Feeling Left Out Are We, Canada?

August 29, 2018 

* Currencies see slippage on Tuesday

* Increased contracts see Gold fall on the day… 

Good Day… And a Wonderful Wednesday to you! Well… I was right about my oncologist “being a stickler about staying the course”… She did allow me to stop taking the chemo until the new dosage that she lowered arrives. So probably about the time I start to feel human again, the drug will show up at the door! Oh well… I tried… and feel as though she “compromised with me”… So I have that going for me! My beloved Cardinals remained on a roll last night. I felt so comfortable with a win that I went to bed before the end of the game! Paul Revere and the Raiders greet me this morning with their song: Kicks…

Well, the currencies and metals took a breather yesterday from their nearly 10 day run VS the dollar, and the euro slipped along with Gold on the day. Not exactly a good way to start the week, but then it’s not every day that the stupid Consumer Confidence Index prints a record high number… I told you yesterday that we could probably see that given the stock market’s setting of a new record level late last week.

And that my friends, is why there was slippage in the currencies and metals… The people that were surveyed, must have been singing “happy days are here again, the skies above are clear again, Happy Days are here again!”

And to that I would retort a Beatles song… It wont’ be long, yeah, it won’t be long, yeah… But let ‘em sing their song, it won’t be long before they’re singing a different tune…

In other data, the Case/ Shiller Home Price Index for June printed and showed a slippage in home prices as the index fell to 6.2 from 6.4… 

Yesterday I talked about another country, Germany, that’s looking into a payments system, ala SWIFT, that’s outside of the U.S.’s control… And then I saw that France was joining up with Germany on this… In the aftermath of a report that Germany was working on a global payment system that is independent of the US and SWIFT, on Monday Germany and France said they’re working on financing solutions to sidestep U.S. sanctions against countries such as Iran, including a possible role for central banks.

China was first… Then Russia… now Germany and France… Pretty soon, the writing will be on the wall for the dollar… But then I’ve always thought that President Trump was a low interest rates, weaker dollar kind of guy… So, he won’t be upset if the dollar gets weaker because of the ability of Central Banks around the world, to deplete their dollar reserves…

The euro, which was so close to 1.17 yesterday morning that it could spit in 1.17’s back yard, gave back some gains yesterday, but remained in the 1.16 level. But I get it… As long as the European Central Bank (ECB) continues to provide stimulus the euro will struggle to garner a lot of interest from buyers… But, the thing is… you want to buy something when the price is cheap, and you know something is about to change… In this case, we know that the ECB will unwind their stimulus, we just don’t know when…

But we live in an instant gratification world… Patience? That’s for doctors! HA!  Seriously though, most investors are looking for the quick buck and hitting the jackpot on any asset they buy within 2 weeks! 

Each day I spend an enormous amount of time reading and doing research for this letter and my DTL pieces. And what I’ve been reading the past couple of days is something that makes me smile… The rest of the world of writers and economists, analysts, etc. are coming around to my thought I had long before the 2nd QTR GDP first printed… 

People are beginning to notice what I told was going to happen… And that is that the 2nd QTR GDP would be like a star burning out, and be the brightest right before it happens… And that the data would begin to show cracks in the 3rd QTR…  Well, I told you the other day that the data is doing just that, with most not meeting expectations, and some even printing negative results for July…   And now, I’m reading reports that are talking about that scenario…  As if they read the Pfennig! 

Speaking of 2nd QTR GDP, the 2nd print / revision of the data will print today, and with the first print at 4.1%, I would think it would slip a tiny bit to 4%… Nothing to write home about yet… 

The U.S. Data Cupboard also has the Pending Home Sales for July for us to see today, but this is a non-market moving piece of data, but I wanted to get it out there to clear the Cupboard and get ready for Personal Income and Spending tomorrow. 

Well, did you hear about the extension of time that the BREXIT negotiators are asking for? Yes, the deadline for final negotiations was approaching, and seeing that they were nowhere near the end, the negotiators requested an extension…  This has got to unnerve those that were hoping for a good outcome here for the U.K. and  pound sterling. 

The much heralded tentative agreement with Mexico has taken a beating since first being announced and thought to be a good thing for the U.S….  It appears to be nothing but smoke and mirrors, and isn’t going to give the economy the boost it was thought to have in its tank…  But that’s not stopping Canada from saying that they’ll now join the negotiations… I just shake my head and wonder who’s in charge of these negotiations, is it a carnival barker? Or how about PT Barnum?  The circus is coming to town, the circus is coming to town! 

Come on Chuck, don’t be so negative toward this process and those that are working so diligently to achieve a goal…   Sorry…  But I’m still going to say that the whole thing reminds me a three ring circus!

And just when it appeared that it was safe to get back in the short Gold paper infested waters, they returned to take Gold down $10 yesterday, and stopping short of driving the price below $1,200…   Yesterday I told you there had been only 211,000 contracts traded on Monday. Well, Tuesday saw 288,000 contracts traded… The difference?  Short Gold paper trades…  Gold is up $2 in the early trading today, so maybe the shiny metal can push back? 

To recap… Apparently, consumers are dancing in the streets and singing Happy Days are here again… The Consumer Confidence Index rose to a record level in July, and the dollar fought to gain back some of its losses in recent days. The euro was ever so close to 1.17, but fell short and now has slipped downward as the dollar fought back. Canada was feeling left out, and decided to join the negotiations on trade… And the scenario I painted for you dear readers a couple of months ago, is beginning to be talked about in the markets…  See there? Even a blind squirrel can find an acorn! HA!

For What It’s Worth… Since I talked about how many article I’ve been reading that are picking up my scenario for the economy, earlier this morning, I have one of those articles for you! And it can be found here: https://www.fxstreet.com/analysis/has-the-us-economy-peaking-out-too-many-indicators-are-going-in-the-wrong-direction-201808241259

Or, here’s your snippet: “After an excellent second quarter, data for the third quarter begin to disappoint.
The circus around Trump diverts attention from the data.
The Fed may begin noticing it soon and this may hurt the US Dollar.

The US economy grew at an annual pace of 4.1% in Q2 2018 according to the initial read. President Donald Trump took a victory lap on the fastest growth rate in four years. Some had noted that the accelerated pace in Q2 might be related to a front-running of the tariffs on China.

Once the rush is gone, we may see some moderation. And with these duties serving as a tax on consumers. There is nothing wrong in a sub 4% quarter. But this may be somewhat worse than that.

Tariff-related or not, the data released in mid-August are not so promising.”

Chuck again…  And it all starts today with a revision of 2nd QTR GDP… 

Currencies today 8/29/18… American Style: A$ .73, kiwi .67, C$ .7762, euro 1.1665, sterling 1.2885, Swiss $1.0237,…  European Style: rand 14.3787, krone 8.36, SEK 9.1720, forint 278.28, zloty 3.6730, koruna 22.0755, RUB 67.58, yen 111.28, sing 1.3675, HKD 7.8492, INR 70.62, China 6.8050, peso 19.13, BRL 4.1014, Dollar Index 94.84, Oil $68.96, 10-year 2.88%, Silver $14.70, Platinum $790.05, Palladium $944.62, and Gold… $1,202.92

That’s all for today…  I’m really dragging the line this morning…  My lobbying for a break in the taking of chemo didn’t exactly work out my way, but there was a compromise I guess… Stop taking it for now, and wait for a lower dosage of the medicine to arrive. Ok, I guess I can live with that! Maybe with the lower dosage, the damage to my skin will cease, and I will be able to stay awake all day!  Alex has moved back home for the last two years of his studies/ Grad School… So, I have someone moving around here in the morning… I’m not used to that! I asked him if he wanted to sit down and add something to the Pfennig, like he used to do 20 years ago! One of my fave Chicago songs, Hard Habit To Break, takes us to the finish line today… So, please go out and make this a Wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler