Author: admin

June 12, 2018   

* Currencies and metals are stuck in the mud!

* Hey, buddy, I’ve got a hot tip for you! 

 Good Day… And a Tom Terrific Tuesday to you! Whew! I’m one worn out writer this morning! A late night for me, and then my chemo drug decided that it was not going to be a good night for sleep… UGH! But, I’m running on adrenalin this morning, from that nice win last night that I got to witness with friends from the Old EverBank… A Big Thanks to Barry for the invite! Well, we’ve got a lot to cover today from the Big Singapore Summit, so let’s get moving, eh?  Blackfoot greets me this morning with his song: Highway Song..  A good driving song!   

Well, President Trump came out of the Singapore Summit (SS) with a big smile and words for the press that he was satisfied with the meeting, which when he has the smile on his face, it’s usually a tell-tale sign that he’s like the cat that swallowed the canary…  And Kim came out of the meeting a self-proclaimed “new man”…   They also had a signed agreement that N. Korea would begin denuclearization, which was hailed by the press… Ahem, press, you might want to temper that enthusiasm, as there was no date / deadline for this denuclearization…  I’m just saying… 

So, while the press is all ga-ga over the initial thoughts for the SS outcome, the markets are taking a “wait-n-see” stance, which I would think would be the prudent thing to do given they weren’t privy to what was said inside the room where the SS was held.  

The currencies and metals saw little movement since yesterday morning. The Dollar Index has only move 5 ticks in the last 24 hours, and Gold gained a whopping $1 yesterday! So definitely a “wait-n-see” stance for the markets. The 10-year Treasury’s yield remained steady Eddie at 2.96%, and the price of Oil found some bids and was able to move higher in the $65 handle, but no great moves here either. 

In the U.K. today, they are taking some votes on BREXIT items that could be very damaging to PM May’s direction for BREXIT… And pound sterling has really been feeling the effects of two arrows fired at it recently… The first arrow came in the form of Bank of England Gov. Carney, admitting that rate hikes will have to wait, and 2. All these questions about BREXIT, and the “unknowns” which I’ve taught you through the years, are always damaging to a currency. 

There’s little news on the monetary front from the Eurozone, which will see a European Central Bank (ECB) meeting this Thursday. This will be a BIG meeting for the ECB, as the markets are expecting the to begin the process of a unwind of their stimulus, with a narrative on how the ECB will go about it and when it can begin…  Anything short of that, and the euro will get thrown under the bus once again… But if the ECB delivers the goods, the euro could flourish… 

Well, Gold… Boy there sure are some stories out there right now about the shiny metal, and all of them present a different scenario for Gold. I have one them highlighted in the FWIW section today, so be sure to check that out… But the thing I want to highlight here is the fact that my spider sense is tingling and I’m of the opinion that “something BIG” is going to happen this summer that’s going to propel Gold much higher…  I certainly don’t have the contacts that I once had across the industry to confirm this feeling, but let’s just say I’m of a strong opinion that “something Big” is going to happen this summer here… 

So, I have a question for you…  If a friend of yours came to you and told you that he heard that Gold was going to be propelled upward this summer, would you go inside and ask your wife or husband, if they know how you could buy some Gold?   Well, I’m your friend, right? (I certainly hope so) So, take this as me whispering this to you in the driveway… That’s all I’m saying about that… 

I was perusing Twitter yesterday, and came across something that the great economist, David Rosenberg, said about the Jobs report from two Fridays ago.  First off, Rosenberg, is one of the most credible economists out there folks, and anything he says should be listened to…  And this is what he pointed out from the jobs report… “The most important behavioral statistic today in the jobs report was the quit rate, which hit an 18-year high. Workers are telling their bosses where to shove their lousy pay. Profit margins at risk of facing the big squeeze!The most important behavioral statistic today in the jobs report was the quit rate, which hit an 18-year high. Workers are telling their bosses where to shove their lousy pay. Profit margins at risk of facing the big squeeze!” – David Rosenberg

Through the years the economists that I follow have changed names quite a few times… Years ago, it was Stephen Roach that usually had my attention, and then along came others like Danielle Di Martino Booth, and David Rosenberg.  Notice the absence of one Paul Krugman? Good, because he’s no fave of mine! Except when he would make dumb  quotes that I used to capture for Presentations! 

The U.S. Data Cupboard continues to be lacking any real economic data, but it will print the stupid CPI (consumer price index) today, which should show that on an annual basis, the Fed has finally achieved their goal of sustaining 2% inflation… I can’t begin to go through all the heavy lifting the Fed did to get here… But it was a HUGE AMOUNT!  And was it really worth the effort? I mean wouldn’t inflation begin to creep higher on its own without the Fed’s help? Of course it would, it’s a part of the economic nature of things.  But I digress here, and need to move along… 

I told you yesterday that the Emerging Markets were getting whacked on a daily basis these days, and that the rot on the vine had spread to the more mature Emerging Markets…  And then this morning I saw a report on Bloomberg where they listed the top 5 Emerging Markets Currencies to steer clear of, for Bloomberg believes these 5 currencies are the most risky…   So, here’s the top 5…   Brazilian real, Russian ruble, Mexican peso, Turkish lira, and S. African rand…   

It’s a shame that the ruble is being thrown in with these other risky currencies. All the work the Central Bank of Russia (CBR) has done to offset the sanctions placed on them by the U.S. and European Union, is being ignored right now… that’s just not right… but it is what it is, folks… 

To recap…  The Big Singapore Summit ended with the press going ga-ga over the smiles on the faces of the leaders of the U.S. and N. Korea. The markets however, have decided to take a “Wait-n-see” stance, which Chuck thinks is prudent… The currencies hardly moved, Gold only gained $1 on the day, and the price of Oil remains in the $65 handle.   I had a dear reader send me a note yesterday saying that I had forgotten to list the price of Oil in the currency roundup for two consecutive days!  Well, I won’t forget today!  HA!

For What It’s Worth… Back to normal today… Here’s an article that talks about how we could be nearing Peak Gold… Well, if that’s the case, that beeping sound is the truck backing up to load up on physical Gold… However, Peak Gold remains to be seen. Here’s the link to the article… https://seekingalpha.com/news/3357367-major-gold-deposits-discovered-goldcorp-chairman-says?dr=1#email_link

Or, here’s your snippet: “Goldcorp (GG -0.1%) Chairman Ian Telfer is the latest industry exec to predict the world has reached “peak gold,” saying that mine production will continue to decline because all the major deposits have been discovered.

“Gold produced from mines has gone up pretty steadily for 40 years,” Telfer tells the Financial Post. “Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down… We’re right at peak gold here.”

“Are we not looking for it? Are we bad at finding it? Or have we found it all? My answer is we found it all. At US$1,300/oz. gold, we found it all. I don’t think there are any more mines out there, or nothing significant. And the exploration records indicate that,” Telfer says.

Barrick Gold is “shrinking fast,” Telfer says. “We’re sort of going sideways. Newmont’s going sideways.”

Chuck again… Well, like I said above, if what they’re telling us is factual and truthful and I don’t have any reason, other than the fact that these are leaders of company’s that make more money the higher the price of Gold goes, to doubt them, then beep, beep, beep…

Currencies today 6/12/18… American Style: A$ .7606, kiwi .7028, C$ .7685, euro 1.1778, sterling 1.3382, Swiss $1.0154, … European Style: rand 13.1839, krone 8.0138, SEK 86225, forint 271.25, zloty 3.6307, koruna 21.7617, RUB 62.52, yen 110.25, sing 1.3349, HKD 7.8467, INR 67.47, China 6.3996, peso 20.61, BRL 3.7054, Dollar Index 93.60, Oil $65.94, 10-year 2.96%, Silver $16.88, Platinum $907.18, Palladium $1,020.35, and Gold… $1,297.52

That’s it for today…  Well, Happy Anniversary to my beautiful bride of 42 years today… I’m not supposed to talk about Kathy in the Pfennig, so I’ll just say Happy Anniversary and move along…  I was thinking yesterday, the 42 years ago, I drove a Cadillac Eldorado, a real monster of a car for sure… I was at least 100 lbs lighter than I am now, had hair, and certainly wasn’t worried about cancer…  The Peter Frampton Live album was the top seller that year, and I spent a lot of time listening to Wings over America… by Paul McCartney and Wings… Three Dog Night takes us to the finish line today with their live version of : Eli’s Coming    And with that, I’ll send you on your way to a Tom Terrific Tuesday, and please Be Good To Yourself! 

Chuck Butler

June 11, 2018 

* Currencies can’t hold their lofty levels…   

* G-7 meeting nets whiney spoiled children… 

Good Day… And a Marvelous Monday to you! A pretty fun-filled weekend was just had by your truly… The weather was great, the friends were great, and good times were had by all, I do believe! The Reds finally ended the Cardinals 13-game win streak against them yesterday, but my beloved Cardinals took two of three from the Red Legs…  Hall and Oates greet me this morning with their song: She’s Gone…  

So, yes, while President Trump didn’t make any new friends at the G-7 summit this past weekend, his real mission is in Singapore to meet with N. Korea’s leader, of whom I’ve not been so nice to in the past calling him a “nut job”…  Everyone seems to think that this meeting is going to be all sunshine, lollipops and rainbows after this meeting in Singapore… I tend to be a little more pessimistic about these things, because, well, because I am… 

The G-7 meeting saw round one of the trade war between Canada and the U.S. That’s nice that the Canadian PM Trudeau, thinks he can stand up to the U.S. President, and shove stuff in his face without recourse…  And that recourse will first come from traders thinking like me on this, selling Canadian dollars/ loonies…  Yes, the Mexican peso is also caught up in this, but it has already been beaten around the neck and shoulders enough…

And then President Trump offered up an olive branch to Russia, petitioning the G-7 to add Russia to the mix once again. (Russia had been bounced out after the conflict in Crimea)   Wait until you hear about what Russia has done to deal with the U.S. sanctions… 

The currencies on Friday couldn’t hold their grip on the higher levels that were seen on Thursday, as traders squared up positions ahead of the 1. Singapore summit, and 2. the Fed’s rate hike announcement on Wednesday this week. The trading in the currencies can be seen as a prime example of what I’m talking about when I say that currency traders are fickle!  Last week it was sell the dollar, and yes we know the Fed is meeting next week to hike rates.  And that turned to “Oh my God! The Fed is meeting this week to hike rates”!    They didn’t just figure that out folks, it’s just a true reflection of how 1. sentiment has its grips on the currencies and 2. traders are fickle! 

One of the best things I get to do now that I’m no longer tied to a bank, is to write about my conspiracy theories… And brother do I have a good one for this week’s Dow Theory letters piece!  I know that a lot of you dear readers have already signed up for the Dow Theory Letters…  And I’m hoping that many more Pfennig Readers will do so too! But that’s all I have to say about that today… 

So, did you hear the news that the CFTC (Commodities Futures Trading Commission), the regulatory arm that polices commodities trading, including Gold & Silver, announced that they are going to “probe market manipulations”…  of Bitcoin, not Gold & Silver!  And did you also hear that there was a major problem with a cryptocurrency late last week? South Korean cryptocurrency exchange Coinrail said there was a “cyber intrusion” in its system.   This caused Bitcoin and other cryptos to post losses once again… 

I’ve shied away from talking about the cryptocurrencies these past couple of years, because I just didn’t see them lasting that long. I figured if the U.S. Gov’t has a problem with citizen’s losing faith in the dollar and buying Gold, that they surely would have a problem with the same people buying crypto currencies instead of dollars… And it wouldn’t be long before the hammer was brought down on the whole lot of them… But boy they sure had a run didn’t they? An now it appears to be over… 

Well, we have three major Central Banks meeting this week… First up is the Fed who will have a two-day meeting beginning tomorrow, and ending with a rate hike announcement on Wednesday. On Thursday the European Central Bank (ECB) will meet, and is expected to begin to explain how they will go about unwinding stimulus… IF that actually happens and the ECB doesn’t decide to chicken out again, it should be a lift for the euro. 

And then rounding out the week, we’ll have a Bank of Japan (BOJ) meeting on Friday (for them Thursday night for us)…   The BOJ will do nothing, the ECB might talk unwinding stimulus, and the Fed will hike rates…  As I said last week, I do believe the rate hike is already priced into everything, so the dollar will get its direction not from the actual rate hike, but from the statement following the rate announcement… Just how hawkish is Jerome Powell?   

The Emerging Markets are getting whacked daily now as they have some major problems…  A dollar liquidity crisis is brewing for them, and all that dollar denominated debt they’ve issued these past few years while interest rates were near zero, is going to come back to haunt them for years… So, with every Fed rate hike, the Emerging Markets feel a little more heat, and now the selling has spilled over to the more mature Emerging Markets currencies like S. African rand, Mexican pesos, and Brazilian real… 

The U.S. Data last week didn’t see any prints that were good for not only 1. the dollar, but 2. the economy… But I doubt seriously the Fed even cares about the teetering economy… They need to bump up rates quickly before the recession hits so they have some rates to cut! I told you last week that in the previous 10 recessions the average Fed Funds interest rate at the start of the 10 recessions was more than 9%… And after the Fed hikes rates on Wednesday, their Fed Funds rate will only be 2%… Brother can you spare a rate hike? 

The price of Oil remained pretty steady Eddie around $65 after it was announced that the Rig count here in the U.S. and inclined last week, and that Russia is going to increase production. 

OK, I won’t beat around the bush any longer there, regarding Russia’s announcement last week…  Basically, the U.S. has placed sanctions on Russia, and that demands that U.S. companies not do business with Russia… So, Russia announced that they were going to make it illegal to NOT do business with Russia, if you had done business with them before, and the penalty could include jail time…  Oh, I can hear my mother now, with one of her favorite lines…  You made your bed, now go lay in it!  In other words… Oh, never mind, I think you get the point here… 

Ok, back to the markets… Gold was able to eke out a $2.20 gain on Friday, and is up in the early morning trading a buck or two…  Last week, I made a big deal out of my thought that I was seeing a breakout in the price of Gold to the upside, and even drafted Omar Ayales for Gold Charts-R-Us fame to concur with me… But then I received a note from a longtime reader, and fellow St. Louis Cardinals fan, who reminded me that we are entering the slow months of the year (dog days of summer) and that could weigh heavily on my breakout call…  As usual there I was banging my head on the desk top because I had forgotten about the dog days of summer trading doldrums… UGH!   But I’m going to stick to my guns here, and say there will be “something” this summer that kickstarts Gold and the summer doldrums will disappear!  

The U.S. Data Cupboard is filled with tier 2 and 3 data prints this week, nothing to speak of really, except the FOMC meeting that begins tomorrow.  And I doubt that much of any data would get precedence over the news from Singapore the early part of this week… So, check your cable news every now and then or the internet feed for news that you depend on, for breaking news about what’s going on in Singapore.  

To recap… The currencies couldn’t hold their collective grips on the lofty levels they were trading at on Thursday, and it appears that the markets want to take a breather until they know or hear about what’s going on in Singapore.  First the G-7 meeting was full of whiny little children in the form of the G-7 nations, complaining to big brother (the U.S.) that they aren’t being treated fairly… Oh, poo, poo… Don’t you feel sorry for them? NOT!  Oil and Gold are also stuck in the mud this morning, and Chuck has some additional thoughts on Gold… 

For What It’s Worth… We’re going to do something different with the FWIW section today… it’s going to be all me… Ranting and pounding my fist about something, so here we go!

I was doing some reading on Friday, and came across an article on the Bloomberg that quoted former Fed Chair, Ben Bernanke… He of the two extra rounds of Quantitative Easing that were NOT needed! And he of the near zero interest rate cuts that remained there far too long, but I digress with my description of the man, I wanted to highlight something he said in the article… let’s listen in, to Big Ben Bernanke… “The stimulus “is going to hit the economy in a big way this year and next year, and then in 2020 Wile E. Coyote is going to go off the cliff,” Bernanke said, referring to the hapless character in the Road Runner cartoon series.”

Now, you can tell me there’s no tooth fairy, and you can tell me there’s no bunny that delivers eggs, but you can’t tell me that Fed reserve members aren’t political… Why would he pick 2020? Well, that’s the year the President Trump would be running for reelection.

We’ve not heard very much from Big Ben since he left the Fed Chair, and judging from this quote, I would prefer that to remain that way! But wait a minute Chuck, isn’t this in the same vein that you’ve been using to tell us a recession is coming?  Well, it’s close… You see, I’m of the opinion that the Fed Rate hikes are going to send us to recessionville, not the stimulus…  Got it? OK!   

Currencies today 6/11/18… American Style: A$ .7606, kiwi .7031, C$ .7680, euro 1.1785, sterling 1.3370, Swiss $1.0138, … European Style: rand 13.15, krone 8.0670, SEK 8.7055, forint 272.76, zloty 3.6205, koruna 21.7805, RUB 62.29, yen 109.92, sing 1.3352, HKD 7.8461, INR 67.44, China 6.4028, peso 20.41, BRL 3.7060, Dollar Index 93.65, Oil $65.04, 10-year 2.96%, Silver $16.82, Platinum $906.66, Palladium $1,013.05, and Gold… $1,296.99

That’s it for today… Lots to talk about today, and so little time and space to do it, which is why I truly believe you should look to subscribe to the Dow Theory Letters (www.dowtheoryletters.com) for daily in-depth reports from a different writer every day! (my day is Thursday!)  We tried out the new Hofbrau House on Saturday, IT IS HUGE! And a fun place for sure! And I was invited to the baseball game tonight, where I’ll see some former colleagues that too no longer work at the old place of business… Castaways, that’s what we are!  Tomorrow is Chuck and Kathy’s 42nd wedding anniversary… When I was a young man, I doubted that I would live to see 42 years old, much less be married for that long! Better living through chemistry, as my good friend, Ty Keough likes to say! Pink Floyd takes us to the finish line today with their song: Wish You Were Here… I used to play that one on my guitar too! Ok… time to go… I hope you have  a Marvelous Monday, and remember to Be Good To Yourself!  

Chuck Butler

 

June 7, 2018…  

* Currencies continue to rebound

* Bank of Brazil finds out the hard way… 

Good Day… And a Tub Thumpin’ Thursday to you… Many I feel badly that I did not recognize yesterday as D-Day… That’s what happens when you’re up at 2 am writing the Pfennig, you don’t have it all together!  Did you notice the time of delivery of yesterday’s Pfennig? it was around 4:30 am, so I’m not making stuff up! We received some very sad news last night… Red Schoendist longtime Cardinals player, manager, coach, and Hall of Famer, died… He was 95…  I don’t want to bore you with a story about him, so if you don’t want to hear it, go ahead and skip ahead to the next paragraph…  Each year on opening day, the Cardinals Hall of Famers come in first on the backs of convertible mustangs, and all the other “old guys” would struggle and need help getting out of the car. But not Red, he would swing his legs over the side and hop out like he was 18, not 88! Always brought a smile to my face to see him do that!  The Moody Blues greet me this morning with their song: I’m Just A Singer (in a rock and roll band) 

The daily beatings of the currencies by the dollar in the before Tuesday’s trading, have ended. Yesterday, the currencies ratcheted higher and higher as the day went on… And last night as I grew tired of watching my beloved Cardinals lose to the Marlins yet again, I walked over to my writing desk and turned on the currency screen to see what was going on, and saw that at that point, the euro was closing in on 1.18, trading at 1.1792…  

And in the overnight markets, the euro has indeedly do, climbed over the 1.18 handle… And it’s taking the rest of the currencies along for the ride. Shoot Rudy, even the Chinese renminbi, which had been on the slippery slope downward, was allowed to appreciate overnight! 

So, once again, the sentiment toward the dollar has changed… And this all coming in front of a rate hike that will happen next week here in the U.S. You can’t tell me that traders don’t look ahead, and see what’s on the docket in the days ahead before they begin to sell or buy dollars…  So, what I’m saying is that the rate hike has already been priced in, and now traders are dealing with Trade Wars, and exploding debt here in the U.S.,  with the prospects of an upcoming recession, and stock market collapse…  And I think they got their cues from the bond guys, who pushed the 10-year Treasury’s yield back below 3% earlier this week. 

Gold only gained about 30-cents in trading yesterday, but I’m still of the opinion that a breakout is coming… Well, a couple of times this week, I’ve mentioned that I believe that Gold is getting ready to breakout of this tight trading range it’s been held down to… So, I went to our Gold guru, at the Dow Theory Letters, Omar Ayales, who when I told him what I was thinking, and asked him his thoughts he replied: “I agree. I think we’re getting ready for a bullish rise… Copper’s breakout rise yesterday and today tell me the economy continues to heat up and an inflationary boom continues to develop. This dynamic is very bullish for gold and likely the backbone of its cyclical and secular strength. Short term, gold is finishing up a period of weakness. I think the upcoming Fed rate hike could be the catalyst for the leg up rise we’ve been waiting for. A break above $1380 would be super bullish.

Another bullish reason are silver and the miners. They’ve been very weak, but they didn’t fall much when gold declined below $1300. This is a sign of a bottom for the entire gold universe in my view.”

Thanks to Omar for his contribution to the Pfennig! Trends are trends, and when a commodity trend begins a bull market, they usually last a very long time… The great mind of Jim Rogers told us in his book Hot Commodities that historically, bull market commodity trends last 17 years! I’d say that’s a long time, for if that were to happen starting now, I doubt I would be around to see the end of it!

So… what re you waiting for, a special gold printed invitation to buy some physical Gold? Well, I’m sorry, but there won’t be any of those in your mail box… But you will have this in your email box!

I had lunch yesterday, with my good friend, Dennis Miller, the Retirementor. We talked about all kinds of things that were on our minds, but the one thing that we kept coming back to was how inflation eats away at everyone’s purchasing power, but especially retired people’s purchasing power, for if you are on a fixed income, that really doesn’t get adjusted upward, (who are they kidding telling us that Cost of Living Adjustments go both ways?)…    

Dennis gave me some reading material of something he’s putting together that I think those that are retired or those getting close to retirement or really just about anyone for that matter, will want to read.  I don’t think he would mind me spilling the beans on a small piece of his work here, so here goes… This is Dennis Miller talking… 

“During the 5 year period, 1977-1981, accumulated inflation amounted to 59.9%. If a person retired on 1/1/77 and received $1,000 per month in fixed income payments, 5 years later they would need $1,599 per month to have the same buying power.” – Dennis Miller   

The price of Oil was steady Eddie yesterday, and remains well below the lofty figures of just a few weeks ago.  I read this blurb on the Bloomberg this morning and it boggles the mind, well at least my mind it did! Check it out: “The U.S. government has quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day, according to people familiar with the matter.

The rare request came after U.S. retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices on Twitter. It also follows Washington’s decision to reimpose sanctions on Iran’s crude exports that had previously displaced about 1 million barrels a day, or just over 1 percent of global production.”  – www.bloomberg.com 

Pretty interesting don’t you think? I was under the impression that the U.S. Shale producers were taking care of any disruptions in the Oil production line?  Oh well, it is what it is… And we move along… 

The U.S. Data Cupboard yesterday had some reports that weren’t market movers but printed nonetheless, and they tell a story, which I always like it when data has a story behind it.  I went through the gyrations of the Trade Deficit yesterday and told you there could be some movement, and there was with Trade Deficit for April showing a drop to $46.2 Billion from $47.2 Billion in March. Not to get too excited about this slippage, for the May report that will print next month will show the dollar rebound, and that’ll be the end of the slippage in the Trade Deficit!    

We also saw Productivity’s second revision for the 1st QTR, and it was not good, slipping to 0.4% from 0.7% previously…  and here’s where the story gets good… Unit Labor Costs increased in the 1st QTR from 2.7% to 2.9%… So, if you put the two together, workers are not working as hard as before, but are earning more for their laziness, to put it bluntly…  

The Daily Reckoning (www.dailyreckoning.com) has a great article this morning about a dollar liquidity crisis that’s brewing…  If that floats your boat, then I would certainly go there and read it… I know I liked it, and would have used it in the FWIW section this morning, but I already have an article spooled up for that!  

To recap… The dollar’s daily beatings on the currencies has ended, it does appear… The euro has climbed back above 1.18 and brought all the currencies along for the climb. Even the Chinese renminbi was allowed to appreciate overnight!  Chuck employs the Gold guru from The Dow Theory Letters for his take on Chuck’s call that Gold is ready to breakout to the upside. And the poor Brazilian real…  You’ll find out about in today’s FWIW section… 

For What it’s Worth… Well, I’ve been noticing the Brazilian real dropping by significant amounts almost daily now for a couple of months. I kept thinking that it would turn around soon, especially with the rising price of Oil (think Petrobas) and Commodities in general rebounding… But it just hasn’t happened and then yesterday, I read where the Central Bank had to Intervene to hold back the selling, but it did no good in the long run… Of course I’ve told you for years, that single country intervention is only a short term blip, because the markets have deeper pockets than one Central Bank… And that the only way to get some real traction is form a coordinated effort of multiple Central Banks performing intervention together… But I digress here, and here’s the link to the story on Bank of Brazil intervention: https://www.ft.com/content/abe11c9e-698c-11e8-b6eb-4acfcfb08c11

Or, here’s your snippet: “Investors are rubbing Brazilian policymakers’ noses in the dirt.

After the central bank’s failed attempt on Tuesday to stop the sell-off in the real, the currency is again declining sharply, falling 1 per cent to hit a new two-year low of just below BRL3.85 against the dollar.That stands in marked contrast to most other emerging-market currencies, which are trading higher against the buck.The central bank auctioned additional contracts in FX swaps to stop Tuesday’s slide to BRL3.80, a move that had the effect of pulling the currency higher. But the relief was shortlived and the real ended Tuesday more than 1.8 per cent lower, lining up further losses on Wednesday.

Investors have numerous headwinds to tackle. Elections in October will determine whether Brazil is capable of engineering fiscal reform, the truckers’ strike is highlighting the strain of rising oil prices, while the resignation of the chief executive of state-controlled Petrobas, a free-market champion, raises questions about political interference in key parts of the economy.” – FT, which was found on Google search for Brazil…

Chuck again… Well, I won’t be using the FT any longer for FWIW section stories, as it takes me having to jump through fire hoops to get it done… And it would cost me money, which, unless you dear readers would like to pay for this letter… wink, wink… I didn’t think so…

Currencies today 6/7/18… American Style: A$ .7654, kiwi .7047, C$ .7720, euro 1.1820, sterling 1.3452, Swiss $1.0189, … European Style: rand 12.77, krone 8.04, SEK 8.6730, forint 268.67, zloty 3.6065, koruna 21.6830, RUB 61.95, yen 109.92, sing 1.3325, HKD 7.8460, INR 66.98, China 6.3899, peso 20.37, BRL 3.8160, Dollar Index 93.31, Oil $65.14, 10-year 2.98%, Silver $16.76, Platinum $907.21, Palladium $1,109.38, and Gold… $1,299.44 

That’s it for today…  Well, yesterday was the 74th anniversary of D-Day… What brave men took to those beaches of France that day… The first real depiction of that day in movies came in the movie Saving Private Ryan… After see that, I had tears in my eyes… Well, also on D-Day was the sad news of the passing of the beloved Red Schoendist… Sad to hear that another baseball legend has passed… When he wasn’t able to make Opening Day this year, I just knew the end was near for Red… So sad… And his, and my beloved Cardinals laid an egg last night once again losing to the Marlins! Day game today, but I can’t make it… UGH! Elvin Bishop takes us to the finish line today with his song: Fooled Around and Fell In Love… Charlie Daniels said it best in his song: The South is gonna do it again, when he said: “Elvin Bishop is sittin on a bail of hay, he ain’t good lookin’ but he sure can play”…   And he was talking about his guitar playing ability, which is pretty darn good in my book!  Ok, this ends a week of reversal in sentiment once again, so I hope you can take that and get out and make this a Tub Thumpin’ Thursday!  And remember to Be Good To Yourself!   That’s it that’s all, there ain’t no more! 

Chuck Butler

 

June 6, 2018   

* Currencies fight back on Tuesday 

* Gold rallies, then gets sold… UGH!

Good Day…. And a Wonderful Wednesday to you! Another beautiful day here in the St. Louis region… My dad used to tell me on days like this, he’d say: Chuck, they don’t have days like this in the Soviet Union…  Of course back then we were in a cold war with the Soviets… I tried that line on my older kids when they were younger, and they looked at me like I had three eyeballs, as the meaning of it passed them right on by!  And once again the luck of the draw is an apropos song today, as Al Stewart greets me with his song: Time Passages…  There’s a great line in the song that goes like this: Well it’s just now and then my line gets cast into these
Time passages… great use of the fishing term, eh?

The currencies fought back against the dollar again on Tuesday, with the euro climbing back above 1.17… But in reality, this has been a range bound week so far… A little up, a little down, and so on, but all in tight ranges…  The world is barking about the latest announcement of tariffs by President Trump. I would bet that he’s saying, “let them bark, they’ve taken advantage of the U.S. for too long!”  The problem with going about evening out these trade imbalances with tariffs, is that they may not be the root cause of a recession, but I would be they are at the scene of the crime!  

Yesterday, I talked about the bond guys and what’s going on in their minds right now… And the 10-year’s yield remained below 3% again on Tuesday. The good folks at FX Street, reprint my Pfennig each day, and then post it on Twitter, and yesterday’s headline of What Are The Bond Guys Telling Us? got a lot of airplay…  

I’m nearing my one-year removal from my previous employer, and I couldn’t be happier about the move for the Pfennig… Not only does the FX Street repost the Pfennig each day, so does the Aden Research group that publishes the Pfennig now. The Aden group also sends it to their Aden Research readers, so I have so many new readers right now, and the direction for the Pfennig is upward and onward…  And that’s all I can say about that… 

Well, did you hear about the 2 completely different meetings of nations this weekend?  First it’s the same old G-7 that will meet, but I’m sure this meeting won’t be so chummy-wummy, as the nations try to nail down the U.S. for its tariffs…    the other meeting of nations will happen in Asia, where the likes of Russia, China, and a bunch of the “stans” will all meet, and I doubt they’ll be talking trade tariffs, but more likely progress on China’s new silk road project, that I’ve discussed in the past.  So, we have those meetings going for us this weekend! HA, as if!   

The U.S. economic data sure doesn’t shout the need to hike rates, but as I told you yesterday, there odds are at 91% that the Fed will hike rates this month. And I personally am really surprised that this charade of rate hikes has continued to what now appears to be this month. Longtime readers are well aware that I come up with thoughts and ideas as to how I see things going, long before they take place… And sometimes I even put time lines on things I’m calling for, like the reversal of interest rate hikes by the Fed…   

Obviously, that’s not happening this month… But with them still using the Phillips Curve, as their model to detect rising inflation,  they are strangely working with outdated models, and will continue to go down this interest rate hike rabbit hole, until the economy blows up in their collective faces…  But the economy while teetering on blowing up, is still muddling its way to a whopping 2.16% average GDP for the last 10 years!   So, I still maintain that this economic expansion is getting very long in the tooth, and there are a list of things that could go wrong for the economy, and if any of them do, well… it’ll be like the one guy at a ballgame that decides everyone needs to do the wave… he won’t be happy until the most of the people in the ballpark join him in doing the wave…    OK, maybe that wasn’t the best example I was looking for, but it’s what my fat fingers started to type before I could stop them!    

The Fed meets next week(6/12 & 13), and so too does the European Central Bank (6/14)…  Man would l like to see the ECB begin to unwind their stimulus… First I would like for them to get away, far away from their negative deposit rates structure…  The bond buying can continue for now, but had better begin to be unwound by fall…   The Fed on the other hand, as we already discussed will be hiking rates to 2.00% after they put away their board games from the two-day meeting.  The Tale of Two Central Banks, coming to a theater near you, next week…  Geez, I can’t wait! NOT!

Yesterday, I read a report from the GATA people, and it caught my eye, because the title was about the Chinese renminbi, and not about Gold… I said to myself, I should check this out, because, just earlier in the day when I was putting together the currency roundup I had noticed that the Chinese renminbi was losing ground VS the dollar, and wondered, what’s up with that?

I would have thought that given the history of the past couple of years, with Capital outflows from China that the Peoples Bank of China (PBOC) would have kept the renminbi stronger… And then in reading the article it all came together… The PBOC is keeping the renminbi stronger, per se… You see the dollar index this year has gained over 6%, but the renminbi has lost only 2%… Historically, since the basket of currencies was introduced in 2014, to price the renminbi, it has moved almost lockstep to the dollar, in an inverse manner… So, as the dollar index rose, the renminbi went down, and vice versa… So, I was right, but not completely right… The PBOC is keeping the renminbi stronger but in the whole scheme of things… Interesting, eh?

Gold finally saw a somewhat strong bid in yesterday’s trading, and was up to $1,304 at one point in the day, but…  that couldn’t last not with the nearly 260,000 contracts traded hitting the market, and Gold closed the day at $1,295 and change… UGH!  Get people/ investors all lathered up and then pull the rug out from under them… These price manipulators are not nice people folks…  But I think, like I said the other day, that Gold is biding its time before it breaks out of this range trading and heads higher…   

The GATA folks sent me another note yesterday, and it was about how, well, I had better let them tell you… “South African market analyst Nicholas Biezanek reports that whatever is represented by the explosive increase in use of the “exchange for physicals” mechanism to settle gold and silver contracts on the New York Commodities Exchange represents, it is not drawing down the inventory of metal vaulted in London. So what exactly is happening with those “exchange for physicals”? Whatever it is, Biezanek and Organ conclude that the mechanism is a fraud, concealing a lack of metal. ”    

Oh, boy just another scam for the markets to deal with… I shake my head and wonder why people can’t put their good minds to work on coming up with a cure for cancer or ALS… 

Speaking of ALS… I was saddened to read the news yesterday that Dwight Clark had died… He was only 61… But, as with just about everyone else that is diagnosed with ALS, he has lost his battle with the disease… My mind immediately went to my older sister Barbara, who died last year from the same disease, ALS. It’s a devastating diagnosis, folks, and it’s a shame that a country as great as ours can’t at least find a treatment that prolongs quality of life, if not a cure… I’ll always remember “the catch” by Dwight Clark… therefore I’ll remember him. 

The U.S. Data Cupboard today has the second revision of Productivity data from the 1st QTR, and should remain muted…  We’ll also see the Trade Deficit from April… Recall that late in April, the dollar began to swing back at the currencies, but for most of April it was weaker, so the there could be some jiggle room in the data, we’ll have to wait-n-see.  

And the price of Oil recovered a bit yesterday, as inventories were lighter than expected… So, with Oil recovering on the day, the rest of the commodities rallied too, and they brought the commodity currencies along for the ride… Aussie and N. Zealand dollars, Canadian dollars/ loonies, and S. African rand…  Back in the day when I created the Commodity Currency CD at my old place of employment, the Russian ruble wasn’t available/ heavily traded, but if I were putting the CD together now, I would definitely include the ruble..   

To recap…  The currencies fought back on Tuesday, Gold saw a somewhat stronger bid, but had to settle for a small gain after being up $10 earlier in the day. The price of Oil also recovered on weaker inventories, thus allowing the rest of the commodities to join the rally.  Chuck discusses the two separate meetings going on this weekend, and gives an R.I.P to Dwight Clark…    

For What It’s Worth…  I need to thank longtime reader, Bob, for another great article for the FWIW section today… This one is about how bad off countries are from having funds for chaos, like the financial meltdown of 2008, and can be found here: https://theconversation.com/the-worlds-economic-crisis-fighting-mechanisms-are-dangerously-inadequate-97608?utm_medium=email&utm_campaign=Latest%20from%20The%20Conversation%20for%20June%206%202018%20-%20103449111&utm_content=Latest%20from%20The%20Conversation%20for%20June%206%202018%20-%20103449111+CID_ca134b9722c6a028c3c1ae44dd099957&utm_source=campaign_monitor&utm_term=The%20worlds%20economic%20crisis-fighting%20mechanisms%20are%20dangerously%20inadequate    

Or, here’s your snippet: “t was only in January that the International Monetary Fund (IMF) was celebrating the strength of the global economy, heralding “the broadest synchronised global growth upsurge since 2010”.
How quickly things have changed.

Argentina has since sought a bailout from the IMF, Turkey is facing a potential currency crisis, Indonesia is seeing investors flee, alarm bells are sounding for Italy and Spain, China’s debt remains a serious concern, and the only thing more uncertain than the fallout from Brexit is the outcome of Donald Trump’s trade war.

It’s time to review the world’s capacity to respond to crises.”

Chuck again… the article goes on to give a breakdown of countries’ reserves for chaos… And comes to the conclusion that it’s just not enough…  Good article… but put away the sharp objects before reading it! 

Currencies today 6/6/18… American Style: A$ .7645, kiwi .7035, C$ .7722, euro 1.1747, sterling 1.3420, Swiss $ 1.0141, … European style: rand 12.8367, krone 8.1134, SEK 8.7460, forint 271.27, zloty 3.6452, koruna 21.8180, RUB 62.06, yen 110.05, sing 1.3330, HKD 7.8468, INR 66.96, China 6.4040, peso 20.45, BRL 3.7657, Dollar Index 93.76, 10-year 2.94% , Silver $16.58, Platinum $901.93, Palladium $997.75, and Gold… $1,301.10

That’s it for today…  Well, our welcoming back to the lineup for two star players last night didn’t go too well, and the Cardinals lost to the… wait for it… Marlins! UGH!  There was a lot of rust on the arm of Carlos Martinez last night, hopefully his next start will be more normal. I be meeting one of my good friends for lunch today. Dennis Miller, will be driving to meet me at a local restaurant. It’s about a 3 hour drive from where he’s coming from so, I had better pick up the tab!  Lots more to talk about in the currencies tomorrow, so stay tuned… Same bat time, same bat channel!  Van Morrison takes us to the finish line today with his song: Moondance… It’s a marvelous night for a moondance….  I hope you have a Wonderful Wednesday, and Be Good To Yourself!     

Chuck Butler

 

 

 

June 5, 2018    

* Currencies are unable to hold their gains…      

* Lots of reasons for a Gold rally… 

Good Day… And a Tom Terrific Tuesday to you! Well, did you like my song from Carousel yesterday? And all this time you thought I was just a rock-n-roller, eh? I was trying out for a lead part of that Musical back in High School, when a teacher’s strike interrupted the school year, and deep sixed that production…  Oh well, I soon left to join my band that was based in Midwest City , Okla.  We lived on the outskirts of town, down the road from Tinker Air Force Base…  And Believe it or don’t, but Steely Dan greets me this morning with their song: My Old School…   Kind of apropos, eh?  

I was  just sitting there thinking about stuff last night, when I thought to myself… What is the Fed going to do when the recession starts?  Did you know that during the last 10 recessions  the average Fed Funds Rate was over 9%… Our Fed Funds rate today is less than 2%, at 1.75%… So, when each of the recessions started in the past, the Fed had a quiver full of arrows in rate cuts to help bring the economy out of the recession… What will the Fed do when they reach for an arrow this time and find none? Uh-oh!   Full disclosure here… I wrote that in last week’s Dow Theory Letters… 

OK, enough of that!… The currencies, for the most part weren’t able to hang onto their gains from the previous night’s trading, but they remain within striking distance of those previous night’s levels. And Gold is still wallowing in the mud, looking for a strong bid. The price of Oil has really been for a ride on the slippery slope, and the 10-year Treasury’s yield remains below 3%…   

Ok, let’s break these things down.  First, the currency traders just don’t seem to be on the same page or singing from the same song sheet these days… One day it’s all about commodities, the next day, not so much… Then they switch to Trade Wars, and then back off from that trade…  I’ve been around currencies since 1985 (the year Don Denkinger stole the World Series from the Cardinals, I’ll always remember that, and will always contend that he stole the World Series from us), but back to 1985, I’ve been writing a letter about currencies since 1992, and I don’t believe I’ve ever seen a time where traders flip-flopped their sentiment so easy and often. 

So, we’re in uncharted waters folks… Which I would think would lead us eventually back to the underlying weak dollar trend… That’s my Pfennig’s worth on that thought!    

Gold continue to fight for its ground every single day, and it makes no sense to me whatsoever!  I mean look at the backdrop that should be supporting the price of Gold every day… We have upcoming headlines on steel tariffs, we have upcoming headlines on China trade negotiations, we have NAFTA, we have an uncertain political backdrop in Italy, we have a new government potentially in Spain, and we have bombs, bullets and fighting in several parts of the world… Afghanistan, Syria, Ukraine, and a few others, right?  And still Gold is being held down, by short Gold paper trades…  Oh, and it’s not just geopolitical things that should be supporting Gold… The countries like Russia, China, India, Turkey, Iran, and others are upping the ante on the amount of Gold they purchase each month…  I shrug my shoulders and walk away, I’m not wrong here, folks… but it sure seems that we’re fighting a battle against the short paper traders…  I do believe we’ll eventually win that battle, but when is the question…  

The price of Oil has really slid backwards in the past week. First it was the announcement of Russia and Saudi Arabia, that the OPEC members that are hurting will be allowed to increase production… Then the shale producers pile on, by pounding their collective chests, proclaiming that they will add to supply by the boatload… 

And what is up with the yield of the 10-year Treasury? Two weeks ago, it appeared to be ready to set sail for higher yields after pushing past the psychological 3% level… But what have we here, now? The 10-year’s yield has fallen back below the 3% level. I was always taught to pay attention to what the bond guys were doing, for they always had their finger on the pulse of the economy… So, if that remains intact, then the bond guys are telling us that the Fed is all wet, and the economy is shaky… 

But here we are… less than 10 days away from the next Fed meeting, where the odds are 91% that they hike rates again, this time brining their whopping Fed Funds rate to 2%…  That’s right, all this hub bub about the Fed’s higher interest rates is a bunch of malarkey 2%! 2% is NOT a high interest rate, and we’ll all find that out when the economy finally slips into a recession… (see discussion above)  

Man, you’re certainly not in a good mood this morning Chuck… Well, 4 hours of sleep will do that to you! I make no excuses though, for they never won a ballgame for anyone… And I’m better than that! Maybe it’s because there was no baseball (besides college playoff games) to watch last night! HA!  At least I know I’m not a baseball “junkie”, for those college games just don’t hold my attention. I guess it’s the aluminum bats they use… 

The U.S. Data Cupboard had one piece of economic data yesterday, and it was what I call “real economic data”. Factory Orders for April printed, and were negative…  For newcomers to the Pfennig, Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month.  So, this “more complete information” was negative -0.8% for April…  That’s not a good reading for the economy folks… But that won’t stop the Fed from its appointed rounds with a rate hike… 

There are a couple of prints in the Data Cupboard today, but none of them amount to a hill of beans, so the dollar will have to deal with trader sentiment, which flip flops from day to day… UGH!  

To recap… The currencies couldn’t hold their gains yesterday, but remain within shoutin’ distance of those levels this morning. Gold lost a whopping $1.60 yesterday, and Chuck lists the things that should be supporting the price of Gold, so you won’t want to miss that!  And what are the bond guys telling us these days? All this and more in today’s Pfennig, man you would think you would have to pay big bucks for a letter like this! HA!   

For What it’s Worth… Well, it didn’t take long for the retaliations to begin… And Mexico was the first to retaliate with an announcement, and the article can be found here:  http://thehill.com/policy/finance/390045-mexico-counters-trump-tariffs-with-new-duties-on-us-products

Or, here’s your snippet:”The government of Mexico announced on Thursday it would implement new duties on various U.S. products in response to President Trump’s decision to levy steel and aluminum tariffs on the country.

“Mexico reiterates its position against protectionist measures that affect and distort international commerce in goods,” the government said in a statement.

“In response to the tariffs imposed by the United States, Mexico will impose equivalent measures to various products like flat steels (hot and cold foil, including coated and various tubes), lamps, legs and shoulders of pork, sausages and food preparations, apples, grapes, blueberries, various cheeses, among others, up to an amount comparable to the level of affectation.”

Chuck again…  And the Mexicans had a little extra than just announcing tariffs in retaliation. The ministry also said it was opening a 350,000 tonne tariff-free quota for imports of pork legs and shoulders from other countries.   Be creative, think outside of the box, and do something that gains people’s attention!    That was me, in a nutshell, so I think it’s pretty cool when you see someone else do that!    

Currencies today 6/5/18…  American Style: A$ .7620, kiwi .7023, C$ .7705, euro 1.1685, sterling 1.3365, Swiss $1.0140, … European Style: rand 12.6550, krone 8.1240, SEK 8.7637, forint 272.56, zloty 3.6668, koruna 21.9450, RUB 62.03, yen 109.80, sing 1.3351, HKD 7.8465, INR 67.09, China 6.4088, peso 20.21, BRL 3.7518, Dollar Index 94.09, 10-year 2.92%, Silver $16.39, Platinum $893.97, Palladium $989.62, and Gold… $1,294.90  

That’s it for today… I just read an article that our All-World catcher, Yadier Molina is set to return tonight, after missing a month with an injury. This is a Big Deal for Cardinals fans, and the Cardinals!  Man someone turned the outside air conditioner up, it’s only 60 degrees outside this morning! It’ll warm up, but what a great way to start a day! Nice, but cool air… What on earth did I do to deserve this, I ask myself?   Oh well, it’s a double dose of Steely Dan today, as they also take us to the finish line with their song: Rikki Don’t Lose That Number…   And with that, it’s time to go… I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself! 

Chuck Butler… 

June 4, 2018  

* Dollar’s rally gets stopped cold  

* Turkey & Indian Central Banks meet this week… 

Good Day… And a Marvelous Monday to you! And welcome to June! Pfennig tradition calls for this on the first day of writing in June…  June is busting out all over, all over the meadow and the hill, buds are busting out of bushes and the romping river pushes every little wheel that sits behind a mill…  Ahhh, here we go into the hazy, lazy days of summer… School’s out, school’s out, someone let the monkeys out! I guess the kids don’t sing that any longer…   The Moody Blues greet me this morning with their song: Ride My Seesaw… 

The currencies traded in tight ranges on Friday, but that was before all hell broke loose with the new Trade War here for good… No more on/ off for the Trade War, it’s ON, just ask Canada, Mexico and the Eurozone, for they were not spared in President Trump’s attempt to even the trading playing field.. While that’s all fine and good, what will it do to the economy that’s already teetering on a recession to beat the band?  That’s the $64 question folks… If history teaches us anything about Trade Wars, what can be expected for the economy is not a good thing… 

I watched a snippet of an old radio address by President Reagan from back in the day, about trade…  Here’s the link to the video… If President Reagan was your bag, baby, then maybe you might think, Shoot Rudy, I’m not wasting my time with that! And you would be missing some very important words spoken so, many years ago…   https://twitter.com/twitter/statuses/1002592843075072000    

So, the currencies got going late on Friday, and then picked up the ball in the overnight markets last night. The euro has recovered back to the 1.17 handle, and the Aussie dollar (A$) has traded past the 76-cent handle!  The price of Oil keeps slipping lower and lower, as the shale producers pound their collective chests and talk about increasing supplies.  And Gold just can’t find a strong bid these days, which makes me think that something is about to happen here… a busting out of this price range to a higher level…  Of course I could be all wet on that one, but it’s just what I’m feeling as I watch what’s going on here with Gold…  

I’m loaded for bear this morning and that bear will be the Jobs Report from the BLS last Friday… Come on, let’s go bear hunting!

Oh, so the BLS said that 223,000 jobs were created in May, and the markets went bananas over the size of the number of jobs created… But wait! I have something that usually takes the punch bowl away from the party the markets are having over the BLS report… Of the 223,000 jobs the BLS said were created, and “created” being the operative word, here… 215,000 of them were added to the surveys by the BLS with a hedonic adjustment! My oh my, what a tangled web the BLS weaves each month… My good friend Dennis Miller sent me a link to a story on The Burning Platform website… And here’s what they had to say about the labor reports from the BLS…

“A record 95.9 Million Americans are no longer in the labor force”…

(I had to change a few words, due to the harshness of the words the writer used, although I agreed with them 100%! I’ve long told you that the BLS report was nothing but made up numbers, and that the ADP Employment Report would be a gauge of what’s going on month to month… But even then, the ADP report doesn’t get into the Labor Participation Report… So, let’s go back to The Burning Platform and hear some more from them… )

“Don’t believe the BLS BS. Scanning the Household data proves it is BS. If the economy was booming the number of people not in the labor force would be declining, as discouraged people came back into the work force Since September 2017 the unemployment rate has supposedly fallen from 4.2% to 3.8%. Sounds awesome. But it’s BS. Just the facts ma’am:

New jobs added since September 2017 – 1.15 million
Number of people who have left the labor force since September 2017 – 1.435 million

The participation rate has dropped back to 62.7%. The average number of new jobs added over the last eight months is a pitiful 144,000 per month, while 179,000 per month have left the labor force.

The reported unemployment rate of 3.8% is pure propaganda, not supported by the reality on the ground. Millions of Americans don’t leave the labor force when jobs are plentiful and the economy is humming along.” – The Burning Platform www.theburningplatform.com “

OK, I’m back! What a lovely way to spend my Friday, going over the BLS reports and seeing the real data… NOT! But it’s what I do! Oh, and there was still plenty of time for me head off to my regular drinking hole for Friday evening! I don’t let too many things interfere with that! HA! 

The Emerging Markets have been in chaos since the Fed began hiking interest rates, and the chaos, while in the beginning was muted, has really picked up some steam in recent days. So Turkey and India will have Central Bank meeting  this week, in which the Emerging Markets players will be wishin’ and hopin and thinkin’ and prayin’ that these two or at least one of them will hike interest rates this week.  The Emerging Markets Central Banks have had to dance around higher U.S. interest rates, and so now is their opportunity to go toe to toe with the Fed… At least for a couple of weeks until the Fed meets this month where rates are on the docket to be raised once again.   

It just happens that Turkey and India are at the front of the line that contains the countries making overtures about changing the terms of trade and using their own domestic currencies… I dig deep into this problem in this week’s Dow Theory Letters (www.dowtheoryletters.com)

The U.S. Data Cupboard will be pretty light on real economic data this week, but not today, as the only print today will be Factory Orders for April… The dollar will get its direction from the fallout from the Trade tariffs announced last Friday, and that shouldn’t be good times for the dollar…   Oh, and in a sign of the times… Sears announced the closing of another 72 of their stores…  But no one except employees of Sears seems to notice or care… strange, eh?

The Big Question will be whether or not Gold begins to participate like it should during times of unknowns, and geopolitical saber rattling… Like I said above, I get the feeling that Gold is getting ready for a big breakout on the upside… My spider sense is tingling… Will it be bang on?  

To recap… The dollar rally appears to be ending, as the Trade War heated up on Friday, and caused some dollar selling. Chuck believes that more of that will be coming as the data cupboard this week is void of much that could help the dollar. Chuck goes all DEFCON 4 on the BLS and their jobs report, that printed last week, you won’t want to miss that!  And Gold still cant seem to find a good strong bid…  Something seems to holding the price of Gold back, I wonder what it could be?…    HA! As if, I didn’t know already!   

For What it’s Worth… Well, the meeting between President Trump and the leader of N. Korea has been like the Trade War was, on / off and rinse repeat… But it now appears to be ON… this is Zerohedge’s take on this announcement and can be found here: https://www.zerohedge.com/news/2018-06-01/top-north-korean-official-visits-white-house-most-significant-meeting-18-years  

Or, here’s your snippet: “Following a visit to the White House by North Korean envoy, Kim Yong Chol, President Trump announced that the previously canceled summit with Kim Jong Un was back on schedule, and would take place in Singapore on June 12.

Trump said that a letter hand delivered by Former North Korean spy chief Kim Yong Chol was “very nice,” and “very interesting,” but that it would be inappropriate to release its contents. The President also said that it would be a big mistake if the summit did not take place, and that while sanctions were discussed during Friday’s meeting, North Korea’s human rights abuses were not brought up.

While nothing will be signed at the June 12 summit, Trump did say that North Korea says it will denuclearize, and that the meeting will be one step in the process.”    

Chuck again…  I have to question this pre-statement, that nothing will be signed at the meeting… Then why have the face to face meeting?  I’m confused on its meaning…  Oh well, I’ve never been a Political person, no reason to start now!  HA!    

Currencies today 6/4/18… American Style: A$ .7655, kiwi .7040, C$ .7750, euro 1.1725, sterling 1.3386, Swiss $1.0160, … European Style: rand 12.5611, krone 8.1095, SEK 8.7470, forint 272.05, zloty 3.6562, koruna 21.9645, RUB 62.16, yen 109.50, sing 1.3343, HKD 7.8462, INR 67.05, China 6.4190, peso 19.90, BRL 3.7636, Dollar Index 93.79, Oil $65.40, 10-year 2.91%, Silver $16.40, Platinum $905.29, Palladium $1,006.13, and Gold… $1,298.60    

That’s it for today… What a great weekend we had here in the St. Louis area, with warm, breezy days, and umbrella blue skies on Sunday… We also almost witnessed a no-hitter by St. Louis Cardinals pitcher Michael Wacha, who went 8 full innings before giving up his first hit of the game. This was his second attempt at a no-hitter, he had gone 8 2/3rds without a hit in 2013… (his rookie year!) Sunday was definitely a day to be outside here in the Midwest.. Friday was Dawn’s hubby’s birthday, so Happy Birthday Jerry! I hope your day was grand!  I think my good friend, Dennis Miller is going to make a trip here on Wednesday for a lunch… That sounds like fun for me!  The Rev. Al Green takes us to the finish line today with his song: Love And Happiness…  And that’s all I have today, thanks for reading the Pfennig, now go out and make this a Marvelous Monday and don’t forget to Be Good To Yourself!   

Chuck Butler

 

May 31, 2018   

* Dollar loses its grip on control

* Bank of Canada hints at additional rate hikes… 

Good Day… And a Tub Thumpin’ Thursday to you! I’m going  to have to wait on starting my Tub Thumpin’ today, I have a reservation with my bed! Two consecutive nights of stomach problems… UGH! But, I’ll soldier through this morning, and then head back to attempt to make up for lost sleep!  Elton John greets me this morning with this song: Honky Cat… Man I really liked Elton John in his early years, but the Goodbye Yellow Brick Road album was jumping the shark tank for me…  

The global trade war is back on the docket as of yesterday, and the dollar lost its grip on the currencies and metals, while the price of Oil recovered a bit of lost ground, and the 10-year Treasury yield remained at 2.87%…  When the President placed  25 percent tariffs on imported steel and 10 percent on aluminum in March, he granted a reprieve to Mexico, Canada and the European Union until June 1.  Well, guess what tomorrow is? Yessiree, Bob! It’ll be June 1st, and it will be busting out all over, all over the meadow and the field…  And then we have to get back to the Trade Wars…    

Remember in March when the tariffs were first announced, and the dollar got sold like funnel cakes at a State Fair?  Well, the realization by traders, that this is all coming around again, and then add to that the fact that the President did announce additional tariffs on a large number of Chinese goods yesterday… If all these plans to push through tariffs continues, I suspect the dollar will be subjected to large rounds of selling once again.

And in reality, a weak dollar is just what the doctor ordered according to President Trump, so it can help to correct the Trade Deficit. I’ve said this before, so that’s nothing new, but more of a friendly reminder, so that as the dollar slides once again, you know the real reason for all of it…

I had to laugh when I read an article on the Bloomberg this morning that talked about how White House Trade Advisor, Peter Navarro, chastised Treasury Sec. Mnuchin, for 1. saying the trade dispute with China was over, and 2. stepping outside the arena that the Treasury Sec. is supposed to remain in…  Navarro, didn’t say it, but just the way he snapped at Mnuchin, made me think that he was telling Mnuchin, you keep to the dollar, and I’ll keep to trade…  

OK, enough of the Trade War talk today, just know that it the root cause of the slide in the dollar yesterday, overnight, and this morning. The euro is pushing toward the 1.17 handle, and the Aussie dollar (A$) is pushing toward the 76-cents handle! Gold is back ! And things seem to be turning around just in time, because I was about ready to raise the white flag, and surrender to the dollar… 

The price of Oil recovered a bit of the recent lost ground on supply news… Yesterday, I wrote an epistle-like write up on Russia and the prospects for the ruble. And last night Russian president, Putin, made a statement that pretty much sealed the deal for production cuts in Oil by the OPEC members… Putin pointed out that Russia no longer is addicted to Oil money for their economy, and therefore he doesn’t need the production cuts that helped push the price of Oil higher for the last year.

So, this could be a knife in the back of Oil’s rise in price… We’ll have to see… eh?   The Bank of Canada held steady Eddie on their interest rates, however, the bank said in a statement accompanying its decision that developments since April reinforce its view that “higher interest rates will be warranted to keep inflation near target.”   And that statement lit the fire under the loonie, and got it moving in the right direction once again… 

Longtime readers know that I’ve explained that a strong currency can help combat inflation, which is why I get so disgusted with countries that forget that a strong currency can go the work of higher interest rates… Shoot Rudy, look at Singapore… Their Monetary Authority of Singapore (MAS) doesn’t have to move interest rates up and down, they keep them very steady, and adjust the band in which the Sing dollar trades in… If they need to allow the Sing dollar to appreciate, they widen the band, and so on… 

There are no wild swings are Central Bankers out talking up rate hikes, etc. in Singapore…  And that’s the way it should be everywhere!  I learned about the benefits of a strong currency from the former Reserve Bank of New Zealand (RBNZ) Gov. Don Brash, who, when I met him, gave me his business card with his direct telephone line, and told me to call him when I had questions about RBNZ policy… So, one day, I picked up the phone and made the call, and guess who answered the call? Don Brash himself!  And we talked for an hour that time, and a few more times after that! 

We have somewhat kept in touch through the years, as Don Brash has gone into politics… I got a real kick out hearing from him when I turned 60 a few years ago…   OK… let’s get back to stuff…    

Gold inched higher by a whopping $2.50 yesterday, and is up another couple of bucks in the early morning trading today…  The shiny metal sits at $1,309 and change this morning… and is back to moving in the right direction again, after an awful month of May… No reason to sell Gold in May, but that didn’t stop the price manipulators…  It’s all going to blow up in their collective faces one day, and when it does, I’ll be there to laugh, and point a finger, saying neener, neener, neener!   (yes, I can still be child sometimes! HA!)  

The U.S. Data Cupboard had the 2nd reading of 1st QTR GDP and yesterday I said, “The first print gave us a 2.3% growth rate… the only way I see this number changing is it going downward…”   And since I said that, the only print that could happen was that 1st QTR GDP printed at 2.2%, down from the original reading of 2.3%! HA!   Hey, my first boss in the investment business told me one time when I got something right, that “even a blind squirrel can find an acorn”…   (he knew how to put me in my place, eh?) 

To recap… The on again off again Trade War, is heating up again with the June 1st deadline for Canada , Mexico and the Eurozone on the docket for tomorrow… Trump added more tariffs to China yesterday, and all this has taken the stuffing out of the dollar’s shirt. The currencies and metals are back on the rally tracks this morning, and IF the Trade War continues to heat up, we could very well see the dollar continue to slide downward…   

For What it’s Worth…  My good friend, and the Retirementor, Dennis Miller, sent out his weekly letter yesterday, and in it he talked about the scandals at Wells Fargo and the other Too Big Too Fail Banks… I wanted you all to read about this, since the other day, I had in the FWIW section an article about the Wells Fargo CEO talking about no more scandals…  So, here’s Dennis’s letter, which he tells me that whenever I mention him he gets a few more subscribers… Well, let’s inundate him and get everyone signing up!  Here’s the link…   https://milleronthemoney.com/if-you-do-business-with-organized-crime-be-careful/   

Or, here’s your snippet: “When we last checked, since 2009 the top banks had been fined a total of $204 billion. Bloomberg now reports, “Wells Fargo’s $1 Billion Pact Gives US Power to Fire Managers”:
“The settlement covers issues in Wells Fargo’s auto-lending and mortgage units. The bank revealed last year that it had forced unwanted insurance on customers who took out car loans….”

Fines are just part of the cost of doing business:

“Still, investors appeared relieved…as shares advanced 1.8 percent to $52.44…the best performer in the 24-company KBW Bank Index. The settlement should remove one overhang from the shares, especially since the penalty isn’t as bad as some analysts had anticipated….” (Emphasis mine)

A week later, American Banker reports, “Yet another Wells scandal; House moves closer to passing dereg bill.” Quoting from the Wall Street Journal:
“…. Just when you thought all of the various Wells Fargo scandals had been settled, or at least known about, comes word that the Labor Department is investigating the bank for allegedly pushing holders of lower-cost 401(k) plans it manages…pressuring them into buying the bank’s in-house funds.” – Dennis Miller   

Chuck Again… A dear reader sent me a note yesterday, after my FWIW piece the day before regarding Wells Fargo’s CEO… talking about no more scandals… The dear reader told me that he received a notice from WF addressed to his mom, that her credit card payment was overdue… His mom has been dead for 3.5 years now! So much for “no more scandals”, eh?   

Currencies Today 5/31/18… American Style: A$ .7583, kiwi .7012, C$ .7794, euro 1.1690, sterling 1.3340, Swiss $1.0138, … European Style: rand 12.5680, krone 8.1667, SEK 8.78, forint 272.52, zloty 3.6828, koruna 22.04, RUB 62.40, yen 108.93, sing 1.3380, HKD 7.8485, INR 67.40, China 6.4192, peso 19.78, BRL 3.7270, Dollar Index 93.89, Oil $67.77, 10-year 2.87%, Silver $16.57, Platinum $913.52, Palladium $988.35, and Gold… $1,309.10

That’s it for today… Well, the hyped up start by our young stud pitcher, didn’t exactly turn out great, but he did OK, for the first game… But the Cardinals lost and come home limping… They need to make some hay while at home for sure! Went to watch Braden play ball last night, some of the antics of the boys in the field were hilarious…  The end of the week for me, thank goodness, I need to recover! America takes us to the finish line today with their song: Daisy Jane… Now, please be careful out there, but do have a Tub Thumpin’ Thursday!  Thanks for reading the Pfennig, and remember to Be Good To Yourself!    

Chuck Butler

 

May 30, 2018  

* Currencies rebound in the overnight markets!    

* Fundamentals point to ruble appreciation? 

Good Day… And a Wonderful Wednesday to you! Today is the day all Cardinals baseball fans have been waiting for. The Day Alex Reyes takes the ball and starts a game for the Cardinals. And Major League Baseball is in the doghouse with me, for this will be one of those games that’s only shown on Facebook… Wait, What?  I guess it’s back to listening to the game on the radio!   Kansas greets me this morning with their song: Hold On…  And we start a new day…   

Well,  the dollar still had a tight grip on the euro and the other currencies, as even the Aussie dollar (A$) dipped below 75-cents yesterday, which I thought to myself yesterday that I should have never talked about how the A$ was hanging onto the 75-cent handle… I jinxed the A$… sorry…   But in reality it wasn’t fair to the other currencies to not get mixed up with U.S. dollar strength!  HA! I know, I sounded like a millennial there, with their “it’s not fair” whining…  

When Alex was a young boy, he really had a problem with the “it’s not fair” stuff, until one day I sat him down, and told him that while he might not actually get this until he was older, but that “life isn’t fair”.. .and then asked him, “do you think it was fair for me to get cancer?” It hit him like a palette of bricks, and I don’t think I ever heard me say that again!  

Sorry about that, I started typing and before I knew it I was going into stuff you probably don’t give two hoots about!  

I had good intentions to go from what happened yesterday to what’s going on in the overnight markets, so this looks to be as good a place as any!  There’s been some healing in the currencies in the overnight markets, and the euro has climbed back to the 1.16 handle, and the A$ is back above 75-cents! 

I think this trading is a result of traders feeling that they had gone too far, too fast… 

I do want to point out something that caught my eye yesterday, and that is the yield on the 10-year Treasury, which last week was above 3%… But this week, the yield has fallen back below 3%, to 2.87%… Folks, being from a bond trading desk in my early formative years, I would say that this is the bond guys saying that they don’t believe the Fed’s stated path for interest rates this year… (2 more rate hikes that is)  I was taught many years ago to watch what the bond market is doing, because that’s the key indicator of what’s ahead for the economy and interest rates… 

I get asked a lot by readers and people I talk to that want to know what currencies I like right now…

I usually start with the Chinese renminbi… and right behind the renminbi is the Russian ruble… You must remember though, I’m a fundamentals guy, and when I like a country’s fundamentals, I like their currency… 

And yesterday, dear longtime reader, Bob, sent me a note that quoted the IMF Chief, Christine Lagarde talking about Russia… let’s listen in… “Russia has put in place an admirable macroeconomic framework-saving for a rainy day, letting the exchange rate float, introducing inflation targeting, and shoring up the banking system. As a result, it was able to weather tough times well, and today it has virtually no fiscal deficit, a solid current account balance, and very little debt.”

Sounds like a recipe for good currency appreciation doesn’t it? And even though they have brought down their extremely high interest rates, those rates still remain at a positive differential to most currencies of the world. And I can’t discuss how well Russia is doing without giving kudos to the Central Bank of Russia (CBR) Gov. Elvira Nabiullina, for my money, she’s the best Central Banker out there right now… Longtime readers know that I have no extra love for Central Bankers these days, as for the most part, they have gone to the dark side… But Ms. Nabiullina is the exception to the rule, and for her work, the ruble should be appreciating… Patience is a virtue right? All good things come to those who wait, right? Well, my patience is growing thin waiting for the ruble to appreciate, and return to the levels it traded around before the conflict with Ukraine began. So, come ruble traders, investors, and potential investors, get up off your duffs and get to buying some rubles while they’re cheap!

Well, this morning in the Eurozone, their latest reading on consumer inflation (CPI) will print, and most economists think it will bump higher to 1.9%, which would be very close to the European Central Bank’s (ECB) target rate of 2.0%, and if the ECB sees the momentum for CPI to be going higher, then it would certainly signal to the ECB that they need to begin their much awaited dismantling of Stimulus… 

And in Italy, they will hold a bond auction for Italian Gov’t bonds… the slaughtering that Italian bonds had taken in recent days, was held at bay yesterday, and there was some healing, so this auction this morning is a litmus test for this debt… and the euro as an extension. 

Elsewhere around the world the Bank of Canada (BOC) meets this morning to discuss rates. There isn’t one soul out there that thinks the BOC will hike rates at this meeting, but what will be looked for are any indications that rate could be going higher in future meetings…  The Canadian dollar/ loonie saw some selling on Monday, but was back to being bought in the overnight markets… I’ve always liked the loonie, because they have “something” that other countries want, which should keep the loonie well bid… 

The loonie has been quite resilient in the face of two dark clouds overhead, with one being the NAFTA negotiations, which by all reports aren’t going well, and the other being the Gov. of the BOC, Poloz… I’ve gone through, my fears of what he’s up to many times in the past, so I won’t go through it again, just smile and move along with me here to the next thing going on today…  HA!  

Gold was able to add a whopping $1.20 to its price yesterday, after nearly 300,000 contracts were traded in the metal…  I was reading some reports yesterday about Gold, and how the supply is down, and the demand is up for physical Gold from Russia, China, Turkey, Iran, and so on…  And it’s this scenario that I point to for all the naysayers to Gold price manipulation, as my question for them to explain how that might happen, given the supply and demand situation..   

The U.S. Data Cupboard yesterday saw Consumer Confidence jump even higher this month from 125 to 128… Crazy, I know, but what are you going to do about it? Nothing, absolutely nothing, say it again!  Today’s Cupboard has the second reading of first QTR GDP… The first print gave us a 2.3% growth rate… the only way I see this number changing is it goining downward…  

It’s also ADP Employment Report day, which means that this Friday will be a Jobs Jamboree Friday!  Recall that we’ve seen two consecutive months of disappointing jobs reports… And if you were to take out the BLS’s hedonic adjustment from last month’s total, it would have been negative!  Right now the so-called experts think the total jobs created in May will be 198,000…  Again, less than the previous month’s total…   

To recap… The death grip the dollar has had on the currencies and metals has been loosened in the overnight markets, with the euro and A$ recovering some lost ground. Gold gained a whopping $1.20 yesterday… Chuck talks about the Russian ruble, and their great Central Bank Gov. And gives us his thoughts on why the yield on the 10-year Treasury bond has fallen in recent trading days…      

For What It’s Worth… I sure hope everyone reads this today, and they say, after reading it, that Chuck sure has been telling us all this, but we were looking through the Fed’s rose colored glasses and believing the hype they were spreading about the strong economy.. We feel badly that we didn’t believe Chuck! This article is about how the economy is sinking folks… and can be found here: http://www.stltoday.com/business/local/the-alarming-statistics-that-show-the-u-s-economy-isn/article_140475b7-864e-52a5-a68b-7a78eb17e9e3.html#utm_source=stltoday.com&utm_campaign=BusinessNewsletter&utm_medium=email&utm_content=A12874506A3B5805DDED6C95AF30D7173DF7C77A

Or, here’s your snippet:”
In the past week, two reports – a new Federal Reserve survey of more than 12,200 Americans about their finances and a new United Way report on financial hardship – reveal just how unstable life remains for a large number of people. Here’s a rundown of the key findings:
– Forty percent of American adults don’t have enough savings to cover a $400 emergency expense such as an unexpected medical bill, car problem or home repair.
– Forty-three percent of households can’t afford the basics to live, meaning they aren’t earning enough to cover the combined costs of housing, food, child care, health care, transportation and a cellphone, according to the United Way study. Researchers looked at the data by county to adjust for lower costs in some parts of the country.
– More than a quarter of adults skipped necessary medical care last year because they couldn’t afford it.
– Twenty-two percent of adults aren’t able to pay all of their bills every month.”

Chuck again… nothing new here to me, how about you?  

Currencies today 5/30/18… American Style: A$ .7550, kiwi .6975, C$ .7702, euro 1.1635, sterling 1.3280, Swiss $1.0099, … European Style: rand 12.5535, krone 8.21, SEK 8.84, forint 274.32, zloty 3.7028, koruna 22.1935, RUB 62.58, yen 108.90, sing 1.34, HKD 7.8460, INR 67.38, China 6.4129, peso 19.70, BRL 3.7324, Dollar Index 94.33, Oil $66.80, 10-year 2.87%, Silver $16.39, Platinum $904.89, Palladium $980.73, and Gold… $1,301.50   

That’s it for today…  The rain from the tropical storm Alberto, that hit the gulf region this past weekend, has made its way to St. Louis… That’s OK, nothing planned outside for me anyway! In every life a little rain must fall… right? Cardinals find their bats again last night in time for a win… And now it’s the Alex Reyes debut… I sure hope he can deal with the hype surrounding him, and pitch a good game. Matthew Sweet takes us to the finish line today with his song: Evangeline… Years ago, Chris Gaffney and Chuck took a foreign bond trader from AG Edwards to a concert by Matthew Sweet… How long ago was that, Chuck? Probably 20 years ago!  OK, let’s head out the door, and I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!   

Chuck Butler

 

May 29, 2018  

* euro falls through the trap door 

* Oil drops on Saudi/ Russian agreement

 

Good Day… And a Tom Terrific Tuesday to you! What a great holiday weekend for yours truly! And I topped it off last night with dinner at the newest BBQ spot in the area! Sunday, we celebrated Braden’s 7th Birthday, and a good time was had by all! I spent a lot of time outside this past weekend, working on the patio, getting it ready for the B-day celebration, and I’ve found that I have to do things in spurts now… Take a breather under the umbrella, and then get back at it…  Oh well, I get the jobs done, it just takes me longer! I don’t want anyone to think that I didn’t stop and think about what the weekend was all about…  Edwin Starr greets me this morning with his song: Twenty Five Miles…   

Well, I’m minus another tooth, but… it came out without any problems during or after, so I had that going for me! The poor euro had another tooth extracted from it on Friday, and no longer trades with a 1.17 handle.. no wait… i5 no longer trades with a 1.16 handle either! …  The Italian election has really taken the bat out of the hands of the euro, And even with the Italian President doing his bit to bring everyone together, and stop the “leave the euro talk” the markets aren’t buying it… 

Many, years ago now, I used to call the countries of Spain, Italy, Portugal, and Greece… Club Med…  They were always doing something to throw their respective legacy currencies under a bus… And unfortunately, some things never change, eh?  Italy may have the 3rd largest economy in the Eurozone, but the have the 2nd largest debt, falling in behind Greece! 

The Big Dog is being chained to the porch, no more chasing the dollar down the street, for now that is…  And where is European Central Bank (ECB)  President, Mario Draghi, during this drop in the euro? He of the famous line, ” the ECB is prepared to do whatever it takes to preserve the euro” I guess not this time, eh, Mario?  Central Bankers, what good are they if they can’t, at least, attempt to calm markets in times like this?  I remember the “whatever it takes” speech by Draghi, and how the markets reacted to it, hanging a bid on the euro, and driving the price upward for a day or two.. 

I’ll bet a dollar to a Krispy Kreme that the ECB is not a bunch of happy campers right now, with another headache being caused by a member of the Club Med countries, this time Italy…  I can hear some of them singing, nobody knows the trouble I’ve seen, nobody knows the sorrow, why on earth did we ever agree to let Club Med in to our Union, I wish we could go back and start all over again…  I do believe I can hear them singing!

Talk about the bottom falling out of an asset’s price…  Have you seen the price drop in Oil? Last week, the price of Oil was sailing on clear and smooth waters, and the price was inching higher and higher… And then came a summit with Saudi Arabia and Russia… And all hell broke loose! You see, the Saudis and Russians agreed to delay an end of their production cuts, which on its own would have boosted the price of Oil, but wait, there’s more! These two countries then issued a memo that said other members of OPEC could begin to boost production now, if the high price of Oil was hurting their exports…  Wait! What?   

Oh, you heard me sweetheart… The OPEC Oil producers received an Get Of Jail Free Card! And with that thought filtering through the markets, traders began to mark down the price of Oil because of the fear of over supply once again.    I was listening to my iPod outside the other day, and the great song: Spinning Wheel by Blood Sweat and Tears came on… What goes up, must come down… and that got me thinking of the price of Oil… 

Well, Gold lost $4 in trading yesterday, with the U.S. on Holiday, there was very little in the way of trading going on, and the contracts traded were less than 75,00 And last Friday’s trading in the shiny metal netted a loss of less than $3 bucks…  But the price of Gold is above $1,300 this morning, proving so far, that last week’s dip below $1,300 proved to be an excellent buying opportunity… But my guess is we’ll se more opportunities, because the trading in the anti-dollar assets, seems to be very strange right now, as if an invisible hand is guiding them… 

I don’t like what’s going on right now, for none of it seems to be of the cloth that drives asset prices, it seems to be an invisible hand pushing the buttons right now. This is when I say to batten down the hatches, and only come out to look for bargain basement prices… For as quickly as the currency and metals and Oil rallies changed direction, they can change direction again, and head back up without any notice!  

There is one currency though that, so far that is, attempts to defy the gravitational pull of the other currencies, and that is the Aussie dollar (A$)…  The A$ is holding onto the 75-cent handle as if its life depended on it! The A$’s kissin cousin across the Tasman, kiwi, isn’t so defiant but it does receive protection as it trades in the shadow of its larger cousin… 

I truly thought that by now the Reserve Bank of New Zealand (RBNZ) would be beating the drum for higher rates in New Zealand… But nary a word from the RBNZ these days about anything, much less interest rate direction! Maybe the RBNZ is waiting for the Reserve Bank of Australia (RBA) to hike first… Hmmm… I certainly hope not… That’s not the bold Central bank that used to be run by Don Brash!  Brash would not have felt that waiting for the RBA was the thing to do, if moving interest rates were in the best interest of New Zealand!   One of these days, I’ll tell you a story about Don Brash the former Gov. of the RBNZ, but not today, I’m running late!    

Well, in my sophomoric style… I told you so! This past week, The Bank of England’s (BOE) Gov. Mark Carney, admitted to a crowd that the rate hike, previously mentioned, will be delayed, because of the problems with BREXIT negotiations.  Pound sterling got Whacked! and rightly so, for those traders that ran the price of sterling upward thinking that Carney was going to hike rates, should have their trader card revoked!  

The U.S. Data Cupboard on Friday had some more bad news for the U.S. economy… Durable Goods Orders for April fell -1.7%…  Capital Goods Orders rose 1.0% but the previous month was revised downward at -0.9%, which means the last two months are a wash!  Just chalk these two up as two more pieces of proof that the U.S. economy is not strong, so take that Fed Heads!    

Speaking of Fed Heads, St. Louis Fed President, James Bullard is scheduled to speak today… Bullard is always good for a quote or two, so I’ll be following that today…    

And to add to all this madness going on, today we’ll see the latest Consumer Confidence report…  I shake my head in disbelief and disgust that Consumers don’t see what’s going on here… 

To recap… the currencies are getting whacked, the price of Oil is getting whacked and Gold is getting sold daily.. What the hell is going on here? The U.S. economy proves over and over again that it’s not the strong economy that the Fed Heads keep telling us about, but the dollar remains in the driver’s seat… (great song BTW!)    

For What It’s Worth…  There I was reading my local newspaper, drinking my coffee one morning last week, and this article came jumping out of the pages to smack me in the face!  This is about the Wells Fargo CEO talking about how things are going to change after all the scandals at his bank this past year, and can be found here: http://www.stltoday.com/business/columns/david-nicklaus/wells-fargo-ceo-emphasizes-honesty-in-wake-of-scandals/article_c9a05cda-49db-57de-8a03-014c51aeb9be.html#utm_source=stltoday.com&utm_campaign=BusinessNewsletter&utm_medium=email&utm_content=A12874506A3B5805DDED6C95AF30D7173DF7C77A    

Or, here’s your snippet: “Wells Fargo admitted in 2016 that its employees, driven by aggressive sales quotas, had opened 2 million unauthorized accounts for customers. It was fined $185 million and then other problems surfaced, including auto-loan borrowers who paid for unnecessary insurance and mortgage customers who were charged excessive fees.
After those abuses resulted in a $1 billion fine, a new scandal surfaced this month over altered business-customer documents.

Weary customers might think the giant bank has an endless stream of improprieties waiting to bubble up. Sloan maintains that, counterintuitively, the latest disclosure shows that his reforms are working.

“We’re encouraging team members, if they see something they’re uncomfortable with, to raise their hands,” he said, and employees in the business-banking unit did just that.”    

Chuck Again…  Well, that’s all fine a good, until there’s another scandal, eh? And can I remind you that no one went to jail for these improprieties…

Currencies today 5/29/18… American Style: A$ .7518, kiwi .6920, C$ .7672, euro 1.1548, sterling 1.3240, Swiss $.9973, … European Style: rand 12.66, krone 8.2875, SEK 8.9396, forint 277.27, zloty 3.7364, koruna 22.4065, RUB 62.26, yen 108.90, sing 1.3470, HKD 7.8463, INR 67.85, China 6.39, peso 19.72, BRL 3.6813, Dollar Index 94.84, Oil $66.87, 10-year 2.86%, Silver $16.43, Platinum $905.54, Palladium $980.28, and Gold… $1,307.28   

That’s it for today… Sorry for the tardiness, I ate something last night that didn’t agree with me in the middle of the night… UGH! it sure tasted good, so I’m not sure what the problem was, but I spent a few hours in the middle of the night awake… UGH!  My beloved Cardinals can’t deal with prosperity… After a good weekend in Pittsburgh, they laid an egg yesterday in Milwaukee! the Stanley Cup Finals began last night, it’s difficult for me to fathom that an expansion team could win the Cup… My Blues have been here for 51 years and are no closer to winning a Cup than I am to running a marathon!  AC/DC takes us to the finish line today with their song: Hells Bells… My high school biology teacher used to say that… “hells bells”…  And with that thought, it’s time to go! I hope you have a Tom Terrific Tuesday, and Be Good To Yourself!    

Chuck Butler

May 23, 2018   

* Currencies for the most part give back Monday’s gains

* Geopolitical problems arise again…

 

Good Day… And a Wonderful Wednesday to you! One and done! Yesterday was a One and Done Day for more than one thing… UGH! Another good night’s sleep last night, I’m of the opinion, that my recent problems have dissipated, for now that is, and things are looking up… Of course, I will find out more this morning, when I visit my oncologist. And then next month when my bi-annual set of scans are taken. That nasty cold I had is gone too! Man, I may just sign up for the next marathon! NOT! HA! Now, if we could get the markets healed, that is the markets I care about!  The Guess Who greets me this morning with their song: No Time… 

Well, our first One and Done yesterday is in the currencies, which for the most part gave back their gains from Monday. Geopolitical pressures entered into the markets again, as President Trump told reporters that the summit with N. Korea planned for June in Singapore, may not happen. The Turkish lira plunged and that led the Emerging Markets currencies down the slippery slope. There were a couple of currencies that added to their Monday gains, and they were members of the Petrol Currencies Club. 

Yes, the Russian ruble, and Brazilian real bucked the tide yesterday, and rallied, even with the price of Oil slipping back below $72 on the day. I think the huge gains in the commodities on Monday, spilled over to these two currencies. Gold’s consecutive days of gains, albeit very small ones, ended, with a drop of $1.70, but, the shiny metal is up big in the early morning trading today, and has climbed back to trade above the $1,300 figure. 

I read a report yesterday, where James Rickards, was saying that Gold is getting ready for a Big Breakout to the upside… And then I received a note from the GATA folks who printed a report from someone that believes the messages calling for Gold to rise to new heights is hurting GATA’s attempt to expose the price manipulators. Hmmm…  Well, unless the folks, like me, are pointing people to possible gains, how else would they find out? 

Of course, I have to emphasize the word, “possible” because no one, including yours truly, knows for sure that an asset is going to gain, or lose for that matter!  For Instance, remember late last year, when I told you that James Rickards was calling for a HUGE “price reset” for Gold?  That was supposed to have happened at the start of the new year. Well, we’re almost to June… But all Gold holders would have been happy campers for sure, had the “price reset” occurred… Sometimes it takes a major prod to get investors to move, and if this got investors to buy some Gold, then that was a good thing, in my opinion! 

Our next One and Done came in the stocks… I won’t spend a lot of time here, but geopolitical unknowns are not good for stocks folks…  The next One and Done is a work in progress, as the yield in the 10-year Treasury dropped from 3.08% to 3.01%..  I don’t think this buying of Treasuries is going to last long, so this is will turn out to be another one and done! 

So… How about that rally in the Russian ruble?  The RT recently had this to say, that makes abundant sense to me.. “Western media would have you believe that Russia is an underdeveloped nation with a wretched standard of living. They advance the perception that it is a country that has never recovered from the collapse of the Soviet Union.

They would also want you to believe that Russia is suffering under the heavy burden of Western imposed sanctions that have brought Russia to her knees as a result of isolation, which couldn’t be further from reality.. ” 

Well, that’s all fine and good, but the ruble is still very weak considering where it was trading before the conflict with Ukraine erupted. Which if you’re someone that likes to buy when everyone else is selling, this seems to be the place you would want to start!  Especially if you believe the price of Oil is going to continue to inch higher…   

The next one and done came from the Commodities, which on Monday looked like they were ready to run a marathon, but apparently it was only a sprint. And the main commodity currency, the Aussie dollar (A$) got pushed downward, thus wiping out its Monday’s gains. 

Speaking of wiping out Monday’s gains, the biggest wipe out came in the euro, which saw the problems in Italy worsen, as Italian bonds are getting whacked and now trade at a huge premium VS a German Gov’t Bond…  Remember back in 2011, when the problems with Greece were first being exposed, and I said then that Greece had an economy the size of Kentucky’s…  But writing off Italy’s problems won’t be as easy, as Italy is the 3rd largest economy of the Eurozone… And their debt is HUGE! 

The new anti-euro Gov’t needs to sit down and be talked to by the leaders of the Eurozone, and tell them that leaving the euro is impossible, and therefore they need to quiet down the leave the euro rhetoric, and the demands that the ECB write off loans made to Italy…  Otherwise this is going to go down a rabbit hole that no one wants to go down… I’m just saying…   

The Swiss franc dropped below parity to the dollar… We first saw this drop a week or so ago, but the franc quickly move back above parity, but to see this drop below parity again, gives me the thought that this is the general direction for the franc…  

Back in 2011, when investors were running away from the euro as if it were Godzilla trashing the streets, they ran mostly to the Norwegian krone, and some to the Swiss franc. But soon investors realized something that I had been telling them for years, that the franc is so closely tied to the euro…  

And then back to Gold for a minute.. In Ed Steer’s letter today he highlighted an article that I took this quote from… You can find Ed Stter’s letter at www.edsteergoldsilver.com .I highlight this because it was just yesterday that I was talking about how China’s Gold reserves totals are much greater than the World Gold Council quotes them to be.  Let’s listen in here… “Perhaps more interesting however in terms of global gold trade was the export of 16.1 tonnes (24.6%) direct to mainland China (and only 0.5 tonnes to Hong Kong). As we have often pointed out the known gold exports to mainland China (mostly from Hong Kong and Switzerland) tend to be comfortably in excess of the figures assessed by the major precious metals consultancies as Chinese consumption, and the high UK export figure, although well below the amounts from Switzerland and Hong Kong, serves to emphasize this point.”   

Well, the U.S. Data Cupboard is still pretty much emptied out, but this afternoon, the Fed’s last Meeting Minutes will print, and like I said yesterday it will be chock-full-o-the-same-nonsense…  I’m just saying…  Around the world though, it’s what I like to call PMI Day… As the PMI reports for April will print for a lot of countries today.. These are the Markit PMI’s, which I’ve explained are different from the Gov’t PMI’s. PMI is the short version of a manufacturing index report..  It will be interesting to see if manufacturing around the world is still expanding… 

To recap…  Well, the currencies just couldn’t stand the prosperity, neither could the stocks, commodities including Gold and Oil! The good news though is that Gold is up nicely in the early morning trading today, as geopolitical problems have come back into focus for the markets. The Trump / Kim summit in Singapore is “iffy” right now…   Chuck calls Tuesday a One and Done Day…   

For What It’s Worth…  I want to thank dear reader Bob for sending this to me. It’s an article about how decarbonization or an energy transition, is just folly, and can be found here: http://business.financialpost.com/commodities/energy/what-decarbonization-the-world-will-soon-be-burning-100-million-barrels-of-oil-per-day   

Or, here’s your snippet: “One hundred million. It’s a number that drowns comprehension; it’s more jelly beans than can fit in an average-sized swimming pool.

Within a year, world oil consumption will top 100 million barrels of oil per day. Over the same time period, close to 100 million new piston-firing vehicles will be bought by petroleum-thirsty customers.

I hate to say it, but any notion of an imminent “energy transition” or “decarbonization” is folly.

In fact, the percentage of fossil fuels in the world’s energy mix — coal, oil and natural gas — is still lingering well above 80 per cent, a figure that has changed little in 30 years. That remains so, despite being challenged by serious environmental policies, financial pressures, viable alternative systems, public awareness and social activism.

It’s true that wind and solar are being deployed quickly, in fact, at an exponential rate. But impressive as it all is, renewable energy installations are far too slow to catch the still-hardy appetite for fossil fuel consumption.”   

Chuck Again…  I liked the article because it tells it like it is, and should be good fodder for Commodity traders… wink, wink…  

Currencies today 5/23/18… American Style: A$ .7543, kiwi .6910, C$ .7758, euro 1.1727, sterling 1.3358, Swiss $ .9908, … European Style: rand 12.61, krone 8.1140, SEK 8.7695, forint 272.92, zloty 3.6882, koruna 21.9715, RUB 61.33, yen 109.79, sing 1.3443, HKD 7.8499, INR 68.44, China 6.3686, peso 19.90, BRL 3.6610, Dollar Index 93.83, Oil $71.79, 10-year 3.01%, Silver $16.56, Platinum $907.84, Palladium $988.10, and Gold… $1,301.60  

That’s it for today…  Today is Braden Charles Butler’s Birthday! Happy Birthday buddy! Braden turns 7 today… Wow! Where do these years go? Oh well, I sure hope your day is Grand today! I have a busy morning, with a visit to the oncologist and then off to the ball game! Another One and Done came in the Cardinals game last night, who saw their 1 day of good pitching and hitting go missing! Well, there’s someone  walking around upstairs this morning, I’m not alone any longer! 🙂  Maroon 5 take us to the finish line today with their song: This Love…   I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!  

Chuck Butler