So, What Really Ails Us?
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In This Issue.

* Gold begins 2014 in turn-around mode .

* Thinly traded markets cause wild swings.

* Some great data on China .

* Is Fisher a Pfennig Reader? .

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

So, What Really Ails Us?

Good Day! And a Happy Friday to one and all! Burrrrrrr, it's cold outside. But baby it's cold outside. You know, 100's of duets sang that song over the years, but my fave version was with Ann Margaret and Al Hirt . Or another song about the cold. Little Jack Frost Get Lost. I loved the Marjorie Hughes, Frankie Carle version. I know there are folks that just love the cold, but I'm not one of them!

Well, it appears that Gold has given the cold shoulder to the dollar to start the year. Yesterday, Gold hiked up $25 on the day, and today it's up another $7 as I write. And imagine this, the guys that write about Gold think it's all about demand from Asia. They are surprised by this demand. Are you kidding me? How could anyone, unless you've been living under a rock, (recall the Geico commercial? ) not already know that demand drives up price, and that the demand from Asia has been strong for a few years now? Well, OK, let me rethink that. I guess these "guys" don't read the Pfennig, for if they did, they wouldn't have been surprised!

And speaking of demand. Did you see the numbers from the Perth Mint? If you didn't then get a load of this. The Perth Mint, said that sales of Gold coins and bars totaled 754,635 ounces in 2013, VS 533,333 ounces in 2012! And the same for Silver coins and bars, which totaled 8.6 million ounces in 2013, VS 6.5 million ounces in 2012!

All the while the price of Gold and Silver plummeted in 2013. Doesn't that smell fishy to you? It sure does to me! And it's not Tilapia, or Grouper, Snapper, or Yellow Tail, or even Redfish or Flounder that smells. That fishy smell is call manipulation.

The currencies were mixed bag yesterday, with the euro losing ground VS the dollar, and that brought the European currencies down too. The Antipodean currencies of Australia and New Zealand were up and down all day, like a yo-yo in action. And Japanese yen, of all currencies to rally. rallied. Huh? Anyhoo. The Antipodean currencies are much stronger in overnight trading, along with yen. There wasn't any news, data, or jawboning to make these moves overnight, so I'll have to put it down to the fact that the markets are still thinly traded, and any large trades could move the market one way or the other, due to the lack of volume.

OK. You might see someone making some noise about how Central Banks really ramped up their diversification in the 3rd QTR of 2013. But don't be confused (in my best Steve Mizerany voice) They didn't ramp up their diversification into alternative currencies to own instead of dollars. Go back in time to the 3rd QTR last year, and we had the dollar on the ropes doing the old rope-a-dope, so that meant the values of the alternative currencies that the Central Banks held rose in value. That makes it look like they increased their holdings, but they really didn't folks, the value of what they did hold increased, that's all.

That's not to say that Central Banks around the world hadn't already done some heavy lifting in the diversification arena, and they'll continue to do more, but not at the levels the IMF reported for the 3rd QTR.

OK. One of our EverBank Infinity gurus, Peter Mason, sent along a link to a story on currencies yesterday, and from that story I came across some very interesting data. So, let me lay the groundwork for you on this. Long time readers will recall me ranting and raving about how U.S. leaders kept harping about how China's currency manipulation was the answer to all that ails us as a country. And how I kept saying HOGWASH! Well, now I have some real data to back up my thoughts. In 2004, the bilateral trade deficit the U.S. posted with China was $162 Billion. Now, it's important to remember a couple of things before I go on. 1. China's currency was pegged to the dollar in 2004, the peg wasn't broken until July 2005. and 2. The U.S. went through a nasty depression that's still going on between 2004 and 2013.

Now, after an increase in the renminbi of around 36% since the drop of the peg, (recall I told you that yesterday) this year, the bilateral trade deficit the U.S. will run with China will be $325 Billion.

What-What? (as the kids say). How can that be? The U.S. leaders told us if China allowed their currency increase in value that our problems would be solved. What happened? Well, it's obvious that our leaders didn't know what ailed us, because China has allowed a 36% gain in their currency VS the dollar, and yet the Trade Deficit with them doubled!!!! And yet, we continue to hear calls from our leaders about how China needs to allow more appreciation in the renminbi!

That gets me to the real nut behind our leaders claiming foul on China's currency. As I've always told you, our leaders need for the dollar to be weaker, to allow them to pay our debt servicing (bond interest) with cheaper dollars. So, what better way to achieve this than to claim a foul on China, and point to them and say their currency weakness is a problem and will cure what ails us, knowing all the while that what they really want is a cheaper dollar, for if the Chinese currency continues to appreciate, as it has for 8 years now, (they actually held the renminbi steady during the financial meltdown, so there was no appreciation during that time) the dollar will continue to lose value. The leaders get what they want, a cheaper dollar, and no one knows what's really going on. Except me. and you dear reader!

There's not much news from the overseas markets today, and like I said the other day, I don't expect trading to get back to normal volumes and liquidity until Monday, Jan 6. Long time readers are now getting comfortable in their chairs and making sure they have a full cup of java for they know all too well that when there's not much going on in the markets, that Chuck gets on his soapbox and begins to rant and wail about something. So. I guess the pressure is on me now to come up with something that will keep with tradition! HA!

I could talk about how Dallas Fed Head Richard Fisher, must be a Pfennig Reader, for in an interview last month, he talked about how Bernanke had "painted the Fed into a corner". OK, I know that the Big Boss Frank Trotter, and the little boss Chuck, are the only people that have talked about this. Frank in presentations, and Chuck in the Pfennig and the Review & Focus. So, OK, maybe he came up with that on his own, and doesn't read the Pfennig, but, it sure is suspicious, eh? And I did like something else Fisher had to say about all the excess reserves piling up in the U.S. banking system, calling the reserves "potential tinder" for inflation.

This interview with Fisher took place on December 2nd. So why did it take so long for the masses to hear what he had to say? Now, I don't know if this is what happened, but it sure makes sense to me. And that's the interview was too harsh toward Big Ben Bernanke, and his policies, and the interview got put under the rug for a short period of time so that when it did appear it flew under the radar?

OK. maybe that doesn't have anything to do with what I'm supposed to be talking about, but Hey! There are times you have to take a detour and find out what's going on elsewhere!

In keeping with the general theme that I began talking about a couple of years ago now, the relative calm in the Eurozone. Did you see that Spain paid back the bailout of their banks, and now start 2014 without Eurozone support for its banks? I find this news sort of incredible, don't you? I mean a year ago, the pundits were still saying that Spain would collapse or leave the euro. But the Eurozone's European Stability Mechanism (ESM) smoothed out the wrinkles for Spain, and now a year later, the banks are once again on sound footing. Unfortunately, this news hasn't carried over to any euro strength, the euro has lost about 1/4 of a cent this morning, after posting a near 1-cent loss yesterday.

Once again, the euro is getting kicked, but if things go as I see them going this year, this will only prove to have been a buying opportunity to buy at cheaper levels. And if they don't go the way I see them, then I'll have egg all over my face. Not to worry. I've had egg all over my face before, I know all too well how that feels.

Before I head to the Big Finish today, I wanted to talk about this news that I came across yesterday in the 5 Minute Forecast. I've told you about the 5 Minute Forecast before, as it's a must-read for me Monday - Friday. Let me have Dave Gonigam over at the "5" tell you. "The Bank of Canada is about to melt down 200,000 century old coins to balance their books. "

Chuck again. reminds me of the late 90's when the European Central Banks were selling their Gold to make their books look better and to meet the Maastricht Treaty requirements. I think the European Central Bankers rue the day they sold their Gold. and I suspect that eventually the Bank of Canada will too.

For What It's Worth. It's all Chuck today folks. Shoot Rudy, things are so desolate out there in News land that I have to resort to doing my own FWIW. OK. last week, the long term unemployment benefits stopped for 1.3 million jobless workers. And by the time we reach Christmas 2014, there will be another 4.9 million jobless workers who see their benefits stopped. So. get ready for the Spin Doctors, and not the ones that sang Little Miss Can't Be Wrong, to attempt to make some lemonade out of these lemons. You see, once these benefits stop, the U.S. in all their mental genius, will count these people as "no longer looking for work" and no longer count these people as unemployed. And thus we'll see the Unemployment Rate drop, which is what the Fed Heads want, it's what the Gov't wants, and it's what the markets will get all lathered up about. But it doesn't really mean anything any longer, folks. The unemployed which is really around 23%, and not the 7% the Gov't claims it to be.

To recap. The markets are thinly traded and with little liquidity as everyone is not back to work yet, Japan remains closed, and so on. So, wild swings in the currencies can and will be found. Yesterday saw a huge $25 gain in Gold, and the shiny metal is up another $7 this morning. The Perth Mint says demand for Gold & Silver bars and coins soared in 2013. in a year where both Gold & Silver saw huge losses in value. Hmmm.

Currencies today 1/3/14. American Style: A$ .8990, kiwi .8295, C$ .9410, euro 1.3650, sterling 1.6430, Swiss $1.1095, . European Style: rand 10.5920, krone 6.1260, SEK 6.4920, forint 218.75, zloty 3.0525, koruna 20.1525, RUB 33.10, yen 104.50, sing 1.2650, HKD 7.7550, INR 62.15, China 6.1039, pesos 13.08, BRL 2.3765, Dollar Index 80.55, Oil $95.40, 10-year 2.98%, Silver $20.20, Platinum $1,408.99, Palladium $729.65, and Gold. $1,230.99 And in 2014, I'll only bug you to look at the U.S. Debt Clock every once in a while.

That's it for today. Well, Jan 3 is finally here, which means my beloved Missouri Tigers finally play their bowl game tonight. They'll play in the Cotton Bowl, against Oklahoma St. The recent history of games between these two teams doesn't bode well for my Tigers, so maybe they can turn the tables on that history! Well, Alex will be attending St. Louis University for the next 6 years (hopefully) as he was accepted into their program for Physical Therapy and sports medicine or something like that. So, for Christmas we all received St. Louis University (SLU) shirts and sweatshirts. That color blue will be difficult for me to get used to, given that the only colors I really know are Black & Gold (Missouri) or Red & White (Cardinals). But the SLU Billikens Basketball team is good, so that should be fun! I'll be heading over to a friends' house for a tail-gate before the football game tonight. I think the tail-gate will be inside though, due to the bitter cold outside. And with that, I thank you for reading the Pfennig, and I hope you have a Fantastico Friday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 01-03-2014 12:11 PM by Chuck Butler
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