Chuck Butler’s: A Pfennig For Your Thoughts
July 10, 2017
Good Day… And a Marvelous Monday to you! Another absolutely beautiful weekend, weather-wise here in the St. Louis area this past weekend! WOW! We sure have had our share of good weather so far this summer, but it appears that it’s going to really ratchet up the temps this week, so hot, humid days will return! The great Al Stewart greets me this morning with his song: Song On The Radio.
Mom… He’s doing it again! OK, let me explain… There’s a classic rock-n-roll station here in St. Louis that’s been on the air since the late 60’s… And about 30 years ago, they ran a TV commercial, with the Rolling Stones song, Brown Sugar playing those very recognizable guitar chords… And a dad in his study, with the radio turned up real loud, playing the air guitar to the song. The daughter opens the door to the study, and see’s her dad, playing the air guitar, and she shouts… “Mom, He’s doing it again”! The TV commercial was way more funny than I just described it, and the reason I brought this up today is simply that, every month, when the BLS reports the jobs created in the previous month, I quickly go out to their website and see how many jobs they added out of thin air to the surveys, and I think of this TV commercial… Folks, they’re doing it again….
So, the total jobs created in June, according to the BLS was 222,000… Of which 102,000 were added by the BLS after their surveys were finished, and only showed job creation at 120,000… Now, we can’t have that can we? Not according to the BLS, who probably got their marching orders from… Well, it’s better that I not go there… But they got them from someone, and voila’. 222,000 jobs were “created” for June! Ain’t it a shame that we have to put up with this nonsense? I’m so fed up with the BLS that if I were President, they’d all be fired!
My oh my, the games people play, every night and every day. I could go on, but what’s the point, we all know that the BLS cooks the books each month when it comes to the Jobs report… I sent out a Tweet on Friday after the numbers printed, and said, “BLS says 222,000 jobs added in June, but 102,000 of the jobs were added by the BLS with hedonic adjustment.”
And like most days when the jobs numbers are printed, the dollar wasn’t able to significantly move higher, even though the number looked strong. The dollar did gain a bit, pushing the euro back below 1.14, and the Aussie dollar (A$) back below 76-cents, but those moves were very small on Friday, and in the overnight markets, there hasn’t been much movement at all, so we start the week, with the currencies itching to move against the dollar on an upward path, knowing that this week is chock-full-o-data here in the U.S, which normally isn’t good for the green/peachback…
I don’t like hitting you right out of the starters blocks like that with my thoughts on the Jobs #’s but the BLS has got to be stopped! The ADP Employment Report, which is what I’ve always said should replace the BLS report, because, ADP does the payrolls for almost every business in the U.S. so, they KNOW how many new payrolls were added, and how many were taken off each month, without guessing the number, print last Thursday and said that only 158,000 jobs were added in June… That’s a 64,000 difference, a subtle little difference that makes all the difference in the world!
Oh and the things I told you to actually pay attention to.. The Average Hourly Earnings grew at a 0.2% clip in June, and May’s data was revised downward from 0.2% to 0.1%… So, no wage inflation here… The Average Workweek was 34.5 in June, up from 34.4 in May… No great shakes here! And the Labor participation rate ticked up in June to 62.8%… this is not a good level folks..
And like I’ve always said, traders swallow the BLS report, hook, line and sinker, and buy dollars on a strong report, and that shouldn’t take place… There’s also something going on that I discussed in my weekly article for the Dow Theory Letters website (www.dowtheoryletters.com) a few weeks ago, and that is that the Swiss National Bank (SNB) has been buying U.S. Stocks with their reserves, which is another bump upward for the dollar, since the SNB has to buy dollars to buy U.S. Stocks… I really drove the point home about Central Banks buying stocks in the article… I know it’s a paid for subscriber newsletter, but given the other writers that contribute to it, and of course my stuff, I feel it’s well worth the cost.
OK… Well, let’s see, what’s in the news… The G-20 summit came and went without any surprises in the communique’. The U.S. and Russia did agree to a ceasefire in Syria, which can only be a good thing. But besides that, there were no market moving items this time… And THAT, can only be a good thing too! Because these market moving items that DO come from the G-20 usually don’t have any staying power in them.
So I was doing some research this past weekend (early morning, didn’t want to miss going outside!) and came across a forecast for the euro that caught my eye… While most analysts are forecasting the euro to remain around the 1.13-1.14 area for the next year, The analyst at German Bank DZ Bank AG, which had the best estimate for the second quarter for the euro, says the euro will reach 1.15 by year-end, and move to 1.18 in 2018…
I think he’s being too conservative, myself… I don’t think he’s seeing what I’m seeing, which is an end of the strong dollar trend, which would bring about dollar selling, and we all know what dollar selling brings us don’t we? That’s right! Euro buying! But my momma didn’t raise no fool! I’m not going to say the euro is going to X.XX, I just think it will be stronger as we go along in the change of sentiment from dollars to euros.
But let’s not forget that the euro has already gained 8% VS the dollar this year, and has marked up gains against all of its G-10 peers…
I mentioned above that the Aussie dollar (A$) fell back below 76-cents on Friday, and is trading around .7555 this morning. 76-cents seems to be sort of a line in the sand for the A$, as it has reached that level a couple of times in the past couple of weeks, and has failed to hold it. The A$ still enjoys a positive yield difference VS the dollar, euro and yen, and its mother-land’s currency, pound sterling. And Australia continues to do a good job weaning itself from a dependence on the mining sector… A good diversified economy is as important to a country’s outlook, as a good diversified investment portfolio is for an individual investor!
Sure when China was growing at a better than 10% clip all those years, it made sense for Australia to ramp up the mining sector, but now that China’s economy has cooled its jets, things must change, and they are!
I received an email from the Reserve Bank of New Zealand (RBNZ) this past weekend, telling me that this is the 50-year anniversary of the introduction of the decimal dollar… So, kiwi is turning 50 this year, just like the Summer of Love, and the release of the Beatles Sgt. Peppers album! I remember when I first was trading foreign bonds for the World Markets group at the old Mark Twain Bank, and was charting currencies, and noticed that kiwi was really moving higher, and mentioned it to one of the “seasoned” guys on the trade desk, and he told me, “don’t waste your time with kiwi, it’s too small of a market”…
A year later, he was writing to his clients about how great kiwi was and how he found this great currency! I about came over the desk to grab him and shake him, but, I thought, oh well, it’s all good for the investors! Well, I like kiwi again… I told you a couple of weeks ago, I’m all about euros and kiwi these days…
What’s gotten into the Brazilian real lately? After months of weakness due to a Political scandal and the falling Oil prices, the real turned on a dime last week and began rallying. I’m going to have to look into this, as I had just written off the real because of those two items just mentioned that pushed it down. So, more on this maybe tomorrow.
I’m going to switch gears here because there are a couple of things I need to get off my chest…
Well, I’m calling this the “Recovery That’s Not For Everyone”… Why? You ask… Because of this recovery that supposedly began in 2009, has left some states out in the cold… Yes, that’s right, Arizona, Connecticut, Mississippi, Nevada and Wyoming have not yet recovered… These 5 states still haven’t regained their levels of gross domestic product from before the financial crisis, more than five years after the country as a whole hit that milestone. Eight states are below prerecession levels of employment. And 15 have home prices that have yet to rebound fully.
Oh but the BIG Metro city areas are doing just fine, right? The problem is, that there’s just not enough Big Metro City areas to make up for the rest of the country that is still mired in a recession…
And as I said above, Eight states are below prerecession levels of employment! Wyoming, West Virginia, Connecticut, New Mexico, Mississippi, Vermont, Maine and Alabama… And there are more problems…
15 states have home prices that have yet to rebound fully.. They are: Connecticut, Nevada, Maryland, New Jersey, Rhode Island, Delaware, Arizona, Illinois, Florida, New Mexico, Virginia, New Hampshire, Alabama, Maine, and New York.
Even with this information, Robert Hall, a Stanford University economics professor, and the man who heads of the National Bureau of Economics, the folks that make the “official call” on when a recession starts and ends, says that, “The National Recovery is absolutely complete!” Wait, what? You’re telling me/ us, that the recovery is completed, but this is all we get out of it? Less than 2% growth, and an economy that can’t seem to get out of its own way? Wasn’t there supposed to be more from a recovery? Especially one that had zero interest rates for most of it, Trillions of bonds being bought by the Central Bank for the most of it, and easy credit? This is it? Say it ain’t so, Joe! (Or Robert Hall!)
Gold lost $12.80 on Friday… The short Gold paper traders and the naysayers to manipulation, will point to the trumped up BLS jobs report as the reason Gold took a hit on Friday… But I say hogwash! Well, Gold is down another $2.40 in the early morning trading today… The short sellers won’t be happy until the drive the price below $1,200… Again, these trades have got to be stopped!
Speaking of Gold… I saw a graph on Friday of the Gold exports by the U.S… They have increased this year so far, VS last year’s exports to the same date… (Jan through April)… This just reinforces my thought that I’ve had for years now… That here in the U.S. investors look at Gold as a commodity that should go up or down, and in the East (Asia, Russia, etc.) they view Gold as a “store of wealth”… Here in the U.S. we lament when the price of Gold goes down, in the East, they rejoice, for they get to continue to add to their storage of wealth at cheaper prices… Sort of like the: One man’s trash is another man’s treasure.. And that’s why, even though I get upset when the price of Gold gets “whacked by Da Boyz”, I don’t get that caught up in the price of Gold… To me, it is what it is, and eventually it will go higher in my opinion. But while it doesn’t go higher, it gives me opportunities to add to my stash of Gold (& Silver of course!) at cheaper prices… I guess, I think like someone in the East, eh? For I look at it, simply as a store of wealth, a store that has never gone to zero, and never will!
Well, I’ve built up the Data Cupboard’s print this week a couple of times in the past few days, so with no further ado, here’s the “real economic data” that’s scheduled to print this week…
We start the week slowly and build to a crescendo! Today we’ll see the color of May’s Consumer Credit (read debt)… Tomorrow we’ll see May’s Wholesale Inventories… Wednesday, Janet Yellen will speak… this ought to be good, that is as long as someone asks here the question, “why are you hiking rates when the economy is weakening, and don’t give me any of that “we see the economy growing strong in the second half stuff, because you’ve told us that the last 3 years!”
Thursday, we’ll see PPI (wholesale inflation) and the Federal Budget numbers… And then finally on Friday, we start with the stupid CPI (consumer inflation) and then move to Retail Sales for June, and then finish off the week with Business Inventories, and two of my fave prints, Capacity Utilization and Industrial Production. Whew! I’m tired out after all that!
To recap… The Jobs Jamboree was interesting in that the BLS added 102,000 jobs to their surveys… And the traders swallowed the data hook, line and sinker, thus pushing the dollar higher, not by much, but higher nonetheless! Chuck talks about the euro, the A$, kiwi, the uneven economic recovery in the U.S. and that the U.S. was net negative with Gold exports last month… That and more!
For What it’s Worth… Since the world was watching G-20 for something special this past weekend, I thought this was worth a shot for a FWIW section article today… It’s about how China and Russia are teaming up to deal with the President… You can read it all here: https://www.unz.com/article/the-great-power-shift-a-russia-china-alliance/
Or, here’s your snippet: ”
Top Russian and Chinese leaders are busy comparing notes, coordinating their approach to President Donald Trump at the G20 summit in Hamburg this weekend. Both sides are heralding the degree to which ties between the two countries have improved in recent years, as Chinese President Xi Jinping’s visits Moscow on his way to the G20. And, they are not just blowing smoke; there is ample substance behind the rhetoric.
Whether or not Official Washington fully appreciates the gradual – but profound – change in America’s triangular relationship with Russia and China over recent decades, what is clear is that the U.S. has made itself into the big loser.
Gone are the days when Richard Nixon and Henry Kissinger skillfully took advantage of the Sino-Soviet rivalry and played the two countries off against each other, extracting concessions from each. Slowly but surely, the strategic equation has markedly changed – and the Sino-Russian rapprochement signals a tectonic shift to Washington’s distinct detriment, a change largely due to U.S. actions that have pushed the two countries closer together.”
Chuck again… OK, G-20 has come and gone, let’s move on too, eh?
Currencies today 7/10/17… American Style: A$ .7555, kiwi .7269, C$ .7738, euro 1.1393, sterling 1.2873, Swiss $.9668, … European Style: rand 13.3350, krone 8.3460, SEK 8.4387, HUF 270.37, zloty 3.7155, koruna 22.91, RUB 60.35, yen 114.20, sing 1.3855, HKD 7.8138, INR 64.55, China 6.8045, peso 17.94, BRL 3.2795, Dollar Index 96.15, Oil $43.87, 10yr 2.36%, Silver $15.25, Platinum $900.98, Palladium $836.81, and Gold.. $1,207.30
That’s it for today.. Cards take two of three from the Metropolitans this past weekend and head into the All-Star Break under .500 for the first time in 10 years! That’s unacceptable, and when they come back they’ll have 2 weeks to change things or some changes will be made for them! Had a great day yesterday, with friends, and partial family in the backyard, watching the ballgame from the pool! Son Andrew commented that “you know it’s hot when dad’s in the pool” Ambrosia takes us to the finish line today with their song: Holdin’ On To Yesterday… And with that, It’s time to go… I hope you have a Marvelous Monday, and Be Good To Yourself!