Good day… And a Tom Terrific Tuesday to you! I hope your Memorial Day Holiday weekend was grand… I have to tell you straight up, I did not cook, smoke or grill anything this past weekend. Probably the first time in my adult life that I didn’t light up a fire at some point to cook. I didn’t really get the opportunity to do so, I guess that’s my excuse!… Saturday, Andrew grilled for all the guests at Braden’s Birthday Party… Saturday, I was lost and all alone, and Sunday I attended the Cardinals game with my boys… I was doing much better with my CPAP machine, until last night… I had an awful night! And I’m doing something a little bit different this morning, instead of the wide variety of music that’s on my iPod I’m listening to the Allman Brothers concert that closed the Fillmore East in June of 1971… The recording is a little raw, and wouldn’t be acceptable in today’s digital word, but to me, I’m there… standing in the crowd, listening to Dickey Betts play his big red guitar, and Duane Allman slide guitar with Gregg Allman’s bluesy voice… We lost Gregg Allman this past weekend.. And so that’s why I’m reliving my days in the blues/ rock band playing my bass guitar to: In Memory of Elizabeth Reed… Oh, and don’t forget Jai Johnson on the drums!
The currencies lost their mojo on Friday in what seemed to be some interesting trading given most senior traders had already headed to the Hamptons. But Gold took a shot at the dollar, and didn’t miss, gaining more than $ 11 on the day, with 411,000 contracts traded! WOW! That’s just crazy, and I’m crazy for crying, and I’m crazy for trying and I’m crazy for loving you! It’s days like this for Gold that I tend to forget all the days that Gold gets sold for no particular reason… I guess it’s like the weather, for if it weren’t for the rainy days, you wouldn’t treasure the beautiful blue umbrella skies filled with sunshine.
The Currencies continued to slide in yesterday’s thinly traded market, with both the U.S. and U.K. on holiday, the euro slide further but the slides were small, and range bound it appeared to me, as I checked them out last night. This morning, the slide continues for the currencies, but again, the moves are small, and it appears that everyone is not in their places with bright shiny faces yet this morning.
Well, looky there! 1st QTR GDP was revised upward to 1.2% from the first print of 0.7%… Recall that I told you that it was thought that an upward revision to 0.9% was expected, so the revision beat expectations, and that lit a fire under the dollar to end the week and head into the weekend. The euro took the brunt of the dollar buying, just as it had benefited in reverse in the overnight trading on Friday, and was up VS the dollar. While this revision is nice in GPD, and does alleviate some of the fears that investors had about the economy, one has to take a step back and look under the hood… Come on, let’s look together, it’s fun looking under the hood!
Well, well, well, what have we here, a worn drive belt? (do cars today even have one of those?) No, what I’m talking about is a slowing of consumer spending… Yes, Consumption as it’s called, which always reminds me of the presentation Frank Trotter gave in Bermuda a few years ago, when he said, “everyone wants consumption, but as I walked through the cemetery here in Bermuda, the cause of death on most of the graves was “consumption”, so to me that doesn’t look like a very good thing to want.” And now back to what I was talking about… Consumption was revised up from 0.3% to 0.6%, but come on.. that still doesn’t pay the bills folks! This GDP revision was more about revisions to: Government spending (down, can you really believe that one?) and intellectual property investments (up, can you really believe that this is part of GDP?)
I shake my head at the games that are played with this data.. isn’t GDP supposed to be as easy as pie?
GDP = C (consumer spending) + I (investment) + G (government spending + (X (exports) – M (imports)
But adding intellectual property sounds like someone is just trying to find things to add to make the number better… And reducing Gov’t spending? Really? Who are they trying to kid here, and I don’t think we’re their favorite goats! I wouldn’t buy that thought that Gov’t reduced spending, with your money! So, in my mind, I see the GDP for the 1st QTR as still very tepid, and right now having been goosed, because there’s no way the Fed could continue to hike rates with growth at just 0.7%… I’m just saying…
Oh, and remember the addition of Research & Development (R&D) to GDP a couple of years ago in hopes that it could goose GDP to get it to 3%? Once again, we’ve gone the extra yard to gather enough sticks to make a fire, and the fire still is just smoldering…
Well, this week is Holiday shortened, but that doesn’t mean we won’t get a ton of data around the world, but especially here in the U.S., starting with today’s Personal Income and Spending, the Case/Shiller Home Price Index, and Consumer Confidence. Thursday’s fare will include the ADP Employment Report, and the ISM Manufacturing Index, but most important to all data this week will be the May Motor Vehicle Sales report on Thursday.. I’ve talked about this in a previous Pfennigs (May 16 & 19) So, just know that this will be an important print… And on Friday, it will be a Jobs Jamboree Friday, but I don’t care about that anymore, so I mention it because everyone else seems to think it matters…
The Eurozone will see the final print of their May CPI (we’ve seen the flash reports, which showed consumer inflation backing off a bit, which is probably more of a reflection of the timing of Easter than anything bad) The Reserve Bank of New Zealand (RBNZ) will issue their Financial Stability & Review tonight, followed by a press conference by RBNZ Gov. Wheeler. I’ll be holding my breath tonight in anticipation of Wheeler dissing kiwi like he always does… I would think he would spend most of his time worrying about the housing bubble in Auckland instead of thinking of ways to talk down kiwi strength…
And, come on Chuck tie all this data talk up, it’s getting boring! OK! Finally, In Canada this week, they’ll print their latest Current Account Deficit, which will most likely show a widening, but don’t get your pants all twisted up here, Canada’s Current Account Deficit is only 2% of GDP… Now worries here, move along now…
So, the price of Oil really took off on Friday after the OPEC announcement… At first it was not pretty to watch the Oil traders take a pound of flesh from the price of Oil, but after they got that off their chests, they decided to buy once again, and the price of Oil rebounded back to a $ 49 handle, and last night when I checked the prices, Oil was $ 49.90, but… it has slipped about a quarter this morning, but still much better than the initial reaction after the OPEC meeting…
The Petrol Currencies got caught up in the Oil selling late last week, and they haven’t recovered with the price of Oil rebounding. And with the euro a bit weaker, the Norwegian krone, which last week was benefitting from euro and Oil price strength, is seeing the double boost it received last week, getting reversed now… UGH!
I was reading a Tweet I received the other day about how this person believes that China A shares will finally get included in the MSCI Emerging Markets (EM Index later in June… this would be HUGE for China to be included in this index, which is the bellwether for Emerging Markets Indexes. China has been banging on the MSCI’s door for years now to get their A Shares included, and I think that being included in the IMF’s roster of reserve currencies for Special Drawing Rights (SDR’s) last year, will go a long way toward seeing China reach their goal… This will be another step in their distribution of their currency folks.. Just another brick in the wall…. We don’t need no education… We don’t need no thoughts controlled, no dark sarcasm in the classroom, Teachers leave those kids alone… All in all it’s just another brick in the wall…
And here’s something that I borrowed from Ed Steer’s letter this morning (www.edsteergoldandsilver.com ) The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, reported on Thursday that its index had fallen to its lowest since early March as demand slowed across all vessel segments. Interesting eh? I sure pulls the stakes holding down the Global Tent Revival’s tent!
This could be a very wild and wacky week for the currencies and metals, with all the data in the U.S., the fact that President Trump sent out a flurry of Tweets this weekend, and the fact that N. Korea fired off another missile this weekend, that was dangerously close to Japan, has the markets on edge, so we’ll have to roll with the punches this week and see where it takes us… Gold, in the early morning trading is down nearly $ 5 today, maybe that’s an indication of what we can expect this week? I certainly hope not!
To recap… A Holiday shortened week will be chock-full-o-data this week ending with the Jobs Jamboree on Friday, and having some very important prints in between, like the Vehicle Sales data for May on Thursday… The currencies lost their mojo on Friday, and haven’t been able to get it back since, but the moves are small and range bound. But Chuck thinks that will all change once everyone returns to their trading desks this week. Lots of things going on around the world this week, so strap yourself in, keep your arms and legs inside at all times, and let’s go for this ride!
For What It’s Worth… OK. Straight up here, I’m not promoting Apple.. I’m merely following up on something that Frank wrote about a couple of weeks ago in a Sunday Pfennig, regarding robots, and artificial intelligence… This can be found on Bloomberg here: https://www.bloomberg.com/news/articles/2017-05-26/apple-said-to-plan-dedicated-chip-to-power-ai-on-devices
Or, here’s your snippet: “Apple Inc. got an early start in artificial intelligence software with the 2011 introduction of Siri, a tool that lets users operate their smartphones with voice commands.
Now the electronics giant is bringing artificial intelligence to chips.
Apple is working on a processor devoted specifically to AI-related tasks, according to a person familiar with the matter. The chip, known internally as the Apple Neural Engine, would improve the way the company’s devices handle tasks that would otherwise require human intelligence — such as facial recognition and speech recognition, said the person, who requested anonymity discussing a product that hasn’t been made public. Apple declined to comment.”
Chuck again… We live in interesting times, eh?
Currencies today 5/30/17… American Style: A$ .7452, kiwi .7072, C$ .7423, euro 1.1170, sterling 1.2865, Swiss $ .9760, … European Style: rand 13.1487, krone 8.4377, SEK 8.7442, forint 276.21, zloty 3.7373, koruna 23.6882, RUB 56.49, yen 110.96, sing 1.3856, HKD 7.7926, INR 64.58, China 6.8575, peso 18.55, BRL 3.2628, Dollar Index 97.37, Oil $ 49.53, 10yr 2.23%, Silver $ 17.31, Platinum $ 944.47, Palladium $ 795.23, Gold 1,266.00, and SGE Gold $ 1,266.53
That’s it for today… Thank you for Reading the Pfennig, and thank you for putting up with my long descriptions or recounts of my playing days regarding music… Here’s some more… It was less than 100 days that Duane Allman had to live after the June, 27 1971 concert that closed down the Fillmore East. He died in a motorcycle accident and then about 1 year later, bass player Berry Oakley also died in a motorcycle accident , less than 3 blocks from Duane’s fatal accident. The Allman Brothers would go on and continue making music for many years… But there was always something missing, in my humble opinion… I had just finished my sophomore year in High School in June of 1971… And don’t recall if I even knew the Allman Brothers existed then, but would get to know them the next couple of years, and by 1974, I was playing their music! I had a grand time at the Baseball Game yesterday with my “boys”.. .Andrew, Alex and Jerry… We had a blast! Even though we had to watch the Cardinals anemic offense! The 4 of us were together for Game 7 of the 2011 World Series Championship. I’ll never forget the feeling of being there with my “boys”… I’m on the 19 minute version of Whipping Post by the Allman Brothers to take us to the finish line today… And with that, I hope you have a Tom Terrific Tuesday… Be Good To Yourself!
EverBank Global Markets
Creator / Editor of: A Pfennig For Your Thoughts