Good day… And a Tub Thumpin’ Thursday to you! Van Morrison is greeting me this morning as I kick the day off, and he’s singing his great song, Into the Mystic. We received some sad news yesterday. One of our longest standing clients, who goes back to the Mark Twain Bank days, just received a cancer diagnosis, that looks like it will be fatal very soon. ? This client has been so supportive of me during my cancer problems, so it is like a good friend is suffering.
So… A somber start today. But I’m sure he wouldn’t want us to mope around, so let’s get going! Well, right out of the starters blocks this morning, there are two Central Bank meetings going on as I write. First up is the Bank of England (BOE), with their new leader, Mark Carney. Carney doesn’t actually have complete control of the BOE’s reins, until July. But, since he’s going to be man in charge, he might as well begin talking about his plans for the downtrodden and debt ridden U.K.
I did like what he had to say this morning, about currency intervention. “I do not, in general, think such action should be pursued when other instruments are available. In addition, consideration of any such action must take into account the G-7 convention against unilateral currency intervention.” OK, in other words, unless everyone is doing it at the same time, Carney won’t be intervening in the currency markets. The pound sterling gained some ground on the dollar with those words.
Next up, is the European Central Bank (ECB), and here, I think we’ll hear ECB President, Mario Draghi, continue his optimism toward an economic recovery, that he started at the last meeting. I don’t believe he’ll complain about the euro’s strength, and if that all carries through, we should see the euro add to its gains that it has already booked this morning VS the dollar, that was fueled by a better Spanish bond auction, and German Industrial Production that rose .3% in December, after a negative .-2% in November, thus giving us more signs that the German economy has turned the corner and is now on recovery street.
Regarding my thought that the Draghi won’t be mentioning the euro’s strength, I read a research paper that said, of the 170 ECB meetings that have taken place there have only been 15 occasions when the ECB expressed concern about the euro’s price level (10 have been about the weakness, and 5 have been about the strength). So, while I thought that France’s complaints about the strong euro would fall on deaf ears at the ECB, this information plays well, with my thought, eh?
Neither Central Bank will move rates today. so the words they choose to speak will be the drivers of their respective currencies. and right now, all is good. But that can change in a heartbeat, as we all know too well!
Overnight in the South Pacific, it was a tale of two employment reports. The Aussie employment report was positive, and the Aussie dollar (A$) tried to rally on the news, while across the Tasman New Zealand’s employment report contracted, and the New Zealand dollar / kiwi got sold.
Moving north from these two island nations, we find the People’s Bank of China (PBOC) warning the markets that “an economic recovery and demand expansion may pass into consumer inflation in a relatively fast manner.” A China analyst said that he thought the central bank was signaling that room for further monetary easing is quite limited, and I would agree! So, my thought yesterday that China might raise rates this year, might become a reality. Like California dreaming is becoming a reality.
This inflation threat in China is one of the main reasons I believe that China will eventually get back to allowing appreciation in the renminbi / yuan soon.
And then moving even further north, we find Japan, where the Japanese yen is hovering just below the 94 figure. But that’s just a breather being taken by the yen, folks. In my opinion that is, which could be wrong, but all the signs point to further weakness in yen.. Their debt has finally caught up with them. At least their economy is of the size that doesn’t allow the immediate attack on bond yields like what happened with Greece’s debt finally caught up with them.
Euro strength parlays into Swiss franc strength, as these two are tied together at the ankles. And so I’m sure the boys and girls at the Swiss National Bank (SNB) are banging their heads against the wall, for they were sure the euro would be going south by now and that would drag their franc weaker. But for the plans of mice and men. Makes me think that the SNB might be going back to the drawing board, and considering a change in the peg figure of 1.20. But you can count on a Central Bank to stick their hands in the cookie jar and act like they know what they’re doing. So, franc strength is not on terra firma in my opinion.
When I was telling you about the U.S. filing a claim against S&P, the other day, my conspiracy blood was boiling! So… just like Eagan Jones the ratings firm that got stripped of their mojo by the Gov’t for what I said was retaliation for Egan Jones’s insistence on downgrading the U.S. credit rating….. I also feel as though there has to be something with the lawsuit filed against S&P… for wasn’t S&P warning the U.S. leaders that if they didn’t make significant cuts to spending that their credit rating would be downgraded? And why did it take 6 years for this lawsuit to become a reality? OK… I’m sure if I was on CNBC, and connecting the dots for them, they would be laughing at me, and telling me to take this idea to Hollywood…
Remember when they did that to me a few years ago when I tried to explain how the stock market was seeing its gains in the afterhours trading? The laughed, scoffed and ridiculed. but then a couple of months later it was revealed with facts that this was what was happening. I never received a note from those people at CNBC apologizing. Oh well, you can only lead a horse to water, you can’t make it drink. And these guys needed to be led to the water for sure!
Chris and Chuck are going to be interviewed together by the International Business Times this morning. The interviewer wants to talk about the Currency Wars. A good subject, and so there should be plenty to talk about! If what we say gets printed, I’ll let you know! And then on Friday, Frank and Chuck are getting interviewed by Dow Jones.
Did you see where the Fed Reserve had one of its websites hacked during the Super Bowl? The hacktivist group Anonymous claimed responsibility. The stole details of more than 4,000 bank executives. I just have one thing to say to people that do this hacking stuff. Couldn’t they put their extensive talents to work helping the world instead of making things difficult?
And while I’m on the public service announcements. Did you see that the U.S. Postal Service is going to shut down Saturday delivery on August 1st? In my opinion, it’s about time! They could have saved a ton of money over the years by halting Saturday mail delivery.
OK. Brazil is back in the new this morning. Apparently after all the deep rate cuts, Brazil’s inflation is accelerating at the fastest pace since 2005. The inflation rate jumped to 6.15% from 5.84% the previous month. The real is still trading below the psychological level of 2, because traders now feel that the Brazilian leaders have painted themselves into a corner, and will have to hike rates soon. once the Brazilian leaders have their mojo stripped from them, which was their ability to throw everything including the kitchen sink at the real to weaken it, the flows will surge back into this higher yielding currency.
Of course, that doesn’t mean the Gov’t will give up their quest to have a weaker real without a fight. So, there will be quite a few gyrations, which is why I always tell you that reals should only be purchased with the speculative allocation in your investment portfolio.
Well… Here in the U.S. the data cupboard begins to get restocked today, with usual Tub Thumpin’ Thursday data. The weekly Initial Jobless Claims, and then some second tier data showing Consumer Credit for December. Next week has all the “good stuff” so, we’ll have to wait for that. I’ll be gone next week, so Chris & Mike will bring you the news.
OK… When I saw this story, I about fell out of my chair. What in the world are we doing? I mean we finally get the gumption to cut spending, and right before the cuts are to take place, we get cold feet. Here’s the skinny. U.S. Senate Democrats say they are putting the final touches on legislation to prevent $1 Trillion in spending cuts from taking effect March 1st. One of these days, the U.S. will run into the same wall that Greece, and Japan have run into, regarding debt. and they will wish they had carried through on these spending cuts now, when they had the chance to.
Then There Was This… Speaking of U.S. debt. The Congressional Budget Office (CBO) had a thought. “U.S. spending on Social Security and healthcare will double to $3.2 trillion a year over the next decade, threatening a sharp rise in the national debt unless Congress acts to avoid the danger, congressional researchers warned on Tuesday.
A report from the nonpartisan Congressional Budget Office did not put forth a plan to resolve the long-term imbalance between revenues and spending on retirement and healthcare benefits. But it said that action taken now would help minimize the economic impact of whatever course lawmakers can agree on.
“Unless the laws governing these programs are changed – or the increased spending is accompanied by corresponding reductions in other spending, sufficiently higher tax revenues, or a combination of the two – debt will rise sharply relative to (the U.S. economy) after 2023,” the CBO warned.”
Chuck again. yes. I spent a lot of time in my two presentations last week talking about the unfunded liabilities of the U.S. and this is what adds to them. There has to be changes to the plans, folks. otherwise we as a country fail.
To recap. Both the BOE and ECB are meeting this morning, and neither one will move rates. New BOE Gov. (not officially until July) Carney, dissed currency intervention, so good for him. The markets are looking for more optimism from ECB President Draghi. Aussie employment was strong, while New Zealand employment was weak. The tale of two employment reports and of two currency directions.
Currencies today 2/7/13. American Style: A$ $ 1.0335, kiwi .8360, C$ $1.0045, euro 1.3570, sterling 1.5715, Swiss $1.1015, … European Style: rand 8.8925, krone 5.4775, SEK 6.3530, forint 216.40, zloty 3.0855, koruna 18.5865, RUB 30.01, yen 93.65, sing 1.2375, HKD 7.7560, INR 53.21, China 6.2322, pesos 12.67, BRL 1.9850, Dollar Index 79.57, Oil $96.95, 10-year 1.99%, Silver $31.80 and Gold. $1,677.12
That’s it for today. Our Blues are back on the ice tonight in an attempt to erase that awful showing on Tuesday night, and my beloved Missouri Tigers are back on the basketball floor tonight. I had a rough night last night, the pain in my leg kept me awake a lot, and anything that can keep me awake must be powerful! HA! I’ll be in Houston next week at the MD Anderson Cancer Clinic. The people there are great, and if I didn’t have to fly there and stay in a hotel it would be easier, but like my dad used to say, “Who said life was easy?” Good luck to Alex, who will be wrestling in districts tomorrow and hopefully Saturday. Then he gets a week off before water polo practice begins. crazy schedule he keeps! And with that, I hope you have a Tub Thumpin’ Thursday!