A Strange Start To 2019…

A Pfennig For Your Thoughts

December 28, 2018

* Currencies get sold, except yen…
* Apple spooks the markets…

Good Day… And a Tub Thumpin’ Thursday to you! I love to read the Pfennig Replies each day, or whenever I get to them that is… Alex’s girlfriend, Grace, is from Arkansas, and she is known to let loose a “y’all”… So, in her honor, Thanks to Y’all for all the kind words sent my way, in the last week… I also really do enjoy being in the deep south during winter… We may not have winters, like we did years ago, back in St. Louis, but in my opinion, it’s still cold there! And while I miss my kids and darling grandkids, and friends, I know in my heart of hearts that I’ll return to St. Louis in the spring when it warms up there! The Turtles greet me this morning with their song: Happy Together… Imagine me and you, I do, I think about you day and night, it’s only right…

U.S. Stocks were down most of the day, beginning 2019, much like they have begun each new year the past few years… But by day’s end, the PPT had done its job, and stocks were positive once again. This is like putting icing on a hot cake… It’s not going to stick! And neither will all this support the stocks are getting from the PPT… But I don’t want to talk about this any further, so , let’s move along…

The currencies, led by the Big Dog, euro, didn’t fare too well on the first day of trading 2019… In the past few years, the euro has led the currencies on a rally march VS the dollar as we began each year, but by June it would be something in our rear view mirrors. But not this year… So, does that mean we’ll see the opposite of the past couple of years, with the dollar rallying early in the year, and then getting sold like funnel cakes at a State Fair later in the year? I wouldn’t put it past the markets to trade that way…

You see, Mr. Market, does what he wants, when he wants, and how he wants, and there is no one to stop him… No matter how much I rant and rave about how the currencies are being treated unfairly, while the U.S. creates more debt than you can shake a stick at… Mr. Market will decide when the dollar’s strong trend is over, and not a moment before…

The euro lost nearly 1-cent on the day, which is a BIG one-day move… (Yes, Mike K. that’s what I said… 1-cent) But one day of trading does not make a trend, so we’ll have to wait a few days and see where we stand then… If the dollar is still being supported by the PPT, then we had better batten down the hatches, and ride this one out…

A dear reader thought I was a little hard on the beaver, I mean on the Commodity Currencies yesterday… But no matter how you slice the bread, there’s only so much to go around, and so it is with money in an economy, and China’s economy is slowing folks… President Trump will be shouting from the roof tops that the U.S. is winning the Trade War… But he had better hold back, because we haven’t seen the effects on the U.S. economy, fully, that is, just yet.

In our never ending search to find warning signs for the U.S. economy… Bloomberg reported yesterday that “U.S. Leveraged Loans just suffered their biggest monthly loss in 7 years! And that loans posted a 2.5% loss in December, the worst since August 2011, when the S&P downgraded the U.S. AAA credit rating and loans lost 4.4% in the month.” www.bloomberg.com

And then David Rosenberg chimed in on his Twitter feed… “How about the Fed Dallas? The US economy is in such great shape that the diffusion index swung to -5.1 in Dec from +17.6 in Nov. Biggest negative swing in nearly six years.” – David Rosenberg on Twitter

And after the close yesterday, Apple, made an announcement on future earnings, calling for a reduction in their earnings the first time they’ve done that in 20 years!

I’m telling you now… I’m telling you right away… That a recession is coming, hear me now, or listen to me later, but this is what’s coming and you had better be getting ready for it… Oh, and once again, I’ll tell you that during recessions, stocks perform horribly… I’m just saying… Oh, and one more thing… Got Gold?

How about that Japanese yen? A so-called “flight to safety” has investors flocking to yen, and the yen’s value has responded appropriately by rallying in big chunks for the last week. I’ve talked about Japan being a so-called “Safe Haven” before, and how that just wreaks with irony, given that they have more debt than anyone on the face of the earth, have a demographics problem, and negative interest rates…. But don’t let those things get in the way of a so-called “Flight to Safety”, eh?

Now, buying Treasuries, as a “Safe Haven” makes a little more sense than buying yen… Of course, I would think that the only real “Safe Haven” would be Gold (& Silver of course!)… Don’t look now, but the 10-year Treasury’s yield has slipped downward to 2.64%… Just when you thought that Treasury yields were going to the moon, we turn on a dime, and the next thing you know is Treasury yields are below 3%, and now sliding further to 2.64%…

Basically, for those of you new to bonds… As bond yields go down the price of the bond goes up, and vice-versa. So, this means for the past couple of months Treasury bonds have rallied, and when bonds rally, that means that the “bond boys” don’t believe in the economy… And therefore they believe that owning bonds is the better choice… I was taught early on in my career in markets, to always watch the trading in Treasury Bonds, for they will tell you a lot about the future of the market… My first mentor in bond trading, was a man named Ed Bonawitz… I have remained friends with him through the years, and I thank him here, for pointing me toward bond trading.

OK, I did some reading yesterday, and came across a quote from one of my fave economists, Danielle Di Martino Booth, who said that it was her belief that the Fed would pause in 2019… I was glad she jumped on my bandwagon, as she’s very well respected, and the author of the book: Fed Up… Ahem… (as I clear my throat) Got Gold?

Speaking of Gold… The shiny metal was allowed to gain a couple of shekels yesterday, and is up another couple of shekels this morning… These moves are quite small, but they are positive, and that’s important! As eventually the small gains add up to a nice big gain… At least that’s how things usually work, but with Gold… Who knows? I give you my opinions, and guys like Mike Maloney, James Rickards, and so on, give you their opinions on the direction of Gold, but we don’t know anything that you don’t know about its prospects! I’m just saying…

The U.S. Data Cupboard today, will have the ADP Employment for December, which, as I’ve told you previously, this report is supposed to give us an indication as to what the BLS has up their sleeve for tomorrow’s Jobs Jamboree, but that rarely happens… We’ll also see the ISM Manufacturing Index for December, and I believe we’re going to begin to see the effects of the Trade War here in the U.S. with this data print. So expect a reduction of the index number… And then finally, we’ll see the color of the total vehicle sales in the U.S. also for December…

To recap… The year, 2019, has started out differently than previous years, and Chuck hopes that it continues to play out, which would mean that the currencies and metals are soaring in the second half of this year! Apple issued an earnings warning, their first in 20 years, and that has the markets spooked this morning, with a flight to safety, which means yen and Treasuries are being bought…

For What It’s Worth… Longtime reader Bob, sent me the link to this article, which I later found in my email box from the RT, and it’s about how countries are ditching the use of the dollar, and it can be found here: https://www.rt.com/business/447915-top-states-ditching-dollar/

Or, here’s your snippet: “The past year was full of events that inevitably split the global geopolitical space into two camps: those who still support using US currency as a universal financial tool, and those who are turning their back on the greenback.

Global tensions caused by economic sanctions and trade conflicts triggered by Washington have forced targeted countries to take a fresh look at alternative payment systems currently dominated by the US dollar.

RT has taken a deeper look into the recent phenomena of de-dollarization, summing up which countries have taken steps towards eliminating their reliance on the greenback, and the reasons behind their decision.”

Chuck again… What? you thought I would give you the 5 countries that the RT sees ditching the dollar in the snippet? No.. you’ll have to click on the link to find the 5 countries ditching the dollar… Sorry!

Currencies today 1/3/2019: American Style: A$ .6953, kiwi .6631, C$ .7343, euro 1.1343, sterling 1.2560, Swiss $1.0112, European Style: rand 14.5405, krone 8.7605, SEK 9.0767, forint 284.57, zloty 3.7962, koruna 22.6750, RUB 69.31, yen 107.55, sing 1.3683, HKD 7.8379, INR 69.98, China 6.8599, peso 19.62, BRL 3.8469, Dollar Index 96.46, Oil $46.36, 10-year 2.64%, Silver $15.55, Platinum $791.43, Palladium $1,265.28, and Gold… $1,287.24

That’s it for today… And this week… Short week for yours truly, but judging from all the people out during the day this week, I would have to think I’m not alone! Tomorrow would have been by dad’s 94th birthday, but he died at 70, but I still think about how great it would be if he was still around at 94! His mom, my grandmother, died at 99, so, it could have happened! So… who are you rooting for: Alabama or Clemson in the College Championship Game that will be played next Monday night? And the NFL playoffs begin this weekend, Hockey is in the middle of their season, and conference play begins for College Basketball… Great stuff! Van Morrison takes us to the finish line today with his classic rock song: Brown Eyed Girl… When I used to play this song on the trading desk, Jennifer would always say he was singing to her! And with that, it’s time go… I hope you have a Tub Thumpin’ Thursday, a Fantastico Friday, and remember to Be Good To Yourself!

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