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In This Issue..

* The dollar rallies overnight...                                  
* Gold loses $10...                                     
* Retail Sales for December are negative!                                           
* Chinese games with the renminbi continue...                                                                                                        

And Now... Today's Pfennig!

Back To the Greece Debacle...                                           

Good day... And a Happy Friday to one and all! I said on the way to work, as I hit each stop light on green, that it was going to be a Fantastico Friday! I mean, why not? 1. it's a Friday, 2. it's a payday Friday, 3. it's the start of a 3-day Holiday weekend! Shoot Rudy, I thought to myself, as I drove to work, "nothing can spoil this day"...

But... Then I got to work, turned on the currency screens, and it hit me like a slap in the face! The euro has led the non-dollar currencies down VS the dollar overnight... After spending 3 days this week, hovering back and forth over and under the 1.45 handle, the euro finally succumbed to some selling...

The selling is being blamed on the Greece story once again... I mean, come on! Haven't we already been there, done that, and bought the T-Shirt with Greece? But, here we are this morning, looking at the euro trading below 1.44... And, all the other currencies have backed off VS the dollar... The Swiss franc, and Canadian dollar / loonie, have even backed off VS the dollar overnight... And... Of course, in keeping with the trading theme of 2009, the only currency to rally with the dollar is the Japanese yen!

So... Yesterday, the European Central Bank (ECB) met, kept rates unchanged, as expected, but then in the press conference after the meeting ECB President Trichet, threw what the markets believed to be a cat among the pigeons when he said something about Greece being responsible for their debts... This led traders to believe that Greece won't be able to pawn off their bad bonds to the ECB, like was done here in the U.S. with U.S. banks dropping off their toxic waste bonds at the Fed...

Once again, I'm going to go out on the edge of a cliff here, and shout as loud as I can in hopes that someone, somewhere, hears me now, so they can listen to me later... Greece is nothing compared to California! California is the world's 8th largest economy (it's in the top ten, but floats around, so for today, I'm going to say 8th largest!) Greece? It probably isn't even in the top 50! So... Why does the euro get beaten like a rented mule (no animals were hurt here!) and the dollar skips to my Lou around California's problems?

I have to tell you that Trichet, made two comments that had me chuckling... (GET IT? Chuck-ling?) first was this... "The stories going around about countries leaving the Euro are absurd"... "And I don't comment on absurd hypothesis"...

Tim Smith, on the desk here, said, wouldn't it have been funny to actually hear Trichet, a Frenchman, say the word, absurd? Think about it, and then say the word like inspector Clouseau would say it!

OK, back to the Canadian dollar / loonie for a minute... Other than last night's performance, the loonie has had a very strong performance this week, as it heads toward parity VS the green/peachback. I just put the monthly newsletter, The Review & Focus to bed for February, (yes, I know, it sure seems early in the month for that, eh? But that's the publishing business for you!) Any way... What I was getting to, is that Mike Meyer did some great research on Canada, and the prospects of a stronger loonie...

It's not just the currencies that have backed off VS the dollar overnight... Gold has given back $10! UGH!

I want to talk briefly about something I said yesterday about Gold... When I said that I laughed at a comment on the newswire that called for Gold at $5,000, I did not mean that I was laughing at the thought that Gold could get to $5,000... I was trying to make the point that pundits are calling this, that, and the other thing for Gold... That's all... Shoot Rudy, I own Gold, I would be one happy camper if Gold reached 1/2 of that call of $5,000! But again, I must point out that 1. the Gold price manipulators would probably be dead if Gold were to reach $5,000, and 2. the state of the economy would be in shambles...

OK... Yesterday, during the day, like I said, the euro hovered around 1.45 all day, probing higher and then selling off to go lower... Even the awful color of the U.S. Retail Sales data for December didn't move the euro higher, and thus all the other currencies...

U.S. Retail Sales for December, were a negative -.3%! For December? Yes, for December! The unexpected fall in Retail Sales, points to 1. a weak Christmas shopping season, and 2. that consumers were pulling in on the reins of spending...  The November lofty figure of +1.3% was revised upward to +1.8%, so that revision probably shook some of the "bad data label" off the December figure... But... December... We had negative Retail Sales figure for December... And people still want to talk about the recession being over? Let's see the latest reports, show that December lost 85,000 jobs, and had a negative Retail Sales figure... Sure doesn't sound like the recession ended in December!

OH! And wanna know how the major media spun this story? They didn't mention the negative sales figure for December, opting instead to talk about how December's sales were 1.1% higher than in 2008! Geez Louise, could I get some serenity now?

Oh! And the Weekly Initial Jobless Claims added 11,000 more claims last week, VS the previous week to 444,000...

The data cupboard is chock-full-o-data today... First we'll see the "stupid" CPI data for December... Although this data is so manipulated, I think we'll see that CPI year-on-year is up 2.8%... That's 2.8% consumer inflation, which while not the soaring inflation I still expect, is nothing to laugh about... And... I'm absolutely positive that if we took out the manipulations, we would see inflation around 7%...

We'll also see two of my fave data prints... Industrial Production, and Capacity Utilization... Both for December... And both are expected to show gains in percentage use.. Capacity Utilization is one of the few data prints that is forward looking, and here, the utilization is expected to be 71.8%, up from last month's 71.3%... Still a long way from the go-go days of 10 years ago, when Capacity Utilization was over 80%!

And the U. of Michigan Consumer Confidence index finishes the day of data, and is expected to show a improved confidence of consumers... Again... Why? One in 45 homes are in default, unemployment is 17%, we've just suffered through a lost decade in the stock market, the recession hangs on, and we're still at war... Oh, the list of reasons to not be confident is as long as Rapunzel's hair, but I don't want to get gloomy on what can still be a Fantastico Friday!

Unfortunately though... More than one or two of you wrote to me to tell me that the link I provided the other day to the Business Week story about your IRA's and 401K's, didn't work...

Well... So sum up the story it goes like this... there was a story in Business week that said that the Obama administration was looking into a requirement for all 401K's and IRA's that they would take a portion of the funds,  and put them into an annuity, to provide a steady stream of income for the person...

That's the same lie that they told about social security!

I could go on a rampage here and list the things that I think the Gov't would use those funds for... But I'll leave that to your imagination... But I can tell you this... Don't ever expect to get back a dollar that you give to the Gov't to "hold for you"...

Then there was this... The head of the Chinese think-tank, DRC, Long Gouqiang, acknowledged that the renminbi is undervalued, but warned that a big, sudden renminbi rise would hit the economy hard. He acknowledged there is expectation abroad for a renminbi rise, but now is not the time. Hmmm... Same-o, same-o, with China, folks... They know their currency is undervalued, but it does not interest them at all to do anything about it... However, I'm of the opinion, that IF the global economy continues to grow, and we see some semblance of order in trade, that the Chinese would get back to allowing the renminbi to gain VS the dollar like they did when the currency gained more than 10% in 2007...

Oh, and one more thing that I saw in the Washington Post this morning... The Congressional Budget Office (CBO) issued a report yesterday saying that without any major thrust by the Gov't, unemployment in the U.S. will remain above 8% for the next two years... Given the CBO's track record for forecasting I would probably add a percentage point or more to their number!

To recap... The "Greek story" was back on the burners yesterday, causing a sell off of the euro to below 1.44, overnight. The euro's losses dragged down the other currencies VS the dollar, except Japanese yen. Retail Sales for December were negative, and we have a ton of data to deal with today...

Currencies today 1/15/10: American Style: A$ .9270, kiwi .7490, C$ .9745, euro 1.4390, sterling 1.63, Swiss .9750, European Style: rand 7.4174, krone 5.66, SEK 7.04, forint 185.50, zloty 2.8040, koruna 18, RUB 29.55, yen 90.90, sing 1.3890, HKD 7.7590, INR 45.77, China 6.8269, pesos 12.71, BRL 1.7665, dollar index 77.18, Oil $78.72, 10-year 3.72%, Silver $18.54, and Gold... $1,135.20

That's it for today... I'm looking forward to the NFL playoff games this weekend, especially the Saints / Cardinals game on Sunday... It is 10 years since the Rams won the Super Bowl... I can still remember the joy I had at seeing them win the Super Bowl. And the parade... Alex was only 4 then, when we took him to the victory parade... Oh well, time flies, eh? Our Blues won for a second time in a row on home ice last night! I think Chris' son Brendan got to see his first win of the year, as home ice victories had been far and few between... This weekend is the Cardinals Winter Warm Up here in St. Louis, which only gets me thinking about spring training! Little Delaney Grace wouldn't let me nap yesterday afternoon, she wanted me awake... Didn't want me to play with her, read to her, tickle her, she just didn't want me to sleep! Girls... That's all I'll say about that! HA! OK... The deep freeze has lifted here in St. Louis, so we've got that going for us, along with a 3-day Holiday weekend! So... Let's go out there and have a Fantastico Friday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 01-15-2010 7:51 AM by Chuck Butler