It’s May Day!

* Dollar is mixed this morning.
* Euro has swinging gate day.
* U.K. election next week, so far it’s a toss up
* BCB says it’s the end of the rate hike cycle.

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

Good day.. And a Happy Friday to one and all! And welcome to May! I’m late this morning! I FINALLY got a whole night’s sleep, without being awakened to cough! YAHOO! So, I overslept a bit this morning, and then I was down to a quarter tank of gas, so I had to stop and fill up. I can tell you that I’m saving about $30 every time I fill up, which is about every 10-12 days. But like I explained a couple of months ago, I don’t see that. Chicago greets me this morning with their song: Wake up sunshine. I remember buying the Chicago double album that contained this song and many of their early hits, and probably wore the albums out, as I played it again and again, for this was the “sound” I was looking for in my life. A fabulous horn section, screaming guitar, and a raucous drummer. The guitar player, Terry Kath, was very good, in fact, the great Jimi Hendrix once told a member of the Chicago band, that “your guitar player is better than me”. You’ll find the most songs by a group on my iPod belonging to Chicago, or their first band name, The Chicago Transit Authority. We lost Terry Kathy very early in life to a gun accident.

So, I guess if you’re reading this, you’ve wakened up sunshine! Glad you’re with me this morning. I really don’t have a lot to say today, so get ready for a short-n-sweet letter this morning. My good friend, Kevin, always kids me and says “when you say the letter will be short-n-sweet, it’s usually longer!” So, I guess I’ll have to watch for that today.

What a swinging gate day for the euro yesterday, and what a tough row to hoe for the A$… As I signed off with the Pfennig yesterday morning the euro was trading at 1.1210. But it soon slipped, and actually fell to 1.1130, but then it swung the gate again, and traded to 1.1175. Crazy day of trading in the single unit. I would say that it was all tied to U.S. Data, but that was a mixed bag-o-nuts as far as I was concerned, so I quickly ruled that out! There has to be so many profit taking trades right now, that the gate is getting swung open and closed with every trade.

Overnight, the euro has rallied strongly in thin European markets, as a lot of countries take a holiday today, with it being May Day. When I turned on the currency screens this morning the euro was trading well into the 1.12 handle at 1.1265. I’m told that 1.13 is a strong line of resistance, and will provide a hurdle that the euro will have to clear if the rally is to hold. Of course that “technical talk” of which I’m not even your last choice for a “charts guy”, but I play one on TV. HA! There’s been no news from the Eurogroup / Greece, and we’re now within a week of Greece needing to make a pension payment.

The dollar, is a mixed bag of performance today, as it is losing ground to the euro, franc, krone, euro wannabes, and ruble, but gaining good ground VS the A$, kiwi, loonie, pound, and Gold is down a couple of bucks, after getting totally whacked yesterday.

The Aussie dollar (A$) has seen a very tough week, after reaching 80-cents early this week. At first it was profit taking, then sympathy trading with the selling of kiwi, and now it’s all about the Reserve Bank of Australia (RBA) meeting next week, in which 23 of 27 economists surveyed are calling for a 25 Basis Points rate cut from the RBA. And with that kind of sentiment surrounding the A$, the weakness is unavoidable. I’ll have more thoughts on the RBA next Monday.

China printed their official April PMI (manufacturing index) last night and it beat expectations but just narrowly. The official print was 50.1 with the expectations at 50.1.. That’s two months of “over 50” for China, which is very important, as it shows that while the economy is expanding it’s taking it slow, which is a good thing in my mind, as it allows them to keep a handle on inflation, should that become a problem.

Yesterday, I told you that the rate hike of 50 Basis Points (1/2%) by the Brazilian Central Bank (BCB) would probably help the stealth-like rally the real has been experiencing. But that was not to be, and I guess I should have known better. You see, the BCB basically has indicated that this rate hike would be the end of the rate hike cycle, and the markets now have gone from feeling giddy about the real to thinking that the next move is a rate cut. UGH! Of course, they don’t know when that may occur, but they’re already acting as if the BCB said they would cut rates at the next meeting!

There’s less than a week until the U.K. election, and polls still have the result a toss-up. But that’s not all that’s going on in the U.K., we also had another data print that showed the U.K. economy a real mess. April PMI (manufacturing index) printed at 51.9, still expanding, but was expected to print at 54.6. So the strength in manufacturing is slip sliding away. Slip sliding away, you know the nearer your destination, the more you’re slip sliding away. – Paul Simon

On a sidebar.. A few years ago, I saw Paul Simon in concert at our Fabulous Fox, where he was the musical entertainment at the Bob Costas Benefit, that benefits Cardinal Glennon Children’s Foundation. I was not expecting much that night, but at the end of the night I found myself totally entertained by Paul Simon.

Well, Gold hot whacked yesterday, and whacked hard! At one point the shiny metal was down $24. the price manipulators pointed to the Fed’s outlook for rates, as the reason Gold dropped so much, Really? Do they take us for a bunch of morons? The Fed, if anything, told the markets to watch the data, and that they were delaying the June rate hike.. But, leave it the manipulators to be brazen and come up with their own excuse for the media as to why Gold lost $24 in one day.

Silver though is gaining today while Gold is losing and Silver yesterday hung tight. Hmmm.

So. the U.S. Data Cupboard will have the first test of 2nd QTR data for us today when the ISM Manufacturing Index will print for April. This index which measures the pulse of manufacturing in the U.S. has been slipping the past 3 months and in March in printed at the lowest level in a couple of years when it printed at 51.5. the April consensus has the index at 52. Not exactly a huge gain from March, but a gain nonetheless.. so, IF the actual number prints higher than 51.5, then we’ve had a recovery, which is what the Fed is looking for..

To recap. The dollar is mixed today, gaining VS the A$, kiwi, loonie, pound, and Gold, and losing ground today to: the euro, franc, krone, ruble, and the euro wannabes. Most of Europe is closed today for May Day, and the thin markets is really pushing the currency appreciation envelope for euros strongly. The U.S. data today will be ISM manufacturing index, the first 2nd QTR test for the economy, and to see if the Fed was right, and the weakness was only transitory.

For What It’s Worth. OK.. here’s a treat, and something I’ll admit that will change this from short-n-sweet to regular length, sorry about that. But I have the great Bill Bonner for the FWIW section today, from his daily letter: Diary of a Rogue Economist. And he’s talking about the value of money.

“Yesterday, we looked at the coming liquidity drain.

It is roughly what has been happening in California already. When more liquidity is being used than is available, things dry up.

But wait.

Do the feds have a still-untapped aquifer of cash and credit they can pump dry?

Short-term interest rates are already as low as they’ve been. But could they go lower?

Yes on both counts.

Ask your spouse: “What will you give me if I kiss you?” If the answer is nothing, you have established the value of your kiss: zero.

But suppose the answer comes: “If you take out the trash, maybe I’ll let you kiss me.”

Now, the value of your kiss is even lower – below zero. You have to add something to it to make it acceptable.

Likewise, it appears that lenders – mainly in Europe and Japan – must add something to their money each year in order to persuade the government to take it.

We have already been humbled and flummoxed by zero-percent interest rates. Even when we are in our cups. or deprived of oxygen. they make no sense.

How could something simultaneously have no value – or less than no value – and still be worth anything?

Money has got to be worth something, right? ”

Chuck again. good stuff Bill! The last time I asked my wife what she would give me if I kissed her, she said, “A fat lip!” HAHAHAHA!

Currencies today 5/1/15. American Style: A$ .7875, kiwi .7580, C$ .8260, euro 1.1260, sterling 1.5270, Swiss $1.0760, . European Style: rand 11.8870, krone 7.5335, SEK 8.3155, forint 269.60, zloty 3.5940, koruna 24.3515, RUB 51.47, yen 199.75, sing 1.3245, HKD 7.7500, INR 63.42, China 6.1137, pesos 15.35, BRL 3.0135, Dollar Index 94.65, Oil $59.52, 10-year 2.07%, Silver $16.14, Platinum $1,138.50, Palladium $777.97, and Gold.. $1,179.77

That’s it for today. A running back? In the day of a passing league, the Rams drafted a running back in the first round? Really? I’ll tell you what’s going on here, the Rams owner, wants to move the team to L.A. and he’s trying to really tick off the fans so he can say he didn’t get support here, as his reason for moving the team. Maybe running back can block because we certainly don’t have an offensive line that can! Cardinals take 3 of 4 from the Phillies, so another series win in the books. A BIG early season series with the Pirates this weekend. I got the timing of the big boxing match wrong, it will take place tomorrow night. Tomorrow is the Kentucky Derby! Ladies get your big hats out of the closet! And fire up the mint julips! Well, my wife returns home tomorrow, so I did it! And I think I’m finally on top of this cold, so at least she won’t have to be awakened in the morning with me coughing up a lung. Cat Stevens song: Father & Son is playing on the iPod right now. There was a time in the 70’s when I really like this music, then I forgot about it, and then returned to it a decade ago. Well, I’m late. and it’s time for me to get off this bus today, so I hope you have a Fantastico Friday!

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