In This Issue   Markets think the elections ar

first_imgIn This Issue. *  Markets think the elections are good for the U.S. *  Gold loses $28 and probably more as the day goes on! *  Canada gets a renminbi hub! *  U.S. Trade Deficit soars to $43 Billion! And Now. Today’s A Pfennig For Your Thoughts. Currencies & Metals Get Ambushed! Good Day!…  And a Wonderful Wednesday to you! Right from the top this morning (and before I have a senior moment) I want to say a GREAT BIG HAPPY BIRTHDAY to the lovely Rachel Butler. Oldest son, Andrew’s lovely bride, Rachel. I always think of the first time I met Rachel, it was at the Annual Butler Christmas Party, and I thought, she’s perfect for Andrew! And so it was, a few years later, they were married! Now, she’s a Butler, and a big part of our family. Happy Birthday, sunshine. Well, there’s no sunshine for the currencies and metals this morning, and guess what’s getting blamed for this ambush this morning. The results of the mid-term elections in the U.S. last night, which saw the Republicans gain the Senate for the first time in long time, and the markets are all giddy about this prospect.  It seems they think that this will grease the tracks for clearer decision-making to take place. Hey! I didn’t say that, the pundits out there in writer-land did! I’m just reporting what they are associating the ambush on the currencies and metals this morning with. Of course, I could very easily say to them, if they would hear me now and listen to me later, that this is no panacea for debt cutting, and budget balancing. For, when this dollar weak trend began we had the same scenario, expect the President was from the other party. Remember that? So, I guess what I’m saying is that there’s no guarantee that business will recover because of the party in charge. And that’s all I’m saying about this political stuff, because it gets me nowhere, I’ll tick off half the readers, and make the other half not so happy because I didn’t jump up and down in an euphoric dance!  But, the damage to the currencies and metals this morning is UGLY. They aren’t just getting hit with the UGLY stick, they are having the whole forest hit them! Gold is down $26 this morning, and looking like it could go even lower. Last night I was reading a report from Casey Research, and the headline of the story read: Sellers Waterboard Gold – Is The Price Torture Over?  Well, the markets are answering them this morning, and saying not no, but Hell No! I saw another conspiracy thought yesterday regarding who’s behind this latest drive to get Gold cheaper. The thought centered around the Swiss Gold Referendum. Saying that the Swiss are behind this move to get Gold cheaper, for they believe they will lose the resistance to the Referendum, thus requiring them to buy 1,700 tonnes of Gold, as I explained last week. Well, if they have to start buying, wouldn’t it be better to start at a cheaper price? Of course it would be. But let me ask this question, and don’t get me wrong, the idea is solid, just not the player. Do they really think the Swiss National Bank (SNB)  have enough intestinal fortitude to do this? I don’t.  But then they did pull of that devaluation of the franc two years ago, and the markets barely batted an eye. Well, this is no fun. watching Gold get ambushed day after day by the paper trades. As I told you yesterday, Koos Jansen reported that China has an insatiable demand for physical Gold, and Russia, and Turkey, and Brazil, I could go on, but just about every county in the East and Middle East are adding to their Gold reserves. Are they doing this for the hell-of-it? Or, are they doing so, because they see something coming down the pike that’s going to be UGLY. Even uglier than this ambush of the currencies and metals this morning by the dollar bugs. But you know. I told you months ago that I thought the dollar was ready to have a short period of strength, and could drive the euro down to below 1.20. I just didn’t think it would come this quickly, which leads me to believe that we could very well see a bounce that’s based on the drop in the currencies was too far, too fast. We usually see that. I’m just saying. OK. on Monday I told you the Big News regarding the direct convertibility of the Chinese renminbi, with Singapore dollars. Well, it was Big News as far as I’m concerned, and let me remind you that in 2008, I began writing about the currency swap agreements that China was signing with one country at a time, and thought that too was Big News, even if most news outlets didn’t see it that way.   And then yesterday, in the Canadian National Post, was more Big News. Apparently, this coming weekend, when Canadian PM Stephen Harper visits China, both he and the Chinese will use the visit as an opportunity to announce that Canada (Toronto) will become a trading hub for the renminbi, thus allowing Canadian firms to trade directly in the local Chinese currency, rather than converting loonies in U.S. dollars to do business in China.   This is the culmination of the currency swap agreement that was signed last year between the two countries, where they agreed to swap each country’s currency, thus leaving out the U.S. dollar, in the terms of trade between the two countries.  Now there is a Hub in Canada, for depositing renminbi, by Canadian firms doing business in China. It just keeps growing bigger and bigger all the time folks. The Chinese drive to gain a wider distribution of the renminbi, which is the number one requirement of a reserve currency! I don’t know of any other way I can emphasize the importance of the news regarding the renminbi this week. I can no longer do handstands or cartwheels (I was a on the “tumbling team” as a young man in elementary school, yes, I know, look at me now, go ahead and laugh, that’s OK, I know that somewhere in this extra-large body is the Chuck that was quite, what my dad used to call, a country athlete)  But I digress.   What I’m saying is this is absolutely crazy that no news outlets are of the same mind as me and believe this news is important. UGH! I told you yesterday that the Reserve Bank of Australia (RBA) left rates unchanged, and didn’t take their meeting as an opportunity to deep six the Aussie $ (A$). But today, the A$ has lost over 1-full cent. Why? Wasn’t the fall from $1.04 to the low 90-cent range, tied to the weak prices in commodities, namely iron ore? And then the fall from the low 90-cent range to 88-cents due to RBA jawboning the currency lower? And then what’s to blame for this next downward move?  I really think the interest rate differential narrowing talk in favor of the U.S. dollar is getting overblown. But it is what it is, right? We have to deal with it. until someone has a V-8 head slap moment, and realize they have been premature with their thoughts about rates in the U.S.. That could take some time, folks, for these knuckleheads have very thick skulls! Or, it could last until the next round of QE is announced. Yes, I know that’s not carved in stone, and it might never happen, but as I said the other day, if it doesn’t ever happen, then I’ll believe that pigs can fly.  So, I guess it would be good to talk about when I suspect the next round will come. They were discussing the timing of the next round of QE (QE4) in the 5 Minute Forecast / The “5” last Thursday, and they said that James Rickards pointed out that” the time between the end of QE1 and the start of QE2 was 17 months. The time between the end of QE2 and the start of QE3 was 15 months. So, expect QE4 in late 2015″.  And I thought, no, no, no, that can’t be, I see the lack of liquidity and the drop in inflation happening far before that. And then The “5” went on to say that they have this “Oh Sh*t” Graph, that tracks inflation. And funny thing, every time, since 2009, that inflation dropped below 2.2%, the Fed has embarked on another round of QE, and guess what the graph is telling us now?  “Uh-Oh, the line has been breached!  Inflation has dropped below 2.2% again. Come again, I hear you saying. Are you telling me that we could expect QE4 at any time now? Ahhh, grasshopper, not quite yet. the Fed will have to see that all their hard word of the past 6 years is being undone for sure first.   Because consumer inflation can be volatile, but we should continue to look for this to happen. And when it does, all this talk of dollar strength will be reversed, or at least that’s how I see it, it’s my opinion and I could be wrong! Well, the U.S. Trade Deficit widened by an amount that was not seen or forecast by the experts in September, and guess what the culprit was? Well, first let’s talk about the size of the Trade Deficit, which printed at $43 Billion in September, up from $40 Billion in August.  The deterioration came from exports falling 1.5% and imports remaining unchanged.  So, guess what the culprit was?  The relatively stronger dollar.  Just another unintended consequence of a strengthening currency on a country that depends so much on exports to offset the imports that are usually quite high.  Of course, exports could have been held down too, by the slowing economies of the world. But, these countries still need capital goods, no matter how slow their economies are, just like here in the U.S. we import things like Oil no matter how slow the economy is. The U.S. Data Cupboard was busy yesterday with the Trade Deficit print, and the ugly -.6% negative print of Factory Orders, which wasn’t as bad as August’s -10% print, but ugly nonetheless.  The NY regional ISM (manufacturing index) fell from 63.7 to 54.8. That’s a HUGE drop, but these regional reports can be volatile, and I grew tired of reporting on them because they never seemed to have any bearing whatsoever on the National ISM, but this one stuck out like a man with a hatchet in his forehead! Today’s Data Cupboard will begin to get us ready for the Jobs Jamboree on Friday, when the ADP Employment Change report for Rocktober. This report is expected to show that 220,000 jobs were added in Rocktober.  The song: The Walker, by Fitz and the Tantrums is playing, and I have the speakers turned up so loud, it’s a good thing I’m here by myself! This is a real  wiggle and bounce in your chair song!  I had a laugh the other day, when the National ISM report and the Markit version of ISM printed for Rocktober.  One showed a HUGE gain in the index up to 59, and the other showed a lower number of 55. Now remember this printed on Monday before the elections yesterday, so guess which one the Gov’t is responsible for printing and which one is a public company. Are you laughing out loud with me on this? That gain to 59 was so trumped up that it made it look ridiculous! The size of the, no wait I can’t say that. I’ll just say that the boys and girls printing that number were brave, eh? I read a story on the Bloomberg this morning that pretty much sums up the data prints in the U.S..  Let’s see what the Bloomie has to say.. “Paul Singer’s Elliott Management Corp. said optimism on U.S. growth is misguided as economic data understate inflation and overstate growth, and central bank policies of the past six years aren’t sustainable. Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth,” New York-based Elliott wrote. “When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.” Amen brother! I think this is bang on, folks. and I’m glad I happened to see it, as I was looking through stuff on the Bloomie this morning. My email box was loaded with emails from the WSJ and Washington Post this morning, giving me the results of the all the races, as if I really wanted to see all those! UGH!, so I spent part of the morning, deleting over 100 emails!  Gold isn’t the only metal getting ambushed this morning by the dollar. Silver has a $15 handle, Platinum has lost $25, and Palladium has lost $42 since yesterday morning. OMG! (oh my goodness!) This is crazy folks, just downright crazy! For What It’s Worth. There’s something happening here, what it is, ain’t exactly clear.  Yes, I’ve waited a long time to use that line after the FWIW beginning. and today’s piece works out perfectly, for we have some numbers, but it’s just not clear what to make of them yet.  I saw the headline on Ed Steer’s letter, and so I went to the site at to find the story. Are you ready? Yes, I’m ready. “The portion of home purchasers who are first time buyers dropped to 33 percent for the 12 months through June, the lowest since 1987, and down from 38 percent a year earlier, according to a survey by the National Association of Realtors. The average since 1981 is 40 percent. “Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the workforce,” Lawrence Yun, the NAR’s chief economist, said in a statement. Average hourly wages for all workers rose only 2 percent in the 12 months through September. “Adding more bumps in the road is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums,” Yun said.” Chuck again. Chris and I were talking about housing and housing loans yesterday, and in the previous day, we discussed with one of our mortgage guys in Jacksonville, who told us that there is more pressure on banks to give loans to low credit rating borrowers. Chris and I said, isn’t that what got us in this crazy financial meltdown to begin with?  And then Mike Meyer chimed in and said, ” Yes, and when it all crashes like it did before, who are they going to blame? The Banks for giving the low credit borrowers loans!”  I shake my head in disgust that this is happening again. To recap. The currencies and metals are getting ambushed by the dollar this morning, and it’s all due, according to the stories on the wires, to the Republicans winning the Senate which gives them the ability to set the course for the President’s last two years, and the markets believe this will be clear decision-making. Of course Chuck pointed out that we’ve seen this before, about 12 years ago at the beginning of the weak dollar trend. so, he’s questioning their thought process. (but isn’t Chuck always questioning the markets’ thought processes? HA!) Gold is down $28 as I write, and looks like it could be one of those really ugly days for the shiny metal. Canada will have a hub for renminbi to facilitate trade and allow the direct exchange of loonies and renminbi in the terms of trade. This is HUGE news folks, but don’t tell the news agencies, or the markets, they can’t seem to find their rear end with both hands. Currencies today 11/5/14. American Style: A$.8620, kiwi .7735, C$ .8740, euro 1.2480, sterling 1.5905, Swiss $1.0365,  . European Style: rand 11.1495, krone 6.8845, SEK 7.3840, forint 247.45, zloty 3.3940, koruna 22.2830, RUB 44.18, yen 114.70, sing 1.2955, HKD 7.7525, INR 61.41, China 6.1503, pesos 13.63, BRL 2.5200, Dollar Index 87.53, Oil $76.96, 10-year 2.35%, Silver $15.24, Platinum $1,200, Palladium $757.80, and Gold. $1,141.35 That’s it for today. Well, did you get out and vote? It was an ugly rainy day here, so getting out to vote took effort, but I did my part despite the weather. It’s difficult for me on days like this when everything that I believe about economics, markets, and trading is shattered, shaken, and left for dead. But about 7 years ago, after being told I had Stage 4 cancer, I began to have a different outlook about those things I couldn’t control. I have no control over the markets, or the people that make up numbers for economic reports, or created Trillions of dollars with one stroke on a keyboard, so I work diligently to not let these things get to me. Instead I attempt to focus on what’s important. like Rachel Butler’s birthday today! I understand that we’re going to dinner tonight to celebrate Rachel’s birthday, so that should be fun!  Shooting Star is playing their hit song: Last Chance, on the IPod, man that was a big song in the 80’s. They were a Kansas City, Mo band, so they got a lot of air time here in St. Louis.  See, there, a little rock history on top of all the other things we talked about today, where else can you get such a wide array of information in one place. Like the Wide World of Sports. Spanning the Globe. And then the sky jumper falls off the ramp.   Good and bad. just like the everything else. But the good today is that it is Rachel’s Birthday! YAHOO!  And. our catcher, Yadier Molina won his seventh consecutive Gold Glove! WOW!  Ok. time to get out of your hair today. that is if you have any left after seeing the ambush. I hope you have a Wonderful Wednesday! Chuck Butler President EverBank World Marketslast_img

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