Rocktober 9, 2018
* Currencies rally then stumble overnight…
* More on Russia than you paid for!
Good Day… And a Tom Terrific Tuesday to you! BYE-BYE to the Braves and Indians as their baseball seasons ended yesterday. I spent the day yesterday, tidying up as Kathy is expected home today. So, with the kitchen being spotless, I told Alex that we needed to go out for dinner, and we did… I don’t get the opportunity for just one on one with him most of the time, so I love it when I get that chance! And welcome back to all the folks that had the day off yesterday… I hope you enjoyed your 3-day weekend! I on the other hand, was here, writing, no holiday for me! I mean, doesn’t anybody want to work any longer? HAHAHAHA! Neil Young and Crazy Horse greet me this morning with their 16 minute live version from The Filmore East of: Cowgirl In The Sand…
The day yesterday for the U.S. trading hours was a non-event, and the currencies traded in a tight range, which meant the Big Dog euro, remained below 1.15. The rest of the currencies fall in line behind the euro, except, the Brazilian real… I talked last week about how the real had been on the rally tracks, and it appeared to be all political, which scares me a bit… Well, over the weekend in Brazil, the guy the masses wants to see run the country won a regional vote and goes on, and that gave more love to the real… Like I said last week, ride this horse until it bucks…
I had a longtime reader, send me a note yesterday, disagreeing with my thoughts on the Russian ruble… And while he did a great job of showing me that the ruble hasn’t kept up with inflation… I thought, Ok, I’m a dolt… But… Well… here are a couple of things he didn’t take into account… The ruble was smashed when it entered the conflict with Ukraine… The sell off had nothing to do with fundamentals of the country, simply that the world was aghast that the Russians were at war again… Hmmm… let’s see, the U.S. has been in a war in the gulf region since the early 90’s, where’s the aghast there? I’m just saying…
Yes, the drop in the price of Oil did the ruble no good either… And I’ve long said, (you can check the archives if you want!) that the ruble is an “oil play”… So, if you believe the price of oil is going higher, then the ruble should be your choice currency… Of course I know there are some out there that can’t get their arms around anything Russian, expect salad dressing! So, if that’s your bag, baby… Then the same holds true for the Norwegian krone… The Norwegians haven’t done anything to tick off investors except cut interest rates…
But keep the cards and letters coming, for they point out when I’m being a major dolt! And I realize that I fall under that umbrella many times… more than I care to admit!
Gold got whacked good (or bad depending on how your look at it) yesterday… More than $15 was shaved off the value of Gold yesterday, and in the more than 300,000 contracts traded in Gold, were some large sells that dictated the direction of the shiny metal on the day… The climb of the bond yields has done a number on not only Gold & Sliver, but also stocks… I mentioned that last week that the rise in yields would reach a point where stock investors would just as well, take their money out of the risky stock market and put it back into the bank or bond market to guaranteed interest returns… I don’t think interest rates are quite there yet, but if late last week’s turmoil in stocks is any indication, I would run for the hills as fast as I can here folks, because this is no false down, like the moves to higher rates were previously, this time, it’s for real…
Some time ago, I asked you to ask me what the most difficult part of my job (TIMING!) is… HA! Well, I did it again, I jumped the gun… I bought some bonds a couple of weeks ago, before this recent move upward in yields… Of course I did! That’s how much of a dolt I am sometimes! Geez Louise, Chuck, if you had just waited 10 days, you could have booked higher yields!
There are bond traders out there folks, that are so young, they’ve never seen a bear market in bonds… I say bear market because with bonds, yield and price have an inverse relationship… If bond yields go up, the price of the bond goes down, and vice versa… So, if bond yields are rising, bond prices are going downward, and thus the bear market… And there are some stock traders that came on board after 2008, that can’t imagine a bear market in stocks… Blood Sweat & Tears said it best… What goes up, must come down… Spinning wheel’s got to go ‘round… And of course, there are currency traders that came on board after 2010, and can’t imagine anything but dollar strength…
I’m just pointing this out to say… That trees don’t grow to the moon, and bull markets don’t either! At some point, the bull market ends, and a bear market begins… Trends… I explained this all to you last week, so I won’t go there again, but hopefully you get the message I’m sending here…
I guess the IMF with all their highly paid and educated economists are seeing things my way these days… I point this out because that doesn’t happen very often! The IMF issued a report that lowered their outlook for Global Growth, and pointed to the Trade War going on as their reason for doing so… Again, as I’ve pointed out… Nobody wins in a Trade War, period!
It’s a dead air week, this week for the U.S. Data Cupboard… Yes, there will be some data prints here and there, but nothing to really get behind and say this or that… We will see PPI (wholesale inflation), which has been falling in recent months, and the stupid CPI (consumer inflation) later in the week… But other than those two, I could wrap the rest in yesterday’s newspaper and pass it off for day old fish… I’m just saying…
The price of Oil had really slipped in the past few trading sessions, falling from a $76 handle last Thursday, to a $73 handle yesterday… I think that was akin to getting ahead of one’s self… The price of Oil has rebounded a bit in the past 24 hours and is back to a $74 handle this morning. I read a report the other day about the prospects for Oil, and there were a number of so-called experts saying that the price of Oil could see $80 soon… I filled the gas tank in my car on Sunday, boy that was sicker shock! I think I recall $4 gas back when the price of Oil was trading around $100… Talk about something that could really hurt the economy…
To recap… It was a holiday in the U.S. yesterday, so after the European markets closed up shop and headed to the pub, the markets drifted… But overnight the dollar is back to enjoying the higher yields Treasuries are booking… The IMF is singing from the same song sheet as Chuck, as they point out the damage that the Trade War is doing to Global Growth. Gold got whacked by $15 yesterday, inflation is coming folks… and all these whackings Gold has taken will be distant items in our rear view mirror… At least that’s how I see it!
Of course I thought we be seeing this all taking place by now, so once again I jumped the gun… UGH!
For What It’s Worth… Ok, this has been Russia Week so far this week, eh? Well, there’s no reason to stop there! I’ve been talking about how Russia, China and now Europe have been developing their own payment systems ala SWIFT that are outside of the dollar, and the U.S. has no control over, and how this would badly damage the dollar once put into use… Well, this article sent to me from Bob, talks about all of that and more, and can be found here: https://www.rt.com/business/440482-russia-dollar-economy-dependence/
Or, here’s your snippet: “The Russian Finance Ministry has announced a plan to wean the country of dollar dependence. It is expected to be a long and painful process. RT has asked analysts to explain how this could be done.
According to the plan published this week, Russia seeks to de-dollarize the economy by 2024. The program is long and complicated, but its key point is that Russian exporters who use rubles instead of dollars would get huge taxation benefits including quicker VAT returns and other stimulus to ditch the greenback.
But there are also other ways to strengthen the role of the ruble in Russia. “It is necessary to gradually switch to such a system of international payments, which implies payment in rubles for Russia’s best and most popular goods on the world market like oil, gas and arms exclusively,” Andrey Perekalsky, analyst at financial institute FinIst, told RT.
Russia should also unite with China and the European Union in creating a payment channel that can’t be controlled by the United States. The alternative to the SWIFT interbank settlement network that could bypass Iranian sanctions could be seen as a first step in that direction, the analyst notes.”
Chuck again… I want to make this perfectly clear, I’m not cheering these moves… I’m strictly pointing them out so that investors can do something about them, that’s all… Shoot Rudy, I don’t want these things to happen to the dollar’s value, I use dollars for gas, groceries and giggles!
Currencies today 10/9/18… American Style: A$ .7058, kiwi .6430, C$ .7693, euro 1.1435, sterling 1.3042, Swiss $1.0050, European Style: rand 15.0300, krone 8.2986, SEK 9.1311, forint 284.33, zloty 3.7733, koruna 22.5852, RUB 66.72, yen 113.20, sing 1.3868, HKD 7.8345, INR 74.45, China 6.9083, peso 19.01, BRL 3.7996, Dollar Index 96.12, Oil $74.77, 10-year 3.24%, Silver $14.31, Platinum $814.05, Palladium $1,074.76, and Gold… $1,186.93
That’s it for today… Alarm went off, and I kept sleeping this morning, that’s why this is later than usual… I don’t worry about that stuff any longer, It’ll get finished when I’m good and ready to finish it! I hear that fall/ autumn weather is going to arrive by this weekend… Get the woolies out! Gather up the wood for the bonfire, and buy something pumpkin spiced! I complained about that pumpkin spice thing last year, and this year I saw Frosted Flakes that were pumpkin spiced! I’m surprised that there aren’t pumpkin spiced sandwiches! Ok… Journey takes us to the finish line today with their song: Who’s Crying Now? I heard that Steve Perry the former lead singer for Journey has come out of retirement and has a new album… I’ll have to check it out! I hope you have a Tom Terrific Tuesday and remember to Be Good To Yourself!
Chuck Butler