April 10, 2018
* New economic sanctions for Russia…
* Did China step away from the auction window?
Good Day… And A Tom Terrific Tuesday to you! Right from the get-go this morning, I want to thank everyone who sent me notes yesterday, with all those wonderful words regarding my mentioning that the tumor in my mouth was gone… The notes are truly appreciated! The Pfennig Replies email box was flooded with emails, and that’s pretty cool! My beloved Cardinals find another way to lose a game last night. UGH! Jane’s Addiction greets me this morning with their song: Been Caught Stealing…
Well, why don’t we, as a country, just go out and attempt to tick everyone off at the same time? Did you hear about the new economic sanctions place on Russia? What for this time? No Crimea, no Ukraine, did we just say, what the hell, and place sanctions on Russia? Well, this is crazy folks… The Russian ruble got whacked on the news, and brings about a point that I’ll attempt to make here… The ruble is very undervalued, wink, wink, and now it’s even more of a bargain price… wink, wink…
There’s so much going on, it’s impossible for me to talk about all of it in one letter, but I jam as much of my thoughts on the goings on in today’s letter, for tomorrow isn’t guaranteed to us, only today is. Look at Chuck being philosophical ! Yeah, sort of akin to SNL’s Deep Thoughts by Jack Handy! HA!
The currencies, led by the Big Dog euro, had a good day yesterday and in the overnight sessions, for the first time in quite a few days. Or it sure seems that way, that just about every morning, I’m saying “the currencies didn’t move much” or something like that! But not today! The euro has recovered back above 1.23, and I was reading an article this morning that talked about the improved sentiment toward the Eurozone, with Germany, the Eurozone’s largest economy, getting very close to a coalition Gov’t, and more and more talk about the European Central Bank (ECB) getting closer to an unwind of their stimulus…
With the Big Dog on the move, the other currencies are following the lead dog. The Aussie dollar (A$) finally moved past 77-cents, and kiwi has really been burning the midnight oil to get past 73-cents. The price of Oil has fought back to the $64 handle, on supplies news, and the added sanctions…
Well, Gold was able to gain $2.30 yesterday, but the big move upward for the shiny metal is likely to be associated with whatever it is that President Trump does to Syria… Geopolitical problems usually send Gold soaring, with the price manipulators sitting on the sidelines.
Well, how many of you are aware of the historical fact that whenever the U.S. Treasury yield curve inverts, it’s an indication of an economic recession on the way? Well, that’s that, and what’s the reason I’m bringing this up today… I’ll let the boys and girls from Bloomberg tell you in their own words…
“The forward curve of a closely watched proxy for the Federal Reserve’s policy rate has slightly inverted, signaling investors are either pricing in a mistake from central bankers or end-of-cycle dynamics, according to JPMorgan Chase & Co.
The inversion of the one-month U.S. overnight indexed swap rate implies some expectation of a lower Fed policy rate after the first quarter of 2020, the bank’s strategists including Nikolaos Panigirtzoglou, wrote in a note Friday.
“An inversion at the front end of the U.S. curve is a significant market development, not least because it occurs rather rarely,” they said. “It is also generally perceived as a bad omen for risky markets.” – Bloomberg…
Of course they’re just talking about the front end of the curve being inverted, but the curve as a whole, is flattening and in danger of inverting, so I’ll keep an eye on that, don’t worry about that!
The Trade War talk is heating up again. Did you know that, the Chinese tariffs are a huge blow to American growers, especially those in Midwestern states that the President needs to win re-election in 2020. China is the biggest buyer of U.S. soybeans, picking up about a third of the entire U.S. crop. The trade is worth about $14 billion.
The U.S. tariffs target the high-end technology products made in China. That could mean that companies like Apple Inc. and Lenovo Group Ltd. that operate significant Chinese production bases face higher costs or supply-chain disruption. The biggest blow by far is to almost $4 billion worth flat-panel TV screens. And I’ve got a real doozy for you in the FWIW section today, it’s so BIG that I wouldn’t blame you if you skipped ahead to read it right now!
The U.S. Data Cupboard doesn’t really have any real economic data this week, so the news that will drive the markets will come from the U.S. Gov’t… And I don’t think any of that will help the dollar, but instead it just might help Gold!
To recap… The currencies finally moved off the point they were stuck at for over a week, and the Big Dog euro led the currencies higher VS the dollar! Geopolitical pressures are what will move the markets for currencies and precious metals this week, with questions like: What will Trump do in Syria? The President did add new economic sanctions on Russia yesterday, and Chuck doesn’t understand what the heck is going on here….
On a sidebar, I’ve talked about this before but it’s even more important now because of the new sanctions on Russia… The world has 3 super powers, the U.S., China and Russia… It would behoove the U.S. to buddy up with one of the other two so they could gang up on the third country and get their way with them… But guess what we haven’t done? That’s right, we haven’t buddied up with anyone, in fact we’ve ticked off China, and now add Russia, so guess who’s buddying up? That’s right China and Russia, and soon they’ll be getting their way with us… I’m just saying…
For What It’s Worth… I think you had better pay attention to this article that appeared on the ZeroHedge.com site. It’s about China stepping away from the Treasury auction window, just like I said we needed to be afraid they might do, and it can be found here: https://www.zerohedge.com/news/2018-04-09/we-understand-chinese-government-has-halted-purchases-us-treasuries-sgh
I don’t have much of a snippet today, because 1. I want you to click on the link and read the report, and 2. I can’t get the copy and paste to work for this article…
Chuck again… Brother have we stepped into a pile of doggie doo… It’s been a longtime arrangement between China and the U.S…. The U.S. buys China’s exports, and China buys U.S. Treasuries… But when you play with fire, you get burned… And if the report is true, that China has ceased buying Treasuries weeks ago, who’s going to take up the slack? The Fed is not buying Treasuries, and the U.S. increased their deficit spending, which needs the sale of Treasuries to finance the deficit spending! Uh-oh!
I’ve explained this in the past, but what the heck… When Treasuries aren’t being bought, the U.S. Gov’t has two choices… They can aggressively hike rates to get the yields on the bonds higher and more attractive, but risk causing the economy to go into a recession. Or… They could depreciate the value of the dollar, so that the purchase price on the conversion to dollars in the terms of the transaction, would be cheaper… Given the two choices, which do you believe the U.S. Government will choose? What’s behind door #1 or door #2? #2? Johnny, tell them what they’ve won! You’ve won a weak dollar that will reduce your purchasing power, like a tax, but that’s not all! You have also won higher interest rates because the Fed will hike rates at first to see if they can attract buyers, and then seeing they can’t, they’ll ask for a depreciation of the dollar…
Got Currencies and Gold (or silver)?
Currencies today 4/10/18… American Style: A$ .7737, kiwi .7350, C$ .7889, euro 1.2330, sterling 1.0462, Swiss $1.0462, … European Style: rand 12.05, krone 7.8211, SEK 8.3493, forint 252.61, zloty 3.4001, koruna 20.5470, RUB 59.43, yen 107.02, sing 1.3102, HKD 7.8494, INR 64.84, China 6.3051, peso 18.28, BRL 3.3846, Dollar Index 89.81, Oil $64.21, 10-year 2.79% Silver $16.48, Platinum $936.72, Palladium $936.85, and Gold… $1,339.60
That’s it for today… Lots on our plates, eh? My stomach is performing circus tricks this morning, so I’ll end this here and try to get that settled down… The sun came out yesterday, and it kind of got a bit warmer, and I’m told that it will continue to get warmer today and tomorrow, so that’s a good thing, because I can’t stand cold weather! Junior Walker and the All Stars take us the finish line today with their song: What Does It Take? Great sax work in that good old song… And with that… it’s time to go… So, I hope you have a Tom Terrific Tuesday, and don’t forget to Be Good To Yourself!
Chuck Butler