China’s A Shares Get Added To The MSCI!

Good day… And a Tub Thumpin’ Thursday to you! I’ve done my share of Tub Thumpin’ the last two nights, and with today being an infusion day, I’ll have to leave all the Tub Thumpin’ to all of you! Please Tub Thump responsibly! HA! I’m greeted this morning by Chicago, and their song: Old Days… I was just doing some writing yesterday for an article, and talked about the old days of arriving at a currency’s value… Pretty interesting stuff, I must say!

The dollar strength that was being displayed all over the globe yesterday, has faded, but there’s really been no turn-around, just consolidation of the dollar moves on Tuesday and yesterday morning. The Gold price finally saw some light of day, but the price of Oil slipped further, falling to the $42 handle in the past 24 hours…

Let’s start with Gold today, you know, mix it up a bit, and see where it takes us, eh? Well… Gold didn’t do much again yesterday… Closing up only $3.70… I said yesterday morning when it was up nearly $5 in the early morning trading that it would be interesting to see what happened when the short Gold paper traders arrived… Well it didn’t take long to figure out what they thought! And the short Gold paper traders saw to it that Gold’s mini-rally didn’t go any further…

Then there was this article that showed up on the site, from Simona Gambarini — with the job title of “commodity economist,” reports that “gold’s luck has run out” with the 25-basis-point nudge in rates by the Fed. She further explains that her predicted two more rate hikes will cause even more money to leave the gold market.

I about fell out of my chair folks… As the U.S. economist, Dave Kranzler, responds to the GATA folks, “Hmmm. … “If Gambarini were a true economist, she would have conducted enough research of interest rates to know that every cycle in which the Fed raises the Fed Funds rate is accompanied by a rise in the price of gold. This is because the market perceives the Fed to be “behind the curve” on rising inflation, something to which several Fed heads have alluded.”

I’ll also throw in my two-cents, and say HOGWASH to those two more rate hikes! I’ve said it before and I’ll say it again, by the end of summer the Fed will be putting a halt on their plans to hike rates, and by Rocktober, they will be beginning their reversal that will eventually lead to QE4, and maybe even negative rates! Let’s see what Ms. Gambarini says then about Gold!

Whew! give me a minute while I climb down from the soapbox…  OK, I’m back on terra firma now, and ready to talk about something else!  The BIG NEWS yesterday involved China, so let’s talk about that for a minute.. I told you a couple of weeks ago that the MSCI (Morgan Stanley Corp Index) International Index was contemplating adding Chinese A share stocks to this index, and I said that they probably would add them, after telling the Chinese no, the previous 3 times they were up for adoption.

This deal comes with some parameters, as only 222 of Big Cap stocks were admitted, and since the Chinese like to “suspend stocks”, any stocks that had been suspended in the past 50 days were excluded. There was no discussion as to how the index would treat the 10% rule that the Chinese have on their stocks… No stock that gains or loses 10% in one day is allowed to trade further that day.  But here’s the real benefit for China…

You see, their stocks and currency will get a wider distribution, which has been a goal of the Chinese to gain a wider distribution of their currency for over a decade now. China has a lot of debt problems that they’ve created in creating an infrastructure that’s second to none. Have you seen the new Beijing Airport? They also keep their citizens happy by spending lots of money… And they have something called WMP’s, which is nothing more than a Ponzi scheme, but… China always seems to be able to weather their storms, and while a collapse of the WMP’s could bring on major damage to the economy and China’s reserves, the Gov’t continues to make inroads to having a free floating currency, that will most likely be backed by some percentage of Gold…

Earlier this morning, the Norges Bank met (Norway’s Central Bank) and like I said on Tuesday when I went through the events of the week, the Norges Bank left rates unchanged…  But also like I said on Tuesday, Norway has seemed to have weathered the storm from the drop in the price of Oil, which they had leaned on very heavily through the years.

Here’s a comment from the Norges Bank this morning after the announcement of no rate change. “Capacity utilization in the Norwegian economy appears to be higher than envisaged earlier. Inflation is lower than expected and may continue to drift down in the months ahead, but increased activity and receding unemployment suggest that inflation will pick up. Inflation expectations appear to be firmly anchored. Low house price inflation will curb debt accumulation, but it will take time for household vulnerabilities to recede.”

“The Executive Board’s current assessment of the outlook and the balance of risks suggests that the key policy rate will remain at today’s level in the period ahead,” says Governor Øystein Olsen.

The Reserve Bank of New Zealand (RBNZ) also left their Official Cash Rate (OCR) unchanged at 1.75% and in out going RBNZ Gov. Wheeler’s dwindling opportunities to diss kiwi strength, chose to just briefly mention that a weaker kiwi would help rebalance the growth outlook towards the tradables sector. Hmmm… what’s gotten into Wheeler? Has he gotten soft on kiwi strength? I really don’t know, but this is just not like him. Maybe he sees the light at the end of the tunnel, which will come when he steps down from his post in September…  Not that I want him to be himself with regards to dissing kiwi strength, I’m just being a Curious George here…

Kiwi did gain some ground after the OCR announcement, and no major dissing of the currency… So, kiwi has that going for it today!

Next week’s article for the Dow Theory Letters is going to be about what I talked about some yesterday, and that will be all about the euro… I’m putting the finishing touches on it today… is the website where these articles will print on Thursdays, but you have to pay for a subscription to the site, which is very good, with different writers each day, and ending the week with the Aden Sisters, so if it floats your boat, set sail my friends!

The U.S. Data Cupboard is still being restocked, but we will see the color of the latest, Leading Indicators Index today… This report and Capacity Utilization are about the only two forward looking pieces of economic data, so I’ll be watching for the data print today… On Tuesday, the U.S. Current Account Deficit for the 1st QTR printed, and printed worse than expected… The forecasters had the deficit around $112 Billion, but the actual print was $117 Billion!!!!!!   UGH, when will the deficit spending every stop? When the wall of debt comes crashing down, that’s when!

To recap… The dollar strength of Tuesday through Wednesday morning faded into consolidation yesterday, and the currencies and metals have won a little of the lost ground back… Both the Norges Bank and the RBNZ left rates unchanged and really didn’t have much to say about their no rate moves either. Strange that RBNZ Gov. Wheeler wasn’t out dissing kiwi strength! Gold finally saw some light of day yesterday, but its gain was kept to just $3.70… And the price of Oil slipped further falling to the $42 handle…

For what It’s Worth… In 2003, I remember sitting in our convertible mustang, as the three Amigos, Chuck, Duane and Rick were setting out to find Roger Dean Stadium on our first trip to Spring Training together. And Duane asked me what was on my mind regarding the U.S. economy. (now this was long before they realized they should never ask me stuff like that!) And I responded that I had been reading and writing about something that really troubled me, and that was the underfunding that was going on with Pensions.. That’s right I said that in 2003… And I’ve been writing about it since, sounding like a broken record, I guess, but still it goes on and on, and keeps getting larger and larger… Look at Illinois, they’ve now been ordered by a Court to pay bills, but they have no money, and their State Pension is grossly underfunded!

Well, any-old-way you look at it, Chuck was out there seeing stuff that was going to be a problem, long before anyone else did, and that brings me to today’s FWIW… It’s an article on Bloomberg, that talks about GE’s pension shortfall, and when I say shortfall, I’m being kind to GE! You can find the article here:

Or, here’s your snippet: “It’s a problem that Jeffrey Immelt largely ignored as he tried to appease General Electric Co.’s most vocal shareholders.

But it might end up being one of the costliest for John Flannery, GE’s newly anointed CEO, to fix.

At $31 billion, GE’s pension shortfall is the biggest among S&P 500 companies and 50 percent greater than any other corporation in the U.S. It’s a deficit that has swelled in recent years as Immelt spent more than $45 billion on share buybacks to win over Wall Street and pacify activists like Nelson Peltz.

Part of it has to do with the paltry returns that have plagued pensions across corporate America as ultralow interest rates prevailed in the aftermath of the financial crisis. But perhaps more importantly, GE’s dilemma underscores deeper concerns about modern capitalism’s all-consuming focus on immediate results, which some suggest is short-sighted and could ultimately leave everyone — including shareholders themselves — worse off.”

Chuck again.. well, there’s no reason for me to pile on here… You know when I played football, I was usually the guy that made the first hit and then as we fell to the ground, I got piled on. I always hated that feeling of being at the bottom of a pie of people, especially other football players! Yes, I was what my dad would call, a “pretty good country athlete”, but that was in a different life, for if you’ve seen me in my adult life, I no more look like any kind of athlete! HA! (maybe a Sumo wrestler! HA)

Currencies today 6/22/17… American Style: A$ .7540, kiwi .7253, C$ .7510, euro 1.1165, sterling 1.2665, Swiss $ .9736, … European Style: rand 13.0052, krone 8.4890, SEK 8.7398, HUF 276.65, zloty 3.7957, koruna 23.5154, RUB 59.82, yen 111.33, sing 1.39, HKD 7.8003, INR 64.56, China 6.8287, peso 18.17, BRL 3.3268, Dollar Index 97.55, Oil $42.66, 10-year 2.16%, Silver $16.59, Platinum $927.73, Palladium $888.07, and Gold… $1,251.60

That’s it for today… Running a bit later this morning, but no biggie! A great day for me yesterday, I was sent the subscriber list for the Pfennig, which means, we can load it up now and maybe by tomorrow, but probably Monday the emailed Pfennig will be going out once again! YAHOO! Things are looking up once again for yours truly… I do have to get a chemo infusion today though, so I’ll deal with that later this morning, and hopefully it doesn’t rain on my parade! Another extra inning win for my beloved Cardinals last night. But like I told my friend Dennis Miller, winning extra inning games against the worse team in baseball, isn’t what I would call “good wins”… But a win is a win, right?  Ok.. time to get going. The iPod has reshuffled and we’re being taken to the finish line today by Billy Squier and his song: My Kind Of Lover…  I hope you have a Tub Thumpin’ Thursday, and Be Good To Yourself!


Chuck Butler