March 7, 2018
* Cohn resigns and the Trade Wars intensify…
* Rate hike talk goes to the back burner…
Good Day…. And a Wonderful Wednesday to you! Another beautiful day here, except if you wanted to go to the beach. The weather system up north has caused the ocean to really get angry down here, and the waves are some of the biggest ones I’ve seen here. We had a Happy Hour on the deck last night, our friends from St. Louis are going back home, but my good friend Duane arrived here. There’s Big News that’s rattling the stock market futures this morning, so we’ll have that to talk about and more, so grab your cup of coffee, and let’s get going! Cheap Trick greets me this morning with their song: Dream Police…
Yesterday, we talked about the tariffs and the Trade War that’s spooling up, and today we’re going to talk about how U.S. National Economic Council head, Gary Cohn, resigned over the tariffs… You see, Cohn, is a free trade guy, and was believed to be the architect of the recent tax cut bill, but when he was pressed to stand behind the President’s Tariffs, he balked, and quit… This has thrown the stock futures into a deep abyss this morning, and it will be interesting to see how they open and trade today…
Cohn was with the President on his thought that China was trading unfairly, but the steel and aluminum Tariffs will hurt Mexico, Canada and Europe too, and he just didn’t think that was the right thing to do… Europe has already responded, as I told you yesterday, and this whole scene is getting ugly fast!
Why would Cohn’s resignation upset the stock market applecart? The markets thinking that without his opposition voice in the administration, that this Trade War could really gear up fast… And from the rumors going around that someone’s underground, and she will… wait! What on earth are you doing Chuck? The rumor going around is that Trump is ready to add to the Steel and Aluminum Tariffs with a whole array of other things that he feels America is getting the shaft on in the world…
Gold sure got the memo that the world’s economies are about to begin to circle the bowl, and rallied to the tune of $14.40 yesterday… And the gain would have been greater on the day, but it was obvious that in the 253,000 contracts traded there were some trades that didn’t agree with the rally going on… wink, wink… The shiny metal is flat to down a buck or two in the early morning trading this morning, but I would have to think that the disturbance in the galaxy that was the stock market, would tend to see Gold gain…
Remember back in 2009, when stocks, currencies, and Gold all moved together as they were considered to be the “risk assets” and each day we would have to discuss whether it was a “risk on” or “risk off” day? Well, that’s no longer the case, as these three have all decoupled and trade on their own fundamentals now. Well, fundamentals with a strong presence of trader sentiment that is…
The euro has just about gained back all that was lost last week, when the dollar bugs were getting their way, with all the rate hike talk, which have taken a back seat to the Tariff / Trade Wars talk. The European Central Bank (ECB) meets tomorrow, and like I’ve already said, the rumors are that the ECB will announce that they are not ready to begin to unwind their bond buying program, and will revisit it this summer… That means that the stimulus that has been in place for a couple of years now, will remain in place, for now, and the euro traders took this as a good thing for the economy and rising inflation, which would bring about higher interest rates, and therefore the buying of euros and selling of dollars has returned…
The Aussie and New Zealand dollars are both on the rally tracks this morning, as they too attempt to recover the lost ground they experienced last week. The Aussie dollar (A$) has climbed back over 78-cents, and the New Zealand dollar / kiwi is inching toward 73-cents… With the rate hike talk on the back burner in the U.S. these two currencies that currently enjoy a positive rate differential to the green/peachback dollar, are free to move about the country…
The Canadian dollar / loonie and Mexican peso are getting sold on the threats that Trump’s Tariffs are going to affect their respective economies negatively. I heard/ read a funny line about these two yesterday from famous and well respected analyst, Peter Boockvar, when he said that Trump originally said that the Tariffs were to protect American National Security, so “we must be expecting a war with Mexico and Canada”… HAHAHAHAHA! Not that this Tariff stuff is funny, but that line is!
OK… The U.S. Data Cupboard wasn’t kind to the dollar yesterday, just as I suspected it wouldn’t be… January Factory Orders fell to a negative -1.4% figure, the weakest month since last June. And the look under the hood wasn’t very pretty either… here are the numbers, courtesy of Ed Steer’s letter this morning (www.edsteergoldandsilver.com)
• Transportation equipment -10.0%
• Nondefense aircraft: -28.4%
• Defense aircraft: -45.6%
• Mining, oil field machinery: -8.9%
Pink Floyd sang, all in all it’s just another brick in the wall… And Chuck is changing the words to all in all it’s just another crack in the economy’s wall…
Today’s Data Cupboard has quite the bounty of data reports, like the ADP Employment Report, The Trade Deficit, Productivity, Unit Cost Index and Consumer Credit (read debt!)… I’m really only interested in the Consumer Credit data to see just how much in debt consumers got themselves into during the month of January… We know that January data so far has been awful, which means that we could actually see the debt numbers of consumers go down in January… I’m from Missouri, I’ll have to shown that!
To recap… The Trade Wars are spooling upward, and U.S. head of the National Economy, Gary Cohn, resigned over the Tariffs that the U.S. has already announced, and now there are rumors of more Tariffs are going to be announced. Gold rallied by $14 yesterday, and the currencies found a way to carve out more gains VS the dollar.
For What It’s Worth… This link was sent to me by longtime reader, Bob, and I thank him for that! This is about how our lawmakers keep getting rich, and can be found here: https://www.pressherald.com/2018/02/27/in-the-moneycongress-net-worth-keeps-on-growing/
Or, here’s your snippet: “The cumulative net worth of senators and House members jumped by one-fifth in the two years before the start of this Congress, outperforming the typical American’s improved fortunes as well as the solid performance of investment markets during that time. The total wealth of all current members was at least $2.43 billion when the 115th Congress began, 20 percent more than the collective riches of the previous Congress, a significant gain during a period when both the Dow Jones industrial average and Standard & Poor’s 500 index rose slightly less than 10 percent. Beyond that grand total, the median minimum net worth (meaning half are worth more, half less) of today’s senators and House members was $511,000 at the start of this Congress, an upward push of 16 percent over just two years – and quintuple the median net worth of an American household, which the Federal Reserve pegged at $97,300 in 2016. The financial disparity between those who try to govern and those who are governed is almost certainly even greater than that. Members of Congress are not required to make public the value of their residences and their contents, which are the principal assets of most Americans. Nor are they required to reveal their other assets and debts to the penny, or even close – instead using 11 broad categories of value … that do a comprehensive job of obscuring what each member is precisely worth.”
Chuck Again… I should have been a politician, eh? Actually, on the lowest level of politics, I was an elected alderman in my little river city at one time, but never had grand designs of moving higher, but I guess I should have! HA!
Currencies today 3/7/18… American Style: A$ .7808, kiwi .7283, C$ .7731, euro 1.2427, sterling 1.3865, Swiss $1.0658, … European Style: rand 11.9055, krone 7.7980, SEK 8.2334, forint 251.45, zloty 3.3755, koruna 20.4519, RUB 56.50, yen 105.56, sing 1.3142, HKD 7.8347, INR 64.88, China 6.3275, peso 18.88, BRL 3.2287, Dollar Index 89.49, Oil $62.14, 10yr 2.85%, Silver $16.72, Platinum $960.12, Palladium $974.50, and Gold… $1,333.60
That’s it for today… The first rain since January will come down on us today, hopefully before game time, so we don’t have to sit through a rain delay or even heaven forbid, a rainout! A grand time was had last night with our friends, and even some of our friends from the building joined us! My good friend, Rick B. called last night to tell me it was snowing back home. He said, “I thought you would enjoy hearing that”… And I did! Rick and Kevin will be here tomorrow to round out the Spring Training buddies, and on Friday, I begin my two week vacation! And with that, the Allman Brothers take us to the finish line today, with their song: Whipping Post… Which I identify with regularly… Sometimes, I feel, like I’ve been tied to the Whipping Post! Now, go out and make this a Wonderful Wednesday, and always, always I tell you to Be Good To Yourself!
Chuck Butler