Author: admin

June 26, 2018  

* Currencies rally, then fall back… 

* More warnings that a recession in near… 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

June 25, 2018 

* Currencies rally on the Trade War news… 

* David Rosenberg visits the Pfennig again! 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

 

 

June 20, 2018   

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

* David Rosenberg on this Wonderful Wednesday! 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

 

 

June 19, 2018 

* Euro gets thrown under the bus again by Draghi

* Anything you can do, I can do better! 

Good Day… And a Tom Terrific Tuesday to you! It’s not quite a Tom Terrific Tuesday for the currencies, as they’ve been sold in the overnight markets. The Cardinals come back late, but lose in extra innings last night. UGH! Thanks to all that sent along nice notes about my scans results. I truly appreciate your kind words! The Outlaws greet me this morning with their 9 minute long song: Green Grass and High Tides…  My good friend, Mike (from the hood) likes this song when playing songs on our juke box at the local watering hole, because he “gets his money’s worth”… HA! 

Well, I spilled the beans right out of the starting gate this morning… The currencies got sold in the overnight markets last night… Which is strange to see, because normally, we see the overnight markets be more dollar bearish, but not last night… President Trump upped the ante in this Trade War by telling the markets that he would be adding $200 Billion in tariffs to Chinese goods…  And China’s Xi, responded that China would match the $200 Billion in tariffs of American goods.

Yesterday, it was a “anything you can do, I can do better” day for the leaders of the worlds two largest economies. China was first to say that they would outlast the U.S. in this Trade War, and that was followed by the U.S. saying they would outlast China in this Trade War…  I was already putting together some thoughts for next week’s Dow Theory Letter piece last night, so I’ll give you a little tease of what’s in it… just a small tease, because readers of the letter do pay for it! But I pointed to China’s savings horde as a reason that I believe Xi just might be right…  

So, what got the dollar bulls all lathered up overnight? Well, it was probably ECB President, Mario Draghi, speaking in Portugal that sent the dollar bulls into a tizzy again…  Mario Draghi addressed the bank’s approach to increasing interest rates, saying it will be patient in determining the timing of the first hike, then taking a gradual approach going forward.   

And that was all it took to remind the markets that they whacked the euro last week for the same crap from Draghi, and they went right back to work pushing the lead / Big Dog currency (the euro) back down… Alright then! We get it Mario! You’re not going to hike rates for the Eurozone for another year, and then you’re going to go at it very slowly, thinking that he’s the turtle in the fable the turtle and the hare… 

I’ve got news for you Mario, that’s all fine on paper, but when global inflation takes off this year, what are you going to do then? Germany’s Bundesbank will be all over you to hike rates because Germany has a long history with runaway inflation, and have vowed to never allow that to happen again… 

In the U.K. yesterday, the pound dropped to a seven-month low against the dollar after U.K. Prime Minister Theresa May lost a vote on her BREXIT legislation in the House of Lords. There’s another vote tomorrow, but from the looks of things, May’s proposals aren’t getting any love, and I’ve said for some time now that the pound would struggle because of these BREXIT negotiations…

The Aussie dollar (A$) has gotten all caught up in the “faster pace” rate hike talk in the U.S., as U.S. rates are for the first time in my life as a currency guy, higher than those in the land of OZ… (Australia for you new readers)… Of course had the Reserve Bank of Australia (RBA) begun their rate hike cycle by now as I implored them to do late last year, this new situation wouldn’t be happening! But then, why would the RBA listen to some country bumpkin from the middle of the U.S.? What does he know about what’s going on in Australia, that he could suggest the RBA is dragging their feet to hike rates, even with housing bubbles popping up all over the island nation?  

The “boys in the band” decided to take a pause for the cause yesterday, and only 170,000 contracts traded in Gold, but the threat of another engineered takedown by the price manipulators held Gold back on the day, with the shiny metal able to eke out a gain of $1.00…  I have a dear reader who is at odds with me on my thought that Gold will see a breakout to the upside this summer. He writes a commodity letter, and just doesn’t see Gold going anywhere this summer… So, there you have it… fair and balanced, and you dear reader get to decide which thought you will follow…  I thank Mickey F. for his contribution to the letter… 

The price of Oil took another drop down in the past 24 hours… Our friends at OPEC (NOT!) will meet this week to discuss the output question… But hanging over them like the Sword of Damocles is a vote in Washington where lawmakers there resurrect the ” No Oil Producing and Exporting Cartels Act,” or NOPEC, which would make members subject to the Sherman antitrust law, last used to break up John Rockefeller’s oil empire.

The bill’s chance of  passing have snowball’s chance in hell, but the impact on the oil industry, should hell freeze over, would be HUGE!

The Wall Street Journal (WSJ) reported this little ditty… “JPMorgan Chase & Co. agreed to pay a $65 million fine to settle claims that it tried to manipulate a global interest rate benchmark, the latest fine levied by U.S. regulators to punish crisis-era manipulation schemes by large banks.

The Commodity Futures Trading Commission said JPMorgan employees between 2007 and 2012 made false reports and attempted to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix, a benchmark that is referenced in many derivatives products.”    

Again, no one goes to jail… and $65 Million? that’s like a drop in a bucket for JP Morgan Chase and Co. I would go as far as saying that I’m sure they made far more money than the $65 Million in the scheme… And the $65 Million, once again is just a “cost of doing business”…  I shake my head in disgust at this stuff folks, it’s just one scandal after another for these big banks, when will it all end? 

The U.S. Data Cupboard is still void of any real economic data this week, and we’ll see the Housing Data for May, and that’s it… However, Fed St. Louis president, James Bullard is scheduled to speak today, and he’s always good for a market moving quote… I wonder what’s on his mind today? 

The Data Cupboard is pretty bare this week, so out trot the Fed Heads to give speeches… It was Bostic yesterday, Bullard today, Kashkari tomorrow, and so on… I’ve said this before, but I truly like the “old days” when the Fed Heads were almost anonymous to the every day investor, and they didn’t give their opinions in speeches throughout the month… 

To recap…  Draghi did it again… reminds me of the old KSHE Radio TV commercial, with the dad playing air guitar to Brown Sugar, and his daughter catches him, and then yells, “Mom, he’s doing it again!” Of course it would have been better if Draghi was playing air guitar yesterday instead of repeating his promise to not hike rates for some time and then gradually once the rate hike cycle begins… The euro got whacked once again, and brought all the other currencies along for the ride on the slipper slope.  Trump and Xi play a game of “anything you can do I can do better”, and the markets get whipsawed by the talk of more tariffs… 

For what It’s Worth… OK, this is good… For as long as I can recall, I’ve been telling readers that currency (FX) intervention might work in the short term, but that’s it, as it becomes a losing deal…  I saw this on Ed Steer’s letter this morning and had to highlight it here, because it’s as if this guy just figured that intervention doesn’t work, and it can be found here: https://www.zerohedge.com/news/2018-06-18/brazil-central-banker-makes-striking-admission-warns-fx-interventions-are

Or, here’s your snippet: “The good news for the Brazilian Central Bank was that these ongoing interventions managed to stabilize the Brazilian real last week, when the BCB unveiled as much as $10BN in weekly swaps to spook the shorts and halt the capital flight, which succeeded in sending the USD/BRL back to 3.70, and stabilizing the BRL in the 3.70-3.80 range.

There was just one problem: as we reminded the market last week, these massive swap interventions would have to be settled at some point, and only then would it emerge just how naked the Brazilian FX reserve emperor truly is.

Just 4 days later, it was none other than Brazil itself which confirmed our warning, because as Bloomberg reports on Monday afternoon, citing an unnamed central bank official with direct knowledge of issue, that the volume of currency swaps the Brazilian central bank is currently offering to reduce volatility is not sustainable through the Oct. general election.”

Chuck Again… I told you, I told you, I told you! Oh, wait, Chuck, there’s probably not a soul in Brazil much less the Brazilian Central Bank members that read the Pfennig! Yeah, you’re right… Oh well, if they had… HA!

Currencies today 6/19/18… American Style: A$ .7365, kiwi .6898, C$ .7538, euro 1.1550, sterling 1.3170, Swiss $1.0043, … European Style: rand 13.8675, krone 8.2140, SEK 8.9310, forint 280.90, zloty 3.7355, koruna 22.3746, RUB 63.33, yen 109.85, sing 1.3584, HKD 7.8495, INR 68.29, China 6.4374, peso 20.63, BRL 3.74, Dollar Index 95.19, Oil $64.97, 10-year 2.89%, Silver $16.35, Platinum $878.94, Palladium $981.42, and Gold… $1,278.43

That’s it for today… A little shorter today, which means I wasn’t as loaded for bear today as yesterday… writing every day, can begin to feel like a broken record for the writer… But on “days off” I sit here and read and find things I want to talk about! So, there’s never really any “days off”…  I’m not complaining, just making a point… Besides nobody want to hear a complainer! Another day of “extreme heat” according to my weather alert this morning… I stepped outside yesterday evening and it was a nice summer evening with a little breeze blowing, not too shabby! So, Mike Matheny, maybe Mikolas needed to warm up longer before starting the game last night, eh? I’m just saying… And with that, Heartsfield takes us to the finish line today with their song: The Wonder Of It All…  (I’ll never cease to be amazed at the wonder of it all)  So, let’s go out and make this a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

June 18, 2018

* Euro has biggest one day drop! 

* Gold gets whacked by $23 drop! 

Good Day, and a Marvelous Monday to you! I sure hope that all the “dads” had a fantastico Father’s Day yesterday… I know I did… It sure was hot here though… 98 degrees and the humidity was tough! We spent most of the day in the pool… I was pleasantly surprised when I walked into my usual Friday afternoon watering hole last week, and saw two of my fave former colleagues waiting for me to arrive! My little Christine, and Danielle, or former office manager, stopped by to say hi! I can’t tell you how much I enjoyed seeing them again! I hired Christine when she was a young 20-something, and taught her the business from the ground floor up. I used to make her come in on the weekends to help me with preparations for the next week’s trading. I don’t think she liked me much back then… But through the years we worked things out, and she was my assistant for over 15 years! OK… enough of that… I don’t want to get sappy here… The Blue Jays, who were two members of the Moody Blues, Justin Haywood, and John Lodge, greet me this morning with their song: Maybe…

In the song, there’s a line that I’ve used for many years… Maybe, maybe I’m wrong… I have no qualms about saying when I’ve been wrong about something through the years… I even incorporated the line: It’s my opinion, and I could be wrong, to make the “reviewers of the letter” happy every time I spouted off about something… I’m not telling you anything new here… I know I was so wrong about the Treasury Bond bull market ending, and the Fed’s first rate hike, and a few other things through the years… But through it all, I’ve always laid out my reasons that I think this or that is gong to happen or not happen, and all the cards are on the table, for everyone to see, pick apart, or agree with…

My dad used to tell me that if I said something now, but it didn’t happen for some time down the road, that I wasn’t “right”… That timing was everything… So, I began to talk about things in the future that I saw happening, so that there was no time deadline… But last week, I went rogue, and said that Gold would have a huge breakout to the upside from the recent ranges, this summer… Now, I’ve locked myself in on that, and from the looks of trading on Friday, I should have kept my mouth shut! The price manipulators went at Gold’s price with both barrels blazin’… 407,000 contracts traded in Gold and after all the slicing of the salami (as Ed Steer calls it) Gold finished the day down $23!!!!

There’s no reason whatsoever that this should have happened, folks… And don’t let them point to higher interest rates as their reason for slicing the salami… The Fed Funds rate is only 2%!!!!!! So, here’s where I am with all this talk about a Gold breakout to the upside… I think the price manipulators are seeing the same thing, and they wanted to get Gold’s price lower, so they could buy at much cheaper prices and then be long at those cheaper prices when Gold takes off later this summer! I also have to go back to something I wrote about a couple of weeks ago, when I told you that the Dow Theory Letter’s Gold guru, Omar Ayales, pointed out that Gold could drop to $1,278, before making its move higher… Well, guess where Gold closed on Friday? That’s right… $1,278… beep, beep, beep, what’s that sound I hear you asking? It’s the sound of the truck backing up… wink, wink…

The Currencies also got whacked on Thursday, and I mean whacked good! And then on Friday the currencies attempted to heal some, and wrap a tourniquet around their bleeding… Just for those of you keeping score at home… The euro was trading at 1.1825 on Thursday morning, and we were waiting for the ECB and Mario Draghi, to announce an end of stimulus, which he did… And then the selling began, and at the end of the day on Thursday the euro had dropped into the 1.15 handle! Folks, that’s a HUGE one-day move in a currency! What on earth happened to cause this Huge move?

Well, let’s take a step back to review just what Mario Draghi had to say, because this is where the body is buried here, folks… Draghi, did announce an end to the bond buying program, which was good… But then he stepped in the dookie, by emphasizing a more cautious than predicted approach to rolling back its easy money policies… The ECB will begin tapering their bond purchases in Rocktober, by $15 Billion per month. They currently buy $30 Billion per month, and end the purchases altogether by the end of the year, which is all good, but here’s where things got messy… He then emphasized that the ultra-low interest rates will remain for most of the next year, giving trades the idea that they wouldn’t see the Eurozone leave negative rates behind until 2019, and that deep sixed the euro!

I told you earlier last week that I thought that if Draghi dropped the ball on what the markets wanted to hear, that the euro was get whacked… And that’s exactly what happened… I certainly didn’t believe that Draghi would disappoint once again, but he did…

This was the worst 1-day performance for the euro is some time, and begs the question… “Should we buy at these cheaper prices?” You’ll have to answer that one yourself, but for me… I would think that the worst has been absorbed by the euro, and things should get better from here… But then that’s just my opinion, and I could be wrong!

Well, President Trump had his trade people announce more tariffs on Chinese goods on Friday, and this morning the Bloomberg is reporting that China’s Xi, is saying that he will match Trump’s tariffs one for one, and thus the Trade War begins… the previous stuff was just small conflicts here and there, but now… The real Trade War begins…  And Gold got whacked because of this? Wait, What? No, what I’m saying here is that there is no reason on earth that Gold should have gotten sold when the two largest economies of the world are duking it out in the Trade ring.  UGH!

The Bloomberg article also had XI saying that China would outlast the U.S. with the devastation that this Trade War is going to do to each country’s respective economy… Well, hang on to your hats, people… This is going to get really interesting, and if you ask me, it’s also going to hurt the U.S. in regards to foreigners buying Treasuries to finance our deficit spending… 

And here’s an example of what I’m thinking here… The GATA folks sent me a note on Saturday, and I have it for you here, but first let me repeat something that I’ve said about Russia several times through the years… And that is that they are doing everything they can to promote a “drop the dollar” stance… the dreaded “dedollarization” So, here’s the GATA note…

“Russia has held a major selloff of U.S. Treasury bonds, dumping some $47 billion worth of papers and momentarily dropping six places on a list of major foreign holders of U.S. securities, recently released statistics for April have shown.

In just one month Russia proceeded to sell $47.4 billion out of the $96.1 billion the country had in U.S. Treasury bonds in March. The latest statistics released by the U.S. Treasury Department on Friday showed that, in April, Russia had only $48.7 billion in American assets, occupying 22nd place on the list of “major foreign holders of Treasury securities.”

Chuck Again… Selling Treasuries and buying Gold, I’m quite sure that’s the trade that Russia is trying to show the world that it needs to get done…

A couple of weeks ago, in my weekly Dow Theory Letters piece, I wrote about “what did we do to deserve this?”  And then I went back to my very early days of writing a daily letter, when I would talk about how debt is slavery, and deficit spending if allowed to be added on to instead of paying off each year, would become a real problem here in the U.S.    And that’s exactly what has happened…  We were not good stewards of the reserve currency in the world, and now, other countries have the wherewithal to do something about it…  I’m just saying… 

On Thursday morning, all three anti-dollar assets, Gold, euros, and Oil were pounding their respective chests…  And then the dollar bugs kicked sand in their faces… And like the old ad for Charles Atlas’s work out, the currencies need to go “bulk up” and then come back and confront the big bad bully, dollar…  

So, I was reading one of my fave writers, Bill Bonner, the other day, and he was feeling the knife in his back like I am these days, and the fact that the markets believe the Fed is winning this economy… So, he said if this is true… , “We’re finished. We’re done. This is not a world we know. Up is down. Down is up. Time goes backward. Suckers are given better-than-even odds. And fools are reunited with their money.

If so… we will recant, insincerely, and slip off our little stage like a drop of rain off a windshield.”

I doubt he’ll have to do any of those things… But I feel the same way… (Maybe this is my way of actually retiring! HAHAHAHAHAHA!) 

Before we begin to head to the Big Finish I have a fun thought for today… This past weekend, was the 51st anniversary of the famous Monterey Pop Festival that Jimi Hendrix showed off his guitar playing to the crowd. I was a young man just learning to play the guitar in 1967 (I taught myself to play), and I remember thinking that Jim Hendrix was the greatest guitar player of all time back then… He still ranks pretty high, but through the years, I’ve heard even better guitar players… My all-time fave guitar player was Terry Kath, of Chicago… Jimi Hendrix once told a member of Chicago that Kath was better than he was… Carlos Santana, Alvin Lee, Duane Allman, David Gilmore, Eric Clapton, are some of the greatest, in my humble opinion… 

Friday’s Data Cupboard had two real pieces of economic data in Industrial Production (IP), and Capacity Utilization (CAPU) for May… Well, these two pieces of data told a different story than the strong Retail Sales report told on Wednesday last week..  IP for May printed a negative -0.1%, and CAPU dropped from 78.1 to 77.9… Not huge drops for these two, but drops nonetheless, and that tells a different story about the economy than the rogue Retail Sales figure… 

To recap… Trump announces additional tariffs to China and China responds with the same to the U.S. The Trade War is for real folks… Gold got whacked badly on Friday, by $23! And Chuck has his thoughts on why the price manipulators did that on Friday…  The euro fell out of bed on Thursday and has spent the last two trading sessions trying to get up off the floor… Mario Draghi was responsible for kicking the dollar out of bed, as he has done a several occasions these past couple of years… 

For What It’s Worth…  It’s been quite some time since I highlighted John Mauldin’s letter here… John and Chuck have been friends for some times now, but since I don’t travel to conferences any longer, I haven’t seen John in a few years. I read all his stuff, eventually that is, and this one is one that dear reader Bob, sent me a note and said I should read this article… It’s about the pension problem and as usual John goes through it with a fine toothed comb…  and it can be found here: http://www.mauldineconomics.com/frontlinethoughts/archive

Or, here’s your snippet: “Unlike actual trains, we as individuals don’t have the option of choosing a different economy. We’re stuck with the one we have, and it’s barreling forward in a decidedly unsafe manner, on tracks designed and built a century ago. Today, we’ll review yet another way this train will probably veer off the tracks as we discuss the numerous public pension defaults I think are coming.

Last week, I described the massive global debt problem. As you read on, remember promises are a kind of debt, too. Public worker pension plans are massive promises. They don’t always show up on the state and local balance sheets correctly (or directly!), but they have a similar effect. Governments worldwide promised to pay certain workers certain benefits at certain times. That is debt, for all practical purposes.

If it’s debt, who are the lenders? The workers. They extended “credit” with their labor. The agreed-upon pension benefits are the interest they rightly expect to receive for lending years of their lives. Some were perhaps unwise loans (particularly from the taxpayers’ perspective), but they’re not illegitimate. As with any other debt, the borrower is obligated to pay. What if the borrower simply can’t repay? Then the choices narrow to default and bankruptcy.”

Chuck Again… It’s a long read so make sure you allot enough time for it, but once you do get through it, you’ll see what I’ve been warning people about since 2003…  

Currencies today 6/18/18… American Style: A$ .7442, kiwi .6941, C$ .7592, euro 1.1620, sterling 1.3250, Swiss $1.0050, …. European Style: rand 13.4685, krone 8.1243, SEK 8.8185, forint 277.70, zloty 3.69, koruna 21.1475, RUB 63.10, yen 110.50, sing 1.3503, HKD 7.8495, INR 68.03, China 6.4382, peso 20.69, BRL 3.7288, Dollar Index 94.72, Oil $64.78, 10yr 2.91%, Silver $16.59, Platinum $885.02, Palladium $988.04, and Gold… $1,283.70

That’s it for today…  A lot to get through today, I know… sorry, but I had a lot on my mind today!  The Cubs sure put the heat on the Cardinals this past weekend, winning 2 of 3… The Cardinals sure aren’t playing “Cardinals baseball” these days, and I blame the manager for that!  Another “hottie” today here… “Extreme Heat” is what my weather advisory is telling me right now…  OK, are you ready for a health update? I had new scans taken on Friday… And besides something on my lung that they’re not sure what it is and it hasn’t grown, all the other spots where cancer existed are gone or nearly gone…  And the extreme pain in my hip, from the infection there last Nov. is pretty much gone too… In other words, I’m a happy camper! So, how about that? Ok, time to go…  Chicago takes us to the finish line today with their song: Does Anybody Know What Time It Is?   Great 70’s music for sure!  And so, I hope you have a Marvelous Monday, and Be Good To Yourself! 

Chuck Butler

 

 

 

June 14, 2018

* Currencies rally on U.S. rate hike… 

* All three anti-dollar assets rally!

Good Day… And a Tub Thumpin’ Thursday to you! WOW! It’s Flag Day! So, Happy Flag Day to one and all! Well, for the first time in over a week, I had a good night’s sleep! And woke up ready to fight a bear! Or at least dollar bugs! I watched another night of weak at-bats by my beloved Cardinals last night… They just have no consistency whatsoever, and I blame the manager for that. I’m just saying…  The Cornelius Brothers & Sister Rose greet me this morning with their song: It’s Too Late To Turn Back Now… 

That’s funny, because I think that’s what the Fed Heads are saying to each other about now… It’s too late too turn back now, with their rate hikes that is… Yeah, they sure sounded quite hawkish yesterday, and mentioned that their going to pick up the pace of rate hikes because in their words, “the economy is strong”…  But I’m of the opinion that the Fed is hiking rates to fill their quiver with arrows to use on the upcoming recession… And that’s why they’re picking up the pace, because they see it coming, and they haven’t got enough arrows in their quiver to combat it… 

And just like in the Wizard of Oz, my all-time fave movie. (you should ask me to do the Lollipop Guild skit sometime!) Dorothy sees the Kansas twister coming and she can’t get to the storm cellar… It’s too late to turn back now for Dorothy, and the Fed Heads… the recession is coming, and you turning hawkish now so late in the economic cycle is only going to make matters worse!

So, did the dollar get all kinds of love because the Fed Heads have turned hawkish? No sirree Bob it didn’t, the currencies have been on the rally tracks since the Fed announcement and press conference yesterday, and now we wait for the ECB’s decision, which will come shortly this morning… 

Well, this morning, the European Central Bank (ECB) is meeting, and this is a BIG meeting for ECB President, Mario Draghi… The markets have grown tired of hearing that “an explanation “ was forthcoming when talking about the stimulus unwind, and they are wanting to see something concrete at the meeting today, or else!

But I have faith in Draghi, he might not always do what’s right for the euro, but he does understand what the markets want, and I think he’ll deliver them what they want today… We won’t have to wait long to hear about it as the meeting should end about the same time I get this out the door, or shortly afterward!

The euro has climbed back above the 1.18 handle this morning ahead of the ECB meeting, so apparently traders are thinking like me, which is usually a bad combination, folks! HA!  

In fact, all three anti-dollar assets are on the move VS the dollar since the rate hike decision yesterday… euros, Gold & Oil…  The price of Oil is within spittin’ distance of $67 and Gold did trade albeit briefly above $1,300 yesterday, but the “boys in the band” saw to it that this move over $1,300 didn’t close there…  However, the “boys in the band” will have to be back at it again this morning, because Gold has gained $6 in the early morning trading today, and back above $1,300… 

Alrighty, let’s get to the “I told you so” part of the letter today… Remember when the tax deal was put through, and I said I doubted it would do more than just add to our deficit spending, for the tax deal wasn’t about you and me, it was about Corporations, and I said, that I thought those Corporations’ Big Shots would use the tax deal to buy back their company’s stock? And thanks to a story on CNBC.com I found this: Stock buybacks in 2018 to total $800 billion thanks to tax reform

I told you, I told you, I double, double told you!

Since the rate hike yesterday was such BIG news, well, actually the Fed Heads statement that they are picking up the pace of rate hikes was really the BIG news, let’s circle the wagons and talk about it some more…  

Well, as expected, the Fed hiked their Fed Funds rate 25 Basis Points (1/4%) yesterday, and repeated their earlier stance of looking to hike rates again in Sept and December. But will they actually get the chance to do that? I doubt they will, and have been shouting from the rooftops for sometime now that they’re going to have to begin to reverse these rates hikes and end up looking very foolish doing so.

It’s not just the actual rate hikes that are putting the governor on the economy, but as I’ve stated before, you have to also add in the Quantitating Tightening…. Talk about something that continues to go along and fly under the radar! But, it’s there, and it’s causing problems already… I’ve read where $500 Billion of QT, is equal to 1/4% in rate hikes… So, since the Fed has been performing QT since Rocktober of 2017, they’ve held to their unwinding schedule that looks like this:
The schedule of monthly caps consistent with the Committee’s September 20 decision and the June 2017 addendum is as follows: Monthly caps on System Open Market Account (SOMA) securities reductions Treasury securities Agency Securities1 Oct – Dec 2017 $6B $4B Jan – Mar 2018 $12B $8B Apr – Jun 2018 $18B $12B Jul – Sep 2018 $24B $16B From Oct 20182 $30B $20B

So, if my new math is correct, The Fed will have unwound a total of $80 Billion in Treasuries by year end. They will reach a total of $2.5 Trillion by 2023… 2.5 Trillion would be equal to 1.25% in additional rate hikes… But if things go the way I expect them to go, the Fed won’t see the end of the “great unwind”… They’ll be back to Quantitative Easing before they get to the end of their “great unwind”…

And further more… I’m sick and tired of hearing the Fed heads say that this “great unwind” is not contractionary… But wait! Didn’t they spend many years telling us that Quantitative Easing was stimulus? So, when you take the stimulus away, why wouldn’t that be contractionary? Man, I would love to be able to throw that in their faces and hear what they have to say about that!

Well, I need to get this out the door, so I can sit back with a cup of coffee and see what Mario Draghi has to say this morning…  I usually like to have the Thursday Pfennig be a bit longer because there’s no Pfennig on Friday any longer… But not today! I’ve said all there is to say about the rate hike, the ECB, and more… 

Oh, and China’s Peoples Bank of China (PBOC) left their key interest rate on hold last night, and that has the Emerging Markets and the rest of Asia in a good mood… At least for today that is!  

So, what was up with the U.S. Data Cupboard this week? Here’s what I’m talking about… Usually, PPI (wholesale inflation) prints before CPI (consumer inflation), but not this week! The mental giants switched the order, which makes no sense, but it was done anyway.  Well, after a week or so of non-meaningful economic data prints, we’ll get back to the meat today and tomorrow, with May Retail Sales today, and Industrial Production and Capacity Utilization tomorrow…  

May Retail Sales are expected to gain 0.4% for the month, which is not bad, but it’s also not good, and not worthy of a faster pace of rate hikes, I’ll tell you that! 

To recap… The Fed did hike rates yesterday as expected, but then threw a cat among the pigeons by announcing that they will pick up the pace of rate hikes… Chuck thinks this is them in panic mode, as they see the recession coming and they haven’t prepared the storm cellar! It’s BIG day for the ECB and Mario Draghi, Chuck thinks he’ll do the right thing today, and that should send some major love the euro’s way…  And then Chuck pulls out the abacus to do some quick calcs on the Fed’s QT… 

For What it’s worth… Back in the day… Back when I was with EverBank, and I wrote the monthly newsletter for clients, called: The Review & Focus, I wrote a piece in the winter of 2017, at that point, xci could see the writing on the wall for me, so I decided to go out on a limb and call out the Fed Rate hikes, pointing to the increased bond servicing costs (interest) , and pointing to the new President at that time, Donald Trump and saying that he said that if rates went to 4% “We’re screwed” (pardon the salt, but it’s what he said!) The Bank didn’t much care for me pointing out how the Fed was going to bring us under… But it went to press, and so on… life went on until… Until today, when the MarketWatch folks sent me an email with words from Jeff Gundlach, the new Bond King, who is calling out the Fed rate hikes… ( I bet he gets more attention than I did, when I did it!) and it can be found here: https://www.marketwatch.com/story/the-us-is-on-a-suicide-mission-warns-bond-king-gundlach-2018-06-13?link=MW_popular

Or, here’s your snippet: “Here we are doing something that almost seems like a suicide mission,” he said in a fresh webcast about his DoubleLine Total Return Bond Fund. “We are increasing the the size of the deficit while we’re raising interest rates.”
“It’s pretty much unprecedented that we’re seeing this level debt expansion so late in an economic cycle,” Gundlach reportedly said, noting that both Fed fund-rates and the debt-to-GDP level are rising.” – Jeff Gundlach

Chuck again… Yes, here we are pretty much at the end of the road as far as the economic expansion is concerned, and we’re still hiking interest rates… Seems pretty strange to me, but then I’m just a country bumpkin, what the heck do I know above all those PHD’s at the Fed! 

Currencies today 6/14/18… American Style: A$ .7550, kiwi .7040, C$ .7714, euro 1.1825, sterling 1.3428, Swiss $1.0164, … European Style: rand 13.18, krone 7.9950, SEK 8.6095, forint 272.60, zloty 3.6143, koruna 21.7415, RUB 62.71, yen 110, sing 1.3336, HKD 7.8479, INR 67.60, China 6.3988, peso 20.57, BRL 3.7125, Dollar Index 93.30, Oil $66.91, 10-year 2.94%, Silver $17.15, Platinum $907.03, Palladium $1,015.70 and Gold… $1,305.11

That’s it for today, and this week! I had a very frustrating day at the Social Security Administration’s office yesterday… It’s no wonder this country is in the debt situation it is in, and the years of neglect are showing… But that sounds like a personal problem, so I’ll leave that there! This Sunday is Father’s Day… Time to tell your dad that you love him, and thank him for all he’s done to make your life what it is…  I miss my dad every day, for when I sit down to write, there’s a picture of him, me, and my late brother David from many years ago… And when I sing the national anthem at baseball games, I close my eyes and see him sitting there smiling at me…  Stealers Wheel takes us to the finish line today with their song: Stuck In The Middle With You…  Clowns to the left of me, jokers to the right, and I’m stuck in the middle with you…  (man you don’t know how many times I thought that in the old days!)   And with that it’s time to head out and make this a Tub Thumpin’ Thursday! Please Be Good To Yourself!  And Don’t forget your DAD!   Bye~

Chuck Butler

 

June 13, 2018 

* Currencies lose more ground…   

* It’s Fed rate hike announcement day! 

Good Day… And a Wonderful Wednesday to you! I want to thank everyone who sent along happy anniversary wishes to me yesterday… Yes, I am not supposed to talk about Kathy, but… She is the love of my life, always has been, always will be, and that’s that!  The last 11 years have not been easy on me to say the least, but they certainly haven’t been any easier for Kathy…  Marvin Gaye greets me this morning with his song: What’s Going On?  In my book, Marvin Gaye was one cool dude… 

Well, more and more writers caught on to what I found in the Singapore Summit right away and talked about yesterday… And that is that there was no deadline for N. Korea to denuclearize…  No wonder Kim was smiling when he left the summit. Did you wonder like I did if the two leaders sat around, Indian style, and sang kumbaya? I make fun of this, and I know that I shouldn’t being the adult here, but I just can’t help it… That’s who I am a real smart-you know what, at heart… And I doubt I’ll ever grow out of it! 

The currencies lost a little ground on Tuesday, as we draw closer to the Fed Announcement of their latest rate hike to bring short term rates to 2%…  Whoopee, Yahoo, out of sight, can you dig it? The U.S. has 2% Fed Funds rate, the U.S. has 2% Fed Funds rate, neener, neener, neener!  That’s the braggadocio that the U.S. dollar bulls are out singing today…  I find this all pretty strange, because 200 Basis Points is not the end-all of high rates in the world! But the dollar bulls would have you believe that to be true! 

No, rather the highest rates reside in Russia, S. Africa, Brazil, and India… Looky there, the only member of the BRICS to not be on this list, of countries with higher rates is China… I have an article for you on the BRICS in the FWIW section today… So you won’t want to miss that! 

Well, Gold closed down $4.50 yesterday, as the price manipulators just couldn’t allow the shiny metal to rise above $1,300.  I hope you read my thoughts on Gold yesterday and took them to heart… There are war drums pounding in the distant, and those war drums are not signaling a war, but more like a major news announcement that will happen later this summer…  Shoot, with my luck, it’ll happen while I’m on my summer vacation, which will be the last week of July and first week of August… What pray tell, will you do without me every day for two weeks? HA!

There seems to be something going on that we don’t often see, and that’s Silver breaking away from Gold… Silver has been quietly moving higher this week, as Gold gets stopped at the border ($1,300). These two usually move in tandem, so it’s been interesting to watch this going on this week. A few very aware readers sent me notes this week to tell me that Silver is breaking out of the relationship / spread that has been prevalent here. A Change of scenery, if you will… 

My response is simply, “it’s about time”! I recall writing in the old defunct Review & Focus a couple of years ago, that Silver supplies were dwindling and that with the advent of Solar Panels, that Silver could be on its way to higher ground…  So, I’m watching, folks… you don’t have to worry or think that I’m not! 

I’m getting a little nervous as I await the responses to my Thursday Dow Theory Letters piece, It’s all about a Conspiracy theory I have regarding the end of cash… I wonder how it will be accepted by the DTL readers… I know you dear Pfennig Reader, loved my conspiracy thoughts through the years, before they were turned off by the marketing folks at the old place of business… 

Speaking of the old place of business, it’s now TIAA Bank… I’m sure a lot of you have accounts there, so I’m not telling you anything new… But I had an agreement with management when they told me it was time to retire, to not say anything negative about them for one year… Well, on Friday, it’ll be one year… But I doubt I’ll want to air dirty laundry, I’m happy with my new publisher, the Aden Research group, and my freedom to say what I want to say (legally that is)…  

The price of Oil climbed to the $66 handle yesterday, just to prove that even a, no wait, Chuck, you don’t want to say that, it’ll be taken the wrong way, by people with no sense of humor…  OK, I get it…  so, let me put it like this… Even though the price of Oil looked dead in the water, due to all the announcements of increased production again, it has bounced higher nonetheless… 

Yesterday, I had a piece in the FWIW section about peak Gold… and a longtime reader and commodity expert pointed out to me that I needed to recall that the same was being said about Oil 10 years ago… And Peak Oil never happened, right? Dirty some water with sand, and other chemicals, and shoot it into the ground, nothing bad is going to come of that, right?  While I’m not a fan of fracking, I’m also not a fan of the thought that we shouldn’t continue to search for Oil… 

But I got off course there, sorry… the point was and I thought I made it clear, that these guys calling for peak Gold are heads of big Gold mining companies, who make more money (for themselves) if the price of Gold rises, so why wouldn’t they talk about peak Gold?   Well, I have another angle on Gold in the FWIW section today, and tomorrow, I’ll have a real hum-dinger on Gold… come back tomorrow, same bat time, same bat channel! 

The U.S. Data Cupboard had the stupid CPI (consumer inflation), yesterday and while there was no more than modest pressure in the consumer price report for May, at monthly gains of 0.2 percent overall and with the core rate also seen up only 0.2 percent. Year-on-year rates were up 3 tenths to 2.8 percent but the core up only 1 tenth at 2.2 percent.  

GRUNT! That’s the Fed doing the heavy lifting on getting inflation, finally above their target level of 2%… I’ve long thought that once they got it above 2%, that it wouldn’t stop there, and soon the Fed would be chasing rising inflation down the street… But shouldn’t they just now be beginning to hike rates, as their employment and inflation targets have just now been met?  Well their previous rate hikes had nothing to do with reality in the economy folks, it had to do with pumping the interest rate higher so they had room to cut rates when the recession hit…  

To Recap…  The currencies lost some additional ground yesterday, but not much, as we drew nearer to the Fed’s rate hike that will be announced this afternoon. More and more writers are picking up the on the fact that I pointed out yesterday regarding the Singapore Summit, that there was NO deadline in N. Korea’s denuclearization announcement… But since there wasn’t a lot of dollar buying on the Summit’s outcome, there wasn’t much to be sold later… Gold loses $4.50 on the day, and the price of Oil bounces to the $66 handle. 

For What It’s Worth… Yesterday, I told you of several articles I’ve been following regarding Gold and this is the second of those articles. It talks about how the BRICS could start their own Gold trading platform, thus leaving out the short Gold Paper traders here in the U.S., and it can be found here: https://www.rt.com/business/412546-china-russia-gold-standard-dollar/

Or, here’s your snippet: “The BRICS are considering an internal gold trading platform, according to Russian officials. When this happens, the global economy will be significantly reshaped, and the West will lose dominance, predicts a precious metal expert.

In 2016, 24,338 tons of physical gold were traded, which was 43 percent more than in 2015, according to Claudio Grass, of Precious Metal Advisory Switzerland.

“We have to put the BRICS initiative into a broader context. It is just part of a geopolitical tectonic shift which started decades ago. We have seen a constant outflow of physical gold from the West to the East. At the same time, the West has lost the economic war, and as a consequence, the focus now turns to the financial system. China dominates the world economy and has displaced the US as the world’s most formidable economic powerhouse,” he told RT.

The creation of a new gold standard by BRICS is also a step to end the US dollar’s domination of the global economy.”

Chuck again… I recall when the Shanghai Gold Exchange (SGE) began me telling you dear readers that this could be the end of the short paper Gold & Silver trades, and while this is still in the works, it could very well be the end for the price manipulators… We shall see… We shall see… 

Currencies today 6/13/18… American Style: A$ .7581, kiwi .7033, C$ .7678, euro 1.1755, sterling 1.3327, Swiss, $1.0120, … European Style: rand 13.2757, krone 8.0263, SEK 8.6236, forint 272.53, zloty 3.6388, koruna 21.8690, RUB 62.84, yen 110.55, sing 1.3357, HKD 7.8478, INR 67.56, China 6.40, peso 20.68, BRL 3.7061, Dollar Index 93.85, Oil $66. , 10yr 2.95%, peso $16.92, Platinum $895.55, Palladium $1,008.05, and Gold… $1,294.18

That’s it for today…  The first summer league swim meet was last night and all three grandkids are swimmers, of course! And Andrew and Alex are their coaches! I don’t go to swim meets any longer, but I wish I had instead of staying home to watch my beloved Cardinals lose to the Padres… UGH! Hot and humid, are the days here as it gets closer to the start of summer. Man! I received some sticker shock last evening, as I went to the grocery store for a week’s worth of groceries…  The checker told me the amount I owed and showed me the screen, and I about went into shock! I hadn’t bought a week’s worth of groceries in a while… UGH!  The Moody Blues take us to the finish line today with their great song, from the Seventh Sojourn Album… Isn’t Life Strange…    I couldn’t agree more!  I hope you have a wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler

 

 

June 12, 2018   

* Currencies and metals are stuck in the mud!

* Hey, buddy, I’ve got a hot tip for you! 

 Good Day… And a Tom Terrific Tuesday to you! Whew! I’m one worn out writer this morning! A late night for me, and then my chemo drug decided that it was not going to be a good night for sleep… UGH! But, I’m running on adrenalin this morning, from that nice win last night that I got to witness with friends from the Old EverBank… A Big Thanks to Barry for the invite! Well, we’ve got a lot to cover today from the Big Singapore Summit, so let’s get moving, eh?  Blackfoot greets me this morning with his song: Highway Song..  A good driving song!   

Well, President Trump came out of the Singapore Summit (SS) with a big smile and words for the press that he was satisfied with the meeting, which when he has the smile on his face, it’s usually a tell-tale sign that he’s like the cat that swallowed the canary…  And Kim came out of the meeting a self-proclaimed “new man”…   They also had a signed agreement that N. Korea would begin denuclearization, which was hailed by the press… Ahem, press, you might want to temper that enthusiasm, as there was no date / deadline for this denuclearization…  I’m just saying… 

So, while the press is all ga-ga over the initial thoughts for the SS outcome, the markets are taking a “wait-n-see” stance, which I would think would be the prudent thing to do given they weren’t privy to what was said inside the room where the SS was held.  

The currencies and metals saw little movement since yesterday morning. The Dollar Index has only move 5 ticks in the last 24 hours, and Gold gained a whopping $1 yesterday! So definitely a “wait-n-see” stance for the markets. The 10-year Treasury’s yield remained steady Eddie at 2.96%, and the price of Oil found some bids and was able to move higher in the $65 handle, but no great moves here either. 

In the U.K. today, they are taking some votes on BREXIT items that could be very damaging to PM May’s direction for BREXIT… And pound sterling has really been feeling the effects of two arrows fired at it recently… The first arrow came in the form of Bank of England Gov. Carney, admitting that rate hikes will have to wait, and 2. All these questions about BREXIT, and the “unknowns” which I’ve taught you through the years, are always damaging to a currency. 

There’s little news on the monetary front from the Eurozone, which will see a European Central Bank (ECB) meeting this Thursday. This will be a BIG meeting for the ECB, as the markets are expecting the to begin the process of a unwind of their stimulus, with a narrative on how the ECB will go about it and when it can begin…  Anything short of that, and the euro will get thrown under the bus once again… But if the ECB delivers the goods, the euro could flourish… 

Well, Gold… Boy there sure are some stories out there right now about the shiny metal, and all of them present a different scenario for Gold. I have one them highlighted in the FWIW section today, so be sure to check that out… But the thing I want to highlight here is the fact that my spider sense is tingling and I’m of the opinion that “something BIG” is going to happen this summer that’s going to propel Gold much higher…  I certainly don’t have the contacts that I once had across the industry to confirm this feeling, but let’s just say I’m of a strong opinion that “something Big” is going to happen this summer here… 

So, I have a question for you…  If a friend of yours came to you and told you that he heard that Gold was going to be propelled upward this summer, would you go inside and ask your wife or husband, if they know how you could buy some Gold?   Well, I’m your friend, right? (I certainly hope so) So, take this as me whispering this to you in the driveway… That’s all I’m saying about that… 

I was perusing Twitter yesterday, and came across something that the great economist, David Rosenberg, said about the Jobs report from two Fridays ago.  First off, Rosenberg, is one of the most credible economists out there folks, and anything he says should be listened to…  And this is what he pointed out from the jobs report… “The most important behavioral statistic today in the jobs report was the quit rate, which hit an 18-year high. Workers are telling their bosses where to shove their lousy pay. Profit margins at risk of facing the big squeeze!The most important behavioral statistic today in the jobs report was the quit rate, which hit an 18-year high. Workers are telling their bosses where to shove their lousy pay. Profit margins at risk of facing the big squeeze!” – David Rosenberg

Through the years the economists that I follow have changed names quite a few times… Years ago, it was Stephen Roach that usually had my attention, and then along came others like Danielle Di Martino Booth, and David Rosenberg.  Notice the absence of one Paul Krugman? Good, because he’s no fave of mine! Except when he would make dumb  quotes that I used to capture for Presentations! 

The U.S. Data Cupboard continues to be lacking any real economic data, but it will print the stupid CPI (consumer price index) today, which should show that on an annual basis, the Fed has finally achieved their goal of sustaining 2% inflation… I can’t begin to go through all the heavy lifting the Fed did to get here… But it was a HUGE AMOUNT!  And was it really worth the effort? I mean wouldn’t inflation begin to creep higher on its own without the Fed’s help? Of course it would, it’s a part of the economic nature of things.  But I digress here, and need to move along… 

I told you yesterday that the Emerging Markets were getting whacked on a daily basis these days, and that the rot on the vine had spread to the more mature Emerging Markets…  And then this morning I saw a report on Bloomberg where they listed the top 5 Emerging Markets Currencies to steer clear of, for Bloomberg believes these 5 currencies are the most risky…   So, here’s the top 5…   Brazilian real, Russian ruble, Mexican peso, Turkish lira, and S. African rand…   

It’s a shame that the ruble is being thrown in with these other risky currencies. All the work the Central Bank of Russia (CBR) has done to offset the sanctions placed on them by the U.S. and European Union, is being ignored right now… that’s just not right… but it is what it is, folks… 

To recap…  The Big Singapore Summit ended with the press going ga-ga over the smiles on the faces of the leaders of the U.S. and N. Korea. The markets however, have decided to take a “Wait-n-see” stance, which Chuck thinks is prudent… The currencies hardly moved, Gold only gained $1 on the day, and the price of Oil remains in the $65 handle.   I had a dear reader send me a note yesterday saying that I had forgotten to list the price of Oil in the currency roundup for two consecutive days!  Well, I won’t forget today!  HA!

For What It’s Worth… Back to normal today… Here’s an article that talks about how we could be nearing Peak Gold… Well, if that’s the case, that beeping sound is the truck backing up to load up on physical Gold… However, Peak Gold remains to be seen. Here’s the link to the article… https://seekingalpha.com/news/3357367-major-gold-deposits-discovered-goldcorp-chairman-says?dr=1#email_link

Or, here’s your snippet: “Goldcorp (GG -0.1%) Chairman Ian Telfer is the latest industry exec to predict the world has reached “peak gold,” saying that mine production will continue to decline because all the major deposits have been discovered.

“Gold produced from mines has gone up pretty steadily for 40 years,” Telfer tells the Financial Post. “Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down… We’re right at peak gold here.”

“Are we not looking for it? Are we bad at finding it? Or have we found it all? My answer is we found it all. At US$1,300/oz. gold, we found it all. I don’t think there are any more mines out there, or nothing significant. And the exploration records indicate that,” Telfer says.

Barrick Gold is “shrinking fast,” Telfer says. “We’re sort of going sideways. Newmont’s going sideways.”

Chuck again… Well, like I said above, if what they’re telling us is factual and truthful and I don’t have any reason, other than the fact that these are leaders of company’s that make more money the higher the price of Gold goes, to doubt them, then beep, beep, beep…

Currencies today 6/12/18… American Style: A$ .7606, kiwi .7028, C$ .7685, euro 1.1778, sterling 1.3382, Swiss $1.0154, … European Style: rand 13.1839, krone 8.0138, SEK 86225, forint 271.25, zloty 3.6307, koruna 21.7617, RUB 62.52, yen 110.25, sing 1.3349, HKD 7.8467, INR 67.47, China 6.3996, peso 20.61, BRL 3.7054, Dollar Index 93.60, Oil $65.94, 10-year 2.96%, Silver $16.88, Platinum $907.18, Palladium $1,020.35, and Gold… $1,297.52

That’s it for today…  Well, Happy Anniversary to my beautiful bride of 42 years today… I’m not supposed to talk about Kathy in the Pfennig, so I’ll just say Happy Anniversary and move along…  I was thinking yesterday, the 42 years ago, I drove a Cadillac Eldorado, a real monster of a car for sure… I was at least 100 lbs lighter than I am now, had hair, and certainly wasn’t worried about cancer…  The Peter Frampton Live album was the top seller that year, and I spent a lot of time listening to Wings over America… by Paul McCartney and Wings… Three Dog Night takes us to the finish line today with their live version of : Eli’s Coming    And with that, I’ll send you on your way to a Tom Terrific Tuesday, and please Be Good To Yourself! 

Chuck Butler

June 11, 2018 

* Currencies can’t hold their lofty levels…   

* G-7 meeting nets whiney spoiled children… 

Good Day… And a Marvelous Monday to you! A pretty fun-filled weekend was just had by your truly… The weather was great, the friends were great, and good times were had by all, I do believe! The Reds finally ended the Cardinals 13-game win streak against them yesterday, but my beloved Cardinals took two of three from the Red Legs…  Hall and Oates greet me this morning with their song: She’s Gone…  

So, yes, while President Trump didn’t make any new friends at the G-7 summit this past weekend, his real mission is in Singapore to meet with N. Korea’s leader, of whom I’ve not been so nice to in the past calling him a “nut job”…  Everyone seems to think that this meeting is going to be all sunshine, lollipops and rainbows after this meeting in Singapore… I tend to be a little more pessimistic about these things, because, well, because I am… 

The G-7 meeting saw round one of the trade war between Canada and the U.S. That’s nice that the Canadian PM Trudeau, thinks he can stand up to the U.S. President, and shove stuff in his face without recourse…  And that recourse will first come from traders thinking like me on this, selling Canadian dollars/ loonies…  Yes, the Mexican peso is also caught up in this, but it has already been beaten around the neck and shoulders enough…

And then President Trump offered up an olive branch to Russia, petitioning the G-7 to add Russia to the mix once again. (Russia had been bounced out after the conflict in Crimea)   Wait until you hear about what Russia has done to deal with the U.S. sanctions… 

The currencies on Friday couldn’t hold their grip on the higher levels that were seen on Thursday, as traders squared up positions ahead of the 1. Singapore summit, and 2. the Fed’s rate hike announcement on Wednesday this week. The trading in the currencies can be seen as a prime example of what I’m talking about when I say that currency traders are fickle!  Last week it was sell the dollar, and yes we know the Fed is meeting next week to hike rates.  And that turned to “Oh my God! The Fed is meeting this week to hike rates”!    They didn’t just figure that out folks, it’s just a true reflection of how 1. sentiment has its grips on the currencies and 2. traders are fickle! 

One of the best things I get to do now that I’m no longer tied to a bank, is to write about my conspiracy theories… And brother do I have a good one for this week’s Dow Theory letters piece!  I know that a lot of you dear readers have already signed up for the Dow Theory Letters…  And I’m hoping that many more Pfennig Readers will do so too! But that’s all I have to say about that today… 

So, did you hear the news that the CFTC (Commodities Futures Trading Commission), the regulatory arm that polices commodities trading, including Gold & Silver, announced that they are going to “probe market manipulations”…  of Bitcoin, not Gold & Silver!  And did you also hear that there was a major problem with a cryptocurrency late last week? South Korean cryptocurrency exchange Coinrail said there was a “cyber intrusion” in its system.   This caused Bitcoin and other cryptos to post losses once again… 

I’ve shied away from talking about the cryptocurrencies these past couple of years, because I just didn’t see them lasting that long. I figured if the U.S. Gov’t has a problem with citizen’s losing faith in the dollar and buying Gold, that they surely would have a problem with the same people buying crypto currencies instead of dollars… And it wouldn’t be long before the hammer was brought down on the whole lot of them… But boy they sure had a run didn’t they? An now it appears to be over… 

Well, we have three major Central Banks meeting this week… First up is the Fed who will have a two-day meeting beginning tomorrow, and ending with a rate hike announcement on Wednesday. On Thursday the European Central Bank (ECB) will meet, and is expected to begin to explain how they will go about unwinding stimulus… IF that actually happens and the ECB doesn’t decide to chicken out again, it should be a lift for the euro. 

And then rounding out the week, we’ll have a Bank of Japan (BOJ) meeting on Friday (for them Thursday night for us)…   The BOJ will do nothing, the ECB might talk unwinding stimulus, and the Fed will hike rates…  As I said last week, I do believe the rate hike is already priced into everything, so the dollar will get its direction not from the actual rate hike, but from the statement following the rate announcement… Just how hawkish is Jerome Powell?   

The Emerging Markets are getting whacked daily now as they have some major problems…  A dollar liquidity crisis is brewing for them, and all that dollar denominated debt they’ve issued these past few years while interest rates were near zero, is going to come back to haunt them for years… So, with every Fed rate hike, the Emerging Markets feel a little more heat, and now the selling has spilled over to the more mature Emerging Markets currencies like S. African rand, Mexican pesos, and Brazilian real… 

The U.S. Data last week didn’t see any prints that were good for not only 1. the dollar, but 2. the economy… But I doubt seriously the Fed even cares about the teetering economy… They need to bump up rates quickly before the recession hits so they have some rates to cut! I told you last week that in the previous 10 recessions the average Fed Funds interest rate at the start of the 10 recessions was more than 9%… And after the Fed hikes rates on Wednesday, their Fed Funds rate will only be 2%… Brother can you spare a rate hike? 

The price of Oil remained pretty steady Eddie around $65 after it was announced that the Rig count here in the U.S. and inclined last week, and that Russia is going to increase production. 

OK, I won’t beat around the bush any longer there, regarding Russia’s announcement last week…  Basically, the U.S. has placed sanctions on Russia, and that demands that U.S. companies not do business with Russia… So, Russia announced that they were going to make it illegal to NOT do business with Russia, if you had done business with them before, and the penalty could include jail time…  Oh, I can hear my mother now, with one of her favorite lines…  You made your bed, now go lay in it!  In other words… Oh, never mind, I think you get the point here… 

Ok, back to the markets… Gold was able to eke out a $2.20 gain on Friday, and is up in the early morning trading a buck or two…  Last week, I made a big deal out of my thought that I was seeing a breakout in the price of Gold to the upside, and even drafted Omar Ayales for Gold Charts-R-Us fame to concur with me… But then I received a note from a longtime reader, and fellow St. Louis Cardinals fan, who reminded me that we are entering the slow months of the year (dog days of summer) and that could weigh heavily on my breakout call…  As usual there I was banging my head on the desk top because I had forgotten about the dog days of summer trading doldrums… UGH!   But I’m going to stick to my guns here, and say there will be “something” this summer that kickstarts Gold and the summer doldrums will disappear!  

The U.S. Data Cupboard is filled with tier 2 and 3 data prints this week, nothing to speak of really, except the FOMC meeting that begins tomorrow.  And I doubt that much of any data would get precedence over the news from Singapore the early part of this week… So, check your cable news every now and then or the internet feed for news that you depend on, for breaking news about what’s going on in Singapore.  

To recap… The currencies couldn’t hold their collective grips on the lofty levels they were trading at on Thursday, and it appears that the markets want to take a breather until they know or hear about what’s going on in Singapore.  First the G-7 meeting was full of whiny little children in the form of the G-7 nations, complaining to big brother (the U.S.) that they aren’t being treated fairly… Oh, poo, poo… Don’t you feel sorry for them? NOT!  Oil and Gold are also stuck in the mud this morning, and Chuck has some additional thoughts on Gold… 

For What It’s Worth… We’re going to do something different with the FWIW section today… it’s going to be all me… Ranting and pounding my fist about something, so here we go!

I was doing some reading on Friday, and came across an article on the Bloomberg that quoted former Fed Chair, Ben Bernanke… He of the two extra rounds of Quantitative Easing that were NOT needed! And he of the near zero interest rate cuts that remained there far too long, but I digress with my description of the man, I wanted to highlight something he said in the article… let’s listen in, to Big Ben Bernanke… “The stimulus “is going to hit the economy in a big way this year and next year, and then in 2020 Wile E. Coyote is going to go off the cliff,” Bernanke said, referring to the hapless character in the Road Runner cartoon series.”

Now, you can tell me there’s no tooth fairy, and you can tell me there’s no bunny that delivers eggs, but you can’t tell me that Fed reserve members aren’t political… Why would he pick 2020? Well, that’s the year the President Trump would be running for reelection.

We’ve not heard very much from Big Ben since he left the Fed Chair, and judging from this quote, I would prefer that to remain that way! But wait a minute Chuck, isn’t this in the same vein that you’ve been using to tell us a recession is coming?  Well, it’s close… You see, I’m of the opinion that the Fed Rate hikes are going to send us to recessionville, not the stimulus…  Got it? OK!   

Currencies today 6/11/18… American Style: A$ .7606, kiwi .7031, C$ .7680, euro 1.1785, sterling 1.3370, Swiss $1.0138, … European Style: rand 13.15, krone 8.0670, SEK 8.7055, forint 272.76, zloty 3.6205, koruna 21.7805, RUB 62.29, yen 109.92, sing 1.3352, HKD 7.8461, INR 67.44, China 6.4028, peso 20.41, BRL 3.7060, Dollar Index 93.65, Oil $65.04, 10-year 2.96%, Silver $16.82, Platinum $906.66, Palladium $1,013.05, and Gold… $1,296.99

That’s it for today… Lots to talk about today, and so little time and space to do it, which is why I truly believe you should look to subscribe to the Dow Theory Letters (www.dowtheoryletters.com) for daily in-depth reports from a different writer every day! (my day is Thursday!)  We tried out the new Hofbrau House on Saturday, IT IS HUGE! And a fun place for sure! And I was invited to the baseball game tonight, where I’ll see some former colleagues that too no longer work at the old place of business… Castaways, that’s what we are!  Tomorrow is Chuck and Kathy’s 42nd wedding anniversary… When I was a young man, I doubted that I would live to see 42 years old, much less be married for that long! Better living through chemistry, as my good friend, Ty Keough likes to say! Pink Floyd takes us to the finish line today with their song: Wish You Were Here… I used to play that one on my guitar too! Ok… time to go… I hope you have  a Marvelous Monday, and remember to Be Good To Yourself!  

Chuck Butler

 

June 7, 2018…  

* Currencies continue to rebound

* Bank of Brazil finds out the hard way… 

Good Day… And a Tub Thumpin’ Thursday to you… Many I feel badly that I did not recognize yesterday as D-Day… That’s what happens when you’re up at 2 am writing the Pfennig, you don’t have it all together!  Did you notice the time of delivery of yesterday’s Pfennig? it was around 4:30 am, so I’m not making stuff up! We received some very sad news last night… Red Schoendist longtime Cardinals player, manager, coach, and Hall of Famer, died… He was 95…  I don’t want to bore you with a story about him, so if you don’t want to hear it, go ahead and skip ahead to the next paragraph…  Each year on opening day, the Cardinals Hall of Famers come in first on the backs of convertible mustangs, and all the other “old guys” would struggle and need help getting out of the car. But not Red, he would swing his legs over the side and hop out like he was 18, not 88! Always brought a smile to my face to see him do that!  The Moody Blues greet me this morning with their song: I’m Just A Singer (in a rock and roll band) 

The daily beatings of the currencies by the dollar in the before Tuesday’s trading, have ended. Yesterday, the currencies ratcheted higher and higher as the day went on… And last night as I grew tired of watching my beloved Cardinals lose to the Marlins yet again, I walked over to my writing desk and turned on the currency screen to see what was going on, and saw that at that point, the euro was closing in on 1.18, trading at 1.1792…  

And in the overnight markets, the euro has indeedly do, climbed over the 1.18 handle… And it’s taking the rest of the currencies along for the ride. Shoot Rudy, even the Chinese renminbi, which had been on the slippery slope downward, was allowed to appreciate overnight! 

So, once again, the sentiment toward the dollar has changed… And this all coming in front of a rate hike that will happen next week here in the U.S. You can’t tell me that traders don’t look ahead, and see what’s on the docket in the days ahead before they begin to sell or buy dollars…  So, what I’m saying is that the rate hike has already been priced in, and now traders are dealing with Trade Wars, and exploding debt here in the U.S.,  with the prospects of an upcoming recession, and stock market collapse…  And I think they got their cues from the bond guys, who pushed the 10-year Treasury’s yield back below 3% earlier this week. 

Gold only gained about 30-cents in trading yesterday, but I’m still of the opinion that a breakout is coming… Well, a couple of times this week, I’ve mentioned that I believe that Gold is getting ready to breakout of this tight trading range it’s been held down to… So, I went to our Gold guru, at the Dow Theory Letters, Omar Ayales, who when I told him what I was thinking, and asked him his thoughts he replied: “I agree. I think we’re getting ready for a bullish rise… Copper’s breakout rise yesterday and today tell me the economy continues to heat up and an inflationary boom continues to develop. This dynamic is very bullish for gold and likely the backbone of its cyclical and secular strength. Short term, gold is finishing up a period of weakness. I think the upcoming Fed rate hike could be the catalyst for the leg up rise we’ve been waiting for. A break above $1380 would be super bullish.

Another bullish reason are silver and the miners. They’ve been very weak, but they didn’t fall much when gold declined below $1300. This is a sign of a bottom for the entire gold universe in my view.”

Thanks to Omar for his contribution to the Pfennig! Trends are trends, and when a commodity trend begins a bull market, they usually last a very long time… The great mind of Jim Rogers told us in his book Hot Commodities that historically, bull market commodity trends last 17 years! I’d say that’s a long time, for if that were to happen starting now, I doubt I would be around to see the end of it!

So… what re you waiting for, a special gold printed invitation to buy some physical Gold? Well, I’m sorry, but there won’t be any of those in your mail box… But you will have this in your email box!

I had lunch yesterday, with my good friend, Dennis Miller, the Retirementor. We talked about all kinds of things that were on our minds, but the one thing that we kept coming back to was how inflation eats away at everyone’s purchasing power, but especially retired people’s purchasing power, for if you are on a fixed income, that really doesn’t get adjusted upward, (who are they kidding telling us that Cost of Living Adjustments go both ways?)…    

Dennis gave me some reading material of something he’s putting together that I think those that are retired or those getting close to retirement or really just about anyone for that matter, will want to read.  I don’t think he would mind me spilling the beans on a small piece of his work here, so here goes… This is Dennis Miller talking… 

“During the 5 year period, 1977-1981, accumulated inflation amounted to 59.9%. If a person retired on 1/1/77 and received $1,000 per month in fixed income payments, 5 years later they would need $1,599 per month to have the same buying power.” – Dennis Miller   

The price of Oil was steady Eddie yesterday, and remains well below the lofty figures of just a few weeks ago.  I read this blurb on the Bloomberg this morning and it boggles the mind, well at least my mind it did! Check it out: “The U.S. government has quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day, according to people familiar with the matter.

The rare request came after U.S. retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices on Twitter. It also follows Washington’s decision to reimpose sanctions on Iran’s crude exports that had previously displaced about 1 million barrels a day, or just over 1 percent of global production.”  – www.bloomberg.com 

Pretty interesting don’t you think? I was under the impression that the U.S. Shale producers were taking care of any disruptions in the Oil production line?  Oh well, it is what it is… And we move along… 

The U.S. Data Cupboard yesterday had some reports that weren’t market movers but printed nonetheless, and they tell a story, which I always like it when data has a story behind it.  I went through the gyrations of the Trade Deficit yesterday and told you there could be some movement, and there was with Trade Deficit for April showing a drop to $46.2 Billion from $47.2 Billion in March. Not to get too excited about this slippage, for the May report that will print next month will show the dollar rebound, and that’ll be the end of the slippage in the Trade Deficit!    

We also saw Productivity’s second revision for the 1st QTR, and it was not good, slipping to 0.4% from 0.7% previously…  and here’s where the story gets good… Unit Labor Costs increased in the 1st QTR from 2.7% to 2.9%… So, if you put the two together, workers are not working as hard as before, but are earning more for their laziness, to put it bluntly…  

The Daily Reckoning (www.dailyreckoning.com) has a great article this morning about a dollar liquidity crisis that’s brewing…  If that floats your boat, then I would certainly go there and read it… I know I liked it, and would have used it in the FWIW section this morning, but I already have an article spooled up for that!  

To recap… The dollar’s daily beatings on the currencies has ended, it does appear… The euro has climbed back above 1.18 and brought all the currencies along for the climb. Even the Chinese renminbi was allowed to appreciate overnight!  Chuck employs the Gold guru from The Dow Theory Letters for his take on Chuck’s call that Gold is ready to breakout to the upside. And the poor Brazilian real…  You’ll find out about in today’s FWIW section… 

For What it’s Worth… Well, I’ve been noticing the Brazilian real dropping by significant amounts almost daily now for a couple of months. I kept thinking that it would turn around soon, especially with the rising price of Oil (think Petrobas) and Commodities in general rebounding… But it just hasn’t happened and then yesterday, I read where the Central Bank had to Intervene to hold back the selling, but it did no good in the long run… Of course I’ve told you for years, that single country intervention is only a short term blip, because the markets have deeper pockets than one Central Bank… And that the only way to get some real traction is form a coordinated effort of multiple Central Banks performing intervention together… But I digress here, and here’s the link to the story on Bank of Brazil intervention: https://www.ft.com/content/abe11c9e-698c-11e8-b6eb-4acfcfb08c11

Or, here’s your snippet: “Investors are rubbing Brazilian policymakers’ noses in the dirt.

After the central bank’s failed attempt on Tuesday to stop the sell-off in the real, the currency is again declining sharply, falling 1 per cent to hit a new two-year low of just below BRL3.85 against the dollar.That stands in marked contrast to most other emerging-market currencies, which are trading higher against the buck.The central bank auctioned additional contracts in FX swaps to stop Tuesday’s slide to BRL3.80, a move that had the effect of pulling the currency higher. But the relief was shortlived and the real ended Tuesday more than 1.8 per cent lower, lining up further losses on Wednesday.

Investors have numerous headwinds to tackle. Elections in October will determine whether Brazil is capable of engineering fiscal reform, the truckers’ strike is highlighting the strain of rising oil prices, while the resignation of the chief executive of state-controlled Petrobas, a free-market champion, raises questions about political interference in key parts of the economy.” – FT, which was found on Google search for Brazil…

Chuck again… Well, I won’t be using the FT any longer for FWIW section stories, as it takes me having to jump through fire hoops to get it done… And it would cost me money, which, unless you dear readers would like to pay for this letter… wink, wink… I didn’t think so…

Currencies today 6/7/18… American Style: A$ .7654, kiwi .7047, C$ .7720, euro 1.1820, sterling 1.3452, Swiss $1.0189, … European Style: rand 12.77, krone 8.04, SEK 8.6730, forint 268.67, zloty 3.6065, koruna 21.6830, RUB 61.95, yen 109.92, sing 1.3325, HKD 7.8460, INR 66.98, China 6.3899, peso 20.37, BRL 3.8160, Dollar Index 93.31, Oil $65.14, 10-year 2.98%, Silver $16.76, Platinum $907.21, Palladium $1,109.38, and Gold… $1,299.44 

That’s it for today…  Well, yesterday was the 74th anniversary of D-Day… What brave men took to those beaches of France that day… The first real depiction of that day in movies came in the movie Saving Private Ryan… After see that, I had tears in my eyes… Well, also on D-Day was the sad news of the passing of the beloved Red Schoendist… Sad to hear that another baseball legend has passed… When he wasn’t able to make Opening Day this year, I just knew the end was near for Red… So sad… And his, and my beloved Cardinals laid an egg last night once again losing to the Marlins! Day game today, but I can’t make it… UGH! Elvin Bishop takes us to the finish line today with his song: Fooled Around and Fell In Love… Charlie Daniels said it best in his song: The South is gonna do it again, when he said: “Elvin Bishop is sittin on a bail of hay, he ain’t good lookin’ but he sure can play”…   And he was talking about his guitar playing ability, which is pretty darn good in my book!  Ok, this ends a week of reversal in sentiment once again, so I hope you can take that and get out and make this a Tub Thumpin’ Thursday!  And remember to Be Good To Yourself!   That’s it that’s all, there ain’t no more! 

Chuck Butler