Oil Price Plunges Again!

* No agreement in Doha.
* No G20 suggestions….
* Risk Sentiment fades.
* Safe Haven Buying is Back! .

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

Good Day. And a Marvelous Monday to you! I want to start today by giving thanks to everyone one of you who sent me a note with kind words regarding my great news from the oncologist on Thursday night! Thank you, thank you, thank you! I wish I could give you all a great big Chuck Hug. If you’ve ever gotten a Chuck hug, you know that it’s like no other hug you’ll ever receive. The technician in the infusion room, Keiko, loves it when I pick her up and hug her, and she just giggles and laughs. So, there! I have given you all a make-believe hug. Thank you so much!

Well Pfennig Tradition calls for me to do this, so here goes. Should five per cent appear too small Be thankful I don’t take it all Cos I’m the taxman, yeah I’m the taxman. Today is the tax day for all you who have yet to finish and file your tax returns.. Sorry to be the bearer of this news, but as the song says: Be thankful I don’t take it all! Of course the “I” there is the Tax Man.. Steely Dan greets me today with their song: FM.

Front and Center this morning, the price of Oil has plunged $3 as the Oil Ministers meeting in Doha, ended with no agreement to slow production, just like I told you last week that there wouldn’t be an agreement. I find this to be quite interesting in that I get the feeling from the rhetoric there that the Oil Ministers are feeling pretty cocky right now, and believe they would be better off going on their own, and not part of an Oil producing group. And that’s got to send shivers down the spines of those with Oil related investments, for the supply glut would probably just grow to enormous size under those parameters. At least that’s how I see it all playing out.

It appears that the Canadian dollar / loonie, and the Russian ruble are being taken to the woodshed for their association with Oil. The other Petrol Currencies from Norway (krone), and Brazil (real) aren’t reacting as violently as rubles and loonies at this point in the day. The real may in fact open up on the positive side of the ledger, given that Brazil’s Lower House voted to impeach President Dilma Rousseff. I do believe there’s one more step in this impeachment process and it goes now to the Senate, where all they need is a simple majority vote. It doesn’t look good right now for Rousseff, and real traders are very happy about that prospect, given her time as president, she did everything she could do to weaken the real.

The Risk Sentiment that was all over the place on Friday, has switched back to safe haven buying, which means Gold, yen, euros, and Treasuries are being bought, and really nothing else. All the hoopla and high-fiving in the currencies on Friday, has ended. for now that is! In Australia, their last Reserve Bank of Australia (RBA) meeting minutes will print tonight. The problem with the minutes as I see them is that they will appear to be stale, given that since the meeting, Aussie employment smacked another ball out of the park, and the currency hasn’t exactly taken off to the moon, although it has been up and down, mostly up each day. I would think that any comments in the statement tonight regarding the strength of the currency would be hollow given that there’s no rate cut on the horizon right now.

And the New Zealand dollar / kiwi, is seeing some love this morning, not a lot, just a little, as their latest CPI (inflation) was stronger in the month at 0.2% than expected at 0.1%… So for that, kiwi gets some love this morning, and continues the recent trend of outperforming the A$..

The G20 meeting in Washington didn’t come up with anything new. I did think it was interesting that the G20 members decided that would add some verbiage in the communique that talked about the need for member countries to end their prolonged, excessive reliance on unconventional monetary policy to power growth. So, why did I find that interesting? Because the IMF had just issued a statement that called for the established countries to do more with their monetary policies to promote growth, which the IMF had just downgraded for 2016. So, we had the IMF calling for an opening of the monetary policy spigot, and G20 calling for the spigot to be closed.

Getting back to the Rousseff Impeachment process. I wanted to mention that it’s important to note that while the Brazilian real is getting the benefits of this impeachment process, it could all unravel very quickly. You see, the markets/ traders/ investors, all believe that getting Rousseff out is important, so they can get a gov’t in that makes decisions that would pull the Brazilian economy out of its economic funk. But what happens if the “new guys” are as inept as the “old guys”? Well, I’ll tell you what I see happening if that happens.. And that the real’s gains get unwound.. So, the impeachment is important to the real, but even more important will be the performance of the new Gov’t.

The euro has a small gain this morning that has pushed the euro back over the 1.13 handle.. But like I said above, it’s safe haven buying that’s doing the trick here, for there hasn’t been any data to speak of from the Eurozone. The G20 meeting this past weekend, did begin a discussion about BREXIT, and the horrors that will be tied to that.. You’ve gotta love these G20 guys and girls, for they love to over dramatize things. Expect more of this talk from future G20 meetings..

The Chinese renminbi saw a HUGE appreciation in the fixing last night! And when the fixing was being announced, a Chinese finance official made certain that his audience understood that he believes there are signs that China’s economy has turned the corner. Recall that on Friday last week, I told you that I believed that China’s economy showed signs of building momentum. So, the Finance official confirmed what I believed!

After a tough week prior to Friday for Gold, the shiny metal was able to post a $6 ($6.50) on Friday, and is up about $5 this morning, as it slowly rebuilds back to $1,250.. The days of production needed to cover the short positions in Gold remains at about 70.. And for Silver it’s around 185.. That’s sad isn’t it? That the firms can have that many short positions that would require so many days of production to cover them? Oh well, it is what it is. There’s nothing I can do about this, but tell you so that you have an idea of what the metals are up against, but still manage to carve out gains..

The U.S. Data Cupboard does not have any Tier 1 data for us today, and actually it only has something called the Housing Market Index.. Friday’s Data Cupboard was another disappointment. March Industrial Production (IP) printed negative again at -0.6%, and Capacity Utilization (CAPU) fell from a revised downward 75.3% (was 76.7% when it originally printed) to 74.8%.. Uh-Oh, folks, that’s going in the wrong direction! And CAPU is one of the few forward looking pieces of data.. UGH! The U. of Michigan sentiment index for the first two weeks of April fell from 91 to 89.7, and was expected to rise to 92.

To recap. G20 said one thing while the IMF said another regarding monetary policy. Strange sequence of events. The price of Oil tumbled after no agreement to freeze production from the Oil ministers in Doha was reached. And Chuck things this could be the beginning of an unraveling of the Oil producers group thinking.. And that could be bad for the price of Oil and Oil related investments. Rubles and loonies are taking the brunt of the drop in the Oil price this morning, and the Chinese renminbi saw a very large appreciation. Gold is up $5 this morning, as the safe haven buying is back and risk sentiment is out!

For What It’s Worth. I saw this a couple of places this weekend, so it should be good to go. I took this one from the newsire.ca website and the entire article can be found here: http://www.newswire.ca/news-releases/silver-price-manipulation-class-action-brought-on-behalf-of-canadian-investors-575890221.html

And here’s the snippet: “A class action lawsuit seeking $1 billion in damages on behalf of Canadian investors was launched today in the Ontario Superior Court of Justice.

The class action alleges that the defendants, including The Bank of Nova Scotia, conspired to manipulate prices in the silver market under the guise of the benchmark fixing process, known as the London Silver Fixing, for a fifteen-year period.

It is further alleged that the defendants manipulated the bid-ask spreads of silver market instruments throughout the trading day in order to enhance their profits at the expense of the class. This alleged conduct affected not only those investors who bought and sold physical silver, but those who bought and sold silver-related financial instruments.

Law enforcement and regulatory authorities in the United States, Switzerland, and the United Kingdom have active investigations into the defendants’ conduct in the precious metals market.”

Chuck again. Well here we go! I always wondered what it was going to take to get these class-action suites going.

Currencies today 4/18/16. American Style: A$ .7707, kiwi .6935, C$ .7755, euro 1.1305, sterling 1.42, Swiss $1.0360, . European Style: rand 14.5890, krone 8.2415, SEK 8.1250, forint 274.55, zloty 3.8010, koruna 23.8960, RUB 67.70, yen 108.30, sing 1.3555, HKD 7.7556, INR 66.53, China 6.4787, peso 17.61, BRL 3.5315, Dollar Index 94.63, Oil $39.14, 10-year 1.74%, Silver $16.22, Platinum $984.88, Palladium $560.72, and Gold. $1,237.62

That’s it for today. Well, a great weekend for me.. Chuck, Kathy, Gus, and Diane drove up to St. Augustine to attend the wedding of our neighbor’s daughter, Emily.. It was a beautiful day, the bride was beautiful, and a grand time was had by all! After all these years of coming to Florida I’ve driven just about all over the state.. Flat as a pancake I must say! And lots of cattle! This begins my last week down here. That’s sad for me, but I do get to get back home and see friends I haven’t seen and the kids and grandkids. Some were just here, but still, they are just too much fun to not be around! I’ve really enjoyed having our friends Gus and Diane here with us. I’ll need to go on fast to reverse all the “damage” I’ve done the past 5 days! Both my beloved Cardinals and Blues won yesterday, so a great day in St. Louis! The Youngbloods take us to the finish line today with their song: Let’s Get Together. When the one that left us here, returns for us at last. We are but a moment of sunlight fading in the grass. And with that, let’s get this week going! I hope you have a Marvelous Monday, and Be Good To Yourself!

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