In This Issue.
* Markets are enamored with what Yellen said.
* Greek talks outweighs good data in Germany.
* It's a Jobs Jamboree week, and I don't care!.
* Dollar is back at the top of the house!
And Now. Today's A Pfennig For Your Thoughts.
Good day.. And a Tom Terrific Tuesday to you! Yes, I'm baaaaaaaccccckkkk. I guess the markets got word that I was coming back, and decided to end the Chuck's away rally for the currencies and metals, for the last two days have not been very kind to those asset classes, and the dollar has returned to its spot at the top of the house. Dionne Warwick greets me this morning with her song: Walk Away. What a great song to start the morning with!
Turning on the currency screens isn't a great way to start the morning though. UGH! Last week, I checked what was going on in the markets, when I had a spare minute, and after seeing the rallies going on in the currencies and metals, I thought to myself, “this is going to be fun to come back to.” But that was wiped out on Friday, and Chris told you yesterday that the reversal all came about after some comment by Fed Chair, Janet Yellen. Of course I don't agree with the markets' rendition of what they thought she said, but that won't put any butter on my bread.
So. The trading in the currencies and metals is all based on the markets' rendition of what Yellen said, and that is just crazy folks. But it is what it is, and even though I think the markets are all barking up the wrong tree, that doesn't mean that they'll figure it out any time soon, and we have to live with this dollar strength a little longer. One thing I did notice while I was gone, is that the reversal came swift and strong, when it did occur, which led me to believe that the markets are not sold 100% on this dollar strength.
Overnight, the currencies and metals are getting whipped again by the dollar. This would be a good time for the Allman Brothers song: Whipping Post to play. The euro is the worst performer overnight, losing a full-cent, even though Germany, the Eurozone's largest economy, posted a record low falling to 6.4% from 6.5%… On top of that you had the Bundesbank, Germany's Central Bank, say in their monthly report that “output in the country probably increased sharply in the first quarter.” All of this should have been manna from heaven for the euro this morning, but. something far outweighed this good news from Germany, and it was. of course, Greece. The party guests that just won't go home, no matter how many times you walk to the door.
As we close the books on the first quarter of 2015 today, I look back and see some real damage to the currencies and metals to start the year. I mean “real damage”! The Brazilian real lost 18% in this quarter, the euro 11%, and so on. There were a couple of surprises in the quarter.. The Swiss franc gained 2.1%, and even with all the talk of future rate cuts in Australia, the Aussie dollar (A$) pretty much held ground losing just .8% in the quarter.
This combination of the last days of March and the first days of April this week, will bring us a ton of data, of which not much will be that important. We will end the week with a Jobs Jamboree, which I've weaned myself off of. I no longer give a hoot whether the BLS prints jobs data or not! The reports always walked the fine line between believable and unbelievable until the past few months, and now they are just unbelievable, and I can't see how and why the markets continue to take them for face value. But they do, and so I've decided to just walk away from all this. Sure I'll report on it for you, but to get all caught up in it I will no longer do!
While we're touching on data, and I mean that! We might as well, talk about the Personal Income and Spending data from the U.S. data that printed yesterday. Consumer Spending is just not happening folks. And there was all that talk about how the cheaper gas prices were going to just turn the U.S. economy on its ear. Well, it isn't happening, and I guess I should say, “yet”, but I don't really expect much from it. Personal Spending for Feb barely rose after printing negative growth in January. But Personal Income was up. For those of you keeping score at home, the Income grew at .4%, and Spending grew at .1%…
And this is where I'll remind everyone that Consumption (personal spending) is what drives the U.S. economy. And without it, the economy struggles to gain any ground, which is exactly what I said was going to happen as we move further away from stimulus and closer to a rate hike. It's all about Consumption. I'll tell you a little story about Consumption. A few years ago, Chuck was in Bermuda with the Big Boss, Frank Trotter. We were both speaking at a Conference, and Frank was part of a panel discussion. So during the panel discussion, Frank was asked about Consumption, and he had this to say, “I was walking around the cemetery and I noticed that most of the grave markers said that the person died from “Consumption”, so to me it's not a very good thing.” Of course that drew a lot of laughter, but when you stop to think about it. That Big Boss, he's such a wise fox isn't he?
Well, that should do the trick for me. I needed to soften the blow of coming back to work next week and then leaving on Friday again. You see I'll be speaking at the American Association of Individual Investors (AAII) meeting in Las Angeles on April 11. If you're a member of AAII, I hope you come out to listen to what I have to say!
So, getting back to the U.S. Data Cupboard from yesterday. The Fed members like to use the PCE (Personal Consumption Expenditures) as their guide for Consumer Inflation instead of the stupid CPI. And yesterday, the February PCE printed at just 1.4%, far below the Fed's preferred level of 2%… So, riddle me this Batman, If PCE is just 1.4%, how can the Fed talk about rate hikes?
The U.S. Data Cupboard today has the S&P/ CaseShiller Home Price Index for January, along with Consumer Confidence for March.
OK. I really got off on a tangent with the data early today, so let's get back to the currencies and metals a bit before we go to the Big Finish!
Another of the surprises on the positive side of the equation for the currencies is the Russian ruble, which posted a 5.4% gain in the first quarter. That's a good start, but there's a ton of work still to do here to patch up the nearly 46% collapse in 2014. Russia is still in need of the dropping of the sanctions against them, which seem to be on the negotiating table right now, which is a good thing, and if approved to remove them, could lead to more gains in the ruble. But then the whole process could fall apart, for it is like walking on eggs right now.
As long as the rest of the world's currencies were rallying VS the dollar in the past couple of weeks, so too did the Chinese renminbi. But since that “rally” ended, so too has the positive moves in the renminbi / yuan. There are a ton of rumors flying around China right now that they are ready to move rates lower, and that probably has the renminbi / yuan on the ropes with the Peoples Bank of China (PBOC) who sets the fixing rate each day for the currency.
The Indian rupee is booking a gain VS the dollar this morning, one of the few doing that! The rupee had stalled for a couple of months, but now seems ready to resume its hike up the currency appreciation mountain. A month or so ago, I wrote about the rupee in the Sunday Pfennig & Friends. I was very disheartened to see the stalling of the rupee after that article printed, but now the stall appears to have ended, and so we can all go back to what we were doing previously.
And Gold. What a difference a day makes, eh? Gold took one to the chin on Friday, and again yesterday, and unfortunately for the shiny metal, it appears that the pounding is going to continue today, with Gold down $4 already this morning. This past Saturday, I saw a headline from Ed Steer's letter saying: “Red Rag to Gold Bulls – JPMorgan Added to LBMA Gold Price Banks” and had a chuckle. Basically the writer, Lawrence Williams, was saying that Gold Bulls had better beware, because JPMorgan is going to be one of the banks that set the fixing price for Gold each day. Apparently, Lawrence Williams has a problem with that. I wonder what that could be? Hmmm, HA!
For What It's Worth. How's this for a title to an article: “Janet Yellen Admits that “cash is not a store of value”. WOW! But that's what I read on zerohedge.com this weekend. And if you don't believe me, you can check it out yourself here: http://www.zerohedge.com/news/2015-03-27/santelli-stunned-janet-yellen-admits-cash-not-store-value
Chuck again. So, let me get this straight. Janet Yellen, is telling the American public that they shouldn't hold cash for it is not a store of value. Now, she didn't go on to say that holding stocks was a store of value or anything like that, but in essence isn't that close to what she was saying? I have to believe this is a very scary thing for her to have said. I can't give you the full press of what I'm thinking here folks, that will be saved for the Butler Patio when I return!
To recap. The nearly two week rally for the currencies and metals ended Friday, and carried over to Monday and now our Tom Terrific Tuesday! All on what the markets think Janet Yellen said last week about rate hikes. German Unemployment fell to record low of 6.4% last month, and the Bundesbank has rosy outlook for the German economy, the Eurozone's largest, but none of that has helped the euro which is down a full cent this morning on a stalling of the talks with Greece. The U.S. data recently has continued the trend of bad data with Personal Spending barely gaining any ground in Feb, which is probably a very good indicator that the 1st QTR GDP here in the U.S. is not going to improve upon the 4th QTR's 2.2% gain.
Currencies today 3/31/15. American Style: A$ .7605, kiwi .7475, C$ .7845, euro 1.0730, sterling 1.4785, Swiss $1.0275, . European Style: rand 12.2140, krone 8.1120, SEK 8.6540, forint 279.30, zloty 3.8115, koruna 25.6660, RUB 58.17, yen 120.00, sing 1.3745, HKD 7.7540, INR 62.54, China 6.1422, pesos 15.32, BRL 3.2280, Dollar Index 98.53, Oil $47.68, 10-year 1.95%, Silver $16.58, Platinum $1,126.00, Palladium $737.90, and Gold. $1,182.57
That's it for today. Well, thanks to Frank, Mike and Chris for their combined efforts in getting the Pfennig out while I was vacationing with my family and then my Spring Training buddies. I know that they have “other things to do” each morning, so I thank them for their support. I had a grand time. Yesterday, was one of the most beautiful days I've seen down here, and I was sick all day. I mean nothing like having stomach problems at a ballgame! UGH! My good friend, Duane, was so sick that he couldn't make spring training this year. UGH! I sure hope he's better now! And yes, I celebrated my 60th birthday while I was on vacation. I want to thank everyone that sent along birthday wishes. Wasn't the birthday note that the Aden sisters sent me that was in the Pfennig yesterday so sweet? Yes it was! Thank you Pamela and Mary Anne! Emerson Lake and Palmer's song: Lucky Man is playing on the iPod right now, and that's how I feel. Very lucky to have friends like I have, and the loving family I have, and you dear readers! And with that, I had better get this to the legal team, before I get anymore sappy! I hope you have a Tom Terrific Tuesday!
EverBank Global Markets