August 15, 2018
* The dollar bugs are still dancing in the streets!
* Russia prints a very strong IP report…
Good day… And a Wonderful Wednesday to you! I’m late, I’m late, to a very important date! I apologize for the tardiness of the letter today. I was talking to my wife on Sunday, and telling her that I was worried about being able to wake up on Monday morning to write, because I had been sleeping so soundly (for the first time in eons!) Well, Monday was no problem, Tuesday I fought it a bit, and this morning? The sleep won… Another Cardinals victory last night, they’ve finally lassoed momentum, and it’s on their side… The Moody Blues greet me this morning with their song: I Know You’re Out There Somewhere…
Some might have thought when there wasn’t a Pfennig in their email box early this morning that I had decided to find a big rock and crawl under it and hide, from all this dollar buying… But it hasn’t come to that… yet that is… HA! Seriously, I’m a Big Boy, I’ll face it and spit into the wind! For I know that it’s all going to come crashing down at some point… It’s like a weight lifter on steroids… The crash isn’t pretty, and it won’t be with the dollar… But, it sure seems a little off base to talk about that with the dollar kicking sand in the face of the currencies and metals.
The price manipulators took a breather yesterday, after the $18 whacking they gave Gold on Monday. But it does appear that they are back at it this morning in the early trading with Gold down nearly $7 already.
Today is the BIG Day for the U.S. Cupboard and first out of the chute this morning will be Retail Sales and with the letter going out so late this morning, we already have the numbers on July’s Retail Sales, and they were better than expected, thus being about the only piece of economic data that has printed better than expected for July. Retail Sales grew 0.5% in July, which is OK.. not great, especially for a country of spenders like the U.S. but given the rot on the vine of other data prints so far for July, this was better than the average bear…
Speaking of a country of spenders… Household Debt, as measured by the Fed Reserve, grew to $13.29 trillion in Q2 of 2018, 3.5% higher than a year earlier. I know, I know the propeller heads like to point out that there are more people in the country… But come on you’re telling me that there was an increase so great that offset all the deaths in the country, in one year to skew the data? I’m not buying it! Which is something that U.S. consumers sure didn’t say in in the 2nd QTR… Here’s the breakdown of the expenditures… (I got this from zerohedge.com)
Mortgage balances-the largest component of household debt-rose by $60 billion during the second quarter, to $9.00 trillion. Credit card debt rose by $14 billion to $829 billion; auto loan debt increased by $9 billion in the quarter to $1.24 trillion and student loan debt hit a record high of $1.41 trillion, an increase of $2 billion in Q2.
The U.S. Gov’t’s debt is $20.787 Trillion, the States have a mountain of debt, and so consumers have just done what their leaders have done, and run up HUGE amounts of debt… This can’t end with rainbows and lollipops folks… Remember 2007 & 2008? I’m just saying…
The Trade War continues to be tit-for tat, I jump, you jump, scenario that I’m thinking the Chinese are wishing they hadn’t decided to fight the bully on the street… The Chinese economy is already showing signs of fatigue, and the Chinese Gov’t announced yesterday that they would increase small-business lending and increase infrastructure investment to help offset the impact.
What have I always told you was the Ace in the hole that China had that most other countries didn’t have? A HUGE Treasure Chest of reserves that they could allocate to smooth out bumps in the economy… And that’s what we’re seeing here with the announcement they made yesterday… But here’s the problem with this… It’ll take some time to make a difference and in that time things are going to get touchy in the Chinese economy…
The Treasure Chest of reserves will go a long way toward smoothing out the economy, but the Chinese have to be proactive with it, and not wait for a fire to start before they apply water… If they see smoke, it’s time to act, and may be too late then!
This morning Russia printed a strong Industrial Production number for July on a year on year basis… The consensus was for a rise of 2.6%, but that consensus was beaten handily with a 3.3% print… The ruble saw a bit of love on the data print. The ruble has been beaten down severely during this Emerging Markets currency contagion. So, any love it can get is helpful…
I see on Twitter that the great economist, David Rosenberg, has noticed what I was talking about yesterday, the rot on the vines of the Emerging Market Currencies… here’s David on Twitter… “Turkey is not the only country who’s currency is melting away. The real is off 21% from its nearby highs. The rand is off more than 20%. The forint has collapsed 13%. The zloty has sagged 12%. The rupiah is down more than 9%… the Singapore dollar, Malaysian ringgit, Thai baht and Taiwan dollar are all down 5%-6% too. The contagion is already here, and chances are slim it stays in the FX market alone.”
Have I told you how much I enjoy Twitter? I don’t get into all the who’s doing what and what have you, I only use it to follow economists who love to post things on Twitter, that I can’t get any longer without a Bloomberg machine… Talking about Twitter though, reminds me it has been a month of Sundays since I last posted a Tweet… UGH!
Most of Europe is on holiday today, as in the Catholic Church it’s Assumption Day… Did I ever tell you that I was brought up in the Catholic Church? Back in the day when they did mass in Latin… So, I remember bits and pieces of what was taught back in the day… Not much, but some!
The U.S. Data Cupboard has more data for us today, so there you go! It’s a data palooza!
To recap… Chuck’s late, Retail Sales for July has already printed, and the letter is very tardy! The dollar continues to dance in the streets and beat up on the currencies and metals, but Chuck doesn’t think it has that “much” left in its tank… We’ll see, eh? Russia prints a very strong Industrial Production report, and China makes an announcement on where they will spend money to smooth out the economy…
For What It’s Worth… Since Gold is seeing all this selling these days, I thought this article that I first saw on Ed Steer’s letter and then in a review of what’s hot on the Bloomberg sight… it’s about how some of the best known investment gurus are staying with Gold through this selling and can be found here:https://www.bloomberg.com/news/articles/2018-08-13/billionaire-dalio-s-bridgewater-maintains-holdings-in-gold-etfs
Or, here’s your snippet: “Billionaire hedge-fund managers John Paulson and Ray Dalio stayed loyal to gold even as an investor exodus sent prices of the metal tumbling.
As of June 30, Paulson & Co. kept his stake in SPDR Gold Shares, the largest exchange-traded fund backed by bullion, at 4.3 million shares. Dalio’s Bridgewater Associates maintained its 3.9 million shares in GLD, and 11.3 million in iShares Gold Trust, the second-largest, according to regulatory filings.
ETF investors turned sour on gold in the three months ended in June, with more than $1 billion exiting SPDR Gold and the iShares fund posting its first quarterly outflow since 2016. The flight from the funds has continued, with holdings in all bullion-backed ETFs tracked by Bloomberg shrinking to the smallest in six months.
The metal’s haven appeal waned on a strengthening dollar and a rally in equities, sending prices down 5.5 percent in the period. Robust U.S. growth bolstered the case for the Federal Reserve to keep raising borrowing costs, adding to headwinds against the non-interest-bearing asset.”
Chuck again… I wonder IF it’ll be known should they decide to sell?
Currencies today 8/15/18: American Style: A$ .7226, kiwi .6560, C$ .7633, euro 1.1325, sterling 1.2705, Swiss $1.0032, European Style: rand 14.5716, krone 8.4265, SEK 9.1805, forint 286.52, zloty 3.8193, koruna 22.6945, RUB 66.84, yen 111.00, sing 1.3797, HKD 7.8497, INR 70.69, China 6.8822, peso 19.09, BRL 3.8708, Dollar Index 96.83, Oil $66.40, 10-year 2.87%, Silver $14.81, Platinum $780.42, Palladium $873.86, and Gold… $1,187.30
That’s it for today… it’s only been 9 days but it seems like longer that I’ve been down here by myself… With this time of year not being high on people’s list of places to go, the building is pretty empty, which means I have the pool, the hot tub, and the deck to myself! But most days I find myself inside at my laptop reading and researching stuff… I went for a drive yesterday afternoon. I like to explore parts of the area that I haven’t seen in all my years coming here… I first came to this area in 1998, So twenty years! The band, ACE, takes us to the finish line today with their song: How Long… a one hit wonder, but the singer: Paul Carrack went on to fame and fortune with other groups. And with that, it’s high time I got this out the door! I hope you have a Wonderful Wednesday and remember to Be Good To Yourself!
Chuck Butler