Money Talks… B.S. Walks…

A Pfennig For Your Thoughts

May 9, 2019

* The dollar is back in charge this morning…
* Trade Talks are failing miserably…

Good Day… And a Tub Thumpin’ Thursday to you! I’m laying low for a couple of days to make certain my problems with my stomach don’t return… By tomorrow, if all goes well, I should be ready and champing on the bit to do some Tub Thumpin’! Cardinals got shut out again yesterday… UGH! For many that were at the game the old saying that a bad day at the ballpark is better than a good day at work, fell into play. Or, maybe that’s just a saying that my good friend Duane and I have used for years! And now that we’re both retired… It just doesn’t have the same ring to it. The band Heartsfield greets me this morning with their rock classic song: Shine On…

Well, that pinch the dollar felt on Tuesday when President Trump announced that he would implement new Tariffs on Chinese goods, went away quickly, and the dollar was back to moving stronger VS the currencies yesterday. The euro dropped below 1.12 again, the A$, which was closing in on 70-cents on Tuesday, fell back into the 69-cent handle… I had a reader ask me why I always highlight those two currencies, euros and A$’s… And I replied… Because the euro is the offset currency to the dollar, and the A$ is the proxy for Global Growth… By knowing what those two are doing, can pretty much tell you the direction of the other currencies.

I have another dear reader that always asks me why I don’t talk about the Swiss franc very much… Well, my mother always taught me that if I didn’t have anything nice to say about someone I should not say it… HA! Seriously… There’s just not that much going on in Switzerland these days, and every time I do see something going on to talk about, it’s not very good… The franc has really sunk in value the past couple of month, but that’s all tied to the euro’s fortunes…

And I’m sure some followers of the currency roundup will be asking what the heck has gotten into Japanese yen? Well, here we go again with the Safe Haven buying, and for some crazy notion/ idea the yen is thought of as a Safe Haven currency… Personally, I would prefer to own Gold, as my safe haven currency!

Gold’s two-day rally came to screeching halt yesterday… In the early morning, Gold had risen by more than $4, and by the end of the day, Gold was down nearly $9… I’m sure when I get around to reading Ed Steer’s letter (www.edsteergoldandsilver.com) I’ll read about how the “Da Boyz” as he calls the price manipulators, unloaded arms full of short Gold trades at the COMEX…

I have to point out the price plunge of Palladium though… I guess the thought that Car Dealers have so much inventory these days, that the production of autos has to be slowing down, and thus a hit to the need of Palladium…

From what I read, the Trade Talks between China / U.S. are not going very well… Again, I might add… I know, I know, the Chinese have taken advantage of the good will of the U.S. for years, but, negotiations, that are worked out amiably, are the way to go… Not implementing tariffs! As my dad taught me years ago… “Money talks… B.S. walks”… And I guess the U.S. negotiators are tied of hears B.S. so, they’re walking!

Well, first I was reading about Modern Monetary Theory or MMT… And brother, you don’t want to read this stuff for it will make you go yell at the wall, find something to kick, and cause you to drink heavily in the middle of the day, (not that there’s anything wrong with that! HA!) I just shake my head in disgust and try to walk away and hope it dies an ugly death…

And now… I’m reading about how the Fed is dusting off a form of Quantitative Easing that was used during World War II…. And get this… Fed heads, Brainard, and Clarida agree that this “new/ old policy is what we need, and that it’s been used in Japan… Wait! What? That’s their reference… it’s Japan? The country that has been an economic funk for over two decades? That’s who were going to reference on this policy?

I’m at wits end, trying to remain civil here… I started the week calling out the Fed heads and saying that they had painted themselves into a corner, and now I end the week with them telling the American public that this policy has been used in Japan? Ok, the full story is in the FWIW section today…. You can go there now to read it, or you can read when you get there! See there? See how easy I am to work with?

We as a country, continue to go down the same paths worn down by the Japanese, who could write the book on How To Ruin Your Economy… Well, we’re turning Japanese, yes, I really think so!

The U.S. Data Cupboard doesn’t have a lot for us today, just the Trade Deficit for March, and April PPI (wholesale inflation)… Yesterday, we saw March Consumer Credit (read debt), and it was very interesting, as it was weaker at $10 Billion, VS $15 Billion the previous month… There are a couple of ways you could take this data, and the way I’m going to take it is that the U.S. Consumer not only has run out of disposable income, but also have run out of credit cards that have any room on them…

And here’s where I’ll remind everyone that Consumption is about 2/3rds of our GDP… So, consumer Spending is important… Of course you shouldn’t spend more than you make, over and over again, but spending is important, and without it, the economy dries up and dies… I’m just saying…

To recap… The pinch the dollar was feeling on Tuesday, went away quickly, and the green/peachback is back to gaining VS the currencies today. The China/ U.S. Trade Talks are failing miserably, and new tariffs have been announced by the U.S. and China says they’ll retaliate… So, here we go… Gold couldn’t hold its early morning gains yesterday, and ended up down about $9… And you’ll not want to miss today’s FWIW, it’s next up, so let’s not dawdle around any longer and go there!

For What It’s Worth… Well, I teased you with this article above today, so here it is in all its glory, the article on how the Fed is dusting off a policy last used during WWII and it can be found here: https://www.marketwatch.com/story/the-fed-is-dusting-off-a-qe-replacement-last-used-during-world-war-ii-2019-05-08

Or, here’s your snippet: “Federal Reserve Governor Lael Brainard on Wednesday became the second U.S. central banker to talk about the possibility of targeting longer-term interest rates as a “new” tool to combat the next recession.

It’s actually not so new. The last time the Fed conducted such a policy was during World War II to keep down the costs of funding the war.
The concept is relatively simple. If the Fed’s benchmark interest rate fell to zero and the two-year Treasury yield was at 2%, the Fed could announce it intends to use its balance sheet to peg the 2-year TMUBMUSD02Y, -1.06% rate at 1%. The general idea is that lower long-term rates spur activity.

Fed Vice Chairman Richard Clarida floated the idea in a speech earlier this year, and has done research on its use in Japan.”

Chuck again… Recall me telling you that during recessions in our history that the Fed, on average, have cut interest rates 5%… But with interest rates not even 3% in the U.S. how would the Fed combat the next recession? I told you that more Quantitative Easing would come, even if it weren’t named that, and then next would be negative interest rates…

Well, the Fed Heads are trying to do an end run, and get involved in the Bond market, but as a price determinate, not a buyer… Why, oh why must these Central Banks feel that they have to “do something” why can’t they just let economies do what economies need to do, and let interest rates be determined by the economy? Why, oh why?

Currencies today 5/9/19 American Style: A$.6975, kiwi .6575, C$ .7416, euro 1.1191, sterling 1.2989, Swiss $.9824, European Style: rand 14.3279, krone 8.7607, SEK 9.6458, forint 288.91, zloty 3.8360, koruna 22.9742, RUB 65.15, yen 109.84, sing 1.3637, HKD 7.8479, INR 70.04, China 6.7768, peso 19.14, BRL 3.9503, Dollar Index 97.62, Oil $61.62, 10-year 2.44%, Silver $14.76, Platinum $851.94, Palladium $1,288.96, and Gold… $1,281.41

That’s it for today… Well, this weekend we’ll celebrate Moms, and it will be Mother’s Day on Sunday… As I typed the word Mom, I got a chill down my spine, because I thought of my mom, who I miss terribly, especially since I’ve had cancer, because I know if she had been alive she would have made me feel better during some rough times… Last year, daughter, Rachel asked me to tell her a story about my mom… And by the time I got half way through it my eyes were filled with tears, and voice was cracking… I loved my mom, and miss her dearly… So… if your mom is still around, make sure you hug her and tell her you love her… Happy Mother’s Day to all the Moms out there! Chicago takes us to the finish line today with one of their early songs: In The Country… I hope you have a Tub Thumpin’ Thursday… A Fantastico Friday tomorrow, and a Wonderful Mother’s Day Weekend! And please Be Good To Yourself!

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