Traders Finally Wake Up & Smell The Coffee.

* More U.S. data that misses expectations.
* Dollar sees broad based selloff this morning!.
* Indian Finance Minister talks glowing about India.
* Banks want CBR to hold back ruble gains .

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

Good day.. And a Happy Friday to one and all! Friday at last is what I’m saying this morning for this has been one very long week for yours truly. The great Alvin Lee greets me this morning, as his band, 10 years after, plays the song that the band I played in and traveled around the country ended every show we ever did, which is: I’m Going Home. Have you ever seen the Woodstock movie and Alvin Lee playing this song? Truly classic rock-n-roll. One of the all-time best guitar players too! We lost Alvin to early a few years ago, when he checked into a French hospital for an everyday procedure, and never came out on his feet. Years ago, at Mark Twain Bank, I had about 30 people that worked for me, and I would hand them the VHS of the Woodstock movie when I hired them, and required them to watch it, and return the VHS (back then you could do that kind of stuff) just so we would have something to talk about going forward.

Speaking of having something to talk about going forward. I never have a problem coming up with something, it just all depends on what you want to hear. HA! Well, when I turned on my computer and brought up my email, I saw an email from the Wall Street Journal (WSJ) that told me that Bloomberg Terminals globally had shut down, causing traders to panic. I then paid no attention to it, logged onto Bloomberg as if I wasn’t aware of a problem. So, this just shows to go ya that you can’t believe everything you read! HA! As I’m writing a letter, I decide to tell you that? Not a good idea, Chuck. Sometimes you are a real dolt, you know that? Ahem, yes, I do.

Well, the dollar is getting sold on a broad basis this morning and not to just a handful of currencies here and there, as in previous days. This broad based selling of the dollar is tied to the markets finally waking up and smelling the coffee that I’ve been serving them for months now. And that is that the data here in the U.S. is not the kind of data the Fed needs to hike rates.. And the dollar’s strength has been 85% based on rate hike thoughts, and 15% on the slowdown in other countries globally.

It’s about time the rest of the markets caught up with me, eh? HAHAHAHA! But seriously, I have been one of the lone rangers pointing out the bad data while the Fed shrugs it off saying it’s only transitory. Really? That’s all you’ve got to say for what’s going on? And be careful blaming it all on “bad weather” which is really a good song by Poco. For the bad data began in the 4th QTR, remember? Yesterday, it was Housing Starts in the U.S. which failed to meet expectations, and therefore failed to retrace the HUGE drop we say in February. And Building Permits fell by 5.7%… So, the hits just keep coming for the U.S. economy. That 6 years after the official recession ended, should be looking in its rearview mirror at these weak numbers by now. Of course I say “official recession ended”, because I contend that 1. It is a depression, and 2. Has never ended.

So, a quick look around the world, we have the Aussie and New Zealand dollars both up about ½-cent this morning, the Chinese renminbi was allowed to appreciate again last night, making this the best performing week for the renminbi in a month of Sundays. I guess the Peoples Bank of China (PBOC) the folks that set the fixing rate each day, got the memo from Chinese Premier, Li, that I talked about yesterday.

Elsewhere, the Russian ruble has now booked 2 consecutive days of selling, which sticks out like a man with a hatchet in his forehead. Hey, Chuck, that was a little too much on the description, don’t you think? Well, maybe, but I had to really make it stick out, so I went there. OK. let’s continue on. I saw an article on the Bloomberg this morning that talks about how banks around the world are telling the Central Bank of Russia (CBR) to intervene and slow down the ruble’s rise that has seen a 20% rise in 2015, which includes a 15% rise in April alone.

The banks think that the gains have been too fast and will erode Russia’s competitiveness and further restrain the economy that is already had a governor placed on it by lower Oil prices and economic sanctions from the U.S. and Eurozone. I would have to think that the CBR, who spent $88 Billion last year defending the ruble, is enjoying this 20% gain so far this year and will be slow to do anything about it. But then the ruble is down 1% overnight, so maybe there’s some credence to the story, eh? I certainly hope not.

The Indian rupee is a currency that has seen its share of Central Bank intervention in the past, but the last 4 weeks has shown that the Reserve Bank of India (RBI) has slowed their intervention by a large margin. I saw an interview with the Finance Minister, Jaitley, and I’ll highlight a couple of his comments here.
1. Steps taken in past 11 months now giving India about 8% growth.
2. India’s deficit reduction gives growth confidence.
3. Considering the vast depth and size of the Indian market, our ability to absorb those shocks is far stronger. Our dependence on our own domestic market has made us relatively more stable.

I had to laugh when I saw this headline. “Lew Urges Japan To Use All Policy Tools Available To Lift Growth”. OK, after I stopped laughing out loud, I said, “Mr. Lew, what in the hell do you think Japan has been doing for 20+ years?” I’m sure the Japanese just smiled at him and walked away muttering, where has this guy been? You see, the thing the Japanese are now finding out, and the U.S. will eventually find out, that debt is like an Albatross on your shoulders that won’t go away. It drags the economy down, and no amount of stimulus, rate cuts, and bond buying is going to turn the economy around. Don’t you think the Japanese would love to have never attempted to stimulate their economy with deficit spending? I do. I also still believe that we’re turning Japanese, yes, I really think so.

The euro has climbed back above the 108 handle. I thought that my description yesterday of the euro being knocked to the canvas and taking a 10-count was just plain genius. But when I have to give myself a gold star for writing, it takes away the ability to pound one’s chest. But oh well, back to the euro. Well, with the broad based dollar selling, the euro is allowed to rally. I keep saying this over and over again, but for the new readers it’s important to let them know what’s going on, and that is. The euro is the offset currency to the dollar (for now that is), and therefore the euro rises when the dollar sells off, even if there is no news, data or drama going on in the Eurozone. And that’s what’s going on here today with the euro strength. It’s simply a matter of the euro being the offset currency to the one that’s seeing a broad based selloff.

A currency that’s really taken a liking to the rise in the price of Oil recently is the Canadian dollar / loonie. I just read an article this week from a guy that said that the Canadian dollar / loonie was ready to drop like a rock in value from the housing bubble they have in Toronto and Vancouver. And then the loonie rises to 82-cents. Now this can be looked at two ways. either you believe the writer on the housing bubble thing and therefore the loonie is like a star, burning the brightest before it burns out, or. the writer is full of dookie and the loonie is the cat’s meow, as long as Oil continues to recover.

Well, yesterday, I talked about how the price of Gold had moved back above $1,200, but it could get whacked at any time, and whacked it did get. After hitting an intra-day high of $1,208, it (Gold) was then sold back below $1,200. Well, Gold is not one to give up easily, and has rebounded back above $1,200 again this morning. The price of Oil is back above $56 this morning, so you have the euro, Gold and Oil, all the anti-dollar assets attempting to get back on the mend VS the dollar this morning.

The U.S. Data Cupboard today has the stupid CPI report for March as its feature presentation today. For those of you who still believe in CPI, consumer inflation is forecast to remain steady at 1.7% annualized. Now, if you put all your cards in the center of the table on this data, then you might be subject to thinking that 1.7% would keep the Fed from hiking rates. But I would then point out that the Fed said that meeting their inflation target (2%) was not required before making a rate hike. Of course, it wouldn’t, the Fed can do whatever their minds tell them to do. But I’m going all in on the idea that the weak data WILL keep them from hiking rates in June.

Yesterday I was talking about GDP here in the U.S. and all the hits it’s going to take in the 1st QTR. And then I went out on a big fat limb, and told you that I thought that once all the revisions were made that 1st QTR GDP would be 1%… And an astute reader sent a message to the Pfennig’s blog site: www.dailypfennigcom and reminded me that 3% of growth was added to GDP annually from the inclusion of R&D and other stuff never included before. the Gov’t did that because they didn’t like the looks of the GDP reports. So, if what I think comes to fruition, and the 1st QTR GDP is only 1% annualize, then take away the 3% hedonic adjustment, and we have a negative GDP.

For What It’s Worth. This is quite long today, but well worth the time spent on it, if I say so myself, and I do! It’s from an article on and can be found here:

“Having generously (if not obliviously) stepped up to the plate to bail out Ukraine (with open-ended bond guarantees), U.S. taxpayers are opening their wallets again – this time for Iraq. As Reuters reports, cheap oil has ravage Iraq’s state finances just as the government faces rising military spending from the war it is waging against ISIS; and so it has decided to issue $5 billion in international bonds. However, Iraq is considering other ways to cover its budget deficit, including asking the IMF (i.e. U.S. taxpayers) for relief funding and also requesting the controversial U.S. Export-Import Bank (U.S. Taxpayers) finance the purchase of 10 planes from Boeing Co, which cost the government $500 million.

Cheap oil is ravaging Iraq’s state finances, just as the government faces rising military spending from the war it is waging against Islamic State militants. As Reuters reports, Iraqi Finance Minister Hoshyar Zebari said the government was facing a budget deficit of $25 billion, out of a budget of approximately $100 billion. Iraq’s 2015 budget is based on an oil price of $56 per barrel, he said.”

Chuck again. That’s crazy stuff folks. I’ll be sending a note to my representative telling her what I think of this you can be sure of that! I’ll never forget the takeover of our embassy, and hostages.

To recap. It’s a broad based dollar selloff this morning folks. I think the markets are finally waking up to smell the coffee that I’ve been serving them for months now, and that is that the economy is too weak to take on Rate Hikes. that has given the currencies with positive rate differentials to the dollar, a boost, and even the currencies that don’t have a positive rate differential have something to show for themselves today. The U.S. Data yesterday was weaker than expected Housing starts and Building Permits. The Russian ruble is bucking the currency rally today, and banks around the world begin to whine to the CBR to do something to slow down the ruble’s 20% gain so far this year, with 15% of that coming in April alone. And after getting brought down below $1,200 again yesterday, Gold is back above the figure this morning.

Currencies today 4/17/15. American Style: A$ .7815, kiwi .7710, C$ .8220, euro 10810, sterling 1.5015, Swiss $1.0510, . European Style: rand 11.9170, krone 7.7680, SEK 8.5935, forint 279.10, zloty 3.7250, koruna 25.4360, RUB 50.73, yen 118.70, sing 1.3435, HKD 7.7510, INR 62.34, China 6.1267, pesos 15.18, BRL 3.0190, Dollar Index 97.30, Oil $56.14, 10-year 1.86%, Silver $ 16.44, Platinum $1,175.50, Palladium $778.38, and Gold. $1,205.32

That’s it for today. Oh my! The visiting team scored on the home team’s ice! Our Blues got off on the wrong foot last night losing 4-2.. OUCH! There goes their home ice advantage, and the mystique for the other team on the Blues’ ice.. Oh well, I won’t have to watch the game I recorded now. But for those 17,000 fans that paid good money to attend the playoff game, it had to be quite a bummer. My beloved Cardinals won another series taking 2 of 3 from the Brewers, it will be a weekend of rain according to the weather person, so the Cardinals will be playing between the raindrops I guess. Little Braden Charles was at the house again yesterday evening, and I sat outside and watched him play in the driveway, and all the time I was thinking, “Man I wish I had his energy” I was trying to get him to stop and listen to the birds singing, and decided to whistle like the birds to get his attention. He walked past Kathy and said, “General is trying to be a bird”. HAHAHAHA! I decided I needed to take a short walk, and Braden went with me, he would run ahead and then turn around and run back to me, again, I wish I had his energy! It was an absolutely beautiful day and evening, and with that, it’s time to get off this bus, and head to the weekend.. I hope you have a Fantastico Friday!

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