Daily Pfennig : Carney

German Business Confidence Jumps!

Chuck Butler — Tue, 11 Dec 2012 21:01:00 GMT

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In This Issue.

* Currencies & metals level off .

* ZEW climbs out of hole.

* Franc deposits get charged interest .

* Carney to speak today.

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

German Business Confidence Jumps!

Good day. And a Tom Terrific Tuesday to you! Front and center this morning, please accept my apology for the Pfennig faux pas yesterday. I can't really explain what happened because I don't know how Friday's Pfennig went out again. But it did. The great thing about it was that if you missed Friday's letter, it was your second chance to read it! HA! A good friend of mine, told me that he thought I was just trying to point out something I said on Friday. Oh well. Good thing that doesn't happen all the time!

Well, the currencies leveled out yesterday, and the euro gained about ¼-cent on the day, with the Aussie dollar (A$) trading at $1.05, if only briefly. Gold held onto its gain for the day, and it appeared that the dark cloud that hovered over the currencies and metals was being lifted throughout the day. When I turned on the currency screens this morning, I saw that some additional lifting of the dark cloud has occurred in the overnight markets. And so, we begin our Tom Terrific Tuesday!

The euro has received some additional boost this morning from the printing of German Investor Confidence, as measured by the Think Tank ZEW. German Investor Confidence climbed out of the hole they dug for themselves in October, and jumped to a number of 6.9 from a minus 15.7 the previous month. This report was in contrast to what I told you last week about how the Bundesbank had cut their economic growth forecast for 2013. In this case, I think the markets and businesses are looking at the bond purchases by the European Central Bank (ECB) as a very favorable scenario for Germany.

And. I still believe that we will continue to see relative calm claim more days in the Eurozone than Chicken Little Days. And as that happens, I think we'll see an economic revival led by Germany. Now. that's just how I see it happening, but I'll betcha a dollar to a Krispy Kreme that the first time I mentioned that I believed that we could begin to see some stability in the Eurozone, that you thought I was ready for the loonie bin. But, look around and see what's happening in the Eurozone. some semblance of stability, and relative calm.

OK. enough of that! One of these days I'm going to have to pay off all these dollar to Krispy Kreme bets I've made! Or. collect on them! Ahem. I'll take the Krispy Kreme doughnuts at least I can taste them!

The Aussie dollar (A$) remains well bid. overnight the price of iron ore reached a 4 ½ -month high, and was a good underpin for the A$, as a Business Survey for November was very weak, and could have caused some selling of the A$... But the rising raw material price was enough to keep the A$ well bid.

Across the Tasman, the New Zealand dollar / kiwi is trading at a 5-week high (.8375) on news that New Zealand housing continues to recover. But for the most part, kiwi trades on the coattails of the A$... It wasn't always this way, and I don't believe it will remain this way, but for now, it is what it is. (that's my fave saying these days) The 'technical guys" show kiwi gaining to a 9-month high (.8470). So, I guess we'll have to wait-n-see, eh?

Well. the rumors I was telling you about regarding Swiss Banks charging for franc deposits, is now a fact. We received notice from UBS (Credit Suisse had already made the same announcement) that deposits of francs would now be charged interest. The franc lost some additional ground to the euro, and remember that cross that about a year ago was pushing the envelope of the ceiling cross at 1.20? Well, a year later that cross between euros and francs stands at 1.2110. and falling. Long time readers will recall that I told you that the Swiss National Bank (SNB) wanted to see the cross around 1.30-1.35. Well, the SNB would still love to see the cross at those weak levels. But all the problems of the Eurozone (see Greece, Italy and Spain) the past year, made things difficult for the SNB. But, now take that discussion above about the relative calm in the Eurozone, and the SNB might just get their wish!

Eventually, the euro / franc cross will carry over to the dollar/ franc cross. for if the franc is getting weak VS the euro, it will eventually get weaker VS the dollar.

Speaking of getting weaker VS the dollar. I see where the Chinese renminbi/ yuan backed off its ascent to the upper end of its trading band last night. Rumors have it that the Chinese Gov't / Central Bank, intervened to stop the appreciation in its tracks. I think that the Chinese leaders are just wanting to throw some cold water on the markets' speculation that the Chinese economy has turned onto recovery street. The Chinese leaders just don't want the markets to get ahead of themselves. You know me though. I don't like intervention. but, I understand why the Chinese would use it right now. But remember, the Chinese can only set the "fixing rate", after that the offshore market in Hong Kong trades it and things there can get pretty dicey at times.

Well, get the board games out. (Hey! I call Battleship!) The Fed's FOMC will begin a two-day meeting today, with a rate announcement tomorrow afternoon. Maybe the Fed Heads will be practicing their gangnam style dancing instead of playing board games for two days. Recall that I told you a couple of weeks ago that some Fed Heads were talking about increasing their bond buying? Well, this could be the meeting that they bring that discussion out in the open.

As it stands right now, the Fed is buying $40 Billion in mortgage bonds each month. I would look for the Fed Heads to announce an additional $45 Billion in monthly Treasury bonds that they will buy, which would push their balance sheet to $4 Trillion. So, why all this additional stimulus if the economy is doing OK, like the Gov't tells us through their hedonic adjusted economic data reports? Ahhh grasshopper. I told you a long, long time ago, that the U.S. economy has become addicted to stimulus. And the economy has a "friend" in the Fed Heads that believe the economy can't function without stimulus. I can hear Big Ben Bernanke now, saying that "this stimulus is what's needed to sustain the economy"

The market's reaction to such an announcement? Probably muted. we certainly won't see the all-out assault on the dollar like we did with QE 1 and QE 2. As I like to say over and over again. We Have Become Comfortably Numb.

The Canadian dollar / loonie, backed off some overnight, as traders prepare for a Bank of Canada Gov. (Carney) speech today. I will be interested in the press conference after the speech, where I've heard that reporters are going to ask Carney, who is moving on to become the Gov. of the Bank of England, about his preference for forward rate guidance. Why would they ask him about that, I hear you asking? Because. The current Bank of England Gov. King, recently dismissed the usefulness of such guidance. This could get juicy!

I had to stop to sing along and dance in my seat to the Foundations' great song, Baby, Now That I've Found You. Remember that one? That's what's great about an iPod, great songs are not forgotten! Mike is here now, and I'm sure he's wondering what's so good about the song! Kids.

I haven't talked about Norway and Sweden lately. and that's because not much has been going on in these two countries. The markets are still using the same brush on the krone and krona that used on the euro. Although, I'm of the opinion that we're beginning to see divergence between currencies return to the markets, and that would be a great thing for these two countries, for their fundamentals are far better than those found in the Eurozone. And then we could get back to using them as true alternatives to the euro.

I saw this yesterday and it just hits me in the gut every time I see stuff like this. here in the U.S. there are now 47,710,324 people enrolled in the food stamp program as of the end of September. That's an increase of over 607,000 people since August! That means that 1 in 6.5 people in America are on food stamps. Back in the 1970's, it was 1 in 50 ! We should strive to get back to that again!

Then There Was This. from CNS News. "In June, a total of 142,415,000 people were employed in the U.S, according to the BLS, including 19,938,000 who were employed by federal, state and local governments.

By November, according to data BLS released today, the total number of people employed had climbed to 143,262,000, an overall increase of 847,000 in the six months since June.

In the same five-month period since June, the number of people employed by government increased by 621,000 to 20,559,000. These 621,000 new government jobs created in the last five months equal 73.3 percent of the 847,000 new jobs created overall.

Chuck again. that means that 73% of New Jobs Created in the last 5 months are in the Government! That's one way to make the unemployment rate fall, and have everyone think you're doing great!

To recap. The dark cloud that came over the currencies and metals on Friday, began to get lifted yesterday and the lifting has continued through the overnight markets to this morning. German Business Confidence really jumped out of the hole it was in, and reflects on my call that relative calm could return to the Eurozone. The A$ and kiwi remained well bid throughout yesterday and overnight. And the BOC Gov. Carney's speech today could get good.

Currencies today 12/11/12. American Style: A$ $1.0495, kiwi .8370, C$ $1.0130, euro 1.2985, sterling 1.61, Swiss $1.0725, . European Style: rand 8.6805, krone 5.6510, SEK 6.6570, forint 217.15, zloty 3.1490, koruna 19.4630, RUB 30.69, yen 82.45, sing 1.2210, HKD 7.75, INR 54.27, China 6.2446, pesos 12.78, BRL 2.0755, Dollar Index 80.13, Oil $86, 10-year 1.63%, Silver $33.20, and Gold. $1,713.80

That's it for today. Well. a quick visit to my oncologist here in St. Louis (the real one is at MD Anderson in Houston) to have my liver, thyroid, and kidney functions checked, (they are at some risk with the chemo I take) showed they are fine. So I've got that going for me! And so, next week I start my 4th month on the drug that saved me from having my jaw removed. I can't even come close to telling you how happy I am about that! I just wish there could have been something to save my eye a couple of years ago! I have articles to write this week for three different publications, so, I'll hunker down in my office and attempt to get them completed before I walk out the door for my Christmas vacation on Friday! And with that. Thanks for reading the Pfennig and I hope you have a Tom Terrific Tuesday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Spain Goes Into Recession, Again!

Chuck Butler — Mon, 30 Apr 2012 17:50:38 GMT

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In This Issue.

* Currencies trade in tight range..

* RBA to cut rates tonight.

* Will Carney hike rates?

* A different view on Silver.

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

Spain Goes Into Recession, Again!

Good day. And a Marvelous Monday to you! I'm still "on the road" so to speak, so with that comes the regular trials and tribulations along with headaches that come with being out of the office. But. I carry on, my wayward son!

Friday's price action in the currencies was all about tight ranges, but if there was any bias, it was to sell dollars, especially after it was announced that the first print (they'll be revisions coming) of 1st QTR U.S. GDP was 2.2%, down from the 4th QTR's 3% clip.

We edge ever so slightly to the other side of the storm from the "eye" and data print after data print shows that. Shoot Rudy, the "experts" had forecast slippage, so they see what's happening too. Unfortunately for their reputations, they forecast 1st QTR GDP at 2.5%... but it printed at 2.2%, even worse slippage than the "experts" saw happening.

So, with the bias to sell dollars hanging over the markets, it was not shaken to the core when the much slower GDP printed. This is how things used to be before the Financial Meltdown. when fundamentals ruled the roost! If the U.S. printed weak data, the dollar got sold. but it hasn't been that way in some time, at least not on a consistent basis!

One component of the GDP data, consumer spending, showed an increase. Great, the rest of the economy is slowing down, but Joe Consumer are chasing goods around like a kid in the hen house, trying to catch a hen. and then one more thought on 1st QTR GDP. the weather in the 1st QTR, for most of the country, was pretty warm compared to a regular winter. So, a lot of economic activity was put into motion in the 1st QTR. and 2.2% was all it could muster?

So, the grease on the economy's tracks, that was put there by the two rounds of Quantitative Easing, one round of Operation Twist, and money supply that would choke a Clydesdale, is now wearing thin, folks. soon the train will stop, because there is no grease. And that's when the Fed will feel once again that they need to "do something".

As I look at the currencies this morning, there's been a bit of slippage in the overnight markets as the markets look at Consumer Spending for March that will print today. Since the one component of the weaker GDP report was Consumer Spending, the markets believe this will be a real large number. And if it is, that would be dollar positive today.

Now, to me. Consumer Spending is fine, as long as there is Income to provide that spending with cash, and not credit. but then that's just me. I'm funny that way! Not funny HA HA.

The currencies are also having to deal with the calls that have now turned to shouting for not only A rate cut in Australia, but more as the year goes on. But the funny thing going on here, not funny HA HA, is that the Aussie dollar (A$) has pushed higher. Well , until last night that is. the Reserve Bank of Australia (RBA) meets tonight (May 1st for them), and a 25 Basis Point rate cut will take place. It's a done deal folks. so, we'll just have to see if the RBA is in the mood to discuss what comes next.

With the A$ pushing higher last week in spite of the calls for rate cuts, tells me that bond buying in Australia was HUGE. Lock in the higher yields, and book profits as the yields go down from the rate cuts. a very good move by the bond guys.

The euro has felt some heat this morning from the news that Spain had entered a recession for the second time since 2009. Yes, recessions are a part of tightening the belt, right? That's why we'll never tighten the belt here in the U.S. Heaven forbid we slow down, and everyone has to hunker down here in the U.S.!

That's why I continue to say that while the euro is on tenterhooks now, in 3-5 years, after the Eurozone has suffered through belt tightening, that things will be better there, and they'll have made the necessary cuts to insure survival. While here in the U.S. our GPS navigation system will still be broken, thus keeping us from getting on the road to correction.

Now. the euro may not have as many members in 3-5 years, or may look completely different, who knows? All I'm saying is that at least, they are attempting to right the ship. And in doing so, there will be recessions to deal with.

And this message is just as much pointed at us here, but also to those calling for "anti-austerity" in the Eurozone right now.

In Canada. things are getting pretty screwy. Here's the skinny. The Bank of Canada's (BOC) Gov. Carney, has made no bones about the need to raise interest rates. But the markets are not rewarding the Canadian dollar / loonie. First because they don't believe he'll actually be the only Central Bank that is raising rates, and two. because the Canadian economy has a large component in it of domestic demand. and domestic demand is led by Consumer Spending.

The markets are fearful that a rate increase will damage the domestic demand, thus putting the economic growth in the country in harm's way. The markets only have to look back to 2010, when the BOC hiked rates 3 times from .25% to 1%, and the loonie lost 7.4% while those rate hikes were being made.

You know me though. if a rate hike is needed. make it!

Today, the markets will get to sniff around on Canada's 1st QTR GDP report.

In Japan, the Japanese yen is rallying again. this has got to be driving the Japanese Finance Ministry crazy! I know it has done a number on me! Just what investors see in the Japanese yen given the known fact that the Japanese Gov't wants a weaker currency, is what I would like to know!

Not much else going on here, data wise, today. Fed Head, Richard Fisher, will be speaking today. that's always interesting, for he's one of the few Fed Heads that "get it". in my opinion that is.

Then There Was This. from Barrons. titled: Beware: Silver Can Bite. here's a snippet of the story on Silver. "Infamously volatile, the metal is out of favor with investors, industrialists, and even coin collectors, and may stay that way for the foreseeable future.

Silver's charms are fading-and so are chances of a quick silver comeback.

The metal has had a manic-depressive 12 months. On April 29, 2011, futures vaulted to a record settlement high of $48.599 a troy ounce, then plunged 27% over the next five sessions. The metal never recovered after exchange owner CME Group raised trading margins to quell the extreme volatility.

However, with prices now around $31, don't be seduced into thinking that silver is about to shine again anytime soon. "Silver is the one that doesn't get invited to the birthday party because it bites people; it's nasty," says Sterling Smith, an analyst with Country Hedging in St. Paul, Minn."

Chuck again. Hmmm. I guess everyone is entitled to their own opinion, right? I don't agree with the article, but just because I don't agree with it, doesn't mean I should keep it from you, dear reader. It's just another person's opinion. Of course mine would be different, in that I would say if the price manipulators would keep their hands out of the cookie jar, Silver would be near $75! But we all know that the price manipulators have us over a barrel right now.

To recap. the currencies have remained in a tight range with a slight bias toward selling dollars on Friday. but that has been reversed overnight, as Spain entered their second recession in the past 3 years, and the RBA will meet tonight to cut rates. the loonie is weaker on thoughts that the BOC will hike rates, I know, a real perverted way of thinking. but it is what it is.

Currencies today 4/30/12. American Style: A$ $1.0430, kiwi .82, C$ $1.0190, euro 1.3225, sterling 1.6275, Swiss $1.10, . European Style: rand 7.7340, krone 5.7390, SEK 6.7445, forint 216.45, Zloty 3.1545, Koruna 18.7880, RUB 29.40, yen 80.20, sing 1.2360, HKD 7.7585, INR 52.73, China 6.2795, pesos 12.95, BRL 1.8890, Dollar Index 78.85, Oil $104.20, 10-year 1.93%, Silver $31.23, and Gold $1,665.40

That's it for today. the Casey Conference went well. I got a chance to speak to the audience, albeit briefly, but you know me, I did with some humor mixed in. Friday night, I was able to head to Miami with Jack Stapleton, Suzanne Lee, and Patti Van Derlofske, and go to the Marlins new ball park. WOW! What an experience! I never knew you could mix so many colors and have it look good! A grand time was had by all. but what was that package Suzanne handed to Patti? HA! Inside joke. Great news from St. Louis. Alex scored the winning goal in overtime to defeat a school that hadn't lost a game in 10 years! The LHS Jr. Varsity finished the tournament for the second weekend in a row, without a loss! And not so great news from St. Louis and damaging storms hit Saturday, and people under a big tent were hurt and there was loss of life. sadness. Ok. I think I'd rather be proud of Alex and his newfound scoring prowess this year. Now.. I hope you can go out and have a Marvelous Monday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837