May 10, 2018
* The dollar’s rally appears to be ending…
* China’s depreciations hurting emerging markets…
Good Day… And a Tub Thumpin’ Thursday to you! I think I finally got control of the nasty cold I had, and shook it out of me! I still have an occasional cough, but nothing near what was going on earlier in this week! So Yahoo! By the time you see this in your email box this morning, I’ll be all by myself again for the next 11 days. No biggie, I’m used to it by now. Hello Pizza Man, Pizza? HA! There wasn’t much on the telly last night, so I sat down and began reading emails… I think about how we used to get in touch with people and how it’s done now, and I’m not sure it’s a better way, it’s faster, and more precise, but I miss memorizing important phone numbers, and talking to people on the phone… Oh well…
And I wonder just how many homes still have a land line for a phone line? I don’t have one, and most millennials don’t have one. I knew that if I kept looking I would find something in common with them! HA!
The dollar rally that began last week with a short squeeze, and continued this week with panic selling, looks to be petering out and looky here, I’m not the only one that thinks that…
Jeff Clark is someone I’ve known for quite a few years, as he used to be associated with the Casey Group. We would talk each year in Vancouver, and one year, he even video recorded an interview with me that can be found on line still. In fact, I’ve got a treat for you here’s the link to the interview that took place in 2012… Now, keep in mind that this was during the revealing of Greece’s problems and the rot on the euro’s vine that waa being exposed. For If that information was available at that time, I don’t believe I would have been so bearish on the dollar. Anyway… here’s the link: https://www.youtube.com/watch?v=_KXCiqYt4Cg
One thing I really noticed in watching it, is that my left eye is closed a lot while I talked. As you know I don’t have any sight on the left side, in fact, my eye was taken out in 2010… You may not have noticed anything different, but I did… Oh, and I’m also probably 50 lbs lighter now than I was then…
Alrighty now, getting back to Jeff Clark… he recently wrote on his blog that his charts indicate that the current dollar rally is about to end….. I would show you the chart, but… It won’t copy and paste to this blog… UGH! But i can give you the link to his website, so here it is: https://www.gold-eagle.com/authors/jeff-clark
Longtime readers know that I mainly use fundamentals as my criteria for buying currencies and metals, but there are times that I refer to the “chartists” like Jeff Clark, and my old colleague Sean Hyman…
Now that’s music to a non-dollar investor’s ears to hear that the dollar rally is nearing an end…
Well, well, well… what on God’s Green Earth have we here? By golly, it’s the Bank of England (BOE) meeting this morning, and the BOE Gov. Mark Carney, not fulfilling his promise to hike rates this year one more time. About a month ago, sterling was on a daily climb higher VS the dollar, as it was looking as if Carney would finally be able to pull a rabbit out of his hat. And I kept saying then, that there were too many questions with the BREXIT negotiations to be hiking rates, and besides, the economy isn’t THAT strong! And then a couple of weeks ago, the economic data reports began to show cracks in the rate hike foundation, and now, this morning, there’s no hope at all that rates will be hiked today, or next month, or the next month… And sterling has taken the hit on this turnaround…
Now, the BOE might talk a rate hike game today after announcing that they didn’t hike rates, but in reality, they don’t have a leg to stand on righ now… BREXIT is proving to be a real problem, and the economy isn’t on terra firma… And Mark Carney knows this in his heart of hearts, but I’m betting a shiny quarter that he comes out and says a “rate hike is coming” or something like that! And the sterling bulls will take whatever morsel Carney throws their way…
Gold got back in the rally game yesterday with a $6 gain, but that came after the market closed! And the shiny metal has a $4 gain in the early morning trading today… One of the perks of subscribing to the Dow Theory Letters, is that I receive a weekly letter from Omar Ayales of Gold Charts R Us… Now, I’m going to give you a snippet of his letter, but if you want more, you’ll need to go www.dowtheoryletters.com and subscribe! Here’s Omar on Gold…
“Gold is holding up well in spite of the sharp dollar rise. The B decline is underway, and it’s telling us gold could possibly test the $1278 level, its 23-month MA, and still be in a solid uptrend rise.” Omar Ayales
Chuck again… I really like reading what Omar has to say each week about Gold, and I do believe you would too! He probably wouldn’t say it in so many words, but I will… If Gold moves under $1,300, you need to seriously consider scooping up more for your portfolio, I know I will!
The Chinese renminbi has been on a downward path recently and that concerns me, for a number of reasons. But the main reason is that what we had last month was dollar down, renminbi stronger, and that’s the scenario the world would like to see more of, for it facilitates trade worldwide. The Emerging markets are getting hammered with stronger dollar and higher interest rates in the U.S. and this weaker renminbi, for their competitiveness with exports into China aren’t working out for them…
I think I know why China has been marking down the renminbi each night at the fixing, and that is to offset the tariffs on their exports to the U.S. I sure hope they don’t move the currency 20% lower though! And I doubt they will, they just want to take a chunk out of the tariffs bite…
The U.S. Data Cupboard today will have the stupid CPI for April… Yesterday, April’s PPI only showed a 0.1% increase, which was below the estimates of 0.3%… So, wholesale inflation took a hit in April, and now it’s the stupid CPI’s turn to print. Recall that in March CPI turned negative and was down -0.1%, so an uptick for April will offset March’s negative print, and that’s what I’m expecting, but who knows for sure what the BLS has on their minds?
To recap… Chuck may have lost a battle or two to the nasty cold, but he believes he’s won the war! The dollar’s run appears to be ending today, as the currencies attempt to mount a rally VS the green/peachback. Chuck goes back in time and gives you a link to a video interview he did in 2012… And Gold seems to have stopped the bleeding today too.
For What It’s Worth… To end the week (for me that is) I have a very interesting piece today that Ed Steer highlighted in his letter this morning… This is about tunnels under a prison that were producing diamonds, and the whole set up, and you can find it all here: http://resourceclips.com/2018/05/08/inmates-caught-tunnelling-below-prison-were-miners-not-escapees/
Or, here’s your snippet: “Illicit diamonds and metals, often from conflict sources, plague the Democratic Republic of Congo’s mineral-rich reputation. But in a new twist on illegal mining, authorities have discovered a covert diamond operation run by prisoners right underneath their prison. And while the country’s notorious conflict operations often use forced labour, this mine was popular enough with its workers to retain some of them after their sentences finished.
The mine was discovered under the Osio Prison in the country’s north, DRC radio Okapi reported. A raid found over 30 people, including a prison guard, working underground or toiling in their cells at mining-related tasks.
Some prisoners had refused to leave the institution after finishing their sentences. Non-prisoners built temporary homes nearby to join the operation.”
Chuck Again…. This sounds like a plot in a movie doesn’t it? You can’t make this stuff up! I thought this was very interesting and different for you today…
Currencies today 5/10/18… American Style: A$ .7488, kiwi .6930, C$ .74, euro 1.1885, sterling 1.3570, Swiss $1.0029, … European Style: rand 12.3830, krone 8.0492, SEK 8.6861, forint 264.36, zloty 35678, koruna 21.4630, RUB 63.22, yen 109.67, sing 1.34, HKD 7.8496, INR 67.26, China 6.3657, peso 19.40, BRL 3.5776, Dollar Index 92.91, Oil $71.51, 10yr 2.97%, Silver $16.64, Platinum $919.10, Palladium $982.20, and Gold… $1,317.30
That’s it for today… I wonder what I’ll do all day today here, all by myself? Well, the first order of business is to go back to sleep, I didn’t sleep well last night, and I have some making up to do… My beloved Cardinals are in San Diego for the next 4 games, of which I’ll only see one on Sunday. Those games out there start way too late for me! The weather is warmer now, finally, and I spent some time outside yesterday soaking up some vitamin D! I traded emails with my former colleague, and friend, Jen, yesterday, man she was full of questions for me! Jen sat to the right of me on the trading desk for a long time. So, we had some catching up to do! Foghat takes us to the finish line today with their iconic rock song: Slow Ride… I recall when I was on the trading desk and Mike Meyer was too, and this song would come on, and we would immediately begin to talk about the Hardee’s commercial that featured this song… Ahh memories… OK, you’ve got to go out and make this a Tub Thumpin’ Thursday, and carry that over to a Fantastico Friday tomorrow! And please remember to Be Good To Yourself!
Chuck Butler