U.S. Data Continues To Disappoint…

A Pfennig For Your Thoughts

December 3, 2019

* Currencies & metals rally on Monday
* Waiting for a short squeeze in Gold?

Good Day… And a Tom Terrific Tuesday to you! Well, have you recovered from your Thanksgiving weekend, of… maybe travel, eating, celebrating, etc.? I had forgotten last night, that the Blues were playing the Blackhawks… But remembered just in time to turn the game on, only to see the first goal of the game… I can’t remember a Blues/ Blackhawks hockey game with very little rough stuff going on… Blues won 4-0… More decorating went on yesterday… The house is ready for Christmas! I love Christmas lights… Trees… ornaments, gifts under the tree… And I love the way the world seems to be under the trance of magic… At least for a few days that is… The Gin Blossoms greet me this morning with their song: Until I Fall Away…

I don’t want to spoil your appetite for more Pfennig today, so I’ll just touch on the note that the U.S. Data continues to be sketchy at best, and probably was the reason the dollar lost ground yesterday to the currencies and Gold. The euro was able to gain ½-cent on the day, which doesn’t sound like much, but in the whole scheme of things, and in the words of my longtime friend, and former Big Boss, Frank Trotter, it was “better than a sharp stick in the eye”…

On a sidebar, as many of you know I lost my left eye to cancer back in 2010… But before it went completely dead, I used to get shots in my eye of chemo… I can tell you that while it’s not as bad as it sounds, it’s still not the most pleasant thing in life! So, one day, after getting a shot in my eye, I mentioned something to Frank, and he came back with his “better than a sharp stick in the eye” comment, and I said, “you mean better than a sharp needle in my eye”! I don’t think he ever used that saying around me again after that! HA!

So, the currencies rallied about as much as they were going to be allowed to rally on the day, and the same thing went on with Gold who erased most of the $6 loss in early trading to close at $5 to $1,461 on the day… In the never changing back and forth trading of the shiny metal, Gold is up $7 this morning….

I read a lot about Gold yesterday, and from what I read, I garnered that some big time analysts, are calling for Gold to take off to the upside soon… It’s something that I’ve been thinking about for a couple of weeks now…. Remember when I would say that there was a “short squeeze” in an asset that caused it to rally? Well, I got to thinking about all the short positions that are out there in Gold and Silver… For instance it would take 100 days of current production to cover the short positions on the books in Gold… And for Silver it would take 210 days of current production to cover the short positions on the books…

And those two numbers are what I’m thinking about seeing a short squeeze… And that could beget more buying back of short positions, taken along with the actual physical Gold & Silver and we could be in store for a major upward move… IF a short squeeze happens to take place, which would come about if the physical buying of the two metals really makes a difference in the next positions each day… So, if we begin to see Gold & Silver begin to take off to the upside, we might very well, be in the first inning of a short squeeze…. I’m just saying…

There are times in one’s life when they are witness to something amazing… My first dance with seeing something amazing was the birth of my 3rd Child, Alex, who was born 14 years after our last child. My second dance with amazement has been seeing myself in the mirror each morning, when all the data says I should be 6 feet under by now… And now I’m hoping to see another amazing thing, and that is the collapse of the COMEX when all the short positions get jammed up…

OK, enough on short squeezes, COMEX problems, and the rest of that stuff for today… I think I sufficiently beat the dead horse on that one… (no animals were hurt here!)

Remember when all the talk was there was no need for safe havens because the Trade War was coming to an end? Well, they may want to rethink that strategy, as China balked yesterday at a Blacklist and the presence of it could threaten the Trade Talks… And now President Trump said there was no deadline for the Trade Talks, and he would prefer to wait until after the election… Recall that the next round of tariffs on China kick in on December 15th… What will the markets think about that?
Another thing for the markets to think about is the Fed making an announcement yesterday that they are going to, by policy shift, allow inflation to grow greater than 2%… Mark my words on this folks… Once inflation gets going it will fly past whatever level the Fed is thinking they can stop it, and won’t be able to…

The Eurozone Administrators sure are doing some back slapping, as a recent report showed that while the Eurozone economy is weak, that stimulants are working… And one of the things they point to was the fact that last week it was reported that Eurozone unemployment had dropped to an 11-year low! Eurozone unemployment rate fell to 7.5% from 7.6%, to represent the lowest figure since July 2008…

If I were a Eurozone Administrator, I would be backing away from any backslapping… There’s no proof that negative rates stimulate an economy… Again, if I’ve said this once I’ve said it 100 times, that if negative rates were “all that and more” then Japan would have the best performing economy on the face of the earth! And they certainly don’t have that, and haven’t had it for 2 decades, and won’t have it any time in the near future!

And I told you yesterday that the Chinese PMI (manufacturing index) had surprised the markets with an upward tick and that had the Global Growth campers in a happy state of mind. So much so that the Aussie dollar (A$) rallied and took its kissin’ cousin across the Tasman, kiwi, along for a nice upward ride…

Australia hasn’t been receiving a lot of love from analysts lately, so it was good to see the A$ spread its wings again… The problem with these kinds of moves is that, they, for the most part, don’t carry through… So, we’ll have to see with this one, eh?

Now for the aforementioned Data report….Well, the Data Cupboard wasn’t so kind to the dollar yesterday, as the prints were quite ugly to say the least… Let’s start with the ISM Manufacturing Index… I told you yesterday that I didn’t agree with the forecasters call for the index number to improve… And I was correct to say that! Here’s the skinny on the data… The ISM for Rocktober was 48.3… The forecasters said it would improve to 49.2, but instead it slipped further to 48.1… That makes 3 consecutive months below the line in the sand number 50… In addition to the ISM, we also saw the color of Rocktober’s Construction Spending, and it was not colored so brightly, as it printed negative -0.8%…

The economic data hasn’t completely gone into “recession awareness mode” but it’s getting there, folks… I know, I know I said we would be in a recession by year-end, and while we still have 4 weeks, I don’t see how that will happen, not with the Fed not only cutting rates, but printing money like it’s going out of style with the repo operations in NY…. Oh, well, they say, that good things come to those who wait… Not that a recession would be a good thing, but… it’s what we need to clean out the excesses and start over… Let the bad companies and banks fail… Those that survive will scoop of the failed business and be stronger!

To recap… The Trade Talks take on water… The U.S. Data is weak… and a combination of those things sent the dollar to the woodshed yesterday, and through the overnight markets. The currencies all look a little healthier this morning, and Gold is up $7… China’s uptick in their CAIXIN PMI was responsible for a mini rally in both the A$ and kiwi, as the Global Growth campers had a day in the sun. I have no idea what the Fed is up to now… they have me scratching my balding head!

For What It’s Worth…. Oh brother… Two weeks ago it was JPMorgan in the sites of Russ and Pam Martens of Wallstreetonparade.com, and now it’s Morgan Stanley… And from what I read, They’re being very courteous to the folks at Morgan Stanley… Bloomberg announced a HUGE trading loss in currencies on Thanksgiving, when no one was paying attention… The skinny on that, and other problems at Morgan Stanley can be found here: https://wallstreetonparade.com/2019/12/the-new-york-fed-has-some-explaining-to-do-over-morgan-stanleys-unreported-trading-losses/

Or, here’s your snippet: “Today, the New York Fed will only say that it’s making these new loans, which tally up to hundreds of billions of dollars each week, to some of its 24 “primary dealers.” For the most part, those “primary dealers” are the high-risk trading units of big commercial banks in the U.S. and abroad.

One of the primary dealers that is eligible to be taking these multi-billion dollar loans from the New York Fed is Morgan Stanley & Co. LLC. Morgan Stanley describes that unit as follows: “Its businesses include securities underwriting and distribution; financial advisory services, including advice on mergers and acquisitions, restructurings, real estate and project finance; sales, trading, financing and market-making activities in equity and fixed income securities and related products, and other instruments including foreign exchange and commodities futures; and prime brokerage services.

At 11:36 a.m. on Thanksgiving Day, when households across America were either watching the Macy’s Thanksgiving Day Parade on TV or hustling in the kitchen, Bloomberg News dropped the bombshell report that foreign currency traders at Morgan Stanley had hidden a trading loss of upwards of $140 million. Two of the traders involved in the losses were based in London, according to the Bloomberg report.

There are a number of curious and noteworthy aspects to this report. First, only Bloomberg News was privy to this information. Morgan Stanley had not informed its shareholders via any public statement nor had it informed the Securities and Exchange Commission via a public filing. Thus it is also highly likely that it had not informed the New York Fed, another of its regulators, despite the fact that its CEO, James Gorman, sits on the Board of the New York Fed. The Bloomberg article suggests that the firm itself is just now investigating what actually happened, meaning that an outside news agency attempting to place a realistic figure on the amount of the losses is suspect at best.

In 2012, the Chairman and CEO of JPMorgan Chase, Jamie Dimon, called news reports of its derivative trading losses in London “a tempest in a teapot.” Those hidden trading losses turned out to be over $6.2 billion.
Morgan Stanley, however, can top JPMorgan’s historic trading loss. During the financial crisis, one of Morgan Stanley’s traders, Howie Hubler, lost $9 billion betting on subprime debt. But Morgan Stanley survived the financial crisis because the New York Fed secretly pumped more than $2 trillion into Morgan Stanley from 2007 to the middle of 2010 according to a Fed audit performed by the Government Accountability Office (GAO) and released to the public in July 2011. The audit occurred as the result of an amendment attached to the Dodd-Frank financial reform legislation of 2010 by Senator Bernie Sanders and others.”

Chuck again… These major banks are taking on water folks… and as Russ and Pam Martens said in their ending of the article: “If you’re thinking this is the banking structure from hell, you would be spot on.”

Currencies today 12/3/19 American Style: A$.6845, kiwi .6520, C$ .7515, euro 1.1075, sterling 1.2989, Swiss $1.0111, European Style: rand 14.6267, krone 9.1696, SEK 9.5295, forint 299.17, zloty 3.8648, koruna 23.0490, RUB 65.25, yen 108.85, sing 1.3648, HKD 7.8283, INR 71.55, China 7.0360, peso 19.57, BRL 4.2279, Dollar Index 97.81, Oil $56.02, 10-year 1.79%, Silver $17.00, Platinum $901.08, Palladium $1,852.68, and Gold… $1,469.56

That’s it for today… That’s really something isn’t it, that on one day the markets are thinking there’s no need for safe havens, and the next day the thought is reversed? Crazy, fickle traders! Our Blues sure seem to be a streaky team, in the early season so far… multi-winning streaks are followed my multi-game losing streaks. So far however the winning streaks like the one they are on now that totals 4 games, have occured more! I saw that the folks at Roger Dean Stadium charged me for my Spring Training tickets already… But in reality Spring Training is only 2 months away…. Yay! The report from the wound treatment center last week was that there was 30% healing in the leg wound… It’s a start! The original Doobie Brothers take us to the finish line today with their song: China Grove… I watched a documentary about the Doobie Brothers yesterday, learned some new stuff, rehashed the rest… I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

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