RBA Leaves Rates Unchanged

And now… Today’s A Pfennig For Your Thoughts…

April 3, 2018

* More Trade War Talk… UGH!
* Economists point out U.S debt levels as a problem!

Good Day… And a Tom Terrific Tuesday to you! And Congratulations to the Villanova Wildcats on their NCAA Basketball Championship last night. For the second time in 2 months, the city of Philadelphia was rocking last night. It’s the first time that the Super Bowl Champions and the NCAA Basketball Champion are from the same city… It’s ugly cold here, and I’m about ready to turn around and head back down south! Triumph greets me this morning with their song: Lay It On the Line…

Which is what the Chinese keep asking the U.S. to do, but the U.S. apparently has better things to do than to meet with the Chinese and discuss tariffs.

Yesterday, I gave you my thoughts on the Trade War and tariffs… And yesterday Bloomberg ran an article titled: Trump’s Tariffs Hurting American Factories as Prices Skyrocket. Hey! I don’t make this stuff up folks… I told you the tariffs would hurt the economy, and already they are beginning to show… For instance, yesterday, the ISM manufacturing index printed for March, and it showed some slippage, albeit the index is still showing a healthy manufacturing sector. But think about this, we saw slippage, and the tariffs didn’t go into effect until the last week of March! Soon, oh soon the light… (Yes) I was reminded of those lyrics while writing about how the tariffs are already showing up hurting the manufacturing sector…Yes, soon, we’ll all see the light…

And the Trade War is having an effect on other countries, like Australia, where the Reserve Bank of Australia (RBA) left rates unchanged last night and pointed to the higher funding costs and the increased concern around U.S. Trade Policy… Hmmm… I found it interesting that RBA Gov. Lowe, didn’t mention the one bugaboo in the recovering Aussie economy, which is the price of iron ore, Australia’s biggest overseas earner, slipped into bear market territory recently, but chose instead to point the finger at the problems in the U.S. as his main reason for leaving rates unchanged.

The Aussie dollar (A$) shrugged off the unchanged rates news, and continues to recover the losses it took after reaching 81-cents in January, both the A$ and kiwi got whacked and both have been in recovery mode since. Of course a rate hike in Australia would have been like Manna From Heaven for the A$, but that was not to be, and the A$ will have to continue to take small gains daily.

Speaking of U.S. Trade Policy… I would think that you all have heard that President Trump is threatening to pull the U.S. out of NAFTA… I tell you this now, so you can hear me now and listen to me later, but should the President prevail the congressional block of pulling out of NAFTA, and lawsuits filed by U.S manufacturers who would be damaged by such a move, Mexico’s economy would be in deep dookie… But it would also hurt the U.S. economy…

For instance, without NAFTA, Mexico could impose a tariff on U.S. Corn imports, and those tariffs could be as high as 37%! These trade wars are really stupid ideas, folks, for no one wins, and everyone’s economy is sucked down a black tube… Remember Ross Perot? Remember his great sucking sound, when talking about the negative effects of NAFTA? I don’t know what’s worse now 23 years later…

The rest of the currencies have seen some slippage in the past 24 hours, with the euro slipping below the 1.23 handle… I always here the stock jockeys ranting about how investors needed to “buy the dips”… Well, I won’t rant… but I will say it does make sense to me to “buy the dips in the currencies and metals” But maybe, that’s just me, being me, eh?

Gold had a good day yesterday gaining more than $15 for the day. I was talking yesterday morning and saying that with everything that’s going on in the world these days, Gold should be well bid… And then it went out and gained more than $15 on the day! Unfortunately, there is no follow up in the early morning trading today, and Gold is getting sold by $6 early this morning.

The price of Oil saw a $2 slide downward in the past 24 hours, as supplies are up again… It’s the darn cycle that I’ve explained before with Oil… The price falls, developers ramp up exploration, and the price rises, but then all the exploration fills the coffers with Oil and the price drops again, and then later, rinse, repeat… Something needs to happen to break this cycle that the price of Oil has been stuck in for what seems like a month of Sundays!

Now, don’t get me wrong here, I’m not rooting for higher priced Oil, as I don’t care to pay $75 to fill up the gas tank for my car! But when something should be seeing price gains and it isn’t, I point it out… Like I do with the price of Gold every day, and euros…

Yesterday’s Data Cupboard saw some interesting data prints, with the aforementioned ISM (manufacturing index) slipping and Construction Spending only able to carve out a 0.1% gain for February… Today’s Cupboard has just one print, but it will be an interesting one, as Vehicle Sales for March will show whether consumers begin to show signs of being tapped out…

Bloomberg ran an article that talked about this, and here’s what it had to say, “The American consumers who were stretching themselves to buy or lease a new car are starting to go missing from showrooms. Rising interest rates and new-vehicle prices are squeezing shoppers with shaky credit and tight budgets out of the market. In the first two months of this year, sales were flat among the highest-rated borrowers, while deliveries to those with subprime scores slumped 9 percent, according to J.D. Power”

To recap… The currencies saw some downward slippage in the past 24 hours, and Gold which had gained $15 yesterday, is getting sold by $6 in the early morning trading. The RBA left rates unchanged overnight, and pointed to the rising financing costs and Trade policy of the U.S. as their reason for leaving rates unchanged…. Hmmm… The President is discussing pulling the U.S. out of NAFTA…

For What It’s Worth… Well to hear me, or some other people talk about the rising debt is one thing, but to hear about if rom 5 of the most well-respected economists (notice Paul Krugman isn’t one of them!) is another, and something people should be sitting up and understanding immediately…. This article originated in the Washington Post and it can be found here: https://www.washingtonpost.com/opinions/the-debt-crisis-is-on-our-doorstep/2018/03/27/fd28318c-27d3-11e8-bc72-077aa4dab9ef_story.html?utm_term=.e2d5c85f2771

Or, here’s your snippet: “It’s difficult to get economists to agree on anything, but this article is a rare instance of five prominent economists in total agreement. Unfortunately the issue they agree on is that the U.S. is going broke. This article is an op-ed published in the Washington Post and written by Michael Boskin, John Cochrane, John Cogan, George Schultz and John Taylor. Schultz was Treasury Secretary for President Nixon. Boskin was Chairman of the Council of Economic Advisors for President Bush 41. John Taylor was on the short list to be Chairman of the Fed before President Trump settled on Jay Powell. Cochrane and Cogan have highly distinguished academic careers as do the others. In short, this is an “A-List” of top-tier economists. What they agree on is that the U.S. is heading quickly toward $1 trillion annual deficits, probably by next year, and that these deficits will continue at that level as far as the eye can see. They also warn that government debt will increase by $5 trillion in the next few years on top of the $20 trillion already outstanding. Higher interest on the debt will just add to the burden. These are not the warnings of a fringe doomsday blogger, but of the establishment itself.”

Chuck Again… My own estimate is that the actual debt and deficit numbers will be worse than these projections pushing the U.S. closer toward a true crisis of confidence in the dollar. Because… we, as a country, ALWAYS underestimate debt levels… And don’t forget that 10,000 baby boomers retire every day, and will continue to do so for at least another 9 years… Whose going to pay for all those Unfunded Liabilities?

Currencies today 4/2/18… American Style: A$ .7681, kiwi .7245, C$ .7760, euro 1.2296, sterling 1.4040, Swiss $1.0440, … European Style: rand 11.8477, krone 7.8372, SEK 8.3750, forint 254.16, zloty 3.4245, koruna 20.6308, RUB 57.17, yen 106.20, sing 1.31, HKD 7.8485, INR 64.91, China 6.2795, peso 18.22, BRL 3.3088, Dollar Index 90.09, Oil $63.05, 10yr 2.57%, Silver $16.51, Platinum $930.40, Palladium $940.75, and Gold… $1,340.80

That’s it for today… well, our Blues laid another egg last night and they most likely will miss the playoffs this year. UGH! Oh well, if you don’t make the playoffs you can’t experience a playoff heartbreak! My beloved Cardinals saw their bats come alive yesterday in Milwaukee… How about that 6th man for Villanova last night? He ended up being the star of the game! This is late again today! UGH! It’s taking me longer and longer to gather up all my thoughts each day as to what to write about… One of these days you’ll get a Pfennig and it will only be 500 words! Hey! teacher leave those kids alone! Yes, Pink Floyd sends us to the finish line today with their song: Another Brick In The Wall… some great guitar work by David Gilmour in that song! And with that, 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



) 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 Kerkhoff, Jon 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.