In This Issue..
* It’s a Risk On day!
* Commodity Currencies have the “stuff”!
* Gold’s one-day window slams shut!
* RBA to not wait 2 months to hike rates!
And Now… Today’s Analysis!
Silence Is Golden…
Speaking of Gold… Well, you had a 1-day window to buy it cheaper, for the overnight sessions has the shiny metal hitting on all 8, and soaring once again to $1,148!!!!! Don’t you just hate those 1-day windows? I mean, you wanted to pull the trigger and buy, but thought, what if Gold drops more today, that would mean I could buy it cheaper tomorrow… Don’t be fooled! It’s like this folks… If you want to buy something, buy it! Trying to time a purchase will leave you sitting the sidelines with a baseball cap turned backward on your head and holding a clipboard!
I used to tell people that if you’re standing at the bus stop waiting for the bust to take you downtown, and the bus pulls up, but it’s an old bus, and the rumor is going around that a brand spankin’ new bus is on the way, you decide to not get on the old bus, but wait for the new bus… Then the new bus arrives, and there’s a rumor that an even newer, updated bus is on the way, and you decide to wait for that one… If you never get on the freakin’ bus, you’ll never get downtown!
OK… So… Remember when I questioned the current administration’s claims that instead of “creating jobs” they were “saving jobs”? I pointed out that claiming that jobs were saved, would be difficult to prove… Well, guess what? Proving that the jobs saved don’t exist, has been pretty easy… And the people claiming that the stimulus “saved jobs” have egg all over their collective faces…
Speaking of Jobs… One of my fave economists, Nouriel Roubini, had this to say about jobs…
“Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%.
While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession.
Also, remember: The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession.
So we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back.”
Chuck again… And you think the recession / depression is going to end with the unemployment problem in this country? Not when the consumer is needed to generate nearly 70% of the GDP…
And all that tells me that the cartel / Fed (Fartel!) is going to believe that they need to keep rates near zero for some time to come…
So… It’s Risk On today! It was Risk Off yesterday! Don’t ask me why… Tell me why, you cry, and no wait!
Yesterday’s data cupboard was a mixed bag of economic data for the U.S. PPI wasn’t as strong as forecast, Industrial Production slowed in October, but Capacity Utilization bumped higher, and the TIC Flows for September were $40.7 Billion, which was more than the $34.2 Billion in August. The report showed that Japan, China and the U.K. all increased their holdings of Treasuries. September’s TIC Flows were probably the best report of the day, and the best report that this series has printed in a long, long time… Does this mean that the all-clear horn is blaring, telling us not to worry any more about whether we finance our deficit or not? Well… It might be, but I’m not listening to it!
Well… The President ended his visit to China, with a call for a more flexible Chinese currency (renminbi)… And… The Chinese said… Nothing! They met the President’s words with silence… I used to date a girl that would say to me when I wasn’t talking… “Silence is Golden ” and I would say… “Then shut up and we’ll make a million!” HA!
Now, while it would nice if the Chinese played ball with us… I understand their dilemma… The IMF still believes that China’s currency is about 25-40% undervalued… China could not deal with a floating currency that went up 40% overnight!
Did you know that America’s trade deficit with China widened to a 10-month high in September? Well… It did, thus raising concern that the combination of a recovering U.S. economy and a fixed renminbi exchange rate against the dollar will worsen global imbalances. But… As I’ve said at least 100 times before this… The Chinese will do what they believe is best for their country, and that’s not floating the renminbi at this time, no matter who the U.S. sends to visit them to persuade them to do so!
Moving further south in the Pacific, we land in Australia… I thought about this next Reserve Bank of Australia (RBA) quite a bit the past couple of days… And have come to the conclusion that the Dec 1st meeting of the RBA will net another 25 BPS rate hike… The reason I think this, is the fact that there will be no meeting in January, thus leaving a 2-month gap, which in these economic times could be devastating… So… Look for another rate hike in Australia on December 1st… Which would be their 3rd consecutive meeting rate hike, and could be the harbinger to parity for the A$… Could be… I didn’t say it “would be”!
I know that yesterday morning, I talked about how the RBA meeting minutes had been perceived as “dovish”, and that spooked the markets into thinking that the RBA would NOT hike rates in December… But upon further review, the meeting minutes were really pretty vague, and while they didn’t sound outright hawkish, they also didn’t sound “dovish” either… After reading the minutes, I got the feeling that overall, the minutes support the idea of “steady rate hikes”… I don’t think the RBA will stop until they reach an internal rate of 4.25% early next year…
OK… To recap… The currencies have gained back the ground they lost in yesterday’s Risk Off trading sessions. Gold is back to soaring after a 1-day stall… Data yesterday in the U.S. was a mixed bag. Chuck expects the RBA to hike rates in December, and China responds to the U.S. President’s request to allow greater flexibility in the renminbi, with… Silence…
Currencies today 11/18/09: American Style: A$ .9325, kiwi .7490, C$ .9550, euro 1.4960, sterling 1.6810, Swiss .99, European Style: rand 7.4290, krone 5.58, SEK 6.8275, forint 177.50, zloty 2.7370, koruna 17.0130, RUB 28.67, yen 89.10, sing 1.3830, HKD 7.75, INR 46.22, China 6.8270, pesos 12.99, BRL 1.7080, dollar index 74.97, Oil $80.03, 10-year 3.34%, Silver $18.75, and Gold… $1,148.30
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