In This Issue.
* Currencies are rallying VS the dollar.
* Iron ore prices rally for two days.
* China talks more RRR cuts.
* Martin Weiss talks BRICS!
And Now. Today's A Pfennig For Your Thoughts.
The Two Day FOMC Meeting Begins!.
Good day.. And a Tom Terrific Tuesday to you! Front and Center this morning. Well we received the happy news yesterday that colleague, Mike Meyer, sometimes Pfennig writer, and wife Sarah, celebrated the birth of their son, Jacob on Saturday night. Jacob joins sister Gia, and the happy family are all doing fine. So, it's not every day that I can start the letter with happy news like that, eh? I could always make up happy stuff, but that's not me. I feel what I write, and it's all out there on my sleeve, which gets me into trouble now and then, but hey! They love me, and the Pfennig, they just can't show it! HA!
The dollar is getting whacked this morning. I told you yesterday about the gains I was noticing in the currencies this month, and today just adds to those gains. I certainly hope that those of you dear readers that have been waiting for the “turn-around”, are seeing this. Is this the real deal? Or is this a “false dawn”? Well, only time will tell folks. And I would say that its timing is early, according to what I saw coming, but then the dollar's move was really strong, fast and furious. Overdone if you will, so this could just end up being a correction, and the real move is still in the cards later this summer, or. it could be the “real deal”. That's a decision that investors have to make, but if you really want to get in at ground zero, you can't think that it's a false dawn.
The Aussie dollar (A$) is the best performer overnight, but the Norwegian krone, and New Zealand dollar/ kiwi, are not far behind. The A$ move came about initially when the price of iron ore rallied for a second consecutive day, and the news that China was thinking about reducing their reserve ratio requirement again, which as I've told you, it like a rate cut, without debasing the currency. In fact the Chinese renminbi was allowed to appreciate again last night. Hmmm.
I just read a piece by Martin Weiss regarding his feelings toward the BRICS, and he was very optimistic about Brazil, China, India, and Russia, but never really mentioned S. Africa, but that's OK, I wouldn't either! Weiss, went through all the things I've told you previously, like how in Brazil , China and India there is now a middle class of people that are driving cars and spending money on domestic goods, and the domestic economies of these countries are on the rise. I've told you all that stuff previously, so it was nice to see the well-respected Martin Weiss agree with me!
The dollar's whacking is coming courtesy of the latest survey of economists by Bloomberg asking them when the Fed will raise rates, and the latest survey 73% of the 59 economists surveyed said that the Fed will wait until September to hike rates. When you push things of that far into the future, and yes, I know in the whole scheme of things, it's not that “far into the future, but for the markets 5 months is like an eternity, and when you push things like a rate hike that far into the future, the markets begin to think that it might not happen at all. Of course if they read the Pfennig, and listened to me, they would already know that!
So. Like I saw previously this morning, the Chinese renminbi / yuan was allowed to appreciate again last night, and that came after the Peoples Bank of China (PBOC) Deputy Gov. Yi, said that “there was significant room for further adjustments in the reserve ration requirement. I think he said that because there rumors going around that someone's underground and, no wait! The rumors are about how China might opt to do a buy bonds (QE) to stimulate loans. The Wall Street Journal (WSJ) is even reporting on this rumor. But I think Yi, came out to try and squelch those rumors.. I hope it worked, because I really don't think China, with their over $4 Trillion in reserves, needs to deal with their economic slowdown like this. And I don't think they are anywhere close to “keeping up with the Joneses” here. (you know, Japan, the U.K. and U.S.) It would behoove them to keep the thought in mind that I drilled into my kids when they were young, and would ask why they couldn't do something “:all the other kids were doing” . Because, I would say, don't you want to be better than X? So, China, don't you want to be better than the U.S. , U.K. and Japan?
The British/ U.K. pound sterling (pound) has gained ground overnight, but I really think that's more of a result from the dollar weakness than it is from pound strength. You see, overnight, U.K. 1st QTR GDP printed and was well short of expectations at just .3% (expected .5%) which turned out to be the weakest quarterly print in two years. Can you imagine what this would look like if Bank of England Gov. Mark Carney, actually did hike rates in the last year, when everyone but Chuck believed Carney's promises of rate hikes? Good thing that didn't happen, eh? But then it should come as no surprise to you Pfennig readers who kept reading me saying over and over again that Carney and his bag of promises would fail to deliver a rate hike, because the U.K. economy was all smoke and mirrors, they had too much debt to deal with. And now here we are, and look what's coming to light. No strong economy, no rate hikes.. Hmmm
The Indian rupee is rallying today, which makes two consecutive days of rally, after what seems to be a month of Sundays where the rupee was getting sold. I told you last week or before, that all the investment flows that were going into India were leaving, as they lost their patience for the unlocking of the Indian economy. Investment flows have begun to return to India, and it's of no coincidence that earlier this month, a bill was passed to allow investors to use the double taxation avoidance treaties that have been signed between India and other countries. Without that clarification, investors would face a 20% tax on their past capital gains. So, the withdrawal of funds wasn't just about losing patience, it was also about avoiding a 20% tax. But now that the tax thing has been worked out, the investment flows return. But for how long this time?
Come on India, come on Rajan, come on Modi, don't let all your good work to date be wasted, you've got to keep working!
Here in the U.S. most of the focus in the markets that is, because outside the markets, the focus is on Baltimore, but inside the markets, the focus is on tomorrow's FOMC meeting. Which is a real shame, because the focus of this country should be on how they are going to pay for their debts? Take this for instance. I have to admit that I missed this news the first time through, but thanks to someone I was able to pull it back up, for it's that important to miss! U.S. Student Loan Debt now totals $1.3 Trillion, and nearly one-third of the payments are delinquent. And when they don't get paid back, do you know who will pick up the tab? That's right, you and me, the taxpayers that's who! So. right now, I've put two kids through college, without them having one cent of debt, and my third kid will be afforded the same debt freedom as long I as I have anything to say about it, but what gets me, is that I will most likely end up paying for a few other college educations. That just makes me one big happy camper. NOT!
So, do you know who the “big winners” are regarding the currencies, when it looks like the Fed is going to delay their rate hike? Yes, Gold. But what other currencies? The Emerging Markets collection of currencies. These Emerging Markets currencies can get whacked on the slightest thing or data but when they rally, they. rally! It's the volatility that can drive someone batty when you think about it, so why not remove the risk? That's what our MarketSafe ideas are.. well.. ideal! For they remove the risk of currency volatility that leads to losses. You do have to tie up your money for 5 years, but 5 years is no biggie, it will be 2020 before you know it!
Well, Gold shot up $22 yesterday and returned to $1,200. I heard over the weekend that El Salvador, sold 80% of their Gold reserves. They say that El Salvador had 5,412 tons of Gold and they sold it for $206 Million, and that they sold it to diversify their reserves to protect it against market volatility. Hmmm.. Now, wouldn't you like to know who they sold their Gold to? Any bets that China, India and Russia took down a large chunk? I went into the China and Gold thing in detail yesterday so I won't go there again, but if you missed it, you can read it on the archives of the Pfennig blog site: www.dailypfennig.com But I did want to also mention that.
And the U.S. Data Cupboard has the S&P/ CaseShiller Home Price Index for us today, along with the National Consumer Confidence. Neither of these two are real market movers, so they'll print and the markets will shrug them off, and keep their focus on the FOMC meeting, which actually begins today, and ends tomorrow. Yes, one of those 2-day FOMC meetings, where the board games all get brought down from the shelves to be played to pass the time today, or maybe the FOMC will need an extra day to put together the statement they will tell the press and the markets tomorrow that explains how they went from “a hate hike in June” to a “rate hike sometime down the road”. I think I would rather hear cries of: By Joe, you sank my battleship coming from the room where the FOMC will be meeting.
To recap. The dollar is getting whacked this morning, as the latest Bloomberg survey of economists show that 73% of them think the Fed is going to announce the rate hike is being delayed until September instead of June. Iron ore prices have rallied two consecutive days, and that has the A$ on the move higher, leaving the thoughts of parity with kiwi in its rear view mirror. Martin Weiss talks up the BRICS, but doesn't say anything you haven't already heard from me. China is reviewing more Reserve Ratio Requirement reductions, which Chuck reminds you is like a rate cut, and Gold rises $22 yesterday.
Currencies today 4/28/15. American Style: A$ .7950, kiwi .7690, C$ .8285, euro 1.0935, sterling 1.5295, Swiss $1.0450, . European Style: rand 11.8960, krone 7.6780, SEK 8.5850, forint 275.45, zloty 3.6595, koruna 25.1410, RUB 52.13, yen 119.00, sing 1.3215, HKD 7.7510, INR 63.14, China 6.1209, pesos 15.31, BRL 2.9045, Dollar Index 96.35, Oil $56.84, 10-year 1.92%, Silver $16.42, Platinum $1,142.88, Palladium $779.85, and Gold. $1,203.50
For What It's Worth. Today is the birthday of two colleagues here Luke and Lara. Now, that has a ring to it doesn't it? Oh, that's right, that was the General Hospital couple from years ago! So, Happy Birthday to both of you! A HUGE loss by my beloved Cardinals last night, and I'm not talking about the game. It was confirmed yesterday that our Ace pitcher was going to miss the rest of the season, and might not be ready by next spring! UGH! I'm surprised that the Blues, who's season ended in a 1st round playoffs ouster, didn't already announce major changes for the team. Don't tell me we're going to remain status quo on a team that wilts in the playoffs? Maybe the owner is still shocked by the 1st round ouster. Oh well, out of my control, no reason for me to fret over it. The sun is up, the sky is blue, but there's one thing missing. warmer weather! It's been quite chilly crossing the bridge each morning. But the warmth will come, and until then I'll take the blue skies and sun any time! I had a reader send me a note yesterday, saying that he thought he was the only person that remembered the band King Crimson. I laughed, and said, not where I came from, we all knew the band King Crimson! Right Mike? Well, those of us that were into music. In 1969 when their most famous song was released, In the Court of the Crimson King, I was a freshman at Roosevelt High School in S. St. Louis, and my life revolved around music and sports. (I guess girls would be thrown in there too! HA!) So, with that, I've got to go. I hope you have a Tom Terrific Tuesday!
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