Author: admin

February 1, 2018  

* Currencies founder on Wednesday…

* But Chuck thinks it will be short-lived..  

Good Day… And Welcome to February, a good month in my book now that I spend in South Florida… We have a holiday weekend, Valentine’s Day, and most importantly, pitchers and catchers report to spring training! And this year Spring Training Games actually start the last week of February! YAHOO!  It’s a Tub Thumpin’ Thursday, but not for me. I’ll remain hunkered down with my deformed face…  Good friend, Gus, stopped by yesterday to check on me since it was a nice day out, and I wasn’t outside soaking up the sun.  What a good friend!  Bob Seeger and the Silver Bullet Band greet me this morning with their song: Turn The Page..  It’s a song about being on the road in 1971, I relate to this song because just two years later I was on the road too!  

The Currencies didn’t really move much yesterday, but the move they did make was downward, except the Chinese renminbi, and Norwegian krone teaming up to fight the dollar yesterday and in the overnight market. There are some currencies that have traded flat, like the Hungarian forint, and the Swiss franc. The rest of them saw some lost ground on the day and night.  The Biggest Loser in the past 24 hours has been the Aussie dollar (A$).  

I told you earlier in the week that the A$’s rise to 81-cents was being looked at by the A$ bears as an opportunity to bring it back down, and they have…  The A$ lost over 1 full cent yesterday and overnight, and the A$ bears said that they believed that the Aussie inflationary pressures had slipped in the December QTR, and that would push back the thought that the Reserve Bank of Australia (RBA) was ready to begin a rate hike cycle. 

The New Zealand dollar/ kiwi, which had been quite the perky looking currency lately, sold off in sympathy with their kissin’ cousin across the Tasman.  I get the feeling that this selling of kiwi will be short-lived… So, this may be an opportunity to buy at cheaper levels, in hopes of better days ahead!    

The reason I say that goes for all the currencies.  You see I’ve said that the dollar has entered a new weak trend, but a trend is not a ONE-WAY street, and there could be volatility like we saw yesterday.  And I’m not the only one that has recognized what’s going on, although I have to admit I was the first (last June, to make the call!)  Let’s listen in to the analyst at PIMCO who was talking on Bloomberg.com, about how the U.S. has entered a Cold War with the dollar that they winning.  The U.S. want’s the dollar weaker… so here is PIMCO.. 

“Cold wars are not fought in open battle (for example, with currency intervention), but with words and covert actions,” Fels said. “These actions are sending an implicit but very clear signal to markets: A weaker dollar is the goal. Markets have understood the signal.”  

The dollar has lost 12% since the start of 2017 (in the Dollar Index) and I foresee more losses, especially with the growing twin debts. We talked about the national debt growing by leaps and bounds yesterday (actually Bill Bonner was doing the talking!) And today we’ll get to the ever increasing Trade Deficit, that if it keeps growing, and I believe it will given the trade war going on, the U.S. is going to want a much cheaper dollar to deal with the Trade Deficit. 

Speaking of the Trade War… China joined officially last night, when a Chinese official said that China would retaliate VS the Trump tariffs on Chinese solar panels we talked about 10 days or so ago.  So, game on Garth!  Game on Wayne!  

There was no surprise yesterday when the Fed announced that they were leaving rates unchanged, in Janet Yellen’s last Fed meeting as the “Leader of the Pack”…  But there was surprise by me that the media made such a Big Deal out of the fact that Fed’s statement contained a comment about how they saw inflation increasing this year…  

Geez, Louise, where have these media people been? The Fed has been forecasting an increase in inflation for the last few years every chance they got!  I guess this just proves that if you just stick to your story long enough that maybe you’ll get lucky and it will come to fruition. I say that because I too think inflation is ready to take off for higher ground, finally.  

Gold bulls have also seen this inflation coming, and I think that’s a lot of the reason that Gold has rallied about 20% in the last 12 months with 12% coming in the past few months. You can’t tell me that most of that move wasn’t fueled by inflation fears…  

Gold, yesterday, saw a $6.90 gain to $1,345… This past week, Ed Steer has been reporting monstrous levels of contracts traded, with some days reaching over 500,000 contracts traded. Yesterday’s total was 365,000. There’s a lot of interest in Gold going on right now folks, and I don’t expect it to remain stuck in the current range too much longer.  I’m just saying… 

The price of Oil gained back a buck in the past 24 hours after a report showed that gasoline supplies had fallen significantly. Oil trades with a $65 handle this morning. 

The U.S. Data Cupboard had a decent day at the office yesterday, as the ADP Employment Report printed 234,000 jobs created in January, which is a much stronger number than the forecast for the BLS jobs report that will print tomorrow at 185,000…  Then the Employment Cost Index (ECI), which you would see wage increases in, was a bit weaker than in the 4th QTR, but the year-to-date figure showed a nice increase of 2.6% VS 2.2% in 2016…  The Chicago PMI (manufacturing for the region) fell a bit to 65.7 from 67.8 in December…  But these regionals don’t every really equate to what the national PMI shows, so we’ll move along here…  And then finally, the FOMC meeting announcement, which we already talked about above. 

To recap…  The Fed left rates unchanged, no surprise, but the surprise came at how the media got all juiced up over the Fed’s statement that expect inflation to grow in 2018. The Fed has been like the boy who cried wolf by calling for rising inflation for the past couple of years and then not seeing it. But Chuck thinks this year they might be right! The currencies had a bad day, with only 2 currencies gaining VS the dollar, but Chuck thinks that this will be short-lived…   

Before I head to the Big Finish today, I wanted to make one final run at bringing yourself to help the Pfennig be named the Best FX buy-side letter out there…  I’ll go back to the original request in hopes that if you procrastinated that this gets you going!    Here’s what I said on Jan 25th: I’ve been nominated for the Best of FX Award given by FX Street…

Now, not that I want to ring my own bell, or blow my own horn (my dad used to tell me there were times you needed to blow your own horn, otherwise it wouldn’t get heard) but I think it’s about time! So, here’s the deal… starting today, and don’t put this off or you’ll forget to do it later, you can go to this website https://goo.gl/forms/Z3K8LIjtr6RYz0z62

Then there are several categories just click “don’t know” if you don’t know these people. When you get down to Best Buy-side Contributor, then you’ll find my name, click on it, and continue to the end, and submit.

It’s important that each category has at least a “don’t know” or else they won’t count your vote. I’m up against some heavy hitters folks, so I know I can count on you, as you’ve always been there when I asked for something!

Let’s go vote! Wouldn’t that be something, IF my little letter from the Midwest, would be named best newsletter in FX? That would be an upset to the proportions of the NY Giants VS the Patriots…  

For What It’s Worth…  this is an article about our ever growing national debt that is quite interesting and can be found here: https://wolfstreet.com/2018/01/30/us-national-debt-will-jump-by-617-billion-in-5-months/  

Or, here’s your snippet: “While everyone is trying to figure out how to twist the new tax cut to their advantage and save some money, the U.S. Treasury Department just announced how much net new debt it will have to sell to the public through the second quarter to keep the government afloat: $617 billion.

That’s what the Treasury Department estimates will be the total amount added to publicly traded Treasury securities – or “net privately-held marketable borrowing” – through the end of the second quarter. This will be the net increase in the U.S. debt through the end of Q2. By quarter:

* During Q1, the Treasury expects to increase U.S. public debt by $441 billion. It includes estimates for “lower net cash flows.”  

Chuck Again… Yes, recall that I told you when the tax plan was announced that it would add $1.8 Trillion to our National Debt? Well, here we go! 

Currencies today 2/1/18… American Style: A$ .7995, kiwi .7344, C$ .8115, euro 1.2435, sterling 1.4243, Swiss $1.0729, … European Style: rand 11.9196, krone 7.6886, SEK 7.88, forint 249.36, koruna 20.2885, RUB 56.24, yen 109.70, sing 1.3132, HKD 7.8207, INR 63.93, China 6.2963, peso 18.61, BRL 3.1768, Dollar Index 89.07, Oil $65.24, 10-year 2.74%, Silver $17.22, Platinum $996.70, Palladium $1,023.75, and Gold… $1,342.90

 That’s it for today… Ahhh, February! One other thing about the month that I forgot was that it was a short month too! So, guys… here’s your 13-day ahead of time public service announcement… You have that many days until Valentine’s Day! I opened up the door this morning to allow some fresh air in and it’s another windy day, the ocean is very angry this morning.  Have you been able to get out at night and see the Super Moon that came up Jan 30th? I love watching the moon rise over the ocean at night…   Steely Dan takes us to the finish line today with their song: Black Cow…   from my fave Steely Dan album, Aja…  And with that it’s time to go! I hope you have a Tub Thumpin’ Thursday, and that you always Be Good To Yourself!  

Chuck Butler

January 31, 2018   

* Currencies continue their rebound

* Kiwi is best performer overnight! 

Good Day… And a Wonderful Wednesday to you! Well, I went to the dermatologist yesterday about this reaction on the left side of my face that has my left eye swollen shut. The Dermatologist looked at me and I could tell that she wanted to say Ewww! But she didn’t, she calmly gave me shot and two creams and told me to call her on Thursday with a report on progress… Well one day on the creams and no progress, but I’m a patient man. (NOT!) She asked me if the swollen left eye was causing me any problems, and I told her no, what she was looking at was a shell, and I hadn’t seen anything from the left side for 8 years now. Weezer greeted me this morning with their song: Islands In The Sun      

Well, the President gave his first State of the Union Address last night, and while I would hope that what he was saying about the country’s debt path, would come to fruition, I have to say I didn’t agree with that part of the speech.  He didn’t say anything to move the markets violently in the overnight sessions, so we’ll just move along here, these are not the droids we’re looking for…    

The currencies enjoyed a continuance of the overnight sessions’ Turnaround Tuesday, and have continued to add to their gains into this morning. The New Zealand dollar is one of the best performers overnight, and has climbed above the 74-cent handle. The Dollar Index fell below the 89 handle it had traded in for about a week, and this morning is 88.96. Recall that it wasn’t that long ago that the Dollar Index was trading above 93!  

The stronger euro is doing its job in fighting inflation, and that’s evident by looking at the Eurozone CPI data that printed this morning… Eurozone CPI (consumer inflation) in January fell year-to-date to 1.3% from 1.4% the previous month.  I can tell you right here and now, that European Central Bank (ECB) President, Draghi, is not going to take this drop in CPI sitting down… Soon, he’ll make a statement in a speech or an interview and throw the euro under a bus… That’s been his M.O. for the past couple of years as he’s tried everything under the sun and moon to get inflation to rise, and while it has, its rise has not been swift or strong enough, given the monetary policies of the ECB.   

Or maybe, maybe Draghi has a relapse to his former self, when he proclaimed that the ECB would do everything and anything to support the euro…  I doubt it, and in fact I would make a shiny quarter bet that he rues the day he said that!  

So…  Yes that was U.S. Treasury Sec. Mnuchin, talking yesterday, and trying to explain what he really meant when he talked about how a weaker dollar was good for the U.S. right now…  It was as if he thought about it and then said, “Oops, did I say that out loud about the dollar?” Because he doesn’t want any part of a discussion about the dollar now…  I find all these gyrations with whether or not the U.S. administration is for a weak dollar or not, pretty interesting, and funny at times!  

The price of Oil climbed back over $64 in the past 24 hours, and while Gold did lose $1.80 yesterday, it’s up over $8 this morning, and the euro is stronger this morning, so once again we have all three anti-dollar assets moving against the dollar. Ganging up on the dollar if you will, which what it takes to get the dollar moving downward, because we’re still talking about the reserve currency of the world.  It’s losing its grip on that title, but for now, holds it proudly, and it takes a village to bring it down. 

Well, there I was reading my friend, and publishing guru, Bill Bonner, yesterday and he had some interesting things to say about the path of debt in this country… Let’s listen in to Bill who was writing his letter: Bill Bonner’s Diary that can be found here: www.bonnerandpartners.com So, with no further ado, here’s Bill!  “Starting next year, federal deficits are expected to reach over $1 trillion a year – with no emergency anywhere in sight.

So far in this century, the feds’ debt has been growing eight times faster than GDP.

Total government debt is already programmed to hit $30 trillion within 10 years… but will more likely hit $40 trillion when deficits explode in the next recession.”   

Thanks Bill, I talk a lot about how bad our country’s debt is but sometimes people need to hear from someone else!  And here’s something else that might seal the deal on the new weak dollar trend… Long ago, I learned that a country with  a Current Account deficit that was more than 2.5% of GDP, was in for a currency crisis, or major selloff… Guess where ours is now? More than 4%… Think about that and get back to me!  I’m just saying… 

I told you yesterday that today’s U.S. Data Cupboard was stocked with data but that we needed to let tomorrow be, but tomorrow is today, and so here we go..  Oh! But first I’ll tell you that the Consumer Confidence Index for January rose from 123.1 in December to 125.4 in Jan.  Crazy, folks, just plain crazy if you ask me!   

Today’s Cupboard has the ADP Employment Report for January, and The Employment Cost Index (ECI) , then some secondary data will lead us to this afternoon, when the Fed will end their two-day meeting, and after putting away all the board games and playing cards, they will tell us they left rates unchanged…  But they needed two days to make that decision, that was already made before the meeting began! 

To recap… The Fed winds up their two-day meeting today, the currencies have continued their rebound after the Monday rally by the dollar. Gold lost a whopping $1.80 yesterday but is up $8 in the early morning trading today. Chuck doesn’t agree with POTUS on the direction of debt, and brought his friend, Bill Bonner into the discussion on debt.  And U.S. Treasury Sec. Mnuchin, is trying to steer clear of his comments last week about the weak dollar…   

For What It’s Worth…. I read this yesterday and thought it to be FWIW worthy, and then Ed Steer highlighted in his letter this morning, and that confirmed my thought!  It’s an article about how the Perth Mint is going to issue a Gold Backed digital coin and how it could hurt the Gold ETF market, and can be found here: http://www.afr.com/brand/chanticleer/perth-mints-digital-gold-threatens-122bn-in-goldbacked-etfs-20180130-h0qeu9   

Or, here’s your snippet: “The Perth Mint’s release of digital gold certificates for trading, holding, and transferring physical gold could have profound consequences for the $US98 billion ($122.5 billion) in gold-backed exchange traded funds.

The technology underpinning the digital gold certificates could have other uses such as the clearing and settlement of equities.

At this stage the digitisation of gold ownership by the Perth Mint is available only to institutional investors, such as banks, which can then offer it to retail customers.”  

Chuck Again…. Everybody wants in on this cryptocurrency mania, and even a conservative institution like the Perth Mint has succumbed to the pressure of being like everybody else! UGH!   

Currencies Today 1/31/18… American Style: A$ .8107, kiwi .7405, C$ .8145, euro 1.2450, sterling 1.4155, Swiss $1.0728, … European Style: rand 11.8211, krone 7.6915, SEK 7.8435, forint 249.43, zloty 3.3318, koruna 20.3220, RUB 56.22, yen 108.78, sing 1.3075, HKD 7.8201, INR 63.57, China 6.3265, peso 18.59, BRL 3.1653, Dollar Index 88.96, Oil $64.17, 10-year 2.71%, Silver $17.21, Platinum $1,003.98, Palladium $1,061.95, and Gold… $1,346.10

That’s it for today… It was another very windy day here yesterday, but it’s supposed to be better today, YAY! I had experienced two consecutive nights of decent sleep until last night, that was another story… UGH!  Well, this is the last day of January, and it couldn’t get over fast enough for me and our Little Christine, who told me it was her 2nd least favorite month, behind November.  I guess I shouldn’t say “our” any longer since she doesn’t work for me any longer! So, from now on, I won’t say that any longer…  The Jefferson Starship takes us to the finish line today with their song (and my fave Jefferson Starship song): Miracles… And with that I hope you have a Wonderful Wednesday, and Be Good To Yourself! 

Chuck Butler

 

January 30, 2018

* Currencies go on a Roller Coaster ride!

* Fed’s FOMC begins two day meeting today

    

Good Day… And a Tom Terrific Tuesday to you! I’m feeling much better, although I don’t look like it… The tumor in my jaw continues to grow, and now I’ve had allergic reaction to something and the left side of my face is all swollen and red… UGH! What I sight to see, eh? I had dinner last night, my first real meal since last Wednesday, with our building friends, Jack & Lorraine, and hosts, Gus and Vivi… Vivi and Gus are both from Greece, and she is an excellent cook, OMG! Robin Trower greets me this morning with his band’s song: Bridge of Sighs…     

Well, things didn’t exactly go the way I thought they would yesterday, as the dollar got a boost from the dollar bugs, who saw that the writing was about to go up on the wall for a huge dollar decline. It sure wasn’t the data that did the trick for the dollar yesterday, and Personal Income and Spending both increased 0.4%, and Core Inflation only gained 0.2% putting the YTD increase at 1.5%…   I’ve got something for you in the FWIW section today about Consumer Spending, that I think you’ll want to read, so stay with me here…   

The good news this morning is that all the dollar buying yesterday didn’t change things much except for 1 day, as the currencies have fought back in the overnight sessions to trade this morning about in the same place they were yesterday morning… So, a roller coaster ride for sure, but we’re back at the launching pad, and ready to get off this ride…  

And Gold lost $9.40 yesterday, but has gained back nearly $4 of that loss in the early morning trading today.  The price of Oil slipped below $66 in the past 24 hours, and hasn’t seen any reversal of any kind. Apparently, according to Bloomberg, that is, the large reserve withdrawals have ended, and that should be the end of Oil’s rise in price. That may be the case, but I would have to think that if the dollar is headed for an extended stay in the woodshed like I think it will do, then the price of Oil will rally, just on the dollar weakness. 

Well…  last week I highlighted my good friend, the Retirementor, Dennis Miller’s newsletter that was an interview with me… I also invited you to visit his website, and sign up for his free newsletter.  But, I digress here… What I wanted to point out is that in the interview I talked about Treasuries, let’s listen in to what I actually said…   

What could cause a Minsky Moment in bonds? Well, think about this for a minute. The U.S. Fed has been a very large bond buyer since the first round of Quantitative Easing began in 2009. They bought boatloads of both U.S. Treasury bonds and Mortgage-backed bonds. Look at their balance sheet, it increased five-fold to over $4.6 Trillion in 2017. 

The Fed announced a “tapering” in 2015, but they kept buying Treasuries to replace bonds that matured. Late last year they announced that they were going to stop buying bonds altogether. No replacement bonds, no auction window buying.

The question was… “Who is going to take the Fed’s place”? Well, there has been no one, to date, and the 10-year Treasury yield has risen from 2.05% on Sept. 8, 2017, to 2.65% on Jan. 18, 2018. That’s just the beginning, in my opinion!

The Fed may not be the only “no show” at the auction window. China is considering slowing down their Treasury purchases or halting them altogether! Guess who else has been slowing down their Treasury purchases? Saudi Arabia, and Russia… Oh-no! Say it ain’t so, Joe!
This is the Minsky Moment for bonds…no big Central Bank buying, will drive yields much higher. It could easily be followed with another Minsky Moment for stocks. – Chuck Butler, www.milleronthemoney.com   

And then this morning I saw this head of interest rate strategy at Wells Fargo saying the same thing I said last week! Let’s listen in to what he had to say… “Michael Schumacher’s chief concern right now: Who’s going to buy all those extra Treasury notes?

“They [people] are worried about Treasury issuance going up, up, up. You could see an increase in 2018 of 50 percent – maybe more versus last year. That’s got a lot of people very concerned, myself included,” he said recently on CNBC’s “Futures Now.”

He anticipates the Treasury Department will likely announce within days a “pretty significant change” in the way it issues bonds. It comes just as the Fed is shrinking its balance sheet. With less demand coming from the Fed, a fire sale of sorts would increase supply and emerge as the major catalyst causing yields to jump.”   You can find this person’s viewpoint on interest rates further, by going here: https://www.cnbc.com/2018/01/26/treasury-market-fire-sale-could-hurt-bonds-wells-fargo-warns.html      

OK, enough on Treasuries, and I think you got the point here…  

The Fed’s FOMC begin a two-day meeting tomorrow. Time to get out the board games and playing cards… HA!  They will wrap it all up around 1 pm on Wednesday with no rate change… Two days wasted… Or, maybe they’ll discuss the fact that 4th QTR GDP came in at 2.6% instead of the preliminary 3.2% that everyone was gushing about, except me, who knew it would be revised downward…  And the great economist David Rosenberg had this to say about GDP… “The savings rate fell from 3.3% to 2.6%. If it had stayed the same, real PCE would have been 0.8% (annualized) instead of 3.8% and GDP would have been 0.6% instead of 2.6%.”   

WOW! But to me 0.6% sounds more reasonable than 3.2%!  I’m just saying…  

Earlier this morning the Eurozone printed some data, leading off with their 4th QTR GDP figure, which was 2.6%, the same as the 3rd QTR. And a slew of Confidence reports for January, either saw a small slippage or a flat print from the December. So, nothing really to be concerned about here, and I keep my contention that the Eurozone has outperformed the U.S. with regards to GDP the last couple of years. Because if the GDP here in the U.S. was calculated correctly without “adjustments” it would be much lower…   

Speaking of outperforming the U.S. economy… Longtime reader, Bob, sent me this: from the RT.com: Russian economy under Putin: quality of life tripled, and foreign debt fell by 75%!   That’s pretty impressive, and no I’m not a cheerleader for Russia! It’s just that when you see an economy, especially one under the strains of economic sanctions, overcome those obstacles I believe it should be pointed out…  

The problem the Russian ruble has right now, is that most of the world isn’t a fan… The conflict with Ukraine continues, and as long as that’s the case, the ruble will have to look to the price of Oil for its support.  

The U.S. Data Cupboard today will have the Case/Shiller Home Price Index for November, and we’ll see the color of the stupid Consumer Confidence Index for this month….  Tomorrow’s Cupboard is stocked to the top row with data, but that’s tomorrow, and we need to just let tomorrow be… 

To Recap…. The dollar got bought by the bushel full yesterday, but then got sold by the same amount in the overnight sessions, and the currencies are trading in about the same places they were yesterday morning.  Chuck spends an inordinate amount of time on Treasuries this morning. The Fed meets this week, and Gold and Oil both saw slippage yesterday.   

For What It’s Worth… Well, I built this one up, so I hope it doesn’t disappoint… But recall when I kept saying that the U.S. consumer was tapped out? But then along came credit cards… You can find this article here: https://www.zerohedge.com/news/2018-01-29/us-savings-rate-hits-crisis-lows-amid-soaring-credit-card-debt    

Or, here’s your snippet: “Amid soaring credit card use, the tumble in Americans’ savings rate continued in December with a modestly better than expected 0.4% MoM rise in incomes and as expected 0.4% rise in spending (but upward revisions in spending).

For the inflation waters, the Fed’s favorite price indicator, the Core PCE, saw a one-tenth gain to 0.2%, matching consensus, and was up 1.5% Y/Y. Income is growing at 4.1% YoY – the most since Nov 2015 – but spending continues to outpace that growth.

What is odd is that despite the rise in incomes, Americans continue to spend more than they make, which means that the U.S. savings rate continues to slide, and is now not only the lowest since the crisis, but is the lowest since September 2005.

Recall the striking Gluskin Sheff chart we presented a month ago, which showed that 13-week annualized credit card balances in the U.S. had gone “completely vertical” in the last few months of 2017. We now know why: American consumer are officially tapped out.”  

Chuck Again…  It’s nice to see a great firm like Gluskin Sheff come around to my way of thinking!   

Currencies today 1/30/18… American Style: A$ .8094, kiwi .7334, C$ .8115, euro 1.2420, sterling 1.4091, Swiss $1.0715, … European Style: rand 11.8923, krone 7.7060, SEK 7.8732, forint 249.48, zloty 3.3386, koruna 20.3786, RUB 56.29, yen 108.58, sing 1.3103, HKD 7.8187, INR 63.62, China 6.3289, peso 18.62, BRL 3.1569, Dollar Index 89.12, Oil $65.10, 10yr 2.68%, Silver $17.23, Platinum $1,001.95, Palladium $1,086.24, and Gold… $1,348.80  

That’s it for today…  Day 3 of being all by myself was non-eventful, I did finally turn some lights on, and go outside…  Progress… But this allergic reaction on the left side of my face is very ugly, and my left eye is swollen shut, but I don’t see out of that eye so no biggie as far as seeing is concerned. I’m just thankful that it’s not on the right side of my face! I do believe that I totally missed Happy Birthday notes to two of my former colleagues… Our Little Christine, and Chris Gaffney. I apologize for letting those days get past me…  My TV lost its volume, and went silent yesterday, I was watching Robin Meade, and listening to her speak one minute, and the next minute there was nothing! So, I’ve got to figure that one out today! Alrighty then.. The Buckinghams take us to the finish line today with their song: Mercy, Mercy, Mercy…  I hope you have a Tom Terrific Tuesday, and Be Good To Yourself!   

Chuck Butler

January 29, 2018   

* Dollar books 7th Week of losses!

* But fights back in the overnight markets… 

Good Day…. And a Marvelous Monday to you! I’ve had a setback after my infusion on Friday, and for the most part, I’ve lived like a hermit all bunkered down with the lights off, and wrapped in blankets.  But, i woke up this morning, and feel much better, so here I am! I guess that because it had been a month since my last infusion, it hit me like a ton of bricks! The Righteous Brothers greet me this morning with their song: Just Once In My Life…  I always love listening to the voice of Bill Medley…  

The dollar finished the week last week with its 7th consecutive week with losses… But there’s been all kinds of gyrations last night, but first let’s review what happened on Friday. One day we had U.S. Treasury Sec. Mnuchin diss the dollar, then the next day, European Central Bank (ECB) President, Mario Draghi, decided to take a shot at Mnuchin (not in name, but you could tell who he was talking about), and the euro slipped a bit, but recovered on the day… Then we had U.S. President, Trump, say the markets misunderstood the Mnuchin comments, and that the U.S. does want a strong dollar… Back and forth… a real you know what contest! In the end on Friday afternoon, the euro had slipped about ¼-cent, but remained above 1.24.

But I have to come back to the you know what contest… These are things that currency traders don’t like, because they are filled with unknowns.. And, on Friday, these currency traders seem to be on board with the Mnuchin statement, and not what Draghi or Trump had to say! But like I said above, the currencies have gone through some gyrations in the overnight markets, and the fact that this week is a week that has a plethora of data here in the U.S. and the possibility of more policy changes, had the Asian traders intrigued with the dollar.  

I’m not that concerned with the what I would call profit taking in the currencies and carrying over to the metals. I think this dollar buying will be short-lived and by the end of the week, the dollar will be booking its 8th consecutive week of losses.  

Why do I think that way, I hear you asking? Well, if the economic data this week is anything like the data we saw on Friday, where Durable Goods Orders beat the expectations, but Capital Goods Order, when you take out aircraft and defense spending, was negative. I don’t know how many times I’ve said this in the past, but it doesn’t matter, because I’m going to say it again, Capital expenditures are the life blood of a growing economy, and without these expenditures, the economy will just muddle along. 

And the Proof is in the pudding, as 4th QTR GDP here in the U.S. fell from the preliminary print of 3.2% to 2.6%… I do believe that when the 3.2% figure printed I said hogwash, and that it would be adjusted downward…  So, I might as well tell you what’s on the economic data print docket this week…    First, today, we’ll see two of my faves, Personal Income and Spending. I don’t think that either of these are going to give the dollar bugs any reason to hold their dollars.  Then we meander through the week with some housing data, and then on Friday, Groundhog Day, we’ll see the BLS’s version of an employment reports in the Jobs Jamboree, and more importantly, we’ll see the color of the latest Factory Orders, which will most likely be weaker than the previous month… 

So, nothing here to give the dollar any love, as I see it…  And that’s why I believe we’ll see the dollar end the week with its 8th week of losses…  Any questions?   HA!  

I read this morning, a report that talked about how with the Aussie dollar’s (A$) surge, that the bears are showing up, as they think the Reserve Bank of Australia (RBA) will do something to halt this surge… There hasn’t been any words from the RBA in recent days, and so I’m not sure why the Bears are so sure this is going to happen?  

The pound sterling had really surged last week especially after their most recent GDP report showed that the U.K. economy had grown faster than expected, but then the trap door was sprung on the pound, and soon the currency was licking its wounds… No matter how strong this currency gets, I’m still not convinced that the BREXIT goings on, aren’t going to weigh heavily on the currency.  Again, BREXIT is an unknown…  

The price of Oil jumped late last week and trades with a $66 handle this morning.  Last week we had all three anti-dollar assets trading with a flyer, but this morning things aren’t looking up for these three… The euro is down, the price of Oil has slipped, and Gold is down $5 in the early morning trading… 

Speaking of Gold remember the “great Gold price reset” that I told you about months ago? Well, it never occurred the way James Rickards explained it would, but there has been more and more analysts talking about this still happening… So, if that’s the case, then these current prices whatever, they are, represent excellent buying opportunities… And if they are all full of baloney, I still believe the buying of Gold right now is a prudent thing to do…  I’m just saying!   

OK, we’ve talked about the direction of the dollar, the anti-dollar assets, and the economic data this week, that’s just about all I have for you today…  But I do believe that the FWIW article will be quite interesting for you, so don’t hit exit just yet, stay with me here…  

To recap…  The dollar ended last week with its 7th consecutive week of losses, but has fought back in the overnight trading, not a strong comeback, as the euro is still above 1.24, and the A$ is trading at 81-cents… It’s big data week here in the U.S. with a Jobs Jamboree taking place on Groundhog Day, which happens to be one of my fave movies!  U.S. 4th QTR GDP was revised downward from 3.2% to 2.6%… Remember all the hoopla over the 3.2% print months ago? Well, where are all those partiers now?    

For What It’s Worth…  This was sent to me be the good folks at GATA, and it appeared on the Reuters sight. It’s about the fines that some bullion dealers will be paying for “spoofing” and it can be found here: https://www.reuters.com/article/us-usa-cftc-enforcement-exclusive/exclus…   

Or, here’s your snippet: “The U.S. derivatives regulator is set to announce it has fined European lenders UBS, HSBC, and Deutsche Bank millions of dollars each for so-called “spoofing” and manipulation in the U.S. futures market, three people with direct knowledge of the matter told Reuters.

The enforcement action by the Commodity Futures Trading Commission (CFTC) is the result of a multi-agency investigation that also involves the Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI), the people said. 

The fines for UBS and Deutsche Bank will be upward of ten million, while the fine for HSBC will be slightly less than that, the people said, without providing exact figures. 

Spokesmen for all three banks declined to comment.” 

Chuck Again…  In case you’ve forgotten what “spoofing is”…Spoofing” is an illegal type of market manipulation that works like bluffing: A trader places big orders for stocks, bonds or futures to get others to think the price is going up or down. Then, in the blink of an eye, the spoofer cancels those orders and puts in opposite orders to take advantage of those traders.  Dirty rotten scoundrels and again, no one goes to jail…   

Currencies today 1/29/18… American Style: A$ .8101, kiwi .7334, C$ .8102, euro 1.2420, sterling 1.4105, Swiss $1.0688, … European Style: rand 11.9592, krone 7.6943, SEK 7.8816, forint 249.08, zloty 3.3855, koruna 20.3668, RUB 56.20, yen 108.67, sing 1.3090, HKD 7.8182, INR 63.51, China 6.3184, peso 18.52, BRL 3.1514, Dollar Index 89.14, Oil $66.14, 10yr 2.72%. Silver $17.36, Platinum $1,011.90, Palladium $1,088.23, and Gold… $1,351.80     

That’s it for today…  I hope you had a great weekend. I’m here all alone, as my beautiful bride went home to visit her grandbabies! So, that made it easy for me to sleep most of the day yesterday, without any noise making going on…  I had some grapes yesterday, that’s it! I’ve got some good news though! Since I was admitted to the hospital last March, I’ve lost over 100 lbs! WOW! Now, if I could lose 100 more, I would be back to playing shape! I’m still HUGE folks so no accolades needed… But remember last year when I was on those steroids, and I kept saying that I felt like the Michelin Man? Last year was not a good year for me in many ways, but mostly health wise…  I got word about 10 days ago, that my former colleague and friend, Mike Meyer, was moving on to a new job… Good luck Mike! I hired Mike 14 years ago, and he was a young man out of college. 14 years is a long time!   It was always Chuck in the office first and then Mike each day and we enjoyed that time together… Oh well, people move on… Shoot Rudy, I did it too!   Blackfoot  The Easybeats take us to the finish line today with their great 60’s song: Friday On My Mind…  Don’t know that one? YOU TUBE it… You’ll love the song!  And with that, it’s time to go! I hope you have a Marvelous Monday and Be Good To Yourself!  

Chuck Butler

January 25, 2018  

* A Two day thumping of the dollar!

* Gold’s momentum is something to see! 

Good Day… And a Tub Thumpin’ Thursday to you ! It certainly is a Tub Thumpin’ Day for the currencies and metals, as they attempt to add to their gains yesterday. More on that and other things as we go through the last Pfennig of this week. I slept like a baby again last night… Up every couple of hours. UGH! Eddie Money greets me this morning with his song that the dollar is singing to Treasury Sec. Mnuchin this morning… Baby Hold On To Me…    

U.S. Treasury Sec. Mnuchin was in Davos for the “economic summit” that will be attended by the world’s elite economic and finance ministers, and other “elites”…  President Trump will make an appearance at the summit. So, Mnuchin was in Davos and decided to diss the dollar, by saying, “A weak dollar is good for the U.S. Trade”…  Currency traders heard that, and decided that the long standing joke about “a strong dollar is in the best interests of the U.S.” had ended. 

And the dollar got sold like funnel cakes at a State Fair once again yesterday. Tuesday was Trump announces tariffs on solar panels day for the currencies, and yesterday was Mnuchin disses the dollar day for the currencies.  The euro has gained 2-cents this week and trades with a 1.24 handle this morning. The Aussie dollar (A$) which worked so diligently to get to 80-cents, went through the 80-cent handle like a hot knife goes through butter, and now trades with a 81-cent handle. And the beat goes on for the rest of the currencies.  One currency that I look at each day and wonder how in the heck it gets so much love, pound sterling, is really moving higher and trades with a 1.43 handle this morning! 

Of course, I scratch my balding head every time I see Japanese yen drop another figure, which it did yesterday and trades this morning with a 1.08 handle…  But this is what happens when a currency trend is in place, and I’ve long called for the new weak dollar trend to have begun, and now it appears that it is going through the stage where it doesn’t matter what the fundamentals are of a foreign currency, it’s going to rally VS the dollar. 

In my weekly DTL letter (dowtheoryletters.com) I reminded the readers that I told them last June that the sentiment toward the dollar / euro had shifted and it appeared to me that a new weak dollar trend was beginning.. The euro at that time was 1.09… Don’t get upset, i told you dear Pfennig reader the same thing!  

Goldman Sachs, aka Lola, issued a statement calling for the euro to climb to 1.30 by year-end…  I think they’ll be going back and erasing that figure and changing it to something higher by year-end, but that’s just me, and my opinion, which could be wrong! 

The European Central Bank (ECB) is meeting while my fat fingers fly across the keyboard, but I doubt anything good comes out of the meeting…  And actually, I’m kind of scared of what ECB president, Mario Draghi, might say, as he likes to use these occasions as an opportunity to throw the euro under a bus, to put a halt to its rise…  Maybe, just maybe, he sees the weak dollar trend in place and decides to not fight city hall on this one…  I can send that thought telepathically to Draghi, so I’ll step away for a minute to do that… Be back in a Sec.! 

Ok, that telepathic transmission took a lot out of me, so I had better get going and head to the Big Finish!  But first, Gold sure had a great day yesterday, gaining $16.80 on the day to close at $1,357.70, and is already being bought this morning in the early trading, and is up to $1,363.70! The drop in the Dollar Index to 89.12 has a lot to with this most recent rise in the price of Gold, but add to that, the announcement by the World Gold Council (WGC) that Russia now has an equal amount of physical Gold as China.. (we all know that the WGC doesn’t have a clue as to how much physical Gold China really has, but we’ll leave this alone for now)  And there’s a story from Australia, who used to be the number one Gold producer in the world, before China put their efforts into mining the shiny metal, and the story talks about a merger between Australia and Indonesia for Gold products… 

All-in-all everything is coming up roses for Gold these past couple of days, and the momentum is beginning to get rolling for the shiny metal, as long as the “boys in the band” remain on the sidelines…  Remember how strong the momentum for Gold was in the early days of it’s move from around $260 to $1,000 and then on to its record high of $1,917? I do, and around $500 I realized what was going on, and began to buy…  I had been a buyer of Silver going back to the 80’s…  

The U.S. Data Cupboard had the Existing Home Sales yesterday for December, and the result wasn’t a good one, with home sales falling 3.6% from November.  I’m thinking that this is a sign that the prices of the existing homes for sale are too high, and that’s not a good thing, folks, as it’s what started the housing meltdown in 2007-08. I’m just saying…  

To recap…  It was a Wonderful Wednesday for the currencies and metals yesterday, as they added to their gains from Tuesday, after U.S. Treasury Sec. Mnuchin dissed the dollar in Davos. Currency traders took this as a new monetary policy, and continued to sell dollars like funnel cakes at a State Fair. And Gold is gaining momentum… I’m just saying…  The ECB is meeting right now… hopefully they leave the euro’s rise alone…  

Before we head to the Big Finish today…  Hey folks! I have some exciting news to share with you today… I’ve been nominated for the Best of FX Award given by FX Street… Now, not that I want to ring my own bell, or blow my own horn (my dad used to tell me there were times you needed to blow your own horn, otherwise it wouldn’t get heard) but I think it’s about time! So, here’s the deal… starting today, and don’t put this off or you’ll forget to do it later, you can go to this website https://goo.gl/forms/Z3K8LIjtr6RYz0z62

Then there are several categories just click “don’t know” if you don’t know these people. When you get down to Best Buy-side Contributor, then you’ll find my name, click on it, and continue to the end, and submit.

It’s important that each category has at least a “don’t know” or else they won’t count your vote. I’m up against some heavy hitters folks, so I know I can count on you, as you’ve always been there when I asked for something!

Let’s go vote! Wouldn’t that be something, IF my little letter from the Midwest, would be named best newsletter in FX?  That would be an upset to the proportions of the NY Giants VS the Patriots…    

For What it’s Worth…  My good friend, the Retirementor, Dennis Miller, interviewed yours truly for his latest letter… There are some thoughts there from me, from the Butler Patio, for sure! So, his new letter will be posted today, so if it’s not up when you click this link, just go back to it later… www.milleronthemoney.com   

Or, here’s your snippet: “DENNIS: I’ve noticed a lot of ads encouraging people to refinance their homes while rates are still low, suggesting they can take some of the equity and pay off their credit cards. That only works if they cut up the damn credit cards. If millions of consumers refinance, basically taking equity out of their home, what impact will that have?

CHUCK: In 2005, I told my readers that consumers were using their houses like ATM machines, taking equity out of their homes to buy SUV’s, big screen TV’s, and fancy clothes. That was all fine until the house values began to fall, and now the consumers owed more on their house than it was worth.

Never in a million years would I have thought that we would again fall for that idea that house values will never fall, especially so soon after the last crisis and collapse. But here we are again…. And it’s all going to end up just like the last crisis, but this time, it will be worse, because we never cleaned out the excesses of the last boom period.” 

Chuck again… I really think that Dennis does a fabulous job of helping retirees or people who are thinking about retiring in the near future, so if that’s you, what are you waiting for? Sign up at his website before you forget… 

Currencies today 1/25/18… American Style: A$ .8105, kiwi .7377, C$ .8127, euro 1.2445, sterling 1.43,  Swiss $1.0623, …. European Style: rand 11.88, krone 7.7144, SEK 7.8864, forint 248.64, zloty 3.3293, koruna 20.3984, RUB 56.29, yen 108.88, sing 1.3053, HKD 7.8165, INR 63.40, China 6.3793, peso 18.48, BRL 3.2046, Dollar Index 89.12, Oil $66.09, 10-year 2.64%, Silver $17.55, Platinum $1,022.14, Palladium $1,103.77, and Gold… $1,363.70   

That’s it for today and tomorrow, recall I’m heading to the infusion center bright and early tomorrow, so no Pfennig on Friday…  Tomorrow is my youngest sister’s birthday… Happy Birthday Joanie! My beloved Missouri Tigers took one on the chin last night losing to the high flying Auburn team. I don’t like that we have to wait an extra week for the Super Bowl, not that I’ll make a Big Deal out of watching it this year any way, but still, two weeks? So, I hope you have things to do, people to see, and so on planned this weekend, I don’t! Oh, poor, poor, pitiful me, as Linda Ronstadt once sang…  Paul Young takes us to the finish line today with his song: Every Time You Go Away…  And with that I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow! And don’t forget to Be Good To Yourself!  

Chuck Butler

January 24, 2018

* Currencies take dollar to the woodshed!

* And metals keep the door to the woodshed shut!  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

For What It’s Worth… You would think that with all that’s going on there would be a plethora of worthy FWIW articles out there this morning, but that’s not the case. But I did find this ditty on Zerohedge.com and it’s about the Fed being in a pickle, and can be found here: https://www.zerohedge.com/news/2018-01-21/nomi-prins-fed-scared-death-crashing-global-financial-system   

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

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

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

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

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

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

Chuck Butler

Chuck Butler’s: A Pfennig For Your Thoughts  

January 23, 2018

* Kicking the can down the road… again!

* Revisiting 2004, and 2005…  

Good Day… And a Tom Terrific Tuesday to you! I’m just so-so this morning, as I had a rough night of trying to sleep more than 2 hours at a time. UGH! So, I’m getting started on the letter a little later than usual today, so I apologize up front and center for the tardiness, and what will most likely be the shortness of the letter today. The early rendition of the band Journey (pre Steve Perry) greets me this morning with their song: Of A Lifetime…   

Well, the government shutdown didn’t last too long now did it? And guess what got the government spending money we don’t have going again… Yes, just like I said would happen… The lawmakers would find a way to kick the can down the road, and promise to work on this spending impasse diligently during those next couple of weeks… The new and improved deadline is Feb 8… 

The news of a new and improved extension/ deadline didn’t rattle the cages of the currency traders, and the currencies continued to drift about aimlessly. The euro slipped a little, so did the Aussie dollar (A$), but the New Zealand dollar / kiwi and Sing dollar gained a little.. The price of Oil gained a few shekels on the day, but remains trading with a $63 handle this morning. 

Do you recall 2005? Better yet, do you recall 2004? Well, I’m going to talk about both of those years so grab a cup of Joe, and let’s get to discussing these years..   First, I can’t begin to tell you how I keep having these feelings of Deja vu. In 2004, the Fed was tightening their Fed Funds rates, just like they are now, but the rest of the world was growing too, and so the U.S. debt took front stage and the dollar got whacked all year long… 

Fast forward to 2018… The Fed, as we just discussed, is hiking rates, but the rest of the globe is growing faster than the U.S. Shoot Rudy, the Eurozone the region everyone likes to diss, has out paced the U.S. for two years running. And I reported last week that China’s GDP is back to growing. The question remains, like the rest of the year, Does the dollar get whacked the rest of this year, like it did in 2004?  

If you asked me, and I don’t know if you did or not, but since this is my letter you’re going to hear me now, and probably listen to me later… I believe that all things being equal, the dollar is in for a ride on the slippery slope…   But there’s 2005, and this could throw a spanner in the works of this dollar sell off…  

In 2005, the U.S. implemented a tax amnesty for Corporations doing business overseas to repatriate their earnings to dollars an bring them home at a reduce tax rate… This brought back Billions and propped the dollar up for the whole year, but when the tax amnesty window closed on 12/31/2005, the dollar went right back to the underlying weak trend in 2006.  

Apple has already announced that they were going to repatriate hundreds of Billions… But the dollar hardly budged… So the question here is: Will this current tax amnesty prop up the dollar like it did in 2005? Well, given what we know about 2005, there’s certainly that possibility…  And that leaves us with battling themes… 

In one corner we have the results of 2004, and in the other corner we have the results of 2005, please come to the center of the ring and shake hands before you begin this brawl.  I think this brawl will yield conflicting results for the dollar this year… While I believe the dollar will lose ground in 2018, I also see periods of dollar strength sprinkled in which astute currency buyers will see them for what they are, which is an opportunity to buy at cheaper levels! 

The price of Gold gained a whopping $2.50 yesterday, but it had all kinds of gyrations during the trading session, that had the shiny metal stronger and then weaker, and stronger, and so on, and when the dust settled on the day, Gold was $2.50 higher… Gold is up $4.70 in the early morning trading today, but we all know what can happen to those early morning gains once the “boys in the band” arrive at their desks, now don’t we?

Sometimes, the “boys in the band” just let it go, and see where it lands, so let’s hope for some of that today! 

The U.S. Data Cupboard is empty today, so no data to speak of, and like I said yesterday, we won’t see real economic data until Friday. The dollar, Gold and Oil are all trading on their own merits until then… Would somebody get ahold of the steering wheel and stop this drifting by the currencies?   

To recap… The lawmakers agreed to kick the can down the road again yesterday, to stop the government shutdown. Feb 8 is the new and improved deadline… Doofusses and clowns… no, I’m calling the lawmakers names, I’m just saying that Doofusses and clowns could have figured this all out months ago…  put your petty differences aside, and your personal agendas and do what’s right for the country. Now does that seem so difficult to do?  The currencies are drifting about aimlessly, Gold gained just $2.50 yesterday and the price of Oil inched higher.  

For What It’s Worth…  This was sent to me by dear reader, Bob, who knows how intrigued I am with the economic growth in Russia. This is about the ruble’s readiness for global expansion, and can be found here:https://www.rt.com/business/416636-russia-ruble-dollar-dependence/   

Or, here’s your snippet: “The ruble can play a greater role in the former Soviet republics, according to the Central Bank of Russia. The Russian currency is seeking to compete with the US dollar in trade with the Eurasian Economic Union and CIS countries.

The country’s central bank says by 2035 the ruble can expand in the EEU, a trade and political bloc uniting Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan. It can also develop in the Commonwealth of Independent States (CIS), the bank says. 

The BRICS countries are also among the key markets for promoting the ruble. In Russian-Indian trade, the share of foreign currencies, mostly the dollar, has dropped from 96 to 80 percent. Moscow and Beijing have increased the share of ruble-yuan trade from 13 to 16 percent in the matter of a year.”  

Chuck Again…  Who’da thunk it, right? Russia, the country with all the economic sanctions placed on it, is ignoring the sanctions and keeping the pedal to the metal so to speak…   

Currencies today 1/23/18… American Style: A$ .7964, kiwi .7316, C$ .8010, euro 1.2250, sterling 1.3945, Swiss $1.0406, … European Style: rand 12.1369, krone 7.8775, SEK 8.0397, forint 252.86, zloty 3.4065, koruna 20.7378, RUB 56.56, yen 110.40, sing 1.3194, HKD 7.8175, INR 63.74, China 6.4017, peso 18.82, BRL 3.1970, Dollar Index 90.43, Oil $63.75, 1oyr 2.62%, Silver $16.96, Platinum $991.15, Palladium $1,090.45, and Gold… $1,336.60   

That’s it for today.. Here’s proof that you can’t please all the people all the time… I received about the same number of emails from those agreeing with me about being tired of the Patriots, as I did from those calling me names because I don’t like their beloved Patriots… Two Big Games will be taking place in St. Louis tonight… Our Blues will attempt to reverse that ugly loss Saturday night, and the SLU Billikens face VCU… Kathy & Chuck will meet the lady that found this beautiful location on the beach for us 6 years ago, for lunch today. Sharon has been a Pfennig reader for a number of years now, and we always enjoy meeting up with her!  And with that, Jethro Tull takes us to the finish line today with their song: Locomotive Breath…  Now go out and have a Tom Terrific Tuesday, and be good to yourself!  

Chuck Butler

 

Chuck Butler’s: A Pfennig For Your Thoughts 

January 22, 2018

* Gold can’t take advantage of Gov’t shutdown!

* ECB & BOJ meet this week

Good Day… And a Marvelous Monday to you! Well, winter is over here, thank goodness, and we can get back to warmer days with sun filled skies, and all that goes with spring in the deep south! The U.S. government is in shutdown right now, but has worked throughout the weekend to end this impasse that they’ve arrived at, and so, they’ll take another vote today to see if anyone has changed their minds…  The Gov’t has “emergency funds” to keep things going for now, but when you’re fighting a war you certainly don’t want to not make your payroll to the military!   Uriah Heep greets me this morning with their song: Stealin’   

There are some great stories about the American revolution and how the U.S. military almost quit, because they weren’t being paid, but along came some funding from France of all places, who would have loved to see the Brits lose, and well, you know the rest of the story…  

Well, what else is going on besides all this stuff with the lawmakers not being able to come to an agreement? Nothing comes close to the magnitude of a U.S. government shutdown folks… With the government having it tentacles extended in just about everything these days, it stands to reason that the shutdown will affect just about everything… 

One of the assets that has NOT taken advantage of this government shutdown is Gold… I would think, that Gold would be high stepping it to the Sly Stone song, I want take you higher! But Gold was only able to add $4.20 on Friday, and is up a couple bucks in the early trading today.  The “boys in the band” have made certain that Gold doesn’t get away from them, as another 224,000 contracts traded in Gold on Friday.  I hope I’m still on the right side of the daisies on the day that the “boys in the band” become irrelevant…  I long to see that day!  

The currencies have drifted about since our Tub Thumpin’ Thursday.  At times trading gets a little choppy, and the rest of the time there’s just no conviction to go one way or another.  I would have thought that Friday’s disappointing Consumer Confidence number (94.4 VS 95.9 previous month and 98 forecast) would have been enough to send the dollar to the woodshed for a little while… But come on Chuck! Think about it, you’re not only stuck in the 60’s with your music, you’re stuck in the thought that fundamentals rule currency moves… UGH! You’re right, other Chuck, thanks for reminding me! 

The European Central Bank (ECB) meets this Thursday. This could be the meeting that spins the Eurozone monetary policy out of business… But I doubt it will… Everything seems to be moving along without any major obstacles in the Eurozone right now, and I don’t see the ECB wanting to upset that applecart.  But keep in mind that ECB President Mario Draghi, will speak after the rate announcement, and he has a tendency to throw the euro under the proverbial bus whenever the single unit begins to look strong again.  

Speaking of Central Bank meetings, the Bank of Japan (BOJ) will meet tomorrow night… Wouldn’t that be something if the BOJ joined the U.S. and Eurozone in Quantitative Tapering?  (selling the bonds they’ve been buying for years now)  Nah… I don’t see that happening, and with BOJ Gov. Kuroda probably nearing the end of his reign, that could mean the next BOJ GOV could be a “bond buyer”, and that would be that! 

The Japanese yen has recently come back a bit in value VS the dollar, as it hangs onto the coat tails of the euro. But I’m just not a fan of the yen, too much debt, too many demographics problems, and a current Gov’t that believes they haven’t done enough to help the economy, keeps me thinking that yen is just a day away from falling from grace…  That’s only 24 hours away! HA!  But seriously, how does this currency remain relevant with all those problems I just talked about, and more that I didn’t talk about? Only the Shadow Knows!  

After a couple of weeks of increasing its value almost daily, the price of Oil has been stuck in the mud for the last week. After rising above $64 on supply problems the price of Oil has fallen back to the $63 handle and can’t seem to find a bid.  Over the weekend, Russia and our friends at OPEC (NOT!) had a joint announcement that their alliance will go through 2018, which means that the production cuts will remain in place for now. 

With the price of Oil stuck in the mud, the Petrol Currencies from Russia, Brazil, Norway, and Canada have not been able to add to their gains either. The Norwegian krone has gyrated the most because of its association with the euro, but other than the krone, the rest of the Petrol Currencies are non-movers, once again.  Start and stop, start and stop, rinse and repeat, is the norm for the Petrol Currencies these days.

 I already talked about the one and only economic print from the U.S Data Cupboard on Friday above, so, all that’s left to do is to look at the data prints we’ll see this week!  And looking at the schedule, I really don’t see anything that will move the markets until Friday, when Durable and Capital Goods Orders will print.  And with the Gov’t shutdown going on, the other scheduled data might not be timely this week… 

Before I head to the Big Finish I’ve got a couple of thoughts for you today…  The first being how significant this week is historically… Well, as we start the week, let me remind you that there are some historical things that happened within the next week 45 years ago… 45 years ago this week: Within a period of 72 hours, Nixon was re-inaugurated, LBJ died, Roe v Wade was decided, and the Vietnam settlement was announced. Bet you didn’t know that!   

And Second…For all of you out there, that despise Paul Krugman the way I do, you’ll really get a kick out this website that my former colleague, and friend, the metals guru, Tim Smith, sent me last week… It’s called Contra-Krugman! And these two guys, Tom and Bob, take issue with just about everything that comes out of Paul Krugman’s mouth. ( I usually just pick out the Big Ones he makes) You should Google: Contra-Krugman, and check it out!

I was looking at an email that was sent to me from the Contra-Krugman guys yesterday and came across some data that blew my mind! Jumpin’ Jehosephat! (when was the last time you heard that phrase?) But in a recent survey, consumers were asked what percentage of a dollar earned by corporations is kept by them after expenses, and taxes? The average for the total answers was 36%… Boy is that far off base, so far, even a righty could pick him off! The answer is… drum roll please… 7.9%, and only 6.9% when you take out the financials… Walmart’s is only 2.1%…

Oh, the things that are going to mount up to bring down the financial system… I’m just saying…   

To recap… The U.S. Gov’t is in shutdown mode, but lawmakers have worked all weekend to come to an agreement, but seem to be at an impasse… They will take another vote today to see if they can end this shutdown. In the meantime, Chuck wonders why Gold isn’t high stepping it with the Gov’t shutdown, bringing about so many things that could upset the economic applecart. The ECB and BOJ meet this week, and Chuck doesn’t expect much out of either of these two Central Banks. And Chuck reminisces about this week 45 years ago…    

For What It’s Worth…  i found this on Ed Steer’s Saturday letter, and thought it to be FWIW. It’s about Latin American Gold and how it’s being brought to the U.S. and can be found here: www.miamiherald.com/news/local/community/miami-dade/article194187699.html  

Or, here’s your snippet: “When Juan Granda ventured into Peru’s Amazon rainforest to score another illicit load of gold, he boasted that he felt like legendary Colombian drug lord Pablo Escobar.

“I’m like Pablo coming … to get the coke,” he told two co-workers in a text message in 2014.

A 36-year-old Florida State University graduate who once sold subprime loans, Granda was no cartel kingpin. But his offhand comparison was apt: Gold has become the secret ingredient in the criminal alchemy of Latin American narco-traffickers who make billions turning cocaine into clean cash by exporting the metal to Miami.

The previous year, Granda’s employer, NTR Metals, a South Florida precious-metals trading company, had bought nearly $1 billion worth of Peruvian gold supplied by narcos – and Granda and NTR needed more.

The United States depends on Latin American gold to feed ravenous demand from its jewelry, bullion and electronics industries. The amount of gold going through Miami every year is equal to roughly 2 percent of the market value of the vast U.S. stockpile in Fort Knox.”  

Chuck again… pretty neat article from the Miami Herald, hope you have time to read it..   

Currencies today 1/22/2018… American Style: A$ .8016, kiwi .7308, C$ .8022, euro 1.2261, sterling 1.3905, Swiss $ 1.0410, … European Style: rand 12.0310, krone 7.8476, SEK 8.0218, forint 252.32, zloty 3.40, koruna 20.7077, RUB 56.67, yen 110.69, sing 1.3187, HKD 7.8176, INR 63.76, China 6.4006, peso 18.57, BRL 3.1951, Dollar Index 90.42, Oil $63.32, 10yr 2.65%, Silver $17.06, Platinum $1,108, Palladium $1,105.69, and Gold… $1,332.90

That’s it for today…  Well, the Super Bowl teams were decided yesterday… I don’t think I’ll even watch the game, for I’m tired of the Patriots…  Not that I’m a Jaguars fan, but I know a lot of people who are… only 24 days until pitchers and catchers report, and a little over a month until the first spring training game! YAHOO! Our Blues got thumped on Saturday… UGH!  I’m glad that game didn’t get broadcast down here! My good friend, Duane, and I think the Blues play to their competition…  The Yardbirds take us to the finish line today with their song: For Your Love… I hope you have a Marvelous Monday, and Be Good To Yourself!  

Chuck Butler

 

Chuck Butler’s: A Pfennig For Your Thoughts 

January 19, 2018

* Dollar to end the week down

* For the 6th consecutive week!   

Good Day…  And a Happy Friday to one and all! I don’t know what’s going on in your life, but I sure hope to make this a Fantastico Friday, and hope that you can too! Our Blues won last night in Ottawa, setting today up for a good day! Will the U.S. Gov’t shutdown today? I doubt it! I heard yesterday that a plan to extend the deadline and keep the Gov’t running was being worked on. So, expect to hear that good news later today…  Paul McCartney and Wings greet me this morning with their song: Band On The Run… 

My weekly letter for the Dow Theory Letters (DTL) printed last night, and in it I talk about China… And then this morning, I read some more good stuff on China, and thought, “darn it Chuck, once again you talked about something before you should have!”  Yes, that’s usually the case, but better early than late to the party don’t you think?  It’s just a pain in the rear end waiting for what I said would happen to actually happen! UGH! 

So, since I opened with talk about China, I’ll go through the recent data a little later this morning, but first, we’ve got to talk about the U.S. Gov’t shutdown that’s scheduled for today… Because of this threat to our economy, the dollar is getting sold this morning, and the currencies are looking spiffy, and Gold is looking like something out of Gentlemen’s Quarterly! HA!  

The Aussie dollar (A$) finally knocked on the door of 80-cents and the door opened wide for the A$, and the currency stepped through! Running after the A$ is its kissin’ Cousin across the Tasman, kiwi, which also made a strong move past 73-cents in the overnight markets. The Big Dog, euro, is off the porch, chasing the dollar down the street, but it appears that all the little dogs (other currencies) are going to outrun the Big Dog… 

One of those little dogs outrunning the euro, is British pound sterling. This currency has really taken off for higher ground in recent weeks. Of course it doesn’t hurt the pound that the dollar has seen 6 consecutive weeks of losses… That’s right 6 consecutive weeks the dollar has ended down on the week, now that’s the makings of a weak dollar trend if I’ve ever seen one, and I’ve been around long enough that not only were rainbows in black and white when I was a boy, but I’ve seen 4 different trends since I began writing the Pfennig! 

One currency that has me a bit befuddled is the Swiss franc, which normally moves in opposite directions of the euro, well, when I say “usually” I mean since the Swiss National Bank (SNB) decided to tie the franc to the tracks, I mean the euro about 10 years ago.. But not this time… the SNB has remained on the sidelines, and I haven’t heard a peep out of them as the franc has been pushing the envelope of currency appreciation across the desk. 

I believe that this is a tell-tale sign that a weak dollar trend is in place, when currencies that have closets full of skeletons like the franc and pound sterling can keep the closet door shut, and rally like there’s no tomorrow… 

Ok, I promised above that I would go through the Chinese data that has printed since I wrote my DTL article that printed last night. So, here you go… For the first time since 2010, Chinese GDP grew in 2017 to 6.9% from 6.7% a year earlier. December Retail Sales were strong with a 9.4% figure attached to them, and December Industrial Production (IP) also printed strong at +6.2%, and finally, China reported that they created 13 Million new jobs in 2017… 

No wonder the Global Growth Revival has taken off in the past 6 months! Yesterday I told you about how the Tent Revival for Global Growth that I talked about seeing take place 6 months ago, had really taken off for higher ground, and now I see what has underpinned this Global Growth… A recovery of the Chinese economy… 

Now, you make be one of those naysayers that believes that China cooks their books, and none of this growth is really there… But if that’s the case, why then hasn’t the Chinese economy collapsed like so many economists and pundits wrote about the past 5 years? And then there’s the thought that the U.S. also cooks their books, so it all evens out in the wash, eh? 

My good friend, Dennis Miller, the Retirementor, and creator and editor of his newsletter that appears on: www.milleronthemoney.com, wrote a very good article for yesterday’s release, on Social Security, here in the U.S. and this is where the cooking of the books really is seen, as the cost of living  (COLA) increases haven’t kept pace with inflation or the increased Medicare costs.  If you’re retired or nearing retirement, or just plain interested in what he has to say, I strongly suggest you visit the link above and then read away! 

But the inflation calculator for Social Security payments  certainly is a case of cooking the books, don’t you think? Alrighty then, let’s move on from this before I begin to yell at the walls and wake everyone in the building up! 

Gold saw a choppy day of trading, with a very large 280,000 contracts traded, but it ended the day down just 20-cents… Every up-tick was met with a paper short trade, and it went on like that all day. But as my mom used to tell me all the time… “Chuck there’s a silver lining in everything”, so where is the silver lining in Gold you may be asking?  Well, the early morning trading sees Gold up $8 this morning! This possibility of a Gov’t shutdown today, has Gold moving higher as it should when something like this exists in the economy.  

The U.S. Data Cupboard just has the stupid Consumer Confidence index today, and it’s expected to have risen again this time from 95 to 98, and why not since MarketWatch is reporting that more than half of S&P 500 stocks are up 20% or more since Trump took office.   And the stupid Consumer Confidence Index is nothing more than a check of the pulse of stocks…  Don’t these people realize that the U.S. Gov’t could be shutdown today? Shouldn’t Consumer Confidence fall because of this threat?

Well, it should, but it won’t… And that’s why I call it the “stupid Consumer Confidence Index”  My grandkids would be all over me like white on rice if they heard me say that, or knew that I wrote that! But, I tell them all the time, I’m old, and when you’re Old you’re allowed to say things that little kids are not allowed to say!  And when they’re old they will be able to say stupid again too!

It‘s all about not wanting to hurt someone’s feelings…  But when I was a kid, if you got your feelings hurt, it encouraged you to do something about it, to better yourself.. Our moms loved us, but they sure didn’t think we were God’s gift to the world, and, wait a minute Chuck, that’s a Butler Patio discussion, not a Pfennig discussion.. Whew! saved by my conscience!   

To recap…  The U.S. Gov’t shutdown looms today, will it happen? Chuck doesn’t think so, as another extension is in the works already! But if it does, watch the dollar get taken to the woodshed! The dollar has had 6 consecutive weeks of losing ground on a weekly basis. This morning, the currencies have the conn, and Gold is up $8 in the early morning trading…

For What It’s Worth…  Here’s another case of a BIG BANK getting fined for breaking the law but no one goes to jail… This article was found on Reuters and you can find it here: https://www.reuters.com/article/us-hsbc-settlement/hsbc-to-pay-100-mln-to-settle-u-s-probe-into-currency-rigging-idUSKBN1F739N   

Or, here’s your snippet: “HSBC Holdings today agreed to pay $101.5 million to settle a U.S. criminal probe into the rigging of currency transactions.

The payment includes a $63.1 million fine plus $38.4 million in restitution to a corporate client, according to a deferred prosecution agreement filed today with the U.S. District Court in Brooklyn, New York.

In the settlement with the U.S. Department of Justice, HSBC also agreed to bolster its internal controls, and admitted and accepted responsibility for wrongdoing underlying two criminal wire fraud charges filed today against the bank, according to the agreement.

Deferred prosecution agreements let companies avoid criminal charges so long as they comply with the terms.” 

Chuck Again… And nobody goes to jail… That should be the title of a country-western song… it could go like this: I worked at a bank that taught me how to trade, and I done a client wrong, it was what I was taught to do, but now I’m without a job, but at least Nobody goes to jail!  

Currencies today 1/19/18… American Style: A$ .8020, kiwi .7302, C$ .8057, euro 1.2274, sterling 1.3908, Swiss $ 1.0461, … European Style: rand 12.15, krone 7.8394, SEK 8.01, forint 251.88, zloty 3.40, koruna 20.7115, RUB 56.62, yen 110.64, sing 1.3196, HKD 7.8180, INR 63.69, China 6.4241, peso 18.60, BRL 3.2154, Dollar Index 90.31, Oil $63.66, 10-year 2.63%, Silver $17.09, Platinum $1,012.75, Palladium $1,112.87, and Gold… $1,338.20  

That’s it for today… Sorry for that rant I started to go on near the end today… I need to keep this on the tracks! Happy Birthday tomorrow to my good friend and former neighbor, Kevin Yanker aka Webbie…  How about our Blues? They’ve won last night, making it 2 consecutive games won on the road… I sure hope they can keep this edge through the playoffs this year…  It’s now less than one month before pitchers and catchers report for Spring Training! YAHOO! Spring Training games start earlier than usual this year, which means the games will end earlier than usual, and I’ll have to go back home earlier than usual! UGH! Easter is the first Sunday in April this year, and that’s the reason for my earlier trip home than usual! Oh well, it is what it is!  Hey! today looks like a good day, to have a good day! right? Now, let’s go out and do everything we can to make this a Fantastico Friday, and Be Good To Yourself!   

Chuck Butler

Chuck Butler’s: A Pfennig For Your Thoughts

 January 18, 2018  

  * Bank of Canada hikes rates!

* U.S. prints strong data… 

Good Day… And a Tub Thumpin’ Thursday to you! I’m still waiting for the infusion center down here to call me to come in. I can’t imagine what the holdup is, but when you deal with insurance companies, they sure know how to elongate things. I’m just saying…  It was a good night, for my teams, as both the Mizzou Tigers, and the SLU Billikens won their respective basketball games. I actually was able to watch the Mizzou game VS Tennessee, as the beauty of Cable TV shown brightly! Steely Dan greets me this morning with their song from the album of the same name: Aja

Instead of Turnaround Tuesday, today we have a Turnaround Thursday! Yesterday saw the dollar continue to gain throughout the day, with the euro falling through the 1.22 handle, and Gold losing over $11 on the day. But all that bad stuff has turned around in the overnight sessions, and the euro is back above 1.22 and Gold has gained $3 in the early morning trading.  It’s a Turnaround Tub Thumpin’ Thursday…   

The Bank of Canada (BOC), did indeed go ahead and hike rates yesterday, which happened to be their 3rd rate hike since last summer! Yesterday, I told you how the markets had soured on the thought of a rate hike, and thought that the BOC would still talk like a hawk. But I was holding to my guns, and said the BOC would hike rates, and they did, moving their internal rate to 1.25%.  

This is a step in the right direction to throw some cold water on the housing bubbles in Toronto and Vancouver, but there’s a lot more work to be done there, and I hope the BOC is up to it!  The Canadian dollar/ loonie didn’t rally on the rate hike, as it had already been priced in weeks ago, back when the markets did believe that the BOC would hike rates, and before their confidence in the BOC waned.  

So, the BOC is moving in the right direction now, and I’ll stop dissing BOC Gov. Poloz, as long as he sticks to the rate hike cycle now in place… Remember last year when I kept talking about the Tent Revival for Global Growth? I was out in front of this idea that the economies of the Globe were healing and Global Growth was going to return.  And now it’s coming to fruition right before my eye!  

OK, the dollar pulled itself off the canvas yesterday, first to do a little rope-a-dope, and then come out of that defensive position, swinging and landing some heavy blows on the currencies and metals. This all took place after the morning U.S. Data prints, that included a very strong Industrial Production print for December.  And when I went to bed last night, the dollar appeared to have wrestled the conn back from the currencies.  But when I turned on the currency screen this morning, the overnight markets had turned things around, and the dollar is back to doing the rope-a-dope again.

Shoot Rudy, even the price of Oil, you know Black Gold, Texas Tea, slipped after enjoying a nice uninterrupted run higher in price. Black Gold slipped below the $64 handle, and looked like it was going to slip even further through the handle, but the turnaround Tub Thumpin’ Thursday stopped the slide and Texas Tea is recovering lost ground this morning. 

I was very disappointed in “the boys in the band” yesterday…  Just when you think they’ve slipped under the rocks they live under, they pop out and cause havoc in the price of Gold… Yesterday, Gold had climbed to $1,344, and then you should see the price graph with a line straight down. Even a novice graph watcher would look at that move and say, “what the hell just happened?” And they would soon figure out that it was an engineered take down by the price manipulators. 

I get so, frustrated, depressed, and worn out knowing that the “boys in the band” did what the did yesterday…  Gold is attempting to gain back some of the lost ground that happened in one fell swoop yesterday. But the shiny metal has its work cut out for it once again. This isn’t the first engineered take down of the price of Gold, and each time it’s happened in the past, the shiny metal has been able to eventually, move even higher than it was when the takedown occurred. 

Have you been tracking the 10-year Treasury’s yield advance lately? the 10-year hit 2.60% yesterday, and quite frankly I don’t see what’s holding it back!  We have the U.S. Fed stepping away from the auction window, and China contemplating doing the same… The U.S. continues to increase its debt, and that debt has to be financed with the sale of Treasuries, and the two of the biggest buyers are nowhere to be found… 

There’s only one place for Treasury yields to go…  UP!  I’ve got a very telling article for you in the FWIW section today that highlights this whole scenario of countries backing away from buying Treasuries… Be sure to stick around for that! HA!   

The U.S. Data Cupboard goes back to producing non-market moving data today. But boy did they turn the markets attention toward the data prints yesterday… I already told you that Industrial Production was a very strong print for December, but in addition to that strong print for IP, was an equally strong print in Capacity Utilization (CAPU).   This data, CAPU, is important in my eye, because it’s one of the few forward looking pieces of data, and it gives you an indication of how corporations are feeling about the economy… 

I do believe that this euphoria over the U.S. economy is going to be short-lived, as the Fed has been hiking rates and says they will continue to do so, which is going to squash any hopes of an economic recovery here in the U.S.  Now, I say that with the thought that interest rates here in the U.S. are still very low, historically speaking that is, and they’ve got some ground to cover before they become a burden on the economy…   

To recap… The dollar had its way with the currencies and metals yesterday, but things have turned around in the overnight markets. The euro fell below 1.22 yesterday, but has climbed back over the figure in the overnight markets. Gold got taken down by “the boys in the band” yesterday, and is attempting to recover some lost ground, with a mini-rally this morning. The Bank of Canada hike rates, as Chuck said they would, yesterday.  

For What It’s Worth… I pulled this from Ed Steer’s letter this morning, and he got it from Zerohedge.com and like I said above, it’s about countries reducing their Treasury holdings at a time when, well we need for them to increase their holdings! This article can be found here: https://www.zerohedge.com/news/2018-01-17/chinese-treasury-holdings-slide-lowest-july  

Or, here’s your snippet: “In the aftermath of Bloomberg’s report from last week that China may slow down or reverse its Treasury purchases should the U.S. trigger trade war with Beijing, pundits were closely watching today’s TIC report from the Treasury to see what China did November. And according to the just released Treasury International Capital data data for the month of November, Chinese Treasury holdings dropped from $1,189.2BN in October to $1,176.6BN in December, the lowest since July’s $1,166BN.

China wasn’t the only seller in November: the total value of foreign investors Treasury coupon holdings fell $18.825 billion in November on top of a $22.264 billion decline in October, but foreign holdings of corporate debt surged $28.699 billion in November, following a $10.447 increase in October. There was also a net increase in the value of GSE/MBS holdings of $12.267 billion in November after the $9.971 billion increase in October. These totals do not include adjustments for non-marketable Treasuries, ABS repayments and stock swaps.

Some other notable foreign holders of U.S. paper:
* Japan holds $1.08t, a decrease of $9.9b from last month
* Belgium holds $115.3b of U.S. Treasuries, a decrease of $0.7b from prior month
* Russia holds $105.7b of U.S. Treasuries, an increase of $0.7b from prior month
* Cayman Islands hold $269.4b, a decrease of $0.5b from last month
* Saudi Arabia holds $149.0b, an increase of $3.8b from last month 

Chuck again… I found it interesting that Saudi Arabia saw an increase in their holding. A few months ago, they were one of the Biggest sellers of Treasuries. You don’t suppose that the U.S. and Saudis kissed and made up do you?   

Currencies today 1/18/18… American Style: A$ .7985, kiwi .7293, C$ .8037, euro 1.2228, sterling 1.3860, Swiss $1.0414, … European Style: rand 12.26, krone 7.86, SEK 8.0370, forint 252.19, zloty 3.4070, koruna 20.7582, RUB 56.63, yen 111.26, sing 1.3218, HKD 7.8178, INR 63.75, China 6.4328, peso 18.69, BRL 3.2289, Dollar Index 90.67, Oil $63.94, 10-year 2.60%, Silver $17.09, Platinum $1,001.90, Palladium $1,106.82, and Gold… $1,329.90

That’s it for today… That cold front that has dipped so far south, has even touched down here in S. Florida. The weather people were reminding parents to bundle their kids up for their wait at the bus stop this morning, as it was going to be cold (according to them) at 40 degrees! HA! Today is our winter, that’ll be it…  We said goodbye to our friends yesterday, after their short-stay. It was fun while it lasted, their stay that is! Our Blues are on the road and play in Ottawa tonight. Well, I needed to hear the song that’s taking us to the finish line when I first woke up this morning, because I really didn’t want to answer the bell, but did, and so now I get to hear the late, great Alvin Lee, play his guitar as his band Ten Year After, play their song: Choo, Choo Mama…  I hope you’re able to have a Tub Thumpin’ Thursday, and remember to always, Be Good To Yourself! 

Chuck Butler