OK, Italy… You Had Better Cool Your Jets!

A Pfennig For Your Thoughts

August 14, 2018

* Gold gets whacked again!
* Is Turkey the 90’s version of the That baht?

Good day, and a Tom Terrific Tuesday to you! Well, I was just checking the scores from last night’s baseball games, and was pleasantly surprised to see that my beloved Cardinals had rallied to win on a walk off homer in the bottom of the 9th last night… WOW! I had long gone to bed and missed it all, but will see it on the replay this morning. When you’re on the East Coast, like I am for a while here, those games start so late for me… And next week, I see the Cardinals will be on the West Coast… Forgetaboutit! I’ll check the score the next day! Billy Stewart greets me this morning with a perfect song for a summer day… Summertime…

Yesterday afternoon, I checked on the currencies and noticed that the euro had rallied a little bit and was trading over 1.14… But then Italy went to Twitter and all hell broke loose! Claudio Borghi who is the head of the budget committee in Italy’s lower house, stressed that not only is Italy’s spread with German bonds widening, but also the ones of other nations like Spain are doing so. He added that “either the ECB will provide a guarantee or the Euro will be dismantled” as “there is no third option.”

Italy is demanding that the European Central Bank (ECB) maintain the thin spreads between German bonds and Italian bonds… Well, that’s not going to happen folks… The ECB has no interest in maintaining each country’s yield curve! And think about this for a moment, the ECB has already announced a reduction of bond buying, and how they intend to end the bond buying altogether by the end of the year… That means the support for Italian bonds is going away, and it will be natural for the yields to rise in order to attract investors.

And it does no one any good whatsoever to make statements about “dismantling the euro” when you know in your heart of hearts that’s not going to happen, so why make the noise? Italy just needs to cool their jets… They don’t need to apologize, although that would be nice, they just need to shut the hell up and go back to the beach…

I was putting the finishing touches on this week’s DTL piece yesterday, and went into a long discussion about the Big Dog euro, and how it got that name from me, etc. Something new to those readers, but something borrowed and blue for you longtime dear readers, eh? The Big Dog has been neutered by all this dollar buying… But it will change, it’s just a matter of time before all this debt in the U.S. and weak economy come crashing down on the dollar… Until then though, we have to put up with the dollar kicking sand in the Big Dog’s face…

I know I wrote about this yesterday, but I wonder just how many of you read it and said “whoa this is getting scary again” I’m talking about the falling mortgage apps that I mentioned yesterday… here’s what I actually said… ” just last week it was announced that Mortgage apps sank 3% in the Aug 3rd week, down now for four weeks running, and the YoY trend has collapsed 17% from year-ago levels.” I will bet a shiny quarter that you didn’t hear that new on the TV or radio… And you would have to do a deep dive search on the internet for the news… And that’s all I have to say about that!

Besides the news from Italy, the other BIG news for the currencies concerns the Emerging Markets currencies, which are seeing the contagion selling that’s rooted in Turkey… I’ve long explained how the Emerging Markets currencies all get lumped together when one of them goes bad… And the selling has reached the Russian ruble, the S. African rand and so on… I read an article yesterday calling the Turkish Lira “the Thai baht of the 90’s”…

And since I was writing the Pfennig back in the 90’s I had a first row view of the Asian currency crisis that had the Thai baht at ground zero… And so it does seem that Turkey is this era’s Thai baht, and sits at ground zero of this Emerging Markets currency selloff.

The Trade War is really having a negative effect on the Emerging Markets currencies. And the tent revival we were seeing in Global Growth last year, has come crashing down on us… Hopefully you were able to get out from under that tent before it came crashing down!

Of course Russia rubles are being battered on a couple different fronts… First, we have the Emerging Markets meltdown, and second we have the latest sanctions on their economy by the U.S. I have been very impressed with Russia’s ability to take a punch and not punch back… At this time, the U.S. has placed sanctions on everything Russian, and still nothing in retaliatory words or actions by the Russians… Something’s not right here, folks… There has to be something BIG planned by the Russians because they have never been a “yes sir, may I have another” kind of country…

There’s a good article on the RT website this morning that talks about what Russia could do to retaliate and can be found here: https://www.rt.com/business/435760-russia-response-us-sanctions/

What the hell happened to Gold’s price yesterday? The shiny metal was whacked by $18!!!! What did Gold do to deserve that treatment? Well, the renminbi was weakened again, and so like I told you yesterday, when I said that I didn’t think the price of Gold had bottomed out yet, as long as there is a Trade War and China is offsetting tariffs with a weaker renminbi and Gold price.

There’s a report this morning that says that Gold imports in India are surging… And why not? The price of Gold has sunk to new cycle lows, and if you are in the market for more Gold, it’s your lucky day! I hope that India sends a Thank You Card to China…

The U.S. Data Cupboard is still on its mini-vacation, but that will end tomorrow, when a truck load of data will print, so we need to get ready for that, because I doubt seriously that any of it will be good for the U.S. dollar, that is as long as fundamentals are used in pricing currencies…

To recap…Italy was completely out of line yesterday with comments about dismantling the euro, if the ECB doesn’t maintain the spreads between German and Italian bonds… Chuck doesn’t side with the Italians on this, and tells them to cool their jets! Gold got whacked by $18 yesterday, and Chuck wonders if India has sent a Thank You Card to the Chinese for that cheaper price in Gold? And the Emerging Markets currencies are being brought down by Turkey’s lira… Is this a 90’s style, Asian Currency Crisis, brewing for the Emerging Markets? Maybe…

For What It’s Worth… Ok, before you go on, you must pledge to put away the sharp objects… Finished with that? Ok… this is the economic collapse blog, so you have to take it with a grain of salt, but the problem here is that they are talking about all the things I’ve been talking about, and I sure hope you don’t take what I’m saying with a grain of salt! HA! Anyway, this is their 10 numbers that are very scary for the U.S. and can be found here:http://theeconomiccollapseblog.com/archives/10-numbers-that-prove-that-americas-current-financial-condition-is-a-horror-show

Or, here’s your snippet: ” America’s long-term “balance sheet numbers” just continue to get progressively worse. Unfortunately, since the stock market has been soaring and the GDP numbers look okay, most Americans assume that the U.S. economy is doing just fine. But the stock market was soaring and the GDP numbers looked okay just prior to the great financial crisis of 2008 as well, and we saw how that turned out. The truth is that GDP is not the best measure for the health of the economy. Judging the U.S. economy by GDP is basically like measuring the financial health of an individual by how much money he or she spends, and I will attempt to illustrate that in this article.”

Chuck Again… yes, I totally agree, but until the rest of the market and its participants agree, we as a country will continue to go skipping along this road to ruin, oblivious to the dangers ahead…

Currencies today 8/14/18… American Style: A$ .7460, kiwi .6595, C$ .7635, euro 1.1405, sterling 1.2785, Swiss $ 1.0086, European Style: rand 14.06, krone 8.3560, SEK 9.0927, forint 283.44, zloty 3.7705, koruna 22.5393, RUB 68.13, yen 111.00, sing 1.3737, HKD 7.8497, INR 69.79, China 6.8814, peso 18.93, BRL 3.8775, Dollar Index 96.34, Oil $67.85, 10-year 2.90%, Silver $15.03, Platinum $803.60, Palladium $893.75, and Gold… $1,194.71

That’s it for today… What’s gotten into my beloved Cardinals? They are actually playing good baseball again! Good defense, base running, fundamentals, pitching and hitting… Makes you wonder what took the front office of the Cardinals so long to make the managerial change? Maybe they learned a lesson about hiring your best buddy, that it sucks if one day you have to fire him… Maybe… The team had more excuses for their sloppy play than Carter has liver pills, but that has stopped, and we’re back to real Cardinals baseball now… YAHOO! Oh, and Carters doesn’t have liver pills any longer! Remember when you used phrases like that? Like “all the tea in China”, and others? I’ve tried to keep some of them going in the Pfennig though the years, like “heavens to Murgatroyd” and others… Good friend Craig sent me a note with a list of all those old phrases that nobody uses any longer… Pretty cool… And at this point I bet you would think it was real swell, if I finished! HA! The Spencer Davis Group takes us to the finish line today with their song; Gimme Some Lovin… Now, please go out an make this a Tom Terrific Tuesday, and remember to Be Good To Yourself!

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