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In This Issue.

* Currencies & metals swing wildly.

* Merkel sends the euro to the woodshed.

* BOC leaves things the way they were.

* Swedish krona is best overnight performer!

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

Will They Ever Learn?

Good day. And a Wonderful Wednesday to you! What a crazy day in the risk markets yesterday! We had the Big Ben testimony on the economy, (more on that in a minute) making me feel as though I was getting spun around and around. The great song by Blood, Sweat & Tears, called spinning wheel kept popping into my head as I watched the currency screens. It was downright crazy folks. For all you youngsters that don't know the song. here's a snippet: What goes up, must come down, Spinnin' wheel, got to go round. Talkin' 'bout your troubles, it's a cryin' sin. Ride the Painted pony, let the spinnin' wheel spin.

OK. here's the skinny on what I'm talking about. So, yesterday morning I told you how the traders and hedge fund gurus were selling the dollar ahead of the Big Ben Bernanke testimony, in hopes that he would use that stage to announce additional stimulus for the economy / markets. I told you how they would be disappointed and therefore the downside risk was great. You may recall that the euro was playing peek-a-boo with the 1.23 handle. OK.. the stage is set. and then.

Big Ben never even mentioned additional stimulus. So the selling of the dollar spun around, and the risk asset were on the selling blocks. The euro fell from 1.23 to 1.2185. Ahhh grasshopper, we weren't finished. Having been disappointed once again, the market gurus, said, OK. "but isn't he going to talk again tomorrow, this time to the House?" Why yes he is! And, so once again they began to sell dollars, in hopes that Big Ben would change his testimony on the economy to include an announcement of additional stimulus. up, down, up, down, up, down.. Crazy! Which brings me to this question for the markets. Will you ever learn?

Of course, most "real diversification investors" just watch these moves and shake their heads in disgust for the noise it creates. They don't get caught up in these crazy moves on days like yesterday. That's for the "trader guys". let them get caught up in all that!

Well. there I was trying to get work done yesterday, when I looked up to see some of the text that Big Ben Bernanke was delivering in his speech to lawmakers on the outlook for the economy. You know, the testimony that traders et al. were all lathered up about yesterday morning. And what to my wondering eye did appear?

But the Fed Chairman delivering a very somber, bleak message assessment of the U.S. economy to the lawmakers. I actually kept waiting for Roy Clark and Buck Owens to pop out of the crowd, and begin singing. gloom, despair, and agony on me. deep dark depression, excessive misery. if it weren't for bad luck, I'd have no luck at all. gloom, despair and agony on me.

HEY! Maybe Big Ben has become a Pfennig Reader! Nahhhhhhh. I doubt that would ever happen! But rest easy my dear readers. For the Fed Chairman made sure the lawmakers knew that "the Fed is prepared to take action should the economy weaken". Yes, we can all rest easier now.

Did you see any of the testimony and the questions the lawmakers asked? Why didn't they ask Big Ben about how his "additional stimulus" has done so far? Why didn't they ask him about the new way money is created in the U.S? Does it not border on counterfeiting? What? I hear you saying. OK. the other day, I was reading some research, and the writer, was explaining how guys that keep saying that the Fed is printing money, are wrong. They don't really "print" money any longer. They make entries into a computer. it's called the System Open Market Account at the Fed Reserve N.Y. Are these entries actually considered to be, "legal tender"?

So many questions they could be asking Big Ben while they have him in front of them. like what did, they have to do, if anything, with the LIBOR rate fixing scandal? Any way. none of the good things were asked of the Fed Chairman, and he skedaddled out of the Senate before they could ask him any tough questions.. Now, it's on to the House. Nothing will change there, folks.

OK. let's go on to other things. I could spend all morning on that stuff! So, we had the risk assets spinnin' around yesterday. This morning, there is some trepidation with the markets gurus with their conviction that Big Ben will help them out. And so, the recovery we saw yesterday afternoon with the risk assets is on shaky ground this morning. Maybe the markets gurus have finally figured out that The Fed is going to do nothing but disappoint them, time and time again. maybe. but then, it is the markets gurus. they sometimes act as though they are not the sharpest tool in the shed.

The Bank of Canada (BOC) left rates unchanged yesterday, just as I thought they would, and continued to say that "some modest withdrawal of the present considerable monetary policy stimulus may become appropriate". Hey, folks. that's central bank parlance for, "we would love to hike rates, but something has got to change in the U.S. and Eurozone before we do that". The Canadian dollar/ loonie was all caught up in the spinnin' 'round yesterday, so this BOC keeping their interest rate powder dry, didn't do much on a day like yesterday.

The Aussie dollar (A$) traded above $1.03 yesterday. And today, it's right there once again! And the rest of Asia is also stronger this morning. China allowed the renminbi / yuan to gain this morning, and when that happens you can bet your sweet bippie that the Singapore dollar is right on the renminbi's tail. I write a monthly article for the World Money Analyst, that's published by the International Man. and I highlighted this connection between the renminbi and Sing dollar this month.

Have you been following the Peregrine Financial Group disaster? I found this statement by CFTC Chairman Gary Gensler to be very interesting. You know the firm where the CEO faked statements for over 20 years, and spent all the customer funds? "U.S. Commodity Futures Trading Commission Chairman Gary Gensler told the Senate agriculture committee that regulators failed customers of Peregrine Financial Group, which recently collapsed. Gensler vowed that his agency will do better and outlined measures that he said should help."

I could really dig my heels in here and talk about the CFTC and the manipulation going on with Gold & Silver, but. the, kinder, gentler Chuck, isn't going to be hooked by the bait. it's tempting, but, I'll leave the whole thing up to your imagination.

Oh. and Gold is down $5 this morning. Since reaching $1,595 the other day, it has slid down the slippery slope to $1,578. I look at this trading in Gold (& Silver) and just shake my head in disgust, that we're still talking about Gold below $1,600. I can't help but think that this is like this because the market gods want everyone to own Gold, and are giving them time to buy it at these cheaper levels. Call me crazy. That's OK, you wouldn't be the first person to call me crazy.

The euro is seeing some additional weakness this morning from comments that came from Germany Chancellor Angela Merkel, who said that the "European project is at risk unless policy makers work harder." Traders are looking at these words and thinking that there is still a very wide divide between Germany and those Eurozone members that would like to issue a Eurozone bond. Things had been pretty quiet this week so far, with the Eurozone, and their debt crisis, until now. Just shows to go you that you have to keep one eye on the Eurozone, and the other on the rest of the markets. I guess I can't do that. but you can!

I got a few minutes to work on my Vancouver presentations yesterday. and I borrowed a slide from the Big Boss, Frank Trotter, that brings up all kinds of news items randomly on the screen, and I talk about how it's difficult to focus on one thing in the markets these days, and then in great BIG Bold Letters GREECE appears. yes, the markets continue to be fixated on Greece's problems. They refuse to look at the problems in the U.S. states.

There was an article on YAHOO Finance that reader/ friend, Scott, sent to me last night on the problems with the U.S. states. here are a couple snippets from the article: "U.S. states face long-term budget burdens that are already limiting their ability to pay for basic services such as law enforcement, local schools and transportation. Aging populations and rising health care costs are inflating Medicaid and pension expenses. At the same time, revenue from sales and gas taxes is shrinking. And grants from the federal government, which provide about a third of state revenue, are likely to shrink.

The state's financial problems aren't just a result of the recession and slow recovery. They have built up over years. Many states have already cut spending on public university and infrastructure projects. California has cut its spending on state universities 12.5 percent in the past five years, the report said. South Carolina has reduced its support 30 percent in that period, the deepest cuts in the country. Florida and Iowa have cut higher education spending about 25 percent."

Chuck again. these cuts are just drops in the buckets for the states, folks. things are going to get a lot worse before they ever turn to better. if ever. And that doesn't bode well for the economy. But, it's all about GREECE, right? Pardon me while I go scream at the wall!

OK. I'm back now. Before I head to the TTWT story for today. I wanted to highlight that the best performer overnight for the currencies is the Swedish Krona. The krona is outperforming all other currencies as investors look for alternatives to the euro, but remain in the Europe arena. The Swedish economy has been quite strong recently, thus the reason the Riksbank (Sweden's Central Bank) left rates unchanged at their last meeting. It's a good story today for the krona. how long will it last? Good question. but given the recent movements in the currencies, this could very well be short-lived, although it shouldn't be!

Then There Was This. You know me. I've said that all the previous two implementations of Quantitative Easing (QE) achieved was that it propped up the stock market and lowered the value of the dollar. I've not been a fan from the beginning, and while I talk about more QE, I'm merely talking about what I think the Fed Heads will feel that they have to do next! I would have thought that QE3 would have already been announced, and we would be talking now about QE4. but the Fed Heads are keeping things held together with ceiling wax and bailing wire. Well. Rex Nutting of MarketWatch wrote an article saying that QE3 is pointless. Rex believes the U.S. has many things to deal with and QE3 just distracts us from the choices that must be made.

Chuck again. yes. I agree! Everyone keeps talking about the Fiscal Cliff that the U.S. is heading for, but no one is doing anything about it! And QE3, 4, 5 or 25, doesn't resolve these problems. Maybe Big Ben finally got the memo on QE? I doubt it. As I said before, I don't think he wants to implement the next round of QE this close to the election as to not be seen as a political move.

To recap. we went for a ride on the Spinning Wheel yesterday with the risk assets, as it was a Risk on, off, on, off, on wild day. Big Ben Bernanke disappointed the markets once again with no mention of additional stimulus, and instead painted a picture of gloom and despair for the U.S. economy. He'll speak again today to the House. Merkel decided to make certain everyone knew there was still a wide divide between Germany and those that want a Eurozone bond. And the Bank of Canada left rates unchanged and had the same-o, same-o to say about removing stimulus.

Currencies today 7/18/12. American Style: A$ $1.0305, kiwi .7940, C$ .9865, euro 1.2225, sterling 1.56, Swiss $1.0180, . European Style: rand 8.1840, krone 6.1175, SEK 6.9410, forint 233.75, zloty 3.4125, koruna 20.6790, RUB 32.40, yen 79, sing 1.2610, HKD 7.7565, INR 55.43, China 6.3690, pesos 13.18, BRL 2.0210, Dollar Index 83.25, Oil $88.83, 10-year 1.48%, Silver $27, and Gold. $1,578.15

That's it for today. the +100 degree days returned to St. Louis yesterday. I started across the bridge to the garage yesterday afternoon, and the heat took my breath away. When we were above 100 for all those consecutive days, it got to be no big deal. But after a week's reprieve, it hit me between the eyes! My beloved Cardinals can't seem to find a way to build a winning streak, and I think that's going to haunt them all year, which, unless they find another gear, like last year, will not guide them to the playoffs. Bend me, Shape me, by the American Breed is playing on the iPod, and got me moving in my chair! I hope Chris is having fun out west where it was only 60 degrees yesterday! The Olympics are only 9 days away!

And then I want to talk about something to end this today. I saw where our publishing friends have introduced a new Gold trading platform. I love the competition! And if it gets more people buying Gold then good! All I ask any of you that received a notification of this new service this one thing. Before you buy on their new platform, ask what the "ALL-IN Price" is, and then give us at EverBank Metals Select, a call before you buy to compare prices.

And with that. I hope you have a Wonderful Wednesday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 07-18-2012 12:19 PM by Chuck Butler
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