Russian Economy Continues To Grow, 5 Years After Sanctions!

September 9, 2019

*China cuts reserve requirement ratio 50 basis points!

* U.K. surprises with a 0.3% GDP growth print for July! 

Good Day… And a Marvelous Monday to you… Well, my beloved Cardinals have taken over 1st place in the Central Division, and widened their lead with the Cubs all weekend long, thanks the the Brewers who beat the Cubs while the Cards won their games… I sure hope we can hang onto that 4.5 game lead with 19 games remaining… Another beautifully pitched game by Cardinals pitcher Jack Flaherty, and then it was onto to other things on my Sunday… I’m all alone again, for 4 more days… We had beautiful weather on Saturday, and my beloved Missouri Tigers won their home opener, at which Alex, Andrew and Grace were in attendance… Jimmy Buffett greets me this morning with this song: Boat Drinks… “The boys in the band ordered boat drinks”…

Well, the BIG news from this weekend as far as currencies are concerned came from Russia, where after 5 years of economic sanctions, the Russian economy continues to grow! Industrial output is on the rise, the Russians believe they will have a record harvest this year, their Current Account is in surplus by $500 Billion… and… Inflation, which has always been a bugaboo for the Russians, has been falling for the past couple of years, and while it was expected to fall to 4.3% this year, it appears that it will be more likely around 3%… With deposit rates still above inflation, that means that Russia, as opposed to most countries, the U.S. included, do not have real negative rates…

The currency, the ruble, rallied big time on the news… And I can say that I’m vindicated! I remember when I first wanted to offer the ruble… And the all the pushback I received… Well, the ruble still have a quite a ways to go to reach the levels it traded at back then, but it has slowly but surely, chopped away at the currency price that the ruble fell to after the conflict in Ukraine, now 5 years ago…

Coming in second place for the currency news was China’s announcement that they would cut their Reserve Ratio percentage by 50 Basis Points (1/2%). A Reserve Ration cut is akin to an interest rate cut, as it frees up more money to use to support the economy… This news was welcomed by the Asian and Pan Asian Currencies and followed by a rally in this region’s currencies. 

And just when it appeared that the Chinese renminbi would slip off the ledge and fall into a deep dark abyss, this reserve ratio cut allowed the renminbi to rally for what seems like the first time in month of Sundays! 

it’s not all gloom and doom news coming from the U.K. these days, although I do have to say that this one caught me by surprise… U.K. GDP saw a 0.3% growth print for July, after June’s 0.0% print, there were, and I among them, economists that thought the U.K. was already in recession… 

This news was welcomed in the European region, and allowed pound sterling to rally, but left the euro stuck in the mud…  

When we last talked I told you that the price of Oil had rallied nicely and that was helping the Petrol Currencies… Well, the price of Oil continues to trade with a $56 handle this morning, and the best performing Petrol Currency is the Ruble, followed by the Canadian dollar/ loonie, and the Norwegian krone… 

Well, it was not a good week for Gold, as the price manipulators took back the conn from the physical Gold buyers, and Gold lost a good chunk of its value late in the week… Maybe this week will be better, and it’s off to a good start in the early trading today… And along with the engineered price taken down in Gold, they also showed up at the COMEX with an armful of short Silver paper trades too!

Longtime readers already know what I’m about to say, right? Buy the dips in Gold… well, that would be what I should say… But it’s not advice I’m giving, it’s merely a thought… and to that thought lies another one so let’s go there!

Longtime friend, publishing guru, and writer extraordinaire, Bill Bonner said it best the other day in his diary writings… I’ll let Bill explain, “a very simple Capital Loss Avoidance System, which proved to be very effective for long-term capital preservation: Any time you can buy the Dow for less than 5 ounces of gold, you should buy all the stocks you can. Then, when the Dow goes over 15 ounces of gold, you should sell stocks, buy gold, and sit tight until stocks fall again.

The real beauty of it is that it doesn’t require any research or any pretense of knowledge.” – Bill Bonner
Chuck again…. OK… doing some simple math is all that’s required to know when to sell stocks and buy Gold… And using my trusty calculator on the iPhone, I see that it takes more than 17 ounces of Gold to buy the DOW these days… Hmmm…..

OK, I’m not saying that you could bet the farm on the sell the DOW buy Gold trade right now… But it certainly does make for some interesting conversation, doesn’t it? And why not give it whirl? As Bill says, it has been proven to be very effective for along-term capital preservation.

Here in the U.S. things were interesting last Friday… Well, looky there…. The Jobs Jamboree was a disappointment to the dollar bugs camp out! The BLS reported that only 130,000 jobs were created in August, and of the 130,000 what the BLS didn’t report was that they had added 93,000 jobs after the surveys were completed… Of course that wasn’t as bad as the previous month when the BLS reported 160,000 jobs created, but had added 148,000 after the surveys!

Remember about a month ago, when I told you that the BLS had to eat all those extra jobs that they had added in the past year? Well, not all of them, but most of them! Which goes to prove what I’ve been saying all along… The BLS is full of their name minus the “L”…. Their numbers are worthless! But yet the markets still react to them like they were words from the Bible! I just don’t get it, do you? They’ve been proven wrong, and yet, people still listen to them… One of these days, folks, someone with far greater gray matter than I, will come up with a way to count jobs correctly… Right now, I believe the ADP folks, who are responsible for setting up payroll systems for just about every company in the country, would have a better count of who’s getting a paycheck this month, that wasn’t getting one last month!

But does anyone in the markets listen to me? HAHAHAHAHAHAHAHAHAHAHAHAHA! Now that was worth a great big-o-belly laugh!

So, stocks rallied, the dollar rallied, on Friday, and the Jobs number wasn’t even close to the 170,000 that were forecast for the month…. Now you tell me, why that was? And I’ll give you a Gold star! OK, not really… but you get what I’m trying to say… It’s preposterous! A Royal Scam (sorry Steely Dan), and so forth… I had better go on to something else before I blow my top!

The U.S. Data Cupboard this week, will be a real bummer for those looking for data that really counts…. In fact, we won’t see anything “worthy” printing until Friday, when Retail sales will print… This will be from August, which might still have some residual back-to-school spending in it, as I guess not all states go back to school as early as we do in Missouri… But other than that, it should be disappointing, when it does get around to printing on Friday. Today we will see the color of the Consumer Credit (read debt) for July… But like I said, not too much to bank on the rest of the week…

Before I head to the Big Finish today… I wanted to share with you a cartoon… Well, it’s a link to a cartoon… My fave cartoon, Pearls Before Swine, this one really hit home with me, and explains our political system with humor… So here’s the link, click it if you want to :

To Recap…  The Jobs Jamboree was a real big disappointment, but the markets didn’t care… Stranger than fiction… But China cut it’s reserve requirement ratio by 50 Basis Points, and allowed the renminbi to rally… The U.K. surprised the markets with a 0.3% growth in GDP for July, and it’s all coming up roses for Russia and the ruble… 

For What It’s Worth… Well, we all know, by now that is, that former Fed Chairman, Big Al Greenspan, was a Gold bug before he took over the reins at the Fed, and all the while he was there, nary a word about Gold was spoken by Big Al… But since he’s been retired from the Fed Reserve, he’s back to extolling the virtues of owning Gold…   And this article is Big Al talking about Gold, and it can be found here:

Or, here’s your snippet: “During a CNBC interview, former Federal Reserve Chairman Alan Greenspan said gold prices are surging because investors are looking for hard assets that they know will have value in 20 or 30 years.

Gold is up more than 21% on the year and is trading at levels not seen since 2013.

During the interview, Greenspan focused on an interesting fundamental he thinks is driving both the bond and gold markets – the aging population. He said there has been a shift in time preferences as people recognize they will likely live longer and they will need to finance those longer lives. This, he says, is increasing the demand for hard assets like gold.

“One of the reasons that the gold price is rising as fast as it is … that’s telling us essentially that people are hard resources which they know are going to have a value 20 years from now, or 30 years from now as they age, and they want to make sure they have the resources to keep themselves in place. That is a clearly fundamental force that is driving this.”

Historically, gold has served as an inflation hedge and a wealth preserver. It makes sense that investors concerned about maintaining their savings well into the future would turn to gold. This is especially true given the likelihood of increasing inflation as the Federal Reserve continues to try to prop up the economy with low interest rates and quantitative easing.”

Chuck again… Well there’s something there in the idea that Big Al is once again talking about owning Gold… Was he told to keep his trap shut about Gold while running the Fed Reserve? It sure appears to be the reason to me… 

Currencies today 9/9/19 American Style: A$.6866, kiwi .6438, C$ .7601, euro 1.1026, sterling 1.2365, Swiss $.9911, European Style: rand 14.6992, krone 8.9411, SEK 9.6620, forint 298.97, zloty 3.9335, koruna 23.4593, RUB 66.70, yen 106.99, sing 1.3795, HKD 7.8409, INR 71.64, China 7.1147, peso 19.53, BRL 4.0606, Dollar Index 98.37, Oil $56.94, 10-year 1.59%, Silver $18.18, Platinum $955.91, Palladium $1,552.53, and Gold… $1,509.74

That’s it for today… Things continue to be quite strange in the markets, to an old markets person that have been around them for 46 years… But, it is what it is… and I can’t do a thing to change it, so…   Well…  I treated myself to some great smoked chicken thighs yesterday… Son Andrew and his family (Rachel and Braden) joined me for dinner…  Good friend, Dennis Miller, is doing better these days, and he sent me a video of a guy giving his recipe for chicken thighs, and I responded to him saying “I already do that!”  So, we’re down to the proverbial cheese that binds with my beloved Cardinals… They’ve gotta keep the pedal to the metal…  The Blue Jays take us to the finish line today with their song: Maybe…. “maybe, I’m wrong” I do believe I’ve used that line many times through the years!  I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler