In This Issue.
* Currencies attempt to claw back lost ground.
* German Factory Orders rise.
* ECB meets today, with Draghi's hands tied.
* U.S. Trade Deficit with China hits new record high!
And Now. Today's A Pfennig For Your Thoughts.
CBR Moves Closer To Free Float For Ruble.
Good Day!… And a Tub Thumpin' Thursday to you! Well, it was nice last night watching TV and not having to flip through channels every time a political ad came on. Lucky us, in less than two years, we'll be going through a Presidential election, I wonder when those ads will begin. I'm sure they will begin long before we care for them to begin! It will be interesting to see how the current layout of the Gov't here in the U.S. works for the next two years, or doesn't work. I would bet on the latter of the two!
Yesterday was the 15 year anniversary of a small group of people launching EverBank the online only bank. How about that? On that same date in 2002, we joined the group in Jacksonville, who promptly changed their name to EverBank, and then we were all one big happy EverBank family! And that brings us to today. On one hand I could say that 1999 seems like a very long time ago. And on the other hand, I could ask where the years went? It just goes to show ya that the old adage about finding something you love to do, and the years will fly by, is true in my case.
I can tell you that in those 15 years, not all of them were weak dollar years. When took over the deposit book of World Currency CD's, etc. in June of 2000, it was all about the “king dollar”. I laugh at all the people that comment on currencies these days. Back in the days of Mark Twain Bank, and then the early days of EverBank, it was Chuck Butler, who talked about currencies. Oh, sure there were some other guys and gals, but they mostly were overseas, where currency discussions have gone on for much longer a time than here. In 2003, The Wall Street Journal (WSJ), came calling, and writer, Craig Karmin, did an article on me, he called me a “pioneer” when it came to talking about diversification using currencies. In 2010, another WSJ writer came calling, this time Jeff Opdyke, centered on the Pfennig. and how many years I had been putting it together every morning.
So, where is this all going? No, I'm not walking away from the Pfennig, if that's what you are thinking! I have no idea where it's going, I just started typing about yesterday's milestone for EverBank and this is where I ended up! I apologize if I've taken you around the block to get to the currency discussions this morning. As I've said for many years, this letter is written from a stream of consciousness at 5 in the morning, and sometimes this is what you get!
Well, yesterday was an absolute ugly day for the currencies and metals. I told you all about the what the markets were attributing to the dollar bugs going wild. But that was yesterday, and I'm glad for numerous reasons that it's over, and today is a new day, and with that new day, comes a day that sees the dollar backing off its grip on the currencies and metals. The currencies, led by the euro, at least have the right color of numbers next to them on the currency screens this morning, and even Gold has a positive number next to it.
So, let's start with the euro. The European Central Bank (ECB) is meeting as I type away with my fat fingers this morning. I don't expect any grenades being lofted from left field from the ECB and its president, Mario Draghi, today. Draghi is still in a battle to allow him to implement all-out Quantitative Easing / QE. And so, I'm sure he's not going to upset the applecart with comments that would tick off the people holding up the stop sign on all-out QE.
I don't know how Big Ben Bernanke knows this. But he told an audience in Denver yesterday, that, “it is going to be very difficult for the ECB to buy government debt because legal and political barriers are being thrown up.” Shoot Rudy, maybe Big Ben is a Pfennig Reader, because I've explained that to Pfennig Readers for over a month now!
I read a piece on the Bloomberg this morning that made me laugh. The writer, was talking about how the euro was rallying this morning, but would most likely give back those gains tomorrow when the U.S. Jobs Jamboree takes place (of course he didn't say Jobs Jamboree, that's my description, and mine ONLY! HA!) So, it makes me laugh that traders are that short-sighted that they see to rally the euro today, but already know that most likely it will be a thing of the past tomorrow. YIKES. See? This is what I put up with every single day!
But the euro does have a reason to rally today. German Factory Orders increased by .8% in September VS the previous month. Tomorrow we'll see the latest Industrial Production print from Germany, the Eurozone's largest economy.
So. Speaking of the Jobs Jamboree tomorrow. I told you earlier this week that so far the experts were looking for 234,000 jobs to have been created in Rocktober. Yesterday, the ADP Employment Change report showed that there were more jobs created in Rocktober than forecast, with the number printing at 230,000, when 220,000 was expected. This could be a good sign for the Jobs Jamboree tomorrow. But then it will be the first report after the elections, I would think that there could be some BLS “adjustments” to previous reports.
S&P affirmed Canada's AAA Sovereign Rating and kept their stable outlook for the country. As well they should! And the Canadian dollar / loonie is clawing back some lost ground this week. 5 consecutive days of losses in the loonie, appear to be over today. But then, we do have the rest of the day to get through. The plunging Oil price has not been kind to the loonie, or any of the other petrol currencies. I've spent quite a bit of time this week talking about the plunging price of Oil, and the unintended consequences tied to that plunge. I would think that Bank of Canada (BOC) Gov. Poloz is a happy camper with the weaker loonie, but now he has to figure out how to balance his Trade figures that will show the deficit widening with the loss of income from Oil..
The Australian Jobs Report printed last night, and was not too shabby for Australia. Rocktober full-time jobs rose 33.400, with part time jobs falling 9,400. That's a good sing for an economy folks. part time jobs falling, and moving to full time jobs. The Rocktober Unemployment Rate remained unchanged at 6.2%… The Aussie dollar (A$) is attempting to push back on the U.S. dollar this morning, but the A$ is having to exert a lot of pressure in their attempt to push back!
There was some Big News from Russia yesterday. It appears that the Central Bank of Russia (CBR) has taken the next step toward a fully free float of the ruble. Unfortunately, the news didn't help the ruble, as it books a new record low nearly every day now. It's been a one-way street downward for the ruble, but you and I know that there's no such thing as a One-Way Street in currencies that goes on forever. So, to that end, the CBR Gov. said yesterday that he expected to see the ruble stabilize by year-end. Of course he didn't offer up any ideas on why he thought that, or what he planned to do if it didn't stabilize! Central Bankers. You can tie them all up in a bow, and send them downstream as far as I'm concerned!
One country that is really jumping high and clicking their heels together over the plunge in Oil prices, is India. You take a country like India that has to import all the Oil they use, and the plunge is a good thing for them. India's Current Account deficit, narrows, and India's problem with inflation gets taken care of. With that scenario in mind, I don't see how India can't keep the pedal to the metal as far as economic growth is concerned. Ahem, Mr. Modi, this is the time to hit the economy with reforms. NOW! Don't wait a day longer! Do it NOW!
The Chinese renminbi was moved weaker overnight, thus wiping out the appreciation that it was given the night before. So, why move the currency at all, if you're going to ratchet it up one day and ratchet it back down the next day? Just, sit on your hands, and let the world turn. Makes no sense to me. They control the moves, so it's not as if the markets are doing this to the currency. The Chinese PMI for Services (non-manufacturing) slipped a bit in Rocktober, but nothing to get all jiggy about. I personally think that the Chinese are putting up smoke screens with their currency moves in an effort to throw analysts like me off the scent of what they are trying to do, which is prepare the renminbi to be the next reserve currency. And back the currency with Gold. Probably a percentage of Gold, but still a currency that has something behind it besides the “full faith of the Gov't”.
I just saw the results from the latest poll on the Swiss Gold Referendum. And the results were part of the reason Gold got hit with the whole ugly forest yesterday. the latest poll showed that only 38% were in favor of the Referendum, as opposed to the 45% from the previous poll. 15% remain undecided. But this wasn't good news for the Swiss People's Party (SVP) initiative that calls for all Gold to be returned to Switzerland (currently held in the U.K. and Canada), that the Swiss National Bank (SNB) to be prohibited from selling Gold, and here's the real kicker that the SNB hold 20% of their reserves in Gold. They currently hold about 7.6%…
I thought at first that this would be a layup for the SVP to get passed in Switzerland, given that the only opposition to this referendum is the Swiss Gov't and SNB, and I'm told that the Swiss don't like being told what to do by the Gov't. The SVP is going to have to get out and work to get this vote in their favor, otherwise nothing changes. And the SNB gets to maintain their floor on the cross of francs to euros at 1.20.
I think the SVP needs to point out how the SNB was responsible for a devaluation of their franc 3 years ago, and that the SNB wants an even weaker franc, and then showing the Swiss people what that weaker franc does to their purchasing power! That's how I would go about getting people on my side for this vote! Memo to the SVP. You can send your payment for these services to: Chuck Butler, at EverBank.
The U.S. Data Cupboard will have the Challenger Job Cuts today for Rocktober, and the Weekly Initial Jobless Claims, and then it will get all prepared for the Jobs Jamboree tomorrow. We, also have a couple of Fed members speaking today. The Fed's Evans, Powell and Mester all speak today at various events, with Powell talking on Derivatives Clearing. I wonder if he touches on the total number of Derivatives out there in investing land. I doubt it.
And don't look now. OK, you can look now.. HA! But the U.S. Trade Deficit with China just hit a new record high! Yes, that's right. In September, we exported a measly $9.3 Billion of Goods to China, while we imported $44.9 Billion of Good from China. YIKES! Somebody help me to understand here how we as a country can grow stronger, when we buy more things than we sell? We only get poorer as a nation.
And I mentioned Gold above, but I wanted to point out something that caught my eye yesterday. It's not just China, Russia, India, and so on with strong demand for physical metals. The U.S. Mint announced that they had sold out of Silver American Eagle Coins. Of course they'll produce more, but the fact that the demand for the coins was so strong that it depleted the inventory at the Mint is pretty interesting don't you think? But yet the price of Silver falls to a $15 handle?
For What It's Worth. Well, the “talk” is starting folks. The “talk” I'm referring to is China beginning to describe how they see the world going forward. Didn't this used to be a “talk” that the U.S. would have with the rest of the world? Oh well, let's listen in to a snippet or two.
“A new global financial order is essential in the rapidly changing global economy, and strategic dialogues and cooperation are needed to reform the current system, international financial experts said at a forum in Beijing.
“The world today is facing a revolution. It is imperative to construct a new global financial framework and to formulate new rules for global financial market,” said Cheng Siwei, chairman of the International Financial Forum (IFF), a Beijing-based think tank, which concluded its three-day 2014 annual meeting on Sunday.
“The world has gone through the global financial crisis … new rules have been discussed not only inside the advanced economies, but with all emerging economies, including the most important emerging economies, namely, China.” Jean Claude Trichet said.
Many experts agreed with Trichet and said that China, the world's second-largest economy, is playing a more crucial role in reshaping the world financial order, which was criticized by emerging economies and developing countries as unable to reflect the rapidly changing world economic reality.”
Chuck again. Yes, this is what I suggested to each and every one back in the days of the financial meltdown. Start a journal, and record these things, because one day, your grandkids are going to ask you what happened, and you can pull out the journal and take them through step by step, beginning with the exploding U.S. Debt last decade. That's a good place to start, and then in 2005 with the dropping of the dollar peg for the renminbi, and their baby steps toward dominating the currency system.
To recap. Yesterday is over, thank goodness, for it was one of the ugliest days I've ever witnessed in the currencies and metals. Currencies and metals are usually long sweeping moves, and not the kind of blow it out of space day we had yesterday. Today, the currencies are attempting to claw their way back, led by the euro, which saw a nice print from Germany this morning in Factory Orders. The CBR is taking steps to have a fully floating ruble very soon, but with the plunge in oil prices, the petrol currencies can't find a bid these days. Aussie Employment rose and the A$ ticks higher. And American Eagle Silver Coins get sold out at the U.S. Mint!
Currencies today 11/6/14.American Style: A$ .8610, kiwi .7740, C$ .8765, euro 1.2515, sterling 1.5935, Swiss $1.0385, . European Style: rand 11.1230, krone 6.8145, SEK 7.3465, forint 247.70, zloty 3.3730, koruna 22.2030, RUB 46.02, yen 114.65, sing 1.2930, HKD 7.7530, INR 61.41, China 6.1565, pesos 13.57, BRL 2.5300, Dollar Index 87.29, Oil $78.55, 10-year 2.33%, Silver $15.28, Platinum $1,206.75, Palladium $756.75, and Gold. $1,144.53
That's it for today. One of my fave Steely Dan song, Reeling in the Years, is playing on the IPod right now. Great guitar work in that song! We had a nice family dinner last night to celebrate the lovely Rachel's birthday, everyone was there, except Alex. He's busier than a one-armed wallpaper hanger these days, which I guess is good. A couple of small school football games was all I watched on TV last night. Our Blues are back in action tonight at home. And my beloved Missouri Tigers have another bye this weekend, what the heck is that all about? I guess it's better than playing the Little Sisters of the Poor, like a lot of teams do at this time of the season! I hear that AC/DC's drummer is in trouble, as their hit song, Shook Me All Night Long, plays on the IPod. Yes, I have AC/DC on my IPod, and the beauty of it, the next song will probably be by Dusty Springfield! I hear that about 2/3rd's of the country failed to vote on Tuesday. That's a sad statement, don't you think? I hear the Millennials were the biggest no-shows at the voting booths. It's their country, don't you think they would want some say in how it's run? Oh well. You can lead a horse to water. And with that I'll get off this merry-go-round now and hope you have a Tub Thumpin' Thursday!
EverBank World Markets