All This Reminds Chuck Of 2002…

January 24, 2018

* Currencies take dollar to the woodshed!

* And metals keep the door to the woodshed shut!  

Good Day… Another restless night for yours truly… I tried not taking a nap yesterday, but that didn’t help things. UGH! Another beautiful day here, as winter has come and gone from the region. Blues win, Billikens lose in OT last night… Must have been a busy night near downtown St. Louis last night, with both events taking place…  The Great Van Morrison greets me this morning with his song: Brown Eyed Girl…    

Front and Center this morning, I had an omission of a word yesterday, that I want to tell you was a error of omission, and I did NOT intend to call our lawmakers Doofusses and Clowns… My statement was I am calling them names… But what I thought I typed was: “I’m NOT calling them names”… So, if you felt inclined to launch an attack on me, please know that I truly omitted the NOT in error…   

Well, someone finally grabbed the steering wheel, as I requested they do yesterday, and gave the currencies and metals some direction yesterday and throughout the overnight sessions. The currencies, for the most part, have taken the dollar to the woodshed, and the metals are holding woodshed’s door shut!  The Dollar Index has fallen below 90 for the first time since 2015, and the  Index’s 2.3% slide so far this year is the worst beginning to a year for the dollar since 2003! 

We have some very strong performers in the currencies this morning, with the Big Dog euro leading the way, currencies like pound sterling, rand, krone, krona and kiwi stand out as the best performers.  This is the first time the Swedish krona has traded below 8 in a month of Sundays, and shoot even Japanese yen is participating in the dollar whipping with a move below 110!

The announcement of new trade tariffs on U.S. imports is the latest reason du jour for the dollar selling… Trade tariffs, tax cuts, and unsustainable debt reminds me of 2002… Yesterday, we did some reminiscing about 2004, and 2005, but the last weak dollar trend began in Feb. 2002, after then President Bush, announced steel tariffs on Japanese steel, and the U.S. implemented tax cuts… Hmmm… And don’t you dare say, “this time will be different”!   

Isn’t that the beauty of reading someone’s letter that has been there, seen that and bought the T-Shirt?  Yes, that’s me! I’m not new to these markets, and what moved them then, VS these “new guys and females that just recently graduated from college and think that they know everything”  I’ve been around currencies since 1988, started trading foreign bonds in 1992, and currencies in 1993. In the early 80’s I traded short term U.S. Treasuries, BA’s, Commercial Paper, and CD’s.  And in the 70’s I was the youngest ever to run a margin dept in a brokerage, and dipped my toe in the commodities briefly.  Ok, enough about me, and how old I must be to have done all that! HA! 

Gold had a good day yesterday gaining $7.80 on the day, but in the early trading today, Gold is up over $12!  Yesterday morning I told you that Gold had added $4.70 in the early morning trading and that the number was temporary because the “boys in the band” hadn’t arrived at their desks yet… Well, when they did arrive, they tried to take down the price of Gold, and did so by $5, but the physical Gold buyers fought back and soon the shiny metal had gained back that $5 it had lost, and then some, but this morning’s performance is quite impression, and puts that $7.80 gain yesterday to shame! HA!  

You know the currencies have the conn when currencies like Euro Wannabes (Czech, Polish, and Hungarian currencies) and the S. African rand are pushing the currency appreciation envelope across the desk. The rand’s move has the currency below the 12 handle for the first time since 2015… (rand is a European priced currency so the lower the number the greater the value VS the dollar) 

So, when do you think the PPT (Plunge Protection Team) will show up to protect the dollar’s slide? They had better do so quickly, or else this dollar selling is going to get away from them, and it’ll be too late baby, now it’s too late…   

The Bank of Japan  (BOJ) announced Tuesday it was keeping its monetary policy unchanged,  which was in line with everyone and their brother’s expectations.In a statement released following the conclusion of its two-day m eeting, the BOJ said it would keep the short-term policy rate unchanged at negative 0.1 percent and the 10-year yield target around 0 percent.  They follow that up with a quarterly assessment, where they repeated their line about maintaining their quantitative and qualitative easing policy for as long as it takes, until they reach 2% inflation… 

And Japanese yen rallied… Wait, What? Yes, yen rallied below 110 on the night… yen is a phenomenon to me… News like the BOJ delivered yesterday should have sent yen on a ride on the slippery slope… I guess the only thing I can think of here is that the dollar selling was so strong, that it overcame the weakness yen might have had from the BOJ announcement…  But it still is a mystery, this yen rally.. 

The U.S. Data Cupboard was empty yesterday, but today we will see the December Existing Home Sales, and try to get a reading of whether or not there are cracks in the housing markets foundation… I’m really not ready to go out on the limb here regarding a housing bubble, because every market these days gets the “bubble” label thrown on it, but rising interest rates, and rising home values, don’t go together like two peas in a pod folks… I’m just saying…   

Before I head to the Big Finish today, I’ll put the finishing touches on this week’s Dow Theory Letters ( entry from me. My thoughts from the Butler Patio, are printed on the website on Thursdays, and this week’s entry is all about the great economist Hyman Minsky, and how eerily similar today’s scenario is to his thoughts on a Minsky Moment…  I know, I know, it costs to subscribe to the DTL but I like to think about like this…  The cost of a DTL subscription $69, the ability to get Chuck’s thoughts from the Butler Patio… priceless!  HA! 

To recap…  The dollar has been shown the way to the woodshed, by the currencies, and the metals are making sure the door remains shut, not allowing the dollar to leave the woodshed! Tax cuts, tariffs, and unsustainable debt in today’s economy, reminds Chuck of 2002… And that’s not a good thing for the dollar! The BOJ left their negative rates unchanged, and stated that they will maintain their current policy until they reach 2% inflation. And yen rallied… Don’t ask me, for it doesn’t makes sense to me!   

For What It’s Worth… You would think that with all that’s going on there would be a plethora of worthy FWIW articles out there this morning, but that’s not the case. But I did find this ditty on and it’s about the Fed being in a pickle, and can be found here:   

Or, here’s your snippet: “The media discusses this as a major tightening move. Somehow all of our economies have finally worked because of central bank activity. Growth is real. It’s all positive. The markets are evidence of that because of the levels they are at; and, therefore, these central banks, starting with the Fed, are going to reverse course of these last 10 years.

“The reality is if you look at the actual activity of the central banks, beyond the Fed raising rates by a little bit, there hasn’t been and there isn’t being a reversal of course because they are scared to death that too much of a reversal is going to cause a major crash throughout the financial system.

Everything is connected. All the banks are connected. Money flows around the world in less than nanoseconds, and all of it has the propensity to collapse if that carpet the central banks have created is dragged from beneath the floor of all this activity.” – Nomi Prins     

Chuck again… I like where Ms Prins showed that the Fed had only reduced their balance sheet by $10 Billion since they announced their quantitative tapering…   

Currencies today… American Style: A$ .8070, kiwi .7399, C$ .81, euro 1.2345, sterling 1.4097, Swiss $1.0512, … European Style: rand 11.9750, krone 7.8152, SEK  7.9758, forint 250.50, zloty 3.3707, koruna 20.5698, RUB 56.44, yen 109.53, sing 1.3118, HKD 7.8173, INR 63.66, China 6.4013, peso 18.64, BRL 3.2167, Dollar Index 89.67, Oil $64.64, 10-year 2.63%, Silver $17.24, Platinum $1,013, Palladium $1,102.50, and Gold… $1,354.30

That’s it for today…  I’m going to finally receive my first infusion down here on Friday… So, no Pfennig this Friday, as I’ll be reporting to the infusion center first thing Friday morning. it’s been a month since I received a cancer treatment, and the tumor in my mouth has grown again, so much that my face is all deformed again, and I’m having trouble speaking without problems… UGH! I’m still waiting for that “magic pill” to make this all go away… A nice 3-0 win for our Blues VS Ottawa last night, and my Billikens had the lead late in the game but lost it in overtime… UGH! My beloved Missouri Tigers play Auburn tonight, should be a good game that I’ll get to watch on the SEC network! YAHOO!  Eric Clapton and his Derek and the Dominoes band, take us to the finish line today with their iconic rock classic: Layla…   There’s a story behind that song…  And with that, I hope you have a Wonderful Wednesday and be Good To Yourself!   

Chuck Butler