Let The Discussions Begin!
Daily Pfennig

Blog Subscription Form

  • Email Notifications


In This Issue.

* Bias to buy dollars remains in place.

* New Japanese PM dissolves parliament.

* RBA printing A$'s.

* Eric Sprott on Gold.

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

Let The Discussions Begin!

Good day. And a Happy Friday to one and all! Well, I made it back from Houston. The MD Anderson Campus is near Reliant Stadium where the Texans play football, and near Rice University and the Rice village. A pretty cool area, with lots going on, and plenty of good, non-chain restaurants! I'll start today's letter off with the good news. My tumors are shrinking! YAY! The people, doctors, nurses, etc. at MD Anderson are the best! You do have to wait enormous amounts of time for each test, visit, but I guess it's worth the wait!

Sort of like waiting for this bias to buy dollars to end! But that's what we have right now. a bias to buy dollars, but not for the dollar's attractiveness, which I would put in the league of Cinderella's step sisters, but for its so-called safe haven status. The coming, and very fast I might add, Fiscal Cliff, has the markets convinced that this will be a repeat of 2008, and therefore a flight to dollars and Treasuries are in order. The 10-year Treasury's yield has fallen to 1.59%... Come On Markets! This is not a safe haven! You'll only get your hearts ripped out!

The bias to buy dollars is really strong this morning, as the U.S. President is supposed to be meeting congressional leaders today regarding the Fiscal Cliff. But just like the discussion about the raising of the debt ceiling, which should be getting started soon, I doubt the discussions are going to get anywhere close to a compromise or agreement. So, this haggling will go on, and the bias to buy dollars will hang on us until. The markets get tired of hearing the discussions, and begin to take their frustrations out on the dollar. Remember August 2011? Same thing happened then. History may not repeat itself, but it often rhymes. -Mark Twain

So, the bias to buy dollars is attempting to put me in bad mood. but it's Friday! So no bad moods allowed! Besides good things come to those who wait, and I guess we'll have to wait for this dollar bias buying spree to end.. But, while we wait, we can take this opportunity to buy at cheaper levels, eh? You know, I really don't believe that the lawmakers will allow the Fiscal Cliff to happen. The lawmakers, leaders, Fed Heads, and Treasury Dept all believe that they have to have their hands in the mess and "taking care of it". They will do the same here. it may be 11th hour stuff but it will happen, and then we shift to the debt ceiling discussions.

I was reading a story last night (Thanks Dennis!) that highlighted a business owner in Florida, who was about to tell his 1200 employees that they could no longer work more than 30 hours a week. This was in reaction to the strains on his business from the HealthCare Bill. This could repeat itself all over the country folks. In 2008, I talked about how Germany was handling the financial meltdown with regards to unemployment that was raging wild here in the U.S. I told you how Germany pushed for part time jobs so that more people could at least have a job. I don't think this is what will happen here, but it's something to think about.

The Aussie dollar (A$) slipped back below $1.04 this week, with all the bias to buy U.S. dollars. But there's something that's been going on in Australia that's good and bad. Remember when I told you about how the Central Banks of the World were clamoring for A$'s? Well, that's all good, except, when their demands become so strong that the Reserve Bank of Australia (RBA) has to sell A$'s that didn't exist before. In other words, the RBA had to print them. Uh-oh! But Wait Chuck! Something has to be different about printing A$'s to sell them to Central Banks, rather than printing them to produce more debt. Well, they are different in a way, but printing money is still printing money! More A$'s dilutes the value of the existing ones. But not so much if the Central Banks buying the A$ put them away and never get them back out to sell to the street..

In Japan overnight, the New Prime Minister, Noda, dissolved parliament, and that will pave the way for the lower house election on Dec. 16. And that news has added to the weight the Japanese yen is carrying these days. The yen has lost major ground in the currency markets these past couple of weeks, but mostly this week. When was the last time we saw an 81 handle on the yen? April, this year, but that's when the price was falling. (remember yen is a European priced currency, so when the price rises it loses value) I've been waving the warning flag on yen for so long that my arms hurt! And sometimes I was ready to exchange my warning flag for a white flag. But. the white flag was not needed!

Did you hear the news that the U.S. Treasury is in discussions with 50 countries in attempt to finalize intergovernmental agreements to police bad American tax policy? Yes, the Treasury is extending their domain to reach out to these countries with a promise of reciprocal information. Just another U.S. Dept, making up laws as they go along folks. This should bother you, like it bothers me. and I don't even have overseas accounts!

OK. that has been gnawing at me all morning, and I just had to get it off my chest! OK. back to regular programming. Well, we'll get my fave piece of U.S. data today. Capacity Utilization. Expect it to remain flat at 78.3%... We'll also see Industrial Production for October, which will also probably be flat to up .2%, and the once important to the markets TIC Flows, which measure the net foreign purchases of U.S. Assets (read Treasuries). The markets used to get all lathered up for this data, but not any longer. so, we'll just move along, for these aren't the droids we're looking for!

Yesterday, Chris printed some info I had sent him on the FHA exhausting their Capital Reserves. The FHA is to announce it all this morning, but. an advanced copy got into the Wall Street Journal's hands last night. here's the skinny. The Federal Housing Administration will exhaust its capital reserves and faced a deficit of $13.5 billion at the end of September, according to the agency's independent annual audit set for release on Friday.

The report shows that the agency's reserves aren't adequate to pay for expected losses on the $1.1 trillion in loans that it guarantees, which means the agency is likely to require taxpayer funding for the first time in its 78-year history.

Oh boy! Another Gov't Agency under water! We'll be expected to bail them out, the postal service, and everyone else! And what about that so-called "recovering Housing sector" ?

About two years ago, I wrote a piece for a major magazine on Silver. I called Silver the new Gold. Yes, that was me! You may have seen the article, and thought, Geez Louise, that sure sounds like Chuck. well you were correct! Any way. I saw a story last night regarding Silver in India. It appears that the price of Gold has gone too high for the people of India, and they have begun to switch to Silver. Thus, Silver becoming the new Gold in India! I love it when a plan comes together!

I was reading an interview with the metals guru, Eric Sprott. he was focusing on Gold, and had this to say when asked if he was still optimistic about Gold given the last 18 months of gyrations in the price of Gold. "A little history is probably important here. Gold has gone from $250 to over $1700. It's beat the Dickens out of every other asset class over the last 12 years...To specifically answer your question, am I more optimistic today than I might otherwise be? Absolutely. I wrote an article recently questioning whether the Western Central Banks had any gold left. We simply did a physical analysis of the people that are coming into the gold market and the changes that have happened since 2000, (and the supply of gold has not changed since 2000 on an annual basis, it's still 4,000 tons). When you look at the fact that the central banks used to sell 400 tons annually, now they buy 500tons. The ETF didn't even exist in 2000, now they buy 300 tons a year."

OK. so we know where Eric Sprott stands on Gold! And you know where I stand on Gold. Where do you stand?

Then There Was This. You know, this section is always filled with stuff that makes you think outside the box. well, Today, I thought we could have some fun. and let our imaginations go wild! I came across this link (thanks Doc. Dave!) and thought about when I was a kid. I used to always think about when I was older that I would be in flying cars. (remember the Jetsons?) But I've been driving for, well, a long time now, and the cars are still rolling on the roads.. Well, VW is testing a levitating car! If you want to see it, you need to go to the Pfennig website: www.dailypfennig.com and go the TTWT section and you'll find the link to view the levitating car. it's pretty cool! And. I might see flying cars in my lifetime!

To recap. The bias to buy U.S. dollars is strong today ahead of the first discussions on the Fiscal Cliff. The markets believe there will be no compromise on the Fiscal Cliff and therefore we could repeat 2008, which saw a flight to the so-called safe haven of the dollar and Treasuries. We'll see some data today in the U.S. The RBA is printing A$'s, and Eric Sprott is optimistic on Gold.

Currencies today 11/16/12. American Style: A$ $1.0320, kiwi .8085, C$ .9990, euro 1.2745, sterling 1.5865, Swiss $1.0580, . European Style: rand 8.8785, krone 5.7725, SEK 6.7810, forint 222.95, zloty 3.2660, koruna 20.042, RUB 31.73, yen 81.15, sing 1.2270, HKD 7.7520, INR 55.17, China 6.2340, pesos 13.23, BRL 2.07, Dollar Index 81.18, Oil $85.15, 10-year 1.59%, Silver $32.41, and Gold. $1,711.45 and our regular Friday tradition. here's the link to take a peek at the U.S. Dollar Debt Clock. http://www.usdebtclock.org/index.html

That's it for today. It was chilly in Houston! I took shorts to wear, and never got them out of the suitcase! I thought it was supposed to be warmer there than here! At least the sun was out each day. The last time I was there it was rainy and ugly. The big earth moving machines are out of my back yard now, so I can go home and nap! The Beatles song: In My Life is playing, what a great song! Makes get sentimental, given my status. Little Braden Charles will be at the house when I get home today, he's such a excitable toddler. Thanks to all who sent along notes wondering how things were going in Houston. Like I said at the top, my tumors are shrinking! YAY! And Thanks to Chris for taking the conn on the Pfennig this week. This is very late, for me. so I had better get it on the conveyer belt of approvals. Thank you for reading the Pfennig, and I hope you have a Fantastico Friday!

Chuck Butler


EverBank World Markets



Posted 11-16-2012 1:10 PM by Chuck Butler