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In This Issue.

* Moodys causes currency selling.

* Gold & Silver get taken down again!

* China imports more Gold than the Eurozone has total!

* Are QE implementations causing bubbles?

And, Now, Today's Pfennig For Your Thoughts!

Back To A Dollar Buying Bias.

Good day. And a Tom Terrific Tuesday to you! I feel somewhat at a loss this morning, as my beloved Cardinals season has ended, earlier than we thought just 5 days ago! I think the Cardinals have to go on a mission, and maybe get Austin Powers to assist them, and find their mojo, for they lost it. Congrats to the Giants for their win, now go beat that American League team!

Well, the currencies and metals are also at a loss this morning. They've lost their footing that appeared to be terra firma yesterday.. I told you yesterday that the data cupboard was bare, and that the currencies would have to find other reasons for continuing their mini-rally. Well, the trap door sprung on the euro this morning, as Moodys, who just last week, left Spain's credit rating unchanged, decided that 5 Spanish regions needed to have their ratings cut. So, just when it appeared that we could see some stabilization, pop goes the weasel!

You know. I read yesterday, that Spain has put to bed 80% of its funding needs for this year, which means they did so, at much lower yields than one would have thought, earlier this year, and. they did so, without having to request a bail out. I still believe that Spain is in need of some assistance, but not to the degree that Greece did.

Another reason the euro lost ground overnight came from a very weak French Business Confidence report. And strike three for the euro came from Spain's announcement that they will not meet its budget deficit target in 2012. The target was 6.3% and Spain reckons it will be 7.3% of GDP. UGH!

So, with the euro getting sold this morning, shoot, I've seen it lose 1/4-cent already this morning since I've been here. But with the euro getting sold, the other currencies are finding it difficult to gain VS the dollar. The Aussie dollar (A$) has lost 1/2-cent, and so has the Swiss franc. The only currency with a gain VS the dollar this morning, is the Chinese renminbi/ yuan. Japanese yen is pretty much flat, and everything else is fumbling, stumbling, rumbling in the red..

The biggest loser, not to be confused with the NBC show, on the night though is Gold. I told you yesterday that I thought that the price manipulators had more selling on their minds, but thought maybe now was not the time. Apparently, they are showing that they aren't worried about being caught with their hands in the cookie jar. Poor Gold & Silver, they must feel like the price manipulators are like the Death Star. Where's Luke Skywalker when you need him to blow up the Death Star? Not to be flippant about this take down of Gold & Silver, but at this point, I've stopped to yell at the walls so many times, that I have to try something else! For it is very difficult for me to sit here and watch this when it happens.

The worst performing currencies this morning come from Norway, Australia, Switzerland, and Canada. Speaking of Canada, the Bank of Canada (BOC) meets this morning to discuss rates, and Canadian Retail Sales will print about 1/2-hour before the meeting starts. These are August Retail Sales figures, so far behind, I know. And they are expected to gain .3% Vs the .7% gain in July. With the dovish comments by BOC Gov., Carney last week, I would think that the BOC would drop their tightening bias and move to a neutral stance. A lot of good that tightening bias did, the BOC left rates unchanged all during the tightening bias! The Canadian economy is still booking positive data, so Gov. Carney's stance is questionable to me.

There were reports overnight that the Bank of Japan was going to announce that they would increase their bond purchasing program by 20 Trillion yen at its next meeting. and Japanese yen briefly weakened to 80 (VS the dollar) but then Finance Minister Jojima, denied the reports. You know me. I say where there's smoke, there's fire. So expect the BOJ to announce an increase in their bond purchasing program at their next meeting. I'm surprised, given the desire by Japanese officials to weaken the yen, that the Finance Minister would deny the reports, which stopped the slippage in the yen.

Yesterday, I talked to you about the plateauing of Corporate profits here in the U.S. and then later in the day, one of the Bloomberg headlines, basically said the same thing. Hmmm. pretty cool, eh? Not that the profits are falling, but that little old me came up with that thought! HA! There is one more thing I want to talk about here. and that is the latest round of Quantitative Easing / QE3. I think that 3 rounds of QE have really distorted asset prices. and if you want to keep the party going, the Fed will have painted themselves into a corner, having to provide additional rounds of QE every time the previous round of QE wears off.

Big Ben Bernanke himself acknowledged that QE works by lowering borrowing costs and encouraging investors to seek higher-yielding assets. He also has acknowledged that boosting home prices through bond buying will encourage consumers and businesses to spend more. (from a story on Bloomberg). So, in my opinion, and I could be wrong. but, in my humble opinion, I believe that the rounds of QE are forming another stock bubble, and could be setting up housing for another wicked move down. That is, if the Fed cuts off the implementation of additional rounds of QE. So. on one hand, we need to keep printing money, and implementing rounds of QE so that the bubbles don't pop, or. we stop, and watch the bubbles go POP!

And we just might get an indication of which of these two directions the Fed Heads might go, when they meet starting today and ending tomorrow. At this meeting, according to Yahoo Finance, the Fed Heads will discuss a possible expansion of the size of its QE3. So, get ready for tomorrow's announcement. but first, the board games need to be brought out, so the Fed Heads have something to do today.

The price of Oil lost $2 yesterday and in the overnight trading. This has a lot to do with the losses that the worst performers, Canada and Norway booked today. (see above) But, most of the loss in the price of Oil, comes from the rally in the dollar. So. if you believe that this rally has legs, then the price of Oil will continue to come down.

Getting back to Gold for a minute, because this plays well with my call a year or so ago, that China was hoarding Gold so that one day in the future, when they decide to float the renminbi/ yuan, that they will back the currency with Gold. China has imported 512 tons of Gold so far in 2012. That's 10 tons more than the European Central Bank (ECB) has total! Then add in the Gold that China produces themselves, which is around 350 tons of Gold a year, and you have the makings of a gold backed currency.

Now, ask yourself this question. if China bought 512 tons of Gold this year, wouldn't that be pushing the price of Gold higher and higher, Sly Stone like? So, why hasn't it? I guess we should ask the CFTC, eh?

Then There Was This. Recall that I asked a couple of weeks ago, why the media, for the most part, wasn't making a big deal out of the upcoming "Fiscal Cliff". And many observers believe that the Fiscal Cliff will never materialize, for it will be addressed by whomever wins the election, after the election.

Well, the Washington Post ran an article that addresses the lack of interest in this Fiscal Cliff by ordinary consumers. Here's a snippet of the story. "Politicians, economists and now CEOs are sounding the alarm over "Taxmageddon" and its potential impact on the near-term economy. But all indications seem to suggest that ordinary consumers aren't terribly concerned, even if they are aware of the economic uncertainty on the horizon.

That's not to say that consumers are completely unaware or unconcerned about what's at stake in the next few months. About 64 percent of consumers say that the current state of political and economic uncertainty is affecting their overall spending plans. And a little more than half - 56.6 percent - say there are aware of the fiscal cliff, which the NRF broadly defines as "tax increases and budget cuts that will take place at the end of 2012 if Congress does not act."

But for now, such concerns have largely taken a backseat to the emerging signs of strength in the economy, the group concludes. "The optimism comes from the fact we have seen positive trends with key indicators - the unemployment rate is decreasing, housing prices are a better place than they've been for a long time, consumer sentiment on the up, retail sales have actually been fairly solid," says Kathy Graniss, a NRF spokeswoman."

Chuck again. Oh brother! Say it ain't so Joe! U.S. Consumers swallowing the strong economy hook, line and sinker! Don't they know that all these "better economic reports" are cooked books ahead of the election? I shake my head in disbelief that this is the reason consumers aren't concerned with the upcoming Fiscal Cliff.

To recap. The mini-rallies in the currencies and metals got all turned around overnight, as Moodys announced that they were downgrading 5 Spanish regions. Add to that, French Business Confidence dropping like a rock, and the Cardinals lost. Chinese renminbi/ yuan is the only currency booking gains VS the dollar this morning. Japanese yen, touched 80 overnight, but was saved from any further decline by the Finance Minister, who denied reports that the Bank of Japan would add Trillions to their bond buying program at the next meeting.

Currencies today 10/23/12. American Style: A$ $1.0270, kiwi .8125, C$ $1.0035, euro 1.30, sterling 1.5990, Swiss $1.0750, . European Style: rand 8.7430, krone 5.70, SEK 6.6265, forint 216.50, zloty 3.1790, koruna 19.15, RUB 31.21, yen 79.85, sing 1.2250, HKD 7.75, INR 53.73, China 6.2475, pesos 12.96, BRL 2.0280, Dollar Index 79.81, Oil $88.30, 10-year 1.79%, Silver $31.79, and Gold. $1,709.30

That's it for today. Hello, Austin Powers? Please help my beloved Cardinals find their mojo, before next spring. it was a good season, but a frustrating one, given their propensity to go on multi-game batting slumps. It would have been something, though, for the last team to get an invitation to the playoffs to get to the World Series! Now, let's get this NHL (hockey) lockout ended so the Blues can get back on the ice! A winter without hockey here in St. Louis, will be a real bummer. Even in the years that the Blues were pretty bad, they at least gave us something to watch and root for! Alex finally went back to school yesterday, after his oral surgery last week to have 3 wisdom teeth cut out. He stays up to midnight most nights doing his homework, I don't know how he'll catch up a week's worth! But that's his problem to deal with, and he will, he's very good at that. And with that. I hope you have a Tom Terrific Tuesday today!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 10-23-2012 1:17 PM by Chuck Butler