Good day… And a Wonderful Wednesday to you! I’m dragging the line to day, so I have no idea if this will be of normal length, longer or short-n-sweet at this point. I guess you’ll have to read through it to see what’s in it! HA! The Beds are Burning by Midnight Oil is first up on the iPod this morning, so that’s a good way to start, no matter how much I’m dragging the line this morning.
These days are to be expected, given where I am with the stuff I take each day, just so long as they don’t become a regular part of my routine! I don’t have a problem with feeling this way, as I know they are a part of the process. And so. I begin today’s letter. sorry for the dissertation on how I feel to start the day!
Well. the back and forth in the currencies and metals continues. In recent times I’ve been talking about the divergence I’m seeing in the risk assets, and this morning is a good example. Oil is flat, Gold is up, and the euro is down. All three anti-dollar investments, and three different directions. The euro is down, but the trading range is about 1-cent either way, so the move isn’t exactly screaming a new direction!
The euro lost some ground this morning, when German Industrial Production for November printed less than forecast. German Industrial Production gained in November .2% which erased the -.2% fall in October. But the forecast was for a more robust figure of 1%… So, the disappoint, reminded everyone that the recession in the Eurozone has filtered over to Germany. But as you notice, the German IP was positive, which I think shows that Germany still has growth. Which is important, given that Germany’s economy is the largest of the Eurozone.
BMW, the largest maker of luxury cars, believes that growth in the U.S. and China will given them growth in earnings in 2013. Hmmm. That’s interesting. I would say that 1/2 of that statement will be correct, as growth in China will be strong. But here in the U.S., I look for the stuck in the mud economic growth to be the case in 2013.
I read a very good article yesterday on China. The article centered on the new Chinese leader, Xi, and how he is a reformer, and wont’ be the robotic-like Hu (previous leader). (remember my attempt at being funny and saying that when Hu said there needed to be a change in the dollar standard, that “The dollar hears a Hu”?) Well. I’m sure those that continue to invest in China appreciate that the new leader will bring about more capitalism and changes in China. Oh, by the way, the Chinese renminbi / yuan reached a 19-year high VS the dollar yesterday when it touched 6.2216, the highest level VS the dollar since the government unified the official and market exchange rates at the end of 1993.
Yes, that’s 19 years ago. Kids born in 1993, always have had a remote control for the TV. They have always had cable, and an answering machine, they don’t know what hard contact lenses are, popcorn has always been cooked in the microwave, and then on the funny side, they don’t know who Mork was or where he was from!
OK. that public service announcement has been brought to you by the Pfennig. Now back to regular programming. Speaking of China. I was talking on the phone yesterday to a reporter from the Street.com, Joe Deaux, about the bump up in the price of Gold, after a couple of days when the shiny metal really got whacked. It was announced yesterday morning that imports of Gold for China and Hong Kong doubled in November. So I told him that. along with my thought heard here first 2 years ago, that China was going to eventually back their currency with Gold. Maybe not 100%, but a percentage that would make the renminbi/ yuan the most attractive currency in the world.
I went on to tell him that once the other countries like Russia, India, Brazil, and others, see how popular and attractive the gold backed renminbi was that they would follow, and all of that Central Bank buying would be very good for the price of Gold in future years.
Sometimes I feel like I write and say these things in a vacuum. People hear me but don’t listen to me. But one of these days, they’ll say. “Hey! I recall Chuck telling us this would happen” But then it will be too late to participate! I think about in 2000 and 2001 when I was on the road doing presentations based on the White Paper I wrote, titled: The Downfall of the dollar. At the time most people heard me but didn’t listen to me. Back in 2001, The Aussie dollar (A$) was 55-cents, the euro was 91-cents, Gold was $260, Silver was $4.70, the U.S. debt, which I thought then was unsustainable was $5.7 Trillion, a gallon of gas was $1.46, China was just awakening from their slumber. Chuck had hair, less weight, and few believers.
You see, sometimes, things are evident, but aren’t imminent. remember that. things might be evident but not imminent. But they eventually become imminent. When will you realize that they are becoming imminent?
It started with a whisper. I bet you thought I was going to go into the lyrics of the Neon Trees song! But not today. just pointing out that you need to listen to the whispers.
Yesterday afternoon, Aussie Retail Sales for November were much weaker than forecast, printing at -.1% (Vs .3%) which made those that thought the Reserve Bank of Australia’s (RBA) decision to cut rates in December was the right thing, look like geniuses. NOT! Australia didn’t need to cut rates in December or the previous time they were cut! But then that’s just my opinion, and you know that the Aussie Central Bank HAS to know more than I do about what’s needed in the Aussie economy! Yes, I said that with a straight face, but I’m finding it difficult to keep from laughing out loud!
Any way. this news in Australia pushed the A$ back below $1.05, but just barely. As I said yesterday, this data from Australia is old. and before the turn-around in China moved to terra firma. So, let’s keep the rate cut campers from jumping in there and acting like they know what they’re doing!
Well.. the fun times in Japan just keep rolling along. The new Gov’t in Japan is set to announce a new program to promote growth, inflation and a weaker yen, this Friday. However, most of their components of the program has already been leaked to the press. For instance, the Gov’t spending will be set to increase by Yen 13.1 Trillion, and that the Gov’t is set to go on an aggressive easing of monetary policy. The ratings agency Fitch, is looking at these ideas that the Japanese Gov’t are set to put in place and are warning the Gov’t that a downgrade is coming.
I wouldn’t touch Japanese yen with your ten foot pole at this point, folks. if you think that Japan has already gone overboard with stimulus, zero interest rates, and Quantitative Easing in the past, I think this is going to be a case of: you ain’t seen nothing yet!
And, as I get ready to go to the Big Finish. the price of Gold has given up the $5 gain it has posted when I turn the screens on today. I guess the NY traders arrived at their desks!
Then There Was This. Did you hear about AIG? Well first of all they are all over the TV this past weekend, bragging about paying back every cent they borrowed from the Gov’t. OK, that’s good. but then they announced that they are thinking about suing the U.S. Gov’t. my friends Dave and Addison over at the 5-Minute Forecast, reported yesterday that the “The NY Times reports the restored insurance company is weighing whether to tell the government agencies that rescued it during the financial crisis: Thanks, but you cheated our shareholders”. A $25 Billion shareholder lawsuit against the government will be voted on by the AIG board today.
Chuck again. ARE YOU KIDDING ME? Tell me this is a joke! Please! I have to go on to something else now, or I’ll blow a gasket!
To recap. the currencies and metals are mixed this morning with a slight bias to buy dollars, as economic data from Germany to Australia wasn’t the stuff that underpins a respective currency. China doubles it’s gold imports in November, so the push is still on to hoard more and more gold to eventually back their currency (Chuck’s thoughts). And Japan’s new government thinks they know more about stimulus, zero rates and quantitative easing than the previous Gov’t's from the past 20 years!
Currencies today 1/9/13. American Style: A$ $1.05, kiwi .8365, C$ $1.0125, euro 1.3050, sterling 1.6020, Swiss $1.0795, . European Style: rand 8.5880, krone 5.6150, SEK 6.5850, forint 222.55, zloty 3.1515, koruna 19.5550, RUB 30.41, yen 87.55, sing 1.2275, HKD 7.7520, INR 54.75, China 6.2251, pesos 12.78, BRL 2.0425, Dollar Index 80.55, Oil $93, 10-year 1.87%, Silver $30.39, and Gold. $1,661
That’s it for today. Well, my beloved Tigers got their debut season in the SEC basketball season going in the right direction last night with a win VS Alabama. I got through the letter this morning with no problems, so. I’ve got that going for me! The weather here has warmed up a bit, but that’s usually not a good thing in the winter, as it brings unstable weather. Ever since the tornado on New Year’s Eve of a couple of years ago that passed near my house, I think about this stuff more. I saw my St. Louis oncologist on Monday, and he checked my liver, kidney and thyroid function and they all checked out good. That’s a good thing, eh? It means I get to keep taking my chemo drug! As long as it continues to shrink the tumors I have, then that’s a good thing! And with that. I made it! I hope you have a Wonderful Wednesday!
Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837
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Comments
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Japan changes its government as quickly and as often as one changes one’s underwear. It is not a question of the new government know more than the previous government. The big question will be is the new government more corrupted than the previous government or less corrupted. I don’t have an answer. Let’s wait and see when the Japanese are going to change their underwear again. As soon as they change their underwear that will be the answer to the question.
Let’s for the time being forget about what the new Japanese government know or don’t know. Let’s talk about something that we all know. It is the US Debt Ceiling. Nobody knows what will happen come February or at least I don’t know. All I know is the president may invoke a controversial provision of the 14th amendment that may authorizes him to borrow more. The number 14 according to we Chinese is a very inauspicious number which means “sure dead”. Wow, this is scary!!
I just got a phone call from a friend in Beijing who read my post regarding the number 14. He said the US government can kick the can further down the road. I told him they have been kicking that can for so long and as a result the can has become as flat as Beijing Airport runway and they can’t kick it no more. Game over.
Japan’s leaders are as foolish as their American counterparts. Both countries want growth but that isn’t possible when a large chunk of their manufacturing has been gifted to China. Both will deficit spend until some sort of crisis ends it. The “We wither while China grows” game won’t last forever. The psycopaths running Communist China are on “auto-evil”: it won’t be long before they overplay their hand and end up in a war with Japan and/or the US.