China To Suspend Rare Earth Minerals To The U.S…..

A Pfennig For Your Thoughts

May 30, 2019

* Dollar bugs bask in the sunlight of a flight to safety…
* German Unemployment rises in May for first time since 2013…

Good Day… And a Tub Thumpin’ Thursday to you! Our Blues evened the best of 7 series known as the Stanley Cup Finals last night… YAHOO! An overtime win on the road, made it even sweeter of a win! The first win in Stanley Cup Finals history for the Blues too! And I know for fact I’m right about that one! Lots of chances to score for both teams last night in the 3rd Period, but once it got to overtime, the Blues dominated the Bruins! As excited about that game as I was, I was also as dejected about the Cardinals latest futile effort to win… I told my good friend, Dennis Miller, yesterday that the Cardinals had brought up a young kid to pitch tonight, that I had seen in Spring Training, and he couldn’t get anyone out there, what made the Cardinals think he could do the job here? Well, he didn’t… I sure wish I ran the team! OK… Midnight Oil greets me this morning with their song: Beds Are Burning…

Well, I beat around the bush long enough this morning, I might as well tell you that the dollar hit a 2-year high in the Dollar Index… Investors are rushing to Gold and Treasuries, and the buying of those Treasuries is a boon for the dollar bugs. Gold is a different animal, as Gold for a lot of the world is priced in dollars, but not in China… And the Gold Russia buys is from China, with renminbi they earned from selling the Chinese Oil… So, two major players in the Gold arena don’t use dollars to buy Gold… I told you yesterday the historically the safe havens included euros… But not this time around… Yen and Swiss francs are seeing some buying on the side, but not the type of buying that really moves a currency stronger… Just enough to keep it steady Eddie.

Well… China isn’t buying those Treasuries as safe haven investments, in fact they are unloading them in small amounts, as to not move the markets violently… China also made a statement yesterday about their retaliation in the Trade War, and they mentioned that they would use rare earth minerals as a tool… In other words, you can get rare earth minerals from China, so if they hold them back from exporting them to the U.S. what will the U.S. do? I understand that there are other countries that may have rare earth minerals, but what if one of this Iran? YIKES!

That’s the fear that the markets have and thus the flight to safety…. I mentioned that Gold is one of the Safe Havens, and it is, but the boys in the band are keeping Gold from gaining too much… They can’t have investors thinking that Gold is what they need to own in times like these! Oh, and on a side bar… one of the members of the Plunge Protection Team here in the U.S. stepped down… I guess he just couldn’t stomach what they were doing any longer! I don’t know… Like I said I guess… But I put myself in his shoes, and I would be sick to my stomach too, if I had to live with all the stuff the PPT did!

This story gets more interesting folks… Simon Potter was the head of the Fed NY’s FOMC, and Richard Dzina, head of the Fed NY’s Financial Services Group, both quit this week and only gave 4 days notice… My spider sense tingled when I read that they only gave 4 days notice… Was their departure voluntary? Seems to me that with only 4 days notice, it was forced…

Now what could be the reason that 2 stalwart Fed NY markets guys get the boot? Please tell me it’s not because their GDP reporting system FEDNOW, just printed a revision to their 2nd QTR GDP forecast, from 2.2% to 1.41%?

I can Imagine hearing their boss telling them… “What are you two thinking? We can’t have this kind of reporting hitting the streets? But you two decided that it was the “right thing to do”… Well, I’m here to tell you that it wasn’t the “right thing to do”, now go clean out your respective desks, and don’t look back! Oh, and there’s a nice parting gift for you at the door!

In the Eurozone yesterday, German Unemployment jumped higher, unexpectedly, and caused even more slippage in the euro to the dollar. The Eurozone is not immunized against economic problems that the Trade War between the U.S. and China are causing… I have to tell you this before I go on… I’m so glad that today is Thursday, and since I don’t write on Fridays any longer, I won’t have to talk about the strong dollar for 3 more days…. YAHOO!

But for those of you keeping score at home… here’s the skinny… For the first time since 2013, the German unemployment rate rose: the ranks of the jobless made up 5% of the labor force in May, a tiny nudge up from 4.9% the month before. In case you were wondering… That’s 60,000 Germans that lost their jobs in May…

Parts of the world that are Catholics are off today for Ascension Day… Here in the U.S. we are no longer a God fearing country, as we once were… And I don’t know why I went down that rabbit hole… but my fat fingers were flying around the keyboard, and then it happened… I said it! Oh, well. Can’t take it back now… HA!

Remember when our former President wanted to remove the Star Spangled Banner as our National Anthem? Just goes to show how far these people that want to take over our history and twist it to their liking, will go… And that’s all I’m going to say about that! Today that is…

Every time I think of Gold, it always comes back to the price manipulators… and then the silly song from the 60’s by Nancy Sinatra rolls through my head… These boots are made for walking, and one these days these boots are gonna walk all over you…. Gold is the boots… and the you, is the price manipulators…

The U.S. Data Cupboard was empty yesterday… So no news is good news for the U.S. economy… Today, we’ll see Pending Home Sales, and the final revision of 1st QTR GDP, which previously was 3.2%… I’ll betcha a dollar to a Krispy Kreme that it gets revised downward…. Probably not by much, but still downward, because that’s the direction the economy is headed in the 2nd QTR…

I was reading longtime friend, Bill Bonner’s letter yesterday, and he sounded a lot like me regarding the signs of a recession coming being evident. Let’s listen in… “Retail sales are headed down. Appliances, too. GDP growth. Industrial production. Hours worked. New hires. Durables. Manufacturing new orders (excluding defense). Construction spending. All down…

A recession is approaching. And our Crash Alert Flag is up on the pole… flapping… waiting… warning.” – Bill Bonner

Nothing’s changed in the U.K. folks… they’re still bickering back and forth about BREXIT, with nothing getting done, which is what caused PM May’s departure, as she couldn’t bring the deal home… And the poor pound sterling just keeps getting caught in the middle…

You know, when I first became a currency trader, after having done foreign bonds for years, and wanted to have control of the other side of the bond trade, the currencies, everything was priced off of pound sterling… Traders would use the sterling / dollar cross as the base and then D-marks, both francs (Swiss and French), etc. were priced off that cross…

Of course this was pre-euro… and pre-computers that did the cross for you gave you the price VS dollars right on the screen! Pretty nifty, I thought at the time…

But times change, and the pound sterling is no longer held in high regard as the base currency to price other currencies from… Another step downward for sterling, as before WWII it (sterling) was the reserve currency of the world…

To recap… The dollar bugs are basking in the sunlight of a flight to safety that is seeing tons of Treasury buying… The Trade War got notched up in the fear meter yesterday when China announced that they may suspend rare earth minerals to the U.S. Germany sees its first Unemployment rise since 2013 in May, as the Trade War filters through to other countries for sure… Gold can’t get off the bench without being put right back on the bench by the price manipulators… And The Fed NY’s FEDNOW system is forecasting 1.41% GDP for the 2nd QTR… Ahem….

For What It’s Worth…. I told you some months ago that the U.S. had warned Europe not to trade with Iran, and the Europeans said, “don’t tell us what we can and can’t do” and proceeded to trade with Iran… Well, now the U.S. is retaliating and threatening to cut the Eurozone out of the SWIFT system… That story is kind of long, and can be found here: https://www.zerohedge.com/news/2019-05-29/us-threatens-europe-loss-access-us-financial-system-over-its-iran-funding-spv

Or, here’s your snippet: ” It’s going from bad to worse for Europe, whose currency had just hit session lows after Brussels confirmed that Italy faces a massive fine over its debt, when the Euro was hit with a double whammy after Bloomberg reported that the Trump administration is escalating its battle with “European allies” over the fate of the Iran nuclear accord, and is “threatening penalties against the financial body created by Germany, the U.K. and France to shield trade with the Islamic Republic from U.S. sanctions.”

According to Bloomberg, the Treasury Department’s undersecretary for terrorism and financial intelligence, Sigal Mandelker, sent a letter on May 7 warning that Instex, the European SPV to sustain trade with Tehran, and anyone associated with it could be barred from the U.S. financial system if it goes into effect.

As a reminder, last September, in order to maintain a financial relationship with Iran that can not be vetoed by the US, Europe unveiled a “Special Purpose Vehicle” to bypass SWIFT. Back then we predicted that Washington would not be too delighted with this development seeking to undermine the dollar’s reserve status. We were right.

“I urge you to carefully consider the potential sanctions exposure of Instex,” Mandelker wrote in the letter to Instex President Per Fischer. “Engaging in activities that run afoul of U.S. sanctions can result in severe consequences, including a loss of access to the U.S. financial system.”

Germany, France and the U.K. finalized the Instex system in January, allowing companies to trade with Iran without the use of U.S. dollars or American banks, allowing them to get around wide-ranging U.S. sanctions that were imposed after the Trump administration abandoned the 2015 Iran nuclear deal last year.

Not surprisingly, a senior admin official behind the letter said the U.S. decided to issue the threat “after concluding that European officials, who had earlier downplayed the significance of Instex in conversations with the Trump administration, were far more serious about it than they had initially let on.”

Chuck again… Believe me when I say that I don’t understand why we must tick off our allies…

Currencies today 5/30/19 American Style: A$.6930, kiwi .6525, C$ .7413, euro 1.1140, sterling 1.2628, Swiss $.9907, European Style: rand 14.6000, krone 8.7523, SEK 9.5436, forint 291.64, zloty 3.8497, koruna 23.1905, RUB 64.94, yen 109.70, sing 1.3793, HKD 7.8477, INR 69.80, China 6.9114, peso 19.11, BRL 4.0039, Dollar Index 98.11, Oil $59.04, 10-year 2.26%, Silver $14.42, Platinum $795.73, Palladium $1,345.23, and Gold… $1,276.60

That’s it for today, and tomorrow… I sure liked this 3-day workweek, I’ll have to look at my contract to see if I could swing that more often! HA! Well, when I talk to you next it will be June… The year is flying by… Cubs come to town this weekend, and I get to go the Saturday night game. YAHOO! The cellulitis in my leg is not getting any better, I’m at a loss as to why, except I keep thinking that the chemo I take each day, causes cuts and bruises I get to heal very slowly… So, in my mind, the chemo is holding the healing process up… In which case there’s not a thing I can do about it… Except grin and bear it… Let’s Go Blues, Let’s Go Blues, Let’s Go Blues! the Blues will play on home ice, also on Saturday night… I don’t know why the Cardinals couldn’t reschedule the game on Saturday night to a an afternoon game, so that fans don’t have to choose… Oh well, it is what it is… Del Shannon takes us to the finish line today with his song: Runaway… I always loved that song… I hope you have a Tub Thumpin’ Thursday and a Fantastico Friday tomorrow, and will Be Good To Yourself!

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