U.S. Slaps Tariffs On Chinese Steel!

* Currencies are mixed and in tight ranges.
* Except the worst performer, the ruble.
* China continues to follow the path of devaluation!
* No real data, nothing here to look to for direction.

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

Good day. And a Marvelous Monday to you! The last Monday of 2015 to boot! Rainy days and Mondays always get me down, and that’s what we have today. It has basically rained non-stop here since Friday night, and at times the downpours were so heavy it was scary. the roads all around us are flooded, and getting around today won’t be a breeze. And I don’t think we were hit the hardest by these storms! Thank goodness for small miracles, eh? Doucette greets me this morning with his song: Mama Let Him Play. Jazz is much too crazy he can play it when he’s old, he’s too young for the blues, he’s still in his first pair of shoes. are some of the lyrics, with great guitar work. Good old song..

Well, it’s the last week of the year, and it’s a year I would like to forget for the most part. I had personal setbacks, and the currencies & metals were in shambles. The wars continue to carry on, you know, the war in Afghanistan, and anywhere else we have troops, like the Middle East, etc. But also the wars on poverty, energy prices, and stuff like that, that have been HUGE disasters through the years, but we continue to spend taxpayer money on them. I really didn’t mean to start out today on a such a downer note, it just developed that way. But I’ll stop there because you know me, I could really slip into a soapbox mode and come out on the other end having ranted and vented about this, that, or the other things!

Just to set the record straight though, 2015 was just an awful year in the markets. with a couple of trading days left, the S&P 500 Index has gained just 2.2%, with dividends, cash hasn’t gained anything, and bonds, commodities and currencies are all losers this year. Sure you can find a stock, or commodity that might have had a good year, but overall, it has been a bummer of a year for investments. And that’s all I’m going to say about that!

Well, this morning, as I look at the screens, I see much of the same type of trading that was going on last week, with the trading ranges very tight, and the euro finding ways to add to its value inch by inch. The Big Mover, and worst performer overnight is the Russian ruble, which is getting taken to the buzz saw for posting a -4% drop year on year in GDP, and a huge chunk of their Trade Surplus taken away. The ruble is trading with a 72 handle this morning, which is much worse than last week’s prices. And is a 2015 low price. UGH! So, how’s the “end of dollar dominance” going for you, Russia? And for you China? Sure, things can look pretty ugly before they turn around, but for the most part, these two countries have made it known that they have set out to end dollar dominance, and ever since they did that, their country’s fortunes have gone south. Makes you wonder, eh?

I can tell you this. The price of Oil is what could be what ails a lot of countries including, Russia, Norway, Canada, Brazil, and so on, but it could also be what cures all that ails these countries. I’ve been reading some interesting reports on the price of Oil for 2016. Some analysts have the price of Oil falling further in 2016 to $20 a barrel, while others see a rebound for the price of Oil in 2016. I would have to see a cut in production to go along with the rebound story, and I would have to see less rigs closing here in the U.S. to go with the Oil price drop story. But should the rebound story become the headline news, then we could see many battered currencies in 2015, rebound in 2016.

The Chinese renminbi continues to slide, and I have to say that I really believe that the Chinese Gov’t is behind this slide. Remember they warned the Fed to not hike rates, and when they did that, I told you all that the Chinese would allow renminbi weakness to offset the Fed rate hike, for China couldn’t have the dollar getting stronger VS the euro and yen, which would then make those two weaker on the crosses with the renminbi. For these two countries are two of China’s biggest trading partners, and to keep exports going into these countries, they need for the renminbi to remain the weaker of the two currencies in the terms of trade, or least not too much stronger.

So, I continue to believe that China will just keep the renminbi on this path of devaluation, as long as the Fed keeps up the hype of rate hikes that are on the docket for 2016. It’s a sad thing, given that the renminbi was really one of the few currencies since 2011, that we could look to for currency strength, albeit small moves, but positive ones nonetheless, but not any longer.

Well, the “play time” for the Aussie dollar (A$) is just about over. Remember, Reserve Bank of Australia (RBA) Gov. Stevens, told us a month or so ago, to “chill out over monetary policy, and to enjoy Christmas, and then come back in the New Year to review monetary policy again”. The Aussie economic data has been hit-n-miss since that “chill out” statement by Stevens, so you would have to think that the since there’s been no real strong statement from economic data that Stevens will have to deal with calls from the markets to cut rates further in 2016. So, that lingering cloud has hovered over the A$ for a couple of weeks now, and has cast a darkness on the A$… Things and momentum could always change before the RBA meets, and that would certainly be welcomed by the A$.

The New Zealand dollar / kiwi is in the same boat as the A$… There’s a dark cloud of further rate cuts in 2016 hovering over kiwi. And while this isn’t the time or place for the rate cuts, traders are holding back kiwi from further gains until they get a clearer picture of what’s going on in New Zealand with economic data.

I’m thinking that with the Chinese renminbi continuing to follow the path of devaluation, that the Singapore dollar (S$) is in deep dookie too. For, as I’ve explained for a few years now, the Monetary Authority of Singapore (MAS) can’t allow the S$ to get too strong VS the renminbi because of competition for exports. Well, if the renminbi is getting weaker, one has to go with the thought that the S$ will too. UGH!

I can tell you now that this coming Sunday’s Pfennig is going to be a special feature that will have the 2016 outlooks for stocks, bonds, metals and currencies, with a different “guru” giving their thoughts on their respective asset they are responsible for. So, look for that in your mailbox next Sunday! Or go to www.dailypfennig.com

So. How are things in the U.S. these days? It’s been a time when most things get swept under a rug, because there aren’t enough traders on trading desks to deal with them, and besides it was Christmas! The trading desks will remain understaffed this week, but come back all refreshed next week. Last week, as we drew close to Christmas, U.S. November Durable Goods Orders printed negative once again this time at -0.1%, and with airplanes it was down -0.4%… And Capital Goods Orders were also negative at -0.5%… UGH! That’s some bad data once again. I know, while I was gone, for a few days, the data wasn’t very good either, so the bad data is piling up on the U.S. Shoot Rudy, even New Home Sales dropped in November! But not to worry. the U. of Michigan U.S. Sentiment index rose in November to 92.6 from 91.8. They sure didn’t call me to survey me!

On a sidebar. You know how I keep telling you that the Fed’s Birth/ Death model makes no sense, given that they keeping adding jobs each month, which would mean that there are more business “births” than “deaths”. But that isn’t the fact for this year, and I read this weekend that it hasn’t been the case for the last 6 years! This is something that had never happened before in the history of the U.S. and now it’s happening for 6 years running. Makes you wanna go back and add up all the jobs that I report to you that were added by the BLS every month, and throw the numbers out the window doesn’t it?

Well, you knew I wouldn’t just let that sit there like that, right? This year the net BLS jobs added using the Birth/ Death model is 804,000 jobs. Think about that for a minute. That’s an average of 73,000 jobs per month. Remember the months when we didn’t have many jobs to report in the first place? So. that’s for the first 11 months of this year. What about 2014? Well, the BLS only goes back to April of 2014, so for the 9 months of 2014, the net was 844,000 jobs, which was an average each month of nearly 93,777. So, do you see now why I make such a BIG deal out of this “adjustment”? For 6 years, according to the data I was reading, more business deaths have occurred than births here in the U.S. So, why is the BLS adding these “ghost jobs?” That’s a good question, and one I can’t answer, but I’m sure someone can. But won’t!

The U.S. Data Cupboard is basically empty today, with just a regional manufacturing index on the docket (Dallas) . And besides the Trade numbers tomorrow, and the S&P Home Price Index also tomorrow, there’s not a lot to look at data-wise this week. So, it’ll be like pulling teeth this week to come up with stuff to write about, but you know me, I’ll find something of interest!

Gold is down this morning, by $4 as I write. What a year it’s been for the shiny metal. Gold is down over $100 from where it began the year. But the real loser this year of value was Palladium which saw a price of $802 on Jan 2, 2015, and today it has a price of $560.72. It was a year when most analysts saw the demand for new cars, and thought that it would be a great year for Palladium (& Platinum) But it was not to be. What happened? Can you say price manipulation? I knew you could. And that’s all I have to say about that!

To recap. it’s the last week of the year, the trading desks are still understaffed, and it’s been a rainy weekend in St. Louis, dangerously rainy weekend in St. Louis I might add! The currencies are in a tight ranges just like last week, with the biggest loser overnight being the Russian ruble which is being taken to the buzz saw for posting a narrowing Trade Surplus and a drop in GDP of -4% year on year. the Chinese renminbi continues on the path of devaluation to offset the rate hikes in the U.S. And Chuck looks under the hood at the Birth/ Death Model, something you’ve all probably wondered about for years! HA!

For What It’s Worth. Let me take you back to 2001. Why so long ago, Chuck? Because that’s when I first saw that then president Bush, had signed a law placing tariffs on Japanese Steel. I said then, this is not good for the dollar, and went to work on the white paper, Decline of the dollar. talk about a timely white paper, given the weak dollar trend began in 2002. OK, skip to 2015, now, whew, I’m tired! But here in 2015, I read this weekend that the new president had signed a low to place tariffs on Chinese Steel. Uh-Oh, is this a case of “here we go again?” I certainly wouldn’t be surprised if it turned out that way! So, you can read the whole article on Zerohedge.com here: http://www.zerohedge.com/news/2015-12-23/trade-wars-begin-us-imposes-256-tarriff-chinese-steel-imports¬†

Or I have a snippet or two for you here: “The tariff hike comes on the heels of a previous announcement from November 3, which saw countervailing duties as high as 236%. Together these create a barrier to imports of these steel products from China, said Caitlin Webber, an analyst at Bloomberg Intelligence in Washington.

Together these create a barrier to imports of these steel products from China, said Caitlin Webber, an analyst at Bloomberg Intelligence in Washington. A 500 percent duty is obviously prohibitive,” Webber said in an interview. “The lower ones are much less prohibitive and would probably have a lower impact on imports.”

This means that suddenly China’s steel exporters will have to scramble to find a comparably large market in which to sell their wares as now exporting to the US is prohibitively expensive and would result in massive losses to domestic producers.”

Chuck again. Who knows? But it sure worked against the dollar in 2001. Could we see history repeat itself?

Currencies today 12/28/15.American Style: A$ .7265, kiwi .6835, C$ .7205, euro 1.0990, sterling 1.4905, Swiss $1.0120, . European Style: rand 15.2315, krone 8.69335, SEK 8.3755, forint 285.90, zloty 3.8660, koruna 24.5875, RUB 72.14, yen 120.45, sing 1.4075, HKD 7.7505, INR 66.19, China 6.4750, pesos 17.30, BRL 3.9475, Dollar Index 97.83, Oil $37.26, 10-year 2.24%, Silver $14.09, Platinum $874.93, Palladium $560.72, and Gold. $1,072.09

That’s it for today. Well, Saturday was Kathy’s birthday, no big celebration this year. I think everyone was just plum worn out from the Christmas celebrations. How was your Christmas? We got to have all the kids and grandkids this year, so it was good for me! So, Pfennig Tradition calls for no Pfennig on New Year’s Eve morning. So just 3 Pfennigs this week, and then our BIG 2016 outlook in the Sunday Pfennig! Hey! Our Rams won yesterday! Beating Seattle in Seattle for the first time in 10 years or something like that! WOW! Our Blues split a home and away 2-game series with Dallas. With the game here Saturday Night going 9 rounds of shootout hockey, which is a really stupid way to decide a game if you ask Chuck. Play the game until somebody wins, period! So, do you have BIG plans for New Year’s Eve? Just a dinner with friends is on my docket, but who knows? The Big College Playoffs are on New Year’s Eve this year. Strange time if you ask me, because lots of people that would normally be in front of their TV’s watching those games will be out celebrating the New Year, like they always do. Pretty strange if you ask me! Well, I can hear it pouring outside again right now. More rain, UGH! Alright then. time to get going. I hope you have a Marvelous Monday!

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