U.S. ISM Soars…

Rocktober 3, 2017

* RBA leaves rates unchanged…
* U.K. PMI drops, so does pound sterling!
* Venezuela to trade Oil with renminbi!

Good day… And a Tom Terrific Tuesday to you! Well, it’s either feast or famine with me, with regards to sleep… Last night I slept through the night, well sort of, and when the alarm went off this morning, which I normally never hear because I get up before it goes off, I turned it off and went back to sleep! I kind of wish I were still sleeping this morning, but that doesn’t work with regards to the Pfennig, so, here I am! And I’m full of you know what and vinegar this morning, so watch out! The Gap Band greets me this morning with their 80’s song: You Dropped A Bomb On Me… At our Labor Day BBQ Party, this song played and good friend, Rick, requested it be played again! (he’s a child of the 80’s)…

Get the women and children and head to the basement or storm cellar, for the U.S. economy is on its way through town and its kicking tail and taking names later! And No, I haven’t changed my song… I’m just telling you what the pundits out there are writing about this morning, as one piece of economic data in the U.S. rose, and you would think that it was the Tell-All for the economy!

I’m talking about the U.S. ISM (manufacturing index) which took a large step forward yesterday rising from an index number of 58.8 in August to 60.8 in September, thus beating the estimates which was for the index number to back off the 58.8 August number. I told you yesterday that the U.S. was not going to be shown up by the strong PMI (same thing, different name) prints in the Eurozone, which by the way, is set to print tomorrow, not today, as I reported yesterday…

Any way, the dollar was able to retain its gains and carve out a couple more, but the Dollar Index is reflecting a flat performance in the past 24 hours, and that’s how I see it too, but to read the articles out there, you would think someone paid these guys $20 to say that the economy was soaring just like Janet Yellen said it was, along with saying nice things about the dollar!

I chuckle at the thought that all it would take would be $20! Reminds me of the best we used to make on the trade desk at the old Mark Twain Bank… A shiny quarter would be the amount we bet when we would have a disagreement on something… Frank Trotter would be the arbiter of any questionable outcomes… Good times… memories…

The currencies weren’t able to gain any ground on the dollar yesterday, except small moves here and there, but Gold got whacked once again, and this is beginning to look like a pile on, which used to be a penalty in the NFL, to me. Gold lost $8.90 yesterday, but has not taken on any additional water in the early morning trading today, so maybe a bottom has been put in, but I kind of doubt it, given all the negative rhetoric about the shiny metal vis-à-vis the U.S. economy and rate hikes…

In my Dow Theory Letters / DTL (www.dowtheoryletters.com) article last week, I went through all the “real economic data” and showed that the economy is NOT strong, and robust as Janet Yellen continues to tell us, so she can rationalize her rate hikes. The Lone Ranger, is the Manufacturing Index, which raises more questions than give answers for me… How can Manufacturing be so strong, when Factory Orders are weak if not negative each month, and Durable and Capital Goods Orders can’t find any terra firma? So, we’re making stuff, and just putting it in inventory? I say that because Personal Spending is not at the rate that would say, this economy is heading up!

Speaking of Janet Yellen… I read this last weekend that President Trump and Treasury Sec. Mnuchin, met with former Fed member Kevin Warsh recently… And they weren’t meeting him regarding what tee time the three of them would have the next day! And although it was not discussed as to what they really talked about, but come on… it’s not rocket science, even a country bumpkin like me can figure this one out! They met with Warsh to discuss taking over the Chairmanship of the Fed… It’s been long rumored that Warsh would be Trump’s candidate to take Yellen’s place. And even though Yellen’s term as Fed Chair doesn’t end until Feb… Trump could strongly suggest that she step down (she would still be a Fed member for a few more years), and then Warsh would step in.

The reason I believe that President Trump would want to move things up is that the Fed is beginning their “great unwind of the balance sheet” Or in honor of my good friend, the Great Mogambo Guru, GWOTBS… , which I’ve explained will be the same after reaching $600 Billion as a 1/4% rate hike, and Trump is no fan of higher interest rates, folks… So, watch for a Presidential announcement soon… At least that’s how I see this happening!

OK, enough of all that U.S. economic stuff! The Reserve Bank of Australia (RBA) met last night (today for them) and decided to keep rates unchanged. But RBA Gov. Lowe, sounded very upbeat and optimistic about the Aussie economy saying that, “Over recent months there have been more consistent signs that non-mining business investment is picking up. A consolidation of this trend would be a welcome development.” Lowe also pointed to “a large pipeline of infrastructure investment” which is “also supporting the outlook”.

OK… If you feel that good about what’s going on in the country, why not hike rates? All the data has been supportive of a rate hike, except wage growth, but Shoot Rudy, I think that’s a just a laggard, and will come along… The Aussie dollar (A$) saw a little love, well maybe a half-baked hug from the markets after the rate decision and statement…

Pound sterling got whacked yesterday, as they printed their latest PMI and things didn’t turn out so good for them as they did in the Eurozone and the U.S.! UK Sept. PMI saw the index number drop from 56.9 in August to 55.9 in Sept…

It’s nice to see the Norwegian krone get back under the 8 ball/ figure this morning, as the krone takes it cues from the direction of the euro. It sure didn’t get any positive vibes from the price of Oil, which slid further yesterday, losing the $51 handle… So, in the last week, we’ve seen the price of Oil jump from the $50 handle to $52 and change, and then reverse its rise each day sliding to $50.47 this morning…

A few months ago in a DTL article I wrote about how I saw Oil doing this two steps forward, two steps back for some time… As the U.S. shale producers step in when the price of Oil rises, and they increase the supply, which causes the price of Oil to drop, and then they cut production, and then rinse and repeat the whole scenario again and again and again… And this is exactly what we’re seeing right here, right now…

I already talked about the drop in Gold yesterday, but wanted to share with you this article that appeared on Bloomberg regarding Russia’s 10-year Itch with Gold… The article talks about how Russia has doubled its previous amounts of Gold brought into the country, and in the 2nd QTR of this year, Russia’s Gold buying was 38% of the total Central Bank buying in the world! Their Gold buying is quite impressive, folks, and they are going to use this Gold stash for something, that will hurt the value of the dollar, I can feel it in my bones, and titanium femur!

Oh! I can’t forget to mention that it was announced last night that Venezuela has decided to stop selling their Oil for dollars, and will now accept Chinese renminbi for payment… Is this the tip of the iceberg, which could be tipped over with China’s fixing Gold to their Oil futures?

Let’s say you’re an Oil producing country, and you can sell Oil to China… which in the past would require dollars be in the terms of the trade, but now China will pay you Gold for your Oil… Hmmm… Gold or dollars? I’ll take what’s behind door number 3, Monty… HA! Remember all those old game show hosts? Monty Hall, Gene Rayburn, Bob Barker, Chuck Woolery, Allen Ludden, and Wink Martindale, among others? OK, Chuck get back to work!

The U.S. Data Cupboard yesterday was all about the ISM and how great it was… And today’s Data Cupboard just has one print… Auto sales in September… We’ve seen auto sales take the dead man walking routine the last 6 months, and from the looks of the expectations, the so-called experts believe that Auto Sales in September will rebound… I talked about this a few weeks ago, when I talked about the flooding in Texas, Florida and other states from the hurricanes, and how cars were flooded out, and people would probably take the insurance money and buy new cars, thus propping up the auto sales business for a few months…

To recap… The U.S. Sept. ISM was very strong and Chuck is seeing tons of articles about how ISM print proves that the economy is as strong and robust as Janet Yellen keeps telling us, and that allowed the dollar to retain its recent gains. HOGWASH is what I think of when I hear the words strong and robust in relation to the U.S. economy, but then that’s just little old me, and not Goldman Sachs saying it! The RBA left rates unchanged but sounded very upbeat in the statement following the rate decision. Gold lost $8.90 yesterday and the price of Oil slid below $51..

Before I head to the Big Finish this morning, I wanted to stop and think about yesterday, we began to hear the news from the shooting at a Las Vegas country music festival. As of the time I’m writing this, 58 are dead and hundreds had been wounded. Then as the day went on, I saw a news flash that rock-n-roll legend, Tom Petty, 66, had died. Wait, what? Tom Petty, is gone? Yes, apparently, he had a heart attack… Two sad events on the same day, instead of rainy days and Mondays always getting one down, Shootings and heart attacks always get me down… I don’t know where to start with this Las Vegas shooter… So, I’ll just say a prayer for those he changed the lives for. I guess we’ll hear more about Tom Petty’s health as time goes on. But shoot Rudy, watching him perform would have had me believing that he was the most mellow rock-n-roller out there.. But I wouldn’t pretend to know his personal life, and don’t care to, at this point. Tom Petty… R.I.P.

For What It’s Worth… A few years ago, I wrote about how I thought China’s Gold reserves were much greater than what was being reported by them. I even threw out a figure that I thought it could be… It was 12,000 to 14,000 Tonnes of Gold… Well, this article that Reuters took from the Chinese newspaper, Xinhua, can be found here: http://www.reuters.com/article/china-gold/china-proven-gold-reserves-at-12100-tonnes-at-end-2016-xinhua-idUSL4N1MD2NN

Or, here’s your snippet: “China’s proven gold reserves reached 12,100 tonnes at the end of 2016, the state news agency Xinhua reported on Monday quoting an official with the national gold association.

China has been the world’s biggest gold producer for 10 years and the largest consumer of the metal for four years, it said. China aims to increase its annual gold output to 500 tonnes by 2020 from around 450 tonnes currently, it said.

Last year, 70,000 tonnes of gold were traded in China on spot exchanges, futures exchanges and over-the-counter at banks, and that amount was expected to exceed 100,000 tonnes by 2020, Xinhua quoted Zhang Yongtao, vice chairman of the China Gold Association (CGA), as saying.”

Chuck again… WOW! I love it when eventually I’m proved to have been correct! And that’s all I’ll say about that! But for all you naysayers out there that doubted me… neener, neener, neener! HA!

Currencies today 10/3/17… American Style: A$ .7820, kiwi .7180, C$ .80, euro 1.1758, sterling 1.3260, Swiss $ .9740, … European Style: rand 13.6753, krone 7.9880, SEK 8.1360, forint 265.05, zloty 3.6650, koruna 22.0533, RUB 57.78, yen 113, sing 1.3623, HKD 7.8114, INR 65.63, China 6.6515, peso 18.27, BRL 3.1598, Dollar Index 93.54, Oil $51.47, 10-year 2.37%, Silver $16.64, Platinum $ 914.86, Palladium $913.39, and Gold… $1,273.90

That’s it for today… I know this is a little later than usual, I’m sorry, but I just couldn’t deny myself the sleep I needed! Little d, (Delaney Grace) was here yesterday, as she wasn’t feeling well, and had to leave school. I could tell she wasn’t right, as she just laid on the couch and didn’t sing, or talk! I was talking to my friend yesterday, and she asked me how was feeling, and I said, “well I’m 10 days from my last infusion, and 3 days before my next one”… “Does that answer your question? ” The Turtles takes us to the finish line today with their song: It Ain’t Me Babe, which I believe was a Bob Dylan song that they re-recorded. And so, we end today’s letter, and 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.

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:
  • THE ADEN FORECAST. The flag-ship. Covering major markets and providing specific investment recommendations for over 36 years, written by Pamela and Mary Anne Aden. To subscribe, click here.
  • DOW THEORY LETTERS. A daily newsletter published for over 50 years, originally created by legendary investor and writer Richard Russell. Currently, it provides commentary written by in-house market specialists, including Pamela and Mary Anne Aden, Matthew Kerkoff, John Strebler, Chuck Butler and Carla Pasternak. To subscribe, click here.
  • GOLD CHARTS R US. A weekly trading service started by legendary investor and trader Sir Harry Schultz. GCRU is written by trader and market strategist Omar Ayales. To subscribe, click here.