Author: admin

April 10, 2018        

* New economic sanctions for Russia… 

* Did China step away from the auction window?

 

Good Day… And A Tom Terrific Tuesday to you!  Right from the get-go this morning, I want to thank everyone who sent me notes yesterday, with all those wonderful words regarding my mentioning that the tumor in my mouth was gone… The notes are truly appreciated! The Pfennig Replies email box was flooded with emails, and that’s pretty cool! My beloved Cardinals find another way to lose a game last night. UGH! Jane’s Addiction greets me this morning with their song: Been Caught Stealing… 

Well, why don’t we, as a country, just go out and attempt to tick everyone off at the same time? Did you hear about the new economic sanctions place on Russia? What for this time?  No Crimea, no Ukraine, did we just say, what the hell, and place sanctions on Russia?  Well, this is crazy folks… The Russian ruble got whacked on the news, and brings about a point that I’ll attempt to make here… The ruble is very undervalued, wink, wink, and now it’s even more of a bargain price… wink, wink…    

There’s so much going on, it’s impossible for me to talk about all of it in one letter, but I jam as much of my thoughts on the goings on in today’s letter, for tomorrow isn’t guaranteed to us, only today is.  Look at Chuck being philosophical  ! Yeah, sort of akin to SNL’s Deep Thoughts by Jack Handy! HA!  

The currencies, led by the Big Dog euro, had a good day yesterday and in the overnight sessions, for the first time in quite a few days. Or it sure seems that way, that just about every morning, I’m saying “the currencies didn’t move much” or something like that! But not today! The euro has recovered back above 1.23, and I was reading an article this morning that talked about the improved sentiment toward the Eurozone, with Germany, the Eurozone’s largest economy, getting very close to a coalition Gov’t, and more and more talk about the European Central Bank (ECB) getting closer to an unwind of their stimulus… 

With the Big Dog on the move, the other currencies are following the lead dog. The Aussie dollar (A$) finally moved past 77-cents, and kiwi has really been burning the midnight oil to get past 73-cents. The price of Oil has fought back to the $64 handle, on supplies news, and the added sanctions… 

Well, Gold was able to gain $2.30 yesterday, but the big move upward for the shiny metal is likely to be associated with whatever it is that President Trump does to Syria… Geopolitical problems usually send Gold soaring, with the price manipulators sitting on the sidelines.  

Well, how many of you are aware of the historical fact that whenever the U.S. Treasury yield curve inverts, it’s an indication of an economic recession on the way? Well, that’s that, and what’s the reason I’m bringing this up today… I’ll let the boys and girls from Bloomberg tell you in their own words…

“The forward curve of a closely watched proxy for the Federal Reserve’s policy rate has slightly inverted, signaling investors are either pricing in a mistake from central bankers or end-of-cycle dynamics, according to JPMorgan Chase & Co.

The inversion of the one-month U.S. overnight indexed swap rate implies some expectation of a lower Fed policy rate after the first quarter of 2020, the bank’s strategists including Nikolaos Panigirtzoglou, wrote in a note Friday.

“An inversion at the front end of the U.S. curve is a significant market development, not least because it occurs rather rarely,” they said. “It is also generally perceived as a bad omen for risky markets.” – Bloomberg…

Of course they’re just talking about the front end of the curve being inverted, but the curve as a whole, is flattening and in danger of inverting, so I’ll keep an eye on that, don’t worry about that!   

The Trade War talk is heating up again. Did you know that, the Chinese tariffs are a huge blow to American growers, especially those in Midwestern states that the President needs to win re-election in 2020. China is the biggest buyer of U.S. soybeans, picking up about a third of the entire U.S. crop. The trade is worth about $14 billion. 

The U.S. tariffs target the high-end technology products made in China. That could mean that companies like Apple Inc. and Lenovo Group Ltd. that operate significant Chinese production bases face higher costs or supply-chain disruption. The biggest blow by far is to almost $4 billion worth flat-panel TV screens.    And I’ve got a real doozy for you in the FWIW section today, it’s so BIG that I wouldn’t blame you if you skipped ahead to read it right now!  

The U.S. Data Cupboard doesn’t really have any real economic data this week, so the news that will drive the markets will come from the U.S. Gov’t…  And I don’t think any of that will help the dollar, but instead it just might help Gold!  

To recap…  The currencies finally moved off the point they were stuck at for over a week, and the Big Dog euro led the currencies higher VS the dollar! Geopolitical pressures are what will move the markets for currencies and precious metals this week, with questions like: What will Trump do in Syria?  The President did add new economic sanctions on Russia yesterday, and Chuck doesn’t understand what the heck is going on here….  

On a sidebar, I’ve talked about this before but it’s even more important now because of the new sanctions on Russia…  The world has 3 super powers, the U.S., China and Russia…  It would behoove the U.S. to buddy up with one of the other two so they could gang up on the third country and get their way with them…  But guess what we haven’t done?  That’s right, we haven’t buddied up with anyone, in fact we’ve ticked off China, and now add Russia, so guess who’s buddying up? That’s right China and Russia, and soon they’ll be getting their way with us…  I’m just saying…  

For What It’s Worth… I think you had better pay attention to this article that appeared on the ZeroHedge.com site. It’s about China stepping away from the Treasury auction window, just like I said we needed to be afraid they might do, and it can be found here: https://www.zerohedge.com/news/2018-04-09/we-understand-chinese-government-has-halted-purchases-us-treasuries-sgh

I don’t have much of a snippet today, because 1. I want you to click on the link and read the report, and 2. I can’t get the copy and paste to work for this article…

Chuck again… Brother have we stepped into a pile of doggie doo… It’s been a longtime arrangement between China and the U.S…. The U.S. buys China’s exports, and China buys U.S. Treasuries… But when you play with fire, you get burned… And if the report is true, that China has ceased buying Treasuries weeks ago, who’s going to take up the slack? The Fed is not buying Treasuries, and the U.S. increased their deficit spending, which needs the sale of Treasuries to finance the deficit spending! Uh-oh!

I’ve explained this in the past, but what the heck… When Treasuries aren’t being bought, the U.S. Gov’t has two choices… They can aggressively hike rates to get the yields on the bonds higher and more attractive, but risk causing the economy to go into a recession. Or… They could depreciate the value of the dollar, so that the purchase price on the conversion to dollars in the terms of the transaction, would be cheaper… Given the two choices, which do you believe the U.S. Government will choose? What’s behind door #1 or door #2? #2? Johnny, tell them what they’ve won! You’ve won a weak dollar that will reduce your purchasing power, like a tax, but that’s not all! You have also won higher interest rates because the Fed will hike rates at first to see if they can attract buyers, and then seeing they can’t, they’ll ask for a depreciation of the dollar…

Got Currencies and Gold (or silver)?  

Currencies today 4/10/18… American Style: A$ .7737, kiwi .7350, C$ .7889, euro 1.2330, sterling 1.0462, Swiss $1.0462, … European Style: rand 12.05, krone 7.8211, SEK 8.3493, forint 252.61, zloty 3.4001, koruna 20.5470, RUB 59.43, yen 107.02, sing 1.3102, HKD 7.8494, INR 64.84, China 6.3051, peso 18.28, BRL 3.3846, Dollar Index 89.81, Oil $64.21, 10-year 2.79% Silver $16.48, Platinum $936.72, Palladium $936.85, and Gold… $1,339.60  

That’s it for today… Lots on our plates, eh? My stomach is performing circus tricks this morning, so I’ll end this here and try to get that settled down… The sun came out yesterday, and it kind of got a bit warmer, and I’m told that it will continue to get warmer today and tomorrow, so that’s a good thing, because I can’t stand cold weather! Junior Walker and the All Stars take us the finish line today with their song: What Does It Take? Great sax work in that good old song… And with that… it’s time to go… So, I hope you have a Tom Terrific Tuesday, and don’t forget to Be Good To Yourself!   

Chuck Butler

April 9, 2018      

* Jobs report is very disappointing but the dollar doesn’t get sold!

* Who will depreciate first?

 Good Day… And a Marvelous Monday to you! It was a very cold weekend here in the St. Louis area this past weekend, making me remain indoors, for the most part of the weekend, daring only to go outside when I was going to my car! It’s so cold here that I’ve decided to go back to S. Florida next week. I would have gone this week, but the flights were still very expensive from the Easter Weekend. Our Blues got bounced out of the playoffs this year, so boys, gather up your golf clubs and head to the links… UGH! Oh well, at least no “playoff heart break” for us this year! My beloved Cardinals hit the ball one day, and not the next day, and then rinse and repeat… I think I’m going to the day game this Wednesday with good buddy Duane, so I’ve got that going for me! Big Head Todd & The Monsters greet me this morning with their song: Tomorrow Never Comes…

Well, Friday’s Jobs Jamboree sure was a shocker, eh? The so-called experts had forecast that the jobs created number for March would be 170,000 (that was down from a forecast earlier in the week that called for 240,000) and the BLS said that only 103,000 jobs were created in March, and that was with the help of 65,000 jobs added to the surveys! In my eye, that means only 38,000 jobs were created in March… But did the dollar get sold?

Unfortunately, the answer is no… Unlike the previous months that showed good jobs reports, and the dollar rallied, the green/peachback didn’t get sold on bad jobs numbers… I told you last week about the quote I had from Charles Hugh Smith, who talked about how he thought the PPT was ordering food into the office for they were having to work through the night… Makes sense that they were in to prevent dollar weakness just like they came in a week or so ago, to prevent the dollar from falling off a cliff!

Of course you can’t really hand your hat on bets about what the BLS is going to do next month, but if we should see another weak jobs report, then someone at the BLS is going to be getting a call asking them to pump up the numbers!  Or at least to turn in their government issued jacket, and to clean out their locker! 

So…Getting back to the markets… Stocks got whacked on Friday, but the futures are positive this morning, so I guess someone is interested in catching this falling knife!  Think about the trading on Friday.. The Jobs report was very disappointing and stocks got sold, but bonds didn’t rally, which they normally do when disappointing economic data prints, and the dollar didn’t get sold.. Hmmm..   Very interesting don’t you think? 

Gold was able to gain $7.20 on the day, Friday, but is down a buck or two in the early morning trading today. So, no follow up out of the starters blocks this morning with Gold.. I just finished my DTL (Dow Theory Letters) letter for this week last night, and in it I really dig deep into the jobs report, so you’ll not want to miss it! Oh, Chuck! don’t tease them like that, the DTL is a paid subscriber letter, and readers can’t just go to www.dowtheoryletters.com and read it!  I’m sorry, I just assumed that you all had signed up to read more of my stuff! HA!     

Well, the news on the Trade War front has China vowing to remain in this fight until the bitter end…  And the BIG NEWS is that China is reviewing the idea of allowing a big depreciation of the renminbi as a tool to combat the U.S’s tariffs…  I was wondering when this was going to show up…  Think about that if the U.S. raises tariffs 25% on Chinese goods, and the Peoples Bank of China (PBOC) depreciates the renminbi by a large margin, they offset some of the damage of tariffs and keeps the goods priced where U.S. consumers will still buy them. 

The one thing holding the PBOC from announcing a large depreciation is the timing… You see, the report on “currency manipulators” is due later this month, and China does NOT was to be named a “currency manipulator”, which they would most certainly be in line for admission to the club if they depreciated the renminbi by a large margin right now. 

This would be reverse engineering the thought I talked about last week when I told you the rumors going around that there could be another Plaza Accord in store for the dollar…  Who will blink first? Quick draw McGraw is needed by either China or the U.S.  What a mess! These two Giants trying to out due the other by depreciating their currency VS the other…  I shake my head in disgust that this wasn’t thought of before going to war with Trade tariffs…   

The price of Oil, only got to trade above $63 for one day, before falling back below that handle.  The Petrol Currencies that didn’t participate in Oil’s one-day rebound last week, got hit the hardest… The Russian ruble and Brazilian real saw lots of selling, while the Canadian dollar / loonie and Norwegian krone held their ground.  One other currency that used to be thought of as a Petrol Currency is the Mexican peso, and even with the reduced amount of petrol that Mexico produces these day, it gets hit with the drop in the price of Oil just like everyone else…  

The U.S. Data Cupboard had the Jobs report last Friday, which also showed that the Avg. Hourly Earnings were stronger. Longtime readers know that I put more emphasis on the Avg. Hourly Earning and the Avg. Work Week Hours  each month instead of the number of jobs created.  I think this month’s rise in the Avg. Hourly Earnings is something that we need to be on top of going forward, for wage inflation is something that we don’t want to see, and if it begins to get out of hand, those of you who own Gold will be happy you do!    

To recap…  The Jobs Jamboree was very disappointing on Friday, with only 103,000 jobs created in March, but in Chuck’s eye, only 38,000 real jobs were created… The dollar didn’t get sold on the disappointing jobs report, which is puzzling to Chuck. And Bond yields didn’t drop like they usually do on disappointing economic data… Did someone order in food for the PPT?  Gold did gain $7.20 on Friday, and China is thinking about a large depreciation of the renminbi to offset the effects of the tariffs..  

For What It’s Worth…  Since there’s all this talk of tariffs, depreciations and so forth, I thought this article explained why these things have come to the forefront of our daily lives, and it can be found here: https://www.zerohedge.com/contributing-editors   

Or, here’s your snippet:”With so much attention focused on trade data in recent weeks, Trump will hardly be happy to learn that not only did the U.S. trade deficit grow by 1.6% in February from $56.7BN to $57.6BN, missing expectations of a $56.8BN print, but was the highest monthly trade deficit going back ten years, just as the financial crisis was warming up back in 2008.

According to the Census Bureau, the deficit increased to $57.6 billion, as imports increased more than exports. Broken down by components, the goods deficit increased $0.3 billion in February to $77.0 billion. The services surplus decreased $0.6 billion in February to $19.4 billion.

The good news is that exports of goods and services increased $3.5 billion, or 1.7% , in February to $204.4 billion. Exports of goods increased $3.0 billion and exports of services increased $0.5 billion.

Meanwhile, the countries that should be worried they are about to fall in Trump’s trade war sights and resulted in a US trade deficit, included China ($34.7), European Union ($15.3), Germany ($6.7), Mexico ($6.6), Japan ($6.0), Italy ($2.8), OPEC ($2.3), India ($1.9), Taiwan ($1.5), France ($1.4), South Korea ($1.1), Saudi Arabia ($0.4), and Canada ($0.4).

More importantly, it’s not just China: the deficit with Mexico increased $1.0 billion to $6.6 billion in February, while the deficit with Germany increased $0.4 billion to $6.7 billion in February. Meanwhile, the deficit with Canada decreased $1.2 billion to $0.4 billion in February.”  

Chuck again…  So, here you are a country that makes things that U.S. consumers want…  and the country you export to, is running a deficit with you. You don’t seem to have a problem with this deficit, as long as the U.S. keeps buying your stuff, right?  But then someone upsets the applecart, and now everything is up in the air…   Who wins? Who loses? Either way I think I’ll be glad that my investment portfolio is diversified!  

Currencies today 4/9/18… American Style: A$ .7657, kiwi .7283, C$ .7815, euro 1.2269, sterling 1.41, Swiss $1.0410, … European Style: rand 12.1344, krone 7.8086, SEK 8.3846, forint 254.32, zloty 3.4191, koruna 20.6672, RUB 58.07, yen 107.10, sing 1.3129, HKD 7.8489, INR 64.88, China 6.3048, peso 18.36, BRL 3.3679, Dollar Index 90.19, Oil $62.28, 10-year 2.80%, Silver $16.31, Platinum $916.92, Palladium $921.22, and Gold… $1,331.80  

That’s it for today…  Saturday was the coldest day ever for game at Busch Stadium III… But at least the sun was shining! After winning Friday night VS our hated rival Blackhawks, I thought our Blues would win on Saturday night and sneak into the playoffs, but I was wrong, the our Blues laid a big egg on Saturday night. Hey! I’ve got some great news! Are you ready for this? The tumor in my mouth is gone… my face is back to normal size, my tongue doesn’t have to share space with a tumor any longer!  The new chemo drug worked fast. Unfortunately, the new drug is doing some strange things that I’m not pleased about.  But the tumor is gone!  Now if it will stay away and not return again!   The Gin Blossoms send us to the finish line today with their song: Allison Road.   I hope you have a Marvelous Monday and remember to Be Good To Yourself! 

Chuck Butler

April 5, 2018    

* Trade War talk softens on Wednesday…

* The PPT spreads its wings…

Good Day…  And a Tub Thumpin’ Thursday to you! I’m not in the mood for Tub Thumpin’ this morning, so hopefully that changes by this afternoon! I reacquaint myself to my St. Louis Oncologist today. She’ll be amazed at the shrinkage of the tumor in my jaw. At least I think she’ll be amazed! Nice win for my beloved Cardinals who if they hadn’t blown the game the night before would be on a 4 game winning streak! UGH!  Our Blues lost their game on a goal scored on the home team’s ice with 8-seconds left in the game… I watched it, and still don’t believe it… 10CC great me this morning with their song: Dreadlock Holiday… I don’t like cricket, I love it!  

It’s Opening Day here in St. Louis today.  The Baseball season should always open in St. Louis, as we do Opening Day better than any other organization. It’s quite the spectacle and you should put it on your bucket list to be here for Opening Day!  

Well the PPT (plunge protection team) were busy again yesterday saving the world…  I was doing some reading yesterday and came across some research that talked about how the PPT has brothers across the oceans of the world. The ECB and BOJ both stepped up their bond buying programs late last week when it looked like U.S. stocks would lead stocks around the world for a ride on the slippery slope…  

I can hear the phone call now..  Hello ECB, this is the U.S….  Since we’ve ended our bond buying programs, we need for you, who still has one, to step up the bond buying to save the word.  And then the same phone call goes to the BOJ…  Of course I’m making that stuff up, but can you see how that all played out?  

For heaven’s sake! These two Central Banks were getting prepared to do some unwinding of their respective bond portfolios, and out of the blue, they both decide to step up their bond buying?  This scenario has the PPT’s fingerprints all over it…  And Charles Hugh Smith had this to say about how hard the PPT’s all over the world have been working… .”Global Plunge Protection Teams must be ordering take-out food; every night is a long one now.”   

The effects of the bond buying only helped for one day, but Shoot Rudy, they could do this for a long time to let the stocks of the world down easy, instead of these one-day crashes!   And here’s another telling sign that something fishy is going on.. Peter Navarro of the President’s administration sent out a message the other day to U.S. investors to not fear the markets and to buy the dip…   

The price manipulators were driving the bus again yesterday… Gold traders were pushing the appreciation envelope quite nicely , and Gold reached $1,352.50, and then the price manipulators woke up and saw it above their line in the sand of $1,350, and they proceeded to flood the markets with short Gold paper trades and by the end of the day Gold was $20 lower from their high of the day, and 326,000 contracts traded, of which I’m quite sure there were quite a few short Gold paper trades..  UGH!

Gold did actually end up gaining 60-cents on the day, Big Whoop, eh?  The same fate was Silver’s trading yesterday, and the two industrial metals of Platinum and Palladium saw their values chopped off at the knees, even with the surprising auto sales data, that was propped up by pick ’em up Trucks and SUV’s…   Like I said yesterday, everything I’ve read leading up to the auto sales data print, wasn’t pointing at a better than expected auto sales print… So, I still think the auto sales print was done with smoke and mirrors..  I’m just saying…   

The currencies continue to allow the dollar bugs to beat them up, but not too badly, to keep the currencies coming back for more… UGH!  The euro continues to trade sub-1.23, and the Aussie dollar (A$) can’t seem to gather enough strength to get past 77-cents. The price of Oil gained nearly a dollar back after giving up $3 since last week, but the Petrol Currencies saw their reactions mixed… The Russian ruble and Brazilian real lost ground, while the Canadian dollar / loonie and Norwegian krone gained ground on the day.  I wonder what gives with that?  Well, now I have the job of researching that!  Hey! it gives me something to do while I wait to see the oncologist! HA!   

The Trade War talks saw a softening of the stances yesterday, and we had The White House’s National Economic Council Director Larry Kudlow reminding everyone that would listen to him that none of the tariffs discussed have gone into place yet…  We also heard that both the U.S. and China have mentioned that there’s still time for negotiation…  Recall that previously, it was only China talking about talking… What brought the U.S. into the discussion, when they seem to hell bent and whisky bound to hurt China? Well, China went for the motherlode of tariffs when they included soybeans and other agriculture from the Midwestern states that Trump needs…  Now that’ll get the U.S to the negotiation table in a NY minute!  

Oh, the tangled webs we weave, eh? There’s a lot on the plate of the U.S. right now… A teetering stock market, a Trade War, directing the PPT, and bringing the ECB and BOJ into the fray, and on cherry on top continues to be the debt, at $21 Trillion and now scheduled to have more than $1 Trillion added to it every year.. YIKES…   

I was talking with my son Andrew on Sunday, and asked him if he still showed the I.O.U.S.A documentary to his class, and he said yes, but it had gotten old. The Debt at the time of filming was $8.5 Trillion… So, he’s gotten some updates, and tries to educate his students about the rising debt and what it would mean to them as they grow older… 

He told me that he had some students that just didn’t get it, and said that their parents told  them that the U.S. just needs to print enough money to pay off the debts…  He asked me to come in to talk to them and explain how that would not be a very good solution…  So, I guess at sometime in the next two months I’ll be heading to Lindbergh H.S. for something other than a swim meet or water polo game!   The Butler Patio goes to school! HA!  

The US. Data Cupboard yesterday saw the ADP Employment report show that jobs created in March were 241,000, but we’ll have to wait-n-see what gruel the BLS has put into the jobs surveys, maybe some crow’s feet, or eye of newt…  Whatever it is, it won’t be the same as the ADP report..  We also saw that Factory Orders tried to recover the negative -1.7% January print yesterday with a 1.2% positive print for Feb…  The 1.2% figure was good, but didn’t match the expectations for 1.7% gain…  Hmm…  Oh well, they’re only expectations!  

Today’s Data Cupboard doesn’t really have another market moving so we’ll just move along here for these aren’t the droids we’re looking for!  

To recap…  The PPT has morphed into PPT for Europe and one for Japan, as they were recruited to help out late last week…  Gold had a nice day going yesterday, until the price manipulators showed up, and Gold’s nice day turned into just a 60-cents gain… UGH!  And the Trade Wars talk softened yesterday, after China had gone for the gut with tariffs on agriculture including soybeans… Whatever gets the talks going is good with me!  The currencies continue to allow the dollar bugs to have the hammer, and the price of Oil recovered nearly $1 of its $3 dollars loss this week.   

For What It’s Worth…  Since I spent some time talking about the U.S. debt this morning, I thought when I saw this article that it played well, as U.S. consumer debt is soaring just like the U.S. National Debt… This article can be found hhttps://www.cnbc.com/2018/04/04/growing-debt-among-older-americans-threatens-retirement.htmlere:    

Or, here’s your snippet: “Debt among older Americans is rising fast. In 2016, the average debt in families in which the head of the household is age 75 or older was $36,757. That is up from $30,288 in 2010, according to a recent report by the non-profit Employee Benefit Research Institute in Washington.  

 The average monthly Social Security check is $1,404, and more than 40 percent of single adults receive more than 90 percent of their income from that check, according to the government.

“There’s just fewer options that you have at that stage of the game,” said Justin Halverson, a financial advisor and co-founder of Great Waters Financial in Minneapolis. ”   

Chuck Again… This is a very disheartening article, but it’s better if you know about the problems so you can adjust, improvise, and deal with it…

Currencies today 4/5/18… American Style: A$ .7689, kiwi .7289, C$ .7833, euro 1.2266, sterling 1.4055, Swiss $1.04… European Style: rand 11,92, krone 7.8086, SEK 8.3976, forint 253.39, zloty 3.4294, koruna 20.6420, RUB 57.62, yen 107.02, sing 1.3141, HKD 7.8491, INR 65.02, China 6.2982, peso 18.09, BRL 3.3401, Dollar Index 90.18, Oil $63.13, 10-year 2.82%, Silver $16.27, Platinum $913.72, Palladium $924.41, and Gold… $1,333.10

That’s it for today…  I’m really tired today, and don’t know why, but I’m sure it has to do with the new chemo I’m taking by pill every day… The new chemo has also ramped up my blood pressure, so my BP medicines change, UGH!  But as the oncologist in Florida told me, we can take care of the BP as long as the chemo is shrinking the tumor! I’m not worries about my BP, they’ll get it in order, I’m sure! This is what I’m thinking folks… I’m thinking about taking Friday’s off, which would mean only 4 days of Pfennigs a week… What do you think?    Bad night for the Blues, good night for the Cardinals last night… The Turtles takes us to the finish line today with their song: It Ain’t Me Babe…   I hope you can get out and make this a Tub Thumpin’ Thursday, and please Be Good To Yourself! 

Chuck Butler

April 4, 2018      

* Eurozone prints some good data today   

* Was smoke & mirrors used to count Car Sales?

 

Good Day… And a Wonderful Wednesday to you! Rain, rain go away, Chuck wants to go out to play! Rain came down in buckets at times yesterday, and the temp dropped throughout the day all the way down to the lovely 29 degrees it sits at this morning… UGH! Some spring, eh? Old Man Winter still has a grip on us, and Mother Nature can’t wrestle him for control. It’s the same with the dollar bugs, they just won’t let go, and still think the dollar is the place to be, even though the dollar has lost 13% value in the past year and couple of months… Neil Young greets me this morning with his song: The Needle And The Damage Done…  I played that song on my guitar and sang for a group of EverBankers on Amelia Island about 8 years ago, maybe more now that I think about it!    Time flies when you’re having fun!  

Well, I turned on the currencies screen this morning thinking that the recent slippage in the euro and other currencies would be reversed, but that was not to be, and instead of a reversal, what I saw was more slippage… UGH!  So, why did I think I would see a reversal of recent weakness in the currencies?  

Ahhh grasshopper, I’m glad you asked!  Well there are two reasons… First and foremost, the U.S. announced more tariffs, to the tune of 25%, on Chinese goods yesterday. The list of goods was so long, that you need a spreadsheet to keep track of them. But that’s not it… China retaliated this morning with an announcement of $50 Billion in new tariffs, mostly on agriculture, including soybeans.. 

The Trade War is really heating up, but through the fog we hear a faint voice calling out to us from China, saying that there’s still time for negotiations… But, in a move that I’m not happy about, the President has gone full-ahead with his tariffs, as if he wants a Trade War with China… 

The other reason I was looking for a reversal is the Eurozone printed some good data today…  First, Eurozone inflation grew 1.4% in March and is going to put pressure on the European Central Bank (ECB) to begin to unwind their stimulus measures, including bond buying and negative deposit rates… In addition, Eurozone Unemployment dropped to a 9-year low in March, to an 8.3% level…  But the dollar bugs have a grip on the currencies right now, just like old man winter has a grip on the weather! 

The Peoples Bank of China (PBOC) didn’t allow an appreciation in the renminbi last night, choosing instead to mark it down. The PBOC probably put the brakes on the recent string of appreciations because they were getting out of whack with their trading partners…  You see, if the Russian ruble and euro were also gaining then the appreciations would continue, but with them seeing slippage, the renminbi has to follow, or else get out of whack with their trading partners’ currencies.  

Gold lost $8.60 yesterday, continuing the recent trading pattern of seeing Gold rise one day, only to see it get whacked the next day. And that’s played out today with Gold up $10 in the early morning trading today.  I saw a note from friend, Rick Rule, the commodities guru, with Rick saying that Gold will easily move higher to $1,400 if an all-out Trade War breaks out… 

I also saw some data from the Perth Mint that showed sales of Gold products rose about 13 percent in March from a month earlier, while month-on-month silver sales fell for second month in a row.  And Gold sales climbed about 34 percent in March compared with the same month last year!  So demand for physical Gold is good and strong right now, but these things like the amount of demand get thrown to the curb by the price manipulators when they decide it’s time for a whacking…  One of these days, Alice!   

The prices of Platinum and Palladium are really on the skids these days and it’s all about the car sales around the world, but especially here in the U.S.  Vehicle Sales in March surprised the markets and me with a rise from the February figure… I don’t know how the folks that compiled this data did it, if they used smoke and mirrors, or an abacus, but from everything I read about car sales, I don’t see how they could post a rise in the number of cars sold…  Just the other day, Bloomberg ran an article talking about how subprime buyers were going missing from the car dealerships’ showrooms… So, anyway you slice the salami, falling car sales figures are really putting pressure on Platinum and Palladium… 

Have you noticed the drop in yield of the U.S. Treasury 10-year in the currency roundup? What looked like a rout on the yield and its next stop would be 3%, has turned around, and the U.S. Treasury 10-year’s yield has dropped to 2.75%… I think this is important folks… So pay attention if you can.. The bond boys are not fond of what the U.S. is doing with tariffs, and they believe like me that the U.S. economy will get whacked, and so they buy bonds, thus pushing the yield down… Remember, bond pricing is derived by an inverse relationship between price and yield.  If the price of the bond goes higher, the yield goes down, and vice versa…  

And the price of Oil is seeing the Trade War as a reason to ignore the latest report on supplies showing a HUGE DROP, and so the price of Oil has dropped $3 in the past few days… And this drop in the price of Oil has really played hell with the Petrol Currencies from Russia, Norway, Canada and Brazil. 

Today’s Data Cupboard has some interesting data to print today including; the ADP Employment Report for March, Factory Orders for Feb, and the Fed’s meeting minutes from their last meeting…  Of these three data prints, I would think the ADP Employment report is the most important, followed by Factory Orders, and then the meeting minutes, which quite frankly I don’t give two hoots about!  

To Recap…  The dollar bugs have a firm grip on the currencies right now, just like Old Man Winter has on the weather… The euro couldn’t find any love from two good prints for them starting with inflation rising, and Unemployment dropping. The Trade War is to blame, right now, with the U.S. placing 25% tariffs on a long list of Chinese goods, and China retaliating with $50 Billion of tariffs mostly on agriculture… UGH!  Gold got sold yesterday, but is up in the early morning trading today.  

For What It’s Worth…  This is BIG NEWS folks… I told you in the last year that Russia was working on an alternative to SWIFT (worldwide payments system that the U.S. threatened to lock Russia out of after the conflict in Ukraine) and they are ready to go live! You can read about it here: https://www.rt.com/business/418665-russia-banks-ready-shut-swift/    

Or, here’s your snippet: “Russian financial institutions and firms are ready to work without SWIFT’s interbank cash transfer services, according to Deputy Prime Minister Arkady Dvorkovich.

The potential disconnection of Russia from SWIFT has been under discussion since 2014, when the EU and the US introduced the first round of international penalties against Moscow over alleged involvement in the Ukraine crisis and the reunification with Crimea.
At the time, the European Parliament called for strong actions against Russia, including expelling the country from money transfer services. However, the Society for Worldwide Interbank Financial Telecommunication regarded the recommendations as violating rights and damaging for businesses.

In 2017, Russia’s Central Bank Governor Elvira Nabiullina told President Vladimir Putin that the banking sector had been provided with all the necessary conditions for operating lenders and payment systems in case of disconnection from SWIFT. According to the regulator, 90 percent of ATMs in Russia were ready to accept the Mir payment system, a domestic version of Visa and MasterCard.

The Mir payment system was introduced in 2015 after clients of several Russian banks (SMP Bank, InvestCapitalBank, Russia Bank and Sobinbank) were unable to use Visa and MasterCard due to the sanctions.”

Chuck Again… Just another step in the direction that Russia and China are working toward that will bring about a change in the current currency regime…    

Currencies today 4/4/18… American Style: A$ .7675, kiwi .7280, C$ .7795, euro 1.2278, sterling 1.4035, Swiss $1.0428, European Style: rand 11.9070, krone 7.8532, SEK 8.4034, forint 253.92, zloty 3.4265, koruna 20.5478, RUB 57.53, yen 106.13, sing 1.3147, HKD 7.8487, INR 64.81, China 6.2857, peso 18.32, BRL 3.3180, Dollar Index 90.10, Oil $62.36, 10-year 2.75%, Silver $16.44, Platinum $921.24, Palladium $923.82, and Gold… $1,347.30

That’s it for today… What an awful end to the baseball game last night with my beloved Cardinals blowing the game. I sent off my taxes for 2016 to the tax guru yesterday… I know it’s late, but when you have to pay like I always have to do, better late than early! At least that’s my story and I’m sticking to it! HA! The Home opener is tomorrow here in St. Louis. We do Home Openers like no other team and I used to love being there for the festivities prior to the game, but my “source” for opening day tickets has me on the personal non gratis list these days, and so I watch the festivities from home… Buddy Miles takes us to the finish line with his song: Down By the River…  Which always reminds me of the line from the late great Chris Farley… I live in a van down by the river!   And with that, it’s time to go… I hope you have a Wonderful Wednesday, and Be Good To Yourself! 

Chuck Butler

 

 

April 3, 2018      

* More Trade War Talk… UGH!  

* Economists point out U.S debt levels as a problem!  

 

Good Day… And a Tom Terrific Tuesday to you! And Congratulations to the Villanova Wildcats on their NCAA Basketball Championship last night. For the second time in 2 months, the city of Philadelphia was rocking last night. It’s the first time that the Super Bowl Champions and the NCAA Basketball Champion are from the same city… It’s ugly cold here, and I’m about ready to turn around and head back down south! Triumph greets me this morning with their song: Lay It On the Line…  

Which is what the Chinese keep asking the U.S. to do, but the U.S. apparently has better things to do than to meet with the Chinese and discuss tariffs.    

Yesterday, I gave you my thoughts on the Trade War and tariffs… And yesterday Bloomberg ran an article titled: Trump’s Tariffs Hurting American Factories as Prices Skyrocket. Hey! I don’t make this stuff up folks… I told you the tariffs would hurt the economy, and already they are beginning to show… For instance, yesterday, the ISM manufacturing index printed for March, and it showed some slippage, albeit the index is still showing a healthy manufacturing sector. But think about this, we saw slippage, and the tariffs didn’t go into effect until the last week of March! Soon, oh soon the light… (Yes) I was reminded of those lyrics while writing about how the tariffs are already showing up hurting the manufacturing sector…Yes, soon, we’ll all see the light…   

And the Trade War is having an effect on other countries, like Australia, where the Reserve Bank of Australia (RBA) left rates unchanged last night and pointed to the higher funding costs and the increased concern around U.S. Trade Policy…  Hmmm…  I found it interesting that RBA Gov. Lowe, didn’t mention the one bugaboo in the recovering Aussie economy, which is the price of iron ore, Australia’s biggest overseas earner, slipped into bear market territory recently, but chose instead to point the finger at the problems in the U.S. as his main reason for leaving rates unchanged.  

The Aussie dollar (A$) shrugged off the unchanged rates news, and continues to recover the losses it took after reaching 81-cents in January, both the A$ and kiwi got whacked and both have been in recovery mode since. Of course a rate hike in Australia would have been like Manna From Heaven for the A$, but that was not to be, and the A$ will have to continue to take small gains daily.   

Speaking of U.S. Trade Policy… I would think that you all have heard that President Trump is threatening to pull the U.S. out of NAFTA…  I tell you this now, so you can hear me now and listen to me later, but should the President prevail the congressional block of pulling out of NAFTA, and lawsuits filed by U.S manufacturers who would be damaged by such a move, Mexico’s economy would be in deep dookie…    But it would also hurt the U.S. economy…

For instance, without NAFTA, Mexico could impose a tariff on U.S. Corn imports, and those tariffs could be as high as 37%!   These trade wars are really stupid ideas, folks, for no one wins, and everyone’s economy is sucked down a black tube… Remember Ross Perot? Remember his great sucking sound, when talking about the negative effects of NAFTA?  I don’t know what’s worse now 23 years later…   

The rest of the currencies have seen some slippage in the past 24 hours, with the euro slipping below the 1.23 handle… I always here the stock jockeys ranting about how investors needed to “buy the dips”… Well, I won’t rant… but I will say it does make sense to me to “buy the dips in the currencies and metals” But maybe, that’s just me, being me, eh?  

Gold had a good day yesterday gaining more than $15 for the day.  I was talking yesterday morning and saying that with everything that’s going on in the world these days, Gold should be well bid… And then it went out and gained more than $15 on the day!  Unfortunately, there is no follow up in the early morning trading today, and Gold is getting sold by $6 early this morning.  

The price of Oil saw a $2 slide downward in the past 24 hours, as supplies are up again… It’s the darn cycle that I’ve explained before with Oil… The price falls, developers ramp up exploration, and the price rises, but then all the exploration fills the coffers with Oil and the price drops again, and then later, rinse, repeat…   Something needs to happen to break this cycle that the price of Oil has been stuck in for what seems like a month of Sundays!   

Now, don’t get me wrong here, I’m not rooting for higher priced Oil, as I don’t care to pay $75 to fill up the gas tank for my car! But when something should be seeing price gains and it isn’t, I point it out… Like I do with the price of Gold every day, and euros…  

Yesterday’s  Data Cupboard  saw some interesting data prints, with the aforementioned ISM (manufacturing index) slipping and Construction Spending only able to carve out a 0.1% gain for February…  Today’s Cupboard has just one print, but it will be an interesting one, as Vehicle Sales for March will show whether consumers begin to show signs of being tapped out… 

Bloomberg ran an article that talked about this, and here’s what it had to say, “The American consumers who were stretching themselves to buy or lease a new car are starting to go missing from showrooms. Rising interest rates and new-vehicle prices are squeezing shoppers with shaky credit and tight budgets out of the market. In the first two months of this year, sales were flat among the highest-rated borrowers, while deliveries to those with subprime scores slumped 9 percent, according to J.D. Power”  

To recap… The currencies saw some downward slippage in the past 24 hours, and Gold which had gained $15 yesterday, is getting sold by $6 in the early morning trading. The RBA left rates unchanged overnight, and pointed to the rising financing costs and Trade policy of the U.S. as their reason for leaving rates unchanged…. Hmmm…   The President is discussing pulling the U.S. out of NAFTA…  

For What It’s Worth… Well to hear me, or some other people talk about the rising debt is one thing, but to hear about if rom 5 of the most well-respected economists (notice Paul Krugman isn’t one of them!) is another, and something people should be sitting up and understanding immediately…. This article originated in the Washington Post and it can be found here: https://www.washingtonpost.com/opinions/the-debt-crisis-is-on-our-doorstep/2018/03/27/fd28318c-27d3-11e8-bc72-077aa4dab9ef_story.html?utm_term=.e2d5c85f2771

Or, here’s your snippet: “It’s difficult to get economists to agree on anything, but this article is a rare instance of five prominent economists in total agreement. Unfortunately the issue they agree on is that the U.S. is going broke. This article is an op-ed published in the Washington Post and written by Michael Boskin, John Cochrane, John Cogan, George Schultz and John Taylor. Schultz was Treasury Secretary for President Nixon. Boskin was Chairman of the Council of Economic Advisors for President Bush 41. John Taylor was on the short list to be Chairman of the Fed before President Trump settled on Jay Powell. Cochrane and Cogan have highly distinguished academic careers as do the others. In short, this is an “A-List” of top-tier economists. What they agree on is that the U.S. is heading quickly toward $1 trillion annual deficits, probably by next year, and that these deficits will continue at that level as far as the eye can see. They also warn that government debt will increase by $5 trillion in the next few years on top of the $20 trillion already outstanding. Higher interest on the debt will just add to the burden. These are not the warnings of a fringe doomsday blogger, but of the establishment itself.”

Chuck Again… My own estimate is that the actual debt and deficit numbers will be worse than these projections pushing the U.S. closer toward a true crisis of confidence in the dollar. Because… we, as a country, ALWAYS underestimate debt levels… And don’t forget that 10,000 baby boomers retire every day, and will continue to do so for at least another 9 years… Whose going to pay for all those Unfunded Liabilities?  

Currencies today  4/2/18… American Style: A$ .7681, kiwi .7245, C$ .7760, euro 1.2296, sterling 1.4040, Swiss $1.0440, … European Style: rand 11.8477, krone 7.8372, SEK 8.3750, forint 254.16, zloty 3.4245, koruna 20.6308, RUB 57.17, yen 106.20, sing 1.31, HKD 7.8485, INR 64.91, China 6.2795, peso 18.22, BRL 3.3088, Dollar Index 90.09, Oil $63.05, 10yr 2.57%, Silver $16.51, Platinum $930.40, Palladium $940.75, and Gold… $1,340.80  

That’s it for today… well, our Blues laid another egg last night and they most likely will miss the playoffs this year. UGH! Oh well, if you don’t make the playoffs you can’t experience a playoff heartbreak! My beloved Cardinals saw their bats come alive yesterday in Milwaukee… How about that 6th man for Villanova last night? He ended up being the star of the game!  This is late again today! UGH! It’s taking me longer and longer to gather up all my thoughts each day as to what to write about…  One of these days you’ll get a Pfennig and it will only be 500 words!  Hey! teacher leave those kids alone! Yes, Pink Floyd sends us to the finish line today with their song: Another Brick In The Wall…  some great guitar work by David Gilmour in that song!  And with that, I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!  

Chuck Butler

 

April 2, 2018    

* China moves forward with their own tariffs!

* A heavy data week here in the U.S.  

 

Good Day…. And a Marvelous Monday to you! And, welcome to April! One of my dear friends at my old office is named April, and for years I’ve called her April Showers… So, it’s her month! I’ve done this joke every April, so only new readers will not get it before the punch line. But if April showers bring may flowers, what do May flowers bring? The answer: Pilgrims… HA! Well, my beloved Cardinals could only win 1 of 3 in NYC, UGH!  The NCAA Tournament Championship game is tonight: Villanova VS Michigan. I was saddened when Loyola of Chicago lost on Saturday…  Eric Clapton greets me this morning as he and his bandmates Derek and the Dominoes sing their song: Layla… There’s a long juicy, gossipy story behind that song, but I won’t get into it here…   

Well… Here we are in April.. Yesterday was Easter, along with April Fool’s Day, and Mother Nature decided to play a joke on us with some nasty weather, sleet that turned to snow yesterday.  I’m dreaming of a White Easter…  I think I may have a hit song there, you think? HA!  We’ve had one day of sun since I returned to St. Louis, and the rest of the time, it’s raining and ugly outside… UGH!   

It’s been very much like that with the currencies and metals in the past two weeks too. The markets are confused with the signals from the U.S. and China regarding their pending Trade War, and so with no real signs that this is going to take place, traders and such are not going out on limbs..  A bunch of chickens if you ask me! Make a call, invest some capital and see where it goes!  Besides, today, China has gone ahead and place tariffs on 128 U.S. exports to China… Yes, they begin today, and this is no After April Fool’s Day joke, folks… 

I’ve received quite a few emails from readers in the past week, jumping all over me for my stance on the Trade War. I tried to be as diplomatic as I could and told them to go jump in a lake! No… I really tried to explain my position, that I understood that the U.S. had been treated unfairly by other countries for years, with regards to Trade. But quite frankly, the problem with the things we make here in the U.S. and attempt to sell overseas is that they are too darn expensive… And we can thank the fact that our wages are much higher here than in other countries. So, the answer to correct that is to add tariffs to imported goods? That’s just one of the tools in the negotiation tool box.. And one that should only be used when nothing else works. Instead we’ve gone to the “anchor tool” right from the start… The only place we can go now is to back off, and look weak…

Besides, I’ve shown how past attempts by presidents to implement protectionism measures led to economic messes, and that’s what I’m fearful of, folks… And that’s my stance and I’m not moving from it! (people that know me personally, know I’m difficult to move! HA!) 

The U.S. Data Cupboard, last Thursday, showed that Personal Spending only grew at 0.2%, that’s not the kind of consumer spending that the economy needs to grow, but don’t let that fact get in the way of more Fed rate hikes!   On Friday, it was a holiday for the stock jockeys, and that gave the bond and currency guys the idea to take off early, and head for the Hamptons.  So, we didn’t see much movement in the currencies and metals on Friday, for instance Gold added 60-cents… 

The euro has inched higher after the PPT took the single unit to the woodshed last week. Yes, with Gold trading over $1,350 and the euro heading to 1.25, and stocks licking their wounds after a horrible trading day, the Plunge Protection Team stepped in and bought stocks and dollars…  So, now a week later, stocks are still “iffy”, while Gold is up $8 in early morning trading and the euro is adding to its 1.23 handle.  

While the euro and other currencies suffered from the wrath of the PPT, the Chinese renminbi took a different course, and had a good week. The renminbi was allowed to appreciate again last night, and I think they are allowing these appreciations to get under the U.S. President’s skin… To show him that these tariffs and a Trade War isn’t going to hurt the Chinese…  That’s just my viewpoint on these nightly appreciations going on with the renminbi…  And don’t forget that China had a good week last week as they introduced their new Oil futures contract that’s denominated in renminbi, and it was a HUGE HIT for China on the first day and on…  

The Chinese will gain a much wider distribution of their currency with these Oil Futures denominated in their currency.. Getting Central Banks around the world to bulk up on renminbi in their reserves, and then completing the Opening of their capital markets are the last two steps the Chinese need to see happen before they allow a float of their currency, but considering where they came from 8 years ago, only having two more steps, means they’ve done a lot of work in these past 8 years, and should be commended… But then they ARE a Communist Country, but when they allow a float of their currency, we will be able to put the fact that they are a Communist Country on the back burner… 

I like it when the renminbi is allowed to appreciate, because it allows the Singapore dollar (S$) to follow the renminbi’s lead. I’ve always like the S$ for the way they run their country, and the Monetary Authority of Singapore (MAS). The MAS does something that all Central Banks should use, and that is the used the value of their currency to fight inflation, instead of just willy nilly rate hikes… 

Another country that’s ahead of China in the distribution and float of their currency is Russia… I was explaining Russia’s reserves to anyone that would listen to me yesterday. You see, as I’ve explained in the past, Russia decided to slow down the accumulation of other country’s currencies as reserves and instead bought physical Gold, and then in the past few years, while the dollar was still swinging a mighty stick, Russia’s reserves grew in value because they held Gold, and not euros, francs, etc.   

Well, like I said above, Gold is up $8 in the early morning trading today, which is a good start to the day!  And it should be gaining with all that’s going on in the world on April 2nd, 2018… But then that’s just me thinking out loud about Gold…   One thing I’m going to highlight in the FWIW section today is the fact that the use of dollars in Central Bank reserves had fallen, with euros and renminbi picking up the slack. I’m sure Gold, if properly measured would be the biggest winner of this category… 

For instance, the country of Pakistan is depleting their dollar reserves at the fastest pace in Asia, according to Bloomberg… Now, all of Pakistan’s dollar reserves aren’t being sold because of trade problems… keep that in mind… it’s just an example of how, what I talked about a couple of weeks ago is still going on, and that’s Central Banks selling their extra dollar reserves in preparation of a long sweeping downward move in the dollar because of the pending Trade War.    

The U.S. Data Cupboard will be very busy this week with ISM (manufacturing index), Factory Orders, Car Sales and the ADP Employment Report that will print ahead of the Jobs Jamboree on Friday…  Lots o’ data, and the dollar won’t be the beneficiary if the data disappoints like it has for the last 1/2 year.   

To recap… Chuck’s singing I’m dreaming of a White Easter, and wishing he was back in S. Florida!  The currencies and metals didn’t move much on Friday, as it was a holiday for the stock jockeys, that the bond and currency guys just piled on to. But Gold is up $8 in the early morning trading today, and China went ahead and began their tariffs on 128 U.S. products today… 

For What It’s Worth… Ok, I already spoiled the surprise, if there is one, with the FWIW article today, which is about how the dollar reserves are falling and it can be found here: http://www.themalaymailonline.com/money/article/us-dollar-share-of-global-currency-reserves-hits-4-year-low-says-imf  

Or, here’s your snippet: “Reserves held in U.S. dollars rose to US$6.28 trillion (RM24.2 trillion), or 62.7 per cent of allocated reserves, in the fourth quarter, from US$6.13 trillion, or 63.5 per cent, in the third quarter.

The share of U.S. dollar reserves declined to its smallest level since reaching 61.24 per cent in the fourth quarter of 2013, IMF data showed.
Ranked second behind the greenback, the euro’s share of global reserves reached 20.15 in the fourth quarter, up from 20.05 per cent in the third quarter. This was its biggest share in three years, but well below the single currency’s peak share of reserves at 28 per cent in 2009.

The yen’s share of currency reserves rebounded from a dip in the third quarter to 4.89 per cent, which was its biggest since the fourth quarter of 2002, IMF data showed.

China’s share of allocated currency reserves was 1.23 per cent, up from 1.12 per cent from the prior quarter. The IMF had reported the yuan’s share of central bank holdings for the first time in the fourth quarter of 2016.

IMF data also showed that global reserves climbed to US$11.425 trillion, which was the highest since the second quarter of 2015 and was up from US$11.297 trillion in the third quarter.”  

Chuck Again…  It’s all happening right before our eyes folks… I sure hope you’ve properly diversified your investment portfolio using currencies and metals!  

Currencies today 4/2/2018… American Style: A$ .7683, kiwi .7236, C$ .7776, euro 1.2330, sterling 1.4065, Swiss $1.0490, … European Style: rand 11.82, krone 7.8390, SEK 8.3408, forint 253.35, zloty 3.4140, koruna 20.5668, RUB 57.17, yen 106.27, sing 1.31, HKD 7.8480, INR 64.93, China 6.2795, peso 18.18, BRL 3.3038, Dollar Index 89.89, Oil $65.20, 10yr 2.76%, Silver $16.47, Platinum $936.77, Palladium $952.76, and Gold… $1,336

That’s it for today…  Friday night was the Lindbergh High Water Polo alumni game, and I got to watch both my sons score goals for the winning team. I also got to catch up with my buddies, Kevin, Mike, Duane, Rick, Carl and Aaron at my local watering hole on Friday afternoon. Mike was nice enough to buy me a ticket bet on the Cardinals to win the World Series. I used to do that every year that I was sent to Las Vegas in the spring. but since I don’t go there any longer, I need to have those that do go there make my bet for me!  Otis Redding takes us to the finish line today with his classic song: Dock of the Bay…  And with that, I’m late, so this had better get out soon! I hope you have a Marvelous Monday, and please remember to always Be Good To Yourself!  

Chuck Butler

March 29, 2018  

* The PPT springs to action!   

* Consumer Confidence falls? What gives with that?

 

Good Day… And an Opening Day, Tub Thumpin’ Thursday to you! IT’S OPENING DAY… YAHOO! Yes, Major League Baseball begins its new season today. I’ve long said that Opening Day should be a National Holiday, for our National Sport! So, since I believe today should be a holiday, this will be short-n-sweet this morning! HA!  Seriously, I’m going to talk a bit about the markets yesterday and last night, and then turn a long discussion about the U.S. consumer for today’s letter…  R.E.M. greets me this morning with their song: It’s The End Of The World…  leave to my iPod to shuffle and spool up a song like that on a day when I’m going to give you some dire news on the U.S. Consumer…    

Well, while I was jetting through space yesterday, sipping on a Bloody Mary, and chomping down some peanuts, the currencies and metals were getting whacked! And when I checked everything last night I thought to myself that this didn’t really shock me one iota. In fact, earlier this week I told you that Gold had gone past $1,350, which was the line in the sand that the price manipulators had drawn, and every time Gold had climbed to that level and beyond in recent times, it got whacked, and whacked good… 

And that’s exactly what happened with Gold… The currencies on the other hand were subjected to a taste of the PPT (Plunge Protection Team), who saw to it that stocks recovered their losses last week, and brought the Dollar Index back above 90…  So, not to worry, as I attempt to do my best Alfred E. Newman, for this was all an engineered take down to protect the dollar…  And that’s my thought on this, and I’m not going to change it!

Wait, What? you don’t believe in this thought that stocks, currencies and Gold were all subjected to a taste of PPT seasoning?  Well, then you explain to me and everyone else what caused the stocks to rebound, and the dollar to rebound?  Come on, I’m waiting!     OK… So the euro has dropped below 1.24 again, and is barely holding on to the 1.23 handle. Aussie and kiwi dollars have given back most of their hard fought gains of recent trading days, and Gold lost $20 yesterday…   

So, I’m going to give you some information now about the U.S. Consumer that’s going to make you scratch your head and say, “How in the world are stocks rebounding when investors stop and think about this stuff?” 

Alrighty then with no further ado, let’s get to the information I’ve compiled…  The U.S. savings rate has fallen from, an already reduced figure of 3.2% in Jan to 2.9% in Feb… This savings rate level of 2.9% represents the lowest level since November 2007…  Now, do I need to tell you what happened right after 11/2007?   

Digging further into the U.S. Consumer’s plight…  we have credit card usage…  but first I need to tell you that this data is only recorded quarterly, so the last data we have is the quarter ending Dec. 2017…  But that’s recent enough for this discussion…  And Credit Card debt has risen like a rocket leaving a launch pad…  In the past year Credit Card Debt is up $779 Billion from the previous year or,  a change of 3.22% from last quarter and 7.06% from one year ago. 

Can you say, “tapped out”? I knew you could!  Well, if you think the U.S. Consumer can rebound given the tax cuts that are coming his way, you better think again… Even knowing that tax cuts are coming the Consumer Confidence Conference Board reports that plans to buy things like autos, home, large appliances, etc. has plunged in recent months…  

U.S. Household Debt’s graph looks like a the hill that you wouldn’t want to climb as it continues to grow, with last year’s gain at 4.55%…  In fact, when you break Household Debt down you see the pain levels… Auto Loan Debt is up .66% to the previous quarter. And Auto loan Delinquencies greater than 90 days is up 2.02%… Student Loan Debt is up 1.55%, and I already told you about Credit Card Debt..  

Who’s going to “bail out the consumer”   No one… foreclosures, debt defaults and all those other niceties that come with debt that cant’ be paid back is in our future folks…   I don’t like talking about this stuff, but unless you read it here, you won’t hear about it on the nightly or cable news, and if you didn’t read it here,  then one day, the crash and burn happens and you say, “I didn’t realize the U.S. Consumer was in trouble”…  

The U.S. Data Cupboard has seen the past two days some interesting data prints, like the Consumer Confidence report for March fell from 130 to 127.7…  I was surprised by this fall in Confidence… Maybe there something here? I guess we’ll have to see next month’s data to know for sure… We also have seen the Case/Shiller Home Price Index for January slip from 6.3% to 6.2%…  Again, something there?   

Yesterday’s Data Cupboard had the final revision of 4th QTR GDP, and surprisingly, it jumped higher than the last revision which was 2.5%, and ended the year, supposedly, at 2.9% GDP for the 4th QTR…   Today’s Data Cupboard has two of my fave data prints… Personal Income and Spending. In addition, we’ll see Core Inflation from Feb…   The Personal Spending data will be the key to today’s take on just how “tapped out” the U.S. Consumer is…   

Gold got whacked by $20 yesterday… I wish I could say that I didn’t know it was coming…   And the price of Oil slipped below the $65 handle. So all three anti-dollar assets were in the dumpster yesterday, euros, Gold and Oil…  

Hey! for all of you who are looking for a silver lining in all of this today… The Chinese renminbi saw an appreciation last night… So, we’ve got that going for us! HA!    

To recap… In Chuck’s mind, the PPT was out in force and bought dollars and stocks yesterday… I remember telling my good friend Walt on Sunday as we talked on the Butler Patio South, that not to worry about the HUGE sell off of stocks on Friday, the PPT would make sure that selling didn’t carry on… And looky there! Once again, I would slap myself on the back, but my arms aren’t long enough! HA!    

For what It’s Worth…  You won’t believe this when you read it, so stop, take a deep breath, and reread it… It’s an article about how Goldman Sachs, aka Lola, is touting Gold and fearing a stock market crash, and can be found here: https://www.cnbc.com/2018/03/26/goldman-sachs-expects-gold-to-outperform-amid-growing-fears-of-a-stock-market-correction.html    

Or, here’s your snippet: “Goldman Sachs is expecting gold to “outperform” over the coming months.

For the first time in more than five years, commodity analysts at the U.S. investment bank are bullish on yellow metal prices. Goldman’s analysts said signs of an uptick in inflation and the “increased risk” of a stock market correction should both prove to be price supportive for bullion.
“Our commodities team believes that the dislocation between the gold prices and U.S. rates is here to say,” Goldman Sachs analysts, led by Eugene King, said in a research note published Monday.

“Based on empirical data for the past six tightening cycles, gold has outperformed post rate hikes four times,” the analysts added.”

Chuck Again…  I want to thank Ed Steer, for he posted this article first, and is always first out of the chute each day with his letter, that can be found at www.edsteergoldandsilver.com     

Currencies today 3/29/18… American Style: A$ .7666, kiwi .7193, C$ .7742, euro 1.2306, sterling 1.4055, Swiss $1.0442, … European Style: rand 11.8244, krone 7.8675, SEK 8.3575, forint 253.80, zloty 3.4127, koruna 20.65, RUB 57.57, yen 106.60, sing 1.3120, HKD 7.8483, INR 65.04, China 6.2876, peso 18.29, BRL 3.3279, Dollar Index 90.08, Oil $64.51, 10yr 2.77%, Silver $16.23, Platinum $937.31, Palladium $971.72, and Gold… $1.328.00 

That’s it for today…  Basically an uneventful trip back to St. Louis yesterday from my little place in S. Florida. And today, my beloved Cardinals, injuries and all to start the season, open up in NYC against the Metropolitans (Mets)… The Mets have all that pitching, and getting them to start the season before they get hurt, which they have a history of doing as the season goes on, is not a good way to start the season… But we’ll have to see what happens…  Tomorrow is Good Friday… and it’s a holiday for the stock market, and therefore I’m calling for a holiday for me too! So, no Pfennig tomorrow, I hope, if you observe Easter that you have a blessed one. It’s supposed to be cold here for Easter, which will cut short the Easter Egg hunts for sure! I can’t wait to see what my darling little d is wearing on Easter… I really enjoyed getting to spend time with her last week, and her brother too! OK… time to go…  The Jackson Browne song that always makes me tear up, takes us to the finish line today, as he sings his song: Late For The Sky…   And with that, I hope you have a Tub Thumpin’ Thursday, and a happy Opening Day!   And Be Good To Yourself!

Chuck Butler

March 27, 2018  

* A “nothing day” for the currencies…

* Media hype gets traders all lathered up…    

 

Good Day…  And a Tom Terrific Tuesday to you! Good news from the oncologist yesterday. The tumor in my jaw has shrunk significantly, which I already knew, but the effects of the medicine on my body functions, haven’t shown up, yet, so it’s all systems on Go! My last full day in S. Florida, where the frigid weather up north never gets to, and that makes me very happy! Dave Loggins greets me this morning with his song: Please Come To Boston…  Which I’m sure the people of Boston are singing to warmer weather!   

Well, it was a “nothing day” for the currencies yesterday, but they held their ground and inched higher in some cases, and lower in other cases.. Gold found a way through the short Gold paper traders’ gauntlet, to gain $6.40 on the day, and the price of Oil held steady Eddie.   As with many things these days, the media got the markets all lathered up late last week and over the weekend, on the news of a Trade War, and then the news feed faded and the markets are left to trade on its own…

And that’s what we saw yesterday.  One day it’s all about buying the euro, and the next day, not so much… Oh well, I carry on despite the flaws of trading currencies these days… 

Yesterday, I meant to talk about the rise in pound sterling, as it was trading as high as 1.4225. This move higher came about because of the news that the BREXIT negotiation might not cause a hard landing for the U.K. economy…  But that was yesterday, and today the pound is getting sold on the news / rumors that BREXIT negotiations aren’t going well… See what I mean?  The media gets the markets all lathered up about something one day, and then no follow up the next day… 

This will continue to go on, until it doesn’t…  Yes, one of these days, the markets will ignore the media’s hype about something, and when that happens, this trading pattern will have ended…  But until that day, we have to be careful and not go feet first into the traps that the media sets… 

Trends are the things that move markets in sweeping moves that take years to play out. There can be volatility within those trends, like the stuff we’re seeing now, but eventually the asset will return to the underlying trend.   

I’m not seeing any love being sent the direction of the Petrol Currencies, which is weird, given the upward push of the price of Oil. The Russian ruble, Norwegian krone, Canadian dollar/ loonie, and Brazilian real, all are stuck in ruts, neither gaining or losing ground VS the dollar these days. I think Petrol Currency traders have figured out the media hype trading pattern and aren’t falling for it any longer.  Well, not until Oil breaks out of this $62-$65 range, and makes a strong move toward $70…  

I’ve been doing some reading about the pending Credit problems for bond issuers…  It’s some scary stuff folks… And I don’t mean to cause you to hide in your rooms after reading this, but I do need to let you know what could happen, so you can prepare your investments accordingly… 

I’ll keep it to the broad strokes to keep from getting from too detailed…  But first, promise me you’ll put away the sharp objects… OK, are we finished?  OK… here goes…

Basically we’re looking at the high probability that we could see a credit default coming… And here’s why… Basically, corporate bond issuers took advantage of the Fed’s zero rate circus and issued bonds by the boat loads, but it’s my opinion that these corporations didn’t use the funds generated by the bond sales to increase their business like corporations have done for eons before now. Instead, it’s my opinion that these corporations took the bond proceeds and bought their own stocks, buy backs if you will, to prop up their stock price, and in the end the Captains of these Corporations receive HUGE bonuses for the performance of the company’s stock… 

So, there’s nothing in the till to pay off these bonds, and as they come due, they will have to be refinanced, but at a much higher interest rate, because the Fed has moved their zero rate circus to another city. These higher interest rates can’t be paid by the bond issuers… Uh-Oh!  Or even worse, no one will buy their refinanced bond… Double Uh-Oh!  

So, you can relax now, that’s all over… Whew!  There’s not much happening in the U.S. Data Cupboard, until we get to Friday’s edition, when Personal Income and Spending will print. Today, we’ll see the latest Consumer Confidence report, and it’s expected to rise once again…  That’s fine, go ahead and get real confident, and complacent about the economy, for when that happens, a Minsky Moment will be upon us in a heartbeat, and it will be too late baby, now it’s too late, though I really did try to make it…  

And before that happens what should we be backing up the truck to? You get a shiny star if you said, Gold!  OK… well, Gold did gain $6.40 yesterday and is taunting the price manipulators’ line in the sand at $1,350…  Hmmm… This line in the sand will be long forgotten, and out of the rear view mirror,  in my opinion, once everything begins to come crashing down upon us…  I really don’t like to talk like that, because it sounds so gloom and doom, but when you hold Gold it softens the gloom and doom…

To Recap… It was a “nothing day” for the currencies yesterday, as the hype of the Trade War faded yesterday, not gone , but faded yesterday, and that caused some, “take a breather” trading in the currencies. Gold gained $6.40 and is taunting the $1,350 line in the sand drawn by the price manipulators.  The U.S. Data Cupboard doesn’t have much for us until Friday, and Chuck goes dark and talks abut credit defaults…  

For What It’s Worth… I found this in a round about way.. I first saw it from the GATA folks, then Ed Steer highlighted it, so I check it out, and it’s an article about the need for a Gold standard, and it originally printed on the Wall Street Journal site, but since you have to subscribe to the WSJ to read it, the GATA folks printed it out…  I’ll give you the WSJ link and hopefully you can get something from it:  https://www.wsj.com/articles/steel-and-aluminum-lets-talk-about-gold-1522005011  

Or, here’s your snippet: “I believe in free trade, but I still understand why President Trump is imposing tariffs on steel, aluminum and a range of Chinese products. America’s industrial workers have suffered for a long time, and Mr. Trump is fighting to create middle-class jobs.

Achieving that will take more than righting the last administration’s wrongs on taxes and regulation, a task already well under way. Blue-collar prosperity was eroded along with American manufacturing. From 2000-10, U.S. manufacturing employment shrank by a third after holding steady for 30 years.

President Trump has rightly blamed bad trade deals, particularly those with Mexico and China, for contributing to this meltdown. But the Federal Reserve deserves a share of the blame, too, since its inflationary policies priced out U.S. manufacturers from global trade. Since 2000, their prices have risen nearly 50%, compared with about 25% for German competitors — mirroring the domestic inflation rates in each country. As a result, manufacturers fled the U.S., much the way American families have fled high-tax states.

The solution is to take control of the money supply away from the Fed and give it back to the American people-in other words, to return to the gold standard. Gold gets a bad rap in some history books because of its misuse during the 20th century. This ignores its peacetime record of high growth and nil inflation between 1834 and 1913.” 

Chuck Again… I know, I know the so-called snippet was quite long today… but I had to do it that way to get the call for a Gold standard in there…  

Currencies today 3/27/18… American Style: A$ .7725, kiwi .7277, C$ .7776, euro 1.2415, sterling 1.4115, Swiss $1.0560, … European Style: rand 11.6559, krone 7.70, SEK 8.2250, forint 251.81, zloty 3.3930, koruna 20.51, RUB 57.09, yen 105.63, sing 1.3084, HKD 7.8465, INR 64.81, China 6.2859, peso 18.33, BRL 3.3076, Dollar Index 89.32, Oil $65.74, 10-year 2.84%, Silver $16.70, Platinum $955.56, Palladium $978.30, and Gold… $1,354.50  

That’s it for today…  There will be no Pfennig tomorrow morning, as it’s a travel day back home for me. I’ll pick it back up on Thursday morning from my writing desk at home.  Thanks to all that sent along welcome back wishes and birthday wishes… When I receive so many, I can’t reply to each one or else I would be at my laptop for days! So, hopefully thanking you all as a collective group works… Going to baseball games, day games at that down here means so much to me. I’ll probably get to go to one or two games back in St. Louis, but down here I get to go to 15 in one month!  But spring training is over now, time to head north with the Cardinals!  The Four Tops take us to the finish line today with their great song: Reach Out… I’ll Be There.   I hope you can make this a Tom Terrific Tuesday, and I’ll talk to you again on Thursday… And don’t forget to Be Good To Yourself!  

Chuck Butler

March 26, 2018  

* Trade War looms, and dollar gets sold!  

* U.S. is proud of its new $1.3 Trillion spending Bill! 

 

Good Day… And a Marvelous Monday to you! Yes, I’m back, just as I promised, although the thought did cross my mind today to walk away from this daily routine, but the thought didn’t last long, and here I am! I thoroughly enjoyed my two week vacation, with first my spring training buddies, and then Alex, Dawn, Jerry, Delaney, and Everett visited, and to finish off the vacation, yesterday, I was visited by my good friends, Walt and Laila… I don’t know what I can really talk about today, as I’ve not kept up with the markets, except Gold, for the last two weeks! But, I’ll give it my best shot, as always…  John Lennon greets me this morning with his song: Mind Games…  Hmmm, seems apropos doesn’t it?  

Mind Games seems to be the thing that the Fed is playing with us. But I’ll save that discussion for another day. Today, we have to concentrate on the Trade War that seems to be coming to fruition. When I left you, the U.S. had announced tariffs on Chinese Steel and Aluminum, but as it turned out, those tariffs stretched their tentacles and showed they would also hurt European, Canadian and Mexican steel exports to the U.S.  

Now, two weeks later, the Chinese are beating the Trade War Drum, with retaliatory measures that right now haven’t been detailed, but we do know they are coming, because if we’ve learned one thing about the Chinese over the years, it’s that they don’t say things they don’t mean…  And what does all this mean to you?  Well, history shows us that protectionism is not good for a country that is implementing the protectionism measures.  But as I explained to Walt yesterday, on my home away from home Butler Patio, the Chinese renminbi is a managed currency, so the damage to the renminbi from the Trade War will be determined by the Peoples Bank of China (PBOC)…  

However, the damage to the dollar could end up being quite noticeable… I was reading this morning that a couple of reserves managers at Central Banks are looking to dispose of extra dollars they have on hand, and are looking at the euro as the destination for those reserve dollars.  And why not? The euro has seemed to gotten past the persistent problems that have plagued the single unit currency for the past 7 years, and if things continue to improve in the Eurozone, we could very well see the stimulus measures like negative deposit rates, become a thing of the past… So, I ask the question again, why not euros?  

The rest of the currencies would seem to be in line for some love from reserve managers too, as these reserve managers are keen to diversification rules. In June of 2016, 9 months ago, I wrote about a change in sentiment among traders, that would lead to a new weak dollar trend. Well, that new weak dollar trend has been slow to develop, but develop it has, as the euro has risen from 1.09 to 1.24  and Gold has risen from $1,212 last July to $1.350-ish today…  

But if the HUGE buys from Central Banks come to fruition, then this nascent weak dollar trend could very well get some legs and begin to run. I’m just saying… Wink, wink…   

Gold continues to be held back each time it rises to the $1,350 level, which as I wrote in last weeks Dow Theory Letters, seems to be the line in the sand that the price manipulators have drawn. I still hold out hope that the gig will be up on the price manipulators soon, and then Gold will be allowed to move freely through price handles.

I really call the Fed to the red carpet in my last Dow Theory Letters (DTL) piece last week… I’m parting ways with one of my fave economists, Danielle Di Martino Booth, who believes interest rates need to be higher, and I don’t believe that. But just because we disagree on this, doesn’t mean I discontinue reading her work…   OK, I digress here, and need to move along now!  

Whenever you see these reserve managers of Central Banks begin to reallocate their reserves, the major currencies get the most love… That means the euro, sterling, yen, francs, and a bit of Aussie dollars (A$).  And quick look at those “majors” and their respective performances these past two weeks, shows that my thoughts are correct, as the yen has rallied to a 105 handle, sterling has risen to 1.42 handle, and the A$ has moved steadily toward 78-cents once again.  

OK, this just came across my screen, and I’m feeling my blood pressure rise…  you can find it here: https://www.blacklistednews.com/article/64729/bank-of-america-merrill-lynch-agrees-to-pay-ny-42-million-fine-for.html  

And it’s about how Bank of American/ Merrill Lynch has agreed to pay a record $42 million fine to the state of New York for fraudulent activity related to its electronic trading services.   Brother! Another Scam and another fine, but no one goes to jail..  UGH!   And trust me on this folks, these fines that get paid are nowhere near the profits that were made, and the perpetrator looks at the fine as a “cost of doing business”…   A mere slap on the wrists… I shake my head in total disgust folks…   

Gold gained more than $18 on Friday, after days of being sold for small amounts, the shiny metal finally rebounded!  But as I mentioned above, Gold is back to $1,350, which has been the limit level that the price manipulators seem to allow before whacking Gold back in price. I would think that given the turmoil in the markets right now, with the pending Trade War and stocks getting smoked on Friday, that Gold would be a very good alternative  right now… Gold is ALWAYS a good alternative but there’s something about what’s going on right now, that has my spider sense tingling for Gold…   

The price of Oil has climbed to a $65 handle in the past two weeks… The Chinese begin trading their Oil futures contract today. This is the contract that is denominated in renminbi, but can be converted to Gold at the Shanghai Gold Exchange (SGE) , so  lot of people are saying this contract is denominated in Gold… And that’s not true.. .It can be converted to Gold easily, but it’s denominated in renminbi…   And it makes its debut today… This should stir up the energy sector market, eh?   

To recap, the dollar appears to be on the chopping block as Central Bank reserve managers begin to diversify out of dollars in fears that the Trade Wars will be bad for the U.S. economy and dollar. The euro is the main beneficiary of the reallocation of dollar reserves, but the major currencies are also seeing some love. China will enter the Trade War that was started by the U.S. and Chuck doesn’t think the dollar has much hope of remaining well bid.    

For What It’s Worth…  yeah, I know, I didn’t mention the $1.3 Trillion spending bill that was passed last week… Well, we all knew it was going to be HUGE, so nothing new there… But what was new was the news that Venezuela decided to knock off a couple of zeroes in their currency’s value….  That story can be found here: https://www.reuters.com/article/us-venezuela-economy/venezuela-knocks-three-zeros-off-ailing-currency-amid-hyperinflation-idUSKBN1GY3AP  

Or, here’s your snippet:”Venezuela’s President Nicolas Maduro ordered a re-denomination of the ailing bolivar currency on Thursday, by knocking three zeroes off amid hyperinflation and a crippling economic crisis. 

The measure to divide the so-called bolivar fuerte – or “strong bolivar” – currency by 1,000 would take effect from June 4, the socialist leader said. It would not have any impact on the bolivar’s value.

The move illustrates the collapse of the bolivar, which has fallen 99.99 percent against the U.S. dollar on the black market since Maduro came to power in April 2013. A $100 purchase of bolivars then would now be worth just a single U.S. cent. ” 

Chuck again… a bout There’ll come a day, not in my lifetime, but my kids will be here to see this same announcement take place here in the U.S.  That’s all I’ll say about that..   

Currencies today 3/26/18… American Style: A$ .7738, kiwi .7289, C$ .7780, euro 1.2408, sterling 1.4225, Swiss $ 1.0577, … European Style: rand 11.6775, krone 7.6980, SEK 8.1944, forint 252.07, zloty 3.4060, koruna 20.4854, RUB 57.24, yen 105.97, sing 1.3107, HKD 7.8464, INR 64.85, China 6.3141, peso 18.45, BRL 3.3136, Dollar Index 89.20, Oil $65.64, 10yr 2.84%, Silver $16.62, Platinum $951.51, Palladium $983.52, and Gold… $1.353.70   

That’s it for today…. Well, while I was on vacation, I celebrated my birthday. I never used to get into birthday celebrations, but since I was told I had cancer, I’ve enjoyed putting another notch in the belt of life each year, and this year was no different.  I spent the day at the ballpark, with two of my grandkids.. .what a day! My time here comes to an end on Wednesday, as we’ll head home for Easter…  The tumor in mouth which had become a real problem with its size earlier this month, has begun to react to the new chemo I’m on, and has already shrunk by a significant amount. YAHOO! And I seem to be tolerating the new chemo right now, so that’s good… I’ll find out this afternoon how my body is reacting to the new chemo when I visit my Florida oncologist for the last time this year…  The Moody Blues take us to the finish line today with their song: Story In Your Eyes…   And with that, it’s time go! I hope you have a Marvelous Monday! And remember, to always Be Good To Yourself!  

Chuck Butler

 

 

 

March 8, 2018  

* Trade War talk cools for a day…

* The dollar fights back in the overnight markets… 

     

Good Day… And A Tub Thumpin’ Thursday to you! The early morning rain came and went yesterday, and didn’t interfere with the baseball game, and the day turned out to be another beautiful day at the ballpark! I’m having an iffy morning with my stomach so far, I think it’s due to the anticipation of the new drug I’ll be taking. It’s going to be delivered to me today…  I just don’t know what to expect, so I guess it’s a good thing that this is the last Pfennig for two weeks. Hopefully, no problems occur, and I’ll be back in two weeks full of you know what an vinegar! Buddy Miles greets me this morning with his band’s song: Them Changes   Which is pretty apropos considering my “changes”…   

Well the dollar fought back in the overnight markets last night and this morning, but not by much, the Dollar Index traded at 89.49 yesterday morning and is trading today at 89.72… So, some slippage but not much… The European Central Bank (ECB) is meeting as my fat fingers fly across the keyboard. As I told you earlier this week, most of what the ECB is going to say and not do, has been leaked, and so the actual meeting should be very anticlimactic…  No surprises, here, move along now, for these aren’t the droids you’re looking for!   

Did you see that HUGE Trade Surplus that Australia booked yesterday? WOW! Australian trade  rebounded from a surprisingly large deficit at the end of last year, to record an unexpectedly large surplus in January.

Australia recorded a $1.05 billion surplus, a more than $2 billion turnaround on the $1.1 billion deficit the month before.
While total exports on goods and services jumped 4 per cent, a 2 per cent drop in the big import bill from December also helped. The surplus as underscored by the fact that around three-quarters of the surplus was made up by a $770 million contribution by gold, with exports jumping 54 per cent over the month. Hmmm…   This report not only shows that the Aussie economy has turned the corner and is headed for growth, but also shows the recovery of physical Gold demand…   

On the other side of the world, the U.S. printed a Trade Deficit for January that was the  highest level since October 2008. The Commerce Department said Wednesday that the trade deficit rose to $56.6 billion in January, up 5 percent from $53.9 billion in December and the highest since October 2008’s $60.2 billion trade gap. The trade deficit has risen for five straight months. 

And this Trade Deficit is not going to sit well with President Trump, and I think he’ll use it as an example of how unfair the trade practices are around the world. I would look for a wide range of new tariffs to be announced soon… Think of it like a poker game… The U.S. raises the bet with an announcement of Tariffs, The Eurozone matches that bet and raises the pot with their own Tariffs, back to you U.S. what are you going to do? 

And all the while, China has not said what they intend to do about the Tariffs on their exports of Steel and Aluminum. Remember a few Pfennigs ago, I wrote about a thought I had as to how China could retaliate by stepping away from the Treasury bond auction window? Well, apparently someone at Bloomberg is a Pfennig reader and they did their own version of “Chuck’s Thought”  by talking about how China’s relative share of the market for Treasury notes and bonds is near its lowest since 2005, at 9.4 percent.

And I know they aren’t being dragged into the Trade War yet, but Japan, which owns $1.06 trillion, its 8.4 percent share is the smallest in at least 18 years! Which begs the question once again… Who’s buying the ever increasing number of Treasuries that are issued to finance our ever increasing deficit spending?  Unless the Fed has some “secret account in the Caymans” it’s not the Fed bellying up to the Auction window, for their balance sheet is shrinking due to them not participating in QE any longer.

Inquiring minds need to know who’s buying Treasuries?  China has already begun to show their true colors and Japan’s not buying really surprises me, but then The Bank of Japan  (BOJ) has been busy buying their own bonds, and stocks for years now. Shoot Rudy, Japan started QE / bond buying before it was cool to do!  Of course I kid, because it was never cool to do, in my opinion…  I

was looking over an article that longtime reader Bob sent me and in the article it talked about overvalued and undervalued currencies, based on a formula that included purchasing power parity PPP, and the behavioral equilibrium exchange rate (BEER)  (I like that one! HA!) and came to the conclusion that the Swedish krona was the most undervalued currency, and the Swiss franc was the move overvalued currency… The euro was in the middle.  The Canadian dollar/ loonie was considered undervalued, while the Aussie dollar (A$) and kiwi were both considered to be overvalued…   Hmmm… I’ll have to think about this a little more before I comment further…   

The U.S. Data Cupboard had a ton of data for us yesterday, so let’s take a look at what was shown…    Leading off and playing second base… The ADP Employment Report, which showed 235,000 jobs created in February, which was off from the forecast of 245,000… then batting second, was the Consumer Credit (read debt) for January… Yesterday, I told you that given the negativity of the data reports for January so far, I would have been surprised to see this debt figure fall in January… And it did, falling from an upward revised $19 Billion in December to $14 Billion in January… 

The savings rate in the U.S. is down, Personal Spending last week was weak, and Retail Sales for January were negative, now does that look like an economy where the consumer is geared up to spend and make the economy grow? Or does it look like an economy where 4 rate hikes are needed this year?    

Oh, and Productivity for the 4th QTR was flat, and the Unit Labor Costs increased in the 4th QTR by 2.5%…  Nothing to see here, move along… 

I liked what Ed Steer when he said today, something like this: “what da boyz gave to us on Tuesday was taken away on Wednesday”…  Gold lost $9.30 yesterday after posting a $14 gain the day before. The shiny metal closed at $1,324, with 259,000 contracts traded…  Gold is seeing some buying in the early morning trading, but no real conviction to take it much higher yet…  I think the “boys in the band” or as Ed Steer calls them “da boyz” are going to have to work like the dickens…   You know… I have used that phrase “like the dickens” all my life, and always thought it had something to do with Charles Dickens…  But apparently not!  It has nothing to do with Charles Dickens. Dickens is a euphemism, specifically a minced-oath, for the word devil, possibly via devilkins.    So, I hope I passed something on for you to use at cocktail trivia!    

To recap…  The dollar fought back and gained some lost ground in the overnight markets, as the “Trade War” talk cooled off for a day…  Gold gave back nearly $10 of its $14 gain the day before, yesterday. Chuck wants to know who’s buying our every increasing amount of Treasuries? And according to ANZ’s new currency valuation model, the Swedish krona is the most undervalued currency, and the Swiss franc is the most overvalued currency…  Chuck is going to look into this further…. 

For What It’s Worth…  I sent off this week’s DTL letter to the publisher yesterday, and in it I talk a lot about how protectionism isn’t good for an economy… My friend and publishing guru, Bill Bonner, took it a step further yesterday and you can find his thoughts on this here: https://bonnerandpartners.com/why-trump-will-lose-his-trade-war/   

Or, here’s your snippet: “Protection is among the worst things you can give to a business; you may as well tell your children not to bother with their homework.

Legendary steel executive Ken Iverson explained it as follows:
As soon as prices began to rise so that the steel companies began to be profitable, they stopped modernizing. It’s only under intense competitive pressure – both internally from the mini-mills, and externally from the Japanese and the Koreans – that the big steel companies have been forced to modernize.

Unless you’re under intense competitive pressure, and it becomes a question of the survival of the business to do it, you’re just going to lapse back into your old ways. There’s no other answer.

But Mr. Trump thinks he has another answer. He spelled it out in his books. Hardly a single one of his tweets fails to mention it. He thinks you win by making someone else lose.

But this win-lose programming doesn’t work for business, commerce, trade, marriage, family, or friendships. In these things – and in most of life – you win by letting the other guy win, too.”  

Chuck Again… Well, this Trade War should be going great guns by the time I get back from vacation… I’ll try to tweet any thoughts I have during that time, should things get ugly…   

Currencies today 3/8/18… American Style: A$ .7801, kiwi .7262, C$ .7737, euro 1.2383, sterling 1.3879, Swiss $1.0582, … European Style: rand 11.90, krone 7.8415, SEK 8.2490, forint 251.77, zloty 3.3940, koruna 20.5151, RUB 56.84, yen 106.08, sing 1.3159, HKD 7.8388, INR 65.04, China 6.3213, peso 18.72, BRL 3.2228, Dollar Index 89.72, Oil $61.19, 10-year 2.88%, Silver $16.19, Platinum $949.80, Palladium $970.85, and Gold… $1,326.40

That’s it for today, and for the next two weeks… It’ll take me a few days to get used to not waking up so early, but then I’ll be in the swing of vacation!  Good friend Rick B. arrives today. Prayers and thoughts with good friend Kevin, who had to drop out of the Spring Training trip this year, due to a death in his family…  So, it will just be the original 3 Amigos Chuck, Rick and Duane for Spring Training games the next 5 days…  What will you do for the next two weeks? I’ll miss you more than you miss me, I’m certain of that! It sure looks like a good day, to have a Good Day! The sun is shining, and Robert Plant  takes us to the finish line today with his song: In The Mood…  So, let’s go out and make this a Tub Thumpin’ Thursday today, and remember to always Be Good To Yourself!  

Chuck Butler