Chuck Recalls The End of 2001…

A Pfennig For Your Thoughts

January 24, 2019

* Currencies rally, then fade in the overnight markets
* Waiting for Gold…

Good Day… And a Tub Thumpin’ Thursday to you! I plan on doing some Tub Thumpin’ this afternoon, so let the good times roll! I have to hope that the wind settles down a bit here, today, because we’re expected to have a day of rain, and if the wind is blowing like it has been, it’s going to feel like a hurricane-light… Isn’t this sibling fight going on too long now? The President wants to make his State of the Union Address, which happens every year at this time, and the House Speaker says, “no you can’t have it my house!” Ridiculous… Can’t we all just get along? My goodness, we’ve gone a down a dark, dirty rabbit hole with regards to Compromise and Civility… But I can’t do anything about it, so let’s move on… Neil Young greets me this morning with his song: Southern Man, which spurred the Sweet Home Alabama song in response…

The currencies found a way to remove one of their legs from the mud they’ve been stuck in recently, during yesterday’s trading… But they didn’t make much progress in doing so… The euro bumped up a bit, and left the door open for the rest of the currencies to move out of the mud, but…. They failed to do so. So, it sure looks like we’re going to go into the weekend with currencies mired in the mud, and unable to pull themselves out, because in the overnight markets, the 25 ticks upward move the euro made yesterday, was wiped out and a downward move replaced it.

Reminds me of late 2001… The currencies were reacting the same way, day in and day out, until I was about to pull my hair out (yes, I had hair back then… not much but some)… And then it began in February of 2002, the euro began to move higher first, then the other currencies followed along, and they didn’t stop moving higher until a one year pause for the cause in 2005, only to get moving again in 2006-2008… Then the sky fell on the earth in 2008, and it wasn’t until March 2009 when the Fed first announced Quantitative Easing, that the dollar got sold again, and that went on until the end of 2010, when the hidden debts of the PIIGS were discovered, and it’s been all about the dollar since.

I recall our old Marketing Guru at the time, telling me in 2001 that I was crazy for writing a white paper titled: The Demise of the Dollar… But then when things began swinging in the right direction for me, he came back and asked me to write another one late in 2002… This one was titled 2003, The Year of the Euro… And once again I had nailed the pitch and sent it soaring into the gap, clearing the track, wall and into the seats!

I was younger then, and this was pre-cancer… I had lots of energy, and made time during my busy days to research items for those white papers. Now, it’s time for someone else to take up the charge… I’m what we used to call old football players… “has beens”…

Back in the day, it was far easier to make a call on a direction of a market, because everything was based on fundamentals… Trends resulted from fundamentals, and the Technical stuff just told you what happened inside the trend… For instance, there was not ONE technician that called for the Weak dollar Trend back in 2001… It was all about fundamentals… which included: interest rate spreads, Debt, Trade, leadership, stability, whether a country had something that other countries wanted or needed, and so on…

Jeff Opdyke from the Wall Street Journal was in town years ago, wanting to write an article about me and my Pfennig newsletter, and during the time he was there, the Norges Bank (Norway’s Central Bank) had hiked interest rates, and the currency had climbed higher by a good amount… I then pointed out to him that I had written a month earlier that it appeared to me that the Norges Bank was ready to hike rates and that it would behoove currency investors to own some Norwegian krone ahead of a rate hike… He didn’t believe it at first, but when Chris Gaffney pulled out the copy of the Pfennig from a month earlier, and then showed him the number of people that had bought krone, ahead of the rate hike, he stepped back and said, “how did you know this was going to take place?” And I replied… Fundamentals…

Speaking of fundamentals… Well, while there’s not a lot to talk about that’s not BREXIT related from overseas… We all know China’s economy is slowing down, and Russia’s is going along just fine. And the Eurozone is teetering toward a recession, and the Emerging Markets are in shambles…

But here at home we did see some data sneak through and one of the minor prints was the Philly Fed Index, non-manufacturing was one of them… I normally don’t pay too much attention to the non-manufacturing sides of these Regional indexes, because, everyone knows that we’ve become a servicing based economy, and our service sucks eggs!

But then I was going through Twitter yesterday afternoon and came across this Tweet from one of my fave economists: David Rosenberg, who tweeted : To little fanfare yesterday, the Philly Fed released its nonmanufacturing index for January and it fell through the trap door. Look at the charts — have the recession label all over them. As if the housing report wasn’t bad enough!

Chuck again… Yes, I told you about the housing report the other day, and how it was exposing the rot on the vine of housing little by little… In the FWIW section today I have an article from a guy that I debated with on Bloomberg radio many years ago, and he’s come around to see the light! HA But it’s more talk about a U.S. recession, so you wont’ want to miss that!

The currencies can’t find a bid, and neither can Gold… Going into the year-end, I really thought that Gold was looking like it was ready to breakout to the upside, and certainly past $1,300… But then the New Year came along, and out the window went that strong move in Gold and now it stuck in the mud like the currencies. Something here just doesn’t seem right folks… There’s madness all around the world, Interest rates for the most part are still low, and recessions loom everywhere… And Gold can’t find a bid… What’s up with that? I guess greater minds than mine will figure that one out! Gold, for the record, lost $2.40 yesterday, and is down more than $3 in the early trading this morning…

Recall yesterday, I told you about investment legend, Sam Zell, buying Gold for the first time in his life… Well, I guess he’s getting a nice cheap price, compared to where I believe Gold is eventually going… I’m just saying…

We still haven’t seen Retail Sales for December that report was expected a week ago… But other reports have made it through the data vacuum, and today, we’ll get the Markit versions of ISM with their manufacturing index… Since data has been lacking the market will be looking at this piece of data a little more closely, to see if the weakness that was recorded in manufacturing last month, carried through to the year-end. My thought is that it did, but then I think logically, and not the other way…

To Recap… Another day of little movement in the currencies. The euro tried to step out of the mud, but was brought back down in the overnight markets last night. Gold is also stuck in the mud, and Chuck is scratching his balding head more and more these days! Chuck goes through the timing of the last weak dollar trend, and the difference between now and the way things used to be valued, just for general consumption…

For What It’s Worth… I always know when something is important enough to report on, when I received it directly from the news source, and from longtime reader Bob… And so it is with today’s FWIW article, which is about Gary Shilling, calling for a recession ahead of other economists… And it can be found here: https://www.marketwatch.com/story/contrarian-who-called-the-2008-housing-crash-expects-a-global-recession-this-year-2019-01-23/

Or, here’s your snippet: “Still, economists overwhelmingly expect slower growth this year but no recession. More than half of those surveyed by The Wall Street Journal in January saw recession coming by 2020.

One well-known independent economist thinks it will happen even sooner—he’s looking for a global recession to start in 2019. A. Gary Shilling, president of his eponymous consulting firm, made two of the best contrarian calls of recent decades: he saw the mega-bull market in bonds at its very outset in 1981, and in the years before the 2008 financial crisis and Great Recession, warned repeatedly that the housing bubble would turn into a bust and would take the whole economy down with it.

Now he says it’s once again time to batten down the hatches. Although he concedes that financial excesses aren’t what they were a decade ago and that the Federal Reserve is not raising rates willy-nilly—the two principal causes of recessions since World War II—he thinks the global economy will die a “death by a thousand cuts” in 2019.”

Chuck again… Many years ago, during the last weak dollar trend (2002-2010) I was asked by Bloomberg radio to talk about the falling dollar, and they had Gary Shilling on the other line to debate me on this subject… Let’s just say, he may have won the battle, but I won the war… So, it’s good to see him on my side this time!

Currencies today 1/24/19: American Style: A$.7100, kiwi .6773, C$ .7487, euro 1.1348, sterling 1.3023, Swiss $1.0053, European Style: rand 13.8160, krone 8.5720, SEK 9.0705, forint 280.85, zloty 3.7844, koruna 22.6630, RUB 66.23, yen 109.75, sing 1.3605, HKD 7.8466INR 70.96, China 6.7880, peso 19.05, BRL 3.7954, Dollar Index 96.40, Oil $52.38, 10-year 2.73%, Silver $15.29, Platinum $792.51, Palladium $1,348.41, and Gold… $1,279.80

That’s it for today, and tomorrow… No 4 day weekend this week, UGH! I like those because I actually do lose track of what day of the week it is! It was a mixed bag of results for my teams that I follow last night… Our Blues won big 5-1, but both the Mizzou and SLU basketball teams lost… I just took a peak outside at the sunrise, and see that the wind has diminished greatly… Thank goodness for that! Another cold front is supposed to come our way today, and keep the temps over the weekend from not getting any higher than 70… Oh, the humanity! HAHAHAHA! The Guess Who takes us to the finish line today with their song: These Eyes… A classic rock song for sure! The Guess Who featured one of my fave singers, Burton Cummings… And with that, I hope you have a Tub Thumpin’ Thursday and Fantastico Friday, and remember to Be Good To Yourself!

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