The Dollar Ends The Year On A Sour Note…

A Pfennig For Your Thoughts

December 31, 2020

* Currencies & metals have a good week 
* McConnell plays the part of the soup Nazi… 

Good Day… And a Tub Thumpin’ Thursday to you! It’s New Year’s Eve! Well, I’m here in my winter home once again… I left rainy, chilly St. Louis yesterday morning, and arrived here a few hours later, and it was partly sunny and 80! My kind of weather! Well, President Trump’s $2,000 offer of checks to be sent to citizens, was shot down by the Senate… So… no $2,000 check for you! So, when did the Senate get a coming to Jesus nerve and turn down spending money we don’t have to spend? Ok, did you have a Great Christmas? Mine was good… family gathered like we do every year… And the little kids… I simply loved watching them! Last Wednesday, the grandkids, sans little Evie, came over to the house to bake Christmas cookies with Mimi… (Kathy) I took some videos of the baking extravaganza and when I need a laugh, I’ll pull up those videos! 10cc greets me this morning with their song: Dreadlock Holiday…

While Chuck’s Away…. As they used to say on the currency desk… “The currencies rally!” So, as I’ve offered before, if you would like me to go on permanent vacation, just say the word… I could be easily talked into taking one for the team here… You know… I’m really flying blind here this morning, as I usually send myself some notes when I’ve been away for a week, that remind me of things that went on that I need to talk about, but not this time…. I was too busy celebrating Christmas! And then the next day after Christmas was Kathy’s birthday… So, let’s see what I can find to talk about here…

The dollar continued to get sold last week, holiday or not… Yesterday, with the news that while the stimulus checks weren’t $2,000, the outlook for the economy continues to weaken, and the outlook for a recovery from the virus doesn’t look like it’s going to be coming to a Theater near you, any time soon, and mark my words here, the new administration will go back to the wishing well and ask for more money soon enough… And therein lays the problem, as I told you back when he first checks went out, that it was setting a bad precedence, in that, once you give somebody something for nothing, they will expect more, and more, and more, etc.   And so we are in our second of those “mores”…

I keep thinking about McConnell playing the part of the Soup Nazi.. “No $2,000 check for you!” On a sidebar, wasn’t the Seinfeld show one of the greatest ever? 

When I arrived at my winter home, I plugged in my laptop, connected to the wifi, and pulled up the currency prices to see the euro reach 1.23… That was late yesterday afternoon… And this morning, the single unit is trading  a little weaker at 1.2280…   The Dollar index, which early last week , tried to rally, has fallen below the 90 figure…. And looks to be in some real trouble… Traders are starting to see the future for the dollar, which is troubled to say the least. And don’t look now, but the news this past weekend was that China’s economy has passed the U.S.’s economy as far as size… And make sure you make notes about all those economists that kept saying that the 4th QTR GDP would be strong…

Because, they are going to be proven very wrong… And with those wrong thoughts will be the ones from the other set of economists that said that a collapse of the U.S. dollar was not going to happen…

So, as we close out 2020 (thank goodness finally!), we have the dollar bugs on the run, we have the currencies led by the euro kicking tail and taking names later, and we have Gold back on the rally tracks… A good sign for the currencies and Gold to start out the New Year, which will not have to work very hard to beat 2020 in the race for what was a better year… 

There are three bubbles blowing bigger and bigger right now folks… Home Prices…. Stocks…. And Bitcoin… Will those bubbles bust in 2021? Well, that remains to be seen, and I don’t have an answer for you, but I will say that I wouldn’t be surprised to see at least 1 of these 3 bubbles bust in 2021… I don’t have a crystal ball here, nor do I know something about these 3 that everyone else doesn’t know… I’m just making an educated guess about how long they’ve been blowing, and using my experience in watching these things come to an end…

Well, did you hear that Russia not only just reaped a record year in crop yields? And that they, in spite of the continuing economic sanctions Russia will post a positive 2.7% GDP for 2020… Hey! They’ve been hit by the Plandemic just like everyone else… So, posting a 2.7% GDP for 2020 is quite an achievement. And the path of the Russian ruble shows that traders are sitting up and taking notice. At the beginning of this month the ruble was trading with an 80 handle… and to end the month it’s trading with a 74 handle..

OK, before I get accused of being a Russia cheerleader… I’ll move on to another currency that has really been the cat’s meow lately… And that is… drumroll please… The Aussie dollar (A$) fell to a low of 57-cents back on March 20… ( I was at Roger Dean Stadium watching my beloved Cardinals and not paying attention to the currencies one iota) and last night, the currency traded above 77-cents… Oh, and remember that saber rattling exercise we went through a couple of months ago, when China announced that they were going to boycott imports of Aussie steel? The Aussies have held their position and the Chinese are finding that they desperately need those shipments of steel… So, what could have become a major problem for both countries, turns out have been a tempest in a teacup… And the A$ moves on…

Of course maybe these two currencies I’ve just discussed aren’t your cup-o-tea… Well, when the dollar makes its final move into the new weak dollar trend, you’ll have your choice of currencies to own, and look to make a part of your diversified investment portfolio!

Gold had a good day yesterday… The shiny metal gained $15.90 to close at $1,895.30… And Silver put in another day of good moves gaining 46-cents to close at $26.76… Silver has been the hot commodity lately, despite the fact that there are so many short contracts out there that it would take 190 days of production to equal the ounces sold short in those contracts. One of these days, someone with some gray matter will realize that this short selling more ounces than are above ground is wrong, immoral, unethical, and just plain stupid, and will stop this from going on… and when that does happen, or I guess IF that should happen, Silver will skyrocket to the moon… A real moon shot baby! But until then, we have to settle for these, what I call, rally disruptions..

In the overnight markets last night, the euro slipped a little, probably profit taking once it hit 1.23, and Gold is down a buck, and Silver is down 22-cents… Year -end bookings will take place today, and already took place last night overseas… Square them up boys! I can hear the head accountant yelling out to the boys and girls on the trading desks in the big banks…  

The U.S. Data Cupboard has been lacking this past week, but with the Christmas holiday, and now the New Year’s holiday, I guess we shouldn’t expect much more than what we got, which was the year on year Case/Shiller Home Price Index… And circling back the 3 bubbles I called out above, Home Prices for Oct on a year on year basis increased 8.4%! 

So, riddle me this Batman… We’ve got over 20 Million people collecting unemployment, which means they don’t have a job… We’ve got millions more that have fallen off the unemployment books because their benefits ran out… We’ve got the country running scared of a virus…. And through all that Home prices are soaring!  You know, I realized something the other day, and that I’m getting all of my daily exercise these days, by shaking my head in disbelief! HAHA!

To Recap… It has been a good time for the currencies and metals while Chuck was on his winter vacation… The President’s attempt to get $2,000 checks out to people in need, didn’t have a snowball’s chance in hell of getting through the Senate, who have become penny pinchers? Oh, one can only hope, but I doubt it seriously! Chuck’s call that the dollar has begun a new weak dollar trade, continues to tread water, he’s just waiting for the damn to break on the dollar bugs…

Before we head to the Finish line today, I wanted to mention some of the people that we lost this past year that I followed…. Like Bob Gibson, Lou Brock, Dick Allen… Al Kaline, Whitey Ford, and just this week Phil Niekro… We lost great musicians like Charlie Daniels, Leslie West, Chad Stuart, and more… Don’t know who Chad Stuart was? Remember Chad & Jeremy? Sean Connery aka James bond… And then Dawn Wells, and Melody Patterson, two of my faves! Mary Ann, and Wrangler Jane! I know I missed mentioning probably quite a few important names, but… These are the ones that when I heard they had passed I stopped what I was doing and thought about them…

For What It’s Worth… You know, I worked in a few banks in my life… starting in 1979, with the old First National Bank of St. Louis… Where I met my good friend, Ed Bonawitz… What I’m getting at is I’m glad I don’t work for a bank now… Banks are sure getting black eyes from all the pounding they brought on themselves, and since the year 2000 Banks have been charged $195 Billion in fines… For some that were dinged, they simply wrote it off as The Cost of doing Business… But for some others they had to suck it up and take their blows… Well, I have an article for you today that talks about these fines the banks have paid since 2000, and it can be found here: Cost Of Doing Business: Big Banks Have Paid $195 Billion In Fines Since 2000 | ZeroHedge

Or, here’s your last snippet of 2020: “Often times when the “too big to fail” banks are caught with their hands in the cookie jar (or placing the entire global economy on the precipice of collapse, as was the case in 2008), nobody goes to jail and the banks wind up paying a hefty fine and putting the “youthful indiscretions” behind them. This inevitably leads to jokes about how paying fines is part of the cost of doing business for big banks.

But it isn’t until you aggregate the sums paid over the last 2 decades, which FT did in a report published this weekend, that one can really see just how much these fines actually are becoming a cost of doing business for banks. Over the last 20 years, the six largest U.S. banks have paid out nearly $200 billion in fines and penalties.

Advocacy group Better Markets found that Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo have paid $195 billion, collectively, since 2000. The group claims the numbers show banks behavior deteriorating, as they have endured more fines since the global financial crisis than prior to it.

There were 85 major legal complaints against banks between 2000 and 2008. Between 2008 and 2012, that number was 110 cases, most of which were mortgage related. But since 2012, the group found that there has been another 204 legal actions.

Better Markets chief executive Dennis Kelleher said: “They’re all major legal actions?.?.?.?It’s not like it was a ‘broken windows’ theory post-crash where prosecutors are fining every little violation. If they were held to higher standards they all would have been put out of business because the recidivism is really quite shocking.”

He continued: “It’s absolutely shocking that JPMorgan has now pleaded guilty to three separate criminal charges for egregious years-long criminal conduct.”

Banks like JP Morgan are repeating past mistakes, too. In October, the bank paid $920 million for manipulation of the metals market – this comes after the bank admitted AML failings in 2014 and pleaded guilty in 2015 to manipulating FX markets.”

Chuck Again… Again, I’m getting my exercise here, shaking my head in disbelief…

Market Prices 12/31/20: American Style: A$ .7737, kiwi .7239, C$ .7852, euro 1.2280, sterling 1.3658, Swiss $ 1.1355, European Style: rand 14.6789, krone 8.5144, SEK 8.1579, forint 296.80, zloty 3.7104,  koruna 21.3600, RUB 74.19, yen 103.05, sing 1.3213, HKD 7.7524, INR 72.97, China 6.5242, peso 19.89, BRL 5.1975, Dollar Index 89.63, Oil $47.96, 10–year .92%, Silver $26.54, Platinum $1,007.00, Palladium $2,416.00, and Gold… $1,894.10

That’s it for today… Well, I guess many people had to cancel plans for big New Year’s Eve parties… And we won’t be home to host an after dinner party like we’ve done the past few years… So, how many of you will still be awake at midnight? I doubt seriously I will be… We’re going to celebrate with some condo friends around the pool, with social distancing of course! I was very disappointed that my beloved Mizzou Tigers had to cancel their bowl game because of a virus outbreak… And then to top it off The Tigers basketball team got the snot kicked out of them by Tennessee last night… I know when I last talked to you I said that they had lost the game the night before, but they had actually won it… But no comeback was in the cards last night… And it was on the Tigers’ home court! UGH! Well, hockey is slated to start in two weeks… That’s a good thing… I think our Blues will be better than the average Bear this year…  Hamilton, Joe, Frank and Reynolds takes us to the finish line today and this year, with their song: Fallin’ In Love…. Baby, Baby fallin’ in love, I’m Fallin’ in love again… So… be careful out there tonight, this is what Kathy’s dad used to call “Amateur’s Night”… I hope you have a Tub Thumpin’ Thursday And a very Happy New Year! And Please Be Good To Yourself!

Chuck Butler

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A Pfennig For Your Thoughts