Author: admin

January 2, 2018 

* 2018 was best year for dollar since 2015

* But 2019 will hold challenges for the dollar… 

Good Day… And a Wonderful Wednesday to you! Welcome to January 2019! A new year to start, and the end of the old year… I read this weekend that 2018, was actually the best year for consumers in quite a long time.. So, there you go! I tried to find where the qualifiers were for that statement, but couldn’t, as usual, as journalism has gone to the way, of quick hits, without fact checking, to see if a rise can be gotten from the reader… OK… It’s been nearly a week since we last talked, so we have some things to get to today. But first, the Moody Blues greet me this morning with their song: Maybe.   From my fave Moody Blues album. Seventh Sojourn

The currencies, led by the Big Dog, euro, finished the year 2018, on a high note, with some exceptions, and those exceptions being the Petrol Currencies. However, having said that, Reuters tells me that 2018 was a good year for the dollar, and was its strongest year since 2015…  Boy, it sure didn’t feel like it was going that way for the first part of 2018, when I was sure that the strong dollar trend was ending… But then along came more rate hikes by the Fed, and optimism was abound here in the U.S. And the dollar became the beneficiary of those things. 

The stock jockeys have moved front and center in any discussion of markets these days… And will continue to dominate the news in the markets as we work our way though 2019… I hope not to have to talk about them that much!  I found it interesting this morning, that Reuters had that story about the dollar being so strong in 2018, and then right below that one there was an article about how the dollar will face challenges in 2019… 

In my own humble opinion, I’d have to say that that’s going to be an understatement… But then that’s just me, and how I see things. But if we really put our ear to the ground, we can here the rumbling of the recession train coming our way, and once that hits, it’s going to be anyone’s guess just how deep it runs, but if I were to be asked, I would say that this one will be worse than 2007/08, because, we never corrected the problems of 2007/08, all we did was make matters worse, with more debt, more derivatives, more easy credit, leveraged loans, and a Central Bank that hasn’t got a clue about any of that! 

Did you know that… Since 1950, there have been 13 Fed Rate hike cycles… OK, so what Chuck? Well, of those 13…. 10 have been followed by a recession… So, what are the odds of that happening this time, you ask? Well, 10 of 13, would not only put you in the Baseball Hall of Fame, but would get the whole shootin’ match named after you, that’s how great those odds are! I’m just saying… Take if for what you want… But instead of singing Santa Claus is coming to town, I’ll be singing: An economic recession is coming to town… 

The Data Calendar for the world, shows a lot of holidays still being taken this week by various countries, which is going to throw all the attention to the U.S. and its Jobs Jamboree on Friday this week…  However, the U.S. Data Cupboard starts out slow as we begin 2019, but comes to a crescendo on Friday, with the December jobs created report.  Job creation seems to be slipping here in the U.S. as the Weekly Initial Jobless Claims ratchet higher each week.  But we’ll never know the true health of the job market here in the U.S. because the Bureau of Labor Statistics (BLS) won’t allow that to happen… 

Gold seems to be back on everyone’s minds once again, as we start 2019, the shiny metal has rebounded the last couple of weeks to end 2018, and has begun 2019, on the good foot, as James Brown used to sing. I was wrong, at the beginning of last summer, when I said that I thought by the end of summer Gold would have made a strong move higher.  So, put that one down on my grade as a red mark…  But have you been following the story that’s unfolding about the former metals trader at JP Morgan who has become a whistleblower and is being taken to court to tell his side of the price manipulation in the metals?   I find this to be quite interesting, and wonder why the major news outlets haven’t picked up on it? 

Don’t kid yourself here, I know why, I just don’t want to talk about it to start the year!  Any-old-way, I continue to see Gold on a breakout higher, that’s coming… I’m just saying… 

Well, they might be saying that 2018 was a good year, and I would point to the debt accumulation in 2018, and say, what was so good about it?  In 2018, here in the U.S. the current National Debt grew by $1.37 Trillion, which drills down to $10, 743 per resident…  That’s the increase in 2018, folks, not the total!  We’re at $21.9 Trillion in current National Debt, and a measly $66, 450 per resident, or even worse $179,224 per tax payer… 

10 years ago, I stood in front of about 700 people in Vancouver, and put up on the screen a flashing red number that was $45,000… Which was the total debt per resident then, and you should have heard the gasp from the audience…  Here we are, 10 years later, and things have continue to rot…  And before we go on here, let’s not forget that the total Unfunded Liabilities here in the U.S. are greater than $121 Trillion, and that professor Lawrence Kotlikoff says that he can prove that our debts are greater than $200 Trillion!!!!!! 

OK, I’ve got to change subjects before I go down this rabbit hole and never come back out! I’ve been reading some stuff that makes you want to make sure you’ve put away all the sharp objects, and I promise I won’t talk about them here, except to say…  You know all those dollars you have hidden in coffee cans, and under the mattress? Well…  You might want to re-think those depository options…   And one more thing…. Got Gold? 

The U.S. Gov. has been on partial shutdown for over a week now… President Trump wants his wall, and the other side wants to tax and spend on programs that get them reelected… and neither side is willing to talk about how to get a grip on deficit spending…  I’m just saying… 

This is just the start of the gridlock that’s going to strangle any progress from Congress for the next two years. And that should be downright awful for the dollar, but I guess we’ll have to wait-n-see, eh?

China has started the year with weaker manufacturing data, and that has the Commodity currencies running for cover… For if the Chinese economy is going to go even slower, Global growth will be non-existent, and therefore commodities will not be in demand, and if commodities aren’t in demand, then the commodity currencies aren’t either…  So, line them up and take a good look at them, for they won’t be getting any love IF, and that’s a BIG IF, China does slow down…   Australia, New Zealand, S. Africa, Russia, Brazil, Norway, Canada, and a few others…  

The price of Oil has fallen to $45, and it does not appear to be able to buy a bid right now, so we could very well, see it continue to slide. All the owners of those BIG HONKING SUVS, are loving this drop in the price of Oil… And further, the homes in the North that still get heated with propane and other heating oils, those people are smiling like the Cheshire Cat! 

The European Central Bank (ECB) did end their bond buying program on 12/31, as they said they would… I don’t know why I doubted them in some degree, but those doubts were laid to rest on 12/31…  The Eurozone is still offering negative interest rates for deposits, which can’t be any fun, can it?

The euro, though is a tough old bird, and continues to do rope-a-dope defensive measures over and over again, to remain stronger than the dollar. 

To Recap…  Out with the old, and in with the new, which probably won’t end up being very good, but it’s shiny and new, so everybody likes it right now… The currencies led by the Big Dog, euro, minus the commodity currencies, saw some buying to end the year, and Gold has been on a two week run, is this the beginning of the strong breakout, Chuck’s been talkin about? Hmm….. 

For What It’s Worth… The fine folks at GATA pointed me to this article on Reuters over the weekend that talks about how the dollar is slipping as a reserve currency around the world, and it can be found here: https://in.reuters.com/article/forex-reserves/us-dollar-share-of-global-currency-reserves-hits-near-5-year-low-imf-idINKCN1OR1DO

Or, here’s your snippet: “The U.S. dollar’s share of currency reserves reported to the International Monetary Fund fell in the third quarter to a near five-year low, while the euro’s share of reserves grew to its largest in almost four years, data released on Friday showed.

The Chinese yuan’s share of allocated reserves shrank for the first time in the third quarter since the IMF began reporting its share of central bank holdings in the fourth quarter of 2016.

Reserves held in Japanese yen reached a 16-year peak in the third quarter, IMF data showed.

Global reserves are assets of central banks held in different currencies, primarily used to support their liabilities. Central banks sometimes use reserves to help support their respective currencies.

Total allocated reserves increased to $10.71 trillion in the third quarter from $10.51 trillion in the previous quarter.

Reserves held in U.S. dollars rose to $6.63 trillion, or 61.94 percent of allocated reserves, in the third quarter, from $6.56 trillion, or 62.4 percent, in the second quarter. The share of allocated U.S. dollar reserves declined to its smallest since the 61.27 percent in the fourth quarter of 2013, IMF Data confirmed.”

Chuck again… Well, they used to say when the dollar would slip in reserve holdings that it was because of the loss of value, skewering the amounts… But since the dollar has been in a somewhat strong trend since 2011, one would have to think that previous thought is no longer the case, and instead Countries around the world are lowering their dollar reserves, just like I’ve been telling you they were doing, but now the IMF confirms it!

Currencies today 1/2/2019: American Style: A$ .7008, kiwi .6705, C$ .7334, euro 1.1435, sterling 1.2667, Swiss $1.0156, European Style: rand 14.5137, krone 8.6610, SEK 8.9279, forint 281.81, zloty 3.7592, koruna 22.5340, RUB 69.55, yen 109.06, sing 1.3635, HKD 7.8332, INR 69.92, China 6.8763, peso 19.70, BRL 3.8766, Dollar Index 96.28, Oil $45.00, 10-year 2.65%, Silver $15.45, Platinum $791.22, Palladium $1,263.39, and Gold… $1,286.59

That’s it for today… Another year…  I’ve been writing the Pfennig since 1992…  Back when there was a pfennig coin! My good friend Rick is pumped that his Clemson Tigers will play for the National Championship! My beloved Mizzou Tigers laid another Bowl egg…  UGH! The NFL Playoffs will start this week… I don’t know about you, but for my money, I would watch the Rose Bowl and no other Bowl Game if it came down to that! What a beautiful setting…  Well, I’m down south again for the winter, away from potentially cold weather… And so I’m going to go out and soak up some Vitamin D as soon as I hit send this morning!  Little Feat takes us to the finish line today with their song: Fat Man In A Bathtub…  (I wonder if they were singing about me? HA!)  And with that, it’s time to go… I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler

 

December 27, 2018 

* Currencies and metals rally while Chuck’s gone! 

* Stocks take their jockeys for a wild and wacky ride! 

Good Day… And a Wonderful Wednesday to you! Well, did you get through everything you wanted to do for Christmas? I did… Yesterday was my wife’s birthday, (I’m not supposed to talk about her in the Pfennig) So, Happy Birthday anyway! I learned the first year we were dating that I was supposed to buy two different presents. One for Christmas and one for birthday, and never will the two be the same! Man, that was a long time ago! We’ve now spent 47 Christmases together… And I’ve not messed up with the presents since 1972! We’ve got a lot to talk about today, and the Moody Blues greet me with their song (from a long time ago): Questions…

Well, Front and Center this morning I want to thank, from the bottom of my heart, everyone that sent along Christmas wishes and kind words, responding to my Christmas eve-day letter… If you missed it, you can still go to www.dailypfennig.com to see it…

OK… Well, the Fed did hike rates last week, just like I said they would do, even with all the ideas going around that the Fed would pause… I’ve said this for a couple of years now, and I’ll keep saying it until things change, but the Fed is hell bent and whiskey bound to hike rates, and Fed Chairman Powell, basically said that, when he commented that he would be hiking rates more in 2019, and… this is the part that most pundits and economists forget about… He said that the Fed would be continuing to reduce their balance sheet by $50 Billion a month… Well, if that’s so… then that would be equal to $600 billion in 2019. That equates to 3 extra rate hikes on top of the two announced in his statement.

If that doesn’t bring down the house of cards economy here in the U.S. I’ll be a monkey’s uncle!

HA! When was the last time you heard that phrase? I do believe the stock jockeys get the message though, because they sold stocks like funnel cakes at a State Fair, after the Fed’s rate announcement and following statement. Stocks had fallen so far that U.S. Treasury Sec. Mnuchin, reportedly called in the Big Guns… the Plunge Protection Team, in an effort to keep stocks from falling further.

Stocks fell over 600 points on Christmas Eve… and rallied over 1,000 points the day after Christmas, and the day after Mr. Mnuchin said he was releasing the Kraken, I mean, the PPT… So, take yesterday’s rally for what it was… PPT fueled, but for how much longer will this medicine work, or will it end up being like my cancer medicines through the years, that work for a while, then my body adjusts to them and then they don’t work any longer, and I have to go onto a new cancer drug?

There’s a lot to be said about that scenario when it comes to stocks, but I’ll let the stock jockeys deal with it, I’m just here to report what I see…

Well, if you ask me, and I’m not stock jockey, but I certain have an opinion about that, and if I were a stock jockey, I would be running for the hills, because by nature of admitting that stocks are so bad that he has to call in the PPT, that would scare the bejeebers out of me… I’m just saying…

Of course, a lot of people believe the U.S. economy is the stock market… So, this will be a case of which came first the recession, which stocks perform miserably during, historyically that is, or stocks performing badly causing the recession? Chicken and egg, right? Well, I’m not one to think the stock market is the economy… I think more that it is a result of the economy… So, I’m going with the recession will cause stocks to fall badly…

Speaking of a recession… There was a great Twitter battle of thoughts going on last week… One side claimed that you can’t possibly experience a recession following a 3% GDP quarter… And finally one astute follower replied, “except in 1953, 1957, 1960, 1973, and 1981″… That shut the other side up… 

OK… Onto other things… I don’t like spending a lot of time talking about stocks, but when they are tied to a recession, then they get mentions! You know, I had a lot of time to look at the rest of the world, in addition to our country’s situation… And there aren’t a lot of countries that are isolated from this buildup of leveraged Corporate Debt, and country debt… Russia for one, is a country that doesn’t fall into that trap… Singapore is another… New Zealand is another, but they have different problems right now…

Of course a major rise of the price of Oil would go a long way toward helping two countries; Canada and Norway, but unless Oil makes a major comeback, these two will get thrown in with all the others… UGH!

The European Union, or rather, the Eurozone, is prepared to end their bond buying program next week, but they still have negative interest rates… And the Eurozone economy, as a whole, isn’t ready to leave negative interest rates…

But overall, it was a good week for the currencies and metals… The currencies and metals traders must have thought that I was back yesterday, for they gave back some of their gains from last week while I was gone… UGH! But as I’ve said before… If you really want to test the idea that “When Chuck’s away” the currencies and metals rally”, you can send money to fund my retirement to: …….. HA!  

There were a ton of articles last week, regarding the soaring price of Palladium… The metal’s price has softened a bit since I last talked to you…I don’t mean that it’s gone down, I mean that it’s not as heavily traded each day, it’s still over $1,250 an ounce, which is not something to diss… Heaven’s To Murgatroid, NO!  I’m not doing that! If traders and investors want to continue to push Palladium higher then so be it! 

Any way… the thing that’s got Palladium so all juiced up, is that apparently electric cars are not, what they were expected to be by now, and combustible engines, needing Palladium in the catalytic converters is what this is all about…  So, let’s circle back to the talk above about a recession… Do cars sell the newest toy at Christmas during a recession? I don’t think so! I’m just saying…

Well, all the Kings men and all the Kings horses couldn’t put debt in its place around the world in 2018…  Here in the U.S. our national debt is closing in on $22 Trillion, and the unfunded liabilities are $116 Trillion… Debt is everywhere, but since most of us live here in the U.S. we need to keep our eye on the U.S. Debt…  Right now, according to the Debt Clock, which can be found here: www.usdebtclock.org/ , the liability of each tax payer (that characteristic is important) is $949,000…  How much longer can this go on? 

 Also in 2018… We saw currencies rallies that looked like they were bound and determined to start a new strong trend, only to be beaten back… We saw a Trade War begin, and folks, let me tell you… We haven’t seen anything yet… The big claws of the Trade War begin to be exposed in 2019… So get ready for that!  

We saw Bond yields rise, and then fall again… The 10-year Treasury’s yield found its way to 3.25%, only to see it fall again to today’s 2.77%…  Short yields inverted, briefly, in 2018, was it a sign? We’ll see in 2019…  And Gold started the year around $1,300, fell, nearly 100 dollars, but has since recovered to this morning’s $1,272… On it’s way back to $1,300?  I would think so given all that’s going on in the world, but then who knows?

Let’s hope 2019, is more stable… I doubt it will be, but then that’s just me…  We’ll, also be observing some notable things that have happened 100, 50, and 25 years ago during 2019, of which I going to highlight the one’s I feel are important… 

100 years ago… World War 1 ended…  We also passed the 19th Amendment giving women the right to vote. 

50 years ago…  We experienced Woodstock… Charles Manson… The first message was sent by a computer, Scooby Doo and Sesame Street first aired, and Man landed on the moon. 

25 year ago…  Remember that sucking sound? NAFTA was implemented, Amazon was founded, The World Series was cancelled due to a strike, (worker’s strike, not a pitched ball!) And the first OJ Simpson trial took place… 

So, how about that?  There will be lots of remembrances of things in the past that take place in 2019… 

OK… The U.S. Data Cupboard has been wishy washy lately with data prints with the holiday and G.H.W. Bush’s funeral.  Yesterday’s Data Cupboard saw the Case/Shiller Home Price Index for Nov. remain unchanged from Rocktober… This was interesting because recent prints had shown home prices falling…   

Today’s Data Cupboard has the Weekly Unemployment Claims, which have been trending upward in recent prints, New Home Sales for Nov. and the stupid Consumer Confidence report for this month… Not much here to move the markets today, so we’ll move along, for these are not the droids we’re looking for… 

To recap… It’s been a wild and wacky week for stocks, and the BIG BOYS of the PPT had to be called out to save the day… Here I come to save the day, that means that Mighty Mouse is on his way!  The currencies and metals traders marked up the two asset classes because “Chuck Was Away”, and Chuck offered up a solution to that scenario, should everyone want to see it last! HA!  Bond yields continue to go downward here in the U.S., and because electric cars aren’t what they were thought they would be by now, Palladium is still soaring in price… 

For What It’s Worth… OK… I’ve said all along that Russia’s economy was going quite well, despite the economic sanctions placed on them by the Eurozone and the U.S., and that if these sanctions were removed we would see the true strength of the economy, which of course would mean the currency would be allowed to rally.  Well, here’s an article that I came across last week from Bloomberg that talks about how the Eurozone is softening up on their sanctions, and it can be found here: https://www.bloomberg.com/news/articles/2018-12-19/europe-loses-taste-for-punishing-russia-as-u-s-toughens-stance

Or, here’s your snippet: “Almost five years since Russia’s military intervention in Ukraine sparked Western sanctions that have helped to smother growth, European governments are losing the appetite for punishing actions against Moscow. That’s no solace for investors.

While the European Union shied away from penalizing Russia after a naval clash with Ukraine last month that was condemned by the West, the U.S. is threatening escalating sanctions tied to accusations of Russian meddling in the 2016 presidential elections. The risk of new measures has made it much harder for foreign businesses to work in Russia.

“The most effective sanctions are the ones that aren’t entirely clear, because the lack of clarity has a chilling effect on investment,” Frank Schauff, chief executive officer of the Association of European Businesses in Russia, said in an interview. A sanctions law passed by Congress last year that allows for additional steps “will be in place for a long, long time,” he said.

The U.S. and the E.U. imposed sanctions over Russian President Vladimir Putin’s 2014 annexation of Crimea and support for separatists fighting in eastern Ukraine. There’s been little progress on implementing a 2015 peace accord to end the conflict in Ukraine’s east, giving the EU no scope for easing the penalties. The bloc agreed unanimously last week to prolong the sanctions for another six months. Together with a slide in oil prices, the U.S. and EU measures contributed to a slowdown in Russia’s economy and helped deter foreign investment.

For now, major European companies with operations in Russia are hunkered down but are finding it hard to finance expansion because banks are wary of U.S. reprisals. German investment averaged $550 million annually since 2013 compared to $3.6 billion a year from 2007-2012. French companies invested $666 million in the first half of 2018, down from a peak of $2.6 billion in 2010.”

Chuck again…  Long, too long, I know, but I wanted to let you read about the sanctions and how they could be softening… 

Currencies today 12/27/18: American Style: A$ .7048, kiwi .6713, C$.7348, euro 1.1399, sterling 1.2640, Swiss $1.0088, European Style: rand 14.5305, krone 8.7510, SEK 9.0266, forint 282.10, zloty 3.7628, koruna 22.6947, RUB 68.91, yen 110.80, sing 1.3729, HKD 7.8310, INR 70.07, China 6.8884, peso 19.88, BRL 3.9101, Dollar Index 96.76, Oil $45.41, 10-year 2.77%, Silver $15.10, Platinum $796.26, Palladium $1,258.83, and Gold… $1,272.01, 

That’s it for today, this week, and this year! That’s right… on Monday, 12/31, I’ll be traveling to the Dixie sunny shores, from Atlantic to Pacific, gee the traffic is terrific!  HA!   So, next Pfennig will be on Wednesday 1/2/19…  The Big College Football Playoff Games are this weekend… I’ll be glued to the TV… And my beloved Missouri Tigers play their bowl game on Monday.  Alex will representing the Butler clan at the Bowl Game… I get to visit my oncologist today… And then I won’t see an oncologist for 3 months! That’s the longest I’ve gone between visits in 5 years! WOW! I don’t think she’s going to like the weight gain I’ve had during the Christmas holiday, but then who doesn’t gain weight then?  So, this is it for 2018… I said it last year, and I’ll say it again now…  The Celtic Women’s Christmas CD is one of my faves, and Lisa sings Auld Lange Syne… you should put that one on your bucket list of things you want to hear, because I’ve never heard anyone else sing it better…    but to help you through on New Year’s Eve so you don’t have to mumble the words… 

Should auld acquaintance be forgot,
and never brought to mind?
Should auld acquaintance be forgot,
and auld lang syne?

For auld lang syne, my jo,
for auld lang syne,
we’ll take a cup o’ kindness yet,
for auld lang syne.

So, long for 2018…  Be Careful out there on New Year’s Eve… Kathy’s Dad used to call it “Amateur’s Night”…   Ambrosia takes us to the finish line for the last time in 2018, with their song appropriately titled: Holdin’ On To Yesterday…   I’ll see you again next Wednesday, until then… Happy New Year’s!    bye~ 

 

 

 

December 24, 2018

Good day… And a Marvelous Monday to you… It’s Christmas eve-day, and so I remember as a young boy, being so darn excited that I thought it took a week for this day to become night… I love Christmas, always have, and hope to always will. The Currencies and metals have had a good run of it while I’ve been gone, as usual, but that’s not what I’m here to write about today… And that brings me to Pfennig Tradition for Christmas eve-day.  I hope everyone has a blessed Christmas…  

First, let’s do some caroling to help us feel the Christmas spirit… 

White Christmas…
I’m dreaming of a debt free Christmas
Just like the ones I used to know…
Where gold kept debts from piling
And Congressmen were complying
To make America Great again we’re told…

The Christmas Song
Austerity budgets burning by an open fire
Our kids futures going up in smoke
Yuletide carols being sung by a choir
Let’s me know it’s Christmas once more…

Silver Bells
What is wrong, What is wrong?
No one knows how to cut deficit spending…
It won’t be fun, It won’t be fun
Living with taxes that are never ending…

OK…
Enough caroling… here’s what you’ve all been waiting a year for…

T’was the night before Christmas
And all though the house
Congress is wondering
How, they can be quiet as a mouse

They’ve got gridlock
And it’s no fun to see
That the next two years
Will not be filled with glee.

The President is all snug in his bead
While visions of Trade Wars dance in his head

And I with my pfennig announcing so bold
And so quick,
With a line about price manipulation
I must be St. Nick!

When out on the lawn there arose such a clatter
I sprang form my writing chair to see what was the matter
Chuck had been set free, of stifled writing
And the world was a better place but still quit frightening!

I went straight to work, filling stockings and then turning with a jerk
I had to find something to do since I no longer work!

To my darling granddaughter, Delaney, You’re so sweet and kind
And always willing to hug me but will there come a time
When you’re too old to hug St. Nick?
I hope not, because I love you to pieces!

To grandsons Everett and Braden, you two are so much fun
I wish I had your energy to run and run and run…

To Kathy, who’s always been the love of my life
And doesn’t like me talking about her, my wife…

To Dawnie, you’ll always be my little girl.
I’m glad you decided to give teaching a whirl!

To Andrew, the swimmer and water polo player
You’ve become such a wonderful coach,
There’s no one that could approach
Your record of winning and building youg men
Who come back to see you now and then.

To Alex, the wonder child, I’m so darn proud
You’re going to be a doctor! Then I’ll shout
Dr. Alex, please help me with my sore back
And he’ll be the best, and that’s a fact Jack!

To Rachel, and Jerry, and even newcomer, Grace
You all are perfect matches for my kids
And now it’s a big, big race
To see who gets to open their presents first!

Finally, I climb to the rooftop and stumble
For I forgot my friends, I don’t want them to rumble
There just too many to name
But I love you all just the same!

And I can’t forget to stuff a stocking
For all my dear Pfennig Readers
They’ve been so kind through the years
With prayers and layers
Of kindness and friendship, I am so lucky!

I would love to give each the gift
Of peace and love and friendship
To a life without debt piling on,
And a healthy life must I go on?

For the Government, and economy I hope good things
But I have to say ,that’s just wishing, and hopin’ and thinkin’ and prayin’
Plannin’ and dreamin’ These rate hikes will help…
They just came too late and now… Well…

Oh, forget about it St. Nick
It’s Christmas time, who cares?
So, I turn to blow out the candle’s wick
And think about all the Christmases I have seen
As good old jolly St. Nick!

And you could hear him exclaim as he flew out of sight…
Merry Christmas to all and to all a good night!

I end each year’s note with the same line… May the light of faith, and the warmth of heart be your gifts this Christmas…

Chuck Butler – Christmas 2018

December 13, 2018

* Currencies drift through Wednesday… 

* California wants to do what? Wait until you hear this one! 

Good Day… And a Tub Thumpin’ Thursday to you! I’m saving myself for tomorrow, so I won’t be Tub Thumpin’ Today or tonight… Tomorrow is our (the guys in the neighborhood) annual “shopping day”, so it will be a long day for yours truly… And then we’ll be 1/2 – way through the month of December… The sun was out again yesterday, making the temperature outside bearable, but still too cold for me! I’m back to listening to Christmas music from my satellite radio station, and this morning it’s playing Chet Atkins singing Silver Bells… When I was a very young man, I remember hearing my first Christmas song, and it was Silver Bells, which my mom told me she liked a lot, and so now when I hear Silver Bells, I think of my mom…

Well, the currencies tried to mount a rally yesterday, but just couldn’t get past the border patrol, who had the road to bigger gains on the other side of the border patrol’s gate. So, small gains were all that was on the docket for yesterday. Data here in the U.S. didn’t help the dollar’s fate going forward, as CPI (consumer inflation) saw 0% growth in November from Rocktober, and Core CPI gained just .2%, unchanged from Rocktober. I don’t believe that the Fed really pays much attention to the CPI prints, for if they did they would be backing away from the rate hike table very quickly… I said yesterday, that I doubt many people pay much attention to the stupid CPI any longer, after years of being hedonically adjusted. But stocks had a good day, not as good as they were having in the middle of the day, but a good day nonetheless…

This up one day down the next day for stocks is a very telling sequence of things… Historically, a bear market starts off with these kinds of days… So… there you have it…

The U.S. Treasury 10-year’s yield gained a couple of shekels and finished the day with a 2.90% yield, up from 2.8i9% yesterday… Last week we had the short end of the Treasury yield curve invert…. That should have scared the bejeebers out of most people, but then it didn’t last too long, But the 2year and 5year Treasury right now, yield the same level 2.77%… So a full inverstion is teetering, folks…

I read a report yesterday that claimed that Oil supplies had seen a huge chunk withdrawn. and I thought, well that should be good news for the price of Oil… NOT!  I guess supply and demand just doesn’t rule the roost any longer, eh?  Yesterday, I talked about the shortage of Silver, and that doesn’t seem to make a difference, and so on… Oh, and there’s a semi-truck load of dollars out there, and it doesn’t seem to hurt the dollar’s value… I’m just saying!

Gold and the other precious metals had a day of drifting, with even Palladium the recent star each day, taking a pause for the cause.  I have a brief article for you from Jim Rogers this morning in the FWIW section, where he talks about commodities, and repeats my thought from a couple of weeks ago, that Commodities should rebound in 2019. So, we’ve got that going for us today… 

The European Central Bank (ECB) is meeting while I talk, but they have already confirmed the one thing, and that is that they will be ending their bond buying at the end of this month, as planned. Recall I said that the risk was that they would decide to delay this end of bond buying, given the recent data that has been damaged by the Trade War. So, that’s out of the way, and the euro has already begun to move higher this morning! 

I had a dear reader chastise me for always banging on the dollar… Well, I say, gimme one reason to love you, as Bonnie Raitt once sang… I told him that I just didn’t think that the Fed, Treasury, and Congress had done a good job shepherding the Reserve Currency of the world, accumulating debts that can never be repaid, and therefore the shepherds have brought this banging on the dollar on themselves…

Besides, I don’t want to see this stuff happening, but since most people don’t write about it, I take it upon myself to be there for you. I use dollars for gas, groceries and giggles, and would prefer to see the power that be, take better care of the dollar… And that’s all I’m saying about that!

But that got me thinking…  Had I become so dollar-centric? That made me think back of things I’ve said about other countries and their dolt Central Bankers? 

And of course, I’ve beaten on the U.K. for first their debt, second the choosing of Mark Carney as BOE gov., and then the problems with negotiating a BREXIT agreement… I agree with those traders keeping the pound down in value while this all gets sorted out.

I’ve been hard on the beaver, I mean Australia for not hiking rates and now they have a housing bubble ready to pop…

I didn’t have nice things to say about the Reserve Bank of New Zealand, after they hinted late last year that they would be hiking rates in 2018, and then crickets…

And I warned people about the new Central Bank Gov. (Poloz) in Canada, when he was announced, because his background was on the Trade Side of the business, and those trade guys are always clamoring for a weaker currency… Since he’s taken over, the loonie hasn’t been able to return to its former lofty value…

I’m not fan of Mexico, as their past indiscretions with foreign investors still weights on the peso, and I’ve pointed out over and over again that until there’s higher rates that represent a rate premium, over other currencies, the peso will remain weak.

So… As I look at it… I don’t always bang on the dollar… But, the dollar does give me more opportunities to do so, and I take them! When you have characters like Lola, aka Goldman Sachs, and JP Morgan Chase, and others to throw darts at, well, they give me plenty of opportunities to do just that…

I told you all this story before, but it works well here too… In 1998, I attended a conference in London, and one of the first questions asked was to see a show of hands of those in the crowd that didn’t believe the euro would make it… I raised my hand… And in 1999 when the euro was introduced it immediately fell in value from 1.17 down to 90-cents… I wrote back in those days that the euro was going to fail, and this drop in price was a precursor to that fall… People back then thought I was banging on the euro a lot…

But once the euro got through its first year, and got a couple years under its belt, and finally called in all the legacy currencies and swapped them for euros, the currency began to rebound, and in 2002, I wrote a white paper titled 2003: The Year of the Euro… So, just because I bang on a currency at some point doesn’t mean it can’t reverse its course… Soon the euro was the 2nd most traded currency in the world, behind the dollar… And the rest, as they say, is history…

And when the hidden debts of the Club Med countries of the Eurozone were revealed in 2011, I backed off my support for the currency, and still believe that until the ECB removes all the stimulus, the euro won’t be allowed to move significantly higher…

Sooner or later Debt is going to come back to haunt a country… And so it will be with the U.S. Shoot Rudy, we already have reduced GDP because of the debt… And just wait for the bond servicing bills, (bond interest) begin to show up at the Treasury’s door… The Trillion dollar a year deficits will only enlarge that number… How long can this go on? Well, apparently longer than I thought, but then it’ll end when it ends, and then it will be too late. I’m just saying!

OK, in other news… U.S. PM May survived a vote of confidence, but with at least 1/3rd of her supporters now against her BREXIT plan, the vote on the BREXIT plan is going to be quite sticky, and could get ugly, which would only add more weight on top of the pound.

And did you hear the proposal to help the deficit spending in California? They want to tax, texts… Talk about one of most insane things I’ve heard from politics… This is it! Considering that texting has become the way that we communicate these days, that would be quite the haul for the California leaders… But… if it costs to text, wouldn’t it behoove the texters to use the phone for what it’s original purpose, make a phone call?

The U.S. Data Cupboard doesn’t have much for us today, and all eyes will be turned to tomorrow’s Data Cupboard, which will have November Retail Sales, which I’ve already told you the BHI indicates that November will be weaker than Rocktober.  

To Recap…  The Currencies drifted yesterday, but the euro is attempting to lead them upward this morning, after it was announced that the ECB will indeed, end their bond buying program at the end of this month.  U.K. PM May survived a vote of confidence, but her BREXIT remains in peril. Chuck goes back and talks about times he found fault with other currencies…  And California wants to tax texts!  yes, I said texts! Crazy, eh? 

For What It’s Worth… I’ve know Jim Rogers for many years, he used to read the Pfennig, but I don’t know if he still does… But when I saw an article with his name in the title, I knew in a moment it must be St. Nick, no wait! It must be good pfodder for the Pfennig’s FWIW… So, this is Jim Rogers talking about commodities, and it can be found here: thesoundingline.com/jim-rogers-commodities-will-outperform-stocks-oil-is-making-a-complicated-bottom/
Or, here’s your snippet: “t is the time to buy commodities again. I would say to you and you can write it down… commodities are going to do better than stocks in the future.”

“I have learned not to pay too much attention to OPEC… I think oil has been down ten days in a row which is one of the few times in history that that’s ever happened. Oil is making a complicated bottom. We are going to look back one day and say ‘2015, ’16, ’17, ’18, ’19, oil made its bottom, and then oil is going to go up again. Known reserves of oil are in decline, and continue to decline, except for fracking, but that bubble has popped, so be careful. Don’t sell your oil.” – Jim Rogers

Chuck again… I watched the video that’s on the website, and Jim Rogers mentioned that he thinks Sugar is a buy, as it’s down 80% from its high. “There are not a lot of things in the world that are down 80%” was what he said…

Currencies today 12/13/18: American Style: A$.7227, kiwi .6865, C$ .7483, euro 1.1370, sterling 1.2660, Swiss $1.0075, European Style: rand 14.6330, krone 8.5653, SEK 9.0570, forint 284.10, zloty 3.7739, koruna 22.7080, RUB 66.36, yen 113.46, sing 1.3706, HKD 7.8083, INR 71.42, China 6.8828, peso 20.12, BRL 3.8777, Dollar Index 97.07, Oil $50.54, 10-year 2.90%, Silver $14.72, Platinum $799.74, Palladium $1,259.92, and Gold… $1,242.91

That’s it for today… And tomorrow… and the next two weeks! Yes, I’ve talked about it a lot, but it’s finally here, my annual Christmas vacation!  While I’m gone there will be a few birthdays to celebrate… My sister Terri, Jen Mclean, Ty Keough, Kathy, and of course the most important birthday of all, that of Christ.  So, Happy Birthdays all around…  I plan on writing a Christmas Pfennig, so I won’t be away, for good those two weeks, and if you follow me on Twitter, you never know what I might say there! I hope everyone has a very blessed Christmas… I’ll be back on the 27th and I’m sure there will be some catching up to do… Until then I suggest you go to sleep and dream of SNOW… (Bing Crosby!) HA!   Yes, faithful friends who are dear to us, gather near to us, once more… And we all will be together if the fates allow…   So, like I said I hope you have a Blessed Christmas, or whatever holiday you personally celebrate.  I hope you have a Tub Thumpin’ Thursday, and remember to Be Good To Yourself! 

Chuck Butler

December 12, 2018 

* Currencies get derailed again on Tuesday

* Chuck smells something fishy with the Palladium trading… 

Good day… And a Wonderful Wednesday to you! The sun finally came out yesterday and warmed the air a little bit… It’s too late in the year for it to be warm here, but the air did feel warmer while in the sun, and that’s a good thing to me, who’s stuck here until the end of this month! Good luck to Alex today, as he takes an important big test that he’s studied for the last two days and nights… Our Blues tried to skate out of the rut they’ve been in with a spirited 3rd period rally to win last night.. And The Charlie Daniels Band greets me this morning with their song: The Devil Went Down To Georgia…

Well, once again yesterday, the currencies were on the rally tracks in the morning, and by mid morning they are derailed by the dollar bugs… UGH! I really have no idea what moves these dollar bugs to derail the currencies, because there was nothing in the data reports to get them all lathered up… The NFIB Small Business Index for Nov. fell from 107.4 to 104.8, and the Producer Price Index (PPI) fell from .6% in Rocktober to just .1% in November… So, tell me what on earth did the dollar bugs see that made them derail the currencies?

The only thing I can think of is that the dollar bugs want a higher starting point for the dollar when the walls come crashing down on the economy, and the dollar gets sold… That’s a stretch, I know, but my goodness, what else is there?

They can’t be pinning their hopes on the Plunge Protection Team to keep rescuing them or the stock market for that matter. Bond yields are dropping, the President has now decided to call out the Fed by saying “it would be a mistake if the Fed hikes rates next week”… Of course that doesn’t mean the Fed is going to stop their rate hikes now, and rates will be hiked when they meet next week, but… Could that be the last one in this rate hike cycle? You know the song, It’s beginning to look a lot like Christmas? Well, it’s beginning to look like the rate hike cycle is coming to an end…

I have the Reuters news article that highlights the President’s feelings about the Fed’s rate hikes in the FWIW section today… So, hold on, we’ll get to it sooner or later…

Alright then… Well, longtime readers will remember when I kept harping at the Reserve Bank of Australia (RBA) for not hiking rates as they had housing bubbles popping up in the major cities. This was the mistake of the Fed back in the mid 2000’s, ignoring the warning signals of a housing bubble, and then well, we all know how that worked out for us… And the same could be in store for Australia, as housing prices are starting to tumble… It’s a start of bad things to come, and all because the Central Bank failed to heed the warning signs… I get it… Central Bankers think that what happened to the U.S. in 2007/08, couldn’t happen to them… So, they ignored the warning signals, but now they aren’t just signals they are flashing Red lights with sirens and Tornado warnings!

You know, the world would be a better place and a whole lot safer, investment wise, if I were king… I would outlaw Central Banks, except if they wanted emulate the Central Bank of Russia (CBR)… But all interest rate settings would be taken away from the Central Banks if they remained, and interest rates would be set by the bond market. This way there would be no more housing bubbles, stock market bubbles, and bubbles of any kind, because the markets would adjust immediately to the goings on in economies. I would outlaw all QE and negative interest rates… And I would outlaw any requirement to go to a cashless society. And that would just be the start of my changes! Oh, and any banker, investment officer, what ever, that breaks the law would be sent to jail! No more slaps on the wrists, as they walk off with billions in fees earned…

OK… I had better get back to reality here before I begin to talk about fairy dust, and pots o’ gold!

So, there I was last night going through news articles and researching what I might want to talk about this morning, and there it was! It was flashing lights and waving signs at me to look at it… So, I did… But, it couldn’t have been true, for the article talked about how former Fed Chair, Janet Yellen was quoted as saying that she feared a new potential financial crisis, saying that there were “holes in the system”… Wait! What? I thought that she told us before she left the Fed Reserve that she didn’t see a chance of another financial crisis… 

But, just like Big Al Greenspan who finally saw the light after being away from the deep state in the Fed Reserve, now Yellen too sees the light…  Why, oh why, can’t these people that are chosen to lead the Central Bank see the light while they are making decisions that affect all of us? 

I just shake my head in disgust at this stuff…  Yes, technically, she’s right, there is potential for another financial crisis, I’ve been talking about that for months, but I guess too much water has passed under the bridge now and she feels that if the financial crisis does hit, that she won’t be blamed for it…   shame, shame, shame, Janet Yellen…  And that’s all I have to say about that, now… 

Once again in the metals, Palladium shines the brightest… but something interesting happened in Palladium trading yesterday… And it reminded me of the trading first of Silver, and then Gold through the years…  I’ll tell you what happened and let you decide what you think was in play here… Palladium ended up $18 on the day, which looks good, right?  Well, it was up $30 at one point in the day… 

Gold lost 90-cents on the day, so no big move, and it’s up about 2 bucks in the early morning trading today.  I had a dear reader send me a note the other day, telling me that he had bought some Silver, and the dealer had told me that supplies were dwindling… He asked me how the price of Silver was so cheap, with supplies falling?  That’s when I went to Ed Steer’s letter (www.edsteergoldandsilver.com) to get the production numbers that he posts every Saturday. And then I replied to the dear reader that right now it takes 185 days of Silver production to match the number of ounces that are represented in short paper trades… And that’s why Silver can’t find an everlasting bid…    

And I’ve talked about this supply problem for Silver many times in the past… And how Solar Panels should have depleted the Silver supplies, and yadda, yadda, yadda, but Silver can’t get up off the canvas…  I’m just saying… 

The U.S. Data Cupboard had the aforementioned two pieces of data yesterday, and today we’re supposed to see the color of the Federal Budget, which you might recall I made a big deal out of last month, because in the first month of the new fiscal year for the U.S. the Deficit had an annualized number of more than $1 Trillion…  So, Let’s strap ourselves in for this print that might print today, or tomorrow, one never knows, as it’s up to the issuers’ fancy… 

The stupid CPI (consumer inflation) for November will print… I can’t see why anyone even cares about this data any longer, as it has been hedonically adjusted so much over the years, that it no longer resembles the simple basket of goods used to price and calculate inflation… 

To Recap…  Once again, the currencies were on the rally tracks in the morning only to be derailed by the dollar bugs mid morning, and seeing no need to go through the motions of climbing on the rally tracks only  to be derailed each day, the currencies are drifting this morning.  Janet Yellen, yes, that former Fed Chair, Janet Yellen, backtracks on her earlier statements about not seeing another financial crisis… I guess when you’re the former Fed Chair, you get to backtrack your statements, and no one holds your feet to the fire… 

For What It’s Worth… Well, as previously advertised, this is an article from Reuters that highlights how the President really feels about rate hikes… And it can be found here: https://www.reuters.com/article/us-usa-trump-fed-exclusive/exclusive-trump-says-it-would-be-foolish-for-fed-to-raise-rates-next-week-idUSKBN1OB02Y

Or, here’s your snippet: “President Donald Trump said on Tuesday it would be a mistake if the Federal Reserve raises interest rates when it meets next week, as it is expected to do, continuing his criticism of the U.S. central bank.

“I think that would be foolish, but what can I say?” Trump told Reuters in an interview.

Trump added that he needed the flexibility of lower interest rates to support the broader U.S. economy as he fights a growing trade battle against China, and potentially other countries.

“You have to understand, we’re fighting some trade battles and we’re winning. But I need accommodation too,” he said.

Trump named Jerome Powell as Fed chairman, but has repeatedly railed against him since he took over as head of the U.S. central bank last February. Trump in August told Reuters that he was not “thrilled” with Powell’s raising interest rates.”

Chuck again… I characterized this relationship last week, as Trump having “buyers remorse” over nominated Jerome Powell…

Currencies today 12/12/18: American Style: A$.7210, kiwi .6852, C$ .7477, euro 1.1335, sterling 1.2540, Swiss $1.0060, European Style: rand 14.3310, krone 8.5817, SEK 9.1455, forint 285.40, zloty 3.7945, koruna 22.8323, RUB 66.45, yen 113.43, sing 1.3730, HKD 7.8161, INR 71.92, China 6.8989, peso 20.13, BRL 3.9115, Dollar Index 97.37, Oil $52.59, 10-year 2.89%, Silver $14.65, Platinum $789.25, Palladium $1,261.79, and Gold… $1,245.00

That’s it for today…  I wonder what lit the fire under the Blues’ skates last night? 4 goals in the 3rd period! I had turned the game and tv off before the 3rd period and gone to bed with them losing 0-3… Now, if they can only win two in a row and not fall off the bus!  Baby steps…  Well, I see the calendar and it tells me that tomorrow’s Pfennig is the last one before my annual Christmas vacation! WOW! Time goes fast!  Baseball’s Winter meetings are going on in Las Vegas right now… I have expected the Cardinals to announce a few more signings of name players… But so far, just crickets…  UGH!   Don Henley takes us to the finish line today with his song: End of the Innocence…  I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself! 

Chuck Butler

December 11, 2018 

* A HUGE reversal yesterday in stocks, currencies & metals

* Palladium is the star performer this morning! 

Good Day… And a Tom Terrific Tuesday to you! So, did you watch the Army/Navy football game on Saturday? It’s quite the scene, all the pomp and pageantry, and traditions, followed by a football game… I will always attempt to be somewhere where I can watch this each year… It’s not the best football, but it’s football like I used to play it… Grind it out, tough line play, and tough defense. I simply love it! Alrighty then… It’s a Tom Terrific Tuesday today, and with that Chuck is in one foul mood, so he’s listening to Christmas music to calm him down, and right now playing on his iPhone is a jazzy number by Oscar McLollie… Dig That Crazy Santa Claus…

Well, what’s got Chuck all fussed up and in a foul mood today? Could it be the play of our Blues Hockey team? Not exactly… Could it be the cold weather outside? Not today… Well, what then, is it? The Return of the Plunge Protection Team (PPT)… Yesterday when I signed off the currencies were booking gains VS the dollar, and then about mid morning, everything turned on a dime… And it wasn’t just the dollar’s fate… stocks also rallied to erase a very deep loss that was about to get even deeper… The PPT had to be the culprit behind the turnaround in the dollar… There was nothing else going on, and The Fed didn’t exactly come out and say, “We don’t care what everyone thinks, we’re still on course to hike rates throughout 2019”…

What do you believe happened to the currencies’ rally VS the dollar? For the rally ran into a Buzzsaw… And I’ve said my piece on the subject… I can’t say that I’ve really calmed down at this point of the early morning, but I’m ready to talk about something else!

With every day that passes, there’s another article about the Corporate Bonds and the downgrades, the leveraged loans and so on… And yesterday was no different, as a report on Twitter said that: “In the US, about a quarter of junk-rated issuers are now rated at B minus or lower, up from 17 per cent four years ago and the highest level since 2009, according to data from S&P, the rating group.”

And as we inch closer to the same level as we had in 2007… I want to point out that I’ve been sending out the warnings on Corporate Bonds for 2 years… Yes, I’ve been called the boy who cried wolf… But when it eventually happens and the walls come crashing down around us, does it make a difference to the goings on that we had to wait 2 years for this to come about? I don’t think so!

I saw this list of countries and their 2018 projected GDP… I only pulled the major countries that I talk about all the time… India was number 1 with 7.3% GDP, China #2 at 6.6%, Australia #5 at 3.2%,  finally the U.S. shows up with a 2.9% GDP, Mexico will book 2.2%, and Canada 2.1%, Germany will then follow with 1.9%, then Russia (despite all the economic sanctions) at 1.7%, France at 1.6%, and then the U.K. at 1.4%… to round out where these 10 countries will place at year end. 

Just imagine what the U.S. GDP would be without all the Government spending? And I’m going to go out on a limb here and say that 2.9% will be the highlighted year of growth during the current expansion… Whatever, you call it, but I wouldn’t exactly call it “expansion”, but the technical books say it is, so be it!

Russia has managed to eke out 1.7% GDP despite all the economic sanctions they have to deal with… But the ruble has never been able to recover from the HUGE Chunk that was removed from its value after the conflict with Ukraine began a few years ago… Before all that happened, the ruble was around 35… It’s stuck around 65-66 these days, and until the price of Oil goes significantly higher, or the economic sanctions are removed or both (ruble holders would rejoice) the ruble will struggle to get any real traction…

And here’s a brief update on those international payment systems that are popping up in Russia and the Eurozone… The Eurozone Commission issued a report calling for more international business to be done through the Euro payment system, thus removing the dollar from terms of trade. I’ve read that this Euro payment system is really taking off and getting rave reviews… Depending on how wide the distribution is of this system, will determine the hit to the dollar… I do believe it will be HUGE… But then I cast that line in the water a long time ago… 

OK, this happens every time I go to the quotes well, and pull the Bluto quote out and run it up the flag pole, about “was it over when the Germans bombed Pearl Harbor”…  I get readers who believe that I believe the Germans bombed Pearl Harbor! Come on… think about that… I just laugh out loud when I see the comments come through…  Just shows to go ya that the skimming method of reading doesn’t work! HA! 

Well then… The currencies are back on the rally tracks this morning attempting to pick up where they were cut off at the knees yesterday, by what I feel was the PPT. The euro is knocking on the door to 1.14 again, and so on…  Gold, which lost $4 after all the dust settled yesterday, is up about $3.20 this morning. And once again the star performer for the day was Palladium which is up $20 in the early morning trading. 

The Trade War is taking its toll on car sales in China… Imports to China are also falling at an alarming rate…  But here in the U.S. we, as consumers, continue to buck up and buy Chinese goods, while running up massive credit card debt…  

The U.S. Data Cupboard will print November PPI (wholesale inflation), which I believe we’ll see weakening in November, and the NFIB Small Business Index for November, no great shakes here, but I do believe the markets will take notice of any weakness in PPI, for Wholesale Inflation leads to Consumer Inflation, and if that’s going to weaken too, that reduces the Fed’s need to hike rates. 

Speaking of Fed’s rate hikes…  I see that Lola, aka Goldman Sachs is calling for the Fed to pause next March and not hike rates at the meeting. And John Tudor Jones, the hedge fund guy, is saying that the Fed will not hike rates at all in 2019…  Well, I’m of the opinion that the Fed will be ceasing their rate hike cycle ride in 2019, but not before going kicking and screaming… 

To Recap…  The currencies and metals, along with stocks were saw their moves yesterday morning all reversed on a dime, which indicates to Chuck that the PPT was in to flex their muscles, buying dollars, and stocks…  The currencies are attempting to pick up the pieces this morning once again.. Gold lost $4 yesterday, but is up $3 this morning, while Palladium once again is kicking tail and taking names later with a $20 gain so far today… 

For What It’s Worth…  I’ve been talking about credit card debt a lot lately and when I saw this article on MarketWatch, well I knew that I had to highlight it so here it is: https://www.marketwatch.com/story/this-state-is-the-most-burdened-by-credit-card-debt-2018-12-10?mod=MW_section_top_stories 

Or, here’s your snippet: “Where you live in the United States makes a difference when it comes to paying off credit card debt.

It takes the average New Mexico household nearly twice as long to pay off their credit-card debt as it does households in Massachusetts, according to a new report from CreditCards.com. New Mexico had the highest credit-card burden of all 50 states, while Massachusetts had the lowest.

The disparity comes down to the relationship between debt and income, CreditCards.com industry analyst Ted Rossman said in the report. “The states where residents owe the most on their credit cards (Alaska, Virginia, Texas, Maryland and Connecticut) do not rank among the five highest debt burdens because their median household incomes are higher,” he said.

The problem for people who live in New Mexico, Louisiana, West Virginia, Alabama and Arkansas isn’t just how much they owe, it’s compounded by how low their incomes are by comparison.”

In New Mexico, a household earning the median annual income of $46,744 would take nearly 1.5 years to pay off the state’s average household credit card balance of $8,323. 

Chuck again… I think it’s more a case of: Wages just aren’t keeping up with rising credit card debt… 

Currencies today 12/11/18: American Style: A$.7220, kiwi .6885, C$ .7470, euro 1.1395, sterling 1.2607, Swiss $1.0128, European Style: rand 14.2795, krone 8.5788, SEK 9.0425, forint 283.70, zloty 3.7707, koruna 22.6620, RUB 66.46, yen 113.20, sing 1.3720, HKD 7.8156, INR 71.82, China 6.9015, peso 20.22, BRL 3.9076, Dollar Index 96.89, Oil $51.57, 10-year 2.88%, Silver $14.64, Platinum $783.77, Palladium $1,249.21, and Gold… $1,247.66

That’s it for today… A strange day yesterday, I was busy and then the day was over… UGH! I don’t like days like that… Closer and closer we draw nearer to my annual Christmas vacation! And when the alarm goes off in the morning, I will be able to simply turn it off! YAHOO! Can you feel it? I was out for a bit yesterday, and people are smiling and being friendly… The Christmas spirit has touched them… And it will only grow stronger as the days go by… The St. Louis band, Mama’s Pride takes us to the finish line today with their song: Blue Mist…  I hope you have the opportunity to make this a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler

December 10, 2018

* Currencies and metals rally for the most part

* RBI Gov. steps down, leaving unknowns for the rupee… 

Good Day… And a Marvelous Monday to you! One week down, 3 more until Christmas, and then a few days after that I head south for the winter, to get out of these dreary, cold days! Friday was December 7th, Pearl Harbor Day… I few years ago, Kathy and I traveled to Hawaii, and visited the Pearl Harbor Museum and the things there… I was moved by the whole scenario… I sure hope the younger generations don’t forget… But then it’s probably history that isn’t taught in school any longer, and if it is, they probably tell the kids to feel for the enemy… I’m just saying… And I had better stop there… Johnny Mathis greets me this morning with his version of: Blue Christmas… Nobody sings that song like Elvis… I’m just saying…

Well, the markets are finally figuring out that “no new tariffs”, doesn’t mean “no tariffs” and stocks lost about $1 Trillion of wealth last week… OUCH! That’s going to leave a mark! I’m not being flippant about that, but you can’t say I didn’t tell you to make sure your stop losses are updated and in place! The other thing that weighed heavily on the stocks was a drop in the number of Jobs created in November to 155,000, and the news that should have put shudders down everyone’s collective spines… and that is that Consumer Debt in November exploded by $25.4 Billion! That’s a record folks, and annualized total Consumer Debt has reached $3.963 Trillion, a 7.7% increase from a year earlier… I made a comment about spending for Christmas last week, and it sure holds true, because  credit card debt is rising quickly… Hmmm…

Gold gained more than $10 on the day on Friday, and Bond yields continued to drop, as more and more people jump on my bandwagon… You know the one that I started some time ago that featured highlighting weakening data, and a call for a recession earlier than most people believe it will come. Palladium fought back to gain $16 on the day, after losing a HUGE chunk of its recent gains on Thursday, losing $33 for the day, but was down $55 at one point of the day…

The currencies found some terra firma after the Jobs Jamboree, and the euro headed toward 1.14 once again… that was Friday, and by the time I looked at the currencies screen on Sunday night, the euro had rallied past 1.14! The markets are beginning to believe that the dollar is going to get pummeled.. We’ll have to see about that as there could very well lead to the Plunge Protection Team come in to save the dollar…

Ok, in news from overseas this morning… UK PM May, decided to cancel the vote on her BREXIT proposal. She cancelled it because she didn’t have the votes to pass it, and this news sent shock waves through pound sterling causing it to slide downward on the day, even with the dollar losing ground. 

Further south India saw their Central Bank Gov. Pajit step down unexpectedly… The rupee has been under a lot of pressure after another revalue last week, and speculation is that the Gov. had had enough… I guess he needed a pep talk like the one from Animal House about not giving up… “What? Over? Did you say ‘over’? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no!…
It ain’t over now, ’cause when the goin’ gets tough, the tough get goin’. Who’s with me? Let’s go!” – Blut0, from Animal House… 

So, I think you all know that this kind of news from a Central Bank leaves questions and unknowns, and if I’ve talked about things that move a currency I’ve talked about unknowns more than anything else through the years… And so, with the unknown… the rupee is getting sold like funnel cakes at a State Fair… 

There’s not much in the way of data from the foreign countries this week, but… We will have a European Central Bank (ECB) Policy meeting on Thursday this week…  Ok, let me lay this one out for you…  Previously, the ECB said that they would end their bond buying on 12/31 this year. So, with that in mind, I’m a little leery of the meeting this week, as it will be the last one before 12/31, and this is the meeting where the ECB could announce a delay to the end of bond buying…  So, there’s risk at this meeting, let’s hope it doesn’t come to that! 

As I said above, Gold had a good day on Friday, and a good week, after an awful performance the previous week. The storm clouds are gathering for economies around the world, and that could end up being a real bugaboo for the dollar, and the main beneficiary will be Gold…  At least that’s how I view it… 

Another thing that seems to be heading toward a good thing for Gold is interest rates here in the U.S.  I’ve done this math for you for before folks, but let me go through it again…  The average Fed Funds Rate (FFR) that was in place before recessions, on average, was 6.5%…   We are currently at 2.25%, and will end the year at 2.50%… that’s nowhere near where the FFR needs to be if we are going to enter into a recession next year…  And here’s the other piece of math for you… The average total of rate cuts that have been made during recession in the past, on average, was 4%…  Again, we don’t have 4% of interest rates to cut, now do we?   

And the in demand economist, Danielle Di Martino Booth, had this to say about the interest rate math we just went through on her Twitter feed, “My concern is that we don’t have enough dry powder to combat what is to come.” 

This is why I keep talking about a return to Quantitative Easing, thus ending the Fed’s Great Unwind of their balance sheet. And if the recession is as deep as I believe it will be, I would be a shiny quarter that we end up seeing negative interest rates…  And any trader worth his salt would be looking ahead at this, and figuring out that Gold would be in great demand during a run like this… I’m just saying… 

The U.S. Data Cupboard is pretty empty for most of this week, until we finally see a real piece of economic data in the form of Retail Sales on Friday this week. Until then, we’ll see PPI (wholesale inflation) and the stupid CPI (consumer inflation)…  So, the dollar will be on its own most of this week, and usually that doesn’t bode well for the green/peachback… 

To recap…  The Jobs Jamboree was disappointing last week, stocks are getting sold by the truck load these days, and Gold made a comeback during the week. More folks are jumping on Chuck’s bandwagon, and there’s still some room! The U.K. cancelled their vote on BREXIT, which is not a good thing for pound sterling, and the RBI Gov. stepped down, and Chuck gives him the Bluto pep talk, but I guess it’s too late… 

For What It’s Worth… Well, I’ve been writing about the liquidity crunch, and the leveraged loans held by Corporations for months now, and whenever I see an article that brings this up to date, it catches my eye… And so here it is here: https://www.zerohedge.com/news/2018-12-07/credit-death-spiral-accelerates-loan-etf-sees-record-outflow-primary-market-freezes

Or, here’s your snippet: “One week after even the IMF joined the chorus of warnings sounding the alarm over the unconstrained, unregulated growth of leveraged loans, and which as of November included the Fed, BIS, JPMorgan, Guggenheim, Jeff Gundlach, Howard Marks and countless others, we reported that investors had finally also joined the bandwagon and are now fleeing an ETF tracking an index of low-grade debt as credit spreads blow out and cracks appeared across virtually all credit products.

Specifically, we noted that not only had the $6.4 billion Invesco BKLN Senior Loan ETF seen seven straight days of outflows to close out November, with investors pulling $129 million in one day alone and reducing the fund’s assets by 2% to the lowest level in more than two years, but over $800 million has been pulled in last current month, the biggest monthly outflow ever as investors are packing it in.

Fast forward to today, when another major loan ETF, the Blackstone $2.9BN leverage-loan ETF, SRLN, just suffered its largest ever one-day outflow since its 2013 inception.

Year-to-date, the shares of this ETF backed by the risky debt have dropped 2.6%, hitting their lowest level since February 2016; the ETF’s underlying benchmark, the S&P/LSTA Leveraged Loan Index, has also been hit recently and is down 2.3% YTD, effectively wiping out all the cash interest carry generated YTD and then some.

With the leveraged loan market freezing up – and potentially entering a death spiral – the recent weakness has raised concerns that other debt sales currently in the works may be sold at discounts that are so deep underwriters may have to book a loss, if they can be sold at all. This is precisely what happened in late 2007 and early 2008 when underwriters found themselves with pipelines of debt sales that sudden got blocked, and were forced to take massive haircuts to keep the credit flowing.”

Chuck Again…  With an article title like: Credit “Death Spiral” Accelerates as Loan ETF Sees Record Outflow, Primary Market Freezes…  You can see why it caught my eye!

Currencies today 12/10/18: American Style: $.7220, kiwi .6896, C$ .7512, euro 1.1425, sterling 1.2663, Swiss $1.0117, European Style: rand 14.2745, krone 8.4788, SEK 9.0427, forint 282.27, zloty 3.7568, koruna 22.6530, RUB 66.39, yen 112.70, sing 1.3709, HKD 7.8145, INR 72.40, China 6.8731, peso 20.23, BRL 3.9014, Dollar Index 96.62, Oil $51.94, 10-year 2.85%, Silver $14.55, Platinum $790.52, Palladium $1,230.75, and Gold… $1,246.90

That’s it for today… A little later than usual this morning, sorry…  Had a great day yesterday, attending the Billikens basketball game VS Oregon St. And the Billikens won which made it even better! Well, it was Allison Road’s birthday on Saturday, I hope her day was grand!  Well, I’m a week away from my annual Christmas vacation!  Of course I always have something up my sleeve for Christmas for you dear Pfennig Readers, and this year will be no different!  I always start my vacation on Jen Mclean’s birthday, and end it the day after Kathy’s birthday… So, there you go! Oh, I guess you need to know those dates! HAHAHAHAHA!  You’ll figure it out! HA! OK…  The Allman Brothers take us to the finish line today with my fave Allman Brothers song: Melissa…  I hope you have a Marvelous Monday, and Be Good To Yourself!

Chuck Butler

December 6, 2018  

* Hopes for Global Growth have been smashed! 

* Palladium sees profit taking… 

Good Day… And a Tub Thumpin’ Thursday to you! Well, my beloved Cardinals traded for a much needed middle of the order bat yesterday… So, we got a model citizen, gold glove 1st baseman, Paul Goldschmidt, and solidified our infield defense at 1st Base… But in doing this trade, we basically told our current 1st Baseman that he’s going to have to move to 3rd base, and in doing that, we’ve weakened our infield defense at 3rd base… I’m just asking… Did the Cardinals really think this one out? Welcome to St. Louis Mr. Goldschmidt… I so hope you enjoy being a Cardinal! I sure hope the Cardinals don’t ask him to come here for a press conference… It’s 20 degrees and snowing here, and the sun is probably shining and much warmer in Houston, Texas where he lives… Well, enough of that, eh? Jimmy Dean greets me this morning with his version of the song: Have Yourself A Merry Little Christmas…

Well… The stock market didn’t fall yesterday… Oh, that’s right, the stock market was closed for the funeral of our former President. So, that was a good thing for the stock jockeys, who got a day to catch their collective breaths… But today’s open should be interesting as stock futures are down big at the moment…  The currencies and metals traded though… And the dollar fought back a little bit on the day. I can tell you that with the markets finally figuring out what I had told you was the case with the Trump / Xi agreement at the G-20 meeting, that has put the kyboshes on the Global Growth trade, and negatively affects the Aussie dollar (A$) and its kissin cousin across the Tasman, kiwi…

You see, I’ve told you all this before but for new readers or those of you who missed class those days that I talked about it… The A$ and kiwi are proxies for Global Growth… And that leads me to a question that a dear reader posed to me yesterday, Asking me to reconcile how I could say one day that a deep recession is coming and the next day say that commodities will rally in 2019? Well, it’s a two staged process… first we’re going to have Stagflation, with high inflation and little growth, and that will be the ladder rungs the commodities step on to climb higher in 2019… And then the Deep Recession begins to build… And well, I’ve told you my feelings on how that all ends up before so I won’t go into it again… I’m trying to be optimistic but… You can only be successful with the tools you are given to succeed with… I’m just saying…

There’s some news from last night that are spooking the markets this morning… Meng Wanzhou, a top executive at China’s Huawei Technologies Co Ltd and daughter of the founder and CEO, was arrested, in Canada, and is going to be sent to the U.S. And this news jolted the global business community on Thursday and raised fears that a truce in the U.S.-China trade war could come to a swift end. 

Huawei is the world’s largest supplier of telecommunications network equipment and second-biggest maker of smartphones, with revenue of about $92 billion last year.  And quite frankly the stealing of intellectual property has been the real reason for these tariffs, so this all plays into this story… It will be interesting to see how this shakes out… 

There were some data prints in Australia last night… First their Trade Balance showed a narrowing Trade Surplus… from A$2.940 Million in Sept. to $2.316 Million in Rocktober, and that overshadowed the rise in Aussie Retail Sales in Rocktober by .3% VS .1% in September… So, the narrowing surplus weighed on the A$ as we moved through the overnight markets.

The euro slipped further on Wednesday… The ECB’s Financial Stability Report late last week, has done no favors for the euro since printing… But, the euro’s moves this week have been muted, and I put down to as drifting, as if traders are waiting for something to get them off their duffs… We’ll see…

So, all the euphoria that was in the currencies late last week, has taken a step back, and we’re back to watching the dollar pound its chest… But for how long will that continue? These currency moves in 2018 have been so sketchy, and full of bumps and bruises, and then days of seashells and balloons…  And the latest series of bumps and bruises gives an investor an opportunity to buy at cheaper prices… I’m just saying… 

The Yield on the 10-year Treasury continues to ratchet downward, and this morning is trading with a 2.89% rate… WOW! It wasn’t that long ago that the 10-year’s yield was as high as 4.25%…  And the Fed, supposedly, isn’t buying Treasuries any longer, so the stock market selling, is going straight to Treasuries, is how this looks to me…  A classic, “Flight to Safety”… 

I do believe that today will be quite choppy, what with all the economic data that will print, so let’s go head to the Big Finish and find out what’s on the docket today… 

Well, Palladium traders/ investors, etc. saw an opportunity to take profits what with all the huge gains the metal has booked recently, and they did just that… Palladium lost $17 of its recent gains and back to being 2nd dog to Gold’s price… 

Speaking of Gold… It lost a whopping $1 and change yesterday, and is flat in the early morning trading today… It’s waiting for you to back up your truck… I’m just saying… 

And finally, the goosing of the price of Oil recently, as I told you, was all about the proposed production cuts between OPEC and Russia, but as things turn out, Russia hasn’t necessarily put down that they agree to production cuts in writing yet… And that has the Oil traders spooked, and when that happens the asset gets sold…  I do think that Russia will eventually go along with our friends at OPEC (NOT!)…  

The U.S. Data Cupboard gets a workout today, with yesterday and today’s data lumped together… But with all the reports that will print the only one that really makes a difference to me is a piece of real economic data, and that’s Factory Orders for Rocktober, and a report that I said on Monday this week would probably print negative, and if it does, it will be added to the roster of data reports that are on the “weak” side of the ledger…

The ADP Employment Report for November will print today, not that it has anything to do with the hedonically adjusted BLS report that will print tomorrow, but it’s always good to look at, in my mind anyway, because if anyone should know about who’s employed in this country its ADP. And so just to check on the so-called experts, the forecast is for 195,000 jobs created in November…

One of my economics mentors through the years, was the great Hyman Minsky… And he once told me that the phenomenon called “full employment” was something that should be feared, because, once you’ve reached “full employment” it can’t get any better from there, it can only get worse… And last month I’m positive I heard a Fed Head talk about full employment being reached here in the U.S. Hmmm…

To Recap… The funeral of former President George H.W. Bush, closed the government offices yesterday, and that meant the stock market was closed, so at least it didn’t get beaten down again yesterday! The stock futures this morning are down big, so that doesn’t look good for that asset class today…  The dollar is back on top this morning after looking like it was ready to circle the bowl late last week, this week it’s back on top… Hmmm… And the 10-year’s yield has dropped to 2.89% this morning, looks like a classic case of a “flight to safety” to Chuck… 

For What It’s Worth… I came across this article by chance last night, and thought it was interesting to say the least… It’s about which country is now the country with the highest taxes… Denmark held that title for 15 years, but there’s a new sheriff in town… Before you go on, can you guess who it is? Well, you can find out here: https://www.marketwatch.com/story/after-15-years-denmark-isnt-the-most-taxed-country-heres-the-one-that-is-2018-12-05

Or, here’s your snippet: “ France, which has faced countrywide protests in recent days sparked by a tax-hike proposal, emerged as the most heavily taxed of the 36 countries in the Organization for Economic Cooperation and Development, according to the group’s annual review published on Wed.

The “yellow jacket” riots, which have quieted since three people reportedly died and more than 100 were injured over the weekend, initially erupted in response to a fuel-tax increase that President Emmanuel Macron has decided to scrap. Critics say such a tax would disproportionately hurt the lower rungs on the economic scale.

Clearly, the report will do little to ease tensions.
France’s tax revenues equaled 46.2% of economic output, up from 45.5% in 2016 and 43.4% in 2000. Denmark, which had held the top spot since 2002, slipped to 46% of GDP from 46.2% in the previous year and 46.9% in 2000.”

Chuck Again… Well, I held my breath when I read the title of the article, thinking that given my tax status, that it might be the U.S…. But not so! Whew! But given the right mix we could be looking at higher taxes to help offset the deficit spending… Think about that one…

Currencies today 12/6/18: American Style: A$.7207, kiwi .6870, C$ .7450, euro 1.1345, sterling 1.2753, Swiss $1.0034, European Style: rand 14.0625, krone 8.5425, SEK 9.0185, forint 285.46, zloty 3.7755,  koruna 22.8311, RUB 66.71, yen 112.80, sing 1.3713, HKD 7.8117, INR 70.81, China 6.8554, peso 20.59, BRL 3.8570, Dollar Index 97.06, Oil $51.63, 10-year 2.89%, Silver $14.38, Platinum $791.90, Palladium $1,232.22, and Gold … $1,236.58

That’s it for today… Man I was busy yesterday, and I have no recollection of what kept me so busy yesterday! But not today… It’s a Tub Thumpin’ Thursday! Our Blues lost another game last night, but at least this time they lost in Over Time. This is one of the worst years I can recall for our Blues who were supposed to be much better than this… UGH!  Alex is taking me to the Billikens Basketball game this Sunday afternoon. When, oldest son, Andrew was a young man, I used to take him to Billiken basketball afternoon games… Now my youngest son is taking me! Where’d all those years go in between? UGH!  I switched iPods while writing today, and Head East takes us to the finish line today with their song: Never Been Any Reason…  And with that, I hope you have a Tub Thumpin’ Thursday, and remember to Be Good To Yourself!

Chuck Butler

 

December 5, 2018 

* The Markets finally get the memo on the Trade War!

* RBA keeps rates unchanged… 

Good Day… And a Wonderful Wednesday to you! I know, I know, I said that with today being a Government holiday, that I too would take it as a holiday… But upon further review, there was just too much going on to not write today, so, in the words of Scorpion… here I am… rock you like a hurricane! I doubt I’ll rock anyone, but… I could very well wake up a reader with something so I have to work toward that! Rosemary Clooney greets me this morning with her version of Winter Wonderland…

OK… Yesterday, I ranted about how the stock jockeys and economists had gotten the message from the G-20 meeting all wrong… This is what I said yesterday: I don’t know if I’ve even seen more misinformed writers and markets than now. The agreement between Trump and Xi was to not “add additional tariffs for 90 days”, not what everyone else seems to think, that Trump and Xi agreed to end tariffs and thus the Trade War! That’s simply not the case, but yet the stock jockeys rallied stocks… The Trade War still exists, and if anything the Trump / Xi agreement simply prolonged the Trade War…

Well, I guess they finally got the memo for stocks lost about 800 points yesterday, and the dollar got sold… The Trade War is still on the table folks… It’s almost as if the past couple of days of trading stocks were a trap… Traps can be ugly, painful and make you wish you hadn’t been tricked, or goaded into buying.. Of course stocks could rally today and the stock jockeys will be back waving the flag to buy… That there’s nothing wrong, etc. I’ve told you all before that stocks, historically, do not perform well in a recession… So, are we already in a recession?

Longtime readers know that I’ve contended that we had remained in a depression all these years, due to the 90 + Million Americans still looking for a job, and those long soup kitchen lines were no longer needed because now the money was mailed to the recipients… So, if everyone can’t see the effects of all these people out of a job, then problems can’t exist, right?

OK… enough of that… I can feel my blood pressure climbing! The Reserve Bank of Australia (RBA) met yesterday, and did indeed leave their key interest rate unchanged, as I told you it would… RBA Gov. Phillip Lowe had this to say about the prospects of a rate hike any time soon… “With the economy expected to continue to grow above trend, a further reduction in the unemployment rate is likely,” governor Philip Lowe said in his statement. “The stronger labor market has led to some pick-up in wages growth, which is a welcome development.”

Well, the RBA takes the rest of the year off, and won’t meet again until Feb 2019, so by the time they meet again, the RBA will have a complete picture of what’s going on… Basically, I believe they missed their opportunity to hike rates earlier this year, and that by the time February comes around, it could be pretty sketchy for a rate hike…

The euro drifted even though the dollar was getting sold yesterday, which is pretty rare, given the euro is the offset currency to the dollar. I realized yesterday that I had made a big deal last week about the European Central Bank’s (ECB) Financial Stability Report that printed on Friday, and then forgot to even mention what happened! UGH! So, here we go… Recall, I had said that this report could be the green light to the ECB to completely remove stimulus… Well, from what they said, you’d be scratching your head and trying to figure out where they learned Greenspeak… (former Fed Chairman Al Greesnspan’s ability to say stuff that nobody understood) here’s what I pulled from the ECB’s website:

A growing economy and a more resilient banking sector continue to support financial stability in the euro area. However, vulnerabilities in global financial markets continue to build, with political and policy uncertainties on the rise. – ECB Financial Stability Report 11/30/18

So, there are still questions about when the ECB will completely remove their stimulus… they are still on the docket to stop bond buying on 12/31/18… And next will be their negative deposit rates… And then and only then, will the euro be free to appreciate VS the dollar!

With the markets finally understanding that the Trade War is still on the table, the Global Growth flag wavers went home to lick their wounds, and with Global Growth back on the questionable list, the Aussie dollar and kiwi both saw some profit taking, I still believe that commodities will be the cat’s meow next year, so don’t panic with your A$’s and kiwi. At least that’s my opinion and I could end up being wrong… 

Longtime readers know that I’ve been on top of this deficit spending glut in the U.S. for years, shoot even a decade and more! And I was asked why I thought it was bad for the dollar, when Japan is the king of deficit spending and the yen hasn’t collapsed yet?  Ok… good point… And one that I’ll attempt to differentiate between the two… You see, as I’ve explained through the years, the Japanese debt is, for the most part, held “in-house”…  In other words, Japan’s debt is contained within Japan, for the most part…  In the U.S., that isn’t the case… We depend on the kindness of strangers, as they imitate Blanche… And therein lies the problem for the dollar… You see, the U.S. needs foreigners to buy our Treasuries so that we can finance out deficit spending… And Japan doesn’t depend on the kindness of strangers…  Not that what they’ve done with deficit spending is anything to put on a pedestal and honor!  But that’s the difference… OK?

A couple of years ago, when I was still on the trading desk I spoke to a trader at I believe, Morgan Stanley, and told her that the next crisis in the U.S. was going to be pushed by a  Liquidity Crunch…  And I was so happy when longtime reader and good friend, Sharon, sent me this link to an article that features an interview with David Rosenberg, who is thinking along the same lines as me with the liquidity crunch… So, here’s the link if you would like to see or hear what Rosenberg had to say… https://www.cnbc.com/2018/11/29/liquidity-squeeze-could-hit-stocks-hard-david-rosenberg-warns.html?recirc=taboolainternal 

OK… My mother taught me that you can make some of the people happy some of the time, and I needed to ignore those who aren’t happy with what I said…  BTW… my mom always thought that I would end up being a sportscaster… Close, mom… but no cigar!    OK, anyway, yesterday, when I had kind words to say about former President George H.W. Bush, a reader took exception to my thoughts…  See? what I’m talking about when you can’t have an opinion these days without someone taking an axe to it? Oh well, I learned well Mom… thank you for all you taught me… 

So, the funeral for former President Bush, will be today, and that’s why all the government offices are closed for the day, which means no data will be printed, moving it to tomorrow.  The ADP Employment Report for November was going to print today, and prelude to the Jobs Jamboree that will happen on Friday.  

Well, it happened! Palladium’s price bypassed that of Gold… Palladium was up $24 yesterday, and is up another $17 in this morning’s early trading… This Palladium price surge is amazing, given that its kissin cousin, Platinum is getting sold…  Gold has been unable to keep up with the surge in Palladium’s price, and Gold is down a buck or two in the early trading today, after posting a $7 gain yesterday…  

I’m told that Palladium’s strong run is linked to surging sales of petrol cars globally, in part because consumers are turning their backs on diesel vehicles. Hmm… But I thought that car sales here in the U.S. were slowing down? I guess the key word used here is “globally”…  And with that I have to say that I’m a little iffy on this surge in Palladium’s price, given that Global Growth is on tenterhooks… I’m just saying… 

To recap… They will bury former President George H.W. Bush today, so the Government is shut down, which means no data prints. The markets finally realized that they were walking down the wrong path on the Trade War, and finally listened to Chuck!  The currencies drifted on the day, and in the overnight markets, as there are just too many questions in the markets these days for anything other than Treasury Bonds to be bought… 

 

For What It’s Worth… Well, this is an update on the information I’ve been telling you about regarding Russia and their dedollarization plan, and it can be found here: https://sputniknews.com/business/201811291070246094-dollar-russia-euro/

Or, here’s your snippet: “Russia has found yet another potential substitute for the dollar in international trade. While Washington is threatening to step up sanctions, freeze Russia’s dollar-denominated assets, and even target the country’s sovereign debt, Moscow is confidently moving away from the greenback.

The US is ‘shooting itself not in the foot, but a bit higher’, said Russian President Vladimir Putin commenting on Washington’s sanctions and attempts to use the dollar as nothing short of a weapon.

‘We do not have the goal to move away from the dollar, we are forced to do this. Let me assure you, we will do this… We just do not want to do anything sudden that would hurt us… We are not leaving the dollar, the dollar is leaving us’, the Russian president said, while speaking at the annual ‘Russia Calling!’ Investment Forum on 28 November.”

Chuck Again… Don’t look now but the Europeans are looking to get out from the dollar’s thumb… So, all these things I’ve been telling you that were coming, are getting nearer and nearer… Closer he gets, step, by step… BOO! Yeah, it’s going to be scarier than that for dollar holders… You see… as I’ve explained before many times… When the dollar loses value, it’s like a tax on U.S. consumers, because we import so much stuff, and consumer buy so much foreign stuff, and they’ll be paying more and more for those foreign goods, just like a tax being added…

Currencies today 12/5/18: American Style: A$.7293, kiwi .6917, C$ .7527, euro 1.1355, sterling 1.2788, Swiss $1.0025, European Style: rand 13.7555, krone 8.4963, SEK 8.9748, forint 284.97, zloty 3.7666, koruna 22.8110, RUB 66.56, yen 112.95, sing 1.3669, HKD 7.8114, INR 70.44, China 6.8407, peso 20.43, BRL 3.8410, Dollar Index 96.84, Oil $53.16, 10-year 2.91%, Silver $14.55, Platinum $799.60, Palladium $1,249.29, and Gold… $1,237.25

That’s it for today… A bonus Pfennig, eh? HA! Well, it snowed all day here yesterday, but never accumulated on the pavements, so in the whole scheme of things, if it has to snow, that’s the best kind! But then I don’t have to get up and on the road in the morning any longer, so I don’t care! The STLTODAY.com site had pictures of the event I attended on Monday night, and checking it out, there I was, along with friends, Rick and Kevin, and old friend, Jim Thomas! The great voice of Johnny Mathis takes us to the finish line today with his version of the song: Caroling Caroling… That should get you started with some Christmas spirit! I hope you have a Wonderful Wednesday, and Be Good To Yourself!

Chuck Butler

December 4, 2018

* Currencies & Metals Continue to ratchet higher… 

* RBA meets today… 

Good Day… And a Tom Terrific Tuesday to you! What a great evening last night, listening to the St. louis Sportswriters tell stories. I even met up with a childhood buddy! One of the sportswriters, Jim Thomas, and I grew up in S. St. Louis on the same street. Wyoming St. We went to elementary school together, played ball together and so on. He was “gifted” and went to the arch enemy of the high school I went to, and we ended up playing football against each other.  I hadn’t seen him since those days, so that was quite the treat for me meeting up with him again last night. Our friend, Billy Squier greets me this morning with his song: My Kinda Lover… 

I don’t know if I’ve even seen more misinformed writers and markets than now. The agreement between Trump and Xi was to not “add additional tariffs for 90 days”, not what everyone else seems to think, that Trump and Xi agreed to end tariffs and thus the Trade War! That’s simply not the case, but yet the stock jockeys rallied stocks…  The Trade War still exists, and if anything the Trump / Xi agreement simply prolonged the Trade War…  

But the currencies continued to rally in small chunks VS the dollar yesterday and overnight. Like I told you yesterday, the Aussie dollar (A$) and kiwi are the best performers, as they continue to ratchet higher every day…  In the Eurozone yesterday, it was announced that Italy had finally decided not to “fight city hall”, and went back to the drawing board to find ways to cut their deficit spending budget… That news helped the euro to climb on the day. That, and the news that PPI (wholesale inflation) increased for the month of Rocktober and on a year to year basis, it rose from 4.6% to 4.9%…  Just a quick econ 101 lesson here… PPI is where you first see inflation, and once Producers begin to hike prices, that bleeds to CPI (consumer inflation)… 

The Reserve Bank of Australia (RBA) meets today to discuss interest rates, but I don’t expect them to have much of a discussion, and their key rate will remain at 1.5%… I find the fact that Australia’s key rate is lower than the key Fed Funds rate in the U.S. very interesting… I doubt that hasn’t happened in a month of Sundays… 

OK… Well, I didn’t tick many people off yesterday with my diatribe on the Fed… So, with that in mind, I’ve got more up my sleeve for today…  So, yesterday, James Rickards wrote the following: “the impact of QT is roughly equivalent to another 1% per year of rate hikes. This means that the combination of nominal rate hikes and QT is equal to 2% of rate hikes per year off an extremely low base. The Fed is tightening more than it realizes and will probably cause a recession or worse by the time it realizes its mistake. If this happens, the Fed will cut rates back to zero. But it won’t be enough. Then they’ll have to abandon QT and go back to QE4. The more things change, the more they stay the same.”

Now, where have I heard that before? Could it be… No… not there… but where? Oh, that’s right, I heard it right here in the Pfennig! Because… I wrote that same thing several times in the past about what the Fed was doing!  I found Rickards to be bang on with what I’ve been saying, but also I would add that QE4 won’t be enough, and in the next recession, because of its depth, the Fed will resort to negative interest rates… I’m just saying… 

OK… yesterday, I talked about how the Palladium price could very well bypass the Gold price next year… But when Palladium streaks higher by $23 in one day, it doesn’t look like Palladium will wait until next year to bypass Gold! The price of Palladium this morning is $1,229., and if it weren’t for the $8.20 price increase in Gold yesterday, the $8.45 in the early trading today, the deed would have been done already! 

Did you hear the latest stupid idea that folks in Sweden are falling for? OK, first, let’s revisit the fact that Sweden is the poster child for the cashless society. They’ve pushed the envelope much further with a cashless society than everyone else.. And their latest thing is to implant a micro-chip in a person, so that when they buy something, all they have to do is wave their hand at the counter, and it automatically charges their banking account…  Sure that sounds convenient, right? Well, if they can connect that to your bank account, the Gov’t could track your every move and every purchase… Now there’s always someone in the crowd that says. “I haven’t done anything wrong, or don’t expect to, so why would I care if the Gov’t is tracking me?”  Civil liberties…  You’ve lost freedom…  I shake my head at people that don’t “get it” that you’re giving away your freedom… 

Well, it looks like a judge in the U.K. has ruled that the U.K. could still walk away from BREXIT…  And just having that hope, helped pound sterling to recover some recent losses. This BREXIT thing has really had a life of its own, and has shake rattled and rolled, with lots of twists and turns along the way since the people of the U.K. voted for the BREXIT amendment… I think that by just saying, “well the judge says we can nix it now” would be the easy way out this mess… And besides the people of the country voted for it to happen! 

The U.S. Data Cupboard is basically empty today, and tomorrow’s data releases have been postponed until Thursday, due to the Government offices being closed down for the funeral of former President, George H.W. Bush, who died last week.  I find it to be a real shame that the thing most people think of when they think of the former president, is that he made a promise he couldn’t keep… “Read my lips, no new taxes”…  He was a far better man and president than that slip up… I’m just saying… 

Hey! It just occurred to me, that if the Governmental Offices are closed tomorrow, that the markets will also be… So that means I get to sleep in tomorrow! HA!   But seriously, it’s going to be a mid-week holiday, and therefore, I will close too! 

To recap… Chuck thinks the markets and writers of the world have it incorrect regarding the Trump / Xi agreement. The currencies and metals continued to rally yesterday and overnight, with Gold adding more than $16 in the last 24 hours, but Palladium has gained $23 in the same period, and is within $10 of matching the Gold price! The RBA meets today, but Chuck doesn’t believe they will move rates, and wonders when the last time it was that the Aussie key rate was below the U.S. key rate? 

For What It’s Worth… Well, I’ve been telling you over and over again about how foreigners are shying away from the Treasury Auction window, and this article on Reuters really gets into that idea. I do want to say though, that his is a really scary thing, considering the increase in Treaury issuance due to our debt increases. So, you can find the article here: https://www.reuters.com/article/us-usa-bonds-foreign-graphic/foreign-buyers-find-u-s-treasuries-less-appealing-idUSKCN1NV27V

Or, here’s your snippet: “ foreign holders of Treasuries like China and Japan have shrunk their portfolios of U.S. government bonds this year, and a recent barometer of participation in Treasury auctions suggests overseas buyers have not been showing up in force, according to Treasury Department data.

Some auctions since late October had the weakest foreign participation rates in nearly a decade, a Reuters analysis of U.S. Treasury sales shows. At the same time, auction sizes are rising fast, with bond issuance this quarter projected to set a record of $83 billion after deducting maturing debt.

“We do worry about where demand for Treasuries is going to come from, given the ongoing significant increase in supply,” said Torsten Slok, chief international economist at Deutsche Bank.

That concern will be on sovereign debt investors’ minds this week with the Treasury scheduled to auction $129 billion in notes with maturities ranging from two to seven years beginning on Monday.’

Chuck Again… Well, I wondered when everyone else on earth was going to see this as a potential problem, and now, well, I guess they have begun to see it…  Of and one more thing this morning regarding Treasuries… The 2 and 5 year Treasures yields inverted yesterday…  

Currencies today 12/4/18: American Style: A$.7380, kiwi .6968, C$ .7588, euro 1.1397, sterling 1.2808, Swiss $1.0051, European Style: rand 13.5895, krone 8.4644, SEK 8.9693, forint 281.65, zloty 3.7580, koruna 22.7260, RUB 66.52, yen 112.82, sing 1.3635, HKD 7.8057, INR 70.42, China 6.8994, peso 20.27, BRL 3.8477, Dollar Index 96.51, Oil $54.06, 10-year 2.96%, Silver $14.56, Platinum $805.01, Palladium $1,229.42, and Gold… $1,239.12

That’s it for today… And tomorrow, but I’ll be back on Thursday loaded for bear… None of the sportswriters last night, thought that the Cardinals had a chance to sign Bryce Harper… I hope they are proven wrong! Well, it looks like we received a sprinkling of snow last night, probably not even sticking to the pavements. Which is timely, because Roger Williams is playing Let It Snow! on my iPhone this morning… I’m not a fan of snow, although I do like to see it when it first falls, before the white snow turns to black slush! But then I want it to melt in hours! I’m not a fan of cold weather, so that pretty much tells you where I am with snow… I hope you have a Tom Terrific Tuesday, and you remember to Be Good To Yourself!

Chuck Butler