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Ripping Off The Band Aid…

A Pfennig For Your Thoughts November 12, 2020 * Currencies drift higher on Wednesday… * Gold gives back its Tuesday gain on Wednesday…  Good Day… And a Tum Thumpin’ Thursday to you! It was one of those days for me yesterday, I guess too much going on recently finally caught up to me… Around 1:30 pm I was reading stuff, and I began to feel my eye lids closing and me yawning. I knew I needed a nap… That nap lasted 4 ½ hours! And then all evening I was still yawning. UGH! Last year, I ditched cable, and decided that streaming TV was what I wanted. So I signed up for YOUTUBE TV… And all was well, here and in my second home in Florida… But then YTTV hiked their prices… Ok, it’s still about 50% less than what I paid the cable company. But then they announced they were dropping the regional

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A Pfennig For Your Thoughts
November 12, 2020
* Currencies drift higher on Wednesday…
* Gold gives back its Tuesday gain on Wednesday… 
Good Day… And a Tum Thumpin’ Thursday to you! It was one of those days for me yesterday, I guess too much going on recently finally caught up to me… Around 1:30 pm I was reading stuff, and I began to feel my eye lids closing and me yawning. I knew I needed a nap… That nap lasted 4 ½ hours! And then all evening I was still yawning. UGH! Last year, I ditched cable, and decided that streaming TV was what I wanted. So I signed up for YOUTUBE TV… And all was well, here and in my second home in Florida… But then YTTV hiked their prices… Ok, it’s still about 50% less than what I paid the cable company. But then they announced they were dropping the regional Fox sports stations… That’s where I get my Cardinals and Blues telecasts! This is getting bad…. Then last night, a national outage of YTTV…    I guess it’s time to look elsewhere… UGH!  Credence Clearwater Revival (CCR) greets me this morning with their song: I Put A Spell On You…  
Well, the healing that took place on Tuesday, was wiped out on Wednesday, Gold lost $12.50 to wipe out most of Tuesday’s $14 gain… To close at $1,866.20…. Silver, on the other hand, gained a nickel on the day… Yes, 5-cents to close at $24.37… Strange day indeed for the metals… The currencies kind of drifted during the day, up a little , down a little, not really moving much. Yesterday morning the Dollar Index was 93.09, and last night after the close, it was 92.99… So, like I said, drifting. On the day…
In the overnight markets the dollar has gotten sold a little more, and Gold is up $4… The euro has climbed back above 1.18, and I’ve got some to say about the single unit, so keep reading! 
The news on Monday of a breakthrough in finding a vaccine for the COVID-19 Virus seemed to be a strong indication that things will get back to the way there were…. However, there is still some time that’s going to be needed to organize and plan the distribution of the vaccine… And that’s not helping the Eurozone, who’s deaths from the virus are climbing… And the Eurozone leaders are contemplating a lockdown again… Italy, which suffered the worst of the ravages of the virus last spring, have been demonstrating against another lockdown… We’ll have to see where that takes the region as a whole…
I went through of that to explain what’s causing the weakness in the euro… The euro on Monday was within spittin’ distance of the 1.19 handle, and hadn’t sniffed the 1.18 handle since, until last night that is…. The single unit had traded below 1.18 for three days now, and looks like it wants to drop further to me… But the one thing supporting the euro, is its place as the offset currency of the dollar. So, when traders want to sell dollars, they buy: Euros, first, francs second, yen third, sterling fourth, and then so on down the line… And the thought of selling dollars is weighing heavily on traders right now… Hedge Funds too, are contemplating selling dollars, as are many other large outfits…
I don’t know what it will take for them to pull the trigger on the selling of dollars… But when it comes it will be like the proverbial snowflake that causes the avalanche! It could be delay news on the vaccine, it could be a final decision of the courts on the winner of the Presidential election, it could be the announcement of a new economic lockdown here in the U.S., it could be a number of things, but one sure seems to be ready to happen, at a moment’s notice… 
I’ve seen the trading outfits all ready to move before, folks… See, that’s what you get when you follow a guy who has been around currency trading since 1992… And in the investment business since 1973… The last time I saw this, was 2009, when it was rumored that the Fed would begin to demonetize the debt (Quantitative Easing), and then when it was announced in March of 2009, the triggers were pulled and it was an all-out assault on the dollar… The time before that was 2001, and I recognized what was going on and wrote the White Paper: The Decline of The Dollar. Soon, then President Bush announced that he was going to implement tariffs of Japanese steel… And that caused the triggers to get pulled, and sell the dollars, in February 2002….  
Yes, we’ve had several false dawns in the past couple of years… And each time, I jumped too soon, and thought that the sentiment toward holding dollars had changed… But this time, I have checked all the boxes, and they all line up to a scenario much like 2009, and 2001…  I’m just saying…
OK… well the Aussie dollar (A$) began the week trading above 73-cents, reaching .7320 before backing off on Tuesday… I believe what we’re seeing in the A$ is a correction, in that the A$ jumped too high too fast and now needs to fill in the gaps… You know interest rates here in the land down under are still pretty low, with their official cash rate at 0.10%, which most depositors are getting nothing or being charged… When you trade for the A$, the price of the A$ will include forecasts for interest rates…. Let’s listen to the Reserve Bank of Australia (RBA) in their latest (11/6) Economic Statement….
“In Australia, the recovery in activity has been underway for several months after the economy experienced the deepest peacetime contraction since the Great Depression in the first half of the year. The domestic recovery is set to be supported by the further easing in activity restrictions and substantial monetary and fiscal policy stimulus. The baseline scenario for GDP growth has been upgraded a little relative to the August Statement. This reflects stronger-than expected household consumption and additional policy support (including that announced in the Australian Government Budget), though a downward revision to resource exports has partly offset the firmer outlook for domestic demand. Even after the GDP forecast upgrade, the severity of the downturn in the first half of the year means that GDP is not expected to return to its pre-pandemic level until the end of 2021.” = RBA Economic Statement 11/6/20
So, there’s a lot of central bank parlance there, but what I get out of it is that the RBA feels that while the outlook is for subdued growth, they feel like things will get better as we move along early next year… So, to me, the A$ is looking like a buy at sub 73.50-cents… 
I just saw a blurb that made me laugh out loud…. Do you want to take a guess at what was the best performing Emerging Markets currency in the last week? Well, if you happened to guess that is was the Turkish Lira, you would be correct… The bump up in price of the lira was due to the canning of the former finance minister, who had see the lira drop to the lowest level on record during his watch… I still wouldn’t touch that currency with YOUR ten foot pole!
Ok, back to stuff that we follow… Well, the price of Oil slid downward yesterday for the first time in about two weeks… Oil lost $1 in trading yesterday, and that caused some slippage in the Petrol Currencies… Not much, but some… enough to be able to see with a quick check of the currency values…
The yield on the 10-year Treasury Bond fell a couple of bips yesterday, from .96% to .93%… I had been watching this yield rise from the .68% level a few weeks ago, to where it is today, and kept wondering what the bond boys were telling us… Do they see inflation as a problem? Or do they see something else… Well, now that the daily increases of yield have had a setback, one has to wonder what caused that? And here’s where this is going to sound a bit political but trust me I’m just stating the facts that were reported on CNBC.com  “That a Biden advisor says a 4-6 week lockdown could control the pandemic and revive the economy”…   Bond buyers were lining up to buy bonds on that news folks….
Remember the original lockdown was supposed to be 15 days? And then that went on for months, unnecessarily, in my opinion, but it is what it is….  So, if they tell us 4-6 weeks, that could turn into? Only the Shadow knows how long!
Man do I not like talking about this darn pandemic…. I call it the plandemic, for a number of reasons that we won’t get into here…. But come to the Butler Patio before I head to Florida in Jan, and I’ll be glad to opine…
The U.S. Data Cupboard actually has something for us today! The Weekly Initial Jobless Claims for last week will print, along with the stupid CPI (consumer inflation) for Rocktober… I’ll be interested in the Continuing Claims which last week were 21.51 Million…  And the other piece of data that will print is the Rocktober Federal Budget… I’ll bet you a dollar to a Krispy Kreme that the Budget Deficit for Rocktober is greater than $100 Billion… That’s Billion with a capital B…. 
Oh, Lordy, me… please protect me from the damages of deficit spending! 
To recap… The healing on Tuesday saw the band aid ripped off of Gold on Wednesday, as the shiny metal lost $12 of its $14 gain Tuesday… Silver actually gained a nickel yesterday, which is much better than a plug nickel! Remember how upset you would be when you reached in the coin return box, and pulled out a plug nickel? Soon vending machines caught up with the use of plug nickels and that didn’t happen any longer…. I saw a sign the other day, that was sad…. “My kids will never know the joys of reaching in a coin return box of a coin operated Telephone.”   
Man! Did I ever go off on a tangent there! Sorry about that! To finish up the recap… Oil slid downward by a buck, and Treasuries rallied. The currencies drifted throughout the day, as there were no new developments on the virus vaccine announcement on Monday.
For What It’s Worth… There’s been some upbeat news from China in recent times… Inflation is the lowest its been in years, GDP was 5%, and they have the lowest number of Covid cases in the world…. I saw this quote from Ray Dalio and it got me thinking, “Anti-Beijing bias has blinded too many for too long to opportunities” by Ray Dalio, founder, co-chairman, and co-chief investment officer of Bridgewater Associates. And then longtime reader, Bob, sent me a link to an article about China in the FT, and I immediately thought, this is FWIW fodder for sure! And so you can fine the article here: https://www.ft.com/content/8749b742-d3c9-41b4-910e-80e8693c36e6
Or, here’s your snippet: “For as long as I can remember, people have said that China cannot succeed. Communism doesn’t work. Authoritarianism doesn’t work. The Chinese aren’t creative. They have a big problem with bad debts and property speculation. Yet every day we see China succeeding in exceptional ways.
It has achieved some of the world’s lowest Covid-19 case rates. Over the past year, its economy grew at almost 5 per cent, without monetising debt, while all major economies contracted. China produces more than it consumes and runs a balance of payments surplus, unlike the US and many western nations. This year nearly half the world’s initial public offerings {1} will be in China, including Ant Financial’s $30bn listing {2}, the world’s biggest ever. Even Tesla’s best-selling Model 3 {3}car may soon be made entirely in China.
The world order is changing, yet many are missing this because of a persistent anti-China bias. China’s extraordinary performance isn’t new. In fact, apart from the 1839-1949 “Century of humiliation”, it has historically been one of the world’s most powerful countries and cultures. Just over the past four decades, its economic changes have been remarkable. Whatever criticisms you may have about Chinese “state capitalism”, you cannot say it hasn’t worked, even if you strongly disagree with how Beijing has done it.
All this is to say that China’s rise has giant political, economic and investment implications. Politically, China has become a major issue for both parties in the US, which fears its rise, spreading global influence, and rejects its authoritarian model {5} and treatment of minorities such as the Uighur Muslims {6} in Xinjiang. China’s rejoinder is that a strong hand is needed to maintain order, what happens inside its borders is its business, and the US has its own human rights problems. 
Meanwhile, China’s economy is roughly the same size as the US’s and expanding at a faster pace – so time is on China’s side. It has a growing population of well-educated people, with around a third of the world’s science and technology university majors, three times the US share. It also produces and collects vastly more data to process with artificial intelligence. One way to look at China’s relative power is that, with four times the US population, when its per capita income reaches half the US’s in about 25 years, its economy will be twice as large.
Last, there are the investment implications. As a global macro investor, I think a lot about how much I should invest where, looking at fundamentals and how others are positioned. China’s fundamentals are strong, its assets relatively attractively priced, and the world is underweight Chinese stocks and bonds. These currently account for 3 per cent or less of foreign portfolio holdings; a neutral weighting would be closer to 15 per cent.
This discrepancy is at least in part due to anti-Chinese bias. I think it is about to change. Chinese markets are opening up to foreigners, who can now access at least 60 per cent of them compared with 1 per cent in 2015. Benchmark weights in major indices are rising. {9} As a result, I expect China to enjoy favourable capital inflows that will support the currency, {10} already at a two-year high, and financial markets too. All this argues for a China overweight in my portfolio.”- Ray Dalio
Chuck Again… This talk about China takes me back to 2003, when we first found out on the EverBank World Markets Desk that we could buy forward contracts in Chinese renminbi… And then made a press release that we could offer renminbi CD’s.. OMG! The phones lit up and stayed lit up for weeks with potential clients wanting to know the details of our renminbi CD…  China has come a long way since then, and now offers a deliverable yuan… I don’t think it would wise to keep an anti-Chinese bias, folks… I’m just saying…
OK, I’ve just got to go down this rabbit hole this morning… Did you see the news that Citicorp got a $400 Million charge by the regulators for doing “unsafe or unsound practices”… The regulators wouldn’t tell us what Citi did wrong.. OK, this has got my goat this morning! First last year the regulators wouldn’t tell us who was having to get the daily injections of money from the Fed, and now they won’t tell us what Citi did… I know one thing, I’m writing my Senator this morning to let her know that I do not believe this is the right way to be transparent! 
Market Prices 11/12/20: American Style: A$ .7262, kiwi .6867, C$ .7646, euro 1.1811, sterling 1.3150, Swiss $1.0934, European Style: rand 15.6480, krone 9.1123, SEK 8.6183, forint 300.56, zloty 3.8062,  koruna 22.3885, RUB 76.58, yen 105.30, sing 1.3487, HKD 7.7537, INR 74.58, China 6.6171, peso 20.53, BRL 5.4084, Dollar Index 92.90, Oil $41.81, 10-year .93%, Silver $24.25, Platinum $871.00, Palladium $2,362.00, and Gold… $1.870.80
That’s it for today… no YTTV last night didn’t shut me out of watching TV… I have ROKU, so there are many other channels I could watch, including ESPN… So, I had that going for me! I finished my part of the Interview with Dennis Miller yesterday, and sent it off to him… I’m really excited about this one folks… Well, I was excited about the last one, where I gave my explanation about who’s behind the curtain of the price manipulators… Dennis always has a good line of questions for me, and I have to work hard to get them right! You can still probably read that letter with my thoughts at his website: www.milleronthemoney.com Journey takes us to the finish line today with one of my fave Journey songs: I’ll Be Alright Without You… (There’ll be someone else, I keep telling myself!) I hope you have a Tub Thumpin’ Thursday, and Fantastico Friday tomorrow, and will please, pretty please with sugar on top, Be Good To Yourself!
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts

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