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Chuck Butler’s: A Pfennig For Your Thoughts  

August 30, 2017 

* Lola sends the dollar higher on the day… 

* Gold sees 433,000 contracts in a day’s trading!

* Why are Americans so confident right now? 

 

Good day… And a Wonderful Wednesday to you! Yesterday was a “turn down day”…  The Cyrkle sang a song in the 60’s titled “turn down day”… It’s a turn down day, nothing on my mind, It’s a turn down day, and I dig it…  Well, I didn’t dig the turn down day yesterday, but it was what it was, and now we have to dig through the rubble and try to put together another rally for the currencies and metals…  The stylistics greets me this morning with their ballad song: Betcha By Golly Wow…  Betcha you don’t have that on your iPod! HA!  

Well, I nailed that scenario that I described yesterday, nearly bang on! But instead of European Central Bank (ECB) President beginning the jawboning to stop the bleeding in the dollar, it was Lola instead… Ahhh, yes, good old Government Sachs, pun intended, AKA Lola, showing that the old girl still gets what it wants, whenever she wants it… So, there we were going along just fine there was a little slippage in the euro but nothing to speak of, my goodness, there had to be some profit taking, don’t you think? But then the major move came, and I was frantically looking for the reason the dollar rebounded so strongly, and there it was… Lola had gotten the wink and nod from the Treasury to say something about the dollar, and Lola did… (Ok, longtime readers know that I’m just playing this out in my mind, that I don’t know if it really happened this way or not) So, what did Lola say that got the dollar so gussied up after getting sand kicked in its face all day on Monday? I’ll tell you… I just have to take a deep breath and exhale. Because I still don’t see how we got to this point with Government Sachs running the show… OK… here’s the main quote from Lola…

“The biggest pain trade, no question, has been the dollar. You really have to look at fundamentals and step back from, geopolitical risk, political risk, and weaker inflation over the course of the last few months, and really look at what’s going on from the economic perspective. The dollar is very, very attractive right now.” – Mike Swell, co-head of global fixed-income portfolio management at Goldman Sachs.

I’m playing this whole thing out in my head here… So, this guy gets a instant message that his boss wants to see him, and he thinks, “I’m in the money, I’m in the money”, and he reports to the boss, and the boss gives him this note of what to say, and he walks out of the office very dejected, thinking, “me? Why me? Why do I have to go on Bloomberg TV and say this stuff, when everyone else in the markets is thinking the opposite? I’m going to look very foolish, but wait! We’re Government Sachs, what we say is the gospel! So, I’m going to go there and sound very convincing, and then watch the markets react”

OK, I’m back from my visit to the funny farm… I really do believe that it all happened like that, but the point is, that Government Sachs doesn’t say stuff unless they have some skin in the game… That’s right, they probably had either short trades lined up, or really needed to buy a large sum of euros, at a much cheaper price… That’s how the game is played by the Big Boys folks… So, does this mean the euro rally is over? Not just no! Hell-no! Like I described yesterday, the set backs from jawboning will be short-lived, but on a short-term basis effective, as the trajectory of the euro and the Dollar as witnessed by the Dollar Index is quite evident, and I don’t think can be all-out stopped at this point!  

And if you think that was the only place we saw the intervention taking place (dollar/ euro) well think again, because Gold also got taken to the gauntlet of intervention… Folks, there were 433,000 contracts traded yesterday in Gold… ARE YOU KIDDING ME?  Sadly, no… 433,000 contracts to see the fluctuation of Gold rise to $1,331.90 but end the day around $1,308.00… The after hours trading saw Gold recover a bit, and has opened in the early morning trading today at $1,316…  

I was happy that “the boys in the band” didn’t whack Gold that much that it fell below $1,300…  Was this just a warning shot across the Gold Bugs bow by “the boys in the band” to remind the Gold Bugs what kind of hell they can bring down on Gold if they want to?  You know, I’m really not that upset about this move yesterday, for I saw it coming… Of course that doesn’t mean I liked it, but if it does one thing, it gives Gold a cheaper price to buy today, before the shiny metal gets back on the rally tracks, which in my mind is going to happen, no two ways about it!  Of course that’s my opinion and I could be wrong…  

As I mentioned above, the Dollar Index sure got a boost from the jawboning, and probably some actual intervention from the PPT (plunge protection team). I say that because the Dollar Index was in a free fall folks… Last Monday morning, the Dollar Index was 93.49, and yesterday before the turnaround the Dollar Index had fallen to 91.78… That’s free fall for that index folks… And if my job was to make sure the dollar retained its value, I would have been in a panic!  “Hello, yes it’s me, we need to intervene to stop the dollar’s plunge, can you give me some help here?” “sure we can, let me make some calls to the other members, and you’ll see the results later today, OK?” “yeah, thank you very much!” 

Boy, I’m sure playing out in my head a lot of conversations today, eh? Sorry if that bothers you, but if you’re a new reader, then you need to know that I’m a Simple Man that needs to have explanations for things, because without the explanation, there’s no logical reason for the event to have happened… And this is how I put closure on those unexplained events…   OK? 

Well, let’s see..  There were a small handful of currencies that didn’t get caught up in the whirlwind dollar trading yesterday…  And they include, the Chinese renminbi, the S. African rand, Swiss francs, and Indian rupee…   We could play the, “one of these currencies is not like the others” game, but Swiss francs are as evident here as that currency that’s not like the others, as a man with hatchet in his forehead!  OUCH! 

What the Swiss franc has become in the minds of traders is an ally of the dollar… The euro has taken liberties with both the dollar and the franc, so far this year… Remember when the SNB (Swiss National Bank) tried to hold a floor in the cross with the euro at 1.20?  Well that cross today sits at 1.1430…   The SNB came out late last year and said that the franc was overvalued, and then he repeated that line in a speech on July 28th… So, he’s wanting more weakness in the franc, and traders are more than happy to oblige him!  

Yesterday, I talked about European Central Bank (ECB) President, Mario Draghi, and how he would begin the jawboning, but Lola beat him to it…  Draghi’s next opportunity to speak will come on Sept. 7, when the ECB next meets…   By then, I would think the euro was back to following its trajectory higher, and then we’ll see what Draghi thinks of this euro strength. The ECB could make some comments that would slow down the euro’s ascent, but I don’t expect them to have an all-out stop effect on the euro… The currency has gained 14% VS the dollar so far this year, and you don’t just step out in front of a bus moving at that speed to stop it.. 

The price of Oil continues to wallow in the mud, but slip a little lower each day…  The price of gas has sure gone higher due to the problems that Hurricane Harvey is having on Oil refineries in that area of Texas… Now the Hurricane, which has been reduced to a tropical storm will move North, and bring us rain this weekend… UGH! But compared to what the people of Houston and areas surrounding Houston are going through, that’s nothing!  

Well…  I have to get this off my chest this morning… On Monday we saw Consumer Confidence rise from an index number of 120, to 122.9… And this is a pulse that was taken this month! But yet we have floods of great magnitude in Texas, and are on the brink of nuclear war with N. Korea, but hey! Let’s be confident, and dance in the streets!   I can’t get over the non-caring about this stuff that’s going on…  Following North Korea’s firing a ballistic missile across Japan overnight, China has warned that tensions on the Korean peninsula have reached a “tipping point” and urged all sides to avoid provocations.  

Provocations? Aren’t we past that point? N. Korea fired a ballistic missile over the country of Japan, for crying out loud!  And then they brazenly boasted about shooting one over Guam, next!  And we thought Hussein was a nut-case!  President Trump responded by saying that “all options are open” And maybe with China and Russia pleading with N. Korea to back off, some diplomatic resolution can be gained…  But if you asked me, on the Butler Patio, I would say, this is too crazy for diplomacy…  We’ve tried that T-shirt on, and it didn’t fit…  But as long as there’s still a chance, and only a chance because Slim left town, we have something to pray for…     

OK, I’m down from my soapbox now… Sorry for that tirade, but things are looking pretty grim, and yet people don’t seem to see the writing on the wall… UGH!   The U.S. Data Cupboard today has the latest revision to 2nd QTR GDP, which should be around 2.8%, and the ADP Employment Report, which is used as an indicator of Friday’s BLS experiment, I mean Jobs report.. I’ve said it before, and I’ll say it again, that the ADP report should play a larger role in determining our jobs picture in this country… 

As Pfennig readers, you know I don’t believe one iota of the BLS’s jobs report… I get my numbers from the Debt Clock…  And I even have a Debt Clock app on my iPhone!  And I just have one question for the Fed… What are you going to do about the 94+ Million Americans that are “not in the work force now?”  Raise interest rates again? yeah, that will do the trick…  NOT!   

To recap…  Well it was a turn down day on Tuesday, and Lola made certain that the euro and Gold’s ascents were at least slowed down… The ECB meets next week, what will Draghi have to say about euro strength? N. Korea fires a ballistic missile over Japan, and the tensions ratchet higher… And what’s up with Swiss francs?  

For What It’s Worth…  I searched and searched this morning for a FWIW article and had to settle on this one, which is about how the smaller, dictator run, countries are issuing bonds this year, and they are in demand, for their higher yields…  There can’t be anything that goes wrong with that is there? I shake my head in disbelief, but anyway, you can find the article here: https://www.bloomberg.com/news/articles/2017-08-30/looks-like-2017-is-the-year-of-the-dictator-bond  

Or, here’s your snippet:”Investors’ thirst for yield has lured many a dollar-bond virgin to market this year, with Tajikistan the latest to be testing the waters.

The Central Asian nation starts investor meetings on Thursday, and may sell dollar notes thereafter, a first for Tajik President Emomali Rahmon, who last year won a referendum to rule the remittances-dependent country for life.

Tajikistan wouldn’t be the first sovereign issuer currently rated B- by Standard & Poor’s to sell dollar-denominated bonds in 2017, with at least five others issuing. But at $850, it has one of the lowest GDP-per-capita ratios of all the sovereigns S&P rates.”   

Currencies today 8/30/17… American Style: A$ .7954, kiwi .7244, C$ .7979, euro 1.1947, sterling 1.2927, Swiss $.9561, … European Style: rand 13.0351, krone 7.7947, SEK 7.9547, HUF 255.63, zloty 3.5069, koruna 21.8282, RUB 58.63, yen 109.86, sing 1.3556, HKD 7.8299, INR 63.89, China 6.6010, peso 17.87, BRL 3.1655, Dollar Index 92.45, Oil $46.19, 10yr 2.13%, Silver $17.50, Platinum $993.78, Palladium $941.75, and Gold… $1,316.00

That’s it for today… Boy I sure did carry on about stuff today, eh? Sorry, for those of you who want a short letter every day. There are just days when I have to get stuff off my chest! My Cardinals get another good pitched game by the rookie, Weaver, and win last night. A day game today, but it’s in Milwaukee!  My CPAP machine isn’t doing the trick for me, as I think the effects of my chemo infusions are trumping the CPAP… And that means I’m up in the middle of the night. That’s a bad habit to fall into again, I’ve got to do something different! I mentioned the Cyrkle in the opening, and guess who’s taking us to the finish line today?  The Cyrkle takes us the finish line with their song: Red Rubber Ball…  the Cyrkle’s claim to fame is that they were the opening band for the Beatles! And with that I’ll get out of your hair for today… I hope you have a Wonderful Wednesday, and Be Good To Yourself!

Chuck Butler’s: A Pfennig For Your Thoughts 

August 29,2017

* Currencies have a strong performance day

* Gold pushes past $1,300! 

* Chuck remembers the currency roundup today!

 

Good Day… And a Tom Terrific Tuesday to you! What a day, what a day, yesterday for the currencies and metals! I know this could all end abruptly with interventions, so I’m going to savor a day like yesterday for a long time! No baseball for me last night, had me in front of the computer, reading article after article, so you would think I would be loaded for bear this morning… I guess we’ll have to see?  Frank Sinatra greets me this morning with his song: The Way You Look Tonight… That was the song that my darling daughter, Dawn, and I danced to at her wedding reception. So, whenever I hear this song on my iPod, I get nostalgic, and remember just how beautiful she looked that day…

Front and Center this morning… Boy did I have a brain drain or what yesterday? I had written all the prices down for the currency roundup, and then completely forgot to put them in the Pfennig! UGH! This senior moment has been brought to you by the makers of my chemo drug! And for once I wasn’t being sheepish about the reporting the prices, they were all good! Oh well, I’ll make certain they are included today. Sorry about that! But going forward, remember that I’m not the one to ask to remember to bring you your hear pill! HA!

Well, I don’t know where to start… Either with the euro’s rise, or Gold’s rise… Hmmm…  OK, I’ll flip my Mogambo Guru, 1 0z. Silver coin that I keep in my pocket…  heads it’s the euro, tails it’s Gold…  OK, it’s heads, so Gold, which end of the field would you like to defend? HA!

The euro has climbed back to trade well above the 1.20 handle overnight, after moving steadily through the 1.19 handle in yesterday’s trading. In the middle of June, I wrote about how the sentiment was changing toward the dollar, and it was being questioned as to whether or not the dollar deserved the love of traders any longer…  The euro was 109…  Last night I read an article from a currency trader, who basically said the same thing I did back in June!   Here’s what the trader actually had to say… ” If you are a global asset allocator, the status of the U.S. dollar is really being questioned. Is it necessarily the currency that justifies the same status as it has in the past years? I think strategically you can make the case that the dollar could see its status revisited downwards which would benefit the euro, and not only the euro, but also the Chinese renminbi.”

OK, Chuck again, glad to see this guy jumping on my euro train that left the station back in June!  OK, I mentioned the “I” word above, and here’s where I have to let a little air out of the currencies’ balloons… When is European Central Bank (ECB) President, Mario Draghi, going to say, “Whoa there partner, we can’t have the euro soaring like this, as it will wipe out the rising inflation we have right now.” And with that, he’ll attempt to jawbone the euro back down, and when that doesn’t work, look for some coordinated effort among the G-7 nations to slow down the dollar’s decline.

That’s just how I see this playing out… the good news about this scenario is that all the potential buyers of euros, that procrastinated and wanted to see more proof of a weak dollar trend, will be able to buy at cheaper levels for the next leg up because, as I just mentioned… This is a weak dollar trend that began in January 2017… and there won’t be any stopping it in its tracks by jawboning or actual intervention for these things can only halt the forward movement for a short-lived period of time.

The rest of the currencies are attached to the euro train, so they all look good this morning, but I wanted to make special mention of the Norwegian krone and Swedish krona… I told you last week that these two have been quite active in the recent months, and now that more traders, investors, hedge fund managers, etc. have jumped on board the euro train, currencies that were dragged down by the euro, are being rewarded as the euro rises again.  The Norwegian krone is especially standing out, in that the rise in the price of Oil has petered out, and has actually lost ground the last few trading days.

Well, it’s time to switch to the other side of the coin, which is me talking about Gold..  Gold too, had a strong, steady climb yesterday, gaining $18 on the day and has gained a few more bucks in the early morning trading today to sit at $1,325 as I write…  I had been telling you, dear readers, over and over again that this dance is gonna be a drag, no wait! Try this instead, I’ve been telling you over and over again that I believed that Gold was getting ready to go on a strong run…  And in my humble, country boy opinion, this is just the beginning…  For if the dollar’s status is being questioned like I talked about above, then Gold is the natural replacement for the dollar…  Got it? Good!

Back in the 2003, I used to write in this space about Gold and how everyone needed to buy some Gold… I know, I know, I still say that all the time, but back in 2003, this was new to people’s ears…  About 6 years later, I was at my local watering hole with my buddies, and someone said, that they didn’t have enough money to retire, and my good friend, Duane, said, “Well, if we had all just listened to Chuck 6 years ago,  and bought Gold, we’d all have enough money to retire!” I smiled like the Cheshire Cat… For I had bought Gold, over and over again as it rose in price…

OK, that’s enough of that Chuck! Even a blind squirrel can find an acorn, so don’t go thinking you’re all that and then some!  HA! Of course I don’t think that way! I’m just a country bumpkin that uses logic and fundamentals and trend analysis to get him through this every day… Oh, and I still think that Gold can get to $1,400 by year end… I’m just saying…

When the price of Oil began its recovery from $25 last year, every day I would mention the Russian Ruble as leading the pack of Petrol Currencies…  The ruble, in recent weeks, has taken a back seat and allowed the Canadian loonie to get in the driver’s seat on some days, and the Norwegian krone on others, and then the Brazilian real on the remainder of days…  But there’s an article out there today regarding Russia paying down all of the USSR’s debts, and that should be a good thing for the ruble!

I don’t know if you’ve noticed or not but the Central Bank of Russia (CBR) has slowed down their rate cuts… I thought that by now the CBR would be cutting rates at nearly every meeting, but they’ve slowed those rate cuts down, and that has helped underpin the ruble, while the price of Oil wallows around in the mud.  So, that article about Russia paying off all of the Soviet Union’s debts ($70 Billion) is the featured article in the FWIW section today, make sure you check it out… 

The U.S. Data Cupboard has a couple of prints for us to view today… First up in the Case/Shiller Home Price Index, which was last seen printing at 5.6% on the good side… Of course the excuse that was given for the awful print last week of New Home Sales was that home prices had gotten too high, so this will be interesting to see…  Then the stupid Consumer Confidence report, which will probably show a rise in the index number…  This report always floors me, in how ridiculous it is, for it’s really just a pulse of the stock market… And that really digs at me, because when will these people ever learn that “THE STOCK MARKET IS NOT THE ECONOMY”!    Oh well… it is what it is, and I’ll just move along now to the Big Finish!

To recap…  It was a Marvelous Monday and overnight trading sessions for the euro and Gold… The dollar’s status is being questioned and that has the euro on the rise, while as I said yesterday, Yellen, opened the doors to a rise in the price of Gold when she failed to talk about interest rates or monetary policy last Friday. Might as well get used to this kind of stuff folks, because the weak dollar trend is here to stay!   

For What It’s Worth…  Well, I mentioned this above, so no reason to get into a long discussion about it… You can read all about Russia paying off the USSR’s debts here: http://russiafeed.com/russia-pays-last-soviet-debt/    

Or, here’s your snippet: “An aspect of the events surrounding the dissolution of the USSR in 1991 which rarely gets discussed is that Russia took on itself the entire burden of paying the whole of the foreign debt owed by the USSR at the time of its collapse.

By contrast the other fourteen Soviet republics – now all of them independent states – were not required to pay any of this debt when the USSR collapsed.

The result was that from the moment it came into existence Russia found itself liable for the entire burden of the USSR’s debt – estimated to be around $70 billion – with just a few billion dollars held in the Russian Central Bank’s gold and foreign currency reserves to cover it.

By contrast the other republics of the USSR when they became independent found themselves entirely debt free.

In the event Russia has successfully discharged the whole of this huge Soviet debt burden it took on itself, steadily paying off all the USSR’s debt ever since Vladimir Putin became Russia’s President in 2000.
The final payment of $152 million to Bosnia has just been made, clearing the debt completely.” 

Chuck again…  That’s pretty impressive if you ask me! Especially since the country has had economic sanctions placed on it by not only the U.S. but also the European Union for the last 3 years… And like I said above, this should be good for the ruble!   

Currencies today 8/29/17… American Style: A$ .7955, kiwi .7276, C$ .8022, euro 1.2043, sterling 1.2965, Swiss $.9444, … European Style: rand 13.0763, krone 7.7127, SEK 7.9215, HUF 253.50, zloty 3.5404, koruna 21.6911, RUB 58.49, yen 108.52, sing 1.3518, HKD 7.8240, INR 63.97, China 6.6273, peso 17.89, BRL 3.1575, Dollar Index 91.78, Oil $46.62, 10yr 2.12%, Silver $17.57, Platinum $996.05, Palladium $943.88, and Gold… $1,325.60    

That’s it for today…  Looky there! I remembered the currency roundup today! YAHOO! Who says you can’t teach an old dog a new trick? HA!  Boy those are some pictures of the devastation of Hurricane Harvey aren’t they? I traded texts with my sister Joanie who lives in Tomball Texas, and she had to move out of her house to another location.. Living here by a river I know all about floods, but not of that magnitude!  I hope it’s just material things that get destroyed there, and not any human lives…  The Rev. Al Green takes us to the finish line today with his song:  Love and Happiness…  I love the beginning of this song, it just sets the stage for the rest of the song…  And with that thought, it’s time to go… So, please go out and have a Tom Terrific Tuesday, and Be Good To Yourself!

 

Chuck Butler’s: A Pfennig For Your Thoughts 

August 28, 2017  

* Yellen & Draghi disappoint on Friday

* Euro soars! Loonie does too!

* A way to hold off the wolves… 

 

Good day… And a Marvelous Monday to you! Well, I bounced back much quicker after last week’s infusion, so I had that going for me this weekend! Friday night, I had friends, Kevin, Rick and Laura stop by to watch some of the baseball game with me, and yesterday, Dawn, Jerry, Delaney and Everett were here to watch the game with me. The only game the Cardinals won over the weekend was the game I watched by myself! Hmmm… The Gin Blossoms greet me this morning with their song: Allison Road, which is my name for the Rick and Laura’s youngest girl, Allison. She’s in 8th grade now, so I don’t see her that often, but when I do, it’s Allison Road to me!  

Front and Center this morning, the euro is at a 2-year high, Gold is back to $1,300 and the assault on the dollar that began on Friday, was not cooled off any in the overnight markets last night. So, we begin the week with the dollar on ropes…  Let’s now talk about what the heck happened, or didn’t happen on Friday…   

Talk about disappointment! Whew! It was like going to the bottom of the ninth, when the Cardinals had, Jim Edmonds, Albert Pujols, and Scott Rolen, coming up to bat, and all three went down in order…. Both Janet Yellen and Mario Draghi decided to leave monetary policy discussions at home, and instead talked about regulations… Well, the euro soared, and I mean soared when the markets didn’t hear nary a word about interest rates from Janet Yellen. Nor did they hear nary a word from Draghi about euro strength, and with that it was off to the races for the euro!

I have no inside information on why she chose to talk about regulations, but I do have my imagination, and it was just my imagination, once again, running away with me… No wait! No time for songs Chuck, we need to be serious here… Had Yellen seen the writing on the wall, that she is going to be replaced when her term expires in February, and took this opportunity to take a shot at the President, who’ll be replacing her with someone else in Feb.? I mean it sure looked that way to me, as President Trump, has stated that he wants to delete some of the Volcker Rules, and Yellen comes out and talks tough about not changing regulations? You tell me, this sure looked like a shot in the dark to me..

So, the euro soared on Friday, all the way to 1.1926, from 1.786 earlier in the morning on Friday… That’s basically a 10-cent rise in the currency since I told people around the 3rd week of June when the euro was 1.09-ish, that the sentiment had changed, and traders were going long euros… About 3 weeks ago, I told readers that a hedge-fund manager, said that it was “lethal to be short euros”… When a hedge fund manager says something like that, folks… it’s time to back up the truck… So… I have to wonder, wonder who, who wrote the book of Love… But also wonder who read the writing on the wall back in June and July?

The Big Dog (euro) was off the porch chasing the dollar down the street, once again, just like in the days of 2003-2011… And for the most part the little dogs, (the rest of the currencies) followed the Big Dog’s lead… One of the best performing currencies on the day was the Aussie dollar (A$), followed by its kissin’ cousin across the Tasman, kiwi… And with hurricane Harvey devastating the South Texas coast, Oil held strong, and the Petrol Currencies led by the Canadian dollar / loonie, which gained 2-cents on the day, rallied too.

Gold was able to carve out a few bucks of gains, which surprised me, and I would have to think that the “boys in the band” kept a tight check on the shiny metal throughout the day… Boy I sure miss when Ed Steer is on vacation, because I don’t get his letter each morning, that is chock-full-news-and-information, and has the number of contracts traded each day in the metals. (edsteergoldandsilver.com) Gold closed on Friday at $1,297 and change, so for the week it lost $3, as it was Monday morning last week that I shouted out that Gold was trading at $1,300… 

And looky who is back to $1,300 on this Marvelous Monday morning! Why, it’s none other than Gold, as it has added $5 to it’s closing price on Friday in the early morning trading today to climb to $1,302, as I write.

Well, bust my buttons! I learned something on Friday that I had never heard of before, so I sure didn’t know about it! But now I do, thanks to the 5 Minute Forecast! (www.agorafinancial.com) So, there I was Friday evening, when I should have been at my local watering hole, but instead had just awakened from a fog brain induced afternoon nap. I woke up, and I was feeling better so I took a shot a reading email, and it was then that I learned that the U.S. Treasury holds its Gold at Fort Know at a value of $42.50 per ounce, instead of the market value of $1,297… James Rickards was explaining in “The 5” that, well, I’ll let him tell you… “The Treasury could get $355 billion in cash from thin air without increasing the debt simply by revaluing U.S. gold to a market price. Once the Treasury revalues the gold, the Treasury can issue new ‘gold certificates’ to the Fed and demand newly printed money in the Treasury’s account under the Gold Reserve Act of 1934. Since this money comes from gold revaluation, it does not increase the national debt and no debt ceiling legislation is required. This would be a way around the debt ceiling if Congress cannot increase it in a timely way.”

Chuck again… Hmmm… I also found out that this had been done before, by the Eisenhower administration in 1953! Wow! I love it when I learn new stuff to throw out at cocktail parties! HA! .  But that would sure be a simple way of not allowing the Gov’t to shutdown if an agreement on the Debt Ceiling can’t be worked out…  You know, holding off the wolves, if you will…  I don’t want to talk politics here, but since it involves debt I’ll give myself a pass…  I recall being in Panama on my last visit there, and woman from Texas cornered me, and asked me what I thought about the Tea Party. It was a loaded question, because I later found out that she was the Tea Party regional chair…  

Well, I said, that I thought the idea of the Tea Party was good, and that someone needed to step up and stop the madness of expanding our unsustainable debt. But then I went on to say that IF the Tea Party failed to stop the madness, then they will have failed…  So, look where we are now… Debt discussions and from what I read, the Tea Party members aren’t going to fold like a lawn chair like their colleagues when it comes to raising the Debt Ceiling… Good for them!     OK, now back to the currencies and metals… This debt talk usually gets me all frustrated, and I don’t need to be that way on a Marvelous Monday morning!  

I sent out a Tweet on Friday about the disappointment I had, and the markets had with the Yellen / Draghi Jackson Hole speeches… Just a reminder that should you want to get periodic tweets from me about things in the markets or even the Cardinals, you can find my handle by typing in: ChuckOButlerjr…  

  I don’t mean to slight the other currencies out there folks, there are just so many of them that it would be a 10-page letter if I talked about all of them! But the currencies that I like to follow are usually the ones I talk about, but that doesn’t mean I’m not watching the other ones. Each morning I scour the currency values to see if there’s a rally going on that I wasn’t aware of…  So with that in mind, here are some of the currencies that really put on the Ritz in Friday’s trading…   The Norwegian krone, The Swedish krona, the Hungarian forint, Polish zloty, Czech koruna, Russian ruble, Singapore dollar, Indian rupee, Chinese renminbi, and Brazilian real…   

Adding to the dollar’s problems on Friday was the awful print of Durable Goods Orders for July of a negative -6.8%… The U.S. Data Cupboard didn’t have to take all the heat for the dollar’s drop on Friday though, and most observers and participants weren’t paying much attention to this awful print, of real economic data… 

 

To recap… Yellen and Draghi chose not to talk monetary policy or currency strength in their Jackson Hole speeches on Friday, and that gave the markets an indication that rate hikes are on hold here in the U.S. and that Draghi, isn’t concerned about euro strength. With those two things in mind, the euro soared! And took the other currencies along for a ride on the euro rally train. Gold has climbed back over $1,300 in the early morning trading today, and Chuck rambles on and on about other things this morning…  

This week’s Data Cupboard has some data prints that aren’t earth movers, but will be interesting to see, like the Case/ Shiller Home Price Index, and of course on Friday, we’ll have a Jobs Jamboree… Ooohhh, I can’t wait for that!  NOT!  

For What It’s Worth….   Well, there’s a ton of talk going around about the tariffs, taxes, or other trade barriers that the U.S. Gov’t is going to implement VS China… I shake my head in disbelief that it has come to this, but it is what it is, and this article on zerohedge.com talks about how China might respond to these measures, and can be found here:http://www.zerohedge.com/news/2017-08-27/unloading-dollar-assets-would-be-most-effective-chinese-state-media-outlines-trade-w    

Or, here’s your snippet: “China state media immediately signaled the nation would hit back against any trade measures, as it has done in past episodes, and now, thanks to a treatise in Chinese official mouthpiece, China People’s Daily newspaper, we have an idea of what those countermeasures could be…

China could take three countermeasures against the recent “Section 301” investigation initiated by the U.S. government, experts told Chinanews.com

With growing trade friction between the two largest economies, the spokesperson of China’s Ministry of Commerce made a strong response on Monday, saying China strongly opposes unilateral and trade protectionism acts conducted by the U.S., and will take all appropriate measures to safeguard its legitimate interests.

According to the report, limiting imports from the U.S., reducing exports to the U.S., and unloading dollar assets would be the [[[three]]] most effective countermeasures.”  

Chuck again… One has to take a good long look and think about the last countermeasure listed there… “unloading dollar assets”…  Talk about something that could send the dollar for a long ride on the slippery slope!

That’s it for today… I put the finishing touches on my DTL letter for this Thursday over the weekend. I know, you’re asking, “does the guy ever stop writing?”  HA!  This week’s letter is about the ban on cash that’s going on, and I don’t hold back with my thoughts from the Butler Patio! I know it costs to read the Dow Theory Letters, but I think it’s money well spent! www.dowtheoryletters.com    Well, next Monday, I’ll be recovering from two days of cooking, and having fun at the Butler Labor Day BBQ! This traditional BBQ got its start many years ago, when former neighbor Kevin, said let’s do a BBQ together and invite the neighbors. Well he moved a few years later, and I took the whole shebang over…  if you’re in the neighborhood next Sunday, drop on in! HA! Cheap Trick takes us to the finish line today with their song: Surrender…  And with that, it’s time to wish you a have a Marvelous Monday… And Be Good To Yourself!     

 

Chuck Butler’s: A Pfennig For Your Thoughts 

August 24, 2017 

* Weak U.S. data sends the dollar down

* Sweden’s Unemployment Rate drops!

* Norway’s 2nd QTR GDP beat expectations!

 

Good day…  And a Tub Thumpin’ Thursday to you! I saw a sign yesterday in a doctor’s office that I’m going to adopt as one of my own, it read: Today is a good day to have a good day…  Loved it! It’s amazing what they can do these days. Yesterday, they put four probes on me, waved a wand in front of my pacemaker, and voila! The computer lit up and reports started printing with all the data about what my heart has been doing in the past 3 months…  And they could do it remotely! Journey greets me this morning with their song from their early days (before Steve Perry): Of A Lifetime…  If you’ve never heard the pre-Perry, Journey stuff, you should take a listen…   

As we start the day today, the dollar, which got sold yesterday for a couple of reasons, has recovered some of those losses in the overnight trading.. But the Dollar Index which yesterday morning sat at 93.41 is lower this morning at 93.31…  Front and Center this morning, the dollar got sold yesterday because of weak economic data, even if it was 2ns Tier data, the large drop in New Home Sales of 9.4%,  to a 7-month low of 571,000… Apparently, new home prices are soaring and that kept the sales out of the reach of the Joe-six pack crowd.  

The other thing weighing on the dollar was the Trump speech in Arizona, where he threatened to shut down the government if he didn’t get funding for his wall… This wasn’t the first time the President had mentioned shutting down the government.  Is he sending a message to Congress to get off their duffs and get something done?   Maybe, or then maybe he was just playing to the crowd in Arizona yesterday who would love a wall!  Either way, the dollar got sold on the comments. 

We were supposed to see the color of the Markit PMI for the U.S. yesterday, but apparently the folks at Markit, hadn’t finished working the numbers…  So, comparatively speaking yesterday, we had Eurozone Flash Composite PMI rise, and in the U.S. we saw New Home Sales drop 9.4%, so the dollar got sold, and the euro got bought…  One thing I’ve noticed and I’m sure of you currency round up watchers have too, is that the euro has seen some good performances during the U.S. markets, and then sees selling in the overnight markets… You don’t think , nah… that couldn’t ever happen! Oh, shoot Rudy, I’ll just throw this out there… You don’t think that the European Central Bank (ECB) is intervening to keep the euro in check?  Well, if the markets get wind of that, the ECB will be in deep dookie for sure!  

Old school traders would love it if they found out a Central Bank was intervening in a market that the traders were thinking should be higher…  There used to be an old saying that I used over and over again, and that the markets have deeper pockets than any Central Bank…  But that thought has to be reviewed and changed, because these days, as we’ve found out, Central Banks print money like there’s no tomorrow, and there’s no recourse for doing so…   

I shake my head in disgust at what Central Banks have become… But that’s a discussion for the Butler Patio, which BTW is the name of my weekly letter that the paid subscribers at Dow Theory Letters get to read each Thursday night…  If you’re interested in checking them out, go to: www.dowtheoryletters.com  

Earlier this morning, Sweden printed their July Unemployment data, and Sweden’s unemployment rate decreased less-than-expected in July, figures from Statistics Sweden showed Thursday. The jobless rate dropped to 6.6% in July from 7.4% in June. Economists had expected the rate to fall to 5.9%. So, the real good news we hoped for here didn’t materialize, although a drop from 7.4% to 6.6% isn’t chopped liver, but I don’t think that this will be enough to get the Riksbank (Sweden’s Central Bank) to begin to significantly unwind their monetary policy of bond buying and negative rates.  

In Norway this morning we saw the color of their 2nd QTR GDP… REcall I had told you in a previous Pfennig that the hopes here were that 2nd QTR GDP would rise from the first QTR’s 0.2% print to 0.6% in the 2nd QTR… Well, Norway’s economic growth accelerated in the second quarter largely driven by investment and exports, Statistics Norway said Thursday with GDP  rising to 1.1% , which using my new math skills is  faster than the 0.2% expansion in the 1st QTR. At the same time, growth in Mainland-Norway held steady at 0.7%  in the 2nd QTR.  This is all good for Norway, folks, and should be a strong underpin for the krone’s rally.   

Today, on this infusion Thursday, the Fed’s Jackson Hole Boondoggle gets started, with the usual meet and greet, and cocktail reception, I’m sure, but tomorrow is what the markets and observers are waiting for… And that is the day that both Janet Yellen and Mario Draghi will both give speeches… Oh to be a bug and be able to read what they are going to say ahead of time would be cool…  I’m thinking it’s going to quite the market moving speeches you don’t want to miss, that is if you’re into that kind of thing… Some people could give two hoots about currencies, and economies as long as they have a job, put money in the bank so they can pay their bills, and have some left over for gas, groceries and giggles…

The folks over at the FXStreet.com who, first of all, think enough of my writing that they repost the Pfennig each day on their site, sent me a note and said if I had any initial reaction to the speeches tomorrow to send it to them…  Well, I might have some reactions, but I’m sure I won’t be able to focus on them long enough to write them out…  But, I might be ready to focus on Saturday or Sunday, when I just might Tweet out some thoughts…  

Gold wasn’t much of a participant in the markets yesterday, and this morning’s early morning trading has the shiny metal down $3, I guess the olive branch that President Trump extended to N. Korea is playing out here, but I wouldn’t get too upset with the $3 drop today, or Gold’s inability to move past $1,300 right now, and instead think of it as the train getting ready to leave the station, and keeping its doors open an extended time to allow everyone that wants to get on board to get on board! 

Today’s U.S. Data Cupboard has Existing Home Sales for July, along with the usual Tub Thumpin’ Thursday fare, of the Weekly Initial Jobless Claims, so not much here, but as yesterday’s 9.4% drop in New Home Sales proved, if the data moves that much, the markets will react accordingly! 

Tomorrow’s Data Cupboard finally has a real economic data print for us, in the July print of Durable Goods, along with Capital Goods… I expect these two to be very disappointing tomorrow, but I’m not sure the markets will even see them, as their focus is going to be on the Jackson Hole speeches later in the day…   

To recap…  Weak data in the U.S. deep sixed the dollar once again yesterday, although the dollar has rebounded a bit in the overnight markets. Chuck thinks there’s some funny business going on at the ECB…  Trump talked about a government shutdown again yesterday, which weighed on the dollar too. Sweden’s Unemployment Rate didn’t fall as much as they expected but still had a significant fall from 7.4% to 6.6%, and Norway’s 2nd QTR GDP printed better than expected at 1% with strong domestic activity… And Gold couldn’t find a bid or offer yesterday, but is down $3 in the early morning trading today.  

For What It’s Worth…  Last Friday, at our Fantasy Football League Draft, I don’t know how the conversation got to this, but I put on my tinfoil hat and began to preach to the guys about how the cashless society would mean the end of their privacy, and so forth… They all looked at me like a deer with the headlights on them…  So, I stopped…  Well, this is an article / opinion  by William Engdahl that I have no link to, that’s about a cashless society,  that dear reader Bob sent me…  

Here’s your snippet of this blog:

“Has it ever occurred to you that when you have no cash, you have no privacy?

An operation that began as a seemingly obscure academic discussion three years ago is now becoming a full-blown propaganda campaign by some of the most powerful institutions in the industrialized world. This is what rightly should be termed the War on Cash. Like the War on Terror, the War on Cancer, or the War on Drugs, its true agenda is sinister and opaque. If we are foolish enough to swallow the propaganda for the complete elimination of cash in favor of pure digital bank money, we can pretty much kiss our remaining autonomy and privacy goodbye. George Orwell’s 1984 (1949) will be here on steroids.””

Let me be clear. Here we discuss not various block-chain digital technologies, so-called crypto-currencies. We are not addressing private payment systems such as China’s WeChat. Nor do we discuss e-banking or use of bank credit cards such as Visa or Master Card or others. These are of an entirely different quality from the goal of the ongoing sinister war on cash. They are all private services, not state.

What we are discussing is a plot, and it is a plot, by leading central banks, select governments, the International Monetary Fund in collusion with major international banks to force citizens – in other words, us! – to give up holding cash or using it to pay for purchases. Instead, we would be forced to use digital bank credits. The difference, subtle though it may at first seem, is huge. As in India following the mad Modi US-inspired war on cash late in 2016, citizens would forever lose their personal freedom to decide how to pay or their privacy in terms of money. If I want to buy a car and pay cash to avoid bank interest charges, I cannot. My bank will limit the amount of digital money I can withdraw on any given day. If I want to stay in a nice hotel to celebrate a special day and pay cash for reasons of privacy, not possible. But this is just the surface.”

Chuck again…  I can’t even begin to express how important it is that we attempt to stop this in its tracks… But then most people just don’t care about this stuff, because it’s not the latest crazy Despacito song! But one day when there is no cash, they’ll look around and say, “how’d this happen?”  

Currencies today 8/24/17… American Style: A$ .7894, kiwi .7213, C$ .78, euro 1.1786, sterling 1.2820, Swiss $.9650, … European Style: rand 13.2085, krone 7.8557, SEK 8.0723, HUF 257.12, zloty 3.6311, koruna 22.1067, RUB 59.03, yen 109.34, sing 1.3615, HKD 7.8253, INR 64.00, China 6.6607, peso 17.69, BRL 3.1542, Dollar Index 93.31, Oil $48.18, 10yr 2.18%, Silver $17.01, Platinum $974.66, Palladium $932.34, and Gold… $1,291.70 

That’s It For Today… And this week, as I explained earlier this week, on infusion weeks, there’ll be on Pfennig on the Friday following the infusion…  Well, order was restored in the kingdom last night, as my beloved Cardinals beat the Padres… The heart doc says I’m doing fine, but wishes I wasn’t on chemo that messes up his numbers, I told him, “I feel for you” He laughed and said, “I didn’t mean to minimize your problems with chemo”…  I’ve been home alone the last two nights, which meant I was on my own for dinner, which in the old days would have meant eating food that’s not exactly good for you… But these days my appetite has gone to hell in a hand basket, so it’s not big deal as I don’t eat anyway!  And with that… The Temptations takes us to the finish line today with their song: Papa Was a Rolling Stone…   Now go out and do some Tub Thumpin’ today, OK?  And Be Good To Yourself!  And remember today is a good day to make it a good day!

 

Chuck Butler’s: A Pfennig For Your Thoughts 

August 23, 2017 

* Eurozone Composite PMI rises!

* Oil and Petrol Currencies can’t find a bid! 

* We need to get out of the mud! 

 

Good Day… And a Wonderful Wednesday to you! Well, the “day after” had everyone sharing their personal experiences with the Great American Solar Eclipse, they were all good stories! My beloved Cardinals got whacked by the Padres… Yes, I said the Padres… Yesterday’s trading was a real dud, and Elton John greets me this morning with his song: Mona Lisas and Mat Hatters… A good early morning song, for sure! 

Watching paint dry would be for interesting than the action in the currencies yesterday, as the Dog Days of Summer really had a grip on traders… In the overnight markets the euro was taking on some water,  which was easily bailed out when their latest PMI report printed and showed that manufacturing in the Eurozone is expanding faster than expected, and it’s not just Germany pulling the weight on this, folks… France showed a nice expansion too, as did the Club Med countries. 

For those of you who are keeping score at home the Eurozone PMI Index grew to 55.8 in August, which I’ll remind you any number over 50 represents expansion… The previous month’s index number was 55.7, so the recovery of the Eurozone economy continues, and this should go a long way to convince the European Central Bank president Mario Draghi that the economic stimulus of bond buying a negative deposit rates needs to begin to be unwound. 

So, the euro is a bit stronger this morning because of a fundamental economic report, but the rest of the currencies haven’t shaken the mud that they’ve been stuck in, off, yet…  So, a Jackson Hole Rebound (JHR) is what dollar bugs are positioning themselves for…  And that’s why if there’s been any movement in the currencies so far this week, it’s been about the dollar.  

So, what’s this JHR all about? Well, recall on Monday this week, I talked about the Fed’s Jackson Hole Wyoming Boondoggle that takes place this time of year every year, and how both Janet Yellen and Mario Draghi would be there, and my hopes were for Janet Yellen to not keep to the company line about how the U.S. economy is doing great, blah, blah, blah, but that Draghi would announce plans to unwind the Eurozone’s monetary stimulus.  

Well, apparently my wishes for Yellen, aren’t held by everyone… Hmmm, imagine that! Chuck’s thoughts being different than everyone else’s… I never would have thought that to take place, but there it is… amazing, don’t you think? HA!   OK, back to being serious…  Yes, apparently the dollar bugs believe that Yellen will also dive into the unwinding of the Fed’s Balance Sheet, and if that happens the dollar could very well rebound for a day or two. 

But all that doesn’t get started until tomorrow, but the positioning for a JHR is taking place now… UGH!  I prefer, much more that these markets react to what’s happening at the time, so there is no need to unwind positions and see the currencies whip around… But, it is what it is, and we are left to deal with everything. 

Above, I mentioned that the currencies, for the most part, are still stuck in the mud, and left that open for me to talk about the stealth moves of the Norwegian krone and Swedish krona…  I’ve been mentioning the krone and how it’s receiving love from the Oil rebound, and the euro rebound, but usually stop there and leave out the krona…  But the krona’s rally has been nearly as impressive as the krone’s rally, and today and tomorrow the krona could step up its moves if the economic data prints as I expect it to.  

For those of you who missed class on Monday or just a refresher on the data that will print in Norway and Sweden today and tomorrow, here you go… Norway will see a labor report and 2nd QTR GDP, and Sweden will see a labor report… I would love to see these two currencies react accordingly to the data prints, for that would mean fundamentals were present, if not for just a day…  

Pound sterling has seen itself in a gauntlet formed by the BREXIT talks… Apparently, the latest development that sent the pound to the woodshed, is the report that European Union laws will still affect the U.K. even after BREXIT…  Right now, I don’t think I would touch the pound with your ten foot pole… There are just too many unanswered questions surrounding the BREXIT talks and how they will weigh on the pound…  So, move along here, for these are not the droids you’re looking for! 

The price of Oil appears to be stuck in the same mud as the currencies, and therefore the Russian ruble and Brazilian real, along with the Canadian loonie, also remain in the mud. I have to think that sooner or later, love is gonna getcha, no wait!  I have to think that sooner or later, we’ll see the mud dry and the currencies and commodities will be able to break out of the mud’s grip…   

Next week, for example, we’ll return to a week of economic data here in the U.S. and that will provide the drive for the currencies to react.  And next Friday Sept. 1, will be a Jobs Jamboree, and we all know what kind of emphasis that report has on the dollar. I sit here and chuckle at that thought, because I have to wonder how many traders will actually be around on that Friday, since next weekend will be Labor Day…  

Speaking of Labor Day… it’s the last party weekend of summer, and when I was a kid, it meant the return to school, but these days they go back way before that! I have a big BBQ on Labor Day every year, and as we grow older, friends end up spending time away from home on Labor Day, and our crowds dwindle each year, but those that come are treated to what the Big Green Egg produces and a lot of comradery and games…  So, until it’s just me and Kathy attending the BBQ, I’ll keep cooking!  

Alrighty then, let’s get back to the markets!  Gold didn’t find a bid or offer to move it yesterday, and in the early morning trading today, it’s up a whopping $1.90!   One might be content with the move that Gold has booked so far this year…. But not me!  I still believe that Gold is cooking up something, and is gearing up for a strong run…  of course that’s my opinion and I could be wrong…  

  You know I say that a lot in this letter, that “it’s my opinion and I could be wrong”…  But in reality, isn’t the whole letter my opinion?  Oh well, it’s far better to put things out there front and center than to hide them in the fine print! 

The U.S. Data Cupboard has a couple of prints today, 2nd Tier that is… First up is the Markit PMI for August, and then the New Home Sales for July will print. I’m sure traders  will take a look at these two prints, shrug them off and move on to their appointment to get their boats primed and ready to go for this weekend!  

To recap…. Another day of doldrums as the Dog Days of Summer really have a grip on the markets right now. The euro was losing some ground overnight, but then a strong Composite PMI for August turned thing around for the single unit and it is up a bit on the day.  It appears that traders are positioning themselves for a Jackson Hole Rebound for the dollar…  

For What It’s Worth…  Well, I talk so much about debt, and consumer debt, that when I saw this report on MarketWatch I thought it would be good as an add-on to those talks about consumer debt…  So, it can be found here: http://www.marketwatch.com/story/one-thing-not-to-do-when-trying-to-improve-your-credit-score-2017-08-22?link=MW_popular  

Or, here’s your snippet:”People with bad credit who try to improve their score by signing up for “subprime” credit cards could be doing themselves more harm than good.

Personal-finance company NerdWallet analyzed 10 popular “subprime specialist issuer” cards (SSIs), which are marketed to people who have low credit scores and may have difficulty getting a regular credit card. On average, they cost consumers more than $150 a year in annual fees, application fees and maintenance fees, NerdWallet found.

“A lot of people don’t understand how subprime cards work,” said Kimberly Palmer, a credit card expert at NerdWallet. “When you dig into the details, they can actually really hurt you.” If every subprime consumer had one subprime specialist issuer card, and they all paid $150 a year in fees, they would be paying some $2.5 billion a year.

Consumers with low credit scores often find it difficult to get out of that credit category because they have few options for credit products to use, and the ones they can be approved for, including subprime credit cards, often have undesirable terms. In contrast, there are many credit cards available to people with higher scores that have no annual fee, application fee or maintenance fees. ” 

Chuck again…  This is the kind of stuff that people with credit problems need to hear, not tricks of the trade, or get rich quick schemes… 

Currencies today 8/23/17… American Style: A$ .7897, kiwi .7223, C$ .7812, euro 1.1785, sterling 1.2802, Swiss $.9691, … European Style: rand 13.2379, krone 7.8939, SEK 8.0969, HUF 257.40, zloty 3.6345, koruna 22.1604, RUB 59.02, yen 109.36, sing 1.3627, HKD 7.8258, INR 64.07, China 6.6598, peso 17.77, BRL 3.1602, Dollar Index 93.41, Oil $47.73, 10year 2.22%, Silver $17.14, Platinum $980.39, Palladium $936.46, and Gold… $1,292.90 

That’s it for today… I sat outside last night to watch the Cardinals/ Padres game, it was a nice cool evening, strange for August, but about 9pm I bagged it and came inside!  Well, as soon as I hit send on this today, I have to begin to get ready for my scans this morning.  it’ll be a busy morning for me, with scans, and then a visit with the heart doctor, and then a visit with the cardiac device people… By the time I’m finished with all that, I’ll be starving!  Alice in Chains takes us to the finish line today with their song: No Excuses…  And that reminds me of a saying that the old football coach used to say over and over… “Excuses never won a ballgame for anyone”…  And with that, I’ll send you on your way to having a Wonderful Wednesday… Be Good To Yourself!   

Chuck Butler’s: A Pfennig For Your Thoughts 

August 22, 2017 

* Euro rises, then falls with in 24 hours!

*A$, kiwi, krone and krona are quite active

* Munchin visits Fort Knox! 

 

Good Day… And a Tom Terrific Tuesday to you! Well, that was quite the experience yesterday, witnessing the Great American Solar Eclipse (GASE)… Everything got still, the crickets were chirping, because they thought it was night time, and in two minutes, it was over… Pretty cool, but I have to say, that’s one thing off my bucket list! It’s been a strange trading session in the past 24 hours, folks, and hopefully I can straighten it all out for you… Emerson, Lake and Palmer (ELP) greet me this morning with their iconic rock song: Lucky Man…  

Well, here goes…  Yesterday, the euro shot up past 1.18 and nearly hit its 2.5 year high  on comments in the Wall Street Journal (WSJ) “Draghi is likely to layout the end of Europe’s QE”. This article helped the euro after we saw some anonymous European Central Bank (ECB) sources that were  throwing ice water on the notion just last week. But the euro’s rise was short-lived, and in the overnight markets, it was put back below 1.18… But if you just looked at yesterday morning’s price of 1.1749, and today’s price of 1.1769, you would think that the euro had a good day… 

Well, “good day” in the whole scheme of things, to me 20 ticks in price is like removing a bucket of sand off the beach… nobody notices…  But all the other currencies have basically followed the euro’s lead, as they rose in price yesterday, and fell in price in the overnight trading. The Aussie dollar (A$) and kiwi have been two of the most active currencies in recent weeks, as traders position themselves for rate hikes from the countries of these two currencies, that should be coming sometime in the next 6 months… And yes, traders do look that far out at times..

 In kiwi’s case… This is the scenario I tried to tell you about months ago, when I told you that now would be the time to buy kiwi when traders and other big market participants weren’t pricing in a rate hike yet, and therefore you could get cheap kiwi prices before the Big Boys began to price a rate hike in…  

In both currencies, A$’s and kiwi, their respective Central Bank Governors will fight the markets tooth and nail every step forward either of these currencies take, so keep that in mind, there’s no one-way street in currencies, sorry…   

Another pair of currencies that have been quite active these past couple of months is the Norwegian krone and Swedish krona… I told you yesterday that both these countries have some important economic data reports printing this week, and the reports could underpin these two more… I would really love to see Sweden get out of the bond buying and negative rates monetary policy, as it would go a long way toward helping the krona continue its move VS the dollar. 

And then there’s the Chinese renminbi, of which, I talked about last week, and reminisced about 2003 and how back then you could almost bet and win that the renminbi would be appreciated overnight… Well, the renminbi is seeing appreciations in the overnight fixings on a frequent basis in the past couple of months, which coincides with better economic conditions in China… 

The Capital Flows out of China have subsided, and the Chinese Gov’t no longer has to spend their reserves to defend the currency, from these Capital outflows, and the reserves are in recovery mode, increasing the past few months. China is not out of the woods in any sense of the imagination, but at least they’ve moved closer to the edge of the forest..

 “I assume the Gold is still there”… Those were the words from U.S. Treasury Sec. Steve Mnuchin when he visited Fort Knox on Monday, marking only the 3rd official visit there by the Gov’t since it was built to house the Gov’t’s Gold in 1936 after FDR had confiscated the citizen’s Gold for $25 an ounce and then repriced it to $35… But that’s another story, this is about the Treasury Secretary’s visit to Fort Knox, where he quipped, “It would really be quite a movie if we walked in and there was no Gold” Funny guy, eh? He then assured his audience after taking the tour that the Gold was there… $200 Billion worth… However, he did also say seriously, that the Gold hasn’t actually been counted since 1953… 

Gold rallied a few bucks yesterday to $1,295… And I couldn’t get that Bob Dylan song out of my head all day… Knock, knock, knocking on heaven’s door, but replacing the lyrics with knocking on $1,300’s door… but before we book flights to watch Gold surpass $1,300, I have to tell you that the shiny metal has lost $6 in the early morning trading today, and is back to $1,290 and change…

I have to say that my attention has been grabbed by the industrial metals of Platinum and Palladium, and the narrowing of the spread between the two… Last week it was around $75, this week Palladium has closed the gap to just $40. That’s less frustrating to talk about than the goings on with the short Gold paper trading, for sure!  

I received an email from former colleague and friend, Chris Gaffney the other day, and in it was an article from the CFA, the organization that Chris belongs to. And in the article, they pretty much throw cold water on the reports about Consumer Debt hitting an all-time high… They conclude, and I somewhat agree, that the report doesn’t take into consideration the increase in population… So, basically more people can take on more debt…  And that’s a valid point, but… Should we be celebrating the fact that debt just keeps rising here in the U.S. no matter how many people there are?  I prefer to look at the debt of consumers on a “household basis”…   And on a household basis, consumer debt is still out of control, folks…  

My dad taught me at an early age, that numbers can be massaged and cooked to tell any story you want to hear… Do you want to hear that everything is hunky-dory, peaches and cream and sunshine, lollipops and rainbows, or do you want to hear that something might cause a problem down the road?  And depending on which mantra you take, you’ll go to that source for your data… It’s that simple…  

Me? I just tell it like it is, and let you dear reader decide what you want to listen to and what you don’t…  

OK, time to move on… The U.S. Data Cupboard is empty today, and I mean empty, not even a third tier data report like the one we saw yesterday when the Chicago region activity index printed negative…  Tomorrow we get back in the saddle with data as the Markit PMI (manufacturing index) for this month and July’s New Home Sales will print…  So, the dollar is on its own today, and in recent weeks that hasn’t been good for the green/peachback…  

To recap… A sharp rise in the euro yesterday was sold off in the overnight markets, but on a morning to morning comparison the euro is up today VS yesterday… All the other currencies are tagging along with the euro, which makes sense since the euro is the offset currency to the dollar. Chuck points out a couple of pairs that have been quite active lately, and the Treasury Sec. visits Fort Knox!   

For What it’s Worth….  this is really good folks… It’s a professor of economics at John Jay College, CUNY and a fellow at the Roosevelt Institute, named J.W. Mason, who points out that the economy is not running at full capacity and can be found here: “http://rooseveltinstitute.org/wp-content/uploads/2017/07/Monetary-Policy-Report-Brief.pdf  

Or, here’s your snippet: “U.S. GDP has not recovered from the 2008 financial crisis. Unemployment has returned to the level considered to be full employment, and price inflation is close to—if still short of—the Fed’s 2 percent target, seeming to indicate that the economy is using all productive labor, capital, and resources, or “operating at potential”. But participation in the labor force has declined and labor productivity (output per worker) has stagnated. The result: Output (or GDP) remains 15 percent below the pre-2007 trend line, a gap that is getting wider, not narrower, over time.

There is no historical precedent for the GDP slowdown, nor was it predicted by pre-recession forecasts. In the 60 years since World War II, periods of above-average growth have followed periods of below-average growth, and vice versa. But this is not the story since the Great Recession. The apparent recovery—the closing of the gap between potential GDP and actual GDP—is due to downward revisions of the estimated potential output. These estimates have been steadily revised downward since 2007, as economic growth has continued to disappoint. And so while the proverbial GDP ball has gotten closer to its goal, that is because the goalposts have been moving backward, not because the ball has been moving forward.”  

Chuck Again…  This is a very good dissection of the things the Fed and other economists have been pointing out that is holding back the economy, and if you’re into this stuff, this is definitely worth the read… 

Currencies today 8/22/17… American Style: A$ .7915, kiwi .7292, C$ .7788, euro 1.1769, sterling 1.2842, Swiss $.9655, … European Style: rand 13.2208, krone 7.9066, SEK 8.1027, HUF 258.12, zloty 3.6388, koruna 22.1784, RUB 59, yen 109.24, sing 1.3622, HKD 7.8262, INR 64.10, China 6.6681, peso 17.67, BRL 3.1467, Dollar Index 93.41, Oil $47.52, 10yr 2.20%, Silver $16.94, Platinum $974.32, Palladium $933.72, and Gold… $1,290.70 

That’s it for today… yesterday’s bright blue sun filled skies have given way to dark angry rain clouds this morning. There’s lots of noise going on outside as I write.  Did I hear that the President is going to send more troops to Afghanistan? And Graham Nash’s song: Military Madness is playing as I wrote that!  Hey! I don’t make that stuff up folks! Like I said above, I’m a “tell it like it is” kind of guy!  And one of my fave songs, and what I think is Jefferson Starship’s best song: Miracles takes us to the finish line today… If only you believed in miracles baby, so would I…  I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler’s: A Pfennig For Your Thoughts 

August 21, 2017 

* It’s Solar Eclipse Day!

* Currencies stuck in the mud… 

* A ton of overseas data this week!

 

Good day… And a Marvelous Monday to you! Well, today’s the day… The day the Solar Eclipse will take place across the U.S. Here in my little river town, we are in what’s called the “the path of totality”, which means we’ll get a good look at it… That is, as long as we have protective glasses to wear. I was very upset to read last week that there were glasses being sold as “protective” but weren’t… If I were king, I would put that CEO in jail and throw away the key, just to show Corporate America that we aren’t going to stand for that kind of greed, any longer! 

The day will turn to night, and the temps will drop, it will be very eerie… If you’re wanting to witness it, I hope you’re in a place that will allow you to see it today.  OK… now onto other things… But this Solar Eclipse is a BIG DEAL today, so that’s why I’ve taken up so much time with it to start the week.  

  Friday was a typical Dog Days of Summer trading wise in the currencies, as there was just no movement, to speak of, and little conviction of traders to make a call.  The euro is trading in the same clothes it has been in for a few days now, and I’m sure they are beginning to get a little rank! Time to change clothes, if you ask me! But there’s just nothing out there to move the currencies one-way or another right now… We went through the gauntlet of U.S. Data prints last week, and nothing… And now the Jackson Hole boondoggle will attempt to rattle the cages of currency traders… 

The Jackson Hole boondoggle won’t get started until Thursday this week, and this COULD be an important boondoggle, as both Fed Chair, Janet Yellen will attend, along with European Central Bank (ECB) President, Mario Draghi…   Both of the Central Banks that these two attendees represent, are looking at the unwinding of their balance sheets in the coming months, and either of these two, or maybe both will lay out plans for doing so at this meeting.  

You know… while Quantitative Easing (QE) / bond buying to this degree, has been done for some time by the Japanese, no Central Bank has ever gone through the unwinding of balance sheet… Think about that for a minute, and then come back… Ok, now doesn’t that scare the bejeebers out of you? It does me!  So, other than the presentations of these two Central Bankers, the rest of boondoggle will take a back seat and a nice ride through the Wyoming countryside!  

We will see a ton of overseas data this week, that could at least budge the currencies from the muck they’ve been stuck in for the past week…  But most of it doesn’t get printed until Wednesday and Thursday, which will still be before the JH Boondoggle, but it will seem like an eternity in the currency markets…  But here’s a roll call of the data print this week in places other than the U.S.   

Aug. 23:  Japanese Aug. Prelim. PMI (manufacturing index)… Considering how strong the 2nd QTR GDP in Japan was, this should be an interesting print, to see if the momentum is continuing.    Also on 8/23, we’ll see the color of Norway’s Unemployment Rate, which is expected to remain unchanged…   And the Eurozone’s Flash PMI’s for the month… And finally on 8/23, S. Africa will print their latest CPI report…   

Aug 24: Norway will lead us off on Thursday morning with their 2nd QTR GDP print, which is expected to have grown 0.6%, VS 0.2% in the 1st QTR, and that could add some flavor to the krone on Thursday…  Sweden will join the economic data prints party on Thursday with their July Unemployment Report, which is expected to see a HUGE drop from 7.4% to 5.9%!  And that could add some spice to the krona…  And then we’ll see the color of the prelim. 2nd QTR GDP report from the United Kingdom (UK) and here they are expecting 2nd QTR GDP to print at 0.3%, and the annual rate to be 1.7%…   Not a very good annual rate for the U.K.

And  that’s it, which is enough as far as I’m concerned! Too much data makes for a very boring letter, Chuck! I know, I know, but I had to find something that could shake the currencies out of these Dog Days of Summer! 

Well, I guess my fears on Friday morning about Gold climbing to $1,300 were not misplaced, as the “boys in the band” made sure that the shiny metal did NOT close at $1,300… Instead it fell to $1,292, which is where it starts the day today, as the early morning trading in Gold has not moved the price very much. OK, I don’t recall if I told the DTL (Dow Theory Letters) readers this, or I told you… So, if it’s new to you, we know which one it is… But unwinding the balance sheets is like raising interest rates, so keep an eye on that… 

So, why on earth did you decide to say that in the middle of a discussion on the price of Gold, Chuck? Ahhh grasshopper, come, sit and you’ll hear why…  You see, I’m darn sure stuck on proving that Gold can thrive even with higher interest rates, and so if the unwinding of the balance sheet is like rate hikes, then we’ll have to see how Gold reacts… And I’m about as sure as this as I am that the Cardinals are NOT going to the playoffs this year, that Gold will perform just fine with higher rates! 

Oh, there will be knee-jerk reactions to higher rates, but in the long run, they won’t matter… So, hear me now, and listen to me later about this…

 Longtime Pfennig readers, JMR Doug, recently sent me the latest print of the Great Mogambo Guru, and after I read it, I said, “darn, he’s not lost a beat, he’s still as good as he ever was”…  Should you ever want to read his stuff, which I’ll warn you hits on the Fed quite hard, simply go to: www.mogamboguru.com  

The U.S. Data Cupboard is going to go on a mini-vacation this week with only some housing reports to print until Friday when two real pieces of economic data, Durable & Capital Good Orders will print…  Friday’s Data Cupboard saw the U. of Michigan Consumer Confidence Index soar to a 97 handle from a 94 handle… What are all these people so confident about? 

Before I head to the Big Finish today, I have to make an IMPORTANT ANNOUCEMENT…  From now on the Fridays after my infusions, there won’t be a Pfennig… I used to have a bullpen of writers to fill in for me on those days, as Frank Trotter coined it: Infusion Confusion… But now it’s just me at my writing desk in my basement, with my IPod playing music and my fat fingers flying across the keyboard!  So… we’ll begin this new set up this Friday…  I hope you understand.  

To recap…  Today’s the Solar Eclipse, do you have glasses? The currencies are stuck in the Dog Days of Summer, and my fears about what the “boys in the band” would do to the price of Gold that had climbed to $1,300 on Friday morning we’re bang on, as Gold saw a ton of selling on Friday… We’ll see a ton of economic data print from overseas this week, and maybe there’s something there to rattle the cages of the currency traders… And the Fed’s Jackson Hole, Wyoming boondoggle starts this week…  

For what it’s worth…  One would think that I would be loaded for bear with FWIW articles today, but that’s not the case, but I did find this that I found interesting, and it’s in the NY TImes to boot! I’m no fan of the NYT, but every once in a while they have something FWIW worth, and you can find this one here: https://www.nytimes.com/interactive/2017/08/07/opinion/leonhardt-income-inequality…

Or, here’s your snippet: “Many Americans can’t remember anything other than an economy with skyrocketing inequality, in which living standards for most Americans are stagnating and the rich are pulling away. It feels inevitable. But it’s not. A well-known team of inequality researchers … has been getting some attention recently for a chart it produced. It shows the change in income between 1980 and 2014 for every point on the distribution, and it neatly summarizes the recent soaring of inequality. The message is straightforward. Only a few decades ago, the middle class and the poor weren’t just receiving healthy raises. Their take-home pay was rising even more rapidly, in percentage terms, than the pay of the rich. The post-inflation, after-tax raises that were typical for the middle class during the pre-1980 period – about 2 percent a year – translate into rapid gains in living standards. At that rate, a household’s income almost doubles every 34 years. In recent decades, by contrast, only very affluent families … have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else. The basic problem is that most families used to receive something approaching their fair share of economic growth, and they don’t anymore.” 

Chuck again… you should really hit the link above and see the graph/ chart they have on the site… OMG! no wonder the U.S. Economy can’t get off the canvas!  

Currencies today 8/21/17… American Style: A$ .7926, kiwi .7312, C$ .7760, euro 1.1749, sterling 1.2890, Swiss $ .9677, … European Style: rand 13.1557, krone 7.9062, SEK 8.0970, HUF 258.08, zloty 3.6376, koruna 22.1927, RUB 59.02, yen 109.13, sing 1.3624, HKD 7.8236, INR 64.07, China 6.6701, peso 17.69, BRL 3.1521, Dollar Index 93.49, Oil $48.63, 10-year 2.19%, Silver $16.99, Platinum $981.87, Palladium $933.40, and Gold… $1,292.30  

That’s it for today… Well, Jerry Lewis dies this weekend, as did Dick Gregory, a St. Louis native.. I know Jerry Lewis did stuff with Dean Martin early on, but all I can think about is his Muscular Dystrophy Telethons… He’ll be missed for sure…  Well, yesterday, was my darling daughter Dawn’s birthday! Happy Birthday scrawnie! I call her scrawnie, Dawnie, because she’s so tiny! 3 doctor visits, two scans and one infusion for me this week… Gee, I know how to have all the fun, eh? HA!  It was great seeing: Aaron, Mike, Christine, Jen, and Danielle on Friday afternoon, as they came to my little river town to see me! And then I participated in our Fantasy Football league draft… I don’t like me team already! UGH!   The Searchers take us to the finish line today with their song: Love Potion #9…   And with that I hope you have a Marvelous Monday and Solar Eclipse!  Be Good To Yourself!

 

Chuck Butler’s: A Pfennig For Your Thoughts  

 August 18, 2017 

* $1,300 and Chuck is scared…

* ECB looks for ideas to help them… 

* No overseas investments for you!

 

Good day… And a Happy Friday to one and all! Hey! I woke up this morning, and I don’t seem to be draggin’ the line! So, maybe this will turn out to be a Fantastico Friday! If not for me, I certainly hope for you! I usually open up the template to write the Pfennig with some thoughts about what I’m going to write about, but not today… UGH!  So, who knows where this will take us today!  Chicago greets me this morning with their song: Hard Habit To Break, which also happens to be my fave song by the group, followed closely by Beginnings…  

Well, looky there! Gold has traded to $1,300 this morning! I’ve made such a Big Deal about the $1,300 level that now that Gold is here, which is the first time it has visited $1,300 since November of last year, I’m getting scared… Scared of what? Those nasty “boys in the band”, that’s what! For the last time Gold climbed to a figure above $1,300, the “boys in the band” engineered a take down that was quite ugly for the price of Gold… 

So, which way will Gold go this time? Will it remain on the rally tracks and go higher, or will the “boys in the band” see to it that they derail Gold before it heads down the tracks? Yesterday, Gold gained $4.70 to close at $1,287.50, with a whopping 321,000 contracts traded.. That’s crazy volume folks… I just checked and we are still in the month of August. You know, when everyone goes on vacation, and the markets go stale for the month? The Dog Days of Summer and all that? 

I guess that if the U.S. wasn’t seemingly going from one crisis to the next, that the interest in Gold and the other precious metals would be lower on the scale, but that’s what we have, so we have to roll with the punches, right? Of course in this case, Gold is dolling out the punches!

The Big mover from yesterday morning is Palladium, which has hit a 16-year high, and has narrowed the spread to Platinum again to just $33… 

I read an article last night during the second rain delay of my beloved Cardinals game in Pittsburgh, that talked about how the European Central Bank (ECB) is looking for a way to unwind their stimulus without causing an overshoot of the euro…  This is where I put my tin foil hat on and act out a phone call from the ECB to the U.S. …   “hello, is anyone there? Yes, hello, we’re here! Good, because I have a problem that I think you can help me deal with. And that is, I’m afraid that the euro might take off for Neverland when we begin to unwind our stimulus, and I think you know what I’m going to ask for, right? What? We don’t have any idea what you’re going to ask for, but, for your information, we do have this Plunge Protection Team, and if the euro is soaring that means the dollar is getting sold like funnel cakes at the State Fair, and we’ll do whatever it takes to keep the dollar from falling off the cliff…  Do we understand each other?  Yes, of course and thank you…  OK, you can hang up now… No you hang up first, no you, OK, we’ll both hang up together on three… One, two, three… ” 

Alrighty then that sure was being silly, Chuck… What, me? Silly? I highly doubt that!  Ok, moving on… China was in the news last night, as they issued a order restricting domestic companies from investing in overseas property, hotels, entertainment and sports clubs, according to a State Council guideline posted on the government’s website. Companies will instead be encouraged to support the Belt and Road initiative linking the country across Asia and Europe.  I guess this is what happens when you are in a communist country, eh?   

The price of Oil has been range bound this week between $46 and $47, and no one really knows where it’s going next, except I like through my hat in the ring there and repeat what I said in my Dow Theory Letters (dowtheoryletters.com) article of a few weeks ago, which was that I thought the price of Oil would remain between $40 and $50, until something shakes out of the supply tree. 

And that means the countries with currencies that really depend on the price of Oil to determine their moves, are seeing their currencies move in tight ranges, up one day, down the next…  Countries like the Norwegian krone are very dependent on the moves in Oil, but they are also loosely tied to something else, which in this case is the euro, which means they get an added boost whenever the euro rallies.

And, although the rally has stalled, the euro has rallied in 2017… The euro began the year at 1.0484… And today is 1.1747… And just last week, we were looking at the 1.19 level for the single unit!  I’d call that a rally, wouldn’t you?  

From one crisis to another crisis has the safe haven assets whipping around, but just take  a look at Gold, yen, euro, and Treasury yields, and they’ll tell you if another crisis is taking place…  Gold is up, yen is stronger, the euro too, and the 10-year Treasury yield has fallen to 2.19%, when just earlier this week, when all the saber rattling had calmed down, was trading with a 2.28% yield..  Remember, bond pricing works like this, as the yield goes down the price of the bond goes up, and vice versa… So, when the yield is dropping, that means the price of the bond is going up from all the purchases. 

The U.S. Data Cupboard has two real economics prints for us yesterday, and one that’s just a tick below those two… Industrial Production was disappointing, and didn’t meet expectations (0.2% VS 0.3% exp.) and Capacity Utilization remained unchanged at 76.7%… And then leading Indicators were also disappointing, as they didn’t meet last month’s number (0.3% VS  0.6%)…  So, once again, the data came, and printed, and once again it revealed a weak economy…  

There’s really not much to today’s Data Cupboard.. The U. of Michigan Consumer Confidence index is about it, and of course it will print strong, because people are fooled easily… I’m just saying..   

To recap, Gold has finally made it back to $1,300 for the first times since Nov. 2016, overnight, and Chuck is scared… The ECB is looking for ways to keep the euro in check when they begin to unwind their stimulus, and China issued a restraining order on domestic companies to keep them from investing overseas, and preferably allocating their investment to China’s Belt & Road project. 

For What it’s Worth…  I’ve spent the better part of my life researching and preaching to people that they need to diversify their investment portfolios using assets that have a low correlation to the other asset in their portfolio, and to properly do that you need to add currencies and metals. Well, my good friend, the Retirementor, Dennis Miller, takes this one step further in this excellent piece on diversification that can be found here: http://milleronthemoney.com/diversification-trying-accomplish/  

Or, here’s your snippet: “Friend Courtenay W. referenced recent articles where Chuck Butler and I emphasized diversification. He made a great suggestion, “You should explain what you mean – diversification means different things to different people.”

I visited several mutual fund companies’ booths at The Money Show. Each company urged us to take our entire nest egg and invest it in their family of funds. By doing so, “We would be well diversified and safe.” Sorry, not diversified enough to suit my comfort level!

Dictionary.com defines the old saying, “Don’t put all your eggs in one basket”:
“Don’t concentrate all your prospects or resources in one thing or place, or you could lose everything.” (Emphasis mine)

While a fire is unlikely to happen, prudent homeowners buy insurance. Insurance does not alter the risk of a fire; it protects the homeowner from suffering catastrophic economic losses.”

Chuck again…  I sure hope that you all go and visit Dennis’s website, and sign up for his free weekly letter, for if you are retired, or thinking of retirement this letter is your bag, baby! 

Currencies today 8/18/17… American Style: A$ .7922, kiwi .7327, C$ .7902, euro 1.1747, sterling 1.2892, Swiss $.9616, … European Style: rand 13.2237, krone 7.9322, SEK 8.1145, HUF 258.24, zloty 3.6411, koruna 22.2197, RUB 59.24, yen 109.04, sing 1.3633, HKD 7.8221, INR 64.10, China 6.6746, peso 17.85, BRL 3.1592, Dollar Index 93.51, Oil $47.23, 10yr 2.19%, Silver $17.18, Platinum $966.45, Palladium $933.25, and Gold… $1,300.30  

That’s it for today… I just about turned the game off last night after the Cardinals fell behind 5-1, but I didn’t, and I was rewarded with a rally that gave them the game 11-7…  Well, one week after my infusion and I finally feel half human!  Just in time for a reunion later this afternoon with former colleagues… I’m scheduled for new scans next Wednesday, so I’ll know more about what’s going on inside of me when those results get printed. Fun stuff, eh?  My writing desk here at home has a ton of pictures pinned to it. One is a fave of mine… It’s a picture of me, my younger brother David, and my dad, sitting on our back porch. I’m probably 10, and David 3, that’s an OLD picture! Little Feat take us to the finish line today with their song: Dixie Chicken… And all the boys at the bar began to sing along.. If you’ll be my Dixie Chicken, I’ll be your Tennessee lamb… And with that, I hope you have a Fantastico Friday, and Be Good To Yourself!

 

 

Chuck Butler’s: A Pfennig For Your Thoughts   

August 17, 2017 

* Dollar short trade becomes overcrowded

* Gold gets back on the rally tracks!

* A$ and kiwi are best overnight performers

Good day… And a Tub Thumpin’ Thursday to you! I’m still not feeling like I could go out and do some Tub Thumpin’ so, it’s up to you today… Gold did some Tub Thumpin’ yesterday and overnight, short dollar is an overcrowded trade, and more real economic data today… All that, and more! The Eagles greet me today with their song: Victim of Love… This is from the Hotel California album, which I played so much in the day, that the groves in the record disappeared! 

Well, it appears that we’ve stepped back into the Twilight Zone.. No wait, I meant to say, the dog days of summer! The participants of the saber rattling, last week, have been sent to their respective rooms, to think about what they did! HA! Seriously, the saber rattling is being forgotten for now, and we’re back to the dog days of summer, where the volumes are thinned out, and the heat just gets to everyone. 

I read an article on Bloomberg this morning that made sense, given the way the euro has traded in the past week, after it nearly traded to 1.19…  The article points out that the “short dollar” trade is overcrowded… It’s the 2nd most overcrowded trade… So, take wild guess at what is the most overcrowded trade… Final Jeopardy music is playing in my head, and the answer is… Long dollar!   In all my years of being around currencies, I’ve never seen anything like this!   Until January this year, the long dollar trade was the cat’s meow, and the charts are quite interesting showing all the trades in long dollar, and then watching them change to “short dollar”…  

But, the point I’m attempting to get to, is that the short dollar trade is overcrowded, which has been illustrated these past few days, with the euro losing ground it had earlier gained. These short positions begin to get closed out, until something comes along to make the investors go short again.  

That’s as clear as mud, right?  Sorry, I’ll attempt to do better with this discussion of the Aussie and kiwi dollars… The Aussie dollar (A$) jumped back over 79-cents overnight, after a better than expected Employment report showed that Aussie job creation for July was 27,000, marking the 10th consecutive month of job gains, and the Unemployment rate fell to 5.6% from 5.7%…  

Then add in the Fed’s FOMC Meeting Minutes (the minutes) revealed that the Fed members are beginning to worry about the fact that inflation will not get to higher levels as they keep telling everyone it will. This helped the currencies like A$ and kiwi because they currently enjoy a positive rate differential to the dollar, and if the Fed members are worried about the lack of inflation, they won’t be hiking rates, thus the A$ & kiwi don’t have to worry about a narrowing of their positive rate differential. There! How’d I do, better, eh? HA!  

Gold got a reprieve from all the selling that has occurred in the shiny metal this week, and carved out a gain yesterday… I was reading an article yesterday that got me thinking about what could be the catalyst to get Gold back on the rally tracks firmly… And there it was right before my eye! The U.S. debt ceiling debacle that was kicked down the road a few months ago, is coming back to haunt us this September… Now, I realize that nothing really bad has ever come from these debt ceiling circuses, but this time we have a president who has said, “the U.S. Government is in need of a good shutdown”… Uh oh! So, as we draw closer to September, I’m sure the jawboning will begin, and depending on the President’s participation in the jawboning, it could be a very good time for Gold…

The shiny metal saw a gain yesterday of $11.70 to close at $1,282.80, and in the early morning trading today, Gold is up another $8.30, and is back to knocking on the door of $1,300, as it trades this morning at $1,291.20! I just sent my weekly article to the Dow Theory Letters editors and its about Gold, and I’ll give you a little peak at what I said… “I just can’t help but think that Gold’s got something cooking, can you smell it? Like the Rock says, “can you smell what I’m cooking”…  

  And then one more thought on Gold today. I took this from Ed Steer’s letter this morning (www.edsteergoldandsilver.com) and he got it from a 46 minute video interview with Brien Lundin, the Gold Newsletter editor and New Orleans Investment Conference organizer. The video interview can be seen here: https://www.peakprosperity.com/podcast/110158/brien-lundin-if-dont-want-own-probably-should   And here’s the best part of it… “What’s so special about gold? If what they tell us — that it’s a barbaric relic and it has no use in society — is true, then why be so secretive about it? Why be so reluctant to have your citizens own it? That alone tells you all you really need to know. If they don’t want you to know about it, if they don’t want you to own it, you probably should.”

I know, I could have used that as my FWIW article today, but I thought it fit better there with my discussion of Gold…  Hey! Palladium narrowed that spread to Platinum again yesterday, and now just sits $50 below Platinum… Hey! it’s the dog days of summer, and I’m trying my best to find things to talk about!  

The U.S. Data Cupboard will yield a couple of real economic data prints today, which also happen to be two of my fave prints! Industrial production and Capacity Utilization…  I don’t see either of these two giving the dollar any love today… We’ll also see the color of the Leading Indicators index.. So, two forward looking pieces of data for us today, with Capacity Utilization and leading Indicators printing on the same day… 

Yesterday’s Data Cupboard has the Housing Starts for us and they were a real disappointment, as the July data saw a HUGE drop in Housing Starts…  Of course it could just be a one month oddity because this did follow the June rate hike by the Fed, and at that time the Fed members were all slapping themselves on the back and giving cheers with their champagne glasses to future rate hikes…  

To recap…  The FOMC Meeting Minutes disappointed the rate hike campers, and allowed the A$ and kiwi currencies to gain on the idea that their positive rate differentials to the dollar will remain in tact. The Minutes also lit a fire under Gold, which got back on the rally tracks and is closing in on $1,300 once again this morning. The Short Dollar trade appears to be overcrowded, and that means exactly what we’ve seen in the past week… An unwinding of those shorts, which means the euro suffers, and suffer it has as it has traded below 1.17 overnight…   

For What It’s Worth…  Well, I came across this article thanks to dear reader Bob, and thought it to be quite FWIW worthy! It’s about how Russia is stepping up their efforts of de-dollarization…  You can read it all here: http://russia-insider.com/en/politics/russian-economy-experiencing-trend-towards-de-dollarization/ri20691?ct=t(Russia_Insider_Daily_Headlines11_21_2014)&mc_cid=77eacd5275&mc_eid=0ed824d0a6  

Or, here’s your snippet: “A major “de-dollarization” trend is seen within the Russian economy, Oreshkin said, underscoring the need to support an increased role of the ruble.
“There is a big trend toward the de-dollarization of the Russian economy. The Central Bank made some very important steps so that fewer foreign currency loans were issued,” Oreshkin said.
He added, speaking at a session on the development of transport infrastructure in Northwest Russia, that the increased role of the ruble “is such a trend that should be fully supported.” 

Chuck Again… These moves by the Russian have come about now because of the sanctions that were placed on them by the U.S. But Russia was going to eventually move to these steps for de-dollarization…  

Currencies today 8/17/17… American Style: A$ .7919, kiwi .7293, C$ .7910, euro 1.17, sterling 1.2860, Swiss $.9677, … European Style: rand 13.2325, krone 7.96, SEK 8.1263, HUF 260, zloty 3.6422, koruna 22.2486, RUB 59.55, yen 110.16, sing 1.3660, HKD 7.8236, INR 64.06, China 6.6907, peso 17.72, BRL 3.1613, Dollar Index 93.91, Oil $46.69, 10-year 2.24%, Silver $17.04, Platinum $972.94, Palladium $922.45, and Gold… $1,291.20 

That’s all for today… Gesh! Another heartbreaking loss for my beloved Cardinals last night, as they went to the bottom of the ninth with a 4-2 lead, and lost! UGH! They can’t afford to lose games like that, if they’re serious about winning the division! A very quiet day at the house yesterday, was a welcome relief for me…  I do believe I’m going to meet some of my former colleagues tomorrow afternoon, at my local watering hole… I sure hope my overall feeling turns around by then! Van Morrison takes us to the finish line today with his song: Brown Eyed Girl…  My friend, Jen, used to say this was her song, (since she had brown eyes) So many artists have redone this song, but none is better than Van the man’s version!  I know, the letter is a little late today… Better late than never, right?  And with that, I’ll send you on your way to a Tub Thumpin’ Thursday!  Be Good To Yourself!

 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts   

August 16, 2017

* U.S. Retail Sales soar in July!

* U.S. dollar fights back!

* Eurozone 2nd QTR GDP rises!

Good day… And a Wonderful Wednesday to you! Well, I finally threw in the towel and succumbed to the urge to take an afternoon nap yesterday… I just can’t get past this feeling that I need to sleep! Maybe it’s the accumulation factor on the infusions? Whatever it is, I finally said, to hell with it, and laid down, and then woke up 3 hours later! This morning, I’m still draggin’ the line, but not as bas as yesterday, or the day before, so maybe I’m onto something! Pink Floyd greets me this morning with their song: Comfortably Numb… It’s my fave Pink Floyd song, and a phrase I’ve used to describe everyone’s response to the huge debt in this country..

Well, looky there! U.S. Retail Sales are not dead in the water! They are alive! Of course they needed a boost and it was quite the boost. Yesterday, when I was writing about Retail Sales I meant to mention that “back to school” sales would be a part of the July numbers, but I totally missed that Amazon Prime Day was also in July, and the boost that Retail Sales got from Amazon Prime Day, was off the charts! So, as I ask in the title today… Can we have Amazon Prime Day every month? Because the 0.6% rise in Retail Sales in July is going to be a one and done going forward, in my humble opinion…

But for now, the strong Retail Sales, got the rate hike camper bugs to come of the wall boards, and start dancing in the streets, for they figure that this strong Retail Sales print confirms that the previous Fed rate hikes haven’t put a damper on the economy, and therefore the economy can stand more rate hikes… And the currency traders kind of took that ball and ran with it on the day, as the euro gave away a few ticks, and the rate differential currencies like the Aussie dollar (A$) and kiwi saw even more selling…

The worst performer on the day was Gold, which was down at the close $10.50, and that was with a brief rally at the close, which saw Gold close at $1,271.10… There were 284,000 contracts traded yesterday in Gold… And as I said yesterday, I would bet that good number of the 284,000 contracts were of the naked short Gold variety… I’m just saying… 

In the overnight markets, the A$ and kiwi recovered ground lost during the day, and the euro fell quickly to trade barely above the 1.17 handle… We began the week with the Dollar index looking like it was about to fall below 93, but 3 days later it is 94… The euro began the week at 1.18 and 3 days later it’s 1.17, and Gold… well, let’s just say it hasn’t been a good week, so far, for the shiny metal… 

What to make of this? Was the Fed correct that all the weak data was just transitory? I was wrong to say that I though the strong dollar trend was over? Is the accumulation of debt not going to be a problem? Just so many questions about this dollar move, right?  Ok… here’s my attempt to answer some of these questions.. 

First of all, I don’t think I’ve ever said these words, so I’m not going to begin now, and those are: The Fed was right! Let me remind you that one data print does NOT make a trend, there’ll have to a few more really strong Retail Sales reports to confirm that the U.S. consumer hasn’t “tapped out”…  And I don’t think I’m wrong about the weak dollar trend coming to an end… As I’ve explained many times in the past… When an asset is in a trend that is nearing its expiration, the asset will have days of basking in the sun, but those are short-lived…   And of course you know me, I think debt is a HUGE problem, and it will come back to haunt us for years…  

Speaking of debt, the Wall Street Journal (WSJ) reported yesterday that U.S. Household debt has reached a record high.. let’s listen in on the WSJ to hear what they have to say… “U.S. household debt reached a new record of $12.8 trillion in the second quarter, driven by rising mortgage debt, a strong quarter for auto loan originations, and an uptick in credit-card balances, which reached their highest level since 2009.” 

Hmmm, did you get that last part? Credit-card balances reached their highest level since 2009…  I know the government is happy as a lark to see consumers in so much debt, because that’s part of the plan… Plan? what plan are you talking about Chuck?  Ahhh grasshopper, come sit, grab your coffee cup and listen…  As I see it, the Elites want us all to be in so much debt that it makes it easier to switch to a cashless society… That’s my opinion and I hope to be wrong!  

OK, onto something else, Chuck! Hey! how about that Eurozone economic recovery? Showing even more signs that the Eurozone is pulling itself out of the doldrums of an economic recession, the 2nd QTR GDP Flash report showed an increase of 0.6% in the 2nd QTR.. Always keep in mind that the Eurozone has the juggernaut German economy, on one side, and the dogs of Italy, Portugal, Greece, and so on, on the other side…  But let’s not lose our focus here, and that is that the Eurozone economy is coming out of the recession, and that might mean that the European Central Bank (ECB) will begin to dismantle their monetary policy of bond buying, and negative deposit rates, soon..  

It can’t be soon enough for me! I was reading an article the other day about the global economy, and how it was giving Central Banks and Governments a false reading on the Global Growth, and that if they reverse their negative rates, they’re going to have to just go back and put the negative rates back on, when the global recession hits…  The writer, found a place in my thoughts, as he talked about the accumulation of debt being the main factor behind the Global recession! 

I already talked about Gold today, so I thought I would point something out that might not be caught by the naked eye…  And that is: Remember earlier this year, when I wrote about the CEO of a Palladium company, who said that Palladium would bypass Platinum in price this year? Well, Palladium is catching up, and right now sits only about $68 from Platinum, and at the beginning of the year the difference was about $200!

The U.S Data Cupboard will have difficulty living up to yesterday’s Retail Sales print, and it won’t, but it will have Housing Starts data, and the FOMC Meeting Minutes this afternoon. The Meeting Minutes might throw some cold water on the dollar this afternoon, as I expect the minutes to contain some conversation about how the Fed needs to dealy rate hikes…   

To recap…  Amazon Prime Day in July, along with back to school purchases, pushed Retail Sales to an increase of 0.6%! And the dollar bugs came out of the wallboards once again. The euro is taking a trip to the woodshed, to join Gold, which has been there all week! Eurozone 2nd QTR GDP Flash report was good at a 0.6% increase! And Palladium continues to narrow the spread to Platinum…

For What It’s Worth…  Well, since I mentioned this above, I thought this article on zerohedge.com was apropos… It’s about the consumer debt… and can be found here: http://www.zerohedge.com/news/2017-08-15/fed-issues-warning-household-credit-hits-new-record-high 

Or, here’s your snippet: “After we first reported last week that U.S. credit card debt hit a new all time high with both student and auto loans rising to fresh records with every new report…

Discussing the troubling deterioration in credit card defaults, first pointed out here in April, the New York Fed said that credit card balance flows into both early and serious delinquencies increased from a year ago, describing this as “a persistent upward movement not seen since 2009.” As shown in the chart below, the transition into 30 and 90-Day delinquencies has, over the past two quarters, surged to the highest rate since the first quarter of 2013, suggesting something drastically changed in the last three quarters when it comes to U.S. consumer behavior.

“While relatively low, credit card delinquency flows climbed notably over the past year,” said Andrew Haughwout, senior vice president at the New York Fed. “This is occurring within the context of loosening lending standards, as borrowers with lower credit scores recover their ability to access credit cards. The current state of credit card delinquency flows can be an early indicator of future trends and we will closely monitor the degree to which this uptick is predictive of further consumer distress.”

That bolded statement, is the first official warning by the Fed that the U.S. consumer is sick, and the Fed has no way reasonable explanation for this troubling jump in delinquencies. Timestamp it, because this will certainly not the be the last time the Fed warns about the dangerous consequences of all-time high credit card debt.

As for the “further uptick in consumer distress”, we are just guessing but the fact that credit card defaults are jumping at a time when sales at fast food and other restaurants have declined for 17 consecutive quarters, and when $250 billion in U.S. household savings was just “revised” away, may all be connected.”  

Chuck again…  I’m telling you now so you can listen to me later, all this debt is not good for anyone, but the Elites… I’m just saying! 

Currencies today 8/16/17… American Style: A$ .7855, kiwi .7243, C$ .7769, euro 1.1704, sterling 1.2872, Swiss $.9742, … European Style: rand 13.2446, krone 7.9574, SEK 8.1050, HUF 259.61, zloty 3.6516, koruna 22.2437, RUB 59.82, yen 110.81, sing 1.3683, HKD 7.8219, INR 64.13, China 6.6790, peso 17.79, BRL 3.1854, Dollar Index 94.01, Oil $47.71, 10-year 2.28%, Silver $16.67, Platinum $964.28, Palladium 896.39, and Gold… $1,276.10 

That’s it for today… Oh My! Did my beloved Cardinals get spanked in Boston last night or what? Man that was so ugly, I had to switch channels! Those little rascals, my grandkids, were at the house again yesterday… Thank goodness school starts today for them! August is half over, which means… Football season will be upon us!  I’m hoping that my beloved Missouri Tigers will be better this year, for they sure stunk up the place last year! of course everyone in Missouri is waiting for Basketball season to begin, as Mizzou had a banner recruiting year to say the least!  The Beatles take us to the finish line today with their song: Norwegian Wood…  This was from the Rubber Soul album, which was the first Beatles album to contain only songs they had written.  And it was one of my fave Beatles albums!  And with that, it’s time to go.. I hope you have a Wonderful Wednesday, and Be Good To Yourself!