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A Pfennig For Your Thoughts

Rocktober 30, 2019

* Currencies trade steady Eddie on Tuesday…
* Gold & Silver keep their back and forth pattern in place

Good Day… And a Wonderful Wednesday to you! I went through a battery of tests yesterday, and still have one more next week before I know the real story with the blood flow to my lower extremities. Yesterday was all good news though, and the doctor said that we’re going in a new direction with the treatment of my leg wound… The bad news is that I had planned to go a mini-vacation starting the 9th, just like last year to get away from November, here, but…. I may not be able to go, now. I guess I’ll find out for sure next week… They’re going to have to hogtie me to my house to get me to stay here this winter, I can assure you that! I’ve gotta go where it’s warm! The Beatles greet me this morning with their love song: And I Love Her…

Well, from the looks of things when I got home yesterday around noon, the currencies were treading water, and certainly not gaining nor losing ground VS the dollar. Gold on the other hand saw another engineered takedown on Monday, bringing it back below $1,500, but like I’ve said a couple times now, this is to be expected, with every move above $1,500 countered with a move back below it the following day… And even though the boys in the band keep getting taken to court, and called names that are usually reserved for gangsters, they just keep doing what they’ve been told to do… keep Gold from moving higher too quickly…

But what’s a Gold bug like me going to do when we’re back to the back and forth between a level again? It’s no use for me to get all lathered up one day, and have to back track the next day… Eventually, this $1,500 level will be left behind, just like the $1,300 level was a couple of months ago…

Oh, and Palladium traded, briefly, over the $1,800 figure overnight… The experts say that a shortage of Palladium has caused this huge move in the metal’s price… I always then have a follow up question for these guys, and ask why then hasn’t the shortage in Silver caused the same explosive upward move? Crickets…

Longtime readers know my affection for Lola (aka Goldman Sachs) NOT! But shoot, Rudy, right now they look like a choir boy when compared to JPMorgan… I’m going to go for the jugular this morning, so if this doesn’t suit your needs, then skip ahead… OK… I’ve quoted the folks, Pam and Russ Martens of before, and they seem to be the new “go to” folks for the GATA folks… And that suits me just fine, because I agree with nearly all that these two say… So, with no beating around the bush, let’s go to what really set me off yelling at the walls yesterday…

“JPMorgan Chase is the largest bank in the United States with $1.6 trillion in deposits from more than 5,000 retail bank branches spread across the country. When it withdraws liquidity from the U.S. financial system, that has a reverberating impact.

According to the filings that JPMorgan Chase makes annually with the Securities and Exchange Commission (SEC), since 2013 JPMorgan Chase has spent $77 billion buying back its own stock. That includes the whopping $17.01 billion it has spent in just the first nine months of this year buying back its stock.” – wall street on parade

Chuck again, and you do you want to know what really ticked me off? JPMorgan/ Chase admitted that they had “partly used customer deposits for their shares buybacks”… Well, if there was any question before as to whether or not the money you have on deposit in a back was yours or the bank’s… That’s been answered now!

So, a year ago, when the tax cut was put into place I said, “this will not be a boon for moms and pops, but for Corporations, and they will not use it to expand their businesses, or Banks to make loans, but to buy back their company stocks… And look where we are a year or so later?

I saw that coming like a hanging curveball back then folks… I’m shocked that most economists didn’t see it that way!

OK, let’s get back to the markets…. I had a dear reader send me a note the other day asking me to please continue to write about the mess in the repo market… Well, first of all, I didn’t get one reader to agree with me on my tin foil hat comment the other day… Which means that you all agree with me on this! WOW ! Yesterday’s repo action saw the lowest amount used in about a month… But still… that’s $47 Billion worth, folks…

So… The Fed keeps the “newly created electronic funds” coming, to support the lack of liquidity in the repo market… They’ve gone to buying bills to help banks with their liquidity, and all this to plug the holes in the dam (economy) one more time… Pretty soon, those plugs are going to begin to pop, and once one does, they all will follow, and then we’ll see just how much the Fed is going to keep the “newly created electronic funds” coming… My guess is they will open up the spigot, and let them flow!

And all that should be bad news for the dollar… Well, wait a minute, let me restate that… It COULD be bad news for the dollar… IF… the markets behave the way they should, when a Central Bank is debasing the country’s currency by adding truck loads of new currency to the mix… The reason I hesitated here, is that for the last month the dollar has been getting debased just about every day, and all we’ve seen from it as far as dollar weakness is a 1-cent move in the euro… I shake my head in disbelief, folks… but it is what it is!

Well, let’s see… Mario Draghi, the European Central Bank (ECB) President steps down this week, and former IMF head, Christine Lagarde takes over… I’m sure that some pundits will be heaping praise on Draghi for “saving the euro” (back in 2011), but for me, I don’t think he did such a good job. He added over $3 Trillion euros to the ECB’s balance sheet among other crimes of passion… And publishing guru, and writer extraordinaire, Bill Bonner, in his daily letter, had this to say about Draghi’s time at the head of the ECB…

“First, they haven’t produced real prosperity. That can be seen by looking at the growth rate. In the eight years before Draghi took the helm, European GDP growth averaged a limp 1.2%. Over the Draghi years, the growth rate was exactly the same, 1.2%. In other words, that $3 trillion added to the euro economy bought nothing.

Second, the money didn’t stop the business cycle either. For example, Germany’s manufacturing sector just registered its 10th straight month of decline. (Germany is Europe’s biggest economy by GDP.)

Third, Mr. Draghi saw his mission as getting consumer prices to rise by 2% per year. Two percent is the totem of almost all modern economists; less than 2% is a threat to prosperity, they believe.”

Chuck again… I like that he said, “they believe”… He’s talking about the dolt economists… Because, is less than 2% CPI (consumer inflation) really that big of a deal? I mean come on! Think about that… with no rising prices, an economy can move along nicely… Think further from 1980 when CPI was 14% to 2000 when it was 3%, the economy was growing… And CPI wasn’t below 2%, then was it? NO!

OK, the BREXIT deadline of 10/31 has been extended to December 12… So, just like the Fed, Treasury and Congress, that keep kicking the debt can down the road, the BREXIT negotiations have been kicked down the road… The U.K. will be going to the polls soon, all these unknowns about the future should be putting pressure on pound sterling. But in that same perverse mentality that has taken over currency traders, the pound is on the rally tracks… go figure!

The Petrol Currencies aren’t getting any help from the stuck in the mud price of Oil these days… There is one Petrol Currencies though that has, very stealthily moved stronger each day for the past 10 days, and that is the Brazilian real… Things have calmed down here, and traders are booking gains on their short trades, it appears to me…

Brazil still has positive interest rates to the dollar, euro, yen and sterling, so that could be beneficial to the real should their political problems continue to calm down.

So, today’s the day the Fed Heads will put away the board games they’ve been playing since yesterday… I just got this mental picture of the Fed Heads sitting around a table and playing Dungeons and Dragons… Yeah, that’s the picture! Any way, the Fed Heads will come out of their “green room” and announce what they are doing with interest rates…

I read a piece yesterday that talked about how the rate decision isn’t a layup for another rate cut, as there were too many dissenters at the last rate cut meeting… Well, that may be, but since the last rate cut meeting, 6 weeks ago, we’ve seen economic data go to hell in a hand basket, and if they hold to their words, about rate movements being tied to the economic data, then a rate cut will be announced this afternoon…

Before we get there, the stock jockeys will see earnings from two of the “FANGS” companies… Amazon and Facebook… will they overshadow what the Fed is going to do later in the day?

The U.S. Data Cupboard saw the Case/ Shiller Home Price Index, reverse the recent trend of monthly declines in prices, when their August report showed an uptick in home prices… You are aware that mortgage rates have fallen by leaps and bounds again, right? But still home sales aren’t what you would consider to be great, given the rate environment… What gives here?

Before I head to the Big Finish today, I wanted to mention something that I saw yesterday that sent shivers down my spine… Have you heard of “Online Installment Loans”? Well, that’s the new thing with the young folks, who don’t see the problems with these things… I had been seeing these silly commercials on TV for Cashnet USA, and didn’t think anything of them, because I would have thought that everyone learned their lessons with “payday loans”…. Mark my words on this folks… At some point we will begin to see the defaults in these “online installment loans”… I’m just saying…

To recap… The currencies held steady Eddie yesterday, but Gold & Silver saw downward movements that began with another engineered take down on Monday. Back and forth, over and below the $1,500 figure, is the new game for the price manipulators with Gold, and with Silver the figure is $18… What’s JPMorgan up to now, that makes Lola look like a choir boy? Brexit gets an extension, and there will be an election in the U.K. All this and more today!

For What It’s Worth… Well, I mentioned Lola (aka Goldman Sachs) earlier this morning, and now here I am talking about them in the FWIW! Lola has slashed their economic forecasts, and that article can be found here:

Or, here’s your snippet: “As we warned, the drop in wholesale inventories has sparked concern on U.S. economic growth in Q3. Goldman has slashed its forecast:

“While the advance trade report had positive implications for net exports in September and Q4, the inventory data was weaker than our previous assumptions. We lowered our Q3 GDP tracking estimate by two tenths to +1.4%, ahead of Wednesday’s advance release.”

And The Atlanta Fed has just cut its forecast too:

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2019 is 1.7 percent on October 28, down from 1.8 percent on October 24.”

Indeed, since President Trump’s election we’ve only seen one quarter of growth at a rate below 2%, and analysts will be looking out for what this might mean for the economy heading into next year’s election.

Thanks to a plunge in inventory stacking for non-durable goods (which sounds admittedly oxymoronic), wholesale inventories slumped 0.7% MoM in September – the biggest decline since Nov 2017.”

Chuck again… Well the first report, with many revisions till to come, on 3rd QTR GDP was that it fell to 1.9%… I’m sure it will see downward revisions as we go along…

Currencies today 10/30/19 American Style: A$ .6860, kiwi .6350, C$ .7642, euro 1.1113, sterling 1.2890, Swiss $1.0079, European Style: rand 14.6085, krone 9.2132, SEK 9.7144, forint 296.33, zloty 3.8356, koruna 22.9477, RUB 63.83, yen 108.85, sing 1.3620, HKD 7.8402, INR 70.68, China 7.0594, peso 19.11, BRL 3.9920, Dollar Index 97.64, Oil $55.61, 10-year 1.82%, Silver $17.95, Platinum $923.59, Palladium $1,788.53, and Gold… $1,493.85

That’s it for today… Well, I have what they call a Uni-boot on my left leg now… This is the fourth different treatment for the leg wound… Fingers crossed on this one, for sure! Well, there’ll be a Game 7 in the World Series, as neither team been able to win at home! St. Louisan and former Mizzou pitcher, Max Scherzer will pitch for the Nationals tonight… I’m doing better on my new medicine, so hopefully my body has adjusted to it… Well, I’m really late today, so for that, I apologize… Tomorrow is the end of Rocktober, and Halloween! Will the Fed spook us early with a no rate cut announcement this afternoon? Jackson Browne takes us to the finish line today with his song, that always brings a tear to my eye: Late For The Sky… I hope you have a Wonderful Wednesday, and please Be Good To Yourself!

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