JPMorgan Says U.S. Economy Is Deteriorating….

A Pfennig For Your Thoughts

May 29, 2019

* The dollar recovers its losses from Friday…
* Midwest rains are cause for concern…

Good Day… And a Wonderful Wednesday to you! Our Blues get back on the ice tonight in Boston, and try to tie up the best of seven series that is the Stanley Cup Finals… I misspoke yesterday when I said that the Blues hadn’t scored in the Finals before… I was just going on my memories of those series from 68, 69 and 70… Sorry to all that caught that! I’m so sad about my car… I bought this car 8 years ago, with 29,000 miles on it, and it was 1 year old. I’ve only put 50,000 miles on it in the 8 years that I’ve bought it, and to date I hadn’t had to spend more than normal maintenance on it… But that will all change today… UGH! I wish I could take my beloved Cardinals’ bats to a shop to be fixed, because they need it badly! The Main Ingredient greets me this morning with their song: Everybody Plays The Fool… There’s no exception to the rule… is how the song goes, from the 70’s…

OK… The dollar was able to hold onto to its move from Monday, on Tuesday and through the overnight trading last night. For some reason, currency traders are betting that the U.S. dollar is going to be the main beneficiary of the Trade War… And you know how they say, “you can’t beat City Hall”… An older guy on the trading desk of a firm where I worked back in 1979, told me… “Son, the markets are never wrong”… In other words, don’t try to be a contrarian… I’ve applied that to my trading and investing for a long time… The markets my not be wrong, but they sure are barking up the wrong tree, as far as I’m concerned, most of the time!

Yesterday, I said something nice about the Russian economy, and then longtime reader, Bob, sent me a note from intellinews.com that talked about how the Russian economy is stagnating… The Central Bank of Russia (CBR) Gov. Elvira Nabiullina, recently said that she expected the economy to grow, but put parameters on the growth saying, “ GDP growth rate is bound to be low: less than 1% next year and 1.5-2% in 2018 and 2019”

She also gave an interview the other day and talked about how she saw a Global recession coming… See? She thinks like me! No wonder I think she’s the best Central Banker around! Anyway, the Russian ruble gave back some of its gains on the news that GDP had slowed so much… As it should! Fundamentals folks! It’s good for the ruble to use fundamentals, but not the dollar these days…

Another thing weighing on the ruble and the rest of the Petrol Currencies is the drop in the price of Oil… The drop in price is really beginning to show on the faces of the Canadian dollar/ loonie, and Norwegian krone…
And the pound sterling continues to feel the heat of the failed BREXIT talks and PM May… Political uncertainty is abundant in the U.K. and I’ve told you all for years that currency traders don’t like political uncertainty, and so pound sterling is feeling the heat…

And Gold couldn’t hold its gains from Friday, after the holiday thinned markets on Monday left it at $1,284, but yesterday, Gold slipped about $4 on the day… I don’t believe it was profit taking, just because Gold rose more than $10 on Friday… I would have thought that given the flight to safe havens like Treasuries and yen that Gold would follow suit… But so much for the best laid plans of mice and men, eh?

But not to fret, Gold has recovered that loss yesterday in the early morning trading today… Now, let’s see how long the boys in the band allow that to continue once they arrive at their desks this morning!
Speaking of Treasuries… The 10-year’s yield has dropped to 2.24%…

Last week on Wednesday the 10-year’s yield was 2.41%.. So that’s quite a move down in yield in just a week, folks… And remember that bond pricing goes like this… When the yield goes down the price goes up and vice versa… So, bonds have been rallying strongly, and it has to be from the flight to safe havens because of the Trade War…

The bond rally isn’t just about fears from the Trade War… The “bond boys” see the U.S. economy for what it is, and where interest rates are going, which is down… Things just don’t look, feel, or smell right here in the U.S. economy, to me folks…And don’t look now, but guess who’s waking up on the same side of the bed as Chuck? JPMorgan, who yesterday said that “the economy was deteriorating, and was now on recession watch”… Ok, I have to admit I don’t like being associated with the kind of folks that short Gold & Silver the way this firm does, but at the same time it’s not too shabby to have a Big Brokerage with tons of research people, say the same things I’ve been saying for months now… And… don’t look now but the yield curve is inverted more than it was in 2007… I’m just saying….

The U.S. Data Cupboard had the March Case/ Shiller Home Price Index yesterday, and just like I said I thought it would, the report showed that Home Prices slipped again in March… I do believe that makes 4 consecutive months of slippage here… And get this… sit down because you’re going to want to be sitting when you hear this one…. Consumer Confidence rose this month from 129 to 134! Crazy, simply crazy…

But it does prove that the Gov’t and all the Gov’t’s men have done a great job of pulling the wool over investors’ collective eyes… I just wonder what’s going to happen here once Humpty Dumpty falls off the wall, and all the government’s men can’t put it back together again!

And I don’t know about you, but I’m worried about the farmers in the Midwest… We’ve received so much rain this spring, that the Mississippi River is going to crest this week at a level higher than the record level that was set in 1993, which was supposed to be a 200 -year flood… I read yesterday that the price of corn in contracts is falling because of all the rain, and if my yard is squishy from all the rain, I can easily imagine what the fields of a farm feel like…

Econ 101 tells me that when supplies diminish (like they will with food from the Midwest farms that don’t yield what they normally yield) and demand remains high, that inflation rears its ugly head… Remember the line I’ve told you about many times through the years that my dad taught me… There’s no such thing as a shortage… It’s merely something that needs a price adjustment… So, get ready for those price increases folks…

OK… one more note before I head to the Big Finish today… In the past the safe havens were: Euros, yen, francs, Gold and Treasuries… But now the safe havens appear to be yen, and Treasuries along with dollars… One would think that the other, historically favored safe havens would join in at sometime, but the back of my brain is telling me that we should doubt that will happen… UGH!

To recap… The dollar fought back throughout the day, yesterday, and the overnight markets, last night, and has recovered just about all of its losses from last Friday. Strange that the dollars have replaced euros and francs as safe haven investments, but it is what it is, folks… Treasuries are really rallying and Chuck thinks that it’s more than just the fear of the Trade War, but the direction of interest rates in addition… And JPMorgan says the U.S. economy is deteriorating…

For What It’s Worth… Well, this article came to me from the folks at MarketWatch, and its about how more annuities are going to be available in 401k’s if a bill passes… You can find the article here: https://www.marketwatch.com/story/the-house-passed-a-bill-that-would-allow-more-annuities-in-401k-plans-is-that-actually-a-good-thing-2019-05-28?mod=MW_section_top_stories

Or, here’s your snippet: “The SECURE Act is one step closer to becoming law, and with it, Americans would see a few tweaks to the way the retirement system works.

As part of the SECURE Act, which the House of Representatives passed last week, individual retirement accounts’ age cap would be lifted, small businesses would have more avenues to offer retirement plans to their employees and part-time workers would get access to 401(k) accounts. The legislation would also boost the use of annuities in retirement accounts — something that may tilt a few heads considering the bad reputation annuities typically get for being an upfront expense with an uncertain payout (such as, if the owner of an annuity dies before reaping the benefits, or being tied to a seven- to 10-year contract).

Currently, plan providers have the fiduciary responsibility to vet annuities but under the safe harbor provision of the SECURE Act, the onus would be placed on insurers to provide employers with the right products. Employers would be given guidance on how to ensure those providers and their products are up to par, including reviewing the insurers’ status under state insurance regulation and enforcement.”

Chuck again… Yes, annuities have a bad reputation but not all annuities should be thrown in the bad reputation pile… In my opinion, only variable rate annuities should be banned from 401k’s… But then I’m no expert in the matter, and for that expertise, you should go to www.milleronthemoney.com and get his annuity brochure…

Currencies today 5/29/19 American Style: A$.6918, kiwi .6518, C$ .7405, euro 1.1158, sterling 1.2647, Swiss $.9943, European Style: rand 14.7905, krone 8.7453, SEK 9.5933, forint 292.93, zloty 3.8545, koruna 23.1845, RUB 64.54, yen 109.34, sing 1.3820, HKD 7.8493, INR 69.80, China 6.9076, peso 19.22, BRL 4.0325, Dollar Index 97.99, Oil $57.93, 10-year 2.24%, Silver $14.38, Platinum $793.01, Palladium $1,338.57, and Gold… $1,283.99

That’s it for today… Well, I received bad news yesterday on the Delaney video front… It appears that the video didn’t turn out good, and the audio was bad, so we’ll try again when she sing the national anthem at the Gateway Grizzlies game in August… I guess you’ll just have to take my word that she sounded awesome! I may be just little biased, but don’t let that get in the way! HA! What’s it going to take to get the Cardinals straightened out? They can’t fire the manager and hitting coach, they already did that last year… A major trade? Change the look of the team? Whatever it is, the GM has his work cut out for him! Ok, my fave Supertramp song is playing as I head to the finish line today…. Hide In Your Shell… I hope you have a Wonderful Wednesday, and will continue to Be Good To Yourself!

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