Is Intervention in the Cards?

Good day… And a Happy Friday to one and all! I’m out the door early this morning and on my way to get more stupider in Jupiter! HA! Another record day for the euro (EUR) on Thursday, while yen (JPY) backed off that 100 level with tons of profit taking. And who can blame these profit takers? They haven’t held yen as long as I have, but I’m sure they’ve held it long enough that when they see a chance to take profits… DONE!

It was a Tub Thumpin’ Thursday for the currencies once again… But at one point during the day, the dollar rebounded a bit only to give it all back by the end of the day. But overnight, there seems to be a feeling creeping into the markets that there could be some co-coordinated Central Bank intervention… The euro has given up 1/2 cent on the creeping feeling…

Let me talk a minute about co-coordinated Central Bank Intervention (CCBI)… For anyone new to class, CCBI would be a case of let’s say… The European Central Bank (ECB), The Bank of England (BOE), and maybe the Bank of Japan (BOJ) are being brought together by the Fed to buy dollars and sell their own currency to wrap a tourniquet around the bleeding dollar.

Traders like to talk about this kind of stuff because it provides great drama… But in reality, it is a very rare occasion that brings these Central Banks together. This IS obviously a very rare occasion when the euro is high stepping it into the 1.60 end zone, and Japanese yen flirts with a sub-100 level… So… Do I think this will take place? No… I don’t think it will… But does it have a chance to take place? Yes, it does…

So… Watch for this, but keep in mind that CCBI can lead to even worse levels in the dollar (in this case), as the markets have far deeper pockets than a Central Bank… CCBI can lead to short term appreciation for the currency the Central Banks are trying to “save”… That, my friends, could lead to a great buying opportunity for those of you who believe the currency parade had passed them by…

Retail sales in the U.S. collapsed in February, just like the BHI indicated it would… Recall, I said the BHI indicated that the results would be disappointing… The “experts” had retail sales rising .2%… They actually fell .6%… This tells me that Consumers are battening down the hatches, just like they should be doing during a recession! You have rising food and energy costs, house prices falling, Jobs weaker, and somehow the “experts” thought the U.S. Consumer would just continue to spend… That dog ain’t gonna hunt!

Hey! And how about gold? I actually, with my own two eyes saw gold futures trade at $1,000 yesterday… Spot gold was just a hair below $1,000 at $999! WOW! With oil pumping the its price higher and higher every day, gold is taking advantage of high oil and a low dollar.

OK, it’s all clear now… Everyone back in the pool! S&P (standard & poors) said yesterday that the end to subprime-related write-downs is in sight… That’s right… That’s what they said… And that brought about a rally in stocks… So… S&P is part of the Plunge Protection Team, eh? Now… How does S&P know this about the write-downs? My two-cents is on the fact that they know nothing more than you and I, but saw stocks in a meltdown and came in to save them… I could be wrong about that… But from my view in the cheap seats, that’s my two-cents!

Oh… And the Wall Street Journal says that in their latest poll of economists (funny, they didn’t call me!) the economists now believe the U.S. has slipped into a recession. Hmmm, welcome to the party boys and girls! Your host, this evening, Mr. Chuck Butler, has been waiting for you to join him in the “the U.S. is already in a recession room”!

With U.S. stocks taking comfort in the news from S&P, that gave the green light to Aussie (AUD) and New Zealand dollar (NZD) bulls to push their respective currencies higher… Yesterday, Aussie was nearing 94-cents… Last night it hit .9450! 1/2 cent a day… You can’t beat that with a stick!

This morning, we get to see the “stupid” CPI for Feb… Along with U. of Michigan Consumer Sentiment… Oh, and don’t forget Big Ben is in Washington to speak about homeownership… That ought to be interesting!… But I won’t have the faintest idea what he said, because I’ll be jetting off to Spring Training!

Expect CPI to show some stupid number of .2% rise… .4% year-on-year… If it does, then you have to throw in the towel and finally agree with me that this report is “cooked”, “baked”, “massaged” and whatever other term you want to use, by the Government… They can’t let you feel like the roof is crashing in with high inflation can they? They don’t believe they can… And so, they lie!

The Chinese renminbi moved higher VS the dollar again overnight, moving to yet another record VS the dollar since dropping the peg in July of 2005. Talk about people that have some nice gains in a currency… We began offering renminbi in 2003, and there are investors that have owned it since then… I don’t know what’s going to happen in China and the renminbi, but this scenario reminds me of something my dad taught me years ago… It’s not a profit until you take it…

And finally… The U.S. 10-year Treasury Auction yesterday had the lowest bid-cover ratio since 2003… That’s not a good thing folks… It means that no one wants the paper at the price it was auctioned… This won’t make the mortgage people happy either, as Treasuries weakened on the news, which means mortgage rates will rise… I didn’t see anything on the Network News last night regarding this, did you? I didn’t think so!

Currencies today: A$ .9420, kiwi .8165, C$ 1.0150, euro 1.5565, sterling 2.0285, Swiss .9905, ISK 69.85, rand 7.93, krone 5.1130, SEK 6.0750, forint 165.30, zloty 2.2680, koruna 16.11, yen 100.50, baht 31.30, sing 1.3825, HKD 7.7810, INR 40.38, China 7.0890, pesos 10.76, BRL 1.6930, dollar index 72.09, Oil $110, Silver $20.65, and Gold… $997.50

That’s it for today… And for me until next Wednesday… A two day stint, back in town, and then I leave again until Opening Day! A typical March for me, travel wise… I try so hard to get things in my life back to normal… A nice family gathering at the Butler House last night to celebrate my beautiful bride’s mom’s birthday… My older kids named her “granny” when they were little… I’m heading to Florida with my good friends Rick, who just turned 40, and Duane… Our other member of the “posse” Jay couldn’t make it this year, even though he was the one that told us that “we had no excuse to not make it to spring training each year”… The NCAA brackets will be announced this weekend. This is such an exciting time for college basketball fans… My beloved Missouri Tigers Basketball team will not be invited to the “Big Dance”, they have been in a downward spiral opposite of the upward spiral of the football team… Oh, well, there’s next year!  Ok… I hope you have a Fantastico Friday, and wonderful weekend… Oh! Wait!, Monday is St. Patrick’s Day… A BIG Day for yours truly… I left my Review & Focus readers with a fave Irish poem of mine… I’ll do the same for you!

May the road rise up to meet you
May the wind be always at your back
May the sun shine warm upon your face
May the rain fall softly upon your fields
And until we meet again
May God hold you in the Palm of his hand…

Chuck Butler
March 14, 2008