In This Issue.
* Chuck thinks Fed will remain dovish.
* Currencies give back some of their gains.
* Chuck gets on his soapbox regarding sanctions.
* Chuck does know Jack!
And Now. Today's A Pfennig For Your Thoughts.
Everybody Has Their Own Take On The Fed's Meeting Minutes.
Good Day!… And a Tub Thumpin' Thursday to you! Well, this is the first Thursday in what seems to be a month of Sundays that I somewhat feel like Tub Thumpin' with you today! The day, right now, could go either direction, but. and I know this will make all of you who tell me all the time to quit eating sugar mad, our Little Christine is bringing me a cake donut this morning, and if the past history plays out, the direction I go today will be a good one!
OK. First things first this morning. Yesterday, I said that the Keystone Pipeline Bill had been defeated, but then I should have gone back to the “I'm a Bill” explanation I made last week, and seen that what vote failed to do, was garner 2/3rds votes so that if the President vetoed it, they could have enough votes to override the veto. I had a dear Pfennig Reader send me a note on that, and for that misstep I apologize. But in essence, it was defeated, because now the president can veto it without fear of the Senate going around him.
The Politics of this country get me so riled up at times. But there's nothing much I can do about them, so, I get mad, yell at the walls, and move along. It's a good thing this is not a political newsletter. They would have probably thrown me in jail by now, you know, so I could spend time with all the financial guys that caused the financial meltdown. Wait! You're telling me that only 1 of them has gone to jail? Again, I shake my head in disgust.
OK. The Big News yesterday was the FOMC's Meeting Minutes (FOMCMM). I've read quite a few reports on the FOMCMM, and I have to tell you that there are just about as many “takes” on what the FOMCMM had to say. The currencies, took what the minutes had to say as “dovish”, which meant the dollar remains with .25% internal rates (near zero!), and nothing changes as far as the outlook. The euro rallied, Gold rallied, and so on.
Speaking of Gold, you should have seen the whipsaw action of the shiny metal yesterday morning. Recall, by the time I was signing off yesterday, Gold had slipped over to the negative side of the ledger, but only by a couple of bucks. Then came a story that the Swiss people were turning away from the Yes vote on the Swiss Gold Referendum, and Gold started sliding, and sliding fast, and within 20 minutes, it was down $20 on the day. Then came the whipsaw, and Gold turned around. And within another 20 minutes it was back to a couple buck gain on the day, on news that Gold open interest had risen to a 22-month high. I was looking for a neck brace at that point!
OK, back to the FOMCMM. So, here's my take after reading tons of reports on what people thought the minutes were telling them. I think right now that the Fed members are scared of what's going on in the world's economies, the strengthening of the dollar, and the weakening of inflation here in the U.S. If you read carefully, you begin to get this feeling about these things. When a couple of Fed members bring up something, and then discussion stops, it doesn't mean they just shrugged it off. It's duly noted. And with Fed watchers like me. I'm a Fed watcher, I'm a Fed watcher. No wait! Anyway, with me, you not only get the real story other than the one weaved by the highly influenced media, but you get fun, laughter and Tub Thumpin'!
I think the WSJ came closest to my thoughts let's listen in to what the WSJ had to say about the FOMCMM. “Federal Reserve officials were preoccupied at an October policy meeting with tumult in financial markets, weak conditions abroad and risks that low inflation could drift lower, but they forged ahead with a decision to end their bond-buying program because the U.S. economy and labor market appeared to be on course for further improvement.
Participants at the Oct. 28-29 meeting “pointed to a somewhat weaker economic outlook and increased downside risks in Europe, China, and Japan, as well as to the strengthening of the dollar over the period,” according to minutes of the session. “However, many participants saw the effects of recent developments on the domestic economy as likely to be quite limited.”
Chuck again. There was a command performance for me yesterday, as our Clearwater, Fl. Branch requested an economic update from me mid-morning, and we did it via a video hook-up. At that time the markets were all waiting for the FOMCMM, so the discussion soon turned to other things. It was fun doing it, and I got to see some of the people in the branch! But, this kind of video link hook-up seems to be the way everything is going. I remember, years ago, if I were to appear on TV, I would have to go to the local TV station, and stand in front of a HUGE camera. I think in the future I'll just have to sit at my desk and talk into the screen. We've come a long way baby!
OK. Well, as I said above the currencies and metals thought the FOMCMM were dovish, and they rallied in the afternoon trading. Overnight, they've given back some of those gains, but the moves overnight are not that huge. Gold has decided to add to yesterday's recovery and is up nearly $11 this morning, but again, not that I want to remind us of these dastardly things, but the U.S. trading desk participants haven't arrived yet.
The Indian rupee has really been disappointing in its performance to me lately. But, then again, I fully expected new PM Modi to have taken the country by storm with new reforms, and changes to unlock the Indian economy by now. I think the markets carry that same disappointment, and therefore, they have taken their frustrations out on the rupee. So, there's always opportunity for the rupee to turn-around, but the longer you wait, the more difficult the turn-around becomes. That should be a memo to Mr. Modi, for every market participant! But who among us don't believe that India is going to turn-around? Well, if that's the case, then there's no question that looking to buy rupees at this much cheaper price is worth the price of admission! And the rupee finally put an end to its slide this week, with a nice performance overnight, now if it can hold on and add to that.
The Canadian dollar / loonie is hanging in there, considering the results of the Keystone Pipeline vote. I would have thought the damage to the loonie to be more than what has been suffered so far. But then again, this currency likes to show resiliency all the time. So, I shouldn't be too surprised! You know, there will be another attempt at some point to get this Keystone Pipeline through the Senate, so the loonie can always hold on to that hope!
The euro is down about ¼-cent this morning, nothing big, but remains above 1.25 at 1.2530. German Chancellor, Angela Merkel, is speaking this morning, and talking about how the sanctions on Russia were unavoidable. Hmmm, sounds like she's apologizing for them to the Russians, and she can't wait to remove the sanctions, to me. So, let me take an overview of this whole thing. Russia defends its border, and gets sanctions placed on it by the U.S. and Europe and whomever else's arm could be twisted by the U.S. Now, I'm not saying that the Russians are without some blame here, but now the Russian economy is struggling, the Eurozone economy is struggling, and the U.S. economy can't find terra firma. So, remind me again, what were these sanctions supposed to accomplish? For if it was to bring the Russian, Eurozone and U.S. economies to their respective knees, then they certainly were successful. But now it's time to move along here, folks.
I know that quite a few of you will have problems with that, but as long as you present your view politely I'll address it. I learned many years ago, you can't make all of the people happy all of the time.
So, who among us, caught that line above when I was talking about the FOMCMM, regarding the Fed members being concerned with the strengthening dollar? I did, I did! And I've been waiting for you to come back to that, Chuck! OK. OK. calm down. You know, the Fed implemented 4 rounds of QE (4 if you count Operation Twist and Shout) and through it all, they wanted to get inflation higher, and the dollar lower, for they go hand in hand here. But now that their 4 rounds are over, inflation is actually falling again, as measured by their stupid CPI data, and the dollar is strengthening, relatively that is, What to do, what to do? Do you really think the Fed members are going to sit idly by and watch all of what they did the past 5 years, begin to circle the bowl? I don't. And the sooner the markets figure this out, the sooner we can get back to the underlying weak dollar trend.
I just saw a funny (to me that is) story on the Bloomberg. Here it is, let's see if you find the humor in this like I did. “American Pigs Too Fat For Holiday Hams As Farmers Ratchet Up Feed Rations”. Pigs too Fat? That cracks me up!
The Chinese said “enough with the appreciation of the renminbi / yuan!” And therefore a weaker renminbi is with us this morning. I saw something else on the Bloomberg this morning, it was a title stating that China was responsible for 49.4% of the World's Steel Production in Rocktober. China remains the top dog in the World in Steel production posting past months performances of 50.19%, 50.98%, 49.84% and 50.28%… The nearest competition comes from. Japan ( I bet you were thinking the U.S.!) at 6.85%… Shoot Rudy, India is very near to taking over 3rd place from the U.S. The U.S. was at 5.35% in Rocktober, while India posted 5.18%…
I tell you all this just to point out how strong China is economically. Yes, they experience slowdowns, but didn't the U.S. during its hey-days? Why, yes, it did! And that's why I can't ever understand these guys that write about China and say it's going to collapse. They just don't get it.. Slowdown, even recessions will happen. But collapse? Not as long as China maintains their treasure chest of reserves.
The Aussie dollar (A$), which got whacked big time on the drop in Iron Ore prices yesterday, is still feeling the negative effects of that price drop in Iron Ore this morning, albeit much less negative today. Reserve Bank of Australia (RBA) Gov. Stevens, was speaking yesterday, and didn't miss an opportunity to diss the A$, saying that the A$ faces declines going forward. YIKES. But the folks over at Westpac Banking Corp in Australia, don't agree with the RBA Gov., and still maintain what I've been trying to say for weeks now, and that is that the rate differential of Australia will be maintained even as the Fed begins to talk about rate hikes (which I maintain aren't coming soon). Great to see someone else agrees with me. Even if it did take them forever and a day to come out with that thought, leaving me out here on the limb all by my lonesome.
And speaking of yields in the U.S.. Have you noticed that the 10-year Treasury yield seems to be stuck in the mud? So what gives on that? Well, here's my Pfennig to tell you. The Fed stopped buying oodles of Treasuries, thus keeping yields low, a few months ago, with the final purchase of just $15 Billion last month. That means the bonds are slowing getting handed back over to the bond boys. (Yes, the Fed will keep buying to replace maturing bonds, but none of that is happening yet) Well, in the past, when the bond boys didn't like what they saw in the economy they brought yields down. So, is that what they are telling us now by keeping bond yields low, without Fed interference? I do think so folks.
I would mark that up there with the Central Banks buying Gold hand over fist. They see something that everyone else doesn't see coming. So, let's tally it up. The Fed is concerned. The bond boys are concerned. and Central Banks (not western CB's) are concerned. And we shouldn't be? Oh, well, I am, and I will continue to be as long as these FLASHING LIGHTS are blinding me. Hello. Tim? Yes, Tim, I need to talk to you about looking to buy more metals.
The U.S. Data Cupboard had some weaker Housing Starts data for us yesterday. Just another notch in the weak data belt, as far as I'm concerned. Today's Cupboard has the stupid CPI data for Rocktober, and Existing Home Sales which will probably also show weakness, and Leading Index for Rocktober will also grace us with its presence today. The usual weekly Initial Jobless Claims for last week will also print, so a busy day for the Data Cupboard today..
Before we head to the Big Finish today, I wanted to talk briefly about something I said last week that got a big laugh out of the people around the trading desk that heard it. I was talking about the dollar, and how people were viewing it these days, and said it was the cleanest shirt in the dirty laundry basket. And then today, I see in Ed Steer's letter that he quoted someone at TD Securities as saying the same thing! I can't accuse him of being a Pfennig reader because I didn't say it in the Pfennig, until this morning. Oh well. OH! BTW, Ed had an even funnier line this morning saying that the dollar was “the best looking horse in the glue factory”.
For What it's Worth. Well, I found this on Ed Steer's letter this morning which is actually posted at the CFTC's web site. CFTC.gov. OK. remember the CFTC are the regulators for commodities, which includes Gold & Silver. So, keep that in mind when you reading this.
“The U.S. Commodity Futures Trading Commission (CFTC) today launched CFTC SmartCheck, a new national campaign to help investors identify and protect themselves against financial fraud. The comprehensive campaign includes a new website, a national advertising campaign and interactive videos that will help investors spot investment offers that are potentially fraudulent. The new website, SmartCheck.CFTC.gov, unveiled today, is an educational tool that helps investors conduct background checks of financial professionals.
“The CFTC is committed to protecting investors from fraud, and we demonstrate that commitment today with the launch of CFTC SmartCheck,” said CFTC Chairman Tim Massad. “This campaign provides investors with new interactive tools that include the website as well as a targeted advertising campaign and collaborative outreach with allied organizations.”
Over the coming months, the CFTC SmartCheck campaign will include online, television, and print advertising slated to run nationwide and additional outreach efforts with organizations aligned with the CFTC's mission to reduce financial and investment fraud. The campaign will also feature special events to reach investors and encourage them to use the online tools available at SmartCheck.CFTC.gov. In addition to the background-check tools, the SmartCheck.CFTC.gov website includes a range of information for investors, including interactive.”
Chuck again. Well, let me think, how can I say this without being accused of being snarky, which always gets me in trouble? Hmmm. Well, first, good for the CFTC for protecting investors. Fraud is not a nice thing to encounter, and I applaud them for doing this. But. and here's where Gold & Silver come into this discussion, and remember I can't be snarky! So, I'll leave the end of this discussion to you all to fill in. Go ahead be as snarky as you want!
To recap. The FOMC Meeting Minutes (FOMCMM) were the Big News yesterday, and everybody and their brother had their take on what the minutes said. But you can always count on Chuck to give you the downright and dirty meaning in English and he does! The currencies thought the FOMCMM were dovish so they rallied yesterday afternoon, but are giving some of those gains back overnight and this morning. The Data Cupboard in the U.S. is over stocked with data prints today, so strap yourself in for that, and Westpac shows that they are pinning their colors to Chuck's mast regarding the A$… Nice to see!
Currencies today 11/20/14. American Style: A$ .8615, kiwi .7855, C$ .8825, euro 1.2540, sterling 1.5685, Swiss $1.0440, . European Style: rand 10.9955, krone 6.7755, SEK 7.3940, forint 242.80, zloty 3.3615, koruna 22.0495, RUB 46.53, yen 118.15, sing 1.3015, HKD 7.7560, INR 61.95, China 6.1417, pesos 13.60, BRL 2.5610, Dollar Index 87.66, Oil $74.30, 10-year 2.31%, Silver $16.22, Platinum $1,203.63, Palladium $767.75, and Gold. $1,192.77
That's it for today. Except to send out a HUGE Happy Birthday, to my longtime friend, and now colleague, Jack Stapleton. Happy Birthday, Jack! See, when people tell me that I don't know “Jack”, I tell, why yes I do. Jack Stapleton! Jack works on the St. Louis Sports Commission, and he along with the rest of us were disappointed last week, when St. Louis was NOT named as the host of the Final Four for 2017. UGH! We've always been a great host for the basketball tournament, but they chose Phoenix instead. March weather in St. Louis obviously isn't as nice as Phoenix, but Basketball is played indoors! When I was a young man, we used to play basketball outside all year long, and in the winter months, we would have to stop and take the ball inside the convenience store, across the street from the courts, for a while so the air inside the ball would expand and allow the ball to bounce again. We were troopers out there playing no matter how cold it was. Well, no one outside of Missouri is giving my beloved Missouri Tigers any chance against Tennessee on Saturday night. UGH! Oh well, that will make it even sweeter if we can somehow upset them! That Indiana loss earlier this season, the game I attended, is haunting the Tigers all year, as teams and writers don't respect them for losing to Indiana. UGH! OK. It's time to get off this bus today, and now I hope you go out and make this a Tub Thumpin' Thursday!
EverBank World Markets