What The Heck Is Going On Here?

May 29, 2018  

* euro falls through the trap door 

Oil drops on Saudi/ Russian agreement


Good Day… And a Tom Terrific Tuesday to you! What a great holiday weekend for yours truly! And I topped it off last night with dinner at the newest BBQ spot in the area! Sunday, we celebrated Braden’s 7th Birthday, and a good time was had by all! I spent a lot of time outside this past weekend, working on the patio, getting it ready for the B-day celebration, and I’ve found that I have to do things in spurts now… Take a breather under the umbrella, and then get back at it…  Oh well, I get the jobs done, it just takes me longer! I don’t want anyone to think that I didn’t stop and think about what the weekend was all about…  Edwin Starr greets me this morning with his song: Twenty Five Miles…   

Well, I’m minus another tooth, but… it came out without any problems during or after, so I had that going for me! The poor euro had another tooth extracted from it on Friday, and no longer trades with a 1.17 handle.. no wait… i5 no longer trades with a 1.16 handle either! …  The Italian election has really taken the bat out of the hands of the euro, And even with the Italian President doing his bit to bring everyone together, and stop the “leave the euro talk” the markets aren’t buying it… 

Many, years ago now, I used to call the countries of Spain, Italy, Portugal, and Greece… Club Med…  They were always doing something to throw their respective legacy currencies under a bus… And unfortunately, some things never change, eh?  Italy may have the 3rd largest economy in the Eurozone, but the have the 2nd largest debt, falling in behind Greece! 

The Big Dog is being chained to the porch, no more chasing the dollar down the street, for now that is…  And where is European Central Bank (ECB)  President, Mario Draghi, during this drop in the euro? He of the famous line, ” the ECB is prepared to do whatever it takes to preserve the euro” I guess not this time, eh, Mario?  Central Bankers, what good are they if they can’t, at least, attempt to calm markets in times like this?  I remember the “whatever it takes” speech by Draghi, and how the markets reacted to it, hanging a bid on the euro, and driving the price upward for a day or two.. 

I’ll bet a dollar to a Krispy Kreme that the ECB is not a bunch of happy campers right now, with another headache being caused by a member of the Club Med countries, this time Italy…  I can hear some of them singing, nobody knows the trouble I’ve seen, nobody knows the sorrow, why on earth did we ever agree to let Club Med in to our Union, I wish we could go back and start all over again…  I do believe I can hear them singing!

Talk about the bottom falling out of an asset’s price…  Have you seen the price drop in Oil? Last week, the price of Oil was sailing on clear and smooth waters, and the price was inching higher and higher… And then came a summit with Saudi Arabia and Russia… And all hell broke loose! You see, the Saudis and Russians agreed to delay an end of their production cuts, which on its own would have boosted the price of Oil, but wait, there’s more! These two countries then issued a memo that said other members of OPEC could begin to boost production now, if the high price of Oil was hurting their exports…  Wait! What?   

Oh, you heard me sweetheart… The OPEC Oil producers received an Get Of Jail Free Card! And with that thought filtering through the markets, traders began to mark down the price of Oil because of the fear of over supply once again.    I was listening to my iPod outside the other day, and the great song: Spinning Wheel by Blood Sweat and Tears came on… What goes up, must come down… and that got me thinking of the price of Oil… 

Well, Gold lost $4 in trading yesterday, with the U.S. on Holiday, there was very little in the way of trading going on, and the contracts traded were less than 75,00 And last Friday’s trading in the shiny metal netted a loss of less than $3 bucks…  But the price of Gold is above $1,300 this morning, proving so far, that last week’s dip below $1,300 proved to be an excellent buying opportunity… But my guess is we’ll se more opportunities, because the trading in the anti-dollar assets, seems to be very strange right now, as if an invisible hand is guiding them… 

I don’t like what’s going on right now, for none of it seems to be of the cloth that drives asset prices, it seems to be an invisible hand pushing the buttons right now. This is when I say to batten down the hatches, and only come out to look for bargain basement prices… For as quickly as the currency and metals and Oil rallies changed direction, they can change direction again, and head back up without any notice!  

There is one currency though that, so far that is, attempts to defy the gravitational pull of the other currencies, and that is the Aussie dollar (A$)…  The A$ is holding onto the 75-cent handle as if its life depended on it! The A$’s kissin cousin across the Tasman, kiwi, isn’t so defiant but it does receive protection as it trades in the shadow of its larger cousin… 

I truly thought that by now the Reserve Bank of New Zealand (RBNZ) would be beating the drum for higher rates in New Zealand… But nary a word from the RBNZ these days about anything, much less interest rate direction! Maybe the RBNZ is waiting for the Reserve Bank of Australia (RBA) to hike first… Hmmm… I certainly hope not… That’s not the bold Central bank that used to be run by Don Brash!  Brash would not have felt that waiting for the RBA was the thing to do, if moving interest rates were in the best interest of New Zealand!   One of these days, I’ll tell you a story about Don Brash the former Gov. of the RBNZ, but not today, I’m running late!    

Well, in my sophomoric style… I told you so! This past week, The Bank of England’s (BOE) Gov. Mark Carney, admitted to a crowd that the rate hike, previously mentioned, will be delayed, because of the problems with BREXIT negotiations.  Pound sterling got Whacked! and rightly so, for those traders that ran the price of sterling upward thinking that Carney was going to hike rates, should have their trader card revoked!  

The U.S. Data Cupboard on Friday had some more bad news for the U.S. economy… Durable Goods Orders for April fell -1.7%…  Capital Goods Orders rose 1.0% but the previous month was revised downward at -0.9%, which means the last two months are a wash!  Just chalk these two up as two more pieces of proof that the U.S. economy is not strong, so take that Fed Heads!    

Speaking of Fed Heads, St. Louis Fed President, James Bullard is scheduled to speak today… Bullard is always good for a quote or two, so I’ll be following that today…    

And to add to all this madness going on, today we’ll see the latest Consumer Confidence report…  I shake my head in disbelief and disgust that Consumers don’t see what’s going on here… 

To recap… the currencies are getting whacked, the price of Oil is getting whacked and Gold is getting sold daily.. What the hell is going on here? The U.S. economy proves over and over again that it’s not the strong economy that the Fed Heads keep telling us about, but the dollar remains in the driver’s seat… (great song BTW!)    

For What It’s Worth…  There I was reading my local newspaper, drinking my coffee one morning last week, and this article came jumping out of the pages to smack me in the face!  This is about the Wells Fargo CEO talking about how things are going to change after all the scandals at his bank this past year, and can be found here: http://www.stltoday.com/business/columns/david-nicklaus/wells-fargo-ceo-emphasizes-honesty-in-wake-of-scandals/article_c9a05cda-49db-57de-8a03-014c51aeb9be.html#utm_source=stltoday.com&utm_campaign=BusinessNewsletter&utm_medium=email&utm_content=A12874506A3B5805DDED6C95AF30D7173DF7C77A    

Or, here’s your snippet: “Wells Fargo admitted in 2016 that its employees, driven by aggressive sales quotas, had opened 2 million unauthorized accounts for customers. It was fined $185 million and then other problems surfaced, including auto-loan borrowers who paid for unnecessary insurance and mortgage customers who were charged excessive fees.
After those abuses resulted in a $1 billion fine, a new scandal surfaced this month over altered business-customer documents.

Weary customers might think the giant bank has an endless stream of improprieties waiting to bubble up. Sloan maintains that, counterintuitively, the latest disclosure shows that his reforms are working.

“We’re encouraging team members, if they see something they’re uncomfortable with, to raise their hands,” he said, and employees in the business-banking unit did just that.”    

Chuck Again…  Well, that’s all fine a good, until there’s another scandal, eh? And can I remind you that no one went to jail for these improprieties…

Currencies today 5/29/18… American Style: A$ .7518, kiwi .6920, C$ .7672, euro 1.1548, sterling 1.3240, Swiss $.9973, … European Style: rand 12.66, krone 8.2875, SEK 8.9396, forint 277.27, zloty 3.7364, koruna 22.4065, RUB 62.26, yen 108.90, sing 1.3470, HKD 7.8463, INR 67.85, China 6.39, peso 19.72, BRL 3.6813, Dollar Index 94.84, Oil $66.87, 10-year 2.86%, Silver $16.43, Platinum $905.54, Palladium $980.28, and Gold… $1,307.28   

That’s it for today… Sorry for the tardiness, I ate something last night that didn’t agree with me in the middle of the night… UGH! it sure tasted good, so I’m not sure what the problem was, but I spent a few hours in the middle of the night awake… UGH!  My beloved Cardinals can’t deal with prosperity… After a good weekend in Pittsburgh, they laid an egg yesterday in Milwaukee! the Stanley Cup Finals began last night, it’s difficult for me to fathom that an expansion team could win the Cup… My Blues have been here for 51 years and are no closer to winning a Cup than I am to running a marathon!  AC/DC takes us to the finish line today with their song: Hells Bells… My high school biology teacher used to say that… “hells bells”…  And with that thought, it’s time to go! I hope you have a Tom Terrific Tuesday, and Be Good To Yourself!    

Chuck Butler