He’s Baaaaaaaccccckkkk!

  • U.S.GDP disappoints!
  • Where has all the expansion gone?
  • Currencies rally 1.3% on Friday
  • The end of the strong dollar trend?

Good day… And a Marvelous Monday to you! And welcome to August… I don’t have a Pfennig tradition song for August, so we carry on…Vacation was great! I got to spend time with my two sons, Andrew & Alex, Rachel and Braden.. With each day attempting to outdo the previous day, with regards to weather! A very good morning song greets me this morning as Jackson Browne sings: These Days…. These days I sit on cornerstones and count the time in quarter tones to ten… Don’t confront me with my failures I had not forgotten them….

I get back in town today… Back in the saddle tomorrow and back to my every two weeks infusions on Thursday… The currencies are pretty much flat to down a bit,certainly not giving back all of their gains from Friday… But it’s quite early right now, so we’ll have to see what today brings us. We’ll see the color of the latest PMI data, but that’s not the official ISM manufacturing data, so today will start off slow… It is the dog days of summer, I’ll remind you again!

The U.S. Data Cupboard wasn’t kind to the dollar on Friday as U.S. 2nd QTR GDP disappointed lots of people (not me!) who were looking for 2.5% growth, but we’re left with a dismal 1.2% print, and the 1st QTR GDP was revised downward… Of course I had told you previously that the upward revisions to 1st QTR GDP were too optimistic, but I digress…

I normally don’t like to lead off with data, but since the 2nd QTR GDP was such a market mover, I have no other choice but to play ball here with data… The currencies rallied to the tune of a 1.3% gain overall against the dollar, Gold & Silver had good rallies, and the rate hike campers tried to hide behind the rocks but once again they have been exposed for the frauds they are! There will be no rate hikes this year… Mark my words, but don’t read my lips! HA! I saw last week that well respected analyst, Art Cashin, agrees with me on this, and said he didn’t see any rate hikes this year!

Longtime readers know that I don’t believe that GDP truly represents the U.S. Economy , and that Final Sales does a better job. But there’s also another way of looking at this, and that is looking at the rate of economic expansion… The current expansion remains smaller that the one during Richard Nixon’s administration. For those of you keeping score at home… The U.S. Economy at the end of June was 15.5% larger that it was at the end of the last official recession in 2009. In terms of average annual growth, the pace of this current expansion has been ,by far, the weakest of any since 1949!

The Nixon years I mentioned above saw the economy grow at 16%… From 2001-2007, the economy grew 18%, and from 1961-1969 the economy grew at 52%!!!! WOW!

So, do you want to know my thoughts as to why we as a country can no longer generate annual growth rates of 3% GDP Or expansions like in the 60’s ? One word….. Drum roll please…DEBT.. I truly believe that as debt grows it adds weight that the economy has to bear. It takes away from the financial needs of the economy, and brings unwanted pressures to businesses that keep them form expanding and growing. We have two examples of this… Japan and the U.S. Since becoming the largest debt countries of the world. These two are no longer able to generate sustainable economic growth.

Alrighty then, that’s that! Time to move on down the road, eh? Well I’ve been telling you for months now that it appeared to me as though the strong dollar trend was beginning to show signs of ending in the last few days there are others that have jumped in my bandwagon with this thought. Just last week, the research team at Morgan Stanley issued a report saying. “The dollar is set to fall 5% in the next few months. The Fed is it going to raise rates, and the U.S. Economic data is only y going to get worse.”

And the big boss, Frank Trotter, told us last week that Dr. Steve Sjuggerud said that the strong dollar trend was over in his talk in Vancouver.

So, what does that mean for the currencies and metals? We have the currencies, for the most part, seeing who could beat every other currency to the title of “weakest currency” and we’ve had the not for profit sellers in the metals keeping a lid on the metals… Well something has got to give here folks. And if all my years dealing with, analyzing, writing and talking about the currencies carry any weight here, I would say that the dollar’s pull to be weaker will outweigh the counter-pulls… And we should see currencies and metals rally… That’s my opinion and I could be wrong…..

Is this 1971, or 1985, or 1992, or 2002, years that the weak dollar trends began, all over again? It sure appears that way to me!

Could the dollar hold on in spite of a weakening economy and no rate hikes? I guess anything can happen, and I do see this new weak dollar trend taking its time to get into gear. Manly because the Fed members will do their best to maintain a semblance of order and a fear that rate hikes could still be on the table but “as time goes by”, the props for the dollar will fade away.

“You must remember this. A kiss is just a kiss ,a sigh is just a sigh. The fundamental things apply…..As time goes by…. Play it again Sam….

So, a lot of discussion this morning for my first day back from vacation, which I find to be amazing because I really try to get all this stuff out of my head while I fight off the people on the beach who keep trying to roll me back into the ocean! HA!

Gold, as I said above, had a nice rally on Friday, and for those of you who keep track of things, the shiny metal pushed higher by 16… It’s seeing some selling this morning, but not much at this point so no worries….I’m really bullish on Gold and Silver especially if the dollar, as I’ve talked about above, is beginning a new weak trend…

Did you see the Sunday Pfennig? Boy did we ever dive into the numbers and data here in the U.S. If you missed it, or it accidentally got deleted before you could read it, you can find it here: www.dailypfennig.com sure hope you get the opportunity to read it, I put my heart and soul into those Sunday Pfennigs…

The price of Oil sure can’t seem to find a bid these days…These days I sit in cornerstones and… No way, Chuck! Don’t pull that on us again! OK, OK, sorry, but when I style those words, These days my mind immediately goes to that Jackson Browne song…with the price of Oil dropping once again, the Petrol currencies, led by the Russian ruble are also losing ground that they had worked so diligently to gain these past 6 months… I would have thought that with the drop in supplies that we had seen before July, and the summer driving season upon us, that the price of Oil would recover some… But miraculously, supplies improved, and the rest is history…

No FWIW today… Back to that tomorrow

To recap… 2nd QTR GDP disappointed the markets with how weak it was, and the currencies and metals rallied strongly to end the week. Chuck discusses economic expansions ,and why Japan and the U.S. Can’t generate sustainable economic growth like they did years before they began to add debt… And Chuck goes out on a limb, with thoughts that this is the beginning of a new weak dollar trend…

Currencies today 8/1/16. American Style: A$ .7564, kiwi .7181, C$ .7654, euro 1.1160, sterling 1.3191, Swiss $1.033 European Style: rand 13.89, krone 8.4608, SEK 8.5823, forint 278.39, zloty 3.8974, koruna 24.211, RUB 66.166, yen 102.33, sing 1.3407, HKD 7.7591, INR 66.700, China 6.6277, pesos 18.7336, BRL 3.255, Dollar Index 95.761, Oil $41.29, 10-year 1.49%, Silver $20.51, Platinum $1,143.99, Palladium $714.50, and Gold $1,346.86.

That’s it for today… I want to thank Frank. Chris. Mike and Dane for getting the pfennig out to you dear readers while I was away… If it were up to me, I would just let it slide while I was gone, on vacation,just like all the other writer’s do,,, My beloved Cardinals have been playing a little better since the All-Star break. But if they want to be a part of the playoffs for the 6th consecutive year they still need to be more consistent! Well it’s August, the dog days of summer are here… It’s a slow month for just about everything. So be patient! Little Delaney Grace turns 9 this week! Can you believe that? I’ll always know how old she is because she was born the same year as I was diagnosed with cancer… Al Stewart takes us to the finish line today with his great song: Time Passages… Al Stewart is known for his melodic songs, and lyrics… Like the lyrics to this song… And with that… I’ll get out of your hair today and speak to you again tomorrow.. Have a Marvelous Monday and Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts