Author: admin

July 11, 2018   

* The boys in the band show up Tuesday

* Currencies once again get sold overnight… 

 

Good day… And a Wonderful Wednesday to you! I went out and made sure that I had a Tom Terrific Tuesday yesterday… Did you?  I sure hope so, but if not, you can make it up today with a Wonderful Wednesday! I see my beloved Cardinals won last night, when I went to bed the score was 4-2 in favor of the Cardinals. And they wound up with a football score winning 14-2… The Marshall Tucker Band greets me this morning with their song: Heard It In A Love Song…   

Well, the currencies didn’t move much yesterday, if anything they firmed up a bit, as the bounce from the dollar in the overnight markets Monday night was brought to an end. Last night in the overnight markets saw the same kind of trading we saw the previous night, with the dollar being bought, for some unknown reason…  Oh, there’s the usual suspect of excuses for this dollar buying… The Fed’s on a faster pace to hike rates, a flight to safety, and it’s the king currency, are at the top of the lists of excuses, but to me that’s all they are… excuses, and excuses never won a ballgame for anybody! 

All those excuses are nothing but window dressing… curb appeal… lipstick for a pig, and all those other things… Because the traders out there know as well as I do, that a recession for the U.S. is coming, and therefore that wipes out the rate hikes..  In fact, I was explaining to my good friend Duane, yesterday that what we’re probably going to see during the next recession is negative interest rates here in the U.S.  So, that would take care of the flight to safety excuse, and then there’s this King Dollar that the dollar bugs love to talk about… Well, if that’s all it has going for it is talk, then as my dad taught me years ago… Money talks, BS walks…  

But for now, we have to put up with this stuff, but let it go, because its just a phase… You know like when your child comes home with a mohawk spike in his hair that’s colored orange… No reason to fly off the handle, it’s just a phase and it will pass… This too shall pass… Just be patient, keep your currencies and Gold, and I feel it will all be right on the night!  Of course that’s just my opinion and I could be wrong, but I wouldn’t say these things if I truly didn’t believe in them! You can take that to the bank!

So, Chuck, do you really think that negative interest rates are in our future here in the U.S.?  Yes, I do… Think about this, the average interest rate that was in place prior to previous beginnings of recessions was 6%, and the average total amount of rate cuts during a recession was 4.03%…  And our current Fed Funds rate is 2%?    Well, if we just have a normal recession, which I doubt we will because of all the excesses that have built up in the past 9 years, easy credit, zero interest rates and lackadaisical attitude toward debt build up, but if we just have a normal recession, 4% in rate cuts puts us negative -2%…   See what I just did with the math there? Man, I am a math whiz, eh? HA!  

But seriously, do you see where I’m coming from there? Not many people in the world know these averages, but now you do, dear Pfennig Reader! And I’ll tell you who else knows them all to well… The Fed Heads…  Recall a couple of years ago, when then Fed Chair, Janet Yellon, asked for a answer to her question, “Can the U.S. have negative deposit rates”  and her answer was yes…  I made a big deal out of that then, calling it “greasing the tracks”,  and in the next recession, the Fed Heads will be able to pull that off the shelf, dust it off, and implement negative deposit rates!   

This is all in the plans for getting you, me and the guy down the street that cuts his grass with his shirt off, to spend our money that we’ve saved and hold in the bank…  But here’s where it gets really dark and grim, folks, and if that’s not your bag baby, then skip ahead because I’m going in… Who’s with me? Come on, I don’t want to be like Will Ferrell in the movie where he’s streaking and thought the rest of the crowd was behind him, only to be the only naked guy running down the street!   

OK, those that have chosen to come with me to this dark and grim place, had better put your sharp objects away first… Ok? Alrighty then here we go…  This is all a plan to eventually go to digital money… a cashless society…  here’s the idea hatched in my head several months ago…  The recession causes the Fed to go negative with interest rates, and depositors decide instead of spending their cash, they’ll just go to the bank and withdraw it, take it home, and put in under the mattress because at least there it’s not costing you money to have it…  The Gov’t sees this as a real problem and decide to make withdrawing your cash a crime, and overnight your dollars become digital units in the bank…  Talk about an end to your privacy, civil liberties, and all the other things that make this a great country! 

I’m back now…  that was quite the ugly trip to the dark and grim location in Chuck’s brain, wasn’t it?   But I have one question to ask… Got Gold?

Speaking of Gold… The shiny metal was gaining some ground yesterday morning, and then the boys in the band showed up with their arms full of short Gold paper trades… If you see a graph of the day’s trading in Gold you can point to the exact time of day the boys in the band showed up…  So, the early gains were wiped out, and Gold ended up down $2.20 after about 267,000 contracts were traded… 

And if I can just circle the wagons and go back to the dark and grim place for a moment… The way I see things, Gold will play a BIG role in the formation of a new currency regime…  I’m just saying… 

Today’s U.S. Data Cupboard just has the PPI (wholesale inflation index) for June to view today… PPI has really been on a tear, higher that is, so far this year, and I doubt that it took a breather in June, but we’ll see…  There’s not a whole lot in the Data Cupboard this week folks.. Tomorrow we’ll see the stupid CPI (consumer inflation) and that’s it…  So, the currencies will be left to trade on their own accord the remainder of this week… That’s usually not a good thing for the dollar, but we’ll have to wait-n-see how this all falls out. 

I’m still amazed that the major media outlets aren’t making a big deal out of the Consumer Credit (read debt) print from Monday, when it jumped to $25 Billion from $10 Billion the previous month… To me, if I were a paid journalist, I would be looking into this data print, and telling everyone that this is not good… 

To recap…  The currencies gained a bit yesterday, but gave it all back and more in the overnight trading… Consumer Credit (debt) was shockingly strong at $25 Billion, with credit card debt really soaring…  Gold couldn’t hold its early morning gains and ended up down on the day $2 and change…  Chuck takes some brave readers to a dark place this morning… 

For What It’s Worth…  I don’t know how I was able to pull this article, recall me telling you my problems with Bloomberg, but I was, so this is about a firm telling us their “recession flag” is flashing red, and it can be found here: https://www.bloomberg.com/news/articles/2018-07-10/a-u-s-recession-indicator-flashes-red-for-leuthold-s-paulsen

Or, here’s your snippet: “One gauge of recession risk with a “pretty good” track record over the last half century has just raised a cautionary signal, according to the Leuthold Group.

For the first time since just prior to the 2007-2009 recession, premiums on the lowest-rated tranche of investment-grade U.S. corporate bonds have risen to 2 percent after being below that level, according to data compiled by the Minneapolis-based research group. The analysis looks at the gap in yields between corporate debt rated Baa by Moody’s Investors Service and those on 10-year Treasuries.”

Chuck Again…  More and more the big guys are coming around to my way of seeing this economy…  

Currencies today 7/11/18… American Style: A$ .7393, kiwi .6793, C$ .7550, euro 1.1710, sterling 1.3245, Swiss $1.0051, European Style: rand 13.4880, krone 8.0645, SEK 8.7790, forint 277.03, zloty 3.6945, koruna 22.1350, RUB 62.20, yen 111.26, sing 1.3605, HKD 7.8488, INR 68.72, China 6.6223, peso 19.02, BRL 3.8473, Dollar Index 94.35, Oil $73.71, 10-year 2.84%, Silver $15.97, Platinum $841.14, Palladium $937.07, and Gold… $1,250.06

That’s it for today… Seeing Dexter Fowler hit a grand slam last night, makes you wonder how good the Cardinals would be if he had hit like that all year?   I’m just saying… Duane and Chuck tried a new place for lunch yesterday, that was very interesting and good! Cardinals play one more game on this extended road trip, and then come home! George Harrison takes us to the finish line today with his song: What Is Life?  And with that, I’ll let you go today… HA!  I hope you have a Wonderful Wednesday, and Be Good To Yourself!

Chuck Butler

July 10, 2018

* Currencies get whacked in the overnight markets… 

* What’s up with Chuck today?

Good day… And a Tom Terrific Tuesday to you! I hope your Monday was Marvelous, as mine was… It’s very quiet here, when I’m all alone, and that’s a good thing!  I think  I gave a dear reader a heart attack the other day, I guess my fat fingers reported the ruble price as 22.94… When it was really 62.94… Darn fat fingers… No baseball last night to complain about. HA! I broiled me a nice big fat steak last night, sautéed some mushrooms to go with it, had a salad, and a bottle of wine… It was a great meal for me, especially since I’m here by myself!   The Great Jimmy Buffett, greets me this morning with his song: Fins…   You’ve got fins to the left, fins to the right and your the only girl in town!

Well, we didn’t see any further gains in the currencies yesterday, and in fact there could have been some slippage, but it was difficult to tell, given the tight ranges the currencies trade in.  Gold wasn’t able to hold on to the near $10 gain it had in the early morning trading, only being able to hold on to $ 4 of it.. UGH!  But that was yesterday, and in the overnight markets, the currencies have given back a chunk of their gains from late last week, and the euro is in danger of giving back/ falling below the 1.17 handle again..  

I have to say that this small bounce by the dollar surprised me, but then, I’m not sure why I would be surprised…  It’s all manipulated markets and the direction is determined by the elites…  Which, therein lies my surprise…  I’m convinced that the elites want to collapse the dollar, so a new currency regime can be put in place… Of course this isn’t going to happen today, next week or even next year, but my point is simply if that’s the direction they want the dollar to eventually go, why would they allow support for it now?  

I thank you for staying with me here today after that last paragraph, as I can see some of you dear readers thinking that I’ve lost my mind, well, no worries, I found it, so let’s continue on with the letter today, eh?

I waited and waited for the Consumer Credit data to print, and having not seen it yesterday, I was thinking they were hiding something… But it must have been my source, not picking it up, because Consumer Credit (read debt) did print! 

And brother, what a print it was! Consumer Debt rose $24.5 Billion in May, up from just $10 Billion in April… All the components increased but the one that caught my eye was Credit Card debt, which rose  $9.8 billion, the biggest monthly increase since November, and one of the highest monthly increases on record!  Now I see why the propeller heads are saying the second QTR GDP is going to be a whopper!  

But don’t you also see how I have come to the thought that it will be a one and done for the whopper GDP quarter? Run those credit cards sky high, until they are maxed out, then what do you do? You wait for another one to come in the mail! But my point here is that we don’t normally see credit card debt increase like this over and over again… 

I told you yesterday that the stock market seems to be taking a “wait-n-see” attitude with the Trade War, but that won’t last long folks… My suggestion would be to make sure you have your stop losses in place. I mean you should have them in place all the time, but especially now, because Recessions are not kind to equities… I’m just saying…

The flight to safety kind of took a breather yesterday, as I just told you Gold wasn’t able to hold its early gains, the price of Oil gained pennies on the day, and the 10-year Treasury ‘s yield remained steady Eddie on the day. The trading yesterday was very much like what we normally see in the dog days of summer, but with all the goings on around the world, it sure seems like the dogs will be more active than usual this summer! 

So, I read where the N. Koreans are putting a different spin on the summit that took place last month between the leaders of the U.S. and N. Korea. And this is where I’m going to point out once again that I was one of the few people in this country to point out that the agreement for N. Korean to denuclearize DIDN’T HAVE A DEADLINE!   And now the N. Koreans are taking advantage of that…  You know, my mother used to say if you go to bed with dogs, you end up with fleas…  I wonder if President Trump is having an itching feeling these days? 

The GATA folks sent me a note yesterday with a link to a site where they calculate sound money states… Now, that’s an interesting concept, don’t you think… I think of Arizona who I told you last year was dropping the sale tax on precious metals and so forth… And looky there, Arizona is the 4th best state…  Here’s the top 6 states for sound money.. 

Best 6 states for sound money:
-Utah – 63.16%
-Texas – 58.82%
-Wyoming – 57.89%
-Arizona – 47.37%
-South Dakota – 47.06%
-Oklahoma – 42.11%

If your state is not listed there, you might want to fire off a letter to your congressman and ask him why your state is not in the top 6 of sound money states! 

In the U.K. a BMOC with BREXIT, Boris Johnson, resigned and that makes two supporters of PM May, as she attempts to get her BREXIT plan passed. The pound sterling took the news as bad news, and got sold.  In China overnight, the renminbi was actually allowed to gain on the night. This has to be the first appreciation in the renminbi in over a month!  Hmmm, I do believe I told you last week that the weakening of the renminbi was about to end… More proof that even a blind squirrel can find an acorn! HA! 

The price of Oil moved upward into the $74 handle in the past 24 hours. And the Petrol Currencies of Rubles, and loonies gained on the move in the price of Oil, but the krone was held back because of the weakness in the euro, and the Brazilian real is a basket case, so there’s no amount of increase in the price of Oil that’s going to help the real! 

The U.S. Data Cupboard is pretty bare today with only some 3rd Tier data prints to offer us.  But I’m still all worked up over the rise in Credit Card Debt in May… I find that to be unsustainable, but we’ll have to wait-n-see, eh?

To recap… The currencies held fast throughout yesterday’s trading, but last night’s overnight markets whipped them pretty good, with the dollar coming back, and that surprised Chuck, who then goes into a third mind kind of spiel, who knows what spurred that? Gold couldn’t hold its early gains yesterday, and is down nearly $7 in the early morning trading today…  The U.K.’s PM May, is watching her supporters resign, and now there’s a question of whether she’s going to be able to hold on to the PM job, all this has the pound under pressure… 

For What It’s Worth… Ok, hit article is about how the Big 3 of the European Union (Germany, France and the U.K.) are going to band together to defy the U.S.’s call to not trade with Iran… Pretty interesting I thought, and it can be found here: https://www.rt.com/business/432363-eu-dollar-trade-iran/amp/

Or, here’s your snippet: “Major European countries party to nuclear negotiations with Iran – France, Germany and the U.K. – have agreed to maintain trade with Tehran independent from the U.S. dollar, said Russia’s Foreign Minister Sergey Lavrov.

European companies are under increasing pressure from Washington to cut business ties with Tehran. Since the majority of transactions are currently conducted using the U.S. dollar, firms working in Iran face potential U.S. penalties.

According to Lavrov, the decision particularly concerns small and medium-sized companies. He explained that the participants in the Iranian deal have agreed to work out measures to protect the countries’ businesses from US sanctions.

“Everyone agrees that this [U.S. sanctions – Ed.] is an absolutely illegal and unacceptable policy, but, of course, this can hardly be changed and there will be enough struggle in trade, economic and political spheres,” the minister said.”

Chuck again… Well, my feeling here is that we’re going to see a lot of this going around the U.S. in trade folks… I guess we’ll see what the fallout becomes, but I’ve already told you my thoughts on it… 

Currencies today 7/10/18… American Style: A$ .7445, kiwi .6818, C$ .7542, euro 1.1712, sterling 1.3259, Swiss $1.0052, European Style: rand 13.4490, krone 8.0370, SEK 8.7465, forint 277.46, zloty 3.6887, koruna 22.1190, RUB 62.71, yen 111.23, sing 1.3568, HKD 7.8479, INR 68.68, China 6.6170, peso 19.10, BRL 3.8637, Dollar Index 94.32, Oil $74.11, 10-year 2.87%, Silver $16.02, Platinum $841.86, Palladium $950.96, and Gold $1.250.99

That’s it for today… I saw this really funny (to me) cartoon yesterday, it’s people all crammed into an elevator that has crashed and is in between floors, and the caption says, “Remain calm. It’s not a crash – it’s just a correction”  I’ll have that cartoon in my next DTL piece for sure! I’m also going to dive deep into the Pension funding or lack of funding problem here in the U.S. So, what are you waiting for? sign up for the Dow Theory Letters at www.dowtheoryletter.com   I have some errands to run today, so I’ll get out of the house, which is something I didn’t do yesterday except to get the mail! I noticed the other day that I’ve put just 50,000 miles on my car since I bought it over 7 years ago! Doctor’s offices, hospitals, and down the street to my favorite watering hole is about the only places I go these days… Oh woe is me, right? HA!  Seriously, I’m good as gold right now, so no worries!   And with that, Led Zeppelin is taking us to the finish line with their great song: Kashmir…   I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!  bye~

Chuck Butler

 

 

July 9, 2018

* Jobs Jamboree is interesting… 

* Currencies are back on the rally tracks! 

Good Day… And a Marvelous Monday to you…  I trust you had a grand Independence Day Holiday week. I know I did… Saturday was probably one of the most beautiful days in July I’ve ever experienced in my life!  But the heat will return later this week, so we have that to look forward to! NOT!  I’m all alone again for the next 10 days, so as usual, “Hello, Pizzaman Pizza? I need a large, no, make that an extra large, with extra cheese, walk it through the garden and then through the barn!” HA!  My beloved Cardinals are heating up the twitter verse these days, I wish they would concentrate on gong on a win streak of more than 4 games! Deep Purple greet me this morning with their song: Hush… 

I last left you last week on Tuesday, the day before our Independence Day Celebration, and at that time, the euro was climbing through the 1.16 handle, and on the days following the euro climbed through that handle, and is trading this morning with a 1.17 handle!  I read and researched quite a bit this past weekend, and I have to tell you that most of the chartists believe that the dollar’s run is over, which I would think would lead to lots of back up the truck noises… Beep, Beep, Beep… 

On Friday of last week, the BLS printed their latest version of a very hedonically adjusted jobs report for June… The BLS claims that 213,000 jobs were created in the month of June, which was better than the 200,000 jobs that were expected to have been created in June.  Of those 213,000 so-called jobs that were added in June, 104,000 of them came courtesy of the BLS themselves, adding them to the surveys with their Birth/ Death Model… The Unemployment rate though rose in the June to 4%, from 3.8% in May… And there was something else that caught my eye… Of the 104,000 jobs the BLS added out of thin air, they claim that 89,000 of them were in the Leisure and Hospitality sector…  In fact, they’ve added 373,000 jobs for this sector, this year!  Isn’t that nice that the economy is running on bartenders and wait staff? Not that there’s anything wrong with those jobs, but they aren’t going to bring this economy out of the 2.16% GDP it has averaged for the last 10 years! I’m just saying…

Well, we’ve begun a new quarter, the 3rd quarter of the year is here! And while I’m thinking of what’s going on this quarter, don’t forget that I warned you that the GDP reading for the 2nd QTR  could be a moonshot above 4%, but it will be akin to a star burning brightest right before it flames out.  In keeping with the 4th of July celebrations, in last week’s DTL piece I called the 2nd Quarter’s GDP potential print the Grand Finale… Congers up an image in your mind of fireworks going off everywhere, right?  But then the show is over… And there’s nothing left but smoke and crying! 

The Tariffs began to be added to Chinese exports to the U.S. on Friday, and the stock market shrugged it off… I don’t think this is a case of the tariffs being priced in already, but more a case of traders and investors not knowing full what the hit will be to the economy, so until we know for sure what it is, it’s a case of Party on Wayne, Party on Garth! 

There’s an article on the Bloomberg this morning that has Morgan Stanley picking the currencies they feel will perform better than others during a Recession here in the U.S.  I’ll come back to this in a moment, but first, I do believe that the major investment houses, are coming to the realization that a recession is on the way, as I see more and more of them talking making investment plans for the recession…  Will this be a case of thinking something to reality?  You know, the recession might not actually be here yet, but if everyone thinks it is, well, it is… 

Yen, francs, and Singapore dollars are the three currencies that Morgan Stanley believes will be the best performers in a recession…  I guess Morgan Stanley believes in the so-called safe havens and then throws in Singapore dollars… I’m not so sure this should be an end-all list folks, so take this with however many grains of salt you wish! 

Gold didn’t have a good day on Friday, closing down $2.80 on the day, but the early morning trading this morning has Gold climbing nearly $10, so it could be a very good day for the shiny metal…  I read this weekend that Chinese first half Gold demand exceeded 1,000 Tonnes… WOW!  Russia, will see your 1,000 Tonnes and raise you 1,000 Tonnes! HA!   That’s what it seems like is happening with physical Gold demand in China and Russia…  One country announces their Gold figures and the other had to beat them! 

Did you ever have a friend or know somebody that was always having to something better than you? If you bought a house, they bought a bigger one, if you bought a car, they bought a more expensive one, and so on… That’s Russia and China these days, and it’s all good for Gold!  Oh, and guess what? I’ve got the link to Shanghai Gold Exchange’s price for Gold each day, and I’ll add it to the currency roundup from here on out… 

So, the currencies are on the rally tracks, and it looks like the dollar’s run has come to an end… I might be a little early with that statement, but it’s a call, right?  If I end up being early and the dollar bounces again, I’ll just pick up the pieces of my broken confidence, and move along…  The signs are all there for me to be correct though… The Emerging Markets currencies have found a bid, a weak one, but a bid nonetheless. The Petrol Currencies are rebounding, and the offset currency to the dollar, the euro is leading the charge.    

They had some new wrinkles added to the BREXIT negotiations, but even those setbacks aren’t raining on sterling’s parade this morning… 

One currency that just seems to be on the chopping block every single day, is the Brazilian real… And Brazil has an election coming up , which normally lends a hand to the real, but not this time… And on top of that the Brazilian National Team lost their knockout round game in the World Cup, and the whole country is reeling from that loss… 

The price of Oil continues to be well bid… It sold off a bit on Friday, but has rebounded in the past 24 hours. And the other commodities like copper, sugar, etc. are looking like that have some pep again… As well, they should given the inflation report in the U.S. last week, that we talked about… 

The Commodity currencies though are really in the dumps… Kiwi, can’t seem to find a bid, the same goes for the S. African rand and the Canadian loonie… The only Commodity Currency to find some love is the Aussie dollar (A$) …  I feel as though I’ve been led down a road that’s going in the wrong direction with kiwi… A year ago, the Reserve Bank of New Zealand (RBNZ) started talking about a rate hike cycle, and I was led to believe that this rate hike cycle would begin in the 2nd QTR of 2018… You may recall me talking about kiwi and saying that investors were getting a chance to buy ahead of the Big Boys…. But the 2nd QTR of 2018 just ended, and the RBNZ isn’t any closer to beginning a rate hike cycle than I am to the man in the moon!  So, we’ll have to batten down the hatches here, and wait out the RBNZ!

The 10-year Treasury’s yield sits at 2.85%, and there seems to be a strong flight to safety going on right now, which supports the bond market here…  I’ve told you this before, but the 10-year Treasury is used to price mortgages… and I found these rates online…the 30-year fixed-rate mortgage averaged 4.52% during the July 5 week, down from 4.55%, mortgage provider Freddie Mac said Thursday. The 15-year fixed-rate mortgage averaged 3.99%, down five basis points. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.74%, down from 3.87%.

And remembering my old training from the bank I must included this: Those rates don’t include fees associated with obtaining mortgage loans. 

So, mortgage rates are falling again, which means more air will be blown into the housing bubble…   It’s a shame that this is happening, yet again… 

Speaking of the housing bubble… We’re quickly approaching the 10 year observance of the 2008 Financial Meltdown… And later this fall it will be the 20 year observance of the LTCM meltdown, where they had to form a “committee to save the world”…  The timing for a the next meltdown could be bang on the 10-year, 20-year times…  I’m just saying… 

The U.S Data Cupboard is scratching the walls looking for some real economic data to print this week, and early in the week, there just isn’t much to talk about… So, we’ll move along now, for these are not the droids we’re looking for!

To recap… The Trade War between the world’s two largest economies began in earnest on Friday, and the markets are kind of reacting to it, with stock reaction muted, and the flight to safety in Treasuries and Gold taking flight, but not soaring yet. The rot on the economy’s vine isn’t being exposed just yet, but it will…  The Jobs Jamboree netted 213,000 jobs in June, of which 104,000 were added out of thin air by the BLS, and the Unemployment Rate rose to 4% from 3.8% the previous month.   The currencies are rebounding and Chuck has made the call that the dollar’s rally is over…  Will he be right?  Only the Shadow Knows! 

For What it’s Worth… I came across this story and went into a deep dive on it for next week’s DTL, but will still give it to you here… this is about a warning from Moodys about corporate debt defaults, and it can be found here: https://www.cnbc.com/2018/05/25/moodys-warns-of-particularly-large-wave-of-junk-bond-defaults.html 

Or, here’s your snippet: “With corporate debt hitting its highest levels since before the financial crisis, Moody’s is warning that substantial trouble is ahead for junk bonds when the next downturn hits.

The ratings agency said low interest rates and investor appetite for yield has pushed companies into issuing mounds of debt that offer comparatively low levels of protection for investors. While the near-term outlook for credit is “benign,” that won’t be the case when economic conditions worsen.

The “prolonged environment of low growth and low interest rates has been a catalyst for striking changes in nonfinancial corporate credit quality,” Mariarosa Verde, Moody’s senior credit officer, said in a report. “The record number of highly leveraged companies has set the stage for a particularly large wave of defaults when the next period of broad economic stress eventually arrives.”

Chuck again… Yes, this could very well be the snowflake that causes the avalanche for the U.S. economy folks… better keep an eye on this one!

Currencies today 7/9/18… American Style: A$ .7476, kiwi .6850, C$ .7495, euro 1.1779, sterling 1.3345, Swiss $1.0124, European Style: rand 13.3566, krone 7.9940, SEK 8.7015, forint 274.04, zloty 3.6730, koruna 21.9521, RUB 62.94, yen 110.40, sing 1.3536, HKD 7.8482, INR 68.69, China 6.6427, peso 19.03, BRL 3.8644, Dollar Index 93.77, Oil $73.83, 10-year 2.85%, Silver $16.24, Platinum $858.69, Palladium $965.63, and Gold $1,265.31, and SGE Gold $1,269.64

That’s it for today… Nice to be back. We had an absolutely gorgeous weekend, weather-wise… A Chamber of commerce weekend. But the excessive heat is supposed to return this week, so I have that to look forward to! I’m all alone again for the next 10 days… good friend, Mike, came to the house yesterday to keep me company and watch the Cardinals blow another game. We grilled some good stuff to eat, and had a good day! Chicago takes us to the finish line today with their song: Hard Habit To Break, one of my fave Chicago songs! And with that I’ll get out of your hair today. Thanks for reading the Pfennig, and I hope you have a Marvelous Monday, but please remember to Be Good To Yourself!

Chuck Butler

 

July 3, 2018   

* Currencies hit a roadblock yesterday… 

* It’s Our Independence Day Tomorrow! 

Good Day… And a Tom Terrific Tuesday to you! Are you staying cool? Because it’s going to be a hot one here for the 4th of July Independence day Holiday. I’m going to put something in the Big Green Egg, and 6 hours later I’ll check it. No standing over a hot grill for me! But Barbeque will be in order for sure! I’d like to do some ribs, but, I don’t think everyone that will be here are fans of ribs, so I’ll have to think of something else…  Kansas greets me this morning with their song: The Wall…  In the 70’s you didn’t get much hotter for a band than Kansas was… I’m just saying… 

Well, I was looking over some charts yesterday, of the stock market performances of the S&P 500, Dow and Russell 2000… And if you believe in charts, then go out and load up on more stocks… But if you only use charts as a “helper”, then be careful… Because in other charts I looked at, the effects of the Trump tariffs are already kicking in, as they might not be actually kicking in, but psychologically they’re kicking in, as companies worry about what it’s going to do their costs… 

That was very evident in the ISM (manufacturing index) that printed yesterday for June. The ISM index rose to 60! WOW, now that’s impressive, especially given that Durables and Factory Orders were all negative in growth… But I digress…  The thing that caught my eye in the ISM though were the “internals” of the report.  You see, apparently the supply chain is under stress and factories are taking longer to deliver goods.

My friend, David Gonigam at the Five Minute Forecast  had this yesterday… “The “supplier delivery” number is up to 68.2, and this is an instance where higher numbers aren’t necessarily better. Instead, we’re looking at the worst disruptions to the supply chain since the “oil shock” of the mid-1970s.

The cause? Steel and aluminum tariffs, say the report’s authors. “Respondents are overwhelmingly concerned about how tariff-related activity is [affecting] and will continue to affect their business,” says ISM’s Timothy Fiore.” – David Gonigam www.agorafinancial.com

I love it when I have a thought about something, and then out of the air, comes a link, a newsletter, etc. with confirmation of what I’m thinking!  

There’s certainly a “split” if you will, of people in this country that think everything’s coming up roses, and then there’s people like me that think that the roses are 7-days picked!  But that’s what makes the world go around, right? As long as we can have a civil discussion about it, I hear you, you hear me, and we go get a beer, right? 

I keep talking about a credit crisis that’s going to hit the markets sooner or later… It could come from any number of credit sources… Auto loans, student loans, mortgage loans, corporate loans, etc. But I’m keeping my eye on the student loans… There’s more than $1.5 Trillion in Student Loans and the default rate has steadily climbed to 20%… And it’s still growing, folks…

A credit crisis begins in one sector and then spreads to the other sectors very quickly… So, we had better keep our eye on all of these credit sources… because they are all risky business, and I’m not talking about the Tom Cruise movie either!   One of these days, all this stuff will come crashing down around us, you don’t keep adding to debt until it can’t take any more! And you have to stop digging a hole when you find out the hole doesn’t have any Gold! 

Well, I should have figured that if I saw that China’s renminbi was being allowed to depreciate, to offset trade tariff effects, then the People’s Bank of China (PBOC) was ready to disavow any hint that this is what was going on… And the PBOC has begun to talk about how they will not allow the renminbi to be taken down excessively… Those sly Chinese bankers… They knew just how weak they could allow the renminbi to go before they would apply the brakes on any further thoughts of depreciation.

And that’s what they are doing right now… applying the brakes… The Chinese have come to the conclusion that the renminbi has fallen enough… Enough is enough, now we’ll have to see if the markets are going to play along…

When I first began trading currencies for the old Mark Twain Bank, I was taught that the markets had deeper pockets than any Central Bank… And that’s why I’ve always said that Central Bank intervention can move markets short term, but they won’t last, because the Central Bank can’t continue to spend money on a falling currency to defend it. 

But I think China’s PBOC presents a different animal to the equation of whether Central Bank intervention works or not. The Chinese proved back in 2015, when the Capital Flight out of China was HUGE, and there were all those calls for a collapse of the Chinese economy… But, China simply used some of their $3 Trillion plus reserves and bought renminbi, to defend it, and soon, the markets were playing along with the PBOC…

I was excited to see that my Pfennig last week titled: Emerging Markets, the Canary In The Coal Mine, got a lot of notice… The Twitter-verse seemed to like it, and I didn’t get one email that day telling me I was wrong, as opposed to a normal day where people tell me I’m wrong all the time! HA!    

I’ve gone this long into the letter without telling you what the currencies did yesterday… And that was on purpose, as the currencies and their attempt to recover got stopped at the border…  I had a funny line (to me that is) ready, but decided it wouldn’t be funny to everyone… See how I’ve matured? HA!  

During the day yesterday, the euro was giving back most of its gains from Friday, but by the time the day ended the single unit was back to the same level it was early yesterday morning 1.1642.  Overnight, there was more movement, and the single unit has inched higher, but not by much. The Dollar Index is trading at 94.68 this morning, and yesterday morning it traded at 94.79… 

The rot on the Emerging Markets currencies’ vines is beginning to really take hold, and getting exposed to the sunlight, which means it’s going to keep growing… The price of Oil has bumped to near $75 this morning, and the Russian ruble can’t find a bid, and the Brazilian real continue to fall like a rock from a ledge. 

Come to think of it, the price of Oil’s rise isn’t helping another of the Petrol Currencies this morning, as the Canadian dollar/ loonie has dropped in price. The Norwegian krone, which follows two leaders, the price of Oil and the euro, is on the rally tracks this morning, due to both of its leaders bumping higher. 

 told you yesterday that on Friday this week, it’ll be the Jobs Jamboree for June… Right now the so-called experts are expecting 205,000 jobs created in June… That sure doesn’t say much for all those college grads that were looking for jobs, eh? Yesterday afternoon, I got to thinking about me not being around after today for the rest of the week, and thought, well, I guess I should at least give everyone a heads up as to what else could move markets as the week goes on…

OK, so starting today… automakers will report their June sales totals. Forecasters predict full-year sales falling short of the three previous years when sales have topped 17 million cars and trucks.

Also today, we’ll see Factory Orders for May… April’s negative showing here, will probably spill over to May, so another piece of real economic news in the negative…

The stock market will close today at 1pm ET, and be closed tomorrow along with banks and a whole shootin’ match of other things. We pick things up again on Thursday with the Fed’s last meeting Minutes… These could be a powder keg for the markets, so look out for those Meeting Minutes!

Then on Friday, we have the aforementioned Jobs Jamboree, and, more importantly, in my opinion, since the Jobs report is so heavily hedonically adjusted each month. The first round of Trump tariffs goes into effect on Friday when the U.S. will begin imposing a 25% tax on $34 billion worth of Chinese products… And the rot on the economy’s vine will begin to creep up the vine…

So, there you have it… a week’s worth of stuff that will go on once I sign off today… You know, that reminds me to remind you, that the last week of July, first week of August, is my annual summer vacation… I’ve been taking those weeks off for so long now, that I almost forget they are coming up! It’ll be a two week sabbatical for you from me, so you have that to look forward to!

Yes, it’s just me these days… At my old place of business, I had “back ups”, when I was unable to write, like vacations, scans days, infusion confusion days, etc.  So, now there’s just a void… I’m sure my publishers, the wonderful Aden Sisters, will probably send you a letter or two during those two weeks…  I have to say that I’m loving my association with the Aden Research folks, Mary Anne and Pamela…  

Gold lost another $6 in yesterday’s trading… The shiny metal just can’t seem to catch a break or a bid these days. I’m still not going to back off my view that Gold is a store of wealth, is independent, has no obligations, or any dolt Central Bank doing dolt things like implementing negative deposit rates, etc.  And since Gold hasn’t performed very well lately, a lot of people/ investors panic… But… if you want to diversify from the legitimate fear for your assets into tangible assets –  Then an asset allocation to Gold I would think would be good especially in view of the unresolved debt crisis and the policy of the central banks – then Gold is an obvious choice of asset class…  And that’s all I’m going to say about that! (today at least! HA!)’

And looky there! Gold is up $5 in the early morning trading on this Tom Terrific Tuesday! They used to have a saying on the trading desk at a brokerage firm I worked at in the late 70’s…  just to get this out of the way, no bodies were harmed….   But the traders would say, “even a dead body bounces”…  And when I saw Gold bounce this morning, my mind drifted back to the late 70’s…  Sorry if I offended anyone with that old trader saying about assets that bounce…  Man, that’s so long ago, my oldest child, Dawn, wasn’t even born yet!  Wait, What? I had a life before children? I don’t believe that for one minute! HAHAHAHAHA!

To Recap…  The currencies hit a roadblock yesterday, and their advances were stopped at the border, but have recovered in the overnight markets to sit about where they were yesterday morning. Gold lost $6 in trading yesterday, but is up $5 in the early morning trading today. Chuck brings you up to date with all the goings on for the rest of the week, and the Trump tariffs are already showing up in the economic data! 

For What It’s Worth…  I’ve been talking about the rot on the Emerging Markets for a few weeks now, and when I saw this synopsis of the goings on in these markets I had to get it in this letter so you could see it too… 

• The DXY index, which tracks the US dollar against other major currencies, rose 5%.
• The Argentine peso and Brazilian real fell 30% and 14%, respectively.
• The Turkish lira and South African rand each fell nearly 14% versus the dollar.
• A bunch of Asian emerging market currencies fell 3% – 6%.
• Europe’s emerging markets weren’t spared. The Hungarian forint (-10.0%), Polish zloty (- 9%), and Czech koruna (-8%) led a long list of EU peripheral currency losers.
• China’s stock indexes fell by double-digit percentages in the quarter, though that might have more to do the incipient trade war than relative inflation and interest rates.
• Asian junk bond spreads (their yields versus those of high-grade bonds) widened dramatically.
• Emerging market bank stocks got crushed, including Banco do Brasil (-30%), Banco Bradesco (- 30%), and Brazil’s Ibovespa stock index, down 27% in U.S. dollars.
• Last but definitely not least scary, US and European bank stocks fell hard last week, which isn’t surprising since they’re on the hook for untold amounts of the aforementioned emerging market securities and currencies.

Chuck Again…  I have to say that this all could certainly blow over, and everything will be right on the night… There! I said it, now this FWIW piece is fair and balanced!  But do I believe that? Not for one Iota! Like I said earlier in the week… The Emerging Markets is the Canary in the Coal Mine… 

Currencies today 7/3/18: American Style: A$ .7395, kiwi .6735, C$ .7583, euro 1.1650, sterling 1. 3188, Swiss $1.0062, European Style: rand 13.7228, krone 8.1275, SEK 8.8521, forint 281.60, zloty 3.7743, koruna 22.4025,  RUB 63.21, yen 110.85, sing 1.3660, HKD 7.8445, INR 68.56, China 6.6542, peso 19.68, BRL 3.89, Dollar Index 94.68, Oil $74.82, 10-year 2.87%, Silver $15.94, Platinum $824,48, Palladium $947.47, and Gold… $1,247.26

That’s it for today… And for this week… I sure hope you can have a grand Independence Day tomorrow… I would suspect the markets, for the most part will be shut down for the rest of the week, as those that are able to make this a long holiday week, will do just that!  My beloved Cardinals are making a trip out west, which means I won’t get to see much of the games because they are on so late! Last night, for instance I went to bed in the 5th inning! Maybe a trip out west is what they need to straighten themselves and their season out… time will tell… At least they got off on the right foot last night with a win in Arizona. I hear that there will be a large crowd of people here tomorrow, and I was asked what would I like to cook for them… Hmmm… I’ll have to think about that, since it’s going to be near 100 tomorrow! The late Great Leon Russell takes us to the finish line today with his song: Queen of the Roller Derby…  So, get out there and shoot some fireworks, wear some red, white and blue, and fly a flag… And be careful! I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler

 

 

July 2, 2018  

* Currencies continued to rebound on Friday   

* The price of Oil jumps higher, but Gold remains without a bid… 

Good Day… And a Marvelous Monday to you! And welcome to July! It’s Pfennig tradition that we being July like this:   There I was on a July Morning, I was looking for love. With the strength of the night behind me, and a road of my own- Uriah Heep…  I made 4.5 hour drive to the beautiful home of Ray and Donna Hambuchen this past weekend. They were wonderful and gracious hosts to the whole Butler family! Their home is on the White River in Arkansas, and I could have sat out on their deck overlooking the beautiful White River every day of my life!  Steely Dan greets me this morning with their great song:  Rikki Don’t Lose That Number… 

I want to get this out of the way front and center this morning…  With the 4th of July Independence Day Holiday  on Wednesday this week, I’m going to make it a short week for me and the Pfennig… Today and tomorrow, and then off on Wednesday, and so on…  Alrighty then, that’s put to bed, now let’s see what’s going on in the markets, economies and in the minds of dolts… 

The currencies ended the week last week on a good foot, not a great foot, but a good foot, as they attempted to rebound after the week’s weak performance had them reeling… The euro traded back above 1.16 and the A$ had found its way back to 74-cents, after dipping to .7350 on Wednesday/ Thursday last week. But in the overnight markets last night, the A$ dipped back below 74-cents… Back and forth, back and forth… Get’s Old after awhile, eh?

The Emerging Markets currencies, and the Asian currencies continued to get whacked but not for the same reasons… I told you about 10 days ago about the Emerging Markets’ problems with rising debt servicing costs that come from the Fed’s rate hikes… And I also told you about how the Asian currencies, right now, appear to be the whipping boy for the dollar bugs, because of the Trade War… 

But did you hear the news from Tokyo this weekend? 16 Asian nations are forming a Trading Block, that would cover over 1/3rd of the global trade…  This would be a way for these countries to avoid tariffs on trade amongst themselves… There are many obstacles before an agreement is signed, which could come before year-end, and these obstacles  include India’s requirement that any agreement to reduce tariffs on goods and services should allow for free movement of people, something India wants for its highly skilled information technology sector. You see when you get this many nations involved, every nation has their “been in the bonnet” item that will fill or kill the deal. 

This is a must for the Asian countries, that include Australia and New Zealand to help offset the U.S. tariffs… As long as they keep that main goal at the top of their lists, and number 1 in their collective brains, they should be able to reach an agreement before year-end… 

For the most part, I would stick with the major currencies through this rough patch with the dollar bugs hoopin’ and hollerin’ just about every day…  For the major currencies will be able to stand up to the dollar bugs every now and then.    

Gold finished the month of June down over 3%, and hasn’t seen the light of day in the $1,300 hand since mid-May. I get it, I get it, forget about all the hot spots around the world, and how they are like tinder waiting for a match, and that Gold should be well bid during this time… Well, no, actually I don’t get it… I don’t get why Gold isn’t reacting favorably to all this “stuff” going on in the world…  I’m well aware of the physical demand for Gold from Central Banks in the East, and I’m also well aware of the short Gold paper trading… But to me, one should be on top of the other, thus giving Gold it’s proper due.. 

All I can say about this “selling of Gold on paper” is that it gives all of you who have procrastinated and put off buying Gold a cheaper price to buy! And after Friday’s performance, in which Gold added $4.40 to its price, the shiny metal sits at $1,248 this morning… As the early morning trading isn’t being nice to Gold… 

The price of Oil continues to rise and this morning it’s trading with a $74 handle… One would have thought that ROPEC’s announcement last week that they were going to increase production would have brought the price of Oil back down… But, as I said last week, that thought is thrown out the window, once the U.S. puts pressure on its allies to not buy Oil from Iran… 

Down in Arkansas this past weekend, I paid $3.54 for a gallon of premium gasoline… Before I left I paid $3.11 here in my little river town… I thought to myself, “man they must really like their gas here!” Now, some of the increase could have come from rise in the price of Oil on Friday, but, I get the feeling that most of the difference came because I was on a two-lane road in northern Arkansas, and it was the only gas station around…  

We saw some interesting economic data on Friday last week… Personal Income and Spending, along with the Core PCE, the Fed’s preferred inflation calculator…  OK, first things first… Personal Income was bang on expectations to gain 0.4% in May… But Personal Spending was not up to snuff, and only gained 0.2% in May…  That’s not a good thing for the economy folks…  And then the Core Personal Consumption Expenditures, which take out food and energy (like we don’t use those things every darn day of our lives!) and it rose to 2% annualized, which is the Fed’s Target! 

Remember what the Fed Heads told us a few months back, that they were willing to allow inflation to run a bit once it hits 2%…  So, why stop here? And I don’t think inflation will, folks… Like I’ve said before, I truly believe that we are headed to a low growth, high inflation time period… There’s a name for this phenomenon and it’s called Stagflation! 

And while this will be a shortened week here in the U.S. and there probably won’t be anything but “junior traders” left on the desks of the major banks and brokerage houses come Friday. The Jobs Jamboree will go on without them on Friday morning… Today’s Data Cupboard has the ISM (manufacturing index) for June, you might recall that the Markit version of this data printed last week and showed slippage.. 

The yield on the 10-year Treasury continues to inch downward…  I’ve said this before, and I’ll probably say it many more times, but the bond boys get the picture of the economy, and that’s why they have reduced the rate on the 10-year, which is used to price mortgages.  Oh, and the overall yield curve? it’s doing its best imitation of Head East…   Flat as a Pancake… for all of you not knowing what I’m talking about! 

I tried to add a graph of the Yield Curve, but I guess I don’t have the skills required for such a thing… So, I’ll just keep typing words, and hope that you can visualize the Treasury Yield Curve flattening…   

To recap…  The currencies are attempting to rebound, and that has been going on since last Friday. The major currencies seem to be the only ones that have a chance to gain VS the dollar right now, as the Emerging Markets and Asian currencies get whacked for different reasons.  Gold still can’t find a consistent bid, and is off again in the early morning trading today. The price of Oil has found a consistent bid, and is trading with a $74 handle this morning! 

For What It’s Worth:  James Bullard is the President of the St. Louis Fed, and someone that has been able to move markets with his words before, as he was the original Fed Head to mention QE2… Well, Bullard was speaking in St. Louis the other day, and had something to say about interest rates that I think you’ll find interesting. You can find it all here: https://www.marketwatch.com/story/fed-should-not-raise-interest-rates-just-because-second-quarter-gdp-growth-may-surge-bullard-2018-06-28

Or, here’s your snippet: “In an press conference with reporters following a speech in St. Louis, Bullard said the surge in growth is likely to be temporary and the economy’s growth rate will likely be on a downward trend in 2019 and 2020.

So the Fed should not react with a “permanent rate hike” to a “temporary” increase in output, Bullard said. The strong second quarter is also flattered by the quirks in the GDP data that continue to depress growth in the prior quarter. So the best way to view the second-quarter is to average it with the 2% growth seen in the first quarter, he said.

Bullard is one of two officials on the central bank that have been calling on the Fed to be cautious about hiking rates further.

The Fed’s benchmark rate, now in a range of 1.75%-2%, is close to neutral, neither stimulating or dampening growth, he said.”

Chuck Again…  So… what he’s saying, in Central Bank parlance here is that The Fed should NOT raise interest rates just because the 2nd QTR GDP may surge…  And I agree, as I said last week, the 2nd QTR GDP may be north of 4% when it prints later this month, but it will be like star that shines the brightest right before it flames out! 

Currencies today 7/2/18: American Style: A$ .7363, kiwi .6737, C$ .7595, euro 1.1642, sterling 1.3160, Swiss $1.0074, European Style: rand 13.8058, krone 8.1648, SEK 8.9657, forint 283.17, zloty 3.7696, koruna 22.3205, RUB 22.32, yen 110.75, sing 1.3671, HKD 7.8454, INR 68.70, China 6.6193, peso 20.01, BRL 3.8761, Dollar Index 94.79, Oil $74.07, 10-year 2.83%, Silver $15.97, Platinum $839.05, Palladium $948.64, and Gold… $1,248.81

That’s it for today…  I had a great weekend with my family, but my beloved Cardinals didn’t have a great weekend, as they were swept by the Braves… UGH! At Home, no less! double UGH! Storms rolled through last night, and I think they will cool things down a bit here in the St. Louis area But remain hot, which is fine with me! Yesterday morning it was early, and only Braden and I were up, and we watched a critter of some sort walk around outside looking for food. We had an interesting conversation to say the least! HA!  It’s our Independence Day week! YAHOO!  The great Carlos Santana takes us to the finish line today with his song: Black Magic Woman…  So, keep cool, go out and make this a Marvelous Monday, and Be Good To Yourself! Can you do that? I knew you could! HA!  

Chuck Butler

 

 

June 28, 2018  

* Currencies stop spinning and go into reverse!

*it’s Alex’s Birthday! 

 

Good Day… And a Tub Thumpin’ Thursday to you! Today is my youngest son Alex’s birthday… So Happy Birthday, front and center this morning to the young man that 20 years ago, used to sit on my lap, during my first “retirement” and help me write the Pfennig… Yes, even though the bank that had bought the old Mark Twain Bank and then performed ethnic cleansing on the Mark Twain Employees, got rid of me… I still wrote the Pfennig from my home, much like I do these days. Except then I had two kids in college, and a 3 year old at home. At the time I thought it was the end of the world losing my job, but when one door closes another opens, and soon I was working with the group led by Frank Trotter, to start a new bank, which would become EverBank… Charlie Daniels Band (CDB) greets me this morning with their song: Long Haired Country Boy…  Now that’s one song that will get the crowd singing along! 

Well, the euro bears won the day again yesterday, pushing the euro below the 1.16 handle… Just two days ago, I remarked that the euro had climbed back above 1.17, so a chunk of change has been taken away from the single unit in the last two days. When the roosters come home to crow, those euro bears are going to be going into hiding…  But then that’s what we’ll have to wait for, but I do believe it will come… the Fed Heads just need to show their hand, begin to reverse their rate hikes, or halt their balance sheet unwind, and out the window goes the remaining thread of credibility they have left..   

I’ve put so much thought and work into this scenario that if it doesn’t come to fruition, then I’m going to wave the white flag, and become Puff the Magic Dragon, who went back into his cave, and ceased his mighty roar! I’m serious here folks… I will give up, and throw in the towel! No more analysis from me, no more conspiracy ideas, and no more Pfennig… For like the Fed Heads, I would have no more credibility…  So, that’s a sobering thought this fine Tub Thumpin’ Thursday, now isn’t it?

So, while I still have a “job” being your Pfennig writer, I’ll continue to do my best to look forward, around corners, under hoods, and back alleys to find the information you need to make informed investment decisions… 

And today, that means.. I have this to say… I’ve been telling you about the difficult time the Emerging Markets are going through right now… And well, they are the canary in the coal mine regarding the seizing up of the Credit Markets…  It’s happening in the Emerging Markets right now, folks… so I’ll ask you this again… “Got Gold?”

Speaking of Gold… Once again the price manipulators took their pound of flesh from the price of Gold yesterday…  Depending on what price you look at, Gold lost either $4 or $5 yesterday… Ed Steer tells me this morning that there were over 255,000 contracts traded yesterday…  Have you heard of Ted Butler?  I’ve mentioned him a time or two in the past. Ted Butler, has taken it upon himself to bring the price manipulation of Silver and taken further to Gold, to the masses, in hopes that one day the CFTC gets some intestinal fortitude and decides to really investigate the goings on with Silver and Gold…  Remember the old CFTC member, Bart Chilton, telling us that he looked into it and found nothing?  I remember responding to this back when he made that comment, that he couldn’t find his rear end with both hands!  And now he’s got his own show on cable talking about economics! 

I shake my head and wonder about how people that fail miserably in their previous jobs end up getting promoted?   Man, am I ticked off this morning or what?  And no it’s not because my beloved Cardinals’ winning streak came to an end last night!   Or because it’s hotter than hades in St. Louis with humidity that you could cut with a knife!   No, it’s because I keep hearing the Fed Heads telling us the economy is robust and strong… And they will all be dancing in the streets when the 4%+ 2nd QTR GDP prints in a month or so… But like I keep telling you, this is going to be a case of a star burning the brightest right before it flames out… 

Oh, and I was going to talk about Ted Butler, and got sidetracked there! What a dolt I am sometimes! But there’s a real good piece on price manipulation by Ted Butler that appeared in Ed Steer’s letter the other day… that, in case your interested, is here: 

[T]he allegations that JPMorgan has manipulated silver and gold prices for a decade are so serious that any proportionate fine would be too large to assign. And any fine would only precipitate a virtual landslide of public and private lawsuits from investors, producers and producing countries, so as to jeopardize JPMorgan’s existence as a going concern. Not that the CFTC could ever move against JPMorgan, since the agency has long been held captive to JPM’s lawyers and lobbyists. The CFTC has never enacted any policy or regulation that JPMorgan has opposed; starting with legitimate position limits.

The Commission can’t possibly ever admit that there is anything amiss in silver after denying any such manipulation for three decades. To do so now would be tantamount to formally ending the agency as an independent regulator. Besides, McDonald and company can’t even answer simple questions based upon the agency’s own data – it is completely incapable of ever seriously confronting the crooks at JPMorgan.

JPMorgan, in effect, regulates the CFTC — and not the other way around. — Silver analyst Ted Butler: 20 June 2018

Winning two out of three is not bad, especially to a team that was on a 7-game win streak, and were 16 games over .500 when the series began… But I digress here… back to work, Chuck!

I don’t know if you’ve been checking the currency roundup each day for the Chinese renminbi performance, but I’ll save you the trouble by telling you that the renminbi has been on the slippery slope downward for the last week… And this week’s performance has seen the renminbi’s slide turn to an all-out fall! I think I know what’s going through the minds of the folks at the People’s Bank of China (PBOC)…  They see the Trade War boosting the prices of Chinese exports to the U.S. which could cause a real loss of trade income, because if an item costs more, maybe consumers will choose not to buy it…  So, what can they do to offset this potential loss of trade income? Well, the easy thing that Central Banks turn to every time things het heated… They allow a depreciation (or sell their currency ) of their currency so that the exported items are cheaper… 

This ploy rarely works folks… But that doesn’t stop Central Banks from debasing their currencies in an effort to increase trade… Debasing a currency then allows inflation to be imported and before you know it you have rising inflation, and you have to hike interest rates, and that causes the currency to rise thus wiping out your competitive ace in the hole… 

So, I expect to see more rot on the renminbi’s vine in the coming weeks, unless calmer heads prevail with these Trade War fears. But like I explained yesterday, I think we’ve gone down this Trade War road too far, to turn back now… The Cornelius Brothers and sister Rose sang a song titled: It’s too late to turn back now, and here’s the link to the song in case you’re wondering how the song goes: https://www.youtube.com/watch?v=mfYkhQblYjY   

The U.S. Data Cupboard yesterday didn’t disappoint with its prints… Durable and Capital Goods Orders for May both printed negative, as I told you they would… Durables were a negative -.06%, and Capital Goods were a negative -.02%…  These are pieces of real economic data folks, and they tell a story of an economy that’s struggling…  Today’s Data Cupboard has the final revision of 1st QTR GDP, which should remain about 2.2%… 

Are you scratching your heads too, and wondering just when did 2.2% GDP represent “a robust and strong economy”? But that’s what Fed Chairman Jerome Powell will have you believing if you trust him… And the parade of Fed Heads our on the speaking circuit this week has been busy, but all of them believe the same thing…  Well, if you are thinking that this is all Mularky, then you’re in the same camp as me… So, should we make some s’mores with this campfire? 

Oh, and one more thing before we head to the Big Finish… When I said yesterday that the currencies needed to apply their anti-skid brakes to stop all the spinning of their wheels, I didn’t mean for them to then put the car in reverse! UGH! 

To recap….  The dollar bugs are winning this week… They have gotten the dollar up to a 95 handle in the Dollar Index.. The currencies got sold like funnel cakes at a State Fair yesterday and overnight, and Gold didn’t help offset the currency losses. The price of Oil, however, rose again and now trades with a $72 handle!  The Chinese renminbi is taking a ride on the slippery slope, and Chuck explains his view on why this is happening right now…  And the Data Cupboard had two more pieces of real economic data that paints a not so “robust and strong” economy… 

For What It’s Worth… I’ve been talking about the rot on the vine in the Emerging Markets currencies lately, and I came across this article that seemed to explain the problems in plain English, which is my forte!  So, you can find the article here: https://www.washingtonpost.com/news/wonk/wp/2018/06/28/how-to-tell-if-your-countrys-currency-is-falling-apart/?noredirect=on&utm_term=.c18b2ba26e8b   

Or, here’s your snippet: ” Are you an emerging market that’s wondering whether your currency is going to be the next to fall?

Well, if so, here’s a handy checklist to help you figure that out. Have you been borrowing a lot of dollars recently? Or relying on short-term debt that can leave the country at the macroeconomic equivalent of a moment’s notice? Or is your government either too strong, too weak or of otherwise questionable competence? If you answered yes to any of these questions, you should consult your currency market immediately. You might already be in trouble. And if it was more than one, well, you probably don’t need me to tell you that things aren’t looking great. You know.

Now, there are two stories here. The first is that a lot of the money that poured into emerging markets when the Federal Reserve was cutting interest rates down to zero is heading for the exits now that it’s raising them. 

That’s why money is leaving emerging markets so fast that their currencies are starting to fall quite a bit now, at which point they either have to raise rates themselves to try to persuade investors to stay, or else see all their dollar debts suddenly become much harder to pay back. This, of course, is more of a problem the more they borrowed — those are the ones who are depending on foreign investors — but it’s still a significant head wind for countries that you wouldn’t necessarily think were that much at risk.”

Chuck Again…  I think this line is especially important here: It’s still a significant head wind for countries that you wouldn’t necessarily think were that much at risk…  He’s talking about the mature Emerging Markets currencies, like South African rand, Mexican peso, and even the Russian ruble… 

Currencies today 6/28/18… American Style: A$ .7350, kiwi .6766, C$ .7525, euro 1.1590, sterling 1.3092, Swiss $1.0026, European Style: rand 13.83, krone 8.1670, SEK 8.9866, forint 282.95, zloty 3.7634, koruna 22.4320, RUB 63.13, yen 110.22, sing 1.3663, HKD 7.8479, INR 68.76, China 6.5973, peso 20.07, BRL 3.8224, Dollar Index 95.18, Oil $72.77, 10-year 2.83%, Silver $16.09, Platinum $852.68, Palladium $949.95, and Gold… $1,252,13

That’s it for today…  Hot and muggy… That’s what we’ll have this weekend here in the Midwest…  Alex is 23 today… 20 years ago, he sat on my lap while I wrote the Pfennig, his input would look something like this: 2o0u$(U&ldgul3y !  Happy Birthday little buddy!  (he’s not so little any longer!) I have multiple pictures of Alex through the years, on my desk wall here… Little Delaney Grace was here yesterday, and looking through my books I’ve got stacked everywhere, for something to read… She liked the purple book, so when I pulled it out it was Surviving the Financial Crisis! She took it, but I don’t think she was very interested in it! Well, it’s time to go… Jimi Hendrix takes us to the finish line today with his song: Foxey Lady…  I hope you have a Tub Thumpin’ Thursday today, and Fantastico Friday tomorrow… Be Good To Yourself!     bye~

Chuck Butler

June 27, 2018 

* Currencies spin their wheels yesterday, but get sold overnight

* Gold gets whacked again… But Oil jumps higher!

Good Day… And a Wonderful Wednesday to you!  Crazy weather day yesterday, with wild storms in the early morning, sun and warm weather midday, and then followed by wild storms again to end the day. Robert Plant and the Honeydrippers greet me this morning with their song: Sea of Love..  I’ve always appreciated Robert Plant’s singing, whether he was with Led Zeppelin, the Honeydrippers, going solo, or even his duets with Alison Krauss… 

It was a day of spinning wheels on the wet pavement, yesterday, in the currencies, little movement up or down in the euro, and the other major currencies. The Asian currencies are still under siege, as traders feel that they will be hurt badly by the Trade War.  On the outside of the Trade War, the Emerging Markets are still getting whacked for their lack of liquidity, and the rising costs of their dollar denominated debt, because of the Fed’s rate hikes.

I was surprised to see the euro hang so tough yesterday. For once it wasn’t European Central Bank (ECB) President, Mario Draghi, doing the honors of throwing the euro under a bus, but his partner Luigi, no wait,   ECB official Peter Praet told reporters that  the central bank remains in no rush to normalize monetary policy,  as the board member pledges to retain the zero-interest rate policy (ZIRP) ‘as long as necessary to ensure that inflation developments remain in line with current expectations of a sustained adjustment path.   Ahh, those pesky Central Bankers, always making life difficult for their base currency… 

In the overnight markets though, the euro sellers gained control and found a weak spot, and drove through it, to bring the euro down 1/2-cent…  So, maybe the words of Praet did do the trick…  You see, the leaders in the Eurozone aren’t country bumpkins like me, they see this Trade War as something that’s going to raise prices in the Eurozone, and slow the nascent economy, and so they’re doing everything they can to keep the euro from rising in price, thus making their exports more expensive too… 

There’s a great discussion on the Bloomberg this morning about how President Trump is the first president to point out the imbalances with European trade… I’ve talked about this for years, how Germany has a such a HUGE trade surplus, and I wished we could just buy Germany…  But we can’t… The Eurozone is like that bundle of mortgage loans that get put in a bond… There are some mortgages in that bundle that you would like to “cherry pick” as they say, and some mortgages you wished they hadn’t put into the bundle..  

I told you yesterday that the leaders of the China and the U.S. were having second thoughts about their plans to enter a Global Trade War… And yesterday, president Trump got into acquiescing going on by saying that may take a less confrontational approach, and that any measures would not just target China. The Senate, meanwhile, is considering options to limit the president’s authority to unilaterally impose tariffs on national security grounds.   

Have you ever had an argument with someone and the words get really heated, and when it’s over you realize that there were some words spoken that should have been spoken?  This is what the U.S. and China are going through right now. It doesn’t mean they will kiss and make up, it just means that the harshness of the tariff threats will be watered down some after the two parties go back to their rooms and think about what they said…  I don’t think anyone said anything like, “your mother wears army boots”, which was a real doozy of a put-down back in the day, but these days the kids would probably look at you and say, So?

Gold didn’t get an opportunity to rally back yesterday, after starting off down $8 in the early morning trading, the shiny metal spun its wheels too all day long…  And ended the day down $6…  All this spinning wheels, has me thinking of Blood Sweat & Tears, Spinning Wheel… here’s a link to hear that song if you’re interested…  https://www.youtube.com/watch?v=SFEewD4EVwU 

OK, I’m not the sharpest tool in the tool box when it comes to technology, and how to use it… It took me a number of years to find out that I can listen to just about any song on record by pulling up the YouTube link… A dear reader sent me a note last week with a link to YouTube to watch a young lady play the guitar, after I listed my fave guitar players… She was very good! 

Alright nice try to hijack this letter from currencies, economies, and dolts, Chuck but it won’t work! People come here for information on those things not your latest YouTube finding! 

The price of Oil sure has rebounded… And all this move coming after Saudi Arabia announced that they were increasing production… So, what’s up with Oil? Well, I’m glad you asked!  The price of Oil has rebounded to the $71 handle on fears that the Iranian Oil production is going to suffer severe disruptions, based on a head count of the countries that are considering following President Trump’s request that they not buy Oil from Iran… 

On the local newscast last night, they ran a story about how gas prices had fallen and it was just in time for the summer driving season… OOPS! Better pull that video and talk before someone other than Chuck sees it and points a finger at the TV and says, “You morons!” See, how that was done? I got the people watching TV to call the news people morons, I didn’t do it, for this is the kinder, gentler Chuck! HAHAHAHAHAHA!

Yesterday I went on and on about how I view the Fed Heads saying this is a robust and strong economy as FAKE NEWS!   But all that data that shows it’s FAKE NEWS, doesn’t mean as much as what the bond guys are doing… And the Bond guys are telling us that things aren’t as robust as the Fed Heads keep saying it is. The Yield on the 10-year Treasury has dropped to 2.86%…   At the beginning of the month it was 3.08% and had its eyes on higher levels…  I’m just saying… 

The U.S. Data Cupboard had the Case/Shiller Home Price Index print yesterday, and it showed that home prices had slipped in May from 6.5% to 6.4%, no big deal, but slippage, could this be the start of a fall? Most slippages are the cause of a fall, we had better watch this… The stupid Consumer Confidence report also printed, and bust my buttons, Confidence is falling this month… I guess a week of stock market losses will do that, eh? 

Today’s Cupboard has the real economic prints of Durable and Capital Goods Orders, and like I told you yesterday, I believe they will both be negative prints for May, so put that in your pipe, you Fed Heads, and smoke that one! 

To recap… The currencies held Steady Eddie throughout the day yesterday, but saw some slippage in the overnight markets once again. Traders were feeling better about the dollar when president Trump indicated that he isn’t planning on going after Chinese goods with so much vigor…  I’m telling you this now, so hear me now and listen to me later, this whole Trade War thing is getting out of hand, and someone with a calmer head needs to step in and stop it all before it ruins the world’s economy!  Gold had another bad day yesterday, but the price of Oil is jumping higher… 

For What It’s Worth… Man, there are so many article out there that could qualify for a FWIW article today… Everything from Universal Basic Income, and Gold Manipulation, to this article that I’m highlighting for you that appeared on Paul Craig Roberts website. For those of you new to Paul Craig Roberts, he is best known as a journalist specializing in economic affairs from an anti-establishment, liberal conservative perspective. And today he’s talking about the Trade War, and how it should be dealt with, this is a very interesting take, folks… and can be found here: https://www.paulcraigroberts.org/2018/06/26/long-can-federal-reserve-stave-off-inevitable-paul-craig-roberts/   

Or, here’s your snippet: ” When are America’s global corporations and Wall Street going to sit down with President Trump and explain to him that his trade war is not with China but with them? The biggest chunk of America’s trade deficit with China is the offshored production of America’s global corporations. When the corporations bring the products that they produce in China to the U.S. consumer market, the products are classified as imports from China.
Six years ago when I was writing The Failure of Laissez Faire Capitalism, I concluded on the evidence that half of U.S. imports from China consist of the off-shored production of U.S. corporations. Offshoring is a substantial benefit to U.S. corporations because of much lower labor and compliance costs. Profits, executive bonuses, and shareholders’ capital gains receive a large boost from offshoring. The costs of these benefits for a few fall on the many-the former American employees who formerly had a middle class income and expectations for their children.

In other words, to put it in the most simple and clear terms, millions of Americans lost their middle class jobs not because China played unfairly, but because American corporations betrayed the American people and exported their jobs. “Making America great again” means dealing with these corporations, not with China. When Trump learns this, assuming anyone will tell him, will he back off China and take on the American global corporations?”   

Chuck Again… Pretty interesting take, eh? 

Currencies today 6/27/18… American Style: A$ .7405, kiwi .6830, C$ .7523, euro 1.1630, sterling 1.3190, Swiss $1.0075, European Style: rand 13.6855, krone 8.1525, SEK 8.8987, forint 280.91, zloty 3.7276, koruna 22.1663, RUB 62.93, yen 110.17, sing 1.3623, HKD 7.8476, INR 68.52, China 6.5618, peso 19.93, BRL 3.7790, Dollar Index 94.80, Oil $71.16, 10-year 2.86%, Silver $16.32, Platinum $863.44, Palladium $957.08, and Gold… $1,258.09

That’s it for today… The markets need some anti-skid brakes, to stop all this spinning in one place! Man, somebody woke up the bats for the Cardinals, as they scored 11 runs last night! It got started late because of a rain delay, and so I didn’t see all of the game, but saw 8 of the runs scored! Winning the first two games of three that will be played with the Cleveland Indians, just backs up my thought that the Cardinals play to the level of their competition… my trip to the dentist went just fine, and made my day! I’m lucky to have such a nice dentist… She’s great! The Allman Brothers take us to the finish line today with their song: Dreams…  And with that I’ll send you on you way to a Wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler

June 26, 2018  

* Currencies rally, then fall back… 

* More warnings that a recession in near… 

Good Day… And a Tom Terrific Tuesday to you! How was your World Beatles Day? Mine was fine… not much going on, lots of reading. Had a nice phone conversation with good friend, Dennis Miller, who told me that 191 of you dear Pfennig Readers signed up for his letter and the special report I highlighted last week! Way to go! Of course in my mind, I would have thought tens of thousands should have signed up… But what do I know? HA!   The Big Bad Cleveland Indians came to town last night and well, Cardinals’ pitchers shut them out! YAHOO!   Triumph greets me this morning with their song: Lay It On The Line… 

I sure would like to see these currency rallies move as fast going up and they do going down! Yesterday, saw the euro gain from 1.1668 to 1.1705 on the day, not a huge move, but at least the euro has a 1.17 handle again, is what I thought when I turned the currency screen yesterday afternoon! 

In the overnight markets… the currencies continued to inch forward, at least those currencies from countries not in Asia! But then suddenly, things turned in the middle of the night, and the selling began, and the euro lost the 1.17 handle, and is trading right now (early morning for us) at the same level it was yesterday! 1.1668… And the Dollar Index yesterday was 94.52, and this morning it’s 94.50..  So, a day and night of gyrations, but we’re in the same clothes as yesterday… 

China’s Shanghai stock index got whacked yesterday, and the Peoples Bank of China took a pound of flesh from the renminbi last night…  With all the saber rattling going on between the U.S. and China, things for both countries are going awry… People are battening down the hatches, and there are some in China that are having second thoughts of an all-out Trade War with the U.S. 

And here in the U.S. those same thoughts but only from a U.S. point of view are evident… White House trade adviser Peter Navarro said that a Treasury Department report later this week on American restrictions on foreign investment won’t be as broad as investors fear as he sought to allay a trade standoff.  

Gold didn’t have a good day, which has been the norm lately… but at least this was only a $3 loss on the day…  Right now, in the early morning trading, Gold is down over $8!   These Trade War drums that were getting quite loud, have done a number on the shiny metal… Here’s the skinny on that.. So, if the countries of the world go all-in on a Trade War, that will halt the global growth that we began to see last year, and without global growth, there’s no inflation, and with no inflation, Gold gets whacked… 

Speaking of economic growth… I keep reading stuff about how the 2nd QTR’s GDP is going to be north of 4%…  And that makes me think of the old saying about how star burns the brightest right before it burns out…  I’m just saying… 

From my view in the cheap seats, it appears to me that this month’s downward move in the euro, was brought about by Europe, and not people buying dollars because they think the economy is doing so well…  First we had the Italian election, where the anti-euro party won a majority of seats, and will get to form a government there… Then we had the European Central Bank (ECB) issue dovish comments, and those were followed up a couple days later by ECB President Draghi, who spoke in Portugal and threw the euro under the bus again.  All the while, the only good piece of data that has printed in a month of Sundays in the U.S. was the May Retail Sales print… So, I don’t know much, but I do know that Europe has been the cause of the euro’s drop, and not people lining up to buy dollars! 

Of course, as I’ve said many times in the past, the euro is the offset currency to the dollar, so when the euro gets sold, mostly likely investors are buying dollars, but they are doing so, because that’s the trade… They are selling euros, and just happen to get stuck with dollars… 

The Eurozone left their recession they were in, many months ago, while the U.S. is headed to recessionville… All ahead, turbines to speed Batman! I’ve told you in the past that I read Jared Dillion’s letter, The 10th Man…  And he believes that the Trade War is going to be dollar positive, and therefore he believes the dollar is going to go on a strong run…  So, there you have it an opposite view of mine… fair and balance, right?

I wonder what the 10th Man thinks about this… Well… I know a lot of you haven’t seen this quote, so here goes… Bridgewater Associates, the largest hedge fund in the world, recently said, “2019 is setting up to be a dangerous period for the economy… for investors the danger is already here.”

Uh-oh!… Add that to the many other warnings economists and analysts, and country bumpkins like me, have been issuing about what the Fed Rate Hikes at the same time they are unwinding their balance sheet, with QT, and now Trade Wars are going to do the economy. It’s beginning to look a lot like a depression… (can you hear the choir singing?) 

Yesterday’s U.S. Data Cupboard didn’t have much to show us, and today’s is throwing all its eggs in the Case/Shiller Home Price Index for May… I’m sure it will show an increase, and the housing bubble just keeps getting more air blown into it…  Tomorrow’s Data Cupboard will finally have some real economic data with Durable Good and Capital Goods orders for May… I’ll be you a dollar to a Krispy Kreme that these two data prints will be negative…  Any takers? HA!

To recap…  There’s been some backing off of the Trade War drum beating but that hasn’t helped the stocks, metals, or currencies which have all been seen as liabilities in this Trade War…  The Asian currencies are hardest hit, as their gravy train of exports are seen to be getting caught in the mud of this Trade War.  The euro tried like the Dickens to trade above 1.17 and remain there, but like all the plans of mice and men…

For What It’s Worth… Well you don’t get much more All-American than Harley-Davidson, and well, that’s about to change…  Seeing that the Tariffs of the Trade War will cost them more than $100 Million per year in profits, the Company has decided to move some operations overseas… This article can be found here: https://www.upi.com/Top_News/US/2018/06/25/Harley-Davidson-to-build-motorcycles-destined-for-EU-outside-of-US/1221529934709/?nll=1

Or, here’s your snippet… “Harley-Davidson said Monday it will move production of its motorcycles headed for European Union customers outside the United States to avoid a new tariff.

The action comes in response to tariffs the E.U. imposed on U.S.-made motorcycles.

The tariffs, which took effect Friday, are retaliation for taxes President Donald Trump imposed on E.U. shipments of steel and aluminum.
In a Securities and Exchange Commission filing, Harley-Davidson said the 31 percent tariff, up from 6 percent, would add about $2,200 to the cost of each motorcycle — and the impact could reach $100 million per year.

About 16 percent of the Milwaukee-based company’s revenue comes from European sales, which reached nearly 40,000 units in 2017. There, it competes with European and Japanese-made motorcycles which are not subject to the new tariff.”

Chuck Again… thanks to Ed Steer (www.edsteergoldsilver.com) for highlighting this article this morning, so I could pick it up and have it for you! 

Currencies today 6/26/18… American Style: A$ .7402, kiwi .6871, C$ .7510, euro 1.1668, sterling 1.3240, Swiss $1.0105, … European Style: rand 13.5567, krone 8.1210, SEK 8.8629, forint 279.20, zloty 3.7186, koruna 22.1940, RUB 62.90, yen 109.65, sing 1.3616, HKD 7.8479, INR 68.11, China 6. 5314, peso 19.92, BRL 3.7795, Dollar Index 95.50, Oil $68.08, 10yr 2.88%, Silver $16.23, Platinum $862.78, Palladium $934.48, and Gold… $1,257.55

That’s it for today… Quite a bit shorter than yesterday’s letter, eh? Some days I have a lot to say, and some days I don’t! Baseball is a tough game to predict what’s going to happen… The Indians came to town with a 7-game winning streak and are one of the best hitting teams in Baseball, and a rookie pitcher shut them out for his 7 inning stint! I get to go see one of my fave people today… My dentist… Yes, I have a crush on my dentist… HA! Seriously… She’s great, and always so nice to me…  The thunderstorm that ripped through this area in the wee hours of the night were very strong, with winds,  heavy rain and a lightening show. It woke me up and then I couldn’t go back to sleep, so here I am… Rock you like a Hurricane! HA! The Gin Blossoms take us to the finish line today with their song: Follow You Down… 90’s music… I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler

June 25, 2018 

* Currencies rally on the Trade War news… 

* David Rosenberg visits the Pfennig again! 

Good Day, and a Marvelous Monday to you! Well, my oncologist gave me a high 5 last Thursday, and lowered the dosage on my chemo… It’s a start to being chemo free… At least that’s my hope!  Last Thursday night, I watched, probably the worst played game of baseball by my beloved Cardinals that I had ever seen! I was so disgusted with them at that point, but by Sunday, they were back to playing baseball the right way… Strange team, folks… a very strange team, and again I lay that all at the feet of the manager…  Today is World Beatles Day… So, with that in mind, I’ll be playing Beatles music all day, and in the car I’ll have it on the Beatles station on Sirius XM… So, the Beatles greeted me today with their song: And I Love Her…   (one of my fave Beatles song, YAY!)

Friday saw the currencies rebound a bit, with the Big Dog, euro, gaining a full cent on the day… The Trade War Drums are beating louder and louder and coming from all corners of the globe, and traders don’t like the feeling of what this might do to the economy, and so, they sold dollars on Friday.  And to the euro’s credit, European Central Bank (ECB) President, Mario Draghi, didn’t speak on Friday or over the weekend, thus keeping the euro out of the path of the bus!

In the overnight markets last night the currencies held their gains, but didn’t add much to the them. I mentioned above that most of the currencies had gained, but I was remiss in not mentioning that the Asian currencies are getting whacked once again, as those Trade War drums beating louder, and louder are taking their toll on the Asian currencies. 

In fact, as I looked at the currency prices on Friday afternoon, I saw that most of them were up about 1-cent on the day, including: sterling, francs, A$’s, and some others… One currency that didn’t join the rally party, was the Canadian dollar / loonie…  The loonie, which has always been a fave currency of mine, due to their ability to sell raw materials to countries that need them, has seen better days, for sure, than what it has experienced in the last week… First it had to deal with the war of words between the leaders of Canada and the U.S., and then they had weak Retail Sales, and inflation data (CPI), and suddenly all the euphoria over the Bank of Canada’s rate hike outlook, was gone! Went up in smoke, adios, ciao, and see ya later alligator… Loonie holders are going to either have to batten down the hatches, or well, let’s just say batten down the hatches… 

Gold was able to eke out a $2 gain on Friday, nothing to write home about, but still a gain, so we can celebrate little victories, eh?  In Saturday’s letter from Ed Steer (www.goldsilver.com) he highlighted, as he always does in his Saturday letter, the number of days of production it would take to cover the ounces sold short in paper trades… Yes, in case you’re new to class, these criminals (in my opinion) are allowed to have more short trades on the books than there is metal above ground… I just hope they get their you know what handed to them one day… Anyway, in Ed Steer’s letter, he highlighted the fact that the number of days of production of Silver would take nearly 240 days of production! Remember when it used to be 180 days? Those short Silver trades are really piling up… And the number of days of production it would take to cover the short positions in Gold is 60… I’ve talked about this for a number of years, and even the naysayers of Gold & Silver manipulation, can’t answer why there’s more short paper trades than actual metal is above ground.  

And The Big OPEC meeting this past weekend left Oil traders with the feeling that supply is going to grow, but a funny thing happened (not funny ha-ha!) to that feeling that supply is going to grow, the price of Oil rallied… I know, I know, strange, eh? I even read this morning that traders were selling Oil, but from the looks of the price I just pulled from the Bloomberg… That’s not what’s really happening!

I’m in the mood to really go at the Fed Heads calling this economy “strong” this morning, so if this discussion isn’t your bag, baby, then skip ahead…    Well, once again we are being bombarded with the Fed Heads telling us the “economy is strong”… HOGWASH I say… There’s a laundry list of things that point to a weaker, than the Fed is telling us, economy, and I won’t get into them all today.. But, one of the scariest items is the fact that mortgage owners are spending a very large portion of their income on their mortgage… Bloomberg reported this as follows: “Americans Devote Biggest Share of Income to Mortgages Since 2009…  “

I tell you… It gets more difficult every day to find the information I need to write a daily, and for that matter weekly letter… Recently, Bloomberg.com went through changes, and you no longer can pull up articles and read them through, without signing up and paying for that information… UGH! That really ticks me off… First my former employer took my Bloomberg unit away from me, and told me I could still pull articles, not data like I could with my Bloomberg unit, from the internet… Well, that’s come to an end too… I can get the headlines, which will work in some cases, but to highlight an article is gone with the wind… I guess I’ll have to depend more on the Russian Times (RT)… Think about that for a moment, and let that sink in, as to what has happened in this country…

I read a great quote from David Rosenberg again late last week. This one was printed on the Bloomberg… And Rosenberg said, “economic cycles die, and do you know how they die? The Fed puts a bullet in its forehead.” Now isn’t that great? I wish I had come up with that one! I would have put it on Twitter, and announced it to the world! HA!

Rosenberg went on to say that he believes the U.S. will be in a recession within the next 12 months… I believe the current economy to be on a much shorter leash, but we’ll see, eh?   As long as we’re on a David Rosenberg kick here, I’ve got some more juicy tid bits from him… Check this out:

As we enter the last week of June, I’m reminded that the Fed’s Quantitative Tightening (QT) will be increased from the current $90 Billion in bonds each month to $120 Billion on July 1… Did the markets forget about this increase? Apparently so, but soon it will hit them like a forehead slap!

The reason I make a BIG Deal out of this QT is that, as I’ve explained previously, with each $500 Billion that the Fed doesn’t renew, it’s like a ¼% rate hike… In a recent DTL piece, I focused on the Fed’s QT, and just what will it mean for interest rates… And it’s not a good thing, unless that is, you’re looking for higher rates for your deposits… You see, I’ve explained all this before, but, it bears repeating here… Fed Rate hike cycles haven’t always been the actual cause of a recession, but they sure seem to be at the scene of the crime.

Last week I had David Rosenberg, give his two cents on a subject, and I’m going back to the well this morning, where I found another priceless quote by Rosenberg on Twitter… Here we go… “If the Fed raises rates and shrinks the balance sheet as much as it says it will, the cumulative de facto tightening by the end of 2019 will have totaled 525 basis points. If you don’t think this is enough to cause a recession, take note that the Fed tightened 425 bps from 2004 to 2006, by 350 basis points prior to the 2000 downturn, and by nearly 400 basis points in the lead up to the 1990 pullback.” – David Rosenberg on Twitter

And therefore, it’s my opinion, and always has been since the first rate hike in December 2015, (yes, that’s almost 3 years ago!) that the Fed will rate hike the U.S. economy right into a recession, because, well history shows us, it’s what they do! 

I love it when great minds, like David Rosenberg’s, talk in the same circles as I do… Not that I’m a great mind, but…  the fact that I’ve been talking about this QT phenomenon for some time now, and the rate hike effect it’s going to have on the economy, and David Rosenberg is too, well, that puts some starch in my collar!  And make me sit up straight! 

While we’re in this vein… The U.S Data Cupboard on Thursday & Friday, didn’t exactly spell out a strong economy… First we had the Philly Fed Index, (manufacturing index for the Philly region) fall from a 34.4 index number to a 19.9 index number in May… Then the Leading Indicator data showed a drop from .4% to .2% in May, and finally on Friday the Markit PMI (manufacturing index) fell from 56.4 in May to 54.6 this month… The index is obviously still well above the 50 level that determines the difference between expansion and contraction, but, the direction is not good…   

I had a dear reader ask me last week to discuss the idea of China selling all of their Treasuries…  Well, while that would be really bad for the Treasury market, it wouldn’t be so good for China either, as they would experience huge losses in the bonds, and if that much supply is getting sold, along with dollars, they would experience a loss in the dollar component of the trade too…   

It has long been thought in certain circles and by me, that the reason that China is accumulating physical Gold by the boat load is to have something to offset their losses when they do sell their Treasuries…  But selling their Treasuries would be the “nuclear option”, and I doubt we’ll see that happen, instead I believe we’ll see China continue to be absent at the Treasury Auction window… And that’s a bad thing for the U.S. because we finance our debt with Treasury bond issuance, and with the amount of debt were booking now and in the future, the total bond issuance is going to do nothing but grow larger, and larger, which then begs the question, “who’s going to buy all those bonds?” 

To recap… The currencies rallied on late last week, as the trade war drums are beating louder and louder from all corners of the globe. Have you ever wondered about that statement, if we’re talking about Globe, how can it have any corners? Food for thought I guess…  And Chuck goes to extremes to prove the U.S. economy isn’t strong, and it’s a good thing he stopped when he did, or else the laundry list of items would break a camel’s back! 

Before I head to the Big Finish today, I was reading my fave letter last night, Grant Williams’ Things That Make You Go Hmmmm….  And in it I read about a guy that owes more than $1 Million dollars on his student loan… His monthly payments don’t even cover the interest on the loan, and therefore $130 are added to the balance every day!   If nothing changes in two decades his balance will be $2 Million! And he’s not the only guy with that kind of a student loan balance… This from TTMYGH…  “Due to escalating tuition and easy credit, the U.S. has 101 people who owe at least $1 million in federal student loans, according to the Education Department. Five years ago, 14 people owed that much.”

I just don’t know what to say or think about that… How in the world could that happen? Somebody is going to eat those loans… and guess who that will be? That’s right you, me and anyone else that pays taxes…

For What It’s Worth… I came across this article and it played so well with everything I was thinking about and writing about today, that I thought it would be good for a FWIW article… It’s about a guy that believes the next recession is going to be a doozy, and you can find it here:  https://www.marketwatch.com/story/hedge-fund-boss-who-predicted-87-crash-says-next-recession-will-be-really-frightening-2018-06-19?link=MW_popular   

Let me set this up… This is Paul Tudor Jones, a hedge-fund luminary  speaking… 

Or, here’s your snippet: “The next recession is really frightening because we don’t have any stabilizers.

We’ll have monetary policy, which will exhaust really quickly, but we don’t have any fiscal stabilizers.

The billionaire investor said the dynamic created by the Federal Reserve, as it attempts to normalize interest-rate policy from the 2007-‘09 financial crisis, is unsustainable, referring to valuations for stocks that many on Wall Street view as pricey. “

Chuck Again… Yes, this is the same stuff I’ve been telling you for some time now… Maybe now that Mr. Jones is saying it, people will listen! 

Currencies today 6/25/18… American Style: A$ .7427, kiwi .69, C$ .7521, euro 1.1668, sterling 1.3263, Swiss $1.0124, … European Style: rand 13.5267, krone 8.1170, SEK 8.8786, forint 278.77, zloty 3.7122, koruna 22.1641, RUB 62.96, yen 109.62, sing 1.3628, HKD 7.8469, INR 68.01, China 6.5027, peso 20.08, BRL 3.7853, Dollar Index 94.52, Oil $68.48, 10yr 2.89%, Silver $16.48, Platinum $872.29, Palladium $953.65, and Gold… $1,268.21 

That’s it for today… The heat here did break this past weekend, which was a relief, it was still warm, just not so darn hot! But the high temps are expected to return in time for this weekend…  Next week is the 4th of July! Can you believe that one? Where does the time go? Braden Charles stayed with us Saturday night. What a character! And he’s only 7! Next week’s schedule is going to be whacky with a holiday in the middle of the week, but I’ll deal with it… Long letter today, sorry, I was really loaded for bear, or better said, loaded for strong economy bunk!  The Beatles takes us to the finish line today with their song: A Day In The Life…     Alright, I hope you have a Marvelous Monday, enjoy World Beatles Day, and remember to Be Good To Yourself!   

Chuck Butler

 

 

June 20, 2018   

* The euro attempts to rebound, but is pulled back down

* David Rosenberg on this Wonderful Wednesday! 

Good Day… And a Wonderful Wednesday to you! Another day of extreme heat in my area yesterday. I hear we are supposed to be receiving a break in this heat streak, but I never trust what the weather people say! They always have an “excuse” for being wrong! Well, now, wait a minute Chuck, you always seem to have an excuse when you’re wrong too! Oh, so now I’m a meteorologist? HA! OK, enough of that silliness… Elton John greets me this morning with his song: Levon…  He was born a pauper to a pawn on a Christmas Day when the NY Times said God is dead, and the war begun… 

And once again yesterday, the euro attempted to tend to its wounds afflicted on it by European Central Bank (ECB) President , Mario Draghi…  I do believe that calmer heads saw the euro under the bus, and attempted to pull it to safety…  But the sellers were still in charge, and the euro only gained about 1/3rd of a cent…  In the overnight markets, there’s been more slippage, as traders overseas attempt to figure out, which country gets hurt worse in the Trade War…  

Right now, with China’s HUGE Trade Surplus, it appears that they have more to lose, but then we are talking about China, and they somehow always figure out how to avoid real problems. But since it appears that the Chinese Trade Surplus is at risk, that’s a potential problem for the economy, and slowdown for China’s economy is now being talked about, which is a bad thing for the rest of the countries in the region… 

Especially, Australia… The Aussie dollar (A$) has already dropped from the 76-cent level to the 73-cent handle, and now the fund, Blackrock, is calling for the A$ to fall to 70-cents this year on the China slowdown. Recall if you will the last time the Chinese economy slowed significantly, from plus 10% GDP prints to barely reaching 7%, and the A$ got sold from its lofty perch above $1.00 to the 70-cent range…  So, we’ve got history here, that can’t be ignored…  And like I said the other day, if only the Reserve Bank of Australia (RBA) had listened to me and begun their rate hike cycle late last year, they wouldn’t be facing a currency that just might lose the 70-cent handle! 

Gold got sold again, but this time it was by only $3.50 on the day, with 275,0000 contracts traded, again, with a huge amount entered by the short Gold paper traders…   David Kranzler is a guy that I’ve tracked through the years, and he has become a real go-to guy on Gold… He wrote the other day, that “physical Gold didn’t get sold”, it was simply “paper Gold” I liked that description, because I’ve said all along that the demand for physical Gold has remained strong, especially from Central Banks, not named the Fed, and the selling was dominated by the paper trades… 

I read the latest edition of Jim Rickards’ Strategic Intelligence last night, and in it ( I can give you a hint, as the letter costs money to read) he talks about all the “free money” that the new policy debate in the U.S. is all about… I kept shaking my head in disbelief that this is actually getting air play… Oh well, I’m old and getting older, and don’t really care that everyone in the U.S. could get paid whether they work or not, because right now nearly half of the population gets paid for not working, whether it’s warranted or not…  I say that, but in reality, I worry about my kids and grandkids, having to deal with the hyperinflation that something like these payment schemes could cause…   I know, I know “that kind of thing can’t happen here!” Well, that’s what everyone thinks, until… well, it does happen here! 

Last week it was announced that Russia had dumped 1/2 of their Treasury Bonds holdings… I dive deep into this in my latest Dow Theory Letters piece this week, where I point out that we could end up seeing more of this from countries that believe they are being wronged by the U.S. Trade Tariffs…  And David Rosenberg had something to say about this, so let’s defer to David Rosenberg… 

Last week, I highlighted a quote by one of my fave economists, David Rosenberg, who is Author of the daily economic report, Breakfast with Dave, and Chief Economist & Strategist at Gluskin Sheff + Associates Inc. And I pulled this quote of his from Twitter… “The end-game retaliation comes via a global boycott of the Treasury auctions. Foreign entities fund half the US fiscal deficit, which is set to double. Imagine the locals funding their own budget gap! This forces the savings rate up at the expense of spending. Recession follows.” – David Rosenberg

Alrighty then… So, men…do you ever sit back and think about nothing? It’s pretty cool thing to do, and if you haven’t tried it, you should make a concentrated effort to do so! It’s when we get out our “nothing box”… I can tell you that women do not like to catch their man doing “nothing”! But here I was this morning, and 30 minutes had passed before I realized that I was not writing, and I was just thinking about “nothing”..  Talk about “clearing your mind”!  There’s a YOUTUBE out there of a comedian doing a skit about a “nothing box” I laughed until I cried… 

The U.S. Data Cupboard yesterday had some housing data for us that showed a strong print for Housing Starts in May… The Housing Bubble just keeps getting air blown into it…   Today’s Cupboard has the 1st QTR Current Account for here in the U.S. And it should be a whopper! But then nobody cares about debt any longer, I’ve become a dinosaur with my warnings of debt accumulation…  I guess now I just wait for the BIG Meteor to hit, and wipe me from the face of the earth! 

Well, all this “doing nothing” has me behind the 8-ball for time this morning, and I guess I’ll just have to head to the Big Finish from here… 

To recap… The sabers are rattling in the Trade War between the U.S. and China, but Chuck fears the Chinese region will be hit too, and that includes Australia. The currencies tried to rebound yesterday, but the overnight markets put up roadblocks. And Gold continues to drop in price, but as Chuck points out today, it’s the paper price of Gold that’s dropping! 

For What It’s Worth… Not much in the way of good stuff out there this morning, unless you’re watching GE get bounced from the Dow! But I did come across this on the Bloomberg.com site this morning, and thought it to be interesting…  So, just go to www.bloomberg.com and look for it if you want to read the whole article, otherwise… 

Or, here’s your snippet: “German Chancellor Angela Merkel and French President Emmanuel Macron came to an agreement on how to move forward with strengthening the euro area, citing a common regional budget, a more robust European Stability Mechanism, and a shared approach to immigration. The leaders want to make it easier to restructure sovereign debt, while also putting pressure on banks to tackle bad debt problems that continue to dog economic growth. The proposals will have to be agreed by other euro members, which may prove difficult, particularly in the case of Italy where a populist government is in power.”

Chuck Again…  Yes, those pesky relatives that hold everything up! I’ll just let that one sit there and move along before I get into trouble! 

Currencies Today 6/20/18… American Style: A$ .7390, kiwi .6886, C$ .7521, euro 1.1565, sterling 1.3173, Swiss $1.0027, … European Style: rand 13.6782, krone 8.1823, SEK 8.88, forint 279.96, zloty 3.7318, koruna 22.3345, RUB 63.76, yen 110, sing 1.3577, HKD 7.8460, INR 68.05, China 6.4684, peso 20.50, BRL 3.7460, Dollar Index 95.15, Oil $65.10, 10-year 2.90%, Silver $16.27, Platinum $863.11, Palladium $969.03, and Gold… $1,272.96

That’s it For today, and this week, as I’ll be absent tomorrow, getting ready for a bright and early doctor’s appt with my oncologist…  I’m going to point out to her the good results of the scans, and she’s going to remind me that the wolf is always at the door, with me, and that I need to remain on the treatment… Isn’t it nice when you already have the appt. laid out? HA!  My beloved Cardinals come back, go ahead, give up the lead, and then go back ahead to win late… Crazy game… Day game today, it’s raining outside so maybe the weather will cool down for me to sit outside and watch the game today? Johnny Rivers takes us to the finish line today with his song: Summer Rain…  (all summer long we were dancing in the sand, Everybody just kept on playing Sgt. Pepper’s Lonely Hearts Club Band)…  In case you forgot that one..  So, let’s go out and make this a Wonderful Wednesday, and tomorrow, a Tub Thumpin’ Thursday, and then a Fantastico Friday! I’ll talk to you again on Monday, so don’t forget to Be Good To Yourself! 

Chuck Butler