Good Day! …  And a Marvelous Monday to you! Well, my beloved Cardinals made it all the way back to first place on Saturday, only to fall back to second on Sunday… It’s the All-Star break now, so with all their trials and tribulations, injuries, and what not, they are not in that bad of shape… I don’t know how, magic I guess! Magic is a powerful thing, eh? It can also be considered to be smoke and mirrors in some cases… And it’s with smoke and mirrors that we keep churning out data reports that somehow illustrate an economy that’s going great…

And once again, I’ll ask the question, that I would ask, if I were a lawmaker, and sitting through the 2 Janet Yellen testimonies on the economy that will take place this week… “Ahem, thank you, for picking me, I’m a long time listener, first time question asker… But I have this question for you… IF the economy is as strong as you say it is, then why, are interest rates still at zero?, and in a follow up question, “Why is deflation a bad thing, while inflation is better in your eyes?”  “Yes, that’s all I have for you Ms. Yellen, thank you for your time, this time, till next time…”

We certainly don’t get clear answers from the other Fed Members… Just last week Fed Member, Plosser said that “we are closer than a lot of people think to the first rate hike.”  But then on Friday, we had Federal Reserve Bank of Atlanta President Dennis Lockhart, on the other hand, who said that, “ the FOMC is still somewhat short of the point where achievement of the two objectives is confidently in sight’. Federal Reserve Bank of Chicago President Charles Evans argued for a lack of inflation pressures and for continued slack in the labor market, suggesting that “it could well be the case that it should be early 2016 before the first rate increase.”

So.. What’s it going to be boys?

Whew! I got the ball rolling this morning right out of the starters blocks, eh? Well, we have to hit the streets ready to run this week, so, that’s why I primed the pump to get you started this week! You will definitely need to keep your arms and legs inside at all times until the end of the ride this week folks!  I know, you’re saying, “Whoa, there partner! We haven’t even brushed out teeth yet, and you’re shaking the foundation!” Sorry, but that’s how I roll! So, let’s get to all the hub-bub about this week, eh?

Front and Center, Chuck goes on vacation this week! That’s the Biggest news of all! HA!  In addition to that, we’ve got a slew of Central Bank meetings, the aforementioned testimony before lawmakers by Janet Yellen on the economy, and the U.S. Data Cupboard comes back on board this week, chock-full-o-data for us to view! So, we could be watching the currencies and metals act like a contortionist this week, twisting and turning on every data print, mention of something, or rate hike/ cut… So, I guess it would help if I gave you a rundown of who’s doing what this week…

The Bank of Japan (BOJ) starts us off tonight with a rate / monetary policy decision.. The markets are still waiting for the “mother of all QE” from the BOJ (remember PM Abe talked about this last year) but I doubt they’ll see it tonight, or next month, or the following month… As it was all talk by Abe… The Bank of Canada (BOC) meets tomorrow, and this should be interesting, as I’m sure that BOC Gov. Poloz would like to hike rates, but his hands are tied, and he can’t have the loonie getting stronger on him! In fact, I would be willing to bet a dollar to a Krispy Kreme, that he’ll attempt to sound bearish, and that won’t be good for the loonie… short-term that is…

Tomorrow and Wednesday, Janet Yellen will speak to lawmakers about the economy, the markets will be listening to see if she has a slip, like she has been prone to do so far… And then later this week we’ll see Central Bank meetings in: Brazil, and S. Africa… These two are wild cards, when it comes to Central Bank meetings, and I won’t even attempt to figure out what they might do! But, I don’t think they’ll be looking to cut rates, and that’s a good thing for their respective currencies, as these two have the best rate differentials to the major markets of the: U.S. , Japan and Eurozone…

We’ll discuss the data prints in the Data Cupboard section below, but you can see that already we have a full plate of things to digest this week! So, let’s go to what’s going on in the currencies and metals right here, right now, eh?

Well, we have a mixed-bag-o-performances this morning in the currencies, but there’s a clear direction in Gold… and it’s downward! UGH!  The euro is stronger this morning, but just by a few shekels and that goes for most of the currencies… The Chinese renminbi was marked down last night… Hmmm… I guess that means the U.S. contingence left for home this weekend!

Speaking of the euro… The single unit, has moved a bit higher this morning despite having to deal with an awful result in the Industrial Production print…  Eurozone May IP was down -1.1% VS the previous month. (the consensus was for a drop of -1.2%, so it beat expectations!) Those that watch this stuff and keep a close eye to it, tell me that this report was not of concern, because there were already signs that June bounced back…  They had a storm of public holidays and the sun was in their eyes, they tripped on a rock, and thought they heard someone else call the ball, and all those other excuses… But I’m told that June bounced back, unfortunately, for us and the euro, we won’t see confirmation of that until next month!

The Aussie dollar (A$) is still sniffing around 94-cents, and is basically flat this morning. The Reserve Bank of Australia (RBA) Gov. Stevens, who last week threw the A$ under a bus, gave an interview this past weekend, and decided to not pile on his warning last week that we talked about, that “investors are underestimating the impact of a rise in USD short term rates on the A$.”

I don’t think he “gets it”.. But that’s his prerogative! Can I get everyone to stand up and put your arms over your head and wave them back and forth, and sing along, “That’s my prerogative”… I don’t need permission, Make my own decisions, That’s my prerogative”  Oh brother, I can’t believe I just did that! That’s gotta be a first for me! For you know me… the biggest oxymoron saying is: rap music…

OK… time to get back up the plate… The British pound sterling is still trying erase the bad taste of that negative data print last week, and will finally get the opportunity to do so this week when U.S. CPI (consumer inflation ) and Labor data hits the streets… I read recently that the calls for a rate hike in the U.K. by year end, had fallen from 85% to 50%, jus on the negative print last week of output… So, these reports this week could change that outlook once again, unless of course they don’t meet expectations…

The New Zealand dollar / kiwi, remains above 88-cents, and at all-time record highs in the Trade Weighted Index area… (remember I explained TWI to you a couple of weeks ago) New Zealand has some data out this week, their 2nd QTR CPI (consumer inflation) which given the strength of their currency (kiwi) should be below their target of 2%… But, if it inches higher than 1.8%, I would have to think that the rate hike campers would flood the markets with thoughts of another rate hike, and that would push kiwi into record levels… I think we’ll have to wait for another day on that though, as I really do think that inflation will remain below 2% for this print… But the next one… Ahhh, grasshopper, that’s when the rubber will meet the road, as they say…

The currencies of Norway and Sweden, are attempting to get back on the rally tracks, after spending most of last week, thrown to the side of the road by Sweden’s Riksbank, who thought it to be prudent to cut rates last week… I have to say that if I were to show disappointment in the performances of currencies it would be with these two… Fundamentally, they are as sound as the pound… HA! Now that’s an old saying that I just had pop into my head, as I was typing away… Any way… These two are fundamentally sound, and shouldn’t be mopping up the bottom of the barrel of currencies!

But as I told my guitar playing friend, Steve Sjuggerud, last week…” Fundamentals have left the markets, and it’s all Central Bank driven these days…”   One day, the markets will take the conn back from the Central Banks, but until then, The Central Banks have it, and are not allowing fundamentals to even enter into the equation!

Speaking of fundamentals… Gold certainly wouldn’t be staring at a loss of $17 this morning, if fundamentals were in play!  But you could almost set your watch by this… What?  Well, you see this past weekend, Goldman Sachs issued a report saying that they are still Gold Bears, and if Goldman says something… Well, you can set your watch by it!  But the last time they came out and said they were Gold bears, the shiny metal slowly recovered the lost ground, for as they say, the cream rises to the top! So, basically, one could look at this $17 drop in Gold this morning, and say, “Hmmm, that sure is a cheaper price to buy, now isn’t it?”

The other metals of Silver, Platinum and Palladium, are down too, but not getting sold like Gold is right now… HSBC (Hong Kong, Shanghai Banking Corp) issued a report calling for the 6-month price of Platinum to be at $1,505..   Hmmm… They didn’t have to go too far out on the limb with that call now did they? Platinum this morning is $1,502…  I just keep saying that both Platinum and Palladium should be set this year, given the vehicle sales… Doesn’t someone on your block have a new car? Everybody has a new car, and those cars have catalytic converters, folks… And what do catalytic converters have in them?  But then, here I go again, using fundamental analysis on an asset! UGH!

The U.S. Data Cupboard is getting restocked today, so there’s nothing to view here, move along, for these are not the droids we’re looking for!  Tomorrow, we get June Retail Sales… The last two prints of Retail Sales have not been the stuff of strong economies, but it’s supposed to rebound in June (I guess no bad weather in June!)… I told you last week that the BHI (Butler Household Index) indicated a better than the average bear report for June… So, we’ve got that going for us!

Alvin Lee, and 10 Years After, were just playing: Going Home… We used to play that song to end our shows, back in the day when I was a long-haired, hippie freak, playing my guitar in a rock band… Brings back those memories every time the song plays…

For What It’s Worth…  I have a special treat today for you… The Big Boss, Frank Trotter, sent along something that’s very thought provoking, and I knew you would enjoy reading it, and allowing your thoughts to be provoked! HA!   Here’s my good friend: Frank Trotter…

“”Sure”, I said, “why don’t you give me a map.”

I was pulling out of the Oakland California Avis lot on Friday at 5pm.  I never ever take a map these days.  My MO is to turn on Google Maps or Waze and just go where it tells me.  Not that I don’t like maps – I am one of those wonky people who can stare at them for extended periods of time.  I have historical maps on the wall of my office both at work and at home.  But today the staring is mostly online.

So I tossed it in the passenger seat and plugged in the cigaret lighter charger for the phone and pulled out onto the access road.  By the time I got to the highway the message on the phone read “you are using more power than the charger is providing – shut down some applications to save power.”  Uh oh.  I was headed to Yosemite to hike the Half Dome Trail with a mob of financial services colleagues.  I was headed up the trail at 2am so getting to the resting place in short order was a priority.  I had been at a conference in Las Vegas all morning with a lot of calls and data downloads to the phone which apparently sapped it’s power.

About 2 hours into the 4 hour drive the screen went blank in the middle of nowhere.  I had a general idea that it was east, that there weren’t many roads headed that way, and that there might eventually be signs to the National Park.  I squinted at the Avis map, pretty much devoid of detail and set in a challenging font, especially in low light with reading glasses at high speed on a windy road.  Humpf.  I was on a back country road so when I passed the 55 sign I figured that must mean 80 if I was to make the most time before dark.  I wound around searching for the rise of the Sierras until the sun set, and with the help of a few Saloon keepers (the only thing I could find open) I finally hit the road to the park.  Whew.

I’ve been trying to think of an analogy in investing to this dilemma.  Maybe Chuck can think of one in the morning (it’s midnight now and I suspect he’s been asleep for at least 3 hours).  But I think it will center around the old phrase “measure twice, cut once.”  When we looking at alternatives for our allocations don’t just take the fast and easy pathway with one guru or another.  Grab that advice but have a backup.  By the way the hike was magnificent.”


Chuck again… Thanks Frank!  Yes, I would say that when you’re traveling roads that you haven’t been down before, you had better have a backup plan… The same can be said for allocating an investment portfolio on today’s road that hasn’t been traveled before… Diversification is the key, and the different allocations are your backup plan!

To recap… We have a chock-full-o-stuff week ahead of us that starts tonight with the BOJ meeting, and then goes to the BOC, Brazil, S. Africa, a Janet Yellen testimony on the economy twice this week, and a Data Cupboard that gets restocked, and should be enough to cause some major twists and turns this week, so strap yourself in, keep your arms and legs inside at all times, and enjoy the ride!  The currencies are mixed this morning, and Gold is getting whacked this morning…

Currencies today 7/14/14… American Style: A$ .9395, kiwi .8815, C$ .9315, euro 1.3625, sterling 1.7115, Swiss 1.1225, … European Style: rand 10.7005, krone 6.1750, SEK 6.7870, forint 227.25, zloty 3.0360, koruna 20.1320, RUB 34.31, yen 101.45, sing 1.2395, HKD 7.7500, INR 60.13, China 6.1362, pesos 12.99, BRL 2.2205, Dollar Index 80.12, Oil $100.47, (the first time in weeks Oil has a chance of falling below $100) 10-year 2.52%, Silver $21.09, Platinum $1,500.35, Palladium $871.25, and Gold… $1,318.96

That’s it for today… Well, it’s a two-day week for yours truly, as I leave on Wednesday, and won’t be back until the last week of July… I’ll be heading to Vancouver next week, I gave you the info on the Sprott Vancouver Conference last week, so I won’t bug you again.. Congrats to Germany, who won the World Cup! I was really getting frustrated that the World Championship would be decided by penalty kicks, but then Germany scored a goal, and all was right on the night for them… When I head to Vancouver, Alex will be heading to California to play water polo in the Junior Olympics! I wish I could go watch that, but I’ll be way north of California… Besides he’ll be playing at St. Louis U, on the club team, so I can go watch him play there, which is only 20 minutes down the road from home! I had an awful night Saturday night, but was back to feeling better yesterday, so that was fun!  And with that, I’ll get out of your hair for today, and send you on your way to a Marvelous Monday!


Chuck Butler


EverBank World Markets

Editor of A Pfennig For Your Thoughts





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