Ding Dong, Deflation Is Dead!
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In This Issue.

* A soft bias to buy dollars in early morning trading.

* Durables to print today, wait for the excuses.

* Abe thinks he's got the deflation tiger by the tail.

* Grant Williams does his best Dr. Seuss for us!

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

Ding Dong, Deflation Is Dead!

Good Day! . And a Wonderful Wednesday to you! Another starter for my beloved Cardinals down, which makes 3/5ths of our starting rotation down and out with injuries. UGH! Japan's PM Abe announces the End of Deflation! Nothing to speak of from the Fed speakers yesterday. Today, it's the ECB's turn to churn out speakers for the masses, and May Durable Goods prints today. watch out, dollar! Looks like the rain is going to stay away for a day, but no worries, it will return tomorrow.

It may not be raining outside for once, but it sure is raining on the currencies parade this morning, as the bias to buy dollars has silently slipped into traders' minds. But for how long? Recently, these bias to buy dollars days have not lasted very long, since there's always something there to remind me. (how about that? A Naked Eyes reference in the second paragraph! I bet my good friend Rick is excited about that!) Yes, and that something to remind us that a bias to buy dollars isn't a good idea will come early this morning in the form of May Durable Goods Orders. I can hear the excuses for this data to print negative already. Aircraft orders were nonexistent, and so on. But don't I tell you all the time even when there are aircraft orders and the data prints wildly upward, that you just can't count on that stuff every month. And May will prove that fact. But it won't just be about aircraft orders, folks. although the manufacturing sector has certainly looked better recently.

Well. Japanese Prime Minister (PM) Shinzo Abe is talking BIG TALK overnight. So, we had better listen in to what he's saying, for you know, there are times that people say things, and then afterward, they think. Oh brother, I'm going to be hearing those words again someday thrown back at me. And I think this is going to be one of those times, for I've told you over and over again, Japan is a basket case, period. But's listen in anyway, eh?

Abe said, " the deflation that wiped out much of Japan's growth the past 15 years and so stunted the economy that it slipped to number 3 behind China, has ended and will be thwarted by new government policies designed to encourage business expansion. Through bold monetary policy, flexible fiscal policy and the growth strategy we have reached a stage where there is no deflation. Deflation has ended." I can almost hear him singing.. "ding dong deflation's dead, the mean old deflation, is dead". maybe he sounds like a munchkin.. HAHAHAHAHA!

Well. Mr. Abe.. I'm from Missouri.. You'll have to Show-Me. And while you're talking about encouraging business expansion, you might want to discuss just who are these businesses going to sell their goods to? Your population is aging quickly, and the youngsters have no interest in helping out the Gov't. It's a basket case Mr. Abe. But I do appreciate the fact that you haven't given up the fight and that you still think you can win. you remind me of the Greek story of Sisyphus. Sisyphus was sentenced by the Gods to roll a rock up a hill. but when he got to the top of the hill, the rock would roll back down, and he would have to start over again, forever rolling the rock up the hill. It's a much longer story than that, but you get the drift, right?

I talked to you a bit the other day about how I viewed the Fed Reserve (there's no "reserve" to them but that's what they are called) as not acting on what they see in the future, but more acting on what's already happened, and that would put them behind the inflation 8-ball in my opinion, which could be wrong. The more I read about the last Fed meeting, the more I just cringe and think about what I see happening. First of all, I think that Janet Yellen is wrong about the assessment that the rise in inflation is just "noise". I received Grant Williams' latest letter yesterday, and he decided to do a lot of it in "anapestic meter" which was made famous by Dr. Seuss. Here's his take on Yellen's thought that the rise in inflation was just "noise".

"Don't worry, it's nothing" said Chairwoman Janet.

"Everything's happening just as we plan it.

Ignore all the pundits (the girls AND the boys) Have faith when I tell you, forget it, it's noise."

Grant Williams is a genius, folks. I strongly recommend that you sign up for his newsletter, which can be found here: http://www.mauldineconomics.com/subscribe

Grant Williams had another Seuss inspired ditty on the Fed. Let's see what he had to say now. There isn't a bubble in equity prices, nor housing, nor bonds, there will be no surprises.

The Slip 'n' Fail Mutts have their eyes on the ball, There's no need to worry, there's no need at all.

But wait just a second here, what if they're wrong? What if they've had no idea all along?

The tech bubble fooled them, the market got caned, remember when Ben said subprime was "contained"?

These people are clueless I'll venture to say, Not that they'll listen (to me anyway).

But time after time when they face a new bubble, They never once think they're the cause of the trouble. - Grant Williams

I know you're wondering just who he's referring to when he says the Slip 'n' Fail Mutts. the Slip 'n' Fail Mutts are a Seuss character that has a tail very long tail. Each night it bites its own tail, but since its tail is so long, it doesn't send the pain to his brain until early morning, which is a perfect alarm clock. so. put all this together folks. To me, I see this as Grant saying that the Fed has bitten its tail, but it's going to take a while for the pain to be felt.. But it's getting close, I do fear. don't you?

Well, speaking of inflation. it sure does seem to have a life of its own down in Brazil.. Inflation continues to hover just above the 6.5% level that the Gov't has put down as their line in the sand. And since it remains above that line in the sand, the Brazilian Gov't can't do anything to weaken the real, as they did a couple of years ago. As we've discussed in these pages many times in the past, currency strength can go a long way to combat inflation pressures. That means Brazilian rates might not be going any higher, but they won't be going any lower either, for lowering them would invite inflation two ways. So, taking all that into consideration, the Brazilian real should remain well bid.

Both the Indian rupee and Chinese renminbi moved weaker overnight. Not by much, but weaker nonetheless. Monsoons have hit India, and then the high price of Oil adds to the problems of kick starting Indian economy. So, they'll have to batten down the hatches and ride this out, and hope the rupee doesn't get banged on too much. I think the Reserve Bank of India (RBI) has an appetite to intervene to keep the rupee from sliding too much, so we'll have to watch this closely going forward, eh?

I see where PIMCO (the world's largest bond fund) issued a report saying they favored rupees over S. Korean won, on India's improved economic fundamentals and higher yields. PIMCO also likes the currencies of Brazil, Mexico and get ready for this one. the U.S.. Well, 3 out of 4 will get them in the Hall of Fame, right?

The renminbi / yuan just keeps getting pushed around by the Peoples Bank of China (PBOC). Ty Keough, sent me a link to an article on Reuters yesterday, regarding the renminbi, which talked about how the Chinese need to make the renminbi / yuan more flexible. here's a snippet of that article. "Ma Jun, the chief economist at the central bank's research bureau, told a forum that China's net capital flows may not be as big as some expect once the country frees its closed capital account. However, capital inflows into China's bond market could increase as domestic bond yields are higher relative to overseas markets. China needs to further increase the renminbi / yuan's flexibility to help cope with possible capital inflows."

Interesting don't you think? As I've said before I really think that China is stepping up the pace for removing the dollar as the reserve currency, and this is just part of those steps they'll have to take to do so.

Well, the cease-fire that was called in Ukraine over the weekend, ended, and that renewed unrest took the stuffing out of the Russian ruble, which had been on a very nice winning streak. On a sidebar. We don't currently offer rubles, but are in the initial planning to get this on our roster of currencies. so stay tuned, same bat time, same bat channel for updates!

After hitting the "send button" on the Pfennig yesterday, the euro, which had held to gains above 1.36 even after the weaker IFO printed, lost its mojo and 1.36 was no longer held on to. But like most data in the Eurozone, the pain is forgotten the next day, and so it is today, that the euro has rebounded back to just above 1.36. Let me remind you all, exactly why the with all the negativity toward the Eurozone a couple of years ago, that the euro didn't collapse. It's a direct reflection of what the markets think about the U.S. fundamentals and the dollar.

The Aussie dollar (A$) is down a bit today, and the New Zealand dollar / kiwi is up a bit today. Nothing of great importance has happened in the South Pacific to move the currencies, so it's just a normal flow for the two this morning. And it all makes sense to me. the A$ has rallied and probably gone about as far as it can go for now, while kiwi too has rallied, but still have the possibility of another rate hike this year, which keeps the investors' interest in the currency at a high level.

I know that sometimes I sound like a broken record, or scratched CD, or a defected MP3. with my talking about stuff like New Zealand, but you have to remember, that not everyone reads the letter religiously every day. So, for those that miss class on the days that I talk about something, are pretty happy that I sound like a broken record, scratched CD, or defected MP3!

Well, let's see, I already talked to you about today's Big Kahuna Data Print. May Durable Goods Orders. We'll also see a final revision to 1st QTR GDP. Watch for this folks, because at first the Gov't told us 1st QTR GDP was positive, then they told us it was negative by -1%, and today's revision is probably going to show a negative figure of -1.8%!!!! But it was all bad weather, so no worries. right? And then finally we get the stupid Personal Consumption data for the 1st QTR, which originally printed at 3.1%, but will most likely be revised downward, for how could we have been working that hard, when nothing was produced in the 1st QTR?

Gold spent the Tom Terrific Tuesday going back and forth, up and down, but most of the time going sideways. This morning, the shiny metal is down $5. The U.S. is sending "advisors" to Iraq, and Gold traders don't see that as something that should induce the fear factor buying of Gold? Geez, Louise! I think I told you this the other day, but did you know that the U.S. Gov't doesn't consider special forces, the CIA, or "advisors" as "ground troops". Hmmm I'm just saying.

For What it's Worth. Do you know G. Edward Griffin? He's the author of the great book: Creature From Jekyll Island, which was the story of how the Fed Reserve came to be, by whom, and what for. Well, G. Edward Griffin has a weekly email called "unfiltered news" to which I subscribe, for what good Pfennig editor wouldn't? And it's in his newsletter that I found today's FWIW story. Mr. Griffin, took it from zerohedge.com, and I'm taking it from all of them! Isn't the internet great? Well, get ready for this one folks. this is going to be a doozy! And. I wonder how long, if ever, it takes the mainstream media to report this.

"Another conspiracy "theory" becomes conspiracy "fact" as The FT reports "a cluster of central banking investors has become major players on world equity markets." The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which "could potentially contribute to overheated asset prices." China's State Administration of Foreign Exchange has become "the world's largest public sector holder of equities", according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world's banks try to diversify themselves and "counters the monopoly power of the dollar.

While most have assumed that this is likely, the recent exuberance in stocks has largely been laid at the foot of another irrational un-economic actor - the corporate buyback machine. However, as The FT reports, what we have speculated as fact for many years now (given the death cross of irrationality, plunging volumes, lack of engagement, and of course dwindling credibility of central planners)... is now fact..."

Chuck again. Well. I wonder if I'll ever get a call from the people at CNBC that ridiculed me and told me that I should take my theory on stock manipulation to Hollywood, to apologize. I doubt it. but wouldn't it be grand? Of course I would take the call on a recorded line, so I could play it back again, and again, and again, and, well, you get the picture!

To recap. There's a soft bias to buy dollars this morning, which will be put before the firing squad this morning, when May Durable Goods Orders prints. Watch and listen for the excuses as to why the data is negative, folks, for the Spin Doctors will be out in force! Japanese PM, Abe announces that deflation is dead. PIMCO likes: rupees, real, pesos, and dollars. Chuck reminds us that 3 out of 4 puts you in the Hall of Fame..

Currencies today 6/25/14. American Style: A$ .9365, kiwi .8697, C$ .9310, euro 1.3610, sterling 1. 6975, Swiss $1.1185, . European Style: rand 10.6125, krone 6.1430, SEK 6.7395, forint 225.20, zloty 3.0485, koruna 20.1580, RUB 33.79, yen 101.90, sing 1.2510, HKD 7.7515, INR 60.13, China 6.1555, pesos 13.06, BRL 2.2235, Dollar Index 80.32, Oil $106.44, 10-year 2.58%, Silver $20.85, Platinum $1,454.00, Palladium $823.20, and Gold. $1,314.50

That's it for today. Well, I forgot to check the Birthday calendar this week, and in doing so, I missed wishing our colleague, Sheryl Dickerson a Happy Birthday yesterday. Sorry! Another starting pitcher bites the dust last night for the Cardinals. You know all that "depth" they thought they had in Spring Training? Well, it's going to be on display for the next couple of weeks! And we have the toughest trip going. Colorado, then L.A., then San Francisco. UGH! I'm being treated to a couple of Leon Russell songs this morning. Back to the Island (my fave L.R. song) and stranger in a strange land. Now that's my kind of way to start a day! I'm really dragging the line today, as I didn't sleep well last night, which is very strange for me, as I normally sleep quite soundly. Maybe I napped too long yesterday afternoon. I'll have to adjust that today! OK. time to get off the bus. I hope you have a Wonderful Wednesday!

Chuck Butler
EverBank World Markets

Posted 06-25-2014 4:43 PM by Chuck Butler
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