China Send Out A Warning…

Chuck Butler’s: A Pfennig For Your Thoughts 

January 11, 2018  

* The Bond Gurus send out a warning!

* Eurozone prints strong data again! 

Good Day… And a Tub Thumpin’ Thursday to you! If I were back in St. Louis, I wouldn’t be writing this morning, I would be preparing for my visit with the oncologist and my infusion. My appt. with the oncologist here, isn’t until this afternoon, so here i am!  But, tomorrow will be an infusion confusion day for sure, since I’ll be receiving my infusion so late in the day. So, no Pfennig tomorrow, infusion confusion Friday… Got it? Good! The Guess Who greest me this morning with their song: These Eyes…  (be your humming or singing the words to that one now!)  

The trading mentality that was brought upon the currencies and metals after last week’s disappointing jobs report, remains in place, but really, we just have some drifting by the currencies and metals. This is getting old in my opinion… No data anywhere, to speak of, and no conviction to move the currencies one way or the other. 

The euro found a way to have a mini-rally yesterday and close back in on 1.20, but then the rug was pulled on the single unit, and it came back and stayed well below 1.20 through the night and the morning sessions.

Yesterday mid-morning I sent out a Tweet that said: Hey Twitter followers, did you see where a Chinese official announced that the Chinese would consider either slowing down or halting U.S. Treasury purchases? Now, that’s a scary thought for the dollar, eh?

For those of you on Twitter that haven’t added me as someone you follow, what are you waiting for? HA! But seriously, you should check it out, as you’ll get these little tid-bits before I write about them in the Pfennig the next day! #ChuckOButlerjr  

But…  Those words by the Chinese official didn’t move the dollar one iota…  Those words didn’t even move the U.S. Treasury market, as the 10-year Treasury saw a mini-rally with its yield moving from 2.59% yesterday morning to 2.54% this morning.  What gives with that? the former Bond King, but still a bond guru, Bill Gross, issued a statement saying that the Treaury’s  25 year long bull market has come to an end…  And the new Bond King, Jeffrey Gundlach basically said the same thing, saying that, “The moment of truth has arrived for [the] secular bond bull market! [Bonds] need to start rallying effective immediately or obituaries need to be written.”  

So, there you have it two bond guys that should know the end of a bull market when they see one, are calling for an end, and Treasuries rally… I told you on Monday that traders were trading with an “opposites day” approach. Thinking further about their words, leads me to think that these two guys head HUGE Bond Funds, so if they want to make their comments come to fruition, they certainly have the ability to make that happen… 

OK, enough on bonds…  Longtime readers know that I have a background in bond trading, so bonds get my attention very easily!  Well, the price of Oil continues to ratchet higher each day, and this morning the price of Oil is knocking on the door of a $64 handle…  Commodities, as a whole, continue to move higher as an indication that inflation is going to be a problem in the future. 

Gold was up $8 in the early morning trading yesterday, and added to that figure as the morning went along… And then voila! “The boys in the band” saw to it that the $1,328 figure that Gold had reached, was cut back, and on the day Gold only gained $3.70 to end the day at $1,316.30… The shiny metal is once again up today in the early morning trading another $3, but as we’ve seen time and time again, the early morning trading no longer is an indication of how the day will go for Gold… 

Once again today, the euro saw a strong piece of real economic data print, and it couldn’t gather any steam from the print.  Eurozone Nov. Industrial Production rose 1.0%  VS an expectation of 0.8%, so not only did the data print beat expectations, it was strong… But did it help the euro?  We’ve been through that already this morning. UGH!   

Yesterday, the Petrol Currencies weren’t going along with the rise in the price of Oil, except the Canadian dollar/ loonie. Today, things have flip-flopped, as the Petrol Currencies led by the Russian ruble are on the rally tracks, but the loonie is getting sold…  I’m telling you this now, so you can listen to me later… This trading mentality that is so prevalent in the markets right now, is for the birds! I can’t wait for it to end, and go away, it doesn’t have to go away mad, just has to go away! 

The U.S. Data Cupboard still doesn’t have much to look at. UGH! Yesterday, I stepped up to my soapbox and railed on about consumer debt accumulation. Then later in the day, I received a tweet from my fave economist, Danielle DiMartino Booth, who said, “U.S. Households May Rue the Binge of 2017—Americans will soon find out they have been living beyond their means.”

I was glad to see that she was talking about the same thing I was!  As you know, besides this writing that I do, for the Pfennig and the Dow Theory Letters, I’m basically retired, and I find that nothing has changed for me, other than the flow of income in… I’ve always been someone that likes to spend money, but doesn’t… I save up for things I want, and when I have saved enough, I go and buy what I wanted…  It’s too bad that consumers, for the most part, don’t work their finances that way, eh?  Oh well, they’ll all learn one day…  

To recap… It was another day of opposites trading in the currencies and metals. the euro tried to mount a rally, only to see it collapse, and the same with Gold. Bong Gurus, Gross and Gundlach, both issued statements that warned investors that the bond market’s 25 year bull run has come to an end. And Treasuries rallied! see? opposites! 

For What it’s Worth… Fed member, Kashkari, was talking to CNBC yesterday, and I have the video for you…  He sounds a lot like me regarding interest rate hikes, and the video can be found here:  

Or, here’s your snippet: “The Minneapolis Federal Reserve proposed a set of sweeping new regulations Wednesday aimed at reducing the risk big banks pose to the economy.

At the core of the recommendations are higher capital requirements for the nation’s largest financial institutions as well as a reduction in burdens for smaller regional and community banks. The proposals also take aim at so-called shadow banks — nonbank lenders — which are targeted for sharp taxes on the bigger firms.

In total, the proposal offers a contrast with the current regulatory aims of the White House, which is seeking to reduce many of the banking rules imposed by the Dodd-Frank reforms, adopted in the wake of the 2008 financial crisis. Incoming Fed Chairman Jerome Powell also has indicated that a lighter touch is likely for regulations.”   

Chuck Again… watch the video, please… I think you’ll see what I mean about him sounding like me…    

Currencies today 1/11/18…  American Style: A$ .7875, kiwi .7227, C$ .7963, euro 1.1947, sterling 1.3495, Swiss $1.0217, … European Style: rand 12.44, krone 8.06, SEK 8.1880, forint 258.52, zloty 3.4956, koruna 21.3680, RUB 56.93, yen 111.62, sing 1.3330, HKD 7.8222, INR 63.57, China 6.5118, peso 19.29, BRL 3.3411, Dollar Index 92.42, Oil $63.96, 10-year 2.54%, Silver $17.03, Platinum $977.46, Palladium $ 1,079.98, and Gold… $1,319.80

That’s it for today…  I just remembered that Monday is a holiday, so no Pfennig until next Tuesday… Tomorrow is son Andrew’s Birthday, Happy 35th Birthday Andrew… The day you were born, we had snow storm that dropped 9 inches of snow , but I had gotten your mother to the hospital before the snowfall began, so no dicey stories there! 3 weeks later we would have the most snowfall at one time that I had ever seen, 24 inches, that shut down the city for 3 days!  1982…  The Cardinals also won the World Series later in 1982, and on my writing desk back home, I have a picture of me holding Andrew at the World Series parade… I got to see my beloved Missouri Tigers on TV last night beat Georgia in Basketball.. That was a hoot for me, down here! Nazareth takes us to the finish line today with their song: Holiday…  And with that it’s time to go! I hope you have a Tub Thumpin’ Thursday, and Be Good To Yourself! 

Chuck Butler