Tsipras’ Agreement Would Mean No More Grexit! .

* Greece and creditors nearing a final agreement.
* Dollar’s broad based rally comes to an end.
* ECB on cruise control, as economy heals
* Mining Co. writes to CFTC.

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

Good day.. And a Wonderful Wednesday to you! Well, no soul searching questions to myself this morning, so that’s a good thing. I really need to apologize for saying that stuff out loud yesterday morning. I don’t know what I was thinking, putting it in the letter. UGH! Of course I know you dear readers care, otherwise you wouldn’t read the Pfennig! I think I was just feeling sorry for myself, which is NOT something I’ve done much of in my life, even with the bumps in the road that I’ve experienced. So, I’ll just write it off as a bad moment at 4 in the morning.

Well, the currencies certainly look quite different this morning from where they were yesterday morning at this time. In case you missed the brouhaha in the currencies yesterday, the euro gained nearly 2 full cents at one point, so did the Swiss franc, and the euro alternatives of Norway and Sweden also saw nice gains in their respective currencies. So, what goosed them like that, you might be asking? Ahhh, grasshopper, that is what we come to the Pfennig for, some answers, and not soul searching questions!

Did they, or didn’t they? So, yesterday morning, I told you that Greek PM Tsipras was going around telling everyone that he had an agreement for loans from the Eurozone/ IMF creditors that 95% of Greeks would like. And right after I sent the Pfennig out, the WSJ sent out an email saying that “Greece’s creditors reach consensus on proposal to Athens.” So, I went out of my office to the trading desk, to make sure everyone had seen the news and the reaction of the euro, which gained nearly 2 full cents right out of the blocks after the WSJ email. Not everyone had seen the move or the article. But while we were talking about how the euro was reacting so favorably, a German leader, made a statement on the Bloomberg, that there was no deal, and that the two parties were still too far apart. What the heck is going on here? The euro immediately lost ½-cent of its gains, but then settled in with a good strong entry into the 1.11 handle.

As the day went along, we saw more statements about a proposal and then contra statements about there not being one in place. We all did have a laugh when I said that if there was a proposal, that the Greeks still had to vote on it, and then Dane said, “wouldn’t it be like the Greeks to have a proposal and then have them vote it down”? Not that voting it down would be funny, but the idea would be funny. So, what’s the skinny this morning? Well, from what I can see so far, is that Tsipras was jumping the gun once again, but apparently they are so close to an agreement that they are within spittin’ distance. And one thing that Tsipras said that I thought was a good first pitch strike was that his “proposal would end the question of Grexit”.

So, this morning, there seems to be some profit taking going on in the euro and other currencies that soared higher yesterday. But beyond that, the whole Broad Based dollar rally from the past week, is a thing of the past, once again.

This morning, we have the European Central Bank (ECB) meeting, which is strange for them, given that usually their meetings are held on Thursdays. But they’re meeting nonetheless. I don’t expect anything from the ECB at this meeting, basically they are on cruise control, as the Eurozone economy heals. There was more evidence of the Eurozone economy healing this morning, Retail Sales for April grew at a faster pace than forecast, printing at 0.7% VS 0.6% consensus. The Unemployment rate for the Eurozone dropped to 11.1% from 11.3%, (see, they don’t use hedonic adjustment to count their unemployed, it is what is is!) And then we also saw the PMI’s (manufacturing indexes) from two of the laggard Eurozone members, Italy and Spain, and.. Drum roll please. Both remain above 50, and Spain manufacturing index reached its highest level since April 2007! So, the healing is going fine, and therefore the ECB, and it’s President, Mario Draghi, should be quite pleased, and should be in a the kind of mood that just leaves things alone! Let the economy heal on its own pace, DO NOT think that it needs goosed, like every other Central Banker around the world would do!

The Chinese renminbi was allowed to appreciate last night, as the Peoples Bank of China (PBOC) gets back to the window dressing they’ve been applying to the renminbi / yuan as the PBOC prepares for the IMF inspection. You know, this past weekend, I submitted an article for the Sunday Pfennig, regarding the Chinese plans to remove the dollar as the reserve currency. There were quite a few naysayers that let me know that I was wrong. And that’s OK. But they all had one thing in common, they were talking about right now. I was talking about 5 years from now. Yes, you don’t need to tell me that China’s bond market isn’t large enough right now, but will it be in 5 years? Look at the changes and how quickly China has pushed them on the markets in just the past couple of years? The stock market was opened up to foreigners, the bond market was just opened up. Look, we won’t know who’s right or wrong for 5 years, maybe sooner, but, until then, I’ll be sitting and watching the moves, and with each one, I’ll put another notch on the wall.

Speaking of my Sunday Pfennig last week, The guys over at the 5 Minute Forecast (The 5) picked up a lot of it for their issue yesterday. I love it when I see my name up in lights! I loved the map they included in their letter that showed all the countries with currency swap agreements with China, that no longer require dollars to be in the terms of trade. As Dave Gonigam at The 5 said, “It’s one thing to say the world is slowly abandoning the U.S. dollar. It’s another thing to grasp it virtually.” So, I guess you’ll have to take my word on it, since I don’t have that ability to print that map here. Or. better yet! Go sign up for an Agora publication and then get The 5!

In Australia last night the Aussie 1st QTR GDP print beat the expectations of a 0.7% increase by printing at 0.9% increase over the last quarter. I think the thing to take away from this report is the fact that we all know that mining and resources have been the suppliers of GDP growth for years in Australia, but we also know that mining and resources have faltered in the past year, with the economic slowdown of China, so this report tells me that Australia found new sectors with growth in the 1st QTR. That’s a good thing folks! The Aussie dollar (A$) is flat today, after polishing up their best performer trophy from the night before.

In Canada, the April Trade Balance printed, and it showed some improvement in the previous C$ 3 Billion Deficit, printing at $1.9 Billion Deficit. That will go a long way toward improving the GDP of Canada in the second quarter. But, it will only go so far as the next print for May, so therefore the Canadian dollar / loonie is basically flat this morning.

The U.S. Data Cupboard wasn’t so much of a mixed-bag-o-results yesterday, printing bad data only instead. So, let’s start with Factory Orders for April. And here we see the 2nd QTR starting off in the negative, and Factory Orders printed -0.4%… then we had the ISM New York (manufacturing index for the region) and here we saw a HUGE drop in the index number from 58.1 to 54. Economic Optimism, as measured by Investors Business Daily and TechnoMetrica Market Intelligence fell from an index of 49.7 to 48.1.. None of this was good, or gave us any indication that the 2nd QTR was going to be better than the 1st QTR for economic growth. But as I’ve been saying all along, it’s not just “transitory”.

But something got under the skin of the U.S. Treasury /bonds traders. The U.S. Treasury 10-year yield, kept pushing higher yesterday, and ended the day adding 6 Basis Points, which is a strong move in this market. This morning, the 10-year yield is closing in on 2.30% It started yesterday at 2.21%.. I haven’t seen anything from anyone telling me what is going on here, except a blip on Bloomberg talking about European bonds rising, and taking Treasuries along for the ride. Hmmm, I thought it was supposed to be the other way around. Another chink in the armor?

Yesterday, in the Daily Reckoning/ DR www.dailyreckoning.com They highlighted a graph of Final Sales Annual Growth Rates. I have to say that I was impressed with it, so I’ll try to explain it to you.. . First of all let me set this up for you. Final sales to domestic purchasers is GDP minus net exports and inventory investment. It measures demand for goods and services from US households, businesses and government, regardless of whether those goods and services are imported or domestically produced. GDP, by contrast, measures demand for US-produced goods and services, regardless of whether that demand is from foreigners or US residents.

So, in my mind, and that of many right-thinking economists (I know, I know that reduces the numbers! HA!) Final Sales are a better gauge of the U.S. economy. So, let’s take a look at the numbers. for the period of 1957-1964 Final Sales were 3.8%… Pretty steady Eddie, eh? From 1990-1997 they were 3%… Uh-Oh, seems like we’re slipping. 2001-2008 another slip to 2.2%, and now from 2007 to 2015, we’ve really only seen the economy grow at 1%… Now that sounds about right to me. From now on, it’s Final Sales data for this guy!

The U.S. Data Cupboard this morning, as the ADP Employment Change, which is supposed to be an indication of what the BLS Jobs Jamboree will have on Friday this week. But normally, that doesn’t play out, since the BLS plays games with the jobs numbers. For instance, last month the ADP said job growth was 169,000. But the BLS said it was 282,000. But then the BLS did add out of thin air I might add, 213,000 jobs to the surveys. So, somewhere between 69,000 and 169,000 was the real job growth last month. So, anyway, the ADP today is expected to show 200,000 jobs created in May. We’ll also see the Trade Deficit for April, which should show an improvement from the $51.4 Billion March Deficit, and then this afternoon the Fed will print their Beige Book, as if anyone really cares any longer about that!

Gold is flat this morning.. I was surprised that I didn’t get a rise out of readers yesterday regarding the stuff about the Texas Gold Depository. But even more surprising was the fact that Gold itself couldn’t find an ounce of wind for its sails. But, oh well, we carry on despite the shortcomings of the markets! HA! So. did you hear about the mining Co. that wrote a letter to the CFTC (commodities, futures Trading Commission) bringing the price manipulation in Silver to their attention? The mining company is First Majestic Silver. They got Ted Butler (no known relation) the Silver guru, to write the letter for them, so you can be sure that he had nothing but facts in the letter. Kudos to this mining Co. for doing this! Of course the CFTC already did their own investigation into this allegation of Silver price manipulation a couple of years ago, and told us that they found nothing. I would have to think that they were looking for love in all the wrong places! I doubt the CFTC will do anything about this, but now that the miners are taking notice you have to wonder what comes next for them? A strike? A Shutdown? I hope it doesn’t come to that!

To recap. The Broad based dollar rally ended yesterday, and while most the currencies are either flat or down a bit today, as they give back some profits, the currency landscape looks much different today.. Greek PM and the WSJ were touting an agreement yesterday between the creditors and Greece, but that failed to materialize once again, but they must be close, because the euro has taken to the 1.11 handle nicely. The ECB meets today, and they should be on cruise control, as the Eurozone economy continues to heal, as evidenced by the strong print of Retail Sales, and the PMI’s from Spain and Italy. The U.S. economic data was awful yesterday, and lead to some of the currency gains. Today’s ADP report is the highlight of the day’s data prints.

For What It’s Worth. Later this week, actually on Friday, there will be an OPEC meeting. the U.S. is not invited to this meeting. Usually, I don’t give two hoots about OPEC meetings, because these guys caused me much pain in the 70’s and early 80’s and that’s all I’m saying about that. But, this OPEC meeting might be different, in that there are rumors going around that Saudi Arabia is going to spring a surprise at the meeting that could spell trouble for the dollar. Now I don’t usually see the worth in talking about this stuff, unless it has a real “conspiracy angle to it” and then I have to keep that on the Butler Patio, for I’ve been forbidden to talk about Conspiracy theories any longer in the Pfennig. I know, I know, it’s “my letter” I should be able to say what I want to say, right? Well, not so fast there. The letter has a sponsor. And that sponsor gets to make the rules. But meanwhile back at the ranch, I want to point out that this rumor might have smoke. I don’t believe that there’s much love that remains between the U.S. and Saudi Arabia, right now. So, there’s the smoke.. Now we’ll have to wait-n-see if there’s a fire.

Chuck again. Actually, I never left you today! So, I wonder, don’t you? About what it could be that is rumored to be bad for the dollar? And then it could end up being nothing, which is probably the case, but in just in case there was something, you can say you read about it here first! HA!

Currencies today 6/3/15. American Style: A$ .7770, kiwi .7140, C$ .8040, euro 1.1120, sterling 1.5285, Swiss $1.0665, . European Style: rand 12.2575, krone 7.8435, SEK 8.4465, forint 280.35, zloty 3.7120, koruna 24.6885, RUB 53.40, yen 124.40, sing 1.3485, HKD 7.7540, INR 63.90, China 6.1176, pesos 15.46, BRL 3.1395, Dollar Index 96.20, Oil $59.81, 10-year 2.27%, Silver $16.71, Platinum $1,114.70, Palladium $764.97, and Gold. $1,192.45

That’s it for today. My wife just sent me a link to a St. Louis Business Journal report of the most influential Women in St. Louis Business and our old neighbor and good friend, Lisa Yanker is on the list! WOW! Lisa is one of the sweetest people on earth, and she is quite successful at IBM. Congrats Lisa! Make sure you tune in to tomorrow’s Pfennig, same bat time, same bat channel, as I’ll have something on the missing audits at Ft. Knox. Cardinals turn the tables after losing 1-0, they win last night 1-0. Good pitching will defeat good hitting is the old baseball adage, but this is ridiculous! I was really dragging the line last night, but seem to be rested and ready to go today. The cellulitis is attempting to comeback in my leg, as the pains increase. I’ll have to get back on antibiotics to combat this strange infection. But no worries, I’m on top of it! Alex got a stationary bike delivered to the house last night, for his training for the ½ Ironman he’ll be a part of in August. It was his birthday present, early that is, as his birthday isn’t until the end of the month, when he’ll turn 20! That means it was 17 years ago, that I got to spend days with him, as I was “retired” for a while, and he would sit on my lap as I wrote the Pfennig, and contribute to the letter with: ))&*$NG)09#E(()_ great stuff I would tell him, the readers are going to love it! And he would giggle with that big smile. So where were you 17 years ago? Think back, and have fun doing it! And with that, I’ll get out of your hair for today. I hope you have a Wonderful Wednesday!

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