U.S. GDP Calculations Are Questioned.

* Dollar fights back!
* Rubles and Real are only rallying currencies! .
* Gold gains $10.
* Kiwi loses a cent on rate cut fears!.

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

Good Day. And a Wonderful Wednesday to you. Cardinals blow another game last night, but it happened well after I went to bed, so when I went to bed we were winning! I’m greeted this morning with a song from the Beatles, as they sing: When I’m 64. I sometimes wonder, if I should sing, will you still need me, will you still feed me when I’m 61. Can you tell I’m feeling somewhat unappreciated these days? No worries, I’ll get over it, now that I’m back in the saddle again. Sorry no Gene Autry lyrics today. I woke up late, didn’t hear the alarm, the boot up time this morning seemed to take an eternity, the computer speed is snail like, and so I’m really behind the 8 ball this morning. UGH!

Well, the dollar is fighting back and appears to be not ready to give up its strong dollar trend belt, that it wears so proudly. The only two currencies I can find out there in currency-land that have sizeable gains VS the dollar this morning, are the ruble and real. The ranges in the remainder of the currencies are tight though, so it’s not like the dollar came out swinging , it’s more that it came out bobbing, weaving, and jabbing. I don’t think it will end up floating like a butterfly and stinging like a bee today, but stranger things can happen.

The Bank of Japan (BOJ) announced their newest fiscal package, and while it was somewhat disappointing to the “let’s go all-in on stimulus crowd” the yen backed off its lofty level of yesterday. I’m not even going to get into the details of the fiscal package, because I’ve been doing that for nearly 2 decades now, and none of it has ever had any inkling of giving sustainable growth for the economy in Japan. So, I’m treating these “fiscal packages” like persona non grata from now on!

A dear reader (thank you Walter) sent me a note yesterday and said, “Don’t feel bad about thinking the RBA wasn’t going to cut rates. Kathy Lien also thought the same.” For those of you who don’t know, Kathy Lien is a very well respected currency trader/ analyst for BKForex.com. She has been one of the go-to’s for the media when questions arise about currencies. I used to be one of those go-to’s but somehow, someway, the media forgot about me. meet me on the Butler Patio, and I can tell you why I think that happened. But anyway, I digress, and I wanted to give you some thoughts as to why both Kathy Lien and Chuck Butler didn’t think the RBA would cut rates. and here they are:

“The last time we heard from the RBA they sounded open to the idea of easing if data supports it but since the last meeting in July, manufacturing activity accelerated, consumer prices increased, full time job growth rebounded, business confidence improved and the participation rate is up.” Now, why in the world would the RBA tell us that if data supports a rate cut they would act, only to act when the data didn’t support a rate cut? I’m as confused as the next guy, and I do this for a living!

And tonight, Australia will give us the skinny on their latest Retail Sales (for June) which will probably keep the handle down on steady growth in consumer spending. But if the RBA is going to continue to ignore these good economic data reports, then I don’t see the A$ having much chance of pushing higher. So, what will it be RBA? Are you going to keep your word, or just ignore the data and cut rates, while laughing in our faces?

The price of Oil slipped below $40 in the past 24 hours. I was surprised to see that given the rallies in the ruble and real this morning. But, stranger things have happened, so we’ll just go with that for now. The Canadian dollar / loonie has not slipped as much as one would think given the drop in the price of Oil, but that doesn’t mean it won’t catch up. And I’m somewhat concerned about the loonie right now.

The U.K. saw the National Institute of Economic and Social Research issue a report that said that in May they thought if the U.K. remained in the EU the country’s GDP would expand to 2.7% in 2017. Since the vote to leave the EU, the Institute has cut their forecast to 1%, and warning that the country could slip into a recession in the next 18 months. Pound sterling just shrugged off this report, and rallied yesterday, but is flat this morning. There was another report that should have shot the pound in the foot, when it was announced. It appears that retail investors are pulling funds out of the U.K. faster now after the BREXIT vote than they did in 2008.

Well, didn’t I tell you from the get-go on this BREXIT result that we couldn’t really say it was a Lehman Bros. moment, in that thing will take time to come to light here, and now we’re seeing the beginnings of those “things that will come to light”. The pound should be seeing selling pressures right now, but it isn’t. Is there some intervention going on here? I haven’t seen any sign or heard of any word of such, but one has to wonder, given the ongoing exposure of the rot on the vine here.

The euro climbed back over the 1.12 handle yesterday, but is down a tiny bit this morning, but remains above 1.12 just barely as I write. The European Central Bank (ECB) doesn’t meet this month (August is holiday time in Germany and most of Europe) And so the euro doesn’t have to deal with the ECB throwing it under a bus until September 8th. With that being the case, I would think the euro could muster up some more rally points VS the dollar in August, for while the cat is away the mice will play, right? And if the dollar’s strong trend is beginning to show signs of ending, we’ll see it first right here in the euro. The euro remains the offset currency to the dollar, folks.

The New Zealand dollar / kiwi, took one to the chin last night and is down nearly 1 full cent as I write this morning. Traders have gotten spooked by the RBA’s rate cut on Monday, and have now come to the belief that the Reserve Bank of New Zealand (RBNZ) will cut rates at their next meeting August 10. While I wouldn’t put it past the RBNZ to cut rates next week, I really don’t believe that they need to, given the housing bubble in Auckland. But the RBNZ is perceived to be on a rate cut campaign, and if there’s one thing I’ve learned in my life that has remained to be true is that you are what you are perceived to be.

Here in the U.S. I have to talk about this, because I’ve made such a Big deal about the GDP reports. Well, after my tirade about how GDP doesn’t really truly reflect the economy’s strength or lack of it on Monday, I had a dear reader send me an email where he quoted the Bureau of Economic Advisors (BEA) (not to be confused with Aunt Bea!) who have found, “evidence that efforts to adjust the country’s measure of economic growth for seasonal fluctuations have not been fully successful.”

Well, when you don’t really have “seasons” like business cycles and so on any longer due to the Central Bank interventions, why would you need to have “seasonal adjustments”? If you ask me, I would say that the BEA economists just made matters worse, and worse, and worse every time they revised data from quarter to quarter. In fact, going back to last December, the Fed was working off of GDP data that was not correct, and then they hiked rates that month, only to find out that the 4th QTR, when all was said and done, grew at the slowest pace in two years! And the dollar soared on the rate hike and subsequent talk about more rate hikes.

I stand by my thought that GDP should NOT be used by anyone or any entity to measure the economy’s strength or lack of it.

Speaking of data. The U.S. Data Cupboard did exactly what I thought it would do, and said so in the Pfennig, yesterday when the Personal Spending data for June showed a stronger than expected printing at 0.4% instead of the consensus thought of 0.2% growth. So, once again, we are back to spending more than we make as the Income portion of this data showed just a 0.2% gain VS 0.3% expected. So, consumers had to dip into savings in June to fund their purchases, or go further into debt. Neither option being the kind that will be good for the economy going forward. Sure the strong purchases in June gives everyone that feeling of “We’re in the money, we’re in the money” which is more of the Looney Tunes version than that of the Rosemary Clooney version! But when all is said and done, the money doesn’t last and neither does the credit card, when you’re spending more than you make, and that’ll be a financial reckoning day of all financial reckoning days!

This Friday, will be a Jobs Jamboree Friday. Right now the consensus for July job creation is for a 185,000 gain. One has to wonder if these consensus results take into consideration the BLS’s need to add ghost jobs each month? Well, we’ll see the ADP Employment Report today, which is supposed to give us an indication of the BLS Friday report. The ADP Report’s consensus if for 165,000 jobs in July. We’ll see who’s more correct come Friday, but here’s the thing I think you should consider going forward. That we just don’t pay attention to the jobs numbers. That’s what I’ve been doing, except here in the Pfennig, where readers want to know. I can tell you that when I report of all the adjustments that the BLS makes, my blood pressure rises, so you don’t want to see me go through that do you? Good! From now on, I’ll just mention if it’s a Jobs Jamboree Friday. HA!

Gold found some room to maneuver higher yesterday by $10.40, after spending the morning down a few bucks. This morning Gold is down a couple of bucks in the early morning trading, but nothing to worry about right now. Silver was able to climb to $20.83, but was sold off in the afternoon and finished at $20.56. well off its high tick of the day. UGH!

To recap. BOJ announces fiscal package and Chuck decides to ignore it. It hasn’t done any good for 2 decades now, so what makes anyone think this one will? Kiwi loses a cent, on thoughts that since the RBA cut rates that the RBNZ will cut rates too next week at their meeting. The currencies are for the most part down a tiny bit, with only the real and rubles on the positive side of the ledger VS the dollar this morning, and that’s with the price of Oil falling below $40 in the past 24 hours! Gold gains $10 yesterday, and Silver did have a good day going until the not for profit sellers came in and brought the price of Silver back down for the day. Jobs Jamboree coming this Friday, and Chuck doesn’t care any longer!

Before I head to the Big Finish today, I need to tell you about something that I think will be a great conference to attend. The ANA World’s Fair of Money will be held August 9-13th, and our very own metals guru, Tim Smith will be there! You can find more information about the conference by clicking here. https://www.money.org/worldsfairofmoney Don’t miss an opportunity to speak with Tim Smith!

For What it’s Worth. Despite the action in the price of Silver yesterday, Silver has put together a very nice performance for the 7 months of 2016. And this story on Silver Kangaroo Coins is one of the reasons for that very nice performance. You can read the whole article here: http://www.goldcore.com/us/gold-blog/silver-kangaroo-coins-sales-surge-to-over-10-million/

Or, here’s your Snippet: “Introduced to the market less than 11 months ago in September 2015 at a launch attended by GoldCore, sales of the new release Perth Mint’s 2016 Australian Kangaroo 1 ounce silver bullion coin were anticipated to reach 5 million coins in their introductory first year. Yet sales of the silver coins have already surged to a whopping 10 million coins.

Commenting on the new silver coin’s worldwide success, the CEO of the Perth Mint, Richard Hayes said:

“Now that we can better gauge the popularity of the release, we predict sales in excess of 12 million this coming year.”

The Kangaroo coin is 0.9999 fine silver and it is only available in the 1 ounce size, unlike the Perth Mint’s other bullion coins which range in weights from 1/2 ounce to 10 kilograms. The 1 ounce weight was specifically selected for the new annual series because investors and silver stackers favor the size.

Chuck again. That sure is some whopping size of coins being sold, eh? I just wish that not for profit sellers would go away, they don’t have to go away mad, just go away!

Currencies today 8/3/16. American Style: A$ .7587, kiwi .7180, C$ .7620, euro 1.1205, sterling 1.3353, Swiss $1.0326,. European Style: rand 13.9910, krone 8.4320, SEK 8.4995, forint 277.63, zloty 3.8490, koruna 24.1410, RUB 66.63, yen 101.25, sing 1.3420, HKD 7.7580, INR 66.96, China 6.6309, peso 18.95, BRL 3.2590, Dollar Index 95.25, Oil $39.75, 10-year 1.54%, Silver $20.66, Platinum $1,158.42, Palladium $705.52, and Gold. $1,371.00

That’s it for today. So sorry for being so late this morning! I know some of you have been waiting to pour that first cup of hot coffee so you can sit down and read the Pfennig and drink your coffee! UGH! Today is the birthday of our colleague, Suzan Adams. I know I miss a lot of birthdays around the office, so I’m trying something new to catch them! The Olympics begin this weekend. I saw an email yesterday that our office manager, Danielle, was organizing the “office Olympics”. That should be a lot of fun, that I’ll miss of course! Infusion day tomorrow and Infusion confusion on Friday, so I have that going for me! Come on Cardinals! You can’t afford to blow games to teams completely out of contention in the 9th Inning! That was just plain awful. Stay cool, it’s going to be very hot these next few days! The Rolling Stones take us to the finish line today with their song: Can’t You Hear Me Knocking. That’s it, that’s all, 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