The Tax Man's Day…

Good day… A quick one-day trip to the Big House, in Jacksonville yesterday went well. Chris tells me things were crazy on the desk yesterday… (That’s a good thing!) And of course our thoughts and prayers are with the families of the Virginia Tech campus shooting. What an awful thing.

Well… I guess I’m the first to wear a lampshade on the desk. There was a day last year, when John Kaupisch said, “when yen gets to 110, I’ll wear a lampshade on my head!” Well, that prompted me to say, “I’ve been touting the pound sterling getting to 2 for so long, that I’ll wear one when it finally gets there! The pound sterling is trading just below the 2 figure, but in overnight trading, it did hit 2. But since no one saw it here, I wonder if I still have to wear the lampshade? No worries, the pound sterling will get back to 2 for everyone to see, and then head to 2.05, and maybe even 2.10!

The euro is also hitting some lofty levels that haven’t been seen since December of 2004, and the first couple weeks of January 2005. Last Friday, I said it looked like a rout on the dollar because of the markets’ collective fear that the trade deficit widened in February. Of course, that didn’t happen and as Chris told you yesterday, the trade deficit narrowed in February. Let me remind everyone here of something, that shouldn’t be forgotten so easily by the markets… FEBRUARY HAS FEWER DAYS THAN THE OTHER MONTHS! IF THE TRADE DEFICIT CAN’T NARROW IN A MONTH THAT HAS FEWER DAYS, I’D SAY WE HAD BETTER BATTEN DOWN THE HATCHES!

Let’s see here, if I get out some paper and pencil, I see that February had three fewer days than January, which posted a $59 billion deficit. That’s a $1.9 billion (and change) a-day ticket. So if we just add three more days of $1.9 billion to February to even it out, we see the trade deficit actually widened to $64 billion! Aye, yi, yi! But, hey, don’t let the facts get in the way of a “feel good” story by the media!

Oh… And German investor confidence just printed a 10-month high! Investor confidence as reported by the think tank, ZEW, says that this is the highest level since June 2006. And why not? German exports, even in the face of a rising euro, rose 1.9% in February, and the German stock exchange, DAX, hit its highest level since 2000! WOW!

I see the pound sterling just went back over the 2 figure… So I have a wardrobe addition in my future!

You know, a couple of years ago, I was receiving hate mail daily. Some awful things were said to me, about me, and so on… All because the dollar had taken a technical, or mid-weak dollar trend, pause. Today, I feel vindicated. I said two years ago that the pound sterling would get to 2… And today, it’s there!

No backslapping though. I’m just pointing out that in currencies, you have to be patient. And yes, I do write a daily letter about currencies, but I don’t think that I ever lose sight of the fact that currency movements are long sweeping moves that at times seem to not move at all. When you look back at where you came from, you see things like Aussie at 49-cents, kiwi at 39-cents, euro at 82-cents, and sterling at 1.37.

Yes, that’s where all those currencies were when I was pointing out the chinks in the dollar’s armor. Then, the dollar slipped into the weak dollar trend in February of 2002, and well, today, you can see we’ve come a long way, baby!

I just finished next month’s Review & Focus, and I really spent a lot of time talking about the mid-trend pause in commodities that now seems to be over. Commodities have really come back with a vengeance and are taking names later. They were led by the rebound in base metals that I’ve talked about before, the precious metals, and now oil is bubbling again. I know…I just filled up my gas tank on the way to work this morning. OUCH!

But the point I make in the R&F is that you can put the rebound of the commodities right on top of the rebound in Aussie, kiwi, and Canadian dollars/loonies. They illustrate, what a commodity currency is all about!

Today, we’ll see the color of the March Consumer Price Index (CPI). Long time readers know just how much I dislike what CPI is all about… But, it’s here, and the markets cover it (why, I have no idea, but they do), so I have to. Inflation is forecast to have taken a jump in March, but the media likes to focus on the “Ex-Food & Energy” number, which is expected to remain flat.

Yeah, and I have the title on some swamp land in Buena Vista, Florida, that some guy named Disney wants to buy! Inflation remaining flat? Who are they trying to fool? We all know what’s going on, we can feel it in our wallets every day. Just the other day I saw a note in the paper that the University of Missouri will increase tuition over 3% next year. But, inflation is flat – don’t worry about it! NOT!

In addition to the CPI, we’ll see data on March housing starts, and two of my faves – industrial production and capacity utilization. No big market movers, but they should be!

Today is also Tax Day – April 17th. My beautiful bride mailed ours off yesterday. That was a tough one! Every year, I add some lyrics by the Beatles song “Taxman”, and this year won’t be different! “Let me tell you how it will be. There’s one for you, nineteen for me. ‘Cause I’m the taxman. Yeah, I’m the taxman. Should five percent appear too small. Be thankful I don’t take it all. ‘Cause I’m the taxman. Yeah, I’m the taxman.”

April 17th is also the last funding day for this month’s two MarketSafe CD’s. Japanese REIT, and gold – BUT NOT TO FEAR, FOR UNDERDOG IS HERE! Well, that may be, but what I don’t want anyone to fear that this is it for those two issues.

We WILL be issuing the Japanese REIT and Gold CD’s again next month! YAHOO!

Currencies today: A$ .8340, kiwi .7405, C$ .8840, euro 1.3545, sterling 2.002, Swiss .8265, ISK 65.20, rand 7.1250, krone 5.9525, SEK 6.8025, forint 181.60, zloty 2.82, koruna 20.64, yen 119.40, baht 32.60, sing 1.5120, HKD 7.8120, INR 41.95, China 7.7310, pesos 11, dollar index 81.98, Silver $13.97, and Gold… $688

That’s it for today. I was unaware of the Virginia Tech shootings until reaching the airport yesterday. What a shock… Again, our thoughts and prayers should be with these people today. I’ll be sneaking out today; well I guess it’s not sneaking, now that I just wrote about it! Anyway… Cardinals and Pirates at Busch at noon today. Need I say more? Hope you weren’t hurt by the tax-man. Time to hit send. Have a great Tuesday!

Chuck Butler —  April 17, 2007

Chuck Butler is the senior vice president of EverBank World Markets. He oversees the trading desk and operations for over 12,000 individual and corporate clients, both in the United States and abroad, who look to EverBank for FDIC-insured World Currency Deposit Accounts, and Single-Currency and Index CDs .

Chuck is the author of The Daily Pfennig, which is reposted here at The Daily Reckoning. His respected analysis is frequently quoted in or referenced by: the Wall Street Journal, U.S. News and World Report, CBS Market Watch, USA Today, CNNfn, the Chicago Tribune and many other publications.