The Fed Changes Horses In The Middle Of A Stream...

• Currencies & Metals continue to be stuck in the mud... 

• Federal Budget hits a record deficit! 

Good Day… And a Marvelous Monday to you! Front and center this morning, I want to say thank you to all who sent along birthday wishes to me last week… I had a grand day, and ate like a king that night, along with some of my family. I paid for it, when I stepped on the scale the next day! HA! Well, all the March guests have gone now, and it’s just the two of us here, where we seem to bump into each other all the time… UGH! We saw some beautiful moon rises last week, as the last Super Moon of 2019, appeared in the sky… When you’re on the ocean like I am, the moon seems to come up out of the ocean, it’s all pretty cool… Chicago greets me this morning with their song: In The Country… Some of my fave guitarist, Terry Kath’s, greatest work…

Well, I left you last week with the euro trading around 1.1350, and this morning it’s trading around 1.1322… So, not much to talk about still (regarding currency movement) … But there have been some things going on in the world that do need to be addressed, so I’m here, reporting for duty!

First and foremost was the Fed’s FOMC meeting that concluded last Wednesday afternoon, with the Fed backing off their outrageous previous comments about the economy being strong and robust, and decided to take the dovish road… The Fed has basically changed horses in the middle of a stream! (I was always told that that was a very bad idea!) They basically jettisoned their plans for more rate hikes this year, and yet the dollar didn’t budge…

Wait! What? That’s right, the dollar stood in place like a Buckingham Palace Guard… So, let me get this straight… The dollar began its rally because the Fed was hiking rates, while most of the world was stuck in the mud with rates near zero, and now that the Fed has stopped hiking them, and is basically looking at cutting them should the economy warrant it (and it does, but no one but me seems to think that right now), the dollar doesn’t get sold? I guess it just shows me that the dollar is the king, and no amount of chinks in the armor can hurt it…

Well, we’ll see about that… I’m just saying, because, bad things are coming, folks… The Treasury Yield Curve inverted last week… That means that long term rates fell below the shorter term rates… And this, historically, has been a keen indicator that a recession is on its way… I don’t make this stuff up folks… It’s all there in the history books on recessions… And this recession could very well be the end of the line for the Credit guys… It won’t be pretty… We have never had this much debt, we have never had this much Corporate Debt leveraged, we have never had this many derivatives that no one knows what happens when they collapse, and we have never had a Central Banks that is bumbling, fumbling, stumbling along and making all the wrong moves…

I must warn you that when the curtain falls on the economy, that at first, Gold will get caught up in the selling because, just like in 2007, when the dark clouds began to appear, investors sold whatever they had that had a profit to offset their margin calls, or just keep the debt collectors at the door… But when all the dust settles, you’ll want to back up the truck to the Gold window… I’m just saying.

Did you hear that the Federal Budget Deficit hit a record? The Treasury Department said Friday in its monthly report that the deficit hit an all-time high for February of $234 Billion. That surpasses the old February deficit record of $232 Billion set in 2012, the last year the deficit for the year topped $1 Trillion!

It’s time that everyone gives up and realizes that I was correct when I told you last year that the Tax Cuts wouldn’t do anything but raise the deficit, for Corporations wouldn’t use the tax cuts to invest in their businesses, but use them for stock buybacks instead… And that’s exactly what has happened, and now we don’t have the Corporations with good futures, and a Treasury Dept, that is lacking tax receipts!

And then add to that… The cost to finance that debt… Interest rates being higher as they are, are adding to the Deficit spending in a Big Way folks… I read last week that the amount we spent in 2018 was greater than in any other previous year… I’ve got a great piece on this from the Peterson Foundation in the FWIW section today, so I’ll leave this here…

Before you head to the currency roundup today, let me tell you that the yield on the 10-year Treasury is correct... I say that because I know some of you would be questioning it, as it has tumbled down to 2.47%... Bond guys get it... The Fed's dovish stance that is... The get it, and that's why bonds have rallied like a banshee... I guess that's where I get my attitude here, as I was a bond buy, many year ago... But back then, I was a foreign bond trader, so I had to understand and know the economies of dozens of countries at the same time... Boy, I guess I used to be smart, eh? HA!

But seriously here, we need to take this drop in the 10-year's yield seriously, and begin to prepare for some read rotten eggs coming from the economy, soon... And that's all I'll say about that! 

Around the world last week, we had the BREXIT talks get an extension, but I think this is like a stay of execution… To leave the EU is like Hotel California… You can check out but you can never leave… And UK PM May is going to take a beating from voters who voted to leave, but never was explained to back then what it would take to leave the EU… Maybe if it were explained back then, the vote would have been different? Anyhow, pound sterling continues to be the whipping boy for these talks…

The U.S. / China Trade Talks are still going nowhere… But I did see that President Trump decided to drop some of the sanctions against N. Korea in hopes to get what he wants from them… (Denuclearization)… Negotiations are far better than sanctions, and wars…

In New Zealand last week, the last quarter’s GDP got a bump when consumers went on a spending spree… I don’t want to think that this was like a star that’s getting ready to burn out, but I have to because what’s good for the goose is good for the gander, right? Anyway… the Reserve Bank of New Zealand (RBNZ) meets this week, and I’m still angry with them for their misleading last year, and they won’t do anything to correct it this week either, so look for kiwi’s recent rise to take a bit of hit when the RBNZ sounds all Eeyore when they meet…

Oh! And one more thing about the Fed that needs to be said... The Fed has adopted a very dovish tone, the central bank’s new “dot plot” showed no increases in interest rates this year and only one in 2020, down from a total of four rate hikes in the Fed’s last forecast in December.

So, from December to March, 3 months, if you will, the Fed Heads have gone from "strong and robust" to their current stance of dovish tones... That's how fast the worm can turn on you when you're not paying attention to the weeds in the garden... And they haven't been paying attention to the weeds in the garden... I have.. David Rosenberg has... Bill Bonner has... and others, but none of us have any pull with the Fed Heads... I'm just saying... 

The U.S. Data Cupboard is emptied out today, but will be back tomorrow with goodies to eat up... Late last week, we saw the Markit Manufacturing Index (PMI) here in the U.S. fall to the lowest level it's been in a month of Sundays... (52.5) The index number is still above 50, which is good, but the direction of the number is falling, and that's bad... 

Did you hear that President Trump nominated a new person to the Fed's Board of Governors? And it's "one his guys"... At least he is now... But there's something in the water at the Eccles Building, because horses change color when they go there to work... Greenspan, for example was a Gold Bug before, and after, but not during his time as Fed Chairman... And I'm certain that current Fed Chairman Jerome Powell, was what Trump thought was "his guy" when he was given the top job at the Fed...  

Well, all this talk and no mention of Gold... Hmmm... I wonder what's up wit that, eh? HA! Well, Gold hasn't had its breakout upward move yet, so what's there to talk about? I did have a dear reader ask me last week if I thought Platinum would soon replace Palladium in cars, just as Palladium once replaced Platinum? Cost of the metal being the main reason for the changes... Well, maybe... and today could be the start of that, as Platinum is up $8, while Palladium is down $13 this morning... Hmmm... Good question! 

To recap... Nothing much has changed since last Wednesday, when Chuck threw in the towel on the week for none movements in currencies and metals, Trade Talks and BREXIT Deals... Well, he's baaaaaaacccckkk, but still there's not much movement going on, and it surprises Chuck, given the Fed's changing their dot chart, and their position on the economy... 

For What It’s Worth… Well this is the piece that I teased you with earlier… it explains in black and white, how the spending on financing the deficit is going to begin to hurt the economy.

Or, here’s your snippet: “Programs that millions of Americans depend on and care about may be feeling a squeeze from interest costs on our high and rising national debt.

In fiscal year 2018, the federal government already spent more on interest than it did on budget areas such as veterans’ benefits, transportation, and administration of justice.

But over the next few years, spending on interest will exceed spending on a number of additional major categories:

• In fiscal year 2019, interest will be greater than the amount spent on income security — a category that includes programs such as the Supplemental Nutrition Assistance Program, Supplemental Security Income, and unemployment compensation.

• In fiscal year 2020, interest payments will exceed the amount that the federal government spends on children, according to projections from the Urban Institute.

• In fiscal year 2021, interest will surpass the combined amount spent on Medicaid, the Children’s Health Insurance Program, and subsidies for the purchase of health insurance under the Affordable Care Act.”

Chuck again… The article goes further with more explanation, so if you do have time I think it would be prudent to visit the article in its entirety… 

Currencies today 3/25/19 American Style: A$.7096, kiwi .6883, C$ .7458, euro 1.1320, sterling 1.3172, Swiss $1.0064, European Style: rand 14.4097, krone 8.5234, SEK 9.2162, forint 279.75, zloty 3.7955, koruna 22.7311, RUB 64.63, yen 110.22, sing 1.3509, HKD 7.8479, INR 68.95, China 6.7163, peso 19.07, BRL 3.9041, Dollar Index 96.51, Oil $59.01, 10-year 2.47%, Silver $15.51, Platinum $853.46, Palladium $1,539.52, and Gold... $1,318.29

That's it for today... Good to be back in saddle, but I do have to say that when I don't write, I lose track of the days... Well, my beloved Cardinals ended Spring Training with a win in the 9th inning yesterday. Opening Day is this Thursday... A day that should be a National Holiday, in my opinion! I get a bit sad at the end of Spring Training each year, for I know that I've seen 15 games in 30 days, and probably won't see, in person that is, many more this year... I love Roger Dean Stadium as it's easy for me to get in, sit down, and easy to get out... At my age, and my abilities, ease of use is a major deal to me! OK, so I celebrated another birthday last week... Another notch in the belt since 2007, is all that's on my mind when my birthday comes around... Fleetwood Mac takes us to the finish line today with their song: Say You Love Me... I hope you have a Marvelous Monday, and continue to Be Good To Yourself!