What We Need Are Some Good Old Structural Changes!

* Currencies rally! .
* Chuck & Rickards on the same bandwagon! .
* ECB meets today.
* In the minds of a Central Banker .

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

Good Day. And a Tub Thumpin’ Thursday to you! You know how I tell you some mornings that I almost didn’t answer the bell? Well, this morning I really came close to throwing in the towel, raising the white flag, and so on. I had an awful night, and about the time I really fell into deep sleep the alarm went off, so I bagged it, and went back to sleep, only to have it go off again later. So needless to say, I’m at home doing the Pfennig today, and wanting badly to close my eyes! But. I have a job to do! And if I didn’t love doing this as much as I do, I would expect a “no show” from me today. But Noooooooo! Styx greets me today with their song: Suite Madame Blue.

The currencies are mixed today, with a majority of them gaining VS the dollar. Two of the stars this morning are the Antipodean currencies of Australia and New Zealand. The price of Oil inched higher again in the past 24 hours, and Gold is attempting to push higher this morning. And believe it or don’t, but the euro is knocking on the door to 1.13, and this is with the European Central Bank (ECB) meeting, and could have knock on negative reactions to their announcements. But right now, euro traders are saying ECB, Schmee C B! Fed members, George and Lacker spoke before the House members yesterday, but there’s no report out there telling us what they said, so I’m thinking that they kept to the script, and didn’t go off course with talk about rate hikes.

Some of the moves this morning are suspect or questionable in my opinion. I mean, that they really have no business rallying based on things that happened or were said in their respective countries, but in keeping with the thought that’s been rattling around in my empty head for a few months now. It’s very reminiscent of the end of the strong dollar trend, that I and some of you witnessed back in 2002. For instance, In Australia, the new PM, Turnbull, made some comments about putting fiscal repair at the top of the economic agenda. That should have sent a message to the markets that the A$ is in trouble. But Noooooooo! Instead it rallies!

We have the ECB meeting as I write, even as late as I am writing I might add! And the ECB is expected to announce that QE will continue until inflation rises, and they might even announce a rate move that takes them further into Neverland. But the euro is knocking on the door to 1.13. So, these are the things that someone like me, and I’m like no other, believe me on that one, looks for as clues to the answer of the question: Is the strong dollar trend ending?

Well, bust my buttons! I sure was happy to see that James Rickards agrees with me, although to his credit, he probably has said this many times in the past and not just right now. First, let me repeat what I said on August 9 in the Daily Pfennig, “With 10,000 Baby Boomers retiring for the next 15 years or so, something has to give there, otherwise the debt problem weighing on the economy now, will become an even larger burden to bear. There are other structural changes that need to be made, like changing the tax code, getting the Gov’t out of small businesses’ business, and allow them to fire employees again. And I did like the one politician yesterday who said they would put a moratorium on any new regulation. We have far too many regulations to ever allow creativeness, which is what we need right now!” If you don’t believe me that I said that, you can check out the archived letter here: http://www.dailypfennig.com/2016/08/09/bernanke-points-finger/

OK. Then yesterday I was reading the Tuesday afternoon Daily Reckoning (www.dailyreckoning.com) and James Rickards had this to say. “In a word, the Fed has failed in its mission to restore robust growth to the U.S. economy. That failure has laid the foundation for the next global monetary crisis.  This failure was inevitable. The reason is that the problems in the economy are structural. They have to do with taxation, regulation, demographics and other factors beyond the Fed’s mandate. The Fed’s solutions are monetary. A policymaker cannot solve structural problems with monetary tools.”

So, our words for the day are: Structural Problems.

In a follow up to what I wrote about on Tuesday, regarding the Hanjin Shipping Co. collapse, a longtime reader in S. Florida, (thanks Brett!) sent me a note letting me know that Hanjin handled 50% of Samsung exports, and 23% of LG Electronics exports. Now that’s a huge slice of biz for a shipping company to pick up, eh? And on top of that, think about this another way. Could this be a real problem this Christmas shopping season? If stores don’t have product to sell, they suffer, and that could be a trigger for a full-blown recession. But then that’s just me thinking out loud.

Gold lost $4.50 yesterday, but is up $2.50 in the early morning trading today. I don’t know what was behind the $4.50 drop yesterday, but if that’s all it was, then I’m OK with that, but I still think that given what we know about the world’s economies, and negative rates, and the prospect of helicopter money, that Gold would be stair climbing in price on a daily basis. You have to think like a Central Banker, to figure this all out, and while I don’t like going there, I will on occasion to figure things out. And right now, I was there yesterday, maybe that’s why I couldn’t sleep last night? Anyway, what I’m trying to say here is that It’s ingrained in a Central Banker’s mind that if a policy they implement doesn’t work, then they have to just hit it harder. and keep hitting it until it works, or another newfangled idea arises. And that’s what I think we’ll see with helicopter money. And when we do see it, anywhere in the world, Japan, Europe, wherever, that should send Gold higher. Of course that’s how I see it, and I could be wrong.

The U.S. Data Cupboard is basically empty again today, with the Weekly Initial Jobless Claims about the only thing, Oh, wait! Consumer Credit (read debt) will print today. This is always almost comical. in a sad way I mean to say. So, it’s all about the ECB today folks, when was the last time we said that?

To recap. The ECB is meeting as I write, and they are expected to throw the euro under the bus again today, but. Euro traders aren’t buying it, and the euro is knocking on the door to 1.13 this morning. In fact, most of the currencies are booking gains VS the dollar this morning, and Chuck questions some of their moves, but then ties it back to the idea that the strong dollar trend is ending. Oil inches higher again, and Gold loses $4.50 yesterday.. What’s up with that?

For What It’s Worth. MarketWatch sent me this info yesterday, and I finally got around to reading it last night. It’s about how Businesses are being cautious ahead of the election, which isn’t good for the economy. You can find the article here: http://www.marketwatch.com/story/fed-beige-book-finds-some-concern-over-election-2016-09-07

Or here’s your Snippet: “The presidential election is making some firms cautious about expanding activity, according to a report from the 12 Federal Reserve districts released Wednesday.

The Fed’s latest beige book report said that commercial real estate contacts “in several districts” cited only modest expectations for sales and construction activity moving forward, “due in part to economic uncertainty surrounding the November elections.”

The Dallas, Cleveland and Boston districts cited the election as one reason that firms were cautious about the outlook.

Earlier Wednesday, the Bank of Canada said that the outlook for U.S. business investment had become less certain.”

Chuck again. Yes, the Fed’s Beige Book which is a compilation of the regions’ reports on activity in each region, has been touting the same “modestly positive tone” for some time now, but the key that I find interesting is that there is no hint, whatsoever, of a second-half surge in growth anywhere in the report.

Currencies today 9/8/16. American Style: A$ .7725, kiwi .7466, C$ .7770, euro 1.1295, sterling 1.3372, Swiss $1.0342, . European Style: rand 13.8711, krone 8.1295, SEK 8.3954, forint 273.02, zloty 3.8170, koruna 23.9275, RUB 63.94, yen 101.65, sing 1.3460, HKD 7.7562, INR 66.41, China 6.6615, peso 18.32, BRL 3.1964, Dollar Index 94.66, Oil $46.26, 10-year 1.54%, Silver $19.99, Platinum $1,095.82, Palladium $697.15, and Gold. $1,351.60

That’s it for today. Well, the Cardinals couldn’t pull off the sweep of the Pirates, and now come home where they can’t seem to win. UGH! What’s up with Apple introducing the new iPhone without a headphone jack? Oh, you can pick up some wireless headphones at $160 a crack to deal with that! UGH! Last month, my friend, and the retirementor, Dennis Miller, interviewed me for his letter: www.milleronthemoney And now he’s back for more Chuck speak! This time I’ll be talking about diversification, something I can do in my sleep, that is when I do sleep! HA! See? Even a bad night doesn’t keep me down! All righty then, time to get this out the door. Grand Funk Railroad takes us to the finish line today with their song: I’m Your Captain. This is back when GFR was a real rock band. It’s difficult to reconcile how a band could do this song, I’m Your Captain, and years later do a remake of: The Locomotion. UGH! Oh well, time to go, I hope you have a Tub Thumpin’ Thursday, and Be G
ood To Yourself!

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