In This Issue.

*  Currencies lose ground.
*  Gold loses ground too!
*  U.S. Retail Sales are OK.
*  Meddling in the economy gets you nowhere!

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

Fisher Gets Tough!

Good Day!  And a Wonderful Wednesday to you! Thanks to all of you who sent along notes yesterday. Yes, according to the doctors, stable is good. But. I'm never satisfied with stable, but. after being talked down from the ledge, I do realize that stable is far better than the shape I was in 15 months ago. So. Let's party like it's 1999!

It appears that the currencies' party that started last week with the poor jobs number, has ended early. The punch bowl has been taken away, and the music stopped. As I look at the currency screens this morning, there's only one currency that has eked out a gain VS the dollar, and that gain is quite small, and it belongs to.. Drum roll please. Japan! But let's not get carried away, the Japanese yen has been so weak that it was bound to see a day of sunshine sooner or later, and the sunshine on the yen this morning is just peeking through some very dense clouds!

There's not a lot going on, that would make this currency party end so soon, but the bias to buy dollars never went home I guess, and hung out in a dark corner of the room, waiting for its chance to get back on the dance floor. Yesterday, U.S. December Retail Sales printed up .2%, which as I told you the BHI had indicated it would be OK, not great, but OK. And that it was!  When you take out auto sales, Retail Sales were better at +.7%, but all those months that auto sales were strong, they counted them in the total number, so you can't take them out when auto sales are weak!

In addition, the Business Inventories, which I told you about yesterday, were stronger than expected, albeit still weaker than the October result.  October was +.8%, and November was +.4%. So, not the shot in the arm to GDP that October was, but still good stuff for the GDP number. So, after looking through the data yesterday, one could see that it was simply a case of the last to print getting the highlights. For yesterday morning we had the Eurozone Industrial Production number print nice and strong at +1.8%, but that was long forgotten by the time the U.S. data printed.

Not that I enjoy writing about data prints, but since that's all we have to go on this morning for direction in the currencies and metals, we might as well, see what the U.S. data cupboard has for us today. I see December PPI (wholesale inflation), and Mortgage Applications for this morning's go-around, and then this afternoon the Fed's Beige Book will print, but don't expect anything that you haven't already heard from the Fed Heads in this print.

Carlos Santana is playing his great old song, Black Magic Woman, this morning on the IPod, man he can play the guitar! A couple of years ago, I took my son, Alex, the guitar player, to see Carlos Santana in concert. What a thrill for me. I have no idea why I went in this direction, so I had better get back to what the letter is really about!

China's loan data that printed yesterday was quite as strong as the markets would have liked to see it, and this pushed the Aussie dollar (A$) down even further in the overnight trading. Now the focus in Australia switches over to the Aussie Employment Report that will print tonight (tomorrow for them). This Employment Report wasn't expected to be good, so the A$ is getting taken down even more this morning. Right now, it appears that the A$ just can't catch a break, and when does it can't hold onto to it very long before something else damages the A$'s value.

Hey! The Aussie need what the U.S. is doing to boost its economy. No wait! No one needs that! But it won't be long before the usual suspects begin to express their opinions on what Australia needs to do to boost their economy. I hope Australia ignores all of them! No meddling, and let's see how things come out. My educated guess is that Australia will be just fine, as this is a just a bad part of the business and economic cycle for them.

That doesn't mean that the A$ won't suffer through the slowdown, but remember folks, it's just a cycle. it won't last, as long as the Aussies don't start meddling!  Sort of like when you have kids. I tell young parents all the time, that the most important thing they need to know as the kids grow older, that whatever they are doing, spiking their hair, wearing purple socks, whatever, it's just a phase, don't react to it, or else you'll just prolong the phase. Just like Central Banks and their economies. Don't meddle, or else you'll just prolong the cycle.

My friends over at the 5 Minute Forecast, had an interesting short piece on the U.S. economy yesterday..  “We can be encouraged that the economy is at least crawling forward and not heading in reverse,” says Bill Dunkelberg, chief economist for the National Federation of Independent Business.

The NFIB is out this morning with its monthly Small-Business Optimism Index. At 93.9, the number has risen two months in a row — but it remains mired in the mediocre range where it's been stuck the last four years.

Asked what's the single most important problem they face, the highest number of respondents — 23% — cited taxes, while another 20% said regulations. Poor sales — which long competed with those other two categories — is retreating further into the distance, at 14%.

Chuck again. See what I mean about the economy? It's doing better, yes, but not at recovery speed, and that always carries the chance of a slip up.  And with the Fed talking about removing stimulus, that pushes the envelope on the chance of a slip up. You see, I don't care about the bond buying. Yes, it kept yields down on Treasuries which carried over to mortgage rates and led to a housing rebound, but to me, if the housing rebound is for real, higher rates shouldn't stop that, slow it down, yes, but stop it? Hardly. The thing that I think will be the real problem for the economy is the markets pushing for higher short term rates. I told you how the markets will see the Fed Heads tapering bond purchases and say, “if the economy is strong enough for that, it's strong enough to hike rates” And even if the Fed Heads refuse to hike rates, the markets will apply enough pressure that the threat of higher rates will bring the economy to its knees once again.

I told you yesterday that Fed Heads Plosser and Fisher, both hawks, were going to be speaking on Tuesday, and I thought we would see some “spin” put on last week's jobs data. Well, neither one decided to mention it from what I read, instead they put their focus on how pleased they were with the Fed's decision to Taper last month. Fisher even went so far as to say that he wished the amount that was announced ($10 Billion) was doubled! Then he went on to say something that I think is very important. Let's listen in. “Were a stock market correction ensure while I have the vote, I would not flinch from supporting continued reductions in the size of our asset purchase as long as the real economy is growing, cyclical unemployment is declining and demand-driven deflation remains a small tail risk; I would vote for continued reductions in our asset purchases, with an eye toward eliminating them entirely at the earliest practicable date.”

WOW! Now that's telling 'em Dallas Fed President, Fisher!  It's just too bad that you'll be the lone wolf when all that happens. Just so ya know!

Gold is down again today. The Gold buying party that took the shiny metal to $1,250 last week, is over for now. I was writing the Feb Review & Focus yesterday and spent a lot of time talking about the difference between physical Gold and Paper Gold. I was just whishing and hoping and thinking and praying (like Dusty Springfield ) that there would be two prices for Gold. One for physical, store of wealth, Gold, and one for the paper, computer trading Gold.. Then all those that want to sell Gold without owning it, could go to town, and I couldn't care less! That would leave investors like me, and you, dear reader with our physical Gold. OK, back to reality, Chuck!

I told you above about how the A$ was weaker this morning on news that China's loan data wasn't as strong as expected. But when I look at the loan data I don't see anything weak about it! Credit cam in ahead of expectations in December, and bank loans for January are ahead of last year's run rate. So, maybe I just followed the media's lead on why the A$'s was down, and should've looked under the hood before I said something, eh?

I would think that this data would give the Chinese leaders a big smile, and the forecasters for global growth to rethink their previous calls. I think that China will continue to book GDP growth rates around 7.7%, which even if you think they make things up in China, is a pretty good growth rate. And should keep the renminbi on a 3% per year gain rate VS the dollar until the Chinese allow the currency to float, which in my mind is still a few years away.

And in the UK yesterday, Consumer Inflation fell to the Bank of England's (BOE) target rate of 2% last month. Remember when I was telling you that the markets were pushing for a rate hike in the UK, and BOE Gov. Mark Carney, was playing the same game with them as he did when he was at the helm of the Bank of Canada?  Well, now Carney can continue his game, because with inflation falling, he can keep rates low, as he wishes, and the markets will back off their calls for a rate hike.   This should take the bloom off the rose for the pound sterling, as most of its luster was coming from rate hike expectations.

Before I head to the Big Finish today, I hear that the Swiss National Bank (SNB) is interested in becoming a Chinese renminbi / yuan banking hub. A little late to the party I would think, as Germany, the UK, and others are way ahead of the SNB. But, the Swiss have always been held in high regard when it comes to banking, so maybe they can catch up quickly.

For What It's Worth. Reuters has a story this morning that caught my eye. China is branching out in banking hubs for Gold imports now. Can you believe these guys? Every time you think they'll stop for a break, they just keep pushing the envelope. Let's go to the story.

“China has granted licenses to import gold to two foreign banks for the first time, sources said, as moves to open the world's biggest physical bullion market gather pace.

Allowing more banks to import gold could increase the supply of the metal into the country, easing local prices that are higher than in most Asian nations.

China's gold imports more than doubled last year to over 1,000 tonnes – ousting India as the biggest buyer – as demand soared to unprecedented levels due to the first drop in international prices in 12 years.

ANZ and HSBC were awarded import licenses late last year, two sources with direct knowledge of the matter told Reuters.”

Chuck again. Soon the Chinese will have a distribution network for their currency, and it won't be long after that the Chinese begin to make overtures about replacing the dollar as the reserve currency with the renminbi.  Remember, the Chinese have already stated that they believe it's time for an end to the dollar's reserve status, but they have never offered up a replacement. Well, that's coming folks, are you ready? Now that's a great song from the 60's, by the Pacific Gas & Electric group. Are you ready? To sit by his throne? Are you ready not to be alone?  Someone's coming to take you home, and if you're ready then he'll carry you home..

To Recap. The bias to buy dollars has put an end to  the currencies' party that started last Friday with the weak jobs report. All currencies except yen are down VS the dollar today, and yen's move is very small. Not much in the way of data made this change as U.S. Retail Sales were just OK, not great, but OK, and Business Inventories were OK, but down from the previous month. Chinese loan data was good, which should be good for global growth. And Gold has lost  ground again this morning.

Currencies today 1/15/14. American Style: A$ .8925, kiwi .8365, C$ .9125, euro 1.3615, sterling 1.6415, Swiss $1.1020, . European Style: rand 10.8905, krone 6.1070, SEK 6.4520, forint 220.65, zloty 3.0540, koruna 20.1580, RUB 33.42, yen 104.25, sing 1.2720, HKD 7.7540, INR 61.54, China 6.1005, pesos 13.09, BRL 2.3430, Dollar Index 80.93, Oil $92.67, 10-year 2.87%, Silver $20.10, Platinum $1,420.13, Palladium $735.70, and Gold. $1,238.15

That's it for today. Well, January is half over! And for me, it's almost over! I'll be gone the next two weeks, with a trip to Orlando at the end of January for the Money Show. Have I ever told you about the “door activated wind tunnel” also known as the bridge we walk over to the office building? As soon as you open the door, the wind begins to gust, not just blow, and I'm convinced that it doesn't gust until the door is opened! HA!  This morning was especially cold with the wind gusting to speeds that even a kite would fear! YIKES! The morning hasn't started out too good but I have the rest of the day for it to get better!  Mike just got here, and that reminds me. What day is it Mike? Mike, Mike, Mike?  HA! But I was going to say that Mike just got here, and his fave group Led Zeppelin is playing the Lemon Song, so he's smiling.  I'll be gone for the birthday celebrations of our little Christine, and my old friend, Chris Gaffney. So, I'll wish them Happy Birthday now. And Mike will be celebrating his 10 year anniversary at EverBank on the 26th. WOW! Good Show Mike!  10-years? Really? Where did the time go? Oh well, I've carried on enough this morning, I hope you have a Wonderful Wednesday!

Chuck Butler
EverBank World Markets