For once, the currencies and metals didn't lose their grip on the dollar during the day yesterday. Yes, what started out to be a currency and metals rally lasted all day long! It's been awhile since that has happened, given the PPT and all that. I've got some stuff on the PPT in the FWIW section today, so you'll not want to miss that!
Front and Center this morning, the House of Representatives voted to "suspend" the Debt Ceiling until March 2015, last night. Didn't hear about that? Ahhh grasshopper, that's because they wanted to slide this through under the cover of darkness. Of course this has to go to the Senate now, but that shouldn't be a problem, for this is all a conspiracy by the lawmakers to do away with the Debt Ceiling. By the time March 2015 comes around, nobody is going to give two hoots about the Debt Ceiling, and then the Debt Ceiling will just fade away, and no longer will Americans, at least those that care, get the opportunity to see where the U.S. is on Debt, which could help them with their voting when it came around.
I find this to be right on call with what I said would happen, but, I also find it to be so irresponsible of our lawmakers. I see where the boys and girls on Bloomberg TV, have finally gotten the memo on this and are talking about this being the end of the Debt Ceiling. Hey! Glad to have you aboard, I've been talking about this since the first "temporary suspension" took place! Not that I want any cookies for doing so, just wanted to point out how long it takes the major media to get a clue.
So, one would think that just hearing that news about suspending the Debt Ceiling, that the markets would be taking the dollar to the woodshed, but in reality, the markets are looking at this news as a relief for the dollar, and therefore Gold is selling this morning, and the currencies are mixed. Relief that there won't be all the amendments hung on the Debt Ceiling increase, I guess. You know, amendments like more automatic cuts that get reversed later any way. Hey, don't mind me, I'm just disgusted with all this, for with no Ceiling, what do you think is going to happen to deficit spending? Yes, in spite of those famous words, that "raising the Debt Ceiling doesn't add to the debt" We're going to see the Gov't go on a spending spree. you know, sort of like giving a shopaholic an unlimited credit card.
Overnight, the Chinese reported their latest Trade data, and it was surprisingly better than expected. Overseas shipments rose 10.6% from a year earlier, and the Trade Surplus for January was $31.9 Billion! That's the best January performance since 2009. Of course there's always room for questioning the Chinese numbers, but remember, last year, they took huge steps to eliminate the exaggerated reports. Bill Gross, the bond king from PIMCO, said last week that "China is the mystery meat of emerging market countries because nobody knows what's there"
As far as I'm concerned, China booked a Surplus that beat expectations. The other stuff doesn't help anything for we don't know if China is fudging the numbers or not. I say, just take the reports with a grain of salt, and move along, for these aren't the droids we're looking for.
But, get this. China prints that exceptionally strong Trade Surplus, and the renminbi is marked down. What the what? Yes, you heard me, no wait, you read me right.. I know, doesn't make any sense to me either, but it is what it is, and the Chinese are pretty coy about this stuff folks. I think they marked the renminbi down after the news, because the markets were all calling for a strong appreciation. I can hear them saying. "There, we marked it down, choke on that for a while"! But the markets aren't fooled, they are marking up the forwards market prices.
This morning when I came in after that brutally cold walk across the bridge, Bank of England (BOE) Gov. Mark Carney was on the Bloomberg TV, giving an update this morning on the U.K.'s economy. Same old-Same old, Mark Carney, lots of promises but nothing to back them up. One thing he said that makes me think he received a memo from the Fed, telling him to make certain he says that the economic recovery is uneven and therefore interest rates will remain low for some time to come, for that's what he said, and it sounds just like the Janet Yellen speech yesterday.
But the markets aren't buying Carney's rhetoric, and are still of the belief that the U.K. economy is strong enough for rate hikes. Apparently, these guys and girls didn't do their homework, about what Carney did in his past, for if they did, they would know that he's got a pocket full of promises and nothing to back it up. Isn't that right Canada?
Well, the Aussie dollar (A$) rallied to a resistance line overnight (.9050) and went through it to .9061, on the Chinese Trade data. But since has backed off a bit, not much but the rise in the currency's value has seen a speed bump in the road. Tonight, Aussie employment data will print for January, and I expect to see a rebound from December's awful print. That should be good for the A$, and once .9050 is soundly established, the next stop is 91-cents. But like I said yesterday morning, we haven't heard from the Reserve Bank of Australia (RBA) yet, and to me they are like the Sword of Damocles hanging over the A$ right now.
In Norway overnight, they printed two GDP reports for the 4th QTR. First, the headline GDP printed at -.2% in the 4th QTR from the 3rd QTR. But then the Mainland GDP printed a .6% increase from the 3rd QTR. I've never encountered these two different reports before, so this must be something new, but from the looks of it, I would say that we need to focus on the Mainland GDP, and that looks like it's moving in the right direction. The krone was confused too, and didn't appreciate on the data, but I'm of the opinion that with the strong move of the krone this week, that this is more a bout of profit taking than anything else. Norway continues to have the best fundamentals in the world.
The euro which was flat when I came in, but is now getting sold, as the Industrial Production data for December printed and was disappointing to a degree. Month on Month, IP fell -.7%, but year on year, IP rose .5%... the December report was not as strong as November's report, and leaves me somewhat concerned about what's going on with the Eurozone recovery. The euro has lost about ½-cent in the past 30 minutes and has fallen back below 1.36 on the IP print this morning. Just a minor setback as far as I'm concerned, as I still feel that things are looking better for the euro this year.
And if the euro can continue to gain vs. the dollar, so too will the Swiss franc. The euro / franc cross rate has held steady Eddie for some time now around 1.2250, well above the 1.20 floor that was placed on the cross by the Swiss National Bank (SNB), when they in essence devalued the franc.
Well, Fed Chair Janet Yellen, did her first testimony on the economy yesterday. This testimony used to be required of the Fed Chair under the Humphrey-Hawkins Bill, but that Bill expired a long time ago, and Big Al Greenspan continued to appear before the lawmakers twice a year after the Bill expired, therefore, Ben Bernanke did the same, and so on. I found what Yellen said to be interesting in that you have to wonder what those words she spoke are going to taste like in a few months.
You see, she said that she's "united with her policy committee and sees few risks that could derail a plan to steadily reduce the Fed's bond purchases." Oh, and by the way, she's surprised by the weaker job reports , and wants to see more data before assessing the health of the labor market. Well, if more data is what she wants, more data is what she'll get, as the March Jobs Jamboree will take place before the FOMC meets next. I personally don't see the data getting any better, that is unless the BLS decides to make some magic.
I saw this yesterday and thought it would play well here. 91 million Americans aren't looking for jobs. that's 37% of the population, the highest this has been since 1978. Of course this group includes people who are retired, and with 10,000 baby boomers retiring every day for the next 17 years, that number is bound to get larger. But the point I'm making here, is that the Unemployment Rate U-6, is worthless to use as a measure of the job market. I just hope the Fed Heads are looking past this U-6 rate when making decisions. I'm sure they are, right? Yeah, as if..
U.S. stocks rallied big time on the Yellen words, for she stated that interest rates will remain low for some time to come. And Gold was really pushing the envelope as it traded up to $1,292 before backing off overnight.
The U.S. data cupboard is still waiting for the "meat" that will begin to appear tomorrow with Retail Sales for Jan, which by the way, the BHI indicates that the report will be disappointing. Of course the spin doctors will blame it on the weather. The weather is getting the blame for a lot of things these days, as if we just figured out that in the winter it could snow and get cold! The data cupboard will print the Monthly Budget Statement today for January, and has already printed the weekly mortgage applications for last week that fell 2%...
Well, it's Lincoln's Birthday today. Which means we only have 2 more days before Valentine's Day! YIKES. Here I was earlier this week telling you to make plans, and I've done nothing! I going to blame it on the weather, it's too darn cold to go back out once I get home! Think that excuse will work with my beautiful bride? Hey, it could work. As if!
For What It's Worth. A long time, dear Pfennig reader, sent me a note the other day from a guy that he follows that tracks the PPT. I know for those of you who don't believe there is such a thing, the Plunge Protection Team, is as real as it is cold outside. I wondered if I could use the stuff that his guy wrote, but since it's a paid for subscription list, I can't. but the dear reader (Thanks a ton Bob!) wasn't about to quit, and found other stuff for me to use here. So, let's go to the tape!
"A proprietary indicator of Mainline Investors, Inc, which tracks the PPT, showed it in "buy" mode again last week. First, to stem the sell-off on Monday and then, on Thursday this same PPT indicator rose sharply in parallel with a short covering rally. Faced with a bad jobs # on Friday, the futures market in minutes (look at difference between 7:30 and 8 (CST), rose sharply which continued the pressure on the shorts. That, along with technicians telling us the market was oversold and "analysts" telling investors to buy the dips, caused the market to have a rather stunning reversal on no good news."
Chuck again. I was telling Chris Gaffney about this stuff yesterday, because Chris is asked to comment on the stock market a lot, through his CFA and association with our Wealth Management Div., and Chris said, "no wonder people are afraid to invest these days."
To recap. Yellen spoke, and kept on saying that interest rates will remain low, and doubts there will be any risks to stop the Tapering. Currencies and metals kept the pressure on the dollar most of the day, but overnight have given back some gains. The U.S. lawmakers suspended the Debt Ceiling to March 2015, and the dollar rallied on that news overnight. Eurozone IP was disappointing, and has led to a euro selloff, and China printed a stronger than expected Trade Surplus.
Currencies today 2/12/14. American Style: A$ .9040, kiwi .8340, C$ .9095, euro 1.3580, sterling 1.6520, Swiss $1.1090, . European Style: rand 11.0105, krone 6.1370, SEK 6.4535, forint 227.50, zloty 3.0690, koruna 20.2520, RUB 34.78, yen 102.25, sing 1.2665, HKD 7.7555, INR 62.1, China 6.1078, pesos 13.31, BRL 2.41, Dollar Index 80.74, Oil $100.54, 10-year 2.75%, Silver $20.32, Platinum $1,400.88, Palladium $725.06, and Gold. $1,291.12
That's it for today. Suite: Judy Blue Eyes is playing on the IPod right now. Every time I hear that song, I think of CSNY singing that at Woodstock. Well, finally men's hockey will start tomorrow with the U.S. playing in the early morning (for us) I can't wait to watch T.J. Oshie skate on the larger playing surface that they use in the international game. Did you see that there was a tie for the Gold in the Women's Downhill? A tie! I understand that a tie is rare in Alpine skiing, but not unheard of. Well, it was unheard of for me, until now! I'm not feeling as good today, as the stomach is touch and go right now, but I have the rest of the day to straighten it out! That's the way I look at this, for it does no good to think about what you're going to do the rest of the day being sick. And with that, The Cure is singing Just Like Heaven, and that's seems like a good song to end today's letter. I love the Cure's songs, they were a little weird, but their music was great! OK. I hope you have a Wonderful Wednesday!
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