Chinese Economy Turns On to Recovery Street!
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In This Issue.

* Currencies trade in a tight range on Friday.

* Currencies & metals rally overnight.

* Norway, and others lead way this morning.

* Central Bank meetings galore this week.

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

Chinese Economy Turns On to Recovery Street!

Good day. And a Marvelous Monday to you! And Welcome to December! The last month of 2012! This year, this December has 5 Mondays, 5 Saturdays, and 5 Sundays! Apparently this only happens once every 823 years! Or so I'm told. So, this isn't just any old December! It's a very special December! And that's even before we begin to talk about Debt Ceiling limits and Fiscal Cliffs! So, make this December one to remember!

Friday saw the currencies bounce around but in a tight trading range most of the day. The euro went back and forth through the 1.30 figure so many times, that I was beginning to get dizzy watching it! We had U.S. economic data that normally I get all lathered up about, Personal Income and Spending. But with the effects on spending from Sandy, holding down the number, the data wasn't of much use. one thing though to point out was that Personal Income was flat for the month. So, if there had been a real month of spending data, we would have once again spent more than we made. you can take that to the bank!

This morning, the currencies, for the most part, are rallying VS the U.S. dollar. The BIG movers VS the dollar include: Norway, Czech koruna, and S. African rand. The euro fell below 1.30 overnight, only to turn around and climb back above the figure, after some comments from a Eurozone leader (Noyer). Something about Central Banks needing to discuss exit strategies. The markets, I believe, took that as a subtle hint to Greece. You know, I said this a year or so ago about Greece. While the initial shock of them leaving the euro would be harsh, the euro would eventually be better off without having to deal with Greece's problems. It's the slowest buffalo theory.

Well, Gold tried to move higher on Friday, but guess what happened? You are correct! The price manipulators made sure Gold's aspirations of moving higher were squashed! One of these days, Alice! They'll get what's coming to them. This "game" can't go on forever.

We have a boat-load of Central Bank meetings this week, that lead us into the Jobs Jamboree on Friday. The roll call for Central Bank meetings include: Canada, Australia, New Zealand, the U.K. and the Eurozone. On a lesser scale or a roll call from the back of the room, would also see Central Bank meetings this week in Russia, Poland and Peru. Recall, that last Friday I told you that just about everyone had jumped on the Aussie rate cut bandwagon, except me. I know in my heart of hearts that it's not good to go against the crowd, but I just don't see the need for a rate cut in Australia, not with China's economy sparking growth.

But then, that's me. I'm always against debasing one's currency just to satisfy the markets. I got my start with foreign markets studying the Bundesbank (Germany's Central Bank) and the head of the bank Hans Tietmeyer. This was a man and an institution that NEVER allowed their monetary decisions to be influenced by the markets. So, me being new to all of this, then, I thought that this held true for all Central Banks. Boy, was that thought brought down, like thinking there's a pot of gold at the end of a rainbow!

Speaking of economic growth in China. The Chinese manufacturing index (PMI) printed above 50 for the second consecutive month (at 50.6) and the report had some very good details to it, and confirms, to me anyway, that China's economy has turned the corner and is now on recovery street. Of course I said that before, and of course I meant it. But this new data really puts a feather in the cap of the Chinese economy, and that's a good thing.

The Aussie dollar (A$) is flat today, and has been in the red most of the morning, after Australia printed a flat Retail Sales report which was weaker than the forecast of +.4%, however, the weak actual sales report was offset somewhat by stronger inventories. I expect the A$ to be in a funk this week, as the pricing in of a rate cut gets entrenched in the A$'s ability to rise. But, at $1.0425, where it sits right now as I write, the A$ is about where I've said all along that it's true value resides. But then that's just my opinion.

Across the Tasman, New Zealand printed low 3rd QTR inflation data last night, which isn't going to do the New Zealand dollar / kiwi any favors. I told you last week about the new Reserve Bank of New Zealand (RBNZ) Gov. and how he had picked up the "diss kiwi any chance you get" ball from the previous RBNZ Gov. (Bollard) . So, as I told you above, the RBNZ is meeting this week, and this inflation report, while good in my eye, but bad in the eyes of the markets, could throw a spanner in the works of a no-rate cut meeting. I don't believe the RBNZ and its new Gov have an appetite to cut rates at this meeting. So, just move along.

Last Friday, Canada printed their 3rd QTR GDP. And Annualized GDP slowed to .6% from the 2nd QTR print of 1.7%. The slowdown was expected, but still it's just not what the Canadian dollar / loonie needs to see. And only goes to prove that outgoing Bank of Canada (BOC) Gov. Carney, was correct in keeping interest rates at current levels. You know how much I dislike having to admit that a Central Banker was correct, folks. So, this was not easy for me to do!

But the loonie didn't seem to get all caught up in the slower 3rd QTR Growth. As the consumer spending component of the report was very strong at +3.8%... With BOC Gov. Carney leaving to take the conn at the Bank of England (BOE) there will be much disruption going on in the BOC, so don't expect this weaker GDP report to bring about a rate move at this time.

Did you see the story going around that talks about how Turkey is breaching the U.S. led sanctions against Iran by buying Iranian natural gas? As if that wasn't bad enough, guess what Turkey uses to pay the Iranians? Gold. So, when we see the huge imports of Gold into Turkey, we now know the reason why. I loved this line from the Turkish economy minister. "The U.S. sanctions stand for the U.S., we have multilateral international agreements. These deals we are a party to and are binding for us, and measures taken by the EU are also not binding since we are not a member." So, in other words. he told the U.S. and European Union, eh?

The important thing I take out of this, is the use of Gold as a payment facilitator. Good stuff!

Speaking of Gold. did you see the Sunday Pfennig & Pfriends edition where our metals trader, Tim Smith, talks about popular Gold coins? Good stuff! Well, timing is very important in our business, and our timing in printing that edition was very good, considering, that this past week, the U.S. mint announced that the November sales of American Eagle Gold coins were set to be the strongest in 14 years. WOW!

You don't think that all this sawdust being left on the floor in the discussions about the upcoming Fiscal Cliff, and the huge price swings where bargain basement prices could be locked in, had anything to do with this HUGE surge in demand for American Eagle Gold Coins do you? Yes siree Bob! You bet your sweet bippie it did!

I belong to the Citizens Against Government Waste (CAGW) organization, and once a month they send me the "porker of the month" email. which details a Gov't official that has decided that spending is the way to prosperity. This month, it's a U.S. lawmaker, that was spreading the myth that spending cuts triggered by the Fiscal Cliff would be devastating and that they would really compromise our domestic security and our capacity to respond to emergencies and disasters like the hurricane we just had.

OK. this is in the category of "don't get me started here". so I'll just touch on these things. first of all if you lawmakers hadn't thought that deficit spending was the road of prosperity, we wouldn't have to deal with these spending cuts now. Second, Defense spending as doubled since 2001, the Federal Emergency Management Agency saw its funding rise to $7.1 Billion in 2012, which was a 22% increase since 2008, and the $1.7 Billion Homeland Security Grant Program is full of wasteful spending, folks. So, all his arguments against spending cuts are void of good reasons to not cut!

On a final thought about the currencies before I head to the Big Finish, the Japanese yen is stronger this morning. Last Friday it looked like it was ready to really slide down the slippery slope, but then it stopped short. it's just a matter of time folks. you can do all the window dressing you want, you can add curb appeal, you can put lipstick on a pig. all these things help you hide the ugliness. but eventually, you get up close and see it for yourself. that's the yen all rolled up neatly for you. far away it may appear to be a good value. but up close, you see the problems for the yen.

Then There Was This. from the U.K. Telegraph.. "In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs.

This number fell to just 6,000 after Gordon Brown introduced the new 50% top rate of income tax shortly before the last general election. It is believed that Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes."

Chuck again. I would think this to be the case here in the U.S. should the higher taxes burdens be placed on high earners here in the U.S. So, before you count your chickens before they're hatched, be careful. you could budget for "x" amount of revenue from a source, and then find out that the source left town. Uh-oh.

To recap. Friday saw the currencies trade in a tight range, with the euro going back and forth through the 1.30 level all day. Gold tried to rally throughout the day, only to see a takedown late in the day. This morning, the currencies for the most part are rallying, with the Norwegian krone leading the pack.. The euro looks strong this morning, and the A$ is flat after a weak Retail Sales figure. Canada saw weaker 3rd QTR GDP, and New Zealand printed slower inflation, which probably won't influence the new RBNZ Gov. right away to cut rates.

Currencies today 12/3/12. American Style: A$ $1.0445, kiwi .8220, C$ $1.0080, euro 1.3060, sterling 1.6080, Swiss $1.0805, . European Style: rand 8.8270, krone 5.6350, SEK 6.6365, forint 215.50, zloty 3.1455, koruna 19.3310, RUB 30.90, yen 82.20, sing 1.2185, HKD 7.75, INR 54.76, China 6.2283, pesos 12.88, BRL 2.1115, Dollar Index 79.92, Oil $89.25, 10-year 1.64%, Silver $33.67, and Gold. $1,719.15

That's it for today. a great win by our Rams yesterday VS the 49ers! I didn't see the end of the game, as we left to go cut down our tree for Christmas. Alex and I worked on getting it ready for the stand last night, and it's now standing in our great room! The whole family went, and it was so good to see the three grandkids running around the tree farm, they were so darn cute! The big party was fun Saturday night, and it was so warm outside! In fact, the whole weekend was unseasonably warm, which is just fine with me! Happy Birthday to all the December Birthdays here in the office. I'll be on vacation for most of them. Well. hope your weekend was grand, for mine was. now let's go out and have a Marvelous Monday!

Chuck Butler


EverBank World Markets



Posted 12-03-2012 12:44 PM by Chuck Butler