Chuck Butler’s: A Pfennig For Your Thoughts
August 30, 2017
* Lola sends the dollar higher on the day…
* Gold sees 433,000 contracts in a day’s trading!
* Why are Americans so confident right now?
Good day… And a Wonderful Wednesday to you! Yesterday was a “turn down day”… The Cyrkle sang a song in the 60’s titled “turn down day”… It’s a turn down day, nothing on my mind, It’s a turn down day, and I dig it… Well, I didn’t dig the turn down day yesterday, but it was what it was, and now we have to dig through the rubble and try to put together another rally for the currencies and metals… The stylistics greets me this morning with their ballad song: Betcha By Golly Wow… Betcha you don’t have that on your iPod! HA!
Well, I nailed that scenario that I described yesterday, nearly bang on! But instead of European Central Bank (ECB) President beginning the jawboning to stop the bleeding in the dollar, it was Lola instead… Ahhh, yes, good old Government Sachs, pun intended, AKA Lola, showing that the old girl still gets what it wants, whenever she wants it… So, there we were going along just fine there was a little slippage in the euro but nothing to speak of, my goodness, there had to be some profit taking, don’t you think? But then the major move came, and I was frantically looking for the reason the dollar rebounded so strongly, and there it was… Lola had gotten the wink and nod from the Treasury to say something about the dollar, and Lola did… (Ok, longtime readers know that I’m just playing this out in my mind, that I don’t know if it really happened this way or not) So, what did Lola say that got the dollar so gussied up after getting sand kicked in its face all day on Monday? I’ll tell you… I just have to take a deep breath and exhale. Because I still don’t see how we got to this point with Government Sachs running the show… OK… here’s the main quote from Lola…
“The biggest pain trade, no question, has been the dollar. You really have to look at fundamentals and step back from, geopolitical risk, political risk, and weaker inflation over the course of the last few months, and really look at what’s going on from the economic perspective. The dollar is very, very attractive right now.” – Mike Swell, co-head of global fixed-income portfolio management at Goldman Sachs.
I’m playing this whole thing out in my head here… So, this guy gets a instant message that his boss wants to see him, and he thinks, “I’m in the money, I’m in the money”, and he reports to the boss, and the boss gives him this note of what to say, and he walks out of the office very dejected, thinking, “me? Why me? Why do I have to go on Bloomberg TV and say this stuff, when everyone else in the markets is thinking the opposite? I’m going to look very foolish, but wait! We’re Government Sachs, what we say is the gospel! So, I’m going to go there and sound very convincing, and then watch the markets react”
OK, I’m back from my visit to the funny farm… I really do believe that it all happened like that, but the point is, that Government Sachs doesn’t say stuff unless they have some skin in the game… That’s right, they probably had either short trades lined up, or really needed to buy a large sum of euros, at a much cheaper price… That’s how the game is played by the Big Boys folks… So, does this mean the euro rally is over? Not just no! Hell-no! Like I described yesterday, the set backs from jawboning will be short-lived, but on a short-term basis effective, as the trajectory of the euro and the Dollar as witnessed by the Dollar Index is quite evident, and I don’t think can be all-out stopped at this point!
And if you think that was the only place we saw the intervention taking place (dollar/ euro) well think again, because Gold also got taken to the gauntlet of intervention… Folks, there were 433,000 contracts traded yesterday in Gold… ARE YOU KIDDING ME? Sadly, no… 433,000 contracts to see the fluctuation of Gold rise to $1,331.90 but end the day around $1,308.00… The after hours trading saw Gold recover a bit, and has opened in the early morning trading today at $1,316…
I was happy that “the boys in the band” didn’t whack Gold that much that it fell below $1,300… Was this just a warning shot across the Gold Bugs bow by “the boys in the band” to remind the Gold Bugs what kind of hell they can bring down on Gold if they want to? You know, I’m really not that upset about this move yesterday, for I saw it coming… Of course that doesn’t mean I liked it, but if it does one thing, it gives Gold a cheaper price to buy today, before the shiny metal gets back on the rally tracks, which in my mind is going to happen, no two ways about it! Of course that’s my opinion and I could be wrong…
As I mentioned above, the Dollar Index sure got a boost from the jawboning, and probably some actual intervention from the PPT (plunge protection team). I say that because the Dollar Index was in a free fall folks… Last Monday morning, the Dollar Index was 93.49, and yesterday before the turnaround the Dollar Index had fallen to 91.78… That’s free fall for that index folks… And if my job was to make sure the dollar retained its value, I would have been in a panic! “Hello, yes it’s me, we need to intervene to stop the dollar’s plunge, can you give me some help here?” “sure we can, let me make some calls to the other members, and you’ll see the results later today, OK?” “yeah, thank you very much!”
Boy, I’m sure playing out in my head a lot of conversations today, eh? Sorry if that bothers you, but if you’re a new reader, then you need to know that I’m a Simple Man that needs to have explanations for things, because without the explanation, there’s no logical reason for the event to have happened… And this is how I put closure on those unexplained events… OK?
Well, let’s see.. There were a small handful of currencies that didn’t get caught up in the whirlwind dollar trading yesterday… And they include, the Chinese renminbi, the S. African rand, Swiss francs, and Indian rupee… We could play the, “one of these currencies is not like the others” game, but Swiss francs are as evident here as that currency that’s not like the others, as a man with hatchet in his forehead! OUCH!
What the Swiss franc has become in the minds of traders is an ally of the dollar… The euro has taken liberties with both the dollar and the franc, so far this year… Remember when the SNB (Swiss National Bank) tried to hold a floor in the cross with the euro at 1.20? Well that cross today sits at 1.1430… The SNB came out late last year and said that the franc was overvalued, and then he repeated that line in a speech on July 28th… So, he’s wanting more weakness in the franc, and traders are more than happy to oblige him!
Yesterday, I talked about European Central Bank (ECB) President, Mario Draghi, and how he would begin the jawboning, but Lola beat him to it… Draghi’s next opportunity to speak will come on Sept. 7, when the ECB next meets… By then, I would think the euro was back to following its trajectory higher, and then we’ll see what Draghi thinks of this euro strength. The ECB could make some comments that would slow down the euro’s ascent, but I don’t expect them to have an all-out stop effect on the euro… The currency has gained 14% VS the dollar so far this year, and you don’t just step out in front of a bus moving at that speed to stop it..
The price of Oil continues to wallow in the mud, but slip a little lower each day… The price of gas has sure gone higher due to the problems that Hurricane Harvey is having on Oil refineries in that area of Texas… Now the Hurricane, which has been reduced to a tropical storm will move North, and bring us rain this weekend… UGH! But compared to what the people of Houston and areas surrounding Houston are going through, that’s nothing!
Well… I have to get this off my chest this morning… On Monday we saw Consumer Confidence rise from an index number of 120, to 122.9… And this is a pulse that was taken this month! But yet we have floods of great magnitude in Texas, and are on the brink of nuclear war with N. Korea, but hey! Let’s be confident, and dance in the streets! I can’t get over the non-caring about this stuff that’s going on… Following North Korea’s firing a ballistic missile across Japan overnight, China has warned that tensions on the Korean peninsula have reached a “tipping point” and urged all sides to avoid provocations.
Provocations? Aren’t we past that point? N. Korea fired a ballistic missile over the country of Japan, for crying out loud! And then they brazenly boasted about shooting one over Guam, next! And we thought Hussein was a nut-case! President Trump responded by saying that “all options are open” And maybe with China and Russia pleading with N. Korea to back off, some diplomatic resolution can be gained… But if you asked me, on the Butler Patio, I would say, this is too crazy for diplomacy… We’ve tried that T-shirt on, and it didn’t fit… But as long as there’s still a chance, and only a chance because Slim left town, we have something to pray for…
OK, I’m down from my soapbox now… Sorry for that tirade, but things are looking pretty grim, and yet people don’t seem to see the writing on the wall… UGH! The U.S. Data Cupboard today has the latest revision to 2nd QTR GDP, which should be around 2.8%, and the ADP Employment Report, which is used as an indicator of Friday’s BLS experiment, I mean Jobs report.. I’ve said it before, and I’ll say it again, that the ADP report should play a larger role in determining our jobs picture in this country…
As Pfennig readers, you know I don’t believe one iota of the BLS’s jobs report… I get my numbers from the Debt Clock… And I even have a Debt Clock app on my iPhone! And I just have one question for the Fed… What are you going to do about the 94+ Million Americans that are “not in the work force now?” Raise interest rates again? yeah, that will do the trick… NOT!
To recap… Well it was a turn down day on Tuesday, and Lola made certain that the euro and Gold’s ascents were at least slowed down… The ECB meets next week, what will Draghi have to say about euro strength? N. Korea fires a ballistic missile over Japan, and the tensions ratchet higher… And what’s up with Swiss francs?
For What It’s Worth… I searched and searched this morning for a FWIW article and had to settle on this one, which is about how the smaller, dictator run, countries are issuing bonds this year, and they are in demand, for their higher yields… There can’t be anything that goes wrong with that is there? I shake my head in disbelief, but anyway, you can find the article here: https://www.bloomberg.com/news/articles/2017-08-30/looks-like-2017-is-the-year-of-the-dictator-bond
Or, here’s your snippet:”Investors’ thirst for yield has lured many a dollar-bond virgin to market this year, with Tajikistan the latest to be testing the waters.
The Central Asian nation starts investor meetings on Thursday, and may sell dollar notes thereafter, a first for Tajik President Emomali Rahmon, who last year won a referendum to rule the remittances-dependent country for life.
Tajikistan wouldn’t be the first sovereign issuer currently rated B- by Standard & Poor’s to sell dollar-denominated bonds in 2017, with at least five others issuing. But at $850, it has one of the lowest GDP-per-capita ratios of all the sovereigns S&P rates.”
Currencies today 8/30/17… American Style: A$ .7954, kiwi .7244, C$ .7979, euro 1.1947, sterling 1.2927, Swiss $.9561, … European Style: rand 13.0351, krone 7.7947, SEK 7.9547, HUF 255.63, zloty 3.5069, koruna 21.8282, RUB 58.63, yen 109.86, sing 1.3556, HKD 7.8299, INR 63.89, China 6.6010, peso 17.87, BRL 3.1655, Dollar Index 92.45, Oil $46.19, 10yr 2.13%, Silver $17.50, Platinum $993.78, Palladium $941.75, and Gold… $1,316.00
That’s it for today… Boy I sure did carry on about stuff today, eh? Sorry, for those of you who want a short letter every day. There are just days when I have to get stuff off my chest! My Cardinals get another good pitched game by the rookie, Weaver, and win last night. A day game today, but it’s in Milwaukee! My CPAP machine isn’t doing the trick for me, as I think the effects of my chemo infusions are trumping the CPAP… And that means I’m up in the middle of the night. That’s a bad habit to fall into again, I’ve got to do something different! I mentioned the Cyrkle in the opening, and guess who’s taking us to the finish line today? The Cyrkle takes us the finish line with their song: Red Rubber Ball… the Cyrkle’s claim to fame is that they were the opening band for the Beatles! And with that I’ll get out of your hair for today… I hope you have a Wonderful Wednesday, and Be Good To Yourself!