Fed’s Meeting Minutes Disappoint The Rate Cut Campers…

August 22, 2019

* Currencies remained stuck in the mud yesterday

* Eurozone PMI’s remain below 50… 

Good Day… And a Tub Thumpin’ Thursday to you! I was with a few of my good friends at my fave watering hole yesterday afternoon, and one of them said, “Wainwright is due for a game that looks like he’s throwing underhanded to hitters”, and I replied, “oh, no, not at home, he’s usually at the top of his game before the home crowd”… And then the Brewers went out and scored 4 on him in the first inning… OUCH! That’s going to hurt! But as my mom used to tell me, it’s only a game, Chuck and someone has to lose… And so it was for my beloved Cardinals last night! Yes, greets me this morning with their song: Owner Of A Broken Heart… Yes, was one of my favorite groups back in the 70’s and then they went on to be huge in the 80’s and 90’s! WOW!

Well, it was another dull day for the currencies yesterday… nothing to write about, other than it was just another day, when the dollar kept the currencies clamped down, but didn’t rally either! I don’t know if I can keep writing each day if this continues… I’m really bored with the currencies lately, and the only thing that keeps me interested is the price action in Gold… So… let’s go see what Gold did yesterday!

And just when I say that, guess what Gold did yesterday? Nothing, absolutely nothing, say it again! OK, well maybe it gained a buck or two, but in reality, that’s nothing, absolutely nothing, say it again! Thanks to the great Edwin Starr for the lyrics I borrowed today… I think all the traders are waiting for the Fed Heads to begin talking at the Jackson Hole Boondoggle, that stars in earnest tomorrow… Fed Chairman Jerome Powell, will be the headline speaker at the boondoggle, so, if there’s going to be any fireworks at the boondoggle they will come when Powell speaks…

Do You recall back a few years ago, at this boondoggle when St. Louis Fed President, James Bullard called for the next round of Quantitative Easing/ QE? That sent the dollar to the woodshed, and created a mini-rally in the currencies… I believe it was 2009… But I could be wrong, I’ve been wrong before, and I’m not ashamed to admit it… The Fed heads should take a cue from what I just said, for they’ve been wrong so many times in the past, that I’ve stopped keeping score!

The Fed’s meeting minutes that printed yesterday, seemed to me to be more of a mea culpa than anything… They characterized their rate cut in July to be a “recalibration of their rate hikes”… and that Fed officials who voted to lower interest rates three weeks ago agreed that the move shouldn’t be viewed as part of a “pre-set course” for future cuts….

Well, you would have thought that would take the starch out of the stock jockeys, who thought for sure they were going to get thrown a bone, in the meeting minutes…  But the stock jockeys will not be disappointed! And Stocks  gained over 200 points yesterday. So, what happens if the Jackson Hole Boondoggle doesn’t throw them a bone, as I told you yesterday, the markets were front running the Fed, in my opinion that is, and thought they would get news of more rate cuts… So, it could get nasty for the stock jockeys for sure… But right now they seem to no care! 

Well, Fed Chairman Powell, may still give the stock jockeys something to cheer about, at this point, I’m thinking that he won’t… And that won’t be taken well by the markets… And it will be cheered in loud voice by the dollar bugs… for no future rate cuts, right now that is, is like manna from heaven for them…  I read a report on Bloomberg this morning where the writer said that Fed Chairman Powell, “needs to give the markets what they want”… Really?  So, that’s what the Fed is there to do, cow tow to the markets?  I know it sure seems that they have done that since the days of Big Al Greenspan, but as a mandate?  I shake my head in disbelief that we’ve gone here… 

And that has me questioning why the dollar didn’t gain a lot of ground yesterday, after the meeting minutes were printed… Has the dollar gone about as far it will go? Like the song from the musical Okahoma… Everything’s up to date in Kansas City, They’ve gone about as far that can go… They went and built a skyscraper seven stories high, About as high as a buildin’ orta grow.

Yes, besides being a long time rock-n-roller, I have a love for the musicals too… I was in the high school production of Carousel, but it got canceled when the teachers went on strike my senior year…

OK, back to the markets… I don’t know if you all have gotten the drift I’ve been sending your way the past couple years of about how the Russian ruble is my new fave currency to own… Back in 2002, it was the euro, then in 2005, it was the Norwegian krone, then the Aussie and kiwi dollars, and now it’s the Russian ruble…

I recall being on the trading desk and having clients accuse me of being unpatriotic because I talked glowingly about the ruble… I would simply explain to them that, 1. I’m probably the most patriotic person they’ll ever know, and 2. That investment opportunities have nothing to do with patriotism…

How can you not be a fan of the ruble? It has the highest interest payable to depositors in the industrialized world… They’ve taken everything the U.S. and Europe has throw at them and said, “is that all you’ve got?” And their economy grows even with economic sanctions… And that they have the most intelligent Central Bank head than any country has… She was the one that decided years ago that instead of buying other currencies with their reserves they would instead buy physical Gold… And that decision has paid off brilliantly for the country, folks… So go ahead and throw stones at the ruble and me… But we’ll be laughing one day,  I’ll bet a shiny quarter on that one!

Ahh… The shiny quarter bet… I can hear you saying, OK Chuck, you really went overboard with that bet! NOT! Well, this goes back quite a few years, but anytime we had two opposite opinions on the currency trade desk, we would bet a shiny quarter… yes, we could have bet hundreds of dollars. But instead we chose a shiny quarter, for it wasn’t the money that was important, it was WHO WAS RIGHT!

OK This morning the dollar is getting a move on as the euro has dropped to a 3 week low, after their PMI (manufacturing index) remained below 50 at 47, but it was better than the previous month’s 46.5, but as long as it remains below the line in the sand that is 50, the markets view the Eurozone manufacturing contracting, and that’s not a good thing!  

The Eurozone can take some pride in the fact that their Composite PMI increased to 51.8 from 51.5… The Composite print includes Services… So, the Eurozone Services were quite strong last month. 

Right now, as I write, we’re waiting for the European Central Banks’ (ECB) meeting minutes from their last meeting… I don’t expect any bombshells to explode here, for the comment that sent the euro to the woodshed came from an out of meeting interview with ECB outgoing President, Draghi, who talked about the need to go back to the bond buying business… 

The U.S. Data Cupboard has nothing for us to see that’s worth the paper it’s printed on… But yesterday, there was a surprise data print that wasn’t on the docket…  The annual payroll revision….   And it was interesting in that it took over 500,000 jobs away from the previous reports!  I’ve got the MarketWatch article about this in the FWIW section today, so we have that going for us today! HA!

To recap…  Another day of no movement, yesterday in the currencies, but there’s something brewing this morning, so maybe the stuck in the mud currencies will actually move today!  The Fed’s Meeting Minutes were more of a mea culpa for the July rate cut, and didn’t give anyone reading them a warm and fuzzy about future rate cuts… That didn’t bother the stock jockeys, as they still have the Jackson Hole Boondoggle speech by Fed Chair Powell that might still throw them the bone they are looking for… 

For What It’s Worth…  OK, this is a first for yours truly, I was never aware that the Gov’t did this payroll revision before… But they did it now, and that’s what this article explains and it can be found here: https://www.marketwatch.com/story/us-created-500000-fewer-jobs-since-2018-than-previously-reported-new-figures-show-2019-08-21

Or, here’s your snippet: “Turns out hiring wasn’t nearly as strong in 2018 and early 2019 as the government initially reported — by about a half-million jobs.

The economy had about 501,000 fewer jobs as of March 2019 than the Bureau of Labor Statistics initially calculated in its survey of business establishments. That’s the largest revision since the waning stages of the Great Recession in 2009.

The newly revised figures indicate the economy didn’t get a huge boost last year from President Trump’s tax cuts and higher federal spending. They also signal the economy is a bit weaker than previously believed and could give the Federal Reserve even greater reason to cut interest rates in September.

“This makes some sense, as the 223,000 average monthly increase in 2018 seemed too good to be true in light of how tight the labor market has become and how much trouble firms are said to be having finding qualified workers,” said chief economist Stephen Stanley of Amherst Pierpont Securities.

The average 223,000 monthly increase in employment in 2018 — the strongest in three years — could be trimmed to 180,000 to 185,000, economists estimate.”

Chuck Again…  OK, who among you are going to say that you doubted me each month when I said that the jobs reports were artificially bumped up? Come on, I know some of you did, and just let it slide because it was just me crying wolf once again… Ahhh, grasshopper, but the wolf showed up didn’t it?  Now tell me this, would the dollar have enjoyed such a strong run through those months if the jobs reports were 180,000 a month and not 225,000 and more?  

Currencies today 8/22/19 American Style: A$.6768, kiwi .6378, C$ .7530, euro 1.1080, sterling 1.2164, Swiss $.9840, European Style: rand 15.1677, krone 8.9640, SEK 9.6685, forint 295.76, zloty 3.9380, koruna 23.2650, RUB 66.03, yen 106.60, sing 1.3862, HKD 7.8395, INR 71.81, China 7.0601, peso 19.73, BRL 4.0382, Dollar Index 98.31, Oil $56.17, 10-year 1.62%, Silver $17.04, Platinum $854.02, Palladium $1,473.36, and Gold… $1,494.66

That’s it for today…  I truly believe the Cardinals would have come back to win that game last night, but the monsoons came and the game was called with the Brewers ahead… UGH!  That was some monstrous rain last night! My little granddaughter, Delaney Grace will be singing the national anthem at the Gateway Grizzlies Independent League stadium tomorrow night… Good Luck little d!  OK… don’t forget no Pfennig on Monday, that’ll give me two weeks in a row with 4 day weekends! YAHOO!  When I finally got into the Pfennig Replies box this week, I noticed quite a few emails from readers wanting to know why the Pfennig stopped at the end of July…  Ahem… I was on vacation, I only wrote about it 100 times before I actually took off! HA!   Maroon 5 takes us to the finish line today with their song: Harder To Breathe…   Alrighty then, I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday! And please Be Good To Yourself!

Chuck Butler