Every Rose Has Its Thorn

Good day…Well, bust my buttons! I’m shocked beyond belief! You want to know what I’m talking about? Of course you do! I’m talking about the U.S. October Leading Indicators that printed yesterday. Recall that I had gone through a scenario where I said the markets had not paid any attention to this report all year, as it proceeded to show negative readings month after month. But now, it was widely expected that Leading Indicators for October would show a positive number, and the markets/media would be jumping all over themselves to point out how strong the economy is.

Well…that didn’t happen! No sirree Bob! While the report did show a positive reading of 0.2%, for once the media reported it correctly! Get the kids and hide out in the cellar, for the sky is about to fall if this continues! Here’s the take by the media, “Leading indicators of U.S. economic activity increased 0.2% in October, suggesting that slow growth will continue through the winter and into the spring, the Conference Board said Monday.”

Unfortunately, the dollar bulls saw this as strength in the economy. These dollar bulls are really becoming a thorn in my side. I think the old Poison song was written with dollar bulls in mind. Don’t know it? Ahhh, grasshopper…

“Every Rose has its thorn….

Just like every night has its dawn….

Just like every cowboy sings a sad, sad song…

Every Rose has its thorn….

Ok…I’m not saying I’m the rose (HAHAHA) but these dollar bulls are a thorn! Of course, when my beautiful bride reads this she will say that she’s the rose and I’m the thorn!

Yesterday, I talked briefly about Aussie and kiwi talking about the rate differentials, etc., supporting these currencies. Well…for a brief moment in the sun yesterday, Aussie traded above 77-cents! These interest rate differentials are huge for a currency, and tend to overshadow any skeletons a currency may have in the closet. And so it goes for these two, especially kiwi, what with that trade deficit that is running about 8% of GDP and all. But don’t let that get in the way of a good interest rate differential! As I said yesterday, of the two…I prefer Aussie.

And Yesterday, I took the ruler and rapped the knuckles of those traders that keep selling pound sterling. And looky what we have here today…pound sterling is rallying! I once had a reader send me a note telling me that I “moved markets” with my newsletter. Of course the people on the desk had to come help me off the floor, from my laughing so hard. Trust me…I kid about this person and his of reading the Pfennig, but in no way does it move markets! Ok, I’m back now. I almost fell out of my chair again!

I do love going to shows though, and having people stop by the booth all day long to tell me how much they love the Pfennig! They sometimes look at me very strangely, though. They can’t believe I’ve been telling them the truth about myself – short, overweight, and balding. It’s all out there on my sleeve…no need to hide behind a curtain and pull strings like the Great Wizard of Oz! HAHAHA… Geez Louise, I’m really entertaining myself this morning!

Have you seen the reports on the European Union/Asian Central Bankers summit? I find this meeting interesting in that, I think there’s smoke coming from it. And you know me, I always say where there’s smoke, there’s fire. Here’s what I’m talking about. The European Union (EU) has been at odds with China and Japan over the weakness of their currencies, so it’s not like the EU to try and iron things out. No…I believe this meeting was all about the Asian region forming a single currency, like in the Eurozone, and they wanted to know about the initial steps to do so. But then again, I’m prejudiced about this. I don’t know if you recall, but if you’ve been around for two years, you’ll recall an article that Frank Trotter put together about this very subject, and why it made sens.. We called the single currency for Asia “the pan.”

Anyway…it’s nice to see the EU and Asia working together, eh? If only they could do something about the imbalances in the global economy!

Well, I’m afraid that we’ve seen the last of volume for this week in the currencies. Tomorrow the “boys” will be heading to the Hamptons, and the week will be shot. There’s no real data to prepare the books for, except the U. of Michigan Consumer Confidence report, which is sure to say that we’re all “happy campers” these days with the price of oil falling, and stocks trading like there’s a fire sale! Don’t you find it interesting though that the price of oil keeps going down, while the price of gas is edging back up? Funny how that all happened after the elections. I know, there was no manipulation there…I just find it funny how it all worked out!

I suspect that OPEC will want to make further production cuts…but unless they police their members for cheating, it’s all window dressing. OPEC announces a production cut, and then the members go back home and turn the spigot on even more. A great bunch to watch your back, eh? NOT!

Well…not everyone is upset with Canada over the taxation on income trusts. I’ve sounded the warning bells because of this new tax, but this morning, I see a story that Westpac (a large foreign bank) is forecasting a strong recovery for the Canadian economy, underpinning the loonie. That’s fine with me…I’m from Missouri (or Missourah, as my grandfather used to call it) and I’m going to want to be shown!

There was a story in Barron’s this past weekend about the dollar. The writer just didn’t see how the dollar was going to lose any further ground, and in fact would rally. A few people have asked me about this article, and my response is simply, “it’s what makes markets…if he wasn’t buying dollars, I wouldn’t have anyone to sell them to!”

Before I head to the Big Finish, I wanted to mention that it looks to me like the South African Reserve Bank (SARB) will want to unwrap a Christmas gift early, as they look to raise interest rates in December. And don’t forget, I still believe the European Central Bank (ECB) will also raise rates in December. Hopefully, the currencies will make this a December to remember!

Currencies today: A$ .7693, kiwi .67, C$ .8725, euro 1.2818, sterling 1.8990, Swiss .8045, ISK 70.55, rand 7.2320, krone 6.45, SEK 7.09, forint 200.70, zloty 2.9680, koruna 21.82, yen 118, baht 36.58, sing 1.56, HKD 7.7860, INR 44.86, China 7.8680, pesos 10.9750, dollar index 85.38, Silver $12.92, and Gold… $625.40

That’s it for today…Except to say that it’s that time of season again. The lights are beginning to get put up and turned on, which means that November is almost over! Oh, and don’t forget St. Nicholas Day on December 6th. I’ll be in Phoenix, and won’t be around to remind you. Wednesday, December 6th! Have a great Tuesday!

Chuck Butler
November 21, 2006

The Daily Reckoning