In This Issue.

*  Currencies get whacked hard yesterday.
*  Fed adds a few words that gets the dollar bug excited!
*  RBNZ takes opportunity to diss kiwi!
*  Greenspan returns to his Gold Bug roots!

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

Brazil Gets Back To The Hiking Rates!   .

Good Day!…  And a Tub Thumpin' Thursday to you! I'm not on the Tub Thumpin' bus this morning, as yesterday was not a good one, and I'm waiting to see what today will bring. Congratulations to the S.F. Giants, who won the World Series Game 7 and therefore are Series champions for 2014. Their 3rd championship in 5 years. WOW! Talk about a dynasty! The Giants have some catching up to do to reach the same number of championships as my beloved Cardinals, but they certainly are the cat's meow in today's baseball world!

Well, the FOMC sure threw a cat among the pigeons yesterday, choosing their words carefully, they said what I thought they would say, but added a few extras, and it was those few extras that got the currencies dumped into a boat and sold down the river. It was ugly, folks. This morning, most currencies are sitting at least 1-cent lower than there were yesterday morning. I kept saying that it was interesting that the currencies were rallying this week ahead of the FOMC, I guess it was a good thing they did!

So, what did the Fed say at the FOMC that got the dollar bugs all lathered up? Well, it all centered around when the Fed is forecasting interest rates will rise. And while they kept their phrase, “for a considerable time”, they also mentioned by the middle of next year, and brother that got the dollar bugs whooping and a hollering, running around like someone just turned the lights on, and buying dollars left and right. I know that description might be ugly, but that's just what the trading looked like yesterday afternoon.

I decided yesterday, to stay awake for the announcement, and see what happens afterwards, and then I wished I hadn't! But the cows were out of the barn at that point, no sense in attempting to grad a nap then.  The selling in the currencies and metals wasn't just confined to yesterday afternoon either. Overnight and in the morning session the selling has continued, albeit not as hot and heavy as yesterday afternoon, but continuing nonetheless.

So, while we're talking about the Fed and the FOMC meeting yesterday, where they announced the end of Quantitative Easing / QE, I might as well get this off my chest.

Yesterday, I was doing the eulogy for QE and getting all emotional about it being, as Gypsy sang, dead and gone.  But then along came some information that will keep the thought of QE3 alive for years to come.  You see, it came to my attention that the Fed is NOT going to allow bonds that they hold from their years of bond buying to mature quietly. Instead of letting them mature, and lowering their balance sheet, the Fed is going to do what most bond buyers do. Roll the maturity to a new bond. That's right, The Fed is NOT going to get out of the bond buying business altogether. Isn't that just peachy dandy?  Yes, Fed Chair, Janet Yellen, has already told us, but I failed to listen until yesterday, that the Fed will be reinvesting the funds from maturing bonds into new issues..  So, now that we know that the Fed is going to remain a “player” in bond trading, we can move on to other things today.

I know a lot of you are getting caught up in the hype that is the U.S. economy. It's difficult to separate the fluff from what's really happening. Take this little ditty.  You know, I was a little hard on the Beaver yesterday, Durable Goods Orders that is, that printed negative for September.  In an effort to be fair and balanced. September's negative print might have had some hangover from the wild swings of the previous months. But when you look at Durable Goods Orders for 2014 as a whole, they are up, and in reality you can go back to March of 2009, and see a steady Eddie rise in this data set.  What else happened in March 2009? Let's see. Oh, that's right! It was the beginning of QE!  So, is it easy to say that this data set was pushed higher by QE? No. it's not cut and dried that QE is responsible for the recovery of Durable Goods to pre Financial Meltdown levels, but it rhymes. right

And so it is with most areas of the economy that has seen improvement. Who's to say that the Fed's QE and ZIRP (zero interest rate policy) wasn't fueling that improvement? Who's to say that it isn't?  There are questions all over this economy. I'm one to believe that the Fed's policies have had a major impact on the improvement in the economy, it's in my upbringing studying economics. So, if it all works out just peachy dandy, I'll have to raise a white flag, along with all my other Austrian economics friends, and ride off into sunset, because no one will ever listen to me again.

My friend, Bill Bonner,  who now writes: Diary of a Rogue Economist, wrote in his letter yesterday, something that I've hinted at for years, when I say that an economy can't grow at a continued fast pace with a large debt hanging on the economy's shoulders like an albatross!  Because it takes too much to deal with the debt instead of the economy. Let's listen to Bill explain it better than Chuck has over the years. “As debt grows, it becomes harder for the economy to grow. Because, the resources needed by the future have already been claimed by the past. Ultra-low interest rates disguise the problem and postpone the reckoning, but they can't put it off forever.” – Bill Bonner

And speaking of pulling it off. Even Alan Greenspan, the man I associate as the root of all the problems we've experienced since 2007, agrees, and says he doesn't believe the Fed will be able to exit from its accommodative monetary policy without some turmoil in financial markets. When asked if he thought the Fed could engineer an exit without sparking a crisis, Greenspan replied, “I don't think it is possible”.

OK. I know myself pretty well, and I know that when I begin to quote Big Al Greenspan, I had better stop before I say something that would get me in trouble, or get my blood pressure so high, that they have to rush me to the hospital!  No worries, none of that is going to happen, for I have taken my anti-Big Al pill this morning! HA!

In other news. The Reserve Bank of N.Z. (RBNZ) left rates unchanged yesterday, as suspected, and also took a shot at the N.Z. dollar/ kiwi, as I also suspected they would! Before we get into that, let's see what they said about interest rates. The RBNZ took out the wording that was in their last statement that it, “expected some further policy tightening will be necessary”  and replaced it with, “A period of assessment remains appropriate before considering further policy adjustment.” 

The RBNZ then had this to say about kiwi. (You might want to put away the sharp objects first!) “Lower commodity prices and increased global financial market volatility have taken some pressure off the New Zealand dollar.  However, its current level remains unjustified and unsustainable and continues to constrain growth in the tradables sector.  We expect a further significant depreciation.” 

Kiwi took a hit on these comments, but has pretty much stabilized overnight. UGH! Central Bankers give me an ugly rash. Have I ever told you that?

The Brazilian Central Bank (BCB) surprised the heck out of everyone and their brother yesterday by hiking rates 25 Basis Points (1/4%). Now that the election is over, the BCB can get back to dealing with inflation pressures in Brazil. That means, in my opinion, which could be wrong, that the BCB will be looking to raise their Selic Rate (their internal interest rate) a couple more times going forward. 1. To offset inflation pressures, and 2. To offset the negativity toward the real from the re-election of Rousseff.  Of course the BCB can't say that's what they're doing, but I see through them like a pane of glass.

I talked briefly about the Russian ruble the other day, and how it continues to get taken to the woodshed daily. I'm really surprised by that, given that Oil prices have stabilized. The very weak ruble has put a lot of fuel into the rise of inflation in Russia. Therefore, I see the Central Bank of Russian (CBR) hiking rates, to 1. Get the double dose of inflation fighting medicine, and 2. Wrap a tourniquet around the ruble..  If the CBR drags their feet, this could get really ugly for the ruble. But I truly expect the CBR will come out with both guns blazing and push rates higher very soon. So, look for that.  And the pleasant news this morning is that the ruble is one of the very few currencies with a gain VS the dollar, and the gain is a HUGE gain for one day's trading, so maybe the rate hike talk is beginning to take hold!

So. What did you think of my research, (along with help from Grant Williams) on the Swiss Gold Referendum? Or better yet, what did you think about the prospects for Gold? Well, once again, I have to pull out a quote from Big Al Greenspan. When asked the question regarding “where will the price of Gold be in 5 years?” Greenspan replied “Higher”, when asked “how much?” Greenspan replied, “Measurably”.  The old Gold Bug himself, was not ready to answer the question about if Central Banks still own Gold. He replied, “This is a fascinating question”, but then went on to talk about other things and not answer the question.  Talk about conspiracy buffs going bananas over this!

So, Gold dropped about $25 yesterday afternoon. See how quickly a few weeks of small gains for Gold can get deep sixed? That's what happens when the regulators allow paper trades to dominate an asset's market. I say that as cynical as I can.  The price manipulators can hold more short positions in Gold or Silver than that what is equal to what has been mined.

The U.S. Data Cupboard today, will have the usual Weekly Initial Jobless Claims, but also have the first print of 3rd QTR GDP.  I told you all a couple of months ago, during the 3rd QTR, that is, that there would be no follow through of the 2nd QTR 4.6% increase, and that we would see 3rd QTR GDP fall back to less than 3%… Well, given there's an election next week, we probably won't see less than 3% on this print, but remember there will be 3 more revisions. As the Gov't accountants play whack a mole with the GDP number, to eventually get it to the number the markets like.

Before I head to the Big Finish today, I wanted to share something with you, that a few of you have asked for since I started talking about the game where you have to list the 10 albums you would take to an island with you. No Greatest Hits, No Live albums are allowed.  You asked to see my list. I had given you one that is on my list, a couple of times.. Seventh Sojourn – Moody Blues..  Well, to be honest with you, I never completed my 10. I have 8 “for sure” and  quite a few that are worthy of an admission to the list, and I can't decide. So for now, here are my 8 “for sure”  

1.            Seventh Sojourn – Moody Blues

2.            Rubber Soul – Beatles

3.            The Captain and Me – Doobie Bros.

4.            Dark Side of the Moon – Pink Floyd

5.            Souvenirs – Dan Fogelberg

6.            Chicago – Chicago

7.            Moonflower – Santana

8.            CSN – CSN

One day, when the news is slow, I'll list the ones worthy of admission, and get your votes to complete my list.  I know, I know, this is silly stuff that doesn't belong in a financial newsletter, but if you can't be silly once in a while, you'll go crazy!  Besides I think I was pretty heavy on the serious stuff today. So, there!

For What It's Worth. So, have you been following this story out of Washington D.C. where the House Committee on Oversight and Government Reform and the U.S. Congress Joint Economic Committee have been investigating “data falsification”?  WOW! Basically, these two Committees feel that there are significant reasons to investigate the Population survey that's conducted by the U.S. Census Bureau on behalf of the BLS.

Well, since this all became public a writer for the NY Post, has come up with what he believes is proof that there were no findings. But you know me. Where there's smoke.  But, wouldn't we rather see that there was no findings of fraud than to find findings of fraud?  Yes, so I won't go any further here, but to say that the Post journalist also looked into Denver and Los Angeles, with no findings of fraud, so I guess we'll just move along here these are not the droids we're looking for.

Chuck again. Yes, I know, I never really left, but the thing I want to point out here is that these committees are sailing into uncharted waters and this could lead to the Gov't investigating all data reports. Let's see, it now takes about 2 months to get the final figures for a quarter of GDP, imagine how long it would take if the Gov't was investigating it?  I think I would rather just have a conspiracy thought that something is awry than to find out for sure! HA!

To recap. The Fed threw a cat among the pigeons with a comment about how rates could rise by mid-2015 yesterday. That comment caught the markets off guard, and let the dollar bugs roam free. The currencies are all about 1-cent weaker than they were yesterday at this time, and most of that drop took place right after the FOMC meeting. Brazil hiked rates 25 Basis Points, and now that the election is over, they can get back to adding more rate hikes. Look for 4 more! And the RBNZ took the opportunity at hand to bad talk kiwi. What else is new there? Gold lost $25 yesterday, and Big Al has returned to his roots as a Gold Bug.

Currencies today 10/30/14. American Style: A$ .8790, kiwi .7805, C$ .8940, euro 1.2585, sterling 1.6005, Swiss $1.0440, . European Style: rand 10.9360, krone 6.7235, SEK 7.3680, forint 244.90, zloty 3.3525, koruna 21.9980, RUB 41.71, yen 109.05, sing 1.2785, HKD 7.7555, INR 61.45, China 6.1457, pesos 13.48, BRL 2.4190, Dollar Index 86.25, Oil $81.39, 10-year 2.31%, Silver $16.82, Platinum $1,251.91, Palladium $ 788.75 and Gold. $1,204.78

That's it for today. Another sad day yesterday for people like me that bleed the black and gold of Mizzou (University of Missouri) Long time ambassador for Mizzou, John Kadlec, aka Mr. Mizzou, died… I used to listen to John Kadlec on the radio, always, and I mean always being so positive about Mizzou… no matter how badly the team was playing… I think I got part of my love of Mizzou from him, and the other part from my dad… Tomorrow is Halloween. And the weather outside here has turned cold. UGH! I'm the one that sits on the porch and gives out the candy to the trick-or-treaters and get a kick out of the costumes of the little ones, but when they have to wear a coat over it, it kind of ruins it, UGH!  Oh well, The end of Rocktober is tomorrow, which means we start November, my most disliked month of them all. Raw, Cold, gray steel days, with trees that look dead, and everyone all bundled up again. I get depressed during November, as I lost two of my siblings in Novembers past.  OK. enough of that, it's not even November yet, and I'm already getting depressed about the month! UGH! Come on Chuck! There! That's better! OK. Let's end this before I begin to get really sappy! I hope you have a Tub Thumpin' Thursday!

Chuck Butler
President
EverBank World Markets