A Day Of Central Bank Meetings.
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In This Issue.
*  Currencies & metals are basically flat this morning  
*  Euro and ruble to benefit from cease-fire?
*  China pushes renminbi stronger VS dollar
*  Buying insurance after the Tornado hits?

And Now. Today's A Pfennig For Your Thoughts.

A Day Of Central Bank Meetings.

Good Day! .  And a Tub Thumpin' Thursday to you! I was doing some Tub Thumpin' yesterday afternoon, when my beloved Cardinals pulled off a 3 game sweep of the Pirates! The winning run was scored in the bottom of the ninth, and driven in by the player that the Big Boss, likes to rag on all the time. So, even a blind squirrel can find an acorn, right? So, I made it in to the office today, before the elevator maintenance began. I don't know if I deserve a Gold star for that or not, for I already get here hours before anyone else! Oh, well, I prefer being here with all my screens and the IPod going.

The currencies sure haven't gone anywhere overnight. They appear to be trading in the same clothes as yesterday. There's absolutely no bias to do anything this morning! So, there you go, and now I can get out of here before I have to walk down 7 flights of stairs! HAHAHAHA! As if! But, really, the currencies are a case of b-o-r-i-n-g. But we all know a single spark can start a fire, and with the Bank of England (BOE) and the European Central Bank (ECB) both meeting as I write, we could get that spark. I really doubt that either of these two central banks will do anything to upset the applecart today.

The BOE did have two members vote for a rate hike at their last meeting, but I doubt they'll have anyone join them in their interest rate hike quest. And The ECB likes to say they have all these arrows remaining in their quiver to deliver additional stimulus, but in reality, they really only have one. Quantitative Easing / QE. And like I said previously, QE is a tough nut to crack for the ECB. There's all kinds of logistics that need to get ironed out, like who's bonds get bought, and so on, and let's not forget the keepers of the German Constitution, I don't believe they look too kindly at QE.

The ECB can still cut rates further, but the cuts would be small, since the rates have been cut to the bone already, and like I've said many times before, once rates are so low, cutting them further has little to no effect. I just wish the Central Banks around the world understood that!

This morning, the markets and the ECB got to see the color of the latest German Factory Orders, which surprised many, for it has been almost a year since any kind of rebound had been seen here. The July German Factory Orders rose 4.6% from June's 2.7% print. This report is seen as an indication that maybe, just maybe, the German economy is rebounding. And we all know that the German economy is the largest of the Eurozone, so any kind of recovery here, will lead to other member countries of the Eurozone.

Sweden's Riksbank will meet this morning too. Yesterday, I told you about the calls in Sweden for the Riksbank to implement QE. I sure hope the Riksbank sees through that QE cloud sweeping through Sweden right now, and does not fall victim to QE.

Yesterday, the Brazilian Central Bank (BCB) made it known that they are not going to get involved with the political side and said that they would not make any further rate moves in Brazil until after the next Government is sworn in. The real has been holding up pretty good through all the back and forth of the Polls in Brazil, which now say that the challenger, Silva, is pulling ahead of the incumbent, Rousseff..  The markets would love for Rousseff to get thrown out of office, as she has not been kind to the markets or the real. And her last ditch efforts to win back all those investors that she burned a couple of years ago, has been a case of: too little, too late.

The Bank of Canada (BOC) met yesterday, and just like I told you they would do, the BOC left rates unchanged and kept their neutral bias steady Eddie. The BOC Gov. Poloz, did make a comment about the improvement in exports, but the comment was stealth-like in delivery, and the markets about missed it completely. The Canadian dollar / loonie rallied a bit after the BOC meeting yesterday, but the move was small.

And the boys and girls at the Almighty Goldman Sachs, are letting everyone know that they weren't kidding about their call for dollar strength a couple of weeks ago, and made sure everyone knows that they believe the dollar is the place to be. And we all know that what Goldman wants.

Well, I don't know that they carry that much weight in China and Russia. Where these two countries have called for an end of American Dominance, which simply means, an end of the reserve status for the dollar. I told you yesterday about the world's largest gas pipeline that will take gas from Russia and deliver it to China. Sure, I hear some of you saying, "just wait until these two don't agree on something, that will be the end of that!"  And yes, that could happen, but right now, Russia and China are building a strong relationship that's based on removing the reserve status of the dollar.

I've told you all, well, maybe not "all" since there are new readers all the time that weren't around the last time I went through this. So, here we go, I'm stepping up on my soapbox now, and telling you that not only China is hoarding Gold, but Russia is too, and both will use their Gold holdings to back at least a percentage of their respective currencies, once the dollar reserve status is lost. Gold backed, or even partially backed currencies would be the most attractive currencies don't you think?  Well, then what the heck are you waiting for! Let me ask you this question. Do you buy home insurance after the Tornado hits? No, it's too darn late, right? Well, that's all I'm saying. I think you get the picture here.

Yesterday, I talked a lot about the cease-fire in Ukraine / Russia. As the day went on, it was more of a feeling that even though the Kremlin said "not so fast there", that the cease-fire will continue. I said yesterday that the euro was receiving some love from that news, and I totally left out the Russian ruble. The ruble has gotten the persona non gratis feeling from the markets since the conflict began. So, IF the cease-fire is for real, these are the two currencies set to benefit the most. the euro and ruble. For they have been the two currencies taken to the woodshed for the fighting.

The Chinese renminbi / yuan was allowed to appreciate again last night, this time a little larger move took place. I can see the Chinese leaders reading the U.S. news and seeing that Goldman has called for a strong dollar, sitting around and getting a belly laugh, and then sending a note to the Peoples Bank of China (PBOC) and telling them to push the renminbi higher. OK. now that's just happening in Chuck's mind, it didn't really happen, I just wanted to make that point clear. It was all in Chuck's mind. You know like those old commercials: Only from the mind of Minolta.

And the Indian rupee pulled itself up off the floor again, to rally overnight. The rupee which was on a roll earlier this year, got yanked back and now only has a 2.2% gain against the dollar this year. I'm still waiting for that "kick" that should come from new leader, Modi's, reforms to unlock the Indian economy. I think patience is going to be needed here with India.

And finally with the Central Bank meetings. The Bank of Japan (BOJ) meets tonight. Yen has resumed its fall to weaker levels that it began last year, but then stalled out for most of 2014. the BOJ is a mess, Japan is a basketcase, and the yen is. well, let's just say the yen has both of those characteristics!

Gold held on to the couple of shekels it had gained yesterday morning, and this morning it has added a couple more, pushing upward by $3.  It would take a month of Sundays though for the shiny metal to recover its $24 loss on Tuesday, with $2 and $3 gains.  I stopped by the other side of the desk to talk to the Business FX guys, Aaron and Mike/ Cisco Harrell, on Monday, and told them that in my heart of hearts, I truly believe that the price manipulators all know that a black swan event is about to happen, and they are driving the price of Gold down, so that when it takes off, it takes off from a lower base. Again only from the mind of Chuck.

Palladium is back to its daily gains, after getting whacked as it neared $900 last week. You know, I see the huge gain in Durable Goods (aircraft sales basically) and Factory Orders (again aircraft and car sales) and I see good times for Palladium. and Platinum. I'm sure there are only a handful of people that think like that, but, that's my gift! HA!

The euro has just dropped 1/4-cent while I was going to town on the keyboard with my fat fingers. The ECB must have said something. Bloomberg isn't reporting anything, so I guess I'll have to go on a search after I send this out.

Today's U.S. Data Cupboard has the ADP Employment Change, and the July Trade Deficit, along with the usual weekly Initial Jobless Claims and the stupid Productivity report for August. Not too much to get the markets all lathered up. Now tomorrow, is a different story, folks. For tomorrow is a Jobs Jamboree Friday. Right now the so-called experts believe that 230,000 jobs were created in August. Hmmm. I wonder how many of those so-called "created" jobs were only from the mind of the BLS.

Hold the phone! This just in! The ECB did cut their refi-rate this morning. Now, as I said above, making a small rate cut when rates are already very low isn't going to mean a hill of beans for the economy, but it DID take the stuffing out of the euro! The euro has lost about 1-cent since the rate cut announcement. This is a knee jerk reaction folks. one that usually gets reversed later, so watch for that, but for now, the euro is the lowest it has been in over a year!

Before I go to the Big Finish today, I wanted to mention something here. Now clients of EverBank World Markets, receive a monthly newsletter called the "Review & Focus", and in the letter I've been writing about what I call the "Inconvenient Debt" for years now. And so it was with that letter in mind: I came across a set of data that a CFP named James Loehr puts out and called: By the Numbers. In it he talks about a survey that was done by the Pete Peterson Foundation did, where they found that 5 out of every 6 Americans 83%, believe that Congress and the President should focus a greater amount of their attention on the country's $17.7 Trillion National Debt than they are currently doing.   WOW, I didn't know we had that many clients in World Markets!  But it just shows to go you that people do realize that we have an "Inconvenient Debt".

For What It's Worth. Unintended Consequences. There are always Unintended Consequences.. And so it is that the U.S. cities, states and municipal borrowings are going to find out soon enough. I found this on Reuters.

"American cities and states criticized a vote on Wednesday by U.S. regulators that tightened rules on which assets banks can sell in the event of a credit crunch, saying the move will raise their borrowing costs and hamper vital infrastructure projects.

U.S. regulators adopted tighter standards on liquidity requirements for large banks, part of a global effort to make big banks such as JPMorgan Chase and Citigroup more resilient in a future financial crisis.

In doing so, regulators excluded debt issued by U.S. states and cities from banks' high-quality liquid assets, or HQLA.

Cities and states are worried that if municipal debt is no longer considered a high-liquid asset, banks will have less incentive to buy their bonds. As a result, they say their borrowing costs will rise, making it even more difficult to fund schools, hospitals and building projects."

Chuck again. Yes, I can't believe that the creators of this change didn't see this coming for the muni bond people. It just blows my mind that they did this. Oh well, get the Government involved and things get more expensive. that's how I see it! You can read the whole article here: http://www.reuters.com/article/2014/09/03/us-financial-regulations-municipals-idUSKBN0GY2DC20140903

To recap. The currencies and metals are pretty flat this morning, although the euro just dipped by a small amount. The ECB, BOE, & Riksbank all are meeting this morning, and the Riksbank is the only Central Bank that the markets believe could do something to shake the markets a bit today. And the BOJ meets tonight. Chuck talks about the Inconvenient Debt, and how Americans are finally noticing it!

Currencies today 9/4/14. American Style: A$ .9345, kiwi .8325, C$ .9185, euro 1.3135, sterling 1.6455, Swiss $1.0880, . European Style: rand 10.6620, krone 6.2040, SEK 6.9985, forint 238.20, zloty 3.1915, koruna 21.0680, RUB 36.95, yen 105.00, sing 1.2515, HKD 7.7505, INR 60.38, China 6.1666, pesos 13.08, BRL 2.2365, Dollar Index 82.96, Oil $95.25, 10-year 2.40%, Silver $19.21, Platinum $1,411.88, Palladium $883.75, and Gold. $1,270.64

That's it for today. Well, the NFL season begins tonight with the Super Bowl Champs, Seahawks playing the Packers. Our Rams begin on Sunday VS the Vikings, and we'll be without our quarterback for the second consecutive season. The Rams will find the season difficult to navigate without a franchise quarterback, so another season of frustration for Rams fans, I guess. I'm sitting here yawning and yawning, I know I got a good night's sleep. I guess I need a cup of coffee!  Journey is signing their hit song: I'll Be Alright Without You, on the IPod right now. Earlier in the morning I had to stop to sing along with the Righteous Brothers song: Just Once In My Life. as always it's good that no one else is here this early in the morning!  Well, that was one very exciting baseball game yesterday with the Cardinals walking off with a win in the bottom of the ninth. Some people don't like low scoring games, but if two pitchers are hooked up and both are nailing the corners, changing speeds and location, it's a fun game to me. And with that, it's time to get off this bus today, and wish you a Tub Thumpin' Thursday!

Chuck Butler
EverBank World Markets

Posted 09-04-2014 1:05 PM by Chuck Butler
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