Good Day!... And a Happy Friday to one and all! Whew! What a difficult week for yours truly, and yes, I am back in the saddle this morning to end the week. You know, I know that there are people out there that have things far worse, health-wise, than me, and sometimes I feel like such a wimp, but, I made a promise to myself after finding myself in the ICU, that I would stop trying to be so macho, and admit it when I was weak and with no energy. So, if you are tired of hearing about these things, I apologize, I don't mean to make this a daily journal on how Chuck feels.
I do intend for this to be a daily journal on the health of currencies, economies, and a check on the pulse of Central Bank shenanigans. And with that in mind, I skip to my Lou to the currency screens, where there are a ton of articles about "the return of the dollar", and even my friend, John Mauldin, has joined in the "here comes the return of the dollar" calls. So, the dollar has some heavyweights, not that John is a Big man physically, but more that he has over a million readers, and they are behind this call. The more the heavyweights talk about the return of the dollar, the more investors feel that this is the way it will be, and react accordingly.
This is much like it was in 2005, 2008, and 2010. 2005 especially, because the dollar rally lasted nearly a year, and the heavyweights were out in force calling for a return of the dollar. Look, they may finally be correct here. But I doubt it seriously. The return of the dollar for a short-period of time? Yes, I'll go along with that call, but the return of the dollar for a multi-year rally? Nah. I think I'll pass on that one.
I guess at this point you would like to know why I'm not pinning my colors to the multi-year rally for the dollar, mast. Well. let's just say, the whole premise is built with as a house of cards.. There's nothing fundamentally strong about why the dollar would go on a multi-year rally. The economy is, as I've said before is uneven, as if a cross-eyed carpenter built it. Interest rates, for now, are going nowhere, and we still have this debt. Remember our debt? I know, the media fails to talk about it any longer, it's not a sensationalism story, like a car chase on TV!
Yesterday, in the FWIW section, I talked about how the Debt Clock was showing that the national debt was $17.925 Trillion. What I failed to mention was that it was just 13 months ago, that we hit $17 Trillion! Rocktober 18, 2013, was the day. So in a year we've nearly added $1 Trillion in debt, and that has me scratching my bald head, for the administration here in the U.S. says they only were in the red (budget deficit) by less than $500 Billion. Hmmm. How could that be? How could that be? The Debt Clock's numbers are real, and the administration's numbers are.. well, let's just say that have been massaged, rolled, and cooked. I know, I know, some smarty pants is going to point out to me that the war costs aren't a part of the Budget. And I would say, why not? If the country decides that we need to go invade a sovereign country, that expense for doing so, should be on the budget's books!
But a Trillion in debt per year. That's not a good thing folks, for that debt has to be financed going forward, and that's what brings me to the cost of financing. Ahhh, this is where the body is buried as far as interest rate hikes are concerned, dear reader. First, we all know that the U.S. sells Treasuries (bonds) as their financing tool. The higher the interest rate, the more in debt servicing (bond interest) the U.S. will have to pay to holders of the bonds, so if the debt continues to go up by a Trillion per year (and that's a conservative number folks, for if the U.S. Gov't had to use the same accounting principles that U.S. Corporations have to use, the debt would be far greater than a Trillion per year!) but even using the Gov't's figures, it's going to become very difficult for the U.S. to pay the current interest costs at the current rate going forward, and that's before there's any rate hikes!
Whew! I knew when I began to talk about debt, I was going to be going down a road that I shouldn't, if I want to get out of here on time today! HA! But seriously, why don't the people in the markets, traders, hedge fund managers, etc. see this like I do? I know that they have far smarter gray matter than I .
So, as I look at the currency screens today, the dollar is still finding it difficult to find a tone other than soft. The dollar is carving out some very small gains this morning VS the euro, A$, kiwi, and a host of others, but the gains are very small, and could be wiped out in a heartbeat, especially with the currency trading patterns we've seen in recent times.
And that reminds me that yesterday afternoon, I was interviewed on TFNN radio. It was a great interview, because they let me talk! HA! Really, they allowed me to talk and not interrupt me when I was on a roll. Forget it, he's rolling! Yeah, and it ain't over now. Cause when the goin' gets tough, the tough get goin'. Who's with me? HAHAHAHAHA!
The Big news overseas this morning is that the Eurozone economy expanded in the 3rd QTR. Ok, I'm going to stop laughing and tell you that the "expansion" was just .3% higher at an annualized pace, or .1% in the Quarter. I would say that was more of a rounding error, and using the word "expanded" was using the word liberally, don't you think? I would think that the word "feeble" would have been more appropriate! But I think there's some brighter news in this report than what's on the outside, and that is that Greece's economy grew .7% in the Quarter. Austerity measures, and still .7% growth for the Greek economy.
The euro is not finding anyone that thinks this report on the Eurozone economy is worth taking a flyer on the currency, and it's fallen even more this morning, while I write and share my thoughts with you all. You see, as I've shared with you over the years, Germany is the largest economy of the Eurozone, accounting for more than 30% of the overall Eurozone economy. So, when Germany slows down, the Eurozone economy slows down. And Germany only posted a .1% increase in GDP for the QTR. And how Germany goes, so too does the euro, when the dollar is not helping the euro.
Well, today the G20 meeting begins in Brisbane Australia and will go through Sunday. I don't know if you read the story that was at the link I supplied you with yesterday, regarding the guy that says it will be announced this weekend that the currency monetary system is going to change. I don't believe that, but I guess this weekend is as good as any for it to happen, eh? But don't go out in the streets acting like Chicken Little here. This is just one guy, crying wolf. But I guess it wouldn't hurt to check the news stories on Sunday afternoon, just to make sure, eh?
I do expect to hear something from China's leader, Xi. at G20. What I don't know, but it just seems like he's a lot like Bluto and he's on a roll!
The Russian ruble continues to get whacked. it's just not the place to be these days. And now that the ruble has had the governor removed from it (the trading band), the speculators can really go after the currency. One way to look at this is that the next BRICS MarketSafe we do, that has its funding period right now, is going to have a very cheap starting price in rubles. And as I told the audience on TFNN yesterday, isn't that the goal of every investment, to buy cheap?
Another currency spinning out of control right now is the Japanese yen. This time, traders feel that the delay in implementing the proposed Sales Tax is reason to push yen lower. That's just an excuse, folks. This currency should be even lower than it is right now, and the only reason it's not, is that it's still on the roster of currencies that people flock to in times like this.
Yes, times like this. Go ahead, look around you, are things as full of sunshine and lollipops as the Gov't would have you believe? I doubt it.
And then there's Gold, which is down nearly $10 this morning. What happened to Gold rallying in "times like this?" Well, I'll tell you what. But I have to play nice here, otherwise all this that I type, will get cut, and you'll never read it. So, let's just say, that the price manipulators are not the ones calling the shots. You can guess who is calling the shots and saying that Gold can't rise in price for it would be used in place of: name your currency.
Well, Gold was able to add about $6 to its value yesterday. I was reading some research yesterday from one of our Gold dealers, and they were adamant about how supply is getting severely depleted, which is going to cause delays in delivery. They also pointed out that the cost to borrow metals to maintain short positions, etc. is rising. Uh-Oh. That could lead to an ugly scene with the price manipulators. Do you remember when I used to tell you that the only way we could stop the short paper trades / price manipulators was for everyone in the world to buy physical metals? Well, China has done their part, so too has Russia, and India is getting back into the game. I really wish this would all end with the price manipulators having to take HUGE losses, but they are slick, and will probably walk away untarnished.
The U.S. Data Cupboard finally gets a data print today that the markets will care about. Rocktober Retail Sales will print this morning, and the BHI (Butler Household Index) indicates to me that Retail Sales will continue to be disappointing. Probably not negative like in September, but disappointing nonetheless. We'll also see the U of Michigan Confidence report and Business Inventories. A piece of data that's new to the roster of data prints will print today for the 3rd QTR, and it's called Mortgage Delinquencies. That should be interesting to go through, don't you think?
For What It's Worth. The U.K. Telegraph is always a good source for stuff that's off the beaten path but important, and today's article is no different. This is about Russia's president, Putin, and the Gold hoarding that's going on in Russia, that I've chronicled in these letters in the past. let's listen in!
"Russia has taken advantage of lower gold prices to pack the vaults of its central bank with bullion as it prepares for the possibility of a long, drawn-out economic war with the West.
The latest research from the World Gold Council reveals that the Kremlin snapped up 55 tonnes of the precious metal - far more than any other nation - in the three months to the end of September as prices began to weaken.
Vladimir Putin's government is understood to be hoarding vast quantities of gold, having tripled stocks to around 1,150 tonnes in the last decade. These reserves could provide the Kremlin with vital firepower to try and offset the sharp declines in the ruble."
Chuck again. OK, let me point something out here. in the second paragraph in the story above, they've got to be smoking something, because there's no way that Russia brought in more Gold in the last 3 months than China! I can't believe the World Gold Council said that! And that brings up a question that's rattling around in my head. What does the WGC have against China? Oh well, you can read the whole article here: http://www.telegraph.co.uk/finance/commodities/11226240/Putin-stockpiles-gold-as-Russia-prepares-for-economic-war.html
To recap. The dollar's soft tone has shifted but it can't really carve out a harder tone at this point, but maybe later today, should Retail Sales not disappoint, as Chuck thinks they will. The euro, A$, kiwi, ruble and a few others are feeling the heat from the dollar this morning. The Chinese renminbi was allowed to strengthen overnight. Data returns to the cupboard this morning, as it has been absent all week, and Gold is down $10 this morning, and has Chuck scratching his balding head once again.
Currencies today 11/14/14. American Style: A$ .8695, kiwi .7870, C$ .8800, euro 1.2445, sterling 1.5660, Swiss $1.0360, . European Style: rand 11.1955, krone 6.7830, SEK 7.74085, forint 245.90, zloty 3.3970, koruna 22.2135, RUB 47.10, yen 116.45, sing 1.2985, HKD 7.7545, INR 61.72, China 6.1399, pesos 13.62, BRL 2.6075, Dollar Index 87.95, Oil $74.34, 10-year 2.34%, Silver $15.36, Platinum $1,191.38, Palladium $765.75, and Gold. $1,153.69
That's it for today. Well, I wasn't here by myself all morning today, as Chris Gaffney came in early to talk to someone about the markets, and now Mike is here, so it's not so lonely today. A nice win at home for our Blues last night, as one of our star players, T.J. Oshie, returned from a concussion received about 10 days ago, and scored the first goal! The Blues have won 9 of the last 10 games, but as I've said over and over again, peeking in the regular season is not what hockey is all about! Baseball meetings by GM's are taking place, and any mention in the papers about baseball warms my heart, which is absolutely necessary with this bitter cold snap on top of us and will probably bring us our first snow of the season tomorrow night! My beloved Missouri Tigers return to play Texas A&M tomorrow night. A&M is highly ranked, and playing there is a tough row to hoe for the Tigers. In two weeks it will be Black Friday. I don't know why they call it that, for it's the day after Thanksgiving, and from now on, I'm not calling it that anymore! I want to thank you for reading the Pfennig, and I hope you have a Fantastico Friday!
