Brazil Impeaches Their President

And now… today’s Pfennig for your thoughts…

Good day, and a Tub thumpin’ Thursday to you!

Well, the dollar was on the selling blocks yesterday, as the “soft belly” of the dollar that was exposed yesterday morning, turned over, and the “soft dollar” became a hard sell dollar. But that was yesterday, and today, it’s not so much a case of overall dollar weakness, but mixed results.

The Dollar Index fell below 94 yesterday, and I’ll remind you what I told you that my friend, and chart guru, Sean Hyman told me a couple of weeks ago, that if the Dollar Index dropped below 94 and remained there for a couple of days, it would signal further dollar weakness was about to come to a newsstand near you. But the Dollar Index is trading right now at 93.99, which isn’t a significant sign that the dollar is going to continue to get sold, in my opinion, we would have to see the Dollar Index drop to 93.80 before I would feel that the dollar is ready to take a ride on the slippery slope.

In overnight news… Brazil’s Senate voted 55-22 to impeach President Dilma Rousseff for breaking Budget Laws. Did you know that this is the second time since democracy was restored in 1985 that a Brazilian leader was forced to step down? Rousseff will have to step down immediately, and then have to stand trial, which could take up to 180 days. The Brazilian real has responded with vigor to the news of the impeachment, and has reached a level it hasn’t seen in a month of Sundays. But what does Brazil do now? The economy is a mess, and the Olympics are supposed to begin there in 91 days.

I’ll mention something here that doesn’t mean it will happen again, but historically, we’ve seen the host country in the Olympics,  have a rally in their currency leading up to the Olympics and during, but afterward, see a reversal of sorts. So, if you believe that the Olympics “thing” can happen again, then you know what you should be doing.  I can lead a horse to water, but I can’t make it drink the water.

The other thing that’s BIG news overnight, is that the price of oil is back above $46 for the second time this year, and this comes in the face of an announcement yesterday by the Saudis that they were going to increase production. I think it was Tuesday, that I questioned how the price of oil could be dropping while Canada losses one million barrels of oil production per day in the Alberta fires. So, I have to play on both sides of the line here, and question how the price of oil can rally in the face of the Saudi announcement? Ahhh, grasshopper, I have the answer for that!

The EIA Oil Supply, Weekly Report showed that supplies dropped 3.41 million barrels last week, which wouldn’t be that bad if it weren’t for the fact that a 750,000 barrel increase was forecast. Crude output dropped to 8.8 million barrels a day, which happens to be the lowest level since September 2014. And there was a report from the Canadian oil sands that workers will start returning to work today, and capacity will be back to snuff within days. So, in the end, it was a case of “who cares what the Saudis are doing”.

The Russian ruble, which is the poster child for how a currency responds to the price of oil, has had four days of rallies this week. but brother, has it come from a very weak point! But the ruble isn’t the only petrol currency on the rally tracks today. Norwegian krone is cooking with gas today, as is the real. And the Canadian dollar/loonie is rallying but the move is small, as until the oil sands return to capacity, it’s better to be safe than sorry here.

One day after The Japanese Fin Min made some noise about intervening, Bank of Japan (BOJ) Gov. Kuroda told a German newspaper that, “Technically we can go as low as the ECB on rates, and lower rates will then lead to a weaker currency.” And that brought a blow to the yen that dropped it to the canvas.

Earlier this week, I was talking about how the Japanese officials hasn’t said or done anything to weaken the yen, and therefore they weren’t ticking off anyone associated with the formation of the so-called Shanghai Accord.  But now we’ve seen two days of “words” that damaged the yen’s value, and I’m sure the IMF is trying to reach Mr. Kuroda as I type to discuss all of this.

The bleeding of the Aussie dollar (A$) continues to seep through the tourniquet, and the losses continue to mount for the A$…  And I’m going to defend the A$ here, as I don’t get it. Sure the Reserve Bank of Australia (RBA) cut rates last week, but let’s not lose track of the fact that Australia still has higher yields than the U.S., Japan, and Europe, and Canada. As I said last month in the Currency of the Month Sunday Pfennig that highlighted the A$..  Aussie GDP should print between 2.5% and 3.5%  this year, and Unemployment holding steady Eddie at 5.7%… Is this an opportunity to pick up some A$’s at cheaper levels?  Sure appears that way to me.

The price of gold had a good day yesterday rising $11, but is giving back some of that this morning as it is down $7 as I write. Last week it was legendary fund manager Stanley Druckenmiller that talked about owning gold. And this week we have another legendary fund manager talking about gold. This time it’s Paul Singer, who believes that gold’s best quarter in 30 years (the first QTR this year) “could represent something closer to the beginning of such a move (higher) than to the end.”  That’s all nice and peachy, as long as these guys that are talking about everyone else owning gold, are bellying up to the bar to buy some too!

The U.S. Data Cupboard is still pretty empty today, and tomorrow we finally get some real economic data with April Retail Sales. I’ve already told you that the BHI indicates that April’s Retail Sales will show an improvement, but not be overly strong.

I’m going to break away from the normal Big Finish ending today. I want to talk about something that is really beginning to eat away at me. And the more I hear Central Bankers talking about it, the more I want to scream! So, here we go. See you on the other side!

I’m stepping up to the podium and the microphone.. tap, tap, testing, testing, can you hear me in the back? Good, because this is important and I’m going to go out on a limb today with a thought that will probably give the reviewers a headache today. But it has to be said, by someone, and that “someone” always seems to be me! So, let’s get started.

I’ve written about the drive to ban cash. I’ve written about negative rates. I even paired them together in the March Review and Focus (just a friendly reminder that you have to go here to see the current R&F). In that letter I focused on these statements that first appeared in Bloomberg (I don’t make this stuff up folks).

.   Norway’s Biggest Bank Calls For Country To Stop Using Cash

. Germany and France want to impose a Europe-wide ban on cash transactions of more than €5,000

. The next weapon in the war on cash: capital controls

. Europe’s €500 Notes Are the Latest Front in the War on Cash

. Ban $100 bills to tackle crime: Ex-bank chief

. Scrap £50 notes to stop plumbers and builders avoiding tax, urges government adviser

And then I said, “Central Banks know that if depositors begin to find solutions to the negative rates, that the only way to combat that is to take away their cash”.

Well, since March, we’ve added Japan to the mix of countries implementing negative rates, that was first used by Denmark four years ago! And we’ve also had European Central Bank (ECB) President, Mario Draghi, start a war of words with the German Central Bank, The Bundesbank, over his call to ban the euro 500 Notes. And Draghi isn’t backing down.

So, what’s to become of all of this? Well in my humble mind, Quantitative Easing begat zero interest rate policy (ZIRP), begat, negative interest rate policy (NIRP), and that begat the ban on cash. I know, I know, this is all up in the air right now, but the fact remains that we’ve seen QE,  ZIRP, and now NIRP, and the calls for a ban on cash continue to get louder and louder. And when cash gets banned, guess what comes next? The electronic surveillance of our financial affairs.

OK, I’ll open the floor for questions. Yes, you in the back, what’s your question for Chuck? This is all conspiracy, Chuck. I thought you weren’t going to talk about that any longer?” I beg your pardon, but this is NOT conspiracy. Have we not seen several rounds of QE? Have we not seen ZIRP? Have we not seen NIRP? And have we not seen officials from all over the world calling for an end to a large denomination of their currency? That’s how it starts, my friend, then the next thing you know, it’s the 50 note, and then the 20 note, and well, after that, they’re gone.

Yes, up in front? “Most of this stuff has happened in other countries so far, Chuck, why are you so concerned it might happen here?”  Well, doesn’t it seem that things that begin in Europe, per se, end up here six months later? I just don’t see how the rest of the world will go to banning cash, and so on, and the U.S. remains outside of that circle.

That’s all for today, folks. Please take the brochures that were on your seats when you arrived in the room, with you, and be sure you begin to look to own assets that aren’t cash. Like gold and silver.

And with that I’ll get out of your hair for today, but first send hopes your way that you have a Tub thumpin’ Thursday and that you be good to yourself!

Regards,

Chuck Butler
for The Daily Pfennig

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