German GDP Surges Higher!
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In This Issue..

* Germany powers Eurozone growth...

* Retail Sales today...

* NZ Retail Sales surge!

* Gold rallies $16!

And Now... Today's Pfennig!

German GDP Surges Higher!

Good day... And a Happy Friday to one and all! It's a Friday the 13th... Now, I don't normally get into all that stuff, but it's fun to talk about! So be careful out there today! Now, with all the depressing stuff in the economy, jobs, investments, etc. I thought that if we decided right out of the starters blocks this morning that we would do our very best to make it a Fantastico Friday, that we could forget about all that stuff... In fact, I'm going to make this a no-bad economy, spin zone today... HA!

Front and Center this morning, there's good news from Germany, the Eurozone's largest economy... Germany's economy grew in the 2nd QTR at the fastest pace since the country's reunification! Ahem... That was 2 decades ago folks! Now... I've seen two different accounts of this report... Bloomberg says it's the fastest pace since the country's reunification, and the Wall Street Journal says it's the fastest pace in 4 years... Come on, can't you dudes get this straightened out?

So... Let's just say, that Germany's economy grew at a fast pace! What was it? Oh, I guess it would help if I told you what the number was, duh... German GDP surged ( I like that word, surged) 2.2% from the 1st QTR, and because Germany is the Eurozone's largest economy, this means the Eurozone economy as a whole grew .7%...

Now... Let me explain what's going on here... Germany is a manufacturing giant of a country, and in the 2nd QTR saw continued euro weakness, thus fueling exports of manufactured items... Now, some of you astute students (HA!) might say, but isn't this the same thing the U.S. has tried to do with the weak dollar? And you would be correct! However, as I've told you over and over again for years now... The U.S. doesn't make things any longer, we became a "servicing" country...

OK, Chuck, that bordered on bad economic news from the U.S., you've got to steer clear of that today...

So... We're half way through the Pfennig this morning, and I haven't mentioned the currencies... I know, I know, this is what you pay for... The currency news! Oh wait, the letter is free! I guess you get what you pay for, eh? HAHAHAHAHA HAHAHAHA!

Any way... The euro, which should have taken that GDP news and run off a nice currency rally VS the dollar, is backing down against the dollar again this morning... When I came in, the euro was 1.2840 VS the dollar, but, 1-hour later, the single unit is hanging on to the 1.28 handle by the skin of its teeth...

Just shows to go you that when the flight to safety is in full force, there's no ability for the risk assets, like currencies to rally even with good economic data!

Shoot Rudy, even France's economy showed some good growth (+.6%)... Remember, this is a no bad economic news spin day!

In New Zealand overnight, Retail Sales printed stronger than expected in June... N.Z. Retail Sales rose .9% in June, which erased the -.2% print in May... The N.Z. dollar / kiwi rallied on this data print, but is beginning to show signs of running out of steam...

Speaking of Retail Sales... That's the Big Kahuna data print from the data cupboard here in the U.S. today. I told you earlier in the week that the BHI suggested a somewhat better print than the recent disappointing monthly reports... But that's not to say that Retail Sales here in the U.S. are rebounding... I couldn't say that, for two reasons... 1. it wouldn't be the truth, and 2. it would be a bad economic story...

Actually, I'm hoping for a very strong Retail Sales figure this morning, so that the dark clouds hanging over the economy like the Sword of Damocles will lighten up...

In Japan, the strong yen, recall I told you yesterday that the yen had traded at a 15-year high VS the dollar on Wednesday, is really beginning to give Japanese officials a rash... You see, Japan needs a cheap yen (again here we are with the manufacturing countries wanting their currency weak to have cheap exports) and they sure aren't seeing a cheap yen these days... The Economist magazine, one of my fave reads, says that the in the race to a cheap currency, the winner is.... The dollar!

You see, the dollar just doesn't get any breaks... When the euro was 1.50, the dollar was getting hammered by the Eurozone exports, and now that the euro has backed off, the yen takes the euro's place as the chief hammer banging on the dollar...

Remember when the Swiss National Bank (SNB) was trying to keep the franc weak VS the euro, as the euro fell against most currencies, including the franc? I would tell you about the SNB intervention, and shake my head wondering just what the SNB was thinking... Well, the final results are in on the SNB intervention, and I'm sure the SNB would rather that people didn't know these results... The SNB lost $4 Billion in their effort to keep the franc weak VS the euro... And in the end... The franc is still strong VS the euro! When will they ever learn? When, will, they, ever... Learn?

Ok... I'm going to have to spin this the right way to keep with the spirit of today's challenge... The Weekly Initial Jobless Claims yesterday printed at 484,000... But that was only 2,000 more than the previous week, so in the way the news media would report it would be something like this... "Initial Jobless Claims Inch Higher" and they would forget about the fact that this number keeps "inching" toward 500,000... The Continuing Claims number was just as bad... But, in keeping with our challenge today, think about it differently than as "bad"... Think about it as pretty soon these people on Continuing Claims will have their benefits run out, and that number will come down...

And here's some good news for the U.S... (right, and I've got some swamp land for sale!) The Average rate on a 30-year mortgage has dropped to the lowest level since Freddie Mac began collecting data in 1971... Oh! 4.44% is the rate... Yes, for people that are home buyers with the ability to repay their loan, that's a GREAT RATE! But I'm afraid that these low rates are going to spur another round of the great housing bubble... The only thing keeping that from happening is the 22% unemployment rate in the U.S.... So, in a way, that's good news, in that the awful labor picture is keeping us from another housing bubble!

This no bad economic news spin zone day is very difficult, folks... And from this point on, I'm not sure I can keep up with this, for, I really want to rip into something or someone right now, but that will have to wait for another day!

Then there was this... OK... I saw a blurb on one of our TV's here yesterday, that said the U.S. would experience the largest tax increase in the history of our nation when the Bush tax cuts expired in January. This did not surprise me, for both the Big Boss Frank Trotter and your Pfennig writer, have been telling people in presentations for 10 years now, that taxes or revenue for the Gov't if you will, was going to have to rise to help finance the deficit... That's one of the reasons I've banged on the rising deficit drum for a decade now... For who wants higher taxes? Not me! And wait until you see what tax increase was in the Health Care Bill... I won't go into that now, but, as the speaker said, "we'll just have to pass it to see what's in it", oh, those words are coming so true... But... No one, can say I didn't warn them... And they said, "deficits don't matter"... Well... When we go to figure out our taxes in the future, we'll become enraged at those words...

But that's not all folks! Rising Taxes are not going to finance the deficit alone, no matter what rate the Gov't decides to charge us... It will take spending cuts, tax increases, and... A cheaper dollar... All those things together might... Just might finance or at least pay the servicing (interest) on the debt we've issued!

Sorry to be a Donald Downer on that last piece, but, when I hear people say "I didn't know taxes were going higher" I just cringe...

OH! And to lift our spirits higher! Gold gained $16 yesterday and hasn't given any of it back (right now) overnight! For once, if there's a flight to safety, I would think that Gold would be the destination, and certainly not dollars, Treasuries, or yen!

To recap... Germany's 2nd QTR GDP grew at the fastest pace in some time (2.2%) and brought the Eurozone GDP to .7%... The euro rallied briefly after the news, but is back to getting sold now, as the "flight to safety" continues. U.S. Retail Sales is the Big Kahuna of data prints today, and I expect the data to be better than the most recent disappointing months... New Zealand Retail Sales were stronger than expected, allowing kiwi to run a bit VS the dollar.

Currencies today 8/13/10: American Style: A$.8965, kiwi .71, C$ .9605, euro 1.2810, sterling 1.56, Swiss .95, ... European Style: rand 7.2945, krone 6.19, SEK 7.4150, forint 219.20, zloty 3.1290, koruna 19.44, RUB 30.54, yen 85.75, sing 1.3625, HKD 7.7715, INR 46.76, China 6.7958, pesos 12.75, BRL 1.7690, dollar index 82.65, Oil $75.90, 10-year 2.71%, Silver $18.10, and Gold... $1,215.00

That's it for today... The end of a very long and hot week... Had my monthly blood check yesterday... All's good... Our Rams begin their preseason tomorrow night... They've been a sorry excuse for a pro team the past few years, but the season begins anew, so good luck to the Rams! It's a Cards-Cubs weekend here in St. Louis, those are special games... But I won't be anywhere near the ball park, as it is too darn hot! I'll watch or listen to the games from the comfort of my recliner, in the A/C! talk about going "soft"! My old football coach always said we would end up on the couch eating chocolate bon-bons! HA! OK... Try to keep cool out there this weekend... And have a Fantastico Friday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 08-13-2010 11:00 AM by Chuck Butler