Shutdown Averted.
Daily Pfennig

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In This Issue.

* Dollar gets some love on Gov't budget deal.

* Canadian employers opt for full-time employment!

* China posts a trade deficit in first quarter.

* Silver trades past $41!

And, Now, Today's Pfennig For Your Thoughts!

Shutdown Averted.

Good day. And a Marvelous Monday to you! What a weekend! The Gov't averted a shutdown, the Cardinal's bats finally came alive, the Blues finished out their season with a win, Little Everett was baptized, and I had a very nasty fall, injuring myself badly. I'm not sure why I'm here in the saddle this morning, but. I remember my dad, who suffered most of his life with a bad back, getting up and going to work to drive his truck, every day, and so. I'm here.

Well. as I said above, the Gov't did avert a shutdown late Friday night. I'm going to tick a few people off with this statement, but, Oh well. On Friday, the Gov't agencies had to make up lists of "essential workers" and "non-essential workers". Wanna reduce the Gov't debt? If those people are "non-essential" then. Well, why are taxpayers paying for "non-essential" workers?

OK. enough of that! The news of a last minute deal to provide a stop-gap budget for the rest of this year, was enough to give the dollar some love in the Asian markets overnight. Not a lot of love, just "some love". Gold has backed off its lofty levels of Friday, but Silver has pushed even higher, and is now trading with a 41-dollar handle!

The overnight trading range for the currencies was very tight. For instance, as of right now, the euro is only off 1/4- cent, and the Aussie dollar (A$) is softer this morning about the same amount. But, like I said above, Gold has backed off by $7.

The dollar index is 74.93 this morning. I thought I would go back to the archives and dust this off what I wrote in the Pfennig on January 18, 2011. "OK... back to the currencies.... Well, I looked at the dollar index this morning, just to see where it was, and I noticed that it was 78.85... Now... I'm not a huge follower of the dollar index, as it stands, but... a lot of markets people use it as their tool to determine the strength of the dollar... Well... folks, we could be at a crossroads, and the dollar may be sinking down... the dollar index has fallen to this level of 78.85 3 times since then end of November... could this be the time it continues through this level, and brings a ton of markets people that want to sell the dollar, but are waiting for a sign of real conviction, into the arena to sell? Could be, folks... "

Well. that's a huge move from 78.85 to 74.93, in 3 months time. Apparently, it was the time that brought a ton of markets people that wanted to sell the dollar, but were waiting for a sign of real conviction to the table.

There was another earthquake and then some very strong aftershocks in Japan this weekend. One would think that all this stuff would bring out the risk aversion people. But so far, only a few sightings. The Global growth train remains on the tracks. For instance. this past weekend, China posted manufacturing data that showed that manufacturing had moderated, but still grew. One thing that did catch my eye this weekend. China posted a trade deficit for the entire quarter, the first time that has happened in 7 years!

In Canada. something good happened, economy wise. Canadian companies changed tactics in March hiring 90,600 full-time workers but cutting 92,100 part-time jobs, leaving the overall level of employment down 1,500 in the month. Full-time employment had been the one thing missing from the Canadian economic recovery, and I personally believe that this is a very good sign for Canada. The Employers felt good enough about the future, that they made the jobs, Full-time.

With the price of Oil at $111, the Canadian dollar / loonie is well underpinned, and now that the economy is showing signs of sustained growth, one has to wonder when the Bank of Canada (BOC) will be back to the rate hike table. The BOC will meet this week to discuss rates, but I don't see them hiking rates this month. But, unless the trap door is sprung on Canada's recovery, I fully expect the BOC to hike rates in June.

And, I tell you that, because, I've made such a BIG deal lately about the return of interest rate differentials as a key value point for currencies. Canada already has a positive rate differential to the U.S. and Japan, I do believe that in June, we'll see that differential widen in the loonie's favor.

The data cupboard here in the U.S. is being restocked with data today, that will begin to print tomorrow.. First, we'll get the Trade Balance (read deficit), and the Monthly Budget statement (read deficit). Wednesday, we'll see Retail Sales for March, which I can vouch for many purchases being made, and therefore the BHI (Butler Household Index) is indicating a moderate Retail sales figure. The rising costs of Oil, really throws a spanner in the works here, but I think Retail Sales will be fine.

Caroline Baum, one of my fave writers, has her latest piece on the Bloomberg this morning, and she's talking about how Two Central Bankers, Bernanke and Trichet, look at the same underlying fundamentals, and reach two different conclusions, and take two different policy actions.

Yes. I talked about this difference just last week. The European Central Bank (ECB) and Trichet, see inflation, and are mandated to provide price stability. The Fed Reserve and Bernanke, see inflation and call it "transitory", don't provide price stability, and go ahead and carry out their Quantitative Easing.

OK. so, the U.S averted a shutdown. Well, they had better do something about the deficit spending, or one of these days they'll be shut down for good! Get this. The debt was $14.2101 trillion on March 30, according to the Bureau of the Public Debt, and $14.2642 on April 7. Folks. that's an increase in 1 week's time of $54 Billion!

Since the beginning of the fiscal year on Oct. 1, 2010, the national debt has increased by $653.4 billion! So. to me, these shenanigans to pass a budget are just that. shenanigans. And once the debt limit is increased, and you know it will be, it just means that there will have to be more Treasuries issued. I shake my head in disgust.

Then there was this. We were saddened to be informed Friday that Jack Pugsley had died. Jack's career in observing and writing about the world of investments and the impact government has on us all was vast. He was a keen observer and analyst of the market, a bestselling author, and a frequent and sought after speaker at investment conferences worldwide. He founded the Sovereign Society with a vision to provide a forum for people to learn about both financial and personal freedom. He was an intensely moral person who also spoke passionately about freedom - what it meant to him and how he felt we should all work to change the path of government intrusion in our lives. Jack was a good friend for many years and we are already missing him.

To recap. The Gov't averted a shutdown, and that news has given the dollar some love overnight and into the European session, but the trading range has been quite tight. Canada's employers have switched from part-time workers to full-time workers, a good sign for the economy. China posted a 1st QTR trade deficit, the first in 7 years, and Silver is trading with a 41-dollar handle!

Currencies today 4/11/11. American Style: A$ $1.0555, kiwi .7840, C$ $1.0465, euro 1.4465, sterling 1.6360, Swiss $1.10, . European Style: rand 6.6540, krone 5.4050, SEK 6.2250, forint 183.30, zloty 2.7460, koruna 16.87, RUB 28.01, yen 84.75, sing 1.2555, HKD 7.7705, INR 44.34, China 6.5381, pesos 11.73, BRL 1.5685, dollar index 74.93, Oil $111.85, 10-year 3.58%, Silver $41.43, and Gold. $1,470.20

That's it for today. yes. so. more on the fall. it was the first time that my depth perception did me wrong, and I fell going head first, and crashing into a wooden church pew. (yes, this happened in church for all of you thinking that I had probably had too much to drink!) I am one sore dude, for sure! And Little Everett go baptized this weekend (which is why I was in a church!) I think I owe the church for a broken pew! Alex's water polo team won their JV tournament this weekend, with Alex scoring two goals. It's a stormy, rainy Monday, but, it's still Marvelous, and I hope you get to enjoy a Marvelous Monday!

Chuck Butler


EverBank World Markets



Posted 04-11-2011 10:27 AM by Chuck Butler