BRICS Growing In Stature.
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In This Issue.

* Dollar rallies on the too far, too fast theme.

* Retail Sales or so-so for March.

* MAS will faster appreciation for Sing dollar.

* Indians switching to Silver!

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

BRICS Growing In Stature.

Good day. And a Tub Thumpin' Thursday to you! After two weeks of swinging feeble bats, my beloved Cardinals found their stroke in the desert. So, things are looking up for the redbirds. Not so, for the Western economies, if the BRIC countries have their way. A couple of years ago, when we offered a BRIC MarketSafe CD, I would talk to groups of people, and warn them that the BRICs not only hold the reserves of the world, but have a large percentage of the World's population, and they would love nothing more than to be looked at as the "leaders of the world". OK. There's a BRIC Conference going on, let's see what's on their minds.

But first, let's look at the markets, specifically those of currencies and metals. Well, that bias to sell dollars that I talked about yesterday, didn't last too long into the morning, and by noon, the currencies were weaker. Gold & Silver remained bid, but not well bid, as they had been in the early morning. In the overnight markets, the currencies have been all over the place. the trading ranges have been blown out, and one minute you see the currencies rally, and the next you see them sell off. it's been pretty amazing watching this since I arrived here and climbed into the saddle this morning.

And. we got to see the color of the President's plan to cut the deficit. The President unveiled a framework Wednesday to reduce borrowing over the next 12 years by $4 Trillion - a goal that falls short of targets set by his deficit commission and House Republicans - and called for a new congressional commission to help develop a plan to get there.

In his most ambitious effort to claim the mantle of deficit cutter, Obama proposed sharp new cuts to domestic and military spending, and an overhaul of the tax code that would raise fresh revenue. But he steered clear of fundamental changes to Medicare, Medicaid and Social Security - the primary drivers of future spending.

So. we get another "commission" to develop the plan.. What happened to the previous commission? Hey, as I shrug my shoulders, at least someone in Washington D.C. is looking at this ever exploding deficit, and thinking that something should be done about it. And the overhaul of the tax code? Oh brother! Did he really say that "secretly we all have a secret desire to pay more taxes"? Can I answer that one? NOT!

In the case of the deficit, personally, I believe it needs to start at the annual Budget. When you can tame that monster, then it will flow to the National deficit. But, that's just me, thinking logically. because. if you don't tame the monster at the Budget level, you won't make the necessary cuts on the National debt level. it's that simple. or, at least that's how I see it.

OK. let's get to the BRIC's. and see what's up with these wild and crazy guys! (can you see Steve Martin and Dan Akroyd with their Wild and Crazy Americans skit right now?)

Well. first of all, the BRIC countries (Brazil, Russia, India & China) have added a new member, and now they are the BRICS (no apostrophe) with the "S" representing South Africa. And they are pounding their chests with new data that shows that the BRICS' combined economies will eclipse the U.S. economy in 2014, and by 2016, they will be putting a 100 miles of desert between their economies and that of the U.S. ($21 Trillion, VS $18.8 Trillion). of course those are projected numbers, so there could be some changes.

But nonetheless, these countries are the straws that stir the global growth drink. Their problem though is how do they act as a group, when they have very different political systems, and economies? But for now the BRICS are feeling strong, and making statements like: That the BRICS want to put an end to the dominance of the Western Economies. and that "the BRICS Oppose use of force in Libya" Just shows to me that they are feeling like they are strong enough now to direct things. I don't think that the time is here.

The most important thing about the strength of the BRICS is that they will have a lot of pull in the future, to demand what currency is considered the reserve currency of the world. Think about that for a minute folks. I don't know about you, but it puts shivers down my spine!

OK. let's talk about something else besides BRICS! Let's see.. Oh! Here we go, Hey! You're going to like this one kids. European Central Bank (ECB) Board member Bini Smaghi was talking last night and said, that further ECB rate hikes would depend on "the economy and inflation". He went on to note that, in trade-weighted terms, the euro is roughly in line with its level in 2005 and in real effective terms is still 10% below the level at that time. Personally, I think that we're hearing Central Bank parlance for: the thought from this ECB member that the euro doesn't enter into the decision for rate moves.

That's a good thing to know up front, because with the euro above 1.40 (currently 1.44), it's above the ECB's comfort level for the currency, but that did not enter into the discussion of the recent rate hike... I like knowing that, for when we get to June or July, and the ECB is greasing the tracks of another rate hike, if the euro is stronger than it is now, we don't have to worry about that getting in the way!

And, there was an interesting thing that happened overnight in Asia... The Monetary Authority of Singapore (MAS) announced that they would re-center the currency band , and allow faster appreciation of the Singapore dollar, to help combat inflation. This was in reaction to the news that the Singapore economy grew at an annualized rate of +23.5%, more than double the forecasts for +11.4% growth! WOW! The Sing dollar rallied on the announcements...

For some time now, I've stated several times that at this time and place, with the Chinese renminbi still manipulated every day, and traded on a non-deliverable forward, that I prefer the Sing dollar, as a proxy for Chinese renminbi appreciation... These Asian countries will all keep their currencies going in the same direction, as they are all in competition for exports... And the MAS does something that most countries don't have a clue about, and that is... Using the Sing dollar's strength to help offset inflation...

I also saw a blurb go across the screens yesterday regarding Indian Investors and Silver. According to the FT, Indian investors, long known for their enthusiasm for Gold, are switching to Silver bullion, as they expect it to generate higher returns. I wonder if they read that in the Pfennig, or the NewsMax story that I appeared in claiming that Silver was the new Gold? HA!

This morning, the U.S. data cupboard will print March PPI, which is expected to continue to show increases in wholesale inflation. Yesterday, the data cupboard printed March Retail Sales, which were less than forecast at .4%, less autos they were .8%... a major contributor to the sales were gas receipts. Which is not a good thing for our economy, as we're spending our disposable income on gas, which lasts about a week in the gas tank, and then is gone, used up. and all the other things that consumers would normally be spending their hard earned cash on, get passed by, because there's nothing left for them.

Speaking of gas. Have you heard of the new "gas coupon". You probably already have a few of them in your pocket, and didn't realize that they were "gas coupons". Look again, they have President Lincoln on the face. OOPS! Those are $5 bills! HA!

There will be some Fed Heads on the speaking circuit today. They are all Hawks, so look for more talk about ending QE2 early. It's not going to happen, but they can talk about it to make themselves feel good. Sort of like buying a HYBRID SUV. HA!

Then there was this. from Bill Bonner. "The Centre for Economics and Business Research (CEBR) said soaring inflation coupled with low pay rises means household peacetime disposable income is at its lowest since 1921.

Rising food, clothing and energy prices mean the average British family will have £910 less to spend this year than they did in 2009.

The CEBR calculates that household disposable income will fall by 2pc this year, more than double last year's fall of 0.8pc and the biggest drop since the savage 1919 to 1921 post-First World War recession.

It forecasts inflation will average 3.9pc in 2011, its highest since 1992, as January's increase in VAT from 17.5pc to 20pc and the rising cost of oil and other commodities continue to drive up prices.

At the same time, salaries will rise just 1.9pc as unemployment remains high and the public sector makes cutbacks.

Chuck again. Geez, Louise. this is not getting any better is it?

To recap. The bias to sell dollars was taken off the table yesterday mid-morning. I think it's more of a reaction to the fact that the currencies moved too far, too fast, and needed to retrace some steps. The President announced a plan to reduce the Deficit by $4 Trillion over 12 years. UGH! The BRIC countries added an "S" to make BRICS, with the "S" representing South Africa. The BRICS just concluded a meeting of the countries, and they are feeling their oats a bit, making statements about the West, etc. Indians are opting for Silver this year, instead of Gold, and the MAS will allow faster appreciation of the Singapore dollar after Singapore's economy grew +23%!

Currencies today 4/14/11. American Style: A$ $1.0480, kiwi .7880, C$ $1.0350, euro 1.4365, sterling 1.63, Swiss $1.1185, . European Style: rand 6.8765, krone 5.4775, SEK 6.2875, forint 186, zloty 2.75, koruna 16.88, RUB 28.29, yen 83.15, sing 1.2520, HKD 7.7770, INR 44.50, China 6.5310, pesos 11.82, BRL 1.5860, dollar index 75.08, Oil $107.05, 10-year 3.45%, Silver $40.75, and Gold. $1,455.70

That's it for today. I'm sure we'll hear lots of debate in the coming days about deficit reduction, and good or bad, at least they're talking about it. But, you have to wonder. would they even be talking about it, had it not been for the Tea Parties making such a big hoopla over last year? That's both sides of the aisle, folks. OK.. I'm listening to Dan Fogelberg's, Scarecrow Dreams this morning. we lost Dan Fogelberg last year. The song is on the Netherlands Album, if you've never heard the songs on that album, you should. I see that some snow showers are in our future weather forecast for this weekend. Are you kidding me? It's the middle of April! UGH! I prefer to be outside when I can, and at this time of the year, sitting outside with my radio on the Cardinals' games is just right with me. Certainly can't do that when it's raining snow! Oh well, it is what it is, can't do a thing about it, so. go out there and have a Tub Thumpin Thursday!

Chuck Butler


EverBank World Markets



Posted 04-15-2011 10:29 AM by Chuck Butler
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