Chuck Butler’s: A Pfennig For Your Thoughts
August 7, 2017
Good Day… And a Marvelous Monday to you! Well, I’m back writing this morning… I tried like the Dickens to keep my head away from the markets while I was gone… But then I was reading James Rickards’ new book: The Road To Ruin… which by the way, I strongly suggest you put away the sharp objects before reading! I had a marvelously relaxing vacation, first with son Andrew, and his family, wife Rachel and son Braden, and then with youngest son Alex and his girlfriend of 3 years now, Molly… A lot of beach time, just relaxing, and a lot of going out to eat at night, which wasn’t good for my waistline!
The currency market saw ups and downs while I was gone… The first week, it was all about the euro, and its trek to 1.19, and I began to think about how on the trade desk they used to say, “When Chuck’s away, the currencies rally”… But then last week, we saw profit taking and then on Friday the stupid BLS report that got the dollar bugs all riled up and thinking that they will soon see a dollar comeback… I beg to differ… And former colleague and friend, Aaron Stevenson, reminded me on Friday that the markets can remain irrational longer than you can remain solvent…
He was referring to Gold, but it could also be attributed to the dollar hanging on right now… Speaking of Gold… It got whacked on Friday after the Jobs report, so let’s talk about that jobs report before we go on today…
Well, the markets went ga-ga again on Friday, because the Bureau of Labor Statistics (BLS) said that 209,000 jobs were “created” in July… The Unemployment Rate fell to 4.3%, and you should have seen the news stories of the bulls out there on Friday, claiming that the Fed was right to hike rates, and that this report suggests that they will be back on the rate hike tracks soon… That sent the dollar soaring, especially VS the euro, and Gold. OK… here’s where I pop the bull’s balloon each month, when I point out a couple of things that the markets tend to overlook… that is until it’s too late! The BLS added 108,000 jobs with their Birth/ Death hedonic adjustment, that they take a good guess at, after they receive all the data from the surveys… I know I sound like a broken record every month, but until the markets realize that 1/2 of the jobs the BLS reports are a guess, I’ll keep reporting it!
I also wanted to mention that the Avg. Hourly Earnings didn’t grow from the prvevious month, and stand at 2.5% growth on an annual basis… OK, so you’ve worked diligently all year, and your supervisor calls you in for your review, and you get glowing remarks, and you’re sitting there thinking, “I’m in the money, I’m in the money” but before you can finish the song in your head, your supervisor tells you that you will receive a 2.5% raise, and you slump in the chair, and the song in your head quickly changes to: poor, poor pitiful me…
Oh, and the Labor Participation rate tick up to 62.9%… That my friends is a rate that SHOULD be looked at with more interest by the markets, but it isn’t, and so… Well, one day, all this is going to smack them in the face and they’ll be wondering why no one told them ahead of time that it was important!
The note I had sent to Aaron on Friday was something that I saw from the GATA folks, who esent me a note letting me know that S. African Gold mines were shutting down for lack of production, and that up to 16,000 S. African workers in those mines could be out of a job… The key here is that the supply of Gold will be greatly reduced, and my note said, “and Gold still can’t buy a bid”… ?????
Sibanyne Gold Corp, Ltd. Made an announcement on Friday… “Sibanye may cut 7,400 jobs as it prepares to close its Cooke and Beatrix West operations, which account for about 16 percent of its planned gold production, the Westonaria, South Africa-based company said today. “ Add those cuts to AngloGold’s planned 8,500 job cuts, that means about 14 percent of the country’s gold-mine workers are at risk, as well…
And the other note I sent to Aaron on Friday was how Ted Butler (no relation that I know of) the silver guru, wrote a report on Friday about how the London Bullion Market Association’s report this week on gold and silver bullion held in London-area vaults indicates that silver supplies are substantially lower than had been assumed… And yet Silver can’t shake off the paper short sales… In Ed Steer’s letter every Saturday, he prints a graph that illustrates the number of days of production it would take to cover the short positions that exist… In Silver it’s 155 days and in Gold it’s 70 days… Those numbers are down from the highs they were a few months ago (180, and 90) but, they are still too, darn many to ever ignore them, like the CFTC has done for years now… You can find Ed’s letter here: www.edsteergoldandsilver.com.
As I look at the currencies this morning, not much is going on as the “dog days of summer” have come upon us and the currency markets. Two weeks ago, it was all about the euro, and the Petrol Currencies, as the dollar kept sinking lower and lower, but then came the profit taking and the euphoria over the trumped up jobs report, and a lot of those gains from two weeks ago, have been watered down. But, when I was looking at the currencies I did notice that the euro was creeping up on 1.18 again, and the Petrol Currencies, which had been led by the Russian ruble for the last couple of years, but now is being led by the Norwegian krone, are still holding Steady Eddie as I write.
I want to take a minute of your time here with a comment on something that I find to be very important to point out… And that is… That all this dollar bug euphoria that came out of the wall boards on Friday, is simply wrong… The dollar bugs think that because of this Labor report that the Fed will be back to hiking rates next month when they meet. I have to keep my mouth shut when I sit in a restaurant and hear people talking about how the Labor picture is so strong and that will be the key to higher rates… I would simply point out to them that the Annual Growth Rate for the U.S. has shrunk from 3.91% in 1972, to 1.01% in 2017.. I got that info from the Fed St. Louis, so don’t be thinking that I just made it up! HA!
But my wife won’t let me talk to people in restaurants, so the only opportunity I have to point this out, is here in the Pfennig! HA! Oooops, I’m not supposed to talk about my wife in the Pfennig any more, so please don’t tell her I made an exception this morning! please!
Well, as I said above, Gold got whacked on Friday, and apparently $1,300 is the limit the “boys in the band” will allow Gold to move to right now, but with all the shenanigans in Washington going on, the problems in the Middle East, Debt up to our eyeballs, along with debt up to the eyeballs of China, the Eurozone, and the U.K. , and supply problems for Gold & Silver that are going to really become a problem, I just don’t see how the “boys in the band” can keep this lid on the price of Gold much longer…
The U.S. Data Cupboard got a workout on Friday, with the Jobs Jamboree, but also the monthly Trade Deficit which was larger than expected at $44 Billion… Today’s Data Cupboard has a couple of data prints for us today. One print is not a market moving print, but one that’s very important in my mind, and that is Consumer Credit (read debt) for the month of June and it is expected to be around $18 Billion… There’s been a recent trend in this data that is troubling to me, and that is an uptick in the revolving credit total, which tells me that consumers are using the last trick in their book… Uh-Oh!
The other print is market moving, and is the Fed’s preferred data for consumer inflation, and it is is the LMCI (Labor Market Conditions Index). This is the Fed’s own report, one they created, and I believe it will show that the June drop to 1.5% was short-lived, and a bounce back to just below 2% is probably in the cards…
As I was writing this morning, I thought, Chuck, you didn’t really talk about what’s going on overseas today, and concentrated on the U.S…. Hmmm, I guess that’s right, and I apologize for that, and will attempt to do better tomorrow!
To recap, the currencies and metals lost their mojo on Friday, when the BLS report on jobs brought the dollar bugs out of the wall boards, and the dollar rallied. I doubt this is something that will continue much longer, and the currencies and metals should be able to rebound this week as U.S. data prints pick up, and we’ve seen how badly the dollar performs on those weak data prints!
For What It’s Worth… When I saw this in Ed Steer’s Saturday letter this weekend, I knew I had to highlight it, because it points out all the things in the jobs report that the markets forget to look at when they go all bat-crazy because the BLS “created jobs”… This is from zerohedge.com and can be found here: http://www.zerohedge.com/news/2017-08-04/where-jobs-were-waiters-and-bartenders-topped-list
Or, here’s your snippet:We already showed that contrary to the strong headline payrolls print, the sole source of job gains in July was part-time jobs, which rose by 393K in the month, the biggest monthly increase since September 2016, as full-time jobs sunk by 54K. Which is why it should not surprise that of the 209K jobs added according to the Establishment survey, the sector that added the most jobs was the “food services and drinking places”, i.e. “waiters and barenders” category, which added 53,000 jobs, the highest monthly increase since March 2014. There have now been 89 consecutive months without a decline for waiter and bartender jobs, the strongest sector for US employment. Needless to say, these jobs fall within leisure and hospitality, that sector pays the worst wages, an average of $13.35 an hour, and $331.08 a week.”
Chuck again… And they go through more job types and their pay, so check it out if you have time, it’s very “telling”, if you ask me!
Currencies today 8/7/17… American Style: A$ .7912. kiwi .7438. C$ .7885, euro 1.1794, sterling 1.3050, Swiss $ .9734, … European Style: rand 13.4374, krone 7.9495, SEK 8.1445, HUF 257.90, zloty 3.6017, koruna 22.1755, RUB 59.93, yen 110.82, sing 1.3628, HKD 7.8222, INR 63.75, China 6.7239, peso 17.87, BRL 3.1394, Dollar Index 93.45, Oil $48.92. 10yr 2,28%, Silver $16.15, Platinum $961.51, Palladium $873.91, and Gold… $1,262.90
That’s it for today, a little light today, but not bad for the first time in 2 weeks without following the markets! I’m writing to you today from another new location… Key West! Yes, we decided on Saturday, that we needed to go on a new adventure, and so we packed and headed to Key West. I’ve never been here before, and I like what I’ve seen so far! Last Friday was Little d’s birthday… Delaney Grace turned 10! I remember going to shows and having Pfennig Readers ask me if I had any updated pictures of Delaney Grace! I trust she had a grand time for her birthday! I hear that once I left St. Louis at its 108 degree temperatures, that it cooled off and has stayed that way… Well, that’s not a usual August! The dog days of summer are here folks… It’s time to go now, so, I hope you have a Marvelous Monday, and Be Good To Yourself!
Chuck Butler
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