AKiss of Death, Or Just A Good Call?

Good Day… And a Wonderful Wednesday to you! Another beautiful day here in St. Louis yesterday. As I’ve always said, “if this keeps up, we won’t be able to afford to live here!” But you won’t ever hear me complain about Chamber of Commerce weather! I’ve whined enough over the years about cold weather, and how I had to go where it’s warm, so you won’t catch me changing horses in the middle of the stream! Steely Dan greets me this morning with their song: Reeling In The Years… (I do love me some Steely Dan!)

Well, Monday’s non-movement in most investment assets, was replaced by some currency volatility, and dollar strength. This dollar strength has stretched its tentacle across the globe, and there doesn’t seem to be one currency that was able to escape the dollar’s moves. The worst performing asset yesterday was Oil, which lost the $44 handle, and is sinking quickly toward $42, as it trades this morning at $43.34.

This awful performance in Oil had really set the Petrol Currencies back on their heels, and this time even the head scratching loonie has seen some value taken from it. While the price of Oil was rebounding earlier this year, the lead dog of the Petrol Currencies, the Russian ruble, would be out front ratcheting up gains VS the dollar, hand over fist… But now that the bloom is off the rose of the Oil price, the ruble is getting hammered daily…

And don’t think for a minute that the ruble’s current hammering isn’t also tied to the aggressive stance against the U.S’s shooting down of a Syrian plane earlier this week. I know, it’s just words between Russia and the U.S. but as I explained yesterday, this is no time to be ticking off Russia…  We’re so stretched and bogged down in the Middle East, and all that is worrying the bejeebers out of me!

The euro hasn’t really lost much ground to the dollar as I look at the currency screen this morning. The euro is still sniffing around the 1.1150 figure this morning, which to me, is pretty impressive, given the dollar strength being displayed around the globe!  And that brings me to the soapbox, where I’m going to step up and make a call… Are you ready for this? OK, here goes!

First off, I sure hope this doesn’t turn out to be the Old Chuck’s Kiss of Death… But I’m so confident about this thought that it might be able to overcome that Kiss of Death, that usually comes along once I talk glowingly about something! OK, enough beating around the bush, for that’s just not my bag, baby!

tap, tap, tap, is the microphone on? Testing, one, two, three… Can you hear me in the back? Good! OK, Ahem, here goes.. I believe that the strong dollar trend is coming to an end, and the main beneficiary of that will be the euro.. More and more I read and see that traders are growing more and more concerned about the weakening economy here in the U.S. and the fact that the Fed keeps hiking rates into that weakening.

While in the Eurozone, we’re seeing the European Central Bank beginning to warm up to removing their accommodating monetary policy, as the Eurozone economy spools up and inflation returns to the region’s economies. I read this and it is so good, that I have to use it now… Right now the euro is like the Jack-in-the-Box right before it starts to pop out…

Back in 2002, I wrote a white paper titled: 2003, The Year of the Euro… I’m thinking I need to pull that out and dust it off, and say that 2017-18 is going to be the New Year of the Euro! I know, I know, the Eurozone has its own set of problems, but you see sentiment really drives currencies these days, and the sentiment toward the dollar is eroding quickly, while the sentiment toward a recovery in the Eurozone seems to be “in vogue”… So, I’ve told you this before, but here goes… I learned early in my career that spans back to 1973 (I know I don’t look that old do I? HAHAHA!) and that is that “the markets are never wrong”…

What that means is of course they could be wrong, and I’ve pointed how wrong it was several times through the years, but weather its wrong or not, if the markets have an axe to grind on some asset, then don’t stand in their way. They may be wrong about it, but that doesn’t matter one iota, so don’t forget that!

Gold sure can’t get off the canvas, where it has been knocked down from a flurry of shots from the dollar, and the short Gold paper traders, of course! Yesterday, Gold tried to mount a rally, but was stopped short of the border, and ended the day with a $1 loss… No biggie, but a loss nonetheless, in a time period that just won’t let Gold loose…  I say that, but in the early morning trading today, Gold has mustered up a $4 gain, so we’ll have to wait-n-see if “da boyz” as Ed Steer calls them want to take their pound of flesh again today from Gold’s value…

In 2006, my friends, Addison Wiggin of Agora Financial, and Bill Bonner, the creator of the Agora Publishing Company, co-wrote a book titled: Empire of Debt… The Rise of an Epic Financial Crisis… In the book the two tell the history of many republics through history that turned into Empires and then crumbled because of a couple of things. Extending their armies too thin, and running up huge debts that had them find ways to deal with the debt, like debasing the money, and raising taxes, until the money could be debased any longer, nor could taxes be raised any higher, and the Empire crumbled… The two did this history lesson to compare the greatest empire in the world at the time, The Roman Empire, to the U.S. Empire… And yesterday, in Bill Bonner’s Diary, he compared the two again, but only this time he used a comparison of Trump and Julius Caesar… Boy, did this bring back memories of history classes, then reading the Empire of Debt, and then the follow-up The New Empire of Debt that came out in 2009…

I thought it would be fun to go through some of the things we worried about in 2006 with regards to debt…
In 1987 Consumer Credit (read debt) was $672.2 Billion.. in 2006 it was $2.1 Trillion, and in 2017 it is $2.8 Trillion
In 1987 Total Household Debt was $2.7 Trillion. In 2006 it was $$10.764 Trillion, and in 2017 it is $12.73 Trillion
In 1987 Domestic Business Debt was $1.9 Trillion. In 2006 It was $5.2 Trillion, and in 2017 it is $5.9 Trillion
And the kicker of things that I think foretell us a recession is near… the last time I was invited to speak at the Agora Financial Symposium in Vancouver, B.C. was 2015… And I brought this little ditty to the audience then… The total U.S. current Debt, which included: Gov’t, State, Business, and individual debt had crossed $60 Trillion for the first time! Well that was 2015, guess what that number is today? Well, if you said more than $67 Trillion, you would be the winner, winner, Chicken dinner!

All this debt is unsustainable, and while that’s quite evident, it’s not imminent, but… What if it was? What would you do? Well, I think that most likely you would scramble to find a reputable Gold dealer… But by then it will be too late, because of all the people that listened to people like me and told them that time to buy insurance is before the floods… I often use this saying.. That’s too late to remind yourself to drain the swamp when you’re up to your rear with alligators! Don’t wait for the alligators, folks… That’s all I’m saying…

Whew! my fat fingers were flying all over the keyboard, as the thoughts just kept coming into my head about the Empire of Debt.. And like I said above, the damage to the dollar from all this debt, might be evident, but it’s not imminent just yet… And that brings me to another thought… I’ve long said that “we’re turning Japanese”, following the Japanese down this deep, dark, dangerous (look at me being the poet! HA) road of debt accumulation. And it’s been pointed out to me that the yen hasn’t really suffered from all their debt..  Well, I guess that’s their opinion, because it’s in my mind that not that too long ago, the yen was trading about 80, and today it’s 111..  (it’s a European priced currency so the higher the number the less in value it returns in dollars, because it takes more of the currency to equal a dollar)

A couple of years ago, yen was 120-ish, and looking like it was going to 150, and I still think that’s where it belongs, given the fundamentals of the country, along with the demographics, and their inability to reform, but Japan still enjoys this “safe haven” status, which just boggles my mind to no end. Safe from what? over 3 decades of an economic funk and deflation? Oh, please sir, may I have another?  NOT!

So, I was really on my horse this morning about debt, Gold, the dollar, yen, and the euro, but those were the things on my mind today… So, guess who gets to share in my thoughts today? You dear reader! HA!

The HA! and HAHAHAHA! that I use in the Pfennig, I borrowed from my good friend, the Great Mogambo Guru (MGM)… He calls me a Junior Mogambo Ranger (JMR)… And quotes me from time to time… Many years ago, and I mean many years ago, when he first quoted me, he said that he didn’t know why he was quoting me, because I had never sent him any candy or flowers…  So, reading that, I found out his address and sent me a bouquet of flowers with a box of candy, as if we were long lost lovers! HA! And we’ve been friends since… I even carry around with me every day for luck, a Mogambo Guru minted Silver Coin, with his mug and his saying on the coin… “This Investing Stuff Is Easy… Wheeee!”

To recap, it was a good day for the dollar yesterday, as the no-movement Monday, turned into a terrible Tuesday for the currencies and the price of Oil, which continues to drive lower… Chuck gets up on the soapbox for the euro, and has a flashback to 2006 and reading the Empire of Debt… You’ll want to check out the debt numbers that Chuck throws out there today…

For What It’s Worth… Well, I spent some time on the price of Oil today, and so when I came across this article on Bloomberg, I thought it played nicely in the sandbox with what I had said, so here’s the article’s link where you can read it all:  https://www.bloomberg.com/news/articles/2017-06-19/oil-s-slide-stalls-as-investors-weigh-stockpiles-against-Libya

Or, here’s your snippet… “Shale producers risk drowning in their own surplus — again.

On Tuesday, oil slid into its first bear market in 10 months, falling 21 percent from its high for the year. The swoon dragged down driller shares amid concern that unceasing production from U.S. shale fields is overwhelming OPEC efforts to ease a global supply glut.

Explorers who came of age at a time when ever-increasing production was rewarded with ever-higher prices are now having a bit of a déjà vu from their fall from grace in 2014.

The S&P 500 Energy Index has lost 14 percent this year, while West Texas Intermediate crude, the U.S. benchmark, has fallen 19 percent. Buoyed by prices that hit $54.45 a barrel in February, U.S. explorers have boosted the number of rigs drilling for oil to the highest since mid-2015, and expanded their production to 9.33 million barrels a day.
“A lot of faith and hope and belief was put into” the deal by OPEC, Russia and other exporters to cut their production as a way to balance the market, said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. But “it’s proven ineffectual.”

Chuck again…  ramp up production, have a glut in supplies and watch the price tumble, then shut down production, and watch the price recover, then rinse and repeat the whole shebang over again… When will these guys ever learn?

Currencies today 6/21/17… American Style: A$.7570, kiwi .7241, C$ .7520, euro 1.1148, sterling 1.2626, Swiss $.9743, … European Style: rand 13.0269, krone 8.5434, SEK 8.7737, HUF 277.35, zloty 3.8042, koruna 23.5715, RUB 59.69, yen 111.15, sing 1.3898, HKD 7.80, INR 64.58, China 6.8272, peso 3.3274, peso 18.27, Dollar Index 97.66, Oil $43.34, 10-year 2.16%, Silver $16.45, Platinum $922.65, Palladium $873.91, and Gold $1,247.60

That’s it for today… Had a great night last night, as a few of my buddies stopped by to watch the baseball game with me outside, since it was such a beautiful night… And it ended up with a Cardinals extra inning win, so all-in-all a good night… I got the word yesterday, that the subscriber list is ready, which means it won’t be too much longer before I can get back to sending out the daily letter by email! YAHOO! But, I do like the set up with the website so far… But the emailed letter can reach so many more, that don’t want to have to bookmark a website and them remember to visit it each day! Boy, we sure have become spoiled haven’t we?  HA!  Elvis Presley takes us to the finish line today, and yes, I said Elvis! with his song: Can’t Help Falling In Love… Come on admit it, you slow danced with an old flame to this song at sometime!  And with that, it’s time to tell you that I hope you have a Wonderful Wednesday!  And don’t forget to be Good To Yourself!

Chuck Butler