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In This Issue.

* Currencies rebound yesterday but turnaround today.

* CBR hikes rates!

* BOJ announces new QE! .

* Ding, Dong QE is Dead, for now that is! .

And Now. Today's A Pfennig For Your Thoughts.

Boo! It's Halloween! .

Good Day!... And a Happy Friday to one and all!... BOO! Gotcha didn't I? It's Halloween! The last day of Rocktober, and the All Hallows Eve. Funny story about my grandson, Braden. He's decided he's NOT going to wear a costume, even though he wanted so badly to be Batman. the pre-school he attends did a pre-Halloween event, where all the kids dressed up in their costumes, except. Braden. And he does NOT want to go trick-or-treating! I told him he could stay home with me and give out candy, but he wanted no part of that either! What a hard headed little boy! I laugh, but I'm sure his parents, Andrew & Rachel are about to pull their hair out!

Well, if I had hair, I would be pulling it out this morning. Gold is down $26. And the only thing I can see that ties to this whacking, is the talk about the Fed moving their first rate hike up in terms of time. I'll let you in on a little secret, that apparently, the markets and investors don't know because they are too young to know, or too old to remember. Gold can rally in the face of high interest rates. And I mean HIGH interest rates, like say 18%! Go ahead and check it out. During Gold's first rally to $800 from $35, where were interest rates? That's right, they were a whole hell-of-a higher than the 50 Basis Points (1/2%) that rates will be when the Fed does get around to hike rates next year.

Yesterday, the currencies made a nice rebound rally throughout the day, at one point I said to Mike Meyer, "look at that rally in the currencies, that's quite impressive", to which he replied, "too bad the metals aren't joining in." But, you know, we've seen that too darn many times in the past few years, the metals, led by Gold, getting whacked during the U.S. trading session, after holding steady or booking a buck-or-two gain overnight. That's why I mention this move in Gold Front and Center this morning, for the overnight markets have taken their pound of flesh from Gold, which doesn't bode well for the shiny metal, given the way it gets treated by the U.S. markets.

So, the rebound rally in the currencies yesterday, has turned over to an all-out assault on the currencies by the dollar this morning. I'm trying my best to figure out just what the heck is the justification for this type of whacking. I just can't get my arms around this thought that's going through the markets in the past 24 hours that the U.S. has turned the corner, and there's no looking back at zero interest rates, and an uneven recovery in the economy. But I don't control the markets, nor do I have the power to move them, as opposed to a few readers over the years that thought I did, so, I can sit here and say that I can't get my arms around the thought, but it doesn't help anything.

So, moving on. The Bank of Japan (BOJ) got things rolling overnight for the dollar, when they unexpectedly announced that they would be expanding their monetary base, in dollar terms, $725 Billion, and they will do that by buying JGB's (Japanese Gov't Bonds). Yes, they've done this before, in fact they were the original cowboys with Quantitative Easing/ QE/ bond buying/ debt monetization/ money printing/ and so on.. The Japanese yen is circling the bowl this morning having given up 2 whole figures since yesterday, and flying past 110, to trade with a 111 handle this morning.

Japan is a basket case, I've said this for a long time now, and this announcement by the BOJ is just another nail in the coffin for yen. And don't for a minute begin to think that the BOJ is just taking over for the Fed in supplying the Globe with liquidity. Japan's latest entry into the Bond buying booth, will be worth about 2% of Japan's GDP. Compared to the usual bond buying programs of the BOJ, which were about 30% of GDP. Spread out, it means about $8 Billion per month in bond buying. That's chump change compared to what the Fed was providing (recall? $85 Billion per month). So, the BOJ as a replacement for the Fed as the provider of global liquidity is a joke. And not a very funny one either!

This morning, we'll see the color of the latest Eurozone "flash" Inflation report. The markets are looking for inflation to fall even further from the .4% print last month. Oh, wait!, The data just printed, and looky there! Eurozone inflation held steady at .4% this month. Hey! At least it didn't fall further, as the markets were suggesting! But this steady Eddie level hasn't helped the euro this morning, as the single unit has given up about ½-cent .

I was checking the prices of things this morning before beginning to write, and noticed that the price of Oil, while seemingly steadying, is back to $80 this morning. The price of Oil slipped to the $80 handle a couple of weeks ago, and then bounced. I wonder if that's on tap this time too. I'll say one thing about the cheaper Oil price, it sure has helped the Trade Deficits of a lot of countries, including the U.S., and the one I've had my eye on for a while now, India.

Recall that last year, India had to ban Gold imports because their Current Account (which includes the Trade Deficit) had gotten so out of whack. Well, with the price of Oil sliding, the Current Account in India doesn't look so rotten any longer. And that could go a long way in helping PM Modi to unlock the Indian economy. It also could go a long way in allowing India to resume Gold imports. But first things first, and that is unlocking the Indian economy. Did you ever check out what I had to say regarding India in that Dukascopy TV interview I did, and put the link in the Pfennig for you to check out? Well, if you didn't, then all those that did, know something about India that you don't know! HAHAHAHAHA! Seriously. while I'm not expecting HUGE gains from the rupee going forward, I did say in the interview that we could see the rupee return to the 58 level, from the 61 level it resides today.

Yesterday, I told you about the Russian ruble rally, and that the markets were getting the feeling, that the Central Bank of Russia (CBR) was going to step in a hike rates in a large-way. Well, the CBR met already this morning, and they did just that! The CBR hiked rates in Russia 1.5%!!!! WOW! Talk about a rate hike! The ruble is struggling this morning in spite of that HUGE rate hike, but at least it hasn't given back all the gains from yesterday. yet.

I said above that the markets were getting the feeling, and that got me singing, James Brown's song, I've got the feeling. I Got the Feeling, baby I Got the Feeling, Sometimes I'm up, Sometimes I'm down, down, I'm bad, Down, Alright, Huh! Remember the Eddie Murphy skit where he imitated James Brown writing a song? "I need a word. EOWWWWWWW! That's a good one!" I'm sorry, I digress here.

So, let's see. this week alone, we had Brazil and Russia hike rates. There's probably 4 more rate hikes coming from Brazil, and even with the 150 Basis Points of rate hike from Russia this morning, there are probably more to come there too.. So, what good have these rate hikes done for the currencies, because a feeble little 25 Basis Points (1/4%) rate hike that hasn't even materialized in the U.S. has certainly helped the dollar. Well, it's a case of two currencies. The Brazilian real has really taken the rate hike to heart, and rallied, while the ruble had a case of buy the rumor, sell the fact.

While I was going through some stuff on Google+ yesterday, I came across a posting by Koos Jansen, who is usually posting stuff on Gold. But this was different. This time he posted a video of Russian President Putin, talking at a conference. Good thing there was an English translator. Apparently Putin is not a happy camper that his country has been made to suffer through sanctions, and pointed out that Economic and Political should not mix. I think, but I'm not sure, because some of it was inaudible, but I think Putin also suggested that we should all wave goodbye to the dollar.

In China / Hong Kong, things are heating up again with the protestors in Hong Kong. The Chinese have wiped out the early week gains in the renminbi, with daily weakening of the currency the past 2 nights. So, nothing gained, nothing lost this week in China. I see more and more naysayers coming out and saying bad things about China. Have they not learned anything over the years? All that handwringing and teeth gnashing over what these boys and girls thought they saw in the Chinese economy, has never materialized, nor has it ever even come close to materializing. Makes you wonder about the. Nah, never mind, I don't need to go there!

Then here in N. America. Remember when the new Bank of Canada (BOC) Gov. Stephen Poloz was first introduced and I told you that things going forward would be a struggle for the Canadian dollar / loonie, because Poloz came from the "Trade Side" of Gov't, and what were the "trade guys" always complaining about? How strong the currency was. So, I put 1 and 1 together, which still equals 2, and figured out that if that was Poloz's base, then it would not bode well for the loonie.

And yesterday, I got some confirmation of all the bad things I had thought about Poloz, when he said, "The recent weakening of the Canadian dollar is icing on the cake for Canada's exporters". Brother, can I call these Central Bankers out for what they really are? Carney, Wheeler, Kuroda, Poloz, Greenspan, Bernanke, Yellen. Geez Louise, they are all cut from the same cloth!

Moving south from Canada, we get to the U.S. and the U.S. Data Cupboard, which gave us the first reading of 3rd QTR GDP, of which, I had warned you yesterday, that the first reading would not be below 3%, as I had called for, because the mid-term election is next Tuesday. and we sure couldn't show that much rot on the U.S. economy's vine 5 days before the election now could we? Well, the Gov't tells us that 3rd QTR GDP was 3.6%, not too shabby, I must say. But then, let's see where the next revisions take us, I still think that when all the dust settles and the beans have been counted, 3rd QTR GDP will have grown at a 2.8% clip.

Today's Data Cupboard has two of my fave reports. Personal Income and Spending. The September print should show that Personal Spending is slipping. Just some early sign that we're about to experience problems, Houston. We'll also see the Employment Cost Index (ECI), and the Personal Consumption data. While all of it will be interesting, it just won't knock the clock off the wall, unless something goes rogue on us!

For What It's Worth. Ding Dong The Witch is Dead, The Wicked Witch, The Wicked Witch, Ding, Dong the Wicked Witch is dead! Yes, that's from my all-time fave movie, The Wizard of Oz, but that's not what I'm going to talk about today. Instead I'm going to say that Quantitative Easing / QE, is the Wicked Witch. And I'm a munchkin singing Ding, Dong QE is dead.

And that's not all! I thought I would now ask you some questions now that QE is dead (in the U.S. that is) Where will your wealth effect come from now? Who will purchase all those bonds? And what of this balance sheet at the Fed? I saw where former Fed Chair, Big Al Greenspan said that the "Fed's balance sheet was a pile of tinder, but it hasn't been lit. "

And don't forget that I'm still betting that free undercoat that the Fed will be back to the QE table and then QE will become the night of the living dead! A little Halloween humor for you there!

To recap. The currencies had a rebound rally yesterday, but Gold didn't participate.. Overnight however is a different story for the currencies who are giving back those rebound rally gains from yesterday, and Gold has plunged $26 overnight.. The BOJ really surprised the markets by announcing a new round of bond buying, and that pushed the yen down 2 whole figures! The CBR hiked rates in Russia by 1.5% this morning, now that's a rate hike!

So, Brazil and Russia hiked rates this week, talk about interest rate differentials VS the dollar, yen, pound and euro!

Currencies today 10/31/14. American Style: A$ .8835, kiwi .7875, C$ .8935, euro 1.2575, sterling 1.6005, Swiss $1.0425, . European Style: rand 10.8925, krone 6.7265, SEK 7.3695, forint 244.30, zloty 3.3435, koruna 22.0770, RUB 42.26, yen 111.65, sing 1.2835, HKD 7.7550, INR 61.36, China 6.1461, pesos 13.42, BRL 2.4205, Dollar Index 86.55, Oil $80.51, 10-year 2.32%, Silver $16.11, Platinum $1,232.24, Palladium $781.65 (the only metal with a gain this morning) and Gold. $1,173.18

That's it for today. You know, I was really upset with the Baseball reporters yesterday, as they were all gaga over Giants pitcher Madison Bumgarner, calling his performance in the World Series the "best". The talked about Koufax, they talked about Shilling, but no mention of Bob Gibson. Hmmm. In three World Series Gibson pitched 9 complete games, and in 1967 his ERA for the 3 games was 1.00, in 1968 is was less than 1.00. I really don't know how Gibson's World Series efforts were forgotten by the reporters. Well, Let's all do the Monster Mash. I hear it's a graveyard smash! I love sitting out on the porch and giving out candy to the trick-or-treaters, especially the little ones. They are always so darn cute, some scared, and some no afraid of anything. I used to dress the yard up with big spider webs, and large spiders, tombstones with body parts sticking out of the ground, and a ghost that flew across the front of the house, screeching and moaning like a ghost does. I finally stopped all that, after Alex got bigger and was no longer interested in setting it up with me. So, it's Halloween, Eat, Drink and be Scary! And have a Fantastico Friday!

Chuck Butler
EverBank World Markets

Posted 10-31-2014 4:26 PM by Chuck Butler
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