Waiting On Retail Sales…

Good day… And a Happy Friday to one and all! It’s a infusion confusion day, along with a killer cold that won’t let go of me, but those things won’t stop me from writing this morning. However, if this is going to be a Fantastico Friday, then it’s going to happen without me, for there is nothing Fantastico about it to me right now, except for the fact that I did wake up on the right side of the daisies this morning! Grand Funk Railroad greets me this morning with their song: I’m Your Captain…

Yesterday, the currencies and metals basically saw the day as a non-event… The Reserve Bank of New Zealand (RBNZ) had already met and was disappointing, and the Bank of England (BOE) was left to pound in the stakes on the Global Growth Revival Tent, and they too disappointed with a very dovish statement, after leaving rates unchanged, as expected. Is everyone putting everything into the U.S. April Retail Sales basket today? It sure appears that way, because nothing has really moved the currencies or metals the past couple of days. The markets have become eerily complacent, and that bothers me… Because I learned my early economics at the feet of the great Hy Minsky… And this is what he talked about in his great dissertation on the markets and complacency… That just when everyone becomes comfortable with these non-moving markets, we will experience a “Minsky Moment”… When chaos enters and those complacent markets trade no more!

That “Minsky Moment” could come today, could come tomorrow, or the next day, the thing is you can’t predict when it’s going to come… U.S. stocks are even participating in the complacency, not really reacting to Geopolitical Tensions (GT’s), yes, they were down yesterday, but barely and the only significant thing about their move yesterday was that it was the biggest daily drop in about a month… Over at the 5 Minute Forecast, (www.agorafinancial.com ) and the Daily Reckoning (www.dailyreckoning.com ) they’re talking about a call by former Budget Director for Reagan, David Stockman, who’s calling for a “Retail Apocalypse” , which is just extrapolating what I’ve been telling you for months now about brick and mortar Retailers, and how many stores are closing, etc.

And my good friend, Dennis Miller, the retirementor, had a great letter about the department stores, featuring Sears, yesterday, and can be read here: www.milleronthemoney.com

Overnight there was news of a Trade Agreement between the U.S. and China.. I’ll let the Wall Street Journal (WSJ) explain it… “After months of bashing China for its trade practices, the Trump administration said it had agreed with Beijing on a broad range of measures aimed at improving the access of American beef producers, electronic-payments providers and natural-gas exporters, among others, to the world’s second-largest economy.

Some items on a 10-point plan address longstanding irritants between the two countries, as both governments strive to show warming ties while seeking cooperation on a range of economic and diplomatic issues such as North Korea’s nuclear program.”

This is BIG stuff folks, especially if it really helps U.S. exporters… I’m sure the details will be gone over with a fine toothed comb by the masses today, so expect to hear more about this later today or over the weekend.

But even this news didn’t really move the currencies, and Gold is only up $4 in the early morning trading, so we go back to sitting and waiting for U.S. Retail Sales for April, which will print this morning. Recall I told you yesterday that the BHI is indicating that this print will be better than the average bear print for Retail Sales, but to remember that Easter fell in April this year…

As one might expect, the currencies from New Zealand (kiwi) and the U.K. (pound) are underperforming on the disappointing respective Central Bank outcomes… But this underperforming is hardly worth talking about, because it’s so small… The reason I did talk about it is to point out once again the disappointment I have with the RBNZ… And apparently the markets are disappointed too… As far as the BOE, I would have thought that this dovish statement would have come previously, as the economic data here just doesn’t cut the mustard. But, it’s apparent that the markets must have swallowed BOE Gov. Carney’s line about removing accommodation a few months ago… Recall, I told you that it was NOT going to happen then?

The U.K. pound has been a real mystery with its recent gains when the economic data didn’t support these gains. But silly me, I wasn’t paying attention to something I talked about last month, and that is the snap election that PM May called for next month…I told you then that PM May was doing this to gain seats and reinforce her BREXIT program… Recall too, at the time of the announcement, I just made a comment about how I didn’t think that PM May should be taking this risk when it wasn’t needed to be taken.

But let’s go back to the reinforcing of her BREXIT programs… The markets saw this call for elections as an win-win for the conservatives, and that’s the reason for the pound rally… But, you can only price-in so much and it appears that that end has come at the same time as the dovish statement from the BOE… And once again, the pound rally fades…

Yesterday I told you how the price of Oil had bounced to the $47 handle, and last night when I was checking things, I saw the price of Oil had risen again to above the $48 handle… But this morning when I did my usual whip around the asset prices, I saw that the price of Oil had slipped back below $48, and the verbiage that I’ve seen is all about profit taking… Well, I guess that’s OK, but I would have liked to have seen the price of Oil get the opportunity to run a little bit before the profit takers came on the scene.

Not that I want to pay more for gas at the pump, but the Petrol Currencies needed some love, that they hadn’t seen in a while. They needed some Kicks… Paul Revere and the Raiders style! You know the song: Kicks just keep getting harder to find, Kicks ain’t bringing you peace of mind…

I don’t know if you’ve noticed or not, but the Hong Kong dollar / honker, has been slipping ever-so-slowly, and ever-so-small the past couple of months… I used to type the currency levels in the currency roundup and get to honkers and automatically type 7.75, and then look for the change.. But then it slipped to 7.76, no biggie I thought.. Then 7.77, and now 7.78.. It appears that it’s not goin to stop slipping until it hits 7.80… What’s this telling us? Well, remember when I told you (years ago) that I thought the Chinese would use the honker as their guinea pig and allow it to float first, and then when they were ready to allow the renminbi to float they would just fold the honker into the renminbi? Could this scenario be getting played out right before our eyes? I don’t know, but it’s beginning to walk like a duck, and quack like a duck..

OK, it’s not every day that I talk about honkers! So, I must be searching the far reaches of my pounding brain this morning…

Well, if it’s all about the U.S. Data Cupboard this morning, let’s go there and get it over with, eh? As stated above, today we’ll see the color of the April Retail Sales, which I’ve already told you, the BHI indicates that it will be a better than the average bear report, somewhere around 0.5%… And once again I remind you that Easter was in April this year… We’ll also see the stupid CPI, which I really don’t care what the report says inflation is, it’s all bunk to me! Consumer Confidence is also primed for a print today… And once again I received no phone call asking me how confident I was… I’m just saying…

The price of Gold added $6 yesterday. I guess the short paper traders were worn out from all the activity of the last week. But Gold closed yesterday at $1,224.80, and like I said above is up $4 in the early morning trading today. I’ve got an interesting piece for you in the FWIW section today on Palladium , so don’t miss that!

Before I head to the Big Finish, I wanted to point out something that should concern everyone, and that is that this week, the U.S. had 10-year and 30-year Treasury Bond auctions, and both of them were awful! The bid to cover ratio of 2.191 for the 30-year Treasury bond, was the lowest in 6 months. And the same kind of non-interest was displayed the previous day with the 10-year auction… I’ve talked about this for months now, and this week’s auctions sure play into what I’ve been talking about, and that is that China, Russia and Saudi Arabia have been pulling away from the auction window, and just when the U.S. is increasing its deficit spending, which requires funding from the sale of Treasuries… Uh-oh!

I’ve explained this before, but here goes again… When the U.S. has boat loads of Treasuries to sell, but there aren’t enough buyers, the U.S. has two choices (well 3 actually, but that 3rd one is never going to be in play) , They can either raise the yields on the bonds they need to make them more attractive, but that would cost the country oodles of extra cash in bond servicing (interest)… Or, the U.S. could devalue or just jawbone the dollar much weaker, thus making the purchase of the bonds at a discount, with the cheaper dollar.

To recap… It was a non-event day, even though there were things going on. The currencies & metals traded as if there was nothing going on, and everyone is comfortable with these couple of days of non-movements… President Trump announces a new trade agreement with China that helps exporters of beef and chicken, and help financial firms.. But even that announcement didn’t rattle the currencies or metals… it’s all about Retail Sales today here in the U.S. , the risk coming from a weaker than expected print, but the BHI tells me not to worry about that.

For What It’s Worth… OK, I know I don’t talk about Silver, Platinum or Palladium as much as I do Gold, so when I saw this article in Ed Steer’s letter (www.edsteergoldandsilver.com ) I thought it to be interesting take on Palladium, so here you go! You can read it all here: http://www.engineeringnews.co.za/article/palladium-set-to-overtake-platinum-gfms-2017-05-09/rep_id:4136

Or, here’s your snippet: “The palladium price is poised to exceed the platinum price for the first time since 2001, Thomson Reuters said on Tuesday with the publication of its GFMS Platinum Group Metals Survey 2017.

The price gap between platinum and palladium – which averaged just over $1 000/oz between 2007 and 2012 – is now at about $100/oz.

“In our view, it’s more a case of when, not if”, Thomson Reuters precious metals demand manager Ross Strachan said of the prospect of palladium overtaking platinum.

Describing platinum as the worst performing precious metal in the year to date, Strachan said palladium’s persistent large deficit would see it above $850/oz well before year-end.”

Chuck again… Now that would be interesting seeing Palladium with a higher price than Platinum… I would have to think that if that happens, that we see a big drop in the price of Platinum to accommodate the higher Palladium price, don’t you?

Currencies today 5/12/17… American Style: A$ .7380, kiwi .6840, C$ .7290, euro 1.0877, sterling 12851, Swiss $.9923, … European Style: rand 13.4433, krone 8.5990, SEK 8.8903, forint 285.21, zloty 3.8766, koruna 24.4385, RUB 57.22, yen 113.90, sing 1.4081, HKD 7.7932, INR 64.29, China 6.9030, peso 18.88, BRL 3.1603, Dollar Index 99.62, Oil $47.78, 10yr 2.38%, Silver $16.36, Platinum $915.06, Palladium $806.20, Gold $1,228.30, and SGE Gold $1,233.56

That’s it for today… Whew! I made it! There were several stoppages in today’s letter to deal with this darn cold, and to run my temples to relax my brain… Well, last night was board game night with Braden, as he came to visit us. We played Candyland, and Sorry.. .Remember those games? Well, bad news from the state water polo tournament last night, as the Lindbergh High Flyers lost their semifinal game 5-3, and they’ll miss the championship game for the first time in 3 years… UGH! The Flyers played valiantly this year, after their best player, was injured badly in a freak accident while swimming in the ocean during his “spring break”… But his absence really showed in the game last night, as earlier in the year, with him, they beat the team they lost to last night. Congrats to the team though, as they will play for 3rd place on Saturday, and congrats to son Andrew, who did another amazing job of coaching his team to another great season! OK… time to get off this bus today… The Doobie Brothers take us to the finish line today with their song: It Keeps You Running… I hope you can have a Fantastico Friday, and Be Good To Yourself!

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


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