A Short Squeeze Is Propping Up The Dollar!

April 25, 2018    

* The Indian rupee is worst performer.. 

* Gold finally sees some love and gains $5.60 on the day… 

 

Good Day… And a Wonderful Wednesday to you!  OOPS I did it again. UGH! I was up walking the floor after midnight, in the moonlight last night And once again I failed to obey the alarm clock. I think that this change in my MO is concerning to me, as I’ve never been one to just “let it be”…  But maybe this semi-retirement I’m in, has caused this change in me… Oh well, The Strawbs greet me this morning with their Rock Classic song: Autumn…  

Right out of the starters blocks this morning, I’ll tell you that the dollar continues to take no prisoners…. I read that it’s a short squeeze, that everyone an their brother was short dollars, and this short squeeze could end up being rock star status… That wouldn’t be good for the currencies, so we’ll have to wait-n-see just how far this short squeeze goes, eh? It won’t be over until it is, is the saying I used to tell the folks on the trading desk at m old place of business… 

One of the worst performing currencies in recent weeks has been the Indian rupee… I mentioned the other day that a banking scam/ scandal was scaring investors here, and that remains, but there’s also this fear that the calm that fell over the Indian economy when Oil prices dropped, is going to reverse, now that Oil prices are moving higher again.  So, if you own rupees I suggest you batten down the hatches, and wait for a sunny day to buy some more at cheaper prices, and if you don’t own any, you don’t care about any of this! HA!  

A couple of years ago, when I was still sitting on the trading desk, I was talking with one of our dealer friends at Morgan Stanley, and I told her the next BIG problem for the U.S. was going to be a Lack of Liquidity, and she was very doubtful that a Liquidity problem was going to come upon us. But I pointed out that with the Fed in the markets every day, buying bonds (at that time) that there would come a day when the Fed stopped buying, and liquidity would begin to dry up… 

I tell you this because there’s an article on Zerohedge.com  this morning that talks about a liquidity problem showing signs of becoming  the real deal…  Let’s listen in… “As The Wall Street Journal recently noted, worsening liquidity comes as banks have reduced inventory of riskier assets and investors more closely track bond indexes, making it harder and harder to buy or sell when they want (let alone when they need)…


The liquidity problem has been worsening for years. Investors say it began nearly a decade ago, when post-financial-crisis regulation prevented banks from trading for themselves, and forced them to hold larger amounts of capital – thereby shrinking their inventory of riskier assets.

This, in turn, reduced banks’ ability to serve as intermediaries between buyers and sellers.”    Chuck again… Crazy, eh? People as me all the time how I see these things happening long before they come to fruition… I tell them, I have no idea, for I use logic to form my thoughts, and logic told me years ago that if you have an entity buying large sums of bonds, and then stops buying, that you’ll have a liquidity problem…  That, my friends is what you get when you read the thoughts of someone that has been around the markets for 45 years… 

I know you’re saying, but he doesn’t look that old, right? HA!  The price of Oil slipped downward to the $67 handle from the lofty $69 handle in the past 24 hours… I would imagine that there was plenty of profit taking going on here.. 

Gold finally saw some love yesterday, and was able to carve out a $5.60 gain on the day, to close at $1,329.80, after the dust settled on the 268,000 contract traded in the shiny metal. It’s a shame, the way the price manipulators keep playing this game of allowing Gold to run up to $1,350 and the whack it back down, and then rinse and repeat over and over again…  One of these days, Alice! To the Moon!  Ralph Kramden would know what to do with the “boys in the band”… 

That’s an oldie but goodie, eh? The euro continues to get battered as the offset currency to the dollar when the dollar is rallying like this. But when things turn around…  I’m just saying, which begs the question, should we be looking to buy some euros at these cheaper prices?  I think we should probably wait and see where this short squeeze for the dollar goes, but when it ends, THAT would be the time to back up the truck, so to speak… 

Beep, Beep, Beep…   No, put it in park, we’re not ready to be backing up yet!

The  U.S. Data Cupboard is empty today, but yesterday’s cupboard had the stupid Consumer Confidence report for April, and it showed a HUGE jump in the index number from 125.9 in March to 128.17 in April…  Weren’t we talking about a possible Trade War this month? How could these people be so darn confident? I just don’t get it…  

We also saw  The Case/Shiller Home Price Index for Feb, and it grew 6.3%, and then the New Home Sales data printed for March, and showed that it beat the expectations by a large margin, showing that 694,000 new Homes were sold in the month, VS 630,000 expected…  I thought that a month ago, there was all this talk that home prices were getting too high and driving away buyers.. Hmmm… I wonder what happened to change that?

Oh well, I’m not going to lose any sleep over the change, go ahead and go deep into debt with that house that cost a bazillion dollars and see how that works out for you when the next financial crisis comes along..  I’m just saying…  

To Recap…  The dollar continues to rally and now it has been revealed that there is a short squeeze going on, and how long it will continue to go on is the $64 question this morning. Higher Oil prices aren’t helping the Indian economy any, and the rupee is getting sold as a result. Gold finally saw some light and was able to gain $5.60 on the day yesterday, but the euro and the price of Oil slid downward.   

For What It’s Worth..  When the Shanghai Gold Exchange began trading Gold in 2014, I said then that it would eventually change the way Gold was traded and priced… Well, this article catches that spirit, and can be found here: https://www.chinadailyhk.com/articles/20/163/245/1524473885382.html   

Or, here’s your snippet: “Led by China, the global gold market has moved from the West to the East, the CEO of the World Gold Council, Aram Shishmanian, told an industry forum on April 19.

And building on that position, China is assuming leadership in the world of gold, he said at the Global Gold Market Summit 2018 in Xiamen, East China’s Fujian province. “Your leadership, I have no doubt, will determine or help determine the structure and form of the evolving international gold market.”

The summit, the third of its kind, was organized by the Shanghai Gold Exchange (SGE) and the Xiamen Municipal People’s Government and gathered about 700 industry heavyweights and professionals from across the world.

Shishmanian noted that China was small in the gold industry 20 years ago but has gone through “spectacular transformation” – the result of a “very careful and deliberate strategy” supported by the People’s Bank of China (PBOC), the central bank.”  

Chuck Again… Whoever didn’t see that China would take this all over eventually once they put their collective minds to it is blind as a bat!  Well, maybe not that blind, as there are investors out there that continue to believe that China’s Communist spirit will overtake this capitalist movement…  I guess we can always have a little fear of that happening in the back of our minds, but not allow it to come forward!    

Currencies today 4/25/18… American Style: A$ .7575, kiwi .7087, C$ .7767, euro 1.22, sterling 1.3945, Swiss $1.0177, … European Style: rand 12.46, krone 7.9470, SEK 8.5444, forint 256.67, zloty 3.4560, koruna 20.8574, RUB 61.60, yen 109.10, sing 1.3277, HKD 7.8479, INR 66.91, China 6.3074, peso 18.99, BRL 3.4581, Dollar Index 91.03, Oil $67.92, 10-year 3.01%, Silver $16.61, Platinum $921.66, Palladium $967.38, and Gold… $1,325.40

That’s it for today…  I don’t know why I did that, but I stayed awake to watch the whole baseball game last night, and to eventually see the Mets win in extra innings.  UGH! For the first time this year, the Cardinals young ptiching stud, didn’t pitch out of jam…   I have some calling to the insurance company to do today, UGH! They are a bunch of knuckleheads and getting my point across to them has to be a lot like Hell would be..  Oh well, if life were easy we’d all be living to 100!  The O’Jays take us to the finish line today with their song: The Backstabbers…   What they do!  I told longtime readers a few years ago when this song played that it always reminded me on someone… And that’s all I have to say about that!  I hope you have a Wonderful Wednesday! And Be Good To Yourself!  

Chuck Butler

U.S. Gives Russian Aluminum A Path Out Of Sanctions…

April 24,2018   

* The dollar continues to swing its mighty hammer

The price of Oil closes in on $70… 

 

Good Day… And a Tom Terrific Tuesday to you! Well, it finally happened… I  told you yesterday that the waking up several times each night had returned, as one of the evil side effects of the chemo drug I take settles in. Well, last night, I was awake for a lot of it, and then about 4 this morning, I fell asleep and when the alarm went off an hour later, I turned it off and made an executive decision, to go back to sleep…  I really didn’t think I would ever do that, but I did it this morning, and thus, the tardiness of the letter…  Journey greets me this morning with their song: Only the Young… 

I think that subconsciously I just didn’t want to face the music of what the news overnight was telling us… The dollar is still swinging its might hammer, and even with the price of Oil closing in on $70, the currencies can’t muster any kind of rebound. The currencies look sick, and the dollar looks like it could do this all day, every day…  It won’t, but you get the idea… 

The Big News overnight is that the U.S. has thrown a life-line to Russia’s Aluminum sector. Here’s the skinny on the whole thing, which to me sounds as if the U.S. is targeting an individual and not a company.. I’ll let the folks at Zerohedge.com to take it from here for this description of what’s going on here…  

“That didn’t take long: just one day after we reported that “in a surprise twist”, most of Europe was pushing the Trump administration to ease Russian sanctions due to growing concerns of stagflation and outright recession should supply chains remain crippled, on Monday morning the U.S. appears to have caved, and in a notice the Treasury announced it would provide sanctions relief to the world’s largest aluminum maker outside of China, United Co. Rusal, if Oleg Deripaska relinquishes control and sells his controlling stake, while extended the deadline for companies to wind down dealings with Russian aluminum producer.

In the notice, the Treasury said that for Rusal, “the path for the United States to provide sanctions relief is through divestment and relinquishment of control of Rusal by Oleg Deripaska.” – www.zerohedge.com    

So, the price of  aluminum, which the president was attempting to prop up with his tariffs, dropped like a rock as the supply of Aluminum would get large given the sanctions being dropped…  

Gold lost another round to the price manipulators yesterday, and after 277,000 contracts traded, the shiny metal posted an $11 loss for the day, closing at $1,324.00.   What in the world is going on here? I would like to say that I’m not losing any sleep over it, but maybe I am! UGH!   

So, guess what’s in the news from the Eurozone this morning?  If you guessed that yet another round of debt problems have shown up at the European Central Bank’s (ECB) door, you get a Gold Star! It seems that the banking sector in the Eurozone has more bad loans than you can shake a stick at, and while the ECB was planning on bringing a requirement for the Banks to add to their loan loss reserves, the Italians, you knew it would be the Italians, right?, balked, and now the ECB is going to shelve this requirement, and instead attempt to have Bank Supervisors work on brining the bad loans up to date…    

I laughed at that decision because if it were as easy as a bank supervisor calling the owner of a bad loan on the telephone and asking them to deposit a large amount of money, then they wouldn’t have the bad loan problem to begin with!  But silly people do silly things, right?   or as Forrest Gump said, Stupid is and Stupid does…      

Anyway… the euro continues to slide VS the dollar, and this news of bad loans that total more than $1 Trillion, hasn’t helped the single unit one iota…    

So, I mentioned above that the price of Oil was closing in on $70, as it trades with a $69 handle this morning. This rise hasn’t helped the Petrol Currencies any, as the leader of the Petrol Currencies, the Russian ruble, can’t muster a rally on a day when Oil rises, and they’ve been given a path to remove Aluminum sanctions…   

That pretty much, right there, indicates the strength the long dollar trades are…  And when the dollar is trading like this, the pimples on the currencies become large zits! Take the Indian rupee for example, the last couple of weeks, the rupee has been slip sliding away, and it’s all been about the banking scams that have been going on there… But, with the rupee slip sliding away, it was confined to small moves, that is until the dollar started swinging its mighty hammer again, and then suddenly, the rupees problems get a floodlight shined on them and they become a real problem!    

The Russian ruble isn’t the only Petrol Currency getting sold in the face of a rising Oil price this morning…  The Norwegian krone, Canadian dollar/ loonie, and Brazilian real are all seeing their values go down this morning. UGH!  

The U.S. Data Cupboard saw the Markit ISM (manufacturing index) rise in March to 56 from 55…  Yesterday we saw the Eurozone manufacturing index also rise, so this seems to be a global thing right now, and not just a U.S. thing.  Today’s cupboard brings us the stupid Consumer Confidence for this month, and the Case/Shiller Home Price Index for Feb, which I’m not sure matters to anyone what home prices were doing in February, which seems like a year ago to me!    

To recap… Chuck slept in, and the Pfennig is later today… Shame, shame, shame!  The dollar continues to swing its might hammer, and all the currencies are getting sold this morning. Gold lost $11 yesterday but is up $3 in the early morning trading today. And the price of Oil is closing in on $70… but it’s not help to the Petrol Currencies, yet…   

For What It’s Worth… I thank longtime reader, Bob, for sending this link my way… It’s James Kuntsler  and his view of the U.S. economy, which I have to say is bang on in my opinion, and it can be found here: https://www.zerohedge.com/news/2018-04-23/kunstler-america-has-become-alzheimer-nation   

Or, here’s your snippet: “We really have reached limits for an industrial economy based on cheap, potent energy supplies. *The energy, oil especially, isn’t cheap anymore. The fantasy that we can easily replace it with wind turbines, solar panels, and as-yet-unseen science projects is going to leave a lot of people not just disappointed but bereft, floundering, and probably dead, unless we make some pretty severe readjustments in daily life.

We’ve been papering this problem over by borrowing so much money from the future to cover costs today that eventually it will lose its meaning as money – that is, faith that it is worth anything. That’s what happens when money is just a representation of debt that can’t be paid back.

This habit of heedless borrowing has enabled the country to pretend that it is functioning effectively. Lately, this game of pretend has sent the financial corps into a rapture of jubilation. The market speed bumps of February are behind us and the road ahead looks like the highway to Vegas at dawn on a summer’s day.

Tesla is the perfect metaphor for where the US economy is at: a company stuffed with debt plus government subsidies, unable to deliver the wished-for miracle product — affordable electric cars — whirling around the drain into bankruptcy. Tesla has been feeding one of the chief fantasies of the day: that we can banish climate problems caused by excessive CO2, while giving a new lease on life to the (actually) futureless suburban living arrangement that we foolishly invested so much of our earlier capital building. In other words, pounding sand down a rat hole.” 

Chuck Again… And in the whole article he really goes off on stuff, but you get the drift… This House of Cards built on deficit spending is really becoming a problem folks… Whew! I’m tired!  

Currencies today 4/24/18… American Style: A$ .7611, kiwi .7124, C$ .7792, euro 1.2216, sterling 1.3955, Swiss $1.0227, …. European Style: rand 12.32, krone 7.8861, SEK 8.4998, forint 256, zloty 3.4380, koruna 20.8225, RUB 61.67, yen 108.81, sing 1.3220, HKD 7.8467, INR 66.42, China 6.3069, peso 18.84, BRL 3.4267, Dollar Index 90.90, Oil $69.06, 10-year 2.97%, Silver $16.68, Platinum $917.28, Palladium $972.18, and Gold… $1,327.40  

That’s it for today…  I apologize for the tardiness of the Pfennig, but I’ll go with the old saying today of: Better late than never, eh?    Cardinals and Metropolitans for a three games series starting tonight… It’ll be interesting to see if the Cardinals can beat a team other than the Reds… I got dragged all over God’s creation yesterday looking at things, and my hip pain flared up on me last night, it’s still feeling a bit iffy this morning, so I had better nip that in a bud!  And with that, Neil Young and Crazy Horse take us to the finish line today with their live version of: Cowgirl In The Sand, recorded at the old Filmore East…  It’s 17 minutes long… I hope you have a Tom Terrific Tuesday and Be Good To Yourself…  

Chuck Butler

The Dollar Swings Its Mighty Hammer…

April 23, 2018    

* Trade War talk softens…

* Gold gets whacked at $1.350, again!

 

Good Day… And a Marvelous Monday to you! Another good weekend for my beloved Cardinals, as they’ve proved one thing so far this early season, and that is that they can beat the Reds… The Mets come to town now with their great pitching staff…. A good test…  I get to watch the games down here in S. Florida because I subscribe to the MLB package…  We had a good meeting with our guy who will do some construction for us down here on Saturday…  I got the old “price shock” but it is what it is…  GULP! I’m still dealing with the side effects of the new chemo that has wiped out the tumor in my mouth. so some bad with the good…  America greets me this morning with their song: Sandman…  I used to play that one on my guitar, but that was a long time ago!    

Well, when I left you on Thursday, the currencies were rebounding from their previous two-day selloff… But that didn’t last very long and soon the dollar was back on top of the heap, swinging its mighty hammer. And the overnight markets last night kept things going for the dollar. i’m really surprised and then I’m not surprised… I would have thought that all that’s going on that should be putting the dollar on the chopping block, the dollar would be getting sold… So, I’m surprised that it’s not… But I’m also not surprised because the Plunge Protection Team (PPT) exists, and they live for the times when the dollar is getting sold and looking iffy, for that’s when they come in with both guns blazing…  I’m just saying…  

So, the Dollar Index is one full point higher than it was Thursday morning, and trades this morning at 90.71. The Big Dog, euro, has seen its lofty level of 1.24 of last week go bye-bye, and the two big movers have been the Aussie dollar (A$) and kiwi… The A$ had briefly traded up to 78-cents last week, and  it starts the week trading with a 76-cent handle… Same for kiwi, which had briefly touched 73-cents, is trading this morning with a 71-cent handle…   

Even the Chinese renminbi, which had been on a mission to prove that Trump’s sanctions weren’t going to hurt them… You know the old, sticks and stone may break my bones but tariffs won’t hurt me!  But that was last week, this week we saw the renminbi get priced at a much weaker level in last night’s fixing.  A

n update on the Honk Kong Monetary Authority’s (HKMA) attempt to stop the selling of the honker (Hong Kong dollar)…  I read this weekend that the HKMA  has spent $6.5 Billion intervening, and trying to turn the honker around.   That’s $6.5 Billion with a capital B!  Somebody is bound and determined to keep the honker weak, but imagine if the HKMA hadn’t spent $6.5 Billion keeping the honker from going into a real tailspin?  

The talk of a Trade War have softened quite a bit, as the two main combatants, the U.S. and China, have stepped back to see what they nearly caused, and have had second thoughts about it… That’s a good thing, folks… And one of the reasons that the price of Gold has also stepped back…   

The 10-year Treasury is seeing some selling so heavy that the yield on the 10-year is 2.98% this morning ahead of a week packed with economic data and new debt supply. The 3%  level, which was last briefly touched in 2014, is seen as the end of the bond rally, if the level is met and holds…  And holds is important, because 4 years go, we thought that bond yields were heading to the stars, only to find out that it was a false dawn.   

The Eurozone saw a good economic print this morning, but so far it hasn’t helped the single unit fight off the dollar’s might hammer.  The March PMI, (manufacturing index) rose to 55.3 from 55.1… I slight move higher, but a move higher nonetheless, and another sign to the European Central Bank (ECB) that they should be implementing plans to unwind their stimulus…     

The price of Oil slid down from its lofty price of $69 on Thursday, and is trading this morning at $68…  I read a report this weekend that hedge fund managers are forecasting an Oil price of $80 this year…  WOW That would certainly help the Petrol Currencies, eh?  

On Thursday morning I pointed out that Gold was trading right on top of the line in the sand $1,350… and wondered out loud when the “boys in the band” would show up to rectify that!   And show up they did…  And trading 270,000 contracts they got Gold to fall $10.10 on the day to close at $1,335.20…  And now we have the aforementioned softening of Trade War talk going on, and it has pushed the price of Gold even lower to start the day today, with the shiny metal losing $5 to start the week   

I mentioned above that this week is packed with data like our own PMI, that we refer to as the ISM (manufacturing index), Consumer Confidence, Durable and Capital Goods Orders, and to round out the week we’ll get out first look at 1st QTR GDP…  Look for it to have fallen from the 4th QTR’s final print of 2.9%… I’m thinking somewhere around 2%, which wouldn’t be very good, or be an indication that interest rates need to go higher, but then will the FED be paying close attention?  I doubt it… 

To recap… Well the currency rally that began on Thursday morning crumbled and the dollar was on top of the heap swinging its mighty hammer by the end of the day. And has continued to rule the roost in the overnight markets. We have a plethora of data this week to comb through, and I’m not of the opinion that any of it will help the dollar maintain this pressure. The 10-year is oh-so-close to 3%, which could be a line in the sand that indicates the bond rally is over for good, and Gold got whacked once again after trading to $1.350 on Friday.. 

For What It’s Worth…  this is a quick and dirty article about China enlarging their footprint in Europe… and can be found here:  https://www.bloomberg.com/graphics/2018-china-business-in-europe/?cmpid=BBD042318_MKT&utm_medium=email&utm_source=newsletter&utm_term=180423&utm_campaign=markets

Or, here’s your snippet: “For more than a decade, Chinese political and corporate leaders have been scouring the globe with seemingly bottomless wallets in hand. From Asia to Africa, the U.S. and Latin America, the results are hard to ignore as China has asserted itself as an emerging world power. Less well known is China’s diffuse but expanding footprint in Europe.

Bloomberg has crunched the numbers to compile the most comprehensive audit to date of China’s presence in Europe. It shows that China has bought or invested in assets amounting to at least $318 billion over the past 10 years. The continent saw roughly 45 percent more China-related activity than the U.S. during this period, in dollar terms, according to available data

The volume and nature of some of these investments, from critical infrastructure in eastern and southern Europe to high-tech companies in the west, have raised a red flag at the European Union level. Leaders that include German Chancellor Angela Merkel and French President Emmanuel Macron are pressing for a common strategy to handle China’s relentless advance into Europe, with some opposition from the EU’s periphery.: 

Chuck Again..  Longtime readers will vouch for me when I say this.. You can’t say I haven’t been warning you about how the former sleeping Giant, China woke up and decided to run the world…  

Currencies Today 4/23/18… American Style: A$ .7638, kiwi .7173, C$ .7817, euro 1.2232, sterling 1.3962, Swiss $1.0236, … European Style: rand 12.2362, krone 7.8682, SEK 8.4797, forint 254.63, zloty 3.4257, koruna 20.7743, RUB 61.35, yen 108.25, sing 1.3230, HKD 7.8436, INR 66.44, China 6.2950, peso 18.70, BRL 3.4131, Dollar Index 90.71, Oil $68, 10-year 2.98%, Silver 16.94, Platinum $922.89, Palladium $1,019.60, and Gold… $1,330   

That’s it for today…  Well, I’m having sleep issues again… I was up at least 5 times during the night, and  our little place down here, is just that little, which means I can’t walk the floors…  I go out walking, after midnight… – THE GREAT  Patsy Cline! My old colleague at Mark Twain Bank, used to ask me to play that song whenever he got a good sale completed…  We had morning rain yesterday, and then it turned to another beautiful day here, much better than those chilly days back home, where it has finally begun to warm up…  Earth, Wind and Fire take us to the finish line today with their song: After The Loving Is Gone…  I have a thought there that I had better keep to myself!  I hope you have a Marvelous Monday, and please Be Good To Yourself!    

Chuck Butler

Palladium Continues to Soar!

April 19, 2018    

* Chuck tells us why we should look to buy euros…

* Silver finally gets back above $17!   

Good Day…  And a Tub Thumpin’ Thursday to you! Another cold and snowy day in Chicago yesterday, caused yet another postponed baseball game… My beloved Cardinals lose an “off day” today, to attempt to get the game in. I went out for baseball my freshman year in high school, the weather was quite like it has been this year, but with much more snow… I hated playing in the cold, so I said, “I think I would prefer playing with my club team that doesn’t start practice until May! And so I feel for these guys out there trying to play a warm weather game in the cold! ( I know they get paid millions to do so, but sill, cold and snowy is not meant for baseball!  The Blue Jays greet me this morning with their song: Remember Me My Friend… The Blue Jays were two guys that split from the Moody Blues, so the music sounds very much like its the Moody Blues playing, and longtime readers know how much I enjoy the Moody Blues!    

The dollar’s attempt to fight back didn’t last long, (just overnight on Tuesday) And the currencies were back at work gaining VS the dollar yesterday and overnight. The big movers on the day were the Aussie dollar (A$), Norwegian krone, Brazilian real, and stretching out Gold gained $2.00, and the price of Oil is trading this morning with a $69 handle… (Ok spring training buddies this is not the time or place to correct me! HA) 

Regarding the price of Oil rising nearly daily in recent weeks, the latest weekly supply report surprised Oil traders as it showed a huge withdrawal, and that has propelled the price of Oil higher.  And with Oil bubbling out of the ground like black gold, Texas Tea, the Petrol Currencies, for the most part, including the Brazilian real have picked up the pace of appreciation… I also read this morning that Lola, AKA Goldman Sachs is telling their clients that the real is read to soar, and to buy the currency.  And we all know that what Lola wants…. Lola gets! right?    

I’ve been watch the euro’s rally that began last June when the currency began to get some love from traders. The single unit was trading at 1.09 at that time, and overnight last night, the euro traded as high as 1.24, it has seen some profit taking since hitting 1.24, but that’s a good sign, get all those old shorts out of the way, so the next move higher won’t have them weighing it down!  

I’m very impressed, that the euro has been able to gain VS the dollar give they still have negative  deposit rates, and the U.S. is hike rates about every 6 months, soon to be every 3 months if you believe new Fed Chairman Jerome Powell.  All signs point to the European Central Bank (ECB) to begin to unwind their stimulus they have used to bring the Eurozone economy back from the flat line they were showing a couple of years ago, after having had to deal with Greece. 

My good friend, Dennis Miller, the Retirementor, and  author of his weekly letter Miller On the Money, is going to issue his newest letter today, and in it is an interview with me!  It’s the first of two parts, with the second part coming next week. if you’re retired or thinking about retiring you should be reading Dennis’s letter each week, that can be found here: www.milleronthemoney.com    I said all that to tell you I said in the interview that the first currency a diversifier should look to own is the euro, because  it’s the offset currency to the dollar… So, as the dollar slides, investors, traders, hedge funds, all look to buy euros.. I’m just saying…   Oh, and this morning there’s news that Iran was switching their reporting that was done in dollars, to euros… Interesting, eh? 

I’ve been wring some very long letters so far this week, but today’s will be the end of that! The ideas just aren’t flowing in my brain this morning, so this will be more of a this is what happened kind of letter to end the week for me… Sorry, but I’ve given you so much stuff to think about these past few Pfennigs, that you should be kept busy with those, and not need another homework assignment! HA!   

Have you been watching the metals prices in the currency roundup each day? I talked a little about the huge jump in Palladium last week, and this week it continues. The price of Platinum is also in rally mode, and yesterday, Silver finally got back above $17 spot! WOW Gold is trading right at $1.350 this morning, so watch that carefully… For this is the level that the “boys in the band” aka the price manipulators have drawn a line in the sand, and they bring out the big guns to short Gold… But I would have to think that shorting Gold right now, with Syria, and dozens of other hot irons in the fire going on, this is Gold’s bag baby!   

Inside looking out, was a hard driving rock song by Grand Funk Railroad from the early 70’s, and  I’m reminded of that song when periods of time like right now are going on… And I think the “boys in the band” are inside looking out at the strong demand for physical Gold and thinking it would be hazardous to one’s wallet to short Gold right now… 

But as I say that, I’m reminded just how brazen these guys have been with their “all-in shorts”…  So, maybe I should dial back my Inside looking out statement right now…  NAH! Longtime readers know that’s not my style, it’s shoot from the hip and don’t get in my way!  But with age comes a softer demeanor, I’m just saying…   

The U.S. Data Cupboard  will have two non-market-moving data prints today, but ones that are interesting… Leading Indicators for March which seem like an oxy moron, as the report is looking forward, but it’s for last month… go figure…   Any way Leading Indicators is a composite of 10 forward-looking components including building permits, new factory orders, and unemployment claims. The report attempts to predict general economic conditions six months out.  And along with Capacity Utilization are the only real forward looking pieces of economic data that aren’t backward views…

 Another print that’s interesting today is the Philly Fed Index, ,which is a measure of the manufacturing activity in the Philadelphia region, and long ago, a trader showed me how it corresponds to commodity trading, and so each month I check that out to see if his hypothesis remains…  I find that it does some months and not in others.. So, much for that, eh?  

To recap…. The dollars 8 hours of recovery came to an end yesterday, and the currencies turned the tables on the dollar.  The real bright spot in recent weeks in Palladium, which once again is on a rampage…  the price of Oil is kicking tail and taking names later, and Silver is trading above $17 again, YAHOO!    

For What It’s Worth…  I did a deep dive into what I call the Retail Apocalypse in my DTL letter that will print tonight, and so when I saw this article come across my screen, I knew it had to be a FWIW article! So, it’s about the Retail Apocalypse and can be found here: https://www.washingtonpost.com/news/on-small-business/wp/2018/04/16/more-retailers-are-going-bankrupt-than-ever/?utm_term=.869171417637        

Or, here’s your snippet: Ask anyone running a store and they’ll tell you that it’s tough to be in the retail business. Merchants big and small are struggling to meet the demands of a customer base that is demanding better service, lower prices and products both in-store and from the comfort of their homes. A new report from investor research firm Moody’s certainly confirms that.

According to last week’s report, bankruptcies in the retail sector were at a record high during the first quarter of 2018.

There were nine defaults in the sector — including Sears and Claire’s – during the three months ended March 31. Tops Friendly Markets, a supermarket chain, and the Bon-Ton, department store chain, also filed for bankruptcy during the period. The only non-U.S. default that occurred in the first quarter was Britain-based BrightHouse Group, which sells rent-to-own refurbished sofas, televisions and refrigerators.

Defaults on corporate debt from the retail sector in the past three months made up almost one-third of defaults by corporations in all industries.
“Stresses in the retail sector have weighed on the operating earnings of department stores, discount stores and drug stores in particular,” a Moody’s spokesman said in the report. “A year ago, we noted that 14 percent of retail debt issuers were distressed and predicted that both the U.S. and European retail sectors would have the highest one-year default rates among all corporate sectors.””

Chuck Again…  I know what you’re thinking, that it’s all the e-commerce’s fault, but that’s not all and I explain it all tonight! Wait! What? you haven’t bitten the bullet and subscribed to the Dow Theory Letters?  Shame, shame, shame… HA!   go to: www.dowtheoryletters.com should this interest you…    

Currencies today 4/19/18… American Style: A$ .7798, kiwi .7313, C$ .7925, euro 1.2370, sterling 1.42, Swiss $1.0325, … European Style: rand 11.9625, krone 7.7526, SEK 8.3893, forint 250.87, zloty 3.3690, koruna 20.4873, RUB 61.31, yen 107.36, sing 1.3093, HKD 7.8488, INR 65.72, China 6.2787, peso 18.17, BRL 3.3933, Dollar Index 89.67, Oil $69, 10-year 2.89%, Silver $17.18, Platinum $947.85, Palladium $1.051.55, and Gold… $1.350.90  

That’s it for today, and this week, of course!  No problems with my Southwest flight down here, and the Uber ride was just fine… I was remiss in forgetting to say RIP Barbara Bush, the former first lady, died on Tuesday. The wife of a president, and the mother of a president… WOW!  the sun is out, something I hadn’t seen much of back in St. Louis the 3 weeks I was home, so that’s a good thing! The coffee is brewing, and once I finish this letter, I take my cup of coffee out to the deck, and watch the ocean,,. The Counting Crows takes us to the finish line today with their song: Round Here…  I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday tomorrow! And remember to Be Good To Yourself! 

Chuck Butler

Tax Day 2…

April 18, 2018   

* Platinum is shining once again!  

* Chuck treats us to a snippet of his DTL writings… 

 

Good Day… And a Wonderful Wednesday to you! Well, if you are a tax preparer procrastinator you received a gift yesterday…  The IRS’s online tax filing system crashed on them, and so they had to announce an additional day for tax returns. So today is Tax Day 2…  To me, it’s like a say of execution from the Gov. But some people love it, so there you go! I saw a funny cartoon where the guy was not happy while putting his tax return in the mail because he was thinking of all the expenditures the previous administration piled up for personal stuff…   In 3 years the cartoon will be redone with the present administration piling up expenditures…   The Allman Brothers greet me this morning with their song: Midnight Rider…  Hey! I just realized that I have something in common with the Midnight Rider… He carried a Silver dollar coin, and so do I !   

Before I get into the letter today, since it’s Tax Day 2, I found this… In a follow up to what I was talking about yesterday I came across the quote, that sums it up quite nicely, in my opinion… A thief is more moral than a congressman; when a thief steals your money, he doesn’t demand you thank him. – Walter Williams

The currencies fell backward in the overnight trading last night. I last checked on them around 6pm yesterday, and all looked as though yesterday’s trading didn’t exist, but this morning, it’s a different look, and it’s not one I would have expected, given all the bad things that’s facing the dollar, it’s being propped up by someone, or some entity, because everything I read form traders around the world is that they don’t like being long dollars at this time…  So, what gives? All I can figure out is the PPT (Plunge Protection Team) is doing the dirty work…  I wish the PPT would take a less from Steely Dan and tell the powers that be that they don’t want to do their dirty work anymore…   

But that’s not going to happen, so just move ahead here Chuck…  I don’t believe the gain in Industrial Production was the key to the dollar’s rebound, because the report had some ugly stuff in it… In fact, let’s talk about it now…   

The U.S. Data Cupboard had two pieces of real economic data for us yesterday… Industrial Production (IP) and Capacity Utilization(CAPU) printed for March, and IP was not as strong as expected, but did carve out a nice 0.5% gain for the month. There is one troublesome piece of the IP that caught my eye… Industrial production has been consistently held back by weakness in the report’s manufacturing component and that is the expectation for March, at a consensus 0.4 percent gain overall but only a 0.2 percent increase for manufacturing.

And that led me to think about something that had come across my writing desk this week… Zombie Corporations… This all surrounds my economics mentor, Hy Minsky, and his thoughts on the phases that the economy goes through… For you readers of my Dow Theory Letters this wlll all sound familiar as I highlighted the great Hy Minksy in a letter a couple of months ago. But let’s listen in from what I said, then…

Chuck Butler: Dow Theory Letters 1/25/18…
1. Stability is Destabilizing. Minsky believed that during periods of economic stability, banks and firms can generate shocks through their own internal dynamics, because after becoming complacent with their current situation, they begin to take on greater risks in pursuit of further profits. Thus firms sow the seeds for the next financial crisis.

2. There are three stages of debt. Minsky believed in a theory called “financial instability hypothesis,” which says that lending goes through three distinct stages. He called them the Hedge, the Speculative and the Ponzi stages. You won’t believe how similar this is to now…

During the first stage, after the crisis, banks and borrowers are cautious. Loans are made in modest amounts, with borrowers known to be able to repay both the principal and interest.

As confidence grows, banks begin to make loans in which borrowers can only afford to pay the interest. The collateral on the loan is usually an asset that’s rising in value. When the memory of the past crisis has faded, and is almost forgotten…

The Ponzi stage begins. At this point banks make loans to firms and households that can afford to pay neither the interest nor the principal. This is done according to the idea that the asset that’s used as collateral will continue to rise in value. When the asset held as collateral stops rising, the loan is called. Thus begins a very bad circle of foreclosures, failures, and bailouts.

3. The Minsky Moment. This occurs when the Ponzi stage of lending is in place. Everyone is complacent with the situation, the asset held as collateral is still rising, and the borrower even adds to his debt because this stage can’t ever end, right?

When the assets begin to lose value, the lenders believe that there is debt on their books that will never be repaid. The collateral begins to get sold, causing an even larger fall in prices. Think about this moment as the classic cartoon, where the character is running, and runs off a cliff. He keeps running for a while, still believing he’s on solid ground, then he realizes that there’s nothing below him but thin air… That’s a Minsky Moment!   

So… how about that! I treated you with some of my writing in the Dow Theory Letters… You should see what I wrote about this week that will print on Thursday!  But let’s get back to something that is more current…  I saw a report yesterday that U.S. shipments overseas gained over 11% VS last year…  And that got me thinking…  Let’s see, didn’t I tell you recently that the dollar, as measured by the Dollar Index, had gained 13% in the past year? See the connection?  You don’t need any of those rose colored glasses that the Fed and Treasury use on a daily basis to see the connection…   

Speaking of the U.S. Treasury, I wonder if they felt like they got their toes stepped on yesterday, when President Trump decided to tweet that “Russia and China were playing the devaluation game, and that’s not acceptable” You see, the dollar is the Treasury’s baby to talk about… Remember Robert Rubin when he was Sec. of the Treasury and his daily message to the markets about how the U.S. believes in a strong dollar…  Yes, he had is fingers crossed behind his back, I do believe… HA!    

Speaking of China…. China has taken another step to opening up its futures markets to the world, announcing that it will allow foreign investors to trade domestic iron-ore futures as of May 4. The move follows the debut of China’s first renminbi-denominated crude oil futures last month in Shanghai, signaling the country’s ambition to have a say on the global pricing of commodities, don’t you think? I do!    

 Gold saw another day of plus 250,000 contracts traded, and at the end of the day it had moved very little… At least yesterday’s gain was more than one thin dime like the previous day! Yesterday’s gain was a whopping $1.70, but Gold continues to quietly creep toward the line in the sand dollar amount of $1,350… In fact, the shiny metal has creeped closer to $1,350 in the early morning trading…  

I mentioned the surge in price of Palladium yesterday, and the alternative metal to Gold has seen its current surge take a trip above $1,000 again…  And Silver, as I’m told by Ed Steer, is trading pennies above its 200-day moving avg. this morning…   

The U.S. Data Cupboard also had the IMF’s outlook on the U.S. economy, and bust my buttons there it is right there! I’m sorry for throwing shade on you, this morning, PPT… The reason for the dollar rally is all right here! The IMF gave the U.S. economy a upgrade in outlook and stated that the tax cuts will be the reason the economy grows in 2018…   For those of  you who are new to the Pfennig… I’m being very facetious here…   

To recap… the currencies saw a dollar rally in the overnight trading last night, the move wasn’t huge, but did stop the 2-day rally that the currencies had put together VS the dollar.  Trump steps on the Treasury’s toes yesterday, Gold gains just $1.70, but Palladium is the big winner on the day, and Chuck treats us to  a piece of his writings in the Dow Theory Letters…   

For What it’s Worth…  I was absolutely furious when I read this article last night, good thing my beloved Cardinals were beating up on the Cubs, or else I would have gone bananas over what Paul Ryan said in this article about old people… And it can be found here: “https://www.dailykos.com/stories/2018/4/16/1757506/-Ryan-No-way-to-avoid-trillion-dollar-deficits-because-of-all-the-old-people?detail=emaildkre   

Or, here’s your snippet: “Speaker Paul Ryan wants you to know that it is not his fault at all that we’re going to have a trillion-dollar deficit. It’s the fault of old people.

That was going to happen. The baby boomers retiring was going to do that,” Ryan said on NBC’s “Meet the Press” of projections that the country will start running trillion-dollar deficits as soon as 2020. […]
“These deficit trillion-dollar projections have been out there for a long, long time. Why? Because of mandatory spending which we call entitlements,” he said when pressed by NBC host Chuck Todd on Corker’s criticism.”  

Chuck Again… Of course they are, but haven’t guys like me, Bill Bonner, Addison Wiggin, Doug Casey, Frank Trotter, and more been pointing out the growing problem for years now? So why haven’t you, Paul Ryan, or anyone else drawing huge salaries and benefits, including a golden parachute retirement plan, done something about it?  Just think if you guys had bitten the bullet years ago, we would be well on the path of thinking about the future in a better way…   But with 10,000 Baby Boomers retiring every day for 10 more years, Trillion dollar plus deficit spending will continue won’t it?  Don’t answer that Mr, Ryan, I already know the answer and have for over a decade, but don’t let me ruin you attempt to pass the buck…  

Currencies Today 4/18/18… American Style: A$ .7751, kiwi .7310, C$ .7947, euro 1.2363, sterling 1.42, Swiss $1.0328, … European style: rand 11.9617, krone 7.7780, SEK 8.4140, forint 250.65, zloty 3.3730, koruna 20.4553, RUB 61.43, yen 107.25, sing 1.3110, HKD 7.85, INR 65.58, China 6.2798, peso 18.01, BRL 3.4096, Dollar Index 89.66, Oil $67.08, 10-year 2.83%, Silver $16.86, Platinum $943.91, Palladium $1,021.96, and Gold… $1,348.70    

That’s it for today…  I briefly mentioned above that my beloved Cardinals won in the frost bowl two last night in Chicago, where more snow is expected today. The Cardinals try to get in a day game before the snow falls and will attempt to add to their winning streak of 5 games now… I’ve got to skedaddle this morning, as I’m leaving on a jet plane, don’t know when I’ll be back again…  No worries, I’m taking my laptop, that drives me berserk every time I use it!   The aforementioned Steely Dan takes us to the finish line today with their song from my favorite Steely Dan album: Black Cow…  Ok, now let’s try to make this a Wonderful Wednesday, and Be Good To Yourself for crying out loud! 

Chuck Butler

 

Tax Day…

April 17, 2018  

  * Chuck goes down a rabbit hole… 

  * HKMA spends $1.7 Billion with a B to defend honkers… 

 

Good Day… And a Tom Terrific Tuesday to you! Cold, blowing snow, and it was April 16th! What gives, Mother Nature? Crazy weather, eh? Oh well, eventually it will get warmer here and stay that way. But I’m not sticking around until “eventually”, I’m heading back to S. Florida tomorrow and wont’ return until May Day! Well, it’s Tax Day. I sure hope you haven’t procrastinated! The Beatles take us to the finish line today, with one of my all-time favorite Beatles songs: In My Life…   

With today being Tax Day, pfennig tradition calls for some lyrics to lighten the day… Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman, yeah, I’m the taxman
– The Beatles… 

I read an article yesterday about taxing social security, and how to avoid such, and one of the statements in the article sounded as if I were writing it… It went something like this… Consumer taxes are only going to go up in the future, and if I were writing it I would have added, as the Government attempts to find ways to drain the turnip and pay for their deficit spending…   Since dipped our toe in this rabbit hole we might as well go all-in it, so come on, come with me, or see you on the other side…   

First off, how many of you recall me saying through the years, when I was warning readers about the U.S. debt picture, and that China held a good portion of those debts, represented by U.S. Treasury holdings, that one day we would rue the day we allowed “people that ran this country into the ground, debt accumulation wise, for once China has a floating currency, they would be able to demand the U.S. did this and that, and direct the value of the dollar.

I truly believe that this is what the Chinese renminbi denominated Oil Futures Contract is all about… The dollar gets a majority of its support from the fact that it is THE petrol currency that Central Banks around the world need to hold to pay for their Oil imports (unless of course they themselves produce enough Oil for their respective country’s needs)… So, if you take away the need to hold dollars to pay for Oil, what’s going to support the dollar then? I’m going to borrow a statement from Grant Williams’ Things That Make You Go Hmm…. Let’s listen in…

“A successful CNY oil contract gives the PBOC (and by extension, the world) the ability to completely neutralize the weaponized USD that has become Washington’s weapon of choice in the ongoing global “currency wars.” In plain English, if CNY is convertible under the contract, the PBOC can control the international trade value of the USD through the ratio of CNY gold & oil contracts.” – from Things That Make You Go Hmmm….

I don’t need to tell you what a disastrous scene this would be for the dollar, inflation in this country, and our loss of purchasing power… But I will nonetheless, because, well, I’m that way! No wait, I just did that yesterday! Oh well, see what getting older does to one’s memory? Anyway… This is not a good thing that’s happening right before your eyes, folks… And the media? They don’t have their eye on the ball on this one, they would rather cover stories that have nothing to do with our economy, the dollar, Gold, etc.

So, aren’t glad that you subscribe to the Pfennig? And unlike Cable charges, The Pfennig doesn’t cost you a dime!    

Another thing to not let this go too far astray, and we’re down the deficit will hurt the economy and dollar rabbit hole,  is that now that the U.S. is energy independent, China has become the world’s largest Oil importer…

And with that, they can demand that the Arab countries price their Oil in renminbi, because, well, they are the largest importer! What? Did you think that the Arabs would honor their agreement with the U.S. back in the early 70’s to price Oil in dollars, and tick off their biggest customer? Well, if you do, you’re living in a paper doll world, living ain’t easy, loving’s twice as tough… No Wait! Why, Chuck, oh why, do you always have to slip into a song when your talking about something so serious? Well, it’s my way of keeping things in perspective. If you’re done your homework and read the Pfennig through the years, and have diversified your investment portfolio using currencies and metals (mainly Gold or Silver) then none of this trashing of the dollar that China will cause will come as something to panic about. But if you haven’t done your homework, you had better get to work on it, because, this Chinese renminbi Oil Futures contract is here to stay… And soon China will be demanding that the countries it buys Oil from, denominate the contract in renminbi…   

You know… part of the deal that the Nixon administration made with the Saudis back in the early 70’s to price their Oil in dollars, and then in turn use those dollars to buy Treasuries (Yes, the Saudis have been the enabler to deficit spending… Think about that) has another side of the coin that a lot of people forget about… And that is… with this new found reserve currency status, the U.S. promised to maintain a strong dollar… how’s that working for you Arab countries? And that in a nut shell is the main reason that China has decided that the world needs another currency to step up and become the reserve currency of the world. 

WOW! I’ve gone pretty deep down this rabbit hole, and I’m at 950+ words and haven’t mentioned the currencies and metals performance yesterday and in the overnight markets! Well, there’s not much to talk about here… The currencies saw minor gains, sort of like the one Gold had yesterday that when the 252,000 contracts were booked, Gold had a one thin dime gain on the day. That’s right 10-cents! Big Whoop, eh?   The currencies did no better, as the Dollar Index went from 89.57 to 89.51… 

I mentioned the other day about the problems the Hong Kong dollar or honker has been experiencing, and how it was at the bottom of the range the Monetary Authority of Hong Kong (HKMAA) uses. I read this morning that the HKMA has spent $1.7 Billion to defend the honker…  That’s some amount of bread, eh? And they didn’t get any traction out of their stolen money, I mean hard earned money… Governments don’t make money, the take it from the people of the country that work hard for their money…  So I say that they “steal it”…  You know what I mean… right?    

The price of Oil remains steady Eddie through all of these fires that are going on around the world, and the Steady Eddie price of Oil has allowed the Petrol Currencies some breathing room. Petrol Currencies like the Russian ruble has gained back a small portion of the ground they lost in the past two weeks, when first it was a dip in the price of Oil, and then came the news that the U.S. was adding sanctions on the Russians… 

Well, I read this morning that U.S. President Trump, has pulled back those additional sanctions, for now…  Maybe someone with an ounce of gray matter, stepped in and persuaded the President to not go forth with his additional sanctions. Any way that it happened, it did bring a sigh of relief from the Russian Traders, and the ruble has gained some of its lost ground…  

Like I said above, Gold gained one thin dime yesterday, and not a pre-1965 dime that at least had 80% silver content…   But have you noticed the HUGH jump in the price of Palladium this week?  OK, here’s the skinny on that, in my opinion…  

The U.S. Data Calendar had the March Retain Sales data for us yesterday, and the print showed that Retail Sales had gained 0.6%, but only 0.2% minus car sales..  So, car sales in March must have been tremendous, (I hear that truck and SUV sales have skyrocketed) and with those car sales, the car makers see nothing but seashells and balloons for the future, and ramp up car production, which means the demand for Palladium goes higher, and does the price of the metal! 

See, how I can pull al that together for less than one thin dime? HA!

To Recap…  It’s Tax Day! And it’s a sad day for me, as I had to once again write checks… UGH!  Oh well, I guess it’s better to have to pay than to have no income to tax! The currencies and metals traded in a very tight range yesterday, so thin was the range that it almost appear that these two assets are trading in the same clothes as yesterday… And Chuck goes down a deep rabbit hole, did you go with him?   

For What it’s Worth…   Here’s a novel idea… that countries repay their debts in Gold… Well that’s the idea of the President of Turkey, and it can be found here: https://ahvalnews.com/imf-turkey/imf-loans-should-be-paid-gold-not-dollars-erdogan  

Or, here’s your snippet: “Turkish President Recep Tayyip Erdoğan on Monday suggested that IMF loans should be paid in gold instead of dollars.

“What I’m saying is that these debts should be in gold. Because at this point the karat of gold is unlike anything else. The world is continually putting us under currency pressure with the dollar,” the Turkish president was quoted as saying by business news site patronlardunyasi.com in a speech in Istanbul. “We need to save states and nations from this currency pressure.”

The president said Turkey had attracted $180 billion of international investment between 2006 and 2017.

“This despite the 2008 global financial crisis, events unfolding in Iraq and Syria, the uninterrupted attacks we have been subjected to since 2013 and the July 15 coup attempt,” Erdoğan said, referring to the 2016 failed military bid to topple his government.”  

Chuck Again…  as they say, out of the mouth of babies…  Or in this cas, out of the mouth of dictators, we might get a good idea… I’m just saying.. 

Currencies today 4/17/18… American Style: A$ .7774, kiwi .7340, C$ .7960, euro 1.2370, sterling 1.4350, Swiss $1.0395, … European Style: rand 12.03, krone 7.7650, SEK 8.4164, forint 251.33, zloty 3.3616, koruna 20.4162, RUB 62.03, yen 107.05, sing 1.3080, HKD 7.85, INR 65.67, China 6.2786, peso 18, BRL 3.4216, Dollar Index 89.51, Oil $66.29, 10-year 2.84%, Silver $16.61, Platinum $926.33, Palladium $992.45, and Gold… $1,344.70  

That’s it for today…  I mentioned yesterday that my beloved Cardinals were heading to Chicago and wondered if they would play at all, given the weather up north (for me)… Well, the game was postponed to July, last night, and there are questions about tonight’s game… All the plans of mice and men, eh? The MLB wanted to start the season earlier to have more days off during the summer, and instead the game will be made up on those scheduled “off days”…      Yes, takes us to the finish line today with their song: It Can Happen…    I hope you have a Tom Terrific Tuesday, and that you remember to Be Good To Yourself!   

Chuck Butler

 

U.S. Is taking Debt Higher and Higher!

April 16, 2018    

* Gold experiences Mr. Toad’s Wild Ride!    

* Russian sanctions begin to spread elsewhere… 

 Good Day… And a Marvelous Monday to you! I have no idea where the last 3 days went… The new chemo drug has done the heavy lifting on my tumors, but has put me in a tailspin energy wise, and the new drug is causing skin rashes that are driving me crazy!  But not doing anything to speak of the past 3 days was OK, because it was too cold and rainy to go outside! UGH!Tom Petty and the Heartbreakers greet me this morning with their song: I Won’t Back Down…  I guess that could be my theme song, as I won’t back down from pointing out the debt accumulation in the U.S.   

Speaking of the debt accumulation in the U.S. The Federal Gov’t recorded a budget deficit of $208.7 Billion in March, and increase of more than $32 Billion from a year ago, as revenues slipped and expenditures climbed… The Treasury Dept. said last Wednesday that the February Deficit was 18.4% higher than a year ago… You see where this is going don’t you? OK, for the first 5 months of this budget/ fiscal year the deficit has totaled $599.7 Billion, and increase of 13.8% from the same period of a year ago…

And… using my new math skills, if we totaled nearly $600 Billion in 5 months, guess what our deficit would be in 12 months, if nothing changes, that is… give up? I’ll do the math for you… Can you believe it would be $1.44 TRILLION? YIKES! Where are the people that projected our deficit this year to be $540 Billion? We’ve already passed that figure in 5 months! I’ll just point out that I told you that whatever the Gov’t was telling us the deficit would be, it would be too conservative, and I said it would be much higher… And looky there! That’s exactly what’s going on!  

This is the fifth year in a row in which household debt growth has been seen in all four major consumer debt categories: mortgage, student loan, auto loan and credit card.”
The eye-opening stats:

• Total mortgage debt has reached $8.8 trillion
• Student loan debt, seemingly ever-increasing, has hit $1.4 trillion
• Auto loans are at a record-setting $1.2 trillion at a time when subprime auto debt is booming
• Americans hold $834 billion of credit card debt.
“More sobering is that the household debt increase in the last quarter of 2017 was at its fastest pace since 2007.”  I thank longtime reader Bob, for sending me this info… Crazy, eh?  Debt everywhere…  

I put to bed my weekly DTL (Dow Theory Letters) last night so be sure to look for it this Thursday, when I’ll be back in S. Florida and away from all this chilly St. Louis weather, and I’m not coming back until May!  Oh, sorry for that, but what I wanted to say before I was so rudely interrupted, was that I really do a deep dive into the Retail Apocalypse which is only going to make Corporate Debt even larger…  This debt accumulation just keeps growing like a weed that is getting ignored by the owner of the ground, but not by the neighbors (like me) that see it growing and point it out to anyone that walks by!   

OK, enough of that before my Blood Pressure rises, which is not something that I need to have going on, as I have a Doc appt. early this morning…  So, let’s switch gears here and talk about the currencies and metals…  The currencies had a day where they attempted to recover their two-day loses to the dollar, on Friday.  If you just follow the Dollar Index then that’s fine, and the Index was trading around 90.20 in the middle of last week, and this morning it has rallied to 89.57… 

So, the euro is doing some of the heavy lifting, but currencies like the Aussie dollar (A$), kiwi, pound sterling, Norwegian krone, and the Chinese renminbi are looking healthier with each passing day.  I was doing some reading this morning (I bet your wondering what time of the day do I wake up to do reading before writing this letter?, it’s a good thing I’m a quick reader!)  and I came across an article on Bloomberg that highlights a fund manager at BNY Mellon , who  beat global peers over the past year is shorting the dollar   Here’s a piece of the article that can be found here, should you want to read more…https://www.bloomberg.com/news/articles/2018-04-15/fund-that-beats-98-of-peers-shorts-dollar-buys-japan-linkers     “The U.S. dollar still looks expensive to us — we’re in the early stages of a U.S. dollar-depreciating trend”   And the fund manager goes on to say that he likes Japanese yen and Norwegian krone… 

Ok I was with him until he said he liked Japanese yen… Although, if the dollar is in the beginning stages of a weak dollar trend, that I called for more than 6 months ago… Most currencies will gain VS the dollar, including yen… I just don’t like it, fundamentally…    

I also read this morning that the Sanctions on Russia are beginning to show up with slower growth in the Eurozone and Switzerland. The Swiss franc has surprised me with its weakness lately, while most of the other currencies have rallied VS the dollar.  And the sanctions on Russia makes sense to me…  

The price of Gold went for spin on Mr. Toad’s Wild Ride last week… Up $13 Wednesday, down $18 Thursday, and up $11 on Friday…  If I hadn’t been such a wimp and was still writing on Fridays, I would have been in a  tizzy about the $18 selloff of Gold on Thursday…  But by the end of the week, the shiny metal had still gained some ground after the ride was over.  

The U.S  talked the U.K. and France into joining them in bombing of Syria on Friday morning, and that news sent Gold on its recovery path that only saw 240,000 contracts traded. When the contracts traded are in the lower range like on Friday, it indicates to me that the price manipulators were absent that day…  So, Gold closed at $1345.40 on Friday, and is basically flat in the early morning trading today.  The shiny metal is closing in on the line drawn in the sand at $1,350 by the price manipulators… Or as I affectionately (NOT!) call them, The Boys in the Band…   

The price of Oil has held steady Eddie from last Thursday, at $66.70 give or take some pennies…  The bombing in Syria pushed the price of Oil so that it could avoid a selloff..  And here’s Bloomberg with their thought on the price rise in Oil… “Rising geopolitical tensions in the Middle East have already boosted oil prices and there is plenty of scope for them to move higher still. That an oil price spike would follow Western missiles launched at Syria seems a foregone conclusion. But for prices to really keep moving higher, the U.S. would have to take serious action against Syria’s key sponsors: Russia and Iran.”    

The U.S. Data Cupboard was taking a breather last week, and the dollar lost ground. This week, we’ll get three real economic data prints, starting today with Retail Sales…  The good Old Butler Household Index or BHI for you new readers, indicates to me that with Easter falling on April 1st, that the buying for the holiday came in March, which means we could see an uptick in Retail Sales… But if we do, remember that it was a one and done… We’ll also see Industrial Production and Capacity Utilization tomorrow, so get prepared for that weaker print.   

To recap… Chuck goes all MMA on debt and what the U.S. is doing about it today, and he also points out that the economy is going to suffer from all this debt accumulation. The currencies are attempting to recover the ground they lost last week, and so far are doing a good job of recovering! The Russian sanctions are beginning to show up elsewhere, and Gold took a spin on Mr. Toad’s Wild Ride last week, but ended the week higher… 

For What It’s Worth… I used up some good stories in the body of today’s letter that could have been FWIW articles but those don’t compare to this one, which is about the crazy pension news and can be found here: https://dollarcollapse.com/pension-funds/more-absolutely-crazy-pension-news-2/   

Or, here’s your snippet: “A public university president in Oregon gives new meaning to the idea of a pensioner.

Joseph Robertson, an eye surgeon who retired as head of the Oregon Health & Science University last fall, receives the state’s largest government pension.

It is $76,111.

Per month.

That is considerably more than the average Oregon family earns in a year.
Oregon — like many other states and cities, including New Jersey, Kentucky and Connecticut — is caught in a fiscal squeeze of its own making. Its economy is growing, but the cost of its state-run pension system is growing faster. More government workers are retiring, including more than 2,000, like Dr. Robertson, who get pensions exceeding $100,000 a year.

The state is not the most profligate pension payer in America, but its spiraling costs are notable in part because Oregon enjoys a reputation for fiscal discipline. Its experience shows how faulty financial decisions by states can eventually swamp local communities. 

What happens next is also predictable: A growing number of pension plans will blow up as states and cities run out of cash, and the resulting chaos will lead the federal government to bail them out with another five-or-so trillion dollars of taxpayer money. Only this time around – with debt at every level of society twice or more as high as when the banks got their bailout — the result, especially in the currency markets, might be a lot less reassuring. ” 

Chuck Again…  That’s a very interesting article and in the end their thought that the result, especially in the currency markets might be a lot less reassuring, is parlance for. The dollar is going to get creamed!

Currencies today 4/16/18… American Style: A$ .7770, kiwi .7340, C$ .7933, euro 1.2365, sterling 1.43, Swiss $1.0411, … European Style: rand 12.0695, krone 7.76, SEK 8.4143, forint 250.83, zloty 3.3636, koruna 20.43o5, RUB 62.07, yen 107.28, sing 1.3113, HKD 7.8598, INR 65.40, China 6.2744, peso 18.05, BRL 3.4233, Dollar Index 89.57, Oil $66.67, 10-year 2.86z%, Silver $16.59, Platinum $927.12, Palladium $992, and Gold… $1,345.70  

That’s it for today…  Well, it was a good weekend for my beloved Cardinals, and proves that they can beat the lowly teams… Hey! You’ve got to start somewhere! It’s really cold outside here, and now the Cardinals go to Chicago where it will be even colder!  Well tomorrow is Tax Day… I wrote my checks last night to mail today. UGH!  When I was a young man and didn’t make enough money to amount to a hill of beans, I used to say… “Give me the income and I’ll gladly pay the taxes” And then when I began to earn some money, well, I wish I hadn’t said that when I was younger!  And with that… Grand Funk Railroad takes us to the finish line today with their classic rock song: I’m Your Captain…  I hope you have a Marvelous Monday, and remember to Be Good To Yourself!  

Chuck Butler

Is All This Stuff Just A Diversion?

April 12, 2018          

* Gold soars yesterday, but gets brought back today

* Russian ruble gets whacked! 

Good Day…  And A Tub Thumpin’ Thursday to you! The old saying goes… A bad day at the ballpark was better than a good day at work… Well, the outcome of the game yesterday was bad, but it was a great day at the ballpark, warmer weather, a good friend with me, and my old boss, and longtime friend, Frank Trotter, stopped by our seats to say hi, and catch up on a few things. I hadn’t seen Frank in almost a year, so that was fun! The Band Ace greets me this morning with their song: How Long… Paul Carrack was the singer for Ace. He also fronted The Squeeze, and Mike and the Mechanics…  

  I told you yesterday that Chinese President Xi, had extended an olive branch to the U.S., thus easing the fears of an all out Trade War… at least for one day! I saw where President Trump sent out a message that he liked Xi’s speech..  So, now after all the war drum beating, and bravado, we’re going to get along nicely in the sandbox?  Oh, well, that sounds like the foundation is pretty questionable, doesn’t it? Well, I think so, which means I wouldn’t be surprised to see the Trade war drums to begin beating again in a couple of days.   

So, with the Trade War fears subsiding right now the dollar fought back yesterday, and all the currencies found that they are not on terra firma… The Chinese renminbi was the exception, as it was allowed to appreciate last night… One currency that doesn’t get a lot of attention due to it being pegged to the U.S. dollar, is the Hong Kong Dollar or honkers as currency traders call them. I don’t know if you’ve been watching it in the currency roundup, but the honker is very weak.

You see, the honker has a trading band and it normally trades right smack in the middle of the band, but in recent days the honker has been trading at the bottom of the range, and Hong Kong citizens, who’ve never seen currency fluctuations, are getting antsy…  The Hong Kong Monetary Authority, the folks that maintain the currency band, issued a message yesterday, in their attempt to calm the people that just because the honker hasn’t been this weak since 2005, there’s no reason to worry.  Hong Kong has ample currency reserves, so they could correct this situation with intervention at any time…  But I did want to make note that I’m watching the honker…  

The Russian ruble got whacked again yesterday. UGH! I told you yesterday that ruble investors are fleeing the currency with fears that the ruble could experience a run on the currency like 2014, after the U.S. announced additional economic sanctions on Russia.   Weak minds…  these sellers must have weak minds, for what has the Central Bank of Russia (CBR) and their rock star Gov. Elvira Nabiullina proven in the past? The proved that they know how to weather a storm, and she maneuvered the Russian economy around the previous sanctions that both the U.S. and Europe had placed on Russia… The country came out of the recession, defeated inflation, and had seen its key interest rate fall in recent times… Oh well… I guess this will test one’s metal, eh?    

How about Gold yesterday? The shiny metal had a great day but… and there’s always a but, right?  Gold is giving back most of yesterday’s gain in the early trading this morning… Here’s the skinny… Gold rallied with conviction yesterday all the way to $1,369, but the price manipulators flooded the market with short Gold paper trades, pushing the number of contracts traded yesterday to 492,000! OMG!  Well, the $1,362 didn’t last long and Gold closed at $1,362 on the day, up $13.69…  

But like I said the early morning trading isn’t being kind to Gold, and it’s already down $11  The Syrian ordeal hasn’t reached panic stage like everyone thought when the President tweeted “the bombs are coming”, and so the impatient Gold holders are winning the day so far… 

It was brought to my attention yesterday, that yesterday’s letter was very long…  Well, I guess I had a lot to say, eh? I had to make up for the fact that there’s only 4 Pfennigs a week now! HA!  And in that vein…  Let’s think about something that’s been on my mind lately…  What if, all this Trade War mongering, and Syrian posturing is just a diversion to keep the sheeple like me from thinking about how the economy is crumbling around us?  I mean, stocks, were down yesterday, but they’ve been up and down in an environment where they should be heading downward daily, because the stock jockeys refuse to believe the gig is up…  I don’t want to go down the rabbit hole that is a discussion on stocks… But…

I do have something to say, and that’s simply, I was reading one of those emails that are trying to sell you something, and in this case it was stocks, and guy was saying that Corp earnings are great and only going to be getting better, and that bodes well for stocks…  If I could I would respond to him and ask him this… If there is a Trade War, wouldn’t that cut into the Corp earnings you’re touting as great, and cause problems for the Corporation’s stock?     Ok, gotta move on, I’m no stock jockey, even though that’s where I cut my teeth in the financial sector…   

The U.S. Data Cupboard had the stupid CPI report, and a drop in gas prices pulled down consumer prices in March which came in at Econoday’s low estimate for a 0.1 percent decline. But the core rate, which excludes energy, did hit expectations at a modest 0.2 percent monthly gain with the year-on-year rate rising 3 tenths to 2.1 percent which also hits expectations. I can’t believe I reserves this much space in the letter talking about the stupid CPI!  

BTW John Williams at Shadow Stats says that CPI is really 6%, when you calculate it like we used to before the “hedonic adjustments” were added to the calculation in the 90’s…    

To recap… the olive branch extended to the U.S. by China calmed the markets yesterday, and allowed the dollar to fight back, and fight back it did, gaining on all the currencies except the Chinese renminbi. Chuck points out the honker weakness, the Russian ruble weakness for us today. And asks a question, is this all a diversion?   

For What It’s Worth… Well, as Gomer Pyle used to say, “Surprise, surprise, surprise” That’s what I thought of when I saw this article sent to me by MarketWatch… It’s about what was in the Fed’s Meeting Minutes that printed last night… Quite interesting, and you can find it here: https://www.marketwatch.com/story/fed-discussed-need-to-slow-the-us-economy-down-minutes-show-2018-04-11  

Or, here’s your snippet: “The Federal Reserve, focused on stimulating the US economy since the financial crisis, has switched to discussing how to cool off the economy, according to minutes of the March meeting of the Federal Open Market Committee.”

Chuck Again… And these mental giants thought that by leaving interest rates near zero for nearly a decade wouldn’t eventually show up in the economy?    Oh well, we carry on despite our shortcomings, right?  

Currencies today 4/12/18… American Style: A$ .7754, kiwi .7380, C$ .7945, euro 1.2338, sterling 1.4194, Swiss $ 1.0384, … European Style: rand 11.9880, krone 7.7692, SEK 8.4118, forint 252.30, zloty 3.39, koruna 20.5771, RUB 63.33, yen 107.17, sing 1.3110, HKD 7.85, INR 65.17, China 6.2750, peso 18.17, BRL 3.3976, Dollar Index 89.74, Oil $66.64, 10yr 2.78%, Silver $16.64, Platinum $929.14, Palladium $953.17, and Gold… $1,349.10 

That’s it for today…  I’m headed to the heart doc this morning, they’ll run a magic wand over my pacemaker, and it’ll tell them all they need to know about what my heart has been doing… Cardinals have noodle bats I do believe… The start of spring training they couldn’t hit, and then things got better, but the start of the regular season has seen a return of the noodle bats… UGH!  OK, no Pfennig tomorrow… I’m officially down to a 4 day a week Pfennig schedule… Do you recall me telling you about the young man that played water polo for my son, Andrew, who became paralyzed last in a swimming mishap in Mexico, and how he had progressed to the surprise of everyone? Well, I saw him last week at a water polo game, and he’s walking better then me! And he negotiated the steps very well! I teared up watching him move about, so inspirational..   And with that it’s time to do, so the Beatles send us to the finish line today with their song: I Want To Hold Your Hand…  I hope you get to get out and make this a Tub Thumpin’ Thursday, and remember to be Good To Yourself!   Chuck Butler 

Russian Ruble Gets Smack, Crack, Bushwhacked…

April 11, 2018  

* Threat of “War” war spooks the markets  

* China extends olive branch? 

Good Day… Well, I finally got through all the emails in the Pfennig Replies. Shame on me, as I had forgotten how many readers respond to a Pfennig when I ask them a question… But get through them I did, and thank you to one and all who replied with “no worries” emails in response to my asking you what you thought about me going to a 4 day week. I even had someone ask me why I got up so early and wrote, when it would be better to write at 5 each day to give a recap of the day’s activities… There are a number of reasons I’ll continue to write in the morning, but the first response would be that this is a conversation that you and I are having at the kitchen table with a cup of coffee, and it will remain that way as long as I write the Pfennig! Like I said there are a number of reasons why I do this, but that’s number one in my book! Chicago greets me this morning with their song: Does Anybody Really Know What Time It Is… This is one of the songs the band I played in and traveled the country in our VW microbus, allowed me to be the lead singer… So, I have a special place in my heart for this song… Besides the Neil Young songs I did with my acoustic guitar, the only other song I had the lead part, was Colour My World…

Well, traders got back to trading currencies yesterday and giving them some direction, rather than just wallowing in the mud, like they’ve done for about a week… The euro gained, not by leaps and bounds, but it gained nonetheless. The Aussie and kiwi dollars both followed the euro’s lead, and gained but not by leaps and bounds. Gold had a good day, just like I thought and said it might do, as the coming Trade War, that has already seen the battle lines drawn, is drawing closer and closer…

I keep getting emails from readers that think I’m not getting the point, as to why the U.S. immediately without provocation, went to the protectionism method of negotiation… I do get the fact that the U.S. trade sector has been treated unfairly in the past, and an evening out of the playing field was in order… But to go to Tariffs before other means of negotiating what it was the U.S. wanted from China, was not, in my opinion the best option, for I believe that the tariffs when put into place will cause the economy to falter quickly, and more than that, the dollar will be subjected to weakness that it has seen in previous times of tariffs in the past. Ok, enough of that!  

Forget the Trade War, what we have now is the threat of a “war” war… President Trump has sent a destroyer to the Middle East region, and Russia isn’t pleased as punch about that… Add to the destroyer that could fire off cruise missiles at any time now that has the Russians all up in arms, is the fact that the market have been spooked by the additional sanctions placed on Russia by the U.S. on Monday…  

The Russian ruble has gotten smack, crack, bushwhacked, tied another one its back, baby (R.E.M.) with investors running as fast as they can from the ruble, fearing another run on the currency like we saw back in 2014…  Well, that may come about, but instead I think the savvy investors will see this selloff as an opportunity to buy rubles and ruble investments cheaper, and the this selloff will not dive as deeply as the one in 2014.  Of course I might be wrong about that, but at least I have the chutzpah to make the call… right?    

The rest of the currencies all, and I mean all, spent the day gaining VS the dollar. And once again, the moves aren’t monumental but they are positive, and when you put all these small daily moves together, you end up at the end of the week, with a nice gain. I’m just saying…  

Gold also saw another small move on the day adding $3.40 to its price, but this morning’s price is up more than $8 in the early trading, just like I said it would probably do once we found out what Trump was going to do with Syria. And now we know, as the President has sent a warning that “the bombs are coming”…   Can’t back down now, you’ve already told the world what was coming…  

And the price of Oil is pushing the price appreciation envelope across the table this morning as it sports a $66 handle this morning. The threat of another war front in the Middle East and disruption of the Oil production, has the price of Oil looking spiffy this morning.  

So, all three anti-dollar assets are on the rally train this morning, once again…. We’ve seen this several times this year, only to see them fall off the train again, due to the PPT performing their circus tricks with saving the dollar from this embarrassment…  But soon, even the PPT will see that they are throwing good money at a bad trade, and step away from the markets, quietly… That’s when we will know that the weak dollar trend that has been nascent is ready to really take off for higher ground! 

And then was this:  Longtime reader, Bob, sent me a note yesterday, telling me that the Global debt has reached $237 Trillion… here’s the skinny… Yesterday we saw the latest update from the Institute of International Finance (IIF) showing that 2017 saw no less than $20 trillion in global debt added in just one year taking the total to $237 trillion. YIKES!  

And helping to build / accumulate this growing debt, is the fact that the U.S. Congressional Budget Office issued a report saying that the annual deficit here in the U.S. will grow to near $1 Trillion two years earlier than first thought, and will begin to rise steadily this year and next year, and then become a part of our annual budget, to be $1 Trillion each and every year… Oh Boy! Where can I get in on this? I sure would like to run my budget in the ground and begin to book annual deficits too! Tell, me, tell me, tell me true! I want to be just like our Government! NOT! 

But didn’t I tell you when the annual deficit was first being discussed about a month ago, that the government’s estimates are always too low, and it was my thought that the actual deficits would larger?  Well, yes I did… but don’t let that get in the way of you deciding that you had better up the ante of currencies and metals in your investment portfolio before things get hot and heavy with the selling of the dollar…  

Well, China extended an olive branch, in my opinion that is, yesterday, when President Xi made a speech where he talked about opening up the Chinese markets even more, and lowering the tariffs on U.S. cars… I commend the Chinese for doing what they can to avert a Trade War, and for their effort the Peoples Bank of China (PBOC) allowed a nice appreciation of the renminbi overnight.  

But think about that for a minute… this was all staged…  The Chinese announce that they are lowering the tariffs on U.S. cars, and at the same time, they make up for that loss in tariffs by upping the ante on the renminbi, so that Chinese exports are move expensive, but the amount will be small and unnoticeable to the U.S. consumer… But when you add up all the marbles, China takes away a big bag of them…  Pretty smart, if you ask me!  

But like I said above the focus changed from Trade War to “War” war… 

The U.S. Data Cupboard yesterday had the PPI (wholesale inflation) And the report showed that there is a little more inflation at the wholesale level in March,  including for primary metals, but the acceleration is modest. Producer prices rose 0.3 percent in March which is 2 tenths above Econoday’s consensus with ex-food & ex-energy also up 0.3 percent and ex-food, ex-energy & ex-trade services up 0.4 percent, both of which are 1 tenth above consensus. 

Today’s Data Cupboard has the stupid CPI (consumer inflation) for March, and the so-called experts believe that CPI will jump to 2.4% Year on year (YOY) and core inflation will rise to 2.1% YOY…  I’m from Missouri, so they’ll have to show me these increases… But when you consider all the hedonic adjustments that are taken in the calculation of CPI, one never really knows what they’re looking at, and that’s why I call it the “stupid” CPI…  

Do you have young kids or grandkids? Do the go into convulsions any time you say the word “stupid” in front of them? Mine do, and I tell them that I’m an adult and can say what i want!  But if you want to see them bonkers, play one of the Charlie Brown videos… The Charlie Brown characters use the word stupid like they use cuss words in jail!   HA!    

To recap… The Trade War fears have given way to “War” war fears and that has Gold pushing higher this morning. The currencies all booked modest gains VS the dollar yesterday, except the Russian Ruble which got whacked because of fears of another run on the ruble like what happened in 2014, after new sanctions were placed on Russia by the U.S. on Monday… And the Global Debt has reached $237 Trillion! My oh My…   

For What It’s Worth… Since I talked about the rising debt levels in the world this morning, and pointed out the increased annual deficit here in the U.S. this article about housing debt rising seemed to play nicely in the sandbox with my earlier thoughts on debt… You can find the entire article here:http://www.builderonline.com/money/affordability/rising-home-prices-push-borrowers-deeper-into-debt_c   

Or, here’s your snippet: “More Americans are stretching to buy homes, the latest sign that rising prices are making homeownership more difficult for a broad swath of potential buyers.

Roughly one in five conventional mortgage loans made this winter went to borrowers spending more than 45% of their monthly incomes on their mortgage payment and other debts, the highest proportion since the housing crisis, according to new data from mortgage-data tracker CoreLogic Inc. That was almost triple the proportion of such loans made in 2016 and the first half of 2017, CoreLogic said.

Economists said rising debt levels are a symptom of a market in which home prices are rising sharply in relation to incomes, driven in part by a historic lack of supply that is forcing prices higher.” 

Chuck again… I would be fearful right now of the pushing out of the crowd that doesn’t have a lot to spend for a house… I’m just saying…

Currencies today 4/11/18… American Style: A$ .7747, kiwi .7368, C$ .7926, euro 1.2384, sterling 1.4185, Swiss $1.0448, … European Style: rand 12.0968, krone 7.7678, SEK 8.3072, forint 251.56, zloty 3.3842, koruna 20.4425, RUB 62.16, yen 106.81, sing 1.3084, HKD 7.8496, INR 65.16, China 6.2882, peso 18.29, BRL 3.4161, Dollar Index 89.47, Oil $66.17, 10yr 2.77%, Silver $16.61, Platinum $935.47, Palladium $960.52, and Gold… $1,354.00 

That’s it for today…  After a 9 innings of feeble at bats my beloved Cardinals won in the 11th inning. Of course I had long gone to sleep thinking that their lack of hitting costs them another game… Was I ever pleasantly surprised to see the score this morning! I’m going to the day game today, the weather is supposed to be warmer, and I’m excited! I love day baseball, for to me, it’s when all the games should be played! I sure hope my hip settles down, and I can sit there and enjoy the game with good company! I see the heart doc tomorrow, I think he’ll be happy with my weight loss, but not with the higher BP that the new chemo drug is causing…  Oh well, it is what it is…   And with that thought, I had better get this out the door.. The Amazing Rhythm Aces take us to the finish line today with their song: 3rd Rate Romance…  Bet you don’t have that one on your playlist!  I hope you have a Wonderful Wednesday, and Be Good To Yourself!  

Chuck Butler

 

 

 

Let’s Go Out And Tick Everyone Off!

April 10, 2018        

* New economic sanctions for Russia… 

* Did China step away from the auction window?

 

Good Day… And A Tom Terrific Tuesday to you!  Right from the get-go this morning, I want to thank everyone who sent me notes yesterday, with all those wonderful words regarding my mentioning that the tumor in my mouth was gone… The notes are truly appreciated! The Pfennig Replies email box was flooded with emails, and that’s pretty cool! My beloved Cardinals find another way to lose a game last night. UGH! Jane’s Addiction greets me this morning with their song: Been Caught Stealing… 

Well, why don’t we, as a country, just go out and attempt to tick everyone off at the same time? Did you hear about the new economic sanctions place on Russia? What for this time?  No Crimea, no Ukraine, did we just say, what the hell, and place sanctions on Russia?  Well, this is crazy folks… The Russian ruble got whacked on the news, and brings about a point that I’ll attempt to make here… The ruble is very undervalued, wink, wink, and now it’s even more of a bargain price… wink, wink…    

There’s so much going on, it’s impossible for me to talk about all of it in one letter, but I jam as much of my thoughts on the goings on in today’s letter, for tomorrow isn’t guaranteed to us, only today is.  Look at Chuck being philosophical  ! Yeah, sort of akin to SNL’s Deep Thoughts by Jack Handy! HA!  

The currencies, led by the Big Dog euro, had a good day yesterday and in the overnight sessions, for the first time in quite a few days. Or it sure seems that way, that just about every morning, I’m saying “the currencies didn’t move much” or something like that! But not today! The euro has recovered back above 1.23, and I was reading an article this morning that talked about the improved sentiment toward the Eurozone, with Germany, the Eurozone’s largest economy, getting very close to a coalition Gov’t, and more and more talk about the European Central Bank (ECB) getting closer to an unwind of their stimulus… 

With the Big Dog on the move, the other currencies are following the lead dog. The Aussie dollar (A$) finally moved past 77-cents, and kiwi has really been burning the midnight oil to get past 73-cents. The price of Oil has fought back to the $64 handle, on supplies news, and the added sanctions… 

Well, Gold was able to gain $2.30 yesterday, but the big move upward for the shiny metal is likely to be associated with whatever it is that President Trump does to Syria… Geopolitical problems usually send Gold soaring, with the price manipulators sitting on the sidelines.  

Well, how many of you are aware of the historical fact that whenever the U.S. Treasury yield curve inverts, it’s an indication of an economic recession on the way? Well, that’s that, and what’s the reason I’m bringing this up today… I’ll let the boys and girls from Bloomberg tell you in their own words…

“The forward curve of a closely watched proxy for the Federal Reserve’s policy rate has slightly inverted, signaling investors are either pricing in a mistake from central bankers or end-of-cycle dynamics, according to JPMorgan Chase & Co.

The inversion of the one-month U.S. overnight indexed swap rate implies some expectation of a lower Fed policy rate after the first quarter of 2020, the bank’s strategists including Nikolaos Panigirtzoglou, wrote in a note Friday.

“An inversion at the front end of the U.S. curve is a significant market development, not least because it occurs rather rarely,” they said. “It is also generally perceived as a bad omen for risky markets.” – Bloomberg…

Of course they’re just talking about the front end of the curve being inverted, but the curve as a whole, is flattening and in danger of inverting, so I’ll keep an eye on that, don’t worry about that!   

The Trade War talk is heating up again. Did you know that, the Chinese tariffs are a huge blow to American growers, especially those in Midwestern states that the President needs to win re-election in 2020. China is the biggest buyer of U.S. soybeans, picking up about a third of the entire U.S. crop. The trade is worth about $14 billion. 

The U.S. tariffs target the high-end technology products made in China. That could mean that companies like Apple Inc. and Lenovo Group Ltd. that operate significant Chinese production bases face higher costs or supply-chain disruption. The biggest blow by far is to almost $4 billion worth flat-panel TV screens.    And I’ve got a real doozy for you in the FWIW section today, it’s so BIG that I wouldn’t blame you if you skipped ahead to read it right now!  

The U.S. Data Cupboard doesn’t really have any real economic data this week, so the news that will drive the markets will come from the U.S. Gov’t…  And I don’t think any of that will help the dollar, but instead it just might help Gold!  

To recap…  The currencies finally moved off the point they were stuck at for over a week, and the Big Dog euro led the currencies higher VS the dollar! Geopolitical pressures are what will move the markets for currencies and precious metals this week, with questions like: What will Trump do in Syria?  The President did add new economic sanctions on Russia yesterday, and Chuck doesn’t understand what the heck is going on here….  

On a sidebar, I’ve talked about this before but it’s even more important now because of the new sanctions on Russia…  The world has 3 super powers, the U.S., China and Russia…  It would behoove the U.S. to buddy up with one of the other two so they could gang up on the third country and get their way with them…  But guess what we haven’t done?  That’s right, we haven’t buddied up with anyone, in fact we’ve ticked off China, and now add Russia, so guess who’s buddying up? That’s right China and Russia, and soon they’ll be getting their way with us…  I’m just saying…  

For What It’s Worth… I think you had better pay attention to this article that appeared on the ZeroHedge.com site. It’s about China stepping away from the Treasury auction window, just like I said we needed to be afraid they might do, and it can be found here: https://www.zerohedge.com/news/2018-04-09/we-understand-chinese-government-has-halted-purchases-us-treasuries-sgh

I don’t have much of a snippet today, because 1. I want you to click on the link and read the report, and 2. I can’t get the copy and paste to work for this article…

Chuck again… Brother have we stepped into a pile of doggie doo… It’s been a longtime arrangement between China and the U.S…. The U.S. buys China’s exports, and China buys U.S. Treasuries… But when you play with fire, you get burned… And if the report is true, that China has ceased buying Treasuries weeks ago, who’s going to take up the slack? The Fed is not buying Treasuries, and the U.S. increased their deficit spending, which needs the sale of Treasuries to finance the deficit spending! Uh-oh!

I’ve explained this in the past, but what the heck… When Treasuries aren’t being bought, the U.S. Gov’t has two choices… They can aggressively hike rates to get the yields on the bonds higher and more attractive, but risk causing the economy to go into a recession. Or… They could depreciate the value of the dollar, so that the purchase price on the conversion to dollars in the terms of the transaction, would be cheaper… Given the two choices, which do you believe the U.S. Government will choose? What’s behind door #1 or door #2? #2? Johnny, tell them what they’ve won! You’ve won a weak dollar that will reduce your purchasing power, like a tax, but that’s not all! You have also won higher interest rates because the Fed will hike rates at first to see if they can attract buyers, and then seeing they can’t, they’ll ask for a depreciation of the dollar…

Got Currencies and Gold (or silver)?  

Currencies today 4/10/18… American Style: A$ .7737, kiwi .7350, C$ .7889, euro 1.2330, sterling 1.0462, Swiss $1.0462, … European Style: rand 12.05, krone 7.8211, SEK 8.3493, forint 252.61, zloty 3.4001, koruna 20.5470, RUB 59.43, yen 107.02, sing 1.3102, HKD 7.8494, INR 64.84, China 6.3051, peso 18.28, BRL 3.3846, Dollar Index 89.81, Oil $64.21, 10-year 2.79% Silver $16.48, Platinum $936.72, Palladium $936.85, and Gold… $1,339.60  

That’s it for today… Lots on our plates, eh? My stomach is performing circus tricks this morning, so I’ll end this here and try to get that settled down… The sun came out yesterday, and it kind of got a bit warmer, and I’m told that it will continue to get warmer today and tomorrow, so that’s a good thing, because I can’t stand cold weather! Junior Walker and the All Stars take us the finish line today with their song: What Does It Take? Great sax work in that good old song… And with that… it’s time to go… So, I hope you have a Tom Terrific Tuesday, and don’t forget to Be Good To Yourself!   

Chuck Butler