RBA Disappoints...
Daily Pfennig

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In This Issue.

* Eurozone Manufacturing rises...

* Japan goes negative with rates!

* A$ gets hammered after RBA decision...

* Food prices are rising...

And Now... Today's Pfennig!

RBA Disappoints...

Good day... And a Terrific Tuesday to you! The grenade that economist Stiglitz threw from left field at the euro yesterday, was a one-day hit. You see... The euro is back to moving higher VS the dollar this morning. More on that, and the RBA leaving their powder dry is on the docket to talk about today, so let's go!

OK... I guess I have to crawl like a viper through these suburban streets, and try not to get hit with a shovel, as my tea leaves were all wrong on the RBA's rate decision... Recall, that originally, I said the RBA would not raise rates at this month's meeting, but then began to drink the Kool-Aid that was being served by the recent data coming from Australia, with the most important one being that inflation was above their target rate, and I said that I was 2/3rds in on a rate hike...

Well... The RBA left their interest rate powder dry last night. That disappointed the many that had bought the Aussie dollar (A$) and driven the price higher on the expectation that the RBA would hike rates. The A$ was sold BIG TIME after the no hike decision. Now, not all is lost here, as the RBA did retain their tightening bias, and hinted about a rate hike... So... Like I said yesterday, "Don't expect their OCR to go back to 7.25%... In the near future... But 4.5% is going higher, and if not tonight... The next time the RBA gets together!"

And so it is... I truly believe that the RBA, will hike rates at their November meeting, unless... Things go really south on them economic data wise...

Alrighty then... It appears that the Bank of Japan (BOJ) was in the markets again last night attempting to manipulate the yen lower. And get this! The BOJ announced a rate cut! I know, you're saying but aren't rates almost zero there? Yes, you would be correct, rates were .10%... But the BOJ cut them to -.10%!!! Negative interest rates! And... On top of that, the BOJ also announced that they were setting up a pool of funds for Quantitative Easing...

Talk about doing everything they can to introduce inflation to their economy! But, Shoot Rudy, the Japanese have been doing these types of things for years now... Hey! How do you think rates got to .10% in the first place? These guys are rearranging the deck chairs on the Titanic.

The currency guys and gals, weren't swayed into believing that they should back off their buying of the yen, and the so it is that Japanese yen is barely weaker this morning than it was yesterday before the BOJ did all these "wonderful, economically and fundamentally sound, creative moves"... ( I sure hope you understand that I'm being facetious with those descriptions, for in my real words, the BOJ did bonehead moves!)

Well, once again this morning, I came in and saw 1.38 in the euro, only to see that wiped out almost immediately after turning on the screens... Hey! Maybe if I don't come in tomorrow, and my screens don't get turned on, the euro will remain above 1.38? Hey, Frank... HA!

Any way... The euro got some wind in its sails overnight when Eurozone manufacturing reported a rise in September. The Eurozone manufacturing index (like our PMI), saw the index rise to 54.1 from 53.6.

The euro also saw some strong statements about the single unit from ECB members who were speaking around the Eurozone. The ECB members took the opportunity to follow up on the strong vote of confidence the Chinese Premier, Wen, gave the euro the previous night. (we talked about that yesterday)

The Irish Eyes are not smiling on the euro though... Just about every time the euro gets its legs under it, news from Ireland, cuts the euro's legs right out from under it! Last night it was the ratings agency (Geez, Louis, again with the ratings agencies! These guys have become persona non grata, with me!) Moodys, saying that Ireland's rating of Aa2 will "most likely" be downgraded... UGH!

And the price of Oil continues to rise, further underpinning the Canadian dollar / loonie... And the Swiss franc continues to push further past parity to the dollar... Pretty amazing move by the franc, folks...

And what do we have here? Gold is up $11 this morning to $1,326.90!!!! And Silver is following with a rise to $22.26 this morning! Oh! And the S&P agriculture Index is at a 2 year high, folks... Food prices are rising, which is inflation, whether the Gov't tells you this or not, you should know one of the reasons people / investors are rushing to protect their wealth with Gold and Silver...

So... Did you see where the final figure on the U.S. deficit for 2010 was... Drum roll please... $1,641,083,866,542.37 ... That's shameful... $1.6 Trillion added to our national debt, bringing it to... Drum roll please... $13.548 Trillion... And that doesn't even take into consideration the Unfunded Liabilities, but I can't even bring myself to type that number... But, if you want to promise me to put away all the sharp object first... Then go to: http://www.usdebtclock.org/index.html but don't go there if you don't want to get depressed!

Oh... A new feature of the Debt Clock is the U.S. Population data... In this data, you will see the thing that I talk about all the time... The "official Unemployed" totals: 15,166,627... But the "Actual Unemployed" totals: $26,204,754... And the total number of Food Stamp recipients is now: 42,762,385... Of course these numbers are real time, and change instantly, so when you go the link the numbers will be different than what I just recorded!

And why do I care about all this deficit stuff? Ahhh grasshopper... Deficits are the root of economic evils...

Hey! I see where Cartel Chairman, Big Ben Bernanke is thinking clearer these days... Big Ben called on lawmakers to consider rules limiting federal spending and deficits, and accumulated debt. Big Ben believes that by controlling these lawmakers can curtail the risk of a fiscal crisis...

Ahem... Hello? Can you hear me? OK... I'm a long time listener, but first time caller, and want to ask Big Ben just what he calls what we're in right now, if it isn't already a fiscal crisis? Thank you for taking my call, I'll hang up now, and listen for the answer...

OK... I can be a little hard on the Beaver... I mean Cartel Chairman... But, he did say something recently that's right up my alley of things I truly believe... Bernanke said, "that unless the U.S. makes a strong commitment to fiscal responsibility, the country in the long run will have neither economic growth nor fiscal stability"... Right Arm Ben!

Farm out Ben! Outta State Ben!

Then there was this... Well... The Bloomie had a great story this morning, that I'll give snippets of... But first... It seems that world renowned economists are coming over to the Chuck Butler way of thinking regarding Global Growth being able to be sustained even with the U.S. in recession...

"Just three years since America began dragging the world into its deepest recession in seven decades, Goldman Sachs Group Inc., Credit Suisse Holdings USA Inc. and BofA Merrill Lynch Global Research are forecasting that this time will be different. Goldman Sachs predicts worldwide growth will slow 0.2 percentage point to 4.6 percent in 2011, even as expansion in the U.S. falls to 1.8 percent from 2.6 percent.

Underpinning their analysis is the view that international reliance on U.S. trade has diminished and is too small to spread the lingering effects of America's housing bust. Providing the U.S. pain doesn't roil financial markets as it did in the credit crisis, Goldman Sachs expects a weakening dollar, higher bond yields outside the U.S. and stronger emerging-market equities."

Chuck again... This is the same stuff I've been telling people for months now... That as long as the financial meltdown doesn't occur, and the U.S. just continues to be swallowed by recession, that there will be global growth, thus proving that the reliance on the U.S. and the dollar for trade, is dwindling...

To recap... The BOJ intervened last night, announced more Quantitative Easing, and cut their interest rate to a negative -.10%! The RBA left rates unchanged, much to the dismay of traders and the A$ suffered big time from this disappoint of traders. Eurozone Manufacturing rose in Sept. pushing the euro higher.

Currencies today 10/5/10: American Style: A$ .9610, kiwi .7435, C$ .98, euro 1.3775, sterling 1.5880, Swiss $1.0325, ... European Style: rand 6.98, krone 5.84, SEK 6.7225, forint 198.25, zloty 2.8870, koruna 17.7885, RUB 30.28, yen 83.35, sing 1.3125, HKD 7.7560, INR 44.59, China 6.69, pesos 12.55, BRL 1.6975, dollar index 78.07, Oil $82.11, 10-year 2.46%, Silver $22.30, and Gold... $1,327

That's it for today... A couple of things that I've forgotten to mention the last couple of days... It was great seeing my old friend from Mark Twain Bank days, Ellie Williams the other day. Ellie is a breast cancer survivor! It was our newest members' birthday over the weekend. Dane Moody was 25! I've known Dane since he was about 5, so... I know, I'm getting old! And this is Jen's last week at work before maternity leave. And my two interviews yesterday went well, I think... One wanted to talk about Gold, and the other wanted to talk about Silver... And I'm bopping around in my chair right now, as the Turtles song, She'd Rather Be With Me is playing on my IPOD... I hope your Tuesday is Terrific!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 10-05-2010 10:47 AM by Chuck Butler