Saber Rattling Calms Down…

Chuck Butler’s: A Pfennig For Your Thoughts   
                          August 14, 2017  

* CPI prints weak for 5th month
* When will Draghi begin to bemoan?
* Loonie is hardest hit Petrol Currency… 

Good day… And a Marvelous Monday to you! Man-o-man, am I glad to be back at home, not that my adventures to Key West, and then to Table Rock Lake weren’t full of good times, it’s just that when I’m here, everything works right, and I don’t have to jump through hoops to get a letter out! Thanks to Nuria at the Aden Research Group for assisting me in getting the letter, what little there was of it, out on Friday morning… The Pfennig is going to go through some changes in appearance in a few days. Remember when I first announced that I was leaving my former place of employment and that the Aden sisters were going to publish the Pfennig, but that there would be ads put on the Pfennig to help defray the costs of the publishing… Hey! It my be free to you, but it doesn’t get completed in a vacuum for free! So, there’s your notice of the changes that are coming… R.E.M greets me this morning with their song: Drive… This song was from the Automatic For The People album, which I think was one of their best!

Well, well, well, look what all those hedonic adjustments, have gotten those that thought that inflation was going to be soaring by now… The week-long awaited print of July’s stupid CPI was a disappointment for the 5th month in a row! The powers that be have kept a lid on CPI for so long now, so that retirees and savers would suffer. That’s right, I said that out loud! Those cost of living increases have been few in number, and small in nature these past 10 years because, the hedonic adjustments like substituting items in the basket of goods, or adjusting the weightings of the items in the basket of goods, to name a couple. But now those same hedonic adjustments are  coming back to haunt the Fed, and the Gov’t… Uh-Oh, what are we going to do now? No inflation (CPI grew at just 0.1% in June and 1.7% YTD) means the Fed doesn’t have anything to hang their hats on when talking about rate hikes… The markets are just now catching on, and all that dollar buying last week, because they thought inflation was going to finally show strength, was wasted…

The dollar got sold like funnel cakes at a State Fair on Friday, and rightly so! The Dollar Index which on Thursday was 93.78, fell to 93.069… There are lots of chartists out there that have their own opinion about where the Dollar Index reveals a true weak dollar trend, I’m hoping my friend and former colleague at the Sovereign Society, Sean Hyman, reads this today, and shares with us his thoughts on at what level the Dollar Index will reveal a true weak dollar trend… I’m pretty sure we’re closing in on it folks…

The euro climbed back above the 1.18 handle on Friday, and remains there this morning, but barely, as the overnight markets saw some profit taking. The one thing that I’ve been waiting for with all this euro strength, is for European Central Bank (ECB) President, Mario Draghi, to begin to bemoan the strength of the euro, like his predecessor did all the time. Remember Jean Claude Trichet? Man, I had to look him up for I had forgotten all about him! 

I think that Draghi is OK with the euro strength so far, because it is a sign that his policies are working, and economic growth is returning to the Eurozone… But too much euro strength is going to put a governor on inflation, which is normally exactly what a country is looking for, but not these days… As we’ve talked about before until the sun comes up, countries now are looking for inflation, as a sign that economic growth is picking up…  So, as far as the euro strength to date is concerned, I think Draghi is proud of it… But should the euro match the last 7 months of strength in the coming months, I expect Draghi to begin to do his best Trichet imitation… 

After a couple of outstanding performances for Gold last week, it was held in check by the “boys in the band” on Friday, and was only able to carve out a gain of $2.90 on the day, and close at $1,288.70… The shiny metal is down this morning, but as I said above the overnight markets has been all about profit taking. 

The saber rattling that dominated last week’s trading, looks as though it is going to calm down a bit this week, which would allow U.S. data to dominate the trading… The U.S. Data Cupboard has Retail Sales, Housing Starts, The FOMC Meeting Minutes from their last meeting in July, two of my fave economic prints: Industrial Production and Capacity Utilization, and Leading Indicators all this week… In recent months, the U.S. data has been very weak, and that hasn’t been a good thing for the dollar. But, even when we get a surprise up-side print, the dollar has been sold, which is one of the signs of a weak dollar trend. 

The Chinese renminbi continues to see appreciations. This past 6-weeks, has reminded me of the period of 2003-through 2008, when the renminbi was the closest thing to a One-Way Street that there was when I came to currency movement.  Of course there were days of mark downs, but for the most part it was a tiny appreciation every day. At least that’s how I remember it! 

And Japanese yen continues to defy the obvious, which is that the currency should be getting sold daily, but instead it basks in the sun rays that come from the flight to safety… The saber rattling may have calmed down a bit, but its still out there folks, and you can see that in the yield of the 10-year Treasury, which has fallen again, this time down to 2.21%… 

The price of Oil has slipped a bit in the past couple of days, and is trading below $49 at $48.59 as I write. The Canadian dollar / loonie has been the hardest hit Petrol Currency and the Norwegian krone has been the least hit by the slippage in the price of Oil. A few weeks ago, I wrote about Oil for my weekly letter in the Dow Theory Letters (www.dowtheoryletters.com) and in it I basically said that I saw the price of Oil trading between $40 and $50 as we go along…   You know, I write some very interesting articles for the DTL website, and while it costs to read them, I don’t believe that there can be a price that relates to my writing! HA!   Seriously though, I don’t think it’s highway robbery, to subscribe, so what are you waiting for? You get me, you get the Aden Sisters, and other very good writers…. 

And in a follow up to things I’ve written about in the past, regarding a cashless society, and how bad that would be for you and me, I had this note sent to me this weekend: Two thirds of traders in Sweden believe they will stop accepting cash by 2030, according to a report by Stockholm’s Royal Institute of Technology… UGH!

I pretty much was out of the loop last week, with all my traveling, and infusion day, which by the way was my worst one yet, I felt like death warmed over for two day following the infusion! UGH!  So, I loved that Ed Steer (www.edsteergoldandsilver.com) highlighted this summary of the markets last week. And he got it from zerohedge.com.. here it is! 

* Dow’s worst week in 5 months (Mar ’17)
* S&P’s worst week since pre-election (Nov ’16)
* Russell 2000 worst week since Feb ’16
* Financials worst week in 5 months
* VIX biggest percentage spike since Aug ’15 (China Devaluation)
* HY Credit Risk biggest jump since election (Nov ’16)
* Silver’s biggest week since Jul ’16
* Gold’s biggest week since Apr ’16
* Offshore Yuan’s best week in 7 months (Jan ’17)  

So, not so much a good week for the stock jockeys, eh? But on the other side of the coin were the precious metals, and bonds…  My good friend, Duane asked me the other day about where does the money go when stocks get sold?  I said, metals and bonds… And look what was the best performers last week!  

To Recap…  The games people play now, every night and every day now, never meaning what they say now, never saying what they mean – Joe South…  That’s the song that kept bouncing round in my fog filled brain last Friday, when the stupid CPI printed just a 0.1% increase for July, when the markets were forecasting a strong print.  The Gov’t has played with the hedonic adjustments in CPI for so long now, that they don’t know how to remove them, and thus when they want to show inflation rising, they can’t! The dollar got sold on Friday, but has fought back in the overnight trading, which has seen mostly profit taking in the investment classes that had gains last week.  The Saber rattling seems to have calmed down a bit and that means the markets can focus on U.S. Data which will be plentiful this week.  

For What It’s Worth… Well, I saw this on Ed Steer’s letter from Saturday, and thought it to be FWIW worthy! it’s an article about what to do with the car batteries of these electric cars, and can be found here: https://www.theguardian.com/sustainable-business/2017/aug/10/electric-cars-big-battery-waste-problem-lithium-recycling  

Or, here’s your snippet: “The drive to replace polluting petrol and diesel cars with a new breed of electric vehicles has gathered momentum in recent weeks. But there is an unanswered environmental question at the heart of the electric car movement: what on earth to do with their half-tonne lithium-ion batteries when they wear out?

British and French governments last month committed to outlaw the sale of petrol- and diesel-powered cars by 2040, and carmaker Volvo pledged to only sell electric or hybrid vehicles from 2019.

The number of electric cars in the world passed the 2m mark last year and the International Energy Agency estimates there will be 140m electric cars globally by 2030 if countries meet Paris climate agreement targets. This electric vehicle boom could leave 11m tonnes of spent lithium-ion batteries in need of recycling between now and 2030, according to Ajay Kochhar, CEO of Canadian battery recycling startup Li-Cycle.”

Chuck again… Yes, and there’s the need to recycle these batteries, because… “batteries carry a risk of giving off toxic gases if damaged, but core ingredients such as lithium and cobalt are finite and extraction can lead to water pollution and depletion among other environmental consequences. ”

Currencies today 8/14/17… American Style: A$ .7873, kiwi .7293, C$ .7707, euro 1.18, sterling 1.2977, Swiss $ .9678, … European Style: rand 13.3249, krone 7.9257, SEK 8.1213, HUF 257.92, zloty 3.6258, koruna 22.1561, RUB 59.79, yen 109.69, sing 1.3613, HKD 7.8205, INR 64.09, China 6.6644, peso 17.77, BRL 3.1895, Dollar Index 93.30, Oil $48.49, 10-year 2.21%, Silver $17.04, Platinum $968.84, Palladium $895.75, and Gold… $1,286.90 

That’s it for today… Well my beloved Cardinal’s 8-game winning streak came to an end yesterday, but not without some dramatics late in the game! These next two weeks are chock-full-o-doctor visits for me… Last spring when they diagnosed me with A-fib, that just added two more doctors to my list… UGH! Well, it’s that time of the year again, to begin the planning for our annual Labor Day BBQ, and Pool Party… It’s always a good time, and my favorite day of the summer! Well, the grandkids go back to school this week, and Alex still has a couple weeks before college begins.  Tom Petty & the Heartbreakers take us to the finish line today with their song: Mary Jane’s Last Dance… This is my fave Tom Petty song, and with that I bid you farewell for today, and hope you have a Marvelous Monday… 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.