In This Issue.
* The Fear Factor is setting in.
* Gold soars past 200-DMA!
* U.S. Retail Sales print very weak!
* RBI cuts rates!
And Now. Today's A Pfennig For Your Thoughts.
SNB Removes The Governor From The Franc!
Good Day!… And a Tub Thumpin' Thursday to you! I'm much better today, thank you, so I've got that going for me! And guess what? I was talking to the Big Boss Frank Trotter on the phone last week, and I mentioned a bad day, stomach-wise, and he quickly did a search, and told me there was a Duncan Donuts 2 miles from my location. Now, I've been coming to this part of Florida since 1998, and it never had occurred to me to look for a donut shop, so now I know! A quick drive to DD and the iced cake donut cure was found! YAHOO! And no Christine, you're not out of a job when I get back to St. Louis!
Well, Front and Center this morning, there's BIG News! The Swiss National Bank (SNB) decided to drop the floor it established a few years ago, with the euro at 1.20. So, all the Big talk the past few years of moving the franc even lower with a cross of 1.35, was just that. talk! This move has really surprised me and the markets overnight, and the franc, having the governor removed from its trading, is soaring.. yes, I said soaring. how about 15% move higher VS the dollar overnight? The franc soared past parity to the dollar, and on to a 1.12 handle. Talk about a moon shot! I've not seen any comments by the SNB regarding this move, why they did this now, and what they expect to see. I'm sure they didn't expect to see a 15% move higher VS the dollar! The SNB is actually more concerned about how the franc performs VS the euro, and here the cross has rallied just as intensely, moving from 1.2010 to 1.0405. Double WOW!
Otherwise in the currencies this morning, the euro is getting hammered just like I thought it would after the ECJ ruling yesterday. The Aussie and N.Z. dollars (A$ and kiwi respectively) are stronger this morning, but last night they were doing much better. The Chinese renminbi was allowed to appreciate again last night, and the price of Oil has recovered a bit to a $47 handle.
Yesterday's price action was dominated by the Retail Sales print in the U.S., so, let's not waste any time and get to what that was all about, eh? Well, well, well, as my grandma used to say, when she knew all the time that something was awry, but let us grandkids play it out to find out what she already knew! Well, well, well, what have we here? Well, we have U.S. Retail Sales that printed for December, and you can bet your sweet bippie that all those economists that have been spouting off about the strong U.S. economy, and you all know who you are, are choking on their words after this Retail Sales report. You know, if you ask me, I would say that the 3rd QTR surprise was simply election period driven. Taking into consideration, the negative reports from Factory Orders, Durable Goods Orders, and now Retail Sales in December when they should be stronger than a locomotive, that have printed since the end of the 3rd QTR. Now, don't expect me to tell you how the economic data was goosed in the 3rd QTR to make it all look good for the election, because I wouldn't know where to begin, but. In my mind, and you now know that this can be a scary place to be, it's all possible. But you can't keep it up, or else everyone will know what a sham it was.
But just like switching off a light switch, the economy has been turned off. For those of you keeping score at home December Retail Sales printed a negative -.9%, and the November .7% print was revised downward to .4%, so in just one month, Retail Sales fell -1.3%… The currencies rebounded yesterday after this early morning print, and Gold turned a small negative to a small positive. This report, along with the Durable Goods Orders, and Factory Orders, and don't forget the drop in the Manufacturing Index, paint a different picture of the economy, and that picture doesn't include the Fed raising rates early this year.
On a sidebar. In just two days, we've had two monumental Companies here in the U.S. file for bankruptcy. Radio Shack, and Caesar's. I expect, don't want to, but expect to be seeing more and more of these, folks. As the house of cards that's been camouflaged by smoke and mirrors begins to weaken.
I was putting the final touches on the February Review & Focus yesterday, and wrote that I didn't believe the Fed was going to hike rates as early (June) as most analysts, economists, and so on think. I truly believe that the U.S. economy is beginning to show signs of gasping for stimulus. Well, at least you can't say I didn't say this would happen! In the words of the latest James Patterson book that I finished reading: You Have Been Warned
But getting back to what this very weak report means to the Fed. It's not just me that's thinking that this means the delay of Fed Rate Hikes, but look at traders around the world. The Brazilian real rallied nearly 1% on the day, as their positive rate differential was highlighted even more VS the U.S., and the Aussie dollar (A$) started to rally on the rate differential, and then got going on their Employment report, that I'll cover in just a minute. The Japanese yen continues to rally, for some head scratching reason, and was the best performing currency VS the dollar so far in 2015m until the SNB unleashed the franc. But I can't see yen strength lasting, wink, wink.
So. last night I decided to look at the currencies to see what effect the ECJ ruling and the awful Retail Sales report had on the currencies and Gold. And the first thing to catch my eye was the Aussie dollar (A$), which was in rally mode, pushing past 82-cents. All this was on the latest print of Aussie Employment. Aussie December Employment report reflected a rise of 37,400 jobs, thus pushing the Unemployment Rate down to 6.1%, and just the surprise of this report has boosted the A$… First, the A$ saw profit taking overnight, but then has gotten back on the rally tracks and is nearing 82-cents again this morning. Wild swings. But if my memory serves me correctly, in the “old days” the A$ was known for wild swings. So, this was not uncommon for the A$, just a trip back in time. Help Mr. Wizard!
The euro saw some McLovin yesterday, after falling to the low numbers of the 1.17 handle, the single unit got a reprieve after the awful U.S. Retail Sales print. Remember, the euro is the offset currency to the dollar, so even when things are not peachy dandy in the Eurozone, if things look iffy in the U.S. the euro will rally. I know I was a little hard on the Beaver (euro) yesterday, talking about the ECJ ruling and how that was going to unleash all-out QE in the Eurozone, which would be as bad for the euro as all-out QE was for the dollar when it was first unleashed on the economy in March of 2009. And I still feel as though the euro is going to have a tough row to hoe going forward, but things will bump around whenever the dollar suffers through one of these iffy moments.
But that was yesterday, and today the euro has slipped below 1.17 and then bounced back and forth around the 1.17 handle since I turned on the currency screens. It certainly looks to me as if the 1.17 handle is soon to be in the euro's rear view mirror just like 1.20, 1.19 and 1.18 are.
Well, above I told you that the price of Oil had recovered to a $47 handle. But that stronger move isn't doing a darn thing for the petrol currencies. the Russian ruble is weaker this morning, along with the Norwegian krone, Brazilian real, and Canadian dollar / loonie. Apparently traders aren't convinced that the price of Oil can maintain this level or move stronger. The Big Boss, Frank Trotter, and I were talking on the phone yesterday, and he mentioned that he just interviewed Marin Katusa from Casey Research, who's a very intelligent guy and does the energy research and writing at Casey. This interview will be a Sunday Pfennig. Not this Sunday but next Sunday. I tell you this, so you can mark your calendars to not miss that Sunday Pfennig!
What I really wanted to talk about here is that Frank brought up something that got my memory swirling. Frank brought up the question of what the cheap Oil price will do to the economy. He said do you recall the late 80's and the drop of the Oil price then? Will that happen again? And oh my, did my memory kick in with details of the Penn Square Bank collapse, the housing in Oklahoma collapsing, jobs lost, and general rot on the vine for the Oklahoma, Texas economies. I had a very good friend that lived in Tulsa, his name was Joe, and the stories of gloom and doom from Tulsa are etched in my memory.. So, why will this drop in the Oil price be different? I don't think it will, but I'll have to wait-n-see what Marin Katusa has to say about all this!
Well, Gold is soaring this morning. Right now, as I type the shiny metal has added $31 to its value, when I turned on the screens this morning it was up $21, so it keeps moving in the higher direction, at least for right now it is. the Big thing I see in this move higher, is the fact that Gold passed its 200-Day Moving Avg (DMA) of $1,253.49. And is currently trading at $1,257.20. Apparently having the Governor removed from the franc gave Gold some wind for its sails. This is how I view what's happening today folks. Basically, to me, the SNB is watching all this stuff in the world unfold, and decided that they no longer wanted a weak franc, and instead are opting for a stronger franc to shield them from all the bad stuff in the world. So, when the metals guys got together, they said. “Shoot Rudy, if the SNB is full of fear, then Gold should rally”! I know, I know, I put things in simplistic views, and it's probably a more far-fetched story line, but I would rather know what I'm talking about than to attempt to confuse people!
Talk about wild swings like the A$ had overnight, Gold is doing much of the same, as it has already given back $6 of that $31 gain I just talked about. You can see that maybe traders weren't ready for Gold to reach its 200-DMA just yet. So, we'll have to watch this unfold today to see where it takes the shiny metal.
Well, we had a surprise rate cut in India overnight. the Reserve Bank of India (RBI) cut its internal rate 25 Basis Points (1/4%), and RBI Gov. Rajan noted that it wasn't just the drop in the price of Oil and other commodity prices but also weaker domestic demand that brought about this rate cut. The markets had penciled in a rate cut at the February meeting of the RBI, so this rate cut at this time, surprised the markets. The Indian rupee rallied on the rate cut news. I know, I know, go figure, a rate cut is a supposed to be bad for a currency's value, but I think what's going on here is that the RBI is no different than the other Central Banks around the world that are scared of the big bad wolf. deflation, and since the RBI took an early step in the fight against deflation, traders rewarded the rupee. stranger than fiction, but true.
The other day, I was writing about how Central Banks never learn anything, given the way they've gone after falling inflation just like the Japanese did 2 decades ago, and are finding out that their moves don't work, just like they didn't in Japan. And a dear reader sent me a note asking me why I was switching from being someone that believed in inflation existing to someone that believes deflation is a problem. I quickly responded and apologized for being confusing. Because I'm talking about what the Central Banks believe, not what Chuck believes, with regards to deflation!
I'm still that same guy that pointed out the reduced package, boxes, sandwich size, etc. and the increase in things we use every day, inflation fearing and not afraid of deflation person that you fell in love with. HAHAHAHAHA! AS IF! That brings me a quick funny before I head to the Big Finish this morning. I always tell people that the number one question that I'm asked is. “Are you available?” HAHAHAHAHA!
The U.S. Data Cupboard has PPI (wholesale inflation ) for us today, and the usual Thursday print of Weekly Jobless Claims, so nothing to get too excited about. And tomorrow, we'll end the week with the stupid CPI report.
For What It's Worth. Well, today's piece for the FWIW section comes from friend, and publisher, writer extraordinaire, Bill Bonner, who wrote this as a part of his daily letter: Diary of a Rogue Economist, which can be found here: www.bonnerandpartners.com/ . This is a great discussion that can be found in his book Empire of Debt.
“Tomorrow, we'll start a new series on practical investing. Today, let's look further at how the global credit bubble has distorted investment markets, perverted the economy and corrupted our government.
They all now depend on something that should never have happened. and can't continue for much longer.
Hardly a day goes by that we don't squint through a glass, darkly, to try to see what the end of the credit expansion will mean for stocks, bonds and other asset classes.
Today, we look at what it will mean for the US Empire of Debt.
Typically, empires succeed by conquest. They take property. women. slaves. The loot is then parceled out like a federal budget – with big portions for the honchos and cronies. and lesser portions to the foot soldiers.
Because the US is a democracy (of sorts), token amounts must also be paid to the voters; each party bids for votes with the money it intends to steal after it has won the election.
The US is a master at the fraud of modern democratic politics. But it has never got the hang of empire.
It conquers foreigners, but it steals only from its own people. Its new lackey states becomes cost centers, not profit centers; it loses money on each “mission accomplished.”
How does this empire stay in business?
Chuck again. And the Credit expansion has to avg. 2% a year, according to economist Richard Duncan, or else the whole shootin' match collapses. (hint here, it's not really credit, it's debt.)
To recap. The SNB dropped their floor on the cross with euros this morning and the franc has soared to a 15% gain VS the dollar, and has gained nearly that amount VS the euro! Gold has traded through its 200-DMA, as traders see the fear factor of the SNB's move. U.S. Retail Sales were awful yesterday and the previous month's number was revised downward, making the U.S. economic recovery look nascent at best, at this point. Aussie employment was good, with the Unemployment rate falling to 6.1%, and the A$ rallying back to 82-cents. And the price of Oil recovered to a $47 handle, but the petrol currencies aren't seeing any love right now.
Currencies today 1/15/15. American Style: A$ .8220, kiwi .7790, C$ .8405, euro 1.1700, sterling 1.5250, Swiss $1.1415, .. European Style: rand 11.4760, krone 7.6825, SEK 8.1005, forint 276.75, zloty 3.6825, koruna 23.8255, RUB 64.94, yen 116.70, sing 1.3240, HKD 7.7515, INR 62.06, China 6.1193, pesos 14.51, BRL 2.6140, Dollar Index 91.88, Oil $47.52, 10-year 1.83%, Silver $17.08, Platinum $1,239.74, Palladium $775.75, and Gold. $1,252.48
That's it for today. Well, that was some news this morning regarding the SNB and the franc, eh? Now I wonder if the SNB Gov.'s wife will show big profits in the franc. Remember the last SNB Gov.'s wife? Oh, that's in the past, right? I totally missed a point I was going to make yesterday, about Ohio State's star running back, Ezekiel Elliott, he's from St. Louis! And is a graduate of John Burroughs High School here in the Loo. The Big Boss, Frank Trotter is a graduate of that same school! So, I guess I should have been rooting for the Buckeyes because of the St. Louis connection. I just couldn't do it, because I'm still not happy that this kid decided to go to Ohio St. instead of Mizzou! Well, our Blues are back in action tonight and put their 5 game winning streak on the line VS the Red Wings. This used to be a HUGE matchup Blues and Red Wings, but then the NHL split the teams into different divisions, and now they play each other quite a bit fewer times a year. The Band, America, is playing their song: The Sandman, on the iPod this morning. I used to play that song on my guitar. But I wouldn't even know where to begin now! UGH! I need to get one of my acoustic guitars down here, so I can sit on my porch swing, strumming my six string. HAHAHAHAHAHA! OK. I gotta go. I hope you have a Tub Thumpin' Thursday!
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