Moodys Again...
Daily Pfennig

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In This Issue..

* Currencies are mixed VS dollar...
* Canadian credit & economy on the mend!
* China to print a very strong GDP number?
* Gold is back above $1,200....

And Now... Today's Pfennig!

Moodys Again...

Good day... And a Terrific Tuesday to you! I'm writing from home this morning, because I go back to the Ocularist this morning to have more work done on my new "eye"... I didn't sleep worth a darn last night, and I think I just had this visit on my mind.

Well.. Speaking of something on one's mind..  Or, more like a case of too much too little too late, Moodys announced overnight that they were downgrading Portugal's debt rating, 2 levels to A1... I don't want to get started on these ratings agencies again, they have become as useless as a pay toilet in a diarrhea ward! Ok... That probably wasn't too good to start off today's letter with a saying like that, but... It's what my fat fingers typed, so it stays!

The currencies are a bit softer this morning overall, but the euro seems to have slept in yesterday's clothes. The single unit starts off the day (for me at least) at 1.2585, which is darn near where we were yesterday morning! This is a good... You see, the single unit has remained unfazed by a report this morning, that German Investor Confidence, as measured by the think tank ZEW, dropped for a 3rd consecutive month in July. Those that were surveyed pointed to the Bank Stress Tests as their reasons for a lack of confidence this month.

Last Friday, Chris wrote about the stress tests, and said that the markets were waiting for confirmation that they were OK, before moving the euro any higher. A reader wanted to know why these stress tests would be market moving, when the stress tests here in the U.S. were not... Ahhh grasshopper... That's the beauty of being the BMOC (Big Man on Campus)... What's good for the goose is NOT good for the gander...

Hey! Remember yesterday, when I told you that the Bank of Canada would get two pieces of data to look at before their rate announcement next week? Well, the Bank of Canada's 2nd QTR Business Outlook Survey, and Senior Loan Officer Survey printed yesterday... And both indicated that credit conditions are easing.. Both reports also suggested that there is strengthening in economic conditions, and that the availability of credit improved in the 2nd QTR...

OK... So here's the skinny folks... The two Bank of Canada surveys released this morning indicate an improvement in lending conditions from both a borrower's and a lender's perspective... And having this kind of feeling about the domestic economy and the ability to lend and receive loans, is the final nail in the rate hike coffin for the Bank of Canada (BOC) next week... I fully expect them to raise rates 25 BPS (1/4%) to .75%, at their July 20 meeting.

The Canadian dollar / loonie isn't reacting positively to this news though, as the currency has backed off their 3-day rally. That's OK... It just means that buyers get a chance to buy at a cheaper level than yesterday!

Aussie & kiwi have backed off their 3-day rallies too this morning... Here it's, yet another case of... An overreaction! Get this... China is going to print their 2nd QTR GDP report this week (the 15th), and the latest forecasts have 2nd QTR Chinese GDP at 10.5%!!!! Now... Doesn't that look great? Unfortunately, for the naysayers, they will point their fingers at the fact that Chinese GDP fell from 11.9% in the 1st QTR to 10.5% in the 2nd QTR, and claim they were correct that they Chinese economy was collapsing....

Did you see what I just wrote? Collapsing? HARDLY! Moderating? Yes! But still, 10.5% GDP is nothing to get all in a huff about, and cause you to take you bat and ball and go home! Here at home, U.S. officials get all excited and pound their chests when we print 3% growth!

So... Any old way... The naysayers are winning the battle today, and that hurts the higher yielding currencies like Aussie and kiwi, who have such close ties to China... And depend on Chinese economic growth. Don't worry boys and girls, the Chinese economic ship is still out to sea, it's not even close to coming in to dock!

In a country that I just plain forget to talk about all the time, India... We have some quotes by the Finance Minister, Mukherjee, this morning that I think are good things to talk about...

Mukherjee was speaking in Mumbai this morning and had these little jewels to say...

"First, our immediate task is to restore 9% growth in the country's economy."

"India will bring fiscal debt to 5.5% in 2011, and 4.5% in 2012"

Those are two things that warm my heart folks... Promoting growth, but bringing in the debt to more manageable levels.... Now... If they can continue to work and bring their debt levels to below 4.5% in a couple of years, that would be fantastic!

I have to say that this long term view on India is one of the reasons I liked the BRIC MarketSafe CD that we did last summer. All of the countries (Brazil, Russia, India, and China) had long term forecasts for appreciation...

Well... I read something this morning that made my stomach turn... The headline was: "PIMCO shifting to Treasuries, from European Debt"... Geez... I thought these guys were saying just a few months ago that they were selling their Treasuries! Yes, Chuck, times change, and therefore we must change... But... Buying Treasuries now? UGH!

There was a report from Japan overnight, that Japan's Public pension fund had turned to a net seller of Japanese Gov't Bonds (JGB's) for the first time in 9 years, in 2009...

1. did it really take a year and a half to get this data?
2. Why did they tell us now?

It does explain though (a year and a half later) yen weakness at that time... Too bad they couldn't do us a big favor and tell us when it was going on!

Well... The Portugal debt rating cut by Moodys did one thing other than apply pressure to the euro this morning... It lit a fire under Gold, and got it back above $1,200 after the shiny metal had slipped below the $1,200 figure for most of yesterday.

Then there was this... Want a good indicator as to why banks aren't lending money these days? I saw this on YAHOO Finance... "Figures provided by FICO Inc. show that 25.5% of consumers -- nearly 43.4 million people -- now have a credit score of 599 or below, marking them as poor risks for lenders."

Chuck again... You know, that all these problems with lost jobs, and people living beyond their means is finally catching up... From here on out it's unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use, when they have credit scores below the "Mendoza Line" for lending...

To recap... Currencies are softer overall this morning, although the euro is trading bang on yesterday morning's level, even in the face of a bad print on Business Confidence from ZEW. Aussie and Kiwi are softer, as people continue to get the terms "collapsed" and "moderated" confused for China's economy. And the loonie breaks its 3-day rally giving investors a cheaper level to buy today.

Currencies today 7/13/10: American Style: A$ .8750, kiwi .7115, C$ .9680, euro 1.2585, sterling 1.5090, Swiss .9425, ... European Style: rand 7.5785, krone 6.3360, SEK 7.4910, forint 221, zloty 3.24, koruna 20.1425, RUB 30.75, yen 88.30, sing 1.3815, HKD 7.7750, INR 46.77, China 6.7720, pesos 12.79, BRL 1.76, dollar index 84.16, Oil $75.30, 10-year 3.06%, Silver $18.01, and Gold... $1,207.00

That's it for today... The Home Run Derby started quite slowly last night, but finally got around to heating up... The All-Star Game is tonight... I was so luck last year to be able to attend the festivities surrounding the All-Star Game, in St. Louis, last year... I'll always remember taking by boys to the Game... OK... Like I said above, I have to go see the "eye guy" this morning for "an adjustment" This is not a pleasant thing folks, but I'll get through it, and be back tomorrow with my usual you know what and vinegar! Now, I can go back to bed! HA! Yeah, like that helped last night! The day will get better... I hope you have a Terrific Tuesday!

Chuck Butler
EverBank World Markets

Posted 07-13-2010 9:10 AM by Chuck Butler
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