May 31, 2018
* Dollar loses its grip on control
* Bank of Canada hints at additional rate hikes…
Good Day… And a Tub Thumpin’ Thursday to you! I’m going to have to wait on starting my Tub Thumpin’ today, I have a reservation with my bed! Two consecutive nights of stomach problems… UGH! But, I’ll soldier through this morning, and then head back to attempt to make up for lost sleep! Elton John greets me this morning with this song: Honky Cat… Man I really liked Elton John in his early years, but the Goodbye Yellow Brick Road album was jumping the shark tank for me…
The global trade war is back on the docket as of yesterday, and the dollar lost its grip on the currencies and metals, while the price of Oil recovered a bit of lost ground, and the 10-year Treasury yield remained at 2.87%… When the President placed 25 percent tariffs on imported steel and 10 percent on aluminum in March, he granted a reprieve to Mexico, Canada and the European Union until June 1. Well, guess what tomorrow is? Yessiree, Bob! It’ll be June 1st, and it will be busting out all over, all over the meadow and the field… And then we have to get back to the Trade Wars…
Remember in March when the tariffs were first announced, and the dollar got sold like funnel cakes at a State Fair? Well, the realization by traders, that this is all coming around again, and then add to that the fact that the President did announce additional tariffs on a large number of Chinese goods yesterday… If all these plans to push through tariffs continues, I suspect the dollar will be subjected to large rounds of selling once again.
And in reality, a weak dollar is just what the doctor ordered according to President Trump, so it can help to correct the Trade Deficit. I’ve said this before, so that’s nothing new, but more of a friendly reminder, so that as the dollar slides once again, you know the real reason for all of it…
I had to laugh when I read an article on the Bloomberg this morning that talked about how White House Trade Advisor, Peter Navarro, chastised Treasury Sec. Mnuchin, for 1. saying the trade dispute with China was over, and 2. stepping outside the arena that the Treasury Sec. is supposed to remain in… Navarro, didn’t say it, but just the way he snapped at Mnuchin, made me think that he was telling Mnuchin, you keep to the dollar, and I’ll keep to trade…
OK, enough of the Trade War talk today, just know that it the root cause of the slide in the dollar yesterday, overnight, and this morning. The euro is pushing toward the 1.17 handle, and the Aussie dollar (A$) is pushing toward the 76-cents handle! Gold is back ! And things seem to be turning around just in time, because I was about ready to raise the white flag, and surrender to the dollar…
The price of Oil recovered a bit of the recent lost ground on supply news… Yesterday, I wrote an epistle-like write up on Russia and the prospects for the ruble. And last night Russian president, Putin, made a statement that pretty much sealed the deal for production cuts in Oil by the OPEC members… Putin pointed out that Russia no longer is addicted to Oil money for their economy, and therefore he doesn’t need the production cuts that helped push the price of Oil higher for the last year.
So, this could be a knife in the back of Oil’s rise in price… We’ll have to see… eh? The Bank of Canada held steady Eddie on their interest rates, however, the bank said in a statement accompanying its decision that developments since April reinforce its view that “higher interest rates will be warranted to keep inflation near target.” And that statement lit the fire under the loonie, and got it moving in the right direction once again…
Longtime readers know that I’ve explained that a strong currency can help combat inflation, which is why I get so disgusted with countries that forget that a strong currency can go the work of higher interest rates… Shoot Rudy, look at Singapore… Their Monetary Authority of Singapore (MAS) doesn’t have to move interest rates up and down, they keep them very steady, and adjust the band in which the Sing dollar trades in… If they need to allow the Sing dollar to appreciate, they widen the band, and so on…
There are no wild swings are Central Bankers out talking up rate hikes, etc. in Singapore… And that’s the way it should be everywhere! I learned about the benefits of a strong currency from the former Reserve Bank of New Zealand (RBNZ) Gov. Don Brash, who, when I met him, gave me his business card with his direct telephone line, and told me to call him when I had questions about RBNZ policy… So, one day, I picked up the phone and made the call, and guess who answered the call? Don Brash himself! And we talked for an hour that time, and a few more times after that!
We have somewhat kept in touch through the years, as Don Brash has gone into politics… I got a real kick out hearing from him when I turned 60 a few years ago… OK… let’s get back to stuff…
Gold inched higher by a whopping $2.50 yesterday, and is up another couple of bucks in the early morning trading today… The shiny metal sits at $1,309 and change this morning… and is back to moving in the right direction again, after an awful month of May… No reason to sell Gold in May, but that didn’t stop the price manipulators… It’s all going to blow up in their collective faces one day, and when it does, I’ll be there to laugh, and point a finger, saying neener, neener, neener! (yes, I can still be child sometimes! HA!)
The U.S. Data Cupboard had the 2nd reading of 1st QTR GDP and yesterday I said, “The first print gave us a 2.3% growth rate… the only way I see this number changing is it going downward…” And since I said that, the only print that could happen was that 1st QTR GDP printed at 2.2%, down from the original reading of 2.3%! HA! Hey, my first boss in the investment business told me one time when I got something right, that “even a blind squirrel can find an acorn”… (he knew how to put me in my place, eh?)
To recap… The on again off again Trade War, is heating up again with the June 1st deadline for Canada , Mexico and the Eurozone on the docket for tomorrow… Trump added more tariffs to China yesterday, and all this has taken the stuffing out of the dollar’s shirt. The currencies and metals are back on the rally tracks this morning, and IF the Trade War continues to heat up, we could very well see the dollar continue to slide downward…
For What it’s Worth… My good friend, and the Retirementor, Dennis Miller, sent out his weekly letter yesterday, and in it he talked about the scandals at Wells Fargo and the other Too Big Too Fail Banks… I wanted you all to read about this, since the other day, I had in the FWIW section an article about the Wells Fargo CEO talking about no more scandals… So, here’s Dennis’s letter, which he tells me that whenever I mention him he gets a few more subscribers… Well, let’s inundate him and get everyone signing up! Here’s the link… https://milleronthemoney.com/if-you-do-business-with-organized-crime-be-careful/
Or, here’s your snippet: “When we last checked, since 2009 the top banks had been fined a total of $204 billion. Bloomberg now reports, “Wells Fargo’s $1 Billion Pact Gives US Power to Fire Managers”:
“The settlement covers issues in Wells Fargo’s auto-lending and mortgage units. The bank revealed last year that it had forced unwanted insurance on customers who took out car loans….”
Fines are just part of the cost of doing business:
“Still, investors appeared relieved…as shares advanced 1.8 percent to $52.44…the best performer in the 24-company KBW Bank Index. The settlement should remove one overhang from the shares, especially since the penalty isn’t as bad as some analysts had anticipated….” (Emphasis mine)
A week later, American Banker reports, “Yet another Wells scandal; House moves closer to passing dereg bill.” Quoting from the Wall Street Journal:
“…. Just when you thought all of the various Wells Fargo scandals had been settled, or at least known about, comes word that the Labor Department is investigating the bank for allegedly pushing holders of lower-cost 401(k) plans it manages…pressuring them into buying the bank’s in-house funds.” – Dennis Miller
Chuck Again… A dear reader sent me a note yesterday, after my FWIW piece the day before regarding Wells Fargo’s CEO… talking about no more scandals… The dear reader told me that he received a notice from WF addressed to his mom, that her credit card payment was overdue… His mom has been dead for 3.5 years now! So much for “no more scandals”, eh?
Currencies Today 5/31/18… American Style: A$ .7583, kiwi .7012, C$ .7794, euro 1.1690, sterling 1.3340, Swiss $1.0138, … European Style: rand 12.5680, krone 8.1667, SEK 8.78, forint 272.52, zloty 3.6828, koruna 22.04, RUB 62.40, yen 108.93, sing 1.3380, HKD 7.8485, INR 67.40, China 6.4192, peso 19.78, BRL 3.7270, Dollar Index 93.89, Oil $67.77, 10-year 2.87%, Silver $16.57, Platinum $913.52, Palladium $988.35, and Gold… $1,309.10
That’s it for today… Well, the hyped up start by our young stud pitcher, didn’t exactly turn out great, but he did OK, for the first game… But the Cardinals lost and come home limping… They need to make some hay while at home for sure! Went to watch Braden play ball last night, some of the antics of the boys in the field were hilarious… The end of the week for me, thank goodness, I need to recover! America takes us to the finish line today with their song: Daisy Jane… Now, please be careful out there, but do have a Tub Thumpin’ Thursday! Thanks for reading the Pfennig, and remember to Be Good To Yourself!
Chuck Butler