Big Ben Visits Japan!

* LCMI prints negative for 6th consecutive month!
* U.K. will have new PM by tomorrow.
* BOA calls for higher prices in Gold & Silver!.
* Route 66 to be repaved with solar panels!.

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

Good Day. And a Tom Terrific Tuesday to you! Another short night for me, and no, I wasn’t up late watching the Home Run Derby! I did see most of the HR Derby though, and Giancarlo (don’t call me Mike!) Stanton put on a show for the fans. The morning seems to be good though, so I’ve got that going for me! Depeche Mode greets me this morning with their song: Policy of Truth, which sure would make things much better in the world, if everyone had a Policy of Truth!

Well, it’s a farewell to bonds this morning. No, bonds aren’t going anywhere, but their yields are! And they are going up, with the U.S. Treasury 10-year yield at 1.48%, where last week it was down to 1.32%… This is a true indicator that investor are bailing on the Risk Aversion trades they made last week. The Japanese yen has gone from 100.50 to 103.68 in the last couple of days of trading, and Gold has lost some ground too, UGH! So, is this the new trading trend? Or. is this just a flash in the pan? I tend to believe that it’s the latter of the two, and that there’s bound to be more black swans out there just waiting for us. That and the fact that the U.K. has a new PM ready to take over, and removes the unknown there, isn’t exactly the kind of news one would think would send the Risk Aversion assets to the woodshed. But it did.

That, and some fancy wording by the Spin Doctors, and no I’m not talking about the Spin Doctors that sang “Two Princes”. I’m talking about the Spin Doctors that take bad news and present it in a way that makes everyone forget that the news was bad. And with that I’m talking about the LCMI yesterday. The U.S Data Cupboard yesterday had the LMCI (Labor Market Conditions Index), and I found this to be quite interesting in that even the 287,000 jobs created by the BLS, I mean the economy for June didn’t help to move the LMCI out of negative territory! The LCMI posted its 6th consecutive month of negative prints as it printed at -1.9 for June. Granted the June print wasn’t as bad as the May print which was revised to -3.6, from the original -4.8, and there’s hope here, but hope and a quarter will get you a pack of gum! I think that the country has given up on hope and that they now think of that word (hope) in a bad light. But anyway, I digress, and for that I apologize. But let me remind you that the LMCI is the Fed’s preferred method of checking the pulse of the labor market, instead of the BLS shenanigans.

And all I could find on it was “Spin”, that the labor market is healing, and that the LCMI “moderated”, and that next month we should see this data move to positive territory. Well, spin it any-old-way you want to but I’m going to stick with the fact that even with the “goldilocks” BLS number 287,000 jobs for June, it wasn’t enough to pull this data out of negative territory. That’s my story and I’m sticking to it! So There! HA!

So, with the Risk Aversion assets getting taken to the woodshed this morning, the risk assets are soaring. The Aussie dollar (A$) has climbed past 76-cents, and the New Zealand dollar / kiwi trading past 73-cents this morning. The euro has pushed back above 1.11, and even the pound sterling has recovered a bit to 1.31 and change. The price of Oil bounced back above $45 in the past 24 hours, and the Petrol Currencies led by the Russian ruble are booking gains VS the dollar this morning. That’s a quick roster call of rubles, krone, real, loonies, and pesos.

I’m waiting this morning for a report on CPI out of Sweden. Sweden’s June CPI is scheduled to print and is expected to hit a four year high of 1% year on year. IF this report meets or beats expectations, then maybe it could be enough to snap the krona out of the sluggish trading it has seen recently as the thoughts in the markets are that Sweden will follow the U.K. out of the European Union/ EU.

Speaking of the U.K., outgoing PM Cameron will oversee his last cabinet meeting this morning, and then hand in his resignation to the Queen. The new PM, the 2nd female PM in the U.K.’s history, Theresa May, will then get to work on negotiating the U.K.’s exit from the EU. Not exactly what the U.K. economy needs right now, but I guess that weight will fall on the shoulders of Mark Carney, the Gov. of the Bank of England (BOE). And this is why I don’t see the pound having much success throughout the summer and fall.

The Chinese renminbi actually saw an appreciation in the overnight fixing last night! I forgot to mention yesterday that we would see a truck load of data from China this week, and all of it is worthy of moving markets, like yesterday’s print of CPI (consumer inflation), which beat market expectations with a 1.9% (1.8% consensus) print. However, PPI (wholesale inflation) printed at negative -2.6%, which was 0.2% better than the May print. So that gives us a narrowing spread between PPI and CPI, which shows us that manufacturing is contracting, and that is causing prices to consumers to adjust higher.

China received a blow to their push to gain the islands in the South China Sea, when an international tribunal ruled that China’s claim to historic rights of the islands has no legal basis. This is not only a blow to China, but also a blow to a peaceful settlement, as the fears are now that China would just take the islands by force, and dare the U.S. to stop them. I’m sure this is going to become some major news going forward, so stay tuned.

Moving north from China I read that Big Ben Bernanke was having a private meeting with Bank of Japan (BOJ) Gov. Kuroda. Now what on earth could Big Ben be sharing with Kuroda that Kuroda and his predecessors at the BOJ haven’t already tried? Oh, that’s right. helicopter money. Japan hasn’t tried, helicopter money! And now they have the architect of that program in the BOJ’s board room! OK, Japan, get ready for the skies to rain yen down on you! That’ll fix everything! Just watch! All the more than two decades worth of deflation, and no growth economies, will be wiped out and it will be all rainbows, and lollipops in Japan! Well, calm down, I need to get back down from the cliff I was standing on when shouting those words, and no I’m not crazy. I am facetious though.. Sarcastic. That’s my middle name! Ok, and seriously, I don’t know if talking about helicopter money is what Big Ben is there for, I’m just putting two and two together, for the fun of it!

Well, I talked about the LCMI above, and the U.S. Data Cupboard only has the JOLTS data, which is the: Job Openings and Labor Turnover Survey (JOLTS) . The markets don’t pay too much attention to this data, so we’ll just move along for these aren’t the droids we’re looking for! We will listen to hear of either James Bullard, or Neil Kashkari respective regional Fed Presidents, speaking to day, have anything important to say, or if they just sound like a broken record.

Gold had another day of rising then falling, as the not-for-profit sellers saw to it that Gold lost ground on the day. The same trading pattern held true for Silver too, with Platinum and Palladium the two precious metals with very small gains on the day. So, do you like my new term for the price manipulators? I got that from Ed Steer! And I thought what a nice way to say “those bas…..” I read a report that quoted the Bank of America (BOA) as saying, “The World is Walking From Crisis to Crisis” and then BOA then called for Gold to rise to $1,500 and Silver to $30 this year. They also had this to say. “Gold: Always believe in your soul. Glad you are bound to return. You’re Indestructible” Really? BOA said that? I find that difficult to believe , but there it was for everyone to read on

Last week I mentioned the large amount of derivatives that scared me, and a dear reader sent me a note on the Pfennig website:, asking me why having so many derivatives was a bad thing. Well, if derivatives were used for their initial intention which included managing a bank’s interest rate risk, or their mortgage pipeline, then 1. We wouldn’t have the total size of derivatives that we have now, and 2. The systemic risk wouldn’t be so huge to the markets should one side default on their holdings. By the way, the total of derivatives right now is more than $700 Trillion, which happens to be more than 10 times the size of the World’s economy! So, why should any institution hold derivatives that would be equal to the world’s economy size? See where I’m coming from here? It’s all a bomb just waiting to explode on the markets. Whether it ever does is not the question. The risk of it doing so is the question, and the fear.

As long as I’m talking about stuff here in the U.S… I read a report in the Washington Post yesterday that talked about how the Millennials don’t contribute to IRA’s. Hmmm, The 5th annual TIAA IRA Survey indicates that a surprising number of people don’t understand IRA’s, especially millennials. And those who do understand them, may say they simply cannot afford to save another dime. Well, I thought to myself, that when IRA’s became available, along with 401K’s I was told by a very intelligent person, to put as much as legally possible in my 401K, and watch it grow over time. When I first retired and left the bank I had worked for 17 years, I took my 401K and moved it to a self- directed IRA. That account, and my current 401K is what I will depend on for retirement funding. And I find it strange that anyone doesn’t take the time to learn about IRA’s and 401K’s. But then, that’s just me being me. saying what’s on my mind, and with it my Policy of Truth!

To recap. The Risk Aversion assets are being unwound, as one of the “unknowns” in the markets caused by BREXIT has been put to bed, as the U.K. will name a new PM today or tomorrow. But is that all it takes to get the markets going again? It sure appears to be that way, but Chuck is certain that there are more Black Swans out there so be careful! Gold and Silver had good days pulled out from under them and ended up in the red on the day. The Price of Oil rebounded back above $45 and the Petrol Currencies led by the Russian ruble, rallied. Big Ben heads to Japan for a private meeting with Kuroda.. What’s left to talk about between these two? Helicopter money!

For What It’s Worth. This is pretty cool, and was sent to me by a dear reader, John. and it touches on something that I talked about when I did my Chuck’s Debt Solutions a few years ago. That is making the upkeep of the roads in the U.S. a private industry. Get the Gov’t and our tax dollars out of the road upkeep. You can find this at:

Or here’s your Snippet. But when reading this, remember, Chuck first talked about doing this kind of stuff 3 years ago!

“Route 66 is getting a facelift: it’s going Solar. The State of Missouri plans to make Route 66 a Solar Roadway using intelligent panels to generate revenue and benefit the environment.

Clean Technical reports that as part of Missouri’s Road to Tomorrow initiative, Route 66 will become a Solar Roadway. Tom Blair, Missouri Department of Transportation (MoDOT) engineer who heads Road to Tomorrow, said:

“It gets Missouri and MoDOT prepared for 21st century innovations. We expect them to be in place, I’m hoping, by the end of this year, maybe before snow flies. If [Solar Roadway’s] version of the future is realistic, if we can make that happen, then roadways can begin paying for themselves.”

Depending on the success or failure of renovating Route 66, other states may follow Missouri’s example. Solar Roadways are tempered-glass roads, which are intelligently designed and capable of producing revenue.”

Chuck again. I can’t believe that this is actually coming to fruition! I sure hope this catches on too!

Currencies today 7/12/16. American Style: A$ .7636, kiwi .7305, C$ .7675, euro 1.1110, sterling 1.3157, Swiss $1.02, . European Style: rand 14.3240, krone 8.4350, SEK 8.5170, forint 282.40, zloty 3.9810, koruna 24.3407, RUB 63.82, yen 103.68, sing 1.3462, HKD 7.7583, INR 67.16, China 6.6845, peso 18.32, BRL 3.3095, Dollar Index 96.18, Oil $45.61, 10-year 1.48%, Silver $20.46, Platinum $1,099.35, Palladium $626.85, and Gold. $1,354.10

That’s it for today. Yesterday, I started off the letter telling you what went through my mind when I typed 7/11. And then I saw a cartoon yesterday afternoon, where the young boy said that since he heard it was 7/11 all he could think about was a Slurpee! Hey! I used to identify myself with Calvin of Calvin and Hobbes. (geez I miss that cartoon strip) (nothing like telling people you sometimes think like a 6 year old, Chuck!) Hey, it’s a Policy of Truth! HA! The Baseball All-Star Game is tonight. I hope our only All-Star, Aledmys Diaz, gets to play and show off his skills! The voters in Chicago pushed their 4 infielders to the top of the vote getters for each position. I would say the only selection I have a problem with is the shortstop. There are at least 3 shortstops having better seasons right now, including our Diaz! But the voters got out and voted, and they won fair and square. The O’Jays take us to the finish line today with their song: Back Stabbers. What they do! Any time this song plays I can’t think of anything other than when I had to pull the knives out of my back years ago by someone I thought was a friend. But that’s history! Thank Goodness! OK, look how long this is today! I had better get it out the door, and send you on your way to a Tom Terrific Tuesday! Be Good To Yourself!

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