What’s All This Dollar Buying About?

A Pfennig For Your Thoughts

November 28, 2018

* Currencies & metals have an awful day…
* Draghi says Eurozone economy is slowing.. No duh!

Good Day… And a Wonderful Wednesday to you… Brrr… It’s cold and I despise cold weather. I was reminded of that yesterday, as I walked across the parking lot for my doctor appt. North of here, up Chicago way, they’ve had a ton of snow already to deal with… My Mizzou Tigers Basketball team made a nice comeback rally last night only to fall 2-points shy, and lose, on their home court! Non-Conference games are not supposed to be lost at home! Tsk, Tsk… Looks like it’s going to be a long season… UGH! Earth, Wind and Fire greets me this morning with their song: After The Love Has Gone…

Another day back and another day of dollar buying… I’m serious when I say if you pay me enough, I’ll go away for good, and that would bring about a currency rally to beat the band! The folks at TIAA Bank tried to pay me to go away, but they didn’t pay me enough! HAHAHAHA! And so, I’m still hanging around, making a nuisance of myself!

President Trump commented that he intended to go ahead with additional tariffs on the Chinese exports to the U.S. And the dollar got bought? What gives? Yes, European Central Bank (ECB) President, Mario Draghi, spoke and acknowledged that economic growth for the region is slowing, and that certainly would be cause for some slippage in the euro, but not a loss of 2 cents since last week!

Anyone worth their weight would have figured that one out, given the Trade War going on, no wait… I take that back… What I meant to say is anyone with an ounce of brains could figure out that Global Growth is going to the outhouse because of the Trade War… The U.S. is not-immune from this and we’re going to soon find out, if we haven’t already (with the GM announcement on Monday)…

So the markets/ traders were not so kind to the currencies & metals yesterday, and one has to wonder why? Why would traders be buying dollars, when like I’ll tell you below, Consumer Confidence fell, along with Home prices? These data prints just continue to point to a recession, and yet, traders keep buying dollars… Is this some conspiracy or something? No… But it does smell like one… A conspiracy to build enough fluff in the dollar so that when the you know what hits the fan, and the dollar begins a long downward spiral, it would then start from a higher level… Now, that I can get my arms around… But nothing else…

Traders are supposed to be forward looking… months in advance… But I would have to say that these traders have blinders on… Yeah, that’s the ticket! The President is even beginning to wave the white flag on the economy… he’s blaming the Fed Chairman for what ails the economy these days, and while that may be true, his Trade War is just as much to blame!

But, I learned a very long time ago, that the markets are always right, and to fight them you would be wrong… I’ve been fighting them for decades now, sometimes I’ve been right, sometimes I’ve been wrong… But it is what it is… nothing more, nothing less… If you believe in something, like diversified investment portfolios then the only thing you can do when things go against you is to hunker down… My dad taught me something many moons ago… I was upset with what was going on at work, and he told me… “Son, just go to work, put your head down, and do your job, and in the end you’ll be fine.”

Well, the hits keep rolling in for the economy… The latest data print to go on the side of “Things that will bring the economy to its knees” is Student Loan delinquencies… I told you the other day about how they had become so large, well, now the percentage of delinquencies has risen 9.1% in the 3rd QTR! OMG! What’s next? Oh, there was another data print… Consumer Debt, which is also Household Debt is soaring… Household Debt hit another record high, rising to $13.5 trillion in the third quarter. It was the largest quarterly jump since 2016!

Corporate Debt, Consumer Debt, State Debt, Government Debt, Underfunded liabilities, Underfunded Pensions, Foreign participation waning at the Treasury Auction Window, And a Trade War still isn’t enough to bring Consumer Confidence back to reality… For the first two weeks of this month Confidence dropped from 137.9 to 135.7… But that’s not that much, considering all that’s going on… And that’s why I call this data stupid, because… It makes no sense… And the data collectors never call me and ask me if I’m confident about all this stuff… Because, well, I am confident, but my confidence is that this is all going to come crashing down on us one day, and at this point, that “day” keeps drawing closer…

OK… let’s talk about something else…

The U.S. Data Cupboard today will have a revision of 3rd QTR GDP, which still doesn’t have the full effects of the Trade War, so a weaker print from the 2nd QTR is a given, but how weak? And New Home Sales from Rocktober will also print. But the big item on the docket today is a speech from Fed Chairman, Jerome Powell…

I read this morning that stock futures here in the U.S. are indicating a strong open today, based on the Powell speech… You see, there’s bound to be a lot of disappointment today from those thinking that Powell is going to signal a pause in rate hikes… He’s given no indication previously that the Fed is thinking of pausing rate hikes at this time, so I have no idea where this wild idea came from… To me, I can only think of grasping at straws… That’s what this stock market is doing… grasping at straws, here in the Last Chance Saloon… I’m just saying…

The price of Oil rallied a bit in the past 24 hours, but not much to write home about. And Gold lost $7 on day yesterday… The euro dropped, Gold lost $7 and Oil saw a small blip of a rally. The anti-dollar assets did not have a good day, and once again I come back to why are traders buying dollars? (when I say traders, I’m talking about all the hedge funds, large trading desks, and so on)

To Recap… It was not a good day for the currencies and metals yesterday, as traders flocked to dollars, and Chuck wants to know why? Draghi did his best Mr. Obvious statement, but that shouldn’t have caused the damage that the euro has seen. More data shows larger cracks in the economy’s foundation… When Is the Fed going to notice the rot being exposed daily on the Housing sector? And if they do notice it, will they do anything about it? I doubt it…

For What It’s Worth… Well, I’ve been talking about these Corporate Leveraged Loans and the problems they are going to cause for the economy, and then this article hit me like a V-8 forehead slap, as the article is all about leveraged loan problems and can be found here: https://www.zerohedge.com/news/2018-11-27/leverage-loan-market-hits-brick-wall-four-deals-get-pulled

Or… Here’s your snippet: “After both investment grade and high yield bonds got crushed in the past month with spreads blowing out to multi-year wides — and generated negative YTD returns as Morgan Stanley now sees the bear market gripping credit accelerating into 2019, many traders were wondering how long before the final bastion of the credit bubble – leveraged loans – would also pop.

It appears the answer may be “now” because as Bloomberg reports, no less than four leveraged loans have been pulled this month as a result of the turbulence gripping the broader credit market, the highest number of pulled deals since July when five deals were pulled. Expect more to come.

This comes as the price on the S&P/LSTA U.S. Leveraged Loan 100 Index has plunged since the start of October, when it was just shy of par, to 97.28, the lowest price since November 2006!

Diversified manufacturer Jason Inc. became at least the fourth issuer to scrap a U.S. leveraged loan this month according to Bloomberg, which writes that the company had kicked off the syndication process on its amend and extend on Nov. 13 was seeking commitments from new lenders by Nov. 20.”

Chuck Again… Well, it’s beginning folks… This is just the tip of the iceberg…

Currencies today 11/28/18: American Style: A$.7241, kiwi .6797, C$.7511, euro 1.1285, sterling 1.2795, Swiss $1.0009, European Style: rand 13.9612, krone 8.6025, SEK 9.0939, forint 287.26, zloty 3.8050, koruna 22.9860, RUB 66.95, yen 113.76, sing 1.3775, HKD 7.8277, INR 70.41, China 6.9461, peso 20.47, BRL 3.9097, Dollar Index 97.37, Oil $51.64, 10-year 3.05%, Silver $14.16, Platinum $832.67, Palladium $1,160.57, and Gold… $1,214.54

That’s it for today… Had a long discussion with my oncologist yesterday about weight… Previously she loved it when I gained weight, but apparently that had a limit! I told her I would work on it… But with me not able to do any exercise, it would be difficult to lose weight. I told her we could go back on the infusions, they seemed to bring my weight down, but then I couldn’t eat for days at a time, and that doesn’t work well in the long run! Oh well, I’ll stop eating cookies with my coffee in the morning, and see where that gets me! HA! Elvin Bishop takes us to the finish line today with his over 7 minute, great song, Traveling Shoes… I hope you have a Wonderful Wednesday, and remember to Be Good To Yourself!

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