Beige Book Acknowledges Stagnant Wages.

January 14, 2016 by

* Fear is back in the stocks markets around the world.
* It’s all about dollars, yen, euros, and Treasuries today!
* Aussie employment wasn’t as soft as expected!.
* What’s China doing with Gold now?

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

Good day.And a Tub Thumpin’ Thursday to you! Poco greets me this morning with their song: Bad Weather. I’m really not “feeling it” today folks. Therefore this just might end up being a very short-n-sweet Pfennig. Stocks around the world are getting sold like funnel cakes at a state fair. U.S. Treasury yields are heading lower once again, as the buying of “safe havens” pushes the envelope in Treasuries, and the “safe haven currencies” of dollars, yen and euros are all looking good this morning, but the last asset considered to be a “safe haven” , Gold, isn’t faring as well.. Hmmm.

The Bank of England (BOE) and the European Central Bank (ECB) both are meeting as I type away with my fat fingers. I don’t expect either Central Bank to announce anything new today, so these should be rubber stamps and move along. We will see the minutes of the ECB’s December meeting today, though. These should be good reading, given that this is the meeting that the ECB didn’t deliver the size stimulus that the markets had expected, so we’ll have to see if there was a reason given in the minutes.

I mentioned at the start today that the “safe haven currencies” of dollars, yen and euros are looking good today. It’s really strange to see the euro on the rally tracks, and none of the other currencies tagging along. But the price of Oil has slipped downward again overnight, thus dragging the Petrol Currencies along for the ride, the Emerging Market Currencies aren’t taking the positive fix of the renminbi by the Chinese overnight as a signal to rally, as they selloff instead. The relatively speaking “higher yielding” currencies are taking it on the chin this morning. It’s all about dollars, yen, euros, and Treasuries, as we start this Tub Thumpin’ Thursday!

Overnight we had the latest employment report in Australia, and the latest CPI check in Sweden. Neither of these reports were market moving, because they were Milk Toast. Aussie employment in December fell -1,000, after booking large employment gains the last two previous months. And this beat the expectation of a -10,000 print, so if it had any life to it, the report sure didn’t seem to show it, and the Aussie dollar (A$) is getting whacked this morning.

In Sweden, where the Central Bank (The Riksbank) has been rattling its “intervention saber” over and over again lately, because of krona strength, saw inflation tick upward and out of negative territory in December. CPI was 0.1% VS the previous month, and 0.1% year on year. As I always say whenever numbers are so low like this, that it was a rounding error from being negative again. So, I would expect that the Riksbank will probably get around to intervening and selling krona to weaken it, given this report. Besides, the spread between Swedish krona and Norwegian krone has gone real haywire. there has to be some sanity here, sooner or later!

I mentioned above that the Chinese renminbi saw a positive fixing from the Peoples Bank of China (PBOC) last night. This time the PBOC pushed the number a little further out from the 20 Ticks moves they’ve posted the previous two nights. I think we could be seeing some consolidation by the PBOC, as they wait to see what the U.S. Fed does next. As maybe, the PBOC has weakened the renminbi enough to offset the rate hike by the Fed last month.

Speaking of the Fed. St. Louis Fed president, James Bullard, is scheduled to speak today. In fact I think I was actually invited to hear him speak, but it’s difficult to be in two places at one time, right? HA! I think Bullard is a key, folks. I think he has Fed Chair, Janet Yellen’s ear, and the markets seem to like him. I wonder if they will still like him after today’s speech! Here’s what I think is going on at the Fed right now.

They are seeing the error of their ways, with the rate hike last month, and especially with that brazen talk of 4 more rate hikes in 2016. So, they’re going to send out Fed members one by one to talk to the masses, and grease the tracks for the Fed to skip Jan and March as meeting months that could hold another rate hike. Oh, we’re still going to hear about how the rate hike was the right time and thing to do last month. They’re not going to deep six their credibility by saying it was a mistake. But they know it was.

The Economic data in the U.S. continues to disappoint, and the biggest thing you have to watch, and I’ve been all over this data like a cheap suit for a year now, and that is Manufacturing Data. Manufacturing Index as measured by the ISM, has fallen steadily for over a year now, and now is sitting at two consecutive months below 50. A wise man once told me that all recessions begin with falling Manufacturing sectors. He told me to watch the Index, for if it posted two consecutive months at 45 or below, that a recession was in place. It might take a while for the official announcement of a recession, but, the indicator would be right there before our faces.

Oh, and the Fed’s Beige Book that printed yesterday afternoon, acknowledged that wages in the U.S. are stagnant. Really? Don’t tell me that they are just now seeing this. That can’t be, they had to see it previously, for it’s been this way for the last decade! Maybe they are just pointing out that with such a large jobs number, that they would expect to see some wage inflation. yes, that’s got to be the ticket here! But regardless of when they first noticed this, it’s interesting that they mention it now. I think this plays well with my thought above that they are greasing the tracks for no rate hike in March.

Well, the U.S. Data Cupboard only has the Initial Weekly Jobless Claims report to print today, and then finally tomorrow, U.S. December Retail Sales print. As I told you earlier this week, the December Retail Sales report would be one that you would expect to be quite strong, right? Well, the forecast is for a -0.1% print. Wait, What? A negative Retail Sales in December? That’s just not right! And this is where the BHI will differentiate with the Retail Sales report, because the BHI indicator told me that December Retail Sales would be strong!

I mentioned above that Gold is not participating in the safe haven assets rally. When I turned on the currency screen this morning, Gold was down $5, but has fought back to being down less than a buck as I write. But still not up $20 or anything like that, so the price movements are boring to me right now. Geez, I sounded like Dieter from Sprockets there. Talk about waking me up, shaking me, and getting me to think and smile. Just thinking about the SNL skit called Sprockets cracks me up. Now is ze time on Sprockets vhen ve dance!

Seriously back to reality here. I saw this quote from Ron Paul, and thought it to be quite interesting and important that you hear it, because other than reading this letter, you might not even hear about it. Ron Paul, is speaking about his call for an end to the petrodollar. Let’s listen in.

“The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better.” – Ron Paul

To recap. It’s back to fear in stocks markets around the world folks. And the trading today is all about dollars, yen, euros, and Treasuries. Gold is not participating in the safe haven assets rally right now, but we have the whole day ahead of us! Aussie employment for December wasn’t as soft as expected, but that hasn’t saved the A$ from getting whacked overnight. Swedish CPI ticked above negative territory, but probably not enough to keep the Riksbank from intervening to weaken the krona. The BOE and ECB are meeting as I write, but I expect nothing from them, their talk is tiresome, ve dance now! HA

For what It’s Worth. I found this in Ed Steer’s letter this morning, and he had pulled it from this website where there is a video and words to describe the story. You can find it all here:  http://english.cntv.cn/2016/01/13/VIDECIyZTNdLnmCfXrduywEf160113.shtml

Or read the snippets instead! “China has launched interbank gold trading at the beginning of this year, in an effort to open up the country’s bullion market. The trading mechanism is introduced by Shanghai Gold Exchange and the China Foreign Exchange Trading System.

It is aimed to boost liquidity of interbank gold trading, and promote market making. Ten banks including China’s big four banks a local branch of Australia and New Zealand Banking Group ANZ will act as first-tier market makers. Another six smaller Chinese banks are listed as second-tier market-makers.

Before the new mechanism, banks were not allowed to trade gold with each other and could only buy the precious metal through the Shanghai Gold Exchange, which is the world’s biggest physical trading platform for the metal.”

Chuck again. You don’t think that China is launching this to get ready for a Gold backed renminbi do you? Nah, that can’t be right, can it? We’ll have to keep an eye on this going forward, but this is a HUGE step for the Chines and Gold.

Currencies today 1/14/16.American Style: A$ .6930, kiwi .6440, C$ .6955, euro 1.0925, sterling 1.4375, Swiss $ .9972. European Style: rand 16.5859, krone 8.8305, SEK 8.5200, forint 289.10, zloty 4.005, koruna 24.7340, RUB 76.27, yen 117.75, sing 1.4392, HKD 7.7885, INR 67.29, China 6.5616, pesos 17.95, BRL 4.0230, Dollar Index 98.66, Oil $30.72, 10-year 2.06%, Silver $14.06, Platinum $847.85, Palladium $483.72, and Gold. $1,090.59

That’s it for today. Well, not as short-n-sweet as I thought at the beginning this morning. the Sprockets things really got me going, but now that’s wearing off, and I’m ready to close my eyes again. I begin my infusions again today. I had a 3-week break, which I didn’t want, for I thought I was gaining momentum. But once again, road blocks were put up and I had to navigate around the people that just don’t “get it”. But navigate around them I did, and so I’m back to my every two weeks infusions again. I was really going to say something that was deep, dark and mean there, but then I said, Chuck, are you sure you want to say that? And so I didn’t. But I thought it, and didn’t Jimmy Carter tell us that if you think it. HAHAHAHAHAHA! Well, we only have about a month before pitchers and catchers report for Spring Training, so that keeps me going. The Basketball season for our St. Louis U. Billikens is going south fast, as they lost again last night. UGH! It’s supposed to be a rainy day here today, and that becomes very costly to me! HA! OK. Since this was shorter than the average bear today, I’m finished with it earlier than usual, so I’ll send it off and see if it wakes up the legal folks! I hope you have a Tub Thumpin’ Thursday! Tyrone Davis sends us out the door this morning with his song: Can I Change My Mind. I would like to start all over again, baby can I change my mind.

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts
1-800-926-4922
https://www.everbank.com