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In This Issue..

* A flat trading day in currencies...

* 473,000 newly unemployed last week...

* Kan ready to take "bold action"...

* Ludwig von Mises on a Friday!

And Now... Today's Pfennig!

2nd QTR GDP Today...

Good day... And a Happy Friday to one and all! The last weekend of August! Ty Keough receives the Silver Boot award in my little river town tonight, and other than that I plan on just relaxing, having ruined my last weekend with travel! It's absolutely a beautiful morning... Ahhh, I think I'll go outside for a while, and just smile... Ahhh, it's going to be a Fantastico Friday, I can feel it already!

OK... The currencies are trading in the same clothes as yesterday, it's almost like the movie Groundhog Day... For, the euro has performed the say way as the previous sessions... For instance, the euro rose up to 1.2765 yesterday, only to fall back to just above 1.27, and then overnight, like the previous night, the euro rose to 1.2740, only to see it fall back again...

Looks like the offset currency to the dollar (euro) is having a tough row to hoe getting past 1.27... And to tell you what I think, no wait, I'm doing that any way! But basically, this type of bumping up and down is fine with me, for to have the euro rise to 1.31 as fast as it did in July, is not good, as we've now seen... Too far, too fast, is not good for an asset... That is unless you are a trader, and bought at the low and sold at the high... But that's not what I'm all about, nor EverBank...

OK! I'm sure glad I didn't send anyone down the wrong road yesterday!

I have to say that I got a kick out of you!

I could go into that great song sung by Frank Sinatra, but...

I'll just say that a ton of readers sent me a note in regards to my "amended statement" Pfennig yesterday, and told me that, "We liked the first one better, it was more like reality!" or "Chuck, that was just a Freudian slip!"

So... It's all good... And I carry on, my wayward son!

The Initial Jobless Claims yesterday were being ballyhooed by the media for "falling to 473,000"... Again, get a grip media! Do you really believe that having 473,000 NEW people file for unemployment last week was a good thing? Sure it wasn't 504,000 like the previous week, but still 473,000 isn't anything to be happy about! Especially if you are one of those 473,000! Or one of the 1,465,000 that have filed in the first 3 weeks of August! UGH! That's nearly 4,700,000 this summer alone!

So... I guess, when the number falls by 31,000 it's something to feel good about, eh? But, I can't help wondering if this number won't keep falling, and not because things are getting better... There comes a time when a company can't cut any more employees or else fold... We could very well be at that time...

I totally dislike talking about unemployment... I was "retired" once (read unemployed) and I sure didn't like the feeling... But... It's a part of our economy, and thus part of the dollar's value...

A light bulb went on over my head yesterday, folks...

Now, recall, how I've said for over 1/2 year now that the FOMC would not be able to hike interest rates because of a number of things, including the fact that they owned Trillions of toxic waste mortgage bonds with adjustable rate mortgages... The FOMC told us when they took these into their books, that they would sell them in the market place when things calmed down... But... If the FOMC raised rates, those bonds would have more losses piled on them.

But, yesterday, the light bulb went on, and now I can see clearly now, the rain is gone! If the FOMC could keep rates at historic lows, then people would re-finance their homes at the lower rates... If the people re-financed, it would pay off the old loan and create a new one, thus paying off the old note that is a part of the bond!

Now, there are several reasons for rates being this low, for this long, eh? And... I have to think that the Fed Heads stumbled onto this scenario... I can't for the life of me think this was their intention... It's just one of those unintended consequences... And it's a good one, as far as removing the toxic waste from the FOMC's balance sheet... But what will the unintended consequences of keeping interest rates this low for this long be in future? I have a good guess... And I'm sure you do too, and... I'm sure it's the same guess!

So... FOMC Chairman, Big Ben Bernanke will kick off the Jackson Hole boondoggle for Central Bankers and economists, today... This should be interesting, because I'm sure Big Ben is going to be doing his best to tell the attendees that "his way" of guiding the economy is the best potion, and when ECB President, Trichet, gets up to talk, he'll be doing his best to tell the attendees that "his way" of guiding the economy is the best potion...

We could take a current report card and compare, right? The U.S. economy is heading downward, while the Eurozone economy is rising... The Fed is adding to its stimulus, while the ECB is looking to exit their stimulus. The U.S. is all about Government spending, while the Eurozone is adopting spending cut measures...

So... Which central bank would you pin your colors to the mast of?

And, right on time is the printing of U.S. 2nd QTR GDP today... I'm sure Big Ben will want to try to find a place to hide when that print happens, for like I said yesterday, I don't see U.S. 2nd QTR GDP anywhere near the preliminary print of 2.4%... I've said it would be below 2% and most likely around 1.5%... The summer months have been quite cruel on the U.S. economic data, and if the data hasn't sounded alarms for you yet, this GDP print will...

The question is... What will the markets take from the report? I mean, will they run and hide in the shadows of U.S. Treasuries? Or... Will they take the dollar to the woodshed? In the Old Days, good times I remember, fun days, filled with simple pleasures... The dollar would be taken to the woodshed... But these days, are different... And not fundamentally driven any longer... One day, we'll get back to fundamentals, but until then...

Ok... I'm looking for some slippage in Japanese yen, but just not seeing it... Last night, Japanese Prime Minister, Kan, said that he is, "willing to take BOLD action on currencies." Now, I know that the Japanese PM is not the Finance Ministry that makes the decisions on currency intervention, but this type of talk has got to go a long way toward fanning the flames of intervention, don't you think? But so far, no slippage in yen... Hmmm... I guess the markets are playing a game of currency chicken with Japanese officials...

Whenever the intervention flames get fanned in Japan, the Aussie dollar (A$) gets a little love... So, please, somebody in Japan, keep fanning! The A$ has seen its share of getting taken to the woodshed because of the "hung" election... Traders need something else to focus on besides the election thing.

And the price of Oil, which sunk like a rock in the past couple of weeks, looks to have found a bottom of $71, which it hit yesterday, and is back to $73 this morning... Wouldn't you know it? I haven't needed to get gas during the falling Oil price, but now that it's going back up, I'm about due for a fill-up! UGH! But, the real point here is that a rising Oil price, always helps boost the Canadian dollar / loonie, and the Norwegian krone.

And the price of Gold couldn't hold on to its 8-week highs yesterday, and Gold slipped about $5 on the day, and it's down another $5 this morning... I'm going to put this slippage in price down to profit taking... Yeah, that's it, that's the ticket! Seriously though, that's exactly what I believe went on with Gold the past two days... Profit taking...

So, apparently, these dudes and dudettes taking profits did not buy Gold as a hedge for their investment portfolio... Like you and your Pfennig writer did!

Speaking of taking profits... I sure hope all those people that rushed to Treasuries, are ready to get out and take profits, before the profits are wiped out! I just can't imagine the 10-year Treasury below 2.50%, or the 2-year below .50%... But that's where they are trading this morning, and any new rush to Treasuries because of the disappointing 2nd QTR GDP print will push these yields below those figures... (remember with bonds, yield and price move in opposite directions, so when the yield goes down, the price goes up, and vice versa)

Then there was this... I can't stop thinking about Big Ben and his speech today... I would have to think that the great Ludwig von Mises would be turning over in his grave at what Big Ben and his predecessor, Big Al Greenspan, have done... It was von Mises that observed that massive Central Bank Easing was invariably a form of cowardice that attempts to avoid the need to restructure debt or correct fiscal deficits, avoiding wiser but more difficult choices by destroying the value of the currency.

Think about that, noodle it, and then think about what's going on here...

To recap... The currencies duplicated the previous day and night's trading sessions, just like the movie Groundhog Day! 2nd QTR GDP prints today, and it will most likely show a huge downward revision to the preliminary estimate of 2.4%. How will the markets react to this is the question. And the Japanese PM, Kan, said he was ready to take "bold action" in the currencies, thus fanning the currency intervention flames... But nothing to report yet...

Currencies today 8/26/10: American Style: A$ .8890, kiwi .7060, C$ .9440, euro 1.2720, sterling 1.5520, Swiss .9760, ... European Style: rand 7.3830, krone 6.2735, SEK 7.3750, forint 224, zloty 3.1375, koruna 19.4560, RUB 30.69, yen 84.70, sing 1.3570, HKD 7.7795, INR 46.92, China 6.7977, pesos 13.10, BRL 1.7615, dollar index 82.89, Oil $73.29, 10-year 2.50%, Silver $19.03, and Gold... $1,238.20

That's it for today... Congratulations to Albert Pujols of the Cardinals, as he became a member of the 400 home runs club last night in Washington D.C. Unfortunately, the Cardinals lost again though! UGH! And Congratulations to Stan Kroenke, the new majority owner of the Rams! Only 1 week to go before College Football begins, with my beloved Missouri Tigers taking on Illinois here in St. Louis... And Good luck to Katherine Kuchem, the darling daughter of our Kristin Kuchem, who will see an orthopedic specialist about her broken hand / wrist today... And with that, I'll get out of your hair for today... I hope your Friday is Fantastico, because I truly intend to make mine Fantastico! Bye!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 08-27-2010 10:14 AM by Chuck Butler