There’s A New Foul Smell In The Air…

February 20, 2018  

* Switching from euros to yen? Really

* Gold gets whacked again 

Good day and a Tom Terrific Tuesday to you! If you were lucky enough to be able to celebrate a 3-day Holiday weekend, good for you! I thought to myself and then even mentioned it to someone here that the weather we had last week and through the weekend reminded me of one of my fave movies: Groundhog Day, where every day was repeated.. All good things come to an end though, and the wind returned yesterday. At least it’s a warm wind now! The Olympics have been good TV at night, and Spring Training is in full mode now. YAHOO! Supertramp greets me this morning with their song: Give A Little Bit…

I’m really into the Olympic Curling… Looks to me like it would be a good “drinking game”, like botche ball, bowling, shuffle board, and some others! My stomach seems to be betting straightened out, at least so far that is, and that’s all I know from Lake Woebegone! HA! With the U.S. on Holiday yesterday, the overseas markets decided to  move things in the wrong direction…. The euro lost about ½-cent on the day, along with the Aussie dollar (A$), and Gold is getting whacked this morning, I was waiting for this to come along, by $15… No data prints, but “the boys in the band” have become so brazen that they feel they don’t need no stinkin’ data to cause a disruption in the rally of Gold! 

In the overnight markets, last night, the selling of the currencies and metals continued. Suddenly there’s an air in the markets that’s foul, to me that is… And I’m talking about this “The U.S. economy is strong, so buy dollars, because interest rates are going to rise.”  Well, in my humble country bumpkin opinion, they have some of that right… The U.S. economy isn’t strong, and interest rates might be going up, but not because of the strong economy, but rather they might be going up because we have knucklehead Fed Heads and they have a different agenda for rates than what the economy calls for!  

I just sent off my Dow Theory Letters submission for this week, and in it I dive really deep show readers that what’s really going on in the economy. I’m telling you now so you’ll listen to me later, the site is very good, with different economic/ markets writers each day, and culminating with the Aden Sisters on Friday and a classic Richard Russell letter. It does cost money, but Shoot Rudy, only the Pfennig is free! 

OK… That public service announcement was brought to you by the good folks of Aden Research!  

The new foul air that I talked about above has really taken off in a new direction, and the euro is getting sold because of that. Germany, the Eurozone’s largest economy, saw the Economic Sentiment Index, as measured by the think tank ZEW, remain positive last month, and this comment on the German economy from ZEW followed the data print.  “The latest survey results continue to show a positive outlook for the German economy. The assessment of the current economic situation is still on a very high level and the economy is expected to improve in the coming six months. Economic growth in Germany is substantially driven by the very good development of both the global economy and private consumption. Inflation expectations for Germany and the Eurozone have also started to increase.”    

And on top of all that foul air, is another smelly subject, and that is an article on Bloomberg this morning that talks about how traders have grown tired of waiting for the European Central Bank (ECB) to begin to unwind their stimulus, and have switched to buying yen to short the dollar… Recall, I was questioning how in the world yen was rallying lately? Well, here’s your answer!  What on God’s Green Earth are these traders thinking? What’s in yen that so sexy?  I just don’t see it, and I think these traders will rue the day they thought yen was a better alternative! 

A look around the currencies this morning shows that the Russian ruble, Norwegian krone,  and Brazilian real are the only currencies trading in the green this morning, and those moves aren’t exactly show stealing!  The price of Oil ratcheted upward since Friday, and that has helped these Petrol Currencies to at least hold on to Friday’s gains. 

Remember last week when I told you that in India, PM Modi had announced that stimulus measures would not only be extended but also added to and that the ruble was rallying on that news, but I doubted the rally would last because that stimulus news was not a good fundamental? Well, once again, things went my way, and the Indian ruble has given back all those knee-jerk reaction gains, and more… 

I do have something that I saw last night, that’s not in my DTL letter this week, so a bonus for free! And that is a little thing called a report that the St. Louis Fed (FRED) issued that tracks Household’s Net Worth as a percentage of Disposable Personal Income…  And guess where we are right here and now?  Well, let me set this up first… In the past 18 years we’ve been above the 600% level of Household New Worth (which is really just pure debt) and that was 2000, and 2007, and we all know what happened in those years, right?  Well.. 2018 has the largest divergence in modern history, and sits today around 680%!!!!!!    Hey! I don’t make this stuff up folks, it’s right there on The St. Louis Fed’s website!

The U.S. Data Cupboard printed the stupid Consumer Confidence Index for this month, and believe it or don’t, Consumer Confidence in the U.S. is soaring! The Index rose from an already unbelievable number 95.7 to 99.9! I know, I know, it’s all about the stock market, and its recovery last week back to the 25,000 level, but still, Confidence is soaring? Please!

In addition, the Import Price Index for January printed, and I don’t know why I’m talking about this, because the markets don’t care about it, but, Import Prices rose 1% in January… Makes sense to me, given the dollar’s 2% decline in the month.

U.S. Data this week is sparse… In fact we’ll only see some data prints on Wednesday and Thursday… And those prints will be non-market moving, so a week that the dollar has to trade on its own… Hmmm…  But from the looks of how we’re starting the week… UGH!   

Gold saw little movement yesterday while we were perusing the mattress sales, but this morning is a different story, as I said above, the shiny metal is getting whacked in the early morning trading today…  $1,350 seems to be the line in the sand that “the boys in the band” have drawn on Gold’s price, because every time Gold rises to that level, it gets brought back down, and not by a small amount, just like today… UGH! One of these days, Alice… To The Moon!  But until “that day” we have to deal with these turkeys that trade short Gold paper trades.    

To Recap….  A 3-day Holiday weekend, kept the markets from moving yesterday, but in the overnight markets, dollar buying is back, and only the Petrol Currencies have carved out some small gains this morning… The euro couldn’t even gain a shekel or two after a good ZEW report this morning, and Chuck points out that traders are shifting to buying yen to short dollars… Hmmm, Chuck thinks they’ll rue the day they did that! 

For What It’s Worth…  This is pretty interesting in that it’s Lawrence Kotlikoff speaking, he’s the professor that believes that instead of the $112 Trillion of Unfunded Liabilities that on the books of the U.S. that the number is greater than $200 Trillion…  You can find the article on Forbes, here:   

Or, here’s your snippet: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.” ~ Article I, Section 9, Clause 7, The US Constitution.

On July 26, 2016, the Office of the Inspector General (OIG) issued a report “Army General Fund Adjustments Not Adequately Documented or Supported”. The report indicates that for fiscal year 2015 the Army failed to provide adequate support for $6.5 trillion in journal voucher adjustments. According to the GAO’s Comptroller General, “Journal vouchers are summary-level accounting adjustments made when balances between systems cannot be reconciled. Often these journal vouchers are unsupported, meaning they lack supporting documentation to justify the adjustment or are not tied to specific accounting transactions…. For an auditor, journal vouchers are a red flag for transactions not being captured, reported, or summarized correctly.”

Chuck Again… the 60’s song by Joe South is always popping into my head when I read stuff like this… The games people play…   

Currencies today 2/20/18… American Style: A$ .7883, kiwi .7362, C$ .7938, euro 1.2337, sterling 1.3973, Swiss $1.0698, … European Style: rand 11.7554, krone 7.8377, SEK 8.0808, forint 252.79, zloty 3.36, koruna 20.5277, RUB 56.40, yen 107.10, sing 1.3189, HKD 7.8239, INR 64.86, China 6.3429, peso 18.64, BRL 3.23, Dollar Index 89.64, Oil $61.92, 10yr 2.90%, Silver $16.58, Platinum $1,004.68, Palladium $1,032.10 and Gold… $1,341.20  

That’s it for today…  Well, the marks on the left side of my face still haven’t completely healed, and I go back to the dermatologist this morning to see what she has to say about that! I stayed up way too late last night to watch the U.S. men’s hockey team win and advance… It’s fun watching the young kids with all their speed playing for the U.S. The Russians have ex-NHL players and KHL players, so it’s the same as it used to be our college players VS men… UGH!  Don Henley takes us to the finish line today with his song: The Heart of the Matter…   We got to see Don Henley at the Fabulous Fox year years ago, and we were in the 4th row… A great show for sure!  And with that, it’s time to go! I hope you have a Tom Terrific Tuesday and Be Good To Yourself!  

Chuck Butler