FOMC Meeting Minutes Surprise The Markets!

* Dollar bugs dance Fed Meeting Minutes!.
* Why was Janet Yellen so dovish? .
* Gold gets whacked again!
* Pound sterling is best performer.

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

Good Day. And a Tub Thumpin’ Thursday to you! It was one of those nights, not like one of these nights, the song by the Eagles. It was one of Those nights, where sleep evaded me, and I really don’t feel much like writing this morning, but I’ll give it a shot, and see what comes. Usually when I say I don’t feel like writing, I end up getting on my soapbox or some long discussion about something and forget that I feel like death warmed over! The Searchers greet me this morning with the great song: Love Potion #9. I could use some of that love potion that Madame Rue mixed up right there in the sink, in her pad down on 34th & Vine. Yeah, that would work!

Well, just when I thought, and the markets pretty much thought, that a Fed rate hike in June had a slim chance of taking place, and Slim had left town, along came the Fed Speakers, followed by their April FOMC Meeting Minutes. Who knew the minutes would prove to be hawkish? After the April Fed meeting Chair Janet Yellen sounded like someone that had lost their puppy, as she was deemed to be very dovish, and almost apologetic for hiking rates to begin with. But the meeting minutes proved that this stature taken by Yellen after the meeting and again a week later when she spoke in public, was just a way to throw the markets off the scent of another rate hike.

The dollar bugs are dancing in the street and crushing the currencies and metals this morning folks, and it’s all about the meeting minutes so, let’s look at what they said and then I’ll dissect it.. Among a lot of other things that were dovish, this comment caught my attention. “Most participants judged that if incoming data were consistent with the economic growth picking up in the second quarter and the labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2% objective, it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June.”

I underlined the comment about the labor market conditions continuing to strengthen because it’s a load of crock! I pointed out to you last week that the Labor Market Conditions Index (LMCI) had fallen for the 4th consecutive month! But the Fed members seem to be on a mission from God, and are hell bent and whiskey bound to hike rates in June. Why you ask? Well, September would be too close to the election, heaven forbid they hike rates and be accused of being political. And I guess the fed members haven’t checked their emails lately to see that both HUGE Retailers, Target and Home Depot announced that consumption is faltering heading into the 2nd QTR..

They even made notes in the minutes about how “some participants were concerned that market participants may not have properly assessed the likelihood of an increase in the target range at the June Meeting. They then made a note about the importance of communicating clearly this to the markets. And now you know why Williams and Lockhart were so hawkish in their speeches on Tuesday. I thought it pretty strange that these two members who normally lean to the doves side of the isle, were so hawkish. It was all in the plan. Can you see Janet Yellen wringing her hands and saying, I’ll get you markets, for not taking us seriously. HA!

I guess this is a good place to talk about my new whipping boy, Central Banks. On Tuesday I gave you a hint of what I was going to focus on in the June Review & Focus regarding Central Banks. Then yesterday I ran across some thoughts that just played so well with my thought that Central Banks have lost control, that they do desperately want and need (according to them). If they haven’t lost control then explain these things:
Growth, which was high, is now low. And there’s no excuse by the Krugman and Summers of the economist world as to why that is.
Inflation, which was bad, and everywhere, is now Good and nowhere.. What on earth are these Central Banks doing here? Haven’t they ever heard of the saying, “let sleeping dogs (inflation) lie”?
Helicopter Money Drops, which were mad, are now sane?
And getting back to inflation.. . Central Banks used to fight and prevent inflation, now try to cause it.

Tell me that you think they’re all on the right track and that this will all work out just fine, and I’ll send the paper work over to sell you a piece of swamp land I have.

I’ve seen days like this, but haven’t seen one in a while. A day where the dollar kicks tail and takes names later. And again, I have to think that so-called Shanghai Accord has now been deep sixed, thrown in the circular bin, and is a forgotten piece of paper. The euro has dropped to 1.1205, and 1.1080 is the 200-day moving avg. It could very well slip through there today, given the dollar’s momentum. Yen is within’ spittin’ distance of 110, and the Aussie dollar (A$) continues to take on water, even though their latest employment report was solid.

The lone wolf of the major currencies that is rallying VS the dollar this morning is pound sterling. It’s pretty interesting that just yesterday I told you that the pound could see a rally when the BREXIT referendum was put to bed, and Britain remained in the European Union / EU. And traders beat the referendum to the punch! The latest polls show the “don’t leave” vote widening its lead VS the “leave” vote. So, this is a case of buy the rumor, and probably sell the fact in June..

And Gold is getting whacked again this morning, and is down $19 as I write. I wish I could wrap a tourniquet around the shiny metal but the paper shorts are winning, and trying to stop them right now would be akin to catching a falling knife! Going down a different path with Gold, I was reading the latest Rude Awakening ([email protected]) yesterday, and they supplied a link to a video that they promised would be short. Now, having fallen for that line many times in the past, I was very leery about clicking the link, but then decided that I would simply watch it until I didn’t want to any longer and then exit out of it. But it was as billed. A short 5 minutes, which I can maintain my attention to in that time frame! HA! And in the video a fund manager was being interviewed and it’s not important who he was, but what he was saying about HSBC. (Hong Kong Shanghai Banking Corp) He was concerned with the depository of the physical Gold that backs ETF’s, and that they had
booked a huge loss recently. He’s concerned about the health of the depository that holds the Gold for ETF’s, and therefore he’s concerned with ETF’s as a whole, preferring, but of course, to buy and own physical Gold. And I with him 100% I’ve always maintained that if you want to own Gold, you need to own physical Gold (pooled Gold is physical Gold, you just don’t have to hold it).

The price of Oil slipped back below $48 in the past 24 hours, but still looks like it wants to try its hand at hitting the $50 mark.. With all this dollar strength in the markets today, it will be a tough row to hoe for the price of Oil.

Just about 10 days ago, the Dollar Index was trading with a 93 handle and the thought was that if it traded below 94 for a few days, that the next move down in the dollar was about to happen. Well, this morning the Dollar Index is 95.25. WOW! Talk about a HUGE upward move! And it pretty much tells you how badly the euro has done in the last couple of days. I was sitting at my desk doing some reading about the dollar index yesterday, and it got me thinking. Why does the dollar have an index? The euro doesn’t have one. The Yen doesn’t have one, and neither does pound sterling or the renminbi. What on earth were the originators of this Dollar Index thinking of when they decided that there should be something to value the dollar? And the antiquated dollar index is out of touch with what’s really going on in the world today, one has to wonder why it’s even still quoted, charted, and talked about. But it is. UGH! And here I am talking about it! What a dolt I am some days

There’s really nothing else to talk about with regards to the currencies and metals this morning, they are all (sans pound sterling) getting whacked by a resurgent dollar that now appears to be getting pushed upward due to thoughts of a June rare hike. Nothing more to see here, move along.

Quick Draw McGraw was what I was yesterday morning. I inadvertently hit the “send” button before I had added the content. UGH! 7,325 of you dear readers received the first Pfennig with just the bullet points for the letter and no content. And for that I apologize. While I’m doing my mea culpa for my faux pas, I could blame the template that we use which is old, and doesn’t ask the question, “are you sure you want to send the Pfennig out?” Hit send, and it’s gone with the wind. And that’s always worked great, until yesterday when it didn’t! UGH! But I won’t do that! I’m not a youngster that blames their mistakes on someone/ thing else! Oh well, some people always do the right thing, and never experience a faux pas. Not me! I have them on a daily basis!

Before I head to the Big Finish this will be fun. I was looking for an old email yesterday, and came across this one that I saved from a reader in 2004, who wasn’t pleased with my writing style. He said, “When Chuck writes, I find his style irritating and difficult to comprehend. I’m sure I’m not the only one, Chuck, you may be brilliant, but your writing seems buffoonery at times. It seems that you are more interested in using the Pfennig for being cutesy and drawing attention to yourself than in conveying information to your readers. Sorry if this stings. It’s business. More clients might be attracted to EverBank if they thought you were serious.”

Well, I guess this guy was clairvoyant. Because 1. I didn’t let him dictate to me how I would write the letter each day and, 2. Our subscriber list has gone done by quite a bit since 2004. What should I do? Have you ever thought that I was not serious when I was talking about debts, deficits, money supply, ZIRP, QE, NIRP, and loss of purchasing power? And Buffoonery? Really? Oh well, it’s an old letter, and I haven’t received one similar to this one since, so anyone want to hang a certain email up for a dart board?

To recap. The Fed’s FOMC Meeting Minutes opened Pandora’s Box of interest rate hikes for June yesterday. And in the minutes we see why the Fed members have been singing from the same song sheet, but we still don’t know why, for sure that is, Janet Yellen sounded so dovish after the April meeting and in a follow up speech a week later. Was she just throwing the markets off the scent of a rate hike and therefore keeping them from reacting like they are reacting today, early? I think so. Pound sterling is the only major currency with a gain VS the dollar this morning and the only thing Chuck can figure out is that the latest polls show the “don’t leave” vote widening their lead. Chuck rails on the Central Banks some more, asks the question of why is there a dollar index, does a mea culpa, and steps into the time machine to visit a nasty email from 2004!

For What It’s Worth. Well, I don’t know what kind of value this FWIW will be today, but I thought when I read the title on the screen that I just had to read more. And the title is: The Commodity That No One Knows About But Everybody Wants To Buy. That would pique your imagination too, right? OK, well it can be found on Bloomberg, here:

And here’s your snippet. “the world’s mines and steel plants got so devalued during the commodity slump that some were just given away by owners struggling to cut losses or debt. But there’s at least one metal that’s been attracting a lot of attention.

Niobium — named for a Greek goddess who became a symbol of the tragic mourning mother — is used to produce stronger, lighter steel for industrial pipes and aircraft parts. It is mined in only three places on Earth, and the price of every kilogram is seven times higher than copper.

China Molybdenum Co. outmaneuvered at least 15 companies last month to purchase Anglo American Plc’s niobium and phosphate unit in Brazil, agreeing to pay $1.5 billion, or 50 percent more than the valuation by some analysts. The buying frenzy that included Vale SA, Apollo Global Management LLC and X2 Resources showcased the growing appeal of a market that may be worth $4 billion for a soft, silvery metal many experts don’t know much about.

Niobium is hard to find and hard to value. More than 80 percent of global supply comes from one company — Cia. Brasileira de Metalurgia & Mineracao in Brazil. Metal Bulletin Ltd., which publishes prices for metals as obscure as bismuth and germanium, says there’s not enough liquidity to report one for niobium.

Chuck again. Pretty interesting if you ask me! I’ve been around commodities going back to my days as the assistant Operations Manager at a commodities and securities brokerage in Des Moines Iowa, called R.G. Dickinson. And I had never heard of this commodity.. So, see you can teach an old dog a new trick!

Currencies today 5/19/16. American Style: A$ .72, kiwi .6745, C$ .7635, euro 1.1205, sterling 1.4630, Swiss $1.0115, . European Style: rand 15.8590, krone 8.3580, SEK 8.3570, forint 282.59, zloty 3.9225, koruna 24.1240, RUB 66.46, yen 109.95, sing 1.3795, HKD 7.7670, INR 6745, China 6.5483, pesos 18.49, BRL 3.5655, Dollar Index 95.25, Oil $47.30, 10-year 1.87% ( a huge one day rise in yield here!) Silver $16.66, Platinum $1.017.64, Palladium $574.72, and Gold. $1,254.80

That’s it for today. See? Pretty chock-full-o-thoughts today, eh? I see the sun rising, so apparently we’ll see the sun again today, YAHOO! Blues and Sharks tonight in San Jose, will be on too late for me to watch. Infusion day, so I have to get this out and get on my way to the infusion center, which I ‘ll tell you is a very depressing place, with all the cancer patients there receiving their chemo. I always try to have a smile on my face while there, and be upbeat, because it would be too easy to get drawn in on the depression. OK, happy thoughts, Chuck! Cardinals win and old-school baseball game last night, where two pitchers go head to head, and one makes just one mistake and it costs the game. No video game scoreboard game last night! Wings takes us to the finish line today with their song: Band On The Run. Someone else will have the conn on the Pfennig tomorrow, and I’ll talk to you again next week. I running late again, so I hope you have a Tub Thumpin’ Thursday and Be Good To Yourself!

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