Trade War Is On! Just Ask Canada, Mexico and Europe!

June 4, 2018  

* Dollar’s rally gets stopped cold  

* Turkey & Indian Central Banks meet this week… 

Good Day… And a Marvelous Monday to you! And welcome to June! Pfennig tradition calls for this on the first day of writing in June…  June is busting out all over, all over the meadow and the hill, buds are busting out of bushes and the romping river pushes every little wheel that sits behind a mill…  Ahhh, here we go into the hazy, lazy days of summer… School’s out, school’s out, someone let the monkeys out! I guess the kids don’t sing that any longer…   The Moody Blues greet me this morning with their song: Ride My Seesaw… 

The currencies traded in tight ranges on Friday, but that was before all hell broke loose with the new Trade War here for good… No more on/ off for the Trade War, it’s ON, just ask Canada, Mexico and the Eurozone, for they were not spared in President Trump’s attempt to even the trading playing field.. While that’s all fine and good, what will it do to the economy that’s already teetering on a recession to beat the band?  That’s the $64 question folks… If history teaches us anything about Trade Wars, what can be expected for the economy is not a good thing… 

I watched a snippet of an old radio address by President Reagan from back in the day, about trade…  Here’s the link to the video… If President Reagan was your bag, baby, then maybe you might think, Shoot Rudy, I’m not wasting my time with that! And you would be missing some very important words spoken so, many years ago…    

So, the currencies got going late on Friday, and then picked up the ball in the overnight markets last night. The euro has recovered back to the 1.17 handle, and the Aussie dollar (A$) has traded past the 76-cent handle!  The price of Oil keeps slipping lower and lower, as the shale producers pound their collective chests and talk about increasing supplies.  And Gold just can’t find a strong bid these days, which makes me think that something is about to happen here… a busting out of this price range to a higher level…  Of course I could be all wet on that one, but it’s just what I’m feeling as I watch what’s going on here with Gold…  

I’m loaded for bear this morning and that bear will be the Jobs Report from the BLS last Friday… Come on, let’s go bear hunting!

Oh, so the BLS said that 223,000 jobs were created in May, and the markets went bananas over the size of the number of jobs created… But wait! I have something that usually takes the punch bowl away from the party the markets are having over the BLS report… Of the 223,000 jobs the BLS said were created, and “created” being the operative word, here… 215,000 of them were added to the surveys by the BLS with a hedonic adjustment! My oh my, what a tangled web the BLS weaves each month… My good friend Dennis Miller sent me a link to a story on The Burning Platform website… And here’s what they had to say about the labor reports from the BLS…

“A record 95.9 Million Americans are no longer in the labor force”…

(I had to change a few words, due to the harshness of the words the writer used, although I agreed with them 100%! I’ve long told you that the BLS report was nothing but made up numbers, and that the ADP Employment Report would be a gauge of what’s going on month to month… But even then, the ADP report doesn’t get into the Labor Participation Report… So, let’s go back to The Burning Platform and hear some more from them… )

“Don’t believe the BLS BS. Scanning the Household data proves it is BS. If the economy was booming the number of people not in the labor force would be declining, as discouraged people came back into the work force Since September 2017 the unemployment rate has supposedly fallen from 4.2% to 3.8%. Sounds awesome. But it’s BS. Just the facts ma’am:

New jobs added since September 2017 – 1.15 million
Number of people who have left the labor force since September 2017 – 1.435 million

The participation rate has dropped back to 62.7%. The average number of new jobs added over the last eight months is a pitiful 144,000 per month, while 179,000 per month have left the labor force.

The reported unemployment rate of 3.8% is pure propaganda, not supported by the reality on the ground. Millions of Americans don’t leave the labor force when jobs are plentiful and the economy is humming along.” – The Burning Platform “

OK, I’m back! What a lovely way to spend my Friday, going over the BLS reports and seeing the real data… NOT! But it’s what I do! Oh, and there was still plenty of time for me head off to my regular drinking hole for Friday evening! I don’t let too many things interfere with that! HA! 

The Emerging Markets have been in chaos since the Fed began hiking interest rates, and the chaos, while in the beginning was muted, has really picked up some steam in recent days. So Turkey and India will have Central Bank meeting  this week, in which the Emerging Markets players will be wishin’ and hopin and thinkin’ and prayin’ that these two or at least one of them will hike interest rates this week.  The Emerging Markets Central Banks have had to dance around higher U.S. interest rates, and so now is their opportunity to go toe to toe with the Fed… At least for a couple of weeks until the Fed meets this month where rates are on the docket to be raised once again.   

It just happens that Turkey and India are at the front of the line that contains the countries making overtures about changing the terms of trade and using their own domestic currencies… I dig deep into this problem in this week’s Dow Theory Letters (

The U.S. Data Cupboard will be pretty light on real economic data this week, but not today, as the only print today will be Factory Orders for April… The dollar will get its direction from the fallout from the Trade tariffs announced last Friday, and that shouldn’t be good times for the dollar…   Oh, and in a sign of the times… Sears announced the closing of another 72 of their stores…  But no one except employees of Sears seems to notice or care… strange, eh?

The Big Question will be whether or not Gold begins to participate like it should during times of unknowns, and geopolitical saber rattling… Like I said above, I get the feeling that Gold is getting ready for a big breakout on the upside… My spider sense is tingling… Will it be bang on?  

To recap… The dollar rally appears to be ending, as the Trade War heated up on Friday, and caused some dollar selling. Chuck believes that more of that will be coming as the data cupboard this week is void of much that could help the dollar. Chuck goes all DEFCON 4 on the BLS and their jobs report, that printed last week, you won’t want to miss that!  And Gold still cant seem to find a good strong bid…  Something seems to holding the price of Gold back, I wonder what it could be?…    HA! As if, I didn’t know already!   

For What it’s Worth… Well, the meeting between President Trump and the leader of N. Korea has been like the Trade War was, on / off and rinse repeat… But it now appears to be ON… this is Zerohedge’s take on this announcement and can be found here:  

Or, here’s your snippet: “Following a visit to the White House by North Korean envoy, Kim Yong Chol, President Trump announced that the previously canceled summit with Kim Jong Un was back on schedule, and would take place in Singapore on June 12.

Trump said that a letter hand delivered by Former North Korean spy chief Kim Yong Chol was “very nice,” and “very interesting,” but that it would be inappropriate to release its contents. The President also said that it would be a big mistake if the summit did not take place, and that while sanctions were discussed during Friday’s meeting, North Korea’s human rights abuses were not brought up.

While nothing will be signed at the June 12 summit, Trump did say that North Korea says it will denuclearize, and that the meeting will be one step in the process.”    

Chuck again…  I have to question this pre-statement, that nothing will be signed at the meeting… Then why have the face to face meeting?  I’m confused on its meaning…  Oh well, I’ve never been a Political person, no reason to start now!  HA!    

Currencies today 6/4/18… American Style: A$ .7655, kiwi .7040, C$ .7750, euro 1.1725, sterling 1.3386, Swiss $1.0160, … European Style: rand 12.5611, krone 8.1095, SEK 8.7470, forint 272.05, zloty 3.6562, koruna 21.9645, RUB 62.16, yen 109.50, sing 1.3343, HKD 7.8462, INR 67.05, China 6.4190, peso 19.90, BRL 3.7636, Dollar Index 93.79, Oil $65.40, 10-year 2.91%, Silver $16.40, Platinum $905.29, Palladium $1,006.13, and Gold… $1,298.60    

That’s it for today… What a great weekend we had here in the St. Louis area, with warm, breezy days, and umbrella blue skies on Sunday… We also almost witnessed a no-hitter by St. Louis Cardinals pitcher Michael Wacha, who went 8 full innings before giving up his first hit of the game. This was his second attempt at a no-hitter, he had gone 8 2/3rds without a hit in 2013… (his rookie year!) Sunday was definitely a day to be outside here in the Midwest.. Friday was Dawn’s hubby’s birthday, so Happy Birthday Jerry! I hope your day was grand!  I think my good friend, Dennis Miller is going to make a trip here on Wednesday for a lunch… That sounds like fun for me!  The Rev. Al Green takes us to the finish line today with his song: Love And Happiness…  And that’s all I have today, thanks for reading the Pfennig, now go out and make this a Marvelous Monday and don’t forget to Be Good To Yourself!   

Chuck Butler