Spring Has Sprung!

Good day… The first day of spring! It was cold here yesterday, and didn’t even look close to being the day before spring. Technically, because I know someone would point this out to me, spring began last night at 7:07… But this is the first full day; that’s my story and I’m sticking to it!

I sure hope spring can bring some warmer weather for not only my comfort (you know me, I live by Jimmy Buffett’s words, “I’ve gotta go where it’s warm”) but I’m hoping the warmer weather will also bring about the thawing of the current trading range for the dollar/euro…and other currencies of course! I do know one thing that follows spring… The beginning of the baseball season, which is like manna from heaven for me!

OK… On March 6th, I told you that the rally in the yen (at that time) looked very familiar to last spring’s actions. Let’s go back to the tape, “You see, you only have to go back to last spring to see the same type of sell off in stocks, and commodities, and a rise in yen.” Well… Talk about playing out! 15 days ago, I explained how similar the trading action looked to last Spring, and here we are on March 21st, seeing it all play out! I love it when a plan comes together!

There’s one caveat to this scenario that I didn’t consider when I first talked about it, and that is the subprime mortgage meltdown hanging over the markets like the Sword of Damocles.

The late February panic in the markets was driven by our old friend (NOT!) Big Al Greenspan’s “recession for the United States” comments. It spooked them, and almost like a strong drink and a slap in the face, the markets, for a fleeting minute, had a dose of reality hit them between the eyes. But that’s all in the rear view mirror now.

I’ll tell you this… Comments by Chinese Central Bank Governor Zhou yesterday should have spooked them even more… But NOOOOOO! I guess it takes Big Al, because in the past year we’ve had David Walker, Paul Volker, Warren Buffett, Dr. Richebacher, and a host of others (including yours truly) make statements about the U.S. economy/debt situation, without any movement in the markets at all. But Big Al says something…and Whammo! Hey Rocky… Wanna watch me pull a rabbit out of my hat?

Anyway… Here’s what Mr. Zhou had to say, “CHINA WILL NOT ACCUMULATE MORE FOREIGN RESERVES”, and that “CHINA TO CUT ‘SMALL PIECE’ OF RESERVES FOR NEW FOREX MANAGEMENT AGENCY” Hmmm… Wasn’t it just a week ago when China announced that they were going to form a new Forex Management Agency and that Chinese Minister Wen said, “I can assure you that by instituting such a foreign exchange company, it will not have an impact on U.S. dollar-denominated assets.”

Hmmm… Sounds like the opposite to me! Sounds like they are going to funnel reserves to this new agency, and that the agency will be responsible for spending them… On something… But spending them no less!

OK… As I alluded to earlier… The currencies didn’t move much yesterday… A very tight trading range… But instead of being down about that, and calling the glass half empty, I’ll look at it like this… The dollar didn’t gain any ground either! So the glass was half full! And every day, the dollar remains in the weak dollar trend, the more we’ll see the negativity toward owning dollars grow.

Well… Did you see the housing starts data for the United States yesterday? Amazing! Astounding! And Incredible! Housing starts rose 9.0% in February to an annualized pace of 1.525 million units, slightly stronger than the “experts” calling for an increase to 1.50 million starts. What gives here? Do these builders not see the writing on the wall? Why on earth would they continue to start building more houses with all the houses sitting empty, unsold right now? “Volume” is not going to be the answer to this marketing equation!

Per Census Bureau, in the fourth quarter of 2006, there were 126.6 million homes in the United States. Of these, 16.7 million were vacant. That is a whopping 13.2% of all U.S. homes that were sitting empty. And this was before the subprime meltdown really sunk its teeth into the housing sector!

But don’t let me get in the way of a “feel good” story!

OK… On March 9th I wrote from Orlando to tell you that we had created a new MarketSafe CD, which gives the investor 100% principal protection, and this one tracked Japanese REITs. We had good interest in the CD, but not what I thought it would be. But that’s OK. Maybe the Japanese housing market isn’t your cup o’ tea… But in case you were wondering… You might want to check this out… Tomorrow, a national report on land prices is expected to show a second consecutive year of rising prices in Tokyo and other major cities. Last year’s report showed that commercial land prices rose in all of Japan’s three largest cities for the first time in 15 years!

Here’s what I had to say on March 9th in this very Pfennig! “Our Friend, Steve Sjuggerud, recently wrote in his True Wealth newsletter that he had just gotten back from a visit to Japan, and witnessed a recovering housing market. One that had been beaten down for over a decade… He then came to us, and asked us to create a MarketSafe product on the Japanese housing market.”

All indications point to the fact that Steve has once again “nailed” a market movement. Who would have thought to invest in Japanese REITs? EverBank and Steve Sjuggerud… Oh… If you’re like many people and have trouble pronouncing our friend’s name… He tells me it’s very easy… It’s STEVE! HAHAHAHAHAHA!

So… The funding period for this MarketSafe CD goes until April 17th. There’s plenty of time left… But, don’t wait! Get your paperwork in, fund the account, earn a great rate of interest while waiting for the CD to be issued! Simply reply to this Pfennig if you want paperwork sent to you!

There! I segued right from data on the Japanese housing market to our MarketSafe CD… Simply amazing, I tell you! HAHAHAHAHAHA!

I’ll tie this all up and put a bow on it by telling you that both Aussie and kiwi held onto their gains yesterday, and both are trading above their psychological levels of 80 and 70-cents respectively. And, a jump in Canadian inflation has the loonie moving higher again, as it has reached the 86-cent level, something it hasn’t seen lately! And… Indian rupees are kicking tail and taking names later!

Currencies today: A$ .8020, kiwi .7050, C$ .8610, euro 1.3305, sterling 1.9615, Swiss .8235, ISK 67, rand 7.3430, krone 6.1550, SEK 6.9950, forint 185.90, zloty 2.91, koruna 20.95, yen 117.70, baht 32, sing 1.5225, HKD 7.81, INR 43.57, China 7.7340, pesos 11.09, dollar index 83.18, Silver $ 13.38, and Gold… $662.21

That’s it for today… And for me until April 3rd. As I said on Monday, Chris will have the conn on the Pfennig beginning tomorrow. When I get back… The baseball season will have begun, and the NCAA Tournament will be over! After further review… I’m NOT going to Panama in May, the Big Boss had already booked that one! Can’t wait to get back to Jupiter, and it’s not so I can get more stupider! Warm sun… Beaches (even though people are always trying to roll me into the ocean), and my Cardinals! My little buddy, Alex, loves spring training as he gets to get up close to the players, etc. So… Dark and early tomorrow I’m outta here! Have a great Wednesday!

Chuck Butler –March 21, 2007

The Daily Reckoning