RBA Leaves Rates Unchanged!

* Markets allow the bad jobs print to slide.
* A$ is best performer overnight.
* BOJ meets tonight.
* Dollar recovers losses VS euro .

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

Good day.. And a Tom Terrific Tuesday to you! Well, congratulations to Duke, who won the NCAA Basketball Championship last night. I have to admit, that I was rooting for Wisconsin, as I really liked the fact that most of their players were actually from Wisconsin! Call it old school, or just hokey, but it’s what attracted me to the team. The RBA met last night, and it appears that the markets are now ready to let the bad jobs print last Friday, slide. All that and more, as we begin our Tom Terrific Tuesday!

So. Front and Center this morning. The Reserve Bank of Australia (RBA) left rates unchanged at their previous internal rate of 2.25% last night. I told you yesterday morning that at that point it was 50/50 with economists and analysts on whether the RBA would cut rates or not. But as the day went on, the level of those thinking the RBA would cut, rose to 80%! So, 80% of the those economists and analysts went home unhappy last night. But the 20%, which included me, because as you recall, I told you I didn’t believe the RBA needed to cut rates, were dancing in the streets, and making the Aussie dollar (A$) the best performing currency of the night and early morning, rising nearly 1 whole cent!

The 80% that were looking for a rate cut, aren’t finished though! They came right out and started talking about how the RBA would cut rates in May. Well, let them whine and carry on. We’ll just have to see how the data prints between now and then to see if they are on to something. And speaking of Aussie data. February Retail Sales printed OK at +.7% from January and VS .4% expected. So, that’s a positive mark.

The euro has given back just about all the gains it booked on Friday and early Monday morning. As it now appears that the markets are willing to let the U.S. dollar slide on the disappointing jobs report from last Friday. And I have to say that I understand that, but with a caveat. You know me, and I always say you can’t make long term investment decisions on a small sample size of data. One month doesn’t make a trend, just like one swallow doesn’t make a summer. But, in this case I think the markets should take into consideration all the other data that has printed weak, and just add this to the pile of data reports that have either not met expectations or printed negatively so far this year. In the April edition of the Review & Focus, I wrote about how at that point 80% of the data prints this year had not met expectations or printed negatively. So that’s the caveat that I would add to the just one month of data exception that the jobs report seems to be getting from the markets.

With that get out of jail free card in its pocket, the dollar has resumed its assault on the euro, and the euro alternatives like the Norwegian krone, Swedish krona, Swiss franc, and the Euro-Wannabes. What? You don’t recall who the Euro-Wannabes are? Ahhh, grasshopper. How soon we forget, eh? But that would be the Polish zloty, Hungarian forint, and Czech Republic koruna.

The Asian currencies are mixed this morning, with the Chinese renminbi / yuan given the green light to book a gain, but the Indian rupee taking on water, along with the Singapore dollar. The Japanese yen is flat on the day, as no one want to take a flyer either way on yen ahead of the Bank of Japan (BOJ) meeting tonight. These BOJ meetings have become a real circus with not center ring. As there’s all the hype about more QE/ bond buying, more stimulus, and so on, but nothing materializes in Japan. And that’s because, there’s nothing to materialize! The country is a basket case, and will remain that way for Japan is Japan, and they’ll continue to do the same stupid things they’ve been doing since the mid-90’s.

Remember in the 80’s when it appeared that Japan had the world’s tiger by the tail? And then a bust came, and instead of just letting it clean out the excesses from the boom and then start over again, the Japanese, led by the Finance Ministry and the BOJ thought they knew better. And they began a series of stimulus measures, then rate cuts, then budget adjustments, then Quantitative Easing. When the QE ended, everyone thought that Japan was on its way out of the two-decade funk, but then the past due bills for all stupid things they had done began to come due, and once again the Japanese had to resort to more QE. More stimulus. More stupid pet tricks.

Hmmm. As I was writing that I kept thinking that I’ve gone through that so many times over the years, and longtime readers probably know exactly where I’m going with this now. That the U.S. has followed Japan step for step. Yes, I’m turning Japanese, I really think so. Is the song from the 80’s group the Vapors that I used to always refer to. But as time goes on, and here in the U.S. we begin to show rot on the economy’s vine once again, it all comes back to me now, said the blind man as he spit into the wind.

The Guess Who was just playing on the iPod, and their song: These Eyes, just made me turn the volume up and sing along. Now that I write the Pfennig in my office each morning, I can really crank the volume, but of course there’s still no one here at this time of day, so who cares?

Well, Gold took a flyer higher yesterday, and kept booking gains as the day went along, but overnight, it has given back all those gains. UGH! You know, the usual trading pattern. In afterhours trading, it gets hammered. I really have to wonder just how much longer this can continue. At what point does the physical market get strained because of the demand for physical Gold from India, China and Russia? And if it does, the short positions will have to either be delivered (fat chance that will happen!) or get closed out, which would turn this all around for Gold. But like I said, I wonder when the physical market gets strained. I would have to think that it’s not that far into the future, given the fact that China alone took delivery of the world’s output in Gold last year. And as I told you yesterday, so far this year they are 7% ahead of last year’s accumulation rate.

But that’s all thinking logically, right? You know me, that’s how my mind works. If it’s logical, then it makes sense and it’s how things should go. But that has become too Polly Anna for the markets with all the derivatives, swaps, collateralized debt obligations, and whatever new things are out there that we, the public, haven’t heard of yet, but the large institutions are selling, we can’t depend on logical any longer.

Speaking of thinking logically. Now tell me, tell me true, what would you think the end result is going to be if all outside influences like the Fed, are removed if I told you that Initial Public Offerings (IPO) in the U.S. by companies with major venture capital investment fell in the first quarter to the lowest level in two years? (this came from data that Thompson – Reuters and the National Venture Capital Assoc. put together) .

The U.S. Data Cupboard is still basically bare today, with only the February print of Consumer Credit (read debt) to show us. So, it appears that the slide the markets are allowing the dollar to take a ride on will remain greased down today, as I appear to be the only person out there that gets all lathered up about how much debt Consumers are taking on. Tomorrow, the markets will be all tied in knots ahead of the Fed’s FOMC Meeting Minutes that will print. But that’s tomorrow, it’s 24 hours away, I heard..

Well, I had my 6-month visit to the doctor I give credit to for saving my life nearly 8 years ago. I love this guy, as he always asks me about everything, including the euro, and the U.S. economy. Yesterday, he had a new assistant doctor he was training and he told her, “You know, I love sitting here talking to this man, it’s a miracle that he’s even over there talking to me.” Wow! I love that they tell me this stuff nearly 8 years later.

Before I head to the Big Finish. I just saw a blip on TV that said that men are 5.5 times more likely to lose their hearing than women. Hmmm. I had to laugh, because are they sure that they actually lost their hearing, or did they just turn the world off because they got tired of hearing all the B.S.? What? What did you say? My dad always told me that I would lose my hearing because I played my guitar in front of those HUGE amplifiers and I listened to my music too loud. I wonder what he would think today, with kids and their ear buds blasting what they call music in their ears?

For What It’s Worth. Well, in combing through the Bloomberg for news this morning, I came across this article that I though hit home for sure. And another reason this U.S. economy is going nowhere, fast. You can read the whole article here or just the snippets I have below: http://www.bloomberg.com/news/articles/2015-04-02/americans-watched-their-incomes-shrink-except-for-the-highest-earners

“Americans are earning less than they did in 2013, with one notable exception: the rich.
Average incomes before taxes fell for a second year in the year ended July 2014, down 0.9 percent, while expenditures were up 1 percent on average, according to data from the Bureau of Labor Statistics mid-year consumer expenditures update, released Thursday.

Only the top 20 percent of American earners experienced income growth in that time period, swelling 0.9 percent. Their annual pre-tax income increased to $166,048. Meanwhile, every other income group shed 2 percent or more. The lowest quintile, which earned $9,818 on average, lost the most ground.

The lowest-earners also increased their spending by the most, boosting their expenditures by 2.9 percent, to $22,981 on average.”

Chuck again. That’s quite an interesting bit of info isn’t it? You know what I think here, is simply that this has gone on with incomes not rising for a very long time. Well, me talking about it doesn’t change anything, I know that, but still, if it’s not talked about, then it just gets swept under the rug, and then one day we wake up and wonder what the hell happened!

To recap. The RBA kept rates unchanged in the face of a lot of pressure by the markets to cut rates, and now the focus shifts to the May RBA meeting, but in the short term the non-move allowed the A$ to be the best performing currency of the night. The markets appear to be allowing the dollar to slide on the bad jobs report last week, after the initial knee jerk reaction to the news, the dollar has just about recovered all lost ground VS the euro. And Gold got whacked in the afterhours trading yesterday. When will that all end?

Currencies today 4/7/15. American Style: A$ .7670, kiwi .7540, C$ .8015, euro 1.0875, sterling 1.4905, Swiss $1.0405, . European Style: rand 11.7905, krone 8.0245, SEK 8.6155, forint 274.75, zloty 3.7275, koruna 25.2210, RUB 55.21, yen 1120.00, sing 1.3560, HKD 7.7515, INR 62.25, China 6.1305, pesos 14.91, BRL 3.1255, Dollar Index 97.46, Oil $51.66, 10-year 1.89%, Silver $16.89, Platinum $1,167.38, Palladium $770.10, and Gold.. $1,211.23

That’s it for today. Well, my beloved Cardinals got the new baseball season kicked off on the right foot Sunday night. But yesterday was the official “Opening Day”, which I’ll say again, as I’ve said every year, that “Opening Day” in Baseball should be a National Holiday. It’s our National Pastime! I know most of you are saying “you’re nuts Chuck”, but that’s OK. I still believe it! Our Blues only have 3 more games before the playoffs begin. I still believe that this could be their year, so fingers crossed. It was great seeing everyone in the office again yesterday. My good friend, Jack Stapleton called me a bronze God. HAHAHAHA! I do have some color, but I stay out of the sun except in the early morning and late afternoon, so I don’t think I’m “bronze”. Our little Christine was smiling like the Cheshire Cat, and little April Showers made a special visit to give me a hug. I was nearly late for my doctor appt. because Danielle caught me at the elevator, and Bill Ervin gave me a big Hello, good to see you, for which I always say, “it’s good to be seen”. Too many people to name them all, but it was great to see them again. It was a gray, ugly day on Monday, and it made me think. This is how I left St. Louis, and now I come back to it. I can’t wait for winter to come again! HA! Well, I’m headed to L.A. on Friday to speak at the American Assoc. of Individual Investors meeting. And with that I’ll get out of your hair for today, and hope you have a Tom Terrific Tuesday!

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