We'll Have To Wait A Month!

Good day… And a Happy Friday to one and all! Whew! What a wild day here yesterday at the Orlando World Money show, and in the geo-political arena! The currencies held their half-cent gains, but did not add to them; therefore we remain in a tight range.

We started off the day with both the European Central Bank (ECB) and Bank of England (BOE) both passing on rate hikes. I didn’t really think they would move this month, as I said yesterday, and the markets did not penalize the currencies for this non-move, as both Central Banks issued statements after the rate decision that remained hawkish. In fact, ECB President, Trichet, came right out and said that the ECB would look to hike rates next month! Now how’s that for transparency, Big Ben?

Speaking of Trichet… I found it quite interesting that he took the time in his statement to mention the yen carry trade. He also followed his mention of the yen carry trade with a little reminder for everyone who believes this carry trade is a one-way street… “Market Conditions won’t last forever”.

You know… When it was announced a few years ago that Wim Duisenberg, the first ECB President, would step down for Trichet, I was quite nervous. A French Central Banker in charge? The French Central Bank had long been known for shooting themselves in the foot! But as time goes on, Trichet has grown on me. I think the guy has done a great job… So far!

Then came the news that the Russian Central Bank announced changes to their FX Basket, moving the euro component to 45 cents, and dollars to 55 cents. This move caught the markets off-guard a bit, in that Russia had been saber rattling for some time now regarding a change. But when, was the question?

The move falls in line with all the other Central Banks that have been changing their currency mix for the last year. Recall, it all began with an announcement by South Korea a year ago, and that has led to a flood of changes in currency mixes by Central Banks… Another reason that euros have become a strong challenger to the dollar for the world’s reserve currency!

We have three more Fed Heads on the speaking circuit today… Poole, Pianalto, and Fisher, with two of the three being Hawks. I suspect some inflation fears, and chances of rate hikes talk will be mentioned once or twice today, which would lend a hand to the dollar.

OK… Here we go again! Chinese officials have announced that they will allow the renminbi to appreciate in a “reasonable manner” to help reduce its trade surplus and slow economic growth. That’s all fine and dandy, but once again, the Chinese forgot to mention an important item… WHEN WILL ALL THIS TAKE PLACE!

Time and time again, we hear this kind of talk, usually after some saber rattling by U.S. lawmakers, Schumer and Graham. Yes, when the United States starts its crying about unfair this and unfair that – and that leads to talk about slapping tariffs on Chinese goods – that’s when the Chinese sooth the feathers with talk about allowing more flexibility in the renminbi. It’s a big game the Chinese and United States play. “Will it go round in circles?” as Billy Preston used to sing!

Well… I was talking to an oil and gas guy last night, and he was telling me about the geo-political stuff that was going on with Iran, and how it really affected the price of oil on the day. This is the type of stuff I’m always telling you about! The powder keg that exists in the Middle East is always ready to explode.

Gold shot up on that news, which leads me to say once again that gold should be a part of everyone’s investment portfolio. But if you’re leery towards the price action in gold… If you want to participate in the gold market, but do not want to risk your principal… Then guess what? YOU SHOULD SERIOUSLY LOOK AT OUR MARKETSAFE GOLD CD! We give you 100% principal protection, while you participate in the gold market! See the ad above, or visit out website (you all know the URL)… EverBank.com!

The data cupboard is empty in the United States today… So nothing to talk about there. The United Kingdom saw some widening in their trade deficit, due to the strength of the pound sterling, and this has caused some slippage in the pound. (A buying opportunity?) So, with that… I’ll head to the Big Finish, and get downstairs for breakfast and another day at the booth!

Currencies today: .7780, kiwi .6825, C$ .8480, euro 1.3010, sterling 1.9490, Swiss .80, ISK 67.80, rand 7.17, krone 6.25, SEK 7.00, forint 194.71, zloty 2.99, koruna 21.7250, yen 121.50, baht 33.90, sing 1.5320, HKD 7.8140, INR 44.10, China 7.7475, pesos 10.9450, Silver $13.87, and Gold… $663

That’s it for today… My presentation went well yesterday. I have another one this afternoon, and then I’m on a currency discussion panel tomorrow morning… So, this is no boondoggle for Chuck! With the football season over now, college basketball takes the stage. It’s a great game to watch! But… Pitchers and catchers report in a few days, and it won’t be long before baseball is here again. YAHOO! Have a great Friday and weekend… Chris will get the Pfennig out to you on Monday, as I’ll be traveling from here to Jacksonville.

Chuck Butler — Febraury 09, 2007

The Daily Reckoning