In This Issue.
* Dollar's mini-rally stalls.
* Norwegian 2nd QTR GDP beats expectations!
* Eurozone Flash PMI's are weaker.
* SDR's in our future?
And Now. Today's A Pfennig For Your Thoughts.
Fed Meeting Minutes Are Looked At Differently.
Good Day! . And a Tub Thumpin' Thursday to you! Get the brooms out! The Cardinals finally swept a team instead of just winning the series! Now that looks more like the team I expected to see this year! But before I go out and buy playoff tickets (not that I do that anyway) I have to temper this enthusiasm because this team has found a way to fall right back into a funk all year. Maybe, this time they won't, eh? Just wishin' and hopin' and thinkin' and prayin'!
Well. Let's see. The Fed's FOMC Meeting Minutes or FFMM, as my friend the Mogambo Guru would put it, printed yesterday afternoon. Recall that I said yesterday morning, that the markets were looking forward to hearing what Janet Yellen had to say about what she called a “slack in the labor markets”. I kidded that she would not deliver the goods, Hehehe. The FFMM really just confirmed that the timing of the first Fed Funds rate hike would be data dependent. Of course they (Fed members) didn't bother to tell us what “data they would be looking at”. So, we are left to presume that “real labor markets data” and “real inflation data” would be key. Given the hundreds and I mean hundreds of economists that the Fed employs, I would have to think that they don't let the wool get pulled over their eyes by the cooked and massaged BLS reports.
There was one member, Charles Plosser, that voted against the “forward guidance” of the current Fed Funds rate will likely be appropriate for a considerable time after the asset purchase program (QE) ends. So, in the end, it's up to each individual if you read that rates are on hold for some time to come, or that they will rise sooner than expected. I've seen Barclays say that the FFMM suggest rates will rise quicker than expected, and RBC says, rates are on hold from what they read in the FFMM.
So, with no clear direction, the mini-rally that took place yesterday, mid-morning, for the currencies faded. Yes, after all the talk of a strong dollar rally yesterday morning, things began to turn around min-morning, and even Gold, which was getting whacked earlier in the morning, saw a positive figure briefly. But as yesterday's trading books were handed over to Asia for the overnight session, the mini-rally faded, and now this morning, we're looking at a mixed bag-o-currency moves. And the moves are small, except. The Chinese renminbi / yuan saw a large weakening overnight by the Peoples Bank of China (PBOC), the Indian rupee, which saw a larger than usual downward move, and Gold, which is down $11 this morning.
For the most part, the little dogs are getting off the porch to chase the dollar down the street. But not getting too far from the porch! We'll have to see how long that lasts. I see that James Rickards (Currency Wars, and When Money Dies) is calling for SDR's (special drawing rights) that the IMF issues, to become the new currency dujour for the world. WOW! The Daily Reckoning (www.dailyreckoning.com) had a lot of information on this scenario yesterday, and I suggest you go and read it all the way through. I do have a snippet here from James Rickards.
“Leading the way, says Rickards, will be the International Monetary Fund. “The task of re-liquefying the world will fall to the IMF because the IMF will have the only clean balance sheet left among official institutions. The IMF will rise to the occasion with a towering issuance of SDRs, and this monetary operation will effectively end the dollar's role as the leading reserve currency.”
So, I know, Inquiring minds want to know what a SDR is. Well, my friend, Addison Wiggin thoroughly explains this mechanism in his essay in the DR yesterday. So, see, another reason to read it! But. here is a snippet, as long time readers know that I've explained SDRs to them before. And that they've been issued 3 times in the past due to dollar problems.. 1969, 1979, and 2009. Participants like Goldman Sachs and Citigroup have a supply of SDR's (but of course!)
Here's Addison. “Not that you'd use it to buy a gallon of gas or a loaf of bread. “SDRs will perhaps never be issued in bank note form and may never be used on an everyday basis by citizens around the world. But even such limited usage does not alter the fact that the SDR is world money controlled by elites.”
So, does this happen next month, or next year, or in 10 years? Well, if you ask me for my opinion on this, and it would be just that, my opinion, which I could be wrong, I would say that it's not a 10-year event. I would say by 2017. WOW! Chuck, you've really gone out on a limb here, are you sure you know what you're doing? Well. Let me say this. I've never, before thought that the world would be covered by one currency. And I still don't really think that will be the case, unless China gets a say in what currencies make up a SDR, and China will want a prominent component to be the renminbi. Otherwise, they'll not go along with this new scenario, and they'll continue to fight the IMF, with their new BRICS Development Bank. Besides, the Chinese know all too well, that the IMF is controlled by the U.S. So, their suspicions of the SDR will have to be overcome.
But this all plays well in the sandbox with what I've said about the back side of the hurricane coming ashore in the U.S. and when it does the problems will be far worse than in 2008. Why do I say that? Well, the backside of a hurricane is always worse, right? And I just don't see how Banks that were too Big To Fail in 2008, but are now larger with even more derivatives are going to deal with another financial meltdown. But really, go to the DR and read Addison's essay on SDR's. you'll be flabbergasted! And then you'll be a happy camper that Gold is down $11 this morning!
OK. That's some heavy stuff Chuck, are you OK with lifting that? Sure. no worries. But let's talk about some other stuff, for I'm worn out! Yes! Well, the Eurozone regional Flash PMI's (manufacturing indexes) started coming in this morning, and the composite score was a 52.8, with the expectations at 53.4.. Germany, the largest economy in the Eurozone, caused this downward movement as their PMI was 54.9, slightly above expectations, but down significantly from the previous month's 55.7 print. The euro this morning is basically flat, which is surprising to me, given the color of the flash PMI's.
One of those little dogs. The Norwegian krone is pushing the appreciation envelope this morning after Norway printed their 2nd QTR GDP, which grew at 1.2%, after a .5% gain in the 1st QTR.. The 2nd QTR figure of 1.2% beat the expectations of .6%… The krone has been a very disappointing currency in 2014, and this report and subsequent currency move, seem to be telling me that things are going to get better going forward in Norway.
The U.K. printed their latest Retail Sales for July, and July beat expectations and June's result! U.K. July Retail Sales grew .5% (recall that in June they fell .1%), but even this upbeat report isn't saving the pound from getting sold this morning. The downward move is small, but did move the pound below the 1.66 handle for the first time since earlier this year. and then it was on the way up!
I guess the Gold Traders thought they saw something in the FFMM yesterday to lead them to believe that Gold should get sold this morning. I personally didn't see anything to make me believe that rates are going higher sooner than expected, but. then I don't think the Fed has the intestinal fortitude to hike rates right now, not with them holding $4 Trillion in bonds that would lose value if rates rose. But, it's not about fundamentals any longer folks, except when it makes sense to point to them. It's all about trader sentiment that's derived from news, and Central Bank messages. But that will all change when the you-know-what hits the you-know-what.
The Industrial metals of Silver, Platinum, and Palladium are mixed today, with Silver and Platinum down, and Palladium booking gains. the selloff in Palladium was swift and deep the past two days after getting within spittin' distance of $900. So, it's good to see this metal bounce back!
You know. I tell you all the time about how I follow Koos Jansen on Google+. Koos Jansen is “the man” when it comes to figuring out what China is doing with Gold, production and imports. China doesn't really report on this stuff, and the last time they did was 2009! Well, Koos Jansen recently issued a report saying that it's his best estimate that China now holds 14,000 tonnes of Gold! ARE YOU KIDDING ME? WOW! 14,000 tonnes of Gold makes the U.S.' supposed holding of 8,133 tonnes of Gold, pale in comparison. So, while the price manipulators were whacking Gold's price lower, China was backing up the proverbial truck.
And it's not just China that's backing up the proverbial truck, folks. Russia keeps adding to their Gold holdings. This morning, Ed Steer is reporting that Russia added 300,000 troy ounces of Gold to their reserves in July! And countries like Turkey, and Brazil are getting in on the action too! Does this tell you something? Well, let's see if we agree, for it tells me that Central Banks see the backside of the hurricane coming, and that means they had better have Gold in their reserves. What's good for the goose, right?
The U.S. Data Cupboard today has some 2nd Tier data to print. Like the usual fare on Thursday, the Weekly Initial Jobless Claims, which last week climbed back above 300,000, and will most likely stay there today. In addition, the Markit US PMI, which is not to be confused with the US PMI. Markit has begun to attempt to show the markets that their data should be used with more confidence in the markets. One piece of data that I'll actually look forward to seeing is the leading index for July. And then Existing Home Sales for July, which look as though they'll be down. But all in all, nothing here to really move the currencies and metals today..
For What It's Worth. Well, the hits just keep coming. The Hit Parade this week has Bank of America being added to the roster of mega-banks that have had to pay up for their role in the sale of mortgage backed securities that they knew were bad back before 2008. Here's a snippet of the story that can be found on Yahoo finance.
“Bank of America has reached a record settlement of nearly $17 billion to resolve an investigation into its role in the sale of mortgage-backed securities before the 2008 financial crisis, officials directly familiar with the matter said Wednesday.
One of the officials, who spoke with The Associated Press on condition of anonymity because the announcement isn't scheduled until Thursday at the earliest, said the bank will pay $9.65 billion in cash and provide consumer relief valued at $7 billion.
The deal is the largest settlement arising from the economic meltdown in which millions of Americans lost their homes to foreclosure. It follows agreements in the last year with Citigroup for $7 billion and with JPMorgan Chase & Co. for $13 billion.”
Chuck again. But still only one trader has been sent to jail through all of this. And you have to think about these fines like this. If the bank agrees to pay billions in fines, just how much did they make in the first place on the sale of the bonds? I would think it was far more than what they had to pay, how about you?
Currencies today 8/21/14… American Style: A$ .9280, kiwi .8385, C$ .9115, euro 1.3265, sterling 1.6585, Swiss $1.0950, . European Style: rand 10.7145, krone 6.1560, SEK 6.9085, forint 237.05, zloty 3.1605, koruna 20.9810, RUB 36.33, yen 103.85, sing 1.2505, HKD 7.7500, INR 60.67, China 6.1632, pesos 13.11, BRL 2.2615, Dollar Index 82.25, Oil $92.75 (boy oil's price sure has taken a ride on the slippery slope, eh?) 10-year 2.44% (creeping higher again), Silver $19.39, Platinum $1,421.81, Palladium $876.00, and Gold. $1,280.72
That's it for today. Whew, some heavy stuff to think about today, but it's all there folks. The dollar is in trouble, and it's all because of the debt buildup. I told you all 13 years ago, that this is what would become of a debt buildup, who was listening then? The summer heat has returned to our area, and I'm glad about that. I hear that the Farmer's Almanac is calling for a very bad winter for 2/3rd's of the nation. YIKES! I hope I'm in the 1/3rd that is warm! Jack Johnson is singing his song: drink the water on the IPod right now. Jack Johnson is one of the few “newer artists” that I like his music. Rain, thunder, and lightening came through our area last night, the lightening show was impressive. Well, it's time to get off the bus here, and so, I hope you have a Tub Thumpin' Thursday!
EverBank World Markets