Who Will Blink First?

April 9, 2018      

* Jobs report is very disappointing but the dollar doesn’t get sold!

* Who will depreciate first?

 Good Day… And a Marvelous Monday to you! It was a very cold weekend here in the St. Louis area this past weekend, making me remain indoors, for the most part of the weekend, daring only to go outside when I was going to my car! It’s so cold here that I’ve decided to go back to S. Florida next week. I would have gone this week, but the flights were still very expensive from the Easter Weekend. Our Blues got bounced out of the playoffs this year, so boys, gather up your golf clubs and head to the links… UGH! Oh well, at least no “playoff heart break” for us this year! My beloved Cardinals hit the ball one day, and not the next day, and then rinse and repeat… I think I’m going to the day game this Wednesday with good buddy Duane, so I’ve got that going for me! Big Head Todd & The Monsters greet me this morning with their song: Tomorrow Never Comes…

Well, Friday’s Jobs Jamboree sure was a shocker, eh? The so-called experts had forecast that the jobs created number for March would be 170,000 (that was down from a forecast earlier in the week that called for 240,000) and the BLS said that only 103,000 jobs were created in March, and that was with the help of 65,000 jobs added to the surveys! In my eye, that means only 38,000 jobs were created in March… But did the dollar get sold?

Unfortunately, the answer is no… Unlike the previous months that showed good jobs reports, and the dollar rallied, the green/peachback didn’t get sold on bad jobs numbers… I told you last week about the quote I had from Charles Hugh Smith, who talked about how he thought the PPT was ordering food into the office for they were having to work through the night… Makes sense that they were in to prevent dollar weakness just like they came in a week or so ago, to prevent the dollar from falling off a cliff!

Of course you can’t really hand your hat on bets about what the BLS is going to do next month, but if we should see another weak jobs report, then someone at the BLS is going to be getting a call asking them to pump up the numbers!  Or at least to turn in their government issued jacket, and to clean out their locker! 

So…Getting back to the markets… Stocks got whacked on Friday, but the futures are positive this morning, so I guess someone is interested in catching this falling knife!  Think about the trading on Friday.. The Jobs report was very disappointing and stocks got sold, but bonds didn’t rally, which they normally do when disappointing economic data prints, and the dollar didn’t get sold.. Hmmm..   Very interesting don’t you think? 

Gold was able to gain $7.20 on the day, Friday, but is down a buck or two in the early morning trading today. So, no follow up out of the starters blocks this morning with Gold.. I just finished my DTL (Dow Theory Letters) letter for this week last night, and in it I really dig deep into the jobs report, so you’ll not want to miss it! Oh, Chuck! don’t tease them like that, the DTL is a paid subscriber letter, and readers can’t just go to www.dowtheoryletters.com and read it!  I’m sorry, I just assumed that you all had signed up to read more of my stuff! HA!     

Well, the news on the Trade War front has China vowing to remain in this fight until the bitter end…  And the BIG NEWS is that China is reviewing the idea of allowing a big depreciation of the renminbi as a tool to combat the U.S’s tariffs…  I was wondering when this was going to show up…  Think about that if the U.S. raises tariffs 25% on Chinese goods, and the Peoples Bank of China (PBOC) depreciates the renminbi by a large margin, they offset some of the damage of tariffs and keeps the goods priced where U.S. consumers will still buy them. 

The one thing holding the PBOC from announcing a large depreciation is the timing… You see, the report on “currency manipulators” is due later this month, and China does NOT was to be named a “currency manipulator”, which they would most certainly be in line for admission to the club if they depreciated the renminbi by a large margin right now. 

This would be reverse engineering the thought I talked about last week when I told you the rumors going around that there could be another Plaza Accord in store for the dollar…  Who will blink first? Quick draw McGraw is needed by either China or the U.S.  What a mess! These two Giants trying to out due the other by depreciating their currency VS the other…  I shake my head in disgust that this wasn’t thought of before going to war with Trade tariffs…   

The price of Oil, only got to trade above $63 for one day, before falling back below that handle.  The Petrol Currencies that didn’t participate in Oil’s one-day rebound last week, got hit the hardest… The Russian ruble and Brazilian real saw lots of selling, while the Canadian dollar / loonie and Norwegian krone held their ground.  One other currency that used to be thought of as a Petrol Currency is the Mexican peso, and even with the reduced amount of petrol that Mexico produces these day, it gets hit with the drop in the price of Oil just like everyone else…  

The U.S. Data Cupboard had the Jobs report last Friday, which also showed that the Avg. Hourly Earnings were stronger. Longtime readers know that I put more emphasis on the Avg. Hourly Earning and the Avg. Work Week Hours  each month instead of the number of jobs created.  I think this month’s rise in the Avg. Hourly Earnings is something that we need to be on top of going forward, for wage inflation is something that we don’t want to see, and if it begins to get out of hand, those of you who own Gold will be happy you do!    

To recap…  The Jobs Jamboree was very disappointing on Friday, with only 103,000 jobs created in March, but in Chuck’s eye, only 38,000 real jobs were created… The dollar didn’t get sold on the disappointing jobs report, which is puzzling to Chuck. And Bond yields didn’t drop like they usually do on disappointing economic data… Did someone order in food for the PPT?  Gold did gain $7.20 on Friday, and China is thinking about a large depreciation of the renminbi to offset the effects of the tariffs..  

For What It’s Worth…  Since there’s all this talk of tariffs, depreciations and so forth, I thought this article explained why these things have come to the forefront of our daily lives, and it can be found here: https://www.zerohedge.com/contributing-editors   

Or, here’s your snippet:”With so much attention focused on trade data in recent weeks, Trump will hardly be happy to learn that not only did the U.S. trade deficit grow by 1.6% in February from $56.7BN to $57.6BN, missing expectations of a $56.8BN print, but was the highest monthly trade deficit going back ten years, just as the financial crisis was warming up back in 2008.

According to the Census Bureau, the deficit increased to $57.6 billion, as imports increased more than exports. Broken down by components, the goods deficit increased $0.3 billion in February to $77.0 billion. The services surplus decreased $0.6 billion in February to $19.4 billion.

The good news is that exports of goods and services increased $3.5 billion, or 1.7% , in February to $204.4 billion. Exports of goods increased $3.0 billion and exports of services increased $0.5 billion.

Meanwhile, the countries that should be worried they are about to fall in Trump’s trade war sights and resulted in a US trade deficit, included China ($34.7), European Union ($15.3), Germany ($6.7), Mexico ($6.6), Japan ($6.0), Italy ($2.8), OPEC ($2.3), India ($1.9), Taiwan ($1.5), France ($1.4), South Korea ($1.1), Saudi Arabia ($0.4), and Canada ($0.4).

More importantly, it’s not just China: the deficit with Mexico increased $1.0 billion to $6.6 billion in February, while the deficit with Germany increased $0.4 billion to $6.7 billion in February. Meanwhile, the deficit with Canada decreased $1.2 billion to $0.4 billion in February.”  

Chuck again…  So, here you are a country that makes things that U.S. consumers want…  and the country you export to, is running a deficit with you. You don’t seem to have a problem with this deficit, as long as the U.S. keeps buying your stuff, right?  But then someone upsets the applecart, and now everything is up in the air…   Who wins? Who loses? Either way I think I’ll be glad that my investment portfolio is diversified!  

Currencies today 4/9/18… American Style: A$ .7657, kiwi .7283, C$ .7815, euro 1.2269, sterling 1.41, Swiss $1.0410, … European Style: rand 12.1344, krone 7.8086, SEK 8.3846, forint 254.32, zloty 3.4191, koruna 20.6672, RUB 58.07, yen 107.10, sing 1.3129, HKD 7.8489, INR 64.88, China 6.3048, peso 18.36, BRL 3.3679, Dollar Index 90.19, Oil $62.28, 10-year 2.80%, Silver $16.31, Platinum $916.92, Palladium $921.22, and Gold… $1,331.80  

That’s it for today…  Saturday was the coldest day ever for game at Busch Stadium III… But at least the sun was shining! After winning Friday night VS our hated rival Blackhawks, I thought our Blues would win on Saturday night and sneak into the playoffs, but I was wrong, the our Blues laid a big egg on Saturday night. Hey! I’ve got some great news! Are you ready for this? The tumor in my mouth is gone… my face is back to normal size, my tongue doesn’t have to share space with a tumor any longer!  The new chemo drug worked fast. Unfortunately, the new drug is doing some strange things that I’m not pleased about.  But the tumor is gone!  Now if it will stay away and not return again!   The Gin Blossoms send us to the finish line today with their song: Allison Road.   I hope you have a Marvelous Monday and remember to Be Good To Yourself! 

Chuck Butler