The Ghost of John Connally.
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In This Issue.

* Currencies take a breather.

* IMF talks renminbi as reserve currency.

* Aussie Unemployment drops! .

* Chuck tries to sing like Bill Medley.

And Now. Today's A Pfennig For Your Thoughts.

The Ghost of John Connally.

Good Day! . And a Happy Friday to one and all! It's a real TGIF, remember that saying?, for yours truly! I am so looking forward to this weekend, for the temperatures are supposed to finally be warm, and the Cardinals / Cubs renew their rivalry this weekend, plus, I'm dead tired! So, bring the weekend on, now! Ahem. Chuck, stop right there, you still have the rest of today to go through! OK, I'll calm down. Thank you for getting me on terra firma to start today!

Well, this has been a week that the dollar bugs would like to forget. The price action yesterday, was once again, all against the dollar, all day long, but this morning, it appears that the markets are taking a breather, as the currencies are, for the most part, all flat. But, the good news for them is that they've not given back their gains this week. So. there you have it! The week all wrapped up in a bow. Guess I can go home now and start my weekend! HA! I wish!

The euro is pushing the envelope once again toward 1.40.. I saw where an ECB member from France told the media yesterday that the "ECB would prefer to see the euro at 1.20" Well, I'm sure glad the markets don't agree with you! It's not that I want to see the dollar get pummeled like it has this week, but in my mind, it's getting what it deserves. The Debt in the U.S. and I mean all of it, from Gov't unfunded liabilities, to State Debt, City Debt and Consumer Debt doesn't and shouldn't in any way reflect a strong dollar. I'm waiting for a U.S. official to give the ECB the old Treasury Sec. John Connally phrase. "The dollar is our currency, but your problem".

Yes, that actually happened back in 1971. When the Connally told his European counterparts that in an attempt to shut them up regarding dollar weakness. Skip ahead to today, and I guess you could change the statement to say, "Treasuries are our debt, but your problem". Think about that for a minute. Got it? Anyway, the dollar is weak, and getting weaker as the days go by, so where is all the currency buying? I read a piece the other day from a large brokerage house that is calling for the "death of FX volatility". What they mean by that is that the trading volumes are thinning out, and getting thinner all the time.

Chris and I were talking about this very same thing the other day, in that, for years, people would call us looking for yield. And now that there are a couple of countries that have some yield, and some that are adding to their yield as the year goes on, we don't hear a word from anyone. I know that everyone and their brother are enamored with stocks right now. But as I told the audience in Orlando a couple of months ago, "Everyone is interested in stocks again. Well, good for them! The last time this happened, it didn't turn out too good for stock holders now did it?

Earlier this week I told you about the rumor going around that someone's underground and, well, you know how that ends. But the rumor going around was that the new Shanghai Free Trade Zone was going to be moving to a convertible renminbi / yuan by this summer. Well, to follow that up, a dear reader sent me a note from Standard Chartered Bank, who says that "at least 40 Central Banks have invested in the yuan and several more are preparing to do so. The trend is occurring across both emerging markets and developed nation Central Banks diversifying into "other currencies" Perhaps most ominously, for king dollar, is the former IMF manager's warning that, "The yuan may become a de facto reserve currency before it's fully convertible".

WOW! Now, I've always thought that to be a reserve currency the currency had to be fully liquid, and held by all central banks to facilitate the terms of trade. But, think about what this guy had to say here for a minute. As long as China has the currency swap agreements in place with all the nations that they trade with, and some they don't trade with, and those countries hold renminbi / yuan as a reserve currency to facilitate the terms of trade, then who needs full convertibility to be a reserve currency? Apparently not the renminbi / yuan.

Do you remember when I first told you about the currency swap agreements that China was signing with countries that would remove the U.S. dollar from the terms of the transaction, and only used the currencies of the two countries making trade? I know that many people out in the world, not that many people read the Pfennig, but if anyone around the world had heard that China was signing currency swap agreements, they would have said, "who cares?" But not me! I saw then what China had up their sleeve. And I told you, dear reader, and anyone that would come to hear me talk at conferences, and now the Chinese plan is all coming together right before our very eyes.

I love reading reports from boys and girls at Big Investment Houses, that claim they are the first to see this happening. HAHAHAHAHAHAHA! But I do love the fact that more and more people are seeing this now.

The Aussie dollar (A$) sure has enjoyed a good performance week. The A$ is flat today, but has gained 1 ½ - cents this week. So... Not only was the Aussie dollar (A$) being bought on the rate differential yesterday, but also because of a very strong jobs report! The Aussie Unemployment Rate fell to 5.8% from 6.1%, which was totally unexpected by the so-called experts or the markets... Don't know how I missed that yesterday! UGH!

And since I'm doing mea culpas on mistakes I made yesterday, I might as well get this one out of the way too. Yesterday, I was talking about the inflation reports in Sweden and Norway, and said, "Sweden's inflation report is concerning, and has pushed the chance of a rate hike in Sweden this year to the back burner, but Norway's chances of a rate cut get pushed to the front burner." Of course, I should have said, "Norway's chances of a rate HIKE get pushed to the front burner". I've always said that I write with a stream of consciencenous. well that stream was misfiring yesterday! UGH!

I received a note / question from a dear reader last night, asking me if the Dollar Index falling below 80 was a bearish sign for the dollar? Well, yes and no. The Dollar Index, which measures the dollar's value against 6 trading partners, has been below 80 several times in the past. The past 5 years, the Dollar Index has had an average price of 79.776, and has reached a 5 year low of 72.696 in May 2011. Back before the financial meltdown the Dollar Index fell to 70.698. At that time, (March 2008) it was thought that the dollar was going into a deep dark hole, never to return. But then all Hell broke loose and everyone rushed to buy dollars, which seemed perverse to me, for the U.S. was to blame for the hysteria in the markets. But that's what happened. The next time, the dollar might not be so lucky, given the importance of the Chinese renminbi / yuan these days.

Well, that was long-winded, eh? But important to discuss I might add! Before I go on though, it's important that I tell you that the great and powerful Oz, no wait, I mean the great Richard Russell, has said that a fall below 78 in the Dollar Index would indicate to him that it was a bearish signal for the dollar. So, for those of you keeping score at home, there you go!

You know. I've mentioned this a few times in the past, but since I was just talking about the thoughts about the dollar's direction pre-financial meltdown, one has to wonder, you don't think that, no, that wouldn't happen, would it? Was the financial meltdown that began with the collapse of Lehman Bros, something that was brought on to save the dollar? Nah! Come on Chuck, you know that stuff doesn't happen in real life! HA!

Getting back to reality, and away from Chuck's secret conspiracy hideout, we find that Gold is up $4 this morning. Yesterday, I mistakenly said that Gold had reached a high for 2014. And a couple of you thought to point that out to me, thank you! I didn't mean to say a high for 2014, I meant to say a high for the week. We began the week with Gold below $1,300, at $1,297, and this morning you'll find Gold around $1,322. The FOMC Meeting Minutes, that I talked about yesterday, have really greased the tracks for more Gold gains, given the deposit interest rates aren't going anywhere in the near future, thus removing that competition from Gold.

With Debt everywhere we look here in the U.S. I found it interesting that the IMF's Christine Lagarde was sounding the warning bell and saying that "huge government and banks risk new financial crash. That the world leaders needed to do more to deal with huge government and bank debts that will continue to drag down growth and undermine the stability of the financial system." Hmmm. sounds like Ms. Lagarde has become a Pfennig Reader! Well, if that's the case, (and I doubt it) then let me welcome you to my humble letter, that people all over the world read each workday.

Well, the U.S. Data Cupboard has the March PPI (wholesale inflation) report to print today. and that's it! Which is fine with me, as I need to stop right here and sing along with the Righteous Brothers song, Soul & Inspiration. You should hear me try to sound like Bill Medley. Like I always say, it's a good thing I'm here by myself in the morning! Baby, I can't make it without you, and I'm telling you honey, you're my reason for laughin', for cryin', for livin' and for dyin'

For What It's Worth. I doubt you've seen this that came across on Reuters, but it very interesting. And once again, tells the story of the dollar being reduced to non-reserve status.

"Russian state-controlled oil producer Gazprom Neft said it had received positive responses from Asian clients about the possibility of using euros as a settlement currency instead of the dollar.

Company head Alexander Dyukov said this week Gazprom Neft had broached the idea of dropping the dollar, traditionally the currency of choice for the global energy sector, in response to a possible new round of Western sanctions over Russia's annexation of Crimea.

He said the company had discussed with buyers the possibility of switching contracts to euros and that 95 percent had said they were ready to do it. Gazprom Neft ships around 30,000 barrels per day of oil eastward.

"Gazprom Neft has held discussions with its eastern partners about the possibility of completing settlements in the European currency. They, in turn, expressed their potential readiness for this," the oil arm of top Russian top natural gas producer Gazprom said in emailed comments on Thursday.

Three buyers in Japan and China said they had been approached by Gazprom to settle oil payments in currencies other than the dollar. Two of the buyers said they were still considering the proposal, while the third said his company had bought crude using euros before and did not see it as a problem." -Reuters

Chuck Again. You know, over 10 years ago, the U.S. began fighting in Iraq. There were stories then that the U.S. wanted to get back at Iraq for selling their Oil in euros. Let's hope our leaders aren't willing to fight everyone for using euros to pay for Oil!

To recap. The currencies end a good week for them, taking a breather today. For the most part the currencies are flat today, and Gold is up a few bucks this morning. The IMF says that the Chinese renminbi / yuan could become a de facto reserve currency. Chuck misses a big story on the A$ yesterday, as Aussie Unemployment falls to 5.8% from 6.1%, and Chuck misspeaks about Gold, and the Norwegian direction of rates. Chuck must have had some bad fruit yesterday, as he was really off!

Currencies today 4/11/14. American Style: A$ .9385, kiwi .8660, C$ .9120, euro 1.3875, sterling 1.6725, Swiss $1.1410, . European Style: rand 10.5145, krone 5.9550, SEK 6.5395, forint 221.05, zloty 3.0145, koruna 19.7760, RUB 35.68, yen 101.40, sing 1.2490, HKD 7.7540, INR 60.17, China 6.1495, pesos 13.09, BRL 2.2065, Dollar Index 79.48, Oil $103.19, 10-year 2.64%, Silver $20.05, Platinum $1,459.75, Palladium $795.00, and Gold. $1,321.61

That's it for today. Another game, another loss for our Blues last night. And the Lindbergh Water Polo team took one on the chin last night in the first game of a tournament, which is not the way to start off a tournament! I'll be in the stands at the Rec-Plex all day tomorrow watching Water Polo. Stephen Colbert will replace David Letterman next year when Letterman retires. I think Colbert is funny, but wonder if he'll remain that way in the network playground. Sunday is Palm Sunday, and next Sunday is Easter, which sure seems to be very late this year, but Shoot a couple of weeks ago, we were dealing with snow here, so I guess it worked out well. The Masters is taking place now through Sunday. That's a beautiful golf course! At least what I see on the TV! Well, it's time to go. I want to thank you for reading the Pfennig, and I hope you have a Fantastico Friday!

Chuck Butler
EverBank World Markets

Posted 04-11-2014 11:48 AM by Chuck Butler
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