In This Issue.
* Dollar fights back yesterday
* But currencies try to rally again this morning.
* Foreign Investment flows into India soar!
* Money can't buy you love, but Gold can!
And Now. Today's A Pfennig For Your Thoughts.
Eurozone Starts Negotiations With A Tough Stance.
Good Day!… And a Tub Thumpin' Thursday to you! I'm greeted this morning with a song from the late 70's while Chris was dancing at a mixer to disco music, by Ambrosia. That's How Much I Feel.. Yes, there was “other music” being made besides disco in the late 70's. Chris and I always have fun claiming the other one liked disco music. But I KNOW I didn't! Now, Chris? I think the possibilities are great!
Remember me whining and complaining about the lack of volatility in the currencies the past 3 to 4 years? Well, I whine no more! Volatility has returned, and the leader of the pack is the euro, which is trading with the most volatility that it has seen since 2011! And that volatility has been brought to the euro by the goings on in Greece. Funny, isn't it, that the last time we visited problems in Greece it was 2011. Hmmm.
So, since the euro trading is all about the goings on with Greece, we might as well take a stab at those goings on, eh? Well, the rug was pulled out from under the euro's rally yesterday. After a good start to the day, the news from the Eurozone / Greece meetings became very dark, and pulled the rug with a quick, strong yank! So for those of you who want to get into all this drama coming from the Eurozone, I'll get into it. For those of you who could do without it, because life is so full of drama on a daily basis, go on and skip ahead.
At its non-monetary policy meeting yesterday, the ECB's Governing Council decided to lift the waiver that allowed bonds issued or guaranteed by the Greek government to be eligible at the Eurosystem's refinancing operations (you know the LTRO's we've discussed and other forms of refinancing that is used) despite their sub investment grade rating. As a consequence, such bonds are not eligible anymore as collateral to the ECB's regular liquidity operations, starting from the maturity of the current main refinancing operation on February 11.
So, the Greeks have to go back to the drawing board, and figure out if they want loans or not, because if they do want loans, and they'll run out of money by the end of this month, they'll have to accept and maintain austerity programs. The news on the Bloomberg this morning, say the Greeks are going to keep their “anti-austerity” talk. YIKES! Obviously, these are the opening salvos being thrown out to see where the negotiations start, but to me, this is going to get ugly, folks. There are other things going on, that really get pretty hairy with their description of what's going on, but in essence, this main point that I've discussed here, is what it all boils down to. So don't let all that other stuff, about eligible or non-eligible get in the way of what's important here.
The euro got whacked on this news, but in reality, I would ask why? Here is a governing body that represents 17 countries and they decided that one country has not done anything close to what they were asked to do, and now wants more, and the governing body, decided to say “no mas”. We won't accept your bonds any longer, unless you agree to adopt our terms. The great 70's rock group, Foghat, had a song called. Take it or leave it. Take it or leave it, tell me what you're going to do.. Take it or leave it, now the choice is up to you. I can't wait until tomorrow, tomorrow may be too late. take all the sorrow, I can't wait!
I bet you're wondering, where the heck does he come up with these bands? Foghat? Ahhh, grasshopper, Foghat songs were the soundtrack of many a party in the 70's. Slow Ride, Fool for the city, Drivin' Wheel, and so on. So there's your Rock history for today..
A changeup was badly needed folks. Don't you agree? Today. believe it or don't, the euro is rallying, along with the Aussie dollar (A$), N.Z. dollar / kiwi, Norwegian krone, and well, heck most of the currencies except the Chinese renminbi, and Gold. With the renminbi weaker this morning, what does that indicate the performance of Indian rupees will be? That's right! If you were paying attention in class yesterday, I told you that these two currencies (renminbi & rupee) should in my opinion trade together, but in recent trading they move in opposite directions. So that means the rupee is rallying today.
I have to say that one of the first things I check each morning, are the prices of Oil, Gold, the 10-year Treasury and the euro. And this morning, I noted that the price of Oil had dropped again, losing the $50 handle, making the two-day run in Oil earlier this week a thing of the past, and I thought to myself, that the petrol currencies must be under pressure. But then when I switched over the full currency screen I was stunned and amazed to see not only the Norwegian krone rallying, but too the Russian ruble, Canadian dollar / loonie, Brazilian real, and so on. So, what gives with that? The price of Oil drops, but the petrol currencies rally?
Well, I'll tell you sometimes you get ½ the answers and have to live with it. and this is one of those times. So, let's just move along here, there are not the droids we're looking for. Getting back to the Indian rupee for a moment. I saw some stuff on the Bloomberg this morning regarding investment flows to India, which would go a long way toward the rupee rally. And investment flows to India and Indian Gov't bonds in January were the biggest since last July. Recall that last July we had the euphoria in India about a new PM.
For those of you keeping score at home, foreign investors bought $464 Million more rupee-denominated bonds at the auction yesterday, and in January the total was $3.3 Billion! The yield on the 10-year Gov't bond is around 7.7% (for institutional buyers) That's nearly 600 Basis Points greater than the same tenor U.S. Treasury. Sure, India is no match to the U.S. as far as size, strength, and safety, but. 600 Basis Points would certainly make me think twice about opting for an investment in India. Now, I'm not saying you should go right out and buy Indian bonds. I'm simply pointing out why the foreign investment flows into India are strong right now, and when that happens, the rupee should be the beneficiary.
There's a report out this morning from Citigroup regarding Denmark, and I have to say I love it! Citigroup says that it's unlikely that Denmark will scrap the peg to the euro. So, wait a minute Chuck, didn't you say something opposite to that in the Daily Reckoning? (www.dailyreckoning.com) Well, thank you for being on top of this! Yes, I did say something opposite of that in the Daily Reckoning, but. You know me. Citigroup has probably dozens of researchers that contributed to this report, and here it's just little old me.. So, when someone says something opposite of what I've said, I take it as they read what I said, and decided to prove me wrong. Yes, it's a very myopic viewpoint, but what the heck! Now we have to wait-n-see who turns out to be right.
Well, Gold can't seem to find a bid again this morning. UGH! The Beatles are singing “Money can't buy me love” on the iPod, right now, and that may be true, but I bet Gold can buy you love! HA! And then that song was followed by Pink Floyd's song: Money. strange how that all came about, eh? Money, so they say, is the root of all evil today. Notice they didn't sing: Gold is the root of all evil today! Silly stuff, I know, but so is watching the price manipulators take the price of Gold lower.
Ed Steer's daily letter just showed up in my email box, and clicking on it, I see the headline is: “Buy Gold and Short Federal Reserve, Says Marc Faber Once Again!” Have I ever told you the story about me sitting on a panel at the New Orleans Investment Conference, the granddaddy of all investment conferences, and this is the first time I ever met him. I was totally impressed with his ponytail, and then at one point of the discussion, he even told the crowd that they should listen to me. So, now when I see something he has written or a video interview, I click on it immediately, for this guy must know what he's talking about, he told people to listen to me!
The U.S. Data Cupboard is gearing up for tomorrow's Jobs Jamboree. Just the usual Tub Thumpin' Thursday stuff for us today, like the Weekly Initial Jobless Claims, we'll see if last week's drop was a “true drop” or one that was a result of the week being short a day. Yesterday's Data Cupboard, printed a weaker than expected ADP Jobs report. Hmmm. 230,000 was expected and only 213,000 printed. Hmmm.
On a sidebar. I had the TV on yesterday while I was doing some reading, and the funny Geico commercial with Pinocchio as a failing motivational speaker was on, and it made me laugh, and immediately my mind began thinking about this. Pinocchio is asked to be a motivational speaker to countries.. And he begins by pointing to a country, like Japan, and saying “and you have a strong economy” and his nose grows, then points to the U.K. and repeats “you have a strong economy” and his nose grows, and then points to the U.S. and says, “I really see potential because of your strong economy” and his nose grows a foot! Now, tell me how many people would have thought of that?
For What It's Worth. I have something different for you this morning. Just something else to think about. Thanks to dear reader Bob for sending along to me, and you can read the whole article here: http://www.theguardian.com/world/2015/feb/04/japanese-bank-introduces-robot-workers-to-deal-with-customers-in-branches
“Japan's biggest bank is preparing to unveil robot employees with a human touch.
Nao, a 58-centimetre (1ft 11)-tall humanoid developed by the French company Aldebaran Robotics – a subsidiary of the Japanese telecoms and internet giant SoftBank – will begin work on a trial basis at one or two branches of Mitsubishi UFJ Financial Group from April.
Depending on his performance, more robots could appear at other branches in the coming months.
Equipped with a camera on his forehead, Nao is programmed to speak 19 languages. He analyses customers' emotions from their facial expressions and tone of voice, enabling him to greet customers and ask which services they need.
The 5.4-kg robot, who was “born” in Paris in 2006, lived up to his billing with a faultless interaction with an English-speaking customer, during a presentation in Tokyo this week.”
Chuck again. WOW! Robots in bank branches! I doubt that it catches on here for many years, but in my opinion, if I was concerned about online banking before, I wouldn't be now! Where's a good online bank I hear you asking? Ahem. you're reading this letter that's sponsored by such a bank!
To recap. Well, the playing nicely in the sandbox ended up with some sand being kicked in the faces and kids crying and pointing fingers at who started it. Germany opened the negotiations with Greece by dropping Greek bonds from the lending facility (LTRO) and the Greeks answered by saying they were keeping their anti-austerity stance. Needless to say the euro got whacked and led the rest of the currencies lower yesterday. But today is different, and the currencies for the most part are rallying, led by the euro. The renminbi and Gold are down today, while the rest of the currencies dance.
Currencies today 2/5/15. American Style: A$ .7805, kiwi .7390, C$ .7980, euro 1.1430, sterling 1.5245, Swiss $1.0780, . European Style: rand 11.4205, krone 7.5425, SEK 8.2600, forint 269.45, zloty 3.6520, koruna 24.2915, RUB 67.26, yen 117.35, sing 1.3460, HKD 7.7525, INR 61.73, China 6.1366, pesos 14.79, BRL 2.7295, Dollar Index 93.94, Oil $48.98, 10-year 1.77%, Silver $16.94, Platinum $1,246.48, Palladium $791.50, and Gold.. $1,260.22
That's it for today. It's a downpour outside this morning, so no going out to see the ocean while I wait for the review for me this morning. This is the first day that it's rained in the early morning since I've been here. And it's pouring outside! So, how is your tax accounting going this year? Sorry to bring up such a nasty subject, but it something that has to be done once a year for most, so we might as well face up to it! Mine is not coming along too well, but that's OK. it's always a last minute thing with me! I have no idea what I started talking about that. UGH! I guess I had a pain somewhere and that reminded me. HA! Well, it was announced yesterday that two more baseball teams will play close to me down here. The Astros and Nationals are moving near here, which is a good thing. I had to laugh right now, I just saw a LinkedIn message that was featuring the story I had for yesterday from the CEO of Gallup, talking about how the Unemployment Rate is a fabrication. So, I run it one day, and LinkedIn runs it the next day. Hmmm. that has to be a co-inkee-dink! Emerson Lake and Palmer (ELP) is playing their song: Lucky Man, on the iPod right now, this was the first song I remember hearing a synthesizer being played. I used to play this song on my guitar, so those song are always special for me to listen to.. And with that. it's time to go! I hope you have a Tub Thumpin' Thursday!
EverBank Global Markets