Doug Casey is smart, hard-working, and extremely knowledgeable. He has an instinct about investments that has made him and many of those around him very rich. If you ever get a chance to tap into that instinct, you should take it without hesitation. - Bill Bonner, The Daily Reckoning
Chuck Butler
Two decades ago, Chuck Butler embarked on his extensive career in foreign investments as the Directo... More
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-2.0011/04/2009
Daily Pfennig 11/4/09 : Another New Record Level For Gold!
A Pfennig For Your Thoughts
In This Issue….
* Risk players come back out to play...
* Waiting on the Fed's statement...
* Yield differentials come into focus...
* Lisbon Treaty gets signed / ratified...
All major currencies available. Even some emerging ones.
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You understand the value of diversifying beyond the U.S. dollar. And at EverBank, you'll find a range of currencies and accounts that makes diversifying in foreign currencies easy and convenient.
Apply today, get expert insights and more. Visit EverBank.com ( http://www.everbank.com/002Currency.aspx?ReferID=11953 or call 800-926-4922. '
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And Now... Today's Pfennig!
Another New Record Level For Gold!
Good day... And a Wonderful Wednesday to you! Well... Did you see the strong performance that Gold put in yesterday? And it didn't stop yesterday, overnight Gold is up another $7 on top of the +$20 gain it had yesterday... I've got some info on that, we can talk about later...
Oh Shoot Rudy! Let's talk about it right here, right now! It's not every day that Gold not only goes past its previous all-time record high, but obliterates the previous figure! I know you're wanting to take a peek at the price of Gold in the currency round-up portion of the Big Finish, so go ahead, and then come on back... How'd that $1,090 and change price look to you? Pretty sweet, eh? That is as long as you are a Gold holder!
So... What put the tiger in Gold's tank yesterday and overnight? Well, the weaker dollar helped... The thought became clearer that the cartel, I mean the Fed will keep rates on hold this week helped... But the real beef came from the announcement that the Reserve Bank of India was buying the 200 tons of Gold from the IMF... I know, I know, I told you yesterday that I thought it would be a "wash" for the dollar and the Gold price... But that was before I learned that the Reserve Bank of India paid for their $6.7 Billion dollars worth of Gold with... SDR's!
So... Either, the Reserve Bank of India (RBI) didn't want to get rid of their dollar reserves... (yeah, right!) or... The IMF didn't want anything to do with dollars, and preferred receiving SDR's! (for those of new to class, a SDR is a basket of currencies to make one unit called a Special Drawing Right, of which the IMF uses, and has been rumored to be the replacement for the dollar as the reserve currency of the world... The one government, one currency thing)
I'll pin my colors to the mast of the IMF not wanting anything to do with dollars at this point! Been there, done that, bought the T-shirt!
So... The price of Gold is nearing $1,100... I reminded my beautiful bride last night that just 2 months ago I told a group of close friends that they should seriously be considering buying Gold as it had slipped to $940 an ounce... I wonder what they think when they see Gold at nearly $1,100... I'm sure the V-8 head slap is going on all over my neighborhood!
OK... So what's going on with the currencies, as the dollar has had the hammer for 3 consecutive days now... Well... The dollar is back on the slippery slope this morning, as those same thoughts about the cartel, I mean (crying out loud Chuck, why can't you get that thought about the Fed really being a cartel out of your mind!) the Fed, will keep rates unchanged this week, really emphasizing the fact that Australia has raised rates 50 BPS so far, and Norway has raised them 25 BPS... There are places to go where you can get higher yields...
I get a kick out of some people that call the desk here, and say... "I'm looking for a high yield of around 8-10%, with no risk... Do you have that?" Sure, right here in my back pocket! NOT!
The FOMC meeting will be a 2-day meeting, so get the board games out, find the deck of cards, and make sure you have good batteries for the Battleship Game! When the Fed Heads get tired of the board games, and all, they'll announce tomorrow afternoon that they are going to leave rates unchanged, and that while they see improvement in the economy, sans the 3.5% 3rd QTR GDP, it's too soon to remove the accommodating rates... How do I know that? I don't... But, I'll bet a Krispy Kreme to a dollar that what they say is pretty darn close to that!
The key will be to see if the Fed Heads, led by Big Ben Bernanke, leave the words regarding the how long the low rates will remain, "extended period" for if they do... The dollar will immediately be sent to the woodshed once more, without passing Go, and without collecting $200! So... The statement following the rate announcement is the key tomorrow...
So... The euro is 1-cent higher this morning, the Aussie dollar is about 1-cent higher, and so on... Those that bought at yesterday's blue light special prices will be smiling like a Cheshire Cat this morning!
OK... I have to talk about this... For I've received a ton of emails about it...
Quite a few readers have sent me Nouriel Roubini's interview knowing that Mr. Roubini has long been a fave of mine.
Well... Mr. Roubini talked about the "mother of all Carry Trades" being the dollar, of which I told you had become the new funding currency for the Carry Trade a few months ago...
Mr. Roubini also talked about how this was fueling a huge run-up in the prices of risk assets... I've also told you about that, and how... Should the U.S. do the double dip that a huge sell off of stocks would probably occur, and cause an adverse affect on the risk assets of currencies and commodities....
So... All in all... Nothing new... So I was surprised that readers wanted me to comment on this... Well, the caveat here is that Mr. Roubini is calling for a massive sell off of the risk assets when the correction comes... He doesn't specify when this will happen...
I've also said that the risk assets have gone too far too fast, and that a correction is due... So, let's move on from there...
I see where Marc Faber is saying that the correction will net the dollar 10% VS the euro... Again, he doesn't say when this will happen, but that it will...
But again, as diversification people, with our eyes fixed on the horizon that shows that the only way the U.S. Gov't can repay their debts is with cheaper dollars... We just batten down the hatches for this correction, for we know that on the other side of the correction is another massive move upward...
There was something else that I wanted to talk about... And it's something that I'm sure I'll get a few emails about... Good and bad... But here goes... Did you see that Ford announced a nice profit for the last quarter... CAPITALISM ISN'T DEAD! Three cheers for Capitalism! Maybe that's all I'll say about it, for if I went into how I feel that Capitalism is getting beaten like a rented mule, I might start talking about stuff that doesn't need to be discussed here!
So way to go Ford! Didn't take bailout money... And 1 year later books a profit! Whereas GMAC is in need of additional bailout money, and Chrysler is Fiat now... Great use of taxpayer money wasn't it?
Here I go again... Sorry, didn't mean to go on this tangent about this stuff... It's just that I have no idea why this doesn't just tick off any American that reads about this stuff! But not to worry, the Gov't has more plans to spend money they don't have!
Hey! Earlier I talked about Australia's rate increases... Well, the Reserve Bank of Australia (RBA) is running scared these days... Scared that their rhetoric about rate increases is going to push the A$ to parity with the green/peachback... So guess what the RBA members have decided to do? You've got it! They're going to "tone down" their interest rate hike rhetoric... RBA Gov. Stevens said that the 28% gain in the A$ this year VS the U.S. dollar would be a good inflation fighter, and allow him to slow down the rate increases...
Well... Don't get off the A$ love train just because the RBA Gov. Stevens suggests that he could slow down rate increases... The A$ already enjoys more than 300 BPS of yield differential to the U.S. dollar, Japanese yen, Canadian dollar, and Swiss franc!
And the Lisbon Treaty that was hung up in the Czech Republic, has finally been signed by the Czech Republic's President, thus completing the rounds, and putting the Treaty in place. Now, I'm not a big fan of the Treaty, but... It's what the Eurozone needed to remain viable, and so it it's done... This removes the albatross from around the euro's neck, and will shut those people up that keep talking about a collapse of the European Union, and the euro...
Chris Wood is filling in for good friend David Galland this week on David's daily letter called "Casey's Daily Dispatch"... Anyway, Chris Wood had this to say yesterday, which I believe just about sums it all up regarding the Fed and Treasury here in the U.S....
"A group of federal agencies including the FDIC, Federal Reserve, and Office of Thrift Supervision just released new guidelines for how banks deal with troubled commercial real estate loans. And get this:
Under the guidelines, loans to creditworthy borrowers that have been restructured and are current won't be classified as high risk by regulators solely because the collateral backing them has declined to an amount less than the loan balance.
Yes, you read that correctly. Banks won’t have to show losses “solely” because the collateral has fallen in value below the loan. Perhaps most incredible is that this move is being applauded by the business community. The next step will be a federal move to facilitate refinancing that same collateral."
Chuck here again... That's pretty amazing, don't you think? First the financial institutions were allowed to drop the "mark-to-market" on their collateral... And now this... And people still question why foreigners are growing very weary of these things, and becoming quite scared regarding their dollar backed holdings? They shouldn't question any longer, eh?
And then there was this...
Remember how excited I was that Ron Paul's bill to audit the Fed was going to discussion? I thought, surely (hey! Who's Shirley?) this would be it... The Fed would finally get audited, and treated like the Corporation they are! But, then Ty Keough sent me this, and my hopes were dashed...
Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been “gutted” while moving toward a possible vote in the Democratic-controlled House.
The bill, with 308 co-sponsors, has been stripped of provisions that would remove Fed exemptions from audits of transactions with foreign central banks, monetary policy deliberations, transactions made under the direction of the Federal Open Market Committee and communications between the Board, the reserve banks and staff, Paul said today.
“There’s nothing left, it’s been gutted,” he said...
OK... To recap... Gold is soaring! Gold has reached a new record all-time high! The dollar has given back some of its gains the past 4 days as traders begin to realize that the Fed is going to keep rates unchanged tomorrow. The Gov't is up to its usual tricks regarding collateral and the bill to audit the Fed.
Currencies today 11/4/09: American Style: A$ .9080, kiwi .7245, C$ .9425, euro 1.4770, sterling 1.6525, Swiss .9770, European Style: rand 7.7365, krone 5.7150, SEK 7.0580, forint 187.60, zloty 2.89, koruna 17.6650, RUB 29.27, yen 90.80, sing 1.3970, HKD 7.75, INR 47.06, China 6.8270, pesos 13.22, BRL 1.7280, dollar index 76.14, Oil $80.02, 10-year 3.48%, Silver $17.43, and Gold... $1,091.70
That's it for today... I hear that my colleague on the Currency Capitalist newsletter that I do for the Sovereign Society, Ashish, is going to fill in for me at the Conference that I'm missing, and give my presentation on the Treasury Bubble... He'll do a great job! We've had 4 consecutive days of sunshine, and you should see the people, they are smiling again! I began making my plans for Spring Training with the family last night... Whenever I do that, I get all geeked up and ready to leave now! But I have 4 months to go! UGH! First we have our move to the new building next door, then Christmas, then New Year's, Orlando Money Show, and then finally March! Oh, and there's a conversion to a new system thrown in there somewhere! It's a moving target so we don't know for sure, but it will be HUGE! OK... Well, as with every day, it's time to go, so I hope you have a Wonderful Wednesday!
