Chinese Exports Holding Steady Eddie!
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In This Issue.

* A late morning rush to sell euros.

* Spain & Italy to auction debt tomorrow.

* China's Trade Surplus narrows slightly.

* The BOC's bunker mentality.

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

Chinese Exports Holding Steady Eddie!

Good day. And a Wonderful Wednesday to you! Each morning when I arrive, and turn on the TV's and my computer screens (4!) I go quickly check out what's on each TV for news, then after my email comes up, I go through all the "alerts" that I receive. This morning, the TV's and my email box is full of stories on the outcome of the New Hampshire primary. Well, not that I don't care about that stuff, but it's not the stuff I'll write about, so it doesn't help me any! So, get it out of here!

Also getting out of here is the risk asset rally that went on yesterday. The currencies are sliding a bit this morning, but Gold is up again, so it's not all bad for the risk assets. Both Italy and Spain are auctioning a total of 17 Billion euros in debt/bonds tomorrow, and that is weighing heavily on the currencies at this point of the day. The price action of Italian & Spanish bonds before the auction was good though, with yields falling 11 & 20 basis points respectively. But. having to go to the markets and ask them to take on 17 Billion euros more of debt, is another thing, and so. the euro is weaker this morning, as it should be.

The good news from the Eurozone this morning comes from Germany, where the economy is saying, recession? What recession? German GPD was weaker in 2011 than it was in 2010, but it still beat the consensus forecasts, coming in right at 3% for 2011. (2010 was 3.7%) Given all that Germany has had to deal with this past year, I find 3% pretty amazing.

The bad news is that the ratings agency, Fitch, said yesterday that Italy faces a "significant chance of a downgrade". Fitch also announced that they would make a decision by the end of the month on both Italy and Spain. So, tomorrow's debt auction by these two becomes even more important!

I see where U.S. Treasury Sec. Tim Geithner, not only has pressured Russia & China to not buy Iranian Oil, he's now going to go to a full court press on the Chinese about their currency policy. And once again, a U.S. official will visit the Chinese leaders, they will smile and say they will seek a faster appreciation of the renminbi, shake hands and send the U.S. official home, his chest swelled with the pride that he got the Chinese to move faster, only to find out a couple weeks later that the Chinese have simply continued on with their gradual appreciation of the renminbi.

Save the tax payers some dough, Mr. U.S. Treasury Secretary, and save yourself the time and effort that you're going to put into this meeting. You know, if we had not ever made one trip to China by U.S. officials over the years to get them to move off their slow, gradual appreciation of their currency, we would have saved taxpayers a truck load of cash! None of the visits ever helped and we could have saved money. But since when has it ever occurred to U.S. officials that saving money is a novel idea?

Ok. move on from here Chuck, you're about to go down a road that won't endear yourself to the authorities!

Speaking of China. Chinese officials have to be smiling like Cheshire Cats with the latest round of data. First we saw home price inflation back off, then we saw the manufacturing index improve, and now Exports look like they are holding up very nicely, even with the slowdown in the U.S. and Europe. Chinese export growth in December rose 13.4% from a year earlier. It did slip a bit from November's 13.8% increase, but it looks like the naysayers were wrong once again about China. It appears that with exports to the U.S. slowing down, shipments to Japan and the emerging economies remained Steady Eddie.

The Chinese Trade Surplus widened in December to $16.5 Billion from $14.5 Billion in Nov. You've just gotta love a Trade Surplus!

I think that given all the things / data we've seen recently from China that my call that it would be moderation for the Chinese economy and not "collapse" that a boat load of economists have called for the last two years!

Closer to home. Canada printed a very nice and strong Housing Starts number for December yesterday. Housing Starts increased 7.9% in December from a year earlier. This is another flashing red light for the Bank of Canada (BOC) to hike interest rates. But the BOC is in their "bunker mentality" as they believe the rot on the vine from Europe and the U.S. will be too much for the Canadian economy to handle. Hmmm. I have to disagree with the BOC here. if your economy is in need of a rate hike now, then do it! If the rot does begin to show up later, then cut the rates, but don't hesitate to hike them now! Inflation is a bad thing, BOC. please remember that!

Yesterday, I referred to the now X-Swiss National Bank President, as Hildegard. Well, as my new friend in our Corp FX group, Agnes, (who's Swiss) pointed out. his name is Hildebrand. Hildegard is a woman's name! Geez Louise! I really flubbed that one, eh? Any way it doesn't look like the Swiss franc is going to give us that "pop" I was thinking could happen if Hildebrand resigned.

I gave the desk some numbers last week that were very interesting regarding Gold & Silver and their highs and lows for each year since 2001. One thing that was as evident as a man with a hatchet in his forehead was that each and every year since 2001, Gold & Silver booked their lows for the year in either January or February. Which indicates to me that unless the trend is no longer in place, the only months to buy are January and February. Which is NOW!

And one of my chartist friends, sent me a note yesterday that his charts indicate that Silver is about to break out to the upside. This is technical talk that is difficult to understand until they tell you what they are talking about. here's Scott. He is referring to a chart that you can see if you go to his blog.

"The daily chart has now formed a Bullish "Inverted Head and Shoulders" pattern that I have noted on the daily chart on the right hand side below. The Bears seem to have run out of gas when they formed the "Head" on a decrease in volume from the left shoulder. The right shoulder showed a lack of commitment from the Bears again. A breakout and close above the neckline, which I have drawn with a dashed blue trend line, will put pressure on the Bears, especially those who are short from the prior Bearish "Head and Shoulders" pattern that has not gotten fulfilled yet."

Chuck again. You know, I'm a fundamentals guy. but every now and then the technicals play well with what I'm saying fundamental wise. and this is one of those cases!

The euro is really getting socked right now, as I get ready to head to the Big Finish. I don't see anything on the screens that would tell me the reason for the rush to sell euros. but it looks like the 1.27 handle for euros is about to be taken out on the downside. And, it was just taken out. this is something, watching this rush to sell euros, right here, right now.

And if the euro is getting socked right now, you all know the drill. the rest of the currencies are getting socked too. UGH! Cheaper levels that's the only silver lining.

Then there was this. Last week, I briefly mentioned our new Corp FX or actually they are called Business FX Group. We have always dabbled in this going back to our days at Mark Twain Bank, but we now have a group of people dedicated to small & mid-sized Corporations and their currency needs, payment orders and hedging of future obligations. If you do currency payments in your Corporation, you should give us a call or send an email because I do believe we can save you money in execution costs. The phone number is: 855.417.4843. And the website is:

To recap. The risk assets rally that was so strong yesterday, has been reversed and then some, except with Gold. There's a rush to sell euros this morning for no apparent reason other than the ones that have been already beaten to death. Italy & Spain will sell debt/ bonds tomorrow, but recent bond price performance has been good for both countries. China continues to book strong data, albeit a bit weaker. Canada also continues to book good data reports that warrant a rate hike, but the Bank of Canada has gone into its "bunker mentality".

That's it for today. The guys over at the 5-Minute Forecast were kind enough to quote something I said in the Pfennig yesterday. The 5-Minute Forecast is one of my daily reads that I find to be chock-full-o-info that's important to what I do! This is it for me this week, as I'm slipping out of town to warmer weather for a few days. I'll be back next Wednesday. I don't know if those of you who subscribed to the Currency Capitalist have noticed but I'm no longer writing for that publication. My friends at the Sovereign Society decided to go in a different direction with the letter. So my first "paid writing gig" has ended. Oh well, I gave it my best shot! And so, another chapter in my life comes to a close. Time to move along! No worries. I've always wondered why people would pay me to write any way! HA! And with that. let's get working on making this a Wonderful Wednesday!

Chuck Butler


EverBank World Markets



Posted 01-11-2012 10:55 AM by Chuck Butler
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