U.S. Government Is Shutdown!

Chuck Butler’s: A Pfennig For Your Thoughts 

January 22, 2018

* Gold can’t take advantage of Gov’t shutdown!

* ECB & BOJ meet this week

Good Day… And a Marvelous Monday to you! Well, winter is over here, thank goodness, and we can get back to warmer days with sun filled skies, and all that goes with spring in the deep south! The U.S. government is in shutdown right now, but has worked throughout the weekend to end this impasse that they’ve arrived at, and so, they’ll take another vote today to see if anyone has changed their minds…  The Gov’t has “emergency funds” to keep things going for now, but when you’re fighting a war you certainly don’t want to not make your payroll to the military!   Uriah Heep greets me this morning with their song: Stealin’   

There are some great stories about the American revolution and how the U.S. military almost quit, because they weren’t being paid, but along came some funding from France of all places, who would have loved to see the Brits lose, and well, you know the rest of the story…  

Well, what else is going on besides all this stuff with the lawmakers not being able to come to an agreement? Nothing comes close to the magnitude of a U.S. government shutdown folks… With the government having it tentacles extended in just about everything these days, it stands to reason that the shutdown will affect just about everything… 

One of the assets that has NOT taken advantage of this government shutdown is Gold… I would think, that Gold would be high stepping it to the Sly Stone song, I want take you higher! But Gold was only able to add $4.20 on Friday, and is up a couple bucks in the early trading today.  The “boys in the band” have made certain that Gold doesn’t get away from them, as another 224,000 contracts traded in Gold on Friday.  I hope I’m still on the right side of the daisies on the day that the “boys in the band” become irrelevant…  I long to see that day!  

The currencies have drifted about since our Tub Thumpin’ Thursday.  At times trading gets a little choppy, and the rest of the time there’s just no conviction to go one way or another.  I would have thought that Friday’s disappointing Consumer Confidence number (94.4 VS 95.9 previous month and 98 forecast) would have been enough to send the dollar to the woodshed for a little while… But come on Chuck! Think about it, you’re not only stuck in the 60’s with your music, you’re stuck in the thought that fundamentals rule currency moves… UGH! You’re right, other Chuck, thanks for reminding me! 

The European Central Bank (ECB) meets this Thursday. This could be the meeting that spins the Eurozone monetary policy out of business… But I doubt it will… Everything seems to be moving along without any major obstacles in the Eurozone right now, and I don’t see the ECB wanting to upset that applecart.  But keep in mind that ECB President Mario Draghi, will speak after the rate announcement, and he has a tendency to throw the euro under the proverbial bus whenever the single unit begins to look strong again.  

Speaking of Central Bank meetings, the Bank of Japan (BOJ) will meet tomorrow night… Wouldn’t that be something if the BOJ joined the U.S. and Eurozone in Quantitative Tapering?  (selling the bonds they’ve been buying for years now)  Nah… I don’t see that happening, and with BOJ Gov. Kuroda probably nearing the end of his reign, that could mean the next BOJ GOV could be a “bond buyer”, and that would be that! 

The Japanese yen has recently come back a bit in value VS the dollar, as it hangs onto the coat tails of the euro. But I’m just not a fan of the yen, too much debt, too many demographics problems, and a current Gov’t that believes they haven’t done enough to help the economy, keeps me thinking that yen is just a day away from falling from grace…  That’s only 24 hours away! HA!  But seriously, how does this currency remain relevant with all those problems I just talked about, and more that I didn’t talk about? Only the Shadow Knows!  

After a couple of weeks of increasing its value almost daily, the price of Oil has been stuck in the mud for the last week. After rising above $64 on supply problems the price of Oil has fallen back to the $63 handle and can’t seem to find a bid.  Over the weekend, Russia and our friends at OPEC (NOT!) had a joint announcement that their alliance will go through 2018, which means that the production cuts will remain in place for now. 

With the price of Oil stuck in the mud, the Petrol Currencies from Russia, Brazil, Norway, and Canada have not been able to add to their gains either. The Norwegian krone has gyrated the most because of its association with the euro, but other than the krone, the rest of the Petrol Currencies are non-movers, once again.  Start and stop, start and stop, rinse and repeat, is the norm for the Petrol Currencies these days.

 I already talked about the one and only economic print from the U.S Data Cupboard on Friday above, so, all that’s left to do is to look at the data prints we’ll see this week!  And looking at the schedule, I really don’t see anything that will move the markets until Friday, when Durable and Capital Goods Orders will print.  And with the Gov’t shutdown going on, the other scheduled data might not be timely this week… 

Before I head to the Big Finish I’ve got a couple of thoughts for you today…  The first being how significant this week is historically… Well, as we start the week, let me remind you that there are some historical things that happened within the next week 45 years ago… 45 years ago this week: Within a period of 72 hours, Nixon was re-inaugurated, LBJ died, Roe v Wade was decided, and the Vietnam settlement was announced. Bet you didn’t know that!   

And Second…For all of you out there, that despise Paul Krugman the way I do, you’ll really get a kick out this website that my former colleague, and friend, the metals guru, Tim Smith, sent me last week… It’s called Contra-Krugman! And these two guys, Tom and Bob, take issue with just about everything that comes out of Paul Krugman’s mouth. ( I usually just pick out the Big Ones he makes) You should Google: Contra-Krugman, and check it out!

I was looking at an email that was sent to me from the Contra-Krugman guys yesterday and came across some data that blew my mind! Jumpin’ Jehosephat! (when was the last time you heard that phrase?) But in a recent survey, consumers were asked what percentage of a dollar earned by corporations is kept by them after expenses, and taxes? The average for the total answers was 36%… Boy is that far off base, so far, even a righty could pick him off! The answer is… drum roll please… 7.9%, and only 6.9% when you take out the financials… Walmart’s is only 2.1%…

Oh, the things that are going to mount up to bring down the financial system… I’m just saying…   

To recap… The U.S. Gov’t is in shutdown mode, but lawmakers have worked all weekend to come to an agreement, but seem to be at an impasse… They will take another vote today to see if they can end this shutdown. In the meantime, Chuck wonders why Gold isn’t high stepping it with the Gov’t shutdown, bringing about so many things that could upset the economic applecart. The ECB and BOJ meet this week, and Chuck doesn’t expect much out of either of these two Central Banks. And Chuck reminisces about this week 45 years ago…    

For What It’s Worth…  i found this on Ed Steer’s Saturday letter, and thought it to be FWIW. It’s about Latin American Gold and how it’s being brought to the U.S. and can be found here: www.miamiherald.com/news/local/community/miami-dade/article194187699.html  

Or, here’s your snippet: “When Juan Granda ventured into Peru’s Amazon rainforest to score another illicit load of gold, he boasted that he felt like legendary Colombian drug lord Pablo Escobar.

“I’m like Pablo coming … to get the coke,” he told two co-workers in a text message in 2014.

A 36-year-old Florida State University graduate who once sold subprime loans, Granda was no cartel kingpin. But his offhand comparison was apt: Gold has become the secret ingredient in the criminal alchemy of Latin American narco-traffickers who make billions turning cocaine into clean cash by exporting the metal to Miami.

The previous year, Granda’s employer, NTR Metals, a South Florida precious-metals trading company, had bought nearly $1 billion worth of Peruvian gold supplied by narcos – and Granda and NTR needed more.

The United States depends on Latin American gold to feed ravenous demand from its jewelry, bullion and electronics industries. The amount of gold going through Miami every year is equal to roughly 2 percent of the market value of the vast U.S. stockpile in Fort Knox.”  

Chuck again… pretty neat article from the Miami Herald, hope you have time to read it..   

Currencies today 1/22/2018… American Style: A$ .8016, kiwi .7308, C$ .8022, euro 1.2261, sterling 1.3905, Swiss $ 1.0410, … European Style: rand 12.0310, krone 7.8476, SEK 8.0218, forint 252.32, zloty 3.40, koruna 20.7077, RUB 56.67, yen 110.69, sing 1.3187, HKD 7.8176, INR 63.76, China 6.4006, peso 18.57, BRL 3.1951, Dollar Index 90.42, Oil $63.32, 10yr 2.65%, Silver $17.06, Platinum $1,108, Palladium $1,105.69, and Gold… $1,332.90

That’s it for today…  Well, the Super Bowl teams were decided yesterday… I don’t think I’ll even watch the game, for I’m tired of the Patriots…  Not that I’m a Jaguars fan, but I know a lot of people who are… only 24 days until pitchers and catchers report, and a little over a month until the first spring training game! YAHOO! Our Blues got thumped on Saturday… UGH!  I’m glad that game didn’t get broadcast down here! My good friend, Duane, and I think the Blues play to their competition…  The Yardbirds take us to the finish line today with their song: For Your Love… I hope you have a Marvelous Monday, and Be Good To Yourself!  

Chuck Butler