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Dollar Gets Whacked In Asia Again!

* P-E press conference disappoints
* And dollar gets sold.. .
* Oil price rebounds.
* Gold climbs higher..

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

Good Day.And a Tub Thumpin’ Thursday to you! The currencies are certainly Tub Thumpin’ this morning, and there’s not a whole lot to talk about, that I can talk about that is. So, this will certainly qualify as a short-n-sweet letter today. It’s also my oldest son’s birthday! Happy Birthday Andrew! Andrew is a High School teacher, and swimming and water polo coach. His public school water polo teams have made the State Championship Game the last two years! That quite an accomplishment! On this day 35 years ago, it snowed 9 inches, but that didn’t stop me from going home that night, to be with his sister, Dawn, so we could go see him the next day. The 9 inch snow was just an appetizer for that year, because just a few weeks later, we received a 20+ inch snow! Chicago greets me this morning with their song: Does Anybody Know What Time It Is?

Alrighty then. The dollar has gotten whacked again in Asia overnight, as the President-Elect’s press conference didn’t satisfy traders yesterday. I told you yesterday that traders were looking for confirmation of their optimism and apparently they didn’t receive that, as there was no talk regarding fiscal easing or tax reform. Last night before going to bed, I did a quick check of the currencies because I had thought this would happen, and there right before my eye, I could see the currencies rising. I was a little concerned though, as Gold wasn’t participating with the rout on the dollar. But not to worry, the shiny metal and its friends have played catch-up and Gold is within’ spittin distance of $1,200 this morning.

I’m having intermitted connection problems this morning, which always makes me a happy camper.. NOT! But as long as I’m connected, things will be fine. It’s when things are fine, that I get a little crazy. So. I think I had a scheduling error earlier this week, and said that the European Central Bank (ECB) would meet this week, but that was incorrect. Instead the ECB will print their minutes from their last meeting in December. You may recall that back in December there were a lot of thoughts going around that the ECB would announce a “taper” of the bond buying program. And in a way they did, but ECB President, Mario Draghi, would not, and will not call it a “taper”. At least not yet.. .So, the markets will be looking for any signs in the minutes, that the “taper” discussion took place.

But any disappointment from the markets isn’t going to stand in the way of the surging euro this morning.. And today is a very good illustration of the statement that I make over and over again, that this dance is gonna be a drag.. No wait! The statement I make over and over again, isn’t a Dave Clark 5 song, it’s that the euro is the offset currency to the dollar, and dollar weakness shows up in euro strength, no matter what’s going on in the Eurozone. Of course if what was going on in the Eurozone was a crisis, then that’s different, what I’m talking about is economic slowness, negative deposit rates and stuff like that. The elections later this year will be a different set of circumstances for sure!

I just mentioned yesterday that not much had been going on in Brazil, and then along came the Bank of Brazil! Well, talk about a real rate cut! The Bank of Brazil, cut their Selic Rate (internal rate) 75 Basis Points, or 3/4% yesterday! That’s HUGE! And brings their Selic Rate to 13%.. Still pretty darn high, but the last few Bank of Brazil (BOB) meetings have brought about a rate cut, so one would have to think that this will continue. The Brazilian real wasn’t fazed by the rate cut, and is trading in the same clothes as yesterday. And one would have to think that 1. The rebound in the price of Oil helped underpin the real, and 2. That with an internal rate of 13%, the real still enjoys a HUGE yield advantage over euros, dollars, yen, sterling and you name it. Only the Russian ruble can compete with the interest rate in Brazil!

Speaking of the rebound in the price of Oil. Boy that didn’t take long for the price of Oil to climb out of the $51 handle, and trade higher on the day. The Norwegian krone is taking advantage of this rebound, so too is the Canadian dollar / loonie. But the Russian ruble is lagging the Oil price rebound this morning. Not to worry, I do believe that it could very easily play catchup today, for there haven’t been a handful of days in the past few years, when the ruble didn’t move in step with the price of Oil.. .

So. Gold is within spittin’ distance of $1,200 today. I was down in Gerald, Mo. quite a few years ago, which is the home town of my dad, and where the family farm was. And I was sitting in the drug store having a milk shake when two old timers came in and one asked the other, where is your farm now? And the other man answered, to which the first man said, “Shoot I didn’t know you were that close to me, I could spit in your backyard” I remember that conversation like it happened yesterday especially every time I write about something being within spittin’ distance, for that conversation was where that saying came from!

U.S. stocks are within 200 points of reaching 20,000. and the U.S. current debt is closing in on $20 Trillion, at $19, 956, 645, 000,000 (this morning).. I guess a fun bet would be to put money on whether stocks reach their 20,000 level before debt reaches $20 Trillion! I watched a YouTube yesterday that was an interview with market analyst, Bill Holter. OMG! He believes the U.S. is going to default this year, due to the size of its debt. OK, I admit even for me that’s “out there”. But it does raise a flag of caution on bonds, doesn’t it? Rising interest rates, means falling bond prices and debt that is unsustainable with rising interest rates.

A ton of Fed members will be out speaking today, including Janet Yellen. And I doubt that one of them will even mention debt. or the size of their balance sheet. or the lack of productivity in the U.S. Hey! I’ve got a piece of cocktail trivia for you to share at your next cocktail party. Get a load of this. If you took all the world’s physical currency, Gold, Silver and Bitcoin combined it would equate to just 65% of the national debt..

I remember when folks used to write to me and tell me not to worry about the debt because the US. Could sell their Gold holdings and pay it off.. So, one day I did the math, and even IF the U.S does have the Gold they say they have, and not a bunch of paper trades, selling it wouldn’t even cut the debt in half! But that’s at today’s prices for Gold. What if. Gold got revalued at say $5,000 an ounce? Would it help? Yes. but still wouldn’t pay off the debt.

Well, did you see that the SEC issued a report saying that the “Credit Rating Agencies are still beset by conflicts of interest”? WOW. OK, did you see the movie: the Big Short? And in the movie they attempted to show this conflict of interest. I thought they did OK, but could have really dug the knife deeper and chose not to. If you could go back to Pfennigs that I wrote in 2008, I really placed a lot of blame on the Credit Rating Agencies, for the financial meltdown.. There’s plenty of blame to be passed around for that mess, and I maintain my stance from that time, when I said that “we don’t need new regulations, we just need to enforce the ones we had” Here’s a link to an article I found on this should you want to read more:

The U.S. Data Cupboard has a couple of items today but none are first tier or real economic data, so we’ll just move along here, for these aren’t the droids we’re looking for. Tomorrow we get back in the real economic data saddle with December Retail Sales, of which I’ve already told you that the BHI indicates a rip-roaring print. But that’s tomorrow only today is promised to us. And I did say this would be short-n-sweet, didn’t I?

To recap.. .The dollar got whacked in Asia again last night, and the currencies are in full rally mode this morning. It took a while to get going but Gold finally got the memo and is within spittin’ distance of $1,200 this morning. The price of Oil rebounded back above $52 but the Russian ruble is lagging the Oil price rebound so far today. Chuck shares some cocktail trivia with us, and it’s Andrew’s Birthday today!

For What It’s Worth. This is an interesting piece on demographics here in the U.S. Longtime readers know that I’ve banged on Japan for years because of their demographics problem. Well, according to this article in Bloomberg, the demographic problem has arrived here on our shores. What do I always say about these things when it appears that we’ve followed Japan? We’re turning Japanese, yes, I really think so! Anyway, here’s the link to the article:

Or, here’s your snippet: “White House and whether his administration follows through on an agenda that – when it comes to the economy – features a growth target almost double that of recent years.

Outside the headlines, however, are demographic pressures reaching levels not seen since the Great Depression. That bodes ill for achieving the 3 percent to 4 percent gains in gross domestic product envisioned by Trump’s pick for U.S. Treasury secretary, Steven Mnuchin. Without an improvement in productivity or an influx of people into the workforce, GDP can’t accelerate.

Like many things, including business formation, productivity and capital spending, the expansion in U.S. residents shows sustained damage from the financial crisis of 2008-2009. The American population rose by 0.7 percent to 324 million people last year, according to an estimate released by the Census Bureau in December. That matched 2013’s figure for being the smallest rise since 1937, when the country was struggling with the Great Depression, according to analysis by Thomas Costerg at Standard Chartered Plc.

This is a stark reminder that the ongoing productivity challenge seen since the global financial crisis is compounded by continuing demographic headwinds,” Costerg, Standard Chartered’ s senior economist in New York, wrote in a Jan. 10 report.

Since the last recession ended in 2009, the U.S. economy has expanded about 2 percent a year while population gains averaged 0.76 percent – a slowdown from 0.93 percent in the 10 years to 2008, Costerg calculated.”

Chuck again. I was unaware that the U.S. was experiencing a demographic problem, were you? But it makes sense, as the Baby Boomer generation, which saw many a multi-children family, no longer is having children, and the generations that have followed have no desire to raise 6 kids or whatever the number over 2 , and then the financial meltdown scared the bejeebers out of a lot of families planning on having more kids, but decided against that due to the “unknowns” about jobs, wages, the future. And this lack of productivity thing, just keeps and taking a chunk out of the economy.

Currencies today 1/12/17. American style: A$ .75, kiwi .7113, C$ .7662, euro 1.0644, sterling 1.2268, Swiss $.9920, . European Style: rand 13.5307, krone 8.5040, SEK 8.9289, forint 288.97, zloty 4.1095, koruna 25.3920, RUB 60.09, yen 114.19, sing 1.4250, HKD 7.7549, INR 68.07, China 6.9291, peso 21.66, BRL 3.1986, Dollar Index 101.13, Oil $52.54, 10-year 2.32%, Silver $16.88, Platinum $986.45, Palladium $763.30, Gold $1,198.50, and SGE Gold.. $1,207.75

That’s it for today. it’s still windy down here. it was almost too windy to sit out on the deck last night to watch the wolf moon rise over the ocean. But a gutted it out, and enjoyed the sight! I’m reading a new book that dear reader sent to me (thanks Tom!) titled: War and Gold. And went to my fave place down here for dinner last night. So, it turned out to be a good day, and didn’t bite anybody’s head off or get into a saber rattling argument with anyone. That full of you know what and vinegar attitude didn’t return this morning, so I’ve got that going for me, eh? So. Andrew is 35 today. I coached Andrew in baseball right through High School years, so we used to be together in the summer time, all the time, for if we weren’t at a practice or a game, we were playing catch at home. I used to throw the ball as far into the sky as I could for him to learn to get under it and make the catch. When he got to High School, he swam, played water polo and volleyball. I certainly couldn’t coach him in those sports! Well, the coffee is brewed, and the sun is rising over the ocean, I think it’s going to be a Tub Thumpin’ Thursday, I hope that works for you too! Be Good To Yourself!

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

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