U.S. Pulls Out Of Iran Nuclear Deal…

May 9, 2018     

* David Rosenberg joins our discussion today

* Chuck’s Pfennig gets retweeted!  WOW!


Good Day… And a Wonderful Wednesday to you! I bit better again today, but still coughing violently at times. This is one nasty cold, but then with my immune system compromised, it’s probably worse for me… One more day and then I’ll be all by myself, for about 10 days.  Sunday is Mother’s Day… I miss my mom, she was my biggest fan, and supporter. Mother’s Day is a great day to hug your mom and tell her you love her… Of course that should be done often, and not just on Mother’s Day, but one day won’t cause the oceans to divide..  AC/DC greets me this morning with their song: Rock and Roll Ain’t Noise Pollution…    

The currencies traded in tight ranges yesterday, awaiting the outcome of the  President’s announcement regarding the Iran Nuclear Deal. But once it was confirmed that the U.S. was pulling out of the Iran Nuclear Deal (IND) nothing happened, there was no movement in either direction, and the tight ranges remained in place in throughout the overnight markets. 

I’ll take tight ranges at this point given the dollar’s recent rally, that was originally fueled by a short squeeze. This could very well be the turning point that I talked about last week, that will come and turn around before we can get the keys in the ignition to start up the truck we are going to use to back up and buy euros. The question is: Was this enough for the PPT? Was this enough of a rally that the Plunge Protection Team will be satisfied, and sit on their collective hands again?  

I was doing some reading yesterday, and came across some quotes on data from David Rosenberg, one of my face economists… Let’s listen in to hear what Mr. Rosenberg had to say… But first let me tell you that The job openings and labor turnover survey (JOLTS) is a survey done by the United States Bureau of Labor Statistics to help measure job vacancies… Ok, here’s David Rosenberg: “As per the JOLTS survey, if the consumer was really spending the tax cuts would retailers have slashed their hiring 25K in March, on top of a 4K decline in Mar, and by a total of 60K since last Nov.?”   I saw this quote on Twitter… 

I was also delighted yesterday when checking Twitter, that another of my fave economists, Danielle Di Martino Booth, retweeted my Pfennig the other day that was titled: Manipulations Are Everywhere, They’re Everywhere!  That means she thought highly of my humble little letter that day, and I’ll take that any day!     So, maybe, just maybe, because as Joaquin Andujar used to say his favorite word was, “you never know” that important people are beginning to notice the Pfennig and me again…  

Of course, you dear reader has always been there for me, and this is a good time to thank you for being a Pfennig Reader! 

Well, there’s an article on the Bloomberg today from a trader in the South Pacific telling his readers that they need to sell their New Zealand dollars / kiwi and buy Aussie dollars (A$). He believes that with the prices of raw materials, including the main raw material in Australia, Iron ore, on the rise that the Aussie economy will grow faster than the economy of New Zealand, and thus the RBA will beat the RBNZ to the punch with a rate hike before New Zealand comes around to hiking rates.   

I’m not so sure that’s a great idea…  I do like buying A$’s  but don’t like the idea of selling kiwi, in fact I was prepared to talk today about how the recent plunge in the price of kiwi, has opened up Pandora’s Box of opportunities to buy kiwi at cheaper prices… But then I’m just a country bumpkin in a little river town Southwest of St. Louis, Mo. and not someone that gets articles posted on Bloomberg!    

Man, I need shave…  With me hunkering down these past 3 days to deal with this nasty cold, I didn’t feel like shaving, and when I just reached up to rub my face, I realized that I needed a shave badly! 

OK, sorry for going off line there…  Remember Money Supply? I recall that every week the bond dept would come to screeching halt and shiny quarter bets were made as to what the Money Supply number would be that week. But then the Gov’t took the punch bowl away, and we would no longer have Money Supply to bet on each week.   

I tell you this because long time reader, Bob, sent me a link to a lewrockwell.com  article about Money Supply, which caught my eye. In the article Money Supply is discussed and a True Money Supply Index (TMS) was created, and then the article went further to say the following: ” if the Fed adheres to its recently stated commitment to raise interest rates two more times and shrink its balance sheet by nearly one-half trillion dollars in 2018, it will further throttle back the growth rate of TMS, possibly turning it negative. This portends a spike in market interest rates, a collapse of the housing bubble, and a deep dive in equity prices. The ensuing financial crisis and recession will be made worse by the fact that large financial institutions and are still in a weakened state. While these events cannot be precisely timed and quantified, Austrian business cycle theory teaches us that they are the inevitable outcome of the Fed’s 10-year manipulation of money and interest rates.”   

Without the TMS isn’t this the same stuff I’ve been telling you about the Fed’s rate hikes and their shrinking of their balance sheet? Nice to see the outcome that I’ve sketched out, is being added to…  Too bad we have to talk about the Fed’s misgivings and dealings…  

Well, Gold gyrated yesterday, as nearly 400,000 contracts traded in the shiny metal, that saw a miniscule 60-cent gain at the close of the day, after all of those contracts were traded…  Gold is down about 3 bucks in the early morning trading today, but what on earth is going on here with nearly 400,000 contracts traded in one day? The “boys in the band” must have been busy, eh?    

I read that China’s demand for physical Gold continues to be strong….  And Russia certainly isn’t topping off their Gold demand, but yet, Gold can’t find a bid… Don’t tell me that something isn’t strange here!   

The price of Oil recovered its earlier losses yesterday, after the U.S. announced it was pulling out of the Iran Nuclear Deal, and is trading well above the $70 handle this morning.  I was surprised at how the upward move in the price of Oil was watered down at first. The original thinking here is that Iran’s Oil production isn’t going to be significantly hurt by this U.S. decision.  But as the night went on, the price of Oil slowly ratcheted upward…  

The U.S. Data Cupboard this week so far, that is, has been a real waste of time to deal with, and going forward today and the rest of the week won’t be much better. At least today we’ll see April PPI (wholesale inflation) but don’t expect any fireworks to come of it, so let’s just move along here for these aren’t the droids we’re looking for!   

To recap…  The U.S announced that they are pulling out of the Iran Nuclear Deal, and the markets still don’t know what to make of it all… Chuck highlights a quote from David Rosenberg, and highlights his pfennig of a couple of days ago, that Danielle Di Martino Booth retweeted!  Gold adds 60-cents on a day when nearly 400,000 contracts were traded.. What’s going on with that?   

For What It’s Worth… I told you yesterday that the U.S. and China would face off at the WTO meeting in Geneva, and brother they didn’t disappoint… It was like the Thrilla in Manila all over again but instead of Ali and Frazier, it was the U.S. and China..   I found this accounting of the meeting here: https://www.zerohedge.com/news/2018-05-08/us-slams-alice-wonderland-china-trade-talks-china-claims-wto-taken-hostage

Or, here’s your snippet… “

Despite all the happy-talk of “constructive conversations” from last week’s meeting of the minds between Washington and Beijing, reports from today’s World Trade Organization meeting suggest things are not going so well.

As Bloomberg reports, Chinese and U.S. ambassadors to the WTO clashed at the regulatory body’s general council meeting in Geneva, where Beijing lashed out at President Donald Trump’s proposed tariffs on $150 billion of Chinese goods. Washington defended its measures and criticized China’s vows of retaliation.

Today’s meeting “was extraordinary in its intensity,” WTO Spokesman Keith Rockwell said. “We had the two most powerful members of the WTO weighing in on their views of each others’ policy in a way I have not seen in my many years here.”

Reuters reports that the new U.S. ambassador to the World Trade Organization, Dennis Shea, said something had gone “terribly wrong” with judges at the world body and that China’s arguments showed Beijing was living in a fantasy.

…there was a “steadily worsening rupture of trust” by the Appellate Body

“Something has gone terribly wrong in this system when those charged with adjudicating the rules are so consistently disregarding those very rules,”Beijing’s exhortations against protectionism have “entered the realm of Alice in Wonderland.”  

Chuck Again… I doubt anything good will come of these accusations by each country, but it’s good theater, eh?  

Currencies today 5/9/18… American Style: A$ .7450, kiwi .6982, C$ .7372, euro 1.1875, sterling 1.3565, Swiss $1.0012, … European Style: rand 12.5092, krone 8.10, SEK 8.7375, forint 265, zloty 3.5915, koruna 21.5114, RUB 63.15, yen 109.66, sing 1.3403, HKD 7.8497, INR 67.29, China 6.3658, peso 19.60, BRL 3.5589, Dollar Index 93.05, Oil $70.79, 10-year 3.00%, Silver $16.45, Platinum $911.22, Palladium $972.80, and Gold… $1,308.20

That’s it for today… Boy my beloved Cardinals ran into a buzz saw of pitching from the Twins, and the Cardinals left town with a sour taste in their mouths… They had better find some consistency with their offense soon, or this will be a long summer! I was thinking about their lack of hitting yesterday, and remembered my days a baseball coach, and during the days when the boys began throwing curve balls, I would tell my hitters to look for the curve, and if it wasn’t the curve, take the ball to right field. We won a lot of games and always hit the ball. I wonder if something that simple would help my Cardinals! HA!  Three Dog Night takes us to the finish line today with their song from the live at the Forum album: Easy to Be Hard…  This album was one of the first albums I ever bought, and it always takes me back to those days in my room playing this on a small record player, and turning the volume up as loud as it would go…  Ahhh, memories of youth…  And with that, I had better get this out the door, I hope you have a Wonderful Wednesday, and Be Good To Yourself! 

Chuck Butler