Let's Just Pick And Choose

Good day…I hope your weekend was grand…I’ve been in San Francisco, where the weather hasn’t exactly been “Chamber of Commerce” like, but at least it wasn’t raining! I got to spend some great time with my little buddy though, and that was great! As I reminded you on Friday, the Pfennig will arrive later than usual this week, as I’m on the West Coast, and writing from my room! UGH!

OK…I’ve got a huge bone to pick with the media and the markets. Let me replay the events of Friday…first of all retail sales were expected to be a non-event coming in at plus 0.2 percent. Well…that took a turn for the worst when the data printed at a negative 0.4 percent. That’s right I said a NEGATIVE 0.4 percent! I then thought that we would see dollar selling and a general unwinding of a lot of long dollar positions that were put on in the past week, thinking that the Fed was going to hike rates again. Of course, as Pfennig readers, you know that I believe the Fed is going to hike rates again, but this had become a “new thought” among the traders and investors.

But NOOOOOO! The dollar rallied, and rallied hard! What in blazes was going on here, I asked? And then it hit me…this story came across the screens…”[For] Ex-gasoline and Ex-autos and Ex-building materials (which the U.S. government uses to calculate GDP) the retail sales number is actually up 0.8% in September.” WHAT? So…now, we’re playing games with retail sales too? Oh, I was so disgusted! This data reporting has become a real bad joke. So from now on, viewing printed data in the United States is nothing more than picking and choosing the items we want to include? Get out! That’s like going to a restaurant and telling the waiter that you’d love this wonderful dish, without the signature sauce that goes with it! Let’s just pick and choose, from now on…that’s what it’s all come down to folks. I shake my head and wonder, what the heck is going on around me!

And I don’t want to hear about how the falling gasoline prices in September were the cause of this, that and the other thing! With gas prices falling, the consumers should have either – 1.Bought more gas at cheaper prices, or, 2.Used their newfound cash to buy that pretty little sweater they’ve been looking at! Either of these would have offset the fall in sales…or…wait! I’ve got the answer! Maybe U.S. consumers took their newfound cash and used it to make a payment on their mounds of debt! Awww, who am I kidding? I know that didn’t happen! Anyway, you see my point. Don’t blame it all on falling gasoline prices…that money went toward something. It’s not in the U.S. consumer’s mindset, their constitution, to save money.

All right…I’ve calmed down now. I don’t want to start throwing things around and screaming at the walls, in a hotel room! So, the dollar rallied; and even pushed the euro below the 1.25 level briefly. In the overnight session, the dollar has backed off a bit, but nothing real to speak of. That stupid Empire State Manufacturing Index, which is normally all over the board with wild swings, posted an index number that is almost double last month’s…so the dollar bulls are waving flags and acting like they’re really something!

Last night, Russia’s Central Bank Deputy (Dawg) said that the bank had started buying yen for their reserves. Let’s see now…as we drift a little further down the stream, was it all just a dream? We’ve heard the Russians talk before, about moving their reserves into euros…and then it was gold; now it’s Japanese yen…but for the most part, they’ve not been responsible for any strong move in these assets. So either they are throwing very little money at the asset, or they are just pulling our chains…it’s probably the former.

For all those that were thinking that the recent data from the United Kingdom was not inflationary, here’s one for you! U.K. house prices jumped 11.5% this month…and I still say a rate hike happens here in November.

The commodity currencies of Aussie, kiwi, and loonies have been wandering lately as commodity prices as a whole have weakened. Overnight, however, oil prices have gotten stronger, along with gold prices. Hopefully this is just the beginning of a commodity price rebound!

We’ll see both PPI and CPI inflation reports this week, so hang onto your hat because there will be more “pickin’ and choosin’.” However the markets follow these cooked and massaged reports, so I have to. Whatever! These will be followed by the markets for indications of whether the Fed will hike again…all they have to do is read the Pfennig, and forget all those trumped up Gov’t reports!

Currencies today: A$.75, kiwi .66, C$ .8785, euro 1.2515, sterling 1.8575, Swiss .7860, ISK 67.40, rand 7.4725, krone 6.74, SEK 7.3860, forint 212.37, zloty 3.10, koruna 22.62, yen 119, baht 37.42, sing 1.5840, HKD 7.7835, INR 45.44, China 7.9083, pesos 10.83, Silver $11.79, and Gold… $596.50

That’s it for today. Bad football sports weekend, as my Missouri Tigers lost their first game, and the Rams lost on a 54-yard field goal as time expired! The Cardinals won 2 of 3, but got pasted last night…so a weekend of mixed emotions. I’ve got to get going now, as the next phase of sending out the Pfennig from the road, takes longer than it does to write it! UGH! Hoping for a great show here in San Francisco. Have a great Monday and week!

Chuck Butler
October 16, 2006

The Daily Reckoning