In This Issue.

*  Currencies are mixed again today.
*  Gold has a strong rally yesterday!
*  Norges Bank to cut rates tomorrow.
*  Russia to hike rates tomorrow.

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

U.S. Has A New Spending Bill.

Good Day!…  And a Wonderful Wednesday to you! The Guess Who was singing their great song: These Eyes, to greet me this morning. I always appreciated the lead singer of the Guess Who, Burton Cummings, he had a great voice. I used to think I had a decent voice to sing with, but after a couple of years of chemo, I sound more like Joe Cocker without the English accent!  HA! The gray skies have been over us for 10 consecutive days now, reminds me of the song Desperado. The sky won't snow and the sun won't shine. It's hard to tell the night time from the day.

The dingy gray sky days also remind me of the currencies right now. The currencies haven't seen any sunshine in a long time either. Gold sure found some sunshine to bask in yesterday! WOW! Did you see that rally in the shiny metal? And it didn't go at the dollar alone, Silver, Platinum and Palladium also joined with Gold to take a pound of flesh from the dollar. I was beginning to think we wouldn't see these kinds of days until the dollar neared a collapse, or. are we nearing that just mentioned collapse? Nah, I don't think so, but again, think about all the stuff I've been telling you. Central Banks adding to their Gold reserves by the truckload, and a handful repatriating their Gold home from the U.S. vaults. What are they getting ready for?  Come on, think about it, really intensely here. (hint, I just mentioned it!)

Sorry to hit you with that so quickly this morning, but. I've been teasing you and leading you on for the past week, I thought I would just throw that out there, and see if it sticks. You know the saying. And the news from Washington D.C. yesterday didn't help matters any. Did you hear that Congressional leaders had reached an agreement on a massive $1.1 Trillion spending bill that will keep most of the federal government funded through next September? Well, they did. the current spending extension was set to run out at midnight on Thursday, so the Congressional leaders need to get the pens out and get this signed before the clock strikes midnight tomorrow!

But this is the kind of stuff that just gives investors, institutional investors, hedge funds, and what have you, the willies when it comes to holding dollars, that have so much debt tied to it, and no plans to reduce the debt in anyone's kitchen here in Washington D.C.!  So, we have that going for us! Of course the Gold traders got the message yesterday, and that's why Gold took for the sunshine, but the currency boys and girls must have thick heads, for they didn't get it right away. But eventually did this morning, and the currencies are stronger in the morning session.

I've got a real treat for you today in the FWIW section regarding all this. I have a couple of snippets from an interview with John Williams of! Yes, THE John Williams of whom I have used his data for years now! So, stay tuned for that, don't go anywhere, and if you do, leave your monitor on so you can pick it up where you left off, when you return!    And don't forget, this is all my opinion, and I could be wrong!

And looky there! The Aussie dollar (A$) finally found some wind in its sails and is rallying this morning. This must be the first time I've seen the A$ with green numbers (meaning positive gains) in what seems to be a month of Sundays! The A$ had dipped below 83-cents yesterday and overnight, before turning around and gaining back the 83-cent figure and more. A new report from 14 economists surveyed by Bloomberg, believe that the Reserve Bank of Australia (RBA) will NOT cut rates next year, and will resume hiking rates by late 2015, really put the wind in the A$'s sails, as it should!

Is the A$ out of the woods? Hardly. The RBA is like life for me. The wolf is always at the door, and that's the RBA to the A$… And while you and I know that a Central Bank should be providing price stability, there has been a Titanic shift in Central Bank responsibilities in the past few years. And like the Titanic I believe these Central Banks that have left providing price stability on the side of the road, will find an iceberg that sinks them. Of course the Central Banks like the RBA could always steer clear of the iceberg if they have a coming to Jesus moment and get back to what they are supposed to be doing!

The Blue Jays are singing a song right now, that's apropos. Maybe, Maybe I'm wrong, to go on thinking, to sing my song. Maybe, this world's falling down, call out the trumpeters and knock the walls down.   I find those words to accurately describe how I feel when everything is moving against what I thought would happen.

Well, the price of Oil continues to see weakness dropping $2 more dollars since the start of the week. The spending announcement of the U.S. Gov't sure put U.S. Treasuries back on the rally tracks yesterday, as the yield on the 10-year has pushed to 2.20%, as it started the week at 2.32%… Remember, with bonds, as the yield goes down the price of the bond goes up, and vice versa. Thus the rally. The Bond guys say, we don't believe in this so-called economic revival here in the U.S. and if you're going to continue to spend, we going to continue to keep yields low.

It looks as though the Russian Central Bank is prepared to hike rates again, in an effort to wrap a tourniquet around the massive bleeding in the ruble. I expect their internal rate to be moved 50 Basis Points (1/2%) to 10%, tomorrow when the Central Bank meets. I don't know if this will do the trick or not, my guess is it won't, as the markets want to see the removal of the sanctions to take the governor off the Russian economy. And the drop in the Oil price doesn't help matters any here either.

Speaking of the drop in the Oil price. I've been highlighting the winners and losers of the price drop, and I came across one that is out there on the limb. Way past what we normally would think about.  But with the price drop in Oil, gas is cheaper, and therefore more people are driving longer distances, so who gets the benefit of that? Toll Roads.  And guess who's bonds are rallying? Toll Road muni bonds!  I know, I really stretched out for that one, but you have to see things for what they are, and this is one of those things!

Chris sent me an article yesterday, that was quite interesting to me, regarding the euro, and the Eurozone peripheral countries ratings. Here is a snapshot of the article. “Europe's one-time trouble spots are having decidedly better luck this year, if rating agencies are to be believed, with Ireland, Spain, Portugal and Greece all receiving a pat on the back for progress after years of economic woes.

In the most recent upgrade, Standard & Poor's Ratings Services on Friday raised Ireland's rating for the second time in six months, acknowledging growing employment levels and an improving job market.

It's not alone. Spain was upgraded by Moody's Investors Service In February, Fitch in April and S&P in May. Moody's upgraded Portugal in May and in July, while S&P and Fitch have raised their outlooks for Portugal. Greece has been upgraded by all three agencies”.

Chuck again. the lone wolf is Italy, who saw their credit rating cut to just above a junk bond rating.  But the point here, that I hope doesn't get missed is that the Austerity measures are working. Sure, it makes things tough for a while, but in the you get to start over, and not make the same mistakes as before. Hopefully!

So, I received a few emails questioning me about the “financialization” of Oil that I talked about yesterday. I compared it to what was once a dull mortgage bond market, and how the securitization, CDO's, derivatives, (the financialization) of the market, turned it into one of the riskiest asset classes and when the defaults began, it all unwound.  The Oil business has the same kinds of loans for equipment, etc. and those loans have been securitized, and the whole gamut (the financialization) and when the price of Oil falls, the defaults will begin. and then we are in for another round of unwinding and financial mess.  Hope that helps

The Chinese renminbi was allowed to appreciate once again last night, and is now trading below 6.12. I would suspect that just like the trading pattern when the renminbi was dropping below 6.13, it went back and forth around the figure for a few days, before finally moving strongly into the 6.12 handle, the renminbi would be treated to the same trading pattern now that it has moved below 6.12.  Chinese CPI printed last night, and the November CPI saw unexpected weakness, falling to 1.4% from 1.6% in September.  This CPI data has to be a roadblock to any further rate cuts in China.

The Eurozone would die for 1.4% inflation! I got a kick out of the European Central Bank (ECB) Chief Economist, Praet, who at first said the right thing by saying that the “ECB would do what is necessary to meet its mandate of price stability.”, but then followed that with, “the ECB has calculated it needs to return its balance sheet to 2012 levels in order to meet that mandate.”  Well, to tie this all together in a nice, neat bow, you have to remember that in order for the ECB to get its balance sheet to 2012 levels, which would be about 1 Trillion euros higher than it is right now, they would have to implement all-out Quantitative Easing / QE. And QE is NO WAY to provide price stability! He was talking out of both sides of his mouth and the markets didn't know what to think of it, so they have kept the euro flat today.

The euro did have a strong performance yesterday, and has experienced what appears to be a dead cat bounce (no animals were hurt here). And the Dollar Index (DXY) that I talked about yesterday held below 89. Check out yesterday's Pfennig where the DXY and the 89 level are important in the archives at

The Norwegian Central Bank, the Norges Bank, will meet tomorrow, and most likely do the dirty deed. Yes, cut rates. They don't have any other choice given the drop in the Oil price, putting a major dent in their revenue. They have to get the economy going by whatever means necessary, to offset the Oil price drop. And that's not all, if you cut rates tomorrow, you can get two more in the coming months!  Yes, like an infomercial, the Norges Bank will talk about needing more rate hikes in the coming months, so it should be a tough day for the krone. But then, as strange as things have been in the currencies the past few years, something like this might bring about a rally in the krone! I guess we'll have to wait-n-see, eh?

Did you hear about the point, counterpoint in Europe?  It seems that German Chancellor Angela Merkel told a German newspaper, “The E.U. Commission has made clear that what has been put on the table so far is insufficient in France and Italy. I would agree with this.”   So, Merkel isn't happy with France and Italian plans to trim their budgets. And French politician Jean-Luc Melenchon told Merkel: “Shut your trap, Ms. Merkel! France is free!”   Now that's funny stuff, I don't care who you are! HAHAHAHAHAHA!  Using a Larry the Cable Guy line there, one time many years ago, I used that on a guy at EverBank not knowing that he didn't know who Larry the Cable Guy was, and he replied to me, ” What do you mean you don't care who I am? I'm SVP of EverBank!, you need to apologize immediately”   So, after laughing so strongly I almost fell out of my chair, I called him and explained.

The U.S. Data Cupboard is still “wanting” today, but it does have the November Monthly Budget Statement for us. but no one in the markets  really cares the deficits we keep booking. Sure they aren't as large as they once were, as tax revenues pick up the slack, but they are still deficits, and not deficits that we should ignore. For instance, today we're expected a $65 Billion deficit in November. 

And after posting a strong rally yesterday, Gold is down $4 this morning, along with Silver and Platinum, but Palladium has carved out more gains, so bully for Palladium!

For What It's Worth. Well, as promised I have some snippets of an interview that the great economist, John Williams of did with USA Watchdog.  If you want to read the whole article, and I suggest you should, for he says a lot of the things I've been saying for some time, you can read it here:

Otherwise. here are the snippets I promised: “Contrarian economist John Williams, speaking with Greg Hunter's USA Watchdog, echoes these warnings saying that the information being put out by the government is nothing short of complete non-sense. If these officials numbers are true, says Williams, then what we have is the strongest American economy in 11 years.

It doesn't take a PhD in economics to understand this is a complete sham designed to keep stock markets, banks and the U.S. dollar propped up for as long as possible before the whole system comes unhinged.

No one I know thinks we are growing at 3.9% other than they are trying to sell a bill of goods to the markets, specifically the currency markets. This is the strongest economy we have seen in 11 years, and I can tell you Main Street USA is not seeing that. . . . If you understate inflation, which the government does, you overstate inflation adjusted growth, and that is probably the biggest problem in the GDP report.

Right now, we have a big distortion in the market, and that is the strength of the U.S. dollar. I contend the dollar should be getting much weaker, and indeed it's going to turn very sharply very soon, and that will be an approximate trigger for a major upturn in inflation. The reason the dollar is strong right now . . . the U.S. economy is booming, if you believe the statistics.  Main Street USA doesn't believe the statistics.  The rest of the world is in recession, and guess what?  We're in recession too.  We're just not reporting the numbers as accurately as the rest of the world.”

Chuck again. John goes on to say that “people outside the U.S. know America is in trouble, and they know the dollar is in trouble.”  So, this brings us back to the discussion at the top of today's letter. See how I brought it all together in a neat package for you to unwrap today?  I have to slap myself on the back for that one. well played Chuck. Why thank you!  HAHAHAHAHA!

To recap. Chuck starts out with a discussion of the collapse of the dollar. So that sets the tone of today's letter. The U.S. sets a massive spending budget in place for the next 9 months, and Gold shoots for the moon!  The A$ found some wind its sails overnight, and the renminbi posted another appreciation, after inflation data was weak in China. The euro is flat this morning, but the peripheral countries are seeing their credit ratings raised, which is a direct result of them adhering to their austerity measures. And John Williams makes an appearance in the Pfennig today!

Currencies today 12/10/14.. American Style: A$ .8330, kiwi .7715, C$ .8725, euro 1.2370, sterling 1.5680, Swiss $1.0290,   . European Style: rand 11.5090, krone 7.2025, SEK 7.5410, forint 248.40, zloty 3.3645, koruna 22.3140, RUB 54.28, yen 119.30, sing 1.3130, HKD 7.7520, INR 62.01, China 6.1195, pesos 14.42, BRL 2.5990, Dollar Index 88.72, Oil $62.56, 10-year 2.20%, Silver $17.04, Platinum $1,244.50, Palladium $811.75, and Gold. $1,227.37

That's it for today. Well, yesterday was really just a blur for me, as promised once the Pfennig was out the door, I went back to sleep, and didn't wake up until the afternoon.  Alex came home last night with 3 friends, “to study for finals”.  Kathy made them dinner and cookies, and I think they did more eating than studying, but it was good to see him. One of his friends, in the same PT program as Alex, said he wanted to be the PT for the circus when he graduates for a couple of years. I said, I had never known anyone that wanted to be the PT for the circus! Pretty imaginative, but that's youth, right? Well, my fantasy football team didn't make the winner's bracket playoffs, but instead the Sacco bowl (as called by The League), which is for the guys with losing records. You would think that having Aaron Rodgers as your QB would be enough to get you through, but I needed more for sure!  Michael Franti is singing: Say Hey! On the iPod right now, that's a fun song, and you can dance to it, I'll give it an 85. HA!  I saw him open for Carlos Santana a couple of years ago. I remember thinking, OK, you're good, but get it over with, so Carlos can get out here on stage!  The problem of opening for a legend I guess.  Sort of like how I feel when I stand in for Frank Trotter, which I'll be doing at the Orlando Money Show in Feb.  And with that, I'll get out of your hair for today. I hope you have a Wonderful Wednesday!

Chuck Butler
EverBank World Markets