market views

Review & Focus®

Chuck Butler | April 1, 2016 8 MIN READ

For currencies, March came in like a lion and is going out like a lamb. It’s been an interesting ride watching the markets get used to the newfound realization that the Fed was not going to hike rates in March—and then watching the markets react to this newfound realization. I’m going to spend some time talking about fiat currencies, and a thought that paper short trading of gold and silver might be going away. So, let’s get going on this month’s Review & Focus.


All the buildup that was going on three months ago pointing to the Fed March meeting began to crumble, and as we went into the meeting, the Fed Funds Futures pointed to a 0% chance of a rate hike. The last couple of weeks ahead of the meeting, I had thought that the Fed wanted to hike rates to put another arrow in their quiver, which they would need when the recession actually is announced. But, eventually, I came around to see that the Fed had no other choice but to leave rates unchanged, for the economic data just wouldn’t cooperate with them.

Oh, that economic data. Even with the “seasonal adjustments,” the massaging and cajoling, the economic data just wouldn’t cooperate. I talked to you last month about the “real economic data,” and while the bulk of the “real economic data” prints were better than previous months, they were still nothing that looked like reports that indicated the economy was out of this funk that it is in.

Sure the jobs data each month gets everyone all lathered up, but that’s about the end to that. I really question the jobs data each and every month, and in my Daily Pfennig® newsletter, I’ve told readers that I just don’t care about the BLS (Bureau of Labor Statistic) reports any longer. They just don’t make sense to me. And the hedonic adjustments make even less sense to me. For instance, the BLS uses what they call a Birth/Death Model to adjust the jobs numbers each month. The idea of this adjustment is that when new businesses start out, it takes a month or so for the new employees to be counted. And when business closes, it takes a month or so for the employee to fall off the records.

Knowing this, you would think that the BLS would be subtracting jobs from their surveys each month, right? Well, think again, because for the most part the BLS has added jobs every month. There were two months last year that went back-to-back with an increase of 230,000+ jobs in the Birth/Death model. Let’s see, one month had 269,000 total jobs reported, of which 230,000+ were added using a model that seemed to me to be wrong.

The reason this is such a big deal folks, is that the currencies and metals all trade on sentiment these days. And when the traders see a strong employment report—and trust me they don’t do a single bit of looking under the hood at how the numbers were derived, they just take the total reported—their sentiment tells them to buy dollars, because strong numbers like this will lead to the Fed hiking rates, and thus increase the dollar’s value.

But the problem is simply that this is all based on “surveys” that the BLS takes each month, and adjustments. There’s nothing concrete in those numbers folks. And that’s why I prefer using John Williams’s Shadow Stats numbers. John is a former government accountant who uses the method that was used to count jobs prior to 1990, when the “adjustments” began to arrive. And over at Shadow Stats, John says the true Unemployment Rate is still more than 22%. Now, that makes sense to me.


Last month I told you all about the whispering campaign that has started to end physical cash. Since then, the Swedish Central Bank (Riksbank) has denounced the use of physical cash. And so after I wrote that piece last month and sent it off to the reviewers, I thought, I should have talked about currencies, because they are what I’ve built my career around. And so, with no further ado...

I’ve always been someone that believed that if you had money in your pocket you were rich. No, I’m not crazy! Each and every person defines rich as what makes him or her feel rich. To me, it was always folding bills—currency. And then in 1971, when currencies went “fiat”, which meant that they no longer had anything backing them but the full faith in the government that issued it, I began thinking about real But that didn’t deter me from my love of having “currency” in my pocket.

In 1985, Frank Trotter began the Mark Twain Global Markets Division at the old, now defunct, Mark Twain Bank, and I was asked to figure out how we could get a Bank’s GL dollar-based system to deal with foreign currencies. I began to learn about other currencies besides the dollar. But people would stop me at shows, etc., and ask me why I’m interested in currencies since they were “fiat.” So, along the way, I came up with an idea that I could use when explaining to people why I love currencies so much, which would involve me working around the word “fiat.” I had to figure out how to show that currencies did have “intrinsic value.”

I thought long and hard and then realized that critics of fiat currencies are wrong to charge that there is no intrinsic value in their operating only on confidence. In fact, fiat currencies are the ransom people pay their governments through taxes to be allowed to stay out of jail. Now that’s “intrinsic value” to me!


Well, the U.S. passed $19 trillion in current national debt last month. I find this to be incredible that this debt continues to just go unchecked by anyone. Just 8 years ago, it was only $7 trillion, and I used to have a cow about that number. I do believe that we have all grown “comfortably numb” about these numbers and that’s sad. To wake people up now and again I tell them, “But the real debt is the Unfunded Liabilities, which stands at greater than $101 trillion, and Professor Lawrence Kotlikoff says that the real number is more than $200 trillion.” That sends chills down my spine folks. Especially when you throw in the fact that 10,000 baby boomers will retire each and every day for the next 15 years. Can you imagine what that Unfunded Liabilities Number will look like in 10 years?

So what’s the big deal I hear you asking? Well, I guess we’ll get to see what the big deal is when Japan finally folds the tent, for which I don’t believe they will make us wait much longer (in years). When you build debt, you have to finance it, right? It’s the same with countries, folks. So, does the U.S. become self-financing, which would require us to buy all Treasuries that are issued, which would mean that dollars would have to be printed to purchase those Treasuries? When you just keep the printing presses running non-stop printing currency, eventually that currency has a major problem. So, let’s just keep running up the debt unchecked, and having the time of our lives. We’ll never have to worry about paying the bills, right?

I saw a video recently that showed a mom answer a door holding her two year old, and the guy at the door tells them that they need to begin paying very large sums every month, because the government is broke. And the mom says, but I can’t pay that amount, I already pay taxes, and the voice from the man at the door says, “I wasn’t talking to you” (he was talking to the 2-year old). Pretty dramatic yes, but true. Oh so true!

In conclusion, the currencies have performed better in 2016, so far. And while their performances have been better, they still lack the strength to offset the dollar when the dollar has its good days. But when trends begin, they begin slowly, and then eventually someone notices the moves. Here’s to a change in the strong dollar trend.

Well, I hope you like the new format for the Review & Focus. I went down kicking and screaming about not sending out a printed letter each month. But as you can see, I lost, and you gained, because now you get the Review & Focus whether or not you are a current World Markets Client. Hopefully you will read it each month and become one (because you like the writer so much!).

ASSET TRENDS 2/12/2016 – 3/18/2016

Source: Bloomberg World Currency Ranker Screen (WCRS). WCRS asset trends are based on BGN “Bloomberg Generic” indicative or “spot” currency exchange rates and metals prices as of 5 pm Eastern Time on the dates specified. Such rates and prices are generally only available for large volume transactions conducted by institutional investors at a specific point in time. These values are illustrative only and do not reflect interbank rates available to us or the rates or prices we make available to customers at any point in time, and the trend data provided do not include retail exchange spreads or other transaction costs.

Currency1, 2 Trend Change (%)
Australian dollar 7.11%
Brazilian real 10.43%
British pound -0.11%
Canadian dollar 6.87%
Chinese renminbi 1.55%
Columbian peso 10.56%
Czech koruna 0.31%
Danish krone 0.43%
EMU euro 0.29%
Hong Kong dollar 0.45%
Hungarian forint 0.16%
Indian rupee 2.60%
Israeli shekel 0.62%
Japanese yen 1.57%
Mexican peso 9.50%
New Zealand dollar 2.72%
Norwegian krone 3.36%
Polish zloty 3.35%
Russian ruble1 15.89%
Singapore dollar 3.19%
South African rand 3.90%
South Korean won 4.23%
Swedish krona 2.29%
Swiss francs 1.02%
Turkish lira 2.54%
Metals3 Trend Change (%)
Gold 1.19%
Silver 0.66%
Platinum 1.65%
Palladium 12.53%
EverBank CD Baskets1, 2 Trend Change (%)
Balanced Debt® 5.02%
BRICS 6.87%
Commodity BasketSM 5.15%
Euro Trax® 1.45%
European OpportunitySM 1.39%
Geographic BasketSM 4.34%
Global Power Shift® 6.94%
Investor's Opportunity® 5.82%
Mining OpportunitySM 8.37%
New World EnergySM 5.77%
Pacific Advantage® 2.13%
Pan-AsianSM 3.89%
PetrolSM 4.25%
Ultra Resource® 3.93%
Viking® 2.16%
World Energy® 4.31%

EverBank CD Basket trends are also based on WCRS indicative spot rates for the underlying currency mix, which is described at, and thus are not reflective of interbank rates available to us or the rates we make available to customers at any point in time and do not include our spread. For more information, please see

Chuck Butler
Chuck Butler
Managing Director of EverBank Global Markets Group
Chuck Butler
Chuck Butler
Managing Director of EverBank Global Markets Group
You can count on Chuck to tell it like it is. He has over 35 years of experience in the currency field. And he's got a wit all his own. A frequent and respected analyst for various national media outlets, Chuck is also the original author of the popular Daily Pfennig® blog.

Asset trend data are illustrative only and do not reflect retail exchange spreads or other transaction costs.

Along with the potential for market gains, foreign currency accounts carry some additional risks from currency fluctuations, economic and political factors, and accounting differences.

All statements, comments and opinions expressed are solely those of the writer or speaker and are not the statements, comments or opinions of EverBank or of any of its affiliates, and are subject to change without notice. Due to the rapidly changing nature of currency and commodities markets, any statement, comment, or opinion may quickly become outdated. This is not a solicitation for the purchase or sale of any securities or options on securities or for the purchase or sale of a currency or any precious metal, and it does not constitute a recommendation to you or to any specific person of any particular action. EverBank, its officers and employees do not provide investment or other types of advice. All factual information has been obtained from sources that the writer or speaker believed to be reliable, but the accuracy, completeness, and interpretation of the factual information is not guaranteed and has not been independently verified. Not all products are right for everyone. You should conduct your own research and/or consult your advisor before making any purchases.

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