U.S. Is Surprised By U.K’s Decision.

* China reduces reserve ratio requirement.
* Don’t fret over fears of over issuance of renminbi!.
* A$, C$, and kiwi all have major events this week.
* A big week for euro, Eurozone, and Greece .

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

Good day.. And a Marvelous Monday to you! Well, I’m back in the office today. The Cellulitis in my leg is still a problem, but I think I’m ahead of it right now, so, no use in hanging around the house, where I’m always tempted to just nod off and take a nap! I missed one scheduled meeting last week, when I was sleeping, so, enough of that! Hey! Ringo Starr finally was inducted into the Rock-n-Roll Hall of Fame. Of course he was there already as a member of the Beatles, but now is there for his solo work. Congrats! The Pousette-Dart Band greets me this morning with their song: Amnesia. You know it goes like this: I hope that it’s only Amnesia, Believe me I’m sick but not insane.

I identify with the words of that song, for many times over the years, I’ve said things, that I’m sure people have thought that I must be insane. But believe me, I’m sick but not insane! HA! Well, I read tons of stories over the weekend about how the U.S. Gov’t was caught off-guard when the Brits announced that they were going to be founding members of China’s AIIB. Really? Did we get our noses out of joint? This stuff makes me laugh.

Well, Front and Center this morning, the Chinese announced over the weekend that they had reduced the Bank reserve ratio requirements by 1% to 18.5%… This is like a rate cut folks, for Banks get to put more currency into the economy, if they so wish to do so. The overall view of the markets overnight has been that this is “risk friendly” and so the currencies of Australia, New Zealand, and Canada have all seen small gains. In a somewhat funny scene of events the Japanese yen is also rallying, as I guess some traders in Asia looked at the reduction of the reserve ration as a good for the region thing. I guess that has some merit, but the countries that are so tied to China like Australia, New Zealand and Canada have far more to gain should the Chinese economy break out of this slowdown.

This news could be viewed as a negative for the renminbi/ yuan, due to over issuance fears. But let’s get a grip on this 1% was the move. Not anywhere close to the increase in the Money Supply here in the U.S., which at last reporting was 4.6%… The U.S. stopped reporting Money Supply, but you can still get your hands on it but it’s always a couple of months behind. So, I wouldn’t get all bent out of shape over the 1% increase of money available. And apparently the Peoples Bank of China (PBOC) didn’t think it was a Big Deal regarding over issuance, for they allowed the renminbi / yuan to appreciate overnight.

So, I mentioned the currencies of Australia, New Zealand and Canada, so let’s talk about them this morning. First off Canada will print their fiscal budget. I would say that given the drop in the price of Oil, that Canada will not be able to continue their string of Budget Surpluses, but, as along as that’s the only hit to the Budget, and it’s a known factor, then things should not be so bad for the Canadian dollar / loonie this week.

In Australia, 1st QTR CPI (consumer inflation ) will print on Wednesday. I’m thinking that on an annual basis, Aussie CPI will be around 1.3%, with a slight increase in the 1st QTR. with inflation inching higher, and employment soaring right now, the Reserve Bank of Australia (RBA) is going to have to think twice about cutting interest rates in May.

And then in New Zealand, which was my pick for the Currency of the Month, for April, and was the title of the Sunday Pfennig, which if you didn’t read it yesterday and just deleted it, you can read it at the Pfennig’s site: www.dailypfennig.com Well, New Zealand printed their 1st QTR CPI last night, and here, inflation is falling quickly, and in fact only rose .1% annually, YIKES! That’s pretty incredible given that New Zealand as an islands nation needs to import tons of things, and is usually a case of importing other countries’ inflation. So, while I still believe the economy needs another rate hike or two, consumer inflation sure doesn’t need any rate hikes! So, the Reserve Bank of New Zealand (RBNZ) is stuck right now, torn between two lovers, and feeling like a fool, if you will. And you and I both know what Central Banks do these days when they are confused. The debase their currency. UGH!

Well, we’re getting down to the cheese that binds for the Eurozone, euro and Greece this week. the Eurogroup will meet on Thursday. Greece is running out of time to secure loans that would help them fund wage and pension payments due May 1st, in addition, Greece also owes 200 Billion euros to the IMF on May 1st, and 770 Billion euros on May 12th. As usual with this stuff, all the drama will be added, and talk of Greece leaving the euro, but think about that for a minute.. Even if they did leave, they would still owe the wage and pension payments, and the loan payments to the IMF. So, it looks like Greece is going to have to promise reforms once again, so they can live another day.

The euro is not immune to this stuff, and is down 2/3rds of a cent this morning, as traders begin to position themselves for turmoil later this week and into next week.

Well, as the morning has gone along, now the small gain that the A$ had booked this morning has gone away. UGH! So much for the Chinese announcement helping the A$…

Well, Gold is back below $1,200 this morning. this is beginning to give me a rash, watching this daily movement back above and then back below $1,200. In reading Ed Steer’s letter from Saturday, he had a snippet from Lawrence Williams, so I even cut it more and have it here, so here we go. “Gold prices may well, for the time being at least, be driven by ups and downs in U.S. data and Fed interest rate raising speculation, coupled with the occasional impact of some peculiar massive gold trades on the markets, but we do see these things changing as Asia becomes ever more involved in global gold price setting. We are already seeing the start of this, and it is bound to grow so gold probably is at or near its bottom, with better things ahead.”

Well, that might be, but like I said, I’m really growing tired of this back and forth around $1,200.

The U.S. Data Cupboard has nothing but Housing stuff and third tier data until we get to Friday, where March Durable Goods, and Capital Goods Orders print and attempt to reverse the recent trend in these two that was negative prints. Last week, we had Retail Sales, Industrial Production and Capacity Utilization all miss their marks . So the bad data just keeps printing, and now the number of economists that are calling for a rate hike in June is dwindling. It was something like 45% last month, and now down to something like 25%…. These numbers change daily, so pick your day, pick your numbers, the overall idea here is that more and more analysts, economists and smart people are jumping on Chuck’s bandwagon!

To recap. The Big News over the weekend came from China where they reduced their reserve ratio requirement by 1%, in an attempt to get more money on the streets of China, this announcement helped the risk assets for a while overnight, but that help has dissipated in the morning sessions. A$, kiwi, and loonies all have major events to deal with this week, so watch for that, and U.S. Data continues to be weak, but takes a breather for the early part of this week, and it’s coming down to the cheese that binds for Greece again this week.

Before I head to the Big Finish. I want to apologize for the error I made on Friday, when I mixed Iraq and Iran. I just let my anger over the funding of one country spill over to my anger with the other country’s past indiscretions. So, for that I apologize. I tried to send out a correction on Friday, but my hands got tied behind my back. So. now you know the story.

For What It’s Worth. A dear reader pointed me to this article that was on Silverseek.com and talks about Gold and our debt, so I thought it played well in the sandbox with all the stuff I talk about daily. So, here’s a snippet of the article that can be found in whole at: http://www.silverseek.com/commentary/5000-silver-14318

“To begin, let’s look at what happened in 1980 and why gold traded up to $875 in the first place. As Jim Sinclair has said many times, gold “moved in a manner to cover the value of foreign held debt of the U.S.”. He has also said “$50,000 gold is possible and it may turn out that this figure is far too low”. Before you laugh and start firing spitballs at me or Mr. Sinclair, I remind you of his call of “gold at $1,650 per ounce by Jan. 2011”. He said this when gold was $350 per ounce or so and the year was around 2004 if memory serves me correctly. He was called a nutjob and far worse …he was correct in retrospect and off in his timing by about eight months …SEVEN YEARS AHEAD OF TIME!

To refresh your memory, let’s do some basic mathematics. The U.S. purportedly has 262 million ounces of gold. (As a side note, if you understand how much gold China has imported just over the last six years and compare that to global production, then you understand the U.S. has in all likelihood “dishoarded” much of this gold). We can compare this 262 million ounces to our national debt rounded off at $18 trillion. Doing the math, if we had to back our debt with the gold we supposedly have, the number currently comes up to $68,700 per ounce! ”

Chuck again. That’s some wild-eyed thinking there Partner! But. if you stop to think about it, what would happen if the current monetary system collapsed from too much debt? (not difficult to imagine, right? ) And then the countries of the world meet to discuss the new financial system, which can only be centered on Gold. Then this doesn’t seem to wild-eyed, does it? Now, don’t get me wrong, I’m not saying nor is this guy saying that Gold is going to $68,700 per ounce! All we’re saying is simply: IF the U.S. had to back its debt with Gold they currently have, this would be the price per ounce of debt.

Currencies today 4/20/15.American Style: A$ .7770, kiwi .7685, C$ .8160, euro 1.0730, sterling 1.4920, Swiss $1.0430, . European Style: rand 12.0755, krone 7.8680, SEK 8.6725, forint 278.65, zloty 3.7275, koruna 25.5535, RUB 52.70, yen 119.10, sing 1.3475, HKD 7.7500, INR 62.91, China 6.1255, pesos 15.35, BRL 3.0405, Dollar Index 97.92, Oil $56.03, 10-year 1.88%, Silver $16.08, Platinum $1,159.13, Palladium $774.90, and Gold. $1,199.42

That’s it for today. Today is my good longtime friend, and the Big Boss’s Birthday. Happy Birthday, Frank! He moves 1 year older than me again! HA! And it’s also our colleague Mike Harrell’s birthday! Well, what a sweet victory that was last night for my beloved Cardinals, completing a 3-game sweep of the Reds. A game that mirrored those that used to be played in the 60’s, it took only 2 hours and 2 minutes to get through 9 innings. Our Blues tied their series 1-1 with the Wild on Saturday, our rising star, Vladimir Tarasenko scored a hat trick! But the biggest goal came from Patrick Berglund. I got to sit outside and watch the Cardinals game on Friday night with my FBG buddies. That was a fun way to end what was a trying week. This will be a difficult week, at least the first three days, to come up with good stuff to write about, so we’ll see how that goes, eh? The Marshall Tucker Band is playing their song: Searchin’ for a Rainbow on the iPod right now. This band was a big fave of mine back in the 70’s. I was listening to this kind of music, while Chris was listening to disco. HAHAHAHAHAHA! That’s a joke between the two of us, and he’ll be yelling about he has no idea what I’m talking about , when he reads this today. That is if he does, and doesn’t just delete it. . HAHAHA, another joke between us! And with that, I’ve got to go. I’ve taken up too much of your time today, so . I hope you have a Marvelous Monday!

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