Global Manufacturing Rises.
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In This Issue.

* Chinese play games with exports and imports.

* Strong Chinese PMI pushes currencies higher.

* IMF says Swedish krona not hurting economy.

* Chuck on The Street.com.

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

Global Manufacturing Rises.

Good day. And A Marvelous Monday to you! And, welcome to June! In keeping with Pfennig Tradition Here's the way we start June.. June is busting out all over, all over the meadow and the hill, Buds are bustin out of bushes, and the rompin' river pushes every little wheel that wheels beside the mill! - Carousel, in case you're a youngster and were not familiar with that song!

Well, my Friday was going along just fine until a reader decided that he'd had enough of me, and decided to take me to the woodshed, for what he called, "bad reporting, bad grammar, and too many song lyrics. and then the piece de resistance. He said he had had it with my "talking my book". I reminded him that there was an "unsubscribe" feature of this FREE letter! But, this guy really ticked me off, which is what he was trying to do, so he succeeded! He said I wouldn't talk about something that didn't fit "my book". Hmmm. I wonder how he found what "my book" consists of? The legal beagles are now running around in a tizzy trying to figure out if they ever said it was OK for me to have a "book". HA!

I don't want to give this guy more credit than he deserves, which is none, but. he did bring up something that basically proved what I had been telling you dear Pfennig Readers for years now, and that is to simply only believe 1/2 of what the Chinese say about their economic data. But, this reader believed I wouldn't talk about this, so. here goes. Remember the other day when I told you about how I had read that deposits of renminbi in Hong Kong had soared? Well, apparently, the Chinese have learned to do all this with smoke and mirrors, setting up shell companies in Hong Kong and then exporting from China to the company in Hong Kong, thus shipping to themselves, but blowing up the export and import numbers. So, see. what I've told you for years, to only believe 1/2 of what the Chinese say about this stuff, holds true here.

The currency rally that we had seen for two days in euro, tripped up on Friday, but appears to be back in black again today, with the euro above 1.30 again, and the Aussie dollar (A$) up 2/3-rds of a cent this morning. Speaking of Chinese data. The Official PMI (manufacturing index) that the Gov't prints came out stronger than expected at 50.8, which is above the line in the sand at 50 that determines if a manufacturing sector is contracting or expanding. This data, which you can choose to believe or not, was well received by the markets this morning, and is helping the A$ move higher, along with the other global growth currencies.

The euro received its own bit of good news from a PMI this morning. The Eurozone area manufacturing index rose to 48.3 in April from a 46.7 in March, still below 50, so still in the contraction zone, but. stronger, and a surprise, which gives the boost to the euro even more strength. The European Central Bank (ECB) meets this week on Thursday (6/6), and even thought ECB President Draghi, said at the last meeting that he would cut again if data worsened, I think he'll keep his rate powder dry this week. Data has been mixed at best, but this manufacturing index really places the dust covers over the rate cut machine this week.

The end of this week will bring us the June Jobs Jamboree. The markets are so into the numbers that they refuse to look under the hood. Reminds me of a song: I am so into you, I can't think of nothing else. That's the markets singing to the BLS. The reason I'm talking about this now is that the experts are looking for 175,000 jobs created in May. How many "real jobs" is the question the markets don't want to ask or know, so. the talk after such a number will probably turn to more discussion about the Fed tapering off their Quantitative Easing (QE), or their zero interest rate policy (ZIRP). Well, I don't know how many times I have to say this, but here goes again. I think all that talk is premature.

Well, before we get to the Jobs Jamboree, we'll have other stuff that's just as important to the markets, like the ECB meeting, and the speech by Japanese Prime Minister (PM), Abe, on Tuesday night (Wednesday for them) His speech will about growth strategies. This ought to be good, folks. Let's hope it's new stuff, and not just recycled stuff, we certainly don't want to have the feeling of: been there, done that, bought the T-Shirt, after he talks!

On Friday, I told you about how the Brazilian Central Bank (BCB) had surprised the markets with a 50 basis points rate hike, but the markets were not impressed and continued to sell the real pushing it to 2.10. The BCB President, Tombini, believes that the real's weakening has been "moderate" and won't have any effect on inflation, which is what the BCB is attempting to stop rising, but hiking rates at their last two meetings. Hmmm. let me see if I get this right. the real falls over 4% VS the dollar last week alone, and Tombini doesn't think this is a big deal? Hello, McFly. anyone home? No wonder the markets have decided to take the real to the woodshed and leave it there. The BCB, the Gov't, and anyone else that has had their hands in the cookie jar, are all in a competition to see who can put more fear in the markets' drive.

I had a reader send me a note over the weekend, asking me to talk about the S. African rand. YIKES! Long time readers know that I've always said that the rand was too volatile for my blood and that I wouldn't touch it with someone else's ten foot pole. But all the while that I was saying those things, rand was gaining in the long run. Well, those days have seemed to pass the rand by, folks. The S. African Gov't has done just about everything they can to mess with the Goose that laid the Golden Egg here. And now with the mining strikes that seem to pop up as often as pimples on a teenager's complexion, there's just no shortage of fears about what's going on in S. Africa.

And now, with the rand on the slippery slope, inflation is soaring once again in S. Africa, which cries out for huge rate hikes. But I don't think we'll see them, at least not at this point in time. So, there's just too many questions out there about rand right now folks. and right about the time that I stopped typing that last sentence I see a story go across one of my screens that basically says that rand is the "most oversold currency and it is poised for gains". Well, which way it goes from here is anyone's guess, but I'll stick with my thought that there's just too many questions right now.

Sweden also printed a manufacturing index this morning, and it too beat the expectations, rising to 51.9 in May, from 49.6 in April. I also noticed a story going around this morning, that the IMF issued a statement regarding the Swedish krona, saying that it's strength was not hurting Swedish exports or the Swedish economy. Well, that's all good, but at this point of the proceedings, I have to question whether the IMF carries a big stick with mature countries like Sweden. The IMF is still probably the king of the hill when it comes to Emerging Markets Countries, but beyond that I have to question their need. But. maybe, just maybe, the Swedish leaders listen to the IMF, and if they do, then they're probably feeling better about themselves, and the krona.

The Japanese yen is in the same clothes it traded in on Friday at 100.50. I expect yen to be very volatile this week, as the U.S. data will be volatile and we have the PM Abe talking mid-week.

The U.S. data cupboard is chock-full-o-data this week, and Fed Head speeches! We start today with our own version of a manufacturing index, which should improve, just like everyone else's that has already printed. My problem with this report is that it never reflects the regional reports. The Regional reports have all been negative leading up to the national report. But the national report will be positive. OK. if that's the case once again, then I make a motion to drop the reporting of the regional reports.. They are useless in this case!

We'll end the week the Jobs Jamboree, and the rest of the week will be filled by a plethora of data. Speaking of data. remember when I told you how 65% of the economic data prints in April missed their targets to the downside? Well, to date, it's been about the same kind of count for May. So far, we've had the housing data and leading indicators print the only positive reports, while everything else has been to the downside. You know, you can put lipstick on a pig, but you still have a pig. And you can put all the lipstick you want to put on this so-called recovering economy, but when you count the downside reports, the economy is still weak.

Gold is up $7 this morning, after getting spent on Friday. This up $20 one day, down $15 the next is enough to make someone dizzy. I saw some numbers from our metals trader, Tim Smith, the other day. His reports showed the same thing I've been saying since April. that the paper trades are sells, and the physical trades are buys. According to Tim, " It looks like demand for physical is as strong as ever." So, there! I'm not talking "my book". I'm telling you the skinny from a metals trader who sees every trade!

The thing that gets me about the paper trades is that when you're talking about "pooled Gold or Silver" that's not really a paper trade. Sure you don't have the physical metal in your hands, but. unlike an ETF, you CAN get the physical metal from your pooled account at any time. You just have to pay for the fabrication fees, and whatever it costs to ship it to you. So, it's important to keep that in mind, don't be confused! (in my best Steve Mizerany voice! For non-St. Louisans that won't be funny)

Well. did you see the quick interview that I did on the Street.com last Friday? I was asked about yen and euro VS the dollar. I think I made my points, kept the pace, and didn't trip up. I wasn't aware that the interview would only be 10 minutes, as I was led to believe it would be 30 minutes, but that's OK. this way it doesn't take up everyone's bandwidth to watch it. which you can do here: http://www.thestreet.com/video/11938553/how-to-trade-euro-yen-in-summer.html

A lot of you have never seen me or heard me talk before, so here you go. For the guy that blasted me last week, maybe you can get a still out of this, print it, post it, and throw darts at it. that'll make your day!

I hear that not everyone received the Pfennig last Friday, and for that I apologize, and. to make matters worse, the Friday Pfennig wasn't posted the blog, even though I sent it to the blog master for posting! There's a glitch in the process.

For What It's Worth. I saw this on the Bloomberg last Friday and even mentioned it to the desk. For now Goldman has told their clients to sell Gold, and Treasuries. Hmmm. Let's listen in.

"With yields on government bonds jumping in the past week, Goldman Sachs has warned that a widely predicted bond sell-off is finally happening, while a major U.S. asset manager has warned investors to move out of long-duration bonds to avoid heavy losses.

Pessimistic growth targets, a fear of the Federal Reserve curtailing asset-purchases, and uncertainty over Japan's "Abenomics" policies are the three key reasons that Goldman Sachs cited for the move higher in yields.

"The bond sell-off: It's for real," Goldman's fixed income analysts said in a research note released on Friday. "Our end-2013 forecast for 10-year U.S. Treasuries remains 2.5 percent, above the forwards, and we will be looking for other opportunities to trade the market from the short side."

Chuck again. this was a good For What It's Worth, for there is something happening here, and what it is, ain't exactly clear. On one hand I like it that someone besides me is clanging the triangle for the bond bubble popping, but on the other hand, did it really have to be Goldman? I've been on the opposite side of the fence from them for most of my life. Oh well. I still don't believe the Fed Heads are going to allow the Bond Bubble to pop just yet.

To recap. The currencies sold off halting their two day rally on Friday, but are back on the rally tracks this morning, after a stronger than expected manufacturing report from China, and then the same from the Eurozone, lit up the currencies. The U.S. will also print a manufacturing report today that is expected to be strong, which is opposite from the regional reports that leading up to the national report have been negative.

Currencies today 6/3/13. American Style: A$ .9655, kiwi .7985, C$ .9660, euro 1.3015, sterling 1.5250, Swiss $1.0430, . European Style: rand 9.9820, krone 5.8470, SEK 6.5950, forint 226.75, zloty 3.2780, koruna 19.8090, RUB 31.92, yen 100.50, sing 1.2590, HKD 7.7640, INR 56.76, China 6.1806, pesos 12.79, BRL 2.1395, Dollar Index 83.13, Oil $91.98, 10-year 2.16%, Silver $22.47, and Gold. $1,393.70

That's it for today. We broke the curse! For once the EverBank night at the ballpark was a winner! Well, sort of. The Friday night game was cancelled, and so about ½ the crowd from Friday night returned Saturday afternoon to watch our Cardinals beat up the Giants. Saturday night I attended a charity dinner auction for the St. Patrick's Center here in St. Louis, I was there as a guest of my friends, Gary and Dianne Schuette. A very fun night was had by all! Congrats to our colleague Mike Harrell and his wife, on the birth of their third child, little Ava checked in on Saturday, mom and baby are great! My two grandsons were about to drive me nuts yesterday, as the two-year olds are going through the "mine" phase. OK. time to go.. I hope you have a Marvelous Monday, and Wonderful Week!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 06-03-2013 11:17 AM by Chuck Butler
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