What’s All This Dollar Buying About?

November 28, 2018 

* Currencies & metals have an awful day… 

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

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

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

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

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

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

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

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

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

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

OK… let’s talk about something else…

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

The Trade War Hits Home…

November 27, 2018 

*Currencies give back their gains… UGH!

* Lola says Commodities will soar in 2019… 

Good Day… And a Tom Terrific Tuesday to you! While I took a mini-vacation, I realized that I still wanted to write each day… So, it does feel good to be back in the saddle… At least that is until we get to my annual Christmas vacation! This is my weekly plead to the St. Louis Cardinals’ Front Office… Please sign Bryce Harper! The Hot Stove league is heating up, and the winter baseball meetings will take place in 2 weeks, where things are bound to get hot and heavy! So… get out the checkbooks, boys and girls, it’s time to play… How Many Millions Do We Pay This Guy! The late Great Leon Russell greets me this morning with his great song: Back To The Island… I wish I were going back to the island, for it’s getting quite cold here!

Alright, so for my first day back, the currencies saw some profit taking from the nice gains they made last week, but the damage wasn’t too awful… I continue to be amazed at how many people are jumping on my bandwagon, regarding the U.S. economy, and the dangers that the Corporate Leveraged Bond market are being recognized suddenly too! The euro lost about 1/4 cent, and Gold lost about $4 on the day. The Aussie dollar (A$) held on to its gains, as did the A$’s kissin’ cousin across the Tasman, kiwi… 

In the overnight markets there was more slippage, and now it appears that the rally last week has been reversed… I can’t believe that this new dollar buying is all about the thought of possible debt reduction… It’s not going to happen, folks… and the sooner the markets realize this, the better off we’ll all be! (well, those of us who have diversified our investment portfolios with currencies and metals that is!) 

Did you like my phone call-in show response to the President now calling for spending/ debt reductions? I did, so I guess that’s all that matters… If it weren’t for the responses I get daily to the things I write about, I would think there are days that I’m only writing the letter for my own amusement! So, keep those cards and letters coming… And if you feel up to it… send cash! HAHAHAHAHA!

There wasn’t much to speak of in the way of economic data around the world, and even here in the U.S. yesterday, so to me… the light selling was profit taking… For there was nothing else going on to move them downward like they moved yesterday…  We did however see a reduction in the Trade Deficit in New Zealand for last month, which is a good thing, for it was a sizeable chunk of change! 

I can’t for the life of me think that this week’s European Central Bank (ECB)’s Financial Stability Review will be a non-event… To me, this is akin to a Fed & Treasury summit here in the U.S., that is if we ever had one of those! And the euro is on the fence… it can either be allowed to move higher on the fence, or be taken down a rung on the fence…

I blame my fat fingers for any errors in reporting prices in the currency roundup…  Why am I bringing this up now? Because I had a major faux pas in the currency roundup yesterday. The price of Oil was $50.01 not the $60.01 I typed…  I read a report this past weekend from a writer who thought that the plunge in the price of Oil came about from the harsh words that President Trump had for the Saudi Prince about their decision to cut production of Oil… I laughed, and laughed, until I was being looked at like I was a madman… Madman across the Water, is one of my fave Elton John songs…

Gold is being bought in the early morning trading today, after losing a small amount of ground yesterday. This morning, the newswires are full of articles about how Lola, aka Goldman Sachs is telling their clients that they believe Commodities will soar in 2019…  If that’s their thought, then they must also believe that inflation is going to rise in 2019. I have to say that for once in a blue moon, I agree with Lola…  And we all know that what Lola wants, Lola gets, right?  

If Commodities are soaring in 2019, that will also mean that the Commodity Currencies of Australia, New Zealand, Canada, Russia, Brazil, Norway, and S. Africa to name a few, would be firmly on the rally tracks, and that means a weaker dollar…  I’m just saying… 

Yesterday I told you that the EU had sent their version of the BREXIT agreement to the U.K. for approval by the U.K…. And the reports were that it was believed that this version of an agreement would be rejected by the U.K.  Well, then President Trump decided to throw his two-cents into the negotiations, and told the U.K. that if they signed the agreement, that it would make dealing with the U.S. very difficult.  Well, the agreement has a snowball’s chance in hell of passing now!  (I’m not behind or against the agreement)

I’ve been talking about the lack of foreign participation at the U.S. Treasury auction window in recent months… And finally somebody besides me is seeing this as a major problem for the U.S.!  For what we have here is a failure to communicate! No, Wait, this is no time for reminiscing about Cool Hand Luke…  What we have here, is a problem, for the U.S. is increasing their Treasury Sales, due to the increases in deficit spending, and foreign participation is weakening…  That’s a recipe for disaster, folks… Something’s got to give here… Either Treasury yields get on their horse and begin to ride, or… the dollar’s got to get weaker to entice foreign participation!    

The U.S. Data Cupboard today will have the Case/Shiller Home Price Index (HPI) for September, and I suspect that the September print will show a lower average price than August did. And if you recall, August was lower than July… And the hip bone is connected to the knee bone, and so on… I don’t like this sign and the problem is I don’t think the Fed gives two hoots about lower home prices… For if they did they would be signaling a pause for rate hikes next month… And they are NOT doing that, instead it’s been all-steam ahead for rate hikes from this bunch… (you don’t know how badly I wanted to add: of dolts, to that last line, but in this season of Christmas, I’ll be kind and not do that! )

We’ll also see what the first two weeks of November looked like to Consumers, when Consumer Confidence for that period prints today… Since this is really a reading of how stocks are doing, one would think that Confidence would take a hit in this report… But, I don’t call this report “stupid” for no reason…

The Big News last night was that Government Motors, I mean General Motors is going to layoff 14,000 workers and shutter 7 plants… See? Didn’t I tell you over and over again, that this dance is gonna be a drag? And that neither side of a Trade War wins?  This wouldn’t be happening right now without the Trade War, folks… 

To recap… Chuck’s first day back wasn’t good for the currencies and metals, but the real downward move came in the overnight markets. Lola is saying that Commodities will soar in 2019… Chuck is in agreement for once in a blue moon with Lola, and we all know that what Lola wants, Lola gets! The Trade Deficit in New Zealand saw a narrowing last month, and that was about the only data worldwide worthy of being the Pfennig! HA! 

For What it’s Worth… I know a lot of you don’t like it when I quote James Rickards, but I find him most of the time to be in line with my thinking on what’s happening in the markets, and so with that, here’s Rickards with his thoughts on the next crisis, and it can be found here:
https://dailyreckoning.com/multiple-risks-are-converging-on-markets/

Or, here’s your snippet: “Now a new loan loss crisis is unfolding. The new crisis is not in mortgages but in student loans.

Total student loans today at $1.6 trillion are larger than the amount of junk mortgages in late 2007 of about $1.0 trillion. Default rates on student loans are already higher than mortgage default rates in 2007. This time the loan losses are falling not on the banks and hedge funds but on the Treasury itself because of government guarantees.

Not only are student loan defaults soaring, but household debt has hit another all-time high. Student loans and household debt are just the tip of the debt iceberg that also includes junk bonds (again, as I explained yesterday), corporate debt and even sovereign debt, all at or near record highs around the world.

Meanwhile, the trade war remains a great risk to markets.
When the trade wars erupted in early 2018 I said that the trade wars would be long-lasting and difficult to resolve and would have significant negative economic impacts.

Wall Street took the opposite view and estimated that the trade war threats were mostly for show, the impact would be minimal and that Trump and China’s President Xi Jinping would resolve their differences quickly. As usual, Wall Street was wrong.

Chuck Again… Crazy that Student loans are greater than the Corporate Loans that became problems back in 2007… And that the defaults of Student Loans are greater than the default rates of mortgages in 2007… Think about that, and then tell me again that both Rickards and Chuck are dolts…

Currencies today 11/27/18… American Style: A$.7242, kiwi .6796, C$ .7548, euro 1.1320, sterling 1.2745, Swiss $1.0006, European Style: rand 13.8266, krone 8.5873, SEK 9.0770, forint 286.07, zloty 3.7890, koruna 22.9126, RUB 66.82, yen 113.60, sing 1.3757, HKD 7.8280, INR 70.64, China 6.9389, peso 20.51, BRL 3.8439, Dollar Index 97.16, Oil $51.70, 10-year 3.06%, Silver $14.37, Platinum $842.47, Palladium $1,147.17, and Gold… $1,223.75

That’s it for today… Except… drum roll please… It’s grandson Everett’s Birthday today! Happy Birthday E! He’s 8 today! I hear it’s your birthday, well happy birthday to you! Well, my wife, (I know I’m not supposed to talk about her in the Pfennig, but this is good…) she is having a ball laughing at me right now, because… Well, at the end of the year, my Cobra insurance runs out… and I have 1.5 years until I reach 65… And with my pre-existing condition, I had no other choice but to use the ACA, which I have complained about since the first sign that this was going to be shoved down our throats years ago… I guess I learned a lesson here, to not bad mouth something because you may have to use it later… UGH!  Oh well, it’s better than a sharp stick in your eye, as my good friend and former boss used to say… Jane’s Addiction takes us to the finish line today with their song: Been Caught Stealing…  And with that it’s time to go… I hope you have a Tom Terrific Tuesday! And that you continue to Be Good To Yourself!

Chuck Butler

 

 

Chuck’s Back, So The Currencies Back Off…

November 26, 2018 

* More economists are jumping Chuck’s bandwagon!

* ECB will have their FSR this week… Chuck thinks this is BIG!

Good Day… And a Marvelous Monday to you! I had a grand week, last week, with traveling back to cold St. Louis, Thanksgiving, and a great Mizzou victory on Friday! I don’t know where my Tigers will play their bowl game, but I’m sure they’ll put on a great show for the local crowds! I’m saying nice things to start the day, because I’m loaded for bear today, and it won’t be pretty, for all those who think this economic so-called strength is going to be like the Energizer Bunny, and go on, and on, and on… So, I hope you had a grand Black Friday day, and shopped ‘till you dropped… And it brought you joy and happiness… I doubt you’ll feel so joyous when the credit card bill arrives… I’m just saying… Kansas greets me this morning with their song: Hold On…

I sent out a Tweet on Friday, and said, “they used to have a saying on the trading desk where I worked, that when Chuck was away, the currencies rallied” So, I guess that still holds true, since I was unofficially away last week, and the currencies and metals rallied. There was one day where they didn’t rally, but then made up for it the next day, and at the end of the week, they were on the rally tracks!

But not so much today… Gold lost a couple of bucks on Friday, but like the currencies it ended up for the week… And when you get down to it, weekly gains or losses are what make up trends, not daily bumps and grinds… I once had a dear reader ask me, why I wrote a daily letter, when all I talked about were long sweeping trends for the currencies and metals? I told him that I was here for the reader that just picked the Pfennig up and read it for the first time, and I was here for those that needed to keep abreast of what happened the day before, overnight and prospects for today… So they could make an informed decision to buy or sell… 

Boy, a lot of writers, economists, and observers are jumping on my bandwagon these days with calls that the economy is near its demise, the dollar is too, and Gold’s about to rally, big time… I welcome them aboard, and say to those naysayers, there’s still room for you, whenever it is that you get your head screwed on straight, and see what’s going on in front of you, not in back of you!

The week has a lot in store for us, so strap yourself in, keep all arms and legs inside as we attempt to maneuver around this week. I want to start off today with the headlines from this past weekend regarding the U.S. economy…

Here are the headlines from this past weekend that are playing nicely in the sand box with my previous thoughts about the economy…

From Danielle Di Martino Booth’s Twitter feed: “The Economic Cycle Has Turned “We are officially calling the bottom in initial jobless claims; the current cycle, the second longest economic expansion in U.S. postwar history, has turned”

From David Rosenberg’s Twitter feed: “The credit contraction is starting and recession follows. See “Rates Roil Small Mortgage Firms” on the front page of the WSJ. The # of U.S. nonbank mortgage lenders has shrunk 3.5% from a year ago; over half of the $1.26 tln of mtg originations came from this group this year.

Also from David Rosenberg: “capex orders decline at a 2.9% annual rate in the three months to October.”

Alright, first things first… Capex stands for Capital Expenditures… and when Companies aren’t putting money into expansion or improvments and labor increases then that’s a tell tale sign that the economy is in deep dookie… Now throw on top of that the fact that Credit is contracting… Uh-Oh! When I say credit you say debt… Credit… Debt… good, you’ve got it!

The rot on Housing’s vine is getting more exposed every day, and finally the economic expansion is either near an end, or already having put in its last quarter of somewhat strong growth… Of course I do have to throw something in here… Gov’t Spending has been a HUGE piece of GDP… So, the GDP number in this country will probably hold on longer than one would think, given the amount of Gov’t Spending!

What’s an investor to do? Well, if you haven’t done so already, I would certainly make sure my stop losses are in place on my stock holdings, or, at least, up to date. Bond yields aren’t going to help you much and in fact may have reached a high for now, as I continue to believe that the Fed will reach for another round of QE / bond buying, and their buying will manipulate yields downward once again.

In 2007/ 08… we saw major stock selling, Gold selling, and currencies selling… It was a complete washout for what became known as the “Risk On Assets”… These three all decoupled a while back, but will once again be lumped together… This is how it all played out in 2007/08… Stocks began to tumble and those investors that bought stocks on margin (loans) began to receive margin calls because their respective accounts had fallen below the minimum margin (30% in most cases)… They were strapped for cash, so they had to find something to sell to come up with the cash… So, they sold their Gold and bonds, whatever, get that persistent margin clerk from calling them in the middle of the night and threatening to sell all their account to pay for their margin call… It got ugly… And will again, just wait-n-see… 

I think I’ve told you longtime readers that I used to be the head of the margin Dept. at Stifel Nicolaus back in the mid-70’s, and we had some very interesting calls to investors who had their margin fall below the minimum… 

A couple of weeks ago, publishing guru, Bill Bonner, wrote in his letter about Stagflation… And that reminded me that I said that was what I saw coming to the U.S. economy, and a lot of readers disagreed with me… But now, Big Al Greenspan is in agreement with me, along with Bill Bonner.
This was from Bill’s letter 11/15/18… “Asked whether the tax cut might ignite enough extra growth to raise federal revenues and reduce deficits, Mr. Greenspan was uncharacteristically direct:
“No… there is no chance,” we heard him say. “You get a little ‘bounce’ at the beginning, but that is just about over. After that, a tax cut makes no sense unless you are willing to ‘fund’ it… that is, to cut spending.”
“You can’t get something for nothing,” he might have said, providing a handy epithet for the whole Fin de Bubble Age.
You’re getting into a system now that has no outcome that’s in equilibrium other than inflation and no productivity growth.” -Alan Greenspan 11/15/18

And what’s the technical definition of Stagflation? Well, here you go… Stagflation :persistent high inflation combined with high unemployment and stagnant demand in a country’s economy.

So we have that going for us… Whoopee! Where do I sign up? Please sir, may I have another? And all those other sayings that go with asking for more! But only I say it facetiously!

Last night, I saw a blurb on my laptop telling me that President Trump has now switched his focus on the spiraling upward debt, and he wants deficit reductions…  Ahem… let me clear my voice for this… Hello? Yes, I’m a longtime listener, first time caller, and but I wanted to point out that tax cuts without spending cuts, creates deficits… Thank you, I’ll hang up and listen to your response…. 

On Thursday this week, The ECB’s Financial Stability Review will make their statement, which I feel will go a long way toward either pushing the ECB to remove stimulus, or keep it in place should the review be negative…

Since 2004 the European Central Bank has published twice a year the Financial Stability Review which provides an overview of the possible sources of risk and vulnerability to financial stability in the Eurozone.

We’ll see some other data prints from countries around the world this week, but the ECB FSR is the most important of the lot… Because… The ECB is associated with the Big Dog, euro… when the euro is allowed to get off the porch and chase the dollar down the street, then the other currencies (little dogs) get to run with the Big Dog…

Well, I received an email blurb yesterday telling me that: 
E.U. leaders approve Brexit plan, setting up December vote in British Parliament, where it faces stiff opposition. Hmmm…
The British Parliament is against this plan per the article, so why submit it? You’ve got to wonder, right?

Unfortunately for pound sterling I think it’s going to be caught in the crosshairs of this vote and it won’t be good for the pound…  And I think Traders are already trading ahead of the vote, betting on a bad outcome and selling pound sterling… Darn fickle traders! HA! 

As I said above, Gold finished the week better than the previous week, and that’s a baby step, folks… This week needs to finish higher than last week, and then we go to the third week, and so on, until we find we’re in the middle of a commodity bull market!  Well, at least that’s how I think things will go, but then no body really knows what’s going on and if they say they do, they’re full of baloney…  The Shadow knows… but that’s a horse of a different color to discuss and I’m not ready to talk about that… 

I said above that we have a lot going on this week, and it starts tomorrow in the U.S. Data Cupboard, where we will see the Sept. S&P Case/ Shiller Home Price index, which for the previous two month, we had seen drops, I suspect that will continue when this data prints tomorrow… And the stupid Consumer Confidence for the first two weeks of this month will also print… With stocks teetering, circling the bowl, I doubt Confidence will be high…

On Wednesday, we’ll see the latest revision of 3rd QTR GDP… And New Home Sales… I’ve begun to really watch these housing data prints, for they are telling us in the tea leaves that trouble is brewing…

Thursday will bring us two of my fave data prints… Personal Spending and Income from Rocktober… Core Inflation will also print, and then finally the Fed’s FOMC Meeting Minutes from their last meeting will print. So, all things that could move the dollar and if I had my educated and knowledgeable guess, I would say the dollar will get moved in a downward direction…

To recap… Last week, while Chuck was gone, the currencies and metals rallied… He’s back, so they get sold overnight… OK, if I received enough checks paying me to stay away permanently, I’ll gladly accept your offer!  The economist, etc. are beginning to see things Chuck’s way regarding this economy, and he prints some quotes from well-known economists, proving his point. The ECB will have their Financial Stability Review this week… This is BIG folks… so watch for that! 

For What it’s Worth… Well, I’ve been mentioning the leveraged Corporate Debt problem for quite some time, and so it was good to see the folks at Bloomberg, finally realize this is a ticking time bomb… So, that’s what this is all about today, and you can find it here: https://www.bloomberg.com/graphics/2018-almost-junk-credit-ratings/

Or, here’s your snippet: “ They were once models of financial strength—corporate giants like AT&T Inc., Bayer AG and British American Tobacco Plc.

Then came a decade of weak sales growth and rock-bottom interest rates, a dangerous cocktail that left many companies feeling like they had just one easy way to grow: by borrowing heaps of cash to buy competitors. The resulting acquisition binge left an unprecedented number of major corporations just a rung or two from junk credit ratings, bringing them closer to a designation that historically has made it much more expensive to fund daily business and harder to navigate economic downturns.

In fact, a lot of these companies might be rated junk already if not for leniency from credit raters. To avoid tipping over the edge now, they will have to deliver on lofty promises to cut costs and pay down borrowings quickly, before the easy money ends.”

Chuck Again… Well… this should scare your boots off you in a heart beat… Check out this little ditty: BBB segment of the investment grade bond market…about 3 trillion of bonds that are… susceptible to being downgraded to junk. That happens to be the same size as subprime loans at their peak in 2007…

And so, I’ll ask this question that always seems appropriate…. Got Gold?

Currencies today 11/26/2018: American Style: A$.7260, kiwi .6802, C$.7570, euro 1.1365, sterling 1.2850, Swiss $1.0031, European Style: rand 13.8210, krone 8.5568, SEK 9.0567, forint 284.05, zloty 3.7748, koruna 22.7993, RUB 66.20, yen 113.22, sing 1.3728, HKD 7.8239, INR 70.61, China 6.9472, peso 20.43, BRL 3.8198, Dollar Index 96.77, Oil $60.01, 10-year 3.06%, Silver $14.38, Platinum $850.00, Platinum $1,141.00 and Gold… $1,226.00

That’s it for today…  I was asked to do another interview for Dennis Miller’s Milleronthemoney newsletter, that will appear the first week of December, so If you don’t want to miss that, sign up early! Simply go to: www.milleronthemoney.com   Man, our Blues are in a rut, and don’t seem to be able to skate out of it… UGH!  My Mizzou Tigers ended up 8-4, and with a little luck of the Irish, we could have been 10-2…  College Basketball, doesn’t hold my attention like it used to. It’ll come back when the tournament begins though…  The family got together to get our Christmas trees yesterday… As usual we got a very pretty one…  Jack Johnson takes us to the finish line today with his song: Drink The Water… And with that, it’s time to go… I hope you have a Marvelous Monday, and be sure to Be Good To Yourself! 

Chuck Butler

 

Powell Does His Best Alfred E. Neuman…

November 15, 2018

* Currencies rally, thanks to Chuck… HAHAHAHAHA

* The Bloom is off the real’s rose… 

Good Day… And a Tub Thumpin’ Thursday to you! I’m very excited to say that I will be able to join in on any Tub Thumpin’ that comes my way today! YAHOO! Another beautiful day here… I was supposed to be here for November last year too, but the day before we were to leave, I woke up with that nasty infection that had gathered around my prosthesis, that eventually led to surgery to get the infection out, and zip me back up and send me on my way! So, I’m glad that I got to head south this year for November, my least fave month! Van Morrison greets me this morning with his hit song: Moondance Can I just have one more Moondance with you, my love?

Well, I’m going to take credit for the rally in the currencies & metals yesterday… You see, yesterday I was banging on Traders for not selling dollars on the fact that the U.S. Fiscal Budget was in the hole by $100.5 Billion to start its fiscal year! And I’m sure traders read the Pfennig, no wait, I’m positive they read the pfennig, and did the old V-8 head slap and say, by Joe, he’s right! Let’s sell dollars today and show him we do know what we’re doing! HA! As if, right? Oh well, the news from the currencies and metals at the end of the day yesterday, had the euro at 1.1325, and Gold up $8.50!

Yesterday, I asked Alexa to play some smooth jazz for me, and soon I was bopping along in my chair… I love smooth jazz on the Amazon music station. It’s just stuff you don’t hear all the time, and that gets me thinking… I find that my mind goes racing from one topic to the other while listening to this station… And yesterday, my mind kept going back to this phenomenon that we keep seeing with the dollar getting sold, most days, during the U.S. session, and then getting bought in the overnight session… When I first noticed this weeks ago, I thought for sure it was the European Central Bank (ECB) intervening in weaker volume markets that then carries more movement, thus giving them more bang for the buck. I thought that the ECB was doing this to keep the euro in check, but then as it kept happening, I thought it was a case of dolt foreign investors… But then investors can’t be that idiotic can they? Well, whatever it may be, it happened again last night, and that 1.1365 that the euro held going into the overnight session, was reduced to 1.1290, as I turned on the currency screen this morning. 

Gold is still holding its gains yesterday, and is actually adding to them in the early morning trading…  The Boys in the band haven’t arrived at their desks yet, so let’s just take Gold’s gains this morning with just a grain of salt, and hope the shiny metal can hold onto its gains. 

Getting back to the U.S.’s awful kick start to the fiscal year, after we were told the tax reform would be neutral, and it turned out to be NOT neutral in any sense of the imagination, I thought I would see what other analysts are thinking… 

I thought the following question that was asked by publishing guru, Bill Bonner in his letter yesterday was a pretty good one… here’s Bill: “Here’s a question: How come… in a booming economy… the feds are increasing spending more than twice as fast as revenue? Why do they have to borrow at all? And if they can’t balance the budget when times are flush, when can they?

I’m  thinking that that’s enough on the deficit thing, I don’t want to be accused of beating a dead horse! (No animals were hurt here!) But… my final thought on this is… As Gomer Pyle used to say… Shame, shame, shame…

I noticed yesterday after hitting the send button on my letter that I’ve been quite the heavy thinker these past few days, and I vowed to not be that way today… Wait! What? I agreed to do what? No way! No, backing out now, Chuck, you agreed… So, keep it light or else! 

OK… in the U.K. this week, PM May, introduced her Brexit plan… And well, it was met with tons of disappointment, and now the Brexit secretary resigned and this whole process that took two years to finalize, is a flub… And pound sterling is paying the cost for this mess… The pound got whacked and whacked good and it doesn’t look like the selling is over just yet for the pound.  I told you many moons ago, that this currency seemed to be overpriced, given the potential problems of the Brexit negotiations, and looky there, it all played out like I said we should be wary of…  Hmmm… 

Yesterday I made a quick comment in the currency roundup that the Brazilian real had seen the bloom disappear from the rose, as it seems daily now that the real moves downward. I told you to be careful here… And that’s when things were going the real’s way every day… I’ve seen these currency rallies on a political basis through the years, and they have all done the same thing… Rally during the campaign process, and then after the election the currency gets sold, because… well… now the person that got elected has to get all their reforms that they got elected on, implemented, and the realization sets in that all that stuff can’t be done immediately… It will take time… And well, currency traders don’t have time to wait…  So, the proven medicine for Political based rallies holds true here… Aren’t you glad you use dial, don’t you wish everyone did? Wait! Aren’t you glad you listened to me and remained careful here? 

The Aussie and New Zealand dollars, respectively, are back on the rally tracks after being derailed about 10 days ago… China appears to be dealing with the slowdown caused by the Trade War, and that will go a long way toward giving these two currencies room to stretch their legs…  I have a long lost friend, Jay, that’s 6’8″, and whenever I think of stretching legs, I think of him unfolding those tree like legs in a car or on a plane…  Two of my good friends, Rick and Kevin or 6’4′ and 6’3″ respectively, so I’m always looking up to talk to them! 

The Saudis announced that they will seek additional production cuts, and that news halted the daily downward slide in the price of Oil in the last 24 hours…  But how long will that last? The Saudis had better act fast, or the downward pressure to the price of Oil will return. 

As I said above, Gold gained a little more than $8 yesterday, and was up again in the early morning trading today, but my last look, I saw that those early gains had been wiped out… UGH!… I love Ed Steer’s name for the boys in the band selling of paper Gold… he calls it “salami slicing”… Well, let’s hope the salami slicers stick to baloney today! HA!

The U.S. Data Cupboard had the stupid CPI for us yesterday, and by all accounts it remains muted at best… But we all know that’s a bunch of malarkey!  We also had Fed Chairman Powell, speaking, and well, he’s ready to hike rates again in December… Powell said the U.S. economy is strong, while warning that there may be some headwinds next year. With latest data showing that inflation in the economy remains muted, Powell said nothing to change market expectations for another hike in December. So, Powell, was doing his best imitation of: Alfred E. Neuman… I find this to be so strange… But then I’ve talked about the need for speed, I mean the need for higher rates so they can be cut in the next recession, so many times it shouldn’t be so strange… should it? No! you dolt, Chuck! 

Today’s Data Cupboard has Rocktober Retail Sales, and while I don’t believe they’ll be as awful as Septembers negative -0.1%,  the Butler Household Index (BHI) indicates it will be better, but still not the stuff that “strong economies”, such as the one Powell talked about yesterday, should offer…  I’m just saying… 

To recap… The currencies and metals were firmly on the rally tracks yesterday, all day, but then came the overnight markets to wipe those gains out once again… Chuck is still trying to figure out this phenomenon…  Pound sterling is getting whacked after the Brexit plan that PM May introduced was not met with enthusiasm. And the bloom is off the rose with regards to the Brazilian real…  Aren’t you glad you use Dial? HA!

For What It’s Worth…  After all the heaving reading this week, I thought I would have some fun with the FWIW today, and this article does just that, as it describes paying people to move to Tulsa, and it can be found here: https://www.marketwatch.com/story/this-us-city-is-paying-people-more-than-10000-just-to-move-there-2018-11-14

Or, here’s your snippet: “Tulsa, Okla. is offering remote workers $10,000 to move there. The city is joining the ranks of other locations in the U.S. including Vermont and Maine advertising incentives to workers for relocating.

Tulsa claims it is “the ideal city” for remote workers due to its array of museums, low cost of living, and food and drink scene.

“Tulsa is gaining international recognition for the use of modern technology to better serve citizens, and one of the areas where we see great opportunity is as a home for remote workers,” Tulsa Mayor G.T. Bynum said.

One catch: You have to stay in Tulsa for a full year to cash the complete prize. “

Chuck again… Many, many moons ago, when I was a young man in the brokerage back office, I would be sent to the different cities to act as the back office leader when the local person went on vacation. I spent a week in Tulsa once… And while I’m not here to knock anyone’s city, I will say that if things didn’t change over time, I understand why they need to pay people to move there…  HA! 

Currencies today 11/15/18… American Style: A$.7270, kiwi .6815, C$ .7560, euro 1.1313, sterling 1.2801, Swiss $1.0056, European Style: rand 14.2580, krone 8.4990, SEK 9.0785, forint 284.59, zloty 3.7921, koruna 22.9660, RUB 67.54, yen 113.45, sing 1.3773, HKD 7.8316, INR 71.74, China 6.9490, peso 20.38, BRL 3.7945, Dollar Index 97.17, Oil $55.93, 10-year 3.10%, Silver $14.11, Platinum $832.94, Palladium $1,133.05, and Gold…$1,210.68

That’s it for today… And this week!  Man can you believe that next Thursday will be Thanksgiving? Where do the days go?  And that brings me to something I need to talk to you about…  I was going to be able to write to you on Monday only next week… But since it’s just one day, I’m thinking of taking a mini-vacation and be back after the Thanksgiving weekend…  So, don’t be looking for a Pfennig next week…  If something happens that’s worthy, I’ll Tweet it out! I hope that anyone that’s traveling for Thanksgiving will do so safely, and I also hope that everyone has a wonderful and blessed Thanksgiving with their family, friends, whatever the mix, we should all be thankful for what we have…  I’m thankful for my family, my health (whatever it is), my friends, you dear Pfennig Readers, and my beautiful bride…  Make sure you take a minute next week, and list the things you are thankful for…  Steely Dan takes us to the finish line today with their song: Kid Charlemagne…  Is there gas in the car? Yes, there’s gas in the car…  I hope you have a Tub Thumpin’ Thursday today, and a Fantastico Friday tomorrow, and then a truly blessed Thanksgiving next week… And Be Good To Yourself!

Chuck Butler

 

 

 

The U.S. Kick Starts Its Fiscal Year Off With A $100.5 Billion Deficit!

November 14, 2018

 

Good Day… And a Wonderful Wednesday to you! Yesterday, was simply beautiful here in S. Florida, where a cold front is coming through today, and dropping the daily highs to 78 degrees.. Still much warmer than back home, where they are expecting more snow tomorrow! I had a visit yesterday from one of my fave people in the world… Walt.. Such a great friend! We talked for hours, regarding just about everything under the sun and moon! And then to top off the day, I received an email from another fave person, my old boss, Frank Trotter! I would have to say that it was a good day for me! The Atlanta Rhythm Section greets me this morning with their song: Imaginary Lover…

Yesterday, I really lost my temper writing the Pfennig, talking about debt in this country, and on a lessor note the world. For, when I was a young man, my dad told me that the rest of the world could go to hell in hand basket, but the U.S.A. would still be here… And I believed him.. until the last 10 years when we began to accumulate huge amounts of debt. With no willingness to pay the debts off! 

I came across an old quote from Big Al Greenspan from his essay titled: Gold & Economic Freedom, dated 1966… So, this of course was written while the world, including the U.S., was under the old Gold standard, better known as the Bretton Woods Agreement. As many of you know, Big Al, before he was brainwashed by the dark side and became the Fed Chairman, AKA The Maestro, was a Gold Bug… He learned at the side of the great Ayn Rand… But in 1966, there were calls from dolts (I call them) that wanted to end the Bretton Woods Agreement, and this is Al Greenspan’s response for them…

“This is the shabby secret of the Welfare Statists’ tirades against Gold. Deficit Spending is simply a scheme for the confiscation of wealth… Gold stands in the way of this insidious process. It stands as a protector of property rights. If one can grasp this, one has no difficulty in understanding the statists’ antagonism toward the Gold Standard”… – Alan Greenspan from Gold & Economic Freedom 1966

Well, we all know that Richard Nixon removed the dollar from the Gold Standard in August 1971, and ever since then, the U.S. has gone hog wild in deficit spending, and creating the Welfare state that Greenspan talked about in 1966.

It’s important to remember this part of what he said though… “Deficit spending is simply a scheme for the confiscation of wealth”…  And then remember that Gold, is a store of wealth… I’m just saying… 

 

 

And to that tune… My old boss, and good friend of many years, Frank Trotter, sent me a note last night that he pulled from Bloomberg… Ready? OK, get a load of this… “The United States reported a $100.5 billion budget deficit in October, the start of the U.S. fiscal year, representing a hike of about 60 percent from the year-earlier period, as spending grew about twice as fast as revenue. Receipts hit $252.7 billion in October, a 7 percent rise from October 2017, while outlays jumped 18 percent to $353.2 billion.” – Bloomberg

OK… a point I want to make here is that when the Tax Reform was passed, I told you that it was not for you and me, but more for Corporations, which in theory would be good if Corporations would use the tax savings to improve their plants, buy new equipment, Capital expenditures… But unfortunately, I pointed out that in my humple opinion, Corporations would use the tax savings to buy back more of their respective company’s stock…

And so I was right… The Deficit spending is far outweighing any gains by the tax reform act, and this $100.5 Billion deficit in Rocktober is the first month of the new fiscal year! Annualized we would be looking at $1.2 Trillion in deficit spending… But that’s the good news, if there is such a thing here, because I believe each month will be worse, and therefore the annual deficit will be more than $1.2 Trillion… UGH!

The dollar bugs retreated on the news of this large first month of the fiscal year, deficit. The euro climbed back above 1.13, and Gold gained about $4 on the day. That was far better results than what we had seen since Friday… But in my opinion, it should have been a massaquer on the dollar…  But those rallies were short-lived, as once again, we saw the currencies and metals get taken down in the overnight markets… Somebody out there, folks, wants the dollar to be stronger right now than it should be… 

This deficit spending has gotten out of control once again, and as I was telling my good friend, Walt, yesterday, the next recession in my opinion will make 2008 look like chump change, because of the amount of debt that has been taken on by not only Governments, but the states, Corporations, and Consumers, The Too Big To Fail Banks growing even larger, the amount of derivatives being more in number and size than in 2008, the amount of leveraged Corp loans, and the fact that years of zero interest rates, and easy credit being reined in will be too much for the economy to take, and well… this is where you have to put away the sharp objects to read further…

OK, everything safe now? I believe the economy will collapse in the next recession, which will then be called a Great Depression… The Fed has kicked the recession can down the road, and down the road, and down the road, until… it won’t be able to kick it anymore… And that’s when the chickens come home to roost, the cheese binds, and we find out the true value of physical Gold…

My mother used to have a saying… “You made your bed, now lay in it”… We allowed the Gov’t to go on this deficit spending spree years ago, and well, now we’ll have to lay in it!

I still think that this could be averted somewhat by a complete repricing of Gold… If you repriced Gold to, say, $10,000 an ounce, and maintain that price going forward, the deficits would be forgotten about, and physical Gold holders could pay down debts with their newly repriced Gold… But is that going to happen? I doubt it very much… But it is a way to keep things from collapsing… And I’m not saying that just because I own physical Gold… So, think about that, and then send your representative a note and tell them this is your idea to deal with debts… And then get set to laugh your know what off when you receive a response… The boys and girls in Washington D.C. have no idea how to deal with this debt, so they just continue to add to it, and hope it doesn’t collapse under their watch! 

In the Eurozone this morning, Industrial production for September printed, and was not good, falling -0.3%, VS the 1.0% gain in August. The Year-on-year IP was still positive at -.9%, but I think we have to really pay attention to this one month downward move, and think about the Trade War’s affects on the world of Industrial Production.  The Eurozone also printed their first run at 3rd QTR GDP, which was 1.7%, matching the 2nd QTR’s output of 1.7%… So, no slippage here, but… the majority of the Quarter took place before the Trade Wars began… 

The U.S. Data Cupboard doesn’t have much for us today other than the stupid CPI (consumer inflation) for Rocktober…  In the previous two months to Rocktober, this data had shown some slippage, which it was due to experience because of the Fed Rate hikes… I’ll say this again, just to drive home the point… You don’t hike rates to induce inflation into your economy! You hike rates to eliminate inflation from your economy!  The Fed have been hiking rates all while telling us they wanted inflation to grow…  I shake my head in disbelief that these guys really thought they could pull the wool over our eyes…  

For we all know good and well, why the Fed has been hiking rates… They need higher rates going into the next recession, so they can cut them in an attempt to cut the recession short… We went through the math of this yesterday, so in case you missed class that day, go to www.dailypfennig.com and read it there! 

Will the last trader to leave the Oil trade turn out the lights? There’s been a mass exodus from the Oil trade since last Friday… President Trump called out the Saudis and slam, bammed the production cuts, and that started all this Oil price debacle…  This morning the Price of Oil is trading with a $55 handle…  That’s $20 from its recent peak… 

And Gold eked out a small gain yesterday, but has given it all back already in the early morning trading this morning…  I’m at a loss for words, to describe my feelings toward this recent price action of Gold…  Ed Steer calls the short Gold paper trades as “Salami Slicing”, and that’s a good description of what’s going on… 

To Recap…  The currencies and metals rally on the news that the U.S. kick-started its fiscal year, with a $100.5 Billion deficit… But those rallies were short-lived and the traders in the overnight markets took profits. Chuck believes there’s somebody out there that feels the need to have a stronger dollar right now…  Chuck tells us about a something that Big Al Greenspan said in 1966, and the price of Oil continues to slide downward… 

For What It’s Worth…  Remember Rolling Stone’s Matt Taibbi? He of the famous quote calling Goldman Sachs, the “vampire squid”?  Well, according to this article the folks in Malaysia are probably thinking the same thing. So here you go, this article can be found here: https://www.zerohedge.com/news/2018-11-13/malaysian-prime-minister-obviously-we-have-been-cheated-goldman-sachs

Or, here’s your snippet: “Goldman Sachs famously avoided liability after the Libyan Investment Authority accused the bank of squandering more than $1.5 billion belonging to the country’s sovereign wealth fund after the bank plied employees of the fund with “hookers and five-star hotels” before losing all of their money in complex derivatives trades. But as the DOJ ramps up an investigation into the bank’s role in the sprawling 1MDB scandal (the federal government believes Goldman helped now-jailed former Malaysian Prime Minister Najib Razak siphon $4.5 billion from the fund), it’s looking like the bank (and possibly its ex-CEO Lloyd Blankfein, whose involvement in the scandal was recently revealed by Bloomberg) may not escape culpability this time.

Yesterday, Goldman shares cemented their largest two-day drop since 2010, crashing to a two-year low after Malaysian Finance Minister Lim Guan Eng demanded a “full refund” of the $600 million in fees that Goldman charged Malaysia for the three 1MDB bond offerings underwritten by the bank. Eng also demanded that Goldman repay the “interest-rate differential” that Malaysia paid, which was 100 basis points over the benchmark rate. Goldman has argued that it demanded such high fees because it took many of the unrated bonds on to its balance sheet, increasing its exposure, because Malaysia said it wanted the money “right away” for “development projects”. Of course, Goldman had sold the local currency bonds long before 1MDB defaulted in April 2016.

And on Tuesday, Malaysia turned up the heat when the country’s 93-year-old Prime Minister Mahathir Mohamad accused Goldman bankers during an interview with CNBC of “cheating” Malaysia (though he also said the country wanted to “see the results” of the DOJ’s investigation).

“There is evidence that Goldman Sachs has done things that are wrong,” Mahathir said.”

Chuck Again…  Yes, it’s always someone else’s fault, right? But when the blame finger keeps pointing at the same entity, there’s something to that, right? I’m just saying… 

Currencies today 11/1418…American Style: A$.7193, kiwi .6775, C$ .7550, euro 1.1265, sterling 1.2904, Swiss $1.0099, European Style: rand 14.4015, krone 8.5305, SEK 9.1205, forint 286.59, zloty 3.8135, koruna 23.0680, RUB 67.81, yen 113.90, sing 1.3817, HKD 7.8327, INR 72.11, China 6.9546, peso 20.50, BRL 3.7812 (it sure appears that the bloom is off the rose here with the real, eh?) Dollar Index 97.36, Oil $55.76, 10-year 3.13%, Silver $13.76, Platinum $833.65, Palladium $1,107.29, and Gold… $1,199.95

That’s it for today…  Well, I guess today’s Pfennig was more than you bargained for, eh? I love the fact that I can express my opinions, without having to be stopped at the border… Did I make you think this morning? I sure hope so… If not… Maybe you should go back and reread it? HA!  Well, this is my weekly plead to my beloved Cardinals to sign Bryce Harper… Please?  Triumph takes us to the finish line today with their song: Fight The Good Fight.  That’s what I’ve always done in the Pfennig… I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

Chuck Butler

 

 

The World Is Drowning In Debt…

November 13, 2018

* Currencies & metals continue to get sold

* Oil’s rally is short-lived! 

Good Day… And a Tom Terrific Tuesday to you! I was remiss yesterday in not mentioning that our Blues had gotten their hats handed to them by the Wild on Sunday… I was not following that game, so it took a dear reader to bring that to my attention… Tomorrow night they play the Blackhawks, a HUGE rival, so they have an opportunity to get back on their skates! Go Blues! Things were moving along nicely here, but then ground to a complete stop… Come on guys! I need to get this project completed! The creator of Spider Man, Stan Lee, died yesterday, my he rest in peace. And The great Otis Redding greets me this morning with his song: I’ve Been Loving You… This was a live recording from the famous Whiskey A G0-Go… I met up with a bond trader from New Zealand at the Whiskey A Go-Go years ago, and while I waited for him to show, I kept thinking of Otis Redding singing his songs there…

OK… Yesterday, I told you that the political fears from the Eurozone and the U.K. had put the currencies on a spiral spin downward since Friday. And yesterday, the spiral didn’t stop, and the currencies moved further downward. Like I mentioned yesterday, I find this interesting that the traders are being myopic with these fears, and not looking at the U.S. political situation and not see the potential for nothing but gridlock for the next two years. I remember in 2007, the best marketing person I had ever seen, David Galland, wrote that “if you thought the previous administration were spend thrifts, you haven’t seen anything yet when the new group gets into office”… Boy was he correct… but then most of you longtime readers know how much debt was added the next 8 years, because, I told you!

I bring this up because the world is drowning in debt, and not just countries, but the people that make up those countries are too in debt up to their eyeballs. Last week, I talked about how a year ago we were talking about a Tent Revival for Global growth, and now that has faded, quickly… Here’s David Rosenberg’s take on this crashing of Global Growth from his Twitter page…

“OECD leading indicator fell in September for the 10th straight month. The YoY rate started the year at +0.45%; now stands at -0.82%.”

In case you’ve forgotten… The OECD stands for the Organization for Economic Cooperation & Development. They work Globally with countries to promote growth, and they issue this Leading Indicator of Global Growth, that’s discussed above.

I received an email from a dear reader who asked me, “why are the Fed insisting that interest rates need to go higher, when, as you’ve pointed out the slow down of the economy has already begun?”

Instead of just answering him directly, I thought it best that everyone know this… The Fed has been hell bent and whiskey bound to hike rates, so that they have enough rate to cut when the recession begins… In the past, the Fed has cut interest rates on average around 4% during recessions… And the average rate going into a recession was 6.5%… The Fed is currently at 2.25%, they are going to have to aggressively step up the pace of their rate hikes, or they’ll meet up with the next recession, and won’t have 4% of rate to cut… Which means… They’ll have to implement another round of QE… Or even worse, introduce negative deposit rates here in the U.S.

So, that’s why the Fed hasn’t paid attention to the rot on housings vine, the increase of debt by consumers, the stock market bubble, or the weaker by the print of data reports, and instead continue to hike rates…

I’m not trying to deflect the problems for the currencies and metals folks, I’m just pointing out that it’s not a sunshine, lollipops and rainbows for the U.S. economy and the Fed… And so, I continue to wonder why none of this is entering into traders collective minds right now…  And here’s another thing that traders should be looking at as potential problems for the dollar… 

We have the different payment systems around the world that are dealing the dollar a blow, as the use of the dollar by foreign banks dwindles… The different payment systems, there’s one in Europe, (SEPA), one in China (CIPS) and one in Russia (MIR) have all been created to eliminate 1. The dollar, as a reserve currency and 2. The power of the U.S. to administer sanctions through SWIFT.

Speaking of SWIFT… In December 2015, the U.S. controlled 43.89% of transactions through SWIFT, and the Eurozone had 29.39%… Just two years later, in December 2017, the euro had cut into the dollar’s control of SWIFT… The U.S. was at 39.85%, and the Eurozone was at 35.66%…

Here’s a clip from the Financial Times… “One consequence of the America First policies of US President Donald Trump will be to create a bipolar financial world, with China at one end and the US at the other. That will mean smaller financial flows between the two, and a much more robust effort from Beijing to eventually challenge the dollar’s status as the world’s reserve currency. That, in turn, potentially has implications for everything from the status of US Treasury securities as the safest assets in the world to how oil is priced.

“The Trump administration’s “America First” policy will encourage a long-term move away from the US dollar,” according to Christopher Wood of CLSA, the arm of Beijing-based Citic Securities, pointing to “the growing American practice of using the dollar as a weapon via the implementation of sanctions and the like.”

Chuck again… These things scare me folks… about 8 years ago, the Chinese issued a statement saying that they no longer had the need to accumulate dollars in reserve… And they’ve been true to their word, with their lower and lower amounts of Treasury holdings… They haven’t gone “all-in” like Russia did with their Treasury holdings, and I don’t expect China to even undertake thinking about doing that, but choose instead to do it stealth-like, and hope that it goes unnoticed… But, I see it, and when I see things I write about them, and hopefully you read them and think about what this all means for the dollar, as the reserve currency of the world.

So, as you can see, there are plenty of problems out there that traders could be very worried about with regards to the dollar, but… Right now, they choose not to worry about that right now… Reminds me of Alfred E. Neuman… “What me worry?”  Ok, youngsters, you’ll have no idea who I’m talking about here, so Google his name or Mad Magazine… 

OK, so the currencies got whacked again yesterday, what about Gold? Well, it didn’t fare much better, losing $9.50 on the day, and falling below $1,200… I’m shaking my head in disbelief right now as my fat fingers fly across the keyboard… Physical demand for Gold is strong, but the shiny metal’s price direction is controlled by the short Gold paper trades…  UGH!

Well, Sears announced more store closings last week… It’s not been a good year for brick and mortar stores here in the U.S., but just when you thing we’ve got it bad… Someone else has it worse! Thanks to Dear Reader Bob, for sending this to me, but the U.K. has seen far worse numbers from their Retail Sector… A net 1,123 stores disappeared from Britain’s top 500 high streets in the first six months of the year, according to the accountancy firm PwC.

That’s an average of 14 stores a day… OMG!

And where has all that rhetoric from Bank of England (BOE) Gov. Mark Carney, about hiking rates gone? Long time passing… where have all the flowers gone, so long ago?

Russia continues to dedollarize… They are taking strides to eliminate the use of dollars… And I don’t know if you’ve noticed this or not… But after decades of mistrust between China and Russia, they sure seem to be snugging up these days, don’t they? Look… we as a country have ticked off both those major players in the world, with sanctions and tariffs, so it makes sense to me that they buddy-up. China has long said that the “dollar standard should end”… They began this dedollarization years ago, with their FX Swap Agreements with countries they did trade with, that essentially removed the dollar from the terms of transaction when they traded with each other.

The amount of dollars held in reserve around the world has fallen and has been falling for the last couple of years, but I would think that the tallies at the end of this year will show a HUGE drop… And that’s just the beginning folks… just the beginning…

The Price of Oil saw a brief rally yesterday after the Saudis announced production cuts, but that didn’t last too long, and President Trump, was once again pushing the Saudis for cheaper gas, and well, that’s what we have this morning, as the price of Oil is trading with a $58 handle! 

The U.S. Data Cupboard is pretty light on data prints the first part of this week, but tomorrow we begin with the Data Cupboard yielding a plethora of data, starting with Retail Sales for Rocktober… We’ll talk more about these reports tomorrow, just know that for today, there’s not much other than the Federal Budget Deficit that will print…

There will be 3 different Fed Heads speaking today, so we’ll see more singing from different song sheets by the Fed Heads… There was a time when this, going in different directions, would cause great pain for the dollar… But that’s when fundamentals ruled…

To Recap…  The dollar bugs continue to buy dollars, and sell currencies and metals, and traders say its because of the political problems in the Eurozone and U.K.  I say hogwash, those problems don’t amount to a hill of beans compared to the stuff that’s hanging over the dollar like the Sword of Damocles!  And I spend the rest of the morning pointing out these problems for the dollar! 

For What It’s Worth…  I mentioned the economic sanctions on Russia above and this was in Ed Steer’s letter today, so I thought, what the hey, why not use it for my FWIW… it’s about Germany calling an end to those sanctions and can be found here: http://theduran.com/german-bundestag-mp-petr-bystron-calls-for-an-end-to-sanctions-against-russia/?

Or, here’s your snippet: “Dear Mr. Bystron, recently we have met at the International Conference on the Development of Parliamentarism in Moscow recently. In front of representatives of Parliaments from all around the world, international experts and journalists you held a well-received speech, calling for an end to sanctions against Russia. Why?

I demanded an end to sanctions because they have not achieved anything except harming German business. There’s no point to maintaining these useless sanctions any longer.

The Russian-German relations are very complex. On the political agenda, they are burdened with the sanctions which the E.U. countries imposed to Russia, but on the other hand, Germany and Russia cooperate on a strategic project such as North Stream 2. How do you see the prospect of developing further relations between your country and Russia, and also how the United States relations towards the possibility of greater convergence between Germany and Russia?

North Stream 2 is just one example of this.
But it’s no secret there is a lot of pressure from the United States to stop this project. There was a bipartisan initiative in the U.S. Senate in March supported by 39 Senators, urging the government to do everything it can it stop the pipeline.

Chuck Again…  I’ve long said that these sanctions have gone on long enough, and the idea that Europe may drop them will go a long way toward more trade between the Eurozone and Russia… 

Currencies today 11/13/18.. American Style: A$.7198, kiwi .6747, C$ .7555, euro 1.1250, sterling 1.2923, Swiss $1.010, European Style: rand 14.43345, krone 8.4939, SEK 9.0906, forint 286.71, zloty 3.8215, koruna 23.0623, RUB 67.66, yen 114.00, sing 1.3817, HKD 7.8292, INR 72.48, China 6.9595, peso 20.39, BRL 3.7429, Dollar Index 97.44, Oil $58.70, 10-year 3.17%, Silver $14.02, Platinum $844.48, Palladium $1,106.30, and Gold… $1,198.17

That’s it for today… I heard about more cold weather back home yesterday…  I’m just so glad I’m not there! Things here are pretty quiet, as the “yankees” haven’t begun to move back to the south for the winter just yet…  I’ve gotten past that bad stomach I had late last week, and have been feeling pretty good the past couple of days. Consuming rice and toast for a couple of days, usually does the trick for me, and this time was no different. Customer service in this country sinks… That’s all I’m going to say about that! My mom used to say that something “stinks to high heaven”…  That’s what customer service has come to being, folks…  Pink Floyd takes us to the finish line today with their song: Us And Them… I hope you have a Tom Terrific Tuesday, and continue to Be Good To Yourself! 

Chuck Butler

Currencies & Metals Get Whacked On Friday!

November 12, 2018

* Overseas Political Problems Weigh On Currencies

* Chuck thanks a Veteran… 

Good Day… And a Marvelous Monday to you! This is going to be very short today. The reason? Well, Yesterday was Veterans Day, and that makes today a holiday. If I was still at the bank, I would be sleeping right now for the bank would be on holiday. But, with yesterday being Veterans Day. I thought a tribute to them would be more fitting for today’s Pfennig. These are men and woman that have fought battles for our country. I feel bad this year, in that, normally on Veterans Day, I visit my dad’s grave to place a new flag on it. He was a WWII veteran. But I’m not at home, so I guess that will have to wait until I return… I saw a TV commercial the other day, that featured the song that greets me this morning… Faces, doing their song Ooh, La, la…  I wish that I knew what I know now… When I was younger… 

Well, do a quick drive by on the currencies, and then head to the tribute… On Friday, the support the currencies were using was pulled out from under them. Suddenly, the markets believe there is too many problems with politics of the Eurozone (Italy the main problem) and the U.K. (Brexit negotiations), and the hammer brought down on the euro first, then the pound, and all the other currencies, was a heavy blow… The euro is down nearly 2-cents, and the strong moves last week by the Aussie and kiwi dollars is a distant sight in the rear view mirror… 

I find this interesting in that the political problems that will arise from last week’s U.S. election, hasn’t even registered with traders, they’re quite myopic these days…  Gold got whacked $14 on Friday, and is down a couple of bucks in the early trading today… The only anti-dollar asset rallying is the price of Oil, as the Saudis signaled that the OPEC members had agreed on production cuts, as we discussed last week. 

OK… here goes…  

When you see someone in a uniform,
Someone who serves us all,
Doing military duty,
Answering their country’s call,
Take a moment to thank them
For protecting what you hold dear;
Tell them you are proud of them;
Make it very clear.
Just tap them on the shoulder,
Give a smile, and say,
“Thanks for what you’re doing
To keep us safe in the USA!”
~By Joanna Fuchs

There are many tributes to veterans that can be given, and all should be read or heard…  

Currencies today 11/12/18… American Style: A$ .7207, kiwi .6736, C$ .7576, euro 1.1268, sterling 1.2876, Swiss $1.0091, European Style: rand 14.3772, krone 8.4588, SEK 9.1220, forint 285.56, zloty 3.8128, koruna 23.0265, RUB 67.61, yen 113.90, sing 1.3815, HKD 7.8320, INR 72.78, China 6.9552, peso 20.26, BRL 3.7350, Dollar Index 97.41, Oil $60.53, 10-year 3.18%, Silver $14.13, Platinum $853.24, Palladium $1,107.55, and Gold… $1,207.60

that’s it for today… A good weekend for my teams… Our Blues won Friday night, and my beloved Missouri Tigers won on Saturday! I heard that back home in St. Louis, they received an inch or two of snow this past weekend, and that the temps had dropped into the 20’s… Man, am I a happy camper to be here and not there! I’m not alone down here now, as that person I’m not supposed to talk about joined me on Saturday night. I hope you celebrated Veterans Day…  Yesterday was also the birthday of the Marines! Semper Fi! to all you Marines!  Jackson Browne takes us to the finish line today with his song: These Days…  I hope you have a Marvelous Monday, and remember to Be Good To Yourself!

Chuck Butler

 

 

It’s A Fed FOMC Day!

November 8, 2018 

* Currencies see profit taking on the day… 

* RBNZ leaves their OCR unchanged, and Chuck is disappointed… 

Good day… And a Tub Thumpin’ Thursday to you! My stomach took a turn for the worse yesterday, so I doubt I’ll be doing any Tub Thumpin’ today, but please don’t let my problems keep you from Tub Thumpin’! The dust is still settling on the elections here in the U.S., I really went a bit too far with my statement yesterday, as I have made it a tradition in the Pfennig to not discuss politics at all… And while I just made a statement about the outcome, I probably shouldn’t have gone there… It doesn’t look like my beloved Cardinals are going to attempt to sign Bryce Harper, as his price tag is going to be north of $325 Million… And that’s going to keep the smaller market teams like my Cardinals from participating in the Bryce Harper sweepstakes… The late great Joe Cocker greets me this morning with his song from the movie soundtrack of 9 ½ Weeks… You Can Leave Your Hat On…

Well, there was some profit taking yesterday in the currencies, at least that’s what it looked like to me, as there were no stories on the wires about the king dollar, yadda, yadda, yadda… Instead, I keep finding stuff that the Fed Heads are saying that just leaves me baffled! They are wearing the rose colored glasses, for sure, as they keep giving us rosy forecasts about the economy and inflation… I think they’re full of baloney, but don’t just take my word on that… Here’s economist Danielle Di Martino Booth on her twitter page yesterday, “Goldilocks herself would blush at the near perfect jobs and inflation scenario forecasted by the central bank”

I wrote about their track record yesterday, and that will play nicely in the sandbox with their rosy outlook…

Speaking of the Fed… Their FOMC will meet this afternoon, and discuss rates… If the economy is so strong and robust and will continue that way for as long as the Fed thinks it will, why wouldn’t they hike rates today? Come on, Jerome, back up your words with a rate hike, I dare you… No, wait! I double dog dare you!  While, there’s a slim chance that the Fed could hike rates today, most observers believe they will wait until December… But, as I said, if the economy is as the Fed say it is, then it certainly warrants a rate hike this monrht, and then in December! 

But by doing that, the Fed would be sending out smoke signals that the markets would be taking as the Fed is panicking, and inflation is spiraling upward…  Oklahoma and Oklahoma State football teams play a game each year that’s called “Chaos”…  Well, that’s exactly what we would have if the Fed stepped up their rate hike game… 

In China yesterday, they reported their Tade Balance for Rocktober… And guess what happened to their blance with the U.S. given the Trade War going on? China’s Trade Surplus with the U.S. grew in Rocktober to $34.01 Billion from $31.70 Billion in September… How is that happening? I can hear the leaders in Washington D.C. asking… Well, for one… China has chopped a good chunk of fat from the renminbi’s value, so that the exports to the U.S. won’t be more expensive… The U.S. has put 20% tariffs on Chinese exports to the U.S. and the Chinese have depreciated the renminbi about 16%… So, basically, the exports to the U.S. are a wash… to the U.S. consumer that as… And that brings me to the other thing in play here… the U.S. Consumer… Their cash may be depleated, but not their credit card availability!

And in other news… The GATA folks sent me a note yesterday telling me that Iran and S. Korea agreed to a currency swap agreement, to exchange each other’s currencies in the terms of trade, and leave out dollars… This may be a baby step in regards to the size of dollars not being used going forward between these countries, but… We all know tha baby steps turn to big steps… And that would be the end of the dollar as the reserve currency… So, we’re here… and we’re going there… The difference between humor and trajedy is time… That’s also what’s in play here… Time… how much? I don’t know, but I don’t want to be the last one to turn out the lights on the dollar!

The price of Oil continues to slide downward and this morning its trading with a $61 handle… Our friends at OPEC (NOT!) have decided enough is enough, and the have called for a meeting this coming weekend to discuss production cutbacks… You may recall that last year, the OPEC countries cut production and the price of Oil rallied nicely, and eventually got to the $70 price the OPECKERS were looking for… So, they’ll go for round 2, most likely, this weekend… 

The Reserve Bank of New Zealand (RBNZ) left their OCR (official Cash Rate) unchanged at their meeting yesterday…  And left no indication, in their statement, that rates will be hiked any time soon…  I’m so disappointed in the RBNZ, they gave all kinds of indications last year about this time that they were ready to begin a new rate hike cycle, and then crickets…  

Well, it was good while it lasted…  I’m talking about the rally in the Brazilian real… But from the looks of the trading the last 3 days, I would have to think that the rally is over…  It was a nice rally, as the real rallied from a low of 4.17 on 9/15, to the 3.69 level last week… And if my new math works that’s about an 11% move…  But you will be able to see in the currency roundup that 3.69 is no longer…   Oh, and the real is a European Priced Currency, which means as the price goes down, it takes less of the currency to make a dollar, and therefore represents a rally… 

The Aussie and New Zealand dollars respectively, are back on the rally tracks… A couple of weeks ago, I told you to keep that news quiet, but someone cracked and the two had their rallies stopped at the border. But they’re back at it, and I find no reason to keep quiet about it, for there are just too many voices in the field of currencies these days… 

In 2004, Craig Karmin, of the Wall Street Journal came to St. Louis to interview me for an article in the WSJ. He called me a pioneer, for at that time I was the lone voice shouting about how the dollar was losing value and investors should be diversifying into currencies and metals. I was among the few, that talked about currencies… And today? Well, there’s more currency analysts out there than you can shake a stick at! 

Gold lost a whopping 40-cents yesterday, and the volume picked back up with 242,000 contracts traded. I’m waiting… and I’ll keep waiting… and waiting… for U.S. investors to realize that buying commodities will help to offset the damage that the rising inflation that the Fed is talking about  will do to their investment portfolios… 

The U.S. Data Cupboard is all about the FOMC meeting this afternoon…  Yesterday, the Cupboard has Consumer Credit (read debt) for September, and it was far less than expected, which was $20 Billion, and it only amounted to $11 Billion… That’s so strange, in my book, folks… And now I’m going to be fixated on how that data is comprised to see if “adjustments” are made… Because $11 Billion just doesn’t seem to be right in my estimation… 

For What It’s Worth… I told you last week that I truly enjoy reading anything I can get my hands on from James Grant. So, with that in mind, this is an article with James Grant talking about U.S. Debt that was on a free site! And it can be found here: https://www.weeklystandard.com/james-grant/congress-is-plenty-bipartisan-when-it-comes-to-ignoring-the-national-debt

Or, here’s your snippet: “America’s deteriorating public credit is the cold-button issue of the 2018 midterms. With rare bipartisanship, Democrats and Republicans compete to pretend that the country isn’t going broke. In 1992, the third-party presidential candidate Ross Perot likened the widening gap between federal receipts and federal spending to “the crazy aunt tucked away in the room upstairs nobody talks about.” The old gal’s dottier than ever.

It took the United States 193 years to accumulate its first trillion dollars of federal debt—the gross debt, as it’s called. We will add that much in the current fiscal year alone. All told, the government owes $21.5 trillion, give or take a few careless tens of billions—that works out to $65,885 for each American. It’s the ease of borrowing that drives the growth in federal IOUs.

The remote political cause of this predicament is the ideology of statism. In Washington, this takes the form of tax and tax, spend and spend, elect and elect; on Wall Street, it’s found in too-big-to-fail, a virtually socialized mortgage market, and an overreaching,
manipulative central bank.

The remote monetary cause of our troubles is the closing of the gold-standard era in 1971, or what little remained of it by then. It was the breakdown of the fixed monetary order that opened the floodgates. From Alexander Hamilton to Richard Nixon, the dollar was an IOU, a promise to pay gold or silver at a fixed rate. It subsequently became a thing unto itself, an IOU nothing. In consequence, for the past several decades, federal liabilities have grown faster than the national income with which to service them. Ultra-low interest rates have cheapened the cost of this profligacy and hidden the looming dangers.”


Chuck again… Now, James Grant is as concerned about the National Debt, as I am, and that says something, folks… Too bad the media, or the markets, don’t see it that way…

BTW… The U.S. spent $548 Billion in Rocktober to service its debt… (pay interest on bonds outstanding) That number is only going to go up because 1. Interest rates are rising, and 2. Debt issuance is exploding higher and higher… 

Currencies today 11/8/18… American Style: A$.7283, kiwi .6775, C$ .7632, euro 1.1415, sterling 1.3093, Swiss $1.0027, European Style: rand 13.9896, krone 8.3388, SEK 8.9832, forint 281.67, zloty 3.7605, koruna 22.6735, RUB 66.03, yen 113.75, sing 1.3715, HKD 7.8272, INR 72.13, China 6.9197, peso 19.89, BRL 3.7556, Dollar Index 96.26, Oil $61.76, 10-year 3.22%, Silver $14.47, Platinum $870.94, Palladium $1,124.46, and Gold… $1,222.73

That’s it for today… I had a good phone conversation with good friend Dennis Miller yesterday. He told me that he had just read that the U.S. is going to change the way they compute FICO scores… I immediately thought of all the other hedonic changes that the Gov’t has made through the years, when things just wouldn’t work the way the wanted them to… It’s a sad, sad, thing, folks…  Well, our Blues are back to .500, and at home for the next few games, so they need to put the pedal to the metal now! Let’s Go Blues! This makes two days in a row, but the band Yes takes us to the finish line today with their song: Long Distance Runaround…  I hope you can get out and do some Tub Thumpin’ on this Thursday, and remember to Be Good To Yourself!

Chuck Butler

Are The Election Results Hitting The dollar?

November 7, 2018

* Currencies rebound and climb throughout the night!

* What’s the Fed up to? 

Good Day… And a Wonderful Wednesday to you! Not as early today with the letter, as I allowed discretion be the better part of valor this morning, and turned off the alarm when it went off! Well, the mid-term Elections are in the books. I purposely watched something on TV last night that wouldn’t be interrupted by election returns… I can honestly say that I’m of the opinion these days, that it doesn’t matter what dolt you elect to represent your state, they aren’t going to do that once they get to Washington D.C. Kind of cynical, eh? Well, it’s just how I see it… And we can thank Woodrow Wilson for that! What? you don’t know? I’ll explain this later…  Oh, and Bill Bonner says it best when he wrote: The Bad thing about elections is that somebody wins!  The Allman Brothers greet me this morning with my fave Allman Brothers song: Melissa… 

The turnaround that the dollar was performing yesterday morning, faded as the day went on, and by the end of the day, the currencies were kicking sand in the dollar bugs’ collective faces. The currencies led by the Big Dog Euro, steadily climbed throughout the day, and then continued that climb in the overnight markets, where this morning the euro is firmly in the 1.14 handle, and the Aussie dollar is knocking on the door to 73-cents!  The Asian currencies has joined in, and even the Swedish krona is getting in on the kicking sand in the dollar’s face… 

Gold wasn’t allowed to participate in the kicking of sand yesterday, losing $4.10 on just 173,000 contracts traded, But… the shiny metal has recovered that loss yesterday already in the early morning trading today!  If Gold can at least maintain the early morning gain these two days would be a wash. Hopefully Gold can add to the early morning gains, eh? 

I took this from Ed Steer’s letter this morning which you can find at www.edsteergoldsilver.com and I thought it played well with the Gold move overnight… “European Gold demand was 51.1 tonnes during the third quarter of this year, up 10% year-on-year, according to the World Gold Council.

Germany, which accounts for more than half of the region’s bar and coin investment – was up 10% to 28.4 tonnes. In late September the euro-denominated gold price fell to a two-and-a-half year low of €32,638/kg.

Unlike the European-ETF market, concerns around Italian debt and its potential to spark a broader financial crisis, prompted safe-haven buying among retail investors.”

OK, back to the currencies, which is actually an incorrect statement, as I already was talking about the currencies with my discussion of Gold… I’m just saying…  But for reasons beyond my control, the markets continue to consider Gold a “precious metal”…  

I told you yesterday that the Eurozone would print September Retail Sales this morning, and they did, with Retail Sales climbing 0.8%, which beat the expectations of 0.7% growth. If you can beat expectations, you’re a leg up on the competition!  I also talked briefly yesterday about China’s Treasure Chest of reserves. Well, they printed their total reserves’ value at the end of Rocktober this morning, and it was $3.053 Trillion, which was down from the September print of $3.087 Trillion. The difference appears to me, to be nothing but currency fluctuations.  

It appears to me that the U.S. voters have voted in gridlock… And the advancements that have been made will fade away… I’m not talking politics here, just a general feeling that we’ll experience nothing but gridlock going forward, and that won’t be good for the economy, or the dollar… I’m just saying… 

More rot on housing’s vine got exposed yesterday, when the report on Mortgage applications for last week, printed.  Mortgage Applications fell 2.5% in the week, and reached the lowest level of applications that goes back to December 2014…  The Mortgage industry talking heads are blaming higher mortgage rates… No duh!  That and the fact that houses got too darn expensive once again, and first time buyers have been hit with higher mortgage rates and very expensive homes… That a recipe for disaster if you ask me! 

The U.S. Data Cupboard is still pretty barren, but it will have one print for us today, and that is September Consumer Credit (read debt)…  With other pieces of data that reflect spending, up, one has to believe that credit card use, and home refis, have to be soaring, and if so, it will be reflected in this data…  

A $20 Billion number or anything close to it is going to tell me that debt accumulation is strong among consumers again, and that’s not going to turn out to be seashells and balloons…  

My good friend, and the Retirementor, Dennis Miller, wrote an excellent piece for his readers last week and in it he asks the question. “Is The Fed Engineering A Market Crash?”  Hey lays out the facts and then  says, “Is the Fed trying to engineer a crash before the next election? I hope it is not true. If the deep state is willing to do that to maintain their power, God help us all.” – Dennis Miller

He also quote me in this letter, let’s see what I had to say… So, let’s look at the Fed’s track record, shall we? Did you know that in 105 years, the Fed has never accurately forecast a recession?
…. Or that the current running total is nine straight annual economic forecasts that they’ve had monumentally incorrect! -Chuck Butler in Dennis Miller’s letter: www.Milleronthemoney.com

I know I’ve said this before a couple of times, but I never grow tired of saying it… If you’re retired, or even thinking about retiring, you need to subscribe to Dennis’s letter. I know that a quite a few Pfennig Readers already have signed up, but I would like to see our readers lists mirror each other! Simply go to www.milleronthemoney.com  It’s free, just like the Pfennig! 

To recap… The currencies turned around the dollar’s rally yesterday, and have climbed higher throughout the overnight markets, led by the Big Dog Euro! Shoot Rudy! Even the Asian currencies are joining in on the kicking of sand in the dollar’s face. Gold was allowed to participate yesterday, but is playing catch up in the early morning trading, and Chuck thinks the elections have brought gridlock to the U.S. we shall see if he’s right, eh? 

For What It’s Worth… This is BIG NEWS folks, even if the media doesn’t choose to report on it… The GATA folks sent this to me of course, and it’s about a trader pleading guilty to currency manipulation, and it can be found here: https://www.justice.gov/opa/pr/former-precious-metals-trader-pleads-guilty-commodities-fraud-and-spoofing-conspiracy

Or, here’s your snippet… “An ex-J.P. Morgan Chase trader has admitted to manipulating the U.S. markets of an array of precious metals for about seven years — and he has implicated his supervisors at the bank.
John Edmonds, 36, pleaded guilty to one count of commodities fraud and one count each of conspiracy to commit wire fraud, price manipulation, and spoofing, according to a release today from the U.S. Department of Justice.

Edmonds spent 13 years at New York-based J.P. Morgan until leaving last year, according to his LinkedIn account.

As part of his plea, Edmonds said that from 2009 through 2015 he conspired with other J.P. Morgan traders to manipulate the prices of gold, silver, platinum, and palladium futures contracts on exchanges run by the CME Group. He and others routinely placed orders that were quickly canceled before the trades were executed, a price-distorting practice known as spoofing.

“For years John Edmonds engaged in a sophisticated scheme to manipulate the market for precious metals futures contracts for his own gain by placing orders that were never intended to be executed,” Assistant Attorney General Brian Benczkowski said in the release.”

Chuck again… The question I would have on this is HOW IN THE WORLD DID THE CFTC MISS THIS IN THEIR EXAMINATION ON MANIPULATION WHERE THEY SAID THEY COULDN’T FIND ANYTHING? 

Currencies today 11/7/18… American Style: A$ .7288, kiwi .6777, C$ .7646, euro 1.1478, sterling 1.3155, Swiss $1.0029, European Style: rand 13.9318, krone 8.2995, SEK 8.9892, forint 280.17, zloty 3.7380, koruna 22.6217, RUB 65.97, yen 113.18, sing 1.3693, HKD 7.8293, INR 72.29, China 6.9160, peso 19.67, BRL 3.7353, Dollar Index 95.80, Oil $62.90, 10-year 3.20%, Silver $14.67, Platinum $876.20, Palladium $1,124.51, and Gold… $1,231.89

That’s it for today…  Did you like the use of the term: discretion over the better part of valor? When I was a young man playing football, my teammates used to use that phrase a lot… College basketball is back! They’re getting started too soon in my opinion… College Football has everyone’s attention now, they should wait to start their basketball season until Thanksgiving… But nobody asked me…  Our Blues won last night at home to boot! Go Blues! A slow start by the Blues is getting turned around, slowly but surely… By the way, who’s Shirley? HAHAHA!  The band Yes, takes us to the finish line today with their song: Starship Trooper   I hope you have a Wonderful Wednesday, and keep Being Good To Yourself! 

Chuck Butler

 

 

Russia’s Alternative Payments System Is Gaining Users!

November 6, 2018

* Currencies battle back and forth with the dollar

* RBA meets tonight, no surprises expected… 

Good Day… And a Tom Terrific Tuesday to you! Another day in the warm sun, I’m a happy camper, trust me on that one! I despise November, St. louis, weather. I’ve said this before but the days are so depressing, so I’m glad I’m not there this year! I went out for dinner last night. I got used to eating out by myself when I was traveling to speak at different places, but now, it’s a little weird, for sure! Today is Day 2 of Rachel Butler’s Birthday month! HA! It’s Election Day… When I was a young man, the Banks and bars were closed on Election Day, so that those wishing to buy a vote or two, couldn’t get money out of the bank or buy a prospective voter a beer… That’s all changed these days, votes can be bought easily and “voters” have been known to vote early and often! HA! We have a hotly contested race for Missouri Senator, it’ll be a close vote I’m sure… America greets me this morning with their song: Sandman… I used to enjoy playing that song on my guitar…

The reversal that the dollar had put in VS the currencies yesterday morning, got lost in the woods, and the dollar got sold the rest of the day, with the Big Dog euro, rising through the 1.14 handle, and the Aussie dollar climbing past 72-cents! Gold didn’t fare so well, on the day losing a few bucks… The price of Oil climbed back to 63-cents, only to lose that figure later in the day. The War of Words, were being spoken again yesterday by the leaders of the U.S. and China, with the U.S. saying they will add more tariffs to Chinese exports to the U.S. and China saying they too will add more tariffs on U.S. exports to China.

In the overnight markets, the dollar saw a turnaround, but mostly against the euro, which left the single unit back below 1.14. The last two trading days saw the euro gain VS the dollar, only to be sold in the overnight markets, which has my spider sense tingling… Quacks like a intervention, waddles like intervention, and smells like intervention, so it must be intervention…  Well, at least that’s what my spider sense is tingling about…  A couple of months ago, we went through this trading pattern for a few weeks, and I said at that time that I thought the European Central Bank (ECB) was selling euros to keep them from getting too strong, and push down their rising inflation they claim they need. I think the same thing is happening now… 

The news from the Eurozone is that there are good negotiations between the Eurozone commissioners and Italian leaders with regards to the Italian budget, that was just going to work for the ECB. In other words, “that dog ain’t gonna hunt”… 

There’s not much in the way of data being printed around the world, we will see September PPI in the Eurozone later this morning, but beyond that there’s little to look at. But that changes tomorrow, with a Eurozone Retail Sales report for September, and boat load of data prints from Japan. 

The Reserve Bank of Australia (RBA) will meet tonight for us, tomorrow morning for them, and I really don’t expect to see the RBA surprise the markets with a rate hike, the RBA has gone silent lately, and that tells me that they battened down the hatches, and are in a wait-n-see period, with China… 

Speaking of China…  The Chinese continue to mark down the renminbi almost nightly…  We did see two days of appreciation Friday and Sunday night, but back to mark downs last night.  Before the two days of appreciation recently, I was beginning to work up my talk about how China was going to allow the renminbi to depreciate to 7.0 to help offset the tariffs.  I still think we’re going there with the renminbi, folks… But the Chinese will do it with brief appreciations, so that it doesn’t look so obvious what they’re doing…  But I’ve got a memo for the Chinese… Everyone knows what you’re doing, so just go ahead and do it! 

And I read a report in the RT last night that Russia’s alternative payments system to SWIFT, has already gained quite a few users… When trading partners of Russia, and eventually China too, as they will use this alternative payments system, will use this system and bypass SWIFT, which means they’ll have no need for dollars to settle the terms of the trade.  These are the baby steps to that outcome folks… It’s happening right before your eyes… Do you see it?  

And now this… The good news for the U.S. just keeps rolling in! I’ve told you all about how Central Banks around the world have been backing away from their usual allotment of Treasuries sold at the Auction… Well, yesterday, we had the 2nd worst bid to cover in 9 years at the Auction of short term Treasuries… Wait! What?  Yes, the Auction didn’t go off so smoothly…

So… we’ve seen yields rise, right? I mean we’re at 11 yr highs in short rates, and the stock market is teetering, and all that isn’t enough to attract more buyers at the auction? Uh-Oh! Apparently, yields are going to have to rise much more, and we all know what that does to the bond servicing costs! This is scary to me folks… And should be to you, and I’m NOT the boy who cried wolf, this is actually happening!

Gold gained a whopping $1.60 yesterday on a very reduced amount of volume, as only about 150,000 contracts were traded… The shiny metal is up another $3.50 in the early morning trading today, these cheaper prices of Gold just seem to be calling out to investors… Look at me! Look at me! I’m cheap (comparatively to where I’ve been and where I’m going!) 

The GATA folks sent me an email yesterday that highlighted an article in the Alchemist and featured some quotes by a former French Central Banker… The Alchemist is a publication of the London Bullion Market Association (LBMA)… And at the end of the article I found this quote about what the LBMA is up to, check this out: “While the London Bullion Market Association’s magazine is named The Alchemist, its alchemy is of a different sort, the sort of alchemy undertaken by modern central banking itself: not to turn lead into gold, as the alchemists of old sought to do, but to turn gold into mere paper.”

I of the belief that won’t happen folks, not as long as Physical Gold is being bought by the boat load in Russia, and China…  

The U.S. Data Cupboard today is a non-event with The Election Day dominating the news and the markets today… Tomorrow’s cupboard will have the September Consumer Credit (read debt) which has really ballooned in recent months, and this report should be no different, so we’ll see tomorrow. 

To recap…  The dollar got sold yesterday, but in the overnight markets the euro got sold.. Chuck thinks its intervention by the ECB…  It’s Election Day, make sure you get out there and vote!  The RBA will meet tonight, no rate move is expected. The Chinese continue to mark down the renminbi in an effort to offset the tariffs on their goods going to the U.S. And Gold gained a whopping $1.60 yesterday on little volume… 

For What It’s Worth… Since it’s Election Day, I found this article to be on time! It’s about how Congress no longer carries out their jobs as the founding fathers intended them to, and can be found here: https://www.washingtonpost.com/graphics/2018/politics/laws-and-disorder/?noredirect=on&utm_term=.cc6518c40b72&wpisrc=al_trending_now__alert-politics–alert-national&wpmk=1

Or, here’s yoursnippet:“For more than 200 years,Congress operated largely as the country’s founders envisioned — forging compromises on the biggest issues of the day while asserting its authority to declare war, spend taxpayer money and keep the presidency in check.

Today, on the eve of a closely fought election that will determine who runs Capitol Hill, that model is effectively dead.

It has been replaced by a weakened legislative branch in which debate is strictly curtailed, party leaders dictate the agenda, most elected representatives rarely get a say, and government shutdowns are a regular threat because of chronic failures to agree on budgets, according to a new analysis of congressional data and documents by The Washington Post and ProPublica.

The study found that the transformation has occurred relatively quickly — sparked by the hyperpolarized climate that has enveloped politics since the 2008 election of President Barack Obama and the subsequent dawn of the tea party movement on the right.”

Chuck Again… I could show you evidence of this with emails I sent to our Senator a year or so ago, and her responses to me… It’s a real shame, and that’s all I have to say about that!

Currencies today 11/6/18.. American Style: A$.7228, kiwi .6671, C$ .7671, euro 1.1395, sterling 1.3036, Swiss $1.0048,.. European Style: rand 14.2357, krone 8.3705, SEK 9.0733, forint 282.43, zloty 3.7811,   koruna 22.6717, RUB 66.12, yen 113.17, sing 1.3750, HKD 7.8308, INR 72.74, China 6.9144, peso 19.94, BRL 3.7013, Dollar Index 96.41, Oil $62.97, 10-year 3.19%, Silver $14.68, Platinum $875.10, Palladium $1,135.10, and Gold… $1,235.00

That’s it for today…  I was in an office yesterday, and an older man said to me, “The northerners will be coming soon” I guess he thought I was from the South! My friend, Dennis Miller, used to tell me that they called the change in colors for fall the different license plates that converged on Florida… HA! Well, I’m told that work begins today on my project I have going on down here… I’ll have pop a bottle of Champagne to celebrate, as this has taken a month of Sundays to get started!  Steely Dan takes us to the finish line today with their song from the album of the same name: Aja… (a great song and album!)  I hope you can get out to vote today, and have a Tom Terrific Tuesday… Please remember to Be Good To Yourself!

Chuck Butler

 

On a sidebar… I’m finished with SNL… It’s been years since I religiously watched it each Saturday Night, but I’ve found the show to be a bore the past couple of years, and now they’ve crossed the line… They poked a jab at a guy who lost an eye in combat! Having lost an eye, I’m very sensitive to this… I’m just saying…