Good day… And a Wonderful Wednesday to you! And Happy Halloween! Yesterday, I told you how I love to see the little kids in their costumes, and hear their awful jokes. I do love that, for it reminds me of when I was a kid, but. our costumes were always handmade and our parents didn’t take us from house to house. I understand the parent intervention, but feel bad for the kids because Halloween is for kids to be kids. Oh well. can’t wait for the first Trick-or-Treaters to show up tonight!
Boo! Just thought I would get that out of the way. When Alex was little, I used to tell you all what he was going to dress up as for Halloween. Now that he’s 17, those days are over, although, I do believe he’s going in a Toga to school today! HA! Toga! Toga! A little Animal House for your reading enjoyment on this Boo! Halloween.
Well, the markets here in the U.S. are set to open today, after being closed for the last two days. And apparently, the risk assets, are looking forward to the NY open today, as they are rallying this morning. The euro has traded to 1.30 (again!) and Gold is up $9 this morning. Hey! It’s better than being poked in the eye! (yes, it’s all fun and games until somebody loses an eye! HA!) But, as we all know all too well, the NY traders could see things differently when they arrive this morning, so. let’s not take our rally caps off just yet, this risk asset rally needs all the help it can get! And. I guess we should brace ourselves in case there’s a trading frenzy that develops when the markets open, considering they’ve been closed for 4 days (weekend and two weekdays).
The euro is a on a two-day rally, and it’s all about more opportunity to get things calmed down there. This week’s flavor is Portugal. The word on the street is that Portugal is close to agreeing on a budget. The initial vote will take place soon by the Portugal Parliament. As Greece, Portugal, Italy and Spain all settle down, investors feel better about the euro. But don’t think for one minute that the euro is out of the woods on this. But I still hold to the idea I put forth some time ago, and that is in 3-5 years, the Eurozone will be coming out of recession, that was due to austerity implementation, but, at that time, the countries of the Eurozone will look much better, and form a base from which to grow without the albatross of runaway debt hanging around their necks. I know 3-5 years is a long time to wait. but in reality, 3-5 years is nothing. time flies when you’re having fun.
You know, I’ve beaten the drum for the Asian currencies for some time now. I read a story on the Bloomberg this morning that mentioned that the Asian currencies were set for a 5th consecutive monthly gain VS the dollar. And who knows how long this run can go, but with Fed Heads like Fed Minneapolis President, Kocherlakota, spouting off things like “Fed policy is too tight, and The FOMC must offset these adverse shocks by making monetary policy more accommodative.” He went on to say that “some observers argue that the Fed has done too much, has been too accommodative, I strongly disagree.”
Geez Louise! I sure hope that the rest of the FOMC (I know of at least two FOMC hawks that don’t) agrees with Mr. Kocherlakota. Look, the ZIRP (zero interest rate policy) and the Quantitative Easing (QE) policies appear to be helping, but there will be unintended consequences from these policies folks. We know that the FOMC has targeted asset prices with these policies. and the last time the Fed, led by Allan Greenspan, went about targeting inflation, they created the housing bubble. Now, you know that they never in a million years thought a housing bubble would be the unintended consequences of their policy, but it was. It was the root cause.
OK.. back to the currencies and metals. I could spend hours on the things that the Fed has done to make things bad here.. or. to start with you could read Bill Fleckenstein’s book on the Fed’s Bubbles. Yeah, that’s the ticket! It would be easier for me if you read his book! I’m sure you can find it on Amazon, that’s where I bought it years ago.
The Norwegian krone has been on the rally tracks, as it is still attached to the euro car. When the traders wake up one day and smell the coffee and realize that Norway (& Sweden for that matter too) is not the Eurozone, is not Greece, is not Italy, etc. Then the krone can get back on the rally tracks for good! I can’t tell you when the traders will wake up and smell the coffee, but I do believe in my heart of hearts that the day will come.
I read some research yesterday that talked about the Swiss National Bank (SNB) and their currency reserves. I reported year in the past year, that the SNB, to defend their ceiling level with the euro at 1.20, would have to sell francs and buy euros. Well, buy euros they did! And earlier this year, their weighting of euros in reserve was getting pretty out of whack. But in the past couple of months, the pressure on the 1.20 level has backed off, and so has the selling of francs and buying of euros. That gives the SNB the ability to further diversify their currency reserves. You might recall that I told you a few months ago, about how the SNB had begun to buy Aussie dollars (A$). Well this diversification has continued, which is good news for the A$ and the other currencies in the SNB’s allocation.
Speaking of Australia, and the A$… The A$ has also been on the rally tracks the last two days, and is on the tracks on its own accord, not just following everyone else. Aussie Building Approvals were much stronger than expected. which is causing those bets on rate cuts next year to be further pared back. Aussie Building Approvals increased 7.8% in Sept. from August. The experts had a consensus forecast of 3%, so the data blew the consensus out of the water! I told you that I didn’t agree that those rate cuts would be needed, because of the stronger than expected data prints that just keep coming for Australia.
But. the keymaster, China, will either give the green light for further optimism in this region, or the yellow or even the red light, when they print their latest manufacturing report tomorrow. I believe that we could very well see the green light turned on, as I expect the Chinese Manufacturing Index (PMI) to have moved back over 50 (remember 50 is the index number that determines whether or not manufacturing has expanded or contracted.) Last month the number came close at 49.8, so I expect to see a better than 50 number for October. I’m not saying it will be like 52 or higher. I’m saying it will be 50 point something. like 50.5.
Did you see the results of the S&P/CaseShiller Home Price Index yesterday? Well, for all of you who didn’t see it, Home prices increased 2% in August, the strongest move in home prices in 2 years. When I saw the data, I said to Mike Meyer, who has returned from his honeymoon, all tanned and looking relaxed, “you know, there comes a time when something gets so low in price that it looks attractive, but. I don’t think that with our unemployment problem that this price increase has legs.”
And Gold is up $9 this morning. I had a dear reader send me a link to a story on Germany missing their Gold. and that Central Banks around the world (except China and Russia) could also be missing their Gold. That’s a scary thing to think about. and I hope it’s not true, but I wouldn’t put anything past these Central Banks these days. Any way. Gold is up as the dollar is down, which is how it’s supposed to work, as Gold is an anti-dollar currency.
Then There Was This. I get asked all the time by people that think that their Gold could get confiscated by the Gov’t like President Roosevelt did in the 1930′s, could that happen again? I always say, that I wouldn’t put anything past this Gov’t as it could very easily do something like that, but. I doubt it seriously, because in the 1930′s Gold was tied to our money. it’s no longer tied to the dollar. But, I saw this on Ed Steer’s letter. an explanation of the confiscation point by the well respected analyst and investor, Jim Sinclair. so, here’s Jim’s take on the question.
“In the 1930s gold was to the monetary system what ‘quantitative easing’ is today — a means of increasing the supply of money for Federal Reserve and Treasury Department discretionary use. The secretary of the treasury and President Roosevelt set the gold price higher arbitrarily at their daily breakfast — higher because, to create money then, the system required a higher value of gold to have more money outstanding. This is why Roosevelt ordered the confiscation of gold — to unfold his type of monetary stimulation, his QE. This is what confiscationphiles simply do not know.”
Chuck again. good to know that Jim Sinclair and me are singing from the same song sheet.
I also want to talk about Friday’s Jobs Jamboree a bit. You all know just how questionable I believe the jobs data has become each month. I have my own theory on why that is, but won’t bore you with that now. The thing I want to point out is that this election next week has been all about jobs (never once did the debt become an issue). So, if you believe what I do and that the jobs numbers books are cooked, why would we pay attention to them? And. we need to make sure we don’t base our votes next week on these jobs numbers. Why should some guy in the back room at the BLS decide who’s president? However, if you are one that believes that these reports are all hunky dory, then I’m sorry I wasted your time here.
To recap. The two-day currency rally continues today, and the U. S. markets will reopen today, possibly giving way to a trading frenzy. Things in the Eurozone continue to calm down, but the euro isn’t out of the woods. The Swiss National Bank is back to its normal diversification of its currency reserves and backing off their buying of euros to support their 1.20 euro/ franc cross. And Australia printed a very strong Building Approvals report, that has the rate cut bets getting pared back further.
Currencies today 10/31/12. American Style: A$ $1.0390, kiwi .8225, C$ $1.0030, euro 1.3010, sterling 1.6115, Swiss $1.0770, . European Style: rand 8.6690, krone 5.6890, SEK 6.6115, forint 218, zloty 3.1795, koruna 19.2440, RUB 32.21, yen 79.80, sing 1.2195, HKD 7.75, INR 53.81, China 6.2368, pesos 13.04, BRL 2.0270, Dollar Index 79.73, Oil $86.35, 10-year 1.75%, Silver $32.25, and Gold. $1, 719.65
That’s it for today.. Boo! It’s Halloween! Ok. you know that the Pfennig arrived very late yesterday. Given the problems from the hurricane/ super storm, it was somewhat unbelievable that it went out at all! However, as I’ve told you many times before, when you don’t see it in your email box, simply go to: www.dailypfennig.com and read it there! Speaking of the Pfennig’s website, I wanted to take a minute here to respond as a whole to all the comments left on my Sunday Pfennig. I would like to thank everyone that responded to my Sunday letter on the debt.
Even if you didn’t agree with me, it did cause us all to stop and think, which is what I would love for our leaders to do, regarding the exploding debt. I would never believe that I have all the answers, but truly appreciate the Bank to allow me to speak my mind. OK. the people out East will be attempting to put things back together now. my thoughts are still with them. Can’t wait to see the grandkids tonight. Little Everett is not a “go with the flow” kind of kid, so getting him to wear a costume will be a real challenge. Little Braden is too young to throw a fit over what they put on him. And Delaney will be so cute. I hope you get as big a kick out of the little ones in costumes that I do, and you have a Wonderful Halloween Wednesday!
EverBank World Markets