Good day. And a Tum Thumpin' Thursday to you! I don't know if I'll be able to participate in the Tub Thumpin' today, but I hope you pick up any slack that I leave, and have a Great Day! Boy was it ever windy yesterday here! Usually we see that kind of wind with a storm, but not yesterday, it was windy for the heck of it! Reminded me of January day in S. Florida, where the wind picks up from time to time. It's not a chilly wind, except for the chill that came over the Cardinals last night. UGH! Seals and Crofts greet me this morning with their song; Summer Breeze.. A great morning song for sure!
Well, the Political pressures/ risks here in the U.S. didn't go away yesterday or overnight, but the dollar has fought back some, in the past 24 hours. The euro is still trading above 1.11 but just not as strongly in the handle as it was yesterday. The Aussie dollar (A$) rallied overnight on the news that the labor pullback for April that we talked about yesterday, wasn't all it was cracked up to be, and instead April Employment increased by 37,500! And Gold sure had a whopper of a day yesterday, closing at $1,260.90, up $24.20 on the day!
So, let's start with Gold, since it was the star performer of the day. I read this morning that the U.K. bookmakers have the odds of the probability of the U.S. President leaving office before his 4 year term is up have increased from 40% to 55% in a week! Now that brings about uncertainty, and I've long told you that traders don't like uncertainty, and since that uncertainty surrounds the U.S. the dollar gets taken to the woodshed. Euros and Gold are usually the beneficiaries of any trips to the woodshed that the dollar takes, and the previous two days it was all about euros, and then yesterday it was all about Gold. The good news this morning is that so far, Gold has held its gains, and is up a buck or two in the early morning trading. I say good news, because as I said above, the dollar has fought back a bit overnight..
The Bank of Mexico (Banxico) will meet today, and the forecasters are split 50/50 on whether the Bank will hike rates or not. I would think that given the mini-improvement in the peso this year (recall it was trading with a 20 handle earlier this year, and has an 18 handle today) that Banxico will choose not to hike rates at this time. But I don't believe that Banxico is finished with their rate hike cycle. The problem for the peso though, is centered around just how high is Banxico willing to go with interest rates? I don't think the Bank will go that far, and that will hurt the peso in the long run.
And just when the Brazilian real was looking healthier with its recent rally VS the dollar, it has Political pressures / risks thrown in its face too! The Interim President, was accused of knowing about the hush money that the previous impeached President allegedly received, which led to her downfall. The Interim President is doing his best Sgt. Schultz imitation, saying that he knows nothing. We've seen the process here in Brazil before, with the previous president, and I've got to say that I don't get a warm and fuzzy about this recent accusation.
The price of Oil bumped up to $49 yesterday, but has sold off to $48.22 overnight. But that's not a biggie, not with everything that's going on. And the Petrol Currencies didn't react negatively to the overnight move, which proves to me that they have their sights set on something else right now, and that something else if the OPEC meeting scheduled for next week. I told you the other day that I expect at the very least, an extension of the previously agreed upon production cuts. But that I wouldn't be surprised if OPEC announced additional production cuts. And if that should happen, I would look for the price of Oil to bounce, and bring the Petrol Currencies along for the ride.
Well, there I was yesterday, reading my local paper, which my wife calls useless, and is always threatening to cancel, but I won't let her, because I'm really not a "read stuff on a computer screen" type of guy. I'm old school, and want to have the words on paper to read! So, anyway, I digress here, where was I? Oh yeah, I was reading my local paper, and realized that all my local paper was doing was reprinting stories.. UGH! Oh, well here we go again folks. I tell you when I read this article, my head about exploded. here's some of it.. .
American's debt is BACK AT RECORD HIGH After nearly a Decade (emphasis mine). The Federal Reserve recently published a report on debt, and found that Americans' debt level reached a record high this year of $12.73 Trillion in the first quarter. That's up $473 Billion from a year ago, and bypassed the previous record, which was in the 3rd QTR of 2008, and was $12.68 Trillion. Now, we all know what happened in 2008, and what the U.S. consumer did after the financial meltdown, right? We deleveraged our debt, and brought it down to a low in 2013 of $10.95 Trillion but. It's 14% higher now!.
The report from the Fed also went over delinquency levels. And the percent of Student Loans that are delinquent is 11%. Spokesman from the Fed said that: "Auto Loan and Credit Card delinquency flows are now trending upwards, and those for Student Loans are stubbornly high."
And to carry that theme even further I also ran into this article: "Illinois' unpaid bills hit a record high of $14.3 Billion this month. What will be interesting is the upcoming deadline for the budget that's due 5/31. June 30 is the fiscal year-end for Illinois, and they are surely limping to the finish line"
But $14.3 Billion in bills that are unpaid? That's just crazy folks! Oh, and all of you who live in Illinois, and pay taxes in Illinois, I would have to think that you had better get ready to tighten your belts a little tighter, because the tax man is coming, or else there'll be a new record high of unpaid bills as we go along.
Debt levels. Do we ever learn anything from the past failures? I'm at a loss as to how Americans who lived through the financial meltdown in 2007 & 2008, could allow their personal debt levels to reach record levels again. Did they feel better after deleveraging their debts? Knowing that you have a lighter Albatross wrapped around your neck has got to feel much better than scrambling each month to figure out which bills will get paid and which ones can wait! Sooner or later, it means loans get defaulted on, and one defaulted loan begets another, and another and soon, we have another financial crisis here in the U.S. I just shake my head and go yell at the walls, how about you?
Like I said above, the Political pressures / risks haven't left the U.S. and that's very evident by the drop in the 10-year Treasury yield, which this morning is down to 2.17%... That's a 30 BPS (basis points) drop in the last 40 days! But most of the drop has been this week! And the overall Treasury yield curve is now about as flat as a pancake. And longtime readers might recall me telling them this years ago, but when the yield curve inverts, which means that long rates are lower than short term rates, it's one of the most reliable indicators that the U.S. is in a recession.
And as I get ready to head to the Big Finish, the euro has bounced again, and has won back some of that ground it lost to the dollar overnight. And U.S. stock futures are down again this morning indicating that the rot on the vine that was the stock market yesterday, is potentially going to continue today. So, what I now see in the euro overnight is that it was simply profit taking and not really a mini-rally for the dollar.
The U.S. Data Cupboard gets back on board with a data print today, although not really a "real economic" report, the Philly Fed Index, which is a measure of the Philadelphia region's manufacturing. Earlier this week we saw the Empire (NY region) drop by a larger than expected margin, and that doesn't bode well for the Philly Fed Index today. But, as we've seen in the past the regionals can all show rot on the vine of manufacturing, but the National report doesn't reflect that. It's all in the games that people play now, every night and every day now.
To recap. The dollar fought back overnight, but in the end it just looks like profit taking in the euro, as the single unit has rallied back this morning to win back most of its lost ground to the dollar overnight. The Bank of Mexico meets today, and Chuck doesn't think they'll hike rates now. And the Political Pressures/ risks spread to Brazil yesterday, where their interim President was accused of know about the hush money that did in the previous President. The real took the news badly, and just when it had mounted a nice rally this past week. Gold was the star performer yesterday, and looks to have held its gains overnight. And the 10-year Treasury yield has dropped to 2.17%!
For What it's Worth. I feel like this is the third FWIW article today. But this caught my eye, and thought it FWIW worthy. It's about how Deustche Bank and how the boss wants former bosses to pay for past misconduct.
Or, here's your snippet: "
Deutsche Bank (DBKGn.DE) expects former board members to pay substantial sums for their role in past misconduct which has tarnished the reputation of Germany's biggest lender, its chairman Paul Achleitner said on Thursday.
Achleitner told shareholders at Deutsche Bank's annual general meeting that the supervisory board and two committees were discussing the need for personal and collective responsibility and the bank had sought external legal advice.
"The supervisory board expects that in the coming months, there will be an arrangement which ensures that the individuals involved make a substantial financial contribution," he said, adding that while no decision had yet been reached, talks were at an advanced stage.
Achleitner did not name any names, but people close to Deutsche Bank told Reuters that the supervisory board is in talks with former co-chief executives Anshu Jain and Juergen Fitschen, as well as other former top managers."
Chuck again. WOW! Wrists slapping? I can't believe that a Big Institution like Deustche Bank would go here.. But apparently they are, and good for them!
Currencies today 5/18/17. American Style: A$ .7440, kiwi .6930, C$ .7333, euro 1.1135, sterling 1.3023, Swiss $.9790, . European Style: rand 13.4708, krone 8.4472, SEK 8.7724, forint 278.53, zloty 3.7925, koruna 23.9123, RUB 56.67, yen 110.72, sing 1.3918, HKD 7.7822, INR 64.82, China 6.8862, peso 19.10, BRL 3.1017, Dollar Index 97.58, Oil $48.39, 10yr 2.17%, Silver $16.74, Platinum $935.16, Palladium $767.08, Gold $1,260.20, and SGE Gold $1,252.85
That's it for today. Boy did I ever have a faux pas yesterday, when I said that the Cardinals should bring back the Busch Stadium II, so that they could beat the Red Sox, but then I was reminded that we lost the 2004 World Series to the Sox in Busch Stadium II. I get so mixed up on years! Well, we saw good news on a Tweet last night, oldest son, Andrew, was named co-coach of the year for the State of Missouri! He previously won it for his conference, but this was a first for him, and I sent him a note telling him how proud of him his mom and dad were. When Andrew was younger, and played a ton of baseball, I always told him when he finished playing sports that he should give back "something" to the game. Well, I do believe that he has given back something to his sport of Water Polo. The Spinners take us to the finish line today with their song: Could It Be I'm Falling In Love. And with that, I'll get out of your hair for today, and send you on your way to having a Tub Thump in' Thursday! Be Good To Yourself!
The Daily Pfennig is written each business day by Chuck Butler and distributed by EverBank World Markets.
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The Daily Pfennig is a general update on the global marketplace, is a commentary on the conduct of fiscal, monetary, and political policy and their collective impact on the currency markets, is the analysis of an individual who has nearly 35 years in the investment business and over 15 years experience in the currency market, is the thoughts of a dyed in the wool Saint Louis Cardinal and Missouri Tiger fan (and sometime Saint Louis Ram’s and Blue’s fan), and is a publication that is designed to provide you with some information, some levity, and some analysis to assist your thinking about currencies and their place in an investment portfolio.
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