When A Referendum Isn’t A Referendum.

* Currencies still hold edge over dollar.
* But Gold can’t find a bid .
* RBA meeting minutes are good! .
* Mobius likes Brazil and Russia! .
And now. Today’s A Pfennig For Your Thoughts.

Good Day. And a Tom Terrific Tuesday to you! A very strange day yesterday for yours truly. Not only was my A/C still out (getting fixed today) but my TV was not working correctly, so I had to resort to watching my beloved Cardinals on my iPad! Aggravation. This is something I complain about all the time, and get this from my dad. He used to say, “Chuck, here I am, sick with cancer, and I have to put up with this aggravation. I don’t understand the aggravation, do you? But he would never stop to listen if I had an answer, to which I didn’t, and still don’t, for now I have the same feelings! Sam & Dave greet me this morning with their song: Soul Man. I know the Blues Brothers redid this song, but the original by Sam & Dave is the best!

Well, I completely forgot to mention yesterday that it was the Summer Solstice. 15 hours of sunlight! And the official calendar start of Summer. Reminds me of the song by Jimmy Cliff, Hello Sunshine. And the A/C in the office is working this morning. Another aggravation yesterday, as the A/C was not turned on until around 9am and hadn’t been on all weekend, while the building baked! Man am I whining today too much or what? I bet longtime readers are now realizing that I just don’t have much going on in the markets to talk about today. HAHAHAHA!

The dollar fought back some yesterday, but not much, and today the currencies are mixed but appear to have the conn as we head into the first of back-to-back Janet Yellen talks on “the Hill”, to lawmakers. I wonder which speech Yellen will pick from today. Will she use her stance after leaving rates unchanged, or will she use her stance from a week earlier, when it sure sounded like rates were getting hiked? I wanted to point out something that Chris talked about last week and that is Fed St. Louis President, James Bullard’s comments about future rate hikes. He said that he only saw one more rate hike between now and 2019. I found this comment by the Fed member that was considered to be a hawk, to be very pessimistic for the U.S. economy, but Bullard claims that it was pessimistic. I mean how can it not be? Bullard thinks we are stuck in a low-growth, low inflation, low-interest rate environment for the next 2.5 years! And people/ investors are still buying dollars, why?

There is something going on in Germany today. Germany’s constitutional court will deliver the verdict today on the legality of the European Central Bank’s (ECB) Outright Monetary Transactions policy. I do believe the decision will be favorable for the ECB, with maybe a caveat or two added by the court. This decision is HUGE in Germany because if the ECB is allowed to do this, then the German Central Bank, the Bundesbank will also be allowed to implement this policy should they need to.

There were 2 new polls taken in the U.K. regarding BREXIT. And each poll had a different result! Crazy, eh? I read an article on Bloomberg this morning that quoted a trader saying that should the “leave vote” wins, then Swiss francs and Gold will be the main beneficiaries, and if the “don’t leave vote” wins, the pound sterling and euros will be the main beneficiaries. I agree, and have basically said that, in the past, in not so many words. I’ve told you about the flight from pound sterling to francs and Gold, so it’s only natural that those two would continue to benefit should BREXIT become a real thing. But that’s where the cheese begins to bind folks. Hang with me on this next paragraph, because you’re going to want to know what I’m about to tell you.

Well, I was doing some reading yesterday about BREXIT, and guess what I found out? OK, you’ll never guess so I’ll just tell you! HA! That should the BREXIT referendum win the vote, that the referendum will not necessarily mean that’s the end, and Britain leaves the European Union/ EU! There’s history here folks, so it’s not like this would be the first time a referendum saw another referendum or a Parliamentary decision or some other excuse for not honoring what the majority of the people voted for. The Gov’t could claim, low voter turnout, the day was too hot, or too rainy, or all sorts of mumbo-jumbo as to why they threw the first referendum’s results out the window! So. basically, it’s like this. If the “don’t leave vote” wins, then nothing happens, but if the “leave vote” wins, then I would bet the U.K. Gov’t announces that the results are not binding, and that it will be brought before the Parliament for a vote. So, long ago and far away I told you all that I didn’t think the U.K. would leave the EU, and in the end, it looks like that will be the case, no matter what the referendum reveals. I also said that we could see a bump higher for pound sterling when it was finally decided that the U.K. would remain in the EU. Once the markets figure this whole referendum isn’t a binding referendum thing, that bump for pound sterling could come, or maybe it already has begun!

Now, I bet you’re saying. Those crazy Brits, don’t they know that once the people vote for something the Gov’t can’t change it? I snicker. For it happens here too folks. Yes it does. Just a few years ago, for example, the people of Missouri voted down the concealed carry gun law, only to see the Gov’t of Missouri go ahead and make it legal. I bet every state has a skeleton in their collective closets that would be an example of this. So, it’s not just the Brits folks.

The Aussie dollar (A$) is up 1/2-cent this morning from yesterday morning’s pricing, and it’s all about the Reserve Bank of Australia’s (RBA) meeting minutes, that noted that “recent data on the domestic economy had generally been positive”. You see, this is important, and that’s why the A$ is having a good day, so far. Markets, traders, investors, etc. love to see a currency’s Central Bank actually acknowledge what everyone in the real world has been seeing and that is stronger economic data. Because it appears that most times Central Banks are out of touch with what’s really going on in their respective economy.

Gold was down $8 in early trading yesterday, and held to that loss while gyrating during the day. And the shiny metal is down again this morning, this time just $2 Bucks, but down nonetheless. Watch out these next few days here. I have this feeling that the Gold price is going to see a lot of gyrating due to the coming BREXIT referendum. I would bet a dollar to a Krispy Kreme that the price manipulators are salivating right now, seeing this as another opportunity to whack Gold. Why now I hear you asking? Well, think about that, if the BREXIT vote loses (but see the referendum discussion above) the price manipulators would see this as an excuse to add on and really whack Gold. But like I said above, this could already be happening, so again, please be careful these next few days.

Well, the Japanese yen continues to be well bid. that’s just crazy folks! Yen is trading with a 104 handle and should, if fundamentals were in play, be trading with a 125 handle or maybe even worse! Just look at Japan, and you see bad demographics (declining population), an economy that has been in an economic slow growth, rut for 2 decades, declining productivity, and then add in that they have debt up to their eyeballs, and the currency rallies? Forgive me if hurl here! Just kidding, besides this office is a no hurl zone, like Wayne’s car! HA!

I was talking with the Big Boss on Friday, as he called to check on me after my infusion, which by the way was very thoughtful of him! Anyway, I mentioned to him that once again, I see the U.S. following Japan down this rabbit hole. Sure the U.S. consumer is going to do everything it possibly can do to keep deflation from becoming a problem, but other than that, look at that list I just made for Japan, and it could easily be copy and pasted to the U.S. fundamentals. Bad demographics (and it gets worse, in my opinion, when you figure that one day a millennial will be President of this country!) , declining productivity, and debt up to our eyeballs. I’m turning Japanese, yes, I really think so!

The price of Oil is up about 1/2-cent this morning, and the Petrol Currencies are on the rally tracks. I was reading my guitar playing, friend, and investment analyst guru, Steve Sjuggerud’s letter this morning, and he mentions that an investment wizard, Mobius, recently mentioned that he was focused on two ideas. The first idea is that he believes Brazil is ready to go sky high. And second he thinks Russia is the “Bargain of the Century”.

I really liked this quote, ” There aren’t many things you can buy today as cheap as they were 20 years ago. But today, you can buy Russian stocks at 1997 prices.” Chuck again. and the currency which seems like it’s at basement bargain prices is also cheap. So I thank Steve for helping me this morning, and if you want to read his letter go to: www.stansberryresearch.com Steve is actually one of the nicest human beings I’ve ever met, and probably one of the smartest too! So, if he quotes someone, you know he’s done all the research and believes in what he’s saying.

You know, I’ve long said that Russia needs for the sanctions to be lifted to get back on terra firma, and I still believe that, but I see good things going on in the Russian economy and the Central Bank of Russia (CBR) does too, otherwise they wouldn’t have cut rates last week! But IF the sanctions were lifted, and oh, by the way, I see a certain President candidate lifting them should they win, but if the sanctions were lifted, what a day that would be for the Russian economy and ruble. The little kids sing a song about if all the raindrops were lemon drops and gumdrops, oh what a rain that would be. I ‘d stand outside with my mouth open wide, Ahhh, Ahhh, Ahhh, Ahhh, Ahhh, The kids love to sing that song, and they all get a kick out of the fact that I can sing it long with them! But lifting the sanctions on Russia would be just like lemon drops and gumdrops! Oh what a rain that would be!

And as far as Brazil goes. I just put the finishing touches on our latest Currency of the Month (COTM) and it’s going to be the Brazilian real. I think you’ll want to make certain you see that when it comes to a newsstand near you!

There’s just nothing in the U.S. Data Cupboard to talk about folks. This is really strange, given that there was none yesterday, today or will be tomorrow! But I guess that’s what happens when the data is so weak. You don’t want to print it! HAHAHAHAHA! I say that in jest, for there’s just nothing scheduled to print!

To recap. The currencies are looking for something to keep the pressure on the dollar, but there’s just not a lot going on out there today folks. The German Constitutional Court will decide today whether what the ECB is doing is legal. I think they will give it a favorable verdict, but I guess there’s always a chance they won’t. RBA minutes were good, and the A$ is rallying this morning, and the latest two BREXIT polls had different results so no change for feeling that the leave vote will be voted down. Should it win, Chuck gives us some very good information about the process in the U.K.

For What It’s Worth. Well, since I was beating too much on Japan today I thought this article from the Asian Review would smooth the feathers a bit, or maybe not. You can read the whole article here: http://asia.nikkei.com/Politics-Economy/Economy/IMF-calls-on-Japan-to-reload-Abenomics

Or here’s your snippet: “Japan needs bolder income policies such as penalizing profitable companies that do not increase wages, the International Monetary Fund said on Monday after concluding its annual economic assessment of the country.

Despite initial success, progress under Abenomics, Prime Minister Shinzo Abe’s trademark economic policies, has stalled in recent months. The inflation rate has dropped to negative territory again, while economic growth has remained anemic. The IMF now expects Japan’s economy to grow by about 0.5 percent in 2016, before slowing to 0.3 percent in 2017, with potential growth sliding to close to zero by 2030, due to the declining demographic.

“Abenomics needs to be reloaded,” the IMF said in its report and argued that income policies combined with labor market reforms should “move to the forefront” of the country’s fight against lagging growth.”

Chuck again. Well, Hmmm, let me see here. The IMF is telling Japan to reload Abenomics? Really? Well, I’ve always held the belief that if the IMF is telling you how to run your country and you listen to them you’re in trouble. no wait, not just trouble.. BIG trouble!

Currencies today 6/21/16. American Style: A$ .7495, kiwi .7150, C$ .7830, euro 1.1340, sterling 1.4745, Swiss $1.0437, . European Style: rand 14.6465, krone 8.26, SEK 8.2160, forint 276.29, zloty 3.8682, koruna 23.8678, RUB 64.12, yen 104.60, sing 1.3410, HKD 7.7585, INR 67.53, China 6.5816, peso 18.56, BRL 3.9447, Dollar Index 93.45, Oil $48.96, 10-year 1.69%, Silver $17.42, Platinum $986.55, Palladium $547.55, and Gold. $1,282.86

That’s it for today.. Sorry for all the whining above. Suck it up and get to work is what I should be doing! I was talking with an old friend a couple of weeks ago, and he said, “Chuck, they don’t make them like us anymore”. I said, “I’m sure our dads said the same thing”. And with each generation we become softer. My good friend, and the retirementor, Dennis Miller, is coming to see us today in the office, and we will have lunch before he heads back to his summer home in Indiana. Dennis used to come see us at the Orlando Money Show each year, but he moved to Arizona, and I don’t go to shows any longer. Yes, as you’ve see in the Pfennig ads above that Chris and Frank will be in Vancouver next month. I used to be a good draw there. It was in Vancouver that I had the audience singing Lemon Tree. But I can barely deal with the personal travel I do these days, and so I don’t go to shows or conferences any longer.. So, you have to come here to see me in person! HAHAHAHA! I kno
w some of you are saying, “why in hell would we want to do that?” HAHAHAHAHA! I sure hope you have a Tom Terrific Tuesday! And Be Good To Yourself!

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