In This Issue.

*  ECB meeting to be a dud?
*  BOC leaves rates unchanged.
*  Brazil hikes rates!
*  China continues to open up.

And Now. Today's A Pfennig For Your Thoughts.

Renminbi To Be Included In SDR's?

Good Day!… And a Tub Thumpin' Thursday to you! Well, I beat the ice storm, that we're supposed to get this morning, into work. Last night I heard the weatherman say that sleet & ice would begin to fall around 3am to 4am. Well, I leave for work around 4am, so went to bed wondering if I was going to be slip-sliding away on my way to work this morning or not.Well, the freezing rain, was just beginning as I pulled into the garage, so I beat it! I won! I won! YAHOO! See? It's the little things that make me happy!

Speaking of “happy”. I've talked about this song on my iPod a few times this past year, and I saw yesterday that according to Spotify, it was the number 1 streamed song this year. I don't know all new music, in fact I probably only know a smidgen of it, but I still know a good song when I hear one!

It was not a “happy” day in the currencies yesterday, as the dollar's hammering in the early morning and overnight sessions continued through the U.S. session. Today is not starting out so “happy” for the currencies and Gold, but we have the rest of the day to iron things out. And ironing things out is what European Central Bank (ECB) President, Mario Draghi, is attempting to do as I write. I've written about Draghi's attempt to implement all-out QE, ala Japan, the U.S. and the U.K., but has run into a roadblock in Germany, so I won't get all into that again this morning, but just so you know, that's what Draghi is up against as the ECB meets this morning. Oh, I'm sure he'll jawbone about having the ability to implement QE should the economy continue to show signs of weakness, but remember, those are just words. And the euro should take the stance of many a kid in my day that said, “sticks and stones may break my bones, but words will never hurt me!”

OK. Well, there's BIG news regarding the renminbi / yuan this morning, so we might as well get right to it, eh?  Part of having a wide distribution of one's currency, is having Central Banks around the world hold it as a reserve currency. Well, China has been signing these currency swap agreements all over the world, in hopes that the countries would not only trade in the currency, but also hold it as a reserve. And it appears that is exactly what's going on. The Peoples Bank of China (PBOC) says that more than 30 Central Banks now hold the renminbi as a reserve currency. Of the more than 30 Central Banks listed by the PBOC, nowhere can the U.S. be found. Hmmm.   Ok, well that's just the groundwork for what I'm going to talk about. Once you get more Central Banks to hold renminbi as a reserve currency, then China can go back to the IMF and revisit their earlier request to include renminbi in the SDRs basket of currencies. Now, having the renminbi included in SDRs would be good for the currency, given a lot of it would have to be bought, but the symbolic effect would be HUGE for renminbi.

The IMF reviews the makeup of SDRs every 5 years, and the next review is scheduled for late next year (2015), so China has plenty of time to gain more Central Bank acceptance. And this is what I see going on next year. China makes it known they want inclusion in the SDRs basket, and Central Banks around the world, see this, as something that will happen, so they begin to buy renminbi to hold as reserves, ahead of the IMF announcement, so as to get “in” before things get hot and heavy. The PBOC will fight the appreciation pressure, but won't be able to keep the offshore CNH currency in line, and we could end up with a huge arbitrage potential. But that's for the BIG BOYs to worry about.  Well, that's how I see this all playing out next year, of course that's just my opinion and I could be wrong.

I see that the PlayStation by Sony is celebrating 20 years. Yesterday, it was the 20 year anniversary of the release of the movie: Forrest Gump. WOW! 20 years!

You know, whenever I write about the renminbi/ yuan I receive a few emails from dear readers asking me how they can invest in renminbi. Really? At EverBank World Markets they have a renminbi savings account, called an Access Account, it's liquid, pays no interest, but holds renminbi, so as the renminbi goes, so goes the value of the account, and we just announced that the minimum requirement has been lowered to $2,500. (used to be $10,000). We just changed it internally, so the website and footnotes still say $10,000, we'll work diligently to get those changed quickly!  And of course, unlike most deposits with these accounts there are material risks to your principal (FDIC insurance does not protect against currency devaluation), so they are not for everyone – for more information and important disclosures, you can read here:  www.everbank.com/currencies/access-deposit

Well, the Brazilian Central Bank (BCB) hiked rates last night. The BCB has been quite aggressive with these rate hikes, and this one was no different, as they hiked rates by 50 Basis Points to bring their internal rate to 11.75%… I think we'll see another 75 Basis Points (3/4%) in rate hikes early next year, with the BCB finishing their rate hikes in March. But something is awry here, given that the real can't get any traction from these rates hikes, or the hawkish talk that leads me to believe more rate hikes are on the way, for if I see it, the markets have seen it, and bought the T-shirt!

The Russian ruble is getting whacked again today. The ruble traders in Russia are looking for the Russian Gov't and Central Bank should be defending the currency with intervention. And the Russian Gov't is pointing the blame finger for the rubles problems at the West.. Well, either the Russians are just paranoid, or they are on to something. I'm not willing to go out on that limb just yet, but they sure have some interesting facts. The thing I think about here is that the ruble is getting a double whammy right now from the sanctions and the drop in the Oil price. The sanctions were brought to Russia by the West, and I wouldn't be surprised to eventually learn that the West also orchestrated the drop in Oil's price with the Saudis.

The Bank of Canada (BOC) met yesterday, and while they kept rates unchanged, and their bias at neutral, they did have a hawkish feel / tone to their statement and that helped the Canadian dollar / loonie to a good performance yesterday. This morning, the loonie is basically flat, but leaning toward a gain at this point of the morning. I wanted more from BOC Gov. Poloz yesterday, but I guess I got about the best he was going to deliver. Remember, he's originally from the Trade side of the Gov't, so he's not going to go out of his way to boost the loonie.

I told you yesterday that the Aussie economy is slowing down quickly, and the Reserve Bank of Australia (RBA) will most likely need to begin cutting rates early in 2015. My “guy on the ground”, dear reader, Bob, tells me that he went Christmas shopping and the parking lot had a lot of empty parking spots, and there didn't seem to be anyone inside the mall, which had huge discounts on everything. Now, I don't believe he was complaining, for I wouldn't be! No, he was just letting me know how bad things have gotten in Australia, and this is the Christmas shopping season!  

The Aussie dollar (A$) is weaker again this morning, and most of that is on news that Deutsche Bank had revised their forecast for interest rates in Australia, moving from a forecast that had interest rates rising by the end of summer 2015, to a forecast calling for rate cuts.

The U.S. Data Cupboard showed us some interesting data yesterday. First we had the ADP Employment Change, which I told you yesterday was forecast to show 222,000 new jobs created in November. Well the actual number was not so high, but instead printed at 208,000. In addition, the Unit Labor Costs were actually worse than forecast (-.2%), and printed a negative -1.0%…

Today's Cupboard has the November year on year look at the Challenger Job Cuts. The Weekly Jobless Claims and a Bloomberg Consumer Comfort index. Not much in the way of market moving data. But tomorrow! Tomorrow, Tomorrow, it's only a day away! Tomorrow, we'll get to have the Jobs Jamboree! Oh Boy! I'm so excited! (NOT!)

Gold is down $7 this morning, and the reason given on the screens for this downward move is the questions surrounding the ECB meeting that's going on. Really? That's all they've got? Well, at least Gold is holding above $1,200 even giving back $7 of value this morning! I was reading a post from my fave Gold researcher, Koos Jansen, last night, and he was pointing out how the European Central Banks from each country, are adding to their Gold reserves. Obviously not at the same pace as the Asian Banks, but the point made was that the European Central Banks are adding to their reserves. So, what's the U.S. doing? Nothing, absolutely, nothing, say it again

Before I head to the Big Finish today, I wanted to point out something that I've said for a couple of months now regarding the drop in the price of Oil. and that is that it would slow the Oil shale producers here in the U.S., for the cost of doing business wasn't attainable any longer. And now according Reuters, New well permits issued across the U.S. in November plunged nearly 40%!  New permits, which indicate what drilling rigs will be doing 60-90 days in the future, showed steep declines for the first time this year across the top three U.S. onshore fields: the Permian Basin and Eagle Ford in Texas and North Dakota's Bakken shale.

For What It's Worth. I found this on the Bloomberg this morning, and thought it played nicely in the sandbox with the other stuff on Gold I talked about today. You don't have to have a Bloomberg to read the whole story, as it is also on their on-line version and can be read here: http://www.bloomberg.com/news/2014-12-04/china-said-to-consider-scaling-back-restrictions-on-gold-imports.html

“The People's Bank of China drafted a plan that will open up gold imports to qualified miners as well as all the banks that are members of the Shanghai Gold Exchange, according to the people, who asked not to be identified because the proposal hasn't been made public. China Gold Coin Inc., a maker of commemorative gold and silver coins, could also qualify to import bullion, they said.

Chinese regulators are pushing to open up the country's gold trade and lure foreign investors as part of its broader effort to link the mainland to global markets. The country began offering international institutions access to yuan-denominated gold contracts in Shanghai's free-trade zone in September, a move that may extend its influence over prices while boosting the role of its currency in global trade.”

Chuck again. Everywhere you look China has their hands in the cookie jar! They act like they are getting ready to make a big life changing announcement to me.

To recap. Well, the dollar's swinging of its mighty hammer, continued throughout the trading day in the U.S. yesterday, and is still at it against most currencies this morning, as the ECB is meeting as I write, no wait! They just announced that they were going to leave rates unchanged, but the real beef comes in the statement following the rate announcement, so hold on for that!  China is making noise about being included in SDR's, which would be HUGE symbolically for the renminbi, and ready it for replacing the dollar as the reserve currency. Bank of Canada left rates unchanged yesterday, but gave a hawkish tone to their statement, and the loonie rallied in the face of the strong dollar move yesterday!

Currencies today 12/4/14. American Style: A$ .8385, kiwi  .7750, C$ .8805, euro 1.2315, sterling 1.5675, Swiss $1.0235,   . European Style: rand 11.1750, krone 7.0855, SEK 7.5350, forint 249.10, zloty 3.3775, koruna 22.4240, RUB 53.40, yen 119.95, sing 1.3140, HKD 7.7545, INR 61.93, China 6.1411, pesos 14.10, BRL 2.5780, Dollar Index 88.93, Oil $66.95, 10-year 2.28%, Silver $16.40, Platinum $1,233.75, Palladium $796.05, and Gold. $1,203.11

That's it for today. A bad 3rd period for our Blues last night in Chicago. When I went to bed the game was tied 1-1, but it didn't end up that way. UGH! Eric Clapton is playing his song: Bad Love, on the iPod this morning, great guitar work in that song!  Mike just came in and said it was raining steady outside, but not freezing. So, much for that weather forecast!  Hey, you know what happens this weekend? Saturday is St. Nick's Day! You know, you set your shoes outside your door the night before, and the next morning they filled with stuff! Candy, oranges, video games, etc. Our kids always did St. Nick's Day. So that means Friday night, you need to leave your shoes out.  It's getting to the end of the fantasy football season for me, as my team won't make the playoffs. Every year, I think I have a good team, and every year, they suck eggs! Oh well, I make a donation to the league, I wonder if that's tax deductible? HA!  Well, it's time to get off the bus today, and wish you a Tub Thumpin' Thursday!

Chuck Butler
President
EverBank World Markets