Palladium Gets Goosed

And now… today’s Penning for your thoughts…

Good day, and a wonderful Wednesday to you!

The BIG news overnight, came in the form of the Chinese Flash PMI. Now, most observers believed that this manufacturing index would drop again for a 4th consecutive month. The Flash report showed that the index had fallen to 47, from 47.5 the previous month. This is well into the “contractionary” territory folks, and while the last two days I’ve talked about how some data gatherers wrote that things aren’t that bad in China, this report tells us that things ARE that bad.

A report like this does a couple of things: 1. It sends shivers through the global growth currencies, so the Aussie dollars (A$) and New Zealand dollars/kiwi  of the world get whacked on their way to the woodshed, and 2. It brings out the calls for more stimulus. In the form of an interest rate cut, and a Reserve Ratio Requirement (RRR) reduction.

The problem with making a rate cut and a RRR reduction is that it signals to the markets that things are really bad, and that begets more selling of the renminbi, along with the other Asian currencies, so they can keep in line, and the Global Growth currencies. But, that’s where we are these days.

Of course, all of these currencies, were living high on the hog when China was posting +10% GDP reports! So, you live by the sword, you die by the sword, right?  But not all’s lost in China, so let’s not start digging a hole yet for the renminbi.

I had a dear reader last week send me an email that accused me of waffling on the renminbi. I explained that while I have a long term view of the currency, I write a daily letter to let investors know what’s going on. So there can be conflicts with my long term view from time to time.

My long term view for the renminbi is still on terra firma, and I view what’s going on in China as an economic cycle that’s stuck on the wrong side of town. But if the Chinese Gov’t doesn’t go all Fed, ECB, and BOJ on the problems, then things should work themselves through, and be over in normal time.

Well, the dollar is mixed today with some currencies losing vs. the green/peachback and the other currencies winning. The winning and losing margins are that wide, except in the A$, kiwi, and Sing dollar. And gold is flat, which is better than being down $5 like it has the last two mornings!  T

he euro-wannabes (the term I coined in 2001 or 2002, I don’t recall) which includes the currencies of Hungary, Poland, and the Czech Republic, are all on the rally tracks this morning, which is unusual, in that there’s usually one of the three that goes in an opposite direction. That is usually, but not today!

In addition, usually these three don’t climb up on the rally tracks unless the euro is going strong. But the euro is just so-so this morning. it has a slight gain to its credit right now, but the single unit is anything but “going strong”. right now.

Well, a couple of weeks ago, I told you about all the bad stuff going on in Brazil to that point, and even feared that the real was in additional trouble. That was a Sunday Pfennig, that in case you missed it, you can go back to the archives at and check it out.

So that was then, and this is now, and yesterday, when I was doing the currency roundup I noticed that the Brazilian real had dropped to a 4 handle, and thought, that was pretty low for the real, and then came to found out that it was a record low vs. the dollar. YIKES!

I guess I finally got the timing right on one of those Sunday Pfennigs, eh?  Bloomberg had this to say about the real’s weakness:

Brazil’s real fell to its lowest level since its introduction two decades ago, and stocks dropped a fourth consecutive day on concern that President Dilma Rousseff won’t be able to shore up the country’s budget and avoid further credit-rating cuts.

My friends, at the Daily Reckoning led by Peter Coyne, have gone to Brazil to see with their own eyes what really is going on there. I can’t wait to read his reports, to see if I missed anything with my Sunday Pfennig!

A couple of weeks ago, when the U.S.  stock market went for a spin on Mr. Toad’s Wild Ride, gold got a lot of love. But then the stocks rallied back (briefly I might add) and gold was the last one to leave the party. But now, the U.S. stocks seem to be drifting into a real funk. And I’m surprised at that, given the Fed’s decision to keep rates near zero last week.

Apparently, all the other pressures, from the problems in China, to the buildup in military by Russia again, to the commodities selloff, to global growth grinding to a halt, and many more, have the stock jockeys pretty nervous. So, I have to wonder if this time, gold will get the love it so deserves .

Speaking of stocks… Did you know that there was a song that was very popular in the 1920’s called: I’m Forever Blowing Bubbles.  I thank G. Edward Griffin the author of the Creature From Jekyll Island for that information!

Now, I’m not accusing anyone or any organization of forever blowing bubbles. I’m just pointing out that while it seems that we’ve gone from one bubble to the next here in the U.S. since the tech bubble burst at the beginning of the new millennium. It would be each individual’s opinion as to who was responsible for those bubbles being forever blown.  I have to keep my opinion on this one to myself, but I’m sure longtime readers know where my mind is going on that!

The precious metals of platinum and palladium sure took  two different routes to Wednesdayon Tuesday. Platinum was down over $20 and palladium was up $18.  I’ve been a fan of palladium for some time now, and have been quite disheartened by the drop of the shiny metal since reaching its all-time high of $ 912 back in 2014. What did we stop making new cars?  Or do the cars no longer have catalytic converters?  Or, did the price manipulators find a new toy to play with?  Ahhh, grasshopper, it couldn’t be price manipulators because they don’t exist, right?

Gotcha! I bet you finished that last paragraph, saying, “honey, come quick, something has happened to Chuck, he’s talking crazy stuff this morning.”  The tooth fairy doesn’t exist, but price manipulators do!

The U.S. Data Cupboard is still searching for a rainbow. No wait! The cupboard is still searching for data to print. It will get to print the U.S. Markit Manufacturing index (PMI) for the first two weeks of September. I would suspect that this data continues its trend of dropping a bit each month.

Remember, last week I think it was, that I detailed the drop in the manufacturing index here in the U.S. from 58 to 51.  That was the National ISM, and today’s data is the Markit version of the index.  I had to laugh briefly, when I saw what it said on the Bloomberg about the Chicago Fed Nat Activity Index which is due to print tomorrow. it says, ” U.S. Data to be released on website due to Pope’s visit”.

Yesterday, I talked about the Dave Clark Five and their song: Catch Us If You Can, which begins, “here they come again”.  Well, the same can be said for the U.S. lawmakers who are working on September 30, deadline to work out a spending deal.  I talked about this last week, that it was coming up in two weeks, and now it’s just a week away.

The Government could shut down over funding for Women’s Healthcare Group Planned Parenthood.  So, here’s the link to the whole article that can be found on Reuters, and here are the snippets:

Plans to avert a U.S. government shutdown began taking shape in the Senate on Tuesday, but it was still far from certain whether a dispute over funding for women’s healthcare group Planned Parenthood could be overcome.

With only days remaining before an Oct. 1 deadline, Senate leaders said they were pursuing a stop-gap funding bill to extend the present federal budget for about 10 weeks beyond the Sept. 30 end of the fiscal year.

Known as a continuing resolution, or CR, this approach was gaining traction, said senior senators from both parties.

Chuck again. Yes, here they come again, with their kicking the can down the road! Only this time they have a new name for it. A “CR”. I shake my head in disgust. If they can’t make the cut on this, imagine how difficult the other discretionary spending items will be to cut when the time comes that we can no longer pay for them.

That’s it for today, so go and have yourself a wonderful Wednesday! And first day of Autumn!


Chuck Butler
for The Daily Reckoning

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