In This Issue   Antipodean currencies outperfo

first_imgIn This Issue. *  Antipodean currencies outperform overnight. *  Euro needs a few days for the markets to forget the pain. *  Richard Duncan on Creditism. *  S. African strike boosts metals. And Now. Today’s A Pfennig For Your Thoughts. Consumer Credit Soars!  . Good Day! .  And a Wonderful Wednesday to you! I’m late, I’m late, to a very important date! Well, I’m late in getting here, at least! Late for me that is! Just moving as slow as the turtle crossing the street that I told you I was as tired as yesterday! It’s rain, rain, and more rain for our area, and if it’s not raining, it looks like it should be! I hear that the sun is supposed to come back by the end of the week. Who knows by then, I might resort to doing something drastic! You know, like heading somewhere sunny! The euro would certainly like to find somewhere that’s sunny these days. After recovering nicely last Thursday, and then holding on to those gains on Friday, the single unit has looked pretty sickly, moving slowly, like me, and the turtle crossing the road! I think that the euro has to get through a few days of this, and let the water flow under the bridge. You know, let the markets forget the pain, and let them get back to comparing the euro to the dollar, and see what happens. I have my thoughts on that, but I think you can guess what they are, being longtime devoted, loyal Pfennig Readers! Oh, you’re new to class? Well, first of all, the euro is the offset currency to the dollar, so when you get right down to it. Who has the worst scenario, long term? And any dollar weakness shows up in euro strength, and vice versa. Yes, the euro has its own warts, and ugly ones to boot, but their ugly warts aren’t as many or as ugly as the warts on the dollar. period.  I hate to say that, for the dollar is my base currency, but I was taught at an early age to call a rock a rock, and don’t sugarcoat it! Alrighty then. Now that we’ve established that’s the corner I’m coming from, we can move along. Oh. and for those of you keeping score at home, Personal Incomes haven’t risen in a few decades, but the cost of living just keeps rising. We as Americans can’t seem to dig out of the hole we’re in, and then we have the Gov’t piling loads of debt on top of us. YIKES! What’s a poor boy to do? Well, making certain that a portion of your investments are allocated outside of the dollar, so that you can recover the lost purchasing power of a weak dollar, would be the place to start! One thing I’ve been tracking is Credit. And the expansion of Credit here in the U.S., is amazing folks. Now I like Richard Duncan, and I’ve told you all that before, and Richard does a great job illustrating what he calls Creditism. He believes that Credit in the U.S. has to expand by 2% per year, or else the house of cards which represents the U.S. economy comes crashing down.  And what caused this Creditism? It was the removal of the dollar from Gold.  Let’s listen in to Richard Duncan talking about all this. “When the private sector effectively defaulted in 2008, we would have spiraled into a new great depression then and there had the government not jumped in with Trillion dollar budget deficits every year, financed to a certain extent by paper money creation. It’s that government life support that kept us from collapsing into a great depression. We must continue to have that in order to prevent us from collapsing into a great depression in the years ahead.” So. The U.S., according to Richard Duncan, who let me remind you, I admire quite a bit, has to continue what it’s doing now, which is borrowing and spending massive amounts through Trillion dollar budget deficits, financed in part through Quantitative Easing. Keep spending the way they’ve spent now, essentially without difficulty for another five years, and maybe even as long as ten years. Whenever that comes to an end, they will go bankrupt, just like Greece, and then we will collapse and enter a great depression.” – Richard Duncan The reason I went down that road, was that I read a report last night about how the writer believed that the Credit Bubble was back here in the U.S.  Here is some data to back up what he claims. Total (financial and non-financial ) Credit jumped $484 Billion in the 1st QTR to a record of $59.399 Trillion or 34% of GDP. Corporate borrowings grew at a 9.3% pace. Federal Government Debt mounted a 7.1% pace. Consumer Credit rose at a 6.6% rate. So, what gives? Why is this all ramping up now? Well, if you’re one of those people that say the glass is half full, then you’re dancing in the streets because the U.S. Consumer and Corporation is finally feeling good about the economy. But if you’re a glass is half empty kind of person, then you take the approach that basically, this was bound to happen eventually, due to the zero interest rates policy or ZIRP. I already told you about the car loans getting outrageous once again, and just last Friday, while everyone else was looking at the Jobs created out of thin air by the BLS, the Gov’t reported that Consumer Credit had spiked from $19.5 Billion in March, to $26.847 Billion in April.   So, wages aren’t going anywhere, and haven’t for decades, but Consumer Credit is spiking. Does anyone else see this ending in tears once again, like I do? And while we’re doing some dollar comparisons to any currency or metal, let’s keep this little ditty in mind. The U.S. 401K pension system will turn cash flow negative in 2016, and then will see the deficit each following year widen, as we get to the core of the baby boomer retirements.  What does this hurt, I hear you asking? Well. if more cash is taken out of the pile than is put in, eventually there’s no more cash in the pile, and when the next person goes to take their cash out, uh-oh!  Add to that, when the cash is withdrawn, most likely assets like stocks and bonds will be sold. OK. I’ve really ended up a long way down that road, and it’s time I turned around and got out of here, before I really begin to stomp and yell at the walls!  There are some currencies that have decided to rally without the Big Dog euro getting off the porch overnight and this morning, so let’s go have a look at them! The Antipodean Currencies (A$, & kiwi) are outperforming the other currencies overnight and this morning, and neither one had any data to show as the reason for their moves. Both will, however, have some data tonight . In Australia, the May Employment Report will print. The pace of employment gains so far in 2014 has been much faster than the so-called experts believed to be possible, so the risk here is that the May report “slows down” .  But another strong report would put the A$ squarely back on the rate hike discussion table. In New Zealand, The Reserve Bank of New Zealand (RBNZ) will meet, and I totally expect a rate hike from the RBNZ today of 25 Basis Points (1/4%), which would leave one more to come by this fall. The risk here is that the RBNZ waits and doesn’t hike at this meeting. But I doubt that will happen, as everything, every report, statement, etc. has pointed to this meeting for the rate hike.  And then in the Mother Country of these two, the U.K.  saw some very good labor data reports with the April Unemployment Rate dropping to 6.6% from 6.8% in March. And this data has kicked the pound sterling higher this morning VS the dollar, and VS the euro!  You know I haven’t really discussed the movement in Scotland to leave the U.K.. The vote will be in September, so we have plenty of time between now and then. I see where the writer, J.K. Rowling has donated $1.7 Million to the anti-dependence movement. I don’t have a horse in this race, so I’m just reporting the facts, and you decided what side you want to be on. Well, going into this past weekend, there were many hopes that the MSCI Index for currencies would include the Chinese currency in their Emerging Markets Index, and remove the S. Korean won and place it in the advanced markets index.  Well, neither of those things happened. The won remained in the Emerging Markets Index, and the renminbi was left out in the rain and cold. These are Big things folks. You see, if the renminbi were to be added to the index, every hedge fund, institutional investor, mom & pop, Corporation, etc. would have to buy renminbi as a part of the  index.  And it would have been very prestigious for the won to be moved from Emerging Markets to Advanced Markets. The Advanced Markets Index is a much larger index and would mean more buying of won.   So, none of it happened, this time. I would have to think that the renminbi is close, but still too much of a closed currency for the MSCI’s taste. I remember about 12 years ago, I was doing some research and came across this info that the British pound sterling would be added to the Advanced Index, and I wrote about it, and one of my colleagues at the time, told me it wouldn’t make any difference for pound sterling and that I shouldn’t have gotten people all lathered up about it. Well, it WAS BIG for pound sterling, and those that got lathered up about what I wrote, were rewarded. So, neener, neener, neener ! I see where the World Bank has cut their Global Growth Forecast for 2014, after a “bumpy start to the year”. The World Bank cut their forecast from 3.2% to 2.8%… And the U.S. Forecast was cut from 2.8% to 2.1%…  And here it is, we’ve all be waiting for this, and here it is. The World Bank said that , “The global economy got off to a bumpy start this year buffeted by poor weather in the U.S.”    Man! I’m so glad they decided to include that interlude to poor weather, I missed it so!… NOT! Still now Biggie data from the U.S. Data Cupboard today. We will see the May Monthly Budget Statement (read deficit).  But finally tomorrow, we’ll see May Retail Sales, which, as I’ve already told you, should be better than last month’s anemic print of +.1%, and May’s total should be given a boost by car sales, (bought on super charged credit probably). I would watch for a revision to last month’s number giving that we were really just a rounding error from a negative number! Gold, finally saw some love yesterday, gaining $8 on the day. And this morning, the shiny metal is up nearly $4, as I write. Platinum & Palladium spiked higher on the day, outperforming both Gold & Silver. the mining strike in South Africa failed to end, and is now going on 19 weeks!  I heard business superstar, Steve Forbes, banging the podium for a return to the Gold standard once again yesterday.  I do like what he had to say about Gold. “Gold give money. stability, just like the ruler measures length, the clock measures time, a scale measures weight, a dollar measures value and the value is stable, you get a lot more investment, a lot more growth, a lot more opportunity. Without the Gold Standard in place, the dollar has grown increasingly unstable.” For What It’s Worth. I found this in my MarketWatch email yesterday, and highlighted it to use today, and then saw it on Ed Steer’s letter this morning too. So, once again, great minds think alike! HA “A college degree will help Americans get a leg up on the job market. But financial independence proves more elusive as graduates tap their parents for help with living expenses, new research finds. Some 50% of recent college graduates say they’re receiving financial help from their family, while an additional 19% say they need financial help from their partner or spouse. This is despite the fact that half of these graduates have full-time jobs, according to the latest installment of an ongoing study, “Arizona Pathways to Life Success for University Students,” carried out by Joyce Serido, an assistant research professor at the University of Arizona, who has been tracking 2,000 people at colleges nationwide since they were freshmen in 2008. The study underscores the continuing struggle facing college grads at a time of relatively high unemployment and rising student-loan debt.” Chuck again. There’s nothing wrong with kids coming back home for a period, while they get their careers established, etc. But it sure does throw a house upside down when that happens! To recap. Another day of no data had the currencies and metals searching for something to trade off of yesterday, and finding nothing, the euro slipped further down the slope, and the Antipodean currencies outperformed the rest. Pound sterling got a boost from stronger labor data, and the mining strike in S. Africa going on 19-weeks, really has Platinum and Palladium reaching for the stars. Currencies today 6/11/14. American Style: A$ .9400, kiwi .8560, C$ .9180, euro 1.3555, sterling 1.6780, Swiss $1.1130, . European Style: rand 10.7695, krone 5.9865, SEK 6.6765, forint 225.30, zloty 3.0370, koruna 20.2440, RUB 34.39, yen 101.95, sing 1.2505, HKD 7.7515, INR 59.27, China 6.1506, pesos 13.05, BRL 2.2225, Dollar Index 80.68, Oil $104.63, 10-year 2.64%, Silver $19.24, Platinum $1,486.25, Palladium $857.26, and Gold. $1,263.19 That’s it for today. Well. Yesterday was our colleague Pam Gettinger Birthday, and today is Justin Gunderson’s Birthday, so Happy Birthday to you two! I don’t always remember to check the birthday calendar, so when I miss one, please done be mad at me! Cardinals are nearly shut out, but a St. Louis area kid, but win 1-0 last night! The Cardinals are in St. Pete, FL  I first went to spring training in St. Pete, at old Al Lang Stadium. It’s still there with the marina outside of left field. a beautiful sight line. The new spring training facility doesn’t have a marina, or water anywhere near it, but it’s still fine with me! In another example of: People don’t listen to Chuck. I told Alex over and over again to take it easy and rest longer than he thought he needed to..  did he listen? NO! And now he’s back in the sick bed!  The L.A. Kings are one win away from the Stanley Cup. I really didn’t think the Kings would find the Rangers to be a stumbling block on their way to the Cup! Not that the Rangers didn’t put up a good fight. I’m not saying that at all. And with that, this looks like a good place to stop the bus and get off for today. I hope you have a Wonderful Wednesday! Chuck Butler President EverBank World Marketslast_img

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