ECB Withdraws Greece’s ELA.

In This Issue.

* Greece says a deal is done!.
* Aussie CAPEX prints ugly.
* NZIER says no rate change for 2 years!
* Another day, another full figure loss for yen.

But First, A Word From Our Sponsor..

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

Good day.. And a Tub Thumpin’ Thursday to you! Well, I’m totally relieved of stress this morning that has been wearing on me for a few years. Lindsey Lohan has finished her community hours sentence! Whew! Now that had me worrying for years! Well, how about that, for a smart alec comment to start the day? Just to let you know, that I’m loaded for bear this morning. So, don’t get in my way, I’m just warning you. HA!

What a silly way to start the day, Chuck. You do know that to start the letter that way, you’ll probably rile someone up? Well, now that you say that, I guess I do. But I’m not hurting anyone, and didn’t call anyone a twit, or dolt, didn’t point out how ridiculous someone’s plans to print more money is or anything like that, so I think I’m good. Only time will tell.

Front and Center this morning, well that is after I spent 5 minutes wasting your time, Greek PM Tsipras, is telling everyone that a deal has been drawn out, and the draft is being prepared as my fat fingers work quickly this morning. Funny how that came about. Yesterday, the European Central Bank (ECB) withdrew their ELA facility (Emergency Liquidity Assistance) to Greece. And today we have an agreement! Just like dealing with a child, right? If only the ECB had thought of that previously, we could have avoided all this Greek drama! I can’t help but think that the removal of the ELA to Greece helped speed up the negotiations.

This news has helped the euro to carve out a gain VS the dollar this morning, and move back above 1.09. But we’ve seen this pattern play out the last two days, where the overnight and European markets drive the euro up over 1.09, and the U.S. markets bring it back down to below 1.09. So, let’s hope that 2-day trading pattern doesn’t go for a 3rd day, eh?

With the euro gaining VS the dollar this morning, the usual Euro-alternatives and partners are also pushing the currency appreciation envelope higher. But the Norwegian krone is finding its way higher to be a tough row to hoe, as the price of Oil has slipped lower again. The Oil price has slipped nearly $2 in two days this week, and this morning trades with a $57 handle. So, the usual suspects that gain and lose with the corresponding direction of the price of Oil, like: Norway, Russia, Canada, and Brazil are also finding it to be a tough row to hoe this morning.

In Australia last night, the markets got a shock when Australia printed their 1st QTR CAPEX (Capital Expenditures) report, and it showed a decline of -4.4%… OK. now, longtime readers know how much weight I apply to a country’s CAPEX, and with Australia’s falling 4.4% in the 1st QTR, I have to say I’m shocked.. For those of you new to class, a country’s economy is strongly dependent on CAPEX. Here in the U.S. for instance, CAPEX has been dragging, and that’s one reason I keep talking about how the U.S. economy isn’t strong. Not until CAPEX is strong will the economy have legs to run with.

So, this is very discouraging for the Aussie economy and the Aussie dollar (A$), and traders saw this right away overnight, marking down the A$ almost 1 full cent.

Things don’t look that much better across the Tasman, as in New Zealand, Fonterra (the largest dairy co-op) cut their forecast for dairy payout for this year. Now that news was somewhat offset by the news that the NZIER (New Zealand Institute of Economic Research) printed a report last night forecasting that the Reserve Bank of New Zealand (RBNZ) will keep rates unchanged not just at the June meeting, but for the next two years! Whoa, there Partner, are you really willing to go that far out, 2 years? Apparently so, as the NZIER pointed to the housing in Auckland saying that they had finally reached unaffordable levels and a housing bubble was teetering. Therefore the NZIER said that a rate cut could fuel the fire of a housing bubble, and that the RBNZ would not risk that. Hmmm.

Well the Bank of Canada (BOC) did leave rates unchanged, as I thought they would and said so in yesterday’s Pfennig. The BOC said that the risks to inflation had not materially changed from their previous meeting. The BOC did acknowledge that the U.S. was experiencing weak growth. Hmmm. no mention from the BOC that it was only “transitory”, so maybe they are looking at it through clear glasses and not the rose colored ones that are worn at the Fed..

And another day from the calendar, and another full figure is lost in Japanese yen, as yen is now trading with a 124 handle. A long time ago, in a galaxy far away, I said I wouldn’t be surprised to see Japanese PM, Abe get his wish for a very weak yen, and to see yen fall to 130. But then it held steady Eddie at 120 give or take a yen for so long, that it appeared the markets were in no mood to please the PM. But is sure looks like they are on board now. eh?

Oh, don’t get snarky like that Chuck, it’ll only get you in trouble! Well. what else could I say there that brought it all together? HA! OK. time to get serious. My friends, Pete Coyne, and Addison Wiggin over at the Daily Reckoning (DR), had a great issue yesterday afternoon regarding all the creative things the Fed has done the past few years, and they were discussing it with James Rickards. Now most of you know James Rickards or think you know him. But this guy has been in the middle of quite a few things regarding financial problems, and the Gov’t always calls on him to come up with a solution. So, if anyone “knows” he does.

And yesterday he was talking about the next financial meltdown. Let’s listen in. “But you can be guaranteed that it will be a big problem. The idea that the crisis is all behind us is dangerous. ‘Oh, that’ll never happen again’… Yeah, right. 1998 was strike one. 2008, strike two. Strike three, you’re out. The next one’s gonna wipe everything out. That’s coming.

You have to stop short of saying, “Well, it’s going to melt down on this day.” If that day comes and goes and it doesn’t happen, then you look like an idiot. Instead, go back and read what I said in The Death of Money. There are many possible triggers for the meltdown. If it’s not one, it’ll be another. Either way, you’re going to get the same result.

So set your goals now. Warren Buffett’s bought a railroad. You might be able to do that. But if you’re an individual investor, you can buy some oil, natural gas or hard assets. But do some of those things now. It doesn’t have to be 100% of your portfolio. If I’m completely wrong, you won’t be hurt… and if I’m right, it’ll save your life.” – James Rickards. in the DR 5/27/15.

Chuck again. James also says something that I totally agree with, regarding rising debt and leverages. “it’s not a problem until it’s a problem”. And with that, I’m going to give you a link that I used to feature every Friday, until it occurred to me no one was clicking on it. But here’s the link to the U.S. Debt Clock. I ask that you check out the Unfunded Liabilities number. and apply that to the statement above, that it’s not going to be a problem, until it’s a problem.

And for fun, well I guess that’s to each his own as to what they consider to be fun, Chuck. OK, sorry, just for the sake of saying you did this, up in the right hand corner There’s a green arrow that will take you ahead in the future. Click on the arrow, and then click on 2019. the numbers will adjust to what they will look like IF we continue to keep up this deficit spending pace. Notice that the Unfunded Liabilities are now $110 Trillion? Who, may I ask, is going to pay for that? It’s just 4-short High School years away, folks.

Gold finally got back to a flat position on the day yesterday, and is pretty much trading flat again this morning, which puts it just below $1,190. It’s been a couple of days now, where Gold is an afterthought with market participants. Ed Steer had an article in his letter this morning, regarding S. Africa’s Gold Mining Industry and how it could be gone by 2020. Yikes! Could that really be true? Let’s listen in to Peter Major, mining specialist at Cadiz Corporate Solutions, as he warned that, “one must be wary of thinking that things will always revert to an historically established mean. The mining environment in S. Africa has changed so much over the last few decades that the old rules no longer apply.” Hmmm.

I think what this guys is trying to tell us is simply that we can no longer rely on a turnaround in S. African Gold mining, and that things will probably continue to deteriorate. What that means for the price of Gold is simply, a loss of supply. less supply, usually is a good thing for price. But since this is an unknown, we can’t really think it will provide any benefit today, tomorrow, or next week. But it will be a lot like the debt statement above.. Gold supply won’t be a problem until it’s a problem.

The U.S. Data Cupboard just has the Weekly Initial Jobless Claims and Pending Home Sales for April today. the Bloomberg Consumer Comfort index will also print, but that’s so far down the list of important data, that I almost left it out today. Tomorrow, on Friday, we’ll see the next revision to 1st QTR GDP. Now recall when the last revision printed I told you that it was so close to being flat that a rounding error could make it negative? Well, guess what the “experts” are saying now? That 1st QTR GDP will be revised downward to negative 0.8%.. Hmmm, I wonder where they got that idea that 1st QTR GDP would be negative? Oh, come on Chuck don’t flatter yourself like that, it doesn’t look good on you! HA!

To recap. Front and Center this morning, Greek PM Tsipras is telling everyone that a deal has been agreed to, and a draft is being drawn up right away. Could it be that Greece finally got serious about negotiating when the ECB withdrew their ELA funding yesterday? Chuck thinks it was highly responsible for Greece getting serious! Aussie CAPEX was awful, and surprised Chuck by how awful it was, and in New Zealand, Fonterra dropped their dairy payment, but the NZIER forecast no rate movement by the RBNZ for two years! The Bank of Canada left rates unchanged, as we thought they would yesterday, and the price of Oil has slipped again, causing the usual suspect associated with Oil to drop in value too. Russia, Brazil, Canada, Norway and others.

For What It’s Worth. Well this comes courtesy of a dear reader (thank you Bob!) and it can be found here: I think you’ll get as much from the snippets today.

“Just in the past week, the headlines have been coming like triphammer blows: in Bloomberg News, “Something has gone wrong with the global consumer,” (according to JP Morgan); in International Business Times, “G7 Finance Ministers to address faltering global growth;” in London’s Telegraph, “HSBC fears world recession with no lifeboats left;” in, “Clock running out for struggling oil companies;” and even in the mainstream vanilla Washington Post, a column by Robert Samuelson predicts “China’s coming crash,” then puts a question mark at the end to make sure we don’t worry too much.

When you add these concerns to longer standing ones about wild gyrations in the world’s stock and bond markets; the advent of peak oil in pretty much every oil-exporting country in the world; the onset of the effects of global climate change in California, the Middle East, North Africa, Brazil and elsewhere; it becomes apparent that optimism ought to be listed as a disorder requiring medical intervention.

What’s wrong with the global consumer? In the immortal words of Howard Davidowitz, a leading expert on retail, consumers “don’t have any (expletive) money.” It is slowly – way too late – dawning on the Masters of the Universe that unless ordinary people have money to spend – and by that we mean real money, not more credit cards or a third mortgage – the Masters are toast.

Meanwhile, a report written by and for HSBC, the world’s third largest bank, likens the world economy to the Titanic, “sailing across the ocean without any lifeboats.” In fact the report is titled “The World Economy’s Titanic Problem,” and was written by a writer of financial horror stories appropriately named Stephen King. In his relentless account, the world’s central bankers have expended every bit of ammunition they have to stop the approaching iceberg of debt and depression, and the iceberg is bigger and closer than ever.”

Chuck again. Well, maybe now I have your attention, eh? Excuse me, young fellow at the back of the class, please pay attention, and stop shooting rubber bands at Ms. Jamieson. Yes, I agree, she’s darling, but you won’t win her over by shooting rubber bands at her! Now, where was I? Oh, yes, now that I have everyone’s attention that when all else fails, what will people turn to? Well, I submit that it will be Gold. but that’s my opinion, and I could be wrong. Now, young man, please excuse yourself from class and report to the Principal’s office!

Currencies today 5/28/15. American Style: A$ .7645, kiwi .7195, C$ .8005, euro 1.0915, sterling 1.5275, Swiss $1.0535, . European Style: rand 12.1010, krone 7.7970, SEK 8.5015, forint 283.35, zloty 3.7905, koruna 25.2025, RUB 52.41, yen 124.35, sing 1.3610, HKD 7.7530, INR 63.80, China 6.1202, pesos 15.34, BRL 3.1395, Dollar Index 97.31, Oil $57.72, 10-year 2.13%, Silver $16.63, Platinum $1,116.95, Palladium $784.06, and Gold. $1,186.29

That’s it for today.. Well, day three at home. We were visited last night by Alex’s girlfriend. I’ve kept her out of the Pfennig, for over a year now, thinking that she would be long gone once the two of them attended different colleges. But that was not to be. And Molly stopped by to say hi. I’m looking forward to a real treat for me today. I get to have lunch with Kathy’s cousin, the darling Kristin Kuchem. Many of you may recall that she used to work here with us, but went on to other things. But she sent me a text yesterday, and said, it had been too long.. I told her that was her fault not mine! HA! Cardinals swept the Diamondbacks last night. The game was won long after I had gone to bed! And now the mighty Dodgers come to town. The Dodgers don’t like the Cardinals because the Cardinals have knocked the Dodgers out of the playoffs the last two years, so the Cards had better be ready for a dog fight. My good friend, Rick Baur, got to throw the ceremonial first pitch, at the game Tuesday night. He did great! So, he doesn’t have to live with an embarrassing moment! OK, it’s time to get out of your hair for today. Let’s go make this a Tub Thumpin’ Thursday!

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