Japan Turns To QE Once Again!
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EverBank World Markets

A Pfennig For Your Thoughts

April 27, 2012

In This Issue.

* Currencies trade in tight range..

* Gold trades up $13.

* Swedish Retail Sales beat expectations.

* A$ back on terra firma.

And, Now, Today's Pfennig For Your Thoughts!

Japan Turns To QE Once Again!

Good day. And a Happy Friday to one and all! I'm here! I made it to my destination. but not without some fun. NOT! I was molested at the airport. not just patted down, but in most states, what they did is illegal! HA! I just couldn't figure out why they had a cigarette when they were finished! HAHAHA! No biggie. it is what it is. stupidity, yes. an invasion of my personal being, yes. but is done, and no one was injured.

OK. it's always something interesting with me, eh? South Florida is experiencing San Diego-like weather, and that's just fine with me! I always dreamed of retiring in San Diego, but reality of the cost there finally hit me like a brick bat.

Speaking of retiring. Quantitative Easing (QE) in Japan has decided not to retire. Yes, the Bank of Japan, with instructions from the Japanese Finance Ministry, announced that they would increase their purchases of Japanese Gov't bonds. You know, they decided to do this because their multiple implementations of QE, going back 20 years, have all worked so well! NOT!

We all hear the party line that Central Banks do this to "stimulate growth". and we know that it "kind-of" works. but for only so long. then you need to do more, right Big Ben Bernanke?

The yen weakened a bit, but in real life, most of the pricing of additional QE was already in the yen. because I told you it would happen a few days ago. and when I write something the markets listen. HAHAHAHAHAHAHA! Yeah, right, my grandkids don't listen to me, I think I should start with them before I take on the markets!

I checked the currencies when I arrived yesterday and then again last night. they seem to be trapped in a very tight trading range the past few days. Not that I have a problem with that, as a reduction of volatility for a few days is fine with me! The euro is a tad weaker this morning after S&P downgraded Spain's debt rating two notches. But again, a day late and a dollar short, as my dad used to say, for these ratings agencies.

Well the markets are knocking on the Swiss National Bank's (SNB) door again, and asking them if anyone is home. Because if they are, they need to know that the markets are getting ready to take out the floor on the cross to the euro that they set last Sept at 1.20. I see it trading at 1.2012 right now. so, be careful here folks. going into a weekend is a very good time for a Central Bank to pull some shenanigans. and don't forget what I told you a few weeks ago.

The SNB has been making noise that they would like to see the cross to the euro slide to 1.35 or 1.40. That would be a HUGE hit to the franc both against the euro and the dollar, as the cross trades are all tied together.

As tradition dictates. when I travel, and pass through the St. Louis airport, I grab the latest Economist magazine to read on the plane. I always figure I can look like an egghead while people around me read People, and Us. and so on. But in reality, those people don't care! Ok, Chuck get to what you were going to say about the Economist article you read.

Oh! OK. the article was about how lending around the world, is coming home. I lot of that came about because of the financial meltdown a few years ago. I mean how ridiculous was that to find out that German Banks held U.S. subprime mortgages? But it goes further than that. and the problem with lending coming home is that the Emerging Markets get left out in the cold. So, look for Emerging Market growth to slow down, folks.

Gold gained almost $13 yesterday. as investors are beginning to see what Central Banks around the world are doing to their own currencies.

In China overnight. Chinese Premier Wen Jiabao is doing what he can to bring new energy to his campaign to reform the economy by rooting out corruption and moving the nation in the direction of Western-style markets. Wen's aggressive public statements in support of reform, backed by state-owned media, demonstrate that he and other reformers are in clear control of the Community Party, after the ouster of longtime rival Bo Xilai. - Washington Post.

And then you have our U.S. Treasury Sec. Tim Geithner, heading to China once again to encourage the Chinese to continue with their financial reform. But Wen Jiabao beat him to the punch with his comments last night. So why go, Tim? And by the way, how many times have you traveled to China in the past 4 years? And have they done anything that you've asked them to do? No, they smile at you, and when you leave, they go back to what they were doing all along.

And you know. I have this feeling that much like the fact that for years the U.S. armed countries, and then later had to fight them. the U.S. keeps pushing China to be more open, and one day they'll be wishing they had just let China go along on their super slow pace.

OK. The Risk On trading that we've seen the past few days, is taking a hit this morning, after the S&P announcement on Spain. Yesterday's U.S. data didn't exactly give the risk takers a warm and fuzzy either. Weekly Jobless claims remained high at 387,000 down 1,000 from last week's revised 388,000.

At least the U.S. economy has Big Ben Bernanke in its corner. Did you hear what Big Ben had to say the other day about the upcoming tax cuts expiration? He was basically telling the President to not push us off the "fiscal cliff". let's listen in. "If no action were to be taken by the fiscal authorities, the size of the fiscal cliff is such that there's absolutely no chance that the Federal Reserve could or would have any ability to offset that effect on the economy" - Ben Bernanke

But Ben. how will we pay for those tax breaks? And weren't you recently on your horse about the exploding debt?

In Sweden this morning, Swedish Retail Sales beat expectations with March Retail Sales printing at a .2% increase, VS the forecasts for a -.3% decline. So a very good outcome there, but will it be enough to satisfy the folks at the Riksbank? (Sweden's Central Bank) Recently, the folks at the Riksbank have been sounding a bit dovish, and the markets were of mind that a rate cut was coming. But then this report printed. Hmmm. tough call there!

The Aussie dollar (A$) is back to $104 this morning. the A$ saw some slippage from the S&P announcement, but for the most part, the A$ is on terra firma this morning. going into the weekend, which is better than where it was last week at this time!

Then There Was This. from CNBC. (not that I watch that channel, you just never know where you're going to find stories.) "Big jumps in foreclosure activity in cities like Pittsburgh, Indianapolis, New York and Raleigh pushed the national numbers higher in the first three months of this year, according to a new report from RealtyTrac, an online foreclosure sales and data company.

A majority of U.S. housing markets posted a quarterly increase in foreclosure activity, although the numbers are still down from a year ago.

"First quarter metro foreclosure trends were a mixed bag," said Brandon Moore, chief executive officer of RealtyTrac, adding that the increase in the number of cities seeing a quarterly jump is, "an early sign that long-dormant foreclosures are coming out of hibernation in many local markets."

Chuck again. the favorite thing that my two grandsons, Everett and Braden like say is: Uh-Oh. and that is applicable here, eh?

To recap. Japan has gone back to the QE table, because it has worked so well for them for the past 20 years! NOT! S&P downgraded Spain's debt rating two notches, and that news has turned the Risk On trading that we've seen for the past few days around. But still we're trading in very tight ranges. which is OK with Chuck, for now at least!

Currencies today 4/27/12. American Style: A$ $104.25, kiwi .8170, C$ $1.0170, euro 1.3225, sterling 1.6225, Swiss $1.1010, . European Style: rand 7.76, krone 5.7275, SEK 6.7275, forint 217.25, zloty 3.16, koruna 18.7860, RUB 29.39, yen 80.70, sing 1.2395, HKD 7.7590, INR 52.56, China 6.2830, pesos 13.16, BRL 1.8850, Dollar Index 78.92, Oil $104.20, 10-year 1.93%, Silver $31.07, and Gold. $1,654.20

That's it for today. writing from the road is always interesting, especially when you find out that a program you use to access the markets needs a new plug-in, and now you have to get the IT involved to download it, because they don't trust me to do that. so. I do it the old fashioned way. UGH! Good luck to our Blues who begin the second round of the NHL Playoffs tomorrow night. The NFL draft held its 1st round last night. Once again, our Rams didn't go for the player I thought would help them the most. And. since their draft choices have pretty much been bad, save a few lucky picks, I think they should have listened to me! HA! There I go again with thinking that people should listen to me! A real treat last night for me, as I got to have dinner with old friends, David Galland and John Mauldin. David can really tell some real-life stories, that awe you. I get to spend today and tomorrow around a lot of very smart people here at the Casey Conference, maybe some of their smarts will rub off on me! I can wish, eh? And with that. I hope you have a Fantastico Friday!

Chuck Butler


EverBank World Markets



Posted 04-27-2012 11:18 AM by Chuck Butler