Disappointing Data...

Good day… And a Happy Friday to one and all! The start to a Holiday weekend to boot! And to get things kicked off in the right fashion, one of the trading desk’s faves, Jimmy Buffett will be performing on the Today Show this morning! So… We’ve got that going for us!

Well… The data, mainly GDP, that was supposed to be a moon shot yesterday disappointed the markets… But come on, GDP was still above 5%! OK, I’ve not had a chance to dig into the numbers to see what the relative composition of that number was, but I will… And I’m sure when I do, I’ll find that Government spending was a major part!

With the data somewhat disappointing, the dollar slumped, and has given back about 1/2 the gains VS the euro that were made this week. We’ve had some hawkish statements from ECB ministers the last couple of days, and that has helped support the euro too. The euro is back above 1.28 this morning… A report out this morning tells us that inflation in Germany backed off a bit last month… But that won’t get in the way of an ECB rate hike in June.

The thing I want to point out is the fact that the euro is stronger, and was stronger last month when this reading of inflation was taken. With oil screaming last month, inflation should have been higher… However, this just proves the point that a strong currency can go a long way toward the fight against inflation…

In addition to the GDP report… Existing Homes Sales fell 2% to 6.76 million in April, after posting some strong numbers in February and March… This follows the fall in New Home Sales that was printed on Wednesday. Is this the beginning of the end for the housing bubble? I think so… Shoot Rudy, even the national evening news had a segment on how rising interest rates were putting home owners in a bind, and that sales of homes were taking longer and longer now…

Today, we’ll see the Fed’s preferred inflation gauge… Personal Consumption Expenditure… Or so says Bloomberg… I prefer to look at the Personal Spending and Income data, which will probably show that once again U.S. consumers spent more than they made… But don’t let that get you down… That’s been going on for a couple of years now!

So… Most likely we’ll see a flurry of trading after the data is printed at 7:30 AM my time, until London goes home… Then its every man for himself, as the traders in NY will be skipping out early to head to the Hamptons!

The Asian currencies are ending the week on a high note, after taking shot after shot from the dollar recently. The thing that got them going again, is the same thing that got them off the floor to begin with… Foreign Investors buying into their stock markets! All the stock markets of Asia were strong last night, and too were the currencies! I would like to see this scenario continue to bring the focus back to the fact that the Asian currencies need to gain VS the dollar… Period!

The thing I keep coming back to is as the Asian currencies of Japan, Thailand, Singapore, and even S. Korean, gain VS the dollar, it applies pressure on the basket that China uses to value the renminbi… So… These countries can apply pressure on China through China’s own currency policy! And… That would be the natural way for China to allow the renminbi to appreciate.

I had a nice talk with a Forbes reporter yesterday in a follow up to the fact sheet I sent him last week regarding currencies other than the euro and yen that currency investors should consider… And then I was interviewed on KMVR in the Bay area in the afternoon… Good stuff, people wanting to know about currency investing…

Gold has really backed off in the past week… But again, I’m not buying into the “it’s the end of the rally for Gold” story… We continue to see tons of interest in our award winning MarketSafe Gold CD, especially now that Gold has backed off, and given investors a cheaper price to buy!

Speaking of Gold… The Big Boss, Frank Trotter, will be in Long Beach, CA next week for The 4th Annual True Wealth Gold & Collectibles Conference.

That’s about it on the currency talk today… I have something now to talk about that I think everyone will want to know more about…

My long distance friend, Ray Negrone, has written a book titled: The Boy of Steel… Ray takes the reader on a journey with a young man stricken with cancer, that learns some magical lessons from of baseball’s legends… Lou Gehrig, Babe Ruth, etc. The book will become available in August, but you can find out more right here, right now, by clicking here. I can’t wait for my copy!

Currencies today: A$ .76, kiwi .6380, C$ .9035, euro 1.2820, sterling 1.8725, Swiss .8220, ISK 72.50, rand 6.58, krone 6.10, forint 204, zloty 3. 07, koruna 22, yen 111.75, baht 38.10, sing 1.5775, INR 45.85, China 8.0245, pesos 11.16, dollar index 84.69, Silver $12.79, and Gold… $654

That’s it for today… I heard on the radio this morning that 84% of Americans plan to travel some this weekend… PLEASE BE CAREFUL! Drive defensively, please! Congratulations to my beautiful bride on her retirement from teaching yesterday… No more papers strewn across our dining room table! We’re celebrating Cheryl Harper’s birthday today with a luau after we close… Cheryl bakes cakes for everyone’s birthday in the office, so, we’re turning the table on her! Happy Birthday Cheryl! Have a great Friday, and Memorial Day Weekend!

Chuck Butler
May 26, 2006

The Daily Reckoning