U.S. Economic Data Continues To Disappoint…

A Pfennig For Your Thoughts

March 5, 2019

* Currencies and metals get sold again on Monday
* Eurozone Retail Sales beat expectations!

Good Day… And a Tom Terrific Tuesday to you! Well, day one back in the saddle didn’t have too much excitement for me… I did received quite a few emails welcoming me back, and for that I’m truly appreciative… I do believe my beloved Cardinals are going to have to make a Big Trade by the end of Spring Training this year, to shore up their lack of hitting… And if management truly believes that our pitching rotation is set this year, then I have some swamp land they need to buy! The Cardinals have a plethora of young pitchers that need to grow up fast, and it looks as though, to me, so far that is, that some have and some have not… The great Stevie Wonder greets me this morning with his song: My Cherie Amour… What a beautiful song!

OK, another day, another day of hearing that the Trade talks are near an end, and that everyone is going to be pleased as punch with the agreement… But after the rest of the world sees what kind of deal it is that the U.S. and China agreed to, won’t they too want the same deal? I’m just asking…

And it was another day of currencies trading in very tight ranges, and not moving much, and another day of selling Gold & Silver … Don’t get me wrong here, the slippage is noticeable in the currencies and metals, and is not what I would expect with what’s going on…

The Data here in the U.S. continues to be very weak… and when I saw some of the prints yesterday, I quickly turned to famous economist, David Rosenberg, who had a few things on Twitter to say, that I think I’ll highlight here:
“By my estimation, the Fed took the funds rate 75 bps above neutral, caused several parts of the yield curve to invert and real M1 growth to completely vanish. Recession odds this year are at 80% “ (I’m not stopping here, there’s more from David Rosenberg!)

“Fed took the funds rate to 2.5%. Economy can’t handle it – even with tax cuts!! China tried to slow down the debt treadmill – economy can’t handle it. All ECB did was stop QE, and its economy can’t handle it. What a bullish global backdrop!!”

“A global recession without the USA? That’s what I’m hearing. Reminds me of the clowns who were talking about decoupling back in 2008. No such thing. Sorry to be the one to tell you.” – David Rosenberg from his Twitter handle…

Chuck again… Well, I consider David Rosenberg to be a guy that has his finger on the pulse of the economy, and when he says stuff like that, you, me and the guy down the street that cuts the grass with his shirt off, need to stop and listen… Sort of like those old E.F. Hutton TV commercials…

But the sheeple don’t know any better, and continue to think that the U.S. / China Trade talks will be the cure to all that ails the U.S. economy… Here’s something for you to put in your pipe to smoke…

Fed rate movements take about 6 months, maybe longer before they begin to filter through to the economy… So, if the Fed is talking about pausing and maybe even cutting rates next year, that’s NOT going to stop the U.S. economy from its appointed rounds with a recession! And again thinking about the lag in time from Fed rate movement to economic reaction, All these weak economic reports are a result of the Fed’s first hikes, 3 years ago… Imagine how slow the economy will be when the Fed’s rate hikes of from just last year enter into the economy… I’m just saying…

Longtime reader, Bob, sent me a note yesterday that had a headline title that read: 465 store closures here in the U.S. took place in 48 hours last week… I’ve got the full story for you in the FWIW section today, so stay tuned, for that!

Well, it’s not all gloom and doom for the Eurozone economy just yet… According to the bean counters, Eurozone Retail Sales for January were up 2.2%, beating the estimate for the month of 1.9%… and China announced that they were forecasting GDP for 2019 at 6% to 6.5%… For all of the problems that everyone seems to think that China has, they are still growing their economy 3 times faster than here in the U.S. and 6 times that of Japan and the Eurozone… I guess when you’re the lead dog, everyone tries to find weak spots in your armor… It’s always been that way…

If you think about it in a sports-wise scenario… in the late 90’s and early in the new century, the Yankees were disliked by fans everywhere but NYC, because they won very often. From 2004 to 2016, my beloved Cardinals had darts thrown at them for winning consistently, and don’t forget those Patriots, I even fall into the mix in not liking them because they win very often…

So, what’s up with Gold’s latest round of selling? Wasn’t it just a couple of weeks ago that we were seeing Gold nearing the $1,350, level? And now it struggles each day and has fallen to $1,285… UGH! I was very leery of Gold’s move higher weeks ago, because every time it has gotten close to $1,350, it gets whacked, and this time was no different, as much as we all would have liked to believe that this time would be different… (I totally dislike that saying, but it sure does tell it like it is with Gold, eh?)

All I would say to those of you who think the end is near for Gold… Hogwash! And in my humble opinion, which could be wrong, but I’ll give it anyway… I think this latest slippage in the Gold price is flashing a blue light special to everyone, bargain prices here…

OK, switching gears here…Longtime readers will recall me saying over and over again, years ago, that We’re turning Japanese, yes, I really think so… Well, nothing’s changed, except time… So, let me bring you up to date… The U.S. reached $22 Trillion in National Debt a couple of weeks ago…

Now, longtime readers know that I’ve explained before that the U.S. finances its debt by selling U.S. Treasury bonds… Well, I read last night that foreigners sold U.S. Treasuries at a record pace in December… Foreigners sold $77.35 billion in U.S. Treasuries in the month, after net sales of $13.2 billion in November. December’s outflow was the largest since the U.S. government agency started recording Treasury debt transactions in January 1978…. Uh-oh…

So, while we have been tracking the Japanese with regards to debt accumulation, and economic slowdown (we’ve averaged just 2.2% GPD since 2008, VS 3.2% avg.) But… for the most part that’s where we split up… The Japanese, for the most part own their debt… While the U.S. farms it out to foreigners, for the most part… So, when the foreigners start to dump Treasuries like they did in December, or back away from the auction window, then Houston, we have a problem here in the U.S….

Now, to keep this from imploding the economy and the financial system, the Fed, in all their mental genius, will begin to just print millions and millions of dollars to pay for the Treasuries that are issued, and we’ll be back to Quantitative Easing… You know that this would be bad for the dollar, in more than one way, folks…

To recap… The currencies continue to trade in tight ranges, but the slippage Vs the dollar is noticeable, and has Chuck scratching his balding head… The talk about the Trade War nearing an end continues to drag on, and hold the carrot on a string in front of traders and investors… The Eurozone economy isn’t quite dead in the water just yet, as Retail Sales in January beat expectations, and China anted up and placed a bet on their GDP for 2019 at 6-6.5%…

For What It’s Worth… Well, I did tease you with this earlier in the letter today, so with no further delay, here is the Retail Armageddon article I promised you… It can be found here: http://www.fox5ny.com/news/gap-jcpenney-victoria-s-secret-foot-locker-465-store-closures-in-48-hours

Or, here’s your snippet: ” The ‘retail apocalypse’ is alive and well this week with major chains such as Gap, JCPenney, Victoria’s Secret and Foot Locker all announcing massive closures, totaling the death of more than 465 stores over the last 48 hours.

All four companies reported its fourth quarter results this week during the critical holiday period, with three of them (Gap, JCPenney and Victoria’s Secret) reporting declining in same-store sales, while Foot Locker reported growth that more than doubled expectations.

Still, despite the good news. Foot Locker announced Friday that it plans to close around 165 stores across the country, during its investor call.

That comes less than 24 hours after Gap announced it would close 230 of its namesake stores over the course of the next two years after the brand’s same-store sales fell 7 percent during the holiday quarter. It also announced that it will separate its sister company Old Navy into its own publicly-traded company and create a new firm to house its remaining brands.”

Chuck Again… Tell me again, Fed Heads, how the economy is so strong and robust… I love fish stories! HA!

Currencies today 3/5/2019 American Style: A$.7080, kiwi .6796, C$ .7492, euro 1.1325, sterling 1.3165, Swiss $.9992, European style: rand 14.1387, krone 8.6625, SEK 9.3337, forint 278.54, zloty 3.7972, koruna 22.6112, RUB 65.73, yen 1111.95, sing 1.3552, HKD 7.8499, INR 70.44, China 6.7001, peso 19.28, BRL 3.7721, Dollar Index 96.75, Oil $56.31, 10-year 2.73%, Silver $15.11, Platinum $838.19, Palladium $1,514.82, and Gold. … $1,284.64

That’s it for today… It’s a cloudy day here, so no sunrise to be seen yet… You’ve got to have days like this, to make the beautiful days even more enjoyable… Things here are back to normal, with the return of my wife on Saturday… On Sunday night, I had a hankering for some chicken fried rice, and so that’s what I had! Strange fare for me down here, where seafood is the norm… I seem to be doing OK… I get beat down easily, and I mean easily… but when you take chemo every day, those things happen… OK… The Five Americans take us to the finish line today with their song: Western Union… Bet that one takes you back! I hope you have a Tom Terrific Tuesday, and continue to Be Good To Yourself!

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