Returning The Carter Years...
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In This Issue.

* Currencies rally on bad jobs data.

* Yen continues to slump.

* Relative calm creeps back into Eurozone.

* Roberts says Fed is manipulating Gold price.

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

Returning The Carter Years...

Good day. And a Marvelous Monday to you! I got back from San Diego and the Global Currency Expo late last night, and then had a bad night, so I kind of slept through the alarm this morning... UGH! So, I'm dragging the line this morning... but, hey! At least I woke up! That's the first battle each day! I love San Diego... I used to think I would retire there, but then the little beach shack I used to eye, rose in price to a million dollars, and I began to look elsewhere! Seemed that a lot of people had that same Idea as me!

Well... the big news on Friday was that the Jobs Jamboree disappointed with less than 100k new jobs (88K)... But the unemployment rate dropped to 7.6%... I've explained how this all happens before so I won't go into it again, but there are a couple of things that I noticed that really tells me, and should you, the real story of labor here in the U.S. 90 million people are not working... that leaves us with a 63.3% participation rate.. That's the lowest level in the participation rate since 1979... the Carter years... At last check, the U.S. had done its best to put those years in the distant memory banks, never to bring them out again... But here we are again...

The labor news really sunk the dollar's bias to be bought that existed for most of last week. And that bias is nowhere to be found, except VS Japanese yen, this morning. The yen has been on the slippery slope ever since they announced their latest round of stimulus last week, that was implemented to ecourage inflation in Japan. The yen fell from 93 very quickly, and overnight yen reached 99 for the first time in a month of Sundays. (remember yen is a European priced currency, so the higher the number the weaker the currency is VS the dollar) Yen has since rallied back to just below 99 at 98.70, but still, it looks like this is going to continue until it doesn't...

I know, you're saying, "Hey Chuck, now that's really going out on a limb... NOT!" Well, like I told the audience in my mainstage presentation the other day... Interest rates in Greece were low for a long time, and then one day they weren't... I said the same thing would happen here in the U.S. So, all I'm saying about yen is that I don't know how weak it will get, recall if you will, that I told you that the well respected anaylst, Dennis Gartman, said that yen would weaken to 150... I find that to be quite aggressive, but then no one knows just how weak the yen will get, so, it will continue to get weak until... it doesn't!

But... the thing to remember here is that I told you yen was overvalued a long time ago, and that it should be weaker, based on fundamentals... So, if you were listening to me then, and at least hearing me later, this yen weakness comes as no surprise to you!

The other thing to think about with yen is what kind of pressure it puts on the crosses outside of dollar / yen. I think that the yen weakness is playing into the euro's ability to gain further. As I' ve explained many times over the years... the dollar / yen cross will play into other crosses that are dollar denominated... so euro / dollar sees some pressure too... So, the euro going past 1.30 and staying there is a good sign that it is stronger than the price indicates.

OK... there's more going on than yen weakness on the crosses... One of my themes in my talks at the Global Currency Expo was that the U.S. economy has become addicted to stimulus... And last week's jobs report is proof enough for me that the Fed Heads will continue their attempt to stimulate the economy by buying $85 Billion of bonds each and every month. I mentioned that I wouldn't be surprised to see a person talking at the GCE in 10 years and discussing QE 20, 21, 22, etc. And can you imagine the number of dollars that would have been printed at that time? Oh My! of course, Big Ben Bernanke and his band of Fed Heads don't really "print dollars" any longer.. .they simply, with the stroke of a hand, print electronically, and on their computer they created $85 Billion per month to pay for those bonds they buy...

I was loving a story I was reading on the Bloomberg, as I was up in the middle of the night unable to sleep soundly... the story was about the Swedish krona, and how the Riksbank (central bank) the Prime Minister, and head of the Sweden's state-owned export leader, all are singing from the same song sheet, and keeping their hands out of the cookie jar, with regards to guiding the krona weaker, as many other countries are doing to their currencies. I really liked what the export leader, Peter Yngwe, had to say about the strength of the krona. Let's listen in... "the Swedish export industry is good at being effective and streamling and in the long term that's the right way to go. In the short term it's, of course, tough, with a strengthening krona, but that the strenghth of the krona will help discipline companies and poses little risk to the Swedish economy."

Now... don't you wish every central banker would take this line of thought? I tell people over and over again, that just because a country has a strong currency that the Central Bank should go into convulsions and work to weaken the currency... That's not the answer! Instead, the country should go about making changes in manufacturing, wages, and delivery... When that happens, you'll end up trading similar to the euro... Look at Germany... they deal with a strong euro all the time, but it doesn't shut down their exports...

The bad press that upset the Eurozone's relative calm applecart, sure has passed... and therefore the relative calm has come back to the Eurozone. And when that happens the main beneficiary is the euro. But on the side bars, the emerging markets also get a lift, because with the euro being the offset currency to the dollar, the euro's strength, pushes the dollar down, and the emerging markes can take advantage of that... Of course not all the emerging markets trade in the same direction all the time, so when I say emerging markets, it's just a generalization term...

One of those emerging markets that are seeing gains is the Mexican peso... The peso has been a real strong perfomer this past year, based on the thought that the U.S. economy was coming out of its "greater depression"... As I've explained before, the peso has caused many-a-owner of the currency much pain in the past... But it's been over 20 years since their last meltdown with the currency, so, I'm somewhat in the camp that thinks it won't happen again. But the peso still isn't paying a "risk premium" for those that still "remember"... But that hasn't held the peso back, so far... I would just say, be careful, and keep a watchful eye on the goings on in Mexico... other than that, the peso is having fun basking in the sun...

I just saw a news flash that former British Prime Minister, Margaret Thatcher, has passed.. She had reached the age of 87... I do believe that Margaret Thatcher did a lot for the British,. as she championed free market economics and individual choice... I used to use a quote by her, that people would chuckle at until they realized what it was saying... Here's the quote... "the problem with socialism is that you eventually run out of other people's money" - Margaret Thatcher

Ok... I really hadn't planned on talking about that, but the news flash caught my eye, and so on... I'm sure someone out there won't take what I said about her kindly, and let me know about it, but that's OK... and it won't change my thoughts on the subject!

Elsewhere in the world... Portugal saw its constitutional court overturn 4 of the 9 austerity measures adopted by the government for its 2013 budget... that's not going to help Portugal meet its goals of in debt cuts which have to be met in order to botain future aid. But the Portuguese Gov't was quck to say that spending on social security, health, education and public enterprises will be cut...

If you ask me, and I know you didn't, but I'm going to tell you anyway... I would bet that the Deputy Reserve Bank of New Zealand (RBNZ) Gov., Spencer, is in for a trip to the woodshed from the RBNZ Gov. Wheeler... Why? I hear you asking... Well, you see, as I've told you before, Wheeler likes to follow his predecessor, Bollard, by dissing kiwi any chance he gets... But when the Deputy Dawg was asked about the housing boom, he sounded quite hawkish... and said, among other things that, " if momentum in the housing market continued, a rate rise was likely." Well, talk like that will push kiwi higher... and so, Mr. Spencer is in for some talking to, by Wheeler... because you don't make statements like that without realizing what it will do to the currency that Mr. Wheeler had worked so long to make look bad...

Well... direct renminbi / yuan and Aussie dollar (A$) trading will begin this week, April 10th... I'm surprised the markets just don't believe this to be a big thing... I do... and I have thought that these curreny swap agreements are very important, ever since I noticed that China signed one with Argentina about 4 years ago. I see it as China removing the dollar's relevance as the financing tool in the terms of trade between countries... One day, the markets will wake up and see this too...

Then There Was This... So, there I was Saturday morning, getting ready to make my grand entrance at the GCE, when I came across this story that Ed Steer had in his daily letter, regarding the manipulation of Gold... Here's a snippet of a report that former Asst. Treasury Sec. Paul Craig Roberts posted on his website... the Gov't has to be shaking a bit from this...

"For Americans, financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices.

When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than 8 months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the US dollar losing value so rapidly compared to the world standard for money, the Federal Reserve's policy of printing $1 trillion annually in order to support the impaired balance sheets of banks and to finance the federal deficit was placed in danger. Who could believe the dollar's exchange rate in relation to other currencies when the dollar was collapsing in value in relation to gold and silver.

When gold topped $1,900, Washington put out the story that gold was a bubble. The presstitute media fell in line with Washington's propaganda. "Gold looking a bit bubbly" declared CNN Money on August 23, 2011.

The Federal Reserve used its dependent "banks too big to fail" to short the precious metals markets. By selling naked shorts in the paper bullion market against the rising demand for physical possession, the Federal Reserve was able to drive the price of gold down to $1,750 and keep it more or less capped there until recently, when a concerted effort on April 2-3, 2013, drove gold down to $1,557 and silver, which had approached $50 per ounce in 2011, down to $27."

Chuck again... Yes, this plays well with my explanation of why I thought Gold's price was being manipulated... if it were your job to protect the value of the dollar, and you saw Gold heading toward $2,000, you would panic too...

To recap... the Jobs data from Friday was very disappointing, even with the unemployment rate dropping... We've returned to the "Carter years"... Yen continues to push the envelope of weakness, touching 99 overnight, and the currency crosses are seeing some pressure because of the dollar / yen cross. Sweden's financial leaders are singing from the same song sheet, and Margaret Thatcher has passed.

Currencies today 4/8/13... American Style: A$ $1.0410, kiwi .8450, C$ .9825, euro 1.3020, sterling 1.5310, Swiss $ 1.07,... European Style: rand 9.0405, krone 5.7310, SEK 6.4225, forint 229.05, zloty 3.1735, koruna 19.7730, RUB 31.32. yen 98.70, sing 1.2410, HKD 7.7640, INR 54.57, China 6.2650, pesos 12.14, BRL 1.9820, Dollar Index 82.59, Oil $93.40, 10-year 1.72%, Silver $27.21, and Gold... $1.575.30

That's it for today... Did I tell you that I love San Diego? It's so beautiful there... It was great seeing some EverBankers that I don't normally see all the time, and some of my former writing colleagues at the Sovereign Society at the GCE. Thanks to all the participants that had very kind things to say to me. Cardinals come home from a road trip that started their season 3-3, which isn't too shabby... My dad used to always tell me, play .750 ball at home, and .500 on the road, and you'll find yourself fighting for a pennant! It's Opening Day here in St. Louis... A day where the city should be on holiday... I'll be at the game, that is, if I can find a parking spot! Last year, we had to bribe a guy to get him to allow me to park on his lot.... UGH! The weather people were calling for rain today.. but I see the sun coming up... maybe, as usual they'll be wrong! My first trip to Busch each year is something special for me. It reminds me of when I would go to the game with my dad at Busch stadium I (Sportman's Park). The smells of hot dogs, popcorn. The sounds of the game and in the stands... it's something I cherish... And with that... I'll get out of your hair for today. Again, sorry for the delay and my oversleeping... I hope you have a marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 04-08-2013 1:01 PM by Chuck Butler
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