German Business Confidence Soars!

Good day… I have some BIG news regarding EverBank this morning… Yesterday, The Big Boss, Frank Trotter sent me this message:

“Chuck – Here’s something I think your readers may want to see. Once more it’s a great day at EverBank! On Monday we announced that EverBank has reached an agreement that will increase its assets to approximately $7 billion, its deposits to approximately $6 billion, and its customer base to over 550,000 through the acquisition of NetBank’s direct banking and small business financing divisions and mortgage servicing portfolio.

“EverBank expects to complete the acquisition by early summer with full integration expected by the third quarter of this year.

“We are very excited about the prospects for this transaction and look forward to welcoming 150,000 new customers as EverBankers.”

WOW! Just think about that for a minute… We almost double our assets, and I get 150K potential new readers, and maybe, just maybe they’ll see that diversifying their investment portfolios is a very important thing to do!

OK… Enough of that! The currencies didn’t really budge again yesterday, as the dollar did trade with a bias downward – but like I said, no big deal on the movements. Canadian dollars/loonies (CAD) remained well bid and above 92-cents on the day, but nothing else to really bet a bugger about.

This morning… May German Investor Confidence, as measured by the think tank, ZEW, rose to an 11-month high. ZEW uses an index to measure Investor Confidence, and this index rose to 24, which is quite a jump from the 16.5 it printed in April! I keep telling you that the Eurozone economy, led by Germany, is enjoying its best economic growth in years, which is nothing but manna from heaven for the euro (EUR). So much for the economists that forecast a slowing down of the economy for this year versus last year!

With all this growth – the Central Bank providing price stability, and rising interest rates – one would have to question why the euro isn’t trading above 1.40 and pushing 1.45. But patience, grasshopper… Patience.

Yesterday, I told you that Kuwait had dropped their peg to the dollar, and instituted a currency basket. They still won’t tell us the makeup of that basket, but here are some thoughts from one of my fave currency strategists from The Royal Bank of Canada, Monica Fan, “The Kuwait Central Bank today revealed that their KWD-FX Basket would be ‘import and financial flows weighted’ although the precise composition of major currencies would remain confidential (as expected). Kuwait’s top individual import-partners are in order: the US [14.1%], Germany [10.8%], Japan [8.4%], Saudi Arabia [6.2%], UK [5.7%], France [4.8%] and China [4.5%], according to the CIA. If the KWD-currency basket mirrored the import source of Kuwait’s top merchandise importers, the composition of the KWD-basket would be roughly: USD 46%; EUR 29%, JPY 15% & GBP 10%.”

So… If the major composition of the basket is still dollars, I don’t see any major changes going on here. So let’s move on, there’s nothing to see here.

One of the best performing currencies versus the dollar this year has been the Indian rupee (INR). Earlier this year, I kept hinting about rupee strength, but just couldn’t garner much interest in it. I wish now I would have just placed a flashing green light on the currency, and maybe someone would have noticed. But you know, the regulators keep a tight watch on me and make sure that I don’t blatantly say, “BUY RUPEES NOW!” Ooops, I just did… But I was just making a point!

Anyway… Rupee strength doesn’t look like it is abating any. Inflows of investments into India and the Indian stock market continue to fuel the rupee’s gains. Oh… And it’s now trading near a nine-year high.

Yesterday, I talked about the dolt mentality of those surveyed that told the U. of Michigan that they were “confident”. I also asked the question of how these same people will feel when gas hits $4 a gallon. I can tell you that I didn’t feel so “confident” this morning when I paid $3.35 per gallon! Energy prices are up all over.

That’s why I created the EverBank World Energy CD. And we’ve gotten some real good traction on this CD. But I’m afraid that not everyone is up to date in Kansas City on this CD.

OK… Another cosmetic move in the renminbi (CNY) by the Chinese ahead of the Paulson/Wu meeting. We see these cosmetic moves every time there are talks on the docket, only to see things slip back into the turtle pace once the talks are over. Get this: the renminbi has gained 2% this year, compared to a 9.1% gain in the rupee. Hmmm.

The U.S. data cupboard is pretty bare today, with the same going for it tomorrow. So… I don’t expect any big movements in the currencies, unless we see a rabbit pulled from Bullwinkle’s hat in the Paulson/Wu talks. But much like Bullwinkle’s experiences, I don’t think a rabbit will be pulled.

The euro reached an all-time high versus the Swiss franc (CHF) yesterday. The poor franc… It’s tied up in the “carry trade” as it too is used as a “funding currency”. So, besides the Japanese yen (JPY), the Swiss franc too would benefit from an unwinding of the carry trade. When that will happen is anybody’s guess. Maybe that woman with the tarot cards in Las Vegas could have told us!

Currencies today: A$ .8218, kiwi .7288, C$ .9220, euro 1.3455, sterling 1.9720, Swiss .8120, ISK 62.70, rand 7.02, krone 6.0535, SEK 6.8425, forint 184.20, zloty 2.8050, koruna 20.96, yen 121.50, baht 32.88, sing 1.5330, HKD 7.8230, INR 40.52, China 7.6540, pesos 10.7670, dollar index 82.46, Silver $13.09, and Gold… $664.35

That’s it for today… My fave show 24 ended its season last night. Not the best season for the show, but still my fave! I forgot to congratulate the Lindbergh Flyers Water Polo team for their fourth place finish in the Missouri state playoffs over the weekend. My oldest son, Andrew, is the assistant coach of that team. My two fave NBA teams have been eliminated from the playoffs, so I won’t watch any more of that! Have a great Tuesday!

Chuck Butler — May 22, 2007

The Daily Reckoning