A Downward Revision of Eurozone Growth...
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In This Issue..

* Euro rally ends quickly!                        
* Housing Data continues to be bad...                        
* OECD wants Norway's rates increased...                           
* The Aden Sisters on a Wednesday!                          

And Now... Today's Pfennig!

A Downward Revision of Eurozone Growth...           

Good day... And a Wonderful Wednesday to you! I'm sitting here wondering what to write about this morning, and on the radio is a classic song by Led Zeppelin, Dazed and Confused... Seems quite apropos, eh? I say this because that's what I've been for the last month, as the dollar got up from its death bed, and there's not a sign of any medicine that was prescribed had been taken! Oh well, why would I think that things would change for me at this stage of my life, I've been dazed and confused for a long time! HA!

I'm sure that's what a lot of people are saying right now anyway... The euro rebounded over 1-cent yesterday, but that rebound has been wiped out completely in the overnight markets... There's just no lasting power in any currency rally VS the dollar right now. And as I keep going saying, this is reminding me so much of 2005 when the dollar covered up its pimples and posed for GQ, only to see the pimples pop through the makeup by year-end.

The euro was sold overnight after a report from the German Banking Lobby that downgraded their growth forecasts for this year. This, unfortunately, reminded everyone that we had been playing a game of "who's economy is worse"... And with traders becoming comfortably numb over the repeated awful U.S. data, the fresh stuff from the Eurozone has everyone's attention.

Yesterday, as I said above, the euro rallied all day long after PPI soared and the Housing Starts with Building Permits data came in very soft... Here's the skinny...

The overall PPI (pipeline inflation) soared 1.6% in July following June's 1.8% rise... But instead of this being hawkish for the dollar (remember the mental giants that reward currencies with high inflation rates) the markets realized that the 3.1% rise in energy costs was probably a last hurrah as Oil prices began to fall late in July and have plummeted in August.

Housing starts Printed at  +965k with a 30% decline in the  Northeast.  Building permits printed down 18% to 937k, the lowest printing of this data since January 1991. 

Of course, in my mind, this data is worse than a banking lobby's downward revision of growth forecasts, but not so! UGH!

There's no data to speak of today so the currencies are on their own, and that hasn't been a good thing for currency holders of late... In fact, there's little in the data cupboard for the rest of the week. Here's what the Wall Street Journal said yesterday about this situation...

"Should oil prices, declines of which have been as stunning as the dollar's gains, stabilize or even rebound, that likely would be another reason behind a reversal of some of the dollar's moves against the euro. The lack of any major U.S. economic data could have the two markets looking to each other for direction.

"I suspect we will see a correction, as we've had such a massive move already," said Chris Turner, currency strategist at ING in London. "The euro is oversold."

That story that I talked about yesterday morning regarding the former IMF Chief, Rogoff, talking about another bank failure this year, really began to get some air time yesterday, which also helped the euro rebound. All the Banks that participated in the mortgage debacle (EverBank did NOT!) are all looking over their shoulders right now to see what their shadow has in store for them. And the Brokerage Houses are in the same boat, so I don't want them to think they get to go Ollie, Ollie Oxen Free on this...

You know... With all this Alfred E. Newman (what, me care?) attitude by market participants these days toward risk, the high yielders have inched back VS the dollar... No, the moves haven't been great, but inching back... Aussie, kiwi, South Africa have all inched back...

And how about Treasury Sec. Paulson banging on the Chinese again regarding their currency? I just love it! NOT! Recall a few month ago when I said that we could see the Chinese renminbi begin to slow down its appreciation VS the dollar, because they would be flying under the radar, with U.S. officials all busy tidying up the house for the elections? Looks like that's just what's happened as the renminbi has posted 4 consecutive weeks of decline VS the dollar. But then along came Paulson... And he seems to be a bit "dazed and confused" too! Here's the skinny...

Paulson trying to be the diplomat, said that China was "moving in the right direction with their currency"... Hmmm... Would he be talking about the first 6 months when the renminbi gained 8% VS the dollar, or the last month where the renminbi has given back 1/2%? I have to assume he was talking about the first 6 months...

I find it interesting that the renminbi moved higher VS the dollar yesterday, for the first time in nearly a month, after Paulson talked...

It looks as though the OECD (Organization for Economic Cooperation & Development) agrees with me. In a report printed overnight, the OECD said that they believe that Norway's interest rates are too low, and the Norges Bank (Norway's Central Bank) should consider raising interest rates to slow inflation.

Japanese yen has seen darker days, but for now it seems to have hit the wall regarding selling VS dollars. (of course I just put the kiss of death on yen!) But seriously, I think that yen has been able to apply the tourniquet because it's not tied to commodities, and the fall in oil prices will help Japan (sort of)... But, like I said yesterday, without a reversal of the Alfred E. Newman attitude toward risk that resides in the markets, yen will have a tough row to hoe to gain VS the dollar.

Gold staged a nice rally yesterday moving back above $800... It would be nice to see the shiny metal put together a nice string of rallies VS the dollar, eh? Yesterday, I mentioned my friends Pam and Mary Anne Aden... Pam was nice enough to send me the OK to use their stuff in the Pfennig last night, so here's a snippet of their thoughts on Gold...

"But equally important, gold is extremely oversold. This means it's fallen too far, too fast and it's poised to rise in the weeks and months ahead. The same is true of silver, and gold and silver shares.  Gold's D decline is also near maturity based on timing and gold's percentage decline. In other words, gold is at an extreme and the downside is limited. That being the case, we recommend the following.

Stay put for the time being and keep your metals related positions. It's still too soon to know if this is just a temporary, extreme break, which seems the most likely, or if this marks the start of a new bear market decline. We need to see more.

Since gold is so oversold, the extent of its rebound rise is now going to be very important. If gold, for instance, rises back above $819 during the rebound, then the break below the moving average would've been a temporary aberration rather than a major trend change. In that case, we'll continue holding our metals related investments.

On the other hand, if gold stays below $819 during the rebound rise, it'll mean that an important trend change is taking place and we'll either sell or lighten up on our holdings at a better price during the rebound. We'll then plan to buy gold again once it turns technically bullish."

Thanks to the Aden Sisters for sharing their views... Pam and Mary Anne are friends and I only get to see them in New Orleans each year, so... I'm looking forward to the New Orleans Investment Conference in November.

Currencies today 8/20/08: A$ .87, kiwi .7110, C$ .94, euro 1.4715, sterling 1.8565, Swiss .9110, ISK 82.90, rand 7.7550, krone 5.4020, SEK 6.38, forint 159.60, zloty 2.25, koruna 16.57, yen 110, baht 34.14, sing 1.4140, HKD 7.81, INR 43.75, China 6.8545, pesos 10.14, BRL 1.6230, dollar index 77.07, Oil $114.70, Silver $13.25, and Gold... $811.40

That's it for today... A GREAT BIG Happy Birthday to my darling daughter, Dawn today... I can't believe that my little girl is XX (I'm sure she wouldn't mind me telling her age, but I won't assume that!) She has grown to be a beautiful woman, with a beautiful little girl! I see a lot of Dawn in little Delaney Grace, her smile, her "I just wanna play" persona... Dawn teaches kindergarten at the same elementary school she attended, and the kids simply love her... So... Happy Birthday Dawnie! (that's what her brother called her when they were youngsters)

Did you check out that link I had yesterday for the movie: I.O.U.S.A.? In case you missed it... Here it is again: http://www.agorafinancial.com/iousa/movietrailer.html  the movie premiere's tomorrow! I believe every tax payer should go to see this movie...

OK... Time to go! I hope your Wednesday is Wonderful!

Chuck Butler
EverBank World Markets

Posted 08-20-2008 9:00 AM by Chuck Butler