Good day… And a Happy Friday to one and all! I’m having a tough time focusing this morning, and my infusion confusion hangs on, and this morning, it’s making it tough for me to see clearly. I need some Johnny Nash right now… I can see clearly now the rain is gone… But, hey! I’m not going to let seeing double or blurry words on a screen stop me! It was crazy at the doctor’s office yesterday and the infusion center… What should take no more than 2 hours tops, took 4 hours… UGH! The Late Great, Dan Fogelberg greets me this morning with his song: As The Raven Flies… I used to play that song on my guitar… But wouldn’t remember the first chord now… UGH!
Well, I guess I could say to U.K. PM May, “I told you so!” I would get to needle her in the worst way because as I said months ago when she took a chance and called for this election in hopes it would strengthen her position on BREXIT negotiations, and I said that she was “taking a risk she didn’t have to”… The pound has gotten caught up in all the exit polls, and the final count. Yesterday the pound was sitting pretty at 1.2983, when the polls and bookies had pretty much said the Tories would maintain their majority in Parliament. This morning, the pound is 1.2732, and has been as low as 1.2705 overnight.
A hung Parliament pretty much means that the Tories will have to form a coalition Government, which means they won’t have the strength going into the BREXT process than that would have had, if PM May had not been so greedy… The U.K. is now going to find that negotiations on Trade with the European Union, and all the other things that need to happen, are going to be a real pain… And all along the way, I fully expect that the pound will be caught in the middle, and that doesn’t bode well for the pound, in my opinion…
Well, what’s bad for the pound is bad for the rest of the currencies, as they are, for the most part, sucking wind this morning… One exception is the Swiss franc… It appears that a lot of the pound selling crossed into francs, and that won’t make the Swiss National Bank (SNB) happy campers. Remember that the SNB is all about a weak franc, as long as the rest of Europe is weak, and weaker is what they are this morning, as the Big Dog, euro, lost the 1.12 handle yesterday, and has not attempted to win it back…
Gold lost another $ 9.20 yesterday… On Monday this week, I asked the question about which asset would reach their psychological level first… Euros at 1.13, or Gold at $ 1,300… Unfortunately, I must have put the kiss of death on them, because neither one is close to those levels now, as they’ve both moved in the wrong direction the last couple of days. But what? Me worry? Not really… I really do still believe that Gold is about to go on a run to higher ground, and that the Big Dog, euro, will be the main beneficiary of dollar weakness that will come later in the summer when the Fed has to admit they shouldn’t have been hiking rates into economic weakness, and loses what credibility they have left… Of course that’s just how I see it, you know, my opinion, which could be wrong, right?
Over in China last night, they printed their May CPI (consumer inflation) and it showed a strong jump from 1.2% to 1.5%, and the renminbi was allowed to appreciate again… What’s going on with the renminbi I asked a week or so ago? It now appears that the Chinese want the renminbi to settle in below the 6.80 figure, and probably want to see it around 7.50 by the end of summer… Yes, that would represent a nice appreciation from where it started a couple of weeks ago around 6.90…
There’s been no word from the Chinese Monetary Policy Authorities (CMPA) about the announcement that they would change the way the renminbi was fixed each day… I don’t know what to expect from the CPMPA, they could radically change it, or just make a minor change. But with all the hoopla of announcing that they would make the change, I’m leaning toward a major change…
Wouldn’t it by tre-cool if the Chinese used Gold as the basis for their fixing? I mean why not? As I’ve said for 7 years now, I believe the Chinese are accumulating Gold for two reasons… And one of them is to first float their currency in the open market, and then back it with some percentage of Gold, thus making it the most attractive currency in the world! So, this could be a precursor to that scenario, having the value of Gold (on the SGE, not the COMEX) relate to the renminbi’s fixing… See how I tied that all together with a nice neat bow? (Sometimes you amaze me Chuck! The way your mind works is amazing! HAHAHAHAHAHA!)
The Chinese CPI print has allowed the Aussie dollar (A$ ) and New Zealand dollar / kiwi to maintain their levels and not get caught up in the mess going on everywhere else that was caused by the U.K. election results…
The price of Oil slipped to the $ 45 handle in the past 24 hours… Last week, the price of Oil was $ 50, and this week its $ 45… and looking like it is going to slide further… Yesterday, on my way home from the infusion center, I had to stop for gas, and I noticed that gas prices haven’t yet dropped to reflect the drop in the price of Oil… I did pay less than $ 3 for Premium gas, so I guess I wasn’t that upset, but still, I would expect gas prices to have dropped more by now!
When I first began driving, I know it was a long time ago, and no, we still didn’t use horse and buggies in the City! But when I first began driving, the price of gas was 23-cents a gallon for Ethyl! You would pull into a gas station, and a young man would come out, greet you, ask you if needed a fill up and while the gas was being pumped into your car, he would wash your windows…and check the air in your tires if you asked! Well, all that passed, the price of gas skyrocketed to more than a $ 1 (oh my, the humanity!), pump the gas yourself stations popped up, and then years later, pay at the pump, and here we are… Thanks for sticking with me through that little nostalgic trip…
So… the former FBI Director, Comey, testified yesterday, and from what I can tell, there’s no real smoking gun here that should throw the President’s policies off the tracks… But a lot of the dollar move since yesterday is about dollar shorts unwinding… And you can see it in the Dollar Index, which was 96.78 yesterday morning and 97.45 this morning…
And the final piece of the triple-witching Thursday, was the European Central Bank (ECB) meeting… And here’s where there are two schools of thought from what ECB President, Draghi had to say… the first thought is that Draghi signaled that there was an end to stimulus in the future… And the other thought is that nothing changed, and bond buying and negative rates will continue through 2018… The euro traders took their cue from the 2nd thought and sold euros… I’ll let you decide which thought is appropriate by letting you read what Draghi had to say… “The ECB now expects borrowing costs to stay at present levels for an extended period.”
I’ll also point out something that was left out of his talk.. In previous meetings Draghi had always reminded everyone that “rates could go lower”, and those 4 words were missing yesterday, and that’s what really got some traders excited… But, like I said, traders went with the 2nd thought, and that cost the euro the 1.12 handle…
OK.. onto other things… Well, besides the Political problems in the U.K. the night didn’t have much for us, and neither has the early European session… Today’s U.S. Data Cupboard is basically empty, and there are no Fed speakers today, so we’re all on our own today with the currencies… I would never say that about the metals, though… there’s just too much “outside interference” in my opinion…
Speaking of the metals… As I said above, Gold lost $ 9.20 yesterday to close at $ 1,277.60… The number of contracts traded yesterday was a whopping 243,000! That’s right 243,000 contracts traded just in Gold… So, it wasn’t all selling of Gold yesterday that led to the $ 9.20 loss… At one point, Gold was $ 1,291.50, and later in the session it fell as low as $ 1,273.50, before settling at $ 1,277.60 on the day… The early morning trading has Gold down another $ 3… Which is quite strange to me, given the goings on in the U.K. but it is what it is, and I’m not going to worry myself about it, for I look at like this: Every time Gold gets whacked, it just gives Gold buyers an opportunity to buy it cheaper!
I was thinking about the early days of World Markets at the old Mark Twain Bank… Frank Trotter started the division, that had Peggy Jourdan as our currency trader, Neil George, Chris Gaffney, Mark Elmore, John Kaupisch, Jedda, and me… It was a fun group. I recall my wife bringing us treats all the time, and the time Chris Gaffney showed us his spider bite, that’s all I can say about that! But this is where it all started… It’s where I first began to study currencies, foreign bonds, and economies… It was 1992, and the Pfennig was born… That was 25 years ago! I was a young man then, but had already been in the investment business since 1973! So, an old man on the desk!
To recap… Well, it’s all about the Hung Parliament in the U.K. after the elections yesterday, and the selling of the pound, which crossed over to all the other European currencies, except the Swiss franc, which was the beneficiary of the pound selling. Gold lost $ 9.20 and Chuck wonders why, given the news from the U.K. China prints a stronger than expected CPI, which allows the antipodean currencies to hold their levels and not get caught up in what’s going on in Europe. And besides all that, Chuck rambles on about different things today, someone needs to shake him and get him on track today! HA!
For What It’s Worth… With yesterday being a long infusion day, I didn’t have a FWIW article this morning, until I opened up Ed Steer’s letter (www.edsteergoldandsilver.com ) and found one right away! This is a Bloomberg article from Billionaire Investor, Paul Singer, and his thoughts on the monetary and fiscal policies today in the world, and it can be found here: https://www.bloomberg.com/news/articles/2017-06-07/elliott-s-singer-warns-system-may-be-more-leveraged-than-2008?cmpid=socialflow-twitter-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social
Or, here’s your snippet: “I am very concerned about where we are,” Singer said Wednesday at the Bloomberg Invest New York summit. “What we have today is a global financial system that’s just about as leveraged — and in many cases more leveraged — than before 2008, and I don’t think the financial system is more sound.”
Years of low rates have eroded the effectiveness of central banks to contend with downturns, Singer said at the event in an interview with Carlyle Group co-founder David Rubenstein. “Suppressive” fiscal, regulatory and tax policies have also exacerbated income inequality and led to the rise of populist and fringe political movements, he added.
Confidence “could be lost in a very abrupt fashion causing conceivably a ruckus in bond markets, stock markets and in financial institutions,” said Singer, founder of hedge fund Elliott Management Corp., which is known for being an activist investor>”
Chuck again… Well, while the opinion of a Billionaire Investor, shouldn’t sway our thoughts completely, the should be kept on file, and added to all the other thoughts we get on the financial system, which to date aren’t good, right?
Currencies today 6/9/17… American Style: A$ .7536, kiwi .7209, C$ .7402, euro 1.1183, sterling 1.2735, Swiss $ .9717, … European Style: rand 12.9243, krone 8.5160, SEK 8.7420, forint 275.04, zloty 3. 7450, koruna 23.4545, RUB 56.94, yen 110.33, sing 1.3840, HKD 7.7954, INR 64.28, China 6.7939, peso 18.23, BRL 3.2699, Dollar Index 97.45, Oil $ 45.80, 10-year 2.20%, Silver $ 17.31, Platinum $ 939.54, Palladium $ 870.80, Gold $ 1,276.20 and SGE Gold $ 1,295.46… (this price is from the previous night for China)
That’s it for today… I can see clearly now, the rain is gone… I knew it would take a little while for things to clear up, and they did! Well, Kathy returned home yesterday, and this morning she was up early (on Eastern time) and clanging pots and making noise while I tried to concentrate on my writing. So blame her if I got off track too many times this morning! HA! It’s supposed to really heat up this weekend here. While I love warm weather, really hot weather is a notch below warm weather… But I’ll take it any day over frigid cold weather! Yesterday, I said, we needed to “let tomorrow be”, and see what happened? We woke up, and the world didn’t collapse! So, let’s let tomorrow be again for Monday… Head East takes us to the finish line today with their song: Never Been Any Reason… The diner where the band’s picture is taken for the album is the Olivette Diner, and my good friend, Duane and I go there for breakfast at least twice a year! And it was in the shopping center next to our (EverBank’s) first office! We shared some office space with the PayChex Co. But there I go again being nostalgic! Alrighty then, I’m in no shape to have any fun today, but you can! So, go make this a Fantastico Friday! And Be Good To Yourself!
EverBank Global Markets
Creator / Editor of: A Pfennig For Your Thoughts