It’s Just Short-Term Trading..

February 23, 2018

* Retail Sales in Canada falter…

* Dollar buying ends in the overnight markets…    

Good Day…  And a Happy Friday to one and all! A much better night’s sleep for your truly last night, has me ready to go this morning! Go where? Nowhere in particular, but once my fat fingers begin flying across the keyboard, only the Shadow knows where they will take us! How about that U.S. Men’s Curling Team? My adopted team for this Olympics, have stormed back from a rocky start and will be in the Gold Medal Game on Saturday! WOW! Tom Petty & the Heartbreakers greet me this morning with what should be my theme song… I Won’t Back Down..  

Another day of very little data here in the U.S. or for that matter around the world… Canada did print their December Retail Sales, and loonie traders wished that the report had not printed! Canadian Retail Sales for December dropped by -0.08%…  That report finished out the 4th QTR, for the Canadian economy, and left it with a sour taste in its mouth, for sure! Especially when a 0.2% increase was expected! This is the worst Retail Sales report since March of 2016, and really points to something that I’ve been warning the Bank of Canada (BOC) about for a couple of years now…  

And that’s the Housing Bubble in Toronto and Vancouver, and how the BOC needed to hiking rates a long time ago… How does this tie in to the awful print of Retail Sales?  Well, look at like this… Home values keep rising, and home owners kept taking equity out of those homes, and spending it, but there comes a time when there’s no more blood in the turnip, right? Well, it looks like this is the time, and if the BOC had nipped the housing bubble in the bud when it had the opportunity, then all this wouldn’t be happening!  

Needless to say the loonie got whacked on the data print, as it should have, and opposite of how the U.S. dollar bugs traded the dollar after the U.S. printed its own negative Retail Sales figure last week! 

Well, the dollar buying ended in the overnight markets last night, and the currencies are attempting to rebound… They’ll need Paul Silas to grad a strong rebound though, as we’re ending the week of not much news, and I get the feeling that traders just want to do their 8 and get out of there today… 

The euro has gotten up off the canvas and climbed back to 1.23 this morning, and the Dollar Index has fallen back below 90 again… Gold saw trading yesterday that it hasn’t seen in a while. The trading volume was 188,000 contracts! That’s it! And without all the short Gold paper trades, Gold saw a rise in its price of $7.40 on the day…  Where were the short paper traders? Maybe they all had to attend continuing education classes yesterday, HA! But I don’t care where they went, and I would hope that wherever they went, that they stay there! They don’t have to go away mad… They just have to go away!   

The price of Oil got a boost yesterday, when the Oil supplies data showed an unexpected drop for last week. But Oil’s rise in price hasn’t helped the Petrol Currencies this morning. I think the Petrol Currency Traders have finally figured out just what the heck is going on here and they aren’t going to be caught going back and forth with the price of Oil any longer!

I would hope that they finally saw the trees in the forest here! I never said that they were rocket scientists!  

In Russia overnight, they printed their latest PMI (manufacturing index), and even with the economic sanctions that the U.S. and Eurozone have placed on Russia, their Feb PMI number gained! The Feb PMI was 52.1 VS 51.6 in January… Remember.. any number above 50 indicates expansion of the manufacturing sector… I’m just thoroughly impresses with the Russian economy given the obstacles it’s had to face… I’m telling you once again that the Central Bank of Russia (CBR) Gov. Elvira Nabiullina is the best Central Banker out there… And that goes a long way toward how the economy reacts, the currency trades and the overall outlook for the country improves!  

Not like the shenanigans that go on in Japan, and the U.S. with our Central Bankers, that’s for sure! 

OK… back to the euro…  It would seem, that if you just looked at this week’s trading that the dollar is once again on top and the euro is getting sold…  But those are short-term moves folks… The upward trajectory of the Eurozone’s economy is still in place, and in my humble opinion, the pricing of the removal of stimulus by the European Central Bank (ECB) hasn’t really begun to set it, which would be a HUGE boost for the euro when it does. 

So, what I’m saying is this… Don’t get your shorts all bunched up over what’s happened this week… It’s short-term trading, and has nothing to do with the new weak dollar trend that’s been in place since the middle of last year.  So, what does this week’s trading present us with? Buying at cheaper levels that’s what!    

So, I’m ending this a little short today, as I can’t make up stuff to write about, and the markets just aren’t giving me anything!  Besides, I’ve got a real treat for you in the FWIW section today… It’s Dennis Miller with some jaw-dropping information on Social Security for us!  

To recap…  The dollar buying ended overnight, and the currencies are attempting a rebound this morning. The euro has climbed back to 1.23, and Gold gained $7.40 yesterday.  Canadian Retail Sales were awful in December, and Chuck points to the root reason why. The loonie got whacked as it should!   No data, no news, a shorter than usual Pfennig today…  

For What It’s Worth… Longtime readers know that I have a good friend, named Dennis Miller, the Retirementor. Dennis writes a letter that’s geared to retirees or investors that are thinking about retiring.  He writes about things that are so important, and when he does, I highlight his writing as I’m doing today…  Please check out  https://milleronthemoney.com/     Today’s letter is about Social Security.. 

And here’s your snippet: “Did I achieve a journalistic milestone? I got my first tip from an insider. What I learned is darn important for our readers.

Our article “The Social (IN)Security Charade”, discussed how the government gave us a COLA increase and took it right back by increasing medical premiums.

The tipster confirmed I was spot on – however, I barely scratched the surface. While I prefer interviewing the experts, he politely declined, wishing to remain anonymous (now John Doe).

John’s concerned; all generations need to know the facts, so they can plan accordingly. After following his research suggestions, I’ve come to a conclusion about social security.”  

Chuck Again… This is important stuff folks… please check it out, and while your there, sign up for Dennis’ letter, I think you’ll be glad you did!   

Currencies today 2/23/18… American Style: A$ .7815, kiwi .7292, C$ .7869, euro 1.23, sterling 1.3948, Swiss $1.0703, … European Style: rand 11.6040, krone 7.8656, SEK 8.1612, forint 254.29, zloty 3.3893, koruna 20.5518, RUB 56.64, yen 106.82, sing 1.3223, HKD 7.8222, INR 64.84, China 6.3508, peso 18.59, BRL 3.2603, Dollar Index 89.93, Oil $62.39, 10-year 2.89%, Silver $16.59, Platinum $ 993.75, Palladium $1,037.41, and Gold… $1,331.50   

That’s it for today…  Well, February is winding down next week, and that brings us to March, one of my fave months! As tradition calls for, I’ll be on be on vacation from writing for two weeks in March… I’ll miss you each day, but you can be assured that I’m recharging my batteries for the future!  The Number 1 recruit in basketball last year was Michael Porter, Jr. and he chose to play at my beloved Mizzou! He then got hurt in the first game, had back surgery, and is now cleared to play again! Watch out SEC! And with that, Melvin and the Blue Notes takes us to the finish line today with their song: If You Don’t Know Me By Now…   I hope you can make this a Fantastico Friday, and Be Good To Yourself!  

Chuck Butler

FOMC’s Minutes Roils The Markets!

February 22, 2018   

* Fed minutes are the same-o, same-0 to Chuck!

* Another blow to Carney’s rate hike promises… 

 

Good Day… And a Tub Thumpin’ Thursday to you! I have an early date with the Honda Service garage this morning to deal with some brake adjustments… But… I truly believe that I’ll be on my way to a Tub Thumpin’ Thursday later today! Last night, I had one of the best meals I’ve had in years, and shared it with friends that made the meal even better! We feasted at the Okeechobee Steak House, the oldest steakhouse in Florida, and brother I ate more last night than I have since my Labor Day BBQ! That’s nearly 6 months ago, folks… I sure hope I don’t have to wait another 6 months before enjoying a meal like that again! I do have to admit though that during most of these past 6 months I’ve not felt like eating… I guess being off the chemo for a month now, has its benefits, eh? The group Live greets me this morning with their song: I Alone…  

The FOMC Meeting Minutes that  saw the light of day yesterday upset the stock market rally cart and brought about more dollar buying late in the day, and carried over in the overnight markets. So, I guess we have to dig into the Minutes to see what all this fuss is about, eh? 

Let’s see here… I see nothing new. The Fed Heads have been spewing this garbage to the markets and investors for some time now. They basically said, “that  they have revised upward the economic and inflation projections they made at the previous meeting in December. The Fed Heads  see increased economic growth and an uptick in inflation as justification to continue to raise interest rates gradually, according to minutes from the central bank’s latest meeting.  

Of course I disagree to a point, in that I do agree that inflation is going to become a real problem for the U.S. economy, but I don’t agree with the “increased economic growth”, unless that is you’re comparing today’s economy with that of 2008! And that’s where the Fed Heads get to hide behind their words… They didn’t say that that think the increased economic growth was compared to anything, and knowing them the way I do, they could very well be comparing today to 2008!  OK, maybe not that extreme, but you get the picture…  For the record, I’m calling for low growth, and high inflation going forward. Stagnation if you will.. 

Of course these minutes were recorded 6 weeks ago, and the Fed Heads certainly didn’t know that January Retail Sales would print negative, along with Industrial Production…  I’m just saying…  

So, more rate hikes are on the horizon and that spooked the stocks market, and sent the yield on the 10-year Treasury to a 4-year high if 2.93%. Gold held steady Eddie, but is getting sold in the early morning trading today by $7.   

Then, to top the FOMC Meeting Minutes, Fed Head,  Quarles, had this to say… “The U.S. economy appears to be performing very well and, certainly, is in the best shape that it has been in since the crisis and, by many metrics, since well before the crisis.”   Really? Tell that to all the malls that are closing up, the stores that have shuttered, and the car makers, who are about to see car sales go for a ride on the slippery slope, in my opinion, which could be wrong, of course! 

Poor Mark Carney… The other day, I looked up the definition of putting one’s foot in its mouth, and they had a picture of Mark Carney! For those new readers, Mark Carney is the Gov. of the Bank of England (BOE), and before that job he held a similar job at the Bank of Canada (BOC)…  And it’s there at the BOC that he got his reputation, called by me, of making promises to hike rates, and then never coming through with them. 

The sad thing is that recently when Carney called for rate hikes to come, it marked the 3rd time he has done so, having done one at the BOC, and now two at the BOE…  Yesterday, I told you that his rate hike call got a blow to the midsection with an increase in the Unemployment Rate, and today his rate hike call received an upper cut, from a weaker 4th QTR GDP than previously printed…  Yes, 4th QTR GDP was revised downward, as was the Year-on-Year data…  Where have all the rate hikes gone? Long time passing, eh, Mark Carney?   

And the pound gets caught up in all this, which is why, I continued to question the mental geniuses that keep buying the pound, whenever Carney speaks about rate hikes… They aren’t coming, any time soon, folks, and that’s all I’m going to say about that!  

That Indian rupee warning I gave you last week, sure seems to be playing out with the rupee trading to 65 handle (it’s a European priced currency so the higher the number the lower the value VS dollars) Crazy rupee traders that though the way to currency appreciation was through extended and increased Stimulus…  If they only listened to me! HA! 

I mentioned above that I think car sales are going to begin to really drop. We could see an indication of that in the Retail Sales data that printed last week for January. When you took out the car sales, Retail Sales were flat, instead of negative.  My new fave economist, Danielle Di Martino Booth, sent out her weekly letter (that costs) yesterday, and it was titled: Clear and Present Danger: Will Autos Crash The U.S. Economy?  

She give us a teaser, saying: “This week I’ve taken the opportunity of being called out to make some calls to the best and the brightest covering the auto sector. The analysis and data they provided from multiple sources provided plenty of back-up to support my initial assessment. If anything, I fear forecasts calling for new car sales to decline to a 16.7-million annual rate are overly optimistic.”  

Yikes! I’ve said for sometime now, that I see new cars being driven all over, and sooner or later, everyone that wanted and could afford a new car and even those that can’t afford a new car have bought them, and there had to be a leveling off… And now Ms. Booth, agrees with me! YAHOO! I got someone to agree with me, that’s a real economist! YAHOO!  I’m going out on the deck that overlooks the beach and ocean and yelling this out loud! 

To recap… the Fed’s FOMC Meeting Minutes roiled the markets yesterday, and have sent stocks, currencies and metals down, and bond yields higher, as the Fed Heads are calling for more rate hikes…  The U.K. saw a downward revision to their 4th QTR GDP, and sterling got sold.  And Chuck doesn’t agree with the Fed Heads, go figure, right?  

For What It’s Worth….  I told you earlier this week that the only data that would print this week was some housing data, and yesterday was one of those housing data prints… Existing Home Sales, and brother is there a problem here… this appeared here: https://www.zerohedge.com/news/2018-02-21/existing-home-sales-extend-plunge-december-nar-blames-inventory-not-rates  

Or, here’s your snippet: “After new- and existing-home sales tumbled in December, expectations were for a modest 0.5% rebound in January (despite plunging mortgage applications and soaring rates). But that did not happen as existing home sales tumbled 3.2% MoM to its lowest level since Aug 2016.

(NOTE – this data is based on signed contracts from Nov/Dec, which means the recent spike in rates is not even hitting this yet)

The West (-5.0%) and Midwest (-6.0%) saw the biggest drop in sales and while the blame (see below) was put on inventories, data shows a 4.1% increase, in “available for sale” homes?

Of course NAR is careful to blame inventories – and not soaring rates affecting affordability: Lawrence Yun, NAR chief economist, says January’s retreat in closings highlights the housing market’s glaring inventory shortage to start 2018.

“The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month,” he said.”  

Chuck Again…  Houston, we have a problem… I’m just saying…  

Currencies today 2/22/18… American Style: A$ .7820, kiwi .7332, C$ .7880, euro 1.2284, sterling 1.3877, Swiss $1.0661, … European Style: rand 11.6945, krone 7.8945, SEK 8.1372, forint 254.24, zloty 3.40, koruna 20.6187, RUB 56.60, yen 107.35, sing 1.3223, HKD 7.820, INR 65.05, China 6.3412, peso 18.78, BRL 3.2558, Dollar Index 90.05, Oil $61.49, 10yr 2.93%, Silver $16.49, Platinum $986.68, Palladium $1,026.65, and Gold… $1,325.70   

That’s it for today… Happy Birthday George Washington! I won’t get into my discussion I had on Lincoln’s Birthday, but it applies to today too! Congrats to the U.S. Women’s Hockey Team for their Gold medal win last night… This game was decided by a shoot out, and even though the U.S. won, I still say that it’s no way to decide a Championship! Sunday is getting closer… My first Spring Training game this year! The end of February next week will mean that my building friends will be leaving to go back home…  Hopefully we get to get together again next year! But March brings friends from St. Louis, then my Spring Training buddies, then darling daughter Dawn, Delaney, Everett and Jerry, so I’ll have plenty of company in March! YAHOO!    And with that, Cheap Trick takes us to the finish line today with their song: I Want You To Want Me…  Now, let’s go make this a Tub Thumpin’ Thursday, and remember to Be Good To Yourself!  

Chuck Butler

Lola Moves The Markets Again…

February 21, 2018  

* The Treasury’s Auction Meets Higher Yields! 

* Russia continues to add HUGE amounts of Gold! 

 

Good Day… And a Wonderful Wednesday to you! What an awful night for the sports teams that I follow… First off, the USA Men’s hockey team lost in a shoot out last night. What a horrible way to end a game, with a shoot out! UGH! There was no T.J. Oshie to save the U.S. this go around!  Our Blues lost, the St. Louis Billikens lost, and the one that hurt me the most was that my beloved Missouri Tigers lost on their home court! UGH! The Gin Blossoms greet me this morning with their song: Hey Jealousy…  

The topper on all those losses was the fact that Lola aka Goldman Sachs, says that all this fuss about debt worries are not to worry about, and the dollar shouldn’t be getting caught up in the worries…  So, OK, I don’t have any idea if this scenario actually happened, but in my mind this is how it came about…  The U.S. Fed gives Lola a call… “Hello, yes, I can hear you just fine… What’s up?  The Fed: We need some help… you see we’ve been telling everyone from the Gov’t. to the sheeple that the economy is just fine, no worries on the debt, and that to not worry, be happy… But “things” keep popping up telling everyone differently… Could you spread the word that everything’s right on the night?   Lola: Of course! We would be glad to, for it helps us to get stocks out the door!”  OK, this call never happened right? Right…    

And the sheeple followed, and before you could say, What happened? The dollar buying became the thing to do again, and all those currency and metals levels from last week that looked like they were ready for a moon shot higher, are no longer on the launch pad. They’ve been shuttled back to the storage garage…  I’m so tired of these “manipulators” that swing assets to their way of thinking or someone else’s way of thinking that they agree with!  

Here’s something for Lola and the rest of the manipulators to think about… Speaking of the rebound in the stock market… Longtime readers know that I often say, “I’m not a tock jockey”… But I do follow stocks, and I follow people who write about stocks, and the other day, I had an article sent to me from a guy that really follows the stock market… He claims, like I often do, that the Plunge Protection Team (PPT), which consists of the Fed, Treasury, the SEC, and the CFTC, was responsible for propping up the stock market last week… In fact, he points to a report from a good friend of his that works at a large public pension fund, who claims that his firm did a “stress test” with the data he had provided to him from the Big public pensions… And he says…

“Based on all current stated underfunding at every big pension fund, if the DOW/ SPX declined 10% or more over a sustained period of time (3-4 months) that EVERY PUBLIC PENSION FUND IN THE COUNTRY WOULD COLLAPSE!!!! He then goes on to show that every 10% drop in the stock market since August 2015 has been met with an equally forceful recovery… I found this at www.investmentresearchdynamics.com The study is pretty convincing to those that don’t believe in the PPT…

Well, I told you yesterday morning that Gold was getting whacked at that time by $15, and the whacking didn’t stop there, as Gold finished the day down $17… Why? Because the short Gold paper traders saw to it that it happened! I have a challenge for you dear reader… Write your Congressman / woman, or representative in the House, and tell them 1. The Fed needs to be audited, and 2. To put pressure on the CFTC to come clean with their findings of Gold & Silver price manipulation… Will you do that for me?  

OK…  Recall me telling you many times over and over again that this dance is gonna be a drag? No Wait! Not that! I’ve told you over and over again that the accumulation of debt by the U.S. was going to eventually cause problems with selling Treasuries to finance the debt? And that yields on those Treasuries would have to move much higher to get foreigners interested in buying them…

Well, the higher levels are being demanded already by buyers, as yesterday’s auction of $179 Billion of 3 and 6 month Treasury Bills saw the markets demand higher yields on the Bills, and the yields on these two Bills rose to levels not seen since 2008!  Oh, and the Treasury has $258 Billion of longer bonds to auction still this week…  Hello Mr. Treasury yield, what floor are you going to? The top floor, please, and don’t stop along the way for me!    

I told you yesterday that there’s not much in the way of U.S. Data for this week, but we will see the color of the Fed’s FOMC Meeting Minutes this afternoon… and the markets are waiting with much anticipation to see why it was that central bank officials pledged to make “further gradual adjustments” in interest rates as opposed to simply “gradual adjustments” at last month’s gathering.  To me, I couldn’t give two hoots to find this out, but the markets seem to be Nervous Nellies about this, so I’m talking about it..    

Well, this is shorter than usual this morning, because I’m not on top of the world today…  But keep in mind that currency trends are not ONE-WAY Streets and there is volatility within the trend… So, I’m going to look for bargains here and think it would be a prudent thing for all investors to do..  I’m just saying…  

Oh! I almost forgot to point out two things this morning… First, U.K. Unemployment ticked higher last month, which is not going to help Bank of England Gov. Mark Carney’s quest to hike rates… Sterling got sold on the data, and the other thing is that Russia added 600,000 ounces of Gold to their stockpile last month… At least they tell us what they’re adding, as opposed to China who keeps everything under their coats… 

To recap…. The dollar is back to being bought, courtesy of Lola, and Chuck has a scenario that he made up that makes a ton of sense… Gold got whacked badly yesterday losing $17 on the day, but is flat this morning so far. The Treasury is about to find out just how much demand there is for their Bonds that need to be sold to finance the exploding debt… The Treasury got a glimpse of what will be needed yesterday, but has a ton of more bonds to auction this week…   And the Fed’s FOMC Meeting Minutes will print this afternoon…   

For What It’s Worth… Well, with the President trumpeting his new Tax Cut Bill as the reason for this turn around in small business growth, I thought it would be good to highlight the growth.. a good story for once, eh? And it can be found here: https://www.cnbc.com/2018/02/20/small-business-confidence-hits-record-in-2018-after-tax-reform-win.html   

Or, here’s your snippet: “Small-business confidence is surging in 2018 as optimism rises among small-business owners about the newly enacted tax-reform package, according to the latest CNBC/SurveyMonkey Small Business Survey, released Tuesday.

The CNBC/SurveyMonkey Q1 Small Business Confidence Index saw an increase of five points, from 57 to 62, a record high and the largest quarter-to-quarter move the index has seen since CNBC and SurveyMonkey began measuring last year. This is the first survey since President Donald Trump signed the Tax Cuts and Jobs Act into law on December 22, 2017.

In the Q4 survey, small-business owners were split evenly on the core question about the effect that tax policy would have on their business. Opinions have shifted significantly: Twice as many now expect changes in tax policy to have a positive rather than negative effect on their businesses. Forty-six percent of those surveyed say tax policy changes will have a positive effect, up from 38 percent in the fourth quarter. The number of those saying tax policy changes will have a negative impact fell sharply, from 36 percent in the fourth quarter to 23 percent in the most recent survey. ”  

Chuck Again… Well isn’t that all just peachy? I’m just saying…  

Currencies today 2/21/18… American Style: A$ .7850, kiwi .7340, C$ .7898, euro 1.2320, sterling 1.3914, Swiss $ 1.0670, … European Style: rand 11.7193, krone 7.8400, SEK 8.0980, forint 253.20, zloty 3.3720, koruna 20.5717, RUB 56.50, yen 107.45, sing 1.3207, HKD 7.8248, INR 64.81, China 6.3443, peso 18.72, BRL 3.2416, Dollar Index 89.89, Oil $61.35, 10yr 2.89%, Silver $16.48, Platinum $996.19, Palladium $1,026.24, and Gold.. $1,330.90   

That’s it for today… That was a heartbreaker, the U.S. Men’s hockey game last night…  No Miracle movie for this team…  The wind is still present outside this morning, but the sun is shining so I won’t complain! In just two weeks, my spring training buddies will be here… My first game at Roger Dean is this Sunday, with some friends here in the building. I can’t wait to walk up the ramp for us not able to negotiate steps too well, and see the field, I always get a chill down my spine, and tear in my eye, the first time at the ballpark, because, well, if it were up to the American Cancer Society, I would not be able to experience the ballpark any longer… I’m lucky, and I know it…   And with that, James Taylor takes us to the finish line today with his song: How Sweet It Is To Be Loved By You…  Now, go write that letter, and have a Wonderful Wednesday, but remember to be Good To Yourself!    

Chuck Butler

There’s A New Foul Smell In The Air…

February 20, 2018  

* Switching from euros to yen? Really

* Gold gets whacked again 

Good day and a Tom Terrific Tuesday to you! If you were lucky enough to be able to celebrate a 3-day Holiday weekend, good for you! I thought to myself and then even mentioned it to someone here that the weather we had last week and through the weekend reminded me of one of my fave movies: Groundhog Day, where every day was repeated.. All good things come to an end though, and the wind returned yesterday. At least it’s a warm wind now! The Olympics have been good TV at night, and Spring Training is in full mode now. YAHOO! Supertramp greets me this morning with their song: Give A Little Bit…

I’m really into the Olympic Curling… Looks to me like it would be a good “drinking game”, like botche ball, bowling, shuffle board, and some others! My stomach seems to be betting straightened out, at least so far that is, and that’s all I know from Lake Woebegone! HA! With the U.S. on Holiday yesterday, the overseas markets decided to  move things in the wrong direction…. The euro lost about ½-cent on the day, along with the Aussie dollar (A$), and Gold is getting whacked this morning, I was waiting for this to come along, by $15… No data prints, but “the boys in the band” have become so brazen that they feel they don’t need no stinkin’ data to cause a disruption in the rally of Gold! 

In the overnight markets, last night, the selling of the currencies and metals continued. Suddenly there’s an air in the markets that’s foul, to me that is… And I’m talking about this “The U.S. economy is strong, so buy dollars, because interest rates are going to rise.”  Well, in my humble country bumpkin opinion, they have some of that right… The U.S. economy isn’t strong, and interest rates might be going up, but not because of the strong economy, but rather they might be going up because we have knucklehead Fed Heads and they have a different agenda for rates than what the economy calls for!  

I just sent off my Dow Theory Letters submission for this week, and in it I dive really deep show readers that what’s really going on in the economy. I’m telling you now so you’ll listen to me later, the www.dowtheoryletters.com site is very good, with different economic/ markets writers each day, and culminating with the Aden Sisters on Friday and a classic Richard Russell letter. It does cost money, but Shoot Rudy, only the Pfennig is free! 

OK… That public service announcement was brought to you by the good folks of Aden Research!  

The new foul air that I talked about above has really taken off in a new direction, and the euro is getting sold because of that. Germany, the Eurozone’s largest economy, saw the Economic Sentiment Index, as measured by the think tank ZEW, remain positive last month, and this comment on the German economy from ZEW followed the data print.  “The latest survey results continue to show a positive outlook for the German economy. The assessment of the current economic situation is still on a very high level and the economy is expected to improve in the coming six months. Economic growth in Germany is substantially driven by the very good development of both the global economy and private consumption. Inflation expectations for Germany and the Eurozone have also started to increase.”    

And on top of all that foul air, is another smelly subject, and that is an article on Bloomberg this morning that talks about how traders have grown tired of waiting for the European Central Bank (ECB) to begin to unwind their stimulus, and have switched to buying yen to short the dollar… Recall, I was questioning how in the world yen was rallying lately? Well, here’s your answer!  What on God’s Green Earth are these traders thinking? What’s in yen that so sexy?  I just don’t see it, and I think these traders will rue the day they thought yen was a better alternative! 

A look around the currencies this morning shows that the Russian ruble, Norwegian krone,  and Brazilian real are the only currencies trading in the green this morning, and those moves aren’t exactly show stealing!  The price of Oil ratcheted upward since Friday, and that has helped these Petrol Currencies to at least hold on to Friday’s gains. 

Remember last week when I told you that in India, PM Modi had announced that stimulus measures would not only be extended but also added to and that the ruble was rallying on that news, but I doubted the rally would last because that stimulus news was not a good fundamental? Well, once again, things went my way, and the Indian ruble has given back all those knee-jerk reaction gains, and more… 

I do have something that I saw last night, that’s not in my DTL letter this week, so a bonus for free! And that is a little thing called a report that the St. Louis Fed (FRED) issued that tracks Household’s Net Worth as a percentage of Disposable Personal Income…  And guess where we are right here and now?  Well, let me set this up first… In the past 18 years we’ve been above the 600% level of Household New Worth (which is really just pure debt) and that was 2000, and 2007, and we all know what happened in those years, right?  Well.. 2018 has the largest divergence in modern history, and sits today around 680%!!!!!!    Hey! I don’t make this stuff up folks, it’s right there on The St. Louis Fed’s website!

The U.S. Data Cupboard printed the stupid Consumer Confidence Index for this month, and believe it or don’t, Consumer Confidence in the U.S. is soaring! The Index rose from an already unbelievable number 95.7 to 99.9! I know, I know, it’s all about the stock market, and its recovery last week back to the 25,000 level, but still, Confidence is soaring? Please!

In addition, the Import Price Index for January printed, and I don’t know why I’m talking about this, because the markets don’t care about it, but, Import Prices rose 1% in January… Makes sense to me, given the dollar’s 2% decline in the month.

U.S. Data this week is sparse… In fact we’ll only see some data prints on Wednesday and Thursday… And those prints will be non-market moving, so a week that the dollar has to trade on its own… Hmmm…  But from the looks of how we’re starting the week… UGH!   

Gold saw little movement yesterday while we were perusing the mattress sales, but this morning is a different story, as I said above, the shiny metal is getting whacked in the early morning trading today…  $1,350 seems to be the line in the sand that “the boys in the band” have drawn on Gold’s price, because every time Gold rises to that level, it gets brought back down, and not by a small amount, just like today… UGH! One of these days, Alice… To The Moon!  But until “that day” we have to deal with these turkeys that trade short Gold paper trades.    

To Recap….  A 3-day Holiday weekend, kept the markets from moving yesterday, but in the overnight markets, dollar buying is back, and only the Petrol Currencies have carved out some small gains this morning… The euro couldn’t even gain a shekel or two after a good ZEW report this morning, and Chuck points out that traders are shifting to buying yen to short dollars… Hmmm, Chuck thinks they’ll rue the day they did that! 

For What It’s Worth…  This is pretty interesting in that it’s Lawrence Kotlikoff speaking, he’s the professor that believes that instead of the $112 Trillion of Unfunded Liabilities that on the books of the U.S. that the number is greater than $200 Trillion…  You can find the article on Forbes, here: https://www.forbes.com/sites/kotlikoff/2017/12/08/has-our-government-spent-21-trillion-of-our-money-without-telling-us/#26c08a8c7aef   

Or, here’s your snippet: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.” ~ Article I, Section 9, Clause 7, The US Constitution.

On July 26, 2016, the Office of the Inspector General (OIG) issued a report “Army General Fund Adjustments Not Adequately Documented or Supported”. The report indicates that for fiscal year 2015 the Army failed to provide adequate support for $6.5 trillion in journal voucher adjustments. According to the GAO’s Comptroller General, “Journal vouchers are summary-level accounting adjustments made when balances between systems cannot be reconciled. Often these journal vouchers are unsupported, meaning they lack supporting documentation to justify the adjustment or are not tied to specific accounting transactions…. For an auditor, journal vouchers are a red flag for transactions not being captured, reported, or summarized correctly.”

Chuck Again… the 60’s song by Joe South is always popping into my head when I read stuff like this… The games people play…   

Currencies today 2/20/18… American Style: A$ .7883, kiwi .7362, C$ .7938, euro 1.2337, sterling 1.3973, Swiss $1.0698, … European Style: rand 11.7554, krone 7.8377, SEK 8.0808, forint 252.79, zloty 3.36, koruna 20.5277, RUB 56.40, yen 107.10, sing 1.3189, HKD 7.8239, INR 64.86, China 6.3429, peso 18.64, BRL 3.23, Dollar Index 89.64, Oil $61.92, 10yr 2.90%, Silver $16.58, Platinum $1,004.68, Palladium $1,032.10 and Gold… $1,341.20  

That’s it for today…  Well, the marks on the left side of my face still haven’t completely healed, and I go back to the dermatologist this morning to see what she has to say about that! I stayed up way too late last night to watch the U.S. men’s hockey team win and advance… It’s fun watching the young kids with all their speed playing for the U.S. The Russians have ex-NHL players and KHL players, so it’s the same as it used to be our college players VS men… UGH!  Don Henley takes us to the finish line today with his song: The Heart of the Matter…   We got to see Don Henley at the Fabulous Fox year years ago, and we were in the 4th row… A great show for sure!  And with that, it’s time to go! I hope you have a Tom Terrific Tuesday and Be Good To Yourself!  

Chuck Butler

Is Inflation Rising Around The World?

February 16, 2018

* Bart Chilton sings: I can see clearly now… 

* A day of allowing the dust to settle… 

Good Day… And a Happy Friday to one and all! From the looks of the sunrise this morning, it appears that it will be a carbon copy of the beautiful days we’ve had here in S. Florida, today, and so I’m proclaiming this to be a Fantastico Friday, right out of the starting gate this morning! The Pfennig is coming out a little later than usual this morning, as I was a real bum this morning, and slept through two alarms! The Group, Styx greets me this morning with their song: Lady…   

Well, after a day when Gold gained $20, and the Chicken Littles were out screaming that the sky was falling because the stupid CPI ratcheted up to 2.1% yoy, we had a day of drifting yesterday…  The currencies are, for the most part, trading in the same clothes as yesterday, as witnessed by the Dollar Index, which yesterday morning was 88.84, and today it’s 88.83.

It was a day of allowing the dust to settle form the awful data here in the U.S. the previous day. However, the U.S. data again was very disappointing yesterday… The economy seems to be slip-sliding away, you know the nearer your destination, the more you’re slip-sliding away…  

We did see some minor gains VS the dollar in: kiwi, rubles, real and krone, with the later 3 all being Petrol Currencies, which saw some love from another gain in the price of Oil yesterday. After gaining $2 the previous 24 hours, Oil added another $1 to its price in the past 24 hours, and is trading with a $61 handle this morning…  Up, down, later, rinse and repeat  for the price of Oil, which I went through a couple of days ago… 

I told you yesterday that kiwi was sneaking up on 74-cents, and last night it broke through that level! This last upward move in kiwi came courtesy of a report by the Reserve Bank of New Zealand (RBNZ), that showed that businesses in New Zealand are expecting inflation to rise this year, and that led to the idea that the RBNZ will have to begin their rate hike cycle soon…  I had just said yesterday, that I was convinced late last year that the RBNZ would be removing the dust covers from their rate hike machine in the 1st QTR of 2018… I sure hope this all comes together like a good plan, because longtime readers know that I love it when a plan comes together! 

Could it be that inflation is ready to rise all around the world? Why not? Most countries have kept their respective currencies under wraps too long, and allowed inflation to enter their economies…

I had a dear reader question me yesterday about me calling the euro the offset currency to the dollar, and wondered why I’ve been such a fan of the euro since its inception…  Well, the euro is the second most traded currency in the world, which moves it ahead of Japanese yen as the offset currency to the dollar, that’s a layup… 

But me being a fan of the euro since its inception? I recall me sitting in an audience in London, in 1998, and the moderator asked: Who here thinks the euro will be successful? Then he asked to see a show of hands of those that think it would fail? I raised my hand…  And after the euro’s introduction, I looked to be bang on with my thought, as the euro was introduced at a price of 1.17, and quickly fell to 90-cents… 

But it survived, and I love survivor stories, especially after being diagnosed with cancer in 2007! And the euro began to win me over… Remember this was pre-2000… or Y2K as they used to call it.  So, I sat there thinking about what changed my mind so many years ago, and then it hit me…  The European Central Bank (ECB), was the key… Under the leadership of Wm Duisenberg, the ECB quickly gained respect… 

Now, if you think back to the beginnings of the Fed here in the U.S. you’ll recall that there were two failed attempts to get the Fed off the ground here in the U.S., before Woodrow Wilson, made the big mistake of allowing the cartel of banks to pull the wool over his eyes, and create a “new” Fed/ central Bank…    

There was none of those shenanigans with the creation of the ECB, folks… Yes, we’re talking about eons ago, but the comparison is a good one, and one of the reasons, I quickly turned coat and jumped on the euro’s band wagon. In fact, I wrote a white paper in 2002 titled: The Year of the Euro! 

OK, time to move on here… Recall last week when I highlighted the article that claimed that there was manipulation of the VIX (volatility Index), and said that it didn’t surprise me any to hear that, because in my eye, all markets are manipulated these days… Well, I came across this yesterday, and found it pretty interesting… Bart Chilton, a former member of the Commodity Futures Trading Commission, said a whistleblower’s allegation of manipulation of the CBOE Volatility Index “rings true.” “The VIX has been suspect for at least seven years,” Chilton said.

My oh my… what being free of the Government’s or deep state’s control can do to a person’s view point, eh? I mean look at former Fed Chair Alan Greenspan, who was a Gold Bug before he was nominated to the Fed Chair, but then forgot all about Gold during his 19 year run as Chairman, but since he’s retired from the Fed, he’s all about ownership of Gold again… Hmmm… And now we have Bart Chilton, formerly of the CFTC (the commodities regulator), who NOW sees that there could be manipulation in the VIX, even though the CFTC “suspected it for years”…    

The U.S. Data Cupboard yesterday, as I mentioned above, had some disappointing data yesterday… Industrial Production here in the U.S. for the month of January printed a negative -0.1%, and Capacity Utilization fell from 77.7 to 77.5… Folks, remember, slippage in the Capacity Utilization data indicates that looking forward, businesses think that their businesses will be working at a slower pace…  

We also saw January PPI (wholesale inflation) yesterday, and it ratcheted up 0.4%… Uh-oh!  That means coming down the pipeline are price increases folks… Got Gold?  

Let’s do a quick review of the data this week…  Household Debt rose to a new record level, Retail Sales were negative, and flat when taking out the slumping car sales, Industrial Production was negative, and Capacity Utilization lost ground… Not a good week for all those “the economy is strong” flag wavers, eh?   

Gold gained $3.10 yesterday, with 234,000 contracts traded… I’m somewhat surprised given the rise in PPI that we’ll talk about in a minute, that Gold didn’t gain more on the day, but I’ll take $3.10 gains rather than a whacking! 

To end this week that contained Valentine’s Day, I came across something that ties romance with debt… Leave it me, to do that, eh? But in a recent survey, it was found that a romantic partner would be kicked to the curb if they disclosed that they had more than $11,000 in credit card debt…

So, all you youngsters out there, that think that the Gov’t has your back on your credit card debt accumulation, you might find that you grow old, live alone with all that debt… I’m just saying!

To Recap…  More disappointing data for the U.S. yesterday, but the markets were more about allowing the dust settle on the upward moves in the currencies and metals the previous day. So, for the most part the currencies are trading in the same clothes as yesterday… Don’t run up credit card debt or else you’ll have problems finding a soul mate! And Bart Chilton is singing the Johnny Nash hit, I can see clearly now…   

For What It’s Worth…. I saw this yesterday in the WSJ and it about blew my socks off! This is a tiered subscriber article, which means you can read some of it, if you aren’t a Wall Street Journal subscriber, by clicking here: https://www.wsj.com/articles/fannie-mae-to-require-3-7-billion-government-cash-infusion-1518616798 It’s about how Fannie-Mae needing another tax-payer infusion of cash… Here we go again!

Or, here’s your snippet: Fannie Mae reported a net loss of $6.5 billion for the fourth quarter, triggering what is expected to be the first taxpayer-funded infusion for the mortgage-finance giant in six years.

The quarterly loss was due to a one-time accounting charge due to the reduction in the corporate tax rate. But Fannie, which has been under government conservatorship since the financial crisis, said Wednesday that its regulator, the Federal Housing Finance Agency, would seek a fresh taxpayer infusion of $3.7 billion from the Treasury Department…” 

Chuck again… As I said… here we go again…  

Currencies today 2/16/18… American Style: A$ .7948, kiwi .7402, C$ .8005, euro 1.2467, sterling 1.4040, Swiss $1.0820, … European Style: rand 11.6524, krone 7.7694, SEK 7.9538, forint 249.65, zloty 3.3394, koruna 20.3263, RUB 56.59, yen 106.28, sing 1.3105, HKD 7.8208, INR 64.33, China 6.3439, peso 18.52, BRL 3.2216, Dollar Index 88.83, Oil $61.34, 10yr 2.89%, Silver $16.76, Platinum $1,007.14, Palladium $1,034.54, and Gold… $1,357.20  

That’s it for today…  It’s a 3-day Holiday Weekend as we celebrate President’s Day… I’ve always said that we shouldn’t clump the President’s birthday’s together… If the President deserved to have a Holiday to commemorate his birthday, then let’s celebrate that day! Feb 12, and Feb 22 should be holidays, not clumped together! I’m just saying! I can’t wait to get out to the deck with my cup of coffee this morning…  So, no Pfennig on Monday… I hope you can get through the withdrawal! HAHAHAHA! March is right around the corner, folks, and longtime readers know that I take a spring vacation from writing every year during March… I’m just throwing that out there to get you prepared…  Mathew Sweet takes us to the finish line today with his song: Girlfriend…  And with that, I hope you have a Fantastico Friday, and it sure looks like a Good Day to have a Good Day, eh? Remember, to Be Good To Yourself!  

Chuck Butler

 

A Return To Fundamentals? Don’t Kid Around With me!

February 15, 2018

* Gold soars on rising inflation data

* Rising Debt levels become a concern… 

   

Good Day…  And a Tub Thumpin’ Thursday to you! WOW! What a day yesterday, not only for the weather here in S. Florida, but also for Gold and some of the currencies! I was sitting in my chair on the beach yesterday afternoon, 83 degrees, sunny, umbrella blue skies, and a light sea breeze to keep the sun from biting, and as I sat there relaxing, which is what I needed to do, I thought to myself… Maybe I died and went to heaven… It is my profound hope that everyone finds their “beach” in their lifetime..  Neil Young and Crazy Horse greet me this morning with a song from their Live at the Fillmore East Album: Down By The River… It’s a 12 minute version…  

The currencies this morning are on the warpath VS the dollar, and it all began yesterday. Initially, the dollar rallied after the stupid CPI (consumer inflation) printed (+ 2.1% yoy), but then traders and money managers realized that this was not a good thing, and that we could very well be heading into an abyss, with rising inflation and rising Debts… Yes, believe it or don’t, but the thought of unsustainable debt levels in the U.S. are back on the table with traders, etc.  

It sure took them a while to come around, but they here they are, and the rising debt levels appears to have them scared to death! Could it possibly be that we’ve returned to the thought that longer term, fundamentals tend to gain more credence here and investors put more emphasis on current account surplus currencies?  Just like in the days of old? Well, bust my buttons! While it appears to be the new conversation going on in the markets, I’m from Missouri, and I’ll have to be shown that this is lasting trend/ pattern/ thought process, because we’ve seen these false dawns of returning to fundamentals a few times in the past 9 years…

But if it is for real, then I’ll be one BIG FAT HAPPY CAMPER! Because I would no have to judge the level of sentiment that traders have for currencies and metals! That sentiment B.S. will be out of the way, and we can get back to valuing currencies and metals on their fundamentals! WOW!    

OK, I teased you a bit at the top with my mention of the move in Gold yesterday, so let’s go to the tape…  Gold traders saw the move in the CPI, and put their foot to the metal on the price of Gold, and the shiny metal rose nearly $40 at one point in the day, but the short Gold paper traders brought it back to a $20.90 gain on the day, still a shiny star sticker placed on Gold yesterday!  Imagine waking up this morning and seeing that Gold had gained nearly $40 yesterday, You would do a double take on the figure, right? Well, we almost had that, but 382,000 contracts traded on the day, contained some short trades that brought it back to the hemisphere… 

But, I’m not going to complain, much that is, about the short Gold paper traders, Gold gained $20.90 yesterday, so let’s focus on that!  

And the price of Oil recovered nearly $2 in the past 24 hours as the build up of Oil supplies took a hit and weren’t as strong as suspected at last glance, and that gave the price of Oil an opportunity to take advantage of that and the fall in the Dollar Index, to gain nearly $2 on the day, to trade with a $60 handle again. 

The anti-dollar assets were very perky yesterday, with Gold, Oil and euros all gaining VS the dollar. Euros were the laggard of the three though, and only able to gain about 1/4-cent on the day… Think about it folks… IF, we are going to return to fundamental valuations, the Eurozone isn’t exactly, a surplus region, and has their own warts to contend with, but… having said that, the euro does remain the offset currency to the dollar, and that has its benefits, like being able to rally when the dollar gets sold, even if the Eurozone’s warts are showing!   

The New Zealand dollar/ kiwi, which I highlighted yesterday for its stealth-like move higher in recent trading days, continued to move forward yesterday, and is closing in on 74-cents at .7380 this morning…  The question that hangs over kiwi right now, is when will the Reserve Bank of New Zealand (RBNZ) get their interest rate powder wet? Late last year, I was convinced that the RBNZ would be hiking rates by the end of the first QTR of 2018. They’ve still got a month to go, but I’m not hearing any “talk about a rate hike coming” from New Zealand, and that has me worried, but… That’s a worry for another day… Let’s take the stealth-like moves higher in kiwi and be happy!  

Another currency that is defying gravity right now is the Japanese yen… What on earth do traders see in pushing the currency envelope across the table with yen? I don’t see it, other than, the fact that IF I’m correct and the dollar has entered a new weak dollar trend, then I get the fact that yen is rallying, because the major currencies are the first to show life when a new trend is introduced to the markets…  

Why on earth would I be questioning my call of a new weak dollar trend? Silly me! I know better than to question my calls! They are from years of experience, knowledge, logic, and the guts to make one!  Just like in 2001, when I wrote the white paper, Decline of the dollar…  No one, and I mean no one was talking about the almighty dollar declining, but little old me! 

Oh, well, I digress there, where were we? Oh… Did you see the color of the January Retail Sales here in the U.S. yesterday?  My oh my, just when everyone thought the U.S. economy was getting stronger, except me of course, because I know any economic strength is coming because of low interest rates, stimulus, and Fed intervention… But just when the sheeple were thinking that everything was going to come up roses, January’s Retail Sales printed a negative -0.3%!!!!!   And even when you take the slumping auto sales out of the equation, Retail Sales were flat in January…

I would think that all those credit card purchases made in Nov and Dec for Christmas and other holidays, saw their bills arrive in January, and the receivers of those bills, gasped and wondered how their purchases led to such HUGE bills!  And they decided to hunker down in January, and apply for another credit card so they can make the payment on their current one!

So, the rot on Retail Sales’ vine helped the Dollar Index to fall into the 88 handle yesterday… Today’s U.S. Data Cupboard has some real economic data for us to view, leading off with two of my fave prints: Industrial Production, and Capacity Utilization.  I would look for both of them to struggle in January, which won’t be a good thing for the dollar to have to swallow this morning…  

We’ll also see the PPI (wholesale inflation) for January, and this is where the inflation begins folks… I’m somewhat surprised that the forecasts are for a flat PPI last month… Hmmm… Betcha a dollar to a Krispy Kreme, that PPI shows some gain in inflation…   

To recap… U.S. stupid CPI showed a 2.1% yoy gain yesterday, and suddenly the markets began to panic, and drove Gold higher on the day, and the currencies followed Gold’s lead.  Today’s data could mean more damage for the dollar, as fundamentals seems to have returned to the forefront of trading in currencies… Imagine that!     

For What It’s Worth… I thank longtime reader, Bob, for sending me this article that once again points out manipulation in the markets with this time being the stock market and the Fed being the manipulator. It’s well worth the time to read, and can be found here: http://wallstreetonparade.com/2018/02/rumors-grow-that-the-u-s-fed-is-propping-up-the-stock-market/   

Or, here’s your snippet: “It’s not every day that three well-credentialed men are willing to put their names and reputations behind the allegation that the U.S. Federal Reserve is rigging the stock market. But that’s exactly what happened yesterday. Paul Craig Roberts, a former Associate Editor of the Wall Street Journal and Assistant Secretary of the U.S. Treasury under President Ronald Reagan joined with Economist Michael Hudson and Wall Street veteran Dave Kranzler to write that “it appears that in May 2010, August 2015, January/February 2016, and currently in February 2018 the Fed is rigging the stock market by purchasing S&P equity index futures in order to arrest stock market declines.” 

Chuck Again… The games people play now, every night and every day now, never meaning what they say now, never saying what they mean – Joe South…  I told you last week that the PPT (Plunge Protection Team) had saved the stock market and the dollar… I don’t make this stuff up folks… 

Currencies today 2/15/18… American Style: A$ .7925, kiwi .7380, C$ .80, euro 1.2467, sterling 1.4040, Swiss $1.0807, … European Style: rand 11.6780, krone 7.8055, SEK 7.9493, forint 249.85, zloty 3.337, koruna 20.3423, RUB 57.31, yen 106.70, sing 1.3129, HKD 7.8218, INR 63.93, China 6.3412, peso 18.50, BRL 3.27, Dollar Index 88.84, 10-year 2.93%, Silver $16.81, Platinum $1,002.33, Palladium $1.019.25, and Gold… $1,353.00 

That’s it for today…  That was some awful news from Florida yesterday with a crazy person killing 17 people at a school… My thoughts last night were with the families of those that died but also had to experience that awful scene…  Have you been watching the Winter Olympics? I have no idea why, but I get into the curling…  The U.S. men’s and women’s hockey teams lost yesterday… UGH! No professionals playing this year, that’s got to take you back to the Lake Placid team, and one of my fave movies of all time: MIRICLE     Ok… Paul McCartney and Wings takes us to the finish line today with their song: Band On The Run…  I hope you can get out and make this a Tub Thumpin’ Thursday, and remember to Be Good To Yourself!

Chuck Butler

What Was I Thinking, Forgetting Shrove Tuesday?

February 14, 2018…  

* Just keep digging that debt hole deeper folks… 

* Some Currencies fly under the radar… 

Good Day… And a Wonderful Wednesday to you! Happy Valentines Day, and for those of you who are Catholic, Happy Ash Wednesday. This is the first time that those two observed days fell on the same day since the 40’s, so it’s rare that we have the two days colliding like this. All my Irish brothers were on my like a cheap suit yesterday, reminding me that I forgot to talk about Shrove Tuesday… Shroves are pancakes in Ireland, and on Fat Tuesday for everyone else, it’s traditional for the Irish to fatten up on Shroves…  Valentine’s Day is, well, just another day for us…  But I’d like to think that for all those who get all Cupid-like today, that you find your true love, and live the rest of your life happily with that person!  Ok, the Pet Shop Boys greet me this morning with their song: West End Girls…  For the 80’s sound of electric music, with no drums, etc. The Pet Shop Boys weren’t too bad…   

We start our day of romance, with me being  upset with our debt situation here in the U.S.  We finally saw the color of the 4th QTR Household Debt number yesterday, and just like I suspected, it was monstrous! U.S. household debt rose for the 14th straight quarter in the final three months of 2017, pushing further into record territory as confident Americans added to mortgage loans and credit-card balances.

The Federal Reserve Bank of New York said Tuesday that household debt rose by $193 billion to $13.15 trillion last quarter, completing the fifth straight year overall balances increased. Total debt was the most on record, though the figure wasn’t adjusted for inflation or population growth. 


As a share of U.S. economic output, household debt was about 67% last quarter, barely edging up from the third quarter, but edging up nonetheless! And guess what was the main driver of the rise in Household Debt? Mortgages…  And then there was this report on Bloomberg this morning about those Mortgages, that explains how the Mortgage debt grew by so much in the 4th QTR… Here’s the Bloomberg snippet: 

Home prices jumped to all-time highs in almost two-thirds of U.S. cities in the fourth quarter as buyers battled for a record-low supply of listings.

Prices for single-family homes, which climbed 5.3 percent from a year earlier nationally, reached a peak in 64 percent of metropolitan areas measured, the National Association of Realtors said Tuesday. Of the 177 regions in the group’s survey, 15 percent had double-digit price growth, up from 11 percent in the third quarter.”   You can find the whole article, that is if you promise to put away the sharp objects first, by clicking here: https://www.bloomberg.com/news/articles/2018-02-13/home-prices-in-two-thirds-of-u-s-cities-have-hit-record-highs   

So, what did the currencies and metals do after this Debt debacle printed yesterday? They attempted to mount a rally, and even when I checked the prices in the middle of the night, yes, I was up walking the floors, the currencies were still inching higher… But something happened between the middle of the night and early this morning, because those small gains have been given back, and we’re basically trading in yesterday’s clothes in most of the currencies.  

The Indian rupee is not slipping this morning, after it was announced that PM Modi, was going to not only extend the current stimulus for the economy, but also add to it. This got the warm a fuzzy feelings for rupees going again and this morning it’s the best performing currency since yesterday. 

I’m not sure this euphoria over more stimulus is going to be long lasting, but Shoot Rudy, look what it does for the U.S. psyche every time a stimulus package is announced, like the Tax Cut Reform Bill?  So, maybe, it can, maybe it can’t, we’ll have to wait-n-see… This is where the old timer traders like me, would make a call and either go long rupees or short rupees based on their information and gut feeling…  But we’re a dying breed, folks… Look at me, I was put out to pasture a couple of years ago, and I was a young “old timer”!    

Another currency that flies low on currency traders’ radar is the S. African rand, which has had one of those rally periods that is based on a change of leadership. Every since Zuma was showed the door, the rand has been on a mission to gain back a lot of lost ground that it experienced during the corrupt Zuma reign.  Interest rates are still above those found in most parts of the world, so that also has helped the rand gain… 

But, I have to tell you front and center on the rand, to be very careful, as this has historically been a very volatile currency, but time has proven one thing, that when it’s good volatility it’s good and when it’s bad, it’s bad… 

Reminds me of a song by Grand Funk Railroad, titled: I Can Feel Him In The Morning… And the song begins with a child reciting these words: Good means to obey your mother and father, to do what the teacher says — the things right. I feel miserable when I’m … when I’m bad, I feel miserable on the inside but, on the outside, I just feel like I … I feel now.

I think … um, um … there are more people that are bad than there are good. And, um … if you’re good, you’ll live forever. And, if you’re bad, you’ll die when you die.”    There you go, a song from the 70’s that you’ve probably never heard of… But I know it! 

OK, let’s get back to work here… The New Zealand dollar / kiwi has been very stealth-like in its recovery from the sell off of a couple of weeks ago after getting close to 74-cents, it got whacked, but like I said it has been recovering and this morning it’s back to 73-cents… Kiwi is like the Tub Thumpin’ Song… I get knocked down, but I get up again, nothing’s gonna keep me down!   

I went through the price cycle of Oil yesterday, so I won’t do that again, for awhile anyway, but did want to point out that the slippage in the price of Oil hasn’t stopped and this morning it’s trading with a $58 handle…  

But Gold is picking up the slack for Oil, and has been on the rally tracks for 3 trading days in a row! And yesterday’s gain of $6.80 was without major short paper trading, as the number of contracts were only 182,500 on the day. Gold closed at $1,329.30, and is up almost $3 in the early morning trading today. 

This is the game the short Gold paper traders like to play, they allow Gold to rise in price after they have whacked it and bought at the low price after the whacking, then after Gold gets to a price high enough, they stuff the Paper trading down everyone’s throat and sell, make a quick buck, and then buy at the low price again… This has been the trading pattern for a long time folks, but from what I see, they have allowed Gold to rise higher each time, by the smallest of figures, but rise nonetheless… 

Now, if everyone that had money to invest from all their Bitcoin gains, and they bought physical Gold, they would drive the paper traders out of the market…  Good luck getting that organized, here in the West… In the East? getting that organized would be a lay-up, but not here in the West, as we still, for the most part, don’t see Gold as a store of wealth…  I do, and you probably do, as I’ve hammered this point into your heads for years now, but what about the guy across the street? Or the lady that sits next to you on the bus? I’ll bet they don’t even know how Gold is performing, much less own some!  

At your next cocktail party I challenge you to bring up the question of who among us owns Gold? Say it like this… I picked up some additional physical Gold this week, how many of you own Gold? You don’t have to tell me how much, or where you store it, I’m just interested in how many of you own Gold…   I think you’ll be surprised at how few hands go up…   I’m just saying…   

The U.S. Data Cupboard finally gets some data that people will take notice of today… January Retail Sales, which should be fair to middling, nothing to write home about or support the dollar, and then there’s the stupid CPI that everyone is pointing to as a key to interest rates going forward… Don’t they know how stupid the CPI has become, with all of its hedonic adjustments, swapping, and changing of weightings in the basket of Goods? I shake my head in disgust at these dolts that still think that CPI is something that should be paid attention to!    

To Recap…  It’s Valentine’s Day and Ash Wednesday together! But we get some data today to move the markets, so let’s see if it really does. Rupees, rand, and kiwi are in the spotlight today with their stealth-like moves higher, but for the most part the rest of the currencies are trading in the same clothes as yesterday.  Household Debt rose by a monstrous amount in the 4th QTR, and are we heading to another housing bubble?    

For What It’s Worth… It was good to see someone of “authority” call out the debt situation here in the U.S. yesterday… This can be found on the CNBC website, and it’s about National Security Director Dan Coats saying that the size and direction of the National Debt is a serious threat to the U.S.’s security… WOW!  This can be found here: https://www.cnbc.com/2018/02/13/us-security-chief-calls-national-debt-a-dire-threat.html   

Or, here’s your snippet: “Among the myriad threats to national security – North Korea, Russia and Iran among them – is one very big economic issue, National Intelligence Director Daniel Coats said Tuesday.

Speaking to the Senate Intelligence Committee, Coats said the nation’s debt, up to $20.7 trillion and likely to escalate due to recently passed fiscal measures in Congress, must be taken seriously.

“The failure to address our long-term fiscal situation has increased the national debt to over $20 trillion and growing,” he said during a broader hearing over dangers posed to the U.S. “This situation is unsustainable as I think we all know, and represents a dire threat to our economic and national security.”

The debt has increased 123 percent over the past decade as the nation sought to break free of the financial crisis and the tepid growth that followed.

Total debt is now nearly 105 percent of gross domestic product, just shy of its highest level since World War II. The most recent Congressional Budget Office projections have the trajectory leading to a debt-to-GDP ratio of 150 percent by 2047, well past the point where financial crises typically occur.”  

Chuck again… The room was filled with congressmen and women who hopefully listened to the Security Director’s warning and took it to heart, but I doubt it, they were probably making dinner plans while he was talking!  UGH!   

Currencies today 2/14/18… American Style: A$ .7861, kiwi .7308, C$ .7950, euro 1.2345, sterling 1.3854, Swiss $1.0709, … European Style: rand 11.8270, krone 7.8910, SEK 8.0396, forint 253.14, zloty 3.3775, koruna 20.5544, RUB 57.72, yen 107.36, sing 1.3197, HKD 7.8218, INR 64.10, China 6.3349, peso 18.59, BRL 3.2912, Dollar Index 89.72, Oil $58.77, 10yr 2.83%, Silver $16.56, Platinum $976.35, Palladium $991.62, and Gold… $1,332.90

That’s it for today… Another beautiful day yesterday. I had a nice conversation with my friend and former colleague, Chris Gaffney, yesterday. He had been at the Orlando Money Show, and told me that a lot of people were asking about me… It’s nice to know that you may be gone but not forgotten, eh?  Pitchers and catchers reported yesterday, and the rest of the squad will report this weekend… I’m so stoked about spring training starting! It’s a new day when it starts, a new beginning, hopes are high, and everyone has a chance to win it all! it’s always fun to watch a young Phenom make a splash in spring training and make the team…  Toad The Wet Sprocket takes us to the finish line today with their song: Walk On The Ocean…  a great 90’s song…   I hope you and your honey celebrate Valentine’s Day in grand style, and for some of us, lent begins today…  And with that, it’s time to get going!  I hope you have a Wonderful Wednesday, a Happy Valentine’s Day, Ash Wednesday, and whatever comes your way! And Be Good To Yourself!    

Chuck Butler

Pick Your Poison…

February 13, 2018  

* Gold gets back on the rally tracks!

* The President has his own spending palooza plan! 

  Good Day… And a Tub Thumpin’ Thursday to you! A better day yesterday, night and morning today for yours truly, so here I am… I’m ready to Rock you like a Hurricane! Not! I really don’t have much to say today, imagine that! You don’t hear that very often from me! I was holding court on the deck yesterday afternoon when everyone meets for Happy Hour, and I had everyone’s ear as I explained how Amazon is a great model company, that is if you’re really not interested in turning a net profit… Today is sad but fun… Today would have been the birthday of my oldest sister, Brenda, she died of cancer over about 29 years ago at the age of 38. And the fun day is my good friend, Duane celebrates a birthday today!  The band Yes, greets me this morning with their song: It Can Happen…    

One of these days the ducks will get in order, and the proper trading in a weak dollar trend will occur, until then we get those days like last week, where the dollar bugs just wouldn’t give up on the dollar, and they had the backing of the PPT so the currencies didn’t stand a chance against opponents like that! Yesterday, saw the currencies drift around but not really have any momentum. But today is a different story, so let’s go to the tape, eh?    First off, the Dollar Index which had gotten off the mat last week and rallied back above 90, after looking like it was ready to go on a long ride on the slippery slope, saw the selling return last night, and is back below the 90 figure. 

The Big Dog, euro, which had lost about 2-cents in the trading last week, has gained one of those lost 2-cents back overnight and this morning and with the Big Dog at least doing some barking at the dollar, the other currencies are joining in.  All of them, including the Japanese yen are doing dome barking, except… The one currency, last week, that kept booking gains VS the dollar as the dollar rallied against all the other currencies, the Chinese renminbi, which saw a markdown that was not a small one overnight at the fixing.  I looked and looked for some reason that the renminbi was marked down, but I guess I’m too early… 

Gold had a decent day yesterday gaining $6.80 on the day, but is up even more than that amount in the early morning trading today, to trade at the moment around $1,331. Yesterday, I told you that the Budget deal was passed, but forgot to tell you that the President still needed to sign it, and in the meantime, the President presented his own version of a budget, and in it you would expect for Gold to rally…  Here’s the skinny on the President’s version of a Budget…   

Here’s my view on this proposal the President wants to add $200 Billion for infrastructure projects, which is fine with me, as long as the spending is equaled by revenue… His plan includes ending the funding for NPR and PBS… Which longtime readers that recall, Chuck’s debt solutions, from many years ago, will recall me saying that the country should stop paying for things it doesn’t have money for, and allow some entrepreneur to step in a make it work instead of the Government gumming up the operation.  But the cutting of the funding for those two isn’t going to make up the proposed spending on infrastructure.  So, he has proposed cuts to environmental programs…  He has also proposed major cuts to social welfare programs as part of a new $4.4 trillion spending plan that would massively increase the federal deficit.  

I shake my head in disbelief because even though Trump campaigned for increases in infrastructure spending I always thought he was speaking about a spending neutral deal. In other words, having the revenue to match the spending…  I guess not, eh?  So, there are some good things in his proposal, but in the end, it adds to our problem of growing debt… UGH! In my opinion, you either get to drink the poison of the plan presented by Congress or drink the poison of the President’s plan… Hey! At least you get to choose! 

The good news, that I did read this morning, is that Congress probably won’t pay attention to his proposal, for they have their own version of a Deficit Spending palooza to fight for…  So, investors return to Gold…

In fact, most of the Safe Havens are being bought this morning, Gold, euros, yen, and francs, but no Treasuries, and certainly no Oil… In fact, Oil has really dropped in the past 5 trading periods to trade below $60 again. About 10 days ago, it appeared that the price of Oil was heading to $70, but then the “shale boys” replenished the Oil supplies, and voila! We have a supply gut once again. But here we go with this vicious circle of life for the price of Oil again… The price rises on supply concerns, and the higher price invites the “shale boys” to increase production, and then the supply concerns go away, and the price of Oil drops, driving the “shale boys” away until the supply concerns return… Lather, rinse and repeat… 

I think, that the bond bubble popping that I first began talking about in 2009, before the first implantation of a bond buying program, aka Quantitative Easing, by the Fed was introduced, is really beginning to take shape… That’s nearly 10 years of waiting for this bond bubble to pop… I used to have a slide in my presentations, you know when I used to be in demand to talk to conferences, that showed a guy banging his head on his desk, and I would say, this is me, when I think about my call that the bond bubble was ready to pop.  But the Fed’s $4 Trillion in bonds that they bought propping up bond prices and keeping yields low, there was no popping of the bond bubble…

But, now we could very well be seeing it happening, given the fact that the Fed is no longer in the bond buying business, or so they claim… No, big buys to support prices, and keep yields low is going to be the Pin that the bond bubble has been floating around the room in search of for so many years now. 

OMG! look at this! I said I didn’t have much to say, and now I’m talking like I’m on the Butler Patio, or the deck here overlooking the beach and ocean, not allowing anyone to get a word in edgewise! HA! I’ll take questions after I’m finished talking! HA!  

The U.S. Data Cupboard didn’t have anything for us yesterday, and today it will only produce the percentage increase in Household Debt, which I told you yesterday I wouldn’t be surprised one iota if it increased in the 4th QTR, which this report will be all about, the 4th QTR…  

To recap… The currencies and metals rebounded overnight and this morning so far, as the Dollar Index fell back below 90. Gold had a decent day yesterday gaining over $6 and is up again this morning and is trading back above $1,330 as I write. President Trump presented his own version of a spending palooza yesterday, and Chuck picks it apart… So, U.S. citizens have a choice, drink the poison of the plan presented by Congress, or drink the poison of the plan the President presented… Either way, you have to drink the poison…   

For What It’s Worth…  This came to me from the GATA folks, whom I greatly appreciate for all their work in brining the Gold price manipulation to the forefront…  This article is about how VIX manipulation costs investors billions, according to a CFTC whistle-blower and can be found here: https://www.bloomberg.com/news/articles/2018-02-13/vix-manipulation-costs-investors-billions-whistle-blower-says  

Or, here’s your snippet: “A whistle-blower today told U.S. regulators that a scheme to manipulate the VIX, the volatility gauge thrust into the spotlight last week during a wild trading session, costs investors hundreds of millions of dollars a month.

A Washington-based lawyer told the Securities and Exchange Commission and Commodity Futures Trading Commission — the nation’s top markets regulators — in a letter today that his client found a flaw that allows traders “with sophisticated algorithms to move the VIX up or down by simply posting quotes on S&P options and without needing to physically engage in any trading or deploying any capital.” Billions in purportedly ill-gotten profits have been scooped up by “unethical electronic option market makers,” according to the letter.

The client wasn’t identified by name. He has held “senior positions at some of the largest investment firms in the world,” according to the letter written by Jason Zuckerman of Zuckerman Law, who has appeared on Washingtonian magazine’s list of top whistle-blower lawyers in the nation’s capital.”   

Chuck Again…. I tell you all the time folks… there’s manipulation going on in all assets, so why is it so difficult for the regulators to see the manipulation going on in Gold & Silver?  

Currencies today 2/13/18… American Style: A$ .7866, kiwi .7288, C$ .7950, euro 1.2350, sterling 1.3903, Swiss $1.0714, … European Style: rand 11.8966, krone 7.8860, SEK 8.0424, forint 252.44, zloty 3.3810, koruna 20.5475, RUB 57.97, yen 107.61, sing 1.3216, HKD 7.8228, INR 64.31, China 6.3166, peso 18.70, BRL 3.2918, Dollar Index 89.70, Oil $59.26, 10yr 2.83%, Silver $16.61, Platinum $977.71, Palladium $991.78, and Gold… $1,331.40 

That’s it for today… Happy Birthday Duane! Hope your day is grand, and I’m looking forward to your visit in 3 weeks! Tomorrow is Valentine’s Day, are you ready? It was an absolutely beautiful day yesterday here, and more of that is expected the rest of the week, so I’m a happy camper this morning! And Pitchers and Catchers report today, I woke up without stomach problems, I’m telling you this is going to be a great day!  I had a long talk with good friend, Dennis Miller yesterday, and he told me about an article that he’s preparing for next week on Social Security. I’ll be sure to highlight in the FWIW section when it prints for sure!  The Staple Sisters take us to the finish line today with their song: I’ll Take You There…  Now, go out and make today your own Tom Terrific Tuesday, and remember to Be Good To Yourself… 

Chuck Butler

I’ll Take What’s Behind Door #….

February 12, 2018

* U.S. Decides to dig their debt hole deeper!

* The Fed is having deep discussions right now… 

Good Day… And a Marvelous Monday to you… Well, for all of you with inquiring minds that wondered what my triumvirate of oncologists had to say on Thursday, here goes… They decided that the drug I was on that I received through an infusion every 2 weeks, had run its course (like the other 3 drugs I had previously taken) and that I it would no longer benefit me to continue on the drug. So, no more infusions… (I never liked going to those infusion centers anyway, it’s a very depressing place) Instead, once the current drug is out of my system, they will start me on the newest kidney cancer drug, that’s a pill taken each day.  So, I have a couple of weeks before they start the new drug. I’m sure my insurance company will throw a hissy fit about this new drug, like they’ve done before, so, I’m expecting a fight with them.  I totally dislike this waiting though, because at this point I have no idea whether or not I will be able to tolerate the new drug, at least as well as I have the previous 4 drugs.  And that is an unknown…  

So, this is a notice to you dear reader that there could be some major disruptions , with the Pfennig, once I begin to take the new drug, or as it begins to build up in my system. You know me, I’ll battle it, and come out on top, but at this point, I don’t know how difficult a battle it will be.  So, I’m not going to worry about it, that’s a worry for another day.  For now, I’m enjoying sunny and 80 degree days in S. Florida, gathering up lots of Vitamin D, and having fun with my neighbors down here. They’ll all go home at the end of this month, and that’s when my St. Louis visitors begin, and that’s when the real party, starts! I just hope I’m in good health to participate and party!  

I’m getting a very late start today, sorry about that, I hit the wall last night, fell asleep in my chair and sometime during the night I got up and went to bed, where I slept right past my alarm! UGH! I guess I needed to sleep, eh?

Well, there’s not much going on in the currencies these days, they’ve backed off their lofty levels of two weeks ago, but have stabilized at this point and seem to be trading sideways, with the Big Dog, euro, remaining on the porch, and all the little dogs waiting for their chance to get back to chasing the dollar down the street. 

So, late, last week, while I was being poked and prodded by nurses, the U.S. finally came up with a spending plan… Before I get into it, I have this question to ask… “What happened to all the momentum the Tea Party people had a few years ago?”  Alright then, let’s get into this, because, well, the lawmakers have kicked the can down the road a little more with regards to reining in the debt.  These mental giants believe that the way to prosperity is to dig the debt hole your in, a little deeper! What on earth are these guys thinking?  I’m sure they didn’t learn any of this in their economic classes in school, unless their professor was Paul Krugman! 

The Budget calls for the annual deficit spending to increase and the deal  would eliminate strict budget caps, set in 2011 to reduce the federal deficit, and would allow Congress to spend about $200 Billion more in the current fiscal year and in fiscal year 2019. That’s $200 Billion more than we were already slated to spend… $575 Billion…  Are we nuts?  We just passed a tax cut bill, and now we’re raising our debt? Those two things together are a recipe for disaster folks… 

The prudent thing to do after passing the tax cut bill was to reduce spending, but NOOOOOOOO! Our elected representatives, know better than you and I folks, they just know that the path to prosperity is to spend more money than you can every imagine having!  And all this spending is going to mean more issuance of Treasuries at a time when foreigners are backing away from buying them! What a mess!  No, it’s absolute madness! Madness I tell you! Serenity NOW!   

Oh, and that leads me to another discussion that’s bound to begin to take place in the Eccles Building (Fed HQ)…  What is the Fed going to do about all this?  They have two choices, right now… They can stop their rate hikes, and even go as drastic as implementing more QE (which would help with the additional Treasury issuance) to stop the bleeding in the stock market, or, they can continue their rate hikes, make debt servicing almost impossible for the U.S. Gov’t, but keep a lid on the rising inflation… 

What’s a Fed head to do? What’s it gonna be boy? Will the pick what’s behind door #1 or Door #2?  This is going to be interesting to see how it plays out. I suggest you keep a journal of these decisions by the Fed, because one day, your great-grandchild is going to ask you, a question, about what happened to the great country that they read about in the history books!   I could go on and on about this stuff folks, but I don’t want to bog you  down or bore you, so I’ll just leave it at this…  Our country can’t get Great Again, when we’re drowning in debt… period! 

Gold closed down a couple of bucks on Friday, but is up $4.60 in the early trading so far today.  The number of contracts in Gold traded on Friday were just shy of 300,000… One of these days, the COMEX will break down the trades for us, and tell us which ones were buys and which ones were “shorts”…  Now that would be helpful, wouldn’t it?  But, I doubt we’ll see that in our lifetime… UGH! There’s just too much protection for the short Gold & Silver paper traders… And that’s all I’m saying about that today! 

The U.S. Data Cupboard doesn’t have much for us until we get to Wednesday, which happens to be Valentine’s Day. On Wednesday we’ll see Retail Sales…  Tomorrow we’ll see the percentage increase in Household Debt, which if it goes higher, won’t surprise me one iota! 

To Recap… The currencies have stabilized after a week of getting sold. The U.S. lawmakers decided to dig their debt hole a little deeper in hopes that it straightens things out… Dolts, all of them! The Fed is down to two choices folks, what’s it gonna be boy?  And the U.S. Data Cupboard is pretty barren until Wednesday, Valentine’s Day.   

For What It’s Worth… Here’s an interview with our old friend, Jimmy Rogers, who’s been pretty quiet in recent days… I can be found on Bloomberg.com or here: https://www.bloomberg.com/news/articles/2018-02-09/jim-rogers-says-next-bear-market-will-be-worst-in-his-lifetime   

Or, here’s your snippet: “Jim Rogers, 75, says the next bear market in stocks will be more catastrophic than any other market downturn that he’s lived through.

The veteran investor says that’s because even more debt has accumulated in the global economy since the financial crisis, especially in the U.S. While Rogers isn’t saying that stocks are poised to enter bear territory now — or making any claim to know when they will — he says he’s not surprised that U.S. equities resumed their selloff Thursday and he expects the rout to continue.

When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime,” Rogers, the chairman of Rogers Holdings Inc., said in a phone interview. “Debt is everywhere, and it’s much, much higher now.”  

Chuck Again, I think it would be prudent to listen to Jim Rogers, folks… And that means back up the truck to the Gold & Silver window…  At least that’s what I think he’s saying…  

Currencies Today 2/12/18… American Style: A$ .7832, kiwi .7240, C$ .7937, euro 1.2240, sterling 1.3821, Swiss $1.0647, … European Style: rand 11.9425, krone 7.9578, SEK 8.1044, forint 254.82, zloty 3.41, koruna 20.7033, RUB 58.35, yen 108.71, sing 1.3261, HKD 7.8198, INR 64.31, China 6.2913, peso 18.66, BRL 3.2937, Dollar Index 90.31, Oil $60.35, 10yr 2.86%, Silver $16.35, Platinum $961.55, Palladium $984.44, and Gold… $1,320.30

That’s it for today…  Big wins this past weekend for both the Missouri Tigers and St. Louis U. Billikens basketball teams. Pitchers and Catchers report tomorrow, YAHOO! I’ve had to stop and start the letter over again a few times this morning, making it even later than I originally thought. I’m not having a good morning, wink, wink… Today is also Lincoln’s Birthday, which should be a holiday, and that’s all I’m saying about that! Are you ready for Valentine’s Day?  And with that…  The Doobie Brothers take us to the finish line today with their song: Ukiah…  I hope you have a Marvelous Monday, and Be Good To Yourself!   

Chuck Butler

When Is A Trade Surplus A Bad Thing?

February 8, 2018  

* Another wild ride in the assets yesterday… 

* BOE meeting this morning, nothing expected… 

  

Good Day… And a Tub Thumpin’ Thursday to you! Would Mother Nature, please slow down the wind? Another breezy day yesterday, but we found protection sitting around the pool, and so we spent the afternoon, with our friends, kibitzing, and eating snacks. Every time someone went inside, the came back with a different snack. This went on for hours, and once Happy Hour arrived, well, I made the martinis and Jack made the other drinks… A good day with friends, and the wind finally died down, and the sun came out, and well… I thoroughly enjoyed the day.  The Eagles greet me this morning with their song: Victim of Love…   

Well, hold onto your hats folks, we’re still taking a ride on Mr. Toad’s Wild Ride, in all the assets, but the one asset that’s really benefitted from the PPT and James Bullard’s speech the other day is the U.S. dollar.  On Monday this week, the dollar looked as if it was ready to drop like a rock, as the Dollar Index traded 89.16… And this morning the Dollar index has improved to 90.43!

For newcomers to the letter, and the foreign exchange (FX) markets, the Dollar Index is an index made up of currencies from countries that used to be BIG trading partners to the U.S.  And currency traders have used this Index for many years to determine the value of the dollar. I used to laugh out loud about this when the Chinese were becoming our largest trading partner and the renminbi was not a part of the Dollar Index… 

The Dollar Index is heavily weighted with euros, so to me, to really look at the value of the dollar, all you have to do is check out the euro’s price, because the euro is the offset currency to the dollar, which means it’s the 2nd most heavily traded currency in the world, behind the dollar.  OK, enough for the new class today, make sure you took notes, because you’ll be quizzed on this at some time in the future!  

OK, speaking of China like I did above, the Chinese got a BIG Surprise this morning after the fixing. The Chinese renminbi had been fixed with an appreciation from yesterday’s price, but then the Gov’t reported that the Chinese Trade Surplus for January had fallen from the month prior, by a larger amount than anticipated… Now. let’s keep this all in line, with the thought that China still booked a SURPLUS folks…  In all the days that I’ve written the Pfennig (since 1992) I don’t believe I ever reported a Trade Surplus for the U.S. 

O.K., now that we’ve laid that groundwork and have that thought in our heads… The Chinese Trade Surplus was $20.34 Billion last month, VS $54.69 Billion the previous month. And the renminbi got whacked after the data printed. Hmmm… Calmer heads will have to come around here soon, because don’t they realize that a lot of the drop in the Surplus can be attributed to the Chinese New Year holiday week? And let’s not forget the fact that Commodity Prices have rallied this year, thus making Chinese imports of those Commodities more expensive…  But, the traders and investors don’t care about those things right now, and until calmer heads present themselves on the scene, this is what happens, to good currencies…   

The Bank of England (BOE) is meeting while my fat fingers fly across the keyboard, putting this letter together. The BOE Gov. Mark Carney, he of the bag-0-promises that never gets opened, will most likely tell the reporters that the BOE left rates unchanged because there are just too many unknowns of the monetary effects of the BREXIT negotiations…  But in reality, that’s been a known, unknown, for a long time now, what he really should say is that the U.S. economy hasn’t gathered enough steam to garner the rate hike he has hinted at a couple of times in the past 5 years. But that won’t happen, because, he has to keep the happy face on to lure the sheeple into believing that everything is going to be peachy, when in his heart of hearts he knows darn well they won’t!  

So, don’t look for any love for pound sterling, as it trades alongside the euro on the downside of some lofty figures from last week. 

The Price of Oil dropped by $2 in the last 24 hours…  Remember the old Chevrolet commercials about the great American pastime of driving? Well, we’re sure doing a lot of that lately… U.S. oil output topped 10 million barrels a day for the first time yesterday… That computes to a lot of gasoline, which is where I got the thought that we are doing a lot of driving these days, and not just little smart cars…

I was driving up from Fort Lauderdale about 10 days ago after taking Kathy to the airport there, and I noticed that either a Big honking SUV or a sporty race car was passing me all the way back (people drive really fast down here) And I thought at the time, look at all that gas that’s being used…  And I could kick myself, if my leg moved sideways, which it no longer will do, but as usual my timing was awful, as I filled up our car yesterday, at much higher prices than would be available today… UGH! Oh well, the price of gas is what it is, to me… I can’t go anywhere without my car, so whatever I have to pay, I’ll adjust my driving habits to deal with it.  

So, with the price of Oil dropping $2, the Petrol Currencies also saw some slippage in their values. The Brazilian real though bucked the trend overnight and gained at the fixing this morning to trade stronger than yesterday’s fixing. The Russian ruble lost just a handful of shekels, and the Norwegian krone and Canadian dollar / loonie saw larger downward moves. 

The prices of Gold, Silver, Platinum and Palladium all got whacked again yesterday, and all 4 precious metals reached new lows for this cycle yesterday. Gold had over 325,000 contracts traded, and lost $5 on the day, and is down a buck or two this morning.  But Silver, saw a fat cut of the hog taken from its price, as did Platinum and Palladium… I would have to think that these are all blue light special prices…  I’m just saying, and maybe you get the hint, wink, wink…   

The U.S. Data Cupboard today is basically empty with the usual Tub Thumpin’ Thursday fare of the Weekly Initial Jobless Claims, which have become a second tier data print. Yesterday’s Data Cupboard had the long awaited Consumer Credit (read debt) for December. And it surprised me with a print of $18 Billion, VS the $31 Billion in November.  I guess the majority of shoppers did their Christmas shopping in November…  No wonder the profit figures from the retailers in December were so weak!  

To recap… The wild ride in all the assets continued yesterday with stocks rebounding, Gold getting sold again, U.S. Treasuries getting sold, and Commodities getting sold… The BOE is meeting this morning, nothing exciting expected here. China’s Trade Surplus saw a larger than expected drop, but Chuck want’s everyone to keep this in perspective, it was still a SURPLUS, something the U.S. hasn’t seen in all his years of writing the Pfennig…   

For What It’s Worth…  This is an article about Gold production for the last 9 years and can be found here:http://www.mining.com/gold-price-9-straight-years-record-annual-mine-production/  

Or, here’s your snippet: “According to the World Gold Council’s Gold Demand Trends report released Tuesday primary gold production hit another record in 2017 after nine years of annual growth in output.

Overall mine production totalled 3,268.7 tonnes or just over 105 million troy ounces in 2017 which was only slightly higher than in 2016 as new mine starts in recent years have mostly served to fill the gap left by production losses elsewhere according to the WGC report. Compared to 2010, global gold output has surged by 525 tonnes or nearly 17m ounces.

The WGC, an industry body, estimates that output in China – the world’s top producer – fell 9% last year, only the second annual drop in production since 1980. China, which overtook South Africa as the number one miner of the metal in 2007, produced 455 tonnes of the yellow metal in 2016 according to U.S. government figures.”  

Chuck again…  Folks, listen to me now and hear me later, that the World Gold Council (WGC) doesn’t have a clue to how much Gold the Chinese have accumulated, produced, and added to their holdings, because the Chinese don’t want anyone to know! They report false numbers to the WGC, and that’s that!    

Currencies today 2/8/18… American Style: A$ .7838, kiwi .7278, C$ .7968, euro 1.2276, sterling 1.3870, Swiss $1.0595, … European Style: rand 11.9832, krone 7.8823, SEK 8.0430, forint 252.79, zloty 3.3896, koruna 20.5564, RUB 57.20, yen 109.48, sing 1.3237, HKD 7.8180, INR 64.22, China 6.2644, peso 18.64, BRL 3.2482, Dollar Index 90.43, Oil $61.43, 10yr 2.83%, Silver $16.25, Platinum $972.02, Palladium $983.20, and Gold… $1,313.40   

That’s it for today…  Well, I have to get moving this morning, for I have a date with my Florida oncologist this morning. I’ll hear about any new plan of attack today, that is if the 3 oncologists that I have all got together like I requested they would do.  The SLU Billikens played tough last night but lost their game with St. Bonaventure. That St. John’s basketball team is on a roll, beating Duke last weekend, and then beating number 1 Villanova last night… WOW It’s supposed to be another day in paradise today, so when I get home from the doctor, I’ll be heading outside to soak up some vitamin D! The Moody Blues take us to the finish line today with their song: The Voice…  Which has nothing to do with the TV show, as the song was released in the 80’s!   OK, let’s go out and make this a Tub Thumpin’ Thursday, and remember to always Be Good To Yourself!  

Chuck Butler