Here We Go!

Chuck Butler’s: A Pfennig For Your Thoughts
August 28, 2017

* Yellen & Draghi disappoint on Friday
* Euro soars! Loonie does too!
* A way to hold off the wolves…

Good day… And a Marvelous Monday to you! Well, I bounced back much quicker after last week’s infusion, so I had that going for me this weekend! Friday night, I had friends, Kevin, Rick and Laura stop by to watch some of the baseball game with me, and yesterday, Dawn, Jerry, Delaney and Everett were here to watch the game with me. The only game the Cardinals won over the weekend was the game I watched by myself! Hmmm… The Gin Blossoms greet me this morning with their song: Allison Road, which is my name for the Rick and Laura’s youngest girl, Allison. She’s in 8th grade now, so I don’t see her that often, but when I do, it’s Allison Road to me!

Front and Center this morning, the euro is at a 2-year high, Gold is back to $1,300 and the assault on the dollar that began on Friday, was not cooled off any in the overnight markets last night. So, we begin the week with the dollar on ropes… Let’s now talk about what the heck happened, or didn’t happen on Friday…

Talk about disappointment! Whew! It was like going to the bottom of the ninth, when the Cardinals had, Jim Edmonds, Albert Pujols, and Scott Rolen, coming up to bat, and all three went down in order…. Both Janet Yellen and Mario Draghi decided to leave monetary policy discussions at home, and instead talked about regulations… Well, the euro soared, and I mean soared when the markets didn’t hear nary a word about interest rates from Janet Yellen. Nor did they hear nary a word from Draghi about euro strength, and with that it was off to the races for the euro!

I have no inside information on why she chose to talk about regulations, but I do have my imagination, and it was just my imagination, once again, running away with me… No wait! No time for songs Chuck, we need to be serious here… Had Yellen seen the writing on the wall, that she is going to be replaced when her term expires in February, and took this opportunity to take a shot at the President, who’ll be replacing her with someone else in Feb.? I mean it sure looked that way to me, as President Trump, has stated that he wants to delete some of the Volcker Rules, and Yellen comes out and talks tough about not changing regulations? You tell me, this sure looked like a shot in the dark to me..

So, the euro soared on Friday, all the way to 1.1926, from 1.786 earlier in the morning on Friday… That’s basically a 10-cent rise in the currency since I told people around the 3rd week of June when the euro was 1.09-ish, that the sentiment had changed, and traders were going long euros… About 3 weeks ago, I told readers that a hedge-fund manager, said that it was “lethal to be short euros”… When a hedge fund manager says something like that, folks… it’s time to back up the truck… So… I have to wonder, wonder who, who wrote the book of Love… But also wonder who read the writing on the wall back in June and July?

The Big Dog (euro) was off the porch chasing the dollar down the street, once again, just like in the days of 2003-2011… And for the most part the little dogs, (the rest of the currencies) followed the Big Dog’s lead… One of the best performing currencies on the day was the Aussie dollar (A$), followed by its kissin’ cousin across the Tasman, kiwi… And with hurricane Harvey devastating the South Texas coast, Oil held strong, and the Petrol Currencies led by the Canadian dollar / loonie, which gained 2-cents on the day, rallied too.

Gold was able to carve out a few bucks of gains, which surprised me, and I would have to think that the “boys in the band” kept a tight check on the shiny metal throughout the day… Boy I sure miss when Ed Steer is on vacation, because I don’t get his letter each morning, that is chock-full-news-and-information, and has the number of contracts traded each day in the metals. (edsteergoldandsilver.com) Gold closed on Friday at $1,297 and change, so for the week it lost $3, as it was Monday morning last week that I shouted out that Gold was trading at $1,300…

And looky who is back to $1,300 on this Marvelous Monday morning! Why, it’s none other than Gold, as it has added $5 to it’s closing price on Friday in the early morning trading today to climb to $1,302, as I write.

Well, bust my buttons! I learned something on Friday that I had never heard of before, so I sure didn’t know about it! But now I do, thanks to the 5 Minute Forecast! (www.agorafinancial.com) So, there I was Friday evening, when I should have been at my local watering hole, but instead had just awakened from a fog brain induced afternoon nap. I woke up, and I was feeling better so I took a shot a reading email, and it was then that I learned that the U.S. Treasury holds its Gold at Fort Know at a value of $42.50 per ounce, instead of the market value of $1,297… James Rickards was explaining in “The 5” that, well, I’ll let him tell you… “The Treasury could get $355 billion in cash from thin air without increasing the debt simply by revaluing U.S. gold to a market price. Once the Treasury revalues the gold, the Treasury can issue new ‘gold certificates’ to the Fed and demand newly printed money in the Treasury’s account under the Gold Reserve Act of 1934. Since this money comes from gold revaluation, it does not increase the national debt and no debt ceiling legislation is required. This would be a way around the debt ceiling if Congress cannot increase it in a timely way.”

Chuck again… Hmmm… I also found out that this had been done before, by the Eisenhower administration in 1953! Wow! I love it when I learn new stuff to throw out at cocktail parties! HA! . But that would sure be a simple way of not allowing the Gov’t to shutdown if an agreement on the Debt Ceiling can’t be worked out… You know, holding off the wolves, if you will… I don’t want to talk politics here, but since it involves debt I’ll give myself a pass… I recall being in Panama on my last visit there, and woman from Texas cornered me, and asked me what I thought about the Tea Party. It was a loaded question, because I later found out that she was the Tea Party regional chair…

Well, I said, that I thought the idea of the Tea Party was good, and that someone needed to step up and stop the madness of expanding our unsustainable debt. But then I went on to say that IF the Tea Party failed to stop the madness, then they will have failed… So, look where we are now… Debt discussions and from what I read, the Tea Party members aren’t going to fold like a lawn chair like their colleagues when it comes to raising the Debt Ceiling… Good for them!  OK, now back to the currencies and metals… This debt talk usually gets me all frustrated, and I don’t need to be that way on a Marvelous Monday morning!

I sent out a Tweet on Friday about the disappointment I had, and the markets had with the Yellen / Draghi Jackson Hole speeches… Just a reminder that should you want to get periodic tweets from me about things in the markets or even the Cardinals, you can find my handle by typing in: ChuckOButlerjr…

I don’t mean to slight the other currencies out there folks, there are just so many of them that it would be a 10-page letter if I talked about all of them! But the currencies that I like to follow are usually the ones I talk about, but that doesn’t mean I’m not watching the other ones. Each morning I scour the currency values to see if there’s a rally going on that I wasn’t aware of… So with that in mind, here are some of the currencies that really put on the Ritz in Friday’s trading… The Norwegian krone, The Swedish krona, the Hungarian forint, Polish zloty, Czech koruna, Russian ruble, Singapore dollar, Indian rupee, Chinese renminbi, and Brazilian real…

Adding to the dollar’s problems on Friday was the awful print of Durable Goods Orders for July of a negative -6.8%… The U.S. Data Cupboard didn’t have to take all the heat for the dollar’s drop on Friday though, and most observers and participants weren’t paying much attention to this awful print, of real economic data…

To recap… Yellen and Draghi chose not to talk monetary policy or currency strength in their Jackson Hole speeches on Friday, and that gave the markets an indication that rate hikes are on hold here in the U.S. and that Draghi, isn’t concerned about euro strength. With those two things in mind, the euro soared! And took the other currencies along for a ride on the euro rally train. Gold has climbed back over $1,300 in the early morning trading today, and Chuck rambles on and on about other things this morning…

This week’s Data Cupboard has some data prints that aren’t earth movers, but will be interesting to see, like the Case/ Shiller Home Price Index, and of course on Friday, we’ll have a Jobs Jamboree… Ooohhh, I can’t wait for that! NOT!

For What It’s Worth…. Well, there’s a ton of talk going around about the tariffs, taxes, or other trade barriers that the U.S. Gov’t is going to implement VS China… I shake my head in disbelief that it has come to this, but it is what it is, and this article on zerohedge.com talks about how China might respond to these measures, and can be found here:http://www.zerohedge.com/news/2017-08-27/unloading-dollar-assets-would-be-most-effective-chinese-state-media-outlines-trade-w

Or, here’s your snippet: “China state media immediately signaled the nation would hit back against any trade measures, as it has done in past episodes, and now, thanks to a treatise in Chinese official mouthpiece, China People’s Daily newspaper, we have an idea of what those countermeasures could be…

China could take three countermeasures against the recent “Section 301” investigation initiated by the U.S. government, experts told Chinanews.com

With growing trade friction between the two largest economies, the spokesperson of China’s Ministry of Commerce made a strong response on Monday, saying China strongly opposes unilateral and trade protectionism acts conducted by the U.S., and will take all appropriate measures to safeguard its legitimate interests.

According to the report, limiting imports from the U.S., reducing exports to the U.S., and unloading dollar assets would be the [[[three]]] most effective countermeasures.”

Chuck again… One has to take a good long look and think about the last countermeasure listed there… “unloading dollar assets”… Talk about something that could send the dollar for a long ride on the slippery slope!

That’s it for today… I put the finishing touches on my DTL letter for this Thursday over the weekend. I know, you’re asking, “does the guy ever stop writing?” HA! This week’s letter is about the ban on cash that’s going on, and I don’t hold back with my thoughts from the Butler Patio! I know it costs to read the Dow Theory Letters, but I think it’s money well spent! www.dowtheoryletters.com  Well, next Monday, I’ll be recovering from two days of cooking, and having fun at the Butler Labor Day BBQ! This traditional BBQ got its start many years ago, when former neighbor Kevin, said let’s do a BBQ together and invite the neighbors. Well he moved a few years later, and I took the whole shebang over… if you’re in the neighborhood next Sunday, drop on in! HA! Cheap Trick takes us to the finish line today with their song: Surrender… And with that, it’s time to wish you a have a Marvelous Monday… And 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.