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EverBank World Markets
A Pfennig For Your Thoughts
Monday, November 28, 2016

In This Issue.

* Dollar loosens its grip.
* Oil price backs off.
* Gold had bad week, but is up today.
* What's going on in India? .

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


A Very Busy "Event" Week!


Good Day. And a Marvelous Monday to you! Once again, the internal alarm went off way before the clock alarm this morning, so I just went ahead and got ready to come into the office, at way before zero-dark thirty! UGH! Oh, well, maybe I can get this out on time today! Maybe, because, as Joaquin Andujar used to say his favorite word was: "You never know". HA! St. Louis baseball fans that read the Pfennig will get that one! Yes, greets me this morning with their song: Yours Is No Disgrace. Yes, was always a band to listen to with headphones on.


Did you have a Happy Thanksgiving? Is there any pie leftover? Mine was grand. And my beloved Missouri Tigers football team found a way to beat Arkansas the day after Thanksgiving, so that was pretty cool.. Motely Crue is singing their song, It's the same old situation, and I'm thinking as I look at the currencies this morning that not much has changed since I last wrote to you on Wednesday last week. It's the same old, same old situation, it's the same old, same old ball and chain. The ball and chain is the dollar weighing down on the currencies and metals. Gold was flat on Friday, but got the snot knocked out of it on Wednesday. I sent our metals guru an email when I got home from the doctor's office, and asked him what happened. He told me that it was a flood of paper trades that hit right before the open. That's all I can say about that. It's up to you to figure out if this was on the up and up or not.


We head into the last couple of days for November, and I have to say good riddance to the month! But, this weekend will hold a very important vote for the Eurozone, European Union, and the euro. On Sunday, the Italians will vote on whether or not they want to make a constitutional change, which if vote for, could see Italy leave the EU, and the euro... We're in the blackout period now, so no more polls can be done or published. Before the blackout period started, the "no" vote was well ahead. But given what we've seen in the last two referendums/ elections, (BREXIT & U.S. POTUS) polls can't be trusted. Prime Minister (PM) Renzi has stated that he will resign if the vote is "no". I say, to the Italian voting, don't let that sway your vote! You've had a baker's dozen different leaders in the past 10 years, what's one more!


Before we get to Sunday though, the Eurozone will print flash CPI (consumer inflation). The recent trend in CPI for the Eurozone is for it to edge higher each month, which is the way the European Central Bank (ECB) would like to see it move, so that they can adapt to the inflation when it comes time, in a timely manner, and not be chasing it down the street, like most Central Banks end up doing. The euro is a bit stronger this morning, as the dollar has backed off its recent bullying of the currencies and metals.


The other Big Deal this week is the OPEC meeting on Nov. 30th (Wednesday) where the members were to finalize the agreement to freeze production of Oil. I'm getting a bad feeling about what this meeting will bring for the price of Oil, as I'm now hearing the Saudis hedging their position that a freeze or cut needs to be made. The Saudis are now of the opinion that the price of Oil could rebound this next year, without the cuts. This is from Bloomberg this morning: "With only two days to go before ministers from the Organization of Petroleum Exporting Countries try finalize the first production decrease in eight years, the foundations for a deal are looking shaky. Internal divisions over how to share the cuts and Russian resistance to reducing supply forced the cancellation of crucial talks with non-OPEC suppliers Monday. Khalid Al-Falih, the Saudi oil minister, for the first time on Sunday opened the door to leaving Vienna without an agreement." And can be found here: htt
p://www.bloomberg.com/news/articles/2016-11-27/opec-push-for-deal-sends-algeria-venezuela-ministers-to-moscow


Last Wednesday, the price of Oil has climbed to trade above the $48 handle, but it has lost $2 of price since then, and trades this morning just over the $46 handle. So, like I said above, I'm getting a bad feeling about this meeting's outcome, which at this point, looks pretty iffy that they will agree to a production freeze/ cut.


Well, the Christmas shopping season has begun in earnest. I understand from the TV this morning that cyber sales are soaring! And I have to admit I bought something online this past weekend too! Instead of shopping bags I'm going to have to adjust the BHI to watching the number of Amazon boxes that come in the door, and of course other outlets! We'll have to watch the Consumer Credit number when it prints next month to see just how much was put on credit cards that won't get paid off in full at the end of the month. I'm going to go out on a limb and say that Consumer Credit will soar for the Christmas shopping season this year, as consumers feel confident about the new direction of the country. I shake my head in disbelief because nothing is a "given" here. The new direction might just as well, be a financial collapse! And then what will those consumers do should that happen, with all that debt they accumulated? Oh, that's right, they learned this trick in 2008. Just walk
away from it.


Hmmm. I got a little snarky there didn't I? Come on Chuck, these are just people trying to make sure their little darlings get everything on their list this year! Why can't you give them a break? Ahhh, grasshopper, I don't care if they run up their credit cards to the max, I really don't. Just don't come crying to me when it's time to pay the piper.


OK. Enough of that! The OPEC meeting that we just talked about above will play havoc with the Petrol Currencies that include the Canadian dollar/ loonie, Russian ruble, Brazilian real, and Norwegian krone. Right now, the Russian ruble is the only Petrol Currency that is getting sand kicked in its face by the dollar. The other Petrol Currencies are all a bit stronger VS the dollar this morning. But should the OPEC meeting yield no agreement, I would suspect that the Petrol Currencies will get taken to the woodshed, for they have been keeping their heads above water on the idea that a production freeze of Oil would come. And if it's not coming, well, a trip to the woodshed is in store. In my opinion that is, and I could be wrong.


We have some Central Bank speakers from around the world this week. ECB President, Draghi will speak two times, Bank of Canada Gov. Poloz will speak tonight, and two Riksbank members will speak this week. And we'll hear what 6 different Fed members have to say this week, Fischer, Dudley, Kaplan, Mester, Powell, and Tarullo will all speak.


So, we have the Italian Referendum, the OPEC meeting, a veritable Whitman's Sampler of Central Bankers speaking here and abroad, and. drum roll please. the Jobs Jamboree on Friday! I'm still so disillusioned with the BLS and their jobs reports that I've taken the stance that I just don't' care any longer what garbage they say represents the jobs created each month. Last month was just ridiculous as they added 197,000 jobs with their Birth / Death model, and then only reported that 161,000 was the total. Without their "hedonic adjustment" job creation for Rocktober would have been negative! But the markets don't care about that stuff, folks. just nerds like me do. And so I see the consensus right now for Friday's print is for a 170,000 number of jobs created for November. Wonder how many will have been "added" by the BLS?


Well, first it was the war on cash in India, now it's moved to a potential war on Gold. That's how I view it, and my feelings about PM Modi have grown very sour, folks. Basically, PM Modi is looking into imposing curbs on holdings of Gold. Gold premiums (is the price you pay over spot for coins and bars) jumped to a two-year high on the news of this potential new law. A Top Finance Minister told reporters this morning that "the government is not considering any proposal to restrict holding of Gold by individuals" Well, that's all said and good, I would have to go back and check to see if any such similar comments were made before the ban on high-value notes? The Indian rupee is caught in the middle of all these changes, and the rot on the vine for the rupee is being exposed. UGH!


Gold is up $12 in the early morning trading today. I have to wonder how long that will last, given the propensity of sellers to come to the market early and enter their paper trades that sell Gold. Koos Jansen at www.bullionstar.com has a new report on physical Gold demand in China, so let's go see what Koos has to say. "Chinese gold demand is still going strong this year, albeit less than in 2015. The most likely reason for somewhat lower demand has been the strength in the price of gold in the first three quarters of this year, to which the Chinese reacted by subduing purchases. From 1 January until 30 September 2016, the gold price went up 24 % in US dollars per troy ounce, from $1,061.5 to $1,318.1; measured in renminbi the price went up 28 % over the same period. But Gold demand in China has been strengthening with the recent decline in the international price of Gold."


Chuck again. Well, the selling of Japanese yen is taking a breather today. The yen had risen to 113, has backed off that figure to a 112 handle this morning. You can't say I didn't point out that yen should be much weaker when it was trading around 100 can you? No you can't! In my humble opinion, of which I could be wrong, I think that yen has a long way still to go, to reach fair value, which I believe is somewhere above 120. I know that sounds pretty wide of a number.. Could you narrow it down a bit, Chuck? No. it's like an over / under bet. and I'm saying that it will be over 120. Does that mean 125? 130? 140? Or what? I would say that I'm sticking to my story!


Well, China sure seems to be a mess these days. And the renminbi is a mere shell of what it was a year ago, with regards to price. But recent data from China is interesting in that it shows some pulse to the life of the economy there. I have a FWIW on commodities that China is driving today, so be sure to check that out later in the letter. But first, in that list of recent data was this overnight: the combined profit of industrial companies rose 9.8% year on year in Rocktober, beating September's gains of 7.8%, and revenue from core operations in Rocktober increased by 5.4% year on year, which was 1.5% better than September's pace. So, in recent days, we've seen profits and revenue at companies increase, a continued rise in Producer Prices, coal production gearing up with some strong growth and the manufacturing index remain above 50. So, it's not all a mess in China, folks. But is this enough to wrap a tourniquet around the renminbi's bleeding? I doubt it. I look for
the Chinese to allow the renminbi to continue to weaken, and even bring about a devaluation should the U.S. Fed hike rates next month.


Yes, on our Tub Thumpin' Thursday this week, we'll turn our calendars over to December, and that's the month the markets have circled as the month the Fed will hike rates again. As I pointed out last week, all the talk about additional rate hikes in 2017, are just speculation at this point. Remember, we were supposed to have seen 4 rate hikes this year, and will only end up seeing 1. The odds of a rate hike are 100%... I guess the rate hike is baked into the pie at this point. But the talk about additional rate hikes is what has the dollar walking around like a 20-game winner!


The U.S Data Cupboard is basically empty today, so move along, these are not the droids you're looking for. Last Friday, while everyone was eating leftovers (not me, I was at the Village Bar, eating a cheeseburger!), the U.S. printed the Fed's Balance Sheet. I'm going to point out that the Fed's Balance Sheet grew $2.4 Billion last week, to $4.466 Trillion. Then I'll go back to something that bothered me last week when the 10-year Treasury yield was rising every day, and then suddenly stopped and the yield dropped by a significant amount and I asked the question, "I wonder who was buying Treasuries?" This is where you might want to put 1 plus 1 together. Now, I have no idea whether this is the case or not, but like I said last week, I don't put any stock in "chance". Logic, and truth, yes, "chance", no.


To recap. It's a BIG week with the Italian Referendum, the OPEC meeting, a Jobs Jamboree Friday, and Central Bankers around the world on the speaking docket. The dollar has backed off its recent all-out assaults on the currencies and metals overnight, and is giving up some of its recent gains. The euro is holding its head above the 106 level ahead of the Italian referendum that saw the last poll with a large lead for the "no" vote. Gold got whacked last week, but is up $12 in the early morning trading today, and Chuck points out the suspicious $2.4 Billion gain in the Fed's Balance Sheet last week.


For What It's Worth. I found this report on the Bloomberg this morning, and talks about how China appears to be turning back to Commodities again. Hmmm. That would be a good thing, right? Well, you can read it all here: https://www.bloomberg.com/news/articles/2016-11-27/these-charts-show-how-china-s-ball-of-money-is-rolling-back-to-commodities


Or, here's your Snippet: "In China, money flow is tightly controlled and capital markets are relatively underdeveloped, meaning the economy works like squeezing a balloon.

You press it in one place, and it bulges in another. Policy-maker moves to cool one expansion only serve to inflate another.

Now that "gyration of bubbles," according to Société Générale SA's chief China economist Wei Yao, has been heating up the commodities market again.

Earlier this month, thermal and coking coal futures hit a record high since their debut in 2013 while zinc soared to the highest since 2011. Steel rebar, nickel, tin, iron ore and rubber futures also climbed to multi-year highs. "


Chuck again. Well, the support for a persistent price increase in Commodities at this point, is weak.., but that doesn't mean it will remain weak, and IF China is turning its attention to Commodities again, that's a good thing for the Aussie dollar (A$).


Currencies today 11/28/16. American Style: A$ .7470, kiwi .7070, C$ .7419, euro 1.0627, sterling 1.2427, Swiss $.9886, . European Style: rand 13.8708, krone 8.5617, SEK 9.2137, forint 292, zloty 4.1640, koruna 25.4611, RUB 65., yen 112.20, sing 1.4262, HKD 7.7559, INR 68.76, China 6.9070, peso 20.56, BRL 3.3965, Dollar Index 101.20, Oil $46.02, 10-year 2.32%, Silver $16.79, Platinum $918.18, Palladium $751.34, and Gold. $1,193.30


That's it for today. Well, I can see by the clock on the monitor that I'm already running late again! UGH! Oh, well, I tried! Yesterday, was grandson, Everett's birthday! Everett turned 6 yesterday. Happy Birthday buddy! Last week, I tried to teach him that when his mom says, "we'll see" that she really means "no!" But he wouldn't believe me, he's such a "momma's boy". So, my Missouri Tigers won their last game of the year on Friday, rallying to win after falling behind 17-points. This weekend will be Championship Weekend, as the Conferences play their Conference Championship Games. And then the final reveal of the 4 playoff teams will be announced. I wouldn't want to be on that committee that chooses the teams, this year! It's going to be difficult to pick teams 3& 4. In my opinion, 1. Alabama, 2. Clemson, 3. Pac 12 Champion, 4. Big Ten Champion.. Alrighty then, let's get this out the door. The Beatles take us to the finish line today with their song: Penny Lane.
I hope you have a Marvelous Monday, and Be Good To Yourself!


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