In The Hands Of Hedge Funds…
"76% of the net flows into U.S. Treasuries originated from NON-central bank flows totaling $22.7 billion. These types of purchase are notoriously volatile, and the scary thing is that foreign central bank flows fell to a six month low of $7.6 billion."
by Chuck Butler In This Issue… - Uh-oh, here comes the hedge funds…
- Chuck gets tricked!
- Japan disposes of $10.2 billion
- Current Account Data today…
--- Advertisement --- Need more World Market deposit slips? Simply give us a call at 800.926.4922, or e-mail worldmarkets@everbank.com. We'll be happy to send you more Bank-By-Mail envelopes by return mail. --------------------- And now…today's Pfennig! In The Hands Of Hedge Funds… Good day. And welcome to the day before St. Patrick's Day! Brother, did I ever get a strange email yesterday from someone. It said, "Hey Chuck, looks like the dollar bulls are correct." What? Save that email my friend, and in about five years you might be able to dust it off and use it again. That is, as long as the economic cycle, the currency trend, and the global imbalances have all had their day in court! Then, as it turns out…he was being facetious! So, I got all lathered up over nothing! (You would think, that me, of all people would be able to detect someone being facetious, wouldn't you! HA!) I'm surprised that someone didn't throw the TIC's data, or the Net Foreign Security Purchases Data in my face, and tell me that I was all wet! That's fair…I'm fair game, for I put my opinions out there on my sleeve everyday for people to take shots at. And in this case I can see a reason for confusion: The Net Foreign Security Purchases (NFSP) did blow the expectations of $58 billion out of the water with a strong showing of $91 billion. More than enough to cover the Current Account Deficit, thus making all my worries about that financing piece go away. But, I'll use those words that all NFL observers hate to hear: Upon further review, the data was strong because of hedge funds. Hot money…offshore gamblers buying U.S. Treasuries. Here's the breakdown: 76% of the net flows into U.S. Treasuries originated from NON-central bank flows (this would be the hedge funds or hot money, from the Caribbean which represents hedge fund activity.) totaling $22.7 billion. These types of purchase are notoriously volatile, and the thing that scares me the most, is that foreign central bank flows, which had underpinned these flows for months, fell to a six month low of only $7.6 billion. I hear someone saying, but Chuck, you said before that all the foreign central bank buying was scaring you. Yes, it was, because I was afraid of the day that the carousel stopped! And now that offshore hedge funds are "helping" to finance the deficit, I'm even more scared! I don't see the data yesterday as bullish for the dollar in any shape or form. But the markets did! And wiped out all of the gains the euro and other currencies had built up the past few days. UGH! Oh, one more thing regarding that NFSP…Japan was a big seller of Treasuries, disposing of $10.2 billion dollars worth, which was the biggest dumping of Treasuries in at least six months, and the second consecutive liquidation and the fourth month out of six that Japan has been a net seller. Okay, enough of that! Today, we'll see the current account deficit number for the 4th QTR. It is expected to reach a record of $183 billion, up from $164.7 billion in the 3rd QTR. Oh, and don't forget that the Congressional Budget Office has already told us that the government planned to spend a record amount in the 1st QTR of this year! Gee, Wally, I can't wait to see the color of that data when it prints! NOT! We'll also see my fave, capacity utilization today along with industrial production, neither of which are expected to turn any heads. So, all the focus will be in the current account deficit, due right out of the starter's blocks at 7:30 CST! So, unless the current account deficit shows a huge improvement today, I expect the euro and other currencies to rebound. Looks to me as though a line in the sand was drawn yesterday at the 1.33 level for the euro/dollar. A very strong base has been established there it seems, and should provide the underpinning to a move higher by the euro in the coming days… I received a call from Craig Karmin of the Wall Street Journal yesterday afternoon, and he had more good news for us. The Wall Street Journal is going to run an expanded version of the article that appeared in last Tuesday's Journal, in their Weekend Journal. That's the Big Time, as the Weekend Journal is included in local Business Sections all over the country! And, oh, it looks like we made Newsweek's latest edition too! I got a huge kick out of the Mogambo Guru's letter this week: http://www.dailyreckoning.com/Writers/Mogambo/DREssays/Widget.html, as he was kind enough to mention me. We have a mutual admiration society going here, as I learn a lot from what he writes, and have a ball reading it. Here's what he said about me! "Chuck Butler, who is president of Everbank, writer of the Daily Pfennig newsletter and is a guy whose sense of humor is so developed that he actually sent me a fruit basket because I facetiously said, trying to make a joke that predictably fell flat, that he never sent me a fruit basket…" He actually goes on to write about something I said about the economy, etc. Currencies today: A$ .79, kiwi .74, C$ .8315, euro 1.3365, sterling 1.9250, Swiss .8640, rand 6.08, krone 6.12, forint 184.30, zloty 3.06, koruna 22.44, yen 104.05, baht 38.44, sing 1.6210, pesos 11.15, dollar index 81.92, and gold… $441.90 That's it for today. Get your green out for tomorrow, for everyone is Irish on St. Patrick's Day, some even more so including yours truly! Our "friends" at OPEC have agreed to boost output…don't look for that to help you at the gas pump though. Oil is going to $60… But don't let that bring you down, it's only castles burning…oops, Neil Young. On that note…have a great Wednesday! |
