Author: admin

July 18, 2018  

* Gold gets whacked badly!

* Currencies get sold again!

Good Day… and a Wonderful Wednesday to you! I had a great time with my grandson, Braden, yesterday, and at the end of the day he said I was his BFF! Well, I can tell you this right here, right now, that the title BFF wouldn’t last 2 minutes if I refused to let him swim in the pool! But for now, I’m beaming like a proud BFF… The All-Star Game last night, was pretty light on highlights, and after about 4 innings, it no longer held my attention! And no I’m not ADHD! Or whatever the letters that are used to describe someone with no ability to focus and sit tight! I did see this morning though that 10 home runs were hit in the game that ended up 8-6 AL… Bob Marley greets me this morning with his song: 3 Little Birds… Don’t worry, cause every little thing is gonna be alright…

My Monday Pfennig was titled: Could We All Just Get Along? And after the Helsinki summit where President Trump met Russian President Putin, I need to repeat that over and over again… How in the world can Trump’s detractors rail on him for meeting with Putin? I shake my head in disbelief! Oh, and before you think this letter has gone political, I’ll just point out that I’m no fan of the Trump tariffs, I’ve said it, defended it, and will do it again!

Well, Monday’s “nothing day” when the currencies and metals were stuck in the mud ended when the beginning of Tuesday morning’s trading began… Once again, the currency rally of Friday last week,, was wiped out with dollar buying on Tuesday. So it was a turnaround Tuesday for the dollar… I have no idea why, other than the stuff that came out of the U.S. Data Cupboard, which you could have had a positive knee-jerk reaction to, but real traders would have looked at last month’s negative -0.5% print, and then compared this month’s (June print) 0.6% gain, and call it basically a wash… But I’m sure some boy-genius, said that this is the start of a trend, and bought dollars…

The euro lost the 1.17 handle, and all the other currencies followed the Big Dog, and were sold too… And Gold? It got sold like funnel cakes at a State Fair, and most of it was paper trades.  But they get to drive the price of Gold down, and since there are more of them than the physical trades, guess who wins? The short Gold paper trades totaled 268,000 yesterday, quite a bit more than usual for a summer day…  As of last Saturday, Ed Steer (www.edsteergoldsilver.com) showed that it would take 60 days of Gold production to cover the amount of ounces sold short in the paper trades. And yesterday’s trading showed trades were entered for Gold, with the probability of a large number of those being short Gold paper trades, being very high! 

The selling in Gold s live leaving blood in the ocean for the sharks to come in a take a bite out of what’s left, and that’s what going on this morning, as Gold is down another $5 in the early morning trading today… 

Speaking of short paper trades… the number of days of production that’s needed to cover the total ounces sold short in Silver is… are you ready for this? … . 216 days, which is a bit over 7 months of world silver production…

The GATA folks sent me this email last night, check it out… “Craig Hemke of the TF Metals Report, writing at Sprott Money, reports tonight that in recent months India’s demand for silver has been running at record levels. But Hemke adds that paper silver traded on the New York Commodities Exchange trades every two days more silver than the world produces in a year.

“Led by India,” Hemke writes, “the world is on pace to consume all the silver produced in 2018, yet the dollar price of silver is now down over 10 percent year to date. That’s a dichotomy that must soon rectify itself. Either physical silver demand will crash before year-end or the paper price will be forced to respond as it did in 2016.”

I shake my head in disgust that this continues to be allowed to go on…  

The price of Oil also saw selling once again, and what for a fleeting moment about 10 days ago, looked like the Price of Oil was heading to $80 and higher?, has been wiped out… And the price of Oil is trading with a $67 handle this morning… I alluded to the ideal of some price shenanigans with Oil yesterday, and I truly believe it to be true, that there’s something else at work here… And it’s not just the increased production from the Saudis that have caused the price of Oil to drop like a rock in the past 10 days!

In The U.K. this morning, they posted their latest CPI (consumer inflation) and it fell… Core CPI dropped to 1.9%, a 15 month low, and out the window went any remaining hopes of a rate hike soon here… And Bank of England (BOE) Gov. Mark Carney? He was nowhere to be found, because he’s hoping that if he stays out of sight, it will be a out of sight out of mind experience for him, and he has egg all over his face right now…  I shake my head in disbelief that the markets were fooled once again by this man’s bag full of promises to hike rates… Tsk, Tsk Tsk.. 

I’m doing a lot of shaking of my head this morning, so I had better wrap this up soon, or I’ll be getting dizzy!  I already talked about the outcomes in the U.S. Data Cupboard yesterday, but we did also have the first of two testimonies by Fed Chairman Jerome Powell to lawmakers. And like I said yesterday, he didn’t tell us anything new, it was the same old yadda, yadda, yadda…   But I did pull this from his speech, and while reading it I bet you’ll be able to tell me why I highlighted this section…  Ok… here we go… 

“Powell said the unemployment rate is expected to fall further and the Fed’s challenge will be to keep inflation close to 2%. Key unknowns are the outcome of the ongoing trade disputes and the impact of the Trump tax cuts and boost in federal spending, he said. “Overall, we see the risk of the economy unexpectedly weakening as roughly balanced with the possibility of the economy growing faster than we currently anticipate.” 

Yes, just like a two handed economist right? on one hand we could see this, and on the other hand we could see this…  And why did he come out with that two handed statement about risk to the economy weakening as balanced with the possibility the economy could grow faster?  Because he’s greasing the tracks for whatever outcome comes about, and he be able to say, “see I told you”…  

There’s not much in the U.S. Data Cupboard today except some Housing Data, that I just don’t see as market moving at this point.  Powell will makes the second of his two testimonies today, and I expect today to be a mirror image of yesterday’s speech.  

To recap… Gold got whacked badly yesterday, and the sharks are circling the blood stained waters this morning and Gold is already down $5 in the early morning trading today. The currencies also got whacked yesterday, the euro lost 1-cent, Oil lost another buck in its price, and the dollar is for some unknown reason pounding its chest… Chuck goes through some numbers on data, and short paper trades in Gold & Silver.. 

For What It’s Worth… Well, I told you last month that Russia had sold 1/2 of their Treasuries they held in reserves. According to the folks at zerohedge.com Russia has sold their remaining Treasuries now… this is all detailed with graphs and is a good write up that can be found here: https://www.zerohedge.com/news/2018-07-17/russia-liquidates-its-us-treasury-holdings

Or, here’s your snippet: “Readers may recall that last month we first reported that for all the confusion about sharply higher yields in April, the explanation was simple: it was Vladimir Putin who liquidated a whopping half of Russia’s Treasury holdings, which declined by $47.4BN to just $48.7BN – the lowest since 2008 – from $96BN in March.

But wait, it gets better, because as Trump continued to jawbone about more sanctions targeting Russia, Putin did not stop and in May he continued what was an outright liquidation of Russia’s TSY holdings, which plunged by another $40BN, or 82%, from $48.7BN to just $9BN in May. Keep in mind this was over $100BN at the start of the year.

It appears that When Putin warned he would diversify Russia’s state reserves out of Treasuries – he was serious.”

Chuck again…  Recall that I said that I thought that Russia’s first sale of Treasuries was a test for China to see the reaction of the markets and the U.S.? The next big seller will be China… well, that’s how I see this all unfolding, folks… I sure hope I’m wrong on this!

Currencies today 7/18/18… American Style: A$ .7355, kiwi .6765, C$ .7673, euro 1.1620, sterling 1.3035, Swiss $1.00, European Style: rand 13.3208, krone 8.1728, SEK 8.8645, forint 278.60, zloty 3.7090, koruna 22.2380, RUB 62.44, yen 113, sing 1.3682, HKD 7.8493, INR 68.44, China 6.6900, peso 18.96, BRL 3.8549, Dollar Index 18.96, Oil $67.62, 10-year 2.85%, Silver $15.44, Platinum $806.34, Palladium $907.79, and Gold… $1,222.75

That’s it for today…  I need to get my eyesight checked today, they make sure that my remaining eye remains in good health… And then I’ll be off to the Muny, St. Louis’ outdoor theater, that’s been around for 100 years! My darling granddaughter, Delaney Grace is an orphan kid in the presentation of Annie tonight!  I’ll be smiling from ear to ear when I see her up on that huge stage! Kathy got home yesterday, just in time for Delaney’s Muny debut! So, someone’s moving around upstairs, and it startled me at first because I’m use to being alone here!   The Steve Miller Bank takes us to the finish line today with his song: Serenade…  Stevie Guitar Miller on the iPod this morning! I hope you have a Wonderful Wednesday and remember to Be Good To Yourself!

Chuck Butler

 

July 17, 2018

* A nothing day for currencies & metals on Monday

* Cut the pork, will you Lawmakers?

Good Day… And a Tom Terrific Tuesday to you! Well, my busy day yesterday, got to me about mid afternoon, and I was wiped out, took a long nap, and was then ready to watch the Home Run Derby… I’m reminded of a HRD of years ago, when I was recovering from my two major cancer surgeries, and my colleagues, Chris, Mike, and Christine, came to visit with me… Good memories…  One of my doctors told me yesterday, that I’m his best patient, and that he loved it when I came in! WOW! My grandson, Braden is coming to spend the day with me… Just me and Braden, I wonder how this turns out! HA!  Seals & Crofts greet me this morning with their song: Summer Breeze…  

Well, yesterday’s trading was a lot of nothing.. No major movements anywhere, the Dollar Index at the end of the day stood at 94.55, and it began the day at 94.53…  Gold lost 80-cents on the day!  Have the Dog Days of Summer come upon us already? 

The U.S. Data Cupboard had the June Retail Sales print for us yesterday… Recall that I call this print a piece of real economic data, so paying attention to it is called for. And like I told you yesterday, the BHI indicated that June’s report would good, not great, but good, and that it was, gaining 0.5% for the month.  When I looked at that yesterday I got this feeling of being let down…  I asked myself, “is this all we get for all we did as a country to spur consumption?” 

Do I think consumers have finally figured it out that sooner or later the bill comes in the mail for their purchases, and if they don’t have the money they won’t buy? I doubt it one second! We’re a country of consumers, we buy, buy, buy…  But as a country of consumers we do catch our collective breaths every now and then, and when we do, the numbers begin to look ugly…  But the point I’m getting to eventually, is this… The U.S. Gov’t and Fed went a long way toward ruining our financial system to get us to this point, and it’s just not what we paid for! 

This past weekend, President Trump said some things about NATO that had a lot of people up in arms… But if you go back to the Chuck’s Debt Solutions from many years ago, I was the first to call for the closing of military bases around the world, especially in countries where the citizens don’t’ want us there to begin with! Now, if that was my call then, I was sure happy to hear the President call NATO to the red carpet… and then tell them they’re obsolete, and that the European countries need to buck up and pay more of their share of the costs of NATO… You tell ‘em!

I spoke about the Federal Budget Deficit yesterday, and good friend, Dennis Miller, sent me a note that he too had written about it in his letter published last Thursday (the day that I was whacked out!). So, I thought I would share with you one of his thoughts on the Federal Debt… Here’s Dennis Miller (www.milleronthemoney.com)

“Today you spoke about government debt. This was last weeks article and I realize you were fogged over. What I found amazing was the budget deficit and the government grants were almost identical.

Congress gives us the BS that there is nowhere to cut the budget. What crap! If they all stopped their pork giveaways, we would have a balanced budget.

This explains to me why Reagan said no matter how much you take in… congress will spend more. They look at revenue as their personal piggy bank.” – Dennis Miller

Chuck again… Thanks Dennis… Yes, I was “fogged over” last Thursday… But I’m back now, and I bet you all are happy as larks that I’m back! HA!

I mentioned above that Gold lost 80-cents yesterday… And that move contributed to my thought that it was a nothing day in the currencies and metals… Have you noticed how the price of Oil has been taken back down so swiftly? I’m going to have to call foul on this move…  The fingers are all pointing at Saudi Arabia’s call to increase production… And while that could have caused some slippage, I’m not buying what they’re selling here, as the reason for this huge drop in the price of Oil… There’s something else in the works here folks… That’s all I’m saying… 

I did let the cat out of the bag last week, when I said that all markets are manipulated… OOOPS, did I say that out loud? I guess I did! No one wants to hear those words, but they’ve got to be said, and if their said enough and loud enough then maybe some regulator will do something about it, but I’m dreaming folks… And before I go deeper into that rabbit hole, I’m going to climb out, and live another day! 

Fed Chairman, Jerome Powell, will be speaking today and tomorrow, so this must be the semi-annual trip to give the Fed Chairman’s testimony on the economy to both houses of the Gov’t. It used to be called the Humphrey-Hawkins Bill, but that bill expired long ago, and Fed chairmen and woman have continued to make the trip up to the “hill”…  I could say that the markets are awaiting Powell’s speech to give them some direction, but deep down I don’t believe that to be the case…  Why?

Because they’ve and we’ve heard it all before… The economy is robust, unemployment is down, yadda, yadda, yadda…  Pink Floyd said it best when they wrote in their song: It’s a battle of words, and most of them are lies… 

The U.S. Data Cupboard has two pieces of real economic data for us today… Industrial Production and Capacity Utilization will print the June’s results today. As I said yesterday, I suspect that the Industrial Production data will reverse May’s negative print, but in all for the year, this data is still underwhelming…   I read a report the other day, about how Capital expenditures are falling, and plans to spend are also showing signs of backing off…  Capital expenditures, or CAPEX, are what makes the economy go around folks… This is an easy thing to check out folks… Check around your place of business, are they planning on making equipment purchases, expand space, etc.? 

It’s all about the U.S. Data and Powell speech today folks, there’s just not much going on overseas today… China did print their latest GDP figure and called it weak at 6.7%…  Sure, it’s not the go-go years of 10% clips and above for Chinese GDP, but weak?  If we saw GDP of 6.7% here in the U.S. we would be dancing in the streets!  We did see that Russian Industrial Production for June printed this morning, and it was not a strong number, only gaining 2.2% VS 3.7% in the previous print… 

The Russian ruble has had to deal with sudden drop in the price of Oil, and now this weaker IP data… Hang on ruble, times will be better…  reminds me of a great 60’s song: Hang on Sloopy, Sloopy hang on… 

I’ve been pleasantly surprised by the resiliency of the Canadian dollar / loonie…  The loonie saw weakness late last month after they picked a fight with the bully, and lost, but has regained its mojo, and has withstood the test of a price drop in Oil. 

To recap… It was a nothing day in the currencies and metals, as there was little movement if any in both asset classes. The Dollar Index dropped 3 ticks from yesterday morning’s figure, and Gold lost 80-cents on the day…  nothing…  Fed Chairman Powell heads to Capitol Hill today for the first of his two speeches to lawmakers, and Chuck believes it will be more of the same yadda, yadda, yadda…  

For What It’s Worth…  OK… I’ve said this quite a few times previously, but when I saw this article, it reminded me that Debt Is Everywhere!  And this article breaks that down and can be found here:https://www.blacklistednews.com/article/67143/there-is-now-officially-3-times-more-debt-in-the-world-than.html  

Or, here’s your snippet: ” You may well have seen in the news the last couple of days that global debt has reached another all time high. After climbing to astonishing $247 trillion when combining public debt of around $60 trillion and non-financial sector debt of about $186 trillion.

This eye-watering figure also means that for the first time ever there is now officially 3 times more debt in the world than money.
It has been reported that this astounding level of debt is causing major cause by investors on top of ongoing concerns about the Federal Reserve’s monetary policy.”

Chuck again… 3 times more debt in the world than actual money… Now how’s that going to work out? Badly, if you ask me, but then I’ve said that all along, but who listens to me? 

Currencies today 7/17/18… American Style: A$ .7407, kiwi .6815, C$ .7572, euro 1.1715, sterling 1.3208, Swiss $1.0052, …European style: rand 13.2720, krone 8.0960, SEK 8.7880, forint 275.80, zloty 3.6720, koruna 22.0735, RUB 62.31, yen 112.55, sing 1.3612, HKD 7.8486, INR 68.28, China 6.6847, peso 18.93, BRL 3.8546, Dollar Index 94.50, Oil $68.13, 10-year 2.85%, Silver $15.76, Platinum $822.71, Palladium $916.56, and Gold… $1,241.31

That’s it for today… Well, I had better get ready for the arrival of Braden today… I had a pretty good day with my stomach yesterday, so hopefully that can continue today… I cringe when I load up the meds in the morning and at night, and realize they are the reason I have stomach problems… of course if I just didn’t eat I wouldn’t have any problems either!  HA!  I used to tell people that I was trying to grow to 6’4″ because I had reached the perfect weight for someone that tall, and I had more of a chance of growing taller at my age, then I did losing the weight! HA! So, here’s to growing to 6’4″!  A Big Thanks to my good friend, Terri, who helped me get something done yesterday, and she went out of her way to get it done for me! Thank YOU!  Ok, Uriah Heep takes us to the finish line today with their song: Sweet Lorraine…  I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler

 

July 16, 2018

* Consumer Debt Soars In June!

* Currencies attempt to come back!

Good Day… And a Marvelous Monday to you! Thanks so much for understanding my plight last Thursday I must have scared a few people, as even my good friend, Duane, sent me a text, asking me if I was OK?  It all passed by Thursday afternoon, and Friday was a new day, full of sunshine and lollipops! I have no idea why the medicine whacks me out like that sometimes… But, I guess I have to say thanks to the Lord, that it doesn’t whack me out like that all the time! The Pousette Dart Band greets me this morning with their song: Amnesia…   I hope that it’s only amnesia, believe me I’m sick but not insane! 

The currencies fought back on Friday to gain a bit VS the dollar, on the day. The week of relatively little economic data came to and end last Friday with a weaker Consumer Confidence Index for July, printing at 97.1 down from June’s 98.2…  On Thursday last week, the U.S. printed its Federal Budget number, and in June, let me remind you that in June quarterly taxes are due, the U.S. posted its second largest June deficit of $75 Billion! 

Here’s the breakdown in case you were keeping score at home: Where the money was spent on social security ($88BN), defense ($65BN), Medicare ($79BN), Interest on Debt ($32BN), and Other ($126BN).  The $75 Billion net deficit, saw receipts of $316 Billion…  There are some other items in the numbers but these are the biggest expenditures…  

Did you notice the $32 Billion spent on bond servicing? And that was just in the month of June… That means if we multiply it by 12 we would get the annual amount spent on paying the interest on debt, and it would be $322 Billion… And that’s at much lower interest rates than will be available going forward!   I’m so disgusted with the lawmakers in this country that I wouldn’t mind if they all lost their reelections. That they have sold the country down the road for a bagful of promises to social security, Medicare, Medicaid, and whatever other Gov’t handout that’s available to them.   They don’t care how much debt they incur, because by the time it all comes crashing down they won’t be in office any longer and it will be someone else’s problem…  Shame, Shame, Shame…  I don’t know how they live with themselves knowing well what they are doing… 

And the Fed is no better, as they’ve allowed the lawmakers the ability to run up debt with zero interest rates for 10 years, now, and even after 3 years of rate hikes, our Fed Funds rate is still only 2%!!!!  I’m get riled up here, don’t know if you can tell, but my blood is boiling thinking about this mess our country is in, and all these people with their grand schemes have failed miserably…  But we as a country (as a whole, not Pfennig Readers!) would rather be intrigued by whether or not Putin rigged the election, than we care about what the lawmakers and Fed Heads are doing to our country! 

OK… I’ll step down from my soapbox now, maybe I can calm down a bit, here… I have to because I’m all alone here, if I passed out or had a heart attack no one would know… So, settle down Chuck, take a sip of coffee, savor it, and then sit back for a minute before continuing on…  Ok, I’ll be back in a minute… 

So, I told you above that the currencies attempted to fight back VS the dollar on Friday, and that was all good, but the real move came last night in the overnight markets, and for once in a blue moon, the overnight markets saw the currencies continue to their moves higher VS the dollar. I told you last week that I thought the dollar rally was over, and then just to prove me wrong, the green/peachback rallied for a couple of days… 

So, once again we sit at the crossroads that has one route heading to more dollar strength, and the other heading to dollar weakness… I’m going to pick the one that has dollar weakness, but I’m hesitant, because the manipulators have proved that they can move the dollar where they want to, as long as it makes them feel alright! If traders show a lot of commitment toward dollar weakness, then the manipulators will step back and play in the shadows…

In the overseas data cupboards this morning, we saw Chinese Industrial Production for May, slip a bit from 6.8% in April to 6% in May, but to offset that slippage, Chinese Retail Sales also printed for June, and saw an increase from the May print of 8.5%, to 9% in June. A mixed bag-0-nuts there, folks, and nothing to really hang your hat on… Let’s move on…

In the Eurozone this morning, they printed their May Trade Balance and saw a nice narrowing of the deficit that printed in April at euro 18.8 Billion to the Mary print of euro 16.9 Billion.   

And finally, today continues the meeting of President Trump and Russian President Putin… I see what Trump wanted to do, as he thought he was on a roll after the meeting with the N. Korean leader, but as time has gone on, that meeting with N. Korea’s leader has turned sour, and hopefully Trump can salvage something from this meeting with Putin… In my view, which is in the cheap seats, so I don’t have an up front and close view, I see the world wanting the U.S. and Russia to get along… 

Since we went down the data cupboard road for overseas, we might as well see what’s going on in the U.S. Data Cupboard… Well, the U.S. Data Cupboard gets restocked this week with a truck load of data, and some real economic data reports, starting today with June’s print of Retail Sales…  The Butler Household Index (BHI) tells me that in June Retail Sales should be good, not great, but good…  (lots of money spent in the U.S. on graduation gifts)…  

According to the latest Monthly Treasury Statement, in June, the US collected $316BN in receipts – consisting of $162BN in individual income tax, $94BN in social security and payroll tax, $3BN in corporate tax and $22BN in other taxes and duties- a drop of 6.6% from the $338.7BN collected last June and a reversal from the recent increasing trend…even as Federal spending also dipped, down 8.8% from $428.9BN last June to $391.1BN last month.

Where the money was spent on social security ($88BN), defense ($65BN), Medicare ($79BN), Interest on Debt ($32BN), and Other ($126BN).

This resulted in a June budget deficit of $75 billion, better than the consensus estimate of $98BN, and an improvement from the $147 billion deficit in May and as well as slightly less than the deficit of $90.2 billion recorded in June of 2017. This was the second biggest June budget deficit since the financial crisis.

Tomorrow’s Data Cupboard will have the latest prints of Industrial Production and Capacity Utilization, and I would look for some recovery in the June print from the negative prints in May… But that’s tomorrow, and you know my saying for that… let tomorrow be… 

I watched a quick video this morning from CNBC that had Ron Paul talking about a great collapse that he sees coming, that has its roots in all the debt… And he something that plays well in the sandbox with my call that that the Fed’s “Great Unwind” of their balance sheet won’t get too much further, before they have to call it off…  Mainstream America just didn’t get Ron Paul, just like they didn’t get Ross Perot, but people like us, Pfennig Readers, we get them, they are true Austrian economics folks… 

This weekend I took a walk through all my books here that I’ve read through the years, and came across the book that I wrote the Foreword for in 2008…  Addison Wiggin’s: The Demise of the Dollar, with Foreword by Chuck Butler.. It was the first time I had any words printed in a book. I then remembered that I wrote a whole chapter for the Little Book of Dollar of a Shrinking Dollar…  I know the guys like John Mauldin, James Rickards, and Addison Wiggin, and Bill Bonner have all written multitude of books through the years, but I’m very proud of my short pieces for these books mentioned above… Something my grandkids can look up one day, and say, “Grandma, the general (that’s what they call me), sure was a smart man, wasn’t he?” 

The folks at Wiley publishing used to contact me all the time about writing a book, and at the time I was busy trading and managing risk at EverBank World Markets, traveling to speak, and writing the Pfennig every day… I had no time to allocate to book writing, and now that I’m no longer doing all those things I no longer hear from them…  Boy, I have no idea how I slipped down this rabbit hole, but I’ve got to get out of it before I begin to point fingers… 

To recap…  The currencies rallied on Friday, and then bucking the recent trend to sell the currencies in the overnight markets, they continued their Friday rally last night… Is the dollar rally finally over?   Did you see the HUGE, Monstrous, Godzilla-like Consumer Credit (read debt) report from last week? Chuck breaks it down for you… Chuck also gets on his soapbox this morning, so you won’t want to have missed that! 

For What It’s Worth… The folks at MarketWatch sent me this late last week, and I saved it for my FWIW section today. It’s about when the tariffs will begin to be felt by consumers and can be found here: https://www.marketwatch.com/story/heres-when-americans-will-start-feeling-the-pain-from-escalating-trump-imposed-tariffs-2018-07-11?mod=MW_section_top_stories   

Or, here’s your snippet: “Very few Americans have paid a price from escalating U.S. tariffs, but if trade fights get worse, the first big bill will come due shortly after the school year starts.

An initial blast of tariffs, mostly targeting $50 billion in Chinese goods, was tailored by the Trump administration to minimize the damage to the U.S. economy. Consumers or businesses could more easily find substitutes for goods whose prices would rise due to higher U.S. tariffs.

For now most consumers don’t have to worry much. The economy accelerated rapidly in the spring and is expected to remain strong through the summer months.

Come fall, though, and the price of many imported consumer goods in the crosshairs of the White House could begin to rise.

China exported about $500 billion in products to the U.S. in 2017. They encompass a vast range of goods such as fabrics, clothing, vacuum cleaners, refrigerators, computers, lighting and so forth — the kind of goods that are no longer made in America or are only made in small quantities.

Absent another source of supply, prices on these goods are sure to rise.”

Chuck Again…  Good analysis here… that I agree with. 

Currencies today 7/16/18…   merican Style: A$ .7425, kiwi .6782, C$ .7545, euro 1.1710, sterling 1.3253, Swiss $1.0014, … European Style: rand 13.2140, krone 8.008, SEK 8.8208, forint 275.50, zloty 3.6760, koruna 22.1040, RUB 62.52, yen 112.42, sing 1.3620, HKD 7.8485, INR 68.53, China 6.6897, peso 18.80, BRL 3.8510, Dollar Index 94.53, Oil $69.35, 10-year 2.85%, Silver $15.78, Platinum $824.63, Palladium $932.21, and Gold… $1,241.09

That’s it for today… I’ve got a busy day ahead, and need to clean up the house from all the parties I’ve had while Kathy was gone… (NOT!) the house looks hardly lived in! But a busy day for me… Well, I’ll my pointing out that the Cardinals poor play was the manager’s fault, came to a head Saturday night, when the Manager was fired… You can’t fire all the players, so you fire the leader…  The All-Star Game is tomorrow night… I have two pictures on my wall here of me and my two boys, at the All-Star Game back in 2009, and one of just the two boys. Good memories…  And with that it’s time to go, and America takes us to the finish line with their song: Lonely People..  I hope you have a Marvelous Monday, and Be Good To Yourself!

Chuck Butler

 

 

 

 

 

July 13, 2018

 

Good Day… And a Tub Thumpin’ Thursday to you! I’m not going to be able to participate in the Tub Thumpin’ today, folks… In fact this is going to a record for the shortest Pfennig ever! The meds have whacked me out, I was awake almost half the night, and finally got to sleep when the alarm went off… I’ve tolerated this new chemo to a degree, and that has been run over with a Mack Truck this morning… So, I’ll give you the currency roundup, and head back to bed, hopefully by noon or so, this death warmed over feeling will have stopped! 

There’s been more dollar buying overnight, and the currencies all are getting knocked around, along with the price of Oil and the Gold, I guess it’s a good thing I’m not commenting on all this today, I would probably say something that got me in deep dookie… 

Currencies today 7/13/18…. American Style: A$ .7383, kiwi .6758, C$ .7576, euro 1.1652, sterling 1.3190, Swiss $1.0014, European Style: rand 13.4350, krone 8.1152, SEK 8.8675, forint 279.12, zloty 3.7131, koruna 22.2624, RUB 62.07, yen 112.55, sing 1.3636, HKD 7.8479, INR 68.42, China 6.6674, peso 18.95, BRL 3.8366, Dollar Index 94.90, Oil $70.85, 10-year 2.86%, Silver $15.86, Platinum $831.56, Palladium $939.65, and Gold… $1,244.58 (not change in the SGE for days now)

That’s it for today, sorry for the short Pfennig, I really can’t believe I was able to get through this much of it!  Have a great day, and Be Good To Yourself!

Chuck Butler

July 11, 2018   

* The boys in the band show up Tuesday

* Currencies once again get sold overnight… 

 

Good day… And a Wonderful Wednesday to you! I went out and made sure that I had a Tom Terrific Tuesday yesterday… Did you?  I sure hope so, but if not, you can make it up today with a Wonderful Wednesday! I see my beloved Cardinals won last night, when I went to bed the score was 4-2 in favor of the Cardinals. And they wound up with a football score winning 14-2… The Marshall Tucker Band greets me this morning with their song: Heard It In A Love Song…   

Well, the currencies didn’t move much yesterday, if anything they firmed up a bit, as the bounce from the dollar in the overnight markets Monday night was brought to an end. Last night in the overnight markets saw the same kind of trading we saw the previous night, with the dollar being bought, for some unknown reason…  Oh, there’s the usual suspect of excuses for this dollar buying… The Fed’s on a faster pace to hike rates, a flight to safety, and it’s the king currency, are at the top of the lists of excuses, but to me that’s all they are… excuses, and excuses never won a ballgame for anybody! 

All those excuses are nothing but window dressing… curb appeal… lipstick for a pig, and all those other things… Because the traders out there know as well as I do, that a recession for the U.S. is coming, and therefore that wipes out the rate hikes..  In fact, I was explaining to my good friend Duane, yesterday that what we’re probably going to see during the next recession is negative interest rates here in the U.S.  So, that would take care of the flight to safety excuse, and then there’s this King Dollar that the dollar bugs love to talk about… Well, if that’s all it has going for it is talk, then as my dad taught me years ago… Money talks, BS walks…  

But for now, we have to put up with this stuff, but let it go, because its just a phase… You know like when your child comes home with a mohawk spike in his hair that’s colored orange… No reason to fly off the handle, it’s just a phase and it will pass… This too shall pass… Just be patient, keep your currencies and Gold, and I feel it will all be right on the night!  Of course that’s just my opinion and I could be wrong, but I wouldn’t say these things if I truly didn’t believe in them! You can take that to the bank!

So, Chuck, do you really think that negative interest rates are in our future here in the U.S.?  Yes, I do… Think about this, the average interest rate that was in place prior to previous beginnings of recessions was 6%, and the average total amount of rate cuts during a recession was 4.03%…  And our current Fed Funds rate is 2%?    Well, if we just have a normal recession, which I doubt we will because of all the excesses that have built up in the past 9 years, easy credit, zero interest rates and lackadaisical attitude toward debt build up, but if we just have a normal recession, 4% in rate cuts puts us negative -2%…   See what I just did with the math there? Man, I am a math whiz, eh? HA!  

But seriously, do you see where I’m coming from there? Not many people in the world know these averages, but now you do, dear Pfennig Reader! And I’ll tell you who else knows them all to well… The Fed Heads…  Recall a couple of years ago, when then Fed Chair, Janet Yellon, asked for a answer to her question, “Can the U.S. have negative deposit rates”  and her answer was yes…  I made a big deal out of that then, calling it “greasing the tracks”,  and in the next recession, the Fed Heads will be able to pull that off the shelf, dust it off, and implement negative deposit rates!   

This is all in the plans for getting you, me and the guy down the street that cuts his grass with his shirt off, to spend our money that we’ve saved and hold in the bank…  But here’s where it gets really dark and grim, folks, and if that’s not your bag baby, then skip ahead because I’m going in… Who’s with me? Come on, I don’t want to be like Will Ferrell in the movie where he’s streaking and thought the rest of the crowd was behind him, only to be the only naked guy running down the street!   

OK, those that have chosen to come with me to this dark and grim place, had better put your sharp objects away first… Ok? Alrighty then here we go…  This is all a plan to eventually go to digital money… a cashless society…  here’s the idea hatched in my head several months ago…  The recession causes the Fed to go negative with interest rates, and depositors decide instead of spending their cash, they’ll just go to the bank and withdraw it, take it home, and put in under the mattress because at least there it’s not costing you money to have it…  The Gov’t sees this as a real problem and decide to make withdrawing your cash a crime, and overnight your dollars become digital units in the bank…  Talk about an end to your privacy, civil liberties, and all the other things that make this a great country! 

I’m back now…  that was quite the ugly trip to the dark and grim location in Chuck’s brain, wasn’t it?   But I have one question to ask… Got Gold?

Speaking of Gold… The shiny metal was gaining some ground yesterday morning, and then the boys in the band showed up with their arms full of short Gold paper trades… If you see a graph of the day’s trading in Gold you can point to the exact time of day the boys in the band showed up…  So, the early gains were wiped out, and Gold ended up down $2.20 after about 267,000 contracts were traded… 

And if I can just circle the wagons and go back to the dark and grim place for a moment… The way I see things, Gold will play a BIG role in the formation of a new currency regime…  I’m just saying… 

Today’s U.S. Data Cupboard just has the PPI (wholesale inflation index) for June to view today… PPI has really been on a tear, higher that is, so far this year, and I doubt that it took a breather in June, but we’ll see…  There’s not a whole lot in the Data Cupboard this week folks.. Tomorrow we’ll see the stupid CPI (consumer inflation) and that’s it…  So, the currencies will be left to trade on their own accord the remainder of this week… That’s usually not a good thing for the dollar, but we’ll have to wait-n-see how this all falls out. 

I’m still amazed that the major media outlets aren’t making a big deal out of the Consumer Credit (read debt) print from Monday, when it jumped to $25 Billion from $10 Billion the previous month… To me, if I were a paid journalist, I would be looking into this data print, and telling everyone that this is not good… 

To recap…  The currencies gained a bit yesterday, but gave it all back and more in the overnight trading… Consumer Credit (debt) was shockingly strong at $25 Billion, with credit card debt really soaring…  Gold couldn’t hold its early morning gains and ended up down on the day $2 and change…  Chuck takes some brave readers to a dark place this morning… 

For What It’s Worth…  I don’t know how I was able to pull this article, recall me telling you my problems with Bloomberg, but I was, so this is about a firm telling us their “recession flag” is flashing red, and it can be found here: https://www.bloomberg.com/news/articles/2018-07-10/a-u-s-recession-indicator-flashes-red-for-leuthold-s-paulsen

Or, here’s your snippet: “One gauge of recession risk with a “pretty good” track record over the last half century has just raised a cautionary signal, according to the Leuthold Group.

For the first time since just prior to the 2007-2009 recession, premiums on the lowest-rated tranche of investment-grade U.S. corporate bonds have risen to 2 percent after being below that level, according to data compiled by the Minneapolis-based research group. The analysis looks at the gap in yields between corporate debt rated Baa by Moody’s Investors Service and those on 10-year Treasuries.”

Chuck Again…  More and more the big guys are coming around to my way of seeing this economy…  

Currencies today 7/11/18… American Style: A$ .7393, kiwi .6793, C$ .7550, euro 1.1710, sterling 1.3245, Swiss $1.0051, European Style: rand 13.4880, krone 8.0645, SEK 8.7790, forint 277.03, zloty 3.6945, koruna 22.1350, RUB 62.20, yen 111.26, sing 1.3605, HKD 7.8488, INR 68.72, China 6.6223, peso 19.02, BRL 3.8473, Dollar Index 94.35, Oil $73.71, 10-year 2.84%, Silver $15.97, Platinum $841.14, Palladium $937.07, and Gold… $1,250.06

That’s it for today… Seeing Dexter Fowler hit a grand slam last night, makes you wonder how good the Cardinals would be if he had hit like that all year?   I’m just saying… Duane and Chuck tried a new place for lunch yesterday, that was very interesting and good! Cardinals play one more game on this extended road trip, and then come home! George Harrison takes us to the finish line today with his song: What Is Life?  And with that, I’ll let you go today… HA!  I hope you have a Wonderful Wednesday, and Be Good To Yourself!

Chuck Butler

July 10, 2018

* Currencies get whacked in the overnight markets… 

* What’s up with Chuck today?

Good day… And a Tom Terrific Tuesday to you! I hope your Monday was Marvelous, as mine was… It’s very quiet here, when I’m all alone, and that’s a good thing!  I think  I gave a dear reader a heart attack the other day, I guess my fat fingers reported the ruble price as 22.94… When it was really 62.94… Darn fat fingers… No baseball last night to complain about. HA! I broiled me a nice big fat steak last night, sautéed some mushrooms to go with it, had a salad, and a bottle of wine… It was a great meal for me, especially since I’m here by myself!   The Great Jimmy Buffett, greets me this morning with his song: Fins…   You’ve got fins to the left, fins to the right and your the only girl in town!

Well, we didn’t see any further gains in the currencies yesterday, and in fact there could have been some slippage, but it was difficult to tell, given the tight ranges the currencies trade in.  Gold wasn’t able to hold on to the near $10 gain it had in the early morning trading, only being able to hold on to $ 4 of it.. UGH!  But that was yesterday, and in the overnight markets, the currencies have given back a chunk of their gains from late last week, and the euro is in danger of giving back/ falling below the 1.17 handle again..  

I have to say that this small bounce by the dollar surprised me, but then, I’m not sure why I would be surprised…  It’s all manipulated markets and the direction is determined by the elites…  Which, therein lies my surprise…  I’m convinced that the elites want to collapse the dollar, so a new currency regime can be put in place… Of course this isn’t going to happen today, next week or even next year, but my point is simply if that’s the direction they want the dollar to eventually go, why would they allow support for it now?  

I thank you for staying with me here today after that last paragraph, as I can see some of you dear readers thinking that I’ve lost my mind, well, no worries, I found it, so let’s continue on with the letter today, eh?

I waited and waited for the Consumer Credit data to print, and having not seen it yesterday, I was thinking they were hiding something… But it must have been my source, not picking it up, because Consumer Credit (read debt) did print! 

And brother, what a print it was! Consumer Debt rose $24.5 Billion in May, up from just $10 Billion in April… All the components increased but the one that caught my eye was Credit Card debt, which rose  $9.8 billion, the biggest monthly increase since November, and one of the highest monthly increases on record!  Now I see why the propeller heads are saying the second QTR GDP is going to be a whopper!  

But don’t you also see how I have come to the thought that it will be a one and done for the whopper GDP quarter? Run those credit cards sky high, until they are maxed out, then what do you do? You wait for another one to come in the mail! But my point here is that we don’t normally see credit card debt increase like this over and over again… 

I told you yesterday that the stock market seems to be taking a “wait-n-see” attitude with the Trade War, but that won’t last long folks… My suggestion would be to make sure you have your stop losses in place. I mean you should have them in place all the time, but especially now, because Recessions are not kind to equities… I’m just saying…

The flight to safety kind of took a breather yesterday, as I just told you Gold wasn’t able to hold its early gains, the price of Oil gained pennies on the day, and the 10-year Treasury ‘s yield remained steady Eddie on the day. The trading yesterday was very much like what we normally see in the dog days of summer, but with all the goings on around the world, it sure seems like the dogs will be more active than usual this summer! 

So, I read where the N. Koreans are putting a different spin on the summit that took place last month between the leaders of the U.S. and N. Korea. And this is where I’m going to point out once again that I was one of the few people in this country to point out that the agreement for N. Korean to denuclearize DIDN’T HAVE A DEADLINE!   And now the N. Koreans are taking advantage of that…  You know, my mother used to say if you go to bed with dogs, you end up with fleas…  I wonder if President Trump is having an itching feeling these days? 

The GATA folks sent me a note yesterday with a link to a site where they calculate sound money states… Now, that’s an interesting concept, don’t you think… I think of Arizona who I told you last year was dropping the sale tax on precious metals and so forth… And looky there, Arizona is the 4th best state…  Here’s the top 6 states for sound money.. 

Best 6 states for sound money:
-Utah – 63.16%
-Texas – 58.82%
-Wyoming – 57.89%
-Arizona – 47.37%
-South Dakota – 47.06%
-Oklahoma – 42.11%

If your state is not listed there, you might want to fire off a letter to your congressman and ask him why your state is not in the top 6 of sound money states! 

In the U.K. a BMOC with BREXIT, Boris Johnson, resigned and that makes two supporters of PM May, as she attempts to get her BREXIT plan passed. The pound sterling took the news as bad news, and got sold.  In China overnight, the renminbi was actually allowed to gain on the night. This has to be the first appreciation in the renminbi in over a month!  Hmmm, I do believe I told you last week that the weakening of the renminbi was about to end… More proof that even a blind squirrel can find an acorn! HA! 

The price of Oil moved upward into the $74 handle in the past 24 hours. And the Petrol Currencies of Rubles, and loonies gained on the move in the price of Oil, but the krone was held back because of the weakness in the euro, and the Brazilian real is a basket case, so there’s no amount of increase in the price of Oil that’s going to help the real! 

The U.S. Data Cupboard is pretty bare today with only some 3rd Tier data prints to offer us.  But I’m still all worked up over the rise in Credit Card Debt in May… I find that to be unsustainable, but we’ll have to wait-n-see, eh?

To recap… The currencies held fast throughout yesterday’s trading, but last night’s overnight markets whipped them pretty good, with the dollar coming back, and that surprised Chuck, who then goes into a third mind kind of spiel, who knows what spurred that? Gold couldn’t hold its early gains yesterday, and is down nearly $7 in the early morning trading today…  The U.K.’s PM May, is watching her supporters resign, and now there’s a question of whether she’s going to be able to hold on to the PM job, all this has the pound under pressure… 

For What It’s Worth… Ok, hit article is about how the Big 3 of the European Union (Germany, France and the U.K.) are going to band together to defy the U.S.’s call to not trade with Iran… Pretty interesting I thought, and it can be found here: https://www.rt.com/business/432363-eu-dollar-trade-iran/amp/

Or, here’s your snippet: “Major European countries party to nuclear negotiations with Iran – France, Germany and the U.K. – have agreed to maintain trade with Tehran independent from the U.S. dollar, said Russia’s Foreign Minister Sergey Lavrov.

European companies are under increasing pressure from Washington to cut business ties with Tehran. Since the majority of transactions are currently conducted using the U.S. dollar, firms working in Iran face potential U.S. penalties.

According to Lavrov, the decision particularly concerns small and medium-sized companies. He explained that the participants in the Iranian deal have agreed to work out measures to protect the countries’ businesses from US sanctions.

“Everyone agrees that this [U.S. sanctions – Ed.] is an absolutely illegal and unacceptable policy, but, of course, this can hardly be changed and there will be enough struggle in trade, economic and political spheres,” the minister said.”

Chuck again… Well, my feeling here is that we’re going to see a lot of this going around the U.S. in trade folks… I guess we’ll see what the fallout becomes, but I’ve already told you my thoughts on it… 

Currencies today 7/10/18… American Style: A$ .7445, kiwi .6818, C$ .7542, euro 1.1712, sterling 1.3259, Swiss $1.0052, European Style: rand 13.4490, krone 8.0370, SEK 8.7465, forint 277.46, zloty 3.6887, koruna 22.1190, RUB 62.71, yen 111.23, sing 1.3568, HKD 7.8479, INR 68.68, China 6.6170, peso 19.10, BRL 3.8637, Dollar Index 94.32, Oil $74.11, 10-year 2.87%, Silver $16.02, Platinum $841.86, Palladium $950.96, and Gold $1.250.99

That’s it for today… I saw this really funny (to me) cartoon yesterday, it’s people all crammed into an elevator that has crashed and is in between floors, and the caption says, “Remain calm. It’s not a crash – it’s just a correction”  I’ll have that cartoon in my next DTL piece for sure! I’m also going to dive deep into the Pension funding or lack of funding problem here in the U.S. So, what are you waiting for? sign up for the Dow Theory Letters at www.dowtheoryletter.com   I have some errands to run today, so I’ll get out of the house, which is something I didn’t do yesterday except to get the mail! I noticed the other day that I’ve put just 50,000 miles on my car since I bought it over 7 years ago! Doctor’s offices, hospitals, and down the street to my favorite watering hole is about the only places I go these days… Oh woe is me, right? HA!  Seriously, I’m good as gold right now, so no worries!   And with that, Led Zeppelin is taking us to the finish line with their great song: Kashmir…   I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!  bye~

Chuck Butler

 

 

July 9, 2018

* Jobs Jamboree is interesting… 

* Currencies are back on the rally tracks! 

Good Day… And a Marvelous Monday to you…  I trust you had a grand Independence Day Holiday week. I know I did… Saturday was probably one of the most beautiful days in July I’ve ever experienced in my life!  But the heat will return later this week, so we have that to look forward to! NOT!  I’m all alone again for the next 10 days, so as usual, “Hello, Pizzaman Pizza? I need a large, no, make that an extra large, with extra cheese, walk it through the garden and then through the barn!” HA!  My beloved Cardinals are heating up the twitter verse these days, I wish they would concentrate on gong on a win streak of more than 4 games! Deep Purple greet me this morning with their song: Hush… 

I last left you last week on Tuesday, the day before our Independence Day Celebration, and at that time, the euro was climbing through the 1.16 handle, and on the days following the euro climbed through that handle, and is trading this morning with a 1.17 handle!  I read and researched quite a bit this past weekend, and I have to tell you that most of the chartists believe that the dollar’s run is over, which I would think would lead to lots of back up the truck noises… Beep, Beep, Beep… 

On Friday of last week, the BLS printed their latest version of a very hedonically adjusted jobs report for June… The BLS claims that 213,000 jobs were created in the month of June, which was better than the 200,000 jobs that were expected to have been created in June.  Of those 213,000 so-called jobs that were added in June, 104,000 of them came courtesy of the BLS themselves, adding them to the surveys with their Birth/ Death Model… The Unemployment rate though rose in the June to 4%, from 3.8% in May… And there was something else that caught my eye… Of the 104,000 jobs the BLS added out of thin air, they claim that 89,000 of them were in the Leisure and Hospitality sector…  In fact, they’ve added 373,000 jobs for this sector, this year!  Isn’t that nice that the economy is running on bartenders and wait staff? Not that there’s anything wrong with those jobs, but they aren’t going to bring this economy out of the 2.16% GDP it has averaged for the last 10 years! I’m just saying…

Well, we’ve begun a new quarter, the 3rd quarter of the year is here! And while I’m thinking of what’s going on this quarter, don’t forget that I warned you that the GDP reading for the 2nd QTR  could be a moonshot above 4%, but it will be akin to a star burning brightest right before it flames out.  In keeping with the 4th of July celebrations, in last week’s DTL piece I called the 2nd Quarter’s GDP potential print the Grand Finale… Congers up an image in your mind of fireworks going off everywhere, right?  But then the show is over… And there’s nothing left but smoke and crying! 

The Tariffs began to be added to Chinese exports to the U.S. on Friday, and the stock market shrugged it off… I don’t think this is a case of the tariffs being priced in already, but more a case of traders and investors not knowing full what the hit will be to the economy, so until we know for sure what it is, it’s a case of Party on Wayne, Party on Garth! 

There’s an article on the Bloomberg this morning that has Morgan Stanley picking the currencies they feel will perform better than others during a Recession here in the U.S.  I’ll come back to this in a moment, but first, I do believe that the major investment houses, are coming to the realization that a recession is on the way, as I see more and more of them talking making investment plans for the recession…  Will this be a case of thinking something to reality?  You know, the recession might not actually be here yet, but if everyone thinks it is, well, it is… 

Yen, francs, and Singapore dollars are the three currencies that Morgan Stanley believes will be the best performers in a recession…  I guess Morgan Stanley believes in the so-called safe havens and then throws in Singapore dollars… I’m not so sure this should be an end-all list folks, so take this with however many grains of salt you wish! 

Gold didn’t have a good day on Friday, closing down $2.80 on the day, but the early morning trading this morning has Gold climbing nearly $10, so it could be a very good day for the shiny metal…  I read this weekend that Chinese first half Gold demand exceeded 1,000 Tonnes… WOW!  Russia, will see your 1,000 Tonnes and raise you 1,000 Tonnes! HA!   That’s what it seems like is happening with physical Gold demand in China and Russia…  One country announces their Gold figures and the other had to beat them! 

Did you ever have a friend or know somebody that was always having to something better than you? If you bought a house, they bought a bigger one, if you bought a car, they bought a more expensive one, and so on… That’s Russia and China these days, and it’s all good for Gold!  Oh, and guess what? I’ve got the link to Shanghai Gold Exchange’s price for Gold each day, and I’ll add it to the currency roundup from here on out… 

So, the currencies are on the rally tracks, and it looks like the dollar’s run has come to an end… I might be a little early with that statement, but it’s a call, right?  If I end up being early and the dollar bounces again, I’ll just pick up the pieces of my broken confidence, and move along…  The signs are all there for me to be correct though… The Emerging Markets currencies have found a bid, a weak one, but a bid nonetheless. The Petrol Currencies are rebounding, and the offset currency to the dollar, the euro is leading the charge.    

They had some new wrinkles added to the BREXIT negotiations, but even those setbacks aren’t raining on sterling’s parade this morning… 

One currency that just seems to be on the chopping block every single day, is the Brazilian real… And Brazil has an election coming up , which normally lends a hand to the real, but not this time… And on top of that the Brazilian National Team lost their knockout round game in the World Cup, and the whole country is reeling from that loss… 

The price of Oil continues to be well bid… It sold off a bit on Friday, but has rebounded in the past 24 hours. And the other commodities like copper, sugar, etc. are looking like that have some pep again… As well, they should given the inflation report in the U.S. last week, that we talked about… 

The Commodity currencies though are really in the dumps… Kiwi, can’t seem to find a bid, the same goes for the S. African rand and the Canadian loonie… The only Commodity Currency to find some love is the Aussie dollar (A$) …  I feel as though I’ve been led down a road that’s going in the wrong direction with kiwi… A year ago, the Reserve Bank of New Zealand (RBNZ) started talking about a rate hike cycle, and I was led to believe that this rate hike cycle would begin in the 2nd QTR of 2018… You may recall me talking about kiwi and saying that investors were getting a chance to buy ahead of the Big Boys…. But the 2nd QTR of 2018 just ended, and the RBNZ isn’t any closer to beginning a rate hike cycle than I am to the man in the moon!  So, we’ll have to batten down the hatches here, and wait out the RBNZ!

The 10-year Treasury’s yield sits at 2.85%, and there seems to be a strong flight to safety going on right now, which supports the bond market here…  I’ve told you this before, but the 10-year Treasury is used to price mortgages… and I found these rates online…the 30-year fixed-rate mortgage averaged 4.52% during the July 5 week, down from 4.55%, mortgage provider Freddie Mac said Thursday. The 15-year fixed-rate mortgage averaged 3.99%, down five basis points. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.74%, down from 3.87%.

And remembering my old training from the bank I must included this: Those rates don’t include fees associated with obtaining mortgage loans. 

So, mortgage rates are falling again, which means more air will be blown into the housing bubble…   It’s a shame that this is happening, yet again… 

Speaking of the housing bubble… We’re quickly approaching the 10 year observance of the 2008 Financial Meltdown… And later this fall it will be the 20 year observance of the LTCM meltdown, where they had to form a “committee to save the world”…  The timing for a the next meltdown could be bang on the 10-year, 20-year times…  I’m just saying… 

The U.S Data Cupboard is scratching the walls looking for some real economic data to print this week, and early in the week, there just isn’t much to talk about… So, we’ll move along now, for these are not the droids we’re looking for!

To recap… The Trade War between the world’s two largest economies began in earnest on Friday, and the markets are kind of reacting to it, with stock reaction muted, and the flight to safety in Treasuries and Gold taking flight, but not soaring yet. The rot on the economy’s vine isn’t being exposed just yet, but it will…  The Jobs Jamboree netted 213,000 jobs in June, of which 104,000 were added out of thin air by the BLS, and the Unemployment Rate rose to 4% from 3.8% the previous month.   The currencies are rebounding and Chuck has made the call that the dollar’s rally is over…  Will he be right?  Only the Shadow Knows! 

For What it’s Worth… I came across this story and went into a deep dive on it for next week’s DTL, but will still give it to you here… this is about a warning from Moodys about corporate debt defaults, and it can be found here: https://www.cnbc.com/2018/05/25/moodys-warns-of-particularly-large-wave-of-junk-bond-defaults.html 

Or, here’s your snippet: “With corporate debt hitting its highest levels since before the financial crisis, Moody’s is warning that substantial trouble is ahead for junk bonds when the next downturn hits.

The ratings agency said low interest rates and investor appetite for yield has pushed companies into issuing mounds of debt that offer comparatively low levels of protection for investors. While the near-term outlook for credit is “benign,” that won’t be the case when economic conditions worsen.

The “prolonged environment of low growth and low interest rates has been a catalyst for striking changes in nonfinancial corporate credit quality,” Mariarosa Verde, Moody’s senior credit officer, said in a report. “The record number of highly leveraged companies has set the stage for a particularly large wave of defaults when the next period of broad economic stress eventually arrives.”

Chuck again… Yes, this could very well be the snowflake that causes the avalanche for the U.S. economy folks… better keep an eye on this one!

Currencies today 7/9/18… American Style: A$ .7476, kiwi .6850, C$ .7495, euro 1.1779, sterling 1.3345, Swiss $1.0124, European Style: rand 13.3566, krone 7.9940, SEK 8.7015, forint 274.04, zloty 3.6730, koruna 21.9521, RUB 62.94, yen 110.40, sing 1.3536, HKD 7.8482, INR 68.69, China 6.6427, peso 19.03, BRL 3.8644, Dollar Index 93.77, Oil $73.83, 10-year 2.85%, Silver $16.24, Platinum $858.69, Palladium $965.63, and Gold $1,265.31, and SGE Gold $1,269.64

That’s it for today… Nice to be back. We had an absolutely gorgeous weekend, weather-wise… A Chamber of commerce weekend. But the excessive heat is supposed to return this week, so I have that to look forward to! I’m all alone again for the next 10 days… good friend, Mike, came to the house yesterday to keep me company and watch the Cardinals blow another game. We grilled some good stuff to eat, and had a good day! Chicago takes us to the finish line today with their song: Hard Habit To Break, one of my fave Chicago songs! And with that I’ll get out of your hair today. Thanks for reading the Pfennig, and I hope you have a Marvelous Monday, but please remember to Be Good To Yourself!

Chuck Butler

 

July 3, 2018   

* Currencies hit a roadblock yesterday… 

* It’s Our Independence Day Tomorrow! 

Good Day… And a Tom Terrific Tuesday to you! Are you staying cool? Because it’s going to be a hot one here for the 4th of July Independence day Holiday. I’m going to put something in the Big Green Egg, and 6 hours later I’ll check it. No standing over a hot grill for me! But Barbeque will be in order for sure! I’d like to do some ribs, but, I don’t think everyone that will be here are fans of ribs, so I’ll have to think of something else…  Kansas greets me this morning with their song: The Wall…  In the 70’s you didn’t get much hotter for a band than Kansas was… I’m just saying… 

Well, I was looking over some charts yesterday, of the stock market performances of the S&P 500, Dow and Russell 2000… And if you believe in charts, then go out and load up on more stocks… But if you only use charts as a “helper”, then be careful… Because in other charts I looked at, the effects of the Trump tariffs are already kicking in, as they might not be actually kicking in, but psychologically they’re kicking in, as companies worry about what it’s going to do their costs… 

That was very evident in the ISM (manufacturing index) that printed yesterday for June. The ISM index rose to 60! WOW, now that’s impressive, especially given that Durables and Factory Orders were all negative in growth… But I digress…  The thing that caught my eye in the ISM though were the “internals” of the report.  You see, apparently the supply chain is under stress and factories are taking longer to deliver goods.

My friend, David Gonigam at the Five Minute Forecast  had this yesterday… “The “supplier delivery” number is up to 68.2, and this is an instance where higher numbers aren’t necessarily better. Instead, we’re looking at the worst disruptions to the supply chain since the “oil shock” of the mid-1970s.

The cause? Steel and aluminum tariffs, say the report’s authors. “Respondents are overwhelmingly concerned about how tariff-related activity is [affecting] and will continue to affect their business,” says ISM’s Timothy Fiore.” – David Gonigam www.agorafinancial.com

I love it when I have a thought about something, and then out of the air, comes a link, a newsletter, etc. with confirmation of what I’m thinking!  

There’s certainly a “split” if you will, of people in this country that think everything’s coming up roses, and then there’s people like me that think that the roses are 7-days picked!  But that’s what makes the world go around, right? As long as we can have a civil discussion about it, I hear you, you hear me, and we go get a beer, right? 

I keep talking about a credit crisis that’s going to hit the markets sooner or later… It could come from any number of credit sources… Auto loans, student loans, mortgage loans, corporate loans, etc. But I’m keeping my eye on the student loans… There’s more than $1.5 Trillion in Student Loans and the default rate has steadily climbed to 20%… And it’s still growing, folks…

A credit crisis begins in one sector and then spreads to the other sectors very quickly… So, we had better keep our eye on all of these credit sources… because they are all risky business, and I’m not talking about the Tom Cruise movie either!   One of these days, all this stuff will come crashing down around us, you don’t keep adding to debt until it can’t take any more! And you have to stop digging a hole when you find out the hole doesn’t have any Gold! 

Well, I should have figured that if I saw that China’s renminbi was being allowed to depreciate, to offset trade tariff effects, then the People’s Bank of China (PBOC) was ready to disavow any hint that this is what was going on… And the PBOC has begun to talk about how they will not allow the renminbi to be taken down excessively… Those sly Chinese bankers… They knew just how weak they could allow the renminbi to go before they would apply the brakes on any further thoughts of depreciation.

And that’s what they are doing right now… applying the brakes… The Chinese have come to the conclusion that the renminbi has fallen enough… Enough is enough, now we’ll have to see if the markets are going to play along…

When I first began trading currencies for the old Mark Twain Bank, I was taught that the markets had deeper pockets than any Central Bank… And that’s why I’ve always said that Central Bank intervention can move markets short term, but they won’t last, because the Central Bank can’t continue to spend money on a falling currency to defend it. 

But I think China’s PBOC presents a different animal to the equation of whether Central Bank intervention works or not. The Chinese proved back in 2015, when the Capital Flight out of China was HUGE, and there were all those calls for a collapse of the Chinese economy… But, China simply used some of their $3 Trillion plus reserves and bought renminbi, to defend it, and soon, the markets were playing along with the PBOC…

I was excited to see that my Pfennig last week titled: Emerging Markets, the Canary In The Coal Mine, got a lot of notice… The Twitter-verse seemed to like it, and I didn’t get one email that day telling me I was wrong, as opposed to a normal day where people tell me I’m wrong all the time! HA!    

I’ve gone this long into the letter without telling you what the currencies did yesterday… And that was on purpose, as the currencies and their attempt to recover got stopped at the border…  I had a funny line (to me that is) ready, but decided it wouldn’t be funny to everyone… See how I’ve matured? HA!  

During the day yesterday, the euro was giving back most of its gains from Friday, but by the time the day ended the single unit was back to the same level it was early yesterday morning 1.1642.  Overnight, there was more movement, and the single unit has inched higher, but not by much. The Dollar Index is trading at 94.68 this morning, and yesterday morning it traded at 94.79… 

The rot on the Emerging Markets currencies’ vines is beginning to really take hold, and getting exposed to the sunlight, which means it’s going to keep growing… The price of Oil has bumped to near $75 this morning, and the Russian ruble can’t find a bid, and the Brazilian real continue to fall like a rock from a ledge. 

Come to think of it, the price of Oil’s rise isn’t helping another of the Petrol Currencies this morning, as the Canadian dollar/ loonie has dropped in price. The Norwegian krone, which follows two leaders, the price of Oil and the euro, is on the rally tracks this morning, due to both of its leaders bumping higher. 

 told you yesterday that on Friday this week, it’ll be the Jobs Jamboree for June… Right now the so-called experts are expecting 205,000 jobs created in June… That sure doesn’t say much for all those college grads that were looking for jobs, eh? Yesterday afternoon, I got to thinking about me not being around after today for the rest of the week, and thought, well, I guess I should at least give everyone a heads up as to what else could move markets as the week goes on…

OK, so starting today… automakers will report their June sales totals. Forecasters predict full-year sales falling short of the three previous years when sales have topped 17 million cars and trucks.

Also today, we’ll see Factory Orders for May… April’s negative showing here, will probably spill over to May, so another piece of real economic news in the negative…

The stock market will close today at 1pm ET, and be closed tomorrow along with banks and a whole shootin’ match of other things. We pick things up again on Thursday with the Fed’s last meeting Minutes… These could be a powder keg for the markets, so look out for those Meeting Minutes!

Then on Friday, we have the aforementioned Jobs Jamboree, and, more importantly, in my opinion, since the Jobs report is so heavily hedonically adjusted each month. The first round of Trump tariffs goes into effect on Friday when the U.S. will begin imposing a 25% tax on $34 billion worth of Chinese products… And the rot on the economy’s vine will begin to creep up the vine…

So, there you have it… a week’s worth of stuff that will go on once I sign off today… You know, that reminds me to remind you, that the last week of July, first week of August, is my annual summer vacation… I’ve been taking those weeks off for so long now, that I almost forget they are coming up! It’ll be a two week sabbatical for you from me, so you have that to look forward to!

Yes, it’s just me these days… At my old place of business, I had “back ups”, when I was unable to write, like vacations, scans days, infusion confusion days, etc.  So, now there’s just a void… I’m sure my publishers, the wonderful Aden Sisters, will probably send you a letter or two during those two weeks…  I have to say that I’m loving my association with the Aden Research folks, Mary Anne and Pamela…  

Gold lost another $6 in yesterday’s trading… The shiny metal just can’t seem to catch a break or a bid these days. I’m still not going to back off my view that Gold is a store of wealth, is independent, has no obligations, or any dolt Central Bank doing dolt things like implementing negative deposit rates, etc.  And since Gold hasn’t performed very well lately, a lot of people/ investors panic… But… if you want to diversify from the legitimate fear for your assets into tangible assets –  Then an asset allocation to Gold I would think would be good especially in view of the unresolved debt crisis and the policy of the central banks – then Gold is an obvious choice of asset class…  And that’s all I’m going to say about that! (today at least! HA!)’

And looky there! Gold is up $5 in the early morning trading on this Tom Terrific Tuesday! They used to have a saying on the trading desk at a brokerage firm I worked at in the late 70’s…  just to get this out of the way, no bodies were harmed….   But the traders would say, “even a dead body bounces”…  And when I saw Gold bounce this morning, my mind drifted back to the late 70’s…  Sorry if I offended anyone with that old trader saying about assets that bounce…  Man, that’s so long ago, my oldest child, Dawn, wasn’t even born yet!  Wait, What? I had a life before children? I don’t believe that for one minute! HAHAHAHAHA!

To Recap…  The currencies hit a roadblock yesterday, and their advances were stopped at the border, but have recovered in the overnight markets to sit about where they were yesterday morning. Gold lost $6 in trading yesterday, but is up $5 in the early morning trading today. Chuck brings you up to date with all the goings on for the rest of the week, and the Trump tariffs are already showing up in the economic data! 

For What It’s Worth…  I’ve been talking about the rot on the Emerging Markets for a few weeks now, and when I saw this synopsis of the goings on in these markets I had to get it in this letter so you could see it too… 

• The DXY index, which tracks the US dollar against other major currencies, rose 5%.
• The Argentine peso and Brazilian real fell 30% and 14%, respectively.
• The Turkish lira and South African rand each fell nearly 14% versus the dollar.
• A bunch of Asian emerging market currencies fell 3% – 6%.
• Europe’s emerging markets weren’t spared. The Hungarian forint (-10.0%), Polish zloty (- 9%), and Czech koruna (-8%) led a long list of EU peripheral currency losers.
• China’s stock indexes fell by double-digit percentages in the quarter, though that might have more to do the incipient trade war than relative inflation and interest rates.
• Asian junk bond spreads (their yields versus those of high-grade bonds) widened dramatically.
• Emerging market bank stocks got crushed, including Banco do Brasil (-30%), Banco Bradesco (- 30%), and Brazil’s Ibovespa stock index, down 27% in U.S. dollars.
• Last but definitely not least scary, US and European bank stocks fell hard last week, which isn’t surprising since they’re on the hook for untold amounts of the aforementioned emerging market securities and currencies.

Chuck Again…  I have to say that this all could certainly blow over, and everything will be right on the night… There! I said it, now this FWIW piece is fair and balanced!  But do I believe that? Not for one Iota! Like I said earlier in the week… The Emerging Markets is the Canary in the Coal Mine… 

Currencies today 7/3/18: American Style: A$ .7395, kiwi .6735, C$ .7583, euro 1.1650, sterling 1. 3188, Swiss $1.0062, European Style: rand 13.7228, krone 8.1275, SEK 8.8521, forint 281.60, zloty 3.7743, koruna 22.4025,  RUB 63.21, yen 110.85, sing 1.3660, HKD 7.8445, INR 68.56, China 6.6542, peso 19.68, BRL 3.89, Dollar Index 94.68, Oil $74.82, 10-year 2.87%, Silver $15.94, Platinum $824,48, Palladium $947.47, and Gold… $1,247.26

That’s it for today… And for this week… I sure hope you can have a grand Independence Day tomorrow… I would suspect the markets, for the most part will be shut down for the rest of the week, as those that are able to make this a long holiday week, will do just that!  My beloved Cardinals are making a trip out west, which means I won’t get to see much of the games because they are on so late! Last night, for instance I went to bed in the 5th inning! Maybe a trip out west is what they need to straighten themselves and their season out… time will tell… At least they got off on the right foot last night with a win in Arizona. I hear that there will be a large crowd of people here tomorrow, and I was asked what would I like to cook for them… Hmmm… I’ll have to think about that, since it’s going to be near 100 tomorrow! The late Great Leon Russell takes us to the finish line today with his song: Queen of the Roller Derby…  So, get out there and shoot some fireworks, wear some red, white and blue, and fly a flag… And be careful! I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler

 

 

July 2, 2018  

* Currencies continued to rebound on Friday   

* The price of Oil jumps higher, but Gold remains without a bid… 

Good Day… And a Marvelous Monday to you! And welcome to July! It’s Pfennig tradition that we being July like this:   There I was on a July Morning, I was looking for love. With the strength of the night behind me, and a road of my own- Uriah Heep…  I made 4.5 hour drive to the beautiful home of Ray and Donna Hambuchen this past weekend. They were wonderful and gracious hosts to the whole Butler family! Their home is on the White River in Arkansas, and I could have sat out on their deck overlooking the beautiful White River every day of my life!  Steely Dan greets me this morning with their great song:  Rikki Don’t Lose That Number… 

I want to get this out of the way front and center this morning…  With the 4th of July Independence Day Holiday  on Wednesday this week, I’m going to make it a short week for me and the Pfennig… Today and tomorrow, and then off on Wednesday, and so on…  Alrighty then, that’s put to bed, now let’s see what’s going on in the markets, economies and in the minds of dolts… 

The currencies ended the week last week on a good foot, not a great foot, but a good foot, as they attempted to rebound after the week’s weak performance had them reeling… The euro traded back above 1.16 and the A$ had found its way back to 74-cents, after dipping to .7350 on Wednesday/ Thursday last week. But in the overnight markets last night, the A$ dipped back below 74-cents… Back and forth, back and forth… Get’s Old after awhile, eh?

The Emerging Markets currencies, and the Asian currencies continued to get whacked but not for the same reasons… I told you about 10 days ago about the Emerging Markets’ problems with rising debt servicing costs that come from the Fed’s rate hikes… And I also told you about how the Asian currencies, right now, appear to be the whipping boy for the dollar bugs, because of the Trade War… 

But did you hear the news from Tokyo this weekend? 16 Asian nations are forming a Trading Block, that would cover over 1/3rd of the global trade…  This would be a way for these countries to avoid tariffs on trade amongst themselves… There are many obstacles before an agreement is signed, which could come before year-end, and these obstacles  include India’s requirement that any agreement to reduce tariffs on goods and services should allow for free movement of people, something India wants for its highly skilled information technology sector. You see when you get this many nations involved, every nation has their “been in the bonnet” item that will fill or kill the deal. 

This is a must for the Asian countries, that include Australia and New Zealand to help offset the U.S. tariffs… As long as they keep that main goal at the top of their lists, and number 1 in their collective brains, they should be able to reach an agreement before year-end… 

For the most part, I would stick with the major currencies through this rough patch with the dollar bugs hoopin’ and hollerin’ just about every day…  For the major currencies will be able to stand up to the dollar bugs every now and then.    

Gold finished the month of June down over 3%, and hasn’t seen the light of day in the $1,300 hand since mid-May. I get it, I get it, forget about all the hot spots around the world, and how they are like tinder waiting for a match, and that Gold should be well bid during this time… Well, no, actually I don’t get it… I don’t get why Gold isn’t reacting favorably to all this “stuff” going on in the world…  I’m well aware of the physical demand for Gold from Central Banks in the East, and I’m also well aware of the short Gold paper trading… But to me, one should be on top of the other, thus giving Gold it’s proper due.. 

All I can say about this “selling of Gold on paper” is that it gives all of you who have procrastinated and put off buying Gold a cheaper price to buy! And after Friday’s performance, in which Gold added $4.40 to its price, the shiny metal sits at $1,248 this morning… As the early morning trading isn’t being nice to Gold… 

The price of Oil continues to rise and this morning it’s trading with a $74 handle… One would have thought that ROPEC’s announcement last week that they were going to increase production would have brought the price of Oil back down… But, as I said last week, that thought is thrown out the window, once the U.S. puts pressure on its allies to not buy Oil from Iran… 

Down in Arkansas this past weekend, I paid $3.54 for a gallon of premium gasoline… Before I left I paid $3.11 here in my little river town… I thought to myself, “man they must really like their gas here!” Now, some of the increase could have come from rise in the price of Oil on Friday, but, I get the feeling that most of the difference came because I was on a two-lane road in northern Arkansas, and it was the only gas station around…  

We saw some interesting economic data on Friday last week… Personal Income and Spending, along with the Core PCE, the Fed’s preferred inflation calculator…  OK, first things first… Personal Income was bang on expectations to gain 0.4% in May… But Personal Spending was not up to snuff, and only gained 0.2% in May…  That’s not a good thing for the economy folks…  And then the Core Personal Consumption Expenditures, which take out food and energy (like we don’t use those things every darn day of our lives!) and it rose to 2% annualized, which is the Fed’s Target! 

Remember what the Fed Heads told us a few months back, that they were willing to allow inflation to run a bit once it hits 2%…  So, why stop here? And I don’t think inflation will, folks… Like I’ve said before, I truly believe that we are headed to a low growth, high inflation time period… There’s a name for this phenomenon and it’s called Stagflation! 

And while this will be a shortened week here in the U.S. and there probably won’t be anything but “junior traders” left on the desks of the major banks and brokerage houses come Friday. The Jobs Jamboree will go on without them on Friday morning… Today’s Data Cupboard has the ISM (manufacturing index) for June, you might recall that the Markit version of this data printed last week and showed slippage.. 

The yield on the 10-year Treasury continues to inch downward…  I’ve said this before, and I’ll probably say it many more times, but the bond boys get the picture of the economy, and that’s why they have reduced the rate on the 10-year, which is used to price mortgages.  Oh, and the overall yield curve? it’s doing its best imitation of Head East…   Flat as a Pancake… for all of you not knowing what I’m talking about! 

I tried to add a graph of the Yield Curve, but I guess I don’t have the skills required for such a thing… So, I’ll just keep typing words, and hope that you can visualize the Treasury Yield Curve flattening…   

To recap…  The currencies are attempting to rebound, and that has been going on since last Friday. The major currencies seem to be the only ones that have a chance to gain VS the dollar right now, as the Emerging Markets and Asian currencies get whacked for different reasons.  Gold still can’t find a consistent bid, and is off again in the early morning trading today. The price of Oil has found a consistent bid, and is trading with a $74 handle this morning! 

For What It’s Worth:  James Bullard is the President of the St. Louis Fed, and someone that has been able to move markets with his words before, as he was the original Fed Head to mention QE2… Well, Bullard was speaking in St. Louis the other day, and had something to say about interest rates that I think you’ll find interesting. You can find it all here: https://www.marketwatch.com/story/fed-should-not-raise-interest-rates-just-because-second-quarter-gdp-growth-may-surge-bullard-2018-06-28

Or, here’s your snippet: “In an press conference with reporters following a speech in St. Louis, Bullard said the surge in growth is likely to be temporary and the economy’s growth rate will likely be on a downward trend in 2019 and 2020.

So the Fed should not react with a “permanent rate hike” to a “temporary” increase in output, Bullard said. The strong second quarter is also flattered by the quirks in the GDP data that continue to depress growth in the prior quarter. So the best way to view the second-quarter is to average it with the 2% growth seen in the first quarter, he said.

Bullard is one of two officials on the central bank that have been calling on the Fed to be cautious about hiking rates further.

The Fed’s benchmark rate, now in a range of 1.75%-2%, is close to neutral, neither stimulating or dampening growth, he said.”

Chuck Again…  So… what he’s saying, in Central Bank parlance here is that The Fed should NOT raise interest rates just because the 2nd QTR GDP may surge…  And I agree, as I said last week, the 2nd QTR GDP may be north of 4% when it prints later this month, but it will be like star that shines the brightest right before it flames out! 

Currencies today 7/2/18: American Style: A$ .7363, kiwi .6737, C$ .7595, euro 1.1642, sterling 1.3160, Swiss $1.0074, European Style: rand 13.8058, krone 8.1648, SEK 8.9657, forint 283.17, zloty 3.7696, koruna 22.3205, RUB 22.32, yen 110.75, sing 1.3671, HKD 7.8454, INR 68.70, China 6.6193, peso 20.01, BRL 3.8761, Dollar Index 94.79, Oil $74.07, 10-year 2.83%, Silver $15.97, Platinum $839.05, Palladium $948.64, and Gold… $1,248.81

That’s it for today…  I had a great weekend with my family, but my beloved Cardinals didn’t have a great weekend, as they were swept by the Braves… UGH! At Home, no less! double UGH! Storms rolled through last night, and I think they will cool things down a bit here in the St. Louis area But remain hot, which is fine with me! Yesterday morning it was early, and only Braden and I were up, and we watched a critter of some sort walk around outside looking for food. We had an interesting conversation to say the least! HA!  It’s our Independence Day week! YAHOO!  The great Carlos Santana takes us to the finish line today with his song: Black Magic Woman…  So, keep cool, go out and make this a Marvelous Monday, and Be Good To Yourself! Can you do that? I knew you could! HA!  

Chuck Butler

 

 

June 28, 2018  

* Currencies stop spinning and go into reverse!

*it’s Alex’s Birthday! 

 

Good Day… And a Tub Thumpin’ Thursday to you! Today is my youngest son Alex’s birthday… So Happy Birthday, front and center this morning to the young man that 20 years ago, used to sit on my lap, during my first “retirement” and help me write the Pfennig… Yes, even though the bank that had bought the old Mark Twain Bank and then performed ethnic cleansing on the Mark Twain Employees, got rid of me… I still wrote the Pfennig from my home, much like I do these days. Except then I had two kids in college, and a 3 year old at home. At the time I thought it was the end of the world losing my job, but when one door closes another opens, and soon I was working with the group led by Frank Trotter, to start a new bank, which would become EverBank… Charlie Daniels Band (CDB) greets me this morning with their song: Long Haired Country Boy…  Now that’s one song that will get the crowd singing along! 

Well, the euro bears won the day again yesterday, pushing the euro below the 1.16 handle… Just two days ago, I remarked that the euro had climbed back above 1.17, so a chunk of change has been taken away from the single unit in the last two days. When the roosters come home to crow, those euro bears are going to be going into hiding…  But then that’s what we’ll have to wait for, but I do believe it will come… the Fed Heads just need to show their hand, begin to reverse their rate hikes, or halt their balance sheet unwind, and out the window goes the remaining thread of credibility they have left..   

I’ve put so much thought and work into this scenario that if it doesn’t come to fruition, then I’m going to wave the white flag, and become Puff the Magic Dragon, who went back into his cave, and ceased his mighty roar! I’m serious here folks… I will give up, and throw in the towel! No more analysis from me, no more conspiracy ideas, and no more Pfennig… For like the Fed Heads, I would have no more credibility…  So, that’s a sobering thought this fine Tub Thumpin’ Thursday, now isn’t it?

So, while I still have a “job” being your Pfennig writer, I’ll continue to do my best to look forward, around corners, under hoods, and back alleys to find the information you need to make informed investment decisions… 

And today, that means.. I have this to say… I’ve been telling you about the difficult time the Emerging Markets are going through right now… And well, they are the canary in the coal mine regarding the seizing up of the Credit Markets…  It’s happening in the Emerging Markets right now, folks… so I’ll ask you this again… “Got Gold?”

Speaking of Gold… Once again the price manipulators took their pound of flesh from the price of Gold yesterday…  Depending on what price you look at, Gold lost either $4 or $5 yesterday… Ed Steer tells me this morning that there were over 255,000 contracts traded yesterday…  Have you heard of Ted Butler?  I’ve mentioned him a time or two in the past. Ted Butler, has taken it upon himself to bring the price manipulation of Silver and taken further to Gold, to the masses, in hopes that one day the CFTC gets some intestinal fortitude and decides to really investigate the goings on with Silver and Gold…  Remember the old CFTC member, Bart Chilton, telling us that he looked into it and found nothing?  I remember responding to this back when he made that comment, that he couldn’t find his rear end with both hands!  And now he’s got his own show on cable talking about economics! 

I shake my head and wonder about how people that fail miserably in their previous jobs end up getting promoted?   Man, am I ticked off this morning or what?  And no it’s not because my beloved Cardinals’ winning streak came to an end last night!   Or because it’s hotter than hades in St. Louis with humidity that you could cut with a knife!   No, it’s because I keep hearing the Fed Heads telling us the economy is robust and strong… And they will all be dancing in the streets when the 4%+ 2nd QTR GDP prints in a month or so… But like I keep telling you, this is going to be a case of a star burning the brightest right before it flames out… 

Oh, and I was going to talk about Ted Butler, and got sidetracked there! What a dolt I am sometimes! But there’s a real good piece on price manipulation by Ted Butler that appeared in Ed Steer’s letter the other day… that, in case your interested, is here: 

[T]he allegations that JPMorgan has manipulated silver and gold prices for a decade are so serious that any proportionate fine would be too large to assign. And any fine would only precipitate a virtual landslide of public and private lawsuits from investors, producers and producing countries, so as to jeopardize JPMorgan’s existence as a going concern. Not that the CFTC could ever move against JPMorgan, since the agency has long been held captive to JPM’s lawyers and lobbyists. The CFTC has never enacted any policy or regulation that JPMorgan has opposed; starting with legitimate position limits.

The Commission can’t possibly ever admit that there is anything amiss in silver after denying any such manipulation for three decades. To do so now would be tantamount to formally ending the agency as an independent regulator. Besides, McDonald and company can’t even answer simple questions based upon the agency’s own data – it is completely incapable of ever seriously confronting the crooks at JPMorgan.

JPMorgan, in effect, regulates the CFTC — and not the other way around. — Silver analyst Ted Butler: 20 June 2018

Winning two out of three is not bad, especially to a team that was on a 7-game win streak, and were 16 games over .500 when the series began… But I digress here… back to work, Chuck!

I don’t know if you’ve been checking the currency roundup each day for the Chinese renminbi performance, but I’ll save you the trouble by telling you that the renminbi has been on the slippery slope downward for the last week… And this week’s performance has seen the renminbi’s slide turn to an all-out fall! I think I know what’s going through the minds of the folks at the People’s Bank of China (PBOC)…  They see the Trade War boosting the prices of Chinese exports to the U.S. which could cause a real loss of trade income, because if an item costs more, maybe consumers will choose not to buy it…  So, what can they do to offset this potential loss of trade income? Well, the easy thing that Central Banks turn to every time things het heated… They allow a depreciation (or sell their currency ) of their currency so that the exported items are cheaper… 

This ploy rarely works folks… But that doesn’t stop Central Banks from debasing their currencies in an effort to increase trade… Debasing a currency then allows inflation to be imported and before you know it you have rising inflation, and you have to hike interest rates, and that causes the currency to rise thus wiping out your competitive ace in the hole… 

So, I expect to see more rot on the renminbi’s vine in the coming weeks, unless calmer heads prevail with these Trade War fears. But like I explained yesterday, I think we’ve gone down this Trade War road too far, to turn back now… The Cornelius Brothers and sister Rose sang a song titled: It’s too late to turn back now, and here’s the link to the song in case you’re wondering how the song goes: https://www.youtube.com/watch?v=mfYkhQblYjY   

The U.S. Data Cupboard yesterday didn’t disappoint with its prints… Durable and Capital Goods Orders for May both printed negative, as I told you they would… Durables were a negative -.06%, and Capital Goods were a negative -.02%…  These are pieces of real economic data folks, and they tell a story of an economy that’s struggling…  Today’s Data Cupboard has the final revision of 1st QTR GDP, which should remain about 2.2%… 

Are you scratching your heads too, and wondering just when did 2.2% GDP represent “a robust and strong economy”? But that’s what Fed Chairman Jerome Powell will have you believing if you trust him… And the parade of Fed Heads our on the speaking circuit this week has been busy, but all of them believe the same thing…  Well, if you are thinking that this is all Mularky, then you’re in the same camp as me… So, should we make some s’mores with this campfire? 

Oh, and one more thing before we head to the Big Finish… When I said yesterday that the currencies needed to apply their anti-skid brakes to stop all the spinning of their wheels, I didn’t mean for them to then put the car in reverse! UGH! 

To recap….  The dollar bugs are winning this week… They have gotten the dollar up to a 95 handle in the Dollar Index.. The currencies got sold like funnel cakes at a State Fair yesterday and overnight, and Gold didn’t help offset the currency losses. The price of Oil, however, rose again and now trades with a $72 handle!  The Chinese renminbi is taking a ride on the slippery slope, and Chuck explains his view on why this is happening right now…  And the Data Cupboard had two more pieces of real economic data that paints a not so “robust and strong” economy… 

For What It’s Worth… I’ve been talking about the rot on the vine in the Emerging Markets currencies lately, and I came across this article that seemed to explain the problems in plain English, which is my forte!  So, you can find the article here: https://www.washingtonpost.com/news/wonk/wp/2018/06/28/how-to-tell-if-your-countrys-currency-is-falling-apart/?noredirect=on&utm_term=.c18b2ba26e8b   

Or, here’s your snippet: ” Are you an emerging market that’s wondering whether your currency is going to be the next to fall?

Well, if so, here’s a handy checklist to help you figure that out. Have you been borrowing a lot of dollars recently? Or relying on short-term debt that can leave the country at the macroeconomic equivalent of a moment’s notice? Or is your government either too strong, too weak or of otherwise questionable competence? If you answered yes to any of these questions, you should consult your currency market immediately. You might already be in trouble. And if it was more than one, well, you probably don’t need me to tell you that things aren’t looking great. You know.

Now, there are two stories here. The first is that a lot of the money that poured into emerging markets when the Federal Reserve was cutting interest rates down to zero is heading for the exits now that it’s raising them. 

That’s why money is leaving emerging markets so fast that their currencies are starting to fall quite a bit now, at which point they either have to raise rates themselves to try to persuade investors to stay, or else see all their dollar debts suddenly become much harder to pay back. This, of course, is more of a problem the more they borrowed — those are the ones who are depending on foreign investors — but it’s still a significant head wind for countries that you wouldn’t necessarily think were that much at risk.”

Chuck Again…  I think this line is especially important here: It’s still a significant head wind for countries that you wouldn’t necessarily think were that much at risk…  He’s talking about the mature Emerging Markets currencies, like South African rand, Mexican peso, and even the Russian ruble… 

Currencies today 6/28/18… American Style: A$ .7350, kiwi .6766, C$ .7525, euro 1.1590, sterling 1.3092, Swiss $1.0026, European Style: rand 13.83, krone 8.1670, SEK 8.9866, forint 282.95, zloty 3.7634, koruna 22.4320, RUB 63.13, yen 110.22, sing 1.3663, HKD 7.8479, INR 68.76, China 6.5973, peso 20.07, BRL 3.8224, Dollar Index 95.18, Oil $72.77, 10-year 2.83%, Silver $16.09, Platinum $852.68, Palladium $949.95, and Gold… $1,252,13

That’s it for today…  Hot and muggy… That’s what we’ll have this weekend here in the Midwest…  Alex is 23 today… 20 years ago, he sat on my lap while I wrote the Pfennig, his input would look something like this: 2o0u$(U&ldgul3y !  Happy Birthday little buddy!  (he’s not so little any longer!) I have multiple pictures of Alex through the years, on my desk wall here… Little Delaney Grace was here yesterday, and looking through my books I’ve got stacked everywhere, for something to read… She liked the purple book, so when I pulled it out it was Surviving the Financial Crisis! She took it, but I don’t think she was very interested in it! Well, it’s time to go… Jimi Hendrix takes us to the finish line today with his song: Foxey Lady…  I hope you have a Tub Thumpin’ Thursday today, and Fantastico Friday tomorrow… Be Good To Yourself!     bye~

Chuck Butler