More Soft Data In the U.S.

And now… today’s Pfennig for your thoughts…

Good day, and a Tom terrific Tuesday to you!

Well, the U.S. Data yesterday was awful, and you’ve got to really get to scratching your head thinking about the Fed members complete turnaround on sentiment toward the economy and the next rate hike. I swear I saw a story headline in my “top stories” app on my phone this morning that said, “Rays of sun seen in the U.S. economy”… would those be the same rays of sunshine that were shining on the “green shoots” that Ben Bernanke saw about 5 years ago? HA! 

I told you yesterday that the week was going to be all about the U.S. and U.S. data, that culminated in a Jobs Jamboree on Friday. And that’s how it all started yesterday, and will carry on today. Fed member Williams was speaking in Singapore overnight, and said that the thought interest rate hikes would be gradual. That’s a little less aggressive than the James Bullard speech on Saturday.

Williams also said something that made me chuckle. He said that “he sees the U.S. economy on track”. To which I immediately said out loud, “on track for what? A recession is all I see!” Williams didn’t say what he thought the economy was on track to do, but I would bet the farm that he and I aren’t singing from the same song sheet!

The currencies and metals remained range bound yesterday with most of the currencies finding some solace in the weaker U.S. data, and gold gained $5 on the day. But this morning, it’s a different story, as those gains the currencies carved out yesterday are being given back. But really, it’s just trading in a range, waiting for the next shoe to drop.

The Chinese renminbi saw a very nice-sized appreciation in the fixing, and the price of oil slipped below $39. Talk about range trade. Since the beginning of March, the price of oil has traded within a $4 range ($37 to $41).  The U.S. will print their latest supply numbers for oil, and they are expected to show a glut of supply remains, and that won’t help oil’s price any.

Fed Chair, Janet Yellen, will speak today, and there’s a lot of talk about how she might give some clues as to what she is thinking about the economy and rate hikes. We saw just two weeks ago, that she was down about the softness of the economy, but maybe like I said yesterday all the negative economic data that has printed since the last FOMC meeting two weeks ago, has changed their minds! HA! As if!  So, according to the scribes on Bloomberg this morning the anticipation of what Yellen might say has the dollar taking back lost ground this morning. Well, that’s all good for those traders that get fooled by what Central Bankers say and then do. But I’m sticking to my guns here that the U.S. economy isn’t going anywhere but down I don’t care what these guys that want you to believe that everything’s OK, say.

Well, I’ve kind of beat around the bush this morning on the weak data yesterday, so I might as well talk about the weak data from yesterday’s Data Cupboard. First of all the PCE that we talked about yesterday, disappointed the forecasters when it didn’t rise closer to the 2% Fed Target rate. So it remained at 1.7% year on year (yoy). The real disappointing data came in the Personal Spending corner…

February Personal Income and Spending were up nominally, at 0.2% and 0.1% respectively, but then we have the “real personal spending” data that now exists, and showed just 0.2% in February, but January saw the original 0.4% print, get revised down to 0.0%!  Hmmm, I didn’t hear many news outlets talking about this, did you? Those darn revisions! They sneak them in under the cover of night, and then they appear before the markets know what hit them!

The U.S. Trade Deficit widened in February to $62.864 billion. Imports rebounded in February, but those darn exports. Pesky little things. And they have that stronger dollar still attached to them. I received an email from my old friend, and former mentor and colleague, Ed Bonawitz yesterday. Ed is always playing the devil’s advocate with me, and making me defend my thoughts on the economy and data etc. 

Well, yesterday he sent me a link to a NY Times article on the Trade Deficit, which was all about how the Trade Deficit isn’t a scorecard, and cutting it won’t make America great again. A direct shot at the candidate that has signaled that he would make America great again when it comes to trade. That’s all I saw in the article, so I won’t go any further here. I would say that if that’s so true what the NY Times said, then why were things so much better here in the U.S. when we used to have a surplus? I’m just asking the question. And yes, I know all too well that the U.S. has been in a Trade Deficit for several decades, but for most of those decades, the U.S. economy was growing faster than its counter trading partners. That’s changed, hasn’t it?

Whew! I certainly didn’t mean to go on and on and on there about the Trade Deficit! OK, I’ll stop with the data talk for now. That stuff can get pretty boring, eh? Hey! At least I spice it up, but sometimes there is no amount of Sriracha sauce you can put on the data that will keep it from being boring! So, what else should we talk about today? Well, I could talk about how Sweden printed a good & bad retail sales report for February, but that’s still data-talk. Or the money supply numbers from the eurozone. Still-data-talk.

Oh, I know! Yesterday, I had a story about how corporate profits were negative in 2015. And immediately, the Spin Doctors, and not the ones that sang: Two Princes, came out and began to spin the data, saying that the data was based on flawed calculations. I had to laugh about that one, because where are these “data police” when the BLS prints their jobs numbers each month? Talk about “flawed calculations”! But that’s how things work these days, it’s no longer a case of what’s good for the goose is good for the gander, but more like we’ll pick what goose we want to use and what gander we want to use, and never the two shall meet! HA!

So, Sweden’s Retail Sales data for February was good in that the January 0.7% rise was revised upward to 1.1%, but it was bad because the February number was negative -0.2%. I guess the hope here is that February sees just as strong of an upward revision as it did for the January data. In the world of what have you done for me lately, this negative print, for February has the krona on the selling blocks this morning.

The euro is pushing higher, inch by inch it seems, but still higher. This morning the Eurozone Money Supply figure was bang on with last month, and this month’s forecast of 5% growth. Steady is what the markets love. Even if when you boil down the peanuts, Money Supply is equal to inflation. But that’s what all central bankers are looking for these days, so let’s print some more money and put it into the economy! YAHOO! HEY! Let’s go bananas with this stuff! Why not? It surely doesn’t hurt anyone to do so! Well, first of all, don’t call me Shirley, and second, when you have inflation up to your eyeballs, you’ll rethink that comment about not hurting anyone!

The U.S. Data Cupboard has the S&P/CaseShiller Home Price Index for January for us to see today, along with the stupid Consumer Confidence report for March. The Consumer Confidence report is really just a gauge on the U.S. stock market, and I told you yesterday that the stocks have rebounded in March, so what do you think the Consumer Confidence Index is going to reflect? Come on, this isn’t rocket science! HA!

Well, gold gained $5 yesterday, and this morning, it’s giving back $3 of that gain yesterday. Still, gold’s March, even with the HUGE Takedown last week, is going to be a good month for the shiny metal. Let’s hear from a Chinese gold retailer:

‘It has been very, very busy for us in the last few weeks,’ said Padraig J. Seif, chief executive officer at Finemetal Asia Ltd., a large Hong Kong-based bullion dealer that sold more gold in the first three weeks of March than in all of February.

I find that the more people that I meet these days still don’t own physical gold or silver. And I find that to be disturbing to me. It’s just something I have to accept, as I can’t hit them over the head and tell them to go buy a physical metal!

The reviewers are always telling me to calm down on the pushing people to do something. I remember back in “the day” before there were fears that everyone was out to cheat someone, when you I could say things like, “The Blue light special is shining brightly for ‘X.'” And no one got hurt, or sent to the poor man’s jail. But things change, and so now, I have to beat around the bushes, and lay the message between the lines, because if I put it in writing it will get cut so why waste the time?

I saw this headline to the article on Ed Steer’s letter this morning, and knew then I had to go read it, and probably use it myself. And I was right! Here’s the link to an article on the U.K. Telegraph, titled: Helicopter or Bottle the Message is the Same, and here’s the snippet:

Helicopters have recently been whirring overhead – I refer to the suggestion that the world’s central banks should engage in a ‘helicopter drop’ of money.

This phrase originates from the arch-monetarist, Milton Friedman, who imagined a central bank sending out a helicopter to rain dollar bills on those below. Well before then, John Maynard Keynes suggested that the Great Depression could be overcome by burying bottles stuffed with bank notes. The usual forces of private enterprise would then ensure that the bottles were dug up and the money spent. Helicopter money is the same as bottled money.

What we are talking about is debt-free money creation. The essential idea is that the central bank can create money out of nothing. It can provide money to the government, without the latter having to pay interest or repay the debt.

The apparent difference between debt-free money creation and a combination of conventional fiscal expansion and QE is largely illusory. In some accounts, under debt-free money creation the largesse is distributed to the populace via a bank transfer – not from the Treasury, but from the central bank. Personally, I cannot see that it makes any difference to citizens’ response whether the provider is Her Majesty’s Government or the Old Lady of Threadneedle Street.

If you think a higher share of government spending in GDP is a good thing, then fair enough. But if, like me, you think state spending needs to be reduced, you have good reason for opposing debt-free money creation.

As I said last week, if we entered another severe economic downturn, I would support more QE. Actually, I would probably support this in conjunction with a fiscal expansion, preferably coordinated across countries. But I would keep the helicopters grounded and the bottles kept safely locked away.

Chuck again. This is quite a long read for an article that I read. HA! But still it covers all the points of Helicopter Money, which was a subject we talked about a couple of weeks ago. So, if you have the time click the link above.

That’s it for today. I hope you have a Tom terrific Tuesday, and be good to yourself!

Regards,

Chuck Butler
for The Daily Pfennig

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