The U.S. Government Shutdown Ends!

Chuck Butler’s: A Pfennig For Your Thoughts  

January 23, 2018

* Kicking the can down the road… again!

* Revisiting 2004, and 2005…  

Good Day… And a Tom Terrific Tuesday to you! I’m just so-so this morning, as I had a rough night of trying to sleep more than 2 hours at a time. UGH! So, I’m getting started on the letter a little later than usual today, so I apologize up front and center for the tardiness, and what will most likely be the shortness of the letter today. The early rendition of the band Journey (pre Steve Perry) greets me this morning with their song: Of A Lifetime…   

Well, the government shutdown didn’t last too long now did it? And guess what got the government spending money we don’t have going again… Yes, just like I said would happen… The lawmakers would find a way to kick the can down the road, and promise to work on this spending impasse diligently during those next couple of weeks… The new and improved deadline is Feb 8… 

The news of a new and improved extension/ deadline didn’t rattle the cages of the currency traders, and the currencies continued to drift about aimlessly. The euro slipped a little, so did the Aussie dollar (A$), but the New Zealand dollar / kiwi and Sing dollar gained a little.. The price of Oil gained a few shekels on the day, but remains trading with a $63 handle this morning. 

Do you recall 2005? Better yet, do you recall 2004? Well, I’m going to talk about both of those years so grab a cup of Joe, and let’s get to discussing these years..   First, I can’t begin to tell you how I keep having these feelings of Deja vu. In 2004, the Fed was tightening their Fed Funds rates, just like they are now, but the rest of the world was growing too, and so the U.S. debt took front stage and the dollar got whacked all year long… 

Fast forward to 2018… The Fed, as we just discussed, is hiking rates, but the rest of the globe is growing faster than the U.S. Shoot Rudy, the Eurozone the region everyone likes to diss, has out paced the U.S. for two years running. And I reported last week that China’s GDP is back to growing. The question remains, like the rest of the year, Does the dollar get whacked the rest of this year, like it did in 2004?  

If you asked me, and I don’t know if you did or not, but since this is my letter you’re going to hear me now, and probably listen to me later… I believe that all things being equal, the dollar is in for a ride on the slippery slope…   But there’s 2005, and this could throw a spanner in the works of this dollar sell off…  

In 2005, the U.S. implemented a tax amnesty for Corporations doing business overseas to repatriate their earnings to dollars an bring them home at a reduce tax rate… This brought back Billions and propped the dollar up for the whole year, but when the tax amnesty window closed on 12/31/2005, the dollar went right back to the underlying weak trend in 2006.  

Apple has already announced that they were going to repatriate hundreds of Billions… But the dollar hardly budged… So the question here is: Will this current tax amnesty prop up the dollar like it did in 2005? Well, given what we know about 2005, there’s certainly that possibility…  And that leaves us with battling themes… 

In one corner we have the results of 2004, and in the other corner we have the results of 2005, please come to the center of the ring and shake hands before you begin this brawl.  I think this brawl will yield conflicting results for the dollar this year… While I believe the dollar will lose ground in 2018, I also see periods of dollar strength sprinkled in which astute currency buyers will see them for what they are, which is an opportunity to buy at cheaper levels! 

The price of Gold gained a whopping $2.50 yesterday, but it had all kinds of gyrations during the trading session, that had the shiny metal stronger and then weaker, and stronger, and so on, and when the dust settled on the day, Gold was $2.50 higher… Gold is up $4.70 in the early morning trading today, but we all know what can happen to those early morning gains once the “boys in the band” arrive at their desks, now don’t we?

Sometimes, the “boys in the band” just let it go, and see where it lands, so let’s hope for some of that today! 

The U.S. Data Cupboard is empty today, so no data to speak of, and like I said yesterday, we won’t see real economic data until Friday. The dollar, Gold and Oil are all trading on their own merits until then… Would somebody get ahold of the steering wheel and stop this drifting by the currencies?   

To recap… The lawmakers agreed to kick the can down the road again yesterday, to stop the government shutdown. Feb 8 is the new and improved deadline… Doofusses and clowns… no, I’m calling the lawmakers names, I’m just saying that Doofusses and clowns could have figured this all out months ago…  put your petty differences aside, and your personal agendas and do what’s right for the country. Now does that seem so difficult to do?  The currencies are drifting about aimlessly, Gold gained just $2.50 yesterday and the price of Oil inched higher.  

For What It’s Worth…  This was sent to me by dear reader, Bob, who knows how intrigued I am with the economic growth in Russia. This is about the ruble’s readiness for global expansion, and can be found here:   

Or, here’s your snippet: “The ruble can play a greater role in the former Soviet republics, according to the Central Bank of Russia. The Russian currency is seeking to compete with the US dollar in trade with the Eurasian Economic Union and CIS countries.

The country’s central bank says by 2035 the ruble can expand in the EEU, a trade and political bloc uniting Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan. It can also develop in the Commonwealth of Independent States (CIS), the bank says. 

The BRICS countries are also among the key markets for promoting the ruble. In Russian-Indian trade, the share of foreign currencies, mostly the dollar, has dropped from 96 to 80 percent. Moscow and Beijing have increased the share of ruble-yuan trade from 13 to 16 percent in the matter of a year.”  

Chuck Again…  Who’da thunk it, right? Russia, the country with all the economic sanctions placed on it, is ignoring the sanctions and keeping the pedal to the metal so to speak…   

Currencies today 1/23/18… American Style: A$ .7964, kiwi .7316, C$ .8010, euro 1.2250, sterling 1.3945, Swiss $1.0406, … European Style: rand 12.1369, krone 7.8775, SEK 8.0397, forint 252.86, zloty 3.4065, koruna 20.7378, RUB 56.56, yen 110.40, sing 1.3194, HKD 7.8175, INR 63.74, China 6.4017, peso 18.82, BRL 3.1970, Dollar Index 90.43, Oil $63.75, 1oyr 2.62%, Silver $16.96, Platinum $991.15, Palladium $1,090.45, and Gold… $1,336.60   

That’s it for today.. Here’s proof that you can’t please all the people all the time… I received about the same number of emails from those agreeing with me about being tired of the Patriots, as I did from those calling me names because I don’t like their beloved Patriots… Two Big Games will be taking place in St. Louis tonight… Our Blues will attempt to reverse that ugly loss Saturday night, and the SLU Billikens face VCU… Kathy & Chuck will meet the lady that found this beautiful location on the beach for us 6 years ago, for lunch today. Sharon has been a Pfennig reader for a number of years now, and we always enjoy meeting up with her!  And with that, Jethro Tull takes us to the finish line today with their song: Locomotive Breath…  Now go out and have a Tom Terrific Tuesday, and be good to yourself!  

Chuck Butler