Someone More Negative About Japan Than Chuck?

* More currencies on the rally tracks today.
* Why would traders move currencies up, ahead of FOMC Minutes?.
* Chuck looks under the hood on India’s idea.
* Koos Jansen on Chinese Gold accumulation..

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

Good day. And a Wonderful Wednesday to you! Woke up early, couldn’t get back to sleep, so I decided to sit down and begin to write. I know, I know, what a whack job I am with this sleeping thing. Well, it will take a couple of weeks for the current drug to leave my system altogether, but once gone, I would hope that sleeping would go back to being normal. Toad The Wet Sprocket greets me this morning with their song: Walk On The Ocean. This was one of the 90’s bands that put out a good 1st album, and then. crickets.

Well. There’s not much to talk about this morning with the currencies and metals, so I’m going to finish eating my Nutri-grain bar, and go back to sleep. No wait! There are at least a few things to talk about today, Chuck, so pull up the bootstraps and let’s get to work! So. The Big thing on the docket today is the printing of the Fed’s FOMC Meeting Minutes from their last meeting in Rocktober. We talked about this a bit yesterday, and I have nothing to add to that. If you forgot what I said about the Minutes, simply go to the tape! It can be read here: The main thing here is that I’m certain that the Minutes are chock-full-o-hawkish-statements about how it’s time to hike rates and so on, which will be good for the dollar, and bad for the currencies and metals.

I have to say that right out of the starters blocks this morning, I want to talk about something that is quite interesting. I actually found someone that is more negative about Japan, the Japanese economy and the yen, than me! I know, I know, that seems preposterous, but as Tweety Bird says, It’s Tru, It’s Tru. So, here’s the skinny. This lawmaker in Japan, that used to be a banker, Takeshi Fujimaki, (I think I’ll refer to him from here as T.K.) believes that Japan is a basket case and the “The yen will slide toward a more appropriate level at 180 to 200 per dollar over the long term. My biggest fear is what will happen to Japan when the 2% target inflation is achieved. When the BOJ (Bank of Japan) stops buying assets, their prices will crash and long-term yields will jump.”

Now, let me temper this with the fact that this guy has been negative on Japan for a long time, and has been predicting an eventual default in Japan over the past two decades. The markets refer to him as an “old guy crying wolf”. Hmmm. I wouldn’t so harsh with him, I do believe he’s onto something, it’s about time someone pointed at Japan’s debt like I do! But 180-200 for yen? Oooooh, that would leave a mark!

Yesterday, the price of Oil dropped 2% during the day, only to recover most of that drop by the end of the day, but it was getting very ugly there for Oil, yesterday. This morning, the price of Oil is still below $42. But, I see that the Petrol Currencies are all on the rally tracks this morning. I guess they liked the resiliency of Black Gold, Texas Tea. It’s just my personal opinion, but I found it very disheartening that the Keystone Pipeline project was vetoed. I guess we, as a country would rather import Oil from other places than our friends to the North. Please don’t rake me over the coals on this folks, if you have a different opinion, please keep it to yourself! I’m just saying, you know talking out loud.

The Chinese renminbi continues to slump. On Tuesday, the renminbi appreciated 10 pts, which was akin to being flat on the day, but at least it was a break in all the consecutive days of depreciation in the renminbi. Unfortunately, new consecutive streak for depreciation began last night. I read on the Bloomberg this morning that the 5-year plan for Chinese growth is to average 6.5% each year, and Royal Bank of Canada says that this goal won’t be reached unless the renminbi falls at least 8% VS the dollar by the end of 2016. These darn currency wars, they are driving me to drink! Seriously! I’m at wits end on this, and just can’t see the intelligence of the countries playing this “beggar-thy-neighbor currency war”.

So.. how much longer will this currency wars things go on? Good question! I think the better person to ask that question would be James Rickards, the author of the book: Currency Wars. My friends at Agora Publishing, like Peter Coyne, the editor of the Daily Reckoning ( has an “in” with Rickards, and Peter reads the Pfennig, so maybe he’ll see this and ask the author this question for us! Please? Pretty Please with sugar on top?

So, the list of currencies on the rally tracks this morning is a bit longer than the previous two day’s counts. The Canadian dollar / loonie, pound sterling, euros, Norwegian krone, Swedish krona, Brazilian real, Czech koruna, S. African rand, Sing dollar, and Russian Ruble, have all carved out gains VS the dollar this morning, and the Aussie dollar (A$), kiwi, yen, pesos, and forints are all flat, so they could be nudged either direction this morning. But what’s the intelligence of pushing the currency appreciation envelope on these currencies this morning, when everyone and their brother believes that the Fed’s FOMC Meeting Minutes that will print this afternoon, will be hawkish, and thus dollar positive?

Nobody ever said that currency traders were rocket scientists. They are a fickle lot, but not rocket scientists. So.. I mentioned that the euro was on the rally tracks this morning. I saw that a UBS hedge fund manager, Stephen Diggle, believes that “the euro’s slide is almost over”. OK. I have to wonder here. Did Diggle’s assistants hide the Goldman report from him, where Goldman called for the euro to reach parity this year? Or is he a “Lone Wolf”? If he is then he’s going to be high on my hit parade! Anyone that has the intestinal fortitude to stand up to Goldman, like I’ve done for years but I’m just a little old newsletter writer, this guy is a hedge fund manager at UBS!, is someone that should be listened to!

Did you notice that the Indian rupee wasn’t on the list of currencies that were either flat or carving out gains VS the dollar today? That’s because the rupee has been pushed down by a large margin this morning. You know, I really got excited about “the idea of a bank paying interest on Gold deposits”, but the more I think about this, I have to back off that excitement. The actual “idea” is a good one. But the underlying problems and agendas of a country could get very ugly for depositors. So. I’m not longer on board with this “idea”. Unless the authorities can prove to me in writing that the Gold deposit is mine, and I will get it back when I want it, and that the Gov’t doesn’t have plans to confiscate it. And I doubt that’s in writing anywhere!

But getting back to the rupee. Capital inflows into India are HUGE for the country and the economy, and therefore for the rupee too. So, when Capital leaves the country (outflows) the reverse happens. And that’s the bug that’s in the rupee these days. Traders fear that with the Fed hiking rates, that inflows into India will be reversed. So, instead of waiting to see if that actually happens, which would be the prudent thing to do, Traders are selling rupees in anticipation of those outflows. I know. seems stupid to me, but everyone has to be the first on their blocks to be able to say they were ahead of the markets these days. I’m sure at cocktail parties, the traders all stand around and try to outdo each other’s stories of getting ahead of the markets! UGH!

The U.S. Data Cupboard this morning goes back to small stuff mode, with only Housing Starts and Building Permits this morning. Of course the FOMC Minutes will print this afternoon.

The U.S. Data Cupboard yesterday, printed the stupid CPI, which I’m not even going to talk about, but instead prefer to talk about Industrial Production (IP) and Capacity Utilization (CAPU). Rocktober IP printed negative matching September’s negative print of -0.2%… Rocktober was supposed to be a positive 0.1%… But once again, this data disappointed, and then add to that a drop in CAPU that pushed the index number to a 4-month low of 77.5 in Rocktober VS 77.7 in September. For new readers, the reason I like CAPU so much, is that it is one of the few “forward looking” data prints we get. Hello, Is this the Fed Reserve? It is? Ok, I’m a first time caller, but long time tracker of data, and I just wanted to ask the Fed Members there if any of this very weak data that we continue to print will have any bearing on whether they decide to hike rates in December or not?… I’ll hang up and listen.

OK. that was fun wasn’t it? Well, Gold is flat this morning.. but continues to struggle every day. And in keeping with my theme that I wasn’t going to get all lathered up over the price movements but instead concentrate on other things with gold, comes into play here this morning, as Gold researching guru, Koos Jansen, has written another article for the website: The article is titled: SGE Withdrawals Break Yearly Record. World Gold Council Continues To Hide Insatiable Chinese Gold Demand. You now know why I want to concentrate on this! Let’s see what Koos has to say today.

“The amount of gold withdrawn from the vaults of the Shanghai Gold Exchange (SGE), which equals Chinese wholesale gold demand, accounted for 45 tonnes in the trading week that ended on 6 November. Year to date SGE withdrawals have reached an astonishing 2,210 tonnes, which is more than the full year record set in 2013 at 2,197 tonnes. With nearly two months of trading left in the Chinese gold market, SGE withdrawals are estimated to reach more than 2,600 tonnes.

How can so much gold be supplied to China without someone buying it and thus being genuine demand? It cannot. Chinese gold demand as disclosed by the World Gold Council (WGC) is fallacious.

Does the mainstream media ever investigate this odd discrepancy? Of course not, according to them gold is just a pet rock. Nobody cares about 2,500 tonnes of gold that have vanished into a black hole somewhere in China. Whilst, coincidentally, China is the second largest economy in the world that has stated the US dollar should be replaced as the world reserve currency. At the same time the global economy is still struggling to recover from the biggest financial crisis in recent history by printing money, which seems to do nothing more than buy time. But Western media refuse to connect the dots.” – Koos Jansen

Alrighty then. I connected the dots a long time ago, and that’s chronicled in the archives of this letter, the Review & Focus, and the Power Points of my presentations from 2010 on.

To recap. We’re seeing more currencies on the rally tracks this morning, but Chuck questions the intelligence of that, given that this afternoon the Fed’s FOMC Meeting Minutes will print, and if they aren’t hawkish, I would be surprised, but hawkish would mean the rate hike is truly on in the minds of traders, and that would push the dollar higher. But, no one ever confused currency traders with rocket scientists! Chuck found someone that’s more negative about Japan, the economy and the yen than he is! Wait till you see what this guy says where he sees yen trading going forward! Chuck also does the old reversaroo, with his thoughts on the Gold deposits earning interest. The “idea” is still novel, the devil in the details is what scares him.

For What’s It’s Worth. Yes, I’m fully aware that this marks two consecutive days for the FWIW section, but please don’t get too attached to it being here. I’ve just been lucky in finding things that tell a story that’s a bit different than my normal daily rants. So, this is short and sweet, but to set it up. Remember years before the Housing Meltdown, I wrote about how damaging it was going to be when the you know what hit the fan, due to home owners using their houses like ATM’s? Well, I have another one for you. this one come courtesy of Tony Sagami and his Connecting The Dots, which can be found on the Mauldin Economics website:

“Withdrawing money from your 401(k) before age 59 1/2 is one of the worst moves you can make. Not only do early withdrawals cost you a 10% penalty as well as additional income tax, they also put a giant dent in your retirement savings. That didn’t stop 30 million Americans from tapping their 401(k) in the last year.

Moreover, according to the Employee Benefit Research Institute (EBRI), another 21% of 401(k) savers have borrowed against their account with an average unpaid balance of $7,153.”

Chuck again. The Dave Clark 5 sang these words.. “Here we come again, Mmm.” Oh, and don’t look now but subprime loans have become the norm for car loans, according to Then I read this quote, that will send chills up your spine. “Studies show that subprime loans, which have been blamed for the country’s mortgage crisis, are growing at a staggering rate of more than 130% since the financial crisis.” YIKES! Somebody do something, Serenity NOW!

Before we head to the Big Finish today. Longtime readers know that both the Big Boss, Frank Trotter, and yours truly, Chuck, have pointed out the problems with the ideas and suggestions for countries, not just the U.S., by Paul Krugman over the years. He of the more stimulus is better, and more inflation is better, themes, haven’t found himself on my Hit Parade over the years. Well, as I said, he doesn’t just keep his thoughts confined to the U.S. and Krugman was a big opponent to the austerity programs that the Eurozone countries signed up for a few years ago. In particular, he singled out Ireland, and how their austerity programs would keep them from recovery and growth. And then there’s this from Ireland.

“Paul Krugman was clearly wrong about the Irish economy and the success of its austerity policies in pulling its economy out of a tailspin. That’s why it’s now time for the left-wing Nobel Laureate to man up and taste some of that bitter-tasting, austerity-spiced Irish crow.” You see, Ireland is not only rebounding but also growing and now has the business confidence to build new facilities for the first time in years. If you’re like me, and you believe in austerity programs, will cause pain in the beginning, but eventually you come out of it, much better off debt wise than you were before, and able, as a country or an individual to concentrate on growth and not debt servicing, then you’ve gotta love this story from Ireland!

Currencies today 11/18/15.American Style: A$ .7105, kiwi .6480, C$ .7515, euro 1.0660, sterling 1.5215, Swiss $ .9850, . European Style: rand 14.1805, krone 8.6320, SEK 8.7185, forint 291.70, zloty 3.9925, koruna 25.3520, RUB 64.75, yen 123.35, sing 1.4220, HKD 7.7510, INR 66.29, China 6.3796, pesos 16.71, BRL 3.7975, Dollar Index 99.53, Oil $41.38, 10-year 2.26%, Silver $14.17, Platinum $847.61, Palladium $544.05, and Gold. $1,070.14

That’s it for today. Well, our Blues proved last night that hockey is not a game that should be played on back-to-back nights, as they lost and looked very sluggish. And yes, I watched some of the game. Remember a couple of weeks ago, when I told you about the note that Delaney Grace had written to her uncles, and I said that she was so much like her mom? Well, Kathy found a note very similar to the one Delaney wrote, that was written by Dawn (her mom) when she was probably 6. Here it is. Dear Dad I Love you in T-Ball. Thack you for being coach. When I’m good I’m just doing my best. I thought you would like this. Dawn. and yes, she misspelled the word Thank. So, see? Just like her mom! I’m off to get a scan today to see what the tumor in my chest is doing. They can see the one in my mouth without a scan! I don’t particularly like getting lit up but they have to do what they have to do. So. I started writing an hour earlier this morning, and ended up pretty much an hour ahead of my normal time, so I’ll send this off, and wake up the reviewers. HA! Wake Up! Seals & Crofts are playing their song: We May Never Pass This Way Again. that was a big hit my Senior year in H.S. OK! Gotta go! But not without sending you wishes that you have a Wonderful Wednesday!

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