Will This Be 1999 All Over Again?

Jan 23, 2020 

* Currencies and metals have little movement on Wednesday

* Ray Dalio, Paul Tudor Jones, and Jan Nieuwenhuijs  talk to us today! 

Good Day… And a Tub Thumpin’ Thursday to you! I’m headed north 50 minutes from here after I get this out the door, to the wound center. My Billikens played an awful game last night at Davidson, a team they should have beaten by 10. Old Man Winter is now gone from down here… 3 days at we’re back to sun and near 80 today… I received an email from a dear reader yesterday… He told me that I had “knocked the ball out of the park” with yesterday’s letter… Now that made me feel good! But now I have pressure to do it again! And much like baseball players, I’ll be doing good to get it to that level 3 out of 10 times, but shoot Rudy, that’ll still make me eligible for the Hall of Fame! The Amazing Rhythm Aces greet me this morning with their song from the 70’s: Third Rate Romance….

The damage that was done to the currencies, metals and Oil on Tuesday, didn’t return for an encore on Wednesday, so in the end the day the currencies & metals wallowed around in the mud all day… The price of Oil lost more ground and this morning is trading with a $55 handle… I wonder where all those folks that were calling for 2020 to be the year of Oil have gone? Probably to the same place I go to whenever I call something wrong…. I’ll give you a hint… Hello bartender… I kid of course…

Come on Chuck, it’s only January give the guys a break here!  OK, you’re right… I guess I’m just upset with the way the price of Oil has beaten down the Petrol Currencies… Two weeks ago, the Russian ruble was ready to trade below 60, and now it’s getting ready to trade above 62! The Norwegian krone was making its way through the 8 handle and now it looks like it might trade back to a 9 handle, and even the Canadian dollar/ loonie, which had resisted all the downward movements previously, with the price of Oil, finally gave up and dropped below 76-cents… 

So, while I’m writing today, the European Central Bank (ECB) is meeting to discuss rates. I told you my opinion of ECB President Lagarde yesterday, so I won’t get into again today. Let’s just say I’m not expecting anything…. Overnight, the Aussie employment numbers came through, and Australia’s December Employment Change beat the 15,000 forecast with an increase of 28,900! Unemployment Rate slipped below 5.2% expected and prior to 5.1%. And this surprised move in employment brought about a ½-cent rise in the Aussie dollar (A$) overnight…

Gold had an OK day, and as opposed to ATT&T’s commercials, OK is OK when one day it gets sold and the next day it gets bought… Gold posted a 70-cents gain on Wednesday… And in Davos, Switzerland, Ray Dalio had this to say about Gold… “You have to have balance … and I think you have to have a certain amount of gold in your portfolio,” Dalio said, adding that gold will be a top asset to own in the years ahead as central banks will fail to normalize in the next downturn, which could’ve already started.” Ray Dalio at zerohedge.com

Longtime readers have heard me carry on about owning physical Gold VS paper Gold before, so I’ll just touch on it right now and then bring you the opinion of a well known Gold researcher on the subject… I’ve always contended that if things come to a grinding halt try getting your Gold out of a paper trade… And now with no further ado… here’s Jan Nieuwenhuijs who used to go by Koos Jensen on owning physical Gold VS an ETF…

“Sure, it offers exposure to the spot gold price. But when things go haywire, GLD exposes you to many counterparties, which would be BNY Mellon Asset Servicing (Trustee), which is a division of The Bank of New York Mellon, HSBC (Custodian), potential sub-custodians (The Bank of England, ICBC Standard Bank, JPMorgan, Scotiabank, and UBS), NYSE Arca, and the Authorized Participants. Owning GLD is like owning a gold derivative with as much counterparty risk as possible.”

Chuck again… That was Jan Nieuwenhuijs from Voima Gold and his whole article can be found here: https://www.voimagold.com/insight/gld-a-crash-course

OK… enough today on Gold, eh? The reason I keep harping on it is because from all reports I read, Gold is still not a part of a very large percentage of investment portfolios… Why is that? What else do I have to say or show you to convince you that the next downturn in the economy is going to take to hell in a handbasket, and you’ll need a diversified portfolio that includes Gold or Silver or any precious metal…

I had a dear reader send me a note and ask me to say a few words about rhodium… I did… And for those of you keeping score at home, I basically said that rhodium had outperformed the other metals, but… And this is a BIG BUT! When I was on the trading desk I inquired to many dealers about buying rhodium… And they all said nyet! So basically, if you can find someone to sell it to you, then go ahead and own some, but I doubt you’ll find someone, that is unless things have changed since I left the trading desk 3 years ago… I guess I should have checked with my old trading desk, metals guru, Tim Smith, before I wrote this…  Oh well… if I’m wrong, I’m sure I’ll receive 1,000 emails telling me that I was wrong… 

OK…  looking around the globe today, I already mentioned the ECB meeting going on right now. In addition to that the Eurozone Consumer Confidence for the current month will print… Smart that they took the poll before the ECB meeting, eh?  In New Zealand, they’ll print their latest CPI (consumer inflation)  which should be OK…  Kiwi has been playing follow the leader (A$) for a very long time now. There’s a spread between the two currencies, and currency traders are very careful to make certain that the spread is not altered. 

Here in the U.S. the Data Cupboard continues to be in need of real economic data to print, and there just isn’t any on the docket. Today we will see the Leading Indicators Index, as of December… You may recall that the November report here was 0%…  The markets don’t really pay much attention to this, one of the two forward looking economic prints, with the other being Capacity Utilization…  I wonder if the bond boys make a big deal out of Leading Indicators, as they, the bond boys, used to be all about looking out to the future…  I’m just saying… 

To recap… The dollar bugs crawled back behind their wall boards yesterday, and left the currencies and metals to wallow in the mud all day with little movement. The price of Oil however, lost a lot of ground again and is down again this morning and is trading with a $55 handle… The Petrol Currencies are getting pushed down because of this free-fall for the price of Oil.  No real economic data today, and overseas the ECB is meeting while Chuck types… 

For What It’s Worth…. Paul Tudor Jones checks in for the FWIW section today, with his quote about this time period reminding him of early 1999… Those of us old enough to recall that time, the dot.com’s were flying high, one day, and the next they weren’t, and then all the corporate scandals came about and so on… I found this on zerohedge.com and you can too by clicking here: https://www.zerohedge.com/markets/reminds-me-1999-paul-tudor-jones-warns-craziest-policy-mix-history

Or, here’s your snippet:” Billionaire investor Paul Tudor Jones sat down with CNBC’s Squawk Box at the conference and warned: “We are in the craziest monetary fiscal mix in history. It’s so explosive. It defines imagination.”

“We are in the craziest monetary fiscal mix in history. It’s so explosive. It defines imagination,” says Paul Tudor Jones. “It reminds me of early 1999.” 

Jones went onto say, “it reminds me a lot of the early ’99. Early ’99 we had 1.6% PCE, 2.3% CPI. We have the exact same metrics today. The difference is fed funds rate 4.75% today 1.62%, and back then we had budget surplus and we’ve got a 5% budget deficit … Crazy times.”

“Crazy times” indeed – if Tudor Jones is right, the market is in the final blow-off stage as ‘Not QE’ propels markets to new highs. It will only be when the Federal Reserve winds down its unprecedented monetary accommodations that will trigger a top in the market (just as it did in 1999 after supplying liquidity to tamp down Y2K anxieties).

As we’ve discussed before, the deviation of the stock market from corporate profitability is the widest since 1999 – it seems that Jones’ warning should grab the attention of bulls as the economy continues to stagnate.

And in Jones’ view – this will end very badly.”

Chuck Again… I also saw this on Ed Steer’s goldandsilver.com letter so, as I always say, if Ed thinks the article is worthy, then I have no reason to quarrel with him! And besides this guy talks like I do! I mean all the while I was reading the note, I was thinking, “did I write this already?”  Of course I did, but….  it always helps when someone else tells your kids what to do, right? 

Currencies today 1/23/20 American Style: A$.6868, kiwi .6593, C$ .7598, euro 1.1090, sterling 1.3125, Swiss $1.0323, European Style: rand 14.3658, krone 8.9827, SEK 9.5043, forint 303.87, zloty 3.8281,    koruna 22.6050, RUB 61.88, yen 109.58, sing 1.3492, HKD 7.7722, INR 71.20, China 6.9034, peso 18.72, BRL 4.1973, Dollar Index 97.49, Oil $55.87, 10-year 1.75%, Silver $17.68, Platinum $1,005.52, Palladium $2,473.77, and Gold… $1,554.14

That’s it for today…  Somehow I get the feeling that this one was as good as yesterday’s letter… Oh, well,  carry on, Chuck…  Come on Coach Ford, I would think that free throw shooting practice would be the only thing on the Billikens’ agenda each day! They would have beaten highly ranked Dayton last Friday night if they had hit 75% of their free throws!  And my beloved Missouri Tigers haven’t had a real bonafide “big man” since Arthur Johnson and that was many years ago now… their lack of a big man shows up consistently in their games…  I understand there’s  big man coming next year… OK, so I have to wait till next year?  UGH!   The NHL All-Star Game is in St. Louis, which is going to go through 2 days of rain, sleet and snow, which should make getting around very interesting for the fans who want to see the game…  Mathew Sweet takes us to the finish line today with his song: Girlfriend….    I hope you have a Tub Thumpin’ Thursday and will Be Good To Yourself! 

Chuck Butler