In This Issue.

*Dollar falls in light trading…
*German business confidence pushes the Euro higher…
*Chuck shares his thoughts on the AUD$…
*Gold headed for a weekly gain…

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

Dollar slides in thin holiday markets… 

Good day. Did you have a good Thanksgiving?  I spent a wonderful day with my family, and as usual ate way too much.  Today is Black Friday, and the parking lot out in front of our office is packed as usual.  Our office building shares a lot with a Best Buy, and it always amazes me how many people ‘camp out’ on the sidewalk in order to be first into the store on Black Friday.  The tents were already in place as we left to go home on Wednesday night.  These people camp out, missing all of their Thanksgiving holiday in order to save a couple bucks on electronics which they probably don’t even need.  I obviously don’t get it, but then they probably don’t get why I wake up early to wade out to a duck blind.  Some people look at Christmas shopping as a competitive sport, searching out the best buys and deepest discounts.  Stores did take some of the pressure off of Black Friday by opening their stores up Thanksgiving night, but I personally think it ruins the holiday as families cut Thanksgiving dinner short in order to get out to the stores.  From the looks of the parking lots on the way home from my sister-in-law’s last night, shoppers were taking advantage of the extended shopping hours. 

Currency investors were certainly in the buying mood as they took advantage of light holiday markets to put their dollar holdings to better work.  It was definitely a ‘risk on’ day yesterday as investors gave the non-dollar currencies one of their best days of the past month.  The euro traded above $1.29 for the first time since the beginning of November, and it drug most of the other currencies along with it.  The spark which ignited the Euro’s rise was data which showed German business confidence rose.  The Munich based Ifo institute said its business climate index climbed to 101.4 from 100 in October.  This was the first gain in eight months, and was unexpected as economists had predicted a drop to 99.5.  This uptick in confidence is a good sign for the euro as German continues to be the growth engine of the European region.

Euro-region finance ministers will meet next week to discuss the next rescue payment to Greece. A deal is expected to be worked out, releasing the funds necessary to keep Greece part of the single currency.  If a deal is announced, the euro could actually see even more upward pressure as investors look for ways to move away from the US$.  Speaking of which, politicians took a break from the negotiations over the fiscal cliff, and won’t start back with discussions until next week.  The risk is that the administration ‘digs in’ and the politicians don’t get anything worked out until just before the deadline.  Uncertainty over a debt deal here in the US will continue to keep the markets volatile, but I still feel a deal will eventually be worked out.  It may be counter-intuitive, but the dollar will likely continue to hold sway while a deal is being worked out, only to reverse course and get sold off after a deal is done. Good news on the debt limit negotiations should be bad news for the dollar, and vice versa.

Sweden’s krona rose again after a survey of Swedish industrial companies showed they are more confident.  The report showed corporate leaders are expecting to increase investments in their industries by 9 percent this year. 

Chuck is at home recovering from his Thanksgiving feast, but he left me with the following thoughts before leaving on Wednesday:

The Weekly Initial Jobless Claims fell last week to 410,000 from the previous week’s 451,000, as the effects of Sandy begin to subside. However, having said that, I wanted to say that a Pfennig reader that’s in the middle of the relief effort from Sandy, tells me that things are far from being back to normal. So, we can’t just forget about these people, like the photo-op celebs and politicians do.. I would say that there’s probably going to be an opportunity that arises from Sandy. With all the rebuilding, there’s going to be a need for building materials.  first and foremost in my mind is copper. and then lumber, and so on.   But I can’t help but to feel bad about taking advantage of these opportunities.

There was some BIG news the other day, that plays well with my call that the dollar standard will be a thing of the past by the end of this decade.  The IMF announced that they were officially naming Aussie dollars (A$) and the Canadian dollar / loonie as “official reserve assets”.  I see this as IMF also moving away from the dollar standard, and looking to a multi-currency reserve system.  Along with this announcement, the IMF is asking member countries to include A$’s and loonies to their reserve holdings.  We already know that the Swiss National Bank (SNB) has been adding A$’s by the truck load this year.  And by adding these two currencies, the IMF’s list of official Reserve Currencies now total 5. the dollar, euro, sterling, Swiss franc, A$, and loonies.

I have to say that while this is Big news, and could be very beneficial to these currencies. I’m somewhat miffed that the best currency to have as a reserve, Gold, (or Silver or Platinum)  was not mentioned by the IMF.

Thanks to Chuck for leaving me this Pfennig Pfodder on Wednesday, it sure made my job this morning a bit easier!

Speaking of Gold, the price of the shiny metal was unchanged through most of the day Wednesday, but saw some buying during the thin Thanksgiving market. I attended the Hard Asset show last week and heard quite a few speakers give fairly convincing arguments for further gains in the metals.  And I added to the chorus with my presentation where I made the case for new highs for both Silver and Gold. Asian consumers and investors will, in my opinion, be responsible for an increase in demand that will send the prices of precious metals higher.  New consumers have emerged in both India and China as years of double digit growth have begun to shift these huge economies away from export only with a gradual increase in consumerism.  Disposable income in these countries has increased and precious metals are much more accepted as a way to invest these additional funds.   

The ‘experts’ over at Merrill Lynch Wealth Management seem to agree.  Bill O’Neill, chief investment officer for MLWM in Europe told reporters in London that he continues to like gold.  “We just use it as a form of diversification, a form of catastrophe insurance, but we are actually looking for a move above $2,000.”  Mr. O’Neill must be a Pfennig reader, as that is what Chuck has been preaching for years.  Gold is not only an excellent hedge against ‘catastrophe’, but it has also been performing very well over the past decade, out-performing a share of Berkshire-Hathaway stock on a rolling 10-year return.

And then there was this. Chuck reminded me that it’s that time of year, where if you’re going to give Gold or Silver coins as gifts to your kids or grandkids in hopes that they retain them for their true store of wealth, that you get it done now! The time to deliver the coins is about 3-4 weeks, so, you can insure that you get them taken care of in time for Christmas or whatever gift giving season you observe.  We recently added some smaller denomination coins to our offerings, though they have larger minimums purchases.  Don’t hesitate to call the trade desk to discuss what we have available, and the timeline on delivery.

To recap. The dollar traded lower in thin holiday trading with the euro pushing back up above 1.29 for the first time since the beginning of the month. The Swedish krona moved higher after a report showed industrial companies are expecting to increase investments in the coming year.   The AUD$ moved higher after the IMF announced they added both the AUD$ and CAD$ to the ‘official reserve assets’ list. And Gold saw some small gains, but is expected to move back above $2,000 by Merrill Lynch Wealth Management. 

Currencies today 11/23/12. American Style: A$ $1.0405, kiwi .8179, C$ $1.0031, euro 1.2900, sterling 1.5929, Swiss $1.0704. European Style: rand 8.89.24, krone 5.6822, SEK 6.657, forint 217.23, zloty 3.1949, koruna 19.968, RUB 31.1387, yen 82.26, sing 1.2244, HKD 7.7505, INR 55.515, China 6.2283, pesos 13.0112, BRL 2.1086, Dollar Index 80.587, Oil $87.26, 10-year 1.67%, Silver $33.4213 and Gold $1,733.92.

That’s it for today. As I mentioned earlier, I had a great thanksgiving.  I was able to drag both my children out to the duck blind yesterday morning which started the day off right.  It was the first time my daughter has ever gone with me, and she took a camera instead of a gun. She got some great pictures of the morning, and we did end up shooting a couple of wood ducks that tried to sneak into our decoys.  We decided to make duck hunting on Thanksgiving morning a tradition, as it is a great way to start a Thanksgiving day; sitting outside watching the sunrise with those you love.  And the rest of the day was also good, as I got to watch plenty of football and eat too much great food prepared by my wife’s family (it was that side of our family’s turn to host dinner).  We’ve got a short day today, and I’m planning on getting back out to the duck blind this afternoon. You will notice I haven’t mentioned any shopping, I would rather stay away from those crowds!! Hope you have a Fantastic Friday, and a wonderful weekend, and thanks for reading the Pfennig!

Chris Gaffney, CFA
Vice President
EverBank World Markets