A Cashless Society?

* Currencies are mixed and in tight ranges.
* Except the worst performer, the ruble.
* India proposes to drop 10% duty on Gold imports!
* Oil drillers are in deep dookie.

And now. Today’s A Pfennig For Your Thoughts.

Good day. And a Tom Terrific Tuesday to you! Well, the rain finally stopped overnight, but it has left behind some major problems for our area. Roads, and not just side roads are closed due to flooding, and now the officials are saying that the river that flows through my little river town is going to rise to the 1993 flood levels, which, if memory serves me right, pretty much shut down our city. 2008, flood levels were bad enough, as the water from the creek behind my house rose to within a couple of feet from our yard, so it appears that this will be worse. I hate to bore you with all this flood talk, but unfortunately, that’s the major issue with me this morning, and so you get to hear about it!

I have to really search for things to talk about these last couple days of the year, given that historically nothing, absolutely nothing, say it again, happens in these final trading days of the year. The “junior boys and girls” are running the trading desks in place of the “real traders”, and so they have instructions to not take any risk. So that means they are not taking positions is assets, and that causes a real decline in volume and when volume is thin, well, let’s just say, that not much happens. There are those rare occasions when a large trade swings a market and everyone scrambles to cover, and that causes a wild swing in the price of the asset, but those get more rare as the years go on.

The biggest story that I’m doing research on right now, is the one coming from Sweden and Denmark, where cash is supposedly being eradicated. So, here we go with the “cashless society” talk again. While I don’t doubt this could happen and in fact probably will eventually, I don’t think that worrying about it right now, with all the other problems that exist is healthy. But for those of you who want to know more about this, I suggest you go to “uncle Google” and type in cashless society. The stuff going on in Sweden and Denmark are just tests if you ask me, to see how the public takes to having the ability to use cash taken from them. I thought for a minute when I read the latest piece of research on this, that the citizens of Sweden and Denmark have had to deal with a lot this year, given that these two countries also implemented negative deposit rates earlier this year.

So, for those of you keeping score at home on this story. 95% of all retail sales in Sweden are cashless. Hmmm, interesting, eh? And in Denmark, the gov’t has actually stated that they have a goal of “eradicating cash” by the 2030. YIKES. Of course this could all play nicely in the sandbox of the calls for a collapse of the financial system that James Rickards and others are calling for. Without a horde of cash outstanding to have to deal with, then a country could adjust the bank records easily to the new money system that comes after the collapse of the financial system.

Well, I’m full of happy news this morning, aren’t I? See what happens when the currencies are trading in tight ranges day after day, and there’s just nothing going on? Well, that’s what’s going on this morning once again, the currencies are mixed, and the moves are within tight ranges. The outlier of that statement is the Russian ruble, which can’t seem to find the sunshine just like we can’t in my river town. But the ruble’s inability to find sunshine brings a different kind of rain, the kind that no currency wants to have come down on them! The price of Oil slipped just a bit overnight, but that small slippage is what all the newswires have being the reason the ruble is getting sold by the truckload again this morning.

In this Sunday’s Pfennig, which I told you yesterday, will feature a 2016 outlook for stocks, bonds, metals and currencies from each of our “gurus” at EverBank Global Markets. And in it, I wrote about how wrong I was regarding the timing of the end of the dollar rally in 2015. But, I also talk about how that’s not unusual for me to be ahead of the actual timing of things by months at a time. And therefore, I was simply moving my end of the strong dollar trend to summer 2016.

That’s all fine and dandy, but here’s UBS Group, AG, the world’s largest private bank, telling their clients there’s “little room for further dollar appreciation, and that they are prepared for the dollar’s rally to end in 2016”. Nice for you to join along with me UBS! Now, let’s get that done!

There’s an article on the Bloomberg this morning that talks about how the Aussie dollar (A$) and New Zealand dollar / kiwi are “biggest gainers among their Group of 10 counterparts in the 4th QTR, rebounding from losses during the first 9 months of the year.” But then hedging their statement, the writer then goes on to say that the surveys they’ve been running showed that forecasters have the A$ slipping to 69-cents in 2016, and kiwi slipping to 63-cents in 2016. Don’t you just love guys that build something up and then hedge their build up by talking it back down? Hmmm, wait a minute here Chuck. Didn’t you just do that here? No, I said that someone else had done it, and I just reported on it. Well, I hate to bicker with you my friend, but I’m your good twin, and I think you did exactly what you just said you didn’t like people doing! Oh, come on, give me a break here, it’s the 29th of December!

The euro is basically flat this morning, but has been down about 20-ticks, no biggie. Italy posted their 2015 GDP this morning, and they confirmed that it was +0.8%… Nothing to get excited about, but think about this for a minute. It’s better than a sharp stick in your hand right? It wasn’t negative! And for the Eurozone, they only need minimal, more than what was posted, but it’s a start, contribution from the peripheral countries like Italy, for Germany is the engine for economic growth in the Eurozone. So, just don’t go negative, Italy!

The Canadian dollar / loonie continues to be resilient in the face of a cheap Oil price, and forecasts for an even cheaper Oil price on the horizon. But I wouldn’t be surprised to see the loonie finally give in and take a ride on the slippery slope, given that the Fed is hiking rates, and the Bank of Canada (BOC) isn’t. And with Commodity prices on the slippery slope, I’m actually surprised that the loonie has continued to be so resilient. Hold on to your hats here folks. this could be a bumpy ride for the first 6 months of 2016.

The drop in the price of Oil hasn’t just hurt the petrol currencies that we talk about, but I read a piece on Ed Steer’s letter this morning that Saudi Arabia posted a record deficit because of the price of Oil. YIKES! But apparently, according to the report that was in the Telegraph U.K. the Saudi Gov’t is “OK” with the record deficit, and believe it is a “considered an acceptable figure”. Oh, geez, I wish they had asked me first before saying that, because that’s how it all gets started. You accept a certain level of indebtedness, and then before you know it, you’re in deep dookie with your “uncle Vinnie”. Oh, well, kids will do what kids do. It’s all fun and games until some country loses their credit rating!

Speaking of Commodities. The precious metals of Gold, Silver, Platinum and Palladium have all had a bad 2015. I talked about Palladium and Platinum yesterday, so today it’s Gold & Silver’s turn on the hot seat! HA! I was speaking of resilient in terms of the loonie above, but that word “resilient” could also be used to describe Gold. Especially when you consider the price drops this year in just about every other commodity. (I think Sugar is the only positive commodity in 2015) . There are also reports from India, where the Jewelry Trade Federation has requested that the Gov’t drop the 10% import duty on Gold, and they have showed the Gov’t that with the current price of Gold that the affect in the Current Account Deficit would not be substantial, which is really important to the Indian Gov’t. This could be a HUGE lift for the price of Gold, should this proposal gain some traction in 2016.

And poor Silver. Every time I stepped up to buy some Silver in 2015, the price then dropped. So, I have a proposal. Who wants to pay me for keeping away from buying Silver in 2016? HAHAHAHA! I think I would get in trouble with the bank authorities if I actually tried to get away with that!

I told you yesterday about the U.S. Data Cupboard being somewhat of a non-event this week, but we will see the November Trade Deficit, which I believe we will see it widen once again, as the dollar was stronger in November. We will probably see it hit $60 Billion for November, up from $58 Billion in Rocktober. We’ll also see the S&P/CaseShiller Home Price Index for Rocktober. This data is so stale now, who cares? Home prices could have moved by a wide margin since Rocktober! The National Consumer Confidence is also expected to print and show an increase in Confidence for this month, given the Fed Rate hike. If these consumers that were surveyed only knew better.

To recap. Another day, another day of mixed currencies that traded in tight ranges, except the Russian ruble, which continues to be taken to the buzz saw each day. Chuck talks about the cashless society that’s being bandied about in Sweden and Denmark, where they’ve already seen negative deposit rates this year. And other than that, there’s not much else to talk about today.

For What it’s Worth. This was an easy one this morning as it was found on the Bloomberg, as I was searching for stuff to write about. Then I saw it on Ed Steer’s letter, and thought, well if Ed thought it was important, than so do I! It’s about the fracking drillers and the problems they are running into with $35 Oil and not $50 Oil. Let’s listen in.

“In 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well.

Those efforts, to the surprise of many observers, largely succeeded. As of this month, U.S. oil output remained within 4 percent of a 43-year high.

The problem? Oil’s no longer at $50. It now trades near $35.

For an industry that already was pushing its cost-cutting efforts to the limits, the new declines are a devastating blow. These drillers are “not set up to survive oil in the $30s,” said R.T. Dukes, a senior upstream analyst for Wood Mackenzie Ltd. in Houston.”

Chuck again. And what did I tell you yesterday about the forecasts for the price of Oil with the majority of them calling for the price to slip to $20. YIKES, what’s that going to do to these guys? And don’t forget the “financialization” of this industry that we’ve talked about previously. It’s not going to be pretty, folks.

Currencies today 12/29/15. American Style: A$ .7270, kiwi .6860, C$ .7180, euro 1.0965, sterling 1.4820, Swiss $1.0120, . European Style: rand 15.2977, krone 8.6880, SEK 8.3495, forint 286.48, zloty 3.8700, koruna 24.6330, RUB 72.63, yen 120.50, sing 1.4125, HKD 7.7500, INR 66.39, China 6.4864, pesos 17.23, BRL 3.8600, Dollar Index 98.01, Oil $36,93, 10-year 2.24%, Silver $14.01, Platinum $882.55, Palladium $553.70, and Gold. $1,070.23

That’s it for today. Well, here I am, in my office this morning. That’s a reason to celebrate. For you see, I no longer am self-conscious about what my face looks like, and my bad breath is better, because the tumor in my mouth seems to be shrinking. Slowly, but shrinking nonetheless. I can’t wait to see everyone, but I’m sure there will be plenty of people “out” this week. When I was last here, I was having major bleeding problems, and the growth was growing so fast, but that was then, and this is now. I still get fatigued very easily, and the walk from the garage, across the bridge to the office building was about as much as I can handle right now. My Shakespeare’s Pizza water cup is missing from my desktop. Hmmm. Someone probably decided that it needed to be put in the dishwasher. At least that’s what I hope! Another reminder that there will be no Pfennig on Thursday, as it is Pfennig Tradition to not write on New Year’s Eve morning. The Raspberries are singing their s
ong: Go All The Way, on the iPod right now. Their lead singer was Eric Carmen, who went on to have a successful solo career. My two grandsons, Braden and Everett got light sabers from their uncle Alex for Christmas, and you should have seen those two play with those things all day long. They received plenty of other things, but the light sabers from uncle Alex were a hit with those two! Little Delaney Grace was so cute in her Christmas outfit, and walking around with her American Girl, doll. It was the best Christmas in a while, since Alex was little. Well, the river is supposed to crest sometime between Wednesday and Thursday. fingers crossed on our backyard and all the things in our backyard! And with that, I’ll get out of your hair for today, and hope you have a Tom Terrific Tuesday!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts