In This Issue.
* Currencies trade in tight ranges.
* Gold attempts to gain back losses.
* Kiwi sees profit taking.
* Yen losing safe haven prop?
And now. Today's Pfennig For Your Thoughts!
Waiting for Friday.
Good Day! . And a Wonderful Wednesday to you! Well, I hope you didn't fall for any April Fool's Day pranks / jokes yesterday. No one tried one on me, because I'm the Duke of Earl when it comes to pranks, so they figure it's useless to prank a prankster! HA! Duke, Duke, Duke of Earl. As I walk through this world, nothing can stop of the Duke of Earl! HA! Now brings back some memories, eh?
Well, once again this morning, the currencies are a mixed-bag-o-nuts, and look very similar to the levels they held throughout our Tom Terrific Tuesday. However, there's always one in the crowd that doesn't adhere to the rules of the day. And that “one” last night was the New Zealand dollar /kiwi. It was bound to happen eventually, folks. A Huge round of profit taking on long kiwi positions is to blame for the near 1-cent drop in kiwi overnight. I'm not worried about kiwi falling apart here, this is healthy for the stale long positions to get out with profits, for that will keep them coming back to establish a new base in kiwi. Other than kiwi, the rest of the currencies are basically flat to yesterday's levels.
I have this feeling that the currency traders, investors and so on, are simply taking a wait-n-see attitude with the currencies, until they see the color of the Jobs Jamboree on Friday. I told you Monday that the markets were highly anticipating this report from March to see if there was a “catch-up” from the previous month's lack of job creation due to bad weather. And if they get what they're looking for, it will be a sunshine and lollipops for the stocks. Bonds on the other hand might want to look for cover, and the currencies? Well. one might say we'll need to batten down the hatches until it blows over! And what happens if the markets don't get what they're looking for? Well, just do the reverse of all scenario above. Of course that's just my opinion on what to look for, and I could be wrong in the end.
So, I guess right now, you're thinking, “well that's all great, Chuck, but you didn't tell us if you think the Jobs report will be good or disappointing”. That's right! I did that on purpose, as of right now, I don't have a feel for what we'll see on Friday in the Jobs Jamboree. We'll get a hint of what to expect when the ADP Employment Change report for March will print. But then, in recent months, this precursor to the Jobs Jamboree hasn't given us anything in the form of a hint. As of right now, the “experts” believe that job creation in the U.S. during March will have hit a net number of 200,000. I'm not sure that really represents a “catch-up”, as this is still isn't even the number we need to add each month to rebound!
The euro remains stuck in the mud around 1.38. The single unit climbs above 1.38 each day only to see it fall back below the figure by the end of the day, but never very far below the figure, and that tells me that two things are in play here. The ECB meeting tomorrow, which I told you on Monday is looked at as a Big meeting, but will yield nothing. And the Jobs Jamboree on Friday. No one wants to go out on a limb here. And even though, as I reported to you here, the Chinese renminbi / yuan overtook the euro as the number 2 currency in global trade last year, the euro remains the offset currency to the dollar, and therefore, with everyone waiting to see the jobs data from the U.S. the offset currency to the dollar remains stuck in the mud.
And on the good news side for the Eurozone. In Germany, the Eurozone's largest economy by a wide margin, it was reported that the service workers have secured a wage deal that will see 2.1 Federal workers receive a 5.4% wage increase. So, there's no wage deflation going on here, at least in this sector. Other sectors will come due for negotiations soon, and this result will help them. And with the European Central Bank (ECB) knowing this, they will not respond to those deflation campers wanting more stimulus. And that's all good for the euro going forward folks.
I had someone ask me yesterday why the return of strength to the Aussie dollar (A$), when by all accounts it was going to fall to 85-cents or lower. It's a long story that I hope to cut short. There are a few things in play here. First, the Aussie economic data has been better in recent months, and hopefully we'll see that continue tomorrow when their latest Retail Sales report will print. 2nd, we have the Reserve Bank of Australia (RBA) backing off their previous statements about needed a weaker currency. 3rd. we have Japanese investors returning to the Aussie bond market, and finally, to feed those returning bond buyers, issuance of Aussie bonds has increased in recent months. My friends over at Morgan Stanley sent me some data on this that's pretty impressive for the A$… “In terms of marginal returning buyer, we know that Japanese investors rebought A$ 5.4 Billion of A$ assets in the four months to January, having sold A$ 34.2 Billion in the 11 consecutive months to September, 2013.” I would say that's quite the turnaround, eh?
Did you hear that there was an 8.2 Richter Scale size earthquake registered off the coast of Chile last night? Well, that news has sent copper prices soaring, and that has spurred a raw materials rally, and with the knee bone connected to the leg bone, and so on, the Canadian dollar / loonie sees some love come its way.
I know that I've raved about the Moody Blues album, Seventh Sojourn, before. But this bears repeating, as I listen to a couple of songs from the album this morning. I get chills when I hear this album. My mind goes back to when I was a senior in high school, and this album was popular. I used to think the band was a full orchestra, only to find out that the orchestral sound came from an instrument called a Chamberlain. At least that's what I recall it being called! Sorry for the meandering away from the markets to talk about music, but it IS my letter, and I DO get to talk about what I want to talk about! HA! (to a degree that is!)
The Japanese yen continues to lose ground to the dollar. This weakness in the yen so overdue. But every time I think the yen is about to take a ride on the slippery slope even lower from here, the currency gets dragged back up by “safe haven flows”. When will the markets get the news that the Japanese Gov't wants a weaker yen from here, and stop treating yen like some strong fundamental safe haven currency? That'll be the day, when you say goodbye, Yes, that'll be the day when you make me cry. And the crying will be all that's left for those that didn't see that yen is no safe haven!
One of the brightest shining currencies for the past 6 months as been the Indian rupee. Funny it was just a little more than 6 months ago, that I told Bloomberg Radio that things were going to turn around for the rupee. Not that I am clairvoyant or anything, I was just looking at fundamentals and the changes that the new Indian Central Bank (RBI) Gov. Rajan, was going to implement. A very successful friend of mine tells me all the time. These companies, countries, etc. tell you what they are going to do, you just need to read it, understand if what they are going to do is good or bad, and make your investment decision. He is bang on here!
So, as China learns how to introduce volatility to their currency and teach the markets a tough lesson about thinking that the renminbi/ yuan was a “One Way Street”. The Indian rupee takes up the slack. Now, the question is. if you missed the opportunity to buy at cheaper levels, is there still more slack to be taken up by the rupee? Well, I think that depends on whether or not we continue to see the foreign inflows into rupees. In the first quarter of this year, global funds pumped $9.3 Billion into Indian markets. It appears to me that inflows will continue. but. the over 4% gain in the rupee in the past 6 months might be the “beef” of this sandwich.. In other words, most of the gains might already have been booked. Of course I could be wrong about that, and for those of you who missed the opportunity to buy when I was talking to Bloomberg Radio, you'll be glad I was wrong!
Gold continued to see selling yesterday throughout the day, losing more ground, but is up $4 this morning, and attempting to gain more. Not much else going on in the precious metals today, nobody writing about how if you don't buy now, you'll be sorry, or no one writing about $10,000 Gold. I love those stories, they make me feel good. But in reality, the price of Gold has been stagnant. I had a long conversation with a client yesterday regarding Gold. I told her that with all things being equal, I believe that one day, we'll look back at the price of Gold now, and not worry about whether we bought it at $1,100, $1,200, $1,300, etc. And I know I've already said this 2 previous times in this letter, but just for GP. That's my opinion and I could be wrong!
And then there's this on Gold. I was reading Grant Williams' latest letter. He actually has the best letter that I read. And in it he quotes James Rickards on China and Gold. here's what Rickards had to say. “The reason China is acquiring Gold is to hedge its exposure to dollars. China actually wants a strong dollar because they own over $3 Trillion in dollar denominated paper they cannot dump. If the U.S. inflates and devalues the dollar, Gold will go up much higher in price. Whatever China loses on its paper due to dollar inflation, it will make up on its Gold profits. So, China is hedging dollars with Gold. Other investors should do likewise.”
The U.S. Data Cupboard will yield the Feb Factory Orders data today, which is expected to reverse January's -.7% print. And of course the ADP Employment Change report we talked about earlier. Tomorrow we begin to get into the meat of the data this week, and then Friday will be a Jobs Jamboree to beat all Jobs Jamborees!
For What It's Worth. You know, over a year ago I wrote a Sunday Pfennig, and called it Chuck's Debt Solutions. In it I addressed the 600lb Gorilla in the room. The so-called entitlement programs. Now, I'm not saying that House Budget Committee Chairman, Paul Ryan, is a Pfennig Reader, although he should be if he isn't, but his new plan to balance the budget looks eerily familiar.
From the WSJ. “House Budget Committee Chairman Paul Ryan (R., Wis.) will propose eliminating the government's budget deficit in 10 years through major changes to Medicare, Medicaid, food stamps and other programs-while for the first time taking the controversial step of counting in assumptions on how the plan would spur economic growth.
The fiscal year 2015 budget blueprint is a largely political document that establishes House Republicans' commitment to eliminating the deficit as a top priority. The GOP budget resolution stands no chance of passing the Democratic-controlled Senate, but budgets have long served as important markers of party priorities.”
Chuck again. I didn't put this here today to be political. I put this here to point out that these are the things that need to be addressed and I don't care who comes up with them, Shoot Rudy, I came up with them first, and I'm the last person to be political! Of course as the WSJ says, this budget plan has no chance of passing. But, it's high time we had some high level discussions about these things, don't you think?
To recap. The currencies are range trading again, with only one exception overnight, the New Zealand dollar/ kiwi took a near 1-cent hit and it appears to be nothing more than profit taking by stale long positions. The rest of the currencies appear to be in a wait-n-see mode as this Friday's Jobs Jamboree looms as the data to beat all data. Japanese buyers and more available bonds appear to be what's behind the A$ strength, and Gold is attempting to gain back some losses this morning.
Currencies today 4/2/14. American Style: A$ .9250, kiwi .8565, C$ .9080, euro 1.3785, sterling 1.6645, Swiss $1.1305, . European Style: rand 10.6225, krone 5.9620, SEK 6.4630, forint 222.85, zloty 3.0295, koruna 19.9150, RUB 35.33, yen 103.70, sing 1.2610, HKD 7.7570, INR 59.88, China 6.1493, pesos 13.06, BRL 2.2585, Dollar Index 80.09, Oil $99.67, 10-year 2.77%, Silver $19.83, Platinum $1,429.25, Palladium $786.61, and Gold. $1,283.78
That's it for today. Well, it's our April Showers' month! April Mosley, our IRA guru, was renamed, “April Showers” by me years ago, so it's now her month! And Showers are what we're getting! It was raining cats and dogs this morning for my drive in. And it's supposed to be that way today and tomorrow. UGH! My neighbor, Paul, said to me the other day, that “we need the rain”, and I said, are you kidding me? After all the snow this winter. wait until all the snow melts, the rivers will be out of the banks again! A tense win last night for our Blues. I went to bed with the score tied 0-0, and it went to overtime, and a shootout before the Blues were victorious. I'll say it again, that a shootout is a stupid way to decide a game. One of my fave cartoons is a cartoon called Pearls Before Swine. and they decided in the cartoon the other day to stop saying stupid and say smartless. So, a shootout is a smartless way to decide a game! HA! And bit of sadness this morning. Kathy's aunt Sammy died this week and will be put to rest today. Her daughter told me last night that “her mom loved me so much”. That was a very sweet thing to say to me, and I'll always remember that. OK. I've gone on too long today, I hope you have a Wonderful Wednesday and all that!
EverBank World Markets