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Chuck Butler’s: A Pfennig For Your Thoughts   

August 14, 2017  

* CPI prints weak for 5th month

* When will Draghi begin to bemoan?

* Loonie is hardest hit Petrol Currency… 

Good day… And a Marvelous Monday to you! Man-o-man, am I glad to be back at home, not that my adventures to Key West, and then to Table Rock Lake weren’t full of good times, it’s just that when I’m here, everything works right, and I don’t have to jump through hoops to get a letter out! Thanks to Nuria at the Aden Research Group for assisting me in getting the letter, what little there was of it, out on Friday morning… The Pfennig is going to go through some changes in appearance in a few days. Remember when I first announced that I was leaving my former place of employment and that the Aden sisters were going to publish the Pfennig, but that there would be ads put on the Pfennig to help defray the costs of the publishing… Hey! It my be free to you, but it doesn’t get completed in a vacuum for free! So, there’s your notice of the changes that are coming… R.E.M greets me this morning with their song: Drive… This song was from the Automatic For The People album, which I think was one of their best!

Well, well, well, look what all those hedonic adjustments, have gotten those that thought that inflation was going to be soaring by now… The week-long awaited print of July’s stupid CPI was a disappointment for the 5th month in a row! The powers that be have kept a lid on CPI for so long now, so that retirees and savers would suffer. That’s right, I said that out loud! Those cost of living increases have been few in number, and small in nature these past 10 years because, the hedonic adjustments like substituting items in the basket of goods, or adjusting the weightings of the items in the basket of goods, to name a couple. But now those same hedonic adjustments are  coming back to haunt the Fed, and the Gov’t… Uh-Oh, what are we going to do now? No inflation (CPI grew at just 0.1% in June and 1.7% YTD) means the Fed doesn’t have anything to hang their hats on when talking about rate hikes… The markets are just now catching on, and all that dollar buying last week, because they thought inflation was going to finally show strength, was wasted…

The dollar got sold like funnel cakes at a State Fair on Friday, and rightly so! The Dollar Index which on Thursday was 93.78, fell to 93.069… There are lots of chartists out there that have their own opinion about where the Dollar Index reveals a true weak dollar trend, I’m hoping my friend and former colleague at the Sovereign Society, Sean Hyman, reads this today, and shares with us his thoughts on at what level the Dollar Index will reveal a true weak dollar trend… I’m pretty sure we’re closing in on it folks…

The euro climbed back above the 1.18 handle on Friday, and remains there this morning, but barely, as the overnight markets saw some profit taking. The one thing that I’ve been waiting for with all this euro strength, is for European Central Bank (ECB) President, Mario Draghi, to begin to bemoan the strength of the euro, like his predecessor did all the time. Remember Jean Claude Trichet? Man, I had to look him up for I had forgotten all about him! 

I think that Draghi is OK with the euro strength so far, because it is a sign that his policies are working, and economic growth is returning to the Eurozone… But too much euro strength is going to put a governor on inflation, which is normally exactly what a country is looking for, but not these days… As we’ve talked about before until the sun comes up, countries now are looking for inflation, as a sign that economic growth is picking up…  So, as far as the euro strength to date is concerned, I think Draghi is proud of it… But should the euro match the last 7 months of strength in the coming months, I expect Draghi to begin to do his best Trichet imitation… 

After a couple of outstanding performances for Gold last week, it was held in check by the “boys in the band” on Friday, and was only able to carve out a gain of $2.90 on the day, and close at $1,288.70… The shiny metal is down this morning, but as I said above the overnight markets has been all about profit taking. 

The saber rattling that dominated last week’s trading, looks as though it is going to calm down a bit this week, which would allow U.S. data to dominate the trading… The U.S. Data Cupboard has Retail Sales, Housing Starts, The FOMC Meeting Minutes from their last meeting in July, two of my fave economic prints: Industrial Production and Capacity Utilization, and Leading Indicators all this week… In recent months, the U.S. data has been very weak, and that hasn’t been a good thing for the dollar. But, even when we get a surprise up-side print, the dollar has been sold, which is one of the signs of a weak dollar trend. 

The Chinese renminbi continues to see appreciations. This past 6-weeks, has reminded me of the period of 2003-through 2008, when the renminbi was the closest thing to a One-Way Street that there was when I came to currency movement.  Of course there were days of mark downs, but for the most part it was a tiny appreciation every day. At least that’s how I remember it! 

And Japanese yen continues to defy the obvious, which is that the currency should be getting sold daily, but instead it basks in the sun rays that come from the flight to safety… The saber rattling may have calmed down a bit, but its still out there folks, and you can see that in the yield of the 10-year Treasury, which has fallen again, this time down to 2.21%… 

The price of Oil has slipped a bit in the past couple of days, and is trading below $49 at $48.59 as I write. The Canadian dollar / loonie has been the hardest hit Petrol Currency and the Norwegian krone has been the least hit by the slippage in the price of Oil. A few weeks ago, I wrote about Oil for my weekly letter in the Dow Theory Letters (www.dowtheoryletters.com) and in it I basically said that I saw the price of Oil trading between $40 and $50 as we go along…   You know, I write some very interesting articles for the DTL website, and while it costs to read them, I don’t believe that there can be a price that relates to my writing! HA!   Seriously though, I don’t think it’s highway robbery, to subscribe, so what are you waiting for? You get me, you get the Aden Sisters, and other very good writers…. 

And in a follow up to things I’ve written about in the past, regarding a cashless society, and how bad that would be for you and me, I had this note sent to me this weekend: Two thirds of traders in Sweden believe they will stop accepting cash by 2030, according to a report by Stockholm’s Royal Institute of Technology… UGH!   

I pretty much was out of the loop last week, with all my traveling, and infusion day, which by the way was my worst one yet, I felt like death warmed over for two day following the infusion! UGH!  So, I loved that Ed Steer (www.edsteergoldandsilver.com) highlighted this summary of the markets last week. And he got it from zerohedge.com.. here it is! 

* Dow’s worst week in 5 months (Mar ’17)
* S&P’s worst week since pre-election (Nov ’16)
* Russell 2000 worst week since Feb ’16
* Financials worst week in 5 months
* VIX biggest percentage spike since Aug ’15 (China Devaluation)
* HY Credit Risk biggest jump since election (Nov ’16)
* Silver’s biggest week since Jul ’16
* Gold’s biggest week since Apr ’16
* Offshore Yuan’s best week in 7 months (Jan ’17)  

So, not so much a good week for the stock jockeys, eh? But on the other side of the coin were the precious metals, and bonds…  My good friend, Duane asked me the other day about where does the money go when stocks get sold?  I said, metals and bonds… And look what was the best performers last week!  

To Recap…  The games people play now, every night and every day now, never meaning what they say now, never saying what they mean – Joe South…  That’s the song that kept bouncing round in my fog filled brain last Friday, when the stupid CPI printed just a 0.1% increase for July, when the markets were forecasting a strong print.  The Gov’t has played with the hedonic adjustments in CPI for so long now, that they don’t know how to remove them, and thus when they want to show inflation rising, they can’t! The dollar got sold on Friday, but has fought back in the overnight trading, which has seen mostly profit taking in the investment classes that had gains last week.  The Saber rattling seems to have calmed down a bit and that means the markets can focus on U.S. Data which will be plentiful this week.  

For What It’s Worth… Well, I saw this on Ed Steer’s letter from Saturday, and thought it to be FWIW worthy! it’s an article about what to do with the car batteries of these electric cars, and can be found here: https://www.theguardian.com/sustainable-business/2017/aug/10/electric-cars-big-battery-waste-problem-lithium-recycling  

Or, here’s your snippet: “The drive to replace polluting petrol and diesel cars with a new breed of electric vehicles has gathered momentum in recent weeks. But there is an unanswered environmental question at the heart of the electric car movement: what on earth to do with their half-tonne lithium-ion batteries when they wear out?

British and French governments last month committed to outlaw the sale of petrol- and diesel-powered cars by 2040, and carmaker Volvo pledged to only sell electric or hybrid vehicles from 2019.

The number of electric cars in the world passed the 2m mark last year and the International Energy Agency estimates there will be 140m electric cars globally by 2030 if countries meet Paris climate agreement targets. This electric vehicle boom could leave 11m tonnes of spent lithium-ion batteries in need of recycling between now and 2030, according to Ajay Kochhar, CEO of Canadian battery recycling startup Li-Cycle.”

Chuck again… Yes, and there’s the need to recycle these batteries, because… “batteries carry a risk of giving off toxic gases if damaged, but core ingredients such as lithium and cobalt are finite and extraction can lead to water pollution and depletion among other environmental consequences. ”

Currencies today 8/14/17… American Style: A$ .7873, kiwi .7293, C$ .7707, euro 1.18, sterling 1.2977, Swiss $ .9678, … European Style: rand 13.3249, krone 7.9257, SEK 8.1213, HUF 257.92, zloty 3.6258, koruna 22.1561, RUB 59.79, yen 109.69, sing 1.3613, HKD 7.8205, INR 64.09, China 6.6644, peso 17.77, BRL 3.1895, Dollar Index 93.30, Oil $48.49, 10-year 2.21%, Silver $17.04, Platinum $968.84, Palladium $895.75, and Gold… $1,286.90 

That’s it for today… Well my beloved Cardinal’s 8-game winning streak came to an end yesterday, but not without some dramatics late in the game! These next two weeks are chock-full-o-doctor visits for me… Last spring when they diagnosed me with A-fib, that just added two more doctors to my list… UGH! Well, it’s that time of the year again, to begin the planning for our annual Labor Day BBQ, and Pool Party… It’s always a good time, and my favorite day of the summer! Well, the grandkids go back to school this week, and Alex still has a couple weeks before college begins.  Tom Petty & the Heartbreakers take us to the finish line today with their song: Mary Jane’s Last Dance… This is my fave Tom Petty song, and with that I bid you farewell for today, and hope you have a Marvelous Monday… Be Good To Yourself!

 

 

 

 

 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts

  August 11, 2017

* Chuck has no connection… 

* Gold is soaring on saber rattling

* This is a half-baked Pfennig today… 

Good day… And a Happy Friday to one and all! This is going to be short-n-sweet this morning, as my infusion confusion has me in a real choke hold this morning. In addition, I don’t know if this will even go out, as I’m having all kinds of technical problems today…  My laptop has decided to move at a snail’s pace, and not accept most of the commands I give it! UGH… Speaking of a snail, do you know what the snail said when he went for a ride on the back of the turtle?    Wheeeeeee!  I’ve got a million of them! HA!  The great Johnny Rivers greeted me this morning with his song: The Poor Side of Town  

The poor side of town, down by the boondocks, and other songs about the “other side of the tracks” as my mom used to call it, remind us of where we don’t want to end up, and therefore we had better diversify our investment portfolios using currencies and metals!  I bet you didn’t see that one coming, eh?  I don’t know why I’m even attempting to write this morning, as I have no currency levels, no metals levels or anything else! And since I spent the better part of yesterday at the infusion center, I wasn’t checking things either!  

So, why am I writing? Because I’ve been doing this so long, that it’s a habit, I wake up, go to my laptop and begin researching, and reading, so I may begin to write. I can tell you that Gold had another stellar day yesterday, as the saber rattling continued, thus driving the “fear factor” that usually gives Gold a boost. 

All the saber rattling caught up with the stock market yesterday. Could this be the beginning of a stock slide or just a blip?  But, since I’m not even your last choice as a stock jockey, I’ll let that one sit there and simmer… 

The flight to safety is in full swing folks, and is kicking tail and taking names later if any asset class stands in its way.  Gold is closing in on $1,300, as it sits around $1,291 this morning. I told you a few weeks ago that it appeared to me that Gold was ready to go on a strong run, and as they would say on the TV Show The A Team, I love it when a plan comes together!

Well, we’ve come to the cheese that binds this morning, and I still don’t have any strong connection, nor is my laptop functioning correctly, so I’m going to punt… I apologize for that, but what can a poor boy do? Even my mobile phone won’t go out and look up stuff! UGH!  I guess it had better reboot the wireless server, eh?   But, before I do that I’ll send you on your way to having a Fantastico Friday, and a Wonderful Weekend! I’m going back to bed, to see if my head clears up, and try not to worry about the fact that I didn’t write a good letter today…    Be Good To Yourself, and have fun… 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts  

August 10, 2017

* Dollar Bugs have the conn

* Gold soars toward $1,300…

* Zuma wins confidence vote… 

 

Good day…  And a Tub Thumpin’ Thursday to you! As I mentioned yesterday, I have an infusion today, so there’ll be no Tub Thumpin’ for me today, so please pick up the slack, eh?  I actually feel like I had the infusion yesterday! UGH! I’m really draggin’ the line today folks, I need a pick-me-up…  Maybe I’ll get it as I go along here this morning…  Carlos Santana greets me this morning with his song: Soul Sacrifice  

Well, here we are once again with the dollar bugs holding the conn, and everywhere I search I can’t find one good reason for that! Oh, I find stuff like, “Traders are upbeat about dollar with the flight to safety, dominating markets”, and “Traders think PPI (wholesale inflation) will be upbeat tomorrow, thus showing inflation is coming”…  Wait! What? Didn’t rising inflation worries used to deep six a currency? Why, yes it did, Chuck, but these days trading currencies is mostly sentiment, with a little fundamentals thrown in…  And so, when traders get it in their collective heads that whatever is going on is good for a currency, like the dollar, then they will be shrug off everything else, and focus on one thing…

  I know, I know, it’s crazy, right? But, that’s the way it is these days, so we have to roll with the punches… I still believe the underlying nascent trend is for a weak dollar, but since it’s just starting, it doesn’t have the legs to run from this kind of stuff, so… It’s a dollar day…  But, hey! I look at it like this… It gives us an opportunity to buy at cheaper prices, right? Yes, indeed it does! 

I saw some really disheartening news this morning from New Zealand… Reserve Bank of New Zealand (RBNZ) Gov. Wheeler, who still has one month to go in his term, was out dissing kiwi again… And telling anyone that would listen that the RBNZ is always assessing the situation with kiwi, and if they have to intervene to keep it from getting too strong, they will…  Well, I guess Wheeler can put his intervention arrow back in his quiver, because kiwi really dropped last night…   UGH!

For years now, and longtime readers will recall, Wheeler has been a thorn in my side, and I’ll be throwing a party on his last day as Gov. of the RBNZ next month…  He just doesn’t “get it” regarding kiwi, and has the Central Bank mentality of a weak currency leads to export growth… But a weak currency has unintended consequences too… But I think he’s been too worried about the export growth to see anything else.  

Well there are a few currencies on the rally tracks today… The Chinese renminbi was allowed to appreciate again last night, and Gold & Silver both put in nice days yesterday, along with early morning trading that continues those move from yesterday.  Gold really too flight yesterday, so let’s talk about Gold, eh?  

Gold closed up $16.20 yesterday to end the day at $1,276.90, and if it weren’t for the “boys in the band” keeping things in order, Gold would have flown even higher, as proved by the high on the day which was $1,281.. The shiny metal is up to $1,284.50 in the early morning trading today, but this is where things get scary as far as I’m concerned…  The usual pattern has been for the “boys in the band” to begin an engineered take down of Gold whenever it begins to get near $1,300..  They usually use an excuse like the “dollar index rose” or some other flim-flam excuse to begin their short selling… But recently, the “boys in the band” have been quite brazen, and proved that they don’t need an “excuse” to sell short… 

And look at Silver this morning, finally back to $17!  Platinum and Palladium aren’t chopped liver either! The flight to safety has really shone the light brightly on these precious metals, as it was about time! I’ve told you about the supply issues in Gold & Silver, I’ve told you about the truck loads of Gold that Russia and China have bought, are buying and will continue to buy, and I’ve told you about how all the saber rattling going on in the world today, there’s no excuse in my mind for Gold and the other metals to NOT rally!   

Speaking of saber rattling… James Rickards thinks that the U.S. and N. Korea will be in a war soon.. no boots on the ground kind of warfare.. The 5 Minute Forecast (www.agorafinancial.com) yesterday, had a good update on Rickard’s thoughts on this, and included this quote from Rickards… “The U.S. attack will involve all elements of U.S. military and covert action including cyberwarfare aimed at the North Korean command structure and critical infrastructure, as well as special operations, psychological operations (psyops), drones, strategic bombing and many other salient.”   

Well if that’s really what’s in the cards, you can understand right away why Gold is ticking higher and higher each day…  And then there’s another reason that’s taking a back seat to the saber rattling right now, but is just as important and that is interest rate talk… 

And in an update from something we talked about earlier in the week… S. African President, Zuma, did win the second round of his confidence vote, thus keep the wolves at the door, and thus removing the euphoria that had helped the rand rally earlier in the week… UGH! 

Well, I’ve been remiss in not sharing something with you regarding Fed St. Louis President James Bullard… Former colleague and longtime friend, Ty Keough, sent me this note the other day, and well, I guess I still had the ocean on my mind… Well, James Bullard was in the mood to talk about interest rates on Tuesday, when he spoke at a conference in Tennessee, and told the crowd there that the “Fed can leave interest rates where they are now, and that the current level of the policy rate is likely to remain appropriate for the near term.”

Bullard has long been a dove and believes like I do that the Fed does not need to raise rates until the U.S. economy breaks out of its pattern of low inflation and about 2% annual growth… Bullard didn’t talk much about the weakening economy, the debt, the car loans problems, the student debt, loan problems, a housing bubble, or anything like that, but I wouldn’t expect him to… That kind of stuff is left up to me to talk about! HA! 

That sure was interesting yesterday, that bit I told you about Big Al Greenspan coming out and talking about the Bond Bubble popping, eh? It’s funny, not funny ha-ha, but funny to me that as a former Fed Chairman, that he talks about this stuff now…  And here’s some cocktail trivia for you.. The U.S Treasury 10-year’s yield has not been higher than 2.5% since 2012…   

The U.S. Data Cupboard yesterday proved me to be correct in my call that Productivity would be weak, which it was only rising 0.9% and the Unit Labor Costs only grew 0.6%… Both of these are used as an indicator of future inflation… And so, given the prints, I would say there are no signs of aggressive inflation in the future, according to the data the Fed uses…

Today’s Data Cupboard doesn’t have much for us… The usual Tub Thumpin’ Thursday fare of the Weekly Initial Jobless Claims, and today we’ll see the Bloomberg Consumer Confidence survey results..  No biggies here…  

Before I head to the Big Finish today, I wanted to talk a bit about the news this week from Wells Fargo Bank, who had already admitted that they had opened accounts for people fraudulently, now has another problem… Wells Fargo acknowledged Friday that for six years about 570,000 of its customers were charged for auto insurance they didn’t need, potentially driving some to default on their loan and have their cars repossessed.  OMG! What the hell is going on here?  Well, the article can be read here : https://www.washingtonpost.com/news/business/wp/2017/07/28/wells-fargo-charged-570000-customers-for-auto-insurance-they-didnt-need-potentially-forced-some-to-have-cars-repossessed/?utm_term=.129747804704

To recap… It was a dollar day yesterday, as the dollar bugs hold the conn on some really flimsy reasons, but sentiment is the key these days, and that’s what ruling the currencies right now… All the saber rattling has the price of Gold soaring once again, and taking Silver, Platinum and Palladium along for the ride, but this is where it gets scary to Chuck, as Gold nears $1,300 which has been a line in the sand by the boys in the band… 

For What It’s Worth.. Well, when I saw this article I about fell out of my chair… About 7 years ago, I wrote a Sunday Pfennig at the old place of employment, and I went through “Chuck’s Debt Solutions”, and it was widely thought to be an excellent article by the readers.  One of the “solutions” was for the Gov’t to get out of the fixing the roads and bridges business, and instead sell the roads and bridges (and reduce debt) to entrepreneurs who could make the toll roads or whatever it took for them to turn a profit…   I went deeper into all that in the article, but for now, that’s the idea…  Well, along came the Australians, who want to pitch that idea to President Trump!  You can read it here: https://www.bloomberg.com/news/articles/2017-08-10/australia-pitches-trump-on-a-plan-to-fix-america-s-roads-and-bridges

Or, here’s your snippet: “Among his many campaign promises, Donald Trump pledged to fix America’s crumbling roads and bridges with $1 trillion in infrastructure spending. Almost seven months into office, though, and two months removed from his vaunted “infrastructure week,” the president has revealed few details for how to pay for it. As his advisers look for ideas, a group of Australian politicians and executives has been lobbying for the administration to adopt a controversial policy of selling or leasing airports, toll roads, and other public facilities to raise money for infrastructure projects.”

Chuck again… OK, I know I’m not the first person to have that idea and put it in writing through the years, but since I’m the only person I know that did that, I’m claiming it was my idea!   I sure hope the Trump administration listens to these proposals to reduce debt… 

Currencies today 8/10/17… American Style: A$ .7878, kiwi .7265, C$ .7856, euro 1.1710, sterling 1.30, Swiss $.9657, … European Style: rand 13.3703, krone 7.9677, SEK 8.1670, HUF 260.57, zloty 3.6477, koruna 22.3278, RUB 59.96, yen 110.83, sing 1.3645, HKD 7.8156, INR 63.99, China 6.6818, peso 17.95, BRL 3.1369, Dollar Index 93.78, Oil $49.88, 10yr 2.24%, Silver $17.07, Platinum $978.30, Palladium $901.77, and Gold… $1,284.50   

That’s it for today… Well, here I am back in the saddle, at home at my writing desk… It seems like a long time since I was last here! Yesterday, I completely forgot to say Happy Birthday to one of my fave people in the world… Kristin Kuchem!  When I sent her a text later in the day, wishing her Happy Birthday, she responded, “UGH”… I take that she doesn’t like getting older! HA!  Well, looky there! My beloved Cardinals have won 5 in a row, and are only 1.5 games out of first place! Who would have thunk that to be possible given their level of play this year?  Alrighty then, I have to get going to make it to the infusion center on time… The Cure takes us to the finish line today with their song: Just Like Heaven… And with that, I hope you have a Tub Thumpin’ Thursday! And remember to be Good To Yourself!

 

 

Chuck Butler’s: A Pfennig For Your Thoughts  

August 9, 2017

* A Flight To Safety picks up steam…

* Gold rallies nearly $11 in early morning trading…

* Currency Trader talks about the euro… 

 

Good day… And a Wonderful Wednesday to you! We had a relatively easy trip back to our home away from home yesterday, and all our bags are packed and we’re ready to go, to the airport this morning for a trip back to St. Louis. Key West was absolute fun for our group…. Me, Kathy, Alex and Molly, and we had to drag Alex away from the Florida straights to leave! I guess I’m ready to return to St. Louis and see my other grandkids, Delaney Grace and Everett… With all the saber rattling going on around the world these days, today’s greeting song plays nicely… It’s Cat Stevens singing his song: Peace Train…

The euro couldn’t hold it’s grip on the 1.18 figure yesterday, as the U.S. Jobs Postings showed a very strong labor market… The problem I see there is that the people looking for jobs, aren’t qualified to fill those openings… And training them is a very costly adventure, and sometimes ends up backfiring. But the dollar got some love from the traders for that strong print, and along with the Small Business Index, which increased surprisingly I might add, gave the dollar bugs enough to push the euro down on the day…

Yesterday I told you that the IMM Futures positions report showed that long euro positions grew / increased last week… But then we’ve seen it down, then up, then back down so far this week. And then I came across this quote from a trader on Bloomberg.com: “To be short euros here is absolutely lethal,” said Ulf Lindahl, chief executive officer of A.G. Bisset Associates, who manages about $1 billion from Norwalk, Connecticut. He expects the currency to rise to $1.30 by the end of the year, if not sooner. Even after its 3.6 percent rally in July, investors and analysts are predicting further gains.”

I agree with this guy wholeheartedly, and that’s all I’m saying about that today!  The Dollar index didn’t gain though even with the heavily weighted euro component not performing well. No, in a case of stranger than fiction, the Dollar Index drop was engineered by the Japanese yen rally… 

Yen has been rallying on the flight to safety, with all the saber rattling going on.. Why just this morning a couple of hours ago, U.S. President, Trump, issued new, harsh warning to N. Korea…

  And Gold has jumped higher with the flight to safety by nearly $11 ($10.80) in the early morning trading today, and the 10-year Treasury yield has dropped to 2.24%, after spending a couple of weeks around 2.30%…  let me remind you that bond pricing works like this: When the yield goes down, the price goes up, and vice versa… So, there have been lots of 10-year Treasury buying to move the yield to 2.24%… 

I mentioned yesterday that the IMM futures positions saw the Aussie dollar (A$) and Canadian dollar / loonie with increased long positions… I wonder why the New Zealand dollar / kiwi wasn’t a part of the list of currencies with increased long positions, as kiwi has basically outperformed the A$ so far this year.  And I would bet a dollar to a Krispy Kreme that interest rates will be hiked in New Zealand before they are in Australia…  Now, I’m not knocking the A$, as I like that currency too, but just wanted to point out kiwi as another currency that should be seeing increased long positions… 

One currency that shouldn’t be seeing increased long positions, is the U.S. dollar! There are too many dark clouds hanging over the dollar these days folks, and if any of the dark clouds have rain in them, well, as Bob Dylan once said, “A hard rain is gonna come”…  And here’s one of the dark clouds…  

Yesterday, I told you about Consumer Credit, and how the revolving credit component had risen once again… Well, the monthly update from the Federal Reserve confirmed that as of the end of June, total revolving (i.e. credit card) credit rose to $1,021.7 billion, an increase of $4.1 billion on the month, and a new all time high, taking out the previous record high set during the summer of 2008. Now doesn’t that make you shudder?

Remember when U.S. Consumers were supposedly “deleveraging their debt”? Well, not so much any longer, eh? I know that I carry on and on and on about debt, but debt is slavery, and as a country, we’re soon to find out exactly what that means!

I don’t have a crystal ball, nor do I use Tarot Cards, to make these statements, I use logic and common sense… I will admit that most times I’m months and sometimes even a year or so ahead of the call to come to fruition, but they normally do… My one exception is the popping of the Treasury Bubble… I was unaware that the Fed was about to become the biggest buyer of Treasuries in the bond market! But, the day will come… It’ll be too much time since I made the call, so no one will remember what I said at that time! UGH! 

Speaking of the Treasury Bubble… Big Al Greenspan had something to say about it yesterday… I thank Omar Ayales of Gold Charts “r Us for sending me this quote from Big Al… Omar does a fantastic job of charting Gold and we did feature his work here in the Pfennig, while I was on vacation. So, getting back to Big Al and the Treasury Bubble… You can find the whole article here: https://www.bloomberg.com/news/articles/2017-07-31/no-bubble-in-stocks-but-look-out-when-bonds-pop-greenspan-says

Or I’ll give you a line or two to whet your whistle… here goes… “Equity bears hunting for excess in the stock market might be better off worrying about bond prices, Alan Greenspan says. That’s where the actual bubble is, and when it pops, it’ll be bad for everyone.

“By any measure, real long-term interest rates are much too low and therefore unsustainable,” the former Federal Reserve chairman, 91, said in an interview. “When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.” – Alan Greenspan 

I already told you about yesterday’s data prints above, so let’s go directly to today’s prints, which are: Productivity, Unit Labor Costs, and Wholesale Inventories… Productivity has been a real problem for the U.S. and I don’t expect any miracles here… Unit Labor Costs could show an increase in wages, but I doubt it, and Wholesale Inventories play into GDP so, we have that going for us today! 

To recap… Another day of the dog days of summer yesterday, but overnight we’ve had some moves… U.S. President Trump, issued new harsh warnings to N. Korea, and that has a flight to safety going on overnight, with Gold, yen, and Treasuries all being bought…  The Dollar Index continues to drop, but instead of the euro being the driving force behind the drop, that job is now being done by the Japanese yen… I shudder when I say that, but it is what it is… 

For What It’s Worth… Well, I’ve spent a lot of time over the years talking about the Underfunded Pension Plans Problem here in the U.S., and when I saw this story on Bloomberg, well, it caught my eye, because it’s talking about something that might help the U.S. Corporations and their underfunded pension plans… People dying too young… Boy that sure sounds cold doesn’t it? But Corporations are looking at this situation and thinking they might see a light at the end of the tunnel… You can find the article here: https://www.bloomberg.com/news/articles/2017-08-08/americans-are-dying-younger-saving-corporations-billions

Or, here’s your snippet: “Steady improvements in American life expectancy have stalled, and more Americans are dying at younger ages. But for companies straining under the burden of their pension obligations, the distressing trend could have a grim upside: If people don’t end up living as long as they were projected to just a few years ago, their employers ultimately won’t have to pay them as much in pension and other lifelong retirement benefits.

In 2015, the American death rate—the age-adjusted share of Americans dying—rose slightly for the first time since 1999. And over the last two years, at least 12 large companies, from Verizon to General Motors, have said recent slips in mortality improvement have led them to reduce their estimates for how much they could owe retirees by upward of a combined $9.7 billion, according to a Bloomberg analysis of company filings.

“Revised assumptions indicating a shortened longevity,” for instance, led Lockheed Martin to adjust its estimated retirement obligations downward by a total of about $1.6 billion for 2015 and 2016, it said in its most recent annual report.”

Chuck again… I guess the opioid problem here in the U.S. is being blamed for a lot of these early deaths.. So, if I were a Pension Plan manager, which I wouldn’t take that job, period!, but if I were one, I wouldn’t bet that this opioid problem will continue! 

Currencies today 8/9/17… American Style: A$ .7893, kiwi .7328, C$ .7893, euro 1.1750, sterling 1.3018, Swiss $ .9641… European Style: rand 13.4448, krone 7.9499, SEK 8.1884, HUF 25927, zloty 3.6282, koruna 22.2365, RUB 59.88, yen 109.84, sing 1.3622, HKD 7.8146, INR 63.80, China 6.7057, peso 17.95, BRL 3.1254, Dollar Index 93.57, Oil $49.30, 10-year 2.24%, Silver $16.58, Platinum $975.66, Palladium $894.95, and Gold… $1,273.40  

That’s it for today… Well, how about that? My beloved Cardinals are finally above .500, with their win last night in K.C.  And they have a 4-game winning streak for the first time in what seems like eternity! Now the Cardinals come back to St. Louis to play two more games VS K.C…  In the old days on the trading desk, before Mike Meyer was married we would hear the song that’s taking us to the finish line today and say it was “Mike’s song”…  10CC singing their song: I’m Not In Love…  And with that, it’s time to gather up all my things and head to the airport… I’ll talk to you again tomorrow, if God allows, and we’ll see what comes of the latest Trump warnings… I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

 

 

 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts 

August 8, 2017

* S. African President in trouble…

* Petrol Currencies leave rubles behind…

* U.S. Credit Card Debt is off the charts!

 

Good day… And a Tom Terrific Tuesday to you! I’m still in Key West, heading back to my home away from home, tomorrow, and then back to St. Louis on Wednesday, just in time for my next infusion on Thursday. I’m loaded up with doctor visits the next couple of weeks, so no sitting around doing nothing for me! HA! We did touristy things yesterday, and I had fun, but too much walking had me in pain by mid-afternoon. We also went on a sunset cruise last night, but… clouds and rain for most of the day, gave way to a beautiful evening and sunset on the ocean!  As soon as I get this out the door, and the kids wake up, we’ll be packing the car and heading north, for our 5 hour car trip. Hey! At least I had something to report that I did yesterday, the currencies and metals sure didn’t! I was greeted this morning by Steely Dan and their song: Black Cow…

It was another of those “dog days of summer” yesterday, as traders sat on their collective hands and did nothing. The story going ‘round is that traders want to see signs of inflation before taking on any more dollar long positions… The IMM futures positions from last week showed that long euros, Aussie dollars, and Canadian dollars, positions were increased, and yen short positions were decreased… That ‘s a good indication that the sentiment toward the dollar has gone to the dogs of summer…

But as I always remind people, a trend is not a ONE-WAY Street, and that there can be volatility within the trend, but once that volatility plays out the asset returns to the underlying trend. And that’s what we’re seeing now, as the dollar had its day on Friday, but has drifted since, and soon, will be on the slippery slope once again… At least that’s my opinion, and I could be wrong! 

Yesterday I told you that the euro was creeping toward 1.18 again, and sure as the sun rises each day, the single unit did climb above 1.18 again by the end of the day, which is where it sits this morning. The best mover overnight though was the Norwegian krone, which, as I’ve told you previously, is getting love from the rise in the price of Oil, and from the rise in the euro. Overnight, the price of Oil moved higher, so the krone had two things going for it once again… 

The other mover yesterday was the S. African rand, which on Friday was getting sold like funnel cakes at a State Fair, because of the news of the Gold mine shutdowns that I told you about yesterday. But then along came a “confidence vote” for President Zuma, of whom the markets do not like, and the first round of the vote was for “no confidence” and the put the rand on the rally tracks. The second round of the vote is today, and if Zuma is ousted, then the rand will continue to rally, but if survives, all this rally will be wiped out… 

China reported yesterday that their reserves grew for a 6th consecutive month, as it appears that the flight of capital has backed off, and China doesn’t need to defend their currency with reserves. The other thing that’s helping their reserves value is the fact that the currencies they do own have increased in value VS the dollar in the past 6 months… 

But any way you slice it, China’s reserves have increased, and that’s a good thing, considering China’s debt position. I just wrote about this in my weekly letter for the Dow Theory Letters (www.dowtheoryletters.com) and while I’m not going to spoil anyone’s appetite that subscribes to the DTL, I will tell you that China’s reserves position goes a long way toward the comfort level that investors have with China.  

I don’t know if you’ve noticed or not, but after a couple of years of daily markdowns of the renminbi, the currency seems to have turned the corner on those daily markdowns. And with the renminbi appreciating, the Singapore dollar follows suit… Yes, I’ve talked about this before, but for any new readers, it’s important that they are aware of the trading pattern of these two..  Singapore has to keep their currency in line with the renminbi, to compete with the Chinese for exports. So, when the renminbi moves in either direction, the Sing dollar follows… And right now that’s a rally mode for the Sing dollar. 

Well, Russia was in the news again last night, and not for all the junk that’s going on in the press, but for an announcement of how they will retaliate for the extension and increase of the sanctions from the U.S. It appears that Russia is prepared to increase their efforts to end their dependence on the dollar.  I’ve talked about this before, so this isn’t new to you, dear reader, but Russia has been accumulating Gold faster than China, and has a goal of ending the dollar standard. 

So, Deputy Foreign Minister Sergey Ryabkov  was quoted yesterday saying, “The Russian government will intensify efforts to cut the country’s dependence on US payment systems and the dollar as a settling currency.”  

I told you above that the price of Oil rose overnight, and that has helped the Petrol Currencies immensely in recent days… One laggard of the group though is the Russian ruble, which is dealing with a rise in inflation in the country, along with the increased sanctions, and a question of whether or not the Central Bank of Russia (CBR) is going to continue to cut rates as the year moves along. 

Speaking of the sanctions that the U.S. placed on Russia…  James Rickards at www.agorafinancial.com sent me this yesterday and I just had to share it with you. You can find the whole article at the link, but here’s a snippet: “The law says that U.S. companies are not allowed to help Russian companies with Arctic oil and gas exploration. But the law also applies to non-U.S. companies that help Russia. That’s a big deal in Europe, where national energy champions like BP, Royal Dutch Shell, Total and Eni had plans to do joint ventures in the Arctic with the Russian energy giants Gazprom and Rosneft. Now the EU is considering sanctions on the U.S. in retaliation for U.S. sanctions on their energy companies. Congress meant to hurt Russia. Instead, they hurt Europe, and now Europe is ready to hurt the U.S.” 

That’s what you call a classic example of “unintended consequences” and reminds me of something my mom used to say… “you made the bed, now go lay in it”… 

And Gold… the dog days of summer have really set in with the Gold trading as only 119,000 contracts were traded yesterday in Gold, and the price only changed a $1 and some change…  The shiny metal is up a few bucks in the early morning trading today, but that hasn’t been a good indicator of what “the boys in the band” will do each day, so we’ll just leave it at that, Gold is up in the early morning trading. 

The U.S. Data Cupboard had the June Consumer Credit (read debt) and it wasn’t as high as expected, as it printed at $12 Billion instead of the $18 Billion that was forecast. I’ve got something in the FWIW section on Consumer debt for you today, so keep reading!  

It also had the LMCI, or did it?  Actually, the Fed has discontinued the LMCI… Here’s the skinny.. As of August, the Federal Reserve’s Labor Market Conditions Index has been discontinued. The report released in July for June is the last of the series. The Fed’s explanation is posted below….

“We decided to stop updating the LMCI because we believe it no longer provides a good summary of changes in U.S. labor market conditions. Specifically, model estimates turned out to be more sensitive to the detrending procedure than we had expected, the measurement of some indicators in recent years has changed in ways that significantly degraded their signal content, and including average hourly earnings as an indicator did not provide a meaningful link between labor market conditions and wage growth.”

Chuck again… Well isn’t that special, in my best Church Lady voice..  I guess the report wasn’t giving the Fed the inflation numbers they wanted to see, so they scraped it…  Sort of like a Mob boss in the movies, they don’t like the performance of a guy so they “rub him out”… 

The Data Cupboard only has a third tier data print today, the Small Business Index, which I would expect to show weakness.

To recap, these are the dog days of summer, and well, the currencies and metals are sure showing us that, as they barely moved yesterday. Dollar traders are waiting for signs of more inflation, and they aren’t going to get it, but that’s just me talking… S. Africa might have a new president by the end of the day, and that would make rand traders happy. The euro has climbed back to 1.18, and Gold is up in the early morning trading today… 

For What It’s Worth… This comes to us by way of MarketWatch and is about how the U.S. Consumer is credit card debt up to their collective eyeballs… It can be found here: http://www.marketwatch.com/story/us-households-will-soon-have-as-much-debt-as-they-had-in-2008-2017-04-03?link=MW_popular

Or, here’s your snippet: “American consumers just hit a scary milestone.
They now collectively have the most outstanding revolving debt — often summarized as credit card debt — in U.S. history, according to a report Monday released by the Federal Reserve. Americans had $1.021 trillion in outstanding revolving credit in June 2017. This beats the previous record in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit.

“This record should serve as a wake-up call to Americans to focus on their credit card debt,” said Matt Schulz, a senior industry analyst at CreditCards.com, a credit card website. “Even if you feel your debt is manageable right now, know that you could be one unexpected emergency away from real trouble.”

Chuck again…  Yes, this is real problem folks, and it shows how easy it has been for consumers to get credit cards… I just shake my head at this kind of stuff, for it all will end up in tears.. mark my words… 

Currencies today 8/8/17… American Style: A$ .7927. kiwi .7362, C$ .7896, euro 1.1808, sterling 1.3032, Swiss $.9732, … European Style: rand 13.1483, krone 7.8953, SEK 8.1382, HUF 257.70, zloty 3.6026, koruna 22.1413, RUB 59.99, yen 110.55, sing 1.3608, HKD 7.8222, INR 63.75, China 6.7199, peso 17.91, BRL 3.1266, Dollar Index 93.31, Oil $49.72, 10yr 2.29%, Silver $16.25, Platinum $970.09, Palladium $890.58, and Gold…. $1,266.50

That’s it for today.. A Big Happy Birthday to my long time friend, and buddy that I call brother, Mike Karvas… Mike used to read the Pfennig, but he’s busier than a one armed paper hanger these days, so I’ll call him later today to wish him happy birthday… Mike and I became friends in 2nd grade… that’s a long time ago, folks.. Hey! my beloved Cardinals finally climbed to .500 with a win last night in K.C.!  It seemed like they were destined to be a losing club this year, and still might end up that way, but for now they are even Steven on the year…   The Beatles takes us to the finish line today with their song: Can’t Buy Me Love.. And with that, it’s time to go, I hope you have a Tom Terrific Tuesday, and Be Good To Yourself! 

Chuck Butler

 

Chuck Butler’s: A Pfennig For Your Thoughts

August 7, 2017

Good Day… And a Marvelous Monday to you! Well, I’m back writing this morning… I tried like the Dickens to keep my head away from the markets while I was gone… But then I was reading James Rickards’ new book: The Road To Ruin… which by the way, I strongly suggest you put away the sharp objects before reading! I had a marvelously relaxing vacation, first with son Andrew, and his family, wife Rachel and son Braden, and then with youngest son Alex and his girlfriend of 3 years now, Molly… A lot of beach time, just relaxing, and a lot of going out to eat at night, which wasn’t good for my waistline!

The currency market saw ups and downs while I was gone… The first week, it was all about the euro, and its trek to 1.19, and I began to think about how on the trade desk they used to say, “When Chuck’s away, the currencies rally”… But then last week, we saw profit taking and then on Friday the stupid BLS report that got the dollar bugs all riled up and thinking that they will soon see a dollar comeback… I beg to differ… And former colleague and friend, Aaron Stevenson, reminded me on Friday that the markets can remain irrational longer than you can remain solvent…

He was referring to Gold, but it could also be attributed to the dollar hanging on right now… Speaking of Gold… It got whacked on Friday after the Jobs report, so let’s talk about that jobs report before we go on today…

Well, the markets went ga-ga again on Friday, because the Bureau of Labor Statistics (BLS) said that 209,000 jobs were “created” in July… The Unemployment Rate fell to 4.3%, and you should have seen the news stories of the bulls out there on Friday, claiming that the Fed was right to hike rates, and that this report suggests that they will be back on the rate hike tracks soon… That sent the dollar soaring, especially VS the euro, and Gold. OK… here’s where I pop the bull’s balloon each month, when I point out a couple of things that the markets tend to overlook… that is until it’s too late! The BLS added 108,000 jobs with their Birth/ Death hedonic adjustment, that they take a good guess at, after they receive all the data from the surveys… I know I sound like a broken record every month, but until the markets realize that 1/2 of the jobs the BLS reports are a guess, I’ll keep reporting it!

I also wanted to mention that the Avg. Hourly Earnings didn’t grow from the prvevious month, and stand at 2.5% growth on an annual basis… OK, so you’ve worked diligently all year, and your supervisor calls you in for your review, and you get glowing remarks, and you’re sitting there thinking, “I’m in the money, I’m in the money” but before you can finish the song in your head, your supervisor tells you that you will receive a 2.5% raise, and you slump in the chair, and the song in your head quickly changes to: poor, poor pitiful me…

Oh, and the Labor Participation rate tick up to 62.9%… That my friends is a rate that SHOULD be looked at with more interest by the markets, but it isn’t, and so… Well, one day, all this is going to smack them in the face and they’ll be wondering why no one told them ahead of time that it was important!

 

The note I had sent to Aaron on Friday was something that I saw from the GATA folks, who esent me a note letting me know that S. African Gold mines were shutting down for lack of production, and that up to 16,000 S. African workers in those mines could be out of a job… The key here is that the supply of Gold will be greatly reduced, and my note said, “and Gold still can’t buy a bid”… ?????

Sibanyne Gold Corp, Ltd. Made an announcement on Friday… “Sibanye may cut 7,400 jobs as it prepares to close its Cooke and Beatrix West operations, which account for about 16 percent of its planned gold production, the Westonaria, South Africa-based company said today. “ Add those cuts to AngloGold’s planned 8,500 job cuts, that means about 14 percent of the country’s gold-mine workers are at risk, as well…

And the other note I sent to Aaron on Friday was how Ted Butler (no relation that I know of) the silver guru, wrote a report on Friday about how the London Bullion Market Association’s report this week on gold and silver bullion held in London-area vaults indicates that silver supplies are substantially lower than had been assumed… And yet Silver can’t shake off the paper short sales… In Ed Steer’s letter every Saturday, he prints a graph that illustrates the number of days of production it would take to cover the short positions that exist… In Silver it’s 155 days and in Gold it’s 70 days… Those numbers are down from the highs they were a few months ago (180, and 90) but, they are still too, darn many to ever ignore them, like the CFTC has done for years now… You can find Ed’s letter here: www.edsteergoldandsilver.com.

As I look at the currencies this morning, not much is going on as the “dog days of summer” have come upon us and the currency markets. Two weeks ago, it was all about the euro, and the Petrol Currencies, as the dollar kept sinking lower and lower, but then came the profit taking and the euphoria over the trumped up jobs report, and a lot of those gains from two weeks ago, have been watered down.  But, when I was looking at the currencies I did notice that the euro was creeping up on 1.18 again, and the Petrol Currencies, which had been led by the Russian ruble for the last couple of years, but now is being led by the Norwegian krone, are still holding Steady Eddie as I write.

I want to take a minute of your time here with a comment on something that I find to be very important to point out… And that is…  That all this dollar bug euphoria that came out of the wall boards on Friday, is simply wrong… The dollar bugs think that because of this Labor report that the Fed will be back to hiking rates next month when they meet. I have to keep my mouth shut when I sit in a restaurant and hear people talking about how the Labor picture is so strong and that will be the key to higher rates…  I would simply point out to them that the Annual Growth Rate for the U.S. has shrunk from 3.91% in 1972, to 1.01% in 2017..  I got that info from the Fed St. Louis, so don’t be thinking that I just made it up! HA!

But my wife won’t let me talk to people in restaurants, so the only opportunity I have to point this out, is here in the Pfennig! HA! Oooops, I’m not supposed to talk about my wife in the Pfennig any more, so please don’t tell her I made an exception this morning! please!  

Well, as I said above, Gold got whacked on Friday, and apparently $1,300 is the limit the “boys in the band” will allow Gold to move to right now, but with all the shenanigans in Washington going on, the problems in the Middle East, Debt up to our eyeballs, along with debt up to the eyeballs of China, the Eurozone, and the U.K. , and supply problems for Gold & Silver that are going to really become a problem, I just don’t see how the “boys in the band” can keep this lid on the price of Gold much longer… 

The U.S. Data Cupboard got a workout on Friday, with the Jobs Jamboree, but also the monthly Trade Deficit which was larger than expected at $44 Billion… Today’s Data Cupboard has a couple of data prints for us today.  One print  is not a market moving print, but one that’s very important in my mind, and that is Consumer Credit (read debt) for the month of June and it is expected to be around $18 Billion… There’s been a recent trend in this data that is troubling to me, and that is an uptick in the revolving credit total, which tells me that consumers are using the last trick in their book… Uh-Oh!

The other print is market moving, and is the Fed’s preferred data for consumer inflation, and it is is the LMCI (Labor Market Conditions Index). This is the Fed’s own report, one they created, and I believe it will show that the June drop to 1.5% was short-lived, and a bounce back to just below 2% is probably in the cards… 

As I was writing this morning, I thought, Chuck, you didn’t really talk about what’s going on overseas today, and concentrated on the U.S…. Hmmm, I guess that’s right, and I apologize for that, and will attempt to do better tomorrow! 

To recap, the currencies and metals lost their mojo on Friday, when the BLS report on jobs brought the dollar bugs out of the wall boards, and the dollar rallied. I doubt this is something that will continue much longer, and the currencies and metals should be able to rebound this week as U.S. data prints pick up, and we’ve seen how badly the dollar performs on those weak data prints! 

For What It’s Worth…  When I saw this in Ed Steer’s Saturday letter this weekend, I knew I had to highlight it, because it points out all the things in the jobs report that the markets forget to look at when they go all bat-crazy because the BLS “created jobs”…  This is from zerohedge.com and can be found here: http://www.zerohedge.com/news/2017-08-04/where-jobs-were-waiters-and-bartenders-topped-list 

Or, here’s your snippet:We already showed that contrary to the strong headline payrolls print, the sole source of job gains in July was part-time jobs, which rose by 393K in the month, the biggest monthly increase since September 2016, as full-time jobs sunk by 54K. Which is why it should not surprise that of the 209K jobs added according to the Establishment survey, the sector that added the most jobs was the “food services and drinking places”, i.e. “waiters and barenders” category, which added 53,000 jobs, the highest monthly increase since March 2014. There have now been 89 consecutive months without a decline for waiter and bartender jobs, the strongest sector for US employment. Needless to say, these jobs fall within leisure and hospitality, that sector pays the worst wages, an average of $13.35 an hour, and $331.08 a week.”

Chuck again… And they go through more job types and their pay, so check it out if you have time, it’s very “telling”, if you ask me!

Currencies today 8/7/17… American Style: A$ .7912. kiwi .7438. C$ .7885, euro 1.1794, sterling 1.3050, Swiss $ .9734, … European Style: rand 13.4374, krone 7.9495, SEK 8.1445, HUF 257.90, zloty 3.6017, koruna 22.1755, RUB 59.93, yen 110.82, sing 1.3628, HKD 7.8222, INR 63.75, China 6.7239, peso 17.87, BRL 3.1394, Dollar Index 93.45, Oil $48.92. 10yr 2,28%, Silver $16.15, Platinum $961.51, Palladium $873.91, and Gold… $1,262.90 

That’s it for today, a little light today, but not bad for the first time in 2 weeks without following the markets!  I’m writing to you today from another new location… Key West! Yes, we decided on Saturday, that we needed to go on a new adventure, and so we packed and headed to Key West. I’ve never been here before, and I like what I’ve seen so far! Last Friday was Little d’s birthday… Delaney Grace turned 10! I remember going to shows and having Pfennig Readers ask me if I had any updated pictures of Delaney Grace! I trust she had a grand time for her birthday! I hear that once I left St. Louis at its 108 degree temperatures, that it cooled off and has stayed that way… Well, that’s not a usual August! The dog days of summer are here folks…  It’s time to go now, so, I hope you have a Marvelous Monday, and Be Good To Yourself! 

Chuck Butler

 

)The Daily Pfennig is no longer published by EverBank and it is now published by Aden Research Group. Please review Aden Research Group’s privacy policy and subscription terms carefully to be sure you agree with them – a link to those documents is [https://adenforecast.com/terms-and-coditions-of-service/ If you do not accept these terms, including our privacy policy, or if you wish to discontinue your subscription to the Daily Pfennig, please click chuck.butler@dailypfennig.com to opt out for future mailings of the Daily Pfennig from us.”

 

 

 

 

 

 

Aug 4, 2017

Dear Daily Pfennig Readers…

It’s our pleasure to be here, filling in for our dear friend Chuck Butler while he’s on vacation.

To introduce ourselves, we’re Mary Anne and Pamela Aden. We write The Aden Forecast letter, and we’ve been happily doing this for 36 years. We cover the major markets, and we’ll be posting some of our articles here.

We also publish Dow Theory Letters. It was founded by the late great Richard Russell and, along with a team of top notch writers, we’ve carried on with his work. Some of these articles will also be posted during Chuck’s R&R.

And finally, you’ll also be receiving articles from GoldChartsRUs, our weekly trading service. Here our top trader covers what to buy, what to avoid, what to do about it and much more.

We hope you enjoy our articles while Chuck’s away.

Chuck’s transition is complete and we’re proud to have him as part of our Aden Group.

Best regards and here’s to good markets,

Mary Anne & Pamela Aden

Today we’re posting an article from Gold Charts R Us.

GOING OUR WAY

Gold rose further this week, reaching an eight-week high yesterday on doubts whether the Fed will raise rates this year as inflation remains subdued per the Fed’s gauges.

Also adding to gold’s luster is intensifying geopolitical turmoil as tensions with North Korea and Russia continue to escalate. In the meantime, the U.S. dollar continues to decline sharply easing the grip on deflationary forces and pushing resources, stocks and precious metals upward.

Most noticeable was crude oil as it reached our first profit target allowing you to secure a 15% gain on half of your position this week.

Copper also edged higher reaching new highs for the move yet again.

The stock market, especially the Industrials, also jumped up to more record highs on good earnings and after the Fed left interest rates alone last week. Yet the Transports declined from the highs likely on higher oil prices as profit margins were seen to fall. Moreover, Transports remain above key support levels and the bullish Dow Theory confirmation remains in play.

The Fed is dominating the markets, and one unknown is how the markets will react when the Fed starts reducing its massive debt on its balance sheet which is scheduled to start, as they said, “relatively soon.”

Meanwhile, gold looks poised for more upside. Gold’s ‘C’ rise hit a higher gear after breaking above $1260. And its next key “make or break” resistance level is near $1300, the previous ‘A’ double peak.

Our Chart of the Week shows gold, the euro and the U.S. dollar index and their relationship.

Note gold and the euro moving together and opposite to the dollar over the past year.  Gold and the euro have been rising together since the Dec 2016 lows while the dollar started its descent.

But something odd happened in June.  Gold abruptly fell while the euro jumped up to a new high, and the dollar fell to a new low.

We don’t think it’s a coincidence that two unusual slip-ups occurred in Jun-early July.  The first was an alleged ‘fat finger’ mistake that pushed gold down, and then silver’s “flash crash”.  In fact, the “flash crash” pushed both gold and silver down to their lows on Jul 7.  This was the low for the move; see second yellow vertical line on chart.

Aside from that month long set back, they’re all back to moving in sync.  That is, gold and the euro rose together while the dollar fell to a 15 month low on Monday.  You could say if it wasn’t for the “mistakes”, gold could’ve been much higher today.  Of course we’ll never know.

You’re probably thinking, yeah, but what about the euro and the dollar, aren’t they about ready to have a breather?  They are, and they’re very overextended.  But gold isn’t.

To read more about Gold Charts R Us, click here.

Aug 3, 2017

Dear Daily Pfennig Readers…

It’s our pleasure to be here, filling in for our dear friend Chuck Butler while he’s on vacation.

To introduce ourselves, we’re Mary Anne and Pamela Aden. We write The Aden Forecast letter, and we’ve been happily doing this for 36 years. We cover the major markets, and we’ll be posting some of our articles here.

We also publish Dow Theory Letters. It was founded by the late great Richard Russell and, along with a team of top notch writers, we’ve carried on with his work. Some of these articles will also be posted during Chuck’s R&R.

And finally, you’ll also be receiving articles from GoldChartsRUs, our weekly trading service. Here our top trader covers what to buy, what to avoid, what to do about it and much more.

We hope you enjoy our articles while Chuck’s away.

Chuck’s transition is complete and we’re proud to have him as part of our Aden Group.

Best regards and here’s to good markets,

Mary Anne & Pamela Aden

Today we’re posting an article from Dow Theory Letters.

Rich Man, Poor Man

By Richard Russell

MAKING MONEY: The most popular piece I’ve published in 40 years of writing these Letters was entitled, “Rich Man, Poor Man.” I have had dozens of requests to run this piece again or for permission to reprint it for various business organizations.

Making money entails a lot more than predicting which way the stock or bond markets are heading or trying to figure which stock or fund will double over the next few years. For the great majority of investors, making money requires a plan, self-discipline and desire. I say, “for the great majority of people” because if you’re a Steven Spielberg or a Bill Gates you don’t have to know about the Dow or the markets or about yields or price/earnings ratios. You’re a phenomenon in your own field, and you’re going to make big money as a by-product of your talent and ability. But this kind of genius is rare.

For the average investor, you and me, we’re not geniuses so we have to have a financial plan. In view of this, I offer below a few items that we must be aware of if we are serious about making money.

Rule 1: COMPOUNDING: One of the most important lessons for living in the modern world is that to survive you’ve got to have money. But to live (survive) happily, you must have love, health (mental and physical), freedom, intellectual stimulation — and money. When I taught my kids about money, the first thing I taught them was the use of the “money bible.” What’s the money bible? Simple, it’s a volume of the compounding interest tables.

Compounding is the royal road to riches. Compounding is the safe road, the sure road, and fortunately, anybody can do it. To compound successfully you need the following: perseverance in order to keep you firmly on the savings path. You need intelligence in order to understand what you are doing and why. And you need a knowledge of the mathematics tables in order to comprehend the amazing rewards that will come to you if you faithfully follow the compounding road. And, of course, you need time, time to allow the power of compounding to work for you. Remember, compounding only works through time.

But there are two catches in the compounding process. The first is obvious — compounding may involve sacrifice (you can’t spend it and still save it). Second, compounding is boring — b-o-r-i-n-g. Or I should say it’s boring until (after seven or eight years) the money starts to pour in. Then, believe me, compounding becomes very interesting. In fact, it becomes downright fascinating!

In order to emphasize the power of compounding, I am including this extraordinary study, courtesy of Market Logic, of Ft. Lauderdale, FL 33306. In this study we assume that investor (B) opens an IRA at age 19. For seven consecutive periods he puts $2,000 in his IRA at an average growth rate of 10% (7% interest plus growth). After seven years this fellow makes NO MORE contributions — he’s finished.

A second investor (A) makes no contributions until age 26 (this is the age when investor B was finished with his contributions). Then A continues faithfully to contribute $2,000 every year until he’s 65 (at the same theoretical 10% rate).

Now study the incredible results. B, who made his contributions earlier and who made only seven contributions, ends up with MORE money than A, who made 40 contributions but at a LATER TIME. The difference in the two is that B had seven more early years of compounding than A. Those seven early years were worth more than all of A’s 33 additional contributions.

This is a study that I suggest you show to your kids. It’s a study I’ve lived by, and I can tell you, “It works.” You can work your compounding with Muni-bonds, with a good money market fund, with T-bills or say with five-year T-notes.

Rule 2: DON’T LOSE MONEY: This may sound naïve, but believe me it isn’t. If you want to be wealthy, you must not lose money, or I should say must not lose BIG money. Absurd rule, silly rule? Maybe, but MOST PEOPLE LOSE MONEY in disastrous investments, gambling, rotten business deals, greed, poor timing. Yes, after almost five decades of investing and talking to investors, I can tell you that most people definitely DO lose money, lose big time — in the stock market, in options and futures, in real estate, in bad loans, in mindless gambling, and in their own business.

RULE 3: RICH MAN, POOR MAN: In the investment world the wealthy investor has one major advantage over the little guy, the stock market amateur and the neophyte trader. The advantage that the wealthy investor enjoys is that HE DOESN’T NEED THE MARKETS. I can’t begin to tell you what a difference that makes, both in one’s mental attitude and in the way one actually handles one’s money.

The wealthy investor doesn’t need the markets, because he already has all the income he needs. He has money coming in via bonds, T-bills, money market funds, stocks and real estate. In other words, the wealthy investor never feels pressured to “make money” in the market.

The wealthy investor tends to be an expert on values. When bonds are cheap and bond yields are irresistibly high, he buys bonds. When stocks are on the bargain table and stock yields are attractive, he buys stocks. When real estate is a great value, he buys real estate. When great art or fine jewelry or gold is on the “give away” table, he buys art or diamonds or gold. In other words, the wealthy investor puts his money where the great values are.

And if no outstanding values are available, the wealthy investors waits. He can afford to wait. He has money coming in daily, weekly, monthly. The wealthy investor knows what he is looking for, and he doesn’t mind waiting months or even years for his next investment (they call that patience).

But what about the little guy? This fellow always feels pressured to “make money.” And in return he’s always pressuring the market to “do something” for him. But sadly, the market isn’t interested. When the little guy isn’t buying stocks offering 1% or 2% yields, he’s off to Las Vegas or Atlantic City trying to beat the house at roulette. Or he’s spending 20 bucks a week on lottery tickets, or he’s “investing” in some crackpot scheme that his neighbor told him about (in strictest confidence, of course).

And because the little guy is trying to force the market to do something for him, he’s a guaranteed loser. The little guy doesn’t understand values so he constantly overpays. He doesn’t comprehend the power of compounding, and he doesn’t understand money. He’s never heard the adage, “He who understands interest — earns it. He who doesn’t understand interest — pays it.” The little guy is the typical American, and he’s deeply in debt.

The little guy is in hock up to his ears. As a result, he’s always sweating — sweating to make payments on his house, his refrigerator, his car or his lawn mower. He’s impatient, and he feels perpetually put upon. He tells himself that he has to make money — fast. And he dreams of those “big, juicy mega-bucks.” In the end, the little guy wastes his money in the market, or he loses his money gambling, or he dribbles it away on senseless schemes. In short, this “money-nerd” spends his life dashing up the financial down-escalator.

But here’s the ironic part of it. If, from the beginning, the little guy had adopted a strict policy of never spending more than he made, if he had taken his extra savings and compounded it in intelligent, income-producing securities, then in due time he’d have money coming in daily, weekly, monthly, just like the rich man. The little guy would have become a financial winner, instead of a pathetic loser.

RULE 4: VALUES: The only time the average investor should stray outside the basic compounding system is when a given market offers outstanding value. I judge an investment to be a great value when it offers (a) safety; (b) an attractive return; and (c) a good chance of appreciating in price. At all other times, the compounding route is safer and probably a lot more profitable, at least in the long run.

RICHARD RUSSELL

1924-2015

Aug 2, 2017

Dear Daily Pfennig Readers…

It’s our pleasure to be here, filling in for our dear friend Chuck Butler while he’s on vacation.

To introduce ourselves, we’re Mary Anne and Pamela Aden. We write The Aden Forecast letter, and we’ve been happily doing this for 36 years. We cover the major markets, and we’ll be posting some of our articles here.

We also publish Dow Theory Letters. It was founded by the late great Richard Russell and, along with a team of top notch writers, we’ve carried on with his work. Some of these articles will also be posted during Chuck’s R&R.

And finally, you’ll also be receiving articles from GoldChartsRUs, our weekly trading service. Here our top trader covers what to buy, what to avoid, what to do about it and much more.

We hope you enjoy our articles while Chuck’s away.

Chuck’s transition is complete and we’re proud to have him as part of our Aden Group.

Best regards and here’s to good markets,

Mary Anne & Pamela Aden

Today we’re posting an article from The Aden Forecast.

U.S. dollar: A bad year, so far

The U.S. dollar fell further this month, posting its biggest quarterly drop in nearly seven years… The dollar is clearly bearish and it’s headed lower in the months ahead.

How can we be so sure?  Well, as you know, markets are always about probabilities. Nothing is set in stone and it’s, therefore, important to be flexible. But if we stand back and look at what’s happening, the big picture is telling us the tide has turned…

Here are a few of the reasons why…

SENTIMENT HAS SHIFTED

Mainly, sentiment has shifted and it’s driving the currency markets, away from the U.S. dollar and into other currencies. Investors are concerned about the U.S. and there’s been a loss of confidence. Investors are feeling somewhat uncertain, especially foreign investors, so they’ve been lightening up on their dollars.

The U.S. economy has pros and cons going for it. But in this uncertain climate, currency investors have generally ignored the good news and reacted to the bad news.

For example, higher U.S. interest rates would normally be good for the U.S. dollar. But since rates are rising into a lackluster economy, it makes investors nervous. Also, with interest rates now poised to rise in other countries, it’s reducing the edge the dollar previously had.

Plus, it didn’t help that the IMF downgraded their forecast for U.S. growth, stating Trump’s target of 3% growth will be difficult to reach for several reasons, like an aging population and so on.

Then there’s the trade deficit (see chart). It’s still huge and this too is putting downward pressure on the U.S. dollar.

It’s also no secret that Trump wants a weaker dollar because it will make U.S. exports more attractive and help boost the economy. So he’s now getting what he wanted…

DOLLAR: LOOK AT DOWNSIDE

Looking at the U.S. dollar index, you’ll see what we mean…

Note the dollar index has stayed below its 65-week moving average, signaling the major trend remains down.

And as we pointed out last month, the dollar index could  likely decline to about the 93 level. This is the next support near the 2015-16 lows.

Going a step further, if the dollar index breaks below 93, it could then continue down to 86.50. In other words, if the dollar index eventually drops below 86.50, it would be super bearish, signaling a big bear market is unfolding.

EURO: Best

The euro has benefitted the most. That’s mainly because the euro is the offset currency for the dollar. So when the dollar declines, the euro rises the most.

The euro is also being boosted by more positive sentiment and better economic signs. The euro has remained bullish by staying above its moving average at 1.0980.

If it now stays above 1.15, it could then continue up to near 1.30. If so, that would be about another 10% gain from its current level.

For more information about The Aden Foreacast, click here.

Aug 1, 2017

Dear Daily Pfennig Readers…

It’s our pleasure to be here, filling in for our dear friend Chuck Butler while he’s on vacation.

To introduce ourselves, we’re Mary Anne and Pamela Aden. We write The Aden Forecast letter, and we’ve been happily doing this for 36 years. We cover the major markets, and we’ll be posting some of our articles here.

We also publish Dow Theory Letters. It was founded by the late great Richard Russell and, along with a team of top notch writers, we’ve carried on with his work. Some of these articles will also be posted during Chuck’s R&R.

And finally, you’ll also be receiving articles from GoldChartsRUs, our weekly trading service. Here our top trader covers what to buy, what to avoid, what to do about it and much more.

We hope you enjoy our articles while Chuck’s away.

Chuck’s transition is complete and we’re proud to have him as part of our Aden Group.

Best regards and here’s to good markets,

Mary Anne & Pamela Aden

Today we’re posting an article from Dow Theory Letters.

RICHARD’S THOUGHTS ON DOW THEORY

Richard’s Comments

Since I call my site and reports Dow Theory letters, I want to spout a bit of Dow Theory now.

The power and usefulness of Dow Theory has been doubted and sneered at since the early 1900s, but the effectiveness of Dow Theory has been proven over and over again.

Over the years, I’ve examined and followed countless new, improved market techniques and theories, and I’ve yet to see one that outdoes the Dow Theory over any extended period of time.

In the end, what I trust most is the price action of the market.

For those who follow the Dow Theory, I want to delve into one critical thesis. When a primary bull signal is given under Dow Theory, it means that the great primary trend of the market has turned up.

The Dow Theory does not tell us how far up the market will go. It does not tell us how long the bull market will last. The Dow Theory does not tell us the path the market will take as the bull market develops. It simply tells us – The major trend is now up.

I guess I’ve written this a few hundred times, but I’m going to say it again. The primary trend always runs to conclusion. The primary trend can be temporarily manipulated, it can be held back, it can be talked back, but ultimately, as night follows day, the primary trend will fully express itself. It will express itself whether it takes a year, or five years, a decade or more.

Yesterday I read a piece by an analyst in which this analyst claimed that there is no such thing as a primary trend. I read the piece carefully, and my conclusion was that this analyst didn’t know what he was talking about.

Let’s take a bull primary trend. A bull primary trend is seen when an item spends an extended period of time rising. Of course, in the course of the rise there will be many secondary corrections, but each correction will be followed by new highs. All true primary trends end in exhaustion. A primary bull trend ends when the last of the participants have “had enough” and take their profits.

As a rule, bull primary movements end amid great excitement and intense speculation. This occurs as a greedy public rushes in to buy the market while at the same time the “smart money” moves out. This creates the state of exhaustion, since the buyers cannot absorb all the supply that is put up for sale. A bull primary trend ends when the best that can be seen ahead is fully discounted in the price structure.

I should add that during a primary bull market the bull will attempt to rise while taking the fewest number of people with him. He does this with the help of multiple downside corrections.

THE PTI: Bullish too

I developed my Primary Trend Index (PTI) in the late 1960’s and early ’70’s for the purpose of aiding me in identifying the major or primary trend of the market.

My PTI is an amalgam of eight critical averages and indicators. Each indicator is based on the ACTION of the stock market (as opposed to sentiment indicators, monetary issues, etc.).

Thus, the PTI provides a special and unique technical picture which has been of great value to me and my subscribers over the years.

During a strong bull movement the PTI will tend to push up day after day and week after week. Let me put it more simply. When the PTI is rising on a major trendline basis, the inference is that the market forces are bullishly advancing in harmony.

For more information about Dow Theory Letters, click here.