I’ll Take What’s Behind Door #….

February 12, 2018

* U.S. Decides to dig their debt hole deeper!

* The Fed is having deep discussions right now… 

Good Day… And a Marvelous Monday to you… Well, for all of you with inquiring minds that wondered what my triumvirate of oncologists had to say on Thursday, here goes… They decided that the drug I was on that I received through an infusion every 2 weeks, had run its course (like the other 3 drugs I had previously taken) and that I it would no longer benefit me to continue on the drug. So, no more infusions… (I never liked going to those infusion centers anyway, it’s a very depressing place) Instead, once the current drug is out of my system, they will start me on the newest kidney cancer drug, that’s a pill taken each day.  So, I have a couple of weeks before they start the new drug. I’m sure my insurance company will throw a hissy fit about this new drug, like they’ve done before, so, I’m expecting a fight with them.  I totally dislike this waiting though, because at this point I have no idea whether or not I will be able to tolerate the new drug, at least as well as I have the previous 4 drugs.  And that is an unknown…  

So, this is a notice to you dear reader that there could be some major disruptions , with the Pfennig, once I begin to take the new drug, or as it begins to build up in my system. You know me, I’ll battle it, and come out on top, but at this point, I don’t know how difficult a battle it will be.  So, I’m not going to worry about it, that’s a worry for another day.  For now, I’m enjoying sunny and 80 degree days in S. Florida, gathering up lots of Vitamin D, and having fun with my neighbors down here. They’ll all go home at the end of this month, and that’s when my St. Louis visitors begin, and that’s when the real party, starts! I just hope I’m in good health to participate and party!  

I’m getting a very late start today, sorry about that, I hit the wall last night, fell asleep in my chair and sometime during the night I got up and went to bed, where I slept right past my alarm! UGH! I guess I needed to sleep, eh?

Well, there’s not much going on in the currencies these days, they’ve backed off their lofty levels of two weeks ago, but have stabilized at this point and seem to be trading sideways, with the Big Dog, euro, remaining on the porch, and all the little dogs waiting for their chance to get back to chasing the dollar down the street. 

So, late, last week, while I was being poked and prodded by nurses, the U.S. finally came up with a spending plan… Before I get into it, I have this question to ask… “What happened to all the momentum the Tea Party people had a few years ago?”  Alright then, let’s get into this, because, well, the lawmakers have kicked the can down the road a little more with regards to reining in the debt.  These mental giants believe that the way to prosperity is to dig the debt hole your in, a little deeper! What on earth are these guys thinking?  I’m sure they didn’t learn any of this in their economic classes in school, unless their professor was Paul Krugman! 

The Budget calls for the annual deficit spending to increase and the deal  would eliminate strict budget caps, set in 2011 to reduce the federal deficit, and would allow Congress to spend about $200 Billion more in the current fiscal year and in fiscal year 2019. That’s $200 Billion more than we were already slated to spend… $575 Billion…  Are we nuts?  We just passed a tax cut bill, and now we’re raising our debt? Those two things together are a recipe for disaster folks… 

The prudent thing to do after passing the tax cut bill was to reduce spending, but NOOOOOOOO! Our elected representatives, know better than you and I folks, they just know that the path to prosperity is to spend more money than you can every imagine having!  And all this spending is going to mean more issuance of Treasuries at a time when foreigners are backing away from buying them! What a mess!  No, it’s absolute madness! Madness I tell you! Serenity NOW!   

Oh, and that leads me to another discussion that’s bound to begin to take place in the Eccles Building (Fed HQ)…  What is the Fed going to do about all this?  They have two choices, right now… They can stop their rate hikes, and even go as drastic as implementing more QE (which would help with the additional Treasury issuance) to stop the bleeding in the stock market, or, they can continue their rate hikes, make debt servicing almost impossible for the U.S. Gov’t, but keep a lid on the rising inflation… 

What’s a Fed head to do? What’s it gonna be boy? Will the pick what’s behind door #1 or Door #2?  This is going to be interesting to see how it plays out. I suggest you keep a journal of these decisions by the Fed, because one day, your great-grandchild is going to ask you, a question, about what happened to the great country that they read about in the history books!   I could go on and on about this stuff folks, but I don’t want to bog you  down or bore you, so I’ll just leave it at this…  Our country can’t get Great Again, when we’re drowning in debt… period! 

Gold closed down a couple of bucks on Friday, but is up $4.60 in the early trading so far today.  The number of contracts in Gold traded on Friday were just shy of 300,000… One of these days, the COMEX will break down the trades for us, and tell us which ones were buys and which ones were “shorts”…  Now that would be helpful, wouldn’t it?  But, I doubt we’ll see that in our lifetime… UGH! There’s just too much protection for the short Gold & Silver paper traders… And that’s all I’m saying about that today! 

The U.S. Data Cupboard doesn’t have much for us until we get to Wednesday, which happens to be Valentine’s Day. On Wednesday we’ll see Retail Sales…  Tomorrow we’ll see the percentage increase in Household Debt, which if it goes higher, won’t surprise me one iota! 

To Recap… The currencies have stabilized after a week of getting sold. The U.S. lawmakers decided to dig their debt hole a little deeper in hopes that it straightens things out… Dolts, all of them! The Fed is down to two choices folks, what’s it gonna be boy?  And the U.S. Data Cupboard is pretty barren until Wednesday, Valentine’s Day.   

For What It’s Worth… Here’s an interview with our old friend, Jimmy Rogers, who’s been pretty quiet in recent days… I can be found on Bloomberg.com or here: https://www.bloomberg.com/news/articles/2018-02-09/jim-rogers-says-next-bear-market-will-be-worst-in-his-lifetime   

Or, here’s your snippet: “Jim Rogers, 75, says the next bear market in stocks will be more catastrophic than any other market downturn that he’s lived through.

The veteran investor says that’s because even more debt has accumulated in the global economy since the financial crisis, especially in the U.S. While Rogers isn’t saying that stocks are poised to enter bear territory now — or making any claim to know when they will — he says he’s not surprised that U.S. equities resumed their selloff Thursday and he expects the rout to continue.

When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime,” Rogers, the chairman of Rogers Holdings Inc., said in a phone interview. “Debt is everywhere, and it’s much, much higher now.”  

Chuck Again, I think it would be prudent to listen to Jim Rogers, folks… And that means back up the truck to the Gold & Silver window…  At least that’s what I think he’s saying…  

Currencies Today 2/12/18… American Style: A$ .7832, kiwi .7240, C$ .7937, euro 1.2240, sterling 1.3821, Swiss $1.0647, … European Style: rand 11.9425, krone 7.9578, SEK 8.1044, forint 254.82, zloty 3.41, koruna 20.7033, RUB 58.35, yen 108.71, sing 1.3261, HKD 7.8198, INR 64.31, China 6.2913, peso 18.66, BRL 3.2937, Dollar Index 90.31, Oil $60.35, 10yr 2.86%, Silver $16.35, Platinum $961.55, Palladium $984.44, and Gold… $1,320.30

That’s it for today…  Big wins this past weekend for both the Missouri Tigers and St. Louis U. Billikens basketball teams. Pitchers and Catchers report tomorrow, YAHOO! I’ve had to stop and start the letter over again a few times this morning, making it even later than I originally thought. I’m not having a good morning, wink, wink… Today is also Lincoln’s Birthday, which should be a holiday, and that’s all I’m saying about that! Are you ready for Valentine’s Day?  And with that…  The Doobie Brothers take us to the finish line today with their song: Ukiah…  I hope you have a Marvelous Monday, and Be Good To Yourself!   

Chuck Butler

When Is A Trade Surplus A Bad Thing?

February 8, 2018  

* Another wild ride in the assets yesterday… 

* BOE meeting this morning, nothing expected… 


Good Day… And a Tub Thumpin’ Thursday to you! Would Mother Nature, please slow down the wind? Another breezy day yesterday, but we found protection sitting around the pool, and so we spent the afternoon, with our friends, kibitzing, and eating snacks. Every time someone went inside, the came back with a different snack. This went on for hours, and once Happy Hour arrived, well, I made the martinis and Jack made the other drinks… A good day with friends, and the wind finally died down, and the sun came out, and well… I thoroughly enjoyed the day.  The Eagles greet me this morning with their song: Victim of Love…   

Well, hold onto your hats folks, we’re still taking a ride on Mr. Toad’s Wild Ride, in all the assets, but the one asset that’s really benefitted from the PPT and James Bullard’s speech the other day is the U.S. dollar.  On Monday this week, the dollar looked as if it was ready to drop like a rock, as the Dollar Index traded 89.16… And this morning the Dollar index has improved to 90.43!

For newcomers to the letter, and the foreign exchange (FX) markets, the Dollar Index is an index made up of currencies from countries that used to be BIG trading partners to the U.S.  And currency traders have used this Index for many years to determine the value of the dollar. I used to laugh out loud about this when the Chinese were becoming our largest trading partner and the renminbi was not a part of the Dollar Index… 

The Dollar Index is heavily weighted with euros, so to me, to really look at the value of the dollar, all you have to do is check out the euro’s price, because the euro is the offset currency to the dollar, which means it’s the 2nd most heavily traded currency in the world, behind the dollar.  OK, enough for the new class today, make sure you took notes, because you’ll be quizzed on this at some time in the future!  

OK, speaking of China like I did above, the Chinese got a BIG Surprise this morning after the fixing. The Chinese renminbi had been fixed with an appreciation from yesterday’s price, but then the Gov’t reported that the Chinese Trade Surplus for January had fallen from the month prior, by a larger amount than anticipated… Now. let’s keep this all in line, with the thought that China still booked a SURPLUS folks…  In all the days that I’ve written the Pfennig (since 1992) I don’t believe I ever reported a Trade Surplus for the U.S. 

O.K., now that we’ve laid that groundwork and have that thought in our heads… The Chinese Trade Surplus was $20.34 Billion last month, VS $54.69 Billion the previous month. And the renminbi got whacked after the data printed. Hmmm… Calmer heads will have to come around here soon, because don’t they realize that a lot of the drop in the Surplus can be attributed to the Chinese New Year holiday week? And let’s not forget the fact that Commodity Prices have rallied this year, thus making Chinese imports of those Commodities more expensive…  But, the traders and investors don’t care about those things right now, and until calmer heads present themselves on the scene, this is what happens, to good currencies…   

The Bank of England (BOE) is meeting while my fat fingers fly across the keyboard, putting this letter together. The BOE Gov. Mark Carney, he of the bag-0-promises that never gets opened, will most likely tell the reporters that the BOE left rates unchanged because there are just too many unknowns of the monetary effects of the BREXIT negotiations…  But in reality, that’s been a known, unknown, for a long time now, what he really should say is that the U.S. economy hasn’t gathered enough steam to garner the rate hike he has hinted at a couple of times in the past 5 years. But that won’t happen, because, he has to keep the happy face on to lure the sheeple into believing that everything is going to be peachy, when in his heart of hearts he knows darn well they won’t!  

So, don’t look for any love for pound sterling, as it trades alongside the euro on the downside of some lofty figures from last week. 

The Price of Oil dropped by $2 in the last 24 hours…  Remember the old Chevrolet commercials about the great American pastime of driving? Well, we’re sure doing a lot of that lately… U.S. oil output topped 10 million barrels a day for the first time yesterday… That computes to a lot of gasoline, which is where I got the thought that we are doing a lot of driving these days, and not just little smart cars…

I was driving up from Fort Lauderdale about 10 days ago after taking Kathy to the airport there, and I noticed that either a Big honking SUV or a sporty race car was passing me all the way back (people drive really fast down here) And I thought at the time, look at all that gas that’s being used…  And I could kick myself, if my leg moved sideways, which it no longer will do, but as usual my timing was awful, as I filled up our car yesterday, at much higher prices than would be available today… UGH! Oh well, the price of gas is what it is, to me… I can’t go anywhere without my car, so whatever I have to pay, I’ll adjust my driving habits to deal with it.  

So, with the price of Oil dropping $2, the Petrol Currencies also saw some slippage in their values. The Brazilian real though bucked the trend overnight and gained at the fixing this morning to trade stronger than yesterday’s fixing. The Russian ruble lost just a handful of shekels, and the Norwegian krone and Canadian dollar / loonie saw larger downward moves. 

The prices of Gold, Silver, Platinum and Palladium all got whacked again yesterday, and all 4 precious metals reached new lows for this cycle yesterday. Gold had over 325,000 contracts traded, and lost $5 on the day, and is down a buck or two this morning.  But Silver, saw a fat cut of the hog taken from its price, as did Platinum and Palladium… I would have to think that these are all blue light special prices…  I’m just saying, and maybe you get the hint, wink, wink…   

The U.S. Data Cupboard today is basically empty with the usual Tub Thumpin’ Thursday fare of the Weekly Initial Jobless Claims, which have become a second tier data print. Yesterday’s Data Cupboard had the long awaited Consumer Credit (read debt) for December. And it surprised me with a print of $18 Billion, VS the $31 Billion in November.  I guess the majority of shoppers did their Christmas shopping in November…  No wonder the profit figures from the retailers in December were so weak!  

To recap… The wild ride in all the assets continued yesterday with stocks rebounding, Gold getting sold again, U.S. Treasuries getting sold, and Commodities getting sold… The BOE is meeting this morning, nothing exciting expected here. China’s Trade Surplus saw a larger than expected drop, but Chuck want’s everyone to keep this in perspective, it was still a SURPLUS, something the U.S. hasn’t seen in all his years of writing the Pfennig…   

For What It’s Worth…  This is an article about Gold production for the last 9 years and can be found here:http://www.mining.com/gold-price-9-straight-years-record-annual-mine-production/  

Or, here’s your snippet: “According to the World Gold Council’s Gold Demand Trends report released Tuesday primary gold production hit another record in 2017 after nine years of annual growth in output.

Overall mine production totalled 3,268.7 tonnes or just over 105 million troy ounces in 2017 which was only slightly higher than in 2016 as new mine starts in recent years have mostly served to fill the gap left by production losses elsewhere according to the WGC report. Compared to 2010, global gold output has surged by 525 tonnes or nearly 17m ounces.

The WGC, an industry body, estimates that output in China – the world’s top producer – fell 9% last year, only the second annual drop in production since 1980. China, which overtook South Africa as the number one miner of the metal in 2007, produced 455 tonnes of the yellow metal in 2016 according to U.S. government figures.”  

Chuck again…  Folks, listen to me now and hear me later, that the World Gold Council (WGC) doesn’t have a clue to how much Gold the Chinese have accumulated, produced, and added to their holdings, because the Chinese don’t want anyone to know! They report false numbers to the WGC, and that’s that!    

Currencies today 2/8/18… American Style: A$ .7838, kiwi .7278, C$ .7968, euro 1.2276, sterling 1.3870, Swiss $1.0595, … European Style: rand 11.9832, krone 7.8823, SEK 8.0430, forint 252.79, zloty 3.3896, koruna 20.5564, RUB 57.20, yen 109.48, sing 1.3237, HKD 7.8180, INR 64.22, China 6.2644, peso 18.64, BRL 3.2482, Dollar Index 90.43, Oil $61.43, 10yr 2.83%, Silver $16.25, Platinum $972.02, Palladium $983.20, and Gold… $1,313.40   

That’s it for today…  Well, I have to get moving this morning, for I have a date with my Florida oncologist this morning. I’ll hear about any new plan of attack today, that is if the 3 oncologists that I have all got together like I requested they would do.  The SLU Billikens played tough last night but lost their game with St. Bonaventure. That St. John’s basketball team is on a roll, beating Duke last weekend, and then beating number 1 Villanova last night… WOW It’s supposed to be another day in paradise today, so when I get home from the doctor, I’ll be heading outside to soak up some vitamin D! The Moody Blues take us to the finish line today with their song: The Voice…  Which has nothing to do with the TV show, as the song was released in the 80’s!   OK, let’s go out and make this a Tub Thumpin’ Thursday, and remember to always Be Good To Yourself!  

Chuck Butler

A Turnaround Tuesday?

February 7, 2018

* PPT and James Bullard to the rescue!

* Manipulated markets are everywhere!    

Good day… And a Wonderful Wednesday to you! Well, my fears of having “one of those days” yesterday didn’t come to fruition, and I spent most of the afternoon our on our public deck that overlooks the beach and ocean, with friends. We waited for the launch from Cape Canaveral of a Space-X rocket, and when it finally launched I didn’t see a thing, although some of the people on the deck said they saw it. I expanded my diet a bit, eating some Wheat Thins, but that’s about as sexy as my diet has been for the last 3 days. The Great Band, Chicago, greet meet me this morning with their song: Flight 602…  Not one of their chart busting songs, but one that I like… 

What a wild time on Mr. Toad’s Wild Ride yesterday for U.S. stocks, that finally put all the negativism to bed and rose 569 points… That meant that the “safe havens” that investors flocked to on Tuesday, were sold on Wednesday… Francs, yen, euros, Gold and Treasuries. Besides the PPT (plunge protection team) saving the stock market from the embarrassment of another HUGE selloff, yesterday, the thing that really caught investors’ attention, was a speech by Fed. St. Louis President, James Bullard, who said, in so many words, “What, me worry about inflation?”

No, he didn’t do his best imitation of Alfred E. Newman, but… He did sound like him when he told his audience that “he didn’t think the strong U.S. labor market meant that higher inflation is just around the corner.” Well, that calmed the stock jockeys, and stocks turned around on a dime, and headed higher for the day… The stock jockeys owe a BIG THANK YOU to the PPT, and James Bullard… I’m just saying… 

Overnight, the foreign markets have taken the dollar saving duo from yesterday to heart, and bought more dollars… Volatility in the investment assets has returned folks… And with a vengeance, I would say! Look at those huge swings in the stocks this week, and look at the currencies, they’ve been all over the place this week… And what’s a key rule that I’ve always told you about a trend?  That it’s not a ONE-WAY Street, and there can be volatility… 

Of course all those propeller heads that though they could get rich shorting the VIX, which is the symbol for the volatility index, and because the VIX hadn’t moved much in a couple of years, got their shorts handed to them these past couple of days. The VIX index had remained below 10 for a couple of months of Sundays, and then it didn’t… the VIX hit 38 yesterday… OUCH!  

And guess who came back to the party in Gold? You would be correct if you said “the boys in the band”…  Once again I’ll point to the number of contracts traded. The previous day when Gold gained $8, the number of contracts traded had fallen to less than 300,000 (292,000), but on the day Gold loses $15 the number of contracts explodes higher to 446,000!!!! The PPT and “the boys in the band” just couldn’t leave things alone could they? And that’s got me so riled up I could scream at the walls, but that would wake Kathy up, and that wouldn’t be nice of me!  

Manipulated markets, where have all the free markets gone? Long time passing… Where have all the fundamentals gone? Long time ago…  I shake my head, and wonder, if we’ll ever see free markets again?  The Treasury market has been manipulated by the Fed since 2009. Stocks and the dollar always have the PPT, that was originally put together by President Reagan after the 1987 stock market crash, and ever since JP Morgan bought the precious metals book from Bear Stearns in 2008, it’s been an adventurous time on Mr. Toad’s Wild Ride…  

You see, Bear Stearns had a small short paper trade operation in Gold & especially concentrated in Silver. Once JPMorgan saw how the business worked, they decided they could really make some big bucks with this shorting Gold & Silver business, and the rest, is history… Soon, other bullion dealing banks joined in to form “the boys in the band”… 

The short Gold or Silver paper trading has gone viral, and in Ed Steer’s Saturday letter, he always gives us the number of days of production that it would take to cover the short trades that are on the books… And for Gold, the number of days of production it would take is 98, and for Silver, hold onto your hat for this number… 190 days of production to cover the short positions in Silver!   

Come on Chuck, go onto something else! OK, twist my arm, that’s enough! HA! I just don’t get how the regulators can let these large banks get away with this, what I call criminal trading?   People aren’t stupid, if they stop in their normal daily routines, and take 5 minutes to think about this stuff, they would come to the same ending, and if enough of them were upset enough to do something about it, or at least got others to do something about it, maybe we could see an end of manipulations, but until then, we can’t depend on the regulators to have out backs, folks… They’re all in cahoots, in my opinion, which could be wrong of course!  

The fundamentals of the U.S. continue to disappoint, and be very shaky… I was reading a piece on the Burning Platform website, written by Jim Quinn, and he pointed out some very disturbing data…  Let’s listen in…  “All is well. Real median household income just surpassed the level achieved in 1999. Think about that for a second. It took seventeen years for the average American family to get back to a household income of $59,000. The $59,000 of household income in 2017 doesn’t quite go as far as it did in 1999, with even BLS manipulated inflation showing an 87% increase in medical costs, 80% increase in energy costs, 51% increase in food costs, 53% increase in housing costs, and a 115% increase in college education. And of course the BLS changed their methodology, boosting household income by $1,700 in 2013. So, in reality it is still below 1999 levels.”  

Chuck again isn’t that some chilling data?  And when you think that 1/2 of the country is below the median income of $59,000, it means that 1/2 of the country doesn’t have two nickels to rub together, and when or if the next recession comes, it’s going to be a very bad one…  But traders and the PPT are still lining up to buy dollars in times when the dollar looks like its ready to fall off a cliff.  Makes you wonder about the mental capacities of these guys, right?   

I’ve really gone off on some tangents this morning haven’t I?   So, let’s do a quick roundup of the currencies and other assets before we head to the Big Finish today… The euro has dropped below 1.24, but is still 3% ahead of the dollar so far this year, and more and more analysts are rethinking their call that the euro would rise to 1.24 this year, it’s already there! Now they’re rebooting their forecasts to 1.30 for this year.  The pound has slipped as the Bank of England (BOE) will meet tomorrow, and no one expects nice things to be said there. The Aussie dollar (A$) was a stealth rally currency overnight, gaining about a quarter from yesterday.  And the Chinese renminbi was allowed to appreciate overnight after they posted their 12 consecutive month of gains in their reserves…   OK, now I feel better and we can proceed…   

The U.S. Data Cupboard today has the data I’ve been waiting for since last month when Consumer Credit (read debt) exploded higher to $28 Billion in November. I said then that if it went that high before the Christmas shopping season I couldn’t imagine how bad it would be for December, and today I don’t have to imagine any longer!   And that’s it for data today…    

To recap… The PPT and James Bullard came to the aid of stocks and the dollar yesterday… Chuck goes on and one about manipulated markets. But all the safe havens that were bought the previous day were sold yesterday, along with other currencies. Gold lost $15 on a day when the number of contracts traded were greater than 446,000! And we do a review of the rise of inflation in the U.S.    

For What It’s Worth…  Well, on a day with all this “other stuff” going on, I’m going to remain calm, and talk about China and Gold… This article appeared on Bloomberg.com and can be found here:https://www.bloomberg.com/news/articles/2018-02-06/china-s-love-affair-with-gold-heats-up-on-property-boom-riches  

Or, here’s your snippet: “China’s growing throng of affluent consumers is driving a rebound in demand for gold rings, bracelets and necklaces as a property boom and high stock market valuations boost wealth in the largest bullion market.

“Things are much more positive than they were this time last year,” and the jewelry market has bottomed out after three years of declines, said Nikos Kavalis, London-based director of research firm Metals Focus Ltd.
Colleagues who visited the southern commercial hub of Shenzhen in early January told him showrooms were quite busy and wholesalers expected clients to return to replenish their stocks before Lunar New Year in the middle of February.

The nation’s demand for gold jewelry climbed 10 percent last year to almost 700 metric tonnes as the wealthy increased purchases and consumption improved in second and third-tier cities, according to the China Gold Association. Buying of ornaments represented more than 60 percent of the 1,090 tonnes of gold consumed in China last year and made up a third of world jewelry demand.”  

Chuck again… Good to know that some things never go away for good, eh? 

Currencies today 2/7/18… American Style: A$ .7866, kiwi .7318, C$ .7990, euro 1.2352, sterling 1.39, Swiss $1.0640, … European Style: rand 11.9430, krone 7.8277, SEK 7.9783, forint 250.93, zloty 3.3668, koruna 20.4213, RUB 57.17, yen 109.19, sing 1.3196, HKD 7.8191, INR 64.26, China 6.28222, peso 18.64, BRL 3.2543, Dollar Index 89.84, Oil $63.21, 10-year 2.77%, Silver $16.63, Platinum $985.91, Palladium $1,000.79, and Gold… $1,330.60  

That’s it for today…  What a beautiful day here yesterday, and another one is in store today… It took longer than usual, this year,  but the normal sunny and 80 days are returning…  And I can’t tell you how great that makes me feel! Well, my beloved Missouri Tigers kept their winning streak going last night with a win at Ole Miss, and I got to watch it! Our Blues were also on cable which I got to watch, but they played a stinker of a game and lost.  Onward and Upward as my good friend and former Big Boss, Frank Trotter always used to say…  the band Kansas takes us to the finish line today with their rock classic, Dust In The Wind… I have a great story to tell you about that song when we get to Cinco de Mayo… I hope you have a Wonderful Wednesday, and Be Good To Yourself!    

Chuck Butler

Was It A Correction Or A Snowflake?

February 6, 2018  

* Safe Haven are spared from the selling… 

* Short Gold paper trades appear to be absent yesterday! 

  Good Day…  And a Tom terrific Tuesday to you! It’s one of those days… It all began yesterday afternoon, I felt very tired and so I took a nap… Then after waking and going outside in the sun for a bit, I came back inside, and felt like I needed another nap, and so on. Then this morning, the alarm went off, and I turned it off, but couldn’t wake up… Every once in a while, I have these days where all I can do is sleep… I’m in one of those patterns right now, so if this is unusually late this morning, it means I dozed off while writing! So, this letter will be shorter than usual, in hopes that I can get it done and get back to sleep! HA!   Actually, I realized yesterday that I had gone on way too long in the letter, so I’ll make up for that today! Redbone greets me this morning with their song: Come and Get Your Love…    

The Big News yesterday was all about the stock market, which saw the DOW lose more than 1,500 points, and that’s better than it stood at one point in the day when it was down more than 2,000 points! Is, this just a correction to a market that has seen nothing but green lights for far too long? Or…  Is this the beginning of the great sell-off that some analysts have been calling for?  I’m no stock jockey, but I’ve seen the writing on the wall for stocks for a long time, but just like any asset that’s in a strong bull market, it defies gravity longer than anyone can imagine. 

The “correction” is what we’ll call it for now wasn’t confined to just U.S. stocks, the Asian stock market lost 3.8%, the Japanese stock market lost 4.7%, and the European stock market, did a little better only losing 1.8%. Commodities took a shot to the mid-section, with Oil leading the way losing about $1.50 in the last 24 hours, and even the all bow to Bitcoin, has dropped below $7,000,  but Gold, which normally does well, in times like this, gained $7.70 yesterday, and is up another $8.80 in the early morning trading.  

Gold and Chinese renminbi are the only two survivors from yesterday’s selling, and isn’t it apropos that these two are joined at the hip today? The Gold story for the last decade has had a background story of Chinese accumulating any physical Gold it could get its hand on…  

Swiss francs, Japanese yen, euros, Gold, and U.S. Treasuries continued to be considered “safe havens” yesterday. The 10-year Treasury saw its yield move from 2.85% yesterday to 2.71% this morning. Believe me folks, I used to trade Treasury bonds, that size move in bonds is like moving mountains!  Remember bond pricing works like this, as the yield rises the bond price goes down, and vice versa. So, there had to be a truck load of buying and driving the price higher, and dropping the yield yesterday.

Don’t ask me why Japanese yen is considered to be a safe haven currency. We’ve been through this before in times like this. And just because it’s the 2nd most traded currency doesn’t qualify it to be a safe haven currency in my book! Their economy is a disaster and has been since the mid-90’s, their debt is greater than anyone’s in the world, and they have negative interest rates, and I could go on and on… But the wizards of the world still consider it a safe haven, so be it… 

So, what caused all this nastiness in everything other than the safe haven assets? A snowflake can cause an avalanche, and the snowflake for U.S. stocks was the thought that Fed Chair Janet Yellen is out, and new Fed Chairman, Jerome Powell, is going to hike rates aggressively, thus throwing the economy into a recession, and panic began to spread… 

Remember what I said when Jerome Powell was confirmed as the new Fed Chairman, that the thought then was that he would be aggressive in hike rates, and wondered how that was going to sit with President Trump, who is all for lower rates and easy credit? I rang the warning bell at that time, but as usual no one paid attention to what I was saying… UGH!

There was a time 15 years ago that if I said something, newspapers, media outlets, would be calling me for an interview. That went on for about 5 years, and then it all stopped… I found out that the public relations firm we used was told to not send interview requests to me any longer. You see, I must have ticked off someone with something I said, and like Puff the Magic Dragon, I ceased my fearless roar…  But any further discussion of that will be held on the Butler Patio…  Moving on…  

Getting back to Gold, because I can, and the fact that it is shining star this morning. I saw something in the trading of Gold yesterday that I found interesting… Recall that a week ago when Gold was being subjected to tons of short Gold paper trades, the number of contracts traded were up in the 300 and 400,000 range. But yesterday, when Gold was getting bought, the number of contracts traded were 292,000, still a healthy number, but on that appears to be minus the short Gold trades…  

And, it reminds me of something I used to tell people all the time, and that’s the fact that if everyone that was buying assets for their investment portfolio bought physical Gold, that it would suffocate the short Gold paper trades… For that’s what it appears to have happened yesterday! 

The U.S. Data Cupboard is pretty much empty today, with a Fed head, James Bullard speech the highlight of the day…  Yesterday’s Data Cupboard showed us that the services index had rebounded from the drop in Rocktober, and November, and December, which was a surprising rebound to me… I’ve long said that here in the U.S. we’ve become a servicing country, and our service sucks eggs…    

To recap…  It was all about the U.S. stock market yesterday, was it a correction, or the beginning of an avalanche for stocks? Jerome Powell was sworn in as Fed Chairman, and the thought of what he’s going to do spooked the markets, with francs, yen, euros, Gold and U.S. Treasuries, the shining lights while everything around them not only here in the U.S. but also abroad, was getting sold.    

For What It’s Worth… I’ve been talking about the BREXIT negotiations and warning that they could be a real game changer for the U.K. and then I saw this article on Bloomberg.com that is European Central Bank President, Mario Draghi, talking about all this from a Euro-view. This article can be found here: https://www.bloomberg.com/news/articles/2018-02-05/draghi-says-ecb-needs-to-prepare-for-possible-cliff-edge-brexit 

Or, here’s your snippet: “Mario Draghi said the European Central Bank has no choice but to brace for the possibility that the U.K. will exit the European Union without a transitional agreement.

“We always prepare for any eventuality but at the same time we are assessing the direction, probability and potential impact of risk,” Draghi told members of the European Parliament in Strasbourg Monday. “The bottom line is this one — either the negotiation is well managed and there won’t be substantial risk, or it is not and then the risks will be there, so we’re certainly looking at that and we’ve got to be prepared.”

The U.K. is scheduled to leave the E.U. in March 2019 and Prime Minister Theresa May currently wants to negotiate a transitional phase after that in which business between her country and the remaining 27 members of the bloc carries on as usual. Yet disagreement within Britain’s ruling Conservative Party, as well as the negotiations with the E.U., mean that achieving such a deal is far from certain.”  

Chuck again… I think Draghi is bang on with his thoughts that Maybe everything will be fine, but there are risks that everything won’t be fine, and they should prepare for those risks… Think about that for here in the U.S. with our debt situation and rising interest rates… same thing, eh?

Currencies today 2/6/18… American Style: A$ .7860, kiwi .73, C$ .7978, euro 1.24, sterling 1.3940, Swiss $1.07, … European Style: rand 12.10, krone 7.8168, SEK 7.9505, forint 250.06, zloty 3.35, koruna 20.3376, RUB 56.75, yen 109, sing 1.3213, HKD 7.8185, INR 64.30, China 6.2917, peso 18.81, BRL 3.2319, Dollar Index 89.53, Oil $63.66, 10-year 2.71%, Silver $16.80, Platinum $996.50, Palladium $1,022.43, and Gold… $1,345.30   

That’s it for today…  I’ve got to get going because I have to go back to the dermatologist early this morning for a follow up. The left side of my face is better, but sill looks bad…  This will be one of those short weeks for me and the Pfennig, as Friday is an infusion day… So, no Pfennig on Friday… Yesterday, I asked all three of my oncologists to get together and come up with a new plan of attack for me.  I’ll find out Thursday what they came up with.  Yes, I have an oncologist in Houston, St. Louis and Jupiter… The St. Louis and Jupiter docs usually take their cue from the Houston doc, who’s at MD Anderson Cancer Center…  Who usually is as difficult to get a hold of as it would be to schedule a meeting of the Easter Bunny, Santa and Bigfoot!  Sorry to bore you with this stuff, my fat fingers just started typing and the next thing I know, I’m telling you that King Crimson is taking us to the finish line today with their classic rock song: In the Court of The Crimson King…   I hope you have a Tom Terrific Tuesday, and remember to always Be Good To Yourself!  

Chuck Butler

Chuck Talks Debt…

February 5, 2018    

* An Engineered takedown of Silver on Friday… 

* The PPT stops the dollar’s slide… for now! 

 Good Day… and a Marvelous Monday to you… I didn’t have the best of weekends, but Sunday made a turn for the better, and my beloved Missouri Tigers upset the mighty Kentucky Wildcats in basketball on Saturday, while I was all rolled up in ball in my chair. Our Blues won Saturday night too, so that was a good day sports-wise, but not physically healthy-wise for me!   Congratulations to the Philadelphia Eagles, who upset the Patriots in the Super Bowl last night… After years of duds for games in the Super Bowl, we’ve been entertained by some good games recently. The guys in Rockapella greet me this morning with their song: Zombie Jamboree…  Back to back, belly to belly… 

What do we have here this early Monday morning?    Recall last week when I told you that I questioned the pound sterling rally because of the facts that the U.K. had too much Debt, and that there were still questions and unknowns about the BREXIT negotiations?  Well, I turned on my laptop this morning and straight away I saw that the pound sterling rally had fallen on difficult times, and so I checked it out, and there it was in black and white…  The pound was on the slippery slope because the BREXIT negotiations may not meet their deadline…   

The Currencies today are a mixed bag-o-nuts, with the Big Dog euro gaining back some ground that it lost on Friday, and Aussie dollar trying to once again mount a run at 80-cents. And then we have the opposite side of the spectrum with the pound, rand, ruble, and rupee all taking on water this morning.  Gold got whacked, so badly on Friday, that the whacking left a mark!  And there was another engineered take down of Silver on Friday… This stuff so disgusts me that I find that I don’t want to talk about it because it gets my blood pressure boiling, and I’ve got enough problems going on without having blood pressure problems!

But I have to, so I’ll try to remain calm as I explain what happened to Gold & Silver on Friday.  So, there we were on Friday morning with the Dollar Index below 89, and falling to mark the 8th consecutive week of losses for the dollar. The Dollar Index looked as though it was ready for a steep ride on the slippery slope, and then in a wink of an eye, it didn’t look like that any longer! Somebody started buying in huge lots, and soon the Dollar Index was back above 89 and moving higher…  I put this down to the PPT (Plunge Protection Team) 

Well it didn’t take “the boys in the band” to see their cue to piggy back on the rise in the Dollar Index to engineer a take down of Silver…  Now, think about this for a minute, we rarely see Silver trade more than 10-cents on a day, but for a while on Friday, Silver was down 70-cents! We began Friday morning with Silver trading at $17.14, and until the shenanigans with the Dollar Index began, Silver was adding to the $17.14 opening price, but then it wasn’t any longer, and fell to $16.52, before settling higher…  It’s a real shame and criminal in my mind that these “boys in the band” continue to get away with this…   

You see, they buy at those cheaper levels that they drove the price of Silver to, after selling it all day… They’ll get everyone to buy in again and then the engineered take down happens again so they can book gains..  Gold saw the same type of trash trading and it ended up losing $16 on the day…  I shake my head in disgust and dismay, and wonder when these guys the PPT and the boys in the band end up “getting theirs”?  

OK, I’ve got to calm down now…  Oh, this ought to do the trick… talk about debt! NOT! I was doing some writing this weekend about Debt levels here in the U.S. but I could have talked about them around the globe. But what would be the point? You live here, you get your gas, groceries and giggles here, so you probably would prefer to know what’s going on with Debt here in the U.S. rather than in, say… France.  Of course that’s just me making that decision for you, sorry if I chose incorrectly!   

But don’t you want to know what these forecasted rate hikes are going to do to the debt servicing levels here in the U.S. not just with the Government who can borrow at much, much lower interest rates, but also U.S. Households, who have been ratcheting up the debt faster than you can say lickety-split! One credit card maxes out, no problem, just apply for another one, Woo-Hoo honey, put on your red dress, we’re going out to eat tonight, I’ve got a brand new credit card with $0 dollars on it yet! I’ve got money I haven’t spent yet! But wait until our friend here receives the first bill in the mail and learns that U.S. Households have to pay WAY MORE in interest rates on their Debt than the Government! 

Well the math was done, and to see it, you’ll have to go to www.dowtheoryletters.com and sign up… And it will print on Thursday this week.  That’s funny, and I do believe every time I’ve thought about it through the years I get a chuckle from the idea that one of my worst subjects in school when I was growing up was math… And then I got into a business where I had to use math every day! I can tell you though, that I’ve never used any y=x stuff in my life!  Any way, the thing to remember here is that the Government has a blank check (sure there’s a debt ceiling, but why? Every time we get close to breaching it, the lawmakers just raise it! )Yes, they’ve raised it 74 times, since 1962…  

But dear Householder has no blank check, except for the ability to keep applying for new credit cards… But one thing remains the same, you create debt, and you have to pay it back with interest, and circling back to my initial thought, as the Fed hikes interest rates… the cost to servicing one’s debt goes higher, and higher, and higher until no one including our Gov’t. is able to pay the interest alone, much less the principal!   And people thought that I’ve been the boy who cried Debt all these years…  And now its staring us in the face, like looking down the barrels of a shotgun! 

And you think the tax cuts will help these debt ridden individuals? Think again my friend… The rise in the debt servicing of their Student loan, Mortgages, Equity loans, and revolving credit, is going to eat that tax savings for lunch! Now, what’s for dinner?  

Oh, and for the Government? Guess what? They cut taxes when the Fed was hiking rates…  President Bush tried that, and it sent the dollar to the woodshed for the next 4 years.  Let’s see… lower your receivables from the taxpayers and increase your need to borrow… Doesn’t anyone else see that this is a recipe for disaster?    OMG!    I need to move along, I’ve sufficiently got my blood pressure on the rise this morning! UGH!   

The U.S. Data Cupboard on Friday had the Jobs Jamboree, and it was a little better than expected at 200,000 jobs created in January (forecast was between 185,000 and 190,000) The Unemployment Rate remained the same at 4.1% (but in true/ reality it’s probably closer to 23% than it is to 4.1%)  The Average Hourly Earnings showed wages going higher, and that got people excited, as wages grew 2.9% Year-on-Year…  Remember, I said that inflation was ready to take off this year, and this increase in wages in proof in the pudding!  And a downward revision to Capital Goods shipments couldn’t hold back Factory Order from rising 1.7% in December…   

Today’s Data Cupboard just has the ISM Non-Manufacturing (servicing) Index for January. The ISM Non-Manufacturing index has been cooling noticeably, moving down from the 60 area in October to what was a lower-than-expected 56.0 in December (revised from an initial 55.9). And I expect January’s index number to be in the mid-50’s, still well above the 50 level that denotes whether the sector is contracting or expanding. 

To Recap…  Well, the Jobs Jamboree was really only good for the Avg. Hourly Earnings data which showed wages rising… finally!  The currencies started Friday on the rally tracks and ended the day derailed at the station, as Chuck thinks the PPT stepped in to stop the dollar’s ride on the slippery slope. And that brought out “the boys in the band” for an engineered take down of Silver and carry over to Gold.  

For What It’s Worth…  Well, did you ever wonder if someone was peeking over your shoulder when you were writing? I sure did when I saw this article highlighted on Ed Steer’s letter (www.edsteergoldandsilver.com) this morning… So recall last week when I told you that the U.S. was in a Cold War with the other countries over how weak the dollar should be?  And then this article on MSN.com appeared, and can be found here: http://money.cnn.com/2018/02/02/investing/dollar-currency-cold-war/index.html        

Or, here’s your snippet: “The dollar is at its weakest level in years against other major currencies.

Experts say the drop is being driven, at least in part, by the U.S. government. And some suggest it’s a deliberate campaign aimed at boosting the American economy at the expense of major trading partners like Europe and Japan.

The Trump administration is engaged in “a cold currency war — and it’s winning,” Joachim Fels, an economist at investment firm Pimco, said this week.

Rather than an open conflict, which would involve direct intervention in currency markets, the hostilities come in the form of words and “covert” actions, he wrote in a blog post.

Fels points to the Trump administration’s moves to slash taxes and boost spending, which he says are coming at “the wrong time”. The measures will pile on more government debt, making investors less eager to own dollar assets, like U.S. Treasury bonds.

Policies like that “are sending an implicit but very clear signal to markets: A weaker dollar is the goal,” Fels wrote. “Markets have understood the signal.”  

Chuck again… Nothing more to add to this, that I haven’t already said… 

Currencies today 2/5/18… American Style: A$ .7937, kiwi .7306, C$ .8048, euro 1.2457, sterling 1.4097, Swiss $1.0748… European Style: rand 12.0434, krone 7.7163, SEK 7.9007, forint 248.55, zloty 3.3351, koruna 20.2235, RUB 56.47, yen 109.85, sing 1.3168, HKD 7.8201, INR 64.20, China 6.3014, peso 18.57, BRL 3.2172, Dollar Index 89.16, Oil $65.18, 10yr 2.85%, Silver $16.84, Platinum $993.20, Palladium $1,035.73, and Gold… $1,339.10  

That’s it for today… How about those Missouri Tigers! Kentucky might be beatable now, but I doubt they will be in March!  I wasn’t going to watch the Super Bowl last night, but friends Jack and Lorraine invited me up to their unit to watch it with some other friends here, so I went, stayed until halftime, and then wobbled back to my place… My friends, here, Jack and Gus, keep checking on me each day. Gus wants to cook me breakfast, and so on… It’s great to have friends like that, eh? I’m on the BRAT diet, for stomach reasons… Bananas, rice, applesauce and toast… Talk about bland! Oh well., hopefully it works and gets me back to normal… Stomach problems are not fun, folks… OK…  Motley Crue take us to the finish line today with their song: Same Old Situation (SOS)  And with that it’s time to get this our the door, I hope you have a Marvelous Monday and remember to always Be Good To Yourself!  

Chuck Butler

It’s A Jobs Jamboree Friday!

February 2, 2018

* Ruble continues to get more attention!

* Could the A$ Bears be right? 

Good Day…  And a Happy Friday to one and all! It’s Groundhog Day! I know that on the East side of the country, they are very interested in what Puxatony Phil has to tell us about the next 6 weeks of winter!  Groundhog Day is also the title of one my fave movies, starring Bill Murray, and Andie McDowell. When I first bought the DVD, years ago, I watched it over and over again and I don’t think it was to see Bill Murray! HA!  Our Blues hope that last night’s loss in Boston isn’t repeated! Emerson, Lake and Palmer greet me this morning with their iconic rock song: Lucky Man… 

I told you on our Tom Terrific Tuesday this week that the dollar buying would be short-lived and that by the end of the week, the dollar would be posting its 8th consecutive week of losses…  And unless the Bureau of Labor Statistics (BLS) pull a rabbit out of their hat, ala Bullwinkle, that’s exactly what we’ll end of seeing today, the dollar posting its 8th consecutive week of losses.

This week’s loss by the dollar will most likely not end up being as impressive as previous week’s losses, but keeping the streak going is what maters! You can look at the loss this week by either comparing last Friday’s Dollar Index  (89.12) or comparing the euro’s price today to last Friday (1.3445). As we start the day the Dollar Index is 88.87, and the euro is 1.2488..   

But all that could change as today is a Jobs Jamboree Friday. Right now the forecast is for an increase of 185,000 jobs in January. But recall I told you yesterday that the ADP report showed 234,000 jobs created in January… So, what’s it gonna be BLS? I get this spider sense tingle that something is wrong… And most likely it’s telling me to beware the BLS and their hedonic adjustments… I guess we’ll have to wait-n-see, but it won’t be too long of a wait, the jobs numbers will print at 8:30 EST.  

The currencies stopped their messing around yesterday and got back on the rally tracks, for the most part that is. Gold gained $3.30 on the day, and the price of Oil soared 1.7% to nearly 66-cents (65.92). The price of Oil got a boost yesterday when Lola issued a statement that said that Lola believed the price of Oil would reach $80 by year-end.  And we all know from past experience that whatever Lola wants, Lola gets!    For any new readers, first, welcome to daily discussion, and second, Lola is what I call Goldman Sachs… Hey! it’s better than what Rolling Stone’s Matt Tiabbi calls them, which is the giant vampire squid!    OUCH! That’s going to leave a mark!

With Oil having such a spectacular day yesterday, the Petrol Currencies joined the party, with the Russian ruble leading the way, more on Russia in a minute) followed by the Norwegian krone, Canadian dollar/ loonie and Brazilian real.  The moves in the Petrol Currencies weren’t as spectacular as the move in the price of Oil, but the moves were positive, and positive moves are good!   

OK, moving on… I was ready to raise the white flag on Palladium, which had booked losses almost daily now for two weeks, and yesterday morning it fell dramatically below $1,000… Good thing I waited, as Palladium saw a turnaround Thursday and booked a nice $22 gain, and in the early trading today is up $17…  Whew! that was a close one…  

 I gave you some interesting data on Russia earlier this week, and that’s to dear longtime reader Bob, I have something additional to add to that data review of Russia a couple of days ago…  In the Eurasian region (EEU), the ruble has replaced the dollar as the number one currency used in International Trade… For instance, Ruble transactions in the EEU are currently worth the equivalent of US$69 Billion, compared to US$18 Billion…   Pretty amazing don’t you agree?  

The Aussie dollar bears that I told you about earlier this week are still weighing heavily on the Aussie dollar (A$), and the fact that their December QTR consumer inflation was weaker than the previous QTR… But now we have some analysts giving the A$ bears more fodder. For instance the FX strategy team at ANZ Bank believe that rate differentials will doom the A$ going forward, as the U.S., in their mind, continues to hike rates, and the Reserve Bank of Australia (RBA) drags their feet to start a rate hike cycle!   

Keep in mind there are two main ingredients of this thought… 1. that the RBA drags their feet to start a rate hike cycle, well that’s not that difficult of call to make, as I believe they’ve been dragging their feet for the last 6 months!   And 2. That the U.S. is going to continue to hike rates… I think the jury is still out on that one, folks… And any stumble, bumble, fumble by the Fed will not allow this thought to come to fruition. 

But, chances are cause I wear a silly grin… No Wait! Chances are the thought by the FX Strategy team above will get very close to coming to fruition, and that’s going to weigh heavily on the A$ going forward… 

I’ve grown tired of shaking my head in disbelief over the strength that pound sterling is displaying each day. I’ll just point out that the U.K. debt picture isn’t getting any better, and any BREXIT agreement is going to add to that debt, and the fact that Bank of England Gov. Mark Carney, who got this pound sterling rally started with talk of a rate hike, still hasn’t gotten his interest rate powder wet…  But my dad used to have saying that he used all the time… He would say, Chuck, you can’t fight City Hall… 

And I take that and shift it to: you can’t fight the markets..  If they are in the mood to make pound sterling their belle of the ball, even though at midnight she might turn into an ogre, you don’t stand in their way..  

The U.S. Data Cupboard today, is dominated by the Jobs Jamboree, but will also have the Factory Orders print for December.. Come on Factory Orders play some catch up and get your data more fresh! 

Gold, as I mentioned above gained $3.30 yesterday to close at $1,348.30, and it pretty flat so far this morning, as Gold traders wait to see what’s in the Jobs data (Avg. Hourly earnings and Avg. workweek hours)  I have an article about China and Gold for you in the FWIW section today, so stay tuned for that!    

To Recap…  It’s a Jobs Jamboree Friday and it’s Groundhog Day! I’m more interested in what Puxatony Phil had to say, and Oh! there it is! Phil tells us we’ll have 6 more weeks of winter!  the currencies are back on the rally tracks, for the most part this morning, but we don’t know what hocus pocus the BLS is going to perform with the Jobs report for January, so that rally might be short-lived today if the BLS decides to go rogue on us! 

For What It’s Worth…  Remember when I used to give you the totals of Gold accumulation all the time? I don’t know what happened there but when I saw this article I knew it was time to catch up… So, as I said above this article is about China and Gold, and can be found here: http://www.scmp.com/business/companies/article/2131562/chinese-gold-demand-returns-growth-appetite-jewellery-soars   

Or, here’s your snippet: “Consumption of the precious metal climbed 9.4 per cent to 1,089 tonnes, according to data from the China Gold Association, released on Thursday. That represents a big turnaround from a 6.7 per cent slump in demand in 2016, and means China maintains its crown as the world’s largest gold market for a fifth consecutive year.

India, in second place, probably saw its gold consumption drop to an eight-year low of 650 tonnes, according to the latest estimate from the World Gold Council in November.

Demand for jewelry in China was especially strong, rising 10.4 per cent to 696.5 tonnes, a dramatic recovery from the 19 per cent drop seen a year earlier, said the Beijing-based association. Jewelry demand is the largest contributor to the total appetite for the yellow metal in the mainland.”

Chuck Again… This is a good sign for Gold, as physical demand would need to outstrip the short paper traders to finally put the kyboshes on the short paper trades…     

Currencies today 2/2/18… American Style: A$ .7990, kiwi .7355, C$ .8127, euro 1.2488, sterling 1.4222, Swiss $1.0755, … European Style: rand 11.9685, krone 7.6677, SEK 7.8658, forint 247.74, zloty 3.3286, koruna 20.1566, RUB 56.11, yen 109.86, sing 1.3132, HKD 7.82, INR 64.10, China 6.2944, peso 18.45, BRL 3.1765, Dollar Index 88.87, Oil $65.91, 10-year 2.79%, Silver $17.14, Platinum $999.11, Palladium $1,046.80, and Gold… $1,348.20    

That’s it for today… Well, it’s also Super Bowl Sunday this weekend… I doubt I pay much attention to it since I’m here by myself, I’ll probably need to do some dusting or something like that!  Here’s the script for the game, the Eagles look good and get out to a good lead, but the Patriots rally to win the game.. Sound familiar? This allergic reaction to something on the left side of my face seems to be getting better, albeit slowly, and you know me, I’m not a patient man when it comes to this stuff! I had better live it up the next couple of days, and then clean up, as Kathy returns next week! HA! I’m sure I’ll hear about it from her when she returns that I mentioned her in the Pfennig. Recall I promised her I wouldn’t talk about her any longer, and whenever I do I ask her friends that do read the Pfennig to not mention it, but she always seems to know… So, who among you is the snitch? HA!  Ok, got to get this out the door quickly now… Van Morrison takes up the finish line with his song: Into The Mystic… (love that song!)  Now go make this a Fantastico Friday/ Groundhog Day! It looks like a good day to have a good day, and remember to Be Good To Yourself, always!  Chuck Butler

Fed’s Inflation Warnings Surprise The Media?

February 1, 2018  

* Currencies founder on Wednesday…

* But Chuck thinks it will be short-lived..  

Good Day… And Welcome to February, a good month in my book now that I spend in South Florida… We have a holiday weekend, Valentine’s Day, and most importantly, pitchers and catchers report to spring training! And this year Spring Training Games actually start the last week of February! YAHOO!  It’s a Tub Thumpin’ Thursday, but not for me. I’ll remain hunkered down with my deformed face…  Good friend, Gus, stopped by yesterday to check on me since it was a nice day out, and I wasn’t outside soaking up the sun.  What a good friend!  Bob Seeger and the Silver Bullet Band greet me this morning with their song: Turn The Page..  It’s a song about being on the road in 1971, I relate to this song because just two years later I was on the road too!  

The Currencies didn’t really move much yesterday, but the move they did make was downward, except the Chinese renminbi, and Norwegian krone teaming up to fight the dollar yesterday and in the overnight market. There are some currencies that have traded flat, like the Hungarian forint, and the Swiss franc. The rest of them saw some lost ground on the day and night.  The Biggest Loser in the past 24 hours has been the Aussie dollar (A$).  

I told you earlier in the week that the A$’s rise to 81-cents was being looked at by the A$ bears as an opportunity to bring it back down, and they have…  The A$ lost over 1 full cent yesterday and overnight, and the A$ bears said that they believed that the Aussie inflationary pressures had slipped in the December QTR, and that would push back the thought that the Reserve Bank of Australia (RBA) was ready to begin a rate hike cycle. 

The New Zealand dollar/ kiwi, which had been quite the perky looking currency lately, sold off in sympathy with their kissin’ cousin across the Tasman.  I get the feeling that this selling of kiwi will be short-lived… So, this may be an opportunity to buy at cheaper levels, in hopes of better days ahead!    

The reason I say that goes for all the currencies.  You see I’ve said that the dollar has entered a new weak trend, but a trend is not a ONE-WAY street, and there could be volatility like we saw yesterday.  And I’m not the only one that has recognized what’s going on, although I have to admit I was the first (last June, to make the call!)  Let’s listen in to the analyst at PIMCO who was talking on Bloomberg.com, about how the U.S. has entered a Cold War with the dollar that they winning.  The U.S. want’s the dollar weaker… so here is PIMCO.. 

“Cold wars are not fought in open battle (for example, with currency intervention), but with words and covert actions,” Fels said. “These actions are sending an implicit but very clear signal to markets: A weaker dollar is the goal. Markets have understood the signal.”  

The dollar has lost 12% since the start of 2017 (in the Dollar Index) and I foresee more losses, especially with the growing twin debts. We talked about the national debt growing by leaps and bounds yesterday (actually Bill Bonner was doing the talking!) And today we’ll get to the ever increasing Trade Deficit, that if it keeps growing, and I believe it will given the trade war going on, the U.S. is going to want a much cheaper dollar to deal with the Trade Deficit. 

Speaking of the Trade War… China joined officially last night, when a Chinese official said that China would retaliate VS the Trump tariffs on Chinese solar panels we talked about 10 days or so ago.  So, game on Garth!  Game on Wayne!  

There was no surprise yesterday when the Fed announced that they were leaving rates unchanged, in Janet Yellen’s last Fed meeting as the “Leader of the Pack”…  But there was surprise by me that the media made such a Big Deal out of the fact that Fed’s statement contained a comment about how they saw inflation increasing this year…  

Geez, Louise, where have these media people been? The Fed has been forecasting an increase in inflation for the last few years every chance they got!  I guess this just proves that if you just stick to your story long enough that maybe you’ll get lucky and it will come to fruition. I say that because I too think inflation is ready to take off for higher ground, finally.  

Gold bulls have also seen this inflation coming, and I think that’s a lot of the reason that Gold has rallied about 20% in the last 12 months with 12% coming in the past few months. You can’t tell me that most of that move wasn’t fueled by inflation fears…  

Gold, yesterday, saw a $6.90 gain to $1,345… This past week, Ed Steer has been reporting monstrous levels of contracts traded, with some days reaching over 500,000 contracts traded. Yesterday’s total was 365,000. There’s a lot of interest in Gold going on right now folks, and I don’t expect it to remain stuck in the current range too much longer.  I’m just saying… 

The price of Oil gained back a buck in the past 24 hours after a report showed that gasoline supplies had fallen significantly. Oil trades with a $65 handle this morning. 

The U.S. Data Cupboard had a decent day at the office yesterday, as the ADP Employment Report printed 234,000 jobs created in January, which is a much stronger number than the forecast for the BLS jobs report that will print tomorrow at 185,000…  Then the Employment Cost Index (ECI), which you would see wage increases in, was a bit weaker than in the 4th QTR, but the year-to-date figure showed a nice increase of 2.6% VS 2.2% in 2016…  The Chicago PMI (manufacturing for the region) fell a bit to 65.7 from 67.8 in December…  But these regionals don’t every really equate to what the national PMI shows, so we’ll move along here…  And then finally, the FOMC meeting announcement, which we already talked about above. 

To recap…  The Fed left rates unchanged, no surprise, but the surprise came at how the media got all juiced up over the Fed’s statement that expect inflation to grow in 2018. The Fed has been like the boy who cried wolf by calling for rising inflation for the past couple of years and then not seeing it. But Chuck thinks this year they might be right! The currencies had a bad day, with only 2 currencies gaining VS the dollar, but Chuck thinks that this will be short-lived…   

Before I head to the Big Finish today, I wanted to make one final run at bringing yourself to help the Pfennig be named the Best FX buy-side letter out there…  I’ll go back to the original request in hopes that if you procrastinated that this gets you going!    Here’s what I said on Jan 25th: I’ve been nominated for the Best of FX Award given by FX Street…

Now, not that I want to ring my own bell, or blow my own horn (my dad used to tell me there were times you needed to blow your own horn, otherwise it wouldn’t get heard) but I think it’s about time! So, here’s the deal… starting today, and don’t put this off or you’ll forget to do it later, you can go to this website https://goo.gl/forms/Z3K8LIjtr6RYz0z62

Then there are several categories just click “don’t know” if you don’t know these people. When you get down to Best Buy-side Contributor, then you’ll find my name, click on it, and continue to the end, and submit.

It’s important that each category has at least a “don’t know” or else they won’t count your vote. I’m up against some heavy hitters folks, so I know I can count on you, as you’ve always been there when I asked for something!

Let’s go vote! Wouldn’t that be something, IF my little letter from the Midwest, would be named best newsletter in FX? That would be an upset to the proportions of the NY Giants VS the Patriots…  

For What It’s Worth…  this is an article about our ever growing national debt that is quite interesting and can be found here: https://wolfstreet.com/2018/01/30/us-national-debt-will-jump-by-617-billion-in-5-months/  

Or, here’s your snippet: “While everyone is trying to figure out how to twist the new tax cut to their advantage and save some money, the U.S. Treasury Department just announced how much net new debt it will have to sell to the public through the second quarter to keep the government afloat: $617 billion.

That’s what the Treasury Department estimates will be the total amount added to publicly traded Treasury securities – or “net privately-held marketable borrowing” – through the end of the second quarter. This will be the net increase in the U.S. debt through the end of Q2. By quarter:

* During Q1, the Treasury expects to increase U.S. public debt by $441 billion. It includes estimates for “lower net cash flows.”  

Chuck Again… Yes, recall that I told you when the tax plan was announced that it would add $1.8 Trillion to our National Debt? Well, here we go! 

Currencies today 2/1/18… American Style: A$ .7995, kiwi .7344, C$ .8115, euro 1.2435, sterling 1.4243, Swiss $1.0729, … European Style: rand 11.9196, krone 7.6886, SEK 7.88, forint 249.36, koruna 20.2885, RUB 56.24, yen 109.70, sing 1.3132, HKD 7.8207, INR 63.93, China 6.2963, peso 18.61, BRL 3.1768, Dollar Index 89.07, Oil $65.24, 10-year 2.74%, Silver $17.22, Platinum $996.70, Palladium $1,023.75, and Gold… $1,342.90

 That’s it for today… Ahhh, February! One other thing about the month that I forgot was that it was a short month too! So, guys… here’s your 13-day ahead of time public service announcement… You have that many days until Valentine’s Day! I opened up the door this morning to allow some fresh air in and it’s another windy day, the ocean is very angry this morning.  Have you been able to get out at night and see the Super Moon that came up Jan 30th? I love watching the moon rise over the ocean at night…   Steely Dan takes us to the finish line today with their song: Black Cow…   from my fave Steely Dan album, Aja…  And with that it’s time to go! I hope you have a Tub Thumpin’ Thursday, and that you always Be Good To Yourself!  

Chuck Butler

Oops, Did I Say That Outloud?

January 31, 2018   

* Currencies continue their rebound

* Kiwi is best performer overnight! 

Good Day… And a Wonderful Wednesday to you! Well, I went to the dermatologist yesterday about this reaction on the left side of my face that has my left eye swollen shut. The Dermatologist looked at me and I could tell that she wanted to say Ewww! But she didn’t, she calmly gave me shot and two creams and told me to call her on Thursday with a report on progress… Well one day on the creams and no progress, but I’m a patient man. (NOT!) She asked me if the swollen left eye was causing me any problems, and I told her no, what she was looking at was a shell, and I hadn’t seen anything from the left side for 8 years now. Weezer greeted me this morning with their song: Islands In The Sun      

Well, the President gave his first State of the Union Address last night, and while I would hope that what he was saying about the country’s debt path, would come to fruition, I have to say I didn’t agree with that part of the speech.  He didn’t say anything to move the markets violently in the overnight sessions, so we’ll just move along here, these are not the droids we’re looking for…    

The currencies enjoyed a continuance of the overnight sessions’ Turnaround Tuesday, and have continued to add to their gains into this morning. The New Zealand dollar is one of the best performers overnight, and has climbed above the 74-cent handle. The Dollar Index fell below the 89 handle it had traded in for about a week, and this morning is 88.96. Recall that it wasn’t that long ago that the Dollar Index was trading above 93!  

The stronger euro is doing its job in fighting inflation, and that’s evident by looking at the Eurozone CPI data that printed this morning… Eurozone CPI (consumer inflation) in January fell year-to-date to 1.3% from 1.4% the previous month.  I can tell you right here and now, that European Central Bank (ECB) President, Draghi, is not going to take this drop in CPI sitting down… Soon, he’ll make a statement in a speech or an interview and throw the euro under a bus… That’s been his M.O. for the past couple of years as he’s tried everything under the sun and moon to get inflation to rise, and while it has, its rise has not been swift or strong enough, given the monetary policies of the ECB.   

Or maybe, maybe Draghi has a relapse to his former self, when he proclaimed that the ECB would do everything and anything to support the euro…  I doubt it, and in fact I would make a shiny quarter bet that he rues the day he said that!  

So…  Yes that was U.S. Treasury Sec. Mnuchin, talking yesterday, and trying to explain what he really meant when he talked about how a weaker dollar was good for the U.S. right now…  It was as if he thought about it and then said, “Oops, did I say that out loud about the dollar?” Because he doesn’t want any part of a discussion about the dollar now…  I find all these gyrations with whether or not the U.S. administration is for a weak dollar or not, pretty interesting, and funny at times!  

The price of Oil climbed back over $64 in the past 24 hours, and while Gold did lose $1.80 yesterday, it’s up over $8 this morning, and the euro is stronger this morning, so once again we have all three anti-dollar assets moving against the dollar. Ganging up on the dollar if you will, which what it takes to get the dollar moving downward, because we’re still talking about the reserve currency of the world.  It’s losing its grip on that title, but for now, holds it proudly, and it takes a village to bring it down. 

Well, there I was reading my friend, and publishing guru, Bill Bonner, yesterday and he had some interesting things to say about the path of debt in this country… Let’s listen in to Bill who was writing his letter: Bill Bonner’s Diary that can be found here: www.bonnerandpartners.com So, with no further ado, here’s Bill!  “Starting next year, federal deficits are expected to reach over $1 trillion a year – with no emergency anywhere in sight.

So far in this century, the feds’ debt has been growing eight times faster than GDP.

Total government debt is already programmed to hit $30 trillion within 10 years… but will more likely hit $40 trillion when deficits explode in the next recession.”   

Thanks Bill, I talk a lot about how bad our country’s debt is but sometimes people need to hear from someone else!  And here’s something else that might seal the deal on the new weak dollar trend… Long ago, I learned that a country with  a Current Account deficit that was more than 2.5% of GDP, was in for a currency crisis, or major selloff… Guess where ours is now? More than 4%… Think about that and get back to me!  I’m just saying… 

I told you yesterday that today’s U.S. Data Cupboard was stocked with data but that we needed to let tomorrow be, but tomorrow is today, and so here we go..  Oh! But first I’ll tell you that the Consumer Confidence Index for January rose from 123.1 in December to 125.4 in Jan.  Crazy, folks, just plain crazy if you ask me!   

Today’s Cupboard has the ADP Employment Report for January, and The Employment Cost Index (ECI) , then some secondary data will lead us to this afternoon, when the Fed will end their two-day meeting, and after putting away all the board games and playing cards, they will tell us they left rates unchanged…  But they needed two days to make that decision, that was already made before the meeting began! 

To recap… The Fed winds up their two-day meeting today, the currencies have continued their rebound after the Monday rally by the dollar. Gold lost a whopping $1.80 yesterday but is up $8 in the early morning trading today. Chuck doesn’t agree with POTUS on the direction of debt, and brought his friend, Bill Bonner into the discussion on debt.  And U.S. Treasury Sec. Mnuchin, is trying to steer clear of his comments last week about the weak dollar…   

For What It’s Worth…. I read this yesterday and thought it to be FWIW worthy, and then Ed Steer highlighted in his letter this morning, and that confirmed my thought!  It’s an article about how the Perth Mint is going to issue a Gold Backed digital coin and how it could hurt the Gold ETF market, and can be found here: http://www.afr.com/brand/chanticleer/perth-mints-digital-gold-threatens-122bn-in-goldbacked-etfs-20180130-h0qeu9   

Or, here’s your snippet: “The Perth Mint’s release of digital gold certificates for trading, holding, and transferring physical gold could have profound consequences for the $US98 billion ($122.5 billion) in gold-backed exchange traded funds.

The technology underpinning the digital gold certificates could have other uses such as the clearing and settlement of equities.

At this stage the digitisation of gold ownership by the Perth Mint is available only to institutional investors, such as banks, which can then offer it to retail customers.”  

Chuck Again…. Everybody wants in on this cryptocurrency mania, and even a conservative institution like the Perth Mint has succumbed to the pressure of being like everybody else! UGH!   

Currencies Today 1/31/18… American Style: A$ .8107, kiwi .7405, C$ .8145, euro 1.2450, sterling 1.4155, Swiss $1.0728, … European Style: rand 11.8211, krone 7.6915, SEK 7.8435, forint 249.43, zloty 3.3318, koruna 20.3220, RUB 56.22, yen 108.78, sing 1.3075, HKD 7.8201, INR 63.57, China 6.3265, peso 18.59, BRL 3.1653, Dollar Index 88.96, Oil $64.17, 10-year 2.71%, Silver $17.21, Platinum $1,003.98, Palladium $1,061.95, and Gold… $1,346.10

That’s it for today… It was another very windy day here yesterday, but it’s supposed to be better today, YAY! I had experienced two consecutive nights of decent sleep until last night, that was another story… UGH!  Well, this is the last day of January, and it couldn’t get over fast enough for me and our Little Christine, who told me it was her 2nd least favorite month, behind November.  I guess I shouldn’t say “our” any longer since she doesn’t work for me any longer! So, from now on, I won’t say that any longer…  The Jefferson Starship takes us to the finish line today with their song (and my fave Jefferson Starship song): Miracles… And with that I hope you have a Wonderful Wednesday, and Be Good To Yourself! 

Chuck Butler


Who’s Going To Buy All Those Treasuries?

January 30, 2018

* Currencies go on a Roller Coaster ride!

* Fed’s FOMC begins two day meeting today


Good Day… And a Tom Terrific Tuesday to you! I’m feeling much better, although I don’t look like it… The tumor in my jaw continues to grow, and now I’ve had allergic reaction to something and the left side of my face is all swollen and red… UGH! What I sight to see, eh? I had dinner last night, my first real meal since last Wednesday, with our building friends, Jack & Lorraine, and hosts, Gus and Vivi… Vivi and Gus are both from Greece, and she is an excellent cook, OMG! Robin Trower greets me this morning with his band’s song: Bridge of Sighs…     

Well, things didn’t exactly go the way I thought they would yesterday, as the dollar got a boost from the dollar bugs, who saw that the writing was about to go up on the wall for a huge dollar decline. It sure wasn’t the data that did the trick for the dollar yesterday, and Personal Income and Spending both increased 0.4%, and Core Inflation only gained 0.2% putting the YTD increase at 1.5%…   I’ve got something for you in the FWIW section today about Consumer Spending, that I think you’ll want to read, so stay with me here…   

The good news this morning is that all the dollar buying yesterday didn’t change things much except for 1 day, as the currencies have fought back in the overnight sessions to trade this morning about in the same place they were yesterday morning… So, a roller coaster ride for sure, but we’re back at the launching pad, and ready to get off this ride…  

And Gold lost $9.40 yesterday, but has gained back nearly $4 of that loss in the early morning trading today.  The price of Oil slipped below $66 in the past 24 hours, and hasn’t seen any reversal of any kind. Apparently, according to Bloomberg, that is, the large reserve withdrawals have ended, and that should be the end of Oil’s rise in price. That may be the case, but I would have to think that if the dollar is headed for an extended stay in the woodshed like I think it will do, then the price of Oil will rally, just on the dollar weakness. 

Well…  last week I highlighted my good friend, the Retirementor, Dennis Miller’s newsletter that was an interview with me… I also invited you to visit his website, and sign up for his free newsletter.  But, I digress here… What I wanted to point out is that in the interview I talked about Treasuries, let’s listen in to what I actually said…   

What could cause a Minsky Moment in bonds? Well, think about this for a minute. The U.S. Fed has been a very large bond buyer since the first round of Quantitative Easing began in 2009. They bought boatloads of both U.S. Treasury bonds and Mortgage-backed bonds. Look at their balance sheet, it increased five-fold to over $4.6 Trillion in 2017. 

The Fed announced a “tapering” in 2015, but they kept buying Treasuries to replace bonds that matured. Late last year they announced that they were going to stop buying bonds altogether. No replacement bonds, no auction window buying.

The question was… “Who is going to take the Fed’s place”? Well, there has been no one, to date, and the 10-year Treasury yield has risen from 2.05% on Sept. 8, 2017, to 2.65% on Jan. 18, 2018. That’s just the beginning, in my opinion!

The Fed may not be the only “no show” at the auction window. China is considering slowing down their Treasury purchases or halting them altogether! Guess who else has been slowing down their Treasury purchases? Saudi Arabia, and Russia… Oh-no! Say it ain’t so, Joe!
This is the Minsky Moment for bonds…no big Central Bank buying, will drive yields much higher. It could easily be followed with another Minsky Moment for stocks. – Chuck Butler, www.milleronthemoney.com   

And then this morning I saw this head of interest rate strategy at Wells Fargo saying the same thing I said last week! Let’s listen in to what he had to say… “Michael Schumacher’s chief concern right now: Who’s going to buy all those extra Treasury notes?

“They [people] are worried about Treasury issuance going up, up, up. You could see an increase in 2018 of 50 percent – maybe more versus last year. That’s got a lot of people very concerned, myself included,” he said recently on CNBC’s “Futures Now.”

He anticipates the Treasury Department will likely announce within days a “pretty significant change” in the way it issues bonds. It comes just as the Fed is shrinking its balance sheet. With less demand coming from the Fed, a fire sale of sorts would increase supply and emerge as the major catalyst causing yields to jump.”   You can find this person’s viewpoint on interest rates further, by going here: https://www.cnbc.com/2018/01/26/treasury-market-fire-sale-could-hurt-bonds-wells-fargo-warns.html      

OK, enough on Treasuries, and I think you got the point here…  

The Fed’s FOMC begin a two-day meeting tomorrow. Time to get out the board games and playing cards… HA!  They will wrap it all up around 1 pm on Wednesday with no rate change… Two days wasted… Or, maybe they’ll discuss the fact that 4th QTR GDP came in at 2.6% instead of the preliminary 3.2% that everyone was gushing about, except me, who knew it would be revised downward…  And the great economist David Rosenberg had this to say about GDP… “The savings rate fell from 3.3% to 2.6%. If it had stayed the same, real PCE would have been 0.8% (annualized) instead of 3.8% and GDP would have been 0.6% instead of 2.6%.”   

WOW! But to me 0.6% sounds more reasonable than 3.2%!  I’m just saying…  

Earlier this morning the Eurozone printed some data, leading off with their 4th QTR GDP figure, which was 2.6%, the same as the 3rd QTR. And a slew of Confidence reports for January, either saw a small slippage or a flat print from the December. So, nothing really to be concerned about here, and I keep my contention that the Eurozone has outperformed the U.S. with regards to GDP the last couple of years. Because if the GDP here in the U.S. was calculated correctly without “adjustments” it would be much lower…   

Speaking of outperforming the U.S. economy… Longtime reader, Bob, sent me this: from the RT.com: Russian economy under Putin: quality of life tripled, and foreign debt fell by 75%!   That’s pretty impressive, and no I’m not a cheerleader for Russia! It’s just that when you see an economy, especially one under the strains of economic sanctions, overcome those obstacles I believe it should be pointed out…  

The problem the Russian ruble has right now, is that most of the world isn’t a fan… The conflict with Ukraine continues, and as long as that’s the case, the ruble will have to look to the price of Oil for its support.  

The U.S. Data Cupboard today will have the Case/Shiller Home Price Index for November, and we’ll see the color of the stupid Consumer Confidence Index for this month….  Tomorrow’s Cupboard is stocked to the top row with data, but that’s tomorrow, and we need to just let tomorrow be… 

To Recap…. The dollar got bought by the bushel full yesterday, but then got sold by the same amount in the overnight sessions, and the currencies are trading in about the same places they were yesterday morning.  Chuck spends an inordinate amount of time on Treasuries this morning. The Fed meets this week, and Gold and Oil both saw slippage yesterday.   

For What It’s Worth… Well, I built this one up, so I hope it doesn’t disappoint… But recall when I kept saying that the U.S. consumer was tapped out? But then along came credit cards… You can find this article here: https://www.zerohedge.com/news/2018-01-29/us-savings-rate-hits-crisis-lows-amid-soaring-credit-card-debt    

Or, here’s your snippet: “Amid soaring credit card use, the tumble in Americans’ savings rate continued in December with a modestly better than expected 0.4% MoM rise in incomes and as expected 0.4% rise in spending (but upward revisions in spending).

For the inflation waters, the Fed’s favorite price indicator, the Core PCE, saw a one-tenth gain to 0.2%, matching consensus, and was up 1.5% Y/Y. Income is growing at 4.1% YoY – the most since Nov 2015 – but spending continues to outpace that growth.

What is odd is that despite the rise in incomes, Americans continue to spend more than they make, which means that the U.S. savings rate continues to slide, and is now not only the lowest since the crisis, but is the lowest since September 2005.

Recall the striking Gluskin Sheff chart we presented a month ago, which showed that 13-week annualized credit card balances in the U.S. had gone “completely vertical” in the last few months of 2017. We now know why: American consumer are officially tapped out.”  

Chuck Again…  It’s nice to see a great firm like Gluskin Sheff come around to my way of thinking!   

Currencies today 1/30/18… American Style: A$ .8094, kiwi .7334, C$ .8115, euro 1.2420, sterling 1.4091, Swiss $1.0715, … European Style: rand 11.8923, krone 7.7060, SEK 7.8732, forint 249.48, zloty 3.3386, koruna 20.3786, RUB 56.29, yen 108.58, sing 1.3103, HKD 7.8187, INR 63.62, China 6.3289, peso 18.62, BRL 3.1569, Dollar Index 89.12, Oil $65.10, 10yr 2.68%, Silver $17.23, Platinum $1,001.95, Palladium $1,086.24, and Gold… $1,348.80  

That’s it for today…  Day 3 of being all by myself was non-eventful, I did finally turn some lights on, and go outside…  Progress… But this allergic reaction on the left side of my face is very ugly, and my left eye is swollen shut, but I don’t see out of that eye so no biggie as far as seeing is concerned. I’m just thankful that it’s not on the right side of my face! I do believe that I totally missed Happy Birthday notes to two of my former colleagues… Our Little Christine, and Chris Gaffney. I apologize for letting those days get past me…  My TV lost its volume, and went silent yesterday, I was watching Robin Meade, and listening to her speak one minute, and the next minute there was nothing! So, I’ve got to figure that one out today! Alrighty then.. The Buckinghams take us to the finish line today with their song: Mercy, Mercy, Mercy…  I hope you have a Tom Terrific Tuesday, and Be Good To Yourself!   

Chuck Butler

A Real, You Know What, Contest By World Leaders…

January 29, 2018   

* Dollar books 7th Week of losses!

* But fights back in the overnight markets… 

Good Day…. And a Marvelous Monday to you! I’ve had a setback after my infusion on Friday, and for the most part, I’ve lived like a hermit all bunkered down with the lights off, and wrapped in blankets.  But, i woke up this morning, and feel much better, so here I am! I guess that because it had been a month since my last infusion, it hit me like a ton of bricks! The Righteous Brothers greet me this morning with their song: Just Once In My Life…  I always love listening to the voice of Bill Medley…  

The dollar finished the week last week with its 7th consecutive week with losses… But there’s been all kinds of gyrations last night, but first let’s review what happened on Friday. One day we had U.S. Treasury Sec. Mnuchin diss the dollar, then the next day, European Central Bank (ECB) President, Mario Draghi, decided to take a shot at Mnuchin (not in name, but you could tell who he was talking about), and the euro slipped a bit, but recovered on the day… Then we had U.S. President, Trump, say the markets misunderstood the Mnuchin comments, and that the U.S. does want a strong dollar… Back and forth… a real you know what contest! In the end on Friday afternoon, the euro had slipped about ¼-cent, but remained above 1.24.

But I have to come back to the you know what contest… These are things that currency traders don’t like, because they are filled with unknowns.. And, on Friday, these currency traders seem to be on board with the Mnuchin statement, and not what Draghi or Trump had to say! But like I said above, the currencies have gone through some gyrations in the overnight markets, and the fact that this week is a week that has a plethora of data here in the U.S. and the possibility of more policy changes, had the Asian traders intrigued with the dollar.  

I’m not that concerned with the what I would call profit taking in the currencies and carrying over to the metals. I think this dollar buying will be short-lived and by the end of the week, the dollar will be booking its 8th consecutive week of losses.  

Why do I think that way, I hear you asking? Well, if the economic data this week is anything like the data we saw on Friday, where Durable Goods Orders beat the expectations, but Capital Goods Order, when you take out aircraft and defense spending, was negative. I don’t know how many times I’ve said this in the past, but it doesn’t matter, because I’m going to say it again, Capital expenditures are the life blood of a growing economy, and without these expenditures, the economy will just muddle along. 

And the Proof is in the pudding, as 4th QTR GDP here in the U.S. fell from the preliminary print of 3.2% to 2.6%… I do believe that when the 3.2% figure printed I said hogwash, and that it would be adjusted downward…  So, I might as well tell you what’s on the economic data print docket this week…    First, today, we’ll see two of my faves, Personal Income and Spending. I don’t think that either of these are going to give the dollar bugs any reason to hold their dollars.  Then we meander through the week with some housing data, and then on Friday, Groundhog Day, we’ll see the BLS’s version of an employment reports in the Jobs Jamboree, and more importantly, we’ll see the color of the latest Factory Orders, which will most likely be weaker than the previous month… 

So, nothing here to give the dollar any love, as I see it…  And that’s why I believe we’ll see the dollar end the week with its 8th week of losses…  Any questions?   HA!  

I read this morning, a report that talked about how with the Aussie dollar’s (A$) surge, that the bears are showing up, as they think the Reserve Bank of Australia (RBA) will do something to halt this surge… There hasn’t been any words from the RBA in recent days, and so I’m not sure why the Bears are so sure this is going to happen?  

The pound sterling had really surged last week especially after their most recent GDP report showed that the U.K. economy had grown faster than expected, but then the trap door was sprung on the pound, and soon the currency was licking its wounds… No matter how strong this currency gets, I’m still not convinced that the BREXIT goings on, aren’t going to weigh heavily on the currency.  Again, BREXIT is an unknown…  

The price of Oil jumped late last week and trades with a $66 handle this morning.  Last week we had all three anti-dollar assets trading with a flyer, but this morning things aren’t looking up for these three… The euro is down, the price of Oil has slipped, and Gold is down $5 in the early morning trading… 

Speaking of Gold remember the “great Gold price reset” that I told you about months ago? Well, it never occurred the way James Rickards explained it would, but there has been more and more analysts talking about this still happening… So, if that’s the case, then these current prices whatever, they are, represent excellent buying opportunities… And if they are all full of baloney, I still believe the buying of Gold right now is a prudent thing to do…  I’m just saying!   

OK, we’ve talked about the direction of the dollar, the anti-dollar assets, and the economic data this week, that’s just about all I have for you today…  But I do believe that the FWIW article will be quite interesting for you, so don’t hit exit just yet, stay with me here…  

To recap…  The dollar ended last week with its 7th consecutive week of losses, but has fought back in the overnight trading, not a strong comeback, as the euro is still above 1.24, and the A$ is trading at 81-cents… It’s big data week here in the U.S. with a Jobs Jamboree taking place on Groundhog Day, which happens to be one of my fave movies!  U.S. 4th QTR GDP was revised downward from 3.2% to 2.6%… Remember all the hoopla over the 3.2% print months ago? Well, where are all those partiers now?    

For What It’s Worth…  This was sent to me be the good folks at GATA, and it appeared on the Reuters sight. It’s about the fines that some bullion dealers will be paying for “spoofing” and it can be found here: https://www.reuters.com/article/us-usa-cftc-enforcement-exclusive/exclus…   

Or, here’s your snippet: “The U.S. derivatives regulator is set to announce it has fined European lenders UBS, HSBC, and Deutsche Bank millions of dollars each for so-called “spoofing” and manipulation in the U.S. futures market, three people with direct knowledge of the matter told Reuters.

The enforcement action by the Commodity Futures Trading Commission (CFTC) is the result of a multi-agency investigation that also involves the Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI), the people said. 

The fines for UBS and Deutsche Bank will be upward of ten million, while the fine for HSBC will be slightly less than that, the people said, without providing exact figures. 

Spokesmen for all three banks declined to comment.” 

Chuck Again…  In case you’ve forgotten what “spoofing is”…Spoofing” is an illegal type of market manipulation that works like bluffing: A trader places big orders for stocks, bonds or futures to get others to think the price is going up or down. Then, in the blink of an eye, the spoofer cancels those orders and puts in opposite orders to take advantage of those traders.  Dirty rotten scoundrels and again, no one goes to jail…   

Currencies today 1/29/18… American Style: A$ .8101, kiwi .7334, C$ .8102, euro 1.2420, sterling 1.4105, Swiss $1.0688, … European Style: rand 11.9592, krone 7.6943, SEK 7.8816, forint 249.08, zloty 3.3855, koruna 20.3668, RUB 56.20, yen 108.67, sing 1.3090, HKD 7.8182, INR 63.51, China 6.3184, peso 18.52, BRL 3.1514, Dollar Index 89.14, Oil $66.14, 10yr 2.72%. Silver $17.36, Platinum $1,011.90, Palladium $1,088.23, and Gold… $1,351.80     

That’s it for today…  I hope you had a great weekend. I’m here all alone, as my beautiful bride went home to visit her grandbabies! So, that made it easy for me to sleep most of the day yesterday, without any noise making going on…  I had some grapes yesterday, that’s it! I’ve got some good news though! Since I was admitted to the hospital last March, I’ve lost over 100 lbs! WOW! Now, if I could lose 100 more, I would be back to playing shape! I’m still HUGE folks so no accolades needed… But remember last year when I was on those steroids, and I kept saying that I felt like the Michelin Man? Last year was not a good year for me in many ways, but mostly health wise…  I got word about 10 days ago, that my former colleague and friend, Mike Meyer, was moving on to a new job… Good luck Mike! I hired Mike 14 years ago, and he was a young man out of college. 14 years is a long time!   It was always Chuck in the office first and then Mike each day and we enjoyed that time together… Oh well, people move on… Shoot Rudy, I did it too!   Blackfoot  The Easybeats take us to the finish line today with their great 60’s song: Friday On My Mind…  Don’t know that one? YOU TUBE it… You’ll love the song!  And with that, it’s time to go! I hope you have a Marvelous Monday and Be Good To Yourself!  

Chuck Butler