Rocktober 24, 2017
* The dollar stops swinging its hammer…
* 4 Central Bank meetings this week!
* Russia says, “What sanctions?”
Good day… And a Tom Terrific Tuesday to you! Another strange night for sleep for me, but that’s the norm these days, so I won’t bore you with the details every time it happens! Sometimes I turn on my laptop and look at what’s gone on overnight, and I sit here and wonder, why did I even wake up for this? And today is one of those days, although there’s still a lot to talk about, we won’t be spending a ton of time on the currencies performance, because, well… it’s a non-event… ELO greets me this morning with their song: Can’t Get It Out Of My Head…
Hmmm that was me yesterday… I just couldn’t get the news that Janet Yellen had talked about how the Fed could be revisiting the moves it made during the Great Recession again, and how the markets just seemed to be not listening..
I was so focused on the thought that Janet Yellen was greasing the tracks for rate cuts yesterday, that I completely forgot to talk about the Central Banks of Europe meeting this week… We’ll have Central Bank meetings with the ECB, Riksbank, and Norges Bank this week, and don’t forget that ECB President, Draghi, promised us that he would give the details of the ECB’s balance sheet unwind after this meeting… I don’t expect Sweden’s Riksbank, or Norway’s Norges Bank to do anything rash, but I do expect them to begin talks about when they see rate hikes happening.. In addition to the European Central Banks meeting this week, we’ll also see a Bank of Canada (BOC) meeting this week. Recall, that at their last meeting, the BOC hiked rates. I don’t expect them to go back to back, belly to belly, with another rate hike this month, but the BOC does need to keep the heat on the housing market of Toronto and Vancouver, so they don’t see their housing bubbles expand any larger!
Yesterday I told you that the dollar was being bought because of two thoughts in the markets: Tax reform, and a new Fed Chairman being announced. Well, as the day went along, the dollar buying stopped, but there was little conviction to move currencies against the dollar. The reason for that was that the markets decided that tax reform could go on for some time before actually being implemented, and who knows when the President will name his new Fed Chairman.
So, the markets are focused on the European Central Bank (ECB) meeting that will take place on Thursday. As I said above, this is the meeting that Draghi and company will give us some details of the ECB’s “tapering” of their bond purchase program. So, this is a Big Deal this week in the Eurozone… The euro has remained steady Eddie in the past 24 hours, and didn’t see any slippage when the Eurozone composite PMI as measured by the folks at Markit, slipped this month… The manufacturing side of the composite report saw a nice increase, while the services side saw the slippage.
The one thing that I saw in the report was that job creation in manufacturing saw the biggest monthly increase in some time, and because of that data point, the euro was able to maintain its level VS the dollar this morning.
The economic data isn’t confined to the Eurozone this morning, as Russia saw their YOY GDP for Sept. beat the forecast and the previous month’s print. If you’re keeping score at home, there are the details… Russian Sept GDP YOY grew at a 2.4% clip, beating the estimate which was 1.9% (I guess the so-called experts were still under the impression that the economic sanctions were slowing the Russian economy!) And the previous month’s print was 2.3%, so the data is trending in the right direction! Russia also announced this past weekend their latest Gold holdings, which we talked about yesterday… I just can’t imagine how the price of Gold isn’t soaring right now, given the Russian physical Gold news… But, like I said yesterday… Beep, Beep, Beep…
OK, Chuck, move along here… There has to be more to talk about… Oh, yes there is! The GATA folks sent me this note that highlighted an article on Reuters… Check this out! A U.S. jury on Monday found a former HSBC Holdings Plc(HSBA.L) , Mark Johnson, executive guilty of defrauding Cairn Energy Plc (CNE.L) in a $3.5 billion currency trade in 2011. This is the first conviction in the global currency-rigging scandal that has seen banks pay more than $10 billion in penalties. Johnson’s London counterpart at HSBC, Stuart Scott, is still fighting extradition to the U.S.
The reason I highlight this is the thought that people, in the know, thought this to be impossible given the size of the currency market, but it did, and if it could happen here, who or what says it can’t be done in the metals too? LIBOR was rigged, and finally exposed… Now this… I’m just saying…
Longtime reader, and a great source of a lot of information that he sends my way, Bob, sent me a note about an article talking about what the writer feels is going to be a financial tsunami to hit the financial system, soon. And I thought… Shoot Rudy, I’ve said that for a couple of years now, but put some big words in the article and you get more traction out of it! HA!
The problem with saying things like that is you have to have some real conviction that what you’re saying has an excellent chance of happening, or else you’ll have egg on your face.. 7 years ago, I stood on a stage in Orlando Fla, and told the audience that there was going to be a currency regime change and the dollar would lose its reserve currency status by the end of the decade… I still believe this to be the case, and I know I stand alone on this thought, but I do believe the Chinese renminbi will be the new reserve currency.
Having said that, I realize that a lot of changes still need to be made in China for this to happen. But we still have 3 years, and… Chinese leader, Xi, was just approved to lead China going forward. This will give Xi, more power to implement the changes he has proposed. So, watch for China to open up more real soon. And getting there, isn’t going to see a big devaluation of the renminbi get in the way…
OK… Gold reversed the early morning losses yesterday and ended up $2 to $1,282 on the day yesterday. 265,000 contracts traded yesterday, not 300,000 but still a good number of contracts that I’m sure contained more than its fair share of short Gold paper trades.. Gold is down $2 in the early morning trading today, so maybe, just maybe it can reverse that and turn positive again today.
Did you hear the news that Scotia Bank, which owns the ScotiaMocatta, the precious metals trading business, is putting that metals dealer up for sale? It’s rumored that Chinese interests are looking to buy the business… So, why is this important? Well, I look at it like this folks… Scotia Bank is one of the major bullion dealers with short positions in all the precious metals, and if they are getting out of the business, could this mean that “the boys in the band” will be losing a member? I think so.. I guess we’ll have to wait-n-see, but to me, this is HUGE news that should be positive for the metals!
The U.S. Data Cupboard is still lacking any real economic data today, but tomorrow we get Durable and Capital Goods Orders so stay tuned for that… Same bat time, same bat channel! I had to laugh there because that’s the ending I put on my weekly DTL letters… This week is a surprising fact about Australia… and will only be found on the Dow Theory Letters website: www.dowtheoryletters.com I have a lot of fun with those letters, I hope you find your way to subscribing to the DTL and joining me each week, as I talk about whatever fancies me that week!
To recap… The dollar stopped swinging its mighty hammer yesterday morning, and the currencies have remained, for the most part, steady Eddie in the past 24 hours. Gold was able to carve out a $2 gain yesterday… And there’s news that Scotia Bank is putting up for sale their metals dealing unit, called ScotiaMocatta… There are 4 Central Bank meetings this week, with the ECB the biggest on of all, followed by the Riksbank, Norges Bank and the Bank of Canada…
For What It’s Worth…. Today’s FWIW is a section of the 5 Minute Forecast, and it’s about Social Security, and can be found here: www.agorafinancial.com
Or, here’s your snippet: “As long as we have retirement on the brain, we see a headline this morning that affirms our long-standing outlook about “the awful way Social Security might be saved.”
That was the title of an article your editor posted at The Daily Reckoning 2½ years ago. Already we were noticing a twin phenomenon: Educated higher-earning Americans were working well past retirement age and continuing to contribute to the Social Security system… while poorer Americans who hadn’t graduated from high school were dying in growing numbers before they could ever collect a dime in benefits.
Along comes Bloomberg with a story with the headline “Americans Are Retiring Later, Dying Sooner and Sicker In-Between.”
“The U.S. age-adjusted mortality rate — a measure of the number of deaths per year — rose 1.2% from 2014 to 2015, according to the Society of Actuaries. That’s the first year-over-year increase since 2005, and only the second rise greater than 1% since 1980.””
Chuck again, I had read that Bloomberg article yesterday and then when I saw it highlighted in the “5” I knew that it was FWIW worthy! Great stuff Dave!
Currencies today 10/24/17… American Style: A$ .7780, kiwi .6930, C$ .7898, euro 1.1755, sterling 1.3175, Swiss $ .9865, … European Style: rand 13. 7217, krone 7.9907, SEK 8..2026, forint 262.35, zloty 3.6072, koruna 21.8046, RUB 57.47, yen 113.70, sing 1.3620, HKD 7.8046, INR 65.09, China 6.6358, peso 19.12, BRL 3.2054, Dollar Index 93.85, Oil $52.20, 10-year 2.39%, Silver $17.08, Platinum $925.50, Palladium $966.32, and Gold… $1,280.00
That’s it for today… Well, I got through this today… three times I took my hat off and threw it at my laptop… and two times I had to restart it… UGH! Yesterday brought news that my beloved Cardinals had hired our longtime coach that had been on leave to return. Jose Oquendo. In addition the always popular Willie McGee will also be coach this next year. I sent an email to my baseball buddies and said, “watch how the infield defense gets better now that Oquendo is back” I saw Willie McGee hit an inside the park home run at the old Busch Stadium years ago. I still believe he was parallel with the ground when he rounded second! Ok, time to get going… The Moody Blues take us to the finish line again today with their song: Ride My Seesaw… I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself!