US Retail Sales are a Clunker

Front and center this morning… The currencies are trading near levels they were when I signed off yesterday morning. They did have a brief rally, after the US Retail Sales data showed some real rot on the “recover is here” vine… But that rally was snuffed out, as the risk aversion campers came back to the markets.

Overnight, the Reserve Bank of Australia’s (RBA) Gov. Stevens, game his semi-annual report on the Australian economy to Parliament, and he was quite upbeat… And not just about the Australian economy. Stevens was quite upbeat about most of Asia, including Australia’s largest export country… Japan. I bet you thought I was going to say China! I thought that Stevens did a fantastic job of putting his thoughts out there for all to hear. Like, talking about how future quarters could show softer growth as the RBA removes “fiscal candy”… Good Show!

One thing is clear, at least to me, from this upbeat report, and that is I believe we can look for the RBA to hike rates aggressively in the first quarter of next year… And, if the future quarters are stronger than Stevens now forecasts, we could very well see a rate hike before we turn the calendar page on 2009!

Speaking of future rate hikes… Since Norway’s Norges Bank moved to a tightening bias on Wednesday morning the Norwegian krone has gained 3.2%! Go krone, Go krone… I’m dancing in my seat. Carlos Santana is playing, dance, sister dance on the radio… It’s all good… OK, I’m sure that’s a sight you didn’t want flashing before your eyes!

OK… So… Here in the US we saw Retail Sales for July, which I told you yesterday was expected to be stronger because of the government’s cash for clunkers program… US retail sales unexpectedly fell -.1% in July despite the debut of the government’s “cash for clunkers” program meant to jump-start the auto business and help turn around the economy. So… Here we go again… The government promises something, and it falls short of expectations… Looks like “cash for clunkers” is a Clunker!

That Retail Sales shocker yesterday really makes one stop to think about all the euphoria being exhibited about the end of the recession… So… When Retail Sales printed, you can understand the return of the risk aversion campers, eh? I wonder how this report fits into the Fed’s view that the economy is “leveling”?

Today, we’ll see the stupid CPI report… Just what we need on a Friday! A reminder of how the Gov’t cheats those that are on fixed payments, and those that buy TIPS… Don’t know what I’m talking about here? That’s OK… You must be new to class! No worries! You see the Gov’t began making changes to the way we calculate consumer inflation back in the mid 90’s, and it’s been a huge mess ever since! I’ll just say this… Consumer inflation in this country has been grossly understated for 15 years… It was all done as part of a plan to allow interest rates to remain low, so that housing would become affordable for everyone… Now, that plan sure worked out well, eh? NOT!

So, enough of that! Let’s talk about Brazil! Before I get into this, I must make this perfectly clear… Brazil is an emerging market, and with that moniker, they should be viewed as a speculation investment only, that is unless it’s got principal protection like our BRIC MarketSafe CD! WOW, did you see how I segued right into that? Man… I are so smart!

OK, back to Brazil… I was reading a story on the Bloomie this morning about how a currency strategist at Standard Chartered Bank in New York, has forecast a level of 1.80 for the real by the end of this year, and 155 by the end of 2010… WOW! That would mean that on top of this year’s already top performance of +27%, the real would add another 15% next year… That’s all nice and sweet… But it is just a forecast by someone I’ve never hear of, so take that with how ever many grains of salt you wish!

Now that I have you all pumped up… OK, for a second there the old Hans and Franz Saturday Night skit, “were going to pump you up” flashed before my eyes… OK, were was I? Oh, now that you’re all pumped up, I will remind you of what I said on Wednesday of this week… And that is, that I’m becoming very scared of this stock market run, and if it runs out of steam, the resulting sell off of stocks could adversely affect the currencies, since these two asset classes are being hog tied together, along with commodities!

Oh, and this just in this morning… Brazilian Retail Sales rose 1.7% in June beating the forecasts of a 1.2% gain. You would have to think that given the strength of this report that Brazilian domestic demand is growing and will contribute further to the thoughts that the Brazilian economy is going to rebound faster than most other countries. And when you have some of the highest yields in the world, and an economy rebounding faster than others, you get a ton of foreign investment into the country, which… Will drive up the value of a currency, which in this case is the real!

It’s been a while since I last talked about gold and silver… And then I was reading a report written Sean Hyman about gold, and decided to share with you some of Sean’s thoughts… Sean believes that we’ll see $1,300 gold by the end of this year, and $2,500 gold in 2010… He bases this on a number of things, but mostly on the fact that the IMF announced sales of Gold made earlier this year, is being completely offset by Chinese buying. With all the demand for gold, having this huge IMF selling of gold offset by the Chinese if HUGE! So… I thank Sean for his thoughts here.

OK… Thanks for all the positive notes about abolishing the Fed yesterday… I did receive a few that thought I had lost my marbles, and didn’t have any problem telling me so! But that’s OK… I didn’t think it was going to be met with 100% approval / participation! Quite a few told me to join Ron Paul’s bandwagon… I’ve been on his bandwagon for some time now! But for those skeptics to my call to abolish the cartel, I mean the Fed, I simply suggest you read the book: The Creature From Jekyll Island… But for an appetizer, I suggest you first read William Fleckenstein’s book, The Age of Ignorance at the Fed, Greenspan’s Bubbles…

And… Let me make something perfectly clear… This letter is Chuck’s letter… And therefore it is Chuck’s opinions, not those of the Bank! While I’m sure that I’m loved by one and all at EverBank, they do not influence my opinions, this is all me, folks… Just imagine what my poor beautiful bride has had to put up with for 33 years!

OK… We had some housecleaning to do this morning, I sorry about that, but just some things to get off my chest and out the door…

Before I head to the Big Finish, I wanted to talk a bit about Canada… While the US was posting an increase in their Trade Deficit, Canada printed a narrowing Trade Deficit! Rising exports and falling imports resulted in a HUGE narrowing in Canada’s trade deficit in June which came in at C$55 million, which was much smaller than May’s revised C$1.1 billion trade shortfall… This is a nice piece of data for Canada, and I would love to see this deficit narrow further next month, and get back to the days of surpluses in Canada!

One would think this data to be a feather in the loonies’ cap!