Wax On, Wax Off.

* Currencies & metals rally .
* Oil rebounds from loss last week .
* Draghi speaks today.
* Renegotiating NAFTA? .

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

Good Day. And a Marvelous Monday to you! I’ve been awake for a while this morning, and when I did wake up, I initially thought, no Pfennig today, it’s a holiday. But that was last week, and quickly realized that, and got up and got to work! Some very strong thunderstorms are moving through the area and the lightening show is impressive! My phone keeps beeping weather alarm, that tornadoes have been sighted. Crazy, eh? Other than that, the weekend weather was absolutely Chamber of Commerce! Rod Stewart greets me this morning with his song: Reason To Believe, which is something I wish the whole country would think about doing. Believing.. That is until proven that things won’t work.

Well, we start the week with dollar weakness. The currencies, for the most part, are looking perky, and Gold tried to follow up Friday’s $5.50 gain with a couple more bucks of gain in the early morning trading. Stocks had a good day on Friday too, so in the not so distant old day, this would be called a “risk off” day.. I’m so glad that the “risk on”/ “risk off” days stuff has been left at the door. Besides it always reminded me of the Karate Kid. Wax on, Wax off.

The Dollar Index is heading to a figure below 100, and last week when that happened, the dollar bounced higher. If we see that again today or tomorrow, then I’ll know that what I’m seeing is a strong dollar trend that’s running out of steam. Today’s FWIW section has a great mind talking about trends. You’ll not want to miss that!

The price of Oil has rebounded once again after plunging last week to a $51 handle. This morning it trades with a mid-$52 handle. The OPEC members met this past weekend to discuss their honoring the production cut criteria. And so far, so good. I’m impressed, even though it’s only been 3 weeks now that the production cuts started. But reports from the meeting say that OPEC and non-OPEC countries have made strong start. So far the agreement is a success..

I think that some of Oil’s pricing problems last week when it plunged from near $54 to $51 was directly influenced by this upcoming meeting (at that time). Oil traders didn’t know what to expect, and many of them, thought that some cheating would be discovered. I would have thought 3that to be the case too, but then it is only 3-weeks down the road.

So, all the anti-dollar assets are on the rally tracks today.. Gold, euros, and Oil.. Speaking of the euro. I read some more reports this week from the Chicken Littles out there, regarding the collapse of the Eurozone, and dropping of the euro. These writers truly believe that this is what is going to happen here, either that or they are grasping at straws. I do believe that the Eurozone is in for an interesting year, given the elections in France, Germany, Netherlands, Spain and Italy. I did like quote that I heard from a leader in the Netherlands, where he was talking about the new feeling about elections given the results of BREXIT and the U.S. election. He said, “you can’t put the Jeannie back into the bottle once it is out”.

You know, if I were the chancellor of Germany, and I got to look back a few years, I would have 1. Told Greece, and all the other countries to work it out themselves, and if that can’t, then leave the euro. 2. Been more selective with regards to immigration. Sure, this would isolated Germany from the rest of the Eurozone, but they are the Big Dog on the porch, and they should have put their foot down with regards to bailing out Tom, Dick and Harry, but they didn’t.. And this immigration mess they’ve gotten themselves in is a fuster. So, much so, that I think that current Chancellor, Angela Merkle is going to face stiff challenges in the German election.

I decided last week that the next Currency of the Month is going to be the Russian ruble. I talk so much about the ruble in this daily letter, and a quick look at the currency returns in the last 6 months, and the best performer has been the ruble. You know, I’m thinking that the economic sanctions on them will be removed by first the U.S. and then followed by the Eurozone in the coming months, as I see this as something the new President doesn’t want to deal with.

Speaking of the new President, Trump. That was a nice inauguration on Friday, eh? I love the peaceful transfer of power.. And now he reports to work for his first Monday on the job.. Good luck Mr. President. You’re going to need a lot of it! Did you see that our current national debt is closing in on $20 Trillion? You did? OK. And you still wanted the job? HA!

Since I just mentioned the near $20 Trillion current national debt. I want to follow up my long dissertation from Friday, on U.S. Debt with a quote on debt from Doug Casey, that appeared in Bill Bonner’s diary on Saturday. I think Doug’s explanation of debt hits the nail bang on the head. So, let’s listen in:

“There’s nothing wrong with debt in itself; lending is one way for the owner of capital to deploy it. But if a society is going to advance, debt should be largely for productive purposes, so that it’s self-liquidating; and most of it would necessarily be short term.

But most of the scores of trillions of debt in the world today are for consumption, not production. And the debt is not only not self-liquidating, it’s compounding. And most of it is long term, with no relation to any specific asset. A lender can reasonably predict the value of a short-term loan, but debt payable in 30 years is impossible to value realistically. All government debt, mortgage debt, consumer debt, and almost all student loan debt does nothing but allow borrowers to live off the capital others have accumulated. It turns the debtors into indentured servants for the indefinite future. The entire world has basically overlooked this, along with most other tenets of sound economics.” – Doug Casey

Last Friday, I listed the debt totals of the last 7 Presidents and I received some pushback from a few readers who thought I was trying to slam bam our last president. Not true. It is true that I didn’t try to explain the circumstances of each president’s debt accumulation, nor did I offer up any excuses or rationalizations, I simply wanted to show under who’s watch the debt totals got to $20 Trillion.. No excuses. As my old football coach used to say: “Excuses never won a ballgame for anyone”

I mentioned above that Gold gained $5.50 on Friday, and is up a couple of bucks in the early morning trading today. The number of contracts traded was another whopping 207,000 contracts! There’s Gold in them thar hills, Jedidiah! Or something like that.. 207,000 contracts just blows me away, and that’s two days in a row of large numbers of contracts traded! What’s going on here?

I read this weekend that Russia continues to accumulate Gold. I explained how they are doing this in the January Review & Focus (www.everbank.com/reviewfocus ) Russia’s Gold reserves grew by 14.7% in 2016, to a total of 1,614.27 tonnes.. This has been going on for a few years now, with Russia adding 208 Tonnes of Gold in 2015, and 172 Tonnes in 2014. This has been a better trade for the Russian Central Bank than buying rubles or other currencies with their reserves. So, look for Russia to continue to buy physical Gold, as the trade has worked out nicely for the Central Bank.

The Canadian dollar/ loonie rebounded a bit on Friday and in the overnight markets with the rebound in the price of Oil.. Last week, Bank of Canada (BOC) Gov. Poloz didn’t do the loonie any favors, and the currency lost 1.6% in one day! I want to remind everyone that I’ve warned you about Poloz on several occasions in the past. He’s from the “Trade side” of the Gov’t, where those folks only know one thing to do, and that is whine about the strength of the currency, and I told you that eventually his “roots” would come back to haunt the loonie, and last Thursday they did just that!

I think that the loonie and the Mexican peso are going to be in for some volatility in the coming weeks/ months, as NAFTA gets discussed by new President Trump, who has stated that he wants to renegotiate the agreement. let me ask you this. do you remember Ross Perot? That’s all I’m going to say about that and NAFTA.. except that as this goes through the renegotiation process, you can expect the currencies of Canada and Mexico to gyrate and be volatile..

The U.S. Data Cupboard is empty today, following Friday’s empty status.. And looking at the docket for this week, I don’t see anything other than the December Trade Deficit that’s Tier 1 data and no “real economic data” until Friday, when Durable Goods and Capital Goods orders will print for December, and we’ll get out first look at 4th QTR GDP..

They do have some economic prints in the Eurozone today, but those will be overlooked by a speech by European Central Bank (ECB) President, Mario Draghi, which is going on as my fat fingers fly across the keyboard!

To recap.. the week starts off with dollar weakness, and all three anti-dollar assets are on the rally tracks this morning, euros, Gold and Oil. there’s not a lot to talk about today, due to no data on Friday or today, and we won’t get any real data until Friday. We had our peaceful transfer of power on Friday. Chuck loves that! Gold, gained $5.50 on Friday, and is up a couple of bucks so far today. And Doug Casey gets into Debt for us.

For What It’s Worth. This is a reflection of thoughts by the late great Richard Russell.. It obviously is from years ago, but, seems to play out quite nicely today. I thank my good friends, Pamela and Mary Anne Aden for allowing me to use this from their newsletter: www.dowtheoryletters.com/

“The single most difficult concept to get across to investors (and I say this after many years of writing about it) is the concept of the great primary trend of the market.

A primary trend, bull or bear, once set in motion, does not reverse until it is EXHAUSTED. A bull market such as this one, for example, will not top out until the bull forces have totally spent themselves. Thus, a bull market will not die on bad news, it will not collapse on Presidential attacks, economic recessions, corporate disasters or political threats.

A bull market will only end when the internal bullish forces have exhausted themselves and there is nowhere to go but down. When that happens, when the next bear market begins, all the Fed monetary flooding and all the Congressional hoopla in the world will not turn the bear market around.

For instance, currently the economic news is anything but glowing. Now, from a cold, selfish, market-oriented standpoint, I don’t give a damn about the bad news.

What I am interested in is the market’s reaction to the news. In a bear market, any bad news would send the stock market careening lower. In a bull market, Wall Street will tend to stand its ground while the bad news is being absorbed. Or at worst, the stock market will back off to protect itself and maybe sink into a secondary reaction.

From the market technician’s standpoint (and MOST of them still don’t understand this) when a bull market is in force, a technical build-up (i.e. bearish sentiment rising, etc.) is an extremely healthy development. Such a build-up within a bull market will, in time, send the market sharply higher.

But if a bear market is in force, all the technical build-up in the world will simply POSTPONE the timing of the next major decline. Technical plusses don’t end a bear market. As I said before, downside exhaustion is what puts the bear back in his lair.

Despite what you read in the advisory advertisements, despite what you hear from your broker, despite what your uncle on Wall Street tells you, investing is a business of probabilities — not certainties. In the investment business, the amateurs demand certainty, the veterans and professionals are resigned to probabilities.

The purpose of all reactions in bull markets is to dampen the enthusiasm of wild-eyed speculators and greedy bulls. The market can accomplish this in a number of ways. It can produce a violent decline. Or it can produce a long, dragged out shallow correction. Or it can produce a complex, trading range-type correction.

But all corrections serve the same purpose. They let the steam out of the market boiler. And in many cases, corrections are the market’s way of discounting bad news that comes within a continuing long-term bull market.”

Chuck again.. You know, I read Richard Russell for years, and never got to meet him face to face, but I understand that he read the Pfennig, and that has always been a source of pride for me to know that this great mind read my humble little letter..

Currencies today 1/23/17.. American Style: A$ .7555, kiwi .7187, C$ .7531, euro 1.0740, sterling 1.2460, Swiss $ .9979, . European Style: rand 13.4960, krone 8.4844, SEK 8.8430, forint 288.13, zloty 4.07, koruna 25.1525, RUB 59.59, yen 113.43, sing 1.42, HKD 7.7569, INR 68.11, China 6.8753, peso 21.36, BRL 3.1651, Dollar Index 100.32, Oil $52.42, 10-year 2.47%, Silver $17.19, Platinum $982.45, Palladium $792.30, Gold $1,212.30, and SGE Gold.. $1,216.75 (don’t expect this number to change for a few days, as China will be celebrating their Lunar Holiday week)

That’s it for today. Well, I made a major faux pas on Friday. I caught it in time for the website posting at (www.dailypfennig.com) but missed it here, so I’m here to make amends to my good friend Kevin Yanker, aka Webbie, who celebrated a BIG birthday on Friday. Keven turned 60 but looks 50! We used to be neighbors, but they moved on up to the East Side, to a deluxe house in the sky! HA! When I get back to St. Louis this spring, I’ll have to buy him a cold one or two! Well the two teams I wanted to see in the Super Bowl lost yesterday.. UGH! And now we’re stuck with the Patriots again. I mean good for them that they’re in it again, but I did want to see a different team. Our Blues gave up another 5 goals in their game Saturday night.. UGH! Our beach bonfire on Friday night was spectacular! A beautiful night, with all our new friends down here. So, I’m hearing that the storms were damaging all around us this morning.. Thank goodness we were safe. Jimmy Cliff takes us to the finish line today with an apropos song: Hello Sunshine. Now go out and make this a Marvelous Monday! And. Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts
1-800-926-4922
https://www.everbank.com