Look Who’s Pounding The Drum For A Weaker Dollar!

July 15, 2019 

* Gold goes on a roller coaster ride… 

* Chinese data is pretty fair, no armageddon there yet… 

Good day… And a Marvelous Monday to you! Doesn’t it seem as though we just started July, and we’re already half way through it? The Rolling Stones sang oh, so many years ago… Time waits for no one and it won’t wait for me! All this means is that we’re getting closer by the minute to my annual summer vacation… I had a wonderful weekend fishing and visiting our good friends, Duane and Toni. Alex won the prize for the biggest fish caught, I won the prize for the first fish caught… The prize being that we could brag about it! The fishing was tough though, and so we just put back in the lake any fish we caught, for we wouldn’t have had enough to feed us! I was worn out when I arrived home yesterday late afternoon, and my age was showing… UGH! Steely Dan greets me this morning with their song: Don’t Take Me Alive…

Well… Last Wednesday, I wrote about how Gold was back on the rally tracks, but was leery of the short Gold paper trades… And on Thursday those arrived at the COMEX by the boat load. Gold was up $20 on Wednesday, down $14 on Thursday, and back up again on Friday… Rollercoaster… My Gold price is like a Rollercoaster baby! So, what will the short Gold paper traders do now… They tried to whack Gold but it didn’t last… What to do? What to do? I would like to suggest that they go home… They don’t have to go home mad, just go home!

OK… The currencies last week were stuck in the mud, for the most part… Not losing ground but not gaining any either…  the Dollar Index, last Thursday was 96.86, and today 4 days later it’s 96.80… The Aussie dollar, (A$) was an exception, as it moved past 70-cents once again, and the S. African rand is pushing the currency appreciation envelope across the desk… The Indian rupee has been very stealth-like with its stronger move, and the Brazilan real continues to recover a lot of lost ground. And the Russian ruble has gone back below 63 once again… So, it’s not a lost cause for the currencies at all, it’s just that the rest of the lot aren’t moving much these days… I thought last week that they were waiting for the Fed Chairman’s speeches to see if he’s really on board with a rate cut in July… And seeing that he was… Well… I said it all above… UGH!

The Treasury yield curve first inverted 3 months ago, and has remained inverted since, and now the yield curve has steepened by the most in the 3 months it has been inverted, telling us that a recession is on its way, and just to prove its point, the yield curve moved more and the inversion is steep now… There’s no question in my mind that this is as good as it gets as a recession indicator!

I got a kick out of the President’s tweet last week when he said that the U.S. should join in on Europe’s and Japan’s currency manipulation… I’ve heard and read that he’s really been reportedly asking aides to find a way to weaken the dollar in an effort to boost the economy ahead of the 2020 election. The strength of the dollar has proven a headache for Trump, who would really like to see a narrowing of the U.S. trade deficit.

 I would fire off a memo to him (he and I email each other! HA!) telling him to be careful with what you wish for… Because if you say something like that over and over again, eventually the markets will oblige you… Mark my words on that! Right now, I believe the dollar’s weakness is more of a result of it facing the firing squad, I mean, rate cuts, and not the President’s words…

Yesterday, in Europe it was Bastille Day… And today in China it’s economic print day… Today, we’ll see the color of 2nd QTR GDP (should be about 6.2%).in addition, we’ll also see June prints of Industrial Production and Retail Sales… And since China is hours ahead of us (it’s almost Tuesday there! HA!) We’ve seen these reports!  2nd QTR GDP was 6.2% (certainly not the plus 10% prints we used to see here, but better than a stick in the eye for sure!)  Retail Sales were stronger than expected, and so was Industrial Production.. So, the Trade War isn’t hitting China very much yet…  

The Global Growth currencies like the A$ liked the news from China this morning, so we have that going for us, eh? 

While we’re talking about data… Last week here in the U.S., we printed the June CPI data… (consumer inflation) , which bumped a bit higher at 0.1%, which is really nothing to write home about… Core Inflation, ex-autos, was stronger by 0.3% in June, which is something I would think the Fed Heads would be wary of… But then again, this is the stupid CPI that doesn’t even look like the CPI reports of 30 years ago…

I’ve long told you dear readers that if you want to know what the “real data” is, that you should go to www.shadowstats.com and apply… John Williams of Shadow Stats does a fantabulous job of going through the Gov’t reports like CPI, and then reprinting them using the methods we, as a country, used before the 90’s… And a Quick look at his report last week, tells me that CPI is actually around 6%… Now, doesn’t that seem more realistic than the sub-2% CPI the government keeps forcing down our throats? Why, yes, Chuck it does… But you taught us many years ago that inflation is a personal thing, and one person’s inflation rate will vary with someone else’s because of the different things they buy and use…
You are correct sir! And quite frankly, I wouldn’t give CPI the time of day, but the markets still do, for some unknown reason, and so we have to deal with it too!

Hey! That was sad news last week when I heard that Ross Perot had died… You know, if you asked me on a good day when my mind was clear, and not chemo fogged, what I thought of Ross Perot, I would tell you that if Americans would have stopped to listen to the man years ago when he ran for president, we would be in much better economic and financial position these days… And that’s all I have to say about that!

Anything you can do I can do better… neener, neener, neener!  That’s what the U.S. Gov’t data guys are saying to the Chinese this morning…  The U.S. Data Cupboard has June Retail Sales, Industrial Production and Capacity Utilization… I expect all three of the reports to show the wear and tear that that suffered through in June… The Butler Household Index, (BHI) tells me that Retail Sales will be disappointing at best… 

To recap…  The price of Gold has been on a rollercoaster ride, but is up over $1,400 today. The currencies have, for the most part, been stuck in the mud, but there have been some movers out there and Chuck goes through them. The President is tub thumpin’ for a weaker dollar, and Chuck believes that he should be careful with what he wishes for…   And China printed some pretty fair data prints today, so they aren’t going to hell in a hand basket, as most people have thought they would be doing… 

For What It’s Worth… I had this sent to me from my friends at GATA, and when I saw the brief description of the email and it said that they had an interview with John Hathaway, I immediately clicked on and read through… So, John Hathaway is the founder of Tocqueville Gold Fund, and someone that the markets usually pay attention to when he talks… This article can be found on his website and you can get there by clicking here: http://tocqueville.com/tocqueville-gold-strategy-second-quarter-2019-investor-letter/

Or, here’s your snippet: “Gold has broken out from a massive base formed over a six-year consolidation. The breakout has left most investors on the sidelines. The powerful rally from below $1,300 to over $1,400 and a 6 year high caught most either wrong-footed (short) or flat footed (no exposure at all.) That is why we believe substantial further upside lies ahead. Gold’s allure (and the explanations for it) should grow as the price advances in the months and years ahead.

Gold has disappointed since 2012, even though it has outperformed stocks and bonds since 2000, the dawn of radical monetary experimentation. However, financial market memories are short. Gold is a big macro idea that offers substantial reward for those with the requisite patience.

During golds six years in the penalty box, the underlying forces that have made the metal a superior strategic investment over centuries have not been idle. The extrapolation of current conditions into unrealistic expectations is a dependable flaw of human nature. The capacity of physical gold and precious metals mining shares to absorb inflows has greatly diminished because of the prolonged attrition of investment interest. Once capital market flows revive, there is real potential in our opinion for parabolic upside in the metal and the shares.”

Chuck again… John Hathaway goes on to talk about how he believes the financial system, as a whole may be due for substantial change… The only reason I see for him to mention that is that he’s tying Gold to that new financial system…

Currencies today 7/15/2019 American Style: A$.7033, kiwi .6731, C$ .7673, euro 1.1277, sterling 1.2550, Swiss $.9820, European Style: rand 13.8642, krone 8.5330, SEK 9.3647, forint 288.82, zloty 3.7787, koruna 22.6905, RUB 62.97, yen 107.88, sing 1.3560, HKD 7.8263, INR 68.40, China 6.8798, peso 18.92, BRL 3.7370, Dollar Index 96.80, Oil $60.44, 10-year 2.11%, Silver $15.33, Platinum $841.72, Palladium $1,560.82, and Gold… $1,416.19

That’s it for today…  And don’t forget about no Pfennig tomorrow or Wednesday. I’m pretty sure I’ll be back in the saddle on Thursday, but then one never knows!  Cards took 2 of 3 from the Diamondbacks, that’s a step in the right direction…  Took a ride through Missouri this past weekend… I’ve always said that Missouri is a very pretty state. With rolling hills, lots of greenspace, I just love driving through the state!  Triumph takes us to the finish line today, with their song: Lay It On The Line…  I hope you have a Marvelous Monday… And will Be Good To Yourself!

Chuck Butler

FOMC Meeting Minutes Show More Members Interested In A Deeper Cut!

July 11, 2019 

* Gold soars on the Powell comments that a rate cut is coming… 

* Currencies get on the rally tracks too, as the dollar gets sold… 

 

Good Day…. And a Tub Thumpin’ Thursday to you! I’m going to try to do some Tub Thumpin’ this weekend ahead of my hospital visit next week… It’s also 7-11 day! We have to observe this day by getting a Big Gulp! HA!This waiting for the Pfennig Replies box to be back in the saddle is getting very old and causing me to have a rash! I’m very sorry about this, but things happen, and then well, you start over, which is what I told them to do if they can’t fix it! UGH! No baseball last night had me watching some re-runs of The Big Bank Theory, which happened to be my favorite show on TV, for many years, but now they’ve ended their run as the number # comedy on TV… double UGH! I’ve really swallowed this hook, line and sinker, on reading Lee Childs books on Jack Reacher… I’ve got them lined up as ones read and ones to read, but the ones to read stack is getting pretty low… Prime Monday is next Monday, so maybe I can pick up some more of his books at cheaper prices! The Late Great Leon Russell, greets me this morning with his song: This Masquerade…

Well, it looks like the Fed Heads weren’t fooled by the BLS jobs report last Friday that the currency and metals traders were thinking they would be… I sent out a Tweet yesterday to my Twitter followers and said, “ Fed Chairman Powell is talking about a July rate cut in his speech to congress today… Gold is back on the rally tracks!”

And back on the rally tracks it was for not only Gold but also the currencies! I also read a few economists that don’t believe the Fed should cut rates, and while I’m not on either side of that fence, I’m just stating what I think they’ll do!

Because I said a year ago, that the Fed would send the economy into a recession, and that it would turn out to be so bad, that the Fed would reverse their rate hike stance, and begin cutting rates, and eventually going to negative deposit rates, ala Sweden, Japan, Eurozone, and others…

I also said that eventually we would see another round of Quantitative Easing, although it would be called something else this time around…

To my surprise, (not really, or as Sheldon would say Bzinga! ) Fed Chairman Powell didn’t use my portrayal of him earlier this week… darn it! Wouldn’t it have trey cool to hear Powell, say, “in the words of Chuck Butler”…

So, Gold closed up about $20 on the day, I told you that when it turned around again the move would be swift, didn’t I ?  

Aren’t you glad you use Dial? Don’t you wish everyone did? HA! Aren’t you glad you didn’t sell your Gold? Don’t you wish everyone didn’t sell their Gold?

So… is it time for the price manipulators to show up at the COMEX’s window with arms full of short Gold paper trades? Or, do they see that it would be costly to step in front of moving bus right now? I think it’s a case of the latter…

OK, I was doing some reading yesterday, and came across this and thought I’ve got to mention this tomorrow, but now it seems too late, but then it’s important to remember these things…  I had the good folks at GATA send me this yesterday from one of their contributors, Craig Hemke…. “Hemke concludes that both gold market indicators compiled by the U.S. Commodity Futures Trading Commission “are flashing warning signals for the short term.” But he adds, “The conditions that led to the most recent price spike will persist — and will only deepen — in the months ahead. So don’t let the next pullback frighten or otherwise concern you. This is just the natural ebb and flow of these bank-dominated ‘markets.’ Higher highs are still pending in 2019 as Comex Digital Gold posts its best annual gain since 2010.”

So… As I’ve been telling you this week, don’t let the selloff scare you into selling your Gold… Don’t let it bring you down… it’s only castles burning, just find someone who’s turning and you will come around… (Neil Young)… Use the dip as an opportunity to buy at a cheaper price… let me say that again… No… wait, no need to say it again, you’ve said it enough this week, Chuck! 

But now Gold has reversed the selling and the cheaper prices…  

For those of you who follow the Dollar Index, you’ll be interested to hear that the Index fell from 97.50 on Tuesday to 96.86 this morning. For the new readers… The Dollar Index is supposed to tell us how the dollar is doing VS its trading partners… But Years ago, all the legacy currencies of Europe were converted to euros, and now the Index is over weighted with euros… So, I always contend that’s it’s easier to just check the euro / dollar price…  But many still use the Dollar Index , so there it is for all to see this morning!

What the Dollar Index is telling us this morning is that the euro has recovered about 3/4’s of a cent on the day… But in reality, the dollar was sold by that amount VS the euro, because, we all know that the Eurozone is not worthy of a stronger currency, but it will receive one, as it benefits from being the offset currency to the dollar.

And it wasn’t just the speech by the Fed Chairman yesterday that sent the dollar to the woodshed…  The Fed’s FOMC Meeting Minutes from their June meeting revealed that several members were interested in talking about a deep rate cut (50 Basis Points)…  Recall when I told you that the Fed Head Kashkari was touting a 50 Basis Points cut , and I wondered how many fellow Fed Heads he would get to see things his way?  Well, it looks like there’s a grassroots campaign to cut rates deeper in one fell swoop.

I still am not wavering on my call that I made months ago that the Fed would cut 25 Basis Points in July…  Now that everyone is on board with a rate cut later this month, does everyone recall that I was the lone wolf out there saying the Fed would cut rates in July?  Not that buys be a cup of coffee, or anything, but it makes me feel better about my ability to see what’s going on!

The U.S. Data Cupboard today, has the stupid CPI (consumer inflation) and it will most likely tell us that in June, there was no inflation increases…  What a bunch of bunk!  But they made their beds with their hedonic adjustments and now they have to lay in them!  This report is of no use to me, but to the markets they still follow it… So a flat or negative CPI print today will only cement the markets’ ideas about the rate cut… 

To recap…  Well, Jerome Powell, threw a cat among the pigeons yesterday, with his comments about how the Fed is ready to cut rates at their July meeting. Those comments and the fact that the FOMC Meeting Minutes yesterday showed that more than a few Fed Heads were talking about a deeper rate cut of 50 Basis Points…  WOW!   Chuck still believes that the plain old vanilla 25 Basis Points cut is in the cards for July… All this got the currencies and Gold up on the rally tracks, erasing the bad that was caused by a hedonically adjusted BLS jobs report last Friday… 

For What It’s Worth… OK… I finally got around to reading Ed Steer’s letter yesterday, and he highlighted this story on Zerohedge.com that I too am going to highlight, for it’s another brick in the recession wall folks, and it can be found here: https://www.zerohedge.com/news/2019-07-04/class-8-heavy-duty-truck-orders-crushed-70-june-following-may-collapse

Or, here’s your snippet: “Class 8 heavy duty truck orders were down for the eighth month in a row, falling a stunning 70% in June to 13,000 units, according to FTR data. The figure was up 20% sequentially, but still follows a 71% decimation in May. Jefferies’ Stephen Volkmann wrote in a note that the figures indicate a SAAR of ~178,000 Class 8 trucks and noted that the sequential growth compares to a sequential drop of 27% in May, when SAAR estimates were 139,000 units.

Kenny Vieth, ACT’s President and Senior Analyst said: “Fraying freight market and rate conditions along with a still-large Class 8 order backlog contributed to the worst NA Class 8 net order performance since July of 2016. May saw NA Class 8 orders fall below the 15,900 units averaged through the year’s first trimester, and year-to-date Class 8 net orders have contracted 64% compared to the first five months of 2018.”

The industry has been dealing with bloated backlogs as a result of aggressive ordering in 2018, coupled with headwinds from the ongoing trade war and the onset of a recession.

The good – and bad – news is that the backlog is starting to decline, and is expected to continue eroding until late summer. However, there is still downside risk for the industry in 2020 as a result of a slowing manufacturing, coupled with recessionary caveats.”

Chuck again… I was taught years ago to always check 1. The shipments on sea, and 2. By Truck as true indicators that an economy is headed for trouble… All in all it’s just another brick in the wall… but did you hear this reported on the nightly news? Or how about the 24/7 cable news?  of course you didn’t…   

Currencies today 7/11/19 American Style: A$.6980, kiwi .6673, C$ .7660, euro 1.1271, sterling 1.2561, Swiss $.9857, European Style: rand 13.8933, krone 8.5472, SEK 9.3856, forint 288.89, zloty 3.7853, koruna 22.7075, RUB 63.47, yen 108.13, sing 1.3554, HKD 7.8215, INR 68.26, China 6.8781, peso 19.13, BRL 3.7810, Dollar Index 96.86, Oil $60.61, 10-year 2.06%, Silver $15.27, Platinum $827.88, Palladium $1,584.07, and Gold… $1,428.89

That’s it for today and this week…  No baseball again tonight, what’s a Chuck to do? A cold front moved through yesterday afternoon, and the temps all cooled off after a downpour, and left us with sunny days and warm temps for the weekend. YAHOO!  I haven’t bought a fishing license for a decade, but I’m going to buy one today…  I have fishing gear and tackle here somewhere! I used to fish all the time, come home from work and go down to the river and cast a line… I always thought it was a good way to unwind… and think… especially when your all by yourself!  The Moody Blues take us to the finish line today with their song: In Your Wildest Dreams…  I hope you have a Tub Thumpin’ Thursday, and please remember to Be Good To Yourself!   

Chuck Butler

 

 

Upon Further Review… Jerome Powell Speaks Today!

July 10, 2019 

* Currency Traders are waiting for Powell’s speech today

* Chuck throws out a number for Gold, should things change… 

Good Day… And a Wonderful Wednesday to you! OK, OK, so I was wrong about the day Powell was supposed to speak! It wasn’t yesterday, it’s today! That’s what I get for glancing at the economic data calendar and not focusing on it! Well, did you enjoy the All-Star Game last night? I went to bed long before it was even getting close to being over! When I was young, the National League won every year, and now it seems the American League wins just about every year… Another reason we all wish we were young again! HA! (I know we’re all not National League fans!) Summer is here! Finally! It took long enough, eh? OK… public service announcement… There will be no Pfennig next Tuesday, Wednesday and possibly Thursday. I have to report to the hospital for a procedure that may keep me there 1, or 2 nights, depending… It’s no big deal, no worries, just a simple procedure. Wait! What am I saying?  The late great Alvin Lee checked into a French hospital for a simple procedure, and he died!  I guess there’s no such thing as a simple procedure!  The Blue Jays greet me this morning with their song: Saved By The Music… (the Blue Jays were a spinoff of two guys from the Moody Blues)

Well, the currencies didn’t move much yesterday, as currency traders appear to be waiting for Jerome Powell to speak today… Gold however found a bid and ran with it on the day gaining $9 from yesterday morning, but still remains below $1,400… UGH!

One of these days, Alice! To the Moon! That’s what I keep telling myself about the price of Gold… Yesterday, I included the piece by Murray Rothbard, and I have more from him today… check this out… “The prospect for the future is accelerating and eventually runaway inflation at home accompanied by monetary breakdown and economic warfare abroad. This prognosis can only be changed by a drastic alteration of the American and world monetary system: by the return to a free market commodity money such as Gold, and removing Government totally from the monetary scene.”

OK, Chuck again… Mr. Rothbard talks about a return to a free market money such as Gold… Well, for that to happen there would have to be a reset in the price of Gold… I figure somewhere around $10,000 an ounce would just about cover the Gov’t debts out there… So, like I said… One of these days Alice….. To The Moon!

Now this is not to say that this is going to happen… It’s just a scenario that’s being thrown out as an alternative to the current: Deficit Spend till you drop policy… Because one day… maybe not in my lifetime, but one day, the chickens will come home to roost on all the debts we have, and when they

do, it’s not going to look like a pretty painting of a beautiful landscape with golden fields, purple mountains and blue umpbrella skies…. No it’s going to be more like Armageddon! But don’t let that get in the way of keeping your corn flakes from getting soggy!

I feel like I need to box a little defensively this morning, you know, do the rope-a-dope thing? I know I shouldn’t feel too bad about getting the Powell speech on the wrong day, but I don’t like making mistakes folks… When I was a young man playing baseball, I doubt I ever made an error, and I doubt I ever stood there and took strike 3 without swinging! Most times pitch counts barely got past 1, if it was a strike, I was swinging! But then high school came along, and so did the pitcher’s ability to throw curve balls…. Well, that was the end my dream to be a professional ball player!

OK… back to the markets… So… why would anyone need to diversify their investment portfolio using currencies and metals? Oh, I don’t know, how about this? So, that when one asset class in your investment portfolio goes to hell in a hand basket, the other asset class that has no correlation to the other asset classes in your portfolio, will rise, and thus offset your losses! I’m a firm believer of Harry Markowitz’s Modern Portfolio Theory… And have been ever since the day 20 years ago that I first stumbled onto Markowitz’s ideas about having different asset classes that have little or no correlation to each other in your investment portfolio!

Currencies, historically (since 1971 that is) have moved in long sweeping trends, that today are called Multiple year trends, that last between 5 and 9 years… The current strong dollar trend has been going on since 2011, when the hidden debts of Greece were revealed… So, the current strong dollar trend is getting pretty long in the tooth, don’t you agree? That’s why whenever we see these, what turn out to be false dawns, small currency rallies, I think that they have a chance to become a multi-year weak dollar trend… And during the next weak dollar trend, the dollar is the last place you’re going to want to be invested in… I’m just saying…

OK, a couple notes on specific currencies this morning… The Mexican peso, seemed to be going in the right direction in recent trading sessions but yesterday it got whacked, and that was due to the Finance Minister resigning, saying that “Mexico’s president was making economy policy that is not “based on evidence”.   Interesting, eh? 

And I don’t know if you track the currencies in the currency roundup each day, but if you do you will have noticed that the Chinese renminbi, which for a couple of weeks there, was on the daily appreciation track…  But this week, the currency has gone back to getting weakened each session… What was the turning point?  G-20…  Leading into the G-20 meeting, the Chinese wanted to window dress the renminbi so that when Trump and Xi met, Xi could point to the appreciation and say, we’re doing out best here…  And since G-20 was over, the depreciations began again… 

There’s no headway on the BREXIT stuff in the U.K. and their new PM, etc. and now I hear that Bank of England (BOE) Gov. Mark Carney, has been mentioned as the new head of the Bank for International Settlements (BIS) …   I’ve never been a fan of Mark Carney’s policies, and so if I were in the U.K. I would say good riddance! But then I’m not… and I doubt people there even care…  Meanwhile, back at the ranch, the pound sterling continues to be weighed down by all this stuff… 

If you’re a currency roundup follower, then you will have noticed the nice stealth-like rally in the Brazilian real in recent times…  Brazil doesn’t have the swash-buckling interest rate differential that it used to enjoy all the time, but it does have a small pickup in yield to the dollars, euros, yen, sterlings of the world…  And with a stable gov’t now, and a price of Oil that’s OK, the real has enjoyed a nice run…  

The U.S. Data Cupboard is basically emptied out today, with only the Fed’s meeting minutes from the June meeting on the docket…  And those won’t print until this afternoon… Until then we’ll get our fill of Fed Chairman, Jerome Powell, as he’ll speak to Congress… Remember what I said about him having that rate cut in his back pocket to pull out and display before the lawmakers should things get hairy today…  I have to say that having that rate cut in his back pocket is well played by Powell, for he knows that the lawmakers will be so distracted by the shiny new rate cut, that they’ll forget what they were hammering him about!  

For What It’s Worth… Man, was I glad to have this sent to me last night… This is from MarketWatch, and is about all the stuff I’ve been warning you about. The article is by famous economist, John Mauldin, and it can be found here: https://www.marketwatch.com/story/when-the-us-falls-into-a-recession-a-credit-bubble-will-explode-2019-03-20

Or, here’s your snippet: “The European Central Bank this month said it would keep record-low interest rates for longer. The news comes shortly after the U.S. Federal Reserve gave in to the stock market and held off on further interest-rate increases.

While investors celebrate the policy reversal, they might soon regret it.
This stimulus may indeed buy the market an additional year or two. But postponing the inevitable downturn with artificially low rates will come at a cost. The cost is a massive credit bubble that is already of biblical proportions. Its implications chill me to the bone.

Here’s a quote from my friend Peter Boockvar, chief investment officer of Bleakley Advisory Group, a $3.5 billion wealth-management firm, which drew an enormous amount of interest: “We no longer have business cycles; we have credit cycles.

To me, it is a very simple message being sent. We must understand that we no longer have economic cycles. We have credit cycles that ebb and flow with monetary policy. After all, when the Fed cuts rates to extremes, its only function is to encourage the rest of us to borrow a lot of money and we seem to have been very good at that. Thus, in reverse, when rates are being raised, when liquidity rolls away, it discourages us from taking on more debt. We don’t save enough.

The problem is that over time, debt stops stimulating growth. Hence, the flat-to-mild recovery years.” – Peter Boockvar…

Chuck again… Well, didn’t I tell you all yesterday that we were in a credit cycle? John Mauldin and Peter Boockvar are very astute economists, folks… We should take heed at what they’re warning us about… And I’ll leave you with my simple question… Got Gold?

Currencies today 7/10/19 American Style: A$.6920, kiwi .6600, C$ .7618, euro 1.1218, sterling 1.2473, Swiss $.9918, European Style: rand 14.1837, krone 8.6496, SEK 9.4730, forint 290.47, zloty 3.8090, koruna 22.7905, RUB 63.75, yen 108.92, sing 1.3614, HKD 7.8152, INR 68.50, China 6.8848, peso 19.17, BRL 3.8000, Dollar Index 97.44, Oil $59.13, 10-year 2.10%, Silver $15.10, Platinum $815.46, Palladium $1,555.66, and Gold… $1,395.88

That’s it for today…  The Cardinals lone All-Star, Paul DeJong, must have thought he was playing a regular game with the Cardinals, as he was left on Third base, and he represented the tying run in the game… UGH!  That’s the Cardinals season right there in a nut shell!  One week closer to my annual summer vacation! I’m going to go fishing this weekend, with son Alex… Should be fun!  I hear that the interviews for new Fed Heads are being conducted, with the question being asked about how they view rate cuts…  I chuckled over that one…  OK… Steely Dan takes us to the finish line today with their song: Do It Again…  I have been a HUGE fan of the music of Don Fagen and Walter Becker (Steely Dan) since their first album back in 1973… Each album had a different twist to their music… great stuff!  I hope you have a Wonderful Wednesday, and will Be Good To Yourself!

Chuck Butler

 

What Will Jerome Powell Say Today? or Better Yet, Why Do We Care?

July 9, 2019 

* Dollar bugs continue to apply pressure to the currencies & metals…

* Chuck pulls out the Big Guns, with a visit from Murray Rothbard! 

Good Day… And a Tom Terrific Tuesday to you! Another day of sun and no rain here, boy it looks like things are drying up, finally! I love the sunshine, and warmth, I don’t think I’ve ever wavered on that! The Home Run Derby last night was something special! The participants were hitting home runs as easy as Grant took Richmond… (That’s just an old saying, I hope I don’t offend anyone in the South) But my dad used to say that all the time, and I’m just a chip off the old block, that’s for sure! Have I ever told you that my dad had lung cancer (yes he smoked) and that it had mestastized to his right hip? He ended up being confined to a wheelchair. I was diagnosed with kidney cancer that had mestastized to my right hip… So, far, so good with not being confined to a wheel chair for me though, thank God! OK… I’m usually not one for instrumentals, because I love to sing along with songs, but this one titled: Samba Pa Ti by Santana is one of my faves, and it greets me this morning!

Well… The markets just don’t know what to do… They’re confused about the signals that the Jobs Jamboree gave them last week. I would think that they would be concentrating more on the negative print of Factory Orders that printed the previous day to the Jobs Jamboree, last week… But then I think logically, and I sure can’t say that the markets do that! Oh, sure I hear some of you saying, but that’s just one print, Chuck… And to that I would say, but what about the negative print in Durable Goods Orders, and the very weak Capital Goods Orders, or the weakness of Retail Sales that printed 10 days ago or so? A recession is pulling into the station, whether the stock jockeys, or interest rate campers are ready for it or not! Let’s listen to economics guru, David Rosenberg who had this to say on his Twitter feed:

“ Real GDP on a monthly basis has completely stagnated in the January-May period. ZERO growth! This has only happened 3x in the past 14 years, two of those in 2008 and 2009. So what is this “strong US economy” all about?”

I shake my head in disbelief that more and more people aren’t seeing this economy for what it is… An economy that has seen its growth cycle remain weak for more than 10 years, and is now turning negative… But I digress…

The currencies didn’t move much yesterday, but in the overnight markets they have continued their slide from the lofty levels of last week. The euro, for instance, is in danger of losing the 1.12 handle this morning, and the Aussie dollar (A$) saw 70-cents briefly last week and has gone on the slippery slope since. 

Gold can’t find a bid once again….  Mom… He’s doing it again!  Ah, the silly ness of an old TV commercial advertising a rock station here in St. Louis, is what I’m thinking of right now…  But in this case we’re talking about how the price manipulators have retaken the conn on Gold trading, and not about how some guy is playing air guitar to the song Brown Sugar! 

I DO know what the markets are thinking with regards to Gold, for the shiny metal got sold again yesterday, and fell back below the $1,400 handle… UGH!… Just when it looked to me that Gold was getting ready for a major move to the upside… It got shot down…. In the 70’s there was a band called April Wine… And they sang a song titled: Shot Down… I had a former colleague back when I was at a  regional brokerage house, and his name was Vinnie, and he loved that song… So, to this day whenever I type the words, Shot Down, I think of him and that song!

I worked with a trader back in the early 80’s that used to say about a stock that was falling… “Hey, you liked the stock at $60, you’re going to love it at $55! And I think of him whenever I say buy the dips like I did yesterday… At this point you may want to wait out this selling of Gold to see where it bottoms out before buying more… But then again, remember how quickly the shiny metal turned around a couple of weeks ago… The turnaround could be swift…. I’m just saying…

The U.S. Data Cupboard had the May Consumer Credit print yesterday… Of course we all know that this in reality is debt… And Consumer Debt remained at $17 Billion in May… In the report there was something that I found that scared the bejeebers out of me…. Try this on for size: Revolving credit, primarily credit cards, rose 8.2% in May, just a bit above the 7.9% gain in April. Ahhh, yes, those credit card debts… Those are just lovely creatures aren’t they? Just fill them up with purchases, and then apply for a new one, and rinse and repeat… It’s the American way… No wait, it’s the American way since 1971…. When the whole new age of Credit became the norm…

Have you ever imagined what it would be like here in the U.S. and the world on the side, if Nixon hadn’t removed the Gold backing from the dollar in August 1971? Well, we wouldn’t have had the economic growth, that was built on credit… Salaries wouldn’t have grown like they did, and the stock market wouldn’t have grown to 25,000… So, that’s all good, eh?

Not so fast there Tim! The U.S. would not be in debt to the tune of over $200 Trillion and growing each day… We wouldn’t have had the tech stock collapse, nor would we have had the housing markets collapse, and near collapse of our financial system… We wouldn’t have Banks that are too Big To Fail… and their Trillions of dollars worth of derivatives! And I could go one, but won’t… 

Whenever I begin to question my stance on money… I go to Murray Rothbard, of the Mises Institute. His book titled: What has Government Done to our money? Always sets me straight… Sort of like going to confession, I guess… (I was brought up in the Catholic church, but never converted, so no confession for me!) In fact, let’s listen to some wise words from Murray Rothbard this morning.. ….

“As we face the future, the prognosis for the dollar and for the international monetary system is grim indeed. Until and unless we return to the classical Gold standard at a realistic Gold Price, the international money system is fated to shift back and forth between fixed and fluctuating exchange rates, with each system posing uncolved problems, working badly, and finally disintegrating. And fueling this disintegration will be the continued inflation of the supply of American dollars and hence American prices which show no sign of abating.”- Murray Rothbard, of the Mises Institute

Smart guy that Murray Rothbard…    These Austrian school of economics guys are all very smart, indeed!  Like I’ve told you before I walk in those same circles as the Austrian economics guys do, but I’m not an expert in the school so I refer to the guys that are from time to time… 

Wait, what did I just do there? Did I give myself a backhanded compliment? I think I did… What a dolt!  I can tell you straight up, that I didn’t mean to do that! But my fat fingers started typing, and the next thing I knew… 

Well, maybe Fed Chairman, Jerome Powell, can sort all this stuff out when he talks to Congress today…  We all know that he has a rate cut in his back pocket, that he can pull out if the going gets tough on the hill…  But will he?  Yesterday, I played the Fed Chairman in some role playing, that was fun… Wouldn’t it be a hoot, if Powell, gave his speech and repeated what I said he should say word for word?  OMG! That would be too much, I would roll out of my chair, and laugh hysterically until the men in the white suits came to take me away!  

To Recap…  The dollar bugs continue to slap down the currencies and metals, which has gotten out of hand, in my opinion, for it was just a stupid hedonically adjusted BLS Jobs report that turned everything around and the euro has lost 2-cents, while Gold has dropped $40 from its high last week…  Why not base the trading on the weak data prints that come out every week?  

For What It’s Worth… I received this over the weekend, and quite frankly, I didn’t pay much attention to stuff this past weekend, and so I spent the day yesterday, going back over all of it, and in the pile of emails there was this… Publishing guru, Bill Bonner, was talking about the founding fathers last week (the 4th of July) and this is what he said, and it can be found here: https://bonnerandpartners.com/the-founders-warned-us-about-the-evolution-of-power/

Or, here’s your snippet: “Many of the founders of the American Republic were readers and scholars. “I can’t live without books,” said Jefferson.
He, Monroe, Madison, Adams, and others were much more aware of Roman history than our leaders today. Most had studied Latin and/or Greek.

In the same year that the Declaration of Independence was adopted, Edward Gibbon published the first volume of his masterpiece, The History of the Decline and Fall of the Roman Empire.

The Founding Fathers were well aware of the transition – natural, and perhaps inevitable – from republic to empire. They had studied it in the Roman example. They had seen how it drew power into a few hands… and corrupted them.

They tried to prevent it from happening in the New World, putting in place limits… circuit breakers… and checks and balances… to keep the government from becoming too big, too ambitious, or too powerful.
Even then, they were doubtful that it would stick. “We give you a republic…” Benjamin Franklin wrote to posterity, “if you can keep it.”

Chuck Again… Well, we couldn’t “keep the republic” and instead turned into another Empire… And Empires all fold eventually… I’m just saying….

Currencies today 7/9/19 American Style: A$ .6930, kiwi .6612, C$ .7620, euro 1.1200, sterling 1.2460, Swiss $.9949, European Style: rand 14.2050, krone 8.6610, SEK 9.4971, forint 290.47, zloty 3.8056, koruna 22.7985, RUB 63.69, yen 108.81, sing 1.3613, HKD 7.8096, INR 68.46, China 6.8832, peso 18.92, BRL 3.8123, Dollar Index 97.50, Oil $57.99, 10-year 2.06%, Silver $15.02, Platinum $808.27, Palladium $1,547.00, and Gold… $1,389.48

That’s it for today…  Boy I really went off some tangents today, eh? Oh well, you never know what you’ll get when I start my fat fingers typing! I used to say that it was a stream of consciousness, but then I was writing the letter earlier in the morning, before my mind was moved by coffee! HA!  I have no idea what Jerome Powell will say today, I do know what he should say, but then that’s me… And I don’t have the President looking over my shoulder telling me what to do!  Robin Trower takes us to the finish line today with his song: Bridge of Sighs… Robin Trower was the lead guitar player in the band Procol Harum before going solo…  I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself! 

Chuck Butler

 

Lies, And Other Things Dominate The Jobs Jamboree!

July 8, 2019 

* Congrats to the USWNT for their World Cup victory!

* Currencies and Gold get whacked badly on Friday! 

Good Day… And a Marvelous Monday to you! No short week for me this week, but I have to say that I really enjoyed my 4th of July holiday weekend so much, that… Nah… Better hold that thought for some later time, Chuck… We enjoyed a marvelous sunny day on the 4th until later that night, and had an old fashioned fish fry, with all the fish that my youngest son Alex caught while in Alabama… Yummy! My beloved Cardinals ended the 1st half at .500… Which is basically what I see for this team the rest of the year… they break my heart each time they blow a game, and either it will have to stop, or I’ll begin to not stay up late to watch them! I watched a TV show last night that was a tribute to one of my fave musical artists of all time, the late Dan Fogelberg… The Outlaws greet me this morning with their near 10-minute song: Green Grass And High Tides…

Well, lies, hedonic adjustments, and all other kinds of names I could call the BLS report were on the agenda on Friday, after the BLS said that 224,000 jobs were created in June… When will these lies ever stop? OK, move along here Chuck… there’s a bit to talk about today!

Well, the dollar rebounded VS the currencies, and Gold got whacked by more than $16, and what do you suppose was the cause of these moves? The Jobs Jamboree surprised the markets, and had the dollar bugs dancing in the streets, when it printed a report that showed 224,000 jobs were created in June… Well, one could say, that June traditionally is strong because of all the graduating college students finding jobs… And then on the other hand you could point to the 102,000 jobs that were added to the total after the surveys were received, showing that only 122,000 jobs were created…. And then you could just throw up your hands, ala Marvin Gaye, and just say forget about it, because it’s all hogwash! And that’s where you’ll find me… It’s too darn bad that markets don’t see things they way I do… Even the usually gung-ho market web site, Bloomberg, said, “Don’t let the June numbers fool you; the job market is weak” Couldn’t have said it better myself!

The markets immediately took the stance that this jobs report would put the Fed’s rate hike in July on hold… Really? As I said last week, before we broke for the independence day holiday weekend, that I really didn’t think it would behoove the Fed Heads to only pay attention to the hedonically adjusted BLS Jobs report… For instance, on Wednesday U.S. Factory Orders in May fell 0.7% and marked the 3rd decline in the past 4 months, and to top it off May’s negative was revised downward to -1.2%… But don’t let that get in the way of a trumped up jobs report!

So the currencies got hit badly on Friday, but not as badly as Gold… I knew when I saw the jobs number being bandied about on cable TV that it was going to be a bad day for Gold… And it ended up being as such… Throw in the fact that the markets had thought it was a sure bet that the Fed heads would cut rates later this month… Throw in the fact that the markets were blindsided by the jobs number, which came out of nowhere, and the swallowed it hook, line and sinker… And then throw in the price manipulators, and some profit takers, and you mixed up a recipe for a sell off in Gold…

But, not to worry, folks… In fact, use this dip in price to buy… I think that’s what I’ll do, well… maybe not… I think I have enough! But I doubt you do, so use this dip in price to your advantage! There! That’s my public service announcement for you today!

Funny story…. A week ago, I was heading into the local grocery store, when I bumped into a neighbor, who reads the Pfennig… She had her mother with her, and introduced me to her mother… After pleasant greetings, I walked away and when I did I heard her tell her mom… he’s the man that wirites the market letter I read, and he’s always telling us to buy Gold… I laughed… and kept walking… At least somebody is listening to me, although they might not hear me till later!

So… did you hear that Deutsche Bank (Germany’s largest bank) is going to send 14,000 employees home with a pink slip?  That includes their U.S. offices folks…  A couple of years ago, I wrote in the now defunct Review & Focus about Deutsche Bank’s problems, and how I thought that this time would have come before now…   I would think a bank the size of Deutsche Bank would have a major impact on the markets should the problems continue after the layoffs, which I’m sure they will… This is window-dressing folks… It makes them look like they’re on top of a their costs, but in reality all they’re doing is dressing up the house for sale…  of course that’s my opinion, and I could be wrong. 

Fed Chairman, Jerome Powell, will be speaking this week (tomorrow) and I would suspect the markets will get more out of what he has to say, as opposed to gleaning anything out of a stupid hedonically adjusted BLS labor report…  What do I expect him to talk about?  Well, this would simply be me shooting in the dark, for I have no idea what Powell will be talking about… But just for grins, let’s say, I was Jerome Powell, what would I be preparing to say tomorrow?  Ahhh…  

Thank you for this opportunity to speak to you today, I’m always amazed that anyone listens to us any longer…  But since you’re here, you might as well know that the Fed intends to reverse its rate hike cycle, and it could come this month at our meeting, and if not, then definitely 6 weeks from our July meeting. We badly miscalculated the economy’s strength, and that’s our bad… But we’re willing to swallow our pride and reverse our rate hike cycle to address this ongoing problem with little to no growth in the U.S. economy…  Yes, we truly believe that we are the Masters of the economy, and all we have to do is apply a little magic elixir, and sprinkle some eye of newt on the economy and voila! 

A couple of Fed Chairmen ago, Big Al Greenspan used to have this magic elixir named for him… The markets called him “The Maestro” and said that he had the “Greenspan put” in his back pocket…   I’m here to tell you that too much praise was bestowed on Alan Greenspan, but I’m now here to make everything right….   

Chuck back to being Chuck… Man, that was fun! I had Powell, admitting the Fed’s blunder, swallowing their pride, and dissing Big Al!  

The markets for the currencies this morning hasn’t changed, and the dollar bugs are still roaming the floor…  I have a funny for you… How many roaches does it take to change a light bulb?  No one knows, because when you turn on the lights they all scatter!  HA!   A little bug humor this morning… 

The U.S. Data Cupboard gets a pause for the cause this week, and doesn’t have much for us… The Fed’s Meeting Minutes from their June meeting will print tomorrow, the same day that Jerome Powell speaks…  Consumer Credit (read debt) will print today… This number just boggles the mind at how large it has become…  And unless we had an election, and someone that wants to give away everything including the kitchen sink, for free, this Consumer debt will just continue to grow… and grow… and grow… 

To recap…  The Jobs Jamboree sent the currencies to the woodshed on Friday, along with Gold, and the currencies are still getting sold this morning, as the markets now believe that Fed’s rate cut is on hold… The stock jockeys saw a bad day, but Gold was the biggest loser, which Chuck says is OK, as it is now a dip in price that should be taken advantage of! And Chuck plays Jerome Powell, just for grins… 

For What It’s Worth… This article was sent to me from longtime reader Bob (thanks!) and it’s an article from Paul Craig Roberts, that talks about how weak the current expansion is, and it can be found here: https://www.foreignpolicyjournal.com/2019/06/25/the-diminishing-american-economy/?utm_source=ActiveCampaign&utm_medium=email&utm_content=Washington+s+Infatuation+with+the+MEK&utm_campaign=Washington+s+Infatuation+with+the+MEK

(Don’t be surprised if he says something that you’ve heard me talk about for years)

Or, here’s your snippet: “Since June 2009 Americans have lived in the false reality of a recovered economy. Various fake news and manipulated statistics have been used to create this false impression. However, indicators that really count have not supported the false picture and were ignored.

For example, it is normal in a recovering or expanding economy for the labor force participation rate to rise as people enter the work force to take advantage of the job opportunities. During the decade of the long recovery, from June 2009 through May 2019, the labor force participation rate consistently fell from 65.7 to 62.8 percent.

Another characteristic of a long expansion is high and rising business investment. However, American corporations have used their profits not for expansion, but to reduce their market capitalization by buying back their stock. Moreover, many have gone further and borrowed money in order to repurchase their shares, thus indebting their companies as they reduced their capitalization! That boards, executives, and shareholders chose to loot their own companies indicates that the executives and owners do not perceive an economy that warrants new investment.

How is the alleged 10-year boom reconciled with an economy in which corporations see no investment opportunities?

Over the course of the alleged recovery, real retail sales growth has declined, standing today at 1.3%. This figure is an overstatement, because the measurement of inflation has been revised in ways that understate inflation. As an example, the consumer price index, which formerly measured the cost of a constant standard of living, now measures the cost of a variable standard of living. If the cost of an item in the index rises, the item is replaced by a lower cost alternative, thus reducing the measured rate of inflation. Other price increases are redefined as quality improvements, and their impact on inflation is neutralized.

Real retail sales cannot grow when “for most U.S. workers, real wages have barely budged in decades.”

Chuck Again… Mr Roberts continues on and on in the article listing several things that I’ve been through with you before on… But I thought it was a good thing to let you hear this from someone other than me every now and then!

Currencies today 7/8/19 American Style: A$.6983, kiwi .6640, C$ .7653, euro 1.1218, sterling 1.2515, Swiss $.9919, European Style: rand 14.1537, krone 8.6240, SEK 9.4405, forint 289.36, zloty 3.7917, koruna 22.7403, RUB 63.73, yen 108.60, sing 1.3597, HKD 7.8004, INR 68.53, China 6.8926, peso 18.98, BRL 3.8203, Dollar Index 97.29, Oil $57.43, 10-year 2.04%, Silver $15.08, Platinum $814.39, Palladium $1,562.58, and Gold… $1,405.41

That’s it for today… Except to congratulate the U.S. Women’s National Team for their World Cup victory yesterday… They Women’s team is the Gold standard for Women’s soccer, that is certain!  The All Star proceedings got started last night with the Futures game, tonight is the Home Run Derby, and then the All-Star Game is tomorrow night. There will only be one Cardinal on the All-Star team…  Congrats to Paul DeJong for being named to the team…  A chance to dry out this week, for the weather is in store, and it’ll be nice to have days without rain!  Cheap Trick takes us to the finish line today with their song: The Flame…    I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler

Gold Fights Back!

July 3, 2019

* Currencies see a non-movement day… 

* Strange couple of days for the price of Oil… 

Good day… And a Wonderful Wednesday to you! The day before our country’s Independence Day, on the Fourth of July. On July 4, 1776, the 13 colonies claimed their independence from England, an event which eventually led to the formation of the United States. My dad fought in WWII as an army infantryman, and was always very excited to celebrate the 4th of July… The shooting off of fireworks had become illegal in the city of St. Louis, but that didn’t stop my dad, he always would say that as a true patriot, he had the right to shoot fireworks! So, however, you celebrate it, be careful, but have fun… Three Dog Night greets me this morning with their song: Mama Told Me Not To Come… ( a great song from the 70’s!)

OK… I do believe that the senior currency traders have already squared their books and headed to the Hamptons, for there was little to no movement in the currencies yesterday. The metals traders have to hang around to combat the short paper traders… And on Monday we saw Gold get whacked badly, only to see it all reversed on Tuesday, and the shiny metal added to its level on the day in a BIG way, closing at $1,418, and the buying continued after the close to a show Gold last night trading at $1,431…. I didn’t believe my eye at first, so I checked both Bloomberg and Kitco for the current Gold price and was pleasantly surprised to see that the reports were correct! Things did begin to come unglued after the markets closed, and the $1.431 level didn’t hold…  but Gold is up $5 in early trading today at $1,423.72, so we have that going for us! 

Nice move, eh? I sure liked to see it rebound from Monday’s whacking! Remember about 10 days ago, when I told you when Gold got to $1,400 that I was scared that the price manipulators would have something to say about this upward move? Well, I guess they had their say on Monday… And on Turnaround Tuesday, they were nowhere to be found!

So, it’s only fitting that I take the rest of the week off, since traders are doing the same, eh? But until tomorrow, we have to get through today, which I think will be the same result as today for the currencies… Gold, will have a different story of course…

The Price of Oil has had two consecutive sessions that have been quite interesting… First Oil suffered one of the worst 1-day losses on record, which was very strange, given that the OPEC boys confirmed that they were maintaining their production cuts… But, I guess traders don’t care about supply and demand, eh?   But then the price of Oil won back some of the lost ground in the second session, when it was announced that Oil supplies in the U.S. had dropped…  So, like I said, a very strange couple of days for Black Gold, Texas Tea! 

I wonder how many dear readers, or attendees of my many presentations in 2009, remember me telling them about the Chinese swap agreements with other countries that would eliminate, eventually that is, the need for countries to hold so many dollars to settle the terms of trade?
Well, I thought it would interesting to see just how many countries had signed these agreements… The total is…. Drum roll…. 34! That’s right 34 countries, big and small have signed these agreements with China that removes the dollar from the terms of transactions!

Yesterday, good friend, Sharon, sent me a link to a YOUTUBE from Mike Maloney… I’ve always liked Mike Maloney, and his ideas, as they, for the most part, followed my own… He tells us in this video that China has created “instex” which they will use to replace SWIFT… (SWIFT is the U.S. controlled system for passing funds across borders) You have to be a member in good standing to belong to SWIFT… We know that Europe and China have been working on their own versions of SWIFT, and now they are in place… That starts the sand trickling through the hour glass that marks the end of time for the dollar as the reserve currency…

Yesterday, I told you that the EU was using their new system to continue to trade with Iran and not use dollars… The Trump administration immediately called for new tariffs totaling $4 Billion on Cheese, whiskey, coffee and pasta… hey! It’s not like your trips to the grocery store are getting cheaper, eh? Why shouldn’t we increase prices for food even more? The Fed removes food and energy from their inflation calculations anyway! UGH!

That’s two paragraphs in a row that started with the word: Yesterday… So… yesterday, all my troubles seemed so far away… Now it looks as though they’re here to stay, Oh I believe in yesterday…

So, let’s keep this going…  

Yesterday, the Dollar Index was 96.75 and this morning its 96.67, so that will pretty much tell you that the currency books have been squared and not much will happen today… That is unless we get a rogue data print today… 

Speaking of data prints… The U.S. Data Cupboard showed that auto sales were still strong in June, and that amazes me…  Today, we’ll see the ADP Employment Report for June…  And then Friday, we’ll see the Jobs Jamboree for June…  I read a report on Bloomberg this morning that they believe the Fed’s decision on a rate cut will be determined by the Jobs Jamboree number on Friday…  Really?   

The Fed Heads maybe dolts at times, but they, as a whole, are pretty smart cookies, and I can’t see them getting all caught up in the Trumped up BLS jobs report…  I would rather like to think that they use the ADP report… 

To recap… Well, it was a no movement day for the currencies yesterday, as Chuck believes the senior currency traders have already squared their books and headed for the Hamptons… Gold fought back bravely yesterday, after spending the previous day in the woodshed, it was turnaround Tuesday for the shiny metal, and it gained $34 on the day…  

For What It’s Worth… Way back in 2003… 16 years ago, I wrote about the lack of funding in state Pensions, and private pensions… That’s right 16 years ago… I recall it because, I was riding in a convertible Mustang with two of my Spring Training buddies for the first time, and I talked to them about my latest Review & Focus article… Well, over the years, the problem hasn’t gotten any better… In fact it’s gotten worse, so bad, that now a mayor wants a Gov’t bailout for the state of Illinois’ pension problem… I shake my head in total disgust because, this could have all ben eliminated long ago, but Corporation leaders took cash and ran… State leaders gave more stuff away free, and interest rates went to hell in a hand basket…. So, after all that’s been said and done, here’s the article about the pension bailout that got me all lathered up! And it can be found here: https://www.zerohedge.com/news/2019-07-01/new-chicago-mayor-wants-state-taxpayer-bailout-chicago-pension-debts

Or, here’s your snippet: “t didn’t take long for new Chicago Mayor Lori Lightfoot to propose a plan that would wash her hands of Chicago’s pension crisis altogether. According to a recent report in Crain’s, Lightfoot wants the state to take over Chicago’s pension debts and merge them with the other pension plans throughout the state. The move would make all state taxpayers responsible for paying down the city’s debts.

The plan to shift city debts to the state would bail out the mayor from having to raise about $1 billion in additional taxes to pay for increasing pension costs by 2023. A massive tax hike is something she’s desperate to avoid.

But while Lightfoot may think the cost-shift is a solution, it will only make things worse for Illinois. She should expect significant pushback from many sides.

Start with downstate and suburban residents. Sure, their public safety pension funds would get consolidated under the state, too, but it’s the Chicago funds that are some of the biggest and worst-funded in the state. The four city-run funds are collectively funded at just 27 percent and face an official shortfall of $28 billion.

In contrast, the 650 downstate pension plans are 58 percent funded and have a shortfall of nearly $10 billion. The end result of any statewide pooling of pension funds will be a net bailout for Chicago.”

Chuck Again… I talked to a former colleague of mine last Friday, and she told me that her family was moving to Missouri, from Illinois… She listed a ton of reasons why Illinois was going to hell in a hand basket, and why they wanted to move out of the state… I didn’t even attempt to talk her out of it!

Currencies today 7/3/19 American Style: A$.7025, kiwi .6690, C$ .7635, euro 1.1296, sterling 1.2570, Swiss $.9844, European Style: rand 14.1097, krone 8.5525, SEK 9.3032, forint 285.60, zloty 3.7577, koruna 22.5306, RUB 63.17, yen 107.65, sing 1.3562, HKD 7.7964, INR 68.80, China 6.8632, peso 19.03, BRL 3.8426, Dollar Index 96.67, Oil $56.77, 10-year 1.96%, Silver $15.27, Platinum $833.84, Palladium $1,558.38, and Gold… $1,423.72

That’s it for today, and the rest of this week! Happy Independence Day tomorrow and basically all weekend long! Can you believe that we’re already this far into summer already? WOW! Cardinals played too late for me to watch the whole game last night, but they ended up losing… UGH! Does any team want to win the Central Division? Because none of them are playing like they do! We’re about 3 weeks away from my annual summer vacation… I’m not going to wish for it to get here fast, because that would mean the summer month of July was about to end!  A quick update on my cellulitis in my leg… It still won’t heal… I believe the chemo I’m taking is keeping it from healing.. A losing battle… But in the end I think I’ll win the war!  Blood Sweat & Tears take us to the finish line today with their song: You’ve Made Me So Very Happy…   I hope you have a Wonderful Wednesday, and an Intergalactic Independence Day weekend!  But be careful out there! And please Be Good To Yourself!

 Chuck Butler

 

 

 

 

Gold Gets Whacked, But Why?

July 2, 2019

* Gold bugs continue to wipe out gains by the currencies

* Markets seem to believe the Trade War is over? 

Good Day… And a Tom Terrific Tuesday to you! A travel day for my beloved Cardinals as they head for a 3-game series with the Mariners, in Seattle… Two teams going nowhere this year, so far, that is… My Cardinals are only 3.5 games from first place in their division, but they’re only a .500 team that can’t hit! And now their best hitter, so far this year, is hurt and will miss some time… Uh-Oh! Well, things got back to normal around here yesterday… While I don’t mind time alone, I do however, like for someone to be here, just in case, I fall or get sick or something of that nature… Creedence Clearwater Revival greets me this morning with their song: I Pull A Spell On You….

OK… So, there are no details coming from the G-20 meeting between Trump and Xi, other than Trump called off additional tariffs on $300 Billion of Chinese goods, and allowed U.S. companies to deal with Huawei… There was nothing mentioned about the previous tariffs on Chinese goods, and that has me worried, and thinking that the dollar bugs have gotten ahead of themselves, with all their dollar buying the past two sessions… So, my advice, which you can listen to now and hear me later, or don’t, would be to buy the dips in both the currencies and metals, for this could turn out to be a false dawn in the hopes of a Trade War ending…

But… having no details didn’t stop the sellers of Gold from piling on short sale after short sale, to the tune of 390,000 contracts on the day, and $25 taken off the price of Gold… Why? Well, I believe it was because the short sellers saw this brief let up in the Trade War pressures as their opportunity to pile on the short paper trades…  That’s my story and I’m sticking to it! 

I read this morning that Dr. Doom, Nouriel Roubini, the famous economist has called for a Global Recession…  So… either his words don’t carry the weight that they once did, or no one is paying attention, because  back in the day, if Roubini had these things to say, Gold would have soared… I’m just saying… 

Well, the shiny metal is trying to win back some lost ground this morning as it is up $8 in the early trading… Maybe some too much, too fast selling being reversed?  Or maybe some WAS listening to Roubini… 

Many years ago, Chuck and Frank Trotter, called Roubini to see if he wanted to work together on a project, but he was too busy at the time… I always thought that he was just saying that, but maybe he was… 

I sure wish I had access again to the Pfennig Replies box so I could see what everyone is saying these days… But there’s a glitch in it right now, that I thought would be corrected by now, but isn’t, so I carry on…

Remember how I’ve told you time and again about how the regional manufacturing indexes don’t seem to have anyting to do with the national ISM manufacturing index? Well, this past month was a prime illustration of that, as each region (NY, Richmond, Chicago, etc. ) printed some very ugly numbers, but the ISM bumped higher in June from 51.3 to 51.7… Now, I want someone from the gov’t to call me and explain how this works… The regionals numbers are ugly, but combined, the national number improves on the month… Explain away, will you please… Hello? McFly? Is anyone home? I’m talking to you, the government, give me an answer, today! I demand it! HA… As if!

So, the currencies drifted lower still during yesterday’s trading, with the euro losing the 1.13 handle, that it had fought so long to win about 10 days ago! I sure hope the Fed Heads are receiving the message from abroad loud and clear… The global growth has gone to hell in a hand basket, because of the Trade Wars, and Central Banks around the world will begin to follow the lead of the Reserve Bank of Australia (RBA) in cutting rates…

Back in the day…. If you wanted yield over what you could get in the U.S., Japan or Europe, you simply looked to the South Pacific, where the Aussie and kiwi dollars were always dependable yield advantage currencies… But not any longer… Rates in these two countries are lower than they are here in the U.S. and that’s saying something, now isn’t it?

Well, is there a BREXIT deal or no deal?  This question is what’s keeping a lid on the progress of pound sterling… One day I read that there’s a new and improved BREXIT deal and the next day I read that there isn’t anything of the sort… So, what’s it gonna be boy?  Inquiring minds need to know!   

And while I’m talking about the U.K….  I want to give a shout out to Bank of England Gov. Mark Carney, for his call that interest rates would be going up soon.  (I’m being sarcastic here in case you didn’t catch on!) He made those comments last year, and, well, have we seen a rate hike in the U.K.? No… and I have to slap myself on the back for pointing out that Carney had made these promises while the Gov. of the Bank of Canada, and never carried through with them… And so therefore I was sure that this time was just hot air… 

The Canadian dollar / loonie continues to be Oil price driven, and has a lofty 76-cent handle these days…  So, while we’re talking about the price of Oil, the OPEC boys decided to hold their production cuts of Oil at current levels until 2020… That has helped the Petrol Currencies like the loonie, and the Russian ruble along with the Brazilian real, and the Norwegian krone to hold recent gains and gain bits and pieces when they can… 

The aforementioned Data Cupboard print of ISM (manufacturing index) yesterday, dominated the data front… Today, we’ll get a little break, but will see the total Auto sales in June…  About 6 months ago, it appeared that the auto industry was about to do a face plant once again, but then lack of interest in new cars disappeared…  I was as surprised as anything to see this, as I was thinking that everyone that wanted a new car had gotten one, by every possible financing method…  Strange turn around here, is all I’m saying, and one that doesn’t make a lot of sense… 

To recap…  Gold got whacked badly yesterday as the short sellers piled on 390,000 contracts…  The markets are seeming to forget that the Trade War that existed before Trump and Xi had a kumbaya at the G-20 last week, is still in place, all that was removed was the additional $300 Billion in tariffs…  But, you can’t fight city hall, and you can’t fight market sentiment… But one day, when no one is looking, someone will say, hey! The Trade War is still on!  And things will go back to where they were before the Kumbaya!

 For What It’s Worth… I told you last week that President Trump was changing horses in the middle of the stream by ending a Trade War and starting a Currency War, and his first opponent was Europe… Well, this article sent to me by longtime reader, Bob, appeared on Zerohedge.com and talks about what Europe is doing to combat the U.S… And it can be found here: https://www.zerohedge.com/news/2019-06-28/trump-unleash-hell-europe-after-eu-says-spv-circumvent-swift-and-iran-sanctions-now

Or, here’s your snippet: “With the world waiting for the first headlines from the Trump-Xi meeting, the most important and unexpected news of the day hit moments ago, when Europe announced that the special trade channel, Instex, that will allow European firms to avoid SWIFT and bypass American sanctions on Iran, is now operational.

Following a meeting between the countries who singed the Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), which was ditched by US, French, British and German officials said the trade mechanism which was proposed last summer and called Instex, is now operational.

As a reminder, last September, in order to maintain a financial relationship with Iran that can not be vetoed by the US, Europe unveiled a “Special Purpose Vehicle” to bypass SWIFT. The mechanism would facilitate transactions between European and Iranian companies, while preventing the US from vetoing the transactions and pursuing punitive measures on those companies and states that defied Trump. The payment balancing system will allow companies in Europe to buy Iranian goods, and vice-versa, without actual money-transfers between European and Iranian banks.

The statement came after the remaining signatures of JCPOA gathered in Vienna for a meeting that Iranian ministry spokesman Abbas Mousavi called “the last chance for the remaining parties…to gather and see how they can meet their commitments towards Iran.”

Until today, Tehran was skeptical about EU’s commitment to the deal and threatened to exceed the maximum amount of enriched uranium allowed it by the deal after US had imposed a series of sanctions on the country.
Meanwhile, opponents of Instex – almost exclusively the US – have argued that the mechanism is flawed because the Iranian institution designated to work with Instex, the Special Trade and Finance Instrument, has shareholders with links to entities already facing sanctions from the U.S.
The announcement sent oil sharply lower, with crude futures falling about $1/bbl in closing minutes before settlement, extending daily loss, as it means Iran now has a fully functioning pathway to receive payment for oil it exports to anyone it chooses.”

Chuck Again… Oh me, oh my… what’s the U.S. going to do when they hear this? Recall that the U.S. said that they would punish any country with sanctions if they traded with Iran? Well, I think the Europeans just said neener, neener, neener to the U.S. So, what comes next? Only the Shadow Knows!  well, someone other than the Shadow does know that more tariffs are being suggested for the EU…  

Currencies today 7/2/19 American Style: A$.6993, kiwi .6663, C$ .7620, euro 1.1299, sterling 1.2625, Swiss $.9884, European Style: rand 14.1154, krone 8.5570, SEK 9.3405, forint 285.81, zloty 3.7550, koruna 22.5148, RUB 62.98, yen 108.27, sing 1.3555, HKD 7.8033, INR 68.99, China 6.8478, peso 19.08, BRL 3.8396, Dollar Index 96.75, Oil $58.86, 10-year 2.02%, Silver $15.16, Platinum $835.48, Palladium $1,555.58, and Gold… $1,392.44

That’s it for today…  The summer heat has FINALLY come to our area… June for the most part was a chillier than normal, and very wet month, but these past few days have seen the summer sun in all its glory appear! YAHOO! But the weather app shows that rainy days will be on the calendar again this week, UGH!  I get flood watch alerts daily on the phone… Too much rain! Do you have plans for this upcoming Independence Day holiday weekend? Be careful whatever it is you decide to do…  I don’t believe I’ll be going anywhere, but right here, and that’s a good thing in my book! Chilliwack takes us to the finish line today with their song: Fly At Night…  A song about being on the road with a band…  I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!

Chuck Butler

 

 

 

 

Trump And Xi Are Buddies Again!

July 1, 2019

*The overnight markets haven’t been kind to the currencies & metals

* The RBA cuts rates… 

Good Day… And a Marvelous Monday to you!  Pfennig tradition calls for this today… There I was on a July Morning… I was looking for love… With the strength of a new day dawning, and a road of my own…  Welcome to July! I didn’t realize this last week, when I shortened the week with my appt. on Thursday… But this week will also be a short week, as the 4th of July will be on Thursday this week… So… Yay for me, eh? My beloved Cardinals finally found a way to score more than 1 or 2 runs a game yesterday. It did take them extra innings to win, but Hey! They’re not much of a team other than a .500 team, so any win is a good one! Alex came home on Friday after being away from home for 10 weeks, as he completed a clinical in Montgomery, Alabama. He begins another one immediately, but this one is near to hear, so, no biggie… A few of us celebrated Alex’s 24th birthday on Friday… How many of you remember when he was 3 and would help me write the Pfennig, and it looked a lot like this: !$##3456*^&^! Ah… Good memories of when he and I were so close and I’ll never forget watching his favorite shows on TV with him in 1998, during my “first retirement”…  REO Speedwagon greets me this morning with their song: Golden Country…

Well, Friday, it was announced that Trump and Xi are friends again, and have ironed out their differences that created a Trade War with China… I find this very difficult to believe that all’s well here, but if that’s what the two leaders want us to know… Then so be it! The damage to the U.S. economy has already caused the Fed to talk about rate cuts, instead of rate hikes, so that’s not a good thing, as far as I’m concerned… Yes, I told you that the Fed would be reversing itself, but I didn’t think it would take this long for them to do so!

So… the China / U.S. announcement on Friday didn’t change the currency levels much, and Gold only lost 30-cents on the day… So, to me, I look at this reaction, as the markets didn’t believe an agreement was reached either! President Trump then went onto N. Korea to meet his BFF Kim, and Trump became the first sitting president to set foot in N. Korea since who knows when! The great negotiator, they’ll be calling Trump soon… Not the opposing party, of course, but his own people…

But… in the overnight markets, the removal of the safe havens has begun to take place… Gold is down big in early trading, and the euro has slumped, along with the Japanese yen VS the dollar… So… Maybe after a little arm twisting, the markets now agree that the Trump / Xi deal is real… 

Well… The Reserve Bank of Australia (RBA) became the first Central Bank to cut rates in 2019 last week… The RBA was driven to cut rates, because of the slowdown in China due to the Trade War with the U.S. I wonder if the RBA would have liked to have waited until this past weekend’s meeting between Trump and Xi took place before they cut rates… But they didn’t, they went ahead and cut 25 Basis Points from their internal rate, which now stands at 1.25%…

The Aussie dollar (A$) traders liked the news at first and ran the A$ above 70-cents on Friday, but like everything else it has succumbed to the overnight markets and their buying of U.S. dollars…  I have to tell you though, when I saw that +70-cent level on the A$ I thought it looked very good…  

So, last week I thought that the dollar was going to be looking for a comfortable place to hang out in the woodshed, for it would be there for sometime… And then along came a spider and… well you know what happened, the powers that be rushed to the dollar’s aid, and now, this week, it looks like the dollar will avoid being sent to the woodshed for any prolonged period… 

The price of Oil is higher this morning and is trading with a $60 handle… How much longer will this last could be a question for our friends at OPEC (NOT!) and their decision to maintain the cuts in Oil production for longer…  Other than that, we’re in that same old cycle for the price of Oil… It bumps higher, the shale producers jump in, flood the markets with supply and the price goes back down, and the shale producers bow out again… Lather, rinse and repeat… 

I wonder what the dollar bugs will think when they hear this news…. 

There’s a rumor going ‘round, someone’s underground, no wait! The rumor I’m talking about is that a major U.S. Bank will fold in the near future… This from the folks at Agora, who have never been known as publishers that pull back punches! Remember when the folks at Agora told us that GM would collapse along with Fannie and Freddie back in 2007? And then ithose things all happened? Well, they won’t tell us what major bank is on the ropes, unless we sign up for a year subscription, but to me, just knowing that a major bank is teetering with all their derivatives, is scary enough! I don’t know about you, but I’m scared about what will happen here…

Last week I told you about how the Hong Kong Dollar / honker was on the rally tracks, which looked very weird to me, but this was happening while the people of Hong Kong rioted in the streets…

Reuters.com had a good piece on why the riots are happening this weekend, so let’s listen in… “More than a million people have taken to the streets at times over the past three weeks to vent their anger and frustration at Hong Kong’s Beijing-backed leader Carrie Lam, posing the greatest popular challenge to Chinese leader Xi Jinping since he came to power in 2012.

Opponents of the now-suspended extradition bill, which would allow people to be sent to mainland China for trial in courts controlled by the Communist Party, fear it is a threat to Hong Kong’s much-cherished rule of law and are demanding it be scrapped and Lam step down. “
I’m still of the belief that the honker’s rally won’t be a long lasting thing, so we shall see…” – Reuters

I guess we’re back to square one with regards to a currency and metals rally taking place. And so our attention will be switched from looking for news on the Trade War, to watching the data prints this week…  Of course this week will be shortened with the Independence Day holiday on Thursday, which means all the senior currency and metals traders won’t be in on Friday, as they’ll make a 4-day weekend with a trip to the Hamptons! 

I’m surprised though that the monthly Jobs Jamboree will still happen on Friday… I would have thought with the markets being so thin that day, that the powers that be would delay it to next week… But that’s not the case, and so on Friday this week the Jobs Jamboree featuring the June payroll numbers will take place. 

We start the data roll call today with the June ISM Manufacturing Index, which at the end of May was showing some weakness and it stood at 51.3, which the Markit version of the data showed manufacturing teetering at 50.1…  The ISM is primed to fall further, after all the regional reports have been very negative, so we shall see… 

In addition to the Jobs Jamboree on Friday, we’ll also see the most recent Trade Deficit (look for a jump higher), Factory Orders (a real piece of economic data) and the auto sales for June…  All could end up being market moving should they expose the economy even more… 

To recap… Trump and Xi are buddies again, and Trump is visiting his BFF, Kim, in N. Korea… All these pleasantries have turned the currencies and metals around, as the safe havens are being removed and the dollar bugs come back out to play.  Gold, which lost 30-cents on Friday, is down nearly $20 in the early trading this morning. And the euro has slipped further down the slippery slope. The RBA was the first central bank to cut rates in 2019… Will the Fed be right behind them?   Inquiring minds want to know! HA!

For What It’s Worth… I told you last week that Trump was turning the Trade War to a Currency War… He’s doing this by putting pressure on the Fed to cut rates and make the dollar less appealing… thus weakening… And this article from Bloomberg.com highlights this ongoing argument between the President and the man he nominated to be the Fed Chairman, and it can be found on Bloomberg.com… 

Or, here’s your snippet: “President Donald Trump wants a weaker dollar to help boost exports, and is counting on the Federal Reserve to help make that happen. But the central bank’s chairman, Jerome Powell, has made clear it’s not his job.

It’s a new twist in the broader pressure campaign the president has brought to bear on Powell to cut interest rates to energize the stock market and fuel growth.

Trump’s focus on the dollar surfaced last week after the European Central Bank said it might ease policy, prompting the euro to drop against the dollar. Trump seized on the move to say on June 18 that the Fed’s failure to lower rates was putting U.S. exporters at a competitive disadvantage. He later mused on June 26 he’d rather have ECB President Mario Draghi running the Fed.

Powell, once again, is finding himself on the defensive, trying to shield the Fed from political influence. He deflected Trump’s calls back at the administration.”

Chuck Again… Well, the Fed Chairman is right here on this subject, but on the other hand he’s totally wrong in his attempt to keep the stock market afloat… Neither of these two directives are in his job description… I’m just saying…

Currencies today 7/1/19 American Style: A$.6995, kiwi .6704, C$ .7630, euro 1.1325, sterling 1.2627, Swiss $.9838, European Style: rand 14.1408, krone 8.5490, SEK 9.3087, forint 284.93, zloty 3.7455, koruna 22.4768, RUB 63.19, yen 108.25, sing 1.3547, HKD 7.8080, INR 69.01, China 6.8655, peso 19.16, BRL 3.8469, Dollar Index 96.54, Oil $60.06, 10-year 2.02%, Silver $15.26, Platinum $834.54, Palladium $1,530.89, and Gold… $1,390.17

That’s it for today…  A great big belated Happy Birthday to youngest son, Alex who turned 24 this past weekend…  On Friday last week, I attended a retirement party for 2 former colleagues: Ty Keough and Mary Vance… It was great seeing most of the folks again… At one point in the proceedings someone mentioned that I had hired them, and I looked around the room and said, “well, I think that I hired nearly everyone one in this room!” And that got a big laugh…  OK, Alex is home… Kathy comes home today… The house won’t be so quiet any longer, but that’s OK… It was becoming too quiet! So… memo to Christine and Jen… That was two weeks alone for me, and I’m still standing, as Elton John sang…   Ok…  The great Otis Redding takes us to the finish line today with his song: I’ve Been Loving You… This was from his live from the Whiskey A-Go-Go recordings, from many years ago now…  I hope you have a Marvelous Monday… Welcome to July, and Please Be Good To Yourself!

Chuck Butler

 

The Fed Heads Say No To A 50 Basis Points Rate Cut!

June 26, 2017 

* Talk of a trade agreement allows the dollar bugs to return… 

* What the heck is going on with the honker? 

Good Day…. And a Wonderful Wednesday to you! What a beautiful day here yesterday, the sky was a blue umbrella, the sun was shining, and it warmed throughout the day. No rain, in there at all! YAHOO! I sat outside last night watching my beloved Cardinals blow another game… UGH! But the night was nice, the company even better, so it wasn’t all bad! I don’t know how much I’ve got to say today, so let’s just get started and see where we go, eh?  The Rolling Stones greet me this morning with their song: Can’t You Hear Me Knocking?  (some of Keith Richard’s best guitar work here)

Well, well, well…. What have we here?  Yesterday, the Fed Heads hit the streets by large numbers, to talk and give their opinions…  Why anyone would listen to them any longer is beyond me… But currency traders did, and what the Fed Heads were telling the markets is that we can forget at 50 Basis Points (1/2%) rate cut…  Shoot Rudy, even the biggest dove of them all, James Bullard, President St. Louis Fed, said a 50 Basis Point cut would be overdone….  

The currency traders took these messages at face value, and decided to take some profits in the currencies, for the run up had been pretty swift and strong… What the currency traders were missing from the Fed Heads talks is that while the Fed Heads said that a larger rate cut was out of the picture, they didn’t say that no rate cut was on the docket…  So, a rate cut is still on the docket, albeit the 25 Basis Points I’ve talked about for a month now… 

So, the currencies backed off their lofty levels, and Gold was only able to eke out a gain of $3.80 on the day… A couple of weeks ago, I would have been a happy camper to see a $3.80 gain in Gold, because that’s not what we were seeing then. The exact opposite was hitting the shiny metal nearly every day.  But a $3.80 gain now is sort of MEH…  Not after the daily moves we seen lately! 

OK Yesterday I told you that today I would talk about the Hong Kong Dollar (HKD) or (honker)…  I don’t know if you’ve been checking the currency roundup or not, but something strange has been happening to the honker… It’s gained steadily for a couple of weeks… at first I didn’t believe what I was seeing, and wrote it off as the blip like we saw last year, when the honker rallied big time, only to have it come back to reality soon after…  

But that’s not what’s going on here this time…  And the thing that has me scratching my balding head is that the honker is rallying while the Hong Kong people are rioting in the streets… Major civil disorder is going on in Hong Kong, and the currency is rallying… Is that not strange or what?  Well, yes it is…  Oh, by the way, the honker is pegged to the dollar so its gains will be limited, but then the peg could always be broken, right? 

This is a public service announcement….  I haven’t had the access to the Pfennig Replies box for over a week now, so if you’ve written me, asking me a question, and I haven’t responded…  Now you know why! I was not just ignoring your emails…  I suspect that soon this will all be corrected, and then I’ll be at my laptop all day, catching up on old email… 

OK…  Well, the economic data prints here in the U.S. are certainly screaming for a rate cut… Yesterday, was no different, with the Case/ Shiller Home Price Index coming in flat for April, after a few consecutive months of home prices falling…   And the stupid Consumer Confidence Index for June dropped from 130 to 121… A HUGE drop, eh? … And then there was this….. 

I’ll get to a real humdinger of a description of the economy from the Fed Heads in the FWIW section of the letter today, so don’t miss it! Until then I’ve got this little ditty for you to chew on regarding the economy…

The Richmond Fed collapsed in June to the lowest level since this survey began. Uh-Oh… And the Chicago region index printed negative again last month… I know I often tell you that these regional reports don’t seem to filter through to the National ISM report… But… the National ISM has been slipping in recent months… I’m wondering if… this month it slips below 50…

The Russian ruble was the only currency yesterday that didn’t see any slippage, and that’s because the ruble enjoys the highest interest rate in the industrialized world… And it doesn’t hurt things that the price of Oil added another buck to its price in the past 24 hours and this morning is trading with a $58 handle… 

I was looking up the price of Oil this morning, and seeing rising, and right next to the price there was an opinion piece that was titled: Here’s why Oil’s outlook could be bleaker than expected…. I had to laugh, because here I am watching the price of Oil rise, and there’s an article about how its outlook is bleak…   Made me laugh… But then that’s my sense of humor! 

On the Trade War front… The markets are getting that warm and fuzzy feeling once again, from talk that Trump and Xi will meet and iron out a Trade agreement at the G-20 later this week…  Really?  I mean talk about people that love to have the rug pulled out from under them! Dolts!  But this shiny happy people (REM) syndrome is helping the dollar fend off sellers… 

The U.S. Data Cupboard has two pieces of real economic data for us today in the form of Durable and Capital Goods Orders for May… You may recall that April’s reports for these two were both negative, and I pretty much expect that to repeat itself for May… 

On Friday this week, we’ll see the color of Personal Income and Spending… This will be a very important report, due to the fact that the economy seems to be teetering toward a recession and a drop in consumer spending could be the snowflake that sends the economy over the edge… We’ll see, and I’ll talk about it next Monday… 

To recap… The Fed Heads went out in force yesterday, and talked the markets down from thinking that a 50 BP rate cut is in the offering at next month’s meeting, and that pushed the currency traders to take some profits, after the currencies had moved swiftly and strong in the past two weeks…  The upcoming G-20 meeting will have Trump and Xi meeting, and the “shiny happy people” think something will come of the meeting, which is helping the dollar this morning… 

For What it’s Worth…. Well… I’ve been saying for sometime now that a recession was coming, and I’ve also told you about 10 days ago, that I saw the Fed cutting rates in July by 25 Basis points (1/4%) and that was BEFORE their last meeting… Well, I was pointed toward this article by economist Danielle Di Martino Booth, and it’s about the next rate move and can be found here: https://www.bloomberg.com/news/articles/2019-06-25/powell-reiterates-rate-cut-case-has-risen-amid-economic-risks

Or, here’s your snippet: “Federal Reserve Chairman Jerome Powell said the downside risks to the U.S. economy have increased recently, reinforcing the case among policy makers for somewhat lower interest rates.

“Crosscurrents have reemerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy,” Powell told the Council on Foreign Relations in New York on Tuesday.

“Many FOMC participants judge that the case for somewhat more accommodative policy has strengthened,” he added.”

Chuck again…. Well, well, well… it now appears quite evident that the Fed will cut rates next month, pulling an about face from their March rate hike, when they talked about how the economy was so strong and robust! We’re the driving the economy with blinders on? I think so… folks… And we should trust them how much? None if you ask me!

Currencies today 6/26/19 American Style: A$.6982, kiwi .6682, C$ .7605, euro 1.1365, sterling 1.2684, Swiss $.9771, European Style: rand 14.3298, krone 8.5078, SEK 9.2650, forint 284.60, zloty 3.7497, koruna 22.4290, RUB 62.71, yen 107.71, sing 1.3540, HKD 7.8074, INR 69.28, China 6.8786, peso 19.17, BRL 3.8328, Dollar Index 96.23, Oil $58.94, 10-year 2.02%, Silver $15.27, Platinum $807.35, Palladium $1,535.52, and Gold… $1,405.58

That’s it for today, tomorrow and Friday… recall I have somewhere I have to go tomorrow morning, so no Pfennig…   When I get back home, I’ll check on stuff and see if I need to Tweet anything… Otherwise, I’ll be back in the saddle on Monday morning!  Friday, early evening, I’ll be attending a retirement party for two of my former colleagues… Ty Keough, and Mary Vance… I guess others are getting to that age too, eh? I sometimes think what I would do if I had to go back to work… And then I say… “nah can’t happen”!  Shoot Rudy, it’s always noon before I get finished with my morning crossword puzzles!  The Alan Parsons Project takes us to the finish line today with their song: Time….   I hope you have a Wonderful Wednesday, Tub Thumpin’ Thursday and Fantastico Friday! And Please Be Good To Yourself!

Chuck Butler

From A Trade War To A Currency War?

June 25, 2019

* Currencies see profit taking in the overnight markets

* Russian ruble proudly displays its highest interest rate…. 

Good Day… And a Tom Terrific Tuesday to you! A night off for my beloved Cardinals last night. I will say something though about all the adoration the St. Louis fans showered on Albert Pujols this past weekend…. IF I was a Current Cardinal ballplayer, I would have viewed that, as…. “if I can perform for 11 years like he did, and bring 2 world championships to the city, I will get ovations like that when I return too”… So, maybe it lit some fires under the underachieving Cardinals… We shall see…. I watched some of the college World Series last night, I still can’t believe they still use metal bats… No wonder pitchers are the most highly drafted players, because you can’t tell if a guy has power or is it his metal bat? OK… Pink Floyd greets me this morning with their 17 minutes song: Shine You Crazy Diamond…

The dollar selling continued through Monday’s trading and into last night, as the euro traded past 1.14… We were here a couple of months ago, when traders were still trying to figure out if the dollar was ready for a multi year weak trend or not… Apparently, at that time it wasn’t, and now the questions come forward and want to know it the dollar’s ready now? I’ll let you know, if the euro continues to climb to 1.15…

And just to throw some spice in our soup… The euro saw some profit taking last night, nothing that would alter your taste buds, but just extra flavoring… The Profit taking brought the euro back below 1.14 this morning, but not a big deal as far as I’m concerned… Watch for today’s reaction to the profit taking… If the euro rebounds and brushes the profit taking off its shoulder, like a dandruff flake, then it’s all good… But should this profit taking trigger some additional selling, then all bets are off… So, watch the trading today… 

For those of you new to class…. The euro was introduced in 1999 at a price of 1.17, but quickly fell in value and throughout the year it traded in the low 90-cent range… By 2002, and traders were getting the idea that it was here to stay, they began offsetting it to the dollar, and the euro had climbed back to parity with the dollar… And then the weak dollar trend began in Feb. of 2002, and the first stop for the euro was 1.10, then 1.20, 1.30, 140, and eventually made it as high as 1.50…

I talked about Jeffrey Gundlach a couple of weeks ago, he’s now the new Bond King… And he was quoted yesterday as saying that the dollar bear market has begun… So… I’m not so sure as of that yet, and like I said if we see the euro trade past 1.15 then I’ll be the first to tell you that the multi-year weak dollar trend is now in place…

There was one other thing I forgot to mention yesterday when spelling out the things that pushed the dollar over the edge last week, and that is… The U.S. President, Trump, has decided to go from Trade War, to Currency War folks… Recall I was complaining about him chastising the Eurozone for keeping the euro cheap for exports, but at the same time was calling out the Fed Chairman and blaming him for the strong dollar…. Well, it’s gone on and on now all weekend, and Trump is not taking any prisoners here… he wants other currencies to be stronger than the dollar… Will he get his wish? Well, it sure looks like it…

And Gold? Well, I was reading an email from the GATA folks last night from Dave Kranzler, of whom I’ve quoted before… And he was saying something that I’m very fearful of… And that is the price manipulators getting together to pool up their short Gold trades and well, whack Gold once again… But, he pointed out that since Gold started this run last week, there’s been no success in brining the price back down yet, and that maybe, with all the foreign Central Bank, and investors buying of physical Gold, that their efforts to get the price of Gold down, may be diminished… But while that may be true… I think we should be prepared for some volatility going forward, which would mean to buy the dips in price, in my humble opinion!

And that talk about all the physical buying got me thinking about what I used to tell you dear readers all the time, and that was if we wanted to snuff out the short Gold trades, there needed to be enough demand of physical Gold so that the price manipulators couldn’t make a difference… So, it was nice to see someone besides me have that idea….

And add to those thought the fact that Gold is up another $8 in the early morning trading today!  Got Gold? 

The Russian ruble continues to move stronger VS the dollar, taking out the 63 handle finally, yesterday…  The ruble is now 62.83, which is a far cry from the rot on the vine that was a price of 70 from a year and a half ago, and it’s also a far cry from the 35 it traded before the conflict with Ukraine that began in 2014… So, it’s been a long slog for the ruble, but now it’s got an ace up its Bullwinkle sleeve…  Higher interest rates than any country in the Industrialized world, and with investors starving for yield…  Well, I think you can see where I’m going here… 

In the U.K. the frontrunner to replace former PM May, and become the Imperial Leader (HA!) of the U.K., Boris Johnson, was quoted yesterday as saying that there could be no BREXIT deal…  That hit the pound sterling traders in the gut… I have to think that he’ll backtrack and come up with some explanation of his comment, so that the pound can get back on the rally tracks. 

The U.S. Data Cupboard has the Case / Shiller Home Price Index for April this morning. I would look for more declines in the price index…  We’ll also see the color of the stupid Consumer Confidence for this month. Last month we actually saw a slide in this index number from 134 to 130, so will it continue to slide? I doubt it, because they don’t ask you and me!

To recap…  The currencies continued to move stronger VS the dollar all day yesterday, but there was some profit taking in the overnight markets, so the question for today, will be whether or not the euro shrugs the profit taking off or not…  Jeffrey Gundlach thinks it will and has called these recent moves the beginning of the bear market for the dollar!  Gold continues to move higher, without any roadblocks being thrown down by the price manipulators…  Has all the physical demand for Gold knocked the price manipulators for a loop? 

For What It’s Worth…. Well, I’ve heard some really strange ideas these past couple of months, I won’t mention them for they’re not even worth my time to mention them… But I did come across something that is just about the stupidest idea I’ve heard… It’s a call to have taxpayers pay for Medicare for everyone, even for illegals and it can be found here: https://dailycaller.com/2019/06/21/bernie-sanders-medicare-for-all-illegal-immigrants/

Or, here’s your snippet: “Vermont Senator and Democratic presidential candidate Bernie Sanders admitted Friday that his Medicare for All plan would cover the nearly 11 million illegal immigrants present in the United States.

Sanders has routinely campaigned on his plan to nationalize the U.S. health care system and provide so-called “free” health insurance to every individual. The plan is estimated to cost more than $32 trillion over the next decade.

“We’re gonna … create a Medicare for All health care system which guarantees health care to every man, woman, and child,” Sanders said during the National Association of Latino Elected and Appointed Officials’ (NALEO) presidential candidate forum Friday. “We will organize the American people around the idea that all people in this country have the right to health care.”

Chuck again… That’s $32 Trillion over the next decade folks… OK, now I change my tune from our annual deficits reaching $2 Trillion to them reaching $4 Trillion! And you and I know who’s going to pay for that right? And that’s all I have to say about that!

Currencies today 6/25/19 American Style: A$.6970, kiwi .6645, C$ .7589, euro 1.1382, sterling 1.2727, Swiss $.9769, European Style: rand 14.2931, krone 8.5052, SEK 9.2428, forint 284.60, zloty 3.7380, koruna 22.4505, RUB 62.83, yen 107.05, sing 1.3534, HKD 7.8063, INR 69.39, China 6.8752, peso 19.23, BRL 3.8217, Dollar Index 96.02, Oil $57.67, 10-year 2.01%, Silver $15.43, Platinum $814.22, Palladium $1,515.30, and Gold… $1,428.51

That’s it for today…  I woke up this morning and thought it was later in the week, and that I had to hurry to get to my Thursday morning appt. And then it hit me that it was only our Tom Terrific Tuesday!  Well, one week down, by myself, and one week to go! I think I’ll be just fine…  I say that just to get to my former colleagues, Jen and Christine, who don’t believe that a man can survive when his wife is away…  Of course we’re all getting older now, and for some it’s not a choice, unfortunately…  OK, I plan to talk about the Hong Kong dollar tomorrow, so be sure to come back for that…  The band Focus takes us to the finish line today with their great 70’s instrumental hit song: Hocus Pocus…  don’t remember that one? YouTube it, I think it will come back to you quickly!  I hope you have a Tom Terrific Tuesday and Please Be Good To Yourself!

Chuck Butler