The Dog Days Of Summer Are Here!

 Chuck Butler’s: A Pfennig For Your Thoughts 

                       August 8, 2017

* S. African President in trouble…
* Petrol Currencies leave rubles behind…
* U.S. Credit Card Debt is off the charts!

Good day… And a Tom Terrific Tuesday to you! I’m still in Key West, heading back to my home away from home, tomorrow, and then back to St. Louis on Wednesday, just in time for my next infusion on Thursday. I’m loaded up with doctor visits the next couple of weeks, so no sitting around doing nothing for me! HA! We did touristy things yesterday, and I had fun, but too much walking had me in pain by mid-afternoon. We also went on a sunset cruise last night, but… clouds and rain for most of the day, gave way to a beautiful evening and sunset on the ocean!  As soon as I get this out the door, and the kids wake up, we’ll be packing the car and heading north, for our 5 hour car trip. Hey! At least I had something to report that I did yesterday, the currencies and metals sure didn’t! I was greeted this morning by Steely Dan and their song: Black Cow…

It was another of those “dog days of summer” yesterday, as traders sat on their collective hands and did nothing. The story going ‘round is that traders want to see signs of inflation before taking on any more dollar long positions… The IMM futures positions from last week showed that long euros, Aussie dollars, and Canadian dollars, positions were increased, and yen short positions were decreased… That ‘s a good indication that the sentiment toward the dollar has gone to the dogs of summer…

But as I always remind people, a trend is not a ONE-WAY Street, and that there can be volatility within the trend, but once that volatility plays out the asset returns to the underlying trend. And that’s what we’re seeing now, as the dollar had its day on Friday, but has drifted since, and soon, will be on the slippery slope once again… At least that’s my opinion, and I could be wrong! 

Yesterday I told you that the euro was creeping toward 1.18 again, and sure as the sun rises each day, the single unit did climb above 1.18 again by the end of the day, which is where it sits this morning. The best mover overnight though was the Norwegian krone, which, as I’ve told you previously, is getting love from the rise in the price of Oil, and from the rise in the euro. Overnight, the price of Oil moved higher, so the krone had two things going for it once again… 

The other mover yesterday was the S. African rand, which on Friday was getting sold like funnel cakes at a State Fair, because of the news of the Gold mine shutdowns that I told you about yesterday. But then along came a “confidence vote” for President Zuma, of whom the markets do not like, and the first round of the vote was for “no confidence” and the put the rand on the rally tracks. The second round of the vote is today, and if Zuma is ousted, then the rand will continue to rally, but if survives, all this rally will be wiped out… 

China reported yesterday that their reserves grew for a 6th consecutive month, as it appears that the flight of capital has backed off, and China doesn’t need to defend their currency with reserves. The other thing that’s helping their reserves value is the fact that the currencies they do own have increased in value VS the dollar in the past 6 months… 

But any way you slice it, China’s reserves have increased, and that’s a good thing, considering China’s debt position. I just wrote about this in my weekly letter for the Dow Theory Letters (www.dowtheoryletters.com) and while I’m not going to spoil anyone’s appetite that subscribes to the DTL, I will tell you that China’s reserves position goes a long way toward the comfort level that investors have with China.  

I don’t know if you’ve noticed or not, but after a couple of years of daily markdowns of the renminbi, the currency seems to have turned the corner on those daily markdowns. And with the renminbi appreciating, the Singapore dollar follows suit… Yes, I’ve talked about this before, but for any new readers, it’s important that they are aware of the trading pattern of these two..  Singapore has to keep their currency in line with the renminbi, to compete with the Chinese for exports. So, when the renminbi moves in either direction, the Sing dollar follows… And right now that’s a rally mode for the Sing dollar. 

Well, Russia was in the news again last night, and not for all the junk that’s going on in the press, but for an announcement of how they will retaliate for the extension and increase of the sanctions from the U.S. It appears that Russia is prepared to increase their efforts to end their dependence on the dollar.  I’ve talked about this before, so this isn’t new to you, dear reader, but Russia has been accumulating Gold faster than China, and has a goal of ending the dollar standard. 

So, Deputy Foreign Minister Sergey Ryabkov  was quoted yesterday saying, “The Russian government will intensify efforts to cut the country’s dependence on US payment systems and the dollar as a settling currency.”  

I told you above that the price of Oil rose overnight, and that has helped the Petrol Currencies immensely in recent days… One laggard of the group though is the Russian ruble, which is dealing with a rise in inflation in the country, along with the increased sanctions, and a question of whether or not the Central Bank of Russia (CBR) is going to continue to cut rates as the year moves along. 

Speaking of the sanctions that the U.S. placed on Russia…  James Rickards at www.agorafinancial.com sent me this yesterday and I just had to share it with you. You can find the whole article at the link, but here’s a snippet: “The law says that U.S. companies are not allowed to help Russian companies with Arctic oil and gas exploration. But the law also applies to non-U.S. companies that help Russia. That’s a big deal in Europe, where national energy champions like BP, Royal Dutch Shell, Total and Eni had plans to do joint ventures in the Arctic with the Russian energy giants Gazprom and Rosneft. Now the EU is considering sanctions on the U.S. in retaliation for U.S. sanctions on their energy companies. Congress meant to hurt Russia. Instead, they hurt Europe, and now Europe is ready to hurt the U.S.” 

That’s what you call a classic example of “unintended consequences” and reminds me of something my mom used to say… “you made the bed, now go lay in it”… 

And Gold… the dog days of summer have really set in with the Gold trading as only 119,000 contracts were traded yesterday in Gold, and the price only changed a $1 and some change…  The shiny metal is up a few bucks in the early morning trading today, but that hasn’t been a good indicator of what “the boys in the band” will do each day, so we’ll just leave it at that, Gold is up in the early morning trading. 

The U.S. Data Cupboard had the June Consumer Credit (read debt) and it wasn’t as high as expected, as it printed at $12 Billion instead of the $18 Billion that was forecast. I’ve got something in the FWIW section on Consumer debt for you today, so keep reading!  

It also had the LMCI, or did it?  Actually, the Fed has discontinued the LMCI… Here’s the skinny.. As of August, the Federal Reserve’s Labor Market Conditions Index has been discontinued. The report released in July for June is the last of the series. The Fed’s explanation is posted below….

“We decided to stop updating the LMCI because we believe it no longer provides a good summary of changes in U.S. labor market conditions. Specifically, model estimates turned out to be more sensitive to the detrending procedure than we had expected, the measurement of some indicators in recent years has changed in ways that significantly degraded their signal content, and including average hourly earnings as an indicator did not provide a meaningful link between labor market conditions and wage growth.”

Chuck again… Well isn’t that special, in my best Church Lady voice..  I guess the report wasn’t giving the Fed the inflation numbers they wanted to see, so they scraped it…  Sort of like a Mob boss in the movies, they don’t like the performance of a guy so they “rub him out”… 

The Data Cupboard only has a third tier data print today, the Small Business Index, which I would expect to show weakness.

To recap, these are the dog days of summer, and well, the currencies and metals are sure showing us that, as they barely moved yesterday. Dollar traders are waiting for signs of more inflation, and they aren’t going to get it, but that’s just me talking… S. Africa might have a new president by the end of the day, and that would make rand traders happy. The euro has climbed back to 1.18, and Gold is up in the early morning trading today… 

For What It’s Worth… This comes to us by way of MarketWatch and is about how the U.S. Consumer is credit card debt up to their collective eyeballs… It can be found here: http://www.marketwatch.com/story/us-households-will-soon-have-as-much-debt-as-they-had-in-2008-2017-04-03?link=MW_popular

Or, here’s your snippet: “American consumers just hit a scary milestone.
They now collectively have the most outstanding revolving debt — often summarized as credit card debt — in U.S. history, according to a report Monday released by the Federal Reserve. Americans had $1.021 trillion in outstanding revolving credit in June 2017. This beats the previous record in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit.

“This record should serve as a wake-up call to Americans to focus on their credit card debt,” said Matt Schulz, a senior industry analyst at CreditCards.com, a credit card website. “Even if you feel your debt is manageable right now, know that you could be one unexpected emergency away from real trouble.”

Chuck again…  Yes, this is real problem folks, and it shows how easy it has been for consumers to get credit cards… I just shake my head at this kind of stuff, for it all will end up in tears.. mark my words… 

Currencies today 8/8/17… American Style: A$ .7927. kiwi .7362, C$ .7896, euro 1.1808, sterling 1.3032, Swiss $.9732, … European Style: rand 13.1483, krone 7.8953, SEK 8.1382, HUF 257.70, zloty 3.6026, koruna 22.1413, RUB 59.99, yen 110.55, sing 1.3608, HKD 7.8222, INR 63.75, China 6.7199, peso 17.91, BRL 3.1266, Dollar Index 93.31, Oil $49.72, 10yr 2.29%, Silver $16.25, Platinum $970.09, Palladium $890.58, and Gold…. $1,266.50

That’s it for today.. A Big Happy Birthday to my long time friend, and buddy that I call brother, Mike Karvas… Mike used to read the Pfennig, but he’s busier than a one armed paper hanger these days, so I’ll call him later today to wish him happy birthday… Mike and I became friends in 2nd grade… that’s a long time ago, folks.. Hey! my beloved Cardinals finally climbed to .500 with a win last night in K.C.!  It seemed like they were destined to be a losing club this year, and still might end up that way, but for now they are even Steven on the year…   The Beatles takes us to the finish line today with their song: Can’t Buy Me Love.. And with that, it’s time to go, I hope you have a Tom Terrific Tuesday, and 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.