Will Earnings Be Hurt By Stronger Dollar?

* FOMC Meeting Minutes print today.
* Currencies trade in range overnight.
* Except A$’s and rubles who soar!.
* Conspiracy VS whispering campaign .

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

Good day.. And a Wonderful Wednesday to you! Man did we have a scary storm here yesterday morning. As it does in the Midwest at times, the sky turned black as night, when it should have been bright with the morning sun, the rain came down in buckets, along with hail that looked like snow when it was all piled up. I got home to see the little creek that runs at the back of our yard, was out of its bed, and climbing ever so close to some major landscaping we had done in the past couple of years! But it calmed down. More storms are expected today, but they’ll have to carry a wallop to match the storm yesterday! Uriah Heep greets me this morning with their song: Stealin’.

Well there’s been no stormy weather for the dollar since Friday’s assault on the green/peachback after the disappointing jobs report. Stormy weather, my dad used to walk around singing that song that was originally from Billie Holliday, but I do believe that Lena Horne made it really popular in the day. Of course I wasn’t around then, and I could go to Wikipedia and look it up, but would rather attempt to have a go at it with my memory of what my dad told me, when I asked him about the song.

The dollar is a bit weaker across the board this morning, but no great shakes, and the currencies are range trading at this point of the day. This could end up being a very interesting day, in that we have the Fed’s FOMC Meeting Minutes from their March meeting to go through, but also something that seems to be flying under the radar right now, and that is the beginning of the earnings season reports, with Alcoa batting leadoff after the markets close today. The reason I’m talking about earnings results is this. I think we need to watch for companies that do business overseas to see how the stronger dollar has affected their earnings. I think that any indication by more than one giant company that the stronger dollar has affected their earnings negatively, will end up being negative for the dollar. Just a thought.

Yesterday morning I told you how the Aussie dollar (A$) was rallying after the Reserve Bank of Australia (RBA) left rates unchanged the night before, but then the rally was cut in half by the U.S. traders when their turn came around. Well, the overnight sessions have brought about another rally in the A$. If the U.S. Traders take another pound of flesh from the A$’s gains, then we will know that they truly don’t believe in the A$ or the RBA’s chances of keeping rates unchanged at the next meeting.

So, it’s a nice sized rally for the A$ this morning, let’s see how long it lasts. The other currency that has really pushed the currency appreciation envelope to the outer edges this morning is the Russian ruble. I find this strong positive move in the ruble to be interesting, as it is happening before Russia gets ready to hold its biggest debt offering in more than a year today. The 2% move in the ruble overnight represents the largest one-day positive move since last November. Like I said the other day, the ruble still has a long way to go to get back to the levels it was trading at before the sanctions were placed on Russia last year. But just because it has a long way to go, doesn’t mean that it will retrace those losses.

The Bank of Japan (BOJ) met last night, and I guess they played spades, or hearts, or battleship, because they certainly didn’t announce anything worthwhile listening to! But that’s the state of things in Japan these days. Maybe the BOJ has run out of medicine to apply to the wounds of the economy. I doubt it. In fact, I was thinking that the BOJ might try to surprise the markets with an announcement of more QE (bond buying). But they didn’t, and the yen rallied about ½ figure. But, mark my words on this. I feel as though the BOJ will revisit QE again sooner than later. Just like I believe that the U.S. Fed will do the same.

Speaking of the Fed. Today, we get to see the color of their latest FOMC Meeting Minutes (FOMCMM) and the whispering campaign that I started that says the Fed will not hike rates in June is beginning to gain followers, and so we will look at the Minutes to see if any “dovish” comments were made at the last meeting.

Well. As regular Pfennig Readers, you are well aware that I think that I have called the Fed’s Bluff, on a rate hike, and I did so long before everyone started jumping on my bandwagon. I find it very interesting that now that the economic data is beginning to pile up on the bad side of the ledger, that more and more analysts and economists are sounding like Chuck. Well, by that I mean they too are calling the Fed’s bluff on a rate hike in June. I don’t mean that they “sound like me”, for you never know what I’m going to sound like day to day, given the effects of medicine on my vocal chords.

But yesterday, I was reading friend, and really smart guy, Dr. Steve Sjuggerud’s Daily Wealth newsletter and in it he illustrates a chart that he says signals to us that the message from the chart is that an interest rate hike is always “just around the corner”. He says that in 2009 a rate hike was expected in 6 months, in 2010, it was expected in 10 months, in 2011, it got pushed out to 15 months, 2012, it got pushed out even further to 28 months, 2013, the expectations came back down to 19 months, and 2014 to 12 months, and as we started 2015, it was 8 months. This data was based on real-money trading in Fed Funds Futures contracts. And to take the point further, now according to Bloomberg, “traders are now expecting the Fed to raise rates later than ever before.”

But what happened to those expectations going back to 2010? They were forgotten about, except by smart guys like Steve that know how to illustrate what they talk about. But I believe that this time, we could very well see the expectation not be forgotten about, and instead come back to haunt the Fed’s credibility, for this time they led the markets to believe that June was the bogey for a rate hike.

And don’t forget the U.S. Debt Clock. remember this? I used to put the link in the Pfennig every Friday, but then it seemed to be too repetitious so I stopped. But here it is here for those of you keeping score at home. click here: http://www.usdebtclock.org/index.html

When going there, you’ll see that the current U.S. National Debt is over $18 Trillion. And even more scary is the Unfunded Liabilities are $95.7 Trillion. And if you want to really go to the dark side, Professor Lawrence Kotlikoff says that the Unfunded Liabilities are really more than $200 Trillion! And all the while, everyone in Washington D.C., and the Fed, and the Treasury, and anywhere Gov’t officials hang out, just go about doing what the old 60’s song said: Tradin’ my time for the pay I get, Livin’ on money that I ain’t made yet. And yet, there are still those that believe the dollar can go on a multi-year rally.

The euro is stronger this morning, and has ratcheted higher from the time I began to write this morning to now when I’m ready to talk about it. Funny how that worked out, eh? Well, tomorrow is the “D-Day” for Greece to pay back the IRS. The IRS fully believes that Greece will make the payment on time. Yeah, and Greece is: Tradin’ my time for the pay I get, and Livin’ on money that it ain’t made yet. Same as the U.S..

Gold is flat this morning, but has been up a couple of shekels at times in the morning hours. I saw on Google+, gold researcher extraordinaire, Koos Jansen, talking about his thoughts on the Gold price, so naturally I had to drill down to the story on www.bullionstar.com to find this snippet from Koos Jansen. “My point being, if central banks suppress the price of gold, this can only be done if physical gold is supplied to the market. So the question is, who is currently selling gold to China? (Or in the free market since the London Gold Pool collapsed in 1968.)

China is the largest miner of gold at 450 tonnes a year, though to satisfy domestic demand additional gold is imported; in 2013 Chinese net import exploded to 1,507 tonnes, my estimate for 2014 is at least 1,250 tonnes and year to date China has imported well over 400 tonnes. Is this sold by institutional investors in London (the LBMA system) or by central banks? Eventually time will tell. In the meantime I will continue to research how much gold is flowing to Asia and if there is any gold left in Fort Knox (read this and this post for my Fort Knox research).”

Chuck again. so basically what he’s saying is that the price suppression in Gold needs physical Gold to be available, and that the supply of physical Gold might be running out.

The U.S. Data Cupboard is still bare, except the FOMCMM today, and I’ve already covered that. Yesterday saw the Consumer Credit (read debt) jump much higher than expected printing at $15.5 Billion for Feb, VS $12.5 Billion expected, and a downward revised $10.8 Billion in January. The debt increase was not on credit cards though. It was mainly from auto and student loans, which saw the biggest monthly gain since July 2011! Now, we all know that Consumer spending is shrinking, and the decline in credit card borrowing of $3.7 Billion truly illustrates that. While I find this refreshing from a consumer standpoint, I’m sure the Fed and the Paul Krugmans of the world are having conniption fits that consumers aren’t doing their part to revive the economy.

For What it’s Worth. Well. I’m no longer allowed to talk about conspiracy stuff. But if someone else is talking about it. HA! No that’s not allowed either! So, when I tell you that there’s a whispering campaign going around talking about a Global financial reset, that’s all it is a whispering campaign, not a conspiracy theory! Now, I wouldn’t just shoot from the hip and talk about this stuff from one entry on the internet! No, in fact, the well-known and revered author, James Rickards says that the financial system will eventually collapse due to the weight of debt, and then all the countries of the world have to come together to redo the global system, and when they do, they’ll all have to show how much Gold they own, for he who owns the Gold makes the rules, right? So, you can see that it’s more than just a whispering campaign.

Now me on the other hand, I would like to think that this “financial system collapse” doesn’t come about, but we come to the edge of the cliff on it, and realize then that we’ve gone too far, and make promises to change the error of our ways. Either way, folks, it will behoove one to at least have a couple of Gold coins to rub together. Of course that’s just my opinion and I could be wrong!

To recap. The data and news is slim pickings this morning, but the dollar is broadly weaker, but the trading ranges are small, except in Aussie dollars and Russian rubles, who both are putting in very impressive rallies. Gold is flat, and once again the question of supply is brought forth by Koos Jansen. More and more economists are jumping on Chuck’s bandwagon that carries his call that the Fed won’t hike rates in June. And the U.S. stocks earning season begins this afternoon, look for U.S. global companies complaining about the stronger dollar hurting their earnings, Chuck feels that would be negative for the dollar..

Currencies today 4/8/15. American Style: A$ .7705, kiwi .7575, C$ .8045, euro 1.0845, sterling 1.4930, Swiss $1.0390, . European Style: rand 11.7995, krone 8.0045, SEK 8.6310, forint 273.05, zloty 3.1090, koruna 25.2260, RUB 53.83, yen 119.90, sing 1.3540, HKD 7.7505, INR 62.24, China 6.1345, pesos 11.86, BRL 3.1085, Dollar Index 97.50, Oil $52.80, 10-year 1.88%, Silver $16.83, Platinum $1,174.50, Palladium $769.35, and Gold. $1,207.18

That’s it for today. Well, our Blues got blanked last night, but had a goal taken away from them by a huge mistake call by a referee. Not good to not score on your home ice in front of a sellout crowd. Well, as long as that doesn’t happen in the playoffs! Card and Cubs were rained out in Chicago, and play a day game today, the way baseball should be played. during the day! It’s been a shaky morning so far for me, but I’m here, so I make the best of it! I asked the other day, “What did the Cardinals do to tick off the MLB that they get stuck playing a Sunday Night game in Chicago to start the season?” Not that there’s anything wrong with Chicago, but it was below 50 degrees that night! I know, I know, I’m just being stubborn about this stuff, but now that I’m officially “old” I can do that! HA! Hopefully, I can get more respect now. (as if!) Man, I almost slept the day away yesterday after getting home. First I had to go vote, and then it was off to napville! Going to vote, I was reminded of how in 1997, I lost a reelection by 1 vote. That’s right, 1 and one is the loneliest number you’ll ever know, vote. Well. all things happen for a reason. Just like me telling you that it’s time to go, and hope you have a Wonderful Wednesday!

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