ECB Confirms The End Of Their Bond Buying Program!

December 13, 2018

* Currencies drift through Wednesday… 

* California wants to do what? Wait until you hear this one! 

Good Day… And a Tub Thumpin’ Thursday to you! I’m saving myself for tomorrow, so I won’t be Tub Thumpin’ Today or tonight… Tomorrow is our (the guys in the neighborhood) annual “shopping day”, so it will be a long day for yours truly… And then we’ll be 1/2 – way through the month of December… The sun was out again yesterday, making the temperature outside bearable, but still too cold for me! I’m back to listening to Christmas music from my satellite radio station, and this morning it’s playing Chet Atkins singing Silver Bells… When I was a very young man, I remember hearing my first Christmas song, and it was Silver Bells, which my mom told me she liked a lot, and so now when I hear Silver Bells, I think of my mom…

Well, the currencies tried to mount a rally yesterday, but just couldn’t get past the border patrol, who had the road to bigger gains on the other side of the border patrol’s gate. So, small gains were all that was on the docket for yesterday. Data here in the U.S. didn’t help the dollar’s fate going forward, as CPI (consumer inflation) saw 0% growth in November from Rocktober, and Core CPI gained just .2%, unchanged from Rocktober. I don’t believe that the Fed really pays much attention to the CPI prints, for if they did they would be backing away from the rate hike table very quickly… I said yesterday, that I doubt many people pay much attention to the stupid CPI any longer, after years of being hedonically adjusted. But stocks had a good day, not as good as they were having in the middle of the day, but a good day nonetheless…

This up one day down the next day for stocks is a very telling sequence of things… Historically, a bear market starts off with these kinds of days… So… there you have it…

The U.S. Treasury 10-year’s yield gained a couple of shekels and finished the day with a 2.90% yield, up from 2.8i9% yesterday… Last week we had the short end of the Treasury yield curve invert…. That should have scared the bejeebers out of most people, but then it didn’t last too long, But the 2year and 5year Treasury right now, yield the same level 2.77%… So a full inverstion is teetering, folks…

I read a report yesterday that claimed that Oil supplies had seen a huge chunk withdrawn. and I thought, well that should be good news for the price of Oil… NOT!  I guess supply and demand just doesn’t rule the roost any longer, eh?  Yesterday, I talked about the shortage of Silver, and that doesn’t seem to make a difference, and so on… Oh, and there’s a semi-truck load of dollars out there, and it doesn’t seem to hurt the dollar’s value… I’m just saying!

Gold and the other precious metals had a day of drifting, with even Palladium the recent star each day, taking a pause for the cause.  I have a brief article for you from Jim Rogers this morning in the FWIW section, where he talks about commodities, and repeats my thought from a couple of weeks ago, that Commodities should rebound in 2019. So, we’ve got that going for us today… 

The European Central Bank (ECB) is meeting while I talk, but they have already confirmed the one thing, and that is that they will be ending their bond buying at the end of this month, as planned. Recall I said that the risk was that they would decide to delay this end of bond buying, given the recent data that has been damaged by the Trade War. So, that’s out of the way, and the euro has already begun to move higher this morning! 

I had a dear reader chastise me for always banging on the dollar… Well, I say, gimme one reason to love you, as Bonnie Raitt once sang… I told him that I just didn’t think that the Fed, Treasury, and Congress had done a good job shepherding the Reserve Currency of the world, accumulating debts that can never be repaid, and therefore the shepherds have brought this banging on the dollar on themselves…

Besides, I don’t want to see this stuff happening, but since most people don’t write about it, I take it upon myself to be there for you. I use dollars for gas, groceries and giggles, and would prefer to see the power that be, take better care of the dollar… And that’s all I’m saying about that!

But that got me thinking…  Had I become so dollar-centric? That made me think back of things I’ve said about other countries and their dolt Central Bankers? 

And of course, I’ve beaten on the U.K. for first their debt, second the choosing of Mark Carney as BOE gov., and then the problems with negotiating a BREXIT agreement… I agree with those traders keeping the pound down in value while this all gets sorted out.

I’ve been hard on the beaver, I mean Australia for not hiking rates and now they have a housing bubble ready to pop…

I didn’t have nice things to say about the Reserve Bank of New Zealand, after they hinted late last year that they would be hiking rates in 2018, and then crickets…

And I warned people about the new Central Bank Gov. (Poloz) in Canada, when he was announced, because his background was on the Trade Side of the business, and those trade guys are always clamoring for a weaker currency… Since he’s taken over, the loonie hasn’t been able to return to its former lofty value…

I’m not fan of Mexico, as their past indiscretions with foreign investors still weights on the peso, and I’ve pointed out over and over again that until there’s higher rates that represent a rate premium, over other currencies, the peso will remain weak.

So… As I look at it… I don’t always bang on the dollar… But, the dollar does give me more opportunities to do so, and I take them! When you have characters like Lola, aka Goldman Sachs, and JP Morgan Chase, and others to throw darts at, well, they give me plenty of opportunities to do just that…

I told you all this story before, but it works well here too… In 1998, I attended a conference in London, and one of the first questions asked was to see a show of hands of those in the crowd that didn’t believe the euro would make it… I raised my hand… And in 1999 when the euro was introduced it immediately fell in value from 1.17 down to 90-cents… I wrote back in those days that the euro was going to fail, and this drop in price was a precursor to that fall… People back then thought I was banging on the euro a lot…

But once the euro got through its first year, and got a couple years under its belt, and finally called in all the legacy currencies and swapped them for euros, the currency began to rebound, and in 2002, I wrote a white paper titled 2003: The Year of the Euro… So, just because I bang on a currency at some point doesn’t mean it can’t reverse its course… Soon the euro was the 2nd most traded currency in the world, behind the dollar… And the rest, as they say, is history…

And when the hidden debts of the Club Med countries of the Eurozone were revealed in 2011, I backed off my support for the currency, and still believe that until the ECB removes all the stimulus, the euro won’t be allowed to move significantly higher…

Sooner or later Debt is going to come back to haunt a country… And so it will be with the U.S. Shoot Rudy, we already have reduced GDP because of the debt… And just wait for the bond servicing bills, (bond interest) begin to show up at the Treasury’s door… The Trillion dollar a year deficits will only enlarge that number… How long can this go on? Well, apparently longer than I thought, but then it’ll end when it ends, and then it will be too late. I’m just saying!

OK, in other news… U.S. PM May survived a vote of confidence, but with at least 1/3rd of her supporters now against her BREXIT plan, the vote on the BREXIT plan is going to be quite sticky, and could get ugly, which would only add more weight on top of the pound.

And did you hear the proposal to help the deficit spending in California? They want to tax, texts… Talk about one of most insane things I’ve heard from politics… This is it! Considering that texting has become the way that we communicate these days, that would be quite the haul for the California leaders… But… if it costs to text, wouldn’t it behoove the texters to use the phone for what it’s original purpose, make a phone call?

The U.S. Data Cupboard doesn’t have much for us today, and all eyes will be turned to tomorrow’s Data Cupboard, which will have November Retail Sales, which I’ve already told you the BHI indicates that November will be weaker than Rocktober.  

To Recap…  The Currencies drifted yesterday, but the euro is attempting to lead them upward this morning, after it was announced that the ECB will indeed, end their bond buying program at the end of this month.  U.K. PM May survived a vote of confidence, but her BREXIT remains in peril. Chuck goes back and talks about times he found fault with other currencies…  And California wants to tax texts!  yes, I said texts! Crazy, eh? 

For What It’s Worth… I’ve know Jim Rogers for many years, he used to read the Pfennig, but I don’t know if he still does… But when I saw an article with his name in the title, I knew in a moment it must be St. Nick, no wait! It must be good pfodder for the Pfennig’s FWIW… So, this is Jim Rogers talking about commodities, and it can be found here: thesoundingline.com/jim-rogers-commodities-will-outperform-stocks-oil-is-making-a-complicated-bottom/
Or, here’s your snippet: “t is the time to buy commodities again. I would say to you and you can write it down… commodities are going to do better than stocks in the future.”

“I have learned not to pay too much attention to OPEC… I think oil has been down ten days in a row which is one of the few times in history that that’s ever happened. Oil is making a complicated bottom. We are going to look back one day and say ‘2015, ’16, ’17, ’18, ’19, oil made its bottom, and then oil is going to go up again. Known reserves of oil are in decline, and continue to decline, except for fracking, but that bubble has popped, so be careful. Don’t sell your oil.” – Jim Rogers

Chuck again… I watched the video that’s on the website, and Jim Rogers mentioned that he thinks Sugar is a buy, as it’s down 80% from its high. “There are not a lot of things in the world that are down 80%” was what he said…

Currencies today 12/13/18: American Style: A$.7227, kiwi .6865, C$ .7483, euro 1.1370, sterling 1.2660, Swiss $1.0075, European Style: rand 14.6330, krone 8.5653, SEK 9.0570, forint 284.10, zloty 3.7739, koruna 22.7080, RUB 66.36, yen 113.46, sing 1.3706, HKD 7.8083, INR 71.42, China 6.8828, peso 20.12, BRL 3.8777, Dollar Index 97.07, Oil $50.54, 10-year 2.90%, Silver $14.72, Platinum $799.74, Palladium $1,259.92, and Gold… $1,242.91

That’s it for today… And tomorrow… and the next two weeks! Yes, I’ve talked about it a lot, but it’s finally here, my annual Christmas vacation!  While I’m gone there will be a few birthdays to celebrate… My sister Terri, Jen Mclean, Ty Keough, Kathy, and of course the most important birthday of all, that of Christ.  So, Happy Birthdays all around…  I plan on writing a Christmas Pfennig, so I won’t be away, for good those two weeks, and if you follow me on Twitter, you never know what I might say there! I hope everyone has a very blessed Christmas… I’ll be back on the 27th and I’m sure there will be some catching up to do… Until then I suggest you go to sleep and dream of SNOW… (Bing Crosby!) HA!   Yes, faithful friends who are dear to us, gather near to us, once more… And we all will be together if the fates allow…   So, like I said I hope you have a Blessed Christmas, or whatever holiday you personally celebrate.  I hope you have a Tub Thumpin’ Thursday, and remember to Be Good To Yourself! 

Chuck Butler

I Guess When You’re The Former Fed Chair, You Can Backtrack…

December 12, 2018 

* Currencies get derailed again on Tuesday

* Chuck smells something fishy with the Palladium trading… 

Good day… And a Wonderful Wednesday to you! The sun finally came out yesterday and warmed the air a little bit… It’s too late in the year for it to be warm here, but the air did feel warmer while in the sun, and that’s a good thing to me, who’s stuck here until the end of this month! Good luck to Alex today, as he takes an important big test that he’s studied for the last two days and nights… Our Blues tried to skate out of the rut they’ve been in with a spirited 3rd period rally to win last night.. And The Charlie Daniels Band greets me this morning with their song: The Devil Went Down To Georgia…

Well, once again yesterday, the currencies were on the rally tracks in the morning, and by mid morning they are derailed by the dollar bugs… UGH! I really have no idea what moves these dollar bugs to derail the currencies, because there was nothing in the data reports to get them all lathered up… The NFIB Small Business Index for Nov. fell from 107.4 to 104.8, and the Producer Price Index (PPI) fell from .6% in Rocktober to just .1% in November… So, tell me what on earth did the dollar bugs see that made them derail the currencies?

The only thing I can think of is that the dollar bugs want a higher starting point for the dollar when the walls come crashing down on the economy, and the dollar gets sold… That’s a stretch, I know, but my goodness, what else is there?

They can’t be pinning their hopes on the Plunge Protection Team to keep rescuing them or the stock market for that matter. Bond yields are dropping, the President has now decided to call out the Fed by saying “it would be a mistake if the Fed hikes rates next week”… Of course that doesn’t mean the Fed is going to stop their rate hikes now, and rates will be hiked when they meet next week, but… Could that be the last one in this rate hike cycle? You know the song, It’s beginning to look a lot like Christmas? Well, it’s beginning to look like the rate hike cycle is coming to an end…

I have the Reuters news article that highlights the President’s feelings about the Fed’s rate hikes in the FWIW section today… So, hold on, we’ll get to it sooner or later…

Alright then… Well, longtime readers will remember when I kept harping at the Reserve Bank of Australia (RBA) for not hiking rates as they had housing bubbles popping up in the major cities. This was the mistake of the Fed back in the mid 2000’s, ignoring the warning signals of a housing bubble, and then well, we all know how that worked out for us… And the same could be in store for Australia, as housing prices are starting to tumble… It’s a start of bad things to come, and all because the Central Bank failed to heed the warning signs… I get it… Central Bankers think that what happened to the U.S. in 2007/08, couldn’t happen to them… So, they ignored the warning signals, but now they aren’t just signals they are flashing Red lights with sirens and Tornado warnings!

You know, the world would be a better place and a whole lot safer, investment wise, if I were king… I would outlaw Central Banks, except if they wanted emulate the Central Bank of Russia (CBR)… But all interest rate settings would be taken away from the Central Banks if they remained, and interest rates would be set by the bond market. This way there would be no more housing bubbles, stock market bubbles, and bubbles of any kind, because the markets would adjust immediately to the goings on in economies. I would outlaw all QE and negative interest rates… And I would outlaw any requirement to go to a cashless society. And that would just be the start of my changes! Oh, and any banker, investment officer, what ever, that breaks the law would be sent to jail! No more slaps on the wrists, as they walk off with billions in fees earned…

OK… I had better get back to reality here before I begin to talk about fairy dust, and pots o’ gold!

So, there I was last night going through news articles and researching what I might want to talk about this morning, and there it was! It was flashing lights and waving signs at me to look at it… So, I did… But, it couldn’t have been true, for the article talked about how former Fed Chair, Janet Yellen was quoted as saying that she feared a new potential financial crisis, saying that there were “holes in the system”… Wait! What? I thought that she told us before she left the Fed Reserve that she didn’t see a chance of another financial crisis… 

But, just like Big Al Greenspan who finally saw the light after being away from the deep state in the Fed Reserve, now Yellen too sees the light…  Why, oh why, can’t these people that are chosen to lead the Central Bank see the light while they are making decisions that affect all of us? 

I just shake my head in disgust at this stuff…  Yes, technically, she’s right, there is potential for another financial crisis, I’ve been talking about that for months, but I guess too much water has passed under the bridge now and she feels that if the financial crisis does hit, that she won’t be blamed for it…   shame, shame, shame, Janet Yellen…  And that’s all I have to say about that, now… 

Once again in the metals, Palladium shines the brightest… but something interesting happened in Palladium trading yesterday… And it reminded me of the trading first of Silver, and then Gold through the years…  I’ll tell you what happened and let you decide what you think was in play here… Palladium ended up $18 on the day, which looks good, right?  Well, it was up $30 at one point in the day… 

Gold lost 90-cents on the day, so no big move, and it’s up about 2 bucks in the early morning trading today.  I had a dear reader send me a note the other day, telling me that he had bought some Silver, and the dealer had told me that supplies were dwindling… He asked me how the price of Silver was so cheap, with supplies falling?  That’s when I went to Ed Steer’s letter (www.edsteergoldandsilver.com) to get the production numbers that he posts every Saturday. And then I replied to the dear reader that right now it takes 185 days of Silver production to match the number of ounces that are represented in short paper trades… And that’s why Silver can’t find an everlasting bid…    

And I’ve talked about this supply problem for Silver many times in the past… And how Solar Panels should have depleted the Silver supplies, and yadda, yadda, yadda, but Silver can’t get up off the canvas…  I’m just saying… 

The U.S. Data Cupboard had the aforementioned two pieces of data yesterday, and today we’re supposed to see the color of the Federal Budget, which you might recall I made a big deal out of last month, because in the first month of the new fiscal year for the U.S. the Deficit had an annualized number of more than $1 Trillion…  So, Let’s strap ourselves in for this print that might print today, or tomorrow, one never knows, as it’s up to the issuers’ fancy… 

The stupid CPI (consumer inflation) for November will print… I can’t see why anyone even cares about this data any longer, as it has been hedonically adjusted so much over the years, that it no longer resembles the simple basket of goods used to price and calculate inflation… 

To Recap…  Once again, the currencies were on the rally tracks in the morning only to be derailed by the dollar bugs mid morning, and seeing no need to go through the motions of climbing on the rally tracks only  to be derailed each day, the currencies are drifting this morning.  Janet Yellen, yes, that former Fed Chair, Janet Yellen, backtracks on her earlier statements about not seeing another financial crisis… I guess when you’re the former Fed Chair, you get to backtrack your statements, and no one holds your feet to the fire… 

For What It’s Worth… Well, as previously advertised, this is an article from Reuters that highlights how the President really feels about rate hikes… And it can be found here: https://www.reuters.com/article/us-usa-trump-fed-exclusive/exclusive-trump-says-it-would-be-foolish-for-fed-to-raise-rates-next-week-idUSKBN1OB02Y

Or, here’s your snippet: “President Donald Trump said on Tuesday it would be a mistake if the Federal Reserve raises interest rates when it meets next week, as it is expected to do, continuing his criticism of the U.S. central bank.

“I think that would be foolish, but what can I say?” Trump told Reuters in an interview.

Trump added that he needed the flexibility of lower interest rates to support the broader U.S. economy as he fights a growing trade battle against China, and potentially other countries.

“You have to understand, we’re fighting some trade battles and we’re winning. But I need accommodation too,” he said.

Trump named Jerome Powell as Fed chairman, but has repeatedly railed against him since he took over as head of the U.S. central bank last February. Trump in August told Reuters that he was not “thrilled” with Powell’s raising interest rates.”

Chuck again… I characterized this relationship last week, as Trump having “buyers remorse” over nominated Jerome Powell…

Currencies today 12/12/18: American Style: A$.7210, kiwi .6852, C$ .7477, euro 1.1335, sterling 1.2540, Swiss $1.0060, European Style: rand 14.3310, krone 8.5817, SEK 9.1455, forint 285.40, zloty 3.7945, koruna 22.8323, RUB 66.45, yen 113.43, sing 1.3730, HKD 7.8161, INR 71.92, China 6.8989, peso 20.13, BRL 3.9115, Dollar Index 97.37, Oil $52.59, 10-year 2.89%, Silver $14.65, Platinum $789.25, Palladium $1,261.79, and Gold… $1,245.00

That’s it for today…  I wonder what lit the fire under the Blues’ skates last night? 4 goals in the 3rd period! I had turned the game and tv off before the 3rd period and gone to bed with them losing 0-3… Now, if they can only win two in a row and not fall off the bus!  Baby steps…  Well, I see the calendar and it tells me that tomorrow’s Pfennig is the last one before my annual Christmas vacation! WOW! Time goes fast!  Baseball’s Winter meetings are going on in Las Vegas right now… I have expected the Cardinals to announce a few more signings of name players… But so far, just crickets…  UGH!   Don Henley takes us to the finish line today with his song: End of the Innocence…  I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself! 

Chuck Butler

Currencies Attempt To Pick Up The Pieces …

December 11, 2018 

* A HUGE reversal yesterday in stocks, currencies & metals

* Palladium is the star performer this morning! 

Good Day… And a Tom Terrific Tuesday to you! So, did you watch the Army/Navy football game on Saturday? It’s quite the scene, all the pomp and pageantry, and traditions, followed by a football game… I will always attempt to be somewhere where I can watch this each year… It’s not the best football, but it’s football like I used to play it… Grind it out, tough line play, and tough defense. I simply love it! Alrighty then… It’s a Tom Terrific Tuesday today, and with that Chuck is in one foul mood, so he’s listening to Christmas music to calm him down, and right now playing on his iPhone is a jazzy number by Oscar McLollie… Dig That Crazy Santa Claus…

Well, what’s got Chuck all fussed up and in a foul mood today? Could it be the play of our Blues Hockey team? Not exactly… Could it be the cold weather outside? Not today… Well, what then, is it? The Return of the Plunge Protection Team (PPT)… Yesterday when I signed off the currencies were booking gains VS the dollar, and then about mid morning, everything turned on a dime… And it wasn’t just the dollar’s fate… stocks also rallied to erase a very deep loss that was about to get even deeper… The PPT had to be the culprit behind the turnaround in the dollar… There was nothing else going on, and The Fed didn’t exactly come out and say, “We don’t care what everyone thinks, we’re still on course to hike rates throughout 2019”…

What do you believe happened to the currencies’ rally VS the dollar? For the rally ran into a Buzzsaw… And I’ve said my piece on the subject… I can’t say that I’ve really calmed down at this point of the early morning, but I’m ready to talk about something else!

With every day that passes, there’s another article about the Corporate Bonds and the downgrades, the leveraged loans and so on… And yesterday was no different, as a report on Twitter said that: “In the US, about a quarter of junk-rated issuers are now rated at B minus or lower, up from 17 per cent four years ago and the highest level since 2009, according to data from S&P, the rating group.”

And as we inch closer to the same level as we had in 2007… I want to point out that I’ve been sending out the warnings on Corporate Bonds for 2 years… Yes, I’ve been called the boy who cried wolf… But when it eventually happens and the walls come crashing down around us, does it make a difference to the goings on that we had to wait 2 years for this to come about? I don’t think so!

I saw this list of countries and their 2018 projected GDP… I only pulled the major countries that I talk about all the time… India was number 1 with 7.3% GDP, China #2 at 6.6%, Australia #5 at 3.2%,  finally the U.S. shows up with a 2.9% GDP, Mexico will book 2.2%, and Canada 2.1%, Germany will then follow with 1.9%, then Russia (despite all the economic sanctions) at 1.7%, France at 1.6%, and then the U.K. at 1.4%… to round out where these 10 countries will place at year end. 

Just imagine what the U.S. GDP would be without all the Government spending? And I’m going to go out on a limb here and say that 2.9% will be the highlighted year of growth during the current expansion… Whatever, you call it, but I wouldn’t exactly call it “expansion”, but the technical books say it is, so be it!

Russia has managed to eke out 1.7% GDP despite all the economic sanctions they have to deal with… But the ruble has never been able to recover from the HUGE Chunk that was removed from its value after the conflict with Ukraine began a few years ago… Before all that happened, the ruble was around 35… It’s stuck around 65-66 these days, and until the price of Oil goes significantly higher, or the economic sanctions are removed or both (ruble holders would rejoice) the ruble will struggle to get any real traction…

And here’s a brief update on those international payment systems that are popping up in Russia and the Eurozone… The Eurozone Commission issued a report calling for more international business to be done through the Euro payment system, thus removing the dollar from terms of trade. I’ve read that this Euro payment system is really taking off and getting rave reviews… Depending on how wide the distribution is of this system, will determine the hit to the dollar… I do believe it will be HUGE… But then I cast that line in the water a long time ago… 

OK, this happens every time I go to the quotes well, and pull the Bluto quote out and run it up the flag pole, about “was it over when the Germans bombed Pearl Harbor”…  I get readers who believe that I believe the Germans bombed Pearl Harbor! Come on… think about that… I just laugh out loud when I see the comments come through…  Just shows to go ya that the skimming method of reading doesn’t work! HA! 

Well then… The currencies are back on the rally tracks this morning attempting to pick up where they were cut off at the knees yesterday, by what I feel was the PPT. The euro is knocking on the door to 1.14 again, and so on…  Gold, which lost $4 after all the dust settled yesterday, is up about $3.20 this morning. And once again the star performer for the day was Palladium which is up $20 in the early morning trading. 

The Trade War is taking its toll on car sales in China… Imports to China are also falling at an alarming rate…  But here in the U.S. we, as consumers, continue to buck up and buy Chinese goods, while running up massive credit card debt…  

The U.S. Data Cupboard will print November PPI (wholesale inflation), which I believe we’ll see weakening in November, and the NFIB Small Business Index for November, no great shakes here, but I do believe the markets will take notice of any weakness in PPI, for Wholesale Inflation leads to Consumer Inflation, and if that’s going to weaken too, that reduces the Fed’s need to hike rates. 

Speaking of Fed’s rate hikes…  I see that Lola, aka Goldman Sachs is calling for the Fed to pause next March and not hike rates at the meeting. And John Tudor Jones, the hedge fund guy, is saying that the Fed will not hike rates at all in 2019…  Well, I’m of the opinion that the Fed will be ceasing their rate hike cycle ride in 2019, but not before going kicking and screaming… 

To Recap…  The currencies and metals, along with stocks were saw their moves yesterday morning all reversed on a dime, which indicates to Chuck that the PPT was in to flex their muscles, buying dollars, and stocks…  The currencies are attempting to pick up the pieces this morning once again.. Gold lost $4 yesterday, but is up $3 this morning, while Palladium once again is kicking tail and taking names later with a $20 gain so far today… 

For What It’s Worth…  I’ve been talking about credit card debt a lot lately and when I saw this article on MarketWatch, well I knew that I had to highlight it so here it is: https://www.marketwatch.com/story/this-state-is-the-most-burdened-by-credit-card-debt-2018-12-10?mod=MW_section_top_stories 

Or, here’s your snippet: “Where you live in the United States makes a difference when it comes to paying off credit card debt.

It takes the average New Mexico household nearly twice as long to pay off their credit-card debt as it does households in Massachusetts, according to a new report from CreditCards.com. New Mexico had the highest credit-card burden of all 50 states, while Massachusetts had the lowest.

The disparity comes down to the relationship between debt and income, CreditCards.com industry analyst Ted Rossman said in the report. “The states where residents owe the most on their credit cards (Alaska, Virginia, Texas, Maryland and Connecticut) do not rank among the five highest debt burdens because their median household incomes are higher,” he said.

The problem for people who live in New Mexico, Louisiana, West Virginia, Alabama and Arkansas isn’t just how much they owe, it’s compounded by how low their incomes are by comparison.”

In New Mexico, a household earning the median annual income of $46,744 would take nearly 1.5 years to pay off the state’s average household credit card balance of $8,323. 

Chuck again… I think it’s more a case of: Wages just aren’t keeping up with rising credit card debt… 

Currencies today 12/11/18: American Style: A$.7220, kiwi .6885, C$ .7470, euro 1.1395, sterling 1.2607, Swiss $1.0128, European Style: rand 14.2795, krone 8.5788, SEK 9.0425, forint 283.70, zloty 3.7707, koruna 22.6620, RUB 66.46, yen 113.20, sing 1.3720, HKD 7.8156, INR 71.82, China 6.9015, peso 20.22, BRL 3.9076, Dollar Index 96.89, Oil $51.57, 10-year 2.88%, Silver $14.64, Platinum $783.77, Palladium $1,249.21, and Gold… $1,247.66

That’s it for today… A strange day yesterday, I was busy and then the day was over… UGH! I don’t like days like that… Closer and closer we draw nearer to my annual Christmas vacation! And when the alarm goes off in the morning, I will be able to simply turn it off! YAHOO! Can you feel it? I was out for a bit yesterday, and people are smiling and being friendly… The Christmas spirit has touched them… And it will only grow stronger as the days go by… The St. Louis band, Mama’s Pride takes us to the finish line today with their song: Blue Mist…  I hope you have the opportunity to make this a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler

Jobs Jamboree Disappoints!

December 10, 2018

* Currencies and metals rally for the most part

* RBI Gov. steps down, leaving unknowns for the rupee… 

Good Day… And a Marvelous Monday to you! One week down, 3 more until Christmas, and then a few days after that I head south for the winter, to get out of these dreary, cold days! Friday was December 7th, Pearl Harbor Day… I few years ago, Kathy and I traveled to Hawaii, and visited the Pearl Harbor Museum and the things there… I was moved by the whole scenario… I sure hope the younger generations don’t forget… But then it’s probably history that isn’t taught in school any longer, and if it is, they probably tell the kids to feel for the enemy… I’m just saying… And I had better stop there… Johnny Mathis greets me this morning with his version of: Blue Christmas… Nobody sings that song like Elvis… I’m just saying…

Well, the markets are finally figuring out that “no new tariffs”, doesn’t mean “no tariffs” and stocks lost about $1 Trillion of wealth last week… OUCH! That’s going to leave a mark! I’m not being flippant about that, but you can’t say I didn’t tell you to make sure your stop losses are updated and in place! The other thing that weighed heavily on the stocks was a drop in the number of Jobs created in November to 155,000, and the news that should have put shudders down everyone’s collective spines… and that is that Consumer Debt in November exploded by $25.4 Billion! That’s a record folks, and annualized total Consumer Debt has reached $3.963 Trillion, a 7.7% increase from a year earlier… I made a comment about spending for Christmas last week, and it sure holds true, because  credit card debt is rising quickly… Hmmm…

Gold gained more than $10 on the day on Friday, and Bond yields continued to drop, as more and more people jump on my bandwagon… You know the one that I started some time ago that featured highlighting weakening data, and a call for a recession earlier than most people believe it will come. Palladium fought back to gain $16 on the day, after losing a HUGE chunk of its recent gains on Thursday, losing $33 for the day, but was down $55 at one point of the day…

The currencies found some terra firma after the Jobs Jamboree, and the euro headed toward 1.14 once again… that was Friday, and by the time I looked at the currencies screen on Sunday night, the euro had rallied past 1.14! The markets are beginning to believe that the dollar is going to get pummeled.. We’ll have to see about that as there could very well lead to the Plunge Protection Team come in to save the dollar…

Ok, in news from overseas this morning… UK PM May, decided to cancel the vote on her BREXIT proposal. She cancelled it because she didn’t have the votes to pass it, and this news sent shock waves through pound sterling causing it to slide downward on the day, even with the dollar losing ground. 

Further south India saw their Central Bank Gov. Pajit step down unexpectedly… The rupee has been under a lot of pressure after another revalue last week, and speculation is that the Gov. had had enough… I guess he needed a pep talk like the one from Animal House about not giving up… “What? Over? Did you say ‘over’? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no!…
It ain’t over now, ’cause when the goin’ gets tough, the tough get goin’. Who’s with me? Let’s go!” – Blut0, from Animal House… 

So, I think you all know that this kind of news from a Central Bank leaves questions and unknowns, and if I’ve talked about things that move a currency I’ve talked about unknowns more than anything else through the years… And so, with the unknown… the rupee is getting sold like funnel cakes at a State Fair… 

There’s not much in the way of data from the foreign countries this week, but… We will have a European Central Bank (ECB) Policy meeting on Thursday this week…  Ok, let me lay this one out for you…  Previously, the ECB said that they would end their bond buying on 12/31 this year. So, with that in mind, I’m a little leery of the meeting this week, as it will be the last one before 12/31, and this is the meeting where the ECB could announce a delay to the end of bond buying…  So, there’s risk at this meeting, let’s hope it doesn’t come to that! 

As I said above, Gold had a good day on Friday, and a good week, after an awful performance the previous week. The storm clouds are gathering for economies around the world, and that could end up being a real bugaboo for the dollar, and the main beneficiary will be Gold…  At least that’s how I view it… 

Another thing that seems to be heading toward a good thing for Gold is interest rates here in the U.S.  I’ve done this math for you for before folks, but let me go through it again…  The average Fed Funds Rate (FFR) that was in place before recessions, on average, was 6.5%…   We are currently at 2.25%, and will end the year at 2.50%… that’s nowhere near where the FFR needs to be if we are going to enter into a recession next year…  And here’s the other piece of math for you… The average total of rate cuts that have been made during recession in the past, on average, was 4%…  Again, we don’t have 4% of interest rates to cut, now do we?   

And the in demand economist, Danielle Di Martino Booth, had this to say about the interest rate math we just went through on her Twitter feed, “My concern is that we don’t have enough dry powder to combat what is to come.” 

This is why I keep talking about a return to Quantitative Easing, thus ending the Fed’s Great Unwind of their balance sheet. And if the recession is as deep as I believe it will be, I would be a shiny quarter that we end up seeing negative interest rates…  And any trader worth his salt would be looking ahead at this, and figuring out that Gold would be in great demand during a run like this… I’m just saying… 

The U.S. Data Cupboard is pretty empty for most of this week, until we finally see a real piece of economic data in the form of Retail Sales on Friday this week. Until then, we’ll see PPI (wholesale inflation) and the stupid CPI (consumer inflation)…  So, the dollar will be on its own most of this week, and usually that doesn’t bode well for the green/peachback… 

To recap…  The Jobs Jamboree was disappointing last week, stocks are getting sold by the truck load these days, and Gold made a comeback during the week. More folks are jumping on Chuck’s bandwagon, and there’s still some room! The U.K. cancelled their vote on BREXIT, which is not a good thing for pound sterling, and the RBI Gov. stepped down, and Chuck gives him the Bluto pep talk, but I guess it’s too late… 

For What It’s Worth… Well, I’ve been writing about the liquidity crunch, and the leveraged loans held by Corporations for months now, and whenever I see an article that brings this up to date, it catches my eye… And so here it is here: https://www.zerohedge.com/news/2018-12-07/credit-death-spiral-accelerates-loan-etf-sees-record-outflow-primary-market-freezes

Or, here’s your snippet: “One week after even the IMF joined the chorus of warnings sounding the alarm over the unconstrained, unregulated growth of leveraged loans, and which as of November included the Fed, BIS, JPMorgan, Guggenheim, Jeff Gundlach, Howard Marks and countless others, we reported that investors had finally also joined the bandwagon and are now fleeing an ETF tracking an index of low-grade debt as credit spreads blow out and cracks appeared across virtually all credit products.

Specifically, we noted that not only had the $6.4 billion Invesco BKLN Senior Loan ETF seen seven straight days of outflows to close out November, with investors pulling $129 million in one day alone and reducing the fund’s assets by 2% to the lowest level in more than two years, but over $800 million has been pulled in last current month, the biggest monthly outflow ever as investors are packing it in.

Fast forward to today, when another major loan ETF, the Blackstone $2.9BN leverage-loan ETF, SRLN, just suffered its largest ever one-day outflow since its 2013 inception.

Year-to-date, the shares of this ETF backed by the risky debt have dropped 2.6%, hitting their lowest level since February 2016; the ETF’s underlying benchmark, the S&P/LSTA Leveraged Loan Index, has also been hit recently and is down 2.3% YTD, effectively wiping out all the cash interest carry generated YTD and then some.

With the leveraged loan market freezing up – and potentially entering a death spiral – the recent weakness has raised concerns that other debt sales currently in the works may be sold at discounts that are so deep underwriters may have to book a loss, if they can be sold at all. This is precisely what happened in late 2007 and early 2008 when underwriters found themselves with pipelines of debt sales that sudden got blocked, and were forced to take massive haircuts to keep the credit flowing.”

Chuck Again…  With an article title like: Credit “Death Spiral” Accelerates as Loan ETF Sees Record Outflow, Primary Market Freezes…  You can see why it caught my eye!

Currencies today 12/10/18: American Style: $.7220, kiwi .6896, C$ .7512, euro 1.1425, sterling 1.2663, Swiss $1.0117, European Style: rand 14.2745, krone 8.4788, SEK 9.0427, forint 282.27, zloty 3.7568, koruna 22.6530, RUB 66.39, yen 112.70, sing 1.3709, HKD 7.8145, INR 72.40, China 6.8731, peso 20.23, BRL 3.9014, Dollar Index 96.62, Oil $51.94, 10-year 2.85%, Silver $14.55, Platinum $790.52, Palladium $1,230.75, and Gold… $1,246.90

That’s it for today… A little later than usual this morning, sorry…  Had a great day yesterday, attending the Billikens basketball game VS Oregon St. And the Billikens won which made it even better! Well, it was Allison Road’s birthday on Saturday, I hope her day was grand!  Well, I’m a week away from my annual Christmas vacation!  Of course I always have something up my sleeve for Christmas for you dear Pfennig Readers, and this year will be no different!  I always start my vacation on Jen Mclean’s birthday, and end it the day after Kathy’s birthday… So, there you go! Oh, I guess you need to know those dates! HAHAHAHAHA!  You’ll figure it out! HA! OK…  The Allman Brothers take us to the finish line today with my fave Allman Brothers song: Melissa…  I hope you have a Marvelous Monday, and Be Good To Yourself!

Chuck Butler

A Choppy Day Ahead Today…

December 6, 2018  

* Hopes for Global Growth have been smashed! 

* Palladium sees profit taking… 

Good Day… And a Tub Thumpin’ Thursday to you! Well, my beloved Cardinals traded for a much needed middle of the order bat yesterday… So, we got a model citizen, gold glove 1st baseman, Paul Goldschmidt, and solidified our infield defense at 1st Base… But in doing this trade, we basically told our current 1st Baseman that he’s going to have to move to 3rd base, and in doing that, we’ve weakened our infield defense at 3rd base… I’m just asking… Did the Cardinals really think this one out? Welcome to St. Louis Mr. Goldschmidt… I so hope you enjoy being a Cardinal! I sure hope the Cardinals don’t ask him to come here for a press conference… It’s 20 degrees and snowing here, and the sun is probably shining and much warmer in Houston, Texas where he lives… Well, enough of that, eh? Jimmy Dean greets me this morning with his version of the song: Have Yourself A Merry Little Christmas…

Well… The stock market didn’t fall yesterday… Oh, that’s right, the stock market was closed for the funeral of our former President. So, that was a good thing for the stock jockeys, who got a day to catch their collective breaths… But today’s open should be interesting as stock futures are down big at the moment…  The currencies and metals traded though… And the dollar fought back a little bit on the day. I can tell you that with the markets finally figuring out what I had told you was the case with the Trump / Xi agreement at the G-20 meeting, that has put the kyboshes on the Global Growth trade, and negatively affects the Aussie dollar (A$) and its kissin cousin across the Tasman, kiwi…

You see, I’ve told you all this before but for new readers or those of you who missed class those days that I talked about it… The A$ and kiwi are proxies for Global Growth… And that leads me to a question that a dear reader posed to me yesterday, Asking me to reconcile how I could say one day that a deep recession is coming and the next day say that commodities will rally in 2019? Well, it’s a two staged process… first we’re going to have Stagflation, with high inflation and little growth, and that will be the ladder rungs the commodities step on to climb higher in 2019… And then the Deep Recession begins to build… And well, I’ve told you my feelings on how that all ends up before so I won’t go into it again… I’m trying to be optimistic but… You can only be successful with the tools you are given to succeed with… I’m just saying…

There’s some news from last night that are spooking the markets this morning… Meng Wanzhou, a top executive at China’s Huawei Technologies Co Ltd and daughter of the founder and CEO, was arrested, in Canada, and is going to be sent to the U.S. And this news jolted the global business community on Thursday and raised fears that a truce in the U.S.-China trade war could come to a swift end. 

Huawei is the world’s largest supplier of telecommunications network equipment and second-biggest maker of smartphones, with revenue of about $92 billion last year.  And quite frankly the stealing of intellectual property has been the real reason for these tariffs, so this all plays into this story… It will be interesting to see how this shakes out… 

There were some data prints in Australia last night… First their Trade Balance showed a narrowing Trade Surplus… from A$2.940 Million in Sept. to $2.316 Million in Rocktober, and that overshadowed the rise in Aussie Retail Sales in Rocktober by .3% VS .1% in September… So, the narrowing surplus weighed on the A$ as we moved through the overnight markets.

The euro slipped further on Wednesday… The ECB’s Financial Stability Report late last week, has done no favors for the euro since printing… But, the euro’s moves this week have been muted, and I put down to as drifting, as if traders are waiting for something to get them off their duffs… We’ll see…

So, all the euphoria that was in the currencies late last week, has taken a step back, and we’re back to watching the dollar pound its chest… But for how long will that continue? These currency moves in 2018 have been so sketchy, and full of bumps and bruises, and then days of seashells and balloons…  And the latest series of bumps and bruises gives an investor an opportunity to buy at cheaper prices… I’m just saying… 

The Yield on the 10-year Treasury continues to ratchet downward, and this morning is trading with a 2.89% rate… WOW! It wasn’t that long ago that the 10-year’s yield was as high as 4.25%…  And the Fed, supposedly, isn’t buying Treasuries any longer, so the stock market selling, is going straight to Treasuries, is how this looks to me…  A classic, “Flight to Safety”… 

I do believe that today will be quite choppy, what with all the economic data that will print, so let’s go head to the Big Finish and find out what’s on the docket today… 

Well, Palladium traders/ investors, etc. saw an opportunity to take profits what with all the huge gains the metal has booked recently, and they did just that… Palladium lost $17 of its recent gains and back to being 2nd dog to Gold’s price… 

Speaking of Gold… It lost a whopping $1 and change yesterday, and is flat in the early morning trading today… It’s waiting for you to back up your truck… I’m just saying… 

And finally, the goosing of the price of Oil recently, as I told you, was all about the proposed production cuts between OPEC and Russia, but as things turn out, Russia hasn’t necessarily put down that they agree to production cuts in writing yet… And that has the Oil traders spooked, and when that happens the asset gets sold…  I do think that Russia will eventually go along with our friends at OPEC (NOT!)…  

The U.S. Data Cupboard gets a workout today, with yesterday and today’s data lumped together… But with all the reports that will print the only one that really makes a difference to me is a piece of real economic data, and that’s Factory Orders for Rocktober, and a report that I said on Monday this week would probably print negative, and if it does, it will be added to the roster of data reports that are on the “weak” side of the ledger…

The ADP Employment Report for November will print today, not that it has anything to do with the hedonically adjusted BLS report that will print tomorrow, but it’s always good to look at, in my mind anyway, because if anyone should know about who’s employed in this country its ADP. And so just to check on the so-called experts, the forecast is for 195,000 jobs created in November…

One of my economics mentors through the years, was the great Hyman Minsky… And he once told me that the phenomenon called “full employment” was something that should be feared, because, once you’ve reached “full employment” it can’t get any better from there, it can only get worse… And last month I’m positive I heard a Fed Head talk about full employment being reached here in the U.S. Hmmm…

To Recap… The funeral of former President George H.W. Bush, closed the government offices yesterday, and that meant the stock market was closed, so at least it didn’t get beaten down again yesterday! The stock futures this morning are down big, so that doesn’t look good for that asset class today…  The dollar is back on top this morning after looking like it was ready to circle the bowl late last week, this week it’s back on top… Hmmm… And the 10-year’s yield has dropped to 2.89% this morning, looks like a classic case of a “flight to safety” to Chuck… 

For What It’s Worth… I came across this article by chance last night, and thought it was interesting to say the least… It’s about which country is now the country with the highest taxes… Denmark held that title for 15 years, but there’s a new sheriff in town… Before you go on, can you guess who it is? Well, you can find out here: https://www.marketwatch.com/story/after-15-years-denmark-isnt-the-most-taxed-country-heres-the-one-that-is-2018-12-05

Or, here’s your snippet: “ France, which has faced countrywide protests in recent days sparked by a tax-hike proposal, emerged as the most heavily taxed of the 36 countries in the Organization for Economic Cooperation and Development, according to the group’s annual review published on Wed.

The “yellow jacket” riots, which have quieted since three people reportedly died and more than 100 were injured over the weekend, initially erupted in response to a fuel-tax increase that President Emmanuel Macron has decided to scrap. Critics say such a tax would disproportionately hurt the lower rungs on the economic scale.

Clearly, the report will do little to ease tensions.
France’s tax revenues equaled 46.2% of economic output, up from 45.5% in 2016 and 43.4% in 2000. Denmark, which had held the top spot since 2002, slipped to 46% of GDP from 46.2% in the previous year and 46.9% in 2000.”

Chuck Again… Well, I held my breath when I read the title of the article, thinking that given my tax status, that it might be the U.S…. But not so! Whew! But given the right mix we could be looking at higher taxes to help offset the deficit spending… Think about that one…

Currencies today 12/6/18: American Style: A$.7207, kiwi .6870, C$ .7450, euro 1.1345, sterling 1.2753, Swiss $1.0034, European Style: rand 14.0625, krone 8.5425, SEK 9.0185, forint 285.46, zloty 3.7755,  koruna 22.8311, RUB 66.71, yen 112.80, sing 1.3713, HKD 7.8117, INR 70.81, China 6.8554, peso 20.59, BRL 3.8570, Dollar Index 97.06, Oil $51.63, 10-year 2.89%, Silver $14.38, Platinum $791.90, Palladium $1,232.22, and Gold … $1,236.58

That’s it for today… Man I was busy yesterday, and I have no recollection of what kept me so busy yesterday! But not today… It’s a Tub Thumpin’ Thursday! Our Blues lost another game last night, but at least this time they lost in Over Time. This is one of the worst years I can recall for our Blues who were supposed to be much better than this… UGH!  Alex is taking me to the Billikens Basketball game this Sunday afternoon. When, oldest son, Andrew was a young man, I used to take him to Billiken basketball afternoon games… Now my youngest son is taking me! Where’d all those years go in between? UGH!  I switched iPods while writing today, and Head East takes us to the finish line today with their song: Never Been Any Reason…  And with that, I hope you have a Tub Thumpin’ Thursday, and remember to Be Good To Yourself!

Chuck Butler

 

Palladium’s Price Flies By The Gold Price!

December 5, 2018 

* The Markets finally get the memo on the Trade War!

* RBA keeps rates unchanged… 

Good Day… And a Wonderful Wednesday to you! I know, I know, I said that with today being a Government holiday, that I too would take it as a holiday… But upon further review, there was just too much going on to not write today, so, in the words of Scorpion… here I am… rock you like a hurricane! I doubt I’ll rock anyone, but… I could very well wake up a reader with something so I have to work toward that! Rosemary Clooney greets me this morning with her version of Winter Wonderland…

OK… Yesterday, I ranted about how the stock jockeys and economists had gotten the message from the G-20 meeting all wrong… This is what I said yesterday: I don’t know if I’ve even seen more misinformed writers and markets than now. The agreement between Trump and Xi was to not “add additional tariffs for 90 days”, not what everyone else seems to think, that Trump and Xi agreed to end tariffs and thus the Trade War! That’s simply not the case, but yet the stock jockeys rallied stocks… The Trade War still exists, and if anything the Trump / Xi agreement simply prolonged the Trade War…

Well, I guess they finally got the memo for stocks lost about 800 points yesterday, and the dollar got sold… The Trade War is still on the table folks… It’s almost as if the past couple of days of trading stocks were a trap… Traps can be ugly, painful and make you wish you hadn’t been tricked, or goaded into buying.. Of course stocks could rally today and the stock jockeys will be back waving the flag to buy… That there’s nothing wrong, etc. I’ve told you all before that stocks, historically, do not perform well in a recession… So, are we already in a recession?

Longtime readers know that I’ve contended that we had remained in a depression all these years, due to the 90 + Million Americans still looking for a job, and those long soup kitchen lines were no longer needed because now the money was mailed to the recipients… So, if everyone can’t see the effects of all these people out of a job, then problems can’t exist, right?

OK… enough of that… I can feel my blood pressure climbing! The Reserve Bank of Australia (RBA) met yesterday, and did indeed leave their key interest rate unchanged, as I told you it would… RBA Gov. Phillip Lowe had this to say about the prospects of a rate hike any time soon… “With the economy expected to continue to grow above trend, a further reduction in the unemployment rate is likely,” governor Philip Lowe said in his statement. “The stronger labor market has led to some pick-up in wages growth, which is a welcome development.”

Well, the RBA takes the rest of the year off, and won’t meet again until Feb 2019, so by the time they meet again, the RBA will have a complete picture of what’s going on… Basically, I believe they missed their opportunity to hike rates earlier this year, and that by the time February comes around, it could be pretty sketchy for a rate hike…

The euro drifted even though the dollar was getting sold yesterday, which is pretty rare, given the euro is the offset currency to the dollar. I realized yesterday that I had made a big deal last week about the European Central Bank’s (ECB) Financial Stability Report that printed on Friday, and then forgot to even mention what happened! UGH! So, here we go… Recall, I had said that this report could be the green light to the ECB to completely remove stimulus… Well, from what they said, you’d be scratching your head and trying to figure out where they learned Greenspeak… (former Fed Chairman Al Greesnspan’s ability to say stuff that nobody understood) here’s what I pulled from the ECB’s website:

A growing economy and a more resilient banking sector continue to support financial stability in the euro area. However, vulnerabilities in global financial markets continue to build, with political and policy uncertainties on the rise. – ECB Financial Stability Report 11/30/18

So, there are still questions about when the ECB will completely remove their stimulus… they are still on the docket to stop bond buying on 12/31/18… And next will be their negative deposit rates… And then and only then, will the euro be free to appreciate VS the dollar!

With the markets finally understanding that the Trade War is still on the table, the Global Growth flag wavers went home to lick their wounds, and with Global Growth back on the questionable list, the Aussie dollar and kiwi both saw some profit taking, I still believe that commodities will be the cat’s meow next year, so don’t panic with your A$’s and kiwi. At least that’s my opinion and I could end up being wrong… 

Longtime readers know that I’ve been on top of this deficit spending glut in the U.S. for years, shoot even a decade and more! And I was asked why I thought it was bad for the dollar, when Japan is the king of deficit spending and the yen hasn’t collapsed yet?  Ok… good point… And one that I’ll attempt to differentiate between the two… You see, as I’ve explained through the years, the Japanese debt is, for the most part, held “in-house”…  In other words, Japan’s debt is contained within Japan, for the most part…  In the U.S., that isn’t the case… We depend on the kindness of strangers, as they imitate Blanche… And therein lies the problem for the dollar… You see, the U.S. needs foreigners to buy our Treasuries so that we can finance out deficit spending… And Japan doesn’t depend on the kindness of strangers…  Not that what they’ve done with deficit spending is anything to put on a pedestal and honor!  But that’s the difference… OK?

A couple of years ago, when I was still on the trading desk I spoke to a trader at I believe, Morgan Stanley, and told her that the next crisis in the U.S. was going to be pushed by a  Liquidity Crunch…  And I was so happy when longtime reader and good friend, Sharon, sent me this link to an article that features an interview with David Rosenberg, who is thinking along the same lines as me with the liquidity crunch… So, here’s the link if you would like to see or hear what Rosenberg had to say… https://www.cnbc.com/2018/11/29/liquidity-squeeze-could-hit-stocks-hard-david-rosenberg-warns.html?recirc=taboolainternal 

OK… My mother taught me that you can make some of the people happy some of the time, and I needed to ignore those who aren’t happy with what I said…  BTW… my mom always thought that I would end up being a sportscaster… Close, mom… but no cigar!    OK, anyway, yesterday, when I had kind words to say about former President George H.W. Bush, a reader took exception to my thoughts…  See? what I’m talking about when you can’t have an opinion these days without someone taking an axe to it? Oh well, I learned well Mom… thank you for all you taught me… 

So, the funeral for former President Bush, will be today, and that’s why all the government offices are closed for the day, which means no data will be printed, moving it to tomorrow.  The ADP Employment Report for November was going to print today, and prelude to the Jobs Jamboree that will happen on Friday.  

Well, it happened! Palladium’s price bypassed that of Gold… Palladium was up $24 yesterday, and is up another $17 in this morning’s early trading… This Palladium price surge is amazing, given that its kissin cousin, Platinum is getting sold…  Gold has been unable to keep up with the surge in Palladium’s price, and Gold is down a buck or two in the early trading today, after posting a $7 gain yesterday…  

I’m told that Palladium’s strong run is linked to surging sales of petrol cars globally, in part because consumers are turning their backs on diesel vehicles. Hmm… But I thought that car sales here in the U.S. were slowing down? I guess the key word used here is “globally”…  And with that I have to say that I’m a little iffy on this surge in Palladium’s price, given that Global Growth is on tenterhooks… I’m just saying… 

To recap… They will bury former President George H.W. Bush today, so the Government is shut down, which means no data prints. The markets finally realized that they were walking down the wrong path on the Trade War, and finally listened to Chuck!  The currencies drifted on the day, and in the overnight markets, as there are just too many questions in the markets these days for anything other than Treasury Bonds to be bought… 

 

For What It’s Worth… Well, this is an update on the information I’ve been telling you about regarding Russia and their dedollarization plan, and it can be found here: https://sputniknews.com/business/201811291070246094-dollar-russia-euro/

Or, here’s your snippet: “Russia has found yet another potential substitute for the dollar in international trade. While Washington is threatening to step up sanctions, freeze Russia’s dollar-denominated assets, and even target the country’s sovereign debt, Moscow is confidently moving away from the greenback.

The US is ‘shooting itself not in the foot, but a bit higher’, said Russian President Vladimir Putin commenting on Washington’s sanctions and attempts to use the dollar as nothing short of a weapon.

‘We do not have the goal to move away from the dollar, we are forced to do this. Let me assure you, we will do this… We just do not want to do anything sudden that would hurt us… We are not leaving the dollar, the dollar is leaving us’, the Russian president said, while speaking at the annual ‘Russia Calling!’ Investment Forum on 28 November.”

Chuck Again… Don’t look now but the Europeans are looking to get out from the dollar’s thumb… So, all these things I’ve been telling you that were coming, are getting nearer and nearer… Closer he gets, step, by step… BOO! Yeah, it’s going to be scarier than that for dollar holders… You see… as I’ve explained before many times… When the dollar loses value, it’s like a tax on U.S. consumers, because we import so much stuff, and consumer buy so much foreign stuff, and they’ll be paying more and more for those foreign goods, just like a tax being added…

Currencies today 12/5/18: American Style: A$.7293, kiwi .6917, C$ .7527, euro 1.1355, sterling 1.2788, Swiss $1.0025, European Style: rand 13.7555, krone 8.4963, SEK 8.9748, forint 284.97, zloty 3.7666, koruna 22.8110, RUB 66.56, yen 112.95, sing 1.3669, HKD 7.8114, INR 70.44, China 6.8407, peso 20.43, BRL 3.8410, Dollar Index 96.84, Oil $53.16, 10-year 2.91%, Silver $14.55, Platinum $799.60, Palladium $1,249.29, and Gold… $1,237.25

That’s it for today… A bonus Pfennig, eh? HA! Well, it snowed all day here yesterday, but never accumulated on the pavements, so in the whole scheme of things, if it has to snow, that’s the best kind! But then I don’t have to get up and on the road in the morning any longer, so I don’t care! The STLTODAY.com site had pictures of the event I attended on Monday night, and checking it out, there I was, along with friends, Rick and Kevin, and old friend, Jim Thomas! The great voice of Johnny Mathis takes us to the finish line today with his version of the song: Caroling Caroling… That should get you started with some Christmas spirit! I hope you have a Wonderful Wednesday, and Be Good To Yourself!

Chuck Butler

The 2 & 5 Year Treasuries’ Yields Invert…

December 4, 2018

* Currencies & Metals Continue to ratchet higher… 

* RBA meets today… 

Good Day… And a Tom Terrific Tuesday to you! What a great evening last night, listening to the St. louis Sportswriters tell stories. I even met up with a childhood buddy! One of the sportswriters, Jim Thomas, and I grew up in S. St. Louis on the same street. Wyoming St. We went to elementary school together, played ball together and so on. He was “gifted” and went to the arch enemy of the high school I went to, and we ended up playing football against each other.  I hadn’t seen him since those days, so that was quite the treat for me meeting up with him again last night. Our friend, Billy Squier greets me this morning with his song: My Kinda Lover… 

I don’t know if I’ve even seen more misinformed writers and markets than now. The agreement between Trump and Xi was to not “add additional tariffs for 90 days”, not what everyone else seems to think, that Trump and Xi agreed to end tariffs and thus the Trade War! That’s simply not the case, but yet the stock jockeys rallied stocks…  The Trade War still exists, and if anything the Trump / Xi agreement simply prolonged the Trade War…  

But the currencies continued to rally in small chunks VS the dollar yesterday and overnight. Like I told you yesterday, the Aussie dollar (A$) and kiwi are the best performers, as they continue to ratchet higher every day…  In the Eurozone yesterday, it was announced that Italy had finally decided not to “fight city hall”, and went back to the drawing board to find ways to cut their deficit spending budget… That news helped the euro to climb on the day. That, and the news that PPI (wholesale inflation) increased for the month of Rocktober and on a year to year basis, it rose from 4.6% to 4.9%…  Just a quick econ 101 lesson here… PPI is where you first see inflation, and once Producers begin to hike prices, that bleeds to CPI (consumer inflation)… 

The Reserve Bank of Australia (RBA) meets today to discuss interest rates, but I don’t expect them to have much of a discussion, and their key rate will remain at 1.5%… I find the fact that Australia’s key rate is lower than the key Fed Funds rate in the U.S. very interesting… I doubt that hasn’t happened in a month of Sundays… 

OK… Well, I didn’t tick many people off yesterday with my diatribe on the Fed… So, with that in mind, I’ve got more up my sleeve for today…  So, yesterday, James Rickards wrote the following: “the impact of QT is roughly equivalent to another 1% per year of rate hikes. This means that the combination of nominal rate hikes and QT is equal to 2% of rate hikes per year off an extremely low base. The Fed is tightening more than it realizes and will probably cause a recession or worse by the time it realizes its mistake. If this happens, the Fed will cut rates back to zero. But it won’t be enough. Then they’ll have to abandon QT and go back to QE4. The more things change, the more they stay the same.”

Now, where have I heard that before? Could it be… No… not there… but where? Oh, that’s right, I heard it right here in the Pfennig! Because… I wrote that same thing several times in the past about what the Fed was doing!  I found Rickards to be bang on with what I’ve been saying, but also I would add that QE4 won’t be enough, and in the next recession, because of its depth, the Fed will resort to negative interest rates… I’m just saying… 

OK… yesterday, I talked about how the Palladium price could very well bypass the Gold price next year… But when Palladium streaks higher by $23 in one day, it doesn’t look like Palladium will wait until next year to bypass Gold! The price of Palladium this morning is $1,229., and if it weren’t for the $8.20 price increase in Gold yesterday, the $8.45 in the early trading today, the deed would have been done already! 

Did you hear the latest stupid idea that folks in Sweden are falling for? OK, first, let’s revisit the fact that Sweden is the poster child for the cashless society. They’ve pushed the envelope much further with a cashless society than everyone else.. And their latest thing is to implant a micro-chip in a person, so that when they buy something, all they have to do is wave their hand at the counter, and it automatically charges their banking account…  Sure that sounds convenient, right? Well, if they can connect that to your bank account, the Gov’t could track your every move and every purchase… Now there’s always someone in the crowd that says. “I haven’t done anything wrong, or don’t expect to, so why would I care if the Gov’t is tracking me?”  Civil liberties…  You’ve lost freedom…  I shake my head at people that don’t “get it” that you’re giving away your freedom… 

Well, it looks like a judge in the U.K. has ruled that the U.K. could still walk away from BREXIT…  And just having that hope, helped pound sterling to recover some recent losses. This BREXIT thing has really had a life of its own, and has shake rattled and rolled, with lots of twists and turns along the way since the people of the U.K. voted for the BREXIT amendment… I think that by just saying, “well the judge says we can nix it now” would be the easy way out this mess… And besides the people of the country voted for it to happen! 

The U.S. Data Cupboard is basically empty today, and tomorrow’s data releases have been postponed until Thursday, due to the Government offices being closed down for the funeral of former President, George H.W. Bush, who died last week.  I find it to be a real shame that the thing most people think of when they think of the former president, is that he made a promise he couldn’t keep… “Read my lips, no new taxes”…  He was a far better man and president than that slip up… I’m just saying… 

Hey! It just occurred to me, that if the Governmental Offices are closed tomorrow, that the markets will also be… So that means I get to sleep in tomorrow! HA!   But seriously, it’s going to be a mid-week holiday, and therefore, I will close too! 

To recap… Chuck thinks the markets and writers of the world have it incorrect regarding the Trump / Xi agreement. The currencies and metals continued to rally yesterday and overnight, with Gold adding more than $16 in the last 24 hours, but Palladium has gained $23 in the same period, and is within $10 of matching the Gold price! The RBA meets today, but Chuck doesn’t believe they will move rates, and wonders when the last time it was that the Aussie key rate was below the U.S. key rate? 

For What It’s Worth… Well, I’ve been telling you over and over again about how foreigners are shying away from the Treasury Auction window, and this article on Reuters really gets into that idea. I do want to say though, that his is a really scary thing, considering the increase in Treaury issuance due to our debt increases. So, you can find the article here: https://www.reuters.com/article/us-usa-bonds-foreign-graphic/foreign-buyers-find-u-s-treasuries-less-appealing-idUSKCN1NV27V

Or, here’s your snippet: “ foreign holders of Treasuries like China and Japan have shrunk their portfolios of U.S. government bonds this year, and a recent barometer of participation in Treasury auctions suggests overseas buyers have not been showing up in force, according to Treasury Department data.

Some auctions since late October had the weakest foreign participation rates in nearly a decade, a Reuters analysis of U.S. Treasury sales shows. At the same time, auction sizes are rising fast, with bond issuance this quarter projected to set a record of $83 billion after deducting maturing debt.

“We do worry about where demand for Treasuries is going to come from, given the ongoing significant increase in supply,” said Torsten Slok, chief international economist at Deutsche Bank.

That concern will be on sovereign debt investors’ minds this week with the Treasury scheduled to auction $129 billion in notes with maturities ranging from two to seven years beginning on Monday.’

Chuck Again… Well, I wondered when everyone else on earth was going to see this as a potential problem, and now, well, I guess they have begun to see it…  Of and one more thing this morning regarding Treasuries… The 2 and 5 year Treasures yields inverted yesterday…  

Currencies today 12/4/18: American Style: A$.7380, kiwi .6968, C$ .7588, euro 1.1397, sterling 1.2808, Swiss $1.0051, European Style: rand 13.5895, krone 8.4644, SEK 8.9693, forint 281.65, zloty 3.7580, koruna 22.7260, RUB 66.52, yen 112.82, sing 1.3635, HKD 7.8057, INR 70.42, China 6.8994, peso 20.27, BRL 3.8477, Dollar Index 96.51, Oil $54.06, 10-year 2.96%, Silver $14.56, Platinum $805.01, Palladium $1,229.42, and Gold… $1,239.12

That’s it for today… And tomorrow, but I’ll be back on Thursday loaded for bear… None of the sportswriters last night, thought that the Cardinals had a chance to sign Bryce Harper… I hope they are proven wrong! Well, it looks like we received a sprinkling of snow last night, probably not even sticking to the pavements. Which is timely, because Roger Williams is playing Let It Snow! on my iPhone this morning… I’m not a fan of snow, although I do like to see it when it first falls, before the white snow turns to black slush! But then I want it to melt in hours! I’m not a fan of cold weather, so that pretty much tells you where I am with snow… I hope you have a Tom Terrific Tuesday, and you remember to Be Good To Yourself!

Chuck Butler

 

I Think The Fed Right Now Is A Much Bigger Problem Than China.

December 3, 2018

* Currencies & metals rally 

* The Trade War Continues… 

Good day… And a Marvelous Monday to you! And Welcome to December! Well, I had a wonderful weekend, with our neighborhood Progressive Dinner party on Saturday night. And those Conference Championship Games on Saturday were great! They announced the 4 teams that will make up the playoffs this year yesterday. Congratulations to: Alabama, Clemson, Notre Dame, and Oklahoma… May the best team win it all! It’s December! Time to start to get into that Christmas Spirit, and I do that by listening to Christmas music at home and in my car! I love the Christmas season. The house is all gussied up, our big tree is sparkling, and everyone has a smile on their face… I always wish that the words of the Christmas song, All our troubles will be miles away… would come true! So, this morning, I’m listening to Bing Crosby singing White Christmas…

So, How about that title today? Guess who said that? You get a shiny gold star if you said, President Trump… That quote was actually in the Wall Street Journal Friday… Have you ever had “buyer’s remorse”?… Well, the President didn’t actually buy Jerome Powell, but he nominated him as the Fed Chairman, and now, well… the President has buyer’s remorse! “I think the Fed right now is a much bigger problem than China.” I couldn’t believe my eye, seeing that statement… You see, the President is smarter than a lot of the country gives him credit for… I would say he was at one time a Pfennig Reader, because, he sees just like I’ve been yelling from the rooftops about, that the Fed began hiking rates very late in the growth cycle, which meant only one thing… That they would bring about a recession…

And just how bad or deep of a recession it will be is the question… You dear reader know  how I see things… Sure, I could end up being  proved wrong, but I don’t care… This is what it looks like to me, and therefore I say it out loud so everyone can hear me! I don’t have problems with that…

All righty then, let’s get to the markets… On Thursday when I left you, I had talked about how Fed Chairman, Jerome Powell, had surprised the markets the previous day with comments that made the markets believe that the Fed was near the end of their rate hikes… Stocks, bonds, currencies, & metals rallied and it was a beautiful sight… HA!

On Friday, we had the comment above from the President, to add to more stock buying and bond buying, but the currencies drifted and Gold lost a buck or two on the day. Don’t look now but the 10-year Treasury’s yield slipped below 3% on Friday… The bond guys know, folks… I was once on a bond trading desk… So, I know all too well what I’m talking about here. HA! But always watch the direction of bonds, they’ll tell you where the economy is going… And with yields falling, that means they believe the economy is circling the bowl… I’m just saying. The 10-year’s yield was brought back above 3% in the overnight trading, as I think the “boys” realized that they had gotten ahead of themselves… 

The two currencies that have been quite sneaky with their respective appreciations lately are the Aussie dollar (A$) and kiwi… Commodity Currencies… To me this is signaling that commodities are about to make a comeback, folks… 

Speaking of Commodities making a comeback… The price of Oil jumped on Friday through last night, on the news that Saudi Arabia and Russia had signed an agreement to cut production, and Canada joined in with a statement that they too will be cutting production. So, the price of Oil has those announcements going for it… 

There still doesn’t seem to be much, in the way of data, that’s getting printed outside of the U.S. but we did see Swiss Retail Sales for Rocktober this morning, and they were a strong 0.8% VS that ugly -2.5% print in September. The Eurozone also printed their Markit version of PMI (manufacturing index) for November, and the index increased during the month to 51.8 from 51.5 in Rocktober. 

I have to say that I found the Eurozone PMI very encouraging in regards to the European Central Bank (ECB) actually removing some stimulus from the Eurozone economy. Remember, they ECB is supposed to put a halt on their bond buying at the end of this month… And a strong report like this could go a long way toward them actually doing what they said they would do! 

I’ve been talking a  lot about the U.S. Corporate leveraged loans and so on…  And I’m really fearful that this is going to crash and cause a major problem for the economy, just like sub-prime loans did in 2007…  But don’t worry about that, according to S&P…  That’s right, the ratings agency S&P said that we needn’t worry about the downgrades in Corporate bonds…  I shake my head and think, didn’t I see this movie before? Oh, that’s right I did see it… The Big Short… 

I’ve also been reading a lot about how the U.S. recession will wait until 2020 to come about. Shoot Rudy, even the bears are saying that, but I’m going to go out on a limb here and say that it begins in 2019…  Now, THAT, was spoken like a true economist (of which I’m not!) because I gave myself 12 months! If the recession waits until the last day of 2019, I will have been proved to be correct! HA!  Well, actually this isn’t funny stuff Chuck, so be serious… 

It all weighs on whether or when The Fed pauses their rate hikes… because as history has told us that wen the Fed pauses a recession starts within 6 months…   I wasn’t aware of that fact until the very impressive economist, David Rosenberg, made me aware of that fact…  Very interesting, eh? 

The price of Gold is up $8 in the early morning trading today. Over the weekend at the G-20 meeting, President Trump and Chinese leader Xi, announced that no new tariffs would be added for 90 days, as they attempt to negotiate a new trade deal. The problem as I see it for both economies is that there was no mention of putting up a road block on the previous tariffs… So, the Trade War is still going on, in spite of what the stock jockeys are thinking… And that is that it’s all sunshine, lollipops and rainbows going forward… 

The U.S. Data Cupboard will get a workout this week, that ends with a Jobs Jamboree on Friday, December 7, Pearl Harbor Day… Our first day in infamy in our history…  One of the real pieces of economic data will print this week when Factory Orders for Rocktober on Thursday… I’ll give you a teaser here, and say that I believe it will print negative…   But getting back to today… The November ISM here in the U.S. will print… It will be interesting to see how that goes, given that it’s a check on the pulse of the manufacturing sector, and in November, the Trade War was in full bloom… 

To recap… First we had Jerome Powell, the Fed Chairman, talking like a dove and then the President calling out the Fed… And the dollar got hammered as we ended the week… It was a small hammer, but hammered nonetheless. Chuck says that the recession will begin in 2019, and not 2020 like most economists think… Gold has a good morning today, and the price of Oil jumped on news of production cuts… 

For What It’s Worth…  Ok, I’ve been recording the price of Palladium every day for years and, and last year it was the year that it passed the price of Platinum… Will this next year be the year that Palladium passed the price of Gold? It gets closer to the price of Gold with every day that passes. So this article talks about that and can be found here: http://financeoffshore.com/article_template.asp?ns6=true&ie4up=false&NewsID=2249

Or, here’s your snippet: “It may appear surprising that palladium prices have almost tripled since the start of this decade, but supply in 2018 is only looking at a rise of just over 10% since 2010. It therefore seems worthwhile to present our latest findings on palladium supply and assess whether this structural lack of price response can change. This article also provides some background, which we hope will be of use to those less familiar with palladium.

It is important to note that palladium is mined in polymetallic ore bodies with the metal forming only a portion of total mine revenues. As such, mining operation’s economics are limited in their exposure to the rise in palladium price. For the largest palladium producer, Nornickel, palladium represents 36% of total metal sales revenue. This week, the company reiterated an essentially flat production profile out to 2020. In lieu of additional mine supply the company is releasing stocks accumulated by its Global Palladium Fund.

Over the next five years, we continue to forecast only a limited supply response from South Africa, with additional ounces from the five growth projects in our data-set offset by cost driven closures at Implats and Lonmin. Platinum forms a larger share of these operations’ revenue and thus the fall in platinum price has mitigated the benefit of rising palladium revenues. The palladium-rich ore bodies of Sibanye’s U.S. operations and North American Palladium’s Lac des Iles have meant that both operations have benefited and each is pursuing growth. However, the 250 koz additional contribution to North American production in 2021 will be partially offset by losses from Vale, which produces palladium as a by-product of nickel mining. This highlights why it is necessary to view palladium production in the context of the PGM basket price. For most operations, the decline in the platinum price has mitigated the rise in palladium. As a result we forecast global palladium production to decline by 2% to 6.7 Moz next year.”

Chuck again… well, after all those words, it comes down to the cheese that binds for Palladium… A decline of production, which means supplies dwindle, which should be a good thing for the price of Palladium! 

Currencies today 12/3/18: American Style: $.7370, kiwi .6915, C$ .7580, euro 1.1333, sterling 1.2722, Swiss $1.0012, European Style: rand 13.6652, krone 8.5458, SEK 9.0480, forint 284.69, zloty 3.7757, koruna 22.8870, RUB 67.01, yen 113.58, sing 1.3675, HKD 7.8198, INR 70.28, China 6.9567, peso 20.09, BRL 3.8628, Dollar Index 97.07, Oil $53.10, 10-year 3.03%, Silver $14.39, Platinum $807.64, Palladium $1,199.10, and Gold… $1,229.41

That’s it for today… All alone again… At least this year, I’m not 2 weeks removed from surgery, and barely able to get around the house! I’m good to go this year! I heard that Rapper Nelly, has gotten into the calling for the Cardinals to sign Bryce Harper! Alright then! I’m going to an event tonight where the sports writers for the St. Louis Post Dispatch, will discuss the Cardinals and take questions from the audience… Should be fun… I would like these reporters to take a message back to the Cardinals… SIGN BRYCE HARPER!  Ok… The great Marshall Tucker Band takes me to the finish line today with their song: Searchin’ For A Rainbow… I hope you have a Marvelous Monday, and are Good To Yourself!

Chuck Butler

Now… That’s A Horse Of A Different Color!

November 29, 2018 

* Powell sounds dovish and the currencies respond!

* A quote from the great Hy Minsky from years ago! 

Good Day…  And a Tub Thumpin’ Thursday to you! I think I’ll be able to join you in any Tub Thumpin’ today, so I’ve got that going for me! What a sorry state our Blues are these days, as they lost another game last night,,, UGH! We’ve got a horse of a different color to talk about today, so grab your coffee, because you’ll certainly want to read the letter today, and not just the first and last paragraphs! The late great Marvin Gaye greets me this morning with his song: Inner City Blues… He has a line in the song that reminds me of me, it goes like this… Oh, and make me wanna holler, and throw up both my hands…  

Well, what have we here? A hawk turned Dove? It sure appears to be the case, and that’s why I say we have a horse of a different color today, so with no further ado, let’s get to it! 

Well, well, well… Looky there! Has Fed Chairman Jerome Powell become a Pfennig Reader? I say that because he sounded like Chuck at yesterday’s speech… I really was off base to think he hadn’t noticed all the pot holes in the economy… But get this…  Powell warned of “generally elevated” asset prices that “appear high relative to their historical ranges.”

He then went on to issue a cautionary note Wednesday about risks to financial stability, saying trade tensions, geopolitical uncertainty and a buildup in corporate debt among firms with weak balance sheets pose strong threats.

Now tell me if I haven’t been warning of these things for months now, while the Fed went along their merry old way hiking rates despite the warning signals, because I have! And now the Fed Chairman is on Chuck’s bandwagon! Welcome aboard, Mr. Chairman, I’ve reserved a seat for you up front, right behind me, because I have been banging the drum for a slow down or pause in Fed rate hikes for months, and so you now get to sit behind me!

The economy is heading for a real pot hole, folks… and it’s about time someone with authority, because I have none, to speak up and say something! GM laying off workers and shuttering up to 7 plants, must have been a real eye-opener for the Fed Heads… Because, like I said yesterday, these things we’re seeing now are just the tip of the iceberg…

Oh, and Powell, decided to tell the markets that the rate of rate hikes could be slowing down, and that sent the stock jockeys to the betting window yesterday, as stocks rallied like a banshee, but guess what else took off on this new development? If you guess the currencies and metals, then you win the kewpie doll!  

And IF the Fed decides to skip a rate hike this month, then all that I told you last year would be coming true right before your eyes, my eye! Remember what I’ve told you about Temporary stops… They sometimes turn into 47 year temporary moves (Gold standard)… Now, I’m not about to go around slapping myself on the back if all this that I’ve said would happen comes to fruition, because this is my country / economy too… And besides all that back slapping causes my bursitis to flare up! HA!

Another thing that caught my ear was Powell saying that the Fed was very close to “neutral”… To me, that means one more rate hike and then they are finished…  It was just Rocktober 3rd, when we heard Powell say that “interest rates were a long way from neutral…  And there you have your horse of a different color!

I don’t like the term one and done, because turkey is done, and you’re finished! This is all really too much like a nightmare come true for me… A nightmare I’ve been sharing with you dear readers for months now… And I’m sure many of you thought I had become the boy who cried wolf… But I haven’t had I?

In 2001, I wrote my first white paper titled: The Decline of The dollar… And it was written while the dollar was kIng of the hill and had been since 1995… And then a year later, I wrote my second white paper titled: 2003: The Year of the euro… After those two white papers, my longtime friend, and former boss, Frank Trotter, began calling me the “Oracle of St. Louis”… (a take from the Oracle of Omaha) boy those were fun days, happy days, and man was I in demand by TV shows, radio shows, and conferences to speak. But like everything else, all good things come to an end… And so it is this time with the economy’s growth cycle.

And so, the Jerome Powell, speech dominated the markets yesterday, and his talk of a possible slowdown/ pause in rate hikes, caused traders to forget about the other data… The revision of 3rd QTR GDP was expected to be revised up from 3.5% to 3.6%, but it didn’t… I remained at 3.5%… And New Home Sales didn’t meet their forecast either, as they were expected to weaken from 597,000 in September to 589,000 in Rocktober, but the selling was even weaker, with Rocktober coming in at 544,000… That’s a HUGE drop from September, folks, and just goes to show you that rate hikes and fears of more rate hikes for all those ARMs loans scared the bejeebers out of home buyers… And then also add in the too high of price on those homes, and you have a bad medicine for the Housing sector.

The Bond boys like the dovish sounding Fed Chairman, and the 10-year Treasury’s yield has dropped to 3.02%… Remember when reaching 3% on the way up was a BIG DEAL? It was supposed to signal a run higher on rates… But that never materialized, and now the yield is back to dropping…  I sure hope you locked in some higher yields while they were available…  Sort of like when the 10-year’s yield fell to 1.38% a couple of years ago, and I said “go get those home loans now!” 

Well, like I said above the metals rallied, led by the Gold, which gained more than $8 on the day, and is up another $5.85 in the early morning trading today, as the overnight markets got a chance to digest the Fed Chairman’s flip-flop yesterday. 

The price of Oil dipped below $50 at one point yesterday, but has since recovered back above the $50 handle. Oil traders don’t believe that Saudi Arabia will cut production like they said they would, and that has the price of oil on tenterhooks… Well, either the Saudi’s do cut production to save the price of Oil from falling further, or they cow tow to President Trump’s harsh words to them for even mentioning a production cut, and Oil slides further downward.   What’s it gonna be boy? 

The U.S. Data Cupboard today, has two of my fave prints… Personal Spending and Personal Income… What we’ve seen in recent months is that Personal Income has risen, while Spending has weakened. It will be interesting to see what the Rocktober prints brings us this morning.  Given that Christmas stuff was already being displayed in stores back in Rocktober, one would think that shoppers were looking for discounts, and spent a lot in that month… The Butler Household Income (BHI) suggests that Rocktober could be a strong month for spending…  But then, hopefully it was with disposable cash and not just willy nilly put on credit cards! 

To Recap…  We had a horse of a different color show up yesterday in the shoes of Fed Chairman Jerome Powell, who talked like he had been reading the Pfennig, and said that the Fed is close to reaching neutral with rate hikes, which was opposite of what he said on 10/3, when he said that rates were a long way from neutral… The currencies and metals, stocks and bonds all rallied, and the overnight markets followed up with more dollar selling… 

Before I head to the Big Finish today, I was treated yesterday with an email from good friend, Dennis Miller, of www.milleronthemoney.com that contained a quote from one of my mentors of the past, the great Hy Minsky… This was on the Burning Platform website… check out what the greatest economist of our time said many years ago…

“The missing step in the standard Keynesian theory (is) the explicit consideration of capitalist finance within a cyclical and speculative context… finance sets the pace for the economy. As recovery approaches full employment… soothsayers will proclaim that the business cycle has been banished (and) debts can be taken on. But in truth neither the boom nor the debt deflation… and certainly not a recovery can go on forever. Each state nurtures forces that lead to its own destruction.”

Hyman Minsky

For What It’s Worth… OK, I talked about the drop in Consumer Confidence this morning, and said that it wasn’t enough of a drop in my opinion, given all that’s going on, and then I saw this on Zero Hedge and it shines a different light on the report, and you can find that here: https://www.zerohedge.com/news/2018-11-27/consumer-confidence-dips-hope-fades

Or, here’s your snippet: “Consumers’ optimism about the short-term future declined in November. The percentage of consumers expecting business conditions will improve over the next six months decreased from 26.3 percent to 22.5 percent, while those expecting business conditions will worsen increased, from 7.2 percent to 8.8 percent.

Notably only the 35-54 cohort saw overall optimism decrease (tumbling from 143.2 to 132.0) while the younger- and older-cohorts saw confidence increase.

Income expectations also fell from 16.5% net expecting an increase to 13.7% net (the lowest since June).

Finally, as a reminder, the divergence between slumping savings rates and surging consumer confidence has typically not ended well…”

Chuck Again… Well, if you put it like that… I guess the fall was significant, but I sure did want to see it fall further to match my expectations for the economy… Oh well, you can’t have your cake and eat it too I guess!

Currencies today 11/29/18: American Style: A$.7325, kiwi .6865, C$.7526, euro 1.1375, sterling 1.2772, Swiss $1.0052, European Style: rand 13.6480, krone 8.5460, SEK 9.0530, forint 284.10, zloty 3.7696, koruna 22.8073, RUB 67.08, yen 113.31, sing 1.3705, HKD 7.8231, INR 69.60, China 6.9531, peso 20.21, BRL 3.8635, Dollar Index 96.85, Oil $50.35, 10-year 3.02%, Silver $14.37, Platinum $825.58, Palladium $1,183.62, and Gold… $1,227.07

That’s it for today… and tomorrow, of course… It’s Conference   Championship game weekend for college football, and will go a long way toward deciding what 4 teams go to the playoffs. It will also be the first Saturday of December, which means it’s time for our neighborhood Progressive Dinner! Time to see the neighbors before things get crazy with Christmas parties, etc.  The house has been getting all decorated again for Christmas… I love it when the house is all gussied up!  When we talk again, it’ll be December! And rotten November will be over! YAHOO!  King Crimson takes us to the finish line today with their classic rock song: In the Court of the Crimson King…  a very long song, I must say, but it’s all good!  I hope you can get out and make this a Tub Thumpin’ Thursday, and remember to Be Good To Yourself!

Chuck Butler

 

What’s All This Dollar Buying About?

November 28, 2018 

* Currencies & metals have an awful day… 

* Draghi says Eurozone economy is slowing.. No duh! 

Good Day… And a Wonderful Wednesday to you… Brrr… It’s cold and I despise cold weather. I was reminded of that yesterday, as I walked across the parking lot for my doctor appt. North of here, up Chicago way, they’ve had a ton of snow already to deal with… My Mizzou Tigers Basketball team made a nice comeback rally last night only to fall 2-points shy, and lose, on their home court! Non-Conference games are not supposed to be lost at home! Tsk, Tsk…  Looks like it’s going to be a long season… UGH! Earth, Wind and Fire greets me this morning with their song: After The Love Has Gone…  

Another day back and another day of dollar buying… I’m serious when I say if you pay me enough, I’ll go away for good, and that would bring about a currency rally to beat the band!  The folks at TIAA Bank tried to pay me to go away, but they didn’t pay me enough! HAHAHAHA!  And so, I’m still hanging around, making a nuisance of myself! 

President Trump commented that he intended to go ahead with additional tariffs on the Chinese exports to the U.S. And the dollar got bought? What gives? Yes, European Central Bank (ECB) President, Mario Draghi, spoke and acknowledged that economic growth for the region is slowing, and that certainly would be cause for some slippage in the euro, but not a loss of 2 cents since last week!  

Anyone worth their weight would have figured that one out, given the Trade War going on, no wait… I take that back… What I meant to say is anyone with an ounce of brains could figure out that Global Growth is going to the outhouse because of the Trade War… The U.S. is not-immune from this and we’re going to soon find out, if we haven’t already (with the GM announcement on Monday)…  

So the markets/ traders were not so kind to the currencies & metals yesterday, and one has to wonder why? Why would traders be buying dollars, when like I’ll tell you below, Consumer Confidence fell, along with Home prices? These data prints just continue to point to a recession, and yet, traders keep buying dollars… Is this some conspiracy or something? No… But it does smell like one… A conspiracy to build enough fluff in the dollar so that when the you know what hits the fan, and the dollar begins a long downward spiral, it  would then start from a higher level… Now, that I can get my arms around… But nothing else…

Traders are supposed to be forward looking… months in advance… But I would have to say that these traders have blinders on… Yeah, that’s the ticket! The President is even beginning to wave the white flag on the economy… he’s blaming the Fed Chairman for what ails the economy these days, and while that may be true, his Trade War is just as much to blame!

But, I learned a very long time ago, that the markets are always right, and to fight them you would be wrong… I’ve been fighting them for decades now, sometimes I’ve been right, sometimes I’ve been wrong… But it is what it is… nothing more, nothing less… If you believe in something, like diversified investment portfolios then the only thing you can do when things go against you is to hunker down… My dad taught me something many moons ago… I was upset with what was going on at work, and he told me… “Son, just go to work, put your head down, and do your job, and in the end you’ll be fine.”

Well, the hits keep rolling in for the economy… The latest data print to go on the side of “Things that will bring the economy to its knees” is Student Loan delinquencies… I told you the other day about how they had become so large, well, now the percentage of delinquencies has risen 9.1% in the 3rd QTR! OMG! What’s next? Oh, there was another data print… Consumer Debt, which is also Household Debt is soaring… Household Debt hit another record high, rising to $13.5 trillion in the third quarter. It was the largest quarterly jump since 2016!

Corporate Debt, Consumer Debt, State Debt, Government Debt, Underfunded liabilities, Underfunded Pensions, Foreign participation waning at the Treasury Auction Window, And a Trade War still isn’t enough to bring Consumer Confidence back to reality… For the first two weeks of this month Confidence dropped from 137.9 to 135.7… But that’s not that much, considering all that’s going on… And that’s why I call this data stupid, because… It makes no sense… And the data collectors never call me and ask me if I’m confident about all this stuff… Because, well, I am confident, but my confidence is that this is all going to come crashing down on us one day, and at this point, that “day” keeps drawing closer…

OK… let’s talk about something else…

The U.S. Data Cupboard today will have a revision of 3rd QTR GDP, which still doesn’t have the full effects of the Trade War, so a weaker print from the 2nd QTR is a given, but how weak?  And New Home Sales from Rocktober will also print. But the big item on the docket today is a speech from Fed Chairman, Jerome Powell…  

I read this morning that stock futures here in the U.S. are indicating a strong open today, based on the Powell speech… You see, there’s bound to be a lot of disappointment today from those thinking that Powell is going to signal a pause in rate hikes…  He’s given no indication previously that the Fed is thinking of pausing rate hikes at this time, so I have no idea where this wild idea came from… To me, I can only think of grasping at straws…  That’s what this stock market is doing… grasping at straws, here in the Last Chance Saloon… I’m just saying… 

The price of Oil rallied a bit in the past 24 hours, but not much to write home about. And Gold lost $7 on day yesterday… The euro dropped, Gold lost $7 and Oil saw a small blip of a rally. The anti-dollar assets did not have a good day, and once again I come back to why are traders buying dollars?  (when I say traders, I’m talking about all the hedge funds, large trading desks, and so on) 

To Recap…  It was not a good day for the currencies and metals yesterday, as traders flocked to dollars, and Chuck wants to know why?  Draghi did his best Mr. Obvious statement, but that shouldn’t have caused the damage that the euro has seen. More data shows larger cracks in the economy’s foundation… When Is the Fed going to notice the rot being exposed daily on the Housing sector? And if they do notice it, will they do anything about it? I doubt it… 

For What It’s Worth…  Well, I’ve been talking about these Corporate Leveraged Loans and the problems they are going to cause for the economy, and then this article hit me like a V-8 forehead slap, as the article is all about leveraged loan problems and can be found here: https://www.zerohedge.com/news/2018-11-27/leverage-loan-market-hits-brick-wall-four-deals-get-pulled

Or… Here’s your snippet: “After both investment grade and high yield bonds got crushed in the past month with spreads blowing out to multi-year wides — and generated negative YTD returns as Morgan Stanley now sees the bear market gripping credit accelerating into 2019, many traders were wondering how long before the final bastion of the credit bubble – leveraged loans – would also pop.

It appears the answer may be “now” because as Bloomberg reports, no less than four leveraged loans have been pulled this month as a result of the turbulence gripping the broader credit market, the highest number of pulled deals since July when five deals were pulled. Expect more to come.

This comes as the price on the S&P/LSTA U.S. Leveraged Loan 100 Index has plunged since the start of October, when it was just shy of par, to 97.28, the lowest price since November 2006!

Diversified manufacturer Jason Inc. became at least the fourth issuer to scrap a U.S. leveraged loan this month according to Bloomberg, which writes that the company had kicked off the syndication process on its amend and extend on Nov. 13 was seeking commitments from new lenders by Nov. 20.” 

Chuck Again… Well, it’s beginning folks… This is just the tip of the iceberg…  

Currencies today 11/28/18: American Style: A$.7241, kiwi .6797, C$.7511, euro 1.1285, sterling 1.2795, Swiss $1.0009, European Style: rand 13.9612, krone 8.6025, SEK 9.0939, forint 287.26, zloty 3.8050, koruna 22.9860, RUB 66.95, yen 113.76, sing 1.3775, HKD 7.8277, INR 70.41, China 6.9461, peso 20.47, BRL 3.9097, Dollar Index 97.37, Oil $51.64, 10-year 3.05%, Silver $14.16, Platinum $832.67, Palladium $1,160.57, and Gold… $1,214.54

That’s it for today… Had a long discussion with my oncologist yesterday about weight… Previously she loved it when I gained weight, but apparently that had a limit! I told her I would work on it… But with me not able to do any exercise, it would be difficult to lose weight. I told her we could go back on the infusions, they seemed to bring my weight down, but then I couldn’t eat for days at a time, and that doesn’t work well in the long run! Oh well, I’ll stop eating cookies with my coffee in the morning, and see where that gets me! HA! Elvin Bishop takes us to the finish line today with his over 7 minute, great song, Traveling Shoes… I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler