A Very Busy Week Ahead!

* No extension for Greece .
* Greek banks shut down.
* Capital Controls are implemented..
* China cuts interest & Reserve Ratio rates.

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

Good day. And a Marvelous Monday to you! Well, it was a busy weekend around the world. China, Greece, U.S. Treasuries, Alex’s birthday, and a Cardinals sweep of the Cubs, all saw activity this past weekend. There’s no sense I beating around the bush with regards to Greece, it’s a real mess this morning, and I’ll attempt to sort it all out for you. The Kinks greeted me this morning with their song: Sunny Afternoon, a good, fun, sing along song. OK. let’s get to the meat, for this is going to take some sorting out.

Well, we’re getting down to the 11th hour, which is when I said an agreement to give Greece more aid to keep them afloat and kick the can down the road. I was very discouraged to read the stories from Europe this past weekend. Greece asked for another month to sort things out, and put out a referendum to the Greek people to vote on the aid package restrictions. Unfortunately, that referendum won’t take place until July 5, and Greece’s loan payments are due to the IMF tomorrow. The IMF said, no mas. no more extensions, no more playing around, you have until the end of day on Tuesday to pay us, or go into default. Now, don’t feel too bad for Greece here, it’s not like they didn’t know their loan payments were going to be due on 6/30, and they had a month to put out a referendum but waited until it was too late. And on top of that, Greek leaders are telling the Greek voters to vote “no”. Now, let’s see. the latest poll had more than 70% of Greek voters wishing to stay in the euro, so let’s see them put their vote with their wishes are.

So, to further the problems, Greek banks shut down for a “Bank Holiday” on Monday. ATM’s ran out of euros, and depositors tried like the dickens to get their money out of the banks, and then before you could say Tsipras, Capital Controls were implemented in Greece, which means money can’t leave the borders of Greece. But, we all know that those controls hardly ever work. Dozens of countries like Mexico, Iceland and Thailand have imposed Capital Controls since WWI, and the IMF’s studies show that only a few countries with strong, sound economies succeeded, in slowing funds leaving the country. But I guess Greece, which is a cash strapped country, had to do this. Too bad though, for it sure gives a country a black eye. Not that Greece hasn’t been walking around with raw steaks on its eyes for a few years now!

The news this weekend whipsawed the euro for sure, as the single unit lost two whole cents right out of the starters blocks in the Asian open last night, only to see it rebound and recover those losses, leaving it about where it was on Friday afternoon. It will be interesting to see where the U.S. traders take the euro today, given the news from the weekend.

So, where does this leave Greece? Does a default mean they’ll have to leave the euro? Well, no. But, it doesn’t help them very much. I’m going to stick to my guns here, and still say that this will all get worked out to prevent Greece from defaulting, but all that means is that in a year, or maybe longer, or shorter, we’ll be revisiting this all over again.

OK? All sorted out for now? In China over the weekend, the Peoples Bank of China (PBOC) threw a cat among the pigeons when they decided to not only cut the benchmark interest rates, but also cut their Reserve Ratio for banks that deal with farmers. Which will probably encompass all of the banks! Talk about a double barrel shot of medicine for the ailing Chinese economy! The PBOC took no chances though, and marked the renminbi / yuan down overnight. I’m sure the PBOC thought that if they allowed the renminbi to appreciate, that currency traders would go hog wild over the forward points, so they tempered the currency traders’ moves. Smart on the PBOC’s part. As long as you have control over the currency in the spot market, you might as well make it work for you as a country. Of course, I would prefer that the renminbi was free floating, and not controlled. But, it is what it is.

So, all these goings on in Greece, and China, sure had the flight to safety going on and the Swiss National Bank (SNB) had to intervene in the markets by selling francs to keep the currency from soaring as investors were selling their currencies and buying francs as a safe haven. U.S. Treasuries also saw a ton of buying, on the flight to safety. The 10-year’s yield dropped from 2.40% on Friday to 2.34% this morning.

But the one asset that should be considered THE safe haven, Gold, just can’t find any wind for its sails this morning. At least the shiny metal isn’t down, which would really raise suspicion wouldn’t it, given the flight to safety going on? I just shake my head in disgust at how Gold, Silver, Platinum and Palladium get treated every day. Hey! Did you get a chance to read the Sunday Pfennig, where we talked about these metals and the prospects from our viewpoint on them? I forgot to mention last week that we were going to be writing about that on Sunday. Well, if you didn’t see it, go back to your email box on Sunday, it’s still there, or you can go to www.dailypfennig.comita and read it there!

What’s ahead this week? Well, we certainly will be gyrating with all the news from Europe, and guess what happens this week? That’s right! The Jobs Jamboree will take place on Thursday this week. And this coming weekend is July 4th! Our Independence Day! WOW! We basically lost June around here, as it rained and rained and rained, and washed out June, so it seems like we’ve gone from Memorial Day to the 4th of July in a week! So, that’s why the Jobs Jamboree will be on Thursday this week, because on Friday, there probably won’t be one-third of the traders around, as they all head to the Hamptons to make it a 3-day Holiday Weekend.

We’ll also have a Riksbank meeting in Sweden this week. I told you last week that I didn’t think the Riksbank would change anything at this meeting, but that doesn’t rule out a dovish statement from the Riksbank after the rate announcement. So, it doesn’t look like a good week to be krona. And Sweden’s neighbor, Norway, is seeing the krone continue to weaken, after the comments from the Norges Bank last week about how they need a weaker krone. I don’t believe that I’ve seen krone this weak since before the weak dollar trend began in 2002.

We’ll see some data prints from Canada this week, but they will take a back seat to everything else that’s going on .

The Currencies are mixed this morning, but none of the moves are huge, as it appears everyone is on the edge of their seat waiting for Europe to implode, which in my mind isn’t going to happen. So, maybe some reversals as the week goes on should things go as I think they will.

The U.S. Data Cupboard just has Pending Home Sales data for May to print today, but the cupboard will heat up as the week goes on. I’m in no mood to talk about the Jobs Jamboree yet, because I’ll just get myself all in a bad mood about “adjustments” and cooked books. Maybe tomorrow, but definitely by Thursday when the Jobs Jamboree will take place! In the meantime we’ll also see Factory Orders for May, which will print negative again, I’m sure of that. And the ISM data for June. So, it will be a busy week with data prints folks. And we know that weak data prints has been the dollar’s kryptonite lately.

Well, everybody is “confident”, eh? That’s what the media would have you believe, given their reporting of the U. of Michigan Confidence survey that printed Friday, and showed their index increased to 96.1 from 94.6 in the previous print.. And like I told you Friday, they don’t come to my house to survey me, or in the office here, or even at my favorite watering hole, the FBG. For if they did, I would be loaded for bear, and they wouldn’t be printing an increase in Consumer Confidence or Sentiment. I stand steadfast in my research, and my thought that the U.S. economy has never truly left the recession of 2008. To me, economic activity since 2009 has been a period of stagnation. But GDP shows there’s been economic growth. Really? How about in Final Sales, you know the data set that probably does a better job of tracking economic growth in the U.S. . Well, I hate to steal my Review & Focus’s thunder, but Final Sales here in the U.S. have averaged 1% growth since 2007. Now that’s what I call stagnation, don’t you?

So, I checked with John Williams, over at www.shadowstats.com to see what he had to say, and he said that, “GDP simply remains the most worthless of the popular economic series, in terms of determining what really is happening to the U.S. Business Activity.” Did you know that President Lyndon Johnson used to review the GDP reports before the Commerce Dept. (CD) could release them? He would send them back, like you do an undercooked steak, to the CD and keep doing it until the CD “got it right”. Does that still go on? You have to wonder don’t you? I mean the 2nd QTR’s revision last week went from -0.7% to -0.2%… But never a reason why. Except that word again. “consumption”.

So, anyway. I urge you all to make sure you check out the July Review & Focus when it prints, to see the section on the Final Sales data.

Last Thursday, my friends, Dave Gonigam, and Addison Wiggin, talked about the Iraqi dinar in the 5 Minute Forecast, and they came to me for a story that I had shared with them. they also went back in time and quoted me regarding the dinar a few years ago, just to show new readers that they’ve been on top of this for some time now. Good for them, I say! But the thing I really wanted to talk about that was in the “5” that day was a discussion about Home Ownership in the U.S. let’s listen in on the “5” to what they have to say here.

“The year was 1993. Apartheid was breathing its last in South Africa. The World Trade Center was bombed — the first time. Buffalo lost the Super Bowl — again.

Little did anyone expect at the time that legions of Americans would start to become homeowners — a surge that continued for the following decade.

Now in 2015, the U.S. homeownership rate is back where it was 22 years ago — below 64%.

What’s more, “the trend does not appear to be abating,” says Chris Herbert, managing director of Harvard University’s Joint Center for Housing Studies.

Many of the people who’ve fallen out of the homeownership ranks never really “owned” a home in the first place. They had mortgages, often more than one, but no equity. Then came the Panic of 2008. ”

Chuck again. It appears that only the over-65 set has a homeownership rate that’s stayed stable the last decade. And the thing I don’t understand here is that Rental costs grew 3.2% last year. That’s double the inflation rate! But, I guess the researchers at Harvard know the answer. They say that Nearly half of all U.S. renters are “cost burdened” which means they shell out at least 30% of their income to their landlords, and in the end, have nothing to show for it. When I was a kid, people would say when greeting someone, “What’s up?, and the answer would be “nothing but the rent”. I guess they should bring that back, eh?

To recap. Greece is a tinder box. As the IMF rejected a request for an extension to the loan payments due tomorrow. The Greeks will vote on a referendum to accept the agreement with restrictions (austerity measures) this coming weekend, and the Greek leaders are urging the voters to vote “no”. There’s a “bank holiday” in Greece today, and Capital Controls have been implemented, as all hell breaks loose in Greece, and Chuck attempts to sort it all out for you dear readers. China cut both their benchmark interest rates, and Reserve Ratio for Banks this past weekend, a real strong move to help the economy. And there’s lots going on this week, so make sure you’re strapped in, arms and legs inside the vehicle at all times this week!

For What It’s Worth. This came to me from one of our dealer banks that we trade with, RBC. So I can’t send you to a link, but I’ll give you as much of their thoughts on this subject as I can. And that subject is. That FX (currencies) is no longer, for the most part, trading as a part of the Risk On, Risk Off trading pattern. What, what? Do they mean, we’re getting back to fundamentals? YAHOO! Let’s see what they have to say here.

“FX is trading as an independent asset class to a degree that has not been seen since the pre-crisis era. Of 45 G10 GX pairs, only four now trade as general risk proxies. The few remaining FX risk proxies are all CHF (franc) crosses. With the dust settled on the SNB’s policy shift, CHF has reestablished itself as the markets’ choice save haven. More surprisingly, all of the JPY (yen) crosses now trade independently of general risk appetite. Yen’s loss of safe haven status is a huge change in market behavior and may not be sustainable. But for now, it removes one of the main obstacles to holding short yen positions.”

Chuck again. I think that when you read between the lines here, you get the sense that RBC believes that the Risk On, Risk Off crap that we’ve had to deal with in the currencies for 8 years now, is over. I welcome that with open arms. Fundamentals are what I understand, not sentiment. So, now maybe we can get back to making calls that makes sense on currencies because of their fundamentals!

Currencies today 6/29/15. American Style: A$ .7660, kiwi .6835, C$ .8085, euro 1.1115, sterling 1.5695, Swiss $1.0705, . European Style: rand 12.2485, krone 7.9180, SEK 8.3230, forint 282.85, zloty 3.7705, koruna 24.5065, RUB 55.56, yen 122.90, sing 1.3485, HKD 7.7525, INR 63.89, China 6.1168, pesos 15.67, BRL 3.1285, Dollar Index 95.64, Oil $58.31, 10-year 2.34%, Silver $15.83, Platinum $1.072.15, Palladium $672.48, and Gold. $1,179.01

That’s it for today. Well, how about that Cardinals Sweep of the Cubs? I’m sure the Cubs thought they were going to win Friday night, but they must have forgotten who they were playing. The cardiac Cardinals! HA! That’s what they used to call our Football Team, before they moved to Arizona in 1989. Well, yesterday, Alex and Chuck had breakfast at McDonalds, like we’ve done on his birthday since he was 3. Yesterday was also the 12th anniversary of darling daughter Dawn and Jerry.. Yes, they got married on Alex’s birthday, and when the whole reception all of people sang Happy Birthday to him, he was in heaven. I got to see my friends, Linda, Pam and Cathy Friday night, that was fun listening to a live band. Braden and Chuck had a fun morning on Saturday Whew! They finally caught those escaped convicts! Buddy Miles is playing his song: Them Changes on the iPod, so I’ll take that, and get this out the door. But first, I hope you have a Marvelous Monday!

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