December 27, 2018
* Currencies and metals rally while Chuck’s gone!
* Stocks take their jockeys for a wild and wacky ride!
Good Day… And a Wonderful Wednesday to you! Well, did you get through everything you wanted to do for Christmas? I did… Yesterday was my wife’s birthday, (I’m not supposed to talk about her in the Pfennig) So, Happy Birthday anyway! I learned the first year we were dating that I was supposed to buy two different presents. One for Christmas and one for birthday, and never will the two be the same! Man, that was a long time ago! We’ve now spent 47 Christmases together… And I’ve not messed up with the presents since 1972! We’ve got a lot to talk about today, and the Moody Blues greet me with their song (from a long time ago): Questions…
Well, Front and Center this morning I want to thank, from the bottom of my heart, everyone that sent along Christmas wishes and kind words, responding to my Christmas eve-day letter… If you missed it, you can still go to www.dailypfennig.com to see it…
OK… Well, the Fed did hike rates last week, just like I said they would do, even with all the ideas going around that the Fed would pause… I’ve said this for a couple of years now, and I’ll keep saying it until things change, but the Fed is hell bent and whiskey bound to hike rates, and Fed Chairman Powell, basically said that, when he commented that he would be hiking rates more in 2019, and… this is the part that most pundits and economists forget about… He said that the Fed would be continuing to reduce their balance sheet by $50 Billion a month… Well, if that’s so… then that would be equal to $600 billion in 2019. That equates to 3 extra rate hikes on top of the two announced in his statement.
If that doesn’t bring down the house of cards economy here in the U.S. I’ll be a monkey’s uncle!
HA! When was the last time you heard that phrase? I do believe the stock jockeys get the message though, because they sold stocks like funnel cakes at a State Fair, after the Fed’s rate announcement and following statement. Stocks had fallen so far that U.S. Treasury Sec. Mnuchin, reportedly called in the Big Guns… the Plunge Protection Team, in an effort to keep stocks from falling further.
Stocks fell over 600 points on Christmas Eve… and rallied over 1,000 points the day after Christmas, and the day after Mr. Mnuchin said he was releasing the Kraken, I mean, the PPT… So, take yesterday’s rally for what it was… PPT fueled, but for how much longer will this medicine work, or will it end up being like my cancer medicines through the years, that work for a while, then my body adjusts to them and then they don’t work any longer, and I have to go onto a new cancer drug?
There’s a lot to be said about that scenario when it comes to stocks, but I’ll let the stock jockeys deal with it, I’m just here to report what I see…
Well, if you ask me, and I’m not stock jockey, but I certain have an opinion about that, and if I were a stock jockey, I would be running for the hills, because by nature of admitting that stocks are so bad that he has to call in the PPT, that would scare the bejeebers out of me… I’m just saying…
Of course, a lot of people believe the U.S. economy is the stock market… So, this will be a case of which came first the recession, which stocks perform miserably during, historyically that is, or stocks performing badly causing the recession? Chicken and egg, right? Well, I’m not one to think the stock market is the economy… I think more that it is a result of the economy… So, I’m going with the recession will cause stocks to fall badly…
Speaking of a recession… There was a great Twitter battle of thoughts going on last week… One side claimed that you can’t possibly experience a recession following a 3% GDP quarter… And finally one astute follower replied, “except in 1953, 1957, 1960, 1973, and 1981″… That shut the other side up…
OK… Onto other things… I don’t like spending a lot of time talking about stocks, but when they are tied to a recession, then they get mentions! You know, I had a lot of time to look at the rest of the world, in addition to our country’s situation… And there aren’t a lot of countries that are isolated from this buildup of leveraged Corporate Debt, and country debt… Russia for one, is a country that doesn’t fall into that trap… Singapore is another… New Zealand is another, but they have different problems right now…
Of course a major rise of the price of Oil would go a long way toward helping two countries; Canada and Norway, but unless Oil makes a major comeback, these two will get thrown in with all the others… UGH!
The European Union, or rather, the Eurozone, is prepared to end their bond buying program next week, but they still have negative interest rates… And the Eurozone economy, as a whole, isn’t ready to leave negative interest rates…
But overall, it was a good week for the currencies and metals… The currencies and metals traders must have thought that I was back yesterday, for they gave back some of their gains from last week while I was gone… UGH! But as I’ve said before… If you really want to test the idea that “When Chuck’s away” the currencies and metals rally”, you can send money to fund my retirement to: …….. HA!
There were a ton of articles last week, regarding the soaring price of Palladium… The metal’s price has softened a bit since I last talked to you…I don’t mean that it’s gone down, I mean that it’s not as heavily traded each day, it’s still over $1,250 an ounce, which is not something to diss… Heaven’s To Murgatroid, NO! I’m not doing that! If traders and investors want to continue to push Palladium higher then so be it!
Any way… the thing that’s got Palladium so all juiced up, is that apparently electric cars are not, what they were expected to be by now, and combustible engines, needing Palladium in the catalytic converters is what this is all about… So, let’s circle back to the talk above about a recession… Do cars sell the newest toy at Christmas during a recession? I don’t think so! I’m just saying…
Well, all the Kings men and all the Kings horses couldn’t put debt in its place around the world in 2018… Here in the U.S. our national debt is closing in on $22 Trillion, and the unfunded liabilities are $116 Trillion… Debt is everywhere, but since most of us live here in the U.S. we need to keep our eye on the U.S. Debt… Right now, according to the Debt Clock, which can be found here: www.usdebtclock.org/ , the liability of each tax payer (that characteristic is important) is $949,000… How much longer can this go on?
Also in 2018… We saw currencies rallies that looked like they were bound and determined to start a new strong trend, only to be beaten back… We saw a Trade War begin, and folks, let me tell you… We haven’t seen anything yet… The big claws of the Trade War begin to be exposed in 2019… So get ready for that!
We saw Bond yields rise, and then fall again… The 10-year Treasury’s yield found its way to 3.25%, only to see it fall again to today’s 2.77%… Short yields inverted, briefly, in 2018, was it a sign? We’ll see in 2019… And Gold started the year around $1,300, fell, nearly 100 dollars, but has since recovered to this morning’s $1,272… On it’s way back to $1,300? I would think so given all that’s going on in the world, but then who knows?
Let’s hope 2019, is more stable… I doubt it will be, but then that’s just me… We’ll, also be observing some notable things that have happened 100, 50, and 25 years ago during 2019, of which I going to highlight the one’s I feel are important…
100 years ago… World War 1 ended… We also passed the 19th Amendment giving women the right to vote.
50 years ago… We experienced Woodstock… Charles Manson… The first message was sent by a computer, Scooby Doo and Sesame Street first aired, and Man landed on the moon.
25 year ago… Remember that sucking sound? NAFTA was implemented, Amazon was founded, The World Series was cancelled due to a strike, (worker’s strike, not a pitched ball!) And the first OJ Simpson trial took place…
So, how about that? There will be lots of remembrances of things in the past that take place in 2019…
OK… The U.S. Data Cupboard has been wishy washy lately with data prints with the holiday and G.H.W. Bush’s funeral. Yesterday’s Data Cupboard saw the Case/Shiller Home Price Index for Nov. remain unchanged from Rocktober… This was interesting because recent prints had shown home prices falling…
Today’s Data Cupboard has the Weekly Unemployment Claims, which have been trending upward in recent prints, New Home Sales for Nov. and the stupid Consumer Confidence report for this month… Not much here to move the markets today, so we’ll move along, for these are not the droids we’re looking for…
To recap… It’s been a wild and wacky week for stocks, and the BIG BOYS of the PPT had to be called out to save the day… Here I come to save the day, that means that Mighty Mouse is on his way! The currencies and metals traders marked up the two asset classes because “Chuck Was Away”, and Chuck offered up a solution to that scenario, should everyone want to see it last! HA! Bond yields continue to go downward here in the U.S., and because electric cars aren’t what they were thought they would be by now, Palladium is still soaring in price…
For What It’s Worth… OK… I’ve said all along that Russia’s economy was going quite well, despite the economic sanctions placed on them by the Eurozone and the U.S., and that if these sanctions were removed we would see the true strength of the economy, which of course would mean the currency would be allowed to rally. Well, here’s an article that I came across last week from Bloomberg that talks about how the Eurozone is softening up on their sanctions, and it can be found here: https://www.bloomberg.com/news/articles/2018-12-19/europe-loses-taste-for-punishing-russia-as-u-s-toughens-stance
Or, here’s your snippet: “Almost five years since Russia’s military intervention in Ukraine sparked Western sanctions that have helped to smother growth, European governments are losing the appetite for punishing actions against Moscow. That’s no solace for investors.
While the European Union shied away from penalizing Russia after a naval clash with Ukraine last month that was condemned by the West, the U.S. is threatening escalating sanctions tied to accusations of Russian meddling in the 2016 presidential elections. The risk of new measures has made it much harder for foreign businesses to work in Russia.
“The most effective sanctions are the ones that aren’t entirely clear, because the lack of clarity has a chilling effect on investment,” Frank Schauff, chief executive officer of the Association of European Businesses in Russia, said in an interview. A sanctions law passed by Congress last year that allows for additional steps “will be in place for a long, long time,” he said.
The U.S. and the E.U. imposed sanctions over Russian President Vladimir Putin’s 2014 annexation of Crimea and support for separatists fighting in eastern Ukraine. There’s been little progress on implementing a 2015 peace accord to end the conflict in Ukraine’s east, giving the EU no scope for easing the penalties. The bloc agreed unanimously last week to prolong the sanctions for another six months. Together with a slide in oil prices, the U.S. and EU measures contributed to a slowdown in Russia’s economy and helped deter foreign investment.
For now, major European companies with operations in Russia are hunkered down but are finding it hard to finance expansion because banks are wary of U.S. reprisals. German investment averaged $550 million annually since 2013 compared to $3.6 billion a year from 2007-2012. French companies invested $666 million in the first half of 2018, down from a peak of $2.6 billion in 2010.”
Chuck again… Long, too long, I know, but I wanted to let you read about the sanctions and how they could be softening…
Currencies today 12/27/18: American Style: A$ .7048, kiwi .6713, C$.7348, euro 1.1399, sterling 1.2640, Swiss $1.0088, European Style: rand 14.5305, krone 8.7510, SEK 9.0266, forint 282.10, zloty 3.7628, koruna 22.6947, RUB 68.91, yen 110.80, sing 1.3729, HKD 7.8310, INR 70.07, China 6.8884, peso 19.88, BRL 3.9101, Dollar Index 96.76, Oil $45.41, 10-year 2.77%, Silver $15.10, Platinum $796.26, Palladium $1,258.83, and Gold… $1,272.01,
That’s it for today, this week, and this year! That’s right… on Monday, 12/31, I’ll be traveling to the Dixie sunny shores, from Atlantic to Pacific, gee the traffic is terrific! HA! So, next Pfennig will be on Wednesday 1/2/19… The Big College Football Playoff Games are this weekend… I’ll be glued to the TV… And my beloved Missouri Tigers play their bowl game on Monday. Alex will representing the Butler clan at the Bowl Game… I get to visit my oncologist today… And then I won’t see an oncologist for 3 months! That’s the longest I’ve gone between visits in 5 years! WOW! I don’t think she’s going to like the weight gain I’ve had during the Christmas holiday, but then who doesn’t gain weight then? So, this is it for 2018… I said it last year, and I’ll say it again now… The Celtic Women’s Christmas CD is one of my faves, and Lisa sings Auld Lange Syne… you should put that one on your bucket list of things you want to hear, because I’ve never heard anyone else sing it better… but to help you through on New Year’s Eve so you don’t have to mumble the words…
Should auld acquaintance be forgot,
and never brought to mind?
Should auld acquaintance be forgot,
and auld lang syne?
For auld lang syne, my jo,
for auld lang syne,
we’ll take a cup o’ kindness yet,
for auld lang syne.
So, long for 2018… Be Careful out there on New Year’s Eve… Kathy’s Dad used to call it “Amateur’s Night”… Ambrosia takes us to the finish line for the last time in 2018, with their song appropriately titled: Holdin’ On To Yesterday… I’ll see you again next Wednesday, until then… Happy New Year’s! bye~