Treasury Yields Soar Higher!.

* The euro takes off for higher ground.
* Krugman blasts Finland’s decision to join euro.
* Aussie Retail Sales & Trade Deficit send A$’s down
* Chuck shares a funny (to him!) .

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

Good day. And a Tub Thumpin’ Thursday to you! Well, looky there! Look who’s doing the Tub Thumpin’ this morning. The poor, beaten and beleaguered euro that’s who! I’m greeted this morning with America and their song: Lonely People. Hmmm. I have to say that even though I’ve been home alone for most of the last two weeks, (Alex has his own life these days!) I’ve not had a feeling of loneliness. So, that’s a good thing. eh?

So, yesterday, I kept watching the euro climb higher and higher, I went out to the desk to see if customers were seeing this, and calling in with questions as to why the euro was soaring. But then Ty Keough, brought me back down to earth, reminding me that the euro has simply returned to the level it traded a couple of weeks ago. UGH! There’s always one party pooper in the crowd, eh? HA! Anyway, I wanted to say that watching the euro soar higher yesterday reminded me an old funny. (well, I think it’s funny!) A snail had won a sports car in a raffle, and immediately took it to the paint shop, and asked the car paint specialist to paint a Big Red “S” on each side of the car on the doors. The specialist thought about it, and then couldn’t resist, asking the snail why he wanted to ruin his car with a Big Red “S” on each door, and the snail said. So, when I drive down the street, people will say. Look at that S-car-go!

Well, talk about being confused. Yesterday, a dear reader sent me a link to an article on , in which they were talking about the dollar index experiencing a “flash crash”. So, I explained to the reader that I didn’t agree that it was a flash crash. You see, the dollar index, as I’ve explained many times in the past, is heavily weighted with euros, so when the euro moves strongly in one direction or the other, the dollar index offsets those moves. And yesterday was a day for the euro, not that the previous day was chopped liver for the single unit, but yesterday. Well, yesterday was grand. The euro shot through the 1.11 handle, you may recall that when I sent out the Pfennig the currency roundup showed the euro at 1.1120, and then proceeded to move past 1.12 and continue onward and upward toward 1.13.

And now in the overnight markets, the euro has added another ¾’s of a cent to push above 1.1350.

So, what’s gotten into the euro, which just last week looked like, once again, it was headed to parity? Well, I’ve told you already this week some of the things moving the euro higher. 1. Higher bund yields that have been coming from the 2. Healing and better looking economy, and 3. The near agreement with Greece and its creditors, which could keep the calls for Grexit to ever happen again, are all what’s got the euro moving. And then add to that the week of awful data from the U.S. thus making the chore of hike rates an even tougher row to hoe for the Fed.

The euro alternatives: Swiss francs, Norwegian krone, Swedish krona, British pound sterling, are all rallying alongside the euro this morning, but currencies like the Aussie dollar A$), N.Z. dollar/ kiwi, Mexican peso, Russian ruble, and Indian rupee are finding the road to currency appreciation chock full-0-pot-holes.. But the Chinese renminbi was allowed to appreciate for a 2nd consecutive night. The renminbi appreciation was tiny, but an appreciation nonetheless!

So, one might think that with all this movement in the euro that the dollar would be getting sold against all the anti-dollar assets, like Gold and Oil. But that’s not what’s happening, so it’s strictly a bounce in the euro, based on those 4 things I talked about above. It will be interesting to watch and see if the euro can muster enough chutzpa to continue this rally, or if it will get beaten back down, like it did a couple of weeks ago.

So, in Australia, the data that has pushed the A$ down overnight, was a flat print for April Retail Sales, and a really bad Trade Deficit print. The Aussie April Trade Deficit printed at nearly double the forecast. A$3.9 Billion VS A$2.1 Billion consensus. That’s an eye popper. No wait! That’s not funny Chuck, and you know better than to use that phrase! But there it is, a real chart topper, is that better? Yes, thank you! I would have to think that the Aussie Gov’t and Central Bank would be looking at this in two ways. The rising Deficit is not a good thing, but it certainly reflects domestic demand doesn’t it? So. while the A$ is caught in the cross-fire of these bad data prints now. I have to believe that the pull from the euro will be strong enough to reverse this move in the A$…

Yesterday, I told you about my Sunday Pfennig last week, where I talked about China, the reserve currency, and lots of other things related to China. And then in Tuesday’s Daily Reckoning (DR) they had some things I didn’t have regarding China, so add this to our list.

“China is one such contradiction. For years in these pages, we’ve focused on their economic rise, despite having questions about its sustainability. But despite their economy slowing recently, China’s innovators are making leaps and bounds. It’s estimated that this year, the country will graduate 17,000 postdoctoral fellows in science, math and engineering. That’s a 60% increase from 2010.

They’re building supercomputers that rival IBM’s and 3-D printers big enough to print air wings. The Chinese also granted 217,000 patents last year — a 26% increase in the past two years alone. ”

Oh, and did you hear that China opened up their repo market? Yes, according to the Bloomberg, “overseas branches of its biggest banks, and possibly some foreign lenders, will be able to borrow renminbi / yuan via repurchase agreements (repo) and us the proceeds abroad.” So, in the first 6 months of this year, China has opened its stock, bond and repo markets. Can anyone say, “to gain a wider distribution of the renminbi / yuan?” I knew you could!

The Japanese yen has seen a tourniquet wrapped around the yen’s bleeding, as the Japanese Gov’t has probably stepped in to slow down the excessive downward moves in yen. The latest report from the Minister of Finance (MF) shows that Japanese equity buying was slower last week, but still strong, thus probably underpinning yen right now. So, worldwide investors are buying Japanese stocks? Isn’t that a lot like putting your cash in a basket with a hole in the bottom?, for Japan is, a basket case. There are no two ways about it. So, I have to wonder what’s going on there, but it’s not for me to worry about, for I don’t have a dog in that hunt!

And talking about Japan gets me thinking of debt. So, I stepped out to the desk yesterday to have a discussion with the folks out there, and we talked about the new Entourage Movie. Then Jen was very upset that there was going to be a remake of the movie Point Blank, and then Tim said there’s also going to be Mad Max, and so on. Jen wondered out loud if movie makers had lost their ability to come up with an original idea for a movie these days.

And then I returned back to my desk in the office I take up space in, and decided to go through email. And in Bill Bonner’s Diary of a Rogue Economist, he kind of touched on our movie remake discussion. Let’s listen to what Bill had to say. ” Naturally, the people who own these things (talking about stocks, and real estate that has been pumped higher by zero rate policies ) and not coincidentally provide early stage funding for congressional and presidential candidates do NOT want to see a new movie.

They want to see the sequel, Credit Bubble 5. Then Credit Bubble 6. And so on.” – Bill Bonner

So, have you seen the rhetoric going back and forth between our fave economist (NOT!) Paul Krugman and the leaders of Finland? Get this. Krugman is peppering Finland with barbs regarding their decision to join the euro. For all of you new to class Krugman is a the lead cheerleader for stimulus, zero interest rate policies, and high inflation. He doesn’t get austerity, he doesn’t get savings. It’s all about stimulus at any cost to pump up inflation. So naturally, he doesn’t like what the Eurozone countries have taken on with austerity measures to reduce debt, which unfortunately, put strains on economic growth. Remember, I’m the guy, you know, your friendly neighborhood Spiderman, that told you some time ago, that we needed to let the austerity measures work their way through, and in 3-5 years the Eurozone would have greatly reduced their debt, and come out looking healthy once again, thus having a very popular euro once again.

So, anyway, Finnish Prime Minister, Juha Sipila, isn’t going to be goaded into a middle school debate with Krugman. Sipila simply replied, “We need to learn to live with the euro. When competitiveness is lost, then we need to find ways to restore it.”

Sounds like a plan to me! No easy way out, with deficit spending measures, etc. which really never really materializes as an easy way out, but more like an easy way to ruins!

On a sidebar, the Buffalo Bills and the Jacksonville Jaguars will be the first teams to play on a worldwide feed over the internet next fall. The NFL announced the deal yesterday with YAHOO to be the league’s excusive partner to deliver first-ever stream of a regular-season NFL game – for free over the internet. I would just question why they picked these two teams. Is it because no one in the U.S. will watch the game since these aren’t exactly two of the best teams in the NFL? Oh, well, sounds pretty neat to me!

Well, there it was again, that change up. I needed one there, as I was beginning to get really heated about Mr. Krugman having the audacity to attack Finland’s decision to join the euro. I mentioned to Ty Keough yesterday that the euro-wannabes: Poland, Hungary, and the Czech Republic needed to get off the shtick, and join the euro. I’ve grown old, and wrinkles waiting for these three to join the euro. Longtime readers may recall me coining the phrase: euro wannabes, back in 2002, when these three were on the “fast track” to joining the euro, but needed to meet the Maastricht Treaty requirements and trade within the ERM (Exchange Rate Mechanism) as a precursor to joining the euro. But that’s all been put on hold for all these years.

The U.S. Data Cupboard is kind of weak today, given that the Challenger Job Cuts report for May is the highlight. Yesterday’s cupboard had a strong narrowing of the Trade Deficit from $50.6 Billion in March to $40.9 Billion in April, but that could be a good and bad thing just like in Australia, but in reverse here. The drop in the deficit is good, but that means that domestic demand was not robust, in fact it means that domestic demand was sickly! Not a good start to the 2nd QTR. But then you dear readers already know that I’ve previously said that the 2nd QTR GDP here in the U.S. is going to be barely better than the 1st QTR, which right now stands at a negative -0.7%…

The 10-year Treasury yield really got a shock treatment yesterday, rising from 2.27% yesterday morning to 2.40% this morning. It’s not the economy folks. for there is little in the economy to move yields this much in such a short time. Our Directory of Secondary Marketing at EverBank is Cameron Beane, he was featured in Frank’s Sunday Pfennig a couple of weeks ago, as the guy at EverBank with his finger on the pulse of the bond market. Well, this morning, Cameron had this to say to all of us that listen.. “Markets are taking the perceived EU rebound, Greek debt crisis resolution, better US ECO data, lower dollar, and rising oil as a sign the rate hikes are near.”

OK. not sure what “better U.S. ECO data” the markets are looking at. But at least there’s some reason for the sudden rise in 10-year yields.

To recap. The euro is soaring again, will this time be the time the euro keeps soaring or will it be brought back down to earth again? German Bund yields are rising, and that has the euro on the rise this morning, along with other reasons Chuck points out this morning. Australia printed two bad Economic reports and the A$ is getting sold, but Chuck thinks that the strong pull from the euro might be enough to reverse the A$ selling today. More good points of interest regarding China today courtesy of the DR, and Gold and Oil can’t find any wind in their sails even with the dollar getting whacked by the euro.

Before I head to the Big Finish today, I wanted to tell you about this Sunday’s Pfennig & Pfriends edition. This week we’ll have a special treat when the Big Boss, Frank Trotter, steps in to offer us his thoughts on the High Net Worker. The title of his offering is: It’s Time You Met The High Net Worker. I can’t wait for this to show up in my mailbox on Sunday, just knowing that it’s Frank doing the writing, and the title, I will be waiting with coffee cup in hand for my email box to show that “You’ve Got Mail”. remember that? So, as Frank likes to say. onward and upward.

For What It’s Worth. Last July, I spoke at a conference in Vancouver, like I do almost every year, but won’t this year, and talked about how U.S. total debt had reached an all-time high. I also talked about how everyone was buying a new car, and how the loan terms of the car loans were getting stretched from 60 months to 74 and even in the 80’s months. I talked about how a lot of those loans would be considered sub-prime, and asked if anyone else saw this as a future problem? So, I liked it when dear reader Bob, sent me this link to a follow up to my presentation last July. You can read the whole thing here.

“Consider the following out Monday from Experian:
The average loan term for new and used vehicles increased by one month, reaching new all-time highs of 67 and 62 months, respectively.
Findings from the report also showed that longer loans, those with terms lasting 73 to 84 months, accounted for a record-setting 29.5 percent of all new vehicles financed, an 18.6 percent rise over Q1 2014 and the highest percentage on record since Experian began publically tracking this data in 2006.
Long-term used-vehicle loans also broke records, with loan terms of 73 to 84 months, reaching 16 percent in Q1 2015, rising from 12.94 percent the previous year – also the highest on record.

The average amount financed and the average monthly payment for a new vehicle also increased to record heights. The average new vehicle loan was $28,711 in Q1 2015, compared to $27,612 in Q1 2014. The average monthly payment for new vehicles also rose, moving from $474 in Q1 2014 to $488 in Q1 2015.

Additionally, leasing continued to increase in popularity during the quarter, jumping from 30.22 percent of all new vehicles financed in Q1 2014 to a record high of 31.46 percent in Q1 2015.

Chuck again. Here’s what this all brings about folks. When Santander Consumer USA sold a $1bn pool of subprime auto-loans this week, it made no pretense that the loans would be paid back in full. So confident was SCUSA that a big chunk of the money would not be coming back that it said it would shield investors in the lowest-rated tranche of the deal from the first 19 per cent of losses. Enough said, eh?

Currencies today 6/4/15. American Style: A$ .7760, kiwi .7155, C$ .8035, euro 1.1345, sterling 1.5405, Swiss $1.0750, . European Style: rand 12.3435, krone 7.7290, SEK 8.2450, forint 275.30, zloty 3.6795, koruna 24.2130, RUB 55.03, yen 124.15, sing 1.3445, HKD 7.7520, INR 64.00, China 6.1164, pesos 15.54, BRL 3.1330, Dollar Index 94.89, Oil $59.73, 10-year 2.40%, Silver $16.45, Platinum $1,106.75, Palladium $758.07, and Gold. $1,182.41

That’s it for today. Whew, I sure had a lot to say today, eh? Sammy Hagar is playing, Rock-n-Roll Weekend on the iPod right now. The Red Headed Rocker, Sammy Hagar, is a St. Louis favorite, but his fan base is getting older. The young kids don’t even know his music. What a shame. My beloved Cardinals took 2 of 3 from the Brewers and finished their home stand 7-2. Not too shabby! But now have to go to LA, and I’m not talking about Lower Arnold! I’m talking about the City of Angels.. where the Dodgers share best home record with the Cardinals. I won’t get to see most of the games there, as West Coast time will come into play. UGH! Oh well, it wasn’t that long ago that the games weren’t all televised. The Moody Blues end today’s letter with their song: The Story In Your Eyes. And this one isn’t from the Seventh Sojourn album. it’s from the Every Boy Deserves Favor album. And with that, I hope you have a Tub Thumpin’ Thursday!

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