Spain Goes Into Recession, Again!
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In This Issue.

* Currencies trade in tight range..

* RBA to cut rates tonight.

* Will Carney hike rates?

* A different view on Silver.

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

Spain Goes Into Recession, Again!

Good day. And a Marvelous Monday to you! I'm still "on the road" so to speak, so with that comes the regular trials and tribulations along with headaches that come with being out of the office. But. I carry on, my wayward son!

Friday's price action in the currencies was all about tight ranges, but if there was any bias, it was to sell dollars, especially after it was announced that the first print (they'll be revisions coming) of 1st QTR U.S. GDP was 2.2%, down from the 4th QTR's 3% clip.

We edge ever so slightly to the other side of the storm from the "eye" and data print after data print shows that. Shoot Rudy, the "experts" had forecast slippage, so they see what's happening too. Unfortunately for their reputations, they forecast 1st QTR GDP at 2.5%... but it printed at 2.2%, even worse slippage than the "experts" saw happening.

So, with the bias to sell dollars hanging over the markets, it was not shaken to the core when the much slower GDP printed. This is how things used to be before the Financial Meltdown. when fundamentals ruled the roost! If the U.S. printed weak data, the dollar got sold. but it hasn't been that way in some time, at least not on a consistent basis!

One component of the GDP data, consumer spending, showed an increase. Great, the rest of the economy is slowing down, but Joe Consumer are chasing goods around like a kid in the hen house, trying to catch a hen. and then one more thought on 1st QTR GDP. the weather in the 1st QTR, for most of the country, was pretty warm compared to a regular winter. So, a lot of economic activity was put into motion in the 1st QTR. and 2.2% was all it could muster?

So, the grease on the economy's tracks, that was put there by the two rounds of Quantitative Easing, one round of Operation Twist, and money supply that would choke a Clydesdale, is now wearing thin, folks. soon the train will stop, because there is no grease. And that's when the Fed will feel once again that they need to "do something".

As I look at the currencies this morning, there's been a bit of slippage in the overnight markets as the markets look at Consumer Spending for March that will print today. Since the one component of the weaker GDP report was Consumer Spending, the markets believe this will be a real large number. And if it is, that would be dollar positive today.

Now, to me. Consumer Spending is fine, as long as there is Income to provide that spending with cash, and not credit. but then that's just me. I'm funny that way! Not funny HA HA.

The currencies are also having to deal with the calls that have now turned to shouting for not only A rate cut in Australia, but more as the year goes on. But the funny thing going on here, not funny HA HA, is that the Aussie dollar (A$) has pushed higher. Well , until last night that is. the Reserve Bank of Australia (RBA) meets tonight (May 1st for them), and a 25 Basis Point rate cut will take place. It's a done deal folks. so, we'll just have to see if the RBA is in the mood to discuss what comes next.

With the A$ pushing higher last week in spite of the calls for rate cuts, tells me that bond buying in Australia was HUGE. Lock in the higher yields, and book profits as the yields go down from the rate cuts. a very good move by the bond guys.

The euro has felt some heat this morning from the news that Spain had entered a recession for the second time since 2009. Yes, recessions are a part of tightening the belt, right? That's why we'll never tighten the belt here in the U.S. Heaven forbid we slow down, and everyone has to hunker down here in the U.S.!

That's why I continue to say that while the euro is on tenterhooks now, in 3-5 years, after the Eurozone has suffered through belt tightening, that things will be better there, and they'll have made the necessary cuts to insure survival. While here in the U.S. our GPS navigation system will still be broken, thus keeping us from getting on the road to correction.

Now. the euro may not have as many members in 3-5 years, or may look completely different, who knows? All I'm saying is that at least, they are attempting to right the ship. And in doing so, there will be recessions to deal with.

And this message is just as much pointed at us here, but also to those calling for "anti-austerity" in the Eurozone right now.

In Canada. things are getting pretty screwy. Here's the skinny. The Bank of Canada's (BOC) Gov. Carney, has made no bones about the need to raise interest rates. But the markets are not rewarding the Canadian dollar / loonie. First because they don't believe he'll actually be the only Central Bank that is raising rates, and two. because the Canadian economy has a large component in it of domestic demand. and domestic demand is led by Consumer Spending.

The markets are fearful that a rate increase will damage the domestic demand, thus putting the economic growth in the country in harm's way. The markets only have to look back to 2010, when the BOC hiked rates 3 times from .25% to 1%, and the loonie lost 7.4% while those rate hikes were being made.

You know me though. if a rate hike is needed. make it!

Today, the markets will get to sniff around on Canada's 1st QTR GDP report.

In Japan, the Japanese yen is rallying again. this has got to be driving the Japanese Finance Ministry crazy! I know it has done a number on me! Just what investors see in the Japanese yen given the known fact that the Japanese Gov't wants a weaker currency, is what I would like to know!

Not much else going on here, data wise, today. Fed Head, Richard Fisher, will be speaking today. that's always interesting, for he's one of the few Fed Heads that "get it". in my opinion that is.

Then There Was This. from Barrons. titled: Beware: Silver Can Bite. here's a snippet of the story on Silver. "Infamously volatile, the metal is out of favor with investors, industrialists, and even coin collectors, and may stay that way for the foreseeable future.

Silver's charms are fading-and so are chances of a quick silver comeback.

The metal has had a manic-depressive 12 months. On April 29, 2011, futures vaulted to a record settlement high of $48.599 a troy ounce, then plunged 27% over the next five sessions. The metal never recovered after exchange owner CME Group raised trading margins to quell the extreme volatility.

However, with prices now around $31, don't be seduced into thinking that silver is about to shine again anytime soon. "Silver is the one that doesn't get invited to the birthday party because it bites people; it's nasty," says Sterling Smith, an analyst with Country Hedging in St. Paul, Minn."

Chuck again. Hmmm. I guess everyone is entitled to their own opinion, right? I don't agree with the article, but just because I don't agree with it, doesn't mean I should keep it from you, dear reader. It's just another person's opinion. Of course mine would be different, in that I would say if the price manipulators would keep their hands out of the cookie jar, Silver would be near $75! But we all know that the price manipulators have us over a barrel right now.

To recap. the currencies have remained in a tight range with a slight bias toward selling dollars on Friday. but that has been reversed overnight, as Spain entered their second recession in the past 3 years, and the RBA will meet tonight to cut rates. the loonie is weaker on thoughts that the BOC will hike rates, I know, a real perverted way of thinking. but it is what it is.

Currencies today 4/30/12. American Style: A$ $1.0430, kiwi .82, C$ $1.0190, euro 1.3225, sterling 1.6275, Swiss $1.10, . European Style: rand 7.7340, krone 5.7390, SEK 6.7445, forint 216.45, Zloty 3.1545, Koruna 18.7880, RUB 29.40, yen 80.20, sing 1.2360, HKD 7.7585, INR 52.73, China 6.2795, pesos 12.95, BRL 1.8890, Dollar Index 78.85, Oil $104.20, 10-year 1.93%, Silver $31.23, and Gold $1,665.40

That's it for today. the Casey Conference went well. I got a chance to speak to the audience, albeit briefly, but you know me, I did with some humor mixed in. Friday night, I was able to head to Miami with Jack Stapleton, Suzanne Lee, and Patti Van Derlofske, and go to the Marlins new ball park. WOW! What an experience! I never knew you could mix so many colors and have it look good! A grand time was had by all. but what was that package Suzanne handed to Patti? HA! Inside joke. Great news from St. Louis. Alex scored the winning goal in overtime to defeat a school that hadn't lost a game in 10 years! The LHS Jr. Varsity finished the tournament for the second weekend in a row, without a loss! And not so great news from St. Louis and damaging storms hit Saturday, and people under a big tent were hurt and there was loss of life. sadness. Ok. I think I'd rather be proud of Alex and his newfound scoring prowess this year. Now.. I hope you can go out and have a Marvelous Monday!

Chuck Butler


EverBank World Markets



Posted 04-30-2012 12:50 PM by Chuck Butler
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