March 2009 - Daily Pfennig

A free, quick-reading daily e-letter on world currencies, economic trends, and the occasional baseball score.

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  • Saying "NO" To Eastern Europe...

    * Dollar continues to rally... * John Taylor buys dollars... * Canada sees a deficit! * More bailout funding... ** Saying "NO" To Eastern Europe... Good day... And a Marvelous Monday to you! Welcome to March too! Here and a lot of the country saw March come in like a lion, which means it should go out like a lamb, right? Let's hope it begins turning in that direction before month-end! 9 days before I leave for Florida, the countdown begins! Well... The currencies continue to trade heavy under the pressure of the dollar, and the "flight to safety" in Treasuries... The euro has lost the 1.26 handle and continues to look weaker and weaker all the time. The latest move down came as a result of new that Eurozone leaders rejected a request for Eastern Europe aid... Here's the skinny on that......
  • RBA Surprises The Markets!

    * Everything but Treasuries trades heavily... * Fundamentally speaking on Australia... * Bank of Canada to cut rates today... * Tell me your story... ** RBA Surprises The Markets! Good day... And a Terrific Tuesday to you! Well... The BIG NEWS this morning comes to us from down under, where the Reserve Bank of Australia (RBA) surprised the markets and left rates unchanged for the first time in 7 months... Now, that's the horse of a different color! How dare they? How could they? Why everybody is doing it, Where do they get off thinking they didn't have to? Ahhh, grasshopper... The RBA continues to shine in my eyes as the best run Central Bank in the world, and this is one of the reasons why... Yes, they could have gone with the rest of the crowd, and cut rates to the bone, but why stoke inflation? Now, having said all that... It doesn't mean the RBA won't cut rates again in the future... It just means that they were being prudent, and taking a step back to see what their previous rate cuts had done to the economy, and how the economy would be affected by them. So, the proverbial "pause for the cause"... But, I believe it to be warranted, given the RBA had cut 400 BPS away from their once lofty rate in 7 rate cuts......
  • A "Stock Tip From The Top Guy!"

    * Australia's economy contracts.... * Bank of Canada cuts rates to .50% * Meeting margin calls... * TALF... ** A 'Stock Tip From The Top Guy!' Good day... And a Wonderful Wednesday to you! My beautiful bride is getting ready to leave this morning. I'm not used to 'talking' to someone when I get up at my usual early hour! She'll be gone in a few, as I write, and then it will be my little buddy, Alex, and your Pfennig writer on their own for 5 days! YAHOO! Well... After a day of waxing eloquently about the how well the Aussie economy was doing compared to the rest of the world, they go and post a contraction in their economic growth! UGH! That's the way to show me up! The Aussie economy shrank in the 4th QTR by .5% VS the forecast of .2% growth... The news scared the markets into believing the Asian problem will be worse off than previously thought. Oh Come On! Australia is STILL doing better than most countries, especially those that I listed in yesterday's Pfennig!...
  • China Announces A Stimulus Plan...

    * China to grow 8%? * An end for Mark-to-markets? * What will the ECB do today? * Gold at a discount.... ** China Announces A Stimulus Plan... Good day... And a Tub Thumpin' Thursday to you! It's a Tub Thumpin' Thursday, because I woke up to see that my beloved Missouri Tigers had beaten #3 ranked Oklahoma last night! YAHOO! I had to hit the sack at half-time, so the outcome was in question when I went to bed. Great stuff! This was HUGE after being not ready for prime-time last Sunday against Kansas... Be gone you demons! You monkeys on our backs too! We just beat OU! Whew! A poet and I didn't know it! Well... We have the Bank of England (BOE) and the European Central Bank (ECB) meeting today. Look for rate cuts from both of them, as recessions are deepening in both camps. The BOE doesn't have many arrows in their quiver, while the ECB has held some in reserve. I doubt the ECB would go for a "huge honkin'" rate cut today, as they are normally more stick in the mud thinking... The BOE will probably move rates nearer to zero......
  • A change in the Trading Theme?

    * A change in the Trading Theme? * Gold rebounds Big time! * ECB cuts 50 BPS, as expected... * Lots of lessons today... ** Jobs Jamboree Friday! Good day... And a Happy Friday to one and all! It supposed to be 70 degrees here today, so in my book that makes it a Fantastico Friday! It's also a Jobs Jamboree Friday, and while this report is probably not going to be anything good, it will be Fantastico BAD! The experts have forecast a job loss in February to be 650K!!!!!! Six Hundred and Fifty Thousand did I say? Yes, sir, may I have another, sir? Well, shiver me timbers, this is just downright awful! And if it prints this bad, it will be the most jobs lost in a month since 1949! This is horrific, just plain horrific folks... And in my opinion, will NOT signal the bottom of the barrel for labor just yet... This thing has momentum and I don't think you'd want to step in front of this run-away bus!...
  • A Horrific Jobs Report!

    * 651K jobs lost in Feb... * Dec. and Jan Job losses revised up... * Talking Norway, Canada, Australia... * Brazil stealthlike for 3 months... ** A Horrific Jobs Report! Good day... And a Marvelous Monday to you! A wonderful weekend here in St. Louis, a taste of spring was in the air. I got to spend some time with some of my closest friends on Friday night, a good time was had by all! Well... Our Fantastico Friday was interrupted by that horrific Jobs Jamboree number that printed Friday morning... 651K jobs were lost in February, which let me remind you is a couple of days shorter than other months. So, it could have been worse! Hard to believe that could be the case, but it's true. The unemployment rate rose to 8.1%, from 7.6% in January. The jobless rate is the highest since 1983. The economy has now shed 4.4 million jobs since the recession began in December 2007, with almost half of those losses occurring in the last three months alone....
  • Auction Week!

    * Currencies have a mini-rally... * Deficits do matter, eh? * Turning Japanese... * Gold fails to respond... ** Auction Week! Good day... And a Terrific Tuesday to you! Sometimes I'm right, and I can be wrong, my own beliefs are in a song... I just heard that great old song on the radio, and thought, that's a great credo to live by... Oh, well... That's just me I guess... Let's go to work! The currencies, led by the euro, made a valiant effort during the trading day in the U.S. yesterday to mount a rally, and they did! They have gained even more ground in the overnight markets, with the euro trading with a 1.27 handle... OK, I hear you saying... But, Chuck, tell us what pushed the currencies higher yesterday? Ahhh... Grasshopper... Of course I'll tell you that! Let me first set the table with the background story, then lead into the real meat with a building crescendo!...
  • A Day Of Healing...

    * Currencies have a mini-rally... * Only to see profit taking overnight... * Gold rebounds too! * Retail Sales on board today... ** A Day Of Healing... Good day... And a Thunderin' Thursday to you! It was a Tub Thumpin' Wednesday yesterday for the currencies and Gold, after seeing them back off earlier this week! I'm in Jacksonville for a company event, and then on Friday morning, I head south to start my spring vacation! But first, some work to do here, and then on to the south! It was 29 degrees when I got in the car to leave for the airport yesterday morning... And it was 77 degrees when I finally arrived in Jacksonville! YAHOO! But even as loud as I can say YAHOO for the warm weather, which I've said over and over again, I've got to go where it's warm, it wasn't as loud as a the YAHOO yelped by currency owners as the euro led the currencies higher and higher all day long!...
  • On the turning?

    * SNB surprise... * Currencies continue... * Retail Sales... * Recipe for inflation... And Now... Today's Pfennig! On the turning? Good day...And a Fantastic Friday to you. It would be nice to have some of that warm weather they have in Jacksonville make its way north, but hopefully its right around the corner...patience. Yesterday was a wild ride so hopefully you had that seat belt fastened tight and both hands on the wheel. I have a lot to talk about so I'll get right to it... We were greeted yesterday morning with some big news out of Switzerland where they not only cut rates to .25% from .50% but also decided to take matters into their own hands. Chuck sent me some thoughts before he left for vacation, so here you go. 'The Swiss National Bank (SNB) intervened in the markets yesterday with a bang! The SNB sold francs for euros and dollars to further reduce the price of money (since they've already cut interest rates to the bone). Francs went from 86-cents to 84-cents in one day! UGH!'...
  • A building block...

    * A quiet Friday... * Euro hits 1.30... * Chinese concern... * This week in data... ** A building block... Good day...And a Marvelous Monday to you. Its hard to believe that Monday morning is already upon us, where does the time go? Just as the currency market took a breather, our cold weather from last week decided to follow suit as it turned out to be a nice late winter weekend. Friday was fairly uneventful as the currencies traded in a tight range throughout the course of the day so it will be interesting to see how this week shapes up. Let's see if the currencies can build from last week...

    Volatility was basically non-existent during Friday trading with less than a .50% difference between the high and the low of the dollar index. The overall bias, however, was a weaker dollar and the euro held onto 1.29 for a majority of the day and was near 1.2920 as I left the desk. The pound and Swiss franc were the only two currencies left on the bench last week with losses of about 1% and 2.5% against the dollar respectively. The rest were able to turn in a decent week with the Swedish krona on top of the pile posting a 6.5% gain....
  • Another day for the currencies...

    * Disappointing data...
    * Euro held ground...
    * Down under...

    Another day for the currencies...

    Good day...And a Terrific Tuesday to you. Another Monday morning has come and gone but not before confirming the US economy is still heading down the wrong side of the slippery slope. The uneventful trading day from Friday certainly didn't carry over as we saw a sizeable run up in currencies along with equities during the morning session. As the day progressed, the equity markets shed their gains but most of the currencies remained resilient and held on. I guess I'll stop beating around the bush and get right to it...

    It seems that Bernanke's calming approach during his interview with 60 Minutes gave investors the feeling that we are not as bad off saying the risk of a depression has been averted. He went on to say if the government succeeds in calming financial markets, the recession will probably end this year and the economy will expand in 2010....
  • Hold on to your hat...

    * Fed opens the pocket book...
    * Creative measures...
    * Inflation/dollar debasement concern...
    * Currencies soar...

    Good day...And a Tub-Thumpin' Thursday to you. Well, yesterday was certainly one wild Wednesday for the record books. It started out like any other day we've had over the past week or so with the dollar down and many of the currencies up a bit, but nothing really out of the ordinary. Then it happened...the Fed adjourned and hit the markets with a big one.

    Many of the market participants weren't looking for an announcement or plans from the Fed to buy Treasuries today, but instead, were anticipating further discussions on how to proceed. It appears there has been disagreement on how to provide aggressive actions with interest rates already at rock bottom. The way they saw it, there were three options. One was to increase the TALF to buy frozen assets, another way was to expand purchases of mortgage backed securities and agency securities, or to begin buying long term Treasuries....
  • Up, up, and away...

    In This Issue..

    * TALF...
    * Dollar falls even more...
    * Commodities...
    * Still disappointing...

    And Now... Today's Pfennig!

    Good day...And a Fantastic Friday to you! It's the end of another week that not only brought us the beginning of spring but also a major shift in the currency market. The effect from the Fed's decisions on Wednesday carried over into yesterday's trading session with the dollar engaged in another large sell off. How long and how far would be the big question marks right now but until another major event comes along, the dollar should continue to get sold.

    As I just touched on, the dollar was still down and out suffering from a two day hangover yesterday as a result of the quantitative easing measures the Fed has decided to pursue. We also gained some insight into the TALF that I mentioned yesterday which is intended to resurrect both consumer and business lending. They will expand to accept securities backed by four types of loans that include leases of business equipment and rental car fleets, securities backed by loans extended by mortgage servicers to cover missed payments by homeowners, and securities for floorplan loans. The Fed also said that this announcement was a first step in expanding the TALF and that a number of other asset classes are under review....
  • High yeilders continue to rally...

    In This Issue...

    * High yeilders continue to rally...
    * Quantitative easing drives the markets...
    * Inventories to drive inflation...
    * Happy Birthday Chuck...

    Good day... I'm back from a long vacation with the family down in Florida, I had a great time but it actually feels good to get back to work. But before I get started this morning, I want to compliment Mike on what a fantastic job he did on the Pfennigs while Chuck and I were in Florida. Mike jumped right in and cranked out some great information, setting the bar rather high for me. We have a busy week ahead of us, so better get right to it.

    Currency investors continued to pull out of the dollar and move funds back into higher yielding currencies on Friday. The best performing currencies on Friday were the higher yielding commodity based currencies of Australia, New Zealand, and South Africa. Investors were eager to move money back into the higher interest rates available in these currencies as markets began to stabilize. With the Feds announcement last week that it will buy $300 billion of US government bonds, deflation is now a thing of the past. This purchase by the Fed monetizes the debt, basically pumping the cash directly into the markets. It is the most inflationary action the Fed can take, Bernanke has now put the printing presses in high gear. With deflation no longer a worry, commodity currencies have begun to look attractive again....
  • The Treasury Secretary rides to the rescue...

    In This Issue..

    * Geithner rescues the stock market...
    * Commercial real estate, the next big drag...
    * Norway: the new safe haven...
    * China pushes for a new reserve currency...

    It was a dramatic day on Wall Street yesterday, with the major stock indexes surging as much as 6 percent, including the Dow Jones which jumped more than 400 points. The reason for all of this euphoria on Wall Street? A combination of Geithner's plan to rescue the banks from the toxic debt in which many are mired, and a surprisingly large uptick in existing home sales. I touched briefly on the Giethner plan in yesterday's Pfennig and readers know I am more than a little skeptical about its possible success.

    But the housing numbers really caught me off guard. Existing home sales jumped a tremendous 5.1% in February, clearly above all expectations. But Chuck pointed out that the almost 1/2 of the sales were either foreclosures or short sales, hardly what you would call a 'rebound' in home sales! And these additional existing home sales came at deep discounts. The median price for an existing home fell 15.5% in February 2009 to $165,400 as compared to $195,800 in February of 2008....

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