Well, Look Who Was Right All Along!

* FOMC says no rate hike in June.
* Currencies rally on the no rate hike news.
* Gold can’t find a bid.
* 2 Central Bank meetings on the docket.

But First, A Word From Our Sponsor..

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

Good day.. And a Tub Thumpin’ Thursday to you! Well, I’m told that today is Red Nose Day. Which is a made up day for a good cause I guess as it represents the raising of money for Children and young people living in poverty. I was in a Walgreens earlier this month (on the first Tuesday so I can get my “senior 20% discount!) and they were selling these Red Noses, and I thought. Hmmm, so everybody wants to be a clown? But now I find out that it was a fund raiser. Should have known better with a girl like you! The Beatles greet me this morning with their song: I want to hold your hand. Now, admit it, when was the last time you heard that song? And just thinking about it, brings a smile to your face!

Well, yesterday, I awoke from my nap, and checked my email, which is always an adventure, because I never know when I’ll see some meeting that I missed while napping, or that someone is trying to reach me. But this time, I wanted to see what the Fed’s FOMC Meeting Minutes said, so I could either pound the drum for Chuck, or hide in the basement. So, let’s go through them and see if you can determine what route I took.

The Fed’s FOMC Meeting Minutes (FOMCMM) allowed the Fed members to keep with their call that the economic slowdown in the winter months was just “Transitory” but then tried to slip in, under the cover of darkness, the fact that the Fed members were not prepared to hike rates in the first part of the year. So, did you get that? No rate hike in June! Didn’t I tell you long ago and far away in a galaxy a million light years away, that there would be no rate hike in June? It didn’t take me months to break it down, and come to that conclusion, it was just plain old logic.

So, now everyone believes that the Fed will hike rates in September. Hmmm. Here’s my take on that. the Fed will have two options. They can feel as though they are cornered by the markets and hike rates just to save face. Or, what will more likely be the case, they’ll have to attempt to do another meeting under the cover of darkness, because the economic data is so weak, that they’ll have to announce that they are coming back to the Quantitative Easing/ bond buying/ debt monetization/ crack cocaine for Central Banks, Table. Uh-Oh.. This delay now of the rate hike in June that everyone a couple of months ago, would have bet the farm that it was going to happen (except Chuck!) is just the Fed dipping their toes in the shark tank. Going back to the QE table will be the full attempt to jump the shark tank, and the dollar will be the thing that gets eaten.

So. what happened last night in the overnight markets and the early European session to the dollar after this admission by the FOMC that there will be no June rate hike? Well, at first not much, but now the Europeans are seeing to it that the dollar gets what it’s got coming, after all that gloating that they were going to be raising rates in the U.S. And the broad based dollar rally we saw yesterday, is being reversed. Crazy, I know, one day on, the next day off. Drives me crazy folks, but hey, at least it’s different each day. HA! So, the currencies are on the rally tracks today, except Gold, which can’t get going for some “unknown” reason.

The other thing that could be moving the dollar downward this morning is profit taking. The dollar rally yesterday was HUGE folks. The Eurozone Flash PMI’s (manufacturing index) printed this morning, and although the overall number didn’t meet expectations for a rise to 53.9, instead printing at 53.4, the manufacturing component was far better than the services component. So any hit to the euro here, will be muted, as long as the traders look under the hood and don’t just take the Flash number as gospel. I’ve been doing a lot of reading and number crunching on the Eurozone economic data lately, and I think the Eurozone is going to surprise the markets quite a bit with 2nd QTR GDP. Might even rival what we see from the U.S. in the 2nd QTR.

The New Zealand dollar / kiwi is up a tiny bit this morning, but is being held back by the Budget Surprise that everyone got to see last night. the N.Z. Finance Minister, English, presented his Budget, and the surprise was that N.Z. printed a Budget Deficit for the year ending in June of NZD 648 Million. I know, that’s chump change compared to the Budget Deficits of a lot of countries. But this is tiny New Zealand, folks. They’ve always been able to carve out Budget Surpluses. In fact, the FM is forecasting a Budget Surplus for 2016. But that’s then, what’s now is that something happened that wasn’t on the docket, and as I’ve always told you, currency traders don’t like “unknowns” and this truly qualifies as a “unknown”. Well, not any longer it’s not! HA!

We have two countries with Central Bank meetings today/ tonight. First we have the South African Reserve Bank (SARB) meeting, and while a lot of observers and economists believe that the SARB will keep rates unchanged, I’m of the opinion that the quietness coming from S. Africa, in terms of strikes, tells me that the economy is probably back to normal, which means inflation is probably becoming a problem there, and I wouldn’t rule out a rate hike from the SARB..

The other country with a Central Bank meeting tonight is Japan. Here the Bank of Japan (BOJ) primed the pump with some changes to their economic forecasts at their last meeting, and one would think that the BOJ would use priming of the pump to add more stimulus to the economy. the BOJ could strike while the iron is hot, given their tiny jump in GDP that I reported to you yesterday. But that’s not the BOJ’s M.O. and they’ll probably just meet, play some pachinko, or checkers and go home without doing anything. Japanese yen has finally moved past the 120 level, to 121, but I don’t think it’s going to go anyplace at the moment.

Other than those two Central Bank meetings today / tonight, the docket is pretty empty. the U.S. Data Cupboard has a plethora of data prints, but 99% of them are third tier, but there is the Leading Index print for April in the Cupboard today, and that should show us that the outlook for the U.S. economy is more of the same-o, same-o, with no improvement.

Well, I really stirred up the hornet’s nest with my comments about Richard Duncan yesterday. I had readers going for my throat for talking about his latest book. One reader asked me if I actually read Dollar Crisis. So, I replied. Yes, I read the book for the information in it. I do not take recommendations from anyone, I come up with my own thoughts based on knowledge and experience, of which I now have 42 years of. Duncan believes that the Credit world we live in today, is the problem, and that credit will have to continue to grow 2% per year or else the whole house of cards collapses, that’s why he advocates low rates, and continued borrowing.

Basically, he’s saying that he sees no way out of this Credit World we live in, so we had better keep it going or else. Oh well, I get hammered when I mention James Rickards, Edward Griffin, and others, so I’ll just add Duncan to the list.

But in the end folks. I read these guys, and I pick out the stuff I like, and then go on with life. Shoot Rudy, don’t you have family or friends that have an annoying thing they do, but all the other stuff is great? Do you just drop them as a friend because of the annoying thing, or do you pick out the stuff you like and go on with life?

OK.. Sorry, but Geez Louise, I was really taken back by that yesterday. I just looked out my office window, and see the sun rising in the East, but very dark, stormy looking clouds to the West. WOW, that makes for a very eerie scene.

The Russian ruble is back on the rally tracks this morning. I also had someone get angry with me for suggesting that the dropping of sanctions on Russia from the Eurozone would be good for both entities. What the heck is going on here? I think I’ll just take my bat and ball and go home, you all can play this game without me! OK, now that I have off my chest. I read in Ed Steer’s letter this morning that the Central Bank of Russia (CBR) added 300,000 Troy Ounces of Gold to their reserves in April. China, Russia, and India. the three Amigos! Adding Gold to their reserves, like Bill Gates adds dollars to his fortune on a daily basis.

On a side bar. I mentioned the Three Amigos. I smile, because it reminds me of that goofy movie of the same name with Steve Martin, Chevy Chase and Martin Short from the 80’s.

And in China.. The HSBC version of the manufacturing Index (PMI) didn’t meet expectations, but was higher than the previous month’s print. I have to say that this usually means the Gov’t’s version of the PMI will be better. So, things in China appear to have bottomed, but are not reversing as fast, which tells me that the Chinese will probably cut rates further, to move this slowdown along a little faster to recovery.

There’s news from China that bothers me. I’ll throw it out there and see if it bothers you or not. The U.S. is to hold Asian Military Summit, and exclude China from the Summit.. Isn’t Life Strange?

Well, as I said above, Gold is trying to find some traction this morning, on a day when you would think it would be no problem, given the FOMC statement yesterday. But Noooooooo! Hmmm. On one day we have the news that China not only added Tonnes to the reserves, but also announced that they were buying mining properties around the world to increase their Gold production, and obviously add to their reserves, and the next day we have news that Russia also added a large amount of Gold to their reserves, and the Fed says no rate hike in June, and all the while, Gold can’t find a bid. Hmmm.

What’s holding Gold back, like a starting gate holds back the thoroughbreds before a race? Good Question. And one that I think the CFTC (commodities commission) should be looking into. But they won’t, and if they did, they wouldn’t find anything, see their past inquiry into Silver trading. So, it must just be market forces holding Gold back this morning. Yeah, that’s the ticket! Yes, and my first wife was a young Elizabeth Taylor, yes, that’s the ticket!

I had to laugh out loud when I saw this dispatch from the GATA people yesterday. First of all let me set this up. The CME (futures exchange) announced that they were going to begin trading in Zinc futures. So then I received this dispatch from GATA, and they said, “Goodbye Zinc Rally, the CME creates futures contract in Zinc.” The GATA people also said that the” CME engaged JPM to rig price”, but the CME actually said that JPM would provide liquidity for the new market. Which one do you subscribe to?

Now that’s funny, I don’t care who you are, that’s funny. “Goodbye Zinc rally, here comes CME futures trading”. Well, funny on the outside, not on the inside. Sort of like Smokey Bill Robinson’s song Tears of a Clown. Now if there’s a smile upon my face, don’t let my glad expression give you the wrong impression, Don’t let the smile I wear, make you think that I don’t care, Really I’m sad and hurting so bad. Ahhh, Smokey Robinson, that mellow voice. Love that guy’s music!

To recap. Well the Fed finally admitted that they are not prepared to hike rates in the first half of this year, which means no rate hike in June, just like Chuck told you months ago! The Broad based dollar rally yesterday, faded overnight, and in Europe, it has been washed out of the markets minds, and the currencies are back to rallying, except for Gold, which no matter what good news comes its way can’t seem to find a bid. The SARB meets today, and the BOJ meets tonight. Chuck thinks the SARB might have a surprise for the markets, and the BOJ should, but won’t, thus keeping with their M.O. Chuck gets lots of negative mail about Richard Duncan, and his thoughts about the Eurozone dropping the sanctions VS Russia. And decides to take his bat and ball and let the game go on without him.

For What It’s Worth. So, have you seen the video or read any of the text of this guy named Ray Dalio, the head of Bridgewater? Last week he got a lot of attention when he said, “if you don’t own Gold, you don’t know history”. And this week he’s in a video that’s going around where he says that Buffett is wrong on Gold. here’s a snippet of the video, and for those of you interested here’s the link to the video. it’s only 2 minutes and 40 seconds, and not one of those hour long tricks that everyone sends out now, saying, ” find out how to “X” by clicking on this short video”.. . http://www.zerohedge.com/news/2015-05-20/ray-dalio-slams-buffett-being-wrong-gold-says-social-disruption-inevitable

For the record, for those of you who don’t want to watch another video, I’ll tell you that when asked about the economy and deleveraging, and Warren Buffet’s negative view on gold, Bridgewater’s Ray Dalio, said, “I don’t know whether we’re beyond the point of being able to successfully manage this, and I worry about social disruption . . . I think gold should be a part of everybody’s portfolio to some degree because it diversifies the portfolio, it is the alternative money . . . I think [Warren Buffet is] making a big mistake.”

Chuck again. I love when the Big Boys get the boxing gloves out and go a round or two. But Dalio is right. Buffett should know better. And I really agree with his quote from last week that got so much attention. “If you don’t own Gold, you don’t know history”. And then there’s that thing about Those that don’t know history are doomed to repeat it.

Currencies today 5/21/15. American Style: A$ .7890, kiwi .7305, C$ .8185, euro 1.1145, sterling 1.5690, Swiss $1.0710, . European Style: rand 11.7685, krone 7.5470, SEK 8.3025, forint 275.00, zloty 3.0050, koruna 24.5420, RUB 49.68, yen 121.05, sing 1.3355, HKD 7.7535, INR 63.63, China 6.1139, pesos 15.16, BRL 3.0065, Dollar Index 95.19, Oil $59.56, 10-year 2.23%, Silver $17.14, Platinum $1,154.04, Palladium $778.52, and Gold. $1,206.91

That’s it for today. Well, on TV this morning, Famous Dave’s is set up on a New York City Street, and they have the Big Green Egg smoking away, and I just saw the ribs having sauce mopped on them. Man, am I ready for summer to begin! Cardinals’ bats still had life in them last night, after scoring 10 the night before they followed up with a 9 spot last night. YAHOO! Loggins and Messina are playing their song: Danny’s Song, on the iPod right now. I used to play that one on my guitar. Alex is back home and yesterday he was playing his guitar again. I love to hear him play. Last week he was sitting at the piano, and playing a very nice song. He taught himself to play the piano. Yes, he’s pretty talented. I told you all that last week I was interviewed by Pete Coyne at the Daily Reckoning.. I saw the text yesterday, so after legal gives it their blessing, it’ll be printed over at the Daily Reckoning, and of course I’ll give you the heads up, when that happens. This is my Friday in the office today, as tomorrow I’ll be at home. A neighbor that started getting treatment for Cancer a couple years after me, was taken down by Cancer. A real shame, as he was not that old, and was a fun person to be around. His funeral is tomorrow. So, there you go. Thank you for reading the Pfennig today, and I hope you can go out and make this a Tub Thumpin’ Thursday!

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