U.S. Data Continues To Disappoint!

* Dollar stabilizes for now..
* Japanese yen rallies!
* RBA gives balanced statement.
* Chuck proves his point!


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

Good day. And a Tom Terrific Tuesday to you! Boy, am I about to throw the towel in on my beloved Cardinals’ season! They can’t hit, can’t catch, can’t throw, can’t run, and when it gets to the 7th inning they can’t pitch! Maybe the GM will stir things up with a major trade, like he did in 2013, that propelled the team to the World Series. And maybe he’ll sit on his hands like he did last year, not wanting to admit that “his team” needed help. Oh well, as my wife tells me all the time, “it’s just a game”. Derek and the Dominoes greet me this morning with their Rock Classic song: Layla. Eric Clapton was the lead force of this band, and this song is his ballad, telling of the unrequited love for Pattie Boyd, the wife of his friend, George Harrison.

OK, not wanting to turn this letter into another Peyton Place, I’ll get on with what you came here for. Well, the currencies didn’t really move much yesterday, and Gold only ended up with an 80-cent gain on the day. And today’s movements aren’t much to talk about, except in Japanese yen. Yes, proving that even a dead body bounces, yen is on the rally tracks VS the dollar this morning, having moved through its 200-day moving avg. I’m sitting here trying to figure out what got yen so lathered up last night, and the only thing I see is that this is simply a risk-aversion trade. And could go further, given the things we have going on this week.

And Thursday is the triple-witching day for the markets, as we will see the results of the U.K. election, the European Central Bank (ECB) meets, and here in the U.S. former FBI chief, Comey, will testify. That’s a lot on the markets’ collective plates for one day, and I think we’ll see a lot of this kind of trading between now and then. The dollar has, for now, stabilized, after getting sold like funnel cakes at a State Fair on Friday and through to yesterday morning.

Last night, the Reserve Bank of Australia (RBA), met, and left their rates and neutral bias unchanged, and then held a very balanced meeting with a statement afterward. The Aussie dollar (A$) saw some initial positive reaction to the RBA statement, but then the anti-risk sentiment in the markets wiped those gains out.

Across the Tasman, the New Zealand dollar / kiwi, got a boost last night from a report that showed commodity prices improved in May by 3.2%, and that offset the other piece of N.Z. data that wasn’t so good, and that was a building data report that printed negative. In fact, the bad data was ignored for the most part, and kiwi was allowed to gain, even with the A$ not faring so well. This doesn’t happen very often, so make note of the fact that kiwi gained while the A$ didn’t.

The Indian rupee has been quiet as a church mouse lately, not wanting to ruffle the feathers of the analysts that went all Chicken Little because the rupee was rallying. The move in the rupee this time has been quite stealth-like, and will most likely be supported when the Reserve Bank of India (RBI) meets tomorrow, and leaves rates unchanged. At least that’s what I’m thinking will happen at the RBI meeting tomorrow, I could be wrong about that. The rupee is our current “Currency of the Month” and it would be nice to see the rupee continue this stealth-like move, to put the stamp of approval on its current title of “Currency of the Month”.

In China tonight, the latest report on their reserves will print. Their reserves have really been the focus of a lot of analysts, who predict gloom and doom on China, because their reserves have fallen from $4 Trillion to $3 Trillion. I look at it differently. You build up reserves to use when things get tight, and things were very tight in China, and the outflow of funds were really beginning to become a real problem because it put a lot of negative pressure on the currency. So, the Chinese used their reserves to defend their currency’s value. And it now appears that the outflows problem has subsided, and the reserves are being added to again. So, look for a gain in the reserves, and that would be good thing for the global growth sentiment.

I don’t know if you’ve noticed or not, but the Chinese renminbi has really been on a run in recent weeks. What the heck has gotten into the Chinese and the Peoples Bank of China (PBOC)? Last month the renminbi was closing in on 6.90, and now it’s closing in on a sub 6.80 figure. (renminbi is a European priced currency so as the number goes down the greater the value is returned in dollars, as it takes less of the currency to sell to equal a dollar)

I think China saw an opportunity to attract investment into China, as the dollar was weakening, and looking like it could be near the end of the strong dollar trend, and that gave the Chinese the opportunity to allow the renminbi to appreciate. Just my thoughts on that. I know nothing more than the next guy about what’s going on in the PBOC’s head.

And the Singapore dollar (sing) or (S$) has really been moving in the right direction for the last couple of months. Their economy has seen waves of good and then waves of bad data, so it’s been quite uneven, but their financial status remains solid, and in today’s investing, that goes a long way toward, currency appreciation. I was reading Ed Steer’s letter this morning (www.edsteergoldandsilver.com ), and he featured a story about how Singapore’s plan to develop itself as a Gold Hub, has proven successful, as its imports and exports almost doubled in the years after the goods and services tax (GST) was removed for investment grade metals in 2012. I love reading stuff like this where success has been generated because someone had the intestinal fortitude to say, “Hey, if we become a Gold Hub, and remove the GST on investment grade metals, we’ll double our imports and exports”.

And we’re one day closer to the U.K. elections, which will take place on our Tub Thumpin’ Thursday. I think in the end PM May’s party will retain their seats, and all the drama that built up around the election will be forgotten. But then the polls have been wrong before, and that’s what I base my thought on, the polls.. But not this time, at least, that’s what I think, and if that’s correct, then the pound should be able to regain some of the lost ground it has seen taken from it, because of the election drama.

So, yesterday, I was going on and on about the jobs data from May, and how the BLS had basically saved the month with their 230,000 jobs added after the surveys. But one thing I forgot to talk about was the downward revisions to the previous two months. This is from the BLS site: The change in total nonfarm payroll employment for March was revised down from +79,000 to +50,000, and the change for April was revised down from +211,000 to +174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported. Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors. Over the past 3 months, job gains have averaged 121,000 per month.

OK.. so let’s look under the hood so that I can prove something once and for all. In March, the BLS added just 32,000 jobs, but March’s total was just 79,000 (at the time) and the BLS had to go back and revise the number downward by 29,000, Hmmm, isn’t that very close to the jobs they added out of thin air? Why, yes Chuck it is!

And April’s addition was 255,000 jobs out of thin air by the BLS, when the total at that time was 211,000. It was revised downward by 37,000, to 174,000. So, we didn’t quite reverse all the jobs added but those can still be revised downward next month!

But remember in May, when the 211,000 jobs were reported and everyone was doing their happy dance, and the Fed were slapping themselves on the back? This is why I get so upset with these hedonic adjustments! The dollar rallied, on this news, but should it have? NO! And by the time the downward revisions come along, everyone has forgotten that they were doing their happy dance and slapping themselves on the back! The next executive order I would like to see, is that there be no more hedonic adjustments on economic data!

As I said above, Gold only gained 80-cents yesterday, after being up over $5 in the early morning trading. Ted Butler, no relation that I know of, the Silver guru, pointed out yesterday that the press release regarding the Deutsche Bank trader that pleaded guilty of spoofing with Gold, Silver, Platinum and Palladium, left out something. And that is that all this illegal trading was going on during the CFTC’s (commodity regulator) 5 year investigation into Silver manipulation. Remember that, I totally recall Bart Chilton, former Commissioner at the CFTC, on TV telling people that the CFTC saw no signs of manipulation. Uh Oh.

The U.S. Data Cupboard yesterday, like I told you yesterday, was full of a bunch of economic data, but the one that I pointed out as the only one I cared about, showed up in the red. Factory Orders for April were negative -0.2%… Since April is the first month of the second quarter, and there were high hopes, yes we’ve got high hopes, we’ve got those high apple pie in the sky hopes, that the 2nd QTR was going to take off to higher ground so that the Fed could point to how proactive they were in hiking rates. And there is still 2 more months of data to round out the 2nd QTR, but quite frankly, I just don’t see the high hopes coming to fruition! And, when it all comes down the pike, the Fed is going to have to reverse their rate hikes because the rate hikes put the economy into a recession! And Factory Orders is a “real economics” piece of data folks. And with it printing negative for April, it sure isn’t getting out of the batter’s box with any speed is it? No, instead, it’s stumbling, fumbling, rumbling its way down the first base line, only to fall flat on its face before it reaches 1st base! (reminds me of my beloved Cardinals base running!)

Today’s Data Cupboard is pretty much empty, and already the markets are writing off tomorrow’s data, as they focus on the triple-witching Thursday.. But I think tomorrow’s data is important, as it will be the April print of Consumer Credit, which should read, Debt. But we all know what it is, and it will be interesting to see if March’s $16 Billion number is overcome by April’s or not. Remember, Easter was in April this year. I’m just saying.

To recap. The dollar has stabilized, against the currencies and metals for the most part, except the Japanese yen, which overnight rallied VS the dollar through its 200-day moving avg. Chuck thinks it’s simply an anti-risk trade with the triple-witching day on Thursday, with the U.K. election, an ECB meeting, and the Comey testimony. Gold only gained 80-cents yesterday, and is down a buck or two in the early morning trading today. The Indian rupee and Singapore dollar are both moving stronger in a stealth-like manor, as to not ruffle the feathers of analysts that go all Chicken Little when these two begin to make noise with their rallies. The Chinese renminbi has also been on the move, positively, reversing the trend that was in place for daily weakening fixings last month. Chuck uses the BLS’s own web site to prove how wrong they were to add jobs each month.

For What it’s Worth. I had a choice this morning between an article on why Consumers aren’t spending, or an interview with San Francisco Fed President Williams. And I chose the Consumers article, because I’m just not buying what Williams had to say, and I’m afraid I would get into trouble with that one! So, here’s the link to the article on why Consumers aren’t spending by Gary Shilling ( a well-respected economist/ analyst): https://www.bloomberg.com/view/articles/2017-06-02/why-consumers-aren-t-spending?utm_medium=email&utm_source=newsletter&utm_term=%7Bdate(%27yyMMdd%27)%7D&utm_campaign=sharetheview&utm_medium=email&utm_source=newsletter&utm_term=170603&utm_campaign=sharetheview

Or, here’s your snippet: “Consumer confidence and retail sales have not moved in tandem of late. Since the U.S. economic expansion started in mid-2009, a gauge of confidence has risen sharply from a low of 25.3 in December 2008 to 120 in April, and has accelerated recently. After an initial recovery, however, retail sales growth has trended down.

Consumer confidence is ineffective for predicting retail sales. The correlation between the two is weak, and the best fit is between year-over-year retail sales growth in the current month and consumer confidence three months later.”

Chuck again. Gary Shilling makes a list of things he believes are keeping Consumers from Spending, and while I won’t go through all of the reasons I will point out one that I think is a real problem.

“Weak income growth. Inflation-adjusted incomes for most Americans have been declining for more than a decade, with total real wages and incomes holding about flat because of the polarization of incomes that benefits top-end households. Average private-sector weekly earnings, inflation-adjusted, rose just 0.3 percent in April from a year earlier.”

Yeah, that’s one that will continue to bite us.. But there are other reasons, and I think Gary Shilling nails all of them.

Currencies today 6/6/17. American Style: A$ .7486, kiwi .7175, C$ .7434, euro 1.1250, sterling 1.2916, Swiss $ .9641, . European Style: rand 12.7841, krone 8.45, SEK 8.6640, forint 273.31, zloty 3.7278, koruna 23.40, RUB 56.59, yen 109.69, sing 1.3807, HKD 7.7940, INR 64.40, China 6.8068,peso 18.37, BRL 3.2654, Dollar Index 96.74, Oil $47.39, 10yr 2.15%, Silver $17.60, Platinum $959.60, Palladium $846.00, Gold $1,280.73, and SGE Gold $1,285.51

That’s if for today. I’ve taken up working crossword puzzles. As I start out, I need a lot of help from Google, but I’m starting to get the gist of the questions. I figured that I needed to keep my mind sharp, in something other than markets and economies! The moon sure was bright last night. The next full moon will come this Friday, and is called the Strawberry Moon.. I was sitting outside for a bit yesterday, and noticed just how beautiful our roses have come in this spring. They are full of color, and tons of blooms. Some years they disappoint, but not this year! Well, the nearly 3 weeks of Kathy being gone is coming to an end, as she will return home on Thursday, which is an infusion day for me, so I’ll be in a fog.. Welcome home! Note to Jen and Christine. I survived 3 weeks without my wife! (they always razz me that I can’t survive without my wife! ) The Moody Blues takes us to the finish line today with their song: Lost in a Lost World, which is exactly how I feel the
day after an infusion! So, it’s time to go. I hope you have a Tom Terrific Tuesday, and Be Good To Yourself!

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