Will The Healing Last?
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In This Issue.

* Gold & Commodities plunge even further.

* Currencies join in with stocks and commodities.

* RBA talks about low inflation.

* U.S. data cupboard returns.

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

Will The Healing Last?

Good day. And a Tom Terrific Tuesday to you! What a horrific scene in Boston at the Boston Marathon Finish Line yesterday. On Patriot's Day in Boston, someone or some group planted bombs near the finish line and set them off yesterday as thousands of participants attempted to finish and spectators watched. Here's what I know at this point: The White House says the explosion will be handled as an act of terror. Three people have lost their lives and over 100 are injured with at least 8 in a critical condition. So far, no group has come forward to take responsibility for the attack.

So, it's with sadness that I begin today's letter. I have to think that we as a country have been pretty lucky that we don't experience this type of stuff like they do in the U.K. So, let's keep the people in Boston in our thoughts, and move on to the markets.

Well. Yesterday, I told you about how Gold was down $80 in the morning. Then as the morning went along, it seemed some healing was happening and Gold began to bounce, but that bounce had little to the ounce and soon Gold was back on the slippery slope as I left the office for the day. The Gold to stocks trade, didn't carry through as even U.S. stocks got taken to the woodshed yesterday, It was all about buying Treasuries, as the 10-year Treasury yield fell to 1.67% (remember for bonds yield and price move in opposite directions, so as the yield falls, the price goes up)

There are more thoughts out on the street about why Gold is falling like a rock from the sky, but I think I'll stick with my theory that the "boys" on Wall Street are behind all this, and probably with the blessings, wink and nod from the Gov't. they saw an opening to drive the price down, and they did. And will continue to do so, until they feel that Elvis has left the building. (masses have panicked and sold). That's my story and I'm sticking to it!

Long time readers know that I have quoted my friend, Bill Bonner, many times over the years, and so in this time of crazy theories about what's going on, I turn to Bill to see what he thinks. By the way, one of the theories out there, plays well with my conspiracy tendencies. It goes like this. The Big Boys in concert with the U.S. Gov't are driving the price of Gold lower, so that the U.S. can buy it cheaper, and therefore have the Gold to deliver to Germany. Hey. I've heard of crazier things that turned out to be fact! OK.. any way. here's a snippet of what Bill Bonner had to say about the Gold selling that the NY Times reported on yesterday.

NY Times- "So Wall Street is growing increasingly bearish on gold, and investment that banks and others had deftly marketed to the masses only a few years ago."

Bill Bonner's response - "Ha-ha. Do you remember Wall Street deftly marketing gold to the masses a few years ago? Show us the ads! Give us the broker's phone logs! Prove it! The fact is, the masses never got anywhere near gold. Not even close. Most people have never seen a gold coin.. Which is why we're nowhere near a top. Wall Street never marketed gold deftly.. or any other way. Not even in its usual greedy, heavy-handed fashion. And the masses never bought it. Just the opposite. Yes, dear reader, we hope Goldman and SocGen are right. We'd like to see gold crash down around $1,300... or lower. First, because this would mark a real correction in the bull market. It's been going on for 12 years without a serious correction. Not a healthy situation. We'd like to get the correction out of the way... shaking out the Johnnies-come-lately and the two-bit speculators. Then, the final stage in the bull market could begin."

I usually get the ship righted after reading Bill's thoughts. Any way.This selling has been a paper event. Yes, an ETF liquidation, and that's what leads me to believe that when the paper selling is over, the physical demand which has remained strong all during the 20% drop in Gold's price since reaching a high of $1,921 a couple of years ago, will take over, and a slow grinding recovery will take place. When will that happen? I don't know. Better asked of the "boys" who are doing the paper selling.

OK. So, yesterday, the Commodities and Commodity Currencies were the assets on the chopping blocks, the rest of the currencies held their own. Well, the selling of the Commodities and Commodity Currencies became too much to bear, and eventually the selling spilled over to the rest of the currencies. The thing I found to be surprising though was the selloff in U.S. stocks yesterday. That was not something I expected during this sell Gold and risk assets timetable.

But that was yesterday. But it's not the end of the world, just a slight change of plans. This morning, I'm seeing some healing once again, with Gold up $35, the euro back to 1.31, and the Aussie dollar (A$) up 1/2-cent. Yesterday, I said something about the A$ that I was shocked that thousands of readers didn't throw right back in my face. I said that the A$ was down $1. YIKES! That should have been 1-cent! Thanks for not spanking me with that faux-pas!

The A$ move higher is curious, given the Reserve Bank of Australia (RBA) meeting minutes that printed last night, in which the RBA talked about how the lower inflation gives them room to cut rates, and then made a statement about how the A$ had remained "high". The markets like to get all lathered up over these meeting minutes that Central Banks print a month after the meeting took place. I find that laughable, but then, it's the markets, it's not as if these guys are rocket scientists! But that's the norm in the markets, Shoot Rudy, they do the same thing with backwards looking data!

It's been some time since I talked about the German Chancellor, Angela Merkel. And that's probably a good thing! But this morning in Germany, the Chancellor told a crowd something that I think she should be commended for. Let's listen in. "We know that there will have to be victims from this austerity in many countries. But, I believe that in the long term we'll have to have a growth strategy without always having to pile on debt. The piling up of debt is often made into a type of obligation to serve the principle of growth. All of that is false. It's not sustainable in the long term."

I think that Ms Merkel had U.S. Treasury Sec Lew in mind with those comments, as it was just last week that Mr. Lew, told the Eurozone Finance Chiefs that they needed to shift toward generating economic expansion like the U.S. has done through monetary measures. You know, we have no idea where all these monetary measures are going to take us, but I would pin my colors to the mast that calls for mass problems, and not the mast that says we'll be just fine from all these stimulus measures.

The Petrol Currencies that include: Norway, Brazil, Canada, Mexico and even the U.K. not only had to deal with the selling in the Commodity Currencies, but also the selling and the subsequent drop in price of Oil. The WTI Oil price which is the one I quote in the currency roundup each day is below $90 (at $88) and the Brent Oil price has fallen below $100. Still a long way from the $40 oil I was promised 2 years ago.

Another thing weighing on the markets is the renewed war rhetoric from N. Korea. News of N. Korea's warning to S. Korea that a "strike will start without any notice" is not doing the risk asset any favors this morning. But, a recovery in the risk assets, like I told you about above is going on, so maybe the markets are beginning to think of N. Korea's warnings like the boy who cried wolf. probably not a good idea, but it is what it is.

And for those of you keeping score at home, the Chinese have added another country to their roster of countries that they trade with and exchange each other's currencies, leaving out U.S. dollars from the terms of trade. This time it's France. OK, the agreement hasn't actually been signed yet, but like the other countries that were added to China's roster, once the verbal announcement has been made, the actually signing is just a formality. France is actually getting a leg up on the competition by doing this. You see, Paris would love to be the offshore renminbi / yuan trading hub in Europe, beating out London. So, getting into bed with the Chinese now, might serve them better when the time comes.

As I told you yesterday, the U.S. Data Cupboard has some items to yield to us today. Two of my faves. Industrial Production and Capacity Utilization, Housing Starts, and Building Permits will all print their results for March today. We'll also see the stupid CPI reports and you can bet your sweet bippie that some Gov't official will make certain to point out that inflation in the U.S. is still not a problem. I do expect to see some more rot on the vine exposed, in the Industrial Production and Capacity Utilization reports. And once again, I'll do my best Alfred E. Newman, and say, recovery? What recovery?

Then There Was This. Caroline Baum, a columnist for Bloomberg News, has always been a fave read of mine. Yesterday, she submitted this article on Japan, and the U.S. Treasury. It's a good read, so here's a snippet.

"With a new president and central bank governor in place, Japan has finally decided to get serious. Earlier this year, Prime Minister Shinzo Abe announced a "monetary regime change" including a 2 percent inflation target. On April 4, following its regular meeting, the Bank of Japan made its "quantitative and qualitative monetary easing" official.

The BOJ will double the monetary base by purchasing about 7.5 trillion yen of Japanese government bonds per month. It plans to extend the average maturity of its portfolio from three to seven years. And it will continue such actions until it achieves its inflation target.

In other words, the BOJ is doing exactly what the Federal Reserve is doing.

And for this it gets a warning from the U.S. Treasury "to refrain from competitive devaluation and targeting its exchange rate for competitive purposes"?

Chuck again. yes. this a case of the kettle calling the pot black. I just don't see how the U.S. can do the "do as we say, not as we do" thing, and then beat on Japan for doing what they said to do.

To recap. The selling continued all through the day yesterday in Gold and then the other currencies joined in. But that was yesterday, and today, we're seeing some healing in the price of Gold and the currencies. The gold selloff has been an ETF, paper event, folks. not physical gold. I keep saying that.

Currencies today 4/16/13. American Style: A$ $1.0374, kiwi .8490, C$ .9790, euro 1.3120, sterling 1.5310, Swiss $1.0790, . European Style: rand 9.1335, krone 5.7335, SEK 6.3875, forint 224.85, zloty 3.1365, koruna 19.7105, RUB 31.34, yen 97.85, sing 1.2355, HKD 7.7620, INR 54.14, China 6.2408, pesos 12.17, BRL 2.005, Dollar Index 82.15, Oil $88.22, 10-year 1.71%, Silver $23.52, and Gold $1,386.39

That's it for today. With all the news stations going 24/7 on the Bombing in Boston last night, I was taken back, in my mind, to 2001. The strange chills returned with each news update. At least I was able to watch my Cardinals and get my mind off that stuff for a couple of hours. I made my presentation on our business yesterday, I guess it went OK, nobody threw darts at me! I have one more day of "stuff" to do and write in my office today, and then back out to the trade desk! So, did you get your taxes filed? I actually came out about even this year, which is always a good thing for me, but somehow, I paid a higher tax rate than the President. I'll stop there, before I say something that gets me in trouble! I hope you have a Tom Terrific Tuesday , and keep those folks in Boston in your thoughts..

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 04-16-2013 11:26 AM by Chuck Butler
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