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In This Issue.
* Currencies and metals drift lower
* Aussie employment jumps for 2nd month.
* Greek Parliament passes austerity package.
* Another conspiracy theory from Chuck.
And, Now, Today's Pfennig For Your Thoughts!
A Return To The So-Called Safe Havens.
Good day. And a Tub Thumpin' Thursday to you! Well. with the election behind us now, we can get to the business of trying to figure out just what went on, and from my view in the cheap seats, I see the U.S. didn't change one bit. Oh sure some of the players are different, but we still have the split in congress, which has left the U.S. economy with tons of uncertainty, and what do I call Gold? The Uncertainty Hedge.. wink, wink!
In addition to the uncertainty that congress will bring us the next two years. can you believe how polarized the country has become? The Popular vote was split 50/50. do you see a problem with that? I do. but I won't get into it here. and it's too cold on the patio! Oh well, this thought for our country isn't going anywhere before it gets warm out.
Yesterday. We saw the currencies and metals drift lower throughout the day. Before the NY traders arrived, Gold was up $9. an hour or two after their arrival Gold was down $4. I've got a conspiracy theory to bounce of you regarding Gold (& Silver of course!) a little later in the letter today. I know you're full of excitement now, but hold on. we've got a few other things to talk about first!
This morning the drifting lower continues for the currencies & metals. In the Eurozone, the Greek Parliament approved the austerity package by just 2 votes.. the package received 153 yes votes, and needed 151 to pass.. So, see, the rumors I told you about, were true. the package passed by the thinnest of margins. (well, I guess not the thinnest, but pretty thin. Olive Oyl thin!) But, Greece isn't out of the woods just yet. On Sunday, the Greek leaders will vote on the 2013 Budget, which is rumored to be a no-brainer, and pass easily. but, there's still uncertainty in Greece, so the euro gets dragged through the muddy mess that Greek deficit spending has created.
The Bank of England (BOE) and European Central Bank (ECB) are both meeting this morning while my fat fingers type away. I don't expect any news or market moving statements from either Central Bank this morning. These guys have their hands tied, just as tightly as the Fed Heads do. their quivers are out of arrows, and their economies are in shambles. We're all in this together I guess, eh?
In Australia overnight. Aussie employment gained 10,700 jobs in October, adding September's gains of 15,500. The consensus was for a gain of 5,000. So, the actual number was twice what was forecast, and I think puts a gold star above the Reserve Bank of Australia (RBA) for keeping interest rates on hold earlier this week. They sure would have looked stupid had they cut rates on Monday and printed this strong jobs report on Wednesday. For those of you keeping score at home, the Aussie unemployment rate remained at 5.4%...
The Aussie dollar (A$) tried to gain out of the starters blocks this morning, but was quickly pulled back by the overall weakness in the other currencies. The A$ did gain VS its kissin' cousin across the Tasman, New Zealand dollar / kiwi. A month or so ago, I had read a report from an analyst that called for the cross between A$ and kiwi to narrow, with kiwi outperforming the A$ in the coming months. well. I would think that by now, that trade has been closed out! The A$ has pushed the envelope out on the cross to kiwi.. As well as it has the U.S. dollar.
Kiwi on the other hand is feeling the pressure of a report that shows their debt widening, and just last night, that their unemployment in the 3rd QTR rose to a 13 year high. Their unemployment rate bounced to 7.3% from 6.8% in the 2nd QTR. That's the highest it's been since 1999. Now, kiwi has gained 5.4% VS the U.S. dollar this year, so not a complete waste, but just not what the A$ is made up of!
The sentiment in the currency markets right now has switched to focusing on the upcoming Fiscal Cliff, and even though the Fiscal Cliff would be very bad for the U.S. economy next year, dollars and Treasuries are being bought as so-called safe haven trades once again. You can add Japanese yen in there too, just to show how ridiculous the so-called safe havens are!
Speaking of the Fiscal Cliff, one thing that I've been warning you about for 6 months now, is about to be delivered to our door step. The breach of the Debt Ceiling. Uh-Oh! I was reading a story yesterday that really ticked me off. here's the skinny. Apparently, some Senators sent U.S. Treasury Sec. Geithner a letter back in August, requesting him to answer 2 questions. 1.) What is Treasury's forecast of the date upon which Treasury will find it necessary to use extraordinary measures to manage to keep federal debt at or below the statutory debt limit? And 2.) What is Treasury's forecast of the date upon which the U.S. Gov't will reach the statutory debt limit given use and exhaustion of these extraordinary measures? And they gave the Treasury a deadline to answer these questions of November 1.
And guess what? Treasury failed to answer the questions by November 1st. OK. so since the Treasury Sec. (who is leaving his job in 2013) failed to answer the questions, I'll give you the numbers and let you do the math for you're probably better at it any way! On October 31, 2012 our federal debt subject to the legal limit was $16,222,235,000 just $171.765 Billion below the $16,394,000,000 debt limit. In October alone, the U.S. added $195.214 Billion to the federal debt/ national debt. If we have the same numbers in November, then we will have breached the debt limit very soon folks. very soon.
And given the recent loss by the Republicans, they will be in no mood to just "rubber stamp" this increase in the debt ceiling. Remember August 2011, when these discussions over increasing the debt limit got very hot, and messy? Gold soared, the dollar plunged, and the U.S. lost its AAA rating with S&P. Now, I've been warning about this coming to a head for months now. Earlier this year I thought it would happen right before the election, which I thought would be good fodder for a debate. but my timing was off.. Now, it's here. the debt limit breach. and this should play out at a theater near you, very soon!
OK. I had better stop before I begin to yell at the walls. and since I'm home this morning writing the Pfennig, I don't want to wake up the family this early! I heard Ty Keough on the phone yesterday talking about the Singapore dollar (S$) The S$ has had a nice run the last couple of years. the moves are small, and sometimes it appears that the S$ has stalled, but you have to remember that countries like Singapore, Hong Kong, S. Korea, and other Asian countries have to keep the Chinese renminbi/ yuan in their respective sights all the time, as they don't want their currencies to get out of whack with the renminbi/ yuan. It's all about competition for exports. I like the S$ for a couple of reasons. the most important one is the fact that the Monetary Authority of Singapore uses the S$ strength to combat inflation, instead of using some arbitrary interest rate like most countries do..
Speaking of China and the renminbi/ yuan. If we go back a couple of months ago, I recall writing about a Chinese analyst saying that the Chinese economy will show that it bottomed out in the 2nd QTR. I said then, that if that's true, then we could very well see an improvement in the global growth prospects. Well, skip forward to today, and the analyst appears to have been bang on with his forecast / call for the economy. The Chinese economy isn't out of the woods just yet, but it's on its way. or it appears to be at least! And that bodes well for the Asian and Pan-Asian currencies.
I had a dear reader ask me about the Russian ruble. I'm asked about this a lot. so, here's my thought on the ruble. it's an oil play. if you believe that the price of Oil is going higher, then you'll like the ruble. if you believe like some analysts I've heard the past two years, that the price of Oil is going to $40 a barrel, then you'll want to steer clear of the ruble. It's an Oil Pay. that's how I see it!
The Norwegian krone and Canadian dollar also have a dog in the Oil play hunt, but these two countries have done a better job of diversifying their economies, so that while the price of Oil does push or pull on these two currencies, the price of Oil isn't the end-all to their values.
Then There Was This. this is only for conspiracy lovers like me. if this isn't your cup o' tea, then skip ahead to the recap. ready? Here we go. "yesterday I wrote about the German Bundesbank officials being turned away from the NY Fed when they requested an audit of Germany's Gold that was held there. Now, I have learned that this wasn't the first time they had been turned away... and then it hit me... I did the V-8 forehead slap! and now, in my best Andy Rooney voice.. Have you ever wondered why the price manipulators (PM's)in Gold & Silver keep all those short positions? And no Gov't regulating agency stops them? Well, put one and one together, that is if you have a conspiracy theory mind like mine... If you think what I'm about to say is just hogwash, then skip ahead... but if you believe where there's smoke, there's fire... come along with me...
Let's just say this.. suppose that all the Gold that nation's hold here in the U.S. is gone... And now that things around the world are looking iffy, these countries want to check on their Gold, you know, just in case something happens that they will need the Gold to either sell or borrow against... Well, if the Gold is all gone, what will these countries do? And if the U.S. Gov't is all over this selling of other countries' Gold like a cheap suit, then why would the U.S. Gov't be interested in disallowing the PM's from selling Gold short? For, if the PM's succeed, they could get the price of Gold back down where it could be bought and each country's Gold supply replenished, and no one would even know, since the countries were never allowed to see their Gold to begin with... this is going to make a great movie one day, folks... the LIBOR scandal is nothing compared to this! This also ties in or plays well with the Wikileaks cable I told you about a year or so ago, where it was confirmed that the U.S. Gov't feared the rise of Gold as a replacement for the dollar...
Oh, brother... this has smoke all over it... And if there's an ounce (pun intended) of truth to this theory, then the price of Gold will eventually soar, when the lid is blown off this story. Oh well, that was fun wasn't it? A couple of years ago, I told the Sov. Society, that a great newsletter would be a Conspiracy letter, that uncovered these stories, researched them, and tried to bring them to the public. That idea was shot down. but, one of these days. I think I'll write one!
To recap. The currencies and metals have drifted lower and lower since the arrival of the NY traders yesterday morning. The markets are already feeling the uncertainty of having a split in the U.S. Congress and seeing the debt limit and fiscal cliff coming, and the flight to the so-called safe havens, dollars, yen and Treasuries is the trade du jour today. Australia posted another strong employment report, while New Zealand saw their unemployment rate rise to the highest level in 13 years! The BOE and ECB meet this morning and neither one will make any moves..
Currencies today 11/8/12. American Style: A$ $1.0415, kiwi .8175, C$ $1.0035, euro 1.2745, sterling 1.5955, Swiss $1.0570, . European Style: rand 8.6850, krone 5.7475, SEK 6.6870, forint 222.95, zloty 3.2645, koruna 19.9235, RUB 31.55, yen 79.80, sing 1.2245, HKD 7.7510, INR 54.42, China 6.2535, pesos 13.08, BRL 2.0335, Dollar Index 80.86, Oil $85.22, 10-year 1.62%, Silver $31.70, and Gold. $1,714.50
That's it for today. crazy how my mind thinks of these things, eh? I don't think I'll be back in the office until next Friday. My leg has flared up again, and then I'll be back to the MD Anderson Cancer Center next week. Hopefully they tell me the tumor in my chest has shrunk. I know the one in my mouth has shrunk! The Big Boss, Frank, is gone, I'll be gone, the mice will get to play in the office! HA! Chris was in Philly the other day to speak to a group. He'll be heading to San Francisco for the Hard Money Assets Show soon. These are things that I would have normally done, but right now, I'm in no shape to stand for any period of time and talk to groups of people! So, thankfully we have Chris, who probably does a better job than I do any way! OK. I've carried on for too long today. I need to go get my leg up. I hope you have a Tub Thumpin' Thursday!
EverBank World Markets
11-08-2012 11:08 AM