Chuck Butler’s: A Pfennig For Your Thoughts
August 16, 2017
* U.S. Retail Sales soar in July!
* U.S. dollar fights back!
* Eurozone 2nd QTR GDP rises!
Good day… And a Wonderful Wednesday to you! Well, I finally threw in the towel and succumbed to the urge to take an afternoon nap yesterday… I just can’t get past this feeling that I need to sleep! Maybe it’s the accumulation factor on the infusions? Whatever it is, I finally said, to hell with it, and laid down, and then woke up 3 hours later! This morning, I’m still draggin’ the line, but not as bas as yesterday, or the day before, so maybe I’m onto something! Pink Floyd greets me this morning with their song: Comfortably Numb… It’s my fave Pink Floyd song, and a phrase I’ve used to describe everyone’s response to the huge debt in this country..
Well, looky there! U.S. Retail Sales are not dead in the water! They are alive! Of course they needed a boost and it was quite the boost. Yesterday, when I was writing about Retail Sales I meant to mention that “back to school” sales would be a part of the July numbers, but I totally missed that Amazon Prime Day was also in July, and the boost that Retail Sales got from Amazon Prime Day, was off the charts! So, as I ask in the title today… Can we have Amazon Prime Day every month? Because the 0.6% rise in Retail Sales in July is going to be a one and done going forward, in my humble opinion…
But for now, the strong Retail Sales, got the rate hike camper bugs to come of the wall boards, and start dancing in the streets, for they figure that this strong Retail Sales print confirms that the previous Fed rate hikes haven’t put a damper on the economy, and therefore the economy can stand more rate hikes… And the currency traders kind of took that ball and ran with it on the day, as the euro gave away a few ticks, and the rate differential currencies like the Aussie dollar (A$) and kiwi saw even more selling…
The worst performer on the day was Gold, which was down at the close $10.50, and that was with a brief rally at the close, which saw Gold close at $1,271.10… There were 284,000 contracts traded yesterday in Gold… And as I said yesterday, I would bet that good number of the 284,000 contracts were of the naked short Gold variety… I’m just saying…
In the overnight markets, the A$ and kiwi recovered ground lost during the day, and the euro fell quickly to trade barely above the 1.17 handle… We began the week with the Dollar index looking like it was about to fall below 93, but 3 days later it is 94… The euro began the week at 1.18 and 3 days later it’s 1.17, and Gold… well, let’s just say it hasn’t been a good week, so far, for the shiny metal…
What to make of this? Was the Fed correct that all the weak data was just transitory? I was wrong to say that I though the strong dollar trend was over? Is the accumulation of debt not going to be a problem? Just so many questions about this dollar move, right? Ok… here’s my attempt to answer some of these questions..
First of all, I don’t think I’ve ever said these words, so I’m not going to begin now, and those are: The Fed was right! Let me remind you that one data print does NOT make a trend, there’ll have to a few more really strong Retail Sales reports to confirm that the U.S. consumer hasn’t “tapped out”… And I don’t think I’m wrong about the weak dollar trend coming to an end… As I’ve explained many times in the past… When an asset is in a trend that is nearing its expiration, the asset will have days of basking in the sun, but those are short-lived… And of course you know me, I think debt is a HUGE problem, and it will come back to haunt us for years…
Speaking of debt, the Wall Street Journal (WSJ) reported yesterday that U.S. Household debt has reached a record high.. let’s listen in on the WSJ to hear what they have to say… “U.S. household debt reached a new record of $12.8 trillion in the second quarter, driven by rising mortgage debt, a strong quarter for auto loan originations, and an uptick in credit-card balances, which reached their highest level since 2009.”
Hmmm, did you get that last part? Credit-card balances reached their highest level since 2009… I know the government is happy as a lark to see consumers in so much debt, because that’s part of the plan… Plan? what plan are you talking about Chuck? Ahhh grasshopper, come sit, grab your coffee cup and listen… As I see it, the Elites want us all to be in so much debt that it makes it easier to switch to a cashless society… That’s my opinion and I hope to be wrong!
OK, onto something else, Chuck! Hey! how about that Eurozone economic recovery? Showing even more signs that the Eurozone is pulling itself out of the doldrums of an economic recession, the 2nd QTR GDP Flash report showed an increase of 0.6% in the 2nd QTR.. Always keep in mind that the Eurozone has the juggernaut German economy, on one side, and the dogs of Italy, Portugal, Greece, and so on, on the other side… But let’s not lose our focus here, and that is that the Eurozone economy is coming out of the recession, and that might mean that the European Central Bank (ECB) will begin to dismantle their monetary policy of bond buying, and negative deposit rates, soon..
It can’t be soon enough for me! I was reading an article the other day about the global economy, and how it was giving Central Banks and Governments a false reading on the Global Growth, and that if they reverse their negative rates, they’re going to have to just go back and put the negative rates back on, when the global recession hits… The writer, found a place in my thoughts, as he talked about the accumulation of debt being the main factor behind the Global recession!
I already talked about Gold today, so I thought I would point something out that might not be caught by the naked eye… And that is: Remember earlier this year, when I wrote about the CEO of a Palladium company, who said that Palladium would bypass Platinum in price this year? Well, Palladium is catching up, and right now sits only about $68 from Platinum, and at the beginning of the year the difference was about $200!
The U.S Data Cupboard will have difficulty living up to yesterday’s Retail Sales print, and it won’t, but it will have Housing Starts data, and the FOMC Meeting Minutes this afternoon. The Meeting Minutes might throw some cold water on the dollar this afternoon, as I expect the minutes to contain some conversation about how the Fed needs to dealy rate hikes…
To recap… Amazon Prime Day in July, along with back to school purchases, pushed Retail Sales to an increase of 0.6%! And the dollar bugs came out of the wallboards once again. The euro is taking a trip to the woodshed, to join Gold, which has been there all week! Eurozone 2nd QTR GDP Flash report was good at a 0.6% increase! And Palladium continues to narrow the spread to Platinum…
For What It’s Worth… Well, since I mentioned this above, I thought this article on zerohedge.com was apropos… It’s about the consumer debt… and can be found here: http://www.zerohedge.com/news/2017-08-15/fed-issues-warning-household-credit-hits-new-record-high
Or, here’s your snippet: “After we first reported last week that U.S. credit card debt hit a new all time high with both student and auto loans rising to fresh records with every new report…
Discussing the troubling deterioration in credit card defaults, first pointed out here in April, the New York Fed said that credit card balance flows into both early and serious delinquencies increased from a year ago, describing this as “a persistent upward movement not seen since 2009.” As shown in the chart below, the transition into 30 and 90-Day delinquencies has, over the past two quarters, surged to the highest rate since the first quarter of 2013, suggesting something drastically changed in the last three quarters when it comes to U.S. consumer behavior.
“While relatively low, credit card delinquency flows climbed notably over the past year,” said Andrew Haughwout, senior vice president at the New York Fed. “This is occurring within the context of loosening lending standards, as borrowers with lower credit scores recover their ability to access credit cards. The current state of credit card delinquency flows can be an early indicator of future trends and we will closely monitor the degree to which this uptick is predictive of further consumer distress.”
That bolded statement, is the first official warning by the Fed that the U.S. consumer is sick, and the Fed has no way reasonable explanation for this troubling jump in delinquencies. Timestamp it, because this will certainly not the be the last time the Fed warns about the dangerous consequences of all-time high credit card debt.
As for the “further uptick in consumer distress”, we are just guessing but the fact that credit card defaults are jumping at a time when sales at fast food and other restaurants have declined for 17 consecutive quarters, and when $250 billion in U.S. household savings was just “revised” away, may all be connected.”
Chuck again… I’m telling you now so you can listen to me later, all this debt is not good for anyone, but the Elites… I’m just saying!
Currencies today 8/16/17… American Style: A$ .7855, kiwi .7243, C$ .7769, euro 1.1704, sterling 1.2872, Swiss $.9742, … European Style: rand 13.2446, krone 7.9574, SEK 8.1050, HUF 259.61, zloty 3.6516, koruna 22.2437, RUB 59.82, yen 110.81, sing 1.3683, HKD 7.8219, INR 64.13, China 6.6790, peso 17.79, BRL 3.1854, Dollar Index 94.01, Oil $47.71, 10-year 2.28%, Silver $16.67, Platinum $964.28, Palladium 896.39, and Gold… $1,276.10
That’s it for today… Oh My! Did my beloved Cardinals get spanked in Boston last night or what? Man that was so ugly, I had to switch channels! Those little rascals, my grandkids, were at the house again yesterday… Thank goodness school starts today for them! August is half over, which means… Football season will be upon us! I’m hoping that my beloved Missouri Tigers will be better this year, for they sure stunk up the place last year! of course everyone in Missouri is waiting for Basketball season to begin, as Mizzou had a banner recruiting year to say the least! The Beatles take us to the finish line today with their song: Norwegian Wood… This was from the Rubber Soul album, which was the first Beatles album to contain only songs they had written. And it was one of my fave Beatles albums! And with that, it’s time to go.. I hope you have a Wonderful Wednesday, and Be Good To Yourself!