Tax Day!
Daily Pfennig

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In This Issue....

* Dollar Bears ignore G-7 warning...
* French inflation rises...
* Retail Sales surprise!
* Net TIC Flows data today...

And Now... Today's Pfennig!

Tax Day!

Good day... And a Terrific Tuesday to you! Thanks for the notes regarding my son Andrew... I believe he'll be fine... Shaken, beaten a bit, but fine... Well... It's Tax Day... A day hated by many, including yours truly... I always like to bring out the Beatles on Tax Day...

Should five per cent appear too small,
Be thankful I don't take it all.
'Cause I'm the taxman,
Yeah, I'm the taxman.

(if you drive a car, car;) - I'll tax the street;
(if you try to sit, sit;) - I'll tax your seat;
(if you get too cold, cold;) - I'll tax the heat;
(if you take a walk, walk;) - I'll tax your feet.

OK... Well... I think the currency guys are all spittin' raspberries at the G-7 ministers and saying G-7, Schmee Seven! NEENERNEENERNEENER! What the heck am I talking about? Well... As I left you yesterday (in the middle of the night) the G-7 ministers had issued a communiqué that for all intent and purpose, warned the dollar bears... And those that were scaredy cats ran for the hills, with the dollar rallying...

But, the last thought I had before signing off was that I believed the G-7 warning would probably need to see some actual intervention by the Fed and the ECB to really scare the dollar bears... And... By the time I made it in to the office yesterday morning, that thought was prevalent in the markets, and the euro was off to the races VS the dollar once again.

So... All the worries about battening down the hatches were ditched on the roadside... I sure hope I don't begin to sound like the boy who cried wolf, always pointing out short-term risks, but I guess that's the chance I take, writing every single work day! But... One thing to keep in mind is this: Have the markets misunderstood G-7's shift in exchange rate thinking? Or, did G-7 simply try to "call it in" with the statement?

And the euro is even higher VS the dollar this morning, as it received two pieces of data, with one outweighing the other... Here's the skinny... First the damaging to the euro data... German Investor Confidence as measured by the think tank, ZEW, printed a negative -40.7 VS -32 in March... That whipsawed the euro a bit... But then France printed an inflation report that showed inflation rising at the fastest pace in at least 12 years! OUCH!

With the European Central Bank (ECB) focused on inflation (as well they should be!), and not growth, this report all but keeps interest rates at their current levels... I say "all but" because, you never know what kind of smokey back room deal the Fed is trying to work with Central Banks around the world to help them in their attempt to drive off a credit meltdown...

Did you see the announcement by Wachovia yesterday? The posted a huge loss, slashed their dividend, and had to raise $7 Billion to make their capital position look better... I'm not picking on Wachovia here... I think we'll see more of this kind of stuff as we move along... And that just weighs on the economy folks...

I just had to take a break from writing, as one of my all time fave songs just played on the radio, and I had to stop and sing along... There's A Kind of Hush... I used to sing it to my little buddy Alex, when I rocked him to sleep at night... OK... I'm sorry, I got really sappy there... Let's get back to the markets!

Even a surprising Retail Sales number yesterday couldn't help the dollar... Retail Sales for March, surprised to the upside at +.2%, and February's negative -.6% was revised to only -.4%... So, the rumors of the U.S. consumer being dead have been greatly exaggerated! But... In my mind, this is just the faint heartbeat of a Consumer driven economy... The breathing is shallow... And it looks like it's on its last legs...

The thing that really kept Retail Sales going though was Gas Sales... Up 1.1%... I can vouch for that! I won't tell you what it cost me 10 days ago to fill my gas tank, but it was roughly twice was it used to cost me when I bought the car two years ago! OUCH! Whoa, I think that's going to leave a mark! Oh... And this little ditty just came across my screen... Our Friends (NOT!) at OPEC have decided to cut production... Interesting...

Swiss francs are back to parity with the dollar, and even beyond! Japanese yen is flirting with a sub-100 figure too! I believe the term, "blue light specials" was used by someone (me!) a couple of weeks ago describing the cheaper levels to buy these currencies... I love it when a plan comes together!

Every once in a while I like to drag out the Euro Wanna Be currencies of Czech, Poland and Hungary to talk about them... These currencies have been stealth like in their ability to fly below the radar while they move higher and higher VS the dollar. The Czech Republic just announced that their February Current Account Surplus more than doubled from January! The February figure was the third-biggest Surplus ever for the Czech Republic...

Looking back over the past 3 months, one would see the Czech koruna gaining 3.2% VS the dollar... I know for the BIG TIME Oil Traders, that figure is small... But... I think it's better than a wedgie!

You know... When I normally talk about the Current Account Surplus, or positive balance of payments countries, I totally draw a blank on the Czech Republic... That will have to change!

And you all know how I feel about Current Account / Positive Balance of Payments countries... They are at the top of my Hit Parade of currencies investors should look to when diversifying into currencies...

Chris mentioned last week the HUGE move by the Singapore dollar... I'm surprised at the size of the move, given the currency is managed by the Monetary Authority of Singapore... I think the Monetary Authority saw the writing on the wall with regards to inflation, and decided to let the currency "go to work!" The move in the Sing dollar has really been impressive, and should go a long way toward helping inflation, along with padding the pocket books of sing dollar holders!

While I'm on currencies that I forget to talk about... The Mexican peso has quietly moved higher VS the dollar... Normally, the peso needs the U.S. dollar to get going first... So... This is interesting, in that even the pesos is beating up on the dollar! The peso rally comes just in time for the Cinco de Mayo celebration!

Today, we'll see the color of the U.S. PPI for March... The Producer Price Index is expected to jump to .6% from .3% in Feb. I don't get caught all up in the PPI and CPI because of all the cooks in the kitchen on these reports... But... Inflation, no matter what PPI and CPI say, is rising faster than you can sell funnel cakes at a State Fair!

The really important piece of data this morning is the TIC Flow... I've explained this before... But, here a refresher course... TIC is Treasury International Capital, and measures the Net flows of foreign investment into the U.S., which is very important, due to the fact that foreign investment is what we used to finance our ever growing deficit...

In my last 4 or 5 presentations I highlight the fact that last year, we only averaged $51 Billion each month in net TIC flows... The problem with that is the fact that we need $80-85 Billion each month to finance the deficit!

For some reason or another, the markets and media sweep this data under a rug each month... And I just don't get it! This is important stuff folks! But then, the media keeps telling us that Deficits Don't Matter... So, why would they get concerned when we can't finance the Deficit? Dolts... The whole lot!

Currencies today 4/15/08: A$ .9245, kiwi .7840, C$ .9795, euro 1.5840, sterling 1.9680, Swiss 1.0009, ISK 74.30, rand 7.90, krone 5.0030, SEK 5.9440, forint 159.10, zloty 2.15, koruna 15.68, yen 100.90, baht 31.55, sing 1.3550, HKD 7.7935, INR 39.97, China 6.9929, pesos 10.45, BRL 1.6855, Oil $112.80, Silver $17.83, and Gold... $934.06

That's it for today... It's the 50th anniversary of the "stealing of Buddy Holly's guitar", which happened right here in St. Louis! The guitar has never surfaced... Can you imagine what it would be worth today if it did surface? It's also Tax Day... UGH! I got home last night, ate dinner, checked email, and went to bed! So... Hopefully, I'll be able to get through today better than I did yesterday! We're finally supposed to get some sun and warmer weather today... I don't know if my little buddy Alex will get a baseball season this year, given all the rain and flooding in our little river town... But the sun's coming out! YAHOO! I hope you have a Terrific Tuesday!

Chuck Butler
EverBank World Markets

Posted 04-15-2008 9:24 AM by Chuck Butler