Tax Day!
Daily Pfennig

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In This Issue.

* Gold & Commodities plunge!.

* Commodity Currencies take it on the chin.

* It's all about the so-called U.S. recovery.

* Chinese GDP weakens to 7.7%.

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

Tax Day!

Good day. And a Marvelous Monday to you! Well. it's Tax Day. April 15th! The day snuck up on me, even though I saw it coming. My tax guru, is probably shaking his head at my excuses but, that's what I'm here for. to entertain! HA! Traditionally, I begin the April 15th Pfennig with some lyrics to Tax Man by the Beatles, but since I did that for the Sunday Pfennig & Pfriends, I won't repeat it today. Instead, I'll go with, Supertramp's, Give a little bit. There's so much that we need to share, So send a smile and show you care.

Well. the Big story from Friday was the major take down of Gold. I had to leave even earlier than usual on Friday for a doctor's appt, and as I was walking out of the office, Jen said, "hey Chuck, Gold is down $80". I about dropped to the floor! What the heck is going on here? I then told the desk that I read a research report that was tying Gold's performance to the Japanese yen, but I wasn't putting much into that report. I then brought up the Goldman call to short Gold that was made earlier in the week. And then left for the doctor's office. Later in the day, I checked the markets and saw that Gold, Silver, Copper, and Oil were all taking it on the chin. A bad day at Bedrock for sure!

Well, the selling doesn't look to be over just yet, Gold is down another $80 this morning, and fell below $1,400 at one point overnight. Well. I just have this to say, which might get nixed. the manipulators really went "all-in" this time with their attempt to scare moms and pops out of Gold and back into stocks / dollars. They've scared the daylights out of just about everybody, that isn't a true believer of Gold this time. But they've really got the ball rolling for them right now, I see them pushing the Commodities lower and lower until somebody says "uncle".

I find this all to be wrong. very wrong. Telling the people that the U.S. economy has turned the corner, and is on a strong rebound, so there's no need to own hedges like Commodities and Currencies. That's like telling kids to go ahead and ride their bikes in the street without checking for cars first. Take away the Gov't activity from your 2% GDP and you've got nothing. or as Edwin Starr used to sing. Nothing, absolutely nothing, say it again!

Some of the selling of Commodities overnight can be attributed to the weaker GDP report that printed in China. China's first quarter GDP printed at 7.7%... That's 7.7% growth, folks, that's not a misprint! Unfortunately, 7.7% was weaker than the 4th QTR print of 7.9%... and the Chicken Littles came out in force! The sky is falling, the sky is falling! And the markets listened. I find this to be totally out of line, and unwarranted, but. the markets are never wrong, eh?

So, not only are the hard Commodities getting sold like funnel cakes at a State Fair, so too are the Commodity Currencies. The Aussie dollar (A$) is down over $1 this morning. I always highlight the A$ because as I've long pointed out, I call the A$ the proxy for global growth. And if global growth is going to take a hit because China's GPD weakened, then the weakness is going to show up in the A$ first, and foremost.

And to add to all this madness going on in the Commodities and Currencies, guess which currency, besides the dollar, is rebounding? Yes. it's the Japanese yen! After touching 100 briefly late last week, the yen is back to a 97 handle this morning. Now that's not going to make the Bank of Japan (BOJ) and the Japanese Gov't very happy to see yen rallying like that! But not to worry. I would think that this rally will be short-lived for yen, but then when the markets are being manipulated, who knows? Only the shadow knows.

And then on the other hand. maybe the Japanese leaders won't be so uptight about the gains in yen, as we head into a G-20 meeting this week. The last thing the Japanese leaders wanted to hear from the other 19-members is that they were not going to sit by idly and allow Japan to drive their currency weaker. So, now, if someone brings up yen weakness, Japanese leaders can point to the currency and say, "hey, look, it's rallying!"

The rest of the currencies are holding up OK. most of the blood in the streets is in the Commodity Currencies. In fact, this is a good illustration of what I've been talking about for a couple of years now with the Dollar Index. It doesn't include the Commodity Currencies of A$'s, kiwi, and a few others, so all the time that those currencies were kicking tail and taking names later the Dollar Index didn't reflect that. And now that they've gotten the stuffing knocked out of them the Dollar Index doesn't reflect that either!

So. it's not a pretty day in the currencies and commodities today. It's all about the U.S. economic recovery and the dollar, folks. The recovery that recently saw the participation rate in the labor force drop to a 1979 low of 63.3%... the recovery that has seen pockets of a housing rebound, only as long as the "shadow inventory" isn't released on the housing market. the recovery that saw Retail Sales for March fall -.4%, the recovery that saw the March Manufacturing Index fall from 54.2 to 51.3, the recovery that continues to need zero interest rates, and bond buying to the tune of $85 Billion per month. I could go on, but what good does that do? The markets don't listen to me.

Ok. so, recall that last week, I told you that the President finally presented his version of a 2014 budget. and I told you that spending was going to increase by 6%... the total spending in the budget was $3.78 Trillion. I just saw that the Gov't expects to collect $2.7 Trillion. Ooops! Isn't the revenue supposed to be equal to or greater than the expenses? This one has an over $1 Trillion dollar hole in it! But don't let that get in the way of a feel good story about reducing deficit spending $1.8 Trillion over the next ten years. (yeah, I want to see that happen, because I doubt it will!)

The U.S. data cupboard has very little for us to view today, except the Total Net TIC Flows (net foreign purchases), which used to carry a lot of weight, but then joined Jared and went on a diet. Tomorrow the data cupboard begins to get restocked with things like Industrial Production and Capacity Utilization, Building Permits and even the stupid CPI.

You all know that CPI is getting changed again, right? And if you're thinking that this time they'll get it right, and throw out all the hedonic adjustments that are made to the index, so that the cost of living increases to fixed incomes will rise, then you would be wrong. No, the Gov't in its infinite wisdom (NOT!) is going to be ratcheting down the CPI, with MORE hedonic adjustments! So. we've got that going for us, eh?

Then There Was This. Well. I sure stirred up the crowd with my Sunday Pfennig & Pfriends article on taxes. Lots of comments. and that's a good thing! It shows people are thinking! And after all is said and done, that's my goal. to get people thinking. so. in an effort to keep that going, here's a snippet from somebody that I admire greatly. Doug Casey. Hey! I realize that he's not everyone's cup-o-tea, but when he speaks, I always feel he's speaking to the masses. and they should be listening! So. here's a snippet from Doug on the U.S. debt. it's quick, so don't blink or you'll miss it!

"The ethical thing to do would be for the U.S. to declare bankruptcy. The next generation will be turned into indentured servants, and people who buy government debt deserve to be punished and taught a lesson. Look, this is an academic point that I'm making. I know that [the U.S. debt] is not going to be defaulted on tomorrow morning. I'm just putting the thought out there so people can think about these things in a new unit of time, and try to think about it rationally." - Doug Casey

Chuck again. I feel the same way about the stuff I write regarding how the U.S. will use cheaper dollars and higher taxes to deal with their debt, and how China is working toward removing the dollar as the reserve currency.These things aren't going to happen today, tomorrow, or next year, but in time, and people should think about these things in a new unit of time.

To recap. the trap door was sprung on Gold / Commodities on Friday. The selling was strong, and pushed Gold down to levels it hadn't seen since March of 2011. The markets are going with the theme that the U.S. economy is recovering and there's no need for hedges. Gold and Commodities are getting sold again this morning, so there's blood in the streets, and the commodities and commodity currencies are badly in need of a tourniquet! Chinese 1st QTR GDP weakens to 7.7% from 7.9% the previous qtr.

Currencies today 4/15/13.. American Style: A$ 1.0410, kiwi .8475, C$ .9790, euro 1.3080, sterling 1.5335, Swiss $1.0765, . European Style: rand 9.07, krone 5.7360, SEK 6.3955, forint 225.10, zloty 3.1475, koruna 19.7750, RUB 31.37, yen 97.80, sing 1.2370, HKD 7.7625, INR 54.62, China 6.2454, pesos 12.14, BRL 1.9695, Dollar Index 82.26, Oil $88.48, 10-year 1.71%, Silver $23.73, and Gold. $1,406.40

That's it for today. I sure caught up on my much needed sleep this past weekend, and then the weather was finally spring-like! YAHOO! Spent the day Saturday by driving 50 miles back and forth a few times to watch the Lindbergh Flyers play in a water polo tournament. The results weren't what son Andrew was looking for, but they played some good teams, and hopefully learned a bit. Cardinals couldn't pull out the sweep of the Brewers yesterday, UGH! The kids and grandkids were at the house yesterday, and we got to spend the day outside. My two grandsons were pretty funny with their buckets of water. I got started a bit earlier this morning, but still am running late! UGH. Oh well, I thank you for reading the Pfennig, and hope you have a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 04-15-2013 4:41 PM by Chuck Butler
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