What’s With All The Saber Rattling?

May 20, 2019 

* Dollar bugs continue to hold the conn on the currencies & metals!

* Blues Win! Blues Win! Blues Win! 

Good Day… And a Marvelous Monday! What a great weekend for our Blues, after having game 3 stolen from them by the NHL, the Blues bounced back to win the next two, and go up 3-2 in the best of 7 series, with game 6 on home ice… Friday night was a real nail biter, but yesterday, the Blues dominated the Sharks on their way to 5-0 win in San Jose! So, the Blues are one win away from facing the Bruins in the Stanley Cup Finals… Pretty amazing considering where this team was in December! My beloved Cardinals limp home from an awful road trip last week… We will celebrate grandson, Braden’s birthday this coming weekend, and find out the gender of his baby sibling to be! I was outside all day on Saturday and Sunday this past weekend, and I was plum tired come Sunday night! Live greets me this morning with their song: All Over You…

Well, the dollar bugs continued to take liberties with the currencies and metals on Friday, with the Dollar Index moving as high as 97.97 to end the day, starting the day on Thursday at 97.59… With the euro so heavily weighted in the Index this price move indicates the euro lost a lot of ground on Friday, which it did… And proves once again that as long a currency is in a strong trend, bad data doesn’t upset it, and good data from other countries don’t do it any harm, and the foreign currency with the good data doesn’t get any love… A year or so, I wrote that I had read that Traders’ sentiment toward the euro was changing. At that time, it was looking as if the European Central Bank (ECB) was going to be able to remove all stimulus, including negative deposit rates, very soon… And at that time I said that it appeared the strong dollar trend was over… But just as soon as sentiment changed to favorable to the euro, it changed back… And the euro and other currencies haven’t been able to shake the confidence of the dollar bugs…

Remember last week, when I told you that Eurozone 1st QTR GDP had proved resilient and didn’t lose any ground from the 4th QTR print? The euro received no love for that data… which was another sign to me that the strong dollar trend was still in place… UGH!

And then on Friday, the Italian PM said some things like “The euro harms his country”…  Really? Come on Mr. You should get down on your knees and thank the Good Lord above that you were included in the Euro…  Otherwise Mr., your borrowing costs would have been through the roof this past decade, as you dealt with your debt buildup… Think about that before you make stupid comments like that, that will end up causing damage to the euro’s value…  What a knucklehead! 

Gold got whacked to the tune of $9.20 on Friday… Someone has to explain to me, why? The world is a tinder box looking for a match… The debt of the world is unsustainable… The Data here in the U.S. continues to point to a downturn in the economy, and the Fed doesn’t have enough arrows in their quivers to combat a deep recession… Need I go on, because I will, don’t tempt me! HA! Seriously though… Gold gets sold because someone shows up at the COMEX with an armful of short Gold trades… There isn’t one thing going on in the world today that would signal to me that Gold needs to get sold… Not one thing!

To add to the world’s miseries, this past weekend the U.S. began a verbal assault on Iran…  Saber rattling if you will… of which, saber rattling that is, usually gives Gold a boost…  

Before I say something I’m sorry for later… I had better move on to other things… The foreign Data Cupboard this week is pretty barren, as there will just be some Industrial Production data from Japan, and Current Account data from the Eurozone this week…

The price of Oil continued to ratchet higher and now trades with a $63 handle this morning, as our friends at OPEC (NOT!) are talking about further cuts in production, and the then there’s the saber rattling that we just talked about as another reason for the boost to the price of Oil…  Hmmm…  Now there’s a real, if the great writer, Grant Williams, doesn’t mind me borrowing his tag line… Things that make you go Hmmm…. 

The U.S. Data cupboard this week will be interesting, in that we won’t get any real economic data until Friday this week, but in the meantime, on Wednesday, the Fed’s FOMC meeting minutes will print… I read a piece sent to me from longtime Reader, Bob, yesterday, that was all about how over ½ the families in this country are one paycheck missing from an economic calamity…

And that reminded me of a cartoon that I copied and sent to my friends, and said: “This Is Kathy in a few years”… Here’s the cartoon:

Late last week, Non-Sequitor, in the comic strips had a very funny to me that is, comic strip that day… it was Titled: Post Economic Apocalypse Campfire Stories: And it had a family that was living in a cave, and the woman was cooking something over an open fire, and she says: OK, kids, gather around to hear your father tell us again how he tried to warn everyone this was coming, but no one would listen….

I even had a dear reader send me a note and tell me that the cartoon strip had reminded him of me that day! So…. Got Gold?

In India this past week, they held elections (Yes it was that time again) and PM Modi was reelected to another term… Longtime readers will recall me talking about Modi during his first campaign was someone that India needed, as his reforms would unlock the economy of India and set the country up for a decade of economic growth… And that the rupee would rally on his election… And it did for about 9 months, and it was at that time that all the euphoria of a Modi win was fading, as he was unable to get his reforms through in a timely fashion… So, I’m not putting a lot of sugar on his reelection, but just hope that his second term is better than his first…

In China, the renminbi continues its slow march to a deep dark abyss… I just can’t get past the comments by the Chinese official who stated months ago, that the Chinese would not weaken the renminbi to offset the tariffs… HOGWASH! I know, I know, you kept your fingers crossed behind your back when you made that statement, eh? Well, how much weaker will the renminbi get? The renminbi has already fallen to a 6.91 and change figure… 6.95 is next, and then 7.00… But what’s a country to do to offset the tariffs being placed on their goods for delivery to the U.S. ? I mean, besides admitting that they HAD been stealing our intellectual property, and promise to stop? Countries have learned a popular way to deal with economic problems… Allow their currency to weaken… The Chinese are no different, folks… And one day we’ll be having this discussion about the U.S. and the dollar… THAT I’m sure of!

And in Australia, they held an election that created a majority for the current PM’s, Morrison, conservative coalition had secured 77 seats, with 76 needed for a majority… So, now there’s a real gov’t. in place in Australia, and no hodge podge makeup of a government…  This news should have pushed the Aussie dollar (A$) a bit higher, but any attempt to do that, was pushed back by the U.S. dollar bugs… 

To Recap…  The dollar bugs are in complete control this morning, and it all started late last week… Weak U.S. Data won’t budge the dollar from its lofty perch, and good foreign data doesn’t help the respective currency related to the good data… As Chuck reminds us, these are typical signs of a strong dollar trend… One that he thought had ended a year or so ago, but with sentiment ruling the roost these days, instead of fundamentals, the changes happen so fast…  Oil is up, Gold is down, India and Australia held elections, and the Blues are one win away from the Stanley Cup Finals! 

For What It’s Worth…  Well, I first saw this on Zerohedge.com and then Ed Steer highlighted it in his letter on Saturday, and since I talked about this above, I thought what the heck let’s talk about it… This is an op-ed by Pat Buchannan about Who Wants a War with Iran?  and it can be found here: https://buchanan.org/blog/who-wants-this-war-with-iran-137040

Or, here’s your snippet: “What would such a war mean for the United States?
It would not bring about “regime change” or bring down Iran’s government that survived eight years of ground war with Saddam Hussein’s Iraq.

If we wish to impose a regime more to our liking in Tehran, we will have to do it the way we did it with Germany and Japan after 1945, or with Iraq in 2003. We would have to invade and occupy Iran.

But in World War II, we had 12 million men under arms. And unlike Iraq in 2003, which is one-third the size and population of Iran, we do not have the hundreds of thousands of troops to call up and send to the Gulf.
Nor would Americans support such an invasion, as President Donald Trump knows from his 2016 campaign. Outside a few precincts, America has no enthusiasm for a new Mideast war, no stomach for any occupation of Iran.

Moreover, war with Iran would involve firefights in the Gulf that would cause at least a temporary shutdown in oil traffic through the Strait of Hormuz — and a worldwide recession.”

Chuck again… Mr. Buchannan does a good job of explaining why Iran doesn’t want the fight, and why the U.S. shouldn’t want the fight either, of which I agree with… 

Currencies today 5/20/19 American Style: A$.6917, kiwi .6537, C$ .7442, euro 1.1158, sterling 1.2743, Swiss $.9907, European Style: rand 14.3855, krone 8.7826, SEK 9.6478, forint 292.26, zloty 3.8522, koruna 23.0895, RUB 64.70, yen 109.90, sing 1.3762, HKD 7.8494, INR 69.68, China 6.9176, peso 19.13, BRL 4.0959, Dollar Index 97.96, Oil $63.01, 10-year 2.39%, Silver $14.48, Platinum $823.00, Palladium $1,328.00 and Gold… $1,276.70

That’s it for today…  Crazy stuff going on in the world, eh?  Man, the cellulitis in my leg just won’t heal, and brother is it painful! When you take chemo, you subject yourself to slow healing of cuts, wounds, etc.  And when you have something as strong as cellulitis, it’s going to take a long time! UGH!  But I don’t let it stop me from what I want to do!  So, did you all read last week, that my darling granddaughter, Delaney Grace is going to sing the national anthem before a baseball game this coming weekend?  We have a wagon full of people all signed up to attend… OK… Nazareth takes us to the finish line today with their song: Holiday…  A classic rock song for sure!  I hope you have a Marvelous Monday, and please remember to Be Good To Yourself!

Chuck Butler