In This Issue.
* Currencies attempt to gain.
* Pointing out the truth in data.
* Norges Bank & SNB meet this week too.
* What happened in June 1933?
And, Now, Today's Pfennig For Your Thoughts!
FOMC Dominates News & Markets.
Good day. And a Marvelous Monday to you! I hope everyone enjoyed Father's Day yesterday. The day began with rain here, but by early afternoon, the sun came out, and it turned out to be a glorious day, weather-wise. The older kids with their kids were at the house to celebrate Father's Day with me. Little Delaney Grace was confused when I said Happy Father's Day to her. I explained that it was the day's name. Like I could have say Happy Sunday to you. And I think she finally got it!
There's a G-8 meeting going on in Northern Ireland today. The U.S. president is there. More tax dollars at work, folks. You know this is good, because strong policy usually gets derived from these G-8 meetings. OK, I'm laughing so strongly right now, I can't hold it in. OK. a little humor to start our day and week!
The currencies tried to maintain their focus on Friday. The bias to buy dollars had been chipped away at during the week, and it was time to close the week with some gains. The currency traders weren't in the mood to see too much read into the currency gains for the week, so they were pared back a bit. This morning, we're seeing some mixed trading as the euro is seeing some minor slippage, but the Aussie dollar (A$) is up 1/2-cent.
OK. Well, remember Friday I told you that two of my fave pieces of data would print? And print they did, once again telling me that the economy is barely getting along. Industrial Production for May increased only .1%, following April's -.4% decline, and Capacity Utilization dropped to 77.6%, from 77.8%… I know this doesn't really look like a huge drop, but when the number drops, it's not a good thing for the economy. As a contrast, when the economy was cooking with gas in 1997 this number was 84.9%
Have you been noticing the rise in the price of Oil this past week? Actually the past two weeks has seen the price of Oil rise from $92 on 5/31 to $98.56 this morning. The geopolitical fears from Syria and the weaker dollar last week, were key ingredients to Oil's rally.. And as usual, the petrol currencies that include: Norway, Brazil, Russia, Mexico, Canada, and so on, see some bids tossed their way. Well, that is most of them do. The Brazilian real is the except to the rule here, as the Brazilian Gov't is seeing what happens when they treat the markets like rented mules. (no worries no animals were hurt here!) The markets having been treated badly the past two years, are very leery of the Brazilian Gov't's requests to “come back”.
Well. The much anticipated FOMC Fed Meeting takes place this week. There's been so much hype injected into this meeting that the markets are having a difficult time catching their collective breaths. There's been a ton of long dollar positions taken in the past month, waiting for the next Fed Meeting, and if things go the way I suspect them to go this week, we'll see a lot of unhappy long dollar positions holders, who will have to reverse those positions, or hold them with losses until the next Fed Meeting!
OK. so I let the cat out of the bag I guess with that statement. So, here I go out on the big fat limb, and say that Big Ben Bernanke is not going announce Fed Quantitative Easing (QE) tapering. I did an interview on the radio on Friday and I spent a long time talking about the Fed Chairman's statement at the last meeting. that some tapering could be seen should the economic data show improvement. And then I listed the economic data that had NOT improved, and in fact gotten worse since then. So. that's what I'm hanging my hat on with my call for a dovish statement from Big Ben on Wednesday. For if he decides to go ahead and announce some tapering, in the face of all the weak data that has printed the past two months, then I'll be chanting, liar, liar, pants on fire, hang them on the telephone wire!
But as I said, I think Big Ben is a man of his word. (too bad I don't agree with most of his words!) I saw where my friend, John Mauldin, wrote about the legend economist, Hy Minsky, in his weekly newsletter last week. The famous Minsky Moment was on display in his newsletter. let's check out how John interjected Hy Minsky into his letter.
“The longer the Federal Reserve sticks to its current policy, the more likely that policy will end in tears. Call it the Revenge of the Minsky Moment.” – John Mauldin
OK. let's talk about something other than the Fed Reserve. The Swiss National Bank (SNB) and the Norges Bank (Norway) will also meet this week. The Swiss franc's strength in recent weeks has coincided with the euro's rise, so the SNB won't be so concerned, although I'm sure seeing the cross to the euro at 1.23, doesn't give them a warm and fuzzy. The SNB has backed off their whispering campaign to implement negative interest rates in an effort to push money out of the franc. I'm not saying that the SNB won't implement negative rates, I mean they already have pushed interest rates to zero, and placed a cap on the franc. But for now, I think they'll pass on the negative rates talk.
The Norges Bank was once thought to be on the rate cut tracks, but that has passed. Although the Norwegian economy is seen slowing as we head to the 2nd Half of 2013. The housing bubble still holds court in Norway, over the slower Oil production and manufacturing sectors. And that's fine with me. keep rates from falling.
The Chinese renminbi continues to defy odds of a halt in appreciation, by continuing to book new record high VS the dollar, after new record high. 6.1598 is the reference (fixing) rate for the renminbi / yuan this morning. On this date in 2010, the rate was 6.8275. That's 9.78% gain in the past 3 years! I know that the daily moves in this currency are not what most investors want to see, as they are slow and methodical, but come on!
I hope you saw Mike Meyer's take on China in the Sunday, Pfennig & Pfriends. For long time readers, nothing there that I haven't said on numerous occasions in the past, but good to get it out there time and time again, just to get it through to some people that just don't believe.
Gold Imports remain a real problem for India's Trade Deficit. May's Trade Deficit rose sharply from $16.4 Billion to $20.1 Billion, and was mostly driven by Gold & Silver imports, which increased 90% year on year. The Indian rupee has recovered a bit from its record low level of a couple of weeks ago, but most of the recovery can be attributed to intervention by the Reserve Bank of India (RBI). I still think that the time to buy something is when nobody else wants it, if only for a tactical holding. And again, Dr. Marc Faber says that India is the best country in Asia for investment. (remember, China is in Asia) So, he must know something that I'm not seeing at the moment.
I see where Apple received U.S. Gov't requests for data on up to 10,000 accounts. Uh-Oh! That's me, folks. I guess I won't be surprised to see the guys with dark sunglasses show up at my house, requesting I go “for a ride” with them. And to all my friends, that I shared my thoughts on stuff, sorry that you're on my contacts list.
I see that sales of the book 1984, are soaring again. Interesting.
Boy, did I really mess things up on Friday. I had made a note to myself to talk about an interview I was doing Friday afternoon, and direct you to the website so you could listen live. But totally forgot about it until it was mid-morning, and the Pfennig had been out for a couple of hours! UGH! So. for those of you who would like to hear what I had to say, you can click here, and then click on the archives and find me from Friday. Click here. If I can twist a few arms down in Jacksonville, I actually can post the interview on our website. OK. who wants to help me with that, down in JAX?
I just heard the great CSN song: Suite Judy Blue Eyes. “It starts out like this: It's getting to the point, where I'm no fun anymore” Boy does that hit a nerve with me! Oh well. I try.
For What It's Worth. On This Day in 1933, The U.S. Confiscates Gold. I found this on Zerohedge.com this past weekend. For those that like history. here you go!
“Roosevelt had only been in office for 101 days and while there was broad bipartisan support for inflationary policies in Congress, it's safe to say that most of those who voted for FDR never expected him to confiscate private holdings of gold coins, bullion, and certificates.
Roosevelt called the measure a temporary one (it wasn't), and he followed it up by invalidating gold clauses in private contracts that obligated payment in gold dollars, which had the effect of devaluing the assets of bond and contract holders. Many of these hoarders and slackers purchased gold as a hedge against the (Fed-fueled) inflationary boom of the 1920s and then hung on to it during the Hoover years when his crazed and unprecedented interventions in wages and prices caused a normal market correction to devolve into a depression. Why would they trust Roosevelt anymore?
They were smart not to. By January 1934, Roosevelt increased the dollar price of gold from $20.67 to $35, thus devaluing the dollar by 70 percent while increasing the value of gold that the government now owned.”
Chuck again. Yes, I'm asked about whether The Gov't would think about confiscating our Gold again, all the time. My usual response is that “While I wouldn't put anything past our Gov't, just as the Chrysler bond holders, I don't think this something that makes sense any longer. You see, in 1933, Gold was a part of our money. The dollar was tied to Gold, and the Gov't wanted to run up deficits, but to do so they needed more Gold. So they confiscated it from the citizens. But Gold, as you know, is no longer a part of our money, if the Gov't wants to run up deficits, and trust me they do, they just do it, without remorse. So, no need to confiscate…
To recap. The currency rally on Friday held on most of the day, but the gains were pared back as we headed to the weekend. This morning is a mixed bag of results. There's not much direction out there, as the markets are all tied to the FOMC meeting this week on Wednesday. Chuck went out on a limb and said that Big Ben will remain dovish this week.
Currencies today 6/17/13. American Style: A$ .9615, kiwi .8075, C$ .9845, euro 1.3345, sterling 1.5720, Swiss $1.0835, . European Style: rand 9.8780, krone 5.7230, SEK 6.4540, forint 217.85, zloty 3.1715, koruna 19.2740, RUB 31.64, yen 94.70, sing 1.2535, HKD 7.776, INR 57.85, China 6.1598, pesos 12.67, BRL 2.15, Dollar Index 80.70, Oil $98.56, 10-year 2.12%, Silver $21.84, and Gold. $1,384.51
That's it for today. Well June is half over now. Soon we'll be talking about the 4th of July. Crazy! The year will have turned the page to the 2nd half of the year, and that's just nuts! But then, it seems to me like eons that I was at spring training! UGH! My beautiful bride and Alex are still gone, so things around the house are different. I just found out that I'll be speaking again at the best conference around, The Agora Investment Symposium in Vancouver, B.C. the last week in July. I totally dislike going there, and coming home, but while in Vancouver, I just love it! The Conference is well worth the travel, folks. If you've never been there, you should look into it right away, this conference sells out! You can check it out here.
Now let's go out and make this a Marvelous Monday, and Wonderful Week!
EverBank World Markets