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Palladium Is On A Runaway Train!

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A Pfennig For Your Thoughts January 21, 2020 * Currencies rebound from selling last week * Gold continues to have good days and bad days…  Good day… And a Tom Terrific Tuesday to you! Seems like it’s been eons since I last wrote to you dear reader, but it’s really only since last Thursday! Since then, the two teams that will play in the Super Bowl were determined (K.C. and S.F.), and all I can say about that is Go Chiefs! Hey! They’re a Missouri Team… And wouldn’t it be cool if they won the Super Bowl 50 years after last winning it, after the Blues won their first Stanley Cup 50 years after last playing in the final? Our Blues have shut down for the All-Star Week, and they have 4 members that will be on the All-Star Team! My son, Andrew and I attended the skills competition, the last

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A Pfennig For Your Thoughts
January 21, 2020
* Currencies rebound from selling last week
* Gold continues to have good days and bad days… 
Good day… And a Tom Terrific Tuesday to you! Seems like it’s been eons since I last wrote to you dear reader, but it’s really only since last Thursday! Since then, the two teams that will play in the Super Bowl were determined (K.C. and S.F.), and all I can say about that is Go Chiefs! Hey! They’re a Missouri Team… And wouldn’t it be cool if they won the Super Bowl 50 years after last winning it, after the Blues won their first Stanley Cup 50 years after last playing in the final? Our Blues have shut down for the All-Star Week, and they have 4 members that will be on the All-Star Team! My son, Andrew and I attended the skills competition, the last time the All-Star Game was in St. Louis… It was at the old Arena then.. Our former neighbor, Jill, worked for the Blues, and got us primo tickets for the skills competition… Earth Wind and Fire greets me this morning with their song: After The Love Has Gone… “After the love has gone, How could you lead me on? “
Well… After signing off on Thursday morning and heading to the wound center, the currencies began to give back their gains they had worked so diligently to achieve earlier in the week. And by Friday’s close, the euro was back to trading with a 1.10 handle, the Aussie dollar (A$) was back below 69-cents, and the rest fell in behind, the Big Dog and the Proxy for Global Growth…
The overnight markets last night were much kinder to the currencies, as the dollar got sold and the currencies tried to recover… The euro is back above 1.11 and so on in the overnight markets, so back and forth we go, where we stop nobody knows! 
Palladium is on a runway train folks… Every day I look at the price and say to myself, ” This is amazing!” There’s no stopping it right now, so either jump on board or get out of the way, would be my suggestion… Gold on the other hand continues to have good days and bad days, with the bad days outnumbering the good days right now. Yesterday, Gold gained $3 as the New York price manipulators weren’t at their desks or showing up at the COMEX with arms full of short Gold paper trades… but in this morning’s trading Gold has given back that $3 gain… Back and forth… 
I mentioned Global Growth above, and so Speaking of Global Growth, the IMF lowered their outlook for Economic Growth in 2020 this past week, claiming that they see major slowdowns around the world. And since the U.S. economy is the growth engine of the world, the IMF must then see that the U.S. economy is going to slow down… Basically, in my mind, I don’t see how the economy could slow down from its already snail’s pace, but there’s always a lower number, folks… And that’s what I see for the U.S. economy, once the Fed gets told to cease and desist their propping up the economy with debt monetization…
Oh, by the way, the Fed Heads still will not call what they are doing Quantitative Easing (QE) But they are doing their “not QE” by the hundreds of Billions each week… And now there’s a rumor going round, someone is underground, no wait! There’s a rumor going around that the Fed is not bailing out the Repo system, that instead they’re bailing out the Hedge Funds… OK, if that’s the case then they should send down more SWAT members than you can shake a stick at and arrest the Fed Heads for lying to the public! Their “not QE” going toward private companies’ coffers? To keep them afloat? OK… I must remind you that these are rumors, not fact… So before I blow a gasket, I’ll move on from here… 
And I found another thing these past 4 days… that answers the question I had about whom was buying the Treasuries that we need to sell to finance the debt. The Treasuries that were being printed and sent out as fast as the ink could dry on them, because the debt was exploding higher and higher! I pulled this from Russ & Pam Martens at their www.wallstreetonparade.com web site, regarding the excess Treasuries and where they were going….. “The New York Fed not only crowded out other counterparties but they also crowded out other forms of repo collateral according to OFR data. The repo collateral at Money Market Funds went from 33 percent U.S. Treasuries on January 31, 2011 to 63 percent on August 31, 2019 according to OFR data, making obligations of Wall Street and foreign banks less and less desirable.”
Chuck again… yes, the Fed is knocking at your door, you answer it, and they sound just like a NY Mafia man, saying, “ You need some treasuries” and you decline saying I don’t need any such thing, and they step inside the door, and in a deep accented voice, say, “you need some treasuries”…
OK, before I really get into trouble… I also read an additional report on wall street on parade.com and came away with these thoughts…
The Jobs Jamboree a week ago or so, was very interesting in that it never, and I mean never really counts true employment… There are so many tricks to the trade, and if you ever have time simply go to the BLS website and read about what the BLS considers to be “employed”… It’s crazy folks, simply crazy, as crazy as the guy who took a pig on a plane and said it was his emotional support animal! Now stay with me here for a minute… I’ve told you all that for the past decade we’ve averaged about 2.1% (some say 1.8%), GDP… Right? Well, how does a weak GDP like that garner an all-time low in unemployment? The two don’t match folks… I have to tell you that you have to have strong GDP to garner such unemployment numbers, and we don’t have that, haven’t had it, and probably won’t ever have it again!
And a dear reader reminded me last week of something that I’ve forgotten about, that I shouldn’t have, so shame on me! But a few years ago, the Gov’t moved the goal posts for computing GDP, and added stupid things that don’t really add to GDP, but they added them anyway, and it was supposed to have meant an additional 3% to GDP… So think about this before we go on… If GDP has only been around 2% for the last decade, that means that without the hedonic adjustments, we would be in negative territory for GDP, right? I’m just saying…  OK, back to the GDP and unemployment discussion.. 
Pam and Russ Martens of www.wallstreetonparade.com wrote about this recently, and went so far as to quote Big Ben Bernanke describing Okun’s Law, which I’m going to give you now from their letter: “Okun noted that, because of ongoing increases in the size of the labor force and in the level of productivity, real GDP growth close to the rate of growth of its potential is normally required just to hold the unemployment rate steady. To reduce the unemployment rate, therefore, the economy must grow at a pace above its potential. More specifically, according to currently accepted versions of Okun’s law, to achieve a 1 percentage point decline in the unemployment rate in the course of a year, real GDP must grow approximately 2 percentage points faster than the rate of growth of potential GDP over that period. So, for illustration, if the potential rate of GDP growth is 2 percent, Okun’s law says that GDP must grow at about a 4 percent rate for one year to achieve a 1 percentage point reduction in the rate of unemployment.”
If apples were counted as apples, oranges counted as oranges, we would have true totals of each, right? So, it points to the need to have a real accounting of unemployment, doesn’t it? I mean we can’t have these two things (slow GDP and low unemployment) out there bouncing off each other and not making any sense… So, since we KNOW that unemployment has a multitude of hedonic adjustments, why don’t we just take the hedonic adjustments out of the unemployment calculation, and come up with a “true unemployment rate?”
I’m just saying… that would be nice, eh? Just like the Chapwood calcs that I showed you a couple of weeks ago, pulling the wool away from our eyes on inflation… We need a Chapwood employment index!
Last week, early on I told you that the U.K. had a slew of data to print for the week, and after the dust settled on the economic prints, the outlook was dreary, as all the prints surprised the markets with how weak they were. No surprise on my part… Well, now the thought in the U.K. is that the economic data set the Bank of England on the path to a rate cut… and sterling rallied on that thought… Really? debase the currency, but let’s rally the sucker! Opposites still reign… 
The U.S. Data Cupboard is on holiday this week, folks… There are no economic prints scheduled for today, and the only print that makes any sense in following won’t come until our Tub Thumpin’ Thursday, when Leading Indicators print… The Data Cupboard is a Big zero this week folks… I don’t like weeks like this because the markets can be moved by things that don’t have anything to do with fundamentals… 
To recap… The currencies got sold going into the weekend, but in the overnight markets last night they rallied and won back some lost ground. Gold continues to have good days and bad days (reminds me of me!) There’s no data this week, to speak of, so the markets are on their own to come up with why they should continue to buy dollars… Looks like a rate cut will be coming from the BOE soon, as recent economic data was very weak… 
Or, here’s your snippet:”On Friday, Minneapolis Fed president Neel Kashkari, who just two months earlier made a stunning proposal when he said that it was time for the Fed to pick up where the USSR left off and start redistributing wealth (at least Kashkari chose the proper entity: since the Fed has launched central planning across US capital markets, it would also be proper in the banana republic that the US has become, that the same Fed also decides who gets how much and the entire democracy/free enterprise/free market farce be skipped altogether) issued a challenge to “QE conspiracists” which apparently now also includes his FOMC colleague (and former Goldman Sachs co-worker), Robert Kaplan, in which he said “QE conspiracists can say this is all about balance sheet growth. Someone explain how swapping one short term risk free instrument (reserves) for another short term risk free instrument (t-bills) leads to equity repricing. I don’t see it.”
To the delight of Kashkari, who this year gets to vote and decide the future of US monetary policy yet is completely unaware of how the plumbing underneath US capital markets actually works, we did so for his benefit on Friday, although we certainly did not have to: after all, the “central banks’ central bank”, the Bank for International Settlements, did a far better job than we ever could in its December 8 report, “September stress in dollar repo markets: passing or structural?”, which explained not just why the Septem but also on the demand side, which as Claudo Borio, head of the monetary and economic department at the BIS, explained was the result “high demand for secured (repo) funding from non-bank financial institutions, such as hedge funds heavily engaged in leveraging up relative value trades.”
Incidentally, we harbor a slight suspicion that Kashkari, who also admitted to “finding amusement in needling critics calling them conspiracists or goldbugs” (which is a delightfully ironic statement for a person responsible for the biggest asset bubble in history, and one which we are confident in 1-2 years time he would love to retract), was being disingenuous and knows exactly how the Fed is impacting markets, because in what was perhaps the most important news last week which flew under the radar, the WSJ reported that the Fed was considering lending cash directly to – i.e., bailing out – hedge funds, or as we put it, “Fed officials are considering a new tool to ease repo market stress: namely bypassing the existing system entirely, and lending cash directly to smaller banks, securities dealers and hedge funds through the repo market’s clearinghouse, the Fixed Income Clearing Corp., or FICC.”
And so we once again get to the real issue at hand, namely the bailout of those hedge funds which even the BIS said were on the verge of failure had the repo market not been unfrozen – and which the Fed was all too aware of – and had the massive leverage that some hedge funds operate under collapsed, forcing an unprecedented liquidation cascade.
Sep repo disaster took place on the supply side (i.e., the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo market)…”
Chuck again… OK, so you can’t believe everything you read on the internet, right? But you can choose to believe what you want to believe, and this rumor makes as much sense to me as to why this is all happening, than that the Repo market was in trouble… Think about that for a minute… But don’t let it get to you, for it’s just an opinion, educated that is, as to what is going on… take with as many grains of salt that you wish!
Currencies today 1/21/20 American Style: A$.6888, kiwi .6605, C$ .7654, euro 1.1106, sterling 1.3060, Swiss $1.0337, European Style: rand 14.4644, krone 8.9416, SEK 9.5030, forint 301.15, zloty 3.8196,  koruna 22.5120, RUB 61.54, yen 110.07, sing 1.3491, HKD 7.7704, INR 71.08, China 6.8627, peso 18.01, BRL 4.1724, Dollar Index 97.48, Oil $57.81, 10-year 1.80%, Silver $18.01, Platinum $1,013.58, Palladium $2,467, 42, and Gold… $1,556.80
That’s it for today… Happy Birthday to my good friend, Kevin, aka Webbie… Yesterday was his birthday, you’re getting old my good friend! OK, I had to call out the folks down here for being soft when it comes to weather… Last night the weatherman said that the shelters were being opened because of the expected “cold” overnight temps… the overnight temp was forecast to be 55 degrees! Wait, What? They think 55 degrees is cold? I don’t know, I just find that all to be very funny… I guess it’s my sense of humor? Winter comes tonight here, as the temps will fall below 50, and then begin to warm back up and winter will have come and gone! OK, I’ve got to go! Steely Dan takes us to the finish line today with their song: Rikki Don’t Lose That Number… I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts

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