Traders Don’t Think Trump’s TRP Will Pass.

In This Issue.

* Rupees and pounds rally.
* kiwi is worst performer overnight!..
* Oil remains below $50.
* What’s Fannie thinking?


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

Good day. And a Tub Thumpin’ Thursday to you! I finally got my bearings straight yesterday, and showed up at the hospital on the right day for my scan. It all went like clockwork, as I was the first scan of the day, so no backup, etc., and I was back home in no time. I said to myself, see, Chuck what happens when you show up on the right day! Our Blues got off to a rough start last night. UGH! And Pink Floyd greets me this morning with their great song: Comfortably Numb.

Well, the dollar fought back yesterday, that is until the President announced his Tax Reform Plan (TRP) Early in the day, the euro had fallen from 1.0940 to well under the 1.09 figure, but as the TFP was laid out, the dollar lost some footing, and the euro rallied back over 1.09. This TRP is going to be a tough sell to the fiscal conservative group of lawmakers, as it pushes the envelope with the National Debt. I won’t get into the details of the TRP, but if it increases the National Debt over and above what we already add to it each year, then I don’t see the TRP going anywhere as it is. I will say this though. On Monday this week, I talked about Tax Freedom Day (TFD) and pointed out the high taxing states that won’t see TFD until May.. Well, the TRP would repeal a piece of the tax code that allows individuals to deduct the state and local taxes they pay from their reportable income. That would be especially difficult for the residents of high-tax states such as New York, New Jersey, Massachusetts, and California.. (for disclosure purposes I got some of this stuff from the WSJ)

But that was yesterday, and overnight, once again, the dollar fought back. I guess, the initial reaction to the TRP was to sell the dollar, and once everyone saw what was in it, and how difficult it would be to get through Congress, they bought the dollar back.. And this morning the euro has dropped, once again, below the 1.09 figure. And for those of you keeping score at home, the Indian rupee is the best performer overnight, and kiwi is the worst performer overnight. Kiwi’s drop is a real mystery to me, as just last week, 1st QTR CPI showed inflation rising above the Reserve Bank of New Zealand’s (RBNZ) target rate of 2%, as it rose to 2.1%, this should have set off the rate hike alarms, whistles, bells and flashing lights, but it didn’t, and kiwi was lost over 2-cents since that report printed. UGH!

Kiwi’s kissin’ cousin across the Tasman, the Aussie dollar (A$) has slipped too in the past week, but not like kiwi.. And the only thing I can find about this drop in kiwi is the information I told you about a couple of days ago, when the 20% tariff was announced on Canadian soft wood exports to the U.S. Can this tariff on just $5 Billion worth of business between Canada and the U.S. really be the reason that kiwi, and to a further extent, the A$, continue to get sold, two days after the announcement? I guess the answer to that question is a BIG FAT Yes! UGH!

OK, let’s move on to some happy news, which is the Indian rupee, which rallied again last night and one point had traded below the 64 figure to 63.93, which was a 20-month high for the rupee. Some profit taking by Big Banks in India who sold dollars early in the trading session, brought the rupee back above 64 as we start the day, but I don’t see it staying there too long. There are rumors going around that Canadian Banks are selling loonies and buying rupees for their investment clients. And that the same thing could be going on in Australia and New Zealand.. Now, don’t get me wrong here, this isn’t nearly the same scenario as the one I’m about to talk about, but it does have similarities.

Back “in the day” when interest rates were high in Australia and New Zealand, Japanese investors, known then as Japanese housewives, would sell yen and buy the higher yielding Antipodean currencies of Aussie and New Zealand. The flows out of Japan and into these countries were HUGE. Well, could we be seeing a new kind of “Japanese Housewife” trading going on here? We very well could, but then I told you above that these were rumors, I haven’t found anything confirming the rumors, yet. But there’s smoke, and remember what I’ve always told you, where there’s smoke, there’s fire.

The price of Oil remains below $50, and is on the verge of slipping below $49 this morning. It’s all about supply, folks. Too much supply, but that won’t last long, as the U.S. producers will begin to slow down again, now that the price of Oil has slipped from the $55-ish range it was earlier this year.. And the poor loonie is getting hit on both sides. on the left from the tariff news, and on the right from the drop in the price of Oil again. And the Russian ruble, keeps bouncing around 56, as traders don’t know what to do with the currency that is so dependent on the price of Oil, but is looking much better economically outside of Oil, and the interest rate being the highest in the Industrialized World, doesn’t hurt the ruble any at all! Yesterday, the ruble traded with a 55 handle, and this morning it has slipped to 56.48.

The British pound sterling (pound) has rallied to 1.29 this morning, as a meeting last night between U.K. PM May, and the President of the European Commission Juncker, led to traders thinking that May got her thoughts expressed and Juncker didn’t, as May was filmed laughing in the corridor of #10 (the PM’s residence) and Juncker was seen leaving an hour and a half later looking very stone-faced. Traders took this as a sign, that May got her way, and that led to them pushing the pound higher on the night. The pound hasn’t been this high since September of last year, and then it going in the opposite direction!

See, how ridiculous these traders have become? What happened to fundamentals driving a currency’s value? Is this country’s fundamentals better than the U.S.’s fundamentals, and if so, then this currency should be bought. Those were the days my friend, we thought they’d never end, we’d sing and dance forever and a day. We’d live the life we choose, we’d fight and never lose, those were the days, oh yes, those were the days.

One of these days, true fundamentals will return to the forefront in valuing currencies and “sentiment” will be a thing of the past.. .At least that’s what I hope happens, and in reality, I don’t see any other way for things to get back to normal. But then there are those pundits out there that don’t think we’ll ever get back to “normal” again. I certainly hope that isn’t the case, but I guess we’ll cross that bridge when we get there, eh?

The U.S. Data Cupboard finally gets some real economic data today to show us with the March prints of Durable and Capital Goods Orders.. I expect both to be disappointing. We’ll also see the size of the Trade Deficit, formally called the Trade Balance, but we all know it’s going to be a deficit, as it has been since I began writing 25 years ago! The last time the U.S. had a Trade Surplus was 1975. WOW! I knew it has been a long time, but when I looked it up this morning, it was 1975. Jaws was the number one movie. The inflation rate was 9.2% (back when before we started adding hedonic adjustments!) A gallon of gas cost 44-cents, the average cost of a new car was $4,250. NYC almost had to file bankruptcy, before president Ford, gave them a loan. And Jimmy Hoffa was last seen. That was 42 years ago folks. do you recall these things? Probably. but did you recall that the last time we had a Trade Surplus was 1975? I sure didn’t.

Well, Gold was able to carve out a $5 gain yesterday, closing at $1,269, on the day. Ed Steer tells me that 224,000 contracts were traded, once gain blowing out the normal volume for a day. But the shiny metal has started today down nearly $4 bucks. UGH! So, almost back to where we started yesterday. The TRP is getting the blame for the selling of Gold this morning. In the end, currency and metals traders are telling the White House that they don’t believe they get this TRP passed through Congress, so they aren’t going to be fooled into thinking the National Debt is going to rise any faster than it is right now. Strange way of thinking about the debt, but then that’s traders, and I’ve always told you that they were fickle!

Speaking of the National Debt. a quick look at the U.S. Debt Clock app on my iPhone tells me that the U.S. National Debt is $19.899 Trillion this morning, and not having any difficulty maneuvering through to the $20 Trillion mark. And this brings me to the FWIW today. You won’t believe what the Gov’t is doing now. Or maybe you will because after 2008, nothing’s sacred any longer, eh?

Before I head to the Big Finish I wanted to point out a couple of categories on the Debt Clock that you can find here: OK. the first item is the total debt per citizen, so in other words, if Americans would self-finance the debt. Our piece of the debt would be $211,464.. And per family it would be $828,607. Ok, the Bill Gates, and Jeff Bezos of the world can write a check for that amount.. .Can you? Well, I could write one, I don’t know how far it would go. And here’s something that I used to point out in my presentations. Each year, the U.S. posts its Budget Deficit. But they don’t count all the beans in the stack! And that the actual Budget Deficit was much larger than reported. You see the Gov’t doesn’t use the same accounting rules that they demand all corporations use. I don’t make this stuff up folks! So, according to the Debt Clock, the U.S. Federal Budget Deficit using (GAAP) is $5.585 Trillion. And then one more item that can be found here is the U.S. Unfunded Liabilities, which is $105.9 Trillion, and according to Professor Lawrence Kotlikoff that figure should be more than $200 Trillion, and growing all the time.

To recap. The pound and rupee are about the only currencies rallying this morning, after a day of selling then buying then selling went on with the other currencies, led by the Big Dog, euro. Gold gained $5 on the day, but is down $4 this morning. And kiwi is the worst performer overnight. President Trump announced his TRP and the initial reaction to the details were to sell dollars, and then after seeing everything, traders came to the realization that this dog isn’t going to hunt, and bought dollars back. The U.S. Data Cupboard finally gets some real economic data to show us today, and the price of Oil is looking like it could slide below $49 any day now.

For What It’s Worth. I was going through some articles on the internet last night, and came across this one, and I immediately began a meltdown. This can’t be true, can it? I kept asking myself, but then checking it out, I found that it was true, it’s true, it’s true, I did see Fannie Mae, adopting new borrowing rules for Millennials. let’s go to the details. here’s a link to check out if you think I’m crazier than a loon here.

Or, here’s your snippet. “Homeowners with student loans could eliminate some of that debt by rolling into a new mortgage with a lower rate through Fannie Mae. In addition, potential buyers sidelined by the burden of student loans could find it easier to qualify for a loan under two other programs.

Under one new Fannie Mae program, existing homeowners could refinance their existing mortgage with a “cash out” component that uses the equity to pay off the student loan balances at a lower interest rate.”

Chuck again.. OK, who here sees a major problem with this? Don’t see it? Think this is all grand? Well, think again, because all that’s being done here is saddling these homeowners with a very large debt position against the same house. Remember 2007? Or 2008? UGH.

Currencies today 4/27/17. American Style: A$ 7475, kiwi .6890, C$ .7365, euro 1.0895, sterling 1.29, Swiss $.9935, . European Style: rand 13.2672, krone 8.5615, SEK 8.8383, forint 286.77, zloty 3.8770, koruna 24.7213, RUB 56.48, yen 111.30, sing 1.3960, HKD 7.7811, INR 64.09, China 6.8883, peso 19, BRL 3.1597, Dollar Index 98.99, Oil $49.08, 10-year 2.30%, Silver $17.47, Platinum $948.01, Palladium $805.04, Gold $1,265.04, and SGE Gold $1,273.69

That’s it for today. The magic that Blues Goalie, Jake Allen, seemed to have harnessed for the 1st round of the playoffs was missing last night, and the Blues couldn’t stay out of the penalty box early in the game, thus falling behind early. The rallied to tie the game in the 3rd period, but then lost on a late goal against. I stayed up to watch the entire game, which isn’t like me on a school night, and I’m paying the price this morning! UGH! Well, it’s infusion day today, my first one since last September. Which means I get stuck with another needle in my arm today, UGH! And I don’t know what tomorrow will bring me, but when I did these infusions before, the next day, I would spend 1/2-the day in a fog. Frank Trotter called it “infusion confusion”, which described it perfectly! Cardinals play two today! There were rained out last night, and with the Blue Jays in town just once this year, they’ll play two today! Doubleheaders used to be more common, but that was back when
the sports dollar was as big as it is today. The Band, Looking Glass takes us to the finish line today with their song: Brandy. A good 70’s song! With that I’ll get out of your hair today, and hope you get to do some Tub Thumpin’ today. Be Good To Yourself!

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