N. Korea Sends A Chilling Message To Japan…

Rocktober 10, 2017

* Thinly traded markets yield no big winners..
* Gold has a good two day run going…
* Political uncertainty in N.Z. is driving Chuck to drink!

Good day… And a Tom Terrific Tuesday to you! What a day yesterday for sports! 4 Playoff Baseball games, and a noon start hockey game! My head was spinning from all the channel changing! But I got through it, thank you for checking on me! HA! I don’t believe they fixed the problem with the website template yesterday, but the email is going out, so that’s a good thing, eh? Steely Dan greets me this morning with their song: Rikki Don’t Lose That Number… We lost one of the great song writers and musicians in Walter Becker of Steely Dan last month… I wonder who Donald Fagen will find to fill in for Becker, or if he will even continue on with the Steely Dan legacy…

Well, I told you yesterday that with the U.S. Banks closed for the Columbus Day Holiday, that we could see either a real doozy of a day, or a real dud… Well, we ended up with the latter of the two options, and so we traded in the same clothes all day yesterday, with Gold doing bucking the currencies trading slowdown, with a nice gain on the day.

But in the overnight markets, the euro has been the favorite currency of investors to buy, as it has gained about 1/2- cent overnight and is knocking on the door of 1.18 once again. And Gold has come along for the ride moving up nearly $9 in the early morning trading today. I can’t say that the rest of the currencies are following the Big Dog at this point, but maybe they will as the day goes on. The folks at FXStreet, who are still so kind to post my Pfennig to their site every day, asked me to give them some “Chuck thoughts” on the goings on in Catalonia, and their effects on the euro.

I don’t want to spoil the soup here so I’ll just mention that overnight, the Catalonia President, said that he would prefer jail over remaining Spanish… Those are some stinging words for the leaders in Madrid. But, as I said in my article for the FXStreet people, I believe the euro has already taken on some selling from this mess when it was first announced that Catalonia would hold a referendum…

So… how was your Leif Erickson, I mean Columbus Day? I ask that, because with everything going on these days, I don’t know how I would have gotten through it all if I were still working… And so, having a day off thus making it a 3-day weekend would have been grand for me! But since I’m somewhat retired, it didn’t mean much to me, and I got to watch our Blues win a game in a shootout, which I don’t like! I’m old school hockey, where you aimed for a Gordie Howe hat trick, which was a goal, a fight, and an assist on a goal. A tie on the road was a good as a win at home… Oh well, the game moves on, leaving me in its dust!

So, Gold didn’t hold onto all of its early morning gains yesterday, but was able to book $7.50 of the early morning $9 gain. But that was under very light volume, as only 190,000 contracts traded yesterday. Today the boys and girls at the bullion banks that house “the boys in the band” will return to their desks, and see that Gold has gained $8.70 in the early morning trading, and inches closer to $1,300, as it trades at $1,293.70 as I write this morning.

The price of Oil tried like the Dickens to get back above $50 yesterday, but failed in doing so, and this morning the Oil price sits just below $50… Did you hear the news about Saudi Arabia’s call on Oil production? Yeah, the Saudi’s have decided to make even larger cuts to their production of Oil in an effort to help boost the price of Oil.. And once again, the definition of insanity is doing the same thing over and over again with a hope of achieving a different outcome…

Hey! Wait a minute there, Chuck! That’s exactly what you were doing yesterday morning with the Pfennig template for the website! You just kept going to the piece you had written on Sunday for the Pfennig, and copying it, and then going to the Template and hitting “paste” with nothing happening… OK, maybe that was bordering on insanity, but I eventually figured out it was not going to work and then went in another direction!

On the data front today, I saw a very good, and strong Industrial Production print in the U.K. this morning, and that has helped pound sterling get up off the canvas and do a little rope-a-dope. Sweden is expected to print their latest CPI, which should show an increase of around 1%, and that would be a good figure for Sweden, who hasn’t seen consumer inflation in a month of Sundays. Sort of like Goldilocks’ search to find the “just right” porridge… That’s what Sweden is doing, trying to find the “just right” inflation rate…

This political uncertainty in New Zealand is driving me to drink! Which I don’t need! Except on every other Friday! HA! It’s been over two weeks and still not a word from New Zealand about the process, or if there has even been any progress! UGH! And while nothing goes on, kiwi continues to get taken to the woodshed on a daily basis. Double UGH!

And I saw an article on Bloomberg this morning talking about how hedge funds are fighting with Lola aka Goldman Sachs, on the direction of the Aussie dollar (A$)… Seems that the hedge funds want to take the A$ higher.. You can almost hear them doing their best Sly and the Family Stone imitation… “I want to take you higher!” But Lola always gets what Lola wants, and Lola thinks that the A$ is overpriced.

In Japan overnight they received a start warning from N. Korea, and printed a worse than expected Current Account Deficit… N. Korea sent Japan a message overnight saying, “You Can Never Be Safe”… Uh Oh! Was that an indication that N. Korea is about to start something? I sure hope not! Every time things calm down with regards to N. Korea, and people / investors begin to put them in the back of their collective minds, something like this wakes them up! Right now Japanese yen isn’t moving much, but I would think that as everyone in NY arrives at their desks that trade yen, will see to it that it gets sold on this N. Korea news…

The U.S. Data Cupboard remains, for the most part, empty today, with only one minor Tier 4 data print on the docket.. And the Data Cupboard will remain this way (basically empty) until we get to Friday, when September Retail Sales will print.. The BHI is warming up right now, and I’ll have the results soon…

Before I head to the Big Finish today… I’m getting a kick out of this Tweeting stuff! On Friday, I tweeted: Spin doctors are out in force today on jobs number. Check out the Pfennig on Monday I point out a discrepancy with the BLS numbers… Now if you don’t have a Twitter account, you probably should, because it’s a great way to get news before the TV stations report on it. And you get to decide who you want to follow…

To Recap… The Columbus Day holiday yesterday has the markets trading very thinly, and the currencies remained in their same clothes as the day before all day. Gold was able to hold onto most of its early morning gains, and then the overnight markets saw traders throw some love the euro’s way, and Chuck believes the other currencies will follow once the euro shows that this move toward 1.18 is for real. Japan receives a dark warning from N. Korea overnight, and just can’t get past the fact that N. Korea has an axe to grind with them.

For What it’s Worth… Well here goes… this will be the cheese that binds, as this is where the template kept balking yesterday… I found this article on zerohedge, regarding the financial system in the world… And you can find it all here: http://www.zerohedge.com/news/2017-10-09/dutch-central-bank-warns-market-calm-storm

Or, here your snippet: “With one foot out of the door of Germany’s finance ministry, the former head of the German economy, Wolfgang Schäuble, 75, delivered a fire and brimstone warning over the weekend, telling the Financial Times in an interview that there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets. Schäuble also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans, something we warned about since 2012, and an issue which remains largely unresolved.

Taking a broad swipe at the current financial regime – which he helped design – Schauble warned that the world was in danger of “encouraging new bubbles to form”.

“Economists all over the world are concerned about the increased risks arising from the accumulation of more and more liquidity and the growth of public and private debt. I myself am concerned about this, too,” he said echoing the concern voiced just one day earlier by IMF head Christine Lagarde, who said the world was enjoying its best growth spurt since the start of the decade, but warned of “threats on the horizon” from “high levels of debt in many countries to rapid credit expansion in China, to excessive risk-taking in financial markets”.

And while Schauble’s dramatic warning was not surprising – prominent economists have a habit of telling the truth once their tenure is over, and once they start selling books warning about all the consequences of policies they helped adopt – one day later a more surprising, and just as urgent warning was delivered by the Dutch central bank, DNB, which on Monday said that ultra-loose monetary policy in the euro zone has run its course, and excessive risks seem to be building up in financial markets making the financial sector vulnerable to a sudden correction.
Putting the current unstable equilibrium in its temporal context, Knot said that the current “picture resembles that of the period before the financial crisis.”

Chuck again… I just can’t get my arms around the idea that this financial system currently in place is going to remain functional with all the debt that most countries have accumulated… but then that’s just me, being me…
Currencies today 10/10/17… American Style: A$ .7787, kiwi .7071, C$ .7996, euro 1.1798, sterling 1.3190, Swiss $.9767, … European Style: rand 13.6928, krone 7.95, SEK 8.0770, forint 263.65, zloty 3.6420, koruna 21.96, RUB 58.25, yen 112.34, sing 1.3570, HKD 7.8038, INR 65.38, China 6.6256, peso 18.58, BRL 3.1670, Dollar Index 93.31, Oil $49.98, 10-year 2.35%, Silver $17.18, Platinum $927.77, Palladium $932.36, and Gold… $1,293.70

That’s it for today… Not much else to talk about today… As I said above, yesterday was a dud, and today is lining up to be another one for me… I tell the oncologist about my days, and she says, that rest and relaxation is what I need while I’m receiving treatments… I say hogwash! Well, at least I would like to say “hogwash”! Our Blues are off to a good start to their season, but there are over 6 months of regular season games left so I won’t get giddy over the start… Marvin Gaye takes us to the finish line today with his song: Inner City Blues… And with that, it’s time to go… I hope you have a Tom Terrific Tuesday, 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.

Chuck Butler recently joined the Aden Research Group, a research center led by writers and market analysts Pamela and Mary Anne Aden. The Aden Research Group publishes three newsletters:
  • THE ADEN FORECAST. The flag-ship. Covering major markets and providing specific investment recommendations for over 36 years, written by Pamela and Mary Anne Aden. To subscribe, click here.
  • DOW THEORY LETTERS. A daily newsletter published for over 50 years, originally created by legendary investor and writer Richard Russell. Currently, it provides commentary written by in-house market specialists, including Pamela and Mary Anne Aden, Matthew Kerkoff, John Strebler, Chuck Butler and Carla Pasternak. To subscribe, click here.
  • GOLD CHARTS R US. A weekly trading service started by legendary investor and trader Sir Harry Schultz. GCRU is written by trader and market strategist Omar Ayales. To subscribe, click here.