August 14, 2019
* Da Boyz Are Back In Town, per Ed Steer
* The Strong dollar trend remains in place, but for how much longer?
Good day… And a Wonderful Wednesday to you. I’m falling apart… I’ll just leave it at that, for you don’t want to hear about my latest malady… My beloved Cardinals are like the bully that beats up on the weaklings, but as my dad used to tell me, “There will always be someone bigger and stronger”, and whenever the Cardinals play a team “bigger and stronger”, they get their hats handed to them… While that kind of play might get you into the playoffs, the problem then becomes how do you beat the “bigger and stronger” teams? Procol Harum greets me this morning with their rock classic song: A Whiter Shade of Pale…
Longtime friend., Ed Steer, said it best this morning when he quoted a Thin Lizzy song, and said, “Da Boyz Are Back In Town”… you only get one guess as to what he’s talking about… Yes, the short Gold paper traders, or price manipulators, or the boys in the band, were back at the COMEX with their arms full of paper trades, that whacked Gold… Gold officially lost $9.60 on the day, but a times it was much worse… I was wondering when they were going to show up, the price manipulators that is, and now I wonder no more!
But not to worry… Gold is up in the early trading this morning, $7, so we have that going for us today! There was no change in the rhetoric and saber rattling in the Trade War, except for President Trump announcing that some of the tariffs will be delayed… Not that they were being dropped… just delayed. I guess he did that to give negotiations an opportunity to work some magic… But if they haven’t pulled a rabbit out of their hats by now, there will be no magic now… That’s my opinion, and it could end up being wrong, but I truly doubt that!
The problems for the U.S. just keep getting swept under a rug… This Trade War is going to be the last shove the economy needs to send it over the cliff… And all the while the dollar bugs continue to ignore all the dark clouds that are forming, and keep pushing the dollar to gain VS the currencies… Interest rates here in the U.S. are going lower, maybe not in September, as of right now there’s a 66% chance of a rate cut at the September meeting. But… they will sooner or later, because the Fed Heads think they know best, and they think they know how to fix the economy when it ails… And all that will be Armageddon for the dollar, and it’s a shame the dollar bugs can’t see that… Party until they take the punch bowl away, is their motto I guess!
Well, it’s not all wine and roses for investors these days, that is unless they are buying Gold & Silver! I came across this Fear & Greed Meter on Zerohedge.com yesterday… Here’s what they show right now…
1 year ago, greed was at 73 on a scale from zero (extreme fear) and 100 (extreme greed)
1 month ago, it was still in the greed at 59…
1 week ago, it was neutral at 48…
And today, it’s at a 22, which is in the Extreme Fear range…
So, what’s happened to all the seashells and balloons for investors?
Reality, may have something to do with it…
The realization that trees don’t grow to the moon, the economic data recently hasn’t been good, and we’re in the middle of a Trade War… May have something to do with it…
And that’s a good indicator that Gold would be getting bought, which it is… Well bought by investors… The Gold ETF is a record levels of size (but try to get your physical Gold out of an ETF) I read a report yesterday that said ETF’s are nothing but a price indicator with extreme risks… But at least these investors realize that Gold is going to get stronger or else they wouldn’t be buying the Gold ETF…
And we all know that Central Banks like Russia and China continue to rack up huge amounts of physical Gold in their reserves… Fear & Greed Index… it pays to keep this on your radar, folks…
And things aren’t any better in the Eurozone… The Trade War is affecting them too, and the proof is in the pudding, as this morning they printed their June Industrial Production numbers, and they aren’t good folks… A negative -1.6% for the month, and a negative -2.6% year on year… The euro took a shot to the mid section after these numbers were printed, and rightly so, but here’s where I stop to question what the heck is going on, for we’ve seen negative numbers in Industrial Production here in the U.S. in the past prints, and the dollar never took a shot to the midsection because of the negative print…
It just shows to go ya, that the strong dollar tend is till in place, although we’ve had a few false dawns the past couple of years, the trend is still in place, but, as I’ve said before, these false dawns are important to see because they tell me, (witness to all of the currency trends since 1971) that the trend is coming to an end… not today, tomorrow or next week or month, but… when the Fed Heads get to cutting rates again, that will be the beginning of the end of the strong dollar trend…
The price of Oil has rebounded further in the past 24 hours, and now trades with a $55 handle and is within spittin’ distance of $56… But the Petrol Currencies must be on a delayed reaction basis… for they haven’t moved along with the price of Oil…
Yesterday I told you about the good news from Russia, and was upset that the ruble didn’t rally on the news… But, again, it must be on a delayed reaction basis, for it rallied last night… And was the only currency to gain VS the dollar on Tuesday. Shoot Rudy, not even the Japanese yen rallied, and instead weakened on the day…
For those of you new to class or just skipped over this thought from the other day, that the Japanese yen has been in rally mode for the last month, and fears in the markets have investors seeking safety… Now, that brings us to the question as to why in the world they would buy yen ? Well, that’s beyond my ability to comprehend, for Japan is far ahead of the U.S. with all their problems…
So, I read a report that quoted Big Al Greenspan, yes, he’s still around, and still thinks he needs to comment on things… And this time he was talking about The Fed and Negative Rates… Big Al basically said if Treasury yields go negative, it’ll be no big deal…. let’s listen to what Big Al had to say: “There is international arbitrage going on in the bond market that is helping drive long-term Treasury yields lower,” Greenspan, who led the central bank from 1987 to 2006, said in a phone interview. “There is no barrier for U.S. Treasury yields going below zero. Zero has no meaning, beside being a certain level.” – Al Greenspan
OK… this is too good to not use… I was talking to my good friend, the Retirementor, Dennis Miller, the other day, and by the way he sounded pretty good, (he’s gone to hell and back with his cancer treatments, that are now on hold) And he said he had an idea… His idea was that with all the countries of the world issuing negative yield bonds, Gov’t and Corporate, then if Sears and GE really want to get back into business they should move to Europe and issued bonds… They wouldn’t have to pay interest! I said, “That’s awesome, Dennis”… and he said I could use it, but I said, I wouldn’t, but after Big Al’s comment on negative yield Treasuries, I thought I can’t let that go without giving Dennis his due!
Oh, and about $15 Trillion have been issued as negative yield bonds to date… it’s amazing what some people will buy, isn’t it?
OK, the U.S. Data Cupboard gave us the stupid CPI (consumer inflation ) yesterday… it’s so stupid it’s not even worth quoting what it did… But today, the Data Cupboard will spill out data prints all over the table, like they’re unloading a pot full of shrimp boil! Retail Sales, Industrial Production, Capacity Utilization and Productivity are the data prints that I’ll be looking to… Surely, (don’t call me Shirley!) the back-to-school sales have helped Retail Sales… (The Butler Household Index can’t help with back-to-school sales, because we don’t have any kids going back to school!) Yes, we still have Alex in his last year, of his 6 year PT program, but he doesn’t need pencils, crayons, markers, notebooks, laptops, and backpacks…
To Recap… The dollar is still in control, but for how much longer? Gold gets whacked but rebounds in the early trading today. the Trade War rhetoric and saber rattling is on hold. And the Greed / Fear Index is showing that investors have gone from Greed a month ago, to extreme fear now… Chuck asks, has reality finally gotten to them?
For What It’s Worth… Since we spent so much time talking about negative yielding bonds this morning, this caught my eye… A Danish bank is the first to issue a negative yielding mortgage! And that story can be found here:https://www.marketwatch.com/story/a-danish-bank-is-offering-mortgages-with-negative-interest-rates-why-you-shouldnt-wish-for-that-to-happen-in-the-us-2019-08-12
Or, here’s your snippet: ” It’s safe to say that mortgage rates have never been lower in Denmark.
In fact, they’re now negative. Denmark’s Jyske Bank JYSKY, -20.24%, is now offering a 10-year fixed-rate mortgage at negative 0.5%. Additionally, Finland-based Nordea Bank announced Wednesday that it will offer a 20-year fixed-rate mortgage in Denmark that charges no interest, and the bank is preparing for the possibility of home loans up to 30 years in duration having negative rates. Currently, the rates on 30-year fixed mortgages average just 0.5% in Denmark.
When a mortgage rate is negative, a borrower still must make monthly payments toward their principal, but they ultimately pay back less than they originally borrowed. They would, of course, still have to pay other costs and fees.
At the same time, other long-term rates now stand at or below 0% across the world. Thirty-year German bond yields TMBMKDE-10Y, +5.73% have dropped deep into negative territory, and central banks in Europe and Japan have toyed with 0% or negative rates for years now.
In the U.S., the situation is much different. Right now, the 30-year fixed-rate mortgage in the U.S. averages 3.6%. Nevertheless, the specter of a recession has some worrying about the trajectory of the interest rates in the U.S. and what negative rates could mean for Americans.”
Chuck again… the poor “savers”… there’s nowhere for us to go, and eventually the savers will be pushed to buy risky investments as they look for income… It’s a same folks… a real shame…
Currencies today 8/14/19 American Style: A$.6757, kiwi .6433, C$ .7526, euro 1.1167, sterling 1.2075, Swiss $.9734, European Style: rand 15.2380, krone 8.9380, SEK 9.6057, forint 290.57, zloty 3.9057, koruna 23.1637, RUB 65.26, yen 106.19, sing 1.3873, HKD 7.8445, INR 71.31, China 7.0532, peso 19.47, BRL 3.9741, Dollar Index 97.78, Oil $55.97, 10-year 1.61%, Silver $17.12, Platinum $852.59, Palladium $1,443.68, and Gold… $1,509.38
That’s it for today… I forgot to mention yesterday that I was sorry for the delayed delivery of the Pfennig on Monday, there were technical problems, and I was frustrated as usual when that happens… I’ve lost the ability to get to the Pfennig Replies box again, so if you’re wondering why I haven’t answered your email, it’s because I haven’t seen it! I spent some time yesterday cleaning my writing desk of all the clutter I’ve accumulated… And added some pictures to my board. I need to organize that board too, but that’s for another day! The Cardinals are playing the Royals for two games, and every time, through the years, that the Cardinals play the Royals, my mind drifts back to Game 6 of the 1985 World Series, when umpire Don Denkinger robbed Cardinals fans of another Series victory… I’ve forgotten the name of the referee that gave Colorado 5 downs to beat my Mizzou Tigers, but I’ll always remember the umpire’s name that robbed us of a World Series Championship… The Cure takes us to the finish line today with their song: Close To Me… I hope you have a Wonderful Wednesday, and please Be Good To Yourself!
Chuck Butler