Author: admin

Rocktober 25, 2018

* Bad Data day for the U.S. changes the course of the currencies

* And Gold continues to gain new investors… Follow the money! 

Good Day… And a Tub Thumpin’ Thursday to you! Man o man, I can’t catch a break these days with something always causing me pain somewhere in my body… I woke up yesterday morning with the gout… Now, I already needed a cane to walk with, and now I limp at the same time! A couple of days of steroids will knock that out, then what will come next? Only the shadow knows…. I’m always reminded of a TV commercial, that I used to imitate the announcers aggravating voice, and say that’s Jim he can’t skate he’s got the gout! I haven’t done that voice since my former colleague and longtime friend Ann Hopkins left the bank… She always requested that I do the voice… Ok, Loggins & Messina greet me this morning with their live version of: Angry Eyes… Well, I bet you wish you could cut me down with those angry eyes…

A nasty first part of the day yesterday, saw the euro drop below 1.14, and the A$ lose about ¼-cent, and even though the Chinese said they were going to stabilize the renminbi, that hasn’t happened, and that went through the morning, until… a couple of headlines… First, it was an article in the Financial Times that said that “Foreigners cut back purchases of Treasuries as Deficit Grows” And now we’re talking about more tax cuts? What am I living in a nightmare here or what? Ok, back to writing… The second headline was from MarketWatch that said, “New-home sales plunge to a near two-year low as housing picture deteriorates”

After the markets got a strong whiff of those headlines, the dollar bugs began backing off their assault on the currencies, and in turn, the currencies got to kick some sand in the dollar bug’s face! Will that be enough to turn this dollar strength around for good? We will know something more definitive by the end of the day tomorrow… 

Last night I was checking the currencies and saw that the kicking of the sand in the dollar bug’s faces had come to an end, as now the focus shifted to the European Central Bank and their meeting this morning…  So, after all the gyrations of yesterday and the overnight markets, we begin this morning with the currencies wearing the same clothes as last night, except for the loonie… 

The Bank of Canada, (BOC) didn’t surprise many watchers yesterday, when they hiked their internal rate to 1.75%, from 1.50%, making this the highest rate that Canadians have seen since 2008! And the loonie responded marvelously, gaining more than 1-cent! I can hear my good friend Mike Kettler, laughing right now, he always kids me that I get too excited about 1-cent, or something near that, gains… but in the whole scheme of things, a full 1-cent move in one day for a currency is HUGE… You have to remember, as I always respond to Mike, that the currency market is $5 Trillion a day in size… Large sums of money trade currencies…

The Riksbank (Sweden) left their negative (-.50%) rate remain in place yesterday, and the Norges Bank issued a communique that they will announce their rate decision today… It was just yesterday, that I talked about bad timing for these two Central Bank in that they would love for the European Central Bank (ECB) to go first, and not the other way around… Well, the Norges Bank bought themselves a day,  and all they did was leave rates unchanged at .75%…  UGH! 

The ECB has already stated that they intend to end their bond buying program at year’s end. So, that’s a start… They also have stated that the negative deposit rates would remain until next summer… The markets are so keyed up about this, and any sign, intentional or unintentional will be reacted to and found in the euro’s moves. ECB President, Mario Draghi, isn’t new at this… And I doubt he’ll slip up, so any remarks that are made will be intentional, with the hopes that it moves the markets one way or the other… In this case, I don’t think he’s going to move up the negative deposit rates, timeline for removing them, and that will leave traders with sour tastes…

Well, Gold started the day yesterday down a couple of bucks, and ended the day up about $5 bucks… The Wall Street Journal, which normally has to search their roster to find a writer that can do an article on Gold, found one the other day, and check out this heading… “Gold Regains Its Shine Among Investors”, and then followed that article up with another heading that said, “Other Market’s Woes are Boon to Gold prices”…  We’ve seen the usual Central Bank suspects, Russia, China, India, making announcements that their Gold reserves are growing , and we’ve seen some newcomers like Hungary, and Poland come around to the Central Bank Gold buying party going on… My dad always told me to “follow the money”… Where the money goes is where you should go with your money, and then he would add, that is when you get some money!”

Yes, all of these Central Banks are backing up the trucks to the Gold window because the price of Gold has dropped so much, and in my humble opinion, that’s what you should be doing too! I’m just saying… 

The U.S. Data Cupboard yesterday, had more housing data, and it wasn’t very good, as we discussed above… One of my fave economists, Danielle di Martino Booth, chimed in on Twitter that “with housing stocks down 40%, investors hope Fed gets the message”…  I found that interesting because she’s been behind the Fed’s rate hikes 100%, until now… 

As mentioned early this week, we finally get a piece of real economic data today with the print of September Durable Good and Capital Goods Orders… I expect the Durables to be negative, and the Capital Goods, which I prefer to refer to as CAPEX, which stands for Capital Expenditures, should be unchanged, which is to say… SLOW! 

After the James Bullard speech last week that we talked about on Monday, more Fed Heads hit the speaking circuit this week, and all them have had a different spin on their rate hike expectations… There’s whispering among the group, folks… Will there be an uprising? I think the Fed Heads see what everyone else is seeing, with regards to housing, and the stock market, not that they care about the stock market, tsk, tsk…   Or to put it another way, I sure hope to hell that the Fed Heads see what we see! 

I got a big kick out of a headline on the Bloomberg this morning… Get this… “• The U.S. economy is doing great. Why isn’t housing?   I can’t believe, no wait, I can believe, I just find it ridiculous to think that we’ve gone so far as to believe that the economy is the stock market…  The stock market should be a result of the economy, right? That is unless stock buybacks skewer the results…  Anyway, I hope Bloomberg found the answer to their question… 

To Recap…  The currencies got to kick some sand in the faces of the dollar bugs yesterday, after a couple of headlines warned that rate hikes are slowing the economy, at a time when debt is exploding higher… But the overnight markets took those gains off the table, and we’re back to the same clothes as yesterday for the currencies, ahead of the ECB meeting, taking place as I write.  Gold is getting warmed up in the bullpen for a late inning save for investors… wink, wink… 

For What It’s Worth… I’ve long been a big fan of James Grant and his Interest Rate Observer newsletter… Jim is a deep thinker folks, and his comments aren’t usually available to anyone outside of his subscriber list, so when I see them in the public’s view, I grab them immediately!  Ed Steer found them first, so kudos to Ed… But here’s James Grant talking about interest rates…  and can be found here: http://thesoundingline.com/james-grant-if-interest-rates-normalize-the-national-debt-will-cost-more-than-the-military/

Or, here’s your snippet: “It took rates exactly ten years to go from 2.25% in 1946 to 3.25% in 1956. Now already, we have gone on the ten-year from 1.375% to 3%. So rates have more than doubled in the course of two years. So the tempo… now would seem (to be) a bit more brisk… Mortgage activity has been dampened. Companies that have borrowed at floating rates are now having to re-budget. You know the federal government has got some debt and it has been paying the most concessionary rates. I think less than 2% on average. So, if the interest bill for the federal government were to go back to… 6%… on $18 or $20 trillion of market holdings, the interest bill would surpass the defense budget… Look at the number three (3% interest rates), of course it’s a small number, and it is small as measured against the evident rate of inflation. So, since the past 50 or so years, the 10-year treasury security has yielded something like 2.7% in excess of the rate of inflation on average… So the rate of inflation now is generously reckoned at… 2%… that would make the 10-year yield not at three-ish but at four-and-a-half-ish or higher and I think that would truly bite… People say, for that reason, it can’t happen. We cant afford that. Well, just because it would be inexpedient doesn’t mean it can’t happen.”

Chuck Again… yes, I’ve said this before, and this looks like a good place to say it again, and PLEASE pardon the language, I’m just repeating it as said by then Presidential Candidate Trump… “If interest rates get to 4%, we’re screwed”…  

Currencies today 10/25/18. American Style: A$ .7078, kiwi .6522, C$ .7756, euro 1.1401, sterling 1.2895, Swiss $1.0003, European Style: rand 14.5302, krone 8.3260, SEK 9.1047, forint 284.30, zloty 3.7822, koruna 22.6471, RUB 65.45, yen 112.27, sing 1.3795, HKD 7.8397, INR 73.08, China 6.9393, peso 19.60, BRL 3.7006, Dollar Index 96.33, Oil $66.86, 10-year 3.13%, Silver $14.72, Platinum $827.00, Palladium $1,095.00 and Gold… $1,232.60

That’s it for today and this week…  I know if you’re a fan of either team in the World Series, the games are interesting, but for me, they can’t hold my attention very long. Maybe it’s the pace of the game with all the commercials and time spent adjusting batting gloves, but something’s not right for me this year…  It’s a BIG GAME this Saturday for my beloved Missouri Tigers, who will take on the #12 rated Kentucky Wildcats… Come on Drew Lock, you’ve got to beat this team once in your time at Mizzou! The Great Carlos Santana takes us to the finish line today with an oldie but goodie, classic rock song: Black Magic Woman…  The first time I ever heard Carlos Santana was when I went to see the Woodstock movie. I Immediately found my way to the record store to buy a Santana album! that was 1969…  Almost 50 years ago… WOW OK, let’s see what we can do to make this a Tub Thumpin’ Thursday, and Fantastico Friday! And remember to Be Good To Yourself!

Chuck Butler 

Rocktober 24, 2018

* Currencies get sold in the overnight markets

* Gold gains $8.20 on Tuesday, but needs to go on a roll! 

Good Day… And a Wonderful Wednesday to you! Well, I received a high five from my oncologist yesterday, but she reminded me that the wolf (metastatic cancer) is always at the door, and we should continue the chemo treatments… I liked, and pointed it out to her, that she said “we should continue the chemo treatments.” I told her that unless she’s going to get up at the time of day that I get up to take that medicine on an empty stomach, with me… Than “we” should come up with another way of saying that… Of course I laughed, she laughed, and she sent me to the infusion center as my punishment! HA! So, life is good for me right now, no active cancer in me at this moment in time… YAHOO! And the Beatles greet me this morning with a very appropriate song: Getting Better… I have to admit it’s getting better, it’s getting better all the time, (It can’t get no worse!)…

OK, that’s out of the way… I don’t have any bombshells to lob your way today, like I did yesterday… And the currencies just drifted yesterday with some booking some small gains, and others with small losses, it was a nothing day for the currencies, except… The Brazilian real, which trades outside the grid, if you will, and is not included with anything other than the BRICS… And the real has been on a very strong run for over a month now… A few years ago, the real was the best performing currency of the year! And then the trap door sprung under the real, and down she went, down, down, down… So, the first to worst title is owned by the real… Now, the question is… Can the real go worst back to first? I’ll leave that for you to decide, but if you decide to take a flyer on the real, please be careful and watch it like a hawk!

But as I look at the currencies early this morning, they have a different look to them than they did yesterday, and this look isn’t a good one for the currencies, as in the overnight markets they got sold further… I’m not seeing the justification for al this dollar strength, but it’s here, and so we have to batten down the hatches once again. UGH!

Gold couldn’t hold onto its early morning gains of nearly $13 yesterday, but did end the day up $8.20 to close at $1,229. I’m wondering what it’s going to take to get Gold on a roll, here… I noticed last week in the Commitment of Traders (COT) report that the Commercials had gone long gold futures…  Hmm… Apparently that news isn’t going to do the trick, so we’ll have to look for something else…  I guess, and this is my mea culpa, that the big move in the price of Gold that I thought we would see by the end of summer didn’t materialize…  I still believe that this will happen, but don’t have any timeline in mind at the moment. Not that giving a timeline makes it come to reality, right? 

The price of Palladium has really pushed the appreciation envelope lately, and as I understand it, this is because of a lack of supplies issue… Remember a few years ago, when Palladium and Platinum were the stories each day with their increases, and then one day it was no more? Well, that came about because Russia delivered a Truck load of the metals to the markets…   The question this time is… Will Russia be so quick to help out the West this time? 

The only thing I have for you that could be considered a bombshell, is the news that President Trump “Jerome Powell was endangering the US economy by raising rates and that he “maybe” regretted nominating him”

Unfortunately, for the President who is by nature a lover a low rates, and understands inflation, he did the deed, and he hired the Fed Chairman that has hiked rates 3 times so far this year, and will most likely do so again in December.  And this is reality, not reality TV, so, while it’s theoretically true that Powell could be “fired”, it’s not going to happen… 

Well, a couple of weeks ago, there was a lot written about how the price of Oil was heading back to $100… I even got caught up in it, thinking that the Hurricane hitting the Gulf of Mexico would be the lynchpin of a move for the price of Oil to reach $80…  But that didn’t materialize, as I explained last week, Oil supplies here in the U.S. have seen a huge ramping up and then I talked earlier this week about how China stopped buying Oil from the U.S. which was probably the cause of those supplies increases…  So, as I write this morning the price of Oil is trading with a $66 handle.. 

In Central Bank news… The Bank of Canada (BOC) meets this morning and most likely will hike rates 25 basis points or 1/4%, which would help the loonie out given the hit it is taking from the drop in the price of Oil.  

The Norges Bank and Riksbank (Norway & Sweden) are meeting as I write, but their timing couldn’t be more bad, given that the European Central Bank (ECB) meets tomorrow, and the Norges Bank and Riksbank would love to know what the ECB is going to say before they make any moves, so I don’t expect anything from these two today, and as far as the ECB goes, I’m hoping that they will be more upfront with their plans for the unwinding of their stimulus policies, that, my friends would go a long way toward helping turn around the euro… 

The Indian rupee has gotten a stay of execution from Currency traders as the price of Oil slips.. India is one of the countries that benefits from a lower Oil price, as their Current Account Deficit, doesn’t take so many hits…  On the other side of the Coin… The Russian ruble benefits when the price of Oil is in rally mode…  So, here are conflicting countries that are both a part of the BRICS (Brazil, Russia, India, China, S. Africa).

I read a report this morning on the Bloomberg that the writer was of the opinion that Oil’s rally wasn’t over yet, and this pullback in the price of Oil is temporary at best…  Hmmm…  no mention of the supplies… I’m just saying… 

It’s also PMI Day around the world…  Today and tomorrow, we’ll see the PMI’s (manufacturing indexes) from most countries… The Eurozone has already printed their PMI for Rocktober… And they weren’t pretty…  I took this from the Financial Times… “The purchasing managers’ index for the eurozone fell to 52.7 in October, down from 54.1 in September, and the lowest figure for 25 months. “The slowdown is being led by a drop in exports, linked in turn by many survey respondents to trade wars and tariffs, which appears to have darkened the global economic environment and led to increased risk aversion.” -Financial Times 10/24/18

The U.S. Data Cupboard will have the Markit version of PMI’s today, so it will be interesting to see if the Trade War is affecting the U.S. too… I suspect it is… 

To recap…  The currencies drifted yesterday, but are getting sold in the overnight markets. The Eurozone printed their latest PMI, and it dropped, due to the Trade War… The Trade War is beginning to show up everywhere folks… Gold gained $8.20 yesterday, but just can’t seem to find the umph to go on a roll… and President Trump “may regret” nominating Jerome Powell as Fed Chairman… 

For What It’s Worth… When I saw this on Ed Steer’s letter this morning, I about blew a gasket! Paul Volcker speaking? WOW! This has got to be good, I thought to myself, and it was, and now it ended up as my FWIW article today, and it can be found here: https://www.zerohedge.com/news/2018-10-23/paul-volcker-trashes-fed-washington-plutocrats-worlds-hell-mess-every-direction

Or, here’s your snippet: “While we have grown used to Alan Greenspan’s flexible world views appearing regularly among US media channels, when former Fed Chair Paul Volcker speaks, it’s low frequency nature tends to make on pay attention, and he is not optimistic about the state of the world… at all.

When he looks around now, he sees “a hell of a mess in every direction,” including a lack of basic respect for government institutions.

“Respect for government, respect for the Supreme Court, respect for the president, it’s all gone,”he said.

“Even respect for the Federal Reserve.”

“And it’s really bad. At least the military still has all the respect. But I don’t know, how can you run a democracy when nobody believes in the leadership of the country?”

…a current Fed that seems to be following a completely arbitrary benchmark…”I puzzle at the rationale,” he wrote. “A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification.”

…and a “swamp” in Washington run by plutocrats.

“There is no force on earth that can stand up effectively, year after year, against the thousands of individuals and hundreds of millions of dollars in the Washington swamp aimed at influencing the legislative and electoral process.“- Paul Volcker

Chuck again…  Well, respect is earned, and that’s all I’m going to say about that!

Currencies today 10/24/18.. American Style: A$ .7091, kiwi .6544, C$ .7636, euro 1.1400, sterling 1.2910, Swiss $1.0027, European Style; rand 14.1793, krone 8.3230, SEK 9.0832, forint 283.37, zloty 3.7732,  koruna 22.6510, RUB 65.35, yen 112.65, sing 1.3801, HKD 7.8417, INR 72.96, China 6.9374, peso 19.31, BRL 3.6918, Dollar Index 96.36, Oil $66.72, 10-year 3.14%, Silver $14.71, Platinum $826.28, Palladium $1,133.98, and Gold… $1,228.65

That’s it for today…  Well, the World Series began last night…  The Red Sox won the first game, which ended much later than I could bear to stay up for…  If you ever want to get depressed quickly… Visit a Cancer Center’s Infusion Center… I used to spend a lot of time in those centers, and don’t wish that on anyone! OK, Chuck, no need to bring everyone’s spirit down… move along here…   I wonder what’s on the agenda today? I haven’t a clue, and that’s a good thing… spontaneity!  Ok, get ready for this one… Humble Pie, takes us to the finish line today with their song: I Don’t Need No Doctor…  A young Peter Frampton was an important piece of that band… ( a little rock trivia for you today!)  I hope you can get out make this a Wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler 

 

 

 

 

Rocktober 23, 2018 

* The dollar continues to hammer on the currencies

* Gold rallies in the early morning trading on Asian fears… 

Good Day… And a Tom Terrific Tuesday to you! I forgot to mention this yesterday, so here goes… 36 years ago, this past weekend, I witnessed a Game 7 World Series victory for my St. Louis Cardinals… The night is strong in my memories of the evening. We drew tickets out of hat, and I got Game 1 and Game 7, the other ticket went to a young lady that worked for me at the time, named Kate… So, we bundled up and went to the game… There’s a picture of me and Andrew (he was a baby) at the victory parade the next day, that I proudly display on my writing desk’s pin up board… I was quite a bit smaller in size, and had hair! So, there you go! Blood Sweat & Tears, greet me this morning with their song: You’ve Made Me So Very Happy… I sing this all the time, but I get ignored… HA!

Alrighty then… I’ve got a bombshell to talk to you about this morning, but first, we need to get you the info on the currencies and metals… Yesterday, the euro kept sliding downward in the 1.14 handle, as I watched on OAN News, Italy is prepared to present their deficit laden budget to the European Commission today… What’s will the Eurozone leaders say about this budget? Well, if I were king, I would tell them to go back, sharpen their pencils, and to not return until they’ve cut the deficit in half!

The Eurozone leaders probably will be more diplomatic than old “shoot from the hip, Chuck” But that’s just leaves the door open for negotiation, and in things like budgets, getting hard numbers to meet is a better process… I know, I went through 39 years of “Budget negotiations”…

So, that’s what’s weighing down the euro right now… Italy is the 3rd largest economy of the Eurozone, so it would be like the state of New York, which is 3rd in GDP size behind Texas and the leader California, having major budget problems… The good news from the press conference in Italy was that the Italian leaders were emphasizing their intent to remain in the Eurozone and with the euro…

OK,  who did it? Who shined the light on the Aussie & kiwi dollars and brought the markets focus to their recent stealth rises? Remember I told you to be Shhh… not to wake up the markets?… But somebody had to be the loud mouth. HA!  But here’s the thing I want to say about these two currencies… They are known as Commodity Currencies… Now we all know that commodities do well in a rising inflationary environment… They also do well, when Commodities enter a bull market like they did in the early aughts… So… if inflation, (and I know all to well it’s affecting me!) is affecting everyone, and is rising again, which is why the Fed claims it is hiking rates every 3 months, then Commodities and the Commodity Currencies would be looked at to rally… I’m just saying… 

OK, I’ve held this back for this long, but I’m like a horse champing at the bit… So, here goes!

I wrote a long piece for the DTL group on derivatives a couple of months ago… And I’ve talked about it here… But, In the piece, I explained that no one, and I mean no one, fully understands the delivery method of when all these derivatives begin to get executed…  The systemic risk is off the charts folks… I’m serious about this!   And then yesterday, I saw a video clip of a former NY Fed Banking Regulator basically say the same thing, and made the point that, “Ex-bank regulator: We don’t understand ‘how systemically broken the system is.”

OMG! Pack the bags, turn out the lights the party is over folks… Here’s a link to the video, and then come back and read the rest, you’ll be fuming out the ears at that time… https://finance.yahoo.com/news/former-bank-regulator-dont-understand-systemically-broken-system-155149941.html

It’s not a question of IF another financial crisis is going to hit us, it’s more a question of “when”, in my mind… Oh, and I do recall that former Fed Chair, Janet Yellen told us that there were no chances of another financial crisis… So, we should all feel free to throw more money into stocks, and forget about Gold… right? Well, I’m not buying that one… And while I feel like Frank the Tank in the movie when he thinks everyone is following him and his streaking, only to find out he was alone… It’s not going to deter my fears of this whole thing blowing up, right… before… your… eyes…

And guess who the Ex NY Fed Bank Regulator’s main bank was that she was assigned to?  Yes, Goldman Sachs…  Figures, right?  Lola doesn’t want to calculate or even acknowledge the systemic risk of these derivatives, and The Fed allows them to do this.. I’m so mad, right now that I’m going to go yell at the walls!   I’ve had to deal with Bank regulators for years on years, and they never gave an inch! But for Lola… they get the whole darn yardstick! 

OK, move along Chuck before you say something that gets you into hot water!  I really didn’t have to say much at all, just point people toward the link of the interview on YAHOO…   But I had to throw my two cents in, and get my blood pressure all worked up and I have to go to the doctor this morning. That’s not going to look good when they check my blood pressure! 

Well, Gold lost $4.80 yesterday, but is up nearly $13 in the early morning trading today… The turnaround’s reason is pointed at the Asian stock markets, led by China… After a two-day rally in this region’s stock markets, Traders began to question, China’s ability to provide enough Global Growth to push the other countries along, and that question, got the stock markets in Asia selling stocks and buying Gold… 

It’ll be interesting to see if this fear carries over to the U.S. markets today, as of right now, the stock futures here in the U.S. are down significantly…  Remember in January 2016, when there were HUGE fears in the markets about China? Capital flows out of China were hinging on having very negative affects on the Chinese economy, and the stock jockeys got scared, and stocks dropped for a few weeks?  This could be the snow flake that causes an avalanche in stocks… But then that’s not my cup o’ tea, so I’ll just leave that there, and say to the stock sellers, welcome to Gold… 

To recap…  The dollar bugs have the hammer and they keep swinging it at the currencies…  Gold lost $4.80 yesterday, but is up nearly $13 this morning on Asian fears…  Chuck found an interesting interview on YAHOO, with a former NY Fed Banking Regulator, who says, that we don’t know the systemic risk of derivatives… Hmmm, I’ve heard that somewhere before, where was it? …. Oh, that’s right I said that plenty of times before! 

For What It’s Worth…  I’ve talked a lot about the exits of countries all over the world from the use of dollars as a main currency in their system, and this article talks more about that, and it’s relationship with Gold… And it can be found here: https://www.rt.com/business/441807-emerging-countries-stockpiling-gold/amp/

Or, here’s your snippet: “In the near future we can witness a big change in the rules of the game. At the beginning of the year, developing countries were the first to feel investor panic. If a crisis in Latin America and South Asia doesn’t surprise anybody, now is the time to worry about the largest economies of the world,” Mikhail Mashchenko, an analyst at the social network for investors eToro in Russia and CIS told RT.

“The aggressive U.S. policy in recent years has forced some countries to look for an alternative to the dollar and replenish their gold reserves. Worries about the future growth of global economy are an additional incentive for purchases. Many question Donald Trump’s protectionism,” the analyst added.

There are signs that the global financial system dominated by the U.S. dollar could collapse, says financial institute FinIst analyst Denis Lisitsyn. These signs include the uncontrolled emission of money from different countries, an increase in U.S. interest rates, trade wars, the rapid rise in energy prices, geopolitical tensions in Syria, Iraq, the war in Yemen, he says.

“Many countries are buying gold in advance. They understand that paper money is constantly eaten up by inflation, equities will sharply fall in price in case of a crisis, and foreign deposits can be arrested, confiscated or frozen,” he said.”

Chuck Again… I have to thank the RT for sending me their headlines each day, they sure look different from the headlines here…  And they’re in English, so it’s not the language that’s different! 

Currencies today 10/23/18… American Style: A$ .7071, kiwi .6555, C$ .7630, euro 1.1460, sterling 1.2980, Swiss $1.0042, European Style: rand 14.3672, krone 8.2803, SEK 9.0250, forint 281.57, zloty 3.7485, koruna 22.5278, RUB 65.33, yen 112.32, sing 1.3790, HKD 7.8390, INR 73.43, China 6.9378, peso 19.36, BRL 3.7002, Dollar Index 95.98, Oil $68.18, 10-year 3.15%, Silver $14.73, Platinum $826.58, Palladium $1,136.49, and Gold… $1,234.80

That’s it for today… recall I told you yesterday that today’s letter would be shorter, and it is!  Our Blues blew another game last night after having a lead late in the game, this time in overtime… UGH! It’s been a slow start for our Blues, but… in my opinion, I would rather see that and build on the season, than to start fast and fade, like they have the last couple of years… Well, will this be the oncologist meeting where she tells me I don’t have to take chemo any longer, at least for now? Because I’m fully aware that the wolf is always at the door!  My body needs a break… I’m just saying…  Ok, here’s a twist today… Chris Stapleton takes us to the finish line today with his song: Tennessee Whiskey… (I loved that song!)  Now, go out and make this a Tom Terrific Tuesday, and Be Good To Yourself!

Chuck Butler

 

Rocktober 22, 2018  

* China is getting back at the U.S…. 

* Currencies & metals drift lower… 

Marvelous Monday to you! The chilly, raw, gray days of last week, turned to sun filled, but still quite chilly days this weekend… I’m a sun worshiper, if you haven’t figured that one out yet, and anytime you have the sun shining it’s a good day… And a Good day was had at Mizzou’s Homecoming on Saturday. It was just last week that I was reminiscing about past glorious Mizzou Tiger Teams, and on Saturday they honored the 1978 team! My Tigers won the game too! We watched the game at a local establishment with friends, Kevin, Lisa, Denny and Nan… A good time was had by all! And I attended another soccer game with grandson Braden, playing this time… I always remember when I coached young boys in soccer… I don’t talk about soccer much, but I sure played it a lot when I was a young man in S. St. Louis, where soccer was king! Stevie Ray Vaughn greets me this morning with this song: Pride and Joy… Now that one will wake up the house!

They say, “Payback is a b&%#”… And that’s what China’s doing to the U.S. for the U.S.’s tariffs on Chinese exports… It was reported last week that China had sold a basketful of Treasuries for only the second time in their history of buying Treasuries. Reuters reported late last week that, “China has sold $3 billion of sovereign dollar bonds. This is only the third such move by Beijing in the last 14 years, and the first involving bonds with a 30-year maturity.

China sold $1.5 billion of five-year bonds at 3.25 percent, $1 billion of 10-year bonds at 3.5 percent, and $500 million of 30-year bonds at four percent.”

Reuters says that this info came courtesy of the Finance Ministry… Well, now this is a horse of a different color is it not? Oh, and that’s not all… China stopped buying U.S. Oil… No wonder, as I reported last Thursday, the U.S. supplies have grown… That was nearly 335,000 barrels per day, but that all stopped in September…

So, as I’ve said over and over again, this dance is gonna be a drag… no wait! I’ve said over and over again that no one wins in these Trade Wars… The U.S. is placing tariffs on everything Chinese, and the Chinese are hitting the U.S. back, and when it comes to Treasuries, and who’s buying them to finance the debt, that’s akin to hitting below the belt… But all’s fair in love and war, right? UGH!

And before we get to the currencies and metals, let me say that China selling Treasuries at this time when the U.S. is issuing more and more of them to finance our exploding debt, is not what the doctor ordered for the economy, folks… And the President sees it… he gave out homework assignments to his Cabinet members late last week, telling them to come back with 5% cuts to their budgets, he did say that the military was not included in this assignment…

Oh, and one more thing to discuss in depth this morning, and that is St. Louis Fed President, James Bullard, and his speech last week… Before we begin, something to remember here is that Bullard isn’t on the Fed’s rate setting committee, but will be come next year.

Remember when I told you that one of the reasons the dollar was still hanging around was that all the Fed members were singing from the same song sheet, and traders love it when there’s harmony at the Fed… Well, that all changed last Friday, when Bullard decided to speak the truth… He said that “unlike other Fed officials, he sees no reason to believe the underlying trend growth has risen beyond the range 1.7% to 2.1% that policymakers estimate as the economy’s current potential. As a result, Bussard said the Fed Fund Rate should stay where it is currently at a range between 2.0% and 2.25%, until something clearly changes for better or worse. Further rate increases would be taking somewhat more recession risk than otherwise, unless the economy continues to outperform.”

His talk didn’t gain much press, folks… Wonder why? Well, I have my thoughts, but I’ll keep them to myself… Bullard has been known to sway Fed members in the past, so when he gets back on the FOMC in January, things may change…

Dollar traders didn’t pay any attention to the Bullard speech, and the dollar continued to hold the hammer. But it was swinging the hammer too much on Friday, more just holding it over the currencies and metals with the threat that it could hammer away at any time. The euro remained just above 1.15, and the Aussie and kiwi dollars were sneaking up the ladder in the darkness… Shhh! Don’t make a scene otherwise their climb will be seen and that will be the end of that!

The overnight markets have ignored the Bullard speech also, and have gone about selling euros and anything that isn’t a green/peachback. The moves are huge or anything, but they are responsible for the euro dropping back below 1.15 this morning. 

And after a day or two of profit taking in the Brazilian real, the currency has gotten back to rallying… The Political scene in Brazil continues to excite real traders… I’m just going to say this one more time… betting on politics in currencies can seem like a good way to invest, but I’ve seen that road strewn with land mines along the way too many times… So, be careful here…

Not that I’m patting myself on the back for this call, but my dad did always tell me to toot my own horn, because you can’t depend on someone else tooting it! Remember when the tax reform act went through, and I told you that it wouldn’t be for you and me, but more for Corporations, and In my opinion, it won’t get put to good use, as the Corporations will just use the extra cash to make more stock buybacks… Well, that’s exactly what’s taken place… And this caught one of my fave economists’ eyes…. Danielle Di Martino Booth’s decided that all these stock buybacks should have been used to correct underfunded pensions…She took it further and pointed out 5 BIG Companies that have been doing stock buybacks while their pensions remained underfunded… “Danielle DiMartino Booth of Quill Intelligence who picked out a few of the more standout firms whose “enthusiasm for funding pensions was subpar compared to buyback” include: American Airlines, Boeing, GE, Lockheed Martin, and AT&T…

Way to go guys… leave those pensions underfunded for you’ll be long gone before that comes to a head… I shake my head in disgust…

OK… Gold eked out a $1.20 gain on Friday, but has given that back and a couple of bucks more this morning as the shiny metal is looking at a loss this morning of $3.50, as I write… That’s easily wiped out though, so, come you Gold Traders! Gold finished last week on the positive side of the ledger for the week, and that made two consecutive weeks that Gold has boked weekly gains VS the dollar. I saw some graphs this past weekend that pointed out that the huge day that Gold had 13 days ago, was indeed, what I thought it looked like, a short squeeze…  

There are still more shorts in Gold & Silver than you can shake a stick at, and so that leaves us with the potential that we could see more days like that going forward. I’m just saying… 

The U.S. Data Cupboard left the country wondering if Housing is about to take a dive here in the U.S. after last week’s housing data proved to be yet another month of weaker data… But that didn’t bother the dollar bugs… And this week, there’s really no real economic data until Thursday, when Durable Goods Orders and Capital Goods orders will print for September… Remember what I’ve always said about this data and have told you for years on years, that Capital expenditures or CAPEX is the most important piece of this data… When an economy is going strong, CAPEX is strong, companies are spending money on their plants, equipment, space, etc. That’s what helps a strong economy along, for it puts so many people to work…   

But we wont see that until Thursday, which means the dollar should be subjected to selling, but since that’s not happening already this morning, there’s another sign that fundamentals still don’t amount to a hill of beans when valuing a currency… Wait! What am I saying here? The U.S. economy is strong and robust and will continue to be that way for the time being… Isn’t that what the Fed Heads keep telling us? The markets get their clues about the future from the Fed… Which brings me back to the Bullard speech last Friday, I still can’t figure out why the speech got no media coverage, and traders ignored it… Hmm…

To recap…  Friday was a day for drifting in the currencies and metals, but the overnight markets last night has seen the dollar swinging the hammer once again.  China is beginning to do things to offset the tariffs, as the Trade War escalates!  Fed St. Louis, President, James Bullard, spoke on Friday, and basically said he didn’t think the Fed should hike rates any more. But the markets ignored it… 

For What It’s Worth… I’ve long been telling you about how Russia was building an alternative to SWIFT, which is the international money delivery system… Well, it’s finished now, and Russian companies are using it, and soon it will open up to International clients… This was sent to me from longtime reader Bob, and he found it on zerohedge.com and can be found here: https://www.zerohedge.com/news/2018-10-19/foreign-banks-are-embracing-russias-alternative-swift-moscow-says

Or, here’s your snippet: “On Friday, one day after Russia and China pledged to reduce their reliance on the dollar by increasing the amount of bilateral trade conducted in rubles and yuan (a goal toward which much progress has already been made over the past three years), Russia’s Central Bank provided the latest update on Moscow’s alternative to US-dominated international payments network SWIFT.

Moscow started working on the project back in 2014, when international sanctions over Russia’s annexation of Crimea inspired fears that the country’s largest banks would soon be cut off from SWIFT which, though it’s based in Belgium and claims to be politically neutral, is effectively controlled by the US Treasury.

Today, the Russian alternative, known as the System for Transfer of Financial Messages, has attracted a modest amount of support within the Russian business community, with 416 Russian companies having joined as of September, including the Russian Federal Treasury and large state corporations likeGazprom Neft and Rosneft.

And now, eight months after a senior Russian official advised that “our banks are ready to turn off SWIFT,” it appears the system has reached another milestone in its development: It’s ready to take on international partners in the quest to de-dollarize and end the US’s leverage over the international financial system. A Russian official advised that non-residents will begin joining the system “this year,” according to RT.
“Non-residents will start connecting to us this year. People are already turning to us,” said First Deputy Governor of the Central Bank of Russia Olga Skorobogatova. Earlier, the official said that by using the alternative payment system foreign firms would be able to do business with sanctioned Russian companies.”

Chuck Again… I know this snippet was long, but I think it’s THAT important for you to know that the dollar’s days of being the reserve currency of the world is nearing an end… And don’t think for one minute that I want to see this happen… I’m just one of the few people in the world that will tell you that it’s happening…

Currencies today 10/22/18… American Style: A$ .7101, kiwi .6577, C$ .7680, euro 1.1488, sterling 1.2996, Swiss $1.0030, European Style: rand 14.3186, krone 8.2340, SEK 8.9840, forint 280.87, zloty 3.7297, koruna 22.3765, RUB 65.48, yen 112.82, sing 1.3791, HKD 7.8392, INR 73.42, China 6.9287, peso 19.31, BRL 3.7095, Dollar Index 95.79, Oil $69.22, 10-year 3.19%, Silver $14.62, Platinum $833.83, Palladium $1,090.89, and Gold… $1,223.01

That’s it for today… A long one today, but I had lots to say, so you got your money’s worth today. HA! And tomorrow’s will be shorter, as I have a doctor’s appt. early in the day that I’ll have to get to… Last week, heart doctor, this week oncologist…  But the oncologist appt. should be a good one, given my scans results last week…  The TV Execs. got their wish, and the World Series will be the Red Sox and Dodgers, and I doubt I’ll pay much attention to the games, because I can’t bring myself to root for either team!  They are “coast teams”… And my dad taught me that coast teams have an advantage, so to never root for them… I taught the same thing to my sons! Depeche Mode takes us to the finish line today with their song: Policy of Truth…  I hope you have a Marvelous Monday, and remember to Be Good To Yourself!

Chuck Butler

Rocktober 18, 2018

* Gold hasn’t been able to follow up it’s big gain… 

* Fed meeting minutes send bond yields higher! 

 

Good Day… And a Tub Thumpin’ Thursday to you… I’m hoping to include myself in your Tub Thumpin’ Today, because, well, I can! How about that! I had a nice meeting with my heart doc yesterday, and well, I feel good! I woke up this morning with the alarm, and I was in the middle of an interesting dream, so I turned the alarm off, and hoped I would return to the dream… That didn’t happen, but I did begin a new dream! And so, why this letter is later than usual… The Dodgers and Red Sox have leads in their respective League Championship Series. Boy the TV executives would be happy with that World Series matchup…. 10CC greets me this morning with their song: Dreadlock Holiday…

So, yesterday, the dollar continued its rebound from the night before, and pushed the euro down to just above 1.15. There wasn’t anything data wise to rally the dollar, in fact, if you want to get down to the cheese that binds, U.S. housing was weaker in Sept. than in August… A sign? Well, maybe, we’ll have to watch it… And on top of the weaker data in housing… The markets had this to contend with:

President Donald Trump plans to withdraw the U.S. from a 192-nation treaty that gives Chinese companies discounted shipping rates for small packages sent to American consumers, another escalation of his economic confrontation of Beijing.

Instead of us backing up a bit because the economy seems to be shaking at its foundation with these Tariffs, we go a step further, and the dollar rallies? I guess one of these days, I’ll get to sit at the grownups table and hear how all this happens… But until then… I’m as confused as you as to why the dollar bugs continue to party…  One day, it’s “sell the dollar, the tariffs are awful.” And the next day it’s “buy the dollar, the tariffs aren’t that bad”… Pick one, please!  I was driving on the interstate yesterday, and there was a car in front of me that couldn’t decide which lane they wanted to be in… I stayed back and kept saying, come on, pick one, I don’t care, which one, just pick one… 

That’s the message I would like to give to the traders of currencies and metals…  Look, the world is turning its back on the dollar, but you dollar bugs don’t care, for you have a Central Bank that’s going to keep hiking rates, come hell or high water! But it’s all going to come crashing down on you one day… and not to far in the future, either!  So, go ahead, dance your dance today, for tomorrow, the music may be gone… 

Well, yesterday’s BIG EVENT under the circus tent was the release of the Fed’s Meeting Minutes from their last meeting in Sept, when they hiked rates… The minutes were pretty much what I expected them to be, a rate hike jamboree among the Fed Heads, with most of them being hawkish, and that got the bond guys all frazzled, and the next thing you knew was bond yields climbing higher once again… The 10-year Treasury’s yield is back to 3.21% this morning… 

I have to question these guys for this move, for what in those minutes surprised you? I mean the Fed Heads hike rates last month at the meeting, did they expect the Fed Heads to be Eeyore on them or what?  Another case of young traders, not looking behind the curtain, around the corner, and under the hood for clues as to how they should trade… 

The price of Oil plunged $2 in the past 24 hours on news that U.S. storage of Oil has really bulked up…  And the Petrol Currencies saw some slippage too. I have to question this drop in the price of Oil too, given what’s going on in the Middle East, and all the saber rattling going on right now… But I’m not going to spend an enormous amount of time thinking about it for it is what it is… 

Ok… Lola is singing again… do you hear her?  Lola is what I call Goldman Sachs… The old saying was, “what Lola wants, Lola gets”, which is how I view Goldman Sachs…  Well, Lola apparently doesn’t like the Trade War, and tariffs…  Here’s something that I think will begin to filter through the markets…  “US sanctions policy against Russia undermines dollar’s reserve currency position” – Goldman Sachs. 

We’ve already hear the Ford Motor Co., Harley Davidson, and a few other U.S. companies complain about the tariffs, and now Lola decides to throw her 2-cents into the ring… Soon, we will begin to hear more calls to end the tariffs… At least that’s how I see it, and how things have worked before whenever Lola decided how she wanted things to go… 

Gold lost a couple of bucks yesterday, and well, I’m disappointed that Gold hasn’t been able to follow up last Thursday’s $30 rally…  Since then, Gold has been back and forth, up and down, with no follow through, and that usually doesn’t bode well for an asset, when there’s no follow through, folks… 

The U.S. Data Cupboard had the Housing Data (starts and permits) yesterday, and both showed a big drop in numbers from the previous month… And then a quick look at Mortgage Applications shows another big drop in the past few weeks…  Other than a couple of outlier weeks, mortgage applications haven’t been this low since 2000…  Oh, and the reason? Well, there’s a perfect storm here working against housing… 1. Home prices are too high, and 2. Mortgage rates are bumping up against 5%…   

But not to worry, there’s no chance of another housing crunch… NOT! There’s a HUGE chance of another housing crunch, with the Fed on the rate hike cycle that doesn’t look like it can stop!  I can’t help but to keep pointing out that the Fed started this rate hike cycle very late in the growth cycle for the economy, and that’s never worked out for a country… I’m just saying… 

And all this debt…  We just booked another year of extraordinary debts, and we’re already off and running in the new fiscal year, with $138 Billion in debts already booked in the first 11 days of the new fiscal year… I’ve got a good piece on this in the FWIW section today… Which asks the question that I keep asking… Who’s buying our Treasuries to finance this debt explosion? 

To Recap…  The Fed Meeting Minutes were the Big Event under the circus tent yesterday, and from the reaction of the bond guys, they were surprised at how hawkish the Fed Heads were… Chuck calls them out for this thinking…  President Trump upped the ante on the Trade War, with China, and the dollar rallied… Chuck wants a seat at the adults table so he can learn how this happens, and Gold dropped 2 bucks on the day, with no follow up from last Thursday’s $30 rally… 

For What It’s Worth…  OK, I already gave you a hint as to what this is about.  Debt is exploding and someone has to be buying our Treasuries… This article explores that question, and can be found here: https://wolfstreet.com/2018/10/16/who-bought-the-1-6-trillion-of-new-us-national-debt-treasury-securities-foreign-domestic/

Or, here’s your snippet: “

As a flood of US debt washes over the globe, someone has to buy.

So far in this fiscal year, which just started on October 1, the US gross national debt – the total debt issued by the US government – has jumped by $138 billion in just 11 business days, fueled by a stupendous spending binge and big-fat tax cuts, to a breath-taking $21.654 trillion, after having jumped $1.27 trillion in fiscal 2018. And these are the good times!

So who owns and buys all this debt? This is a critical question going forward, because the flood of new debt inundating the market is spectacular, and someone better buy it. Today we got another batch of answers from the US Treasury Department’s TIC data on this increasingly edgy topic.

In August, foreign private-sector investors (banks, hedge funds, individuals, etc. outside the US) and “foreign official” investors (central banks, governments, etc.) owned $6.287 trillion of marketable Treasury securities. This was up $37.6 billion from August last year but was about flat going back to the beginning of 2016.

Over the same 12-month period through August 31, 2018, the US gross national debt jumped by $1.614 trillion. So who bought it?

The Biggest holders didn’t buy, they shed: 

China’s holdings of Treasury securities have been inching down ever so gingerly with its holdings at the end of August at $1.165 trillion, down $37 billion from a year earlier.

Japan’s holdings fell by $72 billion year-over-year to $1.03 trillion and are now down by $210 billion from the peak at the end of 2014″

Chuck again… No sign of who is buying though… and it’s all beginning to become quite suspicious to me, how about you? 

Currencies today 10/18/18… American Style: A$ .7144, kiwi .6573, C$ .7667, euro 1.1518, sterling 1.3108, Swiss $1.0069, European Style: rand 14.2339, krone 8.2116, SEK 8.9666, forint 279.50, zloty 3.7280, koruna 22.4405, RUB 65.43, yen 112.46, sing 1.3778, HKD 7.8391, INR 73.42, China 6.9233, peso 18.90, BRL 3.7119, Dollar Index 95.53, Oil $69.05, 10-year 3.21%, Silver $14.51, Platinum $828.00, Palladium $1,066.00, and Gold… $1,224.00

That’s it for today…  And this week…  Man, I sure don’t like having to get our the long pants and long sleeve shirts for these chilly days… I’m a shorts, and golf shirt kind of guy. Getting dressed for chilly days, is like putting on a suit of armor for me… UGH! See how quickly I became that? Just 1 year removed from going to an office every day! At least once a week from now until something is announced, I’m going to be begging the Cardinals to sign Bryce Harper…  And with that… the group called Madness takes us to the finish line today with their 80’s song: Our House… (that’ll make Rick happy! HA!) I hope you have a Tub Thumpin’ Thursday today, and a Fantastico Friday tomorrow, and remember to Be Good To Yourself!

Chuck Butler

 

Rocktober 17, 2018

* Currencies rally, then fall back, over and over again!

* Rubles are best overnight performer… 

Good Day… And a Wonderful Wednesday to you! I have to get this buttoned up and out the door in a timely manner this morning, as I follow up yesterday’s 3 scans with an appt. with my heart doctor later this morning. I don’t know about you, but this switch in baseball to having bullpen pitchers begin their parade of pitchers in the 4th inning or before, has gotten on my nerves! When I was a young man, pitchers pitched 9 innings, and the only guys in the bullpen were washed up pitchers with hurt arms that could only go 1 inning or so… Bob Gibson, the greatest pitcher I’ve ever seen, completed 255 games in his career… He won 251 games, so there were games that he started and finished but lost! Juan Marichial and Warren Spahn, started a game that lasted 15 innings, both starting pitchers were still in the game at the end! Is baseball like everything else, it goes too far one way before it comes back? I certainly hope so! I listened to side 1 of Chicago’s 2nd album last night… My imagination took me back to 1972, when I first heard that music and my socks were knocked off me by the wall of sound! And I was only playing the album on a portable hi-fi record player! I mention that because Chicago greets me this morning with their song: Hard Habit To Break…

Well… I guess the old Butler Household Index (BHI) still carries some weight. I told you yesterday that September Retail Sales would be weak, and they were only gaining 0.1%, and losing -0.1% when you take out car sales… The Spin Doctors and not the ones that sang Two Princes, immediately began to spin a yarn about how hurricane Florence skewed the data… I always refer to economist guru, David Rosenberg, for the official take on this… and this is what he had to say on his Twitter feed yesterday…

“Some pundits are blaming Florence for the slide in food sales. We went back to all the 8 big hurricanes back to Hugo in ’89 and nothing came close to a 1.8% plunge; 7 actually saw gains in restaurant sales, & the avg was +0.5%.”

OK, that puts that attempt to spin the data to bed! Thank you David Rosenberg! My longtime readers believe me when I tell them things, but there are quite a few new readers to the letter, that want more proof when I say something, and when I get the opportunity to pull out a BIG GUN like David Rosenberg, then that goes a long way to showing them I can be trusted!

Well, the currencies didn’t exactly take liberties with the dollar on that weak Retail Sales print yesterday, and if anything they gave an inch back… But the moves were small… Nothing to write home about, and so we start today with the euro having rallied to close to 1.16 yesterday, only to give back most of that move in the overnight trading, and start today trading 1.1530… UGH! Tug and push, tug and push, and do it some more!  Where’s the trend? 

I got to thinking yesterday, when I was waiting for my turn in “the room” to be scanned… Retail Sales have now been soft for two consecutive months… And the Fed’s take? We’re going to keep hiking rates… Well soft Retail Sales now, will really be helped out a lot in the future, with 4 more rate hikes, eh?  NOT! I get it though… The Fed believes inflation is going to go to the moon, and they’ll be behind the inflation 8-ball unless they keep hiking rates… Well, my point is that the Fed is already behind the inflation 8-ball, and have been for some time, as inflation continues to push against the Fed Fund rate, and normally, I’m told, the Fed keeps rates about 130-150 Basis Points above inflation… Hmmm… Hello? Houston? We May have a problem! 

The Big mover in the currencies overnight has been the Russian ruble… It was reported there yesterday that more than $40 Billion will be invested into the Russian economy… And then Lola… you remember Lola, the girl that gets whatever she wants, and is my nickname for Goldman Sachs, because they always seem to get what they want too, issued a report calling out the U.S. Sanctions on Russia…  Better be careful Lola… Oh, that’s right, you can’t be fired! HA! 

Just when I was prepared to talk about how the Chinese looked like they were readying the renminbi for a 7 handle… It was reported by the GATA folks yesterday that — China’s top central banker today pledged to keep the yuan currency’s value “broadly stable,” a sign that Beijing may be trying to prevent a bruising trade dispute with the United States from spilling over into a currency war.”

Well, we’ll see about that, because it was just a month ago that the Chinese declared that they weren’t doing what they’re doing to the renminbi… And for a few days the currency remained steady Eddie… But then the Trade War numberbs began to come in, and soon the renminbi was back to daily depreciations by the PBOC… (Peoples Bank of China)… And at last look on Monday the renminbi had fallen from 6.29 last Feb. to 6.92… And to narrow that range a bit, a month ago the renminbi was 6.84… So, the rot is quite evident on the vine of the renminbi, but we can thank our lucky stars that the daily depreciations have stopped… Or so says the PBOC… I guess we’ll have to wait-n-see, eh? 

Well, I was wrong, it took too long, I got caught in the rush hour… No wait! I was wrong about the Sept. Industrial Production print yesterday… While it WAS weaker than August, it was still better than I expected it to be at +0.3%… And Last week’s dumping of stocks, seems to have rebounded a bit, so the stock jockeys have that going for them! There’s not much in the data cupboard for today, unless you get goose bumps with Housing Data, or Fed Meeting Minutes…  We won’t see real data until Friday when we’ll see the color of the latest Leading Indicators, which along with Capacity Utilization, are the only two “looking forward” pieces of data we look at, the rest are all viewed in the read view mirror. 

To recap… The Data was mixed yesterday… and the dollar got sold for awhile, until the dollar bugs realized the stock market was rallying, and in the overnight markets the currencies lost their gains… Tug and push, tug and push, where’s the trend? That’s Chuck’s dilemma this morning, and every morning these days! Chuck gets David Rosenberg to debunk some claims about Hurricane Florence’s affect on the economy… And the Russian ruble was the best performer overnight. 

For What It’s Worth… I really dropped the ball on Monday when I completely forgot to talk about the announcement that Sears had filed bankruptcy… Sears… Let me repeat that, the once almighty Sears has file bankruptcy… And this was the story in our local paper that described the problem, and it can be found here: https://www.stltoday.com/business/national-and-international/sears-files-for-chapter-amid-plunging-sales-massive-debt/article_c976773e-c613-5a25-a3e1-65cddba516d0.html#utm_source=stltoday.com&utm_campaign=BreakingNewsNewsletter&utm_medium=email&utm_content=A12874506A3B5805DDED6C95AF30D7173DF7C77A

Or, here’s your snippet: Sears filed for Chapter 11 bankruptcy protection Monday, buckling under its massive debt load and staggering losses.
The question now is whether a smaller version of the company that once towered over the American retail landscape can remain viable or whether the iconic brand will be forced out of business.

Sears, which started as a mail order catalog in the 1880s, has been on a slow march toward extinction as it lagged far behind its peers and incurred huge losses over the years.

“This is a company that in the 1950s stood like a colossus over the American retail landscape,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy.”

Chuck Again… Debt… See? It even negatively affects the BIG Guys, when it’s never paid back and continues to pile up! I’m just saying… 

On a sidebar Sears was BIG part of my life as a young man, as my parents had a revolving credit card at Sears, (long before Visa and Master Charge youngsters!) and that meant everything we owned, wore, played with was bought at Sears! There was a HUGE Sears building about 1/2 mile from the house, and we would walk there to get new jeans, etc. I thought that Sears owned the world back then… 

Currencies today 10/17/18…American Style: A$ .7120, kiwi .6565, C$ .7704, euro 1.1530, sterling 1.3112, Swiss $1.0068, European Style: rand 14.2629, krone 8.1768, SEK 8.9456, forint 279.67, zloty 3.7237, koruna 22.4160, RUB 65.42, yen 112.25, sing 1.3762, HKD 7.8376, INR 73.43, China 6.9139, peso 18.84, BRL 3.7216, Dollar Index 95.40, Oil $71.55, 10-year 3.16%, Silver $14.68, Platinum $838.95, Palladium $1,080.34, and Gold… $1,226.00

That’s it for today… Ok, let’s get this out of the way…  My oncologist called me yesterday afternoon, to tell me that the scans revealed that there was no sign of active cancer in my body!  The new Chemo I’m on, has really done the trick, but for how long before my body adjusts to it? And there is a spot that they’re concerned with, right now, that’s so small… so if they aren’t going to worry about neither will I!  I thank all you dear Pfennig Readers that have had me in your thoughts through the years that I’ve been battling this awful disease… And I thank the Good Lord, for allowing me to live all these years…  Ok… out the door to listen to the hear doc complain about my weight…  I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler

Rocktober 15, 2018

* Gold soars on Thursday, is the bottom in?

* Stocks get stomped last week… 

Good Day… And a Marvelous Monday to you!… The pictures of the devastation from Hurricane Mathew are not stuff you really want to see any time… I hope everyone evacuated and were safe… I guess the weather people weren’t kidding around last week when they said that it would cool down by the weekend! It was downright chilly! And you know me, here I go again, complaining about colder weather! HA! I hear you saying, Oh no, here he goes again!.. My beloved Missouri Tigers football team, didn’t fare too well playing Alabama on Saturday, but then I don’t think anyone expected them to! UGH! The Band, Missouri, greets me this morning with their one hit wonder song: Movin’ On… That one and Blackfoot’s song: Highway Song, are two of my faves to play when I’m driving long distances…

Well! How about that move in Gold on Thursday? Up nearly $30 at $29.20… to close at $1,223.60, and at one point in the day it was as high as $1,230! I was having lunch with good friend Duane, when he checked his phone and said “the stock market is getting hammered again today, does that mean Gold should be going higher?” I said, well, yes, theoretically, but we’ll have to see… Well, it didn’t take long before I checked my phone and saw Gold ratcheting higher and higher on the day… And I immediately thought… “Short Squeeze”… And then went back to enjoying my lunch!

But that’s what it appeared to be on Thursday, a major short squeeze… The good news for Gold holders, is that this short squeeze has pushed Gold above its 50-day moving avg. and is bringing it near a Fibonacci replacement figure… that would be HUGE, for the price of Gold, and would play well in the sand box of what I kept telling you last spring that Gold was set for a major upward move by the end of summer…

But then along came Friday… And Gold’s luck looked to have run out, but… the daily downward move wasn’t enough to wipe out the fact that Gold has had two consecutive weeks of being on the rally tracks! And in the overnight markets last night and early morning trading today, Gold is up almost $8, to $1,230… So, it’s game on Garth, game on Wayne, for Gold… 

And guess what other asset class was the beneficiary of the stock rout? Treasuries… bond were bought at a brisk place, and pushed the yield on the 10-year downward to 3.14%… Early last week the yield has risen to 3.24%… I know you’re not a bond guy/ girl, but 10 Basis Points move in bonds is a big move,

You can’t say that I haven’t been telling you that all this was going to happen… I could see it in my mind, in my dreams, and feel it in my heart, and all my years of experience… Sure, most times I’m way ahead of the actual goings on, but… I don’t need to say anymore!

The currencies saw some love as we finished the week last week, and looked  healthier than they were a week ago. A quick glance at the Dollar Index shows us that last Monday the Dollar Index was trading at 96.12, and this morning, one week later, it’s trading at 95.01…  So, put that in your coffee and take a sip, because it doesn’t taste good for the dollar bugs, but it’s sweet for the non-dollar campers. 

The euro is trading toward the 1.16 handle this morning, which is upward…  A couple of weeks ago, I stated that the so-called safe havens were getting sold and wondered what the heck was going on there? Well, I don’t have to wonder any longer, because the so-called safe havens are back! Japanese yen, Swiss francs, the euro, Gold, and Treasuries, have all rebounded and appear to have turned the corner… 

The U.S. Data Cupboard was pretty lame last week, and I called it a dead air week… But this week starts off with a bang! Today we’ll see Sept. Retail Sales… Now, recall that August was OK, and that had back to school spending, so I’m expecting September’s report to show Retail Sales weak… At least that’s what the BHI indicates it will be! Then on our Tom Terrific Tuesday, we’ll see two of my faves… Industrial Production and Capacity Utilization… Again, I expect them both to be weaker than the August prints. And then the Data Cupboard takes a break on Wednesday, with only the Fed’s Meeting Minutes printing, and on our Tub Thumpin’ Thursday, we get back to real data, and the leading Indicators for the economy will print… So, if all goes as I suspect, this week for the Data Cupboard, the dollar won’t be getting any love, because of weaker data. 

Not that I want to get into the stock jockey business of writing about stocks, but that selloff last week was pretty ugly, and Friday saw a bounce back, and all I read about this weekend was that “things were going to get back to normal for stocks”… But then in the overnight markets the Asian markets got sold off by more than 1%, and that case a dark cloud this way…  

In a previously written Dow Theory Letters piece, I went through the rot on the vine that stocks incur when the country goes into a recession… Are stocks just getting a head start on the recession, or is the recession already here?  I think it’s a case of the former right now… And that’s all I have to say about that! 

The price of Oil, saw a pullback in its rally last week, and now attempts to rally back. The goings on with Saudi Arabia, and the missing journalist, are playing into the price of Oil, folks, don’t kid yourself on iota… President Trump is making harsh warnings to Saudi Arabia, and they continue to deny any wrong doing. 

I read an interesting article this past weekend that talked about how the economic sanctions on Iran could turn into a 1970’s like, oil crisis…  A very interesting take on what’s going on in Oil…  I don’t recall where I read it, but if you want to find out more, I’m sure you can Google 1970’s-like oil crisis and find it… 

To recap…  Gold soared on Thursday last week, saw some profit taking on Friday, and is back on the rally tracks today. Has the bottom been put in for the shiny metal? The dollar is under attack from the return of the so-called safe havens… The euro is moving upward toward 1.16 again, and all the other currencies have fallen in line behind the euro, as usual.  

For What It’s Worth… The euro continues to be held hostage by the goings on in Italy. We’ve discussed this previously, and when I saw this on zerohedge.com I thought it played well with what I’ve been talking about, and you can find it all here: https://www.zerohedge.com/news/2018-10-11/ecb-blackmails-italy-obey-eu-budget-rules-or-we-wont-save-you

Or, here’s your snippet: “Reuters reported that the ECB won’t come to Italy’s rescue if its government or banks run out of cash unless the Italian government first secures a bailout from the European Union. Of course, this would almost certainly require that the populist coalition end its ongoing game of fiscal chicken with Brussels and abandon its dreams of lowering the retirement age and extending a basic income to the Italian people – policies that would effectively secure a political future for M5S and the League.

In effect, the ECB’s latest trial balloon is tantamount to blackmail: Either the Italians agree to fall back in line and obey European budgetary guidelines, or the central bank will sit back and watch as bond yields surge, providing the ratings agencies even more ammunition to cut Italian debt to junk – effectively guaranteeing a Greece-style banking crisis as the liquidity taps are turned off.

And to eliminate any lingering doubts that this was a deliberate coordinated leak, Reuters cited “five senior sources familiar with the ECB’s thinking,” many of whom were “present at the economic summit in Indonesia.” Of course, the ECB sources explained that they are merely acting in the best interest of the monetary union. Because if Italy is allowed to shake off the yoke of European austerity and re-assert its sovereignty, then what would stop Spain or Portugal from doing the same?

Now, if Italy instead embraced the path of fiscal discipline, the ECB would be more than happy to backstop the country’s debt via Outright Monetary Transactions (the never-used program adopted by the ECB in 2012 to restore confidence in the euro and euro-area debt amid a burgeoning debt crisis).

Chuck Again… As the article points out… Even if the Italians won’t back off their ill-advised plans to pass their budget through, the ECB can strongarm them into submission…  

Currencies today 10/15/18… American Style: A$ .7135, kiwi .6535, C$ .7682, euro 1.1593, sterling 1.3017, Swiss $1.0143, European Style: rand 14.4393, krone 8.1527, SEK 8.9583, forint 279.03, zloty 3.7040, koruna 22.23.95, RUB 66.01, yen 111.83, sing 1.3764, HKD 7.8375, INR 73.71, China 6.9173, peso 18.82, BRL 3.7817, Dollar Index 95.01, Oil $71.84, 10-year 3.15%, Silver $14.81, Platinum $851.00, Palladium $1,090.00, and Gold… $1,230.40

That’s it for today… No Pfennig tomorrow… I have to show up at the hospital for a scan very early in the morning… I always ask for these first thing in the morning appointments, for I know that there won’t be any delays, and backups… I thought that the actions of one Alabama football player were despicable on Saturday night, and why he wasn’t ejected from the game and suspended for games, is a mystery to me…  This coming Saturday is Homecoming for my Missouri Tigers… I loved it when my older kids were at the U. of Missouri… For it gave me the push to go to games, etc. The Turtles takes us to the finish line today with their song: Happy Together…  I hope you have a Marvelous Monday and remember to Be Good To Yourself!

Chuck Butler

 

 

Rocktober 11, 2018

*Currencies rebound on Wednesday!

* Gold rebounds! 

Good day… And a Tub Thumpin’ Thursday to you!  What a evening last night! I was surprised by a former colleague, and good friend, Jen and her sisters. They were out for the evening and a little bonding, and I was sitting with my friends discussing the problems of the world. Jen began working with me in 1994, right out of college! I got her to come with me to EverBank when we first started the bank, and she was there at my  side all those years…  No baseball last night, UGH! Our Blues play tonight, hopefully they can stop the other team from scoring 5 goals in the game! Robert Plant greets me this morning with his song: Big Log…  

The Headline on Bloomberg this morning is this: Stock Rout Continues, while bonds, currencies remain calm. 

That statement right there, tells you that all my harping and ranting for years on years about diversification of your investment portfolio, including currencies and metals is playing out right here before our eyes… 

Don’t look now but Gold has rallied two consecutive days, and is up nicely early this morning to bring it back to $1,200, the euro is rising again, and Treasury Bond yields are dropping again, thus signaling a flight to safety of bonds and guaranteed yield without capital risk of the stock market…  There’s a reason you diversify, and its to protect the overall value of your investment portfolio, so that when one asset class is in a bear market, the other asset classes are in bull markets… 

The key, and I’ve talked about this for years, but it’s good to repeat for all the new readers to this letter, is that your choice of asset classes, must have different pricing mechanisms and independent trading from the other asset classes in your portfolio…  

A good example of this was the bull market in commodities that took place starting in the early aughts, and out performed just about everything else while they were in the bull market. But while that was going on, Stocks just weren’t the hot potato they have been.  Longtime friend, and publishing guru, Bill Bonner, called it early in the 2000’s by saying that his trade of the decade was to buy Gold and sell the Dow… 

An investor needs to be nimble and quick to reallocate their investment portfolio when a Central Bank begins to monetize the debt, like the Fed began doing in 2009… But I had better not get started on that subject, and just get back to the discussion at hand… So, there you have an illustration of what a properly diversified investment portfolio does, and the thing I like is that it’s happening right here, right now, (as Jesus Jones sang) right in front of your eyes… my eye… 

OK, so I guess we need to talk about what’s causing this rout in stocks… First and foremost, I’m not a stock jockey, so my view is a broad brush stroke about the asset class… And from my view in the cheap seats, it appears that the perfect storm has hit stocks… The Trade War with China, Europe and anyone else that wants a piece of this, is causing falling margins and reduced profits for U.S. corporations. Then add in the rate hikes, and the idea that that the Fed is going full steam ahead with rate hikes, and finally a resurgence of yields in bonds… I told you, no wait, I warned you that this all would happen eventually…   Remember me saying, that “one day yields will be at a level that it makes sense for stock market participants to sell risky stocks and buy guaranteed interest returns”? 

Of course, I really didn’t think that 2.25% Fed Funds rate was going to influence the kind of yields I thought were needed to attract investors, but I guess it’s really tied to the fact that the markets and participants really believe that the Fed is going to keep hiking rates…  And so it begins… 

What will the Fed do? I mean ever since Big Al Greenspan was the Fed Chairman, the Fed has had the stock market’s back…  I’m just saying… 

Well, Gold gained $5.30 yesterday, and is up over $8 in the early morning trading today. The thing I’m hoping to see here, is that Gold is allowed to move upward without interference…  I can hear some of you saying, “But Chuck, won’t the threat of higher rates, negatively affect the price of Gold?” To which, I’ll say that initially, yes, they will, but if you just switch your attention to the 70’s… Interest rates were ratcheting higher and higher in the Volcker years, and the price of Gold was ratcheting higher and higher too! 

OK… yesterday I talked about how a longtime reader sent me a note about how he disagreed with me on the Russian ruble… And I looked at his thoughts and thought to myself, that I was a real dolt sometimes, but then talked about the conflict in Ukraine and the collapse of Oil prices, as the reasons behind the ruble’s drop in price in the last decade…  

He agreed that those two things did major damage to the ruble, but wanted to point out that the ruble hasn’t been able to keep up with the price of Gold through the years, and sent me a chart that I can’t include here, but here’s what he had to say… “Here is a 10-year price chart showing depreciation of the ruble, from roughly 25,000 to 80,000 per ounce of gold. That equals a 320% loss in the purchasing power of the ruble over the past decade.”

Well, I’ll go back to my thought from Monday, and that is that without the sanctions Russia’s economy would be doing much better, and with inflation under control now, the ruble could be much more attractive… And they have all that Gold!  

The Chinese renminbi continues to be marked downward with each and every passing day in the fixing… I see the Chinese reacting to the Trade War with a cheaper renminbi, to offset the tariffs on their goods shipped to the U.S. Period… 

On the other end of the BRICS… The Brazilian real continues to push the currency appreciation envelope further each day. A lot of pent up frustration is being displayed here, and like I said last week, it’s a move that’s all about politics in Brazil, and that scares me, for it’s not a fundamental move, and therefore could be reversed in a heartbeat. But for you trading-jockeys out there, I say ride this horse until it bucks! 

The price of Oil saw a $3 drop yesterday, which was contrary to what I thought might be the case, as the hurricane made landfall in the Gulf region, thus disrupting Oil production…  Strange move if you ask me… And there must be something else in play here, that I’m sure I’ll read about today, but with no Pfennig tomorrow, you’ll have to wait until Monday! Or if it’s significant enough, I might just tweet it out! 

To recap… The headline on Bloomberg says: Stock rout continues, as currencies and bonds remain calm…  And Chuck says this is all playing out as he thought it would, only earlier than he thought. Proper diversification is the key…  Chuck goes through the items in the perfect storm for stocks, and is patting himself on the back this morning!  HA!

For What It’s Worth…  Well, I’ve long feared derivatives… I’ve talked about this several times in the past that no one really knows the delivery mechanics of these derivatives if they all get executed.  Well, this article in the Asian Times is about how these derivatives are beginning to spew smoke… Uh-oh!  And it can be found here: http://www.atimes.com/article/has-the-derivatives-volcano-already-begun-to-erupt/

Or, here’s your snippet: “The risk remains that dollar credit will seize up globally, with disastrous consequences for countries that have to borrow dollars to cover deficits

The cure for the last crisis always turns into the cause of the next one. The economies of southern Europe – Greece, Italy, Spain and Portugal – nearly collapsed in 2011, and Europe’s monetary authorities responded with negative interest rates.

So did Japan. Europeans and Japanese pay to hold cash or own 10-year German government bonds, which means that every pension fund and insurer will fold in a finite time horizon. They responded by exporting more, saving more, and buying American assets that still pay a positive, if low, real yield.

Hedging the foreign exchange risk in this half-trillion-dollar per year business has exhausted the balance sheet of the global banking system. That explains a large part of the jump in the U.S. 10-year note yield to 3.2% last Friday from 2.85% in early September. Hedging the foreign exchange risk in these massive flows created a derivatives mountain, and it has started to spew smoke and lava.

Banks are rationing foreign-exchange swap lines, making hedges so expensive that German and Japanese investors can no longer afford to buy U.S. bonds. If the foreign bid for U.S. debt dries up, the cost of financing America’s $1 trillion annual budget deficit will rise, and so will interest costs around the world.”

Chuck again…  Got Gold?

Currencies today 10/11/18..American Style: A$ .7096, kiwi .6592, C$ .7665, euro 1.1572, sterling 1.3210, Swiss $1.0126,   European Style: rand 14.6327, krone 8.2103, SEK 8.9890, forint 280.80, zloty 3.7262,   koruna 22.3336, RUB 66.29, yen 112.23, sing 1.3797, HKD 7.8369, INR 73.97, China 6.9197, peso 19.05, BRL 3.7308, Dollar Index 95.15, Oil $71.81, 10-year 3.17%, Silver $14.43, Platinum $825.65, Palladium $1,078.95, and Gold… $1,203.35

That’s it for today, and this week… My beloved Missouri Tigers have to go to Tuscaloosa Alabama on Saturday to play the #1 team in college football… UGH! I’m old enough to remember when going to Alabama to play a game for my Tigers was no big deal, or going to Ohio St., or a bowl game and playing a higher ranked team… They took on all challenges, and won! But times change… players like Phil Bradley, James Wilder, Kellen Winslow, Chase Daniel,  just to name a few, moved on to the pros… Oh well, give ’em hell Tigers! I’m heading to lunch today with good friend Duane, so that’ll be fun. Next week, I’ve got scans, and dr. appts so I need to get the fun in while I can! HA!  John Waite takes us to the finish line today with his song: Missing You…   I hope you have a Tub Thumpin’ Thursday today and a Fantastico Friday tomorrow… Be Good To Yourself!

Chuck Butler

Rocktober 10, 2018

* Currencies rally then fall back in the overnight markets

* Russia wants to bypass the dollar in Trade with Europe… 

Good Day… And a Wonderful Wednesday to you… Unfortunately, Mother Nature is seeing to it that the Gulf Coast Region, Florida panhandle, is going to have a rough time of Wednesday, as yet another hurricane will make landfall in the U.S. this year. I hope everyone has listened to the authorities and evacuated by now… When I went to bed last night, the Yankees were losing to the Red Sox, which would mean that the Red Sox eliminated the Yankees from the playoffs… A quick check this morning confirms that to be the case. The band, Yes, greets me this morning with their song: Owner of a Lonely Heart…

Yesterday, I told you about how this week was a dead air week for the U.S. Data Cupboard, and with that in mind, the dollar was sent out to sea without any support, and it didn’t fare well… No data had the dollar bugs climbing back into the wallboards, and the currencies kicking a little sand in the face of the dollar bugs. The euro climbed back to above 1.15 and the Aussie dollar (A$) gained almost 1 full cent on the day, after posting a 7-year low on Monday… That to me looks akin to having go too far one way, only to have it regain too much the other way…

And lo and behold, the overnight markets saw to it that nothing got ahead of itself, as the dollar was bought in the overnight markets, thus causing the currencies to give back about 1/2 of their gains on Tuesday. I’m really surprised, no wait, nothing surprises me any longer, so let’s say this is very interesting in that the overnight markets are comprised of the Asian markets, where China is the big dog and has made claim after claim about how the dollar standard should be replaced, and then Asian markets hand the baton to Europe, where they have been busy building a payments system to bypass using the dollar, and yet, in those two markets the dollar rallies…  Interesting, eh? 

The Reserve Bank of Australia (RBA) has kept rates on hold for a long time now, and quite frankly, I thought by the middle of this year, (which was 4 months ago) that we would have seen a rate hike from the RBA… But NOOOOOOOO! Come on RBA, you’ve got a housing bubble in Sydney… Do you need to see what happened in the U.S. 10 years ago when the Central Bank didn’t believe in housing bubbles and didn’t hike rates to stop the bubble from expanding more? I would think that every Central Bank Gov. in all the Central Banks around the world, get to view a documentary on how a Central Bank does NOT deal with a housing bubble, and it features the U.S. and the Fed…

Last week I talked about how the U.S current debt was nearing $22 Trillion… But the figure that scares the bejeebers out of me more is the Unfunded Liabilities figure right now of more than $115 Trillion (don’t forget that professor Lawrence Kotlikoff says the U.S. owes more than $200 Trillion!) and my, yours, and your cousin Eddie’s portion of that debt is a whopping $943,500… So, when you have a minute, please fire off a check to the U.S. Gov’t for $945,000 (to take into account the change in the number between now and when the check is received!) and then put a sign in your yard, telling your neighbors (really guilting them into doing the same) that you paid your portion of our Gov’t’s unfunded Liabilities…

Wait, What? You don’t have that kind of spare change in your change jar? Well, that’s Ok, because neither does most people have that kind of money… The Bill Gates, George Soros, Jeff Bezos, of the world could do it… And here’s where I always shut those load mouth folks that think that all you have to do is tax the rich more to pay off the debt… There aren’t enough of them to make up that kind of money folks… It’s that simple… When will people ever learn that you don’t reduce debt by adding to it?

The Brazilian real continues to push the currency appreciation envelope, and it’s about time! The real has been bruised and battered and even got to a spot where I referred to it as “a basket case”…  And I don’t say that willy nilly all the time… There are things that fall under the heading “basket case”, which means they are pretty bad, and have no signs of reversal… The U.S. Debt situation is a pretty bad “basket case”, so you see what sets the bar…  But every day now for the last couple of weeks, the real has been on a mission to remove that title of being a “basket case”.  

With the Hurricane in the Gulf, I would think that it would disrupt the Oil production in the region, and that could have an affect on the price of Oil as we go through the next few days. The price of Oil has a $74 handle hung on it this morning, and if things go the way I suspect them to go, we could be looking at a $76 or $77 handle by the end of the week… 

That would give the Petrol Currencies that include, the ruble, krone, loonie and real, a boost they so desperately need as none of these currencies have every really recovered from the fall of the price of Oil from $100 to the lows of a couple of years ago of $27…  I told you yesterday that I keep reading stuff that talks about the price of Oil returning to $80…  Well, it’s not that far of leap from where it is today, so maybe… you just never know, eh?

Gold fought through 230,000 contracts to gain a whopping $1.60 yesterday…  The devastation to the price of Gold had been done, and hopefully completed, but the sellers had to take a break, they’re going to get carpel tunnel syndrome writing all those contracts!  

With the U.S. Data Cupboard on a break this week, you get a break as the letter will be shorter! HA!  

To Recap… The currencies rebounded on Tuesday, only to see 1/2 of their gains given back in the overnight markets, which Chuck thinks is very interesting that they would want to own dollars, given what’s been said and done so far…  The Brazilian real continues to rally…  And the Price of Gold rallied by a whopping $1.60 on Tuesday… UGH!

For What It’s Worth…  Well, I have another article from the RT this morning, hmm… there’s more to that than you think! Anyway, this one is about how Russia is planning to use its currency to trade with Europe and can be found here: https://www.rt.com/business/440675-russia-ditching-dollar-euro/

Or, here’s your snippet: “The Russian Ministry of Finance said on Monday it may shift to the use of local currencies with European trade partners. The move will be part of the so-called de-dollarization of the Russian economy.

“As we can see the main opportunity which can be realized in the short and medium term is the transition to settlements in national currencies with our European counterparts, including settlements involving the euro, and including for the delivery of our energy commodities,” Deputy Finance Minister Vladimir Kolychev told reporters.

According to him, such a decision would benefit Russia’s European partners in several ways.

“This would, on one hand, strengthen the euro’s position as a reserve currency, and on the other hand provide a sort of security for such [energy] deliveries if the U.S. were to make some decisions affecting U.S. dollar settlements for our banks and our large energy companies,” Kolychev said.

He suggested that transition to euro payments would be simpler because the euro is already a reserve currency, and it would be logical to expect interest in the idea from European companies.”

Chuck Again…  Remember it’s my belief that we did this to ourselves… and that’s all I’m going to say about that now, because I don’t need my blood pressure rising so early in the morning! 

Currencies today 10/10/18.. American Style: A$ .7092, kiwi .6460, C$ .7715, euro 1.1499, sterling 1.3152, Swiss $1.0072, European Style: rand 14.6245, krone 8.2133, SEK 9.1148, forint 282.76, zloty 3.7480,  koruna 22.4550, RUB 66.55, yen 113.20, sing 1.3832, HKD 7.8367, INR 74.29, China 6.9198, peso 19.07, BRL 3.7541, Dollar Index 95.69, Oil $74.77, 10-year 3.23%, Silver $14.33, Platinum $821.40, Palladium $1,074.80, and Gold… $1,186.02

That’s it for today… So, it’s Dodgers and Brewers in the NL, and Red Sox and Astros in the AL..   I was talking to a friend last week that’s younger than me, and he didn’t know that before 1969, there was just one Pennant winner in each league that then went to play in the World Series, and it would be over by now… Now 10 teams qualify for the playoffs that take the whole month of Rocktober to finish, and the World Series is played in 40 degree weather…  Except if the Brewers play the Astros, they both had domed stadiums!  Sorry of the baseball talk, but that’s me…  The Gin Blossoms take us to the finish line today with their song: Allison Road…  My good friends, Rick and Laura have a daughter Allison, that I still to this day call her Allison Road… She always giggles at that..  Alrighty then, I hope you have a Wonderful Wednesday, and please remember to Be Good To Yourself!

Chuck Butler

Rocktober 9, 2018

* Currencies rally then stumble overnight… 

* More on Russia than you paid for! 

Good Day… And a Tom Terrific Tuesday to you! BYE-BYE to the Braves and Indians as their baseball seasons ended yesterday. I spent the day yesterday, tidying up as Kathy is expected home today. So, with the kitchen being spotless, I told Alex that we needed to go out for dinner, and we did… I don’t get the opportunity for just one on one with him most of the time, so I love it when I get that chance! And welcome back to all the folks that had the day off yesterday… I hope you enjoyed your 3-day weekend! I on the other hand, was here, writing, no holiday for me! I mean, doesn’t anybody want to work any longer? HAHAHAHA! Neil Young and Crazy Horse greet me this morning with their 16 minute live version from The Filmore East of: Cowgirl In The Sand…

The day yesterday for the U.S. trading hours was a non-event, and the currencies traded in a tight range, which meant the Big Dog euro, remained below 1.15. The rest of the currencies fall in line behind the euro, except, the Brazilian real… I talked last week about how the real had been on the rally tracks, and it appeared to be all political, which scares me a bit… Well, over the weekend in Brazil, the guy the masses wants to see run the country won a regional vote and goes on, and that gave more love to the real… Like I said last week, ride this horse until it bucks…

I had a longtime reader, send me a note yesterday, disagreeing with my thoughts on the Russian ruble… And while he did a great job of showing me that the ruble hasn’t kept up with inflation… I thought, Ok, I’m a dolt…  But… Well… here are a couple of things he didn’t take into account… The ruble was smashed when it entered the conflict with Ukraine… The sell off had nothing to do with fundamentals of the country, simply that the world was aghast that the Russians were at war again… Hmmm… let’s see, the U.S. has been in a war in the gulf region since the early 90’s, where’s the aghast there? I’m just saying…

Yes, the drop in the price of Oil did the ruble no good either… And I’ve long said, (you can check the archives if you want!) that the ruble is an “oil play”… So, if you believe the price of oil is going higher, then the ruble should be your choice currency… Of course I know there are some out there that can’t get their arms around anything Russian, expect salad dressing! So, if that’s your bag, baby… Then the same holds true for the Norwegian krone… The Norwegians haven’t done anything to tick off investors except cut interest rates…

But keep the cards and letters coming, for they point out when I’m being a major dolt! And I realize that I fall under that umbrella many times… more than I care to admit!

Gold got whacked good (or bad depending on how your look at it) yesterday… More than $15 was shaved off the value of Gold yesterday, and in the more than 300,000 contracts traded in Gold, were some large sells that dictated the direction of the shiny metal on the day…  The climb of the bond yields has done a number on not only Gold & Sliver, but also stocks… I mentioned that last week that the rise in yields would reach a point where stock investors would just as well, take their money out of the risky stock market and put it back into the bank or bond market to guaranteed interest returns… I don’t think interest rates are quite there yet, but if late last week’s turmoil in stocks is any indication, I would run for the hills as fast as I can here folks, because this is no false down, like the moves to higher rates were previously, this time, it’s for real…

Some time ago, I asked you to ask me what the most difficult part of my job (TIMING!) is… HA! Well, I did it again, I jumped the gun… I bought some bonds a couple of weeks ago, before this recent move upward in yields… Of course I did! That’s how much of a dolt I am sometimes! Geez Louise, Chuck, if you had just waited 10 days, you could have booked higher yields!

There are bond traders out there folks, that are so young, they’ve never seen a bear market in bonds… I say bear market because with bonds, yield and price have an inverse relationship… If bond yields go up, the price of the bond goes down, and vice versa… So, if bond yields are rising, bond prices are going downward, and thus the bear market… And there are some stock traders that came on board after 2008, that can’t imagine a bear market in stocks… Blood Sweat & Tears said it best… What goes up, must come down… Spinning wheel’s got to go ‘round… And of course, there are currency traders that came on board after 2010, and can’t imagine anything but dollar strength…

I’m just pointing this out to say… That trees don’t grow to the moon, and bull markets don’t either! At some point, the bull market ends, and a bear market begins… Trends… I explained this all to you last week, so I won’t go there again, but hopefully you get the message I’m sending here…

I guess the IMF with all their highly paid and educated economists are seeing things my way these days… I point this out because that doesn’t happen very often! The IMF issued a report that lowered their outlook for Global Growth, and pointed to the Trade War going on as their reason for doing so… Again, as I’ve pointed out… Nobody wins in a Trade War, period!

It’s a dead air week, this week for the U.S. Data Cupboard… Yes, there will be some data prints here and there, but nothing to really get behind and say this or that…   We will see PPI (wholesale inflation), which has been falling in recent months, and the stupid CPI (consumer inflation) later in the week… But other than those two, I could wrap the rest in yesterday’s newspaper and pass it off for day old fish… I’m just saying… 

The price of Oil had really slipped in the past few trading sessions, falling from a $76 handle last Thursday, to a $73 handle yesterday… I think that was akin to  getting ahead of one’s self…  The price of Oil has rebounded a bit in the past 24 hours and is back to a $74 handle this morning.  I read a report the other day about the prospects for Oil, and there were a number of so-called experts saying that the price of Oil could see $80 soon…  I filled the gas tank in my car on Sunday, boy that was sicker shock!  I think I recall $4 gas back when the price of Oil was trading around $100…  Talk about something that could really hurt the economy… 

To recap…  It was a holiday in the U.S. yesterday, so after the European markets closed up shop and headed to the pub, the markets drifted… But overnight the dollar is back to enjoying the higher yields Treasuries are booking… The IMF is singing from the same song sheet as Chuck, as they point out the damage that the Trade War is doing to Global Growth.  Gold got whacked by $15 yesterday, inflation is coming folks… and all these whackings Gold has taken will be distant items in our rear view mirror… At least that’s how I see it!   

Of course I thought we be seeing this all taking place by now, so once again I jumped the gun… UGH!  

For What It’s Worth… Ok, this has been Russia Week so far this week, eh? Well, there’s no reason to stop there! I’ve been talking about how Russia, China and now Europe have been developing their own payment systems ala SWIFT that are outside of the dollar, and the U.S. has no control over, and how this would badly damage the dollar once put into use… Well, this article sent to me from Bob, talks about all of that and more, and can be found here: https://www.rt.com/business/440482-russia-dollar-economy-dependence/

Or, here’s your snippet: “The Russian Finance Ministry has announced a plan to wean the country of dollar dependence. It is expected to be a long and painful process. RT has asked analysts to explain how this could be done.

According to the plan published this week, Russia seeks to de-dollarize the economy by 2024. The program is long and complicated, but its key point is that Russian exporters who use rubles instead of dollars would get huge taxation benefits including quicker VAT returns and other stimulus to ditch the greenback.

But there are also other ways to strengthen the role of the ruble in Russia. “It is necessary to gradually switch to such a system of international payments, which implies payment in rubles for Russia’s best and most popular goods on the world market like oil, gas and arms exclusively,” Andrey Perekalsky, analyst at financial institute FinIst, told RT.

Russia should also unite with China and the European Union in creating a payment channel that can’t be controlled by the United States. The alternative to the SWIFT interbank settlement network that could bypass Iranian sanctions could be seen as a first step in that direction, the analyst notes.” 

Chuck again… I want to make this perfectly clear, I’m not cheering these moves… I’m strictly pointing them out so that investors can do something about them, that’s all…  Shoot Rudy, I don’t want these things to happen to the dollar’s value, I use dollars for gas, groceries and giggles! 

Currencies today 10/9/18… American Style: A$ .7058, kiwi .6430, C$ .7693, euro 1.1435, sterling 1.3042, Swiss $1.0050, European Style: rand 15.0300, krone 8.2986, SEK 9.1311, forint 284.33, zloty 3.7733, koruna 22.5852,   RUB 66.72, yen 113.20, sing 1.3868, HKD 7.8345, INR 74.45, China 6.9083, peso 19.01, BRL 3.7996, Dollar Index 96.12, Oil $74.77, 10-year 3.24%, Silver $14.31, Platinum $814.05, Palladium $1,074.76, and Gold… $1,186.93

That’s it for today… Alarm went off, and I kept sleeping this morning, that’s why this is later than usual… I don’t worry about that stuff any longer, It’ll get finished when I’m good and ready to finish it! I hear that fall/ autumn weather is going to arrive by this weekend… Get the woolies out! Gather up the wood for the bonfire, and buy something pumpkin spiced! I complained about that pumpkin spice thing last year, and this year I saw Frosted Flakes that were pumpkin spiced!  I’m surprised that there aren’t pumpkin spiced sandwiches! Ok… Journey takes us to the finish line today with their song: Who’s Crying Now?  I heard that Steve Perry the former lead singer for Journey has come out of retirement and has a new album… I’ll have to check it out!  I hope you have a Tom Terrific Tuesday and remember to Be Good To Yourself!

Chuck Butler