Central Bank Meetings & A Jobs Jamboree Week!
Daily Pfennig

Blog Subscription Form

  • Email Notifications
    Go

Archives

.........But First, A Word From Our Sponsor..........

WHY RUSH INTO METALS WHEN YOU CAN WALTZ?

The rarity of precious metals helps drive their value and potential significance to your portfolio. But for those not interested in making a mad rush to metals, EverBank has unearthed an exciting and equally rare investment alternative.

With our automatic purchase plan, you can start mining metals at your pace.

?Fund for as little as $100 a month

?Choose from gold, silver and platinum

?Pay no ongoing fees

Available only with the NON-FDIC INSURED Metals Select Unallocated Account1, this is a rare opportunity to strategically utilize dollar cost averaging to grow your metals ownership from one month to the next.

Start mining at your pace today. Learn more and view IMPORTANT DISCLOSURES at https://www.everbank.com/investing/metals/unallocated?referid=11808. Or call 800.926.4922.

EverBank is an Equal Housing Lender

© 2013 EverBank. All rights reserved. 13AGM0003.

......................................................

In This Issue.

* Safe Havens come back into play .

* Markets back to putting pressure on ECB.

* Gold Soars!.

* Where are the price manipulators now? .

Central Bank Meetings & A Jobs Jamboree Week!

Good Day! . And a Marvelous Monday to you! I'm sure many of you are in the same boat as we are here in St. Louis this morning, with regards to the weather.. A nasty ice storm, sleet, and a litt snow (not as much as they guessed would fall) and bitter cold once again has hit us right between the eyes. It was very interesting driving into work this morning. But I'm here, safe, and getting warmed up.

Friday turned out to be a real dud, after the fireworks that took place in the currencies, especially the euro, the previous night. We didn't see any further movement, as the euro remained just above 1.38 all day, and Gold couldn't find a bid or offer, so it was "stuck in the mud".. Over the weekend we had some saber rattling in the Ukraine, and that has the worry meter for geopolitical problems running high. It also has the price of Oil pushing higher. Have you ever seen the map of all the oil pipelines that come out of the Ukraine into Western Europe? If you have, then you quickly understand why the price of Oil is up $2 from Friday's figure..

There will be a boat load of Central Bank meetings this week, with the Reserve Bank of Australia (RBA) leading off tonight. The Bank of Canada (BOC), Bank of England (BOE), and European Central Bank (ECB) will fall in behind the RBA this week. The ECB meeting is putting pressure on the euro this morning, as the markets are back on the thought that the Eurozone needs additional stimulus and what better time to announce such a thing, as an ECB meeting? You all know where I stand on this, I just don't like Central Bank meddling. The ECB has cut interest rates so low that you would have to be a limbo champion to get under them, and as I explained before the last rate cut was announced by the ECB, once rates get so low, further rate cuts do nothing, absolutely nothing, say it again, for stimulating an economy, just ask Japan or the U.S.!!!

So, the euphoria that was all over the greater than 1-cent move in the euro on Friday, has been thrown to the side of the road, and the markets have the conn on the what's going to determine what the euro trades on.. And that is, unfortunately, their feeling that the Eurozone needs additional stimulus. Should the ECB not move to do anything on Thursday, we could very well see all this negativity in the euro unwind. But, Thursday is long time from here, right?

I personally don't see the ECB cutting rates or doing anything at this point with bond buying or any of its ugly step-sisters, as the economic data from Germany, the Eurozone's largest economy, has seen some improvement lately.

The Aussie dollar (A$) continues to get whacked on weak economic data, and I'm sure the RBA will take all that into consideration tonight when they meet. I wouldn't put it beyond the RBA to take a chunk of flesh from the interest rates this week, as we all know that they prefer a weaker A$ anyway.. But, that would be difficult to pull off, given the RBA moved to a "neutral bias" at their last meeting. So, did you hear that Qantas decided to lay off 5,000 workers, after announcing a huge loss last year? Nothing is coming up roses fo4r the A$ these days, so better to step away from the car, with your hands in the air, and slowly turn around, no wait? I wanted to say, it's better to sit on the sidelines and watch all these gyrations.

I was looking at the IMM futures positions report this weekend from the previous week. I always like looking at this report for any clues as to what the traders are thinking about with the currencies. And one currency that has seen its share of short positions is the Canadian dollar / loonie. I think these short positions are in place ahead of the BOC meeting this week. But as far as I'm concerned, the BOC will disappoint us, as usual, and the short will have to be unwound. That will good for the loonie.. But that's just my opinion and I could be wrong.

That leaves the BOE as the only Central Bank, that's meeting this week, that I haven't talked about yet. Here, I have to laugh, at the dumb markets that keep swallowing what BOE Gov. Mark Carney has to say, hook, line and sinker. This is the same game he played with the markets when he was the Gov. of the Bank of Canada, and eventually the markets grew tired of his unfilled promises and took their wrath out on the loonie. I suspect the pound sterling could experience the same wrath..

Well, our old Steady Eddie currency, the Chinese renminbi/ yuan lost 1.3% in February. That's the biggest monthly drop in the value of the currency on record. That surely seems to be more than the usual weakening to discourage traders from thinking the renminbi / yuan is a One-Way Street to appreciation, isn't it? But I'm still convinced that this all it is, and nothing more.. I was doing some reading yesterday, (what else was there to do, it was icing outside!) and came across a report by the boys and girls over at Barclays, who decide to jump on Chuck's bandwagon, (last week we had HABC join Chuck on his bandwagon) I think this is a good place to insert the words of Barclays on China.

"We think the CNY depreciation was likely aimed at discouraging one-way short USDCNY positioning. Other possible explanations of the recent CNY depreciation include preparation for band widening and support of export sector competitiveness given slowing growth momentum. However, given the engineered nature of the depreciation, this is unlikely to be the right time for band widening. Moreover, we do not think policymakers want to encourage expectations of sustained CNY depreciation, which could increase the risk of significant capital outflows."

Sound familiar? Sure it does, as I've told you all this for some time now.. But it's always good to see other join me! Ok, enough of the meeting of the "up, up with Chuck society", time to move along. Oh, before I go. my friends Addison Wiggin, and Dave Gonigam over at the 5 Minute Forecast were kind enough to pull a piece of the Pfennig from Friday for their letter, in which I talked about China. They always seem to pull the stuff I say about China. It's always fun to read a letter and see your name and what you said!

Well, the best performing currency overnight is none other than the Japanese yen! What, What? Yes, that's right, the saber rattling in the Ukraine, has the safe havens of francs, yen and Gold all in favor with the investors this morning. Shoot Rudy, even U.S. Treasuries are rallying! Francs are tied to the floor with the euro, so with the euro not performing well this morning, the positive move in francs has a governor attached to them. Gold is soaring by $19 this morning, more on that in a minute, and yen is cooking with gas this morning. Strange don't younk that the markets continue use Japanese yen as a safe haven when things get ugly in the world, but other times traders and investor think things in Japan or horrible enough to mark the currency down? Strange but true, I'm afraid. Hey! I told you long ago that traders are fickle. They can also be unreasonable, and this is one of those times, with yen.

And then Gold. The true safe haven, don't you think? I do.. Someone asked me the other day, "if you're so convinced that Gold's price has been manipulated down, why then, are the alleged price manipulators allowing this current rise in Gold price? Ahhh Grasshopper, or rather should I say "plant from one of the price manipulators?" HA! If you go back to late last year, I talked about how the price manipulators had pretty much gotten what they wanted, and that was all the short timers, and Johnny-Come-Latelys, to panic and get out of Gold, got the price down where they could take huge profits on their short positions and that we could see the go away for awhile.. Well, that sure appears to have taken place, as I described it.

Regarding price manipulation.. We could start with the Gold price fixing manipulation and move higher from there. Bloomberg had a story last week about the price fixing manipulation that a dear reader sent me, and its' pretty telling. Here's a snippet, "The structure of the benchmark (the fixing) is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality. It's is likely that co-operation between participants may be occurring - Bloomberg. Should you want to read the entire report, and I think you should, click here: http://www.bloomberg.com/news/2014-02-28/gold-fix-study-shows-signs-of-decade-of-bank-manipulation.html

The U.S. Data Cupboard was busy last week, but nothing compared to this week. We start this first week of March with two of Chuck's fave data prints, Personal Income and Spending.. Then move on to the ISM (manufacturing) Index and car sales. We'll end the week with the Feb Jobs Jamboree. So it will be a chock-full-o-data week!

Well. Remember when the U.S. 4th QTR GDP originally printed at 3.2%? I told you then that it would be eventually revised downward, and on Friday, last week, it was. To 2.4%... Now that's a downward revision, eh? Oh, the spin doctors were out attempting to put a happy face on this downward revision, and I think they succeeded, as the dollar didn't budge. In addition, 4th QTR Personal Consumption fell from 3.3% to 2.6% (the consensus was 2.9%), which plays along well with the drop in GDP.

I know this is all in the past, and we tend to get caught up with data prints that are old and stale, but in this case I think it's good to know what really was going on, so you're not so surprised with the current prints. The thing that "get me" sort of like, What's Eating Gilbert Grape? What's Eating Chuck? Is that the dollar got bought and the U.S. Gov't officials were all singing and dancing in the streets, they're dancing in Chicago, Down in New Orleans, in New York City! No wait, Chuck, They were singing and dancing because they told us all that the U.S. economy "was back!" And when this huge downward revision printed on Friday, nary a word from anyone. Where was the dancing? The singing? Not even a mea culpa.. Just ignore it, and it will go away, are the words I'm sure that were uttered throught the Gov't on Friday.

Before I go to the Big Finish today. I have two FWIW's for you. The first one is short, and the second one is a very interest look back at history (not that long ago, no sigh.. Here's the first one, and it is a doozy.

OK.. I belong to a group called the Citizen's Against Gov't Waste (CAGW) and they send me stuff all the time to read. Last week's letter has something that caught my eye. CAGW named their Porker of the month. Sen. Elizabeth Warren, who made a suggestion that "the United States Postal Service (USPS) should be permitted to expand into providing financial services in order to shore up its own financial footing"

Chuck again. OK, so she's saying that by starting another business USPS can save its primary business strains is pretty whacky don't you think? I won't go further on this, so as not to tick people off. But all of you who know, probably have a very good idea what I might have had to say here.

For What it's Worth. This is a real treat, folks. and it has nothing to do with the usual stuff.. But first wait, I have to stop to sing along tithe Doobie Brothers great song, South City Midnight Lady. OK. Back now. This is tre' Cool, it's former Treasury Official: Paul Craig Roberts talking about him working on a committee that was formed to end the cold war. Check this out that was on Kingworld.com.

"When the Soviet Union collapsed I was invited to come to the CIA and explain to them why they had gotten it so wrong. The difference with the CIA dated back to the Reagan years. After Reagan got the economy on its feet again with his supply-side policy, he then focused on ending the Cold War. He wanted to end it, not win it....

His approach was to first cure our economy so it would show the Russians that we were out of this stagflation mess. They (Russia) still had their problems but we were back on our feet.

Once they saw that, they would believe that the pressures that he kept threatening to put on them of a new arms race, of SDI (Strategic Defense Initiative) -- you may remember Star Wars -- none of this actually happened. It was all Reagan propaganda to make the communists in the Soviet Union agree to negotiate to end the war, rather than to be drawn into an arms race that their economy, at the time, was no longer able to sustain.

So that was Reagan's approach. The CIA kept telling Reagan, 'Oh, no, don't threaten the Soviets with an arms race. They will win!' And Reagan couldn't believe this. Of course my book, published in 1971, 10 years prior to Reagan coming into the presidency, had concluded the Soviet economy had already failed.

Reagan was aware of that (book), so when I left the Treasury he appointed me to a secret committee that had subpoena power over the CIA, and we were told to evaluate the CIA's conclusion that the Soviets would win an arms race.

The main argument they (the CIA) had was that the Soviet Union could control investment, and therefore could put whatever percentage of the Soviet economy was necessary into the military in order to prevail over the United States in an arms race. Whereas the American people wouldn't stand for some unlimited amount of resources diverted into the Pentagon's budget. So that was the CIA's position.

I don't know whether they sincerely believed that or whether they just didn't want the Cold War to end. They had a lot of power and influence because of the Cold War and that would take a back seat if there was no longer a Soviet threat. And of course the entire military-security complex made billions of dollars out of the Cold War and the Soviet threat. So they didn't want it to end either.

So Reagan was really up against the entire establishment on that. Many of the Republicans themselves thought he shouldn't be negotiating with Gorbachev because Gorbachev was one of those sneaky Communists, and Reagan was just an old man and the Communists would take advantage of him -- suck him into some kind of agreement that would end up with the Soviets winning.

So this was the whole milieu at the time when Reagan was trying to end the Cold War. And the committee that he appointed me to, we concluded that the CIA was wrong. People took my position in the committee. And this would be an effective threat on the part of Reagan to put pressure on the Communist Party of the Soviet Union to negotiate the end of the war, and it worked! And that's what happened. So that's that story." - Dr. Paul Craig Roberts

Chuck again. I love it! I'm sure back at that time there was someone that had an idea that this was happening like this, and yet everyone said he was nuts!

To recap. Friday morning's good levels for currencies held throughout the day but no further ground was gained. The overnight markets have shown that the saber rattling going on in the Ukraine is going to affect the currencies and metals.. The safe havens of yen, frans and Gold are all up this morning, while the euro and other currencies take it on the chin.. 4 Central Banks meet this week, with the RBA leading off tonight. I don't think we'll see any moves by these Central Banks, but the markets are pushing for a move by the ECB. 4th QTR U.S. GDP was revised downward by a large amount, funny, how we didn't hear any mention of ht downward revision, eh?

Currencies today 3/3/14. American Style: A$ .8910, kiwi .8365, C$ .9005, euro 1.3765, sterling 1.6730, Swiss $1.1355. European Style: rand 10.8105, krone 6.0490, SEK 6.4410, forint 227.30, zloty 3.0490, koruna 19.8705, RUB 36.55 (The Russian Central Bank hiked rates over the weekend, but not much is helping the ruble these days) yen 101.30, sing 1.2685, HKD 7.7595, INR 62.05, China 6.1190, pesos 13.30, BRL 2.3430, Dollar Index 79.92, Oil $104.05, 10-year 2.60%, Silver $21.46, Platinum $1,451.50, Palladium $747.23, and Gold. $1,345.23

That's it for today. Another loss for our St. Louis U. Billikens basketball team on Saturday. UGH! Like Steve McCroskey, who picked a bad week to quit. (fill in the blank) the Billikens surely have picked the wrong time of the year to lose games. My beautiful bride got out of Dodge in time on Saturday. I really wanted to get out of Dodge too, but I have to wait! . Well, March came in like a lion! UGH! School was called off today for Alex, so he's home alone today. He's almost 19, I don't have to be there to watch over hime! I made dinner last night, and less than an hour later, Alex was back in the cabinet looking for something else to eat! It's water polo season now, so he's swimming, and when he's swimming, he eats like a horse! Mike's there, and he just had to sit through a Pet Shop Boys song. I'm sure he's sitting over there wondering what the heck I'm listening to! OK, back to normal, CSN is singing Ohio, now.. OK.. Time to go.. I hope you have a Marvelous Monday, be careful, and keep warm!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 03-03-2014 1:54 PM by Chuck Butler
Filed under: ,