Surprise, Surprise, Surprise!

July 16, 2019

* Eurozone Trade Surplus widens…  Uh-Oh! 

* Chuck Thinks this summer reminds him of 2007… 

Good Day… And a Tom Terrific Tuesday to you! I know that I said that I would be out today, but I got the word yesterday, that I needed show up until after noon… So… here I am… But when I looked at the currencies this morning, I saw little to no movement in them once again, and Gold saw little movement either, so now I’m wondering, why I decided to write today anyway! HA! There’s always something in the markets that we can choose to talk about… I was telling my wife yesterday that the 5th Trucking Company in the U.S. had folded, this year… And then I said, I guess we wouldn’t be able to confirm that given all the semi trucks we saw on the highway this weekend! Elvis Presley greets me this morning with his love ballad: Are You Lonesome tonight? Do you miss me tonight? Are you sorry we drifted apart?

Whenever I hear a song that Elvis is singing, I’m reminded of my good friend Frank Weiler, who passed away several years ago at too young of an age… Frank had a Twin sister, and the two of them loved Elvis, and owned every album he had made… Sorry for the trip down memory lane, but it’s what was on my mind, when hearing that song…

Another thing on my mind this morning is what the heck is going on with the dollar? 3 years ago, when the Fed began its rate hike cycle, the dollar rallied and kept rallying with every subsequent rate hike through those 3 years… And it should have given the old fundamental of the country with the highest paying yield gets the attention of everyone else… But now it appears that the rate hike cycle is over (The Fed said a couple of months ago that they were going to hold at the current rate) , and could very well begin to see a downward movement in rates… Not just a one-and done… And still the dollar holds the conn… Well, it doesn’t make sense to me, maybe it makes sense to the PPTers that keep the dollar well bid… I’m just saying…

Remember about a month ago, when I talked about purchasing power parity, and how people still use the Big Mac Index? Well, the latest Big Mac Index shows the dollar is very overvalued… But, when will it begin to correct with a weakening of the dollar? The dollar’s well bid status, certainly didn’t get any love from the data yesterday… because there wasn’t any… But that will change today with Retail Sales, Industrial Production and Capacity Utilization all on the docket today… 

But sometimes these things take much longer to develop than what we anticipate or even want… It’s really interesting to me that is, that the data continues to disappoint to the downside, We get news like the 5th Trucking Company this year, just folded… and other things that should be pushing the dollar downward, just are materializing… yet… that is…. Yes, even old Chuck, has gotten caught up in “wanting immediate movement” just like the youngsters…

So, like I said above, the currencies & metals didn’t see much action yesterday. Maybe today, we’ll see the upward movement we’re anticipating! The stock jockeys sure have taken the Powell speeches last week to heart, and are pushing the envelope once again… they are trading the way they should (except their way overpriced already!), but the currencies and metals are being held back…

In the Eurozone this morning, the euro is getting sold on the news that the Business Sentiment Index as measured by the think tank ZEW, had dropped, a noticeable amount… The euro, being the Big Dog, has been held back from getting off the porch to chase the dollar down the street, and the dollar is out there on the street taunting the Big Dog… sticking it’s tongue out, and sticking its thumbs in its ears and spreading its fingers out and waving them at the Big Dog, and saying, “You can’t beat me, you can’t touch me, I’m better than you are”…  

President Trump doesn’t like this taunting, for he wants the dollar cheaper…  And here’s something that will really light a fire under the President… The Eurozone’s Trade Balance increased in the latest print… Uh-Oh!  

Well, it does appear that the problems with getting a BREXIT deal done, is what’s weighing heavily on pound sterling… I say that because, this morning the U.K. printed an increase in wages that taken along with the low unemployment should bring about inflation, and that would bring about higher interest rates…  But pound sterling traders let that data slide off its back like water off a duck’s back, and kept the pressure on pound sterling. 

Gold lost $2 yesterday, as it appears that the roller coaster ride had come to an end…  A very long time ago, I told you, dear readers, that I was taught to “follow the money”  when it comes to investing… And when applied to Gold you would think that all the demand for physical Gold would lead Gold higher and higher and higher and higher… And maybe eventually it will… But until then, all this Central Bank buying isn’t pushing Gold like I think it should. 

But when I think about it a little more, maybe the Central Bank demand is offsetting the short Gold paper trades, and that’s the reason the Central Bank buying seems to be putting the price of Gold on mute…  In that case, I’m sure glad there’s physical demand to offset those damn paper trades!

The U.S. Data Cupboard today, has the aforementioned data prints of Retail Sales, Industrial Production and Capacity Utilization… Retail Sales, as I said yesterday will most likely be disappointing at best, as the BHI has indicated as such…  I’m looking for Industrial Production and Capacity Utilization to also be disappointing. These reports will all be for June, so recent stuff, which I like! 

There are a handful of Fed Heads that will be out on the speaking circuit today, led by Fed Chairman Powell, who will be in Paris to talk… I think it’s time for the Fed Heads to sing in concert with one another and talk about how great a rate cut will be next week! 

And before I head to the Big Finish today, I wanted to say that I’ve been getting a strange feeling lately that this summer reminds me of the summer of 2007…  We all remember that one right?  Could we be in a situation where the Fed is going to cut rates way too late?  Remember, I had told you last year that by December the Fed would be reversing their rate hike cycle, and so it has taken them 7 months to get around to doing so…  Too little, too late…   I’m just saying… 

Old friend, Jim Rogers had this to say about the resemblance to 2007… “In 2007, Iceland went bankrupt but nobody noticed or cared. Then Ireland went bankrupt. Then a few weeks later, Bear Sterns went bankrupt and a few weeks later Northern Rock, the English Bank, went bankrupt. Then eventually Lehman brothers went bankrupt and by then, everybody knew there was a problem. But it had been there for over a year and it has always worked that way. It starts when we are not watching. It has already started. Latvia collapsed. Argentina, Venezuela, Turkey, some banks in India are having problems, Indonesia has started having problems. It has not made to evening news yet.” – Jim Rogers

To recap…  the Currencies and metals continued to wallow around in the mud, with the Big Dog seeing the most damage, and the other currencies fairing OK, on the day… Gold lost $2 on the day, so the roller coaster ride has come to an end…  Chuck noticed that the Eurozone Trade Balance (positive)  has gotten stronger, and that’s bound to tick off President Trump…  And Brexit sure has both thumbs holding down pound sterling these days, as even good data doesn’t allow pound sterling to rally… 

For What It’s Worth…  Well, debt is everywhere folks… But since we’re U.S. citizens we give more emphasis on the U.S. Debt, which is completely out of control… but this is a report on Global debt… and it can be found here:

Or, here’s your snippet: “

According to the latest IIF Global Debt Monitor released today, debt around the globe hit $246 trillion in Q1 2019, rising by $3 trillion in the quarter, and outpacing the rate of growth of the global economy as total debt/GDP rose to 320%.

This was the second-highest dollar number on record after the first three months of 2018, though debt was higher in 2016 and 2017 as a share of world GDP. Total debt was broken down as follows:
• Households: 60% of GDP
• Non-financial corporates: 91% of GDP
• Government 87% of GDP
• Financial Corporations: 81% of GDP

And while the developed world has some more to go before regaining the prior all time leverage high, with borrowing led by the U.S. federal government and by global non-financial business, total debt in emerging markets hit a new all time high, thanks almost entirely to China, which has been on such a debt issuance rampage, it would make even Uncle Sam blush, as Chinese corporations owed the equivalent of more than 155% of GDP in March, or nearly $21 trillion, up from about 100% of GDP, or $5 trillion, two decades ago.”

Chuck again…  I read last night that the U.S. Budget Office is forecasting a deficit for 2019 of more than $1 Trillion… I told you when the tax cut went into place last year that this would happen, and I also told you that eventually we’ll see $2 Trillion annual deficits!

Currencies today 7/16/19 American Style: A$.7027, kiwi .6720, C$ .7661, euro 1.1222, sterling 1.2427, Swiss $.9860, European Style: rand 13.8655, krone 8.5565, SEK 9.3952, forint 289.96, zloty 3.7933, koruna 22.7913, RUB 62.78, yen 107.98, sing 1.3576, HKD 7.8174, INR 68.59, China 6.8748, peso 18.95, BRL 3.7425, Dollar Index 97.24, Oil $59.67, 10-year 2.10%, Silver $15.41, Platinum $844.42, Palladium $1,556.64, and Gold … $1,414.17

That’s it for today…  A surprise Pfennig for you today, how about that? Cardinals won last night, making it 3 in a row for them… Got to keep winning!  Grandson, Braden was here yesterday… He likes to play chess now… I would have thought that he was too young to understand how to play chess, but I would have been wrong! Just shows to go you that I’m not in tune with the young kids!  I guess I’m just getting too old… UGH!  Good news from good friend Dennis Miller, his treatments ended and he’s slowing, and I mean turtle slow, feeling better… Small steps… I know all about them!   Cat Stevens takes us to the finish line today with his song: If You Want To Sing Out…    I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler