China Contemplates More Investment…

Good day… And a Tom Terrific Tuesday to you! Well… the death watch for Greek debt continues… I saw one pundit say yesterday that a Greek default wasn’t a question of if, but when… The markets are convinced that Greece and the European Union have no way out of this but to default. The Eurozone leaders are still trying hang on to the 10% chance that Greece won’t default, and good for them… it would do no one any good for them to throw in the towel when there’s still a chance… Unfortunately, the chances are slim and none… and Slim left town!

The Greek drama has really weighed on the currencies this past week, and as I kept telling you last week, the perfect storm was brewing for a period of dollar strength… There’s no need to panic… We’ve seen these periods of dollar strength before folks… Some last longer than others, but not once have they indicated that the weak dollar trend was over… And as long as the U.S. debt continues to grow, and I saw something the other day that showed the U.S. Gov’t had added $500 Million in debt since the debt debacle… Well, as long as that continues, and I don’t see any sign of it not continuing, we don’t have an election until next year… the dollar will remain in the weak dollar trend… Remember… the trend is not a ONE-WAY Street… there can be volatility, and this would qualify for volatility!

A reader asked me to talk about the hits that Norway and Sweden have been taking since their one day of glory last week, when it seemed the world finally discovered that Norway and Sweden aren’t a part of the euro! Well… I think I touched on all this last week, so let me go back and see what I said… Yes, there it is… from the Pfennig, Sept 6, 2011… “The recent data from Sweden isn’t exactly giving me a warm and fuzzy feeling about more rate hikes from the Riksbank… Most recently, Consumer and Industrial Confidence were down sharply… So… unless the euro is going to push higher, the krona will have a difficult time finding terra firma, going forward… Things have turned on a dime here… pretty amazing…

Next door, Norway continues to be the best fiscal / monetary balance sheet country in the world… They’ve recently discovered a new source of oil, so their future looks so bright they have to wear shades… The krone though, continues to get tarred with the same brush as the euro… One of these days that will break, when the markets figure out that the krone isn’t the euro or anything like the euro, but instead what I’ve always called it the euro alternative! But for now… that’s not what goes on… “

I love it when I can go back and find something I said… because… in my humble opinion, I’ve said a lot over the years, that eventually came to fruition… and I love it when I can actually point to the day in the Pfennig, instead of being like most other pundits that claim they “called something long before it happened”… I won’t name names, but I find it all pretty funny most of the time, when I hear someone say, “I told you that was going to happen, for I saw this coming a long time ago”…

OK… back to the currencies and metals… Gold really saw the rug pulled out from under it last week. Recall that I told you that I thought, and all signs pointed to price manipulation… Well that (in my opinion) manipulation was so strong, that it triggered “automatic sells”… you know the computer or box generated trades… Well, one sell has brought on another, and before you know it, Gold is barely hanging on to $1,800… The way I look at this is simply that the price manipulation should be looked at by those looking to buy Gold at cheaper prices, as a good thing… for it does provide cheaper prices!

The Chinese renminbi got back on its rally horse last night, and gained VS the dollar… I didn’t think for one minute that the renminbi was going to get caught up in this dollar strength, but you never know! Speaking of the Chinese, I would think that the current level of Gold is just about right for them to come in and begin buying again…

There are a couple of random currencies that are gaining VS the dollar this morning, preventing an all-out rout by the buck… The South African rand and Russian ruble… now there are some strange bedfellows, and then add in the Japanese yen, which isn’t really gaining per se, but more holding its ground VS the dollar this morning.

In New Zealand… Reserve Bank of New Zealand (RBNZ) Gov. Bollard, was up to his old tricks again yesterday, when he was dissing his own currency… We’ve seen Bollard do this many times over the years, and it just ticks me off to no end to hear him trash his own currency! When Don Brash was the Gov. of the RBNZ, you never heard him trash the currency… that’s because Don Brash understood that a strong currency is a reflection on the country, for a currency IS the stock of that country! He understood that a strong currency helps combat inflation pressures… and attracts foreign investment… here’s what I think is going on in Bollard’s head… The recent data from New Zealand has been strong… and the Monetary Policy Committee will meet in a few days to discuss a rate hike… you may recall that I thought the RBNZ would hike in September, so that would be this upcoming meeting… Well, if the RBNZ decides to wait, they will have some ‘xplainin’ to do, Lucy style, when the Monetary Policy Statement is printed a few days after the meeting, which will contain the minutes of the meeting…

So… Bollard is simply trying to trash the currency ahead of the meeting, for he already knows that rates will have to lifted to bring them back to levels before the emergency cuts were made to help the economy after the earthquakes. And it indicates to me that a rate hike is in the cards…

The selling in the Aussie dollar (A$) continued overnight, with the A$ losing another 1/2-cent… Even the strong data from China over the past two weekends hasn’t been enough to wrap a tourniquet around the A$… The A$ weakness hasn’t been a deterrent to Aussie bond buyers… According to a story on the Bloomie this morning… Australian government bonds are poised for their biggest quarterly rally in more than two years as investors seeking alternatives to the U.S. dollar and euro buy the so-called Aussie.

So… I hear that the Italians are talking to the Chinese about buying some of Italy’s debt… Hmmm… I’m not sure the Chinese are feeling good about their investments in Greece & Portugal right now, so right now might not be a good time to go back and ask them for more investment… But then, why not? The Chinese keep coming to the U.S. debt auctions don’t they?

The Singapore dollar has run into a road block, which is strange considering the Chinese renminbi, and the Japanese yen are holding ground VS the dollar. Normally these currencies from the same region, tend to move in like directions, for they all compete when it comes to exports… The Sing $ has gained 3.3% VS the U.S. dollar this year, and gained nearly 10% VS the dollar in 2010… So, to see it lose ground is a little strange…

I think the Asian countries are trying to break the habit of depending on exports and become domestic driven economies… reminds me of one of my all-time fave Chicago songs… Now being without you, takes a lot of getting used to, Should learn to live without it, but I don’t want to. Being without you is all a big mistake, instead of getting easier, it’s the hardest thing to take, I’m addicted to you babe, You’re A Hard Habit To Break!

I saw a news flash go across one the screens yesterday, and the flash read… Bank of America to cut 30,000 jobs! OUCH! Did they check with the President first though? Because he’s doing what he knows to do to create jobs… I’m not being funny here folks… This is serious stuff… BofA is cutting 30,000 jobs… I was talking to Jen, and said, we have about 2200 employees at EverBank now, and I thought that was a lot! But 30,000 that can be let go? Can you imagine how many total they have?

Well… Italy survived another auction this morning… And PM Berlusconi announced that the Italian Parliament will begin to draw up more austerity measures that will pass. Austerity measures are tough, but they have to be implemented sooner or later… the sooner the better, the later may be too late!

The news of a successful auction in Italy has brought the euro up a bit in early morning trading. But the ranges are so tight, Tupperware would be proud!

Then there was this… from Bloomberg… first, though… I want to make certain, that everyone knows that I first brought this thought to the public’s attention last year, and laid out all the steps that China was taking to bring about a change in the dollar’s reserve currency status… OK… here’s the Bloomie…

“China’s renminbi may displace the dollar as the world’s main reserve currency within a decade, according to Arvind Subramanian, a senior fellow at the Peterson Institute of International Economics. “China has almost caught up with the U.S. as an economic power, with an economy about as large in terms of purchasing power and much greater exports and overseas assets. China still has to carry wide – ranging policy reforms, but the internationalization of the renminbi is being pursued in a characteristically Chinese way… micromanaged, interventionalist and enclave-based.”

Chuck again… yes… and I could add tons of more stuff to his thoughts, but it would be better for you to come see me the next time I’m on the road and have this talk on my docket… to get the “rest of the story”!

To recap… The perfect storm that was brewing last week for a period of dollar strength continues to build and has begun to rain on the currencies’ parade. There are a few currencies mustering a rally VS the dollar, the rand, yen, and renminbi… Gold continues to be weak, from last week’s assault on the shiny metal. Greece continues to have a pulse, and a slim chance of avoiding default, and Italy lives through another auction this morning.

Currencies today 9/13/11… American Style: A$ $1.0325, kiwi .8240, C$ $1.0060, euro 1.3675, sterling 1.5820, Swiss $1.1365, … European Style: rand 7.3660, krone 5.6440, SEK 6.6765, forint 207.10, zloty 3.1760, koruna 17.9260, RUB 30.21, yen 77, sing 1.2430, HKD 7.8030, INR 47.57, China 6.3985, pesos 12.82, BRL 1.7020, dollar index 77.27, Oil $88.92, 10-year 1.95, Silver $40.21, and Gold…. $1,815.30

That’s it for today… They are drilling in the office this morning, as we expanded our space, and the furniture gets anchored to the floor… It’s all modular stuff… So, I’ve got that going on trying to drown out my I-Pod! UGH! Cardinals can’t stand prosperity, as they fail to pick up another game on the Braves last night… And Monday Night Football started… I was thinking about how as a young adult I used to think that Monday Night Football (MNF) was the “end-all”… We used to go to drinking establishments to watch the games, or have everyone over to watch it… But somewhere along the way, that didn’t seem so important any longer… But man did we have some fun! (and on the I-Pod, it’s playing the song Kicks!, how funny is that?) Time to get to work… I had to leave before I was ready yesterday, so I have to get caught up… I hope you have a Tom Terrific Tuesday!