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In This Issue.
* Another "no movement" day.
* Traders await Janet Yellen's speech .
* German IFO stumbles post BREXIT.
* China issues warning on steel production .
And now. Today's A Pfennig For Your Thoughts.
Waiting On Janet.
Good Day. And a Tub Thumpin' Thursday to you! I get to participate in the Tub Thumping this week, so I've got that going for me, eh? Remember last fall, when I would tell you that I was having trouble sleeping? That went away over the winter, but sure as the sun rises each day, that problem is returning! UGH! Oh well, maybe it's this, that and the other thing keeping from a full night's sleep, but whatever it is, I wish for it to go away. It doesn't have to go away mad, just go away! Simon and Garfunkel greet me this morning with their song: America.. They've all come, to look for America.
Well, another day of waiting was the song of the day yesterday for the markets, and will be repeated today, and tomorrow morning, until Fed Chair Janet Yellen speaks at 10 am ET. That'll be pretty early out there in Wyoming, but the early bird gets the worm, right? The currencies, for the most part, are trading in the same clothes as they wore yesterday. We do have a couple of exceptions, like the Aussie dollar (A$), that I'll talk about in a minute. Gold got whacked again yesterday, it's a real shame what the not for profit sellers are doing to the shiny metals, but it is what it is, and I have no control over it, other than to remind everyone that the only way to get rid of these not for profit sellers and make them eat crow, is to have everyone, and I mean everyone buy physical Gold or Silver, and watch them scramble to meet the deliveries of all their short contracts!
For those of you who still question whether there are "not for profit sellers" out there, let me share with you some facts from yesterday.
Yesterday, in 1 minute. that's it, just one single minute $1.5 Billion of Gold notional was sold. That's over 10,000 contracts in just one minute.
Now, that quacks like a not for profit seller, to me.
The Fed's Jackson Hole boondoggle begins today, and everyone and their brother is waiting for Janet Yellen's speech tomorrow morning. Will she or won't she? We'll all find out together tomorrow morning. That is unless she channels her inner Big Al Greenspan, and speak as if the cat has her tongue, which leaves everyone attempting to figure out what she just said.
I read in my local paper yesterday, the St. Louis Post Dispatch, an article about the Fed's Jackson Hole Boondoggle that begins today.
Apparently, there is a group out there called "Fed Up" that is calling for changes at the Fed, and will be heard by a number of regional Presidents tonight.. Hmmm. Interesting don't you think? Well, it's going to end up being, in my opinion which could be wrong of course, nothing more than a "b" session for this group, that the Fed members will nod their heads, and tell the group that they'll look into it, and nothing will come of it.
But, you know me. Where there's smoke, there's fire, right? And there's definitely smoke here. Recall about a week ago I wrote about San Francisco Fed President Williams, who was calling for changes in the way the Fed calculates things? Is this a "let's all gang up on the Fed" type deal? I don't think so, not yet. But should the Fed lose whatever credibility they have left, watch out, for there won't be anything nice about what happens then.
So, early this morning, German Business Climate, as measured by the think tank IFO, for this month printed. And the first signs of post-BREXIT problems appear to be in this report. The IFO report's Index number dropped unexpectedly, from 108.5 in July to 106.2 this month. But guess what the euro did in response to this bad report? Nothing, absolutely nothing! The currency hasn't budged, except to have a look about it that it would like to move higher! Another strange day in the markets, eh?
We also have strange things going on with the A$ this morning. The Vice Chair of China Iron & Steel Association said, "There will be significant declines in the next three months in steel consumption and production."
Now them there's fightin' words! But what it really says is that there will be less demand for Iron Ore, and less demand means lower prices, and lower prices in Iron Ore usually means that the A$ gets sold. But once again, the stranger than fiction reactions of traders these days, has the A$ rallying this morning!
The price of Oil has slipped back below $47 in the past 24 hours, as the latest EIA Crude Supplies data showed an unexpected increase in inventories. Please keep in mind that I've warned you on two different occasions up to now that most of this increase in the price of Oil has come from the renewed hopes that the OPEC countries will come to an agreement at their meeting next month to freeze production. I don't see that happening, and therefore I am wary of this Oil price rally.
The Russian ruble wears the price of Oil on its sleeve, and is so heavily influenced by the swings in price of Oil. But the Canadian dollar / loonie, is very resilient in maintaining its value even in the face of Oil price swings. I read some very disturbing news about the rise of debt in Canadian households yesterday.. But even that news isn't as disturbing as the news that appeared in the WSJ this morning, that the 4 major Oil companies have taken on more debt. Chevron, Exxon, Mobil and Royal Dutch Shell, are now carrying $184 Billion in debt, which is more than twice the
amount these 4 held in 2014! The Financialization of Oil has now reached
a level that it needs to be looked at very closely.
I'm waiting for the July Unemployment report from Sweden this morning, I don't think it will print before I send this off for review, so we'll just have go with what I think it will look like. First of all the employment trend in Sweden is very strong, but just because you get blips that say otherwise from time to time, you don't use that as a reason to panic!
And that's a preview of today's report, which I think will show a blip in the Unemployment Rate rising a tick or two, but the underlying employment trend remains in place. I've been a fan of the Swedish krona for a number of years, but they've been painted with the same brush that's used on the euro. And we all know what's happened to the once proud, and strong euro in recent years.
But, IF. The strong dollar trend is really ending, as I suspect it to be, then the krona and krone from Norway, have historically outperformed the euro once the euro goes into rally mode. So watch for that. I'm just saying.
In case you need a reminder that I said months ago that the train was leaving the station and heading to Recessionville, my friend, Dave Gonigam over at the 5 Minute Forecast (www.agorafinancial.com ) had this to say yesterday. "Yesterday, the Congressional Budget Office issued a new estimate of the fiscal 2016 federal budget deficit - $549 billion, up from an estimate earlier this year of $500 billion.
The big factor in the increase (aside from growing federal spending, of
course): a 13% drop in corporate income tax payments."
Yes, in case you were questioning my sanity months ago, I told you that the tax receipts from Corporate America were going to begin to drop in numbers. And that would be a tell-tale sign that we had entered the city limits of.. Recessionville.
In addition, last week I told you about my never ending search for a correct way to calculate economic growth in the U.S. I told you about Total Business Sales and how that they had peaked two years ago. I'll let Dave Gonigam take the conn again here: "Now let's compare sales with inventories. When inventories are rising, it can mean businesses are having trouble moving product. If inventories are rising as sales are falling, that's a very bad sign, indeed." - Yes it is Dave, yes it is.
And that's exactly what we have going on right now. The speed limit will be reduced as you enter Recessionville.
The U.S. Data Cupboard wasn't so rah-rah for the Housing Market yesterday.
According to the National Assoc. of Realtors, the July Existing Home Sales
fell -3.2% VS June, and fell-1.6% year on year. And the median price of
an Existing Home sold fell -1.4% VS June. I'd have to say that so far
this year, Existing Home Sales have been "choppy" at best, and if you step back and look at the report as a whole calendar of reports, you'd see that this sector is slowing. New Home Sales were off the charts on Tuesday,
for the same period, so what does that tell us? That people only want
what's new and shiny? Or does the breakdown of Housing begin in Existing Homes, and then spread to New Homes? I don't know, I'm not on the National Assoc. of Realtors. But what I do know is this. Everyone that wanted a home should have one by now, don't you think? Even the sub-prime buyers!
Today's Data Cupboard finally has some "real economic data" for us! July Durable Goods and Capital Goods Orders will print, and with some aircraft sales should show a positive number of around 3.5% for Durable Goods Orders. Take out those aircraft sales, and Durable Goods for July would only be around 0.5%... May and June saw very soft numbers for Durable
Goods Orders so a dead cat bounce probably is in order here. Capital
Goods Orders will probably not fare so well as the Durables, with their aircraft orders. And I believe that this report will point directly at
how flat manufacturing has been here in the U.S. So, don't be looking
for any excuses to add to dollar longs today from this data, you won't find what you're looking for here. Go on, move along.
I've already talked about Gold, until I was blue in the face. I know it works for those guys out in Las Vegas, but on me, it's not a good look!
HA! But Gold lost $13 of value yesterday. I did see a large research firm say that the price of Gold would be $1,600 by Christmas time this year.
WOW! Now that would be quite a move, eh? But if you subscribe to the James Rickards view on the dollar then that price isn't so far of a stretch for the imagination!
To recap. Not much going on again today. Memo to myself, next year take the whole month of August off, for there's nothing to talk about! The currencies, for the most part, are trading in the same clothes they wore yesterday, and it's all because everyone is waiting on Janet Yellen's speech tomorrow morning at the Jackson Hole Boondoggle. The not for profit sellers laid on thick yesterday and brought Gold down $13 on the day. Memo to self: time to break the kids piggy banks. The price of Oil slipped back below $47 on the news that the inventories of Crude unexpectedly increased last week. And the train to Recessionville is nearing the city limits, are you ready?
For What It's Worth. Thanks to Ed Steer, who highlighted this article and I found it very interesting so I carved it out for you dear reader to read too! (aren't you the lucky one today! HA) Anyway, it's about Corporations building up debt. and can be found here:
Or, here's your Snippet: "Yes, the federal government owes trillions of dollars more than it did a few years ago. Yes, Americans are still struggling to pay off mortgages and student loans. But it's the buildup in debt elsewhere that is most worrying some experts, and the big borrower this time may come as a surprise: Corporate America.
You might think big U.S. companies, if anything, have been too conservative with their finances. They've collectively hoarded hundreds of billions of dollars in cash, instead of spending it to hire workers or expand their operations.
The reality is different, and more worrisome. Much of the cash is held by just a precious few companies, while debt is ballooning at other, weaker businesses as investors desperate for income rush to lend to them. These investors could face losses, perhaps steep, if economic growth falters.
The broader economy is also vulnerable because companies with more debt have to cut back further and lay off more whenever downturns hit.
"There's a misconception that companies are swimming in cash," says Andrew Chang, a director at S&P Global Ratings. "They're actually drowning in debt.""
Chuck again. Yes, the article explains that of the $1.8 Trillion in cash that's sitting in U.S. Corporate accounts, half of it belongs to just 25 of the 2,000 companies tracked by S&P Global Ratings. Take out Apple and Google, and well, there's goes the neighborhood!
Currencies today 8/25/16. (disclaimer, I can't get a few of the currencies values today but no worries they haven't moved anyway!) American Style:
A$ .7625, kiwi .7715, C$ .7745, euro 1.1295, sterling 1.3225, Swiss $1.0320, .. European Style: rand 14.09, krone 8.21, SEK 8.4108, RUB 64.95, yen 100.40, sing 1.3530, HKD 7.7541, INR 67.05, China 6.6554, peso 18.44, BRL 3.2250, Dollar Index 94.67, Oil $46.88, 10-year 1.55%, Silver $18.57, Platinum $1,081.23, Palladium $684.55, and Gold. $1,323.75
That's it for today. A nice strong comeback win for my beloved Cardinals last night, now if they can string some of those together! The NY Post ran a nice article about my Cardinals yesterday, and in it they pointed out all the warts on the Cardinals this year, but in the end, we're coming to September, and the Cardinals are in the thick of the Wild Card race...
I find it unbelievable given the way they've played this year. The Annual Butler Labor Day BBQ / Pool Party is sneaking up on me. The kids are back to school (my two grandsons started kindergarten this year!, and Delaney Grace is in 3rd Grade (I think) And youngest son Alex begins his Junior year at St. Louis University (SLU) But he has 4 more years on his program so the finish line isn't in sight for him just yet! The Beatles take us to the Finish Line today with their song: From Me To You. I've got arms that long to hold you, and keep you by my side. Alrighty then time to go!... I hope you have a Tub Thumpin'
Thursday. And. Be Good To Yourself!
EverBank Global Markets
Editor of A Pfennig For Your Thoughts
08-26-2016 1:52 AM