In This Issue.
* Dollar is soft again this morning.
* Euro plays game of back & forth around 1.32.
* Canada’s Current Account Deficit to narrow?
* A British tweet gets them in hot water.
And Now. Today’s A Pfennig For Your Thoughts.
Aussie CAPEX Shoots Higher!
Good Day! . And a Tub Thumpin’ Thursday to you! Yesterday was not a “fun” day for yours truly, so I’m glad that is over, and we start today, anew! I’m doing a video presentation this morning, right after I sign off on the Pfennig. It’s been some time since I was in front of the camera. A few years ago, I did weekly videos for the Sovereign Society. And the Sovereign Society asked me to do this one, for their Total Wealth Symposium in Panama next month. I totally appreciate the Sovereign Society for asking me to do this, and if you are going to Panama next month you’ll get to see me up on the screen! (I sure hope we don’t use HD cameras!)
Well, no data yesterday, and a currency rally in the morning, led to a day of dollar weakness. The dollar is weaker again this morning, and it occurred to me that we could very well be seeing some month-end dollar selling, to square books, as this is the last day this week that we’ll see full trading desks. Yes, this weekend is Labor Day Weekend, with the Holliday on Monday, but as has become the tradition, the traders in NYC all close up early and head to the Hamptons. Or wherever they go, but they aren’t at their desks come tomorrow midday.
So, I guess what I’m saying here is don’t let this price action of the last two days begin to make you think that the dollar is headed back down ahead of when I thought it would. Now, come next week, if we still have dollar weakness against most currencies, then we might have something, but for now, no data, month-end book squaring, and thin trading desk, seem to be front and center as reasons the dollar is weaker right now.
Of course, I could be beating the drum and screaming from the mountain tops that everyone should get back into the water. But, I see it for what it is, and that’s something that long time readers appreciate when I tell it like it is! (sorry Aaron Neville) When I came in this morning the euro was trading over 1.32, but in the ½ hour that I’ve been here, it has slipped below that figure once again. It’s been a game of back and forth around 1.32 this week for the euro, so I don’t put too much into these back and forth moves. Sooner or later, a breakout will occur..
The Eurozone has seen declines in the think tank indexes for Consumer and Business Confidence in August, which makes sense given the weakness in the Eurozone economy right now. But you can’t just write these weak reports off as “fully expected given the economy”.. For the Eurozone needs both Confidence reports to rebound.
Well, I had just come back to my desk after spending some time with the Big Boss, Frank Trotter, yesterday, when my phone rang. It was my trader friend from BAML, and she was wondering how I was feeling since I didn’t say so in the Pfennig that morning. We got to talking about the currencies, and how these past 3 years have been pretty boring, given the Central Bank interference with currency values. She told me that her research team was thinking that the euro might see what’s called a: dead cat bounce. (no animals were hurt here, it’s just a saying in the markets) which would have the euro rising maybe to around 1.34, before falling back again to 1.30 a year-end. I tell you this, in case. However, having said that, I have to think that my scenario has a better chance of playing out.
You know, the scenario I’ve told you about for a couple of months now. That right now, since we’re in the eye of the storm, and all the talk about higher interest rates in the U.S. sooner than expected, that we could see a short-term rally in the dollar that takes the euro to 1.28. But then the lack of liquidity that I keep referring begins to creep into the markets, and voila! The dollar goes right back to the underlying weak currency trend!
The Aussie dollar (A$) changed places with the N.Z. dollar / kiwi, today, as the A$ is the best performing currency overnight. The A$ got a boost overnight, when Aussie CAPEX (Capital Expenditures, of which I’ve explained to you until I’m blue in the face that you don’t have a strong economy without CAPEX), for the 2nd QTR rose 1.1% VS a consensus to be negative -.9%. We could be seeing some profit taking in the A$ and kiwi right now, as their overnight highs have been brought down quickly while I write.
Canada will print their 2nd QTR Current Account Deficit today. I would have to believe that their Current Account Deficit will narrow. The 1st QTR Deficit was C$ 12.4 Billion. I don’t expect HUGE narrowing, but a narrowing nonetheless, which is always a good thing, eh? The Canadian dollar / loonie is flat this morning, awaiting this data print. The move to higher ground in the loonie that we’ve seen lately, have been warranted in my opinion, and I’m looking for better things here as the Canadian economy continue to improve.
I received a note from a dear reader that lives in Australia, and he tells me that he just got back from a trip to N.Z. and wanted to let me know that all that I’ve been saying about the N.Z. economy is correct. And with the activity in the cities he visited, he thought that interest rates would be going higher sooner than later in N.Z. due to rising inflation.. The New Zealand dollar / kiwi has been a good performer this year, not so good in August, but August is almost over!
The Chinese renminbi was allowed another very small appreciation overnight. Chris sent me the link to an article on the Economist.com, which is the bogsite for the Economist magazine. And when I clicked on it, I was taken to an article on China, and when China’s economy will surpass that of the U.S. I was surprised to read that they believe it will take longer than I previously read it would take. This article says that they believe China will surpass the U.S. / economy wise, in 2021. I had previously read that it would be 2017 in a different article. The key thing here in either article is that both articles said it was not a case of “if” China could surpass the U.S. , but “when” it would.
And you should see the graph of the Chinese economy and that of the U.S. economy. The U.S. economy shows a path of leveling off, while China’s path is a moon shot! Now, you’re asking me, Chuck, what’s causing this to happen right before our eyes?… Ahhh grasshopper, come, sit, and listen.. Remember many moons ago, when I told you that the enormous debt levels the U.S. was taking on, would one day, put so much pressure on the economy that it would stagnate? Well, look what’s happening?
One currency that is not performing in a good way VS the dollar this morning is the Swedish krona. Overnight, Sweden printed their July Retail Sales report, and it was weak, thus causing the krona a trip to the woodshed. Swedish July Retail Sales fell -.7%… This one time stronger than the average bear economy, has really slowed down, and I would attribute that to the slowdown in the Eurozone. But, as I look at the krona, of which I still think has good fundamentals, I would think one might see these weaker levels as an opportunity to buy at cheaper levels. I’m just saying.
Graham Nash is singing his song: Military Madness right now. How apropos for what’s going on in the world today. I really worry about all this Military Madness right now, and I’ve heard people say for years now, that a war is good for the economy. I certainly hope that’s not we as a country decide to use to spark the economy!
I had a reader send me a note asking me about the Singapore dollar (Sing$) and why I’m a fan of it, given its ties to China and China having all those calls for an economic collapse. Well, that’s a long story that I’ll attempt to make short. First of all Singapore has Fantastico fundamentals. They let the Sing$ strength or weakness combat inflation, instead of arbitrary interest rates set by a Central Bank, and they don’t get involved in all the Military Madness! Then to make this all come together. I do NOT believe the Chinese economy will collapse, and therefore I have no qualms about Singapore’s ties to China. Hope that helps!
Well, the price of Gold is up $10 this morning, and while the dollar is attempting to rally back VS the currencies this morning, it certainly isn’t having any effect on Gold. The meeting between the presidents of Ukraine and Russia ended and no resolution to the conflict on their border was made. I’m sure a lot of Gold’s rise this morning, is a result of that!
In my video presentation today, I’m going to talk about the diversification of currency reserves into Gold that we’re seeing going on all around the world, but not in the West.
I was reading a blog, that Aaron sent me, yesterday on Kingworld.com, and it was an interview with John Embry, of Sprott.. I have a snippet, that’s all, of the interview that I found interesting.
“I was fascinated by the Jackson Hole Conference last week. I thought it was an embarrassment to rational thought and it proved that our central planners have no realistic solutions to the unholy mess they’ve created.
I always loved this quote from Ludwig von Mises where he warned about the type of situation that the world is facing today. He said:
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come as a result of the voluntary abandonment of further credit expansion, or later as the final and total catastrophe of the currency system involved.”
Chuck again. WOW! I think I’ve used that von Mises quote in the Pfennig before, because I just love how it hits the nail on the head here. And the well-respected author and analyst, Richard Duncan says that Credit in the U.S. needs to grow by 2% a year or else the whole thing comes crashing down. And once again, let me explain that the word “credit” here means, “debt”..
The U.S. Data Cupboard is chock-full-o-data today, and again tomorrow, after taking a breather yesterday. Today’s menu though may be full-o-choices, but for the most part it’s all non-market-moving data. We’ll see the first revision of 2nd QTR GDP (look for a downward revision), The Weekly Initial Jobless Claims, the stupid Personal Consumption for the 2nd QTR, and then the July Pending Home Sales.
So, even though the data prints today have the bulk, they don’t cut the mustard when it comes to market moving ability. So, as I discussed at the top today, no data, month-end book squaring, and traders leaving early tomorrow, will probably play a more important role in the currencies today.
For What It’s Worth. Well, I’m going to break from the normal serious stuff in this section and talk about something we talked briefly about on the desk yesterday, and my friends over at the 5 Minute Forecast, thought worth printing yesterday, so I do too! Here’s how “The 5” printed it:
This week marks the 200th anniversary of a supposedly pivotal event in the War of 1812 — the sacking of Washington, D.C. British forces torched both the Capitol and the White House.
To mark the occasion, the British Embassy tweeted a photo of a cake featuring a miniature White House, British and American flags and sparklers.
The Twitterverse was not amused. “Extremely poor taste,” tut-tutted one user.
Meh… The historian Jeffrey Rogers Hummel reminds us even the British commanders didn’t think Washington was strategically important, such a minor force in American life was the federal government. Torching the White House was merely an act of spite by Gen. Robert Ross, who was offended his 4,000 men were taking sniper fire from the good citizens of D.C. (You’d think the Brits would have learned a thing or two about that from the Revolution.)
What was strategically important was the city 30 miles north that Agora Financial calls home today. Baltimore at the time was a thriving center of commerce. (Now? Uh, not so much.) But Ross’ assault here three weeks after the sacking of D.C. failed — the rockets’ red glare and all that — and Ross himself was killed. Now you know…
Chuck again. OK, there you go! A little history lesson! And I did hear that the Brits apologized for their insincere tweet. I found the whole thing to be funny. But then I have warped sense of humor, as I’m told. The Brits said they only used sparklers this time. Now that’s funny! The difference between tragedy and comedy is time. And I would think that 200 years is enough time!
To recap. The dollar is soft again this morning. It was much weaker overnight, but has managed to gain a little in the European session, the dollar is still down on the day. Too bad this two day run in the currencies VS the dollar didn’t happen earlier in the month, we could have held off the 4th month of dollar strength since ZIRP! Australia printed a stronger than expected CAPEX, and the A$ is the best performer overnight. Chuck had lots to say about the euro this morning, so make sure you visit that section!
Currencies today 8/28/14. American Style: A$ .9360, kiwi .8385, C$ .9215, euro 1.3190, sterling 1.6590, Swiss $1.0930, . European Style: rand 10.6485, krone 6.1840, SEK 6.9715, forint 238.15, zloty 3.1935, koruna 21.0505, RUB 36.61, yen 103.75, sing 1.2485, HKD 7.7500, INR 60.51, China 6.1638, pesos 13.09, BRL 2.2460, Dollar Index 82.47, Oil $93.88, 10-year 2.33%, Silver $19.79, Platinum $1,430.12, Palladium $ 897.00, and Gold. $1,293.62
That’s it for today.. Cardinals come limping back home only winning 2 games last week, UGH! The Cubs are in town, and the Cubbies are playing good baseball right now. I know those two things usually don’t go together (Cubbies and playing good baseball) But they are, and so they deserve credit for not throwing the year down the bowl. My eye allergy seems a bit better this morning, and I can see better. It’s a good thing Kathy doesn’t read the Pfennig any longer, for she would be mad that I was driving when I couldn’t see well.. No worries! It’s only me, the truckers, and the bakers on the road in the morning when I leave. And it’s broad daylight when I go home. I’ll be writing from home tomorrow morning. I have to get started on the cooking for our Big Labor Day BBQ this weekend. That Subway commercial cracks me up, with the guy talking about his BBQ. “Are you coming to Steve’s Big B-B-Q, it’s going to be a blow out!” See, there’s my warped sense of humor again! Alrighty then, it’s time to get off this bus, and get this out the door. I hope you have a Tub Thumpin’ Thursday!
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