Good day. And a Tub Thumpin' Thursday to you! I'm back, again! Yes, things keep pushing me down, but I keep coming back! I don't really feel like crowing though, so, I'll move along. Another trip to MD Anderson in Houston is put to bed. And Happy Valentine's Day to all you love birds out there! My Valentine is off on a trip with Alex to visit a college, so, I'll spend the next 4 nights in a very quiet house, alone!
Well, the Big news going through the markets this morning is the GDP reports from the Eurozone. Most importantly, the GDP report from Germany. German 4th QTR GDP contracted -.6% and then the rest of the Eurozone members' reports were just as weak. Now, we all have been tracking the recent data for Germany, and it appears now that the 4th QTR was a trough. But that didn't stop some mental giant from making a really dumb statement. European Central Bank (ECB) Vice President, Constancio, said that, "negative interest rates are a possibility. no decision has been made."
Well, I don't have to tell you that those kind of statements will send a currency to the woodshed in a NY Minute, and that's exactly what his words did to the euro. But, isn't this just a bunch of baloney? First. the data is old and already water under the bridge, and second, where did this ECB VP get this idea? For this "negative interest rates" thought was like a grenade from left field. Totally unsuspected, and for my two cents, unlikely!
I want to thank Chris for taking the conn on the Pfennig for me, once again! Chris admits that he loves writing the Pfennig for short intervals. And I think he does a fantastic job of writing the Pfennig, as does Mike when he's asked on short notice to take the conn. Well, yesterday, Chris talked about the G-20 meeting, and how the members of G-20 are very squeamish about member countries manipulating their currencies lower. And yes, the G-20 members are all for avoiding policies that lead to competitive currency devaluations, but policing this will be one mousetrap that I doubt gets built.
Russia's Finance Minister doesn't want this idea to fade. Anton Siluanov , Russia's FM, wants G-20 members to put it in writing, and have more specific language regarding the policing of this matter. I applaud Mr. Siluanov. for I have always held to the thought that currency policy should be based on market conditions, and fundamentals. So, Let's quit all this beggar thy neighbor currency manipulation, and get back to allowing the markets to direct where a currency should trade, based on fundamentals. I expect to hear lots of statements coming from the G-20 meeting that begins today.
I see that the currencies, for the most part, haven't really changed much this week while I was away, being stuck, and scanned. The euro has the biggest move, and it's downward. But still in a pretty good place, I think. And. I think that we'll continue to see the Eurozone, namely Germany's, economic data improve this year. But then that's just me. I'm sure "real economists" can point out to me all the reasons I'm wrong. But then these would be the same "real economists" that called for the collapse of the euro, and a break-up of the Eurozone and said it would happen in 2012. I'm just pointing that out, because I'm a smart-alec.
Well. the Japanese yen, which is the focus of the G-7 and now G-20 meetings, continues to be the currency everyone wants to short. Last night though, yen gained some ground, when the Bank of Japan (BOJ) upgraded their assessment of the economy. Then possible BOJ Gov. candidate (the current BOJ Gov. only has one more meeting under his control), said that yen in the 90-100 range had reached its equilibrium. That's better than the previous ranges that were far above/ weaker than that! So, yen gets some love on Valentine's Day.
Chris included some thoughts I had sent him on the cover story in last week's Economist, regarding the Nordic countries of Norway, Sweden, Denmark and even Finland. These countries certainly should be looked to as examples of how you can go from a horrible banking crisis in the 90's to sound fiscal positions today. A couple of years ago, when I was writing for the Sovereign Society's "Currency Capitalist", I highlighted the way the Nordic countries handled their banking crisis, which was completely different from the way we did it here. Therefore, I don't expect us to come out of our banking crisis so secure, and fiscally sound.
In China. it's the same-o, same-o. The Economist had a great article in it regarding China's willingness to widen the distribution of their currency. Banks in Hong Kong and now Taiwan now offer deposit accounts in renminbi/ yuan. I've told you about how the surge in Dim-Sum bonds being issued, just adds to the methods that China's using to promote the use of its currency beyond its borders. So, none of this is new to you dear reader. but, for those that are new to class, these moves by the Chinese to gain a wider distribution of their currency, may be new to them.
In New Zealand last night, their manufacturing Index (PMI) increased to 55.2 in January, VS 50.4 in December. That's a HUGE increase folks, add to that impressive data print, an increase in Consumer Confidence this month, and you have the ingredients for a strong move in the New Zealand dollar / kiwi! At one point overnight kiwi was trading over 85-cents! It has seen some profit taking since then, but still has had a very impressive night! Kiwi is also gaining VS the Aussie dollar (A$), as the A$ feels the pinch of rate cut talks..
Well. I'm glad that our President is thinking that bridge repairs are needed in this country. our infrastructure is getting old. And I also liked that he vowed to not add one dime to the deficit. I'm going to leave that right there. I'm afraid I might get on my soapbox and begin to preach. but then, I would probably be just preaching to the choir, eh?
Then There Was This. from King World. and it's a little long, but it plays well with the currency wars theme that we have going right now. This is a snippet of an article I found, written by Robert Fitzwilson, founder of The Portola Group. talking about how we need to follow the bouncing ball again, that is oil, precious metals and tangible assets.
"Talk of currency wars continues to dominate the financial news. Ghosts of the '30s and the "beggar thy neighbor" policies have been resurrected. This is not about beggaring a neighbor this time around. This is not about nationalistic policies to provide markets for goods and employment for citizens.
In the Western bloc countries, this time around it is about allowing citizens to remain unemployed. It is about maintaining banking systems at all costs. It is really a policy of "beggaring thy citizens", not thy neighbor. It is about power. It is about China wanting to regain what they consider their historic role as the economic powerhouse. Russia and China both know that gold is sovereignty and power.
Gold, oil and the success or failure of the yuan as a reserve currency are the only bouncing balls that matter in this game of Titans. As investors, we can only step out of the fiat currency arena and acquire what the powerful desire, primarily oil and precious metals. Tangible assets should also be accumulated, not for their role in global supremacy, but their intrinsic value for whatever comes next.
The devaluation of fiat currency is on a non-linear trajectory. The dollar deteriorated relatively slowly for 90 years. It deteriorated rapidly in the next 10 years. The final destruction will take only a few years. It could virtually happen overnight as we saw with Venezuela and North Korea."
Chuck again. remember. what I keep telling you, folks..The dollar leads the pack for the currencies in their downward moves. And will remain the leader.
To recap. Eurozone 4th QTR GDP contracted, but from the looks of the latest German economic data, this might have been the trough. But it was enough to push the euro down overnight. Japanese yen saw some love on V.D. as a BOJ hopeful called yen's current range its equilibrium. And Kiwi was the best performer overnight, after a very impressive PMI report.
Currencies today 2/14/13. American Style: A$ $1.0340, kiwi .8480, C$ .9985, euro 1.3340, sterling 1.5515, Swiss $1.0840, . European Style: rand 8.9015, krone 5.5170, SEK 6.3345, forint 219, zloty 3.1325, koruna 19.0280, RUB 30.12, yen 93.35, sing 1.2375, HKD 7.7550, INR 53.92, China 6.2316, pesos 12.72, BRL 1.9665, Dollar Index 80.52, Oil $96.93, 10-year 2.03%, Silver $31.01, and Gold. $1,647.57
That's it for today. Well. What did you get your sweetheart? I read a very funny article the other day written by a woman regarding what women want for Valentine's Day. Here's a hint. They may tell you they are on a diet, but it doesn't mean they're on one today! And here I always thought it was flowers! This will be the first VD that I've been away from my sweetheart, since we first met in 1972. Whoa! That's a long time ago! I wasn't here to wish you all a Shrove Tuesday earlier this week. My Irish heritage, comes out big time this time of year! The Mardi Gras celebration here in St. Louis, looked like fun was had by all. But now it's time to reflect. and with that, I hope you have a Tub Thumpin' Thursday!