A Week Of Sentiment Reversal… Again!

A Pfennig For Your Thoughts

June 7, 2018

* Currencies continue to rebound
* Bank of Brazil finds out the hard way…

Good Day… And a Tub Thumpin’ Thursday to you… Many I feel badly that I did not recognize yesterday as D-Day… That’s what happens when you’re up at 2 am writing the Pfennig, you don’t have it all together! Did you notice the time of delivery of yesterday’s Pfennig? it was around 4:30 am, so I’m not making stuff up! We received some very sad news last night… Red Schoendist longtime Cardinals player, manager, coach, and Hall of Famer, died… He was 95… I don’t want to bore you with a story about him, so if you don’t want to hear it, go ahead and skip ahead to the next paragraph… Each year on opening day, the Cardinals Hall of Famers come in first on the backs of convertible mustangs, and all the other “old guys” would struggle and need help getting out of the car. But not Red, he would swing his legs over the side and hop out like he was 18, not 88! Always brought a smile to my face to see him do that! The Moody Blues greet me this morning with their song: I’m Just A Singer (in a rock and roll band)

The daily beatings of the currencies by the dollar in the before Tuesday’s trading, have ended. Yesterday, the currencies ratcheted higher and higher as the day went on… And last night as I grew tired of watching my beloved Cardinals lose to the Marlins yet again, I walked over to my writing desk and turned on the currency screen to see what was going on, and saw that at that point, the euro was closing in on 1.18, trading at 1.1792…

And in the overnight markets, the euro has indeedly do, climbed over the 1.18 handle… And it’s taking the rest of the currencies along for the ride. Shoot Rudy, even the Chinese renminbi, which had been on the slippery slope downward, was allowed to appreciate overnight!

So, once again, the sentiment toward the dollar has changed… And this all coming in front of a rate hike that will happen next week here in the U.S. You can’t tell me that traders don’t look ahead, and see what’s on the docket in the days ahead before they begin to sell or buy dollars… So, what I’m saying is that the rate hike has already been priced in, and now traders are dealing with Trade Wars, and exploding debt here in the U.S., with the prospects of an upcoming recession, and stock market collapse… And I think they got their cues from the bond guys, who pushed the 10-year Treasury’s yield back below 3% earlier this week.

Gold only gained about 30-cents in trading yesterday, but I’m still of the opinion that a breakout is coming… Well, a couple of times this week, I’ve mentioned that I believe that Gold is getting ready to breakout of this tight trading range it’s been held down to… So, I went to our Gold guru, at the Dow Theory Letters, Omar Ayales, who when I told him what I was thinking, and asked him his thoughts he replied: “I agree. I think we’re getting ready for a bullish rise… Copper’s breakout rise yesterday and today tell me the economy continues to heat up and an inflationary boom continues to develop. This dynamic is very bullish for gold and likely the backbone of its cyclical and secular strength. Short term, gold is finishing up a period of weakness. I think the upcoming Fed rate hike could be the catalyst for the leg up rise we’ve been waiting for. A break above $1380 would be super bullish.

Another bullish reason are silver and the miners. They’ve been very weak, but they didn’t fall much when gold declined below $1300. This is a sign of a bottom for the entire gold universe in my view.”

Thanks to Omar for his contribution to the Pfennig! Trends are trends, and when a commodity trend begins a bull market, they usually last a very long time… The great mind of Jim Rogers told us in his book Hot Commodities that historically, bull market commodity trends last 17 years! I’d say that’s a long time, for if that were to happen starting now, I doubt I would be around to see the end of it

So… what re you waiting for, a special gold printed invitation to buy some physical Gold? Well, I’m sorry, but there won’t be any of those in your mail box… But you will have this in your email box!

I had lunch yesterday, with my good friend, Dennis Miller, the Retirementor. We talked about all kinds of things that were on our minds, but the one thing that we kept coming back to was how inflation eats away at everyone’s purchasing power, but especially retired people’s purchasing power, for if you are on a fixed income, that really doesn’t get adjusted upward, (who are they kidding telling us that Cost of Living Adjustments go both ways?)…

Dennis gave me some reading material of something he’s putting together that I think those that are retired or those getting close to retirement or really just about anyone for that matter, will want to read. I don’t think he would mind me spilling the beans on a small piece of his work here, so here goes… This is Dennis Miller talking…
“During the 5 year period, 1977-1981, accumulated inflation amounted to 59.9%. If a person retired on 1/1/77 and received $1,000 per month in fixed income payments, 5 years later they would need $1,599 per month to have the same buying power.” – Dennis Miller

The price of Oil was steady Eddie yesterday, and remains well below the lofty figures of just a few weeks ago. I read this blurb on the Bloomberg this morning and it boggles the mind, well at least my mind it did! Check it out: “The U.S. government has quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day, according to people familiar with the matter.

The rare request came after U.S. retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices on Twitter. It also follows Washington’s decision to reimpose sanctions on Iran’s crude exports that had previously displaced about 1 million barrels a day, or just over 1 percent of global production.” – www.bloomberg.com

Pretty interesting don’t you think? I was under the impression that the U.S. Shale producers were taking care of any disruptions in the Oil production line? Oh well, it is what it is… And we move along…

The U.S. Data Cupboard yesterday had some reports that weren’t market movers but printed nonetheless, and they tell a story, which I always like it when data has a story behind it. I went through the gyrations of the Trade Deficit yesterday and told you there could be some movement, and there was with Trade Deficit for April showing a drop to $46.2 Billion from $47.2 Billion in March. Not to get too excited about this slippage, for the May report that will print next month will show the dollar rebound, and that’ll be the end of the slippage in the Trade Deficit!

We also saw Productivity’s second revision for the 1st QTR, and it was not good, slipping to 0.4% from 0.7% previously… and here’s where the story gets good… Unit Labor Costs increased in the 1st QTR from 2.7% to 2.9%… So, if you put the two together, workers are not working as hard as before, but are earning more for their laziness, to put it bluntly…

The Daily Reckoning (www.dailyreckoning.com) has a great article this morning about a dollar liquidity crisis that’s brewing… If that floats your boat, then I would certainly go there and read it… I know I liked it, and would have used it in the FWIW section this morning, but I already have an article spooled up for that!

To recap… The dollar’s daily beatings on the currencies has ended, it does appear… The euro has climbed back above 1.18 and brought all the currencies along for the climb. Even the Chinese renminbi was allowed to appreciate overnight! Chuck employs the Gold guru from The Dow Theory Letters for his take on Chuck’s call that Gold is ready to breakout to the upside. And the poor Brazilian real… You’ll find out about in today’s FWIW section…

For What it’s Worth… Well, I’ve been noticing the Brazilian real dropping by significant amounts almost daily now for a couple of months. I kept thinking that it would turn around soon, especially with the rising price of Oil (think Petrobas) and Commodities in general rebounding… But it just hasn’t happened and then yesterday, I read where the Central Bank had to Intervene to hold back the selling, but it did no good in the long run… Of course I’ve told you for years, that single country intervention is only a short term blip, because the markets have deeper pockets than one Central Bank… And that the only way to get some real traction is form a coordinated effort of multiple Central Banks performing intervention together… But I digress here, and here’s the link to the story on Bank of Brazil intervention: https://www.ft.com/content/abe11c9e-698c-11e8-b6eb-4acfcfb08c11

Or, here’s your snippet: “Investors are rubbing Brazilian policymakers’ noses in the dirt.

After the central bank’s failed attempt on Tuesday to stop the sell-off in the real, the currency is again declining sharply, falling 1 per cent to hit a new two-year low of just below BRL3.85 against the dollar.That stands in marked contrast to most other emerging-market currencies, which are trading higher against the buck.The central bank auctioned additional contracts in FX swaps to stop Tuesday’s slide to BRL3.80, a move that had the effect of pulling the currency higher. But the relief was shortlived and the real ended Tuesday more than 1.8 per cent lower, lining up further losses on Wednesday.

Investors have numerous headwinds to tackle. Elections in October will determine whether Brazil is capable of engineering fiscal reform, the truckers’ strike is highlighting the strain of rising oil prices, while the resignation of the chief executive of state-controlled Petrobas, a free-market champion, raises questions about political interference in key parts of the economy.” – FT, which was found on Google search for Brazil…

Chuck again… Well, I won’t be using the FT any longer for FWIW section stories, as it takes me having to jump through fire hoops to get it done… And it would cost me money, which, unless you dear readers would like to pay for this letter… wink, wink… I didn’t think so…

Currencies today 6/7/18… American Style: A$ .7654, kiwi .7047, C$ .7720, euro 1.1820, sterling 1.3452, Swiss $1.0189, … European Style: rand 12.77, krone 8.04, SEK 8.6730, forint 268.67, zloty 3.6065, koruna 21.6830, RUB 61.95, yen 109.92, sing 1.3325, HKD 7.8460, INR 66.98, China 6.3899, peso 20.37, BRL 3.8160, Dollar Index 93.31, Oil $65.14, 10-year 2.98%, Silver $16.76, Platinum $907.21, Palladium $1,109.38, and Gold… $1,299.44

That’s it for today… Well, yesterday was the 74th anniversary of D-Day… What brave men took to those beaches of France that day… The first real depiction of that day in movies came in the movie Saving Private Ryan… After see that, I had tears in my eyes… Well, also on D-Day was the sad news of the passing of the beloved Red Schoendist… Sad to hear that another baseball legend has passed… When he wasn’t able to make Opening Day this year, I just knew the end was near for Red… So sad… And his, and my beloved Cardinals laid an egg last night once again losing to the Marlins! Day game today, but I can’t make it… UGH! Elvin Bishop takes us to the finish line today with his song: Fooled Around and Fell In Love… Charlie Daniels said it best in his song: The South is gonna do it again, when he said: “Elvin Bishop is sittin on a bail of hay, he ain’t good lookin’ but he sure can play”… And he was talking about his guitar playing ability, which is pretty darn good in my book! Ok, this ends a week of reversal in sentiment once again, so I hope you can take that and get out and make this a Tub Thumpin’ Thursday! And remember to Be Good To Yourself! That’s it that’s all, there ain’t no more!

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

) The Daily Pfennig is no longer published by EverBank and it is now published by Aden Research Group.