Fear Returns And It’s Ugly Out There Folks!

* Oil price drops below $30!
* Chinese stocks fall to bear market territory.
* It’s all about U.S. Retail Sales today.
* Jeffrey Gundlach says Gold to rise to $1,400.

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

Good Day. And a Happy Friday to one and all! I’m still not “feeling it” this morning, and almost didn’t answer the bell. The dosage of the infusion was increased yesterday, so it was more than I was used to, and it really whacked me out last night. I’ll be fine, no worries, just the initial shock is what has me right now. So, I know I billed yesterday’s Pfennig as short-n-sweet and then it ended up being near normal length, so you might want to take this with a grain of salt, but I DO plan on today’s letter being short-n-sweet, because I can barely function right now.

Maybe I can pull a rabbit out of my hat, ala Bullwinkle, or go the well once more with a discussion on Sprockets, and Dieter, and his monkey Klaus. Whoa, even that didn’t get me going. Hello Chris? Mike? Frank? Is anyone out there that can fill in for me today? OH, quit your whining Chuck! Pull up the bootstraps and get to work! Because you not only have this letter to do, you have the monthly Review & Focus to get out the door today! Ahhh, that’s what I needed a kick in pants! ELO greets me this morning with their live version of their song: Can’t Get It Out Of My Head. The 80’s were great to ELO.

Well, maybe I should have just gone back to bed this morning, with one look at the currencies I’m about as depressed as you can be over stuff like this. The U.S. stocks led a rally of riskier assets yesterday afternoon, but that rally has disappeared in the overnight trading. Chinese stocks dropped into bear market territory, the Chinese renminbi was back to being pushed down by a larger margin and that set the tremors going through the markets, and this morning, we have the price of Oil below $30, the Currencies other than dollars, yen and euros, are all getting whacked badly, and I mean whacked badly.

The fear that gripped the markets so much last week, has returned. The price of Oil dropping below $30 and staying there, has as much to do with the fear as anything this morning. U.S. stock futures are pointing to a weak opening this morning, so it looks like it’s going to be “one of those days”. Mama told me there would be days like this.

The currencies from Canada, Russia, Mexico, and Brazil have blood in the streets, and there doesn’t look to be a tourniquet anywhere in sight. In Canada, the loonie, which had been relatively resilient in the face of the dropping Oil price, has finally broken down, and now, the focus is on next Wednesday when the Bank of Canada (BOC) will meet to discuss rates. For the first time in this cycle, the markets have pushed the likelihood of a rate cut next week past 50%… I would think by the rot that’s been placed on the loonie right now, that the chances of a rate cut next week in Canada are greater than that! And remember what I’ve told you since BOC Gov. Poloz took over. He’s from the Trade Side of the Government, and what od the Trade guys always whine and cry about? That the currency is too strong for them to compete with their exports. I told you that his “roots” would come back and haunt him and the loonie eventually. Well, next week, I do believe he will be visited by the Ghost of Jobs Past.

The Russian ruble saw two days of appreciation this week, and those two days of gains were wiped out in one session last night. It’s all about the newest drop in the price of Oil here folks. I would think that the Central Bank of Russia (CBR) would begin to entertain hiking rates again to protect the ruble from further damage, because this weakness in the ruble is going to invite inflation big time into the Russian economy. it’s time for the interest rates to go higher again, CBR, do you hear me?

Gold has decided to participate in the “safe haven rally” today, after taking a breather yesterday. But Gold’s participation is a small participation at this point of the morning, with the shiny metal only up $3 as I write. I read on Ed Steer’s letter this morning a short piece he had on Gold and that famous money manager Jeffrey Gundlach has called for Gold to rally to $1,400, and that he thinks Gold recently hit its bottom. Then Ed added his two cents to the comment, by saying, “Of course it will only rise that amount, or any amount if the powers that be allow it to happen.” – Ed Steer.

Well, I don’t know if any of you have been watching the Hong Kong dollar/ honker in the currency roundup lately. I don’t blame you for skipping over a currency that is pegged to the dollar and rarely moves, but if you have you’ve noticed the large move in the honker lately. A currency that is usually 7.75 has weakened to 7.85 yesterday, but has recovered a bit to 7.79 this morning. What’s going on here? This currency is not supposed to move like this? Well, it’s all about the bass. No wait! It’s all about speculation about whether or not the Chinese drop the peg. I’ve long thought and wrote about here on several occasions in the past, that the Chinese would allow the honker peg to drop first, so they could learn about a floating currency that is established, before they dropped the peg of the renminbi, and then fold the honker into the renminbi, and have one BIG happy floating currency.

Speaking of being all about something. That’s what it is today with U.S. Retail Sales. There are no significant data prints in Europe today, and not much happened overnight, other than some housing data in Australia, so strap yourself in, and get ready for U.S. December Retail Sales. We’ve been over this data two previous days this week, so I won’t give it as much street cred as the markets are giving it, but I am changing my view on the print. I think it will be disappointing and print -0.2%, the consensus is for a -0.1% drop. There will be all these Pollyannas out there saying (do this is your best deep voice) “If we take out auto sales, then the numbers don’t look so bad”. Yes and if, if’s and buts were candy and nuts, we’d all have a Merry Christmas!

To recap. My mama told me there would be days like this, and she was right! The currencies other than dollars, yen and euros, are getting whacked badly this morning, as the fear the gripped the markets last week, has returned, with the price of Oil falling below $30, Chinese stocks falling into bear market territory, and everything looking like it’s teetering on collapse. Gold is up a few bucks, but nothing to write home about. It’s all about U.S. December Retail Sales this morning, so strap yourself in, and see what becomes of it.

Currencies today 1/15/16. American Style: A$ .6885, kiwi .6400, C$ .6898, euro 1.0905, sterling 1.4350, Swiss $ .9955, . European Style: rand 16.6480, krone 8.8035, SEK 8.5606, forint 288.42, zloty 4.0480, koruna 24.7680, RUB 77.53 (a full figure drop in the ruble.) yen 11735, sing 1.4405, HKD 7.7930, INR 67.60, China 6.5637, pesos 18.04, BRL 4.0274, Dollar Index 98.91, Oil $29.59, 10-year 2.05%, Silver $13.82, Platinum $824.05, Palladium $ 485.79, and Gold.. $1,082.97

That’s it for today. See? Told you. short-n-sweet. the NFL Playoffs continue this weekend with games tomorrow and Sunday. I’m still seething over the Rams getting moved to LA. I heard that back in St. Louis, people are burning their Rams gear. I don’t think I’ll do that.. .I’m not into burning bridges. Look what happened to the Cleveland Cavalier/ LeBron James fans when he left the first time, they burned their LeBron James jerseys only to have to rebuy them for probably double or triple what they originally paid for them when he returned. Our Blues really took a beating last night at home too! UGH! Well, I parted company with my beloved Navigator yesterday. It was time. we no longer used it to pull the camper, and it was 11 years old. I had grown attached to that car/ truck/ SUV whatever. I said goodbye to the Rams and my Navigator in the same week, this has been a tough week for Chuck! Chicago takes us out the door this morning with their song: Color My World. I used to play this song on our piano. I haven’t sat down at the piano now for over a year. Haven’t picked up my guitar in the same time. Shame, shame, shame. Alrighty then, I made it through the letter, it’s short-n-sweet, like I promised, and now I’m going to send you out to make this a Fantastico Friday!

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