A Pfennig For Your Thoughts

In This Issue…

  • Trade Deficit DID NOT NARROW!
  • China loosens the currency knot!
  • Silver shines!
  • Ballgame night!

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And Now… Today’s Pfennig!

Re-figuring The Trade Deficit…

Good day… And a Happy Friday to one and all! It’s Good Friday… And the world, except banks, is closed today! Monday, too, will be a holiday for most of the world… There will be zero liquidity today and Monday, so watch out for wild swings caused by a large trade or two!

Yesterday was a non-event with the currencies as they remained range bound… The euro dipped a bit after Retail Sales rebounded in March to the tune of .6%, and then bounced back a bit when the Weekly Jobless Claims ticked up to 311k… But all in all a range-bound day. So… The BHI was bang on again with regards to indicating what direction Retail Sales go!

You know… Yesterday I was screaming at the walls because of the dolts that thought and wrote about how the U.S. Trade situation was “getting better”… Here’s something these mental giants should have thought about before opening mouth and inserting foot… Doesn’t it make sense that February’s deficit would be smaller than January’s, simply due to the fact that February has fewer days?

Check this out… if you calculated the Trade Deficit on a “daily deficit” (or Double D!), you will find that January’s “daily deficit” was $2.2129 billion per day and the “daily deficit” for February was $2.3464 billion. Get out! So… The total Monthly Deficit figure the media and dollar bulls jumped all over the other day, wasn’t so much “better” after all… was it? No, it wasn’t…

Today, we’ll see my favorite piece of data… Capacity Utilization, and Industrial Production… For new readers, Capacity Utilization is really the only real piece of data that’s forward looking… That’s why I like it… Another reason is that no one else but me looks at this data! Anyway… Both pieces of data today are not expected to be any great shakes regarding a change in direction for the U.S. economy… So… We’ll end the day early today and head to an Easter Egg Hunt, eh?

Well… China took another step toward a more flexible currency policy last night when the People’s Bank of China announced that they will now allow companies and individuals to hold more foreign currency and qualified financial institutions to invest abroad… This will allow more movement outbound, and is just another step toward a flexible currency… I have to laugh though… Because as I’ve already told you, China’s President Hu will visit the U.S. next week… So… Hu comes to town with some arrows in his quiver… He can show the “boys” on “the hill” that he not only allowed the renminbi to make a larger than .03 daily movement earlier this week, but has now allowed outflows of the currency…

I don’t think that’s going to appease the “boys,” especially Schumer and Graham… Besides, Hu has some ‘xplainin to do, Lucy! I’m sure the “boys” are going to point toward China’s second-largest Trade Surplus that was posted the other day, and the announcement last night that their Foreign-Exchange Reserves rose 32.8% from a year ago! But… I don’t think Hu will give two hoots!

And from the “Did You Know” files… Did you know that Asia holds 60.8% of Worldwide Reserve Assets? WOW!

Well… Yesterday I told you that the Net Foreign Security Purchases (NFSP) data would be printed today… My bad… Those dates just blended together on my screen… The sun was in my eyes… I tripped on a rock… Etc. The data will print on Monday…

Earlier this week, I told you “Iceland is in the news overnight as their Central Bank Gov. said in an interview last night that he will push interest rates to record highs to put a lid on prices… “Our models show to keep inflation at bay, we would have to go very much higher, even up to 16%.”

Well… Icelandic inflation has pushed up to 5.5%… So… It looks like the Central Bank Gov. has some work to do! Someone asked me yesterday if I thought Iceland looked like a buying opportunity at current levels… Maybe… The way I look at it… The rot has been exposed, and the Central Bank along with the gov’t have addressed it… Now they need to take steps to correct the deficit problem… When we see them make those initial steps… Then it might be looked at as an opportunity… But I’ve been tarred and feathered enough over Iceland, so I’ll add the bit that this is just my opinion, and I’m not “advising” you on your investments!

Canadian loonies and Aussie dollars both end the week on a sour note, as they were not able to maintain the higher levels they had achieved earlier this week… But then again, oil and gold both stalled this week, too… Base metals like Copper didn’t stall and continue to push higher.

Silver hasn’t stalled, either! Look here… Silver is about to hit $13! Still a ways to go to get back to my 1981 buy level… But at least it is moving in the right direction again!

I just think that once trading ended on Wednesday, things have gotten put on the back burner until everyone gets back from the long holiday next Tuesday… So… With that in mind, I’ll head to the Big Finish, and go get my Friday latte… No latte buddy today as Michelle bagged me today! HA!

Currencies today: A$ .7285, kiwi .6188, C$ .87, euro 1.2115, sterling 1.7525, Swiss .77, ISK 76.20, rand 6.12, krone 6.4930, forint 220.35, zloty 3.25, koruna 23.6575, yen 118.50, baht 37.95, sing 1.6085, China 8.0184, pesos 11.10, dollar index 89.59, silver $12.98, and gold… $595.50

That’s it for today… Big night for the EverBank St. Louis Office, as we are all going to the baseball game tonight at Busch Stadium… Our little Christine has been so fired up all week! Tomorrow my little buddy’s football team gets to play at the Rams indoor facility, he’s fired up about that, too! Well… Time to go, have a great Friday, and if you get a long weekend, enjoy that, too!

Chuck Butler
EverBank World Markets