In This Issue.
* ECB & Bundesbank pull rug from under the euro.
* Relative calm over Eurozone is lifted, again.
* Sandy to affect jobs report.
* The debt ceiling revisited.
And, Now, Today's Pfennig For Your Thoughts!
A Jobs Jamboree Friday!
Good day. And a Happy Friday to one and all! I have a couple of things to discuss front and center this morning that don't have anything to do with currencies, commodities or economies. First, I want to apologize Big Time, for the error I made yesterday talking about the elimination of the penny and nickel. That turned out to be nothing but a hoax. Of course, we all know that the day is coming that those are eliminated, just not now. And then today is our first day of infamy. Pearl Harbor Day. If the movies that were made about that day are even close to what it was really like, I shudder. And then finally, today is also, EverBank Employee Appreciation Day. more on that in the Big Finish.
Well, I told you yesterday that the euro had been stuck in the mud for two days. But then along came the European Central Bank (ECB) meeting, which was nothing, really. but, then the statements began to spew out of the mouths of Euro-leaders. Geez Louise! What? The guys didn't like the direction of the euro, so they decided to bash it with words? That's the way it looks to me. And the euro took a quick ride on the slippery slope, losing 1- cent in value. and dragging all the other currencies down, was the call to order.
This morning, The Bundesbank (Germany's Central Bank) announced that they were cutting their forecast for the German economic growth in 2013. The Bundesbank or Buba as I used to call them, "back in the day", cut their 2013 growth forecast from 1.6% to .4%... That's awful folks, and has caused another ½-cent loss in the euro this morning. Well, that and the surprise that came from the printing of October German Industrial Production, which fell -2.6% from September. This data is in exact opposites with the Factory Orders data I told you about yesterday, so the German economy is mixed for sure.
But one thing that looks to be the case for sure in Germany, is that the Eurozone's largest economy is suffering right now. I read a story that talked about how the analyst didn't think the Bundesbank was as negative as their growth rate forecast cut would indicate. Hmmm. OK. had to stop to sing along with John Waite's song Midnight Rendezvous. That song will get your heart pumping in the morning! Ok, where was I? Oh, yeah, I was questioning the analyst that thought the Bundesbank was as negative as their growth rate forecast. What indicator would he use to say that? Well, the fact that Bundesbank is actually forecasting most of that cut early in the year, and a recovery late in 2013 and leads to strong growth in 2014. Ok. I'll give him that!
So. the relative calm that was draping over the Eurozone earlier this week, has been lifted, which seems to be the way things have been for the euro for the last couple of years. I know there are still calls out there for a complete collapse of the euro, and a break-up of the Eurozone. but I'm not buying them. I will agree that there could be a different look to the Eurozone roster of countries in the next couple of years, but a complete break-up just doesn't register with me. And a complete collapse of the euro? Hmmm. who thinks of these things? Any way. we're not there now, and won't be there next week, or the week after that.
Something that's been happening in the Eurozone that's troubling me though. the bond yields in Italy and Spain have been widening out. Whenever we see the relative calm removed from the Eurozone, we see these bond yields begin to widen again. But this is something that if not kept in control, could spiral quickly out of control. so, I hope the Eurozone leaders have their eye on this like I do.
So, with the Big Dog, euro dragging the rest of the currencies down this morning, the currencies will probably end the week on a down note. Shoot Rudy, even the Aussie dollar (A$) which yesterday was knocking on the door to $1.05, is feeling the downward pull of the euro . Yesterday, I said to the boys and girls, that I truly appreciate every day, not just today, that it was interesting that the two prior days saw the euro gain VS the dollar, but Gold lose value, but yesterday as the euro sank, Gold rallied. Both are anti-dollar assets, so it's always interesting to see divergence, even though it's difficult to explain.
Speaking of Gold. the divergence is over, and Gold is losing value this morning alongside the euro and other currencies. Right now, the markets are reacting to the news from Germany this morning, but in a bit the focus will shift to the U.S. because.. Drum roll please. today is a Jobs Jamboree Friday! And this will be a Jobs Jamboree that the reaction to it will be muted. (I think!) You see, any downside print of jobs created in November, will be explained away with commentary on Sandy. There's probably no arguing that the report will be affected by the devastation of Sandy. So, here's my suggestion. just skip the report this month! If what the Jobs Jamboree is going to report is not right, then why print it? OH! Chuck! Did you just think about what you just wrote before you typed it? For if you did, wouldn't you have made some funny comment about the Jobs Jamboree never has the right numbers and it prints every month anyway!
Here's how I think the Jobs Jamboree will play out. first of all, the initial forecasts were for 125,000 jobs created in November, but then someone reminded the "experts" making these forecasts that the report would be affected by the devastation of Sandy, and they lowered their forecasts to 85,000, thus making a negative allowance of 40,000 for Sandy. But, I see the BLS adding ghost jobs to make the report look brighter, new and improved! So. look for a number north of 85,000.
We do a little contest each month, run by our Swiss Miss Agnes, to guess what number the BLS will report as jobs created. and I've never won it! Back in the day. I remember standing around the bond desk and everyone making their guess on what Money Supply number would print. I almost always got those numbers right! That's because they were hard numbers, not ones that had "adjustments" made to them!
OK. onto other things. did you see that the President and House Speaker are now meeting one-on-one to discuss the Fiscal Cliff? The Speaker thought that there was just too much "noise" from the Senators and others in the room. So, it's mano-y-mano. and maybe there will be something come of it. I'll tell you this. the lawmakers were scheduled to leave for their holiday vacations next Friday 12/14. I can't think of anything else that could motivate them more than the threat of delaying their holiday vacations if this Fiscal Cliff isn't dealt with....
You know. I talk about the Fiscal Cliff and how I see lawmakers not allowing the Fiscal Cliff to happen, because that's what they always do, kick the can down the road. But I really don't know if they will avoid the Cliff now. But, wouldn't it be better to deal with the Cliff now, than in a couple of years, when the fall will be steeper?
And I know I got everyone lathered up late last month, when I talked about us hitting the debt ceiling limit around now. But there's been no talk of it, has there? Strange, to me, for sure. We are now just $153 Billion away from reaching the ceiling. the actual U.S. Debt is way past the ceiling.. but there are things in the total debt that aren't subject to the limit. It took me a couple of tries to figure that one out! HA!
And then I wanted to mention on Gold. I hope everyone got to read that snippet I had in yesterday's Pfennig from James Turk. There were some questions sent in about his comments so I thought I would give you my take on what he said. Basically, he was saying that the price manipulators are loading up on Gold at discount prices that they created, so that when the dollar collapses, and a new currency system is put in place using Gold, that they will be in the catbird's seat.
The other thing to think about here, is that whenever Gold gets cheap (considering where it's been) the Central Banks of China, Russia, and others begin to line up at the door to buy at these cheaper levels. Now, this isn't saying to "expect" them to do that again, it's just saying that's what's happened before, we'll have to wait-n-see if it happens again. I personally believe it will, but then that's my opinion and I could be wrong.
Then There Was This. I found this on a very frequented site I go to: ZeroHedge.com . "Just yesterday, Goldman Sachs suggested its clients should sell their gold (to them?) as the precious metal cycle had turned. It seems Morgan Stanley disagrees; the firm's preferred fundamental metal exposure for 2013 is Gold.
Expecting Silver to outperform also (given its 'cheaper' store of value), MS believes nothing has changed on the fundamental thesis for owning gold as the adoption of QE 3 (and 4...) and the ECB's commitments (and BOJ) remain the most important factors for a continuation of weakness in the TWI (trade weighted Index) trend for the US Dollar.
They also add that low nominal and negative real interest rates, ongoing geopolitical risk in the Middle East and continued mine supply issues are also supportive."
Chuck again. I always wonder about Big Financial Institutions getting into cahoots with each other on stuff like this. OK. I'm NOT saying this is happening. I'm just "wondering" if Big Bob, calls Big Mike and says, "hey, I'll tell my customers to sell, and you tell them to buy, and we'll both make a killing". Just me wondering. not pointing fingers, not accusing anyone of anything, just wondering.
To recap. The euro got pulled out of the mud it was stuck in for two days, yesterday, as ECB leaders began talking about rate cuts, and slowdowns, and then the euro got piled on to by the Bundesbank who took a big cut off their growth rate forecast for 2013. The euro is dragging all the other currencies down today, and it appears they will end the week on a sour note, unless. the Jobs Jamboree here in the U.S. does a Bullwinkle and pulls something out of its hat.
Currencies today 12/7/12. American Style: A$ $1.0465, kiwi .8320, C$ $1.0070, euro 1.2920, sterling 1.6015, Swiss $1.0695, . European Style: rand 8.6960, krone 5.6815, SEK 6.6765, forint 219.70, zloty 3.1995, koruna 19.5040, RUB 30.92, yen 82.30, sing 1.2210, HKD 7.75, INR 54.47, China 6.22, pesos 12.88, BRL 2.0795, Dollar Index 80.44, Oil $86.15, 10-year 1.58%, Silver $30.95, and Gold. $1,695.22. and it's a Friday so here's the link to check out the U.S. Debt Clock. click here: http://www.usdebtclock.org/index.html
That's it for today. As I said at the top, today is EverBank Employee Appreciation Day. I have 10 people that report directly to me, and I truly appreciate their loyalty, professionalism, personalities, the fun we have on occasion, and this division that we have built with tons of difficult work. I think I tell them that each month. OK. I'm looking forward to a weekend without a lot going on and not a lot to do. Speaking of music getting one's heart going in the morning. Choo-Choo Mama by Alvin Lee and 10 years After will do the trick! I saw my regular doctor yesterday, and he believes the infection in my leg, while still there, is finally leaving. I said, "I sure hope so, it's been 3 freakin' months!) He laughed at me. and reminded me that the infection was probably in my leg for over 6 months before it flared up. And with that. I thank you for reading the Pfennig, and Hope you have a Fantastico Friday!
EverBank World Markets
12-07-2012 1:06 PM