Political Uncertainty Deep Sixes Euros And Kiwi!

Chuck Butler’s: A Pfennig For Your thoughts 

September 25, 2017


* Japan to announce another stimulus package?

* # of short paper trades in Gold & Silver Increases!

* Petrol Currencies get on the rally bus! 


Good day… And a Marvelous Monday to you… I bounced back to life quicker than normal after my infusion last week, so that was a good thing… I got to watch my two grandsons play soccer (well, it kind of looks like soccer anyway). Both Braden and Everett play on the same team. Saturday, we went to St. Louis University, where they were celebrating their Homecoming… the “tailgate” was sparsely attended, but the men’s soccer game looked pretty packed! And Sunday, was the White Coat ceremony at St. Louis University. Alex received his white “doctor’s coat”, as the professional phase of his education to be a Physical Therapist, begins now. He’s actually a senior at SLU, but his program is a 6-year program where he’ll come out with a doctorate in Physical Therapy… The Ceremony was long, but I did take a short video of him getting his white coat put on him, and sent it to his siblings for them to see their “little brother”… Chris Issac greets me today with his song: Wicked Game… Love the guitar work in that song!

Well, I thought a lot about how hard I was on the Fed last Thursday, this weekend, and have decided that… It was all deserved! No taking back anything from me, no siree Bob! My weekly letter on the Dow Theory Letters (www.dowtheoryletters.com) this week will be about how the Fed keeps saying the Economy is strong and robust, and I keep saying… “I’m from Missouri, show me!” And believe me, I don’t hold back any punches in that letter either!

The Currencies and metals gained some last ground back on Friday, but the moves were small with the euro only gaining about 1/3rd of a cent, and Gold gaining about $6… The dollar bugs are still scampering about the floor, having come out of the floorboards when the lights were turned off, and giving us that old, “The dollar is the best currency in the world” stuff.. And I just point to the scoreboard… For what currency is worth more than the dollar? Come on quick, it’s a layup! Of course it’s the euro! And of course the precious metals! But, they don’t look, nor do they listen, thsee dollar bugs are a pesky lot… 

But that was Friday… In the overnight markets last night and into this morning’s European session, the dollar has won back that lost ground on Friday, and continues to reap the rewards of having a “perceived” hawkish Central Bank. I’m really at wit’s end with this “hawkish Fed talk”, but there are times you have to just swallow your pride, put your tail between your legs and go to the back of the room and keep your head down as to not gain any attention.  And it looks like this is one of those times for me!  

It appears that both the euro and kiwi are taking on water this morning from the old “uncertainty bug”…  The uncertainty comes from elections held in Germany and New Zealand this past weekend, where the party that won, is going to have to deal with a coalition government, since the winning party wasn’t able to gain a majority seats in the government. 

In Germany, Chancellor Angela Merkel won again, but her party was knocked to their knees and so the negotiations for a coalition government will begin, and that brings about uncertainty for the Eurozone’s largest economy, and that is not a good thing for the euro. 

In New Zealand, the incumbent National Party won 58 of the 120 government seats, and the opposition party, the Labor Party won 45 of the seats, so now both parties are going to have to woo the New Zealand First Party, to form a ruling government. So, here in New Zealand, the uncertainty is even greater than it is in Germany, and this process could take a coupe of weeks!  And just when kiwi was getting some legs under it… Hmmm…  

I had to laugh out loud when I read that Japan’s PM is rumored to be ready to announce yet another stimulus package for Japan… Crazy, isn’t it? I mean they’ve been doing stimulus packages of some sort since the mid 90’s. I know, because, well, I was writing the Pfennig back then and thought at that time that they were a little off their collective rockers in Japan…   But then that was just the beginning of a long love relationship between whatever Gov’t is in, and stimulus packages in Japan… But, yet the yen continues to hold ground below 1.20?  I don’t get it folks… And that’s saying a lot for me to say/ admit, eh?   

The Petrol Currencies are, for the most part, the currencies with something to say this morning VS the dollar, with gains that aren’t great, but gains nonetheless. The Price of Oil, which started to rise late last week, and continued throughout the overnight session, and sits at $50.60 this morning, which has given the Russian ruble, Norwegian krone and Brazilian real a reason to believe they can gain VS the dollar even when the Big Dog euro, is not participating. 

One Petrol Currency not participating with its kissin’ cousins is the Canadian loonie. I told you all last week that the loonie had to go back and fill in the gaps that it skipped through on its way to .8250, after the rate hike a couple of weeks ago, and that I think the 81-cent handle is more where the loonie should be trading right now… And I guess loonie traders think so too! 

Well, “the boys in the band” took a pause for the cause on Friday, and there were no major selloffs during the day or in the after hours markets for Gold.  The shiny metal has slipped back below $1,300 on all the volume from last week.  In Ed Steer’s Saturday letter each week he puts in a graph of the concentration of short paper trades and how many days of production of each metal it would take to fill all those short paper trades…

And for the longest time Silver’s number of days of production needed to fill the short paper trades would be 180 days… But this last weekend I noticed that the number has grown to near 200 days!   And Gold, which stood at around 85-90 days, has moved to 100 days!   And the thing that just really piles on here is the fact that Platinum and Palladium make the list and have more days of production needed than Gold!  

That’s shameful, that we allow this to continue and not only continue but get even larger! And that’s where I’m going to end this discussion on the short paper trades because I’m just not ready to go all Rambo on them this morning! 

I read this weekend (thanks Bob!) that China now has more Billionaires than the U.S….  Now you may be thinking , so what? Well, think of it this way… The wealth of the people in the nation, keeps the nation wealthy…  And when China’s # of B’s flew past the U.S. it passed the U.S. like it was a statue on the side of the road! China has 609 B’s, and the U.S. has 552 B’s…  I just happen to think that shows how far China has come in the past two decades…  

The U.S. Data Cupboard was a BIG dud last week, but gets back into the swing of things this week with some real economic prints like: Durable and Capital Goods Orders, and Personal Income and Spending… There are some housing prints, and other not-s0-important prints this week. As far as Durable Goods, which printed a negative -6.8% in July, I would expect that the number would be a positive this month, but coming from a -6.8% that’s not saying much!  

To recap…. The currencies and metals rebounded on Friday, but have seen, for the most part, a reversal of fortune in the overnight markets, with the dollar getting bought. The euro and kiwi are seeing selling based on uncertainty from the elections held in Germany and New Zealand this past weekend. Both countries will have to negotiate a coalition party to rule and there’s uncertainty in that, and the markets don’t like uncertainty. And Japan is ready to announce yet another stimulus package! 

Where are you Rick Monday? That’s all I’m asking/ saying about that!

For what It’s Worth… Thanks to longtime reader, Bob, for this article on just how much Gold Russia is hording these days… The article can be found here:http://russiafeed.com/how-big-russias-gold-reserves-are/

Or, here’s your snippet: “The amount of monetary gold in Russia’s international reserves increased by 0.9 percent in August and totaled 56.1 million ounces (1,744.9 tonnes) as of September 1, the Bank of Russia reported on Wednesday.

The value of gold in reserves in August increased by 4.94 percent up to $73.5 billion as of September 1, 2017, while the share of gold in international reserves increased to 17.34 percent from 16.74 percent a month before, according to the report.” 

Chuck again… that’s it on the story there, it was short-n-sweet! Here’s the number, deal with it, was what it basically was saying!  

Currencies today 9/25/17… American Style: .7960, kiwi .7282, C$ .8112, euro 1.1887, sterling 1.3514, Swiss $ .9736, … European Style: rand 13.2536, krone 7.8195, SEK 8.0230, forint 260.94, zloty 3.5892, koruna 21.8977, RUB 57.50, yen 112.02, sing 1.35, HKD 7.8128, INR 65.18, China 6.5959, peso 17.77, BRL 3.1294, Dollar Index 92.45, Oil $50.60, 10-year 2.23%, Silver $16.99, Platinum $937.92, Palladium $922.80, and Gold…. $1,298.30   

That’s it for today…  Another dagger for the Cardinals as they dropped a pair of games in Pittsburgh over the weekend… UGH! The come home how to play the last 7 games of the regular season at Busch Stadium! They have to win all 7 to have a chance to make the playoffs… This will mostly likely mark the second consecutive year of not making the playoffs…  And that’s a reflection of management, the GM down to the manager. The ownership may be wearing blinders, but the fans know it in their heat of hearts that this is not a “Cardinals” team…  Kathy, Chuck and Alex went to lunch yesterday after his White Coat Ceremony”. We tried to stay around St. Louis University, but parking was a major problem…  But we finally found a place to go!  There sure were a lot of very proud parents in the Church yesterday for the ceremony, of which we were part of for sure!  Mitch Ryder and the Detroit Wheels take us to the finish line today with their song: Jenny Take a Ride…   I hope you have a Marvelous Monday, and Be Good To Yourself!