FOMC Day – 06/23/2010...
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In This Issue..

* A tight trading range day...
* High yielders underperform...
* Franc at all-time high VS euro...
* Gold gets back on rally tracks...

And Now... Today's Pfennig!

FOMC Day...

Good day... And a Wonderful Wednesday to you! It's also a BIG DAY for the U.S. Men's soccer team... Yes, I know they call it football in all corners of the world but here... Our Soccer legend, Ty Keough, calls the U.S. version of football, "the gridiron"! Any way, it's a Big Day for the Men's team... Win and they are assured of moving on.

Yesterday, after the currencies had sold off in the overnight sessions, they traded throughout the U.S. session in a tight range, with a bias to move higher, but not being able to mount any kind of sustained move against the dollar.

This morning, the overnight sessions, have left the euro about where it was yesterday morning. The worst performers are the ones that were the best performers on Monday... The high yielders... Aussie, kiwi, South Africa, Norway, and even Canada, not that it's a high yielder, but since Canada was the first G-7 nation to raise rates, they get some credit...

The high yielders saw selling after the U.S. Existing Home Sales report yesterday was downright awful... UGH!

Well... It looks like I was as wrong as, well... I was wrong yesterday when I said that I thought the Existing Home Sales Data would be goosed up by 1. Government assistance, and 2. lower Home Prices...

Sales of previously owned homes in the U.S. slipped 2.2% in May from a month earlier despite the influence of a fading government tax credit. Although the tax credit ended April 30 for contract signings on homes, buyers have until June 30 to close. Existing-home sales data are based on closings.

The median price for an existing home was $179,600 in May, up 2.7% from a year earlier.

So... O for 2 on that call! Not only were sales down not up, but home prices were up not down! UGH!

Those home prices being up is a surprise to me, and quite frankly I don't see how that happened... But it has to be viewed as a "blip", for I see home prices slipping another 10% this year, after all the government assistance had dried up, and the foreclosures begin to mount... Yes, the foreclosures... I saw a piece on the Bloomberg TV that said 2.4 million people will lose their homes this year... YIKES! That's just plain awful!

On Monday, the Big News was all about China... Well, two days later, the renminbi has given back over 50% of its move upward against the dollar on Monday morning. I'm going to stick to my conspiracy theory that I gave you yesterday regarding China's announcement, until proven otherwise... So far... I've got something going here...

However, having said that... I've said for years now, that China would do itself a favor when fighting inflation, by having a stronger renminbi. A strong currency goes a long way toward fighting inflation, which I'm sure the Chinese are very well aware of that! So... Maybe, just maybe, they were sincere with their statement about flexibility for the renminbi... I guess, we'll have to wait-n-see, eh?

The other day, I saw an interview with the economist, Paul Krugman, whom, I've pointed out several times over the years that we have major differences in opinions... This time Krugman was spouting off about the Eurozone states implementing austerity measures... Telling them they were wrong to do so, and that they should spend, spend, spend...

Then this morning two of my faves, U.S. Treasury Sec. Geithner, and the director of the Economic Council, Lawrence Summers... NOT! Let me make this clear, these two guys are not even close to being faves of mine, except if you count, my penchant for pointing out how dumb they sound sometimes... And this will be no exception...

Geithner and Summers are prepared to tell the G-20 nations meeting this week, that they should avoid budget cuts that would hurt economic growth. Geithner said, "we must demonstrate a commitment to reducing long-term deficits, but not at the price of short-term growth. Without growth now, deficits will rise further."

Hmmm... How many arrows will I need to shoot this statement full of holes? Ahem... Timmy... The masses might follow your lead here, but I'm not falling for this... You can not spend your way out of this, period! And, just wait until your friends on the Hill, allow the Bush Tax Cuts to expire... Oh! You didn't think about that? I guess your answer would be for us to spend more to make up for those tax cuts? I shake my head in disgust!

OK... I have to go on to something else here... The air conditioning doesn't turn on for another hour, and I was already hot under the collar! Yes... Another "benefit" of our building... It's a good thing I love this space we're in, and what we've done with it!

Just in case you were thinking that with Canada raising rates and leaving the U.S. Fed's rates behind, that the link to the U.S. was gone, you had better think again, for that awful print of Existing Home Sales, sent the loonie down below 97-cents yesterday.

Today's data cupboard in the U.S. will yield New Home Sales for May...  And let's not forget the Fed's FOMC meeting today! Not that anything will come of it... I guess all we're resigned to looking for is if K.C. Fed Head, Hoenig, calls for a rate hike... He has been the "lone dissenter" regarding the time period for leaving rates at historic lows being described as "an extended period"...

In the U.K. this morning, the Bank of England's (BOE) last policy meeting minutes were printed, and to the surprise of the markets, there was a member, that had voted for a rate hike of 25 BPS... Not to worry, the vote was 7-1... But still, maybe this one member can get one his buddies to join him, and that buddy gets a buddy, and soon, the vote gets messy... We can only hope!

The U.K. also released their "emergency budget" this morning... And the reaction has been muted for the most part, with the pound sterling gaining a bit VS the dollar, but not much to write home about.

I chuckle when I hear the words "emergency budget" and think of Japan in the 90's... If you weren't following Japan's moves in the 90's let me explain... Japan, after having "it all" in the 80's, went the opposite direction in the 90's... They spent money, threw money, and dumped money on the economy to get it kick started, and it never worked. They would announce a "Budget stimulus package" and "emergency budgets" and again, they never worked... So... When I hear that the U.K. announced an "emergency budget", then I think that maybe the U.K., too, like us, are "turning Japanese"...

Norway's Central Bank, The Norges Bank, is meeting while I write this morning, but don't expect anything to come of it, as the Eurozone debt problems have put the rate hikes on the back burner with the Norges Bank. I see this hurting the krone, for many traders, etc. had "looked forward" to see additional rate hikes, thus marking up the krone... If these same traders, etc. get the wrong message today, they could very well, begin to mark down the krone, and move on to greener pastures...

The Swiss franc continues to defy gravity folks... The franc is trading today at an all-time high VS the euro... This is going to really test the fabric of the Swiss National Bank, (SNB) who mentioned recently that they no longer had to "stem the appreciation of the franc"... I think that the SNB will keep this pair from getting too out of whack, which would mean they would buy euros to narrow the spread between the two... And sell, francs, which would weaken the franc... But if they do... Look at it as an opportunity to buy francs cheaper!

Gold is stronger this morning, adding to yesterday afternoon's rally in the shiny metal... The "dip" only lasted one day...

Then there was this... Ok... A reader sent me a note about the falling money supply here in the U.S. and was confused about how the money supply can shrink when the Gov't is printing and spending money all the time. Well... This shrinking money supply thing is concerning to me... Yes, I didn't like it when it was HUGE, but it is shrinking faster than you can sell funnel cakes at a State Fair! But let me get back to the confusion... The Money Supply is a different animal than the spending and printing... Money Supply is the total amount of money available in an economy at a particular point in time.[1] There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits (depositors' easily-accessed assets on the books of financial institutions.

Hope that helps!

To recap... There are a couple of Central Bank meetings today (Fed and Norges Bank), but I don't expect any changes in either one. The currencies traded in a tight range yesterday after the overnight sell off. The Swiss franc is trading at an all-time high VS the euro this morning and Gold is back on the rally tracks this morning.

Currencies today 6/23/10: American Style: A$ .8735, kiwi .7105, C$ .9690, euro 1.2280, sterling 1.4930, Swiss .9025, ... European Style: rand 7.5560, krone 6.4675, SEK 7.7510, forint 228.15, zloty 3.3140, koruna 20.9435, RUB 31.01, yen 90.25, sing 1.3880, HKD 7.7780, INR 46.18, China 6.8125, pesos 12.60, BRL 1.7875, dollar index 85.95, Oil $77.66, 10-year 3.18%, Silver $18.96, and Gold... $1,245

That's it for today... Well... What an ordeal! The eye thing yesterday... But, the doctor was great, as was the young lady that painted my new "eye"... 3.5 hours later, voila! It does need to settle in for 3 weeks, and then I go back to have it adjusted so it sits correctly in my socket, and looks just like my right (the good one) eye... My beloved Cardinals are in Toronto, the sight of the G-20 meeting, I bet that's a mess! They won last night... I love those Eastern Time Zone games, they start an hour earlier, and I can watch the whole game! Hey! It's the little things for me! ZOWIE it's hot here! Now... I always said I wanted to go where it was warm... Not scorching hot! But hey! It's St. Louis in the summer... That's why we have air conditioning, no wait! Not yet! HA! OK... Gotta go... I sure hope you have a Wonderful Wednesday!

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





Posted 06-23-2010 12:29 PM by Chuck Butler
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