November 5, 2018
* Currencies rally on Friday, but get turned around overnight
* Everybody has current debt, but the U.S. has current and future debt!
Good Day… And a Marvelous Monday to you! I had an uneventful trip here to my winter home yesterday, other than leaving at zero-dark thirty, in the morning! The good thing about flying that early in the morning is that you still get to enjoy the day when you arrive! The mid-term elections are tomorrow, I tried on numerous occasions to absentee vote last week, but each time I was met with lines of people that were trying to do the same thing. I have this “thing” about long lines… And that’s all I’ll say about that! I don’t know if all the early voting places were as busy as the one I went to, but if they are… There should be good voter turnout for this election… I’m here, all by myself… but I have plenty to do! I did sit outside a bit yesterday soaking up some Vitamin D, it was nice to be able to be outside without layers and a coat! The late great Jimi Hendrix greets me this morning with Bob Dylan’s song: All Along The Watchtower…
Well, Friday was interesting… The Jobs Jamboree surprised the experts & markets with a better than expected print of 280,000 jobs created in Rocktober… Ahem… 246,000 of those jobs were added by the BLS after the surveys, because, well, the “economy is doing so well”… Really? 246,000 jobs were created out of thin air, by the BLS because, well… They thought it would be prudent? I shake my head in disgust that the BLS is allowed to play these games, with people’s money… But then it’s what they call… “other people’s money” or OPM… I had better go on, from here… before I get all worked up!
And with the stupendous Jobs created report on Friday, one would have thought the dollar would have crushed the mini-rally that the currencies had going on when we last looked at them on Thursday. But I didn’t… I can say that the dollar actually lost ground on Friday… Not much… but the loss is significant because it should have been rallying like a banshee! Now, I’m not complaining, just a little confused as to what’s driving the currencies these days? Was it more tariff talk that pushed the dollar down? Seems reasonable, but then that’s been the talk of the town for some time now, it’s not like this is a new thing for the markets to digest…
But the overnight markets reversed the currency rally and the euro, which had touched 1.14 in the mini rally, has given back about 1/3 of its move on Friday… UGH! And Gold is flat in the earling morning trading, with a trading range of a shekel or two…
The world’s economies are slowing down… Last year, we talked about the Tent Revival movement going on with the economies of the world, all syncing up and growing… But that was before there were 3 more Fed Rate hikes, and a Trade War… My friend, Dennis Miller of www.milleronthemoney.com sent me a graph yesterday that shows by year a list of countries and their GDP growth… It’s pretty interesting to watch China’s GDP Grow like a weed, while those in other countries just petered in and out over time.
Remember when Japan was making yen rain on everyone, back in the 80’s… The Vapors sang a song, I’m turning Japanese… that I’ve used for years to point to the fact that the U.S. economy was following in Japan’s path… Japan bought just about everything it could get its hands on, like Pebble Beach… and so on… But debt slowed the Japanese down, and has kept them under the thumb of Debt, ever since the mid-90’s… China has a boat load of debt too… But they also have a Treasure Chest of reserves of around $3 Trillion… The U.K. has more debt than they should, and their economy is slugging along… The Eurozone has huge debts, that the member countries have accumulated, and they’re hoping like hell that Germany’s economy can pull them out of this debt mess… And then that brings us to the good old U.S. of A. Now we have gone about accumulating debt, on a current basis, and on an unfunded liabilities basis…
I’ve always thought, well since I’ve been in the currency markets, that debt was like currencies’ kryptonite. The dollar, has an exhorbinate privilege, because of the fact that it is the Reserve Currency of the World… And that’s the only reason, that the dollar is still hanging on… I’m still of the opinion, that a lot of the dollar standard as we know it, will come to an end with the next recession here in the U.S. that looks like It’s now on track for 2020… I just don’t see how when the mess of a new recession, with all this debt, and derivatives, and leveraged corporate loans, works out well for us, and the dollar, not to mention the stock market… Call me negative Nellie, no wait.. negative Nate, but it’s how I see it all unfolding, and I have only one question for you…. Got Gold?
Getting back to the Jobs report last week, we did see good earnings growth, which is probably keeping the December rate hike still on the table… But there’s more to Jobs created… The BLS thought that Professional & Business Service was the hot spot in hiring as they allocated 91,000 jobs to this sector… So, there are always things that people pick out of the Jobs report that are very interesting… One such person is the great economist, David Rosenberg, who said on his Twitter account…
“The dirty little secret in the ADP report…in the past four months, job gains in the small-business service sector (leading indicator) has slowed from +48k, to +32k, to 29k, to +20k…lowest number since Sept. 2017. Very close to the figure printed in Nov. 2007…”
OK… they say small business is the key to the U.S. economy, and if that’s the case, it sure looks like small business is in trouble…
Over in the Eurozone to start the week there, we had ECB members out talking the talk, and walking the walk, of a Union that has an economy that will, in their opinion, still become a full fledged growing economy… And made sure that everyone heard them when they said that the withdrawal of Monetary Stimulus is on track to take place… they also pointed out that a recent easing of price growth was likely to be temporary…
We’ve talked about the use of the word Temporary before, right? Sometimes it just doesn’t work out… Remember that the removal of the dollar from the Bretton Woods Agreement, (Gold standard) was supposedly, “temporary”… Well, 47 years later, people have forgotten that the removal of the dollar from the Gold standard was supposed to be only “temporary”…
Things are still looking up for the Brazilian real, as it gets marked up nearly every day… Something doesn’t feel right about this to me folks… And that’s where I’ll leave that… Just be careful here!
Sometimes I wish I still went to conferences so that I could talk to the great mind of Steve Sjuggerud… I would ask him now how he feels about commodities. The reason, is simple, commodities have been down for so long, and they are hated, to speak of, by most investors… This is when Steve normally picks up the baton and runs with it… he loves buying asset classes that other people don’t want…
IF he said that it was time to buy commodities, it would confirm my belief that with all this spooling up of inflation around the world, that commodities would return to their glory years… I’m just saying…
The U.S. Data Cupboard doesn’t have much for us this week, with the Election Day tomorrow, and then a Fed FOMC meeting on Wednesday, which will yield no rate move, but could give us some indication of whether or not the Fed is watching the rot on Housing’s vine get exposed…
To Recap… The Jobs jamboree was better than expected last Friday, with the help of 246,000 jobs added to the surveys by the BLS… the surveys only added 34,000 jobs in Rocktober… The dollar didn’t rally on the data print though, and the currencies ended the week with a mini-rally. That Mini-rally has given back some of the gains won on Friday, in the overnight markets today. Gold is flat, and Chuck spends time talking about debt…
For What It’s Worth… the picking were slim this morning for a FWIW article folks… But I found this on Reuters that is Jack Ma of Alibaba talking about the Trade War, and thought it to be FWIW worthy, and it can be found here: https://www.reuters.com/article/us-china-trade-usa-jackma/alibabas-ma-calls-u-s-china-trade-war-most-stupid-thing-in-this-world-idUSKCN1NA0V6
Or, here’s your snippet: “The U.S.-China trade war is the “most stupid thing in this world,” Jack Ma, the chief of Asia’s most valuable public company, Alibaba Group Holding Ltd (BABA.N), said on Monday.
The two countries have set tariffs on hundreds of billions of dollars of each other’s goods and U.S. President Donald Trump has threatened to slap tariffs on the remainder of China’s $500 billion-plus exports to the United States if the trade dispute cannot be resolved.
Ma made the comments at the China International Import Expo (CIIE) held in the Chinese commercial hub of Shanghai.”
Chuck Again… You tell ’em Jack! Because nobody listens to me!
Currencies today 11/5/18..American Style: A$.7193, kiwi .6655, C$ .7690, euro 1.1368, sterling 1.3005, Swiss $1.0063, European Style: rand 14.3750, krone 8.3752, SEK 9.0905, forint 283.59, zloty 3.7938, koruna 22.7244, RUB 66.10, yen 113.28, sing 1.3768, HKD 7.8311, INR 73.83, China 6.8910, peso 20.12, BRL 3.6954, Dollar Index 96.55, Oil $62.76, 10-year 3.20%, Silver $14.73, Platinum $870.46, Palladium $1,130.50, and Gold… $1,232.00
That’s it for today… Well, I do believe that today is Rachel Butler’s birthday! What a lovely person Rachel is, and has become a 2nd daughter to me… Happy Birthday! Rachel is someone that celebrates her birthday, MONTH! Christmas decorations are already out in the stores, and we received a letter from the family that runs the Tree Farm we go to each year, so we’re headed to Christmas whether you want to or not! And one of my fave songs to sing along with takes us to the finish line today… Charlie Daniels song: Long Haired Country Boy… I hope you have a Marvelous Monday, and Rachel has a Happy Birthday, and we all remember to Be Good To Yourself!
Chuck Butler