Is A New Trade Agreement With China The Rabbit In The Hat?

A Pfennig For Your Thoughts

* Currency rally falls flat, and dollar gets bought
* Largest Pension Fund loses boatloads of money…

Good Day… And a Tom Terrific Tuesday to you! The day after the Super Bowl had people walking around like zombies, after staying up to watch that boring exhibition of pro football, that would have been much better represented had the Chiefs played the Saints! Even the half-time show was boring! (sorry Maroon 5 fans, it was boring!) Can you believe the singer wearing a fur coat is being blasted on social media for wearing a fur coat? I just don’t get where we as a country have gone down this rabbit hole of PC… I’m just saying… The great Otis Redding greets me this morning with his song: I’ve Been Loving You… Live from the Whiskey-a-G0-GO…

Well, the currencies tried to get back on the rally tracks on our Marvelous Monday, but just couldn’t get both feet o the train. And the problem I told you about in Australia is getting a lot of air play, but the Aussie dollar (A$) seems to shrug off this mess… On top of all that… Remember me chastising the Reserve Bank of Australia (RBA) many times in the past couple of years for not hiking rates to put the kyboshes on the housing bubble there? Well, the housing bubble has found the pin in the room, and is being drawn to it…. Better watch out… If the bubble makes contact with the pin, I doubt the A$ will be able to shrug that event off… I’m just saying…

The price of Oil couldn’t hold the $55 handle yesterday, but it rebounded overnight to bring it back to the $55 handle… and Gold never recovered the early morning loss , of over $5, to close down on the day. You know… My mind keeps flipping back to what I just talked about regarding the Aussie Housing Bubble… Why don’t Central Bankers read the Pfennig, and learn their mistakes before they become major financial blunders? I don’t make things up folks… Sure sometimes I project a conspiracy theory, but not about things like Housing Bubbles, and Central Banks that begin their rate hike cycle late in the expansionary cycle…

My good friend, the Retirementor, Dennis Miller, of: www.milleronthemoney.com asked me last week if I was up for an interview for his newsletter… After I finished, I had to say that I was not normally a gloom and doom guy… The problem with what I do, is that I tend to sound like a doom and gloom guy… Well, if Central Bankers weren’t all dolts (Save for Elvira Nabuillina) I wouldn’t have to sound so gloom and doom! I could be spreading the word that Sunshine, Lollipops, and rainbows and the everything is what I feel when I write my letter…

OK… So, yesterday I was a little hard on the Beaver, (the BLS), but they deserved it, and that’s another thing that just gets my goat… Economic reports that you can’t trust… So, in my opinion, there ‘s not enough of the “business” ( Eddie Haskel style) that can be given to the BLS…

President Trump will finally give his State of the Union Address tonight, and from what I can see this morning, traders are thinking that this is going to be good for the dollar, visa-vi a new trade agreement with China will be announced during the address… Now, someone in the White House had to “leak that info” other wise, who would think that this is going to happen tonight, when all reports are that the trade negotiations are not going well!

I don’t know if pulling a rabbit (a new trade agreement with China) out of one’s hat at this point is going to save the economy, as it has slid too far down the slippery slope at this point. This morning, I was all prepared to talk about how the bond guys are on board with this sinking economy as the yield on the 10-year Treasury had slipped yesterday to 2.69%, but that all changed in the overnight markets as the 10-year was sold off and the yield rose back to 2.73% this morning…

I still believe that the bond guys are thinking like me with regards to the economy, but, the price action of the past 24 hours would tell me that they aren’t 100% on board with me… There’s always a chance that there are actions that could be taken to save the economy from slip, sliding away, but those chances are slim… And as I like to say, “And Slim left town”…

Longtime reader, Mickey, sent me a note yesterday, and basically said that if I had problems with the components of the Dollar Index, why didn’t I build a different Dollar Index with currencies that I felt were more representative of dollar moves? WOW! That took me back to my days at my old place of business, when Frank Trotter and I would brain storm this exact same idea of a “new and improved Dollar Index”… I can tell you that it’s not as easy as one would think it is… And now that I’m retired…

Well, I’ll let someone with time, energy, and a Bloomberg figure that one out! Until then, I’ll continue to say that with the euro having the largest weighting in the Dollar Index component, I’ll simply check on the euro to see how the dollar is faring… And this morning the euro has slipped in value, so the dollar is stronger this morning.

Japanese yen was trading with a 110 handle when I first turned on the computer this morning… It was just a couple of weeks ago that traders were buying up yen by the truckload, and now, apparently, they are selling yen by that same truckload! I cautioned you when the yen was being bought that it was NOT a safe haven, in my opinion…

In the Eurozone, there were a few data prints this morning, with the spotlight on the Markit PMI, and Retail Sales, both of which printed stronger than expected, and VS the previous print. That should have been enough to push the euro higher this morning, but that hasn’t happened. It’s as if traders don’t believe the data outcomes… Now, I have to ask this because Its clearly front and center on my mind… They don’t trust Eurozone data prints, but they do trust U.S. data prints? Really? What on earth have these guys been smoking? Well, as I’ve always said… It is what it is… Let’s move along…

As I told you yesterday, we will begin to see the delayed data prints from when the Gov’t was shut down last month. And yesterday we saw Nov. Factory Order, which were negative -.6%… Weaker than expected for sure! Today, we’ll se current data from the Markit people on the services sector here in the U.S…. And the ISM nonmanufacturing (services) index will also print… One would think that… aw, never mind, nobody cares about when they print, Chuck! move along…

To Recap… The dollar staged a comeback once again yesterday, after the currencies attempted to rally, the word from a dinner meeting between the President and Fed Chairman, was that that Fed will remain autonomous , and that got the dollar bugs all excited once again. In addition, the President will give his State of the Union Address tonight, and traders are thinking that he’ll have a rabbit to pull out of his hat by announcing a new trade deal with China… I guess we’ll have to wait-n-see…

For What It’s Worth… I saw this mentioned on Twitter last night and knew right away that I had to look into it further… The largest Pension took an $136 Million hit… and it can be found here: https://www.zerohedge.com/news/2019-02-01/no-need-be-pessimistic-worlds-biggest-pension-fund-suffers-record-collapse-q4

Or, here’s your snippet: “The world’s largest pension fund – in the world’s most demographically-challenged nation – suffered a stunning record loss in the last quarter as its Abe-supporting domestic-stock-buying-spree crushed Japan’s Government Pension Investment Fund (GPIF).
Bloomberg reports that GPIF lost 9.1 percent, or ¥14.8 trillion ($136 billion), in the three months ended Dec. 31, it said in Tokyo on Friday. The decline in value and the rate of loss were the steepest based on comparable data back to April 2008. Domestic stocks were the fund’s worst performing investment, followed by foreign equities. Assets fell to 150.7 trillion yen at the end of December from a record ¥165.6 trillion in September.

While global central-bank-liquidity driven gains in global stocks helped the GPIF generate returns for the previous two fiscal years, December’s global rout underscored the risks facing the fund since it revamped strategy in 2014 to accumulate stocks and pare domestic bonds – something they vehemently deny is anything but prudent independent risk-managed behavior.

Bloomberg notes that the GPIF may have little choice but to invest in equities as fixed-income yields, especially those of Japanese government debt, are too low, said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo.

“It makes sense for the GPIF to hold some risk assets in this environment because yields are low globally and bond investments don’t give good returns,” Fujiwara said. “Yet from a pensioner’s point of view, it takes too much risk on its investments.”

Chuck Again… I can see it now… Pm Abe and Bank of Japan President, Kuroda pushing their nation’s “independent” pension fund
administrators to keep buying the dip in domestic stocks…or else.

Currencies today 2/5/19 American Style: A$.7245, kiwi .6892, C$ .7685, euro 1.1418, sterling 1.3011, Swiss $1.0011, European Style: rand 13.3838, krone 8.4668, SEK 9.1157, forint 278.04, zloty 3.7547, koruna 22.4928, RUB 65.56, yen 109.95, sing 1.3526, HKD 7.8445, INR 71.54, China 6.7431, peso 19.05, BRL 3.6637, Dollar Index 95.93, Oil $55.15, 10-year 2.73%, Silver $15.87, Platinum $821.57, Palladium $1,367.20, and Gold… $1,313.65

That’s it for today… A much better night of sleep for yours truly last night… I’ve been feeling very tired all the time lately, I believe it’s from an accumulation effect of the chemo I take every day… I don’t like taking naps during a warm sunny days… And when Spring Training games come there won’t be any daytime naps then! We’re beginning to pack up stuff that we will be moving upstairs this coming week… Good thing there’s an elevator! HA! The sun is rising, which means it’s time to get this out the door… My good friend, Rick, will be happy with this song… Modern English takes us to the finish line today with their song: I Melt With You… Now, got out and make this a Tom Terrific Tuesday, and Be Good To Yourself!

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