U.S. Mint Suspends Silver Sales.

* Greek requests a 3 -year ESM loan .
* Thursday night is deadline to prove they can repay loan .
* NZ Treasury Surplus is strong!
* Oil price keeps dropping..

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

Good day. And a Wonderful Wednesday to you! I’m not going to complain about the rain any longer, it does no good to complain. At this point, I just want to know if anyone is building an ark, because we’re going to need one very soon! I hear the lake the family is heading to this weekend is up 3 feet from all the rain. UGH! The Cubs sweep the Cardinals in a doubleheader yesterday.. UGH! And Alex begins the home stretch in training for his 70.3 Ironman competition next month. I actually think he’s ready for it now, just more training on the racing bike that Chris Gaffney was so kind to lend him, and keep me from having to buy one, just for one race.

Well, here we are on a Wonderful Wednesday, and the currencies are attempting to fight back this morning, but the results are mixed at this point. Greece made their journey to Brussels yesterday, and requested a loan from the ESM (Emergency Stability Mechanism). Greece has basically been told to come back by the end of Thursday with their plan to reform their economy so that paying back the loan is workable. Sunday apparently is the “drop dead” date after that, Greece is in uncharted waters of gloom, despair and agony on them.

Spending Cuts, Higher Taxes, and reforms to pension programs that pay out more than they take in.

Does that sound like too harsh of austerity measures to obtain a loan that would keep your country from falling into an abyss? Say with me again, Spending Cuts, Higher Taxes and pension reforms. Spending Cuts, Higher Taxes, and pension reforms. Sort of like Dorothy, the scarecrow, the Tin Man, and of course Toto, saying, “lions and tigers and bears, oh my, Lions and tigers and bears, oh my. And the thing that scares the bejeebers out of them is the Cowardly Lion. Which seems so apropos given this situation in Greece.

The euro is one of the currencies with gains VS the dollar this morning. I guess there’s a new attitude toward coming together and forming an agreement among the members. Donald Tusk, who chairs meetings of European leaders, is hoping that the negotiators can “do better”, for if they don’t, “everyone will lose”. And that’s basically where this all is as we head to the end of the work week. We’ll know for sure at the end of this week (Sunday) if there is a deal to kick the can down the road, or prepare for an exit.

There are so many economists, analysts, pundits saying that an exit is the only answer for Greece, but remain steadfast in my thought that an exit won’t happen. I saw a comment on line last night that would be funny if it weren’t true. That China has lost many multiples of Greece in market cap in the last three weeks. Kind of puts the Greek thing in perspective, doesn’t it?

Alrighty then. Let’s talk about something else besides Greece and the Eurozone! The price of Oil keeps dropping, along with the yield of the 10-year Treasury. So, what is it that the bond guys are telling us right now? Just a couple of weeks ago, the 10-year yield was heading toward 2.40%, and today it’s 2.21%… Sure safe haven buying is pushing yields down further, but it can’t be all that, can it? Is this also an indication that the bond guys don’t think interest rates are going higher this year? Probably some of both.

Speaking of whether there’s a rate hike this year or not. Well, it’s not often that I get to mention the IMF without a sneer on my face, or having a snarky remark in my back pocket to pull out and use when appropriate, but not today. so without further ado. I see where the IMF is telling our Fed Reserve (Fed) that the IMF doesn’t see inflation as measured by the Fed’s favorite measure (remember I told you it was the PCE?) hitting 2% through 2017. The IMF is fearful of a Fed rate hike, folks. They are fearful, because the world’s economy is on tenterhooks, and a tightening of money in the economy that’s tied for first place in size with China would negatively affect the rest of the world’s economies.

Earlier this year, the IMF requested that the Fed wait on hiking rates. I’m not sure how well that played over at the Fed’s offices. Was it on the Hit Parade with a bullet to the top? Or was it deep sixed in the nearest trash can? I don’t like it, you can’t dance to it, and I don’t understand the words! HA! You see, I don’t think the Janet Yellen led Fed, appreciates one iota being told or even hinting at what they should do by the IMF. or anyone as far as that’s concerned.

But. The IMF is correct, when they say, “We feel there is space for them to wait,” said Nigel Chalk, the IMF’s U.S. mission chief, noting that inflation is far from the Fed’s 2% annual rate target. As measured by the personal consumption expenditure price index, the annual growth in inflation was just 0.2% in May.” I, myself, have pointed this out to you previously, so maybe the folks at the IMF are Pfennig Readers! I also pointed out the NAIRU, remember? The “non-accelerating interest rate of unemployment” And we’re still a few percentage points away from that, when you use the BLS’s figures. I’m sure the Fed’s economists are smarter than the average bear, and aren’t confused by the BLS figures. Well, I’m hoping they don’t!

A couple of months ago, I told you about the Rocktober time table that a few writers are writing about as the time when the financial system comes under tremendous pressure, and collapses. I had several dear readers send me notes asking me what I thought about this. And I told them, that I understand the basis from which these analysts / writers are coming from with this call, but I hesitate to put down a date by which something will happen. Remember Iben Browning? He was the scientist that said that the New Madrid Fault, of which we live nearby, would cause a major earthquake in early December 1990. I’ll always remember this, for I was on the “earthquake preparedness team” at Mark Twain Bank. We had to do Disaster Planning and the whole 9 yards to prepare for the devastating earthquake that never came.

Two things to think about folks. When you put a data on something, it can come back to haunt you. And was all the planning for a disaster a waste of time? Hardly. The Bank experienced things it should have been aware of or thinking of and at least doing something about. And in the end was it bad thing that they were prepared for the worst, and it didn’t come? No. And that’s how I tie this all to owning Gold. You’ll have to put two and two together here, because to go any further would put me in line to get my wrists slapped. But I’m sure you won’t have any problems seeing where I would be going with that.

I can’t get my arms completely around the financial system collapse, but I have to say that I’ve read all the reports and they make sense. I just never really thought that what we have now would collapse, and there would be a “reset”, especially with China around. But now China is having problems of their own it makes a little more sense. But I worry about this Rocktober date, and cringe. And whenever someone mentions a data that the markets, economies will react to something, I think of Iben Browning.

Speaking of China. It appears that even with the announcement of Sunday of an injection of liquidity into the stock market, that the selling is going to continue, and that has me worried about how China will react to this. I sure hope they don’t go the Japanese route, when their stock market began to crumble in 1990.. For that sure didn’t work. Budget stimulus, Quantitative Easing, (it wasn’t called that then) and ZIRP (zero interest rate policy). Memo to China, I know you have a Treasure Chest of reserves, but don’t blow them all on attempting to save your stock market from a nasty sell off. It’s far better to just allow the excesses to clean themselves out, and start again from a new base. In other words, just allow the markets to be markets.

Remember when the rumors of LIBOR (London Inter-Bank Offering Rate) price manipulation were considered to be conspiracy, and something that “couldn’t happen”? Well, conspiracy has become fact in this case, and to show you just how brazen these guys were doing the manipulation, a traders at UBS Group AG was on the witness stand in court yesterday and the prosecution presented an email that he sent 9 years ago that asked him if the LIBOR fixings were manipulated, and he responded, ” Yes, of course they are, just give the cash desk a Mars bar and they’ll do whatever you want.” I would say that this guy’s claim that he’s not guilty of conspiracy to manipulate LIBOR, is not on terra firma after this email, eh?

I tell you this to point out that the conspiracy things I used to talk about aren’t always a bunch of baloney! And this seems to be about as good a place to talk about Gold as any, eh? Yesterday, on the website: www.investmentresearchdynamics.com, David Kranzler, whom I’ve quoted before from this website, had this to say. Kranzler writes: “How is it that day after day gold and silver get smashed when the New York Comex floor trading opens? Does it seem odd that all of a sudden, nearly every day for the last four-plus years at 8:20 a.m. ET all the world decides to unload paper gold and silver positions?

“How is it at all possible that the prices of gold and silver are collapsing like this when China has imported a record amount of gold in the first half of 2015? China and India combined are importing more gold than is being produced on a daily basis. India is importing by far a record amount of physical silver. These countries require the physical delivery of the metal they buy. It’s not good enough for the bullion banks to offer free vault storage in London or New York. The misrepresentation of the true, intrinsic price of gold and silver by the New York and London paper markets is perhaps the greatest fraud in history.”

Well, Gold got whacked again yesterday, and the only thing I can say about it all is to think of all this whacking as an opportunity to buy at cheaper levels, for I don’t believe this to be something that’s going to last forever, the cheaper prices that is. Yesterday, Gold Researcher, Koos Jansen wrote a very interesting piece for the website: www.bullionstar.com , titled: “China Rapidly Changing International Gold Market”, and in the piece, he shows readers the steps China has made and is proceeding toward making to changing the International Gold market, as part of a detailed plan to move the pricing of Gold from West to East. I strongly suggest you go there and read that. you can find it by clicking here: https://www.bullionstar.com/blogs/koos-jansen/china-rapidly-changing-international-gold-market/

And get this.. the U.S. Mint suspended sales of American Eagle Coins due to strong demand outpacing supply. The Mint said they would resume sales in two weeks. So, on a day when the U.S. Mint suspends Silver sales, how can the price of Silver lose nearly 1 full cent? Lucy. You’ve got some explainin’ to do!

There was some good news someplace in the world overnight. Down Under in New Zealand, the printed a better than expected Treasury surplus of NZ$ 1.18 Billion VS a forecast of NZ$ 193 Million. so, it blew the forecast out of the water! But even with this news, the N.Z. Budget is still expected to be a deficit this year of NZ$ 684 Million.. Wouldn’t that be great to have a Budget Deficit here in the U.S. of $684 Million? We spend, as a nation, more than that daily as a part of deficit spending. Oh! Sorry to go off on that tangent! Kiwi is stronger by ½ cent this morning on this news, but hasn’t been able to drag the Aussie dollar (A$) along for the ride today.

Tonight, Australia will print their latest labor numbers, and any upside surprise would help the A$ to recover some lost ground, in my opinion, which could be wrong!

The U.S. Data Cupboard has May Consumer Credit, which given the Retail Sales in May which weren’t that great, we could actually see Consumer Credit (read debt), drop a bit from the April figure of $20.5 Billion. But the Big Kahuna as far as the markets are concerned in an attempt to get Greece off their minds, will be the printing of FOMC’s latest Meeting Minutes from June. You know the one where the Janet Yellen had to inform the markets that there would be no rate hike? Yes, that one. Yesterday’s Data Cupboard saw the Trade Deficit widen, but that was expected, so we move along for these aren’t the droids we’re looking for..

To recap. The dollar’s onslaught over the currencies and metals lasted all day yesterday, with Gold getting whacked again, along with Silver, when there was an announced freeze of buying Silver American Eagle coins by the U.S. mint yesterday due to demand outstripping supply.. Greece requests a 3-year ESM loan, and the lenders give them until tomorrow night to show how they will repay the loan. Sunday is the drop dead date, and after that, they should prepare for an exit of Greece, but Chuck still feels that won’t happen.. Kiwi rallies today on strong Treasury surplus numbers, and the euro is stronger, but other than that, it’s more dollar strength today.

And Before we head to the Big Finish today. Last week I told you about the problems with Puerto Rico’s debt and their inability to repay it, and how the muni-bond insurers like AIG, and others would be on the hook for this inability to repay $72 Billion of debt. Well, yesterday, Puerto Rico’s request to have their debt treated like bankruptcy was turned down, and that brings them back to square one and their inability to repay the debt.

You see, Puerto Rico is a territory not a state, and therefore it can’t file bankruptcy like a state or city like Detroit can. And they can’t restructure their debt either. Uh-Oh!

For What It’s Worth. I found this on the Bloomberg this morning folks. And unlike most things I find on the Bloomberg, this one can be found on the internet by clicking here: http://www.bloomberg.com/news/articles/2015-07-06/greek-risk-seeps-through-currencies-to-torment-ecb-s-neighbors

Of course I have a couple of snippets for you here. “Greece’s debt turmoil has found a favorite conduit for spreading contagion: the $5.3 trillion-a-day foreign-exchange market.

From Sweden to Switzerland, central banks are battling to contain an appreciation of their currencies versus the euro. Greek risks are also infiltrating markets in Eastern Europe after Greece’s decisive vote against austerity this week. Even the Bank of England, whose economy is showing signs of a gradual recovery, may find itself compelled to delay tightening monetary policy, while Japan has signaled it may boost stimulus if the yen strengthens.

“The likes of the Swedish krona and Swiss franc should be worried about a cheaper euro,” said Stuart Bennett, London-based head of Group-of-10 currency strategy at Banco Santander SA, Spain’s biggest bank. “If that happens, it hampers their fight against their low inflation. The BOE might not like the idea that sterling gains as a safe haven. It’s a European issue, but a global foreign-exchange risk.”

The concern for the Swiss National Bank and Sweden’s Riksbank is that the Greek crisis will weaken the euro. Both are struggling to stoke inflationary pressures, and strengthening currencies make that harder. The BOE, which saw the pound reach a seven-year high against the euro last week, has also expressed concern that the exchange rate with the euro may slow U.K. economic growth.”

Chuck again. Yes, they had better be prepared to fight off euro weakness from here, because it will make their lives very difficult. And you know who else will suffer from euro weakness? The U.S. because imports from the Eurozone will be so much cheaper, and imports could outweigh exports, as the dollar strength puts the kyboshes on exports.

Currencies today 7/8/15. American Style: A$ .7415, kiwi .6690, C$ .7850, euro 1.1025, sterling 1.5370, Swiss $1.0540, . European Style: rand 12.5105, krone 8.2260, SEK 8.5190, forint 288.25, zloty 3.8305, koruna 24.5860, RUB 57.08, yen 121.45, sing 1.3530, HKD 7.7530, INR 63.59, China 6.1175, pesos 15.81, BRL 3.2025, Dollar Index 96.57, Oil $52.65, 10-year 2.21%, Silver $15.04, Platinum $1,026.20, Palladium $645.00, and Gold. $1,157.21

That’s it for today. I’m running really late today, and I have no idea how that happened, as I even arrived a little earlier than usual today! UGH! The Raspberries are playing their hit song: Go All The Way, which I would have to say was probably pretty risqué when it was released back in the 60’s. Sort of like The Stones song: Let’s spend the night together, which was banned from AM radio in the day. Yes, we used to have morals. But that’s a discussion for another time and place like the Butler Patio or the Tiki Bar! My beloved Cardinals sure have run into a streak where they can’t buy hits or runs. UGH! Of course, not to make excuses, but their two power hitters they depended on as the season began have been out of the lineup with injuries. St. Louis used to be called the Soccer Capital of the U.S. As the great Harry Keough would lead his St. Louis U. Billikens to national championship after national championship, and the St. Louis area would provide the bulk of coll
ege players around the country. Well, in keeping with that, two young female soccer players from St. Louis were on the U.S. National Team that won the World Cup. Pretty cool, eh? We leave for our camping trip tomorrow. the first time in 5 years for me.. I’m somewhat hesitant about going, given my stomach problems, but I’ll just see how it goes! And with that, I hope you have a Wonderful Wednesday!

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