Data Prints Nothing But Negative

Good day… And a Thunderin’ Thursday to you! The “day after” Tax Day… It still hurts! And to think, one of these days, I’ll be paying even more, thanks to the direction of our country… And you will be too! There’s no two ways about it, the deficit in funding in Washington D.C. which will be a result of all the spending, is going to require greater revenue… Where does the government get the revenue? From taxes… Of course, if it weren’t a debtor nation, it would not have to pay out the large sums of interest on the Treasuries it issues… But, that is a discussion for another day.

The currencies saw more dollar strength yesterday, but it wasn’t a result of anything the dollar had going for it. In fact, the results of the data yesterday were all dollar negative. No, this time it came from the Eurozone. Right about the time I was hitting the send button yesterday, European Central Bank (ECB) minister, Axel Weber Opened Pandora’s Box of questions regarding the future direction of the ECB… Let’s go to the tape!

Weber was so kind to mention that the ECB would announce a package of “non-standard” monetary measures at their next meeting in May… Brother, you should have seen all the different angles that were taken by the pundits after this announcement! Some believe he was telling the markets to get ready for quantitative easing. (Not sure why he would do that, the ECB still has room to cut rates lower)… Some believe he was telling the markets to get ready for rate cuts down to 0%. (Not sure why they would need to go to 0%, or why he would make that announcement now, when rates are 150 BPS away from 0%).

Either way, the euro (EUR) took the brunt of the message, and got sold, leading the other currencies to a day of dollar strength across the board… The board that stops in Japan that is! The Japanese yen (JPY) continues to get back in the good graces of currency traders.

So… What about the data prints yesterday? ZOWIE! Talk about negativity! First, let’s look at capacity utilization, since I talked so much about it yesterday. Capacity utilization fell to 69.3%, a new all-time low for the series. And, the manufacturing component of the data fell to a new all-time low! Recall, I told you this was a “forward looking” piece of data… So the future doesn’t look so bright, eh? Guess I won’t have to wear those shades!

Industrial production also posted a negative number for the month of March posting a -1.5% decline. And… CPI? Well… Consumer inflation posted the first year-over-year decline in the headline rate in over 50 years! 1955 (it was a great year!) was the year… Prices were 0.1% lower in March than in February, contrary to the “experts” that thought prices would increase by 0.1%… This resulted in the annual inflation rate falling to -0.4%, the first negative number since 1955!

So… Don’t look for interest rates in the United States to be going anywhere for some time… The one thing you can look for, though, is more quantitative easing…

And… Leave it to the media to spin the TIC Flows in a positive manner… TIC Flows (net security purchases by foreigners) posted a figure of $22 billion in February, which is below the amount needed to finance the current account deficit. However, the media spun it like this: “International demand for long-term Treasuries rose in February as China and Japan added to their holdings.” Hmmm… Well, it’s a true statement… But, not complete!

OK, enough on the data yesterday… Talk about putting someone to sleep! ZZZZZZZZ!

Did you hear about the U.S. Treasury turning “yellow bellied”? OK, let me first set this up… During the Presidential campaign, Obama indicated that China had indeed manipulated their currency… But when it comes down to the cheese that binds, the Treasury Department declined to name China as a currency manipulator… Bawk, Bawk, Bawk… Chic-ken!

Well, the Fed’s beige book printed yesterday, and believe it or not, half of the Fed districts are seeing a moderation in the pace of the economy’s decline. That plays well with the mental note I made yesterday about full planes and restaurants. But is this just U.S. consumers refusing to batten down the hatches and save for a rainy day? You know, denying the recession and maintaining their spending habits? I mean, you know, the generation that comes after me has never experienced a major slowdown… Maybe they don’t know how to act? HA!

China posted at GDP for the first quarter of 6.1%… Pretty darn good for an economy that was slowing down so much the government had to implement a stimulus package. While it’s a far cry from the 11 and 12% growth rates of a couple of years ago, it’s still better than a sharp stick in the eye! I still believe that China will be the first economy to come out of the global recession.

Japanese yen got bought on the China GDP number, as traders were disappointed with the figure… I believe this all to be overdone, a little too much drama for my taste… I would be careful with this kind of trade, for you never know what China (a communist country) will do.

So… If yen is getting bought, that means the high yielders are getting sold, and so it is for the once highflying currencies of Australia (AUD), New Zealand (NZD), Brazil (BRL) and South Africa (ZAR). I still believe that eventually hedge funds, and investors are going to grow tired of the paltry yields on U.S. assets, and look to go elsewhere… Therefore, I like to be ahead of the crowd, if you get my drift.

Indian rupees are stealth-like these days in gaining ground once again… I’ve had my foot stepped on plenty of times by the Indian Central Bank, and their intervention whenever the currency gets stronger… But like most things, I forget the pain, and talk glowingly about rupees (INR) once again… Talk about a country that is least likely to implement quantitative easing!

And finally, gold… It just hasn’t been a good week for gold. Every morning the shiny metal posts a gain at the London Morning Fixing, but gives it all back by the end of the day. Today, gold posted a loss at the fixing, so maybe, it gains all day! A reversal of fortune if you will! The uncertainty hedge is still just that folks… And in these days of uncertainty you have to wonder, just what’s going on in the minds of investors without gold… But that’s just my opinion…

Currencies today 4/16/09: A$ .7195, kiwi .57, C$ .8285, euro 1.3165, sterling 1.4850, Swiss .8710, rand 9.0250, krone 6.7150, SEK 8.3075, forint 222, zloty 3.2550, koruna 20.44, yen 98.70, sing 1.4975, HKD 7.75, INR 49.75, China 6.8325, pesos 13.08, BRL 2.1835, dollar index 85.23, Oil $49.71, Silver $12.66, and Gold… $889

That’s it for today… The Big Boss, Frank Trotter, was on the Fox Business Channel on Tuesday morning. He was interviewed by one of our faves, Alexis Glick. As I always say, he has the face for TV, I have the face for radio! Tough first game of the playoffs for our Blues. Not to worry, they’ll get them the next game. I slept right through the Cardinals’ game and my little buddy Alex’s baseball game last night! UGH! Tomorrow, I’ll have the first of the “feel good” business stories that I’ve accumulated. I know, it’s been some time since I first announced this, but that was before vacation, and San Diego, etc. Hopefully, the long wait will be rewarded! It’s a crazy time in the world of sports, with baseball getting into full swing, basketball and hockey starting their playoffs, and spring football for college teams… A veritable smorgasbord of sports… A Whitman’s sampler if you will! OK, time to eat my apple… I hope your Thursday is Thunderin’!

The Daily Reckoning