U.S. And Iran to Butt Heads?

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

April 26,2018

* Riksbank leaves rates unchanged, and ECB meets…
* Oil rises on Iran deal talk…

Good Day… And a Tub Thumpin’ Thursday to you! I bagged the alarm again this morning, UHG! Good thing I’m no longer working for a wage, eh? Of course back when I was working for a wage I would go to bed at night and sleep through the night, so getting up before the rooster crows wasn’t a BIG Deal. My beloved Cardinals’ bats came alive last night. This team just can’t find any consistency in the early part of the season so far… I hope they figure it out soon, otherwise it’ll be a long summer… Lynyrd Sknynyrd greets me this morning with their song; The Ballad of Curtis Lowe…

Well, the short squeeze, that has turned the dollar into a world beater once again continued yesterday and in the overnight markets. The euro has given up the 1.22 handle, and the rest of the currencies fall in behind the Big Dog euro. I do want to say that I’m getting the sense that this short squeeze is nearing an end, in my opinion, because the downward moves in the currencies were small yesterday, which indicates to me that the depth of the trade is thinning out. That’s how I see it, so let’s see how it unfolds, eh?

If I’m correct, then we need to be finding the keys to our truck that we’re going to back up to buy the currencies and metals once the short squeeze is over. We’re going to want to be ready to move when the time comes, right? I hope I’m not doing a Will Farrell in his movie when he’s streaking down the middle of the street, and thinks there’s a whole mass of people streaking behind him, only to find out he was by himself…

Alrighty then… The Big News overnight is that France’s President Macron, told reporters yesterday that he believes the U.S. is going to pull out of the Iran Nuclear Deal, which got the Iranians irritated and they responded that if the U.S. pulls out, they will too… Well, that got the juices flowing with Oil traders and investors, and they began to buy Oil and drive the price up over the $68 handle on the day.

I had a longtime reader send me note the other day, and wondered why I stopped adding the link to the Debt Clock each week? I sat back and said to myself… “I don’t have an idea why I that happened!” So, in honor the former longtime tradition on Fridays to list the Debt Clock link, I’ll try my best to recall to do it every Thursday now… So, here you go!http://www.usdebtclock.org/ Did you know that the Debt Clock is also an app for your smart phone? I have it, and whenever I’m out and someone begins to spout off about the debt or whatever, I pull out m iPhone and click on the app and soon am able to right his wrong with proof!

Go ahead and click on the link… Now scroll down and you’ll see the two things that scare the bejeebers out of me… The Unfunded Liabilities which are $112.9 Trillion and the Unfunded Liabilities per Tax payer… $930,348! WOW! and that’s not a good WOW! And Professor Lawrence Kotlikoff believes that the real Unfunded Liabilities is more than $200 Trillion! And as I’ve explained many times before, but will do so again because well, I want to… The Unfunded Liabilities represent the so-called Entitlements, and with 10,000 Baby Boomers retiring every day for the next 10 years, the strain on the Unfunded Liabilities is going to be tremendous…

Now, doesn’t that scare the bejeebers out of you too? Or are you one of those people that believe the U.S. could just print enough money to cover the debt and start over? Well, the U.S. could do that, but what would that do to the value of the dollar? Yes, that would ruin the dollar’s value and bring it to its intrinsic value… Ok, you say, that wouldn’t be the end of the world, now would it? Well, let me ask you this… All your investments, your home, etc. are denominated in dollars, so if you don’t mind that your net worth gets bashed and bruised, and your purchasing power has gone to hell in a hand basket, then you’re good to go!

Alrighty then, enough of that! The Riksbank (Sweden’s Central Bank) surprised observers this morning by leaving their interest rates unchanged. It was thought that the Riksbank was going to hike rates at this meeting, and thus get out of the negative interest rates game… But that didn’t happen and the krona is paying for it…

The European Central Bank (ECB) is meeting while I write this morning, but there’s nothing here to mention… The ECB is stuck in the mud, for the euphoria they had a couple of months ago with the economy, has faded, and with that fade, is the possibility of the ECB also getting out of the negative interest rates game… No wonder the euro can’t seem to find a bid these days…

So, if anything, look for the ECB President, Mario Draghi to be a real Eeyore this morning and not give the euro any ability to rebound…

Gold wasn’t able to put two days of gains together yesterday and lost $7.20 on the day, closing at $1,322.60… There weren’t as many contracts traded yesterday in Gold, with a good amount still of 258,000.. Up one day, down the next, no trend to speak of here, and that really surprises me in that with all the geopolitical stuff going on Gold should be racking up gains on a daily basis… I’m just saying…

The U.S. Data Cupboard was empty yesterday, but gets restocked today with the real economic data prints of Durable Goods and Capital Goods Orders for March.. .I expect these two pieces of data to fall from February’s print of 3.0% and 1.4% respectively. There are some other minor pieces of data to print today, but these two are definitely the cat’s meow of data prints today…

To Recap… The Riksbank left rates unchanged, surprising observers who thought they would hike them. the ECB is meeting as Chuck writes this morning, and the dollar continues to swing its mighty hammer as the short squeeze nears an end, in Chuck’s opinion… The U.S. and Iran seem to be headed in the wrong direction, and that has the price of Oil rising again this morning…

For What It’s Worth… I saw this in Ed Steer’s letter today, and when he said it was Ambrose Evans-Pritchard writing it I knew I would want it for the FWIW section today… This is about the price of Oil rising to $100, and can be found here: http://business.financialpost.com/commodities/energy/oil-shock
Or, here’s your snippet: “The world risks a full-blown oil shock within months as three geostrategic crises come to the boil and Saudi Arabia hints at US$100 crude, setting off a speculative scramble by commodity hedge funds.

Brent crude has surged this week to a 40-month high of almost US$75 a barrel even though the global economy is losing momentum. This price spike is different from earlier China-driven episodes over the past 15 years. It reflects a constriction of supply and a rising “political premium.” Such a context makes it more threatening.

It is now highly likely that Donald Trump will reinstate oil sanctions against Iran on May 12, this time adding extra curbs on distillates. Japan and South Korea will almost certainly join the Americans. Most European firms will fall into line whatever the policy of their own governments since it is dangerous to defy the U.S. Treasury. Most insurers and shippers will steer clear of Iranian cargoes.

“We are pretty confident that oil will be in triple digits by next year,” said Jean-Louis Le Mee from Westbeck Capital. By then the oil market will be feeling the delayed effects of a 40 per cent slump in investment from late 2014 to early 2017, storing up a structural shortfall of 8 million barrels a day (b/d).”

Chuck Again… And what was the driving force of last month’s rise in auto sales? SUV’s and Trucks.. in other words, gas guzzlers, just in time for the price of gas to go through the roof again… How many of those purchases will be abandoned on the side of the road in the future? I’m just saying….

Currencies today 4/25/18.. American Style: A$ .7576, kiwi .7075, C$ .7788, euro 1.2182, sterling 1.3960, Swiss $1.0166, … European Style: rand 12.3711, krone 7.9453, SEK 8.5760, forint 256.76, zloty 3.4744, koruna 20.8975, RUB 61.98, yen 109.22, sing 1.3260, HKD 7.8473, INR 66.74, China 6.3166, peso 18.82, BRL 3.4830, Dollar Index 91.17, Oil $68.32, 10-year 3.0%, Silver $16.60, Platinum $912.16, Palladium $975.96, and Gold… $1,324.60

That’s it for today… My new chair was delivered yesterday… I had long wanted a recliner down here in my winter home, and last week I finally bit the bullet and bought one… Man is it comfortable! I may not get out of it all day now! HA! Day game at Busch today, wish I were there to go to the game, but I’m not, so I’ll have to miss it… I saw it was raining while the game was going on last night… UGH! Should be a good day for a day baseball game today… I know it will be nice an warm here! And with that thought, it’s time to get this out the door! Steely Dan takes us to the finish line today with their song: Black Friday… I hope you will go our and make this a Tub Thumpin’ Thursday, 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:
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