In This Issue.
* Risk meter ticks higher..
* So-called safe havens get bought!
* So, what about that Troika?
* Norway has some bright spots.
And Now. Today's A Pfennig For Your Thoughts.
ECJ Throws A Cat Among The Pigeons!..
Good Day!… And a Wonderful Wednesday to you! I'm starting the day, not so “wonderful”, but. when you start it like this, you have nowhere else to go but better! So I have that going for me today! (Hopefully it kicks in soon!) So, I'm in search of an iced cake donut this morning, wink, wink. I'll get a few emails chastising me for eating a donut (sugar feeds cancer), but I tell them all the time, it's not like I'm eating dozens of donuts all the time! One iced cake donut every now and then.
The currencies and Gold look like they could use my iced cake donut cure for what ails them too! The currencies across the board, except Japanese yen, are all weaker again this morning to the dollar. When I told you 5 months ago, that we would be seeing a bout of short-term dollar strength I didn't imagine the strength of the dollar would be so intense. But it is, and so we start each day looking at the pound of flesh the dollar has cut away from the currencies. I would say at this point that it's getting ugly, but that would be too late, it has already gotten ugly, and unfortunately, it's, in my opinion, going to get uglier. You know that old saying about not just being hit by the ugly tree, but by the whole forest? Well, the whole forest is coming straight at the currencies and I don't believe they will be able to side-step it, dodge it, head fake it, or just plain avoid it.
Even Gold that has been looking quite perky since we began 2015, is down a couple of bucks this morning. I think I may have confused a few readers yesterday when I printed the FWIW article by Koos Jansen. Some thought that Koos was saying that if the U.S. restated the price of Gold on their books it would make their balance sheet look better, and therefore the dollar stronger.. And maybe I missed something by just taking snippets, but the gist of what Koos was saying is simply that IF the U.S. acknowledged that Gold had a much higher price than the $42.22 they have on their books, the U.S. would be saying that Gold is an alternative to the dollar. And by doing so, would drive the price of Gold higher.
Well, I said above that the Japanese yen is the only currency booking gains VS the dollar this morning, and seeing this, the song that my older kids used to sing when they watched Sesame Street. One of these things is not like the others, One of these things just doesn't belong, Can you tell which thing is not like the others, by the time I finish my song? HA! So, why is yen rallying when the other currencies are getting whacked? Ahhh grasshopper, this is where the idiotic trading pattern of rewarding so-called safe havens comes into play. For some unknown reason to any logical thinking person, like myself (HA!), traders still flock to yen when the risk meter turns up. So, what's the “risk” in the world today that has traders flocking to yen?
Well, the BIG News this morning is the opinion of the European Court of Justice (ECJ) of the European Central Bank's (ECB) desire to implement all-out QE. And much to my surprise, and the surprise of just about everyone in Germany, the ECJ threw a cat among the pigeons and basically told the ECB that they are free to move about the country with all-out QE, and that the size of their program is up to them.. ARE YOU KIDDING ME? Well, get ready folks, this basically gives a the ECB and its president, Mario Draghi, the ability to hit all the green lights on his way downtown and all-out QE is coming.
That won't be good for the euro, the euro wannabes and the euro alternatives. Let me list them for you. euro, forint, zloty, koruna, krone, krona, and some others that attempt to hang their hat on the same hat rack as the euro. But the euro will receive the brunt of the selling from this decision. So. what can be done here? Can the decision be reversed in a higher court? Well, technically it could, but as I've said all along, the courts usually take what the ECJ has to say as the gospel. So, the chances are slim and none, and Slim just left town! This is where the quote from Dumb and Dumber comes into play, “So, you're saying there's a chance”. Come on Chuck, this is no laughing matter, but evil twin, you have to inject some levity into situations like this otherwise people get depressed.
So. so much for the euro hanging out around 1.18 because traders thought for sure that the ECJ would rule against all-out QE. And here's something that I think people will rue the day they said this. But recall about 10 days ago or so, I told you that the a currency outfit, came out with a call that the euro would reach parity to the dollar by next year? Well, with this ECJ decision, the outfits are coming out of the walls with their calls for parity. the more that say it, the more we could see it become a reality. But I still doubt it. Sure it's going to get weaker because of the ECJ decision, but by the time the ECB gets around to announcing the size of their all-out QE, the markets might have sold the euro too much, and we could have a sell the rumor buy the fact kind of trading. Maybe. just maybe, because you never know!
One thing that did come up in the ECJ's ruling is the questioning the legality of the Troika. Remember the Troika? The ECB, IMF, and European Commission, which helped the countries that were near default remain solvent and get back on their feet. Well, the ECJ left some open questions about the legality of that union.. Hmmm. if I didn't know any better, I would say that the ECJ was more concerned with monetary policy in the Eurozone, that anything else, and monetary policy is the last thing the ECJ should ever be considering. They should stick to the answering the question of whether its legal or not. Which they did, but this looks awful suspicious to me.
I did a radio interview yesterday, with Voice America and its host Jay Taylor. It was fun, and he let me talk! So, the first interview was letting his listeners hear about EverBank and our products, then we began to get into my outlook, when we ran out of time, so he asked me back! I loved doing this, and can't wait to get my outlook opinion to his audience! Gold was a big subject, and will continue to be, along with Russia! So. I think I'll have all the particulars ahead of time the next time he calls, and I'll share it with you here in the Pfennig in case you would want to “tune in”.
I was reading an article online last night from Norway, where the krone has gotten whacked so badly these last 6 months due to the drop in the price of Oil.. Oil revenues account for 1/5th of the Norwegian GDP, so it's important, but on the bright side, the cheaper Oil price is allowing other non-Oil exporting companies to boost their sales. Now, granted, it will take a lot of those sales to make up for the 60% drop of crude Oil prices, but at least there is a bright side. And it's not all gloom and doom in Norway. I've said all along during this whacking that I didn't like the way traders were going after the krone, and maybe seeing results from the non-Oil exporters will wrap a tourniquet around the krone. The ECJ ruling this morning isn't going to make the wrapping of a tourniquet any easier.
The U.S. Data Cupboard finally has something for us to look at today that could be market moving, and that is Retail Sales for December. I told you on Monday that this report is going to be tricky in that December should be a strong month for Retail Sales given the Christmas Shopping Season, and the other celebrations. And the BHI indicates that it should be a relatively strong print, but right now, the so-called experts have December Retail Sales at a negative -.1%… Now when they take out auto sales it pops up to .5%, which isn't shabby, but still not the kind of data one would expect from December Retail Sales.
We'll also see the color of the November Business Inventories, which should show a big negative. and that plays well with the drop in Manufacturing, the negative prints from Durable Goods and Orders. that printed in December. It takes some circling back and tying some knots but I think you see what I'm saying here.
For What It's Worth. Well, I talk all the time about how strong China is and continue to get stronger, and I came across this article in the Shanghai Daily. You can check out the whole article here or just read the snippets I have below. http://www.shanghaidaily.com/business/finance/Trade-figures-confirm-Chinas-world-status/shdaily.shtml
“CHINA'S trade grew 3.4 percent from a year earlier to US$4.3 trillion in 2014, cementing its status as the world's largest trading nation, the General Administration of Customs said yesterday.
The country's trade surplus shot to a record high of US$382.4 billion last year, or 2.35 trillion yuan, up 45.9 percent year on year.
Zheng Yuesheng, a Customs spokesman, said that although it was the third straight year that China had missed its trade growth target of 7.5 percent, the performance was positive with better goods structure and more diversified trading partners.
In volume terms, Chinese crude oil imports grew 13.4 percent in December, indicating Chinese oil companies intended to take advantage of low prices to raise reserves,” Zhou said.
“Despite the large trade surplus, the Chinese yuan depreciated only by about 3 percent in 2014 … we believe it is not in the central bank's interest to see the yuan weaken significantly as it could trigger large capital outflow, which in turn endangers financial stability,” Zhou said.”
Chuck again. Compare China's performance in trade with that of the U.S. which grew 3.3% in the first 10 months of 2014, and Japan which saw its trade lose -1.4% in the same period, China remains the star performer folks.
To recap. The ECJ threw a cat among the pigeons this morning, basically telling the ECB that they are free to implement all-out QE and the size of their QE is up to them! WHOA there Partner! Did you just type that correctly? Why yes, I did! And the euro and the euro wannabes and the euro alternatives are getting taken to the woodshed for a big whacking! This decision has put the risk meter ticking higher, and causing a flight to safety in the currencies, which means the Japanese yen is rallying. Don't shoot me, I'm just the messenger, but I sure wouldn't be flocking to yen as a safe haven if I were a BIG SHOT trader! U.S. Retail Sales prints today, should be a tricky report.
Currencies today 1/14/15. American Style: A$ .8115, kiwi .7710, C$ .8350, euro 1.1750, sterling 1.5175, Swiss $ .9785, . European Style: rand 11.5170, krone 7.7115, SEK 8.0810, forint 272.20, zloty 3.6460, koruna 24.0050, RUB 66.12, yen 116.95, sing 1.3365, HKD 7.7515, INR 62.18, China 6.1205, pesos 14.62, BRL 2.6255, Dollar Index 92.25, Oil $45.61, 10-year 1.87%, Silver $16.74, Platinum $1,232.63, Palladium $790.78, and Gold. $1,230.30
That's it for today.. Sorry this is shorter than usual, but I'm running on fumes this morning, and just didn't really feel “into it” this morning. But I gave it the old college try! I'm going back to bed when this gets out, and I'll talk to you tomorrow. I do have a bone to pick with Ohio St. and their coach, Urban Meyer, who decided with less than a minute left in a game, and already up by 15 points to go for another touchdown. That's classless right there, folks, and there's no place in college football for that, especially on national TV, and the championship game.. I got to talk to old friend, Charlie Tiano last night, who's going to be near me in about 10 days, and we're going to get together. Charlie is such a fun and interesting guy, so I'll be looking forward to that! It was an absolutely beautiful day and evening here yesterday, I was inside most of the day, but eventually made it outside. Well, I hear my bed calling my name. and my drooping eyes are telling me to stop and get this out the door, so I will! I hope you have a Wonderful Wednesday!
EverBank World Markets