July 16, 2018
* Consumer Debt Soars In June!
* Currencies attempt to come back!
Good Day… And a Marvelous Monday to you! Thanks so much for understanding my plight last Thursday I must have scared a few people, as even my good friend, Duane, sent me a text, asking me if I was OK? It all passed by Thursday afternoon, and Friday was a new day, full of sunshine and lollipops! I have no idea why the medicine whacks me out like that sometimes… But, I guess I have to say thanks to the Lord, that it doesn’t whack me out like that all the time! The Pousette Dart Band greets me this morning with their song: Amnesia… I hope that it’s only amnesia, believe me I’m sick but not insane!
The currencies fought back on Friday to gain a bit VS the dollar, on the day. The week of relatively little economic data came to and end last Friday with a weaker Consumer Confidence Index for July, printing at 97.1 down from June’s 98.2… On Thursday last week, the U.S. printed its Federal Budget number, and in June, let me remind you that in June quarterly taxes are due, the U.S. posted its second largest June deficit of $75 Billion!
Here’s the breakdown in case you were keeping score at home: Where the money was spent on social security ($88BN), defense ($65BN), Medicare ($79BN), Interest on Debt ($32BN), and Other ($126BN). The $75 Billion net deficit, saw receipts of $316 Billion… There are some other items in the numbers but these are the biggest expenditures…
Did you notice the $32 Billion spent on bond servicing? And that was just in the month of June… That means if we multiply it by 12 we would get the annual amount spent on paying the interest on debt, and it would be $322 Billion… And that’s at much lower interest rates than will be available going forward! I’m so disgusted with the lawmakers in this country that I wouldn’t mind if they all lost their reelections. That they have sold the country down the road for a bagful of promises to social security, Medicare, Medicaid, and whatever other Gov’t handout that’s available to them. They don’t care how much debt they incur, because by the time it all comes crashing down they won’t be in office any longer and it will be someone else’s problem… Shame, Shame, Shame… I don’t know how they live with themselves knowing well what they are doing…
And the Fed is no better, as they’ve allowed the lawmakers the ability to run up debt with zero interest rates for 10 years, now, and even after 3 years of rate hikes, our Fed Funds rate is still only 2%!!!! I’m get riled up here, don’t know if you can tell, but my blood is boiling thinking about this mess our country is in, and all these people with their grand schemes have failed miserably… But we as a country (as a whole, not Pfennig Readers!) would rather be intrigued by whether or not Putin rigged the election, than we care about what the lawmakers and Fed Heads are doing to our country!
OK… I’ll step down from my soapbox now, maybe I can calm down a bit, here… I have to because I’m all alone here, if I passed out or had a heart attack no one would know… So, settle down Chuck, take a sip of coffee, savor it, and then sit back for a minute before continuing on… Ok, I’ll be back in a minute…
So, I told you above that the currencies attempted to fight back VS the dollar on Friday, and that was all good, but the real move came last night in the overnight markets, and for once in a blue moon, the overnight markets saw the currencies continue to their moves higher VS the dollar. I told you last week that I thought the dollar rally was over, and then just to prove me wrong, the green/peachback rallied for a couple of days…
So, once again we sit at the crossroads that has one route heading to more dollar strength, and the other heading to dollar weakness… I’m going to pick the one that has dollar weakness, but I’m hesitant, because the manipulators have proved that they can move the dollar where they want to, as long as it makes them feel alright! If traders show a lot of commitment toward dollar weakness, then the manipulators will step back and play in the shadows…
In the overseas data cupboards this morning, we saw Chinese Industrial Production for May, slip a bit from 6.8% in April to 6% in May, but to offset that slippage, Chinese Retail Sales also printed for June, and saw an increase from the May print of 8.5%, to 9% in June. A mixed bag-0-nuts there, folks, and nothing to really hang your hat on… Let’s move on…
In the Eurozone this morning, they printed their May Trade Balance and saw a nice narrowing of the deficit that printed in April at euro 18.8 Billion to the Mary print of euro 16.9 Billion.
And finally, today continues the meeting of President Trump and Russian President Putin… I see what Trump wanted to do, as he thought he was on a roll after the meeting with the N. Korean leader, but as time has gone on, that meeting with N. Korea’s leader has turned sour, and hopefully Trump can salvage something from this meeting with Putin… In my view, which is in the cheap seats, so I don’t have an up front and close view, I see the world wanting the U.S. and Russia to get along…
Since we went down the data cupboard road for overseas, we might as well see what’s going on in the U.S. Data Cupboard… Well, the U.S. Data Cupboard gets restocked this week with a truck load of data, and some real economic data reports, starting today with June’s print of Retail Sales… The Butler Household Index (BHI) tells me that in June Retail Sales should be good, not great, but good… (lots of money spent in the U.S. on graduation gifts)…
According to the latest Monthly Treasury Statement, in June, the US collected $316BN in receipts – consisting of $162BN in individual income tax, $94BN in social security and payroll tax, $3BN in corporate tax and $22BN in other taxes and duties- a drop of 6.6% from the $338.7BN collected last June and a reversal from the recent increasing trend…even as Federal spending also dipped, down 8.8% from $428.9BN last June to $391.1BN last month.
Where the money was spent on social security ($88BN), defense ($65BN), Medicare ($79BN), Interest on Debt ($32BN), and Other ($126BN).
This resulted in a June budget deficit of $75 billion, better than the consensus estimate of $98BN, and an improvement from the $147 billion deficit in May and as well as slightly less than the deficit of $90.2 billion recorded in June of 2017. This was the second biggest June budget deficit since the financial crisis.
Tomorrow’s Data Cupboard will have the latest prints of Industrial Production and Capacity Utilization, and I would look for some recovery in the June print from the negative prints in May… But that’s tomorrow, and you know my saying for that… let tomorrow be…
I watched a quick video this morning from CNBC that had Ron Paul talking about a great collapse that he sees coming, that has its roots in all the debt… And he something that plays well in the sandbox with my call that that the Fed’s “Great Unwind” of their balance sheet won’t get too much further, before they have to call it off… Mainstream America just didn’t get Ron Paul, just like they didn’t get Ross Perot, but people like us, Pfennig Readers, we get them, they are true Austrian economics folks…
This weekend I took a walk through all my books here that I’ve read through the years, and came across the book that I wrote the Foreword for in 2008… Addison Wiggin’s: The Demise of the Dollar, with Foreword by Chuck Butler.. It was the first time I had any words printed in a book. I then remembered that I wrote a whole chapter for the Little Book of Dollar of a Shrinking Dollar… I know the guys like John Mauldin, James Rickards, and Addison Wiggin, and Bill Bonner have all written multitude of books through the years, but I’m very proud of my short pieces for these books mentioned above… Something my grandkids can look up one day, and say, “Grandma, the general (that’s what they call me), sure was a smart man, wasn’t he?”
The folks at Wiley publishing used to contact me all the time about writing a book, and at the time I was busy trading and managing risk at EverBank World Markets, traveling to speak, and writing the Pfennig every day… I had no time to allocate to book writing, and now that I’m no longer doing all those things I no longer hear from them… Boy, I have no idea how I slipped down this rabbit hole, but I’ve got to get out of it before I begin to point fingers…
To recap… The currencies rallied on Friday, and then bucking the recent trend to sell the currencies in the overnight markets, they continued their Friday rally last night… Is the dollar rally finally over? Did you see the HUGE, Monstrous, Godzilla-like Consumer Credit (read debt) report from last week? Chuck breaks it down for you… Chuck also gets on his soapbox this morning, so you won’t want to have missed that!
For What It’s Worth… The folks at MarketWatch sent me this late last week, and I saved it for my FWIW section today. It’s about when the tariffs will begin to be felt by consumers and can be found here: https://www.marketwatch.com/story/heres-when-americans-will-start-feeling-the-pain-from-escalating-trump-imposed-tariffs-2018-07-11?mod=MW_section_top_stories
Or, here’s your snippet: “Very few Americans have paid a price from escalating U.S. tariffs, but if trade fights get worse, the first big bill will come due shortly after the school year starts.
An initial blast of tariffs, mostly targeting $50 billion in Chinese goods, was tailored by the Trump administration to minimize the damage to the U.S. economy. Consumers or businesses could more easily find substitutes for goods whose prices would rise due to higher U.S. tariffs.
For now most consumers don’t have to worry much. The economy accelerated rapidly in the spring and is expected to remain strong through the summer months.
Come fall, though, and the price of many imported consumer goods in the crosshairs of the White House could begin to rise.
China exported about $500 billion in products to the U.S. in 2017. They encompass a vast range of goods such as fabrics, clothing, vacuum cleaners, refrigerators, computers, lighting and so forth — the kind of goods that are no longer made in America or are only made in small quantities.
Absent another source of supply, prices on these goods are sure to rise.”
Chuck Again… Good analysis here… that I agree with.
Currencies today 7/16/18… merican Style: A$ .7425, kiwi .6782, C$ .7545, euro 1.1710, sterling 1.3253, Swiss $1.0014, … European Style: rand 13.2140, krone 8.008, SEK 8.8208, forint 275.50, zloty 3.6760, koruna 22.1040, RUB 62.52, yen 112.42, sing 1.3620, HKD 7.8485, INR 68.53, China 6.6897, peso 18.80, BRL 3.8510, Dollar Index 94.53, Oil $69.35, 10-year 2.85%, Silver $15.78, Platinum $824.63, Palladium $932.21, and Gold… $1,241.09
That’s it for today… I’ve got a busy day ahead, and need to clean up the house from all the parties I’ve had while Kathy was gone… (NOT!) the house looks hardly lived in! But a busy day for me… Well, I’ll my pointing out that the Cardinals poor play was the manager’s fault, came to a head Saturday night, when the Manager was fired… You can’t fire all the players, so you fire the leader… The All-Star Game is tomorrow night… I have two pictures on my wall here of me and my two boys, at the All-Star Game back in 2009, and one of just the two boys. Good memories… And with that it’s time to go, and America takes us to the finish line with their song: Lonely People.. I hope you have a Marvelous Monday, and Be Good To Yourself!
Chuck Butler