Waiting For PPP To Kick In…

A Pfennig For Your Thoughts

June 18, 2019

* WTH is going on with the dollar?
* Chuck gives us a history lesson today… Ooh, where do I sign up for that!

Good Day… And a Tom Terrific Tuesday to you! Still using the phrase “Tom Terrific”, and no one’s knocking on my door yet to tell me to stop! HA! I forgot to congratulate the Toronto Raptors for winning the NBA Championship… They are the first team outside of the U.S. to win the Championship, and they beat the Warriors! A feat I didn’t think any team could do… I don’t follow the NBA much, but do know about the Warriors… I’m at this much earlier than usual today, as I’ve already taken my beautiful bride to the airport this morning… Yes, I’m all by myself, once again… Oh well… Life goes on, eh? Grand Funk Railroad greets me this morning with their song: Heartbreaker…

What the heck (WTH) is going on here? Early last week, the dollar was getting sold like it should have been all along, and the currencies were looking healthy again. And then Boom! Traders switched horses in the middle of the stream, and began to buy dollars once again… There was no news of any Trade Deal with China… There was the news of oil tankers being attacked… There was no good economic data printing… And there was a Fed FOMC meeting looming, where most people think the Fed heads will at least talk about a rate cut… And yet the Traders bought dollars, and are still buying them?

You don’t think , no… Chuck, that couldn’t happen in today’s world, there’s just too many watchdogs out there… But, Chuck, think about it, at one point you thought the dollar was in deep dookie as it was falling, and then it wasn’t, just like that… The only thing that could have turned the dollar on a dime like that was intervention… OK, I’ll give you that, but… from whom, because foreign countries are dropping the buying dollars routine like a bad habit…

Well, have you considered the Fed itself? Or The Plunge Protection Team (PPT)? Oh, I see, you’re going to throw those at my feet because I’ve accused them of intervening before? OK… I get it… I see… there had to be more than the hand of God (Pardon me Mr. Maradona) that changed Traders’ minds last week… So, I’ll play along and say it was the PPT…

And here’s the good news that comes from all this kind of intervention… The prices of the currencies are cheaper again, so you can buy more of them, and stock up for when the dollar does do the old exit stage right, and heads for cover… You’ll be all prepared… YAHOO! Thank you price manipulators for making currencies cheap again! What’s that sound I hear? Beep, Beep, Beep, Oh, it’s the sound of a truck backing up…

The Purchasing Power Parity (PPP) talk I had with you yesterday, isn’t providing any benefit for the euro… If the euro was 20% undervalued on a PPP basis when it was 1.13, it’s even more undervalued now that the single unit has dropped further…

And Gold found a way to gain back some of the $5 loss it had yesterday morning, to close the day down $2… This morning, the shiny metal is up $5, and is within spittin’ distance of the Maginot Line of $1,350 as it trades this morning at $1,344… A couple of months ago I told you how Gold guru, Egon Von Greyerz talked about how he thought that Gold would cross the Maginot Line of $1,350… Did you know that the Maginot Line goes back to World War II, the French thought they had formed a strong line of resistance against Germany, and they called the line of resistance the Maginot Line, named after their minister of war… Andre Maginot

Well, we all know from history that eventually the Germans found a way through the Maginot Line, and it didn’t prove to be as strong as once thought… And there’s your history lesson for the day… Oh, and I too think that eventually Gold will find its way through the Maginot Line, and when it does… clear the decks!

What will it take to get Traders to realize that their barking up the wrong tree? Could it be news that more and more foreign countries are using Russia’s version of SWIFT? Hmmmm… Could it be that on CNN of all places they had Fareed Zakaria explaining how America’s closest allies are working together to undermine the strength of the dollar?
Hmmmm… Or, Could it be news that was reported yesterday that: Combined Russia, China Treasury Holdings Hit 9 Year Low As Foreigners Keep Dumping US Stocks? Hmmm… Or, it may not be any of these, but something else that comes along, but it will be something folks… I can feel it in my bones… And no that’s not the chemo I took this morning talking to me! I can feel it in my bones that something is coming…

The U.S. Data Cupboard had the Empire Manufacturing Index for us yesterday, which normally no one pays attention to these regional reports because they never seem to add up to the National report… But this one seemed to hit a chord with some economists that believe this is a good indication that a recession is on the way, because the Empire region showed the biggest drop on record for a month… May’s number when negative, which was the first time a negative number was printed with this data set since Rocktober 2016! The Empire Region is the New York region, which why they don’t just call it that drives me crazy!

Today’s Cupboard has some Housing data for May to look through… May Housing Starts… I don’t get any big ideas about this data for it has to very lagging, in that the recession could be well into its 3rd month before builders stop starting new houses! The Fed’s FOMC meeting begins today… I really do believe the Fed heads are going to begin to grease the tracks for rate cuts that will start with the July meeting…

Yes, I said July meeting for the first of 3 rate cuts that will come between July and December… You heard it here first, so what are you going to do about it? Got Gold? Got euros?

To recap… The dollar bugs are still in the driver’s seat, and not the one Sniff-n’-the Tears sang about! Chuck is finally convinced that it was more than the hand of God that move Traders from selling dollars last week to buying them… Chuck gives us a history lesion, and goes through some of the things that could turn the dollar into mush…

For What It’s Worth… OK, I spent some time this morning going through the Maginot Line, and when the GATA folks sent me this email I thought, these two play in the sand together nicely… And so this continues that talk about if Gold can get through the Maginot Line and can ge found here: http://investmentresearchdynamics.com/can-western-central-banks-continue-capping-gold-at-1350/

Or, here’s your snippet: “Judging from the latest Commitment of Traders Report, which shows the Comex bank net short position growing rapidly, there’s no question that Friday’s activity was an act of price control. Furthermore, it’s common for the price of gold to be heavily managed on summer Fridays after the physical gold buyers in the eastern hemisphere have retired for the weekend. The motivation this Friday is the fact that the gold price had popped over $1350 on Thursday night. For now $1350 has been the price at which price containment activities are readily implemented.

The price of gold is most heavily controlled just before, during and after the FOMC meeting. The next meeting begins tomorrow and culminates with the FOMC policy statement to be released just after 2 p.m. EST. The event has become the caricature of a society that takes official policy implementation seriously. This includes the journalistic and analytic transmission of the event, which is literally a Barnum and Bailey production.

It seems the number one policy goal of the Fed and the Trump Administration is to keep the stock market from collapsing. But the Fed has very few rate cut “bullets” in its chamber to help accomplish this policy directive. Moreover, a study completed by the Center for Financial Research and Analysis showed that the S&P 500 Index fell 12.4% in the first six months after cuts started in 2007. The drop broke a post-World War II record decline of 9.5% set in 2001, when the Fed’s previous series of rate reductions got under way. Declines in the S&P 500 also followed moves toward lower rates that began in 1960, 1968 and 1981.

This suggests to me that the Fed will have to start printing more money. The only question is with regard to the timing. Judging from the steady stream of negative economic reports – a record drop in the NY Fed’s regional economic activity index released today, for instance – it’s quite possible the printing press will be fired up before year-end.” – Dave Kranzler writing to the folks at GATA…

Chuck again… Yes, it appears to me that the whole shootin’ match is going to be lit up by year end here in the U.S. And none of it is going to be helping the dollar… So, once again I ask… What are you going to do about this?

Currencies today 6/18/19 American Style: A$.6844, kiwi .6512, C$ .74447, euro 1.1188, sterling 1.2527, Swiss $.9999, European Style: rand 14.6557, krone 8.7436, SEK 9.5065, forint 287.91, zloty 3.8095, koruna 22.8682, RUB 64.27, yen 108.30, sing 1.3715, HKD 7.8336, INR 69.66, China 6.9240, peso 19.14, BRL 3.8931, Dollar Index 97.70, Oil $51.69, 10-year 2.05%, Silver $14.89, Platinum $798.53, Palladium $1,482.20, and Gold… $1,344.67

That’s it for today… Well, my beloved Cardinals got their homestand off on the right foot last night with a 5-0 win.. gotta do it again tonight! What will I do with myself for the next 10 days? The same thing I do every day now! I do have a visit with my oncologist tomorrow, but later in the morning, so no probs with getting the Pfennig out before I leave… A friend of ours from Long Island called on Sunday to congratulate us on our team’s (The Blues) Championship… I told her I still get goose bumps and tear up when I think of it… The Yardbirds take us to the finish line today with their song: For Your Love… Guitar legends, Eric Clapton, Jimmy Page, and Jeff Beck all played with the Yardbirds… I hope you have a Tom Terrific Tuesday, and Please Be Good To Yourself!

Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts