A Japanese Surprise: 4% GDP!

Chuck Butler’s: A Pfennig For Your Thoughts

 August 15, 2017

* Safe Haven unwinding in process

* Gold gets whacked again!

* Chuck reminisces for Old School football! 


Good day… And a Tom Terrific Tuesday to you! We had all three grandkids at the house yesterday, as their parents, school teachers, had to report for meetings and school hasn’t started yet…  The kids were really wound up, and I had to raise my voice to them a couple of times, which was surprising to them, as they thought I was just this old man that never said anything! HA! They’ll be back again today… Hopefully, they got worn out yesterday, but I doubt it! They are so funny when they are all together, planning and scheming, especially when they don’t know you’re listening to them!  OK.. Billy Paul greeted me this morning with his song: Me & Mrs Jones…  A great tune!  

Well, the safe haven assets are getting unwound as the saber rattling that grew to a crescendo last week, has dissipated, for now that is, which means the safehavens like Gold, Treasuries, euros, yen have all seen their lofty levels of last week, get thrown out the window. But for how long? I submit that it won’t be long before another round of disparaging words come from Washington, and we start the flight to safety all over again. 

That could come from the U.S. Data Cupboard today, as we will see the color of the July Retail Sales here in the U.S. The Butler Household Index indicates to me that this July report should be better than the average bear, as there sure have been lots of packages that came through our doors both here and in Florida! the so-called experts are calling for an increase of 0.3%, which sure would be a sigh of relief for the Fed members, after they had to sweat out last month’s negative print in Retail Sales. 

But should this print disappoint and not meet expectations, the support the dollar has been getting will most likely head for the hills, and leave the dollar to fight its own battles, which it has not done a very good job of lately. 

It sure has been quiet over in the Eurozone lately…  All I read about is the payment that the U.K. will have to fork over to the European Union (EU) for leaving the Union… It’s a large sum of money, but compared to the money that the European Central Bank (ECB) has forked out to Greece these last 6 years, it’s chicken feed…  

At first yesterday, the Aussie dollar (A$) and kiwi were benefitting from the unwinding of safe havens, as it would sure be nice to not have bombs exploding north of the S. Pacific… Kiwi actually rallied to trade above 73-cents, but then the rug got pulled from underneath these two currencies and soon they were caught up in the selling of the currencies and metals.

Well, if you ask Elon Musk if we should have been concerned about N. Korea, he’ll tell you no, that we should be more concerned about artificial Intelligence (AI)… Check out his tweet from this past weekend…  “If you’re not concerned about AI safety, you should be. Vastly more risk than North Korea.” – Elon Musk 

Interesting take, don’t you agree? OK.. onto other things… Gold got whacked yesterday, and is getting whacked in the early morning trading today too. UGH! This selling has nothing to do with interest rates, or growth prospects, it’s all about two things… Safe haven unwinding, and “the boys in the band” taking this opportunity to “pile on”… Which used to be a penalty in football, but I doubt it is any longer, given al the rules changes they’ve made to football. Look, I’m old-school when it comes to my views of how football is played, and in my humble opinion, at the rate they keep going with the rules changes, pretty soon we won’t recognize the sport any longer…

  And yes, I know all about the head injuries, etc. But it’s just like any other profession, you know the risks going in, and it’s YOUR decision to continue or not…  That’s my thought, and there’s nothing you can say that will change it! HA! 

But doesn’t it just get your dander up when you see engineered take downs of Gold & Silver?  229,000 contracts in Gold were traded yesterday, and I would bet a dollar to a Krispy Kreme that a good number of those contracts were paper short sales, with no intention whatsoever to make delivery…  

In Japan, good economic data surprised the markets, but yen couldn’t get any traction from the 2nd QTR preliminary print of 4% increase (2.5% was expected)… Where in the world did Japan get 4% growth? Did they pull it out of a magician’s hat?  Japan, with all their problems, were able to print a 4% GDP, and the U.S can’t even muster 2%?  Something is awry here folks…  The report for Japan was the strongest GDP they’ve seen in over two years!  And before you go and think that buying yen would be a smart thing to do, let me remind you that we’ve seen blips like this in regards to economic prints from Japan before, and every time things end up to be a one and done print, with no follow up…  So, keep that in mind…

The price of Oil slipped further in the past 24 hours to trade with a $47 handle.. I read this morning that the U.S. shale producers are producing Oil at a record pace, and that just has to make our friends at OPEC< NOT! very unhappy! While I’m happy that the U.S. can shove the price of Oil right up OPEC members’ collective noses, I’m also very concerned about the environmental aspects of shale production using fracking… What will be the unintended consequence of this? 

Oh well, move along now Chuck…  OK, the slippage in the price of Oil has hurt the Petrol Currencies, and now that the euro is also slip sliding away the Norwegian krone is seeing weakness from the price of Oil and the euro slipping… I told you yesterday that the currency that has taken the Oil price slippage the worst is the Canadian loonie, and it continues to be the poster child for how badly a currency can react to something else… 

Speaking of a poster child…  Yesterday, I visited one of my doctors, and he is always amazed at how good (to him) I look considering what’s gone on and is going on with my health… He got to a point yesterday, when he said that I could be the poster child for how to respond to being told you have cancer, and I responded to him… That would have to be a very big poster!  He laughed and said, see? You are amazing!   OK, my big head has come back to normal size after that doctor visit! HA!

The U.S. Data Cupboard has the aforementioned Retail Sales print today, and then a lot of 3rd tier prints, that won’t amount to a hill of beans regarding market moving, so we’ll just move past them and get back to Retail Sales…  This print could be a real market mover today and tomorrow, but then on Thursday we get more market moving data, so keep that in mind when making investment decisions today…  

To recap… No saber rattling, has the save haven currencies and metals on the selling blocks. Gold gets whacked yesterday and is getting whacked again early this morning…  it’s quiet in the Eurozone, and Japan prints a very strong 2nd QTR GDP! The price of Oil is slipping again, and taking the Petrol Currencies along for the ride on the slippery slope. 

For What It’s Worth…  Well, thanks to my friends over at GATA, who went me this story, we have a good FWIW this morning, and it’s about the dollar falling, and can be found here: http://www.scmp.com/business/article/2106812/us-dollars-fall-could-become-self-fulfilling-prophecy  

Or, here’s your snippet: “Evidence of rising Asian central bank reserves could be the catalyst for another leg down in the US dollar. The currency markets may rationally conclude and react to the notion that such accruals will be accompanied by reserve diversification, as the central banks sell some of their new holdings of the greenback for other major currencies.  

 Of course, geopolitical concerns could intrude on market sentiment but even then investors make rational, if hurried, decisions. As rising tensions in the Korean peninsula re-emerged last week, the currency markets were quick to look for safe havens, selling US dollars against, among others, the Swiss franc.

But those decisions are by definition reactive whereas for most of 2017 the currency markets have been pro-active in selling the US dollar, and as the greenback has fallen, Asian central bank reserves have been increasing.” 

Chuck again…  Isn’t it interesting that this article came from China? When they think the dollar is vulnerable, it confirms what I’ve been thinking and saying…

Currencies today 8/15/17… American Style: A$ .7838, kiwi .7280, C$ .7768, euro 1.1746, sterling 1.2875, Swiss $.9716, … European Style: rand 13.2905, krone 7.9606, SEK 8.0773, HUF 258.92, zloty 3.6414, koruna 22.26, RUB 59.76, yen 110.39, sing 1.3660, HKD 7.8231, INR 64.16, China 6.6673, peso 17.82, BRL 3.1886, Dollar Index 93.78, Oil $47.41, 10-year 2.25%, Silver $16.85, Platinum $961.16, Palladium $896.03, and Gold… $1,279.50  

That’s it for today…  No baseball for me last night, as the Cardinals had a travel day, and that meant lots of reading time for yours truly, which normally means I’m full of you know what and vinegar the next day… But you were saved from that, as I’m still feeling the effects of my infusion last week, and can’t seem to shake this feeling that I need to sleep! 8/15 was the day we used to start football practice… Now the kids start school! Crazy!  Well, if you can’t get moving to the song that takes us to the finish line today, there’s no hope for you!  Pharrell Williams takes us to the finish line today with his song: Happy…    And with that, I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!