Palladium… On A Moon Shot!

January 17, 2019

* Front and center today with the Palladium move… 

* Danielle Di Martino Booth, talks about the recession train!  

Good day… And a Tub Thumpin’ Thursday to you… This is also going to be a start to a 4-day weekend for yours truly, as Monday is a National Holiday… YAHOO! I need to get my sleep pattern ironed out, and not having to get up so early will help with that.. I went to Roger Dean Chevrolet Stadium yesterday to pick up my spring training season tickets… They know me at the ticket window now, and they had them waiting for me before I even told them who I was! For 11 years now, I’ve said something when people say, “it’s good to see you”… I always respond, “it’s good to be seen”… And I was “seen” at Roger Dean yesterday! HA! They did mess up my order on additional game tickets, so I’ll have to return to sort that out… Blues Image greets me this morning with their song: Ride Captain Ride… 73 men sailed off from the San Francisco Bay…

Front and Center this morning, take a peek at the currency roundup and check out the Palladium price… Ok, back now? Boy that’s a head scratcher, isn’t it? But from what I can figure out, the buying of Palladium began with a hammer, on news that there’s a shortage of the metal, and that hammer turned to a sledgehammer and Palladium is up over $70 in the past 24 hours! 

That’s a great move, right? But I have to take a step back, and wonder if this is like a flash crash in reverse? Did someone enter a trade to buy that got the decimal in the wrong place?  I mean, shortage, I get that move, but not $70… Shoot Rudy, there’s been a shortage of Silver for a few years now, and we haven’t seen a breakout move in Silver!  Watch this today, to see if there’s a trade problem that’s identified, or if this was the real McCoy… 

Well, the real economic data (Retail Sales) we were looking forward to seeing yesterday, was delayed, because of the Gov’t showdown… That’s one way of keeping the bad news out of the markets minds… Have you seen the earnings reports from JP Morgan and Citi? They aren’t good, but that’s not stopping the stock jockeys from hiking up stock prices once again. I can hear the stock jockeys saying: Things can’t possibly be THAT bad can they?

I’ll bet a dollar to a Krispy Kreme that they are!

Another day of dollar buying and I have no idea why… Bloomberg had a good headline yesterday, they said, “ China is stuck. Theresa May is stuck. The U.S. government is stuck. Sears is stuck. They could just as easily added the Fed, and the economy… But you get the picture, Things around the world are a mess right now, but the things that affect our daily lives are the things that go on here in the U.S. I wouldn’t worry too much about China… Theresa May is a different story, she did survive a vote of confidence, which surprised me, but her problems are just beginning…  Sears is a real problem, and the U.S. Government? If you look up the word (stuck) in the dictionary, it’ll have a picture of Uncle Sam… And right under that would be pictures of the Eccles Building (Fed’s HQ), and a chart of the U.S. GDP going downward…

Gold struggled all day yesterday to get out of the red, but right at the end, a white knight rode in and pushed the price of Gold higher on the day, by $4… And like I said above, Silver trudges along, trying to avoid the potholes that are represented as short Silver paper trades… I was telling a dear reader yesterday, that it takes more than 180 days of Silver production to equal the ounces represented in short paper trades… That’s redonkulous!  But here we are… 

Well, Russia and other OPEC members came forward yesterday, and announced that they are behind the production cuts that the Saudis have proposed for the Cartel… That should have been fuel to move the price of Oil higher, but it doesn’t appear to have worked… The price of Oil is trading in the same clothes as 24 hours ago.  

Funny (not funny ha, ha) that this news on production cuts, did help the Russian ruble to rally, but not any of the other Petrol Currencies… I guess that would be more filed under Strange, not funny… 

It sure is pile on the Eurozone week… I’ve seen more articles this week that talk about how the Eurozone is headed for a recession… Eventually, if they keep saying that, it will become reality…  The euro has been stuck around the 1.14 handle, with no ammunition to move higher at this point. 

Speaking of a recession… Well, well, well… looky here… One of my fave economists, Danielle Di Martino Booth, had this to say on her Twitter account yesterday: “Are we headed to a recession? I think we are. I think the train has left the station….

Chuck again… Now where have I heard that said before? Oh, that’s right I said it! Those are my exact words, the recession train has left the station! Does this mean that Ms. Booth is a Pfennig Reader? I doubt it, but it does show that great minds think alike! Boy am I being egotistical today or what? Me, having a great mind? HAHAHAHAHAHAHAHA!  Now, that would be funny HA HA! 

Another dear reader cut-n-pasted something I said yesterday about how the world would return to a Gold currency regime… And asked me how in the world that would happen, and I replied, ” It would require a major reset in the price of Gold, upward, and then held at that price” Just something to think about… What would the knuckleheads in D.C. do if they had limits to their spending?  Now, that’s something I would pay to see! 

Well, there’s no data to report today, as D.C. is a mess right now, because three people can’t get together and agree on an issue… Compromise, that’s the key…  But that’s a word that’s been missing in D.C. for years now… 

To recap…  The moon shot mover in the past 24 hours has been the price of Palladium… Chuck wonders if the move came about from a flash crash in reverse?  The currencies are stuck in tight ranges, with the Russian ruble the best performer overnight.  With the Gov’t. shutdown, data prints are being delayed, which means the dollar has to trade on its own… That’s usually not a good thing for the green/peachback… 

For What It’s Worth…  Well, this was sent to me from the GATA folks, so there’s no link that I can share with you, but it was taken from the Financial Times, which is also restricted to subscribers only… But I have a snippet for you, so not all’s lost!   This is an article about how investors are being drawn to Gold because of all the mess around the world… 

And here’s your snippet: “If gold is anything to go by, investors are increasingly anxious about the state of the world.Volatile equity markets and fears of a global economic slowdown have helped gold rally 10 per cent from its August lows, putting it among the best performing metals over that period.

It is a sharp contrast to much of the past two years, when rising U.S. interest rates, a strong dollar, and buoyant equity markets hurt gold bugs and the shares of miners such as Barrick Gold, Newmont Mining and Goldcorp. And when there was a correction in U.S. stocks in early 2018, the gold price failed to benefit.

Almost a year on, the big question is whether 2019 could prove a profitable year to own gold, which is typically bought as hedge or haven by investors.

The amount of physical gold in exchange traded funds has risen to 71.9 million ounces, close to the record high of 72 million touched in May 2018.

“We haven’t seen flows like this since the first half of 2016, when the gold market really took off,” says Joe Foster, a portfolio manager at VanEck in New York.”

Chuck again…  Boy if that was really going on, eh? I say that because if it were happening as stated, Gold’s price would be on the move upward… I’m just saying… 

Currencies today 1/17/19 American Style: A$.7175, kiwi .6744, C$ .7530, euro 1.1405, sterling 1.2875, Swiss $1.0081, European Style: rand 13.7025, krone 8.5572, SEK 9.0165, forint 281.20, zloty 3.7565, koruna 22.3957, RUB 66.64, yen 108.80, sing 1.3556, HKD 7.8437, INR 70.91, China 6.7571, peso 18.91, BRL 3.7216, Dollar Index $96.04, Oil $51.63, 10-year 2.71%, Silver $15.59, Platinum $813.64, Palladium $1,436.18, and Gold… $1,294.29

That’s it for today and tomorrow, and Monday! Today, I do believe is my good friend, and former neighbor, Kevin Yanker’s birthday! Happy Birthday Webbie!  OK, important stuff here… I saw a line yesterday that Pitchers and catcher report in 29 days…  Now that’s important stuff! I did something to my left elbow… OMG! It hurts! and swollen, you would think I was a crafty old left handed pitcher with elbow problems!  I can’t imagine what caused this, but I’m a hurtin’ bird for sure! UGH!  I’m not alone here any longer…  My darling daughter Dawn, sent me a link to a video that highlighted the performance of her daughter, my little d, Delaney in the Music Man production at the school… She’s going to break hearts boys… Just so yo know now…  She performed like a professional actress and singer! WOW!   OK… Blackfoot takes us to the finish line today with their song: Highway Song…   That’s one of the top 10 Highway driving songs!  I hope you have a Tub Thumpin’ Thursday and a Fantastico Friday! And please remember to Be Good To Yourself!

Chuck Butler

 

BREXIT Is Soundly Defeated…

January 16, 2019

* Dollar continues to win back recent losses

* Chuck is the ghost of the future… 

Good Day… And a Wonderful Wednesday to you! Have you ever had “one of those days” where you just can’t wake up, and every time you sit down to relax you fall asleep, and the next thing you know it’s 3 0’clock in the afternoon? Well, I had one of those yesterday… Joe Walsh sang a song in the 70’s that went like this: Sleep all day, out all night, I know where you’re going… Well, I don’t go anywhere at night, but I did sleep all day! I’m here by myself, and it’s very quiet around here, so the sleeping was made easier with it being so quiet. And one would have thought that sleeping all day would keep one from sleeping at night… But Nooooooooo! I didn’t find that to be challenging! Ok… Yes, greets me this morning with their song: Owner of a Lonely Heart… (it’s much better than an owner of a broken heart)

Well, I got the first part of my call on the BREXIT vote correct, as it was defeated soundly yesterday. Now we sit back as watch how the U.K. deals with this. I’m still of the opinion that PM May will have to resign after being so soundly defeated, and that the U.K. economy will begin to slow down to a snail’s pace. None of that is good for pound sterling folks… I’m just saying…

I’ve been quite the naysayer about the U.K.’s fortunes, and economy… And it all began with rising debt… Just like every other country that has gone down this road, the U.K. is feeling the pinch of the amount of debt they have and how it takes up all their time effort and tax money to deal with it, leaving nothing else for the governmental programs.

The same thing has had a grip on the U.S. economy, as our debt figure continues to climb toward $22 Trillion. Wanna know what I think caused this all to happen? Well, you’re going to hear about it any-old-way! Go back to August 1971… I had just obtained my driver’s license… And Richard Nixon was removing the Gold backing from the dollar, allowing it to float and therefore removing the Governors from issuance of the dollar. With no governors holding back the issuance of dollars, the U.S. Gov’t went bananas, and began to deficit spend every year… And that’s how we got here…

Of course, if we ever had voted in representatives that had their eye on the debt ball, instead of their getting voted in again for another term, we wouldn’t have needed governors, but we did… And we didn’t have responsible people to keep the spending in check. And from humble beginnings we now have more than $1 Trillion in deficit spending every year! Soon, it will turn to $2 Trillion every year… But before it gets too unruly… The whole shootin’ match will collapse, and guess where we’ll end up? With a currency attached to Gold again… Will the circle be unbroken, by and by, lord, by and by…

I’ve given you all this scenario before, but since this is the road we’re on this morning, here goes…  I imagine there will be a meeting of the leaders of the great nations of the world, and there will be two tables like in a large household for Thanksgiving. At that adults table, will be the major holders of physical Gold, including the U.S., China, Russia, Germany, and so on… And at the kids table will be the minor holders of Gold. And this is where China finally shows their hand, and reveals just how much physical Gold they actually have.  My guess is that China holds more than the U.S’s holding of 8.965 metric tons…  Which means that China will be at the head of the table… Now, that’s scary isn’t it?  It’ll be too late to rue the day you thought Gold was a barbaric relic…

Reminds me of one of my fave sayings… It’s too late to remember that your main goal was to drain the swamp, when you’re up to your rear end in alligators!

Well, the dollar continued to gain back its losses from late last week, yesterday. At one point in the day the euro had given up the 1.14 handle, but has recovered that figure in the overnight trading. Yesterday, Germany posted that its economy grew by just 1.5 per cent last year, down from 2.5 per cent in 2017 and the weakest performance since 2013.  Well, when you print weak data like that, you’re bound to see your currency get sold… 

Like I said the other day, it’s time for the Eurozone to drop their economic sanctions the hold on Russia… The sanctions aren’t doing either economy any good.  In other news from the region, did you hear that the U.S. is thinking of sanctioning Germany for their gas deal with Russia?  And right there is the reason that IF it comes to the physical Gold holders of the world coming together to determine the next currency regime, that the U.S. will get treated like… Well, let’s just say the other countries will not be nice towards the U.S. 

This is where in my younger days I would have said, “who cares?” We’re the U.S. of A!  We don’t need no stinkin’ other countries! But that was before I grew up and realized that the U.S. does need foreign countries so that their ever growing debt can be financed… 

OK… Gold lost $2.10 yesterday on not much volume comparatively speaking to other days when volume is a moon shot. I’m still waiting patiently, no what am I talking about? I’m not a patient kind of person! But I’m still waiting for Gold to breakout to the upside… I’m convinced that it will happen, when is the $64 question… 

The U.S. Data Cupboard yesterday, had the December PPI to print, and it printed negative -0.1%… That means that wholesale inflation that feeds consumer inflation was very weak in December, thus proving my point I made yesterday that inflation has stopped rising…  There was a minor piece of data yesterday that was also interesting… The Empire State manufacturing index fell from 11.5 to 3.9…  That means manufacturing in the NY region fell out of bed this month… 

This morning we’ll finally get some real economic data with the December print of Retail Sales…  Was the Christmas shopping season as weak as I think it was? Well, November’s Retail Sales only grew 0.2%, and the BHI indicates to me that December’s print will be even weaker… 

To Recap…  The BREXIT deal was defeated soundly (by 230 votes!) in the U.K. yesterday, and now the bad scenario of having to deal with this defeat is on the table… This will all be negative for pound sterling.  The currencies saw the dollar gain back more of its losses from last week, yesterday… And Chuck takes us a trip to our future… 

For What It’s Worth…  Thanks to longtime reader, Bob, who sent me this link that highlights the World Bank and their call regarding the world economy… And it can be found here: https://countercurrents.org/2019/01/15/world-bank-warns-of-storm-clouds-over-global-economy/

Or, here’s your snippet: “The World Bank has added its voice to those warning of a worsening outlook for the global economy this year, amid signs that some major economies could experience a recession.

In its Global Economic Prospects report issued last week, entitled “Darkening Skies,” it stated that “storm clouds are brewing for the global economy” and contrasted the situation with that of a year ago.

“At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier ahead,” the World Bank chief executive Kristalina Georgieva said.

Pointing to the main reasons for the slowdown, the bank said international trade and investment had softened, trade tensions remain elevated and several large emerging markets experienced “substantial financial pressures last year.” Growth in emerging markets and developing economies is expected to remain flat, the pickup in economies that rely heavily on commodity exports is likely to be much slower than hoped for and “growth in many other economies is anticipated to be decelerate.”

Chuck Again…  Well, at least the World Bank is trying to tell us the truth, whereas the Fed continues the company line of the U.S. economy is strong and robust…  Which one is reality?  I’ll take what’s behind door number 1!

Currencies today 1/16/19 American Style: A$.7190, kiwi .6783, C$ .7540, euro 1.1410, sterling 1.2877, Swiss $1.0120, European Style: rand 13.6788, krone 8.5305, SEK 8.9660, forint 283.20, zloty 3.7584, koruna 22.4238, RUB 67.00, yen 108.67, sing 1.3544, HKD 7.8441, INR 71.04, China 6.7563, peso 19.01, BRL 3.7059, Dollar index 95.94, Oil $51.79, 10-year 2.73%, Silver $15.58, Platinum $800.60, Palladium $1,334.41, and Gold… $1,289.58

That’s it for today… The Gov’t shutdown continues onward, but certainly not upward… I read where there are 800,000 government workers now furloughed or working without pay…  Ouch! That’s going to leave a mark! Well, our Blues’ winning streak came to an end last night on Long Island where they lost in overtime, but were still awarded one point for the tie at the end of regulation time…  They go to Boston now for a date with the Big Bad Bruins Thursday night!  We had a cold front move through last night, and I have to admit it’s a little chilly outside this morning. But nothing like the overnight lows up north!  OK… do you like old Motown music, The Temptations, Four Tops, Marvin Gaye, etc. ? Well if you do, and you miss that kind of music, you’ll want to listen to Leon Bridges, who takes us to the finish line today with his song: Coming Home… Great groovin’ music for sure… I hope you have a Wonderful Wednesday and make sure that you continue to Be Good To Yourself!

Chuck Butler

 

Chuck Explains The Fed’s Great Balance Sheet Unwind…

January 15, 2019 

* Dollar buying returns… 

* Chuck makes a call on the upcoming BREXIT vote… 

Good Day… And a Tom Terrific Tuesday to you! Well, the news back home wasn’t uplifting weather-wise, as a follow up snow storm might be on the docket for this weekend. That’s the way we used to get them in our area, back to back… But as far as things down in the deep south where I am, there was no snow, only sunshine and 75 degrees! I’m nearing the end of my latest C.B. Strike novel, and wondering what will I read next! This is the 4th of the series that Robert Galbraith has written. Galbraith is really J.K. Rowling, but I really don’t care, I love the books, and can’t wait for the next one! I saw on TV last night that the Championship Clemson football team visited the White House, and were served fast food hamburgers and pizza… How great is that for men that eat like horses? I doubt there was much left when they had finished! OK, the great Johnny Rivers greets me this morning with his song from the 60’s: Secret Agent Man…

Well, first off I want to thank all that sent me notes about my announcement yesterday… I wasn’t completely upfront though… I said I had no tumors in me for the first time in 11 years, and that’s true, but I failed to mention that I do still have a lesion in my jaw, that could come back at any time. So, I still take a chemo pill each day to keep the wolves at the door! But it’s still all good! And thank you to all who sent me notes!

Yesterday, I told you that China’s December Trade numbers were very weak… But then later in the day I received an email from the Russian Times (RT) and they had an article on how Trade between China and Russia had oared by nearly 30% in 2018, reaching a record number of $107.06 billion, according to the latest report released by China’s General Administration of Customs. So, while trade with the U.S. is being held ransom on tariffs, China is finding new avenues for their goods… So, not all is lost here, as previously thought by the naysayers of China!

Meanwhile back at the ranch, Grandma is holding off the Indians! That’s an old saying that we used to say in South St. Louis… So, anyway, the currencies drifted on the day on Monday, the euro did gain a bit, but not much, and most of the currencies remained in tight trading ranges… I would have thought that after last Thursday’s price action in the dollar, that we would have headed right back to that after a day of revision… But nooooooooo!

The overnight markets have brought us more dollar buying, and the euro has slipped again, while still holding the 1.14 handle, it has really backed off of its high last Thursday of 1.1581…  This morning, all the news overseas is about the upcoming BREXIT vote in the U.K….  I’m going to go out on a big fat limb here (to support me!) and say that U.K. PM May, will suffer a crushing defeat, and the mess in the U.K. will start circling the bowl…  

In other words, get the hell out of Dodge, with regards to pound sterling, or not… It is all based on my opinion, which could end up being wrong! 

The price of Oil was as high as $52 last week, and yesterday it traded with a $50 handle, and this morning it’s back up to $51… But the way I see things with the price of Oil, this is going to be the pattern as we go through the rest of this month… Up a bit, down a bit, and settling in-between.  That won’t help the Petrol Currencies any… 

I have to stop and give a shout out to the Brazilian real, which saw a strong move before the country’s vote for President, only to see profit taking once the vote was confirmed. But now, things are looking brighter in Brazil, as the new president is kicking tail and taking names later, and real traders have noticed, and begun to move real higher once again…  

This is such a volatile currency, and has taken over on the volatility scale, the number one position from the S. African rand…  So, I would tread carefully, with real… Longtime readers will recall me saying that I wouldn’t touch S. African rand with Your ten foot pole!  It’s not that bad for real, but close, as the volatility is just something I can’t stomach… 

Gold found a way to hold onto its early morning $4 gain yesterday. The shiny metal is flat to down a buck in early trading today.  Yesterday, a dear reader sent me a link to an article from an analyst who tried to prove that there was no manipulation of Gold and Silver prices. I put this down as Gov’t propaganda…  My good friend, and former Big Boss, Frank, didn’t believe in price manipulation… And I would plead with him to have an open mind, for years ago, no one would have thought that LIBOR was manipulated, but that was proved wrong. No one would have thought that currencies were manipulated, but that was proved wrong…. And so on… to no avail, as the naysayers of manipulation are as dug in as the believers of manipulation… 

The U.S. Data Cupboard was empty yesterday, and today has the PPI (wholesale inflation) for December, which I would be a bag of donuts that it will not be strong!  And here will lay the thing I kept harping about when the Fed began their rate hike cycle 3 years ago…  dododododododododododo… we just went back in time 3 years ago, and the Fed is telling us that they want to see inflation rise…  But, they are going to begin hiking rates…  I called them out on that and said, that’s not what you do when you want to see inflation rise!  And guess what’s happened those 3 years of rate hikes? Inflation has stopped rising! I shake my head in disgust, for they’ve got to be smarter than some country bumpkin like me in the Midwest… 

And physical rate hikes aren’t all that’s fighting the economy and inflation… Don’t forget we have the Fed’s Great Balance Sheet Unwind…  Again, dododododododododododododo, we went back in time to when the Fed’s Balance Sheet was $4.5 Trillion of Treasuries and mortgages (that no bank wanted to hold by the way) And they began to allow bonds that matured to run off the books, and not reinvest them.  It was calculated them that every $200 Billion that comes off the books is equal to a 25 BPS rate hike…  The Fed moved to $50 Billion per month last year, so that means every 4 months (see that new math I used?) we’ve been getting an additional 25 BPS rate hike, and will continue to do so, as long as the Fed keeps unwinding… 

This is important folks… That we keep this unwinding in mind, otherwise it becomes difficult to explain why the economy is teetering on a recession, with Fed Funds rates at 2.5%…  When you factor in the unwinding rate hikes, we’re well over 4%…  Now put that in your coffee and drink it! HA!

To recap… The currencies tried to rally VS the dollar yesterday, but their moves, while quite small on the day, turned to selling in the overnight markets, as the dollar was bought once again.  Gold gained $4 yesterday, but just doesn’t seem to have the energy it had last week…  Chuck makes a call on the upcoming BREXIT vote, and explains the Fed’s Great Balance Sheet Unwind… 

For What It’s Worth…   We’ll do this a little differently this morning, as I’ve got to make certain you read this, and don’t want to just give you a link and think you’ll do that!   OK…. Here goes…. 

I want to thank a dear reader for sending me a link to a YouTube that is a report on GM…

You know, the company that was bailed out using TAXPAYER MONEY back in 2007…

In the report it highlights that 70% of the automobiles that have been made by GM since the bailout have taken place outside of the U.S. … Wait! What? OMG! Is this what we had in mind when we decided to bail them out? Oh, that’s right, we weren’t given that choice by then President at that time! And now, years later, we find out that GM has turned its back on the U.S.

You know, doesn’t this remind you of all those times through the years that the U.S. military would help out a country, only to have them turn and bite the hand that feeds them later? I’m was so saddened watching this video, and got my blood pressure moving higher, and then I remembered that since 2007, I wouldn’t have touched a GM made car or truck if someone gave me one, was that premonition? I hardly think so… But still…

Oh, and I almost forgot to give you the link to watch it yourself, should you want to really get ticked off today… here you go! https://www.youtube.com/embed/Lvl5Gan69Wo 

Currencies today 1/15/19 American Style: A$.7195, kiwi .6817, C$.7536, euro 1.1420, sterling 1.2858, Swiss $1.0135, European Style: rand 13.8190, krone 8.5490, SEK 8.9670, forint 282.36, zloty 3.7588, koruna 22.3736, RUB 67.03, yen 108.40, sing 1.3540, HKD 7.8425, INR 70.95, China 6.7615, peso 19.03, BRL 3.7083, Dollar Index 95.83, Oil $51.15, 10-year 2.69%, Silver $15.85, Platinum $802.26, Palladium $1,333.29, and Gold… $1,291.08

That’s it for today…  Well, I almost bagged today, as I was up a lot last night with a bad stomach… But then the sun was coming through the California shutters we have, and I thought, oh, what the heck!  I used to get paid to write this letter… But no more… So once wonders what it would be like to just shuck it one day? Since I’m not that kind of person it would have to be an out of body experience for me to do that!  Well… our Blues have won 3 games in a row!  Clear the streets! It’s time to plan a parade! No? Oh well, 3 in a row for this team seems as though they won the Stanley Cup!  This is my weekly plead to the St. Louis Cardinals to sign Bryce Harper…  How’s this for a potential top of the lineup… Carpenter, Goldschmidt, Harper, Big Bear Ozuna?  I would pay to watch them play… no wait, I already pay to watch them play! HA!   Speaking of which it’s just about time for my spring training tickets to be ready to be picked up… Pitchers and catchers report in a month!  And with that, Todd Rundgren takes us to the finish line today with his song: I Saw The Light…  I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler 

 

The Barn Door Got Closed!

January 14, 2019

* Dollar fights back after awful Thursday

* Germany prints very weak IP, and China’s Trade numbers are awful! 

Good Day… And a Marvelous Monday to you! Well, thank goodness I’m not home in St. Louis, after Friday through Sunday’s snow storm that left more than a foot of snow on the ground back home! My wife is at home, and she texted me, “are you sad you’re missing this?” And of course I said, “no way! It’s sunny and 75 here today!” And that was that! I hope all my friends got home safely on Friday night… The St. Louis region hasn’t seen a foot of snow in a month of Sundays, so they had forgotten how to drive on slippery roads, I guess… While I can’t claim them for our City’s team, they are our State’s team, and the Chiefs moved on in the NFL playoffs this past weekend… Go Chiefs! Styx greets me this morning with my former colleague, Chris Gaffney’s, favorite song: Come Sail Away!   Or, was that favorite song: Come on Eileen? I get confused….  

Well, someone closed the barn door on Friday, after Thursday’s mass exodus from the dollar, and the green/peachback made a comeback… What fueled that turnaround, when for all intents and purposes looked like the dollar was going to go on a long ride on the slippery slope? Well, it could have been some rotten data from Germany, or could have been the PPT flexing their intervention muscles once again, or, it could have been profit taking…

I would give credence to those items in the order that I listed them. The data from Germany had the pundits all over the world calling for a recession in the Eurozone’s largest economy, which would spread like wildfire throughout the Eurozone… The data I’m talking about was Industrial Production, one of those, what I call, real pieces of economic data… Italy followed up with their own IP print that was negative, and this morning, the Eurozone, as a whole, will accumulate the individual countries reports and issue one for the total of the Eurozone. I have to say that I’m not going all in on this talk of a recession in Germany and thus the Eurozone, but I’ll play along with the pundits until I see this play out for sure.

But the data from the Eurozone was weak, and there’s no two ways about it, but it was just one month, so let’s remain calm and read on… 

The Eurozone still has negative deposit rates, and that’s a scary thing should they enter a recession, because the European Central Bank (ECB) wouldn’t have any interest rates to cut! This is pretty much the scenario for the U.S. too, but… with the U.S. being the larger economy, the hurt could be worse, but then that’s just my viewpoint from the cheap seats…

One of the first things I thought about when I heard this news that the Eurozone might be heading to a recession, was that they could certainly cancel the economic sanctions on Russia, in an effort to help stave off the recession… I think I’ll send ECB President Mario Draghi, a memo…

Here in the U.S. mortgage applications fell again in the past two weeks, and the thing that makes this even more compelling is that mortgage rates have actually dropped 20 BPS in the past couple of weeks… That’s a scary sign folks… think about that for a minute and then come back to me…

OK, back? Alrighty then, let’s get to the other things that are important this morning… The U.S. Gov’t is still shutdown, and this is now the longest shutdown on record… The economy here in the U.S. was already teetering on the edge of the recession cliff, and now the economic consumption is going to take a hit… Doing my best Steve McCroskey in the all-time great funny movie, Airplane, I picked a bad day to stop spending here in the U.S.!

I read this past weekend that one of my fave economists, Danielle Di Martino Booth, formerly of the Fed Dallas, and author of the best selling book, Fed Up, said on Twitter that she was disappointed in Fed Chairman Jerome Powell, in that the man that she once had faith in, had lost credibility with the markets… Well, if she read the Pfennig, she would have come to this realization long before now, as I’ve been all over Powell’s moves like a Cheap Suit!!

What she’s talking about is the fact that Powell, said in a speech long before he was nominated to be Fed Chairman, that he didn’t believe in a Central Bank being involved in markets…  But as the stock market was circling the bowl a couple of weeks ago, he began to back track, and talk like a dove, which settled the stocks down a bit…  Wait! What? He did what?  Yes, he said that he didn’t believe in helping the markets, and then turned right around as did just that!  No, he didn’t! Oh, yes he did! 

So, did Powell, get the tap on the shoulder from the deep state or whomever it is that makes the calls for the U.S. economy? Because from the looks of it, it can’t be Powell’s own decisions here… Nobody would purposely do something that brought down their credibility in one fell swoop, would they? 

OK, let’s move on…  Well, China’s December Trade Data showed a direct link to the Trade War, as Exports were down -4.4%, and Imports were down -7.6%…  WOW I knew China’s economy was slowing down, but I wasn’t aware until these data prints that it had ground to a stop!  OK… So let’s take a look around the world should we?

We’ve got the numbers 2 & 3 economies, (China & Eurozone) size wise, in the world on the tenterhooks of a recession, while the number one economy (U.S.) isn’t heading there, according to economists that continue to point out that the economy can’t go from a 3% GDP to a recession… 

You may recall, me pointing this out a couple of weeks ago, and also pointing out that there were quite a few times in the U.S.’s history that the economy has done just that, gone into a recession the quarter following a 3% GDP print.  What are these economists smoking any way?  When the U.S. does go deep into a recession, these guys will be saying that it was someone else’s fault that they said that. You know the sun got in their collective eyes, they tripped on a rock, they were called off, and all those other excuses…  But, as my old football coach used to say… “Excuses never won a ballgame for anyone”… 

Gold gained a whopping 80-cents on Friday, but is up more than $4 in the early trading this morning.  Did you see the news from the weekend that according to the records of the World Gold Council (WGC), Russia has moved ahead of China, with regards to the total of physical Gold they hold…  But seriously, the WGC isn’t the gatekeeper of the Gold data, because China doesn’t even report their Gold holdings… Shoot Rudy, China went two years before they reported some Gold activity…  China’s physical Gold reserve is probably, at least as large as that in the U.S. or most likely even larger at this point, given their massive imports and production of Gold. 

I tell you all this because it’s important to know…  What are the plans for these Gold accumulations in Russia and China? Do they have plans to issue  Gold backed currencies? Or, are they just preparing to be major players at the adults table,  when the financial system collapses from all the debt?   Well, you guessed it… I’m thinking that it’s what’s behind door number 2, but then that brings about what’s behind door # 1…    And that’s why they only accumulate physical Gold, and not paper Gold…  hint, hint!

The U.S. Data Cupboard is completely empty today, and we won’t get any real economic data until Wednesday, when December Retail Sales prints, which I’m afraid to say that the BHI indicates a weak number… And that would be a telling sign on the economy wouldn’t it, if in December, when Santa comes, Retail Sales are weak?  I would think so… And I did stay at a Holiday Inn Express last night! HA! 

To Recap… The barn door which everyone was exiting from on Thursday to get away from the dollar, was closed on Friday, and the dollar made a comeback… Chuck puts the recovery down to three things…  Rotten data in Germany, the PPT back protecting the dollar, and profit taking…  China printed some awful Trade Data for December, really revealing the effects of the Trade War are showing up, and Gold was flat on Friday, but up more than $4 today, so far… 

For What It’s Worth… Well, among all the other dastardly things going on in the world, we have the general trend toward a cashless society… I’ve written at length about this and this is just another step toward a cashless society, and the article can be found here: https://www.coinworld.com/news/paper-money/2019/01/eurozone-drops-500-bank-note.html

Or, here’s your snippet: ” Seventeen of the 19 countries using the euro stopped issuing the €500 denomination as of Jan. 27, according to a statement on the website of the European Central Bank and reported by Agence France Press.

The statement added, “Austria and Germany will both continue printing the banknotes until April 26 in order to ensure a smooth transition and for logistical reasons.”

The highest-denomination note is being discontinued because the European Central Bank suspects that its high value makes it a payment method of choice for money laundering by criminals and for financing terrorist activities.

The ECB’s statistics show that €500 bills comprise only 2.4 percent of the total number of bank notes in circulation, and a little over 20 percent of the total value. At the end of November 521 million of them were in circulation.

The €500 notes remain legal tender, will continue to circulate, and can be used to as a method of payment. “

Chuck Again… Yeah, the euro 500 note may remain legal tender now, but eventually it will be wiped from the memories of the people…  I’m telling you now, so you can either listen me now or hear me later, but this is not a good thing folks… 

Currencies today 1/14/19: American Style: A$.7196, kiwi .6820, C$ .7530, euro 1.1467, sterling 1.2850, Swiss $1.0185, European Style: rand 13.9040, krone 8.5398, SEK 8.9342, forint 280.04, zloty 3.7425, koruna 22.2935, RUB 66.85, yen 108.00, sing 1.3540, HKD 7.8430, INR 70.73, China 6.7604, peso 19.15, BRL 3.7072, Dollar Index 95.61, Oil $50.74, 10-year 2.66%, Silver $15.61, Platinum $803.53, Palladium $1,322.42, and Gold… $1,295.22

That’s it for today…  Saturday was my son Andrew’s birthday… I reminded him that he was born during a snow storm, in 1982, and so it was appropriate that it snowed on his birthday!  Happy Birthday, Bud… Hope your day was grand! While my beloved Missouri Tigers fall flat, our other team the St. Louis U. Billikens are hot! I ran into a good friend yesterday, and I couldn’t believe what I told her…  I said, “for the first time in over 11 years, I can say that there are no cancer tumors in me”…  That’s the first time I’ve said that, not wanting to jinx myself… But there! I said it! Believe me when I say this though… I know the wolf is always at the door…   And on that note… here’s a goodie… Cornelius Brothers and Sister Rose take us to the finish line today with their song: Too Late To Turn Back Now…  That’s a goodie!  So, I hope you have a Marvelous Monday, and remember to Be Good To Yourself! 

Chuck Butler

 

Who Left The Barn Door Open?

January 10, 2019

* dollar gets sold like funnel cakes at a State Fair!

* Fed’s Meeting Minutes spring a surprise on the markets! 

Good Day… And a Tub Thumpin’ Thursday to you!  I’m have a feeling that I’ll be doing some Tub Thumpin’ this afternoon, as my good friend from Long Island will arrive here. So, I’ve got that going for me! HA! I had a long talk with our flooring guy yesterday, and he really wanted me to check out the natural  drugs if you will… Nice guy… But I think I’ll stick with the program I’m on, as it seems to be working!  The Cure greets me this morning with their song: Lovesong…   This song was redone by the group 311, of which Alex prefers, so we have these little disagreements, for I prefer the original! 

It was if the farm animals all figured out at one time that the barn door was open, and they all rushed to get out…  That was like the dollar bugs yesterday, and other currency traders, after the Fed’s Meeting Minutes painted an entirely different picture of the economy, and the Fed’s rate hike cycle, than Fed Chairman Jerome Powell gave us at his press conference following the Fed’s last rate hike in December… 

One of my fave sayings comes into play here, as the dollar got sold like funnel cakes at a State Fair…  The euro soared to 1.1550, and the Dollar Index fell to 95.20 from the 95.89 it traded at yesterday morning. It was a day that reminds one of the days between 2002 and 2005, and then again between 2006-2007, and then again in 2009-2010, before the hidden debts of the Club Med Eurozone countries were exposed and we began the current strong dollar trend…  

During those periods of time, during the weak dollar trend of 2002-2011, I always talked about how the euro was the Big Dog, and all the other currencies were the little dogs, and just about every day, the Big Dog would get off the porch and start chasing the squirrel (dollar) down the street, which would allow the little dogs to follow, and sometimes the little dogs would out run the Big Dog… But the idea here was that all were in the chase VS the dollar… 

And as I said above, that’s what yesterday reminded me of, for the Big Dog got off the porch, and all the little dogs followed…  I received an email from my friends, and publishers, Mary Anne and Pamela Aden, yesterday evening, and they pointed out that according to the charts, if the Dollar Index fall to a 93 handle that it would signal a weak dollar trend… And that asked me what I thought…   I responded: “In my opinion this is the beginning of a new weak dollar trend… with the euro being the offset to the dollar it will lead the charge against the dollar… the yen has been moving higher too.”

I hear you questioning my choice of highlighting yen, as I’ve been quite the Japan basher for some time now…  Well, that’s the beauty of a weak dollar trend, it matters not if a particular country, as Japan, has weak fundamentals, demographic nightmares, Too much internal debt, and sits too close to N. Korea… The weak dollar trend, masks those problems, and yen rallies…  

Shoot Rudy, the dang Swiss franc is also doing some chasing of the dollar of its own these days… Switzerland with their negative deposit rates, and a shady Central Bank is all forgotten about… 

But, of course, we’ve seen these false dawns before, and I was even fooled into thinking in 2016 that we were beginning to see a new weak dollar trend, as the trader sentiment all changed against the dollar… But then the Fed kept hiking rates, while every other country in the world was either still cutting them or holding them down artificially low. 

You won’t be able to trap me into saying “this time is different” I totally dislike that saying…  But things have changed since 2016… The Eurozone has stopped their bond buying program, our friends (NOT!) at OPEC have implemented production cuts of Oil, The U.S. started a Trad War with its biggest financier, and probably most important of all, the Fed is thinking about their rate hike cycle, and I don’t mean in a good way…

So, that was a long explanation of what I got out of yesterday’s Fed’s Meeting Minutes reveal…  If you think that was long, you should ask me some day to give you my opinion on how the housing meltdown started…

In the absence of a lot of data prints, we get to hear the Fed Heads as they hit the road for individual talks, that for some strange reason, the markets listen to… Remember when you would struggle to even know who the Fed Chairman was?  You certainly didn’t know the regional presidents, but now we do, because they believe they’ve become rock stars that need to go on tour…  

Today, we’ll hear St. Louis Fed President, James Bullard speak… Bullard has been a dove with his previous comments about rate hikes, and any further talk of holding rate hikes will send the dollar down the slippery slope once again today.

In addition to Bullard today, we’ll also have Fed Chairman Powell, go on tour, along with Fed Heads: Evans, and Clarida…  I’m sure we’ll get these guys all singing from different song sheets, which will further confuse the markets…  But with Manufacturing showing some major cracks last week, and Factory Orders still in the red earlier this week, the supposedly, “data Dependent” Jerome Powell, will remain dovish… as well he should!

Gold got on the rally tracks again yesterday closing up more than $8 and is looking like it wants to move higher again this morning.  As Gold nears the $1,300 figure, one has to wonder if this figure is going to be the road block to higher prices for Gold that has been previously?  I’d like to think it won’t be this time, due to the Fed becoming dovish… But I guess we’ll have to wait-n-see, eh?

To Recap…. It was a day much like the days when the weak dollar trend was in place (2002-2011) The dollar got sold like funnel cakes at a State Fair, as The Fed’s Meeting Minutes were quite dovish, and painted a different picture of the economy and the rate hikes than what was explained by Powell after the last meeting. That got the dollar bugs all running for the exit door, but now will there be follow up? That’s the $64 question today…

 Before I head to the Big Finish today, I wanted to point something out… Well, I know that some of you follow publishing guru, Bill Bonner’s letter… Well, if you don’t, you should have seen him go the full nine-yards on the newcomer to Congress that I talked about yesterday, and her wanting to bring the tax rate to 70% for the rich… Here’s a link to his article in case you don’t usually read Bill, (I don’t know why anyone wouldn’t!) https://bonnerandpartners.com/bill-bonner-diary/ 

For What It’s Worth… I had a longtime Pfennig reader send me a link yesterday to an article that I would normally not find, because it was on the CNBC site, that talks about how Fitch is giving a warning to the U.S Gov’t that their AAA rating could be in peril, and it can be found here: https://www.msn.com/en-us/money/markets/fitch-warns-of-possible-cut-to-us-triple-a-rating-if-shutdown-continues/ar-BBS0jKF

Or, here’s your snippet: “The U.S. is in danger of losing its triple-A sovereign credit rating later this year, Fitch said on Wednesday, warning an ongoing government shutdown could soon start to impact highly sensitive areas of the world’s largest economy.

A stalemate between Donald Trump and congressional Democrats over a spending package to fund nine government agencies entered its 19th day on Wednesday. It comes at a time when lawmakers are deeply divided over the president’s demand for money for a border wall.

“I think people are looking at the CBO (Congressional Budget Office) numbers. If people take the time to look at that you can see debt levels moving higher, you can see the interest burden in the U.S. government moving decidedly higher over the next decade,” James McCormack, Fitch’s global head of sovereign ratings told CNBC’s “Squawk Box Europe” on Wednesday.

“There needs to be some kind of fiscal adjustment to offset that or the deficit itself moves higher and you’re essentially borrowing money to pay interest on the debt. So there is a meaningful fiscal deterioration there, going on the United States,” he added.”

Chuck Again… So, I bet you’re wondering why I would not search CNBC for reports… Well, some longtime readers might recall about 10 years ago, when I was in demand from news outlets all over radio, print, TV, internet, etc. and I wrote one day about the suspicious trading done in the aftermarkets that I believed was the PPT at work…. Well, CNBC called our PR guy, and told him they wanted to talk to me, seriously… And I asked, are they sure, they want to talk to me, because they’re so Pro-stocks, and I’m talking about suspicious trading? He assured me that the director of the program told him that they wanted to talk seriously with me… So, I gussied up, went downtown to stand in front of a camera, and went live on CNBC, only to have them ridicule my findings and tell me I needed to go to Hollywood so they could make a SCI-FI movie! I called our PR guy on the way back to the office and told him to never, ever, book me or even grant any kind of interview with CNBC again… And I’ve held my ground on that all these years! Oh, and by the way, a week after my debacle on CNBC, there was an article in the WSJ from a MIT engineer guy, who said the same things I was saying! Oh well, live goes on… right?

Currencies today 1/10/19: American Style: A$ .7187, kiwi .6784, C$ .7588, euro 1.1535, sterling 1.2744, Swiss $1.0242, European Style: rand 13.8444, krone 8.4637,  SEK 8.8730, forint 278.63, zloty 3.7258, koruna 22.2115, RUB 66.68, yen 107.97, sing 1.3571, HKD 7.8386, INR 70.25, China 6.8254, peso 19.23, BRL 3.6982, Dollar Index 95.24, Oil $52.00, 10-year 2.70%, Silver $15.78, Platinum $826.56, Palladium $1,325.69, and Gold… $1,293.58

That’s it for today… and this week…  Things are pretty quiet around here, except for the noise from the construction on the 3rd floor. The Beach goers have been pretty sparse, as the license plate colors continue to change down here.  I hear that it’s suppose to snow for a couple of days back home. Good! I say that because the insect population has been bad the last couple of summers, after winters that yielded few snow days, and no zero degrees days…   When I worked, I drove a large SUV that was made to go through snow, so I didn’t had any problems getting work when it snowed…  I miss my Navigator!  Drove to Trump International Gold Course yesterday in West Palm Beach… Bentleys, Rolls, and Mercedes filled the valet parking area…  I dropped off something ,and got the hell out of there before they called the cops on this trespasser in his Honda van! HA!   The Beatles take us to the finish line today with their song: When I’m 64…  Will you still need me, will you still feed me, when I’m 64?  I’ll be singing that song in a couple of months! HA! I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday, and remember to Be Good To Yourself!

Chuck Butler

 

 

What Will The Fed Meeting Minutes Tell Us?

January 9, 2019

* Currencies trade in tight ranges on Tuesday

* Trade negotiations end with negotiators smiling… 

Good Day… And a Wonderful Wednesday to you! Sorry about yesterday, but I was needed to play Uber driver at the time of the morning, when I’m usually writing… It was another Chamber of Commerce day here yesterday, but I hear a cold front is moving through soon, oh the humanity! It might get to 50 degrees! It’ll be snowing back home, so I’m not about to let 50 degrees get me down! Besides there’s nothing I can do about it… Elton John greets me this morning with his song: Levon…

Well, it was a non-event in the currencies yesterday, the euro traded in a very tight range, and so did all the other currencies, with the only exception being the Aussie dollar (A$) which is still getting bought on the news that China reduced their bank reserve ratio this past weekend, which is, as I’ve told you before, akin to a rate cut, thus fueling the thought that the Global Growth could be on the mend… Now, if the Reserve Bank of Australia (RBA) would get off their duffs and hike rates to squash the housing bubble going on there, we might see a real run in the A$…

The price of Oil continues to rebound and trades with a $50 handle this morning, thus helping the Petrol Currencies of: Russia, Norway, Canada, Braxil and some other smaller players… so, the Commodity currencies were getting well bid, along with the Petrol currencies, all the while the euro held its gains from Friday and Monday in check.

Well, did you watch the President’s Address to the nation last night? I forgot about it, and was locked in to watching my beloved Missouri Tigers Basketball team lose their SEC opener to the 3rd ranked Tennessee team. Our St. Louis University Billikens beat Rhode Island, so it wasn’t a complexly lost night! The U.S. Gov’t remains shut down, which is no sweat off my back, shoot Rudy, they could stay closed forever as far as I’m concerned, because tax returns and wefare payments are still going out, there’s nothing shut down about them!

Have you heard about the newcomer representative that’s calling for a 70% top tax rate? I always knew it would come to this, but no… What? … Really? She’s not calling for the 70% tax rate to pay down the debt? She’s going to do what with it? Oh, my… I can’t even talk about that without genuflecting… So, I’ll just move along…

Seriously, I always thought that the lawmakers would come around to having to deal with the debt that’s probably a month or two of going past $22 Trillion, and they would do that by taxing people heavily… And then finding out that it made but a little dent in the debt total, they would switch to drastic measures… If, you’re ever on the Butler Patio, I’ll tell you what those drastic measures could possibly be, but not here… I’ve learned that you can please some of the people all the time, but if you bring up controversial stuff, you’ll have not pleased very many… And so in effort to retain my dear readers, I’ll let your imaginations take over here…

Gold has returned to its old habit of allowing the short Gold paper traders the upper hand, as it has lost over $7 in the last two days of trading, including this morning’s trading.  Gold now trades at a $56 dollar discount to palladium…  I’m still waiting for “something big” to take place with Gold… And I don’t like waiting! 

OK… I read a very long letter yesterday from the head of the largest hedge Fund, Ray Dalio, and he was talking about the wonder of China’s change in the last 50 years. He also mentioned that the dollar’s days of being the reserve currency were coming to an end. He ended his letter with this thought: “Nothing lasts forever”…

So, it was nice to see that I’m not the lone wolf out there talking about the end of the reserve currency status for the dollar… of course I began talking about it 9 years ago, at the World Money Show in Orlando… I always like to state where I made the first call about the currency regime change because they would have a recording of it, should anyone ever say, “hey, I doubt you called for that in 2010”

Au Contriaire Monfrere… And there were some of you dear readers in the audience that day, taking notes… Well, here we are 9 years later (The World Money Show in Orlando was always held in early Feb) And while I doubt that we’ll see the end of the currency regime, which was the title of my presentation that day, before the clock strikes 12 on 12/31/19… I still believe that there will be a change in the currency regime, it’s just taking longer than I expected it to take!

OK… In the U.K., PM May has presented her latest BREXIT deal to parliament for their review, and to either give it the thumbs up or thumbs down. I would think that pound sterling has suffered quite a bit at the expense of bad news from the Brexit negotiations, and therefore it wouldn’t surprise me one iota if the U.K. Parliament approved the deal that pound sterling would rally strongly..  And if the U.K. Parliament rejects the deal, they watch…. out… below…   What’s it gonna be boy? 

The negotiations on Trade between China and the U.S. ended yesterday, but time they ended with a bit of optimism… So, they’re telling us there’s a chance at an agreement? A slim chance, but a chance nonetheless, and from a spark a flame can ignite…  In the meantime, we’re stuck with a Trade War that’s really beginning to take its toll on the economy and the Data Cupboard has the latest economic prints to prove that… 

The U.S. Data Cupboard had some weak data yesterday… Recall that I had said that there could be some healing with Factory Orders, due to the negative -2.1% print in Rocktober, but the November print was still negative at -.2%…  And the servicing index fell to 57% in December from a 60% in November…  That makes it a dynamic duo for the ISM indexes, as both manufacturing and nonmanufacturing both had huge falls in the index number in December… 

Today’s Data Cupboard has just the Fed’s Meeting Minutes from their last meeting to print… The markets will be looking over these minutes for any signs of weakness in the call for a rate hike last month. Wouldn’t it be cool if the minutes actually had this conversation that I’m making up in them? 

” OK, let’s see a show of hands of the voting members who think this is the last rate hike in this cycle”  OK, thank you, I find it amazing that it was unanimous! – Chuck’s take on what really happened at the Dec. Fed Meeting… But we won’t see any of that, because those minutes get edited before they print… 

To recap…  The currencies traded in tight ranges yesterday, but did move forward on the day. The biggest mover was the A$, but Chuck thinks that there could be really big moves in the A$ if the RBA would get off their duffs and hike rates.  Gold slipped in price once again, and is now trading at a $56 dollar discount to Palladium?   China and the U.S. ended their trade negotiations with a smile… And PM May’s BREXIT deal goes before the U.K. parliament… What’s it gonna be boy?

For What It’s Worth… U.S. Consumer Debt continues to grow larger and larger, folks… it’s beyond recognition now, and something has to give… This is an article about just that and it can be found here: https://www.zerohedge.com/news/2019-01-08/us-consumer-credit-hits-all-time-high-amid-surge-student-and-auto-loans

Or, here’s your snippet: “After a surprising slump in the use of revolving debt in September, when US consumers unexpectedly paid down a total of $23 million (revised)on their credit cards, followed by a sharp rebound in credit card usage in October, moments ago the Fed reported that in November, the surge consumer credit continued, rising by $22.1 billion, above the $17.5 billion expected, after October’s whopping $25 billion increase as non-revolving credit surged by the most since December 2017. The surge in borrowing in November brought the total to $3.979 trillion, new all time high, largely on the back of a newfound love with auto and student loans.

After a brief, one-month dormancy in credit cards usage in September, American consumers have clearly returned to doing what they do best – spending money they don’t have – with revolving credit jumping by $4.8 billion, one month after it surged by $9.3 billion. The latest monthly increase brought the total credit card debt to a new all time high of $1.042 trillion.

But the big reason behind the November surge in consumer credit was nonrevolving credit, i.e. student and auto loans, which soared by $17.4 billion, the highest monthly total since 2017, and bringing the non-revolving total to a new all time high of $2.937 trillion.”

Chuck Again… Debt like this is so dangerous to an economy, folks… I can’t stress enough that this cannot continue to grow at the current pace or any pace for that matter! I have no idea what people are thinking with taking on all this debt, other than they believe that the Gov’t will bail them out… I’m just saying… 

Currencies today 1/9/19: American Style: A$ .7163, kiwi .6766, C$ .7552, euro 1.1450, sterling 1.2722, Swiss $1.0199, European Style: rand 13.9625, krone 8.5239, SEK 8.9392, forint 280.87, zloty 3.7525, koruna 22.3766, RUB 66.88, yen 108.90, sing 1.3565, HKD 7.8393, INR 70.35, China 6.8512, peso 19.34, BRL 3.7241, Dollar Index 95.89, Oil $50.78, 10-year 2.73%, Silver $14.63, Platinum $821.95, Palladium $1,337.78, and Gold $1,281.09

That’s it for today… Since I was AWOL yesterday, I didn’t get the chance to congratulate Clemson for their football championship… Good friend, Rick, was at the game, I told him before the game that I thought he was too old to be seen running on the field if Clemson won! HA! I’ve been remiss the last couple of weeks in not repeating my call for the Cardinals to sign Bryce Harper… Come on, open up the pocketbook and make the deal! I’m all alone here for a few days… no biggie… I’m getting quite used to being alone for periods of time!  The Searchers take us to the finish line today with their song: Love Potion #9…   I took my troubles down to madam Ruth, you know the gypsy with the gold capped tooth…   Love it!   And with that I’ll seen you on your way to hopefully a Wonderful Wednesday where you continue to Be Good To Yourself!

Chuck Butler

 

 

 

 

No Worries, Stock Jockeys, Powell Has Got Your Back!

January 7, 2018

* Currencies rally after strong Jobs data

* China reduces reserve ratio requirement… 

Good Day… And a Marvelous Monday to you! The first Monday of the new year too! Well, it was an interesting weekend, with the NFL playoffs, lots a strange calls, if you ask me. I’ve kind of adopted the KC Chiefs this year, as they are from Missouri! The Chiefs will play the Colts this coming up weekend. Our Blues seem to take two steps forward, three steps back, and think they are are “finding something”… It’s sad right now, it what it is. We just had two of the most beautiful days that I’ve experienced in the deep south in January this past weekend… Simply beautiful… And reminded me why I wanted to spend more time here during the winter! I’ve only been here a week, and it only feels like I just got here! Time flies by too quickly for me! The New Radicals greet me this morning with their song: You Get What You Give

Well… I’m puzzled this morning, as I look at the data from Friday… The Jobs Jamboree, according to the BLS created 312,000 jobs in December… But the Unemployment Rate rose from 3.6% to 3.9%, Wait, What? Don’t shoot me, I’m just the messenger, but that’s what the folks at MarketWatch are telling me… Makes no sense, but then when has a BLS, hedonically adjusted, jobs report made sense to me? How many of those jobs were “seasonal, or temporary” for the Christmas shopping season? That’s the only thing I can think of that would drive that jobs number so high…

The markets looked at the data, had its usual knee jerk reaction with stocks rallying, along with the dollar, but by day’s end, things had changed… And here’s the real puzzling part… I read that the markets saw the 312,000 jobs created in December, and decided that the economy was going downhill from here… Really? Now, I agree that the economy is going nowhere but downward, but not because the BLS posted a 312,000 jobs created number!

And then we had Fed Chairman, Jerome Powell, made some statements that really got things moving… He said that “that the Fed is not on a preset path of interest rate hikes and that it will be sensitive to the downside risks markets are pricing in.” And then he went further to say that “The Fed is prepared to shift the stance of policy” Sounds pretty dovish don’t you think? I feel like screaming from the rooftops… “Don’t worry stock Jockeys, Powell’s got your back!” 

OK… Well, the dollar, originally rallied on the jobs report on Friday, but by day’s end, the currencies were fighting back, and as I open up the currency screen this morning, the euro is back to 1.14… And the Commodity Currencies are rallying, led by Aussie dollar (A$), as China reduced their reserve ratio on banks last Friday, which is akin to a rate cut, and that got the Commodity Currencies back on the rally tracks. I wouldn’t got all hog in on this news, as a rate cut, can only provide so much, and then it needs some follow up…

The Chinese are known to go “for the hit” and then sit back and see what happens… So, the Powell quotes will go a lot further to promote a currency rally than the lowering of the Chinese banks reserve ratio requirement.
The precious metals are really romping VS the dollar this morning, as Gold is up over $5, and Palladium is up over $8 as I write… Can you imagine the chagrin on the faces of those that sold their Gold on the jobs data news from last Friday, only to see Gold rally today?

The 10-year Treasury’s yield continues to point to lower rates this years… The Bond Boys Do NOT believe the Fed is going to continue to hike rates going forward… And I’ve told you all this many time in the past to keep an eye on what bond traders were doing… And this time is no different!

There was an important piece of data that printed last Thursday here in the U.S….  It was the ISM Manufacturing Index for December, and it was rotten! The index number slipped from 59.3 to 54.1…  Yes, it’s still above the line in the sand number 50, that determines whether or not the manufacturing sector is contracting or expanding… But a one-month drop like that should not be ignored…  Of course I always say that one swallow doesn’t make a summer, and that goes both ways, so we’ll have to wait-n-see what the color of January’s Index number before a trend can be called… 

In the Eurozone this morning, we saw November Retail Sales print an unchanged +0.6% gain from the Rocktober print, but on a year on year basis, Retail Sales in the Eurozone fell from 2.3% to 1.1%… And that’s not a good trend, folks… But the euro traders have shrugged the data off and decided that the dollar has larger problems…  Which brings me to something I haven’t talked about in some time, and that is the relationship of the euro to the dollar… 

The euro is the offset currency to the dollar, it took this position over from pound sterling not long after the euro was introduced. It soon became the second most traded currency, and it didn’t take long for it to become the offset currency to the dollar.  When you’re the offset currency to the Reserve Currency of the world, your country’s individual fundamentals take a back seat to what’s happening to the Reserve Currency, which in this case is the dollar. 

When the dollar was  last, firmly placed, in a weak dollar trend the euro soared to near 1.50, and the Eurozone’s fundamentals weren’t anything to write home about… So, the point I’m trying to make here, is that should the dollar begin another weak trend, we could very well see the euro soar once more, even with negative interest rates! 

The price of Oil has bounced off the lows of last week, when it appeared that the price of Oil was about to circle the bowl… But then it didn’t, and began to ratchet higher and this morning the price of Oil is trading with a $49 handle, and last week it was trading with a $44 handle. This rally has helped the Petrol Currencies regain some curb appeal…   And once again has shown that even a blind squirrel can find an acorn! 

The U.S. Data Cupboard will have November Factory Orders this morning, and that’s about it. The ISM non-manufacturing index will print, but this represent “service”, and I’ve long said that we’ve become a “service” country and our service sucks eggs!  So, I don’t pay much attention to that data… The Factory Orders for Rocktober were negative -2.1%, So, I would think that some healing here could be seen for the November print… 

To recap…  The Jobs Jamboree was a doozy on Friday with 312,000 jobs created, but a funny thing happened on the way to the forum, the markets began to question the data, and then Fed Chairman Powell, made some very dovish comments, and by day’s end, the dollar was getting sold… Gold is up $5 in early morning trading today, and Palladium has reached $1,300! WOW!  

Before we head to the Big Finish today, I wanted to make one more point that things aren’t as good as the media would have to believe they are… of the 312,000 jobs created in December, 117,000 of them were to people taking on 2nd jobs…  I’m just saying… 

For What It’s Worth… Well, I’ve talked about the economic sanctions placed on Russia by the U.S. and European Union, until I’m blue in the face, but then along came this article in the RT that talks about why these sanctions are working in Russia and it can be found here: https://www.rt.com/business/447815-russia-natural-resources-sanctions/

Or, here’s your snippet: “The country with the largest mineral reserves in the world, Russia, is the second top exporter of rare earth minerals. Its natural resources are estimated at tens of trillions of dollars.

It has abundant supplies of oil, natural gas, timber and valuable minerals, such as copper, diamonds, lead, zinc, bauxite, nickel, tin, mercury, gold and silver. Most of those resources are located in Siberia and the Far East.

Russia’s mining industry, which is the country’s second largest after oil and gas, accounts for a significant share of its GDP and exports. The country is among the top three producers of mineral commodities such as platinum, gold and iron ore. It is also the world’s largest producer of diamonds and palladium. The Ural Mountains have vast amounts of minerals while most deposits of coal, oil, gas and timber are located in Siberia.

Russia is the world’s fifth largest producer of coal, with reserves of about 175 billion tons. Most of those mines are in Siberia and the Urals.
The timber industry, which is worth about $20 billion annually, is also a significant economic contributor to the Russian economy. The country’s fishing industry is the fourth largest in the world.

The value of Russia’s resources is huge and, according to statistics, is Estimated at $75 trillion. In comparison, the US natural resources are worth approximately $45 trillion while China’s stand at $23 trillion.”

Chuck again… And no… I’m not a cheerleader for Russia, I’m just attempting to show that the economic sanctions are having the effect on the Russian economy that they were supposed to, and therefore they should be eliminated.  That’s all… 

Currencies today 1/7/2019: American Style: A$ .7125, kiwi .6756, C$ .7484, euro 1.1442, sterling 1.2750, Swiss $1.0184, European Style: rand 13.9080, krone 8.5825, SEK 8.9395, forint 280.60, zloty 3.7523, koruna 22.3334, RUB 67.31, yen 108.36, sing 1.3575, HKD 7.8353, INR 69.48, China 6.8671, peso 19.38, BRL 3.7106, Dollar Index 95.93, Oil $49.13, 10-year 2.64%, Silver $15.75, Platinum $827.97, Palladium $1,310.20, and Gold… $1,291.31

That’s it for today…  Well, did you team win? The college Football Championship Game is tonight… Clemson VS Alabama…  And yes, we’ve seen this match up before in the Championship game… Well, if you don’t like seeing these two play for the Championship, beat them before they get here!  Another Chamber of Commerce Day here is expected today, so I’ve got that going for me! There’s a chance there won’t be a Pfennig tomorrow morning as I’ll be playing Uber driver to the airport!   I’ll do my best to get one out, but then one never knows, right?  The Beatles take us to the finish line today with their song: The Long And Winding Road…   One of my fave songs from the Fab Four…  I hope you have a Marvelous Monday and remember to Be Good To Yourself!

Chuck Butler

A Strange Start To 2019…

January 3, 2019

* Currencies get sold, except yen…

* Apple spooks the markets…

Good Day… And a Tub Thumpin’ Thursday to you! I love to read the Pfennig Replies each day, or whenever I get to them that is… Alex’s girlfriend, Grace, is from Arkansas, and she is known to let loose a “y’all”… So, in her honor, Thanks to Y’all for all the kind words sent my way, in the last week… I also really do enjoy being in the deep south during winter… We may not have winters, like we did years ago, back in St. Louis, but in my opinion, it’s still cold there! And while I miss my kids and darling grandkids, and friends, I know in my heart of hearts that I’ll return to St. Louis in the spring when it warms up there! The Turtles greet me this morning with their song: Happy Together… Imagine me and you, I do, I think about you day and night, it’s only right…

U.S. Stocks were down most of the day, beginning 2019, much like they have begun each new year the past few years… But by day’s end, the PPT had done its job, and stocks were positive once again. This is like putting icing on a hot cake… It’s not going to stick! And neither will all this support the stocks are getting from the PPT… But I don’t want to talk about this any further, so , let’s move along…

The currencies, led by the Big Dog, euro, didn’t fare too well on the first day of trading 2019… In the past few years, the euro has led the currencies on a rally march VS the dollar as we began each year, but by June it would be something in our rear view mirrors. But not this year… So, does that mean we’ll see the opposite of the past couple of years, with the dollar rallying early in the year, and then getting sold like funnel cakes at a State Fair later in the year? I wouldn’t put it past the markets to trade that way…

You see, Mr. Market, does what he wants, when he wants, and how he wants, and there is no one to stop him… No matter how much I rant and rave about how the currencies are being treated unfairly, while the U.S. creates more debt than you can shake a stick at… Mr. Market will decide when the dollar’s strong trend is over, and not a moment before…

The euro lost nearly 1-cent on the day, which is a BIG one-day move… (Yes, Mike K. that’a what I said… 1-cent) But one day of trading does not make a trend, so we’ll have to wait a few days and see where we stand then… If the dollar is still being supported by the PPT, then we had better batten down the hatches, and ride this one out…

A dear reader thought I was a little hard on the beaver, I mean on the Commodity Currencies yesterday… But no matter how you slice the bread, there’s only so much to go around, and so it is with money in an economy, and China’s economy is slowing folks… President Trump will be shouting from the roof tops that the U.S. is winning the Trade War… But he had better hold back, because we haven’t seen the effects on the U.S. economy, fully, that is, just yet.

In our never ending search to find warning signs for the U.S. economy… Bloomberg reported yesterday that “U.S. Leveraged Loans just suffered their biggest monthly loss in 7 years! And that loans posted a 2.5% loss in December, the worst since August 2011, when the S&P downgraded the U.S. AAA credit rating and loans lost 4.4% in the month.” www.bloomberg.com

And then David Rosenberg chimed in on his Twitter feed… “How about the Fed Dallas? The US economy is in such great shape that the diffusion index swung to -5.1 in Dec from +17.6 in Nov. Biggest negative swing in nearly six years.” – David Rosenberg on Twitter

And after the close yesterday, Apple, made an announcement on future earnings, calling for a reduction in their earnings the first time they’ve done that in 20 years!   

I’m telling you now… I’m telling you right away… That a recession is coming, hear me now, or listen to me later, but this is what’s coming and you had better be getting ready for it… Oh, and once again, I’ll tell you that during recessions, stocks perform horribly… I’m just saying… Oh, and one more thing… Got Gold?

How about that Japanese yen? A so-called “flight to safety” has investors flocking to yen, and the yen’s value has responded appropriately by rallying in big chunks for the last week. I’ve talked about Japan being a so-called “Safe Haven” before, and how that just wreaks with irony, given that they have more debt than anyone on the face of the earth, have a demographics problem, and negative interest rates…. But don’t let those things get in the way of a so-called “Flight to Safety”, eh?   

Now, buying Treasuries, as a “Safe Haven” makes a little more sense than buying yen… Of course, I would think that the only real “Safe Haven” would be Gold (& Silver of course!)… Don’t look now, but the 10-year Treasury’s yield has slipped downward to 2.64%…  Just when you thought that Treasury yields were going to the moon, we turn on a dime, and the next thing you know is Treasury yields are below 3%, and now sliding further to 2.64%…   

Basically, for those of you new to bonds…  As bond yields go down the price of the bond goes up, and vice-versa. So, this means for the past couple of months Treasury bonds have rallied, and when bonds rally, that means that the “bond boys” don’t believe in the economy…  And therefore they believe that owning bonds is the better choice…  I was taught early on in my career in markets, to always watch the trading in Treasury Bonds, for they will tell you a lot about the future of the market…  My first mentor in bond trading, was a man named Ed Bonawitz…  I have remained friends with him through the years, and I thank him here, for pointing me toward bond trading. 

OK, I did some reading yesterday, and came across a quote from one of my fave economists, Danielle Di Martino Booth, who said that it was her belief that the Fed would pause in 2019…   I was glad she jumped on my bandwagon, as she’s very well respected, and the author of the book: Fed Up…   Ahem… (as I clear my throat)  Got Gold? 

Speaking of Gold… The shiny metal was allowed to gain a couple of shekels yesterday, and is up another couple of shekels this morning… These moves are quite small, but they are positive, and that’s important! As eventually the small gains add up to a nice big gain… At least that’s how things usually work, but with Gold… Who knows?    I give you my opinions, and guys like Mike Maloney, James Rickards, and so on, give you their opinions on the direction of Gold, but we don’t know anything that you don’t know about its prospects!  I’m just saying… 

The U.S. Data Cupboard today, will have the ADP Employment for December, which, as I’ve told you previously, this report is supposed to give us an indication as to what the BLS has up their sleeve for tomorrow’s Jobs Jamboree, but that rarely happens…  We’ll also see the ISM Manufacturing Index for December, and I believe we’re going to begin to see the effects of the Trade War here in the U.S. with this data print. So expect a reduction of the index number…  And then finally, we’ll see the color of the total vehicle sales in the U.S. also for December… 

To recap…  The year, 2019, has started out differently than previous years, and Chuck hopes that it continues to play out, which would mean that the currencies and metals are soaring in the second half of this year!  Apple issued an earnings warning, their first in 20 years, and that has the markets spooked this morning, with a flight to safety, which means yen and Treasuries are being bought… 

For What It’s Worth…  Longtime reader Bob, sent me the link to this article, which I later found in my email box from the RT, and it’s about how countries are ditching the use of the dollar, and it can be found here: https://www.rt.com/business/447915-top-states-ditching-dollar/

Or, here’s your snippet: “The past year was full of events that inevitably split the global geopolitical space into two camps: those who still support using US currency as a universal financial tool, and those who are turning their back on the greenback.

Global tensions caused by economic sanctions and trade conflicts triggered by Washington have forced targeted countries to take a fresh look at alternative payment systems currently dominated by the US dollar.

RT has taken a deeper look into the recent phenomena of de-dollarization, summing up which countries have taken steps towards eliminating their reliance on the greenback, and the reasons behind their decision.”

Chuck again… What? you thought I would give you the 5 countries that the RT sees ditching the dollar in the snippet? No.. you’ll have to click on the link to find the 5 countries ditching the dollar… Sorry! 

Currencies today 1/3/2019: American Style: A$ .6953, kiwi .6631, C$ .7343, euro 1.1343, sterling 1.2560, Swiss $1.0112, European Style: rand 14.5405, krone 8.7605, SEK 9.0767, forint 284.57, zloty 3.7962, koruna 22.6750, RUB 69.31, yen 107.55, sing 1.3683, HKD 7.8379, INR 69.98, China 6.8599, peso 19.62, BRL 3.8469, Dollar Index 96.46, Oil $46.36, 10-year 2.64%, Silver $15.55, Platinum $791.43, Palladium $1,265.28, and Gold… $1,287.24

That’s it for today…  And this week… Short week for yours truly, but judging from all the people out during the day this week, I would have to think I’m not alone! Tomorrow would have been by dad’s 94th birthday, but he died at 70, but I still think about how great it would be if he was still around at 94! His mom, my grandmother, died at 99, so, it could have happened!  So… who are you rooting for: Alabama or Clemson in the College Championship Game that will be played next Monday night? And the NFL playoffs begin this weekend, Hockey is in the middle of their season, and conference play begins for College Basketball… Great stuff! Van Morrison takes us to the finish line today with his classic rock song: Brown Eyed Girl…  When I used to play this song on the trading desk, Jennifer would always say he was singing to her!  And with that, it’s time go… I hope you have a Tub Thumpin’ Thursday, a Fantastico Friday, and remember to Be Good To Yourself! 

Chuck Butler

 

 

 

 

Out With The Old, And In With The New!

January 2, 2018 

* 2018 was best year for dollar since 2015

* But 2019 will hold challenges for the dollar… 

Good Day… And a Wonderful Wednesday to you! Welcome to January 2019! A new year to start, and the end of the old year… I read this weekend that 2018, was actually the best year for consumers in quite a long time.. So, there you go! I tried to find where the qualifiers were for that statement, but couldn’t, as usual, as journalism has gone to the way, of quick hits, without fact checking, to see if a rise can be gotten from the reader… OK… It’s been nearly a week since we last talked, so we have some things to get to today. But first, the Moody Blues greet me this morning with their song: Maybe.   From my fave Moody Blues album. Seventh Sojourn

The currencies, led by the Big Dog, euro, finished the year 2018, on a high note, with some exceptions, and those exceptions being the Petrol Currencies. However, having said that, Reuters tells me that 2018 was a good year for the dollar, and was its strongest year since 2015…  Boy, it sure didn’t feel like it was going that way for the first part of 2018, when I was sure that the strong dollar trend was ending… But then along came more rate hikes by the Fed, and optimism was abound here in the U.S. And the dollar became the beneficiary of those things. 

The stock jockeys have moved front and center in any discussion of markets these days… And will continue to dominate the news in the markets as we work our way though 2019… I hope not to have to talk about them that much!  I found it interesting this morning, that Reuters had that story about the dollar being so strong in 2018, and then right below that one there was an article about how the dollar will face challenges in 2019… 

In my own humble opinion, I’d have to say that that’s going to be an understatement… But then that’s just me, and how I see things. But if we really put our ear to the ground, we can here the rumbling of the recession train coming our way, and once that hits, it’s going to be anyone’s guess just how deep it runs, but if I were to be asked, I would say that this one will be worse than 2007/08, because, we never corrected the problems of 2007/08, all we did was make matters worse, with more debt, more derivatives, more easy credit, leveraged loans, and a Central Bank that hasn’t got a clue about any of that! 

Did you know that… Since 1950, there have been 13 Fed Rate hike cycles… OK, so what Chuck? Well, of those 13…. 10 have been followed by a recession… So, what are the odds of that happening this time, you ask? Well, 10 of 13, would not only put you in the Baseball Hall of Fame, but would get the whole shootin’ match named after you, that’s how great those odds are! I’m just saying… Take if for what you want… But instead of singing Santa Claus is coming to town, I’ll be singing: An economic recession is coming to town… 

The Data Calendar for the world, shows a lot of holidays still being taken this week by various countries, which is going to throw all the attention to the U.S. and its Jobs Jamboree on Friday this week…  However, the U.S. Data Cupboard starts out slow as we begin 2019, but comes to a crescendo on Friday, with the December jobs created report.  Job creation seems to be slipping here in the U.S. as the Weekly Initial Jobless Claims ratchet higher each week.  But we’ll never know the true health of the job market here in the U.S. because the Bureau of Labor Statistics (BLS) won’t allow that to happen… 

Gold seems to be back on everyone’s minds once again, as we start 2019, the shiny metal has rebounded the last couple of weeks to end 2018, and has begun 2019, on the good foot, as James Brown used to sing. I was wrong, at the beginning of last summer, when I said that I thought by the end of summer Gold would have made a strong move higher.  So, put that one down on my grade as a red mark…  But have you been following the story that’s unfolding about the former metals trader at JP Morgan who has become a whistleblower and is being taken to court to tell his side of the price manipulation in the metals?   I find this to be quite interesting, and wonder why the major news outlets haven’t picked up on it? 

Don’t kid yourself here, I know why, I just don’t want to talk about it to start the year!  Any-old-way, I continue to see Gold on a breakout higher, that’s coming… I’m just saying… 

Well, they might be saying that 2018 was a good year, and I would point to the debt accumulation in 2018, and say, what was so good about it?  In 2018, here in the U.S. the current National Debt grew by $1.37 Trillion, which drills down to $10, 743 per resident…  That’s the increase in 2018, folks, not the total!  We’re at $21.9 Trillion in current National Debt, and a measly $66, 450 per resident, or even worse $179,224 per tax payer… 

10 years ago, I stood in front of about 700 people in Vancouver, and put up on the screen a flashing red number that was $45,000… Which was the total debt per resident then, and you should have heard the gasp from the audience…  Here we are, 10 years later, and things have continue to rot…  And before we go on here, let’s not forget that the total Unfunded Liabilities here in the U.S. are greater than $121 Trillion, and that professor Lawrence Kotlikoff says that he can prove that our debts are greater than $200 Trillion!!!!!! 

OK, I’ve got to change subjects before I go down this rabbit hole and never come back out! I’ve been reading some stuff that makes you want to make sure you’ve put away all the sharp objects, and I promise I won’t talk about them here, except to say…  You know all those dollars you have hidden in coffee cans, and under the mattress? Well…  You might want to re-think those depository options…   And one more thing…. Got Gold? 

The U.S. Gov. has been on partial shutdown for over a week now… President Trump wants his wall, and the other side wants to tax and spend on programs that get them reelected… and neither side is willing to talk about how to get a grip on deficit spending…  I’m just saying… 

This is just the start of the gridlock that’s going to strangle any progress from Congress for the next two years. And that should be downright awful for the dollar, but I guess we’ll have to wait-n-see, eh?

China has started the year with weaker manufacturing data, and that has the Commodity currencies running for cover… For if the Chinese economy is going to go even slower, Global growth will be non-existent, and therefore commodities will not be in demand, and if commodities aren’t in demand, then the commodity currencies aren’t either…  So, line them up and take a good look at them, for they won’t be getting any love IF, and that’s a BIG IF, China does slow down…   Australia, New Zealand, S. Africa, Russia, Brazil, Norway, Canada, and a few others…  

The price of Oil has fallen to $45, and it does not appear to be able to buy a bid right now, so we could very well, see it continue to slide. All the owners of those BIG HONKING SUVS, are loving this drop in the price of Oil… And further, the homes in the North that still get heated with propane and other heating oils, those people are smiling like the Cheshire Cat! 

The European Central Bank (ECB) did end their bond buying program on 12/31, as they said they would… I don’t know why I doubted them in some degree, but those doubts were laid to rest on 12/31…  The Eurozone is still offering negative interest rates for deposits, which can’t be any fun, can it?

The euro, though is a tough old bird, and continues to do rope-a-dope defensive measures over and over again, to remain stronger than the dollar. 

To Recap…  Out with the old, and in with the new, which probably won’t end up being very good, but it’s shiny and new, so everybody likes it right now… The currencies led by the Big Dog, euro, minus the commodity currencies, saw some buying to end the year, and Gold has been on a two week run, is this the beginning of the strong breakout, Chuck’s been talkin about? Hmm….. 

For What It’s Worth… The fine folks at GATA pointed me to this article on Reuters over the weekend that talks about how the dollar is slipping as a reserve currency around the world, and it can be found here: https://in.reuters.com/article/forex-reserves/us-dollar-share-of-global-currency-reserves-hits-near-5-year-low-imf-idINKCN1OR1DO

Or, here’s your snippet: “The U.S. dollar’s share of currency reserves reported to the International Monetary Fund fell in the third quarter to a near five-year low, while the euro’s share of reserves grew to its largest in almost four years, data released on Friday showed.

The Chinese yuan’s share of allocated reserves shrank for the first time in the third quarter since the IMF began reporting its share of central bank holdings in the fourth quarter of 2016.

Reserves held in Japanese yen reached a 16-year peak in the third quarter, IMF data showed.

Global reserves are assets of central banks held in different currencies, primarily used to support their liabilities. Central banks sometimes use reserves to help support their respective currencies.

Total allocated reserves increased to $10.71 trillion in the third quarter from $10.51 trillion in the previous quarter.

Reserves held in U.S. dollars rose to $6.63 trillion, or 61.94 percent of allocated reserves, in the third quarter, from $6.56 trillion, or 62.4 percent, in the second quarter. The share of allocated U.S. dollar reserves declined to its smallest since the 61.27 percent in the fourth quarter of 2013, IMF Data confirmed.”

Chuck again… Well, they used to say when the dollar would slip in reserve holdings that it was because of the loss of value, skewering the amounts… But since the dollar has been in a somewhat strong trend since 2011, one would have to think that previous thought is no longer the case, and instead Countries around the world are lowering their dollar reserves, just like I’ve been telling you they were doing, but now the IMF confirms it!

Currencies today 1/2/2019: American Style: A$ .7008, kiwi .6705, C$ .7334, euro 1.1435, sterling 1.2667, Swiss $1.0156, European Style: rand 14.5137, krone 8.6610, SEK 8.9279, forint 281.81, zloty 3.7592, koruna 22.5340, RUB 69.55, yen 109.06, sing 1.3635, HKD 7.8332, INR 69.92, China 6.8763, peso 19.70, BRL 3.8766, Dollar Index 96.28, Oil $45.00, 10-year 2.65%, Silver $15.45, Platinum $791.22, Palladium $1,263.39, and Gold… $1,286.59

That’s it for today… Another year…  I’ve been writing the Pfennig since 1992…  Back when there was a pfennig coin! My good friend Rick is pumped that his Clemson Tigers will play for the National Championship! My beloved Mizzou Tigers laid another Bowl egg…  UGH! The NFL Playoffs will start this week… I don’t know about you, but for my money, I would watch the Rose Bowl and no other Bowl Game if it came down to that! What a beautiful setting…  Well, I’m down south again for the winter, away from potentially cold weather… And so I’m going to go out and soak up some Vitamin D as soon as I hit send this morning!  Little Feat takes us to the finish line today with their song: Fat Man In A Bathtub…  (I wonder if they were singing about me? HA!)  And with that, it’s time to go… I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler

 

For Auld Lange Syne…

December 27, 2018 

* Currencies and metals rally while Chuck’s gone! 

* Stocks take their jockeys for a wild and wacky ride! 

Good Day… And a Wonderful Wednesday to you! Well, did you get through everything you wanted to do for Christmas? I did… Yesterday was my wife’s birthday, (I’m not supposed to talk about her in the Pfennig) So, Happy Birthday anyway! I learned the first year we were dating that I was supposed to buy two different presents. One for Christmas and one for birthday, and never will the two be the same! Man, that was a long time ago! We’ve now spent 47 Christmases together… And I’ve not messed up with the presents since 1972! We’ve got a lot to talk about today, and the Moody Blues greet me with their song (from a long time ago): Questions…

Well, Front and Center this morning I want to thank, from the bottom of my heart, everyone that sent along Christmas wishes and kind words, responding to my Christmas eve-day letter… If you missed it, you can still go to www.dailypfennig.com to see it…

OK… Well, the Fed did hike rates last week, just like I said they would do, even with all the ideas going around that the Fed would pause… I’ve said this for a couple of years now, and I’ll keep saying it until things change, but the Fed is hell bent and whiskey bound to hike rates, and Fed Chairman Powell, basically said that, when he commented that he would be hiking rates more in 2019, and… this is the part that most pundits and economists forget about… He said that the Fed would be continuing to reduce their balance sheet by $50 Billion a month… Well, if that’s so… then that would be equal to $600 billion in 2019. That equates to 3 extra rate hikes on top of the two announced in his statement.

If that doesn’t bring down the house of cards economy here in the U.S. I’ll be a monkey’s uncle!

HA! When was the last time you heard that phrase? I do believe the stock jockeys get the message though, because they sold stocks like funnel cakes at a State Fair, after the Fed’s rate announcement and following statement. Stocks had fallen so far that U.S. Treasury Sec. Mnuchin, reportedly called in the Big Guns… the Plunge Protection Team, in an effort to keep stocks from falling further.

Stocks fell over 600 points on Christmas Eve… and rallied over 1,000 points the day after Christmas, and the day after Mr. Mnuchin said he was releasing the Kraken, I mean, the PPT… So, take yesterday’s rally for what it was… PPT fueled, but for how much longer will this medicine work, or will it end up being like my cancer medicines through the years, that work for a while, then my body adjusts to them and then they don’t work any longer, and I have to go onto a new cancer drug?

There’s a lot to be said about that scenario when it comes to stocks, but I’ll let the stock jockeys deal with it, I’m just here to report what I see…

Well, if you ask me, and I’m not stock jockey, but I certain have an opinion about that, and if I were a stock jockey, I would be running for the hills, because by nature of admitting that stocks are so bad that he has to call in the PPT, that would scare the bejeebers out of me… I’m just saying…

Of course, a lot of people believe the U.S. economy is the stock market… So, this will be a case of which came first the recession, which stocks perform miserably during, historyically that is, or stocks performing badly causing the recession? Chicken and egg, right? Well, I’m not one to think the stock market is the economy… I think more that it is a result of the economy… So, I’m going with the recession will cause stocks to fall badly…

Speaking of a recession… There was a great Twitter battle of thoughts going on last week… One side claimed that you can’t possibly experience a recession following a 3% GDP quarter… And finally one astute follower replied, “except in 1953, 1957, 1960, 1973, and 1981″… That shut the other side up… 

OK… Onto other things… I don’t like spending a lot of time talking about stocks, but when they are tied to a recession, then they get mentions! You know, I had a lot of time to look at the rest of the world, in addition to our country’s situation… And there aren’t a lot of countries that are isolated from this buildup of leveraged Corporate Debt, and country debt… Russia for one, is a country that doesn’t fall into that trap… Singapore is another… New Zealand is another, but they have different problems right now…

Of course a major rise of the price of Oil would go a long way toward helping two countries; Canada and Norway, but unless Oil makes a major comeback, these two will get thrown in with all the others… UGH!

The European Union, or rather, the Eurozone, is prepared to end their bond buying program next week, but they still have negative interest rates… And the Eurozone economy, as a whole, isn’t ready to leave negative interest rates…

But overall, it was a good week for the currencies and metals… The currencies and metals traders must have thought that I was back yesterday, for they gave back some of their gains from last week while I was gone… UGH! But as I’ve said before… If you really want to test the idea that “When Chuck’s away” the currencies and metals rally”, you can send money to fund my retirement to: …….. HA!  

There were a ton of articles last week, regarding the soaring price of Palladium… The metal’s price has softened a bit since I last talked to you…I don’t mean that it’s gone down, I mean that it’s not as heavily traded each day, it’s still over $1,250 an ounce, which is not something to diss… Heaven’s To Murgatroid, NO!  I’m not doing that! If traders and investors want to continue to push Palladium higher then so be it! 

Any way… the thing that’s got Palladium so all juiced up, is that apparently electric cars are not, what they were expected to be by now, and combustible engines, needing Palladium in the catalytic converters is what this is all about…  So, let’s circle back to the talk above about a recession… Do cars sell the newest toy at Christmas during a recession? I don’t think so! I’m just saying…

Well, all the Kings men and all the Kings horses couldn’t put debt in its place around the world in 2018…  Here in the U.S. our national debt is closing in on $22 Trillion, and the unfunded liabilities are $116 Trillion… Debt is everywhere, but since most of us live here in the U.S. we need to keep our eye on the U.S. Debt…  Right now, according to the Debt Clock, which can be found here: www.usdebtclock.org/ , the liability of each tax payer (that characteristic is important) is $949,000…  How much longer can this go on? 

 Also in 2018… We saw currencies rallies that looked like they were bound and determined to start a new strong trend, only to be beaten back… We saw a Trade War begin, and folks, let me tell you… We haven’t seen anything yet… The big claws of the Trade War begin to be exposed in 2019… So get ready for that!  

We saw Bond yields rise, and then fall again… The 10-year Treasury’s yield found its way to 3.25%, only to see it fall again to today’s 2.77%…  Short yields inverted, briefly, in 2018, was it a sign? We’ll see in 2019…  And Gold started the year around $1,300, fell, nearly 100 dollars, but has since recovered to this morning’s $1,272… On it’s way back to $1,300?  I would think so given all that’s going on in the world, but then who knows?

Let’s hope 2019, is more stable… I doubt it will be, but then that’s just me…  We’ll, also be observing some notable things that have happened 100, 50, and 25 years ago during 2019, of which I going to highlight the one’s I feel are important… 

100 years ago… World War 1 ended…  We also passed the 19th Amendment giving women the right to vote. 

50 years ago…  We experienced Woodstock… Charles Manson… The first message was sent by a computer, Scooby Doo and Sesame Street first aired, and Man landed on the moon. 

25 year ago…  Remember that sucking sound? NAFTA was implemented, Amazon was founded, The World Series was cancelled due to a strike, (worker’s strike, not a pitched ball!) And the first OJ Simpson trial took place… 

So, how about that?  There will be lots of remembrances of things in the past that take place in 2019… 

OK… The U.S. Data Cupboard has been wishy washy lately with data prints with the holiday and G.H.W. Bush’s funeral.  Yesterday’s Data Cupboard saw the Case/Shiller Home Price Index for Nov. remain unchanged from Rocktober… This was interesting because recent prints had shown home prices falling…   

Today’s Data Cupboard has the Weekly Unemployment Claims, which have been trending upward in recent prints, New Home Sales for Nov. and the stupid Consumer Confidence report for this month… Not much here to move the markets today, so we’ll move along, for these are not the droids we’re looking for… 

To recap… It’s been a wild and wacky week for stocks, and the BIG BOYS of the PPT had to be called out to save the day… Here I come to save the day, that means that Mighty Mouse is on his way!  The currencies and metals traders marked up the two asset classes because “Chuck Was Away”, and Chuck offered up a solution to that scenario, should everyone want to see it last! HA!  Bond yields continue to go downward here in the U.S., and because electric cars aren’t what they were thought they would be by now, Palladium is still soaring in price… 

For What It’s Worth… OK… I’ve said all along that Russia’s economy was going quite well, despite the economic sanctions placed on them by the Eurozone and the U.S., and that if these sanctions were removed we would see the true strength of the economy, which of course would mean the currency would be allowed to rally.  Well, here’s an article that I came across last week from Bloomberg that talks about how the Eurozone is softening up on their sanctions, and it can be found here: https://www.bloomberg.com/news/articles/2018-12-19/europe-loses-taste-for-punishing-russia-as-u-s-toughens-stance

Or, here’s your snippet: “Almost five years since Russia’s military intervention in Ukraine sparked Western sanctions that have helped to smother growth, European governments are losing the appetite for punishing actions against Moscow. That’s no solace for investors.

While the European Union shied away from penalizing Russia after a naval clash with Ukraine last month that was condemned by the West, the U.S. is threatening escalating sanctions tied to accusations of Russian meddling in the 2016 presidential elections. The risk of new measures has made it much harder for foreign businesses to work in Russia.

“The most effective sanctions are the ones that aren’t entirely clear, because the lack of clarity has a chilling effect on investment,” Frank Schauff, chief executive officer of the Association of European Businesses in Russia, said in an interview. A sanctions law passed by Congress last year that allows for additional steps “will be in place for a long, long time,” he said.

The U.S. and the E.U. imposed sanctions over Russian President Vladimir Putin’s 2014 annexation of Crimea and support for separatists fighting in eastern Ukraine. There’s been little progress on implementing a 2015 peace accord to end the conflict in Ukraine’s east, giving the EU no scope for easing the penalties. The bloc agreed unanimously last week to prolong the sanctions for another six months. Together with a slide in oil prices, the U.S. and EU measures contributed to a slowdown in Russia’s economy and helped deter foreign investment.

For now, major European companies with operations in Russia are hunkered down but are finding it hard to finance expansion because banks are wary of U.S. reprisals. German investment averaged $550 million annually since 2013 compared to $3.6 billion a year from 2007-2012. French companies invested $666 million in the first half of 2018, down from a peak of $2.6 billion in 2010.”

Chuck again…  Long, too long, I know, but I wanted to let you read about the sanctions and how they could be softening… 

Currencies today 12/27/18: American Style: A$ .7048, kiwi .6713, C$.7348, euro 1.1399, sterling 1.2640, Swiss $1.0088, European Style: rand 14.5305, krone 8.7510, SEK 9.0266, forint 282.10, zloty 3.7628, koruna 22.6947, RUB 68.91, yen 110.80, sing 1.3729, HKD 7.8310, INR 70.07, China 6.8884, peso 19.88, BRL 3.9101, Dollar Index 96.76, Oil $45.41, 10-year 2.77%, Silver $15.10, Platinum $796.26, Palladium $1,258.83, and Gold… $1,272.01, 

That’s it for today, this week, and this year! That’s right… on Monday, 12/31, I’ll be traveling to the Dixie sunny shores, from Atlantic to Pacific, gee the traffic is terrific!  HA!   So, next Pfennig will be on Wednesday 1/2/19…  The Big College Football Playoff Games are this weekend… I’ll be glued to the TV… And my beloved Missouri Tigers play their bowl game on Monday.  Alex will representing the Butler clan at the Bowl Game… I get to visit my oncologist today… And then I won’t see an oncologist for 3 months! That’s the longest I’ve gone between visits in 5 years! WOW! I don’t think she’s going to like the weight gain I’ve had during the Christmas holiday, but then who doesn’t gain weight then?  So, this is it for 2018… I said it last year, and I’ll say it again now…  The Celtic Women’s Christmas CD is one of my faves, and Lisa sings Auld Lange Syne… you should put that one on your bucket list of things you want to hear, because I’ve never heard anyone else sing it better…    but to help you through on New Year’s Eve so you don’t have to mumble the words… 

Should auld acquaintance be forgot,
and never brought to mind?
Should auld acquaintance be forgot,
and auld lang syne?

For auld lang syne, my jo,
for auld lang syne,
we’ll take a cup o’ kindness yet,
for auld lang syne.

So, long for 2018…  Be Careful out there on New Year’s Eve… Kathy’s Dad used to call it “Amateur’s Night”…   Ambrosia takes us to the finish line for the last time in 2018, with their song appropriately titled: Holdin’ On To Yesterday…   I’ll see you again next Wednesday, until then… Happy New Year’s!    bye~