Author: admin

November 8, 2018 

* Currencies see profit taking on the day… 

* RBNZ leaves their OCR unchanged, and Chuck is disappointed… 

Good day… And a Tub Thumpin’ Thursday to you! My stomach took a turn for the worse yesterday, so I doubt I’ll be doing any Tub Thumpin’ today, but please don’t let my problems keep you from Tub Thumpin’! The dust is still settling on the elections here in the U.S., I really went a bit too far with my statement yesterday, as I have made it a tradition in the Pfennig to not discuss politics at all… And while I just made a statement about the outcome, I probably shouldn’t have gone there… It doesn’t look like my beloved Cardinals are going to attempt to sign Bryce Harper, as his price tag is going to be north of $325 Million… And that’s going to keep the smaller market teams like my Cardinals from participating in the Bryce Harper sweepstakes… The late great Joe Cocker greets me this morning with his song from the movie soundtrack of 9 ½ Weeks… You Can Leave Your Hat On…

Well, there was some profit taking yesterday in the currencies, at least that’s what it looked like to me, as there were no stories on the wires about the king dollar, yadda, yadda, yadda… Instead, I keep finding stuff that the Fed Heads are saying that just leaves me baffled! They are wearing the rose colored glasses, for sure, as they keep giving us rosy forecasts about the economy and inflation… I think they’re full of baloney, but don’t just take my word on that… Here’s economist Danielle Di Martino Booth on her twitter page yesterday, “Goldilocks herself would blush at the near perfect jobs and inflation scenario forecasted by the central bank”

I wrote about their track record yesterday, and that will play nicely in the sandbox with their rosy outlook…

Speaking of the Fed… Their FOMC will meet this afternoon, and discuss rates… If the economy is so strong and robust and will continue that way for as long as the Fed thinks it will, why wouldn’t they hike rates today? Come on, Jerome, back up your words with a rate hike, I dare you… No, wait! I double dog dare you!  While, there’s a slim chance that the Fed could hike rates today, most observers believe they will wait until December… But, as I said, if the economy is as the Fed say it is, then it certainly warrants a rate hike this monrht, and then in December! 

But by doing that, the Fed would be sending out smoke signals that the markets would be taking as the Fed is panicking, and inflation is spiraling upward…  Oklahoma and Oklahoma State football teams play a game each year that’s called “Chaos”…  Well, that’s exactly what we would have if the Fed stepped up their rate hike game… 

In China yesterday, they reported their Tade Balance for Rocktober… And guess what happened to their blance with the U.S. given the Trade War going on? China’s Trade Surplus with the U.S. grew in Rocktober to $34.01 Billion from $31.70 Billion in September… How is that happening? I can hear the leaders in Washington D.C. asking… Well, for one… China has chopped a good chunk of fat from the renminbi’s value, so that the exports to the U.S. won’t be more expensive… The U.S. has put 20% tariffs on Chinese exports to the U.S. and the Chinese have depreciated the renminbi about 16%… So, basically, the exports to the U.S. are a wash… to the U.S. consumer that as… And that brings me to the other thing in play here… the U.S. Consumer… Their cash may be depleated, but not their credit card availability!

And in other news… The GATA folks sent me a note yesterday telling me that Iran and S. Korea agreed to a currency swap agreement, to exchange each other’s currencies in the terms of trade, and leave out dollars… This may be a baby step in regards to the size of dollars not being used going forward between these countries, but… We all know tha baby steps turn to big steps… And that would be the end of the dollar as the reserve currency… So, we’re here… and we’re going there… The difference between humor and trajedy is time… That’s also what’s in play here… Time… how much? I don’t know, but I don’t want to be the last one to turn out the lights on the dollar!

The price of Oil continues to slide downward and this morning its trading with a $61 handle… Our friends at OPEC (NOT!) have decided enough is enough, and the have called for a meeting this coming weekend to discuss production cutbacks… You may recall that last year, the OPEC countries cut production and the price of Oil rallied nicely, and eventually got to the $70 price the OPECKERS were looking for… So, they’ll go for round 2, most likely, this weekend… 

The Reserve Bank of New Zealand (RBNZ) left their OCR (official Cash Rate) unchanged at their meeting yesterday…  And left no indication, in their statement, that rates will be hiked any time soon…  I’m so disappointed in the RBNZ, they gave all kinds of indications last year about this time that they were ready to begin a new rate hike cycle, and then crickets…  

Well, it was good while it lasted…  I’m talking about the rally in the Brazilian real… But from the looks of the trading the last 3 days, I would have to think that the rally is over…  It was a nice rally, as the real rallied from a low of 4.17 on 9/15, to the 3.69 level last week… And if my new math works that’s about an 11% move…  But you will be able to see in the currency roundup that 3.69 is no longer…   Oh, and the real is a European Priced Currency, which means as the price goes down, it takes less of the currency to make a dollar, and therefore represents a rally… 

The Aussie and New Zealand dollars respectively, are back on the rally tracks… A couple of weeks ago, I told you to keep that news quiet, but someone cracked and the two had their rallies stopped at the border. But they’re back at it, and I find no reason to keep quiet about it, for there are just too many voices in the field of currencies these days… 

In 2004, Craig Karmin, of the Wall Street Journal came to St. Louis to interview me for an article in the WSJ. He called me a pioneer, for at that time I was the lone voice shouting about how the dollar was losing value and investors should be diversifying into currencies and metals. I was among the few, that talked about currencies… And today? Well, there’s more currency analysts out there than you can shake a stick at! 

Gold lost a whopping 40-cents yesterday, and the volume picked back up with 242,000 contracts traded. I’m waiting… and I’ll keep waiting… and waiting… for U.S. investors to realize that buying commodities will help to offset the damage that the rising inflation that the Fed is talking about  will do to their investment portfolios… 

The U.S. Data Cupboard is all about the FOMC meeting this afternoon…  Yesterday, the Cupboard has Consumer Credit (read debt) for September, and it was far less than expected, which was $20 Billion, and it only amounted to $11 Billion… That’s so strange, in my book, folks… And now I’m going to be fixated on how that data is comprised to see if “adjustments” are made… Because $11 Billion just doesn’t seem to be right in my estimation… 

For What It’s Worth… I told you last week that I truly enjoy reading anything I can get my hands on from James Grant. So, with that in mind, this is an article with James Grant talking about U.S. Debt that was on a free site! And it can be found here: https://www.weeklystandard.com/james-grant/congress-is-plenty-bipartisan-when-it-comes-to-ignoring-the-national-debt

Or, here’s your snippet: “America’s deteriorating public credit is the cold-button issue of the 2018 midterms. With rare bipartisanship, Democrats and Republicans compete to pretend that the country isn’t going broke. In 1992, the third-party presidential candidate Ross Perot likened the widening gap between federal receipts and federal spending to “the crazy aunt tucked away in the room upstairs nobody talks about.” The old gal’s dottier than ever.

It took the United States 193 years to accumulate its first trillion dollars of federal debt—the gross debt, as it’s called. We will add that much in the current fiscal year alone. All told, the government owes $21.5 trillion, give or take a few careless tens of billions—that works out to $65,885 for each American. It’s the ease of borrowing that drives the growth in federal IOUs.

The remote political cause of this predicament is the ideology of statism. In Washington, this takes the form of tax and tax, spend and spend, elect and elect; on Wall Street, it’s found in too-big-to-fail, a virtually socialized mortgage market, and an overreaching,
manipulative central bank.

The remote monetary cause of our troubles is the closing of the gold-standard era in 1971, or what little remained of it by then. It was the breakdown of the fixed monetary order that opened the floodgates. From Alexander Hamilton to Richard Nixon, the dollar was an IOU, a promise to pay gold or silver at a fixed rate. It subsequently became a thing unto itself, an IOU nothing. In consequence, for the past several decades, federal liabilities have grown faster than the national income with which to service them. Ultra-low interest rates have cheapened the cost of this profligacy and hidden the looming dangers.”

Chuck again… Now, James Grant is as concerned about the National Debt, as I am, and that says something, folks… Too bad the media, or the markets, don’t see it that way…

BTW… The U.S. spent $548 Billion in Rocktober to service its debt… (pay interest on bonds outstanding) That number is only going to go up because 1. Interest rates are rising, and 2. Debt issuance is exploding higher and higher… 

Currencies today 11/8/18… American Style: A$.7283, kiwi .6775, C$ .7632, euro 1.1415, sterling 1.3093, Swiss $1.0027, European Style: rand 13.9896, krone 8.3388, SEK 8.9832, forint 281.67, zloty 3.7605, koruna 22.6735, RUB 66.03, yen 113.75, sing 1.3715, HKD 7.8272, INR 72.13, China 6.9197, peso 19.89, BRL 3.7556, Dollar Index 96.26, Oil $61.76, 10-year 3.22%, Silver $14.47, Platinum $870.94, Palladium $1,124.46, and Gold… $1,222.73

That’s it for today… I had a good phone conversation with good friend Dennis Miller yesterday. He told me that he had just read that the U.S. is going to change the way they compute FICO scores… I immediately thought of all the other hedonic changes that the Gov’t has made through the years, when things just wouldn’t work the way the wanted them to… It’s a sad, sad, thing, folks…  Well, our Blues are back to .500, and at home for the next few games, so they need to put the pedal to the metal now! Let’s Go Blues! This makes two days in a row, but the band Yes takes us to the finish line today with their song: Long Distance Runaround…  I hope you can get out and do some Tub Thumpin’ on this Thursday, and remember to Be Good To Yourself!

Chuck Butler

November 7, 2018

* Currencies rebound and climb throughout the night!

* What’s the Fed up to? 

Good Day… And a Wonderful Wednesday to you! Not as early today with the letter, as I allowed discretion be the better part of valor this morning, and turned off the alarm when it went off! Well, the mid-term Elections are in the books. I purposely watched something on TV last night that wouldn’t be interrupted by election returns… I can honestly say that I’m of the opinion these days, that it doesn’t matter what dolt you elect to represent your state, they aren’t going to do that once they get to Washington D.C. Kind of cynical, eh? Well, it’s just how I see it… And we can thank Woodrow Wilson for that! What? you don’t know? I’ll explain this later…  Oh, and Bill Bonner says it best when he wrote: The Bad thing about elections is that somebody wins!  The Allman Brothers greet me this morning with my fave Allman Brothers song: Melissa… 

The turnaround that the dollar was performing yesterday morning, faded as the day went on, and by the end of the day, the currencies were kicking sand in the dollar bugs’ collective faces. The currencies led by the Big Dog Euro, steadily climbed throughout the day, and then continued that climb in the overnight markets, where this morning the euro is firmly in the 1.14 handle, and the Aussie dollar is knocking on the door to 73-cents!  The Asian currencies has joined in, and even the Swedish krona is getting in on the kicking sand in the dollar’s face… 

Gold wasn’t allowed to participate in the kicking of sand yesterday, losing $4.10 on just 173,000 contracts traded, But… the shiny metal has recovered that loss yesterday already in the early morning trading today!  If Gold can at least maintain the early morning gain these two days would be a wash. Hopefully Gold can add to the early morning gains, eh? 

I took this from Ed Steer’s letter this morning which you can find at www.edsteergoldsilver.com and I thought it played well with the Gold move overnight… “European Gold demand was 51.1 tonnes during the third quarter of this year, up 10% year-on-year, according to the World Gold Council.

Germany, which accounts for more than half of the region’s bar and coin investment – was up 10% to 28.4 tonnes. In late September the euro-denominated gold price fell to a two-and-a-half year low of €32,638/kg.

Unlike the European-ETF market, concerns around Italian debt and its potential to spark a broader financial crisis, prompted safe-haven buying among retail investors.”

OK, back to the currencies, which is actually an incorrect statement, as I already was talking about the currencies with my discussion of Gold… I’m just saying…  But for reasons beyond my control, the markets continue to consider Gold a “precious metal”…  

I told you yesterday that the Eurozone would print September Retail Sales this morning, and they did, with Retail Sales climbing 0.8%, which beat the expectations of 0.7% growth. If you can beat expectations, you’re a leg up on the competition!  I also talked briefly yesterday about China’s Treasure Chest of reserves. Well, they printed their total reserves’ value at the end of Rocktober this morning, and it was $3.053 Trillion, which was down from the September print of $3.087 Trillion. The difference appears to me, to be nothing but currency fluctuations.  

It appears to me that the U.S. voters have voted in gridlock… And the advancements that have been made will fade away… I’m not talking politics here, just a general feeling that we’ll experience nothing but gridlock going forward, and that won’t be good for the economy, or the dollar… I’m just saying… 

More rot on housing’s vine got exposed yesterday, when the report on Mortgage applications for last week, printed.  Mortgage Applications fell 2.5% in the week, and reached the lowest level of applications that goes back to December 2014…  The Mortgage industry talking heads are blaming higher mortgage rates… No duh!  That and the fact that houses got too darn expensive once again, and first time buyers have been hit with higher mortgage rates and very expensive homes… That a recipe for disaster if you ask me! 

The U.S. Data Cupboard is still pretty barren, but it will have one print for us today, and that is September Consumer Credit (read debt)…  With other pieces of data that reflect spending, up, one has to believe that credit card use, and home refis, have to be soaring, and if so, it will be reflected in this data…  

A $20 Billion number or anything close to it is going to tell me that debt accumulation is strong among consumers again, and that’s not going to turn out to be seashells and balloons…  

My good friend, and the Retirementor, Dennis Miller, wrote an excellent piece for his readers last week and in it he asks the question. “Is The Fed Engineering A Market Crash?”  Hey lays out the facts and then  says, “Is the Fed trying to engineer a crash before the next election? I hope it is not true. If the deep state is willing to do that to maintain their power, God help us all.” – Dennis Miller

He also quote me in this letter, let’s see what I had to say… So, let’s look at the Fed’s track record, shall we? Did you know that in 105 years, the Fed has never accurately forecast a recession?
…. Or that the current running total is nine straight annual economic forecasts that they’ve had monumentally incorrect! -Chuck Butler in Dennis Miller’s letter: www.Milleronthemoney.com

I know I’ve said this before a couple of times, but I never grow tired of saying it… If you’re retired, or even thinking about retiring, you need to subscribe to Dennis’s letter. I know that a quite a few Pfennig Readers already have signed up, but I would like to see our readers lists mirror each other! Simply go to www.milleronthemoney.com  It’s free, just like the Pfennig! 

To recap… The currencies turned around the dollar’s rally yesterday, and have climbed higher throughout the overnight markets, led by the Big Dog Euro! Shoot Rudy! Even the Asian currencies are joining in on the kicking of sand in the dollar’s face. Gold was allowed to participate yesterday, but is playing catch up in the early morning trading, and Chuck thinks the elections have brought gridlock to the U.S. we shall see if he’s right, eh? 

For What It’s Worth… This is BIG NEWS folks, even if the media doesn’t choose to report on it… The GATA folks sent this to me of course, and it’s about a trader pleading guilty to currency manipulation, and it can be found here: https://www.justice.gov/opa/pr/former-precious-metals-trader-pleads-guilty-commodities-fraud-and-spoofing-conspiracy

Or, here’s your snippet… “An ex-J.P. Morgan Chase trader has admitted to manipulating the U.S. markets of an array of precious metals for about seven years — and he has implicated his supervisors at the bank.
John Edmonds, 36, pleaded guilty to one count of commodities fraud and one count each of conspiracy to commit wire fraud, price manipulation, and spoofing, according to a release today from the U.S. Department of Justice.

Edmonds spent 13 years at New York-based J.P. Morgan until leaving last year, according to his LinkedIn account.

As part of his plea, Edmonds said that from 2009 through 2015 he conspired with other J.P. Morgan traders to manipulate the prices of gold, silver, platinum, and palladium futures contracts on exchanges run by the CME Group. He and others routinely placed orders that were quickly canceled before the trades were executed, a price-distorting practice known as spoofing.

“For years John Edmonds engaged in a sophisticated scheme to manipulate the market for precious metals futures contracts for his own gain by placing orders that were never intended to be executed,” Assistant Attorney General Brian Benczkowski said in the release.”

Chuck again… The question I would have on this is HOW IN THE WORLD DID THE CFTC MISS THIS IN THEIR EXAMINATION ON MANIPULATION WHERE THEY SAID THEY COULDN’T FIND ANYTHING? 

Currencies today 11/7/18… American Style: A$ .7288, kiwi .6777, C$ .7646, euro 1.1478, sterling 1.3155, Swiss $1.0029, European Style: rand 13.9318, krone 8.2995, SEK 8.9892, forint 280.17, zloty 3.7380, koruna 22.6217, RUB 65.97, yen 113.18, sing 1.3693, HKD 7.8293, INR 72.29, China 6.9160, peso 19.67, BRL 3.7353, Dollar Index 95.80, Oil $62.90, 10-year 3.20%, Silver $14.67, Platinum $876.20, Palladium $1,124.51, and Gold… $1,231.89

That’s it for today…  Did you like the use of the term: discretion over the better part of valor? When I was a young man playing football, my teammates used to use that phrase a lot… College basketball is back! They’re getting started too soon in my opinion… College Football has everyone’s attention now, they should wait to start their basketball season until Thanksgiving… But nobody asked me…  Our Blues won last night at home to boot! Go Blues! A slow start by the Blues is getting turned around, slowly but surely… By the way, who’s Shirley? HAHAHA!  The band Yes, takes us to the finish line today with their song: Starship Trooper   I hope you have a Wonderful Wednesday, and keep Being Good To Yourself! 

Chuck Butler

 

 

November 6, 2018

* Currencies battle back and forth with the dollar

* RBA meets tonight, no surprises expected… 

Good Day… And a Tom Terrific Tuesday to you! Another day in the warm sun, I’m a happy camper, trust me on that one! I despise November, St. louis, weather. I’ve said this before but the days are so depressing, so I’m glad I’m not there this year! I went out for dinner last night. I got used to eating out by myself when I was traveling to speak at different places, but now, it’s a little weird, for sure! Today is Day 2 of Rachel Butler’s Birthday month! HA! It’s Election Day… When I was a young man, the Banks and bars were closed on Election Day, so that those wishing to buy a vote or two, couldn’t get money out of the bank or buy a prospective voter a beer… That’s all changed these days, votes can be bought easily and “voters” have been known to vote early and often! HA! We have a hotly contested race for Missouri Senator, it’ll be a close vote I’m sure… America greets me this morning with their song: Sandman… I used to enjoy playing that song on my guitar…

The reversal that the dollar had put in VS the currencies yesterday morning, got lost in the woods, and the dollar got sold the rest of the day, with the Big Dog euro, rising through the 1.14 handle, and the Aussie dollar climbing past 72-cents! Gold didn’t fare so well, on the day losing a few bucks… The price of Oil climbed back to 63-cents, only to lose that figure later in the day. The War of Words, were being spoken again yesterday by the leaders of the U.S. and China, with the U.S. saying they will add more tariffs to Chinese exports to the U.S. and China saying they too will add more tariffs on U.S. exports to China.

In the overnight markets, the dollar saw a turnaround, but mostly against the euro, which left the single unit back below 1.14. The last two trading days saw the euro gain VS the dollar, only to be sold in the overnight markets, which has my spider sense tingling… Quacks like a intervention, waddles like intervention, and smells like intervention, so it must be intervention…  Well, at least that’s what my spider sense is tingling about…  A couple of months ago, we went through this trading pattern for a few weeks, and I said at that time that I thought the European Central Bank (ECB) was selling euros to keep them from getting too strong, and push down their rising inflation they claim they need. I think the same thing is happening now… 

The news from the Eurozone is that there are good negotiations between the Eurozone commissioners and Italian leaders with regards to the Italian budget, that was just going to work for the ECB. In other words, “that dog ain’t gonna hunt”… 

There’s not much in the way of data being printed around the world, we will see September PPI in the Eurozone later this morning, but beyond that there’s little to look at. But that changes tomorrow, with a Eurozone Retail Sales report for September, and boat load of data prints from Japan. 

The Reserve Bank of Australia (RBA) will meet tonight for us, tomorrow morning for them, and I really don’t expect to see the RBA surprise the markets with a rate hike, the RBA has gone silent lately, and that tells me that they battened down the hatches, and are in a wait-n-see period, with China… 

Speaking of China…  The Chinese continue to mark down the renminbi almost nightly…  We did see two days of appreciation Friday and Sunday night, but back to mark downs last night.  Before the two days of appreciation recently, I was beginning to work up my talk about how China was going to allow the renminbi to depreciate to 7.0 to help offset the tariffs.  I still think we’re going there with the renminbi, folks… But the Chinese will do it with brief appreciations, so that it doesn’t look so obvious what they’re doing…  But I’ve got a memo for the Chinese… Everyone knows what you’re doing, so just go ahead and do it! 

And I read a report in the RT last night that Russia’s alternative payments system to SWIFT, has already gained quite a few users… When trading partners of Russia, and eventually China too, as they will use this alternative payments system, will use this system and bypass SWIFT, which means they’ll have no need for dollars to settle the terms of the trade.  These are the baby steps to that outcome folks… It’s happening right before your eyes… Do you see it?  

And now this… The good news for the U.S. just keeps rolling in! I’ve told you all about how Central Banks around the world have been backing away from their usual allotment of Treasuries sold at the Auction… Well, yesterday, we had the 2nd worst bid to cover in 9 years at the Auction of short term Treasuries… Wait! What?  Yes, the Auction didn’t go off so smoothly…

So… we’ve seen yields rise, right? I mean we’re at 11 yr highs in short rates, and the stock market is teetering, and all that isn’t enough to attract more buyers at the auction? Uh-Oh! Apparently, yields are going to have to rise much more, and we all know what that does to the bond servicing costs! This is scary to me folks… And should be to you, and I’m NOT the boy who cried wolf, this is actually happening!

Gold gained a whopping $1.60 yesterday on a very reduced amount of volume, as only about 150,000 contracts were traded… The shiny metal is up another $3.50 in the early morning trading today, these cheaper prices of Gold just seem to be calling out to investors… Look at me! Look at me! I’m cheap (comparatively to where I’ve been and where I’m going!) 

The GATA folks sent me an email yesterday that highlighted an article in the Alchemist and featured some quotes by a former French Central Banker… The Alchemist is a publication of the London Bullion Market Association (LBMA)… And at the end of the article I found this quote about what the LBMA is up to, check this out: “While the London Bullion Market Association’s magazine is named The Alchemist, its alchemy is of a different sort, the sort of alchemy undertaken by modern central banking itself: not to turn lead into gold, as the alchemists of old sought to do, but to turn gold into mere paper.”

I of the belief that won’t happen folks, not as long as Physical Gold is being bought by the boat load in Russia, and China…  

The U.S. Data Cupboard today is a non-event with The Election Day dominating the news and the markets today… Tomorrow’s cupboard will have the September Consumer Credit (read debt) which has really ballooned in recent months, and this report should be no different, so we’ll see tomorrow. 

To recap…  The dollar got sold yesterday, but in the overnight markets the euro got sold.. Chuck thinks its intervention by the ECB…  It’s Election Day, make sure you get out there and vote!  The RBA will meet tonight, no rate move is expected. The Chinese continue to mark down the renminbi in an effort to offset the tariffs on their goods going to the U.S. And Gold gained a whopping $1.60 yesterday on little volume… 

For What It’s Worth… Since it’s Election Day, I found this article to be on time! It’s about how Congress no longer carries out their jobs as the founding fathers intended them to, and can be found here: https://www.washingtonpost.com/graphics/2018/politics/laws-and-disorder/?noredirect=on&utm_term=.cc6518c40b72&wpisrc=al_trending_now__alert-politics–alert-national&wpmk=1

Or, here’s yoursnippet:“For more than 200 years,Congress operated largely as the country’s founders envisioned — forging compromises on the biggest issues of the day while asserting its authority to declare war, spend taxpayer money and keep the presidency in check.

Today, on the eve of a closely fought election that will determine who runs Capitol Hill, that model is effectively dead.

It has been replaced by a weakened legislative branch in which debate is strictly curtailed, party leaders dictate the agenda, most elected representatives rarely get a say, and government shutdowns are a regular threat because of chronic failures to agree on budgets, according to a new analysis of congressional data and documents by The Washington Post and ProPublica.

The study found that the transformation has occurred relatively quickly — sparked by the hyperpolarized climate that has enveloped politics since the 2008 election of President Barack Obama and the subsequent dawn of the tea party movement on the right.”

Chuck Again… I could show you evidence of this with emails I sent to our Senator a year or so ago, and her responses to me… It’s a real shame, and that’s all I have to say about that!

Currencies today 11/6/18.. American Style: A$.7228, kiwi .6671, C$ .7671, euro 1.1395, sterling 1.3036, Swiss $1.0048,.. European Style: rand 14.2357, krone 8.3705, SEK 9.0733, forint 282.43, zloty 3.7811,   koruna 22.6717, RUB 66.12, yen 113.17, sing 1.3750, HKD 7.8308, INR 72.74, China 6.9144, peso 19.94, BRL 3.7013, Dollar Index 96.41, Oil $62.97, 10-year 3.19%, Silver $14.68, Platinum $875.10, Palladium $1,135.10, and Gold… $1,235.00

That’s it for today…  I was in an office yesterday, and an older man said to me, “The northerners will be coming soon” I guess he thought I was from the South! My friend, Dennis Miller, used to tell me that they called the change in colors for fall the different license plates that converged on Florida… HA! Well, I’m told that work begins today on my project I have going on down here… I’ll have pop a bottle of Champagne to celebrate, as this has taken a month of Sundays to get started!  Steely Dan takes us to the finish line today with their song from the album of the same name: Aja… (a great song and album!)  I hope you can get out to vote today, and have a Tom Terrific Tuesday… Please remember to Be Good To Yourself!

Chuck Butler

 

On a sidebar… I’m finished with SNL… It’s been years since I religiously watched it each Saturday Night, but I’ve found the show to be a bore the past couple of years, and now they’ve crossed the line… They poked a jab at a guy who lost an eye in combat! Having lost an eye, I’m very sensitive to this… I’m just saying…

November 5, 2018

* Currencies rally on Friday, but get turned around overnight

* Everybody has current debt, but the U.S. has current and future debt! 

Good Day… And a Marvelous Monday to you! I had an uneventful trip here to my winter home yesterday, other than leaving at zero-dark thirty, in the morning! The good thing about flying that early in the morning is that you still get to enjoy the day when you arrive! The mid-term elections are tomorrow, I tried on numerous occasions to absentee vote last week, but each time I was met with lines of people that were trying to do the same thing.  I have this “thing” about long lines… And that’s all I’ll say about that!  I don’t know if all the early voting places were as busy as the one I went to, but if they are… There should be good voter turnout for this election… I’m here, all by myself… but I have plenty to do! I did sit outside a bit yesterday soaking up some Vitamin D, it was nice to be able to be outside without layers and a coat! The late great Jimi Hendrix greets me this morning with Bob Dylan’s song: All Along The Watchtower…

Well, Friday was interesting… The Jobs Jamboree surprised the experts & markets with a better than expected print of 280,000 jobs created in Rocktober… Ahem… 246,000 of those jobs were added by the BLS after the surveys, because, well, the “economy is doing so well”… Really? 246,000 jobs were created out of thin air, by the BLS because, well… They thought it would be prudent? I shake my head in disgust that the BLS is allowed to play these games, with people’s money… But then it’s what they call… “other people’s money” or OPM… I had better go on, from here… before I get all worked up!

And with the stupendous Jobs created report on Friday, one would have thought the dollar would have crushed the mini-rally that the currencies had going on when we last looked at them on Thursday. But I didn’t… I can say that the dollar actually lost ground on Friday… Not much… but the loss is significant because it should have been rallying like a banshee! Now, I’m not complaining, just a little confused as to what’s driving the currencies these days? Was it more tariff talk that pushed the dollar down? Seems reasonable, but then that’s been the talk of the town for some time now, it’s not like this is a new thing for the markets to digest…

But the overnight markets reversed the currency rally and the euro, which had  touched 1.14 in the mini rally, has given back about 1/3 of its move on Friday… UGH!  And Gold is flat in the earling morning trading, with a trading range of a shekel or two…

The world’s economies are slowing down… Last year, we talked about the Tent Revival movement going on with the economies of the world, all syncing up and growing… But that was before there were 3 more Fed Rate hikes, and a Trade War… My friend, Dennis Miller of www.milleronthemoney.com sent me a graph yesterday that shows by year a list of countries and their GDP growth… It’s pretty interesting to watch China’s GDP Grow like a weed, while those in other countries just petered in and out over time.

Remember when Japan was making yen rain on everyone, back in the 80’s… The Vapors sang a song, I’m turning Japanese…  that I’ve used for years to point to the fact that the U.S. economy was following in Japan’s path… Japan bought just about everything it could get its hands on, like Pebble Beach… and so on… But debt slowed the Japanese down, and has kept them under the thumb of Debt, ever since the mid-90’s… China has a boat load of debt too… But they also have a Treasure Chest of reserves of around $3 Trillion… The U.K. has more debt than they should, and their economy is slugging along… The Eurozone has huge debts, that the member countries have accumulated, and they’re hoping like hell that Germany’s economy can pull them out of this debt mess… And then that brings us to the good old U.S. of A. Now we have gone about accumulating debt, on a current basis, and on an unfunded liabilities basis…

I’ve always thought, well since I’ve been in the currency markets, that debt was like currencies’ kryptonite. The dollar, has an exhorbinate privilege, because of the fact that it is the Reserve Currency of the World… And that’s the only reason, that the dollar is still hanging on… I’m still of the opinion, that a lot of the dollar standard as we know it, will come to an end with the next recession here in the U.S. that looks like It’s now on track for 2020… I just don’t see how when the mess of a new recession, with all this debt, and derivatives, and leveraged corporate loans, works out well for us, and the dollar, not to mention the stock market… Call me negative Nellie, no wait.. negative Nate, but it’s how I see it all unfolding, and I have only one question for you…. Got Gold?

Getting back to the Jobs report last week, we did see good earnings growth, which is probably keeping the December rate hike still on the table… But there’s more to Jobs created… The BLS thought that Professional & Business Service was the hot spot in hiring as they allocated 91,000 jobs to this sector… So, there are always things that people pick out of the Jobs report that are very interesting… One such person is the great economist, David Rosenberg, who said on his Twitter account…

“The dirty little secret in the ADP report…in the past four months, job gains in the small-business service sector (leading indicator) has slowed from +48k, to +32k, to 29k, to +20k…lowest number since Sept. 2017. Very close to the figure printed in Nov. 2007…”

OK… they say small business is the key to the U.S. economy, and if that’s the case, it sure looks like small business is in trouble…

Over in the Eurozone to start the week there, we had ECB members out talking the talk, and walking the walk, of a Union that has an economy that will, in their opinion, still become a full fledged growing economy… And made sure that everyone heard them when they said that the withdrawal of Monetary Stimulus is on track to take place… they also pointed out that a recent easing of price growth was likely to be temporary…  

We’ve talked about the use of the word Temporary before, right? Sometimes it just doesn’t work out… Remember that the removal of the dollar from the Bretton Woods Agreement, (Gold standard) was supposedly, “temporary”…   Well, 47 years later, people have forgotten that the removal of the dollar from the Gold standard was supposed to be only “temporary”…

 Things are still looking up for the Brazilian real, as it gets marked up nearly every day… Something doesn’t feel right about this to me folks… And that’s where I’ll leave that… Just be careful here! 

Sometimes I wish I still went to conferences so that I could talk to the great mind of Steve Sjuggerud…  I would ask him now how he feels about commodities. The reason, is simple, commodities have been down for so long, and they are hated, to speak of, by most investors… This is when Steve normally picks up the baton and runs with it… he loves buying asset classes that other people don’t want… 

IF he said that it was time to buy commodities, it would confirm my belief that with all this spooling up of inflation around the world, that commodities would return to their glory years… I’m just saying… 

The U.S. Data Cupboard doesn’t have much for us this week, with the Election Day tomorrow, and then a Fed FOMC meeting on Wednesday, which will yield no rate move, but could give us some indication of whether or not the Fed is watching the rot on Housing’s vine get exposed… 

To Recap… The Jobs jamboree was better than expected last Friday, with the help of 246,000 jobs added to the surveys by the BLS…  the surveys only added 34,000 jobs in Rocktober…  The dollar didn’t rally on the data print though, and the currencies ended the week with a mini-rally. That Mini-rally has given back some of the gains won on Friday, in the overnight markets today. Gold is flat, and Chuck spends time talking about debt… 

For What It’s Worth…  the picking were slim this morning for a FWIW article folks… But I found this on Reuters that is Jack Ma of Alibaba talking about the Trade War, and thought it to be FWIW worthy, and it can be found here: https://www.reuters.com/article/us-china-trade-usa-jackma/alibabas-ma-calls-u-s-china-trade-war-most-stupid-thing-in-this-world-idUSKCN1NA0V6

Or, here’s your snippet: “The U.S.-China trade war is the “most stupid thing in this world,” Jack Ma, the chief of Asia’s most valuable public company, Alibaba Group Holding Ltd (BABA.N), said on Monday.

The two countries have set tariffs on hundreds of billions of dollars of each other’s goods and U.S. President Donald Trump has threatened to slap tariffs on the remainder of China’s $500 billion-plus exports to the United States if the trade dispute cannot be resolved.

Ma made the comments at the China International Import Expo (CIIE) held in the Chinese commercial hub of Shanghai.” 

Chuck Again… You tell ’em Jack!  Because nobody listens to me! 

Currencies today 11/5/18..American Style: A$.7193, kiwi .6655, C$ .7690, euro 1.1368, sterling 1.3005, Swiss $1.0063, European Style: rand 14.3750, krone 8.3752, SEK 9.0905, forint 283.59, zloty 3.7938, koruna 22.7244, RUB 66.10, yen 113.28, sing 1.3768, HKD 7.8311, INR 73.83, China 6.8910, peso 20.12, BRL 3.6954, Dollar Index 96.55, Oil $62.76, 10-year 3.20%, Silver $14.73, Platinum $870.46, Palladium $1,130.50, and Gold… $1,232.00

That’s it for today… Well, I do believe that today is Rachel Butler’s birthday! What a lovely person Rachel is, and has become a 2nd daughter to me… Happy Birthday! Rachel is someone that celebrates her birthday, MONTH!  Christmas decorations are already out in the stores, and we received a letter from the family that runs the Tree Farm we go to each year, so we’re headed to Christmas whether you want to or not! And one of my fave songs to sing along with takes us to the finish line today… Charlie Daniels song: Long Haired Country Boy… I hope you have a Marvelous Monday, and Rachel has a Happy Birthday, and we all remember to Be Good To Yourself! 

Chuck Butler

November 1, 2018

*Currencies finally break the dollar’s spell over them!

* Gold reverses yesterday’s selloff… 

Good Day… And a Tub Thumpin’ Thursday to you!  Welcome to November… I despise this month, so we’ll start out like that today! This was the day, when I was a young lad that I used to wish I went to the private Catholic School, instead of the public school, because today was a Catholic holiday! And still being somewhat sugar high hungover from the night before, I would trudge into school… I almost called this in today, saying that I was Catholic and it was a holiday for me! Funny thing, I was raised Catholic, went to church each Sunday, bought pretzels from the guy outside the church, and so on… But that’s as far as it went with me… I was actually baptized in a Baptist Church… go figure on that one! So, I hope your Halloween was great, and that you heard lots of good jokes! Elvin Bishop greets me this morning with his song: Traveling Shoes…

Another day, another day of the dollar pushing the currencies and metals downward… I’m almost resigned to think about how badly the currencies look, each day instead of thinking about how much they may have gained in the overnight markets… The overnight markets have been non-existent recently, And then last night… Boom! They mattered again! Before last night’s move, I was thinking that  I would write most of the letter the night before, then wake up later, and add in any extras and send it out… But I know what would happen if I actually did that… Over time I would not even get up in the morning to write anything, I would just spool it up the night before and be done with it! And… at this point, I have no idea why we’re even talking about that!

So… I didn’t get much feedback from my attack on the Fed yesterday from dear readers, I guess they all agree with me! HA! But good friend, and the Retirementor, Dennis Miller of www.milleronthemoney.com sent me some quotes from an article on Rand Paul, and his desire to audit the Fed… here are a couple of quotes from that article… “Probably one of the more startling things is the Fed will say that they are already audited, and that is kind of disingenuous, is the best way you can put it. The GAO auditor was before a House committee a few years ago, and they say, “Well, you’re the auditor and you perform the audit,” and she said yes, and they said, “Well, what does the Fed own? They have $4.5 trillion of assets — what are these assets?” and they said, “Oh, we don’t audit that.” It is like, what do you audit, how much coffee they purchased, what their salaries are, their expenses? It is kind of ridiculous and really unfair to say they are audited, when an audit would be what are your activities, what do you buy and sell, and what are they really worth?

Because I think for the confidence of the nation, we would want to know what their assets are worth, are they marked-to-market, who did they buy them from, what did they pay for them.” – Rand Paul

I just shake my head and wonder how in the hell we got here? This Fed was supposed to be the end all that ails the U.S. economy, but have they even come close to realizing that goal? Since they’ve been around (1913) we’ve seen dozens of recessions, a Great Depression, and a Great Recession, along with a financial meltdown… Boy, they’ve sure done their jobs there, eh? I’m just saying… 

Well, I hear that not only is today November 1st, the beginning of my least fave month, and also my former colleague, Our Little Christine’s, least fave month too… But today is also National Toothbrushing Day… When I was a young man, I didn’t take good care of my teeth, shoot I even played football without a mouth guard! But as a young adult, I met a dentist who got me straightened out, and I’ve been admant about tooth health ever since! And now I’m so lucky to have the wonderful dentist, Holly Ellis, as my dentist… How lucky is that?

But today is the beginning of month that has historically been the worst month every year of my life… Need I remind everyone that last November, I was stricken with an awful infection, that put me having to use a walker, and eventually have to have surgery, to clean out the infection… I was in tremendous pain for a long time, and it lasted the whole month of November… Besides that there are numerous other bad things that have happened in November, not to mention the cold, raw, steel gray days that just jab at you… Well, this year, I’m heading to S. Florida for most of November… Hopefully, when I return spirits will have changed to Christmas cheer…

The Dollar Index bumped up over the 97 figure on Tuesday, but in the past 24 hours it has retreated to 96.65… One of the currencies that is NOT a part of the Dollar Index, the Aussie dollar (A$) finally climbed above 71-cents on the night. The A$ has attempted to move higher for a few weeks now, but always seemed to be “not worthy”… 

And one currency that IS a part of the dollar index, The Swedish krona, had some news so let’s go there… Well, how about that reversal, about face, and whatever other term you want to use to describe what Sweden has done regarding their previous move to remove cash…  Here’s what’s going on… The Swedish government and its central bank, Riksbank, have been pushing for a “cashless society” for years, and many of Sweden’s bank branches have stopped handling cash altogether. However, Sweden’s central bankers now want to reverse their policy and have proposed making it mandatory for all banks and financial institutions to offer cash services so that it does not disappear as a form of payment. Financial companies and businesses that have converted out of cash may also be obligated to trade in cash.

I’m so glad to have read this… I was really beginning to believe that Sweden was going to not only be the poster child for negative interest rates, but also a cashless society… And that would have stricken them from my list of fave countries for sure! They’re teetering on getting bounced from the list with their negative interest rate Policy (NIRP) (remember ZIRP? Zero interest rate policy) . But I read this past weekend that there are whispers that the NIRP hasn’t worked the way the Swiss leaders thought it would, and they are looking to drop NIRP soon… Hmmm… Now, wouldn’t that be a different barrel of fish?

The Price of Oil slipped downward again in the past 24 hours, and trades with a $64 handle this morning…  Gold got whacked by nearly $9 yesterday, but is up nearly $9 in the early morning trading today, so that’s a wash… I read so much regarding Gold that I get confused over if I’ve talked about it or not… So, to keep me from being confused today, let’s just move along to the U.S. Data Cupboard… 

The U.S. Data Cupboard is gearing up for tomorrow’s BIG Jobs Jamboree, and yesterday’s attempt to prime the markets for a big number, was the ADP Employment Report, which showed 227,000 jobs created in Rocktober, with the Employment Cost Index (ECI) moving higher, as expected, and the Chicago region manufacturing pulse slipping… 

Today’s Data Cupboard has more data to sift through, with the likes of the stupid Productivity level, U.S. Vehicle Sales, and the ISM manufacturing index… So, all middle tier data prints, that unless there’s a rogue print in there, the markets will move along not noticing them… I say that, knowing all too well, that sometimes, the markets get a wild hair, and decide something WAS important… 

For What it’s Worth… Yesterday, I went on a rant about the Fed… And today, well, it’s Ron Paul’s turn! I found this at: https://www.lewrockwell.com/2018/10/ron-paul/trump-is-right-the-fed-is-crazy/

And he thinks the Fed is crazy… Hmmm… he said it, not me!

Or, here’s your snippet: “The very act of creating money and manipulating interest rates distorts the market. Therefore, the Federal Reserve System cannot be fixed with a “rules-based” monetary policy or even with “tying” the Fed-created money supply to the price of gold. It is amazing how many economists who oppose price controls on all other goods support allowing a secretive central bank to control the price of money.
Trusting the Federal Reserve to produce permanent prosperity instead of a boom-and-bust cycle is a textbook example of a popular definition of insanity being repeating the same action in hope of getting different results. The Federal Reserve System is as unworkable and doomed to failure as every other form of central planning.

It is likely that the next Fed-created recession will come sooner rather than later. This could be the major catastrophe that leads to the end of fiat currency. The only way to avoid crisis is to force Congress to end our monetary madness. The first steps are passing the Audit the Fed bill, allowing people to use alternative currencies, and exempting all transactions in precious metals and cryptocurrencies from capital gains taxes and other taxes.”

Chuck again… Another point I would like to make regarding the Fed, is that I’m a firm believer that we as a country and our economy would be better off without them! I say, let the bond markets set interest rates, and count the beans the way they were supposed to be counted for inflation… 

Currencies today 11/1/18.. American Style: A$.7155, kiwi .6610, C$ .7627, euro 1.1380, sterling 1.2880, Swiss $1.0031, European Style: rand 14.5475, krone 8.3662, SEK 9.0530, forint 284.12, zloty 3.8017, koruna 22.7370, RUB 65.69, yen 112.95, sing 1.3805, HKD 7.8377, INR 73.23, China 6.9694, peso 20.16, peso 3.7056, Dollar Index 96.65, Oil $64.85, 10-year 3.16%, Silver $14.41, Platinum $848.70, Palladium $1,078.90, and Gold… $1,223.54

That’s it for today… And this week… My next correspondence with you will be transmitted from my winter home… Just a 3 week trip this time, to make sure work is getting completed on time! I didn’t hear any good jokes last night, and I only had about 25-30 kids show up to Trick-or-Treat. I told Kathy, “see I told you we had enough candy for me to sneak some early”…  Dawn brought  Delaney Grace and brother Everett, in their Halloween costumes by early yesterday… My little d, is growing up, I’m not sure I’m ready for that!  Sorry for all the directions in the Pfennig today, I’m still dealing with a sugar hangover! HA!  OK, this is my weekly plead to the Cardinals to sign Bryce Harper…   Surely someone in the Cardinals office reads the Pfennig, and can let the GM know that I want them to sign Bryce Harper! HAHAHAHA!  And with that, Journey takes us to the finish line today with their song: Girl Can’t Help It… (one of my fave Journey songs)… I hope you can go out and make this a Tub Thumpin’ Thursday, and remember to Be Good To Yourself!

Chuck Butler

 

 

Rocktober 31, 2018

* Currencies and metals take on more water… 

* Chuck explains his dislike of the Fed… 

Good Day… Boo! And a Wonderful Wednesday to you! And a Happy Halloween to one and all! I recall going to New Orleans on Halloween for a conference years ago… They sure do get into Halloween in New Orleans! No baseball, no football, no hockey to watch, what’s a guy to do? HA! Our Blues don’t play again until tomorrow night… I sure liked the strike-shortened season of a few years ago, when they crammed as many games as they could into a short time, it seemed like there was a game every other day! I don’t live each night on sports watching alone, if that’s what you think, but it does help the night go by, and keep me from sitting at my writing desk, reading and researching for the next day’s Pfennig… I do so much of that already, I don’t need to be doing it at night too! The late, great, Tom Petty, greets me this morning with his song: You Got Lucky…

And don’t you feel you got lucky so many years ago, when you found this letter? HA! I’m feeling better today, as my one-week trip on steroids ended yesterday morning… So, if there’s a dolt out there, I’ll find them for sure! Whoa, there Partner, what on earth do you mean, If there’s a dolt out there, You know darn good and well that there are plenty of dolts out there!

One guy who’s not a dolt, and is a very well respected and admired economist, David Rosenberg, likes to use Twitter, which is pretty cool for me, because I get to see his quotes for free! Yesterday, he posted the following to his Twitter Account: “Best economy of all time generated the first decline in real per capita disposable personal income last month since June 2017!” – David Rosenberg

He does have a way of using a pointed stick, doesn’t he?

OK… Well, the dollar’s spell over the currencies remains, and the euro took on more water yesterday. The Trading Ranges so far this week have been quite muted/ small… But the overall depreciation of the currencies remains in place… The euro, is still above the 1.09 level it was 18 months ago, but it’s also far below the 1.25 it reached last spring. And there’s just not that much going on overseas to talk about… In Australia today, they will print their latest CPI (consumer inflation) for the 3rd QTR… The experts are forecasting an unchanged level from the 2nd QTR of 0.4% growth.. That won’t get annual CPI above 2%, so you can see why the Reserve Bank of Australia (RBA) has disappointed the markets so far this year with no rate hike.

Gold never could recover from its early morning selling yesterday, and closed the day down $7… UGH! No forward momentum can be found with Gold, folks… it’s up one day, down the next two, up two days, down the next one, and so on, and so on… Just bumping along, picking up passengers … That’s right, buyers at these reduced levels seem to be ganging up, but right now, they’re just not making any difference… But they will…

Have you ever held a one-ounce Gold coin in your hand? The Maple Leaf is the shiniest, and the Gold Eagle is pretty shiny too… Once you hold a Gold coin in your hand, you get this feeling of being wealthy… Well, you may not be wealthy, but you’ve provided yourself a store of wealth, with the Gold coin… I’m just saying…

There was more evidence overnight that the Trade War with China is hurting both countries, but this time it’s China’s manufacturing… China’s official manufacturing Purchasing Managers’ Index (PMI) was 50.2 — lower than the 50.6 analysts expected in a Reuters poll and down from 50.8 in September. Gloom, despair, and agony on both economies in this Trade War… If it weren’t for bad luck, I’d have no luck at all… Gloom, despair, and agony on me..  

I made a big deal out of the increase in debt to our country yesterday, and one of the things I was all set to talk about that was related to that, escaped my mind at the time of writing… About an hour later, I realized that I had completely forgotten to talk about what was related to the spending! UGH! (A Senior moment?) Anyway… let’s look at this from another angle… Military spending is soaring, folks… And when you get down to the cheese that binds… Gov’t. spending is making up most of the gist of GDP these days… yes, if it weren’t for the Gov’t spending like there’s no tomorrow, GPD would be much lower… So, there! I finally said it! Aren’t you glad I remembered? HA! 

One of my “go-to’s” with economics questions through the years, Lisa, used to tell me, that it’s the role of government to fill in the gaps of consumer consumption…  I used to argue, why? We rarely saw eye-to-eye with things, but she made me think, and I adored her for that! 

OK… I told you yesterday that was going to talk about my dislike of the Fed today… Many of you will recall when I used to make a big deal out of a saying that I coined… Repeal 1913!  For it was 1913 that Woodrow Wilson crammed the idea of a Central Bank down the throats of Americans, and we ended up with the Federal Reserve, which by name alone is a bunk of malarkey, for there’s nothing Federal about it! 

I was asked a question the other day, that I had to really think about the answer, not that I didn’t know what to say, but more how to say it so that there were no follow-up questions… So, the question was… “Chuck, you’re always being negative of the Fed, why is that, is there some risk that they’ve added that we, the public don’t’ know about?”

Then I saw this quote and thought this says it all!  “The greatest threat to the central bank’s existence is the tendency of Fed governors and economists to pursue abstract economic theories that make no sense in real world terms and often do more harm than good. “I have written at length about how the radical policies followed by the FOMC, first under Bernanke and then Yellen, have distorted asset allocations, and the term structure of interest rates and credit spreads.

I went on to say, “think about what easy money the past 10 years has done to asset allocations and valuations? Think about about what easy money has done to the yield curve of Treasuries bonds? And think about what easy money has done to the retired people’s savings… Was all that necessary? The answer is an emphatic NO! Operation Twist, doesn’t get its due, but when the dust settles on this coming financial mess, people will look back and examine the damage that Operation Twist did to the yield curve… And ask the question… “What on earth was the Fed thinking?”

Yes, there’s risk that no one talks about… That’s why I’m 100% behind an “audit the Fed” bill… Sort of like the health care act, we won’t know what’s in there until we pass it…  

So, there it is in a nutshell, folks… My take on the Fed, and what they’ve done to our economy and our future… I really got a kick out of a recent article I read that quoted former Fed Chairman, Paul Volcker, with him really calling out Bernanke and Yellen over their complete lack of knowledge regarding deflation, and the stupid 2% inflation target…

The U.S. Data Cupboard saw the Case/Shiller Home Price Index for August fall to 5.8% from 6% in July… I told you yesterday that the big move in home prices probably hadn’t occurred yet for the August report, but that we could still see some weakness, and that’s exactly what we saw… I sure hope the Fed Heads are watching all this rot being exposed on Housing’s vine… If not, what are they watching? I heard it’s reruns of WKRP In Cincinnati… HAHAHAHAHAHA! Just kidding… Baby, if you’ve ever wondered, wondered whatever became of me… I’m living on the air in Cincinnati, Cincinnati WKRP…

In addition to the HPI… This piece of data falls under the heading of… Believe It or Don’t! Consumer Confidence for this month… Let me make that clear, this month… increased from an index number of 135 last month to 137.9 this month! And they say that most of the Consumer Confidence Index is derived from stock market performance? Well, that can’t be the case any longer, because the stock market has really pushed the exit button this month, and Confidence rose? Go figure that one!

If Consumer Confidence is so darn strong I have to ask the question, Why then are the mid-term elections next week so “up in the air?” I’m just saying, and that’s as far as I’ll go with politics…  Ask a question and then retreat… Throw a grenade, and retreat…

Today’s Data Cupboard will have the ADP Employment Change report… Which signals to me that this Friday will be a Jobs Jamboree Friday! We’ll also see the Employment Cost Index (ECI), which I bet is increasing… Unless the ADP report falls out of bed, I doubt that either of these will cause too much disturbance in the currencies’ atmosphere…

To Recap… The dollar’s spell cast over the currencies and metals remains in place this morning, with bot asset classes taking on more water this morning. Chuck is concerned with debt, as usual, but looks at it from a different angle today, which should be interesting! The Trade War with China is having negative effects to their manufacturing, as evidenced by the latest PMI print from China.  And the rot on housing’s vine is being exposed more and more with every housing report… Are you watching, Fed? 

For What It’s Worth…  Ok, I haven’t talked much about Gold price manipulation lately, so when I saw this article highlighted on Ed Steer’s letter this morning, I just had to use it for my FWIW today… So, that’s what it’s about and it can be found here: https://hedgenordic.com/2018/10/precious-times-times-ahead/

Or, here’s your snippet: “Behind the scenes, the dynamics steering the gold price are undergoing some fundamental changes that could lead to this breakout, Eric Strand of Swedish Pacific Fonder suggests. One indication, he believes, came when the CFTC (Commodity Futures Trading Commission) reported in early September 2018, that for the first time in 17 years, commercial participants in gold futures flipped their COMEX positioning from short, to being net long. Retail, and technical funds, however, now have big short positions, “which could lead to a big short squeeze”, Strand adds.

“The price of gold has been suppressed artificially for too long, Strand believes, and now may be the time for a change”.

Strand refers to Silver expert Ted Butler who has monitored the market every single day for over 30 years and describes it as follows: “Every time we’ve had a rally in the last 10 years, ever since J.P. Morgan took over the investment bank Bear Stearns, J.P. Morgan has added aggressively to its paper short division on the COMEX as retail speculators and technical funds come in to chase rallies higher. J.P. Morgan has always been the seller of last resort, and they sell whatever is required to satisfy all buying. And, ultimately, after that buying is satisfied, the prices roll over and come back down. J.P. Morgan adding short positions has stopped every rally in silver – and gold, for that matter – over the last 10 years.

J.P. Morgan never sells on the way down. They only sell and add short positions on the way up. And, when J.P. Morgan adds short positions, once they’re done selling and the buyers are done buying, the price stops going up and people turn to sell. That’s when J.P. Morgan rings the cash register and buys back all the shorts that they’ve added at lower prices than where they sold, meaning they always make a profit.”

Chuck Again…  I think this plays well in the sandbox with what I talked about earlier this morning, with regards to Gold… So there you go!

Currencies today 10/31/18.. American Style: A$.7095, kiwi .6540, C$ .7614, euro 1.1338, sterling 1.2740, Swiss $1.0060, European Style: rand 14.7025, krone 8.4295, SEK 9.1780, forint 286.36, zloty 3.8190, koruna 22.8448, RUB 65.66, yen 113.14, sing 1.3858, HKD 7.8450, INR 73.79, China 6.9629, peso 20.01, BRL 3.7104, Dollar Index 97.03, Oil $66.41, 10-year 3.14%, Silver $14.35, Platinum $836.12, Palladium $1,073.15, and Gold… $1,217.78

That’s it for today…  Except… I hear that talks with China regarding Trade/ tariffs are going on, and if they don’t come up with something, the U.S. is ready to add more tariffs to China’s bill… I shake my head , and wonder when this will all go away…  It’s raining cats and dogs outside right now, I sure hope it ends before the Trick or Treaters go out tonight!  I’ve become a candy lover, and having all this candy here waiting for tonight, is driving me crazy! I got caught stealing some Starburst yesterday…  I said, Oh, come on, we’ve got more candy here than there are kids in the neighborhood, can’t I have a piece?  OK, enough of that… I can’t wait to see the little ones tonight, as each year, I sit on the front porch, and give out candy to the Trick-or-Treaters…  Why did the mushroom get invited to the party?  Because he was a fungi! HAHAHAHA! Happy Halloween! The late great Alvin Lee and his band Ten Years After take us to the finish line today with their song: I’d Love To Change The World…  Now, it’s your responsibility to go out and make this a Wonder Wednesday, a Happy Halloween, and remember to Be Good To Yourself!

Chuck Butler

Rocktober 30, 2018

* dollar continues to cast its spell over the currencies

* Germany’s Merkel announces that she’ll step down… 

Good Day… And a Tom Terrific Tuesday to you! Almost to the end of Rocktober, can you believe that one? It won’t be long now, and all the discussion around the house will be about Thanksgiving, and when we go and cut down our Christmas Tree! WOW! On Saturdays on SiriusXM they play the top 40 songs on the 70’s on 7, from a corresponding week of the 70’s… Casey Kasem’s coast to coast… This past weekend, we were in the car, and I asked Kathy if she liked hearing songs from her freshman year of High School… Well, all I can say is that I enjoyed it! No baseball! What’s a baseball loving boy to do? I guess if I lived out in Arizona, I could watch some fall baseball, but I don’t… so I won’t! HA! S The great Rod Stewart greets me this morning with his song: Every Picture Tells A Story…

The BIG News yesterday came from Germany, where Chancellor Angela Merkel announced that she was stepping down…  This would be at the end of her term which happens to be 2021. Germany, right or wrong, had steady leadership through all the mess of the uncovering of debt in the PIIGS… (Portugal, Ireland, Italy, Greece), and the austerity plans, and the awful decision to allow so many refugees into the country… That’s my opinion, nobody else’s, so if you have a problem with me saying that, I hope you can go on without wanting to do physical harm to me!

That’s the problem in the U.S. these days, you can’t have an opinion that’s not of the ruling crowd, for if you do, you get met with physical harm… I’m just glad I can give my opinions on the internet, and the ruling crowds can’t find me! I don’t know whether to say Ha! Or I’m sorry!

OK, enough of that… The Dollar’s spell over the currencies remains in place, and yesterday, we saw more weakness in the currencies led by the Big Dog euro… Shoot, even the strong charging Brazilian real saw some profit taking and a loss, after the man they all wanted to win the election, won! Now, that, that has taken place, we’ll have to see where the real goes now… if, it’s anything like most of these politically charged currencies go, after “the fact”, the real has seen its best days… But then, we could actually see a Political leader get the things done he talked about during his campaign, and that would be good for the real… So, it’s a wait-n-see… But I’m leaning toward, the real have seen its best days…

I could be already wrong, as I just checked the real and it has recovered yesterday’s small loss and the rally continues…  We’ll see for how long… 

Gold looks to have lost about $5 on the day yesterday, and is down another $7 in the early morning trading today…  I was looking over friend, and former colleague, Omar Ayles, Gold Charts-R-Us report, and Omar thinks that Gold in technical terms is ready for a breakout upward in price… I continue to received emails from dear readers who ask me why I think that Gold could breakout upward in price, with all the manipulation that I’ve talked about through the years… And my answer, always, is simple… One day the manipulators will go home, and when they do, and Gold is allowed to reach its potential price, well, I don’t think that potential price is going to be lower than it is right now!

OK, the U.S. Data Cupboard was quite interesting with its prints yesterday… First we had Personal Income, which slowed in Sept… And Personal Spending, which also slowed, but its gain was more than Personal income, so we spent more than we made once again… And then Core Inflation slowed in September… Inflation for the year to year, fell to 2.0% from 2.2%… And this leads me right back to what I kept saying when the Fed began this rate hike cycle, and tried to tell us they were attempting to get inflation to 2.0%… You DO NOT HIKE rates when you’re trying to let inflation run… You HIKE rates when you want inflation to stop… Our Fed is backwards, which is the nice way to say that by the way… So, now rates are rising, and inflation that the Fed worked so diligently to increase, is falling… Go figure, right?

I found this on Twitter last night… It’s Danielle di Martino Booth, talking about rate hikes… “New homes sales report was very weak. It doesn’t matter where mortgage rates are, what matters is how much interest rates have increased, becoming a depressant on consumer activity. That pans out in consumption, which drives our economy.” -Danielle di Martino Booth…

But will all this put a lid on rates? Not so fast there… As I’ve said before, the Fed is hell bent and whiskey bound to hike rates further, and will continue to hike them in December… That one’s a given, right? But what would happen to the dollar’s spell over the currencies and Gold IF the Fed held back and didn’t hike rates in December, due to all the bad data in housing, and inflation? So, there, I put it out there, two months early, but that’s the risk that will be hanging over the Fed’s FOMC meeting in December, like the Sword of Damocles…

Ok, back to the currencies… I came across an article in the Business insider that can be found here: https://www.businessinsider.com.au/fx-currency-aud-australia-dollar-china-yuan-cny-tariff-trump-merkel-2018-10

But for those of you short on time… The article talks about how the Aussie dollar (A$) has become the whipping boy for the currency traders, as the Chinese renminbi continues to slide further, even after the Chinese leaders said two weeks ago that they were going to stop the daily depreciations and stabilize the renminbi… Look, I’ve said this before, but there are times when You have to repeat yourself, and this is one of those times… The weakness in the A$ can be attributed to all sorts of things, but there just one thing that if changed would reverse this weakness, and that is a rate hike from the Reserve Benk of Australia (RBA)… It was thought, last year at this time, that the RBA would be hiking rates in the 1st QTR of 2018… Well, as we all know, that didn’t materialize, and so the A$ has weakness… You can blame all the outside influences that you want, but the major blame should be laid at the feet of the RBA…

And the euro has dropped downward again… I guess some of that could be attributed to the news about Merkel, for there is now an “unknown” that the markets will have to deal with…  I think this recent bout of dollar strength, certainly gives those of you who have procrastinated and held off diversifying your investment portfolios, an opportunity to buy at cheaper levels… I always remember my former colleague, Ty Keough, who would tell people that when currencies dropped in price that “it was a good thing, because now they can buy more of them”…  So True… So True… 

I read this morning that the U.S. is going to have to finance $1.34 Trillion in the next year… That’s a whole-hell-of-a-lot-of Treasuries to issue, eh? At a time when foreign Central Banks are backing away from the Treasury auction window, and the U.S. consumer has tapped out…  I know I told you all last year that by now the Fed would be thinking about reversing their rate hikes, and begin a rate cut cycle that ended with negative rates, and a Central Bank buying stocks, and bonds…  And, well, that obviously hasn’t happened… yet that is… I still believe it will happen… 

I was talking on the phone with good friend Dennis Miller of www.milleronthemoney.com  and we touched on the subject of how all the bad things we’ve talked about that could happen, just seem to be put in corner and not allowed to come out… I reminded him of the great saying, about how the markets can remain irrational longer than you can remain solvent…  This dark cloud hanging over the U.S. and it’s debt picture, continues to amaze me that it can go on, and on, and on, and on… 

But, it all ends when the countries around the world stop buying, and using dollars for everything…  That’s why I always highlight the news of a currency swap agreement being signed that removes the dollar from the terms of the trade, like the one that Japan and China signed last week. Look, like what I have to say here or don’t… But I have to say it…  We’ve ticked off everyone in the world, and sent them to other lovers… Be it our handling of the dollar’s value, or our run up of debt, or our Trade Wars, the shine has come off the dollar folks… Which is why I’m so lost when I turn on the currency screens each day, and the dollar is till on top…  Props… I used to use a three legged stool to illustrate what happens when a leg/ Prop is removed, and the biggest Prop for the dollar is the rate hike cycle… 

The U.S. Data Cupboard today has the Case/Shiller Home Price Index (HPI) for August, which shouldn’t show the real drop that started in September, but we could still see some shaking of Housing’s foundation today…  The stupid Consumer Confidence is also going to print… This index has gotten so strong, and I have no idea, except the stock market’s performance, why, but stocks are getting sold these days, so this will be interesting… not important, but interesting… 

To Recap… Well, I climbed out on big fat limb a few times today, eh? The currencies continue to be under the dollar’s spell, Gold lost its footing, and the Business Insider things the A$ has become the whipping boy of currencies…  We as a country will need to finance $1.34 Trillion this year… Attempt to get your arms around that one, folks… and then you’ll be like Chuck who gets lost when he sees the dollar on top… 

For What It’s Worth… Well, I mentioned this above, the need to finance $1.34 Trillion this year and here’s article about just that… Put away the sharp objects first, and then click here: https://www.zerohedge.com/news/2018-10-29/americas-true-deficit-us-borrow-over-13-trillion-2018

Or, here’s your snippet: “Confirming recently reduced estimates of U.S. debt borrowing needs – mostly as a result of new funds brought in via Trump’s trade tariffs – the Treasury Department today lowered its estimates of fourth-quarter borrowings to $425 billion from the $440 billion forecast it made in July, while assuming an end-of-December cash balance of $410 billion, up from $390 billion 4 months ago.

The revised Treasury numbers bring the total net borrowing needs for calendar 2018 at $1.338 trillion, while borrowings for fiscal year 2018 (which ended on Sept. 30) amounted to just under $1.2 trillion.
The Treasury also released its first estimate of borrowing needs for the January – March 2019 quarter, which it expects to hit $356 billion, well below the $488 billion borrowed in the same quarter of 2018, while assuming an end-of-March cash balance of $320 billion.

Meanwhile, during the July – September 2018 quarter, the last of fiscal 2018, the Treasury borrowed $353 billion in net debt, up from the $329 billion it had estimated in July and ended the quarter with a cash balance of $385 billion, which was also higher than the $350 billion forecast previously. The increase in borrowing resulted from the higher end-of-quarter cash balance partially offset by higher net cash flows.
So why did the U.S. borrow $1.2 trillion in Fiscal 2018 even though the official budget deficit was reported to be $779 billion for the same period? That is mostly due to “off budget” items that Congress thinks shouldn’t be part of the normal budgetary process. It includes things like Social Security and Medicare, which vary from year to year, and can be anywhere from $200 billion to almost $500 billion.

Of course, since the U.S. Treasury ultimately ends up borrowing those dollars as the table above shows, the true deficit that adds to the debt is actually about 50% higher than the number discussed by the media.”

Chuck Again… That’s going to be a lot of Treasuries issued in the next year… I’m just saying… 

Currencies today 10/30/18.American Style: A$ .7096, kiwi .6550, C$ .7630, euro 1.1352, sterling 1.2746, Swiss $.9976, European Style: rand 14.6586, krone 8.3942, SEK 9.1735, forint 285.95, zloty 3.8116,  koruna 22.7825, RUB 65.69, yen 112.83, sing 1.3845, HKD 7.8460, INR 73.47, China 6.9538, peso 20.03, BRL 3.60,  Dollar Index 96.92, Oil $66.60, 1o-year 3.11%, Silver $14.43, Platinum $835.07, Palladium $1,085.23, and Gold… $1,222.06

That’s it for today… Tomorrow I think I’m going to get into discussions I’ve had with dear readers about why I bang on the Fed so much… So, look for that! I have no idea why I climbed out on the limb so far and so many times today, must be this new feeling I have… I’m not holding anything back any longer… So you had better watch out! Tomorrow is Halloween, and it looks like the weather people are calling for a rainy Halloween here in the St. Louis area… That’s too bad for the little guys…  R.E.M. takes us to the finish line today with their song: Losing My Religion…   (and now I’ve said too much) which is me today, I think!   I hope you can make this a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler

 

Rocktober 29, 2018 

* Currencies are stuck in the mud…  with no 4 wheel drive vehicle to use!

* The Rot is being exposed on Housing’s vine… 

 

Good Day… And a Marvelous Monday to you! A simply marvelous weather-wise weekend here in the Midwest this past weekend… I spent some time outdoors, not much, as there’s little I can do, while I’m dealing with this gout… But… I soaked up some Vitamin D… which is always a good thing, had dinner with Andrew, Rachel and Braden last night, and I’ve been up half of the night, given I’m on my last couple of doses of steroids… Those things play hell with my sleep! My beloved Missouri Tigers got Mizzoued on Saturday, that’s all I’ll say about that, and our Blues finally played a complete game on Saturday night. R.E.M. greets me this morning with their song: Fall On Me… Buy the sky and sell the sky, and tell the sky… Don’t fall on me…

I guess that’s what a lot of stock jockeys are singing these days… But… a tree doesn’t grow to the moon, and bull markets don’t either… I am told, that nearly $ 9 Trillion in global markets have been taken off the table, and that all the U.S. indices are trading below their 200 day moving averages… That’s all I’ll say about that, but IF it’s coming to an end, it was one hell of a ride, eh? 

To Start the week this week, the markets get to digest the editorial that appeared in the Wall Street Journal late last week, written by Fed Head Neel Kashkari, who flatly states that the Fed needs to stop hiking rates… I told you last week about the speech James Bullard made that bordered on dovishness, and now this… I also told you that there were whispers going around at the Eccles Building… And now those whispers are going to change to shouts, and soon there will be waring members of the Fed, and traders won’t like that one iota… So, get ready for that…

Kashkari, reminds me of a story in the book by Danielle Di Martino Booth, Fed Up, but only the opposite…  In the book she describes how Dallas Fed President Richard Fisher, opposed the rate cuts to zero, but he was the only one… And now Kashkari opposes the rate hikes to normal… And the cheese stands alone… for now that is… 

The week that was last,  had 4 Central Bank meetings, of which there was only one that make a move, the Bank of Canada, and the other non-moves were quite frustrating, if you ask me… Norway and especially Sweden with their negative rates, need a change, to be out in front of inflation… But they chose to remain with their hands firmly planted beneath them, and the European Central Bank (ECB) decided to not move up their calls for the next rate move, which in essence should have been a good thing for the euro, because the recent data in the Eurozone has shown the effects of the Trade Wars, and there were some that thought the ECB might be moved talk about the slowing down as a risk… But they didn’t… and the euro didn’t get any love either… go figure…

OK… enough with the housekeeping from this past week. As I look at the currencies this morning I see them still being held under the dollar’s spell… They seem to be like deer caught in the headlights… Not knowing if they should hold still, jump, run, retreat, what? I find times like these to be the worst of times to write about currencies, because there’s just nothing there… Unless I want to sound once again like I’m beating a drum and waving a flag for the Russian economy, (hint, they are kicking tail and taking names later!) But… I carry on despite the inadequate amount of information available when nothing is happening!

Or talk for hours about how the Brazilian real continues to recover its losses from these past couple of years, with another big jump in the value of the real overnight. But we’ve seen how these politically charged currencies (see Indian rupee) can get pumped up, to be totally set up for a reversal when the new leader (s) can’t get anything accomplished. 

Shoot Rudy, even the Canadian dollar/ loonie, which saw a nice rally right after the Bank of Canada (BOC) hiked rates last week, has given back those gains… Man, that was quick, eh? It’s much like most things in life… gaining the objective is much easier than maintaining it! You can lose weight, but it much easier to lose it than to keep it off… And so on… So, the loonie, gave back its gains, and the price of Oil didn’t give any of the Petrol Currencies reason to gain last week.

We start the week with the price of Oil trading with a $67 handle… A far cry from the $80 a barrel that was being talked about just two weeks ago…

Gold, also seems to be stuck in the mud along with the currencies, the shiny metal was able to gain a whopping $1.20 on Friday… That’s it, that’s all, thanks for coming, there’s a nice parting gift waiting for you at the door… Johnny, tell them what they’ve won!

There was something that came across my computer screen this past weekend, and that is news that, China and Japan had signed a bilateral currency swap agreement on Friday during Japanese Prime Minister Shinzo Abe’s visit to China, sized at 200 billion yuan (28.7 billion US dollars), China’s central bank announced on its website Friday.

After all those years when there were unmentionables, from past wars, keeping these two from working out any agreements, they’ve come to an agreement that works against the dollar… Think about that for a minute and then come back…

The U.S. Data Cupboard on Friday printed the first view of 3rd QTR GDP, and it was 3.4%, certainly good enough, but well below the 4.2% of the 2nd QTR, and if you asked me over a cold frosty one, I would tell you that I would bet a shiny quarter that this will be the highest 3rd QTR Print, as I believe the following revisions will show 3rd QTR GDP to have dropped even more…  

This data takes me back to 3 months ago, when I wrote that the 2nd QTR’s GDP was like a star that’s burning out… It shines the brightest before flaming out… Not that I’m patting myself on the back or anything like that, but hey! I said it then… so why not remind everyone? HA!

Today’s Data Cupboard starts the week off with bang, as two of my fave reports will print for Sept: Personal Income and Spending, which probably won’t be good… And then Sept. Core Inflation will print…  Tomorrow’s Data Cupboard will have the Case/Shiller Home Price Index, which will be watched intently, after the past couple of months of rot on housing’s vine….  Cause and effect, folks… Apply that to the rate hikes and the rot on housing’s vine…  the definition is: the operation or relation of a cause and its effect….    I’m just saying… 

Before I head to the Big Finish today, I was reading my Things That Make You Go Hmmm… by Grant Williams last night, and he had this little ditty among all his other great passages about housing in his letter. He was talking about Commercial Real Estate (CRE) that’s circling the bowl right now, and pointed out this: “(Forbes, October 22, 2018): Bank OZK lost more than a quarter of its value on Friday after the Arkansas based lender (formerly known as Bank of the Ozarks) wrote off about $46 million in commercial real estate loans on two unrelated projects in North Carolina and South Carolina.”  

That’s right he said $46 Million in write offs of bad, or non-performing CRE loans…  I truly believe that when we look back at this mess in a couple of years, someone is going to say, “remember when Bank OZK had to write off $46 Million in CRE loans, that seems to have been the trigger”…  

OK, back to our regularly scheduled programming… To Recap… The currencies are being held under the dollar’s spell, and are like deer caught in the headlights… Gold was only able to eke out $1.20 on Friday, and is down $3.57 in early morning trading today…  Oil continues to stay down in price, and Chuck was very frustrated with the Central Bank meetings last week from Norway, Sweden and somewhat surprised by the non-fallout of the ECB meeting. 

For What It’s Worth… My oh my, what have we done? We’ve allowed this welfare state to become so massive that we border on it becoming unsustainable… This is quickie article today, folks, that includes a quote from Albert Von Mises and can be found here: https://needtoknow.news/2018/10/over-half-of-america-gets-more-in-welfare-than-it-pays-in-taxes/

Or, here’s your snippet: “More than half of Americans receive more money in various types of government transfer payments (Medicare, Medicaid, food stamps and Social Security) than they pay in federal taxes. The Congressional Budget Office reports that only the top 40% income earners in the US pay more in taxes than they receive in government transfers. Ludwig von Mises once noted that once we get to the point that a majority of the voting population receives more in benefits than it pays in taxes, then voters will demand more and more wealth be transferred to them through government programs. It will then become politically necessary to extract larger and larger amounts of wealth from a minority in order to subsidize the majority.”

Chuck again… I shake my head, and think about… no wait, Chuck, you know darn good and well that nothing good will come from what you were about to talk about, so just move along and have a good day without all the trouble… OK… but I really wanted to say… No! you don’t!

Currencies today 10/29/18.. American Style: .7096, kiwi .6560, C$ .7640, euro 1.1397, sterling 1.2837, Swiss $1.0004, European Style: rand 14.4336, krone 8.3412, SEK 9.1126, forint 284.48, zloty 3.7855,  koruna 22.6615, RUB 65.61, yen 112.20, sing 1.3820, HKD 7.8431, INR 73.26, China 6.9435, peso 19.55, BRL 3.6580, Dollar Index 96.46, Oil $67.28, 10-year 3.09%, Silver $14.68, Platinum $839.00, Palladium $1,111.95, and Gold… $1,229.96

That’s it for today… Sorry for the skip through the park on the currencies today, but there’s just not enough there to spend a lot of time with… But that will change, as it always does! Congrats to the Red Sox for their World Series Championship that was completed last night. It’s not often that the team with the best reg. season record, wins it all. (right 2015 Cardinals?) The pain in my foot joint is gone, so the gout has left… YAHOO! Thanks for the suggestions on how to deal with the gout from you dear readers…  This is my second time having to deal with the gout, but the first time was 2 years ago, so, I look at it as my body telling me to slow down… And so I did!  Next week, I’ll be writing to you from my home away from home, as I go to check up on work that’s being done… The World Series is over, so now the Free Agent signings can begin… Here’s my weekly plead to the Cardinals to get Bryce Harper…   And with that…  One of my all-time fave songs by anybody will take us to the finish line… Chicago Transit Authority’s: Beginnings…    I hope you have a Marvelous Monday, and Be Good To Yourself! 

Chuck Butler

 

Rocktober 25, 2018

* Bad Data day for the U.S. changes the course of the currencies

* And Gold continues to gain new investors… Follow the money! 

Good Day… And a Tub Thumpin’ Thursday to you! Man o man, I can’t catch a break these days with something always causing me pain somewhere in my body… I woke up yesterday morning with the gout… Now, I already needed a cane to walk with, and now I limp at the same time! A couple of days of steroids will knock that out, then what will come next? Only the shadow knows…. I’m always reminded of a TV commercial, that I used to imitate the announcers aggravating voice, and say that’s Jim he can’t skate he’s got the gout! I haven’t done that voice since my former colleague and longtime friend Ann Hopkins left the bank… She always requested that I do the voice… Ok, Loggins & Messina greet me this morning with their live version of: Angry Eyes… Well, I bet you wish you could cut me down with those angry eyes…

A nasty first part of the day yesterday, saw the euro drop below 1.14, and the A$ lose about ¼-cent, and even though the Chinese said they were going to stabilize the renminbi, that hasn’t happened, and that went through the morning, until… a couple of headlines… First, it was an article in the Financial Times that said that “Foreigners cut back purchases of Treasuries as Deficit Grows” And now we’re talking about more tax cuts? What am I living in a nightmare here or what? Ok, back to writing… The second headline was from MarketWatch that said, “New-home sales plunge to a near two-year low as housing picture deteriorates”

After the markets got a strong whiff of those headlines, the dollar bugs began backing off their assault on the currencies, and in turn, the currencies got to kick some sand in the dollar bug’s face! Will that be enough to turn this dollar strength around for good? We will know something more definitive by the end of the day tomorrow… 

Last night I was checking the currencies and saw that the kicking of the sand in the dollar bug’s faces had come to an end, as now the focus shifted to the European Central Bank and their meeting this morning…  So, after all the gyrations of yesterday and the overnight markets, we begin this morning with the currencies wearing the same clothes as last night, except for the loonie… 

The Bank of Canada, (BOC) didn’t surprise many watchers yesterday, when they hiked their internal rate to 1.75%, from 1.50%, making this the highest rate that Canadians have seen since 2008! And the loonie responded marvelously, gaining more than 1-cent! I can hear my good friend Mike Kettler, laughing right now, he always kids me that I get too excited about 1-cent, or something near that, gains… but in the whole scheme of things, a full 1-cent move in one day for a currency is HUGE… You have to remember, as I always respond to Mike, that the currency market is $5 Trillion a day in size… Large sums of money trade currencies…

The Riksbank (Sweden) left their negative (-.50%) rate remain in place yesterday, and the Norges Bank issued a communique that they will announce their rate decision today… It was just yesterday, that I talked about bad timing for these two Central Bank in that they would love for the European Central Bank (ECB) to go first, and not the other way around… Well, the Norges Bank bought themselves a day,  and all they did was leave rates unchanged at .75%…  UGH! 

The ECB has already stated that they intend to end their bond buying program at year’s end. So, that’s a start… They also have stated that the negative deposit rates would remain until next summer… The markets are so keyed up about this, and any sign, intentional or unintentional will be reacted to and found in the euro’s moves. ECB President, Mario Draghi, isn’t new at this… And I doubt he’ll slip up, so any remarks that are made will be intentional, with the hopes that it moves the markets one way or the other… In this case, I don’t think he’s going to move up the negative deposit rates, timeline for removing them, and that will leave traders with sour tastes…

Well, Gold started the day yesterday down a couple of bucks, and ended the day up about $5 bucks… The Wall Street Journal, which normally has to search their roster to find a writer that can do an article on Gold, found one the other day, and check out this heading… “Gold Regains Its Shine Among Investors”, and then followed that article up with another heading that said, “Other Market’s Woes are Boon to Gold prices”…  We’ve seen the usual Central Bank suspects, Russia, China, India, making announcements that their Gold reserves are growing , and we’ve seen some newcomers like Hungary, and Poland come around to the Central Bank Gold buying party going on… My dad always told me to “follow the money”… Where the money goes is where you should go with your money, and then he would add, that is when you get some money!”

Yes, all of these Central Banks are backing up the trucks to the Gold window because the price of Gold has dropped so much, and in my humble opinion, that’s what you should be doing too! I’m just saying… 

The U.S. Data Cupboard yesterday, had more housing data, and it wasn’t very good, as we discussed above… One of my fave economists, Danielle di Martino Booth, chimed in on Twitter that “with housing stocks down 40%, investors hope Fed gets the message”…  I found that interesting because she’s been behind the Fed’s rate hikes 100%, until now… 

As mentioned early this week, we finally get a piece of real economic data today with the print of September Durable Good and Capital Goods Orders… I expect the Durables to be negative, and the Capital Goods, which I prefer to refer to as CAPEX, which stands for Capital Expenditures, should be unchanged, which is to say… SLOW! 

After the James Bullard speech last week that we talked about on Monday, more Fed Heads hit the speaking circuit this week, and all them have had a different spin on their rate hike expectations… There’s whispering among the group, folks… Will there be an uprising? I think the Fed Heads see what everyone else is seeing, with regards to housing, and the stock market, not that they care about the stock market, tsk, tsk…   Or to put it another way, I sure hope to hell that the Fed Heads see what we see! 

I got a big kick out of a headline on the Bloomberg this morning… Get this… “• The U.S. economy is doing great. Why isn’t housing?   I can’t believe, no wait, I can believe, I just find it ridiculous to think that we’ve gone so far as to believe that the economy is the stock market…  The stock market should be a result of the economy, right? That is unless stock buybacks skewer the results…  Anyway, I hope Bloomberg found the answer to their question… 

To Recap…  The currencies got to kick some sand in the faces of the dollar bugs yesterday, after a couple of headlines warned that rate hikes are slowing the economy, at a time when debt is exploding higher… But the overnight markets took those gains off the table, and we’re back to the same clothes as yesterday for the currencies, ahead of the ECB meeting, taking place as I write.  Gold is getting warmed up in the bullpen for a late inning save for investors… wink, wink… 

For What It’s Worth… I’ve long been a big fan of James Grant and his Interest Rate Observer newsletter… Jim is a deep thinker folks, and his comments aren’t usually available to anyone outside of his subscriber list, so when I see them in the public’s view, I grab them immediately!  Ed Steer found them first, so kudos to Ed… But here’s James Grant talking about interest rates…  and can be found here: http://thesoundingline.com/james-grant-if-interest-rates-normalize-the-national-debt-will-cost-more-than-the-military/

Or, here’s your snippet: “It took rates exactly ten years to go from 2.25% in 1946 to 3.25% in 1956. Now already, we have gone on the ten-year from 1.375% to 3%. So rates have more than doubled in the course of two years. So the tempo… now would seem (to be) a bit more brisk… Mortgage activity has been dampened. Companies that have borrowed at floating rates are now having to re-budget. You know the federal government has got some debt and it has been paying the most concessionary rates. I think less than 2% on average. So, if the interest bill for the federal government were to go back to… 6%… on $18 or $20 trillion of market holdings, the interest bill would surpass the defense budget… Look at the number three (3% interest rates), of course it’s a small number, and it is small as measured against the evident rate of inflation. So, since the past 50 or so years, the 10-year treasury security has yielded something like 2.7% in excess of the rate of inflation on average… So the rate of inflation now is generously reckoned at… 2%… that would make the 10-year yield not at three-ish but at four-and-a-half-ish or higher and I think that would truly bite… People say, for that reason, it can’t happen. We cant afford that. Well, just because it would be inexpedient doesn’t mean it can’t happen.”

Chuck Again… yes, I’ve said this before, and this looks like a good place to say it again, and PLEASE pardon the language, I’m just repeating it as said by then Presidential Candidate Trump… “If interest rates get to 4%, we’re screwed”…  

Currencies today 10/25/18. American Style: A$ .7078, kiwi .6522, C$ .7756, euro 1.1401, sterling 1.2895, Swiss $1.0003, European Style: rand 14.5302, krone 8.3260, SEK 9.1047, forint 284.30, zloty 3.7822, koruna 22.6471, RUB 65.45, yen 112.27, sing 1.3795, HKD 7.8397, INR 73.08, China 6.9393, peso 19.60, BRL 3.7006, Dollar Index 96.33, Oil $66.86, 10-year 3.13%, Silver $14.72, Platinum $827.00, Palladium $1,095.00 and Gold… $1,232.60

That’s it for today and this week…  I know if you’re a fan of either team in the World Series, the games are interesting, but for me, they can’t hold my attention very long. Maybe it’s the pace of the game with all the commercials and time spent adjusting batting gloves, but something’s not right for me this year…  It’s a BIG GAME this Saturday for my beloved Missouri Tigers, who will take on the #12 rated Kentucky Wildcats… Come on Drew Lock, you’ve got to beat this team once in your time at Mizzou! The Great Carlos Santana takes us to the finish line today with an oldie but goodie, classic rock song: Black Magic Woman…  The first time I ever heard Carlos Santana was when I went to see the Woodstock movie. I Immediately found my way to the record store to buy a Santana album! that was 1969…  Almost 50 years ago… WOW OK, let’s see what we can do to make this a Tub Thumpin’ Thursday, and Fantastico Friday! And remember to Be Good To Yourself!

Chuck Butler 

Rocktober 24, 2018

* Currencies get sold in the overnight markets

* Gold gains $8.20 on Tuesday, but needs to go on a roll! 

Good Day… And a Wonderful Wednesday to you! Well, I received a high five from my oncologist yesterday, but she reminded me that the wolf (metastatic cancer) is always at the door, and we should continue the chemo treatments… I liked, and pointed it out to her, that she said “we should continue the chemo treatments.” I told her that unless she’s going to get up at the time of day that I get up to take that medicine on an empty stomach, with me… Than “we” should come up with another way of saying that… Of course I laughed, she laughed, and she sent me to the infusion center as my punishment! HA! So, life is good for me right now, no active cancer in me at this moment in time… YAHOO! And the Beatles greet me this morning with a very appropriate song: Getting Better… I have to admit it’s getting better, it’s getting better all the time, (It can’t get no worse!)…

OK, that’s out of the way… I don’t have any bombshells to lob your way today, like I did yesterday… And the currencies just drifted yesterday with some booking some small gains, and others with small losses, it was a nothing day for the currencies, except… The Brazilian real, which trades outside the grid, if you will, and is not included with anything other than the BRICS… And the real has been on a very strong run for over a month now… A few years ago, the real was the best performing currency of the year! And then the trap door sprung under the real, and down she went, down, down, down… So, the first to worst title is owned by the real… Now, the question is… Can the real go worst back to first? I’ll leave that for you to decide, but if you decide to take a flyer on the real, please be careful and watch it like a hawk!

But as I look at the currencies early this morning, they have a different look to them than they did yesterday, and this look isn’t a good one for the currencies, as in the overnight markets they got sold further… I’m not seeing the justification for al this dollar strength, but it’s here, and so we have to batten down the hatches once again. UGH!

Gold couldn’t hold onto its early morning gains of nearly $13 yesterday, but did end the day up $8.20 to close at $1,229. I’m wondering what it’s going to take to get Gold on a roll, here… I noticed last week in the Commitment of Traders (COT) report that the Commercials had gone long gold futures…  Hmm… Apparently that news isn’t going to do the trick, so we’ll have to look for something else…  I guess, and this is my mea culpa, that the big move in the price of Gold that I thought we would see by the end of summer didn’t materialize…  I still believe that this will happen, but don’t have any timeline in mind at the moment. Not that giving a timeline makes it come to reality, right? 

The price of Palladium has really pushed the appreciation envelope lately, and as I understand it, this is because of a lack of supplies issue… Remember a few years ago, when Palladium and Platinum were the stories each day with their increases, and then one day it was no more? Well, that came about because Russia delivered a Truck load of the metals to the markets…   The question this time is… Will Russia be so quick to help out the West this time? 

The only thing I have for you that could be considered a bombshell, is the news that President Trump “Jerome Powell was endangering the US economy by raising rates and that he “maybe” regretted nominating him”

Unfortunately, for the President who is by nature a lover a low rates, and understands inflation, he did the deed, and he hired the Fed Chairman that has hiked rates 3 times so far this year, and will most likely do so again in December.  And this is reality, not reality TV, so, while it’s theoretically true that Powell could be “fired”, it’s not going to happen… 

Well, a couple of weeks ago, there was a lot written about how the price of Oil was heading back to $100… I even got caught up in it, thinking that the Hurricane hitting the Gulf of Mexico would be the lynchpin of a move for the price of Oil to reach $80…  But that didn’t materialize, as I explained last week, Oil supplies here in the U.S. have seen a huge ramping up and then I talked earlier this week about how China stopped buying Oil from the U.S. which was probably the cause of those supplies increases…  So, as I write this morning the price of Oil is trading with a $66 handle.. 

In Central Bank news… The Bank of Canada (BOC) meets this morning and most likely will hike rates 25 basis points or 1/4%, which would help the loonie out given the hit it is taking from the drop in the price of Oil.  

The Norges Bank and Riksbank (Norway & Sweden) are meeting as I write, but their timing couldn’t be more bad, given that the European Central Bank (ECB) meets tomorrow, and the Norges Bank and Riksbank would love to know what the ECB is going to say before they make any moves, so I don’t expect anything from these two today, and as far as the ECB goes, I’m hoping that they will be more upfront with their plans for the unwinding of their stimulus policies, that, my friends would go a long way toward helping turn around the euro… 

The Indian rupee has gotten a stay of execution from Currency traders as the price of Oil slips.. India is one of the countries that benefits from a lower Oil price, as their Current Account Deficit, doesn’t take so many hits…  On the other side of the Coin… The Russian ruble benefits when the price of Oil is in rally mode…  So, here are conflicting countries that are both a part of the BRICS (Brazil, Russia, India, China, S. Africa).

I read a report this morning on the Bloomberg that the writer was of the opinion that Oil’s rally wasn’t over yet, and this pullback in the price of Oil is temporary at best…  Hmmm…  no mention of the supplies… I’m just saying… 

It’s also PMI Day around the world…  Today and tomorrow, we’ll see the PMI’s (manufacturing indexes) from most countries… The Eurozone has already printed their PMI for Rocktober… And they weren’t pretty…  I took this from the Financial Times… “The purchasing managers’ index for the eurozone fell to 52.7 in October, down from 54.1 in September, and the lowest figure for 25 months. “The slowdown is being led by a drop in exports, linked in turn by many survey respondents to trade wars and tariffs, which appears to have darkened the global economic environment and led to increased risk aversion.” -Financial Times 10/24/18

The U.S. Data Cupboard will have the Markit version of PMI’s today, so it will be interesting to see if the Trade War is affecting the U.S. too… I suspect it is… 

To recap…  The currencies drifted yesterday, but are getting sold in the overnight markets. The Eurozone printed their latest PMI, and it dropped, due to the Trade War… The Trade War is beginning to show up everywhere folks… Gold gained $8.20 yesterday, but just can’t seem to find the umph to go on a roll… and President Trump “may regret” nominating Jerome Powell as Fed Chairman… 

For What It’s Worth… When I saw this on Ed Steer’s letter this morning, I about blew a gasket! Paul Volcker speaking? WOW! This has got to be good, I thought to myself, and it was, and now it ended up as my FWIW article today, and it can be found here: https://www.zerohedge.com/news/2018-10-23/paul-volcker-trashes-fed-washington-plutocrats-worlds-hell-mess-every-direction

Or, here’s your snippet: “While we have grown used to Alan Greenspan’s flexible world views appearing regularly among US media channels, when former Fed Chair Paul Volcker speaks, it’s low frequency nature tends to make on pay attention, and he is not optimistic about the state of the world… at all.

When he looks around now, he sees “a hell of a mess in every direction,” including a lack of basic respect for government institutions.

“Respect for government, respect for the Supreme Court, respect for the president, it’s all gone,”he said.

“Even respect for the Federal Reserve.”

“And it’s really bad. At least the military still has all the respect. But I don’t know, how can you run a democracy when nobody believes in the leadership of the country?”

…a current Fed that seems to be following a completely arbitrary benchmark…”I puzzle at the rationale,” he wrote. “A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification.”

…and a “swamp” in Washington run by plutocrats.

“There is no force on earth that can stand up effectively, year after year, against the thousands of individuals and hundreds of millions of dollars in the Washington swamp aimed at influencing the legislative and electoral process.“- Paul Volcker

Chuck again…  Well, respect is earned, and that’s all I’m going to say about that!

Currencies today 10/24/18.. American Style: A$ .7091, kiwi .6544, C$ .7636, euro 1.1400, sterling 1.2910, Swiss $1.0027, European Style; rand 14.1793, krone 8.3230, SEK 9.0832, forint 283.37, zloty 3.7732,  koruna 22.6510, RUB 65.35, yen 112.65, sing 1.3801, HKD 7.8417, INR 72.96, China 6.9374, peso 19.31, BRL 3.6918, Dollar Index 96.36, Oil $66.72, 10-year 3.14%, Silver $14.71, Platinum $826.28, Palladium $1,133.98, and Gold… $1,228.65

That’s it for today…  Well, the World Series began last night…  The Red Sox won the first game, which ended much later than I could bear to stay up for…  If you ever want to get depressed quickly… Visit a Cancer Center’s Infusion Center… I used to spend a lot of time in those centers, and don’t wish that on anyone! OK, Chuck, no need to bring everyone’s spirit down… move along here…   I wonder what’s on the agenda today? I haven’t a clue, and that’s a good thing… spontaneity!  Ok, get ready for this one… Humble Pie, takes us to the finish line today with their song: I Don’t Need No Doctor…  A young Peter Frampton was an important piece of that band… ( a little rock trivia for you today!)  I hope you can get out make this a Wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler