Chuck Butler’s: A Pfennig For Your Thoughts
September 20, 2017
* Currencies get back on the rally tracks!
* Chuck forgets talk like a Pirate day!
* The FOMC members talk “Risk”?
Good day… And a Wonderful Wednesday to you! Boy did I miss something yesterday that I always make a big deal of! I guess if I wasn’t up at 2 am writing the Pfennig, because I couldn’t sleep, gives me an excuse, right? HA! AS IF! Yesterday was “talk like a pirate day” What was I thinking mates? I tried to go the movies but couldn’t get in because the movie was rated ARRRRRRGH! HA! I have my pirate shirt and of course an eyepatch, but I completely let it slip my brain! Arrrrrgh! The three Amigos, Rick, Duane and Chuck, used to see an entertainer in Jupiter, actually on Singer Island, named Fritz, and he would do the Jimmy Buffett song: A Pirate looks at 40, and when he got to the part where he would sing: Yes, I am a pirate, the three Amigos would all throw our fists in the air and shout Arrrrrrgh! Good times… Oh well… I missed it… what a dolt! In honor of the day yesterday, and that song, I spooled it up on the iPod this morning and so: A Pirate Looks At Forty greets me this morning!
Some conversations overheard as the Fed members assemble at the Eccles Building for their two-day meeting… “Hey! make sure you get the Risk game down from the shelf, that way we can tell people that we looked at Risk in the statement tomorrow.” HAHAHAHAHAHA! Boy, I sure have fun with these Two-Day FOMC meetings, don’t I? One thing the Fed might discuss in reality, is the fact that their preferred inflation calculator/ data print, the Personal Consumption Expenditures (PCE) has been moving in the wrong direction…
That’s right PCE at its last print was 1.4062… At last check, that’s not 2%, or even closing in on it, as the Fed members promised us it would in the second half of this year. No, wait a minute, they’ve been promising us that for the last 3 years, haven’t they? Yes, the “Transitory” (the Fed’s words, not mine!) slowing down of the economy seems to be more than “transitory” doesn’t it now? Of course I could easily point the blame finger right back at the Fed, for hiking interest rates…
I’ve said this before and I’ll continue saying it until someone shows me I’m wrong, and even then I’ll probably keep saying it because I’m a hard-headed Irishman! But a Central Bank doesn’t hike rates in hopes that it fuels inflation and a growing economy… But that’s what the Fed has done, and now they’ll sit around the Eccles Building for two-days, scratching their heads and wondering why their “magic potion” for the economy and inflation didn’t work… Don’t you feel for them? They’ve failed, and yet, some still think that their words are worthy, of moving markets…
OK, Chuck, move on here, you could spend all day talking about the Fed and their failures… Jackson Browne sings a song titled: These Days, and in it he sings: Don’t remind me of my failures, I’ve not forgotten them… And that’s all I’m going to say about that today!
The currencies, for the most part, are back on the rally tracks this morning. The upward move began yesterday afternoon, with the only things that could be pointed to as reasons for the dollar selloff would be the new expectations for the FOMC meeting, which is for no rate hike, Hey! come on board my wagon, there’s room for you here, glad you have finally decided to see things my way! And the Current Account Deficit (CAD) which, I told you yesterday that I thought would be greater in size than the expected $117 Billion, and it was far greater in size than I even imagined, as the 2nd QTR CAD was $123.1 Billion! YIKES!
The biggest movers since yesterday afternoon are the Aussie dollar (A$) and kiwi, which makes sense to me, given that these two currencies are always thought of when investors / traders, think of currencies with positive rate differentials to the U.S. And while A$’s and kiwi don’t have Huge positive rate differentials, they do have them, and proving that fundamentals still play a part in currency valuation, A$’s and kiwi were cooking gas last night and this morning.
The Bid Dog, euro, came back into Trader’s focus yesterday afternoon, when everyone had a V-8 head slap moment and realized the Fed isn’t going to hike rates today, and sold dollars and bought euros… The Big Dog climbed back above 1.20… Yesterday, I talked about the rarified air that 80-cents seemed to he for the A$, and you could say “ditto” for the euro and 1.20… But both currencies are playing in the rarified air again this morning, let’s see how long they can remain there…
Speaking of an asset that can’t seem to hold above a psychological figure… The price of Oil slipped back below $50 (just barely, but it is below $50) in the past 24 hours… All the Petrol Currencies took on some water with the slippage of the Oil price. One of the hardest hit in the past couple days has been the Canadian loonie. While I loved seeing the loonie soar to well above 82-cents after the Bank of Canada (BOC) hike rates 10 days or so ago, I never really felt like that level was sustainable… For once again traders got ahead of themselves, and went a little too far on a 25 Basis Points rate hike…
The .8150 level the loonie is trading around today looks a little more comfortable to me… But should the BOC hike rates again while the smoke clears from the previous rate hikes fireworks, that would warrant a stronger loonie for sure!
Well, so much for the rate hike talk in the U.K. from last week… Yesterday, Bank of England (BOE) Gov. Mark Carney had this to say about BREXIT and the U.K. economy in a speech to the International Monetary Fund that BREXIT will boost inflationary pressures in Britain and undercut economic growth. He said there is “little the central bank could do to help because BREXIT represents a real shock about which monetary policy can do little.” So, higher inflation, but slower economic growth… I would not like to think that Carney would go down the same road as the Fed, and hike rates into a weakening economy, even without signs of runaway inflation!
But then Carney is a Central Banker, and logic, and doing the “right thing” sometimes eludes Central Bankers… In honor of “talk like a Pirate Day” yesterday, I would make all Central Bankers walk the plank! Well, not all… Elvira Nabiulina from Russia is a “cut above” the other Central Bankers, in my humble country boy opinion…
Gold trading was choppy yesterday, but in the end the shiny metal was able to gain a few bucks, and has added a few more bucks of gains in the early morning trading today. “the boys in the band” took it easy on Gold & Silver yesterday and decided to take a pound of flesh from Platinum and Palladium, which had been lucky to fly under the radar of “the boys in the band” until yesterday that is…
I’ve not mentioned Gold researcher extraordinaire, Koos Jansen, lately, and it’s my fault, because I ten to forget about checking the bullionstar.com website for his latest research, but not last night! And so I have something here that’s quite interesting… The article on the website goes through the explanations of Chinese Gold exploration and production, but the thing that caught my eye was this: “the 2016 mineral resource bulletin which now claims that at year-end 2015, China has a huge 11563.5 Tonnes of identified in ground gold reserves[8]. The Ministry of Land and Resources also claims to have discovered an additional 1130.3 Tonnes of gold reserves during 2016.”
Looks like Chinese mining companies have a lot work to do, eh? But think about that… It’s now thought that the Chinese have already accumulated more than 5,000 Tonnes of Gold (and probably more), and then add to that the 11,563 Tonnes yet to come out of the ground and well, you’ve got the country with the most physical Gold… He who has the Gold, rules, right? I’m just saying…
Today’s Data Cupboard, is dominated by the FOMC meeting and press conference following the meeting… So, we need to be somewhere else today at 1 o’clock S.T. , right? HA!
To recap… it’s FOMC meeting conclusion day, and Chuck is happy that everyone else has jumped on his bandwagon, which is the thought that Fed won’t hike rates at this meeting. And that V-8 head slap moment hit traders yesterday afternoon, and they began to sell dollars once again, with the A$ and kiwi the best performers because of their positive rate differentials VS the dollar. Gold & Silver were spared yesterday, but Platinum and Palladium were the focus of “the boys in the band”…
For what It’s worth… Thanks to dear longtime reader Bob for this article that really should be all over our cable news, but you probably won’t see it there, because it’s about Russia… The headline reads: Putin orders end to dollar trade at seaports… And you can find it here: https://www.rt.com/business/403804-russian-sea-ports-ruble-settlements/
Or, here’s your snippet: “Russian President, Vladimir Putin has instructed the government to approve legislation making the ruble the main currency of exchange at all Russian seaports by next year.”
Chuck again…. That’s really all you need to know in the article. Talk about giving the ruble a major boost should this legislation be approved, which if Putin says “approve it” , I can’t imagine that it doesn’t get approved.
Currencies today 9/20/17… American Style: A$ .8040, kiwi .7351, C$ .8150, euro 1.2010, sterling 1.3515, Swiss $.96, … European Style: rand 13.3130, krone 7.7866, SEK 7.94, forint 256.73, zloty 3.5594, koruna 21.7456, RUB 58.09, yen 111.34, sing 1.3448, HKD 7.8070, INR 64.35, China 6.5843, peso 17.77, BRL 3.1332, Dollar Index 91.68, Oil $49.97, 10-year 2.23%, Silver $17.39, Platinum $954.39, Palladium $911.03, and Gold… $1,317.60
That’s it for today… A nice comeback win by my beloved Cardinals last night in Cincinnati, sure wish they could have had a couple of those in Chicago last weekend… UGH! Well, I’m not home alone any longer, as Kathy got back from her trip to our place in S. Florida to inspect the damage, which thank goodness wasn’t much, and certainly not what was forecast… Whew! I just realized that the Pfennig is a bit shorter than usual today, so what are you going to do with those extra 2 minutes? HA! This will make my friend Rick happy… The Outfield takes us to the finish line today with their song: Your Love… (80’s music… there was some that was salvageable! HAHAHAHA! ) Time to go! I hope you have a Wonderful Wednesday, and Be Good To Yourself!