Mini-Rally Is Reversed.
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In This Issue.

* Greeks decide to keep euro.

* U.S. posts Monthly Budget Surplus!

* JP Morgan throws a spanner.

* Eric Sprott talks about manipulation.

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

Mini-Rally Is Reversed.

Good day. And a Happy Friday to one and all! What a quick week! We have a Happy Hour planned tonight, so I can tell right from the starters blocks this morning that it's going to be a Fantastico Friday! Next week I'll be in Las Vegas. not my kind of city, but it is what it is, and I'll be there to speak on two different days, so if you're in the area, drop by, the MoneyShow is free!

Well. that little mini-rally that a handful of currencies saw yesterday, faded overnight, and that handful of currencies are all back to the levels of Wednesday. UGH! The handful, in case you were wondering, included: Aussie dollar (A$), euro, Brazilian real, Norwegian krone, Swedish krona, Singapore dollar (S$), and a couple of others.

Yesterday, we saw the U.S. Trade Deficit widen from $45.4 Billion in March to $51.88 Billion in April. It's not all with China folks. the majority is with OPEC. remember, the price of Oil in April was well over $100 all month!

We also saw the Initial Weekly Jobless Claims, which was flat VS the previous week at 367,000. The Continuing Claims remain a problem, folks. I know I talked yesterday about jobs, etc. and I received a few emails from very disgruntled folks, that have been looking for jobs, and don't believe there are any out there to be found.

That brings me to the thing that I've said since 2008. that a lot of the jobs that were lost were not going to come back. and the jobs that did open up, were going to be completely different, than what the unemployed person was trained to do. I'm not insensitive to this, folks. I just tried to get it out there a few years ago, so that people could begin to make changes.

OK... so, did you see that the Monthly Budget Statement, which had been a deficit each and every month for so long that I had begun to call it the Monthly Budget Deficit, actually stopped the bleeding in April? The Gov't posted a $59.1 Billion surplus in April. WOW! OK. hold on a minute there, Tim. Isn't April the month that all taxes owed are collected? (for the most part any way) the key here is to see where this balance goes the next couple of months. My bet is that it will go right back to the monster deficits that were seen every month prior to April.

Today, we'll see wholesale inflation (PPI) for April, and the U of Michigan Confidence index.

Overnight, we heard that the Greeks were having second thoughts about electing an anti-euro government, and now it appears that the government that will be elected will keep the euro, no questions asked. That's nice of them! Obviously, calmer, smarter heads prevailed here, because I don't believe that the Greeks want to see what life is like for them outside of the euro!

Euro traders are kind of lost between two lovers here. They just can't figure out whether they want Greece to leave a stay. Should I stay or should I go now, If I go there will be trouble, and if I stay it will be double.

The Aussie dollar (A$) had climbed back above $1.01 yesterday, but is right back to Wednesday's level of $1.0050 this morning. losing ½-cent overnight. The other day, I talked about the forecast Aussie Budget Surplus for next year. Well, while that would be great for them should they achieve that surplus, it won't really be known if that's going to be a reality until September.

I also told you a couple of weeks ago, that I thought it was bond buyers of Aussie Gov't Bonds (ACGB's) were behind the resiliency of the A$ in the face of a rate cut. Of course back then, I thought that the Reserve Bank of Australia (RBA) was only going to cut 25 basis points, and the surprised the markets with a 50 basis point rate cut. That severely inhibited the resiliency of the A$...

And I talked about how it is believed that if Australia does achieve a Budget Surplus that the supply of ACGB's would drop by a large margin. So, if that's true, that underpinning that the A$ enjoyed from bond buyers, would be damaged. But, as I told a small group the other day. "Even if the A$ falls to 95-cents, it's still a strong currency, just 10 years ago it was trading around 50-cents."

As far as today's prospects for a Risk On Day go. I think the chance are slim and none, and Slim left town. All the overnight bourses are down, and U.S. stock futures are down. Everyone is running for the hills after a story in the Wall Street Journal hit the streets last night. According to the WSJ report, "J.P. Morgan Chase has taken $2 billion in trading losses in the past six weeks and could face an additional $1 billion in second-quarter losses due to market volatility" - WSJ

Most of you all know how I would have reacted to this report in "the old days". So, this is your chance to "be like Chuck". and give me your version of what Chuck would have said in the old days. (you don't really have to send it to me, unless you think you have really nailed it!)

I think I'll talk about Silver now (wink, wink). Did you see that China had introduced Silver Futures Contracts that will trade in renminbi / yuan, on the Shanghai Futures Exchange? The contracts will not be allowed to fluctuate more than 7% per day. I have to wonder how the Chinese are going to take seeing the price of Silver brought down in after hours trading.

And did you know that China is now the world's leading producer of Silver? No, it's not Mexico, and no it's not Peru. It's China. And that's good, because China is the world's second leading consumer of Silver behind the U.S.

Have you been following the news on Scotland contemplating leaving the U.K.? That would be a HUGE blow to the U.K., not only prestige wise, but monetarily. Scotland's economy is second in contribution to the U.K. economy, coming behind the Southeast part of England.

The pound sterling, which has defied gravity recently, is beginning to feel the weight of doing a double dip in the recession pool, and everything else that's going on badly there. like this morning they reported that March Construction output was very disappointing, which points to a downward revision to 1st QTR GDP, that already showed that the U.K. economy was going for a double dip.

Gold enjoyed a day in the sun yesterday, but it's raining on the shiny metal again this morning. It seems that we've returned to the days around 2008 and early 2009, where the dollar is rewarded with bad data. Dollar Bugs will tell you that this is how it should be, as the only true safe haven is the U.S. dollar, and Treasuries. I want to hit these dollar bugs over the head with a Gold Bar! Maybe then they would find the true safe haven!

Speaking of Gold. I did some math about a year ago and ran it here, and with all the talk about the U.S. paying off its debts by selling its Gold holdings, I thought it best to pull this back out.

There are 5,046 tons of gold at Fort Knox There are 7,716 tons of gold at Fed NY

Total = 12,762 tons. there are 32,000 ounces in a ton, 12,762 tons x 32,000 = 408,384,000 x $1,590 (price of Gold) = $649,330,560,000

Sorry. but $650 Billion doesn't even pay for the stimulus that was thrown at us a couple of years ago! But. if the price of Gold were to be pushed up to, let's say, $5,000. Then we would be talking about making some inroads to the debt! And if the price were pushed to $10,000, then we're getting somewhere, but. we would still be left with a very large national debt.

You see that's the problem with deficit spending. at some point, the numbers become so HUGE that you can't make a difference in total unless you come in with both guns blazing! And then keep those guns blazing! Doing one-off corrections, are only chinks in the armor.

For long time readers. do you remember a few years ago, when I tried to show the knuckleheads at CNBC that the markets were being manipulated in the afterhours trading, and they laughed and told me to take the story to Hollywood? Well. CNBC has come a long way, I guess, for they allowed Eric Sprott to talk freely about manipulation the other day. Of course maybe not that long a way, as I wanted to include the link to the video here, but it's not working. and the folks at CNBC did attempt to ridicule him.. But he would have none of it!

Maybe CNBC will have it fixed later, just Google Eric Sprott at CNBC, and look for the most recent video..

Anyway, Eric Sprott, Ted Butler, and others, including me, have done our best to inform the public of what's going on. Maybe one day, We The People will get the message. and exercise our right to contact our representatives and discuss this with them.

Then There Was This. I saw this on Reuters. "Financial advisers increasingly warn that U.S. Treasury bonds are close to a bubble and suggest that clients look elsewhere for stable and safe returns. Alternatives recommended include investment-grade corporate and emerging-market bonds, master limited partnerships and preferred stocks."

Chuck again. Hmmm. I liked that they had finally come around to noticing the Treasury bubble, but nowhere on their list of alternatives did I see Gold?

To recap. the mini-rally in a handful of currencies yesterday, was wiped out in the overnight markets, and the currencies and Gold are back to Wednesday's levels. The Greeks agree to elect a government that keeps Greece in the euro. The U.S. posted a monthly surplus for the first time a very long time in April, but then tax collections are made in April, one would think that if they can't book a surplus in April, when could they? And JP Morgan has really thrown a spanner in the works for a Risk On Day, with their aftermarket announcement yesterday.

Currencies today 5/11/12. American Style: A$ $1.0040, kiwi .7845, C$ .9950, euro 1.2935, sterling 1.6110, Swiss $ 1.0770, . European Style: rand 8.1150, krone 5.8650, SEK 6.9550, forint 224.20, zloty 3.2815, koruna 19.52, RUB 30.15, yen 80, sing 1.2520, HKD 7.7650, INR 52.64, China 6.31, pesos 13.54, BRL 1.9530, Dollar Index 80.25, Oil $96, 10-year 1.85%, Silver $28.66, and Gold. $1,582.70

That's it for today. Well. Let's see. today we will celebrate two birthdays on the trading desk, Lori/ Gidget and Aaron will see their birthdays this Sunday. So Happy Birthday Gidget & Aaron! Sunday, of course, is Mother's Day. This is a day when I truly miss my mom. and not the mom that was devastated by MS later in life. the mom that would come downstairs and listen to me play the guitar. She loved it when the band got together to play in the basement, and most of all, she was always there for me, and sometimes I didn't deserve to be "there for", but that didn't stop her. So, if your mom is around, give her a great big bear hug, and tell her you love her! OK. time to get this out the door. you've been a lovely audience, thank you for reading the Pfennig. I was here all week, I hope you tried the veal! Talk to you next week from Las Vegas. now go out and have a Fantastico Friday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 05-11-2012 12:29 PM by Chuck Butler