Rocktober 4, 2017
* Not much movement in the currencies yesterday
* UK Only country with weak PMI’s…
* Revisiting the Recovery & Reinvestment Act of 2009…
Good day… And a Wonderful Wednesday to you! 10/4… That’s a 10/4 good buddy! How was your Tom Terrific Tuesday? Well, I hope it was grand. Mine was a little subdued. I tried to stay awake to watch the AL Wildcard Game last night, but that wasn’t happening! Why do they have to start these games so late at night? The NL Wildcard Game is tonight, same deal with that one! UGH! Graham Nash greets me this morning with a song from his solo album, Songs For Beginners… The song today is titled: I Used To Be A King… And while I wasn’t a “king”, no wait, Chuck, they don’t want to hear about that! Just back away from the keyboard slowly, with no intent to rush back to it! HA!
Well, as I look at the currencies and metals this morning, I get the feeling that traders are now waiting for “something” to give them further direction in which to take these assets. Gold gained 60-cents yesterday… The euro is trading in the same clothes as yesterday, and the Dollar Index is down just 9 ticks from yesterday morning’s price. Gold has added nearly $4 in the early morning trading today, but we all know what can happen cone “the boys in the band” arrive at their desks, now, don’t we?
I was perusing through the Bloomberg stories this morning and came across one that caught my eye. Let’s see if it would catch yours as it printed as: $1 Trillion Fund Doubts Dollar Rally Will Last… In the article the writer gives this piece of info that I think is very important… “Hedge Funds increase dollar shorts to most in 4 years” I haven’t seen the IMM positions report lately, which reminds me that I need to go out and look for it each week, you dolt! Nonetheless, dollar shorts have been increased to the most in 4 years, folks… It’s good to see that other minds think the way I do regarding this rally by the dollar, that’s it will be short-lived, and soon will return to losing ground like it has for most of this year!
The euro is receiving another half-baked hug from traders this morning after the Eurozone harmonized PMI printed and saw a small increase from 55.6 to 55.8, and the composite print, which is manufacturing and services remained at 56.7 … Not great shakes, but also not a step backward that would have to be dealt with!
The Eurozone also saw their August Retail Sales data, which was NOT, good, but it was August, when most of Germany is on holiday, and things basically slow down to a crawl. The markets are aware of this, as it happens every year, and so the August print for Retail Sales of 1.25%, down from July’s 2.3%, didn’t ruffle any feathers this morning.
Overnight, Japan printed their September PMI, and even Japan saw an increase in the index number from 53.2 to 53.7. Thus, the U.K. is the only major country to print their September PMI and see it lose ground. But wouldn’t we expect that, given the on going BREXIT discussions? I think so!
Boy, kiwi just can’t seem to even buy a bid these days… The Political uncertainty here is just dragging kiwi through the muck. And I have to admit I didn’t see this one coming… I really thought that the National Party would win a majority of the seats and we could go on with our happy lives. And the problem with this is that this dragging out the Political uncertainty could go on for weeks, if not months… But eventually it will iron itself out, and when the rumors begin to spread that a coalition gov’t could soon be formed, kiwi will rebound like Paul Silas!
I’ve got a some thoughts this morning on the U.S. economy, so I might as well get to them before it gets too late! So…
Longtime readers know that I call myself a “Fed Watcher”, I’m a Fed watcher, and so on… In that light, I sign up for all kinds of reports from the Fed. St. Louis, and most of the time it’s the same old Fed rhetoric, about saving the world and all that… But yesterday’s Fed note caught my eye, and soon I was reading something that just made my blood boil… You see the article was about the funding that was earmarked for highway and infrastructure improvements back in 2009… Remember 2009? The first year of Quantitative Easing, and TARP, and this little thing called The American Recovery and Reinvestment Act of 2009… or just the Recovery & Reinvestment Act…
The major component of the bill targeted infrastructure, particularly the nation’s highways, and provided the states with $27.5 Billion in grants. This amount totaled 44% of all highway improvements made by the states in the previous year! But something happened to that money, as highway projects spending remained flat for the next three years. 40% of Americans lived in states that spent less on highway infrastructure in 2010 than they did in 2008, before the grants were made! Where did the money g
Ahhh grasshopper, the funds were “overcrowded”… In other words, the funds were needed elsewhere in each sate… If you recall at that time the States were hurtin for certain with tax revenues down big time, and so the States used the funds for other things… Like administration salaries! I kid you not! Anyway, here we are 8 years later, and those same highways still need improvements, but we have well paid administrators to tell us that the latest tax increase bill is needed! Here’s the link to the article on the Fed… I don’t know if you’ll be able to get to it or not, if you don’t have a sign on to the Fed’s site, but we’ll give it a try anyhoo… click here: https://research.stlouisfed.org/publications/economic-synopses/2017/09/22/why-the-2009-recovery-act-didnt-improve-the-nations-highways/?utm_medium=email&utm_campaign=201710A%20Research%20Newsletter&utm_content=201710A%20Research%20Newsletter+CID_3cb87ec7819ef51804e4c63181c2ba62&utm_source=Research%20newsletter&utm_term=Read%20why%20the%202009%20Recovery%20%20Reinvestment%20Act%20didnt%20improve%20the%20nations%20highways
Brother! I just shake my head in wonder of how in the world these state leaders got where they are? OK, I’ve got to move on here, don’t want to get bogged down on one subject…
I was reading my Daily Reckoning (www.dailyreckoning.com ) And James Rickards was talking about the U.S. being in a Depression, and I sat up and thought, “Hey, I’ve said that since 2010!” And I said it right here in the Pfennig! And the old Review & Focus. Well, Rickards thought the best way to get people thinking like him on this was to give them the John Maynard Keynes description / definition of a depression… Keynes said a depression is, “a chronic condition of subnormal activity for a considerable period without any marked tendency towards recovery or towards complete collapse.”
Hmmm… Very interesting don’t you think? I say that because that’s exactly what we’ve had since the financial meltdown in 2007-2008. Keynes didn’t say that a depression was negative GDP, he didn’t mention GDP at all! Instead he chose his words carefully, and said that a depression was a considerable period of Chronic subnormal activity… Isn’t that exactly what we’ve had since 2008? I talk about it all the time, how the economy is just muddling along, and not growing at the pace associated with an economy that’s nearly 10 years into its so-called recovery…
Yes, we’ve recovered from the depths of the economy after the financial meltdown, but recover beyond that? I say no! And if it weren’t for Gov’t spending, GDP would probably be negative! So, put that in your pipe and smoke it, Federal Reserve!
Oh, and one more thing that I’ve said about this depression over the years is that: “one might not associate this economy with a depression because there are no soup lines… Well, that’s because the government assistance checks are mailed directly to the participant now. Their debit cards are sent directly to the participant. The days of soup line are over, and replaced by government assistance going directly to the participant.”
Ed Steer tells me this morning that “all 4 precious metals put in intraday lows yesterday”… YIKES! And like I said above, Gold gained just 60-cents yesterday, with just 200,000 contracts traded, which leads me to believe that’s why Gold’s move was so small… wink, wink…
Yesterday’s Data Cupboard had a BIG SURPRISE for us… Sept. Auto Sales soared to 18.8 Million from 16.1 Million in August. Auto Sales had seen monthly declines for more than 6 straight months until this September print, but then again I warned you a few weeks ago that this is what we could see as a result of all the flooded cars… I figure we’ll se another strong month in Rocktober, but after that, we’ll return to the monthly declines..
Today’s Data Cupboard has the ADP Employment Report, which is supposed to be an indicator of what the BLS Jobs report will be on Friday… But most times it doesn’t work out that way, and it’s not the ADP report’s fault… It’s the hedonic adjustments that the BLS puts into their Jobs report that’s to blame! So, anyway, the ADP report today is expected to be around 140,000 for September… And that’s not a good number, folks…
To recap… Not much is going on with the currencies and metals in the past 24 hours folks… The Eurozone printed a strong harmonized PMI (manufacturing index) this morning, but their August Retail Sales fell, and Chuck explains why that happened. All 4 precious metals put in intraday lows yesterday, as “the boys in the band” were busy! And Chuck explains why he thinks we’re still in a depression…
Before I head to the Big Finish today, I wanted to send out a HUGE THANK YOU! To longtime reader Bob T., who I met in Chicago during the years I participated in the FX University Tours. Bob came across some Pfennig coins, and sent them to me… and now they are displayed on my desk wall! Thank you so much Bob!
For What It’s Worth… I was searching for a rainbow (Marshall Tucker) this morning, which would be FWIW worthy, and really didn’t find much, but did see this on Ed Steer’s letter, and he borrowed it from NASDAQ, and I’ll do the same. It’s about banks getting fined for FX manipulation, and so on, and can be found here: http://www.nasdaq.com/article/hsbc-deutsche-bank-pay-penalty-for-fx-rate-manipulation-cm853954
Or, here’s your snippet: “Two major foreign banks, HSBC Holdings plc and Deutsche Bank AG, resolved legacy business misconduct matters in the United States. The banks were accused of rigging foreign exchange (FX) rates.
HSBC was fined $175 million for its “unsafe and unsound practices in its foreign exchange (FX) trading business” by the Federal Reserve. The bank was accused of failure of oversight and internal control of its FX traders who buy/sell currencies “for the firm’s own accounts and for customers.”
The banking regulator alleged that the bank’s dealers shared confidential information about client orders and matched up trades to benefit them. The bank was also accused of attempting to manipulate FX rates.
HSBC is now required to improve control and fix shortfalls in “governance, risk management, compliance, and audit policies” pertaining to its FX trading operations. The company spokesman Rob Sherman said, “We are pleased to have resolved this matter related to practices in the FX market from 2008-2013.”
Chuck Again… I’m totally convinced that this type of stuff will go on and on until somebody goes to jail for their wrongdoing! These fines, are like a light slap on the wrists for these Big Institutions… Go To Jail, go directly to Jail, do not pass GO, do not collect $200!
Currencies today 10/4/17… American Style: A$ .7852, kiwi .7163, C$ .8017, euro 1.1755, sterling 1.3267, Swiss $.9738… European Style: rand 13.5652, krone 7.9580, SEK 8.1175, forint 264.63, zloty 3.6555, koruna 21.9915, RUB 57.91, yen 112.53, sing 1.3603, HKD 7.8064, INR 65.35, China 6.6514, peso 18.16, BRL 3.1495, Dollar Index 93.45, Oil $50.14, 10-year 2.32%, Silver $16.77, Platinum $915.89, Palladium $921.55, and Gold… $1,278.50
That’s it for today… I see that the Yankees move on in the AL with their win last night. My dad taught me as a young kid, to not root for the “coast teams”. He said they had all the money, and could get whomever they wanted to play for them. So, I grew up always rooting against the “coast teams”, except the California Angles. I loved the halos on the tops of their baseball caps! HA! The Allman Brothers take us to the finish line today with their song: Southbound… “Oh you can tell your other man, sweet daddy’s on the way” Love it! And with that, I’ll get out of your hair for today, and send you on your way to a Wonderful Wednesday! Be Good To Yourself!