July 15, 2019
* Gold goes on a roller coaster ride…
* Chinese data is pretty fair, no armageddon there yet…
Good day… And a Marvelous Monday to you! Doesn’t it seem as though we just started July, and we’re already half way through it? The Rolling Stones sang oh, so many years ago… Time waits for no one and it won’t wait for me! All this means is that we’re getting closer by the minute to my annual summer vacation… I had a wonderful weekend fishing and visiting our good friends, Duane and Toni. Alex won the prize for the biggest fish caught, I won the prize for the first fish caught… The prize being that we could brag about it! The fishing was tough though, and so we just put back in the lake any fish we caught, for we wouldn’t have had enough to feed us! I was worn out when I arrived home yesterday late afternoon, and my age was showing… UGH! Steely Dan greets me this morning with their song: Don’t Take Me Alive…
Well… Last Wednesday, I wrote about how Gold was back on the rally tracks, but was leery of the short Gold paper trades… And on Thursday those arrived at the COMEX by the boat load. Gold was up $20 on Wednesday, down $14 on Thursday, and back up again on Friday… Rollercoaster… My Gold price is like a Rollercoaster baby! So, what will the short Gold paper traders do now… They tried to whack Gold but it didn’t last… What to do? What to do? I would like to suggest that they go home… They don’t have to go home mad, just go home!
OK… The currencies last week were stuck in the mud, for the most part… Not losing ground but not gaining any either… the Dollar Index, last Thursday was 96.86, and today 4 days later it’s 96.80… The Aussie dollar, (A$) was an exception, as it moved past 70-cents once again, and the S. African rand is pushing the currency appreciation envelope across the desk… The Indian rupee has been very stealth-like with its stronger move, and the Brazilan real continues to recover a lot of lost ground. And the Russian ruble has gone back below 63 once again… So, it’s not a lost cause for the currencies at all, it’s just that the rest of the lot aren’t moving much these days… I thought last week that they were waiting for the Fed Chairman’s speeches to see if he’s really on board with a rate cut in July… And seeing that he was… Well… I said it all above… UGH!
The Treasury yield curve first inverted 3 months ago, and has remained inverted since, and now the yield curve has steepened by the most in the 3 months it has been inverted, telling us that a recession is on its way, and just to prove its point, the yield curve moved more and the inversion is steep now… There’s no question in my mind that this is as good as it gets as a recession indicator!
I got a kick out of the President’s tweet last week when he said that the U.S. should join in on Europe’s and Japan’s currency manipulation… I’ve heard and read that he’s really been reportedly asking aides to find a way to weaken the dollar in an effort to boost the economy ahead of the 2020 election. The strength of the dollar has proven a headache for Trump, who would really like to see a narrowing of the U.S. trade deficit.
I would fire off a memo to him (he and I email each other! HA!) telling him to be careful with what you wish for… Because if you say something like that over and over again, eventually the markets will oblige you… Mark my words on that! Right now, I believe the dollar’s weakness is more of a result of it facing the firing squad, I mean, rate cuts, and not the President’s words…
Yesterday, in Europe it was Bastille Day… And today in China it’s economic print day… Today, we’ll see the color of 2nd QTR GDP (should be about 6.2%).in addition, we’ll also see June prints of Industrial Production and Retail Sales… And since China is hours ahead of us (it’s almost Tuesday there! HA!) We’ve seen these reports! 2nd QTR GDP was 6.2% (certainly not the plus 10% prints we used to see here, but better than a stick in the eye for sure!) Retail Sales were stronger than expected, and so was Industrial Production.. So, the Trade War isn’t hitting China very much yet…
The Global Growth currencies like the A$ liked the news from China this morning, so we have that going for us, eh?
While we’re talking about data… Last week here in the U.S., we printed the June CPI data… (consumer inflation) , which bumped a bit higher at 0.1%, which is really nothing to write home about… Core Inflation, ex-autos, was stronger by 0.3% in June, which is something I would think the Fed Heads would be wary of… But then again, this is the stupid CPI that doesn’t even look like the CPI reports of 30 years ago…
I’ve long told you dear readers that if you want to know what the “real data” is, that you should go to www.shadowstats.com and apply… John Williams of Shadow Stats does a fantabulous job of going through the Gov’t reports like CPI, and then reprinting them using the methods we, as a country, used before the 90’s… And a Quick look at his report last week, tells me that CPI is actually around 6%… Now, doesn’t that seem more realistic than the sub-2% CPI the government keeps forcing down our throats? Why, yes, Chuck it does… But you taught us many years ago that inflation is a personal thing, and one person’s inflation rate will vary with someone else’s because of the different things they buy and use…
You are correct sir! And quite frankly, I wouldn’t give CPI the time of day, but the markets still do, for some unknown reason, and so we have to deal with it too!
Hey! That was sad news last week when I heard that Ross Perot had died… You know, if you asked me on a good day when my mind was clear, and not chemo fogged, what I thought of Ross Perot, I would tell you that if Americans would have stopped to listen to the man years ago when he ran for president, we would be in much better economic and financial position these days… And that’s all I have to say about that!
Anything you can do I can do better… neener, neener, neener! That’s what the U.S. Gov’t data guys are saying to the Chinese this morning… The U.S. Data Cupboard has June Retail Sales, Industrial Production and Capacity Utilization… I expect all three of the reports to show the wear and tear that that suffered through in June… The Butler Household Index, (BHI) tells me that Retail Sales will be disappointing at best…
To recap… The price of Gold has been on a rollercoaster ride, but is up over $1,400 today. The currencies have, for the most part, been stuck in the mud, but there have been some movers out there and Chuck goes through them. The President is tub thumpin’ for a weaker dollar, and Chuck believes that he should be careful with what he wishes for… And China printed some pretty fair data prints today, so they aren’t going to hell in a hand basket, as most people have thought they would be doing…
For What It’s Worth… I had this sent to me from my friends at GATA, and when I saw the brief description of the email and it said that they had an interview with John Hathaway, I immediately clicked on and read through… So, John Hathaway is the founder of Tocqueville Gold Fund, and someone that the markets usually pay attention to when he talks… This article can be found on his website and you can get there by clicking here: http://tocqueville.com/tocqueville-gold-strategy-second-quarter-2019-investor-letter/
Or, here’s your snippet: “Gold has broken out from a massive base formed over a six-year consolidation. The breakout has left most investors on the sidelines. The powerful rally from below $1,300 to over $1,400 and a 6 year high caught most either wrong-footed (short) or flat footed (no exposure at all.) That is why we believe substantial further upside lies ahead. Gold’s allure (and the explanations for it) should grow as the price advances in the months and years ahead.
Gold has disappointed since 2012, even though it has outperformed stocks and bonds since 2000, the dawn of radical monetary experimentation. However, financial market memories are short. Gold is a big macro idea that offers substantial reward for those with the requisite patience.
During golds six years in the penalty box, the underlying forces that have made the metal a superior strategic investment over centuries have not been idle. The extrapolation of current conditions into unrealistic expectations is a dependable flaw of human nature. The capacity of physical gold and precious metals mining shares to absorb inflows has greatly diminished because of the prolonged attrition of investment interest. Once capital market flows revive, there is real potential in our opinion for parabolic upside in the metal and the shares.”
Chuck again… John Hathaway goes on to talk about how he believes the financial system, as a whole may be due for substantial change… The only reason I see for him to mention that is that he’s tying Gold to that new financial system…
Currencies today 7/15/2019 American Style: A$.7033, kiwi .6731, C$ .7673, euro 1.1277, sterling 1.2550, Swiss $.9820, European Style: rand 13.8642, krone 8.5330, SEK 9.3647, forint 288.82, zloty 3.7787, koruna 22.6905, RUB 62.97, yen 107.88, sing 1.3560, HKD 7.8263, INR 68.40, China 6.8798, peso 18.92, BRL 3.7370, Dollar Index 96.80, Oil $60.44, 10-year 2.11%, Silver $15.33, Platinum $841.72, Palladium $1,560.82, and Gold… $1,416.19
That’s it for today… And don’t forget about no Pfennig tomorrow or Wednesday. I’m pretty sure I’ll be back in the saddle on Thursday, but then one never knows! Cards took 2 of 3 from the Diamondbacks, that’s a step in the right direction… Took a ride through Missouri this past weekend… I’ve always said that Missouri is a very pretty state. With rolling hills, lots of greenspace, I just love driving through the state! Triumph takes us to the finish line today, with their song: Lay It On The Line… I hope you have a Marvelous Monday… And will Be Good To Yourself!
Chuck Butler