Riksbank Announces the End of QE

And now… today’s Pfennig for your thoughts…

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

Front and center this morning.

The big event today is the European Central Bank (ECB) meeting that is taking place as my fat fingers fly across the keyboard! Like I saw earlier this week, regarding the ECB meeting, I really don’t see Draghi, doing anything new and exciting at this meeting. Yes, I’m sure he’ll drag the standard old lines out and march them down the street, like: “Should we need to, there’s more stimulus that can be added.” The euro is holding its own going into the ECB meeting, after getting sold yesterday as the day went along.

The two currencies that hold their collective breaths every time the ECB meets, the krone and krona (Norway and Sweden) walk on eggs and try to get through the ECB meeting without having to react positively or negatively. (Mostly negatively)  And it’s no different today, especially for the Swedish krona, which had just dealt with the Riksbank stating that their QE was going to end. But the krona rally going on could very well get scalped should ECB President Mario Draghi decide to talk incessantly today.

Well, the real movers today are the price of oil, and the precious metals. So, let’s start with oil. The price of oil jumped $4 in the last 24 hours on the news that the U.S. Production dropped to a 17 month low, and the Iraqi Deputy Oil Minister, said that there will be an OPEC production meeting next month. And once again the hopes of a production freeze will rise. But I just don’t see it happening folks.

These oil producing countries have been cheating on oil production for years, why would they want to freeze production?   Yes, to get the price back up, but I think they are comfortable with making up the difference with volume. I say that with tongue in cheek, and hopefully you got the joke…

After all my talking about how there was a shortage of silver, and how it was going to eventually be the thing that lights a fire under silver to get it going in the right direction again, things are coming around, and silver is outperforming the other precious metals. Don’t look now but silver has $17 handle again! Year to date, silver is up more than 25%, while gold is up a respectable 18.74%, and platinum has really begun to push the metals appreciation envelope.

All this scares the bejeebers out of me, for the last time we saw all this appreciation in the precious metals, the price slam hit them. And I certainly don’t want to see that again, or have to talk about it without calling the price manipulators names, and cursing till I’m blue in the face!

But how about silver? Back in the day 2001 through 2011, when the metals were pushing the appreciation envelope daily, I had done some research and found that silver had outperformed gold in seven of the 10 years it was rallying. Could we be returning to those days? Need I remind you that silver is outperforming gold right now.

The two star currencies this week until this morning, The Russian ruble and Chinese renminbi, are not faring so well this morning. I find the ruble move interesting and curious, as the ruble normally bounces on a line with the price of oil, and I talked above about how the price of oil soared higher by $4 in the past 24-hours.

So, what’s up with the ruble? I’ll find out today, and forward a note to Chris, Mike or Frank, whomever is going to be picking up the Pfennig while I fly home tomorrow.

And the Chinese renminbi? Who knows what’s going on there with the currency? The Outflows data printed last night, but they were in line with the previous month’s data and not out of line with expectations, so the large depreciation in the renminbi overnight had just be an adjustment to the large appreciations the renminbi booked up to today, this week.

It’s opposites day for the Aussie and N. Zealand dollars. For the most part of the last two weeks, we’ve seen the N. Zealand dollar/kiwi outperform the Aussie dollar (A$), but today the roles are reversed. There is a whispering campaign going on right now regarding the Reserve Bank of New Zealand (RBNZ) and when they will cut rates again. And the consensus is fourth QTR. And they are selling kiwi now? Seems strange to me folks, but from the smallish size of the selling, one could believe it to be profit taking and not rate related selling.

The Reserve Bank of Australia (RBA) Gov. Stevens, followed up the RBA’s meeting minutes the day before with some updated information. I like this guy, and for a Central Banker he’s not so bad. Stevens slammed calls for central banks to directly pump cash into the pockets of households and governments to resurrect moribund global economic growth, warning that such “helicopter money” drops would be almost impossible to stop once they start. You’ve got to love this guy!   He also took on the viewpoint of Lawrence Summers, and just for doing that he gets a Gold Star from me today!

I’ve got a real treat for you today. I’ve done a lot of talking about the coming recession in the U.S. and how the train is departing for Recessionville, etc. and I know all too well, that I’ve been early with these calls before, and will probably be with this one too. And I welcome the recession. And so does publishing guru, Bill Bonner, and that’s our treat for today. Here’s Bill talking about recessions:

…bad stuff still happens. And it is unlikely that recessions have been completely banished.

Then again, recessions are not bad things – not in our book.

They are nature’s way of clearing out mistakes. Recessions are when the destruction part of economist Joseph Schumpeter’s ‘creative destruction’ comes into play.

The ‘creative’ part follows. But you can’t have one without the other. Marginal businesses. bad investments. weak competitors – they all need to get out of the way so better uses can be found for the capital at work.


Believe it or not, capital is limited. If you use it for bad projects, you get poorer, not richer.

Yes, I thought I would talk about what I think is the coming recession, instead of the Data Cupboard today. Oh, and for those of you keeping score at home, my GDP Tracker for the first QTR GDP here in the U.S. is pointing to a 0.3% increase.  Hmmm.. 0.3%?  So, if we take out the “adjustment” the U.S. made last year to include R&D to GDP, first QTR GDP would print negative, and we would be well on our way to Recessionville!

The problem as I see it, is that past recessions, since the turn of the millennium have been squashed by the Fed and not allowed to run their course through the economy. This, to me, is like continuing to put one more thing in a small closet, and then one day, all that stuff come crashing out of the closet. The Fed kept squashing the recessions, and putting them in the small closet. Until one day, that’s when we’ll have a Minsky moment.

At last check, gold was up $14.83 this morning, and has passed the $1,250 figure again. Will gold finally take that figure out, and leave it standing in the middle of the road, in the rear view mirror?  That’s the question for today and then if it does hold the line, then the question goes to tomorrow and so on. Recall, that the most recent ascent of gold past $1,250 lasted two days, and then WHACK! So, like I said above, this all scares the bejeebers out of me. Sort of like in a horror film when the person know they shouldn’t open the door, but they do it anyway! HA

Longtime readers may recall me talking about how one day, the retirement benefits were going to have to be adjusted because of a lack of funding and bad management, etc.  (numerous reasons)..  Well, this article, which can be found on Zerohedge.com, is all about a real problem developing with the Central States Pension. Uh-Oh. You can read the entire article here, or, here’s your snippet:

A dark storm is brewing in the world of private pensions, and all hell could break loose when it finally hits.

As The Washington Post reports, the Central States Pension Fund, which handles retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York, and Minnesota, and is one of the largest pension funds in the nation, has filed an application to cut participant benefits, which would be effective July 1 2016, as it ‘projects’ it will become officially insolvent by 2025. In 2015, the fund returned -0.81%, underperforming the 0.37% return of its benchmark.

Over a quarter of a million people depend on their pension being handled by the CSPF; for most it is their only source of fixed income.

Chuck again. My dad was a Teamster, and his pension was administered by the CSPF. This is one time I’m glad he’s not here any longer, so that he doesn’t have to see this happening .

That’s it for today. I hope you have a tub thumpin’ Thursday! Be good to yourself!


Chuck Butler
for The Daily Pfennig

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