Special Bonus Edition

July 25, 2017

Dear Daily Pfennig Readers…

It’s our pleasure to be here, filling in for our dear friend Chuck Butler while he’s on vacation.

To introduce ourselves, we’re Mary Anne and Pamela Aden. We write The Aden Forecast letter, and we’ve been happily doing this for 36 years. We cover the major markets, and we’ll be posting some of our articles here.

We also publish Dow Theory Letters. It was founded by the late great Richard Russell and, along with a team of top notch writers, we’ve carried on with his work. Some of these articles will also be posted during Chuck’s R&R.

And finally, you’ll also be receiving articles from GoldChartsRUs, our weekly trading service. Here our top trader covers what to buy, what to avoid, what to do about it and much more.

We hope you enjoy our articles while Chuck’s away.

Chuck’s transition is complete and we’re proud to have him as part of our Aden Group.

Best regards and here’s to good markets,

Mary Anne & Pamela Aden

Today we’re posting an article from Dow Theory Letters.

RICHARD’S THOUGHTS ON WINNERS

Richard’s CommentsNothing created by the mind of man has ever equaled the stock market in terms of its sheer ability to frustrate people. Why is this? The answer is that the stock market frustrates because millions of traders and investors across the face of the US and the world are all trying to take money out of the market.

Now when millions of people are trying to take money out of the NYSE or NASDAQ, you know right off the bat that it can’t be done. A majority of people are not fated to make money doing anything, much less beat the stock market. “It’s not fair” you complain, “why can’t all those nice, well-meaning people make money with their trading and investing?”

There’s one simple fact that makes this difficult. And that fact is that throughout history, going back to the days of primitive barter, there have always been a small number of financial winners and there has always been a mighty army of financial losers.

So when we state that the stock market is “frustrating,” we must qualify the statement by asking, “frustrating to whom?” And the answer again is that the stock market is frustrating to the great majority of participant-losers, but highly rewarding to a small minority of informed, hard-working, intelligent winners.

Next question: What do you have to do to be one of the minority of investment winners? Answer: You have to work and work hard. It’s an ironic fact that people are willing to work hard and put in long hours in their own businesses or on their jobs — but then they think that they can turn around and make easy money in the stock market or in the bond market, or even in the commodity markets.

Beating the markets is the hardest endeavor in the world, and these supreme optimists believe that with a modicum of knowledge, little study, and a large portion of luck they can make money “playing the market.” It doesn’t work that way, never has and never will.

Here’s an interesting illustration of what I’m talking about. The great, historic Dow Theory writing was done by Charles H. Dow, William P. Hamilton, Robert Rhea and E. George Schaefer. How many analysts, how many professionals, have read the works of these four men?

How many pros have ever studied Dow’s Theory, which, by the way, is the basis of all technical market studies? Frankly, I think I could count on the fingers of both hands the analysts I know who have read and are familiar with the works of these men.

As far as my own personal efforts, writing about the stock market or even investing in the stock market without studying the works of these pioneers would be impossible. I learned to think in terms of bull and bear markets from Dow’s writings. I learned the history of

the stock market from Hamilton’s works. I learned how to read the Averages from Robert Rhea. I learned the real meaning of the primary trend from George Schaefer.

I added studies of my own to what I learned from the great analysts of the past, and out of all this I developed a stock market strategy and philosophy that seems to work. At least it seems to work for me and the majority of my subscribers.

I try to give investors an approach to the market that I believe will help them rather than just tell them “what to do.” To me, a typical list of stocks “that should double in the next six months” is useless. First of all, it’s a touting approach to the market which I don’t like, and secondly the odds are that few if any of the stocks on the list are actually going to live up to their billing.

Actually, my view is that 90% of my subscribers don’t have the time or the inclination to be as obsessed with the market (as I am), and therefore they are paying me to do some of the work for them. They are also paying me to present history, to present my ideas, to present my investment philosophy, and to provide my views of the market.

That’s legitimate, but I’ll let you in on a secret — I never want to be known as an expert or a guru. As far as I’m concerned, there are very few experts on Wall Street and market gurus (if indeed there have ever been any) are as rare as Australia’s DoDo birds.

“All right,” I’m asked, “then Russell, what the devil do you call yourself?” My answer is that I call myself “a market student,” but an avid one. That title is good enough for me. And it is the way I view myself.

Why am I writing all this? I guess I’m writing it out of frustration. Every day I read dissertations and tomes on why the market is doing this or that. And I say to myself, “How can this yo-yo get away with writing such nonsense? How can he mislead people so badly? How can I get over to subscribers the real picture, as I see it — the real picture minus the bunk, the wishes, the uninformed theories, even the misconceptions about Dow’s Theory?”

Then a little voice inside me says, “Calm down, Richard. You wouldn’t have a business if everybody did the work, if all the analysts were brilliant and honest.”

So I guess I will calm down and just do my own work and let it go at that. I love Wall Street although the truth is that I’ve never spent so much as a single work-day on the Street. But then, I’ve never been a chef, but I know a good meal when I’m presented with it.

For more information about Dow Theory Letters, click here.

Special Bonus Edition

Dear Daily Pfennig Readers…

It’s our pleasure to be here, filling in for our dear friend Chuck Butler while he’s on vacation.

To introduce ourselves, we’re Mary Anne and Pamela Aden. We write The Aden Forecast letter, and we’ve been happily doing this for 36 years. We cover the major markets, and we’ll be posting some of our articles here.

We also publish Dow Theory Letters. It was founded by the late great Richard Russell and, along with a team of top notch writers, we’ve carried on with his work. Some of these articles will also be posted during Chuck’s R&R.

And finally, you’ll also be receiving articles from GoldChartsRUs, our weekly trading service. Here our top trader covers what to buy, what to avoid, what to do about it and much more.

We hope you enjoy our articles while Chuck’s away.

Chuck’s transition is complete and we’re proud to have him as part of our Aden Group.

Best regards and here’s to good markets,
Mary Anne & Pamela Aden

QUESTIONS ANSWERED

We’re starting off with some of the most asked questions from our subscribers…

Q: Could the Russian investigation and Trump’s political concerns affect the markets?

A: So far, they haven’t. The stock market has basically ignored what’s happening in Washington and it’s still focusing on other things, like good earnings, the economy and so on.

But a couple of months ago, we got a taste of how this could indeed affect the market. The stock market fell sharply in its worst one day drop in months. The growing concerns in Washington were the main reason why and this is something we’ll definitely want to keep an eye on.

We’ll see… but if so, it’s important to remember that Watergate coincided with a big bear market in stocks in 1974 and a recession. That doesn’t mean this has to fall out the same way but, again, it does warrant caution.

Q: When you refer to a “normal downward correction,” what do you mean? The technical definition of a correction is after a market declines 10% from its high. Less than 10% is an adjustment.

A: These definitions are just something someone made up one day, and in the past decade or so many traders have taken these rules as gospel…

Another one is the definition for a bear market, which is a decline of 20% or more.

This doesn’t really mean anything. A bear market, for instance, could be a decline of 10%, 20%, 50% or more.  There are other indicators and tools to use that’ll determine if a market is bearish or not, and not just a 20% decline.

The same is true of downward corrections…they might decline 4%, 8%, 15%… It just depends on if it’s a steep correction or a moderate one. Here too, other indicators will assist in identifying when a correction is over.

Our indicators, for example, are designed to aid in identifying major and intermediate trends, and major changes.

But the numbers should not be ignored. Since so many traders follow this rule, you have to keep this in mind because it will affect sentiment.

Overall, however, all factors need to be taken together in an effort to reach an educated conclusion… at least that’s what we strive to do.

Q: When the VIX is high, the adage is to buy. When the VIX is low, it’s time to go. Does that still apply?

A: Like most stock market rules, this one is not ironclad…

As you know, the VIX index is the fear index. And the general rule is this… when investors are scared and fear is high, it usually coincides with a stock market bottom and you’d want to buy.

On the other hand, when fear is low, it usually means stocks have been doing well and the market’s near a top, so you’d want to sell.

This is not a timing tool and the rule doesn’t always work. This year, for instance, the VIX has generally been low this year, meaning investors have not been fearful, yet stocks have surged upward. So this rule, like many others, can go off the bandwagon for a while.

Q: Many experts are warning of a steep crash. Are you concerned?

A: We’re always concerned when we hear these forecasts. But we also know that many of these experts have been saying the same thing for decades. Yes, 2008 was scary but a total collapse just hasn’t happened.

We know that debt, derivatives, delinquencies, credit growth and several other factors are at worrisome levels, and some are in worst shape that in 2008. Like the subprime problem then, any of these factors could evolve into a wild card, triggering a crisis.

At this point, there’s no way of knowing when this might happen or how deep it could be, but here too we’ll be staying cautious and on the alert.

Q: What was the date of gold’s last C rise top?

A: The last C rise in gold started at the bear market low in December, 2015, and the top was reached in August, 2016. During that rise, gold gained about 30%. It was also the rise that turned gold’s bear market into a bull market.

This year gold has moved up too in a smaller rise we call “A.” But with the U.S. dollar now on the decline, it’s likely going to keep upward pressure on gold and it’s set to head higher.

Most interesting, even though the stock market has been getting all the publicity, most people don’t realize the gains in gold have actually been about the same this year. In fact, over the past 20 years gold has outperformed both stocks and bonds.

Q: Do you think there should be caution about stocks given the historical pattern in 1929? At that time, the Dow Industrials rose for 8 years, then corrected for 3 years.

This time, the Dow has been rising for 8 years. If we’re to see a similar pattern to 1929, then stocks could correct until 2020, which correlates to your time frame for a high in gold.

A: Well, anything is possible. We all know that. But looking at the price action, there is currently no sign of a stock market top, at least not yet.

On the contrary…  stocks remain strong and bullish, and they’re poised to rise further.
One important reason why is because interest rates remain near historical lows, and the stock market loves low interest rates.

The real estate market has been thriving too in this low interest rate environment. Real estate prices recently hit new highs and they’ll likely continue to do well as long as interest rates stay near these low levels.

So all things considered, this alone could make today’s situation different than what played out in the 1920s. But again, it’s best to keep on open mind.

For more information about The Aden Forecast, click here.

A Marriage Made In Heaven…

Chuck Butler’s: A Pfennig For Your Thoughts 

July 21, 2017  

* Draghi throws euro traders a bone!

* RBSA cuts rates… 

* Tons of paper trades keep Gold in check

 

Good day… And a Happy Friday to one and all!  Boy did yesterday’s infusion whack me out yesterday, as I came home, ate a delicious, Carl’s Deli sandwich, and went to bed, and slept most the day. I’ve still got that “foggy feeling” this morning, so I won’t attempt to make this a marathon news letter today. I know, you’re thinking, “Whew!” That’s OK, I’ll be gone for the next two weeks, you’ll be missing me soon enough! HA!  Don Henley greets me this morning with his song: The Last Worthless Evening…  

Well, let’s get right to this today… The dollar ends the week looking at a Dollar Index number that it hasn’t seen since 2015…  And the main driver of the index’s downward move is the rise of the euro…  And if you haven’t figured it out by now, even though I’ve said it over and over again, that this dance is gonna be a drag, no, wait! I’ve said over and over again that the sentiment toward the euro has switched to loving the single unit and not the dollar… 

Well, we’re going to the chapel and we’re, going to get married, going to the chapel and we’re, going to get married. Gee I really love  you and we’re going to get married, going to the chapel of love… That’s what euro traders and the euro were singing together yesterday, as the euro’s relative, Mario Draghi, gave the traders the wink and nod, and all was right again, after the euro traders had displayed a bout of cold feet at the altar the previous day… I told you that the traders would be back, and come back they did, with flowers, candy, and heartfelt sweet nothings for the euro’s ear… It’s now a match made in heaven…

Ahhh, I love it when a plan comes together, and it was little old me that played match-maker for these two 6 months ago, when I said the strong dollar trend appeared to be ending, and the sentiment / love would switch from the dollar to the euro… Back then the euro was trading with a 1.09 handle… So, let’s see, even if you waited a bit and didn’t buy your euros until they reached 1.10, you would still be looking at a 6-cent gain! Now, that may not sound like a lot to you, but when you invest larger sums of money, which you tend to do with currencies,, that’s a 5.4% return… I’m just saying… I wrote about it here… I wrote about it in the Old Review & Focus,… I wrote about it in the Dow Theory Letters… and if I was a Beatle, I would sing it from a rooftop! If I were a hammer, I’d hammer in the morning, I’d hammer in the evening, all over this land, and I would hammer home that the strong dollar trend has ended, it’s time to back up the truck, and get a load of euros, and whatever flavor of currency you prefer, and throw some Gold & Silver on top so they don’t blow away while you drive off into the sunset, with a smile as wide as a country mile!

OK, slow down here Chuck, you move too fast, you’ve got to make the morning last! Why don’t you tell them what Draghi said yesterday that stirred the euro to a 1-cent gain on the day? OK, I guess I can do that… Well, as you know, being the astute reader that you are, because I told you so… The markets were looking for the ECB and Mario Draghi to throw them a bone about when the uber-accommodating monetary policy might begin to be dismantled.. And Draghi delivered the goods, telling the markets that Q/E (Quantitative Easing) talks to tighten would begin in September. What’s that fizzling sound in the background? Oh, it’s all the euro holders grabbing for the Plop, Plop, fizz, fizz, oh what a relief it is, Alka Seltzer… Hey there was no reason to get your stomach all tied in knots over this, if he didn’t say it this time, it would be the next meeting, or the meeting after that… 

And how can I be so sure that THIS TIME is not a false dawn with regards to the end of the Strong dollar trend? Well, I’ve told you before about the data prints in the U.S. whether they be good or bad, the dollar ends up getting sold anyway… And then yesterday, yes, Mario Draghi did throw the markets a bone that they were looking for, but he then went on and sounded pretty dovish to me, but the euro traders didn’t care, they got what they came for, and let the dovish comments slide…  That’s a classic illustration of a currency that’s in a strong trend…  And the dollar’s reaction to economic data is a classis illustration of a currency that’s in a weak trend… 

And here’s something else that’s really a side session, but plays back into the dollar/ euro trading… The Reserve Bank of South Africa (RBSA) surprised the markets and the economists that made a call on rates, with a rate cut. Their first rate cut in 5 years… The rand fell as a knee jerk reaction to the surprise rate cut of the internal rate from 7% to 6.75%, but then rallied back by the end of the day, and has continued to rally in the overnight markets… 

So, is the RBSA on a rate cutting spree? I doubt it seriously, folks… The cut rates with inflation at the top of their range, and I think this is a one and done for the RBSA, which means if the rate cut didn’t slow down the real, which has been one of the better performing emerging currencies this year, this time, then the rand should be set for a nice run…  Now, I’ve always said that I wouldn’t touch rand “with your 10-foot pole”, except in a bundle that would help protect the investor from the wild swings of the rand… That’s why at the “old place” I created what I called the Commodity Currency CD, that included: A$, kiwi, rand and loonies… 

Back then, the Brazilian real, and the Russian ruble weren’t available, but are now…  And look what currencies are setting the pace that aren’t the euro, or a part of the Dollar Index… The A$, kiwi, and rand, the loonie is a part of the Dollar Index, but its weighting is low, so let’s say it’s not! I read an article a couple of days ago, about how this has been a disaster of a year for commodities… And I thought, hmmm… Is that right?  It’s not been a great year, or a good year, but a disastrous year? Hmmm…

So, here we are in the middle of summer, the middle of July, and we’re watching the dollar’s strong trend come to an end… These trends don’t end with a loud bang, instead they fade off into the sunset. That’s why it’s difficult to pinpoint exactly when a trend ended or began… The thing that really concerns me about this new weak dollar trend, is that it begins at a time when debt levels are soaring, and going higher every day…  Knowing that, my mind begins to race around and think about all the bad things that can happen when debt levels cause a financial system to collapse… 

But then I just say, “Chuck that can’t happen”, and then go check my statement for my Gold & Silver holdings, just in case…  And of course I know “it could happen” but don’t you tell yourself little lies to make you feel better? Well, that’s what that is… 

Speaking of Gold, it was a wild day at the COMEX yesterday, with 216,000 contracts traded, which the “boys in the band” needed to put a governor on Gold, as the Dollar Index began sliding, and Gold looked poised to rise by a good amount, but was held to a $3 gain to close the day at $1,244.00…  But “something” happened in the overnight markets and Gold has popped higher to $1,253.80 as I write. 

I sure hope that what I wrote about earlier this week, is going to come true… I’m talking about the quote I printed by Avery Goodman, who said that he witnessed lots of closing of short paper Gold Trades that were long dated… His thinking was that the short paper traders were pulling out… Well, the “boys in the band” may have put their instruments down, but they haven’t left the building, because they were in with a bang yesterday keeping Gold in line… 

Well, I’m just about out of things to talk about this morning, but did want to mention the large move in the New Zealand dollar / kiwi yesterday and overnight, and if you took a peek at the currency roundup, that’s right, that’s kiwi trading with a 74-cent handle this morning! Remember when I kept telling you that the time to buy kiwi was when it was 72-cents, and that it was flying under the radar?  Well, fly under the radar no more! But, if this goes the way I think it will, it’s still not too late… 

There is no trace of a data print today in the U.S. Data Cupboard, and yesterday’s lot of data prints was a virtual “who cares?”…  But I can tell you that the Philly Index, which is a check on the pulse of the manufacturing for the Philadelphia region, fell from 27.6 in May to 19.5 in June… Quite a drop, but in the whole scheme of things, really not that important…  

And this is another classic illustration of a currency in a weak trend is when there is no data to print, and it should be able to garner a buy or two, but can’t seem to find a buyer anywhere. Sign, sign, everywhere a sign Blockin’ out the scenery, breakin’ my mind…  The signs of the end of the strong dollar trend are everywhere folks… And just because I’m the only one out there that’s saying it doesn’t make it wrong!

To recap… Mario Draghi, while sounding dovish, did throw the euro traders a bone yesterday, telling them when the talks will begin on tightening QE (Sept)… And the euro rallied more than 1-cent on the day! Chuck sings an oldie and talks about how the euro traders and the euro got married yesterday, after the traders had displayed a case of cold feet the day before. Kiwi also had a great day and night, and Gold was able to gain $3, but has popped higher in the overnight trading. 

For What It’s Worth…  I found this on the Bloomberg this morning, and it talks about something that I began talking about in 2003… Underfunded Pensions here in the U.S. Well, this problem has gone from a minor problem to a major problem that the markets can’t ignore any longer. You can read it here: https://www.bloomberg.com/view/articles/2017-03-24/pension-crisis-too-big-for-markets-to-ignore 

Or, here’s your snippet: Well, I don’t have a snippet for you today, because, well… I think it best for you to read the article…  But in reality my cut-n-paste feature won’t work this morning… So there you go!

Chuck again… Could this be the snowflake that causes an avalanche here in the U.S.?  I would think so! As I said above, I began talking about Underfunded Pensions in 2003, so that’s 14 years of growing even more underfunded… That’s scary to me folks…  

Currencies today: 7/21/17… American Style: A$ .7926, kiwi .7442, C$ .7954, euro 1.1644, sterling 1.3013, Swiss $.9501, … European Style: rand 12.9579, krone 8.0335, SEK 8.2442, HUF 262.11, zloty 3.6329, koruna 22.3397, RUB 58.96, yen 111.55, sing 1.3635, HKD 7.8081, INR 64.26, China 6.7625, peso 17.48, BRL 3.1396, Dollar Index 94.13, Oil $47.10, Silver $16.37, Platinum $932.45, Palladium $852.78, and Gold… $1,253.80 

That’s it for today… Cards lose another game in the 9th inning yesterday, one step forward, two steps back for this team… UGH!  it’s a good thing I slept through the game…  Alex is staying with us for a couple of days while the A/C in his building gets fixed… It’s nice seeing him here… Well, this is it for two weeks for me… But… don’t dismay!  My good friends, and now bosses, Mary Anne and Pamela Aden are going to be sending you dear Pfennig readers a treat the next two weeks, as they go through some of their favorite letters, that still hold true today… So, look for that in your email box! I asked Mary Anne and Pam to do this, and promised them that you dear readers wouldn’t have a problem with it… Besides you get another viewpoint for 2 weeks… Pink Floyd takes us the finish line today with their song: Time…  Which is appropriate because it’s time for me to get off the bus this week, and send you on your way to a Fantastico Friday!  Be Good To Yourself my friends, and I’ll talk to you again in 2 weeks!  

Chuck

 

 

 

 

What’s Draghi Have Up His Sleeve For Us Today?

Chuck Butler’s: A Pfennig For Your Thoughts  

 July 20, 2017

* Euro traders get cold feet…

* But they’ll be back!

* Gold down, Oil up… 

 

  Good day… And a Tub Thumpin’ Thursday to you! It’s an infusion day for me, and I’m feeling this morning like I already had the infusion! UGH! So, no Tub Thumpin’ for me today. Shoot, I’ve started this letter 3 times already this morning, and stopped, as my mind raced someplace else… UGH! I sure could use something crunchy to eat this morning, maybe that would help!  OH well, quit your whining Chuck! OK… Simon & Garfunkle greet me this morning with their song: America…  

Well, today is the day, and in fact, the European Central Bank (ECB) is meeting as I write…  The euro halted its 3-day rally yesterday, as traders began to get nervous about what ECB President, Mario Draghi, will say when the meeting concludes, and has a press conference to discuss what the ECB talked about. I explained this all yesterday, so if you missed class yesterday, simply go to www.dailypfennig.com  and see the past copies for your reading enjoyment! 

I have this picture in my mind of currency traders and the euro getting married, and the currency traders getting cold feet, and bolting out the door…  You see, they were shaken, not stirred, by some words that came from the euro’s relative, the ECB… But the traders will be back, and eventually the wedding will take place!

So, the Big Dog, euro has returned to the porch, for now, that is… And depending on what Draghi has to say this morning, will determine if the Big Dog and all the little dogs will get to leave the porch and chase the dollar down the street, or not.   I should have just slept longer this morning and gotten up to write after the ECB meets!  But, that would be cheating, Chuck! Besides there’s always tomorrow…  I know, I know today is all that’s promised us, but there will be a tomorrow…  

There were 142,000 contracts traded in Gold yesterday, and the price movement was basically no movement at all, as Gold ended the day down $1.00 from the previous day to close at $1,241.00. Unfortunately, Gold is down $5.30 in the early morning trading today…  Just when it appeared that Gold had gotten through the gauntlet of “the boys in the band” and their short paper Gold Trades, the shiny metal takes a step back… NO! Don’t do it! Sort of like a horror film, and man or woman decides to open the door to another room, where they’ll meet their fate, and you’re sitting there, yelling at the TV, don’t do it, don’t do it, you’re gonna die! But they open it anyway, and well, you slump back in your chair, and say, “I told you not to do it”…

The price of Oil bumped higher yesterday and now trades with a $47 handle, and the Russian ruble was able to carve out a small gain, but the winner, winner, chicken dinner of the night was the Brazilian real. The real has really been on a strong run for the last two weeks, and it’s good to see, after all the selling that went on with the real previously…  I told you last week what the other driver, besides the price of Oil, that was moving the real, and nothing has changed there, so it’s Party On Wayne, Party On Garth!  

The U.S. Data Cupboard yesterday had the June report of Housing Starts and Building Permits, and I told you yesterday that the data would OK, since 1/2 of the month took place before the Fed hiked rates…  Well, Housing data have been up and down and are now back up as both housing starts and permits easily beat the estimates. Starts jumped 8.3 percent in June to a 1.215 million annualized rate with permits up 7.4 percent to a 1.254 million rate.

Both April and May saw very weak Housing Starts, and you have to go back to that period to think about what was going on that would cause the weak months back-to-back, belly-to-belly… Well, if you recall, those months followed the March rate hike by the Fed, and at that point, the markets were believing the spiel by the Fed that more rate hikes were coming, so higher rates, means reduced buyers of homes…

But the thought that the Fed is going to keep hiking rates every three months is long gone with the wind, folks…  I told you yesterday that what was once thought to be the next meeting to hike rates, September, is no longer being thought of, and neither is Rocktober, or November! I’ve said this so many times in the past few months that I think I’m feeling like a broken record… (Hey! I hear vinyl is making a comeback, so I won’t sound so much like an old fuddy duddy when I say that! YAHOO!) 

But, here goes… A Central Bank should never hike rates into a weakening economy, and a Central Bank should never hike rates when they are looking for higher inflation… But, OUR Central Bank has done both of those things, and what are these rate hikes going to cause?  The economic train in the U.S. is pulling into Recessionville…  And that will bring us another round of Quantitative Easing, and maybe even negative rates, depending on how deep a recession it is, which I figure it will be very deep, because The Fed has circumvented the previous recessions here in the U.S. and never allowed the economy to fully clean out the excesses of the boom, so there’s a lot of, let’s say, pent up frustration that will be released with this next recession…

And all that will cause the Fed to lose what credibility they have left, and the dollar will be taken to the woodshed for a long period of time!  Of course that’s all my opinion, and I could be wrong, which I’m sort of hoping I am, but not too much, because I know that my Gold & Silver will shine even brighter if all that comes to fruition…  

To recap…  The dollar wins back some lost ground, but in reality it’s all about what Mario Draghi tells us today, which should be about ready to be told to the markets…  Gold lost $1.00 yesterday, but is down more than $5 in the early morning trading today, and the price of Oil bumped higher to a $47 handle…  Besides those things, there’s not much else going on.

For What It’s Worth… I saw this article this morning and thought, Hey! I’m not part of a bank any longer, so I can take shots at the CFPB all I want! So, this was on the WSJ, and if you don’t have a subscription you won’t get to read it all, but here is the link anyway… https://www.wsj.com/articles/republican-lawmakers-aim-to-kill-cfpbs-arbitration-rule-by-mid-august-1500490229?mg=prod/accounts-wsj    

Or, here’s your snippet: “Congressional Republicans by mid-August hope to overturn a rule put in place by a consumer regulator that could make it easier for consumers to band together and sue banks to resolve disputes.

Sen. Tom Cotton (R., Ark.) said he is working to get enough Senate votes to kill the arbitration rule under a legislative tool called the Congressional Review Act.”

Chuck again… Boy do I have some horror stories about the CFPB that I could share with you, but only on the Butler Patio!  And that’s all I’m saying, other than… You go Tom! 

Currencies today 7/20/17… American Style: A$ .7902, kiwi .7337, C$ .7916, euro 1.1505, sterling 1.2959, Swiss $ .9579, … European Style: rand 12.9669, krone 8.0887, SEK 8.3201, HUF 265.84, zloty 3.6608, koruna 22.6089, RUB 59.03, yen 112.36, sing 1.37, HKD 7.81, INR 64.39, China 6.7536, peso 17.64, BRL 3.1513, Dollar Index 95.04, Oil $47.12, 10yr 2.27%, Silver $16.17, Platinum $916.21, Palladium $855.87, and Gold…. $1,236.70   

That’s it for today…  I feel like Mike Leake this morning.. (Cardinals fans know what I’m talking about)… Day baseball today, but I’ll be in the infusion center. I should get out in time to see the last few innings… Went to local establishment last night with friend, Duane, and we listened to a guy play his guitar and sing. He asked me who I wanted him to play, and I said, “Hank Williams” and he did it… Fun time, singing along to: Your Cheatin’ Heart… Jet takes us to the finish line today with their song: Are You Gonna Be My Girl? And with that, I’ll get out of your hair for today… I hope you have a Tub Thumpin’ Thursday… And Be Good To Yourself!  

Chuck Butler

 

 

What Lola Wants, She Surely Gets!

Chuck Butler’s: A Pfennig For Your Thoughts

  July 19, 2017 

* Currencies await ECB tomorrow…

* Krone outperforms other Petrol Currencies

* Chuck goes crazy in the FWIW section!

 

Good Day… And a Wonderful Wednesday to you! How are you today? I hope you’re having a great day so far! I ventured outside yesterday, and found it to be too hot to enjoy sitting out to watch the ballgame, so I returned to the house to watch it there, and the next 3 days should be even hotter! But that’s OK… I’ll take it over the cold, ice, snow, wind chilled days of winter any time! Neil Young and Crazy Horse greet me this morning with their 17 minute live version at the Fillmore East, of: Down By The River… 

OK, I had lots to say yesterday, and said it, which made yesterday’s Pfennig quite long… I’m thinking that today’s version won’t be so long, as there has been little movement in the currencies in the past 24 hours. We did see some slippage during the day, probably profit taking, but the currencies quickly recovered and appear to be trading in yesterday’s clothes today. 

I do believe that the markets are now waiting to hear what Mario Draghi, the President of the European Central Bank (ECB), has to say when the ECB meets tomorrow. I told you on Monday that this was going to be a BIG meeting, as the markets are expecting to hear that at least the ECB is thinking about a shift in monetary policy, from uber-accommodating to something less “uber”…  Of course, they would love to see some definitive statements about tapering and the removal of negative deposit rates, but I think they’ll be happy just getting a bone thrown to them, which gives the ECB more time under the uber-accommodating umbrella… 

Remember last week, when I told you that Lola aka Goldman Sachs had told their clients that they preferred Japanese yen over Swiss francs as a safe haven currency? Well, once again, what Lola wants, Lola gets, as yen has gained more than 2 whole figures in the past week, while the Swiss franc has lost 2-cents…  I shake my head in disbelief of this whole scenario, and for my next submission for letters for the Dow Theory Letters (www.dowtheoryletters.com) I’m going to do a deep dive into Japan’s economy and show why I think that believing that yen is a safe haven currency is a real stretch of the imagination! 

Kiwi tried to play catchup yesterday, as it lagged the strength of the Aussie dollar (A$)) rally the previous day. I had wondered yesterday morning what the governor was on kiwi, but wonder no more, as a good strong move by kiwi has me forgetting about the governor! 

Speaking of the A$, I mentioned yesterday that it appeared that it was setting its sights on 80-cents… And then out of the blue, an article appeared on Bloomberg titled: A$ sets its sights on 80-cents…  Monday’s BIG move by the A$ can be attributed to two things… 1. the selling of the U.S. dollar, and 2. the markets believe that they read real optimism in the Reserve Bank of Australia’s (RBA) minutes that printed Monday night (Tuesday morning for them)…  I do believe that the RBA has their finger on the rate hike gun’s trigger, but are waiting for further signs of Global Growth revival before moving their rates higher.  And that rate move could come before year-end.. That would be HUGE for the A$, since the rate differential to the U.S. had narrowed, with the Fed rate hikes, which now appear to be on hold… 

About a month ago I was having an email exchange with former colleague, Antione Lawrence, and he was questioning something I had said in the Pfennig that morning about how the Fed might have hiked rates the last time, in this cycle…  He asked, “so no rate hike in Sept.?” And I said, no rate hike for Sept.  As by then the recession will be setting in and the Fed will have to begin to talk about reversals of their rate hikes…

And now the Fed Funds Futures are confirming my thoughts, as the odds of a rate hike in July, August, Sept. Oct, Nov. are basically nil… And December only has a 50% odds of a rate hike at this point, which will most likely move downward as we go along this summer. And I think Janet Yellen’s two speeches on Capitol Hill last week, drove the nails in the rate hike’s coffin… 

The price of Oil has been stuck in a range of $46.20 and 46.80 so far this week, and while that might seem boring to some, I find it to be refreshing… I read an article yesterday where the writer believes that the most recent rise in the price of Oil was more of a result of speculators moving the markets, and not supplies…   Well, I don’t know if speculators were moving the markets or not, but I’ll stick to my guns on this one and continue to say that the supplies dictate the direction of the Oil price!  

So, with the price of Oil stuck in a range, the Petrol Currencies, that include: Russian rubles, Brazilian real, Norwegian krone and Canadian loonies, all have to trade on their own fundamentals other than Oil… And the Norwegian krone is the doing the best at that of these 4 currencies. But then the krone has the euro’s coattails to grab hold of that is an extra “helper” that that other currencies don’t have.  But even with that extra “helper”, the krone is releasing some pent up frustration that’s been held in for too long! 

Gold saw another day of gains yesterday, closing at $1,242, after gaining $8.30 on the day. The early morning trading this morning has Gold down $2.60, but that looks like pure profit taking to me folks, so this could turnaround quickly today…   I’d like to talk about Silver more today, as I give some love to the everyday man’s Gold…   In Ed Steer’s letter this morning (www.edsteergoldandsilver.com) he highlights an article on the Bloomberg site, and like I always say, if Ed thinks its worth highlighting, then I should too!  So, here’s the gist of the article that can be found here: https://www.bloomberg.com/news/articles/2017-07-17/silver-extreme-pits-big-investors-versus-small-as-holdings-surge?utm_content=commodities&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social&cmpid%3D=socialflow-twitter-commodities      

“Silver, known for being a market of extremes, is living up to its reputation this year.

Prices rallied 17 percent in the first four months of the year, only to reverse and wipe out those gains. Despite the selloff, investors are pouring money into exchange-traded funds, and assets have reached a record 21,211 metric tons, valuing the holdings at $11 billion. At the same time, the picture is bearish in the futures market, where hedge funds now hold the first net-short position in two years.

Different kinds of investors are driving the opposing trends, according to George Coles, an analyst at research firm Metals Focus Ltd. Large, active hedge funds shorted Comex futures because of the risk of higher U.S. interest rates, driving silver prices lower, he said. ETF buyers tend to be smaller traders that use silver for long-term diversification of their portfolios. They’ll be rewarded for their bullishness as slower U.S. economic growth spurs demand for haven assets, Coles said.

“This may be a case of the smaller investors versus the big guys,” Coles said in a phone interview from London. “In this case, the smaller guys may be right.”

Chuck again I had to laugh when Ed sarcastically pointed out that George Coles had called for a rally to $20 for Silver… As, Ed, and Chuck, and many others think Silver should be trading much higher than $20!

The U.S. Data Cupboard has been quite quiet this week, and today we’ll see Housing Starts & Building Permits for June… Should be OK data, given that 1/2 of the month took place before the Fed hiked rates again… tomorrow’s Data Cupboard is just as weak with data, and then on Friday there are no data prints scheduled… So, a real nothing week for data, which should have been good for the dollar, but wasn’t… 

To recap… The currencies gyrated a bit yesterday, but in the end they were right back where they started the day, and are still trading in those clothes this morning.  Lola is getting what she wanted… AGAIN!  And the markets seem to be waiting for tomorrow’s ECB meeting for further direction… I sure hope Draghi doesn’t disappoint tomorrow…  And Gold gained $8 yesterday… 

For What It’s Worth… THIS IS BIG FOLKS! And I hope you read it and begin to boycott any business that goes completely cashless! Because, going completely cashless will be the end of our civil liberties (what we have left, after the Patriot Act), our freedoms, and a lot of our money, because, well, the Gov’t will now have control of it… Don’t believe me? Well, so be it, I can lead a horse to water but I can’t make it drink the water! Anyway, thanks to reader Tom for sending me this first… It can be found on NBC News site, or here: http://www.nbcnews.com/business/consumer/war-cash-intensifies-visa-offers-restaurants-10-000-go-cashless-n782276

Or, here’s your snippet: “Visa has declared war on cash and its “opening salvo” is to start paying restaurants $10,000 to go completely cash free.
The credit card giant is this week announcing a new plan to hand out thousands of dollars to up to 50 small food and restaurant vendors if they agree to stop taking cash.

Visa will also upgrade the restaurants’ checkout terminals so they can accept contactless payments, like Apple Pay, and invest in some of the stores’ marketing costs. When you pay at one of the stores you would only be able to do so with a credit or debit card, or via mobile payment. The program participants will be picked from an online application that starts in August.

It’s all part of the trend of moving towards a “cashless” society. Sweden is leading the pack, with that nation already predicted to become the world’s first truly cash-free society; over half the banks there already do not keep any cash on hand.

But the U.S. is catching up: Amazon’s brick-and-mortar retail stores only accept credit cards and mobile payment methods; Facebook recently added a peer-to-peer payment option with its Messenger service; and Apple’s iOS11 will include an upgrade to its ApplePay system that allows users to send money to each other via text message. This is all in addition to services like Venmo, a popular way for consumers — especially the younger generation — to send money to each other easily and quickly. 

Chuck again… I guess that maybe it’s too late baby now, it’s too late, though I really did try to stop it… I’m dead serious about this folks… just think about that for a minute…  Sure it makes things convenient, but at what cost? Well, I think I spelled that out for you at the top of this section…  But when you give someone else complete control over your money, guess what happens?  It seems to end up in their hands… Well, I don’t need to be getting all riled up, so boycott the businesses that go completely cashless and let the millennials eat there!  For soon, mom and pop aren’t going to pay for their meals any longer!  

Currencies today 7/19/17… American Style: A$ .7935, kiwi .7369, C$ .7914, euro 1.1535, sterling 1.3032, Swiss $ .9538, … European Style: rand 12.9224, krone 8.0612, SEK 8.2908, HUF 265.70, zloty 3.6476, koruna 22.5678, RUB 59.17, yen 111.95, sing 1.3677, HKD 7.8086, INR 64.29, China 6.7538, peso 17.52, BRL 3.1705, Dollar Index 94.76, Oil $46.55, 10yr 2.27%, Silver $16.19, Platinum $922.54, Palladium $863.61, and Gold… $1,239.30    

That’s it for today… A nice job of pitching last night by the Cardinals’ Michael Wacha… A month ago, I was ready to send him to the bullpen… Good thing I’m not the manager! HA!  After reading the Visa article featured above, I think I need Bob Marley’s 3 little birds singing their sweet song at my doorstep… Don’t worry, about a thing, cause every little things is gonna be alright…  One day closer to my summer vacation, I’m getting excited… Jimmy Buffett takes us to the finish line today with his song: Son Of A Son Of A Sailor…  And with that, it’s time… I hope you have a Wonderful Wednesday, and remember to… Be Good To Yourself!

 

 

 

 

 

 

 

 

 

 

Are You Ready For “This”?

Chuck Butler’s: A Pfennig For Your Thoughts

July 18, 2017

* Dollar gets sold like…

* The strong dollar trend…

* Is over…  are you ready?

 

Good day… And a Tom Terrific Tuesday to you! Are you ready for this? I know, I have to tell you what “this” is, right? Well, I’ve been talking about it for a couple of months now, come on, you know it, it’s on the tip of your tongue, right? Of course I’ll tell you, but you’ll have to wait a minute, because first Al Stewart greeted me this morning with his song: The Year of the Cat…  And I love Al Stewart’s music, so it comes first! HA!

Well, I turned on the laptop this morning, and went to the currencies, and saw what I’ve been talking about for a couple of months now… The end of the strong dollar trend!  The Big Dog euro is trading well into the 1.15 handle, and the Aussie dollar (A$) has its sights set on 80-cents! Oh, and the Dollar Index has fallen below 95 to 94.65 this morning. And the A$ has not been this strong since May 2015! And then it was going in the opposite direction! And no one out there in newsletter land is talking about an end to the strong dollar trend, but little old me…  Like I said a couple of weeks ago, they call me: Lone Wolf…  (I know you were thinking more like they call me Looney Tunes!) 

So, what has catapulted the Big Dog, euro well into the 1.15 handle? That’s simple… The selling of dollars. Always, always I tell you, be yourself, no wait! I always tell you that the euro is the offset currency to the dollar, so dollar weakness will be seen in euro strength. What was I thinking, tailing off into Mr. Wizard? But, I see it now… My mind was thinking that the dollar is like Tooter Turtle, and in trouble once again, and looking for help from Mr. Wizard… I know, my mind is a strange place to live… 

So, why were dollars being sold? Because they were supposed to be, given the outlook for the U.S. economy… But that’s just me being plain and simple with my answers… The pundits out there will tell you that the dollar got sold when two more Republican lawmakers decided to not go along with everyone else regarding the Health Care re-write. That decision pretty much deep-sixed the vote on the re-write, because if you don’t have the votes to pass something, don’t bring it to a vote!  

I’m on the other side of the fence on this thought, because the dollar has been getting sold in bits and pieces for 6 months now. Sure it has seen a day or two of rallies, but if you look at the euro 6 months ago, it was 1.0630…  And this is where I get up on my soapbox and begin to talk about Trends… 

You see trends are long sweeping moves in asset classes, like currencies, and they begin for a fundamental reason, and don’t end until they do… Trends are the reason, in this case, that currencies move stronger VS the dollar, and all the other stu, ff that goes on, like technical, and jocular attempts to move currencies, are just things that happen inside the Trend.  A Trend is NOT a One-Way Street, as there can be volatility inside the Trend…  The current strong dollar trend began with the discovery of Europe’s debt problems in 2011, and looks to be on its last legs…

There have been 4 completed Trends and one near completion since Gold was removed from backing the dollar by Richard Nixon in 1971… Remember that? it was supposed to only be a “temporary move”, and here we are 46 years later, and we’re still dealing with his “temporary move”…   Ok, I’m getting away from the discussion of Trends here, but you get my point… A Trend is a powerful thing for asset, either way, good or bad… 

And one of the things that points to the this being the end of the strong dollar trend is that all the currencies are on the rally tracks, and we also have Gold with multiple days on the rally tracks. I told you yesterday that the currencies each have their own “stories” as to why they are on the rally tracks, but those just explain what’s happening inside the Trend, which in my opinion is now a weak dollar trend.  There… I said it! And it began 6 months ago… 

Currencies like the Norwegian krone that play follow the leader, are really moving stronger, not being affected by the small drop in the price of Oil in the past 24 hours.  And now that Big Dog euro, has established its place as the leader, the currencies will all be singing: We’re following the leader, the leader, the leader, We’re following the leader, wherever he may go! 

The price of Gold gained $5.30 yesterday to close at $1,233.70, and at last check this morning it was up another $2.30 in the early morning trading.

I was doing some reading yesterday when I received an email from the GATA people. I always stop to at least see what it is they have to say, and in doing so yesterday, I read a report from securities lawyer and markets analyst, Avery Goodman, who was telling everyone that in his recent Examination of the U.S. Commodity Futures Trading Commission’s reports, he explained how the bullion banks continue to close huge volumes of short positions in the monetary metals that they have been carrying for years. “If the bullion banks know what they’re doing, Goodman writes, this foretells a major rise in metal prices in coming months.” WOW! I wondered what was up with that $11 gain on Friday, and then yesterday Gold gaining momentum as the day went on…

Have the “boys in the band” decided to take their instruments and go home? Now, wouldn’t that just be a shot to the heart for the dollar, if Gold is allowed to run up? I guess at this point we can only hope the “boy in the band” have left the building, because I’m tired of their “songs”! wink, wink… 

Let me take you back to what I was telling you a couple of months ago now… And that is that the sentiment toward the dollar was changing, as traders were growing leery of the Fed’s claims that the economy would surge in the 2nd Half of this year, and that’s why the Fed rate hikes were warranted. As the sentiment continues to change from buying dollars to selling dollars, it will build momentum, and by the end of summer, things will look quite different…  Well, it appears that the timetable has moved up a bit, but who cares? If you listened to what I was telling you months ago, and bought euros when they were trading with a 1.06 handle, then you really don’t care that the timetable has move up! 

So, now I’m going to climb back up on my soapbox and give a speech, are you ready for this?  Fill up the coffee cup, because I’m loaded for bear this morning! 

Quite a few of you longtime readers were with me when the last Financial Crisis hit the U.S. in 2007… And all the time that Ben Bernanke, then Fed Chairman, kept saying that, well, let me let you see what he had to say before all Hell broke loose in the economy… Here are some quotes from Big Ben, before and in the early stages of the Financial Crisis…

When asked about a housing bubble Big Ben said, “Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.” – July 2005

And then in Feb. 2007 as things were beginning to heat up Big Ben has this to say, “Our assessment is that there’s not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy. And the lending side of that still seems to be healthy.” – Feb. 2007

I could go on all day with these quotes, that indicated that the Fed Chairman, nor the Fed in general had any inkling of a coming disaster… And this wasn’t the first time this had happened… Shoot Rudy, you can go back to 1999, and hear Big Al Greenspan talk about how productivity was behind the stock market rise, and we all know what happened next, right? Or, you can go all the way back to right after the Great Depression, when Fed members and Senators, etc. were pounding their fists, and saying that all was well once again, only to have the economy fall right back into another recession a year or so later…

So, when Janet Yellen gets up in front of lawmakers last week, and says that the economy is doing fine, she expects stronger growth and inflation in the second half of the year, and that she truly believes that we, as a country, will never experience a Financial Crisis again, should you believe her? Or… should you run for the hills, because the past record of talking up the economy right before we have a major breakdown is right there before us… I don’t really hear people say this any longer, and I’m glad, but if there was a time and place for a Fed member to say it… “this time will be different”, now would be that time, you know, just to help them save face a little longer…

OK, I’ll get down now… I know that some of you like it when I get up on my soapbox and get all riled up… So, there you go! I hadn’t really done that since leaving my old employer, and it felt good to shake the dust off! My former colleague and longtime friend, soccer legend, Ty Keough, likes to call me: ChuckGambo..  in reference to the Great Mogambo Guru! And I love it when people think of me and the Great Mogambo Guru in the same way… 

To recap…  Well, it appears that from the look of things this morning that Chuck has decided to call it official… The end of the strong dollar trend, and the beginning of a new weak dollar trend… He believes it started 6 months ago, but has really gained momentum in the last couple of months. He explains Trends, and how powerful they can be. The Big Dog euro is trading well into the 1.15 handle this morning, the A$ has its sights set on 80-cents, and Gold has booked 3 consecutive days of gains!

Before I head to the Big Finish today… OK, I’m sure some of you noticed last week that I did some tweaking to the Pfennig each day, by making the font for the email larger, and with Bold type, so it would be easier read, and many of you sent me notes of thanks for doing that. But yesterday, I received a note asking me to un-bold the type… I laughed out loud, and said, “you can’t make everyone happy, Chuck!” Oh well, I’ll keep it as is, as it is easier to read on a mobile device than it was before.

For What It’s Worth…   Here’s another, “Mom, he’s doing it again” thought… This time we’re talking about card debt loans and delinquencies…It can be found on the Bloomberg here: https://www.bloomberg.com/news/articles/2017-07-17/new-u-s-subprime-boom-same-old-sins-auto-defaults-are-soaring

   Or, here’s your snippet: “It’s classic subprime: hasty loans, rapid defaults, and, at times, outright fraud. Only this isn’t the U.S. housing market circa 2007. It’s the U.S. auto industry circa 2017.

A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide.

Subprime car loans have been around for ages, and no one is suggesting they’ll unleash the next crisis. But since the Great Recession, business has exploded. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion were, topping average pre-crisis levels, according to Wells Fargo & Co.

Few things capture this phenomenon like the partnership between Fiat Chrysler Automobiles NV and Banco Santander SA. Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines.

Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s subprime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into $1 billion of bonds, according to Moody’s Investors Service. The largest portion were for Chrysler vehicles.”  

Chuck again… OMG! Haven’t we seen all this stuff before? Well, I guess it’s a good thing that auto loans aren’t as big a slice of the pie as housing was, right?  Uh-Oh! I just remembered, that the average car loan now is more than $18,000, and the length is 66 months… My parents first home was $13,000 and a 30-year mortgage… I’m just saying… 

Currencies today, 7/18/17… American Style: A$ .7937, kiwi .7350, C$ .7927, euro 1.1552, sterling 1.3031, Swiss $ .9550, … European Style: rand 12.9485, krone 8.0977, SEK 8.2808, HUF 265.02, zloty 3.6377, koruna 22.5760, RUB 59.20, yen 112.16, sing 1.3669, HKD 7.8040, INR 64.28, China 6.7722, peso 17.57, BRL 3.1802, Dollar Index 94.65, 10yr 2.30%, Silver $16.10, Platinum $925.88, Palladium $866.15, and Gold… $1,236.00  

That’s it for today, I read in the paper yesterday that we’ll see temps above 100 the rest of the workweek… Times like this is when I was glad I worked inside… For when I was a young man I worked one summer in the heat of Oklahoma, building in-ground swimming pools, nothing like dealing with that every day! Yes, I worked outside doing manual labor during the day, and played my guitar with the band at night… I don’t have the energy now to do either! The grandkids, Delaney, Everett, and Braden all swim in the prelims early this morning, good luck to all of them! I tell them all the time, you’re not racing the person next to you, you’re only racing the time clock… they look at me like I’m from outer space! HA! Head East takes us to the finish line today with their song: Never Been Any Reason… And with that, it’s time… I hope you can go out and make this a Tom Terrific Tuesday! And.. Be Good To Yourself!

  Chuck Butler

 

 

 

 

 

 

Strong Chinese Data Gives Currencies A Boost!

Chuck Butler’s: A Pfennig For Your Thoughts

July 17, 2017

* Another day of weak U.S. data!

* Gold gains $11.10!

* Jamie Dimon tells us his thoughts!

Good Day… And a Marvelous Monday to you! Another grand weekend here in the St. Louis area, but hot, hot, hot! But that’s OK, as long as the skies are blue, and the sun shines too! I was lucky enough to get to spend some time with two of my best pals yesterday, as Duane and Rick dropped by to say hi. Those are always good times when friends just stop by to say hi! Charlie Daniels Band greets me this morning with their song: The South’s Going To Do It Again… 

Well… We have a some things to discuss this morning, but the BIG THING I want to get out there, Front & Center this morning, is that next week starts my summer vacation, and while I don’t expect any entries for the Pfennig while I’m gone for 2 weeks,  there might be a re-run of a recent Pfennig for your reading enjoyment… I’ll remind you again on Friday, but you’ll have to do without me for two weeks. I can’t imagine how in the world you’ll get by! HA! 

The other BIG NEWS this morning is that China reported some very good data this past weekend, and that has given the currencies an extra boost to start the week. China’s 2nd QTR GDP printed 6.9%, better than expected at 6.8%… Industrial Production for June beat the estimates with a 7.6% growth print VS last year. Expectations for IP were for 6.5% growth. And to round out the data prints from China, their June Retail Sales grew 11% VS a year ago. The 11% print beat the estimates, which were 10.6%… 

There was strong domestic demand, and with the first QTR’s GDP print also at 6.9%, it does appear that even with all the bad stuff going on in the Chinese economy, that it will have enough momentum to beat their annual estimate for 2017, which is 6.5%…  The Chinese renminbi, in case you haven’t been following it in the currency roundup, has been allowed to appreciate quite often in recent weeks, and with these data prints, the renminbi moved stronger VS the dollar again. 

Well, last Friday was a “data day” here in the U.S. and I told you last week before the data prints began coming in, that I didn’t expect the dollar to get any buying from those reports, as they’ll be weak, negative, or just plain miss the expectation. And… it didn’t! In fact, the data prints were so weak last week, that by Friday afternoon, when the color of CPI (consumer inflation) and Retail Sales were known, the Dollar Index was trading at a level last seen last Rocktober… One data print after another shows the rot on the economy’s vine, and yet the Fed Heads continue to say we’re going to see stronger growth in the second half, along with inflation… Ahem, let me clear my voice here… Yes, you’re on the air with Chuck, what’s on your mind? Thank you for taking my call, I’m a longtime listener, first time caller… I wanted to point out Janet Yellen did mention that inflation was slowing the other day, just wanted you to recall that… thank you I’ll hang up and listen to your response on the radio.. Ahem… Thank you for your call and comment… Yes, she did express concern that inflation isn’t growing and she claims that the Fed Heads can’t figure it out… You mean to tell me that with the thousands of economists they have at the Eccles Building and in each of the district home offices, that they can’t figure this one out? I can… and I’m just a country bumpkin, but I did learn a lot of my economics from the great Hyman Minsky!

So, here it is… I didn’t want to front run an interview print that will be coming soon with good friend, Dennis Miller, the Retirementor, But,,, what in the world do you expect inflation to do, when you’re hiking rates? Don’t you hike rates to cool down an economy and tamp inflation? Why, yes Chuck, that’s what you do! Seems like a layup to me… If you hike rates, inflation comes down… So, don’t go hiking rates when you’re  looking for inflation to get stronger! I shake my head in disbelief that I’m the only one in this conversation with the Fed that can figure that one out!

Oh, and by the way, CPI was flat as a Pancake (Head East), and therefore the year-on-year inflation growth is just 1.6%…

And the Butler Household Index (BHI) was bang on again, as Retail Sales disappointed with a negative -0.2% print…

And Industrial production was both fair and bad at the same time… The June prince was up 0.4% which was fair, but it was all driven by more Oil drilling… And the bad was the manufacturing component of the index, which was down again in June, and marks several months now where this component is down…

In fact, my friend, and publishing guru, Bill Bonner, had this to say about employment gains here in the U.S. “What interests us are the influences that have reduced the labor participation rate for working-age men from 76% in 1990 to only 69% today.

That represents about 6 million men who would otherwise be contributing to growth and output. Instead of adding valuable goods and services, they are consuming them.

Altogether, there are said to be about 102 million working-age people without jobs. Since there are only about 200 million working-age people, that means that more than 1 out of 2 is unemployed.
What’s worse, more and more of those who do have jobs work in “low-productivity” fields – such as government, leisure, education, and health.” – Bill Bonner from Bill Bonner’s Diary 7/14/17

OK… that was a long winded run through the gauntlet of U.S. economic data, eh?  let’s move on to something else. Like I mentioned above, the currencies are getting an extra boost from the Chinese data this morning, after the US. data prints on Friday started the currencies on their way to the rally tracks. The Big dog, euro, has been the leader of these gains VS the dollar for the currencies, but the Global Growth currencies like the Aussie dollar (A$), which I’ve always maintained was the Proxy for Global Growth, are really pushing the currency appreciation envelope across the table this morning. 

All the currencies have their own story as to why they are rallying… The Singapore dollar (S$) is rallying because it keeps pace with the Chinese renminbi. The Norwegian krone is rallying because not only did the price of Oil retain its $46 handle through the weekend, but the euro is rallying, and that is a sign for the krone to push the rally further.  The Canadian dollar / loonie has really gotten a lot of movement from the rate hike last week, and then the fact that the price of Oil retained its $46 handle. 

“It” all appears to be coming together, folks…  What’s “It”? I’m talking about the end of the strong dollar trend, that I’ve been talking about for a couple of months now, as sentiment changes from the love of dollars to the love of the euro…  Well, this will be a BIG week for the euro, and give us some real understanding of whether or not this overall currency rally is on terra firma or not… 

The European Central Bank (ECB) meets this week on Thursday, and the markets are all thinking that ECB President, Mario Draghi, will start the conversation about how and when some accommodation will be removed… IF that actually happens, we could see the euro really start to move higher… Remember, the technical chartists’ said that 1.1428 was the level the euro needed to trade past, and once there, its next stop would be 1.17…  

About a month ago, I wrote for the Dow Theory Letters (DTL) (www.dowtheoryletters.com) about this change of sentiment in favor of the euro, and said then that I thought we were seeing signs that the strong dollar trend was over, as the dollar can’t get love when it prints a good data report (not that often) , and gets the snot knocked out of it when it prints a weak data report. For those of who were around at the beginning of the last weak dollar trend, (Feb. 2002) will recall how everyday was a new record level for the euro VS the dollar… This time we won’t see any new record levels, but, we’ll revisit some old ones that sure looked good back “in the day”… 

On Friday, Gold was allowed to gain $11.10 to close at $1,228.40, and is up a couple of bucks in the early morning trading today. I just finished off my most recent piece for the DTL and it was on Gold… I have a very important point to make in that letter about Gold and the “boys in the band”… I realize that a DTL subscription costs money, which is pretty tight these days, so once it has printed and been out there for readers for a period of time, I can talk about it here… So, you have that to look forward to! HA!

Have I told you lately, that I love you… No wait! Have I told you lately that… I truly enjoy the writings of Grant Williams and his Things That Go Hmmmm, letter that arrives in my email box every other Sunday? This past Sunday had a quote in it that I thought just supported what I’ve been telling you for some time now … That the U.S. Consumer has tapped out! This was taken from iNet and is investment analyst, Jim Chanos speaking on this very thing…

“(iNet Economics): We’re seeing weak consumer spending numbers in both auto and housing, which are big drivers of the economy. With unemployment so low and the expansion where it is, these figures should be better than they are. There are portents of even worse things when you look at state and federal tax receipts, which are down, and other leading indicators.

It could all just be a soft spot in an ongoing expansion — time will tell. But the narrative we were told is that animal spirits would take us to the next level of economic activity. That clearly is not happening in mid-2017. We’re 8 years into an economic expansion, and economists say that the modern U.S. economy has never gone more than 10 years without a recession. So as recoveries go we are well into it.
People have bought their cars and remodeled their houses and done a lot of things that one does in an economic recovery. I think incremental spending [spending based on increased disposable income] is going to be harder and harder to come by as time goes on.” – Jim Chanos

And all I have to say about that is… Right arm, farm out, and out of state! HA! I guess that should be: right on, far out, and out of sight! Just some old hippie sayings from the early 70’s… 

To recap… Friday’s data day in the U.S. was a disaster, and the dollar got put on the selling blocks right away, and stayed there in the overnight markets, but then saw more sliding after China printed 3 strong, better than expected, data reports this morning, 2nd QTR GDP, Industrial Production and Retail Sales. The currencies are all on the rally tracks this morning, led by the BIG DOG, euro… And Gold gained $11 on Friday!

For What It’s Worth… I received this in my email box over the weekend, and immediately thought this is good stuff for the FWIW…It’s a tirade by JP Morgan’s Jamie Dimon, and can be found on MarketWatch here: http://www.marketwatch.com/story/dimon-says-bad-policies-are-hurting-the-average-american-2017-07-14

Or, here’s your snippet: ” Tell us what you really think, Jamie Dimon.

J.P. Morgan Chase & Co.’s outspoken CEO on Friday broke into an impassioned, expletive-tinged rant on the state of Washington politics and its impact on the U.S. economy during one call to discuss second-quarter results.

Dimon said U.S. growth was held in check by a lack of policy momentum in D.C. that has failed to deliver a spate of pro-growth legislation that could help to boost an otherwise sluggish economy. “We have to focus on policy that is good for all Americans,” Dimon said, speaking Friday morning on a call with reporters to discuss earnings.”

Chuck again… Well he goes on and on about this stuff in the article, so if you want to read his tirade in full, click on the lick above… 

Currencies today 7/17/17… American Style: A$ .7824, kiwi .7332, C$ .79, euro 1.1463, sterling 1.3060, Swiss $.9629, … European Style: rand 12.97, krone 8.1719, SEK 8.3311, HUF 266.94, zloty 3.6764, koruna 22.7669, RUB 59.03, yen 112.45, sing 1.3683, HKD 7.8032, INR 64.30, China 6.7708, peso 17.54, BRL 3.1782, Dollar Index 95.21, Oil $46.67, 10-year 2.31%, Silver $16.01, Platinum $926.10, Palladium $857.98, and Gold.. $1,229.60

That’s it for today… I told you I had a lot to discuss with you, and I kept my word, eh? Cardinals are licking their wounds after losing 2 of 3 to the Pirates to start the second half of the season, and now head to the Big Apple.. I received my new letter from Grant Williams last night, and am looking forward to reading it when I get a chance today. While I’m on vacation, little d, Delaney Grace will turn 10.. Can you believe that? She was born right after I had my first two major cancer surgeries, and so I’ll always know how old she is going to be! There used to be this cute little couple that were Pfennig Readers, and every time they saw me at a show, they would ask to see a recent picture of Delaney… Marvin Gaye and Tammy Terrel take us to the finish line today with their song: Ain’t Nothing Like The Real Thing… And with that, it’s time… I hope you have a Marvelous Monday, and Be Good To Yourself!

Chuck Butler 

 

Today’s The Day… Are You Ready?

Chuck Butler’s: A Pfennig For Your Thoughts

July 14, 2017

  • A Big Day for data here in the U.S.
  • Gold gives back Wednesday’s gains… 
  • What the heck is Denmark thinking?
  • Another hazy, lazy, crazy day of summer… 

 

Good day… And a Happy Friday to one and all! With the way I’ve been feeling this week, I’m ready to attempt to make this a Fantastico Friday! Who’s with me? Baseball gets started again today, YAHOO! Some very loud storms rolled through in the middle of the night here. Our power went out just briefly, but they were so loud they woke me up… The Byrds greet me this morning with their song: Turn, Turn, Turn… 

Well, today’s the day… the day that I give you the details on the Gold price suppression that I’ve been promising you… I’m not going to tell you where you can find it in the letter, so that you’ll read the whole letter… See how tricky I am? First we need to go through the normal process… So, with no further ado, here we go!

It was another hazy, lazy, crazy day of summer yesterday for the currencies, which saw little movement during the day, and only saw some minor gains in the overnight markets. I think that the markets are waiting to see the color of today’s U.S. Data prints before taking any further risks. But as of now, before the data prints here in the U.S., the dollar has a weekly loss… 

And I don’t think it will find any solace in the data prints today that include the stupid CPI and Retail Sales…  I can tell you that the BHI (Butler Household Index) indicates that Retail Sales will reflect the hazy, lazy, crazy, days of summer, but they won’t be negative like in May…  And while I refuse to give two hoots about the stupid CPI, the markets continue to think it’s the Cat’s Meow, and therefore we have to cover it…  And in my opinion, we’ll see CPI (consumer inflation) continue to reflect slowing inflation, which was a concern of Janet Yellen’s this week as she gave two prepared talks to lawmakers. 

And with inflation continuing to slow down, the markets believe that the Fed will have to back off deviate from the “dots”…  Don’t know that is? Ahhh, grasshopper, the Fed uses a graph with dots that are projections of where the Fed Funds interest rates will be. To me, their “dots” are ridiculous… And no one organization, such as the Fed, should be allowed to set market rates… The markets should set their own rates! 

OK, enough on the Fed, before I go down a rabbit hole and don’t ever come back! I’ve got other things to get to today! 

The price of Oil moved higher in the past 24 hours and now trades with a $46 handle… And the Petrol Currencies are taking that move and getting on the rally tracks this morning, led by the Russian Ruble. But the Norwegian krone and Brazilian real are far behind! I told you earlier this week what was pushing the real to higher ground, but now with the price of Oil moving higher, the real has really taken to the higher ground. 

And Gold… I look at yesterday’s trading and just laugh… Not a funny-ha-ha laugh, but more of a cynical laugh, for on Wednesday, Gold gained $2.80 and yesterday it lost $2.70…  But the real short selling came in Silver as the every day man’s Gold, got whacked good!

So, I wrote about this quite a few years ago, long before there was a “change” in my writing…  So, are you ready?  OK, here goes…  Let’s say your job here in the good old USA is to be the guy who’s supposed to protect the value of the dollar. (you’ve done a horrible job, by the way!) And you’ve taken your eye off the ball a couple of times in the past 40 plus years since Gold has freely traded. But when you get you eye back on the ball, you realize that something has to be done to stop the bleeding in the dollar, and it’s all that darn Gold & Silver’s fault! 

So, you devise a plan to short the metals using brokerage houses to execute the trades, and assure them that the regulators will never find their dealing illegal, wink, wink.   I’m not saying that this is what actually goes on, I’m saying it’s a possibility, eh?  So, please keep that scenario in mind as you read this next part…

Well… In lieu of a FWIW today, I have this for you, as promised… this is a memo regarding how the U.S. needed to suppress the price of Gold back in 1974… Well, if it was done then, who’s to say that it isn’t being done now? Read on, or hit the link at the bottom to see the office letterhead, etc. that the memo was written on… Here it is, as promised…

A long memorandum written in March 1974 by a U.S. State Department official for Secretary of State Henry Kissinger and copied to future Federal Reserve Chairman Paul Volcker, then the Treasury Department’s undersecretary for monetary affairs, describes the desire of the United States and its options to prevent European countries from increasing the use of gold in the international financial system.

The memo, titled “Gold and the Monetary System: Potential U.S.-E.C. Conflict,” was recently discovered in the State Department archive by GoldMoney Vice President John Butler and brought to GATA’s attention this week by GoldMoney research chief Alasdair Macleod. It emphasizes the longstanding U.S. government policy of subverting gold as a reserve currency in favor of the Special Drawing Rights issued by the International Monetary Fund, an agency then and now largely controlled by the United States.

The memo’s author, Sidney Weintraub, deputy assistant secretary of state for international finance and development, wrote:

“To encourage and facilitate the eventual demonetization of gold, our position is to keep the present gold price, maintain the present Bretton Woods agreement ban against official gold purchases at above the official price, and encourage the gradual disposition of monetary gold through sales in the private market.

“An alternative route to demonetization could involve a substitution of SDRs for gold with the IMF, with the latter selling the gold gradually on the private market, and allocating the profits on such sales either to the original gold holders or by other agreement.”

Weintraub copied his memo to Volcker just a month before Secretary Kissinger met with his assistant undersecretary of state for economic and business affairs, Thomas O. Enders, to hear a similar argument. Whichever nation or group of nations controls the most gold, Enders explained to Kissinger, can control the currency markets by changing gold’s value periodically. Thus, Enders said, replacing gold as an international reserve with SDRs was in the interest of the United States.

See memo here: http://www.gata.org/files/WeintraubMemo-03-06-1974.pdf

Well, how about that? There’s another memo from Kissinger around that same time, regarding the need for Gold suppression, out on WikiLeaks, that I used to have, but have misplaced it, and when this one came across my desk, I figured it was as damaging as the other one. And did you see the mention above about the used of SDR’s? (Special Drawing Rights) A recent Economist magazine even had a cover story on how they believe that very soon, everyone in the world will be using the same currency… Brother! I shake my head in disbelief and disgust! 

Before I head to the Big Finish today, minus a FWIW, Did you hear about how Denmark has predicted it’ll be the first country in the world to get rid of notes and coins altogether. They’ll be replaced by plastic and tap and go technology as soon as next year.

And Australia might not be far behind…   Wanna know what will be the biggest loss of individual and financial freedom IF it ever takes place here? Moving to a cashless society… But don’t get me started on that! I’m having a good Friday morning so far, and don’t want to ruin it!

But just take a minute and think about that cashless society, sure it will be convenient, but… Imagine all the fees that everyone and their brother will now be able to charge you each month, because they have control of your bank account?  Come on Chuck, move on, you said you were going to!

To recap… it was another hazy, lazy, crazy day of summer again yesterday and it was just too hot, for the currencies to move further against the dollar, but they did see some minor gains in the overnight markets…  I remember when Alex was little and played baseball one game he was told to go the field, and he refused to go, saying that “it was too hot”….  I took him home, and he was not allowed to play baseball again that year.. 

Currencies today 7/14/17… American Style: A$ .7760, kiwi .7315, C$ .7714, euro 1.1415, sterling 1.2965, Swiss $.97, … European Style: rand 13.1889, krone 8.23, SEK 8.3436, HUF18 268.45, zloty 3.6964, koruna 22.8529, RUB 59.91, yen 113.21, sing 1.3744, HKD 7.8087, INR 64.41, China 6.7826, peso 17.65, BRL 3.2080, Dollar Index 95.68, Oil $46.36, 10-year 2.33%, Silver $15.66, Platinum $908.11, Palladium $863.59, and Gold.. $1,218.60

That’s it For today… Little d (Delaney Grace) and brother Everett were at the house last night. Little d as I call her, is so sweet to me. She always runs to give me a hug when she first gets here, and always asks me how I’m feeling, and if I’m alright. And then gives me a kiss when she leaves…  Baseball gets started again tonight after the ASG break, my beloved Cardinals have two weeks to prove that they shouldn’t be broken up as a team… They have the ability get it done, I don’t know if they have the “want”…  Reminds me of one of my fave comedian’s lines.. From Ron White: “I had the right to remain silent… I didn’t have the ability”…  The late great Alvin Lee takes us to the finish line today with his song: Choo, Choo Mama… And with that, it’s time to get off this bus this week, and head to a place where I can have a Fantastico Friday!  Please join me! And Be Good To Yourself!

Chuck Butler

 

And Now She’s Concerned About Our Debt Path?

Chuck Butler’s: A Pfennig For Your Thoughts

July 13, 2017

  • Yellen speaks & the markets move!
  • Dollar index on the slippery slope…
  • Terry Duffy talks about Gold & Silver…
  • A$ & Kiwi kick some tails!

 

Good day… And a Tub Thumpin’ Thursday to you! And I’m ready to do some Tub Thumpin’! I’ve got quite a few things to get to this morning and I don’t want to go on as long as I have lately, so I’ll get right to the meat of the market moving stuff, have some opinions, and more… Loggins & Messina greet me this morning with their song: Nobody But You.. This was from their live double album, that I wore out, years ago… 

Monday, I highlighted the “Mom, he’s doing it again” commercial in reference to the BLS, and their hedonic adjustments…. And today, I have to change a word, to say, “Mom, she’s doing it again!” And of course the “she” is Fed Chair Janet Yellen, who did the first of her two stops on Capitol Hill yesterday, with the second coming today. In her first production of: “things that I’ll tell the lawmakers to get them on my side.” She bobbed and weaved, did a little rope-a-dope, and said her piece and left without any major incidences… I’ll let Yahoo Finance take it from here with their description of her testimony…

“In what may be one of her last appearances before Congress, Yellen depicted an economy that, while growing slowly, continued to add jobs, benefited from steady household consumption and a recent jump in business investment, and was now being supported by stronger economic conditions abroad.

The Fed “continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time,” Yellen said in her prepared testimony. Reductions in the Fed’s portfolio of more than $4 trillion in securities are likely to begin “this year,” she said.
But she also noted that given current stoestimates, the federal funds rate “would not have to rise all that much further” to reach a neutral level that neither encourages nor discourages economic activity. The Fed still feels the economy needs loose, or accommodative, monetary policy, so a lower neutral rate means the Fed may feel compelled to slow the pace of rate hikes down the road.”

See what I mean?  But… she did have this grenade to toss at the lawmakers…. “Let me state in the strongest possible terms that I agree” the U.S. federal debt trend is unsustainable, may hurt productivity, and living standards of Americans.”   Hello? Testing, one, two, is this microphone on? Can you hear me in the back? Good, because I want to make a point here… Where has all this concern about our debt path been for the past 8 years when the debt was doubled?  Come on, inquiring minds want to know!

Well, the Fed Chair did turn a little dovish when she talked about how the Fed Funds rate “would not have to rise all that much further”… And that set the dollar down the slippery slope…  Stocks rallied, currencies rallied, Gold rallied, bonds rallied, and all because she slipped up and sounded a bit dovish.  The Dollar Index feel through the 96 handle and is trading with a 95 handle this morning, with the big mover being Japanese yen, Swedish kroner, and a little help from the euro.  Last fall (Sept.) we saw this type of move in the Dollar Index and it proved to be a false dawn. I thought then that the strong dollar trend was ending, but had to cool my jets for 3 months and wait for the next round of dollar weakness to make that call…

Well, it wasn’t all about Janet yesterday, The Bank of Canada (BOC) did raise their internal rate 25 basis points (1/4%) just like I told you they would do yesterday. The thing I didn’t like about the statement following the rate hike was that the BOC seemed to be content that this hike would tamp the housing bubbles… Hmmm…  seems like a strange comment to make, given this is the first rate hike since 2010!  But then it BOC Gov. Poloz, who as I pointed out the day he was named BOC Gov. and I’ve pointed out several times since, and that is, that he’s from the Trade side of the Gov. the people always whining about how they need a weaker currency to help exports.  And that’s why he’s dragged his feet through a mile of broken glass to keep from hiking rates, but given the recent strong data prints in Canada, this rate hike had to be made… Knowing that a rate hike could push the loonie higher, he had to do/ say something…  And that’s why I think the questionable statement was in the statement.. 

So, yesterday, I talked about Lola, aka Goldman Sachs, sending out a note that they preferred Japanese yen as a safe haven currency over Swiss francs…  Personally, I don’t care for either one of them, the only safe haven currency I know of is Gold (&Silver of course!) , but I digress there… I wanted to point out that Lola says something, and then voila! Things happen! And Japanese yen rallied like the Bank of Japan (BOJ) had just hiked rates 200 Basis Points (2%)!  As recent as Tuesday this week, yen was trading 114.35, and this morning it is trading 112.96. I told my good friends, Kevin and Duane yesterday, while we cooled off at our local watering hole, that apparently, Lola was long yen, and needed to get investors to buy to run up the price so they could unload their long position at a profit… Now, I don’t know if that’s reality or not, but in my years of following currencies, it sure seems like that’s the scenario that exists any time a large Investment House comes out with a statement on a currency out of the blue! 

The three of us also had a long conversation about Gold… I was pleasantly surprised to hear friend Duane, explain the store of wealth story. I thought, “Hey, at least someone is listening to me!”  Well, Gold found a way to carve out a tiny gain yesterday of $2.80, to close at $1,220.00. The shiny metal is up $2.50 in early morning trading today… I told you last week that I had a piece on Gold suppression for you this week, and we’re getting pretty late in the week, aren’t we? Well, I’ll have it for you tomorrow, for sure, promise… 

In Ed Steer’s letter this morning (www.edsteergoldandsilver.com) he has a link to a videoed interview between Neil Cavuto and Terry Duffy who is the CEO of the CME, and instead of having to watch the whole video, he highlighted a comment by Duffy that I think is important for us… Let’s take a listen…  OK, let me set this up… Cavuto asks Duffy why the price of Gold & Silver aren’t higher given all the problems in the world today, and Duffy blurts out, “that with all the problems in the world, people will wake up and precious metals, gold and silver, will be substantially higher — and they will wonder why, and then they will realize that an event does impact the precious metals positively.”

What this a wink, wink that metals prices are about to move “substantially higher”?  I think so, folks… And here’s why I think that… Then Duffy will be able to say, “I warned you!” 

Two HUGE movers overnight, but not part of the Dollar Index, is the A$ and kiwi… I told you previously that these two were not as much in demand given their positive rate differential with the U.S. dollar was narrowing, but when Yellen turned dovish yesterday, these two took off! 

So, the European Central Bank (ECB) will meet next week, and right now, there are so many thoughts going around about how the ECB will announce that they are ready to begin to withdraw accommodation… In other words, dismantle their monetary policy that has them putting negative deposit rates in the banks, and buying so many bonds, that now they have run out of bonds eligible to buy.  These thoughts have helped the euro, but let’s face it, the ECB and president Mario Draghi have disappointed us before, and they could very well do it again next week. 

Either way, I don’t think the sentiment toward the euro will change that much, because by then we’ll have seen more weak U.S. Data, and the Fed’s words about growth picking up in the second half will ring hollow…  The euro wasn’t able to keep above that line in the sand figure of 1.1428, so as I explained yesterday, the euro’s move above the figure didn’t constitute a “complete take out” as it couldn’t hold above the figure for more than a day. The single unit is bouncing back and forth around the 1.14 figure this morning… 

Speaking of data… Here In the U.S. yesterday, the Data Cupboard was dominated by the Janet Yellen show… And she’s scheduled to do an encore today on the other side of the Hill, but it will be a rinse and repeat from yesterday, so unless someone asks her to elaborate further on her thoughts on the debt being “unsustainable”, I doubt we’ll hear much from the speech. 

Today’s Data Cupboard will have the June PPI (wholesale inflation) which won’t do much for the dollar, and the Federal Budget print… And THAT most definitely won’t do much for the dollar, especially given Yellen’s thoughts on debt are fresh on the markets minds right now… 

To recap… It was all about Janet yesterday, well, sort of that is, because the Bank of Canada also made news by hiking rates for the first time since 2010 yesterday. Lola said it liked yen over francs, and yen rallied almost two whole figures! Gold found some scraps at the metals gains table and added $2.80, and CME CEO Terry Duffy gives us a warning about Gold prices… 

For What It’s Worth… I thought this would lighten up the mood a little this morning and it can be found on the Washington Post site here: https://www.washingtonpost.com/news/worldviews/wp/2017/07/12/german-police-are-searching-for-a-stolen-gold-coin-its-the-size-of-a-manhole-cover-and-worth-3-9-million/?utm_term=.d545f8e14851

Or, here’s your snippet: “Brother, can you spare a gigantic gold coin?

Hundreds of special German police officers executed raids across several buildings across southern Berlin early Wednesday, nabbing four suspects in the hunt for a 220-pound gold coin valued at about $3.9 million. It was stolen from Berlin’s Bode Museum in March, where it had been since 2010.

The police, who conducted the raids wearing masks and strapped with heavy weapons according to the Associated Press, are questioning nine others in connection with the missing coin. The four main suspects are related and between 18 and 20 years old.

The coin was not recovered in the operation.

“We assume that the coin was partially or completely sold,” Carsten Pfohl of the Berlin state criminal office said at a news conference. Police are picking apart clothes and vehicles used by the suspects to find traces of gold left behind.”

Chuck again… A Gold coin the size of a manhole cover? WOW! I have a phrase I use when talking about someone who’s cheap.. I say, he throws around quarters like they’re manhole covers…  HA!  Well, I guess this manhole cover sized Gold coin, would make that phrase not very funny any longer!

Currencies today 7/13/17… American Style: A$ .7738, kiwi .7333, C$ .7741, euro 1.14, sterling 1.2918, Swiss $ .9652, … European Style: rand 13.1777, krone 8.2721, SEK 8.3601, HUF 269.24, zloty 3.7120, koruna 22.8954, RUB 60.34, yen 112.96, sing 1.3788, HKD 7.8104, INR 64.42, China 6.7891, peso 17.72, BRL 3.2347, Dollar Index 95.73, Oil $45.36, 10-year 2.31%, Silver $15.92, Platinum $919.60, Palladium $872.77, and Gold.. $1,221.60

That’s it for today… No baseball last night or tonight, as my beloved Cardinals get ready to start the second half of the season in Pittsburgh on Friday night… Carlos Santana was in town last night, and it reminded me of a few years ago, when he was here, and I tool Alex to the concert, and Alex, being an excellent guitar player, wasn’t that impressed with Carlos Santana… I was shocked! And told him that was blasphemy! All 3 grandkids were here yesterday to swim in the pool, as it reached 102 degrees here yesterday! I love it when they are here! And the great Steely Dan takes us to the finish line today with their song from the album of the same name: Aja…  (Steely Dan’s best album in my opinion too!)  OK… Now let’s go out and do some Tub Thumpin’ Today! And Be Good To Yourself!

 

Chuck Butler

 

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Janet Yellen & The Bank of Canada Today…

Chuck Butler’sA Pfennig For Your Thoughts

July 12, 2017

 

Good day… And a Wonderful Wednesday to you! Hot, Hot, Hot… And for all you 80’s music lovers out there (Hi Rick!) I’m not talking about the 1987 hit song, I’m talking about the weather outside! But after spending a majority of the day right here at my writing desk in the air conditioning, it felt real good to go outside and “warm up”! The Outlaws greeted me this morning with their song: Green Grass and High Tides… Now that song will get your motor started in the morning!

The currencies rallied VS the dollar yesterday, but in the overnight markets, there has been some profit taking. UGH! One of the first things I learned as a young trader was: It’s not a profit until you take it!  So, here we are on this Wonderful Wednesday, with the dollar having “bounce days” recently, but for the most part, the sentiment is in the process of switching from the love of dollars to the love of the currencies. 

Last night I was checking the currencies in the Asian markets and saw that the euro was getting very close to climbing above 1.15, but I guess that signaled a sell for profit taking, and the single unit is 1.1457 as I write this morning. Remember when I told you that the chartists / technical traders said that 1.1428 was the last line of defense for the dollar, and if that level was completely taken out, that the next stop for the euro was 1.17?  Well, it sure looks to me as though the 1.1428 level has been completely taken out, or is in the process of doing so… I’m just saying… wink, wink… 

So, what does “completely taken our” mean? Well, it’s really one of those “moving targets” if you will. I view it as the level was taken out, and the asset continued to move above it, and then stayed above the level for a day or two… These brief breaches above a level don’t count in my book! 

Well, today is the day Canadian rates might be raised for the first time since 2010, as the Bank of Canada (BOC) meets. The Canadian bond guys seem to think that the rate hike is in the bag, as they’ve driven bond yields up 26 basis points in the last month.  IF the BOC does hike rates today, and I believe they should, should have, and will be real dolts if they don’t, it will be a 25 basis point (1/4%) move to bring their internal rate to 75 basis points or 3/4’s of a percent… Still pretty darn low, eh? 

I said this a few weeks ago, but that might have been before the email version of the Pfennig was being sent, and it was only being posted on the website: www.dailypfennig.com, which remains the first place you’ll see the Pfennig in case the email version is being delayed. Anyway, getting back to what I was saying, I said this a few weeks ago, and it is really showing up this morning… 

The Norwegian krone is finally getting of its duff, and dusting off its old, strong currency clothes, to see if they still fit! The krone has been held down by the falling Oil price, and the fact that the euro was in the doldrums… But now that the euro is picking up the pace with a strong rally of its own, the krone can take hold of the euro’s coattails and rally too.. It also doesn’t hurt the krone for the price of Oil to not be slipping and sliding down the slippery slope! 

A currency that I don’t talk about often, is also on the rally tracks, and is doing it very quietly, as to not wake up those around it… The Hungarian forint is also grabbing hold of the euro’s coattails and pulled itself up on the rally tracks.  The Hungarian forint (HUF) was once a part of a trio-of- currencies that I called the “Euro Wannabes” that also included the Polish zloty, and the Czech Republic koruna. These three were all in the ERM (exchange rate mechanism) that the currencies had to trade in for a period of time before being accepted into euro club. But one by one they began to have problems with their financials and didn’t meet the criteria of the Maastricht Treaty, which most of the other euro countries didn’t meet either, but this caused each country to eventually pull their currencies out of the ERM, and live for another day. 

And now they sit outside of the euro/ Eurozone, and wait for the day that their financials are better, and their respective currencies are ready for that trip to the ERM.. 

I told you on Monday that the Brazilian real was rallying and I would find out more… Well, here you go! Real traders were anxiously awaiting the voting returns from the Brazilian Senate on a new set of laws on labor… And then yesterday they got their wish, and the Senate approved the law that  aims to reduce costs for businesses and allow firms to negotiate contracts freely with employees.

It was deeply unpopular with unions, who say it will reduce job security and called two general strikes in protest

The vote is expected to give President Michel Temer a boost before Congress’ lower house decides if he should be suspended to face corruption charges. The bill will now be sent to President Temer to be signed into law.

And the real is still on the rally tracks this morning! Overall, the currencies look much healthier this morning as evidenced, sort of, by the drop of the Dollar Index below 96…

I have a friend, Sean Hyman, who is a technical guru when it comes to charts, and he sent me a note the other day, saying that he thought the Dollar Index looked vulnerable and could fall to the 93 region…  I thought, “hmmm, that sure would be good for euros, & Gold”

Speaking of Gold… The shiny metal was allowed to gain $3.10 yesterday and close at $1,217.20.. It lost some ground in the “after hours” trading, but has gained back $2.90 so far this morning in the early trading to sit at $1.216.90..  Did you see this news?>>>>  The Trump administration has taken a key step toward paving the way for a controversial gold, copper and molybdenum mine in Alaska’s Bristol Bay watershed, marking a sharp reversal from President Barack Obama’s opposition to the project.”

The Environmental Protection Agency on Tuesday proposed withdrawing its 2014 determination barring any large-scale mine in the area because it would imperil the region’s valuable sockeye salmon fishery. The agency said it would accept public comments on the proposal for the next 90 days.  Very interesting don’t you think? It’s all politics, and apparently the politics have changed..  But you won’t see me get in the middle of this! I’m just here to report the news! 

The price of Oil has rebounded to trade above the $45 handle this morning.. I have more on this in the FWIW section today, so keep reading to get there! HA!

Yesterday’s U.S Data Cupboard had a couple of interesting prints… Wholesale Inventories and the NFIB Small Business Index. Not exactly what I call “real economic prints” but things to keep an eye on anyway… The NFIB Small Business Index fell in June, and notably the gauge of expected business conditions fell 6 points last month, and the NFIB says that 6 points is “significant”!    We also saw Wholesale Inventories, and for that information I’ll turn this over, ever-so-briefly to the folks at zerohedge.com… 

“Well they “built it”, but in May, “no one came.” Wholesale Inventories rose a better-than-expected 0.4% MoM but sales tumbled worse-than-expected 0.5% (the 3rd monthly decline in a row).
Inventories reversed April’s decline…but sales keep falling…and accelerating…

Automotive inventories rose 0.7% MoM (against April’s 1.4% drop) but Automotive sales dropped 0.5% in April.

Wholesale Inventories are still marginally lower for Q2 so far (-0.13%) providing a modest drag on GDP, but sales are down 0.77% in Q2 with the biggest 3-month decline since March 20.”

Today’s Data Cupboard has the return of the Janet Yellen show for us! The Fed Chair, will make the trip up to the Hill to visit with members of the House one day, and the Senate the next day, in what used to be called the “Humphrey / Hawkins Bill” that required the Fed Chairman to report to Congress the state of the economy twice a year. That bill expired a very long time ago, but Fed Chairmen and now the Chair have continued to give their reports… 

This will be important for the dollar, currencies, Gold and bonds today folks… Because even though she has been wrong since she took over the leadership of the Fed, but continues to rinse and repeat the same line about how the Fed sees a pick up of growth and inflation in the second half this year, the markets will react to what she says..  Why? you ask, since her previous forecasts have as bad as, well, they’ve been bad? 

You’ve got me on that one, Joe… They should get a good belly laugh and then sell dollars if you ask me… But that’s not what they’ll do, IF she rinses and repeats again today. 

It’s a good thing Congress doesn’t request Paul Craig Roberts to give them his report on the economy’s progress… You may recall that name, as Paul Craig Roberts was the Treasury Sec. for President Reagan, and yes that was a long time ago, but he has become a real pain in the side for the Government, as he calls them out all the time..  Here’s a recent tirade from him about the BLS… 

“It is very easy for the government to report a low jobless rate when the government studiously avoids counting the unemployed.

Now, let’s do what I have done month after month year after year. Let’s look at the jobs that the BLS alleges are being created. Remember, most of these alleged jobs are the product of the birth/death model that adds by assumption alone about 100,000 jobs per month. In other words, these jobs come out of a model, not from reality.

Where are these reported jobs? They are where they always are in lowly paid domestic services. Health care and social assistance, about half of which is “ambulatory health care services,” provided 59,000 jobs. Leisure and hospitality provided 36,000 jobs of which 29,300 consist of waitresses and bartenders. Local government rose by 35,000. Manufacturing, once the backbone of the US economy, provided a measly 1,000 jobs.”

His tirade can be found in its entirety here:   http://www.informationclearinghouse.info/47417.htm

Before I head to the Big Finish today, I wanted to highlight something that made me scratch my balding head… Lola, aka Goldman Sachs, has issued a report calling for Japanese yen to become the better safe haven than Swiss francs..  Wait! What? Japanese yen? You’re kidding me right? And don’t tell me I’m your favorite goat! Come on Lola what have you been smoking? Japanese yen? YIKES!  I have to steer clear of that one folks, otherwise I’m going to get in trouble with the folks at Lola… 

And one more thing… some folks ask me from time to time why I call Goldman Sachs, Lola.. Because you know the song, “what Lola wants, Lola gets”, and that describes Goldman to a T… 

To recap… The lazy, hazy, crazy days of summer found some shade yesterday, and cooled off, which allowed the currencies, for the most part to rally VS the dollar. The currencies were stronger last night before some profit taking took place. The Bank of Canada meets today and are expected to hike rates 25 basis points, their first rate since 2010. And more weak data for the U.S. yesterday.. 

For What It’s Worth… I mentioned above that the price of Oil had gained a bit yesterday, and there are two reasons for this… And both of them are discussed in this article that can be found here: https://www.bloomberg.com/news/articles/2017-07-10/oil-holds-gains-above-44-as-u-s-crude-stockpiles-seen-falling

Or, here’s your snippet: “Oil rose the most in more than a week after the Energy Information Administration cut its U.S. crude output forecast for next year and as investors focused on the pace of rebalancing.

The EIA cut its 2018 crude output forecast to 9.9 million barrels a day from 10.01 estimated in June. It’s the first time the EIA lowered its forecast for 2018 production since the agency started posting the estimates in January. The market earlier shrugged off a report that Saudi Arabia, the world’s biggest oil exporter, told OPEC it raised output above its agreed-upon limits.

“This pull-back in production is kind of wake-up call to people who thought that shale was going to be viable no matter what OPEC did,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone. If output doesn’t rise as much as previously anticipated, “then it’s time for the bears to start questioning their religion again.”

Chuck again… Boy, do I wish I had read this article before sending off my most recent piece for the Dow Theory Letters website (www.dowtheoryletters.com) for I wrote about Oil… and the what moves the price, etc. And called for Oil to remain range bound in price… I used to tell this joke, about a dumb guy, who is a comedian, and he says, “I’m a dumb comedian ask me what the hardest part of my job is” and before the respondent can finish his response, the comedian says, “timing”…
That’s how I feel this morning… timing is everything, especially when you mistimed something!

Currencies today 7/12/17… American Style: A$ .7650, kiwi .7233, C$ .7738, euro 1.1457, sterling 1.2851, Swiss $.9628, … European Style: 13.3798, krone 8.2616, SEK 8.4149, HUF 268.38, zloty 3.7037, koruna 22.7881, RUB 60.61, yen 113.44, sing 1.3844, HKD 7.8119, INR 64.55, China 6.8019, peso 17.89, BRL 3.2512, Dollar Index 95.72, Oil $45.77, 10yr 2.35%, Silver $15.80, Platinum $906.75, Palladium $859.01, and Gold… $1,216.90

That’s it for today… Well, I tried to stay awake for the All-Star Game last night, but didn’t quite make it. I did see Cardinals catcher Yadier Molina, hit a home run though!  But the NL lost 2-1, UGH! Growing up, I don’t recall seeing the AL win an All-Star Game, but as an adult, they’ve won quite a few! Cardinals pitcher, Carlos Martinez pitched very well for his 2 innings. And I’ve gone on too darn long today, sorry… I hope you have a Wonderful Wednesday, and remember to be Good To Yourself!

Chuck Butler