In This Issue.

*Currency rally is whacked by Greece rumors..
*Gold & Silver are only currencies to gain.
*President to talk about budget deficit.
*Traders are bullish on Gold after election results..

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

Drama Returns To The Eurozone. 

Good day.  And a Happy Friday to one and all! The IPod is playing Beginnings by The Chicago Transit Authority (later changed to just Chicago) I find this to be the proper song to be playing as I begin to write the Pfennig this morning!  Besides it’s one of my all-time fave songs!  I remember playing that song in the band I was in 40 years ago. So, the song isn’t “new”!  Hey! Sunday is Veteran’s Day. I’ll have more on that in the Big Finish, but just a note, the bank is closed on Monday, the Fed Reserve is closed, and the World Markets desk will be closed, and there will be no Pfennig.

Well. Yesterday, the currencies and metals drifted all day. there was no real direction, up or down, although you could smell the bias to buy dollars as a safe haven lingering in the air.  Gold & Silver were the only currencies to find some terra firma, and they remain the only currencies gaining VS the dollar this morning.

The Big Dog, euro, is just not allowing the other currencies that fare better when compared to the dollar, the chance to get off the porch and chase the dollar down the street. All week long, the euro has been dragged through the muddy mess of Greece, and there was no reason to change that this morning.  This time. it’s all about whether or not the next payment of the bailout to Greece is going to be made next week.  I find this hand wrenching stuff to be really stupid! You, and I both know that in the end, the payment will be made. I don’t know why we have to deal with all these dramatics. Drama is not my bag baby.

Overnight, the currencies got a brief lift from data that printed in China.. Chinese inflation fell to 1.7% from 1.9% (remember last year when it was about 6%?) this fall in Chinese inflation gave the markets the idea that China now has more room to move (with stimulus).  But, the brief lift from the Chinese data, dissipated quickly, when the Europeans arrived on the scene with their dramatics over Greece.  In addition, French Manufacturing Output data printed for September and showed a drop of -3.2%… that’s ugly folks, and so, the euro was brought back down from its overnight high of near 1.28.

So. I hear that the U.S. President is going to speak today on the economy and his plans for reducing the budget deficit.  Let’s see if he uses any of my ideas that I presented in the Sunday Pfennig & Pfriends a couple of weeks ago! HA! Yeah, right. my ideas make logical sense, I don’t think politicians even know what logical sense is!

But. if this statement by the President goes like it should go with the President telling us that some difficult decisions need to be made, and that there will be pain, and so on. I doubt this will happen, but if it did, kudos all around, for this is the discussion that needs to be made!

Speaking of pain. The Congressional Budget Office (CBO) issued a statement on the upcoming Fiscal Cliff, and their forecast is darker than any I’ve previously seen. the CBO said that the Fiscal Cliff would drive the U.S. economy back into recession next year and result in a jump in the jobless rate to 9.1% by the end of 2013, and that economic output would drop by .5% in 2013. Remember our GDP is only running at a 1.9% pace right now..

But these are the things WE HAVE TO DO to begin to correct this mess we’re in! For instance if our lawmakers do something to avoid the Fiscal Cliff, the $503 Billion will be added to our national debt in 2013, and $682 Billion in 2014. That’s added to whatever the Budget Deficits are for those years! 

I have this feeling though, that lawmakers will do the wrong thing, thinking that they are doing the right thing, by compromising on a solution to avoid the Fiscal Cliff. look. I love tax cuts just as much as the next guy. but we can’t go on like this (why do I feel like I’m breaking up with a girlfriend? )  These tax increases are what I’ve been warning you all about for years now, and here they are! And it won’t stop here, folks. Once these tax increases go into effect and the Gov’t sees the increase in their revenue, they’ll go back to the well and implement more / higher taxes. The tax burdens here in the U.S. are going to be very painful. But, that’s what we get for allowing our leaders to deficit spend like there’s no tomorrow..

Let’s talk about something else, OK? I’m beginning to sound like Mr. Gloom and Doom. And that’s not me! I’m Mr. Happy Go Lucky!  Well.. maybe not. but I’m somewhere in between those two for sure! I’m Mr. Tell-it-like-it-is (sorry Aaron Neville).

Yesterday, we saw the Trade Balance reports from Canada and the U.S. First, Canada’s report. Canada’s Trade Deficit narrowed to $800 million from $1.5 Billion in August. Exports led the way rising 1.9%, while imports were flat VS July. So. overall, a good show for Canada. to have a Trade Deficit that small! WOW!  OK.. now onto the U.S. Trade Deficit. The U.S. Trade Deficit also posted a decrease to $41.5 Billion in September, from the $43.8 Billion in August. Exports led the way here too. 

So. let’s go back in time (like Mike Meyers and Dana Carvey in Wayne’s World, ) to September. Hmmm.. the dollar was weaker in September, and look at the narrowing of the Trade deficit!  Oh well, I’m sure you knew that. Just making sure those of you who are new to class make proper notes!

I would normally betcha a dollar to a Krispy Kreme that the Trade Deficit would widen in October because of the dollar strength, but. you have to take into consideration the price of Oil, which fell in October. So. the October data will probably be flat. but that’s for next month. so move along, these are not the droid we’re looking for!

The Aussie dollar (A$) felt the pull downward from the euro this morning, and has slipped back below $1.04, which is obviously a cheaper level than a couple of days ago. I saw some data regarding the A$, which was the Fibonacci technical stuff, that said the A$ was set to move higher after it breached a key Fibonaci retracement level. You know me. I’m not a “technicals or charts guy” but I find the stuff interesting from time to time. especially when it plays well with the fundamentals I talk about.

Well. at the top, I mentioned that Gold & Silver were the only currencies to have gained overnight VS the dollar.  The stories all over the internet and on news wires that we subscribe to, are about how Gold traders are more bullish after the results of the U.S. election, as the traders see more stimulus on the horizon for the U.S., which is bad for the dollar, and good for Gold. See how quickly you can get a name for yourself, and you are what you are perceived to be?  The U.S. President is seen as someone who fosters stimulus.  Hey! I’m not saying that, traders are saying that. but, what have we seen in the last 4 years. 3 rounds of Quantitative Easing, 1 continuing round of Operation Twist, and stimulus. remember cash for clunkers? How about the other things that have been tried? I can see why traders are bullish on Gold for these reasons.

I received quite a few responses yesterday regarding my latest conspiracy theory on Gold held by the U.S. for other countries. One response was a question, that wondered why Germany would hold their Gold at the Fed NY. Well, actually, Germany holds Gold at the Fed NY and the Bank of England (BOE). The reason for this is simple. during the cold war, the Gold was moved out of W. Germany because they feared an invasion by the Soviet Union.  Sort of like moving to higher ground when the creek floods.

And one reader sent me a link to a story that talked about Germany recalling their Gold held at the Fed NY. Good for them! And when it gets home, they need to test it, to make sure it’s not tungsten filled like what was discovered with the Gold in. it was either Vietnam or Thailand, I don’t recall right now. but the fact remains that they held tungsten filled Gold bars.

But this isn’t the end of the conspiracy theory. this is just the tip of the iceberg, folks. Let’s see if the Germans get their Gold, and if it’s really Gold.

Then There Was This. I saw this, and thought, it doesn’t play well with currencies and stuff, but does play well with the tax burdens discussion we had above. from Investment News. “IN most years, the decision about how much to give to children and grandchildren is not that difficult. The amount that a person can give annually to anyone without having to pay gift tax is $13,000. That is a fairly simple calculation.

But there has always been a parallel system of gift taxation tied to the estate tax, which sets a lifetime limit that can be given away tax-free. Since the end of 2010, under the Bush tax cuts, this gift tax exemption has matched the estate exemption at a historically high $5 million (adjusted for inflation, $5.12 million this year). And now, like Cinderella’s coach, this gift exemption is set to turn into a big pumpkin when it expires on Dec. 31, along with the estate exemption, unless Congress acts.

Its looming expiration has left many people of means scrambling to use what has been billed as a once-in-a-lifetime way to give tremendous amounts of money to heirs tax-free before death – as opposed to the alternative, after death via the estate tax exemption.”

Chuck again. this just scratches the surface of what’s coming in 2013 folks. and what’s going to come in the form of new taxes in the future. remember this? Deficits don’t matter? Well, I guess they matter now, eh?

To recap. The currencies drifted on Thursday, with Gold & Silver the only currencies to gain VS the dollar.  China posted a drop in inflation, that got the currencies moving higher overnight, only to have that move higher reversed by some drama that’s been brought back to the Eurozone, as the next bailout payment due to Greece is being questioned. the currencies will end the week on a down note, but Gold & Silver will be up for the week.

Currencies today 11/9/12. American Style: A$ $1.0390, kiwi .8145, C$ $1.00, euro 1.2720, sterling 1.5935, Swiss $1.0545, . European Style: rand 8.7210, krone 5.7365, SEK 6.7365, forint 223.30, zloty 3.2780, koruna 19.95, RUB 31.54, yen 79.20, sing 1.2240, HKD 7.7510, INR 54.52, China 6.2455, pesos 13.20, BRL 2.0465, Dollar Index 80.69, Oil $84.78, 10-year 1.62%, Silver $32.19 and Gold. $1,731.60. and our usual Friday peek at the U.S. Debt Clock can be seen by clicking here:

That’s it for today. well. Sunday is Veteran’s Day. a day that we observe and give thanks to all the military people that have served our country. God Bless the veterans. did you know that Veteran’s Day coincides with Armistice Day commemorating the end of World War I?  It was made a legal holiday in 1938.  And in 1947 it was changed to honor all veterans, not just those that died in WWI. My dad fought in WWII, and never wanted to talk about it. in my eye, he was a great man. OK. it’s supposed to be 70 degrees here today and tomorrow before slipping back to the 30’s on Monday. Strange weather we have here in St. Louis, eh?  Remember now, no Pfennig on Monday, and Chris will have the conn on the Pfennig Tuesday thru Thursday, I’ll talk to you again next Friday.  I have a quick Veteran’s Day poem for you, and I hope you have a Fantastico Friday!

When I See an Eagle

Marie Frankson

When I see an eagle, I see a great nation which has been founded on the principles of equality and freedom for all.

When I see an eagle, I see our flag flying high.

I see happy children playing and smiling and laughing and singing.

When I see an eagle, I see a melting pot of blacks and Hispanics, Italians and Indians, Native American and Irish which make up our country.

When I see an eagle, I see no more bondage, no more terrorism, ethnocentrism, racism, and hate.

When I see an eagle, I see our troops fighting for what is right, fighting to keep us free.

When I see an eagle, I see America standing tall and strong and proud behind her servicemen and women.

When I see an eagle, I salute and say a silent prayer of thanks for the troops who protect us.

Have a great Veteran’s Day!

Chuck Butler
EverBank World Markets