What Will Jerome Powell Say? Or Better Yet Why Do We Care?

A Pfennig For Your Thoughts

July 9, 2019

* Dollar bugs continue to apply pressure to the currencies & metals…
* Chuck pulls out the Big Guns, with a visit from Murray Rothbard!

Good Day… And a Tom Terrific Tuesday to you! Another day of sun and no rain here, boy it looks like things are drying up, finally! I love the sunshine, and warmth, I don’t think I’ve ever wavered on that! The Home Run Derby last night was something special! The participants were hitting home runs as easy as Grant took Richmond… (That’s just an old saying, I hope I don’t offend anyone in the South) But my dad used to say that all the time, and I’m just a chip off the old block, that’s for sure! Have I ever told you that my dad had lung cancer (yes he smoked) and that it had mestastized to his right hip? He ended up being confined to a wheelchair. I was diagnosed with kidney cancer that had mestastized to my right hip… So, far, so good with not being confined to a wheel chair for me though, thank God! OK… I’m usually not one for instrumentals, because I love to sing along with songs, but this one titled: Samba Pa Ti by Santana is one of my faves, and it greets me this morning!

Well… The markets just don’t know what to do… They’re confused about the signals that the Jobs Jamboree gave them last week. I would think that they would be concentrating more on the negative print of Factory Orders that printed the previous day to the Jobs Jamboree, last week…

But then I think logically, and I sure can’t say that the markets do that! Oh, sure I hear some of you saying, but that’s just one print, Chuck… And to that I would say, but what about the negative print in Durable Goods Orders, and the very weak Capital Goods Orders, or the weakness of Retail Sales that printed 10 days ago or so? A recession is pulling into the station, whether the stock jockeys, or interest rate campers are ready for it or not! Let’s listen to economics guru, David Rosenberg who had this to say on his Twitter feed:

“ Real GDP on a monthly basis has completely stagnated in the January-May period. ZERO growth! This has only happened 3x in the past 14 years, two of those in 2008 and 2009. So what is this “strong US economy” all about?”

I shake my head in disbelief that more and more people aren’t seeing this economy for what it is… An economy that has seen its growth cycle remain weak for more than 10 years, and is now turning negative… But I digress…

The currencies didn’t move much yesterday, but in the overnight markets they have continued their slide from the lofty levels of last week. The euro, for instance, is in danger of losing the 1.12 handle this morning, and the Aussie dollar (A$) saw 70-cents briefly last week and has gone on the slippery slope since.

Gold can’t find a bid once again…. Mom… He’s doing it again! Ah, the sillyness of an old TV commercial advertising a rock station here in St. Louis, is what I’m thinking of right now… But in this case we’re talking about how the price manipulators have retaken the conn on Gold trading, and not about how some guy is playing air guitar to the song Brown Sugar!

I DO know what the markets are thinking with regards to Gold, for the shiny metal got sold again yesterday, and fell back below the $1,400 handle… UGH!… Just when it looked to me that Gold was getting ready for a major move to the upside… It got shot down…. In the 70’s there was a band called April Wine… And they sang a song titled: Shot Down… I had a former colleague back when I was at a regional brokerage house, and his name was Vinnie, and he loved that song… So, to this day whenever I type the words, Shot Down, I think of him and that song!

I worked with a trader back in the early 80’s that used to say about a stock that was falling… “Hey, you liked the stock at $60, you’re going to love it at $55! And I think of him whenever I say buy the dips like I did yesterday… At this point you may want to wait out this selling of Gold to see where it bottoms out before buying more… But then again, remember how quickly the shiny metal turned around a couple of weeks ago… The turnaround could be swift…. I’m just saying…

The U.S. Data Cupboard had the May Consumer Credit print yesterday… Of course we all know that this in reality is debt… And Consumer Debt remained at $17 Billion in May… In the report there was something that I found that scared the bejeebers out of me…. Try this on for size: Revolving credit, primarily credit cards, rose 8.2% in May, just a bit above the 7.9% gain in April. Ahhh, yes, those credit card debts… Those are just lovely creatures aren’t they? Just fill them up with purchases, and then apply for a new one, and rinse and repeat… It’s the American way… No wait, it’s the American way since 1971…. When the whole new age of Credit became the norm…

Have you ever imagined what it would be like here in the U.S. and the world on the side, if Nixon hadn’t removed the Gold backing from the dollar in August 1971? Well, we wouldn’t have had the economic growth, that was built on credit… Salaries wouldn’t have grown like they did, and the stock market wouldn’t have grown to 25,000… So, that’s all good, eh?

Not so fast there Tim! The U.S. would not be in debt to the tune of over $200 Trillion and growing each day… We wouldn’t have had the tech stock collapse, nor would we have had the housing markets collapse, and near collapse of our financial system… We wouldn’t have Banks that are too Big To Fail… and their Trillions of dollars worth of derivatives! And I could go one, but won’t…

Whenever I begin to question my stance on money… I go to Murray Rothbard, of the Mises Institute. His book titled: What has Government Done to our money? Always sets me straight… Sort of like going to confession, I guess… (I was brought up in the Catholic church, but never converted, so no confession for me!) In fact, let’s listen to some wise words from Murray Rothbard this morning.. ….

“As we face the future, the prognosis for the dollar and for the international monetary system is grim indeed. Until and unless we return to the classical Gold standard at a realistic Gold Price, the international money system is fated to shift back and forth between fixed and fluctuating exchange rates, with each system posing uncolved problems, working badly, and finally disintegrating. And fueling this disintegration will be the continued inflation of the supply of American dollars and hence American prices which show no sign of abating.”- Murray Rothbard, of the Mises Institute

Smart guy that Murray Rothbard… These Austrian school of economics guys are all very smart, indeed! Like I’ve told you before I walk in those same circles as the Austrian economics guys do, but I’m not an expert in the school so I refer to the guys that are from time to time…

Wait, what did I just do there? Did I give myself a backhanded compliment? I think I did… What a dolt! I can tell you straight up, that I didn’t mean to do that! But my fat fingers started typing, and the next thing I knew…

Well, maybe Fed Chairman, Jerome Powell, can sort all this stuff out when he talks to Congress today… We all know that he has a rate cut in his back pocket, that he can pull out if the going gets tough on the hill… But will he? Yesterday, I played the Fed Chairman in some role playing, that was fun… Wouldn’t it be a hoot, if Powell, gave his speech and repeated what I said he should say word for word? OMG! That would be too much, I would roll out of my chair, and laugh hysterically until the men in the white suits came to take me away!

To Recap… The dollar bugs continue to slap down the currencies and metals, which has gotten out of hand, in my opinion, for it was just a stupid hedonically adjusted BLS Jobs report that turned everything around and the euro has lost 2-cents, while Gold has dropped $40 from its high last week… Why not base the trading on the weak data prints that come out every week?

For What It’s Worth… I received this over the weekend, and quite frankly, I didn’t pay much attention to stuff this past weekend, and so I spent the day yesterday, going back over all of it, and in the pile of emails there was this… Publishing guru, Bill Bonner, was talking about the founding fathers last week (the 4th of July) and this is what he said, and it can be found here: https://bonnerandpartners.com/the-founders-warned-us-about-the-evolution-of-power/

Or, here’s your snippet: “Many of the founders of the American Republic were readers and scholars. “I can’t live without books,” said Jefferson.
He, Monroe, Madison, Adams, and others were much more aware of Roman history than our leaders today. Most had studied Latin and/or Greek.

In the same year that the Declaration of Independence was adopted, Edward Gibbon published the first volume of his masterpiece, The History of the Decline and Fall of the Roman Empire.

The Founding Fathers were well aware of the transition – natural, and perhaps inevitable – from republic to empire. They had studied it in the Roman example. They had seen how it drew power into a few hands… and corrupted them.

They tried to prevent it from happening in the New World, putting in place limits… circuit breakers… and checks and balances… to keep the government from becoming too big, too ambitious, or too powerful.
Even then, they were doubtful that it would stick. “We give you a republic…” Benjamin Franklin wrote to posterity, “if you can keep it.”

Chuck Again… Well, we couldn’t “keep the republic” and instead turned into another Empire… And Empires all fold eventually… I’m just saying….

Currencies today 7/9/19 American Style: A$ .6930, kiwi .6612, C$ .7620, euro 1.1200, sterling 1.2460, Swiss $.9949, European Style: rand 14.2050, krone 8.6610, SEK 9.4971, forint 290.47, zloty 3.8056, koruna 22.7985, RUB 63.69, yen 108.81, sing 1.3613, HKD 7.8096, INR 68.46, China 6.8832, peso 18.92, BRL 3.8123, Dollar Index 97.50, Oil $57.99, 10-year 2.06%, Silver $15.02, Platinum $808.27, Palladium $1,547.00, and Gold… $1,389.48

That’s it for today… Boy I really went off some tangents today, eh? Oh well, you never know what you’ll get when I start my fat fingers typing! I used to say that it was a stream of consciousness, but then I was writing the letter earlier in the morning, before my mind was moved by coffee! HA! I have no idea what Jerome Powell will say today, I do know what he should say, but then that’s me… And I don’t have the President looking over my shoulder telling me what to do! Robin Trower takes us to the finish line today with his song: Bridge of Sighs… Robin Trower was the lead guitar player in the band Procol Harum before going solo… I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!

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