China & Japan Sign FX Swap Agreement…

Rocktober 29, 2018 

* Currencies are stuck in the mud…  with no 4 wheel drive vehicle to use!

* The Rot is being exposed on Housing’s vine… 

 

Good Day… And a Marvelous Monday to you! A simply marvelous weather-wise weekend here in the Midwest this past weekend… I spent some time outdoors, not much, as there’s little I can do, while I’m dealing with this gout… But… I soaked up some Vitamin D… which is always a good thing, had dinner with Andrew, Rachel and Braden last night, and I’ve been up half of the night, given I’m on my last couple of doses of steroids… Those things play hell with my sleep! My beloved Missouri Tigers got Mizzoued on Saturday, that’s all I’ll say about that, and our Blues finally played a complete game on Saturday night. R.E.M. greets me this morning with their song: Fall On Me… Buy the sky and sell the sky, and tell the sky… Don’t fall on me…

I guess that’s what a lot of stock jockeys are singing these days… But… a tree doesn’t grow to the moon, and bull markets don’t either… I am told, that nearly $ 9 Trillion in global markets have been taken off the table, and that all the U.S. indices are trading below their 200 day moving averages… That’s all I’ll say about that, but IF it’s coming to an end, it was one hell of a ride, eh? 

To Start the week this week, the markets get to digest the editorial that appeared in the Wall Street Journal late last week, written by Fed Head Neel Kashkari, who flatly states that the Fed needs to stop hiking rates… I told you last week about the speech James Bullard made that bordered on dovishness, and now this… I also told you that there were whispers going around at the Eccles Building… And now those whispers are going to change to shouts, and soon there will be waring members of the Fed, and traders won’t like that one iota… So, get ready for that…

Kashkari, reminds me of a story in the book by Danielle Di Martino Booth, Fed Up, but only the opposite…  In the book she describes how Dallas Fed President Richard Fisher, opposed the rate cuts to zero, but he was the only one… And now Kashkari opposes the rate hikes to normal… And the cheese stands alone… for now that is… 

The week that was last,  had 4 Central Bank meetings, of which there was only one that make a move, the Bank of Canada, and the other non-moves were quite frustrating, if you ask me… Norway and especially Sweden with their negative rates, need a change, to be out in front of inflation… But they chose to remain with their hands firmly planted beneath them, and the European Central Bank (ECB) decided to not move up their calls for the next rate move, which in essence should have been a good thing for the euro, because the recent data in the Eurozone has shown the effects of the Trade Wars, and there were some that thought the ECB might be moved talk about the slowing down as a risk… But they didn’t… and the euro didn’t get any love either… go figure…

OK… enough with the housekeeping from this past week. As I look at the currencies this morning I see them still being held under the dollar’s spell… They seem to be like deer caught in the headlights… Not knowing if they should hold still, jump, run, retreat, what? I find times like these to be the worst of times to write about currencies, because there’s just nothing there… Unless I want to sound once again like I’m beating a drum and waving a flag for the Russian economy, (hint, they are kicking tail and taking names later!) But… I carry on despite the inadequate amount of information available when nothing is happening!

Or talk for hours about how the Brazilian real continues to recover its losses from these past couple of years, with another big jump in the value of the real overnight. But we’ve seen how these politically charged currencies (see Indian rupee) can get pumped up, to be totally set up for a reversal when the new leader (s) can’t get anything accomplished. 

Shoot Rudy, even the Canadian dollar/ loonie, which saw a nice rally right after the Bank of Canada (BOC) hiked rates last week, has given back those gains… Man, that was quick, eh? It’s much like most things in life… gaining the objective is much easier than maintaining it! You can lose weight, but it much easier to lose it than to keep it off… And so on… So, the loonie, gave back its gains, and the price of Oil didn’t give any of the Petrol Currencies reason to gain last week.

We start the week with the price of Oil trading with a $67 handle… A far cry from the $80 a barrel that was being talked about just two weeks ago…

Gold, also seems to be stuck in the mud along with the currencies, the shiny metal was able to gain a whopping $1.20 on Friday… That’s it, that’s all, thanks for coming, there’s a nice parting gift waiting for you at the door… Johnny, tell them what they’ve won!

There was something that came across my computer screen this past weekend, and that is news that, China and Japan had signed a bilateral currency swap agreement on Friday during Japanese Prime Minister Shinzo Abe’s visit to China, sized at 200 billion yuan (28.7 billion US dollars), China’s central bank announced on its website Friday.

After all those years when there were unmentionables, from past wars, keeping these two from working out any agreements, they’ve come to an agreement that works against the dollar… Think about that for a minute and then come back…

The U.S. Data Cupboard on Friday printed the first view of 3rd QTR GDP, and it was 3.4%, certainly good enough, but well below the 4.2% of the 2nd QTR, and if you asked me over a cold frosty one, I would tell you that I would bet a shiny quarter that this will be the highest 3rd QTR Print, as I believe the following revisions will show 3rd QTR GDP to have dropped even more…  

This data takes me back to 3 months ago, when I wrote that the 2nd QTR’s GDP was like a star that’s burning out… It shines the brightest before flaming out… Not that I’m patting myself on the back or anything like that, but hey! I said it then… so why not remind everyone? HA!

Today’s Data Cupboard starts the week off with bang, as two of my fave reports will print for Sept: Personal Income and Spending, which probably won’t be good… And then Sept. Core Inflation will print…  Tomorrow’s Data Cupboard will have the Case/Shiller Home Price Index, which will be watched intently, after the past couple of months of rot on housing’s vine….  Cause and effect, folks… Apply that to the rate hikes and the rot on housing’s vine…  the definition is: the operation or relation of a cause and its effect….    I’m just saying… 

Before I head to the Big Finish today, I was reading my Things That Make You Go Hmmm… by Grant Williams last night, and he had this little ditty among all his other great passages about housing in his letter. He was talking about Commercial Real Estate (CRE) that’s circling the bowl right now, and pointed out this: “(Forbes, October 22, 2018): Bank OZK lost more than a quarter of its value on Friday after the Arkansas based lender (formerly known as Bank of the Ozarks) wrote off about $46 million in commercial real estate loans on two unrelated projects in North Carolina and South Carolina.”  

That’s right he said $46 Million in write offs of bad, or non-performing CRE loans…  I truly believe that when we look back at this mess in a couple of years, someone is going to say, “remember when Bank OZK had to write off $46 Million in CRE loans, that seems to have been the trigger”…  

OK, back to our regularly scheduled programming… To Recap… The currencies are being held under the dollar’s spell, and are like deer caught in the headlights… Gold was only able to eke out $1.20 on Friday, and is down $3.57 in early morning trading today…  Oil continues to stay down in price, and Chuck was very frustrated with the Central Bank meetings last week from Norway, Sweden and somewhat surprised by the non-fallout of the ECB meeting. 

For What It’s Worth… My oh my, what have we done? We’ve allowed this welfare state to become so massive that we border on it becoming unsustainable… This is quickie article today, folks, that includes a quote from Albert Von Mises and can be found here: https://needtoknow.news/2018/10/over-half-of-america-gets-more-in-welfare-than-it-pays-in-taxes/

Or, here’s your snippet: “More than half of Americans receive more money in various types of government transfer payments (Medicare, Medicaid, food stamps and Social Security) than they pay in federal taxes. The Congressional Budget Office reports that only the top 40% income earners in the US pay more in taxes than they receive in government transfers. Ludwig von Mises once noted that once we get to the point that a majority of the voting population receives more in benefits than it pays in taxes, then voters will demand more and more wealth be transferred to them through government programs. It will then become politically necessary to extract larger and larger amounts of wealth from a minority in order to subsidize the majority.”

Chuck again… I shake my head, and think about… no wait, Chuck, you know darn good and well that nothing good will come from what you were about to talk about, so just move along and have a good day without all the trouble… OK… but I really wanted to say… No! you don’t!

Currencies today 10/29/18.. American Style: .7096, kiwi .6560, C$ .7640, euro 1.1397, sterling 1.2837, Swiss $1.0004, European Style: rand 14.4336, krone 8.3412, SEK 9.1126, forint 284.48, zloty 3.7855,  koruna 22.6615, RUB 65.61, yen 112.20, sing 1.3820, HKD 7.8431, INR 73.26, China 6.9435, peso 19.55, BRL 3.6580, Dollar Index 96.46, Oil $67.28, 10-year 3.09%, Silver $14.68, Platinum $839.00, Palladium $1,111.95, and Gold… $1,229.96

That’s it for today… Sorry for the skip through the park on the currencies today, but there’s just not enough there to spend a lot of time with… But that will change, as it always does! Congrats to the Red Sox for their World Series Championship that was completed last night. It’s not often that the team with the best reg. season record, wins it all. (right 2015 Cardinals?) The pain in my foot joint is gone, so the gout has left… YAHOO! Thanks for the suggestions on how to deal with the gout from you dear readers…  This is my second time having to deal with the gout, but the first time was 2 years ago, so, I look at it as my body telling me to slow down… And so I did!  Next week, I’ll be writing to you from my home away from home, as I go to check up on work that’s being done… The World Series is over, so now the Free Agent signings can begin… Here’s my weekly plead to the Cardinals to get Bryce Harper…   And with that…  One of my all-time fave songs by anybody will take us to the finish line… Chicago Transit Authority’s: Beginnings…    I hope you have a Marvelous Monday, and Be Good To Yourself! 

Chuck Butler