Good day… And a Tub Thumpin’ Thursday to you! I’m on shaky ground this morning, so I’m not in the mood to Tub Thump right now, but as the day goes on, who knows? Well, to answer the question I posed as the title of yesterday’s Pfennig, was answered yesterday… We didn’t… We didn’t default, just as I said we wouldn’t. We did however kick the can down the road, which we are so darn good at! Yes, better at kicking the can down the road, than my beloved Cardinals are at knocking out a pitcher in the first inning! UGH!
Ok… Let’s go through this… And No, it wasn’t the 11th hour, but pretty darn close, eh? Congress passed legislation to end the partial Gov’t shutdown, and reopen the government through January 15, 2014, and effectively suspend the debt ceiling through February 7, 2014. They “say” they’ll lay the groundwork for talks over budget issues… Yeah, right… This is where I say, “Well, I’m from Missouri, you’ll have to show me”! But that’s for another day, folks… For now, we can be so relieved and happy, grateful even that our lawmakers didn’t allow the country to default, for now that is… Yahoo! I really don’t know how there weren’t fireworks, marching bands, and great speeches reminding us of how they “saved the world”…
Well, I know one thing.. Kicking the can further down the road was just what the doctor ordered for the currencies and Gold! Yes, it appears that the markets have said, “Hey, if the U.S. wants to kick the can down the road, and continue to mount debt that will have to have money printed as the Fed keeps buying the Treasury auctions, because nobody else wants the bond, then we’ll take the dollar lower, for that’s what it deserves”
So, the euro, the offset currency to the dollar has gained nearly 1-full cent overnight and this morning. The Aussie dollar (A$) is within spittin’ distance of 96-cents, and Gold is up $25… So, it’s business as usual for the U.S. debt accumulation machine, and the debasement of the dollar… What’s new here? Nothing, absolutely nothing! Shoot Rudy, this is eerily familiar, is it not, to how 2011 Debt ceiling talks unfolded? And what did we get from that? Ahhh, let’s see, we got a group of people that were supposed to come up with debt cuts, or else automatic cuts would begin… Remember how well that all worked out?
I expect the same for the next round of “budget talks” that are supposed to take place between now and February 7, 2014… That day will get here quicker than you think folks… I received a call on my cell phone last night, at first, I almost didn’t answer it, for I didn’t recognize the phone number, so… half expecting to say, “sorry you’ve got the wrong number”, I was surprised to hear the fellow on the other end, say, “Hi Chuck, I’m “x” from the Wall Street Journal, is this a good time for you to talk about the debt deal?”
Now, you know me, I immediately, walked outside to the Butler patio, and began to give this guy all he could handle… I told him that eventually, in my opinion that is, which could be wrong, that we will come back to the doorstep of default, and there won’t be any more rabbits to pull out of the hat, there won’t be anything up our sleeves, nor will we be able to levitate to make the debt go away, and then, someone will ask, “Why didn’t we deal with this before now?”
So, for now, we can get the 800,000 furloughed non-essential Gov’t workers back to their, Ahem, jobs… And the markets can now shift their focus to…. Drum roll please… TAPERING! Remember that trick that the Fed Heads want to do to end Quantitative Easing? Or do they? Well, at least for the record, they say they do… But, given all this disruption in the first 16 days of October, I would have to think that if there’s Tapering to be done, it won’t come until we get into 2014… if then…
So, the debt deal, kicking the can down the road, knowing that we’ll have to deal with this again in a few months, and knowing that Tapering is delayed, has got the dollar taking a trip to the woodshed this morning. So… go with it! All the currencies that should show green numbers are doing do, and all the currencies that should how red numbers are doing so…
It’s all about selling the dollar this morning, folks… Nothing has changed in the Eurozone, analysts are still thinking that the Reserve Bank of Australia (RBA) is finished cutting rates, China’s economic turn-around is still proving itself to be strong and true, and Gold is still a store of wealth, an excellent inflation & uncertainty hedge… All these things remained in place this week, as the U.S. was near a default, but now that the U.S. has averted default, everyone is talking about these things again… But in reality, it’s all about selling the dollar, which makes all the currencies and metals more valuable.
The Chinese are expected to print their latest Quarterly GDP report overnight, and we’ll see it tomorrow morning… I fully expect to see that the economic turn-around has pushed the envelope in China, and economic growth print at 7.8%, up from 7.5% in the previous quarter. Remember, on Wonderful Wednesday, I told you that the ratings agency Fitch had put the U.S. on negative watch? Well, in China, the ratings agency there, Dagong Global Credit Rating Co. downgraded the U.S. credit rating from A to A-, and maintained their negative outlook…
Now, I know, Dagong Global Credit Co. (DGCC) isn’t Fitch, or S&P… But it does represent what this Chinese ratings agency thinks of the U.S. credit rating! And, one day, we’ll find that knowing what DGCC thinks is important… I’m just saying…
I see on the Bloomberg that the Hong Kong dollar (honker) and its peg to the U.S. dollar turned 30 today… Yes, 30 years ago, in 1983, things were going south for the honker so badly that the country decided to peg the currency to the dollar, and the rest as they say, is history. I guess the only reason I wanted to talk about this, is to talk about 1983… Not that I remember it as a great year or anything… We had Mr. T… Hulk Hogan… The Washington Redskins beat the Dolphins in the SuperBowl… Thriller was the Number 1 Album… Jimmy V… Bob Forsch pitches 2nd career no-hitter (and I was at the game!) The Orioles won the World Series, and Ronald Reagan was President… Those are the things I remember…
With the U.S. “open for business” again, the economic data will begin to flow again… I saw this morning that Goldman Sachs says the September Jobs report will print on October 25th… Hey, that was awfully nice of Goldman to tell us when the BLS will print the jobs report, eh? So, for inquiring minds that want to know… How did Goldman know when the Gov’t was going to print the jobs report? Anyway… I guess we all know the answer to that question, so it was one of those rhetorical questions, eh?
Now, before I head to the Big Finish today… I saw an interview with Jamie Dimon on zerohedge.com, that had a snippet that I thought was very interesting given Mr. Dimon’s position as CEO of JPMorgan Chase… When he was asked how worried he was that one morning the bond market will have moved against the U.S.? And here’s his answer… “It’s virtually assured, the question is when and how. I don’t know if it will be two years or five years but it will happen. It is a matter of time, the United states can’t borrow indefinitely. Over hundred years of bankruptcies of country after country who thought they could get away with it because they had the reserve currency and the military power of the world. We are going to have fiscal discipline. It’s imposed upon us or we do the right thing and do it to ourselves the right way… America knows the way, it doesn’t have the will.” – Jamie Dimon
Oh My! I know that you all believe that sounds like something I would say or have been saying for years now, but I’m just a little old newsletter writer in the Midwest saying those things… But, when the CEO of JPMorgan Chase says them, they carry a little more weight, eh?
For What it’s worth… I found this on the Bloomberg, and thought, Hey! Somebody other than the usual suspects that write newsletters is dissing Quantitative Easing / QE… And thought it would be good for Pfennig Readers to see that I’m not the only one that has thought QE was wrong from the beginning going back to the first round in March of 2009… So, here’s Canada’s Finance Minister, Jim Flaherty, who isn’t making any friends at the Fed, or probably even his own Bank of Canada (BOC), with comments about the Fed Reserve’s unconventional monetary policy that he made at a private dinner of G-20 officials last week… (and Big Ben Bernanke was at the table too!)
” I was fairly clear at the meeting. It’s not good public policy”, describing QE as “the printing of money”… “The U.S. should never have implemented the policy in the first place. But now that they’ve done it, they should get out of it as quickly as they can.”
Now, Flaherty has a history of ruffling feathers. He likes to criticize people and their motives, and ideas… Hmmm… sounds like a guy that would fit in on the Butler Patio!
Chuck again… In the story, at the end, was a comment from a guy, that said, “I’m surprised that he is going as far to say they shouldn’t have done it in the first place. Most people would disagree with that.” REALLY? Sure, if you’re in the stock market, or getting a loan on a house, you probably didn’t even know that QE was responsible for your good fortune… But at what cost down the road for the rest of us?
To recap… We were taken to the doorstep of default and then after ringing the doorbell, we all ran away! U.S. lawmakers averted a default by kicking the can down the road out a few months. And the dollar is being taken to the woodshed today, for if the U.S. is going to continue to kick the can down the road, the markets will be happy to continue to take the dollar lower. Gold is up $25 this morning…
Currencies today 10/17/13… American Style: A$ .9615, kiwi .8490, C$ .9705, euro 1.3640, sterling 1.6075, Swiss $1.1055, … European Style: rand 9.8385, krone 5.9420, SEK 6.4335, forint 216.05, zloty 3.0595, koruna 18.8395, RUB 32.08, yen 97.95, sing 1.2405, HKD 7.7540, INR 61.20, China 6.1431, pesos 12.82, BRL 2.1795, Dollar Index 79.83, Oil $101.69, 10-year 2.62%, Silver $21.85, Platinum $1,420.55, Palladium $723.18, and Gold… $1.314.58
That’s it for today… Here we go again… Or at least I hope not! The Cardinals are the only team in the NL to lose 3-1 game leads in the NCLS having done it in 1996, and 2012… Maybe this year they’ll stop that! Our catcher sure looked disinterested in bringing that bad karma to an end yesterday… Maybe coming back home will do the trick, playing in front of the sea of red… It’s budget and planning time, one of my fave times of the year… NOT! But it has to be done… We do these video conferences all the time now, I always attempt to get out of the camera’s view, and then it’s just this thundering, booming voice that comes from left field… Nice touch, I think… Little Braden Charles was at the house yesterday when I got home, he’s only 2 ½ but knows his alphabet letters already… I was duly impressed! Mike just came in and got the TV’s all back to the correct stations from the one they were on yesterday that broadcast the baseball game… So, if Mike’s here, Mike, Mike, Mike what day is it? No wait! That was yesterday, this short week has me all confused! Let’s go have a Tub Thumpin’ Thursday!
EverBank World Markets
Editor: A Pfennig For Your Thoughts