Daily Pfennig : Retail Sales, German

The Rally Is ON!

Chuck Butler — Tue, 14 Sep 2010 14:42:18 GMT

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In This Issue..

* A Currency Rally!

* Gold & Silver rally!

* German Investor Confidence slides...

* Swiss francs hit parity!

And Now... Today's Pfennig!

The Rally Is ON!

Good day... And a Terrific Tuesday to you! How are you today? Good I hope! I've still got this "thing" lingering with me, but I feel fine. I hit my green lights this morning, and that gets me all lathered up as I come in...

The Risk investors have nothing but green lights in front of them too! Risk is ON! Funny, don't you think that how things have changed? I mean, in the "old days" an Industrial Production Report from China would have been ignored, for it was "all about the U.S."... But not any longer, apparently, because, the Chinese Industrial Production and Retail Sales reports over the weekend, have opened Pandora's Box of currency rallies!

And here's the real key to seeing that its an all out assault on the dollar once more... Swiss francs and Japanese yen are both rallying VS the dollar! When the partners in crime, I mean flight to safety, turn on the dollar, and begin to rally VS the green/peachback, then you have a rout on the dollar.

Shoot Rudy, the Swiss franc reached parity to the dollar overnight, but has seen some profit taking since hitting that lofty figure. And... The Chinese renminbi continues its 4-day mover higher VS the dollar... No backing off here, folks!

The euro did hit a speed bump this morning, when Investor Confidence, as measured by the think tank, ZEW, reported a slide in Investor Confidence that has reached a 19-month low!

But... The single unit remained well above 1.28, and again that's just another sign, for when a currency gets smacked in the mouth but is able to retain its footing, you know that it's all good for the currencies...

Another thing helping the euro to maintain strength in the face of an awful ZEW report, is that the European Commission increased its projection for growth in the Eurozone to 1.7% for 2010, nearly doubling its May forecast of 0.9%. The strength of Germany's economic recovery is a major factor for the change. The commission upgraded its forecast for Germany's growth from 1.2% to 3.4%.

And Gold? Recall, yesterday, I told you how in the initial reversal of risk aversion, that Gold gets sold, but then turns around? Well, the turn-around has already occurred! Gold is up $7, and is now just 1.6% away from its all-time high! I read a story on the Bloomie this morning that had a title that was quite catchy, it read: "Gold's soothing balm trumps slower inflation" HA! That's a good one! But it's true, it's true, I did see a putty tat! As I told the reporter from The Street.com two weeks ago... These are uncertain times, and Gold is the "uncertainty hedge"...

One currency that did get caught up the cross winds of a bad economic report was kiwi... New Zealand Retail Sales fell .4% in July and some now fear that the earthquake that recently hit New Zealand, has sent consumers to the sidelines in fear... I don't think that this is something that will carry on too long, and if the rest of the currencies continue to rally against the dollar, kiwi will look at this dip in its rear view mirror...

And the poor pound sterling... It can't get any traction, in either direction... It's stuck in the mud... Inflation in the U.K. continues to be a bug-a-boo, as it printed at 3.1% in August... The U.K., you might recall, has a 2% ceiling, but what are they going to do about it? Stuck between the rock and a hard place I would say, for if the Bank of England (BOE) would hike rates to cool this inflation, the economy that is nothing more than a house of cards, would come crashing down... The BOE is resigned to living with 3.1% inflation for now... But what happens when it begins to inch up again?

Now... I've said this many times in the past but it needs to be repeated right here, right now... Since the financial meltdown began, the U.K. experiences things before we do here... So... Is that, what's in our future? Rising inflation that the Fed can't do a thing about? I believe so, dear readers... I do believe so...

An even more reason to buy and hold Gold, eh?

And don't forget Silver! Yesterday, while Gold was fluctuating up and down, the steady rise was in Silver!

Japan's PM, Kan, survived a vote last night, and that helped the yen to reach its 15-year high VS the dollar once again. What's Kan, and his partners in crime, going to do about this yen strength? The markets are convinced that they will do nothing, and that there is a green light to continue to mark up the yen VS the dollar... Hmmm... I'm still pinning my colors to the mast of Japanese intervention... I believe it will come, and when it does it will be with both guns a-blazin'! And those in short-term positions will get whacked! Long term positions, will simply be able to either batten-down the hatches or sell with a profit...

The U.S. data cupboard has August Retail Sales for us this morning... As I said yesterday, the BHI indicates that the report will be just "ok", nothing to get the recovery campers all lathered up about, nor will it be bad to get the "double dip" campers lathered either! Yesterday, the Monthly Budget Deficit came in better than expected, at "only" $90.5 Billion! UGH!

Then there was this... Where do you stand on the tax cuts? Every U.S. taxpayer will be affected by the outcome of debate in Congress regarding whether to extend Bush-era tax cuts and credits scheduled to expire this year. Congress has a few options available, including extending all of the measures, letting them expire or continuing them with change, such as limiting their benefit to middle-income families.

I'll say this, and be done with it... Tax cuts are great for you and me, AS LONG AS THEY ARE ACCOMPANIED BY SPENDING CUTS IN THE GOVERNMENT! The loss of revenue has to be offset by a reduction of spending... This is NOT what happened 8 years ago, and one of the reasons we have such a mess on our hands! And can we really depend on this administration to cut spending? I doubt it seriously, folks...

To recap... The currencies, for the most part, added to their gains yesterday, overnight. Even Swiss francs and yen took a swing at the dollar, with francs hitting parity to the dollar overnight! Gold is back in the swing VS the dollar, and is now only 1.6% away from its all-time high. New Zealand saw a weak Retail Sales report, and kiwi suffered. Pound sterling is stuck in the mud, with rising inflation... Is that what we can expect here?

Currencies today 9/14/10: American Style: A$ .9335, kiwi .7285, C$ .9740, euro 1.2845, sterling 1.5410, Swiss .9965, ... European Style: rand 7.1450, krone 6.13, SEK 7.1835, forint 221.25, zloty 3.0770, koruna 19.1180, RUB 30.78, yen 83.20, sing 1.3385, HKD 7.7665, INR 46.44, China 6.7465, pesos 12.89, BRL 1.71, dollar index 81.96, Oil $76.55, 10-year 2.70%, Silver $20.34, and Gold... $1,257.15 (Gold has risen $3 more since I wrote the above!)

That's it for today... We have some visitors from Jacksonville with us on the trading desk this week, Diane and Lauren... Welcome to St. Louis! Hey! Our DBCR MarketSafe CD is closing out the first issue's funding on Thursday. Not to worry, we'll do another issue. It's been a quite popular issue, which makes me happy because it took us months to put it together! We're closing in on the first 5-year Gold CD maturing (Oct)... I think the people that took the leap of faith on that CD will be quite happy! I don't think the season's ending can get here fast enough for the Cardinals! UGH! They've thrown in the towel, and it's so sad to watch... Well... Enough of all that! I hope you're doing well, and that you have a Terrific Tuesday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Shifting Focus...

Chuck Butler — Tue, 24 Aug 2010 15:26:19 GMT

........But first a word from our sponsor.......

Hello currency trading. So long market risk.

The new CD has a funding deadline of September 16, 2010, so you must act soon.

More key details about the CD:

*Earnings tied to the performance of a specific currency index *100% protection of deposited principal when held to maturity *$1,500 minimum deposit *4-year term *No account maintenance fees

Don't miss the September 16 funding deadline. Apply online now at: http://www.everbank.com/001CertificatesMSCurrencyReturns.aspx?referid=11808

EverBank is an Equal Housing Lender and Member FDIC.

...........

In This Issue..

* The dollar rallies again...

* German economic data is strong!

* Canadian Retail Sales this morning...

* Chuck's thoughts on the shift...

And Now... Today's Pfennig!

Shifting Focus...

Good day... And a Terrific Tuesday to you! Well, as I pulled out of my driveway this morning, I noticed how the light from the full moon had illuminated the neighborhood... I love it when the moon is full, and so big in the sky!

Well... Things didn't get any better for the currencies yesterday (save yen & francs), as the focus, whether it belongs there or not, remains fixated on the GIIPS once again, and their ability to function under the weight of debt they've created for themselves. For those of you new to class, the GIIPS is short for the countries of the Eurozone that consist of: Greece, Italy, Ireland, Portugal, and Spain...

As I've tried to do from the beginning... I'll give equal time to the likes of: California, Michigan, Illinois, and a host of others with debt problems that should demand equal time in the woodshed... But that's not what's on traders' minds right now.

The euro has given up almost 1-cent since yesterday morning, even in the face of news this morning that German Industrial Orders for June had increased 4.1% VS 3.8% in May...

And to top that data... Germany's 2nd QTR GDP blasted a new path to a 2.2% gain! This represents the fastest quarter of growth in Germany in 2 decades! And when you compare what this 2nd QTR did to 2009's 2nd QTR, the increase is 3.7%!!!!

You know, I've highlighted several times in the past, how the weaker euro was helping German manufacturing, and exports... Well, the German Economy Minister, Rainer Bruederle gets upset when people say that exports are responsible for German economic growth. Bruederle said, "German economic growth is in no way driven by exports alone." Apparently, Mr Bruederle was able to point out that domestic demand is contributing about 60% to the economic expansion. He went on to say that, "The recovery in Germany's economy is underway with full force."

Well, that may be, but it's not enough to take the focus off the deficit problems of the GIIPS right now... And the euro is barely hanging on to 1.26 this morning... And, while I admit, I'm not in Germany, so I don't really know, I still believe that exports drive the German economy... I'm from Missouri, I'll have to be shown that I'm wrong here...

Over in Japan, the yen is going hog wild VS the dollar and euro once again this morning... Here's the skinny on this latest move: The Japanese Finance Minister held a press conference last night, and did not make one mention of the yen... He didn't mention its strength, or the risks associated with his currency getting out of whack with the other Asian Currencies... Nothing, nada, zero, zilch, a great big goose egg, regarding the yen...

So... Folks, traders are taking this non-mention of yen, as a signal that the Japanese Finance Ministry has turned on the green lights... But this is where I think these guys and girls that believe that yen can continue to move higher without interference from the Japanese Finance Ministry, have another thing coming... The Fin Min could be setting a trap... I would be very careful here...

And further down in the South Pacific, the Aussie dollar (A$) continues to be held hostage by the "uncertainty" of the election outcome, and of course the risk aversion going on right now...

Yesterday, I went out on the limb and said that the Bank of Canada (BOC) would carry on with a rate hike on 9/8... Well, one piece of data that might give us a better idea if that will hold true or not will print today... Canadian Retail Sales for June prints first thing this morning... I don't have a BHI (Butler Household Index) for Canada, but the "experts" have forecast a nice .4% increase for June... Let's see if that's bang on or not...

Well... South of Canada, the U.S. will print July's Existing Home Sales this morning. I think those campers that believed that housing was "out of the woods" are going to receive a huge awakening this morning... The July report will be the first one that is completely void of the tax credits and other Gov't stimulation (except for the Gov't keeping interest rates at zero!). I think that this report is going to open some eyes, and will begin to play well with my call that home prices will drop another 10% before we turn this ship around...

And... If we remain in this current pattern of risk aversion because the U.S. economy is circling the bowl, the dollar will rally on a bad print of Existing Home Sales this morning. Should it? NO! But... That's the games people play now, every night and every day!

It's all a matter of keeping the dollar from going for a ride on the slippery slope once and for all! Like circuit breakers... We were beginning to see the dollar selling big time once again, and mysteriously the focus shifted from the selling the dollar, to the Eurozone deficit nations... Just like that!

Think about that for a minute, and let this sink in... Remember? We were dealing with a fight if you will between two different ideas... In Europe, austerity measures were being used to get out of deficit problems... And in the U.S., spending to promote growth measures were being used, to get the country's economy rolling. (they didn't care about deficits!)

And from the time Europe began their austerity measures the euro began to gain back lost ground VS the dollar, moving from 1.18 to 1.31... So, guess which plan was winning the markets' favor?

But then it all stopped... Just like that! You can't tell me that it wasn't the U.S. directing the media to focus on the Eurozone to take the heat off the dollar...

I know, I know, that's all a little too much conspiracy... But it's exactly what I believe I see going on, folks... That's what's still great about this country, you can think what you want... At least for now, that is! UGH!

OK... Let's get back to the facts, Jack! And... Gold is down $8 this morning and about $10 since yesterday morning. So... It's not just a "flight to safety" going on... Because if that were true, Gold would be soaring right now. And... It isn't! UGH!

There's something else going on right now, and I can't put my finger on it... I mean, the FOMC announced Quantitative Easing (QE) again a couple of weeks ago, and the damage to the dollar that should be going on, isn't happening... Have the markets become Comfortably Numb, with all the goings on in the U.S.? It sure looks that way... And I'm here shaking my head in disgust, folks... For this is not how "free markets" work...

Then there was this... I saw this on the Bloomie... The U.S. Court of Appeals for the 2nd Circuit denied a request from the Federal Reserve / Cartel to reconsider a ruling that requires the central bank to identify banks that received loans after the collapse of Bear Stearns. The Fed has seven days to disclose the information, unless the court stays its ruling. The Fed has argued that disclosure of the information would stigmatize the borrowers, causing them "severe and irreparable competitive injury.

Chuck again... I can't express enough the need for this information from the Cartel... And I would think that the public is with me on this. Of course if we ever passed the "audit the Fed" bill, we wouldn't have to go to court to get information from these guys!

To recap... The risk aversion that settled into the markets last week, continues, with the euro losing about 1-cent from yesterday morning. This in spite of some very good economic news from Germany. The markets' focus is now fixated on the GIIPS deficit problems once again, and one (me of course!) has to wonder how that focus was shifted from the dollar's problems to the Eurozone... Canadian Retail Sales this morning could be a good indicator for the BOC meeting 9/8, and... U.S. Existing Home Sales for July print this morning... Strap yourself in for this report!

Currencies today 8/24/10: American Style: A$ .8845, kiwi .7035, C$ .9440, euro 1.2620, sterling 1.5415, Swiss .9590,... European Style: rand 7.3870, krone 6.2835, SEK 7.45, forint 226.10, zloty 3.1830, koruna 19.7070, RUB 30.84, yen 84.25, sing 1.3615, HKD 7.7755, INR 46.94, China 6.7966, pesos 12.95, BRL 1.77, dollar index 83.41, Oil $72.35, 10-year 2.55%, Silver $17.94, and Gold... $1,219.00

That's it for today... Man, my IPOD is playing some great music this morning! Nice to see the Cardinals' bats come alive the past few days. They've got about 38 games to go, and they've got to keep the bats alive for all of them! I'll be doing an interview with a reporter from the Street.com this afternoon, should be interesting! Our soccer legend, Ty Keough, and his dad, (the great Harry Keough) are going to be honored by my little river town's parish this weekend... How about that? Well... It's been a struggle this morning, so the letter is later than usual, so I had better get this out the door! I hope your Tuesday is Terrific!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

German GDP Surges Higher!

Chuck Butler — Fri, 13 Aug 2010 16:00:01 GMT

........But first a word from our sponsor.......

Hello currency trading. So long market risk.

The new CD has a funding deadline of September 16, 2010, so you must act soon.

More key details about the CD:

*Earnings tied to the performance of a specific currency index *100% protection of deposited principal when held to maturity *$1,500 minimum deposit *4-year term *No account maintenance fees

Don't miss the September 16 funding deadline. Apply online now at: http://www.everbank.com/001CertificatesMSCurrencyReturns.aspx?referid=11808

EverBank is an Equal Housing Lender and Member FDIC.

...........

In This Issue..

* Germany powers Eurozone growth...

* Retail Sales today...

* NZ Retail Sales surge!

* Gold rallies $16!

And Now... Today's Pfennig!

German GDP Surges Higher!

Good day... And a Happy Friday to one and all! It's a Friday the 13th... Now, I don't normally get into all that stuff, but it's fun to talk about! So be careful out there today! Now, with all the depressing stuff in the economy, jobs, investments, etc. I thought that if we decided right out of the starters blocks this morning that we would do our very best to make it a Fantastico Friday, that we could forget about all that stuff... In fact, I'm going to make this a no-bad economy, spin zone today... HA!

Front and Center this morning, there's good news from Germany, the Eurozone's largest economy... Germany's economy grew in the 2nd QTR at the fastest pace since the country's reunification! Ahem... That was 2 decades ago folks! Now... I've seen two different accounts of this report... Bloomberg says it's the fastest pace since the country's reunification, and the Wall Street Journal says it's the fastest pace in 4 years... Come on, can't you dudes get this straightened out?

So... Let's just say, that Germany's economy grew at a fast pace! What was it? Oh, I guess it would help if I told you what the number was, duh... German GDP surged ( I like that word, surged) 2.2% from the 1st QTR, and because Germany is the Eurozone's largest economy, this means the Eurozone economy as a whole grew .7%...

Now... Let me explain what's going on here... Germany is a manufacturing giant of a country, and in the 2nd QTR saw continued euro weakness, thus fueling exports of manufactured items... Now, some of you astute students (HA!) might say, but isn't this the same thing the U.S. has tried to do with the weak dollar? And you would be correct! However, as I've told you over and over again for years now... The U.S. doesn't make things any longer, we became a "servicing" country...

OK, Chuck, that bordered on bad economic news from the U.S., you've got to steer clear of that today...

So... We're half way through the Pfennig this morning, and I haven't mentioned the currencies... I know, I know, this is what you pay for... The currency news! Oh wait, the letter is free! I guess you get what you pay for, eh? HAHAHAHAHA HAHAHAHA!

Any way... The euro, which should have taken that GDP news and run off a nice currency rally VS the dollar, is backing down against the dollar again this morning... When I came in, the euro was 1.2840 VS the dollar, but, 1-hour later, the single unit is hanging on to the 1.28 handle by the skin of its teeth...

Just shows to go you that when the flight to safety is in full force, there's no ability for the risk assets, like currencies to rally even with good economic data!

Shoot Rudy, even France's economy showed some good growth (+.6%)... Remember, this is a no bad economic news spin day!

In New Zealand overnight, Retail Sales printed stronger than expected in June... N.Z. Retail Sales rose .9% in June, which erased the -.2% print in May... The N.Z. dollar / kiwi rallied on this data print, but is beginning to show signs of running out of steam...

Speaking of Retail Sales... That's the Big Kahuna data print from the data cupboard here in the U.S. today. I told you earlier in the week that the BHI suggested a somewhat better print than the recent disappointing monthly reports... But that's not to say that Retail Sales here in the U.S. are rebounding... I couldn't say that, for two reasons... 1. it wouldn't be the truth, and 2. it would be a bad economic story...

Actually, I'm hoping for a very strong Retail Sales figure this morning, so that the dark clouds hanging over the economy like the Sword of Damocles will lighten up...

In Japan, the strong yen, recall I told you yesterday that the yen had traded at a 15-year high VS the dollar on Wednesday, is really beginning to give Japanese officials a rash... You see, Japan needs a cheap yen (again here we are with the manufacturing countries wanting their currency weak to have cheap exports) and they sure aren't seeing a cheap yen these days... The Economist magazine, one of my fave reads, says that the in the race to a cheap currency, the winner is.... The dollar!

You see, the dollar just doesn't get any breaks... When the euro was 1.50, the dollar was getting hammered by the Eurozone exports, and now that the euro has backed off, the yen takes the euro's place as the chief hammer banging on the dollar...

Remember when the Swiss National Bank (SNB) was trying to keep the franc weak VS the euro, as the euro fell against most currencies, including the franc? I would tell you about the SNB intervention, and shake my head wondering just what the SNB was thinking... Well, the final results are in on the SNB intervention, and I'm sure the SNB would rather that people didn't know these results... The SNB lost $4 Billion in their effort to keep the franc weak VS the euro... And in the end... The franc is still strong VS the euro! When will they ever learn? When, will, they, ever... Learn?

Ok... I'm going to have to spin this the right way to keep with the spirit of today's challenge... The Weekly Initial Jobless Claims yesterday printed at 484,000... But that was only 2,000 more than the previous week, so in the way the news media would report it would be something like this... "Initial Jobless Claims Inch Higher" and they would forget about the fact that this number keeps "inching" toward 500,000... The Continuing Claims number was just as bad... But, in keeping with our challenge today, think about it differently than as "bad"... Think about it as pretty soon these people on Continuing Claims will have their benefits run out, and that number will come down...

And here's some good news for the U.S... (right, and I've got some swamp land for sale!) The Average rate on a 30-year mortgage has dropped to the lowest level since Freddie Mac began collecting data in 1971... Oh! 4.44% is the rate... Yes, for people that are home buyers with the ability to repay their loan, that's a GREAT RATE! But I'm afraid that these low rates are going to spur another round of the great housing bubble... The only thing keeping that from happening is the 22% unemployment rate in the U.S.... So, in a way, that's good news, in that the awful labor picture is keeping us from another housing bubble!

This no bad economic news spin zone day is very difficult, folks... And from this point on, I'm not sure I can keep up with this, for, I really want to rip into something or someone right now, but that will have to wait for another day!

Then there was this... OK... I saw a blurb on one of our TV's here yesterday, that said the U.S. would experience the largest tax increase in the history of our nation when the Bush tax cuts expired in January. This did not surprise me, for both the Big Boss Frank Trotter and your Pfennig writer, have been telling people in presentations for 10 years now, that taxes or revenue for the Gov't if you will, was going to have to rise to help finance the deficit... That's one of the reasons I've banged on the rising deficit drum for a decade now... For who wants higher taxes? Not me! And wait until you see what tax increase was in the Health Care Bill... I won't go into that now, but, as the speaker said, "we'll just have to pass it to see what's in it", oh, those words are coming so true... But... No one, can say I didn't warn them... And they said, "deficits don't matter"... Well... When we go to figure out our taxes in the future, we'll become enraged at those words...

But that's not all folks! Rising Taxes are not going to finance the deficit alone, no matter what rate the Gov't decides to charge us... It will take spending cuts, tax increases, and... A cheaper dollar... All those things together might... Just might finance or at least pay the servicing (interest) on the debt we've issued!

Sorry to be a Donald Downer on that last piece, but, when I hear people say "I didn't know taxes were going higher" I just cringe...

OH! And to lift our spirits higher! Gold gained $16 yesterday and hasn't given any of it back (right now) overnight! For once, if there's a flight to safety, I would think that Gold would be the destination, and certainly not dollars, Treasuries, or yen!

To recap... Germany's 2nd QTR GDP grew at the fastest pace in some time (2.2%) and brought the Eurozone GDP to .7%... The euro rallied briefly after the news, but is back to getting sold now, as the "flight to safety" continues. U.S. Retail Sales is the Big Kahuna of data prints today, and I expect the data to be better than the most recent disappointing months... New Zealand Retail Sales were stronger than expected, allowing kiwi to run a bit VS the dollar.

Currencies today 8/13/10: American Style: A$.8965, kiwi .71, C$ .9605, euro 1.2810, sterling 1.56, Swiss .95, ... European Style: rand 7.2945, krone 6.19, SEK 7.4150, forint 219.20, zloty 3.1290, koruna 19.44, RUB 30.54, yen 85.75, sing 1.3625, HKD 7.7715, INR 46.76, China 6.7958, pesos 12.75, BRL 1.7690, dollar index 82.65, Oil $75.90, 10-year 2.71%, Silver $18.10, and Gold... $1,215.00

That's it for today... The end of a very long and hot week... Had my monthly blood check yesterday... All's good... Our Rams begin their preseason tomorrow night... They've been a sorry excuse for a pro team the past few years, but the season begins anew, so good luck to the Rams! It's a Cards-Cubs weekend here in St. Louis, those are special games... But I won't be anywhere near the ball park, as it is too darn hot! I'll watch or listen to the games from the comfort of my recliner, in the A/C! talk about going "soft"! My old football coach always said we would end up on the couch eating chocolate bon-bons! HA! OK... Try to keep cool out there this weekend... And have a Fantastico Friday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837