In This Issue.

* Currencies rally at night, sell by day.
* Russian rubles best performer again!
* Chuck says shorting renminbi may not be smart.
* And the Big Boss brings us a treat!

And Now. Today's A Pfennig For Your Thoughts.

A Hung Jury?

Good day.. And a Tub Thumpin' Thursday to you! Well, things didn't work out so great for my beloved Cardinals in game 2 of the season, but who amongst us thought they would win all 162? HA!  Baseball is a game where mistakes are magnified, and usually bring about a loss, which is what happened yesterday. I've got a lot to talk about today, and the Big Boss, Frank Trotter, has sent me a piece from NYC to add, so the Pfennig is chock-full-o-stuff today. are you ready? Yes I'm ready..

Well, the Fed's FOMC Meeting Minutes (FOMCMM) printed yesterday, and one of our guys in Jacksonville that does mortgage bond updates throughout the day, called the print a: “hung jury”. I had to laugh when I saw that because that hits the nail on the head in describing the goings on at the FOMC Meeting.  Basically the way I read them, the Fed members are split on the direction of The Fed and rates. They all agreed that the pace of economic growth had moderated somewhat over the intermeeting period, but then said that they thought was this cause by “transitory factors”. Read: Bad Weather. There were a range of views expressed regarding when it would be the right time to begin hiking rates, what they call: normalizing monetary policy. It was even discussed that the Fed members didn't think it was necessary to wait for inflation to move higher to begin hiking rates.

Well, the markets read the FOMCMM and began buying dollars by the truck load once again, but I have to warn them, that just because the Fed members beat around the bush and let on as though they are ready to hike rates, they could be setting a trap. No, they wouldn't actually be trying to trap anyone in a trade, but you get what I'm saying, right?  Oh, I'm going to stop talking about this before I say something that will get me into trouble with the gate keepers of brand.

So, I looked at the currency screens this morning, and after the dollar buying began yesterday afternoon, the overnight markets went right back to selling dollars and buying currencies, and for the 3rd consecutive day, the Russian ruble is the best performing currency, dropping another whole figure from its figure. (remember the ruble is a European priced currency, so as the price drops, like it has from 12/16 when it was 79 and change to today where it is 52 and change, that's means the ruble is rallying, as it takes less rubles to equal a dollar.

I told you yesterday, that Russia was ready to issue their largest bond offering in a couple of years.Well, that offering went off without a hitch, and the ruble posted another 2% gain overnight. In fact, Bloomberg says that the ruble is up 11% this month!  And why not? The truce with Ukraine is holding, and the price of Oil has stabilized, and has in fact gained since hitting a 6-year low in December. And now with the Central Bank of Russia (CBR) is beginning to unwind the emergency rate hikes that took rates in Russia to 17%, so this is one of those “Goldilocks” moments as bond returns are strong, along with currency returns.

Russia's running buddy, China, has seen their currency lose ground in recent trading, as the economy continues to be slower than previous times, and investment flows have been leaving China.  Traders have gone about going short the renminbi / yuan. I think that's a dangerous and not very thought through trade, given the fact that the China is attempting to get the IMF to add the renminbi / yuan into their basket of reserve currencies that make up SDR's (special drawing rights). Think about that for a minute. It would NOT behoove the Chinese to allow the renminbi / yuan to be volatile and trade violently ahead of the discussions with the IMF, now would it?  So, there are reports that China has already begun to tap into their more than $4 Trillion in reserves at a $33 Billion per month clip to even out the trading in the renminbi/ yuan.

The Big Boss, Frank Trotter, sent me a note on Sunday night, asking me for an update on the Swiss franc, as he was going to do an interview on Monday morning regarding the franc. He had his notes but just wanted to know if I had any thoughts to add. And this is what I sent him. And this is for all the dear readers that say I don't talk about the Swiss franc enough.

After the SNB's decision to drop the peg on the cross to the euro, the franc soared, but soon came back to a relatively reasonable atmosphere. Today, the franc trades in dollar terms at $1.05. But has been weaker, as people still associate the trading in the franc with how the euro does. Economic growth in Switzerland has been nascent at best, but still better than the Eurozone, growing at 1.9% last year, and forecast to grow at 1.2% this year, and average 2.4% during 2017-2019.    Inflation has gone into negative territory, much like many other countries, as deflation sweeps across regions. The SNB is still considering negative rates for deposits, to combat what they feel is a real strain on the economy, the relatively strong franc at $1.05. 

I don't foresee the franc returning to the $1.20 levels, but I do believe it will retain its underpinning from being a safe haven currency. And with China, Iran, Israel, and the rest of the rulers who want to rule the world, all vying for top dog, the demand for a safe haven currency will remain strong.  Shoot, look at the Japanese yen. By all accounts Japan is a basket case, but yen hasn't fallen completely out of bed, because it's still considered to be a safe haven currency.

So, taking all things into consideration, if things remain the same this year, and the U.S. continues to muddle along, and the Fed delays rate hikes, I would think the franc would remain well bid around $1.05.  But should the dollar strength reverse itself this year, then the franc could look to rally.

It was another day of the Aussie dollar (A$) rallying overnight, and then getting whacked in the U.S. session, yesterday. So, the ball was in the overnight markets last night and they have pushed the A$ up by ½-cent, now the ball has been volleyed back to the U.S. session, to see what they do with it today. If the previous few days are any indication, we'll see the A$ get taken back down during the day here in the U.S.   I don't know what to attribute this trading pattern to, except the obvious, The foreign markets like the A$, and the U.S. doesn't.   I for one have always liked the A$, but right now, I'm somewhat torn between two lovers, looking like a fool, no wait! I'm really just torn, because you have a housing boom going on in the big cities like Sydney, and you have falling iron ore prices. The Reserve Bank of Australia (RBA) are the one ones that are torn between two lovers, here!

The euro's advance yesterday, was short-lived, as has been most of its advances in recent trading . Yesterday, I made a couple of typing faux pas and one of them was when I said that Thursday would be the day that Greece was supposed to pay back the “IRS”..  HAHAHAHA! IRS!  Of course I meant the IMF, but I guess you can see what's on my mind, eh? Taxes. It's this time every year, that I just get so depressed when I see the total of the amount of taxes that I pay. When I was a young man, and didn't make much money and didn't have two wooden nickels to rub together, I used to say stupid things like: Give me the money and I'll gladly pay the taxes.   HA! Just shows to go ya, that you should always be careful with what you wish for!     

The U.S. Data Cupboard is back to putting out data that most people could take or leave, and mostly leave. However, the Weekly Initial Jobless Claims will print. This report has been all over the place lately, with holidays, closed offices for weather, and what have you, affecting the numbers. This is where I would say, we need to keep an eye on the Continued Claims figure.

Gold is down this morning, and has fallen back below $1,200. This is more than a $20 drop from Monday's figure. Did you see on CNBC (not that I would and don't know why you would, but thought I'd ask anyway) on Monday where well respected, analyst and newsletter writer; Dennis Gartman said that “the move higher in Gold  could just be getting started.”  I found that on Google+ this morning.  Dennis Gartman has stated several times that he's not a Gold Bug, so for him to say this about Gold's price is interesting, don't you think?

And now, our special treat for today. Here's the Big Boss, Frank Trotter, from the Big Apple.

New York, New York – There are indeed a lot of clothes.  When I am on the road, and there is no rink or pick up hockey game that I know of, I like to walk around the city.  The way my meeting were scheduled in NY today I was able to walk between each before heading to the upper east side for dinner with a longtime friend (I am now officially avoiding the term “old friend” which in most cases is redundant).  Back and forth to meetings was mostly amongst people in the midst of business. Smartly dressed New Yorkers hustling between appointments.  Parcel movers, pushing or pulling hand trucks stacked with boxes weaving in and out of the foot traffic.

For dinner I started in mid-town on 46th and took Madison to 84th, first passing the chain stores seen in every mall in the country, then transitioning to couture and then to absurd as I headed north.  I might have counted 200 high end stores, each staffed with a guard and at least two sales people looking lonely out the window hoping someone would come in and make their day.  In the 200 I saw maybe 3-4 had clients obviously inside.  Must be lots of mark-up there to afford the rent.  In all the GPS says I did 8.1 miles between the different legs.  Dogs are barking right now.

I don't really know what to read into my walk except there are a lot of people on the street, and down in the chain store neighborhood the stores are full.  Apparently three weeks ago the Open Market Committee at the Fed didn't quite know what to think either.  Economic activity isn't picking up as fast as the board wants even with the smoke and mirrors of QE.  Inflation is flat, and the fact that the US dollar is strong raised concerns.  Put all those things into one sentence and the Fed is concerned that our money is able to buy more things; sounds tragic don't you think?  A friend said today that the way he imagines the Fed explaining it is – we're in the biggest bubble in world history, and it'll all be fine in the end.  I'll toast to that but keep an eye out for other outcomes.” – Frank Trotter

Before I head to the Big Finish today, I must make amends for my fat finger errors yesterday in the currency roundup. I had the Polish zloty and Mexican peso prices recorded incorrectly. Thanks to a few dear readers for bringing that to my attention. I always fly through those currency prices and don't re-read them, since they are not to be used as a solicitation, bid or offer to buy or sell, just something you can keep an eye on. But I do feel bad when I record one of them incorrectly. And then I had the IRS for IMF faux pas. I must have been half asleep yesterday morning when I wrote the Pfennig!

For What It's Worth.  Well, I was reading my friend, John Mauldin's weekly letter yesterday, as I try to do each week, and in the letter John was talking about his views on debt levels VS the Keynesian views.  I'll let John take if from here:  “Thus they (Keynesians) perceive that the remedy to a recession is to run deficits in order to increase consumption, which will stimulate production, which will create jobs.

On the other side of the economic fence, “Austrian” economist Friedrich Hayek asserted that it is actually production that stimulates the economy and drives consumption. An entrepreneur sees a need and figures out a way to fulfill that need. It may even be a need that no one realizes they have until they see the product that addresses it. For Hayek it is production that sets the wheels of the economy spinning, and increased production comes about because of innovation and free capital markets. Economic cause and effect become far more complicated than that very quickly as you drill down into actual history and real data. Schumpeter took our understanding further with his research on creative destruction and the process of competition.”

Chuck Again. Over the years, John and I tend to agree on most things, and we disagree with other things, that's what keeps a conversation lively! But I have to say that I've never agreed with him more than here, quoting Friedrich Hayek. I prefer to keep to the Austrian economics side of the fence, and commend John for quoting that viewpoint!

And should you not be one of John's Million dear readers of his stuff, then you should click here and look into signing up! :

To recap. Another day of currencies rallying overnight, and then being beaten back during the U.S. session yesterday. The FOMC Meeting Minutes printed, and they were in all essence a “hung jury” in Chuck's opinion, but the markets took it as it's time to go “all-in” on the rate hike in June. The Russian ruble is kicking tail and taking names later these days, if only those sanctions would be lifted. Traders are taking to shoring renminbi, but they had better be careful, as the Chinese prepare to impress the IMF later this year. And it's the IMF not the IRS, although taxes are on Chuck's mind these days.

Currencies today 4/9/15. American Style: A$ .7735, kiwi .7605, C$ .7985, euro 1.0775, sterling 1.4835, Swiss $1.0310, . European Style: rand 11.7970, krone 6.9340, SEK 8.0520, forint 275.80, zloty 3.7295, koruna 25.3770, RUB 52.05, yen 119.95, sing 1.3540, HKD 7.7500, INR 62.24, China 6.1338, pesos 14.87, BRL 3.0485, Dollar Index 98.15, Oil $51.43, 10-year 1.89%, Silver $16.33, Platinum $1,163.00, Palladium $756.00, and Gold. $1,199.57

That's it for today. Oh brother have the monster storms been on display all night long and into this morning. Just South of St. Louis, baseball size hail was destroying things yesterday. And once again, the storms are supposed to last throughout the day today. UGH! Hopefully they are out of here by tomorrow, as I fly out and Frank flies in. The storm systems can't take much more rain, right now, and the water is just sitting on the streets, etc.  it's been crazy here this week! Well, as I told you earlier this week, Mike Meyer will have the conn on the Pfennig tomorrow, as I leave early in the morning for L.A.  I get back home on Sunday, so my weekend will be toast at that point. Monday is the Home Opener for the Cardinals, I've received no invites this year, as I have in past years, hmmm.. nobody likes me, everybody hates, me think I'll eat some worms!  HA! Well, I've got to go over my presentation for Saturday today, and make sure I've got it down.  I have a funny line I use there when talking, but it's not for the letter!   So, it's time to get off this bus today, and hope you have a Tub Thumpin' Thursday!

Chuck Butler
Managing Director
EverBank Global Markets