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Rato Goes To Jail!

* Dollar fights back on Friday..
* Waiting for more Trump tweets.
* Activity should pick up this week!
* Bank of Canada this week.. ..

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

Good Day. And a Marvelous Monday to you! OMG! What a beautiful weekend, weather-wise here! And I got to spend both Saturday and Sunday at the ballpark! I even moved my seats in the shade, down to the sun drenched handicapped seats yesterday, to soak up some vitamin D while watching baseball! Back to the ballpark again today… It doesn’t get much better than that! I hope it was nice where you are and you got to get outside! Being outside is so much better than being cooped up inside, as far as I’m concerned. When Alex was a little dude, and it was raining, he would sing, “rain, rain, go away, little Alex wants to play”.. Billy Jo Royal greets me this morning with his song: I Knew You When.. “I knew you when, you were lonely, a girl all alone without love”..

Well. It was a quiet weekend with regards to economics news. The political news was loud and clear, but I don’t write about politics, per se. The latest polls in France showed the “other candidate” (other than Le Pen, which gets all the press, because they are anti-euro) gaining ground on Le Pen.. Do you believe the polls these days? But this latest poll helped the euro remain on terra firma and that’s a good thing! I say, “that’s a good thing” because the euro has looked shaky pretty much all the time, lately, and since it’s the offset currency to the dollar, that means the dollar isn’t giving up much ground.

On Friday morning, the currencies were looking perky, but that faded as the day went along, on the President Trump comments about China being the “grand champions of currency manipulation”. You may recall me writing about this on Friday and the response by the Chinese Foreign Ministry who said he hoped that the U.S. could “fully and correctly view the exchange rate issue.” But that perkiness faded throughout the day, and by the end of the day on Friday, it appeared that the dollar had regained the hold of the conn. The euro, which was knock, knock, knocking on the 1.06’s door, backed off, and the Aussie dollar (A$) fell back under the 77-cents figure that I said I thought it wouldn’t do again.. Thus proving once again, that I sure can give an asset the old Kiss of Death, whenever I talk glowingly about an asset.

In the overnight markets, there wasn’t much movement in the currencies or metals, as traders get all prepared for a week with economic data, a Bank of Canada (BOC) meeting, Fed speakers who all try to get their 2-cents in before the “black out period” before a FOMC Meeting, and of course a week of Tweets from the President. So, an uptick of activity could be on the docket this week.. But, right now, we’re still just drifting along with the sea breeze in our hair (for those of you that still have hair! ?

So, as I just said, there will be a Bank of Canada (BOC) meeting this week, on Wednesday, that is, and nothing, absolutely nothing, say it again, is expected to come from this meeting, but that doesn’t mean it’s written in stone. We could very well see The BOC come out and say that they’ve seen a strong uptick in activity, and therefore say they need to hike rates! Yeah, and I have some used tickets from yesterday’s ball game to sell you! HA!

The U.S. President, Trump, will speak to Congress this week, and right now, most of the focus in the markets is on this talk, and it is thought that he would spend most of his talk on his top two priorities. I’ll only talk about one of them.. “reforming the tax code”.. For this is something that could very well effect the debt picture here in the U.S. , but could also get the economy kick-started, which would mean higher inflation. Treasury Sec. Mnuchin, said that Trump would be “touching on tax reform”. Trump himself has said that he’s not touching the “entitlement programs”.. So, what’s going to make up the difference, in the budget, between reduced tax receipts and what is received now? That’s the question I always ask anyone that says stuff like: college should be free.. I respond with, “Who’s going to pay for that?” And that pretty much stops them in their track.

It’s just me getting on my soapbox this morning, so if you don’t want to deal with this, just skip ahead a paragraph.. Ok, for the couple dozen of you dear readers that didn’t skip ahead, here I go.. Testing, one, two, testing, on, two, can you hear me in the back of the room? Good, you know, that we wouldn’t have all the problems with the youngsters these days if we hadn’t given them a trophy for participating in every sport they attempted to play, or with some didn’t attempt to play, but just stood there, wishing their parents would get them off of the field. They were taught from the get-go that they get a ribbon, or trophy or some other recognition for not doing that much, if anything.. And so guess what they want as they grow older? Something for nothing. It’s that simple folks.. Now that’s a generalization and obviously doesn’t apply to everyone! I know of a few youngsters that pay their student loans diligently!

OK, for those of you who skipped ahead, hello, it’s me again.. OK, Eurozone inflation (CPI) will print this week, and it’s the last inflation print before the European Central Bank (ECB) meets next Thursday (3/9).. Remember, that March is the month that the ECB said they would begin to drop the amount of bonds they buy each month by euro 60 Billion.. I fully expect that inflation in the Eurozone will tick up to 1.9%, and won’t make the Central Bankers at the Bundesbank (Germany’s Central Bank) happy campers. I’ve talked about the Bundesbank’s kicking and screaming about the bond buying, and negative deposit rates, that the ECB has implemented, due to the Bundesbank’s fear of rising inflation.. And I can see the Bundesbank’s position on this.. If inflation ticks up to 1.9%, the next step will be 2% and then higher. And the BIG problem with that is the ECB would have to unwind bond buying and hike interest rates while inflation starts to run away from the ECB.. I’m with you Buba (which is what I used to call the Bundesbank, back in the days of my hand written notes to the sales staff about what went on in the overnight markets, that eventually became Pfennigs.

I was reading a report over the weekend about an upcoming meeting in Holland, of the parliament to discuss the country’s options for the euro, including the question of should they drop the euro or not.. I was flabbergasted to read such nonsense! The Netherlands / Holland / Dutch were staunch supporters of the Eurozone and euro.. Shoot Rudy, the first ECB President was a Dutchman, Wim Duisenberg. This is unbelievable, it’s like when your brother or sister sides with someone other than you! Sure the Dutch contribution to the Eurozone GDP isn’t that large, it’s not that, it simply that the Dutch were standing there with Germany and France brothers in arms regarding the Eurozone and the euro. And now they’re discussing options to leave? Say it ain’t so Joe!

The 4th QTR GDP print for Australia will be seen on Wednesday. I think that this is the final piece of data that the Reserve Bank of Australia (RBA) needs to see to remove their “easing bias”, and that could be enough to finally get the A$ past 77-cents and stay there for more than one day! I was looking at internal rates from Central Banks all over the world on Friday, and thought, this is ridiculous, all these countries with less than 2% interest is crazy.. You don’t have to look hard at the list of countries and their rates to find the countries that do have high rates to offer, for they stick out like a man with a hatchet in his forehead! Yes, they are that obvious! Russia, Brazil, and India (and India’s rate are dropping quickly) It’s time in my opinion for the RBA to start to think about hiking rates..

New Zealand is in a similar boat as its kissin’ cousin across the Tasman. You may recall that a couple of weeks ago the Reserve Bank of New Zealand (RBNZ) really disappointed the markets by keeping their “easing bias” when it was widely thought that the easing bias would be dropped and there could even be talk of a rate hike. It took kiwi 10 trading days to recover the ground lost after the RBNZ disappointed the markets.

The Chinese renminbi has been taking baby steps in regards to appreciations of the renminbi each night.. As long as the U.S. President keeps the hammer down on the Chinese with his Tweets, I think the Chinese will allow appreciations just to “show the U.S.” Hey! did you see where China replaced the U.S. as Germany’s #1 trading partner in 2016? And France moved into 2nd place, with the U.S. dropping to 3rd place as Germany’s top trading partners.. With the thought that 80% of all trade in the Eurozone is amongst their European Union partners, I would have thought that France would be #1.. But China vaulted past France and the U.S.

Hey, recall last week in a FWIW article, I highlighted the Spanish court proceedings where Spanish Bankers were being taken to court regarding the failure of a bank and losses of millions of euros to consumers? Well, the head guy, Rodrigo Rato, got sentenced to 4 years and 6 months of jail for his misappropriation of bank funds.. There were 64 other executives and bank board members that were put on trial, but Rato was the Big Name, as he had been the head of the IMF before taking the job as the CEO of the failed Spanish bank, Bankia..

So, that means Spain and Iceland have put their bankers that cause financial meltdown, etc. in jail..

Gold had a good day on Friday, closing at $1,256.90, up $7.60 on the day.. Silver has traded higher than $18 through a couple of trading sessions now, which is pretty interesting in that every time, recently, Silver traded above $18, it would get knocked back down pretty quickly.. So, have the Silver paper traders finally given up? Now that’s a crazy thought, Chuck, why on earth would you even think that to yourself, much less say it out loud? HA! I have a good article for you in the FWIW on Gold today, so be sure to finish the letter in its entirety today!

The U.S. Data Cupboard finally gets some real data with the January print of Durable and Capital Goods Orders.. These two data prints spent a lot of 2016 in negative territory, but it looks like there will be some aircraft orders in January that will bump Durable Goods up to start the year. Capital Goods Orders will be looked at to see if Corporations have changed their spending habits.. Corporations have been spending their profits on share buy backs, instead of Capital improvements and equipment.

To recap.. Not much happening in the currencies overnight, or the metals. The currency rally that was going on Friday morning, faded as the day went along, and some of the good moves were erased, like in the Aussie dollar. This week will bring us a Central Bank meeting in Canada, some real economic data, and a ton of Fed speakers who have to get their 2-cents in before the blackout period begins on Friday. Gold had a good day on Friday closing up $7 and trading past $1,250, which had seemed to be a real roadblock lately.

For What It’s Worth. Well, this is interesting, and it came to me from the GATA folks, and can be found on the BullionStar website. Basically, Gold researcher, Koos Jansen, reports that the U.S. Mint provided him some documents in response to his “freedom-of-information” request for documents related to audits of the U.S. Gold reserve.. He had to pay for this information, and when he received it, it was incomplete, redacted, and short by a hundreds of pages, that he was charged for.. So the U.S. Mint refunded his payment, instead of explaining the redacted, incomplete and missing pages. Koos Jansen’s article can be found here:

Or, here’s your snippet: “Thanks to my readers that donated to the crowdfunding campaign I’ve been able to force the US Mint through a Freedom Of Information Act (FOIA) request to hand over documents related to the physical audits of the US official gold reserves stored at the Mint; also referred to as Deep Storage gold. Although the PDF-package digitally sent to me is redacted, incomplete, includes pages copied twice and materials I didn’t ask for, it’s the closest thing that I’ve ever seen to physical audit documentation of gold at Fort Knox and the other Mint depositories drafted in between 1993 and 2008.

What is worrying is that the reports now in my possession reveal the audit procedures have not competently been executed. Combine that with the fact the documents are incomplete and redacted, and the result is suspicion of fraud.

It should be clear that the US Treasury (owner of the gold), US Mint (main custodian), Federal Reserve Bank Of New York (second custodian), and the Office Inspector General of the US Treasury (head auditor), are reluctant to disclose information about the audits of the gold at the four largest depositories that store over 8,000 fine metric tonnes. Consider that the most seasoned gold analysts aren’t even aware this gold is audited.”

Chuck again. I’m of the opinion that this does open Pandora’s Box of questions about the Gold the U.S. holds or doesn’t hold.. I’m not saying that it’s not there, I’m saying that when you look like you’re hiding something it brings about questions, that’s all.. The U.S. Treasury reports that the U.S. has 8,134 metric Tonnes of Gold, of which 4,583 tonnes are held at Ft. Knox.. 1.364 tonnes are held in Denver. Co., 1.682 tonnes are held at West Point, NY, there are 418 tonnes at the Fed Reserve, and 87 tonnes of working stock.. I’ll take the under.. what will you take?

Currencies today 2/27/17.. American Style: A$ .7678, kiwi .72, C$ .7625, euro 1.0580, sterling 1.2425, Swiss $.9932, . European Style: rand 12.9480, krone 8.3587, SEK 9.0250, forint 280.88, zloty 4.0730, koruna 25.5360, RUB 58.44, yen 112.25, sing 1.4062, HKD 7.7605, INR 66.67, China 6.8617, peso 19.82, BRL 3.1080, Dollar Index 101.03, Oil $54.43, 10-year 2.33%, Silver $18.43, Platinum $1,026.67, Palladium $774.60, Gold $1,256.10, and SGE Gold $1,265.29

That’s it for today.. . Well, I was all excited to see our Blues were on national Cable last night, which meant I got to see them play, and that’s as far as the excitement went, as they lost the game. UGH! The did fight back from being down 2-0 to tie the game 2-2, only to lose late.. UGH! Well, my body and mind was renewed on Saturday, when I walked into Roger Dean Stadium.. The sun was shining brightly, the grass was so green, the infield was being watered down, the players were warming up, and the chills went down my back once again, as they do every spring. My martini friend, Gus, and his wife Vivi, left for their home on Long Island on Friday morning.. They have become good friend of ours, and we plan to visit them in September after his busy season ends on Labor Day. And with that.. King Crimson takes us to the finish line today, with their song: In the Court of the Crimson King. A true Rock classic, folks.. If you don’t have this song in your collection somewhere, disk, digital, vinyl, then you can’t say you’re a classic rock song collector! So, 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

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