In This Issue.
* Currencies remain in tight range.
* Euro fights back!
* Swiss franc reaches for the stars.
* Kyle Bass says yen goes to 500!
And, Now, Today's Pfennig For Your Thoughts!
A Jobs Jamboree Friday!
Good Day! And a Happy Friday to one and all! A very chilly, winter-like day here, and from what I see on the weather map, most of the country! I know we're a couple of weeks away from the official calendar start of winter, but that didn't stop mother nature and old man winter from starting early! And so begins my two-month hunker down in an attempt to keep warm and dry! When I retire, (one day) I'm heading south in the winter and become a snow-bird for sure!
Well, today is a Jobs Jamboree Friday, and the markets are all lathered and dressed up waiting for the jobs data. It will be a Big Party on Wall Street when it prints, or maybe it won't. For too much euphoria in a strong jobs number is going to confusing to the stock participants. Because the markets believe so strongly about how the Fed is ready to begin to Taper, the markets will have to deal with the thought that a strong jobs number will bring about the Taper Capers. I say hogwash! I really don't know any other way of making myself clear on this. Yellen will have to be dragged kicking and screaming before she Tapers.
But that's just me. And I could be wrong of course! But in reality, if the Fed Heads and Yellen do decide to Taper, they will quickly figure out that the economy isn't ready to go cold turkey on stimulus. And yes, I know, the Fed Heads say they will keep interest rates near zero for another couple of years even though they cut back their bond purchases, thus not making the economy actually go cold turkey, I don't think the markets are going to care. Do you remember what happened to bond yields, which are a better gauge of interest rates than the Fed Funds Rate, the first time Big Ben Bernanke muttered the words, Taper?
Well, let me remind you. back in August, the 10-year Treasury yield was around 1.69%... And since the Taper Capers began receiving press, that 10-year Treasury yield has risen by more than 100 Basis Points, or 1 full percent, and the Feds just mentioned they could begin to taper if the economy warranted back in September. They didn't say they were going to Taper! I could add the world "Ever" but I guess that would be too drastic for some of you!
So. To tie this all up in a bow nice and neat, the Jobs Jamboree is supposed to show that 185,000 jobs were created in November. And the Unemployment Rate is expected to tick back down from 7.3% to 7.2%... Last month we had a HUGE surprise in the jobs created section of the Jamboree, it will be interesting to see if a downward revision is made and they try to slip it under the radar. I would prefer we concentrated on the Avg Hourly Earnings and Avg Weekly Hours Worked, and the participation rate. But the markets are glued to the jobs created numbers. Any number above the 185,000 expected would be viewed as "super duper" and bring about fears of Taper Capers. I think that it would also be good for the dollar!
Oh, and I'm thinking that 170,000 will be total jobs created. The employment section of the ISM Services report was not strong, and that leads me to believe that we could see a lower number, but then, we don't know what the BLS has up their sleeve. Hey Rocky, wanna watch me pull a rabbit out of my hat?
Look, there! I've gone all this way and not talked about the currencies and metals. Now that's just not right! But, it is what it is on a Jobs Jamboree Friday! The currencies are pretty much in a tight range from yesterday, with only the Swiss Franc and pound sterling gaining VS the dollar. The euro is flat overnight, but that's not the story. And for more on that, here's our man on the street with the latest on the euro. Chuck? Are you there? Yes. Thank you for tuning in, let's get right to the meat of the story!
The euro enjoyed a strong performance day on our Tub Thumpin' Thursday that was all tied to the ECB meeting, which didn't change rates, as we suspected ahead of time, and didn't reiterate the more arrows in Draghi's talk as we thought might happen. That was a good thing. In fact, from what I read about the Press Conference, it seems that Draghi was pressed over and over again about if he thought about implementing Quantitative Easing / QE, to which he finally declined to dismiss QE as a possible tool. I found that to be quite interesting, as an ECB watcher like I am in that, while I think it would be political suicide to even mention QE these days, (I could see the Bundesbank screaming for his head) but he didn't say an emphatic NO! Which reminds me of conversation regarding a new car that I bought when my oldest son, Andrew, was a senior in High School. He asked me, "do I have a chance of driving that car?" to which I replied, "slim and none" and he responded excitingly, "So, you're telling me there is a chance"!
So, after all that, the markets liked what Draghi had to say, which is opposite of how they liked what he had to say at the last meeting, and traded the euro accordingly. Back at the beginning of November, it appeared that the euro was finally getting some legs underneath it, as it rose to 1.38. And then the trap door was sprung under it, by Draghi, and a couple of other things, and it fell more than 3 full cents. But now, maybe the single unit can get back to what it was working on at the beginning of November! And now that the 3-full cents whacking appears to be over, the euro has climbed back into 1st place among G-10 currencies this year VS the dollar.
Hey! Long time readers, and even owners of euros, will recall back in 2003, when I wrote the white paper titled: The Year of The Euro. The euro was able to put together a fabulous year in 2003 gaining nearly 20%, getting beaten by the Commodity Currencies, which in the early part of the 2000's decade were soaring on an annual basis. The reason I bring this past performance up by the euro is strictly to address something that a dear reader was concerned about, saying that with the U.S. economy improving (in his opinion of course) wouldn't that mean bad things for the euro VS the dollar?
Well, on the outside you might think so. But wasn't the U.S. economy doing pretty good in 2003? 2004? And so on? Yes it was, but that didn't stop the euro from outperforming the dollar. Back then it was all about fundamentals, and the dollar had the worst fundamentals. Now, we have the two largest economies in the world tied to the dollar and the euro, with both having debt up to the eyeballs, one country that admits it's in recession, and another that won't admit it, even though they continue ZIRP and $85 Billion on bond purchases every month, one country that's Central Bank has a shrinking balance sheet, while the other one has an expanding balance sheet that's nearing $4 Trillion. So, you tell me. can the euro continue to gain? I think so.
Of course I've been out on the limb with my thoughts on the euro all by myself, don't want to be all by myself, anymore. No Wait! Yes, I've been out there all by my lonesome, while analysts, economists and all the Mr. Know-it-alls said the euro was going to collapse the Eurozone would breakup, and it would be a trail of tears. I said hogwash! I'm not patting myself on the back here folks, I'm just setting the record straight. Remember in the dark days of the Eurozone, I was the first to point out the relative calm that seemed to begin to be cast over the Eurozone. And so here were are as in olden days, happy golden days of old, faithful friends who are dear to us, gather to us once more. And I have no idea where that came from, I just wanted to say so in the old days of fundamentals, things were easier than they are today, but the euro remains the offset currency to the dollar.
Of course the Big Dog on the porch (euro) is watching another Big Dog wedge its way onto the porch. The Chinese renminbi. As I told you earlier this week, the renminbi / yuan surpassed the euro as the second place currency in global trade finance last month, for some is not a threat to the dollar, and again, I say hogwash! Hmmm. sounds like another white paper on renminbi becoming a threat to the dollar is in order. No wait! I've been writing that one for 5 years now!
You know, with the Swiss franc tied to the euro, when the euro reaches for the stars, the franc does too. And that plays over to the franc / dollar cross. As long as the euro is reaching for the stars, the franc can play that game too, So, when I say things like the euro is the best performing G-10 currency this year VS the dollar, you can be assured that the franc is hanging around that level too! And so it is. I've totally missed this franc thing. I was too blinded by science, no wait, blinded by the fact that the Swiss National Bank kept making noises about moving the floor with the euro from 1.20 to 1.35, thus devaluing the franc even more. But that move hasn't come, and the euro has dragged the franc higher and higher. Which reminds me of Sly Stone at Woodstock. I wanna take you higher!
On a side bar. Back many years ago, I used to keep the VHS tape of Woodstock in my desk drawer, and when we would hire someone new, I would give them that tape, and make them take it home and watch it. For it was usually much younger kids that didn't have a clue what Woodstock was. Geez Louise, I wonder if I could get away with that in today's legal mess of H.R.? I doubt it!
I read a lot yesterday once I got home instead of napping, as I had a meeting to phone in for that would have cut my nap very short, so I opted to just read. Well, in doing my reading and research, I came across an interesting take on the Aussie dollar (A$) and New Zealand dollar / kiwi. The writer is obviously enamored with kiwi's prospects for outperforming the A$ going forward, and even called for the two to reach parity, which would encompass the A$ falling in value and kiwi rising in value. I find this to be a bit far-fetched, but it was interesting how the writer talked about all the good things in New Zealand, but failed to leave out the Current Account Deficit. Yes, things are looking brighter in New Zealand, and interest rates will probably be raised as early as next month, but we must all remember the key with Australia is China. And from my view in the cheap seats, China appears to be on a roll once again.
Canada will also print a jobs report today. Their reports have been quite strong lately, but get waxed over by the goings on with the U.S. Jobs Jamboree. The Canadian dollar / loonie could use another strong jobs number print today, as things haven't gone too well for the loonie this week.
And Gold, which saw a classic short covering the day before when it gained $31, but was ready to give back some yesterday when I signed off, really gave back more at one point in the morning, losing $20. Eventually, we saw it get back to just losing $10, but the nastiness was there, and has become a familiar taste that I really would like to not have to experience again! Gold is flat this morning, as like the currencies, the shiny metal just can't get anyone excited about taking moves before the Jobs Jamboree this morning.
I saw a lot of news agencies pick up the Jim Rogers quote I had in the Pfennig yesterday. I finally finished reading his new book, Street Smarts, (Yes, I take a long time to read a book, because I put it down for a week, and then read some, and put it down, and so on) and I must say it is good!
Before I head to the Big Finish today, the U.S. 3rd QTR GDP was revised up to 3.6% yesterday.. WOW! We're on our way, right? Not so fast there! No! This is all trumped up and cooked folks. First of all don't forget that the Gov't uses "new math" for GDP, which added up to 85 basis points to the number, which would bring it back lower than it was in the initial print, and secondly, look under the hood. Most of the gains in this report came from stockpiling inventories. Yes, our GDP uses inventories as a measure of growth, which is what it is, but when companies are stockpiling inventories they are either getting ready for an onslaught of consumer buying, or. they can't find any buyers for their goods. I fear it is the latter of the two. how about you?
For What It's Worth. A Pfennig Reader, sent me a PDF of a letter from Kyle Bass, the well respected analyst from Texas. In the letter / report, Bass calls for the Japanese yen to fall to 500. WOW! Now that's a moon shot from where it is now at 102. Those kind of losses would basically wipe out Japan's debt for sure! But the loss to holders of yen would be devastating. In the report Bass also said that, There are going to be consequences to central bank balance sheet expansion all over the world. It's a beggar-thy-neighbor policy, but everyone is beggaring thy neighbor, and at some point this is going to ignite and set cost pressures off."
You know, I couldn't agree with him more, but we are certainly looking to be the greater fools as long as inflation doesn't explode higher. But that's just now. In the end, we both know we'll be vindicated for making the calls that monetary balance sheet expansion is going to bring about rapid inflation, and investors will flock to Gold when that happens, but will it be too late then? The price could be extravagantly higher, and the supply just not there! I really love it when somebody that has the markets' attention, like Kyle Bass, says something that they need to hear, for they sure don't listen to little old me!
To recap. It's a Jobs Jamboree Friday, and so we have that going for us today! Chuck goes into all kinds of explanations about what a strong or weak report might do to the markets today. The euro had a strong performance yesterday after Draghi didn't rule out QE. strange, but true, I know. And the Swiss franc is reaching for the stars again, alongside the euro. And Gold gave back a good measure of the gains it made the previous day, proving it can't stand prosperity!
Currencies today 12/6/13. American Style: A$ .9075, kiwi .8197, C$ .9390, euro 1.3675, sterling 1.6365, Swiss $1.1170, . European Style: rand 10.4650, krone 6.1705, SEK 6.5135, forint 220.90, zloty 3.0665, koruna 20.0960, RUB 32.96, yen 102.10, sing 1.2530, HKD 7.7550, INR 61.41, China 6.1232, pesos 13.07, BRL 2.3585, Dollar Index 80.30, Oil $97.27, 10-year 2.86%, Silver $19.51, Platinum $1,355.50, Palladium $730.05, and Gold. $1,228.53. And it's a Friday, so let's take a peek at the U.S. Debt Clock by clicking here: http://www.usdebtclock.org/index.html
That's it for today. It wasn't doing anything outside when I came in, but it was supposed to hit us for the second wave early this morning. Mamma's Pride (a St. Louis band) is singing Blue Mist on the IPod right now, what a great song! Today is the draw for the World Cup! Our own St. Louis and soccer legend, Ty Keough, will be glued to the TV to see the draw. Little Everett is starting to talk to me more now that he has seen me every day for the past 7 months! The kids will move into their new house in about a week, just about the time that Everett and the General get on speaking terms! Well, did St. Nick fill your shoes with goodies? I had a dear reader send me a note yesterday telling me that I had brought back bad memories for him, as all he ever got in his shoes was coal and a peanut tied to each shoelace.. I think he was kidding, but I told him, that he must have been a real challenge as a kid! HA! And with that, I think I'll get out of your hair for today and this week. I thank you so much for reading the Pfennig, and hope you have a Fantastico Friday. stay warm, and dry!
EverBank World Markets