Meet The New Boss, Same As The Old Boss…

Meet The New Boss, Same As The Old Boss…

November 26, 2013 Good Reads 0 Comments

November 26, 2013 · by 

Good Day!  And a Tom Terrific Tuesday to you! Well, today is starting out better than the last 7, so maybe I’ll get through it without issues today! Hey! You never know! I think I feel better today because I received a tentative spring training schedule for my beloved Cardinals! Going to spring training is one of those things that I would like to do now, instead of putting off until later… See, I’m no procrastinator! HA! The great Van Morrison is singing, Brown Eyed Girl this morning, so that’s a good one to start the day!

Well… As the day went along yesterday the dollar stretched its tentacles further VS the currencies, and the euro dropped below 1.35, (albeit briefly)  but Gold fought back and after having fallen $15 earlier in the morning, the shiny metal reversed its losses…  Strange, eh?  One would think that if Gold was rallying VS the dollar, that the currencies would be too… But not yesterday!

But that was yesterday… The overnight markets have turned the tables on the dollar, and the currencies, for the most part, are gaining VS the green/peachback… The euro is stronger this morning on comments by an ECB (European Central Bank) member, Coeure, who said that he expected inflation in the Eurozone to pick up gradually and eventually reach the ECB’s price stability target… The markets went with that statement, even though he followed it up with some comments about what the ECB would do if the price target for inflation wasn’t met… But the markets weren’t waiting around for that info, and they drove the euro up to 1.3550, as I write…

The Aussie dollar (A$) continues to bleed. Unfortunately, I told you yesterday that with the Reserve Bank of Australia’s (RBA) Deputy Dawg, Lowe, speaking, that he would probably take another shot at the A$, and so we should look for more downward movement… And that’s exactly what happened overnight… Lowe spoke, dissed the A$, and the markets sent the A$ to the woodshed again.  Then we had a different RBA member, Corbet, speak and talk about how the economy would be better off with a weaker A$… These RBA guys are becoming too predictable, they are going to have to change speeds or location soon, otherwise the markets are going to figure them out, and their plan to jawbone the A$ weaker… Then we could see all this bleeding stopped…

So, 2 of the 3 main anti-dollar assets are stronger this morning… Euros and Oil are seeing their prices move higher, while Gold trades flat… I’m still flabbergasted that the dollar didn’t fall to the floor yesterday, after the U.S. markets got a sniff of the Chinese announcement that was made on Friday afternoon. Wake Up! Come on markets, Wake Up! The Chinese are going to stop supporting the dollar!  Oh well, one day, when this news comes crashing onto the markets and they act as though it’s a surprise, we’ll all be sitting pretty, with our renminbi and the knowledge that we knew it was going to happen all the time!

Of course, I could be completely wrong about all that, and China’s announcement doesn’t mean a hill of beans to the dollar’s future… Come on, you know I had to say that, just to make everyone happy!  Oh… and the People’s Bank of China (PBOC) Gov. Zhou, just happened to mention last night that, “ China will widen yuan trading band in orderly fashion.”   Yes, you have to widen the band quite a bit before you float the currency, and Zhou knows this all too well… He doesn’t need me to tell him! Or draw pictures like I do for… oh, never mind!

Speaking of making everyone happy… The Bernanke Asset Bubble, which was a term coined by my guitar playing buddy, Steve Sjuggerud, which simply refers to how Quantitative Easing (QE) is inflating the stock prices, is making everyone happy these days… Well, that is every mom and pop putting their life savings into the stock market, since they can’t get any interest on their money at the bank… This is what fuels bubbles folks… But, new to be Fed Chair, Yellen, said she sees no signs of an asset bubble… So, we’ll just keep QE going… I saw on zerohedge.com that they referred to Yellen as the QEeen…

You know, earlier this year during the baseball season, the GM of the Cardinals was talking about a starting pitcher that they kept running out to the mound, only to watch him implode at some point early in the game, over and over again… The GM said, “Isn’t that the definition of insanity? Repeating the same thing over and over again, and hoping for a different outcome”   I’m reminded of that saying every time I think about the Fed implementing Quantitative Easing over and over again…

Oh, and I keep getting a kick out of all these analysts that think that the New Fed Chair, Janet Yellen, is going to be different that the two Fed Chairmen that preceded her…  The Who did a song with the lyrics: Meet the new boss, Same as the old boss…    that apply here appropriately!

Well, I’ve talked a lot lately about how I thought interest rates would be going higher in 2014, in countries like Sweden, New Zealand and Brazil, and others… The folks over at ANZ think we could very well see the Reserve Bank of New Zealand (RBNZ) hike rates as soon as January, as the RBNZ will not want to fall behind the inflation 8-ball…  But even this news isn’t helping the New Zealand dollar / kiwi right now, as it gets sold in sympathy alongside the A$.  But as we draw closer to January, we should see kiwi better bid as the markets will eventually get the idea that the RBNZ is ready to hike rates…

Sweden is another on the list of countries with rate hike prospects in 2014… But what’s this I’m hearing now? That the Riksbank is contemplating a rate cut in December?  One more in the rate cut cycle before turning things around in 2014? I would hope not! There’s no need to cut rates, now if you see the growth on a path that leads to a rate hike next year.  Simply stick to your guns, and wait it out Riksbank… come on, I know you can do it!  Unfortunately, I doubt that the Riksbank has the intestinal fortitude to sit tight and wait for economic growth next year…

About 11 years ago, I created a basket currency CD, that I called the: Prudent Central Bank CD… It had the usual suspects of Central Banks that promoted price stability and not growth at the expense of debasing currencies and fueling inflation…  But 6 years later, we had to scrap the CD, because all the formerly prudent Central Banks were no longer in that club… These days, there’s really truly only one or two what I would call prudent Central Banks… The rest have gone to the dogs!

I bet you thought I was going to leave you hanging there, and not give you the names of the Central Banks that I thought to be Prudent!  Well, I tricked you… It’s Tricky! (one of my beautiful bride’s fave songs!)  The Central Banks of: Singapore, China, Norway and Sweden (but Sweden could be bounced if they cut rates next month!)  There are others, but these are the ones that jump out of my mind… One of the poster boys for providing price stability for 10 years was the European Central Bank (ECB) but they squandered away that title with their own version of currency debasement, and bond buying…

An interesting story on the Bloomberg this morning highlights a Cold Storage Co in Stilwell Oklahoma, that stores frozen turkeys… Apparently, the Cold Storage Co warehouse is chock-full-o-frozen turkeys this year, and had to turn away requests from the major players, like Butterball, to store about 1 million more turkeys… Apparently, the producers of turkeys have flooded the market this year, and… apparently, the appetite for turkeys has abated a bit by U.S. consumers…

So, with all this over-production and reduced appetite, turkeys are selling about 4.8% less this year than last year… Which is a welcome drop given the 12% rise a year earlier… Does this tell us anything about inflation or the lack of inflation?  I think it does… and I think this is another reason why QE in the U.S. will continue… See how I tied that all back to QE? And with a little bit of Thanksgiving flavor! Sometimes I just can’t believe how creative I am! HAHAHAHAHAHAHA!

I see where the Swiss National Bank (SNB) President, Jordan, said that he, “sees no reason to remove ceiling on the franc”. In a survey of economists by Bloomberg, it was found that the economist believe the ceiling will remain in place until the first quarter of 2015…  Remember when the ceiling was put in place September 2011, and the markets tested the SNB’s resolve to protect the ceiling price of 1.20 to euros… Well, today, it sits comfortably at 1.23, and the franc is still strong… The stronger euro helps big time here…

The markets are still holding the Emerging Markets currencies down, by thinking that the Fed’s Taper Capers could begin soon… I just don’t see where the markets get this thought, but they have it, and “since they’re never wrong” we have to deal with it.  The Brazilian real, South African rand, Turkish lira, and others are all weaker on the Taper Capers thought, and will remain that way until the markets get it through their thick skulls that there will be no Taper Capers!

Gold is flat to down $2 this morning… I just don’t feel as though Gold has any positive momentum that it can harness right now… The guy over at the Rude Awakening thinks that Gold is going to $1,000… And the H.S. Dent folks think it’s going to $750…  I can’t get my arms around those numbers folks, for they make no sense to me whatsoever!

Before I head to the Big Finish this morning, I just saw on one of our TV’s here, that their economics guru named the city of Detroit as 2013’s economic Turkey… Recall that Detroit filed for bankruptcy earlier this year, and has $18 Billion in liabilities (unfunded pensions)… Well, wanna know the name of a city that has more than that in unfunded pensions?  Chicago…

For What It’s Worth… Dr. Paul Craig Roberts  decided to comment on the Chinese announcement that I talked about yesterday… I thank a long time reader (Thanks Bob!) for sending this along… Let’s listen to what Mr. Roberts has to say…

“Since 2006, the US dollar has experienced a one-quarter to one-third drop in value to the Chinese yuan, depending on the choice of base.

Now China is going to let the dollar decline further in value.  China also says it is considering undermining the petrodollar by pricing oil futures on the Shanghai Futures Exchange in yuan. This on top of the growing avoidance of the dollar to settle trade imbalances means that the dollar’s role as reserve currency is coming to an end, which means the termination of the US as financial bully and financial imperialist.  This blow to the dollar in addition to the blows delivered by jobs offshoring and the uncovered bets in the gambling casino created by financial deregulation means that the US economy as we knew it is no more.

The US economy is already in shambles, with bond and stock markets propped up by massive and historically unprecedented Fed money printing pouring liquidity into financial asset prices.  This month at the IMF annual conference, former Treasury Secretary Larry Summers said that to achieve full employment in the US economy would require negative real interest rates.  Negative real interest rates could only be achieved by eliminating cash, moving to digital money that can only be kept in banks, and penalizing people for saving.

The future is developing precisely as I have been predicting. As the dollar enters its death throes, the lawless Federal Reserve and the Wall Street criminals will increase their shorting of gold in the paper futures market, thereby driving the remnants of the West’s gold into Asian hands:

The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.

“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. (PBOC Says No Longer in China’s Interest to Increase Reserves,Bloomberg News – Nov 20, 2013)

Chuck again… You tell ‘em Paul Craig Roberts!  Remember, Mr. Roberts is the former assistant secretary of the Treasury…

To recap… The currencies made a reversal of yesterday morning’s moves throughout the day and in the overnight markets. Gold wiped out its $15 losses yesterday morning, but remains without wind in its sails. Chuck talks about Prudent Central Banks, what’s left of them, and Paul Craig Roberts talks about China’s plans to dethrone the dollar…

Currencies today 11/26/13… American Style: A$ .9115, kiwi .8190, C$ .9495, euro 1.3550, sterling 1.6175, Swiss $1.10, … European Style: rand 10.1215, krone 6.1075, SEK 6.5620, forint 220.50, zloty 3.10, koruna 20.1690, RUB 32.97, yen 101.45, sing 1.2525, HKD 7.7525, INR 62.51, China 6.1357, pesos 13.08, BRL 2.30, Dollar Index 80.76, Oil $94.44, 10-year 2.72%, Silver $20.05, Platinum $1,380.75, Palladium $719.35, and Gold… $1,247.68

That’s it for today… So… are you ready for Thanksgiving? You can’t say it snuck up on you… You’ve had a year to prepare! HA! Thanks to those that sent along kind words and notes regarding our special Sunday Pfennig… I enjoyed putting that one together, and especially enjoyed knowing that you enjoyed it too! Radiohead is playing on the IPod right now, remember them? That was my “try to remain young by listening to 90’s rock” period… I don’t know if that’s considered a Mid-life crisis, but at least I remained true to rock and roll roots!  We have 3 new babies to guys on the desk this past year, this will be their first Christmas with their babies, that should be special for them. OK… Robin Meade has on a shiny red top today, pretty festive I must say, in my best Ed Grimly voice!  Now, go make today a Tom Terrific Tuesday !

 

Chuck Butler

President

EverBank World Markets

Editor of A Pfennig For Your Thoughts

1-800-926-4922

http://www.everbank.com

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