Spin Doctors At Work!

In This Issue.

* A mixed bag-o-nuts day for currencies.
* Gold backs off for a day.
* Singapore’s NODX soars again!.
* Chuck goes bananas on Debt!

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

Good Day. And a Tom Terrific Tuesday to you! I’m late, I’m late! I’m very late today, and I have a very good excuse! I think it’s even better than the excuse: The dog ate my homework! I should have warned you yesterday, but the whole thing escaped my mind. I had to go to a sleep lab last night for a sleep study. Yes, on top of all the other things I have going for me these days, my wife ratted me out, and told the doctor I had sleep apnea.. Just kidding, they could tell when I was in the hospital last month, because my heart would stop for a few seconds during the night, and when this happened more than once a night, they said, go see the sleep doctor.. I’m reminded of an old Chris Rock skit, where he tells people what NOT to do when pulled over by the police. One of them was don’t be arguing with your wife. So, when the sleep doctor asked if I thought I had sleep apnea, Kathy said, “he’s had it for 10 years!” HAHAHAHAHA! Elvin Bishop greets me this morning with his song: Traveling Shoes.

Well, The euro is a bit stronger this morning, the yen still is well bid, and the Russian ruble is within spittin’ distance of the going below the 56 handle. The Aussie dollar (A$) didn’t fare too well last night, but its kissin’ cousin across the Tasman, kiwi, did. The U.K. PM announced surprise elections for June regarding BREXIT (I guess she wants to make sure everyone is cool with it) and the pound rallied. Gold backed off a few bucks, and Oil slid in price but the Petrol Currencies rallied. It’s a mixed up day for sure, and with the Geopolitical Tensions (GT) still on everyone’s minds, things just aren’t normal.

So, let’s start with the A$… (you know, alphabetical order!) So, the A$ finally saw some selling last night, after about a two week run to higher ground. Investor Sentiment was not good, and add to that the fact the iron ore prices have been slipping, and the A$ saw the gains it made the previous day when China’s economic reports were stronger than expected, got wiped out.. UGH! The Reserve Bank of Australia’s (RBA) meeting minutes printed last night, but I don’t think they contributed to the selling of the A$, as the minutes said nothing new, and if anything confirmed the “hold status” for rates going forward.

As I said above, kiwi, is stronger though this morning. It will be a telling day for kiwi though, as the Global Dairy Trade Auction will take place today. I’ve long told you that New Zealand has three major exports. Dairy, wool, and lumber.. So, how dairy prices are set are very important to New Zealand.

So, the U.K. Prime Minister, Theresa May, said she would call for an early election in June on the 8th, to see if she would win more leeway in the upcoming negotiations with the European Union (EU). I guess Ms. May believes she can win even more approval to leave the EU, and that would give her more freedom in her negotiations with the EU.. I really think this could backfire on her, but the markets seem to like it, as the pound has rallied above the 1.26 figure..

Come one, Come all, to the Global Growth Tent Revival! That’s what I would imagine the folks in Singapore were saying last night, as their NODX (non-domestic oil exports) printed a very strong March number, rising 16.5% year on year! WOW! And I thought the February print of 21.2% was probably a flash in the pan! But that’s not to be, eh? Singapore’s NODX is cooking with gas and that has to be a good sign for the Global Growth Tent Revival!

Here in the U.S. U.S. Treasury Sec. Mnuchin, decided to attempt to wrap a tourniquet around the bleeding that his boss caused last week when the President said that the dollar was too strong. Mnuchin said that Trump’s latest comment about the strength of the dollar was about the short term, and that over long periods of time, dollar strength is good.. Hmmm, can you say spin doctors? I knew you could! And not the Spin Doctors that sang; Little Miss Can’t Be Wrong, HA! No, this is a spin doctor that spins what someone has said, to have it come out differently. I don’t think the markets were swayed by Mnuchin’ s comments, but they’re out there anyway.

A couple of years ago, Frank gave the initial presentation on the history of currencies, and why, the ones that collapsed, and were not overtaken in war, collapsed. In one word, it’s DEBT.. I gave this presentation a couple of times myself, and really tried to emphasize the fact that when a country accumulates so much debt, they have to issue currency to go along, and the simple fact of “too much of something is not a good thing” comes to fruition. Well, I was reading yesterday, and came across a report by the Congressional Budget Office (The CBO), and guess what they had to say about the debt here in the U.S.? Well, this isn’t a pretty sight, folks, so sit down to read this. The CBO says that the Government Debt to GDP ratio will double over the next 30 years. For those of you keeping score at home the current Debt to GDP ratio is 104.78%… The CBO, which has never really been on board with, Government’s “debt doesn’t matter” stuff, and they went on to say that, “t
he prospect of such large and growing debt poses substantial risks for the nation ” You think? A 208% Debt to GDP ratio might finally wake up the echoes! The former director of the CBO called the U.S. debt: “A serial horror story in which the greatest economic power ever to grace the globe sails directly into self-inflicted crisis, suffering and decline.”

Publishing gurus, Bill Bonner and Addison Wiggin, covered this in their bestselling book, Empire of Debt, in which they talk about how every superpower in the history of the world, eventually collapses from the weight of debt..

Long ago, when I began writing the Pfennig for EverBank, I concentrated a lot on the growing debt in the U.S. I used to bang the drum loudly for the $575 Billion deficits that the Bush Administration started gathering, then along came the next administration and their $1.4 Trillion deficits, and now we’re back to $575 Billion, and everyone is happy that they are no longer $1.4 Trillion, as if everything will be right on the night! Not So! The U.S. Debt Clock, (www.usdebtclock.org ) tells me that in 2021, just 4 short High School years from now, the U.S. Debt will be $22.5 Trillion.. Just for a moment, think about how many Treasuries will have to be issued to finance the debt, and the interest that has to be paid on the debt. IF interest rates remain low, the interest alone will be $2.7 Trillion each year. But if interest rates eventually return to the norm? As the Great Mogambo Guru says, “We’re freakin doomed”!

So, what’s the big deal I hear some of you saying, we’ve got plenty of time to correct this direction we’re headed, and even if we don’t correct it, we’ve got plenty of time before we have to worry about the value of the dollar. Ahhh grasshopper. things won’t be that cut and dried for you. Things, in my opinion, which could be wrong, could very easily begin to unravel long before we reach 208% Debt to GDP ratio. And that’s why I continue to harp and always will, about how investors need to diversify their dollar denominated portfolios, with currencies and metals. Why would you put off to tomorrow what should be done today?

And that ends today’s public service announcement. You can come out from under your desks now, the air raid test is over. I’m just shocked, no wait, I’m not shocked, I’m disgusted, that the major news outlets don’t cover this news. I guess it’s more important that they show us a baby giraffe born, or what Miley Cyrus is up to these days. UGH! If I ran a news outlet, there would be a 5-minute section each night on real economic news. Then sports, then the weather, then everything else!

Gold slipped by $3.80 yesterday, no big shakes, but a pause in its recent run of good performance days. But like I said above, the GT’s continue to be on everyone’s minds, so I doubt this will be multiple down days for Gold. Especially when you hear stuff like that we are on track to see $6 Billion of bond defaults here in the U.S. this year. That report was issued by the ratings agency, Fitch, after Payless Shoe Source filed for bankruptcy..

Just another sign that the economy is weakening folks, and the Fed is hiking rates into the weakening economy, almost in defiance, it looks to me. But then I’m just a country bumpkin.

The U.S. Data Cupboard today has two real pieces of Economic Data. Industrial Production and Capacity Utilization both for March.. Both should reveal that the economy has a pulse, but not much of one.. We’ll also see Housing Starts and Building Permits, again both for March.. Nothing to see here, move along.

To recap. It’s a mixed bag-o-nuts day with the currencies, as the euro, yen, sterling, rubles, real, krone and sing are on the plus side VS the dollar today, and the A$, rand, rupee, and a few others are on the minus side VS the dollar today. All have their reasons for the move, except the Petrol Currencies who are on the rally tracks even though the price of Oil has slipped again. Gold gave up a few bucks of gains yesterday, no biggie, and Chuck doesn’t think it will continue. Chuck also goes bananas on debt here in the U.S. you won’t want to have missed that!

For What It’s Worth. Well, yesterday I spent a lot of time pointing out that the data is pointing to the U.S. economy weakening, while the U.S. Fed is hiking rates. A bad combination if you ask me. So, then I came across this website, that dear reader Bob sent me, and once again, if this is not a sign of the times, then I’m a monkey’s uncle! It’s about the brick and mortar stores closing, and can be found here: http://www.nbcwashington.com/entertainment/the-scene/Retail-Stores-Taking-Hits-Hundreds-of-Locations-Close-419089074.html

Or, here’s your snippet: “For the retail industry’s brick-and-mortar stores, the realities of online shopping and changing tastes have driven down sales, causing hundreds of locations to close their doors.

So what’s the status of the stores making headlines these days? Here’s a quick guide:

Abercrombie & Fitch: The preppy classic clothing store is closing 60 U.S. stores during the 2017 fiscal year as leases expire, CNBC reported. This follows the closing of 53 domestic shops last year and likely won’t be the end of it. The company has more than 700 locations, and half of them have leases that will be up for renewal by the end of fiscal 2018, lending the option to more closings.

Aeropostale: The teen clothing store filed for Chapter 11 bankruptcy in May 2016 after losing money for 13 consecutive quarters. They announced the closing of 154 of its approximately 800 locations, with 113 closings in the U.S. and all 41 Canadian locations closing. In a negotiating fight that lasted into fall 2016, the company was able to save 504 stores and keep them operating, saving 26 percent more stores than it had initially projected would stay open.”

Chuck again. And then the list goes on and on and on, in alphabetical order, so you can see if your favorite brick and mortar store is on the list. I know, I know, online shopping is the cat’s meow now, but. what happens to all the jobs in these stores, and the people who clean the stores, and the people who deliver things to these stores, and so on?

Currencies today 4/18/17. American Style: A$ .7548, kiwi .7035, C$ .7494, euro 1.0675, sterling 1.2668, Swiss $.9986, . European Style: rand 13.3480, krone 8.5338, SEK 8.9852, forint 292.52, zloty 3.9648, koruna 25.0590, RUB 56.09, yen 108.90, sing 1.3980, HKD 7.7736, INR 66.63, China 6.8815, peso 18.53, BRL 3.1278, Dollar Index 100.07, Oil $52.18, 10yr 2.23%, Silver $18.60, Platinum $978.35, Palladium $797.63, Gold $1,288.16, and SGE Gold. $1,292.97

That’s it for today. Well, I have to say that the sleep study was weird. I’m sure lots of you have gone through that, and have the CPAP machine / mask now. I’m sure one of those is in my future! The technician at the sleep lab told me “What you’re doing is not sleeping”. So there! Cardinals finally win a game, stopping their losing streak last night. I have tickets, compliments of the EverBank people here in St. Louis, to tomorrow’s day game! They all know how much I love day games! Maroon 5 take us to the finish line today with their song: She Will Be Loved.. And with that, I know I’m very late, but like I said, I have a very good excuse today, that even beats, the wind blew my homework away as I walked to school today! I hope you have a Tom Terrific Tuesday, and Be Good To Yourself!

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