JPMorgan Says Illiquidity Is Going To Get Worse!

A Pfennig For Your Thoughts

Rocktober 22, 2019

* Currencies can’t hold or add to their Friday gains…
* The growth of Treasury Issuance is to blame…

Good Day… And a Tom Terrific Tuesday to you! Well, little Evie, my darling granddaughter came home on Sunday, and made a trip to the doc on Monday, and she’s fine! Newborn babies are so fragile, on the outside and the inside… And she reminded me of that! I’m going to go bananas over the Fed again today, and the government for not implementing spending cuts, so buckle up… I’m just saying…. The late great, Leon Russell greets me this morning with his song: Delta Lady…

Where do I start? Where do I start? OK, maybe I’ll start with the same old song and dance about how deficits do matter, and that the explosion of debt this past decade, has really put a damper on the ability of the Government to issue Treasuries to finance the debt… Budget deficits turn into national debt… just so we have that down… Before we turn the calendar on 2019, our national current debt will be $23 Trillion… Hey!

Didn’t we just recently pass $22 Trillion? Well, not that long ago, yes we did, it just illustrates how much we as a country are spending money we don’t have… Did you know that Social Security and Medicare, basically take up a large portion of our debt? Then you throw in all the Trillions we’ve spent on the military, and then welfare, and so on and son… So, as long as Congress doesn’t have the cajones to cut spending, much less take a long hard look at the retirement system in this country… The debt will continue to grow… And that’s bad news, as I said for the issuance of Treasuries….

Last week, I told you about the Banks that are in need of liquidity… We aren’t allowed to find out who these banks are, but that’s a story for another day. Well, this lack of liquidity simply continues… And you would have to think that the Primary Dealers, you know, the ones that have to buy any of the auction of Treasuries that foreigners don’t buy? Well, you would have to think that by now they are up to their eyeballs in Treasuries… It’s simple math folks… The gov’t spends more, so they have to issue even more Treasuries, and then you have Central Banks around the world not showing up at the auction window, which means the Primary Dealers have to buy even more, taking even more cash out of the economy, and thus creating this illiquidity…

Fed Dallas President, Robert Kaplan, told an audience: “The dramatic increase in Treasury issuance takes liquidity out of the system.” Oh, and JPMorgan says this mess in illiquidity is just going to get worse! I know, I know they’re not Lola, but they still carry lots of weight…

In my best church lady voice, “Now isn’t that special?” And then you wonder why, the Fed has no choice but to cut rates, to keep the bond servicing costs down? And you see why the Fed, has no choice but to keep up the creation of newly created electronic funds…. And now that I’ve brought this all home… Now you see why you need to have a diversified investment portfolio, which includes, 2 asset classes that probably your stock jockey doesn’t know exist… Currencies and metals… I’m just saying…

And then the Fed… They keep allowing this all to happen… If they were truly independent, and lived here in the U.S. and bought their gas, groceries and giggles with dollars, they would step up and tell congress “no mas”! Because if they keep this up, the flood of dollars in the system is only going to dilute the present stock of money that’s being used… And by dilute, I mean, cause it to weaken…

The Fed Heads may tell you that they’re not responsible for limiting the debts of Congress… And I say hogwash! They take on new responsibilities and mandates all the time, it’s kind of a shoot from the hip kind of mandate for the Fed, so buck up, act like adults, and do something!

That’s wishful thinking folks… noting but wishful thinking…

OKBEE… Before I go on… I must go through the currencies and metals from yesterday… The currencies traded in a tight range, but could not add to their gains from Friday… The lack of more negative data prints in the U.S. probably gave the dollar bugs a reprieve from the selling… Gold didn’t fare too well either on Monday, losing about $5.50 on the day, and moving toward what I told a dear reader yesterday…. The chartists tell me that Gold’s correction could take it down to $1,425… And then we would see a dramatic turnaround… I say, well, ok, but let’s get moving on this, because I still believe Gold will be much higher by year end!

Well, one day I’m thinking after hearing the news that President Trump was planning on hosting the next G-7 meeting at his Florida place, that maybe just maybe, this could be a meeting to reset the price of Gold… But then a day later, he cancelled those plans, because of all the flak he got from… well, from the usual suspects… So, there goes my conspiracy plan to get the price of Gold reset, so that our debts could be dealt with. Recall that a few months ago, I said that “if the price of Gold was reset at $10,000 oz. that a lot of our problems with debt could be more easily managed. The way I saw this working was the Gov’ts of the world would have to agree (thus the meeting of G-7) and then further to G-20, and these gov’ts would guarantee the price of Gold bid and ask… Hey! Don’t shoot the messenger! This was just a plan that would work, and I thought, what the heck? Why not?

So, the best laid plans of mice and men, go to the wayside, and get forgotten about… Hmmm… Crazy, I’m crazy for crying, crazy for trying, I’m crazy for loving in you (gold) … (Ahhhh, Patsy Cline) A little cocktail trivia for you here… What song is the most played song on jukeboxes of all time? Crazy, sung by Patsy Cline, and written by Willie Nelson!

Did you hear last week that Japan printed the lowest inflation in their history? And what have they been doing for over 20 years now? The Bank of Japan (BOJ) has been stimulating (they think) their economy with all sorts of programs, but the most thing they’ve depended on is bond buying, and stock buying (yes, the BOJ is now the largest shareholder in Japan!)

The point I’m getting to here is that… shouldn’t the Fed be watching what’s going on in Japan and say, “we want no part of that, for their economy has been slow as molasses for 2 decades!” They’ve tried to stimulate the economy so many times I’ve lost track of them, and for what? Their economy is a basket case and inflation is nowhere to be found…

Oh, and this came across my screen this morning while my fat fingers were flying around the keyboard… JPMorgan, the bank that has had a couple of run ins with the Federal Authorities, have announced that they are going to implement a plan to hire more applicants with criminal backgrounds…

While that may be a noble thing to do… In JPMorgan’s position right now, you would think they would be towing the line… I’m just saying… You would think that they would avoid this kind of publicity as you can hear people mumbling something like, That makes sense since they already employ traders that are being tried for fraud… Crazy stuff folks…

The U.S. Data Cupboard is empty again today… no prints are scheduled for today, which gives the dollar bugs another chance to scatter about the floor with no negative data prints stomping on them… I think yesterday, I said that we’ll get Durable and Capital Goods Orders on Wednesday, but actually they’ll print on Thursday… One of these days I’ll learn how to read a calendar! HA!

There’s nothing on the global economic calendar either… It’s a very slow week for data, for sure!

To recap… The currencies couldn’t add to their Friday gains on Monday, as the no data print on Monday, gave the dollar bugs a chance to scatter… Chuck takes Congress to the carpet, and the Fed for abetting their deficit spending sprees… And JPMorgan thinks this current mess in illiquidity is only going to get worse, and Fed Head Kaplan, says the growth of Treasury issuance is to blame…

For What It’s Worth… Scandals, Scandals everywhere there’s scandals, ruining investor confidence, and shaking my mind… Traders being taken to court for manipulating metals, Banks receiving massive fines for their hand in the manipulating. And more… Reminds me a lot of 2001-2002, when all those Corporate scandals created a world of mistrust in U.S. Corporations… Well, this article is in that same vein and it can be found here: https://www.bbc.com/news/business-50089887?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Tuesday+22+October+2019

Or, here’s your snippet: “One of the world’s leading fund managers has been forced to resign after the BBC discovered he had broken investment rules.

Mark Denning helped to manage more than $300bn (£229bn; €265bn) of investors’ money at Capital Group.

BBC One’s Panorama uncovered evidence that suggests he was secretly acquiring shares for his own benefit in some of the same companies as his funds.

Mr Denning, who had worked at the firm for 36 years, denies any wrongdoing.

The 62-year-old fund manager left his job five days after Panorama wrote to Capital Group about the findings of its investigation.

Capital Group – which manages almost $2 trillion of assets – said Mr Denning was no longer with the firm.

“We have a Code of Ethics and personal investing disclosure requirements that hold our associates to the highest standards of conduct. When we learned of this matter, we took immediate action,” it said.

Fund managers are not supposed to invest in the same companies as their funds, because they could potentially profit at the expense of investors.”

Chuck Again… Are we back in 2000, 2001? Do you recall Enron? WorldCom? Tyco? Freddie Mac? Or how about Healthsouth? Just to name a few… See? I have a memory like a steel trap! HA!

Currencies today 10/22/19 American Style: A$.6860, kiwi .6416, C$ .7634, euro 1.1136, sterling 1.2955, Swiss $1.0114, European Style: rand 14,6762, krone 9.1414, SEK 9.6338, forint 296.36, zloty 3.8424, koruna 22.9518, RUB 63.73, yen 108.60, sing 1.3623, HKD 7.8430, INR 70.74, China 7.0733, peso 19.10, BRL 4.1229, Dollar Index 97.38, Oil $53.54, 10-year 1.77%, Silver $17.63, Platinum $889.42, Palladium $1,758.56, and Gold… $1,486.83

That’s it for today… Well the Stanley Cup hangover seems to have hit the Blues… But I won’t complain, they did win the STANLEY CUP last year! And they played a very good game last night… Thanks to all who sent along emails telling me they were hoping my scans were good… So, here’s the official news… I still have the lesion on my right mandible, it’s been there so long now that part of my mandible gone… It’s been eaten away… I can’t chew food on that side of my mouth, so I guess as long as I don’t end up in a fist fight! I’ll be OK…They found two very small spots on my lung, same place as before. So, they came back, but… They won’t even qualify them as anything but small spots… And besides that, no new cancers! The chemo I take by mouth every day, seems to be doing the trick, and now that I get to take a week off of it every two weeks, I can tolerate it even more! So, now you know what I know… Isn’t that great? I had the doctor in the Wound Center ask me if my original cancer diagnosis was really in 2007… I said, yes it was, and why do you ask? He said, “I’m amazed that you’re still alive”… And with that, The Yardbirds take us to the finish line today with their song: For Your Love… I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

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