India’s Bond Rating Gets Cut Just Above Junk!…

A Pfennig For Your Thoughts
 
June 2, 2020
 
* Currencies again rally VS the dollar on Monday!
* Gold & Silver continue to move toward Breakout levels… 
 
Good Day… And a Tom Terrific Tuesday to you… I sure hope you’re safe wherever you may be… I simply can’t stand to watch TV for more than a small amount of time, or peruse through Twitter, or check out the new items on Bloomberg… They all contain somebody’s viewpoint on something that I’ll never understand. And I’ll just leave that there… Another beautiful day here in the Midwest… I sat outside for lunch and reading my book for about 2 hours, and then had to take a nap! HA! We had a birthday parade last night for Jerry McCoy, who I told you yesterday turned 40. These birthday parades are a good thought, but they really don’t do it for me… People need to be together to celebrate birthdays, etc. Marvin Gaye greets me this morning with his song: Mercy, Mercy, Me, which is very apropos for today, and exactly how I feel regarding things aren’t what they used to be…
 
Another day, and another day of dollar selling, not by the boatload, but selling nonetheless. You know, all I had to do is say they were dead men walking, and they begin to rally VS the dollar. OK, let me make this clear, I never said that my playbook was going to happen in the next week or month. So, just as long as we’re clear on that…. We’ve seen these false dawns a few times in the past couple of years, when the currencies look as though they are going to go on a multi-year rally VS the dollar, and then just as fast as the rally started, it ends… So, you can never tell when trader sentiment is going to change for good…. It’s not like the countries that these currencies are from are performing better than the U.S., They all have debt up to their eyeballs, they all have mingling central banks that have come up with more alphabet lettered programs than you can shake a stick at!
 
I do have to admit though that things here in the U.S., because we are the largest economy in the world, and have the reserve currency, just aren’t going as planned…. The U.S. economy has never, and let me repeat that for those of you trying to scan this, the U.S. economy has NEVER been in a recession / depression as deep as this one! Let’s see what the economists / analysts on Twitter have to say about what’s going on.
 
In my daily perusal of Twitter, I found this Tweet by Egon Von Greyerz, “Big Mac was .65 cents in 1973, in 2020 it is $5.30, an 88% drop in the dollar… Gold in 1973, was $90, and today it’s $1,735, which is a 95% drop in the dollar… And while I was watching the stock jockeys continue to move the stock market higher in the ozone, James Rickards had this to say on Twitter: “American cities are burning, there’s a lethal pandemic, and we’re in a new Great Depression. Of course, the stock market is up. Why do we persist in calling it a “market?” S&P 500 is really the S&P 6, stocks are traded by robots and financed by $5 trillion of printed money at 0%.”
 
My thoughts exactly, as I watched the markets recap…. UGH! But I won’t let it bring me down, it’s only castles burning – Neil Young…. Or how about, “how do we sleep when the beds are burning?” – Midnight Oil… Oh there’s so many song lyrics that fit here, but the sad part is that this is all going to end up in tears….
 
My oh my what have we here? The Ratings agencies have cut India’s bond rating to just one notch above junk.. OUCH! Did you have to hit me that badly? That’s going to leave a mark, for sure! But don’t worry India, investors love junk bonds, the pensions, insurance companies, etc. they line up to buy them, because they know that they will not default, as long as the Fed has a printing press, or a laptop computer to create digits, bonds are the Fed’s darlings… 
 
What? I hear you saying, “But Chuck, the Fed doesn’t buy foreign bonds.” Ahhh grasshopper, are you sure about that? What do you think those Trillions of dollars that were secretly sent to foreign banks in 2008 were for? It sure wasn’t so they could have a blow out party! So, in the end the foreign bonds don’t show up on the Fed’s balance sheet, but the debt is there… off balance sheet that is… 
 
I was being diligent and going through the Pfennig Replies email box yesterday, and came across an email from a reader telling me that I’m right that there isn’t a Gov’t economic report that doesn’t have some kind of “adjustment” to make it look better… I thought about that for awhile, and then agreed, that I don’t think I’ve come across any Gov’t reports that don’t have “adjustments” in them, which made me even more mad! You think that I was wound up yesterday morning? That was nothing compared to how wound up I am about not seeing real unadulterated Gov’t economic reports! I’m going out to the Butler Patio, to scream a bit, I’ll be back soon… 
 
Apples and Oranges… count them separately and do not mix them, would be my first decree as King… Don’t bring me “seasonally adjusted, B.S., or hedonic adjusted reports, or you’ll find yourself hung from a dungeon wall by the ankles! Too harsh? I don’t think so… 
 
OK, no more role playing for me today, I’m worn out! HA! OK… Gold was up $10 yesterday, and closed the day at $1,738, and is up a buck or two this morning. Silver, which has really outperformed Gold in the last week, on a percentage basis, continued to move higher throughout the day yesterday, and again this morning. It’s about time for an engineered takedown, don’t you think? Or…. have the boys in the band finally turned in their instruments? Well, it appears that the boys in the band have given up, at least for now… I wouldn’t be surprised if they came back strong, as Gold nears the launching pad of $1,750 that I talked about yesterday… I hope they don’t, but I get this feeling that they will… 
 
The Aussie dollar (A$) and kiwi have really moved higher in the last week VS the dollar… The A$ was up over 1 full cent yesterday, and kiwi was close to that feat… What gives with these two? The Proxies for Global Growth are attempting to tell us something, but I don’t see what they’re telling us coming true, so I question their moves… 
 
The Petrol Currencies, led by Russian ruble have really taken to this rebound in the price of Oil… I read yesterday that our friends at OPEC (NOT!) are thinking that their production cuts in Oil would last through the summer…. I guess they’re thinking that the summer months equal increased driving, especially here in the U.S. And they’re hoping that the demand will take up the slack in Oil reserves… Take this message to OPEC… We know what you’re trying to do, and we don’t think it will make a hill of beans difference! So, there! 
 
One Petrol Currency that gets double input from Oil and the rising euro, is the Norwegian krone… When both of the inputs are rising, the krone get more love than it can handle at once.. 
 
I have to also point out that the Euro-Wannabes of: Polish zloty, Czech koruna, and the Hungarian forint, have been on the rally tracks… And here’s a question to see if you’ve paid attention in class all this time…. What does Chuck always tell us about the Euro-Wannabes? Give up? OK… I always tell you that when the Euro-Wannabes are on the rally tracks, that sentiment toward the dollar is nearing a low… 
 
The U.S. Data Cupboard yesterday had the ISM Manufacturing Index for May, and it was not as bad as I would have thought it to be… The May ISM was 43.1%… And that makes two consecutive months of the index that printed below 45%… April was 41.1%… A very long time ago, I read that the Royal Bank of Canada, (RBC) had come up with an indicator for U.S. recessions, and that it was two consecutive months of the index printing below 45%…. So, I think that it’s official now, even though the folks here in the U.S. that tell us we were in a recession long after it was over, haven’t put their seal of approval on this recession thing yet…. But to me it’s official! 
 
And once again, there is discrepancy… The aforementioned ISM was 43.1%, and the Markit PMI (same manufacturing report, just a different name) was 39.8%…. So, pick your poison, either one was below 45, but just have these two with such a wide difference is more fodder for the fire that I’m burning for Gov’t Economic reports! Oh… and one more thing, Construction spending for April was negative – 2.9%, VS a flat print for March… Once again, I’ll point out that things were already going badly for the economy before the pandemic reached our shores… 
 
To recap… Another day, another day of the currencies moving higher VS the dollar, when will this stop? Gold & Silver are pushing the envelope for a breakout move higher… Chuck wonders where the boys in the band are? And what are the stock jockeys thinking? Cities are on fire, we have a pandemic amongst us, and we’re in the deepest recession we’ve ever been, and yet the stock jockeys party on…. Party on Wayne, Party on Garth! 
 
For What It’s Worth… Well… remember when I told you that when the end of currencies comes around, that your bank balances would be either just digits or a Gov’t backed crypto currency? Well, it appears that China is one step ahead in developing a Gov’t backed crypto currency, so when the time comes they already have that box checked! This is an article about China’s cryptocurrency and you can find it here: https://www.rt.com/business/489880-china-digital-yuan-olympics/
 
Or, here’s your snippet: “The People’s Bank of China has revealed plans to have its sovereign digital currency ready in time for the 2022 Winter Olympics. The announcement comes as the Covid-19 pandemic has accelerated a shift away from paper money.
 
Limited trials are already underway in Shenzhen, Suzhou, Chengdu and the Xiongan New Area in the northern province of Hebei, said the central bank’s governor Yi Gang. He told reporters that China’s government plans to run pilot tests at Olympic venues, though there remains no official timetable for a release.
 
An unnamed member of the State Council with knowledge of the project told the Nikkei Asia Review that If the government is satisfied with the results of this year’s tests, the currency “will be issued next year.” Otherwise, “more tests will be conducted next year,” he said.
 
The digital yuan will be linked to the holder’s smartphone number, with transactions taking place through an app. Users will be able to transfer money between accounts by tapping phones, much like having physical cash change hands. The currency will be legal tender, so it could be exchanged without needing a bank as an intermediary.
 
The size of transactions would be limited based on identity verification. A phone number alone would permit only small transactions, while providing proof of identity or a photo of a debit card would raise the limit. Speaking with a bank representative in person could allow for the cap to be removed entirely. Suspected criminal activity will be uncovered via transaction histories.”
 
Chuck again… hackers… that’s all I can think of when I think of cryptocurrency… wake up one morning, turn on your laptop and find that someone has wiped out your balance of cryptocurrency…. If I ever get my arms around the hacking thing, then maybe, just maybe, because you never know, I might warm up to cryptocurrency…
 
Market Prices today 6/2/20: American Style: A$.6850, kiwi .6315, C$ .7391, euro 1.1165, sterling 1.2550, Swiss $1.0395, European Style: rand 17.2294, krone 9.5665, SEK 9.3535, forint 309.46, zloty 3.9363, koruna 23.8335, RUB 69.61, yen 107.82, sing 1.4021, HKD 7.7507, INR 74.79, China 7.1269, peso 21.86, BRL 5.3581, Dollar Index 97.62, Oil $36.26, 10-year .67%, Silver $18.28, Platinum $850.24, Palladium $1,974.49, and Gold… $1,740.88
 
That’s it for today…. I’ll say one thing for the replays of old Cardinals games at least doesn’t have interruptions showing another building burning… The Times they are a changing, eh? I shake my head and wonder about all this… OK… I’m back now! I found out this weekend that we’re going to have a food truck come to our subdivision on Friday night! YAHOO! Something different! The Times they are a changing… for sure! A few years ago, the farm where my dad grew up, and we spent our summers, was for sale, and I said, “let’s buy it”! I was shot down with that Idea, but now…. It sure would be good to be out in the country, away from all of this… I’m just saying… OK, Badfinger takes us to the finish line today with their song: Come And Get It…. And, with that, I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!
 
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts