The MAS Keeps The S$ Band Unchanged!

* Only a few currencies are gaining today.
* Norwegian krone rallies on the cross to euros.
* A secret meeting in Washington regarding Gold?.
* Retail Sales today could be a bright spot .

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

Good day.. And a Tom Terrific Tuesday to you! In 2012, I was scheduled to have my right mandible (jaw) removed in a nasty operation that would have had me in the hospital for weeks, but the tumor in my jaw had grown so large that they no longer could wait and the appointment was made. Two days before the operation, I ended up in the hospital with a very gross looking “good leg” that had what they called cellulitis, which is a nasty infection. Well, I couldn’t have an operation with infection in my body, so the removal of my right mandible was postponed. Then along came MD Anderson Cancer Center, and they had a drug that would shrink the tumor and eventually kill it, so no jaw removal was necessary. I put that down to divine intervention, wouldn’t you? Well, I told you all that to tell you that the cellulitis returned to my leg on Sunday. If you’ve ever had this infection, you know how painful it is, and so I’m to be off my feet for a few days, drown my body with antibiotics, and keep it elevated, which I might add is difficult to do when you’re trying to write a letter! UGH! So, that’s why I was AWOL yesterday. sorry about that.

Well, not much has happened since I last talked to you on our Tub Thumpin’ Thursday last week, except for the candidates to start announcing their intention to run for president.. I’m not even going to get into the politics of all this, but I do believe that longtime readers know all too well where I stand on this stuff, for in past years, I could talk about it. Not anymore, folks. so, let’s just make note that there will be a ton of candidates on one side, and just a couple or a little more on the other side.

Front and Center overnight, the Singapore dollar (S$) is the best performer overnight on news from the Monetary Authority of Singapore (MAS) last night. The MAS, who are known as a group that uses the S$ to control inflation, instead of interest rates. (I’ve long said I wish more countries did it like this, but for now it’s only Singapore) And even with a large portion of forecasters on record thinking that the MAS was going to call for a weakening of the S$, the MAS maintained the slope, width, and midpoint of the S$’s band that it is allowed to trade in. Apparently the MAS has no interest in joining the currency wars, and more important than that is the fact that the MAS is showing faith in Singapore’s economy to grow going forward. I think in a country like Singapore, this “faith” as stated, will go a long way toward firing the citizens of Singapore up, and helping the economy to get fired up too!

So, that was good news, for the currencies, which hasn’t come that often in the last 6 months, as the dollar has seen what they call in the markets as a “dead cat bounce”. Now please don’t get mad at me, no cats were harmed, it’s just a saying in the markets. But I do believe it explains how I feel about the dollar’s rally. I spoke to a crowd in L.A. on Saturday, and told them that what we were really seeing in the U.S. economy is a slipping economy, and not a true expansion. When 80% of the economic data prints in the 1st QTR don’t meet expectations & even see some print negative, the economy is in trouble folks. And absolutely nothing, say it again, absolutely nothing will make me change my mind on this view.

So, I was asked, “how much longer is the dollar strength going to last?” Oh my, now I was not a happy camper about that question, for now I felt “on the spot”. But, why not take a stab at it? What if I’m wrong by a month or two? I don’t think I have to go directly to jail, and not collect $200. There were only about 4 Pfennig Readers in the crowd, if you can believe that, and so most of the crowd hadn’t read in the Pfennig that I thought by the end of summer things will have become so messy in the economy that the Fed will have to revisit bond buying, and when they do, the dollar’s mini-rally will be over, caput, fini, and all that. Of course that’s my opinion, and I could end up being wrong, but I would entertain any debate on why I’m wrong thinking this way. civil debate I might add.

The European Central Bank (ECB) issued a statement overnight saying that they are seeing Eurozone banks, tap the bond buying by the ECB and putting the money into the economy by making loans, which is exactly what the ECB intended the banks to do, which is not what happened in the U.S. where banks just took the cash and stored it at the Federal Reserve, where they could earn interest, and not have risk. Now, maybe the ECB is just blowing smoke in our face, but I kind of doubt it.

The news didn’t help the euro overnight, as Greece is still weighing heavily on the euro. I watched an interview on the the other day, that featured our Big Boss, Frank Trotter talking currencies, and he said that he thought the euro would fall to parity with the dollar. OUCH! Now that’s going to leave a mark! But that’s what he thought, so why not say it? I think the realization of the euro at parity finally hit me when I heard Frank say that.. I think before that, I just kept not thinking about it, sort of hoping for a “out of sight out of mind” sort of thing. But I guess we should resign ourselves to this thought. UGH! Of course back in 2000, when the euro approached parity from the other direction after hitting 82-cents, we all threw a party on the trade desk. No wait, back then it was just me and Jen. Jen did stocks, I did the currencies. But I do remember us thinking that times were changing for the dollar, and so they did.

The Norwegian krone is on the rally tracks this morning, and the Norges Bank’s Gov. Olsen is speaking, but he’s not saying stuff that would cause the krone to rally. In fact, if I were a krone trader I would be a little leery going long krone while Olsen is talking, especially when he’s talking about a scenario where rates are cut in May or June! The thing I think we’re seeing here is the krone is finally rallying VS the euro, and on the crosses it has carried over the dollar/ krone, which we care most about. I’ve said over and over and over again, this dance is gonna be a drag, no wait, I said over and over and over again, that one day, traders would do the V-8 head slap and realize that Norway’s fundamentals are far better than the Eurozone’s, and that the krone is not the euro. Now, I’m not saying that this has happened with the krone rally today, for we would have to see a strong trend in place, but you have to have a step in the right direction before you can start a strong trend, right?

Across the English channel the U.K. sits, and tries to deal with a drop in CPI (consumer Price Inflation) which has just about been the final nail in the rate hike’s coffin, folks. Of course you dear Pfennig Readers didn’t have to sit around waiting for the last nail, (which is a great song by Dan Fogelberg, the Last Nail) given that I pointed out to you a very long time ago, when Bank of England (BOE) Gov. Mark Carney, first talked about rate hikes, that he was just full of you know what, and that his bag of promises had been brought to the BOE from the Bank of Canada, where he pulled the same trick. Well, the pound sterling is getting hammered these days, because all the trades that went long waiting for a rate hike, are now being unwound.

Hmmm. Another ditty of information that I have passed onto you dear readers over the years, is that what happens in the U.K. usually shows up here within 6 months. We now have just two months until the Fed Reserve meets in June, where everyone believes the Fed will hike rates for the first time since 2006. But. I’ve said all along that I don’t believe the Fed will hike rates in June, and now that the last nail has been hammered into the rate hike in the U.K.’s coffin, it’s time to start hammering nails on the U.S.’s rate hike coffin.

Chris told you yesterday about the Chinese trade data, which was crazy good on the exports side, but crazy bad on the imports side. It did increase the Trade Surplus which is always a good thing, but really shined a light on the slow pace of the domestic economy in China. Hey! No one said the domestic demand side of the Chinese economy was going to soar overnight! Patience, folks, patience. But in the meantime, the renminbi / yuan was directed weaker overnight, but not by a huge amount, but weaker nonetheless.

The Aussie dollar (A$) is back to within a cent of the New Zealand dollar (kiwi). I find this to be pretty amazing. bad for the A$, good for kiwi. A longtime friend of mine, and someone that has far more gray matter than I, sent me a note yesterday, and said that with the A$ getting close to parity with kiwi, it would seem to him that we should look for an A$ bounce, for this phenomenon of parity with the two, just isn’t right. It’s always nice when people that have far more gray matter than me, send me notes with their thoughts. When my darling daughter, Dawn, was a little girl, she used to be the only one that could call my longtime friend, Eddie. I remember being at his house with Kathy and Dawn, and Ed telling Dawn to be careful with his cat for the cat could be mean, but by the time we left, the cat and Dawn were best friends. Memories.

Well, the U.S. Data Cupboard is going to get a workout today, with March Retail sales, and PPI, and Business Inventories. The BHI (Butler Household Index) indicates to me that March Retail Sales could buck the trend of weak data reports today. For there were a few rainy days in S. Florida in March, which means my beautiful bride goes shopping! HA! But seriously, this report could be quite strong today, and that will get all the dollar bugs crawling out of the floor boards, and waving their flags. But remember, this is just one month’s report.

Gold is down $9 this morning, and once again is in one of those patterns where it can’t find a bid, or any wind for its sails. On Ed Steer’s letter this morning, he highlights a story that says “Central Bankers gather privately in Washington this Friday to discuss Gold”. Well, you know me, and that story was like a neon light to a moth for me. Well, the story came from a print from GATA (the Gold anti-trust people), and they get awfully mad whenever I borrow a snippet from their stories, I guess Ed Steer, has special permission. But anyway, I think the headline of the story says it all. I would have to think that IF this story has credence, and I have nothing to say it doesn’t, then this conspiracy stuff written all over it!

For What it’s Worth. OK. I’ve quoted Lawrence Williams in the Pfennig before regarding his thoughts on Gold. Well, today I have some snippets of an article he wrote titled: Many Gold producers in dire straits despite costs cuts. You can read the whole article here:

“The latest detailed report on gold from GFMS in London does not make pretty reading for those either running gold mining operations, or investing in them. According to the specialist precious metals consultancy around 50% of the gold mining sector looks to be loss-making on its own calculated All-in-Costs basis at a $1,200/ounce gold price.

The GFMS All-in-Costs parameter, which is even more all-encompassing than the All In Sustaining Costs (AISC) metric, which has become the industry norm for most gold mining company reporting, is intended to represent the ‘stay-in-business’ capital cost, or the expenditure necessary to maintain production at current rates. In addition to the components included in the Total Production Cost, the All-in Cost figure also incorporates corporate administration costs (head office overheads), interest charges, exploration expense, extraordinary charges (such as retrenchment costs and asset carrying value write-downs), plus sustaining/on-going capital expenditure. As such, GFMS reckons that its own All-in Cost calculations may be viewed as a far more accurate measure of ‘real’ industry margins even than AISC. Both measures though do go some way to explaining why companies which boast of their mines having exceptionally low cash costs can still end up making significant corporate losses.

Thus the consultancy estimates that in 2014 the average All-in Cost of gold mine production was $1,314/oz, which represented a $427/oz, or 25%, reduction over the figure for 2013.”

Chuck again. Think about this for a minute folks. given the physical demand that we know of from China, India, Russia and others that has been ongoing, with no signs of slowing down, and the cost to produce Gold greater than the price of Gold, this could all become a Big Bang effect, don’t you think? I do.

To recap. The dollar is still crowing this morning, but there are a few bright lights among the currencies. The MAS left the band unchanged for the Singapore dollar, and the currency is the best performer overnight, just ahead of the Norwegian krone, which looks to be rallying mostly against the euro, but trading has spilled over the dollar/ krone, which is what we care about. The rate hike coffin in the U.K. had its final nail driven into it overnight when consumer inflation fell. And the euro looks like it could go to parity with the dollar. UGH! And Gold is down $9 this morning, can’t find a bid, can’t find any wind for its sails.

Currencies today 4/14/15. American Style: A$ .7585, kiwi .7460, C$ .7950, euro 1.0575, sterling 1.4650, Swiss $1.0225, . European Style: rand 12.1115, krone 8.0280, SEK 8.8185, forint 280.50, zloty 3.7930, koruna 25.8530, RUB 51.94, yen 119.90, sing 1.3625, HKD 7.7500, INR 62.49, China 6.1407, pesos 15.35, BRL 3.1110, Dollar Index 99.48, Oil $52.46, 10-year 1.91%, Silver $16.09, Platinum $1,146.34, Palladium $ 756.75, and Gold. $1,186.75

That’s it for today. Well, I have to say that Orange Co. California was absolutely beautiful this past weekend. the audience at the AAII meeting was good, and had lots of good questions for me, so many that I found a chair and sat down while addressing their questions. The Beatles are playing their song: Drive My Car on the iPod this morning. This was the first CD I bought years ago, and was blown away at the how I could hear every instrument clearly! A few years ago, I bought the box set of Beatles CD’s, they were so melodic as a group. And now one of my all-time faves, Al Wilson’s song Show and Tel is playing. One of the top 50 songs for me! Little Braden Charles was at the house last night, and we were eating popcorn and watching baseball together, fun stuff. So, I’m at home, not able to get out much, and off my feet for a few days. Hopefully I caught this coming on this time, and got it addressed right away, before I ended up in the hospital again. Well. my beloved Cardinals are not starting the year on the right foot, defensive-wise, too many errors! I thought they would have ironed that out in spring training! UGH! Oh well. Our Blues begin the playoffs on Thursday night. I said at the beginning of the year that I thought this was their year, they won 5 of their last 6 games so they are trending in the right direction, let’s go Blues! 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