Chuck Butler’s: A Pfennig For Your Thoughts
December 6, 2017
* Dollar Gets Bought…
* RBA leaves rates unchanged
Good Day… And A Wonderful Wednesday to you! The Pfennig lost the coin toss this morning, so that’s the reason this is later than usual… As I said last Wednesday.. Better late than never, right? Things are still not back to normal around here for me, and so the Pfennig suffers. Hopefully, things begin to normalize for me… Bob Seger and his Silver Bullet Band greets me this morning with their song: Turn The Page, which is exactly what I would like to do with this period of my life!
Well, we finally saw some movement in the currencies yesterday and overnight, with the dollar getting bought, and the currencies slipping. Again, the move isn’t great shakes, but it still is noticeable, so therefore it registers on the Richter Scale.. HA!
There’s an article on the Bloomberg this morning that’s talking about how the dollar will see more selling in 2018, even with the Fed in rate hike mode. The article points out that the dollar has seen its worse year in the last decade in 2017, and the analysts writing the article believe that the impetus toward a lower dollar in 2018, will come from a revival of global growth, and rate hikes that challenge the Fed’s rate hikes all over the globe…
This article falls in line with the one I told you about on Monday from UBS that talked about how they saw a global tightening of credit in 2018.. So, remember earlier this year when I would talk about how I was seeing signs of a revival of global growth, and called it the “Global Growth Tent Revival”? Once again I was ahead of the crowd on this call, but did anyone listen to me? I doubt it… So, listen to me now and hear me later, this Global Growth thing has potential, and that’s it…
There are plenty of athletes that have “potential” but very few of them “make it”… So, while I agree with the article that the dollar will find it a tough row to hoe in 2018, I’m thinking it will have more with the Fed losing whatever credibility they have left, when they have to reverse their moves this year… That’s my story and I’m sticking to it!
Things in the U.K. aren’t so rosy these days.. Seems PM May, is backing into a corner on her views regarding BREXIT, and the leaders of the BREXIT move aren’t agreeing with her views… And then there was this latest poll in the U.K. that showed a majority of citizens still believe in BREXIT, but believe it will end badly…
Well, so do I, so we have something in common, eh? The pound was flying high as last week ended, but these new developments with the BREXIT negotiations have pulled the pound back down.
One day after seeing the A$ and kiwi climb to the top of the performers’ list, the both got sold overnight. The A$ took the biggest hit, and the kiwi selling was more of a “sympathy trade”… The Reserve Bank of Australia (RBA) met last night and left rates unchanged, which everyone expected, but then the RBA had this to say, that I’m sure had something to with the A$ selloff.. The RBA said that they were in no hurry to hike rates, which led the markets to think that their earlier thoughts of a rate hike in the 1st QTR of 2018, will have to be pushed back…
You know, I’m still amazed at the dollar’s underwhelming reaction to the passage of the Tax Reform Bill last weekend… I mean wasn’t this tax bill supposed to be the cat’s meow for the reflation trade here in the U.S. ? Or… was all that already priced in to the dollar? It sure appears that way to me…
So, I’m thinking that if the dollar can’t mount a huge rally on the news that the tax reform bill, then it really is in the stage of beginning to end the strong dollar trend… I’ll stop there and let that last thought sink in a bit…
OK, I’m back! Gold got whacked again yesterday.. UGH! Just what the heck these sellers are thinking is a mystery, and while I don’t plan to attempt to get into their heads, I will say that I think they are all somewhat lost… So, Gold lost $9.70 yesterday with 302,000 contracts traded… Craziness here too folks.. Gold closed below its 200-day moving avg. yesterday according to Ed Steer, and began the day at $1,265.90 today…
The U.S. Data Cupboard yesterday had the Rocktober Trade Deficit and it printed worse than expected! The Trade Deficit widened to $48.7 Billion up from the September print of $44.9 Billion… That’s a HUGE swing folks, and while it signals heaps of imports, it also signals that the dollar was stronger in Rocktober than in September…
Today’s Data Cupboard has the ADP Employment Report, which is supposed to give us an idea what the BLS Jobs Jamboree print will be on Friday.. Last week, my fave economist, Danielle Di Martino Booth, asked readers to send in their favorite employment indicator. She was looking for something not followed by everyone but was better than the BLS report… I almost sent her my feelings on the ADP report…
I’ve said many times that I think the country should ditch the BLS and use the ADP report as their “employment go to report”… ADP is the payroll system for almost every corporation or small business in this country, and if they show that 190,000 jobs were added in a month, they should be the ones who know!
To recap… The dollar got bought on Tuesday and overnight but the moves aren’t huge. U.K. PM May is hearing it from all sides on BREXIT, and the citizens of the U.K. think BREXIT will end up badly… This all weighs on the pound. The RBA left rates unchanged and sent the A$ downward with some comments about not seeing the need to hike rates for some time…
For What It’s Worth… Well, this Friday is the deadline for a budget deal here in the U.S. Recall that the lawmakers kicked the can down the street a couple of months ago, to this Friday… And I read this morning, that there will be another bill to delay it another two weeks… This is more craziness folks… And I doubt the Fed will hike rates on the 13th, if there’s no budget deal in place, or the Gov’t is in shutdown mode… You don’t have to take my thoughts on this as James Rickards weighed in with his thoughts in the Daily Reckoning (www.dailyreckoning.com) yesterday, and I have some of that for you here… you can click on the link above for the full story…
Or… here’s your snippet: “Will Republicans and Democrats agree on a budget, and avoid a government shutdown after midnight Friday?
I’d say the odds are 50/50. Actually, I put the odds of a shutdown at about 55%. There’s certainly enough substance here to be wary.
The government could shut down because of disagreements over defense spending, funding for Trump’s wall with Mexico, deportation of illegal immigrants brought to the U.S. as children (the “Dreamer Act” also referred to as “DACA”), funding for Planned Parenthood, funding for Obamacare (called “SCHIP”), disaster relief and more.
There’s not much middle ground between Democrats and Republicans on many of these hot button issues.”
Chuck again… I don’t believe the lawmakers will allow the Gov’t to shut down, so look for that “extension” if you will, to save the day this Friday…
Currencies today 12/6/17… American style: A$ .7585, kiwi .6899, C$ .79, euro 1.1804, sterling 1.3384, Swiss $1.0111, … European Style: rand 13.5260, krone 8.2605, SEK 8.4068, forint 266.41, zloty 3.5698, koruna 21.7142, RUB 58.69, yen 112.49, sing 1.3481, HKD 7.8126, INR 64.48, China 6.6140, peso 18.80, BRL 3.2385, Dollar Index 93.37, Oil $56.89, 10-year 2.33%, Silver $16.07, Platinum $907.14, Palladium $996.05, and Gold… $1,267.70
That’s it for today… Well, our Blues got back on the winning track last night in Montreal. They had gone into a funk, but looked much better last night. Winter weather has arrived here in the St. Louis area… I don’t like cold weather one iota, and longtime readers know that I head to S. Florida in January to get away from the cold. But then there’s always this cold weather in December that I despise! At least now that I’m somewhat retired, I don’t have to go out in it if I don’t want to! So I have that going for me, eh? Nilson takes us to the finish line today with his song: Without You… And with that, out of the way, it’s time to go… I hope you have a Wonderful Wednesday, and Be Good To Yourself!
Chuck