N.Z. Businesses Need To Follow Up!

* Fischer doubles down .
* Keeping a man down .
* U.K. Consumer Confidence prints negative!
* Rubles rally on Oil price rebound .

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

Good Day. And a Wonderful Wednesday to you! The late Great Alvin Lee greets me this morning with his live version of the song: I’m Going Home. When I was a rock-n-roller, many year ago I might add, the band I played in, and traveled around the country with, used to play that song to end every show. Our lead guitar player, Donnie Phillips, and his excellent guitar playing really showed when we played that song. It’s a not so pretty morning in the markets, folks, so I’ll beat around the bush as long as I can before diving into the particulars. I’m having a rough start to the week with my stomach problems, and tomorrow is an infusion day, I’m not so sure I’m going to be ready to enjoy my BBQ this weekend. UGH!

Well, I used to be a wrestler in High School, and one thing the coach always harped on was once you had your man down, don’t let up, keep driving. And that’s the approach that the Fed members seem to be taking these days. They have the currencies & Gold down, and that’s where they want to keep it, with all their talking about rate hikes. Shoot Rudy, they even make unscheduled appearances on Bloomberg TV to reiterate their position that a rate hike is a possibility in 3 weeks. maybe. Yesterday, Fed member, Stanley Fischer, one of the voices in Janet Yellen’s ear, made an unscheduled appearance on Bloomberg TV to basically reiterate his comments from Friday, that really got the dollar moving up the charts. (I’d give it a 5, I can’t dance to it!) That has kept the dollar on top of the currencies and metals.. Although there are a couple of currencies on the rally tracks this morning..

Overnight, The ANZ Business Confidence report for New Zealand, gave kiwi a boost, by showing that their report points to “good times”, which is a 20-month high. So, this is good, right? You bet your sweet bippie it is! Now, if the N.Z. Businesses are feeling this “good” let’s get on with the Capital expenditures! And THAT, will be REALLY GOOD! But without the Capital Expenditures then all you have is a survey, with some words. So, follow-up here is important, I sure hope the N.Z. Businesses remember that!

One of the other currencies on the rally tracks this morning is the Russian ruble. The price of Oil had moved back over $46 in the past 24 hours, and that has the ruble perking this morning. Do you recall percolators? We have one in our camper, and still use it when camping. talk about a pretty cool way to make coffee! Sorry for that, but see how I run in a different direction upon hearing a word that makes me do that? HA! I had someone ask me about the ruble the other day, and I told them simply that the fundamentals of Russia are good, except that they are dealing with the economic sanctions from Europe and the U.S. So, without a judge on what the economy would look like without sanctions, traders use rubles as an Oil play. Rubles play follow the leader with Oil, it’s that simple. So, if you think the price of Oil is going to rally, well that tells you what you should be doing with rubles. And vice-versa if you think Oil’s best days are behind it.

While there’s probably still plenty of Oil to be discovered, the news out today is that Oil discoveries for 2015 were at a 70-year low. From Bloomberg: “Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year they’ll probably find even less, spurring fears about their ability to meet future demand.” This article can be found here; http://www.bloomberg.com/news/articles/2016-08-29/oil-discoveries-at-a-70-year-low-signal-a-supply-shortfall-ahead

In Canada today, they will print their 2nd QTR GDP, and this is where the rubber is going to meet the road folks. I think the Canadian dollar / loonie is in some deep dookie if the forecasts are correct and 2nd QTR GDP will drop significantly from the 1st QTR. So, batten down the hatches with those loonies, for if history tells us anything here, it’s that the loonie is quite resilient, and damage to the loonie from a very weak 2nd QTR GDP report could end up being short-lived. But then that’s history, and no guarantee that it will repeat.

I told you yesterday that the economic data would begin to pick up this week, and with that we’ll see the Eurozone’s July Labor Report today. This report should show that the Eurozone’s Unemployment Rate of 10.1% previously, will fall to 10%… That should be good for the euro, but then since when did the euro move significantly on its own data? Not very often. for, as I’ve explained so many times through the years, the euro is the offset currency to the dollar, and the dollar moves are reflected in the euro’s price immediately.

In the U.K. yesterday, they printed a very ugly looking Consumer Confidence report, which printed at -7, the second lowest reading of this data in two years. But, the lowest reading was June’s -12, so you can look at this as “an improvement” or, you can look at it as “continuing the negativity” I guess since I’m from Missouri, the U.K. is going to have to show me that this negativity won’t continue for me to look at as the glass is half-full.

But none of this data that’s printing will mean a hill of beans come Friday, and the U.S. Jobs Jamboree. It’s the Big Kahuna of data prints, according to the markets. For me, I prefer to not pay attention to the hedonically adjusted, surveys on employment that the BLS uses to give us the monthly jobs numbers. I prefer to look at the ADP report, which will print today, and the LMCI (Labor Market Conditions Index) According to the markets though, they are of the believe that a strong jobs report on Friday will be the medicine for what ails the rate hike campers. And of course next Tuesday, when we return from the 3-day Holiday Weekend, (the Good Lord willing, and the Creek don’t rise) I’ll have to tell you all about the BLS report. UGH!

Well, the first leg is about to drop on the dollar, according to James Rickards, who believes the first leg of the drop in the dollar will come from the G-20 meeting that takes place next week. There is a laundry list of items that the G-20 leaders will want to discuss at this meeting that will take place in Hangzhou, China. And a way to prevent competitive currency devaluation is high on the list of things to talk about, along with discussing ways to improve Global economic growth. And then there’s the little discussion that James Rickards thinks is going to come from this meeting and that China’s announcement that they are no longer going to use the dollar in its basket of currencies it uses to price the renminbi. If the drop that grenade from left field at the G-20 meeting, the dollar would seem to get pummeled, but then these days, who knows?

Well, how about that news item that Ireland has asked Apple to pay $14.5 Billion in taxes going back 10 years? $14.5 Billion is chump change to Apple given the company holds approx. $200 Billion overseas. But should this be viewed as highway robbery, or should it be viewed as “what fair is fair”? This will take years to iron out, and in the end, the amount most likely will be reduced significantly.

And speaking of keeping someone down once you have them there. The CFTC (Commodities Futures Trading Commission) and the regulatory body for commodities and derivatives in commodities, is believed to be on the verge of announcing a fine of Billions of dollars for a large Bank’s repeated failure to report derivatives transactions properly. I find this amazing that the CFTC could find this, but couldn’t find anything awry in the Silver market a few years ago. I’m just saying.

Well, Gold lost $12.70 yesterday, and is flat this morning so far. I would mark this down as another opportunity for the not-for-profit-sellers to keep Gold down, while they have it down. I can imagine them having a conversation like this: Hey! Fed member Fischer talked, so that could be the reason the media thinks that we sold Gold.

It was my lucky day yesterday, receiving two emails from Sean Hyman! This one is a little less unsettling as the other one regarding Norway, that you’ll find in the FWIW section today.. The news is simply that Shareholders of Australian Junior Resolute Mining will now have the option of collecting dividend payments in Gold. The Company currently pays 1.7 cent a share, but will now make that available in Gold. Pretty cool, eh? The Gold will be held at the Perth Mint, and a shareholder will have to own 5,000 shares to meet the minimum requirements of having an account at the Perth Mint. But isn’t that a pretty cool way for a Gold Mining Company to pay dividends?

This plan reminds me of our Metals Purchase Plan that I highlight in the “sponsored by” section of the letter from time to time. I think this is the coolest product we’ve every introduced, and yet, it doesn’t get any fanfare. UGH! Oh well, it’s here if you ever decide you need it!

The U.S. Data Cupboard yesterday had some interesting data, in that the Home Price Index fell last month, and Consumer Confidence jumped 4.5 points higher! WOW! Wait, What? Consumer Confidence jumped to 101.1 this month? Well, why not? If the Fed says that things are getting better and that we could see rate hikes, then that’s reason enough for these people to believe that things will get better for them! Ahem. Ahem. Testing, testing, is this microphone on? Ok, can you hear me in the back? Let me make sure that everyone can hear me on this. Just because the Fed says that they see things getting better, doesn’t mean that things are getting better! They said that every years since 2009, and have things gotten better? Have we seen rate hikes? OK. I just wanted to make sure everyone understood the real facts!

Today’s Data Cupboard will have the aforementioned ADP Employment Report. Look for a return to the running average of 175,000.

To recap. The dollar still holds the conn on the currencies as Fed member Fischer, made an unscheduled appearance on Bloomberg TV yesterday to repeat his comments from Friday about how there would be two rate hikes this year. Gold lost $12.70 yesterday, and is flat this morning so far. The data prints around the world have begun to print again, after a couple of weeks of nothing, absolutely nothing! Say it again! But nothing will compare to the attention that the Jobs Jamboree will get this Friday! Oil moves past $46 again, and the ruble rallies. And Business Confidence in New Zealand hit the “good times” level, and Chuck wants to see Capital Expenditures follow up this giddiness.

For What It’s Worth. Well, one of my all-time fave countries is in trouble. Norway, which I’ve always admired for their fiscal prudence, is showing that putting all your eggs, (Or at least most of them) in one basket, doesn’t work forever. So, this was sent to me by my friend, and one-time colleague, Sean Hyman, who is a technical / charts wizard! And you can find the whole article here: http://news.valubit.com/2016/08/30/norway-raids-sovereign-wealth-fund-to-cover-government-expenses/

Or here’s your Snippet: “Saudi Arabia isn’t the only oil-dependent nation struggling to make ends meet in the wake of weak oil prices. For the first time since its establishment in 1996, the Norwegian government is starting to withdraw money from its sovereign wealth fund to cover government expenses. In fact, in the first half of 2016 the government has withdrawn $5.4 billion. Moreover, withdrawals are expected to accelerate in 2H 2016 reaching nearly $20 billion, a run-rate that would have them exceeding the fiscal limits imposed on fund withdrawals of 4% of assets, or $36 billion. To put those withdrawals into perspective, Norway’s economy is roughly $375 billion and federal spending accounts for roughly 60% or $225BN. Therefore, a $20BN withdrawal in 2H 2016 represents roughly 18% of total government spending.

In an interview with Bloomberg, Egil Matsen, the Deputy Governor at Norway’s Central Bank, said the withdrawals are starting to impact the manner in which the fund manages its risk profile.

Matsen also noted that the economic landscape has “changed” since their last review in 2007. Well, that might just be the understatement of the year. In response to that changing economic landscape, Matsen said that fund managers are doing a lot of “internal analytical work” to figure out whether the “correlation structure between equities and bonds has changed since 2007.”

Chuck again. I don’t care what structure you have, in today’s economic landscape, you had better be allocating a portion of a portfolio like this to Gold! (or Silver, of course), But for a sovereign country like this, Gold would be more easily stored than the amount of Silver that would equal the notional value of Gold.

Currencies today 8/31/16. American Style: A$ .7510, kiwi .7245, C$ .7635, euro 1.1145, sterling 1.3145, Swiss $1.0160, . European Style: rand 14.4855, krone 8.3295, SEK 8.5387, forint 278.42, zloty 3.9115, koruna 24, 2493, RUB 65.22, yen 103.25, sing 1.3628, HKD 7.7570, INR 66.96, China 6.6785, peso 18.79, BRL 3.24, Dollar Index 96.03, Oil $46.08, 10-year 1.57%, Silver $18.80, Platinum $1,060.45, Palladium $684.48, and Gold. $1,317.30

That’s it for today. Cardinals go for the sweep of the Brewers tonight. It’s taken extra innings in both their wins in Milwaukee, but they were wins. I was really surprised yesterday that I only received one comment from a dear reader about me choking up to a song. I thought for sure there would some, “Oh come on Mr. Tough Guy” facetious comments, but not a one, only one that said that he too did the same. R.E.M takes us the Finish Line today with their song: Fall On Me. And somehow the “shuffle” on the iPod follows that up with another R.E.M. song: Losing My Religion. So I have that going for me today! I’ll get out of your hair for today. I hope you have a Wonderful Wednesday, and Be Good To Yourself!

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