China Buys a Huge Hunk of Aussie Land

And now… today’s Pfennig for your thoughts…

Good day, and a Tom terrific Tuesday to you!

The dollar seems to be mixed again this morning, as the week of data will begin today, along with the Central Banks, like the Fed who has a two-day meeting starting today. The news flow overnight has been subdued, tight, or whatever other word you want to use to describe that not much happened. 

So, that’s the reason the currencies have no real direction this morning. But all that should change once we get going with three European Central Bank (ECB) speakers, U.S. Durable Goods Orders, The Bank of Canada (BOC) Gov. Poloz speaking, and U.S. Consumer Confidence data.

Yesterday, I told you that there was a whispering campaign regarding the Bank of Japan (BOJ) who meets this week, and the markets were whispering about how they thought the BOJ would cut rates deeper into negative territory. Well, that whispering campaign got squashed like a bug on a windshield yesterday. I never actually saw what caused the squashing, but it happened, and yen rallied. I really don’t see how yen can sustain a rally, but then I’m actually surprised to see yen still trading below 120.

Another thought in the markets that has been pretty much pushed back is the BREXIT thought. BREXIT had caused the pound sterling to experience some pain points recently. But the BREXIT talks have dried up, and don’t have the save fervor as before, and that’s all good for pound sterling. In fact, the pound is the best performer overnight!

The price of oil is down $1 this morning from 24 hours ago. Recall, I told you yesterday that the oil supply here in the U.S. will be reported today, and that should provide a nice backstop for where the price of oil heads going forward. One thing to keep in mind is that we are approaching the summer driving season, and gasoline use will rise during that season, no doubt about that! There are also rumblings coming from the oil producing countries that they could meet again and once again attempt to put together an agreement to freeze production. Again, I say fat chance of that happening! But, you’re telling me there’s a chance, right? HA!

The Aussie dollar (A$) is up a bit this morning. I read a report overnight that a Chinese-led consortium has agreed to buy 1% of Australia’s land. That’s an area larger than Ireland! Why is this important? Well, think about this it’s like a mergers and acquisitions (M&A). If China is buying something in Australia, they are going to have to convert renminbi to A$’s to setter the terms of the transaction. So, right now that deal is worth $371 million that’s going to have to be bought by the Chinese. That should be a nice lift for the A$. when it happens!

Remember last week, when I told you how the Brazilian impeachment process was helping the real, but for us to be careful, for once the process is over, there’s no plan to improve the economy’s problems, and then Brazil is back to square one. Well, since I wrote that, (and maybe I got traders thinking, do you think? Yeah, right, and my first wife was a young Elizabeth Taylor!) suddenly traders are changing horses in the middle of the stream, and beginning to wonder what the new administration will do to correct the economic malaise that Brazil finds itself in. And the real has backed off its lofty levels of last week.

The Canadian dollar/loonie, has reached for a 79-cent handle, and reached it overnight. I told you earlier that BOC Gov. Poloz is scheduled to speak today, and I’m totally convinced that he’s going to mention that the strength of the loonie is a problem for the Canadian economy. And that might knock some of the shine off the loonie. Remember, always, that Poloz came from the “trade” side of government, where the goal is to promote exports, and to do that you whine, and whine for a cheaper currency. So, that’s always hanging over Poloz like the Sword of Damocles.

The euro was up a bit this morning when I turned on my computer, but now it’s showing a loss on the day so far. There will be three ECB speakers today and I doubt that any of them are going to not mention the euro. So, watch for that, and the dollar for indications of how the euro will fare today.

The Chinese renminbi was depreciated overnight in the fixing, and the Russian ruble is reacting negatively to the drop in the price of oil this morning. I was mentioning to Joseph Stolzer, our managed currency guru, yesterday, that Russia has done a very smart thing teaming up with China on so many things. It’s a real good idea to team up with strong partners in just about anything you do!

Well, gold gained $6 yesterday, and this morning it’s giving it back! UGH! Last week, gold attempted to trade past $1,250 and stay there once again, and once again it was denied. That’s three times in recent memory that gold has been denied the ability to remain above $1,250 for any sustained period of time. What gives with $1,250? Apparently, the price manipulators have drawn a line in the sand at $1,250. There haven’t been any news of problems so far with China’s new renminbi denominated gold fixing. Smooth sailing, so far.

The U.S. Data Cupboard finally gets some “real economic data” today. U.S. Durable Goods Orders will print for March. Yesterday, I told you that I thought this data would once again print negative, but then I read a report yesterday that let me know that there will be some aircraft purchases in this data, and we all know from past wild swings in this data, that the aircraft sales can really skewer things. So, I have to change my thought on the data being negative. Not with aircraft mixed in. That won’t happen, and if it did, you know, print negative with aircraft sales/purchases, then we had better run for cover.

We’ll also see the color of the latest Consumer Confidence Index, which last month saw a huge drop, and this month will probably show no real change.  And the S&P Case/Shiller Home Price Index for March will also print. So, a busy day with data, as there are also some second and third Tier data prints today.

Yesterday’s data cupboard had March New Home Sales data, and for the third consecutive month, starts and permits dropped in the month. The housing hasn’t seen three consecutive disappointing months like this since July 2011. I told you all months ago that I thought we were beginning to see the start of the next housing bubble popping, and with data like this, we just might be there already!

Last week, I put to bed and sent off the May Review & Focus, and in it, I talk a lot about how I think the strong dollar trend is either already over, or heading in that direction quickly. When it gets posted online, you’ll want to read about my thoughts on how that all plays out. Now, I’m not in the crowd that believes this next weak dollar trend, will actually be a collapse of the dollar, but I do see their point of view! And that leads me to remind you that you can always read the Review & Focus on the EverBank Website, by clicking here.

And it also leads me to share with you some thoughts from my friend, Jim Powell, of whom I’ve talked about before, and he writes the newsletter: Global Changes & Opportunities Report (GCOP) and can be subscribed to (it costs) by going hereHere’s Jim Powell’s thoughts on the dollar:

Every time I walk into a store to buy something with paper dollars I am astonished that anyone will accept them. I often get the urge to race out the door with my purchase before the clerk realizes that greenbacks are essentially worthless.  The only reason people will accept any fiat currency is because they expect others with whom they trade will also take them. If anything should shake that confidence, the system will fall apart fast.

Well, here’s more proof that the U.S. economy is in trouble and heading for recessionville quickly. I got this from the USA Today, and can be found here should you want to read the entire article, or, here’s your snippet:

Trying to cut its way to profitability, troubled Sears Holdings announced Thursday that it will close 68 Kmart and 10 Sears stores this summer in its latest move to cut losses.

Sears’ (SHLD) move (see the list of the stores) comes atop a previous announcement that it will close 50 other stores. Sales have been falling and Sears had a disappointing holiday sales season.

‘The decision to close stores is a difficult but necessary step as we take aggressive actions to strengthen our company, fund our transformation and restore Sears Holdings to profitability,’ said Sears Holdings CEO Edward Lampert in a statement.

All of the Sears stores and nearly all of the Kmart stores will close in late July, the retailer said. Two Kmart stores will close in mid-September. The closing Kmart and Sears stores will hold liquidation sales starting May 12 and April 29.

Chuck again. When I was a kid, the only store we ever bought anything from (besides groceries) was Sears. That was the first “revolving credit card” my mom and dad ever had, and I still only ever thought of Sears when it came time to buy tools. It’s really troubling to me that this staple of the Midwest family has gone so deep into trouble.

That’s it for today. I hope you have a Tom terrific Tuesday. Be good to yourself!

Regards,

Chuck Butler
for The Daily Pfennig

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