A Pfennig For Your Thoughts

In This Issue….

* Currencies begin to rally this morning...
* A$ and commodities soar on Chinese exports...
* RBNZ to keep their interest rate powder dry...
* The Commodity Bull Market...

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And Now... Today's Pfennig!


Chinese Exports Soar!


Good day... And a Wonderful Wednesday to you! A Wonderful Wednesday it is, for it is my last day in the office for March! Yes, the countdown that I began long ago, much to the chagrin of some readers that don't believe I should waste their time with my personal stuff, is down to the last day... YAHOO! More on that in the Big Finish... But first, we've got some things to cover in the markets, so let's go!

Well... Let's see... Yesterday's price action in the currencies VS the dollar, was a drag, man... We did, however, see the higher yielding currencies begin to move away from the pack of currencies led by the euro. That move higher by the likes of Australia, Brazil, South Africa, and others, carried over through the overnight sessions, so, as we start today, they are stronger VS the dollar... In fact, the Aussie dollar (A$) is near a 7-week high this morning...

Another thing helping to boost the A$ this morning was the news overnight that China reported that exports had increased the most in 3 years last month... For those of you keeping score at home... That's a 46% increase in exports during February for China! Now... I can hear some of the new readers saying, what in the world do China's exports have to do with the A$ rising? Ahhh grasshopper, come sit...

You see, Australia is a raw materials (commodities) rich country, that supplies China with all the raw materials they need to build their infrastructure. When China slowed down, it caused a chain reaction to Australia... But... As we've seen in the past 9 months, China was the first to come out of the economic slowdown, and this report confirms that they are hitting on all 8 cylinders right now... So, as the old saying goes... What's good for the goose is good for the gander, it applies here... What's good for China is good for Australia!

That can be carried over to the commodities too... What's good for China is good for commodities... And looky here, copper, for instance rose $24 on the Chinese news!

The Reserve Bank of New Zealand (RBNZ) meets this afternoon to discuss rates... I would be very surprised to hear that the RBNZ hiked rates this afternoon... Like I said the other day, I think that they will wait another month... But, does this present us with a buying opportunity before the hike? You bet your sweet bippie it does!

The news from Germany this morning wasn't helping the beleaguered euro any... German exports fell in January according to a report printed this morning. You may recall about a month or so ago, I told you how China had replaced Germany as the #1 exporter... Well, that difference between the two must be widening, given Germany's slumping exports, and China's 46% increase last month!

Hey! The rate hike campers here in the U.S. had to lower their flag yesterday, after Chicago Fed President, Evans, said that he "expects the central bank to hold its target rate (Fed Funds) at a record low for the next "three or four meetings"... OK... The Fed Reserve meets every 6 weeks... So... Given this news, it means the Fed is at least 4-5 months away from moving rates higher...

Now... I know that the markets are always looking forward... But, this is uncharted waters folks... There's no guarantee that the Fed will look to raise rates even in 4-5 months! So... The looking forward thing, is treading water carefully, watching for those sharks that live on the land!

The Canadian dollar / loonie, has backed off its lofty level of .9770 (cents) it reached yesterday... Things are looking good for the loonie... I mean, Canada doesn't have the sub prime mess to deal with... Their housing boom was never even close to that in the U.S. or the U.K.... And the list goes on... But let's not leave out rising oil prices, and commodities remaining in their bull market... It's all good for the loonie these days...

Speaking of the commodity bull market... I've not gone here for some time, and believe that since I mentioned it we could discuss it today... OK... Well... Long time friend, Jim Rogers, yes that famous Jim Rogers, wrote in his book on commodities, that for the past 400 years, commodity bull markets run between 17-22 years in length of time... Well... Lets see... This commodity bull market began about 9 years ago, right? So, that means we're only about 1/2 way through the "normal" or "historical" bull commodity market...

Now... This is where it would be good to discuss trends... Trends begin for a fundamental reason, and normally do not end, until that fundamental reason has been corrected... However, a trend is not a ONE-WAY street. There can be volatility within a trend, that will fool people or trick people into believing the trend has reversed... Only to find later that they were wrong...

This current weak dollar trend is a good example... You see, we're experiencing dollar strength right now... But, does that mean the weak dollar trend is over? Not in my book! For... The fundamental reason, deficits too high, has not only not corrected, it's gotten worse! So, mark this down, and the same can be said for the commodities, as one of those periods of volatility within a trend...

Then there was this... Did you see the news that the FDIC is encouraging public pension funds to invest / inject capital into failing banks? If you just screamed really loud "WHAT?" then you joined me, because that's exactly what I did when I read that headline in a NY Times article that was sent to me... Why in the world would public pension funds want to inject capital into these failing banks? And even more important than that question, why is the FDIC "encouraging" these public pension funds to do so?

Well... I can come up with a number of reasons for the FDIC to be "encouraging" this be done... But, what I'm sitting here banging on the typewriter keys about this morning is the fact that this uses "real dollars"... Not ones that were printed out of thin air, like the Treasury gives to the Fed to use... They aren't future guarantees either... They are "real dollars" that are about to be thrown at failing that have already had money thrown at them and they still can't make it!

I shake my head in disgust at this attempt to get these bad loans off the Gov't's books and onto the public balance sheet...

None of the bailouts should have ever been done, and we wouldn't be still messing with all of this! It's like telling a lie... Once you tell it, you have to keep adding on to the lie, until it gets so big that it explodes in your face... We started this bailout mess, and it just keeps growing and getting bigger and bigger all the time...

OK... I had better stop there, I want this to be a "happy day" here on the desk, and I'm already starting to throw things around my desk, and yell at the walls...

To recap... The currencies traded in a tight range VS the dollar for most of yesterday. The higher yielding currencies did gain ground VS the dollar, and that carried over throughout the night as China posted a 46% rise in exports! German exports slumped in January, and the Canadian dollar backed off its lofty level from yesterday, which means it's cheaper today... Wink, wink...

As I begin to head to the Big Finish, the currencies are mounting a mini-rally VS the dollar, with the euro trading higher to 1.36, which has seemed to be the real hurdle for the single unit... Every time the euro begins to trade above 1.36, it gets smacked right back down again... Makes you wonder if there's something going on here, eh?

Currencies today 3/10/10: American Style: A$ .9170, kiwi .7070, C$ .9745, euro 1.36, sterling 1.4940, Swiss .9310, European Style: rand 7.4160, krone 5.8925, SEK 7.1320, forint 196, zloty 2.8350, koruna 18.7950, RUB 29.65, yen 90.40, sing 1.3985, HKD 7.7590, INR 45.35, China 6.8260, pesos 12.62, BRL 1.7750, dollar index 80.70, Oil $81.45, 10-year 3.70%, Silver $17.48, and Gold... $1,127.50

That's it for today, and this week, and this month... I'll be speaking at the end of the month in Boca Raton, for the Wealth Masters Group before I head home. Today is the birthday of my good friend, Rick Baur. There's quite a separation in age between us, but nevertheless we've become good friends, and he's one of my "spring training buddies"! My beautiful bride asked me last night when I was going to pack for the trip... I guess, I have to do that, eh? HA! Thanks to all of you who have sent me so many uplifting notes of encouragement, and everything, you are so nice to do that! The notes on the Wall Street Journal article keep coming in from readers... Thanks for the kind words! So... This is it... Chris will have the conn on the Pfennig, and then he goes on vacation, when I return... I doubt that I'll file any reports from the road, as I will NOT be checking email, or the currency news. It's time for baseball! I hope you have a Wonderful Wednesday, and a Wonderful week! I am outta here!