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* Currencies & metals are drifting .
* Draghi attempts to diss euros .
* Poloz succeeds in dissing loonie!
* Accumulating debt by President.
And now. Today’s A Pfennig For Your Thoughts.
Good Day. And a Happy Friday to one and all! The end of a long-short week! It’s also Inauguration Day! I sure hope everyone keeps a calm demeanor today and doesn’t do anything stupid. This is a day, where we as a country should celebrate the fact that we have a peaceful transfer of power, and that there was no military coup, or war to get this transfer of power. We went to the polls, voted and that’s that! You can’t always get what you want, but sometimes you get what you need! (Rolling Stones) Supertramp greets me this morning with their song: Give A Little Bit. this song was redone / re-recorded by the Goo Goo Dolls in 2004. They did a good job in the redo, but the original is still better!
Today, will all be about the inauguration, there are no data prints here in the U.S. and the I believe the markets participants will all be fixated on the TV’s, watching the transfer of power. I was flipping through the channels yesterday evening, and came across the Washington D.C. celebration, and Lee Greenwood was singing his song: God Bless America, and I had to stop and listen. That song gets to me every time I hear it. I recall General Norman Schwarzkopf saying that before he led the invasion into Iraq during the first gulf war, that he listened to that song.
So, the currencies, and metals are just drifting around this morning. We had a Big mover yesterday, and that was the Canadian dollar/ loonie, that got caught up in Bank of Canada (BOC) Gov. Poloz’s comments about the strength of the loonie, and before you knew it, the loonie was down 1.6% on the day. UGH! But other than that, the rest of the currencies, for the most part, have just drifted around since yesterday.
The Chinese renminbi has bucked the drifting though and that makes 3 consecutive days of appreciation for the renminbi. I think it’s all window dressing for the inauguration. The President- Elect (I’ll be glad when I don’t have to say: President- Elect any longer!) singled out the Chinese this week for manipulating their currency weaker. So, in my humble country bumpkin opinion, which could be wrong, I see this move to strengthen the renminbi the past couple of days as the Chinese saying, ” what are you talking about? Look the renminbi is stronger!”
China did print a stronger than expected 4th QTR GDP report last night, showing that 4th QTR GDP rose 6.8%, VS 6.7% expected. So despite all the clamoring and saber rattling about how China is about to collapse, they still have a pulse, a strong pulse I might add, because even if you use the calculation I told you about years ago, where you only believe ½ of what the Chinese report, you still get 3.4% GDP. There’s no other Big Country printing 3.4% GDP.
Well, the European Central Bank (ECB) met yesterday. First let me take you back to yesterday’s Pfennig, where I said this about the ECB Meeting. I’ll bet a dollar to a Krispy Kreme donut that Draghi just allows any mention of rising inflation to slide, and if pressed on the subject, I see him attempting to explain the rise in inflation as merely a rising Oil price thing, and something the ECB is watching, but for now, not concerned.” – 1/19/17 Pfennig..
Well, it appears that I win that dollar because ECB President Mario Draghi, made a point of several things and blaming the inflation pick up on rising Oil prices was one of them. Here’s the grocery list of things that Draghi decided to focus on in his after meeting press conference.
. DRAGHI SEES NO CONVINCING UPWARD TREND IN UNDERLYING INFLATION
. DRAGHI SAYS UNDERLYING INFLATION PRESSURES REMAIN SUBDUED
. DRAGHI SAYS INFLATION PICKED UP DUE TO ENERGY
. DRAGHI SAYS RISKS TO ECONOMIC OUTLOOK REMAIN ON DOWNSIDE
. DRAGHI SAYS ECB HASN’T DISCUSSED REDUCING STIMULUS
You may recall that I also said yesterday that he wouldn’t talk about tapering, and he didn’t! The euro dropped a bit on his comments, but remains above 1.06 this morning, so the damage to the euro was contained. I made a big to do about jawboning currencies weaker, in the next Review & Focus, so you’ll not want to miss that when it gets posted at the beginning of next month at www.everbank.com/reviewfocus
I had a reader downunder send me a note about the Aussie Employment Report that I told you beat expectations and continued the strong run of employment reports in 2016, and told me that I was not seeing things clearly there, that the total jobs created in 2016 was actually weak, given that 94,200 jobs were created in 2016, less than 1/3rd of the 2015 total. So, there you have it, fair and balanced. I still contend that given the state of China’s economy that any type of employment growth in Australia proves resiliency.
I ask the question in the next R&F that’s on my mind, and that is. “Is Global Growth On The Rebound?” I pointed to the rising prices of Gold, Oil, copper, iron ore, the Aussie dollar (A$), and strong exports by Japan, Singapore and China, as the keys to all of this. But since I wrote all that, Gold, Oil, copper and iron ore have all backed off. However, we still have strong exports from Japan, Singapore and China, so maybe there’s something there. maybe.
So, with all eyes on the U.S. today, I’m going to talk a lot about debt here. A week or so ago, I asked this question. “With the current National Debt nearing $20 Trillion and the stock market nearing 20,000 which will hit their “20” first? Well, now a week later, the stock market seems to be going in reverse, so the front runner to hit their “20” first is the National Debt, which this morning stands at a rounded off number of $ 19.961 Trillion. (I had someone question all the zeroes I used yesterday, so I eliminated them and went with a truncated number)
So, which horse will you bet on? My money is on the Debt number hitting it’s “20” first. And last Sunday’s Pfennig written by Chris Gaffney, talked about the debt ceiling finally coming to its “day in court” on March 15th, when the debt ceiling can that was kicked down the road 3 years ago, will finally stop rolling down the road, and will either have to be picked up, or kicked further down the road. Guess one I think it will be? If you said, “kicked down the road” you would be a winner, winner, Chicken dinner!
I came across a website that listed the U.S. Presidents and the amount of debt that was added during their terms. I’m sure you already know that the current and outgoing administration holds the record for the amount of debt added during their two terms. And you can find all the numbers here, you know, so you can check to make sure I’m correct. https://www.thebalance.com/us-debt-by-president-by-dollar-and-percent-3306296 But one thing I might point out, is that the article is dated Nov. 21, 2016, so their number for the current administration is short, and the true number won’t actually be posted until after today, but for an updated number you can find it here: http://www.cnsnews.com/news/article/terence-p-jeffrey/obama-leaves-usa-9335000000000-deeper-debt
So.. here we go!
Obama $ 9.334 Trillion
Bush II $ 5.849 Trillion
Clinton $ 1.396 Trillion
Bush I $1.554 Trillion
Reagan $ 1.86 Trillion
Carter $ 299 Billion
Ford $ 224 Billion
Nixon $121 Billion
Johnson $42 Billion and so on..
The thing to think about here is that going back to Carter and before, those dollars would be different in today’s world, due to inflation. So, while their numbers aren’t “that bad” they would be worse in today’s dollars.
About 8 years ago, I stood on the stage in front of 750 people in Vancouver at the Agora Financial Symposium, and told the audience that the amount of debt that each U.S. citizen would have to come up with to pay down the debt was $45,000.. Well, today, 8 years later, that amount is now $61,345. So, go ahead and make your check out to the U.S. Treasury, and while you at it, you might want to add a few thousand for all those people that won’t ever have $61,345 that they can send to the U.S. Treasury as if it doesn’t mean anything! And if you want to get down to the cheese that binds, the dollar amount per tax payer is $166,733!!!!
Gold gained 50-cents yesterday. That’s it! 50-cents. And that was after 207,000 contracts traded! That’s an astronomical amount of contracts for a day’s trading, and when the dust settled, Gold was only up 50-cents on the day. I keep hearing and reading reports that the incoming President, is a fan of a Gold backed currency. Well, if that’s true, then Gold could use a positive tweet from Trump, eh? And Silver slipped back below $17 again. Every time Silver pushes past $17 it gets knocked back. Silver should go Tub Thumpin’.. I get knocked down, but I get up again, nothing is gonna keep me down. Darn paper trades, and that’s all I have to say about that!
The U.S. Data Cupboard yesterday told us that Housing Starts are hot! Burning Hot! Scorching Hot! (OK Chuck , enough I think they get the picture!) And that’s in December! I remember when we built our house in 1989, our builder wanted to wait until the warm weather started and the ground wasn’t froze any longer.. So, we started in June, and finished in September.. (it didn’t take long to build our little house)
To recap. The currencies and metals drifted yesterday, last night and this morning, and I expect them to continue throughout the day given that the focus will be on the Inauguration today, and the fact that there are no data prints in the U.S. today. Draghi tried like the dickens to throw the euro under a bus again yesterday, but failed to do so, but Bank of Canada’s Poloz succeeded and the loonie lost 1.6% yesterday! Chuck spends some time talking about U.S. Debt.
Before I go to the Big Finish though, I wanted to point something out to you, dear readers about EverBank, my employer, and sponsor of this letter. In GOBanking Rates’ annual study, EverBank Bank was Awarded Best CD Account of 2017. And you can check it out here: https://www.gobankingrates.com/banking/best-cd-account-2017-everbank/
Alrighty then.. For What IT’s Worth. I pulled this from the 5 Minute Forecast yesterday that goes out under the Inauguration Day! heading, but you have to have a subscription to one of their other newsletters to receive the “5”. But this is about Student Loans, and I thank my friend, Dave Gonigam at the “5” for highlighting this.. Here you go! Here’s Dave!
“The Education Department is starting to come clean about student loan defaults. And the picture is far worse than even we thought.
As recently as last September, the department estimated that at 477 colleges and universities, more than half of students had defaulted or failed to pay down their debt within seven years.
On Friday, the bureaucrats revised those figures. It’s now 1,029 schools – about a quarter of all the institutions they studied. Yikes.
As we pointed out a few weeks ago, the Education Department has a strange system of accounting; it assumes it will never incur losses via the borrower’s default because student loans can’t be wiped out in bankruptcy. This is how the feds get to claim the federal student loan program is a moneymaker for “the taxpayer” – not that they ever send you a check, heh.
Another perverse effect of this accounting: Student loan defaults don’t show up in the annual budget deficit. But the losses are no less real, and they do add to the national debt.”
Chuck again. I shake my head in disgust.. Hopefully this trend will turn around soon.
Currencies today 1/20/17. American Style: A$ .7522, kiwi .7145, C$ .7486, euro 1.0633, sterling 1.2289, Swiss $.9914, . European Style: rand 13. 5738, krone 8.4533, SEK 8.9355, forint 290.18, zloty 4.1050, koruna 25.4025, RUB 59.60, yen 115.22, sing 1.4294, HKD 7.7581, INR 68.18, China 6.8569, peso 21.93, BRL 3.2186, Dollar Index 101.36, Oil $52.77, 10-year 2.50%, Silver $16.91, Platinum $962.10, Palladium $753.60, Gold $1,202.70, and SGE Gold. $1,213.35
That’s it for today. What an absolutely beautiful day yesterday! And today is supposed to be a carbon copy of yesterday! We’re actually hosting a beach bonfire tonight! That should be a lot of fun. I have a good time when I have a small fire in my backyard in the fire pit, and this one will be on the beach! Like the Elvis movie: Clambake! HA! No, I don’t have my guitar here to play! Well the NFL League Championship Games are this weekend. Steelers and Patriots, and Packers and Falcons. OMG, our Blues lost 7-3 last night! 7 goals? Really? I told you before our problem was defense and Goalies, and these last two games at home giving up all these goals is the proof in the pudding! That’s got to be embarrassing for them! Alright then, it just so happens that the shuffle on my iPod started the day with a Supertramp song, and it is playing another Supertramp song to take us to the finish line today. The song is, I think Supertramp’s best song: Hide In Your Shell. And with that it’s time to get off this bus today and get on my way to a Fantastico Friday, I hope you can join me! Be Good To Yourself!
EverBank Global Markets
Editor of A Pfennig For Your Thoughts