Rocktober 10, 2018
* Currencies rally then fall back in the overnight markets
* Russia wants to bypass the dollar in Trade with Europe…
Good Day… And a Wonderful Wednesday to you… Unfortunately, Mother Nature is seeing to it that the Gulf Coast Region, Florida panhandle, is going to have a rough time of Wednesday, as yet another hurricane will make landfall in the U.S. this year. I hope everyone has listened to the authorities and evacuated by now… When I went to bed last night, the Yankees were losing to the Red Sox, which would mean that the Red Sox eliminated the Yankees from the playoffs… A quick check this morning confirms that to be the case. The band, Yes, greets me this morning with their song: Owner of a Lonely Heart…
Yesterday, I told you about how this week was a dead air week for the U.S. Data Cupboard, and with that in mind, the dollar was sent out to sea without any support, and it didn’t fare well… No data had the dollar bugs climbing back into the wallboards, and the currencies kicking a little sand in the face of the dollar bugs. The euro climbed back to above 1.15 and the Aussie dollar (A$) gained almost 1 full cent on the day, after posting a 7-year low on Monday… That to me looks akin to having go too far one way, only to have it regain too much the other way…
And lo and behold, the overnight markets saw to it that nothing got ahead of itself, as the dollar was bought in the overnight markets, thus causing the currencies to give back about 1/2 of their gains on Tuesday. I’m really surprised, no wait, nothing surprises me any longer, so let’s say this is very interesting in that the overnight markets are comprised of the Asian markets, where China is the big dog and has made claim after claim about how the dollar standard should be replaced, and then Asian markets hand the baton to Europe, where they have been busy building a payments system to bypass using the dollar, and yet, in those two markets the dollar rallies… Interesting, eh?
The Reserve Bank of Australia (RBA) has kept rates on hold for a long time now, and quite frankly, I thought by the middle of this year, (which was 4 months ago) that we would have seen a rate hike from the RBA… But NOOOOOOOO! Come on RBA, you’ve got a housing bubble in Sydney… Do you need to see what happened in the U.S. 10 years ago when the Central Bank didn’t believe in housing bubbles and didn’t hike rates to stop the bubble from expanding more? I would think that every Central Bank Gov. in all the Central Banks around the world, get to view a documentary on how a Central Bank does NOT deal with a housing bubble, and it features the U.S. and the Fed…
Last week I talked about how the U.S current debt was nearing $22 Trillion… But the figure that scares the bejeebers out of me more is the Unfunded Liabilities figure right now of more than $115 Trillion (don’t forget that professor Lawrence Kotlikoff says the U.S. owes more than $200 Trillion!) and my, yours, and your cousin Eddie’s portion of that debt is a whopping $943,500… So, when you have a minute, please fire off a check to the U.S. Gov’t for $945,000 (to take into account the change in the number between now and when the check is received!) and then put a sign in your yard, telling your neighbors (really guilting them into doing the same) that you paid your portion of our Gov’t’s unfunded Liabilities…
Wait, What? You don’t have that kind of spare change in your change jar? Well, that’s Ok, because neither does most people have that kind of money… The Bill Gates, George Soros, Jeff Bezos, of the world could do it… And here’s where I always shut those load mouth folks that think that all you have to do is tax the rich more to pay off the debt… There aren’t enough of them to make up that kind of money folks… It’s that simple… When will people ever learn that you don’t reduce debt by adding to it?
The Brazilian real continues to push the currency appreciation envelope, and it’s about time! The real has been bruised and battered and even got to a spot where I referred to it as “a basket case”… And I don’t say that willy nilly all the time… There are things that fall under the heading “basket case”, which means they are pretty bad, and have no signs of reversal… The U.S. Debt situation is a pretty bad “basket case”, so you see what sets the bar… But every day now for the last couple of weeks, the real has been on a mission to remove that title of being a “basket case”.
With the Hurricane in the Gulf, I would think that it would disrupt the Oil production in the region, and that could have an affect on the price of Oil as we go through the next few days. The price of Oil has a $74 handle hung on it this morning, and if things go the way I suspect them to go, we could be looking at a $76 or $77 handle by the end of the week…
That would give the Petrol Currencies that include, the ruble, krone, loonie and real, a boost they so desperately need as none of these currencies have every really recovered from the fall of the price of Oil from $100 to the lows of a couple of years ago of $27… I told you yesterday that I keep reading stuff that talks about the price of Oil returning to $80… Well, it’s not that far of leap from where it is today, so maybe… you just never know, eh?
Gold fought through 230,000 contracts to gain a whopping $1.60 yesterday… The devastation to the price of Gold had been done, and hopefully completed, but the sellers had to take a break, they’re going to get carpel tunnel syndrome writing all those contracts!
With the U.S. Data Cupboard on a break this week, you get a break as the letter will be shorter! HA!
To Recap… The currencies rebounded on Tuesday, only to see 1/2 of their gains given back in the overnight markets, which Chuck thinks is very interesting that they would want to own dollars, given what’s been said and done so far… The Brazilian real continues to rally… And the Price of Gold rallied by a whopping $1.60 on Tuesday… UGH!
For What It’s Worth… Well, I have another article from the RT this morning, hmm… there’s more to that than you think! Anyway, this one is about how Russia is planning to use its currency to trade with Europe and can be found here: https://www.rt.com/business/440675-russia-ditching-dollar-euro/
Or, here’s your snippet: “The Russian Ministry of Finance said on Monday it may shift to the use of local currencies with European trade partners. The move will be part of the so-called de-dollarization of the Russian economy.
“As we can see the main opportunity which can be realized in the short and medium term is the transition to settlements in national currencies with our European counterparts, including settlements involving the euro, and including for the delivery of our energy commodities,” Deputy Finance Minister Vladimir Kolychev told reporters.
According to him, such a decision would benefit Russia’s European partners in several ways.
“This would, on one hand, strengthen the euro’s position as a reserve currency, and on the other hand provide a sort of security for such [energy] deliveries if the U.S. were to make some decisions affecting U.S. dollar settlements for our banks and our large energy companies,” Kolychev said.
He suggested that transition to euro payments would be simpler because the euro is already a reserve currency, and it would be logical to expect interest in the idea from European companies.”
Chuck Again… Remember it’s my belief that we did this to ourselves… and that’s all I’m going to say about that now, because I don’t need my blood pressure rising so early in the morning!
Currencies today 10/10/18.. American Style: A$ .7092, kiwi .6460, C$ .7715, euro 1.1499, sterling 1.3152, Swiss $1.0072, European Style: rand 14.6245, krone 8.2133, SEK 9.1148, forint 282.76, zloty 3.7480, koruna 22.4550, RUB 66.55, yen 113.20, sing 1.3832, HKD 7.8367, INR 74.29, China 6.9198, peso 19.07, BRL 3.7541, Dollar Index 95.69, Oil $74.77, 10-year 3.23%, Silver $14.33, Platinum $821.40, Palladium $1,074.80, and Gold… $1,186.02
That’s it for today… So, it’s Dodgers and Brewers in the NL, and Red Sox and Astros in the AL.. I was talking to a friend last week that’s younger than me, and he didn’t know that before 1969, there was just one Pennant winner in each league that then went to play in the World Series, and it would be over by now… Now 10 teams qualify for the playoffs that take the whole month of Rocktober to finish, and the World Series is played in 40 degree weather… Except if the Brewers play the Astros, they both had domed stadiums! Sorry of the baseball talk, but that’s me… The Gin Blossoms take us to the finish line today with their song: Allison Road… My good friends, Rick and Laura have a daughter Allison, that I still to this day call her Allison Road… She always giggles at that.. Alrighty then, I hope you have a Wonderful Wednesday, and please remember to Be Good To Yourself!
Chuck Butler