Greece Cries “Foul!”

* No agreement for Greece.
* U.S. 1st QTR GDP is revised upward.
* Aussie and kiwi carve out rallies.
* SNB scares the bejeebers out of the markets.

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

Greece Cries “Foul!”

Good day. And a Tub Thumpin’ Thursday to you! Much better sleep last night, not what I would call optimum, but better. And that meant that I was good to go this morning, no dragging the line, no getting caught in the undertow, no whining or complaining, which is what my dad would have told me I was doing. I love it when my beloved Cardinals play the Eastern Time Zone teams, for I get to watch the entire game before heading off to bed! Most of the time I only see about 6, maybe 7 innings, but. Most of the time I go to bed with the Cardinals winning the game so far, and that’s fine with me! My Big Fat Fingers got in the way yesterday, and the good thing was that most readers didn’t notice it. I typed that the 10-year was 3.39%, when that should have been 2.39%… Sorry for any of you who had their heart skip a beat, but then for all the ladies out there, I’m sure that happens every morning, when they see the Pfennig in their email box! HAHAHAHAHAHA!

Before I get into the meat of the letter today, I received a big treat, for me, yesterday, when Jack Stapleton brought his guest into my office to meet me. The guest was the “voice of the Missouri Tigers” Mike Kelly. I’ve listened to Mike Kelly call football & basketball games for a long time (even though I’m certain he’s much younger than me!) So, it was a real treat to meet “the voice of MY Beloved Tigers” And with first impression being as important as they are, he certainly seemed to be a genuinely nice/ great guy! Jack took some pictures of the two of us together, and I would like to get them on the Pfennig’s website, but that will take me offering a Pirate’s ransom to our web people to get that done!

On a sidebar. When I was a young man, and played H.S. football, I would have done anything to play football for the University of Missouri. My dad has instilled a love of the Tigers in me at an early age. I never understood why all the great players in the state of Missouri didn’t feel the same way I did, when they would leave for another state’s program. Yes, I saw Roger Werhli, Mel Gray, back then, along with many others play for the Tigers, and I wanted to be just like them!

Whew! Sorry about the long intro into today’s letter. I bet longtime readers know the routine by now. And have figured out that there’s just not a lot to talk about in the markets that we haven’t already talked about until Chuck is blue in the face. the only thing really going on different today than yesterday is that the Eurogroup / Greece Summit lasted about 7 hours, and brought about no new agreement. So once again, the markets’ thoughts that a deal would be done by the end of the week, has brought us to the end of such week without an agreement. I know, I know, we still have tomorrow, and these guys should be working overtime into the weekend. But, it doesn’t look like “a done deal” as we were told yesterday.

The euro doesn’t seem to mind too much, it’s still weak, but not getting sold like funnel cakes at a State Fair, even with reports from the Syriza party (the “no austerity for Greece party” ) that the creditors’ proposals amount to “blackmail”. Greece is becoming the boy who cried “foul”. Well, what in the hell do you expect them to do with your financing needs, Greece? You stepped into the debt hole big time, then were given loans, with spending cut measures, that you ignored for the most part, and now you expect white glove treatment when you come back for more loans? If it were me. I would make you come with your begging cup and plead tender mercies! Good thing you’re not dealing with King Chuck! HA!

Over in Switzerland, one of our fave Central Bankers (NOT!) The Swiss National Bank (SNB) President, Jordan, was not happy with the franc’s stronger moves lately, and decided to scare the bejeebers out of the markets by saying that “the franc is considerably overvalued, and that the SNB stood ready to intervene in the markets”. Here’s a fun fact for you, just to show you how strong the franc has gotten VS the euro. Remember that ill-fated floor that the SNB installed on the euro/ franc cross at 1.20? Guess where the cross is today. as the Jeopardy Final Answer song plays. Well, let’s see how much you wagered. And your answer is. 1.15. No, I’m sorry, the answer is: What is 1.05? That’s right. 1.05! The franc VS the dollar is OK, but not as strong as the cross to the euro is.

Well, did you see the 3rd revision of 1st QTR GDP yesterday? Oh, the rate hike campers were coming out of the wall boards again to dance in the street. The last revision has 1st QTR GDP at -0.7%, but this revision took it to -0.2%… I wonder what happened to make GDP look so much better? You don’t think that. nah, that wouldn’t happen in the U.S.! We don’t need no hedonic adjustments, or book cooking to show how strong our economy is! OK. Are you chuckling along with me there? Apparently, the upward revision was brought about by stronger “consumption”. I doubt that really happened. But it’s a good excuse. Think about it, Retail Sales hasn’t been good and strong for a month of Sundays, so where’s the “consumption” happening?

I always liked the story that the Big Boss, Frank Trotter, told an audience in Bermuda a few years ago. He was on a panel, and all the guys on the panel except Frank, were touting “consumption” as leading the U.S. out of the doldrums (This was like 2010?) and then Frank said, “You know, I was walking through one of the old cemeteries here, and I noticed a reoccurring reason for death. “consumption”, so maybe it’s not such a good thing to have” Franks has a good sense of humor, folks, sometimes you have be on his intellectual plane to “get it” but that was funny!

But getting back to the 1st QTR GDP revision. Quite a few economists are saying that this uptick points to a rebound in the 2nd QTR to around 3.8% GDP. What, What? How does that reconcile with the Fed Atlanta, reporting that the 2nd QTR would be very weak? Explain that one to me and then we can go on.

Speaking of the revision in 1st QTR GDP, wrote the following: “Fifteen minutes after GDP data was released — showing Q1 was indeed as weak as expected and inventories suggesting Q2 will be just as weak — someone decided it was an appropriate time to dump over half a billion dollars of notional gold on the futures market.”

Oh brother! When will this all stop? Ever hear of a well-respected investment analyst named Bill Holter? My friend Dave Janda, sent me a note from Bill Holter, and I took this out of the note, because it plays nicely in the sandbox with what I was just talking about. Here’s Bill Holter. “Over the last few years, “theory after theory” has become fact after FACT after FACT! There can no longer be any question, conspiracy to delude and defraud has run rampant and is a day to day operation in the Western world.”

Alrighty then, let’s get back to some different things to talk about. the Aussie dollar (A$) and New Zealand dollar / kiwi, are both stronger this morning. No big shakes, but stronger nonetheless. I was reading some research that one of our dealer friends sent over and it talked about NAIRU, and that caught my eye, because I did a class on NAIRU last week. Remember what it stands for? Non-Accelerating Inflation Rate of Unemployment.. So, at what level of Unemployment does inflation begin to take off. You may recall me talking about how the Fed doesn’t really advertise what their NAIRU is, but given that Unemployment according to the BLS, so take it for how many grains of salt you wish, is 5.4%, and we sure haven’t seen inflation taking off for higher ground yet, according the PCE (personal consumption expenditures), which is the Fed’s preferred measure of consumer inflation, so I guessed that the Fed’s NAIRU is probably around 5%…

Well then this research by the dealer talks about how the Fed has steadily lowered its estimate of NAIRU since late 2012, and any further downward revisions would likely signal a desire to stay more accommodative that the dealer currently projects. Here’s the dealer talking about this whole thing, “In a recent speech, Fed Governor Lael Brainard argued for a lower long-run unemployment rate. Her comments were later echoed in remarks by Governor Daniel Tarullo.
In support of her argument, Governor Brainard cited a recent FEDS Note that argues a decline in worker bargaining power has led firms to be more aggressive in hiring, leading to lower long-run unemployment.”

So. All in all, it appears that maybe more and more people see what I’ve seen all along, and that is that interest rates aren’t going anywhere for a while. And in a very large roundabout that’s what has the currencies A$ and Kiwi, on the rise this morning, for their positive interest rate differentials to the dollar, euro, yen and pound will remain, pointing investors toward these currencies for that positive differential.

The U.S. Data Cupboard has two of my fave prints today, Personal Income and Spending. Personal Spending for May is expected to outpace Income once again, which I will point out over and over again, is not the ideal situation, although the Keynesians will jump with joy seeing “spending” going good. We’ll also see the aforementioned PCE for May. And the usual Weekly Initial Jobless Claims, which continue to bounce around 275,000 each week.

Well, Gold is flat this morning, but just kind of has the look about it, that it could head South at any moment, like when NY Traders arrive at their desks. I cracked up yesterday at a press conference regarding the repatriation of Gold by Texas from NY Banks. You may recall me telling you that Texas announced that they were building a depository for their Gold, which brings about a ton of questions as to why and what they will do with it, but that’s for another day. Well, the press conference had the Texas Gov. proclaiming that Texas had $1 Billion worth of Gold, and the Assistant to the Gov. gets up and says something like: “That’s right, we have $1 Billion worth of Gold, tell me of another state that has $1 Billion worth of Gold” and then someone informed him that the Texas Gold was really worth $340 Million (still a lot, but not $1 Billion) and the Assistant, is shocked, and says, “Well that’s still more than any other state!”

To recap. No agreement from the Eurogroup / Greek summit yesterday, and the Greek party in power, Syriza, is crying “foul” on the creditors, and King Chuck tells them they made the mess, they have to take the medicine. the U.S. 1st QTR GDP was revised upward to -0.2%, which was all accredited to better consumption. Some of the currencies are rallying VS the dollar this morning, but no big shakes, and Gold is flat, but looking like it could head downward, at any minute, like when the NY traders come in!

Before I go to the Big Finish this morning. There was just a report on TV that Whole Foods was overcharging. Really? Now that’s really information that I had no idea was happening! HAHAHAHAHAHA!

For What It’s Worth. I’m sure you’ve all heard by now that the new $10 bill will remove Alexander Hamilton, the first U.S. Treasury Sec., and replace him with a woman. I don’t really care who’s dead mug is on my Federal Reserve Notes, but a twist on this story came to me and I thought you would like to hear about it. The whole report can be found here:

But for those of who just want the broad strokes, this is about former Fed Chair, Ben Bernanke, who now tells us he was a fan of Alexander Hamilton, but the folks who wrote the story believe that Bernanke must be thinking of someone else, for Bernanke did whatever he could to unravel what Alexander Hamilton tried to preach to his followers. Here are a couple of snippets.

“Mr. Bernanke qualifies America’s first treasury secretary as “among the greatest of our founders for his contributions to achieving American independence and creating the Constitution alone. In addition to those accomplishments, however, Hamilton was without doubt the best and most foresighted economic policymaker in U.S. history.” So Mr. Bernanke is opposing the demotion of Hamilton from his featured spot on the ten-dollar bill.

The irony of this is that while chairing the Federal Reserve, Mr. Bernanke traduced every principle Hamilton held dear, particularly the idea of sound money defined by Congress. It was Hamilton who wrote the first law Congress passed under the authority the Constitution grants it to coin money and regulate the value there of, and of foreign coin, and to fix the standard of weights and measures. That piece of legislation, the Coinage Act of 1792, is the final fruit of what Hamilton envisaged in respect of money and the purest record of how he thought about the dollar.

That is the law that established the United States Mint, enacted that the money of account of America would be expressed in dollars, and defined the dollar as having the value of “a Spanish milled dollar” as it was then current and “contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.” The law recognized gold as specie in coins at a value of about 15 times that of silver, and for debasing coins of either specie established the penalty of death.”

Chuck again. Crazy stuff, eh? Sort of like, for the years that Big Al Greenspan was Fed chairman and he never supported Gold. But before he was Fed Chair, he was a disciple of Ayn Rand, probably the first “Gold Bug” and then after his years in the Fed were over, he went back to being a supporter of Gold.

Currencies today 6/25/15. American Style: A$ .7740, kiwi .6910, C$ .8080, euro 1.1210, sterling 1.5730, Swiss $1.0645, . European Style: rand 12.0970, krone 7.8010, SEK 8.2275, forint 278.10, zloty 3.7210, koruna 24.2910, RUB 54.57, yen 123.60, sing 1.3420, HKD 7.7515, INR 63.62, China 6.1148, pesos 15.46, BRL 3.0845, Dollar Index 95.19, Oil $60.11, 10-year 2.40%, Silver $15.85, Platinum $1,073.73, Palladium $ 684.95, and Gold. $1,173.64

That’s it for today. Congratulations to the Virginia Cavaliers who won the NCAA Baseball World Series last night. And my beloved Cardinals also won, coming from behind again last night. And they were able to pick up a full game on the two teams that are chasing them. Little Braden Charles was at the house last night. He sure likes to boss people around.. But the buck stops with me. I tell him, no way, you’re not going to talk to me like that, and then he smiles and gives me a hug, and everything is forgotten. Young kids, they are so darn cute! Kathy calls me a mean, grumpy old man, because I don’t let the kids slide on anything. Oh well, maybe I am a mean, grumpy old man. I really don’t care if I am. At my age, I really don’t care. Just like when I see a kid with his baseball cap on crooked I tell him that his hat on crooked. the new Commissioner for Baseball should tell the players that think it’s cool to wear the baseball caps crooked on their heads to straighten them. They look ridiculous! And that’s my rant for today. Thank you for reading the Pfennig, and I hope you have a Tub Thumpin’ Thursday!

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