January 10, 2019
* dollar gets sold like funnel cakes at a State Fair!
* Fed’s Meeting Minutes spring a surprise on the markets!
Good Day… And a Tub Thumpin’ Thursday to you! I’m have a feeling that I’ll be doing some Tub Thumpin’ this afternoon, as my good friend from Long Island will arrive here. So, I’ve got that going for me! HA! I had a long talk with our flooring guy yesterday, and he really wanted me to check out the natural drugs if you will… Nice guy… But I think I’ll stick with the program I’m on, as it seems to be working! The Cure greets me this morning with their song: Lovesong… This song was redone by the group 311, of which Alex prefers, so we have these little disagreements, for I prefer the original!
It was if the farm animals all figured out at one time that the barn door was open, and they all rushed to get out… That was like the dollar bugs yesterday, and other currency traders, after the Fed’s Meeting Minutes painted an entirely different picture of the economy, and the Fed’s rate hike cycle, than Fed Chairman Jerome Powell gave us at his press conference following the Fed’s last rate hike in December…
One of my fave sayings comes into play here, as the dollar got sold like funnel cakes at a State Fair… The euro soared to 1.1550, and the Dollar Index fell to 95.20 from the 95.89 it traded at yesterday morning. It was a day that reminds one of the days between 2002 and 2005, and then again between 2006-2007, and then again in 2009-2010, before the hidden debts of the Club Med Eurozone countries were exposed and we began the current strong dollar trend…
During those periods of time, during the weak dollar trend of 2002-2011, I always talked about how the euro was the Big Dog, and all the other currencies were the little dogs, and just about every day, the Big Dog would get off the porch and start chasing the squirrel (dollar) down the street, which would allow the little dogs to follow, and sometimes the little dogs would out run the Big Dog… But the idea here was that all were in the chase VS the dollar…
And as I said above, that’s what yesterday reminded me of, for the Big Dog got off the porch, and all the little dogs followed… I received an email from my friends, and publishers, Mary Anne and Pamela Aden, yesterday evening, and they pointed out that according to the charts, if the Dollar Index fall to a 93 handle that it would signal a weak dollar trend… And that asked me what I thought… I responded: “In my opinion this is the beginning of a new weak dollar trend… with the euro being the offset to the dollar it will lead the charge against the dollar… the yen has been moving higher too.”
I hear you questioning my choice of highlighting yen, as I’ve been quite the Japan basher for some time now… Well, that’s the beauty of a weak dollar trend, it matters not if a particular country, as Japan, has weak fundamentals, demographic nightmares, Too much internal debt, and sits too close to N. Korea… The weak dollar trend, masks those problems, and yen rallies…
Shoot Rudy, the dang Swiss franc is also doing some chasing of the dollar of its own these days… Switzerland with their negative deposit rates, and a shady Central Bank is all forgotten about…
But, of course, we’ve seen these false dawns before, and I was even fooled into thinking in 2016 that we were beginning to see a new weak dollar trend, as the trader sentiment all changed against the dollar… But then the Fed kept hiking rates, while every other country in the world was either still cutting them or holding them down artificially low.
You won’t be able to trap me into saying “this time is different” I totally dislike that saying… But things have changed since 2016… The Eurozone has stopped their bond buying program, our friends (NOT!) at OPEC have implemented production cuts of Oil, The U.S. started a Trad War with its biggest financier, and probably most important of all, the Fed is thinking about their rate hike cycle, and I don’t mean in a good way…
So, that was a long explanation of what I got out of yesterday’s Fed’s Meeting Minutes reveal… If you think that was long, you should ask me some day to give you my opinion on how the housing meltdown started…
In the absence of a lot of data prints, we get to hear the Fed Heads as they hit the road for individual talks, that for some strange reason, the markets listen to… Remember when you would struggle to even know who the Fed Chairman was? You certainly didn’t know the regional presidents, but now we do, because they believe they’ve become rock stars that need to go on tour…
Today, we’ll hear St. Louis Fed President, James Bullard speak… Bullard has been a dove with his previous comments about rate hikes, and any further talk of holding rate hikes will send the dollar down the slippery slope once again today.
In addition to Bullard today, we’ll also have Fed Chairman Powell, go on tour, along with Fed Heads: Evans, and Clarida… I’m sure we’ll get these guys all singing from different song sheets, which will further confuse the markets… But with Manufacturing showing some major cracks last week, and Factory Orders still in the red earlier this week, the supposedly, “data Dependent” Jerome Powell, will remain dovish… as well he should!
Gold got on the rally tracks again yesterday closing up more than $8 and is looking like it wants to move higher again this morning. As Gold nears the $1,300 figure, one has to wonder if this figure is going to be the road block to higher prices for Gold that has been previously? I’d like to think it won’t be this time, due to the Fed becoming dovish… But I guess we’ll have to wait-n-see, eh?
To Recap…. It was a day much like the days when the weak dollar trend was in place (2002-2011) The dollar got sold like funnel cakes at a State Fair, as The Fed’s Meeting Minutes were quite dovish, and painted a different picture of the economy and the rate hikes than what was explained by Powell after the last meeting. That got the dollar bugs all running for the exit door, but now will there be follow up? That’s the $64 question today…
Before I head to the Big Finish today, I wanted to point something out… Well, I know that some of you follow publishing guru, Bill Bonner’s letter… Well, if you don’t, you should have seen him go the full nine-yards on the newcomer to Congress that I talked about yesterday, and her wanting to bring the tax rate to 70% for the rich… Here’s a link to his article in case you don’t usually read Bill, (I don’t know why anyone wouldn’t!) https://bonnerandpartners.com/bill-bonner-diary/
For What It’s Worth… I had a longtime Pfennig reader send me a link yesterday to an article that I would normally not find, because it was on the CNBC site, that talks about how Fitch is giving a warning to the U.S Gov’t that their AAA rating could be in peril, and it can be found here: https://www.msn.com/en-us/money/markets/fitch-warns-of-possible-cut-to-us-triple-a-rating-if-shutdown-continues/ar-BBS0jKF
Or, here’s your snippet: “The U.S. is in danger of losing its triple-A sovereign credit rating later this year, Fitch said on Wednesday, warning an ongoing government shutdown could soon start to impact highly sensitive areas of the world’s largest economy.
A stalemate between Donald Trump and congressional Democrats over a spending package to fund nine government agencies entered its 19th day on Wednesday. It comes at a time when lawmakers are deeply divided over the president’s demand for money for a border wall.
“I think people are looking at the CBO (Congressional Budget Office) numbers. If people take the time to look at that you can see debt levels moving higher, you can see the interest burden in the U.S. government moving decidedly higher over the next decade,” James McCormack, Fitch’s global head of sovereign ratings told CNBC’s “Squawk Box Europe” on Wednesday.
“There needs to be some kind of fiscal adjustment to offset that or the deficit itself moves higher and you’re essentially borrowing money to pay interest on the debt. So there is a meaningful fiscal deterioration there, going on the United States,” he added.”
Chuck Again… So, I bet you’re wondering why I would not search CNBC for reports… Well, some longtime readers might recall about 10 years ago, when I was in demand from news outlets all over radio, print, TV, internet, etc. and I wrote one day about the suspicious trading done in the aftermarkets that I believed was the PPT at work…. Well, CNBC called our PR guy, and told him they wanted to talk to me, seriously… And I asked, are they sure, they want to talk to me, because they’re so Pro-stocks, and I’m talking about suspicious trading? He assured me that the director of the program told him that they wanted to talk seriously with me… So, I gussied up, went downtown to stand in front of a camera, and went live on CNBC, only to have them ridicule my findings and tell me I needed to go to Hollywood so they could make a SCI-FI movie! I called our PR guy on the way back to the office and told him to never, ever, book me or even grant any kind of interview with CNBC again… And I’ve held my ground on that all these years! Oh, and by the way, a week after my debacle on CNBC, there was an article in the WSJ from a MIT engineer guy, who said the same things I was saying! Oh well, live goes on… right?
Currencies today 1/10/19: American Style: A$ .7187, kiwi .6784, C$ .7588, euro 1.1535, sterling 1.2744, Swiss $1.0242, European Style: rand 13.8444, krone 8.4637, SEK 8.8730, forint 278.63, zloty 3.7258, koruna 22.2115, RUB 66.68, yen 107.97, sing 1.3571, HKD 7.8386, INR 70.25, China 6.8254, peso 19.23, BRL 3.6982, Dollar Index 95.24, Oil $52.00, 10-year 2.70%, Silver $15.78, Platinum $826.56, Palladium $1,325.69, and Gold… $1,293.58
That’s it for today… and this week… Things are pretty quiet around here, except for the noise from the construction on the 3rd floor. The Beach goers have been pretty sparse, as the license plate colors continue to change down here. I hear that it’s suppose to snow for a couple of days back home. Good! I say that because the insect population has been bad the last couple of summers, after winters that yielded few snow days, and no zero degrees days… When I worked, I drove a large SUV that was made to go through snow, so I didn’t had any problems getting work when it snowed… I miss my Navigator! Drove to Trump International Gold Course yesterday in West Palm Beach… Bentleys, Rolls, and Mercedes filled the valet parking area… I dropped off something ,and got the hell out of there before they called the cops on this trespasser in his Honda van! HA! The Beatles take us to the finish line today with their song: When I’m 64… Will you still need me, will you still feed me, when I’m 64? I’ll be singing that song in a couple of months! HA! I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday, and remember to Be Good To Yourself!
Chuck Butler