In This Issue.
* Dollar bias on a handful of currencies.
* Sweden's Nov Retail Sales soar higher!.
* Kiwi continues to gather investors jumping ship.
* Art Cashin shares some thoughts with us.
And, Now, Today's Pfennig For Your Thoughts!
Good Day! And a Marvelous Monday to you! Well. I'm back! That was a nice and much needed vacation for sure. My Christmas was good in that, the grandkids were so cute. A little wild, and loud, but that was to be expected, given the excitement of Christmas. Now, it's on to the New Year celebration, of which we won't be doing anything this year, so the 2014 New Year's revelers will have to celebrate without me this year!
Well, I kind of kept up with stuff while I was at home. Some days I just didn't feel like reading anything! So, I know that the dollar, according to Chris, had the bias to buy for the last couple of weeks, but when I look at the screens this morning, that probably still exists, but not with all the currencies. For instance, the euro was around 1.37 to 1.38 when I left, and today it's 1.3755. The Chinese renminbi / yuan is still around 6.10, and so on. The Dollar Index, which I usually don't give two hoots about but look at it occasionally it about at the same level of 80.30 that is was when I left.
The bias to buy dollars is evident in the Aussie dollar (A$), Japanese yen, and believe it or don't, the Singapore dollar (S$), and Norwegian krone. Which are not components of the Dollar Index, and therefore the reason the Dollar Index doesn't show much improvement. Things could get a little hairy these next two days, given the end of the month, quarter, and year, but for the most part, the position squaring has all taken place by now, and the boys and girls in NY have headed to the Hamptons or South Beach!
Last week, the 10-year Treasury yield pushed to 3%, it sits at 2.99% this morning, as 3% is a real psychological figure. Remember when I told you that our mortgage guys said that a 3% 10-year Treasury yield would equal a 5% 30-year mortgage rate? So, I know that the local mortgage guys are hitting the commercials on TV and radio like a hurricane, but, could that be like a star that shines the brightest before it burns out? I think so. One indicator could be last week's mortgage applications data, which showed the week after the Fed's Taper announcement, falling 6.3%… But it could have also been just as easy to blame it on the time of year, so close to Christmas and all.
I guess what I'm getting at here, is that the housing recovery could be in for a real roadblock folks. And that will weigh heavily on the economy, which is supposedly doing just fine right now. I also noticed last week that Chris mentioned that the price of Oil had risen to $100. It sits at $100.30 this morning, but that's got to be a real psychological figure too, don't you think? $100 Oil, means $4 gallon gas for premium, easy! And in places that are really proud of their gas, watch out! Again. that's not a good thing for an economy.
Oh, and one more thing. Those extended unemployment benefits finally met its end on Dec. 28. That's not a fun time for those on the benefits, and I'm not going to get into whether its right or wrong, but instead, just point out that this can only hurt consumer spending.
So, that's 3 strikes and you're out, right? Well, maybe the mortgage apps thing is just a time of the season thing, and we'll treat it like a foul tip. While I would love to see the meddling stop, I still can't believe that the Fed thought the economy was doing just fine. I said it 6 months ago, and I've said many times since but the Fed is overly optimistic about the economy, folks, and I think if the Fed continues to cut the bond purchases each month, they'll soon see the true colors of the economy.
I saw a graph yesterday on Google+ that was in a presentation that Grant Williams did recently, that showed the Fed's Monetary Balance projection. With full throttle Quantitative Easing / QE, aka, bond purchases, and then with a tapering. The ending balance doesn't really change that much, folks. The Fed's Monetary Balance, which before all this began was miniscule, will soon reach more than $4 Trillion. And the money supply, which is supposed to rise alongside the monetary balance, is still being held down. But for how much longer can this continue?
Geez Louise, Chuck, did you have to come back and on the first day, get everyone in a depressed mood? Well, I say to myself, “Self, I didn't mean to go in this direction, it's just that one thought leads to another, and the knee bone is connected to the leg bone, kind of thing, so forgive me.”
So. if I'm to stop the depressing thoughts, I guess I can't talk about Gold & Silver! While I was gone, I read a lot about Gold & Silver. It's all a manipulation folks. that's all there is to the story. So, even if you say, Hey, Chuck! How about the rally in the stock market? I would say, well, isn't that also a manipulation? The Bernanke Asset Bubble aka, QE, or as I said in my Sunday Pfennig, aka cocaine to the economy, has blown a lot of air in the stock market bubble, and will continue to do so. To me, that's a manipulation, and that leads to people buying one asset over another.
The New Zealand dollar / kiwi, continues to gather all the folks jumping ship on the A$, and Japanese yen… I think this kiwi run has some legs to it, as interest rates will be rising in 2014 in New Zealand, which could shine the light right on kiwi, as this could be the only place in the industrialized world of currencies that sees their interest rate rise in 2014!
The presentation by Grant Williams that I talked about earlier, also went into the problems for Australia. The strong A$ was a real drag on exports. Especially last year, when the Chinese economy slowed down. But housing & consumer inflation is really a problem, so. The Reserve Bank of Australia, (RBA) Gov. Stevens, is caught in a trap. He wants the A$ to be weaker, but a weaker A$ will only fuel his inflation problem. He would love to hike rates, to squash the housing & consumer inflation problem, but hiking rates would lead to A$ strength. A real problem for Stevens. I think Stevens needs a large country to hike rates, so he could too, but under the radar, and the focus would be on the large country that went first.
Unfortunately, I don't see that happening in 2014. The U.S., Japan, UK, or Eurozone or even Canada, aren't going to hike rates in 2014. So, Stevens is up the creek without a paddle. I think in the end, he'll do the right thing and hike rates, it would be the right thing to do for his country. But how long will he drag this out is the question.
We did see a data print from Sweden this morning, but talk about flying under the radar! November Retail Sales in Sweden beat the estimates of a .4% gain and booked a .9% gain instead! That pushed the annual rise in Retail Sales to 4.5%… Pretty darn good, folks. And Sweden also printed a 4 Billion krona Trade Surplus in November. The krona has gained VS the dollar and euro the past three trading days.
Did you see or read about the speculation of another coup in Thailand? About 5 years or so ago, maybe even more, the Thai baht was the cat's meow of Asian currencies, but a coup threw the whole shootin' match in the toilet, and we never went back. For the past couple of years, investors would write me and ask me why we didn't offer Thai baht, and of course I told them basically, that I was once bitten twice shy. And it now looks like that was a great decision! Even if there isn't a coup, the baht is getting hammered on the rumors. Whew! Thank goodness I took a flyer on this country years ago!
I keep receiving emails from readers asking me why I don't talk about Bitcoin. Well, apparently, they missed class the day I explained why I'm not allowed to talk about Bitcoin as an investment. But I did include a link to a Gary North article on Bitcoin, and said then that I agree with him. I'm sure you can still Google: Gary North Bitcoin, and read the article.
On the ride into work this morning, the great song by the Eagles, Hotel California was playing, and it go to the part where they said, “you can check out, but you can never leave” hit me like a sack of potatoes! That's the QE/ bond buying that Central Banks around the world are participating in. The QE is like the Hotel California. They can check out, but they can never leave!
The U.S. data cupboard is pretty bare going into the end of the year. We will see some Pending Home Sales data today, and the S&P/CaseShiller Home Price Index tomorrow. And then there are some other little crumbs of data that will print, but I doubt anyone will care.
Before I head to the Big Finish. Did you see the news on Friday that a Federal Judge ruled that the NSA mass collection of phone data is legal? I saw that news, and I said out loud, “of course he did, he works for the Government” My beautiful bride said, “are you talking to me?” And I said, “I might as well be, but no.. just talking to myself”.
Oh, and another thing. Did you read those very kind words that both Frank and Chris had to say about me last Friday? WOW! That was so very nice of them to say those things, and it meant a lot to me. So without getting all sappy. I'll just say, thank you, your kind words are very much appreciated! But they were nice, eh?
For What It's Worth. I found this interview of Art Cashin a well respected 50 year veteran of markets on King World. Here are some snippets of the interview.
“There are always surprises. You will recall that although she hasn't been confirmed by the Senate, Yellen is to take over as the Chairman of the Fed. And every Fed Chairman, not only the ones that I've known over 50 years but the ones that have been there for the full 100 year history, have been tested in their first year by some market event. For Greenspan it was the Crash of 1987, and for Bernanke it was the Great Recession. I think it would be very significant in that people would begin to wonder, 'Is the Fed in any control at all?' If they had to reverse rather quickly, before they even began the taper, then people would wonder, 'How much in control are these people? How much do they know?
The Fed has a long history of rather poor forecasts, and if it looks like their policy operation is that fickle, then the markets may begin to lose faith and that could have some (serious) repercussions. “
When asked about if the Fed had to stop or even reverse Tapering, Cashin replied, “It would clearly be a great embarrassment, and if the markets begin to lose faith in the efficacy of the Fed, many strange things will happen. They (market participants) will begin to wonder, 'What other pledges will hold up? What about that pledge to keep rates low for years to come?' The Fed does not want to be in a position of doubt, and it would be a disaster were it to occur.”
Chuck again. Yes, I agree that it would be a disaster, but then, the Fed Heads could always say that “things changed”. They would never admit that they were overly optimistic in error!
To recap. Chuck is back! And brother was he depressing today. And in other news. The dollar bias remains, but only against a handful of currencies, as the euro, renminbi, and kiwi are all trading about where they were when Chuck went on vacation. Chuck is worried about the goings on in mortgage applications, rising mortgage rates, and the cut off on extended unemployment benefits, and how they will affect the economy going forward.
Currencies today 12/30/13. American Style: A$ .8875, kiwi .8170, C$ .9340, euro 1.3765, sterling 1.6470, Swiss $1.1220, . European Style: rand 10.4890, krone 6.1090, SEK 6.4630, forint 215.75, zloty 3.0140, koruna 19.9130, RUB 32.74, yen 105.20, sing 1.2685, HKD 7.7550, INR 61.91, China 6.1024, pesos 13.07, BRL 2.3260, Dollar Index 80.26, Oil $100.30, 10-year 2.99%, Silver $19.72, Platinum $1,363.35, Palladium $711.30, and Gold. $1,203.42
That's it for today. Great to be back. It was a pretty good weekend sports wise until the Rams fell apart yesterday. My beloved Missouri Tigers got back on track with a win, and our Blues won two, including a Saturday night miracle VS the Blackhawks! Go Blues! The weekend did have a sobering time, when we held the celebration of life for Kathy's Dad, who passed away earlier this month. Lots of good stories, filled the day, which made it easier to get through. Alex got to the quarterfinals of a huge wrestling tournament Saturday, but then got injured. He sprained his MCL in his left knee. He'll be out 2-3 weeks, and then it will take him some time to get back into wrestling shape, so his Senior season of wrestling could be in trouble. So. tomorrow is New Year's Eve. do you have big plans? Or resolutions? I don't have either. But. I will say this, that I hope that 2014, is filled with better health, and more happiness! And with that, I'll get out of your hair. I hope you have a Marvelous Monday!
EverBank World Markets
Editor of A Pfennig For Your Thoughts