China Talks About The Internationalization Of The Renminbi!.

* No data, no speakers = boring day!
* Traders await Janet Yellen’s speech .
* Mexican Retail Sales soar!.
* Is U.S. Consumer worn out? .

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

Good Day. And a Wonderful Wednesday to you! A very strange day indeed for me yesterday. I felt fine, until I didn’t and it went downhill from there. But I’m awake this morning, and the demons haven’t visited me yet, so I’ll see if I can get through this today in normal fashion. Boy, there’s just not much happening in the world right now, no Central Bank speakers, very little data, and traders that are content with range trading until Janet Yellen speaks on Friday before they carve out a direction for the dollar. Supertramp takes us to the finish line today, with their song: Babaji. The opening line of the song goes: All of my life, I felt that you were listening.

And that holds true for me when I write this letter each day! Well, here we are on our Wonderful Wednesday, and nobody wants to make a commitment with the currencies, metals, commodities or bonds. I’m no stock jockey, so I have little to say about that market, except that it’s selling at price to earnings ratios that are scary to someone as little trained about stocks as I am.

But for all of you that opened the letter today to find out what the dollar is doing, here we go. The dollar bounced back after getting sold yesterday, but in reality, the range is small, as everyone waits on Janet. You know it’s a slow day when I have something to talk about regarding the Mexican economy! Well? Why not?

Well, our friends to the south, posted a very strong Retail Sales for June, with strong performances in apparel, domestic equipment, hardware, car and food sales. And makes one scratch their balding heads when 2nd QTR GDP contracted -0.2%… But June Retail Sales grew 1% VS May, and 9.4% year on year! And the peso rallied on the news! But how does an economy contract in a quarter, when Retail Sales were so strong? Inquiring Minds Need To Know!

And I had a couple of dear readers question my statement about the U.K. being a mess right now. Well, Riddle me this Batman. When a country has debt up to its eyeballs, they are getting ready to have to renegotiate all of their trade agreements, interest rates are about as low as they can go without being negative, and the Central Bank has just implement a new round of Quantitative Easing, would that not represent a “mess” to you? Sure there might be singular highlights going on, but the effects of BREXIT haven’t hit the U.K. yet, and they will.. of course that’s all my opinion and I could be wrong.

A day after kiwi was the best performer, it is attempting to keep the rally boat out to sea today, but finding it difficult after posting their latest trade deficit, which was worse than expected. The July Trade Deficit was NZD 433 Million , the experts were expecting NZD 325 Million. Kiwi is off yesterday’s highs, but still ahead where it was on Friday, so it has that going for it. Speaking of the Trade Deficit, wouldn’t it be great to have a 433 Million Trade Deficit?

The Aussie dollar (A$) is trading in the same clothes as yesterday, after they saw the color of their latest Construction Work Done report, which fell -3.7% in the 2nd QTR VS the 1st QTR. Not a closely watched data print, which tells you just how desperate the news agencies that report this stuff have gotten! HA!

The Norwegian krone is firmer this morning, as krone traders are of the feeling that the 2nd QTR Oil & Gas Investment Survey will firm up VS the 1st QTR and year on year, given the nascent recovery in the price of Oil. Speaking of the price of Oil. I see that it has bounced above the $47 handle this morning, so that news probably has more to do with the krone being firmer this morning than anything.

The euro slipped back below 1.13 overnight, but the range on the single unit is pretty darn tight VS the dollar. I sent along the September Review & Focus to be reviewed by all the eyes that now review it, last week, and in it, I spend a large amount of time talking about something that I’ve talked about in this letter for months now, and that is the idea that I believe the strong dollar trend is ending, or maybe has already ended. I remember very clearly in late 2001, when the strong dollar trend was ending, (amazing I can clearly remember that, but where I put my iPhone is another thing!) and the dollar would have short periods of rally time, and the pundits would point to them and say, “see, the dollar is still the king”. The dollar was simply displaying its presence like that of a star that’s about to burn out. It then burns the brightest! And then burns out!

On the Pfennig website, where the letter is posted for everyone to read each day and can be found (www.dailypfennig.com) I receive comments on that day’s letter. Yesterday, someone commented on the Monday letter, and had this to say, which I found to be quite interesting. “When the USDX (dollar index) gets down in the 94 area, they (the fed) start to get uncomfortable, just as they start to get uncomfortable when it gets in the high 90’s. They don’t want to see a dollar trend reversal with a definitive break below 93, and they sure don’t want to see an export killing 100+. Too high, they talk about how rates have to be kept low longer, and too low, they talk about how they’re close to meeting their goals and rates can be normalized.”

I’d say this fellow has hit the who scenario bang on!

So, what about the U.S Consumer? Remember a week ago or so, I was surprised at how July Retail Sales were flat, with no growth for the month, big fat 0%! Well, Tony Sagami, of the Connecting Dots letter that you can find at www.mauldineconomics.com had this to say yesterday regarding the 0% Retail Sales figure for July..

“Even that 0% number is misleading. After backing out auto sales, retail sales actually declined by 0.3% in July. Remember, this consumer-spending slowdown is happening against a backdrop of much lower gas prices and (supposedly) an improving job market. My guess is that American consumers are simply running into a brick wall of too much debt.”

Yes, Tony, I agree! I would also add that the cost of things (not computers or big screen TV’s) but of things that we need each day, like food, continue to take a bite out of the weekly budget. I don’t remember when I’ve gone to the grocery store and not spent more than $200. Health Insurance is another BIG Nut that has to be paid by consumers, and those costs just keep going higher and higher. Reminds me of Sly Stone at Woodstock. I wanna take you higher! I don’t mean to make light of this discussion, but you have to not let it get to you. The Fed says there’s not enough inflation, and I say there is. Have you notices the box/ container size of the item that you used to pay $5 for has shrunk, but you still pay $5 for it? That’s inflation folks.

Well, the price of Gold continues to search for a bid, losing a small amount yesterday (-$1.70) and is down $5 in the early morning trading today. I say, fine! Go ahead and mark it down, because it gives everyone a chance to buy it cheaper, including China. I point now to a report on the www.bullionstar.com website from Gold researcher extraordinaire, Koos Jansen. In the report Koos pulls quotes from the Chairman of the China Gold Association and General Manager and Party Committee Chairman of China National Gold Group Corporation, China’s largest Gold Mining enterprise. Song Xin

Xin issued a written report on China’s plans to bypass the U.S.’s 8,500 tonnes of physical Gold holdings. “For China, Gold’s strategic mission lies in the support of renminbi internationalization, and so let China become a world economic power and make sure that the China Dream is realized. Gold forms the very material basis for modern fiat currencies.”

Did you get that? The Chinese are buying physical Gold to support internationalization of the renminbi! I told you so! I told you so! I told you so! I told you all these years that this is what I thought the Chinese were doing, that and to have the seat at the table of countries that get together after the Big Reset of the financial world. And people laughed at me, told me I was talking “conspiracy stories” and the whole 9 yards of “you don’t know what you’re talking about”. Well, there! A big Fat raspberry for you!

In addition to that news on Gold. I ran across this info yesterday. Well, did you hear about how smuggled Gold in India just might account for more than a third of demand this year? Smuggled Gold bypasses import duties, and allows buyers to purchase it at a “discount” on the street. Shoot Rudy, if that was available here, I would be all over that! But it does hurt the Gold importing banks and big jewelers. But think about this for a minute. IF the smugglers and buyers keep putting pressure on the Gold Importing Banks and Big Jewelers then maybe these two entities might put pressure on the Gov’t to reduce the 10% import duty. Just maybe, eh?

But shows to go you, that when physical Gold is what the people want, they’ll go to great lengths to get it. I wonder if that’s any sign of things to come all over the world?

The U.S. Data Cupboard yesterday, had the New Home Sales, that I told you would probably remind robust, given that mortgage rates remained pretty darn low. Well, that’s exactly what happened, as New Home Sales increased 31.3% year on year for new single-family homes in July. Sales hit an annualized 654,000 the highest level since October 2007. Hmmm, that October 2007 figure sits there ominously doesn’t it? I’m just saying.

The Flash PMI (manufacturing index) here in the U.S. printed softer than expected, with the consensus at 53.2 and the actual printing at 52.1. Actually, now that I see it here in front of me, that’s a large move for this index, not just a “softer print”! Today’s Data Cupboard just has the Existing Home Sales for July.

To recap. The dollar bounces back, but the trading ranges on the currencies are tight. Think Tupperware! No real economic data and no Central Bank speakers, makes for a boring day, but that will all change when Janet Yellen speaks at the Jackson Hole Boondoggle on Friday morning. That’s what everyone is waiting for, and until then, there will be no clear direction of the currencies, metals, commodities, and bonds. A stronger Retail Sales figure for Mexico has the peso on the rally tracks this morning. And the price of Oil bounces back above $47 and has the krone trading stronger this morning.

For What it’s Worth. Well, I came across this article on the Bloomberg and was shocked when I read it. I think you will be too, but then I stopped to think about what I, myself, had talked to you about recently, and that is, that the regional Bank Presidents of the Fed, don’t really have any say in the interest rate decisions of the Fed, as those are ironed out before the meeting in the hallways between Yellen, Brainard, and Fischer. But this is an interest read anyway, and can be found here: http://www.bloomberg.com/news/articles/2016-08-23/eight-fed-district-bank-boards-backed-discount-rate-hike-in-july

Or here’s your Snippet: “The boards of directors at eight of the 12 regional Federal Reserve banks sought last month to increase the rate on direct loans from the Fed to 1.25 percent from 1 percent, according to details released by the U.S. central bank Tuesday.

The votes mark the first time since policy makers raised the benchmark federal funds rate in December that a majority of the Fed’s regional boards backed a discount-rate increase. The votes can be a signal of whether a bank’s president favors a change in the main policy rate.

“Federal Reserve Bank directors generally indicated that economic activity had continued to expand at a moderate pace,” the July discount-rate minutes showed. “Several directors cited improvements in the housing sector, as well as steady or increasing levels of consumer spending.”

Chuck again. The Presidents of: Dallas, Philadelphia, Boston, Cleveland, Kansas City, Richmond, San Francisco and St. Louis all voted for a rate hike. However, only the New York Fed’s President, Dudley has a vote on the FOMC Board, from that group of Presidents. So, once again proving what I had told you previously about how the Fed’s FOMC works.

Currencies today 8/24/16. American Style: A$ .7618, kiwi .7317, C$ .7735, euro 1.1280, sterling 1.3230, Swiss $1.0372, . European Style: rand 14.0924, krone 8.19, SEK 8.3765, forint 274.80, zloty 3.8163, koruna 23.96, RUB 64.77, yen 100.25, sing 1.3530, HKD 7.7534, INR 67.11, China 6.6530, peso 18.52, BRL 3.2350, Dollar Index 94.64, Oil $47.28, 10-year 1.55%, Silver $18.82, Platinum $1,103.61, Palladium $698.65, and Gold. $1,341.20

That’s it for today. I just don’t get this Cardinals team. The tear it up on the road, and come home and can’t win. UGH! I have been remiss in not announcing that our compliance guy, Brendan Normile and his wife welcomed into the world their new son. Baby Louie, as I heard the ladies in the office call him. Congratulations Brendan! Well, I made it through, and am sitting here yawning as if I hadn’t had any sleep in days! That’s what it feels like sometimes, but no biggie, you sleep and get over it. The Blue Jays take us to the finish line today with their song: Maybe. I’ve quoted this song many times in the past, as the song begins: Maybe, maybe I’m wrong. In case you never heard of the Blue Jays, they are an offshoot of the Moody Blues, and longtime readers know how much I like the Moody Blues! Little Delaney Grace face timed me last night, to tell me that she was happy that my scans turned out good and that the medicine was working. I told her that Her hugs were better than any medicine I take! She giggled. so darn cute! Time to move along now, I hope you have a Wonderful Wednesday, 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