Starting Over…

Chuck Butler’s A Pfennig For Your Thoughts

July 5, 2017

  • Dollar crushes everything on Monday!
  • N. Korea fires a successful ICBM!
  • Russia & China get real friendly…
  • It’s a Jobs Jamboree week!

Good day… And a Wonderful Wednesday to you! As Gomer Pyle used to say… Surprise, Surprise, Surprise! I know I said I wouldn’t be writing today, but… A change in plans, and here I am at my writing desk this morning! Boy, I’ve received a lot of unsubscribe emails in the past week, since I returned to the email version… I wonder what I did or said that has caused that? Oh well, I can only do what I can do… As Popeye said, “I am what I am, and that’s all that I am!” The Buckinghams greet me this morning with their song: Don’t You Care…

Well, the dollar day on Monday really took some mighty swings at the currencies and metals… But then I told you that we would probably see that happen, given that the ISM (manufacturing Index) was going to show a rise in the index number that would further fuel the dollar’s gains on the day…  But that could all begin get to reversed today, as we have another round of negative economic data scheduled for the U.S. today. And, the Fed’s FOMC Meeting Minutes print this afternoon…  More on that in the Data Cupboard roundup later..

The BIG News yesterday was that N. Korea has successfully fired off an intercontinental ballistic missile (ICBM), which means that they could reach the U.S…. The U.N. has banned these types of missile tests, but apparently N. Korea doesn’t think that applies to them. Now the question is: How will the U.S. react to this news?

My initial reaction to hearing that news, was “I bet Gold has finally turned the corner and begun to head higher”…  But I was wrong… (mark that down!)  Gold only gained $3.50 yesterday, and that’s only because “da boyz” as Ed Steer calls the short Gold paper traders, were on holiday…

In fact, Ed Steer ( had this to say about Gold trading… “There should be no doubt in anyone’s mind that a major bottom is being placed in gold and silver right now — and that’s especially true in silver. It’s still not known whether we’ve seen the last of the engineered price declines in these two precious metals, but if there is any room left to the downside, it would certainly be in gold.

With the bottom in, or mostly in, our eyes should now be focused on what happens during the inevitable rally that will follow. As Ted (Butler) said, how high we go.” – Ed Steer

Alrighty then… Well, like I said above, the currencies have lost that loving feeling that they had last week, and now have to generate the interest in them again. As I’ve said a couple of times now in the past couple of weeks…  We can expect to see days like we did on Monday as we go along, no currency trend is a ONE-WAY Street… And that’s an important thing to remember, as we go along.  So, let’s say you see a currency and want to buy it to further diversify your investment portfolio, but it’s going higher nearly every day, and you don’t want to buy into strength, (smart!) all you have to do is wait for a “dollar day” and then buy into weakness (smart again!)

The other BIG News this weekend came from the Russia/ China summit… And longtime reader, Bob, sent me a link to an article about the Chinese / Russian summit that was held last weekend, and from that meeting, President Putin and President Xi signed a Treaty of Friendliness and Cooperation between the two countries which will see further and deeper integration of Russia and China’s work towards mutual global problem solving.

President Putin later spoke of his optimism for what the One Belt–One Road Chinese economic, commercial and infrastructure project can offer for both countries. And President Xi spoke of the strategic partnership between the two countries as an “historic choice” .

Folks… I really do believe that China and Russia are looking to form an alliance that will scare the bejeebers out of anyone looking to mess with either one of them… Do you hear that Congress? Recall, you just put into place additional sanctions on Russia…

Now, if these two would gang up on N. Korea and have them shutdown their missile program that would work for me!

Speaking of China… I received a note from friend Sean Hyman on the 4th of July, and since Sean is a technical / charts guru, I thought I had better open that right away! And in his note, was a link to an article that talked about China opening up its bond market… Here’s the gist of what it said… “Access to the market will be restricted to “qualified investors” including central banks and sovereign wealth funds, but also commercial banks, insurers, brokerage firms and investment funds, according to the PBOC.

China’s debt market is the third largest in the world, with a cumulative value of about $10 trillion according to Bloomberg news agency.
However, this booming market has been virtually out of reach for foreign investors, who currently hold only a small portion of the bonds issued in China — less than 1.5 percent according to Bloomberg estimates.

China has moved gradually toward opening its capital markets.
In 2014, a trading link between the Hong Kong and Shanghai stock exchanges was introduced, and another was started in December 2016 between Hong Kong and Shenzhen, China’s other exchange.
The links give foreigners some access to China-listed shares, while also allowing Chinese firms to buy Hong Kong-traded stocks.

The bond move is the latest in a series of liberalization pledges from China, which has regularly been hit by complaints from foreign companies and trading partners about access to its markets.”

So.. How about that? Another step for the Chinese to gain a wider distribution of their currency… Folks, I’ve been writing about China’s progress in opening up their markets, gaining a wider distribution for their currency, and their massive accumulation of Gold for a long time now… I do believe that they are getting closer and closer to a float for their currency, backed by some percentage of Gold, and then the push to end the reserve currency status for the dollar really begins…

I don’t think I’ll go into individual currency performances this morning, because I told you the dollar took some mighty swings on Monday, all the currencies are much lower than they were last week, and leave it at that, besides you can check the currencies, metals, commodities out in the currency roundup in about 5 minutes of reading time!

The U.S. Data Cupboard is stocked with data prints this Holiday shortened week…  And it all comes together on Friday, as we will see what the BLS has up their sleeve when the Jobs Jamboree takes place.. Right now, the forecasts are showing that the so-called experts are calling for an increase in jobs for May of 177,000…  In one of my recent articles for the Dow Theory Letters website, I highlighted the fact that if we took out the hedonic adjustment of the Birth / Death Model from the surveys that are taken to determine the job growth/ loss each month, that we would be seeing some very ugly monthly jobs reports…  So, in essence, all the hullabaloo about jobs growth, is just that… because there’s really nothing behind all that hollering and dancing in the streets..

But that’s Friday… Today’s Data Cupboard has the May Factory Orders, which is what I consider to be a piece of what I call “real economic data”… And Factory Orders for May are expected to print even more negative than April’s negative -0.2%…  Durable & Capital Goods Orders, Factory Orders, Industrial Production, Capital Utilization, Retail Sales, the Labor Participation, and the ISM are “real economic data”… And like I said on Monday, the ISM is the only piece of “real economic data” that’s been a bright spot. So what’s up with that? How can manufacturing be a bright spot when Industrial Production and Factory Orders are in the red? Beats me, folks… Just another stranger than fiction item for us to deal with!

I told you Monday that I got a lot of response from my Tweet on Friday about the drop in Personal Spending…  And then I came across this that really helped me stick out my chest, and say… yes, I said that!

Have I told you lately, that I love you… No wait! Have I told you lately that… I truly enjoy the writings of Grant Williams and his Things That Go Hmmmm, letter that arrives in my email box every other Sunday? This past Sunday had a quote in it that I thought just supported what I’ve been telling you for some time now … That the U.S. Consumer has tapped out! This was taken from iNet and is investment analyst, Jim Chanos speaking on this very thing…

“(iNet Economics): We’re seeing weak consumer spending numbers in both auto and housing, which are big drivers of the economy. With unemployment so low and the expansion where it is, these figures should be better than they are. There are portents of even worse things when you look at state and federal tax receipts, which are down, and other leading indicators.

It could all just be a soft spot in an ongoing expansion — time will tell. But the narrative we were told is that animal spirits would take us to the next level of economic activity. That clearly is not happening in mid-2017. We’re 8 years into an economic expansion, and economists say that the modern U.S. economy has never gone more than 10 years without a recession. So as recoveries go we are well into it.

People have bought their cars and remodeled their houses and done a lot of things that one does in an economic recovery. I think incremental spending [spending based on increased disposable income] is going to be harder and harder to come by as time goes on.” – Jim Chanos

You tell ’em Jim! Because that’s what I’ve been doing for some time now! And the U.S. economic train chugs along to Recessionville…

To recap… Monday’s dollar days was very impressive and the dollar took some mighty swings at the currencies, metals, bonds and other commodities. Yesterday, while we shot of fireworks, N. Korea had  fireworks of their own as they successfully fired off a ICBM that could reach the U.S. Chuck thought that would be the thing to turn Gold around, but NOOOOOOO! Russia and China sign agreements to further trade and other things, and China opens up their bond market! Just another step to gaining a wider distribution of their currency folks…

For What It’s Worth…  On Monday I told you that the world’s debt was $217 Trillion, and today I’m going to tell you something else about that amount of debt… You can find it here in the RT:

Or, here’s your snippet: ”

Global debt levels have surged to a record $217 trillion in the first quarter of the year. This is 327 percent of the world’s annual economic output (GDP), reports the Institute of International Finance (IIF).

The surging debt was driven by emerging economies, which have increased borrowing by $3 trillion to $56 trillion. This amounts to 218 percent of their combined economic output, five percentage points greater year on year

The biggest contributor was China with $2 trillion. In June, the International Monetary Fund urged Beijing to tackle its ballooning debt, describing it as unusually high for a developing economy. Some estimates say China’s debt stands at 260 percent of its GDP.

Advanced economies have cut debt levels by $2 trillion over the past year. However, the US is approaching $20 trillion, almost 10 percent of global debt.

“Rising debt may I should say “is – and will continue to  create headwinds for long-term growth and eventually I should say “soon will” pose risks for financial stability,” the report said.”

Chuck again… I like how the report talked about China’s debt, and kind of flies over the U.S. Debt… Interesting don’t you think?

Currencies today 7/6/17… American Style: A$ .7590, kiwi .7265, C$ .7717, euro 1.1320, sterling 1.2910, Swiss $.9676, … European Style: rand 13.4420, krone 8.41, SEK 8.5140, forint 272.44, zloty 3.7508, koruna 23.0505, RUB 59.28, yen 113.65, sing 1.3834, HKD 7.8070, INR 64.82, China 6.7991, peso 18.32, BRL 3.3029, Dollar Index 96.44, Oil $46.21, 10-year 2.35%, Silver $15.91, Platinum $904.27, Palladium $847.24, and Gold… $1,218.40

That’s it for today… Well, a very nice weekend that spilled over to Monday, at Bull Shoals Lake in Northern Arkansas, came to an end yesterday. I was beat when I got home! Our 4th of July celebration was non-existent, as I worked on crossword puzzles… Are we really getting that old, I asked myself? My beloved Cardinals can’t seem to find a real winning streak, as they continue to blow games they should have won! UGH! Sorry about the tardiness of Monday’s letter… There are still some kinks we have to work out before this runs as smoothly as it did before… Foghat takes us to the finish line today with their song: Take It, Or Leave it… And with that I hope you have a Wonderful Wednesday, and Be Good To Yourself!

Chuck Butler