Attempting To Start A Wave
"The point I'm trying to make here is that RBC and HSBC, tried to start the wave and it stopped. Now they've picked up Morgan Stanley, and we'll see how far the wave can go on."
By Chuck Butler
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And now…today's Pfennig! Attempting To Start A Wave Good day. Welcome back from the Thanksgiving Holiday weekend. Not much happened while you were away. The Trichet Circus takes center stage later this week, and we'll see the color of his money there. We've got a plethora of data to get through this week, and Chris will bring that to you, as I'm getting on a plane this afternoon, and will be gone the rest of the week. First, on Friday, there was little to no volume after the "boys" in London headed home. What I was afraid of, "black box" trades, seemed to rule the day. The euro kept ratcheting down all day, and for no particular reason at all. So, nobody manning desks, and the euro heading down, equals "black box" trades. These trades were computer generated, which triggered other trades. Now, on to this week: In case you missed class on Friday, I mentioned that two large currency houses, Royal Bank of Canada and HSBC, had issued alerts to begin, "scaling back into euros." Well, to follow those two up, Morgan Stanley's Stephen Jen, global head of currency research, said in an interview yesterday, that he believes the euro is about ready to turn around. "The pent-up demand for euros is rising quietly and it wouldn't take much for people to pile in and start buying." So, that makes three large currency houses trying to start the "wave." You know, like at the ballpark, and everyone starts doing that darn "wave." Well, if you watched it get started, it's funny. You get a couple of people to do it, and it stops, then you get a few more, and it stops. But then, you get a whole section to "buy into doing it" and the next thing you know, the whole stadium is doing the "wave" (Except, Me! I refuse to do that!). Anyway, the point I'm trying to make here is that RBC and HSBC, tried to start the wave and it stopped. Now they've picked up Morgan Stanley, and we'll see how far the wave can go on. My guess is that it will stop again, and they'll need to get more people to "buy into the idea!" Have you been following the story from China regarding the copper trader? Wow! What a story! I don't have the time or space to tell the long story here, but I'm sure if you go to Google, and put in the copper trader's name, Liu Qibing, you'll have more stories than you can shake a stick at, that is if you're into shaking sticks! Anyway, the reason I bring this up is that copper should be moving higher as we go along, because China is going to have to buy the metal to cover the money-losing bets made by the trader. A rising copper price just leads the way for other raw materials to move higher too, and that begins to filter down to a higher Aussie dollar price, which is exactly what we're seeing this morning. The Kiwi is on the rise, too! Having said that, my friend John Mauldin carried some notes from Simon Hunt, in his weekly letter, that are worth reading: http://www.2000wave.com. Simon Hunt believes that copper is going to experience some price breakdown because of this "trading problem." So for now, it could be leading to copper strength, and will later affect the price of copper. Of course, all of that is opinion. From all that I read last night, and this morning, most observers and economists believe that the data coming from the United States this week, will all be dollar friendly. It all begins today with existing home sales. Then tomorrow, we begin to see the real beef with durable goods orders, which are expected to partially reverse last month's awful showing of a big negative -2.4%. We'll also see the national consumer confidence for November, and it is expected to rebound big time from 85 to 90. Again, I don't know what the heck people are so confident about; they obviously haven't seen their credit card bill payment schedules doubling yet. Wednesday, we'll see a preliminary reading on third quarter GDP, which is expected to climb to four percent. Then on Thursday, my two new faves, personal income and spending, which looks as though it is going to continue to show us spending more than we make in October! And then the ISM manufacturing index will print for November, and is expected to weaken to 58 from 59.1. And to end the week, we have a Jobs Jamboree Friday! Chris is going to be busy! From what I see of what is coming, and what is expected, I don't see it being overly dollar friendly. In fact, I see it continuing the "muddle through" economy we've been saddled with for some time now. On Thursday, we'll also see what the ECB brings us in regards to a monetary policy change. I'm still holding onto my thought that the ECB hikes rates this Thursday, and follows up in January with another. A thought came to me the other day, regarding the ECB. I've been thinking just 25 BPS, but what do you think would happen should the ECB move rates 50 BPS? Now, I think that 50 BPS is a remote possibility, but if the ECB really wants to make a statement regarding fighting inflation, here's their opportunity! I'm running late today, as I still had packing to do, so I'll head to the big finish, and then out the door later today. Currencies today: A$ .7350, kiwi .6980, C$ .8550, euro 1.1720, sterling 1.7110, Swiss .7575, ISK 63.40, rand 6.5290, krone 6.7160, forint 214.31, zloty 3.33, koruna 24.7150, yen 119.70, baht 41.25, sing 1.6965, pesos 10.6050, and gold $498.20 - creeping ever so close to $500! That's it for today. The kids all helped get the lights on the house this weekend. My little buddy sure loves it when we get the house all dressed up for the holidays! Welcome back to Chris who has been gone for a week, and here's the pfennig! I'll be filing reports from the road, but other than that, I'll talk to you next week! Have a great Monday! |
