Out With The Old, And In With The New!

A Pfennig For Your Thoughts

January 2, 2019

* 2018 was best year for dollar since 2015
* But 2019 will hold challenges for the dollar…

 

Good Day… And a Wonderful Wednesday to you! Welcome to January 2019! A new year to start, and the end of the old year… I read this weekend that 2018, was actually the best year for consumers in quite a long time.. So, there you go! I tried to find where the qualifiers were for that statement, but couldn’t, as usual, as journalism has gone to the way, of quick hits, without fact checking, to see if a rise can be gotten from the reader… OK… It’s been nearly a week since we last talked, so we have some things to get to today. But first, the Moody Blues greet me this morning with their song: Maybe. From my fave Moody Blues album. Seventh Sojourn

The currencies, led by the Big Dog, euro, finished the year 2018, on a high note, with some exceptions, and those exceptions being the Petrol Currencies. However, having said that, Reuters tells me that 2018 was a good year for the dollar, and was its strongest year since 2015… Boy, it sure didn’t feel like it was going that way for the first part of 2018, when I was sure that the strong dollar trend was ending… But then along came more rate hikes by the Fed, and optimism was abound here in the U.S. And the dollar became the beneficiary of those things.

The stock jockeys have moved front and center in any discussion of markets these days… And will continue to dominate the news in the markets as we work our way though 2019… I hope not to have to talk about them that much! I found it interesting this morning, that Reuters had that story about the dollar being so strong in 2018, and then right below that one there was an article about how the dollar will face challenges in 2019…

In my own humble opinion, I’d have to say that that’s going to be an understatement… But then that’s just me, and how I see things. But if we really put our ear to the ground, we can here the rumbling of the recession train coming our way, and once that hits, it’s going to be anyone’s guess just how deep it runs, but if I were to be asked, I would say that this one will be worse than 2007/08, because, we never corrected the problems of 2007/08, all we did was make matters worse, with more debt, more derivatives, more easy credit, leveraged loans, and a Central Bank that hasn’t got a clue about any of that!

Did you know that… Since 1950, there have been 13 Fed Rate hike cycles… OK, so what Chuck? Well, of those 13…. 10 have been followed by a recession… So, what are the odds of that happening this time, you ask? Well, 10 of 13, would not only put you in the Baseball Hall of Fame, but would get the whole shootin’ match named after you, that’s how great those odds are! I’m just saying… Take if for what you want… But instead of singing Santa Claus is coming to town, I’ll be singing: An economic recession is coming to town…

The Data Calendar for the world, shows a lot of holidays still being taken this week by various countries, which is going to throw all the attention to the U.S. and its Jobs Jamboree on Friday this week… However, the U.S. Data Cupboard starts out slow as we begin 2019, but comes to a crescendo on Friday, with the December jobs created report. Job creation seems to be slipping here in the U.S. as the Weekly Initial Jobless Claims ratchet higher each week. But we’ll never know the true health of the job market here in the U.S. because the Bureau of Labor Statistics (BLS) won’t allow that to happen…

Gold seems to be back on everyone’s minds once again, as we start 2019, the shiny metal has rebounded the last couple of weeks to end 2018, and has begun 2019, on the good foot, as James Brown used to sing. I was wrong, at the beginning of last summer, when I said that I thought by the end of summer Gold would have made a strong move higher. So, put that one down on my grade as a red mark… But have you been following the story that’s unfolding about the former metals trader at JP Morgan who has become a whistleblower and is being taken to court to tell his side of the price manipulation in the metals? I find this to be quite interesting, and wonder why the major news outlets haven’t picked up on it?

Don’t kid yourself here, I know why, I just don’t want to talk about it to start the year! Any-old-way, I continue to see Gold on a breakout higher, that’s coming… I’m just saying…

Well, they might be saying that 2018 was a good year, and I would point to the debt accumulation in 2018, and say, what was so good about it? In 2018, here in the U.S. the current National Debt grew by $1.37 Trillion, which drills down to $10, 743 per resident… That’s the increase in 2018, folks, not the total! We’re at $21.9 Trillion in current National Debt, and a measly $66, 450 per resident, or even worse $179,224 per tax payer…

10 years ago, I stood in front of about 700 people in Vancouver, and put up on the screen a flashing red number that was $45,000… Which was the total debt per resident then, and you should have heard the gasp from the audience… Here we are, 10 years later, and things have continue to rot… And before we go on here, let’s not forget that the total Unfunded Liabilities here in the U.S. are greater than $121 Trillion, and that professor Lawrence Kotlikoff says that he can prove that our debts are greater than $200 Trillion!!!!!!

OK, I’ve got to change subjects before I go down this rabbit hole and never come back out! I’ve been reading some stuff that makes you want to make sure you’ve put away all the sharp objects, and I promise I won’t talk about them here, except to say… You know all those dollars you have hidden in coffee cans, and under the mattress? Well… You might want to re-think those depository options… And one more thing…. Got Gold?

The U.S. Gov. has been on partial shutdown for over a week now… President Trump wants his wall, and the other side wants to tax and spend on programs that get them reelected… and neither side is willing to talk about how to get a grip on deficit spending… I’m just saying…
This is just the start of the gridlock that’s going to strangle any progress from Congress for the next two years. And that should be downright awful for the dollar, but I guess we’ll have to wait-n-see, eh?

China has started the year with weaker manufacturing data, and that has the Commodity currencies running for cover… For if the Chinese economy is going to go even slower, Global growth will be non-existent, and therefore commodities will not be in demand, and if commodities aren’t in demand, then the commodity currencies aren’t either… So, line them up and take a good look at them, for they won’t be getting any love IF, and that’s a BIG IF, China does slow down… Australia, New Zealand, S. Africa, Russia, Brazil, Norway, Canada, and a few others…

The price of Oil has fallen to $45, and it does not appear to be able to buy a bid right now, so we could very well, see it continue to slide. All the owners of those BIG HONKING SUVS, are loving this drop in the price of Oil… And further, the homes in the North that still get heated with propane and other heating oils, those people are smiling like the Cheshire Cat!

The European Central Bank (ECB) did end their bond buying program on 12/31, as they said they would… I don’t know why I doubted them in some degree, but those doubts were laid to rest on 12/31… The Eurozone is still offering negative interest rates for deposits, which can’t be any fun, can it?

The euro, though is a tough old bird, and continues to do rope-a-dope defensive measures over and over again, to remain stronger than the dollar.

To Recap… Out with the old, and in with the new, which probably won’t end up being very good, but it’s shiny and new, so everybody likes it right now… The currencies led by the Big Dog, euro, minus the commodity currencies, saw some buying to end the year, and Gold has been on a two week run, is this the beginning of the strong breakout, Chuck’s been talkin about? Hmm…..

For What It’s Worth… The fine folks at GATA pointed me to this article on Reuters over the weekend that talks about how the dollar is slipping as a reserve currency around the world, and it can be found here: https://in.reuters.com/article/forex-reserves/us-dollar-share-of-global-currency-reserves-hits-near-5-year-low-imf-idINKCN1OR1DO

Or, here’s your snippet: “The U.S. dollar’s share of currency reserves reported to the International Monetary Fund fell in the third quarter to a near five-year low, while the euro’s share of reserves grew to its largest in almost four years, data released on Friday showed.

The Chinese yuan’s share of allocated reserves shrank for the first time in the third quarter since the IMF began reporting its share of central bank holdings in the fourth quarter of 2016.

Reserves held in Japanese yen reached a 16-year peak in the third quarter, IMF data showed.

Global reserves are assets of central banks held in different currencies, primarily used to support their liabilities. Central banks sometimes use reserves to help support their respective currencies.

Total allocated reserves increased to $10.71 trillion in the third quarter from $10.51 trillion in the previous quarter.

Reserves held in U.S. dollars rose to $6.63 trillion, or 61.94 percent of allocated reserves, in the third quarter, from $6.56 trillion, or 62.4 percent, in the second quarter. The share of allocated U.S. dollar reserves declined to its smallest since the 61.27 percent in the fourth quarter of 2013, IMF Data confirmed.”

Chuck again… Well, they used to say when the dollar would slip in reserve holdings that it was because of the loss of value, skewering the amounts… But since the dollar has been in a somewhat strong trend since 2011, one would have to think that previous thought is no longer the case, and instead Countries around the world are lowering their dollar reserves, just like I’ve been telling you they were doing, but now the IMF confirms it!

Currencies today 1/2/2019: American Style: A$ .7008, kiwi .6705, C$ .7334, euro 1.1435, sterling 1.2667, Swiss $1.0156, European Style: rand 14.5137, krone 8.6610, SEK 8.9279, forint 281.81, zloty 3.7592, koruna 22.5340, RUB 69.55, yen 109.06, sing 1.3635, HKD 7.8332, INR 69.92, China 6.8763, peso 19.70, BRL 3.8766, Dollar Index 96.28, Oil $45.00, 10-year 2.65%, Silver $15.45, Platinum $791.22, Palladium $1,263.39, and Gold… $1,286.59
That’s it for today… Another year… I’ve been writing the Pfennig since 1992… Back when there was a pfennig coin! My good friend Rick is pumped that his Clemson Tigers will play for the National Championship! My beloved Mizzou Tigers laid another Bowl egg… UGH! The NFL Playoffs will start this week… I don’t know about you, but for my money, I would watch the Rose Bowl and no other Bowl Game if it came down to that! What a beautiful setting… Well, I’m down south again for the winter, away from potentially cold weather… And so I’m going to go out and soak up some Vitamin D as soon as I hit send this morning! Little Feat takes us to the finish line today with their song: Fat Man In A Bathtub… (I wonder if they were singing about me? HA!) And with that, it’s time to go… I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

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