No More Zombieland For The Markets!
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.

* Chuck thinks he has the SNB figured out!..

* I wanna take you higher!

* Russia to cut of gas to Europe?

* 2015 to be year of yen reversal? .

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

No More Zombieland For The Markets!

Good Day!... And a Happy Friday to one and all! I have a feeling this will be a Fantastico Friday, given it's a 3-day Holiday weekend, the weather in St. Louis is supposed to warm up a bit, and yesterday was payday. So, let's go do something fun this 3-day Holiday weekend! My fave AC/DC song greets me this morning.. You shook me all night long. Kind of reminds me of what the Swiss franc has done to the dollar and euro.Shook them all night long.. I think I finally figured out the SNB's move yesterday, so let's have it Chuck!

Well, the Swiss National Bank (SNB) decision yesterday sure upset the markets' applecart that had been pretty dull and boring for a few years now. The Swiss franc just kept on going higher in value VS the dollar and euro yesterday after I signed off. I had told you at this time yesterday morning that the franc had gained 15% to that point. Well, it just kept on going higher. Think Sly Stone at Woodstock. I wanna take you higher. Higher. I checked the franc last night before going to bed, and it was $1.1705. But this morning the franc has slipped back some to 1.14. But I doubt this drop is going to last too long, given the ECB's green light to implement all-out QE. I've got some thoughts now about this move by the SNB, so let me first get to what happened and what's happening in the markets, and then we'll visit the SNB.

The euro was moving in the opposite direction of the franc, and lost the 1.17 handle, and is all the way down to 1.1600 this morning. Gold was up big on the day, Oil moved around a bit, bonds rallied like there's no tomorrow, and all of this coming as a result of the SNB's decision to untie the franc from the euro. I had a dear Pfennig reader send me a note yesterday, asking me if I thought it was a good time to sell her francs, now that they have a profit, or to hold on to them.. She wanted to know if I thought this moon shot by the franc would be short-lived. I didn't not have an answer for her other than to say that a wise man once told me, "It's never a profit until you take it, you can always buy the asset back if its price drops, but you won't be able to sell at a profit then!

But I do now! Basically, yesterday I had a knee jerk reaction to the SNB's move, saying that the SNB saw the fear factor of what's going on in the world and decided that having a strong franc was a good idea. Well, I've tweaked that now, to say, that the SNB saw what was going on with the ECB and decided to stop throwing good money down the drain. Let me explain. To defend the cross of 1.20 with the euro, the SNB had to buy euros and sell francs, and that was all well and good until the ECB got the OK from the ECJ to implement all-out QE. Uh-Oh! That means, as I told you the other day that the euro is about to get hit by the whole ugly forest, and the SNB wanted no part of that! The no longer wanted to buy euros when they were falling like a rock from a cliff. The no longer wanted to be the country on the block buying euros. So, THAT's Why the SNB dropped the defense of the cross.

I read one writer's description of the markets the last 3 years as "zombieland". And that zombieland had been awakened yesterday. But. the thing I liked other than the franc's moon shot, is the freedom to move about the country without a leash, that Gold had. So, when do the price manipulators get back in the markets, we've not seen them so far this year?... I'm sure they are champing at the bit, but being patient, watching investors flock back to Gold, and when they have enough of them, WHACK!

Well, I hope not! I hope the price manipulators remain on the sidelines, and Gold continues to move higher as it has since the end of the year. I read on Google+ last night that there's been a physical Gold buying frenzy in China since the start of the year. (Soon, China will have their own New Year Celebration, and the next year will be the year of the RAM) I'm an Aries Ram, and our football team is the Rams, so maybe it'll be our year! But, more importantly. according to Gold researcher extraordinaire, Koos Jansen, January is the time of year the Chinese buy golden gifts for their loved ones, and he tracked 61 Tonnes of physical Gold withdrawn from the Shanghai Gold Exchange (SGE) just last week! WOW!

Here's a thought from Koos that was on Google+. "As most of Chinese Gold demand needs to be sourced from abroad (import), this is draining global Gold inventory. One of the largest suppliers in this markets is the U.K., home of the London Bullion Market (LBMA) It remains to be seen how long the U.K. can export to China - the question is will all Gold from London be shipped to the Orient, or will it stop before they're empty? "

The shiny metal has lost $5 of its value overnight, but this is more of a "the asset moved too far, too fast" kind of trade and not the suspicious kind of trade that takes Gold lower. I'm still a believer that 2015, will be a good year for Gold. Of course that's my opinion and I could be wrong. I'm a believer, not a trace of doubt in my mind! - Monkees

Other than francs, euros and Gold. We saw the Chinese renminbi appreciate again last night. this appreciation was small, but an appreciation nonetheless! The price of Oil remained in the $47 range yesterday and overnight, which was a good thing, you know, no wild swings is a good thing. But like I told you yesterday, the petrol currencies just aren't seeing the love from this small recovery in the price of Oil. The Russian ruble continues its ride on the slippery slope, and the Norwegian krone makes its daily trip to the woodshed, for another whacking! The Brazilian real perks up and then falls back, it's been a real mystery currency since Oil's price began to plunge lower.

There is some news about Russia that I've seen several places, including zerohedge.com, so I would think this is good intel... the articles all say that Russia has cut its gas flows to Europe. YIKES! In the winter too! Double YIKES! And then the other part of these articles is a statement that Russia was selling their dollar reserves to defend the ruble. Well, they must not be selling dollars today, because the ruble is weaker this morning! But that would be a HUGE move by the Russians, don't you think? I mean, didn't we suddenly find WMD's in Iraq when Saddam began selling his Oil for euros? And then we found Saddam hiding in a hole in the ground. And I could go on about how the country is now a mess, but that's not a discussion for here, but rather the Butler patio! But, the point I was making here is these moves by Russia scare the bejeebers out of me.

I guess when you back a bear into a corner. And that's exactly what not only the U.S. has done to Russia, but also the Saudis with their refusal to cut production of Oil, thus keeping the price of Oil low, due to a HUGE supply of the bubbling crude, Black Gold, Texas Tea. The Saudis may have set out to put a hurt on the U.S. shale Oil producers, and then got the call to do the same to the Russians, but either way you cut the cake here, think about how an attack on the Saudis could bring about higher Oil prices, and we would see if the U.S. maintains its defense of the Saudis. I know, I know, this has nothing to do with currencies, except the ruble. So, let's move on to something else!

Well, the Japanese yen continues to push the currency appreciation envelope further and further. This has been totally unexpected by me and probably 95% of currency traders. But apparently not the ex-Top Currency Official in Japan, Toyoo Gyohten (boy spell check didn't like the spelling of that name!), who pointed out that the yen had never before fallen VS the dollar for 4 straight years. This slide in the yen began in 2012, and I'm still of the opinion that the weak yen trend is still in place. You know, as with all trends, they are not ONE-WAY Streets, and they can have volatility, which is what we're seeing now in yen.

But Mr. Gyohten said, "If you ask me if 2015 will be a year for the yen weakness to be sustained, the probability is less than 50%". So, he's not a believer of an even weaker yen this year, and the performance of the yen so far in 2015 backs him up and not me! As I told you yesterday, the yen is the top performing currency not named Swiss francs so far in 2015.

The SNB's move yesterday sent shockwaves through the markets, and has traders, investors, hedge fund managers, etc. all running for safety. And where did they run to? Well, francs, Gold, yen, dollars and Treasuries. The 10-year Treasury yield is 1.72%!!!! That's crazy! But what's even more crazy is the fact that the 10-year Treasury is still being bought! Ahem. folks, even with the watered down inflation figures from the Gov't, owning a Treasury brings you a negative real return. But don't let that get in the way of a run to safety story!

And don't forget that the SNB won't be buying euros any longer to defend the cross. That should turn up the pace on euro weakening. But remember, the ECB doesn't meet until Jan 22nd, and if that's the meeting they announce their all-out QE, the euro could be at an oversold position. so, be careful here. this could get really ugly fast. and then it may have gone too far too fast.

Confusing? Yes it is. Better to just be on the sidelines and watch this all unfold. Or better yet, look to buy Gold on the dips. Makes sense to me!

The U.S. Data Cupboard today, has the stupid CPI, and two of my fave data prints, Capacity Utilization and Industrial Production. If these two follow in the footsteps of Durable Goods and Factory Orders and Manufacturing they should show more rot on the economy's vine. And I think they will! Yesterday's Data Cupboard showed us what the drop in Oil prices have done to wholesale inflation. weakened it. And the Initial Jobless Claims spiked higher last week to 316,000, from an upward revised 297,000 the week before.

In a small and mostly unloved report on Business Outlook by the Philly Fed, the index they use saw a HUGE drop from 24.3 to 6.3. I only tell you this because it plays nicely in the sandbox with the other reports that are showing rot on the economy's vine.. Please don't listen to those that would tell you, and they're out there, I hear them and read them all the time, that the U.S. economy is on the rise, and that will bring rate hikes. The Fed might be challenged and hike rates once, but will rue the day they did so.

For What It's Worth. I looked and looked last night and this morning for a "feel good on a Fantastico Friday story" for today's FWIW. that ended up being a futile exercise. And I ended up with this story that was in Russia Today, and can be found here: http://rt.com/business/222175-russia-china-rating-agency/

"The new Universal Credit Rating Group (UCRG) is being set up to rival the existing agencies Moody's, S&P and Fitch, and its first rating will be issued this year.

The setting up of UCRG is in its final stages, ready to challenge the 'Big Three' that currently dominate the industry, the Managing Director of RusRating Aleksandr Ovchinnikov told Sputnik News Agency on Tuesday.

"In our opinion, the first ratings [will] appear . during the current year," Ovchinnikov said, adding that accreditation with the local regulator is already underway.

The news comes on the heels of Fitch's decision to follow S&P in downgrading Russia's sovereign credit rating to BBB-, a step above junk level and on par with India and Turkey.

The new agency will be based in Hong Kong, and provide a check on the 'Big Three', which some analysts say don't provide an accurate reading of economic situations."

Chuck again. First these two countries led the charge to start the BRICS Development Bank, and now they lead the charge to start a credit ratings group. Good for them! It's like buying a piece of property in a region that only appraisers in that region understand, and not using one would be disastrous. I have experience in this, and know what I'm talking about!

To recap.. Well the zombieland markets were turned on their ear yesterday by the SNB, and Chuck has his idea as to why the SNB did this move now, and what's in it for them. No more buying of euros by the SNB, and the euro's plunge gets amplified. There's news this morning that Russia is cutting off gas to Europe and that they have decided to sell their dollar reserves to defend the ruble. Yen continues to recover, and an ex-currency official in Japan believes the rot on the yen's vine will stop this year. So far he's right. but we're only 16 days into 2015. Gold is down $6 this morning, but it appears to be more of a "gone too far, too fast" correction, than anything suspicious.

Currencies today 1/16/15. American Style: A$ .8220, kiwi .7800, C$ .8335, euro 1.1590, sterling 1.5195, Swiss $1.1460 . European Style: rand 11.5440, krone 7.5840, SEK 8.1240, forint 276.40, zloty 3.7170, koruna 23.9638, RUB 65.17, yen 116.70, sing 1.3260, HKD 7.7515, INR 61.87, China 6.1188, pesos 14.63, BRL 2.6155, Dollar Index 92.50, Oil $47.48, 10-year 1.72%, Silver $16.98, Platinum $1,255.94, Palladium $767.50, and Gold. $1,260.40

That's it for today. Hey! Don't forget that Monday is a holiday, so no Pfennig on Monday, but there will be a Sunday Pfennig as usual, so look for that in your mail box or be sure to read it at www.dailypfennig.com . Well, as usual, I was the kiss of death, in mentioning our Blues' 5 game winning streak yesterday, as they lost in OT to the Red Wings last night. UGH! A cold front is moving through where I am, and we'll only get to 70 today. But back to normal temps tomorrow. So, I've got that going for me! I was looking into a "get away weekend" to the Keys, but apparently so were hundreds of other people, and it soon became an afterthought, due to bookings and other things. Oh well, I tried! Sammy Hagar is playing his song: Rock-N-Roll Weekend. Get on the phone with all your friends, and tell them it's going to be a Rock-N-Roll weekend! Now that's a fun song to end my day of writing with! And so, let's keep it going and have a Fantastico Friday, and a Rock-N-Roll 3-day Holiday Weekend!

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





Posted 01-16-2015 2:03 PM by Chuck Butler
Filed under: ,
Related Articles and Posts