The Return Of The Big Dog?.

In This Issue.

* Euro and “euro-lites” rally.
* Rubles continue to really..
* Oil remains below $50.
* Ever heard of a Kondratieff Wave?.

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

Good day. And a Wonderful Wednesday to you! Well, we draw closer to the end of the month, and the end of the time that’s been given for a Budget to be produced here in the U.S. As I told you the other day, without one by Saturday, the U.S. Gov’t begins to get shutdown. That includes National Parks, etc. But, let’s not worry about that, or talk about that is what it sure seems the Gov’t / Congress is doing here, eh? In my best Alfred E. Newman impersonation. What, me worry? Jethro Tull greets me this morning with their song: Locomotion Breath. And Old Charley stole the handle, and the train it won’t stop going no it couldn’t slow down.

So far this morning, the currency market is fairly quiet. With the exception of rand, kiwi, and Aussie, all of the other major currencies are sitting on marginal losses while the price of gold is slightly higher. It looks like the markets are in a holding pattern at the moment and waiting to see what President Trump will bring us by way of his tax plan proposal. Data this morning is very limited, but we’ll see durable goods figures tomorrow and then Friday will bring us the widely anticipated release of 1st quarter GDP. We also have meetings and accompanying policy reviews by the Japanese and European Central Banks tomorrow and while there aren’t any unexpected developments on the table, investors will still be paying attention.

Alrighty then. Yesterday, in Germany, the Business Climate Index as measured by the think tank, IFO, printed for April, and printed better than expected climbing from 112.5 in March to 112.9 in April with the consensus at 112.4. So, a better than expected print here.. Expectations, which is a component of the index rose to 121.1 from 119.5, so it’s not just what’s going on now that has German Businesses optimistic, it’s also their expectations of the economy that’s strong. That’s a good thing folks, and once again, with Germany as the largest economy of the Eurozone, this is good overall for the Eurozone. And on a minor note, France’s March Unemployment rate dropped to 6% from 6.1% the previous month..

I’m getting a warm and fuzzy about what’s going on in the Eurozone these days, and I’m not so down on them like I have been. I sure hope European Central Bank (ECB) President, Mario Draghi, has some upbeat things to say about what’s going on there, which would send some love the euro’s way, from someone that has thrown the currency under the buss so many times in the past 3 years that I no longer can count them on both hands! All that negativity toward the euro from the ECB leader and that came after he pledged to do everything and anything to protect the euro. So much for words, right? As my dad taught me, when I first discussed a change of employment with him. “money talks, and B.S. walks, Chuck”.

The euro traded up and over the 1.09 handle on the economic news yesterday. and kept going higher as the day went on. It’s been the tale of two currencies this last couple of weeks. First we had the Japanese yen rallying strongly, and the euro weakening. Now they’ve switched places and the euro is the currency rallying strongly, and the Japanese yen is weakening. Yen traded up and beyond the 111 handle yesterday. and that’s not a good thing because it’s a European Priced currency, which means as the number on the price goes higher, the weaker the currency is, because it will take more of the currency to convert to a dollar. The euro did begin to fade a little at the end of our day, before traders turned their books over to their Asian partners, and the fade leads us to where the euro is trading this morning.

I have to say that long ago, in a faraway place, the euro was the Big Dog on the porch. Remember that? Nearly every day, here in the Pfennig I would talk about what the Big Dog was doing. I kind of feel good about talking about the Big Dog again. The Big Dog has really turned old though, and doesn’t get off the porch to chase the dollar down the street as much as it used to. And it is held back by a choker collar better known as negative rates and a bond buying program, which look to me like the collar is getting worn, and is ready to break! Now that would be a sight wouldn’t it? The Big Dog chasing the dollar once again. Hey! don’t laugh, it could happen, as the band Yes, sings.

I forgot to mention yesterday that the Indian rupee had started back up with their daily small moves stronger. Recall last week, I told you that the rupee had taken a pause for the cause, with the cause being that it didn’t want to get overheated. Well, it paused for the week, and on Monday it began to ratchet higher again. The Reserve Bank of India (RBI) recently kept rates unchanged, when it was thought they could cut them and that has helped underpin the rupee.

I told you yesterday that the Commodity Currencies were being dragged down by the Canadian dollar / loonie after the 20% tariff on exports of soft lumber to the U.S. was announced. And that selling of the Commodity Currencies remained in place most of the day on Wednesday, with the Aussie dollar (A$) attempting to fight back at one point. Jamie Saettele, is an FX analysis for Daily FX. He loves his charts and is one of the tech people I lean on from time to time. Jamie is my oldest son, Andrew’s age, and competed against Andrew in H.S. in swimming. The reason I bring him up right now, is that he sent out a note yesterday about the A$, saying that he believes the A$ is stuck in a trading range, and until it falls below .7310, which would be a 50% retracement level ) he’s not too excited about the trading range. So, there!

But, in reality, all these currencies are waiting for, is the shoe to drop on the dollar. And I continue to believe that by the end of summer, the U.S. economy will be begging for a rate cut, and when the Fed has to reverse their rate hikes, the dollar sees major selling. That’s my opinion, that I’ve stated several times now, and I could be wrong.

Yesterday saw a huge appreciation in the Chinese renminbi by the PBOC (Peoples Bank of China) and I saw it when I was checking the currency prices before I began to write, but then forgot about it when I did write! UGH! These senior moments are beginning to really frustrate me! But for those of you keeping score at home, the renminbi on Monday was 6.8883, and yesterday it has been moved to 6.8451. that’s a big one day appreciation for the PBOC, I guess they were celebrating that President Trump went after Canadian exports, with a tariff instead of Chinese exports! But then I got to thinking. Come on Chuck, you’ve not seen the PBOC do a sizeable appreciation like that in the past without crowing about it, so why on earth would you think this price is right? Ahhh, grasshoppers, good catch! Because the renminbi is right back to 6.88. must have been a bad piece of fruit for the guy that entered that price on the computer! HA!

Gold lost some more ground yesterday closing at $1,263.90, down from $1,272.20 close on Monday. I don’t know what the Gold Bullion traders are thinking these days. We have Iran, Syria, N. Korea, Afghanistan, and a few others that are powder kegs, just waiting for the fuse to be lit. You would think that Gold traders would know this, and therefore they would be bidding up the price of Gold ahead of any of these or other powder kegs explode.. For when it does, well, if it does, I mean to say, because I certainly am not wishing for that, but if it does, then it might be too late for the Gold traders because everyone could be rushing for the door at the same time.

And it’s not just Gold getting sold here as traders have come to the thought that everything is right on the night. The 10yr Treasury Yield is looking like 2.40% is its next stop. Japanese yen has really lost some ground, it’s just to eerie to me right now, sort of like what the great economist and early economist mentor of mine said about how the markets become complacent and then. A Minsky Moment arises.

The U.S Data Cupboard had a good number for those of you selling your homes, as the S&P/Corelogic/ CaseShiller Home Price Index increased 5.8% in February, the largest jump in the prices of new homes and existing homes sold that month, in 32 months! WOW! Well, let me say this. Obviously February was before the March rate hike by the Fed. But in the whole scheme of things I don’t think the Fed’s rate hike did anything to stop people from booking new home loans. There were two houses in my neighborhood that recently sold within a week, and very near the asking price. As opposed to last year, that saw a couple of houses here, sit awaiting to be sold for weeks. A quick check of mortgage rates yesterday and I saw that mortgage rates can still be had with a 3% handle. At some point, the people that want to buy will have bought. and then what happens to all the building going on?

Especially the multi-family units like condo units in Florida? I saw yesterday that condo unit sales in Miami are down considerably. Uh-oh. I also read that rents are sky high. now that’s a bad combination don’t you think?

Well, I was correct yesterday, when I said that I thought Consumer Confidence would slide a bit this month. The index fell from 124.9 to 120.6 March to April. But it’s still too high if you were to ask me! And I’m still ticked off that they don’t call me and ask me if I’m confident! They would get an earful, and it would be like being out on the Butler Patio!

And in my daily exercise to bring you information about the weakening economy here in the U.S. today, I have something a little different. First, have you ever heard of a Kondratieff Wave? Well, there’s a guy, Mike Burnick, who is the Director of the Edelson Institute, who’s an expert at reading this chart, that follows economic trends/cycles, and Burnick says that “right now, these cycles are saying that the era in which government could amass unpayable debts with impunity is coming to an end. And the cycle in which mankind pays the price for those debts will soon begin.” YIKES. Talk about doom and gloom! In addition, Burnick also points out that Kondratieff Wave is signaling an ever-weakening economy, soaring unemployment, skyrocketing interest rates, massive defaults on public and private debt and more.

And people thought that my discussions on the Butler Patio were doom and gloom! That fail in comparison! I’ll have to keep an eye on this Kondratieff Wave going forward because this guy claims that this chart ha predicted the stock crashes of 1987, 2000, 2008, and the rise and fall of Gold. Hmmm..

Before I head to the Big Finish today, I’m going to reminisce about something. Our local paper, the Post-Dispatch, sends out an email to subscribers each day, and they pull the headlines of some old story that ran in the paper. They have stuff that goes back to the 1800’s! But yesterday’s email caught my eye, because it was about the flooding of 1973. My mind immediately went back to that time, for I was a senior in H.S. and it was spring time, and every waterway was flooding in our area. I had graduated in January, but remained in school to take courses like cooking, and Home economics, fluff in other words. And that made me eligible to volunteer to help sandbag the River Des Peres that ran through the city’s south side. We were young and didn’t realize the dangers the floods brought, so we sandbagged, and had fun, never realizing that someone’s home would be destroyed if we didn’t build this sandbag wall.. .Years later, I moved to a little town on the river that floods nearly every years in the spring. A couple of years ago, it flooded in the winter, right after Christmas, and several houses in my neighborhood were damaged by the flood waters. It was then that I realized what a great thing I had done, along with my classmates, back in 1973.

To recap. the euro continued to climb higher yesterday, but faded a bit as the books were handed over to Asia.. Gold lost ground again. What are these Gold traders thinking? The Indian rupee got back on the rally tracks after taking a pause for the cause last week, to keep the currency from overheating, and the Commodity Currencies continued to take one in the mid-section from the announcement of a 20% tariff on Canadian soft lumber exports to the U.S. that was made Monday night.

For What it’s Worth. I found this on MarketWatch and thought since I carried on and on about Gold this morning that it would be a good offset. The article can be found here:

Or, here’s your snippet. “Gold is positive on the year, but maybe not as much as some investors expected given the abundance of economic and political uncertainty that usually feeds a rally in prices for the metal.

Year to date, gold futures GCM7, -0.21% have climbed just shy of 10%, and remain up around 1.2% month to date. But the commodity so far has failed to top a key technical barrier at $1,300 an ounce-a level last seen in early November 2016. It has been a rough week so far for gold, with prices down about 1.7% so far.

Gold’s more tempered price rise, however, is actually encouraging, and points to a more sustainable rally for gold, according to George Milling-Stanley, head of gold investment strategy at State Street Global Advisors.

Three months ago, he forecast that gold, which has long traded in the range of $1,050 to $1,350, could test the high end of that range and possibly break through it this year.

But he now offers a slightly better forecast. “By the end of the year or early next year, I believe gold could test the high end of the range of $1,350 to $1,400,” he told MarketWatch.”

Chuck again. in the article the analyst also talks about why Gold is having such a difficult time reaching the $1,300 level. and I agree with him as he said that it’s not unusual to be loved by anyone. No wait! What the heck is Tom Jones doing in the middle of the Pfennig? What I’m trying to say here, if Mr. Jones can wait, it’s not unusual for financial markets to spend some time forming a new base before taking off. Now, what was it you wanted to say Mr. Jones? HA!

Currencies today 4/26/17. American Style: A$ .7484, kiwi .6894, C$ .7361, euro 1.0893, sterling 1.2831, Swiss $1.0056 . European Style: rand 13.2261, krone 8.5771, SEK 8.7731, forint 286.41, zloty 3.8783, koruna 24.701, RUB 56.6755, yen 111.30, sing 1.3955, HKD 7.7804, INR 64.1150, China 6.8845, peso 18.94, BRL 3.1476, Dollar Index 99.053, Oil $49.25, 10yr 2.33%, Silver $17.57, Platinum $950.75, Palladium $798.95, Gold $1,264.14

That’s it for today. I was all discombobulated yesterday morning I think I was told to show up at the hospital at 6:30am on Tuesday, but when I arrived there, they informed me I was not to be there until 6:30am on Wednesday! UGH! And the hospital parking lot was all torn up being resurfaced, and I had to park, what seemed to be, a mile (for me) away. UGH! So, I had to lean on Mike Meyer again today to help me get this out.. Thanks Mike! I can feel that something BIG is going to happen soon. My spider sense is tingling again, so let’s get ready for that, eh? Another beautiful day here in St. Louis yesterday. Spring is here, the sky is blue, birds will sing, as if they knew. Today’s the day, we’ll say I do, and we’ll never be lonely anymore. I bet you won’t be able to get that melody out of your head today! I was thinking about Tim Smith getting married on Saturday, and then there I was, going to the Chapel of Love. My beloved Cardinals can’t stand prosperity, and after a 3-game win streak, they lost in extra innings last night to the Blue Jays. UGH! The Gin Blossoms take us to the finish line today with their song: Hey Jealousy. I hope you have a Wonderful Wednesday, and Be Good To Yourself!

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