Going All In!

A Pfennig For Your Thoughts

September 10, 2018

* currencies and metals get sold on jobs data
* RBI stays out of the intervention game…

Good Day… And a Marvelous Monday to you! As I was heading to bed last night, I had a thought cross my mind, it was a fleeting thought, and one that was very wrong! I thought for a moment that today was a holiday… Why on earth did that thought cross my mind? I guess I was still reliving the previous Labor Day Weekend festivities… I guess… My beloved Cardinals are sliding backwards again… UGH! And Little Feat greets me this morning with their great song: Dixie Chicken. The live version, from the iconic rock album. Waiting For Columbus…

Well, Friday was another day of dollar buying after the Jobs Jamboree showed that 201,000 jobs were created in August… A geeks like me that look under the hood found that 104,000 jobs were added by the BLS to the surveys, because, well… they can… thus putting the actual “hard number of jobs created” at less than 100,000… thus the second QTR is off to a rip-roaring start (NOT!) when if comes to actual jobs created! But don’t let all the euphoria of the BLS doctored jobs numbers blur your vision… The actual jobs created in the 2nd QTR is just 86,000… That’s it folks…

But the markets are so conditioned to taking whatever garbage the BLS prints and running with it, and so, that’s what happened Friday, and carried over to the overnight markets last night. The dollar bugs are back out from the wall board and running all over the place, and Gold & Silver are being treated as persona non gratis… There’s been little to no news in the overseas markets, so it’s all been about the dollar… And here’s where I’m going down the confused road, because besides the shenanigans the BLS plays with jobs numbers, I’m wondering why the dollar is being bought with President Trump calling for more tariffs…

Yes, Trump is doing something that is akin to the poker game move of “going all in”… The President is calling for an additional $247 Billion of tariffs on Chinese goods… Wait! What? That’s it… He’s going “all-in” folks… which will not be good for China, but won’t be as equally good for the U.S. So, why do it? That’s the question I keep asking… I’ve been surveyed dozens of times about “how the President is doing” and each time I ask the question… “Why the tariffs/ Trade War?”

Ok… enough of that this morning! One could develop an ugly rash if they kept talking about tariffs and Trade Wars! And I certainly don’t want to do that! Going back a few years, I was asked by a trader I did business with, what I thought would be the key to the next financial crisis here in the U.S. and I immediately answered, ” A Liquidity crunch”… Well, despite all the warnings of such a thing, there’s been no liquidity crunch… yet! But that doesn’t change my answer, in fact it’s write-ups by JPMorgan that have me thinking the Liquidity crunch” is still coming, it’s just taken longer than I first believed… Here’s a quote from JPMorgan on all this…

“Many people theorise what will cause the next financial crisis and what will it look like? JPMorgan’s global head of quantitative and derivatives strategy, Marko Kolanovic says the dominance of passive, quant, and ETF funds on shares at the moment will lead to what he calls the Great Liquidity Crisis. Here’s what he said just last week:
“What will the next crisis look like?

This year marks the 10th anniversary of the 2008 Global Financial Crisis (GFC) and also the 50th anniversary of the 1968 global protests. Currently, there are financial and social parallels to both of these events. Leading into the 2008 GFC, some financial institutions underwrote products with excessive leverage in real estate investments. The collapse of liquidity in these products impaired balance sheets, and governments backstopped the crisis. Soon enough governments themselves were propped by extraordinary monetary stimulus from central banks. Central banks purchased ~US$10 trillion of financial assets, mostly government obligations. This accommodation is now expected to reverse, starting meaningfully in 2019. Such outflows (or lack of new inflows) could lead to asset declines and liquidity disruptions, and potentially cause a financial crisis.”

Pretty interesting don’t you think? Something else that I’ve been following lately is the rot on the vine of the Indian rupee… The rupee is falling like a rock, kicked off a cliff, and the Reserve Bank of India (RBI) hasn’t stepped in to defend the currency. The RBI has a history of attempting to defend the currency with no real results, so maybe, just maybe the RBI has learned their lesson? Central Bankers have thick skulls… I’m just saying…

Asia as a whole, has seen better times with their currencies and economies for sure, as the Trump tariffs begin to dig their spurs into these economies. I know that most people don’t think of India as part of Asia, but it is… The Chinese renminbi, which had been on a winning streak of nightly fixings, has seen that winning streak fade away, as the Chinese appear to be back on the “mark the renminbi down to offset the tariffs” kick, which they reported said, “We’re not doing to the renminbi what we’re said to be doing”… I called B.S. on that back when it was said, and still do!

The data overseas is sporadic at best, but we did see the final revision to 2nd QTR GDP in Russia this morning, which came in at 1.3% growth, which was down from the 1st QTR print of 1.8%… When you factor in all the economic sanctions on the Russian economy, one has to think that this economy would be growing gang busters without the sanctions, right? But the sanctions are there, and that’s what’s holding this economy back…

Here in the U.S. the Data Cupboard will be sporadic at best this week too, with the stupid CPI the main attraction on Wednesday… Today, though we will see the Consumer Credit (read debt) for July, which I’m thinking will be alarming… But the markets don’t really pay attention to these data prints until its too late to do so…

To recap… The currencies and metals have been getting sold since the Jobs Jamboree on Friday morning, which saw 201,000 so-called jobs created in August… Don’t worry, Chuck has the “real numbers”, and they aren’t as pretty as a peach… The RBI has declined to intervene with the rupee falling without a net, which is not like what they normally do, so Chuck thinks that maybe they learned their lesson? And Chuck’s liquidity crunch scenario, is it coming to fruition?

For What It’s Worth… I’ve talked about the short falls in Pensions since 2003, and it just continues to go deeper in the red with every passing year! And this article is all about the pension funding problems, and can be found here: https://www.lewrockwell.com/2018/09/simon-black/the-pension-crisis-is-bigger-than-the-worlds-20-largest-economies/

Or, here’s your snippet: “As you probably know, pensions are giant pools of capital responsible for paying out retirement benefits to workers.
And right now many pension funds around the world simply don’t have enough assets to cover the retirement obligations they owe to millions of workers.

In the US alone, federal, state, and local governments, pensions are about $7 TRILLION short of the funding they need to pay out all the benefits they’ve promised.

(** And that doesn’t include another $49 trillion in unfunded Social Security obligations…)

America’s private pensions are in bad shape too — a total of around 1400 corporate pensions are a combined $553 billion in the hole. Plus, 25% of those funds are expected to go broke in the next decade. But the pension problem is much bigger than just what’s happening (though the US problems are SEVERE).

In 2015, the total worldwide gap in pension funding was $70 TRILLION according to the World Economic Forum. That is larger than the twenty largest economies in the world combined.”

Chuck Again… Yes, that was in 2015, just imagine if you will, just how deep in the red these pensions are 3 years later? I’m just saying…

Currencies today 9/10/18… American Style: A$ .7122, kiwi .6540, C$ .7590, euro 1.1580, sterling 1.2945, Swiss $1.0245, European Style: rand 14.1355, krone 8.3815, SEK 9.0410, forint 280.17, zloty 3.7215, koruna 22.1448, RUB 69.73, yen 111.15, sing 1.2795, HKD 7.8495, INR 72.30, China 6.8428, peso 19.28, BRL 4.0616, Dollar Index 95.29, Oil $68.24, 10-year 2.94%, Silver $14.20, Platinum $784.10, Palladium $981.69, and Gold… $1,194.02

That’s it for today… I’ve had plantar fasciitis through the years flare up and then go away after a few days, and this past weekend it flared up again… UGH! Very painful to walk… Hopefully, this won’t last too much longer! I noticed this past weekend that the Kentucky football team beat Florida for the first time in 31 previous tries… Reminded me of the hex that Nebraska held on my beloved Missouri Tigers for about 25 years, but when it ended it ended badly for Nebraska… And too it will for Florida… OK… the long awaited of Adam Wainwright pitching for the Cardinals ends tonight, I’ll be watching for sure! And Montrose takes us to the finish line today with their song: Rock Candy… I hope you have a Marvelous Monday, and be sure to Be Good To Yourself!

Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts