Good day. And a Tom Terrific Tuesday to you! With yesterday being a holiday, I hope you were able to enjoy a 3-day weekend. President's Day. Did you go out and buy a new mattress? HA! I think I liked it better when as a kid we celebrated Abe Lincoln's birthday and George Washington's birthday separately. With it now being called "President's Day", we have to assume that knuckleheads like Woodrow Wilson is part of the celebration. Long time readers know of my dislike for Wilson, so knowing he's a part, really is a drag for me!
Well, here in the U.S. we were all out buying new mattresses to celebrate President's Day, and the foreign markets took over. and they didn't like not having their U.S. counterparts in for the day, so they left the currencies and metals in tight ranges for the day. Well, the U.S. traders will return today from their weekends in the Hamptons, and it will be interesting to see where they want to take everything..
The IMM futures positions for currencies had a different look to them last week. The Aussie dollar (A$) long positions were pared way back from nearly 81,000 long contracts to 54,000 long contracts. I think this move was quite evident in the spot price for A$'s last week, which couldn't hold $1.04. The A$ wasn't the only currency to see their long positions cut. The euro saw its long positions cut from 38,000 to 24,000. Japanese yen continued to see short positions added to its total, and pound sterling shorts increased.
Overall, the IMM futures positions report was not a good one for the currencies. The main beneficiary of last week's moves was the U.S. dollar. Strange, don't you think, given the stuff on our docket? Oh, you forgot? Well, March 1st, is fast approaching, and on March 1st, $85 Billion in budget cuts will automatically start taking effect. So, between March 1, and September 30 (the fiscal year end for the U.S. Gov't) reductions of 13% for defense programs and 9% for other programs will take place.
Don't worry, the U.S. troops at war will be protected, the defense cuts would come in fewer Air Force flying hours, and less training for some Army & Navy units. The thing that I think will rile up the U.S. citizenry is $1.6 Billion that will be cut from the National Institutes of Health, and the $600,000 that will affect low-income pregnant women and new mothers would lose food aid and nutrition education. There will be cuts to Education, Transportation, Environment, and a host of other things. The best one I found is a reduction in IRS workers!
These cuts are small chinks in the armor. I'm well aware of that. But, they might begin to cause problems. remember how much the euro suffered when the pictures of Greeks burning their Gov't buildings and banks showed up on TV screens all over the world? What will happen to the dollar, should we experience the same type of stuff here? I know. my fellow Americans as a whole are not going to have a problem with these cuts, for they are just a drop in the bucket of cuts that need to be made. But remember we as a country are growing ever so close to ½ the country receiving some benefit from the Gov't. There's bound to be some bad apples in there, eh?
One of the things that the options positions revealed last week was that the bets on a Eurozone breakup have fallen to a 5-year low. So, the rest of the world is climbing on my bandwagon that noticed the relative calm coming over the Eurozone last year. That kind of news should underpin the euro. Then add in the news that German Investor Confidence as measured by the think tank ZEW, jumped more than forecast this month, to the highest it has been in 3 years! This report by ZEW tries to predict the economic developments 6-months in advance. so it is a forward looking report, which I always like more than the water under the bridge stuff.
Remember, I was the one that told you that I thought the German economy troughed in the last quarter. Things like the ZEW pointing to better times in Germany, really give that call of a trough last quarter, credence! The euro is weaker this morning, which is a surprise given the options news and the ZEW news. But it is what it is.
Well. one of my long time readers and someone that I consider to be "an email friend", sent me a story last night, regarding Norway. UGH! It seems now that Norway's Central Bank, The Norges Bank, and its Gov., Olsen, are throwing in the towel, and joining the rest of the world. With what I hear you asking? Interest rates, that's what! Olsen said last night, that, "if it gets too strong over time, leading to inflation that's too low, we will act." Yes, he was talking about the Norwegian krone, getting too strong.
OK. I've always held the Norges Bank in high regard, but if they are going to start playing games like this, they will get on my you know what list very quickly! For one thing, I think Olsen is barking up the wrong tree. the Norwegian property market is overheated, and lower interest rates would just fed that bear. and we all know that we're not supposed to feed the bears, right Yogi?
I just cracked myself up with the Yogi bear thought. When my darling daughter, Dawn, was a little toddler, I used to call her Boo-Boo Bear. Over time it shortened to Boo. and then Dawnieboo... But, remember Boo-Boo Bear? Yogi's little friend. great memories in those cartoons, folks.
OK Chuck, get back to work! OK. Well, as I said above, the short positions in futures for Japanese yen increased last week. And when I signed off on Friday, the yen has rallied a bit, only to see that rally fade quickly. Japanese Finance Minister, Aso, said last night, that the Gov't has "no intention of buying foreign bonds." Which was interesting, because just earlier in the day, Japanese Prime Minister, Abe, told parliament that "buying foreign bonds exists as one idea". So, these two leaders are not singing from the same song sheet, folks. and when that happens, the currency of that country usually gets hammered.
I just wrote a piece for the World Money Analyst, of which I now contribute to monthly, on Japanese yen. I didn't say anything new that Pfennig Readers haven't read before regarding yen. But. one thing that I pointed out was that just like in Greece, the debt in Japan wasn't a problem, until it was. and then all hell breaks loose. When does that happen in the U.S. ?
Last night, the meeting minutes from the last Reserve Bank of Australia (RBA) meeting were printed. And they weren't as dovish as I would have thought them to be given the statement that followed the meeting. But in the minutes, the RBA said they were in a data-watch mode. Let's listen in on the RBA. "The inflation outlook affords scope to ease policy further if necessary, but that monetary policy was already accommodative and that this stimulus was continuing to work its way through the economy." Hmmm. sounds to me as if they are in a "wait-n-see" moods. While I think the markets are correct to call for another rate cut here in the first half of 2013, I also think that if the previous rate cuts begin to show up in a stronger economy, the markets could end up disappointed.
Across the Tasman in New Zealand, the New Zealand dollar/kiwi, dropped back on the news that China destroyed some imported New Zealand milk powder. It wasn't a huge amount that was destroyed, but still, kiwi got taken to the woodshed. I don't think this is something that will continue, so the beating of kiwi should back off soon.
Well. Gold actually saw some love yesterday. But that was without the NY traders in to apply their daily beating on Gold & Silver. The NY traders are back today, so we'll have to see if they still want to take Gold lower. It makes no sense to me, folks. the daily beatings go right alongside the daily increases in the amount of fiat currencies that get printed by Central Banks all over the world. And with every new paper currency printed, the value of previous printed currencies gets devalued. and should be devalued against Gold & Silver. That is unless something new has taken the place of Gold & Silver. and even platinum for that matter..
The stories about Gold shipments/imports by countries continues to tell a different story on Gold. For instance, India's gold imports in January surged 23% from a year ago! In addition, this was the largest import number for Gold in the past 18 months. 100 tonnes. can you believe that? India imported 860 tonnes in 2012, and they shot up to 100 tonnes in January? So, Central Banks around the world continue to take on Gold.
Not much in the way of data in the U.S. data cupboard today. Last Friday, we saw some weak data in the form of Industrial Production, which contracted in the month of January -.1% . Just another U.S. report that doesn't come shining through.
Then There Was This. I saw this story on MarketWatch this weekend, and it plays well with my thought on currency printing and how that should benefit Gold. "Talk of a so-called currency war has been heating up, and it might finally light a fire under gold, too.
Efforts by countries such as Japan to boost growth with massive stimulus programs - which in turn have devalued their currencies, an aid to exports - can benefit prices for gold. These have started to alter the precious metal's relationship with the foreign-exchange market and expand its role as a safe-haven asset.
"We are now moving irrevocably to a time when gold will measure currencies, not currencies measure gold," said Julian Phillips, a South Africa-based contributor and founder at GoldForecaster.com.
Chuck again. Enough said about all that. unless the NY traders get caught shorting the metals, or until this all catches up with them, these fundamentals for why Gold & Silver should be higher in price, will take a back seat.
To recap. Currencies and metals trade in tight ranges yesterday, without the NY Traders around to dictate direction. This morning we're seeing some weakness in the currencies for the most part, with the Aussie dollar (A$) being the exception. The Reserve Bank of Australia's meeting minutes boosted the A$ overnight. And Japanese yen is back on the selling blocks this morning.
Currencies today 2/19/13. American Style: A$ $1.0340, kiwi .8445, C$ $.9880, euro 1.3340, sterling 1.5465, Swiss $1.0820, . European Style: rand 8.9025, krone 5.5550, SEK 6.3320, forint 218.10, zloty 3.1325, koruna 19.0335, RUB 30.12, yen 93.50, sing 1.2390, HKD 7.7545, INR 54.19, China 6.2437, pesos 12.68, BRL 1.96, Dollar Index 80.62, Oil $95.44, 10-year 1.99%, Silver $30.06, and Gold. $1,613.25
That's it for today. Well, I made it through my 5-days at home alone. I know the ladies on the desk here, didn't think that was going to be possible! HA! Our Blues came home from a 3-game winning streak on the road. Looks like they turned things around, and not too soon! Pitchers, catchers and position players are in camp now, and spring training is full-on. All is right in the world again, the stars are in alignment, and the karma is flowing once again. I have three more weeks before I leave to join my beloved Cardinals in Jupiter, Florida. These will be the three longest weeks for me! I love spring training so much. And with that. thanks for reading the Pfennig, and I hope you have a Tom Terrific Tuesday!