A New & Improved NAFTA!

A Pfennig For Your Thoughts

Roctober 1, 2018

* Currencies attempt to rebound after sell off
* Gold continues to get whacked…

Good day… And a Marvelous Monday to you! Welcome to Rocktober! A longtime Pfennig Tradition of calling this month Rocktober continues… And if I’m about anything in life, it’s “tradition”… A great weekend on my part this past weekend, except my beloved Cardinals blew it and didn’t make the playoffs for the 3rd consecutive year… UGH! But other than that, my Missouri Tigers had a bye, I watched my darling granddaughter, Delaney Grace play soccer, and spent the better part of yesterday with my good friend Rick… I’m no longer employed by anyone, so that makes me officially retired, except I get up early in the morning to write this letter… for free! My dad used to have a saying, he’s say, “I had better get my head examined” , which is what comes to my mind when I wake up before the farmers and begin to write… But it is what it is… The Killers greet me this morning with their song: Somebody Told Me…

OK… well, Thursday morning the euro was trading at 1.1710, and that didn’t last too long, as the trap door under the euro was sprung, and by the end of the day it was trading with a 1.15 handle… All because the Fed hiked rates, and removed the “accommodative” wording from their statement… Need I remind everyone out there buying dollars because of the Fed’s stance, that 1. Interest rates are still only 2-2.25%, and 2. If the Fed is looking at 2nd QTR GDP as their key to hiking rates and being so hawkish, that they might want to step back and take a look at recent history…

Remember back in 2009, when economists and the government, saw “green shoots”? What happened to those green shoots? They saw their vines get brown and die… that’s what… And then we’ve had on couple of occasions in the past 9 years, where we saw a quarter of good growth, only to be disappointed the following quarter…

The Daily Reckoning (www.dailyreconking.com) highlighted these for me last week… check this out… In the first quarter of 2015, growth was 3.2%, but by the fourth quarter that year growth had fallen to a near-recession level of 0.5%.

In the third quarter of 2016 growth was 2.8%, but it fell quickly to 1.2% by the first quarter of 2017. In the third quarter of 2017 growth was 3.2% but then returned to 2.0% by the first quarter of 2018, about the average for the past nine years.

I shake my head in disgust at these numbers… and think, Hey! Oh, and don’t forget that year or so ago, I started writing about the tent revival in Global Growth, right? Well, guess what has gone to the wayside? That’s right Global growth… One day it’s here, the next day it’s gone…

So, this all plays well in the sandbox with my call before the 2nd QTR GDP printed that it was going to be like a star that’s about to burn out, that it shines the brightest right before the burn out…

The Fed Heads are out of touch with reality folks… They sit up in the Eccles Building and chart their dots for rate movements, without stopping to take a look around at the economy… The Trade War… and themselves!

So, as I’ve said before over and over again, let the Fed Heads keep hiking rates, they’ll have to reverse them sooner or later…
The euro got oversold on Thursday and recovered a bit on Friday and in the overnight markets last night, and trades with a 1.16 handle this morning.

The BIG NEWS overnight has been centered on a New and Improved NAFTA… Where’s Ross Perot, when you need him to explain to the public what this is going to do? HA! Well, the New and Improved NAFTA won’t get the seal of approval from Congress until next year, and who knows, by then it could be completely different! But I have to say Kudos to the negotiators who got this done right under the deadline wire…

The Canadian dollar / loonie, and Mexican peso are both beneficiaries of this new Trade deal, with the loonie out pacing the peso’s gains… The loonie gets the extra push from the rise in the price of Oil late last week… Yes, don’t look now, because I’ll tell you… The price of Oil is trading with a $73 handle, and continues to rise despite President Trumps desire to have a cheaper Oil price.

The Russian ruble is also seeing a lot of love from currency traders and investors, as it is the leading Petrol Currency these days. I have to say that, once again, I’m quite impressed with Russia’s ability to work through the economic sanctions placed on it by the U.S. and European Union.

A quick perusal through the economic calendars here and abroad, reveals that there’s just not much on the agenda of anyone’s Data Cupboard, until we get Retail Sales from the Eurozone on Wednesday, August Factory Orders here in the U.S. on Thursday, and of course with it being the first Friday of the month this week, we’ll see the Jobs Jamboree take place on the back-end of this week.

There are a lot of “little data prints” along the way, but I’ve highlighted the real economic data prints for you.

I haven’t seen the Trade figures from China, but all the reports coming from there have Trade figures falling by a significant amount, due to the tariffs and Trade War with the U.S. I’ve said it before, and I’ll say it again, nobody wins in a Trade War, and sooner or later, we’ll begin to see the Trade figures here in the U.S. also start to fall… I told you last week that the CEO of Ford Motor Co. blasted the steel tariffs and said that his company would lose $1 Billion because of the tariffs… That’s just the tip of the iceberg folks… There will be more losses, and strains on the already shaky economy…

I say shaky economy, Jerome Powell says robust economy… I guess we’ll see who’s right, eh? I read this morning that 2/3rds of economists believe the U.S. will be in recession by 2020… I believe it will be before that, but then that’s just me being me…

Longtime readers will recall me warning the Reserve Bank of Australia (RBA) for not hiking interest rates while there was a housing bubble going on in the country… Well, I read an article this past weekend that talked about the housing bubble… Look, folks, when the media finally gets around to writing about something it’s probably really to be over… But Australia isn’t the only country that’s experiencing a housing bubble… I’ve chronicled the housing bubbles in Toronto and Vancouver, and all they’ve seen to stop them is one 25 Basis Points rate hike from the Royal Bank of Canada (RBC)… When will these Central Bankers ever learn, when, will, they, ever, learn?

What on earth is going on with Gold these days? I was stopped by a longtime Pfennig Reader in a restaurant yesterday, and he asked me when Gold was going to begin to rise again? I told him that the Chinese were controlling the price of Gold at the moment, with the blessings of the U.S. (because otherwise it would be illegal to do what’s being done!) And if the Trade War and tariffs ended, the governor would be removed from the price of Gold…

I don’t know if you’ve been watching, but Silver has quietly moved higher while the price of Gold has been beaten around the head and shoulders. Silver’s moves are in cents, not dollars like Gold, but the moves are there, you just have to look for them!

And what’s all this talk going on these days about lifetime earnings, and other socialism thinking? Last night I had a brief conversation with Alex’s girlfriend, Grace, who was telling me about a class she’s in that the professor is touting Marx and socialism… I said, OMG Grace, you’ve got to tell her that in the history of mankind Socialism has NEVER worked! And after she had gone, I sat here thinking that we as a country are in deep dookie, because that’s the $&# that young minds are being taught… God help us, that’s all I can say about that!

Before we head to the Big Finish today, I wanted to mention the passing of Marty Balin, the lead singer of the Jefferson Starship, who’s record: Miracles, is one of my all-time fave recordings… RIP Maty Balin…
To recap… The new and improved NAFTA deal has been reached by U.S., Mexican and Canadian negotiators, and that has seen the loonie and peso receive some love from Traders. The price of Oil continues to ratchet higher, and gives the Petrol Currencies led by the Russian Ruble… Then Chuck goes all crazy on pointing out the blips of growth we’ve seen in the past years, only to be disappointed a month or so later.

For What It’s Worth… Well, it’s happening again… Argentina has economic problems… The IMF is about to announce a funding for Argentina, but I don’t think that’s going to make a difference… I found this on Ed Steer’s Saturday letter (www.edsteergoldandsilver.com) and it’s about the Argentine rate hike and can be found here:https://www.zerohedge.com/news/2018-09-28/aregntina-hikes-rates-65-peso-plunges-new-record-low

Or, here’s you snippet: ” It appears the market is willing to test BCRA’s mettle as it pukes pesos down to a new record low against the greenback and pushes towards the bottom of its new “no intervention” band.

The new record low is now 41.54/USD…
While not ‘allowed’ to intervene directly until 44/USD, Bloomberg reports that Argentina just hiked its Leliq rate to 65%.

The sharp drop follows Thursday’s 2.8% decline and comes despite the IMF agreeing on Wednesday to increase its bailout package to the Latin American country by an extra $7.1bn.

Paging Christine Lagarde…”

Chuck again… Crazy stuff going on down in south America, eh? But what else is new there?

Currencies today 10/1/18… American Style: A$ .7218, kiwi .6607, C$ .7816, euro 1.1610, sterling 1.3040, Swiss $1.0176, … European Style: rand 14.1109, krone 8.1432, SEK 8.9082, forint 278.55, zloty 3.6818, koruna 22.1931, RUB 65.56, yen 113.98, sing 1.3699, HKD 7.8274, INR 72.81, China 6.8665, peso 18.53, BRL 4.0507, Dollar Index 95.11, Oil $73.42, 10-year 3.09%, Silver $14.56, Platinum $812.03, Palladium $1,056.93, and Gold… $1,184.64,

That’s it for today… Can you believe that the regular season for baseball is over? Man did that go fast or what? Or, it’s probably just me getting older, and thinking things go by fast! UGH! No Cardinals in the playoffs once again, this is not a trend, it’s become a bad habit! But I still love them anyway… Was that not the worst play call in the history of college football on Saturday night, when Penn St. tried to run the ball on 4th and 5, when they hadn’t been able to run the ball all night? Strange call indeed! And with that, Junior Walker and the All Stars take us to the finish line today with their song: What Does It Take? I hope you have a Marvelous Monday, welcome to Rocktober, and remember to Be Good To Yourself!

Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts