Good Day. And a Happy Friday to one and all! Well, here we go! The end of a long week, but a good week for the currencies, and not so much for Gold. This morning after all is said and done, I’ll take Kathy to the airport, so she can return home for 2 weeks. She just can’t be away from the grandkids this long. So, I’ll be here all by myself. That means lots of pizza in store for Chuck! I plan on grilling some steaks tonight though, so that will take care of two nights of dinners! Or, Chuck, what are you thinking about? Steak and eggs, yes! That’s the ticket! Look at me being silly already this morning! Come on Chuck, get a grip on what’s important to these dear readers! The Band Missouri greets me this morning with their song: Movin’ On. a great highway driving song for sure!

Well, the daily grind higher for the currencies this week, came to a halt yesterday.. The dollar bounced but it wasn’t a super ball bounce, just a bounce higher as the U.S. stock market seems to be a strong magnet for investors now that it has reached the psychological level of 20,000. Investors are selling just about every other asset they own, to buy more stocks. Gold got whacked yesterday, marking 3 consecutive days of trips to the woodshed for the shiny metal, bonds got sold and the 10-year Treasury is back above 2.50% (as the yield rises, the price of the bond goes down), and the euro finally got out of the mud, and dropped below 1.07, while yen was the biggest loser.

Can this continue? This swap out of just about every other asset to buy stocks? Didn’t I just talk yesterday about how trees don’t grow to the moon? But they will continue to grow until, well.. they don’t. And that’s what’s going to happen here, I do believe, although I’m not even your last choice for a stock jockey. I did however start out in a brokerage house in 1973. Ran a margin dept. for a large regional firm, was the asst. cashier (operations mgr.) of another regional, and then started EverTrade Direct Brokerage. So, I’ve been around stocks for quite a few years, and have seen patterns, etc. But I don’t know any more about this stock rally than the next guy, so take what I say here with a grain of salt..

Today, we finally see some real economic data here in the U.S. and next Wednesday is the first FOMC meeting of 2017. Will the Fed be proactive, and hike rates again at this meeting, which would mark two consecutive meetings with rate hikes? Or, will they keep with the plan that the markets believe is on the docket for the Fed, and that’s to wait until their March meeting to hike rates again? I tend to lean (I do that anyway, because when they put my right leg back together with the prosthesis it was 3/4’s of an inch longer than my left leg!) to the wait till March option here, but if the Fed Chair, Janet Yellen says what I think she’ll say following the meeting next week, it’ll be just like she just hiked rates.

Wait? What are you saying, Chuck? Well, I think that Yellen will want to grease the tracks for the March rate hike, and in doing so, she’ll sound so convincing that the U.S. economy is in need of a rate hike that the markets will jump ahead of the race like the Sooners of years ago, and start buying the rumor.

But that’s next week! We’ve got today, and a weekend to get through before we begin to worry about next week!

The price of Oil remained well bid above $53 in the past 24 hours, so that was one of the anti-dollar assets to keep its gains and not succumb to the pull of U.S. stocks. The U.S. stocks pull is so strong right now, that even a well bid Oil price can’t overcome, and the Petrol Currencies are all weaker this morning, led by the Russian ruble.

Speaking of the Russian ruble. The Russian Ministry of Finance (MOF) announced a new FX (currency) intervention rule last night. Here’s the skinny on this: the Ministry of Finance announced that it will purchase FX on the market when the oil price is above US$40/barrel and sell FX when it is below US$40, starting from February 2017. The new FX intervention mechanism is introduced together with the government’s decision not to spend extra oil and gas revenues, but to narrow the deficit and preserve the Reserve Fund. So, while I don’t particularly like intervention in currencies, except the normal evening out of trade flow where currency needs to get bought or sold, I do believe this will be positive for the ruble going forward. For.. maybe, just maybe, FX traders’ reliance on the Oil price to give them direction on either buying or selling the ruble each day, will get put to the side for they will know what the deal is ahead of time. Traders love to “know” and totally dislike “unknowns”.

I mentioned above that the Japanese yen was the worst performer overnight. Seems that not only did yen have to deal with the U.S. stocks pull, but also the news that came from the Bank of Japan (BOJ) regarding bond buying. The BOJ emphasized that they are not yet prepared to slow down their bond buying, which would lift their target for yields. This news disappointed the markets and traders, so yen got sold on top of the selling already in place from the U.S.

Swiss francs held onto parity with the dollar, by the skin of its teeth, but held on nonetheless! I was reading a research report from a currency dealer that talked about how the Swiss franc could end up being the beneficiary of a new Homeland Investment Act (HIA). So, how many of you recall the last time the U.S. implemented this HIA-tax amnesty? Basically, this Act allows U.S. corporations doing business overseas to repatriate their retained earnings held in the country they’re doing business in at a reduced tax rate.

In 2005, the U.S. implemented this HIA-tax, and it really broke up the weak dollar trend for one year, but once the expiration date on the tax came about (12/31/05) , the dollar went right back into the underlying weak dollar trend. I recall being at the Orlando Money Show in early February 2006, and telling people that the “props” for the dollar had been removed, and it would return to the weak trend, for the fundamental reasons the dollar went into the weak trend (debt) had not gotten better, but turned worse!

Wall Street Journal (WSJ) writer, Craig Karmin, was present at that presentation and devoted a whole chapter of his book; Biograph of the Dollar, which can still be purchased on Amazon or any of the other online book sites, to talking about me, and how I was out front of the crowd calling for the weak dollar trend in 2002, and again now in 2006, after the dollar looked like it could have a multi-year run in 2005.

Things were going my way back in 2006. In the years leading up to 2006, I had two different WSJ writers highlight EverBank World Markets and me and the Pfennig, a chapter in a book, and I was asked to write the forward on Addison Wiggin’s book : Demise of the Dollar, look here: https://www.amazon.com/s/ref=nb_sb_ss_i_1_24?url=search-alias%3Daps&field-keywords=the+demise+of+the+dollar&sprefix=The+Demise+of+the+dollar%2Caps%2C237&crid=1Y074KC0TREUB

Pretty cool, eh? In 2006, I spoke 35 times. That was doing some traveling folks! But I had to get the word out that 2005, was just a “break in the weak dollar trend” and that it was time to get back in or buy some more! And then 2007 happened. And my world came crashing down on top of me, as I was diagnosed with Stage 4 metastasis renal cell carcinoma. cancer.. And I can’t begin to tell you how everything from my home life to my work life changed.

So, I know you didn’t come to the letter today to hear all about my journey in 2005 -2007, but once I got talking about the HIA-tax, my memories just came flooding through, and well, then we had the Ted Mack, Chuck hour! HA! But anyway, I’m not sure I agree with the currency research provided to me by a dealer, talking about how francs could benefit from the HIA-Tax, because in 2005, there wasn’t one currency that was able to remain well bid. And a new HIA-Tax is being discussed by the new administration.

But this would go against all that new President, Trump wants to do, for a HIA-Tax would drive the value of the dollar higher, until the expiration date of the Tax. And I’ve said this before, but let me say it again, I truly believe that a weaker dollar allows Trump to do most of the things he’s stated that he wants to get accomplished. So, it’s a chatch-22. He wants the HIA-Tax to help the economy (as if it would. I see these corporations taking these repatriated earnings and buying their corporations’ stock, instead of buying new equipment, etc. ) but doing so, would drive the dollar higher, which doesn’t help his other plans.

Boy I spent some time on this proposed HIA-Tax, eh? You know, I also wrote chapter of the book “The Little Book of the Shrinking Dollar” Also written by Addison Wiggin. All these books will be in favor again, when the strong dollar trend that we are in right now, ends. There’s a HUGE Tug-o-war going on with analysts on one side calling for continued dollar strength, and analysts on the other side calling for a crashing dollar. You, dear reader, pretty much know what side of the rope I’m going to lend a hand to, right?

So, thinking back to all the times I spoke on behalf of EverBank, and all the Pfennigs, and Review & focus letters I’ve written that promote EverBank products, and the weekly videos I used to do, TV appearances, radio interviews, and the list goes on, I guess I had something that people wanted to hear, or read about, eh?

Well, Gold got whacked again yesterday, marking 3 consecutive days of being taken to the woodshed. Yesterday it lost $12.40 and closed well below the $1,200 figure.. A week ago, I was kind of thinking that Gold had seen the last time it would fall below $1,200 figure for a while. Good thing I didn’t say what was on my mind then, eh? HA! I guess I can give as asset the kiss of death even when I just think about it! UGH!

The U.S. Data Cupboard yesterday had some data, not real economic data, but some data nonetheless, so let’s go take a look.. First, we had the Trade Balance, which was a deficit, of course, and it beat the expectations by printing at $65.7 Trillion VS the $65 Trillion expected. And it widened from the previous month’s $65.3 Billion. I don’t think I have to say this but I will, as long as the dollar remains strong, the Trade Deficit is going to print numbers like this, and that is not a good thing, folks. We also saw New Homes Sales for December, and they kicked tail, beating the expectations by a wide margin, and probably only represented about 1/2 of the month, given the rate hike by the Fed in the 3rd week of the month. Leading Indicators were supposed to print, but I never saw the data print yesterday.

Today’s Data Cupboard is the long anticipated first print of 4th QTR GDP, which is expected to print at 2.5%… Somehow I just don’t see how that works, given we didn’t really see strong retail sales in the 4th QTR, and the net exports were awful, but who knows what hedonic adjustments will be made to this data? Any-old-way, here’s how I look at this.. 4th QTR GDP will be weaker than the 3rd QTR GDP, which miraculously ended up 3.5%, and when all the revisions to 4th QTR GDP get made, we’ll see that the total annual GDP for 2016 was just 1.6% or somewhere near that. That’s downright awful folks! For the U.S. to print annualized GDP at 1.6% 8 years after the end of the Great Recession? Give me a break here! But looking at the economy like this, isn’t going to change the Fed members’ minds about hiking rates in two weeks!

We’ll also see two pieces of real economic data in Durable Goods and Capital Goods orders for December. Both of these were mostly negative last year, but should begin to climb out of that rabbit’s hole, we’ll just have to see how high they climb. And finally, Consumer Confident, which they now call Consumer Sentiment will print, and I’m sure it will be off to the moon, given the stock market performance!

To recap. The dollar finally broke the trance it was in yesterday, as the pull from the U.S. stocks has just about every other asset that’s not stocks, heading to the woodshed. Yen was the worst performer as the stock pull and a BOJ statement about not yet ready to limit bond buying and drive up yields, drove yen down. And the euro finally got out of the mud of 1.0740, and fell below the 1.07 figure. Gold got whacked for a 3rd consecutive day, and doesn’t look like it has the strength to compete with the stocks right now. But Chuck thinks that could all change. The price of Oil remained well bid above $53 but the Petrol Currencies could not rally due to the tractor / I mean stock pull.

For What it’s Worth. There are tons of articles out there that would fit here today, but in order to keep this flowing smoothly today, I picked this one it’s not too wild and crazy! It’s about Gold Exports into China for 2016, and can be found here: https://www.bloomberg.com/news/articles/2017-01-26/china-s-gold-imports-from-hong-kong-rise-as-lunar-new-year-looms

Or, here’s your snippet: ”
Swiss gold exports to China rose more than 400% in December

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Exports from Hong Kong also gained, limiting annual decline

Gold exports to China soared in the run-up to the start of the Lunar New Year, with volumes increasing in December from major suppliers Switzerland and Hong Kong.

More gold was sent from Swiss refiners to the world’s top consumer than in any month since at least January 2014, according to data on the website of the Swiss Federal Customs Administration, while imports from the Asian city-state also increased compared with November.

China is the world’s top gold consumer, according to data from researcher Metals Focus Ltd., and the start of the Year of the Rooster this week is associated with gifting the precious metal. Lower prices at the end of last year, brought on by a stronger dollar as the U.S. increased interest rates, supported demand.”

Chuck again. Just another brick in the wall. or in China’s case, just another step to being a financial center of the world with all their Gold.

Currencies today 1/27/17. American Style: A$ .7530, kiwi .7248, C$ .7625, euro 1.0685, sterling 1.2532, Swiss $1.005, . European Style: rand 13.3611, krone 8.3660, SEK 8.8462, forint 291.88, zloty 4.0650, koruna 25.30, RUB 59.93, yen 115.65, sing 1.4269, HKD 7.7587, INR 68.07, China 6.8791, peso 21.20, BRL 3.1732, Dollar Index 100.53, Oil $53.67, 10-year 2.51%, Silver $16.79, Platinum $976, Palladium $772, Gold $1,188.30 and SGE Gold $1,209.93

That’s it for today. Well, this weekend will see two of my long time colleagues celebrate their birthdays. Chris Gaffney tomorrow, and our little Christine on Sunday. Happy Birthday to you two! Both of these birthday kids started working for me when they were much younger, funny how they got older but I didn’t, eh? HAHAHAHAHA! Our Blues went right back in the tank last night in Minnesnowta. UGH! I bet the team is glad January is about over, for it has been one of the worst months ever for the team! I’ve been remiss in not thanking the team that got the EverBank hats out to the 10-year plus Pfennig Readers. Michelle Boschert, Nikki Storm, Danielle Goodman, and I’m sure I missed someone, so forgive me, but these ladies took the bull by the horns and got them out! And I’ve heard nothing but good comments from those that received the hats. (They’ll be a collectors’ item soon, right? ) the late great Leon Russell takes us to the finish line today with his song: Back To The Island. (I love that song!) Now, let’s go out and make this a Fantastico Friday! And Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts
1-800-926-4922
https://www.everbank.com