Chinese GDP Prints At 7.5% Target .
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In This Issue.

* U.S. Retail Sales dominate today.

* Big Ben talks again this week.

* China prints correction to Lou statements last week.

* Chuck talks to

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

Chinese GDP Prints At 7.5% Target .

Good day. And a Marvelous Monday to you! Another very nice weekend, weather-wise, for us here in St. Louis this past weekend. I was beginning to think that we would have cold, wet weekends the whole year! China prints their 2nd QTR GDP, and from the looks of it, all the fears of a collapse in the Chinese economy were greatly exaggerated. U.S. Retail Sales for June prints today, so we could very well see some wild swings in the currencies. So, let's go to the tape, and figure this all out, eh?

Front and Center this morning, no, I'm not going to talk about the Cardinals winning last night, I'm going to talk about Chinese 2nd QTR GDP, which printed at 7.5%, bang on the Chinese Gov't's target. Recall last week I told you how the Chinese Finance Minister, Lou, had been quoted as saying that China could cope with 6.5% growth? Well, the spin-doctors, and not the ones that sang Little Miss Can't Be Wrong, but the ones that come in and do damage control when a Gov't official inserts his foot in his mouth. Well, those spin-doctors issued a correction in the newspaper this past weekend saying that Lou actually said, "There is no doubt that China can achieve this year's growth target of 7.5%". And voila! 7.5% printed! Amazing how that comes out like that, eh?

So. GDP in the world's second largest economy (actually 3rd, given that the U.S. and Eurozone are tied for first) gained 7.5% in the 2nd QTR. Unfortunately, for the global growth campers, the outlook for continued strong growth like this, is getting checked at the door. But, who knows? All I can say is that all the "experts", "analysts" and people that act like they know what's going on in China, have been wrong for over 3 years now. I guess if they just keep saying something like the Chinese economy is going to collapse, that eventually it might happen, and they can say, "see, I told you so!" Just because it happens in 25 years from now doesn't need to spoil their party, eh?

So. the Aussie dollar (A$) is about the only currency with a gain VS the U.S. dollar this morning, based on the Chinese GDP print. Shoot Rudy, even the Chinese renminbi, wasn't allowed to appreciate on the GDP print! And that A$ gain has been slipping away ever since I came in this morning. So, it appears we are in for another day of U.S. dollar bias holding strong.

Traders are more than happy to add to dollar longs given the outlook for U.S. Retail Sales that will print this morning. The forecasters believe that U.S. Retail Sales will have increased in June to the tune of .8%... (I like to look at the ex-auto sales & gas, numbers to see if people are spending money on stuff other than their car and gas, and that data is expected to gave increase .4%, not as lofty as the whole number) But, the whole number is what it is, and the markets will get all lathered up for a .8% or greater print, as they think this will be a good indicator that the U.S. economy is moving with some good momentum.

Tomorrow, the U.S. is going to tell us all that consumer inflation is up 1.6% year on year. And to that I say. hogwash! But that's for tomorrow. Today, we'll deal with Retail Sales, and the NY regional manufacturing index called the Empire Index. As I told you on Friday, the Butler Household Index (BHI) indicates that the Retail Sales will be strong, but not "real strong". It will be all about how the markets view the data. Will they think that less than a 1% gain in Retail Sales is strong or not? I would guess that anything around the forecast will have the dollar bugs dancing in the streets again today.

Well, last week's trading all revolved around Big Ben's NBER speech, and the FOMC Meeting Minutes (FOMCMM). And we don't get to escape Big Ben this week, so get ready for more Benspeak. Big Ben will make his way to "the Hill" for a semi-annual testimony on the economy. You never know what's going to come from Benspeak, so I guess all the data that's due to print this week here in the U.S. will have to take a backseat to Big Ben. I don't think it should be that way, but it is, and we have to deal with that!

Last Friday afternoon, I got a call from and they wanted to ask me about my thoughts on Gold. I told the interviewer that Gold's price was being highly influenced by whether Big Ben is on the up and up with his plans to taper, or is he beating around the bush, to keep the bond buying going. I made this point a couple of times during the interview and that is the Fed's track record on forecasts is not very good. They've been optimistic about the economy before, only to have to go back to the bond buying table known as Quantitative Easing (QE).

So, if the Fed Heads prove to be overly optimistic, as has been their track record, then all this dollar buying and gold & currencies selling, that's being done based on the end of QE, will have to be reversed. Of course, that's just my opinion, based on the Fed's Track Record, and I could be proven to have been wrong.

Oh, as I've said previously, the Fed Heads may begin to taper, but will have to stop at some point when the economy show it can't stand on its own. So. batten down the hatches, folks, and look for bargains. That's what I intend to do.

Hey. remember a couple of weeks ago when I told you about the Capital Expenditures at Caterpillar being down 16% and how for years they have used as the proxy for Capital Expenditures? (June 21st Pfennig) Well. S&P must have read the Pfennig and realized that they needed to track this further, and in doing so, they came out with research that warns that "the global cycle for Capital Investment has already rolled over with early signs pointing to deepening contraction of 5.4% in 2014. Yes, it appears that growth in spending on machinery and investment by the world's 2,000 biggest companies has begun to contract for the first time since the Lehman crisis.

So, this news isn't just about the U.S. corporations but you would have to think that a good number of that 2,000 reside right here, eh? I think this spells trouble for the global growth campers. But it's just a business cycle, folks, it's not Armageddon, and once the bond buying begins again or its demise proven to have been greatly exaggerated, the confidence of the global growth campers will return.

The Canadian dollar / loonie, just climbed back to 96-cents this morning. Good for you loonie! I have a couple of Canadian Pfennig Readers that send me notes from time to time, giving me their outlook for the Canadian economy and loonie. One particular reader has reminded me over and over again for the past 6 months that my view of the Canadian economy and loonie is rose colored. And he was right for a while that the loonie would fall from parity. But his call for it to fall to 92-cents has been watered down by the loonie's resiliency around 95-cents.

Speaking of Canada, new Bank of Canada (BOC) Gov. Poloz, is running into a buzz saw called the Fed announcing the end to QE. You see, Poloz would love to continue former BOC Gov. Carney's leading the markets on with hints of higher interest rates. But, if Poloz tries that now, no one will pay attention, because of what's happening down south at the Fed. We'll see if he tries to raise his voice over the noise from the Fed this week at his first meeting of the BOC.

The euro is weaker this morning, but remains above 1.30, which is where I told everyone that viewed my interview on the a month or so ago, the euro would remain for the rest of the summer. A dear reader sent me the newsletter of a respected writer that called for the end of the euro this summer. Ok, we still have a lot of summer left, but so far, that call seems to be just another of the calls that called for the Eurozone breakup, sovereign defaults, and a collapse of the euro for the last 3 years that have been wrong..

And Gold is off by $3 this morning. Gold's direction today is tied to the Retail Sales figures. And those will print first thing out of the starter's blocks this morning, so, we'll know soon which way Gold is going to go today..

For What It's Worth. Former Asst. U.S. Treasury Secretary, Dr. Paul Craig Roberts, who I've quoted quite a bit in the past 6 months, is out with more warnings about what the Fed is doing, so let's see what the good Dr. has to say today.

"How can the Fed stop printing money? If it stops printing money, the financial markets will collapse. And when the bond prices fall from the bond collapse, then the values of the debt related derivatives on the bank's books fall, and the whole solvency problem comes back.

So everything the Fed has been doing all of these years to try to boost the solvency of the banks is wiped out if the bond market collapses.... So they are committed to printing money. Now, what's the long-term effect of endless printing of money? It's a house of cards, and at some point it has to blow-up. Usually it (the blow-up) happens through the exchange rate.

I'm beginning to think that the purpose of the Trans-Pacific (trade) Partnership and the Trans-Atlantic (trade) Partnership that Washington is currently negotiating, is to pull all of the European countries and all of the Asian countries, minus China, into structured trade relationships with the United States. It requires all of those countries to support the (U.S.) dollar. They would be dollar-based trade relationships.

So the effect of these partnerships, in fact it may be their real purpose for them, is to achieve this dollarization of trade from Europe and Asia, and thereby a commitment from each of those countries to support the dollar. That then lets the Fed continue this money printing for longer. It can't go on forever. At some point the currency either finds its way into consumer prices, or people just lose faith in the dollar and abandon it, in which case the whole house of cards would collapse.

So it is a house of cards that the Fed has built, and the Fed can't get out of it. And it keeps doing things to perpetuate the house of cards. Can you perpetuate a house of cards forever? Well, it would be the first time if something like that happened (laughter ensues), and I don't see that it's possible. When will the house of cards come down? I don't know. But we've got one, and the Fed keeps finding new ways to perpetuate it."

Chuck again. I was wondering about that Trade Agreement last week too. Maybe it's not what it seems, eh? But any way, the thing is, pretty clear to me, the dollar is at risk, maybe not today or tomorrow, but it is. remember, what appears to be evident may not be imminent.

To recap. China's 2nd QTR GDP printed bang on their target of 7.5%, down from 8% in the first QTR. The A$ is the only currency receiving any love from this report, as the bias to buy dollars remains strong, based on the markets expectations for June Retail Sales that will print today. And Chuck pulls a rabbit out of his hat for and talks about the Fed's track record on being optimistic on the economy.

Currencies today 7/15/13. American Style A$ .9050, kiwi .7755, C$. 96, euro 1.3010, sterling 1.5040, Swiss $ $1.05, . European Style: rand 9.9370, krone 6.0875, SEK 6.70, forint 224.60, zloty 3.2950, koruna 20.00, RUB 32.69, yen 100.25, sing 1.2670, HKD 7.7580, INR 59.90, China 6.1663, pesos 12.79, BRL 2.2665, Dollar Index 83.30, Oil $105.44, 10-year 2.60%, Silver $19.82, Platinum $1,413.75, Palladium $724.55, and Gold. $1,281.82

That's it for today. All the kids and grandkids were over yesterday, Little Delaney Grace has become a little fish that could live in the water I think! She will turn 6 while I'm gone on vacation. Can you believe that? She's already 6 (going on 16!) And she'll start kindergarten this year. Well, my beloved Cardinals did what I hoped they would do, and scratch out a couple of wins in Chicago, where the Cubs play the Cardinals like it's their World Series. The Home Run Derby is tonight, which can be fun to watch, but sometimes turns out to be a dud.. Another Cardinal was named to the All-Star Team, that makes 6! This will be my last week for the next month, as I'll be in Vancouver next week for the Agora Financial Investment Symposium, and then on to vacation. I'm dead tired this morning, I've almost nodded off a couple of times while writing, and I can hear you saying now, that you have almost nodded off reading it! HA! I hope you have a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 07-15-2013 11:29 AM by Chuck Butler