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Chuck Butler’s: A Pfennig For Your Thoughts  

 August 18, 2017 

* $1,300 and Chuck is scared…

* ECB looks for ideas to help them… 

* No overseas investments for you!

 

Good day… And a Happy Friday to one and all! Hey! I woke up this morning, and I don’t seem to be draggin’ the line! So, maybe this will turn out to be a Fantastico Friday! If not for me, I certainly hope for you! I usually open up the template to write the Pfennig with some thoughts about what I’m going to write about, but not today… UGH!  So, who knows where this will take us today!  Chicago greets me this morning with their song: Hard Habit To Break, which also happens to be my fave song by the group, followed closely by Beginnings…  

Well, looky there! Gold has traded to $1,300 this morning! I’ve made such a Big Deal about the $1,300 level that now that Gold is here, which is the first time it has visited $1,300 since November of last year, I’m getting scared… Scared of what? Those nasty “boys in the band”, that’s what! For the last time Gold climbed to a figure above $1,300, the “boys in the band” engineered a take down that was quite ugly for the price of Gold… 

So, which way will Gold go this time? Will it remain on the rally tracks and go higher, or will the “boys in the band” see to it that they derail Gold before it heads down the tracks? Yesterday, Gold gained $4.70 to close at $1,287.50, with a whopping 321,000 contracts traded.. That’s crazy volume folks… I just checked and we are still in the month of August. You know, when everyone goes on vacation, and the markets go stale for the month? The Dog Days of Summer and all that? 

I guess that if the U.S. wasn’t seemingly going from one crisis to the next, that the interest in Gold and the other precious metals would be lower on the scale, but that’s what we have, so we have to roll with the punches, right? Of course in this case, Gold is dolling out the punches!

The Big mover from yesterday morning is Palladium, which has hit a 16-year high, and has narrowed the spread to Platinum again to just $33… 

I read an article last night during the second rain delay of my beloved Cardinals game in Pittsburgh, that talked about how the European Central Bank (ECB) is looking for a way to unwind their stimulus without causing an overshoot of the euro…  This is where I put my tin foil hat on and act out a phone call from the ECB to the U.S. …   “hello, is anyone there? Yes, hello, we’re here! Good, because I have a problem that I think you can help me deal with. And that is, I’m afraid that the euro might take off for Neverland when we begin to unwind our stimulus, and I think you know what I’m going to ask for, right? What? We don’t have any idea what you’re going to ask for, but, for your information, we do have this Plunge Protection Team, and if the euro is soaring that means the dollar is getting sold like funnel cakes at the State Fair, and we’ll do whatever it takes to keep the dollar from falling off the cliff…  Do we understand each other?  Yes, of course and thank you…  OK, you can hang up now… No you hang up first, no you, OK, we’ll both hang up together on three… One, two, three… ” 

Alrighty then that sure was being silly, Chuck… What, me? Silly? I highly doubt that!  Ok, moving on… China was in the news last night, as they issued a order restricting domestic companies from investing in overseas property, hotels, entertainment and sports clubs, according to a State Council guideline posted on the government’s website. Companies will instead be encouraged to support the Belt and Road initiative linking the country across Asia and Europe.  I guess this is what happens when you are in a communist country, eh?   

The price of Oil has been range bound this week between $46 and $47, and no one really knows where it’s going next, except I like through my hat in the ring there and repeat what I said in my Dow Theory Letters (dowtheoryletters.com) article of a few weeks ago, which was that I thought the price of Oil would remain between $40 and $50, until something shakes out of the supply tree. 

And that means the countries with currencies that really depend on the price of Oil to determine their moves, are seeing their currencies move in tight ranges, up one day, down the next…  Countries like the Norwegian krone are very dependent on the moves in Oil, but they are also loosely tied to something else, which in this case is the euro, which means they get an added boost whenever the euro rallies.

And, although the rally has stalled, the euro has rallied in 2017… The euro began the year at 1.0484… And today is 1.1747… And just last week, we were looking at the 1.19 level for the single unit!  I’d call that a rally, wouldn’t you?  

From one crisis to another crisis has the safe haven assets whipping around, but just take  a look at Gold, yen, euro, and Treasury yields, and they’ll tell you if another crisis is taking place…  Gold is up, yen is stronger, the euro too, and the 10-year Treasury yield has fallen to 2.19%, when just earlier this week, when all the saber rattling had calmed down, was trading with a 2.28% yield..  Remember, bond pricing works like this, as the yield goes down the price of the bond goes up, and vice versa… So, when the yield is dropping, that means the price of the bond is going up from all the purchases. 

The U.S. Data Cupboard has two real economics prints for us yesterday, and one that’s just a tick below those two… Industrial Production was disappointing, and didn’t meet expectations (0.2% VS 0.3% exp.) and Capacity Utilization remained unchanged at 76.7%… And then leading Indicators were also disappointing, as they didn’t meet last month’s number (0.3% VS  0.6%)…  So, once again, the data came, and printed, and once again it revealed a weak economy…  

There’s really not much to today’s Data Cupboard.. The U. of Michigan Consumer Confidence index is about it, and of course it will print strong, because people are fooled easily… I’m just saying..   

To recap, Gold has finally made it back to $1,300 for the first times since Nov. 2016, overnight, and Chuck is scared… The ECB is looking for ways to keep the euro in check when they begin to unwind their stimulus, and China issued a restraining order on domestic companies to keep them from investing overseas, and preferably allocating their investment to China’s Belt & Road project. 

For What it’s Worth…  I’ve spent the better part of my life researching and preaching to people that they need to diversify their investment portfolios using assets that have a low correlation to the other asset in their portfolio, and to properly do that you need to add currencies and metals. Well, my good friend, the Retirementor, Dennis Miller, takes this one step further in this excellent piece on diversification that can be found here: http://milleronthemoney.com/diversification-trying-accomplish/  

Or, here’s your snippet: “Friend Courtenay W. referenced recent articles where Chuck Butler and I emphasized diversification. He made a great suggestion, “You should explain what you mean – diversification means different things to different people.”

I visited several mutual fund companies’ booths at The Money Show. Each company urged us to take our entire nest egg and invest it in their family of funds. By doing so, “We would be well diversified and safe.” Sorry, not diversified enough to suit my comfort level!

Dictionary.com defines the old saying, “Don’t put all your eggs in one basket”:
“Don’t concentrate all your prospects or resources in one thing or place, or you could lose everything.” (Emphasis mine)

While a fire is unlikely to happen, prudent homeowners buy insurance. Insurance does not alter the risk of a fire; it protects the homeowner from suffering catastrophic economic losses.”

Chuck again…  I sure hope that you all go and visit Dennis’s website, and sign up for his free weekly letter, for if you are retired, or thinking of retirement this letter is your bag, baby! 

Currencies today 8/18/17… American Style: A$ .7922, kiwi .7327, C$ .7902, euro 1.1747, sterling 1.2892, Swiss $.9616, … European Style: rand 13.2237, krone 7.9322, SEK 8.1145, HUF 258.24, zloty 3.6411, koruna 22.2197, RUB 59.24, yen 109.04, sing 1.3633, HKD 7.8221, INR 64.10, China 6.6746, peso 17.85, BRL 3.1592, Dollar Index 93.51, Oil $47.23, 10yr 2.19%, Silver $17.18, Platinum $966.45, Palladium $933.25, and Gold… $1,300.30  

That’s it for today… I just about turned the game off last night after the Cardinals fell behind 5-1, but I didn’t, and I was rewarded with a rally that gave them the game 11-7…  Well, one week after my infusion and I finally feel half human!  Just in time for a reunion later this afternoon with former colleagues… I’m scheduled for new scans next Wednesday, so I’ll know more about what’s going on inside of me when those results get printed. Fun stuff, eh?  My writing desk here at home has a ton of pictures pinned to it. One is a fave of mine… It’s a picture of me, my younger brother David, and my dad, sitting on our back porch. I’m probably 10, and David 3, that’s an OLD picture! Little Feat take us to the finish line today with their song: Dixie Chicken… And all the boys at the bar began to sing along.. If you’ll be my Dixie Chicken, I’ll be your Tennessee lamb… And with that, I hope you have a Fantastico Friday, and Be Good To Yourself!

 

 

Chuck Butler’s: A Pfennig For Your Thoughts   

August 17, 2017 

* Dollar short trade becomes overcrowded

* Gold gets back on the rally tracks!

* A$ and kiwi are best overnight performers

Good day… And a Tub Thumpin’ Thursday to you! I’m still not feeling like I could go out and do some Tub Thumpin’ so, it’s up to you today… Gold did some Tub Thumpin’ yesterday and overnight, short dollar is an overcrowded trade, and more real economic data today… All that, and more! The Eagles greet me today with their song: Victim of Love… This is from the Hotel California album, which I played so much in the day, that the groves in the record disappeared! 

Well, it appears that we’ve stepped back into the Twilight Zone.. No wait, I meant to say, the dog days of summer! The participants of the saber rattling, last week, have been sent to their respective rooms, to think about what they did! HA! Seriously, the saber rattling is being forgotten for now, and we’re back to the dog days of summer, where the volumes are thinned out, and the heat just gets to everyone. 

I read an article on Bloomberg this morning that made sense, given the way the euro has traded in the past week, after it nearly traded to 1.19…  The article points out that the “short dollar” trade is overcrowded… It’s the 2nd most overcrowded trade… So, take wild guess at what is the most overcrowded trade… Final Jeopardy music is playing in my head, and the answer is… Long dollar!   In all my years of being around currencies, I’ve never seen anything like this!   Until January this year, the long dollar trade was the cat’s meow, and the charts are quite interesting showing all the trades in long dollar, and then watching them change to “short dollar”…  

But, the point I’m attempting to get to, is that the short dollar trade is overcrowded, which has been illustrated these past few days, with the euro losing ground it had earlier gained. These short positions begin to get closed out, until something comes along to make the investors go short again.  

That’s as clear as mud, right?  Sorry, I’ll attempt to do better with this discussion of the Aussie and kiwi dollars… The Aussie dollar (A$) jumped back over 79-cents overnight, after a better than expected Employment report showed that Aussie job creation for July was 27,000, marking the 10th consecutive month of job gains, and the Unemployment rate fell to 5.6% from 5.7%…  

Then add in the Fed’s FOMC Meeting Minutes (the minutes) revealed that the Fed members are beginning to worry about the fact that inflation will not get to higher levels as they keep telling everyone it will. This helped the currencies like A$ and kiwi because they currently enjoy a positive rate differential to the dollar, and if the Fed members are worried about the lack of inflation, they won’t be hiking rates, thus the A$ & kiwi don’t have to worry about a narrowing of their positive rate differential. There! How’d I do, better, eh? HA!  

Gold got a reprieve from all the selling that has occurred in the shiny metal this week, and carved out a gain yesterday… I was reading an article yesterday that got me thinking about what could be the catalyst to get Gold back on the rally tracks firmly… And there it was right before my eye! The U.S. debt ceiling debacle that was kicked down the road a few months ago, is coming back to haunt us this September… Now, I realize that nothing really bad has ever come from these debt ceiling circuses, but this time we have a president who has said, “the U.S. Government is in need of a good shutdown”… Uh oh! So, as we draw closer to September, I’m sure the jawboning will begin, and depending on the President’s participation in the jawboning, it could be a very good time for Gold…

The shiny metal saw a gain yesterday of $11.70 to close at $1,282.80, and in the early morning trading today, Gold is up another $8.30, and is back to knocking on the door of $1,300, as it trades this morning at $1,291.20! I just sent my weekly article to the Dow Theory Letters editors and its about Gold, and I’ll give you a little peak at what I said… “I just can’t help but think that Gold’s got something cooking, can you smell it? Like the Rock says, “can you smell what I’m cooking”…  

  And then one more thought on Gold today. I took this from Ed Steer’s letter this morning (www.edsteergoldandsilver.com) and he got it from a 46 minute video interview with Brien Lundin, the Gold Newsletter editor and New Orleans Investment Conference organizer. The video interview can be seen here: https://www.peakprosperity.com/podcast/110158/brien-lundin-if-dont-want-own-probably-should   And here’s the best part of it… “What’s so special about gold? If what they tell us — that it’s a barbaric relic and it has no use in society — is true, then why be so secretive about it? Why be so reluctant to have your citizens own it? That alone tells you all you really need to know. If they don’t want you to know about it, if they don’t want you to own it, you probably should.”

I know, I could have used that as my FWIW article today, but I thought it fit better there with my discussion of Gold…  Hey! Palladium narrowed that spread to Platinum again yesterday, and now just sits $50 below Platinum… Hey! it’s the dog days of summer, and I’m trying my best to find things to talk about!  

The U.S. Data Cupboard will yield a couple of real economic data prints today, which also happen to be two of my fave prints! Industrial production and Capacity Utilization…  I don’t see either of these two giving the dollar any love today… We’ll also see the color of the Leading Indicators index.. So, two forward looking pieces of data for us today, with Capacity Utilization and leading Indicators printing on the same day… 

Yesterday’s Data Cupboard has the Housing Starts for us and they were a real disappointment, as the July data saw a HUGE drop in Housing Starts…  Of course it could just be a one month oddity because this did follow the June rate hike by the Fed, and at that time the Fed members were all slapping themselves on the back and giving cheers with their champagne glasses to future rate hikes…  

To recap…  The FOMC Meeting Minutes disappointed the rate hike campers, and allowed the A$ and kiwi currencies to gain on the idea that their positive rate differentials to the dollar will remain in tact. The Minutes also lit a fire under Gold, which got back on the rally tracks and is closing in on $1,300 once again this morning. The Short Dollar trade appears to be overcrowded, and that means exactly what we’ve seen in the past week… An unwinding of those shorts, which means the euro suffers, and suffer it has as it has traded below 1.17 overnight…   

For What It’s Worth…  Well, I came across this article thanks to dear reader Bob, and thought it to be quite FWIW worthy! It’s about how Russia is stepping up their efforts of de-dollarization…  You can read it all here: http://russia-insider.com/en/politics/russian-economy-experiencing-trend-towards-de-dollarization/ri20691?ct=t(Russia_Insider_Daily_Headlines11_21_2014)&mc_cid=77eacd5275&mc_eid=0ed824d0a6  

Or, here’s your snippet: “A major “de-dollarization” trend is seen within the Russian economy, Oreshkin said, underscoring the need to support an increased role of the ruble.
“There is a big trend toward the de-dollarization of the Russian economy. The Central Bank made some very important steps so that fewer foreign currency loans were issued,” Oreshkin said.
He added, speaking at a session on the development of transport infrastructure in Northwest Russia, that the increased role of the ruble “is such a trend that should be fully supported.” 

Chuck Again… These moves by the Russian have come about now because of the sanctions that were placed on them by the U.S. But Russia was going to eventually move to these steps for de-dollarization…  

Currencies today 8/17/17… American Style: A$ .7919, kiwi .7293, C$ .7910, euro 1.17, sterling 1.2860, Swiss $.9677, … European Style: rand 13.2325, krone 7.96, SEK 8.1263, HUF 260, zloty 3.6422, koruna 22.2486, RUB 59.55, yen 110.16, sing 1.3660, HKD 7.8236, INR 64.06, China 6.6907, peso 17.72, BRL 3.1613, Dollar Index 93.91, Oil $46.69, 10-year 2.24%, Silver $17.04, Platinum $972.94, Palladium $922.45, and Gold… $1,291.20 

That’s all for today… Gesh! Another heartbreaking loss for my beloved Cardinals last night, as they went to the bottom of the ninth with a 4-2 lead, and lost! UGH! They can’t afford to lose games like that, if they’re serious about winning the division! A very quiet day at the house yesterday, was a welcome relief for me…  I do believe I’m going to meet some of my former colleagues tomorrow afternoon, at my local watering hole… I sure hope my overall feeling turns around by then! Van Morrison takes us to the finish line today with his song: Brown Eyed Girl…  My friend, Jen, used to say this was her song, (since she had brown eyes) So many artists have redone this song, but none is better than Van the man’s version!  I know, the letter is a little late today… Better late than never, right?  And with that, I’ll send you on your way to a Tub Thumpin’ Thursday!  Be Good To Yourself!

 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts   

August 16, 2017

* U.S. Retail Sales soar in July!

* U.S. dollar fights back!

* Eurozone 2nd QTR GDP rises!

Good day… And a Wonderful Wednesday to you! Well, I finally threw in the towel and succumbed to the urge to take an afternoon nap yesterday… I just can’t get past this feeling that I need to sleep! Maybe it’s the accumulation factor on the infusions? Whatever it is, I finally said, to hell with it, and laid down, and then woke up 3 hours later! This morning, I’m still draggin’ the line, but not as bas as yesterday, or the day before, so maybe I’m onto something! Pink Floyd greets me this morning with their song: Comfortably Numb… It’s my fave Pink Floyd song, and a phrase I’ve used to describe everyone’s response to the huge debt in this country..

Well, looky there! U.S. Retail Sales are not dead in the water! They are alive! Of course they needed a boost and it was quite the boost. Yesterday, when I was writing about Retail Sales I meant to mention that “back to school” sales would be a part of the July numbers, but I totally missed that Amazon Prime Day was also in July, and the boost that Retail Sales got from Amazon Prime Day, was off the charts! So, as I ask in the title today… Can we have Amazon Prime Day every month? Because the 0.6% rise in Retail Sales in July is going to be a one and done going forward, in my humble opinion…

But for now, the strong Retail Sales, got the rate hike camper bugs to come of the wall boards, and start dancing in the streets, for they figure that this strong Retail Sales print confirms that the previous Fed rate hikes haven’t put a damper on the economy, and therefore the economy can stand more rate hikes… And the currency traders kind of took that ball and ran with it on the day, as the euro gave away a few ticks, and the rate differential currencies like the Aussie dollar (A$) and kiwi saw even more selling…

The worst performer on the day was Gold, which was down at the close $10.50, and that was with a brief rally at the close, which saw Gold close at $1,271.10… There were 284,000 contracts traded yesterday in Gold… And as I said yesterday, I would bet that good number of the 284,000 contracts were of the naked short Gold variety… I’m just saying… 

In the overnight markets, the A$ and kiwi recovered ground lost during the day, and the euro fell quickly to trade barely above the 1.17 handle… We began the week with the Dollar index looking like it was about to fall below 93, but 3 days later it is 94… The euro began the week at 1.18 and 3 days later it’s 1.17, and Gold… well, let’s just say it hasn’t been a good week, so far, for the shiny metal… 

What to make of this? Was the Fed correct that all the weak data was just transitory? I was wrong to say that I though the strong dollar trend was over? Is the accumulation of debt not going to be a problem? Just so many questions about this dollar move, right?  Ok… here’s my attempt to answer some of these questions.. 

First of all, I don’t think I’ve ever said these words, so I’m not going to begin now, and those are: The Fed was right! Let me remind you that one data print does NOT make a trend, there’ll have to a few more really strong Retail Sales reports to confirm that the U.S. consumer hasn’t “tapped out”…  And I don’t think I’m wrong about the weak dollar trend coming to an end… As I’ve explained many times in the past… When an asset is in a trend that is nearing its expiration, the asset will have days of basking in the sun, but those are short-lived…   And of course you know me, I think debt is a HUGE problem, and it will come back to haunt us for years…  

Speaking of debt, the Wall Street Journal (WSJ) reported yesterday that U.S. Household debt has reached a record high.. let’s listen in on the WSJ to hear what they have to say… “U.S. household debt reached a new record of $12.8 trillion in the second quarter, driven by rising mortgage debt, a strong quarter for auto loan originations, and an uptick in credit-card balances, which reached their highest level since 2009.” 

Hmmm, did you get that last part? Credit-card balances reached their highest level since 2009…  I know the government is happy as a lark to see consumers in so much debt, because that’s part of the plan… Plan? what plan are you talking about Chuck?  Ahhh grasshopper, come sit, grab your coffee cup and listen…  As I see it, the Elites want us all to be in so much debt that it makes it easier to switch to a cashless society… That’s my opinion and I hope to be wrong!  

OK, onto something else, Chuck! Hey! how about that Eurozone economic recovery? Showing even more signs that the Eurozone is pulling itself out of the doldrums of an economic recession, the 2nd QTR GDP Flash report showed an increase of 0.6% in the 2nd QTR.. Always keep in mind that the Eurozone has the juggernaut German economy, on one side, and the dogs of Italy, Portugal, Greece, and so on, on the other side…  But let’s not lose our focus here, and that is that the Eurozone economy is coming out of the recession, and that might mean that the European Central Bank (ECB) will begin to dismantle their monetary policy of bond buying, and negative deposit rates, soon..  

It can’t be soon enough for me! I was reading an article the other day about the global economy, and how it was giving Central Banks and Governments a false reading on the Global Growth, and that if they reverse their negative rates, they’re going to have to just go back and put the negative rates back on, when the global recession hits…  The writer, found a place in my thoughts, as he talked about the accumulation of debt being the main factor behind the Global recession! 

I already talked about Gold today, so I thought I would point something out that might not be caught by the naked eye…  And that is: Remember earlier this year, when I wrote about the CEO of a Palladium company, who said that Palladium would bypass Platinum in price this year? Well, Palladium is catching up, and right now sits only about $68 from Platinum, and at the beginning of the year the difference was about $200!

The U.S Data Cupboard will have difficulty living up to yesterday’s Retail Sales print, and it won’t, but it will have Housing Starts data, and the FOMC Meeting Minutes this afternoon. The Meeting Minutes might throw some cold water on the dollar this afternoon, as I expect the minutes to contain some conversation about how the Fed needs to dealy rate hikes…   

To recap…  Amazon Prime Day in July, along with back to school purchases, pushed Retail Sales to an increase of 0.6%! And the dollar bugs came out of the wallboards once again. The euro is taking a trip to the woodshed, to join Gold, which has been there all week! Eurozone 2nd QTR GDP Flash report was good at a 0.6% increase! And Palladium continues to narrow the spread to Platinum…

For What It’s Worth…  Well, since I mentioned this above, I thought this article on zerohedge.com was apropos… It’s about the consumer debt… and can be found here: http://www.zerohedge.com/news/2017-08-15/fed-issues-warning-household-credit-hits-new-record-high 

Or, here’s your snippet: “After we first reported last week that U.S. credit card debt hit a new all time high with both student and auto loans rising to fresh records with every new report…

Discussing the troubling deterioration in credit card defaults, first pointed out here in April, the New York Fed said that credit card balance flows into both early and serious delinquencies increased from a year ago, describing this as “a persistent upward movement not seen since 2009.” As shown in the chart below, the transition into 30 and 90-Day delinquencies has, over the past two quarters, surged to the highest rate since the first quarter of 2013, suggesting something drastically changed in the last three quarters when it comes to U.S. consumer behavior.

“While relatively low, credit card delinquency flows climbed notably over the past year,” said Andrew Haughwout, senior vice president at the New York Fed. “This is occurring within the context of loosening lending standards, as borrowers with lower credit scores recover their ability to access credit cards. The current state of credit card delinquency flows can be an early indicator of future trends and we will closely monitor the degree to which this uptick is predictive of further consumer distress.”

That bolded statement, is the first official warning by the Fed that the U.S. consumer is sick, and the Fed has no way reasonable explanation for this troubling jump in delinquencies. Timestamp it, because this will certainly not the be the last time the Fed warns about the dangerous consequences of all-time high credit card debt.

As for the “further uptick in consumer distress”, we are just guessing but the fact that credit card defaults are jumping at a time when sales at fast food and other restaurants have declined for 17 consecutive quarters, and when $250 billion in U.S. household savings was just “revised” away, may all be connected.”  

Chuck again…  I’m telling you now so you can listen to me later, all this debt is not good for anyone, but the Elites… I’m just saying! 

Currencies today 8/16/17… American Style: A$ .7855, kiwi .7243, C$ .7769, euro 1.1704, sterling 1.2872, Swiss $.9742, … European Style: rand 13.2446, krone 7.9574, SEK 8.1050, HUF 259.61, zloty 3.6516, koruna 22.2437, RUB 59.82, yen 110.81, sing 1.3683, HKD 7.8219, INR 64.13, China 6.6790, peso 17.79, BRL 3.1854, Dollar Index 94.01, Oil $47.71, 10-year 2.28%, Silver $16.67, Platinum $964.28, Palladium 896.39, and Gold… $1,276.10 

That’s it for today… Oh My! Did my beloved Cardinals get spanked in Boston last night or what? Man that was so ugly, I had to switch channels! Those little rascals, my grandkids, were at the house again yesterday… Thank goodness school starts today for them! August is half over, which means… Football season will be upon us!  I’m hoping that my beloved Missouri Tigers will be better this year, for they sure stunk up the place last year! of course everyone in Missouri is waiting for Basketball season to begin, as Mizzou had a banner recruiting year to say the least!  The Beatles take us to the finish line today with their song: Norwegian Wood…  This was from the Rubber Soul album, which was the first Beatles album to contain only songs they had written.  And it was one of my fave Beatles albums!  And with that, it’s time to go.. I hope you have a Wonderful Wednesday, and Be Good To Yourself!

 

 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts

 August 15, 2017

* Safe Haven unwinding in process

* Gold gets whacked again!

* Chuck reminisces for Old School football! 

 

Good day… And a Tom Terrific Tuesday to you! We had all three grandkids at the house yesterday, as their parents, school teachers, had to report for meetings and school hasn’t started yet…  The kids were really wound up, and I had to raise my voice to them a couple of times, which was surprising to them, as they thought I was just this old man that never said anything! HA! They’ll be back again today… Hopefully, they got worn out yesterday, but I doubt it! They are so funny when they are all together, planning and scheming, especially when they don’t know you’re listening to them!  OK.. Billy Paul greeted me this morning with his song: Me & Mrs Jones…  A great tune!  

Well, the safe haven assets are getting unwound as the saber rattling that grew to a crescendo last week, has dissipated, for now that is, which means the safehavens like Gold, Treasuries, euros, yen have all seen their lofty levels of last week, get thrown out the window. But for how long? I submit that it won’t be long before another round of disparaging words come from Washington, and we start the flight to safety all over again. 

That could come from the U.S. Data Cupboard today, as we will see the color of the July Retail Sales here in the U.S. The Butler Household Index indicates to me that this July report should be better than the average bear, as there sure have been lots of packages that came through our doors both here and in Florida! the so-called experts are calling for an increase of 0.3%, which sure would be a sigh of relief for the Fed members, after they had to sweat out last month’s negative print in Retail Sales. 

But should this print disappoint and not meet expectations, the support the dollar has been getting will most likely head for the hills, and leave the dollar to fight its own battles, which it has not done a very good job of lately. 

It sure has been quiet over in the Eurozone lately…  All I read about is the payment that the U.K. will have to fork over to the European Union (EU) for leaving the Union… It’s a large sum of money, but compared to the money that the European Central Bank (ECB) has forked out to Greece these last 6 years, it’s chicken feed…  

At first yesterday, the Aussie dollar (A$) and kiwi were benefitting from the unwinding of safe havens, as it would sure be nice to not have bombs exploding north of the S. Pacific… Kiwi actually rallied to trade above 73-cents, but then the rug got pulled from underneath these two currencies and soon they were caught up in the selling of the currencies and metals.

Well, if you ask Elon Musk if we should have been concerned about N. Korea, he’ll tell you no, that we should be more concerned about artificial Intelligence (AI)… Check out his tweet from this past weekend…  “If you’re not concerned about AI safety, you should be. Vastly more risk than North Korea.” – Elon Musk 

Interesting take, don’t you agree? OK.. onto other things… Gold got whacked yesterday, and is getting whacked in the early morning trading today too. UGH! This selling has nothing to do with interest rates, or growth prospects, it’s all about two things… Safe haven unwinding, and “the boys in the band” taking this opportunity to “pile on”… Which used to be a penalty in football, but I doubt it is any longer, given al the rules changes they’ve made to football. Look, I’m old-school when it comes to my views of how football is played, and in my humble opinion, at the rate they keep going with the rules changes, pretty soon we won’t recognize the sport any longer…

  And yes, I know all about the head injuries, etc. But it’s just like any other profession, you know the risks going in, and it’s YOUR decision to continue or not…  That’s my thought, and there’s nothing you can say that will change it! HA! 

But doesn’t it just get your dander up when you see engineered take downs of Gold & Silver?  229,000 contracts in Gold were traded yesterday, and I would bet a dollar to a Krispy Kreme that a good number of those contracts were paper short sales, with no intention whatsoever to make delivery…  

In Japan, good economic data surprised the markets, but yen couldn’t get any traction from the 2nd QTR preliminary print of 4% increase (2.5% was expected)… Where in the world did Japan get 4% growth? Did they pull it out of a magician’s hat?  Japan, with all their problems, were able to print a 4% GDP, and the U.S can’t even muster 2%?  Something is awry here folks…  The report for Japan was the strongest GDP they’ve seen in over two years!  And before you go and think that buying yen would be a smart thing to do, let me remind you that we’ve seen blips like this in regards to economic prints from Japan before, and every time things end up to be a one and done print, with no follow up…  So, keep that in mind…

The price of Oil slipped further in the past 24 hours to trade with a $47 handle.. I read this morning that the U.S. shale producers are producing Oil at a record pace, and that just has to make our friends at OPEC< NOT! very unhappy! While I’m happy that the U.S. can shove the price of Oil right up OPEC members’ collective noses, I’m also very concerned about the environmental aspects of shale production using fracking… What will be the unintended consequence of this? 

Oh well, move along now Chuck…  OK, the slippage in the price of Oil has hurt the Petrol Currencies, and now that the euro is also slip sliding away the Norwegian krone is seeing weakness from the price of Oil and the euro slipping… I told you yesterday that the currency that has taken the Oil price slippage the worst is the Canadian loonie, and it continues to be the poster child for how badly a currency can react to something else… 

Speaking of a poster child…  Yesterday, I visited one of my doctors, and he is always amazed at how good (to him) I look considering what’s gone on and is going on with my health… He got to a point yesterday, when he said that I could be the poster child for how to respond to being told you have cancer, and I responded to him… That would have to be a very big poster!  He laughed and said, see? You are amazing!   OK, my big head has come back to normal size after that doctor visit! HA!

The U.S. Data Cupboard has the aforementioned Retail Sales print today, and then a lot of 3rd tier prints, that won’t amount to a hill of beans regarding market moving, so we’ll just move past them and get back to Retail Sales…  This print could be a real market mover today and tomorrow, but then on Thursday we get more market moving data, so keep that in mind when making investment decisions today…  

To recap… No saber rattling, has the save haven currencies and metals on the selling blocks. Gold gets whacked yesterday and is getting whacked again early this morning…  it’s quiet in the Eurozone, and Japan prints a very strong 2nd QTR GDP! The price of Oil is slipping again, and taking the Petrol Currencies along for the ride on the slippery slope. 

For What It’s Worth…  Well, thanks to my friends over at GATA, who went me this story, we have a good FWIW this morning, and it’s about the dollar falling, and can be found here: http://www.scmp.com/business/article/2106812/us-dollars-fall-could-become-self-fulfilling-prophecy  

Or, here’s your snippet: “Evidence of rising Asian central bank reserves could be the catalyst for another leg down in the US dollar. The currency markets may rationally conclude and react to the notion that such accruals will be accompanied by reserve diversification, as the central banks sell some of their new holdings of the greenback for other major currencies.  

 Of course, geopolitical concerns could intrude on market sentiment but even then investors make rational, if hurried, decisions. As rising tensions in the Korean peninsula re-emerged last week, the currency markets were quick to look for safe havens, selling US dollars against, among others, the Swiss franc.

But those decisions are by definition reactive whereas for most of 2017 the currency markets have been pro-active in selling the US dollar, and as the greenback has fallen, Asian central bank reserves have been increasing.” 

Chuck again…  Isn’t it interesting that this article came from China? When they think the dollar is vulnerable, it confirms what I’ve been thinking and saying…

Currencies today 8/15/17… American Style: A$ .7838, kiwi .7280, C$ .7768, euro 1.1746, sterling 1.2875, Swiss $.9716, … European Style: rand 13.2905, krone 7.9606, SEK 8.0773, HUF 258.92, zloty 3.6414, koruna 22.26, RUB 59.76, yen 110.39, sing 1.3660, HKD 7.8231, INR 64.16, China 6.6673, peso 17.82, BRL 3.1886, Dollar Index 93.78, Oil $47.41, 10-year 2.25%, Silver $16.85, Platinum $961.16, Palladium $896.03, and Gold… $1,279.50  

That’s it for today…  No baseball for me last night, as the Cardinals had a travel day, and that meant lots of reading time for yours truly, which normally means I’m full of you know what and vinegar the next day… But you were saved from that, as I’m still feeling the effects of my infusion last week, and can’t seem to shake this feeling that I need to sleep! 8/15 was the day we used to start football practice… Now the kids start school! Crazy!  Well, if you can’t get moving to the song that takes us to the finish line today, there’s no hope for you!  Pharrell Williams takes us to the finish line today with his song: Happy…    And with that, I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!

 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts   

August 14, 2017  

* CPI prints weak for 5th month

* When will Draghi begin to bemoan?

* Loonie is hardest hit Petrol Currency… 

Good day… And a Marvelous Monday to you! Man-o-man, am I glad to be back at home, not that my adventures to Key West, and then to Table Rock Lake weren’t full of good times, it’s just that when I’m here, everything works right, and I don’t have to jump through hoops to get a letter out! Thanks to Nuria at the Aden Research Group for assisting me in getting the letter, what little there was of it, out on Friday morning… The Pfennig is going to go through some changes in appearance in a few days. Remember when I first announced that I was leaving my former place of employment and that the Aden sisters were going to publish the Pfennig, but that there would be ads put on the Pfennig to help defray the costs of the publishing… Hey! It my be free to you, but it doesn’t get completed in a vacuum for free! So, there’s your notice of the changes that are coming… R.E.M greets me this morning with their song: Drive… This song was from the Automatic For The People album, which I think was one of their best!

Well, well, well, look what all those hedonic adjustments, have gotten those that thought that inflation was going to be soaring by now… The week-long awaited print of July’s stupid CPI was a disappointment for the 5th month in a row! The powers that be have kept a lid on CPI for so long now, so that retirees and savers would suffer. That’s right, I said that out loud! Those cost of living increases have been few in number, and small in nature these past 10 years because, the hedonic adjustments like substituting items in the basket of goods, or adjusting the weightings of the items in the basket of goods, to name a couple. But now those same hedonic adjustments are  coming back to haunt the Fed, and the Gov’t… Uh-Oh, what are we going to do now? No inflation (CPI grew at just 0.1% in June and 1.7% YTD) means the Fed doesn’t have anything to hang their hats on when talking about rate hikes… The markets are just now catching on, and all that dollar buying last week, because they thought inflation was going to finally show strength, was wasted…

The dollar got sold like funnel cakes at a State Fair on Friday, and rightly so! The Dollar Index which on Thursday was 93.78, fell to 93.069… There are lots of chartists out there that have their own opinion about where the Dollar Index reveals a true weak dollar trend, I’m hoping my friend and former colleague at the Sovereign Society, Sean Hyman, reads this today, and shares with us his thoughts on at what level the Dollar Index will reveal a true weak dollar trend… I’m pretty sure we’re closing in on it folks…

The euro climbed back above the 1.18 handle on Friday, and remains there this morning, but barely, as the overnight markets saw some profit taking. The one thing that I’ve been waiting for with all this euro strength, is for European Central Bank (ECB) President, Mario Draghi, to begin to bemoan the strength of the euro, like his predecessor did all the time. Remember Jean Claude Trichet? Man, I had to look him up for I had forgotten all about him! 

I think that Draghi is OK with the euro strength so far, because it is a sign that his policies are working, and economic growth is returning to the Eurozone… But too much euro strength is going to put a governor on inflation, which is normally exactly what a country is looking for, but not these days… As we’ve talked about before until the sun comes up, countries now are looking for inflation, as a sign that economic growth is picking up…  So, as far as the euro strength to date is concerned, I think Draghi is proud of it… But should the euro match the last 7 months of strength in the coming months, I expect Draghi to begin to do his best Trichet imitation… 

After a couple of outstanding performances for Gold last week, it was held in check by the “boys in the band” on Friday, and was only able to carve out a gain of $2.90 on the day, and close at $1,288.70… The shiny metal is down this morning, but as I said above the overnight markets has been all about profit taking. 

The saber rattling that dominated last week’s trading, looks as though it is going to calm down a bit this week, which would allow U.S. data to dominate the trading… The U.S. Data Cupboard has Retail Sales, Housing Starts, The FOMC Meeting Minutes from their last meeting in July, two of my fave economic prints: Industrial Production and Capacity Utilization, and Leading Indicators all this week… In recent months, the U.S. data has been very weak, and that hasn’t been a good thing for the dollar. But, even when we get a surprise up-side print, the dollar has been sold, which is one of the signs of a weak dollar trend. 

The Chinese renminbi continues to see appreciations. This past 6-weeks, has reminded me of the period of 2003-through 2008, when the renminbi was the closest thing to a One-Way Street that there was when I came to currency movement.  Of course there were days of mark downs, but for the most part it was a tiny appreciation every day. At least that’s how I remember it! 

And Japanese yen continues to defy the obvious, which is that the currency should be getting sold daily, but instead it basks in the sun rays that come from the flight to safety… The saber rattling may have calmed down a bit, but its still out there folks, and you can see that in the yield of the 10-year Treasury, which has fallen again, this time down to 2.21%… 

The price of Oil has slipped a bit in the past couple of days, and is trading below $49 at $48.59 as I write. The Canadian dollar / loonie has been the hardest hit Petrol Currency and the Norwegian krone has been the least hit by the slippage in the price of Oil. A few weeks ago, I wrote about Oil for my weekly letter in the Dow Theory Letters (www.dowtheoryletters.com) and in it I basically said that I saw the price of Oil trading between $40 and $50 as we go along…   You know, I write some very interesting articles for the DTL website, and while it costs to read them, I don’t believe that there can be a price that relates to my writing! HA!   Seriously though, I don’t think it’s highway robbery, to subscribe, so what are you waiting for? You get me, you get the Aden Sisters, and other very good writers…. 

And in a follow up to things I’ve written about in the past, regarding a cashless society, and how bad that would be for you and me, I had this note sent to me this weekend: Two thirds of traders in Sweden believe they will stop accepting cash by 2030, according to a report by Stockholm’s Royal Institute of Technology… UGH!   

I pretty much was out of the loop last week, with all my traveling, and infusion day, which by the way was my worst one yet, I felt like death warmed over for two day following the infusion! UGH!  So, I loved that Ed Steer (www.edsteergoldandsilver.com) highlighted this summary of the markets last week. And he got it from zerohedge.com.. here it is! 

* Dow’s worst week in 5 months (Mar ’17)
* S&P’s worst week since pre-election (Nov ’16)
* Russell 2000 worst week since Feb ’16
* Financials worst week in 5 months
* VIX biggest percentage spike since Aug ’15 (China Devaluation)
* HY Credit Risk biggest jump since election (Nov ’16)
* Silver’s biggest week since Jul ’16
* Gold’s biggest week since Apr ’16
* Offshore Yuan’s best week in 7 months (Jan ’17)  

So, not so much a good week for the stock jockeys, eh? But on the other side of the coin were the precious metals, and bonds…  My good friend, Duane asked me the other day about where does the money go when stocks get sold?  I said, metals and bonds… And look what was the best performers last week!  

To Recap…  The games people play now, every night and every day now, never meaning what they say now, never saying what they mean – Joe South…  That’s the song that kept bouncing round in my fog filled brain last Friday, when the stupid CPI printed just a 0.1% increase for July, when the markets were forecasting a strong print.  The Gov’t has played with the hedonic adjustments in CPI for so long now, that they don’t know how to remove them, and thus when they want to show inflation rising, they can’t! The dollar got sold on Friday, but has fought back in the overnight trading, which has seen mostly profit taking in the investment classes that had gains last week.  The Saber rattling seems to have calmed down a bit and that means the markets can focus on U.S. Data which will be plentiful this week.  

For What It’s Worth… Well, I saw this on Ed Steer’s letter from Saturday, and thought it to be FWIW worthy! it’s an article about what to do with the car batteries of these electric cars, and can be found here: https://www.theguardian.com/sustainable-business/2017/aug/10/electric-cars-big-battery-waste-problem-lithium-recycling  

Or, here’s your snippet: “The drive to replace polluting petrol and diesel cars with a new breed of electric vehicles has gathered momentum in recent weeks. But there is an unanswered environmental question at the heart of the electric car movement: what on earth to do with their half-tonne lithium-ion batteries when they wear out?

British and French governments last month committed to outlaw the sale of petrol- and diesel-powered cars by 2040, and carmaker Volvo pledged to only sell electric or hybrid vehicles from 2019.

The number of electric cars in the world passed the 2m mark last year and the International Energy Agency estimates there will be 140m electric cars globally by 2030 if countries meet Paris climate agreement targets. This electric vehicle boom could leave 11m tonnes of spent lithium-ion batteries in need of recycling between now and 2030, according to Ajay Kochhar, CEO of Canadian battery recycling startup Li-Cycle.”

Chuck again… Yes, and there’s the need to recycle these batteries, because… “batteries carry a risk of giving off toxic gases if damaged, but core ingredients such as lithium and cobalt are finite and extraction can lead to water pollution and depletion among other environmental consequences. ”

Currencies today 8/14/17… American Style: A$ .7873, kiwi .7293, C$ .7707, euro 1.18, sterling 1.2977, Swiss $ .9678, … European Style: rand 13.3249, krone 7.9257, SEK 8.1213, HUF 257.92, zloty 3.6258, koruna 22.1561, RUB 59.79, yen 109.69, sing 1.3613, HKD 7.8205, INR 64.09, China 6.6644, peso 17.77, BRL 3.1895, Dollar Index 93.30, Oil $48.49, 10-year 2.21%, Silver $17.04, Platinum $968.84, Palladium $895.75, and Gold… $1,286.90 

That’s it for today… Well my beloved Cardinal’s 8-game winning streak came to an end yesterday, but not without some dramatics late in the game! These next two weeks are chock-full-o-doctor visits for me… Last spring when they diagnosed me with A-fib, that just added two more doctors to my list… UGH! Well, it’s that time of the year again, to begin the planning for our annual Labor Day BBQ, and Pool Party… It’s always a good time, and my favorite day of the summer! Well, the grandkids go back to school this week, and Alex still has a couple weeks before college begins.  Tom Petty & the Heartbreakers take us to the finish line today with their song: Mary Jane’s Last Dance… This is my fave Tom Petty song, and with that I bid you farewell for today, and hope you have a Marvelous Monday… Be Good To Yourself!

 

 

 

 

 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts

  August 11, 2017

* Chuck has no connection… 

* Gold is soaring on saber rattling

* This is a half-baked Pfennig today… 

Good day… And a Happy Friday to one and all! This is going to be short-n-sweet this morning, as my infusion confusion has me in a real choke hold this morning. In addition, I don’t know if this will even go out, as I’m having all kinds of technical problems today…  My laptop has decided to move at a snail’s pace, and not accept most of the commands I give it! UGH… Speaking of a snail, do you know what the snail said when he went for a ride on the back of the turtle?    Wheeeeeee!  I’ve got a million of them! HA!  The great Johnny Rivers greeted me this morning with his song: The Poor Side of Town  

The poor side of town, down by the boondocks, and other songs about the “other side of the tracks” as my mom used to call it, remind us of where we don’t want to end up, and therefore we had better diversify our investment portfolios using currencies and metals!  I bet you didn’t see that one coming, eh?  I don’t know why I’m even attempting to write this morning, as I have no currency levels, no metals levels or anything else! And since I spent the better part of yesterday at the infusion center, I wasn’t checking things either!  

So, why am I writing? Because I’ve been doing this so long, that it’s a habit, I wake up, go to my laptop and begin researching, and reading, so I may begin to write. I can tell you that Gold had another stellar day yesterday, as the saber rattling continued, thus driving the “fear factor” that usually gives Gold a boost. 

All the saber rattling caught up with the stock market yesterday. Could this be the beginning of a stock slide or just a blip?  But, since I’m not even your last choice as a stock jockey, I’ll let that one sit there and simmer… 

The flight to safety is in full swing folks, and is kicking tail and taking names later if any asset class stands in its way.  Gold is closing in on $1,300, as it sits around $1,291 this morning. I told you a few weeks ago that it appeared to me that Gold was ready to go on a strong run, and as they would say on the TV Show The A Team, I love it when a plan comes together!

Well, we’ve come to the cheese that binds this morning, and I still don’t have any strong connection, nor is my laptop functioning correctly, so I’m going to punt… I apologize for that, but what can a poor boy do? Even my mobile phone won’t go out and look up stuff! UGH!  I guess it had better reboot the wireless server, eh?   But, before I do that I’ll send you on your way to having a Fantastico Friday, and a Wonderful Weekend! I’m going back to bed, to see if my head clears up, and try not to worry about the fact that I didn’t write a good letter today…    Be Good To Yourself, and have fun… 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts  

August 10, 2017

* Dollar Bugs have the conn

* Gold soars toward $1,300…

* Zuma wins confidence vote… 

 

Good day…  And a Tub Thumpin’ Thursday to you! As I mentioned yesterday, I have an infusion today, so there’ll be no Tub Thumpin’ for me today, so please pick up the slack, eh?  I actually feel like I had the infusion yesterday! UGH! I’m really draggin’ the line today folks, I need a pick-me-up…  Maybe I’ll get it as I go along here this morning…  Carlos Santana greets me this morning with his song: Soul Sacrifice  

Well, here we are once again with the dollar bugs holding the conn, and everywhere I search I can’t find one good reason for that! Oh, I find stuff like, “Traders are upbeat about dollar with the flight to safety, dominating markets”, and “Traders think PPI (wholesale inflation) will be upbeat tomorrow, thus showing inflation is coming”…  Wait! What? Didn’t rising inflation worries used to deep six a currency? Why, yes it did, Chuck, but these days trading currencies is mostly sentiment, with a little fundamentals thrown in…  And so, when traders get it in their collective heads that whatever is going on is good for a currency, like the dollar, then they will be shrug off everything else, and focus on one thing…

  I know, I know, it’s crazy, right? But, that’s the way it is these days, so we have to roll with the punches… I still believe the underlying nascent trend is for a weak dollar, but since it’s just starting, it doesn’t have the legs to run from this kind of stuff, so… It’s a dollar day…  But, hey! I look at it like this… It gives us an opportunity to buy at cheaper prices, right? Yes, indeed it does! 

I saw some really disheartening news this morning from New Zealand… Reserve Bank of New Zealand (RBNZ) Gov. Wheeler, who still has one month to go in his term, was out dissing kiwi again… And telling anyone that would listen that the RBNZ is always assessing the situation with kiwi, and if they have to intervene to keep it from getting too strong, they will…  Well, I guess Wheeler can put his intervention arrow back in his quiver, because kiwi really dropped last night…   UGH!

For years now, and longtime readers will recall, Wheeler has been a thorn in my side, and I’ll be throwing a party on his last day as Gov. of the RBNZ next month…  He just doesn’t “get it” regarding kiwi, and has the Central Bank mentality of a weak currency leads to export growth… But a weak currency has unintended consequences too… But I think he’s been too worried about the export growth to see anything else.  

Well there are a few currencies on the rally tracks today… The Chinese renminbi was allowed to appreciate again last night, and Gold & Silver both put in nice days yesterday, along with early morning trading that continues those move from yesterday.  Gold really too flight yesterday, so let’s talk about Gold, eh?  

Gold closed up $16.20 yesterday to end the day at $1,276.90, and if it weren’t for the “boys in the band” keeping things in order, Gold would have flown even higher, as proved by the high on the day which was $1,281.. The shiny metal is up to $1,284.50 in the early morning trading today, but this is where things get scary as far as I’m concerned…  The usual pattern has been for the “boys in the band” to begin an engineered take down of Gold whenever it begins to get near $1,300..  They usually use an excuse like the “dollar index rose” or some other flim-flam excuse to begin their short selling… But recently, the “boys in the band” have been quite brazen, and proved that they don’t need an “excuse” to sell short… 

And look at Silver this morning, finally back to $17!  Platinum and Palladium aren’t chopped liver either! The flight to safety has really shone the light brightly on these precious metals, as it was about time! I’ve told you about the supply issues in Gold & Silver, I’ve told you about the truck loads of Gold that Russia and China have bought, are buying and will continue to buy, and I’ve told you about how all the saber rattling going on in the world today, there’s no excuse in my mind for Gold and the other metals to NOT rally!   

Speaking of saber rattling… James Rickards thinks that the U.S. and N. Korea will be in a war soon.. no boots on the ground kind of warfare.. The 5 Minute Forecast (www.agorafinancial.com) yesterday, had a good update on Rickard’s thoughts on this, and included this quote from Rickards… “The U.S. attack will involve all elements of U.S. military and covert action including cyberwarfare aimed at the North Korean command structure and critical infrastructure, as well as special operations, psychological operations (psyops), drones, strategic bombing and many other salient.”   

Well if that’s really what’s in the cards, you can understand right away why Gold is ticking higher and higher each day…  And then there’s another reason that’s taking a back seat to the saber rattling right now, but is just as important and that is interest rate talk… 

And in an update from something we talked about earlier in the week… S. African President, Zuma, did win the second round of his confidence vote, thus keep the wolves at the door, and thus removing the euphoria that had helped the rand rally earlier in the week… UGH! 

Well, I’ve been remiss in not sharing something with you regarding Fed St. Louis President James Bullard… Former colleague and longtime friend, Ty Keough, sent me this note the other day, and well, I guess I still had the ocean on my mind… Well, James Bullard was in the mood to talk about interest rates on Tuesday, when he spoke at a conference in Tennessee, and told the crowd there that the “Fed can leave interest rates where they are now, and that the current level of the policy rate is likely to remain appropriate for the near term.”

Bullard has long been a dove and believes like I do that the Fed does not need to raise rates until the U.S. economy breaks out of its pattern of low inflation and about 2% annual growth… Bullard didn’t talk much about the weakening economy, the debt, the car loans problems, the student debt, loan problems, a housing bubble, or anything like that, but I wouldn’t expect him to… That kind of stuff is left up to me to talk about! HA! 

That sure was interesting yesterday, that bit I told you about Big Al Greenspan coming out and talking about the Bond Bubble popping, eh? It’s funny, not funny ha-ha, but funny to me that as a former Fed Chairman, that he talks about this stuff now…  And here’s some cocktail trivia for you.. The U.S Treasury 10-year’s yield has not been higher than 2.5% since 2012…   

The U.S. Data Cupboard yesterday proved me to be correct in my call that Productivity would be weak, which it was only rising 0.9% and the Unit Labor Costs only grew 0.6%… Both of these are used as an indicator of future inflation… And so, given the prints, I would say there are no signs of aggressive inflation in the future, according to the data the Fed uses…

Today’s Data Cupboard doesn’t have much for us… The usual Tub Thumpin’ Thursday fare of the Weekly Initial Jobless Claims, and today we’ll see the Bloomberg Consumer Confidence survey results..  No biggies here…  

Before I head to the Big Finish today, I wanted to talk a bit about the news this week from Wells Fargo Bank, who had already admitted that they had opened accounts for people fraudulently, now has another problem… Wells Fargo acknowledged Friday that for six years about 570,000 of its customers were charged for auto insurance they didn’t need, potentially driving some to default on their loan and have their cars repossessed.  OMG! What the hell is going on here?  Well, the article can be read here : https://www.washingtonpost.com/news/business/wp/2017/07/28/wells-fargo-charged-570000-customers-for-auto-insurance-they-didnt-need-potentially-forced-some-to-have-cars-repossessed/?utm_term=.129747804704

To recap… It was a dollar day yesterday, as the dollar bugs hold the conn on some really flimsy reasons, but sentiment is the key these days, and that’s what ruling the currencies right now… All the saber rattling has the price of Gold soaring once again, and taking Silver, Platinum and Palladium along for the ride, but this is where it gets scary to Chuck, as Gold nears $1,300 which has been a line in the sand by the boys in the band… 

For What It’s Worth.. Well, when I saw this article I about fell out of my chair… About 7 years ago, I wrote a Sunday Pfennig at the old place of employment, and I went through “Chuck’s Debt Solutions”, and it was widely thought to be an excellent article by the readers.  One of the “solutions” was for the Gov’t to get out of the fixing the roads and bridges business, and instead sell the roads and bridges (and reduce debt) to entrepreneurs who could make the toll roads or whatever it took for them to turn a profit…   I went deeper into all that in the article, but for now, that’s the idea…  Well, along came the Australians, who want to pitch that idea to President Trump!  You can read it here: https://www.bloomberg.com/news/articles/2017-08-10/australia-pitches-trump-on-a-plan-to-fix-america-s-roads-and-bridges

Or, here’s your snippet: “Among his many campaign promises, Donald Trump pledged to fix America’s crumbling roads and bridges with $1 trillion in infrastructure spending. Almost seven months into office, though, and two months removed from his vaunted “infrastructure week,” the president has revealed few details for how to pay for it. As his advisers look for ideas, a group of Australian politicians and executives has been lobbying for the administration to adopt a controversial policy of selling or leasing airports, toll roads, and other public facilities to raise money for infrastructure projects.”

Chuck again… OK, I know I’m not the first person to have that idea and put it in writing through the years, but since I’m the only person I know that did that, I’m claiming it was my idea!   I sure hope the Trump administration listens to these proposals to reduce debt… 

Currencies today 8/10/17… American Style: A$ .7878, kiwi .7265, C$ .7856, euro 1.1710, sterling 1.30, Swiss $.9657, … European Style: rand 13.3703, krone 7.9677, SEK 8.1670, HUF 260.57, zloty 3.6477, koruna 22.3278, RUB 59.96, yen 110.83, sing 1.3645, HKD 7.8156, INR 63.99, China 6.6818, peso 17.95, BRL 3.1369, Dollar Index 93.78, Oil $49.88, 10yr 2.24%, Silver $17.07, Platinum $978.30, Palladium $901.77, and Gold… $1,284.50   

That’s it for today… Well, here I am back in the saddle, at home at my writing desk… It seems like a long time since I was last here! Yesterday, I completely forgot to say Happy Birthday to one of my fave people in the world… Kristin Kuchem!  When I sent her a text later in the day, wishing her Happy Birthday, she responded, “UGH”… I take that she doesn’t like getting older! HA!  Well, looky there! My beloved Cardinals have won 5 in a row, and are only 1.5 games out of first place! Who would have thunk that to be possible given their level of play this year?  Alrighty then, I have to get going to make it to the infusion center on time… The Cure takes us to the finish line today with their song: Just Like Heaven… And with that, I hope you have a Tub Thumpin’ Thursday! And remember to be Good To Yourself!

 

 

Chuck Butler’s: A Pfennig For Your Thoughts  

August 9, 2017

* A Flight To Safety picks up steam…

* Gold rallies nearly $11 in early morning trading…

* Currency Trader talks about the euro… 

 

Good day… And a Wonderful Wednesday to you! We had a relatively easy trip back to our home away from home yesterday, and all our bags are packed and we’re ready to go, to the airport this morning for a trip back to St. Louis. Key West was absolute fun for our group…. Me, Kathy, Alex and Molly, and we had to drag Alex away from the Florida straights to leave! I guess I’m ready to return to St. Louis and see my other grandkids, Delaney Grace and Everett… With all the saber rattling going on around the world these days, today’s greeting song plays nicely… It’s Cat Stevens singing his song: Peace Train…

The euro couldn’t hold it’s grip on the 1.18 figure yesterday, as the U.S. Jobs Postings showed a very strong labor market… The problem I see there is that the people looking for jobs, aren’t qualified to fill those openings… And training them is a very costly adventure, and sometimes ends up backfiring. But the dollar got some love from the traders for that strong print, and along with the Small Business Index, which increased surprisingly I might add, gave the dollar bugs enough to push the euro down on the day…

Yesterday I told you that the IMM Futures positions report showed that long euro positions grew / increased last week… But then we’ve seen it down, then up, then back down so far this week. And then I came across this quote from a trader on Bloomberg.com: “To be short euros here is absolutely lethal,” said Ulf Lindahl, chief executive officer of A.G. Bisset Associates, who manages about $1 billion from Norwalk, Connecticut. He expects the currency to rise to $1.30 by the end of the year, if not sooner. Even after its 3.6 percent rally in July, investors and analysts are predicting further gains.”

I agree with this guy wholeheartedly, and that’s all I’m saying about that today!  The Dollar index didn’t gain though even with the heavily weighted euro component not performing well. No, in a case of stranger than fiction, the Dollar Index drop was engineered by the Japanese yen rally… 

Yen has been rallying on the flight to safety, with all the saber rattling going on.. Why just this morning a couple of hours ago, U.S. President, Trump, issued new, harsh warning to N. Korea…

  And Gold has jumped higher with the flight to safety by nearly $11 ($10.80) in the early morning trading today, and the 10-year Treasury yield has dropped to 2.24%, after spending a couple of weeks around 2.30%…  let me remind you that bond pricing works like this: When the yield goes down, the price goes up, and vice versa… So, there have been lots of 10-year Treasury buying to move the yield to 2.24%… 

I mentioned yesterday that the IMM futures positions saw the Aussie dollar (A$) and Canadian dollar / loonie with increased long positions… I wonder why the New Zealand dollar / kiwi wasn’t a part of the list of currencies with increased long positions, as kiwi has basically outperformed the A$ so far this year.  And I would bet a dollar to a Krispy Kreme that interest rates will be hiked in New Zealand before they are in Australia…  Now, I’m not knocking the A$, as I like that currency too, but just wanted to point out kiwi as another currency that should be seeing increased long positions… 

One currency that shouldn’t be seeing increased long positions, is the U.S. dollar! There are too many dark clouds hanging over the dollar these days folks, and if any of the dark clouds have rain in them, well, as Bob Dylan once said, “A hard rain is gonna come”…  And here’s one of the dark clouds…  

Yesterday, I told you about Consumer Credit, and how the revolving credit component had risen once again… Well, the monthly update from the Federal Reserve confirmed that as of the end of June, total revolving (i.e. credit card) credit rose to $1,021.7 billion, an increase of $4.1 billion on the month, and a new all time high, taking out the previous record high set during the summer of 2008. Now doesn’t that make you shudder?

Remember when U.S. Consumers were supposedly “deleveraging their debt”? Well, not so much any longer, eh? I know that I carry on and on and on about debt, but debt is slavery, and as a country, we’re soon to find out exactly what that means!

I don’t have a crystal ball, nor do I use Tarot Cards, to make these statements, I use logic and common sense… I will admit that most times I’m months and sometimes even a year or so ahead of the call to come to fruition, but they normally do… My one exception is the popping of the Treasury Bubble… I was unaware that the Fed was about to become the biggest buyer of Treasuries in the bond market! But, the day will come… It’ll be too much time since I made the call, so no one will remember what I said at that time! UGH! 

Speaking of the Treasury Bubble… Big Al Greenspan had something to say about it yesterday… I thank Omar Ayales of Gold Charts “r Us for sending me this quote from Big Al… Omar does a fantastic job of charting Gold and we did feature his work here in the Pfennig, while I was on vacation. So, getting back to Big Al and the Treasury Bubble… You can find the whole article here: https://www.bloomberg.com/news/articles/2017-07-31/no-bubble-in-stocks-but-look-out-when-bonds-pop-greenspan-says

Or I’ll give you a line or two to whet your whistle… here goes… “Equity bears hunting for excess in the stock market might be better off worrying about bond prices, Alan Greenspan says. That’s where the actual bubble is, and when it pops, it’ll be bad for everyone.

“By any measure, real long-term interest rates are much too low and therefore unsustainable,” the former Federal Reserve chairman, 91, said in an interview. “When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.” – Alan Greenspan 

I already told you about yesterday’s data prints above, so let’s go directly to today’s prints, which are: Productivity, Unit Labor Costs, and Wholesale Inventories… Productivity has been a real problem for the U.S. and I don’t expect any miracles here… Unit Labor Costs could show an increase in wages, but I doubt it, and Wholesale Inventories play into GDP so, we have that going for us today! 

To recap… Another day of the dog days of summer yesterday, but overnight we’ve had some moves… U.S. President Trump, issued new harsh warnings to N. Korea, and that has a flight to safety going on overnight, with Gold, yen, and Treasuries all being bought…  The Dollar Index continues to drop, but instead of the euro being the driving force behind the drop, that job is now being done by the Japanese yen… I shudder when I say that, but it is what it is… 

For What It’s Worth… Well, I’ve spent a lot of time over the years talking about the Underfunded Pension Plans Problem here in the U.S., and when I saw this story on Bloomberg, well, it caught my eye, because it’s talking about something that might help the U.S. Corporations and their underfunded pension plans… People dying too young… Boy that sure sounds cold doesn’t it? But Corporations are looking at this situation and thinking they might see a light at the end of the tunnel… You can find the article here: https://www.bloomberg.com/news/articles/2017-08-08/americans-are-dying-younger-saving-corporations-billions

Or, here’s your snippet: “Steady improvements in American life expectancy have stalled, and more Americans are dying at younger ages. But for companies straining under the burden of their pension obligations, the distressing trend could have a grim upside: If people don’t end up living as long as they were projected to just a few years ago, their employers ultimately won’t have to pay them as much in pension and other lifelong retirement benefits.

In 2015, the American death rate—the age-adjusted share of Americans dying—rose slightly for the first time since 1999. And over the last two years, at least 12 large companies, from Verizon to General Motors, have said recent slips in mortality improvement have led them to reduce their estimates for how much they could owe retirees by upward of a combined $9.7 billion, according to a Bloomberg analysis of company filings.

“Revised assumptions indicating a shortened longevity,” for instance, led Lockheed Martin to adjust its estimated retirement obligations downward by a total of about $1.6 billion for 2015 and 2016, it said in its most recent annual report.”

Chuck again… I guess the opioid problem here in the U.S. is being blamed for a lot of these early deaths.. So, if I were a Pension Plan manager, which I wouldn’t take that job, period!, but if I were one, I wouldn’t bet that this opioid problem will continue! 

Currencies today 8/9/17… American Style: A$ .7893, kiwi .7328, C$ .7893, euro 1.1750, sterling 1.3018, Swiss $ .9641… European Style: rand 13.4448, krone 7.9499, SEK 8.1884, HUF 25927, zloty 3.6282, koruna 22.2365, RUB 59.88, yen 109.84, sing 1.3622, HKD 7.8146, INR 63.80, China 6.7057, peso 17.95, BRL 3.1254, Dollar Index 93.57, Oil $49.30, 10-year 2.24%, Silver $16.58, Platinum $975.66, Palladium $894.95, and Gold… $1,273.40  

That’s it for today… Well, how about that? My beloved Cardinals are finally above .500, with their win last night in K.C.  And they have a 4-game winning streak for the first time in what seems like eternity! Now the Cardinals come back to St. Louis to play two more games VS K.C…  In the old days on the trading desk, before Mike Meyer was married we would hear the song that’s taking us to the finish line today and say it was “Mike’s song”…  10CC singing their song: I’m Not In Love…  And with that, it’s time to gather up all my things and head to the airport… I’ll talk to you again tomorrow, if God allows, and we’ll see what comes of the latest Trump warnings… I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

 

 

 

 

 

Chuck Butler’s: A Pfennig For Your Thoughts 

August 8, 2017

* S. African President in trouble…

* Petrol Currencies leave rubles behind…

* U.S. Credit Card Debt is off the charts!

 

Good day… And a Tom Terrific Tuesday to you! I’m still in Key West, heading back to my home away from home, tomorrow, and then back to St. Louis on Wednesday, just in time for my next infusion on Thursday. I’m loaded up with doctor visits the next couple of weeks, so no sitting around doing nothing for me! HA! We did touristy things yesterday, and I had fun, but too much walking had me in pain by mid-afternoon. We also went on a sunset cruise last night, but… clouds and rain for most of the day, gave way to a beautiful evening and sunset on the ocean!  As soon as I get this out the door, and the kids wake up, we’ll be packing the car and heading north, for our 5 hour car trip. Hey! At least I had something to report that I did yesterday, the currencies and metals sure didn’t! I was greeted this morning by Steely Dan and their song: Black Cow…

It was another of those “dog days of summer” yesterday, as traders sat on their collective hands and did nothing. The story going ‘round is that traders want to see signs of inflation before taking on any more dollar long positions… The IMM futures positions from last week showed that long euros, Aussie dollars, and Canadian dollars, positions were increased, and yen short positions were decreased… That ‘s a good indication that the sentiment toward the dollar has gone to the dogs of summer…

But as I always remind people, a trend is not a ONE-WAY Street, and that there can be volatility within the trend, but once that volatility plays out the asset returns to the underlying trend. And that’s what we’re seeing now, as the dollar had its day on Friday, but has drifted since, and soon, will be on the slippery slope once again… At least that’s my opinion, and I could be wrong! 

Yesterday I told you that the euro was creeping toward 1.18 again, and sure as the sun rises each day, the single unit did climb above 1.18 again by the end of the day, which is where it sits this morning. The best mover overnight though was the Norwegian krone, which, as I’ve told you previously, is getting love from the rise in the price of Oil, and from the rise in the euro. Overnight, the price of Oil moved higher, so the krone had two things going for it once again… 

The other mover yesterday was the S. African rand, which on Friday was getting sold like funnel cakes at a State Fair, because of the news of the Gold mine shutdowns that I told you about yesterday. But then along came a “confidence vote” for President Zuma, of whom the markets do not like, and the first round of the vote was for “no confidence” and the put the rand on the rally tracks. The second round of the vote is today, and if Zuma is ousted, then the rand will continue to rally, but if survives, all this rally will be wiped out… 

China reported yesterday that their reserves grew for a 6th consecutive month, as it appears that the flight of capital has backed off, and China doesn’t need to defend their currency with reserves. The other thing that’s helping their reserves value is the fact that the currencies they do own have increased in value VS the dollar in the past 6 months… 

But any way you slice it, China’s reserves have increased, and that’s a good thing, considering China’s debt position. I just wrote about this in my weekly letter for the Dow Theory Letters (www.dowtheoryletters.com) and while I’m not going to spoil anyone’s appetite that subscribes to the DTL, I will tell you that China’s reserves position goes a long way toward the comfort level that investors have with China.  

I don’t know if you’ve noticed or not, but after a couple of years of daily markdowns of the renminbi, the currency seems to have turned the corner on those daily markdowns. And with the renminbi appreciating, the Singapore dollar follows suit… Yes, I’ve talked about this before, but for any new readers, it’s important that they are aware of the trading pattern of these two..  Singapore has to keep their currency in line with the renminbi, to compete with the Chinese for exports. So, when the renminbi moves in either direction, the Sing dollar follows… And right now that’s a rally mode for the Sing dollar. 

Well, Russia was in the news again last night, and not for all the junk that’s going on in the press, but for an announcement of how they will retaliate for the extension and increase of the sanctions from the U.S. It appears that Russia is prepared to increase their efforts to end their dependence on the dollar.  I’ve talked about this before, so this isn’t new to you, dear reader, but Russia has been accumulating Gold faster than China, and has a goal of ending the dollar standard. 

So, Deputy Foreign Minister Sergey Ryabkov  was quoted yesterday saying, “The Russian government will intensify efforts to cut the country’s dependence on US payment systems and the dollar as a settling currency.”  

I told you above that the price of Oil rose overnight, and that has helped the Petrol Currencies immensely in recent days… One laggard of the group though is the Russian ruble, which is dealing with a rise in inflation in the country, along with the increased sanctions, and a question of whether or not the Central Bank of Russia (CBR) is going to continue to cut rates as the year moves along. 

Speaking of the sanctions that the U.S. placed on Russia…  James Rickards at www.agorafinancial.com sent me this yesterday and I just had to share it with you. You can find the whole article at the link, but here’s a snippet: “The law says that U.S. companies are not allowed to help Russian companies with Arctic oil and gas exploration. But the law also applies to non-U.S. companies that help Russia. That’s a big deal in Europe, where national energy champions like BP, Royal Dutch Shell, Total and Eni had plans to do joint ventures in the Arctic with the Russian energy giants Gazprom and Rosneft. Now the EU is considering sanctions on the U.S. in retaliation for U.S. sanctions on their energy companies. Congress meant to hurt Russia. Instead, they hurt Europe, and now Europe is ready to hurt the U.S.” 

That’s what you call a classic example of “unintended consequences” and reminds me of something my mom used to say… “you made the bed, now go lay in it”… 

And Gold… the dog days of summer have really set in with the Gold trading as only 119,000 contracts were traded yesterday in Gold, and the price only changed a $1 and some change…  The shiny metal is up a few bucks in the early morning trading today, but that hasn’t been a good indicator of what “the boys in the band” will do each day, so we’ll just leave it at that, Gold is up in the early morning trading. 

The U.S. Data Cupboard had the June Consumer Credit (read debt) and it wasn’t as high as expected, as it printed at $12 Billion instead of the $18 Billion that was forecast. I’ve got something in the FWIW section on Consumer debt for you today, so keep reading!  

It also had the LMCI, or did it?  Actually, the Fed has discontinued the LMCI… Here’s the skinny.. As of August, the Federal Reserve’s Labor Market Conditions Index has been discontinued. The report released in July for June is the last of the series. The Fed’s explanation is posted below….

“We decided to stop updating the LMCI because we believe it no longer provides a good summary of changes in U.S. labor market conditions. Specifically, model estimates turned out to be more sensitive to the detrending procedure than we had expected, the measurement of some indicators in recent years has changed in ways that significantly degraded their signal content, and including average hourly earnings as an indicator did not provide a meaningful link between labor market conditions and wage growth.”

Chuck again… Well isn’t that special, in my best Church Lady voice..  I guess the report wasn’t giving the Fed the inflation numbers they wanted to see, so they scraped it…  Sort of like a Mob boss in the movies, they don’t like the performance of a guy so they “rub him out”… 

The Data Cupboard only has a third tier data print today, the Small Business Index, which I would expect to show weakness.

To recap, these are the dog days of summer, and well, the currencies and metals are sure showing us that, as they barely moved yesterday. Dollar traders are waiting for signs of more inflation, and they aren’t going to get it, but that’s just me talking… S. Africa might have a new president by the end of the day, and that would make rand traders happy. The euro has climbed back to 1.18, and Gold is up in the early morning trading today… 

For What It’s Worth… This comes to us by way of MarketWatch and is about how the U.S. Consumer is credit card debt up to their collective eyeballs… It can be found here: http://www.marketwatch.com/story/us-households-will-soon-have-as-much-debt-as-they-had-in-2008-2017-04-03?link=MW_popular

Or, here’s your snippet: “American consumers just hit a scary milestone.
They now collectively have the most outstanding revolving debt — often summarized as credit card debt — in U.S. history, according to a report Monday released by the Federal Reserve. Americans had $1.021 trillion in outstanding revolving credit in June 2017. This beats the previous record in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit.

“This record should serve as a wake-up call to Americans to focus on their credit card debt,” said Matt Schulz, a senior industry analyst at CreditCards.com, a credit card website. “Even if you feel your debt is manageable right now, know that you could be one unexpected emergency away from real trouble.”

Chuck again…  Yes, this is real problem folks, and it shows how easy it has been for consumers to get credit cards… I just shake my head at this kind of stuff, for it all will end up in tears.. mark my words… 

Currencies today 8/8/17… American Style: A$ .7927. kiwi .7362, C$ .7896, euro 1.1808, sterling 1.3032, Swiss $.9732, … European Style: rand 13.1483, krone 7.8953, SEK 8.1382, HUF 257.70, zloty 3.6026, koruna 22.1413, RUB 59.99, yen 110.55, sing 1.3608, HKD 7.8222, INR 63.75, China 6.7199, peso 17.91, BRL 3.1266, Dollar Index 93.31, Oil $49.72, 10yr 2.29%, Silver $16.25, Platinum $970.09, Palladium $890.58, and Gold…. $1,266.50

That’s it for today.. A Big Happy Birthday to my long time friend, and buddy that I call brother, Mike Karvas… Mike used to read the Pfennig, but he’s busier than a one armed paper hanger these days, so I’ll call him later today to wish him happy birthday… Mike and I became friends in 2nd grade… that’s a long time ago, folks.. Hey! my beloved Cardinals finally climbed to .500 with a win last night in K.C.!  It seemed like they were destined to be a losing club this year, and still might end up that way, but for now they are even Steven on the year…   The Beatles takes us to the finish line today with their song: Can’t Buy Me Love.. And with that, it’s time to go, I hope you have a Tom Terrific Tuesday, and Be Good To Yourself! 

Chuck Butler

 

Chuck Butler’s: A Pfennig For Your Thoughts

August 7, 2017

Good Day… And a Marvelous Monday to you! Well, I’m back writing this morning… I tried like the Dickens to keep my head away from the markets while I was gone… But then I was reading James Rickards’ new book: The Road To Ruin… which by the way, I strongly suggest you put away the sharp objects before reading! I had a marvelously relaxing vacation, first with son Andrew, and his family, wife Rachel and son Braden, and then with youngest son Alex and his girlfriend of 3 years now, Molly… A lot of beach time, just relaxing, and a lot of going out to eat at night, which wasn’t good for my waistline!

The currency market saw ups and downs while I was gone… The first week, it was all about the euro, and its trek to 1.19, and I began to think about how on the trade desk they used to say, “When Chuck’s away, the currencies rally”… But then last week, we saw profit taking and then on Friday the stupid BLS report that got the dollar bugs all riled up and thinking that they will soon see a dollar comeback… I beg to differ… And former colleague and friend, Aaron Stevenson, reminded me on Friday that the markets can remain irrational longer than you can remain solvent…

He was referring to Gold, but it could also be attributed to the dollar hanging on right now… Speaking of Gold… It got whacked on Friday after the Jobs report, so let’s talk about that jobs report before we go on today…

Well, the markets went ga-ga again on Friday, because the Bureau of Labor Statistics (BLS) said that 209,000 jobs were “created” in July… The Unemployment Rate fell to 4.3%, and you should have seen the news stories of the bulls out there on Friday, claiming that the Fed was right to hike rates, and that this report suggests that they will be back on the rate hike tracks soon… That sent the dollar soaring, especially VS the euro, and Gold. OK… here’s where I pop the bull’s balloon each month, when I point out a couple of things that the markets tend to overlook… that is until it’s too late! The BLS added 108,000 jobs with their Birth/ Death hedonic adjustment, that they take a good guess at, after they receive all the data from the surveys… I know I sound like a broken record every month, but until the markets realize that 1/2 of the jobs the BLS reports are a guess, I’ll keep reporting it!

I also wanted to mention that the Avg. Hourly Earnings didn’t grow from the prvevious month, and stand at 2.5% growth on an annual basis… OK, so you’ve worked diligently all year, and your supervisor calls you in for your review, and you get glowing remarks, and you’re sitting there thinking, “I’m in the money, I’m in the money” but before you can finish the song in your head, your supervisor tells you that you will receive a 2.5% raise, and you slump in the chair, and the song in your head quickly changes to: poor, poor pitiful me…

Oh, and the Labor Participation rate tick up to 62.9%… That my friends is a rate that SHOULD be looked at with more interest by the markets, but it isn’t, and so… Well, one day, all this is going to smack them in the face and they’ll be wondering why no one told them ahead of time that it was important!

 

The note I had sent to Aaron on Friday was something that I saw from the GATA folks, who esent me a note letting me know that S. African Gold mines were shutting down for lack of production, and that up to 16,000 S. African workers in those mines could be out of a job… The key here is that the supply of Gold will be greatly reduced, and my note said, “and Gold still can’t buy a bid”… ?????

Sibanyne Gold Corp, Ltd. Made an announcement on Friday… “Sibanye may cut 7,400 jobs as it prepares to close its Cooke and Beatrix West operations, which account for about 16 percent of its planned gold production, the Westonaria, South Africa-based company said today. “ Add those cuts to AngloGold’s planned 8,500 job cuts, that means about 14 percent of the country’s gold-mine workers are at risk, as well…

And the other note I sent to Aaron on Friday was how Ted Butler (no relation that I know of) the silver guru, wrote a report on Friday about how the London Bullion Market Association’s report this week on gold and silver bullion held in London-area vaults indicates that silver supplies are substantially lower than had been assumed… And yet Silver can’t shake off the paper short sales… In Ed Steer’s letter every Saturday, he prints a graph that illustrates the number of days of production it would take to cover the short positions that exist… In Silver it’s 155 days and in Gold it’s 70 days… Those numbers are down from the highs they were a few months ago (180, and 90) but, they are still too, darn many to ever ignore them, like the CFTC has done for years now… You can find Ed’s letter here: www.edsteergoldandsilver.com.

As I look at the currencies this morning, not much is going on as the “dog days of summer” have come upon us and the currency markets. Two weeks ago, it was all about the euro, and the Petrol Currencies, as the dollar kept sinking lower and lower, but then came the profit taking and the euphoria over the trumped up jobs report, and a lot of those gains from two weeks ago, have been watered down.  But, when I was looking at the currencies I did notice that the euro was creeping up on 1.18 again, and the Petrol Currencies, which had been led by the Russian ruble for the last couple of years, but now is being led by the Norwegian krone, are still holding Steady Eddie as I write.

I want to take a minute of your time here with a comment on something that I find to be very important to point out… And that is…  That all this dollar bug euphoria that came out of the wall boards on Friday, is simply wrong… The dollar bugs think that because of this Labor report that the Fed will be back to hiking rates next month when they meet. I have to keep my mouth shut when I sit in a restaurant and hear people talking about how the Labor picture is so strong and that will be the key to higher rates…  I would simply point out to them that the Annual Growth Rate for the U.S. has shrunk from 3.91% in 1972, to 1.01% in 2017..  I got that info from the Fed St. Louis, so don’t be thinking that I just made it up! HA!

But my wife won’t let me talk to people in restaurants, so the only opportunity I have to point this out, is here in the Pfennig! HA! Oooops, I’m not supposed to talk about my wife in the Pfennig any more, so please don’t tell her I made an exception this morning! please!  

Well, as I said above, Gold got whacked on Friday, and apparently $1,300 is the limit the “boys in the band” will allow Gold to move to right now, but with all the shenanigans in Washington going on, the problems in the Middle East, Debt up to our eyeballs, along with debt up to the eyeballs of China, the Eurozone, and the U.K. , and supply problems for Gold & Silver that are going to really become a problem, I just don’t see how the “boys in the band” can keep this lid on the price of Gold much longer… 

The U.S. Data Cupboard got a workout on Friday, with the Jobs Jamboree, but also the monthly Trade Deficit which was larger than expected at $44 Billion… Today’s Data Cupboard has a couple of data prints for us today.  One print  is not a market moving print, but one that’s very important in my mind, and that is Consumer Credit (read debt) for the month of June and it is expected to be around $18 Billion… There’s been a recent trend in this data that is troubling to me, and that is an uptick in the revolving credit total, which tells me that consumers are using the last trick in their book… Uh-Oh!

The other print is market moving, and is the Fed’s preferred data for consumer inflation, and it is is the LMCI (Labor Market Conditions Index). This is the Fed’s own report, one they created, and I believe it will show that the June drop to 1.5% was short-lived, and a bounce back to just below 2% is probably in the cards… 

As I was writing this morning, I thought, Chuck, you didn’t really talk about what’s going on overseas today, and concentrated on the U.S…. Hmmm, I guess that’s right, and I apologize for that, and will attempt to do better tomorrow! 

To recap, the currencies and metals lost their mojo on Friday, when the BLS report on jobs brought the dollar bugs out of the wall boards, and the dollar rallied. I doubt this is something that will continue much longer, and the currencies and metals should be able to rebound this week as U.S. data prints pick up, and we’ve seen how badly the dollar performs on those weak data prints! 

For What It’s Worth…  When I saw this in Ed Steer’s Saturday letter this weekend, I knew I had to highlight it, because it points out all the things in the jobs report that the markets forget to look at when they go all bat-crazy because the BLS “created jobs”…  This is from zerohedge.com and can be found here: http://www.zerohedge.com/news/2017-08-04/where-jobs-were-waiters-and-bartenders-topped-list 

Or, here’s your snippet:We already showed that contrary to the strong headline payrolls print, the sole source of job gains in July was part-time jobs, which rose by 393K in the month, the biggest monthly increase since September 2016, as full-time jobs sunk by 54K. Which is why it should not surprise that of the 209K jobs added according to the Establishment survey, the sector that added the most jobs was the “food services and drinking places”, i.e. “waiters and barenders” category, which added 53,000 jobs, the highest monthly increase since March 2014. There have now been 89 consecutive months without a decline for waiter and bartender jobs, the strongest sector for US employment. Needless to say, these jobs fall within leisure and hospitality, that sector pays the worst wages, an average of $13.35 an hour, and $331.08 a week.”

Chuck again… And they go through more job types and their pay, so check it out if you have time, it’s very “telling”, if you ask me!

Currencies today 8/7/17… American Style: A$ .7912. kiwi .7438. C$ .7885, euro 1.1794, sterling 1.3050, Swiss $ .9734, … European Style: rand 13.4374, krone 7.9495, SEK 8.1445, HUF 257.90, zloty 3.6017, koruna 22.1755, RUB 59.93, yen 110.82, sing 1.3628, HKD 7.8222, INR 63.75, China 6.7239, peso 17.87, BRL 3.1394, Dollar Index 93.45, Oil $48.92. 10yr 2,28%, Silver $16.15, Platinum $961.51, Palladium $873.91, and Gold… $1,262.90 

That’s it for today, a little light today, but not bad for the first time in 2 weeks without following the markets!  I’m writing to you today from another new location… Key West! Yes, we decided on Saturday, that we needed to go on a new adventure, and so we packed and headed to Key West. I’ve never been here before, and I like what I’ve seen so far! Last Friday was Little d’s birthday… Delaney Grace turned 10! I remember going to shows and having Pfennig Readers ask me if I had any updated pictures of Delaney Grace! I trust she had a grand time for her birthday! I hear that once I left St. Louis at its 108 degree temperatures, that it cooled off and has stayed that way… Well, that’s not a usual August! The dog days of summer are here folks…  It’s time to go now, so, I hope you have a Marvelous Monday, and Be Good To Yourself! 

Chuck Butler

 

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