Loose Lips, Sink Ships…

A Pfennig For Your Thoughts

October 2, 2018

*Most currencies lose ground on the day
* U.S. manufacturing shows signs of weakening…

Good Day… And a Tom Terrific Tuesday to you! 2 tiebreaker games in the National League yesterday was something new for baseball and its fans. The Cubs and Rockies lost so they become the wild card teams and thus will play a 1 -game play-in game tonight… I had a very nice lunch yesterday with my longtime friend, and former boss, Frank Trotter… It seems that both of us have been doing a lot of travel this year, and not much time at home… For all of you who have wondered what Frank is up to… he’s enjoying retirement, and looked very comfortable and relaxed… Neil Young greets me this morning with his song: The Needle & The Damage Done… (I used to play that song on the guitar!)

Well, one day above the 1.15 handle was all the euro got to enjoy, as it was back to below 1.16 once again yesterday… The Data in the U.S. didn’t warrant a dollar rally, but it did anyway… this downward move was really sparked by an Italian official spouting off about how Italy would be better off outside the euro… A senior official from Italy’s ruling party said most of the country’s problems would be resolved if it scrapped the euro for a national currency, triggering a broad market sell-off.

Most of the euro’s losses came after Claudio Borghi, the economic head of the ruling League party, said Italy would enjoy more favorable economic conditions outside the euro zone, and said Italy’s government had no intention of leaving the euro. But the markets didn’t wait around for his softener statement… And the euro’s still getting sold this morning, which means the other currencies aren’t being able to wander too far from the porch… Kind of reminds me of the old saying: Loose lips, sink ships…

The price of Oil jumped higher once again yesterday and this morning is trading with a $75 handle… So, the Petrol currencies are the only currencies that have been able to at least hold onto previous gains… The Russian ruble continues to lead the Petrol Currencies, with other Petrol Currencies following that include: The Norwegian krone, Canadian dollar/ loonie, and Brazilian real…

Speaking of the data, I know I told you that there wasn’t much real economic data until later this week, but the U.S. ISM Index (manufacturing) for September printed and showed that the Trade War is beginning to show up here (recall yesterday I told you it would begin to show up soon?) as the index fell from 61.3 in August to 59.8 in September. This is the first piece of data to show the Trade War’s effects, and it certainly wasn’t good! But, as I said, the dollar rallied… go figure…

I have many a thought about things going on throughout the day, every day, no matter what I’m doing, there’s always time to think about what to do if all the debt comes crashing down on economies all over the world, but more importantly for you and me, (except overseas readers) here in the U.S…. I used to have a saying that I would pull out in times like this, in my DTL pieces… I would say… Got Gold?

BTW, the Pfennig Replies site has been fixed and is no longer on the fritz… So, yesterday, I had a few questions that the readers wanted me to talk about in the Pfennig… So, here goes…

First… the reader said they heard that the Fed was now under the Treasury… Well, that’s not true… The most important thing to understand is that the relationship between the two organizations is circular. In its simplest form that means the Treasury pays interest to the Federal Reserve on the sovereign debt securities the Fed holds and, in return, the Fed rebates that interest back to the Treasury.

Next up… the reader wanted to know my thoughts on the Trade War… I realize that not everybody reads the Pfennig every day it’s received in their email box. So, I won’t be a smart Alec here, and just repeat what I’ve said previously, that the Trade War is not good for either country’s respective economy… The idea is to outlast the other country… But in the meantime, the two economies are being reduced to shreds… The latest example of this is the tariffs that President Bush placed on Japanese Steel back in 2001… And the furthest example is the Great Depression… The Smoot-Hawley Tariffs maybe didn’t cause the depression, but they were at the scene of the crime…

And then finally, the reader wanted to know what I was talking about when I said that China was in control of Gold and doing it with the blessing of the U.S. even though it’s illegal… Well, I went through this some time ago, showing how the Chinese are using their ability to direct the price of Gold lower, just like they do their currency, the renminbi during the Trade War to offset the tariffs being charged on their exports to the U.S. Well, the Hunt Brothers were caught trying to corner the price of Silver back in the late 70’s… And to me, what China is doing is trying to corner the price of Gold…

I want to welcome a new batch of readers to the Pfennig this morning… They received their first taste of what will be in their email box 4 days a week yesterday…

OK… lots’ of discussion this morning with Gold in mind… The shiny metal lost about $3.60 yesterday but is attempting to recover that loss this morning, in the early trading Gold is up $2.50… The Gata folks sent me a note yesterday telling me that Central Banks around the world increased their Gold holdings by 264 Tonnes this year… The Usual suspects are the top of the list for Gold purchases, Russia and China, but there are more like: Turkey, and Kazakhstan… The reason the GATA folks sent me the note was to highlight that Poland also bought gold for the first time since 1998!

To Recap… The currencies couldn’t hold onto gains after an Italian official spouted off about how Italy would be better off outside the euro, and that chopped the euro’s value off at the knees… U.S. Data (manufacturing index) was weaker once again, this one showed the beginnings of the Trade War’s effects. Gold lost a few shekels on the day, but the price of Oil continues to rise and allow the Petrol Currencies to at least hold onto their gains…

For What It’s Worth… Debt is a real problem for a lot of Governments, states, corporations, and people. The one that could be gotten ride of first is the debt that people have… Longtime reader, and someone that supplies me with ample fodder to read each day, Bob, sent me this one and it can be found here: https://www.inc.com/ryan-jenkins/this-is-millennials-number-1-life-goal.html

Or, here’s your snippet: “$42K, the average debt of millennials. Debt is not only impacting millennials’ ability to amp up their wealth and savings — 23 percent claim that money issues make them physically ill on a weekly or monthly basis. And 94 percent report that their number one financial goal is to pay off all of their debt.

About 67 percent of Millennials (versus 32 percent of Baby Boomers) say financial stress overtakes their ability to focus and be productive at work.

Sixty-eight percent of Millennials say debt has had a “negative impact” on their relationships with their spouse/partner, friends, and colleagues.”

Chuck Again… the thing I found promising in all these debt numbers is that 94% report that they number one financial goal is to pay off all of their debt… Do you see the problem with having all that debt is having on their ability to begin to build wealth, store wealth? It ain’t gonna happen as long as their focus is on paying off debt…

Currencies today 10/2/18… American Style: A$ .7178, kiwi .6583, C$ .7795, euro 1.1527, sterling 1.2958, Swiss $1.0162, European Style: rand 14.3983, krone 8.1855, SEK 9.0027, forint 280.88, zloty 3.7232, koruna 22.3728, RUB 65.39, yen 113.77, sing 1.3748, HKD 7.8350, INR 73.38, China 6.8679, peso 18.81, BRL 4.0341, Dollar Index 95.63, Oil $75.36, 10-year 3.06%, Silver $14.55, Platinum $821.00, Palladium $1,055.84, and Gold… $1,191.54

That’s it for today… Once again Welcome to new readers I sure hope you stick around as long as most of my current readers… It sure was good to catch up with my old Big Boss, Frank Trotter, yesterday. I hadn’t seen him in a month of Sundays… He still plays hockey! Simply amazing! Not much on the telly last night, but the Wild Card baseball game takes place tonight, which has so much tension in it as it’s a one loss and you’re done game… We’ll see who blinks first… ELO (Electric Light Orchestra) takes us to the finish line today with the live version of their song: Can’t Get It Out Of My Head… I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!

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