July 19, 2018
* Euro loses a full cent!
* Gold sees an $11 gash this morning!
Good Day… And a Tub Thumpin’ Thursday to you! I’m hoping to recharge my batteries early this morning, so I am able to participate! It was a very late night for yours truly, but one that was well worth it! Delaney Grace was on stage at the Muny! If you’ve ever been to St. Louis in the summer, you’ve probably heard or had the opportunity to see a production at the Muny… And there was my little bundle of joy, dancing and singing on the stage! She was GREAT! And she’ll be back on stage for nightly presentations of ANNIE for a week! The Kinks greet me this morning with their song: Sunny Afternoon…
Well, I think I had better be getting my things in order to walk away from all this… Recall I told you a couple of weeks ago that if things didn’t work they way I described them that I would have to really “retire”, as my credibility would be shot! And judging from what happened in the overnight markets last night, I’ve got one foot out the door…
So, let’s get to it… Yesterday late afternoon, I checked to see how the markets were behaving, and things looked a bit better, the euro had climed higher within the 1.16 handle, Gold was holding its own, and things seemed calmed down… But that was all put to bed last night, the currencies, led by the Big Dog, euro, got trashed once again, and Gold is down $11.30 in the early morning trading today…
It doesn’t help the currencies when one of the major currencies, is dropping like a rock, as the rate hike thoughts have turned to mush for pound sterling… This morning they printed their latest Retail Sales report and it was negative! OUCH! That’s going to leave a mark! Yes, a June print for Retail Sales in the U.K. was a negative -0.5%!
There’s been not a peep from the European Central Bank (ECB) and so the currencies aren’t even fighting back… They are acting like the 90lb weakling that gets sand kicked in its face by the big bully (dollar), and cowers in fear and doesn’t dare fight back.
I hesitate to even mention this, as I’m sure I will be putting the old jinx on it, but with all the currencies getting whacked, there is one that needs to be singled out for not getting caught up in the dollar buying… The Canadian dollar/ loonie has quietly moved higher by 2-cents in the past week…
Gold yesterday traded down 10-cents… marking two days of trading and about 500,000 contracts for the two days, and not even a full $1 movement in the two days, that is until this morning. I read a piece/ opinion on gold this morning on Bloomberg, and since it’s not what I would like to hear, I think you need to read at least a piece of it…
“The gold chart is incredibly ugly these days. The precious metal is at its lowest level in more than a year, having fallen by over 10 percent since early January. But what’s even worse is that bullion has become boring. A few years ago, in the pre- and post-crisis era, it got tons of attention. Now nobody outside of some die-hard enthusiasts really care. Even critics don’t spend much time on gold, with many of them having moved onto bashing crypto. Still, one must marvel at the cognitive dissonance gold bugs need to have. They argue that the economy remains in a gigantic bubble that’s being held up by central bank stimulus all over the world. And yet gold is meant to be a check or a hedge against precisely that behavior. So either gold isn’t working as advertised, or the economy isn’t the gigantic scam it’s made out to be. It’s basically one or the other. All this being said, just because the bull story has collapsed, it doesn’t mean its argument is flawed.” – Bloomberg 7/19/18
Chuck Again… To that, I would say, yes, what you say is correct, but what you left out, is that physical Gold isn’t allowed to trade on supply/ demand mechanics, that there’s just too much interference from the paper trades, and as long as that scenario exists, people like me that believe in Gold as a store of wealth, will have to hear about how Gold is failing to live up to its historic performances…
OK, since this is all going on this morning, I think it would be best for me to go through a short list of reasons why this dollar rally is on a wobbly three legged stool… So, the Fed says they’re on pace to continue hiking rates (which has helped the dollar turn around), but what happens when the rug is pulled out from under the economy? And more so, out from under inflation? Well, that would be the end of the rate hikes, that’s what! And here’s a hint of what I’m talking about… Real average hourly earnings haven’t managed to rise in any of the past three months. What does this tell me? Well it tells me that inflation is falling again, and I wonder why? Oh, that’s right, Chuck, you told us all two years ago what Fed Rate hikes were going to do for inflation!
Now… for all of you who do not believe me that we are a country that has gone from making things to sell, to buying things, and receiving things for doing nothing, take a gander at this info I pulled from Paul Ryan’s twitter page yesterday… “The last time unemployment levels were this low, there were 17 million SNAP recipients. Now there are 42 million.”
42 Million SNAP recipients? Are you kidding me? That’s really strange for a country that is supposedly at full employment (even with 95 million people still looking for work), and an economy that’s robust, (but could only muster 0.5% growth in Retail Sales in a month full of graduation gifts!) Smoke and mirrors, folks… That’s what the Fed and Treasury are using on you, to make this all look good… But, if this (dollar strength) is what comes of all this, then I give up… Raise the white flag…. Because all that I’ve learned in economics and currency valuations is being thrown out the window, folks…
But I’m still here, talking about it, so no worries about me… I’ll continue to talk about how this doesn’t make sense, point out the things that worry me, and should worry the markets, but don’t…
The U.S. Data Cupboard doesn’t really have much for us today, and yesterday it had housing data that showed June data on Housing Starts that fell from 1.337 Million in May to 1.173 Million in June… And like I just said there’s not much today, so more dollar buying will take place given that if there’s no real data printing, there’s no bad data printing to soften the dollar!
To recap… It was a very ugly night for the currencies and metals, with the euro down 1-cent, and Gold down $11.30 in the early morning trading. Forget the Trade War, forget the exploding debt here in the U.S., forget the fact that there are 42 Million SNAP recipients…
For What It’s Worth… this morning’s FWIW piece come to us courtesy of the WSJ and was sent to me by long time reader, Bob… (thanks!) it’s about the rising debt here in the U.S. and you’ll have to have a WSJ subscription to read it all…
Or, here’s your snippet: “WASHINGTON—The Trump administration expects annual budget deficits to rise nearly $100 billion more than previously forecast in each of the next three years, pushing the federal deficit above $1 trillion starting next year.
The revisions, which went largely unnoticed when the White House submitted its annual update to Congress last week, reflect the cost of federal spending increases agreed to earlier this year and higher interest payments.
The budget proposal released in February showed annual deficits totaling $7.1 trillion over 10 years. The latest revisions increase these cumulative deficits by $926 billion, to $8 trillion.”
Chuck again… And I’m so sure of this if I were a betting man, I would be the farm that even these upward revised numbers will be low, when the final tally comes in… I’m just saying…
Currencies today 7/19/18… American Style: A$ .7342, kiwi .6730, C$ .7705, euro 1.16, sterling 1.2980, Swiss $.9975, … European Style: rand 13.4460, krone 8.25, SEK 8.9350, forint 280.86, zloty 3.7330, koruna 22.3438, RUB 62.90, yen 113, sing 1.3723, HKD 7.8494, INR 68.91, China 6.7144, peso 19.06, BRL 3.8393, Dollar Index 95.49, Oil $68.23, 10-year 2.88%, Silver $15.28, Platinum $799.66, Palladium $893.72, and Gold… $1,216.21
That’s it for today… and this week… I’m going to need to find my old boss and friend, Frank Trotter, for when we worked together and things didn’t make sense a visit with Frank would help me to sort things out… Frank? are you out there? Last night was just perfect for sitting outside at the Muny, as the heat backed off, there was a nice summer breeze, and my little d, as I call her, Delaney Grace was on the stage! My beloved Cardinals get back on the ballfield tonight so good luck to them for the 2nd half of the season, may it be much better than the first half was! One 3 more Pfennigs next week, and then I’m on my annual summer vacation! And with that thought… The Commodores takes us to the finish line today with their song: Brick House… That song will get you dancing in your seat! Ok, I hope you have an opportunity to make this a Tub Thumpin’ Thursday, and remember to Be Good To Yourself!
Chuck Butler