In This Issue.

*Eurozone sees strong data from Germany.
*Aussie employment rises along with the A$.
*RBNZ leaves rates unchanged and sounds upbeat.
*Gold gets whacked again.

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

Stuck In The Mud.

Good day. And a Tub Thumpin’ Thursday to you! I’m already tired this morning, as I got my desk after the long walk from the garage, across the bridge and to the office, and realized that I had left something that I brought to eat for my breakfast in the car. So, I trudged back to my car, and then reversed the trip back to the office. That’s a lot of walking for me, so early in the morning! UGH!  I know, you’re saying, did you really need to eat breakfast? The answer is yes, one of the medicines I take needs to be taken with food. And now I know you’re thinking, is he ever going to get to the currencies, metals and economies? HA!

Ahhh grasshoppers. Yes.. I will. But, given the tight range the currencies traded in yesterday, there’s not really much to say about their performance yesterday.  I even mentioned once yesterday that it had been a month of Sundays since I last saw the euro trade in a 10 tick range. Most of the day, the euro traded at 1.3070. And when I came in and finally got my laptop fired up, I saw the euro trading at. yep, you guessed it. 1.3070. stuck in the mud!  And this morning, the euro should have received some love from the German Manufacturing Orders data that printed for October.

German Manufacturing or Factory Orders surged almost 4 times as much as the experts had forecast in October. Foreign demand was pointed out to be the reason the orders surged 3.9% from September. And then on top of that, German Business Confidence unexpectedly rose in November.  Export Sales soared 6.7% in October, and a key here to really focus on, was that an 8.5% increase in orders from outside the Eurozone.  Long time readers will recall me saying over and over again, this dance is gonna be a drag. No wait! I said over and over again that 80% of trade in the Eurozone is among the members of the Eurozone. So, when Germany is filling orders from outside the Eurozone in addition to the trade inside the zone, then that’s a good sign for the German economy, and the Eurozone as a whole, since Germany is the largest economy, by far, in the Eurozone.

The Big Boss, Frank Trotter, asked the other day what I thought the biggest surprise in the markets had been in 2012.  That was an easy one for me. put it up there on the Tee. The euro is the biggest surprise in 2012 to me. For the past two years, all we’ve heard about was how the euro was going to collapse, and at the very least fall below parity.  And here we are at the end of 2012, and the euro is 1.30.   it hasn’t collapsed.  and as I tell people in my presentations all the time. “with all the negativity toward the Eurozone, the euro remains relatively strong. What does that tell you about what the markets think about the dollar?”

Overnight and through the morning session so far, the Aussie dollar (A$) is the best performer. The A$ pushed higher on news that November Employment increased 13,900, VS the forecast which was flat.  The Unemployment Rate fell to 5.2% from 5.4%… A very nice and strong report, for a country that just saw interest rates cut earlier this week.  I’m sitting here smiling like the Cheshire Cat, and thinking. See, Chuck said there was no reason for cutting interest rates!  But Nooooooooo.  Nobody listens to Chuck until it’s too late. Then they say, “Hey, we should have listened to Chuck”!  

The 2nd best performer overnight is the New Zealand dollar / kiwi. this currency is still on a RBNZ high.  The Reserve Bank of New Zealand (RBNZ) left rates unchanged last night, an had this to say, which has the markets lathered up and buying kiwi. “Economic growth has slowed in recent months and has been accompanied by low inflation and rising unemployment. However, over the next two years, growth is expected to accelerate to between 2.5 and 3% per annum.  The Global outlook remains soft but appears less threatening than was the case earlier in the year. The overall outlook is for stronger domestic demand and elimination of current excess capacity by the end of next year. This is expected to cause inflation to rise gradually towards the 2% target midpoint.”

OK.. I know that “went on” for a bit, but I wanted to highlight that the new RBNZ Gov. Wheeler didn’t take any pot-shots at kiwi, like his predecessor (Bollard) did at every chance he could, and Wheeler sounded upbeat. and that has kiwi well bid this morning.  and in fact it has traded past .83-cents this morning!

It’s not all seashells and balloons for the currencies and metals this morning. The rest of the currencies are either trading flat or down a bit. I like this though. I like it when the  currencies don’t trade together. it’s the herdball thing. you know, have your little kids or grandkids played soccer?  Well, when they are really young, it’s not soccer, it’s herdball.  But the game of soccer is much better when the kids spread out, and play the game correctly. It’s the same with the currencies. Yes, prior to 2008, you could basically throw a dart at a currency, and it would show a gain VS the dollar. But. they didn’t all move together each and every day. They traded on their fundamentals, or VS the dollar’s fundamentals.

In my last article for The World Money Analyst newsletter, I talked about how I was beginning to see the “Risk On” and “Risk Off” stuff go away from the currencies. Which is a good thing, folks. because stocks, currencies and commodities, have no business trading arm-in-arm every day. These asset classes have different pricing mechanisms and a low correlation to each other, and so it has pained me so much to see currencies and commodities traded alongside stocks since 2008. But. like I said, I’m beginning to see this change, and when the currencies begin to really trade on their own, and not in the herdball fashion, then we can finally put this Risk On / Off in the circular file where it belongs!

Hey. don’t get the World Money Analyst or never heard of it? Just Google it. and then you’ll find a link that takes you to the introduction of the letter.  But, just as an FYI. It’s a globally-oriented investment letter that aims to identify the highest-potential and lowest-risk international investment opportunities.  Trust me on this, they keep me around for the entertainment. the list of contributors is very impressive.

OK. I’ve got lots of things to talk about today, that really show the state of our economy / country. and that all leads you toward a weaker dollar. it may not happen today, or tomorrow, or even in the next year, but, the prospects for a weaker dollar continue to pile up.

First up on my list of things to talk about is this news that the penny and nickel are going away. Let’s listen in. “Mr. Geithner has been busy lately. Amongst his many other pressing tasks, he took the time to announce that the U.S. Mint will be removing the penny and nickel from circulation in the U.S. starting early next year. The reason is clear. It now costs the mint $US 0.048 to make a penny and $US 0.162 to make a nickel. They are still just above the break-even point on the dime, which costs them $US 0.092 to produce. That won’t last, according to Mr Geithner, so the dime will be the next to go – probably in 2014.”

Ok, before I get to the next item. let me set it up by telling you that Gold got whacked again late yesterday.  I’m growing so tired of watching this happen but what’s a poor boy to do?   I saw James Turk talking about these takedowns of Gold, and thought it would be good to post his comments here, just to help you understand what’s going on in Gold.

“On a day like today when the metals are getting pounded by the cartel, it’s important to step back and look at the big picture.  And the bottom line here is that we have some tough times coming.  We need to prepare for it, and of course the best way to do that is by accumulating physical gold and silver. 

The reason they are attempting to make gold and silver look weak here is because these monetary metals will provide the foundation when the monetary system is eventually re-constructed, and the price of gold and silver will be far higher than the numbers they are painting the tape with today.  But before that day comes, they need to shake as many people out of these markets as possible so they are victims of the greatest wealth transfer in history, not beneficiaries.” – James Turk

And did you see that Citigroup announced that they will eliminate 11,000 jobs? I wonder where the BLS will hide those job losses?  I think that we’re going to begin to see a rash of these large job eliminations from the Financial Sector. The profits for a lot of these large institutions just aren’t there to support all these jobs. The rest of the country’s companies figured out how to exist and eke out a profit with smaller job corps a couple of years ago. The large Financial Institutions are just now seeing the forest through the trees.

Then There Was This. OK. you know me, I’m not into talking politics, that is, unless I’m on the Butler patio. So, you won’t see me pointing any fingers here, because as far as the debt is concerned both parties are to blame.  But here are some facts about tax increases that you should take to memory to spew out to anyone that comes at you with the it’s fair to tax the rich thing.

Last week I told you about the article by Chris Cox (former head of the SEC), and Bill Archer (former chairman of the House Ways and Means Committee). On the “true debt”.  Well, in the article they explain taxation.  “To collect enough tax revenue just to avoid going deeper into debt would require over $8 Trillion in tax collections annually. The put that in perspective, the entire GDP of the country last year was about $15 Trillion. Just to keep up with our debt, to keep it from growing, we’d have to take more than half of all American Wealth. Every Year. And that wouldn’t even solve our current debt issue.”

Chuck again. So. it doesn’t matter who you tax, it won’t mean a hill of beans to the overall debt problem.  I’ve said all along that higher taxes were coming, because lawmakers would see this as a form of revenue, that they could take. However, I’ve also said all along that these higher taxes will NOT be the cure to all that ails us with regards to debt.  So, it was nice to see these two gentlemen agree with me.  What’s the other way to deal with the interest payments alone on our debt?  Cheaper dollars.  I’ve said all along that this would be used in addition to higher taxes as our leaders’ way to deal with debt payments. But how weak will the dollar have to go, for it to deal with actually retiring some debt?  Well. before we get there, I would think that the leaders of this country would consider default, before a complete collapse of the dollar.

To recap. The currencies traded in a very tight range yesterday, and Gold got whacked at the end of the day again.  Overnight, the Aussie dollar is the best performer after printing a very strong jobs report. The 2nd best performer is the N.Z. dollar / kiwi, as the RBNZ left rates unchanged and sounded very upbeat in their statement.  The rest of the currencies are either flat or down a bit, with the euro trading in the same clothes as yesterday.

Currencies today 12/6/12. American Style: A$ A$ 1.0495, kiwi .8325, C$ $1.0090, euro 1.3070, sterling 1.6110, Swiss $ 1.0790, . European Style: rand 8.7315, krone 5.6160, SEK 6.6015, forint 216.65, zloty 3.1620, koruna 19.2780, RUB 30.85, yen 82.35, sing 1.2190, HKD 7.75, INR 54.13, China 6.2277, pesos 12.90, BRL 2.0860, Dollar Index 79.85, Oil $88, 10-year 1.58%, Silver $32.74, and Gold. $1,690.15

That’s it for today. Well. Happy Birthday to my wife’s dad, Larry Stringer. Larry is a retired Captain on the fire dept, and has lost most of his eyesight, but still tries to read the Pfennig each day.  Congrats to Alex who won his wrestling match last night by a score of 3-1. The year had not started out so great for him, so he was happy with that win.  I had a tough night last night, so I’ll be dragging the line today, and then after my here, back and here trip I should be ready for a nap!  I think I’m going to begin to account my spending the way the U.S. Gov’t does. That way, I’ll have a huge surplus at the end of the year!  I had better not start on the Gov’t accounting. I’ll save that for tomorrow!  Right now, I’m going to get started on a Tub Thumpin’ Thursday and you should too!

Chuck Butler
EverBank World Markets