Retail Sales Disappoint.
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In This Issue.

* Without Cars and Gas, Sales are negative.

* RBA meeting minutes boost A$.

* Riksbank meeting minutes steady krona.

* Euro best performing G-10 currency in past 12 months.

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

Retail Sales Disappoint.

Good day. And a Tom Terrific Tuesday to you! Did you see the Home Run hitting display that the young Cuban defector, Yeonis Cespedes, put on last night? WOW! The first time that a low average (.225) hitter has won the derby. And. for some of those shots into the ozone, it's good to remember that he and all the other major leaguers use wooden bats! Of course I was long in bed asleep when the final round began, but I had seen plenty!

Speaking of hitting home runs, the Aussie dollar (A$) has smacked one over 450 feet in the overnight markets, as the A$ is up over 1-full cent! Apparently, the Reserve Bank of Australia's (RBA) last meeting minutes proved to be cold water thrown on the rate cut expectations that have weighed heavily on the A$. The change in wording was small folks, but I think that the short bets placed on the A$ had become so heavy, that the short position holders were getting very nervous about how "short they were". And when the wording changed, ever so slightly I might add, they panicked and the shorts started getting covered, and that's why the A$ is trotting around the bases right now.

The wording change? Oh, Let's see if you can pick this out. June meeting: The inflation outlook, although slightly higher because of the exchange rate depreciation, might provide some scope for more rate reductions. And the July meeting: The inflation outlook, although slightly higher because of the exchange rate depreciation, could provide some scope for further easing, should that be required to support demand."

The "might provide" to "could provide" and the "should that be required" are the keys that the markets focused on. To me it's 6 of one and 1/2 dozen of another, but the markets thought the change sounded as though the RBA is considering not cutting rates in August, and that sent the short position holders in the A$ heading to the exits..

The Reserve Bank of India (RBI) raised their marginal standing facility rate from 8.25% to 10.25%, but left the benchmark repo rate at 7.25%... This move turned the selling in the rupee around, but it's really nothing but a move that is marginally positive for the rupee, in that the marginal standing facility, basically means that it's more expensive to short the currency. So, the effect on the rupee could be short-lived. That is unless the RBI does more to support the currency, which I don't expect right away. Look how long they took to do something after the rupee fell to record lows a couple of weeks ago.

It must have been Central Bank meeting minutes day, because not only did we see the RBA's meeting minutes, but we also saw the Riksbank's meeting minutes, and they too have been good for the Swedish currency, the krona. The Riksbank members are still split on a rate cut, but the prevailing thought among the majority of members is that the indebtedness of households is too high, and cutting rates in that environment would be disastrous. Too bad our Fed doesn't hold the same thought process! Right now, the Riksbank is on board with keeping rates steady Eddie for another year. And that removes the uncertainty about rates albatross from around the neck of the krona, thereby allowing the krona to continue to be the shining light of the non-euro currencies from Europe.

If you go back 12 months, to July 2012, the best performing currency of G-10 countries is the euro. I know, the beaten and beleaguered euro, the currency that was supposed to have collapsed 3 years ago and every year since, is the top G-10 currency in the past 12 months.

Speaking of the euro. While the euro drives higher this morning, above the 1.31 figure, German Investor Confidence as measured by the think tank ZEW, dropped this month. The survey which aims to predict economic developments 6 months in advance dropped from 38.5 in June from 36.3 in July, the first decline in 3 months. This should not be "news" to observers of the Eurozone, as even the European Central Bank (ECB) believes the risks to the economic outlook in the Eurozone, remain on the downside. The ZEW report actually printed better than expected, so, things aren't as "bad" as everyone expected them to be!

There has to be some bottoming out before you can begin to build again in an economy. A lesson I wish the Fed Reserve had learned long ago.

With the A$ rising more than 1-full cent overnight, the New Zealand dollar / kiwi is getting dragged along in spite of a report in New Zealand that showed that inflation continues to surprise on the downside. With inflation falling VS the forecasts, the pressure on the Reserve Bank of New Zealand (RBNZ) to cut rates increases proportionately. For those of you keeping score at home, the RBNZ forecast 2nd QTR inflation at +.3% and year on year at .8%, and the print was .2% and .7%

But despite all this pressure to cut rates, kiwi is rallying this morning and is up ½-cent.

Gold recovered that $3 it was down early yesterday morning and ended up on the day, slightly. From what I've seen lately, every time Gold rallies to $1,300 it gets smacked back down. This can go one of two ways folks. Either traders get tired of these runs and failure to add on, and decide to give up, or. they take it as a challenge, and keep knocking on the door to higher levels until they break through. I'm a firm believer that it will be the latter of the two ways. But that's just my opinion and I could be wrong.

Well. June Retail Sales here in the U.S., which were supposed to be the bell ringer for the calls to end Quantitative Easing (QE), and print a very strong number, disappointed with a less than stellar number. June Retail Sales were forecast to have risen .8%, but only mustered a .4% gain, and without cars and gas, actually fell -.1%... I'm telling you now so you can listen to me later. This economy isn't strong enough to stand on its own. We can only eke out .4% gain with cars and gas, all the while we have ZIRP (zero interest rates policy) and easy credit with money falling from the skies? The economy is not ready for prime time folks. Now, I'm not saying that I think more stimulus is needed. I wish we would stop all of this accommodation, what I'm saying is that the Fed will feel that it has to do something. Haven't they always felt that way, at least under Big Al and Ben.

Today's U.S. data cupboard will give us two of my fave economic data prints. Capacity Utilization, and Industrial Production, both printing their June results. In addition to those two, we'll also see the Total Net TIC Flows (net foreign purchases) and the ultra-stupid CPI (consumer inflation), which only tends to get me all riled up at the audacity that the Gov't has in telling us with a straight face that inflation has only risen 1.6% in the past year.

Before I go on, let's go back to the Retail Sales report for a minute. You know, this report was supposed to be the "tell all" about how strong the economy was. Well, apparently, it's not. I saw an analysis of the report that said that consumers bought cars and trucks, and the gas to put in those cars and trucks, furniture and clothes, but cut back on everything else. Less eating out, drinking in bars, they decided to stop improving their homes, and live in the dark ages by not buying new computers and electronics. Good for them! So, if consumers are not spending their time eating out, or drinking in bars, and they aren't improving their homes, what are they doing? Ahhh grasshopper, if they are like me, they have done all the improving they're going to do, and it's just no fun going out to eat any longer, so let's just sit and relax in our backyards! Read a book, watch TV, or listen to music. Or, check the news stories for Pfennig Pfodder

For What It's Worth.. Yesterday, I was working on one of my Vancouver presentations, and an email arrived from one of our marketing people, reminding me that the Review & Focus was due and asking when they might receive it from me. I was shocked that I had completely forgotten about the monthly publication that I've written for over 13 years now. So, I dropped what I was doing, and began to gather thoughts that I had saved throughout the month that would help remind me of things I wanted to write about. I've gone all through this explanation to tell you that I found an item that I had saved for the R&F that I think I'll share here first.

It's a discussion about Student Loans in the U.S. I had come across some data that showed an explosion of student debt in the last 10 years. There has to be something fishy about that don't you agree? Of the greater than $900 Billion in Student debt 33% is held by people under 30, and 33% is held by people 30-39. Well, apparently, these debt holders, have been transferring the debt to an unsecured line of credit or even asset backed when available, like a HELOC. They do this because a Student Loan can't be walked away from, but an unsecured line of credit surely can. I find this to be just awful, as these young people are already learning to not live up to the responsibilities they signed up for. Just another line item for us to keep on our ledger of things that will mount up on the dollar. And a glimpse into the world that we'll live in as we grow older and these youngsters take over the world. Oh brother are we in trouble! (of course I'm sure my dad said the same thing about my generation!)

Chuck again. Hey! I never left this morning! But I do want to thank my friend Dennis Miller for sharing the data that got me thinking about all this, and to Casey Research's Alex Daley for sharing some of his thoughts on the data. Sometimes, folks, it takes a few writers to change a light bulb. HA!

To recap. Central Bank meeting minutes ruled the roost overnight, as meeting minutes from the RBA and Riksbank printed. The markets got spooked by the RBA's change in wording, albeit a slight change, the short position holders panicked and closed out their short positions pushing the A$ up 1-full cent. The krona is slightly stronger on the Riksbank's minutes showing that there is still debate about a rate cut, but that the hawkish members still have the majority Germany's ZEW dropped for the first time in 3 months, but the it hasn't stopped the euro's climb above 1.31.

Currencies today 7/16/13. American Style: A$ .9225, kiwi .7880, C$ .9605, euro 1.3120, sterling 1.51, Swiss $1.0610, . European Style: rand 9.8090, krone 6.0155, SEK 6.6290, forint 222.90, zloty 3.2465, koruna 19.7630, RUB 32.42, yen 99.40, sing 1.2590, HKD 7.7575, INR 59.31, China 6.1692, pesos 12.60, BRL 2.2195, Dollar Index 82.73, Oil $106.56, 10-year 2.53%, Silver $19.98, Platinum $1,426.00, Palladium $734.58, and Gold. $1,291.28

That's it for today. Did you see the miracle rescue of the little boy that got swallowed up in a sand sink hole? Amazing. One day down, 4 to go until I begin my 3-week journey from one corner of the country to the other! Baseball's All-Star Game is tonight. 6 Cardinals will be there, with 5 actually playing at some point. I'm a National League fan, as I do not care for the DH (designated hitter) in the American League. And no one will ever change my mind on that! We are ultra-shorthanded on the desk this week. Chris is out west talking, Mike Meyer is at home with new baby, Jen is on vacation, and our little Christine heads out tomorrow. I felt like death warmed over yesterday, but just couldn't leave everyone even more short-handed. And no I'm not looking for any medals, just doing my job! Which reminds me I still have more R&F to write this morning, so I had better get to that right away! I hope you have a Tom Terrific Tuesday!

Chuck Butler
EverBank World Markets

Posted 07-16-2013 5:10 PM by Chuck Butler