September 5, 2019
* The price of Oil jumps higher, delighting the Petrol Currencies!
* The BRICS GPD outpaces the combined GDP’s of the U.S. and Eurozone!
Good day… And a Tub Thumpin’ Thursday to you! I get to go to the day game at Busch Stadium today, so I’m geeked about that this morning… Man a crazy game last night, back and forth with lead changes, but in the end, my beloved Cardinals lost… UGH! Have I got some articles for you today… I feel like I should stop writing and just provide articles to read… Nah, just kidding, but that’s what today is going to seem like… So, grab a cup of coffee, and let’s go! The Babys greet me this morning with their song: Back On My Feed Again…
Well bust my buttons! The currencies stayed off the mat yesterday, and added to their small gains from Tuesday… Very interesting, eh? Has the dollar run its course? Or is this just a correction, and we’ll see the dollar bugs again soon enough? Well, that’s always the question, you would think that a currency guy would be able to come to the right answer every now and then don’t you? HA! It’s always an educated guess… that’s just the way it is… And when you get caught up in Traders’ talk, they can steer you wrong, for sure!
For us currency investors, I’m just happy that the currencies got up off the mat that they had been knocked to in recent weeks by the dollar bugs. For those of you keeping score at home, the Dollar Index has fallen from 99.28 on Tuesday morning, to 98.18 this morning… That pretty much tells you the dollar has been slipping… How long this will last, is the $64 question. I’m thinking that tomorrow’s Jobs Jamboree holds the key… For the rate cut campers will be looking for a weak number that would help sway the Fed Heads to cut rates later this month, and that would not be good for the dollar… A good strong print? that would turn this dollar weakness around on a dime… That’s my story and I’m sticking to it!
The price of Oil has bumped higher to a $56 handle in the past 24 hours, and I think the move higher is tied to two things… 1. The U.S. announced additional sanctions on Iran, and 2. The Russians decided to join the Saudis and cut Oil production… This move higher in the price of Oil has the Petrol Currencies looking perky this morning…
OK, in the movie the Big Short, Michael Burry was the star investor who bet against the mortgage bubble, and won, in the end… Well, he’s been pretty quiet lately, but this week he talked about what he feels is the next bubble to blow up, and that is the stock index funds… Let’s listen to what Michael has to say about that, and this was taken from here: https://capital.com/michael-burry-compares-index-funds-to-subprime-cdos
“passive investments such as index funds and exchange-traded funds are inflating stock and bond prices in a similar way debt obligations did for subprime mortgages more than 10 years ago.
The flows will reverse at some point, he said, and “it will be ugly” when they do.
“Like most bubbles, the longer it goes on, the worse the crash will be.” – Michael Burry
Chuck again… Wow! if you watched the movie the Big Short, you know how hard he worked and researched to come to his decision that the mortgage sector was a bubble… And he was correct, then… I’m just saying…
Well, when they were formed, I knew in my heart of hearts that it wouldn’t take long for them to be bigger than most people thought they would be. And it’s with that, that I have for you today some news about the BRICS remember, the BRICS (Brazil, Russia, India, China, S. Africa)? Of course you do, for you are an astute person that reads the Pfennig! So, it happens to be that the BRICS combined GDP now outpaces the combined GDP of both the U.S. and Eurozone! WOW! And if things continue on path, they should be larger in GDP than the combined countries of G-7 by 2020! Who’da thunk?
OK, this thought came to mind when I read that yesterday… Remember when I told you that China suspended rare earth minerals to the U.S.? (we discussed then what rate earth minerals are used for), and caused the U.S. to find other sources… Like South Africa and Brazil…. What would happen, say, should the other countries of the BRICS vote and decide that S. Africa and Brazil cannot sent their rare earth minerals to the U.S. ?
• Just for fun… I feel like Wikipedia here, but here goes… here is a list of the rare minerals: Neodymium. This is used to make powerful magnets used in loudspeakers and computer hard drives to enable them to be smaller and more efficient. …
• Lanthanum. …
• Cerium. …
• Praseodymium. …
• Gadolinium. …
• Yttrium, terbium, europium.
And here his a list of things that use these rare earth minerals: many modern technologies, including consumer electronics, computers and networks, communications, clean energy, advanced transportation, health care, environmental mitigation, national defense, and you guessed it… that all important… many more!
Just food for thought on this Tub Thumpin’ Thursday…
Boy, I’m on a roll today… Better not stop me! He’s on a roll… better not stop him… It’s like when the German bombed Pearl Harbor! HAHAHAHA… That famous line from the Animal House movie, as been used by me several times through the years, and each time, I swear, I receive one or more emails informing me that the Germans didn’t bomb Pearl Harbor, the Japanese did! Just shows to go ya that people read what they want to read, and pass over the other stuff…
Gold had another wild and wacky day, with the price manipulators, but in the end it gained to $1,552 on the day… But this morning it’s starting out on the downside, with an $8 loss so far… That has time to correct, so let’s see how it unfolds today, eh?
The U.S. Data Cupboard, yesterday, had the Fed’s Beige Book for the markets to read yesterday, and in it the majority of the Fed regions were reporting slower economic growth… the markets took this as an indication that the Fed will cut rates at the next meeting… I’m not sure how they got that from what I read, but they’re on a roll, better not stop them!
The U.S. Data Cupboard today, has some stupid prints, and a good one… July Factory Orders will print… I expect this print to be somewhat weak… which would go along with the Durable & Capital Goods Orders weakness that was reported previously… On Friday, the Jobs Jamboree for August will print… Right now the so-called experts are calling for job growth at 170,000, Recall that June’s number was 164,000… but those are BLS numbers, which are not worth a wooden nickel!
To Recap… The currencies stayed off the mat that had been knocked to in recent weeks by the dollar bugs, and added to their gains from Tuesday. Is this the end of the dollar’s run? or is just a correction? The $64 question, for sure! Chuck highlights stories about stock index futures, and BRICS and poses a question that could lead to real problems…
For What It’s Worth… Yesteday, I received a note from a longtime reader, Bernard, who sent me a link to an article on Wall Street On Parade, it’s written by Pam Martens, someone that I’ve long admired for her intellect, and ability to explain things to people… This week she was writing about how the 1-year Treasury Bill outperformed the DOW… And it can be found here: https://wallstreetonparade.com/2019/09/a-one-year-treasury-bill-beat-the-stock-market-over-the-past-year/
Or, here’s your snippet: “One year ago, investors could have purchased a one-year U.S. Treasury Bill with a yield of 2.47 percent. As of this past Friday’s closing price of the Dow Jones Industrial Average, the Treasury Bill would have beaten the performance of the Dow over the past year by more than three-quarters of a point (not taking into account dividends on the Dow stocks).
On Friday, August 31, 2018, the Dow closed at 25,964.82. This past Friday, August 30, 2019, the Dow closed at 26,403.28 That’s a gain of 438.46 points in a year or a return of 1.68 percent versus earning 2.47 percent on a T-bill.
You would have been saved yourself the agony of living through the 800-point market plunge on August 14 and the 3746-point rout in the Dow from the close of trading on November 30, 2018 until Christmas eve – marking the worst December performance since the Great Depression.”
Chuck again… And don’t forget, as Pam won’t let you in her article, that stock performances were aided by a HUGE tax cut, during that year! Oh, have I told you that publishing guru, and writer extraordinaire, Bill Bonner, has another trade for us? Buy Gold, sell the DOW… Hmmmm… Sounds like a good plan to me, and you know me, I love it when a plan comes together!
Currencies today 9/5/19 American Style: A$.6820, kiwi .6390, C$ .7577, euro 1.1060, sterling 1.2337, Swiss $.9834, European Style: rand 14.8060, krone 8.9787, SEK 9.6563, forint 297.86, zloty 3.9240, koruna 23.7438, RUB 66.38, yen 106.65, sing 1.3834, HKD 7.8392, INR 71.78, China 7.1546, peso 19.65, BRL 4.1366, Dollar Index 98.18, Oil $56.17, 10-year 1.50%, Silver $19.25, Platinum $981.94 (nice to see Platinum finally joining the metals rally, eh?) Palladium $1,558.67, and Gold…. $1,542.66
That’s it for today and this week… Short week, but those things happen all the time, no biggie… Cardinals need to get back on the winning track today, this is no time to go on a losing streak! I was talking with my good friend Dennis Miller, a lifelong Cubs fan, the other day, and he was not happy that the Cubs had fallen 3 games back of the Cardinals… I told him, not to worry there were 7 games left between the two teams, plenty of games to make up the ground… Not that I want to see that… But it’s possible! Hope for the best, plan for the worst! AC/DC takes us to the finish line today with their song: Rock And Roll Ain’t Noise Pollution… I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday, and please Be Good To Yourself!
Chuck Butler