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Where Have All The Spenders Gone?

* Dollar swings a mighty hammer again..
* U.S. data sends mixed messages
* Bank of Canada changes nothing!
* Aussie Trade Surplus narrows.. ..

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

Good Day. And a Tub Thumpin’ Thursday to you! Another day, another beautiful day, weather-wise. And to top it off, I was at the ballpark for the afternoon game with the Mets.. I haven’t been able to get over to our fave watering hole across the street from the stadium, because of my back, but I’ll get there eventually. Shoot Rudy, I can’t even walk from the parking garage across the street, instead I sit on a bench until Kathy pulls the car around to pick me up. UGH! It’s always something with me isn’t it? I made the doctor that saw me about my back laugh the other day, she went through all my surgeries, and illnesses, and when she finished, I told her, “and they call me Lucky” HA! The Moody Blues greet me this morning with a perfect morning song, New Horizons, from the Seventh Sojourn Album.. Well, I have dreams enough for one, and I’ve got love enough for three. Ahhh, the Moody Blues.. .

I told you yesterday that the Fed members had all sang from the same song sheet, and all had the same message, and that is that “It’s time to hike rates”. But then there’s all these questions about the strength of the economy, or lack of strength of the economy, would be my take on it. But any-old-way, the Fed members got the dollar rolling and the dollar bugs all coming out from the wall boards, and that dollar strength yesterday morning was added to throughout the day yesterday.. For illustration purposes, The Dollar Index is 101.96 this morning and it was 101.61 yesterday morning..

I am surprised that the U.S. stock market is still soaring given the rate hike talk, and the odds of a March rate hike rising faster than a toupee in a hurricane! HA! I get it that the stock jockeys think that the economy is strong and that will mean consumers will get out there and spend, but that also means inflation will rise.. Hmmm.. Oh well my dad taught me that you shouldn’t fight City Hall, and when the DOW crosses 21,0000 like it did yesterday, they have become City Hall..

Remember when the currencies and metals were tied at the hip with stocks? Come on, it was just a couple of years ago, when every day the markets were all about “Risk on or Risk off”, but currencies broke out of that trading pattern first, and haven’t looked back since..

Well, well, well.. we’ve had dollar strength the past two days, but even with those two days added in, so far this year the dollar is up against only 1 currency.. Can you guess what it is? Well, if you said that you think that it might be pound sterling, then you would be correct! And we would have a winner, winner, Chicken dinner! I was doing some reading and research before I left for the ballpark yesterday, and I stumbled onto this piece of information. Shoot Rudy, I knew the currencies held the conn more often so far this year than the dollar, but I didn’t imagine in my wildest dreams that only 1 currency was down VS the dollar this year. And I don’t think having pound sterling as the only currency down VS the dollar, is curious, in that you would think the major currencies would all be doing well VS the dollar. I also believe that pound sterling will be subjected to more back and forth negotiations, regarding BREXIT, and that should weigh heavily on pound sterling a
s we go through the year.

The Bank of Canada (BOC) left everything unchanged yesterday, just as I thought they would. The BOC did make mention of the rising inflation that’s been seen in the Canadian economy, and said that they aren’t concerned with it, as they feel that the rising inflation is all tied to energy prices rising, and they prefer to look at the core inflation numbers for their data. I always question these Central Banks that take this out, and add that, a pinch of a bat’s tail, and eye of Newt, and mix it up right here in the sink. Now if energy prices were falling, and not putting pressure on inflation, but deflationary pressures instead, the BOC would not be removing energy prices then! Oh, well, whatever! I like Canada, and their ability to mine raw materials and produce Oil, as long as those things continue to exist for Canada, they will always have other countries that want what Canada has, and that’s a good thing, folks..

The Canadian dollar/ loonie, didn’t move on the BOC non movement but did lose significant ground once the green/peachback got going yesterday.. Our Canadian friends here in the S. Florida, who live in Montreal and drive here each winter, always ask me, “How’s the loonie doing?” In the winter of 2016, the loonie was as low as 70-cents, but by the start of spring it has risen to 72-cents.. this winter the loonie has risen as high as 77-cents and is currently less than that figure at .7480.. UGH! I guess it makes sense, given that Canada’s neighbor is talking rate hikes, and the BOC is not talking rate hikes!

The Aussie dollar (A$) is weaker this morning after their latest Trade Balance report reflected a narrowing of the Trade Surplus, when the Trade Surplus was expected to widen for January. But it’s still a SURPLUS! So, come on A$ traders, back off, will you? This could be a rogue report! A one and done report! Or a report issued by someone that was short the A$! OK, that last one is a bit too “out there” Chuck. Yes, I’ll bring al back in and say traders shouldn’t react that way these A$ traders did seeing just one month’s trade activity. the thing that has helped the Trade Balance is the rise in commodity prices in the past 6 months, it’s not a “volume” business for the Aussies, not like it used to be when China was kicking tail and taking names later.

Speaking of rising commodity prices.. have you seen the advertisement at the top of the letter that I’ve been putting in this week? Check it out and then come back and read the rest of the letter!

We’ll begin to see the Flash PMI’s for the Eurozone countries today, and finish them tomorrow.. Manufacturing growth in the Eurozone has been strong for over a year, thus helping the economies of the Eurozone to rebound from the recession they all were in by some margin. The European Central Bank’s (ECB) Lautenschlaeger, will be speaking today. I would think that any question and answer period would see him having to discuss the ECB’s not wanting to call their reduction in the amount of bonds they buy at the end of this month, what it is, “Tapering”. And then journalists will probably want to know how quickly the bond buying could end, or when the negative deposit rates will be removed.. Should be an interesting day for the ECB member..

Speaking of Central Bankers speaking today.. Norway’s Norges Bank Gov. Olsen will also be speaking. I’ve said this for a few months now, and other countries are beginning to play catchup, but 6 months ago, Norway had the inflation that most of the countries in the world would die for.. And it was at that time that I questioned why the Norges Bank wasn’t even entertaining thoughts of a rate hike. So, it will be Olsen’s turn on the hot seat today, and I were there, I would say this to him.. “I know it’s a difficult thing to do to be the first to hike rates, especially when the Eurozone is nowhere close to hiking rates, but, someone has to be first, and you’ve got rising inflation, aren’t you concerned that inflation could get ahead of you? See how gentlemanly I can be?

Well, it was a day of lots of buying and selling in Gold, as 284,000 contracts were traded, but at the end of the day, Gold had added only $1.20 and closed the day at $1,249.00.. Unfortunately, Gold is down $5.50 in the early morning trading today.. But 284,000 contracts? That’s crazy folks! Silver saw a volatile day, with Silver losing 15-cents at one time, but fought back and ended up a few cents on the day. I was talking with a fellow down here the other day about Gold and Silver in an investment portfolio, and he wasn’t even aware that he could own Gold or Silver and hold it in his account. He said, “my broker, never told me I could do this, so I never knew” I told him, well now you know, and you should transfer your account from that broker! That would teach him a lesson!

The U.S. Data Cupboard, printed some data for us to review, with the first piece of real economic data; Personal Spending and Income.. Let’s breakdown the Spending piece first.. Personal Spending for January inched up 0.2%.. But before you think, that’s OK, not bad and all that, you must know that most of that 0.2% gain was a result of higher prices for goods bought.. Actually, if you took out the price gains, Personal Spending would be non-existent. OK, well, I’ve always said that “if you don’t have the funds to pay for something, don’t buy it” (Yes I understand that when you buy a house, car, boat, yacht, etc. you might not have the funds, and will need a loan, but you have the “ability to repay the loan” and that’s like having cash) So, if consumers figured that they didn’t have the disposable income to spend, and kept their wallets in their pants pockets or purses, then kudos to them!

Unfortunately, no real Personal Spending hurts the U.S. economy, for the economy needs “consumption”. OK, now onto the Personal Income piece of the data.. For once in a Blue Moon, Personal Income outpaced Personal Spending.. So, we didn’t spend more than we make in January.. Personal Income was up 0.4% in January, which beat the expectations of 0.3% growth. So, there you go, Houston, we have liftoff, wage increases have lifted off the platform, and are racing to the atmosphere.. So, the Fed members have to be wondering should they celebrate (wage increases means real inflation on the way) or should they be disappointed (spending was nascent at best) .. Whew! A lot of words for two pieces of data that in the end didn’t give us a true direction!

The U.S. ISM or PMI, which every other country calls the manufacturing index, printed strong again for January.. Do you recall last year, when the PMI was weaker month by month? Then suddenly it took off and hasn’t looked back. But the U.S. is not alone with a rebound in manufacturing. The Eurozone is also seeing a rebound, along with China, who’s PMI will print tonight!

To recap.. the dollar rally we saw yesterday morning, from the Fed members speeches, all talking about how it’s time to hike rates, continued throughout the day and in the overnight sessions also. There hasn’t been much news overseas to give the currencies any direction, and the data and Central Bank speakers have pretty much dominated the news, and since they all benefit the dollar, the dollar has the conn again today. The Bank of Canada left rates and everything else unchanged, and then told their followers that the uptick that they see in inflation is energy driven, and won’t be fooled into thinking they need to hike rates now. And in the U.S. Personal Spending was down, and when you look under the hood, it was negative.. YIKES

For What It’s Worth. Alrighty then.. I found this on Ed Steer’s letter this morning, and you know me, I say if Ed thinks it’s worthy to highlight, then I think it’s worthy to highlight! And this one is about Gold imports in India.. you can read the whole article here

Or, here’s your snippet: “India’s February gold imports surged to 50 tonnes, up more than 82 percent from a year ago, on pent-up jeweler demand and as retail consumers ramped up purchases for weddings, provisional data from consultancy GFMS showed on Wednesday.

The rise in imports by the world’s second-biggest consumer of the precious metal will support global prices that are trading near their highest level in 3-1/2 months, but could widen the South Asian country’s trade deficit.

“Pent-up demand on the ease of the cash crunch and wedding related demand lifted imports in February,” said Sudheesh Nambiath, a senior analyst at GFMS, a division of Thomson Reuters.”

Chuck again.. Demand for Gold seems to always have an area of the country that picks up the pace when it starts to slow down. For the longest time, it was China, then Russia, and so on. So it’s nice to see that the chaos that resulted from the scrapping of 500 and 1,000 rupee banknotes, has calmed down enough for Gold demand to come roaring back!

Currencies today 3/2/17.. American Style: A$ .7620, kiwi .71, C$ .7480, euro 1.0530, sterling 1.2270, Swiss $..9893 .. European Style: rand 13.0813, krone 8.4417, SEK 9.0525, forint 292.79, zloty 4.0780, koruna 25.6696, RUB 58.27, yen 114.25, sing 1.4102, HKD 7.7627, INR 66.62, China 6.8775, peso 19.89, BRL 3.1053, Dollar Index 101.96, Oil $54.20, 10yr 2.46%, Silver $18.40, platinum $1,010.81, Palladium $772.59, Gold $1,244.50, and SGE Gold.. $1,257.27

That’s it for today.. Well, are you ready for spring? It’s just around the corner.. Well, I’m not sure if I like the new 24 as much as the old one with Jack Bauer (Kiefer Sutherland) maybe the new show will grow on me.. We met some new people out on the deck last evening, we could tell they had ties to St. Louis because they had on Cardinals shirts! And yes, they were from Mehlville, which is a small town that’s not far from our little river town. Last March, our next door neighbors were from St. Louis too! And we had lots of “bags games” (they also call the game: corn hole)Shoot Rudy, even Chris Gaffney joined us one day! Well, I had better this out the door.. Smokey Bill Robinson and the Miracles takes us to the finish line today with their song: Ooo, Baby, Baby.. (I was told, not that I know from personal experience, but I was told that this is a great “make out” song!) And with that, I hope you have a Tub Thumpin’ Thursday and don’t forget to Be Good To Yourself!

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

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