Retail Sales Disappoint!

* The dollar gets sold, Big Time!.
* The euro is the Big Dog again!.
* NZ Retail Sales with a strong surprise!.
* Chuck reminisces about Patsy Cline songs..

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

Good day.. And a Tub Thumpin’ Thursday to you! The Guess Who greets me this morning, with their classic song: These Eyes. If I’ve said it once I’ve said it one hundred times, that I love Burton Cummings’s voice. (the lead singer of the Guess Who) Well, now that’s what I call a currency rally yesterday! And I can’t forget the move Gold made! It was as if the traders of the world finally woke up and smelled the coffee that had been brewing right beneath their collective noses for months now, and realized that the smell was telling them that the U.S. economy isn’t going anywhere, and certainly not strong enough to warrant rate hikes. And so the dollar selling got rolling, and continued through the overnight session and the morning European session.

I guess I could say, I told you so, to all these guys that kept buying dollars thinking that the Fed knew what they were talking about, but then that would be an invitation for the Good Lord to slap me in the face and make me pay penance for bragging, and not being humble. But really, what else can I do? Given that I’ve had to take so much garbage ragging from people about how I didn’t know what I was talking about, and so on.. OK. maybe you’re lost right now, and have no idea what I’m talking about, so let’s take a step back to yesterday’s Economic Data and then move forward from there, OK?

So. U.S. Retail Sales for April. Remember I told you the BHI indicated that it would be disappointing. So, I’ll let you decide. Does a flat print basically saying there was no growth in Retail Sales for April qualify as disappointing? The markets thought so, and seeing this , they completely forgot about the trumped up BLS jobs report from last week, and decided to sell dollars, for how could the Fed raise rates when our economy can’t even muster up a little gain in Retail Sales? How about gas sales, you know, that cheaper gas buying that was supposed to kick start the economy? Not a chance, gas station sales were down -.7%… Following gas sales, Furniture sales were down -.9%, electronics down -.4% and even food and beverage, which normally helps Retail Sales, were down -.1%… Non-Store Retailers, and eating & drinking were the only bright spots gaining .8%, and .7% respectively.

So, with the dollar getting sold like funnel cakes at a State Fair, the euro bounced higher, and bounced higher, and bounced higher again. I’ve told you for years now that the euro is the offset currency to the dollar, so when the dollar is not in favor with traders, the euro is, even with the Greek Debt problems hanging over the euro like the Sword of Damocles. I’ve said that like so many times over the years, but yesterday, was illustrated proof of what I’ve been telling you over and over again. But I’ve got a treat for you this morning. Now you remember how I like to quote Jim Rickards, the author of a couple of very important books? Well, here’s Jim in the great letter: The Five Minute Forecast (the 5) yesterday. See if this sounds familiar.

Alas, the central banks miscalculated. (Imagine that.) The assumption was that the U.S. economy was robust enough to handle a strong dollar. It’s not. (Indeed, that’s the reason the euro jumped more than 1% this morning, as you’ll see below.)

“If the U.S. cannot grow,” says Jim, “the whole world is in trouble, and the IMF and G-20 know this. Since cross rates are a zero sum game, we know what this means for the euro. If the dollar gets weaker, the euro must get stronger.” – Jim Rickards.

I’ll also mention that Jim called this move higher in the euro back when the euro was 1.05, and everyone was saying it was going to parity. He believes there will be short squeeze in the euro, as the currency rises, the shorts will have to be closed out, and he sees this driving the euro up to 1.20, in the coming weeks. WOW! Good call so far Jim, I would love to see the rest of it come true.

Well, the euro isn’t the only currency rallying folks, but just like in the hey-days of dollar selling, the euro was the Big Dog, and all the other currencies were the little dogs, and the little dogs couldn’t get off the porch to chase the dollar down the street, unless the Big Dog got going first. Sure the little dogs could outrun the Big Dog (outperform) but they needed the Big Dog to start. It’s been a long time, such a long time coming for this to play out again, and there right before us yesterday, it played out again. Marvelous! Simply Marvelous! Not that I’m a cheerleader for dollar weakness, what I am is a realist, and someone that sees things happening, and when they come to fruition, I like to rejoice that I was right!

The New Zealand dollar / kiwi followed the large move yesterday, with a smaller mover overnight, but a positive one at that, when New Zealand 1st QTR Retail Sales surprised the markets by beating the expectations easily, printing at 2.7% VS the previous quarter. The expectation was for a 1.6% increase. The reason that kiwi is only seeing marginal positive moves this morning after this very impressive Retail Sales print, is that unfortunately, traders are not convinced that this changes the expectations of a rate cut by the Reserve Bank of New Zealand, because under the hood of this Retail Sales report, it revealed that retailers still aren’t able to increase margins, thus creating no inflation.

In the U.K. Bank of England (BOE) Gov. Carney, told an audience yesterday that the next move in rates for England will be up and not down. He said that because the Chief Economist from the BOE had said the day before that there was a chance that next move could be downward, and the pound sterling got whacked. So Carney was out doing some “curb repair” , so that the pound can retrieve the curb appeal it had before the Chief Economist talked. Of course if you ask me, and who else would you ask, given I’m the only one writing this letter? But if you asked me, I would say that we should probably listen to the Chief Economist instead of Carney, for who knows the data? And who has been walking around with a bag of promises to hike rates for a couple of years now, first at the Bank of Canada, and now the BOE?

Well, Carney’s words worked, much to my dismay, given that he’s full of hot air in my opinion, but they worked, and pound sterling is back on the rally tracks this morning, actually knocking on the door to 1.58!

The Swiss franc is sporting at $1.10 price this morning (in dollar terms, which is the way I prefer to quote francs) I have to laugh at this, because the Swiss National Bank (SNB) has been fretting about franc strength, and believed that the Swiss economy would just fall to pieces. I fall to pieces, each time I see you again. I fall to pieces, how can I be just your friend? Ahhh, the Great Patsy Cline. I can hear her singing that song to me right now. But Chuck, you were talking about the SNB. Oh, that can wait! Years ago on the Mark Twain Bank currency trading desk, I used to have a small CD player, hooked up to some speakers, and almost every morning, before everyone got there, while I wrote the Pfennig, I would have Patsy Cline’s greatest hits playing. My colleague then, Neil George, used to love the Patsy Cline song, I go out walking. And here’s some cocktail trivia for you. What song is the most played song on juke boxes of all time? Patsy Cline’s version of the song: Crazy.

So, there! Now can we get back to the SNB, Chuck? Of course we can, for you know how much I love to point the finger at dolt Central Banks. But the SNB thought that a strong franc would ruin their economy, and now the franc has rallied back to $1.10, and guess what? The Swiss economy is doing about as well as anyone else’s (excluding China, and India) . I found this on Seeking Alpha this morning. “They all said a strong currency is bad. We feel absolutely certain that the people running the SNB won’t be convinced by any evidence, whether theoretical or empirical, that puts their misguided assessment of the alleged dangers of deflation and a strong currency into doubt. In spite of Switzerland’s reputation as a nation that holds conservative values in high esteem and is among the economically most free in the world, it’s central bankers are almost by necessity strong believer in central planning and assorted Keynesian and monetarist shibboleths”

The Aussie dollar (A$) rallied past 81-cents yesterday, but is seeing some profit taking this morning, and has fallen back below the 81-cent handle. I say profit taking because there was not much in the way of data, news or Central Bank talk to move the A$, and yesterday’s move was a moon shot, and today’s selling is not that strong, so it all appears to me as profit taking.

You know I briefly mentioned India above. I’ve been really disappointed in the performance of the Indian rupee of late, but absent of any market moving reforms, what were traders supposed to do, hold it steady Eddie? Currencies can’t remain stuck in 2nd gear folks, they either have to go through the higher gears, or be downshifted. But one thing I saw highlighted on Ed Steer’s letter this morning is that India’s 1st QTR Gold Demand was up 15% on the Positive Mood in India. Hmmm. If it’s so darn positive, where’s the positive moves in the rupee? Oh well, it is what it is, right? I can’t magically make it rally. But I do wish it would stop with the downward shifting of the gears!…

All that talk of shifting gears had me singing the Little Honda song by the Beach Boys. 1st gear it’s alright, 2nd gear I lean right, 3rd gear hang on tight. Faster! I bet that takes quite a few of you back to your younger days!

And finally, the Chinese renminbi / yuan saw a very strong appreciation last night from the Peoples Bank of China (PBOC). I love seeing the PBOC get the renminbi back in positive motion, after spending most of last year, teaching the markets a lesson, and introducing volatility to the currency. You have to love it when a plan comes together, right?

Well, the U.S. Data Cupboard had quite the market moving piece of data yesterday, with April Retail Sales. Today’s offering is just PPI (wholesale inflation) and the usual on our Tub Thumpin’ Thursday, the weekly Initial Jobless Claims. So, don’t expect the same kind of excitement of a market moving print today, which is probably a good thing, given all that was put into yesterday! But one thing I do want to point out to everyone, is that the Atlanta Fed, who I recently told you had revised their call for 1st QTR GDP to -1%, yesterday put out their forecast for 2nd QTR GDP, which is just .7%… If that’s the case, and I know we’ll have to wait-n-see, then there will be no rate hike in June folks. of course that’s my opinion and I could be wrong, but if I am, then the Fed is going against the grain on why you raise rates folks.

Cat Stevens song: Morning Has Broken is playing right now, I guess the best timing would be for it to play as I turn on the iPod each morning.

Well, Gold really got on its rally horse and rode it all the way to $1,215 yesterday. I have to believe that the Retail Sales got the rally going, but what kept it going so strong throughout the day? Well, here I believe that we’re beginning to see the appetites for U.S. Treasuries, and investors being somewhat scared of the stock market right now, turning to Gold, as I told you they would some time ago. Maybe I’m wrong on that thought, and Gold’s run yesterday was all fueled by the awful Retail Sales print, but my spider sense is tingling here, and I really do think I’m right.

To recap. An awful print of U.S. April Retail Sales yesterday, got traders to finally wake up and smell the coffee that Chuck has been brewing for them for months now, that the U.S. economy isn’t going anywhere, and that got traders to begin selling dollars, and selling dollars they did! The euro climbed to the 1.14 handle, and James Rickards thinks that’s just a start as the euro recovers to 1.20, and Gold rose to $1,215. New Zealand Retail Sales were up 2.7%, beating the expectations of 1.6%, and kiwi went on to rally strongly. Aussie dollars are seeing profit taking this morning after climbing over 81-cents, and the Chinese renminbi saw a very strong appreciation overnight.

For What It’s Worth. in one of my latest GATA communiques they point to an article that can be seen here:

It talks about China and Gold. Good article. and here are a couple of snippets.

“I think what the Chinese are trying to do is creating a real market that reflects supply and demand for physical gold,” says Mikhailovich. Because of the skewed relationship between paper and physical, this will very likely also lead to higher prices for physical, bypassing the futures trading on the New York Futures Exchange Comex and the obscure price setting mechanism at the LBMA.

“Both gold and silver are very actively traded in the derivatives market. Every other asset that doesn’t have a derivative, has gone up in price,” he says and makes reference to collectibles, such as paintings and antiques.

Indeed, after the gold price topped out at the end of 2011, an index of global art compiled by has risen 9 percent until August of 2014.

Having a vibrant physical market would also help from a technical perspective as the exchange would hold the physical inventory while it goes up in price, rather than paper gold, according to Victor Sperandeo of EAM Partners LLC.

“The paper market doesn’t count here. It knocks the market down. If China wants to participate in the physical market, it helps their portfolio and they will be long inventory all the time.”

Chuck again. yes, the same things that I’ve been telling you for years now. but always good to see someone else with an opinion on this that backs me up!

Currencies today 5/14/15. American Style: A$ .8105, kiwi .7515, C$ .8370, euro 1.1425, sterling 1.5810, Swiss $1.1005, . European Style: rand 11.8295, krone 7.3730, SEK 8.2155, forint 268.85, zloty 3.5705, koruna 24.0210, RUB 49.93, yen 119.20, sing 1.3175, HKD 7.7510, INR 63.65, China 6.1093, pesos 15.20, BRL 3.0280, Dollar Index 93.30, Oil $60.38, 10-year 2.25%, Silver $17.36, Platinum $1,153.26, Palladium $787.97, and Gold. $1,219.28

That’s it for today. Well, my beloved Cardinals nearly had a no-hitter pitched against them last night. Needless to say, they lost the game, as they struck out nearly 20 times, YIKES! A day game today, and then a return home for a weekend series VS the Tigers. I get to go to the game on Saturday (day game!) with spring training buddies, I know that will be fun! I got to have lunch with some High School friends yesterday, it was good to catch up with Robin, Linda, and Pam. We spent so much time together back at Roosevelt High School, and now we’re all 60, and a whole life has gone on since then. My poor wife, Kathy, has the cold that I had a couple of weeks ago, it’s a nasty cold, because she’s so strong, and in good health, but it has knocked her for a loop too. Last night, I felt like the cold was returning to me, but this morning, I’m better, so maybe I dodged a bullet. That’s funny, thinking about me dodging anything! HA! Brother! Have I carried on quite a bit today! Sorry. all those memories, and songs, and good information to trade with, all for free! How about that? HA! Time to go. I hope you have a Tub Thumpin’ Thursday!

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