Good Day! …  And a Tom Terrific Tuesday to you! A HUGE late game rally for the Cardinals propelled them to a win… YAHOO!  Well, yesterday, I told you about my allergies and what they were doing to my eyes… When our little Christine came in yesterday, the first thing she said was: “Ooooh, what’s wrong with your eyes?”… So, apparently it was evident! I guess as evident as a hatchet in a man’s forehead! HA! Excuse me, but did you know you had a hatchet in your forehead? HAHAHAHA!

I’m really dragging the line this morning, but that doesn’t mean I’ll forget what makes the letter… Witty writing! HAHAHAHAHA! Boy, I’m on a roll this morning, hey, don’t stop him now! The dollar was on a roll yesterday, and with a few currencies it’s still on a roll this morning… But with the majority of the currencies, the roll was stopped! So, once again, the dollar’s move is a series of starts and stops… My trader friend at BAML sent me a note from their research people which said that if we end August the way it’s been most of the month with the dollar in rally mode, it will mark just the 4th month since the Lehman Bros collapse that the U.S. still has ZIRP, and the dollar posts a rally… WOW! That’s pretty amazing, given that we haven’t really seen much movement in the past 4 years… But apparently, the movement we’ve seen hasn’t been dollar friendly, eh?

One of the worst performers overnight is the N.Z. dollar / kiwi… New Zealand printed a worse than expected Trade Deficit for July at NZ$ 692 Million, VS the estimate of NZ$ 475 Million… OK, yes, I realize, and the markets should realize that NZ$ 692 Million ($576 Million in dollar terms) is chump change! And could be reversed in a revision! But that didn’t stop traders from taking a pound of flesh from kiwi’s value this morning…

The euro is flat and hanging around the 1.32 figure… The euro has slipped below 1.32 quite a bit the past couple of days, so it sure appears to me like the next stop for the single unit is a data with 1.31… The IMM Futures Positions report from last week showed that U.S. dollar (USD) longs reached another new high for the week ending 8/19…  The main currency to see it lose ground to the dollar was the euro… Euro short positions have not seen the levels it is seeing now since the week before the “whatever it takes” speech by European Central Bank (ECB) President Mario Draghi that took place July 2012…

But don’t look for a redo of that “whatever it takes” speech from Draghi… Right now, the euro isn’t in trouble, so to speak, like it was back in 2012, when the Eurozone was teetering on some nasty things… Looking back on that Draghi speech, wasn’t it pretty amazing that the markets took his word, without any questions? They never asked just what he planned to do if they kept selling euros… They just took his word as the gospel and began to cover their euro shorts… Draghi never had to implement one policy to protect the euro, all he had to do was tell the markets that he would, and they ran for cover!

I think Draghi will have to repeat his “whatever it takes” speech again by year-end when the short-term dollar strength I’ve talked about, takes the euro down below 1.30, and maybe to a 1.28 handle…

As I said above, a few currencies, like kiwi,  and renminbi, are down VS the dollar this morning, but for the most part most currencies are eking out gains… So, the all-out assault that the dollar was taking on the currencies yesterday morning has faded.  Recall, I said it was like the traders were saying “we’re all in on the dollar” — kind of…  So, I find it especially interesting that this will mark just the 4th month of dollar strength since ZIRP has been introduced…

The Aussie dollar (A$) is one of the currencies that has eked out a gain VS the U.S. dollar this morning. And this is one of those “amazing currency tricks”, for one would think the A$ would be having a rough go of it this morning, given the latest reports on iron-ore prices, which have set a post crisis low… Just shows to go ya that the A$ is resilient…

Another currency eking out a gain VS the dollar this morning is the Singapore dollar (S$). And here Singapore shows us all the beauty of diversification… One sector shows weakness and other shows strength… You’ve got to love it! Here’s the skinny of what I’m talking about… July Industrial Production in Singapore great at a 3.3% rate, and showed that strong pharmaceuticals offset the lagging electronics sector… Singapore continues to be on my hit parade of countries with outstanding fundamentals… And China keeps recognizing what’s going on in Singapore, as the Chinese keep adding more things for Singapore to do for them..

The problem that the S$ has had this year, is this has been the year that the Chinese have chosen to teach the markets a lesson and are using the renminbi/ yuan as their tool in the lessons, which means the renminbi / yuan has not been able to gain on a consistent basis this year, and when the renminbi / yuan is held down, the S$ gets held back too… I’ve explained this all to you many times in the past, but for the new readers to class each day… Singapore can’t let their currency get too far out of whack with the renminbi, as both are in competition for exports… And to show you what I mean… Since the peg to the dollar in the renminbi was dropped in July 2005, the renminbi has gained: 26%, and during that same time the S$ has gained: 26%!

Speaking of China.. There’s a story that flashed across the Bloomberg this morning that China is considering providing as much as 100 Billion CNY or $16 Billion in dollar terms, in Gov’t. funding to build more charging stations, which they hope would provide a demand for electric cars… Now, that’s being proactive, isn’t it? And isn’t it nice when you have a treasure chest of reserves to do these things without going deeper into debt?

On Friday last week, Canada printed a stronger than expected 1.1% gain in Retail Sales for June…  And that followed an upward revision to the June print to a .9% gain!  I really like the direction of the Canadian economy folks, and don’t forget that a week earlier the “revised” Labor report for July showed a stronger than expected 41,700 increase.   And given this strong direction for the Canadian economy, the Canadian dollar / loonie struggles to carve out any gain VS the green/peachback… UGH!  But carve it out it does!

Did you see where French President, Hollande, dismissed his whole Cabinet, and has told the PM to form a new Gov’t?  Yes, these Parliamentary Governments crack me up… They just fold the tent and start over again with new faces whenever they get the itch! HA! In this case, Hollande just needed Cabinet members that would agree with his policies… The old Cabinet had a rogue member that came out saying stuff about how France needed to dump the austerity measures…  Well, that member was asked to fall on sword, and now we move along…

The Japanese yen, touched 104.00 overnight, but has recovered a bit to 103.85 as I write… Apparently, the Presidents of Russia and Ukraine are meeting today, and I don’t think this is going to be just a “photo-op”… No, I think these two will attempt to end this conflict that has left quite a few dead, before the rain begins to fall in region, and it all becomes a muddy mess… The Daily Reckoning (www.dailyreckoning.com) had some good stuff on this yesterday… So, the reason I tie this all in to the yen recovering a bit this morning, is the fact that the Safe Havens are being bought this morning, because of this meeting, and what “might happen”, that would be bad.

So, with the “safe havens” getting bought, Gold is up $10 this morning! But still below $1,300, after last week’s whackings to the shiny metal…

The U.S. Data Cupboard began to empty out some data this week, yesterday, with the printing of July New Home Sales, which declined 2.4%, giving the recovering housing sector another black eye… Recall that June’s New Home Sales were originally reported as declining 8.1%… Well, they were revised upward to -7%… But still, these last two months of New Home Sales have been awful…

Today’s Cupboard has the July Durable Goods Orders, which are expected to soar from June’s revised level of 1.7%… July is expected to show a gain of 8%… WOW!  We’ll also see the Capital Goods Orders, which I prefer to focus on! In addition, the S&P/ CaseShiller Home Price Index for June will print, along with the Consumer Confidence report for August.

But before you go out and click your heels together in euphoria over this huge gain in Durable Goods, look under the hood… And there, I’m sure you’ll find that there were boatloads of new airline orders for Boeing during the month, which would put this month as an outlier, with next month’s data reversing that gain… So, just a thought…

So, a busy day in the Data Cupboard, and for the most part should be dollar friendly… But, remember, we’re still in the eye of the storm…

And one more piece of data to talk about… My friend and writer/ publisher extraordinaire, Bill Bonner, had this ditty in his letter: Diary of a Rogue Economist, which can be found here: http://bonnerandpartners.com/category/parent/dre/

“First, we noted that, according to Washington’s own budget people, Social Security is going broke 20 years sooner than forecast. It’s already $15 trillion in the hole, with a deficit that’s up 300% (mistakenly reported as 400%) in the last five years.”

Before I head to the Big Finish…  I wanted to take a minute here to talk about the devastating earthquake in California…  There have been over 100 injured, and 1 critically when a fireplace fell on him. Damage from the earthquake could reach $1 Billion according to EQECAT, which is a company that does studies on catastrophic risk…

And then, I read that a very large percentage of people have earthquake insurance in California… According to CNNMoney.com only 1 in 10 have earthquake insurance..  Uh-Oh… Who then is going to pay for this $1 Billion in damages?  Hey! Don’t look over your shoulder that the guy or gal behind you! Get out the mirror…

For What It’s Worth… This is interesting this morning… A dear reader, sent me a note the other day, and told me to check out the 48 Banker deaths… Now, some long time readers will recall me talking about the banker deaths a year or so ago, but according to a  website  the count is now up to 48! WOW!

I have no idea what’s going on here as the reasons of death are all over the board… Obviously, some people have lost their loved ones, and so, I’m trying to be sensitive here… But I just find it really difficult to believe that all these just happened…

So, you can Google, 48 Banker Deaths, and find all sorts of stories out there… And most border on conspiracy stuff…

Chuck again… Crazy, eh? But interesting, especially to someone like me that loves good, juicy conspiracy theories! But think about this for a minute… In the past couple of years, we’ve had former conspiracy theories that were said to be outlandishly stupid, come around to become “conspiracy fact”.. Things like Libor, FX, Gold fixing, and a few others, so you can’t just wave your hand to be dismissed at these things any longer, can you? I say NO!

To recap… The dollar is mixed again this morning, giving up its all-out assault on the currencies and metals that it held yesterday. But the dollar has had more winning days this month than it has in a very long time, and could end up being just the 4th month of dollar rallies since we started down the road to the land of ZIRP!  N.Z. printed a wider than expected Trade Deficit, but in reality it’s just chump change, but kiwi got sold anyway.  The euro is in need of another Draghi miracle, but I don’t expect one to come until the euro looks vulnerable below 1.30…

Currencies today 8/26/14… American Style: A$ .9315, kiwi .8335, C$ .9120, euro 1.3205, sterling 1.6575, Swiss $1.0920, … European Style: rand 10.6885, krone 6.1695, SEK 6.9380, forint 237.25, zloty 3.1705, koruna 21.0730, RUB 36.15, yen 103.90, sing 1.2490, HKD 7.7505, INR 60.43, China 6.1663, pesos 13.11, BRL 2.2880, Dollar Index 82.53, Oil $93.57, 10-year 2.37%, Silver $19.55, Platinum $1,423.75, Palladium $885.21, and Gold… $1,287.30

That’s it for today… the O’Jays were singing: Back Stabbers.. when Mike walked in this morning, I’m sure he was thinking, “oh boy, here we go with Chuck’s music again”…  A nice win last night for my beloved Cardinals, who have found winning on the road this year to be hit and miss, but if they can take this series they’ll get close to .500 on the road, which is the old adage, that you play .500 on the road and .750 at home for a trip to the World Series… Can you believe that College Football is back? Thursday night is the first game! My beloved Missouri Tigers, who ended last year #5 in the country, barely cracked the preseason Top 25… But that’s OK, because last year, the Tigers weren’t even ranked in the preseason poll, and look where they ended up! These Tigers will have to scratch and claw for victories at Georgia, S. Carolina, and Florida this year… I love College Football, and will be torn between Football games and baseball games each Saturday for the next two months! Alrighty then, I’ve carried on enough today… Time to get this out the door… I hope you have a Tom Terrific Tuesday!

Chuck Butler
President
EverBank World Markets