A Return To The Dog Days Of Summer…

Chuck Butler’s: A Pfennig For Your Thoughts  
August 17, 2017 
* Dollar short trade becomes overcrowded
* Gold gets back on the rally tracks!
* A$ and kiwi are best overnight performers
Good day… And a Tub Thumpin’ Thursday to you! I’m still not feeling like I could go out and do some Tub Thumpin’ so, it’s up to you today… Gold did some Tub Thumpin’ yesterday and overnight, short dollar is an overcrowded trade, and more real economic data today… All that, and more! The Eagles greet me today with their song: Victim of Love… This is from the Hotel California album, which I played so much in the day, that the groves in the record disappeared!
Well, it appears that we’ve stepped back into the Twilight Zone.. No wait, I meant to say, the dog days of summer! The participants of the saber rattling, last week, have been sent to their respective rooms, to think about what they did! HA! Seriously, the saber rattling is being forgotten for now, and we’re back to the dog days of summer, where the volumes are thinned out, and the heat just gets to everyone.
I read an article on Bloomberg this morning that made sense, given the way the euro has traded in the past week, after it nearly traded to 1.19… The article points out that the “short dollar” trade is overcrowded… It’s the 2nd most overcrowded trade… So, take wild guess at what is the most overcrowded trade… Final Jeopardy music is playing in my head, and the answer is… Long dollar! In all my years of being around currencies, I’ve never seen anything like this! Until January this year, the long dollar trade was the cat’s meow, and the charts are quite interesting showing all the trades in long dollar, and then watching them change to “short dollar”…
But, the point I’m attempting to get to, is that the short dollar trade is overcrowded, which has been illustrated these past few days, with the euro losing ground it had earlier gained. These short positions begin to get closed out, until something comes along to make the investors go short again.
That’s as clear as mud, right? Sorry, I’ll attempt to do better with this discussion of the Aussie and kiwi dollars… The Aussie dollar (A$) jumped back over 79-cents overnight, after a better than expected Employment report showed that Aussie job creation for July was 27,000, marking the 10th consecutive month of job gains, and the Unemployment rate fell to 5.6% from 5.7%…
Then add in the Fed’s FOMC Meeting Minutes (the minutes) revealed that the Fed members are beginning to worry about the fact that inflation will not get to higher levels as they keep telling everyone it will. This helped the currencies like A$ and kiwi because they currently enjoy a positive rate differential to the dollar, and if the Fed members are worried about the lack of inflation, they won’t be hiking rates, thus the A$ & kiwi don’t have to worry about a narrowing of their positive rate differential. There! How’d I do, better, eh? HA!
Gold got a reprieve from all the selling that has occurred in the shiny metal this week, and carved out a gain yesterday… I was reading an article yesterday that got me thinking about what could be the catalyst to get Gold back on the rally tracks firmly… And there it was right before my eye! The U.S. debt ceiling debacle that was kicked down the road a few months ago, is coming back to haunt us this September… Now, I realize that nothing really bad has ever come from these debt ceiling circuses, but this time we have a president who has said, “the U.S. Government is in need of a good shutdown”… Uh oh! So, as we draw closer to September, I’m sure the jawboning will begin, and depending on the President’s participation in the jawboning, it could be a very good time for Gold…
The shiny metal saw a gain yesterday of $11.70 to close at $1,282.80, and in the early morning trading today, Gold is up another $8.30, and is back to knocking on the door of $1,300, as it trades this morning at $1,291.20! I just sent my weekly article to the Dow Theory Letters editors and its about Gold, and I’ll give you a little peak at what I said… “I just can’t help but think that Gold’s got something cooking, can you smell it? Like the Rock says, “can you smell what I’m cooking”…
And then one more thought on Gold today. I took this from Ed Steer’s letter this morning (www.edsteergoldandsilver.com) and he got it from a 46 minute video interview with Brien Lundin, the Gold Newsletter editor and New Orleans Investment Conference organizer. The video interview can be seen here: https://www.peakprosperity.com/podcast/110158/brien-lundin-if-dont-want-own-probably-should 
And here’s the best part of it… “What’s so special about gold? If what they tell us — that it’s a barbaric relic and it has no use in society — is true, then why be so secretive about it? Why be so reluctant to have your citizens own it? That alone tells you all you really need to know. If they don’t want you to know about it, if they don’t want you to own it, you probably should.”
I know, I could have used that as my FWIW article today, but I thought it fit better there with my discussion of Gold… Hey! Palladium narrowed that spread to Platinum again yesterday, and now just sits $50 below Platinum… Hey! it’s the dog days of summer, and I’m trying my best to find things to talk about!
The U.S. Data Cupboard will yield a couple of real economic data prints today, which also happen to be two of my fave prints! Industrial production and Capacity Utilization… I don’t see either of these two giving the dollar any love today… We’ll also see the color of the Leading Indicators index.. So, two forward looking pieces of data for us today, with Capacity Utilization and leading Indicators printing on the same day…
Yesterday’s Data Cupboard has the Housing Starts for us and they were a real disappointment, as the July data saw a HUGE drop in Housing Starts… Of course it could just be a one month oddity because this did follow the June rate hike by the Fed, and at that time the Fed members were all slapping themselves on the back and giving cheers with their champagne glasses to future rate hikes…
To recap… The FOMC Meeting Minutes disappointed the rate hike campers, and allowed the A$ and kiwi currencies to gain on the idea that their positive rate differentials to the dollar will remain in tact. The Minutes also lit a fire under Gold, which got back on the rally tracks and is closing in on $1,300 once again this morning. The Short Dollar trade appears to be overcrowded, and that means exactly what we’ve seen in the past week… An unwinding of those shorts, which means the euro suffers, and suffer it has as it has traded below 1.17 overnight…
For What It’s Worth… Well, I came across this article thanks to dear reader Bob, and thought it to be quite FWIW worthy! It’s about how Russia is stepping up their efforts of de-dollarization… You can read it all here: http://russia-insider.com/en/politics/russian-economy-experiencing-trend-towards-de-dollarization/ri20691?ct=t(Russia_Insider_Daily_Headlines11_21_2014)&mc_cid=77eacd5275&mc_eid=0ed824d0a6 
Or, here’s your snippet: “A major “de-dollarization” trend is seen within the Russian economy, Oreshkin said, underscoring the need to support an increased role of the ruble.
“There is a big trend toward the de-dollarization of the Russian economy. The Central Bank made some very important steps so that fewer foreign currency loans were issued,” Oreshkin said.
He added, speaking at a session on the development of transport infrastructure in Northwest Russia, that the increased role of the ruble “is such a trend that should be fully supported.”
Chuck Again… These moves by the Russian have come about now because of the sanctions that were placed on them by the U.S. But Russia was going to eventually move to these steps for de-dollarization…
Currencies today 8/17/17… American Style: A$ .7919, kiwi .7293, C$ .7910, euro 1.17, sterling 1.2860, Swiss $.9677, … European Style: rand 13.2325, krone 7.96, SEK 8.1263, HUF 260, zloty 3.6422, koruna 22.2486, RUB 59.55, yen 110.16, sing 1.3660, HKD 7.8236, INR 64.06, China 6.6907, peso 17.72, BRL 3.1613, Dollar Index 93.91, Oil $46.69, 10-year 2.24%, Silver $17.04, Platinum $972.94, Palladium $922.45, and Gold… $1,291.20
That’s all for today… Gesh! Another heartbreaking loss for my beloved Cardinals last night, as they went to the bottom of the ninth with a 4-2 lead, and lost! UGH! They can’t afford to lose games like that, if they’re serious about winning the division! A very quiet day at the house yesterday, was a welcome relief for me… I do believe I’m going to meet some of my former colleagues tomorrow afternoon, at my local watering hole… I sure hope my overall feeling turns around by then! Van Morrison takes us to the finish line today with his song: Brown Eyed Girl… My friend, Jen, used to say this was her song, (since she had brown eyes) So many artists have redone this song, but none is better than Van the man’s version! I know, the letter is a little late today… Better late than never, right? And with that, I’ll send you on your way to a Tub Thumpin’ Thursday! Be Good To Yourself!
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts
a)            The Daily Pfennig is no longer published by EverBank and it is now published by Aden Research Group.