Rocktober 31, 2017
* Eurozone data is mixed…
* U.S Consumer Spending soars!
* But is it a one and done event?
Good day… And a Tom Terrific Tuesday to you! It’s Halloween! And it’s cold outside! And that means most little kids, the ones I really want to see, will have their costumes covered up with coats. UGH! Tradition has me sitting on the front porch to give out candy the Trick-or-Treaters, but the last couple of years have seen the number of Trick-or-Treaters dwindle, and so I doubt I’ll sit outside tonight… Our kids used to bring the grandkids here to Trick-or Treat, but they have their own neighborhoods now, and so life goes on… Am I a bit melancholy today? You bet I am! Jack Johnson greets me this morning with his song: Posters…
There wasn’t much movement in the currencies and metals yesterday. the U.S. Data was interesting (more on that later) but failed to give the dollar any fuel to strengthen, and so we sit here this morning trading in about the same clothes as we traded in yesterday. Stocks even failed to make a 1% intraday move, for the first time in a month of Sundays! Gold added a couple of bucks, and that left the price Oil to carry the flag for rallying assets…
The price of Oil traded through the $53 handle in the past 24 hours to trade this morning with a $54 handle! That’s a $2 move in the past couple of trading sessions! I told you yesterday that it appeared to be a case of traders taking the Saudi’s seriously, regarding their announcement late last week to cut Oil production even further, and that thought is still prevalent in the markets this morning.
Earlier this morning we saw some data print in the Eurozone… Eurozone 3rd QTR GDP was 2.5%.. And CPI for September was 1.1%… So the Eurozone is seeing economic growth across the board, but inflation is lagging still… And so this data wasn’t able to light a fire under the euro this morning.
Last week, somehow this slipped past me, so better to report it later than never, right? Russia’s 3rd QTR GDP was 2.4% beating the expectations for 1.9% and bettered the previous quarter’s 2.3% print… The Central Bank of Russia (CBR) met on Friday, and kept rates unchanged, and so, if you take these two things and add in the jump in the Oil price, then you have a Russian ruble that’s on the rally tracks! OK, settle down Chuck, the positive move in rubles is very small, so put down the vuvuzela horn and cowbell, Chuck… Awe, Shoot Rudy, I wanted to party!
Speaking of cowbells, there used to be a group of parents at the water polo games for the team my son, Andrew, coaches, that would ring their cowbells whenever the my son’s team scored a goal… I found the noise they created to be obnoxious, and couldn’t wait for their kids to graduate! I hear that the state of Missouri has banned any kind of noise maker other than people’s voices and hand clapping at high school games. Too late to have saved my ears from all that cowbell ringing!
OK, getting back to work here I see that the 10-year Treasury’s yield, which last week hit 2.45%, has been slipping lower again and this morning is trading at 2.37%.. Remember when I told you that the 2.45% had moved higher too fast, and I expected to see this come back down? Of course with all the supply that’s going to be hitting the bond market, from the Fed no longer buying Treasuries, and the Treasury Dept. having to issue more debt, one would think that the yield on the 10-year will be heading higher again…
But that’s only if you don’t believe my scenario that by yearend and into next year, the Fed will be announcing another round of QE/ bond buying… That’s my story and I’m sticking to it! You might be wanting to ask me how I can be saying something like that, when the U.S. economy, is strong, as witnessed by the 3rd QTR GDP of 3%? Because it’s all done with smoke and mirrors folks.. If GDP doesn’t add up to what you want to see, you just add a few items to the calculation and see what that does to the final number, and so on… I’m not buying the strong and robust economy, and neither should you! But like the horse that you lead to water, I can’t make it drink, and I can’t make you think like me, I can only present you with the facts…
Have you ever noticed how when Fed Chair, Janet Yellen, talks about how the economy is strong and robust, that she never gives us any details as to how she came to that decision? I’m sure there are details that prove that to the Fed, right? Details? Come on they’re here somewhere! I saw them yesterday by the copy machine.. No, I saw them over by the candy bar dispenser… Oh, they’ve got to be here somewhere! We’ve got to produce them, because there’s this country bumpkin in St. Louis, that wants to see them.
Oh, stop it, Chuck! Move onto something else quick, before you lose your dear reader! The price of Gold saw some choppy trading yesterday, but by the end of the day, the shiny metal has gained $2.80, to close at $1,276.00… The early morning trading is pretty flat this morning, so we’ll have to wait-n-see how “the boys in the band” feel about the level for Gold & Silver this morning. So, did you read about the apparent fake Gold 1 oz. bar that was discovered in Canada? This whole story seems fishy to me, but here’s the link to the story should you want to read it, and decide for yourself… http://www.zerohedge.com/news/2017-10-30/could-be-huge-gold-bar-certified-royal-canadian-mint-exposed-fake
My friend, and former colleague, the metals guru, Tim Smith , sent me that link yesterday, and I responded to him that I hope that the two guys that supposedly discovered the fake Gold bar, are given the Gestapo interrogation because they seem to be prime suspects to me… Hey! I’m that kind of person, always looking around the corner, or under the hood for the real story!
The U.S. Data Cupboard saw a strong Personal Spending print for September yesterday… But I’m sure hoping the markets and the Fed realize that this was a one and done deal for spending in that it contained all the hurricane relief spending… Personal Income was up 0.4%, which was fine… And Personal Spending was up 1.0%, which if it were for “real” (and I know it’s for real, I mean spending that will continue) then you would see the Personal Consumption Expenditures rising at a fast pace… But that didn’t happen! The PCE was up just 0.1% and remains well below the Fed’s 2% target at 1.6%… And the Core PCE (minus food and gas) is only 1.3%… Retailers couldn’t raise prices during the Hurricane relief, because that just wouldn’t have the right thing to do… So, all this spending and no inflation increase? Crazy, eh?
I read this morning that the U.S. economy hasn’t seen a month of consumer spending like this since the “Cash for Clunkers” deal… Remember that boondoggle to get consumers spending? it lasted a month… that’s it! And so too, I expect this September Spending print to last just one month…
I was also reading this morning on the Bloomberg website an article about how local governments are stepping in to help save retail malls in order to preserve tax revenue they received from the mall. I find this to be a really dumb idea… But then I thought Cash for Clunkers was dumb too… The government, whether it be the national or local or state, just doesn’t see the forest for the trees… I’m just saying…
To recap… It was a day of plugging holes and repairing cracks in the foundations yesterday, as the dollar backed off after putting in its best week of 2017 last week. The currencies and metals hardly moved, Gold added $2.80, but that’s it… The price of Oil continued to climb higher after the Saudi’s announced they would cut Oil production further, and Russian interest rates remained unchanged on Friday, giving the ruble something to gain on.
For What It’s Worth… I had quite a few FWIW articles to choose from this past weekend, as dear reader Bob, sent me quite a few (Thanks!) And I found this one to be the best, given that it talks about Germany and Russia getting together, thus turning another ally of the U.S. into a Russian friend.. And you can find the article here: http://www.informationclearinghouse.info/48100.htm
Or, here’s your snippet: “The visit to Moscow this week by German President Frank-Walter Steinmeier heralds a growing rapprochement between the two countries. That’s not just good news for bilateral business ties. It is key to unlocking the dangerous East-West crisis.
“I‘m convinced we need to resist the alienation that has grown up between our countries in recent years,” said Steinmeier at the talks with Russian President Vladimir Putin. The two leaders held wide-ranging discussions beyond narrow bilateral interests. Both reportedly exchanged views on “pressing global issues” including Syria, Ukraine, North Korea and Iran.
Putin said of his meeting with Steinmeier: “I want to voice hope that your visit will help us to make a contribution to developing our bilateral relations and strengthening our interstate ties.” The German president’s role as head of state is largely ceremonial. Formally, he doesn’t have political power, which rests with the country’s chancellor, Angela Merkel. Nevertheless, the symbolism of Steinmeier’s visit to Moscow carries enormous significance.
This week was the first visit to Russia by a German president since 2010. Steinmeier’s predecessor, Joachim Gauck who was in office from 2012 until this year, was renowned for having a “frosty” view of Russia. Under Steinmeier the relationship is not just thawing, it is warming rapidly.”
Chuck again… I can hear Putin saying under his breath, “can you do something about the Eurozone’s economic sanctions on us?” With Germany being the largest economy in the Eurozone, one would think that their opinion weighs heavily on the decisions of the Eurozone, eh? but one never knows… only the Shadow knows!
Currencies today 10/31/17… American Style: A$ .7670, kiwi .6845, C$ .7787, euro 1.1632, sterling 1.3207, Swiss $ .9984, … European Style: rand 14.1040, krone 8.1741, SEK 8.3717, forint 267.62, zloty 3.6518, koruna 22.0495, RUB 57.90, yen 113.25, sing 1.3615, HKD 7.80, INR 64.80, China 6.6488, peso 19.24, BRL 3.2530, Dollar Index 94.63, Oil $54.12, 10-year 2.37%, Silver $16.88, Platinum $919.32, Palladium $974.08, and Gold… $1,276.50
That’s it for today… Boo! Did I scare you? HA! OK, so tomorrow I’ll have some Halloween jokes for you… I still remember the one my oldest son, Andrew told when he was a kid… What do you do with the Elephant with three balls? You walk him and pitch to the giraffe! Had you going there, for a second didn’t I? How about our Blues? They beat the LA Kings last night, in a battle of the two of the three best teams so far this year! I watched the whole game, and came away with new respect for Jake Allen the goalie.. We no longer have a little one to dress up for Halloween, so the day is just like any other day it seems… Hopefully the little kids can cheer me up tonight! And with that, Eddie Floyd takes us to the finish line today with his song: Knock On Wood.. I recall playing that song in the “Soul Wonders Revue” band I played in, with our shiny gold pants and gold shirts doing the dance steps while we played.. May, that was a long time ago! And with that, I hope you have a Tom Terrific Tuesday, and great all Hallow’s eve.. Be Good To Yourself! (but don’t eat too much of the Halloween candy!)