In This Issue.
* Euro gets whacked again.
* Renminbi & reals rally.
* N.Z. Budget is not kiwi friendly.
* Hell Hath No Fury.
And Now. Today's A Pfennig For Your Thoughts.
ECB Prepares Stimulus Measures For June.
Good Day! . And a Tub Thumpin' Thursday to you! Well, by now, the attendees to the Las Vegas Money Show have figured out that for the first time in 14 years EverBank will not be at the Show, and for only the second time in those same 14 years I'll not be there, as I did miss the Show in 2010 after my eye surgery. The jury is still out if we will return to San Francisco later this year. I love San Francisco, the city, I totally dislike the travel there and back! But that won't be the reason we decide to go or not, it's all about interest in what I have to say.
I'm in a very feisty mood this morning, so watch out! Front and Center this morning, the pressure is back on the euro again as the Eurozone member countries are filing their 1st QTR GDP results, and France took a step back, and Italy remained weak. Germany, the Eurozone's largest economy, actually performed better than expected, doubling the previous Quarter's results (.4%), but the markets are in no mood to say, that Germany's strength offsets the weakness in France and Italy, (even though it does! ) and so, the euro gets whacked again.
Recall the other day, I said that I thought that most of the bad feeling about additional stimulus had already been priced into the euro. Well, apparently there was more! Well, it appears that I'm going to have to admit I was wrong next month. Yesterday, Reuters reported that the European Central Bank (ECB) was readying their policy options ahead of the June meeting. “Five people familiar with the measures being prepared detailed plans involving a potential rate cut, including the ECB's deposit rate going negative for the first time.”
You will recall, that I said that I thought ECB President Draghi was only jawboning the euro weaker and keeping it from going past 1.40. This could still all end up to be nothing but window dressing for their plan to get the euro weaker, but when you read stuff like: “A June rate cut is more or less a done deal” (according to one of the 5 sources) and “This will be the first major central bank to move to a negative deposit rate.” You have to think that physical intervention is on its way.
So, after reading this story, I checked the currency screens and didn't see any movement in the euro. What, what? Well. not then at least. And I was feeling pretty good about my call that the bad stuff had all been priced in already. But, when the weak GDP reports were filed by France and Italy this morning, whack!
With the euro getting whacked this morning, It's difficult to find a rallying currency anywhere, not even the Dollar-Bloc currencies that held up so well after the first round of euro whacking, late last week and into early this week! The Chinese renminbi bucked the trend overnight and appreciated, and the Brazilian real booked some nice gains. Gold is down a couple of bucks this morning, which really is surprising to me, given the rally in U.S. Treasury yields yesterday. So, let's talk about those yields for a minute here, and how I think they play into the price of Gold.
So. the 10-year Treasury yield dropped more yesterday, sinking to a 6-month low of 2.52%, thus making our new MarketSafe Treasury CD even more enticing! The lower the yield goes, the better the starting point for our CD. I had to respond to a couple of articles that didn't take too kindly to our offering yesterday. Look, it's really simple, either you think interest rates will rise in the next 5 years, or you don't. If you don't, there's no need to blast away at the CD, just move along for this is not the CD you're looking for. If you do believe interest rates will rise, and remember we're not talking about now, or next month, or next year, we're talking the in next 5 years, then this is your opportunity to take advantage of those potentially higher interest rates, all the while not having to pay annual fees to a Trust Company, or fret about margin calls on a short position. and have 100% principal protection in an FDIC Insured Bank!
Whew! I really didn't expect to go there. But that's where I went, so where to now? Oh, the price of Gold VS 10-year Treasury yields. You know as well as I do, that with yields dropping that everything with an interest rate will also drop. mortgage rates, deposit rates, loan rates, etc. Which simply means that for now, Gold doesn't have a deposit rate to compete with, which in the past meant good times for the shiny metal..
I was shocked by the surprisingly strong Japanese 1st QTR GDP print of 1.5%… which saw consumer spending account for 1.3% of the gain. That's Huge folks. But, before we go out and load the truck up with yen, let's remember that in the first Quarter, Japan implanted a consumption tax hike in April, but was announced in the 1st QTR, so Japanese consumers went out and made hay while the sun shined. or before the consumption tax hike raise prices.. I would like to think that there's more to the strong consumer spending in the 1st QTR, but I doubt there was. It's the same-o, same-o for yen, folks.
In New Zealand overnight, the Government's 2014-15 Budget printed. (remember, Australia's printed the night before) And I'm not happy with the Budget! Economic growth for New Zealand was revised higher in the Budget, but the thing that gives me a rash, is that the N.Z. Gov't is calling for wider Current Account Deficits that will return to over 6% by 2016. UGH! The good news for the Current Account Deficit, if you really search for it, is the fact that in the near term, the Deficit should narrow some. So, when we see that narrowing, we should remember, that it's not permanent!
The markets didn't take kindly to the Budget either, and kiwi got sold overnight, with the Aussie dollar (A$) taking sympathy with kiwi, and trading down too.
So. Did you hear the news? Well, let me restate that. On your favorite news channel, or cable news channel, did you hear about the meeting between Russia and China? Of course you didn't! But fear not, for your investigating reporter is on the scene! And here's what you should know. The Voice of Russia reported that Russian press sources are saying that the country's Ministry of Finance is ready to Greenlight a plan to radically increase the role of the Russian ruble in export operations, while REDUCING THE SHARE OF DOLLAR DENOMINATED TRANSACTIONS.
It was also reported that Russia held a “De-Dollarization Meeting” and that China, which we already know has stated that the dollar standard must come to an end, and Iran apparently are willing to drop the dollar from all transactions. Of course, China has been doing this step by step for some time now with currency swap agreements.
In other news from the “meeting”. Russia is ready to sign what they are calling the “holy grail” gas deal with China. and guess what's not being used in the terms of transaction? The dollar. I've told you all for years now, what the debt and deficit spending was going to end up doing to the dollar, and while the dollar kept its head above water, everyone laughed at me, pointing to Central Banks all around the world that held dollars as a reserve currency. Now, if the dollar weren't my home base currency, I would say, “who's laughing now?” But since I own dollars for gas, groceries and giggles, I have to hold back the laughter, and instead direct you all to the nearest phone to call 1-800-926-4922, to diversify and allocate a portion of your 100% dollar denominated portfolio to currencies and metals, before the purchasing power loss of the dollar becomes so great that you won't know what hit you!
You know. I don't make this stuff up, folks. The Demise of the dollar, as my friend, Addison Wiggin titled his book, of which he was so kind to allow me to write the forward for the book, wasn't going to happen overnight! Do you want to know what's interesting here? For years, and I mean over a decade, people would ask me repeatedly, what books they should read to bring them up to date on the decline of the dollar, which was the title of the White Paper I wrote back in 2001. I would point them to Richard Duncan's book, books by Addison Wiggin and Bill Bonner, and so on. But in the past 4 years, I've not received but a handful of requests for books to read. Why was that? Because the stock market, was being fueled by the Bernanke Asset Bubble Machine, called Quantitative Easing.
Investors no longer cared about what was causing their loss of purchasing power, in fact they didn't care if they were losing purchasing power, all they care about is the stock market. And why not? The Bernanke Asset Bubble Machine was working overtime, and is still pumping Billions (yes, that Billion with a capital B) of liquidity each month. But should all that I've written about today, intrigue you just a little, then maybe you would like to pick up a copy of Addison Wiggin's book: The Little Book of the Shrinking Dollar, by clicking here.
Last week, I wrote about how Silver Guru, Ted Butler, was encouraged by a letter he received from the GAO that they would investigate further Butler's claims of Silver manipulation. So, I've kept on this story, just so I don't miss anything. And I have to say that what Butler recently said about the CFTC was interesting. So, let me set this up for you. The CFTC (commodities & futures regulator) said that they investigated the claims of Silver manipulation for over 5 years, and found nothing. But Ted Butler says, that has to be hogwash, because in those 5 years, no one from the CFTC called to talk to Ted Butler, the man who had done the most research into Silver manipulation. How could that be? Very interesting don't you think?
Well, even more interesting was the announcement yesterday morning, that the Silver Fix Company that consists of a handful of banks, is ceasing operations on August 14, 2014. Did the heat in the kitchen get to hot for the Fixing banks, so they just ceased operation? I told the Big Boss Frank Trotter yesterday that I really think this is a game of smoke and mirrors, that the real manipulation isn't in the Fixing, but if the powers that be, can get everyone's attention on the Fixing, and then shut it down, that maybe the heat in the kitchen on the real manipulators will be turned down.
I think that's called a McGuffin. or something like that. Show them something, that catches their attention, and then not have that “something” be a part of the real story. You know like the briefcase in opening scene in Pulp Fiction. (sometimes it's spelled MacGuffin)
The U.S. Data Cupboard printed PPI (wholesale inflation) yesterday, and once again, the wholesale prices showed an increase. but I was reading a story on zerohedge.com that talked about how U.S. Consumers are so frugal that they make it tough for food companies to raise prices. and get this: According to Deloitte LLP's annual survey of food shoppers released last week. 94% agreed that they would remain cautious and keep spending at the same level even if the economy improves. That's the same percentage level as in 2010.
Today's Data Cupboard has the smartless CPI (consumer inflation) report for April, and the usual Weekly Initial Jobless Claims. Fed member William Dudley speaks today too. He always has some interesting thoughts to share with us.
For What It's Worth. It's been Tim Geithner week in the FWIW section of the Pfennig this week. So, in keeping with that theme, I thought I would give you snippet of a story that was on Bloomberg.
“Ex-U.S. Treasury Secretary Timothy Geithner must comply with Standard & Poor's demand that he provide documents related to its claim the U.S. sued the company in retaliation for downgrading government debt.
Harold W. McGraw III, chairman of S&P parent McGraw Hill Financial Inc., said in a court statement that Geithner called him days after S&P downgraded the U.S. debt in August 2011 and told him that the company would be held accountable for it. McGraw said Geithner told him there would be a “response” for the downgrade, which the government said was based on an error.
Geithner is the highest former government official S&P has pursued for information to support its allegations. S&P, the only credit rating company sued by the Justice Department for allegedly giving fraudulent ratings to mortgage-backed securities, has said it was singled out because of the downgrade.
The Justice Department and Geithner have denied there is a connection between the downgrade and the lawsuit filed last year. The government has said it may seek as much as $5 billion in civil penalties from S&P for losses to federally insured financial institutions that relied on its ratings for mortgage-backed securities and collateralized debt obligations, or CDOs, that lost value after the housing market collapsed.”
Chuck again. Uh-Oh! Looks like what we have here is a company with deep pockets scorned, and Hell hath no fury like a company scorned by the Gov't!
To recap. The Eurozone 1st QTR GDP reports are getting filed this morning, and so far France and Italy's weakness is outweighing Germany's strength, in the eyes of the markets, and the euro is getting whacked again, which has all the currencies and metals on their heels this morning. 10-year Treasury yields are down again, which Chuck feels should be a good thing for Gold. The ECB prepares for additional stimulus next month, and Silver Guru calls the CFTC's bluff.
Currencies today 5/15/14. American Style: A$ .9365, kiwi .8665, C$ .9200, euro 1.3655, sterling 1.6755, Swiss $1.1175, . European Style: rand 10.3455, krone 5.9375, SEK 6.5730, forint 222.25, zloty 3.0605, koruna 20.0980, RUB 34.71, yen 101.95, sing 1.2530, HKD 7.7515, INR 59.25, China 6.1640, pesos 12.91, BRL 2.2025, Dollar Index 80.29, Oil $102.00, 10-year 2.54%, Silver $19.72, Platinum $1,476.13, Palladium $823.56, and Gold. $1,304.90
That's it for today. Well, it was a sad night in Mudville, as the LHS Water Polo team was upset in the playoffs. UGH! Alex had an opportunity to tie the game late, and hit the crossbar with his shot.. He had little to say afterward, as his high school sports career came to an end. I told a few weeks ago that he was invited to play on the Junior Olympics team from St. Louis again this year, so he still has some playing to do this summer out in California. Cards and Cubs were rained out, and have a day game at Busch today. That is if the rain can stay away for 3 hours. it doesn't look like it though. I got put in my place yesterday by a near 3-year old. I was doing something silly for grandson Braden, and he told me. “That's not funny”. OUCH! One of my all-time fave groups, Yes, was just playing the rock classic, Roundabout on the IPod. I had to stop and turn it louder, as that song should only be played LOUD! Well, it's time to get this out the door, I think I made it through the letter without being mean or feisty with anyone, so I get a Gold star for that! I hope you have a Tub Thumpin' Thursday today!
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