July 2, 2019
* Gold bugs continue to wipe out gains by the currencies
* Markets seem to believe the Trade War is over?
Good Day… And a Tom Terrific Tuesday to you! A travel day for my beloved Cardinals as they head for a 3-game series with the Mariners, in Seattle… Two teams going nowhere this year, so far, that is… My Cardinals are only 3.5 games from first place in their division, but they’re only a .500 team that can’t hit! And now their best hitter, so far this year, is hurt and will miss some time… Uh-Oh! Well, things got back to normal around here yesterday… While I don’t mind time alone, I do however, like for someone to be here, just in case, I fall or get sick or something of that nature… Creedence Clearwater Revival greets me this morning with their song: I Pull A Spell On You….
OK… So, there are no details coming from the G-20 meeting between Trump and Xi, other than Trump called off additional tariffs on $300 Billion of Chinese goods, and allowed U.S. companies to deal with Huawei… There was nothing mentioned about the previous tariffs on Chinese goods, and that has me worried, and thinking that the dollar bugs have gotten ahead of themselves, with all their dollar buying the past two sessions… So, my advice, which you can listen to now and hear me later, or don’t, would be to buy the dips in both the currencies and metals, for this could turn out to be a false dawn in the hopes of a Trade War ending…
But… having no details didn’t stop the sellers of Gold from piling on short sale after short sale, to the tune of 390,000 contracts on the day, and $25 taken off the price of Gold… Why? Well, I believe it was because the short sellers saw this brief let up in the Trade War pressures as their opportunity to pile on the short paper trades… That’s my story and I’m sticking to it!
I read this morning that Dr. Doom, Nouriel Roubini, the famous economist has called for a Global Recession… So… either his words don’t carry the weight that they once did, or no one is paying attention, because back in the day, if Roubini had these things to say, Gold would have soared… I’m just saying…
Well, the shiny metal is trying to win back some lost ground this morning as it is up $8 in the early trading… Maybe some too much, too fast selling being reversed? Or maybe some WAS listening to Roubini…
Many years ago, Chuck and Frank Trotter, called Roubini to see if he wanted to work together on a project, but he was too busy at the time… I always thought that he was just saying that, but maybe he was…
I sure wish I had access again to the Pfennig Replies box so I could see what everyone is saying these days… But there’s a glitch in it right now, that I thought would be corrected by now, but isn’t, so I carry on…
Remember how I’ve told you time and again about how the regional manufacturing indexes don’t seem to have anyting to do with the national ISM manufacturing index? Well, this past month was a prime illustration of that, as each region (NY, Richmond, Chicago, etc. ) printed some very ugly numbers, but the ISM bumped higher in June from 51.3 to 51.7… Now, I want someone from the gov’t to call me and explain how this works… The regionals numbers are ugly, but combined, the national number improves on the month… Explain away, will you please… Hello? McFly? Is anyone home? I’m talking to you, the government, give me an answer, today! I demand it! HA… As if!
So, the currencies drifted lower still during yesterday’s trading, with the euro losing the 1.13 handle, that it had fought so long to win about 10 days ago! I sure hope the Fed Heads are receiving the message from abroad loud and clear… The global growth has gone to hell in a hand basket, because of the Trade Wars, and Central Banks around the world will begin to follow the lead of the Reserve Bank of Australia (RBA) in cutting rates…
Back in the day…. If you wanted yield over what you could get in the U.S., Japan or Europe, you simply looked to the South Pacific, where the Aussie and kiwi dollars were always dependable yield advantage currencies… But not any longer… Rates in these two countries are lower than they are here in the U.S. and that’s saying something, now isn’t it?
Well, is there a BREXIT deal or no deal? This question is what’s keeping a lid on the progress of pound sterling… One day I read that there’s a new and improved BREXIT deal and the next day I read that there isn’t anything of the sort… So, what’s it gonna be boy? Inquiring minds need to know!
And while I’m talking about the U.K…. I want to give a shout out to Bank of England Gov. Mark Carney, for his call that interest rates would be going up soon. (I’m being sarcastic here in case you didn’t catch on!) He made those comments last year, and, well, have we seen a rate hike in the U.K.? No… and I have to slap myself on the back for pointing out that Carney had made these promises while the Gov. of the Bank of Canada, and never carried through with them… And so therefore I was sure that this time was just hot air…
The Canadian dollar / loonie continues to be Oil price driven, and has a lofty 76-cent handle these days… So, while we’re talking about the price of Oil, the OPEC boys decided to hold their production cuts of Oil at current levels until 2020… That has helped the Petrol Currencies like the loonie, and the Russian ruble along with the Brazilian real, and the Norwegian krone to hold recent gains and gain bits and pieces when they can…
The aforementioned Data Cupboard print of ISM (manufacturing index) yesterday, dominated the data front… Today, we’ll get a little break, but will see the total Auto sales in June… About 6 months ago, it appeared that the auto industry was about to do a face plant once again, but then lack of interest in new cars disappeared… I was as surprised as anything to see this, as I was thinking that everyone that wanted a new car had gotten one, by every possible financing method… Strange turn around here, is all I’m saying, and one that doesn’t make a lot of sense…
To recap… Gold got whacked badly yesterday as the short sellers piled on 390,000 contracts… The markets are seeming to forget that the Trade War that existed before Trump and Xi had a kumbaya at the G-20 last week, is still in place, all that was removed was the additional $300 Billion in tariffs… But, you can’t fight city hall, and you can’t fight market sentiment… But one day, when no one is looking, someone will say, hey! The Trade War is still on! And things will go back to where they were before the Kumbaya!
For What It’s Worth… I told you last week that President Trump was changing horses in the middle of the stream by ending a Trade War and starting a Currency War, and his first opponent was Europe… Well, this article sent to me by longtime reader, Bob, appeared on Zerohedge.com and talks about what Europe is doing to combat the U.S… And it can be found here: https://www.zerohedge.com/news/2019-06-28/trump-unleash-hell-europe-after-eu-says-spv-circumvent-swift-and-iran-sanctions-now
Or, here’s your snippet: “With the world waiting for the first headlines from the Trump-Xi meeting, the most important and unexpected news of the day hit moments ago, when Europe announced that the special trade channel, Instex, that will allow European firms to avoid SWIFT and bypass American sanctions on Iran, is now operational.
Following a meeting between the countries who singed the Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), which was ditched by US, French, British and German officials said the trade mechanism which was proposed last summer and called Instex, is now operational.
As a reminder, last September, in order to maintain a financial relationship with Iran that can not be vetoed by the US, Europe unveiled a “Special Purpose Vehicle” to bypass SWIFT. The mechanism would facilitate transactions between European and Iranian companies, while preventing the US from vetoing the transactions and pursuing punitive measures on those companies and states that defied Trump. The payment balancing system will allow companies in Europe to buy Iranian goods, and vice-versa, without actual money-transfers between European and Iranian banks.
The statement came after the remaining signatures of JCPOA gathered in Vienna for a meeting that Iranian ministry spokesman Abbas Mousavi called “the last chance for the remaining parties…to gather and see how they can meet their commitments towards Iran.”
Until today, Tehran was skeptical about EU’s commitment to the deal and threatened to exceed the maximum amount of enriched uranium allowed it by the deal after US had imposed a series of sanctions on the country.
Meanwhile, opponents of Instex – almost exclusively the US – have argued that the mechanism is flawed because the Iranian institution designated to work with Instex, the Special Trade and Finance Instrument, has shareholders with links to entities already facing sanctions from the U.S.
The announcement sent oil sharply lower, with crude futures falling about $1/bbl in closing minutes before settlement, extending daily loss, as it means Iran now has a fully functioning pathway to receive payment for oil it exports to anyone it chooses.”
Chuck Again… Oh me, oh my… what’s the U.S. going to do when they hear this? Recall that the U.S. said that they would punish any country with sanctions if they traded with Iran? Well, I think the Europeans just said neener, neener, neener to the U.S. So, what comes next? Only the Shadow Knows! well, someone other than the Shadow does know that more tariffs are being suggested for the EU…
Currencies today 7/2/19 American Style: A$.6993, kiwi .6663, C$ .7620, euro 1.1299, sterling 1.2625, Swiss $.9884, European Style: rand 14.1154, krone 8.5570, SEK 9.3405, forint 285.81, zloty 3.7550, koruna 22.5148, RUB 62.98, yen 108.27, sing 1.3555, HKD 7.8033, INR 68.99, China 6.8478, peso 19.08, BRL 3.8396, Dollar Index 96.75, Oil $58.86, 10-year 2.02%, Silver $15.16, Platinum $835.48, Palladium $1,555.58, and Gold… $1,392.44
That’s it for today… The summer heat has FINALLY come to our area… June for the most part was a chillier than normal, and very wet month, but these past few days have seen the summer sun in all its glory appear! YAHOO! But the weather app shows that rainy days will be on the calendar again this week, UGH! I get flood watch alerts daily on the phone… Too much rain! Do you have plans for this upcoming Independence Day holiday weekend? Be careful whatever it is you decide to do… I don’t believe I’ll be going anywhere, but right here, and that’s a good thing in my book! Chilliwack takes us to the finish line today with their song: Fly At Night… A song about being on the road with a band… I hope you have a Tom Terrific Tuesday, and will Be Good To Yourself!
Chuck Butler