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My View from the Cheap Seats

Chuck Butler (April 9, 2009)

Issue #58: Thursday, April 9, 2009

Why One Country Looks to Emerge from this Recession First

Also In Today’s Letter…

By Chuck Butler I’m absolutely shocked I was able to answer the bell this morning, so this will be short-n-sweet, as I’m working on borrowed time right now!

Well… No earth shattering announcements, research papers, or data yesterday, so the currencies were able to gain ground vs. the dollar. Not much, but some…

I would have to say that from my view in the cheap seats, there seems to have been a bias to sell dollars this week, ahead of the shortened week and long weekend.

It will be Good Friday for those of us who observe that tomorrow, which means U.S. stock markets will be closed. Also, a handful of countries close down to begin the Easter holiday, which will carry over for some countries until Easter Monday.

Of course, the Forex market will still be open tomorrow, but trading will be fairly thin because the U.S. traders will be off for Good Friday and the European traders will be starting the weekend early.

So, this is the last “full-day” of trading around the world, till next Tuesday.

As I mentioned above, it certainly seems as though the bias has been to sell dollars this week. But how long will that hang around? U.S. Corporations begin, in earnest, to announce earnings next week. In my opinion, there is going to be more blood in the streets for the overall markets. That means, I would like to see the currencies break their tie with stocks beforehand!

They’re Throwing More Good Money at Bad…

I see Japan is back to its old tricks. They spent US$150 billion worth of yen on their “next” stimulus package. Throwing good money at bad money, that’s what I call all this stimulus stuff! Now, I was reading a report yesterday that talked about the U.S. “turning Japanese” because of all the government spending to deal with a recession, just like Japan did in the 90s. (It worked out so well for them, eh?)

Of course, if you’ve been reading FX University over the last year, then you know that I’ve been making that comparison for a while now.

But truthfully, my views on this subject go back even further than that. In fact, my old colleague, Chris Lissner and I sat down in 2001 to figure out where the U.S. was headed. We began putting charts on tops of charts and yield curves on top of yield curves, which showed the U.S. might be following in Japan’s footsteps.

That was a LONG TIME ago folks – way before the U.S. began spending trillions of rtaxpayer dollars to kick-start the economy, before they tried to save us from the “financial disaster” on the horizon.

Have you heard what the press is calling bankers these days? They call them “banksters,” like gangsters. I don’t know about you, but I think calling any of those bankers that brought the financial sector to its knees, “banksters” is probably doing a mis-service to gangsters! Haha!

Could This Be the First Country to Emerge from the Recession?

Recall about six months ago, the markets were buzzing with the news that China was going to “shut down” and would not allow the renminbi to gain vs. the dollar? That’s all water under the bridge now.

You see, as I’ve mentioned a couple of times now recently, it looks like China will be the first country to pull out of the global recession. I’m seeing more and more stories on the news wires that talk about buying renminbi once again. Very interesting…

This morning, the Bank of England (BOE) is meeting to discuss rates, and truthfully, there’s not much left to discuss! The BOE already cut rates to 1/2% or 50 basis points.

But, just like the U.S. Fed, this meeting follows the BOE’s Quantitative Easing announcement. So, you just never know what might be said here to move the pound sterling either way.

Down Under,: Australia saw Consumer Confidence rebound for the first time this year… Here’s the skinny: The Westpac-Melbourne Institute index of consumer sentiment rose 8.3% to 92.7 points, from 85.6 points in March.

However, the index remains below 100 points, signaling pessimists are outweighing optimists, for the 15th month in a row.

A$ Consumer Confidence Battles Back

Westpac chief economist Bill Evans said the result was “surprisingly strong” and followed a month of more positive economic news and a rise in the Australian dollar exchange rate and the stock market.

Just another brick in the wall…, “All in all, just another brick in the wall.” (Thanks Pink Floyd.) Anyway, this goes with what I’ve been saying,: Australia “may” be turning the corner.

I just received a note from a reader who was traveling in Australia. The reader mentioned that they are not seeing the financial panic there. So, some news from a correspondent on the road!

Just Because These Dolts Don’t Care About This…

Someone asked me to address the TIC data, which I used to make such a fuss over. You may recall that TIC stands for Treasury International Capital. In short, it’s the measuring stick used to calculate the “Net Foreign Purchases” of our debt.

And why do we need foreigners to buy our debt?

That’s right, we need those extra funds to finance the deficit. The TIC data has been quite weak lately, and the reader wanted to know why I no longer made a fuss about the data coming up short.

Well, frankly I still care about this data, but the markets don’t seem to care. Are they dolts? Probably… But I would get all wound up about the data coming in short to finance the deficit, which means the dollar should get hammered, and it would be nothing, nada, zilch, zip from the markets.

I shake my head in disgust, but carry on despite the dolts in the markets….

That’s it for today… Well, for those of you with enquiring minds: My trip to the eye specialist yesterday was interesting. The pictures showed the fluid on the back of my eye, drying up, still there, just not as much.

He still believes that a good portion of my eyesight in my left eye will return to me. I can’t begin to explain to you just how unpleasant those injections can be… But it is what it is, and if it gets my sight back, so be it! I get my quarterly scans next Tuesday, so let’s keep those fingers crossed for yet another “clean” scan!

There’s a day game at Busch Stadium today, but I feel so darn bad, I’m going to have to miss it. You know there’s something wrong when I pass up a day game, for that’s when baseball should be played! I’ll be back here tomorrow, as Good Friday isn’t a working bank holiday. Talk to you then!

I hope your Thursday is Thunderin’!
Chuck