Author: admin

Rocktober 18, 2018

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

* Fed meeting minutes send bond yields higher! 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Or, here’s your snippet: “

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

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

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

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

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

The Biggest holders didn’t buy, they shed: 

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

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

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

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

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

Chuck Butler

 

Rocktober 17, 2018

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

* Rubles are best overnight performer… 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

Rocktober 15, 2018

* Gold soars on Thursday, is the bottom in?

* Stocks get stomped last week… 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

 

 

Rocktober 11, 2018

*Currencies rebound on Wednesday!

* Gold rebounds! 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck again…  Got Gold?

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

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

Chuck Butler

Rocktober 10, 2018

* Currencies rally then fall back in the overnight markets

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

Rocktober 9, 2018

* Currencies rally then stumble overnight… 

* More on Russia than you paid for! 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

 

Rocktober 8, 2018 

* Currencies rally on Friday but get sold overnight

* Gold gets whacked again! 

Good day… And a Marvelous Monday to you! A nice weekend was had by yours truly, despite my Missouri Tigers losing in S. Carolina… UGH! And despite that yesterday afternoon here, looked like the monsoons had moved in! Last Thursday night, I got down to business, cooking wise, and made myself, because I was home alone, a big pot of spaghetti and meatballs, with cheese garlic bread, and a small salad… While I sat there eating, and enjoying what I had made, I said, “Those Italian Restaurants on the Hill in St. Louis, should be hiring me!” I’m just saying… It was THAT good! Cat Stevens greets me this morning with his song: Moodshadow… Yes, I’m being followed by a moonshadow…

Well, last Friday’s Jobs Jamboree was interesting in that the BLS said the jobs created in September were just 134,000… But the Unemployment Rate dropped to a cycle low… In fact, the last time it hit a low like this was 1969… Guess what started in 1970? Give up? It was a recession… So, we have that in our back pockets to think about now don’t we? And bust my buttons! It was one of those rare times, when the BLS actually has a come to Jesus moment, and takes away jobs from the surveys… For September they took away 67,000 jobs… So, if I always take out the jobs additions the BLS makes all the time, I have to add back in when they take them out! … So, 201,000 jobs were on the surveys… And that was more like what was expected… And would make more sense that the Unemployment Rate dropped if we had kept the numbers that the surveys gave…

The currencies led by the euro, found their way in the darkness that has been caused by the long shadow the dollar throws off. The euro climbed back above 1.15 on Friday, and I thought to myself… Funny, how the dollar can’t rally on the Employment data… Now, the euro wasn’t really on Terra Firma above 1.15, and that proved out in the overnight markets, where the euro has been pushed back below 1.15… I think, that the Eurozone heads would like for the euro trade between 1.15 and 1.20, for optimum trade… I had a longtime reader send me a note on Friday, and asked me to give my opinion on the Russian ruble…

Well, here goes folks! I’ve said this for a longtime now, that the Russian Central Bank is the best Central Bank on the planet… Their Gov. Elvira Nabiullina, is the best Central Banker going right now. She gets it… But besides the Central Bank, the Russian economy has done quite well, given they have had Economic Sanctions placed on them by the U.S. and Eurozone, for way, too long! And that to me is a sign that the economy would be soaring to the moon if they didn’t have the governor placed on the economy by the sanctions… Sooner or later, the heads of the U.S. and Eurozone will come to the realization that the sanctions haven’t had the effect on the Russian that they thought they would, and drop them… When they do, It is my opinion, which could be wrong, I might add, that the ruble will begin to make headway VS the dollar.

We already see the ruble gain whenever the price of Oil shoots higher, but the currency has this governor on it, and can’t shake it with just higher Oil prices… It needs the world to see how well the country is moving without the sanctions! The Russian Central Bank has inflation under control, which is quite impressive to me, and they have eked out some positive growth in recent quarters…

When the debt in the world comes crashing down… and currency investors / traders/ what have you, begin to look around at where to go besides the dollar, I believe they will turn their focus on the ruble…

So, buying it now, at still blue light special prices, seems like the thing to do… But again, that’s just my opinion, and I could be wrong!

Suddenly, and I mean suddenly yields on Treasuries are rising and acting like nothing is going to stop them from rising! The 10-year’s yield is 3.23%… It sure didn’t take long for that last 28 Basis Points to be gained, now did it? I told you long ago, that when yields start to rise, they will rise quickly, and before you can say “I didn’t know bond yields could rise” They’ll be higher than a kite, on a blustery day! I said last week, that the bond boys have come to the realization that the Fed is downright serious about continuing to hike rates, and that they see inflation coming… Uh-oh!

Don’t just take my word for it… the folks over at dollarcollapse.com had this to say about the sudden change in sentiment toward complacency, and the rise in bond yields… 

“What happened? Apparently the weight of accumulating problems finally became too great to ignore. Interest rates had been rising for a while as inflation bumped up against Fed targets, but traders only noticed when the 10-year Treasury yield pierced 3%. This cycle’s housing boom had been moderating since June, but lately the bottom seems to have dropped out, generating headlines like this:
Manhattan home sales tumble in market clogged with listings
Vancouver home sales mark steady decline
For Sale home supply surges in hot West Coast markets
Bond-market bloodbath likely to hit mortgage rates soon

And the emerging market crisis – easily managed if the dollar just went back down – suddenly feels permanent as rising interest rates pull the dollar along for the ride.” – dollarcollapse.com  

Last week I went on and on about how I believed we would revisit the 70’s… I had some readers agree with me, and some that didn’t agree with me… So for all of you who didn’t agree with me, or were on the fence, here’s something to think about… In 1970, all the Johnson era ‘great society” and “Vietnam war” expenditures were showing up at the white house’s door to be paid… And we thought that those were some doozy debt levels back then! The economy looked like it was going to grow forever, and the Unemployment rate had dropped to all-time low the year before… Bond yields were rising, and Gold was shaking off the dust, for it wouldn’t be too much longer when individuals could own it again…

And the recession broke out… And it was a real doozy, folks… And remember we didn’t have the debt levels we have today as we go full-steam ahead to $22 Trillion!   I’m just saying…

Well, Gold gained a few bucks on Friday and closed above $1,200… And that was all there was to that, for in the after markets and the early trading overnight, Gold has lost more then $9 and is back below $1,200… Ed Steer, told me in his Saturday letter, that Gold did trade above its 50-day moving average at one point on Friday, only to have it drug back below the figure when all the beans were counted, meaning all the contracts traded in Gold… So, what happened between trading above its 50-day moving avg. and then seeing it trade back below the average? The Jobs Jamboree, that’s what! But if you were a Fed Head, and you saw the low jobs number for Sept, and then went back and saw that 4 of the last 5 jobs reports have missed on the downside, would you be willing to put your reputation on the line with another rate hike?

I guess in the long run it doesn’t matter… For no one, except me of course, still hammers on Big Al Greenspan for leaving rates too low, too long when they should have been increased and allowing the housing bubble to begin… Or Big Ben Bernanke, for all his ridiculous quotes prior to the financial meltdown, about how it would never happen, and then his introduction of 3 rounds of Quantitative Easing, along with ZIRP (zero interest rate policy)… There was never a need to go to zero with rates, but he strong armed his fellow Fed Heads into believing there was, and well, the rest is history…  

In other news… China lowered their reserve ratio for banks again, in an effort to hold off a recession. This is like a rate cut folks… and puts more money in the economy. But it does weaken a bank’s position, should bad things happen…  And it seems that Italy is at the root of the euro’s weakness… One by one first it was Greece, then Portugal, then Spain, and Ireland, and now it’s Italy… The 3rd largest economy of the Eurozone…  And what’s their problem? They have too much debt!  And are wanting their budget calling for more debt, to get the seal of approval from the Eurozone heads… 

Today is Canada’s Thanksgiving Day… So, I hope all my friends in Canada have a nice day and celebration…  Today is also Columbus Day here in the U.S. when we celebrate the man that discovered the virgin Islands… OK, I’m just having some fun…  We learned in school that old Chris found the U.S. after convincing the Queen of Portugal that the earth wasn’t flat… And so that’s the story I’m sticking with… Tradition… it means something to me folks! 

So with the Columbus Day holiday, if I were still working, I wouldn’t be writing today, for it’s a bank holiday! So, no data from the Data Cupboard today… Let’s head to the Big Finish!

To recap… The Jobs Jamboree was disappointing on Friday, but only because the BLS played a game with the numbers… The Unemployment Rate fell to a cycle low, just like it did in 1969, only to have a recession appear the following year… The currencies tried to bounce back on Friday, but their attempt was turned away at the border in the overnight markets last night. And Gold is getting whacked this morning… heads up, the ball is coming down toward your head! And Chuck spills his guts on the Russian ruble… 

For What It’s Worth…  Well, there’s a ton of debt / and problem stories out there, but I thought this one was very interesting and goes to show ya, that you never know… This is about a guy who discovered his doorstop was a valuable meteorite and can be found here: https://gizmodo.com/michigan-man-discovers-his-doorstop-actually-a-meteorit-1829551900/amp

Or, here’s your snippet: “A Michigan man recently learned that this 22-pound rock he used for decades as a doorstop on his farm was in fact a meteorite worth over $100,000.

According to a Central Michigan University press release:
The man, who asked to remain anonymous, obtained the meteorite in 1988 when he bought a farm in Edmore, Michigan, about 30 miles southwest of Mount Pleasant.

As the farmer was showing him around the property, they went out to a shed. The man asked about the large, odd-looking rock that was holding the door open.

“A meteorite,” the farmer said matter-of-factly. He went on to say that in the 1930s he and his father saw it come down at night on their property “and it made a heck of a noise when it hit.” In the morning they found the crater and dug it out. It was still warm.

The farmer told the man that as it was part of the property, he could have it.”

Chuck again… Man I really enjoy reading stuff like that…  I wonder if that old fence post for the barbed wire fence that used to be at the back of my property is worth anything?  Hehehehehe… 

Currencies today 10/8/18… American Style: A$ 7066, kiwi .6455, C$ .7696, euro 1.1485, sterling 1.3043, Swiss $ 1.0072, European Style: rand 14.8397, krone 8.2756, SEK 9.0895, forint 282.88, zloty 3.7502, koruna 22.3121, RUB 66.56, yen 113.36, sing 1.3844, HKD 7.8299, INR 74.15, China 6.8673, peso 18.82, BRL 3.8399, Dollar Index 95.91, Oil $73.31, 10-year 3.23%, Silver $14.49, Platinum $821.00, Palladium $1,068.13, and Gold… $1,194.49

That’s it for today…  Boy I was full of you know what and vinegar today, eh? Are the Brewers a hot baseball team or what? Who knew?  The Braves and Dodgers better beware of the hot team… I actually watched some NFL football yesterday, as the monsoon rain came down, and I couldn’t be outside…  Ok… Sniff ‘n’ the Tears takes us to the finish line today with their song: Driver’s Seat…  So… let’s go out and make this a Marvelous Monday/ Columbus Day/ Canadian Thanksgiving Day! And remember to Be Good To Yourself!

Chuck Butler

 

Rocktober 4, 2018… 

*ADP report sends the currencies down… 

* Gold can’t follow up Monday’s gains… 

 

Good day… And a Tub Tumpin’ Thursday to you… I’m not going to be able to participate with you on any Tub Thumpin’, as I’ve hit a brick wall this morning, with regards to answering the bell… Every once and a while, the chemo gets to me, folks… that’s all I can say. Otherwise, I’ve been able to tolerate it to the degree that I can write each day, and no one knows how badly I feel… And today, well, I feel badly, but not bad enough to keep me from writing, just bad enough that I won’t be doing any Tub Thumpin’! Today is 10/4… Remember those old days of CB radios?  10/4 good buddy! Charlie Daniels greets me today with his song: Long Haired Country Boy… A rich man goes to college, and a poor man goes to work, a poor girl wants to marry and a rich girl wants to flirt… I came from a relatively poor family of 7 kids, and I had to go to work… I didn’t begin any college education until I was married, had two kids, and went to school at night… So, I guess old Charlie Daniels wasn’t wrong!

Well, the ADP Employment report that I told you would print yesterday, threw a cat among the pigeons, by printing a blowout number of jobs created in September… According to ADP 230,000 jobs were created in Sept. That got the dollar bugs all excited and they came out of the wallboards by the truck load buying dollars left and right, and by the end of the day the euro had fallen below 1.15… I guess we’ll have to wait-n-see if this holds true when the BLS prints their version of the jobs report tomorrow morning… Until then, we’re stuck with the dollar bugs singing and dancing in the streets…

On a sidebar, a few years ago, I had a dear reader send me question and ask me why I call the dollar buyers, dollar bugs… And I replied, “ well, they call us Gold lovers “gold bugs”, so I’m just returning the favor”…

Less than a week ago, the Aussie dollar was trading above 72-cents, and this morning it’s trading below 71-cents, and the euro was above 1.17 and this morning its below 1.15… And once again, Gold couldn’t hole its price above $1,200… The price of Oil surged higher to trade above $76 a barrel, and the only Petrol Currency to get any love from the move was the Brazilian real, which has been the basket case currency for the last year, as first it was lower Oil prices, and then Political circuses that caused investors to drop reals like a bad habit…

The Brazilian real, at one time in the past was the best performing currency of the year… And the fall from grace was not pretty… But here we are, with the real trading below the 4 handle for the first time in a month of Sundays. Or probably longer, as this circus with Brazil has been going on a long time! But like I said something is going on here and unfortunately, it’s political… We’ve ridden this horse before, and this isn’t my first rodeo folks… Political gains in a currency can be erased in a heartbeat, so be careful here… But ride the horse as long as it doesn’t buck, right?

And all the hoopla and hype about the Hong Kong dollar/ honker last week, has fallen by the wayside, and the honker is nearly back to where it was before there was a euphoria about a rate hike in the country took the currency for a rally ride that shocked the world of currency traders and investors… But like I said, a week later, and all the euphoria is gone… The hype is gone, the hoopla is gone, and so are the gains the currency booked last week…

So, like I said above, Gold wasn’t allowed to hold its gains above $1,200 yesterday, and closed below the figure on the day. So, who’s next in line to be caught rigging the price of Gold & Silver? First it was Deutsche Bank, and then yesterday I told you about Bank of Nova Scotia… Wouldn’t it be great for Eliot Ness to round up all the perpetrators of price rigging and bring them all in to be booked and locked away? OK, I probably dated myself there with the reference to Eliot Ness… But if you’re too young to know who I’m talking about, I apologize,  but Eliot Ness was responsible for heading up the Untouchables, and they took down Al Capone!  I hope you see what I’m talking about now? 

Don’t look now, but the U.S. Debt Clock says the U.S. current Debt is $21.6 Trillion… That’s a gain of more than $1.27 Trillion in the fiscal year of 2018, which just ended at the end of September, by the way… And remember the tax cuts didn’t go through until mid-year… I was talking to someone the other day, and said that during the Bush administration years, his worst deficit year was $740 Billion, which seems like chump change now, right? During most of the previous administration’s years the deficit each year was more than $1 Trillion… They tailed off in the last couple of years, but now their back to being above $1 Trillion, and like was telling this person, I won’t be long before our year deficits are $2 Trillion… And all that’s going to just work out just peachy dandy, don’t you worry your little mind about that the Gov’t has it all under control… Yeah, you can put that up there with believing in all the things they told you as a kid were real only to find out later they weren’t…

The Japanese yen is sliding… A week or so ago, I wrote about how the safe havens were being unwound, and it continues… I guess no one out there in investment land feels that all this sunshine and lollipops is going to end at any time…  This leads me to believe the complacency in the markets is at a place that the great economist, and a mentor of mine, Hy Minksy, would call a Minsky Moment…  

Remember when the tech stocks AKA dot.com stocks were soaring and there weren’t too many people out there saying that it was going to collapse and losses would mount up…  Or, how about the financial meltdown… Me and few others, were warning anyone that would listen to us that there was a housing bubble, and that houses were being used as ATM’s, but again, there weren’t many people that were worried, including Fed Chairman, Ben Bernanke, who thought housing prices would never collapse, like the did…  So, I’m just saying folks… When the markets participants become really complacent, the hammer is about to be dropped on them…  So be careful out there will you please?

Oh, and one more point on the markets getting complacent… The yield on the 10-year Treasury has jumped higher to 3.22% this morning… There are two things at work here… First, the bond guys finally believe the Fed is going to keep raising rates, and second, they’ve lost the belief that the economy is going to suffer at some point…  

And it’s not just the 10-year moving higher with its yield, the 5-year is 3.06%, and a 12-month T-bill is 2.61%… I tell you this to show you that you don’t have to go out 10 years to get any yield…  In a rising rate environment it’s always better to stay short in tenure on your bond holdings so that when they come due you can roll them into a higher yielding bond…  Booking the interest, and rolling the principal, now that’s a store of wealth idea, now isn’t it? 

The U.S. Data Cupboard has August Factory Orders for us today… You might recall that July’s print was negative? Well, it was, and that leaves us question marks about August’s print. I do expect it to be positive, but just not as strong as it should be at this point of the expansionary cycle… 

To recap… The ADP Employment threw a cat among the pigeons yesterday, and got the dollar bugs to come out of the wallboards and do some dancing in the streets. All this left the euro trading below 1.15, and the A$ below 71-cents…  Gold couldn’t follow up Monday’s $14 gain and lost $5.70 on Tuesday. Oil continue to rack up the gains and now trades with a $76 handle. But the only Petrol Currency to get some love was the beaten and bruised Brazilian real… go figure! 

For What It’s Worth…  Well, I had a couple ideas stacked up today, and went with this one, from Nomi Prins, who I really enjoy reading her stuff, and this time she’s talking about zombie companies… Pretty interesting stuff, and can be found here: https://dailyreckoning.com/worlds-most-important-bank-issues-urgent-zombie-alert/ 

Or, here’s your snippet: “So today we stand near – how near we don’t yet know – the edge of a dangerous financial precipice. The risks posed by the largest institutions still exist, only now they’re even bigger than they were in 2007-08 and operating in an arena of even more debt.

Now the Bank for International Settlements (BIS), or the “central bank of central banks,” is sounding a new alarm on this policy.

In its recent quarterly report, the BIS warned that low rates have catalyzed an increase in the number of “zombie” firms. The number of such firms has now risen to an all-time high.

Zombie firms are companies “that are at least 10 years old, yet are unable to cover their debt service costs from profits.” Their prospects for future growth aren’t so hot either.

The problem is that once a company becomes a “zombie” it tends to stay a zombie. That phenomenon is only getting worse. The BIS disclosed that “whereas in the late 1980s zombie firms had a 60% chance of staying in that condition the following year, the probability reached 85% in 2016.”

Zombies created from an influx of central bank money aren’t good long-term investments. It’s one thing for a company to take on debt to grow, but it is another to take on debt simply to re-pay other debt.”

Chuck Again… yes, not all debt is bad, as long as it’s repaid… and that’s all I’m going to say about that!

Currencies today 10/4/18… American Style: A$ .7085, kiwi .6492, C$ .7770, euro 1.1499, sterling 1.2978, Swiss $1.0084, European style: rand 14.6582, krone 8.2235, SEK 9.0414, forint 281.94, zloty 3.7440, koruna 22.4255, RUB 65.60, yen 114.29, sing 1.3797, HKD 7.8345, INR 73.74, China 6.8679, peso 19.01, BRL 3.9105, Dollar Index 95.88, Oil $76.38, 10-year 3.22%, Silver $14.65, Platinum $823.75, Palladium $1,058.94, and Gold… $1,199.01

That’s it for today and this week… Tomorrow’s a Jobs Jamboree Friday, so you’ll have that going for you! My beloved Missouri Tigers play on Saturday so that’ll be my day! Baseball is cruel… One day the Cubs are in first place, where they’ve been most of the season, and the next day, they’re out of the playoffs… That’s cruel man…  I went to get a massage yesterday, my back has really been giving me fits, so it’s feeling much better this morning… I know how to get my back good again… lose weight!  Last winter when I was so sick every day, and eating was the last thing on my mind, I lost a ton of weight, and my back felt great!  But a change in medicine, changed all that, and eating was fun again! Too much fun! UGH! On well, people around here don’t remember what I looked like before, so fat, bald, and short, is what I am now! And with that the great Al Stewart takes us to the finish line today with his song: The Year Of The Cat…  I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow! And please… Remember to Be Good To Yourself!

Chuck Butler

 

 

Rocktober 3, 2018 

* Chuck talks currency trends…  

* Gold jumps higher! 

Good Day… And a Wonderful Wednesday to you! Well, my first couple of days of 2018, in withdrawal, went OK… I’m withdrawing from my dependence on my beloved Cardinals, for they missed the playoffs again this year, and now I have to sit and watch other teams play. UGH! I did receive my order form for my Spring Training Tickets though, so that warmed my heart a bit thinking about watching my Cardinals play again… The Beatles greet me this morning with their song, from the Sgt. Pepper’s Album: She’s Leaving Home…

Yesterday, was kind of the day to take a big breath, and get ready for what’s coming next, whatever it may be… The currencies didn’t really move much, although they did wrap a tourniquet around the wound the dollar caused the previous day. I saw a headline article yesterday from a trader who said that investors should get ready for a HUGE breakout price movement from the dollar. And I immediately thought to myself, he must be a youngster, having never experienced anything than the current situation, and never studying history, for if he had he would know that currencies move in trends, and the strong dollar trend is nearing an end, for it has been in place since 2011, when the hidden debts of Greece were exposed…

He might also find out that during one of the most interesting periods of time in American history, were the 70’s… (if someone hadn’t come up with the idea for disco music, the 70’s would have much higher marks!) Let me explain… In the 70’s inflation followed a period of stagflation, and once inflation got moving higher, it took off to the moon, and it wasn’t tamed until interest rates in this country rose to 20%… And during that time? The dollar was sold like funnel cakes at a State Fair, and Gold soared…

I point that out because I’m so convinced that were going to revisit the 70’s with the economy… So, dig through your closet and find those bell bottom jeans, and leisure suits, and platform shoes… And while you’re looking make sure you pull out that WIN button.. (whip inflation now)!  

In fact, the 70’s had the first weak dollar trend, that lasted from August 1971, when the dollar was allowed to float, as Richard Nixon removed the Gold backing of the dollar, and lasted 7 years, until 1978, when with interest rates at their highest level investors all over the world flocked to U.S. Bank deposit accounts, CD’s and what have you… The trends have gone roughly like this… 1971-1978 weak dollar trend, 1979-1985 strong dollar trend, 1986 -1995 weak dollar trend, 1996-2001 strong dollar trend, 2002-2010 weak dollar trend, and 2011 to now, strong dollar trend.

So, I just think that we’re going to revisit the 1970’s again with inflation soaring to the moon, the Fed chasing it higher and higher, and the dollar getting sold like funnel cakes at a state fair, and this time it could get really ugly, because in the 70’s when Paul Volcker hiked rates so often, even resorting to hiking them on a Saturday night, the U.S. had little debt, certainly not the size of debt it has now that it has to finance… Think about that for moment, let it sink in, and then I’ll remind you… Got Gold?

Earlier this week I told you that the Ford Motor Co.’s CEO had told reporters that the Trade War’s tariffs were going to cost his company $1 Billion… Well, yesterday, car sales data printed… Something strange, in my opinion, is that GM has decided to not report monthly numbers any longer, instead choosing to go to quarterly numbers… Well, Their quarterly numbers can be broken down right?

So, here’s the report card as reported by Wolfstreet.com… “Automotive News estimated that GM’s September deliveries plunged 15.8% to 235,228 vehicles, with GM Silverado pickup sales down 19% (44,960) and Sierra pickup sales down 35% (11,724). These are hot vehicles – or should have been.

Ford reported that sales in September dropped 11.2% to 197,404 – with deliveries at the Ford brand down 11.3% (189,236) and at the Lincoln brands down 7.2% (8,168).”

Chuck again… like I keep telling people… the Trade War with China is going to hurt both countries’ respective economies… This is just the beginning folks…

I read an article last night that said that soon the U.S. will be spending more on bond servicing (interest payments) than they spend on the Military, Medicaid, or children programs… And that’s with interest rates at 2.25% for short term and 3.07% for 10-years… Imagine, if you will, if interest rates were actually normalized… say, 5-6%?   OMG!  

OK, I’ve got to talk about something else here, or I’ll begin to swear, and throw shade at everything and everybody involved with this mess… But not to worry, Fed Chairman, Powell, says everything is seashells and balloons…  My A%# it is… but… that’s what the sheeple want to hear, not the stuff I write… Only people that want to know the truth, read my letter…  

Well, Gold finally had a good day, actually climbing more than $14 on the day, and at one point it was up about $23, before some of the 344,000 contracts traded in Gold brought the shiny metal back down to earth. 

And the price of Oil slipped a bit, but is still trading with a $75 handle this morning… With the slippage here, the Petrol Currencies weren’t able to add to their recent gains.  The Dollar Index moved from 95.63 yesterday morning to 95.54 this morning, so although, as I’ve explained a number of times through the years, the Dollar Index isn’t the best indicator of currency movement, it’s not completely worthless!  And a lot of fund managers still use it, so there you go! HA!   

All the U.S. Data Cupboard had for us yesterday was the aforementioned auto sales data… Today is Fed speaker day, with no less than 5 different Fed Heads out on the speaking circuit… Oh, and the ADP Employment Data for Sept. will print… This data is supposed to give us an indication of what the BLS will print on Friday… The problem with that thought is that one never knows what the hell the BLS is going to pull out of their sleeve! 

To recap… It was a nothing day for the currencies yesterday, as they wrapped a tourniquet around the wound the dollar inflicted on them on Monday and rode out the rest of the day with tiny gains… Gold however gained more than $14 on the day!  The price of Oil slipped a bit, but no great shakes, and Chuck goes through currency trends, and points to the 70’s as our poster decade as one he believes we are about to relive… 

For What it’s Worth… I’ve fought a long and difficult battle against the naysayers of Gold & Silver Price manipulation… I’ve presented proof after proof, and they shrug it off and say it doesn’t prove anything… I wonder what they’ll come up with after seeing the article that the GATA folks sent me yesterday that highlights Bank of Nova Scotia admitting their traders “rigged the Gold & Silver markets”… The article can be found here: https://thedailycoin.org/2018/10/02/another-bank-fined-for-rigging-the-gold-and-silver-markets/

Or, here’s your snippet: “The evidence continues to mount proving the work that GATA has performed for the past two decades is, not only 100% accurate, but shows how much a part of our world gold actually plays. Don’t think for a minute that gold is not part of our monetary system. If it weren’t these price rigging schemes would not happen – especially on a global basis.

We reported on Deutsche Bank two years ago – click here – click here – click here – when their precious metals market rigging schemes were exposed and the bank was “fined” for rigging the gold market. During the investigation it was also discovered Deutsche Bank was rigging the silver market. A series of internal instant messages confirmed the rigging mechanism and the fact the price rigging was actually happening.

Now we learn the Canadian based Bank of Nova Scotia has now been caught with their hand in the cookie jar and charged with “spoofing” the gold and silver markets.”

Chuck Again… When will this stuff be stopped? BNS was only fined $800,000 for these illegal trading programs… Now $800,000 is a lot of money, but no where near where the fines and to go further the jail sentences should be for these types of crimes against people and their investments!

Currencies  today 10/3/18… American Style: A$ .7150, kiwi .6556, C$ .7795, euro 1.1548, sterling 1.2974, Swiss $1.0126, European Style: rand 14.3895, krone 8.1834, SEK 8.9913, forint 279.70, zloty 3.7206, koruna 22.3279, RUB 65.26, yen 113.83, sing 1.3762, HKD 7.8378, INR 73.31, China 6.8679, peso 18.79, BRL 3.9778, Dollar Index 95.54, Oil $75.18, 10-year 3.07%, Silver $14.78, Platinum $833.55, Palladium $1,054.60, and Gold… $1,203.38

That’s it for today… It took 13 innings for the Rockies to defeat the Cubs in the Wild Card game last night… the tension was so thick you could cut it with a knife! I’m hot happy about this being the last season for the TV Show The Big Bang Theory…  That sure was a long run for that show! Well, the NHL hockey season is about to start… Let’s Go Blues!  Ever since our football team was stolen from the city, and if the Cardinals don’t make the playoffs, the focus shifts to the start of the NHL season! Live takes us to the finish line today, with their song: Selling The Drama… Live had a great first album, a not as good 2nd album and then fell of the face of the earth… At least as far as I’m concerned…  So, there you go with that bit of info! HA! I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself! 

Chuck Butler

 

Rocktober 2, 2018 

*Most currencies lose ground on the day

* U.S. manufacturing shows signs of weakening… 

Good Day… And a Tom Terrific Tuesday to you! 2 tiebreaker games in the National League yesterday was something new for baseball and its fans. The Cubs and Rockies lost so they become the wild card teams and thus will play a 1 -game play-in game tonight… I had a very nice lunch yesterday with my longtime friend, and former boss, Frank Trotter… It seems that both of us have been doing a lot of travel this year, and not much time at home… For all of you who have wondered what Frank is up to… he’s enjoying retirement, and looked very comfortable and relaxed… Neil Young greets me this morning with his song: The Needle & The Damage Done… (I used to play that song on the guitar!)

Well, one day above the 1.15 handle was all the euro got to enjoy, as it was back to below 1.16 once again yesterday… The Data in the U.S. didn’t warrant a dollar rally, but it did anyway… this downward move was really sparked by an Italian official spouting off about how Italy would be better off outside the euro… A senior official from Italy’s ruling party said most of the country’s problems would be resolved if it scrapped the euro for a national currency, triggering a broad market sell-off. 

Most of the euro’s losses came after Claudio Borghi, the economic head of the ruling League party, said Italy would enjoy more favorable economic conditions outside the euro zone, and said Italy’s government had no intention of leaving the euro.  But the markets didn’t wait around for his softener statement… And the euro’s still getting sold this morning, which means the other currencies aren’t being able to wander too far from the porch…  Kind of reminds me of the old saying: Loose lips, sink ships…  

The price of Oil jumped higher once again yesterday and this morning is trading with a $75 handle… So, the Petrol currencies are the only currencies that have been able to at least hold onto previous gains… The Russian ruble continues to lead the Petrol Currencies, with other Petrol Currencies following that include: The Norwegian krone, Canadian dollar/ loonie, and Brazilian real… 

 Speaking of the data, I know I told you that there wasn’t much real economic data until later this week, but the U.S. ISM Index (manufacturing) for September printed and showed that the Trade War is beginning to show up here (recall yesterday I told you it would begin to show up soon?) as the index fell from 61.3 in August to 59.8 in September. This is the first piece of data to show the Trade War’s effects, and it certainly wasn’t good! But, as I said, the dollar rallied… go figure…

I have many a thought about things going on throughout the day, every day, no matter what I’m doing, there’s always time to think about what to do if all the debt comes crashing down on economies all over the world, but more importantly for you and me, (except overseas readers) here in the U.S…. I used to have a saying that I would pull out in times like this, in my DTL pieces… I would say… Got Gold?

BTW, the Pfennig Replies site has been fixed and is no longer on the fritz… So, yesterday, I had a few questions that the readers wanted me to talk about in the Pfennig… So, here goes…

First… the reader said they heard that the Fed was now under the Treasury… Well, that’s not true… The most important thing to understand is that the relationship between the two organizations is circular. In its simplest form that means the Treasury pays interest to the Federal Reserve on the sovereign debt securities the Fed holds and, in return, the Fed rebates that interest back to the Treasury.

Next up… the reader wanted to know my thoughts on the Trade War… I realize that not everybody reads the Pfennig every day it’s received in their email box. So, I won’t be a smart Alec here, and just repeat what I’ve said previously, that the Trade War is not good for either country’s respective economy… The idea is to outlast the other country… But in the meantime, the two economies are being reduced to shreds… The latest example of this is the tariffs that President Bush placed on Japanese Steel back in 2001… And the furthest example is the Great Depression… The Smoot-Hawley Tariffs maybe didn’t cause the depression, but they were at the scene of the crime…

And then finally, the reader wanted to know what I was talking about when I said that China was in control of Gold and doing it with the blessing of the U.S. even though it’s illegal… Well, I went through this some time ago, showing how the Chinese are using their ability to direct the price of Gold lower, just like they do their currency, the renminbi during the Trade War to offset the tariffs being charged on their exports to the U.S. Well, the Hunt Brothers were caught trying to corner the price of Silver back in the late 70’s… And to me, what China is doing is trying to corner the price of Gold…

I want to welcome a new batch of readers to the Pfennig this morning… They received their first taste of what will be in their email box 4 days a week yesterday…

OK… lots’ of discussion this morning with Gold in mind…  The shiny metal lost about $3.60 yesterday but is attempting to recover that loss this morning, in the early trading Gold is up $2.50… The Gata folks sent me a note yesterday telling me that Central Banks around the world increased their Gold holdings by 264 Tonnes this year… The Usual suspects are the top of the list for Gold purchases, Russia and China, but there are more like: Turkey, and Kazakhstan… The reason the GATA folks sent me the note was to highlight that Poland also bought gold for the first time since 1998! 

To Recap… The currencies couldn’t hold onto gains after an Italian official spouted off about how Italy would be better off outside the euro, and that chopped the euro’s value off at the knees… U.S. Data (manufacturing index) was weaker once again, this one showed the beginnings of the Trade War’s effects. Gold lost a few shekels on the day, but the price of Oil continues to rise and allow the Petrol Currencies to at least hold onto their gains… 

For What It’s Worth… Debt is a real problem for a lot of Governments, states, corporations, and people. The one that could be gotten ride of first is the debt that people have… Longtime reader, and someone that supplies me with ample fodder to read each day, Bob, sent me this one and it can be found here: https://www.inc.com/ryan-jenkins/this-is-millennials-number-1-life-goal.html?cid=sf01001?utm_campaign=swirled&utm_medium=email&utm_source=newsletter

Or, here’s your snippet: “$42K, the average debt of millennials. Debt is not only impacting millennials’ ability to amp up their wealth and savings — 23 percent claim that money issues make them physically ill on a weekly or monthly basis. And 94 percent report that their number one financial goal is to pay off all of their debt.

About 67 percent of Millennials (versus 32 percent of Baby Boomers) say financial stress overtakes their ability to focus and be productive at work.

Sixty-eight percent of Millennials say debt has had a “negative impact” on their relationships with their spouse/partner, friends, and colleagues.”

Chuck Again… the thing I found promising in all these debt numbers is that 94% report that they number one financial goal is to pay off all of their debt… Do you see the problem with having all that debt is having on their ability to begin to build wealth, store wealth? It ain’t gonna happen as long as their focus is on paying off debt…

Currencies today 10/2/18… American Style: A$ .7178, kiwi .6583, C$ .7795, euro 1.1527, sterling 1.2958, Swiss $1.0162, European Style: rand 14.3983, krone 8.1855, SEK 9.0027, forint 280.88, zloty 3.7232, koruna 22.3728, RUB 65.39, yen 113.77, sing 1.3748, HKD 7.8350, INR 73.38, China 6.8679, peso 18.81, BRL 4.0341, Dollar Index 95.63, Oil $75.36, 10-year 3.06%, Silver $14.55, Platinum $821.00, Palladium $1,055.84, and Gold… $1,191.54

That’s it for today… Once again Welcome to new readers I sure hope you stick around as long as most of my current readers… It sure was good to catch up with my old Big Boss, Frank Trotter, yesterday. I hadn’t seen him in a month of Sundays… He still plays hockey! Simply amazing! Not much on the telly last night, but the Wild Card baseball game takes place tonight, which has so much tension in it as it’s a one loss and you’re done game… We’ll see who blinks first… ELO (Electric Light Orchestra) takes us to the finish line today with the live version of their song: Can’t Get It Out Of My Head…  I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler