Greece Needs To Jump Through Hoops!
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In This Issue.

* Euro euphoria from Friday, fades.

* Gold finally catches a bid.

* Oil price continues to drop.

* FOMC meeting week.

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

Greece Needs To Jump Through Hoops!

Good day. And a Marvelous Monday to you! Writing from the steamy, hot, no air moving, St. Louis office this morning. I contemplated staying home to write, but, Monday's are very busy, and I don't like getting a late start on Mondays. I trust your Father's Day weekend was grand. Mine was. more on that in the Big Finish. But for now, we have the currencies and whatever to talk about.

Well. all the euphoria on Friday that a Greek bailout deal had been struck, has fizzled out this morning. It seems as though, to get the money/ bailout, Greece has to jump through some hoops, and do some back-flips. The Eurozone finance chiefs want Greece to deliver a budget that has seen a ton of red lined items (spending cuts). And now, there's going to be a "confidence vote" in Greece, which means the current PM, Papandreou, is probably out, and a new person will step in, and deliver the budget.

You see. the thing that's in question right now, is the next tranche of payment on the original 110 Billion euro package that was done last year. That next trance of 12 Billion euros is due next month, without it, Greece defaults. So. you see it's not that different from what we have going on in this country.

The debt limit has been reached, and the lawmakers have an extension of time that they are working under to come up with a plan to raise the debt limit, if they don't. The U.S. defaults.

So. on Friday, the euro traded to 1.43, and had steadily climbed higher all day. And all the usual suspects, followed along, while Gold finally caught a bid, and climbed higher too! This morning, with the latest news on Greece now filtering through the markets, the euro has fallen about 1/2-cent, and Gold is off $2.

The price of Oil continues to weaken. I noticed that gas prices had dropped about 6-cents from Friday to Sunday. Of course I filled up on Friday! UGH! I told you on Friday, the petrol currencies of: Norway, Canada, Brazil, Russia, and Mexico are struggling to keep their heads above water. I noticed that one petrol currency that I had missed talking about was the British pound sterling. But not to worry, the pound is struggling too!

I was reading some yesterday morning, before going outside to get ready for the kids and grandkids coming over, and I came across this story on Bloomberg that caught my eye. And it plays well with the talk I had with you last week about the U.S. following in the same footsteps as Japan. The Bloomberg story talks about how the Fed has ruled out another cycle (but we know that it will change) of bond purchases (Quantitative Easing), and have left themselves (the Fed) with little in the way of policy options (remember, interest rates are near zero, and we've done 2 rounds of QE) to respond to the slowing growth and rising unemployment.

This is eerily like the fork in the road that Japan stood at 16 years ago. and they chose at the time to end their stimulus (at the time they had done tons of stimulus packages, and would come back to them again, but too late) and left their economy in a state of paralysis.

Big Ben Bernanke, wrote about all this, 11 years ago, and ripped the Japanese for what he described as "self-induced paralysis". So. Big Ben knows all about this. That's one of the reasons I truly believe that QE3 will eventually come along. Big Ben knows what can happen. and it's happening!

OK. the Aussie dollar (A$) was on a roll Friday, but has since seen a ton of selling, bringing the A$ back to the $1.05 handle. Tomorrow, (tonight for us) the Reserve Bank of Australia (RBA) will release their latest meeting minutes. If there are clues in the minutes for higher rates, which I'll remind you I have called for next month, then the A$ will move back up. It's all about global growth, for which I've always said Australia was the proxy for Global Growth, and interest rates, with the A$...

And as I talked about last week. Wednesday is the FOMC meeting, of which there will be no rate change, but we could actually see / hear Big Ben in his second post-FOMC press conference, sound the "all clear" horn and put to bed QE2. which I would think would bring some investors back to dollars. unless they see what I see, which is an economy that's going nowhere fast.

The U.S. data cupboard yielded a weaker U. of Michigan Confidence survey, with the index number falling to 71.8, from 74.3. The data that really surprised me was the Leading Indicators, which reversed the previous months -.4% print with a +.8% print for May. Hmmm. very interesting. I'm not sure how this data gets massaged, or if it even does, but it sure looks like it, eh?

The data cupboard is bare today. but will come back tomorrow with Existing Home Sales. and then on Wednesday we'll get the post-FOMC press conference with Big Ben.

I looked all over the world for any Central Bank meetings this week , and saw none, so it looks like this week will be dominated by the FOMC meeting / press conference, and Greece's confidence vote. Oh, and I think the extension that the lawmakers here in the U.S. have to reach a deal on the debt limit, is just about up.

So. I think Big Ben will sound all upbeat about the economy in his press conference. I think that this week will end up being OK for Greece, and the euro. And, I sure don't want to see the U.S. default.

And over in China, it was reported this morning that home prices in China have fallen in 23 of 70 measured cities. That's a good sign, and a feather in the caps of the Chinese Central Bank, for the previous month, showed home price increasing in 67 of 70 cities!

You would think that the Chinese, used the mortgage / housing meltdown in the U.S. as their guide on "how not to do things". Yes, it's like when you're playing golf, and you get to putt second, and follow the first guy's "line". You don't have to be the first one in the uncharted waters.

But. you have to learn from the first guy's mistakes! Which, as I view it from the cheap seats, looks like China learned their lesson well. and the U.S. didn't, as they follow Japan's lead, and don't change things, one iota.

Then there was this. back in 2005, we had a "tax amnesty" that allowed Corporations doing business overseas to bring back their profits earned overseas, to the U.S. at a reduced tax rate. This brought about $300 Billion back into the U.S. and propped up the dollar for the entire year of 2005, but when the window shut on the program on 12/31/2005, the dollar immediately went back to the underlying weak trend.

Well. According to the NY Times. "Some of the biggest U.S. companies want the administration and Congress to cut the tax on $1 Trillion or more in foreign profits brought back into the U.S. from 35% to 25% for one year to narrow the budget deficit and create jobs."

Chuck again. Really? You want a tax break, to narrow the budget deficit and create jobs? Really? Hmmm. Well, the National Bureau of Economic Research found that when the Bush Administration put the tax break in for the companies in 2005, that 92% of the money went straight to corporate shareholders in the form of stock buybacks and dividends. Hmmm. I guess my note to the administration would be to "not fall for these Jedi mind tricks"!

To recap. The Greek debacle is back on the front page this morning, after looking as though it would fizzle out last Friday. Seems the Eurozone finance chiefs want Greece to "show them the budget cuts" before releasing the next trance of bailout that's due next month. Without the money, Greece defaults. And the euphoria in bidding the euro and other currencies along with Gold that existed on Friday, has also fizzled out. The FOMC meets this week, and Big Ben should sound the All-Clear Horn for the economy.

Currencies today 6/20/11. American Style: A$ $1.0525, kiwi .8055, C$ 1.0165, euro 1.4225, sterling 1.6175, Swiss $ 1.1810, . European Style: rand 6.8075, krone 5.5710, SEK 6.46, forint 188.90, zloty 2.8070, koruna 16.9555, RUB 28.17, yen 80.25, sing 1.2370, HKD 7.7930, INR 45, China 6.4781, pesos 11.93, BRL 1.5975, dollar index 75.33, Oil $91.85, 10-year 2.91%, Silver $35.50, and Gold. $1,536.80

That's it for today. So. our "tradition" of seeing the Cardinals lose on the World Markets night at the ballpark, continued Friday night. UGH!, But the Cardinals finally ended their losing streak, so the stars are in alignment again! Yesterday was grand, with the kids, and grandkids. Little B.C (Braden) is a month old now, Everett the EverBaby is 7 months old, and little Delaney Grace is heading toward 4, and swimming all over the pool. They are all so cute! It was a hot one though. but, it's supposed to be. It's the middle of JUNE! Thanks to Danielle for creating a fun night for us that the ballpark. I need to get more ice water to cool down now, so I'll end this, and get it out the door. I hope your Monday is Marvelous!

Chuck Butler


EverBank World Markets



Posted 06-20-2011 12:47 PM by Chuck Butler
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