Author: admin

July 1, 2019

*The overnight markets haven’t been kind to the currencies & metals

* The RBA cuts rates… 

Good Day… And a Marvelous Monday to you!  Pfennig tradition calls for this today… There I was on a July Morning… I was looking for love… With the strength of a new day dawning, and a road of my own…  Welcome to July! I didn’t realize this last week, when I shortened the week with my appt. on Thursday… But this week will also be a short week, as the 4th of July will be on Thursday this week… So… Yay for me, eh? My beloved Cardinals finally found a way to score more than 1 or 2 runs a game yesterday. It did take them extra innings to win, but Hey! They’re not much of a team other than a .500 team, so any win is a good one! Alex came home on Friday after being away from home for 10 weeks, as he completed a clinical in Montgomery, Alabama. He begins another one immediately, but this one is near to hear, so, no biggie… A few of us celebrated Alex’s 24th birthday on Friday… How many of you remember when he was 3 and would help me write the Pfennig, and it looked a lot like this: !$##3456*^&^! Ah… Good memories of when he and I were so close and I’ll never forget watching his favorite shows on TV with him in 1998, during my “first retirement”…  REO Speedwagon greets me this morning with their song: Golden Country…

Well, Friday, it was announced that Trump and Xi are friends again, and have ironed out their differences that created a Trade War with China… I find this very difficult to believe that all’s well here, but if that’s what the two leaders want us to know… Then so be it! The damage to the U.S. economy has already caused the Fed to talk about rate cuts, instead of rate hikes, so that’s not a good thing, as far as I’m concerned… Yes, I told you that the Fed would be reversing itself, but I didn’t think it would take this long for them to do so!

So… the China / U.S. announcement on Friday didn’t change the currency levels much, and Gold only lost 30-cents on the day… So, to me, I look at this reaction, as the markets didn’t believe an agreement was reached either! President Trump then went onto N. Korea to meet his BFF Kim, and Trump became the first sitting president to set foot in N. Korea since who knows when! The great negotiator, they’ll be calling Trump soon… Not the opposing party, of course, but his own people…

But… in the overnight markets, the removal of the safe havens has begun to take place… Gold is down big in early trading, and the euro has slumped, along with the Japanese yen VS the dollar… So… Maybe after a little arm twisting, the markets now agree that the Trump / Xi deal is real… 

Well… The Reserve Bank of Australia (RBA) became the first Central Bank to cut rates in 2019 last week… The RBA was driven to cut rates, because of the slowdown in China due to the Trade War with the U.S. I wonder if the RBA would have liked to have waited until this past weekend’s meeting between Trump and Xi took place before they cut rates… But they didn’t, they went ahead and cut 25 Basis Points from their internal rate, which now stands at 1.25%…

The Aussie dollar (A$) traders liked the news at first and ran the A$ above 70-cents on Friday, but like everything else it has succumbed to the overnight markets and their buying of U.S. dollars…  I have to tell you though, when I saw that +70-cent level on the A$ I thought it looked very good…  

So, last week I thought that the dollar was going to be looking for a comfortable place to hang out in the woodshed, for it would be there for sometime… And then along came a spider and… well you know what happened, the powers that be rushed to the dollar’s aid, and now, this week, it looks like the dollar will avoid being sent to the woodshed for any prolonged period… 

The price of Oil is higher this morning and is trading with a $60 handle… How much longer will this last could be a question for our friends at OPEC (NOT!) and their decision to maintain the cuts in Oil production for longer…  Other than that, we’re in that same old cycle for the price of Oil… It bumps higher, the shale producers jump in, flood the markets with supply and the price goes back down, and the shale producers bow out again… Lather, rinse and repeat… 

I wonder what the dollar bugs will think when they hear this news…. 

There’s a rumor going ‘round, someone’s underground, no wait! The rumor I’m talking about is that a major U.S. Bank will fold in the near future… This from the folks at Agora, who have never been known as publishers that pull back punches! Remember when the folks at Agora told us that GM would collapse along with Fannie and Freddie back in 2007? And then ithose things all happened? Well, they won’t tell us what major bank is on the ropes, unless we sign up for a year subscription, but to me, just knowing that a major bank is teetering with all their derivatives, is scary enough! I don’t know about you, but I’m scared about what will happen here…

Last week I told you about how the Hong Kong Dollar / honker was on the rally tracks, which looked very weird to me, but this was happening while the people of Hong Kong rioted in the streets…

Reuters.com had a good piece on why the riots are happening this weekend, so let’s listen in… “More than a million people have taken to the streets at times over the past three weeks to vent their anger and frustration at Hong Kong’s Beijing-backed leader Carrie Lam, posing the greatest popular challenge to Chinese leader Xi Jinping since he came to power in 2012.

Opponents of the now-suspended extradition bill, which would allow people to be sent to mainland China for trial in courts controlled by the Communist Party, fear it is a threat to Hong Kong’s much-cherished rule of law and are demanding it be scrapped and Lam step down. “
I’m still of the belief that the honker’s rally won’t be a long lasting thing, so we shall see…” – Reuters

I guess we’re back to square one with regards to a currency and metals rally taking place. And so our attention will be switched from looking for news on the Trade War, to watching the data prints this week…  Of course this week will be shortened with the Independence Day holiday on Thursday, which means all the senior currency and metals traders won’t be in on Friday, as they’ll make a 4-day weekend with a trip to the Hamptons! 

I’m surprised though that the monthly Jobs Jamboree will still happen on Friday… I would have thought with the markets being so thin that day, that the powers that be would delay it to next week… But that’s not the case, and so on Friday this week the Jobs Jamboree featuring the June payroll numbers will take place. 

We start the data roll call today with the June ISM Manufacturing Index, which at the end of May was showing some weakness and it stood at 51.3, which the Markit version of the data showed manufacturing teetering at 50.1…  The ISM is primed to fall further, after all the regional reports have been very negative, so we shall see… 

In addition to the Jobs Jamboree on Friday, we’ll also see the most recent Trade Deficit (look for a jump higher), Factory Orders (a real piece of economic data) and the auto sales for June…  All could end up being market moving should they expose the economy even more… 

To recap… Trump and Xi are buddies again, and Trump is visiting his BFF, Kim, in N. Korea… All these pleasantries have turned the currencies and metals around, as the safe havens are being removed and the dollar bugs come back out to play.  Gold, which lost 30-cents on Friday, is down nearly $20 in the early trading this morning. And the euro has slipped further down the slippery slope. The RBA was the first central bank to cut rates in 2019… Will the Fed be right behind them?   Inquiring minds want to know! HA!

For What It’s Worth… I told you last week that Trump was turning the Trade War to a Currency War… He’s doing this by putting pressure on the Fed to cut rates and make the dollar less appealing… thus weakening… And this article from Bloomberg.com highlights this ongoing argument between the President and the man he nominated to be the Fed Chairman, and it can be found on Bloomberg.com… 

Or, here’s your snippet: “President Donald Trump wants a weaker dollar to help boost exports, and is counting on the Federal Reserve to help make that happen. But the central bank’s chairman, Jerome Powell, has made clear it’s not his job.

It’s a new twist in the broader pressure campaign the president has brought to bear on Powell to cut interest rates to energize the stock market and fuel growth.

Trump’s focus on the dollar surfaced last week after the European Central Bank said it might ease policy, prompting the euro to drop against the dollar. Trump seized on the move to say on June 18 that the Fed’s failure to lower rates was putting U.S. exporters at a competitive disadvantage. He later mused on June 26 he’d rather have ECB President Mario Draghi running the Fed.

Powell, once again, is finding himself on the defensive, trying to shield the Fed from political influence. He deflected Trump’s calls back at the administration.”

Chuck Again… Well, the Fed Chairman is right here on this subject, but on the other hand he’s totally wrong in his attempt to keep the stock market afloat… Neither of these two directives are in his job description… I’m just saying…

Currencies today 7/1/19 American Style: A$.6995, kiwi .6704, C$ .7630, euro 1.1325, sterling 1.2627, Swiss $.9838, European Style: rand 14.1408, krone 8.5490, SEK 9.3087, forint 284.93, zloty 3.7455, koruna 22.4768, RUB 63.19, yen 108.25, sing 1.3547, HKD 7.8080, INR 69.01, China 6.8655, peso 19.16, BRL 3.8469, Dollar Index 96.54, Oil $60.06, 10-year 2.02%, Silver $15.26, Platinum $834.54, Palladium $1,530.89, and Gold… $1,390.17

That’s it for today…  A great big belated Happy Birthday to youngest son, Alex who turned 24 this past weekend…  On Friday last week, I attended a retirement party for 2 former colleagues: Ty Keough and Mary Vance… It was great seeing most of the folks again… At one point in the proceedings someone mentioned that I had hired them, and I looked around the room and said, “well, I think that I hired nearly everyone one in this room!” And that got a big laugh…  OK, Alex is home… Kathy comes home today… The house won’t be so quiet any longer, but that’s OK… It was becoming too quiet! So… memo to Christine and Jen… That was two weeks alone for me, and I’m still standing, as Elton John sang…   Ok…  The great Otis Redding takes us to the finish line today with his song: I’ve Been Loving You… This was from his live from the Whiskey A-Go-Go recordings, from many years ago now…  I hope you have a Marvelous Monday… Welcome to July, and Please Be Good To Yourself!

Chuck Butler

 

June 26, 2017 

* Talk of a trade agreement allows the dollar bugs to return… 

* What the heck is going on with the honker? 

Good Day…. And a Wonderful Wednesday to you! What a beautiful day here yesterday, the sky was a blue umbrella, the sun was shining, and it warmed throughout the day. No rain, in there at all! YAHOO! I sat outside last night watching my beloved Cardinals blow another game… UGH! But the night was nice, the company even better, so it wasn’t all bad! I don’t know how much I’ve got to say today, so let’s just get started and see where we go, eh?  The Rolling Stones greet me this morning with their song: Can’t You Hear Me Knocking?  (some of Keith Richard’s best guitar work here)

Well, well, well…. What have we here?  Yesterday, the Fed Heads hit the streets by large numbers, to talk and give their opinions…  Why anyone would listen to them any longer is beyond me… But currency traders did, and what the Fed Heads were telling the markets is that we can forget at 50 Basis Points (1/2%) rate cut…  Shoot Rudy, even the biggest dove of them all, James Bullard, President St. Louis Fed, said a 50 Basis Point cut would be overdone….  

The currency traders took these messages at face value, and decided to take some profits in the currencies, for the run up had been pretty swift and strong… What the currency traders were missing from the Fed Heads talks is that while the Fed Heads said that a larger rate cut was out of the picture, they didn’t say that no rate cut was on the docket…  So, a rate cut is still on the docket, albeit the 25 Basis Points I’ve talked about for a month now… 

So, the currencies backed off their lofty levels, and Gold was only able to eke out a gain of $3.80 on the day… A couple of weeks ago, I would have been a happy camper to see a $3.80 gain in Gold, because that’s not what we were seeing then. The exact opposite was hitting the shiny metal nearly every day.  But a $3.80 gain now is sort of MEH…  Not after the daily moves we seen lately! 

OK Yesterday I told you that today I would talk about the Hong Kong Dollar (HKD) or (honker)…  I don’t know if you’ve been checking the currency roundup or not, but something strange has been happening to the honker… It’s gained steadily for a couple of weeks… at first I didn’t believe what I was seeing, and wrote it off as the blip like we saw last year, when the honker rallied big time, only to have it come back to reality soon after…  

But that’s not what’s going on here this time…  And the thing that has me scratching my balding head is that the honker is rallying while the Hong Kong people are rioting in the streets… Major civil disorder is going on in Hong Kong, and the currency is rallying… Is that not strange or what?  Well, yes it is…  Oh, by the way, the honker is pegged to the dollar so its gains will be limited, but then the peg could always be broken, right? 

This is a public service announcement….  I haven’t had the access to the Pfennig Replies box for over a week now, so if you’ve written me, asking me a question, and I haven’t responded…  Now you know why! I was not just ignoring your emails…  I suspect that soon this will all be corrected, and then I’ll be at my laptop all day, catching up on old email… 

OK…  Well, the economic data prints here in the U.S. are certainly screaming for a rate cut… Yesterday, was no different, with the Case/ Shiller Home Price Index coming in flat for April, after a few consecutive months of home prices falling…   And the stupid Consumer Confidence Index for June dropped from 130 to 121… A HUGE drop, eh? … And then there was this….. 

I’ll get to a real humdinger of a description of the economy from the Fed Heads in the FWIW section of the letter today, so don’t miss it! Until then I’ve got this little ditty for you to chew on regarding the economy…

The Richmond Fed collapsed in June to the lowest level since this survey began. Uh-Oh… And the Chicago region index printed negative again last month… I know I often tell you that these regional reports don’t seem to filter through to the National ISM report… But… the National ISM has been slipping in recent months… I’m wondering if… this month it slips below 50…

The Russian ruble was the only currency yesterday that didn’t see any slippage, and that’s because the ruble enjoys the highest interest rate in the industrialized world… And it doesn’t hurt things that the price of Oil added another buck to its price in the past 24 hours and this morning is trading with a $58 handle… 

I was looking up the price of Oil this morning, and seeing rising, and right next to the price there was an opinion piece that was titled: Here’s why Oil’s outlook could be bleaker than expected…. I had to laugh, because here I am watching the price of Oil rise, and there’s an article about how its outlook is bleak…   Made me laugh… But then that’s my sense of humor! 

On the Trade War front… The markets are getting that warm and fuzzy feeling once again, from talk that Trump and Xi will meet and iron out a Trade agreement at the G-20 later this week…  Really?  I mean talk about people that love to have the rug pulled out from under them! Dolts!  But this shiny happy people (REM) syndrome is helping the dollar fend off sellers… 

The U.S. Data Cupboard has two pieces of real economic data for us today in the form of Durable and Capital Goods Orders for May… You may recall that April’s reports for these two were both negative, and I pretty much expect that to repeat itself for May… 

On Friday this week, we’ll see the color of Personal Income and Spending… This will be a very important report, due to the fact that the economy seems to be teetering toward a recession and a drop in consumer spending could be the snowflake that sends the economy over the edge… We’ll see, and I’ll talk about it next Monday… 

To recap… The Fed Heads went out in force yesterday, and talked the markets down from thinking that a 50 BP rate cut is in the offering at next month’s meeting, and that pushed the currency traders to take some profits, after the currencies had moved swiftly and strong in the past two weeks…  The upcoming G-20 meeting will have Trump and Xi meeting, and the “shiny happy people” think something will come of the meeting, which is helping the dollar this morning… 

For What it’s Worth…. Well… I’ve been saying for sometime now that a recession was coming, and I’ve also told you about 10 days ago, that I saw the Fed cutting rates in July by 25 Basis points (1/4%) and that was BEFORE their last meeting… Well, I was pointed toward this article by economist Danielle Di Martino Booth, and it’s about the next rate move and can be found here: https://www.bloomberg.com/news/articles/2019-06-25/powell-reiterates-rate-cut-case-has-risen-amid-economic-risks

Or, here’s your snippet: “Federal Reserve Chairman Jerome Powell said the downside risks to the U.S. economy have increased recently, reinforcing the case among policy makers for somewhat lower interest rates.

“Crosscurrents have reemerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy,” Powell told the Council on Foreign Relations in New York on Tuesday.

“Many FOMC participants judge that the case for somewhat more accommodative policy has strengthened,” he added.”

Chuck again…. Well, well, well… it now appears quite evident that the Fed will cut rates next month, pulling an about face from their March rate hike, when they talked about how the economy was so strong and robust! We’re the driving the economy with blinders on? I think so… folks… And we should trust them how much? None if you ask me!

Currencies today 6/26/19 American Style: A$.6982, kiwi .6682, C$ .7605, euro 1.1365, sterling 1.2684, Swiss $.9771, European Style: rand 14.3298, krone 8.5078, SEK 9.2650, forint 284.60, zloty 3.7497, koruna 22.4290, RUB 62.71, yen 107.71, sing 1.3540, HKD 7.8074, INR 69.28, China 6.8786, peso 19.17, BRL 3.8328, Dollar Index 96.23, Oil $58.94, 10-year 2.02%, Silver $15.27, Platinum $807.35, Palladium $1,535.52, and Gold… $1,405.58

That’s it for today, tomorrow and Friday… recall I have somewhere I have to go tomorrow morning, so no Pfennig…   When I get back home, I’ll check on stuff and see if I need to Tweet anything… Otherwise, I’ll be back in the saddle on Monday morning!  Friday, early evening, I’ll be attending a retirement party for two of my former colleagues… Ty Keough, and Mary Vance… I guess others are getting to that age too, eh? I sometimes think what I would do if I had to go back to work… And then I say… “nah can’t happen”!  Shoot Rudy, it’s always noon before I get finished with my morning crossword puzzles!  The Alan Parsons Project takes us to the finish line today with their song: Time….   I hope you have a Wonderful Wednesday, Tub Thumpin’ Thursday and Fantastico Friday! And Please Be Good To Yourself!

Chuck Butler

June 25, 2019

* Currencies see profit taking in the overnight markets

* Russian ruble proudly displays its highest interest rate…. 

Good Day… And a Tom Terrific Tuesday to you! A night off for my beloved Cardinals last night. I will say something though about all the adoration the St. Louis fans showered on Albert Pujols this past weekend…. IF I was a Current Cardinal ballplayer, I would have viewed that, as…. “if I can perform for 11 years like he did, and bring 2 world championships to the city, I will get ovations like that when I return too”… So, maybe it lit some fires under the underachieving Cardinals… We shall see…. I watched some of the college World Series last night, I still can’t believe they still use metal bats… No wonder pitchers are the most highly drafted players, because you can’t tell if a guy has power or is it his metal bat? OK… Pink Floyd greets me this morning with their 17 minutes song: Shine You Crazy Diamond…

The dollar selling continued through Monday’s trading and into last night, as the euro traded past 1.14… We were here a couple of months ago, when traders were still trying to figure out if the dollar was ready for a multi year weak trend or not… Apparently, at that time it wasn’t, and now the questions come forward and want to know it the dollar’s ready now? I’ll let you know, if the euro continues to climb to 1.15…

And just to throw some spice in our soup… The euro saw some profit taking last night, nothing that would alter your taste buds, but just extra flavoring… The Profit taking brought the euro back below 1.14 this morning, but not a big deal as far as I’m concerned… Watch for today’s reaction to the profit taking… If the euro rebounds and brushes the profit taking off its shoulder, like a dandruff flake, then it’s all good… But should this profit taking trigger some additional selling, then all bets are off… So, watch the trading today… 

For those of you new to class…. The euro was introduced in 1999 at a price of 1.17, but quickly fell in value and throughout the year it traded in the low 90-cent range… By 2002, and traders were getting the idea that it was here to stay, they began offsetting it to the dollar, and the euro had climbed back to parity with the dollar… And then the weak dollar trend began in Feb. of 2002, and the first stop for the euro was 1.10, then 1.20, 1.30, 140, and eventually made it as high as 1.50…

I talked about Jeffrey Gundlach a couple of weeks ago, he’s now the new Bond King… And he was quoted yesterday as saying that the dollar bear market has begun… So… I’m not so sure as of that yet, and like I said if we see the euro trade past 1.15 then I’ll be the first to tell you that the multi-year weak dollar trend is now in place…

There was one other thing I forgot to mention yesterday when spelling out the things that pushed the dollar over the edge last week, and that is… The U.S. President, Trump, has decided to go from Trade War, to Currency War folks… Recall I was complaining about him chastising the Eurozone for keeping the euro cheap for exports, but at the same time was calling out the Fed Chairman and blaming him for the strong dollar…. Well, it’s gone on and on now all weekend, and Trump is not taking any prisoners here… he wants other currencies to be stronger than the dollar… Will he get his wish? Well, it sure looks like it…

And Gold? Well, I was reading an email from the GATA folks last night from Dave Kranzler, of whom I’ve quoted before… And he was saying something that I’m very fearful of… And that is the price manipulators getting together to pool up their short Gold trades and well, whack Gold once again… But, he pointed out that since Gold started this run last week, there’s been no success in brining the price back down yet, and that maybe, with all the foreign Central Bank, and investors buying of physical Gold, that their efforts to get the price of Gold down, may be diminished… But while that may be true… I think we should be prepared for some volatility going forward, which would mean to buy the dips in price, in my humble opinion!

And that talk about all the physical buying got me thinking about what I used to tell you dear readers all the time, and that was if we wanted to snuff out the short Gold trades, there needed to be enough demand of physical Gold so that the price manipulators couldn’t make a difference… So, it was nice to see someone besides me have that idea….

And add to those thought the fact that Gold is up another $8 in the early morning trading today!  Got Gold? 

The Russian ruble continues to move stronger VS the dollar, taking out the 63 handle finally, yesterday…  The ruble is now 62.83, which is a far cry from the rot on the vine that was a price of 70 from a year and a half ago, and it’s also a far cry from the 35 it traded before the conflict with Ukraine that began in 2014… So, it’s been a long slog for the ruble, but now it’s got an ace up its Bullwinkle sleeve…  Higher interest rates than any country in the Industrialized world, and with investors starving for yield…  Well, I think you can see where I’m going here… 

In the U.K. the frontrunner to replace former PM May, and become the Imperial Leader (HA!) of the U.K., Boris Johnson, was quoted yesterday as saying that there could be no BREXIT deal…  That hit the pound sterling traders in the gut… I have to think that he’ll backtrack and come up with some explanation of his comment, so that the pound can get back on the rally tracks. 

The U.S. Data Cupboard has the Case / Shiller Home Price Index for April this morning. I would look for more declines in the price index…  We’ll also see the color of the stupid Consumer Confidence for this month. Last month we actually saw a slide in this index number from 134 to 130, so will it continue to slide? I doubt it, because they don’t ask you and me!

To recap…  The currencies continued to move stronger VS the dollar all day yesterday, but there was some profit taking in the overnight markets, so the question for today, will be whether or not the euro shrugs the profit taking off or not…  Jeffrey Gundlach thinks it will and has called these recent moves the beginning of the bear market for the dollar!  Gold continues to move higher, without any roadblocks being thrown down by the price manipulators…  Has all the physical demand for Gold knocked the price manipulators for a loop? 

For What It’s Worth…. Well, I’ve heard some really strange ideas these past couple of months, I won’t mention them for they’re not even worth my time to mention them… But I did come across something that is just about the stupidest idea I’ve heard… It’s a call to have taxpayers pay for Medicare for everyone, even for illegals and it can be found here: https://dailycaller.com/2019/06/21/bernie-sanders-medicare-for-all-illegal-immigrants/

Or, here’s your snippet: “Vermont Senator and Democratic presidential candidate Bernie Sanders admitted Friday that his Medicare for All plan would cover the nearly 11 million illegal immigrants present in the United States.

Sanders has routinely campaigned on his plan to nationalize the U.S. health care system and provide so-called “free” health insurance to every individual. The plan is estimated to cost more than $32 trillion over the next decade.

“We’re gonna … create a Medicare for All health care system which guarantees health care to every man, woman, and child,” Sanders said during the National Association of Latino Elected and Appointed Officials’ (NALEO) presidential candidate forum Friday. “We will organize the American people around the idea that all people in this country have the right to health care.”

Chuck again… That’s $32 Trillion over the next decade folks… OK, now I change my tune from our annual deficits reaching $2 Trillion to them reaching $4 Trillion! And you and I know who’s going to pay for that right? And that’s all I have to say about that!

Currencies today 6/25/19 American Style: A$.6970, kiwi .6645, C$ .7589, euro 1.1382, sterling 1.2727, Swiss $.9769, European Style: rand 14.2931, krone 8.5052, SEK 9.2428, forint 284.60, zloty 3.7380, koruna 22.4505, RUB 62.83, yen 107.05, sing 1.3534, HKD 7.8063, INR 69.39, China 6.8752, peso 19.23, BRL 3.8217, Dollar Index 96.02, Oil $57.67, 10-year 2.01%, Silver $15.43, Platinum $814.22, Palladium $1,515.30, and Gold… $1,428.51

That’s it for today…  I woke up this morning and thought it was later in the week, and that I had to hurry to get to my Thursday morning appt. And then it hit me that it was only our Tom Terrific Tuesday!  Well, one week down, by myself, and one week to go! I think I’ll be just fine…  I say that just to get to my former colleagues, Jen and Christine, who don’t believe that a man can survive when his wife is away…  Of course we’re all getting older now, and for some it’s not a choice, unfortunately…  OK, I plan to talk about the Hong Kong dollar tomorrow, so be sure to come back for that…  The band Focus takes us to the finish line today with their great 70’s instrumental hit song: Hocus Pocus…  don’t remember that one? YouTube it, I think it will come back to you quickly!  I hope you have a Tom Terrific Tuesday and Please Be Good To Yourself!

Chuck Butler

 

 

 

 

 

 

 

June 24, 2019

* Currencies & Metals continue to move higher Vs the dollar

* Chuck gives us a history lesson about the beginning of the last weak dollar trend… 

Good Day… And a Marvelous Monday to you! What a week, it was last week for Gold, eh? That move above $1,400 sent me into the weekend smiling like The Cheshire Cat! A weekend that had the great Albert Pujols return to St. Louis for the first time since he left us for the Anaheim Angels after helping the Cardinals win the 2011 World Series. The St. Louis crowd gave Albert standing ovations for tying his shoes… And when he hit a homer in Saturday’s game the crowed called for a curtain call… The first time ever for a player on the opposing team! Albert gave us 11 of his best years in Baseball, and for that we remain grateful that we got to witness it. AC/DC greets me this morning with their song: Back In Black…

Well, someone finally said no mas, with regards to short sales of Gold dominating the markets… let’s recap… Last week we started the week knowing that the European Central Bank (ECB) had signaled for more stimulus, and deeper negative rates….. That got Gold moving in the right direction…. Then we had on the same day, news that a military drone was shot down by Iran, and that the Fed was signaling that a rate cut could come soon… Gold skyrocketed on the combo of those three items, and is still looking solid…

And the dollar bugs? They’ve not been seen nor heard from since last Wednesday morning… The euro was 1.1370 last night when I looked… and all the of the other currencies have followed in the euro’s lead… In the overnight markets the dollar selling has continued and now the euro is within spittin’ distance of 1.14, as we start the day today…

Oh, and to add insult to injury for the dollar, the price of Oil is spiking because of a fire at a Pennsylvanian Refinery…  the price of Oil is trading this morning with a $57 handle. So… all the summer drivers? You may have to buck up a few more Benjamins to cover the cost of your summer driving vacation…

There are lots of different directions I could take the letter this morning, but I think I’ll keep it going with the thought that the dollar is going to need some real PPT or Central Bank intervention to keep it from falling more at this point… I read a guy that says he’s not ready to believe that the dollar is ready for a multi-year weak trend, but…. He’s also not ready to add to his dollar holdings… And I would think that this is the idea that’s in a lot of traders’ minds, etc. because we’ve been here before…

A couple of years ago, I wrote about how Traders sentiments had changed and they were all on board for a euro rally, as it appeared that the ECB was getting ready to remove stimulus…  And a couple of months later, the sentiment had all changed again, and the dollar was ready to rebound… Proving that the weak dollar trend was not ready for prime time… 

Then last year, we had economic data report after report print and be disappointing, and people thought, “well this is not good” but then out of nowhere, the 4th QTR GDP had a rogue 4% print, and left investors, traders, economists, etc. scratching their collective heads over that print, but it was the end of the dollar selling….

And it was at that time I explained to readers that this is a pattern I had seen before, when the dollar went into a multi-year weak trend. I had seen the dollar bugs refuse to allow the dollar to get weaker, and when things got strange for them, they found a way, to renew the dollar buying, but each time the dollar didn’t regain everything  it had lost, and eventually it gave way to the multi year weak trend… So… is this it? Is this the take off?

Good question… And one that I’m not ready to answer, but like the guy I talked about above, I may not be ready to call the multi year weak dollar trend, but I’m not buying any dollars either… (of course I hadn’t been doing that for years!)  But… why wouldn’t investors begin to add to their currencies and metals before this does potentially take off? Come on, make a call, you’ll feel better that you did in the long run…  I do believe… 

I read this weekend that Fed Head Neal Kashkari had called for a 50 Basis Point (1/2%) rate cut at the last meeting… He’s always been a dove, but he was really showing his dovishness, eh? He was the only one I heard that called for that size of a rate cut, and now I have to wonder how many other Fed Heads will join him in his call? I’m still of the opinion that the July FOMC meeting will yield a 25 Basis Points (1/4%) rate cut… If the Fed heads go 50 Basis Points, it will signal that they are panicking and that the recession is not only evident but also imminent!

The thing that the talk of rate cuts does is fuel the stock market, as if it needed any further fueling!  A year or so ago, I wrote in the now defunct, Dow Theory Letters, that historically speaking, stocks do not perform well at all during a recession… So, is this going to be different?  I doubt it… The stock jockeys might be dancing in the street over the rate cuts now, but if I’m right and the recession train is pulling into the station, they won’t be dancing long…  Because I don’t believe in the “the time will be different” BS… Never have, never will… 

So… I had a conversation with former colleague Aaron on Friday last week, and he was telling me that he got the feeling that the currency and metals holders  had grown tired of watching the dollar be strong for so long… And I said, Shoot Rudy, didn’t I teach them that when the dollar is strong that’s when they buy more because the currencies are cheaper? Now, IF this is the start of a multi-year weak dollar trend, they will be buying back their currencies and it will be more costly for them to do so… When will we ever learn? When, will, we… ever… learn?

That’s not to say that now is too late…. Au Contraire Monfrere! This has all just started… And, it’s not too late baby, now, it’s not too late… So, swallow your ego, and make the call to buy back your currencies and metals…

And before you think there’s something fishy going on here…. Look, I’m a loner… I don’t work for anyone, and I don’t get paid for saying things… So, if I say something, you can darn well be assured that its coming from me… myself… and I…. and I’m not paid for saying anything! I only want to see you diversified, so that changes in markets don’t negatively damage your investment portfolio…

OK, now that we have that settled….Do you know what FOMO is? FOMO stands for “fear of missing out”… So, do you fear FOMO? I read an article last night that said that fear of FOMO was fueling the run up in the price of Gold… Well, I don’t know if that’s true or not, but I have FOMAS…. Fear of missing a story! HA!  

I think that the run up in the price of Gold is more tied to the 3 items I mentioned above, and the fact that Central Banks around the world have already begun to cut rates… So the interest advantage that the deposits had on Gold & Silver, is going away…  

I read this morning that India’s Reserve Bank Gov. Acharya had resigned, 6 months ahead of his term ending… He cited the reason for leaving early was personal reasons…  Of course those “personal reasons” came after a class with PM Modi about Central Bank independence…  Apparently, PM Modi was applying pressure on the Central Bank of act…  Hmmm, sounds familiar doesn’t it?  

Oh, that’s right, it’s happening right here in the Gold Ole U.S.A! So, do you think that Fed Chair, Powell, will take Acharya’s lead on this and resign? Nah… I think he’s sitting deep in the Fed Chairman’s chair, and his back is straight, and shoulders back, and ready to take on the President…  Memo to Jerome Powell…. If I were you, I’d get out of Dodge before the dam breaks, for when the dam breaks, you’re going to get all the blame for it, because you built the dam too fast, and now it can’t hold back the flood waters…  Get out now! That is if you know what’s good for your career!

The U.S. Data Cupboard gets restocked this week, but we’ll have to wait until Wednesday to see any real economic data… There is the Case/Shiller home Price Index (HPI) that will print tomorrow, but as always this report is old news, as it will print for April…  But as the week goes on we’ll see Durable and Capital Goods Orders, and Personal Income and Spending, but like I said that’s all later in the week…  So no economic data news is good news for the dollar, usually that is… So, we’ll see if that plays out today… 

To Recap…  We’ve not seen nor heard from the dollar bugs since last Wednesday, when the FOMC Meeting and the news of a drone getting shot down hit the markets and the barn door swung wide open and the currencies and metals came running out!  Chuck tells us his experience with the beginning of the last weak dollar trend…  And the RBI Gov. resigned over a clash with the PM for independence… sound familiar? 

For What It’s Worth… Last month, my good friend, Dennis Miller, of www.milleronthemoney.com wrote a very good piece and used Monopoly (the game) to illustrate his point about Socialism…  Well, I came across this article on MarketWatch.com and it’s about how they don’t use cash in Monopoly any longer… and it can be found here: https://www.marketwatch.com/story/the-grim-financial-lesson-children-will-learn-from-cashless-monopoly-2019-06-21?mod=MW_section_top_stories

Or, here’s your snippet: “Hasbro announced Wednesday it will release a version of the classic board game Monopoly designed for the digital age. But financial experts argue the game’s new design could deprive children of important financial lessons.

In Hasbro’s HAS, -0.58% latest edition of Monopoly, gone are the paper money and Community Chest cards. Instead, the board game now comes with a voice-controlled, artificial intelligence device shaped like a top hat.
Designed to prevent cheating, players will now press a button on the top hat and dictate commands, such as paying rent or trading properties.

This is not the first time Monopoly has reflected today’s cashless world. A 2006 edition of the game in the United Kingdom featured Visa-branded V, -0.17% credit cards instead of paper play money. Similar versions of the game are also available in the U.S. Last year, Hasbro even released a version called Monopoly for Millennials in which players compete to buy experiences rather than real estate.”

Chuck Again… Ok, buying “experiences rather than real estate”? Really? That’s what the world is coming to?  Where are the lessons to kids about how to manage money? And building wealth?  I’m shaking in my seat, shuddering, and thinking about the future of this country…  

Currencies today 6/24/19 American Style: A$.6955, kiwi .6610, C$ .7585, euro 1.1395, sterling 1.2756, Swiss $.9746, European Style: rand 14.3327, krone 8.4732, SEK 9.3055, forint 284.30, zloty 3.7320, koruna 22.4620, RUB 63.01, yen 107.30, sing 1.3540, HKD 7.81112, INR 69.37, China 6.8689, peso 19.12, BRL 3.8200, Dollar Index 96.00, Oil $57.77, 10-year 2.03%, Silver $15.38, Platinum $816.38, Palladium $1,516.02, and Gold… $1,409.73

That’s it for today…  Rain, rain go away!  I’m so tired of rainy, chilly days for June! I heard last night that this will be a weak of drying up, and I’m all for that! Last Friday, I had lunch with son Andrew and grandson Braden, of whom seems to be growing up suddenly… He’s only 8, but there was something there that caught my eye…  Well, I’m still surviving here alone! HA! Hmmm…  That’s all I’ll say about that!  OK… Cardinals take 2 of 3 from the Angels and the Albert Pujols Love Affair…   I was more excited to see the best player in baseball, Mike Trout, play, for I don’t get the chance to see him in action very often… He didn’t disappoint.  OK… Steely Dan takes us to the finish line today with their song: Rikki Don’t Lose That Number… I hope you have a Marvelous Monday and Please Be Good To Yourself!

Chuck Butler

 

 

June 20, 2019 

* Fed signals a rate cut is coming… 

* Currencies & metals soar on the Fed announcement… 

Good Day… And a Tub Thumpin’ Thursday to you! As Gomer Pyle would say…. Surprise, Surprise, Surprise! Yes, I told you I had something to do this morning, but… I got my signals crossed and it’s next Thursday that I’ll not be writing… So, here I am… Surprise, Surprise, Surprise… (in my best Gomer voice!) I watched our young pitcher, Daniel Ponce de Leon pitch his arm off last night, only to have the bullpen blow the lead… UGH Still no hitting for my beloved Cardinals though… UGH! Chicago greets me this morning with their song: Make Me Smile… I can tell you this, back in 1972, I sat there totally awestruck by the wall of sound coming from my record player, as I played the Chicago album that this song was from… I still get goosebumps when I hear something from that album…

The currencies continued to fight back yesterday, with the euro leading the way. The single unit moved steadily upward through the 1.12 handle yesterday, and guess what it was that had the dollar bulls running for the cover of the wallboards? The Fed’s FOMC Meeting came to an end, and Fed Chairman Powell spoke… And he gave the markets what they wanted to hear… That the Fed was basically greasing the tracks for a rate cut soon… Remember, I went out on a big fat limb, earlier this week and said the first rate cut will come in the July meeting… I sure hope I’m not proved wrong/ early… But if I am, it only feeds the other thing I’ve said about the Fed for years now, and that is they are always behind the curve…

And don’t look now, but the 10-year Treasury’s yield has fallen below 2%! The yield has recovered a bit and it sits at 2.01%, but for most of yesterday it was 1.98%…. Remember when the world was still wondering if Quantitative Easing (QE) was going to help the economy after the Financial Meltdown, and the 10-year’s yield fell to 1.38%? Well, if you ask me, I would think the 10-year will revisit that low in yield within the next year… I’m just saying…

I guess at this point, because of the quick reversal of the Fed, (It wasn’t that long ago, that they were telling us the U.S. economy was strong and robust) , the question now, and until the next FOMC Meeting in July, is… Will the first rate cut be 25 or 50 Basis Points? Well, since I’ve already gone on record as saying that I think there will be 2 more rate cuts after the July cut, before year-end, that I’ll have to stick with 25 Basis Points (1/4%)… Otherwise, the other 2 rate cuts that I’ve called for wouldn’t be necessary by year end…

The Big Celebration though, and I’ve been holding back on this, as I didn’t want to spend all my wad early… For there would be nothing else to need to read about! HAHAHHA! But the Big Celebration should be for Gold, which soared through the Maginot Line of $1,350 yesterday as it closed up nearly $20 on the day! When I looked at Gold last night to get a feel for how much of a strong move it had made during the day, given the Fed’s announcement, and it was up to $1,379.00 at 10pm last night, and it brought a smile to my face… For it was me who said yesterday, that I thought that Gold would find its way through the Maginot Line soon… And did so because I knew in my heart of hearts that the Fed was going to do a reversal on us yesterday…

And Silver traded above $15 for the first time in a month of Sundays! Silver, because of all the short positions that are on record (it would take 185 days of Silver production to match the ounces that are sold short right now) lags the types of moves that Gold can put on display… But I’m a big fan of Silver… So, to see it move above $15 also made me smile… I was smiling like the Cheshire Cat for sure! And my recent poetic waxing about Silver sure seems to be bang on now, eh?

OK… now I’m going to calm down a bit, and come back to talking about things that are bothering me… Remember earlier this week when I talked about how President Trump was upset with European Central Bank President, Mario Draghi, because Trump felt that the ECB was keeping the euro undervalued to help them with exports? And then we did the whole two-step with Purchasing Power Parity? Ok… here’s my problem… Recently, the President chided Fed Chairman Powell about the dollar being so strong, and that it was hurting exports… Wait! What? Didn’t he just bang on Draghi for his weak euro, and wanted the euro to be stronger, and in the same breath (not really, but for my freedom of expression), he banged on Powell for keeping the dollar stronger?

Do you see the problem with this folks? As opposed to what Bob Dylan sang in his song: Lay Lady Lay, you CANT have your cake and eat it too! 

OK… The currency that I’ve been highlighting for months now, the Russian Ruble, has moved stealth-like to stronger levels lately, and the upward move isn’t tied to the price of Oil, which was talked about the last time I highlighted the ruble… But think about this for a minute folks… The ruble has been steady Eddie with some upward moves, and it has the highest deposit rate among established countries… Now, you’re never going to hear me say that the ruble can’t weaken… Sure it could… But as long as there are more and more people move their funds in to rubles to pick up yield, it’s not going to weaken… So, for now, the ruble seems to be the currency that depositors around the world are looking to… But keep it liquid folks… For we never know when the Russians might invade another country, now do we?

It certainly doesn’t hurt the ruble or any of the other Petrol Currencies that the price of Oil has rebounded to $55…  

I just thought of something that I used to bang on the Fed about… Remember when the Fed began their rate hike cycle over 3 years ago, and the Fed Heads talked about wanting to get inflation to rise to 2%?   I would so eloquently explain how that’s not how you invite inflation to rise… You cut rates to accomplish that feat. So the Fed was fighting themselves with regards to getting inflation to rise as long as they were hiking rates…  Now, the Fed says, “inflation is under control” so we’re going to cut rates… Well, it won’t be under control too much longer! 

Well, as I look across the desk at the currencies this morning, I see that nearly every one of them is on the rally tracks VS the dollar…  the one that sticks out like a sore thumb, and isn’t on the rally tracks is the Swiss franc…  A couple of days ago, the franc was touching parity with the dollar, and fast forward to today, and the franc has slide to .9860…   I bet you’re wondering why?  Well, I could say that the need for safe haven currencies has dissipated… but that wouldn’t explain why the Japanese yen is still strong…   So, it has to be something else, and I’m sure it has something to do with the Swiss National Bank (SNB)… Those guys, led by Gov. Jordan, are a suspicious bunch for sure…  I’m just saying… 

The U.S. Data cupboard has some 2nd and 3rd Tier data reports today… The Weekly Jobless Numbers have been moved to the 2nd team, and rarely gets a chance to play…  But there’s one piece of data today that’s forward looking, and it’s Leading Indicators, and we’ll see the color of that data for May this morning… Leading Indicators aren’t market moving, but they can make for some interesting headlines… 

And one more thing before we head to the Big Finish today…  I was going to write about this yesterday, and forgot…  But not today… Gold, which for trading purposes is priced in dollars (except on the Chinese Shanghai Gold platform) But when you look at Gold in other currencies… It was really shining…  It recently hit an all-time high VS the Aussie dollar (A$), and kiwi…  And that was one of the reasons I kept thinking that Gold was going to take off VS the dollar soon…  

To recap…  The Fed’s FOMC Meeting ended with no rate move, but… Shoot Rudy, let’s make that a BIG BUT… Fed Chairman Powell, gave the wink and nod to the markets that a rate cut is coming, and all hell broke loose in the currencies and metals… The euro shot through the 1.12 handle on its way higher, and Gold soared through the Maginot Line! Nearly all the currencies are on the rally tracks today VS the dollar, and Gold continues to march higher in the early trading… 

For What It’s Worth…  OK… Debt here in the U.S. continues to pile up, thus necessitating the need for more Treasuries to be issued to finance the debt, and I’ve been telling you that countries like Russia and China are dumping Treasuries… This article talks about Russia’s latest dump of Treasuries and can be found here: https://sputniknews.com/business/201906181075934481-russia-chips-away-at-us-debt-holdings-dumping-another-16-bln-in-treasuries/

Or, here’s your snippet: “The targeted selloff brings Russian holdings of U.S. Treasuries to a 12-year-low; total holdings have fallen by over $150 billion over the last decade.

The Russian Central Bank dumped $1.58 billion in U.S. Treasuries in April, freshly released data from the US Treasury indicate.

According to the figures, Russia’s Treasury holdings dropped from $13.716 billion in March to $12.136 billion in April. The sell-off brought Russia’s US debt holdings to their lowest level since mid-2007.

Russia, once one of the most dependable investors in T-bills, has gradually shaved its holdings amid a worsening in relations with the U.S., dropping out of the top 33 holders last year in a sell-off worth tens of billions of dollars. Less than two years ago, in late 2017, Russian Treasuries holdings stood at over $92 billion. In 2010, when bilateral relations were better, Russia owned over $170 billion in U.S. Treasuries.

The April data also showed that China and Japan dropped some of their (much more sizable) Treasury holdings. China dropped its investment by some $8 billion, from$1.121 trillion in March to $1.113 trillion in April, with the figure Beijing’s lowest in nearly two years.

Japan, the second-largest holder of U.S. debt after China, similarly reduced its T-bill holdings, from $1.078 trillion in February to $1.064 in April, indicating a drop of $13 billion.”

Chuck Again…  this is not going to be a pretty picture to look at as we go forward folks… I’m just saying… 

Currencies today 6/20/19 American Style: A$.6925, kiwi .6589, C$ .7583, euro 1.1306, sterling 1.2700, Swiss $.9860, European Style: rand 14.2374, krone 8.5577, SEK 9.4123, forint 286.55, zloty 3.7628, koruna 22.6643, RUB 63.90, yen 107.77, sing 1.3563, HKD 7.8163, INR 69.45, China 6.9026, peso 18.91, BRL 3.8581, Dollar Index 96.65, Oil $55.54, 10-year 2.01%, Silver $15.35, Platinum $817.74, Palladium $1,518.77, and Gold… $1,380.91

That’s it for today…  Well it took 11 innings but my beloved Cardinals finally pulled out a winner, but only had 6 hits in the game… It’s a reoccurring problem for them…  Well, my oncologist asked me yesterday if I had watched the Blues last week… And I had the same reaction I had last week, when they won the Stanley Cup, I teared up and chills went down my spine…  Day 2, alone was fine once again… I was upset a bit at the doctor’s office yesterday, because I had gained back a lot of the weight I had recently lost… UGH!  A vicious cycle with me, for sure!   The Moody Blues take us to the finish line today and this week, with their song from the Seventh Sojourn album (one of my faves!): Isn’t Life Strange?   I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday tomorrow, and will Be Good To Yourself!

Chuck Butler

 

 

June 19, 2019

* Currencies fight back on Tuesday… 

* Trump & Xi will meet at G-20, when did meeting ever accomplish anything? 

Good Day… And a Wonderful Wednesday to you! I was watching my beloved Cardinals get shut out again last night, and I heard the two knucklehead announcers say that they didn’t see this coming, all these shut outs… I sat there and said… I guess they don’t read the Pfennig, nor do they listen to me during spring training games, when I kept saying out loud… This team can’t hit! Well, they can sometimes, but most nights it’s just not their night to hit… Unfortunately, those nights are becoming more and more often… UGH! Well, day one, alone,  was no biggie… I actually slept for most of the afternoon, since I was up at 3 am to take my wife to the airport… I ate Chinese food for dinner last night and my fortune cookie’s message to me was; “Your personality is fueled by the fascination you feel for life” I thought, by gosh, by golly it’s right! Rod Stewart greets me this morning with his rock classic song: Maggie May…

Well, the constant buying of dollars by the dollar bugs tailed off yesterday, and the currencies, led by the euro, were able to gain back some of their lost ground… Not all, but some… Well, longtime reader Bob, sent me a note last night, that scared the bejeebers out of me first thing this morning… So, since it hit me like a ton of bricks, I thought why not you too? Here it is: The amount of negative yielding global sovereign bonds has never been higher, now $12 trillion worth. So bad is the global economy, so nervous is big money, that it is prepared to PAY for the privilege of owning government issued debt.

And yesterday, European Central Bank (ECB) President Mario Draghi, threw the euro under the bus again, when he talked about how the Eurozone had not reached its inflation target, of 2%, and therefore he had plenty of arrows in his quiver to combat that, including deeper negative rates, and bond buying…   

This talk should have shook the euro to its foundation… But it didn’t… I thinking that traders have seen and heard enough of Draghi, by now, and just don’t pay attention to him…  But deeper negative rates?  

Oh, me oh my… And I can’t help but think that before we know it happened, U.S Treasuries will see a part of its curve in negative territory… Yes, I’m saying negative yielding Treasuries are in our future… Just like negative deposit rates are too… I know, I know, I sound like Dr. Doom, and quite frankly, I think Dr. Doom is too Polly Anna for what’s in store for us in the next recession!

But I’m really a very positive person! When positivity is called for that is… Other than that I’m just a guy that calls them the way he sees them… So, now that we’ve laid that groundwork… I have a very interesting FWIW article today, it’ll have you scratching your head and wondering What the Hell! (WTH)

The Fed’s FOMC Meeting will end this afternoon, but not before we find out who sunk Bullard’s battleship! HA! I really threw a grenade from left field yesterday, when I told you I expected to see a rate cut in July and 2 more before year-end, didn’t I?  But that’s not today, and today we’re going to hear the Fed heads talk about how things have changed since their April meeting, and that they see the need for a rate cut should they continue to deteriorate.  That should do the trick, for the dollar folks, but then we never know, right? 

Gold found its way to gain $7 on the day yesterday, but is down $4 in the early trading today.  Can’t have Gold getting to close to the Maginot line of $1,350 now can we?  Well, like I said yesterday, there will be a break through in the Maginot Line for Gold, and I do believe it’s coming soon… 

But for now, you’re still able to pick up some physical Gold before the break through $1,350 comes…  Because after the break comes and it is followed through, it won’t be too late, but shall we say, tardy? 

The U.S. Data Cupboard only has the FOMC Meeting on its agenda today… Yesterday, the housing data proved me to be correct, when I said it lags and that houses can still be being built well into a recession…  There isn’t much in the Data Cupboard for the rest of the week after today, so the way I see this going is that the Fed hints and greases the tracks for a rate cut in July, which causes whiplash to the markets, and then it will linger through the weekend because there’s nothing else to deal with, data-wise. 

OK, the meeting is on!  It was announced yesterday that Trump and Xi WILL meet at the upcoming G-20 meeting.  The markets breathed a deep sigh of relief hearing this, but I have to ask them why?  When in all their years of dealing with meetings have they ever been a part of a meeting that actually accomplished anything?  Come on….  I shake my head in disbelief that they fell for the “meeting”….  

Before I head to the Big Finish today, I wanted to mention that all the saber rattling going on between President Trump and Fed Chairman Powell, is getting old…  But I have a suggestion for the President, should he find that he needs to add a Fed Head…  I would love for him to consider economist, Danielle Di Martino Booth…  She’s been in the belly of the beast (the Fed) before, and has a better viewpoint as to what the Fed needs to do… 

To recap… The currencies fought back yesterday, and through the overnight markets to start today, looking a bit healthier than yesterday morning.  Draghi tries to throw the euro under a bus again, but this time traders aren’t hearing him… But Draghi did mention deeper negative rates, and that has Chuck talking about how he see those coming to the U.S. 

For What It’s Worth… Another article sent to me from dear reader Bob last night, and this one just makes me madder than hell! This article is about what the Banks did with all the Billions of cash the Fed gave them after the last financial meltdown and it can be found here: https://www.cbsnews.com/news/whered-the-bailout-cash-go-its-a-secret/

Or, here’s your snippet: “After receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending it. Some won’t even talk about it. “We’re choosing not to disclose that,” said Kevin Heine, spokesman for Bank of New York Mellon, which received about $3 billion. The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest? None of the banks provided specific answers. Some banks said they simply didn’t know where the money was going.

There has been no accounting of how banks spend that money. The answers highlight the secrecy surrounding the Troubled Asset Relief Program, which earmarked $700 billion … to help rescue the financial industry. Lawmakers summoned bank executives to Capitol Hill last month and implored them … not to hoard it or spend it on corporate bonuses, junkets or to buy other banks.

But there is no process in place to make sure that’s happening and there are no consequences for banks that don’t comply. Meanwhile, banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year. Congress attached nearly no strings to the $700 billion bailout in October. And the Treasury Department, which doles out the money, never asked banks how it would be spent. No bank provided even the most basic accounting for the federal money. Most banks wouldn’t say why they were keeping the details secret.”

Chuck Again… Well, I can tell you that some banks didn’t want to take any cash but were made to take it anyway… But aside from that, the Gov’t doesn’t want to know what the banks did with the money… And since there apparently isn’t any accounting of the money… Now you tell me how in the hell that happens when there are bank auditors? I’m shaking my head in total disgust this morning and had better calm down because I’ll be having my blood pressure taken shortly! UGH!

Currencies today 6/19/19 American Style: A$.6872, kiwi .6525, C$ .7475, euro 1.1208, sterling 1.2587, Swiss $.9970, European Style: rand 14.5397, krone 8.7325, SEK 9.5380, forint 288.92, zloty 3.8056, koruna 22.8705, RUB 64.15, yen 108.40, sing 1.3673, HKD 7.8245, INR 69.73, China 6.9159, peso 19.15, BRL 3.8729, Dollar Index 97.55, Oil $53.83, 10-year 2.08%, Silver $14.94, Platinum $799.45, Palladium $1,496.97, and Gold… $1,342.83

That’s it for today…  And this week… Sorry, but I’m needed somewhere tomorrow morning… I know, I know I’ll miss talking about the FOMC, but I’m sure the media outlets will cover it… Not the way I do, but at least you’ll know what the main story is. My good friend, Dennis Miller, is hanging in there, and is almost finished with his treatments.  He still needs your prayers though, so don’t forget! I get to see my oncologist today… She’s great! I don’t think I continued to drop any weight, so she’ll be good with where I am now… I think I need a different antibiotic to combat the cellulitis in my leg… It just keeps hurting and doesn’t heal…  Oh well… life goes on…    The Strawbs takes us to the finish line today with their song: Autumn….   Hold on to me, I’ll hold on to you, the winter long I will be with you….   I love that line…  if you hold me, I’ll hold you… You can bet your sweet bippie I will! I hope you have a Wonderful Wednesday, and Tub Thumpin’ Thursday, and Fantastico Friday!  And I hope you continue to Be Good To Yourself!

Chuck Butler

June 18, 2019 

* WTH is going on with the dollar? 

* Chuck gives us a history lesson today… Ooh, where do I sign up for that! 

Good Day… And a Tom Terrific Tuesday to you! Still using the phrase “Tom Terrific”, and no one’s knocking on my door yet to tell me to stop! HA!  I forgot to congratulate the Toronto Raptors for winning the NBA Championship… They are the first team outside of the U.S. to win the Championship, and they beat the Warriors! A feat I didn’t think any team could do…  I don’t follow the NBA much, but do know about the Warriors…  I’m at this much earlier than usual today, as I’ve already taken my beautiful bride to the airport this morning… Yes, I’m all by myself, once again…  Oh well… Life goes on, eh?  Grand Funk Railroad greets me this morning with their song: Heartbreaker… 

What the heck (WTH) is going on here? Early last week, the dollar was getting sold like it should have been all along, and the currencies were looking healthy again. And then Boom! Traders switched horses in the middle of the stream, and began to buy dollars once again…  There was no news of any Trade Deal with China… There was the news of oil tankers being attacked… There was no good economic data printing… And there was a Fed FOMC meeting looming, where most people think the Fed heads will at least talk about a rate cut…  And yet the Traders bought dollars, and are still buying them?

You don’t think , no… Chuck, that couldn’t happen in today’s world, there’s just too many watchdogs out there… But, Chuck, think about it, at one point you thought the dollar was in deep dookie as it was falling, and then it wasn’t, just like that… The only thing that could have turned the dollar on a dime like that was intervention…  OK, I’ll give you that, but… from whom, because foreign countries are dropping the buying dollars routine like a bad habit… 

Well, have you considered the Fed itself?  Or The Plunge Protection Team (PPT)?  Oh, I see, you’re going to throw those at my feet because I’ve accused them of intervening before?  OK… I get it… I see… there had to be more than the hand of God (Pardon me Mr. Maradona) that changed Traders’ minds last week…  So, I’ll play along and say it was the PPT… 

And here’s the good news that comes from all this kind of intervention… The prices of the currencies are cheaper again, so you can buy more of them, and stock up for when the dollar does do the old exit stage right, and heads for cover…  You’ll be all prepared… YAHOO! Thank you price manipulators for making currencies cheap again!  What’s that sound I hear? Beep, Beep, Beep, Oh, it’s the sound of a truck backing up… 

The Purchasing Power Parity (PPP) talk I had with you yesterday, isn’t providing any benefit for the euro… If the euro was 20% undervalued on a PPP basis when it was 1.13, it’s even more undervalued now that the single unit has dropped further…   

And Gold found a way to gain back some of the $5 loss it had yesterday morning, to close the day down $2…  This morning, the shiny metal is up $5, and is within spittin’ distance of the Maginot Line of $1,350 as it trades this morning at $1,344…   A couple of months ago I told you how Gold guru, Egon Von Greyerz talked about how he thought that Gold would cross the Maginot Line of $1,350…  Did you know that the Maginot Line goes back to World War II, the French thought they had formed a strong line of resistance against Germany, and they called the line of resistance the Maginot Line, named after their minister of war…  Andre Maginot

Well, we all know from history that eventually the Germans found a way through the Maginot Line, and it didn’t prove to be as strong as once thought…  And there’s your history lesson for the day…  Oh, and I too think that eventually Gold will find its way through the Maginot Line, and when it does… clear the decks! 

What will it take to get Traders to realize that their barking up the wrong tree?  Could it be news that more and more foreign countries are using Russia’s version of SWIFT?  Hmmmm…   Could it be that on CNN of all places they had Fareed Zakaria explaining how America’s closest allies are working together to undermine the strength of the dollar? Hmmmm…  Or, Could it be news that was reported yesterday that: Combined Russia, China Treasury Holdings Hit 9 Year Low As Foreigners Keep Dumping US Stocks? Hmmm…   Or, it may not be any of these, but something else that comes along, but it will be something folks…  I can feel it in my bones…  And no that’s not the chemo I took this morning talking to me!  I can feel it in my bones that something is coming… 

The U.S. Data Cupboard had the Empire Manufacturing Index for us yesterday, which normally no one pays attention to these regional reports because they never seem to add up to the National report… But this one seemed to hit a chord with some economists that believe this is a good indication that a recession is on the way, because the Empire region showed the biggest drop on record for a month… May’s number when negative, which was the first time a negative number was printed with this data set since Rocktober 2016!  The Empire Region is the New York region, which why they don’t just call it that drives me crazy! 

Today’s Cupboard has some Housing data for May to look through…  May Housing Starts…  I don’t get any big ideas about this data for it has to very lagging, in that the recession could be well into its 3rd month before builders stop starting new houses!  The Fed’s FOMC meeting begins today…  I really do believe the Fed heads are going to begin to grease the tracks for rate cuts that will start with the July meeting… 

Yes, I said July meeting for the first of 3 rate cuts that will come between July and December…  You heard it here first, so what are you going to do about it?   Got Gold? Got euros? 

To recap… The dollar bugs are still in the driver’s seat, and not the one Sniff-n’-the Tears sang about!  Chuck is finally convinced that it was more than the hand of God that move Traders from selling dollars last week to buying them…  Chuck gives us a history lesion, and goes through some of the things that could turn the dollar into mush…  

For What It’s Worth…  OK, I spent some time this morning going through the Maginot Line, and when the GATA folks sent me this email I thought, these two play in the sand together nicely… And so this continues that talk about if Gold can get through the Maginot Line and can ge found here: http://investmentresearchdynamics.com/can-western-central-banks-continue-capping-gold-at-1350/

Or, here’s your snippet: “Judging from the latest Commitment of Traders Report, which shows the Comex bank net short position growing rapidly, there’s no question that Friday’s activity was an act of price control. Furthermore, it’s common for the price of gold to be heavily managed on summer Fridays after the physical gold buyers in the eastern hemisphere have retired for the weekend. The motivation this Friday is the fact that the gold price had popped over $1350 on Thursday night. For now $1350 has been the price at which price containment activities are readily implemented.

The price of gold is most heavily controlled just before, during and after the FOMC meeting. The next meeting begins tomorrow and culminates with the FOMC policy statement to be released just after 2 p.m. EST. The event has become the caricature of a society that takes official policy implementation seriously. This includes the journalistic and analytic transmission of the event, which is literally a Barnum and Bailey production.

It seems the number one policy goal of the Fed and the Trump Administration is to keep the stock market from collapsing. But the Fed has very few rate cut “bullets” in its chamber to help accomplish this policy directive. Moreover, a study completed by the Center for Financial Research and Analysis showed that the S&P 500 Index fell 12.4% in the first six months after cuts started in 2007. The drop broke a post-World War II record decline of 9.5% set in 2001, when the Fed’s previous series of rate reductions got under way. Declines in the S&P 500 also followed moves toward lower rates that began in 1960, 1968 and 1981.

This suggests to me that the Fed will have to start printing more money. The only question is with regard to the timing. Judging from the steady stream of negative economic reports – a record drop in the NY Fed’s regional economic activity index released today, for instance – it’s quite possible the printing press will be fired up before year-end.” – Dave Kranzler writing to the folks at GATA… 

Chuck again…  Yes, it appears to me that the whole shootin’ match is going to be lit up by year end here in the U.S. And none of it is going to be helping the dollar… So, once again I ask… What are you going to do about this? 

Currencies today 6/18/19 American Style: A$.6844, kiwi .6512, C$ .74447, euro 1.1188, sterling 1.2527, Swiss $.9999, European Style: rand 14.6557, krone 8.7436, SEK 9.5065, forint 287.91, zloty 3.8095, koruna 22.8682, RUB 64.27, yen 108.30, sing 1.3715, HKD 7.8336, INR 69.66, China 6.9240, peso 19.14, BRL 3.8931, Dollar Index 97.70, Oil $51.69, 10-year 2.05%, Silver $14.89, Platinum $798.53, Palladium $1,482.20, and Gold… $1,344.67

That’s it for today…   Well, my beloved Cardinals got their homestand off on the right foot last night with a 5-0 win..  gotta do it again tonight!  What will I do with myself for the next 10 days? The same thing I do every day now! I do have a visit with my oncologist tomorrow, but later in the morning, so no probs with getting the Pfennig out before I leave…  A friend of ours from Long Island called on Sunday to congratulate us on our team’s (The Blues) Championship… I told her I still get goose bumps and tear up when I think of it…  The Yardbirds take us to the finish line today with their song: For Your Love…  Guitar legends, Eric Clapton, Jimmy Page, and Jeff Beck all played with the Yardbirds…  I hope you have a Tom Terrific Tuesday, and Please Be Good To Yourself!

Chuck Butler

 

June 17, 2019

*Data in U.S. is so-so, certainly not great!

* Fed’s FOMC meets this week… get out the gameboards! 

Good Day… And a Marvelous Monday to you! Yesterday was Father’s Day… I hope all the Dads out there had a Grand Day… It looked like it was going to be a rain filled day here, but then the sun came out, I fired up the Big Green Egg and watched the Cardinals play the Metropolitans. A beautiful day! Son Andrew was in Indianapolis with his club water polo team qualifying for the Junior Olympics. Son Alex is still in Montgomery, Alabama, doing clinical work. From the pictures he’s sending home, he’s become quite the fisherman while away! Daughter Dawn was here, along with her family, and daughter Rachel was here… I always get a little misty eyed when it comes to Father’s Day, for it’s when I feel a deep pang and think about my dad… He’s been gone for 24 years now… Seems like an eternity to me… The Beatles greet me this morning with their song: A Day In The Life, from the Sgt. Pepper’s Album.

Well, last Friday wasn’t kind to the currencies… As the recent runup in the currencies VS the dollar has been all wiped away… it’s like it never happened, as the cleanup company’s crew advertises…  The dollar bugs used the currencies like a punching bag all day… The U.S. Data on Friday was interesting and looked like this: Retail Sales were up, but didn’t meet expectations, Industrial Production was up 0.4%, but all that did was recover the negative -0/4% in April, so flat for the last two months, And Consumer Sentiment lost 3 points to 97… But the dollar bugs figured it was all good enough, and went to work on buying dollars and selling non-dollars…

And of all things they took the uptick in Retail Sales and claimed it was strong print! See? These guys can take anything and put the spin on it to make it sound amazing… the Spin Doctors I call them, and not the ones that sang: Two Princes!  

After a good day on Thursday for Gold, when it climbed $8.80, it was subjected to a ton of short Gold paper trade on Friday, and lost 80-cents on the day… So, not as bad as it could have been, but certainly not as good as it should have been, without the short Gold paper trades. I had a different way of thinking about the price manipulating the other day… A dear reader sent me a note and said, “I don’t mind the price manipulation, while I’m buying Gold”… And I thought… Yes! The price manipulators are doing us a Big Favor, by giving investors one buying opportunity after another, and after another, and after another! So, now, I’m happy the price manipulators are there, because they’re keeping the price of Gold down for investors to buy in… For once you have your Gold, it’s there, it’s your store of wealth, and you’re not going to sell it… Like the old commercial used to say…. Set it and forget it… Well, with Gold, you buy it and forget it!

The shiny metal is getting sold this morning to the tune of down $5 in the early trading…  And the euro, which fell to 1.1205 on Friday, is attempting to recover some of its lost ground this morning…   The Big thing on the calendar this week is the Fed’s FOMC meeting on Wednesday…  Let’s face it, the dollar bugs don’t know what the Fed is going to do or say, but they went out on a limb and bought dollars like funnel cakes at a State Fair!  

Seems like putting cart before the horse…   Because while I don’t think the Fed will cut rates this week, they could very well, begin to grease the tracks for the next meeting to cut rates…  And that wording will be important to the markets, for like I said the other day… If the Fed hints at a future rate cut, it’s about as good as an actual rate cut… And then what are the dollar bugs going to do with all those dollars they bought on Friday? 

Speaking of the euro… last week President Trump said that the euro was undervalued. And I agree with him… But… let’s not stop there… The euro VS the dollar is over 22% undervalued, when you use the Purchasing power parity model that the OECD uses… For a very long time, years ago, people would use what they called: The Big Mac Index, which priced a Big Mac in every country’s currency, and compared the cost VS a dollar. Well, even using the Big Mac Index, the euro is still undervalued… not as much undervalued as the OECD model, but still about 15%…

So, just for grins… let’s take a price that somewhere between the two PPP models, and say the euro is undervalued by 20%… At 1.13 (round price) adding 20% to the price would move the euro to be around 1.35… now that would be more like it in my book! An old colleague of mine, used to use the Big Mac Index to help him forecast currency movements. The thinking here is that eventually a currency will rise to or fall to its purchasing Power Parity..

Well, as I’ve long said now (since 2009), that these kinds of fundamentals are no longer used to value currencies… These days, it’s all about Trader Sentiment… Now a trader might be leaning toward a currency and sees that it’s undervalued in PPP, and he might make a call for that currency, or he may not… What’s he really feeling?

Feelings… nothing more than feelings… no wonder everyone is so darn scared of hurting someone’s feelings these days! But I digress and need to move along to something else now… 

Well, the U.S. Data Cupboard doesn’t have much for us to see this week, a couple of Housing reports, is about it… So, the Fed’s FOMC Meeting on Wednesday will be the big Kahuna this week… It’s one of those two-day meetings, so the Fed Heads will have to open the closets and get out the board games to fill the time between Tuesday morning and Wednesday afternoon…  

To recap… The currencies got whacked on Friday…  And Chuck’s not seeing the reason for the whacking either! The dollar bugs pointed to a pick up in Retail Sales, but the actual print didn’t meet expectations, but that didn’t stop the dollar bugs from buying dollars!  Gold held onto to its gains from Thursday on Friday ending down just 80-cents, but the shiny metal is down $5 today so far…  The Fed’s FOMC meets this week… Get ready to listen to what they have to say!

For What It’s Worth….  Well, I was so glad to see this in my email box this weekend… It’s a note from MarketWatch.com about how the Bond Guy, Gundlach is buying Gold… and it can be found here: https://www.marketwatch.com/story/bond-king-jeffrey-gundlach-bets-on-gold-and-rings-the-alarm-bell-on-potential-us-recession-2019-06-14

Or, here’s your snippet:”Trade tensions are also one reason DoubleLine Capital Chief Executive Officer Jeffrey Gundlach now sees a bigger chance of a recession hitting U.S. shores in the not-too-distant future.

Providing our call of the day, Gundlach predicted a 40% to 50% chance of a U.S. recession within the next six months and a 65% chance of that happening in the next 12 months, in a webcast to clients late Thursday, according to a roundup of his comments from Reuters and other media outlets. He said signs of a slowdown on the global economic front are also a worry.

No doubt, the calls for the Federal Reserve to head off a downturn are growing louder by the day. Gundlach is not expecting an interest-rate cut when the Fed meets next week. Instead, he notes the bond market is tipping two or three cuts by the end of the year.

As for where Gundlach is putting his money, he said he is “certainly long gold,” given expectations the dollar, which stands to take a hit if the Fed lowers interest rates, will close the year weaker.”

Chuck Again… Good call Mr. Gundlach!  But I’m putting higher percentages on the recession calls…  That’s all… 

Currencies today 6/17/19 American Style: A$.6870, kiwi .6508, C$ .7457, euro 1.1233, sterling 1.2591, Swiss $.9984, European Style: rand 14.8105, krone 8.7178, SEK 9.4797, forint 286.91, zloty 3.7929, koruna 22.7560, RUB 64.35, yen 108.68, sing 1.3705, HKD 7.8294, INR 69.91, China 6.9244, peso 19.16, BRL 3.8971, Dollar Index 97.46, Oil $51.94, 10-year 2.09%, Silver $14.80, Platinum $794.03, Palladium $1,455.69, and Gold… $1,336.40

That’s it for today…  Well, that was some turnout for the parade to honor the Stanley Cup Champion Blues on Saturday… Everywhere the camera spanned it was full of people…  I had this thought the other day about the Blues players… “It feels good to wake up a champion, doesn’t it?”
Perhaps the best part is realizing it was not a dream.  Cardinals come home after 10-game road trip 5-5, which isn’t bad. My dad told me as a young man that if a team plays .500 on the road, and .750 at home they should be near the top of the standings…  So, OK, the Cardinals were .500 on the road, now let’s see them go .750 at home!  The great Albert Pujols will be coming back to St. Louis at the end of this week…  The first time since his departure after the 2011 Championship…  If he had stayed in St. Louis, they would be fitting him for a statue opposite Stan Musial’s statue right now… But, he didn’t… and the game goes on…   Supertramp takes us to the finish line today with their song: Even In The Quietest Moments…  I hope you have a Marvelous Monday, and will Be Good To Yourself!

Chuck Butler

 

June 13, 2019

* dollar fights back on Wednesday, despite some awful debt news… 

* Two Oil tankers are attacked, and the U.S. is pointing at Iran…. 

Good Day… And a Tub Thumpin’ Thursday! Blues Win, Blues Win, Blues Win… For the first time the 50 year history of the Blues, they are the Stanley Cup Champions! I can’t even begin to tell you what this means to me… I’ll have more on this as we go along… Today’s letter is going to be more about the Blues winning than currencies and metals, so if that bugs you… Sorry… Come back next Monday for regular programming! Laura Branigan greets me this morning with her song: Gloria… That was the Blues rallying song this year, and while I had to go to youtube to find it, because I can assure you it’s not on my iPod, it’s beautiful music to hear!

When I was 13 years old, in the 2nd year of the Blues existence my good friend, and live-in pal, Frank Weiler, and I, would take two city busses to the old Arena and buy tickets at the window to watch our Blues play hockey… The total cost for the night was less then $7.50, and since I worked all the time back then, that was no big deal for me… People would dress up in suits and fancy dresses to go to hockey games back in those days… But those were the days that I first saw hockey played live, and I was hooked!

The Currencies saw the dollar bounce back yesterday, let’s listen in to hear what Reuters had to say about this move: “The U.S. dollar gained on Wednesday as trade tensions and U.S. interest rate policy remained in focus after President Donald Trump expressed optimism over making a trade deal with China.”

Really? There’s optimism about a trade deal with China, a day after you, President Trump, threatened to raise tariffs if Chinese leader, Xi, didn’t meet with you at the G-20 later this month? Really? Oh brother, what line of BS will the PPT used next to cover their rears as they buy dollars to keep it from falling off a cliff?

I know I can hear you saying, Chuck, how do you know it was the PPT (plunge protection team) buying dollars yesterday? Well, I put one and one together, folks… you tell me how the dollar could rally when this was a headline news item…..
Federal Spending Tops $3 Trillion Through May for First Time; Deficit Hits $738 Billion…

And Gold? Wouldn’t Gold be soaring on news like that? But it didn’t, and actually lost a buck and change on the day…

Our Deficit spending is soaring through the roof once again, and I just keep thinking about how I kept saying that our budget deficit was forecast to be $1 Trillion this year and on out, and I would say that I bet that it was more like $2 Trillion per year soon… So…. Got Gold?

In the overnight news, 2 Oil tankers were attacked in the straits of Hormuz, with one set ablaze and sailors had to be rescued by the U.S. Navy…  This news has heightened the fears of a Middle East war with Iran, and the price of Oil jumped by a buck…. But Gold? no real movement so far today in Gold, even though with something like this, we should be seeing tons of buying in Gold…  I’ve highlighted this news in the FWIW section today, so in a bit you’ll be able to read more. 

OK… with 3 minutes to go last night, my youngest son, Alex, who’s doing clinicals in Montgomery Alabama, face timed me, and we began to talk about how cool this was, and as the time ticked away in the game, both of us were crying! I had received texts earlier in the day from two former colleagues at my old bank… They’re both from the South, and they were watching the game and cheering on the Blues… I said, that’s pretty cool, I’ve converted some Southerners into Blues hockey fans!

And then last night I received an email from a longtime customer, who’s a famous rock singer and guitar player, congratulating me, even though he was a born and bred Bruins fan… Lot’s of texts from friends and family… it’s was a trey cool night, for sure…

But the topper, well, the topper right below the winning of the Stanley Cup, was my good friend Duane, who stopped by with a bag of Jack-in-the-Box tacos… I fired up Gloria on my Bose speaker, and we hugged and reminisced about all the Blues hockey games the two of us had gone to together, throughout the years… Not so much in the past few, with me being sick and gone for most of the winter, and the increased costs of tickets for games, but there was a time when the two of us would see probably 25 games a year! Which most were weekend games, but some were not, and getting up for work all those mornings after, was not a sunshine and lollipops for yours truly!

We used to always stop on our drive home at the Jack-in-the-Box for tacos… it was our winners dinner… So, it was so apropos that he brought over tacos last night!

So… I can tell you that I really had begun to think that the Blues were the Cubs (before 2016) of hockey… We would have the best team in hockey for the year, and bow out in the first round of the playoffs, and there were other strange things that happened to keep them from going to the Stanley Cup Finals, much less winning it! Somebody pinch me… did this really happen? I’m still getting chills down my spine every time I think of the team that I’ve followed for 50 years, finally winning the Stanley Cup…

All the team members, even healthy scratches, get to hold the Stanley Cup above their heads and skate in a circle and then hand it off to the next team member… I think I should be given the chance to lift it over my head! But there are bigger fans tham me, I’m sure…

I played hockey in the school yard, and I played it on roller skates in gyms… let me repeat that for those that don’t think that’s something worthy of talking about… not rollerblades…. Rollerskates!!

They had 20,000 at the Enterprise Center last night to watch the game on the jumbotron… They had 25,000 people at Busch Stadium to watch it on the Big Screen, and another 5,000 at the Ballpark Village to watch it on the big Screen… I was so proud of my fellow St. Louisans they partied, but didn’t let things get out of hand, no property damage, no cars overturned, or burned, no looting, just good old partying into the night!

The U.S. Data Cupboard had PPI yesterday, and like recent prints it was not up to snuff, when considering sending price pressures into the inflation pipeline…  May PPI was 0.1% to the good…  And immediately, really smart economists began talking about deflation… Today’s Cupboard will have the stupid CPI (consumer inflation) and it too will probably show just a 0.1% increase in May…  

I’ve told you this before but it bears repeating here… The Fed Head don’t really rely on CPI for their inflation gauge… They prefer the PCE (Personal Cost Expenditures) But even the PCE has been slip sliding away recently, which should be telling the Fed Heads that they need to get on the rate cut train before this turns into a real deflationary situation… 

One of those really smart economists is David Rosenberg, and he had this to say about the PPI print on his Twitter handle yesterday: “The key in today’s PPI data were the deflationary impulses in the core pipeline price measures. The Fed is way behind the curve. Yield on 10-year T-note down to, or through, 1% in the coming twelve months.” – David Rosenberg on Twitter…

 To Recap… The Blues Win!, The Blues Win! And the dollar bugs came back to fight the currencies for ground that the dollar lost so far this week yesterday… There was news of more Debt, but that didn’t keep the dollar bugs from buying… Chuck smells a rat, because Gold didn’t move either on that news or the overnight news that two Oil tankers were attacked… UGH!

For What It’s Worth…  I almost bagged this today, but shoot Rudy, what’s a day without a FWIW article? HA!  OK, I told you above I had more on the 2 Oil tankers that were attacked and here it is, and it can be found here: https://www.cbsnews.com/news/two-oil-tankers-attacked-in-gulf-of-oman/

Or, here’s your snippet: “Two oil tankers near the strategic Strait of Hormuz were reportedly attacked on Thursday, leaving one ablaze and adrift as sailors were evacuated from both. The U.S. Navy rushed to assist, amid heightened tensions between Washington and Tehran.

Iran claimed it dispatched search teams that rescued the 44 sailors who were on the two vessels.

But a U.S. Defense Department official told CBS news senior national security correspondent David Martin it’s “likely” Iran is the source of the attacks — and said Iran’s rescue claims were “patently false.” He said the USS Bainbridge picked up 21 of them.”

Chuck Again… Think back in history… World Wars have been started over smaller aggressions than this…  I’m just saying… 

Currencies today 6/13/19 American Style: A$.6906, kiwi .6565, C$ .7517, euro 1.1290, sterling 1.2676, Swiss $ .9928, European Style: rand 14.8313, krone 8.6507, SEK 9.4722, forint 285.36, zloty 3.7734, koruna 22.6524, RUB 64.67, yen 108.46, sing 1.3665, HKD 7.8282, INR 69.44, China 6.9158, peso 19.16, BRL 3.8534, Dollar Index 96.99, Oil $52.78, 10-year 2.11%, Silver $14.80, Platinum $812.55, Palladium $1,435.46, and Gold… $1,336.69

That’s it for today and this week… It’s time to party, St. Louis! The plans for a parade will be announced today, and I have to wonder just how many people went to work today here in St. Louis! On a night when it was all about the Blues, my beloved Cardinals took one on the chin… So it was not ALL Good for us last night… Good enough for me though!  When the Blues scored their 4 goal to make it 4-0 I began to cry, with joy, for I knew then that they had won the Stanley Cup…  OK… well, I was up very late last night, as you can imagine, and this was the best I could do today… I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday tomorrow, and will continue to Be Good To Yourself!

Chuck Butler

 

 

June 12, 2019

*Currencies trade flat on the day with little to no movement

* What will the next recession bring us?  spoiler alert… Chuck’s scared… 

Good Day… And a Wonderful Wednesday to you… If I heard the announcer correctly last night he said that 6,308 people were in the stadium for a major league ball game last night in Miami… Shoot Rudy, we get more than that for a Spring Training game! The Cardinals finally bunched some hits together, late in the game and won last night… Whew! Our Blues are on the ice for Game 7 tonight… Game 7 folks, it doesn’t get any more tense than that! Let’s Go Blues! If the Blues don’t come through tonight, I won’t be writing tomorrow, because I’ll be crying in my beer… But if they do come through, I’ll be here to talk about it! I went to Horse Hookey yesterday, and man was that fun! And I got to eat some fried Chicken, which happens to be my fave meal on earth, good juicy, crispy, fried Chicken… it doesn’t get any better than that in my book! Well… today is the wedding anniversary of Chuck & Kathy… Our 43rd year of marriage… I can tell you right now that she’s forgotten about it… And that she received the raw end of the deal when they said, do you take him in sickness and health… Little did she know in 1976, that I would be diagnosed with Stage 4 metastatic cancer 30 year later… Tomorrow is the 12th anniversary of my first major cancer surgery… I’ll be sure to rub my side in remembrance, of what I used to look like before they cut me from stern to spine… James Taylor greets me this morning with his song: Carolina In My Mind…

Whew! That was some intro today, eh? Well… I need to write about something to fill the page, for there wasn’t that much going on in the currencies and metals yesterday… The dollar is hanging on for dear life these days… Reminds me of the song by the Guess Who: Hang On To Your Life… Don’t recall that one? Well, it’s for real… I have the 8-track tape to prove it! HAHAHAHAHA! Seriously, the dollar is in trouble folks… While the Fed might not cut rates next week, they’re going to talk about how they may have to soon, which will be the same as an actual rate cut… And another chink in the Fed’s armor will fall off!

Gold was able to push back and rally through the $5 it was down in the early trading to close up $5… That’s a $10 move folks… now don’t tell me…. I’ve got nothing to do… Counting flowers on the wall that don’t bother me at all… No Wait! What I really meant to say was Gold investors are seeing this rate picture come into focus… And all the time the price manipulators could point to higher interest rates here in the U.S. as their reason to sell Gold Short… They won’t have that in their back pocket any longer!

And the dollar didn’t get any help from the Data Cupboard yesterday either… Producer Price Index (PPI) was only up 0.1%… And today we’ll see the stupid CPI (consumer inflation) for May… That too will show nascent inflation forces  at work… And that will bring about more calls for rate cuts by the markets… 

But don’t just take my word on what’s going on with the dollar right now… The GATA folks sent me a note that they pulled from MarketWatch yesterday that included this snippet: “A growing chorus of analysts has started to pencil in expectations for a weaker dollar in 2019, particularly as expectations grow for Federal Reserve rate cuts. Fed-funds futures, which six months ago were forecasting official interest rates to continue rising this year, now reflect trader expectations for as many as three cuts before year-end amid fears rising trade tensions could amplify a global economic slowdown.”

I read a piece yesterday where the writer was calling for the euro to be at 1.17 in 2020… Well, I’ve got news for him… IF, the dollar goes into a weak trend, the euro will find itself pushing 1.20 once again… and from there who knows? But it will all be about the dollar weakness and not euro strength… But holders of euros won’t care what they call it, as long as the euro is kicking some dollar rear and taking names later!

First it was too much debt that weighed on pound sterling, then along came BREXIT, and the then the BREXIT Talks, and then the stepping down of their Prime Minister, and now we have what I’ll call the battle Royale! This is the goings on to pick a new Prime Minister, one that the people will like, and that’s going to be difficult, because the population feels as if they’ve been let down by politics and that they voted for BREXIT two years ago, and still nothing has happened… 

So, sterling will bounce higher  and then dip lower on any political news these days, which leaves me to say, that I would rather look elsewhere for a currency to invest in… I’m just saying… 

On Monday this week (2 days ago) I told you that Consumer Debt had risen last month to $17.5 BLN for the month, and that it was not going to be a good thing for the economy…   Sean Hyman and I used to write a letter for the Sovereign Society, so I’ve known him a long time, and he’s my “go-to” guy when it comes to technicals… He had this to say about consumer debt yesterday on his Twitter handle: “ Wow!: Auto debt is $1.27 Trillion… And Auto delinquency rates are at a 19-year high! OMG! Consumers now have more debt than they had before the Financial Meltdown…”  

But don’t worry about that stuff folks, it’s all going to work out to the sunny side of the street, right?  I’m kidding, as I’m sure you’re aware…  So grab your coat and grab your hat, leave your worries on the doorstep, Just direct your feet to the sunny side of the street!   Because that’s where all the “strong and robust economy” campers are hanging out…  Go ahead and join them if you dare… I’ll be over here on the dark side of the street, warning people about how the next recession is going to be a doozy… 

Speaking of the next recession… I also read a piece yesterday from a writer that believes that a recession is just that the U.S. economy needs…  Well, if that had been written 19 years ago, I would agree, for we didn’t have all the debt, derivatives, and people who didn’t care about anything but themselves… We had built up access that needed to be wiped out and started again… But now?  I can’t think of anything that could be worse for us right now than a recession… yes, it’s needed, but I’m telling you now, so you will listen to me later, the next recession is going to be a doozy… 

I’ve given you these facts before but it seems appropriate to give them to you again here…  The average Fed Funds rate cuts that the Fed makes during past recessions is 5%…. Our current Fed Funds rate is 2.50%… Uh-Oh!  And the average level of where rates were at the beginning of past recessions is around 6%…     I’m now wondering just how many people went to the sunny side of the street…  For I’m worried about them!

To Recap…  There really wasn’t much movement in the currencies yesterday, but the dollar, in Chuck’s opinion, is hanging on for dear life right now, and the Fed’s FOMC meeting is next week, and the Fed will either cut rates or talk about cutting rates, which in Chuck’s opinion is the same…  And today is Chuck and Kathy’s 43rd wedding anniversary… 

For What It’s Worth…. Well… this is my last free article from Bloomberg.com… So sad, but since I do this letter for free, I would have a difficult time reconciling paying for a news source… So, this article, my last free one, is about Corporate Debt, of which I’ve been warning you about for some time now, and it can be found here: https://www.bloomberg.com/news/articles/2019-06-11/regulators-alarmed-by-risky-loans-but-don-t-know-who-holds-them?srnd=premium

Or, here’s your snippet: “The steady drumbeat of warnings over the surge in risky corporate borrowing is growing louder and louder. Time and again, regulators in the U.S. and Europe have pointed to the hazards of businesses taking on too much debt.

At issue is the $1.3 trillion leveraged lending market, composed of high-yield loans from firms with some of the weakest finances. While Federal Reserve and European Central Bank officials have drawn attention to these heavily indebted companies and the deteriorating standards of loans bundled into securities called CLOs, most regulators are careful to say a repeat of 2008 is unlikely because investors, rather than the banks they oversee, hold most of the debt.

Yet that’s created a new, and potentially more dangerous, kind of risk. Precisely because roughly 85% of leveraged loans are held by non-banks, regulators are largely in the dark when it comes to pinpointing where the risks lie and how they’ll ripple through the financial system when the economy turns. More and more, critics are questioning whether regulators like the Fed have a handle on the problem or the right tools to contain the fallout. A big worry is highly leveraged businesses employing thousands could face severe financial stress and, in some cases, insolvency, deepening the next downturn.”

Chuck Again… Once again, I’ve seen these dark clouds forming over Corporate Debt long before the market and media get a clue… Not that I’m patting myself on the back, but my dad told me many years ago, Son, sometimes you have to toot your own horn”…

Currencies today 6/12/19 American Style: A$.6952, kiwi .6580, C$ .7521, euro 1.1325, sterling 1.2738, Swiss $.9936, European Style: rand 14.7674, krone 8.6395, SEK 9.4439, forint 283.82, zloty 3.7634, koruna 22.6150, RUB 64.54, yen 108.35, sing 1.3642, HKD 7.8222, INR 69.31, China 6.9137, peso 19.14, BRL 3.8708, Dollar Index 96.70, Oil $51.77, 10-year 2.12%, Silver $14.80, Platinum $816.60, Palladium $1,395.36, and Gold… $1,335.81

That’s it for today…  The U.S. Women’s Soccer team got the World Cup off on the right foot yesterday with a 14-0 score VS Thailand…  OK, when did they start to give 7 points for a goal in soccer? HA!  Or, seriously, how did the authorities think that Thailand would be good competition for the U.S? I shake my head in amazement…  OK… Game 7 of the Stanley Cup Finals is tonight… I can barely type that without thinking about what it would mean to this city for the Blues to win the Stanley Cup after 50 years of waiting, and being faithful fans…  So… Let’s Go Blues!  Jimi Hendrix takes us to the finish line today with his remake of the song: All Along The Watchtower… Extra credit for those that know who originally did this song?  I hope you have a Wonderful Wednesday, and will Be Good To Yourself! 

Chuck Butler