Why Are The Safe Havens Being Unwound?

A Pfennig For Your Thoughts

September 25, 2018

*Currencies back off their highs from last week…
* Gold is kept on a short leash…

Good day… And a Tom Terrific Tuesday to you! I have an early morning appt. with my St. Louis oncologist this morning, so this will be a shorter than usual Pfennig today. With that said, my beloved Cardinals started their last three games at home against the team that’s in front of them in the standings… I would like to say that I was able to stay up to watch the entire game, but that would be a lie… I went to bed with the game tied 4-4… I dropped my wife off at the airport yesterday morning at 4:25 am, so I have an excuse! And I see that the Cardinals lost the game… Uh-Oh! Ok, The Guess Who greet me this morning with their song: No Time…

Well, the currency moves from last week didn’t exactly continue through yesterday, and if anything we saw a bit of selling… I told you that I didn’t think the currency rally would last through Wednesday’s FOMC rate hike but I didn’t think it would end on Monday! UGH! There’s really not much in the way of economic data this week here or abroad, so the FOMC Meeting has the spotlight… What will Fed Chairman Jerome Powell say afterward? Will he revert to his somewhat dovish words of about 3 weeks ago? Or will he say the Fed needs to go onward and upward? I’m thinking that he might be feeling the heat of the weaker economic data, and will want to give himself some wiggle room going forward with rates…

The Trade War digs in its heels as the U.S. and China agree to halt talks on Trade negotiation… I feel sad about this, as I really thought that talks would be the way to get this done without throwing the two largest economies under a bus! But when one of the negotiators doesn’t really have their heart into the negotiations, well… It’s needless to say that things just don’t get worked out when that happens, right? And I hear you asking, so, was it the U.S. or China that didn’t have their heart into negotiations? Come on, really? This is a layup… it’s the U.S. folks, sad to say…

OK… So, European Central Bank (ECB) President, Mario Draghi, said in a speech yesterday that “he sees a “relatively vigorous” pickup in underlying inflation”… And that, my friends, is the first sign, albeit hidden from the masses, but not me, of the ECB’s intention to begin to raise rates before next summer… But then this morning, Peter Praet, a member of the ECB’s board, played down Draghi’s remarks with a comment of his own…

Longtime readers will recall me talking about how traders don’t like it when Central Bank members don’t sing from the same song sheet, right? Well, this is what the euro has had to face, along with the pressure the dollar and the Fed rate hikes has added to the euro. I was reading about how there are so many short positions with euros, that a short squeeze could happen at any time… And then I thought to myself, well, we saw a big jump in the euro late last week, and that didn’t trigger a short squeeze, so I doubt the euro can hang its hat on that thought, as a way to get back to at least 1.20…

Gold traded in a wash, rinse, repeat cycle yesterday, as it would climb to $1,200 and then get beaten back below the figure, only to see it rise up again, only to be beaten back down… This morning, the shiny metal is back to $1,200… But for how long? Well, probably, just as long as it takes for the boys in the band to get their instruments tuned… A short leash for sure…

There’s something else that’s going on that scares the bejeebers out of me… I’ll call it the great unwinding of safe havens… Gold, euros, yen, and Treasuries have all been on the selling blocks lately, and it all looks to me as if the markets and the participants have all gone all-in on removing safe havens… And if that’s the case, then we’re in for something that could be very ugly…

It’s not good when everyone moves to one side of the ship, right? it’s not good when everyone wants a pet rock, right? And so on… And it’s not a good thing when everyone is buying dollars, and selling the contra currencies and assets that act as a governor, if you will. And that’s what’s happening… right here, right now… I’m just saying…
I just used a term that I’m sure most youngsters have no idea what I’m talking about… a governor… Well, that’s too bad, but… you always have Google to explain it to you! And since Google, Facebook, and Amazon are out to rule the world, you’ll be in good hands… Of course I’m smiling like the Cheshire Cat, and chuckling to myself, here, alone in the dark basement with only my desk light to illuminate the area, where I’m writing…

I told you yesterday that the data in the U.S. and abroad would be skimpy this week, with the FOMC rate hike in the spotlight… But we will see the color of New Zealand’s Trade Balance for August today… Since New Zealand is an island nation, and they depend on imports for just about everything that isn’t sheep, lumber and dairy related, which means their Trade Balance is usually a deficit… The key with New Zealand is that their exports balance out the imports as best they can… We’ll get a snapshot today of whether the key was turned…

So, did you celebrate the Queen’s birthday yesterday? HA! Hey! Did you hear that N. Korea’s Kim, has requested a meeting with President Trump? I sure hope it’s to get to signing an agreement to denuclearize, and not just leave with a handshake…

A handshake used to mean something in business… Bank loans were gotten with just a handshake, cars were purchased, and mergers were agreed upon with just a handshake… But those days have been long gone for some time now, and that’s what got my goat when the last meeting between these two ended with a handshake to denuclearize N. Korea… Get it in writing, or wear a wire for goodness sakes!

The U.S. Data Cupboard has the Case/Shiller Home Price Index for July to view today… Last month, we saw home prices slip in June… So, this report is important in that it would confirm or deny a trend…

In the errors and corrections section… Well, I wrote a BIG mistake yesterday… I said Russia had imported tonnes of Gold last month, when I meant they had imported 1 million ounces… UGH! Oh well, can’t win ‘em all, right? I do my best, to be accurate, folks…

To recap… The currencies rally last week ended on Monday, but the downward moves were muted. Everyone has their eyes on tomorrow’s FOMC announcement and press conference. Chuck is seeing an unwinding of safe havens, is this a good thing? Chuck thinks not! And Draghi sees an uptick in inflation, is that his way of greasing the tracks for an earlier than next summer rate hike? Chuck thinks so…

For What It’s Worth… This is an interesting piece as it compares network news to professional wrestling… Ah, the days of wrestling at the Chase is in my memory bank… But this writer, gets to the heart of what’s wrong with major media these days, and it can be found here: https://internationalman.com/articles/professional-wrestling-and-the-media/

Or, here’s your snippet: “As a boy, I was quite non-violent, but I confess to having been fascinated with professional wrestling. For one hour, every Saturday morning, I’d watch Yukon Eric, Haystack Calhoun and Killer Kowalski attack each other in the ring in what was called, “professional wrestling.”

Of course, even as a boy, it was evident that it was a sham. Some wrestlers played the role of angry bullies; others were practically cartoon characters. The threats each made to the other before the match, the silly outfits, the absurd holds and body slams – it was clearly phony.

But, as adults, we’ve matured and are no longer so easily taken in.
Today, as responsible adults, we turn off wrestling and watch network news.

Some reporters play the role of angry bullies (Bill O’Reilly, Sean Hannity, etc.); others are practically cartoon characters (Greg Gutfeld, Rachel Maddow, etc.). And, like wrestling, it’s so compelling – watching liberals and conservatives trying to out-shout each other on the stage. Clearly, this is not objective, sober news-reporting, but it’s most certainly producing the desired effect – to get those who are gullible enough to tune in every night to receive the latest updates on a ceaseless rehash of recent events.

In recent years, the average viewer has begun to admit that this is largely a stage show; that conservative networks present a dramatically-skewed conservative slant, whilst liberal networks present a dramatically-skewed liberal slant. This practice has become so extreme that, if the viewer can force himself to flip back and forth from one station to the other, the same news event actually appears to be two different occurrences, the reporting is so divergent.”

Chuck Again… I believe I saw a Rick Flair imitator on TV news the other night! HA!

Currencies today 9/25/18… American Style: A$ .7247, kiwi .6646, C$ .7720, euro 1.1765, sterling 1.3148, Swiss $1.03.53, European Style: rand 14.3672, krone 8.1315, SEK 8.7911, forint 275.13, zloty 3.6458, koruna 21.7715, RUB 66.06, yen 112.87, sing 1.3655, HKD 7.8094, INR 72.62, China 6.8549, peso 18.98, BRL 4.0627, Dollar Index 94.17, Oil $72.42, 10-year 3.11%, Silver $14.31, Platinum $832.30, Palladium $1,060.82, and Gold… $1,200.30

That’s it for today… Well, in the end, the Pfennig wasn’t shorter than usual after all! How about that? My fat fingers must have been flying all over the keyboard this morning trying to keep up with the thoughts coming out of my head! HA! My beloved Cardinals have their backs against the wall now, will they come out fighting? I sure hope so! Have you ever been in a brawl, with your back against the wall? I have, and the only way out is to come out fighting… Hello, McFly? Are you listening? Sugar Ray takes us to the finish line today with their song: Every Morning… And with that, let’s get to making this a Tom Terrific Tuesday! And remember to Be Good To Yourself!

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