Kicking The Can Down The Road.
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In This Issue.

* Traders back on scent of rate hike.

* Oil is stuck in tight range.

* Greece has homework assignment!.

* Happy Late Birthday to George Washington!

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

Kicking The Can Down The Road.

Good Day!...And a Marvelous Monday to you! I have a real disadvantage attempting to type this morning. Some strange thing has happened to my hands, and they have swelled up like two red balloons, and my already fat fingers are well. fatter! I pride myself on how fast I type, it was probably one of the best classes I took in High School! HA! I just noticed that the description that I used above sounded like Pink Floyd's song:

Perfectly Numb, a phrase I have used over and over again though the 23 years of writing the Pfennig. Well, probably not in the beginning years, as the debt in the U.S. wasn't really a major problem like it is today.

I have something for you on pensions not being properly funded in the FWIW section today, so be sure to catch that before head out. And it begs the question that should be everyone's minds. How can pensions be underfunded, given the soaring stock market? Oh, well, that's for greater minds than mine to figure out, I'm just one guy sitting at his laptop, trying to make sense of all this. And before we get to the beef of today's letter, I wanted to mention that I read this weekend that since 2008, global debt has risen $57 Trillion, and the ratio of debt to GDP is up to 286% from 269%, and to top it all off, Central Banks are monetizing nearly 100% of new debt. Does that sound like a winning formula? And who's that in front of all this debt accumulation and monetization? Neck and neck the race comes down to the finish line and the U.S. outdistances Japan by a nose!

OK. Well, now that's not worthy of a Monday morning conversation, Chuck!

You should know better than to get that deep right off the bat on a Marvelous Monday! You've got to ease into the saddle and make it easy like a Sunday morning! Well, there's nothing easy like a Sunday morning with the way traders are treating the precious metals this morning, led by Gold. Gold has dropped below $1,200, and it doesn't stop there, Platinum and Palladium are taking on water, and so too is Silver. It appears that after a couple of days of thinking that the Fed's Meeting Minutes were dovish, and a rate hike not so imminent for June, that Traders are back on the scent of a June rate hike.

And just when things look dark for Gold I read my friend, the great Mogambo Guru's thoughts on Gold & Silver. let's listen in. "Which brings us to the Fabulous Timeless Mogambo Advice (FTMA) to buy gold and silver, which will become invaluable in terms of worthless paper currencies, which is another 100% certainty of the last couple of thousand years.

And with the sheer, staggering tonnage of longitudinal evidence like that, you would have to be a complete idiot, even more idiotic than I am, or more idiotic than my wife for agreeing to marry me in the first place, not to buy gold and silver bullion with a reckless, all-or-nothing abandon usually reserved for imminent life-or-death crisis situations.

And, you will be happy to know, fate is indeed smiling upon you, so that you can just walk in and buy the stuff at bargain prices, right now!

A glaring historical imperative and bargain prices? You just gotta say "Wheee! This investing stuff is easy!" - Mogambo Guru

Of course that's the great Mogambo talking, and he's not shy about giving his opinion, which like anyone else's it could be wrong.

I'm honored to be called a JMR by the Mogambo. Junior Mogambo Ranger. And I plan to meet up with the great Mogambo when I make the trek to the other side of the state next month, to speak at the Oxford Club's Investment U.

Conference. I can't wait! Well, actually, I can, given that I'll be missing 2 baseball games at Roger Dean Stadium. But, no worries, I'll see plenty of them. Not signed up for the conference yet? Well, hold your horses, I'm sure there's a special link I need to give you. So, I'll get that today, and provide it to you tomorrow morning

Well, the Greece / Eurozone negotiations finally yielded something this past weekend. Greece will obtain a 4 month extension to its current agreement. That is, as long as Greece can list the obligations they will have to meet and turn it in today, and then have it approved. so there are still questions about this, which amounts to kicking the can down the road. Currency traders are seeing this for what it is, kicking the can down the road, and thinking that this is all just going to come to a head again in June, so why reward the euro now? And traders have gone about pushing the euro lower. In fact it briefly dipped below 1.13 this morning, but bounced back above the figure, but it appears that 1.13 will be taken out, unless there's something rotten in Denmark with U.S. data today.

This morning, Germany's Business Climate as reported by the think tank, IFO, slipped this month from January's 107.7 print to a 106.8. I read something to the tune of most of the slippage came from the backward looking component. the great Satchel Paige once said, "don't look back, for someone might be gaining on you". the IFO people should take that quote to heart! But, I don't think this has much to do with the euro's weakness this morning, folks.. .It's like I said above, traders don't want to be fooled into thinking that all's well that ends well, with Greece.

The Chinese have been on holiday for the past week, and so there's been no movement in the renminbi / yuan, but the other Asian currencies have traded and haven't fared too well, the Singapore dollar (S$), the Japanese yen, the Indian rupee, are all weaker, and stretching things a bit, the Russian ruble finally went sour on its 3-week rally, after Moodys cut Russia's debt rating to junk.. the ruble is one of the worst performers this morning. The Indian rupee is the one that surprises me given all the good news coming from India these days. Good inflation data begets rate cuts though, and I think that's what's weighing on the rupee right now, a lowering of rates which would by a psychological problem for the rupee, given that traders are back on the scent of a rate hike in the U.S. And even though the rate differential between the two countries would still be wide enough to drive a Mack truck through, it'll all be psychological with one going up and the other going down.

The mini-rally that the Norwegian krone was putting together has been wiped out, with this new negativity toward the krone coming from the rot on the vine in the Swedish krona, but after a day or two of that, it's an all-out assault on the krone once again. The price of Oil has held ground just about $50, but no real direction in black Gold, Texas Tea, has the petrol currencies searching for tidbits on the ground to help each respective currency and right now no tidbits can be found!

The Mexican peso is back above 15. Remember this is a European priced currency so the higher the price the less in value it returns in dollars.

And rate hikes are not forthcoming from the Mexican Central Bank, so this is one currency that had great potential a couple of years ago when the new president, Nieto, was elected with all his reforms for the economy.

But he has failed miserably, thus once more teaching Chuck an important lesson about putting so much faith in a country's leader to lead them out of their respective economic funk. I did this with Brazil, and that didn't turn out good, I did this with India, and while it turned good for about a year, the progress is stuck in the mud now, and I did this with Mexico, and well, we see where that's going.

Central Banks are the gate keepers now, not elected leaders. they've taken over the bond markets, they've manipulated interest rates, they've taken over the mortgage sector, and everything else in the path of Central Banks.. .this is getting completely out of hand folks. But there's nothing I can do about it, so, let's just move along now. quietly, and maybe no one will notice that we were here.

The Aussie dollar (A$) and New Zealand dollar / kiwi are both down this morning, as the rate differential things is playing hell with just about every currency. But what happens IF things go to hell in a hand basket around the world, and the Fed decides it wouldn't be prudent to hike rates in June? Quite frankly, this is the scenario I believe we're going to see come June, but more about problems in the U.S. that changes the Fed's mind.

Maybe we'll get a clue or two from the two testimonies that Janet Yellen, will give on Capitol Hill this week, starting tomorrow. Many years ago, this appointment on the Hill twice a year, was required by the Humphrey-Hawkins Act, but that ACT expired years ago, but the Fed Chair, first Alan Greenspan, then Ben Bernanke, and now Janet Yellen continue to honor the ACT in good faith, and give lawmakers their thoughts on the economy. I wonder if Yellen will be as dovish as the Fed's Meeting Minutes were? Or if she'll attempt to squash those dovish thoughts like a bug.

Probably the latter of the two, as for now, she has to keep the markets on the scent of a rate hike.

The U.S. Data Cupboard just has Existing Home Sales for January on the docket today. New Home Sales stunk and I expect Existing Home Sales to also stink up the place today. We will end the month this week with some major data like Durable Goods orders, and Capital expenditures, the S&P/ CaseShiller Home Price Index, and the first revision to 4th QTR GDP, which you may recall originally printed at 2.6%... Mark this down, now, but I think that given the rot on the economy's vine that was exposed later, that this first revision is going to show a huge mark down. Maybe below 2%... YIKES!

For What It's Worth. In reading about the pension funds underfunding I came across this article that talked about teacher's pensions. Well, with two of my children working as teachers, it of course caught my eye. You can read the whole article here, or just be satisfied with my snippets.



"If you think you have retirement worries, even teachers who are on a state-run pension may be in the same boat, or even worse down the road. A new report card prepared by the National Council on Teacher Quality shows that state teacher pension systems had a total of $499 billion in unfunded liabilities in 2014. Yes, that is just one interest payment short of hitting a half-trillion dollars.

Another concern is that this debt load has risen by $100 billion since the same report card was prepared for 2012. States earned an average overall grade of C? for their teacher pension policies. That doesn't sound very good.

The 2014 report card showed that roughly 70 cents on every dollar contributed to state teacher pension systems is now paying for debt rather than paying for retirement benefits. If that much funding is just supporting debt, what happens if the investment returns take a hit? And what happens if interest rates paid to support that debt start to rise?

Chuck again. There are tons of these underfunded pension stories out there folks. a simple Google search will find more than you care to read, I'm sure! And again, I ask the question: how can this be happening with the stock market soaring?

To recap. The dollar is in the driver's seat this morning, and traders return to their thoughts that the Fed is on course to hike rates in June.

The Eurozone and Greece decided to kick the can down the road 4 months, in agreeing to a 4 months extension of their current agreement, but the euro received no love for this gesture, as traders see right through the kicking the can down the road. Gold has fallen below $1,200 again, and all the good stuff that Gold had going for it in January, has been wiped out.

And the U.S. Data Cupboard starts the week with Housing data, but ends with a crescendo!

Currencies today 2/23/15.. American Style: A$ .7795, kiwi .7520, C$ .7940, euro 1.1310, sterling 1.5355, Swiss $1.0540, . European Style: rand 11.7025, krone 7.6125, SEK 8.4545, forint 269.75, zloty 3.6920, koruna 24.2660, RUB 64.14, yen 119.05, sing 1.3615, HKD 7.7565, INR 62.31, China 6.1330, pesos 15.09, BRL 2.8825, Dollar Index 94.78, Oil. $50.23, 10-year 2.11%, Silver $16.29, Platinum $1,158.50, Palladium $762.50, and Gold.


That's it for today. Well, yesterday was the birthday of our founding father. George Washington. What a great man he was. Little Everett learned a song in pre-school about George Washington, he's so cute when he sings it. Our Blues had a convincing win in Boston, but then lost in Pittsburgh over the weekend.. Over the years, our Blues have done quite well against the Eastern teams, so it would be a good thing if they ever got out of the West during the Playoffs to play an Eastern team in the Stanley Cup Finals! But getting out of the West has been a major problem for the Blues, after doing so their first two years in the league, they have not done it since. the weather here returned to normal in 24 hours, the "cold"

weather was gone. I saw on TV the morning of the "cold" that they were telling parents how to bundle kids up for the bus stop. Ahem. it was 39 degrees. Up north, 39 degrees is a good winter day! I found it all to be pretty humorous.. Congrats to all the winners at the Academy Awards last night. By the time the show started it was bed time for me! And with that, I'm sure I missed a few things, but I'll pick them up tomorrow, it's time to go! I hope you have a Marvelous Monday!

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

Posted 02-24-2015 12:35 AM by Chuck Butler
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