Safe Haven Buying

* Home sales fall
* Hawkish Fed members
* RBNZ leak
* Upbeat Aussie

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

Good day. And welcome to Tuesday morning. It just so happens that its Chuck’s birthday today as well, so here’s to wishing you the best on your special day. Yesterday’s quiet start remained largely intact throughout the remainder of the day as there just wasn’t much to push things in either direction. I’ll tough on the markets in a bit, but first let’s see what Frank has in store for us today.

“A little south of here are the ruins of an old civilization. Monday Carol drove down – first covering the distance we took 7 hours to complete on horseback in about 30 minutes – then into the neighboring province of Tucuman. The site of these ruins, occupied by the Quilmes people, was the largest settlement in pre-Columbian times. The band successfully resisted the Inca remaining nominally independent. For about 130 years they were also able to escape the Spanish scorched-earth approach to conquest. But in 1667 they were defeated and punitively marched to a reservation near Buenos Aires – about 1,500 kilometers away with obvious and predictable results. Like many sites from this era the ruins show a sophisticated culture and are fun to explore.

I’ve been interested for quite some time in the Inca penetration of Salta province and remains of the famous trail system. We have hiked along pieces of the trail in Peru and I’d like to connect the dots. After reading the new book on the trail published by the Smithsonian’s Native American Museum, I visited the museum in DC looking for more detailed maps than appear in the book, or as it turns out in the exhibit. The Inca are known to have conquered and occupied this area. The Spanish used the route on the first reconnaissance south out of Cusco in the mid-1500’s. Locals have told us often – oh there’s the trail up there – a potential but completely unreliable source. At the museum the staff was ever so nice but the response from the academic side was pretty much – go find it yourself – when I read between the lines. Maybe someone in the Greater Pfennig Nation has a lead for me?

This morning (Tuesday) we’ll gather here in downtown Cafayate to discuss and maybe debate where in the world the global economy is headed. The roundtable will include Doug Casey, Nick Giambruno (, an Argentine, and me. Anything with Doug can go in a million directions so I’ll have to be on my toes. As the banker in the group I always sound the most subdued. For what it’s worth I still retain a little optimism but it’s harshly tempered by many of the factors we have discussed here before. The expectations of the market for very low inflation which is not inherently a bad thing – but here indicative of low growth with little wage improvement. Some slender signs that things are going okay in the US business world – but many other indicators suggesting a real contraction. I read a funny article the other day suggesting the contractions were decreasing – but contraction it remains. More later after a return from the Oracle.”

Thanks again Frank. Well, we didn’t have anything positive emerge from yesterday’s economic data as the Chicago Fed activity index, which is a gauge of overall economic activity and related inflationary pressure, printed at a worse than expected -0.29. Since that report is third tier, it was pretty much glossed over and focus shifted to the housing report. February existing home sales fell more than forecast to a 3 month low, which worked out to a 7.1% decline as compared to January. Lawrence Yun, chief economist at the National Association of Realtors, expressed concern over seeing fewer renters interested in buying a home. He went on to say it will be interesting to see whether this is a one-time fluke or if home buyers are beginning to show resistance to higher prices.

The dollar picked up a little steam mid-morning after Atlanta Fed President Dennis Lockhart indicated that an April rate hike isn’t completely ruled out at this point, which seems to fly in the opposite direction of the dovish Fed statement last week. Judging by the muted reaction in the various financial markets, it looks like hawkish rhetoric from both Lockhart and Williams were largely written off. With that said, most currencies did remain range bound as there was less than a 0.50% difference between the high and low of the day for the euro.

Aside from the Brexit talk, there really wasn’t much going on with the other currencies. The top performing currency was the Brazilian real with a gain of 0.30% and the worst performing currency was the pound with nearly a 0.70% loss. Nothing new emerged out of Brazil so ebbs and flows of sentiment surrounding the potential impeachment will push the currency higher or lower accordingly. The New Zealand dollar lost about 0.50% after a report suggests the central bank leaked the rate decision prior to it being released. Additionally, odds are beginning to increase that we could see two more rate cuts this year instead of one. The volatility we saw at the beginning of the first quarter has, for the most part, subsided as we are heading into the final stretch.

As I came in this morning, we are seeing a mild bout of safe haven buying as the USD, yen, and gold are marginally higher after a terror attack in Brussels weighs on investors while the rest of the currencies are still locked in tight ranges. The Australian dollar is the best performing currency with a 0.30% gain and the RBA governor seemed upbeat when he said the economy is adjusting quite well to lower commodity prices. The euro is down about 0.30% even though euro zone business activity in the first quarter showed some improvement and German PMI, which measures manufacturing and services, held steady in February. Interestingly enough, Switzerland was able to post a record high trade surplus in February after strong pharmaceutical sales and increased exports pushed higher. And finally, we had Moody’s come out and warn that it sees clear downside risks if Britain decides to leave the European Union.

That’s it for today, so until next time, Have a Great Day!

Currencies today 3/22/16. American Style: A$ ..7600, kiwi .6745, C$ .7642, euro 1.1223, sterling 1.4284, Swiss $1.0311. European Style: rand 15.2690, krone 8.4168, SEK 8.2300, forint 277.04, zloty 3.7967, koruna 24.078, RUB 68.0642, yen 111.68, sing 1.3607, HKD 7.7528, INR 66.6848, China 6.4971, pesos 17.4650, BRL 3.6391, Dollar Index 95.528, Oil $41.17, 10-year 1.89%, Silver $15.89, Platinum $978.75, Palladium $597.25, and Gold $1,251.75

Mike Meyer
Vice President
EverBank World Markets