This Is The Week! Finally!

And now… Today’s Penning for your thoughts…

Good day, and a marvelous Monday to you!

Well, it rained while in Houston — which it seems to do every time we are there — and the rain appears to have fallen on the dollar on Friday. The euro rallied with Big Boy pants on, and the other currencies followed.

I arrived home on Friday afternoon, to see the results of the day. That was pretty impressive. The euro moved above 1.13, the Aussie dollar (A$) remained above 70-cents, and even the Japanese yen got in the mix with a rally of its own vs. the dollar.

I wasn’t much interested in why the currencies were rallying vs. the dollar on Friday, when I got home. I was frustrated, tired, and ready to indulge in a cold beverage, which I did, and soon forgot that I was going to see what fired up the currencies. UGH!

Oh well, it was Friday afternoon, what was I going to do with that information? Impress all my friends at FBG? I doubt seriously if those guys would be interested in what I did, much less what I had to say about it! HA!

In all fairness, I do have a couple of Pfennig readers that are among those at my table on Friday afternoons. So, this morning, I wanted to check out the news to see if I could re-stage the Friday goings on that moved the currencies.

And what I found was simply that the U.S. Data Cupboard wasn’t kind to the rate hike campers, with PPI (wholesale inflation) falling in August vs. July, the U. of Michigan Sentiment report for the first two weeks of September fell from 91.9 to 85.7,  and the U.S. Monthly Budget Deficit added another $64.4 billion to the wreckage, otherwise known as our National Debt. Which when I take a quick look at the Debt Clock (remember that? ) show me the U.S. National Debt is $18.385 trillion.

Oh? You want to see it drawn out to the full number? Well, it changes every second, but as of 9/14/15, at 5:25 am CT, it is $18,385,394,205,305.

That’s daunting isn’t it when put like that? YIKES!

But the real McCoy is in the Unfunded Liabilities which are now $97,603,522, 000,000. That’s right, that’s $97 trillion with a Capital T! And of course professor Lawrence Kotlikoff says that the “real Unfunded Liabilities” are more than $200 trillion.

None of that data on Friday morning gave the rate hike campers a warm and fuzzy, and there you go. The markets are now coming around to seeing the things Chuck’s way! I commend them for their ability to see through the smoke and mirrors, but, I only ask one thing. “What took you so long to join me?” HA!

So, for new readers that have no idea what I’m referring to here, it’s simply that I first told you all last year, that the Fed wouldn’t hike rates in 2015, and if they did it would be very small, as if they didn’t hike at all, just to save face with the markets. Oh, you can look at the Debt Clock yourself by clicking here.

Of course a year ago, I didn’t really think that China was going to have their economic cycle problems, and now those calling for rate hikes here in the U.S. have the China problems to use as an excuse now for not hiking rates. And that seems to be what the markets are focusing on now, the problems in China, and how they would put a halt to the Fed’s public plans to hike rates.

I say “public plans”, because that’s what they want the public to believe, that the economy is strong enough to begin to hike rates for the first time since 2006. But secretly, the Fed members must know in their heart of hearts that they just can’t hike rates, not with the rest of the world suffering, not with our own economy as uneven as a scale with me on one side and Olive Oil on the other side!

Oh, and don’t forget the debt. That’s the main reason I began this campaign to diss rate hike talk a year ago!

Well, that was Friday. Today, the currencies all appear to be very flat, with most of them down just a shade, but for the most part, flat on the day.

That’s because this is THE WEEK! That’s right! This is THE WEEK, that the Fed will finally make a decision on rates. I do believe that this is going to be a 2-day extravaganza at the Fed, so get the board games out. “I’ve got dibs on Candy Land!” HA!

But on Thursday, at 1 pm CT, the Fed will tell us what they are going to do. And then there will be nothing left but the crying. So, put away the board games, and get out the crying towels!

But until we get there, I’m afraid that we’ll go through these periods of the markets not knowing which way to go, and therefore going nowhere.

So, it’s all about the FOMC meeting this week, folks. Sorry, but that’s what it’s all about, and there’s nothing I can do to stop that!

I can talk about other things than just the Fed, rate hikes, and so on, right? So, that’s what I’ll do!

Looky there! Greece is holding a second general election this year, but this time everything is different. Well, everything that involves Eurozone membership, which is all euro traders care to think about. The two Greek parties that are fighting it out, New Democratic, and Syriza (the leave the euro party) are equal in their votes from the polls. But I don’t put much stock in polls any longer, not with what happened in Brazil last year, and other elections around the world.

This morning in the Eurozone, Industrial Production (IP) was strong in July with a +0.6% gain vs. June, which was above the expectations, and moved the annual growth to 1.9% year on year. The leader of the pack of course was Germany, but most of the members had good recoveries in the month of July, except France, where they brought up the rear here, with a negative print for the month.

So IP isn’t going so great in France, but everywhere else in the Eurozone things are looking brighter. And in Germany things look so bright I’ve gotta wear shades!

Also on Thursday, but many hours ahead of the FOMC decision, the Swiss National Bank (SNB) will have their Quarterly Policy Announcement. It will be interesting to hear what the SNB has to say about the franc. I’m pretty sure they are going to whine about how strong the franc remains.

Just to give you an idea what they are looking at. Remember the “floor” on the cross that the SNB implanted a couple of years ago, and dropped earlier this year? That level for the cross of euros/francs was 1.20. Today it stands at 1.0975.

I remember when it was thought that the SNB really wanted to move the cross floor from 1.20 to 1.30 or 1.35?   We’re a long way from that, baby!  So, get ready to hear some whining. But the SNB is already at a negative deposit rate, so what are they going to do to make the franc weaker? Well, that’s what the Quarterly Policy Announcement is for!

The Bank for International Settlements (BIS) issued a statement this weekend that showed up in the telegraph from the U.K. and in it the statement, the BIS said that “debt ratios have reached extreme levels across all major regions of the global economy, leaving the financial system acutely vulnerable to monetary tightening by the Fed Reserve.”

Uh-Oh!  I have to admit I loved the way the guy, Claudio Borio, wrote the statement, saying at one point that, “the release of pressure that has gradually accumulated over the years along major fault lines.” I don’t know what he was talking about, but the use of “major fault lines” was pretty cool.

But one thing that the BIS statement did point out that’s really interesting is that total debt ratios are now significantly higher than they were at the peak of the last credit cycle in 2007, just before the onset of the global financial crisis. N

ow that’s scary, I don’t care who says it, it’s just downright scary!

Well, the Singapore dollar is rallying this morning, ever-so-slightly, I might add, on the news that the political situation in Singapore will remain stable, with the Ruling People’s Action Party winning 83 of 89 seats in the latest general election held last Friday.

Want to see something that’s pretty impressive about this general election?  The voter turnout was 93.56%!  What do we get here in the U.S, like 57% or some weak number like that?

So, this is a vote of confidence in Singapore, and maybe the rot on the Sing dollar’s vine can be cut off.  But remember what I told you in my “one and done” letter last Tuesday, and that is that wherever the renminbi goes, the Sing dollar goes.

Speaking of the Chinese renminbi, the currency appreciated overnight, not by large amount, and not by a small amount, but one that’s just right! And Goldilocks laid down and fell asleep! HA!

I always tell my grandson Braden Charles, the old time stories, like Goldilocks and the 3 Bears, Jack and the Beanstalk, and so on. He loves them, and sits still on my lap while I tell him the stories. OK. enough with the Hallmark moment, Chuck, you were talking about China.

Oh yeah, well, not much is going on here right now. China is still attempting to allow the markets to work through their economic cycle downturn, with a little help from their friends known as cash reserves. But the U.S. and China just held 4 days of cybersecurity talks. I’m sure that was fruitful and that the talks led to many secrets.NOT! AS IF!

Well, the U.S. Data Cupboard today is barren. Nothing, nada, zero, zilch. And that’s fine with me. I’ve got to get my bearings back after being subjected to insurance madness and doctors. I did learn that I’ve lost 50 lbs. since I first went to MD Anderson in September 2013. WOW! But that’s the way to do it, right? I sure didn’t put those 50 lbs. on overnight! I’m sure it took me a couple of years to gain them.

But tomorrow’s Data Cupboard will yield August Retail Sales. The BHI (Butler Household Index) indicates to me that this print will once again just be “OK”, nothing great, nothing to fear. Remember, there were still back to school purchases in first part of August.

Gold wasn’t allowed to rally alongside the currencies on Friday. The price of oil sure was allowed to participate, but not gold. Hmmm…

After reaching the $1,100 level last week, and then trading well into the $1,100 handle as the week went on, gold hasn’t been able to hold the gains, and is looking as if it is ready to fall back below $1,100 again!

I guess commodity traders aren’t so sure that the Fed isn’t going to hike rates on Thursday. Well, that just means that we could see a relief rally later in the week!  Well, that is, as long as things the way I believe they will go.

Last week, we had a faux pas with the Big Boss, Frank Trotter getting his piece for the Pfennig getting eaten by his dog. HA!  Seriously, this is the Big Boss, bringing us up to date on his Sunday Pfennig where he talked about jobs, and people needed for jobs, etc.

He has a correction in it for all of you who wrote in saying his numbers were off. So, with no further ado. Here’s the Big Boss, Frank Trotter!

Thursday, September 10th, 2015, White Rock, MO.  “The Grand River came up and surprised us.  I need to be out shoring up the levies.”  It won’t make national news but I was getting the lay of the land from the gentleman who manages our wetlands in Northwest Missouri.  He sounded a little frazzled.  “I’ll be up Thursday to meet with you and check out what needs to be done for duck season,” I said.  He indicated that sounded great but I’m betting he felt another day would be better.

Just before the bottom widens out as you head west there is a small quarry which provides the name to the location.  After the 1993 Missouri River floods that created all the Federal Wetlands legislation, this rock pile grew much smaller after it was determined that the railroad main line running a couple hundred feet south would be more effective with the trains traveling above water level.  The quarry still stands out as a landmark from the air as I fly from Saint Louis to the west making it easy to hone in on the 240 acres of water and native grasses.  Apparently it’s easy for the ducks too.

I had some interesting and great responses from Pfennig Pfriends regarding the question I posed about the apparent lack of skilled labor here in the US.  “Very tight on mid-level medical providers,” was one response, Dayton, Ohio reports that it is very difficult to find people who will show up consistently and who are in work shape when they arrive.  Even the hapless Cubs come up in the conversation with a long suffering fan noting that “Apparently it is easy to take an afternoon off and pull your kid from school (teaching him/her that it is OK to goof off)” and go to an afternoon game at Wrigley Field rather than stay at the office and accomplish something.  That brings up an interesting question – is there any Cub fan who was alive the last time they won the World Series in 1908?  Maybe they should have remained the Orphans.   And an unusual opposite on the real estate appraisal side – “Those skilled enough to actually do the job right have largely been replaced . . .  There is the question of whether you need a cordon bleu chef to flip a burger.”

I’ll admit my favorite came from someone who has actually worked as a welder and who verified the problem.  Across a wide array of experience, including a lot of time on massive ranches in Big Sky Country, he notes that there are many of people who are working as welders, or apply to be welders, that are as I said yesterday un poorly or under trained.  But “in summary the welders and mechanics, the “real” ones, are  extremely hard to find and there not even close to “enough” of them.”  Hmmm – need the number for the local technical college?

Chuck again.. Thanks to Frank for helping out this morning. He certainly leads a quite interesting life doesn’t he?

I love it when he writes a journal of his travels and activities. He normally reads the Pfennig on his way into the office from his early morning hockey game! Here I am barely able to walk without falling, and he’s a year older than me, and still playing hockey! And then on Sunday’s he plays soccer!

Wow! Our very own “The world’s most interesting man”!

That’s it for today. I have more talk about, but I need to get this out the door, so I hope you have a marvelous Monday!

Regards,

Chuck Butler
for The Daily Reckoning

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