Heeeeee's Baaaaaacccckkkk!
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In This Issue.

* Currencies & metals try to find terra firma.

* Can Cyprus's plan happen here?

* Chinese manufacturing maintains recovery.

* Gold price to be looked into. (yeah right!)

And, Now, Today's Pfennig For Your Thoughts!

Heeeeee's Baaaaaacccckkkk!

Good day. And a Marvelous Monday to you! And welcome to April! I bet some of you were thinking that Mike was attempting to pull an April Fools Day joke on you, by saying I would be back to today, and then surprise you with him instead of me. But, no AFD joke. Several years ago, on April Fools Day, I went into an elaborate story about the Treasury bubble exploding and what the markets looked like when I came in and turned on the screens. Then I said Gotcha! But too many readers were not entertained by my AFD joke, and so I promised not to do that again.

Tradition tells me that I need to go here first today. Well, beat the drum, and hold the phone, the sun came out today! We're born again, there's new grass on the field. A roundin' third, and headed for home, it's a brown-eyed handsome man; anyone can understand the way I feel..

Yes, it's Opening Day for my beloved Cardinals, and all the rest of the teams (Houston and Texas played last night) today and tonight. The born again feeling that comes with the start of a new baseball season will be watered down a bit for me, as the schedule maker has my beloved Cardinals playing in Phoenix tonight, long after I'll be in bed sleeping! UGH! Note to schedule maker. it's called OPENING DAY! Not opening night!

Well. not much changed in the markets while I was gone. The bias to buy dollars that was building some steam when I left, went ahead and built a boat load of steam, thanks to the dolts in Cyprus. But watching that whole drama unfold in Cyprus, made me think of us here in the U.S. Could that ever happen to us? Could the Gov't just decide to take the "excess funds" from our bank deposit accounts? Let me ask you this. Did you think the Gov't would ever circumvent bond holders' rights? Think back to the financial meltdown. didn't Chrysler bond holders' rights get thrown to the side of the road by the Gov't? I guess I had better stop there, as I'm only two paragraphs into my return to the desk!

But I wanted to get that thought out there, as the Cyprus thing has really bothered me a lot! And I was on vacation, and not supposed to be getting lathered up about markets and economies! The relative calm that had come over the Eurozone last year, has been washed away by the Cyprus goings on. And with the relative calm washed away, the euro has found it very difficult to catch a bid. So, once again, the debt crisis exposes the euro to selling. I thought that Chris and Mike did a great job of explaining the whole Cyprus thing, so I won't spend time going there, but it has washed away our relative calm, for now.

This morning, it appears that the currencies have flattened out, and most are sitting with no gain or loss as I write. This weekend, China printed their Purchasing Managers Index (manufacturing index) and the result surprised most observers. The Index, which works like the ISM manufacturing index here in the U.S. printed stronger than expected at 50.9 in March(recall that 50 is the line in the sand for expansion or contraction) an 11-month high and up from 50.1 in February. Recall that I explained how China shows two reports on Manufacturing. One by HSBC, and one by the Gov't. The HSBC report usually lags the Gov't report, except in March! HSBC showed that the Chinese manufacturing index increased to 51.6 in March from 50.4 in February.

Using either one, you get to the same place. And that is that the momentum for the Chinese recovery is being sustained if not getting a goose. And that's a good thing for global growth. And the Chinese renminbi /yuan, which reached a 19-year high last night! And the Aussie dollar! (A$). I see that the A$ has gained back lost ground in February, to the $1.04 handle. I keep saying that $1.04 is fair value for the A$, as I see it. And as long as the Chinese economy is sustaining momentum, the A$ should be able to catch wind in its sails, but at least maintain its fair value.

Across the Tasman, the New Zealand dollar / kiwi has also caught some wind for its sails. I bet that really ticks the Reserve Bank of New Zealand (RBNZ) Gov. Wheeler, off. I really think that sometimes that these Central Bankers don't have a clue as to what drives their currencies. In fact, I really think that these Central Bankers need to sign up for the Pfennig so they can learn about what drives currency values! HA! But seriously. they really don't get it. and they don't understand why a strong currency is a reflection on their country.

When I left, the 10-year Treasury yield was over 2%... But as I take a peek this morning, I see it has fallen back to 1.87%... How long can the Fed Reserve get away with this manipulation of the yield? I guess when they buy as much as they do, they can dictate the level, so, the real question is. how long can the Fed continue to buy up the Treasury market to keep yields down? I keep reading about how this is going to blow up on the Fed. And I think, sure it will, why else would I have said the Treasury Bubble would pop a couple of years ago? But, I've changed my tune a bit on this. sure I think it will still blow up on the Fed, but now, I think that the Fed can keep this going for some time. They have the printing press, and until the markets say whoa there Nellie, the Fed Heads will just keep printing and smiling and buying Treasuries.

The latest IMM futures positions data for last week printed some surprises. U.S. dollar long positions were pared back, and a sharp increase in A$ longs really stood out considering the selling we've seen lately in the currency positions. Mexican pesos and New Zealand dollar positions were up slightly, and the Canadian dollar / loonie net short positions were cut back. Which meant that A$, MXN, NZD, and CAD had good performances last week, and the U.S. dollar did not.

I don't think we can hang our hat on this data, that this is the true direction of the currencies, but it does give us a indication where the markets are trading them.

The rally in the U.S. stocks has really caught everyone's attention, as I was sitting in a outside restaurant last week, and listening to a conversation taking place at a table next to me. The people were talking about how they had finally believed the rally was for real and decided to go all in. Do you know how badly I wanted to pound on their table and tell them how they were chasing the market, and if they were just now getting it, it was probably too late, and how they were certainly not being prudent by going all in for one market? Pretty badly, I wanted to tell them. but I kept to myself, minded my own business and let them go on talking about what they had done.

The point here was simply that when the nightly news is talking about the rally, and people are talking about going all in, it's getting pretty scary. Don't you agree?

The "good times" for the Brazilian real didn't last too long, and the real slipped back above the 2 handle while I was gone. It was just a matter of time, folks.

I saw that a reader sent a comment to one of Mike's Pfennigs last week, which is open to anyone that goes to the blog at www.dailypfennig.com, and gave us a link to a story on NPR about people on disability. Here's a snippet of that story. "The federal government spends more money each year on cash payments for disabled former workers than it spends on food stamps and welfare combined. Yet people relying on disability payments are often overlooked in discussions of the social safety net. The vast majority of people on federal disability do not work. Yet because they are not technically part of the labor force, they are not counted among the unemployed."

Did you get that? The story goes on to talk about how so many people call things like high blood pressure a disability, and so on. I guess given all that I've been through, I could be on disability. but then that would mean I couldn't write, couldn't talk to thousands of people each year at conferences, and couldn't afford to go to Jupiter each spring to see my beloved Cardinals!

You can read the whole story here: http://apps.npr.org/unfit-for-work/

I see that Gold has gone back and forth around the $1,600 level while I was gone. Again, it can't catch a strong bid. I read a story while on vacation that the Gold's pricing was going to be looked into. Well, you can bet your sweet bippie that nothing will come of that. I've been through that discussion many times!

Then There Was This. Ok. while I was gone. my friends over at the 5 Minute Forecast printed something that caught my eye. I saved it so I could show you. Take a look at this chart. This is the White House's own numbers folks.

Those numbers show that our Government will owe more than 100% of our ENTIRE ECONOMY!

And that brings me back to the discussion of whether or not what happened in Cyprus can happen here.

To recap. It's Opening Day in Baseball, which in my opinion should be a national holiday! The currencies are trading very flat this morning. China's manufacturing index reports were stronger than expected, which is good for global growth, the renminbi, and A$. Chuck talks about how the goings on in Cyprus have washed away the relative calm in the Eurozone, and for the euro, but also how he keeps thinking that this could all end up happening here one day.

Currencies today 4/1/13. American Style: A$ $1.0415, kiwi .8365, C$ .9835, euro 1.2815, sterling 1.5190, Swiss $1.0525, . European Style: rand 9.2185, krone 5.8280, SEK 6.5225, forint 236.65, zloty 3.2595, koruna 20.0735, RUB 31.13, yen 93.75, sing 1.2405, HKD 7.7635, INR 54.27, China 6.2078, pesos 12.32, BRL 2.0210, Dollar Index 82.95, Oil $96.71, 10-year 1.87%, Silver $28.23, and Gold. $1,598.75

That's it for today. Thanks to Mike and Chris for a job well done taking the conn on the Pfennig. And thanks to all that sent along birthday wishes to me. Yes, I added another year while gone. Chris said that I enjoy my birthdays more now and he's right. Last week, the whole family was in Florida, kids, grandkids, what a scene that was. but lots of fun! My grandsons (Everett and Braden) are around two. enough said, right? HA! Little Delaney Grace is a real beach kid. she just loves the beach! I got to meet up with two customers/ readers while in Florida. Thanks to both for their hospitality and friendship. Well, I'm only here for today and tomorrow, and then I head to San Diego for the Global Currency Expo taking place this week. Are you signed up to attend? This is going to be the show of all shows! Of course I say that because I'm a part of it. HA! I have over 1700 emails in my box and another 288 in the Pfennig box that I'll need to get through, in addition to working on my presentations for the GCE, so I had better put a bow on this and get it out the door. I hope you have a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 04-01-2013 1:16 PM by Chuck Butler
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