He’s Back! Just As Promised!

March 26, 2018  

* Trade War looms, and dollar gets sold!  

* U.S. is proud of its new $1.3 Trillion spending Bill! 


Good Day… And a Marvelous Monday to you! Yes, I’m back, just as I promised, although the thought did cross my mind today to walk away from this daily routine, but the thought didn’t last long, and here I am! I thoroughly enjoyed my two week vacation, with first my spring training buddies, and then Alex, Dawn, Jerry, Delaney, and Everett visited, and to finish off the vacation, yesterday, I was visited by my good friends, Walt and Laila… I don’t know what I can really talk about today, as I’ve not kept up with the markets, except Gold, for the last two weeks! But, I’ll give it my best shot, as always…  John Lennon greets me this morning with his song: Mind Games…  Hmmm, seems apropos doesn’t it?  

Mind Games seems to be the thing that the Fed is playing with us. But I’ll save that discussion for another day. Today, we have to concentrate on the Trade War that seems to be coming to fruition. When I left you, the U.S. had announced tariffs on Chinese Steel and Aluminum, but as it turned out, those tariffs stretched their tentacles and showed they would also hurt European, Canadian and Mexican steel exports to the U.S.  

Now, two weeks later, the Chinese are beating the Trade War Drum, with retaliatory measures that right now haven’t been detailed, but we do know they are coming, because if we’ve learned one thing about the Chinese over the years, it’s that they don’t say things they don’t mean…  And what does all this mean to you?  Well, history shows us that protectionism is not good for a country that is implementing the protectionism measures.  But as I explained to Walt yesterday, on my home away from home Butler Patio, the Chinese renminbi is a managed currency, so the damage to the renminbi from the Trade War will be determined by the Peoples Bank of China (PBOC)…  

However, the damage to the dollar could end up being quite noticeable… I was reading this morning that a couple of reserves managers at Central Banks are looking to dispose of extra dollars they have on hand, and are looking at the euro as the destination for those reserve dollars.  And why not? The euro has seemed to gotten past the persistent problems that have plagued the single unit currency for the past 7 years, and if things continue to improve in the Eurozone, we could very well see the stimulus measures like negative deposit rates, become a thing of the past… So, I ask the question again, why not euros?  

The rest of the currencies would seem to be in line for some love from reserve managers too, as these reserve managers are keen to diversification rules. In June of 2016, 9 months ago, I wrote about a change in sentiment among traders, that would lead to a new weak dollar trend. Well, that new weak dollar trend has been slow to develop, but develop it has, as the euro has risen from 1.09 to 1.24  and Gold has risen from $1,212 last July to $1.350-ish today…  

But if the HUGE buys from Central Banks come to fruition, then this nascent weak dollar trend could very well get some legs and begin to run. I’m just saying… Wink, wink…   

Gold continues to be held back each time it rises to the $1,350 level, which as I wrote in last weeks Dow Theory Letters, seems to be the line in the sand that the price manipulators have drawn. I still hold out hope that the gig will be up on the price manipulators soon, and then Gold will be allowed to move freely through price handles.

I really call the Fed to the red carpet in my last Dow Theory Letters (DTL) piece last week… I’m parting ways with one of my fave economists, Danielle Di Martino Booth, who believes interest rates need to be higher, and I don’t believe that. But just because we disagree on this, doesn’t mean I discontinue reading her work…   OK, I digress here, and need to move along now!  

Whenever you see these reserve managers of Central Banks begin to reallocate their reserves, the major currencies get the most love… That means the euro, sterling, yen, francs, and a bit of Aussie dollars (A$).  And quick look at those “majors” and their respective performances these past two weeks, shows that my thoughts are correct, as the yen has rallied to a 105 handle, sterling has risen to 1.42 handle, and the A$ has moved steadily toward 78-cents once again.  

OK, this just came across my screen, and I’m feeling my blood pressure rise…  you can find it here: https://www.blacklistednews.com/article/64729/bank-of-america-merrill-lynch-agrees-to-pay-ny-42-million-fine-for.html  

And it’s about how Bank of American/ Merrill Lynch has agreed to pay a record $42 million fine to the state of New York for fraudulent activity related to its electronic trading services.   Brother! Another Scam and another fine, but no one goes to jail..  UGH!   And trust me on this folks, these fines that get paid are nowhere near the profits that were made, and the perpetrator looks at the fine as a “cost of doing business”…   A mere slap on the wrists… I shake my head in total disgust folks…   

Gold gained more than $18 on Friday, after days of being sold for small amounts, the shiny metal finally rebounded!  But as I mentioned above, Gold is back to $1,350, which has been the limit level that the price manipulators seem to allow before whacking Gold back in price. I would think that given the turmoil in the markets right now, with the pending Trade War and stocks getting smoked on Friday, that Gold would be a very good alternative  right now… Gold is ALWAYS a good alternative but there’s something about what’s going on right now, that has my spider sense tingling for Gold…   

The price of Oil has climbed to a $65 handle in the past two weeks… The Chinese begin trading their Oil futures contract today. This is the contract that is denominated in renminbi, but can be converted to Gold at the Shanghai Gold Exchange (SGE) , so  lot of people are saying this contract is denominated in Gold… And that’s not true.. .It can be converted to Gold easily, but it’s denominated in renminbi…   And it makes its debut today… This should stir up the energy sector market, eh?   

To recap, the dollar appears to be on the chopping block as Central Bank reserve managers begin to diversify out of dollars in fears that the Trade Wars will be bad for the U.S. economy and dollar. The euro is the main beneficiary of the reallocation of dollar reserves, but the major currencies are also seeing some love. China will enter the Trade War that was started by the U.S. and Chuck doesn’t think the dollar has much hope of remaining well bid.    

For What It’s Worth…  yeah, I know, I didn’t mention the $1.3 Trillion spending bill that was passed last week… Well, we all knew it was going to be HUGE, so nothing new there… But what was new was the news that Venezuela decided to knock off a couple of zeroes in their currency’s value….  That story can be found here: https://www.reuters.com/article/us-venezuela-economy/venezuela-knocks-three-zeros-off-ailing-currency-amid-hyperinflation-idUSKBN1GY3AP  

Or, here’s your snippet:”Venezuela’s President Nicolas Maduro ordered a re-denomination of the ailing bolivar currency on Thursday, by knocking three zeroes off amid hyperinflation and a crippling economic crisis. 

The measure to divide the so-called bolivar fuerte – or “strong bolivar” – currency by 1,000 would take effect from June 4, the socialist leader said. It would not have any impact on the bolivar’s value.

The move illustrates the collapse of the bolivar, which has fallen 99.99 percent against the U.S. dollar on the black market since Maduro came to power in April 2013. A $100 purchase of bolivars then would now be worth just a single U.S. cent. ” 

Chuck again… a bout There’ll come a day, not in my lifetime, but my kids will be here to see this same announcement take place here in the U.S.  That’s all I’ll say about that..   

Currencies today 3/26/18… American Style: A$ .7738, kiwi .7289, C$ .7780, euro 1.2408, sterling 1.4225, Swiss $ 1.0577, … European Style: rand 11.6775, krone 7.6980, SEK 8.1944, forint 252.07, zloty 3.4060, koruna 20.4854, RUB 57.24, yen 105.97, sing 1.3107, HKD 7.8464, INR 64.85, China 6.3141, peso 18.45, BRL 3.3136, Dollar Index 89.20, Oil $65.64, 10yr 2.84%, Silver $16.62, Platinum $951.51, Palladium $983.52, and Gold… $1.353.70   

That’s it for today…. Well, while I was on vacation, I celebrated my birthday. I never used to get into birthday celebrations, but since I was told I had cancer, I’ve enjoyed putting another notch in the belt of life each year, and this year was no different.  I spent the day at the ballpark, with two of my grandkids.. .what a day! My time here comes to an end on Wednesday, as we’ll head home for Easter…  The tumor in mouth which had become a real problem with its size earlier this month, has begun to react to the new chemo I’m on, and has already shrunk by a significant amount. YAHOO! And I seem to be tolerating the new chemo right now, so that’s good… I’ll find out this afternoon how my body is reacting to the new chemo when I visit my Florida oncologist for the last time this year…  The Moody Blues take us to the finish line today with their song: Story In Your Eyes…   And with that, it’s time go! I hope you have a Marvelous Monday! And remember, to always Be Good To Yourself!  

Chuck Butler