Big Data and Event Filled Week!

* Awful U.S. data sends dollar down.
* Gold fights back.
* Oil remains above $53.
* Big Ben chimes in .

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

Good Day. And a Marvelous Monday to you! Man, what a kick-back, do nothing but read and write weekend for me! I didn’t have Kathy here to drag me down to the beach, or me drag her out to dinner, and all points in-between. No baseball, no football (except the stupid Pro-Bowl game) and college basketball just can’t seem to hold my attention this year, although having said that, I did watch the entire Kentucky/ Kansas game Saturday night. I had dinner with a condo neighbors and friend, Jack and Loraine, and we watched the game. We were all rooting for Kentucky, but they blew it with too many turnovers and missed free throws. It was a Big Birthday weekend for Chris Gaffney and Christine Peplow, I hope they had grand days! And I have the Beach Boys greeting me today with their song: California Girls.. Which is interesting in that the news this weeks is that California wants to leave the U.S. .

Friday morning we were watching the dollar attempt to fight back, and that held true, that is, until more pieces of economic data printed on sour notes. GDP was awful. Durable Goods and Capital Goods didn’t come close to expectations, and Consumer Sentiment failed to meet expectations. So, all-in-all a bad day for economic data in the U.S. and that pretty much put an end to the dollar’s fight to regain some lost ground. I’ll have more on the data in a bit, but first let’s see what happened in the overnight markets…

The overnight markets saw a bias to buy the currencies but it wasn’t a strong bias. It was if the market participants were champing at the bit to sell dollars, but just weren’t sure it was the prudent thing to do. Yes, the data on Friday was weak, thus ratcheting down the rate hike hype, but in reality, no amount of weak data is going to stop the Fed from hiking rates in March, so that held them back. But the point remains the same this morning, and that simply that the bias is to sell dollars, but the rate hike hype is the governor on that bias..

This will be a BIG Data and Event week, after slogging through the past few weeks with little of both, we stir up the hornet’s nest this week, and all the fun and games are not just for us here in the U.S. Europe, Canada, and others have some Big Data prints, and Japan has a central bank meeting toward the end of the week. So, there will be plenty of cookies in the cookie jar for me to stick my fat hands into and stir things up!

To get things started, we’re waiting for Germany to print their latest CPI (consumer inflation) this morning. It’ll print any minute now, so it would be fruitless for me to give you my thoughts on where it will print.. Oh, come on Chuck, go ahead and go out on the limb! OK, I expect German CPI to continue to increase. Small increases, but increases nonetheless! Germany, as you all already know because I’ve told you over 100 times since the euro’s inception 17 years ago, is the Eurozone’s largest economy, so what goes on in Germany, usually spreads to the other member countries in some form or the other, so this could very well be an indicator to the European Central Bank (ECB) that they need to begin to remove the bond buying from their current policy. The euro is trading just below 1.07 this morning, so even though it has stepped out of the mud last week the single unit is still trading in a very tight range, but a stronger German CPI could get the euro back above 1.07 today.

On Wednesday, China will print their latest PMI (manufacturing index). Recently, we’ve seen China’s PMI’s print stronger with small moves, and I expect this to remain the pattern here. Commodity prices like iron ore, copper, and other raw materials have been picking up the pace in recent weeks, and if you opened up the Sunday Pfennig that was sent to you, you would already know this! In case you scrolled past it, and deleted it mistakenly, you can catch up on what I’m talking about here: www.dailypfennig.com

The Bank of Japan (BOJ) will meet this week, but I don’t expect any fireworks here, as the BOJ already threw their cat among the pigeons last week with their statement that they aren’t prepared to lift yields yet, which means the bond buying remains at current levels. The yen got whacked on those comments, but has since fought back a couple of notches to regain some respectability! HA!

In New Zealand last night, their latest Trade Balance printed and it was a good one! No, it wasn’t a surplus, but it was darn near one! So, to set this up, N.Z. Trade Balance for December printed at NZD 41 Million deficit. It was expected to print a NZD 0.1 Billion. I see where both exports and imports were better than expected. Kiwi has performed nicely in the past couple of weeks, and I’m just waiting for Reserve Bank of New Zealand (RBNZ) Gov. Wheeler to come out and throw kiwi under a bus, which he’s done so many times now in the past few years, that even a country bumpkin like me, can see what he’s’ doing and now expect him to do it over and over again.

The price of Oil, which climbed back over $53 last Friday, added some weight to the figure in the past 24 hours and now trades at $53.10. OK, not much weight, but some. Not like the amount of weight I’ve gained while on steroids! There’s a cellphone or cellphone carrier commercial that has the Staypuff Marshmallow Man in it, and when I see it I think, Hey! I’m looking in the mirror! But, back to the price of Oil. Again, the tractor/ I mean stock pull from the U.S. is overbearing, and not allowing the Petrol Currencies to gain alongside the price of Oil. at this time that is!

Gold added $3 to its value on Friday. And Ed Steer tells me that 380.629 contracts were traded on Friday. That’s unbelievable folks! WOW! Ed called it “monstrous” and that’s a great description of that many contracts traded in one day! I’ve got a piece on Gold in the FWIW section today, so I don’t want to spoil the party so I’ll go. I would hate for my disappoint to show, there’s nothing for me here, so I’ll just disappear, if she turns while I’m gone, please let me know.. – Beatles.

I do have this though.. Well, the GFMS group that is a division of Thompson Reuters news, issued their latest report last week on physical Gold holdings by country, and they pointed out that demand had slowed in 2016. And even hinted that some central banks could have been selling. That report had me concerned, that Central Banks had indeed, as I’ve said they would, backed themselves into a corner, and had to come up with some funds to pay bond servicing or something like that. But that concern was washed away on Sunday, when I saw a report over at bullionstar.com that refutes the GFMX findings, an provides charts that show Gold accumulation by Central Banks around the world has indeed increased. In fact, BullionStar points out that using just China, and their 2 avenues to accumulate Gold, 1. SGE withdrawals 2. Swiss exports to China and 3. We can’t forget Gold production in China, but. I’m sure those numbers get included in the SGE withdrawals, so we don’t want to double count, now do we?

And yes, China’s accumulation for 2016 of physical Gold was down from 2015, it did equal what they did in 2014, and using these avenues described above, the SGE withdrawal alone would show that from 2008 to 2016 the total withdrawals equals 13,028 Tonnes. WOW! And I don’t think I need to remind you that China has been accumulating Gold long before 2008! But there! I did it anyway! For the 9 years from 2008 to 2016 inclusive, total cumulative gold withdrawals from the SGE have now reached a staggering 13,028 tonnes Then add in India, Russia, and all the other smaller countries adding Gold to their reserves, and well. it sure doesn’t look like we have a problem, Houston.

Well, looky there! Look who called the thing that would bring 4th QTR GDP down? Why it was I said the spider to the fly! I sent out the Pfennig on Friday with a note that I thought that the lack of exports and thus a soaring Trade Deficit would bring 4th QR GDP lower than 3rd QTR GDP. And then at 8:42 ET I received an email from the WSJ telling me that the “U.S. economy grew at a TEPID pace in the 4th QTR, Hurt by Trade Deficit”.

Yes, I know even a blind squirrel can find an acorn, but I nailed that one to the tree didn’t I? Hey, I haven’t had that good of a track record in recent years, I think I can gloat a little when I do have one, right? HA! 1.9%? That IS TEPID! But like I said on Friday, I doubt it will have much bearing whatsoever on the Fed’s decision to hike rates in March. or maybe next week, eh? Oh, and for the year 2016. GDP in the U.S. was. 1.6%, compared to the 2.5% in 2015 we appear to be going in reverse. Hey, better use that rear-view mirror, or you’ll end up running into a tree!

I also read a couple of cocktail trivia bits for you to show off with at your next gathering. 1. Since the year 2000 stocks, as measured by using the S&P 500 have lost 63% against Gold. and 2. The average GDP for the past decade has been 1.48%… That’s it! And things are better?

Well, looky who decided to throw his 2-cents into the discussion regarding the shrinking of the Fed’s Balance Sheet? None other than Big Ben Bernanke! While you can read all that he had to say about the recent rhetoric by Fed members that they think it’s time to start the shrinking of the Balance sheet now, which contains $4.5 Trillion in Treasuries and Mortgage Backed bonds, here: https://www.brookings.edu/blog/ben-bernanke/2017/01/26/shrinking-the-feds-balance-sheet/

I’ll do my best to tell you what he said in a nutshell so you don’t have to read everything he said. Basically, Big Ben doesn’t agree with the Fed members that were talking last week about either outright shrinking or just not reinvestment in new bonds for those that mature. He said that until he hears otherwise, the policy remains as it was when he was at the Fed, and that is simply to: wait until interest rates are near normal levels before any shrinking of the balance sheet occurs.

In other words, to throw cold water on my thought last week that if the Fed did start to shrink the balance sheet along with rate hikes, that in effect they would be doing a double tightening, and I questioned whether the economy would be able to deal with a single tightening, much less a double tightening. Of course the current Fed members could just brush these comments aside, and call Big Ben a “has been”. That what we used to call the guys that graduated from school and had no more playing time, they were a “has been”. Of course then I became a “has been” and I stopped using that phrase, until, well this morning!

And here in the U.S. this week, we will have a veritable Whitman’s Sampler of data and Events. Data prints get started today and will be hot and heavy all week. And the two Big Events of the week are the Fed FOMC meeting on Wednesday, and the Jobs Jamboree on Friday! Oh! And on Thursday, it’ll be Groundhog Day (one of my all-time fave movies) So, three BIG Events this week! There’s no press conference scheduled after the Fed’s meeting on Wednesday, but look for them to have become aggressive hawks with regards to inflation fighting. I’m just saying.

The U.S. Data Cupboard on Friday, was not a good collection of data prints, and we already addressed the “tepid” 1.9% GDP for the 4th QTR, but if you call right now, there’s more! You’ll just be asked to pay separate shipping and handling! You’ll get>>> December Durable Gold and Capital Good Orders, and that’s still not all! We’ll add Consumer Sentiment for January! OK, Chuck, enough of that! OK.. seriously, Durable Goods Orders great at only 2.2%, which did not erase the -4.8% print from November. Capital Goods Orders (the meat and potatoes of an economy) were flat. no growth. On Friday, I talked about the HIA-Tax, you know the one that would allow Corporation doings business overseas to repatriate their earnings at a reduced tax rate in an effort to revive the economy here, and said I doubted that it would help the economy, that I saw Corporations using these funds to just buy back shares of their respective corporations.. And now look at the Capital Goods Orders print, Corporations certainly aren’t using funds they have now to buy equipment, etc. are they?

Today’s Data Cupboard has two of my fave prints. Personal Income and Spending will print for December. We, as a county, have gone right back to what we used to do before the financial meltdown, and that is” Spending more than we make. And I expect that to continue for December. We’ll also Pending Home Sales.. NBD.

To Recap. The dollar’s fight to come back on Friday was halted by some awful data prints here in the U.S. and the bias to sell dollars remains in the overnight markets, although not much of that bias to sell dollars is being carried through with. It’s a busy week with data prints and Events, like the FOMC meeting on Wednesday, and the Jobs Jamboree on Friday! Gold added $3 on “monstrous” amount of contracts on Friday, and the price of Oil has held to trade above $53, but giving no love to the Petrol Currencies at this point. BullionStar corrects the GFMS’s statement about how Gold is getting sold by the Central Banks.

For What It’s Worth. This piece was in the Daily Reckoning (www.dailyreckoning.com ) and can be found there. It’s James Rickards talking about how he told readers back in what he calls the “dark days of December” when Gold had fallen to $1,144, that it was time to buy. And since then, even with the recent pull-back in Gold, the shiny metal is up 5% since his comments.. So, we’ll pick it up from there.. Here’s James Rickards..

“The point of reciting these earlier commentaries is not to pat ourselves on the back. But it is to remind you that gold is in a long-term upward trend. Temporary pullbacks are not cause for anxiety, but are excellent entry points for those looking to increase exposure or complete their allocations to gold. Of course, what goes for gold goes even more emphatically for gold mining stocks which should be understood as leveraged bets on the underlying gold.

One question comes to mind. Is it too late to buy gold at attractive levels? The answer is no.

The rally is just getting started. The trends I identified in the December commentaries quoted above are still playing out and will have an even greater impact in the months ahead as the Congress and Fed push back on the Trump stimulus plans.

Weaker than expected growth means the Fed will have to shift to a dovish posture after their March rate hike. That prospective dovish posture is a huge tailwind for gold.

Chuck again. Of course, he doesn’t have to say this, but I do. That’s his opinion and he could be wrong.

Currencies today 1/30/17. American Style: A$ .7548, kiwi .7250, C$ .7605, euro 1.0692, sterling 1.2520, Swiss $1.0014, . European Style: rand 13.5825, krone 8.3207, SEK 8.8385, forint 291.08, zloty 4.0514, koruna 25.2665, RUB 59.78, yen 114.62, sing 1.4252, HKD 7.7579, INR 67.91, China 6.8797, peso 20.86, BRL 3.1338, Dollar Index 100.58, Oil $53.10, 10-year 2.49%, Silver $17.21, Platinum $988.40, Palladium $744.20, Gold $1,192, and SGE Gold. $1,209.93

That’s it for today. Sure was quiet around here this past weekend. Yesterday was the first “rainy day” since I’ve been here, and then it really didn’t rain much, just looked like it was going to all day, thus making you scared to plan anything outside! January sure flew by! I can’t believe we’ll be turning the calendar to February on Wednesday! I get a new scan on Wednesday. I’ve never had a PET Scan, always CAT, Bone or MRI scans. So, something new for me.. I’m supposed to eat only protein foods on Tuesday, you know meat and eggs and stuff like that. The nurse asked, “will that be a problem?” I said “are you kidding me? No worries on that one!? It does mean no pizza though, so I had better fill up on pizza today and tonight! HAHAHAHA! I used to work with a young lady named Kate, who hated winter, and would have a Big blowout Groundhog Day party each year. And every year when we get to Groundhog Day, I, for some unknown reason think of, and not any other time, her. I know, I’m strange, or my mind is strange. Steely Dan takes us to the finish line today with their song from Aja album: Deacon Blues.. ( I bet this song will be in your head all day today now, it’s that kind of song!) I pulled out my old Aja CD and brought it to Florida with me, and crank it up when Kathy is out of the condo, like now! (it’s too early now, Chuck!) Well, you get the picture! And with that, it’s time to go. I hope you have a Marvelous Monday. and Be Good To Yourself!

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