In This Issue.
* Dollar goes back on offense.
* Renminbi and Gold only gainers today.
* Oil price slips again, petrol currencies get whacked.
* Norway's SWF adds $67 Billion to world's largest SWF!/p>
And Now. Today's A Pfennig For Your Thoughts.
Markets Shrug Off 3rd Consecutive Month Of Negative Retail Sales!
Good day.. And a Happy Friday to one and all! It's also Friday The 13th. Ooooohhhh. I'm not really the kind of person that gets into all that, although I am pretty superstitious when it comes to sports, I'm not a black cat, walk under a ladder, toss salt over my shoulder kind of person.. Pharrell Williams greets me this morning with his #1 song of 2014. Happy. Talk about an artist that saw his career soar on one song. I just love that song though. My grandson, little Everett, gets all excited when that song gets played, because it was featured in the kids movie: Despicable Me 2. I speak today on Total Abject Failure, Mad Max, Breakdown of society, chaos. How's that for an upbeat start to today? HA!
I'll give you a little taste of my talk, and then we'll get into what happened yesterday, and what's going on in the morning session of Europe. Here's your little taste: Even though we don't think about it every day, we all know that money is fiction. It is a medium of exchange, a token we pass back and forth instead of bartering, and a store of value that keeps score of our assets and debts. It is based on belief and faith. nothing more.
I bet you now want to get on a plane and get down to St. Pete, FL for my noon talk, don't you? HA! I'm sure most of you are saying to yourself right now: That's just Chuck being Mr. Gloom and Doom again, but you would be wrong. We'll even play a guessing game during my talk, so there! HA! Alrighty, I think I've beat around the bush enough this morning, I have to get to the “real beef” today sooner or later, and that ends up being now!
Well, well, well, what do we have here? Another negative month, the third in a row, for U.S. Retail Sales, and finally someone figured out that the “bad weather” was to blame! As If! I know that the BHI indicated that there would be a recovery in Retail Sales for February, and there was. That is if you count it going from a -.8% in January to a -.6% in February. Hey, that's a recovery in my book! Just not the kind of recovery that should make the Fed feel good about hiking rates, eh? Well, that's what I thought when I initially saw the Retail Sales data, but it's not what happened. the euro tried to get off the canvas, but was slapped back down to where it started the day, and Gold couldn't even hold on to the $4 gain it had on the books before the data printed! What the heck is going on here? I just don't get it, folks. There was a time when you could trade based on fundamentals. You knew that a negative, much less a 3rd consecutive month of negative, Retail Sales would drive the dollar down, and the currencies and Gold higher. At least until another data print came along!
And Retail Sales last month would have been far worse, if it hadn't been for a 1.5% gain in gas station sales.. So, that's just not peachy dandy in my book! But I guess it was just par for the course with the currency and metals guys and gals these days.. These days I sit on corner stones and count the time in quarter tones to ten, my friend. Don't confront me with my failures, I had not forgotten them.. – Jackson Browne
Sorry I had to do something to calm me down I was about ready to rip the markets for their thought process that just shrugged off the 3rd consecutive month of negative Retail Sales, so thanks to the words of Jackson Browne for helping me gain my composure. But don't you find it very strange that this happened? Was there something or someone or some entity pushing the buttons so that the traders and market participants acted like this? Shoot Rudy, even stocks ended the day with a rally, after that awful data that should have knocked the wind out of stocks. So, that's what I'll attribute this all to, a greater being pushing the buttons. Sounds good to me, now that I've settled that, we can move on to today!
So, the dollar went back to taking no prisoners yesterday afternoon, and in the overnight markets only the Chinese renminbi, and Gold have carved out gains VS the dollar, and Gold's gain is a tiny $2 advance, which is not being on terra firma, in no stretch of the imagination, for we saw what happened to yesterday's $4 morning gain, right? There's been no other news or developments to make the dollar move like this.
What we do have is this willingness to “look ahead” into next week, when the Fed's FOMC will meet. The markets are willing to push the currency appreciation envelope with the dollar, in anticipation of the Fed giving us their final answer on a June rate hike. I think of all this finagling like the game show who wants to be a Millionaire? So, FOMC is A. a rate hike in June, your final answer? And the FOMC says, “we would like to phone a friend”. not hearing what they wanted to hear from the friend, the Fed says, “We want to use our 50/50” and then the show runs out of time, and you have to come back next week for the conclusion to this mystery!
But that's in a nut shell folks. The markets are willing to go out on a limb that the Fed is going to hike rates soon, and that they'll be very transparent about telling us ahead of time. That's a lot of faith to put in a group of independent thinkers don't you believe? Well, I do, and therefore I'll take the other side of that thought, (You knew I would, right?)!
The price of Oil is back on the slippery slope falling from the $50 level last week to end this week in the $46 level. Supposedly, there's an Oil supply gut in the U.S. Well, that might be the case now, but with rigs shutting down left and right, Oil companies losing their shirts, and laying off tens of thousands of workers, this can't last. I compare that to my beloved Cardinals, who a year ago in spring had a glut of pitchers with great arms, every team was jealous of them, but after some trades, injuries and so on, this year, guess what the Cardinals need? Pitching! Go figure.. And with Oil it might very well end up the same way.
But with the price of Oil sliding downward once again, the pressure was put back on the petrol currencies from countries like: Norway, Russia, Canada, Brazil, and so on. The two-day rallies in Norwegian krone and Swedish krona were sacked and are now a thing of the past, just a short memory. There was some news from Norway that should have been somewhat of a boost to the krone though. The Norwegian Sovereign Wealth Fund (SWF) reported that they had added to their already largest SWF in the world, during 2014 by $67 Billion (544 Billion krone), which was a 7.6% return. The SWF had said the previous year that that should expect diminished returns going forward, amid record low, and even negative yields around the world. You may recall that in 2014 the SWF's return was a whopping 15.9%, so the SWF was prophetic, eh?
Just another feather in the cap of Norway. that will be important to have one day when the markets wake up and do the V-8 head slap with regard to how badly they've treated one of the best fundamentally driven countries and its currency.
The euro is back after a one day respite from its free fall to free falling. In the words of Tom Petty, I'm free, free falling. I wanna free fall out into nothin', Gonna leave this world for a while. the poor beaten and beleaguered euro is getting what was coming to them, which is pretty strange, given that the markets had a couple of months to chew on the fact that the European Central Bank (ECB) and its president, Super Mario Draghi, had told them that they would be buying bonds in March. But the markets waited until the first bond was bought, before they began taking their pounds of flesh from the euro.
Well, one thing that Super Mario's bond buying is doing, is driving up the prices of bonds and of course lowering the yields. Gov't bonds in Austria and Spain have seen their yields reach record low; which means, it will take a lesser amount of bonds to buy to eat away at the ECB's EUR 60 Billion per month. That's going to present a problem for the ECB going forward, because of the restrictions it has that only allows them to buy bonds roughly in line with the amount of funds each country has contributed to the ECB's capital, a ratio that's known as “capital key”.
So, and I hate going into this so deeply but I have to since I started talking about it, sorry. But with those restrictions, the ECB is going to have to buy about 200 Billion of German Debt, the one country that probably doesn't need to be having the ECB buy their debt, while the countries of the Eurozone that do need to have their bonds bought (think Club Med and France) see their amounts limited as to what can be bought, because of the “capital key”. I can see the countries of Club Med, calling Super Mario and telling him that the “check is in the mail to add to our ECB contributions”. HAHAHAHAHA!
Well, guess who I had lunch with yesterday? Give up? The Great Mogambo Guru that's who! Chuck and the Mogambo together, oh you should have heard some of the conversation! Chris Gaffney and Suzanne Lee came along to meet the Great Mogambo. I'll give you a little taste of the Chuck/ Mogambo conversation. The Great Mogambo said “you want to see inflation? In the 70's I had a 1962 pickup truck, and one day it stopped running, and the carburetor was shot, I walked across the street bought a new one for $25, and with a screwdriver and a wrench I put it on, and drove away. Last week my 2009 truck began to run rough, I took it in, and they called and said it would cost $1,000 to fix the fuel pump. Chuck said, “You can see the engineer at the car company coming in the room of executives, with a big smile on his face, and saying, ” I've got the best idea that is going to make us so much money, I'm going to put the fuel pump inside the gas tank, so that no one can fix it themselves, and then they all sit around this big table and begin laughing so hard that they bust the buttons on their vests of their 3-piece suits” And then Chuck, the Great Mogambo, Chris and Suzanne all had a big laugh!
OK. Well let's go someplace else, I could go on and on about lunch with the Great Mogambo Guru! In other data from yesterday.
Today's U.S. Data Cupboard just has the PPI data from February (wholesale inflation) I don't expect this to be taking off like a jet plane, but then maybe it will, that is if they include fuel pumps! HA!
Since I already talked about Gold, I thought I would spend some time talking about one of the alternative metals to Gold, Platinum. the World Platinum Council's (WPC) announced yesterday that there is a global shortfall of Platinum for a 3rd consecutive year. Hmmm, and Platinum is trending downward, and why? And what about all those solar panels that were supposed to be built this year, and the Silver that was going to be needed to build them? Where's the support for the price of Silver from that? Oh, come on Chuck, you know all too darn well, what's going on here.
Oh, and this just came in. The Russian Central Bank (RCB) cut their key interest rate for the second time in two months and their internal rate is now 14%, and the RCB said that more cuts are in the pipeline. I told you all a few weeks ago to expect to see this happen since the run on the ruble had subsided.
For What It's Worth. The Net Worth of U.S. Households rose by $1.5 Trillion in the 4th QTR of 2014, to $82.9 Trillion. this represents the highest level for Net Worth on record. Everybody let's parrrrrrty! Everybody let's parrrrrrty! Party like it's 1999! Oh, wait. the report also showed that U.S. Households continued to accumulate debt in the 4th QTR, with outstanding debt rising on an annual basis for the 6th consecutive quarter. the 4th QTR increase was $89 Billion, bringing the total to $14.2 Trillion in household liabilities. So, do you want to party with this info, or go toss your cookies in the bathroom? I know what I just did! Because. you and I know who saw the increase of net worth, and who saw the debts pile up. Two different groups of people!
Chuck again. Well, I never left you, it's been all me today! YAHOO! I hear you saying! HAHAHAHA, Surely, Hey, who's Shirley? You don't think that! So, have you booked your flight to St. Pete (actually TPA (Tampa)) yet? HA!
To recap. The February U.S. Retail Sales printed negative for a 3rd consecutive month yesterday, but the markets just shrugged it off and went back to buying dollars, stocks, and selling currencies, metals and Treasuries. The markets have allowed themselves to peek ahead to next week's FOMC Meeting. Chuck is taking the other side of that trade, who's with me? I feel like Will Ferrell in the movie where he thinks everyone is behind him as he goes streaking down the street only to find out he was the only one brave enough to strip and streak. Not much else is happening today, so Chuck carries on about his lunch with the Great Mogambo Guru!
Currencies today 3/13/15. American Style: A$ .7660, kiwi .7330, C$ .7850, euro 1.0585, sterling 1.4830, Swiss $ .9925, . European Style: rand 12.4590, krone 8.1450, SEK 8.6430, forint 289.45, zloty 3.9260, koruna 25.7580, RUB 61.26, yen 121.45, sing 1.3890, HKD 7.7675, INR 62.94, China 6.1588, pesos 15.53, BRL 3.1645, Dollar Index 99.57, Oil $46.95, 10-year 2.13%, Silver $15.58, Platinum $1,122.50, Palladium $795.97, and Gold. $1,157.22
That's it for today. Well, it's a Friday! YAHOO! Well, the rash/ allergic reaction on my hands is finally starting to look better, I would think it had better given the steroids I've been taking and the ointment I've been putting on them. I haven't been able to shake hands with anyone here, and I said yesterday, my name tag should say, “hand rash, can't shake hands” so that people don't get upset when I don't offer them my hand! HA! I had some good conversations with conference attendees at a reception that we sponsored last night Hey! Sunday is Selection Sunday for the NCAA Basketball Tournament, and the Tournament starts next week! March Madness is back! As soon as the top teams are announced, the talk will turn to which of these top teams will be the first to lose and drop out of the Tournament. Crazy stuff happens in this Tournament.. Well, I think I'm ready to do my talk today. Darling Daughter Dawn, husband Jerry, little Delaney Grace and Everett join us on Monday for their spring break. Dawn and Delaney are beach lovers, they could spend an entire day on the beach, so it will be fun having them with us for a week! OK, it's time to get off this bus today, I hope you can go out and make this a Fantastico Friday!
EverBank Global Markets