April 30, 2019
* Currencies continue to inch higher VS the dollar…
* Are the Big Boy new outlets seeing things Chuck’s way?
Good Day… And a Tom Terrific Tuesday to you! What a night for me, as both St. Louis teams were playing on the road… The Cardinals in Washington, D.C. and the Blues in Dallas… I had both on, trying to pay attention to one or the other at various times… And both teams won! WOW! Oh, What a night… I saw yesterday, that Wall Street broke a record… See? What I mean about putting out trumped up economic reports? Investors swallow them hook, line and sinker and buy, buy, buy… And when the following month’s downward revision comes through, it’ll be done under the darkness of night, and no one will make a Big Deal out of it, except me! OK, more on that later… Right now… Jimmy Cliff greets me this morning with a very apropos song… Hello Sunshine… With all the rain we’ve been getting we need some sunshine.
The currencies continue to move higher in small moves though, but higher nonetheless… Yesterday I told you how the Dollar Index had dropped in price from 98.30 to 98.02… Well this morning the Dollar Index is trading at 97.58… I know, I know I’ve told you through the years that the Dollar Index isn’t the best way to follow the currencies, but for this time, it’s been a good indicator to me, that is, that the currencies, led by the Big Dog euro, have been inching higher VS the dollar.
Speaking of the euro… In the Eurozone this morning we had a check on Eurozone 1st QTR GDP, which beat the expectations of 1.1%, the same as the 4th QTR 2018, and printed at 1.2% instead… That’s not a great report card, but… it’s far better than the reports that the Eurozone was going into a recession… Of course, 1.2% isn’t that much of a cushion…
Gold had a bad day yesterday, but not as bad as Palladium! Gold lost $6.50 yesterday, but has gained that amount right back in the early morning trading today… But poor Palladium, it lost $95 yesterday! That’s right, I said $95… OUCH! Now that’s going to leave a mark!
Getting back to my tirade yesterday… The Fed will meet today and tomorrow (time to get the board games out again!), and while I believe they will keep rates on hold for now… I do believe that when Fed Chairman Powell gives his press conference on Wednesday afternoon, he’ll probably casually mention that the Fed Heads are teeing up a rate cut for later this year… Of course later could technically mean at their next meeting, but I digress…
So, while I was just sitting here thinking about the hold the Fed has on the economy these days, I came across a thought that all Central Banks around the world have an equal footing on the way their respective economies run, too… And that got me thinking ( you know the thigh bone is connected to the knee bone, etc. ) that what we have in the world today is not what we used to have, which was free markets… We now have managed economies by each country’s Central Bank… Oh, heaven help us, for we do not know of the things that we have allowed to happen…
I say that because… These Fed Heads are not out in the real world, they have no idea what’s going on from day to day in the economy. Sure they get their regional reports, but those are written by underlings to the Fed Heads, what do you expect them to say… That the whole economy is crashing around us?… it’s a Mad, Mad, World out there, and you had better be street wise and savvy to be a Fed head in my opinion… Take this reversal of their previous thoughts that they would be hiking rates all this year and some more next year… That certainly has been throw to the curb, now hasn’t it? The problem here is that what happens if they “went too far” with consecutive rate hikes? And then when they panic and begin to cut rates again, do they go “too far” that way too?
The thing is, that we have to live with these moves… We have to adjust things, our spending habits, our savings, our investments, etc. Because the Fed managed the economy too much? That’s crazy folks… And I’m going to stop there because… Well, because…
Well, it’s almost all out of my system, except I keep seeing more and more looks under the hood of that dangblasted U.S. GDP revision last week… This one is from David Rosenberg, once again, who looks under hoods as much as I do, or even more! This is from his Twitter feed… “The weak surprise in Q1 GDP was the consumer – a 5.3% annualized plunge in big-ticket spending! The bulls were telling everyone to expect a consumer boom based on surging tax refunds. But guess what? The average refund was 2% lower this year than it was last!”- David Rosenberg on Twitter..
On Bloomberg this morning that have three charts that they say are very good indicators that the economy is headed downward… They talk about the lack of Industrial production, Capital spending, and that gasoline prices are within 10-cents of last year’s peak, and are up 30% since the start of the year… There was nothing new here to regular Pfennig readers, as I’ve talked about all these things, including how gas prices were going up now, as we near the start of the summer driving season…
The reason I brought these things up from Bloomberg this morning is that the major media outlets are beginning to “see the light”… And come around to Chuck’s way of seeing things for what they are, and not pulling any punches!
I just saw a news flash that in Venezuela this morning, the opposition is attempting to overthrow the Maduro Gov’t with a military uprising… This will be something to watch today…
Well, I haven’t talked about the Trade talks lately… And I’m here to correct that! HA! The U.S. negotiators are in China and there’s word that a trade deal might be close to being done. Well, I’m from Missouri… You’ll have to show me… I’ll believe it when I see it!
To Recap… The Currencies continue to inch higher VS the dollar with the euro leading the charge. Eurozone GDP beat expectations but those expectations were watered down, so the beating of them wasn’t exactly a moon shot… But the euro rallied nonetheless. Hey! Bloomberg is coming around to Chuck’s way of seeing the economy for what it is and not what the Fed Heads and Gov’t think it is… That’s a big step for Bloomberg, folks… Because most outlets don’t want to be associated with the likes of Chuck! HA!
For What It’s Worth… Well this article plays well in the sandbox with my thought earlier this morning regarding the Fed overacting with rate cuts/ hikes. And this article talks about a new program that the Fed is thinking about and can be found here: https://www.cnbc.com/2019/04/29/fed-looking-at-a-program-that-could-be-version-of-quantitative-easing.html
Or, here’s your snippet: “Federal Reserve officials are considering a new program that would allow banks to exchange Treasuries for reserves, a move aimed at ensuring liquidity during difficult times that also would help the central bank decrease the size of its nearly $4 trillion balance sheet.
The so-called standing repo facility is in its early discussion phases. Respected St. Louis Fed economists David Andolfatto and Jane Ihrig have authored two papers on the plan, which they say would ease the regulatory burden for banks that feel pressured into holding ultra-safe assets.
In some quarters, the idea is viewed as a natural extension of current Fed policy. Others, though, think it in essence could be a repackaged form of quantitative easing and thus yet another iteration of the Fed’s decade-long tinkering in financial markets.
The idea comes as central bank policymakers look for ways to cut the bond holdings on its balance sheet without being disruptive to markets.”
Chuck again… There they go trying to improve things that were bad to begin with… I mean wouldn’t it be a good idea to see if the markets could function without intervention/ manipulation? I’m just saying…
Currencies today 4/30/19 American Style: A$.7057, kiwi .6677, C$ .7440, euro 1.1212, sterling 1.3009, Swiss $.9808, European Style: rand 14.3143, krone 8.6210, SEK 9.4825, forint 287.97, zloty 3.8216, koruna 22.8817, RUB 64.57, yen 111.25, sing 1.3603, HKD 7.8450, INR 69.64, China 6.7312, peso 18.90, BRL 3.9324, Dollar Index 97.58, Oil $63.30, 10-year 2.53%, Silver $15.07, Platinum $903.00, Palladium $1,377.00, and Gold… $1,286.60
That’s it for today… A late night for me, but I couldn’t turn the hockey game off, the Stars kept scoring to tie the game and the Blues would storm back and move ahead, until the horn sounded and the Blues had won! My beloved Cardinals are on a roll, but the gauntlet of good pitchers is lining up to face them the next 3 games… Their work will be cut out for them for sure! My darling daughter, Dawn, called me last night to see if I was OK… She always checks on me when I’m all by myself… And I truly appreciate that! Son, Andrew tells me that the State playoffs begin this Saturday, and I think I’ll attempt to get to the game. His team is the 3rd seeded team in the state, Good luck to the Flyers! Good luck to the Cardinals, and Let’s Go Blues! Stevie Nicks (old heart throb!) and Fleetwood Mac take us to the finish line today with their song: Landslide… I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!
Chuck Butler