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In This Issue.
* Currencies & metals range trade.
* Mental giants buying yen.
* Aussie inflation rises.
* BOC to leave rates unchanged.
And, Now, Today's A Pfennig For Your Thoughts newsletter!
Let's All Kick The Can Down The Road.
Good day. And a Wonderful Wednesday to you! I sure did receive quite a few responses to the Pfennig yesterday, with wonderful stories about Stan The Man Musial. Great stuff, folks! Thank you! When I left to go home yesterday afternoon, it was snowing like there was no tomorrow, but by the time I got closer to my home in my little river town, there was no sign of the snow! OK. by way of the map, I know I live "southwest" from the office, but it's not THAT far! Crazy snowfall!
Well. the currencies and metals are trading in the same clothes they wore yesterday. We did see a little slippage in the levels yesterday morning, but all-in-all, it was a tight trading range, and by the time I left to drive on snow-covered roads, the currencies and metals were back to their early morning levels. There just wasn't any market moving data to drive the markets yesterday, nor was there any movement in the debt ceiling talks except to talk about delaying them.
What? Talk about kicking the can down the road. Yes. our illustrious leaders, said with tongue in cheek, will vote today on giving the government enough borrowing leeway to meet 3 months worth of obligations, thus delaying the demands for spending cuts, and the whole mess. I have to say that once again, I'm very disappointed in our leaders decision to delay this debt ceiling decision. It's almost as if the debt ceiling doesn't really mean anything. If we reach it, and extraordinary measures can be taken to allow us to continue business as usual, and then when those extraordinary measures run out, we simply move the goal posts, I have to wonder, what significance does it have in the first place!
Don't get me wrong here. I know that the debt ceiling is important, as it makes us stop to think about the deficit spending that's going on. In 2011, I think we almost pushed hard enough, but it all got kicked down the road. and now that we've caught up with the can, we're going to kick it further down the road.
OK. I'll get down from my soapbox now. Hey! European Central Bank President Mario Draghi, gave a speech yesterday, and said that, "We can begin 2013 on a more confident note, precisely because significant progress was made during 2012. The darkest clouds over the euro area subsided. Europe's leaders recognized that monetary union needs to be complemented by a financial union, a fiscal union, a genuine economic union and eventually a deeper political union."
Well. I like the part about the "darkest clouds" subsiding. I would agree. but if you read between lines. he's saying the same thing I keep saying. that the Eurozone and euro are not out of the woods yet. The relative calm that has been cast over the Eurozone, is welcome, given what the area had to go through the past two years. But the Eurozone leaders have too kicked the can down the road, but in their case, they are at least making spending cuts now.
In Spain yesterday, their bond auction went quite well, as there was unprecedented demand for Spanish paper. Today, Portugal goes to the auction block. If things go well with the Portuguese auction, then you will have even further proof that the Eurozone is improving and the optimism toward the Eurozone is increasing.
Speaking of kicking the can down the road. Although it's not a long kick, the Japanese are delaying the monetary stimulus that's been OK'd by the Gov't and the Bank of Japan (BOJ). I have to laugh because one of the headline stories on the news wires this morning is that the Japanese yen rallies on monetary stimulus delay. What? So these guys and gals buying yen because the stimulus is being delayed are figuring that the BOJ will not implement the stimulus? Come on! You've got to be kidding me! These yen buyers can't be that intelligently handicapped. The stimulus is coming, and even if the BOJ can hold off for a longer period of time than I think they can, the Japanese Gov't led by Abe, will find another way to weaken yen! He's told everyone that we wants inflation, and a weaker yen.
Sure the markets could fight him and the BOJ, but seriously folks, why? Japan has lost its credibility toward how they would finance their unsustainable debt. So, why delay the inevitable? Like a couple of my presentations last year. What may seem evident, may not be imminent.
In Australia overnight, Aussie 4th QTR consumer inflation rose from 2% to 2.2% (VS the previous quarter). The rise wasn't as strong as the markets and experts had forecast (2.4%) and so the Aussie dollar (A$) gave back some of its gains. You see, the mental giants that saw inflation here not rise as much as forecast, believed that this will cause the Reserve Bank of Australia (RBA) to pull the dust covers off the rate cut machine once more. You know me. I don't like inflation, and so to me, any gain in inflation is not good, and certainly doesn't warrant a rate cut! Remember what I always tell you. data can enable rate moves, it doesn't force them.
I see where the folks over at Goldman Sachs have raised their forecasts for the euro. They say that they see the euro rising to 1.40 over the next 3 to 6 months. WOW! They also lowered their forecasts for yen. Now. remember what I always tell you about these Financial Institution forecasts. 1. They change them in a heartbeat and 2. There's always the question of whether they are long or short the asset they are forecasting. But, still, I find it interesting to tell you about them, because if an institution as big as this one is telling their clients this info, it just might be the push that could move the asset.
The Bank of Canada (BOC) meets this morning. The BOC has really disappointed me this past year, in keeping their tightening bias, and verbal exercises talking about how sooner or later the accommodative adjustments will need to be removed, that were nothing more than words. So, at today's meeting, I expect more of the same. I am concerned though that the BOC could be holding back the rate hike because the Canadian dollar / loonie continues to show persistent strength. (A rate hike could push the loonie even stronger) I would hope that the BOC wouldn't go down this path. if rates need to be pushed higher than do it!
I had to stop for a moment to sing along with the Casinos, and their great oldie, "Then you can tell me goodbye".
The UK is going down a road I don't believe they'll end up liking in the long run. And that is leaving the European Union. PM Cameron said there will be a UK referendum on the subject. I'm just saying.
Well. the so-called monetary experts of the world are back in Davos Switzerland to discuss the state of the world's finances. This meeting is always good for a quote or two from the more known economists and analysts. Besides that, it's nothing more than a boondoggle.
The price of Oil is a dollar stronger this morning. with all the great stories about the U.S. finding and extracting oil here at home, one would think that the price of Oil would come down. Remember, I told you about the May 2011 call by speaker / analyst for $40 Oil, and how someone else picked up the fight and made a similar call in May 2012. I wish they were correct! But so far, lower oil prices are not to be found. And that's because, in my opinion, Oil is now used as an anti dollar investment.
The other anti-dollar investment, Gold. (Silver & Platinum too!) is unchanged this morning, after bumping up to $1,695 yesterday, it dropped back to $1,692, where it sits this morning. I think that getting back to $1,700 is very psychological and would be a big step toward moving higher for the shiny metal. I see where Currency Wars author, James Rickards said that the "Bundesbank's Gold repatriation is world historical". I agree. because I think that they are just the first to do this, there will be more. And it's all good for Gold, folks..
Then There Was This. In the news lately are stories about a silver shortage. I saw this interview with Dan Norcini, a well respected analyst, who had this to say about the shortage news.
"Most of the time shortages don't mean there is not a lot of the commodity around, it just means there is not a lot of it available at that particular price. In other words, silver is sitting out in the vaults of investors. There are guys with 1,000 ounce bars, and quite frankly, they are not interested in selling that metal at prices down near $30. As a matter of fact, when we look at that weekly price chart now, Eric, 4 out of the last 5 weeks preceding this one the silver has dipped down to $30 or below $30, and it has encountered very substantial buying down at those levels. The bears could not crack the market below that ($30 level).
What that means is if there is a demand for silver out there and it can't be met by the available supply on the market, the price is going to have to go higher. It's going to have to get to a level where people where people who are holding these big bars are willing to relinquish it in size or part with their metal."
Chuck again. This is what I always tell you Tutor Turtle. it's something that my dad taught me many years ago, and that is. there's no such thing as a shortage, it's merely something that' in need of a price adjustment.
To recap. The currencies and metals are trading in the same clothes they wore most of yesterday. No major data to drive the markets left them looking for something to trade off of, and when left with nothing, they simply left their clothes on and went to bed. the U.S. Gov't is about to kick the can down the road on the debt ceiling, and things in the Eurozone are improving.
Currencies today 1/23/13. American Style: A$ $1.0555, kiwi .8420, C$ $1.0085, euro 1.3350, sterling 1.5865, Swiss $1.0765, . European Style: rand 8.9475, krone 5.5465, SEK 6.5060, forint 219.90, zloty 3.1160, koruna 19.1560, RUB 30.15, yen 88.55, sing 1.2265, HKD 7.7530, INR 53.66, China 6.2177, pesos 12.64, BRL 2.0380, Dollar Index 79.73, Oil $96.75, 10-year 1.84%, Silver $32.35, and Gold. $1,694.83
That's it for today. Our Blues got off to a fast start in the shortened NHL season, but took their first loss last night in Chicago. The Cardinals winter warm-up took place this past weekend. I've never been one to stand in long lines for an autograph, so I don't attend. about 10 years ago, my friend Jack Stapleton took me to the winter warm-up luncheon, and I bid on a picture of Stan Musial that he would sign. I won, and now it sits proudly on my back bar at home. Along with pictures of me in my football uniform, and wrestling. I put them there to remind me of what I used to look like. it was a long time ago now. funny really. And with that. I thank you for reading the Pfennig, and I hope you have a Wonderful Wednesday!
EverBank World Markets
01-23-2013 11:45 AM