.0267, European Style: rand 18.4615, krone 10.3646, SEK 9.8811, forint 327.20, zloty 4.1835,    koruna 24.9750, RUB 74.23, yen 106.48, sing 1.4141, HKD 7.7502, INR 74.84, China 7.0805, peso 24.08, BRL 5.5907, Dollar Index 99.76,   Oil $14.24,    10-year .58%, Silver $15.27, Platinum $780.75, Palladium $1,963.27, and Gold… $1,707.52

That’s it for today…  There really hasn’t been much going on overseas lately, and that’s the reason I don’t spend a lot of time there, but that’ll all change as time goes by, so stay tuned! Man did the nice day turn to a very stormy night last night! The black clouds moved in before sunset, and the skies opened up and it rained, and rained, and rained! Crazy night for sure! T-minus 6 days until the stay at home order ends here in Missouri…  One of the things I find interesting in watching old baseball and hockey games is that there are players in those games that I had forgotten about that were integral parts of the teams!  Well, one place I’ll need to go as soon as they open their doors again is the dentist! the tumor has ruined another tooth. UGH!  When spring training was going on before getting shut down, my dentist, Holly, stopped by my seat to say hi!  What a real sweetheart! So, I guess I’ll be seeing her again, soon….   The great Stevie Nicks, and the band Fleetwood Mac takes us to the finish line today with their song: Landslide….   I hope you have a Wonderful Wednesday, and will Be Good To Yourself!

Chuck Butler