The Beginning Of The End?

Good day… And a Tom Terrific Tuesday to you! And right out of the starting gate today, I want to say Happy Birthday to my grandson, Braden Charles Butler, who turns 6 today! My Sorry playing buddy, is 6 and you should see him swim! His dad was an All-State swimmer, so maybe he’ll follow in his dad’s wake! Thoughts and prayers go out to all the people affected by the terrorist bombing in Manchester, England, at a concert venue last night. I’m greeted this morning with a song from Chicago, which is probably not a song that you associate with Chicago… The song is perfect for turning it on a 0-dark 30 in the morning… It’s title: At The Sunrise… It goes like this.. How could I be happy, without her by my side, without her smiling face at The Sunrise… And it’s soft, and in 4/4 time…

Well, the Dollar Index has fallen below 97, and trades with a 96 handle at 96.88 this morning. This is a low for 2017, and from what I’m thinking, it’s not going to be the low for 2017, instead, I’m thinking that this is just the start of more dollar weakness… The euro moved higher yesterday throughout the day, inching ahead, and is well within the 1.12 handle now. The Commodity Currencies are really taking liberties with the dollar, and are led by the New Zealand dollar/ kiwi… Kiwi has really rallied in the past couple of days, and is trading well above 70-cents this morning… At the end of last week, I was getting ready to raise the white flag for kiwi, as traders just kept on banging the currency. I read one dealer’s research who said it best saying that kiwi had gone from zero to hero in just two days of trading!

Well, Russia printed a good piece of data yesterday… April GDP grew at a 1% clip year on year, up from the 1st QTR’s 0.5% print! So, Russia’s economy is picking up the pace, even with economic sanctions still weighing on them from both the U.S. and Eurozone. Hmmm… Imagine all the people, living life in peace… You say I’m dreamer, well I’m not the only one… I hope someday you’ll join us, and the sanctions will be gone!

Look, I’m not a cheerleader for Russia, they have their problems, we have ours, but to me, to place economic burdens on a country for as long as we have put them on Russia, is just not right, in my mind… We wouldn’t like it, as a country, if say, Japan placed economic sanctions on us, because we performed some atrocity half-way across the globe, and not even in Japan’s back yard! I’m just saying…

I’ve written a lot about Mexico and the peso in the past couple of weeks, well, more than I usually do… But yesterday, they printed their 1st QTR GDP number and I thought given the size of the print, that the spin doctors did a very good job of promoting a 0.7% print for the quarter… The spin doctors were talking up the Mexican economy after the print, and I was sitting here thinking… Well, if I hadn’t known what the print was, I would have thought it was 1.5% or something like that, from what I was reading! So, when you get down to the cheese that binds, everything is relative… Relative to what Traders want to think… And so, what do you think traders thought of the print? Well, let’s just say the peso, didn’t rally… and it didn’t get sold off either! It did nothing, absolutely nothing, say it again!

And like I’ve said long ago, when the Big Dog, euro, gets off the porch to chase the dollar down the street, the other little dogs get to run and chase the dollar too, and sometimes these little dogs can outrun the Big Dog… Well, the little dogs were running yesterday and overnight too! The euro-lites, Norway and Sweden have really picked up the pace the last couple of trading sessions… Look, a couple of days (3 including Friday’s moves) of rallies don’t make a trend, but could this be the beginning of the end for the strong dollar trend?

Trends are very strong and they provide the trading pattern for a long time. However, trends are not One-Way Streets, and there can be volatility within the trend… So, that’s where the hesitation comes from me… Now, don’t get me wrong, I’ve been calling for an end to the strong dollar trend for some time now, and this could be the real beginning of a new weak dollar trend, but then it could be just volatility within the strong dollar trend. But, what happens if 6 months from now we point back to May and say, “well that was the beginning of the weak dollar trend”? Well some of us will kick ourselves for not taking a flyer on the chance that May was the beginning of the weak dollar trend… And if we didn’t take that flyer, we’ll be chasing the currencies rally from then on… I’m just saying…

And one of the things that could be deep sixing the dollar, is the lack of spending here by U.S. consumers… I read a report yesterday that made me stop and think about what the heck has happened to us here in the U.S.? This report cited a survey by CareerBuilder where they discovered that 75% of Americans live paycheck to paycheck at least some of the time… 38% said they sometimes live paycheck to paycheck, 15% said they usually live paycheck to paycheck, and 23% said they always live paycheck to paycheck! The report, from August of last year, also had this info… Of workers who currently have a min wage job or have held one in the past, 66% said they couldn’t make ends meet and 50% said they had to work more than one job to make it work. Here’s the link to that report:

So, if you’ve been wondering about how the low-end retailers like Walmart, and the cheap delivery retailers like Amazon are still booking profits while the rest of the Retail World collapses, in what David Stockman calls the “Retail Apocalypse”, then there’s your answer… And once again, I’ll remind you that I’ve told you for weeks now that the U.S. consumer has “tapped out”… And all of this comes 8 years after the Great Recession (supposedly) ended! Where has all the middle class gone? Long time passing… Where have all the middle class gone, long time ago…

Well, Gold was able to hold onto most of its early morning gains yesterday, as the day went along. At the close, Gold gained $4.80, when it was up more than $6 in the early morning trading. The spot close was $1,260.40… And from the looks of the early morning trading today, Gold is giving back a buck or two at this point. I expect to see this change once traders arrive and see that the Dollar Index has fallen below 97…

The price of Oil climbed to $51 in the past 24 hours, but early this morning it has given back about ½-cent… There had to be tons of profit taking going on, once the price of Oil hit $51, so we’ll have to wait-n-see where it goes from here, as we draw nearer and nearer to the OPEC meeting, where everyone now is on board with the thinking that the OPEC nations and Russia are going to extend their production cuts to 2018. (they were supposed to end in June) Remember, I went out on the limb and said that I wouldn’t be surprised to see the OPEC meeting produce an announcement of additional production cuts… Should additional cuts happen, the price of Oil and the Petrol Currencies would be underpinned!

The Fed’s FOMC Meeting Minutes are scheduled to print tomorrow afternoon… The markets are hoping for signs of any discussion of how the Fed will unwind their balance sheet of $4.5 Trillion in Treasuries and Mortgage Backed Bonds… I told you that I don’t expect that to happen but instead more a discussion of “when” they would begin to unwind their balance sheet… I still think the Fed would prefer to talk about the “how” on the same day they hike rates in June, in an attempt to deflect any market reaction to the “how”…

Speaking of the Fed… Long ago, when I was an up and coming newsletter writer, the Public Relations people wanted me to come to NYC and meet with them and they would introduce me to some writers for the major newspapers. So I went, along with the Big Boss, Frank Trotter, and we met with our PR person Peter Robbio, and after an embarrassing situation at lunch, which is a story for some other time, he took me to meet Gretchen Morgenson, who writes for the NY Times… I’ve followed her writings since. Another writer that we were supposed to meet but didn’t, was Caroline Baum who writes for Bloomberg… Well, Caroline Baum pulls no punches, she’s a very good economics writer/ analyst, and calls things the way she sees them… Here’s another example of her calling it the way she sees it…

I told you yesterday that the U.S. Data Cupboard wouldn’t have anything considered to be 1st Tier economic data until Wednesday, when the FOMC Meeting Minutes print. We will see New Home Sales for April today, and I expect to see that New Home Sales fall from March’s print, as we draw nearer and nearer to the June Fed rate hike. I was shocked to see that the odds of a rate hike in June were only 70%.. I would think that by now everyone was on board with the thought that the Fed would hike rates in June… But I guess not!

Next week, will be a Holiday shortened week, but it won’t stop the onslaught of data that will have piled up in the Data Cupboard and need to get out. So, we’ll end May and begin June with some very important data prints… And one that I’ll be on the lookout for is the June 1, automakers report on sales… Remember that I told you that Danielle Di Martino Booth, said that the June automakers’ report would be more important than the Jobs report on June 2nd…

To recap… The dollar is getting sold, and the Dollar Index has fallen to a 2017 low below 97… could this be the beginning of the end for the strong dollar trend? Or is it just volatility within the strong dollar trend? Russia printed a very strong April GDP report, thus showing that their economic recovery is gaining traction and picking up the pace. Mexico also printed a fairly good 1st QTR GDP report, that Chuck, pointed out the spin doctors tried to make it sound like it was earth shattering, and much stronger than it printed. Traders weren’t fooled and didn’t buy or sell pesos… The Commodity Currencies led by kiwi, have picked up a lot of steam these past few days of trading, with kiwi going from zero to hero, according to a currency dealer. The price of Oil rose to $51 yesterday but in what Chuck thinks is profit taking, has slid back by ½-cent this morning. And Gold gained $4.80 yesterday, as the metals continue to regain lost ground.

For What It’s Worth… A sign of the times? Well, something that was very important for me as a kid, was the Circus… We didn’t always get to go, but when we did, I was amazed at the enormous size of everything, the lights, the colors, and the acts… And then later in life, I met my wife and her dad was a Shriner, and they held their main fund raiser every year with the Circus, and so I got to experience it all over again, and then with my kids, until finally, Jackie Paper came no more… That’s right folks, the Ringling Bros. Circus had their last show in Uniondale, N.Y. Sunday night… The Circus will NOT be coming to town this year… Here’s the link to the article:

Or, here’s your snippet: “The lights went up on the Ringling Brothers and Barnum & Bailey circus on Sunday evening to reveal 14 lions and tigers sitting in a circle, surrounding a man in a sparkling suit. It was a sight too implausible to seem real yet such an iconic piece of Americana that it was impossible to believe the show would not go on.

After 146 years, Ringling Brothers and Barnum & Bailey is closing for good, responding to a prolonged slump in ticket sales that has rendered the business unsustainable, according to its operator, Feld Entertainment. On Sunday, the circus glittered, thundered and awed beneath the booms and klieg lights of Nassau Veterans Memorial Coliseum. That there was no tent over the final show, no striped eaves from which the daring young man on the flying trapeze could hang, felt fitting. The big top was packed up, this time forever.

Autumn Luciano stood outside, ticket in hand. “It feels a little like a funeral today, but I’m trying not to mourn it in a sad way,” said Ms. Luciano, 33, a pinup photographer who had flown in from Lansing, Mich., to see the last show. “Circus is all about being happy.”

Chuck again… That’s right, the Circus is all about being HAPPY! I know I was happy every time I saw a circus come to town! But still, I can’t help feeling a little mournful, for a piece of my past and a lot of people’s past, has been taken away… ?

Currencies today 5/23/17… American Style: A$ .75, kiwi .7040, C$ .7429, euro 1.1248, sterling 1.2972, Swiss $ .9713, … European Style: rand 13.2308, krone 8.3383, SEK 8.6715, forint 274.24, zloty 3.7326, koruna 23.5432, RUB 56.66, yen 111.27, sing 1.3876, HKD 7.7876, INR 64.77, China 6.8851, peso 18.63, BRL 3.2649, Dollar Index 96.88, Oil $50.47, 10-year 2.25%, Silver $17.15, Platinum $950.77, Palladium $776.81, Gold $1,259.50 and SGE Gold $1.261.87

That’s it for today… I love it when toddlers begin to become people, talking, walking, and saying things that make you laugh… That’s Braden, he’s 6 today, and a real talker, and conniver already! So, Happy Birthday, little buddy! No baseball last night for me, as my beloved Cardinals traveled to the West Coast, where I won’t be able to watch them play due to the late starts… UGH! This weekend will be a 3 day Holiday Weekend to celebrate Memorial Day. It’s the non-calendar, official start to summer. But the air has been so chilly here this week, it had better heat up quickly for that start to summer! I tried to watch the remake of Twin Peaks last night, but had to turn it off, too, too strange for my blood! And I take my wife to the airport this morning after getting this out, she’ll be gone for more than two weeks… Percy Sledge sends us to the finish line today with his song: When A Man Loves A Woman… Don’t ask me how that song was playing while I was talking about my wife leaving for two weeks! HA! And with that I hope you have a Tom Terrific Tuesday! Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Creator / Editor of: A Pfennig For Your Thoughts

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