A Pfennig For Your Thoughts

In This Issue…

  • Home prices fall…
  • Thailand moving along nicely…
  • Talking trash about kiwi…
  • Gold back over $600!

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And Now… Today’s Pfennig!

New Home Sales Rebound?

Good day… Another day… Another range-bound trading session. The U.S. Housing report gave the dollar a bit of a run, but that was short-lived… We’ll see the final reading of 2nd QTR GDP this morning, and something that the Fed used to keep their eye on, Personal Consumption… Nothing is expected to be out of the norm, so we could very well see more range-bound trading today.

The U.S. New Home Sales surprised on the upside on Wednesday… Talk about a rogue report! New Home Sales for August rose 4.1%… And all the stars were back in alignment, with the karma flowing again, right? Not so fast! Recall that July’s number showed a negative 4.3%… But get this… That negative 4.3% was revised down to 7.5%! Holy revisions, Batman! So… This puts us at a negative 3.4% for the past two months. Oh… And the median price fell 1.3%. So… After reviewing this data, knowing all too well that next month’s revision could really put a damper on this number… And seeing that the overall trend is still downward, the dollar buying stopped on a dime.

My Economics professor friend sent me the latest GAO report yesterday (THANKS!) The GAO stands for the Government Accountability Office… They’ve been publishing reports on the Nation’s Long-Term Fiscal Outlook since 1992. They don’t pull any punches, either! Here’s a snippet of their report….

“Under any reasonable set of expectations about future spending and revenues, the risks posed to the Nation’s future financial condition are too high to be acceptable.”

The GAO calls our current imprudent spending unsustainable… We’ve been through all this before, but thought it important to share the thoughts of the GAO… They seem to be right up there with mine… And, oh… The GAO didn’t just come to this realization… They’ve been talking about this for some time now… It just seems that no one wants to accept what they keep telling us… Sort of like this guy in St. Louis that keeps getting on his soapbox and ranting about the Twin Deficits…

Yesterday, I told you about how kiwi had fallen over 1 cent in two days of trading… well, Finance Minister Cullen didn’t exactly throw a flotation device to the reeling currency… Instead he had negative comments about kiwi! I told you some time during the last election period that the current administration consisting of the Reserve Bank Gov. and Finance Minister didn’t like a strong kiwi, while the challenger and former Reserve Bank Gov., Don Brash, was all about a strong kiwi…

Well… We all know that Brash lost… And we’re stuck with these two that like to talk trash about kiwi. I know that the Current Account Deficit in New Zealand is 9.7% of GDP… But is that any reason to talk trash of your own currency? I don’t think so, Tim!

OK… It’s been over a week since the coup in Thailand… And things seem to be moving along nicely… Recall that about a year ago, I told you that Thailand had just recently gone into a deficit, but that it was small and could be wiped out very quickly, which is why I left them on probationary status with the Current Account Surplus countries…

I love it when a plan comes together! It looks like Thailand is going to post their highest Current Account Surplus in 20 months when the August results are printed. In addition, an interim Prime Minister will be named next week, with general elections a year from now… So… As I said, things seem to be moving along nicely. The Thai baht has been trading sideways for a few days now, but once the Current Account shows a surplus again, I think we’ll see the baht get back on the rally tracks!

Geez Louise… Pound sterling was sold yesterday (within a range) after a Bank of England’s Monetary Policy Committee minister held a press conference and discussed his views, which are opposite of the other MPC ministers. The range-bound sell-off began after MPC minister Blanchflower – the only member that voted against a hike on Aug 3 – said he saw more risk of a slowdown than a pickup in the UK economy. Come on! What else would he say? He voted against the rate hike, for crying out loud! Come on sterling traders, get some back bone!

We don’t see that kind of splintering off over at the ECB! ECB ministers are all singing from the same song sheet… And recently have taken on a more belligerent tone to their hawkish stance… Which makes me think they might raise rates more than 25 BPS next week when they meet… I’ve talked about this before, the chance of a 50 BPS hike while the iron is hot… Personally, I would prefer to have a 25 BPS hike with continued hawkish talk, to keep the markets interested… A 50 BPS hike might make the markets think that the rate hike cycle is over… It’s not over until I say it’s over! Was it over when the Germans bombed Pearl Harbor? No! (ok, just for clarification, that’s from Animal House, I’m fully aware of the fact that the Germans didn’t bomb Pearl Harbor. I actually have to say this, because I had a reader one time heckle me because they didn’t see the movie and thought I was a complete dolt!)

The loonie really caught some wind in its sails yesterday, as my trader friend at the Royal Bank of Canada told me that large U.S. names were selling greenbacks for loonies… It was hard to pinpoint exactly what was moving them to this trade… Could have been Mergers and Acquisitions generated, or the bump in oil price, or option expirations… Or… Maybe all of the above! Anyway… Loonies moved in a positive fashion for the first time in a week…

Well… Not only oil has bumped up again… So too has gold, as it traded over $600 late yesterday afternoon and added to that figure overnight. Is this the beginning of a general healing of commodities? I would certainly like to think so!

Currencies today: A$ .75, kiwi .6565, C$ .8995, euro 1.2720, sterling 1.88, Swiss .8930, ISK 69.90, rand 7.64, krone 6.47, SEK 7.28, forint 215, zloty 3.13, koruna 22.35, yen 117.50, baht 37.50, sing 1.5875, HKD 7.7880, INR 45.92, China 7.8965, pesos 11.04, dollar index 85.68, silver $11.67, and gold… $604

That’s it for today… I thought that my travels were ending with the New Orleans Conference in November, but I just found out yesterday that I’m heading to Phoenix the first week of December… Hey… It’s better than heading north at that time of year! El Hombre, Albert Pujols saved the day and maybe the season for the Cardinals with a blast last night… I’m off to spend a couple of hours in a dentist’s chair today, oh boy! NOT! Have a great Thursday!

Chuck Butler
EverBank World Markets