Did Tsipras Give Us A Head Fake?.

In This Issue.

* No draft has emerged yet.
* 3 going on 4 consecutive days for the euro?.
* Japanese CPI prints positive.
* New Zealand Business Confidence plunges.

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

Good day.. And a Happy Friday to one and all! The Cardinals finally had a day off, after playing on 36 of the last 37 days, on Thursday, and that gave me the opportunity to finally see the movie: American Sniper. Alex and I sat down to watch it last night, after eating dinner, and I came away with the feeling that it was quite good, and a very powerful movie. And then in a co-ink-dink a dear reader sent me an email describing his funeral in Texas. Now that was a strange sequence of events if I do say so myself! The great Stevie Wonder greets me today, with his song: My Cherie Amour. I usually sing along with this one, but it’s even too early for that, given I’ve just fired up all the apparatuses used to write the Pfennig.

Well, I guess Greek PM Tsipras, was giving us a head fake yesterday when he said a compromise had been met, and a draft was being written, because so far, no draft has emerged, and Tsipras had a meeting last night with, Merkel, Hollande and Draghi. What to pop open a bottle of bubbly and celebrate? Hardly! They were still working on wording of the agreement. But I have to hand it to Tsipras, he sure sounds confident. That’ll work pretty well for you, at least for a short-time. Tsipras’ confident front, reminds of something my dad used to tell me. “if you just act like you know what you’re doing, people will follow you, until they know better”.

Yesterday, I told you how the euro had traded up in the overnight and European sessions only to get sold in the U.S. session for the previous two days. Well, make that 3, as the euro saw its gains yesterday morning wiped out very quickly when the boys and girls in NYC arrived at their desks. Well, will we make it 4 in a row? The euro is stronger this morning once again, and is well above the 1.09 handle. I guess, the producing of a real draft in the Eurozone by the Greeks and their creditors would go a long way toward the euro maintaining its gains this morning, but I’ve grown old and tired waiting for that to happen, folks. So, the currencies and metals will get their direction from the U.S. Data Cupboard today.

Well, it occurred to me yesterday morning, after I had sent out the Pfennig, that I probably should talk more about the revision that will print today, of 1st QTR GDP. There’s been a ton of talk lately from Gov’t officials, and non-Gov’t officials that the GDP report “isn’t telling the whole story”. And to that I would agree, but here’s where we differ. These boys & girls believe that economic growth was stronger than the GDP report reflected, and I believe that economic growth was weaker than the GDP report reflected. So, we’re separated by what? Some would say the truth. What’s the truth? And even if we knew the truth, would we even care?

To that, let me also remind everyone that this calculation of GDP has gone through some variations of late, because what the Gov’t was seeing wasn’t meeting what they needed to see to get reelected, or whatever. Remember in July 2014, when research and development was added to the GDP calculation, and was supposed to be adding 3% a year to the GDP number. I truly believe the markets have forgotten this little ditty completely, because when the 1st QTR GDP report prints later this morning, it will be negative (per the forecasts). But let’s just for ease say GPD is revised downward to 0%, no growth. Well, for those of us smart enough to use the new math we learned in school, to calc GDP the way it was done before Research & Development was added last year, it would show a -3% GDP for the 1st QTR! Now, there is no way, the Gov’t is going to go along with that folks. So, you’ll never hear one economic news commentator, one Gov’t official, one Fed Member, etc. remind us that they arbitrarily added 3% annually to GDP last year, and without that, the NBER would be announcing that we are in a recession!

Yes, remember, when the GDP for the 1st QTR is reported, it’s actually on an annual basis. So that’s why I took the full 3% away. Six of one and half a dozen of the other, my dad used to say.

The daily 1 full figure downward moves in yen came to a halt overnight. yes, that certainly did qualify for a too far, too fast downward move that would require some correction, which is what I do believe we’re seeing this morning. Overnight in Japan, printed their April CPI (consumer inflation), a data print that had gotten yen bulls all lathered up with the March print when it surprised everyone and jumped higher to 2.3%, was ready to show the world that PM Abe’s 3 arrows policy had worked and Japan was finally out of the deflation woods. Unfortunately, the April print showed that the annual consumer inflation had grown just 0.6%, which is a HUGE drop from the March number. But at least it was a negative print! And so yen was able to wrap a tourniquet around the bleeding. for now that is.

The Chinese renminbi was finally allowed to appreciate for the first time this week, last night. I had a dear longtime reader send me a note yesterday, and noted that the previous day I talked about the nice strong surprise in Singapore GDP, but was frustrated by the performance of the Sing dollar (S$) that same day, thinking that a strong GDP would translate to a good performance in the S$… Unfortunately, that was not to be. for that would require fundamentals to be present in the currencies. But this does bring up a situation that I’ve talked about before, but bears repeating, for all those new to class, or for those that weren’t paying attention. and you know who you are! HA!

Singapore is a direct competitor for exports with China. And although China is obviously much larger than Singapore, they are competitors. So, the Monetary Authority of Singapore (MAS) can’t allow the S$ to get too far out of whack with the renminbi. And to that, as of 5/1/15, we can go back to 2002 when the dollar weakness trend began, and see that the S$ is up 38% VS the dollar, and the renminbi is up 33%… And remember, the S$ had a 3 year head start, since the renminbi’s peg to the dollar wasn’t truly broken until July 2005.

The other thing to keep in mind here, is that Singapore and China are very close. Singapore was the first non-Chinese depository, and there are other things that have taken place carving out their relationship. So. it was good to see the renminbi appreciate overnight last night for the first time this week.

There’s a G-7 meeting going on in Dresden today and tomorrow. I’m sure the conversation at the meeting is dominated by updates on Greece’s negotiations. I’m not sure what these Finance Ministers from the G-7 countries will accomplish at this meeting, but I’m sure they’ll come up with something that the markets just shrug off and move along. But, you never know, so there it is, in case G-7 pulls a rabbit out of their hats.

The Aussie dollar (A$) is gaining ground this morning, and there’s not much coming out of Australia in terms of news or data. I think it’s more of a reaction to the negativity in New Zealand this morning. So, let’s check out what’s going on in New Zealand to have kiwi on the run for protection this morning. The ANZ Bank Business Confidence index report plunged in May to a reading of 15.7 from an April print of 30.2. YIKES! That’s HUGE! We’ll never get that on the Album cover, man! I know, I know, one second I’m serious about data and the next second I’m being silly. Well, actually in this case I think its warranted. I’ve never come across this data before, so apparently, the markets never gave it much thought, but today, it’s important? I find this strange. But then, Isn’t Life Strange?

Yesterday’s U.S. Data Cupboard saw an increase of the Weekly Initial Jobless Claims for the second consecutive week. Hmmm. And the Bloomberg Consumer Comfort Index fell from 42 to 40, and Pending Home Sales were screaming again. So, another mixed bag-o-results with the housing stuff the only bright spot once again. And just a reminder, I truly believe that this housing stuff is going to peter out, given that I think there’s a mad rush to get a house bought and the mortgage rate locked in before rates go higher. Of course that’s what I think people are thinking. I don’t think rates are going higher now, but, if you listen to Janet Yellen, she continues to talk the talk of a rate hike next month.

There’s a slew of data prints today in the U.S. but none of them will be as important as the revision to 1st QTR GDP. So, keep your ears to the ground, and maybe you’ll hear me yelling at the walls, when by some miracle of the ages, 1st QTR GDP mysteriously revises upward. Nah, that can’t happen can it? The Gov’t wouldn’t be so blatant about that type of “revision” would they? Nah, never mind, let’s just move along.

Gold is still trying to find a bid. Reminds me of the old Country song. I’m looking for a bid in all the wrong places. And the two shining stars of 2014, Platinum and Palladium have lost some of their shine in 2015. What happened to the new car business? Do they not require catalytic converters any longer? Hmmm. a strange wind blows this way toward these two metals, folks. a very strange wind.

To recap. Tsipras’ claim that a compromise deal was done and a draft was being written is still being touted by the Greek PM, but no draft has emerged, so was it a head fake, or really what’s happening? The euro traders have decided to trade the rumor. And the euro is back above 1.09 today for the 4th day in row, with the previous 3 days seeing the euro’s overnight gains wiped out by the U.S. traders. U.S. 1st QTR GDP revision will print today, and dominates the markets ideas as to how to trade everything else today. Japan printed a positive inflation report, but one that was a huge drop from the previous month, but a tourniquet has been wrapped around the bleeding in yen, for now. New Zealand Business Confidence plunges, and kiwi gets sold, while A$’s get bought.

Before I head to the Big Finish today, I was remiss in not mentioning that yesterday was National Burger Day! Ah, yes, the hamburger. As If I needed an excuse to eat a good burger! And I don’t mean one from a fast food joint, although there are times that Whopper with Cheese hits the spot. No, I mean some that’s cooked on a grill, so the edges can get a little crispy, but the middle is a nice pink, juicy mess! Jimmy Buffett’s classic song, Cheeseburger in Paradise, is my description of a burger. I like min with lettuce and tomato, Heinz 57 and French fired potatoes, Big Kosher pickle and a cold draught beer, well good God almighty which way do I steer!

For What it’s Worth. I’m almost scared to print this today, given Big Ben Bernanke’s track record. But, when you’ve wrong so much, you’re “due” to be right, eh? Let’s set this up. In July 2005 when asked about whether or not there was a Housing Bubble, Big Ben told us.. “Well, unquestionably, housing prices are up quite a bit; I think it’s important to note that fundamentals are also very strong. We’ve got a growing economy, jobs, incomes. We’ve got very low mortgage rates. We’ve got demographics supporting housing growth. We’ve got restricted supply in some places. So it’s certainly understandable that prices would go up some. I don’t know whether prices are exactly where they should be, but I think it’s fair to say that much of what’s happened is supported by the strength of the economy.

It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.”

Then in February 2007 Big Ben told us. “We expect moderate growth going forward. We believe that if the housing sector begins to stabilize, and if some of the inventory corrections still going on in manufacturing begin to be completed, that there’s a reasonable possibility that we’ll see some strengthening in the economy sometime during the middle of the new year.
Our assessment is that there’s not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy. And the lending side of that still seems to be healthy.”

And in July 2007 had this to say about the economy, which as we all know was teetering on collapse.. “Overall, the U.S. economy seems likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy’s underlying trend.”

And the list goes on. the Mises Institute, have made a list of the things that he said that were wrong, but that’s in the past, why is it important now, since he’s no longer the Fed Chairman? Well, he was asked the other day about China, and if they would have an economic meltdown, or land softly. And Big Ben replied.

“Former Federal Reserve Chairman Ben Bernanke said that China’s economic slowdown should not worry markets as there was no risk of a hard landing, and emphasized that a move to raise U.S. rates should be viewed as a positive sign for the world’s largest economy.

Bernanke also said the economic slowdown in China is necessary as it needs to change its growth model to be more sustainable in the long term.

He added he was “optimistic” China’s economy would not experience a hard landing.”

Chuck again. Whew! I know that was a long one today, and I knew that going into the letter today, which is why the update on the currencies was a bit shorter today, so I could keep your attention through this little ditty. I Know, I know, I was a little hard on the Beaver here, but like I said at the top. He’s due to be right! And if there’s one time I agree with him, it’s here! So, there! We have history in the making right here, right now. Chuck agrees with something Big Ben said! WOW!

Currencies today 5/29/15. American Style: A$.7650, kiwi .7125, C$ .8045, euro 1.0975, sterling 1.5255, Swiss $1.0610, . European Style: rand 12.1475, krone 7.7690, SEK 8.4905, forint 281.50, zloty 3.7590, koruna 24.9480, RUB 52.51, yen 123.85, sing 1.3485, HKD 7.7530, INR 63.82, China 6.1196, pesos 15.35, BRL 3.1615, Dollar Index 96.93, Oil $58.45, 10-year 2.12%, Silver $16.72, Platinum $1,116.74, Palladium $783.87, and Gold. $1,188.67

That’s it for today. Well, did you have a burger on National Burger Day? I did! And it was good! So, I have a doctor’s appt. this morning, which means I’m writing from home today. Alex just left to go to work. It’s strange seeing him that early in the morning. He’s not a morning person, like me that’s for sure! Seals & Crofts are playing their song: We May Never Pass This Way Again on the iPod right now. That was a hit song in the year that I graduated H.S. and set out to play my guitar around the country in hopes of being a rock star. that song always reminds me of the towns I played in, and thinking I may never pass this way again. And for the most part, I haven’t! That seems like a complete life time ago for me. So many years ago! But when I hear songs that we used to play, or remind me of that time, my mind quickly goes back there, and I begin to relive those days on the road and the stages, my band mates, and the people we met along the way. OK! Wake up Chuck! Quit your day dreaming! The sun is rising. it looks like it could be a pretty day here. Yay! When I get home from the doctor’s office, I think I’ll take my laptop outside to the deck. I want to thank you for reading the Pfennig. Now, it’s time to get off this bus for the week, so please go out and make this a Fantastico Friday! OK?

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts