In This Issue…
* Currencies stuck in a rut…
* Good bond auctions in Spain and France…
* N.Z. unemployment rises…
* Central Banks get weaker currencies…
And, Now, Today’s Pfennig For Your Thoughts!
Hung Out On A Line…
Good day… And a Tub Thumpin Thursday to you! Well… I’ve been here for a week now, I have another conference to speak at starting tomorrow, and into the weekend, and then back home for a week before I head to Las Vegas… Before we get into the goings on today, I want to make this your first reminder that Mother’s Day is May 13th… Which is only 10 days away… If your mom is around, this is your chance to say thank you for being your mom… I lost mine in 1998… and each year at Mother’s Day, I find myself thinking of her…
OK… just your first reminder, I’ll try to remind you again as we draw closer to May 13th…
The currencies are still in rut, VS the dollar this morning… they haven’t lost more ground, just stuck in a rut… The euro, should have gained on the news that Spain was able to auction bonds this morning and meet their target, while France sold bonds and saw their yields drop. These two auction results should have eased the minds of those fearing the Eurozone countries will struggle to finance their borrowings.. Well, at least for now…
I find this new very encouraging, in that the European Central Bank (ECB)’s 1 Trillion-euro LTRO (3-year loans), is fading, and therefore the demand you see for these bonds from Spain and France is “real demand”… not the kind where yields were held low because they were previously artificially held down by EB buying…
But the euro is being hung out on a line this morning, waiting to hear what ECB President, Mario Draghi, is going to say in the press conference following the meeting where he will announce no change in rates… Euro traders are waiting to see if Draghi pulls a rabbit out of his hat of Central Bank tricks…
So… for the euro today, it’s a case of you can’t do anything right as far as the markets are concerned… and I am concerned about what Draghi has to say, for he has really thrown the euro under the bus, to promote growth, which is exactly what we all expected when a Club Med President (Italian central bank) was put in the position of ECB president!
In a case of “this should have been better for us than that”… The New Zealand dollar / kiwi, was the worst performer of the night, moving downward VS the U.S. dollar and the Aussie dollar (A$), in response to a very weak labor report. New Zealand 1st QTR unemployment rate jumped to 6.7%, from the previous quarter’s 6.4% figure… So, that was not so good for kiwi… but in reality, I think it was a knee jerk reaction to the number, for N.Z. unemployment has remained in a range of 6-7% for over two years now…
On the side of “this should have been better for kiwi than the labor report”… The Reserve Bank of New Zealand (RBNZ), who used to be what I would call a “prudent Central Bank”, but kind of lost their way, brought some of that prudency back last night when they introduced a number of prudential policy changes, based on lessons from the global financial meltdown, in order to further strengthen the New Zealand financial system…
For instance, the RBNZ seeing that financial institutions are more vulnerable than previously thought to contagion effects from financial shocks, due to the likelihood of liquidity contraction, decided to “up the game on bank liquidity requirements”, including their Core Funding Ratio, and they also address the Capital Requirements under the new Base III framework.
Another thing the RBNZ announced was a framework to remove the tax payer funded bail-outs when banks fail… and there were more responses…
See? Now, isn’t insuring that their financial system will remain viable during the next financial meltdown better for kiwi than a labor report? Or at least it’s a tie!
This is the kind of stuff that I really get the hair on the back of my neck to stand up for… Central Banks doing what they should be doing, and not financing 61% of Treasury Auctions in one year, or running the printing press 24/7, or implementing stimulus packages that have been shown to not really work in the long run (see Japan, circa 1995-2012)…
The sun is rising on the ocean this morning… I’m sitting on a deck overlooking the ocean, while I write the Pfennig… Now this is the way to write! I have my I-Pod playing. I’m even drinking coffee while I write today, normally I wait until I’m finished writing before I partake in a cup of coffee, as I want what I write to be pure Chuck! But not today… I’m actually having a good time writing this morning!
Ok… sorry for that commercial break! Back to the tape!
Don’t you just love it when someone always has a better way to do something than what you’ve chosen? Or a better idea, or a better anything? Well, I do… and to that is why I dislike any U.S. official that goes to China and tells them “how to do things better”… For instance, yesterday, U.S. Treasury Sec. Geithner told the Chinese that “a stronger, more market-determined currency would … blah, blah, blah… the thing that catches my eye, is that Geithner tells the Chinese they need a stronger currency, when the one he is somewhat responsible for is worth about 3-cents, and will someday trade to its intrinsic value…
If having a strong currency is so important, then why doesn’t the Treasury Sec. go back to Washington and sit down with the President, Big Ben Bernanke, and Congress… He’ll get about as much reaction to that thought as he did in China!
On sidebar… I participated in a CFA poll this week… 926 people responded, and 60% of them said that “hedge funds impact on the financial system can best be characterized as: Destabilizing… 21% said immaterial, and 19% said stabilizing… I voted as destabilizing… as their use of shorting, leverage and derivatives cause an outsized impact on the financial markets… Size matters, and when large amounts of money come into a market the market moves… that can be good, or bad… depending on what side of the trade you reside!
OK… back to regular programming… yesterday we saw another regional manufacturing index print weaker, the NY ISM index printed at 61.2 falling from 67.4 in March… So, once again I say, Riddle me this Batman, how can the national ISM print an increase when all the regionals have printed weaker?
The ADP Employment Change data that is supposed to give us an indication of the Jobs Jamboree which will print tomorrow, showed that in April, the country added 119,000 jobs… Which was much weaker than the forecast of 170,000.. Today, we’ll see another labor report called the Challenger Jobs Cuts… of course, none of this really gives us an indication of the Jobs Jamboree, because of all the “adjustments” the Bureau of Labor Statistics (BLS) makes before printing…
And of course with it being a Tub Thumpin’ Thursday, we’ll see the latest Weekly Initial Jobless Claims for last week… look for 380,000
Gold & Silver have traded down this week… I shake my head in disgust at the things going on behind the curtain with these two… The demand for the two metals remains strong… Last week at the Casey Conference, every person that stopped by our table, eventually wanted to know about our Gold & Silver offerings… Eventually, the demand will win out over the price manipulators…
In the category of Central Banks that have deep sixed their currencies besides the Fed and the dollar… we see the Brazilian real, and the Indian rupee… nasty moves these two have made in recent weeks, and it all comes back to the Central Bank’s moves to get their currency weaker… I told you a few weeks ago, that it appeared to me that the markets had given up on the Brazilian real, and that has really played out since…
I had a Casey Conference attendee stop by the table on numerous occasions last week, and kept asking me if I was sure about the Swiss franc being pushed lower by the Central Bank… Seems the attendee only wanted to buy francs… I said, “that’s fine, but you need to be aware that the Central Bank did a defacto devaluation of 10% last September, and are talking about more”… I probably said that about a dozen times last weekend!
Then There Was This… OK… yesterday, I talked about the future price of Oil… and said that well respected analyst, Porter Stansberry, had forecast a $40 price of Oil in the next year… I then went on to talk about what a great country we are, and why that shouldn’t be something we can’t get to… I then talked about the CPA… what a dork! I meant the EPA!
A lot of you thought I was agreeing the Mr. Stansberry… Well, I wasn’t agreeing with him, I was saying “why can’t we do that”? and then gave a few examples of why it will be difficult to get to… Marin Katusa over at the Casey Research team, wrote a long article about how this will be difficult… You should try to go to www.caseyresearch.com and find that report… Marin does a great job!
To recap… the currencies are stuck in a rut… the euro is being hung out on a line by the ECB meeting today, after seeing some very good results from bond auctions in Spain and France this morning… The New Zealand dollar / kiwi is the worst performer overnight, as their unemployment rate gained in the 1st QTR, and that has put the kyboshes on the hopes of reversing the emergency rate cuts from last year. U.S. data continues to be weaker, except the National Manufacturing data, which still is puzzling to Chuck…
Currencies today 5/3/12… American Style: A$ $1.0295, kiwi .8030, C$ $1.0170, euro 1.3135, sterling 1.6180, Swiss $1.0930, … European Style: rand 7.73, krone 5.7435, SEK 6.7540, forint 215.20, zloty 3.1675, koruna 18.9690, RUB 29.53, yen 80.35, sing 1.2420, HKD 7.7590, INR 53.41, China 6.3053, pesos 12.94, BRL 1.9220, Dollar Index 79.26, Oil $104.85, 10-year 1.93%, Silver $30.48, and Gold…. $1,646.70
That’s it for today… running a bit later this morning… the sun in my eyes, and all that! HA! My beloved Cardinals thumped the Pirates last night.. A day game at Busch today, and I’m 1,100 miles away! UGH! Our Blues take the ice again tonight in L.A. Good Luck Boys! Skate, boys skate! Have you ever heard The Buckinghams song Mercy, Mercy, Mercy? It really gets me moving on the bench here on the deck! I know another 60’s song… from 1965 to 1977, most of the best rock & soul music was created… Alex scored 5 goals in his Water Polo game last night, as his team won… and I missed that too! UGH! When Andrew played in High School, I never missed one of his games, but that was before I began to travel and speak at Conferences… Ok… running late, so let’s get the ejection process started! I hope you have a Tub Thumpin’ Thursday!
Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837
www.everbank.com
