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    In This Issue.

    * More thoughts on bonds .

    * RBA greases the tracks.

    * German DAX outperforms S&P.

    * Yen repatriation is over.

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

    Strong PMI's All Around The Globe!

    Good day. And a Tom Terrific Tuesday to you! A tricky, but successful first day on our brand spanking new computer system was had yesterday. Still some things to work out, but as our first IT guy used to say, "it's not a bug, it's a feature", still rings true! So, onto day 2, and let's see what's in store for us today!

    Which is very similar to the currencies and metals. let's see what's in store for them today, eh? The volatility continues to rain down on these two asset classes. But in the whole scheme of things, the dollar remains in the down trend, and will remain there, with blips higher from time to time, until we correct the debt / deficit problem, or at least, get on the road to correcting them, but as I like to say in my presentations, the U.S. GPS navigation system isn't working, for they can't even find the road to correction!

    Ok. I spent a lot of time yesterday talking about the nearing end of the long standing bond rally. Here's another thing to keep in mind regarding that thought, and that is: That the Fed's Twist & Shout, I mean, Operation Twist, will end in the 2nd QTR. which means that the market will have to absorb more than 70% more in bonds per quarter going forward. and that alone could very well be enough to send yields even higher!

    Well, yesterday I also talked about the Chinese PMI (manufacturing index) and how strong it printed. Well, it must be something that's catching around the globe, because not only did the U.S. too print a stronger than expected PMI (we call it ISM), but so too did Canada! And that's a real good sign for global growth, folks. And like I said yesterday, the proxy for global growth has always been the Australian dollar (A$), and I do believe the A$ will continue to be supported by the global growth machine that's beginning to show up around the world. Right now, the A$ is feeling a bit pinched because the Reserve Bank of Australia (RBA) sounded quite dovish last night, and mentioned rate cuts in their statement, which sounded like.. "Interest rate expectations are going to fall, and this will continue weigh on the Aussie dollar".

    As I said yesterday, I don't see the need for the rate cuts, given the data I've seen, but this whole scenario plays well with James Rickards' book Currency Wars.

    The thing I didn't talk about yesterday, with China's manufacturing report is that the reports of a hard landing for the Chinese economy seem to be exaggerated, eh? Recall that I've said all along that I believed that the Chinese economy would "moderate", not collapse.

    The U.S. stock rally continues to amaze me. But then, the Fed has been priming the stock market pump for some time now, so eventually, we should have seen a stock rally. But I saw something this morning that caught my eye. The German DAX is beating the S&P 500 by the most since 2006. Again, this is a result of the global growth news. But let's not downplay this move in the DAX, for the German stock index has topped every developed market tracked by Bloomberg this year.

    As I've said for some time now. if we could just buy Germany. but we can't, not without all the baggage.

    Speaking of the baggage, while everyone is focused on Spain. Ireland is beginning to rumble again.

    But yet, the euro gains in value. It's called relative value.

    Here in the U.S. we saw a data print on Friday, that I failed to talk about yesterday, basically because the news item was buried in the over 850 emails I had to sift through yesterday. Recall me talking about the TV commercial from the world famous St. Louis rock station, KSHE, where the daughter is appalled that her dad hears the opening chords to the song, Brown Sugar, and begins to play the air-guitar, and she cries. "Mom, he's doing it again".

    Well, that same thing could be played out for the U.S. Consumer. Once again, we are on a path to destruction, as we spend more than we make. Personal Spending in February was stronger than expected at .8%, while Personal Income was up only .2%, thus causing a drop in the savings rate from 4.3% to 3.7%... But it's not just one month here folks. January and December spending rates were revised upward. When will we ever learn? When, will, we, ever, learn?

    But this is what the Fed wants. they've primed the pump for another bubble, folks. you never know where a bubble is going to pop up, but with all the Quantitative Easing, stimulus, and everything else that's gone into reviving the U.S. Consumer, a bubble was imminent.

    While I'm on stuff here in the U.S., this Friday will be the Jobs Jamboree for April, using March jobs data. This Friday is also Good Friday for those of us that observe Easter, which means the stock market will be closed, so a large piece of the markets will be missing. and that could cause some very volatile reaction to the jobs number. Right now, the "experts" are thinking that 205,000 net jobs were created in March. But going back over the years on Good Friday, the Jobs Jamboree has held some HUGE surprises for the markets.

    Since 1994, there have been 5 previous Good Friday Job Jamborees, and 3 of the 5 held some HUGE surprises to the upside for the Jobs Jamboree participants. So, we need to keep that in mind as we head into Friday.

    The price of Oil rebounded by $2 yesterday, back to $104. but for the most part, the petrol currencies are not reacting to that move. There comes a time when the volatility in the asset prices just becomes noise, and the assets just don't react to the daily gyrations. As I like to say, they become Comfortably Numb.

    The Brazilian real has really fallen on difficult times, as once again the Brazilian Gov't complains about Currency Wars, but then goes about doing what it can to weaken its own currency. We've seen several of these moves to weaker values in the real over the years, only to be eventually reversed. I don't know if this is another case where a reversal will be seen, but at least you are armed with the fact that the real has reversed in the weak moves in the past.

    The price of Gold is pretty flat this morning. I read a report from Jeff Clark of Big Gold yesterday that really made sense to me, and plays well with my "everyday observations". What Jeff wrote about was that the price of Gold is being supported by the fact that "real interest rates" in the U.S. are negative. He points out that the Fed continues to say that current rates will remain near zero for at least another year, and maybe longer. He then points out what I've pointed out for some time now that inflation continues to grow higher, which means the "real interest rate" will remain negative.

    For those of you new to class, "real interest rates" are derived from the net of bellwether, 10-year Treasury yield, minus inflation.

    Ok. enough of that! The Japanese yen continues to defy gravity. The need for the "safe haven" trade in yen is over. but I think for the most part that March repatriation of yen which is what we see every year, offset the unwinding of safe haven trades. So, Bullwinkle, what do you have up your sleeve to amaze the markets now? I still don't think yen is a so-called safe haven, and I certainly don't think that it has much else going for it, at this point.

    Then There Was This. So. did you hear about the CFTC (Commodities, Futures Trading Commission), accusing the Royal Bank of Canada (RBC) of "wash trades"? here's the skinny and then my thoughts. From the Wall Street Journal. "U.S. regulators alleged a "wash trading scheme of massive proportion" by Royal Bank of Canada, which was accused in a lawsuit of unlawfully trading hundreds of millions of dollars in stock futures in order to get tax benefits.

    The Commodity Futures Trading Commission filed the civil lawsuit against the Canadian bank in the Southern District of New York on Monday. The CFTC alleged that Royal Bank of Canada broke laws banning "wash trades," or trades a firm does with itself to make it look as if stocks or other securities have been bought and sold."

    Chuck again. OK. RBC denies these claims, and said, the allegation was "absurd." And the spokesperson went onto say that, "The lawsuit is "meritless and we will rigorously defend ourselves against such baseless allegations."

    Well. that's all fine and good. but I want to know when the CFTC is going to do anything about the allegations that the whistle blower made about metals price manipulation.

    To recap. Manufacturing around the world is on an upswing, which is good news for the global growth campers. China, the U.S. and Canada all reported stronger than expected manufacturing index numbers. The RBA left rates unchanged but greased the tracks for future rate cuts. I still don't believe they are necessary, but the RBA seems to have an axe to grind here. Be careful of the Good Friday Jobs Jamboree this week.

    Currencies today 4/3/12. American Style: A$ $1.0380, kiwi .8225, C$ $1.0085, euro 1.3345, sterling 1.6015, Swiss. $1.0185, . European Style: rand 7.6680, krone 5.6705, SEK 6.5865, forint 220.10, zloty 3.0945, koruna 18.4375, RUB 29.28, yen 82, sing 1.2515, HKD 7.7645, INR 50.67, China 6.2862, pesos 12.75, BRL 1.8315, Dollar Index 78.80, Oil $104.44, 10-year 2.18%, Silver $32.98, and Gold. $1,678.55

    That's it for today. Congrats to the Kentucky Wildcats on their NCAA Basketball Championship. I held Kentucky in our office pool that we do for fun. it just means I get to buy lunch! I feel bad for missing this, but it was my first day back yesterday. But Happy Birthday to both Tim Smith and Antione Lawrence who celebrated birthdays on April 1 and 2 respectively. I got to see Alex play a little at his Water Polo game last night. His team was winning by a large margin, so the freshmen all got more playing time. Last week, he scored 6 goals in a game! Little Braden Charles was at the game, and we exchanged Aw's before he fell asleep. How anyone can sleep at a Water Polo Game is unbelievable, but he did! And with that, I'll get out of your hair for today. I thank you for reading the Pfennig, and hope you can go out and have a Tom Terrific Tuesday!

    Chuck Butler


    EverBank World Markets



    Posted 04-03-2012 5:46 PM by Chuck Butler
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