Yellen Says Central Bank Has More Work To Do!.
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In This Issue.

* Yellen's comments stops dollar rally in its tracks!

* Former Fed Head doubts Yellen's resolve to taper.

* Former Fed banker apologizes for QE!.

* Eurozone 3rd QTR GDP ekes out a gain! .

And, Now, Today's Pfennig For Your Thoughts!

Yellen Says Central Bank Has More Work To Do!.

Good day. And a Tub Thumpin' Thursday to you! I spent a lot of the day yesterday dealing with a car that had chewed through fuel injector line. Yes, some critter, probably a squirrel (there were nutshells around the scene of the crime, had eaten through my fuel injector line. UGH! I once had a mouse climb up and make a home, until the heat of the engine fried it, but the nesting and remains caused a problem! Why, do critters want to make a home under my car's hood? Now that's weird!

Speaking of being weird. That's what this whole market feels to me right now. Stocks are flying through the roof on their way to the moon, albeit courtesy of Fed Stimulus, but the rest of the markets, bonds, currencies, commodities just can't seem to find a clear direction right now. One day it's Armageddon, and interest rates are going to go sky high, thus deep-sixing bonds, and the next day they aren't going sky high, and bonds recover. Same thing in the currencies and commodities, one day it's all peaches and cream for these two asset classes, and the next day, it's not.

Yesterday, it was not peaches and cream for currencies and metals, but today, it appears that it just might be a peaches and cream day! The euro is back to moving higher, inch by inch that is, on news that the Eurozone 3rd QTR GDP printed positive, as it was expected to fall back into negative territory. It was like doing chin-ups, or pull-ups when I was a kid, the phys-ed teacher would stand next to me and implore me to do one more. And I would struggle, and my face would turn red, and I would huff and puff, and barely squeeze out one me. Well that was the Eurozone economy in the 3rd QTR. It struggled, and there was lots of huffing and puffing, but in the end the Eurozone squeezed out just one more inch of growth to print a .1% gain over the previous quarter or a .4% annualized number. Nothing to brag about, but. as my little, almost 3 now, grandson, Everett likes to say when he achieves something, "I did it!" The Eurozone, with all the negativity toward their economy being hurled at them daily, was able to eke out a gain.

That was a akin to what the old football coach used to tell us. Unless we couldn't help it, we were NOT to just lay on the field if hurt, get up, and get to the sidelines to show the other team you are OK. (it also helped the parents in the stands to not sit there and wonder, is he OK?) The Eurozone economy could have just folded tent, and gone home, lay down on the field, and not get up. But, it didn't! And for that, the euro is inching higher this morning!

Well, as I told you yesterday and probably Tuesday, Janet Yellen is speaking today, and the markets are looking for some direction from the new Top Dog Fed Head. Yellen decided to give the markets a hint of what she's thinking right now, when she told reporters that "the U.S. economy and labor market are performing far below potential and the central bank has more work to do to support the economy." Now, does that sound as if she's ready to begin tapering, as the markets have so priced in already? It sure doesn't to me!

Speaking of Yellen. Well. I wonder if the markets are so brazen now about tapering coming so soon? MarketWatch had an article on their website yesterday, (I had lots of time to read as my car got fixed!) that would / should put to doubt the markets' brazen attitude about tapering. Former Fed Gov. Kevin Warsh told the Wall Street Journal yesterday that he has doubts about Janet Yellen's courage and conviction to tighten monetary policy when the markets are opposed to it. Warsh said that, "the Fed has been handing out candy to spur markets higher, so consider the challenge when a steady diet of spinach is on offer."

The former Fed Gov. has never been a fan of asset purchases, the MarketWatch article goes on to say, that "he criticized the central bank's second round of asset purchases in a Wall Street Journal opinion piece shortly after it began in Nov. 2010."

Now, put that in your pipes and smoke it all you traders bidding up dollars because you believe that tapering is going to begin soon!

And while I'm on the subject of Quantitative Easing, I came across something that I found really interesting. Now, long time readers know that I've have been vehemently against Quantitative Easing since the first round was announced in March of 2009. It continues to just turn my skin and cause me to yell at the walls every time I even hear the words Quantitative Easing! Well, this will just make your blood boil, that is if you're like me, and Lord help you if you are!

I found this on Google+, and it originated on the website. Let me set the table for this for you first. There's a banker named Andrew Huszar that helped manage the Fed's Quantitative Easing program from 2009 to 2010. He has decided to apologize to the American public. let's listen in:

"I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time."

Chuck again. Oh, great, after 4 years of this stuff, he now figures it all out! That's like saying I'm sorry and expecting everything to be forgiven after you burn down a house! Or other things like that!

I'm shaking my head in disgust right now. The "greatest backdoor Wall Street bailout of all time"? Of course most of us that read or write this letter already figured this to be the case long ago, but to have a former Fed banker come clean, and call it what it is. I find that to be very interesting, and could be a game changer, IF the major media outlets picked it up. But I doubt they will, they have problems finding a snake story when the snake is about to bit their nose off!

Well, let's talk about other stuff, eh? All that QE talk, and tapering or no tapering is beginning to give me a rash! But the question and answer component of Yellen's talk in Congress begins today, and considering the way the markets violently reacted to her prepared statement yesterday, this could get pretty dicey, and reveal just how she intends to deal going forward.

One of the currencies that has just been on the slippery slide since last week, without any reprieve is the Japanese yen. Yen has broken through, on the upside, the 100 figure. And as far as I'm concerned, this currency has far more ground to lose before reaching what I expected yen to be trading at by now, which was 110. Once again, I'm ahead of myself and the markets with my thoughts, and all the while that I wait for the thought to come to fruition, I get barbs and fruit thrown at me, by people that don't know anything about patience!

Things are going to hell in a hand basket for Japan. They have awful demographics, they've been stuck in the mud for two decades, they have taken what was once a strong Current Account Surplus, led by Trade Surpluses, and turned that negative, and their Gov't debt is the largest in the world.. so tell me, why wouldn't yen be falling in value? These fundamentals are awful. And yen deserves to be put on the chopping blocks every day!

The other major currency besides yen and dollars that should be on the chopping blocks every day is the British pound sterling. While some 2nd and 3rd tier data here has been better lately, the real McCoy data, like Retail Sales continues to show the rot on the British economy. October Retail Sales printed weaker than expected this morning printing at -.6% VS the expected -.1%... And non-food sales were even weaker! We had a Bank of England (BOE) member, Fisher, speaking early this morning, and talking about interest rates normalizing in England. Yeah, right! You have Retail Sales falling through the floor, and you're talking about interest rates normalizing? That's funny to me, for it reminds me of that great clip of the football coach, Jim Moira, talking about his awful team's record, when a reporter asks him about the playoffs, and Moira responds, "Playoffs? Playoffs? Don't talk to me about playoffs. Are you kidding me? Playoffs? I'm just hoping we can win a game!" Now, if you've ever seen that video / sound clip and you have a sense of humor that similar to me, for there's no one like me!, then you're laughing out loud right now!

And then Gold. Oh the poor shiny metal sure has been through some rough times since reaching an all-time high a couple of years ago above $1,900. Most of us have a very good understanding what's going on here, but for you naysayers, you might want to step back from the car slowly, and go back and research some more. It's all there for us to see, the price manipulators are so brazen now, they don't even attempt to hide their short selling ahead of market moving news, or in the afterhours trading any longer. But there's some good news for Gold. So, let's talk about it!

My friends over at the 5 Minute Forecast had some interesting tidbits about China's new Gold Vault yesterday, which prompted them to say that with the price of Gold down, "that'll be more gold the Chinese can scoop up at bargain prices." Here are the guys at the "5".

"This month, a gold vault opened in Shanghai's new free trade zone -- a vault big enough to store 2,000 metric tons, or double China's projected gold consumption this year.

"Such a facility is a massive vote of confidence for the Chinese gold market," Philip Klapwijk tells Bloomberg. He's managing director at Precious Metals Insights Ltd. in Hong Kong. "The trend for demand has been very strongly positive."

The rest of Bloomberg's story is a recitation of things you already know if you read us regularly: China is set to overtake India as the world's biggest gold consumer this year. Chinese consumption during the first six months of 2013 nearly equaled the total for all of 2012, even as gold is set to record its first annual price drop in 13 years."

I have always told you, dear reader, to follow the money, and if the Chinese believe that buying physical Gold on the dips is a prudent thing to do, for them. Hmmm..

The U.S. data cupboard is chock full-o-2nd and 3rd -tier -data today, including the always interesting Weekly Initial Jobless Claims. And the stupid productivity reports. I say stupid, because the Fed Heads believe that Productivity is important to keeping inflation in check. I say all it does is prove that people can work harder, longer hours, and still not make enough! Tomorrow, we'll see Industrial Production, which is usually paired with Capacity Utilization but I don't see Capacity Utilization on the list for tomorrow.

For What It's Worth. Lots of things to think about today, and consider. and here's one more. You know how I'm always telling you that China is hoarding Gold so that they can back their currency with Gold when they decide to float the renminbi, thus making it the most attractive currency in the world. Well, I found this report on and it talks about how China has been adding to their Gold reserves, but attempting to keep the amount secret.

"Since writing a recent article suggesting that China's Reserve Bank, the Peoples Bank of China (PBOC), has been building up its gold holdings, but without reporting this to the IMF. We have been contacted by a Bloomberg research analyst, Andrew Cosgrove, who has, with his colleague Kenneth Hoffmann, been working on Chinese gold data, and who has come up with a somewhat similar conclusion. In this case some specific figures have been developed in the research which do tie in well with Philip Klapwijk's assertion that China has taken some 300 tonnes of gold into reserves in the first half of the current year.

The Bloomberg data, which has been available on Bloomberg terminals since mid October, puts a more precise figure on this, suggesting that in the current year the PBOC will likely add some 620 tonnes into its gold reserves, and possibly even more next given the current lower gold price. China can do this without reporting the increase to the IMF by the simple mechanism of holding the newly acquired gold in a separate account from its official reserves and only transferring it into the official reserve when it deems it timely, or politically expedient, to do so. This is exactly what happened in 2009 when China announced an increase in its gold reserve from 600 tonnes to 1,054 tonnes with the gold having been acquired over the prior five years.

It thus seems increasingly likely that China has been steadily accumulating gold since its last gold reserve announcement, but again not reporting the figures - indeed even denying that it has been doing so - surely a question of interpretation if it is working in the same manner as in the five years prior to its 2009 reserve update? However, there is plenty of Chinese domestic evidence that it may indeed be increasing its reserves, not least a number of statements from Chinese officials and academics calling for official gold holdings in line with the size of the country's growing economy - and in China few such statements are made without government approval."

Chuck again. Those sneaky Chinese! HA! The evidence has been there all the time folks, and I've told you about the imports, etc. So, this is old news to many of you that pay attention in class each day! HA! But, IF the U.S. still has their Gold. China could very well match the U.S.'s Gold reserves inside of 10 years.. And when the you know what hits the fan, and the major countries come together to see who has the most Gold, China will belly up to the table, and finally show what they have, and they will end up being the Lead Dog. Scary eh?

To recap. The currencies tried to rebound on Yellen's assertion that the U.S. economy is far from its potential and that the central banks has more work to do, but were quickly slapped back down overnight, only to attempt to rally again in the early morning sessions, led by the euro, where the Eurozone side-stepped a negative 3rd QTR GDP by printing a .1% gain. The markets might have to take a step back in their brazen attitudes about Fed tapering on the Yellen remarks.

I had to stop and sing along and whistle of course (the people on the desk will tell you that I whistle all the time, and it was one of the things I missed doing when I had that egg-sized tumor in my mouth) to one of my fave songs by the Doobie Brothers (before Michael McDonald) titled: South City Midnight Lady. It's from the Doobies' best album (in my opinion), The Captain and Me. I think I wore the grooves out on the LP back in the day!

Currencies today 11/14/13. American style: A$ .9295, kiwi .8250, C$ .9530, euro 1.3440, sterling 1.6040, Swiss $1.0890, . European Style: rand 10.3405, krone 6.2025, SEK 6.6790, forint 221.55, zloty 3.1160, koruna 20.1860, RUB 32.72, yen 99.95, sing 1.2480, HKD 7.7535, INR 63.12, China 6.1315, pesos 13.06, BRL 2.3245, Dollar Index 81.11, Oil $93.54, 10-year 2.72%, Silver $20.75, Platinum $1,445.85, Palladium $735.80, and Gold. $1,282.16

That's it for today. I didn't get a chance to see the sunrise on the water yesterday as it was too cloudy. The arctic blast that hit the U.S. this week, didn't reach this far south, but we're still feeling some of the effects, with very strong winds, and cloudy skies, it's all supposed to get back to norm this weekend. I sure hope so! A local person apologized to me yesterday for the bad weather, and I said, "are you kidding me? It's 16 degrees back home, I'll take warmth with some clouds any day, over 16 degrees!" Mike Meyer was kind enough to send me the Chinese fix rate today, thanks Mike. I forgot to ask Mike what day it was yesterday! Mike, Mike, Mike! We found a neat little local pizza joint last night, that made my day! Well, I'm late getting this out today, so I had better wish you a Tub Thumpin' Thursday and get it out the door!

Chuck Butler
EverBank World Markets

Posted 11-14-2013 12:41 PM by Chuck Butler
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