In This Issue   Currencies metals fight for

first_imgIn This Issue. *  Currencies & metals fight for gains. *  Existing Home Sales drop… *  Is N.Z. like Ireland? *  Singapore core inflation ticks up. And, Now, Today’s Pfennig For Your Thoughts! Flaherty Disses The Emerging Markets. Good Day!  And a Marvelous Monday to you! It sure wasn’t a Marvelous anything for the USA Men’s Hockey Team over the weekend. UGH! We experienced an absolutely beautiful late winter day on Saturday, but I hear it’s back to the cold and snow for this week. UGH!  The U.S. Data Cupboard will get a workout this week, as we end February (and not too soon for me!) and head to March! Oh Mercy, Mercy, Mercy, Me. Things aren’t what they’re supposed to be. Where did all the blue skies go? Ahhh, a little Marvin Gaye to start our day, how about that? Well, Friday’s price action in the currencies was interesting, in that the euro took off for higher ground around mid-morning, gave it up and then rallied back again. Gold did the same, with a rally, selloff, and then a rally to close the day and week. There was little in the tank to run on, but what was there was enough to power these two anti-dollar assets higher.  U.S. Existing Home Sales fell -5.1%, which was more than the -4.1% that was expected. The Bad Weather Excuse campers were out in force once again. One of the things that did happen on Friday was the release of the Fed’s FOMC Meeting Transcripts from 2008. Remember 2008? I know a lot of people would prefer to forget what happened in 2008, but the financial meltdown which began in 2007, carried through the year in 2008, and many feared the meltdown would be enough to collapse the financial system of the world, not just the U.S. Remember, all the swaps, and derivatives that were supposed to bring us all down? Well, that didn’t happen, and trust me it didn’t have anything to do with the Billions of taxpayer funds the Gov’t spent to keep the masses from revolt!  Anyway, those transcripts were interesting, in that it showed how Big Ben Bernanke took charge and became a real outspoken leader of the Fed Heads. I’m not slapping him on the back here folks, just telling you what the reviewers of the transcripts said!  This morning, the currencies and metals are rallying VS the dollar again. The euro is at a 7-week high this morning on the news that the February Business Climate Index report as measured by the think tank IFO advanced to 111.3 from 110.6 in January. The so-called “experts” had thought this index would drop a bit, so the increase surprised the markets, and the euro was the beneficiary of that pleasant surprise. In addition, the final print of Eurozone Inflation for January showed an uptick of .1% to .8% year on year. Not a great big deal, in any stretch of the imagination, but. the index moved in the right direction, correct?  Why yes it did! So with the Big Dog euro off the porch chasing the dollar down the street, the other currencies (the little dogs) are off the porch too. That is except the Chinese renminbi / yuan, which was marked down for the 5th consecutive day overnight. You know, we’ve seen these longer periods of time when the Chinese pushed the renminbi lower in their attempt to throw the markets off the scent of a stronger renminbi that will eventually come. So, let’s not get all lathered up over a 5-day drop in the renminbi. China’s National People’s Congress will meet next week (March 5th), and we could very well see the renminbi weakened going into that meeting. Do you see, what I see? And no I’m not singing Christmas songs. This meeting on March 5th could very well draw out China’s next plan regarding the dollar, and that could set off some strong pressure of the renminbi to rise, which will be much easier for the Chinese Gov’t to allow, given the fact that they weakened the renminbi in preparation of the meeting. Canada’s Finance Minister, Jim Flaherty, was out on the speaking circuit this past weekend, and said something that caught my eye. Flaherty said, It’s easier for the United States and Canada to reach these goals (the G-20’s goals of boosting GDP by an additional 2% in the next 5 years) than it is for some of the Emerging Markets.”  Hmmm.  I find that interesting, because the Emerging Markets have been responsible for a majority of the global growth in recent years. I bet the Emerging Markets saw that comment and had a good laugh. I also find it interesting that Flaherty seems to think adding 2% of GDP to his stumbling, fumbling, economy is going to be so easy! Have you ever seen the growth chart that looks like a quilt? Well, I have it featured on the web site for the Pfennig at  It’s pretty interesting, and I think it warrants a quick jog over to the web site, to see it. If history gives us a roadmap for us to follow, then the Emerging Markets won’t be crying in their beer this year. The World Money Analyst newsletter that is published by Mauldin Economics hit the streets last week, and my humble article on the Emerging Markets was included. Well, most of you know that I’ve been more upbeat, in recent months, about New Zealand’s prospects. I still believe that the Reserve Bank of New Zealand (RBNZ) will hike rates next month. And the N.Z. dollar / kiwi should be the beneficiary of a rate move higher, when practically no one else is doing that (sorry Brazil, you don’t count as someone else!). I have a dear reader (hi Bob!) that lives downunder and he sends me stuff that helps me figure out what’s going on good or bad in Australia and New Zealand.  Well, he sent me a very disturbing article that appeared in the N.Z. Herald. The article talks about how New Zealand is like Ireland pre-global financial crisis and it’s only a matter of time before the kiwi dollar plunges. The writers believe that kiwi is overvalued by 20%…  YIKES!  The writers make a compelling case in the article about how New Zealand’s structural problems being similar to Ireland’s who went from Celtic Tiger in 2007 to requesting a 67.5 Billion bailout in 2010. I have to say this article really threw me for a loop! But then, we have to sit back and say, OK, there’s an opinion that’s different from ours. Who’s to say who’s right? Only the Shadow knows, and time will tell. But it’s something to think about, eh? And while I’m in the South Pacific, The Aussie dollar (A$) is attempting to mount a rally, but keeps getting pushed back down. This morning the attempted rally is being thwarted by weakness from a report that the price of iron ore fell on rumors that iron ore is getting stockpiled in China, which means they aren’t dealing with what has already been shipped to them, thus suggesting that shipments will slow. And finally, Singapore’s January inflation report showed core inflation creeping higher year on year printing at 2.2% up from 2.1%…  This should keep the Monetary Authority of Singapore (MAS) on their toes. Recall, that the MAS uses the Sing dollar as their main tool in combating inflation. So that would mean the MAS would keep the Sing dollar in the upper band. And with the Chinese renminbi weakening a bit, this could be where the Sing dollar catches up with the renminbi. I had to stop to sing along with Spirit, and their song: Nature’s Way. For old timers, like me, that remember that song, it’s a classic rock song. But to me, it’s very personal, as it was nature’s way of telling me something was wrong, back in 2007, and so, the chills are all over right now. And Gold is up about $9 this morning.  Did you get a chance to read our metals guru, Tim Smith, and his thoughts on the Commodities Markets in the Sunday Pfennig? I know we’ve got 10 more months to go in 2014, but if the first two months are any indication about the direction of Commodities in 2014, you’ve got to be impressed that this asset class, has shoved all the calls for a bad year to follow 2013 in Commodities, down the throats of those making those calls. Gold is the doing quite well so far in 2014, and Oil is back to trading over $100 a barrel, Coffee is soaring and so on.  You don’t think that, nah. it’s nothing like that is it, Chuck? Well, it could be, I say let’s run it up the flagpole and see what everyone thinks, OK?  Alright, but don’t get mad at me because I’m running it up the flagpole, but you don’t think that the Commodity guys are looking at the Fed Monetary Balance nearing $4 Trillion, and getting antsy about when the money supply begins to catch up the Monetary Balance, and unleash inflation do you, which is why they are pushing the envelope on commodities?  Well, since I came in, and now, Geez, it’s weird how time flies when I’m writing this letter, but It’s nearing 2 hours since I began this letter this morning, and in that time, the euro has rallied to a 7-week high, and now has given back those gains. Oh, It’s all coming back to me now, said the blind man as he spit into the wind. It appears that European Central Bank (ECB) President, Draghi, was speaking and apparently made mention that he’s still prepared to stimulate the Eurozone economy further should deflation persist, and that has the euro giving back its gains this morning. Well, I told you earlier that the U.S. Data Cupboard will get a workout this week, but it doesn’t really start today. There are only two, 3rd Tier data prints on regional manufacturing activity that will print today. So the markets will have to sort things out themselves. Tomorrow, the S&P Case/Shiller House Index report will print. With the Sales down, due to bad weather of course, I would suspect that the price index will weaken, but that’s tomorrow, and we shouldn’t worry about tomorrow, today. Before I head to the Big Finish today, did you hear about how the Fed Heads knew about LIBOR rigging in 2008, but did nothing?  Yes, it was an article in the U.K. Telegraph. Fed Head Dudley was quoted as saying in April of 2008:  ” There is considerable evidence that the official Libor fixing understates the rates paid by many banks for funding.”   Chuck again, think about that folks. Will we be talking about the metals manipulation in 5 years, and how people that should have done something about it, knew it, but did nothing?  I sure hope it doesn’t take 5 years for that to happen! For What It’s Worth. I found this on King and found it to be very interesting. You see the man who first ran Quantitative Easing (QE) at the Fed, Andrew Huszar, gave King World an interview, and what he had to say should send chills down everyone’s back that hasn’t don’t anything to protect their wealth from inflation! I’m going to give you some snippets from this guy, so here goes. “I don’t even think we have begun to see the costs of this experiment (talking about QE). And I think that with the Fed trying to exit from the buying phase, we are just in the third inning of a game where we really don’t know what the result is going to be. This activism that we’ve seen over the last 15 years or so, over time we are going to look back and think this was a pretty bad idea. I look at what the Fed has done basically since the beginning of the millennium, and I see a central bank that’s effectively been pumping cash into the market in different ways.  I think on some level that initially helped feed the run-up in gold. But today why I am in gold is as a hedge against what I believe is going to be significant volatility down the line.  I think over the long term gold is going to be a very valuable thing to hold as part of a portfolio. … We could see some significant shifts in the way money flows in the U.S. and some real dangers to the US currency as a reserve currency.  Obviously gold is a wonderful hedge for that possibility. So a lot of people are using that fact to delegitimize the idea of even having runaway inflation.  I think the risks are still there.  Based on what the Fed has done, about $2.45 trillion of cash is sitting at the Fed (held by banks).  In other words, a lot of the cash that the Fed pumped into the banks through quantitative easing hasn’t actually gotten out into the economy and it’s just being banked at the Fed right now. “ Chuck again. Look these are all things I’ve told you for some time now. But I thought giving you the words from the guy that ran QE at the Fed, would give what I told you before a little more street cred! (as the kids say!)   The other thing that worries me about QE, is all the money that’s being held at the Fed by the banks. When will the credit picture in the U.S. recover enough that banks feel good about putting that money to work in the economy? To recap. The currencies and metals fought all day on Friday for some ground to gain, and finally finished the day with small gains. This morning we started off with a nice rally in both asset classes only to see the euro give back early gains. China is on a 5 consecutive day weakness trend, which could very well be window dressing before a big meeting next week. And Chuck takes exception to something Jim Flaherty says about the Emerging Markets.. Currencies today 2/24/14.. American Style: A$ .8990, kiwi .8295, C$ .9010, euro 1.3725, sterling 1.6640, Swiss $1.1250, . European Style: rand 10.9325, krone 6.0355, SEK 6.5155, forint 225.80, zloty 3.0275, koruna 19.92, RUB 35.56, yen 102.45, sing 1.2660, HKD 7.7585, INR 62.06, China 6.1189, pesos 13.27, BRL 2.3455, Dollar Index 80.29, Oil $102.18, 10-year 2.72%, Silver $22.07, Platinum $1,434.25, Palladium $741.14, and Gold. $1,334.08 That’s it for today. Well, our St. Louis U. Billikens basketball team is up to 19 consecutive victories, as we head to the last couple weeks of the regular season. What an amazing season for this team! They have a couple of tough road games to close the season, so they had better work on making those free throws!  Spring Training is in full swing now, and waiting for my arrival! The first grapefruit circuit game for my beloved Cardinals is this Friday. And the first one I’ll see is March 13th! That’s 2 ½ weeks away.. UGH!  I thought all our hockey Blues that played in the Olympics did well, and played hard. Let’s hope that carries over to the playoffs!  I had to deal with the car that Alex drives, that had problems this weekend. Alex drives my old car, a 2003 Pilot, and this is the first time we ever had to deal with problem with the car, so I wasn’t too upset. I was more upset that it didn’t happen Saturday when it was 60 degrees, but on Sunday when it was 28! Oh well.  Ok. let’s get to making this a Marvelous Monday, eh. Chuck Butler President EverBank World Marketslast_img

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