Hey! I Didn’t Hire Him!

August 21, 2018  

* Currencies & metals turnaround continues

* Political turmoil in Australia… 

Good day… And a Tom Terrific Tuesday to you! Well, how about that? My beloved Cardinals go to LA and win in the 9th inning VS the best closer in the National league… Baseball is a strange game sometimes, and goes places you would never have imagined…  I didn’t hear from my darling daughter Dawn yesterday, so I’m thinking that she had a grand birthday! I have a treat for good friend Rick today… The Group A-ha greets me this morning with their song: Take Me On…  If know Rick like I think I do, right now he’s searching his music roster to find that song to play it because now it’s in his head! HA!  

I was putting the finishing touches on my Dow Theory Letters piece for this week last night, and in it  wrote about how it appears that the bottoms have been put in for the currencies and metals, but that we had seen so many false dawns lately, that it would take a week to be sure. Well, Day two of the turnaround was a good one for the euro and Gold…  And longtime Pfennig Readers know that what’s good for the goose is good for the gander, when it comes to the currencies… If the Big Dog euro is off the porch chasing the dollar down the street, the little dogs (the other currencies) are right behind!  

And a quick look around the world confirms that thought once again with currencies from Singapore to Canada all looking better this morning. The Chinese renminbi has had two consecutive nights of fixings that have allowed appreciation, and the renminbi is looking much better this morning than a couple of days ago, when it looked like the it was going to take CPR to get the renminbi off the canvas.  

Gold added $5 to its value yesterday, after adding $10.90 on Friday, and this morning the shiny metal is already up $2 in the early morning trading.  And I have to say that even though its not a “huge amount” of difference, $1,193 sure looks better than the $1,178 it was trading at last Thursday. 

So, what’s causing this turnaround, that’s causing the dollar bugs to scatter and crawl back into the wallboards? Well, from everything I’ve read, it sure appears that the President has caused this turnaround… How? I hear you asking… Ahhh Grasshopper, come, sit, and listen…  A couple of weeks ago, I wrote about how the President had broken the trend of sitting Presidents to not talk in public about the Fed…  And there was some wobbling of the dollar… But last Friday, Trump went full bore on the Fed, talking about how their rate hikes were hurting the economy, and he wished they would stop hiking rates. 

It does appear to me, that the markets are taking this comment as a sign that the Fed will cower to the President and stop hiking rates… To that, I say Poppycock!  But then yesterday, Trump had more to say about the Fed… He said that he was going to continue to criticize the Fed if they continue to hike rates…  Look, the President isn’t unlike most people these days, they have to find someone to blame, for nothing could be their fault! 

it’s all connected folks… Trump wants a cheaper dollar to help with the exports that are getting tariffs added to them… But that wasn’t happening because of the Fed Rate Hikes. So, Trump attacks the Fed..   So, that’s what’s behind the turnaround… That and the simple fact that the dollar had been overbought…   And at this point, I would like to tell the President… “Hey, I didn’t hire him… you did!” (in reference to Jerome Powell the Fed chairman)  

The Aussie dollar (A$) is participating in the currency rally, which is surprising to me, in that there is political turmoil in Australia, and normally currency traders want no part of any political turmoil.  Yesterday the PM Turnbull had to hold off a leadership challenge, and barely won… This is the kind of stuff that usually knocks the snot out of a currency, but the A$ just soldiers onward… 

The A$’s kissin cousin across the Tasman, the New Zealand dollar/ kiwi is playing follow the leader with the A$. I always liked that song from the Peter Pan story… We’re following the leader, the leader, the leader, we’re following the leader, wherever he may go…   But, on the serious side… We’ll see the color of the 2nd QTR Retail Sales in New Zealand later today… I expect the report will show growth in Retail Sales during the 2nd QTR, that was above the 1st QTR’s output of 0.6%… 

In the old days of valuing currencies strictly on fundamentals, a stronger Retail Sales report would have sent kiwi on a moon shot…  But these days, it’s a combination of fundamentals and Trader Sentiment, with Trader Sentiment being the main ingredient…   

Ok, I just mentioned the main ingredient…  For the win… who can name the hit song from the 70’s from The Main Ingredient? No Googling the answer! The answer will be in the Big Finish… 

Ok… that was fun!  Hey! Fun is my middle name!  If I’m not having fun, then I don’t want to do whatever it is! Having fun keeps you alive! Years ago after my second go-around with cancer, someone sent me a note and told me how sorry they were, and asked me what I was going to do… I replied… Have fun! 

So, the currencies are back on the rally tracks, and taking Gold with them for the ride. and there’s nothing but dust in the U.S. Data Cupboard today…  Which means that we should continue to see more dollar selling today, as there’s nothing to stop the selling and only one voice causing the selling… And that one voice happens to be the most powerful man in the world… 

Well, the Trade War continues to cause problems and here in the U.S. is what we care about right? Why would we care if Holland is having problems with their Trade Balance because of the Trade War? Over in Germany, they’re not having any problems with the Trade War… Yesterday it was reported that for 2018, Germany will continue to be the world’s leader in Current Account Surplus… Germany’s current account surplus – which measures the flow of goods, services and investments – will remain the world’s largest for the third year running in 2018 at $299 Billion, followed by Japan with $200 Billion, according to IFO (A Think Tank in Germany)  estimates.

You would think that China would be near the top in that category, but China has seen a surge of imports… So, it’s Germany… I’ve said this for years, and it remains as true today as it was the first time I said it, and that is that I would love to be able to just buy Germany’s currency… But the German mark went the way of the dodo bird back in 1999, when the euro came into existence… 

To Recap… The currency and metals turnaround continued on Monday in the overnight markets last night, with the euro climbing back to a 1.15 handle and Gold having two consecutive days of gains. And apparently President Trump is at ground zero of what’s causing this turnaround. Apparently, the President has decided to go toe to toe with the Fed Chairman and his rat hikes… Currency Traders seem to think that this will cause the Fed to rethink their rate hike path… Chuck says poppycock! 

For What It’s Worth… Well, when you’ve backed a dog into a corner, expect it to come out fighting, and when you think you’ve backed a country into a corner, if they’re any good, they’ll find a way to get out… And that brings us to China, who found a way to continue to receive Iranian Oil, which is against the sanctions placed on Iran by the U.S.  This article can be found here: https://www.reuters.com/article/us-china-iran-oil-shipping/exclusive-china-shifts-to-iranian-tankers-to-keep-oil-flowing-amid-u-s-sanctions-sources-idUSKCN1L50RZ

Or, here’s your snippet: “Chinese buyers of Iranian oil are starting to shift their cargoes to vessels owned by National Iranian Tanker Co (NITC) for nearly all of their imports to keep supply flowing amid the re-imposition of economic sanctions by the United States.

The shift demonstrates that China, Iran’s biggest oil customer, wants to keep buying Iranian crude despite the sanctions, which were put back after the United States withdrew in May from a 2015 agreement to halt Iran’s nuclear program.

The United States is trying to halt Iranian oil exports to force the country to negotiate a new nuclear agreement and to curb its influence in the Middle East. China has said it is opposed to any unilateral sanctions and has defended its commercial ties with Iran.

To safeguard their supplies, state oil trader Zhuhai Zhenrong Corp and Sinopec Group, Asia’s biggest refiner, have activated a clause in its long-term supply agreements with National Iranian Oil Corp (NIOC) that allows them to use NITC-operated tankers, according to four sources with direct knowledge of the matter.”

Chuck again… The world has grown up, and is finding ways to go around the orders of the U.S. And if we didn’t owe the world Huge sums of money (debt) we would be able to continue to direct the world… But we gave that ability up when we decided to go down this “debt doesn’t matter road”… 

Currencies today 8/21/18…  American Style: A$ .7358, kiwi .6666, C$ .7678, euro 1.1520, sterling 1.2830, Swiss $1.0128,… European Style; rand 14.4257, krone 8.4330, SEK 9.1330, forint 280.48, zloty 3.7388, koruna 22.3411, RUB 67.12, yen 110.25, sing 1.3672, HKD 7.8495, INR 69.87, China 6.8564, peso 18.95, BRL 3.9319, Dollar Index 95.55, Oil $66.92, 10-year 2.84%, Silver $14.78, Platinum $800.30, Palladium $917.19, and Gold… $1,192.97

That’s it for today… well, my time here in S. Florida is coming to an end… I had to bring all the patio furniture in yesterday, as it is hurricane season, and I won’t be back for two weeks. Well, I see this morning that my beloved Cardinals found a way to win in the 9th inning last night, after blowing a lead earlier in the game. The Cardinals will put their three young pitchers up against the mighty Dodgers in this series… Should be interesting, too bad the game doesn’t start until its 10 pm here… UGH! Well, one of my all-time fave songs is taking us to the finish line today… The Blue Jays sing their song: I Dreamed Last Night…   Now… it’s your mission should you decide to accept it, to go out and make this a Tom Terrific Tuesday, and to Be Good To Yourself!

Chuck Butler