It’s A FOMC Week… What Will It Bring?

March 18, 2019 

* Currencies & Metals begin to climb VS the dollar… 

* BREXIT continues to be in the news… UGH!

Good day… And a Marvelous Monday to you! What a nice weekend here, with rain forecast for us, but it held off for Two baseball games for me. I’ve told you before that my beloved Cardinals can’t hit the ball this year, and yesterday, I witnessed a near no-hitter in spring training! I sure hope they didn’t show that game back home, because they would have lost some fans on the fence for sure! Nary a hit until the top of the ninth! And down here when you lose to the Marlins, well… that’s not a good thing… Of course my wife tells me “it’s only spring training”… But It’s not! You play the way to practice… I’m just saying… 10CC greets me this morning with their song: I’m Not In Love…

Well, Friday wasn’t much to talk about with the currencies, the dollar or Gold… The Data here in the U.S. since we last talked wasn’t not good, but the dollar held its ground… It just doesn’t make sense to me, given that the U.S. data continues to be bad, but the dollar bugs still rule the roost… While I’m talking about data… we had some bad data, first on Thursday with New Home Sales for January coming in lower that what they were in December… Industrial Production wasn’t anywhere close to the expectations for the data, and neither was Capacity Utilization… The only data that was better than expected was the stupid Consumer Confidence report… And as always the people that take the surveys didn’t call me!

Gold lost $13 on Thursday, but was able to gain back $6.80 on Friday…In the overnight markets last night, the dollar did lose a little ground, but remains on terra firma, and Gold has move back above $1,300, but it all lokks shaky to me, I’m just saying… There’s seems to be no conviction to take the dollar lower on traders’ collective minds at this time. 

OK, I’ve told you all before about my background as a bond trader many years ago, and how I was taught even before that time, that I should always pay attention to what the bond guys are telling the markets… So, with that in mind, the yield on the 10-year Treasury has slipped further lower and trades this morning with a 2.59% yield.   What that tells me is that the bond guys are not believers in the U.S. economy, and that they see the Fed cutting rates sooner than later.  I know, I know, now you’re wondering how I got all that out of the slippage in the 10-year’s yield?  It has to do with experience, and brother do I have a ton of that! 

I’ve been around the financial markets since 1973…  that’s more than 45 years folks… Most bond traders these days aren’t even 45 years old!  OK, enough of talking about how old I am…  I have a friend that I’ve met down here, who’s name is Jack, and he was a stock trader at Dean Witter for 35 years, you can just imagine the stories we swap about trading and trade desks and characters we’ve come across through the years!

OK… well Japan isn’t starting 2019 off on a good foot, economics-wise that is… The printed their January Industrial Production data overnight, and it was negative -3.4%.. Yikes! Now that’s going to leave a mark!  That’s what in our future folks… we follow the Japanese, except in one thing… we spend, spend, spend as consumers, while the Japanese save, save, save…  but that’s it, as far as exceptions to the comparisons. 

Tonight the RBA (Reserve Bank of Australia) meets (tomorrow for them). This is going to be a tricky one, in my book, as the RBA last month was very Debbie Downer about things, and this could be their opportunity to do something about their dour mood, like cut rates… I sure hope that it doesn’t come to that, as I’m still concerned with a housing bubble that has existed in Australia for a couple of years now.  This RBA is important and the thoughts of what may come out of it, is what’s been holding the Aussie dollar (A$) from advancing. 

The BREXIT deal is still up in the air, and that fact has knocked the stuffing out of pound sterling, after it had recorded a very strong recovery last week. I read one observers thoughts from Germany, where he said that the BREXIT problems were political not economics…  Now that sure sheds some light on why this divorce can’t get it legs under it!  

So, the week starts out slow for data prints and then gears up as the week goes on. On Wednesday here in the U.S. will be a Fed FOMC day… What comes from that will be very interesting… I’m telling you this now, so you will hear me later… IF the Fed cuts rates or… talks about cutting rates it’s going to be seen as a “We’ve got your back” move for the stock jockeys…  Is that what our Central Bank is supposed to be concerned about? Well, the answer to that is no, but since when haven’t they been? 

Longtime readers know all too well, that I’m no fan of the Fed… And if their existence comes down to the idea that they are there to save stocks, then they’ll be dead to me… so to speak… Useless as a pay toilet in a diarrhea ward!  So, let’s hope it doesn’t come to that, eh?

To recap… The currencies and Gold ended the week, on an uptick, but after suffering through a selloff on Thursday. In the overnight markets last night, there was some positive moves in the currencies and metals, but the moves are quite small at this point.  There may not be a huge amount of data early on in this week, but by Wednesday when the FOMC meets, things will be getting hot and heavy… 

For What It’s Worth… I’ve been telling you about this state and that state that brings up legislature regarding the tax exempt status of Gold and Silver sales, and this article brings it all together and can be found here:

Or, here’s your snippet: “As of right now, 37 states have either no state sales taxes at all (Alaska, Delaware, Montana, New Hampshire, and Oregon) or have complete or partial sales tax exemptions on the in-state retail sales of coins and precious metals bullion. That may soon change.

All ten of the most populous states and 17 of the 20 most populous have such exemptions, so that well over 80% of the nation’s residents have such an exemption where they live.
Last Friday, the West Virginia legislature overwhelmingly passed a coins and precious metals sales tax exemption (33-0 in the Senate and 90-9 in the House). It now awaits the governor’s signature to take effect on July 1.

A legislative committee in Tennessee has already passed a similar exemption bill. On March 13, the first legislative committee in Arkansas considered such legislation. There have also been coins and precious metals exemption bills introduced in the legislatures in Kansas, Maine, and Wisconsin.

Because of my past career as a certified public accountant and in leading Michigan’s effort to gain a coin and precious metals sales tax exemption in 1999, I have been heavily involved in such exemption efforts. After Michigan adopted its exemption, I later documented that the Michigan Treasury actually experienced an increase in total sales tax collections and also in other tax collections. This research, in conjunction with the Industry Council for Tangible Assets, has been used to subsequently help gain similar sales tax exemptions in the states of Alabama, Indiana, Iowa, Minnesota, Nebraska, North Carolina, Oklahoma, Ohio, Pennsylvania, South Carolina, and Virginia and to expand an existing exemption in Texas and Louisiana (and to help reinstate Louisiana’s exemption after it was suspended in 2016).”

Chuck again…  it looks as though the momentum is really gaining steam here folks, and now you should write or call your congressman or woman and tell them how you feel about this! 

Currencies today 3/18/19 American Style: A$ .7111, kiwi .6869, C$ .7536, euro 1.1358, sterling 1.3271, Swiss $1.0003, European Style: rand 14.4060, krone 8.5155, SEK 9.2133, forint 276.69, zloty 3.7838,  koruna 22.5745, RUB 64.78, yen 111.48, sing 1.3510, HKD 7.8487, INR 68.53, China 6.7124, peso 19.16, BRL 3.8127, Dollar Index 96.39, Oil $58.37, 10-year 2.59%, Silver $15.37, Platinum $835.67, Palladium $1,560.17, and Gold… $1,305.78

That’s it for today… Did you have a fun St. Patrick’s Day  yesterday? Have any green beer? Back home in St. Louis, there’s always 3 parades on St. Patrick’s day… And in Chicago they dye the river green!  We’re all Irish on St. Patrick’s Day aren’t we?  Tradition calls for us to go to a local restaurant here, and have corned beef and cabbage on StPD…  And so that’s what we did last night! My favorite little girl, Delaney Grace, is here and brightening up my life for a week… I just love here to pieces!  Everett is an early riser like me, and instead of getting up and writing a letter, he gets up and plays his video games until everyone else wakes up! Good Boy!  Today marks two days in a row that it was too cloudy to see the sunrise… UGH! Kansas takes up to the finish line today with their song: The Wall… and with that, it’s time to say I hope you have a Marvelous Monday, and remember to Be Good To Yourself!

Chuck Butler