Bond Boys End Their Complancency…

Rocktober 8, 2018 

* Currencies rally on Friday but get sold overnight

* Gold gets whacked again! 

Good day… And a Marvelous Monday to you! A nice weekend was had by yours truly, despite my Missouri Tigers losing in S. Carolina… UGH! And despite that yesterday afternoon here, looked like the monsoons had moved in! Last Thursday night, I got down to business, cooking wise, and made myself, because I was home alone, a big pot of spaghetti and meatballs, with cheese garlic bread, and a small salad… While I sat there eating, and enjoying what I had made, I said, “Those Italian Restaurants on the Hill in St. Louis, should be hiring me!” I’m just saying… It was THAT good! Cat Stevens greets me this morning with his song: Moodshadow… Yes, I’m being followed by a moonshadow…

Well, last Friday’s Jobs Jamboree was interesting in that the BLS said the jobs created in September were just 134,000… But the Unemployment Rate dropped to a cycle low… In fact, the last time it hit a low like this was 1969… Guess what started in 1970? Give up? It was a recession… So, we have that in our back pockets to think about now don’t we? And bust my buttons! It was one of those rare times, when the BLS actually has a come to Jesus moment, and takes away jobs from the surveys… For September they took away 67,000 jobs… So, if I always take out the jobs additions the BLS makes all the time, I have to add back in when they take them out! … So, 201,000 jobs were on the surveys… And that was more like what was expected… And would make more sense that the Unemployment Rate dropped if we had kept the numbers that the surveys gave…

The currencies led by the euro, found their way in the darkness that has been caused by the long shadow the dollar throws off. The euro climbed back above 1.15 on Friday, and I thought to myself… Funny, how the dollar can’t rally on the Employment data… Now, the euro wasn’t really on Terra Firma above 1.15, and that proved out in the overnight markets, where the euro has been pushed back below 1.15… I think, that the Eurozone heads would like for the euro trade between 1.15 and 1.20, for optimum trade… I had a longtime reader send me a note on Friday, and asked me to give my opinion on the Russian ruble…

Well, here goes folks! I’ve said this for a longtime now, that the Russian Central Bank is the best Central Bank on the planet… Their Gov. Elvira Nabiullina, is the best Central Banker going right now. She gets it… But besides the Central Bank, the Russian economy has done quite well, given they have had Economic Sanctions placed on them by the U.S. and Eurozone, for way, too long! And that to me is a sign that the economy would be soaring to the moon if they didn’t have the governor placed on the economy by the sanctions… Sooner or later, the heads of the U.S. and Eurozone will come to the realization that the sanctions haven’t had the effect on the Russian that they thought they would, and drop them… When they do, It is my opinion, which could be wrong, I might add, that the ruble will begin to make headway VS the dollar.

We already see the ruble gain whenever the price of Oil shoots higher, but the currency has this governor on it, and can’t shake it with just higher Oil prices… It needs the world to see how well the country is moving without the sanctions! The Russian Central Bank has inflation under control, which is quite impressive to me, and they have eked out some positive growth in recent quarters…

When the debt in the world comes crashing down… and currency investors / traders/ what have you, begin to look around at where to go besides the dollar, I believe they will turn their focus on the ruble…

So, buying it now, at still blue light special prices, seems like the thing to do… But again, that’s just my opinion, and I could be wrong!

Suddenly, and I mean suddenly yields on Treasuries are rising and acting like nothing is going to stop them from rising! The 10-year’s yield is 3.23%… It sure didn’t take long for that last 28 Basis Points to be gained, now did it? I told you long ago, that when yields start to rise, they will rise quickly, and before you can say “I didn’t know bond yields could rise” They’ll be higher than a kite, on a blustery day! I said last week, that the bond boys have come to the realization that the Fed is downright serious about continuing to hike rates, and that they see inflation coming… Uh-oh!

Don’t just take my word for it… the folks over at dollarcollapse.com had this to say about the sudden change in sentiment toward complacency, and the rise in bond yields… 

“What happened? Apparently the weight of accumulating problems finally became too great to ignore. Interest rates had been rising for a while as inflation bumped up against Fed targets, but traders only noticed when the 10-year Treasury yield pierced 3%. This cycle’s housing boom had been moderating since June, but lately the bottom seems to have dropped out, generating headlines like this:
Manhattan home sales tumble in market clogged with listings
Vancouver home sales mark steady decline
For Sale home supply surges in hot West Coast markets
Bond-market bloodbath likely to hit mortgage rates soon

And the emerging market crisis – easily managed if the dollar just went back down – suddenly feels permanent as rising interest rates pull the dollar along for the ride.” – dollarcollapse.com  

Last week I went on and on about how I believed we would revisit the 70’s… I had some readers agree with me, and some that didn’t agree with me… So for all of you who didn’t agree with me, or were on the fence, here’s something to think about… In 1970, all the Johnson era ‘great society” and “Vietnam war” expenditures were showing up at the white house’s door to be paid… And we thought that those were some doozy debt levels back then! The economy looked like it was going to grow forever, and the Unemployment rate had dropped to all-time low the year before… Bond yields were rising, and Gold was shaking off the dust, for it wouldn’t be too much longer when individuals could own it again…

And the recession broke out… And it was a real doozy, folks… And remember we didn’t have the debt levels we have today as we go full-steam ahead to $22 Trillion!   I’m just saying…

Well, Gold gained a few bucks on Friday and closed above $1,200… And that was all there was to that, for in the after markets and the early trading overnight, Gold has lost more then $9 and is back below $1,200… Ed Steer, told me in his Saturday letter, that Gold did trade above its 50-day moving average at one point on Friday, only to have it drug back below the figure when all the beans were counted, meaning all the contracts traded in Gold… So, what happened between trading above its 50-day moving avg. and then seeing it trade back below the average? The Jobs Jamboree, that’s what! But if you were a Fed Head, and you saw the low jobs number for Sept, and then went back and saw that 4 of the last 5 jobs reports have missed on the downside, would you be willing to put your reputation on the line with another rate hike?

I guess in the long run it doesn’t matter… For no one, except me of course, still hammers on Big Al Greenspan for leaving rates too low, too long when they should have been increased and allowing the housing bubble to begin… Or Big Ben Bernanke, for all his ridiculous quotes prior to the financial meltdown, about how it would never happen, and then his introduction of 3 rounds of Quantitative Easing, along with ZIRP (zero interest rate policy)… There was never a need to go to zero with rates, but he strong armed his fellow Fed Heads into believing there was, and well, the rest is history…  

In other news… China lowered their reserve ratio for banks again, in an effort to hold off a recession. This is like a rate cut folks… and puts more money in the economy. But it does weaken a bank’s position, should bad things happen…  And it seems that Italy is at the root of the euro’s weakness… One by one first it was Greece, then Portugal, then Spain, and Ireland, and now it’s Italy… The 3rd largest economy of the Eurozone…  And what’s their problem? They have too much debt!  And are wanting their budget calling for more debt, to get the seal of approval from the Eurozone heads… 

Today is Canada’s Thanksgiving Day… So, I hope all my friends in Canada have a nice day and celebration…  Today is also Columbus Day here in the U.S. when we celebrate the man that discovered the virgin Islands… OK, I’m just having some fun…  We learned in school that old Chris found the U.S. after convincing the Queen of Portugal that the earth wasn’t flat… And so that’s the story I’m sticking with… Tradition… it means something to me folks! 

So with the Columbus Day holiday, if I were still working, I wouldn’t be writing today, for it’s a bank holiday! So, no data from the Data Cupboard today… Let’s head to the Big Finish!

To recap… The Jobs Jamboree was disappointing on Friday, but only because the BLS played a game with the numbers… The Unemployment Rate fell to a cycle low, just like it did in 1969, only to have a recession appear the following year… The currencies tried to bounce back on Friday, but their attempt was turned away at the border in the overnight markets last night. And Gold is getting whacked this morning… heads up, the ball is coming down toward your head! And Chuck spills his guts on the Russian ruble… 

For What It’s Worth…  Well, there’s a ton of debt / and problem stories out there, but I thought this one was very interesting and goes to show ya, that you never know… This is about a guy who discovered his doorstop was a valuable meteorite and can be found here: https://gizmodo.com/michigan-man-discovers-his-doorstop-actually-a-meteorit-1829551900/amp

Or, here’s your snippet: “A Michigan man recently learned that this 22-pound rock he used for decades as a doorstop on his farm was in fact a meteorite worth over $100,000.

According to a Central Michigan University press release:
The man, who asked to remain anonymous, obtained the meteorite in 1988 when he bought a farm in Edmore, Michigan, about 30 miles southwest of Mount Pleasant.

As the farmer was showing him around the property, they went out to a shed. The man asked about the large, odd-looking rock that was holding the door open.

“A meteorite,” the farmer said matter-of-factly. He went on to say that in the 1930s he and his father saw it come down at night on their property “and it made a heck of a noise when it hit.” In the morning they found the crater and dug it out. It was still warm.

The farmer told the man that as it was part of the property, he could have it.”

Chuck again… Man I really enjoy reading stuff like that…  I wonder if that old fence post for the barbed wire fence that used to be at the back of my property is worth anything?  Hehehehehe… 

Currencies today 10/8/18… American Style: A$ 7066, kiwi .6455, C$ .7696, euro 1.1485, sterling 1.3043, Swiss $ 1.0072, European Style: rand 14.8397, krone 8.2756, SEK 9.0895, forint 282.88, zloty 3.7502, koruna 22.3121, RUB 66.56, yen 113.36, sing 1.3844, HKD 7.8299, INR 74.15, China 6.8673, peso 18.82, BRL 3.8399, Dollar Index 95.91, Oil $73.31, 10-year 3.23%, Silver $14.49, Platinum $821.00, Palladium $1,068.13, and Gold… $1,194.49

That’s it for today…  Boy I was full of you know what and vinegar today, eh? Are the Brewers a hot baseball team or what? Who knew?  The Braves and Dodgers better beware of the hot team… I actually watched some NFL football yesterday, as the monsoon rain came down, and I couldn’t be outside…  Ok… Sniff ‘n’ the Tears takes us to the finish line today with their song: Driver’s Seat…  So… let’s go out and make this a Marvelous Monday/ Columbus Day/ Canadian Thanksgiving Day! And remember to Be Good To Yourself!

Chuck Butler