Flushing Out The Speculative Longs In China
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In This Issue.

* Everyone is back!.

* Dollar bias yesterday turns around today.

* Aussie CPI to be strong?.

* Buying on the Cheap.

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

Flushing Out The Speculative Longs In China.

Good Day! . And a Tom Terrific Tuesday to you! Spring is finally here, a month late! But I think I've put away my winter coat for good now. YAY! Both my teams lost 2-0 last night. The Cardinals couldn't hit, and the Blues couldn't put the puck in the net. A Bad night for St. Louis sports teams for sure! The Boston Marathon was won by an American man (on the men's side) for the first time in 20 years! Today is also Earth Day, which when I was a teenager, was a Big Deal. It's still a day to stop and think about what you can do to make the Earth a greener place to live!

Well, it appears from the currency screens this morning, that everyone is back in their places with bright smiling faces. Yes, it appears that after a few days of watching the paint dry with the currencies, that we are back today! YAHOO! That thin trading volumes, was really beginning to give me a rash! HA! The euro, which fell below 1.38 yesterday, is back above the figure this morning, and the Aussie dollar (A$) is moving upward this morning, along with the New Zealand dollar / kiwi, and pound sterling. There are a host of other currencies that have small gains, that wouldn't register on a Scale that measures movements, and Gold is up $1, so basically flat on the day.

Well. As I watched the currencies and metals trade yesterday, I was reminded of the long, hot, summer days as a young boy. we would wrestle for a patch of shade to sit under, collect trashed soda bottles, to return to the store to collect money that we would immediately turn around and buy some baseball cards (with that yummy gum) that we would then go play "flips" with. Sometimes I would win, sometimes I would lose. But the point here is not baseball cards with yummy gum, not patches of shade, but just how long those summer days seemed to last.

Those days were very hot too! And being from a lower middle class family, we didn't have air conditioning, except for one room, and we were NOT allowed in that room during the day! Ahhh, the joys of childhood! Of course, back then I could leave in the morning on my bike, and not return until I was ready to. No parents, guiding our ballgames in the park, or buying us ramps to ride our bikes off. Boy times have changed. and as far as I'm concerned, not for the better, as far as a kid is concerned. To have that freedom, was special..

And when I talk about tax burdens and losses of freedoms that our grandkids will have to suffer, I think about those childhood summers a lot! I know, I know, I weave this story about childhood summers and freedoms, and the next thing you know, I'm talking about ugly stuff again. Sorry. But that's how I roll! HA! So, remember this if you remember anything. When a Gov't deficit spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.

Like the inflation that will be "held in check" by the Fed Reserve, that will be used to weaken the value of the dollar, so that in the end the debt servicing (bond interest) and maybe some principal payments can be made with cheaper dollars. Yesterday, my St. Louis Oncologist, that I've seen for 5 years (my original Oncologist, moved away), was asking me if I still worked, and I told him I did. After helping him off the floor from the surprise shock of hearing that I still work, he asked me what I did. I told him, that after 5 years, he's finally asking me that? Obviously it didn't mean anything to him before!

So. Like a prospective customer, I explained the what, the why and the where, to him from the beginning. In the end, he said, "I think I need to buy some currencies, but I don't trust the euro" I said, no worries, there are other currencies that have far better fundamentals. and I gave him my card.

Sometimes, I wonder if I'll ever be cured completely, and then I think about people that are experiencing things much worse than me. For instance, I heard that Glen Campbell is not doing well with Alzheimer's. I have to say that while he wasn't exactly one of my faves (he was once a Beach Boy, did you know that?) , I can say that he sang some words to an old song, that I believe are the most beautiful words in a Love Song. Get this. "And I need you more than want you. And I want you for all time." Simply beautiful, eh?

I read some research from a Big Bank last night, that was talking about how China is attempting to flush out the speculative long trades. I'm not sure what they accomplish by doing that, but apparently the Chinese want to see the old long trades that were put on by speculators that still think the Chinese will announce at any time, that they are allowing the renminbi / yuan to float.

This "flushing out of speculative long trades" is the reason the renminbi has seen a ride on the slippery slope these past couple of months. And, according to the Big Bank research, this "flushing out" is still in its infancy. In other words, we could see this marking down of the renminbi/ yuan carry on for a while still. I say, "Alrighty then! The Chinese are doing us a BIG FAVOR, here folks. They are making the renminbi /yuan cheaper for us, and I don't see how you let this opportunity go slip-sliding away. Slip-sliding away. You know the nearer your destination, the more you're slip-sliding away.

Earlier this morning, I told you that Gold was up $1 or basically flat today. I want to thank dear Pfennig reader, David, for sending along a link to a MarketWatch story on Gold. Here's the gist of the story. In a recent survey from Gallup, in which Americans picked Real Estate as the cream of the long-term investment crop, the poorer Americans chose Gold over stocks.

That's right! The Gallup survey found that 31% of those in the lower income bracket - living on less than $30,000 - believe Gold is the best investment option, followed by Real Estate and stocks. And those making between $30,000 and $75,000 gave Gold, stocks, and real estate equal billing.

I think the report is interesting in that the high earners buy real estate, and the low earners buy Gold. I wonder who will win out in the end. Well, to restate that I don't wonder. I know who will win out in the end!

Of course these surveys, and reports don't do anything to stop the price manipulation. But, as I said with the Chinese renminbi above. If they want to make it cheaper for us to buy, why would we let that opportunity go slip-sliding away?

In the general description of what was going on this morning, that I did above, I said that the Aussie dollar (A$) was moving upward. It appears that the markets are going out on a limb here folks. The markets believe the Aussie CPI (consumer inflation) report will be so upbeat that the Reserve Bank of Australia (RBA) will have no other choice but to hike rates at a not so distant future time! How can I tell that to be the case? Well, why else would the A$ be moving upward this morning? It certainly isn't taking its cue from A report out of Melbourne, Australia from a guy named Nick Hubble, who thinks, the RBA and economists are (in my own words) nuts, for calling for a weaker A$...

He had a piece (Oh, and thanks Bob for sending this along to me!) of the article that I really liked. Let's listen in. "It's funny how a strong currency used to be seen as a good thing. Everyone complained about how high the Deutschmark was and envied the Germans for it. Now economics says a high currency is a bad thing. Back in the old days, people understood this (a strong currency is good) because it was literally a matter of putting food on the table. A strong currency meant more consumption for the same dollar. Going by the good old economics books, it meant more wine from Portugal, cheese from France and silk from China."

And then finally on the currencies that are up this morning, pound sterling is trading at a 4-year high this morning. That's right, I said a 4-year high. Of course, we all remember, at least I hope we all remember when pound sterling was trading at 2.11 back in 2007. The financial meltdown really hurt the U.K. and the pound. And still hasn't recovered and probably will have a tough row to hoe to recover! In fact, later this week, the U.K. will print their latest Retail Sales report, which I'll take the side of the bet that says it's disappointing, and if that comes to fruition, the pound will not be so perky.

The U.S. Data Cupboard has March Existing Home Sales to print today, and the Richmond manufacturing index. Existing Home Sales are expected to have slipped a bit back in March, which seems like eons ago to me now. Yesterday, I told you not to expect much from the Data Cupboard this week until Thursday's Durable Goods Orders, and that will hold true with today's prints.

Before I head to the Big Finish today, I wanted to talk about something that I first brought to your attention about a year ago, after the Superstorm, Sandy destruction on the East Coast, and the problems the locals were running into in their attempt to rebuild. The Wall Street Journal reported the other day "that Federal officials are considering spending more than $1 Billion of the remaining $3.6 Billion of rebuilding aid on disasters other than superstorm Sandy, money that New York and New Jersey are banking on to finish repairs to thousands of homes and complete major infrastructure projects."

Apparently, "The U.S. Department of Housing and Urban Development, which is in charge of distributing the aid, believes that spreading the funds around to disasters other than Sandy, is required by federal law. New York officials dispute that interpretation."

Chuck again.. Some of you will recall me talking about the problems that the rebuilders were having a year ago. Now this? I really am shaking my head in disgust here.

For What It's Worth. Moneynews.com has become a go-to source for me, along with zerohedge.com, Drudge Report, Kingworld.com and a few others. Last week, moneynews.com had a story that I see that Ed Steer included in his letter this morning, so if it's good enough for Ed, I've got to include it! This is an article about Brown University Economists that don't have good things to say about the U.S. economy. Let's listen in.

"The U.S. economy may not mend its woes soon and instead may suffer a bout of "secular stagnation," Brown University economists Gauti Eggertsson and Neil Mehrotra maintain in a recent paper.

A deleveraging shock, a drop in population growth, or an increase in income inequality could shift people from borrowing to savings, the economists say. Essentially, there simply aren't enough promising real-world investments, forcing investors to put their money into stocks, junk bonds, etc. - and not investments that create demand for a product. This weak demand results in economic stagnation.

And with a short-term interest rates already at zero, the Fed will be "unable to generate a sufficient monetary stimulus," they assert. The outcome: a "permanent slump in output," Eggertsson and Mehrotra write.

"It's not a baseline scenario, but I think people should at least be starting to consider the possibility that this could go on for a while," Eggertsson told CNBC.com.

Chuck again. Ahhh grasshoppers, see more and more people with far more gray matter than your humble Pfennig writer, are beginning to see what I've seen all along with this economy. The markets, don't see it yet though.

To recap. The thin volume markets of yesterday, brought us some dollar strength, but the dosage was nascent at best, and overnight, the bias has shifted from the dollar to the currencies. Chuck talks about hot summer days, Glen Campbell, the best love song words, the reason the A$ is moving upward today, and the reason why the pound is about to turn down.

Currencies today 4/22/14. American Style: A$ .9355, kiwi .8595, C$ .9075, euro 1.3815, sterling 1.6825, Swiss $1.1310, . European Style: rand 10.5610, krone 5.9935, SEK 6.5825, forint 222.25, zloty 3.0335, koruna 19.8760, RUB 35.73, yen 102.55, sing 1.2565, HKD 7.7525, INR 60.76, China 6.1610, pesos 13.03, BRL 2.2360, Dollar Index 79.84, Oil $104.11, 10-year 2.70%... (Talk about strange, Oil and the 10-year have the same levels as yesterday morning, I did a double take when I wrote it down!), Silver $19.50, Platinum $1,411.75, Palladium $786.20, and Gold. $1,291.95

That's it for today. Maroon 5 are singing: She Will Be Loved on the IPod this morning. A good morning song. The women in the doctor's office yesterday, were all carrying on about how I was looking good. I told them, that I wish they were saying I was "good looking"! HAHAHAHAHA! I also told them they should have seen me last Monday. I don't think I was looking so good then! I go for scheduled scans next week. So, Good Luck Chuck! Sorry for all the side bar conversations this morning, but it's how my stream of consciencenous took me today! My mom and dad, always told me to speak what's on my mind. (obviously, they had no idea that one day, their oldest son, would be telling lots of people what's on his mind daily, for if they would have had that idea, they wouldn't have told me that! HA!) I think about that a lot, seriously. I wonder what my mom and dad would think if they were alive to see me today. I think they knew I would be OK, and that's why they let me be me as a kid and young adult. At least I like to think that! Alrighty then. Let's go make this a Tom Terrific Tuesday!

Chuck Butler
EverBank World Markets

Posted 04-22-2014 5:43 PM by Chuck Butler
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