Chuck Butler’s: A Pfennig For Your Thoughts
September 6, 2017
* Brainard sends the dollar reeling…
* Irma to cause major problems for the U.S…
* Oil closes in on $50… once again!
Good day… And a Wonderful Wednesday to you! WOW, what an absolutely beautiful day here yesterday! Chamber of Commerce weather, that as I always say, can’t stay like this, for if it did, it would cost too much to live here! I’m really concerned about the new hurricane that’s about to hit the U.S., Irma… As you know, I have a second home in S. Florida, and I’m not very concerned about that, but also the direct hit, the U.S. will take on the back of Harvey… More on that in a minute, but first, Paul McCartney and Wings greet me this morning with their song: My Love… I loved the music that Paul put together with Wings, back in the 70’s…
The currencies and metals had a decent day yesterday, and really ratcheted up the pressure on the dollar in the overnight markets. The euro popped up over the 1.19 handle late yesterday, and has added to its gains in the overnight markets. Most of the currencies around the world followed the euro’s lead and carved out gains of their own. Last night I was checking the currencies out, and noticed that the Aussie dollar (A$) was pushing the currency appreciation envelope to the 80-cent handle. But when I loaded the currencies up this morning, the A$ had slipped back to yesterday’s price just below .7980. UGH!
I have to think that the Reserve Bank of Australia (RBA) was in the markets performing some intervention. The RBA has stated in so many words, in the past, that they are concerned with the A$’s strength, as their economy heals… So, that’s like a confession of intervention to me! And 80-cents apparently is a roadblock for the A$ right now… So, we’ll have to keep an eye on that.
One of the things that probably set the currencies and metals on their way to gains late yesterday afternoon was a speech by Fed Member, Brainard… I was minding my own business yesterday, when along came a Fed member and disrupted my day! But this time it was a good disruption, because, this Fed member, apparently has been reading the Pfennig, and finally came out and said that the Fed needed to stop the rate hikes… Gold sure noticed, and took off for higher ground… I want to thank the GATA folks for sending me the link to this story that can be found here: http://www.reuters.com/article/us-usa-fed-brainard/brainards-warning-signals-fed-cautious-on-inflation-idUSKCN1BG1O3?il=0
But for those of you who are strapped for time, and need a quickie here… Here’s what Fed Member, Lael Brainard had to say… “We should be cautious about tightening policy further until we are confident inflation is on track to achieve our target,” Boy, was I a happy camper when I heard that, because I’ve been saying that all along! And one thing that I think she was alluding to was the fact that the Fed had been hiking rates, and hoping that inflation would rise… Kind of like trying to cook ice on a grill! I’ve said this over and over again… When you want to lower inflation, you raise rates… And when you want inflation in your economy you lower rates, not raise them! I shake my head and wonder what the Hy Minkskis, and Frederich Von Mises, and Carl Mengers, and any other Areal economics schooled economist would be saying right now about what the Fed has been doing…
I put my fave economist, Hy Minski, in with those famous Austrian Schooled economists, because, well, he’s my favorite! The price of Oil moved past the $48 handle yesterday and this morning is knocking on the door of $49… But I think the Petrol Currency traders are well aware of the fact that this could be a short-term rise in the price of Oil due to the disruptions caused by hurricane Harvey.
Speaking of hurricanes, as I said at the top, I’m really concerned about this new one, Irma. The devastation that Harvey caused two weeks ago, was massive, and Irma could very well match that or exceed it with a hit of the Florida Peninsula. Can the U.S. economy withstand two direct hits like this if they were months apart? How about two weeks apart? Oh, and FEMA is broke, folks… Harvey is going to cost $120 Billion, and who knows the total that Irma will rack up? And the loss of lives… I’m just really upset with Mother Nature, folks…
And… the fact that this is what happens when a country doesn’t have reserves to tap into… The only reserves we have here in the U.S., monetary-wise that is, is the ability to add zeroes to our debt… Later this week, we’ll see the color of the latest Consumer Credit (read debt) report, which will most likely confirm that the U.S. consumer is up to its eyeballs in debt… I read last night that 8 of 10 middle class consumers are so much in debt that they don’t have any reserves set aside for emergencies, or even worse, don’t have any money saved for retirement… That’s almost unbelievable isn’t it? That can’t be true, can it? Ahem, Chuck, check it out, it’s true, now go onto whatever it is that you were going to talk about next and quit questioning these numbers!
OK, I think you get the picture that the recession that I’ve been saying is coming or maybe already here, is going to get a HUGE push down the tracks to Recessionville with Irma coming so close to Harvey…
The Chinese renminbi finally saw a fixing without an appreciation last night… I’m so reminded of the run up in the renminbi that happened from 2003 through 2008, and then again 2009-2014.. The Peoples Bank of China (PBOC) would throw a markdown in the mix every now and then just to keep the markets from thinking that the renminbi was a ONE-WAY St. Last week, I told you that my spider sense was telling me that the Chinese had something up their sleeve, and unlike Bullwinkle, who always pulled something out of the wrong sleeve, the Chinese are using the renminbi as a tool of response to any tariffs or taxation the U.S. might put on their exports to the U.S. By allowing the renminbi to appreciate by a wide margin, they could then do a psychological devaluation in response to any tariffs, and in the end the renminbi would be right back to where it was before…
Investment guru, economist and author, James Rickards believes the Chinese are gearing up for a HUGE devaluation of the renminbi… So, as always, I like it when someone else has come out on the limb with me! HA!
Gold found a way to add a few bucks yesterday at the end of the day that saw a HUGE number of contracts traded, 360,000! Any-old-way you look at it, Gold was as high at $1,349 on the day and ended the day at $1,339.40… The shiny metal has added to that small gain yesterday with a bump higher to $1,345.10 as I write this morning… I look at Gold’s moves in $25 increments… So, $,1350 is the next level to take out… My good friend and former colleague at the Sovereign Society, Sean Hyman, who I consider a technical guru, sent me a note yesterday that said that, well I’ll let him tell you himself! “GLD chart shows it broke a 6-year long downtrend line. Great for gold/metals but another bad sign for the ailing dollar.” – Sean Hyman
Thank You Sean! Sean and I connected immediately back in the day, because he’s a down-to-earth buy that’s not full of himself, which is what I think I am.. You can connect with Sean and his charts and technical expertise by going here: https://www.themaven.net/seanhyman
The U.S. Data Cupboard yesterday printed another disappointing economic data print, when July Factory Orders printed a negative -3.3%. That marks two consecutive months of negative figures for Factory Orders… But the ISM Manufacturing Index increased in July… Hmmm, I have to think that there’s something going on in the ISM that I don’t know about… Anyway, the U.S. Data Cupboard today has the July Trade Deficit, which should be around $44 Billion, and the Fed’s Beige Book this afternoon, which doesn’t amount to a hill of beans in my book!
To recap, The dollar is on the ropes doing the rope-a-dope this morning, as the overnight markets really pushed against the green/peachback. Fed Member Lael Brainard, was speaking “Chuck talk” in a speech yesterday, questioning the Fed’s rate hikes while inflation is still below their target, and that really got the currencies and metals rolling on the day and through the night. Was there intervention goin on by the RBA last night? And the PBOC reminded traders that the renminbi is not a one-way street!
For What It’s Worth… Well, looky here… I have something from the Daily Reckoning this morning… The folks at the D.R. post my Pfennig each day, so I love it when I can return the love… This is an article by Nomi Prins about the Fed, and can be found here: https://dailyreckoning.com/decade-central-bank-collusion/
Or, here’s your snippet: “Since late 2007, the Federal Reserve has embarked on grand-scale collusion with other G-7 central banks to manufacture a massive amount of money. The scope and degree of this collusion are historically unprecedented and by admission of the perpetrators, unconventional in approach, and – depending on the speech – ineffective.
Central bank efforts to provide liquidity to the private banking system have been delivered amidst a plethora of grandiose phrases like “unlimited” and “by all means necessary.” Central bankers have played a game with no defined goalposts, no clock rundown, no max scores, and no true end in sight.
At the Fed’s instigation, central bankers built policy on the fly. Their science experiment morphed into something even Dr. Frankenstein couldn’t have imagined. Confidence in the Fed and the U.S. dollar (as well as in other major central banks globally) has dropped considerably, even as this exercise remains in motion, and even though central bankers have tacitly admitted that their money creation scheme was largely a bust, though not in any one official statement.
On July 31, 2017, Stanley Fischer, vice chairman of the Fed, delivered a speech in Rio de Janeiro, Brazil. There, he addressed the phenomenon of low interest rates worldwide.
Fischer admitted that “the effects of quantitative easing in the United States and abroad” are suppressing rates. He also said there was “a heightened demand for safe assets affecting yields on advanced-economy government securities.” (Actually, there’s been heightened demand for junky assets, as well, which has manifested in a bi-polarity of saver vs. speculator preference.) What Fischer meant was that investors are realizing that low rates since 2008 haven’t fueled real growth, just asset bubbles.”
Chuck again…. OK, this article actually printed on August 29th, but just because something is a week old doesn’t mean it’s not worthy of a read!
Currencies today 9/6/17… American Style: A$ .7977, kiwi .7223, C$ .8075, euro 1.1947, sterling 1.3038, Swiss $.9534, … European Style: rand 12.9280, krone 7.7772, SEK 7.9484, HUF 256.44, zloty 3.5533, koruna 21.8568, RUB 57.64, yen 108.71, sing 1.3514, HKD 7.8250, INR 64.13, China 6.5401, peso 17.88, BRL 3.1287, Dollar Index 92.20, Oil $48.90, 10-year 2.08%, Silver $18.03, Platinum $1,010.82, Palladium $964.55, and Gold… $1,345.10
That’s it for today… I totally forgot to mention the sad news I got Sunday night, when I heard that Walter Becker had died… Walter Becker along with Donald Fagan were Steely Dan… Cardinals win another one last night out on the West Coast. Of course I can’t stay up to watch the games out there that start so late, but when I was up walking the floors at 1 o’clock in the morning I checked out the score! And yesterday I mentioned the great Al Stewart, only to find out later in the day that it was his birthday yesterday! Stevie Wonder takes us to the finish line today with his song: My Cherie Amour… What a pretty song! And with that I’ll get back to tracking Irma… I hope you have a Wonderful Wednesday, and Be Good To Yourself!