Chuck Butler

Good day… And a Happy Friday to one and all! It’s Good Friday, to boot! That means the stock market is closed today, and the bond market will close at noon. Banks, however, are open… Most of Europe is closed today, and will be again on Easter Monday… But, the big thing to me, is simply that it’s Good Friday…

Well… The two consecutive nights of ambushing the dollar came to an end last night. In fact, the profit taking began yesterday during the day… Not a lot of profit taking, but some, which took the bloom off the rose for the currencies… Gold and silver on the other hand are still kicking sand in the dollar’s face… Yesterday, I said something about the gold/silver ratio… I misspoke when I said that the ratio had fallen below 20… No worries, it’ll get there in my opinion, in due time… In due time… But there’s no denying that the ratio has fallen, eh?

So… Speaking of gold and silver, how does $1,509.60 and $47.10 respectively sound, this morning? I thought you would like that very much, unless, of course, you’ve been waiting for a pull back to buy! Geo-political problems persist, money printing continues on, and near zero interest rates in the US and Japan continue to work in gold and silver’s favor… And, let’s not forget the deficits in the US and Japan, and that S&P fired a warning shot across the US’s bow this week…

Did you see this? Americans have turned more pessimistic about the outlook for the US economy, according to a New York Times/CBS News poll. The number of participants who said the economy is getting worse increased 13 percentage points in one month. Confidence that a recovery is under way has nearly disappeared, the poll found. Maybe, just maybe, those people that changed their minds, became realists… And quite frankly, I have to say that it’s a good thing… Because if you are a realist, you don’t sugarcoat things, you simply call them the way you see them.

The price of oil is up another buck ($1) this morning, at $112.29… This is the level it reached a couple of weeks ago, and then plummeted back down. So, it will be interesting to see where this goes now… My guess is that it bounces off that and goes back down again… But then on the third try, it soars past $112, and we all see what it’s like to pay $5 per gallon for gas! UGH!

Hey! Am I imagining this? Was it a dream, or do I truly remember about three years ago, when the price of oil soared to $140, that lawmakers were screaming bloody mercy, strapping themselves to gas tanks, and pointing the blame finger at those “awful” oil company executives? Hmmm… If that really happened, and I really don’t believe I was dreaming, where are they now? Why isn’t this as big a deal as it was three years ago?

So, as I said yesterday or the day before… Today is a tricky day, with not a lot of volume, with Europe closed, and the US stock market closed… We could be in for some really crazy wild swings today, and then again, maybe the Big Shot currency traders have already headed to the Hamptons, and left the book with the Junior people, with instructions to not take any positions… And if that’s the case, then today’s price action will be very muted.

As I look at the currency screens I see that for the most part, the currencies are trying to mount a charge on the dollar, but just don’t have the leg strength to make the push. Every time I see the currencies begin to gain, they fall back this morning… Which is a great indication that there’s no volume to carry these moves further. And, unfortunately…it indicates to me that by the end of the day, we could very well see the currency levels lower…

OK… Yesterday, Canada received some good news, when they printed February’s retail sales figure, which rebounded to +0.4%… Canada’s retail sales had printed negative numbers in December and January, so, it was important to see this turnaround. The Canadian dollar/loonie (CAD) is trading around $1.05, and we all know that the Canadian government – in the past, that is – doesn’t like the loonie above parity, as it hurts tourism… But, I think the Canadian government is looking past this now, as they see the carnage of an economy in the US and want to put 100 miles of desert between their hides and that of the US!

And remember, how I’ve told you that China wants the next reserve currency of the world to be their own renminbi (CNY)? There are a number of reasons I believe this, and you need to come hear me talk in Las Vegas in three weeks to hear those reasons! But, here’s a thought for you on this Good Friday… China has loaned the US more than you can shake a stick at… And now China is helping the Eurozone out… I mentioned this at some time before, but why not? If I were China, I would be unloading those dollars they have on reserve, and loaning them to Europe… Then China will have the US and Europe in their back pocket, right? OK.. Then I read this on Reuters last night…

China signaled on Thursday it was ready to buy more debt from the euro zone’s weaker states, in a move to help stabilize the bloc’s fragile finances and protect its business interests.

After investing billions of euros in Portuguese and Greek bonds to [diversify] its “huge” foreign exchange reserves away from the dollar, China was now considering buying more, Song Zhe, Beijing’s ambassador to the European Union, said.

This past week, I was reading about the BRICS meeting last week, and a lot of things were said at that meeting, and I’ve mentioned a few of them here… But something that Brazil’s Mantega (Finance Minister) said, kind of just flew right past me, until… I read this statement by Australia’s Finance Minister, Rudd…

First, Mantega claiming that the “Currency War was still on” didn’t register with me, for I’m not a believer of the currency war… But then Australia’s Foreign minister Rudd’s says: “Australia won’t manipulate its currency and countries that do will pay a price.” WOW! That’s right, Mr. Rudd! You tell ’em! I feel like singing the words from “The Wall”… We don’t need no intervention…. We don’t need no trade controlled… Nor dark closed back door deals… Hey, central bankers, leave those currencies alone!

OK… That was fun! What’s not fun, is seeing the Weekly Jobless Claims here in the US remain above 400,000 each week, like they did last week at 403,000… This unemployment problem here in the US remains in a dark hole, and there’s very little climbing out of the hole going on… Unemployment and housing are two HUGE hickeys for the US to deal with… And in the past, we would have taken those challenges and made them a positive… But that was before we were burdened with debt coming out of the country’s ears… All time and effort is steered toward dealing with the deficit, and how to finance it, etc.

I think that I’ll go to the Big Finish here, and make this somewhat short-n-sweet, as there’s just not a lot of new stuff to talk about, with Europe closed, and it already being the weekend down under…

Then there was this… There’s been lots of rhetoric lately about a “one-off revaluation” of the renminbi… Some people believe this will be a large revaluation for the renminbi… I’m just not on that train… The train I’ve boarded is the one that believes that if China does decide to revalue the renminbi it would be a small revalue if they do it at all! Instead, believing that China will just decide to open the dam a bit more, and allow more appreciation of the renminbi… I could be on the wrong train, but I don’t think so…

To recap… It’s Good Friday, so most markets are closed, or will be closing early. The nightly ambushes the dollar was experiencing this week ended last night, with a bit of profit taking, after the currencies had moved quite far and quite fast this week. Gold and silver continued to shine brightly versus the dollar, with gold reaching yet another all-time record high, and silver trading to $47!

Chuck Butler
for The Daily Reckoning

Chuck Butler

Chuck Butler is the Managing Director EverBank Global Markets. The father of the Daily Pfennig® newsletter, Chuck has a career in investment services and currencies spanning 35+ years. His tacit knowledge of the global markets along with his inventive spirit has led to the creation of many distinct and innovative currency-based products. A respected analyst of the currency market, Chuck has made frequent appearances on MarketWatch, USAToday, CNNfn, Bloomberg Television, and CNBC as well as quoted in The Wall Street Journal, US News & World Report, and The Chicago Tribune.

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