A Soft Bias To Sell Dollars.
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In This Issue.

* Fed Monetary Balance increases.

* While ECB's decreases .

* Weak PMI's for Russia & India.

* Swedish krona outperforms on data .

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

A Soft Bias To Sell Dollars.

Good Day! . And a Wonderful Wednesday to you! Well another day of recovery in the rear view mirror, has me ready to slay a dragon this morning! HA! There are no dragons to slay, and if there were, I would be the biggest coward about slaying them! The only dragons these days, are cartoons, or Gov't figures. Hmmm. Oh, stop it Chuck! Jimmy Buffett is singing, stars fell on Alabama to start the day, so that mellow song, just put me back on track to be a good boy.

I had another email from a dear reader that asked me the question that I've answered so many times I could do it in my sleep! The question? Why, with all the problems in the Eurozone, is the euro more than 1/3-rd cent more valuable than the dollar? Ahhh, grasshoppers. I've got this one. There are lots of things to consider, but for now, the thing the markets are focusing on is the fact that the U.S. Fed's Monetary Balance just keeps climbing. Last May it was roughly $3.3 Trillion, and this May it is roughly $4.276 Trillion. Nearly a $1 Trillion increase in a year, while over at the European Central Bank (ECB) their Monetary Balance is decreasing. Last May it was roughly 2.5 Trillion euros, and this May it is roughly 2.1 Trillion euros. And in the end, the it is the opinion of the markets that the euro should be stronger than the dollar.

Of course that could be questioned tomorrow, when the ECB meets and announces their flavor of stimulus that they've chosen for the Eurozone economy. Should they go too far, in the markets' opinion, the euro could be sent to the woodshed, but, if they settle for what's already priced into the euro, (negative deposit rates) the euro could very well rally. So the risk is high going into tomorrow's ECB meeting.

But, knowing the risk is out there, didn't stop the euro from adding about ¼-cent to its value yesterday. The euro bugs were feeling a little frisky. But today, they have returned to the places with bright shining faces, and their tails between their collective legs, as the euro has given back those frisky feelings from yesterday.

Speaking of the euro. Yesterday, I said that Eurozone inflation had ticked down from 11.8% to 11.7%... Of course that couldn't be correct, since inflation in the Eurozone isn't even 1%! I was talking about Unemployment in the Eurozone. I guess I have inflation or the lack of it in the Eurozone on my mind, eh? So, anyway, Unemployment ticked down in April. Sorry for the confusion. I guess I was still feeling the effects of my whacked out day!

Most of the currencies are flat to up just a bit this morning, as there is a slight bias to sell dollars in the markets, but that, as we are so darn well aware of, can change in a heartbeat, especially when the New York boys and girls arrive at their desks, and see what they've been told to do by management.

Yesterday, there was some good data printed in Australia, so let's go downunder and see what's going on, eh? Aussie 1st QTR GDP increased from 2.7% in the last quarter to 3.5%! That beat the estimates (3.2%), and it really surprised the markets, who had drank the Kool-Aid that the Reserve Bank of Australia (RBA) had been serving about the economy being bleak. There was some other news from Australia yesterday that I'm sure flew under the radar of the markets, except the bond-guys. And that is as of last week, there is a Record Net Holdings of Aussie Bonds by foreigners. Given the Huge maturities last month in A$ bonds, this is good news, as an mass exit from these bonds by foreigners could have really put the A$ in a tight headlock.

So, the A$ is up just a small bit this morning. And as my longtime friend who also happens to be the Big Boss, Frank Trotter, likes to say. That's better than a sharp stick in the eye. You know what? I just realized that since April 2010, Frank no longer says that to me. I think you know why. HA!

The New Zealand dollar / kiwi is off a bit this morning, which is troublesome to me, in that this marks two consecutive days of weakness in kiwi, which should be garnering all the love it can stand from investors looking for positive rate differentials, with an added possibility of a boost in the differentials.

Well, the PMI's (manufacturing indexes) from around the world have, for the most part, printed and put to bed. And for the most part, the indexes from around the world have increased, which is a good sign for global growth. Of course we still don't know for sure what happened in the U.S. and what the actual index number is, given the games that were played with the data the other day. But, the point I'm getting to here is that in two of the countries that have seen good rallies in their currencies, the Russia and India, their manufacturing indexes left a lot to be desired, thus taking the starch out of the rallies for their respective currencies.

Someone asked me about Russian rubles the other day. And I said that we're working on being able to offer the currency, but if you ask me what the ruble is all about, I would say that in my humble opinion, which could be wrong, the ruble is an oil play, plain and simple. What do you think about the price of Oil? I see where the Saudis issued a communique that talked about what they saw as a fair price for a barrel of Oil, which was $100.

It must be storming like crazy outside, I've heard loud thunder, I've seen bright flashes of lightening, and now the TV's we have on the trading floor are out. I could go into the problems that you have with storms when using a dish. but since that's all we can get here, I think it's not a problem at all! HA!

And I've talked more about India and Indian rupees in the past few months than I've talked about them in all my time writing! So I won't go into why I think that this weakness in the rupee is short-term, and look for better times, as new leader Modi implements his plans to unlock the Indian economy. Look, I went ahead and told you any way!

The Swedish krona is outperforming this morning on some stronger data prints. Industrial Production and their manufacturing index (PMI) both beat estimates and previous prints. Industrial Production in Sweden for April increased 4.5% VS 3.3% in March, and the May PMI increased to 58.5 from 57.9 in April. So take that you rate cut campers! It seems like that about every couple of weeks I'm writing about the krona outperforming the other currencies overnight on stronger data prints. But still the rate cut campers have a governor on the krona.

There's an old song. um, um, um, um, um, um. Really! That's the title of the song! And it's what I sing a lot when I see data like this, and then a day later, it is swept under a rug.

Gold is weaker this morning again.But I must point out something that had escaped my memory, which I must say, a lot of things are doing these days. But my good friends, the Aden Sisters, Mary Anne and Pamela, reminded me of. I'll let these two fabulous ladies tell you in their own words. "Gold is entering a seasonally slow period. This could last for another month or so, but seasonality alone doesn't explain why the decline was so steep and sudden."

The U.S. Data Cupboard has some good stuff for us today. The ADP Employment Change for May, the April Trade Deficit, and the U.S. Fed Beige Book, along with some other not that so important data.

Well, the U.S. Data Cupboard gave us a couple of prints yesterday. Leading off was the April Factory Orders print, which showed a .7% increase, which sounds good, but when compared with March, you know when bad weather was hurting the U.S., Factory Orders increased 1.5%... So, more rot on the vine in April. Then we saw the vehicle Sales for May, and I guess people are still out buying cars, and why not? Financing rates are still near zero, and unless you're buying a Lamborghini, there are still opportunities to buy.

And then there are three other things to talk about with the U.S. economy. I don't mean to be gloom and doom folks, but I just want to point out that other people, and organizations that track this stuff are beginning to agree with me on the economy. It's a groundswell of thoughts, we just need to get this to the point of a shouting campaign so that the Fed hears us loud and clear!

OK. First out of the starters blocks is something I came across yesterday. So, I was going through zerohedge.com yesterday, as usual I must add, and came across something that really caught my eye. According to the BEA (Bureau of Economic Analysis) the people that do a calc that gives us the actual corporate profits, there was a plunge in Corporate profits in the 1st QTR, and that plunge was the biggest since the collapse of Lehman Bros! OUCH! So, the -1% decline in GDP has this little ditty to go to the dance with, and neither of them are very pretty!

And then this piece of information, which doesn't paint any pretty picture of the economy either. The uneven distribution of incomes is currently escalating and leads to growing social tensions. In the US, between 1979 and 2011 the average household's income rose by 64%, while the income of the top 1% of households increased by 300% and the income of the lowest quintile increased by only 18%. This strongly rising increase in wealth concentration can be gleaned from the GINI coefficient, which has reached historic extremes in many countries. This means that extremes at the lower and the upper end of the scale of incomes become ever more pronounced, while the classical middle class loses importance. Thus the GINI coefficient in the US is, for example, currently at the same level as in the 1920s prior to the Great Depression.

Chuck again. WOW. One calc has us on the precipice of repeating the Lehman Bros devastation, and the other has us on the precipice of the Great Depression.. Now, here's hoping that neither of them come to fruition, I will say, that unless we do something about the debt and deficits in this country, I'm afraid we'll have no choice. No wait! I said there were 3 things. OK, here's the 3rd thing. The Unemployment Rate for teens ages 16 to 19 years old who don't have a high school diploma yet is 54.2%!!!!! OUCH!

For What It's Worth. We have a long-time colleague and friend, that we've worked with on and off for quite a few years. Joe Losos, comes in and shares his Financial Times (FT) with us on the desk, and there's always a good ditty or two in the pages of the FT. I didn't find this story in those pages, but rather online, but I'm sure they'll be there! This is a snippet of the story about how banks routinely rigged Gold Fixing to defend their positions, according to the FT. Let's go to the tape!

"When the UK's financial regulator slapped a L26 million fine on Barclays for lax controls related to the gold fix, it offered more ammunition to critics of the near-century-old benchmark. But it also gave precious metal traders in the City of London plenty to think about.

While the Financial Conduct Authority says the case appears to be a one-off -- the work of a single trader -- some market professionals have a different view. They claim that the practice of nudging a tradeable benchmark to protect a "digital" derivatives contract -- as a Barclays employee did -- was routine in the industry.

As a result, customers of Barclays and other market-making banks may be looking to see if they too have cause for complaint, according to one hedge fund manager active in the gold market.

"If I was at the Financial Conduct Authority I would be looking at all banks trading digitals. This could be the tip of the iceberg -- there's a massive issue with exotic derivatives and barriers."

Chuck again. Yes, this is a part of the Gold price manipulation, and should this continue to be unraveled as I suspect it will, then maybe we can go to the next step and investigate the paper trades. Then, we'll have cut into a fat hog folks.

To recap. There's a soft bias to sell dollars in the market today, but the gains are minimal at best, with the Swedish krona taking the prize for outperforming the other currencies overnight, on some good strong data. Australia saw some good strong data too overnight, and the euro is still range bound. Gold is down again, and the Aden Sisters give us a reason for this. And Russia and India both see their currency rallies squashed out, by some weak PMI's.

Currencies today 6/4/14. American Style: A$ .9270, kiwi .8410, C$ .9155, euro 1.3625, sterling 1.6760, Swiss $1.1160, . European Style: rand 10.7470, krone 5.9930, SEK 6.6585, forint 223.95, zloty 3.0425, koruna 20.1550, RUB 35.18, yen 102.60, sing 1.2575, HKD 7.7530, INR 59.33, China 6.1693, pesos 12.94, BRL 2.2795, Dollar Index 80.55, Oil $103.32, 10-year 2.58%, Silver $18.81, Platinum $1,422.85, Palladium $834.35, and Gold. $1,245.79

That's it for today. Man oh Man. 10 days ago, I thought my beloved Cardinals had finally come out of their funk. But they've slipped right back into it. This is a very disappointing team so far, and difficult to watch play.. They've got to find their mojo soon, or it will be too late! The Zombie Jamboree is playing on the IPod right now. Back to back, belly to belly. My spring training buddies will get a charge out that! OK. I have a ruptured vertebrae in my lower back, I had it cut back in 1991,with something called "micro-surgery", but re-ruptured it a year later, and have lived with that since. It normally doesn't bother me, but I picked up a cooler full of beverages and melted ice yesterday, and I soon wished I hadn't! So, now I have to walk around gingerly for a few days, and get it to calm down. UGH! My beautiful bride returns home tonight, so thus ends Chuck and Alex's fraternity house! HA! I didn't see Alex much as he's always going somewhere! And with that, I'll get out of your hair, hope I didn't gloom and doom you too much today, I certainly don't mean to. I hope you have a Wonderful Wednesday!

Chuck Butler
EverBank World Markets

Posted 06-04-2014 12:31 PM by Chuck Butler
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