April 11, 2018
* Threat of “War” war spooks the markets
* China extends olive branch?
Good Day… Well, I finally got through all the emails in the Pfennig Replies. Shame on me, as I had forgotten how many readers respond to a Pfennig when I ask them a question… But get through them I did, and thank you to one and all who replied with “no worries” emails in response to my asking you what you thought about me going to a 4 day week. I even had someone ask me why I got up so early and wrote, when it would be better to write at 5 each day to give a recap of the day’s activities… There are a number of reasons I’ll continue to write in the morning, but the first response would be that this is a conversation that you and I are having at the kitchen table with a cup of coffee, and it will remain that way as long as I write the Pfennig! Like I said there are a number of reasons why I do this, but that’s number one in my book! Chicago greets me this morning with their song: Does Anybody Really Know What Time It Is… This is one of the songs the band I played in and traveled the country in our VW microbus, allowed me to be the lead singer… So, I have a special place in my heart for this song… Besides the Neil Young songs I did with my acoustic guitar, the only other song I had the lead part, was Colour My World…
Well, traders got back to trading currencies yesterday and giving them some direction, rather than just wallowing in the mud, like they’ve done for about a week… The euro gained, not by leaps and bounds, but it gained nonetheless. The Aussie and kiwi dollars both followed the euro’s lead, and gained but not by leaps and bounds. Gold had a good day, just like I thought and said it might do, as the coming Trade War, that has already seen the battle lines drawn, is drawing closer and closer…
I keep getting emails from readers that think I’m not getting the point, as to why the U.S. immediately without provocation, went to the protectionism method of negotiation… I do get the fact that the U.S. trade sector has been treated unfairly in the past, and an evening out of the playing field was in order… But to go to Tariffs before other means of negotiating what it was the U.S. wanted from China, was not, in my opinion the best option, for I believe that the tariffs when put into place will cause the economy to falter quickly, and more than that, the dollar will be subjected to weakness that it has seen in previous times of tariffs in the past. Ok, enough of that!
Forget the Trade War, what we have now is the threat of a “war” war… President Trump has sent a destroyer to the Middle East region, and Russia isn’t pleased as punch about that… Add to the destroyer that could fire off cruise missiles at any time now that has the Russians all up in arms, is the fact that the market have been spooked by the additional sanctions placed on Russia by the U.S. on Monday…
The Russian ruble has gotten smack, crack, bushwhacked, tied another one its back, baby (R.E.M.) with investors running as fast as they can from the ruble, fearing another run on the currency like we saw back in 2014… Well, that may come about, but instead I think the savvy investors will see this selloff as an opportunity to buy rubles and ruble investments cheaper, and the this selloff will not dive as deeply as the one in 2014. Of course I might be wrong about that, but at least I have the chutzpah to make the call… right?
The rest of the currencies all, and I mean all, spent the day gaining VS the dollar. And once again, the moves aren’t monumental but they are positive, and when you put all these small daily moves together, you end up at the end of the week, with a nice gain. I’m just saying…
Gold also saw another small move on the day adding $3.40 to its price, but this morning’s price is up more than $8 in the early trading, just like I said it would probably do once we found out what Trump was going to do with Syria. And now we know, as the President has sent a warning that “the bombs are coming”… Can’t back down now, you’ve already told the world what was coming…
And the price of Oil is pushing the price appreciation envelope across the table this morning as it sports a $66 handle this morning. The threat of another war front in the Middle East and disruption of the Oil production, has the price of Oil looking spiffy this morning.
So, all three anti-dollar assets are on the rally train this morning, once again…. We’ve seen this several times this year, only to see them fall off the train again, due to the PPT performing their circus tricks with saving the dollar from this embarrassment… But soon, even the PPT will see that they are throwing good money at a bad trade, and step away from the markets, quietly… That’s when we will know that the weak dollar trend that has been nascent is ready to really take off for higher ground!
And then was this: Longtime reader, Bob, sent me a note yesterday, telling me that the Global debt has reached $237 Trillion… here’s the skinny… Yesterday we saw the latest update from the Institute of International Finance (IIF) showing that 2017 saw no less than $20 trillion in global debt added in just one year taking the total to $237 trillion. YIKES!
And helping to build / accumulate this growing debt, is the fact that the U.S. Congressional Budget Office issued a report saying that the annual deficit here in the U.S. will grow to near $1 Trillion two years earlier than first thought, and will begin to rise steadily this year and next year, and then become a part of our annual budget, to be $1 Trillion each and every year… Oh Boy! Where can I get in on this? I sure would like to run my budget in the ground and begin to book annual deficits too! Tell, me, tell me, tell me true! I want to be just like our Government! NOT!
But didn’t I tell you when the annual deficit was first being discussed about a month ago, that the government’s estimates are always too low, and it was my thought that the actual deficits would larger? Well, yes I did… but don’t let that get in the way of you deciding that you had better up the ante of currencies and metals in your investment portfolio before things get hot and heavy with the selling of the dollar…
Well, China extended an olive branch, in my opinion that is, yesterday, when President Xi made a speech where he talked about opening up the Chinese markets even more, and lowering the tariffs on U.S. cars… I commend the Chinese for doing what they can to avert a Trade War, and for their effort the Peoples Bank of China (PBOC) allowed a nice appreciation of the renminbi overnight.
But think about that for a minute… this was all staged… The Chinese announce that they are lowering the tariffs on U.S. cars, and at the same time, they make up for that loss in tariffs by upping the ante on the renminbi, so that Chinese exports are move expensive, but the amount will be small and unnoticeable to the U.S. consumer… But when you add up all the marbles, China takes away a big bag of them… Pretty smart, if you ask me!
But like I said above the focus changed from Trade War to “War” war…
The U.S. Data Cupboard yesterday had the PPI (wholesale inflation) And the report showed that there is a little more inflation at the wholesale level in March, including for primary metals, but the acceleration is modest. Producer prices rose 0.3 percent in March which is 2 tenths above Econoday’s consensus with ex-food & ex-energy also up 0.3 percent and ex-food, ex-energy & ex-trade services up 0.4 percent, both of which are 1 tenth above consensus.
Today’s Data Cupboard has the stupid CPI (consumer inflation) for March, and the so-called experts believe that CPI will jump to 2.4% Year on year (YOY) and core inflation will rise to 2.1% YOY… I’m from Missouri, so they’ll have to show me these increases… But when you consider all the hedonic adjustments that are taken in the calculation of CPI, one never really knows what they’re looking at, and that’s why I call it the “stupid” CPI…
Do you have young kids or grandkids? Do the go into convulsions any time you say the word “stupid” in front of them? Mine do, and I tell them that I’m an adult and can say what i want! But if you want to see them bonkers, play one of the Charlie Brown videos… The Charlie Brown characters use the word stupid like they use cuss words in jail! HA!
To recap… The Trade War fears have given way to “War” war fears and that has Gold pushing higher this morning. The currencies all booked modest gains VS the dollar yesterday, except the Russian Ruble which got whacked because of fears of another run on the ruble like what happened in 2014, after new sanctions were placed on Russia by the U.S. on Monday… And the Global Debt has reached $237 Trillion! My oh My…
For What It’s Worth… Since I talked about the rising debt levels in the world this morning, and pointed out the increased annual deficit here in the U.S. this article about housing debt rising seemed to play nicely in the sandbox with my earlier thoughts on debt… You can find the entire article here:http://www.builderonline.com/money/affordability/rising-home-prices-push-borrowers-deeper-into-debt_c
Or, here’s your snippet: “More Americans are stretching to buy homes, the latest sign that rising prices are making homeownership more difficult for a broad swath of potential buyers.
Roughly one in five conventional mortgage loans made this winter went to borrowers spending more than 45% of their monthly incomes on their mortgage payment and other debts, the highest proportion since the housing crisis, according to new data from mortgage-data tracker CoreLogic Inc. That was almost triple the proportion of such loans made in 2016 and the first half of 2017, CoreLogic said.
Economists said rising debt levels are a symptom of a market in which home prices are rising sharply in relation to incomes, driven in part by a historic lack of supply that is forcing prices higher.”
Chuck again… I would be fearful right now of the pushing out of the crowd that doesn’t have a lot to spend for a house… I’m just saying…
Currencies today 4/11/18… American Style: A$ .7747, kiwi .7368, C$ .7926, euro 1.2384, sterling 1.4185, Swiss $1.0448, … European Style: rand 12.0968, krone 7.7678, SEK 8.3072, forint 251.56, zloty 3.3842, koruna 20.4425, RUB 62.16, yen 106.81, sing 1.3084, HKD 7.8496, INR 65.16, China 6.2882, peso 18.29, BRL 3.4161, Dollar Index 89.47, Oil $66.17, 10yr 2.77%, Silver $16.61, Platinum $935.47, Palladium $960.52, and Gold… $1,354.00
That’s it for today… After a 9 innings of feeble at bats my beloved Cardinals won in the 11th inning. Of course I had long gone to sleep thinking that their lack of hitting costs them another game… Was I ever pleasantly surprised to see the score this morning! I’m going to the day game today, the weather is supposed to be warmer, and I’m excited! I love day baseball, for to me, it’s when all the games should be played! I sure hope my hip settles down, and I can sit there and enjoy the game with good company! I see the heart doc tomorrow, I think he’ll be happy with my weight loss, but not with the higher BP that the new chemo drug is causing… Oh well, it is what it is… And with that thought, I had better get this out the door.. The Amazing Rhythm Aces take us to the finish line today with their song: 3rd Rate Romance… Bet you don’t have that one on your playlist! I hope you have a Wonderful Wednesday, and Be Good To Yourself!
Chuck Butler