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In This Issue.

* Chuck goes off the grid for 4 hours.

* Euros, A$'s, kiwi lead most currencies weaker.

* U.K. inflation ticks up, but remains below 2%

* Chuck talks FACTA.

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

A Dose Of News That's Too Strong .

Good Day! . And a Tom Terrific Tuesday to you! Man, talk about getting knocked out, put to sleep, snooze city. I got home yesterday, feeling pretty dragged, sat down ate my lunch, and then dropped off the grid for 4 hours! I find that taking the chemo medicine that I take every day, twice a day, has days when it seems that a particular dose is stronger than another. Which explains why I would drop off the grid for 4 hours. But, I doubt that is what is really happening, for pharmacy stuff is an exact science, right? .

Sort of like days in the currencies and metals. Some doses of news seem to work their way through the system with no hiccups, and then some doses just knock a currency on its butt! And so it is today. The Aussie dollar (A$) got some news overnight that knocked the A$ off the grid, if you will. And the euro had to fight off the wolves of June, and the dose of Draghi, and just didn't have the strength to do it. Before we get deep into today, let's review yesterday first, eh?

Well, as I told you yesterday, the currencies and metals had no clear direction to them and probably won't until Thursday rolls around, and that's exactly what happened yesterday. The euro pushed higher, but then fell back, same with the Aussie dollar (A$), and the same with Gold. It was Groundhog Day for Gold once again, as we await the news on lifting restrictions on Gold imports for India, from the new Gov't there.

If you read the Pfennig on the Pfennig's website/ blog ( you will notice that we have a reader that comments almost daily, which is welcomed, and he believes that the problems in India are so deep, that the new leader, Modi, will be busy dealing with, instead of relaxing the restrictions on Gold imports. I agree that India's problems run deep, but to get the people on his side, right off the bat, relaxing the Gold imports restrictions would go a long way.

The IMM Futures Positions report printed for last week, and guess what happened to the long euro positions.. Yes, in conjunction with European Central Bank (ECB) President, Draghi, throwing the euro to the wolves, long euro positions dropped by a large amount last week. (Conjunction, junction what's your function?) And long U.S. dollar positions saw their biggest pickup, as 40,000 contracts were added last week. I think this was simply a knee-jerk reaction to the Draghi bus ride, and nothing that will become a trend. For these weekly IMM Futures Positions reports are very volatile. And haven't really shown a true long term trend for anything in some time.

OK. So back to today. Which I would prefer that we just skip. Yes, I'll pack up and go back home right now, if think skipping today would be a good idea. Nah. I knew it, you want the whole story. Well, I don't know if I can give you the "whole story", but at least I can give it the old college try, eh?

One of the few currencies gaining VS the dollar this morning is the British pound sterling / the pound. The pound is getting marked up this morning because April CPI (consumer inflation) popped higher to 1.8% from 1.6% in March. The markets are taking this April CPI print as a trend, and that inflation will continue to move higher, which would bring about a rate hike by the Bank of England (BOE). But, I'm here to have you think about the other side of the coin, and given the BOE's projections for CPI, one would have to think that inflation would remain just below the BOE's target rate of 2%...

The BOE has to be dancing in the streets because inflation remains below 2%, but is not falling.

Remember a couple of weeks ago, when I lamented that the peripheral countries, like Italy and Spain were enjoying borrowing rates (bond yields) at near the same levels of Germany? This was the case before the financial meltdown, and I was concerned that the markets were getting ahead of themselves once again.. Well, yesterday, we saw the peripheral country yields drift wider away from German yields, and I thought, "OK, that's good, as long as they remain low, and borrowing costs don't get out of hand once again. In addition, this should be good for the euro, given rate differentials."

But then last night as I prepared to get situated for the latest episode of 24, I was reading about the stimulus measures that ECB President, Draghi, might implement in June. And one of the measures is a larger bond buying program, which if that program would act like the one here in the U.S. and in Japan over the years, then bond yields will shrink again, to levels that are unwarranted. not fundamentally sound. UGH!

I doubt he'll opt for bond buying, as the Bundesbank has already told him that they will not support a bond buying program. And the last thing that Draghi needs is for the Bundesbank to be in the press dissing his programs.

One of the other few currencies gaining this morning VS the dollar, is the Norwegian krone. In Norway, the latest print of their 1st QTR GDP was bang on the estimates at +.5%.. That should put annual growth for Norway at 2%... Not China-like, but still better than mainland Eurozone. And with that I think we could very well see Norway's Central Bank, the Norges Bank, up the ante next month for their growth forecast. The Norges Bank had not been so kind with their growth forecast previously, so with 3 consecutive quarters of +.5% growth on the books, they have to see that the economy has stabilized, and should gain momentum from here. At least that's what I would tell them, if they listened to me!

The thought that the Norges Bank would revise their growth forecast, has the krone moving higher VS the dollar this morning. Norway's kissin' cousin Sweden, is also seeing some love for the krona this morning, but the krona's gains are tiny.

The Chinese renminbi / yuan saw an appreciation VS the dollar overnight. You know, if you just chart these daily fixings by the People Bank of China (PBOC) you would see what I'm talking about when I say there's no trend here, it's all a game being played by the PBOC. I'm sure they don't see it as a game, but I do. I've explained my thoughts for the PBOC and renminbi / yuan a few times before, so I won't go there again, but just know that this "game" will all end eventually, and the PBOC will get back to the task at hand, which is appreciating the currency VS the dollar. And this is where I have to say.. That's my opinion and I could be wrong.

It was Groundhog Day again for Gold, yesterday. But this morning, there hasn't been a markup of Gold overnight for the first time in what seems like a month of Sundays. Instead, this morning, Gold is flat. And that's not a good sign for the shape of things to come later in the day when the NY price manipulators show up to work. Nothing Can Change the Shape of Things to Come! I betcha that you can't name the band that sang that song (the original here, not the remakes) without going to Google or Bing or another search engine. Are you ready? It's a band called Max Frost & The Troopers. How's that for a one hit wonder band? Yes, they did a lot of songs and albums but this was their only true hit.

See that? Currency, bond, country, economics, personal, sports and music history, all rolled into one letter! What else could you ever ask for? HAHHAHAHAHA!

OK, the hit songs just keep coming for Singapore. Last night, Singapore's 1st QTR GDP was revised upward to 2.3%, from the initial .1%.. Quite the upward revision, eh? And their 4th QTR GDP was also revised upward to 6.9% from 6.1%... Strong manufacturing was the reason for both upward revisions. What's concerning though is the drop from 6.9% to 2.3% quarter to quarter in Singapore. And I think that was expected to happen, given there were some one-offs in the 4th QTR in Singapore. So, the Ministry of Trade and Industry has their growth forecast for 2014 at 2.4%, and that's a good steady & sustainable number for the tiny country. I don't know what's keeping the Sing dollar (S$) stuck in the mud, for this GDP reports makes three consecutive data reports that have painted a beautiful picture for Singapore. It has to be the back and forth game the PBOC is playing with the renminbi / yuan that's responsible for the S$ stuck in the mud. Ain't that a shame? My tears fell like rain.. Ain't that a shame.

And here in the U.S. things remain pretty quiet on the data front. U.S. stocks saw a little upward movement yesterday, but the Dow Jones is still down for the year, and the S&P 500 is only up 1.99%... I'm telling you now, so you can listen to me later, but I don't see how this unwinding of the Bernanke Asset Bubble helps things in this sector. But then, Fed Chair, Janet Yellen has confirmed on more than one occasion that the Fed intends to keep rates near zero for longer than most believe they will.

Which always begs the question with me, of. If the U.S. economy is so strong, why then do we need to keep interest rates near zero? Actually, the Industrial Production, Capacity Utilization and Retail Sales numbers for April that printed last week, tell the story. The economy isn't strong, period. And that's why interest rates remain near zero!

The recovery that wasn't, is what I call this economy. But then I've said it all along, but no one listens to me!

The Brazilian real booked some more gains last week, and then started this week off on the appreciation foot. I get the willies when I talk about reals, because what the Brazilian Gov't, led by current leader, Rousseff, did to the currency a couple of years ago, is still very fresh on my mind. But for now, Brazil has the best rate differential, and a rallying currency. What else is there? (of course assurance that the Gov't won't stick their hands in the cookie jar again would be the thing I would want!)

Before I head to the Big Finish this morning, several dear readers have asked me to comment on the new FACTA law that will go into effect on July 1st. I'll give it the broad strokes treatment, if you will. You know, the saying about doing something to fix one thing and not realizing the damage that unintended consequences have? Well, that's what's going on with FACTA. In its basic form, it was written to catch U.S. citizens that were hiding money overseas from paying taxes on the money. What's it done is place a very heavy burden on Foreign Companies, that they don't think they'll be able to deal with, and instead of making huge changes, they'll most likely just decide to disinvest from U.S. securities, and thus U.S. dollars.

So, as I told one dear reader, Great Idea, Bad Execution. Now U.S. citizens that have foreign bank or securities accounts are being treated like they have the plague.

Now, some gloom and doom writers, seem to think that this will be the end of the dollar. But I don't see it like that. I do see the dollar losing ground because of this law, but the only way the dollar comes to an end is when the U.S. either defaults, or. the dollar loses its petrodollar status. that latter or those two, I discussed at length yesterday.

For What It's Worth. Remember last year, when I told you about how companies were shrinking the size of their offerings and charging the same as before? This is why there wasn't inflation ticking higher and higher. But it's all coming to light now, as reported yesterday.

" Have you noticed that some of your favorite brands are downsizing, giving you less and less while charging you the same price, or even more? Some experts say companies are getting sly in how they do it.

For cereal to cookies, paper towels to peanut butter, you can find it in supermarkets everywhere. Some of the most trusted brands getting smaller, the price tag not so much. It's a very sneaky way to raise the price of a product, said consumer crusader Edgar Dworsky, who runs the website,

One tactic: "the optical illusion" Dworsky showed us two boxes of Apple Jacks side by side. Back in 2008 the product went from 11 ounces to 8.7 ounces, but from the front, the two boxes appeared the same; only when they were turned to the side did it become apparent that one was much narrower.

Then there's the old "hollow the bottom" technique. Here's Skippy peanut butter. The old one was 18 ounces, but now it's only 16.3. How did they do it? They hollowed out the bottom of the container. It looks the same, but when Skippy downsized the product in 2008, they didn't drop the price. The companies divert your attention to "new look" or something else at the top, to take your eyes off the bottom where the size of contents are listed.

When shoppers were let in on the secret, one young mom said, "I feel like I'm constantly buying and buying and buying and it runs out quicker," And another mom said, "it's frustrating beyond".

Chuck again. Yes, these people that are shocked by the discovery, must not have been Pfennig Readers! But I thought this story on was interesting in that it shows that the downsizing has gone viral, every company is doing it. Shoot Rudy, even sandwich shops are doing it, and so on. And they say there's no inflation? What a load of hogwash!

To recap. The no data, low volatility played out yesterday, but overnight we've seen some movement down in currencies like euros and Aussie dollars, and with some currencies moving higher like Norwegian krone, pound sterling, reals and renminbi. Eurozone peripheral countries' yield widen from Germany, which, as long as they remain low is a good thing to Chuck. And British inflation ticks higher but remains below the BOE's target of 2%. Reals give Chuck the flashbacks of the Brazilian Gov't treating the real like a dookie. Chuck gives broad strokes of FACTA, and downsizing is the name of the game.

Currencies today 5/20/14. American Style: A$ .9265, kiwi .8585, C$ .9185, euro 1.3705, sterling 1.6840, Swiss $1.1215, . European Style: rand 10.3490, krone 5.9335, SEK 6.5915, forint 222.60, zloty 3.0560, koruna 20.0420, RUB 34.54, yen 101.35, sing 1.2525, HKD 7.7525, INR 58.65, China 6.1626, pesos 12.92, BRL 2.2060, Dollar Index 80.05, Oil $102.64, 10-year 2.54%, Silver $19.34, Platinum $1,471.25, Palladium $819.00, and Gold. $1,291.45

That's it for today. Yesterday, I forgot to mention the win on Saturday by California Chrome in the Preakness. Yes, we've got the chance for a Triple Crown winner this year! Isn't that fun? Now the Belmont race will have three times the viewers! It was a good race on Saturday. I hope the horse wins the Triple Crown, as there hasn't been one since Affirmed in 1978. Remember 1978? Bands like Cheap Trick, The Police, Van Halen, were all new and had big hits. I will not even mention the other kind of music that was popular in 1978. Pete Rose, who should be in the Hall of Fame, got his 3,000th hit. the new Pope died after only 34 days in office. The framework for peace. remember? Sadat, Begin, and Jimmy Carter? And then the awful mass suicide of Jim Jones' followers in Jonestown, Guyana. I'm sure I'm forgetting some. oh, yeah, Chuck & Kathy move to Des Moines, Iowa. It wouldn't be too long before they returned! And with that. I hope you got to reminisce a bit there. as Al Stewart says in his great song: Time Passages: It's now and then that my mind gets cast into these time passages. Now go out and make this a Tom Terrific Tuesday!

Chuck Butler
EverBank World Markets

Posted 05-20-2014 5:36 PM by Chuck Butler
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