Says, “Global Economy Has Reached A Delicate Moment”…

A Pfennig For Your Thoughts

April 11, 2019 IMF

* Currencies for the most part remain in yesterday’s clothes…
* EU gives May a 5 month extension for a BREXIT deal…

Good Day… And a Tub Thumpin’ Thursday to you! I’m heading to the Cardinals day-game with the Dodgers a little later today, so I’m a happy camper, and no amount of manipulation, PPT, or weak data is going to upset me this morning, because…. I’m going to baseball heaven for a day game! OK… I laughed so much yesterday at something that my stomach hurt! CNBC sent out a news article and misspelled the word “refinance” And they had the gaul years ago to tell me to take my thoughts on manipulation to Hollywood? What a bunch of dolts! Mr. Excitement, Jackie Wilson, greets me this morning with his song: Your Love Keeps Lifting Me Higher… They don’t write songs like that any longer, I’m just saying…

Well, it appears that the folks at the IMF are getting on board with me, regarding a global slowdown, led by the U.S. They downgraded their forecast for 2019 global growth yesterday… And I never saw one mention of this on TV, except when I switched over to a show on the markets… But econoguy, David Rosenberg, didn’t miss it. So, let’s hear what he had to say about what the IMF did yesterday… This from his Twitter handle: “The permabull trollers may have missed this, but the IMF just took another hatchet to its 2019 global growth forecast, down to the slowest pace for the cycle. In just two words, the Fund politely concluded that we have reached a “delicate moment”

I have to say front and center this morning, that the comment about having reached a “delicate moment” is a real classic in my book… Now if I were on the journalists team following the IMF, I would have asked them to explain that comment… “Ahem, what do you mean by a delicate moment?” Would it have hurt anyone’s feelings, because we all know we have to be careful not to hurt anyone’s feelings these days, to have asked that question?

Are there any “true journalists” out there these days?

OK, well, there were two currencies that saw gains yesterday… The Norwegian krone, which I talked about yesterday, as having gained recently VS the euro, made strides against the dollar when it was made clear that consumer inflation in Norway is rising, with the March print at 2.7% VS expectations of 2.5%… This has traders thinking that the Norges Bank will hike rates soon…
The other currency to show some gains was the Aussie dollar (A$)… no data here, just people looking at inflation and how it’s probably going to begin to go higher sooner or later around the world, and that spells good times for the commodities, and the further the commodity currencies, led by the A$.

There was also some minor positive moves in the Russian ruble, but they were very small… But gains nonetheless…

Gold found a way to push and shove its way to a $3.80 gain on the day, only to see it given back in the early trading this morning. The gain yesterday had pushed Gold above its 50-day moving average, and seeing that, the price manipulators couldn’t let that happen, and well, they brought Gold back below the average this morning. UGH!

The European Central Bank (ECB) met yesterday and left rates unchanged, and ECB President Draghi, tried to throw the euro under the bus, but his Eeyore impression didn’t cause too much damage to the euro, and the single unit was able to recover quickly after falling following the meeting. Eeyore, I mean Draghi, had this to say… “The risks surrounding the euro area growth outlook remain tilted to the downside, on account of the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets.”

Notice how he took the opportunity to take a shot at President Trump’s Trade War? I did, and I’m sure that the folks at the White House did too… But it was like water off a duck’s back to the folks at the White House… They don’t care who the Trade War is hurting, including themselves… I’m just saying…

OK… The EU gave U.K. PM May until Roctober to come up with a BREXIT deal that everyone would accept… That’s more than 5 months to get a deal done… But let’s see here, they’ve had a couple of years prior to now to get a deal done, and nothing has been accepted, what makes the markets believe that something will get done in 5 months? I ask that question because just about every article I’ve read talks about how this extension of time is like Manna from Heaven… And I view it as a stay of execution…

The U.S. Data Cupboard had an interesting print in the Stupid CPI yesterday, with consumer inflation growing in March at 0.4%, which was double the previous month’s print and the expectations. There was one piece of data that usually gets combed over but I think it’s telling us something, and that is Real Hourly Earnings for March which were negative -0.3%… Wait, What? I thought earnings were growing? I guess not, eh?

Oh, and as far as putting another brick on the wall, I had a reader send me a note highlighting an analyst’s comments on the Trucking industry… It doesn’t look good folks… layoffs, empty trucks, etc. are beginning to pop up, in yet another sign that the economy is heading to recessionville…

But like I said above, all that stuff isn’t going to dampen my mood this morning! So, before I ruin that thought with something else to talk about, I had better head to the Big Finish, and hopefully I won’t run into any rabbit holes to fall down the rest of the letter! Hmmm, but Chuck, what about that FWIW article on derivatives that’s coming up? Oh, darn it, I knew there would be a rabbit hole I wouldn’t be able to avoid!

To recap… The U.K. received a stay of execution, and has until Rocktober to come up with a BREXIT plan that will be accepted… Chuck has his doubts… The ECB met yesterday, and left everything unchanged, while ECB President Draghi, did his best impression of Eeyore! The currencies pretty much remained in the same clothes as yesterday, except the krone, which was bought after a strong CPI printed than expected… And Chuck is heading to the baseball game today!

For What It’s Worth…. Longtime readers of the Pfennig, know that I’ve been warning them about how many derivatives there are in the markets these days, and how no one knows what happens if they begin to get execution… There are more derivatives ( and here I mean bad derivatives) now than were on the books of financial institutions in 2007… When their mere existence almost caused a financial collapse, but instead we had a financial meltdown… Well, this is an article on Bloomberg.com that talks about the mess we have in derivatives now, and can be found here: https://www.bloomberg.com/opinion/articles/2019-04-10/derivatives-are-still-too-dangerous

Or, here’s your snippet: “Financial regulators have done a lot to reform the derivatives markets that helped turn the financial crisis of 2008 into a global disaster. But their work is unfinished — and there’s even a danger that, in one way, they might have made things worse.

Derivatives are bets on the performance of something else, such as stocks, interest rates or creditworthiness. They can be useful in mitigating risks and expanding investors’ choices: A bank, for example, might use an interest-rate derivative to protect itself against rising borrowing costs, or a hedge fund might use a credit derivative to bet against a company’s bonds. But because they enable big wagers with little money down, they can quickly generate losses and cash demands large enough to destabilize the entire financial system.

For a long time, governments left the derivatives market largely to its own devices. At best, only the parties to the contracts knew who owed what to whom, or how much collateral had been posted to cover potential losses. The folly of this approach became apparent when, in the darkest days of the 2008 crisis, it emerged that a single company — insurance giant AIG — owed billions on subprime-mortgage bets to several of the world’s largest banks and didn’t have the cash to pay up. Taxpayers had to provide $182 billion to keep the company afloat and avert a broader collapse.”

Chuck Again… This is a good article, and talks about how the Gov’t tried to step in to prevent another 2007, but probably only made matters worse…

Reminds me of the old quote from Ronald Reagan… “The scariest words ever spoken are: “Hi, I’m from the Government, and I’m here to help”…
Now, that wasn’t THAT bad was it Chuck?

Currencies today 4/11/19 American Style: A$.7160, kiwi .6755, C$ .7487, euro 1.1279, sterling 1.3085, Swiss $1.0020, European Style: rand 13.9862, krone 8.5010, SEK 9.2506, forint 284.86, zloty 3.7962, koruna 22.6996, RUB 64.56, yen 111.15, sing 1.3532, HKD 7.8440, INR 68.99, China 6.7147, peso 18.88, BRL 3.8373, Dollar Index 96.90, Oil $64.07, 10-year 2.48%, Silver $15.15, Platinum $900.74, Palladium $1,376.17, and Gold… $1,304.23

That’s it for today… Another win by my beloved Cardinals over the Dodgers last night… Suddenly, they’ve found their bats… but they are facing the Dodgers’ young stud pitcher today, so their found bats might be lost again after today, but then you never know, right? That’s why they play the game! Our Blues got the playoffs off to a great start with a comeback in the 3rd period to win on the road! Alex and Chuck had two TVs set up so we could watch the baseball game on one and hockey on the other… Pretty cool set up… Alex is going to the game with me today, along with a couple of my spring training buddies, so a good time should be had by all… The Strawbs takes us to the finish line this morning with their song Autumn… “hold on to me… I’ll hold on to you… The winter long I will always be with you”… I hope you have a Tub Thumpin’ Thursday, and will Be Good To Yourself! Let’s Go Blues!

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