Who Says Austerity Doesn't Work?
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In This Issue.

* German IFO prints a strong number.

* Swedish confidence soars.

* Mexican GDP jumps! .

* RBA doing an opposite Rubin .

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

Who Says Austerity Doesn't Work?

Good Day! And a Happy Friday to one and all! Well. Here we go, are you ready for the weekend? The last weekend that won't be filled with the pull to holiday shop. At least that's how I see it, and means that Thanksgiving is next week! WOW! That means it'll be a short week for me, so I've got that going for me! And then before you know it, I'll be heading out the door for my annual Christmas vacation! Hey! It's the little things that get me excited! You should know that by now!

Well, as I look at the currency screens this morning, it's another mixed bag of results, with the euro still pushing the appreciation envelope, now past the 1.35 level, and the Aussie dollar (A$) getting whacked once again. Gold is flat, but that doesn't mean it will remain that way, it all depends on how the manipulation machine feels about it today. We had some Confidence surveys really light fires under some currencies this morning. In the Eurozone, German Business Confidence as measured by the think tank IFO, which is based on a survey of 7,000 business executives, increased to 109.3 from 107.4, which is the highest reading in over a year.

And in Sweden this morning, Swedish Confidence data rose more than estimated for this month, which puts the 2014 rate hike for Sweden back on track, which is just what the doctor ordered for the Swedish krona. I talked briefly about Sweden the other day, when I compared the way the Scandinavian countries dealt with their economic crisis over 10 years ago, and haven't looked back since. I know that most people think that bailing out the failing businesses in the U.S. was the thing to do to keep the system from collapsing, but I will always maintain that if a business or entity was failing it should have been left to fail, pick up the pieces and move ahead to a better future. That's what Sweden did. Now compare that to what the Japan did back in the mid-90's and what the U.S did nearly 6 years ago. My wrestling coach used to say, "There's no gain without pain". That certainly applies to a lot more than a young man getting in shape to last 6 minutes on a mat!

As the day went along yesterday, the euro strengthened, and the A$ sold off more, it was as if everyone was getting out of A$'s and going to euros. Not exactly, what happened, but when you just look at things on the outside of the hood, you can come away with those kinds of ideas and thoughts! That's exactly what the market participants / markets, do. They take things on the run, and trade them without finding out if the data was good, bad or indifferent. It's like what someone used to say to me all the time. Just act like you know what you're doing and everyone will follow. Me? I've always been interested in what's under the hood. Most people can be told by the salesperson that there's a V8-hemi under the hood, and never ask to have the hood opened to confirm that!

That's how the markets traded the Retail Sales report this week. Remember? The October Retail Sales report showed a .4% increase when, in the middle of a Gov't shutdown, and falling out of bed consumer confidences, should have shown otherwise. Well, I scratched my balding head, and kept standing up and asking the boys and girls on the desk how this strong Retail Sales # could be. And then an email came into my email box, and while I think the sender was being somewhat facetious about it, I thought to myself. "Finally! At last! An explanation that I can believe in! His thought was, "Retail Sales were so strong in October, because of the 800,000 out of work government workers, taking their free time, and shopping, with money they didn't have, but would get once they got back to work." Now, that to me, is a strong reason to support the data. logical, and makes sense! But doesn't support any thought that the U.S. consumer is ready to take off on a spending binge!

And economic data guru, John Williams over at Shadowstats.com said the report was "insignificant". Well, to the markets it wasn't, for they jumped in with both feet and began to trade as if everything was right on the night for the U.S. and the dollar!

So, when it rains it pours for the A$ it seems. Three consecutive days of Reserve Bank of Australia (RBA) chatter that wasn't exactly complimentary of the A$... Last night it was RBA Gov. Stevens, yet again, with his discussion of intervention. I've seen this kind of verbal backing or dissing of a currency, that scares the bejeebers out the markets before. Let's see, it was 1995, and the dollar had been in a weak trend for almost 10 years, thanks to the Plaza Accord in 1985. And then Treasury Sec. Robert Rubin, began to scare the bejeebers out of the markets with his repeating over and over again, about how "a strong dollar is in the best interest of the U.S."

Traders began shaking in their boots, and the short positions in the dollar were closed out, and for no other fundamental reason, at that time, the dollar began a 7-year strong trend. Well, RBA Gov. Stevens and his henchmen, are scarring the markets with their talk about intervention, and so the opposite effect is taking place here. The markets are scared to death, to go long A$'s because they fear the RBA will intervene and sell the A$ to make it weaker.

This will be interesting to see how long this lasts. Does the RBA have the thunder to make this last for a long time? Or will the markets call their bluff, and prove once again that the markets have deeper pockets than any Central Bank! I think it will be the latter of the two, but, no one knows for sure.

OK. I received an email from a dear reader asking me why I never talk about the Mexican peso any longer. Well, the reason is simple. There's never really any news to share about Mexico, but when there is, I'm all over it like a cheap suit! And so it is with Mexican 3rd QTR GDP! The Mexican economy grew 3.4% in the 3rd QTR, which is the first real strong quarter of growth in Mexico this year. You may recall that 1st QTR GDP was .8% and 2nd QTR GDP was -2.2%... I think the strong 3rd QTR shows that the Mexican President, Nieto's reforms are already filtering through the economy. The forecasts for 2014 GDP were raised to return to 4% annual growth.

Maybe this return to stronger growth can help interest rates in Mexico to get back to rising. They've moved the wrong direction for far too long now.As I've always said about Mexico. Because of its past indiscretions with foreign investment money in their country, Mexico needs to pay a "risk premium" in their interest rates. And that "risk premium" hasn't been there for a few years now, and neither has foreign investment, and that weighs on the peso.

There was some good news overnight from Italy. Boy, it's been some time since I wrote those words! But it's true, it's true, I did see a putty tat! HA! Italy announced the cancellation of two scheduled bond auctions because.. Drum roll please. a lack of funding requirements! WOW! Good for them! And who says that austerity doesn't work?

Yesterday's U.S. Data Cupboard was a non-event really, but there was an economic print that I wanted to talk about. The Producer Price Index (PPI) or wholesale inflation. And like the stupid CPI that showed October inflation as negative, so did PPI. Which makes sense if you believe the reports. But the thing I wanted to point out is that PPI was -.2% month on month, but the core, without food and energy, was up 1.4%... Remember when we were always told that the Fed only looks at the "core"? Apparently that's all changed, and no one told me!

The Chinese renminbi / yuan had a good week VS the dollar, which one would think would have been the case, given the announcement by the Chinese last Friday, where they listed the reforms to the economy and policy that they pledged to implement. China is opening up, folks, right here before us! I was talking to a good friend earlier this week and went through the list of things that China is doing to prepare to take over the title of reserve currency from the dollar. He asked if it would just be renminbi or a basket of currencies, and I said, "remember, that as U.S. citizens, with the dollar as our base currency, the key thing is that the dollar loses its reserve status, who takes over is important, but not as important as the devastation that we will suffer from the loss of the reserve currency status.

OK. Before I go to the Big Finish, and because it's a Friday, that hopefully turns into a Fantastico Friday, (I'm not feeling it right now, all I'm feeling is nausea and the pull to go back to sleep!, but the rest of the day could change!), I have a funny for you from Jimmy Kimmel.

"We are coming to you with only two commercial breaks tonight. The two commercial breaks is made possible by HP, which stands for Hewlett-Packard, one of the world's biggest tech companies. HP started in a garage. Google started in a garage. Microsoft and Apple started in a garage. Maybe we should be spending less money on education and more money on garages.

Let's get every nerd in America a garage."

For What It's Worth. I found this on Moneynews.com. "The U.S. government expects to sell the last of its stake in General Motors by the end of the year, bringing an end to a sad chapter in the 105-year-old auto giant's history.

The Treasury Department, in a statement issued Thursday, said it still owns 31.1 million shares of the auto giant, less than 2 percent. It plans to sell them by Dec. 31, as long as the price holds up.

The government received 912 million shares in exchange for a $49.5 billion bailout during the financial crisis in 2008 and 2009. So far it has recovered $38.4 billion of the money, but selling the remaining shares at Wednesday's $37.69 closing price gets the government $1.17 billion, leaving taxpayers short by roughly $10 billion."

Chuck. Hey! Another example of the Gov't getting involved in stuff they shouldn't, and using taxpayer funds to do so, then booking losses. OH Boy! Where do I sign up for more of that?

To Recap. The mixed bag of currency results continued throughout yesterday and is back for a 2nd day of performances today to end the week. The euro has pushed through 1.35 on a strong IFO this morning, and news that Italy cancelled two bond auctions for lack of funding requirements. Swedish krona is also stronger this morning after a stronger than expected Confidence report, while the A$ continues to get whacked from verbal intervention by the RBA.

Currencies today 11/22/13. American Style: A$ .9180, kiwi .8160, C$ .9480, euro 1.3535, sterling 1.6215, Swiss $1.10, . European Style: rand 10.1090, krone 6.0660, SEK 6.5695, forint 220.10, zloty 3.1010, koruna 20.1255, RUB 32.76, yen 101.20, sing 1.2510, HKD 7.7525, INR 62.86, China 6.1380, pesos 13.05, BRL 2.2960, Dollar Index 80.80, Oil $95.03, 10-year 2.78%, Silver $20.02, Platinum $1,396.50, Palladium $720.68, and Gold. $1,247.08. And it's a Friday, so let's take a peek at the U.S. Debt Clock by clicking here: http://www.usdebtclock.org/index.html

That's it For today. Geez Louise, did I ever drop the ball this week! My friend and colleague, Jack Stapleton, celebrated a birthday on Wednesday. Happy belated Birthday, Jack! Tomorrow is the 50th anniversary of the assignation of JFK. I remember that day as if it happened just a few years ago. I was getting the TV for the class from the AV room, and turned it on to make sure it was working and Walter Cronkite was telling the nation that the President had been shot and killed. I ran into the class to tell the teacher and the class, and of course I was reprimanded for doing that. A sad day in American history, and one that still has a ton of mystery around it. And tomorrow night, my beloved Missouri Tigers travel to Oxford Mississippi to play Ole Miss, the grove will be hopping tomorrow afternoon. wish I were there! The Zombie Jamboree is playing on the IPod right now. I bet Mike is sitting across the desk from me, wondering what the heck I'm listening to now! Come on! Back to back, belly to belly, it's the Zombie Jamboree! My spring training buddies always get a kick out of me talking about the Zombie Jamboree! We attended the Swim Team Banquet last night, Alex was named all-conference so that was unexpected and a nice surprise! Andrew, Alex's older brother was all-state when he was a senior, so those were some big flippers to fill, and I think he did a good job! And with that, I'll get out of your hair for the day and week. Hopefully this will turn out to be a Fantastico Friday for everyone!

Chuck Butler
EverBank World Markets

Posted 11-22-2013 4:18 PM by Chuck Butler