Good Day. And a Tum Thumpin' Thursday to you! And right out of the starters blocks this morning I want to say HAPPY BIRTHDAY to my longtime friend, and colleague, the big boss, Frank Trotter! It was 1981, when Frank joined Mark Twain Bank as one of their "best and brightest" college grads, and he was brought around to the departments to be introduced.. I remember this like it was yesterday.. He had on an Olive khaki suit (the style back then) with a pink shirt and tie. He looked like something out of GQ. So, we've known each other for 36 years. that's 1/2 of my life! And Frank's appearance hasn't changed the much over the years. I used to joke that only Frank and Paul McCartney never aged! I could go on and on about what a great person Frank is, but I have a financial letter to write, so I had better stop here, for now. More later. Kansas greets me this morning with their song: Song For America.
OK. Well, at first glance of the Dollar Index, one would think, "the dollar is still weaker this morning." But here's where depending on the Dollar Index can get you into trouble. The euro is still trading above 1.0750 and since the euro is an over weighted component of the Dollar Index, it can hide the rot on all the other currencies' vines. OK, so now that we've established the ground rules, I can tell you that while the euro is doing OK this morning, most of the other currencies are not.
The New Zealand dollar / kiwi was the top performer overnight for a while, after their 1st QTR CPI (consumer inflation) report printed a much stronger inflation number, with inflation moving from 1.3% in the previous quarter to 2.2% in the 1st QTR! WOW! I said that kiwi was the top performer overnight for a while, and that was in place until some profit taking came along and brought kiwi back down to earth. Alrighty then, this is all falling into place. What am I talking about? Well, for those of you who read the Sunday Pfennig a couple of weeks ago, when I highlighted kiwi, know what I'm talking about, but for those of you who skipped class that day,
So, here's how I see this all unfolding in New Zealand. with this HUGE jump in inflation, the Reserve Bank of New Zealand (RBNZ) will have to remove their easing bias at their meeting next month, and that sets in motion the eventual return to a rate hike cycle that I talk about in the Sunday Pfennig feature article. I've also talked about it here too, that investors normally don't get a chance to participate when a sea change occurs until the move is half-over. And the markets could be getting the hint now regarding what I'm talking about, and soon it could be too late and the rate hike campers will be all over kiwi, and the markets will begin to drive the price based on rate hike presumptions. So, clear as mud? I hope this all makes sense, and of course it's my opinion and I could be wrong.
The Biggest mover in the past 24 hours is the price of Oil, which plummeted from the $52 handle to the $50 handle, and took the Petrol Currencies , led by the Russian ruble, along for the ride on the slippery slope. It's that old problem I've talked to you about from time to time regarding the price of Oil and the U.S. shale producers. the price of Oil rises, from the production cuts by the OPEC nations, but the rising price gives the U.S. producers life, and they begin to pump like crazy, and the next thing you know, you have oversupplies of crude, and when that happens the price of Oil slides, and we start all over again.
The Russian ruble has become the proxy for the Oil price whether it wants to be or not! And yesterday, I told you that the ruble was sitting bang on 56. Well, this morning its weakened, due to the plummeting Oil price, and is sitting at 56.25. Late last year, I featured the Russian ruble in a Sunday pfennig, and I talked about the extraordinarily high interest rates in Russia, and how they might be there to help protect one's investment should the currency weaken.. Of course higher interest rates generally reflect higher risk (that is when everyone else's interest rates are very low!) so, as always you are will have to speculate whether the expected returns (interest) will offset the downside risk, which in the case of the rube would come in currency losses. Or, if the currency gains, the interest is added to those principal gains.
Well, I have my blood pressure sufficiently rising this morning, and my friend, Ed Steer, of sent me a note last night, with the graph from world gold charts, that shows the 8 largest institutions (bullion dealers) and their short positions. OMG! I just don't get this folks!
Now, some people might say, Chuck, you are so wrong about Gold & Silver being held down in price by the paper trades that are allowed to accumulate to the size of more metal being short on paper, than is above ground. And I may be wrong. But someone would have to prove to me what those short positions are all about. My friend, Ed Steer, also sent me the latest graphs on the number of day of production it would take to cover the short positions. For Silver, it's 220 days of production to cover the shorts of the 8 largest institutions with short positions, and 160 days for the largest 4! And for Gold it's 70 days of production to cover the short positions of the largest 8 and 50 days to cover the 4 largest institutions with short positions.
OK, I'll get down from my soapbox now, and try to concentrate on something else. Oh, I know! It's Frank Trotter's Birthday today! How about that for turning my frown upside down? HA! Oh, one more thing before I go on. Ed Steer's letter is a must read for Gold & Silver investors, it does cost, but is worth every penny, in my opinion that is!
I met Ed in New Orleans many moons ago, at that time he was writing his letter for my old colleague, and marketing genius, David Galland. And I've read his letter daily ever since!
Speaking of Gold. The shiny metal lost $8.90 yesterday to close at $1,280.30, and is down a few cents in the early trading this morning. The Geopolitical Tensions (GT) have backed off, and that's quite evident by viewing yen which is weaker this morning, Gold we just talked about, and the 10-year Treasury yield, which bumped higher yesterday a few basis points. Gold at one point of the day yesterday had fallen further to $1,275, before mounting a rally at the end of the day.
The British pound sterling/ pound, is finding life above 1.28 to be fleeting. as the currency is finding it difficult to maintain that figure this morning. My friend, Dave Gonigam, from the 5 Minute Forecast, highlighted my comments about the UK PM's decision to call for a snap election. Yeah, she may know something that I don't, that's very possible, in fact it's probable! But, I just continue to wonder how many voters that voted for BREXIT last June, have now had that buyers' remorse feeling of, "What on earth did I do?" So, in the end, all I'm actually saying is that this is a risk that didn't need to be taken. Sure great outcomes can arise from taking risk, but then failures also take place.
The U.S. Data Cupboard was basically dry yesterday, and will only have the Leading Indicators Index to print today as a the print that means anything. Tomorrow is the same thing, rinse, repeat, rinse and repeat. So, I might as well move along here, and head to the Big Finish for today.
To recap. While the Dollar Index is still below 100, the dollar is actually doing better today VS most currencies. Kiwi topped the list of strong performances for a while last night, but then saw profit taking wipe out the gains, that were made when 1st QTR CPI jumped from 1.3% to 2.2% quarter to quarter, and Chuck sings a song about kiwi that he first sang in the Sunday Pfennig a few weeks ago. Chuck loses his cool when he sees the short positions of the 8 largest institutions (bullion dealers) in Gold and Silver, you won't want to have missed that!
Or, here's your snippet: "Usually a French general election doesn't present a make-it or break-it moment for the entire Eurozone, but this time it's different. After a race full of surprises, a surge in the polls by far-left, Eurosceptic Jean-Luc Melenchon has again reminded investors of the sweeping antiestablishment sentiment grabbing Europe and the U.S. at the moment.
Investors (and French voters) are getting worried about a 'nightmare' scenario in which Le Pen faces Mélenchon on 7 May, leaving them with a hard choice between two anti-globalization, anti-EU and pro-Russia candidates," strategists at Citigroup said in a note.
"The French election presents 'volcano' risk, i.e. strong moves are likely across financial markets but risks are very much two-way," they added.
And here are the two-way risks: A win for either Le Pen or Melenchon would spark a selloff in risk assets and drive French and European equities down 5%-10% by the end of June, Citi said. However, if Macron or Fillon secures the presidency, stocks in Europe could see a 10%-20% rally before the end of the year, they said."
Chuck again. All I'll say is that this is a mess! The first runoff will take place this Sunday, so next week we should have a better idea of what's going on there.
Currencies today 4/20/17.American Style: A$ .7515, kiwi .7015, C$ .7413, euro 1.0756, sterling 1.2813, Swiss $.9963, . European Style: rand 13.1870, krone 8.5682, SEK 8.9415, forint 291.32, zloty 3.9660, koruna 25.0190, RUB 56.25, yen 109.06, sing 1.3964, HKD 7.7754, INR 64.60, China 6.8845, peso 18.85, BRL 3.1162, Dollar Index 99.56, Oil $50.92, 10yr 2.23%, Silver $18.17, Platinum $969.43, Palladium $786.91, Gold $1,279.70, and SGE Gold. $1,289.86
That's it today except to say once more. Happy Birthday Frank! Now, today also happens to be one of our colleagues on the World Markets desk, Mike Harrell's birthday too! They share the same date! So Happy Birthday Mike! Well, what a beautiful day it was yesterday, and one of the reasons they should play more day games in baseball! I watched my beloved Cardinals sweep the Pirates, with all three games ending at 2-1. WOW! Our Blues though were unable to complete the sweep of the Wild and were beaten soundly last night 2-0. The great Old Blues player, Bob Plager, said it best, "Boys you don't get any more money for a Game 5, so win tonight".. But it was not to be last night. This worries me a bit. But oh well. The weather is supposed to change and get chilly again this weekend.. UGH! Well, once again, I'm late. The Beatles take us to the finish line today with their song: Get Back. Remember the video of them playing this song from the rooftop of the Abbey Roads studio? Pre tty cool. And with that, I hope you have a Tub Thumpin' Thursday, and Be Good To Yourself!
The Daily Pfennig is written each business day by Chuck Butler and distributed by EverBank World Markets.
The purpose of the Daily Pfennig is not to provide investment advice or to manage your money – THOSE ARE DECISIONS THAT YOU HAVE TO MAKE. If you do hold investments you should conduct your own research and evaluations taking into account other independent sources of information and commentary.
The Daily Pfennig is a general update on the global marketplace, is a commentary on the conduct of fiscal, monetary, and political policy and their collective impact on the currency markets, is the analysis of an individual who has nearly 35 years in the investment business and over 15 years experience in the currency market, is the thoughts of a dyed in the wool Saint Louis Cardinal and Missouri Tiger fan (and sometime Saint Louis Ram’s and Blue’s fan), and is a publication that is designed to provide you with some information, some levity, and some analysis to assist your thinking about currencies and their place in an investment portfolio.
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