The Dollar Is Our Currency, But It’s Your Problem!

A Pfennig For Your Thoughts
 
June 24, 2020
 
* Gold pushes through $1,750 and is not looking back! 
* Currencies benefit from dollar selling… 
 
Good day… And a Wonderful Wednesday to you! What a day, yesterday, what a day! One of the most beautiful days I can recall in June… No major problems at the Butler house to deal with yesterday, so my normal routine was not in trouble like it was on Saturday, Sunday and Monday! I’m a “routine” kind of person, and to upset the applecart which is my daily routine, tends to send me spiraling into a funk… But the funk was taken care of yesterday, by the routine being back in place, and the beautiful day! Today is supposed to be a lot like yesterday, so I have that going for me, eh? The breakout for Gold is happening, the currencies gather steam again, and other things about the economy that you’ll probably not hear anywhere else! But before that, the band, Yes, greets me this morning with their song: Rythm of Love… (and yes, they spelled rhythm like that!)
 
OK, so all my whining and complaining yesterday about the baseball players and owners being knuckleheads was quieted when a report came out that the MLB Commissioner per the agreement from March 26th, has implemented a start to the season which will be July 26th, with players reporting for “summer camp” by July 1st… So, another of Chuck’s routines, watching his beloved Cardinals play baseball will be returning, and not soon enough as far as I’m concerned!
 
Well… The breakout to higher prices for Gold has begun in earnest, folks… Yes, there could still be an uprising by the price manipulators, but for the most part, the bull-market has dug its heels in and it looks like there’s nothing holding Gold back now…. Gold rose $16 yesterday to close at $1,770… So the parameters I put on whether or not $1,750 was going to be launching pad, was that Gold had to first cross it, and then hold that level… check, check! So, we’re off to find the Wizard the Wonderful Wizard of Oz… What were Dorothy, toto, and her friends told to do? Follow the yellow brick road…. Follow the yellow brick road…
 
Late last week’s drubbing of the currencies by the dollar bugs, appears to be small number now in the review mirrors of the currencies. The currencies, led by the euro was back over 1.13 handle last night, and the Aussie dollar (A$) was climbing toward 70-cents, at .6951. However, in the overnight markets the A$ was brought back to .6915… 
 
With the price of Oil pushing higher, the Russian ruble has gotten back on the rally tracks… I just wish the ruble was strong enough to pull all the Petrol Currencies, like the Norwegian krone along for the ride! 
 
I wonder just how much weight, the words of economist, Stephen Roach, has had to do with this rebound in the currencies? Recall, I told you late last week, that Roach, now of Yale University, told an audience that the dollar is getting ready to fall to great lengths, price wise. There was a time 20 years ago, when Stephen Roach said something, people, and traders stopped to listen… I still get excited to see a quote by him… So, maybe, just maybe, ‘cause we just never know, he’s still listened to by traders?
 
Yesterday, I was a little tough with the beaver…. Oh, come one, Chuck you were just giving the RBNZ, “the business”, Ok Eddie Haskel… I’ll take your word on that… The Reserve Bank of New Zealand (RBNZ) didn’t cut rates as I suspected they would last night, and instead they did something that I would call very prudent! They said that no further monetary policy changes would be made until they saw the total effect of what they have already done, first…. Yay for the RBNZ! Hip, hip, horary! It’s been awhile since I last heard a Central Bank talk with prudency…
 
I don’t know if you’ve been watching the Swiss franc lately, but a stealth-like move has been going on and this morning the franc is within’ spittin’ distance of $1.06…. I know someone who has been watching the franc’s upward movement, and that is the Swiss National Bank (SNB)…
 
Yesterday, the SNB issued a report reminding traders that monetary intervention is still a tool in their tool belts…. This, rallying currencies, is going to really cause some problems for all the currencies that rally VS the dollar, as the dollar get sold… All the countries of the world, except maybe Russia, can’t be having their respective currencies on the rally tracks too long, they don’t have inflation right now to fight, and they need all the help they can get with exports… So, they don’t need stronger currencies right now… But unless they want to throw good money after bad money and intervene, they’ll have no choice…. It’s all the dollar’s fault!
 
The U.S. Treasury Secretary John Connelly had this to say in 1971 (remember when the dollar was losing so much ground after being taken off the Gold standard) “The dollar is our currency, but it’s your problem”
 
Getting back to the Swiss franc… Remember when the SNB placed a floor on the franc VS the euro and then couldn’t defend it and eventually had to scrub the whole idea? Dolts… certifiable dolts! They tried to tie down the franc, and all that did was present a dare or challenge to traders, who went immediately for the SNB’s throat! All that happened not that long ago folks….
 
OK… onto other things… Well, remember earlier this month when I said that I wouldn’t trust another economic print, no matter who was printing it? Well, my leeriness with these economic prints is that of Government intervention…. In other words, a guy shows up at the research division’s door wearing a trench coat, shades, and a Sam Spade hat, and says “Vito needs you to goose the numbers this monrh, so they don’t look so bad, got it?” Now, I don’t know if that really happens, but I have my suspicions… speaking of suspicion, that’s a great song from long ago, by Terry Stafford, and it sounds so much like Elvis singing! Just thought you probably should know it’s not Elvis singing, but Terry Stafford…
 
So, with my suspicions on the data prints, the Markit version of PMI (manufacturing index) for the first part of June printed yesterday, and they claim there was a HUGE recovery from May’s really low number of 39.8, to a 49.6!!!! Really? So, when did Vito visit you at your offices, Markit? And New Home Sales in May skyrocketed higher! So, while the country is on lockdown, and people are supposed to be staying at home, they were able to go out and buy new homes? Really? Come on….
 
Today’s Data Cupboard has the IMF’s World Economic Outlook for us… The IMF are not easily influenced by the Vito’s of the world so look for this report to be pretty gloom and doom, which is should be given what we know has happened around the world!
 
I know that I do those Data Cupboard roundups just for my own entertainment, because nobody pays attention to them any longer, unless something sticks out like a sore thumb!
 
The price of Oil moved past $40 yesterday, I will admit that when I do go to the doctor or hospital for something, there are more cars out on the road these days, than before, so maybe the demand is growing once again… I saw two different car companies’ commercials yesterday that both told people to get back out on the road, for an old time road trip! The problem that I see with traveling by car right now, is that you have to get out and fill up with gas, and go to the bathroom, and you’ll be touching all kinds of things that who knows who, has touched them already… Then you’ll have to go to a motel…. What are their cleaning practices? When was the last time the room was sanitized? Questions that will need to be asked and satisfied, before staying….
 
Planes? I think that’s probably pretty safe right now, those folks are becoming what we used to call in S. St. Louis, “a scrubby Dutchman” There were people who used to get on their hands and knees and scrub the sidewalks with soap and water! That’s when people took pride in their surroundings…
 
Now? Cleaning the sidewalks? That’s what rain is for!…. I’m just saying…
 
In my daily run through Twitter to see who’s saying what (economists, I don’t get into all that other cr.. ) Danielle Di Martino Booth leads off today with her report on GNC… “GNC filed for bankruptcy protection with the aim of selling itself and closing stores after its latest effort to manage its debt load unraveled amid the coronavirus pandemic.
Yet another retailer that has been encouraged to make its footprint too big bites the dust.” from her Twitter feed…
 
Next up is David Rosenberg… “I don’t think it is well understood or appreciated that we have a looming crisis in commercial real estate, and the banks are not immune. See “Brookfield Skips Mortgage Payments” in today’s National Post for a wake-up call.” – from his Twitter feed… 
 
Just two examples of many that are out there, of how badly the economy is, no matter how stupid strong the stocks are…. 
 
To recap…. Gold finally crossed the $1,750 level that Chuck’s been talking about for months, and now it’s time to follow the yellow brick road! The currencies are seeing gains visa-vi the dollar getting sold,. Chuck wonders if the words of Stephen Roach, got traders thinking about selling dollars? The RBNZ left rates unchanged and wants to wait to see what the previous moves have done in the economy before making another cut… Chuck applauded them, for it’s been a year of Sundays since he last heard a Central Bank talk with prudency…
 
For What It’s Worth…. Ok, since I talked about this earlier, regarding the bankruptcies and economic gloom and doom, this article that Ed Steer highlighted today seems to be right up that alley, as it’s about rising bankruptcies, and if can be found here: https://www.zerohedge.com/markets/default-wave-arrives-weekly-bankruptcy-filings-soar-financial-crisis-levels
 
Or, here’s your snippet: “One month ago, when looking at the recent flurry of chapter 11 filings and a striking correlation between the unemployment rate and loan delinquencies, we said that a “biblical” wave of bankruptcies is about to flood the US economy.
 
 It appears that the wave has now arrived, because according to Bloomberg data, no less than 13 US companies sought bankruptcy protection last week, matching the peak of the global financial crisis. The filings, led by the perennially weak consumer and energy sectors, were the most for any week since May 2009. 
 
And while energy has been the second-biggest contributor to this year’s bankruptcy surge, there is much more coming here. Chesapeake is preparing for a filing while California Resources got an extension until June 30 to make interest payments originally due May 29. Seadrill is also considering bankruptcy.
 
A Deloitte analysis has found that almost a third of U.S. shale producers are technically insolvent with crude at $35 a barrel. And while WTI has been trading slightly higher, this does little to prevent 15 years of debt-fueled production growth catching up with many shale producers,
Deloitte said in a study. Adding to the pain is the spring redetermination season which resulted in most high-yield borrowers seeing their reserve-based loans. Borrowing bases, which are determined by the collateral value of oil and gas reserves, were cut by an average of 23%, which means that most energy companies now have roughly 25% less access to liquidity.”
 
Chuck Again… the most bankruptcies filed in one month in 11 years… Remember 2009? It was the first year of Quantitative Easing, which fueled the return of the stock market… 
 
Market Prices 6/24/20: American Style: A$.6915, kiwi .6435, C$ .7372, euro 1.1307, sterling 1.2520, Swiss $1.0588, European Style: rand 17.3134, krone 9.5455, SEK 9.3030, forint 310.64, zloty 3.9347,  koruna 23.6182, RUB 68.85, yen 106.55, sing 1.3884, HKD 7.7498, INR 75.30, China 7.0637, peso 22.51, BRL 5.2056, Dollar Index 96.73, Oil $38.64, 10-year .72%, Silver $17.89, Platinum $826.13, Palladium $1,928.28, and Gold… $1,776.21
 
That’s it for today… So, how are you doing with the pandemic? I read this morning that the number of cases are soaring again, but…. the number of deaths are falling, does that mean that it’s more like the flu? Things around the Butler house are getting back to normal, with the kids, and grandkids coming over, soon friends will be here too, and then we can have a big blowout party to celebrate the end of the virus, and the start of the baseball season! Yesterday was the birthday of a former colleague, Neil George, who when I sent him a birthday note yesterday, said, “Maybe next year I’ll make the Pfennig”… Well, no need to wait until next year! I have a treat for us today, as Billy Squier takes us to the finish line with his song: Lonely Is The Night… And with that, I get on to my routine! I hope you have a wonderful Wednesday, and will Be Good To Yourself!
 
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts