In This Issue.
* Bank of Canada cuts rates!
* Brazilian Central Bank hikes rates!
* Gold can't hold $1,300.
* Volatility returns to currencies.
And Now. Today's A Pfennig For Your Thoughts.
ECB's QE Plan Is “Leaked”!
Good Day!… And a Tub Thumpin' Thursday to you! Well, today is THE DAY. The day when European Central Bank (ECB) president, Mario Draghi, will tie the euro to the train tracks, and finally get what he has wanted all along, all-out Quantitative Easing/ QE. I'm loaded for bear today, and I feel like death warmed over this morning, so that's a bad combination for anyone in my way this morning. It was a bad night, so I'm basically doing this letter while I remain ½-asleep. Instead of sleep walking, it's sleep writing. I bet the great financial writers of today, that includes: Doug Casey, David Galland, Bill Bonner, Addison Wiggin, Grant Williams, David Rosenberg, and Frank Trotter, can't sleep write!
Well, the currencies were a sight to see yesterday, I saw an article headline on the Bloomberg this morning when I turned it on, that said, “traders once begging for volatility in currencies, now have too much.” Let's look at the volatility of the euro as an example. Yesterday was a wild ride for the euro. In the early morning, I told you how the euro had gotten a little boost on some words from ECB member, Nowotny. then the euro carried on throughout the morning to over a 1-cent gain on the day, only then to have the rug pulled from under it, when the ECB's plans to implement all-out QE were “leaked” to the press, a day ahead of when the ECB was to meet and make an announcement. So, let's go through the “leak”. The Wall Street Journal (WSJ) said that The ECB's Executive Board called for bond purchases in the amount of 50 Billion euros per month that would last for a minimum of one year. Well, that caused the euro to take a trip to the woodshed. And more than ½ of what was gained in the early morning, was given back. And then just like that! The euro turned around and rallied again! Strange day indeed for the single unit. I was not surprised at how it lost ground after the “leaked info” but I was surprised to see it rebound in the same day!
But, in case you skimmed over that last paragraph, there's the plan that was “leaked” to the press and the markets yesterday, that the ECB will announce today. And the euro remains above 1.16 ahead of the announcement, which leads me to believe that most of the initial knee jerk reaction to the announcement of QE will not happen, as it has already been priced in. Of course that doesn't mean the euro won't suffer through the gyrations of the 50 Billion euros worth of bonds each month, and it also is held against the thought that the “leaded” deal is the actual deal that Draghi will announce. We'll just have to wait-n-see. Of course we won't have to wait long, as the ECB is meeting as I type.
Well, if it's not one surprise it's another. yesterday, the Bank of Canada (BOC) surprised the markets and cut rates 25 Basis Points (1/4%) to .75%… Canada had no other choice given their reliance on the sales of raw materials, and those revenues have plummeted. Oil, copper, coal, and other raw materials have caused huge losses of revenue, which will in turn cause weakening of Canadian GDP. So, in the last week, we've had the SNB surprise, The Bank of England drop their rate hike stance, leaked QE parameters for the ECB, and now the BOC cut rates. And those calling for a strong U.S. growth recovery in 2015, don't believe that these things have anything to do with the U.S. Shoot Rudy, even Fed St. Louis President says that the reason Treasury yields are low is due to overseas investment and not fears over weak domestic growth. Hmmm. Well, Let me explain something to everyone including Fed members. If overseas investments were weak, that would mean they wouldn't be buying Treasuries, and yields would rise. However, when the “bond boys” see a weakening on the horizon, and trust me, they're always looking forward, they begin buying bonds and driving yields lower. AND THAT'S what we're seeing folks..
Well, looky there! I told you yesterday that we could expect to see a rate hike from the Brazilian Central Bank (BCB) of 50 Basis Points (1/2%) on Wednesday evening. And that's exactly what we got from the BCB! Their internal rate that they call the Selic Rate, is now 12.25%… And then the BCB issued a statement that said the rate increase was an unanimous decision.. That's different than the previous meeting, where the BCB tiptoed through the tulips and danced around the issue. It's obvious that the BCB got spooked by the latest forecast of rising inflation in 2015.. So they acted! I love it when a plan comes together!
Well, in keeping with what I've been focusing on lately. the weakening of the so-called strong U.S. economic recovery, I saw this in the Rude Awakening http://rude.agorafinancial.com/ and basically it talks about how the staid and old school malls with anchors like: Sears, J.C. Penney, and K-Mart, are closing at a fast pace, while the high end malls, you know the ones that cater to the really rich people, thrive. it's just another indication that the middle class in the U.S. if dying a slow death. And what supported the U.S. tax-wise all these years? The Middle Class, and then you wonder why I think we are in for a real bad situation here in the U.S.?
Gold just couldn't hold $1,300 yesterday, but that was no surprise to me, as I had even told you that $1,300 would be a line of resistance, and Gold would have to make more than one run at that figure. And the Aussie dollar (A$) couldn't hold its gains either. the volatility in the currencies yesterday was really something, and the kind of stuff we used to see, long ago in a galaxy far away. But the Death Star had cast a dark shadow on the currencies for quite a few years, until now. And I think we can thank the Swiss National Bank (SNB) for this return to normal trading. The SNB got the ball rolling last week, and now may the force be with them!
Platinum and Palladium have been very volatile lately, gaining big one day, and selling off the next. At Least Platinum has been gaining more than it has lost, while Palladium just can't seem to find any wind for it sails these days. What? Has the new car buying phenomenon in the U.S. ended and we didn't hear about it? Is the new car buying phenomenon coming to the realization that the mortgage refinance guys found out about last year, that once everyone that's can refinance has done so the gig is up? I don't know about that, because new cars are different than mortgage loans. You can get a new car every year if you want/ can. But to me, this must be the only thing holding Platinum and Palladium back, given the run that Gold & Silver are on since the start of the new year. For those of you not following along here. Platinum and Palladium are key ingredients in catalytic converters, so when new cars are sold, they had to be built first. So, if the demand for new cars weakens, then so too would the demand for these two metals. to a degree. So, maybe, just maybe, that's what's going on here.
The U.S. Data Cupboard is basically empty again today, with only some minor data prints to show us, like the Weekly Initial Jobless Claims, and the Bloomberg Consumer Comfort Index. So. all eyes will be on the ECB this morning folks. even though the outcome was probably leaked yesterday in an effort to water down the knee jerk reaction to the euro, it's still the Biggest Fish in the lake today.
Speaking of the lake. Believe or not, I'm actually trying to be more active these days, you know get out and move my body through space, and there's a small lake / pond near here, that I've been walking around each morning. I love the signs posted around the lake. Beware of Alligators. And then I see lots of people with their small dogs walking them, and think, “don't get too close to the water, or spot will become some alligator's lunch!”
OK. I've got two For What it's Worth pieces for you today. grab a seat. here we go!
For What it's Worth. Well, quite a few years have gone by since 2007. I'm always able to mark that year for that was the year, the financial markets began their meltdown, I was diagnosed with cancer, and my darling little granddaughter, Delaney Grace, was born. But from the get-go on the financial meltdown, I placed a lot of the blame on the ratings agencies. And like I just said, quite a few years have gone by, but in an attempt to get this news under the radar, S&P agreed to pay nearly $80 million to resolve and investigation into its mortgage-backed securities ratings. Well, it's about time something was done, but. $80 million? Really? How much did they earn in fees during the buildup years to 2007? Shouldn't those all be returned? Oh well, at least it was something, and something is better than nothing, eh?
For What it's Worth Deux. Back in 2008, 2009, and 2010, I wrote a letter for the Sovereign Society called: the Currency Capitalist. In addition to the monthly newsletter, which allowed me to dive into things very deep, I also did a weekly video that was sent out to subscribers. One of those videos was my own write up and thoughts on something that didn't really have anything to do with currencies. The title was: Who Chuck Thinks is the Worst President of all Time.
Well, I'm sure I surprised a few people when I nominated Woodrow Wilson as the worst president of all time, I even started a movement (it didn't get past my video) to repeal 1913. So, why did I say these things? Well, first of all, it was Wilson that was allowed to be railroaded into backing the start of the Federal Reserve. Of course it was all done in secrecy on Jekyll Island by the JP Morgans, and Rothschilds, etc. but they got Wilson to push it through congress, and voila, the U.S. had a Central Bank, not Federal Bank, a Central Bank that was wholly owned by the families that started it.
I'm not finished there. It was also 1913 that Wilson pushed through the income tax. The IRS and so forth came about in this year, man was this not a good year for Fred the farmer, or Joe the plumber. And then there was one more thing. it was under Wilson's watchful eye and leadership (I use that word loosely here) that the way Senators go to D.C. was changed. You see, it used to be all about the states. not the Federal Gov't, because isn't that how a republic such as was created by the founding fathers is supposed to be run? Well, the Gov. of each state would assign the Senators that way, they would always be looking out for the good of the state. But no more, with Wilson, we get elected Senators, that may or may not be looking out for the good of the state, but more the good of his or her reelection bid. So there you go! A President with not one, but three black eyes!
Chuck again, not like I ever left you today! But the reason I brought this all up is that my friend, Addison Wiggin at Agora Financial, and the Daily Reckoning, did a piece on Woodrow Wilson yesterday, and how David Stockman called Wilson the worst president ever. So, I thought, well, let's get this all straight, for I was the first to say that probably 5 or 6 years ago! Nice that others have caught on now!
To recap. Well volatility has returned the currencies, and we can thank the SNB for that! The ECB will announce their plans today, although it appears the plans for QE were “leaked” to the press and markets yesterday. Gold couldn't hold $1,300, but Chuck thinks it will take a few runs at the figure before finally moving past it. Brazil hiked rates and Canada cut rates. it's been a week full of surprises, and I think most of 2015 is going to be chock-full-o-surprises, so get ready for that!
Currencies today 1/22/15. American Style: A$ .8125, kiwi .7575, C$ .8110, euro 1.1625, sterling 1.5180, Swiss $1.1675, . European Style: rand 11.4870, krone 7.6275, SEK 8.1255, forint 270.70, zloty 3.7005, koruna 23.9890, RUB 64.70, yen 117.65, sing 1.3315, HKD 7.7535, INR 61.70, China 6.1247, pesos 14.69, BRL 2.5800, Dollar Index 92.58, Oil $47.92, 10-year 1.91%, Silver $18.08, Platinum $1,276.76, Palladium $761.75, and Gold. $1,286.38
That's it for today. Well, I made it through without falling asleep at the table! The Good Lord knows how badly I wanted to! Well, I've been anticipating today, and not because of the ECB meeting, but because tonight, I'm going to drive north about ½ hour and meet up with a good friend ! He's speaking today in Port St. Lucie and then driving to Orlando tonight, and at a predetermined spot we'll meet up, break some bread, and share some stories. It was an absolutely beautiful day here yesterday, and today is supposed to be a repeat, but then rain comes and well. away go the beautiful blue umbrella skies, the warm sunshine, and the light sea breeze. But it's just a day of rain, Chuck, don't act like there won't be any more beautiful days! So, have you seen the brouhaha going on in the NFL about how the Patriots allegedly cheated last Sunday? Boy, that takes me back to the early 2000's when the Rams were the talk of the town, the Greatest Show on Turf, and lost the Super Bowl Game to the Patriots, and there were charges of cheating, videotaping the Rams' practices, etc. This “cheating” enigma is not a good one to carry around with you, but I don't think the Patriots or their fans give a hoot, as long as the just win baby! OK. have you had enough of me for today? I thought so. I hope you have a Tub Thumpin' Thursday!
EverBank World Markets