In This Issue.
* Currencies & metals give way to dollar strength.
* Eurozone Retail Sales beat expectations.
* FOMC meeting minutes today.
* Grant Williams on Gold manipulation.
And, Now, Today's Pfennig For Your Thoughts!
The Dollar Holds The Hammer.
Good Day! And a Wonderful Wednesday to you! Well, the sub-zero temperatures finally broke yesterday, the sun came out, and the snow and ice on the roads began to melt. Well, at least on the major arteries. “light snow” is expected tonight, gee isn't winter fun? When I was a young man I spent a winter in Des Moines Iowa, the locals told me it was the worst winter ever, I told them as I left in the spring, I wasn't staying around to see if they were correct! I feel much like I did that winter in Des Moines right now.
Well, the traders, investors, and hedge funds, have turned a cold shoulder to the currencies these past couple of days, and last night was no different. The euro has lost the 1.36 figure, and Gold is down $5 this morning. Every time we seem to gain some momentum in these two asset classes, a large trade appears to reverse the momentum.. You don't think it's the Plunge Protection Team (PPT) flexing their muscles do you? I do. And that's all I'll say about that!
Well, I'm feeling pretty down this morning, and not because of anything physical, which is usually the case, but instead, this morning I'm feeling pretty down, because I just keep reading article after article about how 2014 is going to be the year of the dollar. Not that I'm rooting against the dollar, it's just that I don't see it that way, and that makes me feel sheepish at best. I told you a couple weeks ago about how the boys and girls at Barclays has put out a thought on why they believed the dollar would shine in 2014, and that thought has really gone viral, because every article I read now on the subject paints the same picture.
The picture is simply that with the Fed in Taper mode, the markets will begin to say, “if the economy is strong enough to continue tapering, then it must be strong enough for rate hikes.” And even if the Fed doesn't accommodate the markets with rate hikes, the thought is that the pressure on them will be so strong to hike rates, that the overall consensus in the markets will anticipate when the rate hikes will come. And that, my friends, is why all these pundits believe that the dollar will shine in 2014.
Now this morning I turn on the Bloomberg and I see an article that's titled: “Euro To Surpass Consensus with 6% drop by April”. That would put the euro around 1.2750. Not a level that would cause me to pull my hair out, now wait, Chuck, you don't have hair to pull out any longer! But you get what I'm saying. The euro would still be stronger than the dollar. And ready to move forward again once the Fed sees the errors of their ways, stops tapering, and the whole thought process above comes crashing down.
That's the mast that I've pinned my colors to folks. I will either be right, and everyone will want to ask me why I went against the grain and the crowd, or I will be wrong, and look pretty foolish, given that everyone and their brother is thinking that 2014 will be the year of the dollar. Hey! We're only in January, there are 357 more days to 2014, and a lot of different things can happen.
But if it appears that I am proved to be wrong, I'll admit it, not to worry. As opposed to my beautiful bride's belief that I never admit when I'm wrong, I do, I have, and I will. When the facts change, I change my mind. What do you do, sir? But you can bet your sweet bippie that I'm always the last one to change my mind, for, if I believe in something, I believe in it, period.
Did you see what Fed Head Rosengren said last night? He said that the “economy is far from where it needs to be and the Fed's exit from stimulus should only be gradual.” Rosengren is a non-voting member of the Fed, so his comments don't hold a lot of water with the markets, but I think it's important to know what the “dissenters” are thinking.
Well, did you see the Trade Deficit data yesterday for November? The U.S. Nov. Trade Deficit plummeted to $34 Billion from $40 Billion the previous month. They say that the move was a result of the price of Oil dropping during Nov. Hmmm. if that's right, then one would think that the Monthly Trade deficit will be like the bouncing ball over song lyrics, for the price of Oil jumped to $100 in December, and is back down to $93 in January. The reason this Nov. print is important is that right now, it would give GDP a boost. But then we'll have to wait for the December print to get the real affect of the Deficit to GDP.
As I said above, the euro slipped below the 1.36 figure overnight. The move was preceded by the Eurozone Unemployment Rate remaining steady at 12.1% in November. There were some thoughts that 12.1% level would be reduced, but that failed to materialize, and so, the euro is punished. On the flip side was a data print that should have given the euro a boost, but failed, was Nov. Retail Sales for the Eurozone, which surprised Big Time to the upside gaining 1.4% (VS consensus of .1%). That's a good sign that the Eurozone economy, as a whole, may be recovering.
There's not one currency that is trading stronger VS the dollar this morning, not even the Chinese renminbi / yuan! And Gold is down $5 as I write. It's a star shine day for the dollar. There's not much else to say about it.
The Fed's Dec. 18 FOMC Meeting Minutes will print this afternoon, and should be interesting although we already know what the outcome was, and that was an announcement to begin tapering in January. I will be interested to see what the vote was, yay or nay. Rosengren, whom we just talked about above, was a voting member in 2013, and I already know he voted nay to tapering.
The markets seem to think that the Minutes are going to reveal some great revelation about the economy that the Fed Heads have failed to share with us so far. I think the markets are nuts on this, but so be it.
The U.S. Data Cupboard will also have the December ADP Employment Change report for us this morning, which is an indicator of what the Jobs Jamboree might have in store for us on Friday, this week. The ADP forecast is for 200,000 jobs being created in December. Of course they don't say whether these jobs were seasonal for the Christmas shopping season, or what, so don't get too all lathered up. But figure that if the ADP people say 200,000 jobs were added in December, what the BLS will do with that? Right now, the forecast by the so-called experts is that the BLS will report that 195,000 jobs were created in December.
None of that interests me because the data has become so meddled with that it's difficult to figure out what's real and not real. I told you last month that I'm of the mind to file this data in the circular file next to the CPI (consumer inflation ) data that also no longer is representative of the facts. But the data sure captures the attention of the markets, so, here I am talking about it. UGH!
One currency that, while down VS the dollar today, is holding on at this point, is the New Zealand dollar / kiwi. For, if the trader mentality is to reward the U.S. dollar for rate hike forecasts, then kiwi should too be held to the same rewards! The Reserve Bank of New Zealand, (RBNZ) will hike rates before the Fed does, and probably multiple times before the Fed does. But, kiwi gets dragged down by its kissin' cousin across the Tasman, the Aussie dollar (A$).
Late last week, the A$ was trading near 90-cents again, and I said to the boys and girls on the desk, no wait, there were no girls last week, so just to the boys on the desk that Reserve Bank of Australia (RBA) Gov. Stevens wasn't going to like seeing the A$ near 90-cents!
Before I head to the Big Finish today, and do I have a good one there today, I wanted to talk briefly about how the questions regarding if the U.S. really has the reported 8,133 tons of Gold at Fort Knox, are beginning to build up again. Recall that former lawmaker, Ron Paul, introduced a bill to audit Fort Know a few years ago, but it got swept under the rug. I think that as long as the U.S. Gov't pays no attention to the calls for an audit, that the questions about whether the 8,133 tons of Gold are really there will persist.
This has become something that I think about a lot. I recall writing last year, when it was announced that the Germans would not be allowed to audit their Gold holdings, and that it would take 7 years for the U.S. to deliver the Gold to the Germans, that this, to me, proves the Gold is not there. Probably leased out, which coincides with the 7 years to deliver thing. I told a dear reader and friend yesterday that the Gov't could stop the calls to audit the Fed in their tracks if they revalued the price of Gold to $10,000 oz. It would make everyone happy, and they would forget about the audit. I know that's far-fetched, but you have to think outside the box folks. And that's a specialty of mine! HA! The problem with leasing out something like Gold is that it gets leased again and again, and soon, there are a number of entities putting that one allotment of Gold on their books. Eventually, someone wants their Gold back, and that's when the whole house of cards comes tumbling down.
For What It's Worth. OK. Have I told you how much of a fan that I've become of Grant Williams' work? What a great writer and mind! I was reading his latest letter yesterday and once again he makes some strong points about Gold manipulation. And then I found this interview on that subject over at Kingworld.com So, here's a snippet of that interview with Grant Williams regarding Gold manipulation.
“Once you start down a road and get yourself in too deep, you have to keep pushing on. Going back is no longer an option. So we've seen this desperation with the way the gold market has been handled over the last few years. We've seen these egregious price smashes in the paper gold market on big volume.
This takes place even when the gold isn't available in the physical markets. But these raids have been done consistently. We saw one (raid) yesterday, when a 4,000 contract sale took place in just a few seconds and smashed the gold price $30 lower. But the paper price just rebounded.
So it really starts to feel like these massive bear raids we've seen are having less and less effect. The big problem these guys (central planners and bullion banks) have is when this thing turns around, you can sell all of the paper gold you want, but what you can't do is conjure up physical gold out of thin air. And when the price spikes are going up instead of down, various players and large entities are going to want their physical metal, and that's when this whole thing is going to start to unravel because we all know the physical metal isn't really there.
There is very little gold available VS all of the paper claims. This massive trend of Asian buying of physical gold, wherever they can get their hands on it, is going to take over the gold market. I've had entities approach me looking to buy gold, 'in whatever quantities they can find.' At some point this is going to matter.” – Grant Williams
Chuck again. This all reminds me of something that I think Warren Buffett has said, about when the tide goes out, you then get to see who's swimming naked. Just like those leases I talked about above, eventually someone wants their Gold back. Well with these short positions, eventually someone is going to want delivery, and that's when the tide goes out.
To recap. The dollar has the hammer today, and the calls for the dollar to have the hammer throughout 2014 continue to grow in numbers. I'm sticking to my guns though and still believe that this Tapering is not going to become the norm. Eurozone Retail Sales were stronger than expected, but there was no traction in the Unemployment Rate, and the markets focused on the Unemployment Rate, which meant the euro suffered overnight. ADP report in the U.S. today, along with the FOMC Meeting Minutes dominate the day.
Currencies today 1/8/14. American Style: A$ .8930, kiwi .8290, C$ .9260, euro 1.3595, sterling 1.6425, Swiss $1.0990, . European Style: rand 10.6775, krone 6.1870, SEK 6.5490, forint 220.95, zloty 3.0730, koruna 20.1980, RUB 33.11, yen 104.75, sing 1.27, HKD 7.7550, INR 62.07, China 6.1079, pesos 13.02, BRL 2.3720, Dollar Index 81, Oil $93.74, 10-year 2.95%, Silver $19.56, Platinum $1,410.94, Palladium $734.80, and Gold. $1,226.95
That's it for today. Well, today is a big day for former Big league baseball players, as today the Hall of Fame vote gets announced. Greg Maddux, Tom Glavine will be shoo-ins, in my opinion. I watched our St. Louis U. Billikens basketball game last night on TV. I've seen them play a few games this year, and they could end up having a good year like last year, from what I've seen! And our Blues extended their winning streak to 6 games last night in Edmonton! Go Blues! I think we're down to about 5 weeks before Pitchers and Catchers report to spring training, and a little over 2 months before I report! Jr. Walker and the All-Stars are playing on the IPod this morning. Love that sax! I see on the TV the people talking about false praise pressures kids. Hmmm. Would that be like “everyone gets trophies”? I better not get started on all that! OK. back to regular timing this morning, so I'll get out of your hair for today, and hope you have a Wonderful Wednesday!
EverBank World Markets