U.S. Data Shows More Economic Weakness…

Rocktober 2, 2017

* Doll returns with vengeance
* Ruble is best overnight performer…
* Gold gets whacked! UGH!

Good day… And a Marvelous Monday to you! It’s the middle of the night again… I just don’t get it… Went to the park Sunday evening to watch my beautiful granddaughter play soccer. Delaney is a tiny thing for her age, but she sticks her nose in the middle of everything out there on the pitch… A real bulldog with pink socks and bows in her hair! Rocktober is here, so welcome to Rocktober! Longtime readers know that I change this month to Rocktober. Pink Floyd greets me this morning with their song: Us and Them… Which is what I feel it’s like at times…

After two days of healing for the currencies and metals, the dollar fought back on Friday, which was kind of strange, given that the economic data wasn’t exactly the prints that would give the dollar the edge… Personal Income and Spending were weaker on both fronts than the expectations, but the dollar rallied anyway. Makes you wonder, and I’m not talking about who wrote the book of love, no… I’m talking about what/ who was driving the buy the dollar trade on Friday? My spider sense is tingling, and I moved the Ouija Board to the “The PPT intervenes” answer…

The saber rattling took a back seat this past weekend, and that’s a good thing, as the words were beginning to lead me to think that something bad was going to come of them. I checked the currencies and metals prices Sunday night before going to bed, and noticed that the euro was losing ground, but still held a 1.18 handle… But, then the news came through overnight that the Catalans (of Spain) had voted, and the results of their vote will be known in a couple of days, and the leader of the Catalans said that their independence from Spain could come as quickly at 48 hours after the vote reveal..

This vote really sunk the euro’s battleship overnight folks… And without the Big Dog getting off the porch to chase the dollar down the street, all the little dogs stayed in their allotted places until their time had come for them to visit the woodshed, and one by one they took their punishment in the woodshed, and returned to their allotted places with their collective tails between their legs. But should this “vote” bring about a demise of the euro’s rally? I don’t think so, and would think that by next week, this Catalan vote and independence news will be water under the bridge for the euro.

Since January this year, I talked about how the Norwegian krone was not only benefitting from the rebound in the price of Oil, but also the rally going on with the euro, and that was all peachy, until the euro rally was stopped, and the rebound in the price of Oil stalled… The krone has backed off and has returned to trading with an 8 handle, and I don’t like seeing that, but understand why that is. The Swedish krona had been one of the best performing currencies so far this year, but they too had already slipped to the 8 handle, and these two currencies need something to jolt them from this funk that they are presently in.

Earlier this morning, Germany, France, Spain and Italy all reported their PMI’s for September, and all were at least bang on with August’s number or Spain had a big jump in their PMI (manufacturing Index) and saw their Index number rise from 52.4 to 54.9… Tomorrow we’ll see the color of the “harmonized” PMI, which will be reports from all the countries of the Eurozone, melded together for one report.. I expect the harmonized report to be just as Steady Eddie as the reports from Germany, France and Italy were this morning.

Not to be shown up by strong PMI’s, the U.S. will print their own version of a PMI, (we call it the ISM) today, and it will be just as strong and impressive as the Eurozone’s prints… There not much going on data-wise in Asia today, so we’ll just move along here…

Before we go though I need to talk about Russia a bit… This past week Russia reported that they would have a record grain harvest, beating the old record held by the Soviet Union. So, let’s see now… Russia is either a leader or near the top in nuclear, military, oil, natural gas, minerals, geopolitical ability, and now wheat harvesting… And all while dealing with the effects of economic sanctions placed on them by the U.S. and the Eurozone.

And the ruble is rallying this morning despite the problems the other currencies are having, the ruble the top performing currency overnight, and it’s not because the price of Oil has jumped again… In fact, the price of Oil has slipped a little from Friday morning’s price. So, we have a winner, winner, chicken dinner today, and it’s the ruble!

No news from either Germany or New Zealand about respective progress with forming a coalition gov’t. I was talking with Frank Trotter last week, at lunch, and we were discussing these Governments and the problems they will have in forming coalition Gov’ts. And I offered up that New Zealand will have the more difficult time since the 3rd Party that’s needed by either side (National Party VS Labor) has a leader that dislikes both parties attempting to woo him and his party to join them… And if little old me in St. Louis can see this, then kiwi traders should be all over it like white on rice, and they are, taking kiwi lower every day…

In the U.K. the uncovering of details in the BREXIT stuff continues and last week it was the reveal that when you take out Gold, exports to the European Union are more than 50% of the U.K.’s total exports. (you have to take Gold out, because London is a major Gold hub, and Gold can’t be included in the other nonfinancial exports… I think this news will weigh heavily on pound sterling… I don’t really believe that anything good is going to come out of the BREXIT discussions, and that will continue to be a cross to bear for pound sterling.

Speaking of weighing heavily on something… The short Gold paper trades weighed heavily on Gold on Friday, and in the early morning trading today… Gold lost $7.30 on Friday, and is down another $10 this morning to trade at $1,274.70… I’m just not buying the story going around that Gold is getting sold because the Fed sounded hawkish at their last meeting, and the President’s tax reform will make American Great Again…

First of all I think the Fed will have to eat those hawkish statements come December, and who knows what gets passed these days in this country that has leaders that are so divided on everything. And besides, the tax plan on the table right now, is nothing more than a debt gatherer… Don’t get me wrong, I would love to have less taxes taken out of my money… But, that’s not what this tax reform is all about… And that’s all I’m saying about that!

The U.S. Data Cupboard was interesting on Friday, in that we had the Personal Income and Spending data prints that didn’t meet expectations, and we actually saw a small slip in the Consumer Sentiment report for September… The really bad news came from inflation readings as the core PCE price index (Persona Consumption Expenditures), which is the Federal Reserve’s central inflation gauge, inched only 0.1 percent ahead while the year-on-year rate fell backwards, down 1 tenth to 1.3 percent for the weakest result since November 2015. This data print is better than the stupid CPI, but it still has its flaws, and I prefer to see what John Williams at Shadowstats.com says about inflation… And he has CPI near 6%..

To recap… It’s all about the dollar, for the most part, today, and this dollar buying started on Friday and hasn’t stopped. The Russian ruble is the only currency that I follow that has a gain VS the dollar this morning. Gold got sold on Friday and in the early morning trading today, Gold has given up $10… It’s PMI week around the world, with the Eurozone seeing individual country reports today, and the harmonized report tomorrow, and the U.S. to print their version of a PMI when our Sept ISM gets printed. Friday’s Data Cupboard saw Personal Income and Spending not gain any ground, Consumer Sentiment slip, and the PCE inflation calculator see an annual drop to 1.3% from 1.4%…

For What It’s Worth… Longtime reader, Bob, sent me this on Saturday, and I knew from reading the headline that it would be FWIW worth! It’s about stagnation, which is what we are currently in here in the U.S. and it can be found here: http://www.blacklistednews.com/Stagnation_Is_Not_Just_the_New_Normal–It%27s_Official_Policy/61050/0/38/38/Y/M.html

Or, here’s your snippet: “Although our leadership is too polite to say it out loud, they’ve embraced stagnation as the new quasi-official policy. The reason is tragi-comically obvious: any real reform would threaten the income streams gushing into untouchably powerful self-serving elites and fiefdoms.

In our pay-to-play centralized form of governance, any reform that threatens the skims, privileges and perquisites of existing elites and fiefdoms is immediately squashed, co-opted or watered down.

So the power structure of the status quo has embraced stagnation as a comfortable (except to those on the margins) and controllable descent that avoids the unpleasantness and uncertainty of crisis. We all know that humans quickly habituate to gradual changes in circumstances, and that if the changes are gradual enough, we have difficulty even noticing the erosion.

So wages/salaries stagnate, inflation eats away at the purchasing power of our net income, junk fees, tolls and taxes notch higher by increments too modest to trigger protest, fundamental civil liberties are chipped away one small piece at a time, healthcare costs rise every year like clockwork, and the gap between the bottom 95% and the top 5% widens, as does the gap between the top .1% and the bottom 99.9%, productivity stagnates, the growth rate of new businesses stagnates, but it’s all so gradual that we no longer notice except to sigh in resignation.”

 

Chuck again… This article was written by Charles Hugh Smith, who always writes stuff that I want to read!

Currencies today 10/2/17… American Style: A$ .7804, kiwi .7178, C$ .7980, euro 1.1745, sterling 1.3333, Swiss $.9722, … European Style: rand 13.6385, krone 8.0070, SEK 8.1812, forint 265.30, zloty 3.6727, koruna 22.1253, RUB 57.52, yen 113.02, sing 1.3623, HKD 7.8121, INR 65.69, China 6.6544, pes0 18.29, BRL 3.1614, Dollar Index 93.56, Oil $51.39, 10-year 2.37%, Silver $16.60, Platinum $910.17, Palladium $933.59, and Gold…. $1,274.70

That’s it for today… My first Sunday of not watching any pro football, I have to say I didn’t miss it! Of course I watched my beloved Cardinals last game for 2017, and they lost… UGH! I’m pinning my colors to the Cleveland Indians to win it all this year… I sure hope I didn’t just jinx them! My friend and former colleague, Aaron Stevenson, came out to my little river town to see me last Friday… It was great to see him, hear about the folks back on the World Markets Trading Desk. I guess I’ll attempt to go back to sleep now that this is finished, so good night! HA! The McCoys take us to the finish line today with their classic song: Hang On Sloopy… And with that… Welcome to Rocktober, I hope you have a Marvelous Monday, and I also hope you are 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.

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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