John Williams Says U.S. Economy Is Headed Down.
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In This Issue.

* Thin Volumes remain.

* And Tight currency ranges are in place.

* Doomsday report on New Zealand? .

* China continues to weaken renminbi.

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

John Williams Says U.S. Economy Is Headed Down.

Good Day! . And a Marvelous Monday to you! Easter Monday on the Calendar, which means, most of Europe and Australia are closed, along with other outposts along the beaten road. I hope that whether you observe Easter or not, that Sunday was as grand a day as it was here in St. Louis. I spent the day outside, and I hope you could too! It was also Frank Trotter's birthday, so I believe it was a grand day at his house! A lot of us made "birthday videos" for Frank, with little messages to him that one of his two lovely daughters, Jessica, put together. And now we move on to the 3rd week of April.

But before I begin to talk about the boring stuff, you know economies, data, boneheads and twits, I want to mention that Rubin "The Hurricane" Carter died yesterday. Carter was idolized by the 1975 song, "Hurricane" by Bob Dylan. If you don't know the story of Rubin "The Hurricane" Carter, I suggest you Google it. I was never a Bob Dylan fan to say, but his 1975 song that publicized Carter's wrongful conviction of 3 murders in 1966, was his best work.

Back in those days, the late 60's and early 70's I was into boxing. I spent hours boxing with my buddies in an empty garage, so I was into this story from the beginning.

OK. Sorry for the long intro this morning. but quite frankly, as I told you last Thursday and Friday, the volumes are thin, the data is sparse, and the senior traders haven't returned from their long Easter holidays to move the markets in one direction or another. The same has held true this morning, as the overnight markets were sparse, with Asia around, but not the South Pacific, or Europe. Nonetheless, we do have some things to talk about this morning, even with the currencies trading in very tight ranges across the board.

The main currency to talk about this morning is Gold. The shiny metal spent Friday trading below $1,300, and this morning Gold has lost another $6 to $1,288. All that I've read about lately, are stories touting higher interest rates in the U.S. But, quite frankly, I don't get it. What are these guys writing these stories seeing that I'm not seeing? Let me point out that the 10-year Treasury saw its yield fall last week. Let me also point out that Bank deposit rates are losing the ground they recently attempted to gain. And let me also point out that The FOMC Meeting Minutes flatly stated that, "Our forecasts have overstated the rate rise pace." But that's not stopping the markets from having their own ideas. wrong or right!

So, all that weight is being thrown on the shoulders of Gold. And that won't stop until it does. In other news. The Chinese marked down the renminbi/ yuan again last night, and now the last two nights of markdowns have totaled more than the appreciation that was allowed late last week, that means that the renminbi / yuan is now at a one-month low. The Chinese leaders are not happy about the latest report that showed about $10.5 Billion of new "hot money" entering the Chinese economy. This "hot money" is what Chinese leaders have been worried sick about, and the reason they are attempting to curb the inflows of "hot money" by marking down the renminbi, in hopes that the investors lose hope of currency appreciation.

I liked what I saw last week from a former Peoples Bank of China (PBOC) adviser Yu Yongding when he said, "market forces should determine the exchange rate so long as there are controls on speculative, short-term capital flows." And then Liang Hong, a big shot at China International Corp, said, "China can no longer bear the cost of forex reserves, so just let the yuan appreciate."

Unfortunately, the Chinese leaders are swayed by comments like these. The Chinese leaders will continue to do what they think is best, and right now, that is centered around throwing the markets off the scent of currency appreciation. But, I truly believe that this maneuver will end, and China will get back to the currency appreciation business. Of course, that's my opinion, and I could be wrong.

While we're in the neighborhood, let's skip over to New Zealand, where a story that appeared in Forbes about New Zealand really got the New Zealand dollar / kiwi going in the wrong direction. Apparently, the writer for Forbes, believes that New Zealand's economy is heading for a crisis. And gives 12 reasons why New Zealand's economic bubble will end in disaster.

OK.. I'm not going to go through the 12 reasons, because I'm not buying it! But, I told you about it just to be "fair and balanced" on this stuff. For I was ready to tell you how I saw interest rates heading higher again in New Zealand, which is to combat a couple of things, one of which is the whole premise of the Forbes writer's thesis. That the housing market in New Zealand is overvalued, and the interest rate hikes will pop the bubble. Let's listen in to a NZ economist who debunks the Forbes writer's views. This is economist Shamubeel Equab.

"The basic premise that there are risks in the economy from a high housing market in Auckland, lots of debt and reliance on very few countries for exports are true, but his interpretation that this is a precursor to a massive slump is hugely overdone."

So. you get to choose with mast you want to pin your colors to. The mast of a future disaster in New Zealand, or the mast of continued growth, wider interest rate differentials, and currency appreciation.

I get this stuff all the time folks. I receive emails from people that don't believe a word I say about what's going on in the U.S. But as I said the other day. As Thin Lizzy said, "if they don't want know, forget 'em".

And that vein, I give you something I picked up on Friday on KingWorld.com. It's about John Williams of ShadowStats.com. Let's listen in.

John Williams (Shadow Stats) runs a famous advisory in which he dissects the government's economic data, and reveals the truth about what's really happening. He notes that the government puts out optimistic data and then a month or two later revises or adjusts the data to tell the real truth. For instance in a recent message Williams writes, "Payroll and employment numbers remain at horrendous quality, generally not comparable to earlier reporting."

Many economists follow the so-called leading, coincident and lagging indicators to forecasting the US economy. But some sophisticated economists follow what they call the "shadow leading indicator." This is the ratio of the coincident to the lagging indicator. This ratio has proven to be very accurate. This ratio is now in a downtrend, indicating that the US economy is heading down. Williams believes that first quarter GDP will be down.

I've quoted or used data from John Williams so many times over the years, that I tend to think of him as a partner!

OK. In Australia, which is closed. they printed 4th QTR CPI, which is useless to me, other than to mark where 1st QTR CPI prints. But 4th QTR CPI in Australia was stronger than expected, with no particular reason for the uptick, which leads me to believe that the 1st QTR will be weaker than expected. Any way. this isn't the stuff that will lead the Reserve Bank of Australia (RBA) to a rate hike any quicker. The Aussie dollar (A$) is flat on the day, as the markets seem to be in agreement with me on the CPI data.

The IMM Futures report from last week, showed that the Net Long euro position was the strongest it has been in the last 5 weeks. The euro is up a bit this morning, but with the volumes thin, there just isn't enough umph to get it moving with more conviction. There is something I want to talk about with the Eurozone. I think the markets are getting ahead of themselves a bit, folks. Last week we saw Greece enter the bond markets, and the demand for Greek bonds was so strong, that the yield on the bonds were in line with German bond yields again. ARE YOU KIDDING ME? Are the markets that smartless that they will fall for the same old trick once again?

The only way I would even touch a Greek bond right now, with someone else's ten foot pole, is IF the bond paid a "risk premium". You know, a higher yield to give you some cushion. I just don't get this one iota. But the bond auction was good for the euro, so. there you go!

In Japan, overnight, we saw some data that weighed heavily on the yen. The Japanese Trade Balance, which shifted to a Deficit a couple of years ago, printed worse than expected for March, with a yen1.7 Trillion deficit, which was close to the record deficit that printed in January.. . Japanese exports were down -2.5% year-on-year in March. Remember when Japanese exports were "da bomb"? I do! And it was the reason that the yen was able to remain strong all that time, as the Current Account in Japan was strong due to the Trade surpluses booked each month.

Well, all that's gone now, and it's just Gov't Debt on top of Current Account Debt. Same as here in the U.S., but Japan used to be different. but not any longer, folks. And yet, when things get hairy, the dollar, and yen are bought as SCSH (so-called Safe Havens). I call this, "perverse thinking" , which is just another way of saying that this thinking is obstinately persisting in an error or fault.

And one day, Alice! No really, one day, the markets and investors and anyone else that wants to participate, will wake up and smell the coffee. And it's then that they will realize that dollars and yen are losing purchasing power by the truckload and that other currencies and metals should be viewed. Currencies with strong fundamentals. Now, that would be a revelation, eh?

Well, the Boston Marathon is being run today. I still can't believe what happened last year. Here's hoping we never experience stuff like that again. I know that in this day and age, that's wishful hoping. But, as Dusty Springfield (of whom I love!) said. Just wishing, and Hoping and Thinking and Praying.

So, I read a multi-page story in the Economist on Ukraine and Russia yesterday. I was wishing the Muppets would jump out of the magazine and sing their song, No, we don't have no room for boring, for boring we don't have no room! The Economist believes that Ukraine's army is no match for Russia's, and that signals bad things for Ukraine, should Putin decide to do something. The Russian ruble is taking the brunt of all this tension. And rightly so!

The U.S. Data Cupboard gets a breather this week, with nothing but 2nd and 3rd tier data until Thursday when Durable Goods Orders for March prints. We will see the Existing Home Sales and New Home Sales data, but recently the markets have not paid attention to this data set. So, this is one of those weeks that we have once a month, where the data schedule is weak, and the markets have to make do on their own. And that's fine with me, given my new found dislike and disapproval of all data prints in the U.S..

For What It's Worth. Today I have a treat for you. My friend, Bill Bonner, has done a lot of writing in his life, and his most recent endeavor is to write the " Diary of a Rogue Economist" I suggest that if you read my letter, that you'll enjoy his. and you can find it to sign up for, here: http://www.bonnerandpartners.com/category/dre/

And now. Here's Bill! "But in economics and investing it is virtue, not brainpower, that really pays off. "All the world is moral," said Emerson. It is moral in the sense that if you are careless enough to step on a hoe, the handle will hit you in the face.

One generation takes the virtuous path. The next is likely to slip off, honoring the old virtues in speech, but not in act. The oldest generation of Americans remembers the Great Depression. They borrowed reluctantly, saved eagerly, and made the United States the greatest power on Earth.

Their children still talked their parents' talk, but didn't mind walking off in a different direction when the wind was at their backs. And their grandchildren? The newest generation seems to have no regard whatever for the virtues of their grandparents or the futures of their grandchildren. They disregard the wisdom of the dead, and load up the unborn with debt.

The end of the US Empire of Debt may be near or far. We don't know. Washington will probably not be sacked anytime soon. But the imperial currency - the dollar - is in grave danger. America's central bankers not only fail to protect it, they invite the barbarians to destroy it... slowly."

Chuck again. And if the Central Bankers, are destroying the value of the dollar, what should you do to protect your wealth? That's the age old question, that's easily answered if you're the Great Mogambo Guru, who says, "This investing stuff is easy, wheeeeee". Gold, Silver and Oil are his choices. And Bill Bonner says, "Since Central Banks won't protect your wealth, you'll have to do it yourself. How? In the old-fashioned way- holding reserves of your own. Traditionally, what the central banks hold in reserve is Gold."

To recap. A lot of nothing on Friday and in the overnight markets. Volumes are still thinned out, and senior traders haven't returned from their long holiday weekends. There was no data on Friday and this week the data cupboard has little outside of Durable Goods Orders on Thursday to show us. Chuck goes ballistic on the Greek bond auction last week, and tries to paint the picture of currency debasers correctly.

Currencies today 4/21/14. American Style: A$ .9330, kiwi .8576, C$ .9075, euro 1.3820, sterling 1.6805, Swiss $1.1325, . European Style: rand 10.4845, krone 5.9755, SEK 6.5905, forint 221.75, zloty 3.0290, koruna 19.8605, RUB 35.66, yen 102.60, sing 1.2530, HKD 7.7535, INR 60.46, China 6.1591, pesos 13.05, BRL 2.2360, Dollar Index 79.84, Oil $104.11, 10-year 2.70%, Silver $19.43, Platinum $1,409.50, Palladium $794.65, and Gold. $1,286.30

That's it for today. Looks like it's going to be a rainy day today. That's fine, as yesterday was just grand here. My beloved Cardinals split 4 games in the Capital, and now head to NYC to play the Mets. And our Blues won another overtime game VS the Blackhawks to go up 2 games to none. The Blues scored with 6.4 seconds left in regulation to tie the game. that was crazy! Paul Revere & the Raiders are singing, "Kicks" on the IPod. So, you think you're gonna find yourself a little piece of paradise? A Great old song! I had a fairly good stomach weekend, so I had that going for me! Better than last weekend for sure! I see my St. Louis oncologist this afternoon, I wonder what he's been hearing from my oncologist in Houston? I guess I'll find out this afternoon! Duh! I watched the movie "The Lone Ranger" this weekend, and liked it! I don't see why it got bad reviews. I liked it better than "the Hangover Part III". for sure! And with that entry as a movie critic. NOT! I hope you have a Marvelous Easter Monday!

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





Posted 04-21-2014 12:36 PM by Chuck Butler
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