U.S. 4th QTR GDP Only Grows 0.7%!

* Will other Central Banks follow Japan?
* RBA to meet tonight, leave rates unchanged.
* Chinese PMI remains below 50!
* Gold’s trend is your friend.

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

Good Day. And a Marvelous Monday to you! And Welcome to February! It’s a Leap Year, so that means we get one extra day in February this year. And that one extra day delays the start of Spring Training Games, so therefore I’m no fan of February 29th! HA! David Crosby and Graham Nash greet me this morning with their song: Wind on the Water, which is about the cruelty to whales. It’s Super Bowl Week, and the hype will really begin to build this week for Super Bowl 50. I’ve watched at least parts of all 50 Super Bowls, and of course my fave Super Bowl was in 2000 when the St. Louis team won the Super Bowl, with the Greatest Show on Turf.

Front and Center this morning, in the overnight markets we had China print their latest gauge of Manufacturing with their National PMI (manufacturing index) and it revealed a 6th consecutive month below 50, at 49.4. I know, I know, 49.4 is not that far below 50, but the idea here is that this marks 6 consecutive months of deep manufacturing problems in China. To me, this just shows that the slowdown in the Chinese economy is lasting longer than most would have thought it to last, but it’s certainly not a collapse of the Chinese economy. The U.S. PMI (we call it ISM) will print later this morning, and last month’s index number was 48, which even using new math, is below 49.4, but you didn’t hear anyone (except me maybe) screaming about the U.S. economy collapsing did you? So, this is a part of cleaning out the excesses of the previous boom in China, and what a boom it was!

The Chinese renminbi took the brunt of the below 50 print for Manufacturing, and the currency was marked down, which in my opinion should happen to a currency when they print a below 50 PMI.

The Japanese yen is still taking blows to the midsection after the Bank of Japan’s (BOJ) big announcement last Friday. On Friday morning I told you about the BOJ and their 3 tiered negative rates announcement, and how it had sent the yen to the woodshed. Well, as the weekend went along, I saw more and more comments from economists and what have you, talking about how the stock markets around the world (that includes the U.S.) would rally on this news, because they believe that now that the BOJ has done this, other Central Banks will follow, with more stimulus. UGH!

I really don’t want to see U.S. stocks circling the bowl, but I also don’t want to see more deficit spending, or money printing, and bond buying, on silly stimulus packages. But, it’s my opinion, and I could be wrong, that that’s exactly what we’re going to be seeing later this summer here in the U.S. . UGH!

The euro is carving out a better than the average bear, gain VS the dollar this morning. Here in the Eurozone, euro traders are taking a stance that European Central Bank (ECB) president, Mario Draghi, will see that the Eurozone economy is recovering, and that there won’t be any further need for additional stimulus, and that’s a good thought for the euro!

Tonight, tomorrow for them, the Reserve Bank of Australia (RBA) will meet, and I do believe that given the strength of the labor sector, and the fact that the remainder of the data prints have been mixed, that the RBA will leave rates unchanged, but keep their easing bias. So that will be good and bad for the Aussie dollar (A$), and the bad could be highlighted in the statement following the rate announcement. This is where RBA Gov. Stevens will have to choose his words carefully, as to not upset the applecart. I didn’t used to have a lot of faith in Stevens to do the right thing here, but he gained major brownie points with me in December with his “chill out” speech. So, here’s another chance for him to win more approval from me. HA! Like he stays awake at night worrying about what I think about his moves! Now that’s funny, Chuck! You crack me up sometimes, you know?

This coming Friday will be a U.S. Jobs Jamboree Friday, and the pundits out there are already talking about it, but you know me, I really have become so ambivalent with this report, that I’ve given up getting all lathered up about what the BLS says are jobs numbers each month.. They pull the wool over the eyes of the markets every month, and the markets just take it and ask, may I have another? It just gets me riled up every month, when you see economists, and accountants, what have you, giving their best guesstimate as to what the number of jobs will be, and then the BLS surprises them with their number that’s based on two surveys, and whatever “adjustments” the BLS wants to make. I’ve got to move on here, before I really get going on this number of jobs pet tricks.

The 4-day rally in the Russian ruble came to a halt overnight, with the ruble posting a loss, but this time it wasn’t because of a drop in the price of Oil. It certainly looks like what we have here is a case of profit taking from the strong 4-day run of the ruble. The price of Oil remains above $33 (barely but still trading with the $33 handle), so there’s nothing with Oil that has the ruble getting sold this morning. The Central Bank of Russia (CBR) made a statement about how an interest rate cut is possible this year. Yeah try getting on the bus with that! I don’t think the ruble selling is based on the CBR silliness, as I said, I think it’s profit taking after a nice 4-day rally.

The Aussie and New Zealand dollars respectively (A$ and kiwi) are down a small amount this morning, after the Chinese PMI print. I already talked about Australia, so I guess I’m left with New Zealand. This weekend, the N.Z. Treasury gave a report on the economy, and said that they believe the economy will grow faster in 2016, than previously forecast, and pointed to an expansion in growth of 2.5% for 2016. That’s all fine and dandy, but forecasts can be changed in a heartbeat. The Treasury did point out that they expect good growth from Business and Consumer Confidence growing, reduced drought risk, and ongoing immigration, tourism and construction growth.. So, at least they were able to point to the reasons they made their forecast! And not just throw out those statements like a Central Bank that we all know too well, likes to do, without anything to base their statement on.

I was doing some reading this weekend, hey, don’t knock it! It’s what I do! I’m here by myself, so what do you expect me to do? Any way. I came across some excerpts from a speech that “Bond God” Jeffrey Gundlach made recently. And yes, the markets have dubbed this guy the “Bond God” which I do believe would make him more powerful than the “Bond Kind” Bill Gross. But that’s not what I’m talking about now. I just wanted to bring you this comment about the dollar from Jeffrey Gundlach. “”Once the Fed backs off its rhetoric, the dollar will [likewise] back down.” He adds that even if the Fed tightens, it’s not necessarily a good thing for the greenback. With the exception of 1983, the dollar has gone sideways or has fallen during past Fed tightening cycles.”

So, it’s nice to see someone with far more gray matter than I basically saying the same things I’ve been saying for months now! And no that’s not a dig at anyone! Just facts, ma’am.

Hey, did you know that the U.S. Fed actually considered using negative rates during the Financial meltdown? Former Fed Vice Chairman, Alan Binder, pushed to get negative rates assigned to overnight deposits at the Fed by banks, thinking that this way the banks would put the money to better use in the economy. But in the end, the Fed couldn’t work out the costs of doing that. But don’t you think that they’ve worked that out by now? Shoot Rudy, even former Fed Chairman, Big Ben Bernanke, added his two cents to this conversation by saying, ” I think negative rates are something that the Fed will and probably should consider if the situation arises.” Really? Are you “greasing the tracks” Big Ben? I got all that stuff from my MarketWatch email this weekend. pretty interesting don’t you think?

Gold is up $5 this morning, after closing up about $10 on Friday with a late rally. I like the direction that Gold has gone so far this year. Not all days are positive, but that’s normal. The Trend is your friend, as they say in the markets. Have you been following the reports from the COMEX regarding the lack of metals that they have on hand? Yes, for those of you out of the loop here, the COMEX which is the exchange for trading metals, has been reporting very small numbers of Gold & Silver in terms of ounces of physical metal that’s on hand for trading. Hmmm, makes you wonder if there is going to be a delivery shock at some point? Well, if we do see one, we’ll see it in Silver before Gold, as there is far less Silver at the COMEX. Actually, I can’t believe that the COMEX prints these reports for everyone to see. They basically have led us down this path of thinking that there’s going to be a real problem here. Let’s hope they haven’t led us down a path of no return.

The U.S. Data Cupboard on Friday, was mixed. We had the first print of 4th QTR GDP print lower than expected, but we had the Chicago PMI (manufacturing index for the region) soar to 55.6 in January from a 48.53 the previous month. We’ve recently seen nearly all of these regional PMI’s show weakness, but, apparently not in the Chicago area. So, the 4th QTR GDP was only 0.7%… I kept telling you that the GDP tracker was showing me GPD dropping in the QTR, but I bet a lot of you didn’t think that to be possible, given the fact that during the 4th QTR the Fed hiked rates, and told everyone that everything is going to be alright. I can hear Bob Marley signing. “Don’t worry about a thing, ‘Cause every little things is going to be alright. Of course I don’t believe it, and I can’t make your mind up for you, but you shouldn’t believe it for it’s all smoke and mirrors!

Today’s U.S. Data Cupboard has two of my fave prints. Personal Income and Spending. and then not to be confusing or anything like that, but “Real personal Spending” will also print with all reports showing December results. That “Real Personal Spending” is something that prints, when we already get Personal Spending and Income just cracks me up. It’s like, here’s Personal Spending, and if you order today, we’ll not only send you one Personal Spending report, but also send you the new “Real Personal Spending” report you just need to pay separate shipping and handling!

But Wait! That’s not all! The U.S Data Cupboard also has the national ISM for January (PMI Manufacturing Index) You may recall me talking about this the past 8 months or so, as I documented the falling index each month that brought the index from 58 a year ago in August, to the 48. In December. Remember any number below 50 represents contraction of the manufacturing sector.. And Manufacturing usually leads the way for a recession, folks. I’ve seen a couple of economists say that they think we could see a pop upward of this data this month. I say if that happens, then it will be quite suspicious and bring about questions regarding this data.

To recap. The currencies are mixed this morning, with the Big News coming overnight in the form of a 6th consecutive month for Chinese PMI to print below 50. The manufacturing Index number (PMI) was 49.4, not that far below 50, but below it nonetheless, and put some pressure on the Asian and Pan Asian currencies this morning. After 4-days of rallying, the Russian ruble seems to be seeing some profit taking, given that the price of Oil was pretty steady overnight and remains above the $33 handle. The RBA meets tonight, and Chuck believes they will keep rate unchanged, but maintain their easing bias, and it all depends on what RBA Gov. Stevens has to say in the statement afterward that will affect the A$… Gold is trending upward, and Chuck likes the direction. and he points out a potential problem at the COMEX.

For What It’s Worth. I’ve been on top of this subject I’m about to tell you about for 16 months now, going back to Vancouver in the summer of 2014, when I told the audience there that “according to report by the International Energy Agency (IEA) in which they state that “U.S. tight oil production, which draws largely from the Bakken in N. Dakota, and the Eagle Ford in Texas, will peak around 2020 before declining.” Well, on Zerohedge.com they had a follow up for us regarding this problem for shale producers. Let’s listen in, but if you want the whole story, go here: http://www.zerohedge.com/news/2016-01-30/another-nail-us-empire-coffin-collapse-shale-gas-production-has-begun

Or, here is the snippet for your reading pleasure: “The U.S. Empire is in serious trouble as the collapse of its domestic shale gas production has begun. This is just another nail in a series of nails that have been driven into the U.S. Empire coffin.

Unfortunately, most investors don’t pay attention to what is taking place in the U.S. Energy Industry. Without energy, the U.S. economy would grind to a halt. All the trillions of Dollars in financial assets mean nothing without oil, natural gas or coal. Energy drives the economy and finance steers it. As I stated several times before, the financial industry is driving us over the cliff.

Very few Americans noticed that the top four shale gas fields combined production peaked back in July 2015. Total shale gas production from the Barnett, Eagle Ford, Haynesville and Marcellus peaked at 27.9 billion cubic feet per day (Bcf/d) in July and fell to 26.7 Bcf/d by December 2015:

According to the EIA’s Productivity Reports, domestic oil production from the top four shale oil fields peaked in April of 2015.”

Chuck again. if there was ever a time when going to the linked article was required, today might be that day, for there are so many graphs that really illustrate what the author is saying, and describe for you. So, if you have the time, hit the link and sit back and be amazed at this research!

Currencies today 2/1/16. American Style: A$ .7070, kiwi .6465, C$ .7115, euro 1.0870, sterling 1.4275, Swiss $ .9787, . European Style: rand 16.0620, krone 8.6525, SEK 8.5455, forint 286.35, zloty 4.0460, koruna 24.8510, RUB 76.16, yen 212.35, sing 1.4240, HKD 7.7820, INR 67.83, China 6.5539, pesos 18.26, BRL 4.0030, Dollar Index 99.39, Oil $33.01, 10-year 1.93%, Silver $14.31, Platinum $869.20, Palladium $497.10, and Gold. $1,124.75

That’s it for today. Well, the Iowans cast the first votes today. And let all that goes with an election year start with it. I really dislike this stuff. the amount of money that is spent and wasted on the election process is disgusting in my mind. I had been having some problems with the muscles in between my shoulder blades getting really tight. When I used to travel, I used to get a massage at every stop, but they removed me from the rotation, and I don’t travel any longer, so when I went to get a massage on Saturday, I paid the price for not traveling any longer! I found a place right down the street here, and I’ll be going back soon! So, 10 days on my own now. Attn. Jen and Christine, I’m still doing fine! HA! Saturday was absolutely beautiful here, but the rain is supposed to come back today and tomorrow. We received 9 inches of rain last week! YIKES! 16 days until pitchers and catchers report! I’m sure that a handful of players have already reported to camp, and can be seen on the back fields, but I prefer to wait until the boys are back in town! I hope our little Christine had a grand day on Saturday for her birthday. I sent her a text, and several hours later, she responded, so the delay was probably due to her celebrating! And with that, I’ll get this out the door, and hope you have a Marvelous Monday!

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