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In This Issue.
* Bickering led to euro weakness yesterday
* Eurozone Crisis meeting this weekend
* Swiss francs get back on the rally tracks.
* Bernanke to help with housing market?
And, Now, Today's Pfennig For Your Thoughts!
Where's The Economic Growth We Were Promised?
Good day. And a Happy Friday to one and all. I've got to tell you that I almost raised the white flag this morning, and stayed home. But. somehow, I'm here. But as the doctor told me on Monday, "it's only going to get worse". So, to me, next week is questionable. I'll still be able to write, there's nothing wrong with my fat fingers, or my mind. My sense of humor might be under siege from the way I feel, but, Shoot Rudy, there are a few of you that tell me all the time that I shouldn't quit my day job! HA! So.
Here we are, it's a Friday. My beloved Cardinals couldn't find a way to win last night, so the Series is tied 1-1, and they go to Texas for the next 3 games. That's scary. So. I've got the effects of radiation on my jaw that has my mouth unable to talk right, eat right, etc, the Cardinals lost, but it's a Friday! I won't go so far as to say it's a Fantastico Friday. But a Happy Friday is still high on my hit parade!
Have you ever wondered, at least recently, if the markets are just playing games with investors? It's like a game of good cop, bad cop. On one day, the markets will be all about the euro, and the prospects for a solution to the Eurozone debt problems, and without any notice, turn on the euro, for a different reason. I've always said that traders were fickle, but this is taking it to the extreme, and beginning to cause me to have a rash!
For instance, yesterday morning, the markets were full of euphoria regarding the size and shape of the European Financial Stability Fund (EFSF), and rewarded the euro by pushing it above 1.38. Then a couple of hours later, the euro began to slide, and now it was because traders & participants became nervous about the European Leaders bickering over a plan to contain the Eurozone's debt crisis.
You don't know whether to hug the euro, or kick in the rear! But I can tell you this. I truly believe that we are going to see this volatility in the euro remain for some time to come. Investors and traders want to punish the dollar for zero interest rates, exploding debt, and the inability by lawmakers to deal with the debt the right way. But then the offset to the dollar is the euro, and they have exploding debt too, but at least their leaders are attempting to address how to deal with it, and have implemented many austerity measures already. So. the volatility will continue, because. There's no clear direction. not yet. but if one should surface, we could put all this volatility in our rear view mirrors.
So. the euro is trading around 1.3770 this morning. not 1.38, but also not 1.31! I don't think traders want to go out on a limb this morning, with the Eurozone Crisis Meetings happening this weekend. Remember, on Monday, I told you that Eurozone leaders pledged to have a solution on October 23rd. So. the Eurozone leaders will have some meaningful meetings this weekend, leaving a ton of sawdust on the floor, and hopefully they can stop the bickering, and come up with a solution. It's not just a Eurozone problem folks. If the Eurozone falters they will bring the rest of the world along for the ride. Yes, even the U.S., because there is so much in common between the two "countries".
Come Monday. It'll be all right.. Come Monday, I'll be holding you tight. No wait! I was going to say that Come Monday I wouldn't be surprised to wake up to calls from the Eurozone leaders that they need more time to iron out the details of their plan. If that happens, I would think that the euro would get punished, for the euro was rewarded when the Eurozone leaders pledged that they would have a plan Come Monday. Heading up to San Francisco. stop it Chuck!
The Swiss franc is back on the rally tracks this morning, pushing the envelope with franc strength to $1.12. People are still convinced that owning Swiss francs is the way to offset euro & dollar weakness, and they may very well be right. But I'm still concerned with Swiss francs for a number of reasons. Like: The country and the issuance of francs is small compared to dollars, euros, yen & pounds. The reason that people flock to francs is that they believe the franc is backed by Gold. And that's an urban legend. And then we have the Swiss National Bank (SNB) intervening. Just not the recipe for stability that I look for here.
Rather. I look to the Asian countries, like China and Singapore for that stability. not that they can't lose value, but they aren't as volatile, and they do have something behind them. I've long said that everyone should own some renminbi in their currency account, for I truly believe that eventually the Chinese will achieve wide distribution of their currency, float it, and look to take over the reserve currency of the world.
I've told you here, and whenever I speak, that the Chinese have been hoarding Gold. Huge chunks of Gold over the past few years. And I thought, and this is long before the rest of the pundits out there came up with idea, although, they really didn't come up with it, they simply read it in the Pfennig. I thought that the Chinese were buying up Gold, to back the renminbi with Gold someday. Talk about making your currency attractive overnight! WOW! Maybe not, 100% backed with Gold, but some percentage backed by Gold, is what I've said for a couple of years now.
And then I saw this on the Casey Research site. "This week the Chinese Gold & Silver Exchange Society (CGSE) - a bullion exchange based in Hong Kong - started trading gold quoted in Chinese yuan. The contract, called Renminbi Kilobar Gold, is promoted as offering investors a "double safe haven" - exposure to both gold and an appreciating currency. This line of thought nicely accompanies China's intention to boost the yuan's international appeal. It is expected that this product will attract retail and institutional investors alike from both the Chinese mainland and overseas.
Whether or not the yuan can deliver its part of the "double safe haven plan," Renminbi Kilobar Gold trading in the first day was strong, with 322 traded gold contracts totaling 112 million yuan (or US$17.5 million). The settlement price ended up at 346.95 yuan per gram, or $1,693.9 an ounce."
Just a quick reminder that yuan and renminbi are one in the same, like the dollar and buck, or green/peachback.
I love it when a plan comes together! And apparently this is the start of what I saw was going to happen! WOW! Hey, even a blind squirrel can find an acorn!
And yes, owning renminbi isn't sexy. it moves at a snail's pace. you know what the snail said as he rode on the back of a turtle? WHEEEEEEEEEEEE! Sorry, but whenever I talk about a snail, I laugh because I remember that old joke! But seriously, here. owning renminbi is like watching paint dry. But think about this for a minute. Since July of 2005, the renminbi has gained about 25%... (and remained steady during the financial meltdown). That's 25% of purchasing power you lost in holding dollars during that time that could have been made up by owning renminbi!
When I give presentations, people say, "Hey Chuck, I hear what you're saying about renminbi, but how can I own it if the currency can't be taken out of China"? Ahhh grasshopper. If your adventurous you can go to Hong Kong, open an account and hold renminbi. Or, if you're not into international travel, but are willing to go to New York City, the Bank of China office in NYC allows you to buy and hold renminbi, but there's a limit to the amount you can buy per year. Or. if you want a quick and simple way to own renminbi, you can hold renminbi in a deposit account at EverBank World Markets. The renminbi deposit account does not pay interest, but you do receive any appreciation or depreciation the renminbi experiences.
That public service announcement was brought to you by me!
Ding, dong, the witch is dead. that's what I keep thinking every time the TV reports on the former dictator of Libya. I'm also of the thought that if he was killed it was by his own people, and not us, it works out better.
Gold suffered through another day of selling yesterday. The Central Banks of the world, except those in Asia, and in Russia, are scared to death that Gold is going to replace the dollar, and they can't have that happen! Circuit Breakers. But Gold looks like it has caught a bid this morning, but the buying is weak, and could be turned around in a heartbeat.
OK. it looks like the 2nd Half of the year rebound that the Fed kept telling us that was coming, isn't coming. Even The Fed Heads are beginning to talk about how they will deal with continuing weakness in the economy. Eric Rosengren, Fed Reserve Boston President said, " the Federal Reserve should restart purchases of mortgage backed securities to boost the U.S. economic recovery." And St. Louis Fed President, James Bullard said, "a third round of Quantitative Easing is still on the table".
Of course, if the Fed Heads had just read the Pfennig they would know that they are going to implement another round of Quantitative Easing (QE) and they could just skip to the chase! So, like the two old ladies in the old commercial. "Where's the beef?". Where's the economic growth we were promised?
And then this story headline flashed across the screen yesterday, but I was unable to find any back up to the story. Get this. "U.S. Fed Chairman Bernanke to submit proposals next week to congress to help housing market."
Ok. I'm going to stop on that thought right there, before I get myself in trouble! But being the astute readers you all are, you can complete that thought with your own thought.
Yesterday's data here in the U.S. was mixed, with Weekly Initial Jobless Claims remaining above 400,000 at 403,000, The Bloomberg Consumer Comfort index fell from -50.8 to -48.4. And Leading Indicators were positive, as was the Philly Fed Index, and Existing Home Sales fell 3% VS August. All-in-all nothing to back up the Fed's claim that the economy would rebound in the 2nd half of this year.
The data cupboard is completely empty today. So, the markets will have to find something else to trade off of.
Then there was this. from the McClatchy Washington Bureau. "Citigroup agreed to pay $285 Million to end a Securities & Exchange Commission case related to a $1 Billion offshore collateralized debt obligation. The SEC said Citigroup gave deceptive information to investors, then bet against its customers".
Chuck again. Hmmm. Ok. who gets the $285 Million? Shouldn't it go to the investors that got deceptive information?
To recap. Another up & down day for the currencies. The volatility in the currencies, led by the euro will continue until a concrete plan to deal with the Eurozone debt is in place. Gold suffered through another day of selling yesterday, but seems to have caught a bid this morning, although a weak bid. And has China begun to issue a gold backed renminbi? Uh-oh!
Currencies today 10/21/11. American Style: A$ $1.0245, kiwi .7935, C$ .9860, euro 1.3765, sterling 1.5865, Swiss $1.1215, . European Style: rand 8.1520, krone 5.60, SEK 6.6105, forint 217.80, zloty 3.20, koruna 18.1550, RUB 31.30, yen 76.70, sing 1.2775, HKD 7.78, INR 50.11, China 6.3835, pesos 13.70, BRL 1.7760, dollar index 76.96, Oil $86.32, 10-year 2.19%, Silver $30.85, and Gold. $1,626.32, and keeping with our Friday tradition, here's the link to the U.S. debt clock. click here: www.usdebtclock.org/index.html
That's it for today. And this week! What a long week! The World Series continues tomorrow night. and my beloved Missouri Tigers take on the #6 team in the country tomorrow. UGH! My beautiful bride heads to Florida this morning with her mom & dad. Which would normally mean that Alex and yours truly would be ordering lots of pizza. But, with me having a difficult time eating right now, that will be not be on our choice of foods this weekend. The office is having 5 Guys Burgers & Fries today, which I love, and I don't think that's going to work for me. UGH! Oh well, in couple of weeks I'll be back to normal. I sure don't want to sound like I'm complaining, I'm just stating the facts, for I know complaining doesn't get me anywhere! And with that thought. take that last sip of java, because this is the end for this week. I hope you have a Happy Friday, and Wonderful Weekend!
EverBank World Markets
10-21-2011 10:58 AM