A Greek Resolution (for now)?
Daily Pfennig

Blog Subscription Form

  • Email Notifications


.........But First, A Word From Our Sponsor..........

Now get 5 metals & forget the market risk(1)

With the all new MarketSafe® Timeless Metals CD, we've brought together 5 of the world's most valued metals-gold, silver, platinum, copper and nickel-into one CD. Now through August 18, 2011, you have the unique opportunity to seek gains from this robust and diverse collection of metals without any risk to your deposited principal.(1,2)

Returns based on the performance of these 5 equally weighted metals:

*If prices increase for these metals, earn a market upside payment plus all principal(1) *If prices decrease for these metals, receive 100% of deposited principal(2)

Min. deposit: $1,500

Account fees: None

FDIC insured: Yes(2)

IRA eligible: Yes

Don't miss the August 18, 2011 funding deadline. Review important disclosures and apply today at https://www.everbank.com/personal/timeless-metals-cd.aspx?referid=11808

©2011 EverBank. All rights reserved. 11AGM0013.1 EverBank is an Equal Housing Lender and Member FDIC ......................................................

In This Issue.

* Euro heals some.

* Merkel & Sarkozy meet.

* Oil price drops $7 this week!

* Big Al in the news.

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

A Greek Resolution (for now)?

Good day. And a Happy Friday to one and all! The end of a very long week for yours truly. and was I sure glad this morning when waking up, I realized it was the last day this week that I had to get up so early! YAHOO! So. given that, and the fact that the currencies healed a bit yesterday and this morning, qualifies this as a Fantastico Friday! Let's hope it fills the bill!

Front and Center this morning. There was a story that hit the newswires in the European Session that claimed the bailout of 150 Billion euros was close to being agreed on by all parties. The euro shot up on this news, and is back to 1.42, after spending most of yesterday with a 1.40 handle, and looking very much in need of some medicine. Well, that medicine came in the form of an unsubstantiated newswire story. I say that because, there is no proof that this is the case. So. don't get too comfy, cozy, with the 1.42 handle in euros. The rug could be pulled on that rally in a New York Minute.

German Chancellor Merkel and French President Sarkozy, are meeting today to iron out the differences that Germany and France have on how to handle the Greek debt. The Germans believe that bond holders need to take the brunt of the losses, while France believes in spreading the damage out. I personally side with the Germans on this. The bond holders are what you consider to be "Big Boys", and knew what they were buying. But in the end, I'm afraid that the Germans will have to "give in" and compromise to get this all done now.

The euro rally has caught the overnight market currencies in Asia and the South Pacific off guard, as they had closed shop a long time ago and headed to the pubs. So, the reaction from currencies like Singapore, and Aussie dollars (A$), is muted right now. Their next chance for lift-off will be when the U.S. traders arrive at their desks and see what's been going on overnight.

The talking heads on TV this morning, are still focusing on a total Greek default. With smiles on their faces. I don't think they would have those same smiles, if they knew that a Greek default would be bad for U.S. institutions that sold debt insurance to those bond holders. I told you on Monday about this. Apparently, Eurozone banks own 70% of the Greek Debt (Bonds). which would be very damaging to the Eurozone, and euro for that matter. But. 50% of that exposure is insured against default? And who issued that insurance? U.S. institutions. So, for everyone here in the U.S. that's rooting for Greece to fail, so you can then pound your chest and say "see I told you the Eurozone would collapse", you had better put that insurance news in your pipe and smoke it.

I was checking all the assets this morning to get a feel for the market direction, and was shocked to see the price of Oil, which actually has recovered $1 as I write. Oil's price has dropped $7 this week (was $8 earlier this morning!), and is trading at $93. The only thing I see on this fall are comments about the price of Oil falling on Greek debt problems. So. the Greek debt problems are being blamed for everything? I find this kind of ridiculous. Greece's debt problems are a nothing to ignore, or deal with in a mamby pamby style. But responsible for the price of Oil? OH, I guess if you want to follow the yellow brick road and say that a Greek default could disrupt global growth, and a disruption of global growth would affect gas buying, and so on and so on.

This selloff of Oil, looks technical to me. for I noticed that when it fell to $92, it bounced of the level, and after checking the charts, $92 is the 200 day moving average for Oil. Looks like a technical selloff to me, folks. that's all. noting more, nothing less.

So. with the price of Oil getting taken to the woodshed, the currencies of Norway, Canada, Brazil, Russia, and even Mexico, are at the bottom of the best performers list this morning. But, if the euro has some legs to this move to 1.42, and the Merkel / Sarkozy meeting goes well, and the stars align, and the karma flows, these currencies will grab on to the euro's coattails and go for a ride.

I see where Greek Prime Minister Papandreou reshuffled his cabinet this morning. Reminds me of the that rearranged the deck chairs on the Titanic! But, when the ship is going down, you try everything you can to stop the sinking.

And I also wee where Big Al Greenspan, and I can't go into my usual tirade on Big Al, because. You see, it's the new "kinder, gentler me. Any way. Big Al speaking on Charlie Rose's show, said that, "a default by Greece is "almost certain" and could help drive the U.S. economy into recession." I guess, Big Al got the memo on the insurance sold on the Greek bonds, eh?

But. I have a correction to something he said there. he said the U.S. economy would go into recession.. Ahem. I guess Technically, old school, talking, he's correct. But in Chuck's world of economics, or A.K.A. The Real World. I don't care what the NBER said about us coming out of recession long ago. I contend that we're in a depression, and have been since 2008. Again, let me remind you of something I told you a month ago. The Great Depression soup lines have been replaced with checks in the mail. We send people food stamps and checks in the mail now, instead of making them stand in line for the assistance. Unemployment at 23%, 44 million people on food stamps, interest rates at near zero, and the Central Bank doing everything they can think of to stimulate the economy. Depression.

Ok. I'm watching the euro continue to add to gains this morning, as I write, gaining 3/4-of a cent, while I was typing away here. So. at this point, no one in the Eurozone has claimed that the newswire story had no basis of truth to it..

On a sidebar here. I'm listening to an old Chicago song, called "Dialogue" where two young men (at that time in the early 70's) are talking, but it's as if the song was made today, as one young man says to the other. "Don't it make you angry, when a war is dragging on?" And the other answers. "Well I hope the President knows what he's into, I don't know, Ooh, I just don't know". WOW! That hit me like a ton of bricks. talk about history repeating itself!

Ok. back to the risk assets. Gold & Silver just haven't been able to catch a bid lately. almost every day this week, Gold rallies mid-day, and then sells off later in the day. I'm not even going to carry on about the "funny business" that goes on with the metals day-in and day-out. No, I'm just going to say that for the past 9 years, every time Gold & Silver seem to be about to give up the ghost on this bull market run, they turn around, and when they do. they soar! So. either this is going to be another of those moves, or it's the end of the line.

You know me. I'm not buying the end of the line for the bull market in commodities. If I've said this once in the past 6 years, I've said it 2 -dozen times. Our friend, and well respected analyst, investor, and author, Jim Rogers told us in his book "Hot Commodities" that going back in time, that bull markets for commodities lasted between 17 and 22 years. This Bull Market for commodities is barely a decade old.

Ok. the data cupboard yesterday here in the U.S. showed us that the Weekly Initial Jobless Claims slipped lower, but remained well above 400,000 for the 10th consecutive week. And then some good news, I think. Privately-owned housing starts in the U.S. rose 3.5% in May to an annualized pace of 560K units, retracing a portion of April's unexpected 8.8% drop to 541K (previously reported 523K). The increase in new home construction activity in May was better than market expectations for an increase in the level of starts to 545K.

I'm told though. that the residential building is being propped up by multi-unit components. Apartment housing. A sign of the times, I guess. But it was good to see the 8.8% drop in April reversed somewhat.

Today, we get to look to the future a bit, when the Leading Indicators data prints. Last month it printed at negative -.3%... We'll also see the color of the latest U. of Michigan Consumer Confidence report, which I would be surprised to see moving higher. Of course, these Confidence surveys always get my blood pressure rising, because I wonder who they are surveying? The Polly Anna's, singing about seashells and balloons, I guess.

If they "asked me". boy would they get an earful! That is as long as they didn't ask me on the street, or called me at home, or at work. Wait! Chuck, how are they going to survey you if you don't want them to contact you? Ahhh grasshopper, it's better this way, so I can complain about it, and not participate! HAHAHAHA!

Well. next week should be quite interesting. We have the Eurozone finance ministers meeting, and the FOMC (Fed Reserve) Meeting on Wednesday. This is the meeting where all the collective "all clear horns that have been sounded by the Fed Heads this past month" get gathered and put into one Big All Clear Horn that will be sounded, with the announcement that QE2 has ended. I think the markets have already begun to trade this idea, as one Fed Head after another made comments about ending the stimulus they have provided for the market.

See. the kinder, gentler, me isn't even going to go down the road that leads to me saying dastardly things about Quantitative Easing, and question why it was done. TWICE! Ala Japan. You know, I've made that comparison of the economies of the U.S. and Japan for about 7 years now. So, people ask me how I saw that the Fed was going to do more stimulus last fall before anyone else did. And I say. "I've seen it all before. all this went on in Japan in the 90's and earlier this decade".

To recap. The dollar rally that took no prisoners on Wednesday, was held in check yesterday, with some healing in the currencies. Overnight though, a newswire story claimed that a 150 Billion euro package was a done deal for Greece, and the euro has rebounded about 1% this morning. Merkel and Sarkozy are also meeting, which hopefully they work out their disagreement on how to hand Greece. The price of Oil has dropped $7 this week, and the petrol currencies of: Norway, Canada, Brazil, Russia, and Mexico, are all a the bottom of the top performers list this morning.

Currencies today 6/17/11. American Style: A$ $1.0615, kiwi .8080, C$ $1.0215, euro 1.4275, sterling 1.6175, Swiss $1.18, . European Style: rand 6.80, krone 5.51, SEK 6.4350, forint 187.50, zloty 2.7815, koruna 16.8915, RUB 28.06, yen 80.25, sing 1.2350, HKD 7.7965, INR 44.86, China 6.4744, pesos 11.90, BRL 1.6025, dollar index 75.15, Oil $93, 10-year 2.95%, Silver $ 35.40, and Gold. $1,528.50, and with it being Friday, let's take a peek at the debt clock here: www.usdebtclock.org/index.html

That's it for today. Tonight, we have our office outing to Busch Stadium for a Cardinals game. Always fun, but, we've rarely seen a winner. But that all changes tonight! Alex got home from wrestling camp, and looked beat up. with mat burns on his face. We went out for pizza. It's been awhile since just the two of us went out to eat. Alex turns 16 in 11 days. I still think of how he used to sit on my lap and "help me write the Pfennig when he was 3.. his contribution looked like this: lhj0894&$hg but it was fun. That makes me feel old. again! OK.. Sunday is Father's Day. if your father is still around, give him a hug, yes guys, it's OK! I'll spend the day with my kids, and grandkids. looking forward to it! And with that. I thank you for reading the Pfennig, I hope your Friday is Fantastico, and the Father's Day weekend is grand!

Chuck Butler


EverBank World Markets



Posted 06-17-2011 2:46 PM by Chuck Butler
Filed under: , , ,