In This Issue.

*  German IP kicks tail takes names later!
*  Aussie Retail Sales print strong, but A$ sells off.
*  Fed Heads see diminishing returns in bond purchases.
*  What happened to Germany's Gold?

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

Currencies Trade In Very Tight Ranges.

Good Day!  And a Tub Thumpin' Thursday to you! Another “snow day” here in St. Louis. But the drive in was no problem, so let it snow! We received bad news from the MRI on Alex's knee on Tuesday. Instead of a sprained MCL, he has a partially torn MCL, and a fractured tibia. His senior year of wrestling is finished, and boy is he bummed out! The medical people tell us that he should be ready for water polo in the spring, that is if he does the physical therapy to a T. Well, PT is what he's going to college for, so hopefully he learns a lot,  and follows the program!

Well, the Bank of England (BOE), and the European Central Bank (ECB) both are meeting this morning as my fat fingers type away. I told you earlier in the week that the markets are really lathered up about a BOE rate hike at this meeting, and I also told you that the non-event (no rate hike) risk would rule the day when the BOE left rates unchanged, as I suspect they will. The British pound sterling has been trading with a bid lately (stronger) and that reflects the lathered up markets anticipation of a rate hike. So, it makes sense that non-event risk could cause the pound to drop today. But then maybe the BOE makes some stupid statement about rate hikes coming soon, you know. the kind where months from now, they sit there and keep telling us that rate hikes are coming soon, and the markets give up and go home.

Does that sound familiar? Ahhh, yes, grasshoppers. Who's the BOE Gov.? Mark Carney. And wasn't Carney the Bank of Canada (BOC) Gov. that did that very same thing when he was at the controls in Canada? Why yes, it was!  Well, it worked in Canada for over a year, before the markets said, to hell with your “removing accommodation soon” stance.

The ECB is a different story. Here, the markets would love to see ECB President, Mario Draghi, announce QE, or a rate cut, or something to get the Eurozone economy going. Well, that is, “the rest of the Eurozone economy other than Germany”, which is already “going”!  This morning, German Industrial Production (IP) for November jumped up to a gain of 1.9%, VS the consensus of a 1.5% gain. So far this month and year obviously, we've seen German Retail Sales print strong (+1.6%), and their manufacturing index (PMI) remain strong at 54.3 (remember any number above 50 represents expansion )

Germany is the largest economy of the Eurozone, but when you add the other 17 together, they weigh down the Eurozone growth. Something is strange in the Eurozone again folks. This morning, Spain sold bonds at a record low yield! A year ago, Spain was said to be close to defaulting, and now within a year, Spain has paid back the bank bailout, and is now selling bonds at record low yields. I'm just saying.

OK. The currencies spent the day yesterday trading in a very tight range, but the bias was definitely in the dollar's corner. The euro gained the 1.36 handle back during the day, and even with the strong German data this morning, just can't get any wind its sails right now, especially with the ECB meeting representing a black cloud hanging over the euro.

The Aussie dollar (A$) has really bounce around lately, but by the end of each day, it's trading down. I watched the A$ rise to 89-cents yesterday, which was about 1/3rd of a cent increase, only to lose it all back overnight. So, to me, this currency has lost favor with the markets and investors right now. When you watch a currency gain and lose, gain and lose, and so on, you realize that if it can't build on the gains, then it has lost favor.

Aussie Retail Sales were stronger than expected for Nov. That report printed last night, and the A$ couldn't gain on that news.   I've written about the Reserve Bank of Australia (RBA) and the Gov. Stevens, and his problems with housing and consumer inflation, but needs a weaker A$ to help promote exports, so I won't go there again, but it's a real dilemma for Stevens, and the A$ right now.

Well, the Fed's FOMC Meeting Minutes (FFMM) had a couple of ditties in it that surprised the markets. The one that caught my eye was that the Fed Heads realized that asset purchases have declining benefits over time..  And then they voiced concern about future risks to the financial stability if they continued the bond purchases.  What-What? Where was this concern in the 4 tranches of bond buying they did before? (3 tranches of QE, and 1 of Twist and Shout, I mean Operation Twist).  Oh well, I think the Fed Heads are like the guy driving a car on an icy road, and soon he begins to lose control, and the car begins spinning, and heading to a guardrail.  He knows he's going to crash into the guardrail, he just doesn't know when.

But, more and more I read stories and articles written by dealers, traders, analysts, and economists that say the U.S. economy is more than ready to stand on its own.  And just about the time yesterday that I was about to raise the white flag on my stance that the economy can't stand on its own, I received reinforcements. The Calvary arrived in the form of some notes from John Williams of  He pointed out what I kept seeing, but was beginning to get hazy from all the other articles. Remember, folks. we still don't know what all the things the Fed has done in the past 6 years will do when they are all unwound. But, to me, as someone that looks under hoods, and sees things for what they really are, the unwinding won't be a case of seashells and balloons.

I'm going to talk at length about this stuff in one of the two presentations I'm scheduled to do at the Orlando Money Show that will take place at the end of this month. If you're up North and want to get away to at least a little warmer weather (sometimes it's been warm, and sometimes it's been quite chilly) then come on down to Orlando to the Money Show, it's free to attend, and you can come by and see me! Check it out here.

Well, The Fed monetized 72% of the debt issued last year. The percentage of monetization by the Fed each year since 2009 has been quite high, and at least 70%… The year the Fed did Twist and Shout, things got convoluted, but you get the picture here.  When you monetize debt, you print money, and when you pint money for this purpose it increases the monetary balance, which is something I've highlighted for several months now.  We get all caught up in things that really don't matter in the long run, but as a country we never talk about what the Fed has been doing monetizing the debt.

Well, Gold, and I know some of you get the reason why I follow up the missive on debt and monetization of the debt with a discussion of Gold, so, I won't get into that. But what I wanted to say most of all  is that Gold continues to get slammed every time it gets some wind in its sails. This is different than the A$ discussion above, because this slamming isn't profit taking or speculators seeing something different, this is outright manipulation.  My good friend, Peter, sent me a note yesterday that was a very good explanation of what he thinks is affecting the price of Gold. 

Here are the two main thoughts from his note: “You and I were brought up in a world where integrity meant something.  Certainly not everyone was truthful, but truth was respected and most of our leaders were at least semi-truthful some of the time and perhaps, even most of the time.  Facts were “stretched” and bent, but outright, bold-faced lying was rare.  Not only that, but most people in Congress and government had a measure of core competency. Not a particularly comforting thought, but perhaps part of what is going on that frustrates both of us.

Gold is often seen in emotional terms as being true value.  In a world were less and less appears to be true and virtuous, I have no trouble turning to gold for solace.  Profit is almost secondary.”

Chuck again. Yes, so true, so true. and a good thought to hold to one's self, especially when the manipulators are working on pushing Gold's price down again.

OK. and then I've received quite a few emails the past couple of days asking me to talk about Germany's Gold. Recall when Germany showed up in NY and wanted to audit their Gold holdings? They were turned away, and told that the Great and Powerful Oz wasn't seeing anyone. Then Germany demanded delivery of their Gold, and again, they were told to not look at that man behind the curtain. But they would get their delivery in 7 years!   Well, Germany didn't like that answer and demanded deliveries to begin.

This is where things get really interesting, not that being told that it would take 7 years to deliver their Gold wasn't interesting enough, but now it appears that a partial delivery of Germany's Gold was made last month, and guess what? It was not the same Gold that was placed on hold.

So the conspiracy thoughts are flying around like a Jeff Bezos dream of package delivering drones, and you know me, I'm a sucker for these conspiracy things. The biggest one is simply that the Fed NY didn't have Germany's Gold, and they had to go out and buy some, or take someone else's Gold and make a delivery.   OK. NOTHING IS PROVEN TO BE FACT here, so don't pin me to the wall on this. It's just all speculation, but what else are people supposed to do when the facts are presented like this?

Hey! Back to reality. The Chinese renminbi was weakened by a large percentage overnight and now sits at the weakest level in two weeks. I've told you all about how this is all in the cards held by the Chinese to throw the markets off the scent of one-way currency appreciation, and they're doing a good job of it right now.

And when the renminbi is getting pushed weaker, the rest of Asia has a problem too. The Singapore dollar (S$) has really been weaker lately, and a couple of weeks ago I wrote about how the S$ had some catching up to do to maintain its historical gains alongside the renminbi.  There's been no catching up since that time, and it appears to me as if the Monetary Authority of Singapore (MAS) isn't that interested in doing anything about it.  That scares me a bit, as I've always held the MAS in high regard. Maybe they are on holiday!

The ADP Employment Change report surprised the forecasters by showing that 238,000 jobs were added in December, not the 200,000 that were forecast.   The recent history of this data compared to the Jobs Jamboree that's thrown each month by the BLS (bureau of labor statistics), reveals that the BLS usually is about 30,000 jobs less than the ADP reports. I guess we'll find out tomorrow how that all plays out. Today's data cupboard will have the Weekly Initial Jobless Claims, which curiously continues to remain above 300,000 per week. So, you have 300,000 per week filing unemployment claims for the first time, and yet, the Fed thinks the unemployment picture is getting better. Hmmm.

For What It's Worth. OK. Have you been following the stuff on the Madoff Ponzi Scheme and JP Morgan? On Tuesday, it was announced that JP Morgan would have to pay a settlement of $1.7 Billion on knowing that there was a Ponzi scheme but not reporting it. The report from the Gov't. said that as far back as the mid-1990's employees raised questions about Madoff, but nothing was done.

Well, I really don't care about this stuff, for these guys are the Big Boys, and $1.7 Billion is chump change to them., other than I think you could extrapolate that maybe, just maybe the same type of thing is going on with Gold manipulation? That many people know about it, but no one will talk about it? No wait! We did have that whistleblower last year, remember? And, what happened? He was called crazy by the establishment, and nothing was done!  Any way. I found this story on MarketWatch yesterday.  Oh, and if you want to revisit the whistleblower story, you can see it in brief form by clicking here.

To recap. The currencies are trading in a very tight range the past couple of days, but the bias to buy dollars remains in place. The BOE and ECB are meeting this morning, Chuck doesn't expect any changes, but the markets are sure lathered up about a BOE rate hike. they'll be disappointed, Chuck believes. And then Chuck gets on his soapbox about debt monetization.

Currencies today 1/9/14. American Style: A$ .8885, kiwi .8260, C$ .9215, euro 1.3605, sterling 1.6455, Swiss $1.0990, . European Style: rand 10.7945, krone 6.1850, SEK 6.5610, forint 219.95, zloty 3.0690, koruna 20.1490, RUB 33.13, yen 104.95, sing 1.2705, HKD 7.7545, INR 62.07, China 6.1109, pesos 13.12, BRL 2.3940, Dollar Index 80.99, Oil $92.75, 10-year 2.99%, Silver $19.62, Platinum $1,419.00, Palladium $737.57, and Gold. $1,230.18

That's it for today. I went to bed all disgusted last night at my beloved Missouri Tigers, who lost in overtime at home to Georgia! UGH! The end of a 26-home game win streak! The Tigers looked uninspired, as if they were still on Christmas break! Well, Maddux, Glavine, and Thomas (the Big Hurt) were voted into baseball's Hall of Fame yesterday. Good for them! I was also happy to see that Barry Bonds didn't get close to the 75% of votes needed to gain the Hall of Fame.  I'm sure I just ticked off all the S.F. Giants fans, but that's my opinion and this is my letter!  It goes back to the discussion above about true and virtuous. Alex heads back to school today, with his crutches, I bet he'll be ready to throw the crutches out the door by noon! And with that. I hope I didn't put you in a bad mood with the debt monetization talk today. Now go out and have a Tub Thumpin' Thursday!

Chuck Butler
EverBank World Markets