Oops, Did I Say That Outloud?

January 31, 2018   

* Currencies continue their rebound

* Kiwi is best performer overnight! 

Good Day… And a Wonderful Wednesday to you! Well, I went to the dermatologist yesterday about this reaction on the left side of my face that has my left eye swollen shut. The Dermatologist looked at me and I could tell that she wanted to say Ewww! But she didn’t, she calmly gave me shot and two creams and told me to call her on Thursday with a report on progress… Well one day on the creams and no progress, but I’m a patient man. (NOT!) She asked me if the swollen left eye was causing me any problems, and I told her no, what she was looking at was a shell, and I hadn’t seen anything from the left side for 8 years now. Weezer greeted me this morning with their song: Islands In The Sun      

Well, the President gave his first State of the Union Address last night, and while I would hope that what he was saying about the country’s debt path, would come to fruition, I have to say I didn’t agree with that part of the speech.  He didn’t say anything to move the markets violently in the overnight sessions, so we’ll just move along here, these are not the droids we’re looking for…    

The currencies enjoyed a continuance of the overnight sessions’ Turnaround Tuesday, and have continued to add to their gains into this morning. The New Zealand dollar is one of the best performers overnight, and has climbed above the 74-cent handle. The Dollar Index fell below the 89 handle it had traded in for about a week, and this morning is 88.96. Recall that it wasn’t that long ago that the Dollar Index was trading above 93!  

The stronger euro is doing its job in fighting inflation, and that’s evident by looking at the Eurozone CPI data that printed this morning… Eurozone CPI (consumer inflation) in January fell year-to-date to 1.3% from 1.4% the previous month.  I can tell you right here and now, that European Central Bank (ECB) President, Draghi, is not going to take this drop in CPI sitting down… Soon, he’ll make a statement in a speech or an interview and throw the euro under a bus… That’s been his M.O. for the past couple of years as he’s tried everything under the sun and moon to get inflation to rise, and while it has, its rise has not been swift or strong enough, given the monetary policies of the ECB.   

Or maybe, maybe Draghi has a relapse to his former self, when he proclaimed that the ECB would do everything and anything to support the euro…  I doubt it, and in fact I would make a shiny quarter bet that he rues the day he said that!  

So…  Yes that was U.S. Treasury Sec. Mnuchin, talking yesterday, and trying to explain what he really meant when he talked about how a weaker dollar was good for the U.S. right now…  It was as if he thought about it and then said, “Oops, did I say that out loud about the dollar?” Because he doesn’t want any part of a discussion about the dollar now…  I find all these gyrations with whether or not the U.S. administration is for a weak dollar or not, pretty interesting, and funny at times!  

The price of Oil climbed back over $64 in the past 24 hours, and while Gold did lose $1.80 yesterday, it’s up over $8 this morning, and the euro is stronger this morning, so once again we have all three anti-dollar assets moving against the dollar. Ganging up on the dollar if you will, which what it takes to get the dollar moving downward, because we’re still talking about the reserve currency of the world.  It’s losing its grip on that title, but for now, holds it proudly, and it takes a village to bring it down. 

Well, there I was reading my friend, and publishing guru, Bill Bonner, yesterday and he had some interesting things to say about the path of debt in this country… Let’s listen in to Bill who was writing his letter: Bill Bonner’s Diary that can be found here: www.bonnerandpartners.com So, with no further ado, here’s Bill!  “Starting next year, federal deficits are expected to reach over $1 trillion a year – with no emergency anywhere in sight.

So far in this century, the feds’ debt has been growing eight times faster than GDP.

Total government debt is already programmed to hit $30 trillion within 10 years… but will more likely hit $40 trillion when deficits explode in the next recession.”   

Thanks Bill, I talk a lot about how bad our country’s debt is but sometimes people need to hear from someone else!  And here’s something else that might seal the deal on the new weak dollar trend… Long ago, I learned that a country with  a Current Account deficit that was more than 2.5% of GDP, was in for a currency crisis, or major selloff… Guess where ours is now? More than 4%… Think about that and get back to me!  I’m just saying… 

I told you yesterday that today’s U.S. Data Cupboard was stocked with data but that we needed to let tomorrow be, but tomorrow is today, and so here we go..  Oh! But first I’ll tell you that the Consumer Confidence Index for January rose from 123.1 in December to 125.4 in Jan.  Crazy, folks, just plain crazy if you ask me!   

Today’s Cupboard has the ADP Employment Report for January, and The Employment Cost Index (ECI) , then some secondary data will lead us to this afternoon, when the Fed will end their two-day meeting, and after putting away all the board games and playing cards, they will tell us they left rates unchanged…  But they needed two days to make that decision, that was already made before the meeting began! 

To recap… The Fed winds up their two-day meeting today, the currencies have continued their rebound after the Monday rally by the dollar. Gold lost a whopping $1.80 yesterday but is up $8 in the early morning trading today. Chuck doesn’t agree with POTUS on the direction of debt, and brought his friend, Bill Bonner into the discussion on debt.  And U.S. Treasury Sec. Mnuchin, is trying to steer clear of his comments last week about the weak dollar…   

For What It’s Worth…. I read this yesterday and thought it to be FWIW worthy, and then Ed Steer highlighted in his letter this morning, and that confirmed my thought!  It’s an article about how the Perth Mint is going to issue a Gold Backed digital coin and how it could hurt the Gold ETF market, and can be found here: http://www.afr.com/brand/chanticleer/perth-mints-digital-gold-threatens-122bn-in-goldbacked-etfs-20180130-h0qeu9   

Or, here’s your snippet: “The Perth Mint’s release of digital gold certificates for trading, holding, and transferring physical gold could have profound consequences for the $US98 billion ($122.5 billion) in gold-backed exchange traded funds.

The technology underpinning the digital gold certificates could have other uses such as the clearing and settlement of equities.

At this stage the digitisation of gold ownership by the Perth Mint is available only to institutional investors, such as banks, which can then offer it to retail customers.”  

Chuck Again…. Everybody wants in on this cryptocurrency mania, and even a conservative institution like the Perth Mint has succumbed to the pressure of being like everybody else! UGH!   

Currencies Today 1/31/18… American Style: A$ .8107, kiwi .7405, C$ .8145, euro 1.2450, sterling 1.4155, Swiss $1.0728, … European Style: rand 11.8211, krone 7.6915, SEK 7.8435, forint 249.43, zloty 3.3318, koruna 20.3220, RUB 56.22, yen 108.78, sing 1.3075, HKD 7.8201, INR 63.57, China 6.3265, peso 18.59, BRL 3.1653, Dollar Index 88.96, Oil $64.17, 10-year 2.71%, Silver $17.21, Platinum $1,003.98, Palladium $1,061.95, and Gold… $1,346.10

That’s it for today… It was another very windy day here yesterday, but it’s supposed to be better today, YAY! I had experienced two consecutive nights of decent sleep until last night, that was another story… UGH!  Well, this is the last day of January, and it couldn’t get over fast enough for me and our Little Christine, who told me it was her 2nd least favorite month, behind November.  I guess I shouldn’t say “our” any longer since she doesn’t work for me any longer! So, from now on, I won’t say that any longer…  The Jefferson Starship takes us to the finish line today with their song (and my fave Jefferson Starship song): Miracles… And with that I hope you have a Wonderful Wednesday, and Be Good To Yourself! 

Chuck Butler