A Pfennig For Your Thoughts

In This Issue…

  • Thaksin is out as PM in Thailand!
  • Housing starts to fall 6%!
  • A new conspiracy theory…
  • A message from EverBank management…

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And Now… Today’s Pfennig!

A Coup For Thailand…

Good day… Well… We and the markets received a jolt yesterday when the first news reports came across telling the world that tanks had rolled into the streets of Bangkok… The next thing we knew, a military coup had taken place in Thailand, with Premier Thaksin in New York City at the U.N. summit…

Things got pretty interesting right away, with big firms halting trading in Thai baht until things were clearer… However, don’t panic… Here’s some soothing words from currency traders around the world… Christopher Wood, global equities strategist at CLSA Ltd., said, “investors should raise their holding of Thai stocks because the coup may end the nation’s political stalemate.” And… Craig Scholl, senior portfolio manager at State Street Global Advisors, said, “We actually see this as having long-term benefits.”

OK… Let me lay this all out for you… As you recall, last spring there was a political scandal with PM Thaksin caught in the middle… The people screamed for Thaksin’s ouster… So, feeling quite confident, Thaksin called for an April vote in an attempt to end the ongoing street protests in Bangkok. The snap election was boycotted by the three biggest opposition parties in Thailand and later annulled by a court. New elections had been expected to be held this November.

Thailand has had a lame duck government since then… And with all that political turmoil going on, the Thai baht was able to gain as much as 8% vs. the dollar this year. However, with the lame duck government no spending on new factories and roads, etc. was happening… So… In the end, I agree with Mr. Scholl above and see this coup as having long-term benefits for Thailand.

The Thai baht has lost ground on the news, as I’ve explained many times in the past, the markets do not like “uncertainty” and that’s what they have right now… Although, the military has announced that this was not a military coup, and that the power would be returned to the people.

So… At this point, I think a “batten down the hatches” approach would serve us best, until we see exactly what kind of government is put in place in Thailand… And… Did you know that this Thailand’s 18th coup in 60 years? So, this stuff is commonplace for Thailand… So far, the baht has lost some ground, but most of that move came yesterday when the coup was announced… Not much movement overnight, or this morning…

OK… Let’s talk about some other things, eh? There was more cooked-up and massaged data printed yesterday, as PPI (Producer Price Inflation) didn’t show much pipeline inflation, which you and I know to be a bunch of baloney! But then, we can’t get in the way of a “feel good” story by the Government…

We also saw some disturbing news from the housing sector, as U.S. housing starts fell 6% to an annualized rate of 1.665 million units in August, the slowest pace since April 2003 and weaker than the “expert” forecasts for a 1.746 million unit pace or a 2.7% decline. July starts were revised down to a 1.772 million unit pace. This result is simply proof of further exteriorization in the housing sector. The bubble has found the pin it was trying to avoid… Right now, it’s just a slow leak, we’re still waiting for the pin to fully puncture the bubble.

So… After the housing data printed, the dollar was sold, albeit slowly… But when the news of the tanks entering Bangkok hit the wires, all that dollar selling dried up, and just like the day before, the greenback had lost ground during the morning session, only to rally back in the afternoon session.

I had someone send me an email yesterday telling me that I should stop sounding surprised that the dollar doesn’t weaken on bad data… Well… I’m not really too surprised, especially at this time of the year… While I thought we could really get the wheels rolling on dollar selling, I knew that there would be much manipulation going on as we head to the election in November… Which, in my latest conspiracy theory, says that the election is the reason oil/gas has fallen so much in price, and the Fed has stopped raising interest rates, and gold has suffered…

And least I forget that today is a FOMC meeting… Big Ben and his Fed Heads… Sounds almost like a rockabilly band name! Anyway, the boys & girls will meet… And I believe they will hold rates steady once more… This won’t help the dollar… But then I think the markets already believe rates will be held steady and have priced things accordingly…

And one more important thing…. Here’s a note from EverBank Management….

Dear EverBank Customer,

This afternoon, we were made aware of a FRAUDULENT email that was designed to appear to come from EverBank.

This random attack email was sent out to many email addresses, potentially including EverBank consumers, inviting them to enroll in a new Antifraud program. If you receive this email, DO NOT FOLLOW THE INSTRUCTIONS IN THE EMAIL AND DO NOT CLICK THE LINK TO ENROLL IN THIS FRAUDULENT PROGRAM.

For your safety, please continue to disregard emails sent to you on an unsolicited basis that ask for any personal or confidential information. ONLY enter personal and confidential information after you have securely logged in to the EverOne Financial Center, EverBank’s secure online banking site. This fraudulent technique is often referred to as “phishing” and has been written about extensively in the press.

Currencies today: A$ .7530, kiwi .6585, C$ .8860, euro 1.2675, sterling 1.8835, Swiss .7990, ISK 70.10, rand 7.40, krone 6.54, SEK 7.27, forint 215.84, zloty 3.12, koruna 22.46, yen 117.20, baht 37.75, sing 1.5860, HKD 7.7850, INR 45.99, China 7.9265, pesos 10.96, dollar index 85.95, silver $10.78, and gold… $574.80

That’s it for today… Lots to cover… Please make sure you read that note from Management above… These people that are always trying to ruin the lives of people through their computers are just awful low-lives… Imagine how much better the world might be if these low-lives put their talents to GOOD USE! Imagine there’s no low-lives, it isn’t hard to do… No computer viruses, no stolen identities… A little John Lennon, Chuck-style on a Wired Wednesday! Have a great Wednesday… And be careful out there!

Chuck Butler
EverBank World Markets