It's Not Just Oil
"These holders of the oil contracts have so many dollars now they are coming out their collective ears! So, when they receive the dollars, they are probably converting them to a currency that has promise…"
by Chuck Butler In This Issue… - He's Baaaacccckkkk….
- A Tale of Two Trade Reports…
- Canada gets a taste of the BHI!
- A Long wait for yen…
--- Advertisement --- Need more World Market deposit slips? Simply give us a call at 800.926.4922, or, you can send an e-mail to worldmarkets@everbank.com. We'll be happy to send you more Bank-By-Mail envelopes by return mail. --------------------- And now…today's Pfennig! It's Not Just Oil… Good day. Well, I'm baaaacccckkkk! Didn't Chris do a phenomenal job on the Pfennig in my absence? You bet he did! So good in fact, I'm thinking of handing it over to him permanently…Gotcha! Nah, I wouldn't / couldn't even think of doing that, this is my baby that started out with hand written notes to salesmen in 1992! But the point is, that I'm completely comfortable now leaving it to Chris! What a nice currency rally while I was away, eh? I wrote to Chris on Thursday night and said that I believed that the sentiment toward the dollar has shifted big time, and that the markets were moving away from the SIRT mentality that I've ripped them on for so long, and returning to the awful fundamentals that a near $60 billion trade deficit and current account that's nearing 6% of GDP will bring a currency! On Friday, Canada posted a very nice, and larger than expected trade surplus. This gave the loonie traders reason to move the currency to 1.1925. A level that hadn't been seen since Big Al's bomb was dropped on March 22nd. After spending a week in Canada, I can tell you that the people I spoke to were full of optimism for the loonie. The National Post's front-page story on Saturday was titled "Economy Juiced on oil, coal." This story was about the Trade Surplus that printed on Friday, and went on to say things like, "The Canadian economy is getting a big juice from the trade numbers" and "Everything is pointing toward a firmer Canadian dollar." And I can't let this one pass. The Canadian economy got a dose of the Butler Household Index (BHI) for Retail Sales last week! I came back to the hotel room one day and it looked like Christmas Day! Shopping bags all over! I would have to say right here, right now, that the Canadian Retail Sales number for August should be a real barn burner! Of course, this Trade Surplus was announced on a day when the U.S. Trade Deficit hit $58.8 billion, thus showing the Tale of Two Trade Reports! And I've got bad news for the people that say the Trade Deficit didn't gain as much as Chuck said it would… Only half of the increase in the deficit between May and June was accounted for by higher oil prices as the non-oil deficit increased to $41 Billion from $39.6 Billion. That means that it's not just oil that's knock, knock, knocking on heaven's door here. No wait, I got carried away there again. What I mean is the U.S. consumer continues to spend their way on the road to ruins. But, that's just my opinion; don't let that get in the way of a rising Trade Deficit! Oh, and the price of oil continued to gain in July and into August as we are all well aware of, and that can't be a good thing for the Trade Deficit! And here's something else to think about that a lot of people ask me about all the time. Yes, oil contracts are denominated in dollars, so all these gyrations in the price of oil must be a good thing for the dollar, right? Ah, grasshopper…come sit… These holders of the oil contracts have so many dollars now they are coming out their collective ears! So, when they receive the dollars, they are probably converting them to a currency that has promise… Pound sterling has really taken a flyer since the Bank of England decided to cut rates while I was gone… I think that 1. at first it was a relief rally that a larger rate cut didn't materialize, and 2. The dollar has gone back to trading on fundamentals, and that will help almost all currencies. And Japanese yen! WOW! Finally, traders sat up and noticed the investment flows coming back into the Japanese stock markets, and the light bulb went on over their collective heads… "Wow! I could've had a V-8!" No… Wait… They are slapping themselves in the forehead and saying… "We should be buying this currency"! But really… It has been a trying time with yen and the other floating Asian currencies of Thailand and Singapore… But I continue to believe these currencies are the ones that need to move to gain any traction in the Current Account Deficit… And I just told two different groups at the Agora Wealth Symposium last week just that! Today… We get the TIC's data, or the Net Foreign Security Purchases (NFPS) which the dollar bulls continue to point to at every opportunity! They (dollar bulls) claim that the deficit is being more than covered by foreign purchases… I say they are not… But then there aren't many people in the world that really know the total picture of the Current Account and net foreign direct investment outflows… And those reached a total of around $75 Billion last month… So… Let's see where the NFPS comes in today… The experts have it around $64.5 Billion… The dollar has gotten some wind in its sails overnight on the thoughts that the NFPS will be greater than the $64.5 Billion that is forecast… This is one of those classic times when the risk here is that the number is disappointing (which it will to me anyway, but we've got to deal with the media)… If the data disappoints, the dollar will fall like a rock today… But the data is so confusing to most people, that we'll have to see which way the traders want to take this one… My friend Addison Wiggin, the co-author with Bill Bonner of the Best Seller, "The Financial Reckoning Day", has just written a new book titled: "The Demise of the Dollar"… I'm only half way through it, but once again Addison has hit the nail on the head! His book has knocked Harry Potter off the number one position! This is a must read! [If you would like your own copy, you can get it right here: The Demise of the Dollar (and why it's great for your investments) Well, the Chinese renminbi moved to its highest level VS the dollar (since the 7/21 un-pegging to the dollar) last night at 8.0971… And we know what this is a result of right? Recall, I explained this all before I went on vacation, which by the way was fabulous! You see the basket of currencies that the renminbi is now tied to, has a greater ability to move VS the Asian trading partners… And if those currencies move higher, then the renminbi will move higher VS the dollar… And, as I said above… The Japanese yen, Singapore dollar and Thai baht have really turned the corner VS the dollar! I hope that's not clear as mud! Time to head to the Big Finish on my first day back in two weeks! Now… Let me check that calendar for when my winter vacation begins! HA! Currencies today: A$ .7720, kiwi .7080, C$ .8360, euro 1.2375, sterling 1.8105, Swiss .7980, rand 6.435, krone 6.4290, forint 197.50, zloty 3.28, koruna 23.80, yen 109.50, baht 41.02, sing 1.6575, pesos 10.65, and gold… $443.00 That's it for today. WOW! Vancouver was such a beautiful city, with so many things to do! However, going through customs on the way home was something I'd like to soon forget! CPI and PPI will be printed this week for July, not that I put much stock in what the government tells us is inflation and what isn't these days… The Big Kahuna this week is today's NFPS. Hey! Vacation was great, thanks to all that sent along a note to me hoping for such! My Cardinals just took one on the chin from the Cubs, but overall they are still flying high, and without two major stars in their lineup! Have a great Monday and week! | 
