Author: admin

August 20, 2018 

* Currencies & metals rally on Friday

* MAERSK says U.S. economy will be hurt from Trade War! 

Good Day… And a Marvelous Monday to you! What a way to turn the season around by my beloved Cardinals, coming home and playing winning baseball in front of the home crowd, has been something so lacking these last couple of years, but that ended last week with a 7-game home stand seeing 5 winners! And just as important, they’ve won 7 series VS teams in a row! That’s how you get to the playoffs… Ok… Today is my beautiful daughter’s birthday… Happy Birthday Dawn! Dawn is a kindergarten teacher, and ever since she was a young girl, the little kids just flocked to her… So, she picked the correct vocation, eh? When she was a little girl, I called her Boo Boo, then Dawnie boo, and then she grew up… I tried like hell to keep her from doing that… But it didn’t work… And now I’m hoping that Dawn’s daughter, my little d (Delaney Grace) never grows up! Dawn always takes the time to call me when I’m alone and see how I’m doing, or if I need anything. That’s my Dawnie boo! Foghat greets me this morning with their song: Take It Or Leave It…

Front and center… I wanted to remind everyone that the Pfennig Replies site crashed, and they haven’t been able to resurrect it yet, so if you respond to the Pfennig, I’ll not see it… and that’s why you haven’t’ received a response… it’s not a case of me just deleting them… I haven’t been getting them!

OK… That’s out of the way… Something strange happened on Friday… The dollar got sold! It was a good day for the currencies and metals… I sure would like to say that was the turnaround, but I get this feeling that it was a day of rest for the market participants that have driven the dollar to near the 97 level of the Dollar Index. I was zapped out most of Friday, so I had to look up what went on… And I found out that the dollar bugs were sent back into the wall boards by a better than expected CPI (consumer inflation) report from the Eurozone… CPI in July was 2.1%… So, all the stoplights have turned green for the European Central Bank (ECB) to begin to unwind their stimulus…

On top of the good CPI report (Good for the markets, no inflation is good with me!) The Eurozone Current Account Surplus widened to EUR 23.5 Billion! This report came with red lights flashing, warning the Eurozone that U.S. President Trump will be coming for some of that EUR 23.5 Billion surplus! And I’m being serious about that folks! The Trade War might have taken a bit of a break in the latter part of the week, but that won’t last long, and I truly expect the Trade War saber rattling will begin again as this week gets started…

Have you ever been to a port city? Or the Panama Canal? The reason I ask, is that if you have you would be very familiar with the company name MAERSK… It’s on just about every ship or container in the port or canal! Well the folks at MAERSK decided to throw their two cents into the comments about the Trade War… And they said that in their opinion, which to me carries a lot of weight, given their business, that the Trade War will hurt the U.S. economy the most. 

I thought long about this comment from MAERSK, and have to say that the U.S. is a country of spenders… But if prices rise too much, first we flock to Walmart, and if prices keep rising, we then stay home. I was doing some research this past weekend, and read a report that highlighted what I just wrote about Walmart…  That when things get hairy in the U.S. economy, Walmart sees increased sales, and when things are looking smooth, they see decreased sales… Interesting don’t you think?  So, keep an eye on Walmart, if the parking lots are filled to the brim… the economy is already well on its way to recessionville. 

I’ll let you all in on a little secret… come in close here so I don’t have to say it too loudly… Ready? Ok, here we go… The Bond guys don’t think much of the Trade War, and what it’s going to do to the economy… In case you haven’t been paying attention, the yield on the 10-year Treasury remains below 3%, at 2.86% this morning… Basically, as you look at this bond maturity, you have to see that the bond guys don’t believe the economy is going to be better than 2.86% can’t handle… think about that for a minute and then come back with questions… HA!

Well, Gold got off the canvas and dusted itself off to gain $10.90 on Friday! It was beginning to look as if Gold was going to stay down for the count last week, but on Friday, it pulled itself up, and the referee waived off the count… China must have thought that enough was enough, eh? Or maybe the Chinese really meant it when they said, “We’re not doing what we’re doing to the renminbi” Remember that one? I was laughing until my side hurt… But maybe they should have said, “We’re finished doing what we’re doing to the renminbi”

Gold is up another $4 in the early morning trading today, so hopefully it can put together consecutive days of gains, and not have Friday be a one and done… 

As I said above, the currencies rallied on Friday, the Big Dog, euro traded up from 1.1370 on Thursday to 1.1444 on Friday… There was a little profit taking in the overnight markets, or selling by the ECB, take your pick, either way the euro has backed off a bit in the overnight markets… 

The Aussie and New Zealand dollars both saw nice recoveries on Friday that held through the overnight trading last night.  On Friday, the Peoples Bank of China (PBOC) allowed a nice appreciation in the renminbi, and again last night… So that makes sense that the A$ and kiwi were on the rally tracks given their biggest customer stopped with the Armageddon actions with their currency…  

It’s going to be a week chock-full-o-data and stuff from around the world… Like Japan will print their latest CPI… The Eurozone will print their latest PMI’s… Canada will chime in with a data print of their own with June Retail Sales (seems a little stale don’t you agree?) and New Zealand will print their 2nd QTR Retail Sales on Tuesday, IWed for us)… there are lots of other prints from the countries around the world taking place this week, but these are the major ones…

Last Friday, Russia printed two very interesting pieces of data. I say that because these data reports from Russia continue to amaze me with how resilient they are in the face of economic sanctions on just about anything that’s Russian. Retail Sales for july were up 2.5%… pretty darn good, eh? And Russian GDP for July Year on year, was up 1.8% from 1.1% the previous month. The Soccer or FIFA World Cup games surely had a positive effect on the Russian economy this summer I would think, so now after the games are over, what happens? And that’s what I’ll be watching… You can bet your sweet bippie on that!

So, Since we’re talking about economic data… The U.S. Data Cupboard is so worn out from last week’s deluge of data, that it’s taking Monday and Tuesday off this week! Yes, no data to speak of… Only the Fed’s Meeting Minutes from the last meeting will print tomorrow. In fact, we won’t see a piece of real economic data until Friday, when Durable and Capital Goods Orders print for July…

Whenever we have a week such as the one we’re about to have here in the U.S. with little or no data for a number of days, the dollar usually gets lost in the shuffle… Oh, but wait! I almost completely forgot, the Fed’s Jackson Hole Boondoggle begins this week! OMG, what was I thinking? Most years, this boondoggle of finance ministers, central bank govs. And others, don’t bring about much movement in the markets… But a few years ago, St. Louis Fed President, James Bullard broke the news about another round of QE was needed… And well, that, my friends was a piece of market making news!

So… I’m not of the opinion that much will shake from the trees at this meeting, but we never know, now do we?

To Recap…  The currencies and metals rallied on Friday, after some strong economic prints from around the world, sending the dollar bugs back to the wall boards… It looks like there was either some profit taking or more  ECB selling of the euro in the overnight markets, but the Big Dog has held a good piece of its gains on Friday…  Gold gained $10.90 on Friday, and is up $4 in the early morning trading today… And Chuck let’s his dear Pfennig Readers in on a little secret… 

For What It’s Worth…  With the U.S. ratcheting up the debt machine and making it have steam coming out of it from working so much, the issuance of Treasuries is astronomical… But there’s a problem… Who’s buying them? The Fed… no… Russia… no… China… maybe… Japan… no… Uh-oh… Well this article talks about that and more and can be found here: https://wolfstreet.com/2018/08/15/who-bought-the-1-36-trillion-of-new-us-national-debt-over-the-past-12-months/ 

Or, here’s your snippet: ““Official” foreign investors – this would be central banks, governments, etc. – and private-sector foreign investors held $6.21 trillion of US Treasury Securities at the end of June, up by $61 billion from a year earlier, according to the Treasury Department’s TIC data released Wednesday afternoon.

But over the same period, the US gross national debt, fired up by a stupendous spending binge, soared by a breath-taking $1.36 trillion. So who bought this $1.36 trillion in new debt?

The largest holder of marketable Treasury securities remains China, whose holdings in June fell by $4.4 billion from May to $1.18 trillion, within the same range since August 2017, despite escalating threats and counter-threats over trade.

But Japan has been systematically reducing its Treasury holdings. They’d peaked at the end of 2014 at $1.24 trillion. In June, its holdings dropped by $18.4 billion from May, to $1.03 trillion, the lowest since October 2011:”

Chuck again… I’ve said this before that the Fed was like Steve McCrocskey from the original Airplane movie… The Fed picked the wrong time to begin to unwind their balance sheet! 

Currencies today 8/20/18… American Style: A$ .7310, kiwi .6618, C$ .7650, euro 1.1415, sterling 1.2742, Swiss $1.0042, European Style; rand 14.5065, krone 8.4605, SEK 9.1834, forint 283.81, zloty 3.7683, koruna 22.5306, RUB 66.99, yen 110.65, sing 1.3717, HKD 7.8495, INR 69.74, China 6.8752, peso 18.89, BRL 3.9100, Dollar Index 96.30, Oil $65.88, 10-year 2.86%, Silver $14.77, Platinum $779.40, Palladium $917.29, and Gold… $1.188.09

That’s it for today…  I can’t believe my daughter is turning… No, I won’t tell you that number, I know better than that… Let’s just say, she’s making me feel old! I’m told by my beautiful bride all the time that I am old… So, that settles that!  I started sending out the invites to the Annual Butler Labor Day BBQ this past week…  I love that weekend, the last of the summer, the start of college football, a gathering of friends and family… And the Big Green Egg working overtime! I’ve done this Labor Day BBQ for almost 20 years now… it’s a Big Deal to me!  Cardinals go to LA tonight I won’t be catching that game on TV, for it will come on at my bed time! UGH! And with that the Beatles take us to the finish line today with their song: I Feel Fine…  I hope you have a Marvelous Monday, and Be Good To Yourself!

Chuck Butler

August 16, 2018  

* U.S. Data Continues to not impress… 

* China & the U.S. meet on trade… 

Good Day… And a Tub Thumpin’ Thursday to you! I’m ready for some Tub Thumpin’, I’ll tell you that! I received a call from good friend Dennis Miller, the retirementor, yesterday. He informed me that he had picked up quite a few new readers after I told you dear Pfennig readers that you should sign up for his letter! I told him that it was good to talk to someone, other than myself! The Hooters greet me this morning with their song: All You Zombies… 

When I hear that song, I’m reminded of the great publisher and writer, Bill Bonner, who refers to things as “zombie”…  I sure with the price manipulators in the metals would go zombie on us!  Yesterday 382,000 contracts were traded in Gold with most of them directing Gold lower by $19 on the day… Whoa! $19? Yes, $19…  Three Dog Night is singing a song on the iPod right now, and they are asking the question, “how can people be so heartless?”  Gold is up $4.25 in the early morning trading this morning though, so maybe it can gain back some of that $19 loss yesterday in today’s trading.  It certainly has been a rough time for Gold enthusiasts like me, these last two months… 

I just can’t get my arms around what’s going on with the dollar bugs… They continue to dance in the streets, while Rome is burning behind them, and they just don’t seem to notice it… Yesterday, the U.S. Data Cupboard was chock-full-o-data and while Retail Sales for July were OK, they weren’t great, and the rest of the data showed more cracks in the economy’s foundation.

The news from the Eurozone has been centered on the Italian bond spreads that we talked about on Monday… The spread between Italian Gov’t bonds and German Gov’t bonds is wide enough to drive a Mack Truck through…  Too bad investors can finally find some yield in a Gov’t bond, only to find out the bond is issued by Italy…  As a reminder of what I said on Monday… The European Central Bank (ECB) is ending their bond buying program, and have already tapered the amount they buy each month, which included many an Italian Gov’t bond… Without the ECB’s support the lower yields of these bonds, the yield will go where it’s supposed to go… higher, to reflect the Italian economy… 

Yesterday, President Trump made a statement that I have to call him out on… He said that the U.S. had always had tariffs… I’m sure he meant since there was trade with other countries and there was a currency to place a tariff on…  I am optimistic about a developing story that could be good for ending this stupid Trade War with China… China is sending Vice Commerce Minister Wang Shouwen to the U.S. later this month for low-level talks. If it goes ahead, it will be the first official engagement since negotiations broke down two months ago.   Bloomberg reported this news and added that the Chinese currency rallied the most in 6 months on the news… 

I’m not sure where they got their info… Yesterday morning, the renminbi was 6.8822, this morning the renminbi is 6.9145…  With the renminbi being a European priced currency, the move from 6.8822 to 6.9145 is a loss folks… I’m just saying… 

Australia printed some data overnight that should lead to a stronger A$… Front and Center is Consumer inflation Expectations which edged higher to 4.0% this month… They also printed their Employment data for July, which saw their Unemployment Rate fall to 5.3% from 5.4%…  Stronger employment, and rising inflation should equal a rate hike…

In the U.K. this morning they saw a stronger Retail Sales report in July than June’s negative -0.2%, with July’s figure printing at 0.7%… That beat the expectations of a 0.2%… So, that’s a good one for the U.K., which hadn’t seen much good data with all the problems of BREXIT still hanging over the economy like the Sword of Damocles. 

The price of Oil continues to slide further down the slippery slope… Oil has a price handle of $65 this morning, and on Monday this week it had a price handle of $67…  I think the price of Oil has gotten caught up in all the price smashing of Commodities, from the Trade War between the world’s two biggest economies. 

Inflation around the world, (well probably not in Japan!) is rising, and Commodities should be rising too, but aren’t. That leads me to believe that there could be a huge explosion of upward prices in commodities once the Trade War gets worked out or ends…  And IF that were to happen the Commodity Currencies of Australia, New Zealand, Canada, Russia, Brazil, S. Africa, etc. should respond accordingly. 

And finally, the stupid productivity report printed in the U.S. yesterday for July, and it showed a gain of 2.9%, which gets highlighted because productivity has averaged 2.6% for the last 10 years…  But I wouldn’t put too much into this increase, for it’s just one month… 

To recap… The currencies continue to be under the spell of the dollar, and the paper short Gold trade were in abundance yesterday as Gold got whacked $19 on the day. Rome is burning, and the dollar bugs don’t care, or haven’t noticed yet…  Good data in Australia, and the U.K. overnight should be pushing these currencies higher, but that’s not happening… UGH!

For What It’s Worth… I want to thank longtime reader Bob, for sending this along, as this is a true FWIW article! it’s about how Gov’t agencies are going to be allowed to alter reports (I thought they already did that! HA!) and it can be found here: https://fas.org/blogs/secrecy/ 

Or, here’s your snippet: ” In an apparent departure from “generally accepted accounting principles,” federal agencies will be permitted to publish financial statements that are altered so as to protect information on classified spending from disclosure.

The new policy was developed by the government’s Federal Accounting Standards Advisory Board (FASAB) in response to concerns raised by the Department of Defense and others that a rigorous audit of agency financial statements could lead to unauthorized disclosure of classified information.

In order to prevent disclosure of classified information in a public financial statement, FASAB said that agencies may amend or obscure certain spending information. “An entity may modify information required by other [accounting] standards if the effect of the modification does not change the net results of operations or net position.”

Agencies may also shift accounts around in a potentially misleading way. “A component reporting entity is allowed to be excluded from one reporting entity and consolidated into another reporting entity. The effect of the modifications may change the net results of operations and/or net position.” See Statement of Federal Financial Accounting Standards 56, FASAB, July 5, 2018 (final draft for sponsor review).”

Chuck again… gotta protect sensitive data right?    I shake my head in total disgust… 

Currencies today 8/16/18… American Style: A$ .7272, kiwi .6587, C$ .7620, euro 1.1370, sterling 1.2699, Swiss $1.0063, European Style: rand 14.4745, krone 8.4625, SEK 9.1966, forint 284.65, zloty 3.7905, koruna 22.5980, RUB 66.98, yen 110.91, sing 1.3762, HKD 7.8493, INR 70.28, China 6.9145, peso 19.02, BRL 3.8837, Dollar Index 96.57, Oil $65.01, 10-year 2.88%, Silver $14.60, Platinum $780.25, Palladium $863.50, and Gold… $1,179.11

That’s it for today…  I received a text yesterday from my former colleague and friend, April Showers… She sends me a text every now and then asking how I am… That’s so sweet of her to do… Thank you April Showers! How about those Cardinals? 8 in a row! If the front office had only listened to me and made the changes they made last month earlier this year…  I’m just saying…  In 1964 it was a young Lou Brock, in 1982 it was a young Willie McGee, in 1985 it was a young Vince Coleman, and this year it will be a young Harrison Bader that leads the team to great heights! Chris Stapleton takes us to the finish line today with his song: Tennessee Whiskey…  And it’s time to say goodbye for today and this week… I hope you have a Tum Thumpin’ Thursday, and remember to Be Good To Yourself!

Chuck Butler

August 15, 2018 

* The dollar bugs are still dancing in the streets! 

* Russia prints a very strong IP report… 

Good day… And a Wonderful Wednesday to you! I’m late, I’m late, to a very important date! I apologize for the tardiness of the letter today. I was talking to my wife on Sunday, and telling her that I was worried about being able to wake up on Monday morning to write, because I had been sleeping so soundly (for the first time in eons!) Well, Monday was no problem, Tuesday I fought it a bit, and this morning? The sleep won… Another Cardinals victory last night, they’ve finally lassoed momentum, and it’s on their side…  The Moody Blues greet me this morning with their song: I Know You’re Out There Somewhere… 

Some might have thought when there wasn’t a Pfennig in their email box early this morning that I had decided to find a big rock and crawl under it and hide, from all this dollar buying…  But it hasn’t come to that… yet that is… HA!  Seriously, I’m a Big Boy, I’ll face it and spit into the wind! For I know that it’s all going to come crashing down at some point… It’s like a weight lifter on steroids… The crash isn’t pretty, and it won’t be with the dollar… But, it sure seems a little off base to talk about that with the dollar kicking sand in the face of the currencies and metals. 

The price manipulators took a breather yesterday, after the $18 whacking they gave Gold on Monday. But it does appear that they are back at it this morning in the early trading with Gold down nearly $7 already. 

Today is the BIG Day for the U.S. Cupboard and first out of the chute this morning will be Retail Sales and with the letter going out so late this morning, we already have the numbers on July’s Retail Sales, and they were better than expected, thus being about the only piece of economic data that has printed better than expected for July. Retail Sales grew 0.5% in July, which is OK.. not great, especially for a country of spenders like the U.S. but given the rot on the vine of other data prints so far for July, this was better than the average bear… 

Speaking of a country of spenders… Household Debt, as measured by the Fed Reserve, grew to $13.29 trillion in Q2 of 2018, 3.5% higher than a year earlier. I know, I know the propeller heads like to point out that there are more people in the country… But come on you’re telling me that there was an increase so great that offset all the deaths in the country, in one year to skew the data?  I’m not buying it!   Which is something that U.S. consumers sure didn’t say in in the 2nd QTR…  Here’s the breakdown of the expenditures…  (I got this from zerohedge.com) 

Mortgage balances-the largest component of household debt-rose by $60 billion during the second quarter, to $9.00 trillion. Credit card debt rose by $14 billion to $829 billion; auto loan debt increased by $9 billion in the quarter to $1.24 trillion and student loan debt hit a record high of $1.41 trillion, an increase of $2 billion in Q2.  

The U.S. Gov’t’s debt is $20.787 Trillion, the States have a mountain of debt, and so consumers have just done what their leaders have done, and run up HUGE amounts of debt…  This can’t end with rainbows and lollipops folks… Remember 2007 & 2008?  I’m just saying… 

The Trade War continues to be tit-for tat, I jump, you jump, scenario that I’m thinking the Chinese are wishing they hadn’t decided to fight the bully on the street… The Chinese economy is already showing signs of fatigue, and the Chinese Gov’t announced yesterday that they would increase small-business lending and increase infrastructure investment to help offset the impact.  

What have I always told you was the Ace in the hole that China had that most other countries didn’t have? A HUGE Treasure Chest of reserves that they could allocate to smooth out bumps in the economy… And that’s what we’re seeing here with the announcement they made yesterday… But here’s the problem with this… It’ll take some time to make a difference and in that time things are going to get touchy in the Chinese economy… 

The Treasure Chest of reserves will go a long way toward smoothing out the economy, but the Chinese have to be proactive with it, and not wait for a fire to start before they apply water… If they see smoke, it’s time to act, and may be too late then! 

This morning Russia printed a strong Industrial Production number for July on a year on year basis…  The consensus was for a rise of 2.6%, but that consensus was beaten handily with a 3.3% print… The ruble saw a bit of love on the data print. The ruble has been beaten down severely during this Emerging Markets currency contagion. So, any love it can get is helpful… 

I see on Twitter that the great economist, David Rosenberg, has noticed what I was talking about yesterday, the rot on the vines of the Emerging Market Currencies… here’s David on Twitter… “Turkey is not the only country who’s currency is melting away. The real is off 21% from its nearby highs. The rand is off more than 20%. The forint has collapsed 13%. The zloty has sagged 12%. The rupiah is down more than 9%… the Singapore dollar, Malaysian ringgit, Thai baht and Taiwan dollar are all down 5%-6% too. The contagion is already here, and chances are slim it stays in the FX market alone.”  

Have I told you how much I enjoy Twitter? I don’t get into all the who’s doing what and what have you, I only use it to follow economists who love to post things on Twitter, that I can’t get any longer without a Bloomberg machine…  Talking about Twitter though, reminds me it has been a month of Sundays since I last posted a Tweet… UGH! 

Most of Europe is on holiday today, as in the Catholic Church it’s Assumption Day… Did I ever tell you that I was brought up in the Catholic Church? Back in the day when they did mass in Latin…  So, I remember bits and pieces of what was taught back in the day… Not much, but some! 

The U.S. Data Cupboard has more data for us today, so there you go! It’s a data palooza! 

To recap…  Chuck’s late, Retail Sales for July has already printed, and the letter is very tardy! The dollar continues to dance in the streets and beat up on the currencies and metals, but Chuck doesn’t think it has that “much” left in its tank… We’ll see, eh?  Russia prints a very strong Industrial Production report, and China makes an announcement on where they will spend money to smooth out the economy… 

For What It’s Worth… Since Gold is seeing all this selling these days, I thought this article that I first saw on Ed Steer’s letter and then in a review of what’s hot on the Bloomberg sight… it’s about how some of the best known investment gurus are staying with Gold through this selling and can be found here:https://www.bloomberg.com/news/articles/2018-08-13/billionaire-dalio-s-bridgewater-maintains-holdings-in-gold-etfs

Or, here’s your snippet: “Billionaire hedge-fund managers John Paulson and Ray Dalio stayed loyal to gold even as an investor exodus sent prices of the metal tumbling.

As of June 30, Paulson & Co. kept his stake in SPDR Gold Shares, the largest exchange-traded fund backed by bullion, at 4.3 million shares. Dalio’s Bridgewater Associates maintained its 3.9 million shares in GLD, and 11.3 million in iShares Gold Trust, the second-largest, according to regulatory filings.

ETF investors turned sour on gold in the three months ended in June, with more than $1 billion exiting SPDR Gold and the iShares fund posting its first quarterly outflow since 2016. The flight from the funds has continued, with holdings in all bullion-backed ETFs tracked by Bloomberg shrinking to the smallest in six months.

The metal’s haven appeal waned on a strengthening dollar and a rally in equities, sending prices down 5.5 percent in the period. Robust U.S. growth bolstered the case for the Federal Reserve to keep raising borrowing costs, adding to headwinds against the non-interest-bearing asset.”

Chuck again… I wonder IF it’ll be known should they decide to sell?

Currencies today 8/15/18: American Style: A$ .7226, kiwi .6560, C$ .7633, euro 1.1325, sterling 1.2705, Swiss $1.0032, European Style: rand 14.5716, krone 8.4265, SEK 9.1805, forint 286.52, zloty 3.8193, koruna 22.6945, RUB 66.84, yen 111.00, sing 1.3797, HKD 7.8497, INR 70.69, China 6.8822, peso 19.09, BRL 3.8708, Dollar Index 96.83, Oil $66.40, 10-year 2.87%, Silver $14.81, Platinum $780.42, Palladium $873.86, and Gold… $1,187.30

That’s it for today… it’s only been 9 days but it seems like longer that I’ve been down here by myself… With this time of year not being high on people’s list of places to go, the building is pretty empty, which means I have the pool, the hot tub, and the deck to myself! But most days I find myself inside at my laptop reading and researching stuff… I went for a drive yesterday afternoon. I like to explore parts of the area that I haven’t seen in all my years coming here… I first came to this area in 1998, So twenty years!  The band, ACE, takes us to the finish line today with their song: How Long…  a one hit wonder, but the singer: Paul Carrack went on to fame and fortune with other groups. And with that, it’s high time I got this out the door! I hope you have a Wonderful Wednesday and remember to Be Good To Yourself!

Chuck Butler

 

August 14, 2018 

* Gold gets whacked again! 

* Is Turkey the 90’s version of the That baht?

 

Good day, and a Tom Terrific Tuesday to you! Well, I was just checking the scores from last night’s baseball games, and was pleasantly surprised to see that my beloved Cardinals had rallied to win on a walk off homer in the bottom of the 9th last night…  WOW! I had long gone to bed and missed it all, but will see it on the replay this morning. When you’re on the East Coast, like I am for a while here, those games start so late for me… And next week, I see the Cardinals will be on the West Coast… Forgetaboutit! I’ll check the score the next day! Billy Stewart greets me this morning with a perfect song for a summer day… Summertime… 

Yesterday afternoon, I checked on the currencies and noticed that the euro had rallied a little bit and was trading over 1.14… But then Italy went to Twitter and all hell broke loose! Claudio Borghi who is the head of the budget committee in Italy’s lower house, stressed that not only is Italy’s spread with German bonds widening, but also the ones of other nations like Spain are doing so. He added that “either the ECB will provide a guarantee or the Euro will be dismantled” as “there is no third option.”

Italy is demanding that the European Central Bank (ECB) maintain the thin spreads between German bonds and Italian bonds…  Well, that’s not going to happen folks… The ECB has no interest in maintaining each country’s yield curve! And think about this for a moment, the ECB has already announced a reduction of bond buying, and how they intend to end the bond buying altogether by the end of the year… That means the support for Italian bonds is going away, and it will be natural for the yields to rise in order to attract investors.  

And it does no one any good whatsoever to make statements about “dismantling the euro” when you know in your heart of hearts that’s not going to happen, so why make the noise? Italy just needs to cool their jets… They don’t need to apologize, although that would be nice, they just need to shut the hell up and go back to the beach… 

I was putting the finishing touches on this week’s DTL piece yesterday, and went into a long discussion about the Big Dog euro, and how it got that name from me, etc.  Something new to those readers, but something borrowed and blue for you longtime dear readers, eh?  The Big Dog has been neutered by all this dollar buying… But it will change, it’s just a matter of time before all this debt in the U.S. and weak economy come crashing down on the dollar… Until then though, we have to put up with the dollar kicking sand in the Big Dog’s face… 

I know I wrote about this yesterday, but I wonder just how many of you read it and said “whoa this is getting scary again” I’m talking about the falling mortgage apps that I mentioned yesterday…  here’s what I actually said… ” just last week it was announced that Mortgage apps sank 3% in the Aug 3rd week, down now for four weeks running, and the YoY trend has collapsed 17% from year-ago levels.”    I will bet a shiny quarter that you didn’t hear that new on the  TV or radio… And you would have to do a deep dive search on the internet for the news…  And that’s all I have to say about that!

Besides the news from Italy, the other BIG news for the currencies concerns the Emerging Markets currencies, which are seeing the contagion selling that’s rooted in Turkey… I’ve long explained how the Emerging Markets currencies all get lumped together when one of them goes bad… And the selling has reached the Russian ruble, the S. African rand and so on… I read an article yesterday calling the Turkish Lira “the Thai baht of the 90’s”…

And since I was writing the Pfennig back in the 90’s I had a first row view of the Asian currency crisis that had the Thai baht at ground zero… And so it does seem that Turkey is this era’s Thai baht, and sits at ground zero of this Emerging Markets currency selloff. 

The Trade War is really having a negative effect on the Emerging Markets currencies.  And the tent revival we were seeing in Global Growth last year, has come crashing down on us… Hopefully you were able to get out from under that tent before it came crashing down! 

Of course Russia rubles are being battered on a couple different fronts… First, we have the Emerging Markets meltdown, and second we have the latest sanctions on their economy by the U.S.  I have been very impressed with Russia’s ability to take a punch and not punch back… At this time, the U.S. has placed sanctions on everything Russian, and still nothing in retaliatory words or actions by the Russians… Something’s not right here, folks… There has to be something BIG planned by the Russians because they have never been a “yes sir, may I have another” kind of country… 

There’s a good article on the RT website this morning that talks about what Russia could do to retaliate and can be found here: https://www.rt.com/business/435760-russia-response-us-sanctions/

What the hell happened to Gold’s price yesterday? The shiny metal was whacked by $18!!!! What did Gold do to deserve that treatment? Well, the renminbi was weakened again, and so like I told you yesterday, when I said that I didn’t think the price of Gold had bottomed out yet, as long as there is a Trade War and China is offsetting tariffs with a weaker renminbi and Gold price. 

There’s a report this morning that says that Gold imports in India are surging… And why not? The price of Gold has sunk to new cycle lows, and if you are in the market for more Gold, it’s your lucky day!  I hope that India sends a Thank You Card to China… 

The U.S. Data Cupboard is still on its mini-vacation, but that will end tomorrow, when a truck load of data will print, so we need to get ready for that, because I doubt seriously that any of it will be good for the U.S. dollar, that is as long as fundamentals are used in pricing currencies… 

To recap…Italy was completely out of line yesterday with comments about dismantling the euro, if the ECB doesn’t maintain the spreads between German and Italian bonds… Chuck doesn’t side with the Italians on this, and tells them to cool their jets!  Gold got whacked by $18 yesterday, and Chuck wonders if India has sent a Thank You Card to the Chinese for that cheaper price in Gold?  And the Emerging Markets currencies are being brought down by Turkey’s lira… Is this a 90’s style, Asian Currency Crisis, brewing for the Emerging Markets? Maybe… 

For What It’s Worth…  Ok, before you go on, you must pledge to put away the sharp objects… Finished with that? Ok… this is the economic collapse blog, so you have to take it with a grain of salt, but the problem here is that they are talking about all the things I’ve been talking about, and I sure hope you don’t take what I’m saying with a grain of salt! HA!   Anyway, this is their 10 numbers that are very scary for the U.S. and can be found here:http://theeconomiccollapseblog.com/archives/10-numbers-that-prove-that-americas-current-financial-condition-is-a-horror-show

Or, here’s your snippet: ” America’s long-term “balance sheet numbers” just continue to get progressively worse. Unfortunately, since the stock market has been soaring and the GDP numbers look okay, most Americans assume that the U.S. economy is doing just fine. But the stock market was soaring and the GDP numbers looked okay just prior to the great financial crisis of 2008 as well, and we saw how that turned out. The truth is that GDP is not the best measure for the health of the economy. Judging the U.S. economy by GDP is basically like measuring the financial health of an individual by how much money he or she spends, and I will attempt to illustrate that in this article.”

Chuck Again… yes, I totally agree, but until the rest of the market and its participants agree, we as  a country will continue to go skipping along this road to ruin, oblivious to the dangers ahead… 

Currencies today 8/14/18… American Style: A$ .7460, kiwi .6595, C$ .7635, euro 1.1405, sterling 1.2785, Swiss $ 1.0086, European Style: rand 14.06, krone 8.3560, SEK 9.0927, forint 283.44, zloty 3.7705, koruna 22.5393, RUB 68.13, yen 111.00, sing 1.3737, HKD 7.8497, INR 69.79, China 6.8814, peso 18.93, BRL 3.8775, Dollar Index 96.34, Oil $67.85, 10-year 2.90%, Silver $15.03, Platinum $803.60, Palladium $893.75, and Gold… $1,194.71

That’s it for today… What’s gotten into my beloved Cardinals? They are actually playing good baseball again! Good defense, base running, fundamentals, pitching and hitting… Makes you wonder what took the front office of the Cardinals so long to make the managerial change? Maybe they learned a lesson about hiring your best buddy, that it sucks if one day you have to fire him… Maybe…  The team had more excuses for their sloppy play than Carter has liver pills, but that has stopped, and we’re back to real Cardinals baseball now… YAHOO! Oh, and Carters doesn’t have liver pills any longer! Remember when you used phrases like that? Like “all the tea in China”, and others? I’ve tried to keep some of them going in the Pfennig though the years, like “heavens to Murgatroyd” and others… Good friend Craig sent me a note with a list of all those old phrases that nobody uses any longer… Pretty cool… And at this point I bet you would think it was real swell, if I finished! HA!  The Spencer Davis Group takes us to the finish line today with their song; Gimme Some Lovin…  Now, please go out an make this a Tom Terrific Tuesday, and remember to Be Good To Yourself!

Chuck Butler

 

 

August 13, 2018  

* The dollar bugs continue to dance in the streets!

* But the U.S. economic data is weakening… 

Good Day… And a Marvelous Monday to you! What a very nice vacation I just finished up having! Simply marvelous! Lots of fun, with a heaping helping of rest and relaxation! Good for the body and soul, especially for a chemo patient! I remain in S. Florida, for an extended stay, as I need to be here while some work is being done on our new place. I feared this would happen, so I did pack my laptop upon leaving 2 weeks ago… Since I left, we celebrated my darling granddaughter’s birthday… Little d, or Delaney Grace turned 11 this year… She was born the same summer I was diagnosed with cancer, so I’ll always know how old she is! Funny, I actually kind of don’t remember much from before Little d was around…  The Beach Boys greet me this morning with their song: Surfer Girl… 

Alrighty then… I guess the old thought/ saying they used to have on the trade desk, that when Chuck was away, the currencies rallied, just doesn’t hold water any longer, now that I’m no longer on a trade desk…  The currencies continue to be ram rodded by the dollar bugs, who are still of the belief that these interest rate hikes are going to go on forever…  They are so euphoric over the prospect of endless rate hikes, that they’re missing the weak data that’s already showing up across the board… 

Yes, it’s tru, it’s tru, I did see a putty tat! And on top of that I have seen most of the data that’s printing for July coming in and not meeting the expectations and some being very weak…  And… In a case of “I told you so”… I read a report last week that showed that only 8% of the people that received a tax cut are going to use their money to make a major purchase…

And on the flip side, Corporations are doing just like I said they would do with the tax savings, they’re buying back their own stock…. So, there’s no “happy days are here again, the skies above are clear again” for the economy from the tax cuts like Americans were sold, I mean told…  

On top of that… guess what else is beginning to show signs of fatigue from the rate hikes already in place?   Housing…  I don’t make this stuff up folks…  just last week it was announced that Mortgage apps sank 3% in the Aug 3rd week, down now for four weeks running, and the YoY trend has collapsed 17% from year-ago levels. Oh, the humanity!   And wait till you get a load of what I have to tell you about the recent Jobs Jamboree!  

On August 3rd, 2018, the Labor Department’s Bureau of Labor Statistics (BLS) reported that July payrolls rose 157,000. However, in their back door CES Birth/Death report, where they reveal how many of the 157,000 jobs were an estimated number of new jobs they hope were created by new businesses they think might have started up in July, net of jobs lost from businesses that closed their doors in July, they reported that 146,000 of the 157,000 were in fact a guess. That means the U.S. Economy generated 11,000 “counted” new jobs in July…   Now, I’ve been through all this birth/death model stuff before, but if I were ever to have a BLS official on the Butler Patio, I would ask them this… “Why do you make these assumptions that there were more business births, than deaths, when a couple of years ago, it was proven that all the while the BLS was adding jobs each month from thin air, that there were more business deaths than births for the last 10 years! So, why may I ask do you do this?

So, I’ve gone through all this so early today, because I’ve had time to think about these goings on… The dollar bugs dancing in the street, while Rome is burning in the background…  It’s there for everyone to see, but right now, the dollar bugs aren’t paying attention to that, and so, we have a stronger dollar… 

Mind you, I didn’t say, “Strong dollar”, because it’s not really strong per se, given the fact that even with the euro falling to a 1.14 handle, the single unit is still stronger than the dollar…  keep that in mind, as you scroll through the currency roundup today… 

Of course the leaders of the Eurozone, Australia, New Zealand, Switzerland, Japan, and others could make this easier for their respective currencies to stand up to the dollar, if they would do something about their interest rate structure!  I’m really singling out the Eurozone, Australia and New Zealand here folks…   It seems like we’ve been waiting forever for the European Central Bank (ECB) to get off their duffs and begin to reverse their stimulus policies…  It may never happen… It’s like a watching a pot of water on the stove, and waiting for it to boil… 

And here’s where I put my tail between my legs and wimper on home, hoping no one stops to give me whack! Last year about this time, I wrote about all the goings on in New Zealand, and how the Reserve Bank of New Zealand (RBNZ) were making overtures about the beginning of a rate hike cycle that could begin in the first quarter of 2018… I jumped all over those overtures to say that this was an opportunity for investors to get in before the rate hike occurred…  Well, we got in… and we’re still waiting for that rate hike…  And, unfortunately for us, the RBNZ stated last week that they don’t see rates changing this year or next year… Wait, What?  How did they go from what was believed last year at this time, to what they believe now?

Central Banks, and Central Bankers… If I ever had the opportunity to meet up with them in an alley! No wait, Chuck, you’re a broken down, partially handicapped old man, that’s had his strength zapped by 11 years of 5 different cancer medicines, you’re in no condition to “meet up with someone in an alley!”  Oh, thanks… Boy, that’s just what I needed a stark reminder of how the mighty have fallen…  OK… let’s say, that I would yell at them! HA!

Has Gold bottomed out? The recent trading of the shiny metal seems to indicate that could be the case, but I’m reminded of what I wrote about before I went on vacation, and that is that China had taken control of the COMEX and was pushing down the price of Gold along with their renminbi to offset the tariffs, which would lead me to believe that as long as the Trade War is going on, Gold will be subjected to further price manipulation by the Chinese, who get the wink and nod from the U.S. Gov’t to do so… 

And to further my thought… Gold is down $8.50 in the early morning trading today, so the daily beatings may have taken a break last week, but they’re bound to pop up again… 

I had to laugh when I read an article this past weekend, that the GATA folks sent me, that said that China says it’s not doing what it’s doing to the renminbi…  HAHAHAHAHAHAHAHAHA! What? do the Chinese think we’re all a bunch of dolts, and twits that don’t understand that their currency is a managed currency and if it gets weaker they made it go weaker?  I laughed so strongly that I spilled my coffee… 

They’re not doing to the renminbi what they are doing…  You have to laugh, right? 

The price of Oil has backed off it’s highs from last month, and has settled into a $67 -$68 range… Not the higher levels I thought we would see while the price of Oil was running higher last month, but still pretty good, compared to its slumped price of a couple of years ago. Have you heard about this new kind of Oil? Brandt Oil? It supposedly is chock full-o-energy that allows a car to get ultra-improved gas mileage…  Can’t wait for that take place, because I’ll be down the road at the Lincoln dealership waiting for my new Navigator to pull up for me to drive away! HA! 

The U.S. Data Cupboard is on a brief vacation the first two days this week, but on Wednesday, the Cupboard explodes with economic data! We’ll see the likes of Retail Sales, Industrial Production, Capacity Utilization, Unit Labor costs, Productivity, and more! All in one day! WOW!  So, with no real data today and tomorrow, the dollar will continue to be well bid… 

To recap… The dollar bugs continue to dance in the streets… But Chuck is pointing out many pieces of data that are beginning to show signs of fatigue from the already in place rate hikes… The price of Gold has appeared to have bottomed out, but Chuck thinks that’s a head fake… And what’s with this new kind of Oil that Chuck’s talking about?

For What It’s Worth… Well, I’ve talked and talked and talked about how debt is slavery through the years, and I’ve been tracking this Consumer Credit (read debt) data each quarter with a keen eye on the increases… Well, this article spells all this out with a nifty graph so you can see the increase and not just read numbers and get perfectly numbed by them… It can be found here: https://wolfstreet.com/2018/08/08/the-state-of-the-american-debt-slaves-q2-2018/

Or, here’s your snippit: “Total consumer credit – or less soothingly, consumer debt – rose 4.8% in the second quarter from a year earlier, or by $176 billion, to $3.87 trillion (not seasonally adjusted), the highest ever, according to the Federal Reserve. This includes credit-card debt, auto loans, and student loans, but not mortgage-related debt. Given how passionate Americans normally are in spending money they don’t have – that 4.8% increase is moderate: In 2011, increases exceeded 11%.”

Chuck Again… I love it when you can pull data right from the Federal Reserve… They counted the beans but apparently don’t pay attention to them, eh?

Currencies today 8/13/18… American Style: A$ .7275, kiwi .6575, C$ .7605, euro 1.1388, sterling 1.2750, Swiss $1.0055, European Style: rand 14.4310, krone 8.3735, SEK 9.1520, forint 284.80, zloty 3.7840, koruna 22.5456, RUB 67.57, yen 110.35, sing 1.3765, HKD 7.8496, INR 69.82, China 6.8465, peso 19.23, BRL 3.8683, Dollar Index 96.42, Oil $67.61, 10-year 2.86%, Silver $15.18, Platinum $813.75, Palladium $896.68, and Gold… $1,202.05

That’s it for today… I’d like to say it was good to be back in the saddle again, but I’ll leave that for you to decide! I wasn’t keeping track of the actual days and I completely allowed one of my long time friends’s birthday slip by… Happy belated Birthday, Mike…  We’ve known each other and have remained good friends since the 2nd Grade… Lordy that was a long time ago! Speaking of a long time ago… This month in 1969, the Beatles were breaking up, and I was in 3 a-days football practices, man was I in some kind of shape back then! I often wonder just how I lost all of that, as I dip a chocolate chip cookie in my coffee… HA!  R.E.M. takes us to the finish line today with their song: Drive…    I saw this band live back in 1995, they were really hot back then…  I hope you have a Marvelous Monday, and remember to Be Good To Yourself! 

Chuck Butler

July 25, 2018 

* Currencies can’t find a bid on Tuesday

* Subsidies to offset tariffs?

Good Day… And a Wonderful Wednesday to you! I’m sure hoping that my time away from home for the next two weeks, is better for my sleep time! Because I’m tired of what’s been going on here these nights! Yes, the day will finally arrive very early tomorrow morning when I board a plane going south! And this year, the whole family is going to be there with me! Usually it’s Andrew, Rachel and Braden, along with Alex that go with us this time of year. Dawn, Jerry, Delaney and Everett, usually go in the spring for Spring Training games, and warm weather. But this year, Dawn & family are going too! It’ll be a crowded little condo that we own, but we’re all family, so who cares, right? Jr. Walker and the All-Stars greet me this morning with their song: What Does It Take… (love that song!)

For my last Pfennig before vacation, I’m going to be nice and sweet, no harping on or calling people dolts, including myself! No complaining, no whining, no Chuck being Chuck… But more like Chuck when he was courting Kathy, all sweet, and lovey dovey! HAHAHAHAHAHA! So, let’s get to the meat of this letter today!

The currencies couldn’t find any buyers yesterday, and the euro dropped below 1.17 once again. And Gold didn’t do much better, after starting the day up $2, it ended the day down 10-cents… Yes, that’s what was left of the early $2 gain, just one thin dime… 

I am going to point out something that’s worrisome to me regarding the currency was last around this level back in January of 2017, and that was when there was a flight of capital flow out of China… A lot of observers, including me, thought that China would devalue the renminbi at that point, but they didn’t…  And a couple of weeks ago, it appeared that they were finished with this round of weakening the renminbi, but that was just a pause for the cause, apparently…  Talk about currency manipulation! But they have a managed currency, one that doesn’t float, so they can do with it what they want, as long as they realize that a weak currency invites inflation into the economy… 

I was sitting in front of my TV yesterday, for a short period of time, and while doing that, a blurb came across the screem that said that president Trump had announced a subsidy bill for billions of dollars to farmers that will be hurt by the trade war… He then tweeted that “tariffs are great!” Just don’t tell that to any company that gets parts from overseas, like Harley Davidson, Whirlpool, and others… tariffs aren’t so great for them!

So, that’s how it’s done I guess… get in a trade war, and then have tax payers pick up the bill for the subsidies to those hurt by the Trade War! OK, Chuck settle down, you said lovey, dovey today, remember? Yes, I do, but I want you all to think about that.. Your tax dollars being spent that way… Wouldn’t you rather have them spent on new bridges and roads, Fire Houses, etc.? But that’s what happens when you start a Trade War… unintended consequences…

Today, a delegation from the European Union (EU) comes to Washington D.C. to talk to President Trump about ending this Trade War with them. Jean Claude Juncker the EU Commission’s President, said that if no resolution to these tariffs can be found that the EU is prepared to retaliate the U.S. tariffs… So, I guess we want to hear later today that the U.S. and EU negotiated an agreement… Otherwise, that Beemer you were hoping to buy come fall, is going to be more expensive than you planned! 

A dear reader, (thanks Dave!) sent me a link to an article that was about China taking control of the direction of Gold away from the COMEX… OK, I’ve thought long and diligently on this, and I tend to agree with the writer’s theory that the Chinese are not only pushing their currency, the renminbi, weaker to offset tariffs, but also the price of Gold, to keep commodities from getting to high priced while this Trade War is going on. You should see the graph that Gold Guru, Omar Ayales sent me that showed the movement of Gold’s price and that of the renminbi… Talk about moving in tandem! So, Gold get’s pushed down in yet another of the unintended consequences of the Trade War…

Where will it stop? Well, according to the article, it appears that $1,174 has a target on it… That’s another $50 bucks or so, from where we are this morning… I don’t know if I can stand to watch it get taken down like that.. But if that’s what it’s going to be, then so be it… I will batten down the hatches with my Gold & Silver, and expect you do the same, for we all know these two metals are not going to zero value, and that these drops just bring us excellent buying opportunities…

Alrighty then, that brings us to the section that talks about U.S. data…  In the U.S. Data Cupboard yesterday, we saw the Markit version of a PMI index tick higher in July from 55.4 last month to 55.5 this month, so not a great or strong move forward, but no real signs of the Trade War interfering here yet. Today’s Data Cupboard will show us the June New Home Sales… On our Marvelous Monday June’s Existing Home Sales came in weaker than the previous month’s total… Are those cracks in the foundation? I guess we’ll have to keep an eye on that one, eh? 

Tomorrow’s Data Cupboard will have the June print of Durable and Capital Goods Orders, which should go in line with the rest of the data that has printed for June and be stronger than the May print, which for Durables was negative! 

To recap…  The currencies couldn’t find a bid yesterday, and lost some ground, while Gold was only able to eke out a 10-cent gain. Gold is up more than $6 in the early morning trading today though…  Trump announces subsidies for farmers hurt by the Trade War, and Chuck has a problem with the whole scenario… But he just points it out today, as he is all lovey dovey today!

For What It’s Worth…  Ok, since the news this morning on Gold and it’s price going forward for now, wasn’t so good, this article from Zerohedge.com seems to be bang on time! And it can be found here: https://www.zerohedge.com/news/2018-07-21/case-gold-not-about-price

Or, here’s your snippet: “Rather than long-term, ever-higher, onward and upward, we see strictly defined periods of extreme volatility. Indeed, it appears almost cyclical.

And our previous total return of 4,400 percent for the forty-year period August 1971 to August 2011, is reduced to 900 percent. Even so, that is the equivalent of a 6% average annual return, net of inflation. Which is huge.
(In case you are interested, the average annual return for the S&P 500 – with dividends reinvested – for the same exact time period, is 5.13 percent.

That relatively small differential on an annual basis is magnified considerably when you compare cumulative total returns: Gold at 900% vs. S&P 500 at 639%)

So, does the nine hundred percent total return/6% annual return represent a profit? Yes, most definitely. Net of the effects of inflation, the price of gold increased ten-fold; all of which represents added value. Here’s why…

In 1971, the cost for one loaf of bread was $.24. The average cost for one gallon of gasoline was $.36. With gold at $42.00 per ounce, you could purchase one hundred seventy-five loaves of bread or one hundred seventeen gallons of gasoline (or some combination of the two).

Forty years later, in 2011, the average cost for one loaf of bread was $2.42; and one gallon of gasoline was priced at $3.52. Hence, again, using only one ounce of gold (this time priced at $1900.00 per ounce) you could purchase seven hundred eighty-five loaves of bread or five hundred thirty-nine gallons of gasoline.”

Chuck Again… The title of the article is: The Case For Gold Is Not About The Price…  of which I wholeheartedly agree! It’s a store of wealth and protection from raging inflation… 

Currencies today 7/25/18… American Style: A$ .7415, kiwi .6812, C$ .7620, euro 1.1693, sterling 1.2155, Swiss $1.0079, European Style: rand 13.2470, krone 8.1660, SEK 8.7980, forint 278.86, zloty 3.6795, koruna 21.9458, RUB 62.98, yen 111.10, sing 1.3624, HKD 7.8451, INR 68.69, China 6.7995, peso 18.82, BRL 3.7638, Dollar Index 94.51, Oil $68.40, 10-year 2.94%, Silver $15.59, Platinum $841.61, Palladium $931.20, and Gold… $1,231.13

That’s it for today, this week, and for the next two weeks! This is the vacation where I don’t even take my laptop with me! It’s my opportunity to “get away” from the markets… Another gem of a game pitched by a different rookie pitcher for my beloved Cardinals last night, this time the Cardinals were able to win the game! Day game today! YAHOO! Love day baseball, the way it should be played all the time! Well, it’s that time to say goodbye for two weeks… The late great Alvin Lee takes us to the finish line today with a live version of his song: Going Home… Alvin Lee was a great guitar player, and died too early in life, when he checked into a French hospital for a simple procedure, and his life ended… I still say his performance at Woodstock was one of the best there!  And with that, I’m outta here… I hope you have a Wonderful Wednesday, and please remember to Be Good To Yourself!

Chuck Butler

 

 

 

 

July 24, 2018

* Currencies and metals give back most of their Friday gains

* A check on Russian fundamentals on the docket today… 

Good day… And a Tom Terrific Tuesday to you! At this point, we’re going to have to hope for a turn-around Tuesday to take the starch of the dollar’s collar. I sat outside with good friend Duane last night to watch the Cardinals blow yet another game late… Our rookie pitcher, making his major league debut, pitched 7 no-hit innings, but the bullpen blew the leas and he was not awarded a win, nor were the Cardinals… I said to Duane, “well, that’s what happens when you only score 1 run, you lose 2-1”… UGH! I’m about to wave the white flag on the Cardinals’ season, folks… The Beatles greet me this morning with their classic rock song: The Long & Winding Road…

Well, the overnight selling of the currencies from Sunday night, continued throughout the day on Monday… Why on earth, would investors/ traders/ hedge fund managers, be thinking that the dollar is the place to be when 1. We’re about to set a new record for length of an expansionary period. 2. The Fed has decided to hike rates late in this cycle, which has me about as confounded as can be, and 3. We as a country are ticking off our allies, and making enemies of the two countries that have said they was to change the dollar reserve status?

I posed that question to my long time friend, and former Boss, Frank Trotter, yesterday when we talked for about an hour on the phone. He seems to think that the Fed needs to be hiking rates right now… I meant to ask him if he meant, so that they have interest rates to cut in the next recession? But forgot, as I was once again mesmerized by the Jedi mind tricks of Frank Trotter! HA!

But with things all cockamamie these days, and what’s up is down, and what’s down is up, who knows where this will all go? I surely don’t… And quite frankly, I’m beginning to not give a damn, either, because if investors / traders and hedge fund managers, want to keep this circus going then I’m not going to keep telling them it’s all being done with smoke and mirrors. I’ll give them the rope, and let them hang themselves…

Yesterday in the Eurozone, we saw that Consumer Confidence fell this month -0.6%… Nothing that would have led to the euro getting sold… And this morning, July PMI (manufacturing index) ticked higher from 54.9 to 55.1 this month, led by an strong month from Germany. And yet, the euro can’t find a bid, even with this strong data print. 

I have to make an announcement here, so sit down… The Pfennig Replies mail server has basically crashed, and isn’t working, so all of you who sent me ugly emails yesterday about my position on the Russian economy and currency, aren’t going to see my response, because, well, I can’t see them!

But, I realized yesterday that I talked about economic fundamentals that were superior to other countries, and then didn’t really get into them, so here we go…

On July 12th, Russia announced that Russia’s trade surplus widened by 75.5 percent to USD 15.15 billion in May 2018 from USD 8.63 billion in the same month a year earlier, but still below market expectations of a USD 18.06 billion surplus.

Longtime readers know that I love surpluses! But that’s not all! The unemployment rate in Russia went down to 4.7 percent in May of 2018 from 5.2 percent in the corresponding month of the previous year, below market expectations of 4.9 percent. It was the lowest jobless rate since at least October 1992.

And just when you think this is over, there’s one more piece of fundamentals data here that you need to see and that is: Russia’s gross domestic product advanced by 1.3 percent year-on-year in the first quarter of 2018, matching the preliminary estimate and following a 0.9 percent growth in the previous period.

And the icing on the cake is that inflation in Russia fell to 2.3% last month! Now, I challenge you to find another country in this world that’s putting up these kinds of fundamentals… And that’s all I’m going to say about that!

My longtime friend, and former colleague, Chris Gaffney, sent me a note yesterday, and said that he had just done a presentation in Vancouver, and he had listed Russia’s economy as one of the best in the world, according to the back pages of the Economist… 

But in this day and age, fundamentals will only get you a cup of plain black coffee, that’s not even hot! I remember when currency valuations were all about fundamentals. These days I sit on cornerstones and count the time in quarter tones to ten… No wait! These days, it’s all about trader sentiment… For instance if traders went out for dinner, and went to a Mexican restaurant, only to have Montezuma’s revenge on their digestive systems overnight, they’re probably going  to sell pesos the next day…

Ok, I exaggerated there, but you get the picture, right? Alrighty then, we move along… You can’t have a discussion about Russian without talking about Gold… And well, the shiny metal is just not favored by the paper traders… On Friday, we saw Gold gain $9 but yesterday the shiny metal gave just about all of that gain back by dropping $7.50…  I know you all are getting tired of, or have already grown tired of me harping about the short Gold paper trades, so I’m not going to go there today… 

I mentioned to Frank Trotter yesterday that there seems to be a tinder box ready to go up in flames all over the world these days, and in my simple way of thinking of things, I just can’t put my finger on why Gold is being held back in these times… But, it is, and well, if it is anything these days, it’s much cheaper than it was a month ago, and a month before that! 

The Chinese are back to weakening the renminbi almost nightly again. A couple of weeks ago, it appeared that the Peoples Bank of China (PBOC) had weakened the renminbi enough, but that was before President Trump announced tariffs on an additional $200 Billion of Chinese exports to the U.S. Since the renminbi is a “managed currency”, the Chinese are able to move it wherever they please, and their thinking is straightforward, if you increase the price of my goods, I’ll lower the transaction costs… to even out the price… 

Now, the Chinese have added tariffs to U.S. goods coming into China, but here, we have the dollar rising, which is going to make the U.S. goods even more expensive… Who’s plan is going to work here?  I’ll give you a moment to think about that… 

Ok… Data-wise, this seems to be PMI Day around the world, as countries report their latest reports on the pulse of their respective manufacturing sector… For instance Japan already printed their latest PMI and it fell to the lowest level it has seen since Nov. 2016. At 51.6 the index remains above the important line in the sand figure of 50, but it’s going the wrong way… 

I mentioned the Eurozone PMI above, but there was something else going on in their PMI… In Europe, there are signs protectionism is already starting to weigh on output, with survey respondents reporting rising prices for raw materials and delivery delays.   There’s trouble brewing with the global trade war folks… And this is just the tip of the iceberg…  and each country’s economy is the Titanic… 

The U.S. Data Cupboard will have it’s own PMI for June to print today. This will be the Markit version of the PMI, which is different from the national ISM (of course we have to be different, right?).  I expect to see our PMI show signs of fatigue, but I’ll have to wait-n-see… 

To recap… The currencies and metals need for today to be a Turn-around Tuesday, after Monday’s trading just about wiped out all their gains from Friday. Chuck goes on and on about Russia’s economy this morning. Hey! don’t blame him, he was on a roll! Gold lost most of Friday’s gain yesterday, but is up $2 in the early trading today, and it’s PMI Day around the world today… 

For What it’s Worth…  more years ago than I care to admit, I met Thom Calandra, who at that time started the CBS MarketWatch, and he liked our products so much that he wrote about them, which was a good thing for our products, and his letter, because soon the dollar was dropping like a rock and he looked like a superstar!  Thom ran into some problems with the authorities years later, and he was penalized, But now he’s back, and writing a letter again, and yesterday, the GATA folks sent me a note about an article he posted on Gold, that can be found here: thomcalandra.com/cook-islands-marries-gold-royal-note/

Or, here’s your snippet: “Gold is back in circulation in small denominations as official government currency issued by the small South Pacific country of the Cook Islands, whose gold-containing bills are manufactured by the Valaurum company in Portland, Oregon.

The bills were publicized today by Thom Calandra of The Calandra Report as a reminder that there are entirely practical ways of putting gold into circulation in amounts usable for ordinary daily transactions.

Of course since the Cook Islands are too remote for a shopping trip for anyone who doesn’t live there already, the bills most likely will find use as curiosities and collector’s items. But they demonstrate that technology easily will remonetize gold as soon as governments get out of the way of free markets, which may be another reason why governments fear and undermine gold so. ”

Chuck again… Pretty interesting don’t you think? Sure it’s a tiny little island economy, but you have to start somewhere right? I’m telling you this now, so hear me now and listen to me later, the world is in need of a Gold standard, period.

Currencies today 7/24/18… American Style: A$ .7406, kiwi .6806, C$ .7602, euro 1.1705, sterling 1.3130, Swiss $1.0068, European Style: rand 13.3177, krone 8.1654, SEK 8.8250, forint 279.20, zloty 3.6910, koruna 22.0130, RUB 63.16, yen 111.05, sing 1.3638, HKD 7.8458, INR 68.80, China 6.7752, peso 18.82, BRL 3.7766, Dollar Index 94.49, Oil $68.22, 10-year 2.95%, Silver $15.53, Platinum $841.36, Palladium $924.78, and Gold… $1,226.56, and the SGE Gold Price $1,233.55

That’s it for today… What a great pitched game by the rookie last night, only to have the bullpen blow it… It’s a very frustrating season for me with these Cardinals… But they’re my team… All three grandkids were here yesterday, they play together so well, but they sure are loud! I found that my noise cancelling head phones come in handy! Well this Pfennig is in the books, and only one more to go before I head out the door for two weeks… I’ve talked about this enough that you are probably tired of hearing about it, but I always get a few emails asking where I’ve been when I’m on vacation… Frank Sinatra takes us to the finish line today with his song: Fly Me To The Moon…   I hope you have a Tom Terrific Tuesday, and that you continue to Be Good To Yourself!

Chuck Butler

July 23, 2018 

* Currencies and metals rally on Friday!

* Trump doesn’t appreciate the rate hikes!

Good Day… And a Marvelous Monday to you! A very nice weather-wise weekend here in the St. Louis area, led to a lot of outside time for me! Warm but not excessive heat, I loved it! My beloved Cardinals didn’t have the weekend series with the rival Cubs turn our the way they wanted… But boy did Matt Carpenter have “a day” on Friday… I texted my baseball buddies yesterday to say, that I have officially given up on Marcel Ozuna, not that most of you care, but that’s pretty bad when I give up on a player… I sure hope he proves me wrong! Yes, greets me this morning with their classic rock song: Roudabout…

Well, Friday’s price action in the currencies saw the dollar’s worst day in over two weeks… Seems the dollar bugs got spooked when President Trump not only blasted the Fed and their rate hikes one day, but came back for more for day two! Seems that Trump doesn’t appreciate the Fed hiking rates after all he’s done to improve the economy (tax cuts)… I don’t see this having any affect on Jerome Powell, and his band of Fed Heads from proceeding with their rate hikes, but I guess one always has to have in the back of their mind, that the President isn’t happy with them!

So, the euro, which on Thursday morning was hovering around the 1.16 handle, going back an forth around the handle. But by Friday’s end of the day/ week, the euro was 1.1745… I’ve told you all this before, but for any new readers here goes… The euro is the offset currency to the dollar, so when the dollar gets sold, the euro rallies, and vice versa… The recent trading has seen the dollar on the rally tracks just about every day, so the rain on the euro’s parade was quite heavy at times.

And Gold was allowed to rally closing on Friday up $9.20 on the day VS Thursday’s close. Boy was I ever mesmerized by Grant Williams’ Things That Make You Go Hmmmm…. Last night… He printed his speech from the recent Vancouver Conference, and in it he points out something I used to tell people all the time… In fact, a few years ago in hills outside of Atlanta, Georgia, where the EverBank managers were having a retreat, I told the people there that if Richard Nixon hadn’t removed the dollar from the Gold standard, that they wouldn’t be making so much money these days… I also told them that we wouldn’t be looking at a $15 Trillion debt, and unfunded liabilities of nearly $100 Trillion (remember this was a few years ago)… We, as a country had been growing by leaps and bounds, until the debt reached a limit where it took too much effort and attention to service the debt, and that’s when the economy began its Japan-like decade of relatively no growth…

Grant Williams pointed out that we are a need of a new Gold Standard… Again, about 6 years ago, a reader sent me a note and asked me why the U.S Gov’t didn’t just sell its Gold to pay off the debt? I then put pencil to paper, and did some math… and responded that selling the Gold at the price at that time wouldn’t put a dent in the National Debt… However, if the Gov’t wanted to reset the price of Gold, to say $10,000 per ounce, then they would have something! A reset of the Gold price wouldn’t be the first time this was done… Remember FDR confiscated everyone’s Gold and then reset the price of Gold up 75%!!!!! And then made it illegal to own Gold or trade it… We all know that’s been changed over time, but the reset is the most important thing…

Things That Go Hmmm… is a paid for subscriber newsletter, and it’s well worth the cost of admission, so just Google it or Grant Williams and you’ll find it… I rely on his newsletter to set me straight from time to time!

OK… Well, did you see/ hear about the tweet that President Trump sent out last night directed to the Iranian President? WOW! Very Strong words, but now that he’s gone to DEFCON 4 with this message, what happens if Iran ignores it and continues to threaten America?  There’s no backing down now… In case you missed it here’s the tweet: “To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!”  

Now, I’m not about talking about the President’s Tweets, but I thought for sure that this tweet would be a market mover for Gold… But a quick look at the shiny metal this morning, shows that’s just not the case, as Gold is flat as a pancake (Head East)…  

I told you last week, that what I needed was some time with my long time friend, and former boss, Frank Trotter, to help me with understanding what the heck is going on in the markets… What should be down is up, and what should be up is down…  He read that in the Pfennig, and fired off a note to me telling me this: “Things here in the US are simply madness to me. Pick a topic and rational analysis and decorum seems to no longer apply. The residents are running the insane asylum and people seem okay with that.” 

I have a call scheduled with Frank today, so hopefully he’ll be able to perform those old Jedi mind tricks on me, and I’ll hang up feeling much better about the goings on in the currencies and metals! 

The overnight markets have once again been unkind to the euro, and other currencies… Gold was able to hold its Friday gains, but not so much the euro, which gave back 1/4-cent of its gains overnight  last night.  UGH! You don’t think it’s the European Central Bank (ECB) doing the euro selling overnight do you? I mean, they need a weaker currency to help introduce inflation in their country, (they think!)…  So, they have the motive, they have access to the currency markets, so they have the weapon… Uh-oh! 

But they wouldn’t do that would they? Sell their own currency? In this day and age, I have no doubt they would…  But let’s just say that it’s not the ECB, then who?  The Russians and Chinese would much rather see the euro gain VS the dollar, as they have no qualms about telling the world that it needs a dedollarization…  

I sent off my DTL piece for this Thursday yesterday… And I’ll give you a snippet of a topic I discussed in the letter. And that is about the Russian ruble…  Think about this for a moment… What country has a Trade Surplus? What country has seen their inflation drop from near 10% to less than 3%? What country has seen economic growth, despite economic sanctions placed on them? And what country other than China has gone bonkers with Gold accumulation?  And more importantly, what country hasn’t gotten caught up in the currency wars going on right here, right now?  There’s only one answer to these questions and that is Russia, and their currency the ruble is a currency that I tend to believe should be stronger and would be if the euro got on a roll VS the dollar… 

I’m not a cheerleader for Russia, folks.. I’m just pointing out the facts that lead to a potentially strong currency… I can’t find many currencies these days that warrant getting pointed out for having a potentially strong currency!  

The U.S. Data Cupboard doesn’t have much for us in the early part of this week, with only Existing Home Sales and New Home Sales dominating the first two days of data prints this week. It’ll be Thursday when we finally see a piece of real economic data, when Durable Goods and Capital Goods Orders print for June. By the time that data prints on Thursday, I’ll be 35,000 feet in the air, on my way to my summer vacation! 

To recap… The currencies turned around and rallied on Friday, but saw some of those gains of Friday, given back in the overnight markets last night… Chuck points out, using his CSI training, that the ECB looks to be the perp we’re looking for with regards to who is selling the euro in the overnight markets?  Gold did gain $9.20 on Friday, and is flat this morning, so maybe that’s the start of something, eh?   And Chuck points out that Gold should be rallying on the President’s latest tweet, but it’s not… UGH!  

For What It’s Worth…  I thought that since I went on and on about Russia and the ruble this morning, that this article about Russiaphobia fit nicely in the FWIW section today, and it can be found here: https://www.rt.com/usa/433798-russophobia-us-russia-war/

Or, here’s your snippet: “Russian demonization and Russophobia have gripped the U.S., where politicians would rather impeach Trump than avert a nuclear war with Russia, professor emeritus at both Princeton and New York Universities Stephen Cohen believes.

While U.S. media and establishment still cannot settle nerves after Trump-Putin summit in Helsinki, Cohen, who is also contributing editor at The Nation, and Chicago University professor John Mearsheimer, bashed the Russian bogeyman approach in an interview to Vice news.

Cohen has been labelled as Russian president’s apologist, with “tsunami” of attacks on him. However, the scientist says that those people are just uninformed, with Mearsheimer adding many refuse to engage in fair dialogue with both of them merely because they would “lose the debate.”

“We’ve demonized Putin and we’ve putinized Russia, so we’ve demonized Russia. Russophobia is running amok in this country.” Cohen said. “I’ve seen these things from the inside. I’ve re-thought and re-thought how we got to the edge of war with Russia, where we haven’t been since Cuba in 1962. And I have concluded it is 95 percent our own doing.”

Chuck again… It’s all strange to me what’s going on folks…  but I do believe it’s all the discord between the parties, and the parties’ followers… I’m just saying… 

Currencies today 7/23/18… American Style: A$ .7410, kiwi .6810, C$ .7610, euro 1.1712, sterling 1.3240, Swiss $1.0083, European Style: rand 13.49, krone 8.1526, SEK 8.8342, forint 278.32, zloty 3.69, koruna 22.0585, RUB 63.12, yen 111.10, sing 1.3633, HKD 7.8474, INR 68.68, China 6.7685, peso 19.07, BRL 3.77, Dollar Index 94.46, Oil $69.08, 10-year 2.88%, Silver $15.49, Platinum $832.15, Palladium $894.02, and Gold… $1,230.38, and the SGE Gold price $1,232.32

That’s it for today… Up all night again last night… I’ve been sleeping like a baby, up every 3 hours! But I don’t have a tumor in my mouth any longer! I’m happy to trade the tumor for sleepless nights! My St. Louis oncologist, told me that my recent scans said there were two very small nodules on my lung, but that they hadn’t grown, so they’re not sure what they are… I told her, that with my history, we all know what they are…  But they aren’t growing which means the medicine is keeping them in check… I never smoked one cigarette in my life… go figure!  OK, enough of that! I have two more Pfennigs to write (Tuesday and Wednesday) and then you’re on your own for the next two weeks…  My darling granddaughter, Delaney Grace, continues to perform on the Muny stage each night with the closing night coming this Wednesday. And with that, the band, Looking Glass takes us to the finish line today with their song: Brandy…  One hit wonders, eh? I hope you have a Marvelous Monday, and remember to Be Good To Yourself!

Chuck Butler

 

 

 

 

July 19, 2018  

* Euro loses a full cent!

* Gold sees an $11 gash this morning! 

Good Day… And a Tub Thumpin’ Thursday to you! I’m hoping to recharge my batteries early this morning, so I am able to participate! It was a very late night for yours truly, but one that was well worth it! Delaney Grace was on stage at the Muny! If you’ve ever been to St. Louis in the summer, you’ve probably heard or had the opportunity to see a production at the Muny… And there was my little bundle of joy, dancing and singing on the stage! She was GREAT! And she’ll be back on stage for nightly presentations of ANNIE for a week! The Kinks greet me this morning with their song: Sunny Afternoon… 

Well, I think I had better be getting my things in order to walk away from all this… Recall I told you a couple of weeks ago that if things didn’t work they way I described them that I would have to really “retire”, as my credibility would be shot!  And judging from what happened in the overnight markets last night, I’ve got one foot out the door… 

So, let’s get to it…  Yesterday late afternoon, I checked to see how the markets were behaving, and things looked a bit better, the euro had climed higher within the 1.16 handle, Gold was holding its own, and things seemed calmed down… But that was all put to bed last night, the currencies, led by the Big Dog, euro, got trashed once again, and Gold is down $11.30 in the early morning trading today… 

It doesn’t help the currencies when one of the major currencies, is dropping like a rock, as the rate hike thoughts have turned to mush for pound sterling… This morning they printed their latest Retail Sales report and it was negative! OUCH!  That’s going to leave a mark! Yes, a June print for Retail Sales in the U.K. was a negative -0.5%!  

There’s been not a peep from the European Central Bank (ECB) and so the currencies aren’t even fighting back… They are acting like the 90lb weakling that gets sand kicked in its face by the big bully (dollar), and cowers in fear and doesn’t dare fight back. 

I hesitate to even mention this, as I’m sure I will be putting the old jinx on it, but with all the currencies getting whacked, there is one that needs to be singled out for not getting caught up in the dollar buying…  The Canadian dollar/ loonie has quietly moved higher by 2-cents in the past week…  

Gold yesterday traded down 10-cents… marking two days of trading and about 500,000 contracts for the two days, and not even a full $1 movement in the two days, that is until this morning.  I read a piece/ opinion on gold this morning on Bloomberg, and since it’s not what I would like to hear, I think you need to read at least a piece of it… 

“The gold chart is incredibly ugly these days. The precious metal is at its lowest level in more than a year, having fallen by over 10 percent since early January. But what’s even worse is that bullion has become boring. A few years ago, in the pre- and post-crisis era, it got tons of attention. Now nobody outside of some die-hard enthusiasts really care. Even critics don’t spend much time on gold, with many of them having moved onto bashing crypto. Still, one must marvel at the cognitive dissonance gold bugs need to have. They argue that the economy remains in a gigantic bubble that’s being held up by central bank stimulus all over the world. And yet gold is meant to be a check or a hedge against precisely that behavior. So either gold isn’t working as advertised, or the economy isn’t the gigantic scam it’s made out to be. It’s basically one or the other. All this being said, just because the bull story has collapsed, it doesn’t mean its argument is flawed.” – Bloomberg 7/19/18

Chuck Again… To that, I would say, yes, what you say is correct, but what you left out, is that physical Gold isn’t allowed to trade on supply/ demand mechanics, that there’s just too much interference from the paper trades, and as long as that scenario exists, people like me that believe in Gold as a store of wealth, will have to hear about how Gold is failing to live up to its historic performances… 

OK, since this is all going on this morning, I think it would be best for me to go through a short list of reasons why this dollar rally is on a wobbly three legged stool…  So, the Fed says they’re on pace to continue hiking rates (which has helped the dollar turn around), but what happens when the rug is pulled out from under the economy? And more so, out from under inflation?  Well, that would be the end of the rate hikes, that’s what! And here’s a hint of what I’m talking about… Real average hourly earnings haven’t managed to rise in any of the past three months. What does this tell me? Well it tells me that inflation is falling again, and I wonder why? Oh, that’s right, Chuck, you told us all two years ago what Fed Rate hikes were going to do for inflation! 

Now… for all of you who do not believe me that we are a country that has gone from making things to sell, to buying things, and receiving things for doing nothing, take a gander at this info I pulled from Paul Ryan’s twitter page yesterday… “The last time unemployment levels were this low, there were 17 million SNAP recipients. Now there are 42 million.”

42 Million SNAP recipients? Are you kidding me? That’s really strange for a country that is supposedly at full employment (even with 95 million people still looking for work), and an economy that’s robust, (but could only muster 0.5% growth in Retail Sales in a month full of graduation gifts!)  Smoke and mirrors, folks… That’s what the Fed and Treasury are using on you, to make this all look good…  But, if this (dollar strength) is what comes of all this, then I give up… Raise the white flag….  Because all that I’ve learned in economics and currency valuations is being thrown out the window, folks… 

But I’m still here, talking about it, so no worries about me… I’ll continue to talk about how this doesn’t make sense, point out the things that worry me, and should worry the markets, but don’t… 

The U.S. Data Cupboard doesn’t really have much for us today, and yesterday it had housing data that showed June data on Housing Starts that fell from 1.337 Million in May to 1.173 Million in June… And like I just said there’s not much today, so more dollar buying will take place given that if there’s no real data printing, there’s no bad data printing to soften the dollar! 

To recap… It was a very ugly night for the currencies and metals, with the euro down 1-cent, and Gold down $11.30 in the early morning trading. Forget the Trade War, forget the exploding debt here in the U.S., forget the fact that there are 42 Million SNAP recipients… 

For What It’s Worth…  this morning’s FWIW piece come to us courtesy of the WSJ and was sent to me by long time reader, Bob…  (thanks!) it’s about the rising debt here in the U.S. and you’ll have to have a WSJ subscription to read it all…  

Or, here’s your snippet: “WASHINGTON—The Trump administration expects annual budget deficits to rise nearly $100 billion more than previously forecast in each of the next three years, pushing the federal deficit above $1 trillion starting next year.

The revisions, which went largely unnoticed when the White House submitted its annual update to Congress last week, reflect the cost of federal spending increases agreed to earlier this year and higher interest payments.

The budget proposal released in February showed annual deficits totaling $7.1 trillion over 10 years. The latest revisions increase these cumulative deficits by $926 billion, to $8 trillion.”

Chuck again… And I’m so sure of this if I were a betting man, I would be the farm that even these upward revised numbers will be low, when the final tally comes in… I’m just saying… 

Currencies today 7/19/18… American Style: A$ .7342, kiwi .6730, C$ .7705, euro 1.16, sterling 1.2980, Swiss $.9975, … European Style: rand 13.4460, krone 8.25, SEK 8.9350, forint 280.86, zloty 3.7330, koruna 22.3438, RUB 62.90, yen 113, sing 1.3723, HKD 7.8494, INR 68.91, China 6.7144, peso 19.06, BRL 3.8393, Dollar Index 95.49, Oil $68.23, 10-year 2.88%, Silver $15.28, Platinum $799.66, Palladium $893.72, and Gold… $1,216.21

That’s it for today… and this week… I’m going to need to find my old boss and friend, Frank Trotter, for when we worked together and things didn’t make sense a visit with Frank would help me to sort things out… Frank? are you out there? Last night was just perfect for sitting outside at the Muny, as the heat backed off, there was a nice summer breeze,  and my little d, as I call her, Delaney Grace was on the stage! My beloved Cardinals get back on the ballfield tonight so good luck to them for the 2nd half of the season, may it be much better than the first half was! One 3 more Pfennigs next week, and then I’m on my annual summer vacation! And with that thought… The Commodores takes us to the finish line today with their song: Brick House…  That song will get you dancing in your seat! Ok, I hope you have an opportunity to make this a Tub Thumpin’ Thursday, and remember to Be Good To Yourself! 

Chuck Butler

 

 

July 18, 2018  

* Gold gets whacked badly!

* Currencies get sold again!

Good Day… and a Wonderful Wednesday to you! I had a great time with my grandson, Braden, yesterday, and at the end of the day he said I was his BFF! Well, I can tell you this right here, right now, that the title BFF wouldn’t last 2 minutes if I refused to let him swim in the pool! But for now, I’m beaming like a proud BFF… The All-Star Game last night, was pretty light on highlights, and after about 4 innings, it no longer held my attention! And no I’m not ADHD! Or whatever the letters that are used to describe someone with no ability to focus and sit tight! I did see this morning though that 10 home runs were hit in the game that ended up 8-6 AL… Bob Marley greets me this morning with his song: 3 Little Birds… Don’t worry, cause every little thing is gonna be alright…

My Monday Pfennig was titled: Could We All Just Get Along? And after the Helsinki summit where President Trump met Russian President Putin, I need to repeat that over and over again… How in the world can Trump’s detractors rail on him for meeting with Putin? I shake my head in disbelief! Oh, and before you think this letter has gone political, I’ll just point out that I’m no fan of the Trump tariffs, I’ve said it, defended it, and will do it again!

Well, Monday’s “nothing day” when the currencies and metals were stuck in the mud ended when the beginning of Tuesday morning’s trading began… Once again, the currency rally of Friday last week,, was wiped out with dollar buying on Tuesday. So it was a turnaround Tuesday for the dollar… I have no idea why, other than the stuff that came out of the U.S. Data Cupboard, which you could have had a positive knee-jerk reaction to, but real traders would have looked at last month’s negative -0.5% print, and then compared this month’s (June print) 0.6% gain, and call it basically a wash… But I’m sure some boy-genius, said that this is the start of a trend, and bought dollars…

The euro lost the 1.17 handle, and all the other currencies followed the Big Dog, and were sold too… And Gold? It got sold like funnel cakes at a State Fair, and most of it was paper trades.  But they get to drive the price of Gold down, and since there are more of them than the physical trades, guess who wins? The short Gold paper trades totaled 268,000 yesterday, quite a bit more than usual for a summer day…  As of last Saturday, Ed Steer (www.edsteergoldsilver.com) showed that it would take 60 days of Gold production to cover the amount of ounces sold short in the paper trades. And yesterday’s trading showed trades were entered for Gold, with the probability of a large number of those being short Gold paper trades, being very high! 

The selling in Gold s live leaving blood in the ocean for the sharks to come in a take a bite out of what’s left, and that’s what going on this morning, as Gold is down another $5 in the early morning trading today… 

Speaking of short paper trades… the number of days of production that’s needed to cover the total ounces sold short in Silver is… are you ready for this? … . 216 days, which is a bit over 7 months of world silver production…

The GATA folks sent me this email last night, check it out… “Craig Hemke of the TF Metals Report, writing at Sprott Money, reports tonight that in recent months India’s demand for silver has been running at record levels. But Hemke adds that paper silver traded on the New York Commodities Exchange trades every two days more silver than the world produces in a year.

“Led by India,” Hemke writes, “the world is on pace to consume all the silver produced in 2018, yet the dollar price of silver is now down over 10 percent year to date. That’s a dichotomy that must soon rectify itself. Either physical silver demand will crash before year-end or the paper price will be forced to respond as it did in 2016.”

I shake my head in disgust that this continues to be allowed to go on…  

The price of Oil also saw selling once again, and what for a fleeting moment about 10 days ago, looked like the Price of Oil was heading to $80 and higher?, has been wiped out… And the price of Oil is trading with a $67 handle this morning… I alluded to the ideal of some price shenanigans with Oil yesterday, and I truly believe it to be true, that there’s something else at work here… And it’s not just the increased production from the Saudis that have caused the price of Oil to drop like a rock in the past 10 days!

In The U.K. this morning, they posted their latest CPI (consumer inflation) and it fell… Core CPI dropped to 1.9%, a 15 month low, and out the window went any remaining hopes of a rate hike soon here… And Bank of England (BOE) Gov. Mark Carney? He was nowhere to be found, because he’s hoping that if he stays out of sight, it will be a out of sight out of mind experience for him, and he has egg all over his face right now…  I shake my head in disbelief that the markets were fooled once again by this man’s bag full of promises to hike rates… Tsk, Tsk Tsk.. 

I’m doing a lot of shaking of my head this morning, so I had better wrap this up soon, or I’ll be getting dizzy!  I already talked about the outcomes in the U.S. Data Cupboard yesterday, but we did also have the first of two testimonies by Fed Chairman Jerome Powell to lawmakers. And like I said yesterday, he didn’t tell us anything new, it was the same old yadda, yadda, yadda…   But I did pull this from his speech, and while reading it I bet you’ll be able to tell me why I highlighted this section…  Ok… here we go… 

“Powell said the unemployment rate is expected to fall further and the Fed’s challenge will be to keep inflation close to 2%. Key unknowns are the outcome of the ongoing trade disputes and the impact of the Trump tax cuts and boost in federal spending, he said. “Overall, we see the risk of the economy unexpectedly weakening as roughly balanced with the possibility of the economy growing faster than we currently anticipate.” 

Yes, just like a two handed economist right? on one hand we could see this, and on the other hand we could see this…  And why did he come out with that two handed statement about risk to the economy weakening as balanced with the possibility the economy could grow faster?  Because he’s greasing the tracks for whatever outcome comes about, and he be able to say, “see I told you”…  

There’s not much in the U.S. Data Cupboard today except some Housing Data, that I just don’t see as market moving at this point.  Powell will makes the second of his two testimonies today, and I expect today to be a mirror image of yesterday’s speech.  

To recap… Gold got whacked badly yesterday, and the sharks are circling the blood stained waters this morning and Gold is already down $5 in the early morning trading today. The currencies also got whacked yesterday, the euro lost 1-cent, Oil lost another buck in its price, and the dollar is for some unknown reason pounding its chest… Chuck goes through some numbers on data, and short paper trades in Gold & Silver.. 

For What It’s Worth… Well, I told you last month that Russia had sold 1/2 of their Treasuries they held in reserves. According to the folks at zerohedge.com Russia has sold their remaining Treasuries now… this is all detailed with graphs and is a good write up that can be found here: https://www.zerohedge.com/news/2018-07-17/russia-liquidates-its-us-treasury-holdings

Or, here’s your snippet: “Readers may recall that last month we first reported that for all the confusion about sharply higher yields in April, the explanation was simple: it was Vladimir Putin who liquidated a whopping half of Russia’s Treasury holdings, which declined by $47.4BN to just $48.7BN – the lowest since 2008 – from $96BN in March.

But wait, it gets better, because as Trump continued to jawbone about more sanctions targeting Russia, Putin did not stop and in May he continued what was an outright liquidation of Russia’s TSY holdings, which plunged by another $40BN, or 82%, from $48.7BN to just $9BN in May. Keep in mind this was over $100BN at the start of the year.

It appears that When Putin warned he would diversify Russia’s state reserves out of Treasuries – he was serious.”

Chuck again…  Recall that I said that I thought that Russia’s first sale of Treasuries was a test for China to see the reaction of the markets and the U.S.? The next big seller will be China… well, that’s how I see this all unfolding, folks… I sure hope I’m wrong on this!

Currencies today 7/18/18… American Style: A$ .7355, kiwi .6765, C$ .7673, euro 1.1620, sterling 1.3035, Swiss $1.00, European Style: rand 13.3208, krone 8.1728, SEK 8.8645, forint 278.60, zloty 3.7090, koruna 22.2380, RUB 62.44, yen 113, sing 1.3682, HKD 7.8493, INR 68.44, China 6.6900, peso 18.96, BRL 3.8549, Dollar Index 18.96, Oil $67.62, 10-year 2.85%, Silver $15.44, Platinum $806.34, Palladium $907.79, and Gold… $1,222.75

That’s it for today…  I need to get my eyesight checked today, they make sure that my remaining eye remains in good health… And then I’ll be off to the Muny, St. Louis’ outdoor theater, that’s been around for 100 years! My darling granddaughter, Delaney Grace is an orphan kid in the presentation of Annie tonight!  I’ll be smiling from ear to ear when I see her up on that huge stage! Kathy got home yesterday, just in time for Delaney’s Muny debut! So, someone’s moving around upstairs, and it startled me at first because I’m use to being alone here!   The Steve Miller Bank takes us to the finish line today with his song: Serenade…  Stevie Guitar Miller on the iPod this morning! I hope you have a Wonderful Wednesday and remember to Be Good To Yourself!

Chuck Butler