What Was I Thinking, Forgetting Shrove Tuesday?

February 14, 2018…  

* Just keep digging that debt hole deeper folks… 

* Some Currencies fly under the radar… 

Good Day… And a Wonderful Wednesday to you! Happy Valentines Day, and for those of you who are Catholic, Happy Ash Wednesday. This is the first time that those two observed days fell on the same day since the 40’s, so it’s rare that we have the two days colliding like this. All my Irish brothers were on my like a cheap suit yesterday, reminding me that I forgot to talk about Shrove Tuesday… Shroves are pancakes in Ireland, and on Fat Tuesday for everyone else, it’s traditional for the Irish to fatten up on Shroves…  Valentine’s Day is, well, just another day for us…  But I’d like to think that for all those who get all Cupid-like today, that you find your true love, and live the rest of your life happily with that person!  Ok, the Pet Shop Boys greet me this morning with their song: West End Girls…  For the 80’s sound of electric music, with no drums, etc. The Pet Shop Boys weren’t too bad…   

We start our day of romance, with me being  upset with our debt situation here in the U.S.  We finally saw the color of the 4th QTR Household Debt number yesterday, and just like I suspected, it was monstrous! U.S. household debt rose for the 14th straight quarter in the final three months of 2017, pushing further into record territory as confident Americans added to mortgage loans and credit-card balances.

The Federal Reserve Bank of New York said Tuesday that household debt rose by $193 billion to $13.15 trillion last quarter, completing the fifth straight year overall balances increased. Total debt was the most on record, though the figure wasn’t adjusted for inflation or population growth. 

As a share of U.S. economic output, household debt was about 67% last quarter, barely edging up from the third quarter, but edging up nonetheless! And guess what was the main driver of the rise in Household Debt? Mortgages…  And then there was this report on Bloomberg this morning about those Mortgages, that explains how the Mortgage debt grew by so much in the 4th QTR… Here’s the Bloomberg snippet: 

Home prices jumped to all-time highs in almost two-thirds of U.S. cities in the fourth quarter as buyers battled for a record-low supply of listings.

Prices for single-family homes, which climbed 5.3 percent from a year earlier nationally, reached a peak in 64 percent of metropolitan areas measured, the National Association of Realtors said Tuesday. Of the 177 regions in the group’s survey, 15 percent had double-digit price growth, up from 11 percent in the third quarter.”   You can find the whole article, that is if you promise to put away the sharp objects first, by clicking here: https://www.bloomberg.com/news/articles/2018-02-13/home-prices-in-two-thirds-of-u-s-cities-have-hit-record-highs   

So, what did the currencies and metals do after this Debt debacle printed yesterday? They attempted to mount a rally, and even when I checked the prices in the middle of the night, yes, I was up walking the floors, the currencies were still inching higher… But something happened between the middle of the night and early this morning, because those small gains have been given back, and we’re basically trading in yesterday’s clothes in most of the currencies.  

The Indian rupee is not slipping this morning, after it was announced that PM Modi, was going to not only extend the current stimulus for the economy, but also add to it. This got the warm a fuzzy feelings for rupees going again and this morning it’s the best performing currency since yesterday. 

I’m not sure this euphoria over more stimulus is going to be long lasting, but Shoot Rudy, look what it does for the U.S. psyche every time a stimulus package is announced, like the Tax Cut Reform Bill?  So, maybe, it can, maybe it can’t, we’ll have to wait-n-see… This is where the old timer traders like me, would make a call and either go long rupees or short rupees based on their information and gut feeling…  But we’re a dying breed, folks… Look at me, I was put out to pasture a couple of years ago, and I was a young “old timer”!    

Another currency that flies low on currency traders’ radar is the S. African rand, which has had one of those rally periods that is based on a change of leadership. Every since Zuma was showed the door, the rand has been on a mission to gain back a lot of lost ground that it experienced during the corrupt Zuma reign.  Interest rates are still above those found in most parts of the world, so that also has helped the rand gain… 

But, I have to tell you front and center on the rand, to be very careful, as this has historically been a very volatile currency, but time has proven one thing, that when it’s good volatility it’s good and when it’s bad, it’s bad… 

Reminds me of a song by Grand Funk Railroad, titled: I Can Feel Him In The Morning… And the song begins with a child reciting these words: Good means to obey your mother and father, to do what the teacher says — the things right. I feel miserable when I’m … when I’m bad, I feel miserable on the inside but, on the outside, I just feel like I … I feel now.

I think … um, um … there are more people that are bad than there are good. And, um … if you’re good, you’ll live forever. And, if you’re bad, you’ll die when you die.”    There you go, a song from the 70’s that you’ve probably never heard of… But I know it! 

OK, let’s get back to work here… The New Zealand dollar / kiwi has been very stealth-like in its recovery from the sell off of a couple of weeks ago after getting close to 74-cents, it got whacked, but like I said it has been recovering and this morning it’s back to 73-cents… Kiwi is like the Tub Thumpin’ Song… I get knocked down, but I get up again, nothing’s gonna keep me down!   

I went through the price cycle of Oil yesterday, so I won’t do that again, for awhile anyway, but did want to point out that the slippage in the price of Oil hasn’t stopped and this morning it’s trading with a $58 handle…  

But Gold is picking up the slack for Oil, and has been on the rally tracks for 3 trading days in a row! And yesterday’s gain of $6.80 was without major short paper trading, as the number of contracts were only 182,500 on the day. Gold closed at $1,329.30, and is up almost $3 in the early morning trading today. 

This is the game the short Gold paper traders like to play, they allow Gold to rise in price after they have whacked it and bought at the low price after the whacking, then after Gold gets to a price high enough, they stuff the Paper trading down everyone’s throat and sell, make a quick buck, and then buy at the low price again… This has been the trading pattern for a long time folks, but from what I see, they have allowed Gold to rise higher each time, by the smallest of figures, but rise nonetheless… 

Now, if everyone that had money to invest from all their Bitcoin gains, and they bought physical Gold, they would drive the paper traders out of the market…  Good luck getting that organized, here in the West… In the East? getting that organized would be a lay-up, but not here in the West, as we still, for the most part, don’t see Gold as a store of wealth…  I do, and you probably do, as I’ve hammered this point into your heads for years now, but what about the guy across the street? Or the lady that sits next to you on the bus? I’ll bet they don’t even know how Gold is performing, much less own some!  

At your next cocktail party I challenge you to bring up the question of who among us owns Gold? Say it like this… I picked up some additional physical Gold this week, how many of you own Gold? You don’t have to tell me how much, or where you store it, I’m just interested in how many of you own Gold…   I think you’ll be surprised at how few hands go up…   I’m just saying…   

The U.S. Data Cupboard finally gets some data that people will take notice of today… January Retail Sales, which should be fair to middling, nothing to write home about or support the dollar, and then there’s the stupid CPI that everyone is pointing to as a key to interest rates going forward… Don’t they know how stupid the CPI has become, with all of its hedonic adjustments, swapping, and changing of weightings in the basket of Goods? I shake my head in disgust at these dolts that still think that CPI is something that should be paid attention to!    

To Recap…  It’s Valentine’s Day and Ash Wednesday together! But we get some data today to move the markets, so let’s see if it really does. Rupees, rand, and kiwi are in the spotlight today with their stealth-like moves higher, but for the most part the rest of the currencies are trading in the same clothes as yesterday.  Household Debt rose by a monstrous amount in the 4th QTR, and are we heading to another housing bubble?    

For What It’s Worth… It was good to see someone of “authority” call out the debt situation here in the U.S. yesterday… This can be found on the CNBC website, and it’s about National Security Director Dan Coats saying that the size and direction of the National Debt is a serious threat to the U.S.’s security… WOW!  This can be found here: https://www.cnbc.com/2018/02/13/us-security-chief-calls-national-debt-a-dire-threat.html   

Or, here’s your snippet: “Among the myriad threats to national security – North Korea, Russia and Iran among them – is one very big economic issue, National Intelligence Director Daniel Coats said Tuesday.

Speaking to the Senate Intelligence Committee, Coats said the nation’s debt, up to $20.7 trillion and likely to escalate due to recently passed fiscal measures in Congress, must be taken seriously.

“The failure to address our long-term fiscal situation has increased the national debt to over $20 trillion and growing,” he said during a broader hearing over dangers posed to the U.S. “This situation is unsustainable as I think we all know, and represents a dire threat to our economic and national security.”

The debt has increased 123 percent over the past decade as the nation sought to break free of the financial crisis and the tepid growth that followed.

Total debt is now nearly 105 percent of gross domestic product, just shy of its highest level since World War II. The most recent Congressional Budget Office projections have the trajectory leading to a debt-to-GDP ratio of 150 percent by 2047, well past the point where financial crises typically occur.”  

Chuck again… The room was filled with congressmen and women who hopefully listened to the Security Director’s warning and took it to heart, but I doubt it, they were probably making dinner plans while he was talking!  UGH!   

Currencies today 2/14/18… American Style: A$ .7861, kiwi .7308, C$ .7950, euro 1.2345, sterling 1.3854, Swiss $1.0709, … European Style: rand 11.8270, krone 7.8910, SEK 8.0396, forint 253.14, zloty 3.3775, koruna 20.5544, RUB 57.72, yen 107.36, sing 1.3197, HKD 7.8218, INR 64.10, China 6.3349, peso 18.59, BRL 3.2912, Dollar Index 89.72, Oil $58.77, 10yr 2.83%, Silver $16.56, Platinum $976.35, Palladium $991.62, and Gold… $1,332.90

That’s it for today… Another beautiful day yesterday. I had a nice conversation with my friend and former colleague, Chris Gaffney, yesterday. He had been at the Orlando Money Show, and told me that a lot of people were asking about me… It’s nice to know that you may be gone but not forgotten, eh?  Pitchers and catchers reported yesterday, and the rest of the squad will report this weekend… I’m so stoked about spring training starting! It’s a new day when it starts, a new beginning, hopes are high, and everyone has a chance to win it all! it’s always fun to watch a young Phenom make a splash in spring training and make the team…  Toad The Wet Sprocket takes us to the finish line today with their song: Walk On The Ocean…  a great 90’s song…   I hope you and your honey celebrate Valentine’s Day in grand style, and for some of us, lent begins today…  And with that, it’s time to get going!  I hope you have a Wonderful Wednesday, a Happy Valentine’s Day, Ash Wednesday, and whatever comes your way! And Be Good To Yourself!    

Chuck Butler