In This Issue.

* Dollar strength all around today.
* No bright spots today!
* Treasury yields drop lower, and lower and lower!
* Why take steps to insure against bad things?

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

Eurozone CPI Goes Negative.

Good Day!…  And a Wonderful Wednesday to you! What an absolutely beautiful day yesterday, unfortunately, I was unable to enjoy it to the max, as it was a bad stomach day for me, and that sent me to sleep most of the day. UGH! But, that's OK, because when I awoke, I was better, went out to dinner and then watched the moon rise, the stars dance in the sky, and so on. See? It's the little things with me..

Well, it must be the “little things” with U.S. Treasury buyers too! WOW! The yield on the 10-year Treasury fell below 1.90% yesterday. Now you may recall that for one day in Rocktober, the 10-year's yield briefly dropped to 1.88%, but that was a flash in the pan, this move lower is a true reflection of investor's fears right now. The fear of many things going on, and so they flee to the safety of U.S. Treasury bonds. This move to Treasuries is really fueling the dollar's rally too. The dollar long position is as I told you the other day, becoming a real problem when you consider it to be a One-Way trade (UP) and how crowded that trade is becoming. But, we have learned over the years that this phenomenon can continue way past the time we believe it should end.

Well, the Eurozone printed their latest flash CPI (consumer inflation) report this morning, and it wasn't pretty, but proving that the Temptations had it right when they sang: Beauty is only skin deep, Eurozone CPI print was only skin deep.  Here's the skinny. the overall CPI fell from .3% to -.2% in December. BUT, core CPI actually moved higher from .7% to .8%… So, deep down, deflation is not a problem in the Eurozone, but when you factor in the plunge of the Oil price, which is to blame for this negative overall print, things get pretty hairy in the Eurozone. And I have this feeling that the Eurozone members that were so high and mighty about not needing additional stimulus to counter deflation, aren't sitting so high and mighty right now. I have this feeling that they felt a little squeamish, and fidgety in their seats, seeing this negative print.

And knowing the media's inability to see through the smoke here, they'll be all over this negative print like a cheap suit!  So, the European Central Bank (ECB) will meet in a couple of weeks, and that meeting should be a doozy. I just had a flashback to when my oldest son, Andrew, was a young boy, and we would watch the show Fraggle Rock, and they had these guys that were the builders, and they called them Doozers. What will the Doozers do at the ECB meeting? That'll be the question with many a suggestion coming in the next couple of weeks, and that means the euro will get taken to the woodshed on a regular basis, sort of like a young Hellion out to cause trouble.  But in this case the poor beleaguered euro will be minding its own business, when it finds itself being dragged through the mud on its way to the woodshed.

And so it is like that today, folks. The euro has slipped down to 1.1850 overnight, mostly because of the negative CPI print.  Why has no one noticed that the core report saw inflation rise, I hear you asking. Well, that's the way the cookie crumbles when a currency is on the run, and doing the rope a dope, any good news is pushed to the side of the road, and the bad news is put up in bright lights for the world to see!

On Monday we had Gold and the ruble running opposite the dollar strength. Yesterday we had Aussie dollars (A$), kiwi, yen, and Gold running opposite the dollar strength and today.. Well, today, we have nothing running opposite the dollar strength. The news yesterday that the Chinese were going to inject $1 Trillion in stimulus to their economy, ended up being just as I suspected, a one-day and done deal for the A$ and kiwi. I'm telling you this now so you can listen to me later, but this is looking so much like 2005, and 2008, that I'm having daily flashbacks to those years, when I was ready to raise the white flag and surrender. My beliefs, my training, and all the years of reading what the smart guys (traders) had to say about trends, etc. was getting hammered daily, and just about the time I was ready to raise the white flag, things changed and went back to how they should be.

And I have no doubts that I'll be back at the doorstep of raising the white flag again soon enough, as this dollar strength is gaining strength, and people that should know better think this is the way things should be for the dollar. Remember when I told you months ago, about how the forecasters believed the A$ would fall from the high 90-cent levels to 85-cents? That was crazy talk at the time, but now with the A$ at 80-cents, it's not so crazy, eh?  Well, those same guys are now saying the A$ will fall to 75-cents. And it's all because it's about the U.S. dollar right now.

The price of Oil has fallen more than $6 in the first 4 trading days of 2015. And this continuing drop of the price of Oil has caused major headaches for the currencies of Norway, Canada, Russia, Brazil, U.K., Mexico, and others. There's no blue sky for these currencies, as the price of Oil is in no position to recover any time soon. I told you yesterday, about the supply glut of the bubbling crude, Black Gold, Texas Tea. that doesn't bode well for a price recovery. But think about this for a minute, when have things been “stable” in the Middle East in the past 50 years?  One event could upset the cheap Oil applecart, and I think that's on the minds of traders every day!

Teachers keep on teachin', preachers keep on preachin', the world keeps on turnin'.  Yes, lyrics to Stevie Wonder's song Higher Ground. And yesterday, I was reading Bill Bonner's letter, diary of a rogue economist, and he said, “Pumpers keep on pumpin'” and that immediately brought that Stevie Wonder song into my head! Of course, Bill was being serious when he said that “pumpers keep on pumpin' to try to keep up with their debt service costs.”   (he was talking about Oil producers).  But see how my mind works? A simple saying, causes me to think of a song, and then relate that to investments. WOW! We should bottle that thing, freeze it, and preserve it for future generations, so that they might be able to prosper from the mind of Chuck.  HAHAHAHAHA, now that's funny stuff right there!

There's a report on the Bloomberg this morning that's talking about the Swiss National Bank (SNB) and how they had to get back into the foreign exchange buying business in December, as their reserves increased to $490 Billion (francs in dollar terms)  Remember a few years ago, when I told you about the SNB buying currencies like the A$ to diversify their reserve holdings?  That worked for them for a few years, but what to do now? Well, if I were running the SNB, and trust me I'm not throwing my hat into the ring for SNB Gov., I wouldn't stop buying A$'s now. the drop in the A$'s price allows a dollar cost averaging to occur. I would also be bulking up on the Chinese renminbi, but then that's just me, playing a SNB Gov. on TV. I'm not really a Central Bank Gov. and I didn't stay at a Holiday Inn Express last night!

Oh, and by the way (BTW) the euro/ franc cross is dangerously close to the 1.20 floor the SNB set for the cross. the cross is trading at 1.2009 this morning. So, who's going to blink first? The SNB or traders pushing this envelope? I think the SNB will blink first, folks.. it's their floor! They said they would defend it, why wouldn't they be the first to blink?

Well, Gold is giving back some its gains that it has made this week this morning. And so has the U.S. Treasury 10-year, as the yield moves back above 1.90%… Apparently, all the flight to safety investors got itchy, and had second thoughts. But  back to Gold here. The shiny metal is seeing some selling overnight, ahead of the printing of the Fed Meeting Minutes that will show up this afternoon. The markets believe that these minutes will contain the double secret words that give them the wink and nod, that interest rates are going up very soon..  Yes, the markets have their super spy mood rings that will allow them to go over the minutes and find the hidden messages that only they are able to find, because they have their Buck Rogers super spy ring! 

I hope they find what they're looking for, but I doubt they will! I prefer to listen to guys like the bond king himself, Bill Gross, who said yesterday that the “gravy days are over in the U.S.” and that interest rates won't be going up until later in 2015, and maybe not even then!  But then, it's true what Paul Simon said, when he sang: A man hears what he wants to hear, and disregards the rest. That's me in a nutshell! Which is where a lot of people, including my beautiful bride, believe I came from. a nutshell!

Well, looky there, I was bang on with my call on Factory Orders yesterday, in fact the print was even worse than expected, printing a negative -.7%…  And the Markit U.S. Composite ISM (manufacturing and services) index fell from 53.8 to 53.5. not a huge drop by any stretch of the imagination, but. it certainly shows some cracks, eh? But if you go back to June, 2014, just barely more than 6 months ago, the index was at 60.88.   So, where were the pundits, economists, and government figures pounding their collective chests and boasting about how they turned around the economy?   But see what I'm talking about above here? The dollar is pushing the bad news to the side of the road, right now. But at some point the bad news will pile up on the side of the road, and eventually spill onto the road, causing the dollar to veer into the guardrail!

The U.S. Data Cupboard has the Fed Meeting Minutes this afternoon, but first we'll see the color of the latest Trade Deficit for November. the price of Oil really began to move lower at a quicker pace in November, so we should see an improvement here. We'll also see the ADP Employment Change report for December. The experts are forecasting a gain of 225,000 jobs in December. I've told you for a long time now that if I were king, I would use this ADP report and replace the BLS surveys. ADP does the payrolls for just about everyone in the U.S. and they have their finger on the pulse of jobs created and lost. But we as a country couldn't allow a public firm like ADP to make this report THE report for jobs. I can hear this call being made if that were to happen. “Hello, this is ADP. Hello there, this is the BLS, we would like to submit some hedonic adjustments to your report this month, can you help us with that? .  I'm sorry, be we don't allow hedonic adjustments, I can switch you to your representative in Congress if you wish?… HA!

For What It's Worth. I read an article yesterday that was submitted by dear reader Bob, that had the forecasts of 11 top economists, analysts for 2015. I took a couple of these from that report for the FWIW section today, because they paint the same picture I expect for 2015.  here you go!

Bill Fleckenstein. “They are trying to make the stock market go up and drag the economy along with it. It's not going to work. There's going to be a big accident. When people realize that it's all a charade, the dollar will tank, the stock market will tank, and hopefully bond markets will tank. Gold will rally in that period of time because it's done what it's done because people have assumed complete infallibility on the part of the central bankers.”

Paul Craig Roberts. “”At any time the Western house of cards could collapse. It (the financial system) is a house of cards. There are no economic fundamentals that support stock prices – the Dow Jones. There are no economic fundamentals that support the strong dollar.”

Rob Kirby. “What this breakdown in the crude oil price is going to spawn another financial crisis.  It will be tied to the junk debt that has been issued to finance the shale oil plays in North America.  It is reported to be in the area of half a trillion dollars worth of junk debt that is held largely on the books of large financial institutions in the western world.  When these bonds start to fail, they will jeopardize the future of these financial institutions.”

Gerald Celente: What does the word confidence mean? Break it down. In this case confidence = con men and con game. That's all it is. So people will lose confidence in the con men because they have already shown their cards. It's a Ponzi scheme. So the con game is running out and they don't have any more cards to play.

What are they going to do? They can't raise interest rates. We saw what happened in the beginning of December when the equity markets started to unravel. So it will be a loss of confidence in the con game and the con game is soon coming to an end. That is when you are going to see panic on Wall Street and around the world.”

Chuck again. I guess I should have warned you to put away the sharp objects first, eh?  But think about this stuff for a minute folks. these people are on the outside looking in, along with me, and while we see these things could happen, that doesn't mean they will, or even come close for that matter. it's what we see. and we could be wrong. all of us!  But here's my thought, and something I explained to my friends on New Year's Eve.  OK, so we go down the line and I'm proved to be wrong about this stuff, but did that mean I was wrong to take out insurance like Gold, when I thought these things would come true? No.

And, in case you're wondering. all of the articles said about the same thing. but in case you're wanting to make sure you find it here:

And for full disclosure here. I should also tell you that if I wanted to, I could find just as many or more economists analysts that believe the good times are going roll here in the U.S. for the economy and the dollar.   just so you know, I'm fair and balanced!

To recap. The Eurozone Flash CPI report showed that overall  CPI went negative in December, but core CPI actually moved higher. But Chuck believes the media and the ECB will be all over the negative print as reasons the ECB needs to inject more stimulus, like all-out Quantitative Easing/ QE. And that has the euro in the woodshed this morning. The price of Oil has fallen $6 so far this year, and that has the petrol currencies doing the rope a dope again. In fact, there are no bright spots opposite dollar strength today.  Even Gold is reversing its gains from the first 3 days of trading in 2015. And U.S. Treasury yields sink lower and lower and lower.

Currencies today 1/7/15. American Style: A$ .8075, kiwi .7755, C$ .8455, euro 1.1840, sterling 1.5135, Swiss $ .9860, . European Style: rand 11.6850, krone 7.7590, SEK 7.9360, forint 269.40, zloty 3.6415, koruna 23.4395, RUB 63.59, yen 119.10, sing 1.3380, HKD 7.7545, INR 63.42, China 6.1269, pesos 14.78, BRL 2.6805, Dollar Index 91.92, Oil $48.38, 10-year 1.97%, Silver $16.32, Platinum $1,219.25, Palladium $798.80, and Gold. $1,213.56

That's it for today. Well, the three pitchers I mentioned yesterday, Johnson, Martinez, and Smoltz, were elected to the Hall of Fame, along with second baseman, Craig Biggio. Our Jen Mclean is a huge John Smoltz fan, so I'm sure she was happy with that announcement.  I could go on about how I don't agree with the HOF voting these days, but what good would that do? Nobody listens to me. A Big 6-0 victory for our Blues last night in Phoenix (they play hockey in the desert? HA!) I was talking with the Big Boss, Frank Trotter, on the phone yesterday, and mentioned it was not a good stomach day, and he immediately searched for and found a donut shop nearby where I am. What a good friend, eh?  Now, I know where I can get an iced cake donut when I need one! Back in the office, I could call our little Christine, and she would stop on her way to the office and pick one up for me, but I'm “roughing it” now without her around!  Leon Russell is singing, Back To The Island. And watch the sun go down, and listen to the sea roll in, and I'll be thinking of you, and how things might have been. What a great song!  OK. tick tock the clock says it's time to get this out the door, so here we go, I hope you have a Wonderful Wednesday!

Chuck Butler
EverBank World Markets