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In This Issue.

* Euro breaks range to the downside.

* Moodys warns the Eurozone.

* Comparing the U.S. & Eurozone debts.

* The Treasury Bubble.

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

Waiting For Downgrades.

Good day. And a Marvelous Monday to you! It's beginning to look a lot like Christmas. The houses are all decorated, and that sparkle in the faces of people like me that simply love this time of year is really showing. The gift that keeps giving for the Eurozone, their sovereign debt problem, continues to cause problems for the risk markets. and that's where we'll start today.

But first, I want to say that today's letter is going to ask you to check out a couple of links, one to an article that my friend, David Galland wrote this past weekend, and second to a short video on Silver. By all means I don't demand you check these things out, but when we get right down to the heart of the matter, this letter is not just about reporting prices and trends. It's about making you think, so you can make better informed investment decisions.

So, right out of the starters blocks this morning, the euro has broken through that trading range it held last week (1.3350 - 1.3450), to the downside, as the ratings agency Moodys warned the Eurozone that it will begin to review each member. I told you on Friday, that I didn't believe that the Eurozone leaders had done enough to satisfy the ratings agencies. And this is the first step of downgrades all across the board in the Eurozone. And most likely a double notch downgrade for France.

While the ratings agencies are at it. they could take a look over here at the U.S. and ask the question of: Where's the $1.2 Trillion in automatic cuts to discretionary spending? Because, as I've point out before. The Eurozone as a whole, and the U.S. both generate about 20% each to global GDP. So. if the Eurozone, which is at least addressing the matter, albeit too late, is getting downgraded, why isn't the Eurozone's kissin' cousin the U.S.? The U.S. debt is worse than what's going on in Europe folks. but don't let that get in the way of a media fire storm to point all the focus on the Eurozone.

So. I'm not saying that the Eurozone shouldn't be downgraded. they made their bed, now they have to lay in it. All I'm saying, is if the Eurozone's debt scares the rating agencies, then they should be frightened out of their skin by the U.S's debt.

You do realize that our debt is now greater than the GDP of the country? Our debt is greater than $15 Trillion, and our annual GDP is about $14.5 Trillion. And, the question I have for the ratings agencies is this. When will you make the U.S. address this, and not the way they have proposed to do it? Don't know what I'm talking about? Well. you know that $1.2 Trillion in discretionary spending that's supposed to get cut? It's all back end loaded, and. here's the big thing. it doesn't really "cut" spending. it cuts the proposed increases to spending! So, the U.S. is saying, in 10-years we'll not add to our spending as much each year. That's not cutting the spending folks.

But then. in I personally doubt we, as a country ever get to 10 years going status quo. In other words. the you know what will hit the fan on U.S. debt issuance long before we get to 2021. I've written about this several times in the past, and even did a video on it over a year ago, for the Sovereign Society, regarding the bursting of the U.S. Treasury Bubble. It's all tied to when the foreign creditors say, "no mas" on buying our debt.

I actually read this weekend that the credit guru, Martin Weiss, is now saying the same thing. Talk about being surprised as to who has now jumped on my bandwagon! Mr. Weiss believes this "event" could happen soon.

As soon as this week's auction of $78 Billion of Treasuries? Probably not. but each auction adds to the weight of debt issues already in the hands of foreigners. One can never tell which auction is going to be the one that breaks the backs of foreign buyers, but it's coming.

So. here we are on December 12, 2011. and the two largest economies in the world, have debt up to their eyeballs. Where does someone that has money that they just don't want to have sitting around earning next to nothing do in each of these countries? Well. like I tell people whenever I speak in public. I would tell the people of any country I was in. If I was in Canada, Switzerland, the U.K., Australia, Singapore, it doesn't matter. for I would tell the people in each of those countries the same thing. do not hold 100% of your investment portfolio in your base currency. You should diversify using currencies of other countries and precious metals.

And that leads me to. precious metals. I see that Gold is down below $1,700 this morning. it just doesn't make any sense to me. on a fundamentals basis, Gold should be trading greater than $2,000. The price manipulators continue to throw a spanner in Gold's climb to $2,000. But, I truly believe that the price manipulators can be used to our advantage, for every time they drive the price of Gold & Silver down, they provide us with buying opportunities!

Demand for the precious metals continue to climb higher, and another thing I tell people when I'm out on the road, and talking about metals is this. Demand remains strong for the metals, and supply continues to slow, which is a problem, because miners can't just go into a cave and flip a switch and have Gold & Silver appear!

Here's a video on Silver supply with some very good facts for you to consider. Again, this should just be one of the things that you use to make an informed investment decision.


So. I guess I don't have to tell you that with the euro getting hammered this morning that all the other currencies, save the Chinese renminbi, are getting sold too. But there! I told you anyway!

Speaking of the Chinese renminbi, which happens to be the only currency gaining VS the dollar this morning, it looks like the Chinese Gov't is back to allowing appreciation again. It took them longer than normal, to come around and begin the appreciation of the renminbi again. You know. I never, ever, say that an asset is a "one-way street". And the renminbi is probably the best illustration of that, for all things considered, a person might think that the renminbi is a one-way street to greater appreciation. But, that isn't the case. from August 2008 to June 2010, the currency held steady Eddie, and was not allowed to appreciate. In June of 2010, the Chinese Gov't issued a communiqué that called for a faster appreciation of the renminbi. Since June 2010 to today the renminbi has gained almost 7%... But there have been periods of weakness and non-movement, like we recently experienced. So, while the renminbi may look like a one-way street, it's NOT! Should the appreciation continue? Probably, as long as Asia's domestic demand remains unaffected by the slowdown in Europe and the U.S.

The data cupboard here in the U.S. is pretty barren today, with only the Monthly Budget Deficit expected to print. However, some months, this data is held up by someone or something. Nevertheless, the Budget Deficit for November is expected to be around $140 Billion.

Tomorrow, we'll see the color of the latest Retail Sales for November. I have to say that this time of year, I see tons of packages being delivered to our house, so. the Butler Household Index (The BHI) tells me that Retail Sales will be strong for November.

And don't forget the FOMC meeting that will take place tomorrow! Geez Louise, how could I almost forget about the FOMC? Just because I would like TO forget them, doesn't mean I can forget them! This meeting will be a non-event folks. But, as always, it will be interesting to see / hear what Big Ben Bernanke has to say. Not that I find what he has to say interesting! But the markets seem to think it to be important, so since I'm in "the markets" I play along.

The Swiss National Bank (SNB) meets this week. remember, they want to implement negative interest rates on deposits. And The Eurozone will see their up-to-date PMI's (manufacturing index reports), which should show more weakness.

So. besides waiting for the ratings agencies to downgrade the Eurozone members. There's not much on our plates this morning and this week, my last week of work this year!

And that gives me an opportunity to talk about my friend, David Galland. David is THE Best writer in the markets, but if he decided to do novels he would be the best at that too! David writes a weekly letter about "stuff" . Sometimes it's the markets, sometimes it's about things that we deal with everyday. He makes people think, something that I hope I've learned from him.

So. this week, David is talking about the ever expanding Gov't and what he thinks is going on. you can read his letter here: http://www.caseyresearch.com/cdd/man-vs-morlock

But. you should sign up for the letter while you're there!

Then there was this. Well. David's letter this week he uses a lengthy excerpt from a book written in 1955 by Milton Mayer, a reporter who studied the lives and attitudes of ordinary Germans leading up to and through the Hitler regime.

I read the article and kept coming back to this paragraph because, this reminds me of my fight against deficit spending and the growing debt that I began many years ago, and people would look at me like was crazy... I knew the "end" and was trying to alert people of the beginning...

"And you are an alarmist. You are saying that this must lead to this, and you can't prove it. These are the beginnings, yes; but how do you know for sure when you don't know the end, and how do you know, or even surmise, the end? On the one hand, your enemies, the law, the regime, the Party, intimidate you. On the other, your colleagues pooh-pooh you as pessimistic or even neurotic. You are left with your close friends, who are, naturally, people who have always thought as you have."

Chuck again. yes. but my "close friends", who think like me, continues to grow. As I said in San Francisco a couple of months ago, in 2001, I spoke in a room that was empty except for our family members that came to listen. These days, they don't have enough seats in the rooms they have me speak in. And Pfennig readers. the numbers continue to grow. and this is organic growth folks. I have never gone out and "bought a list of names" . The Pfennig is: by word of mouth. and for that. I thank you, dear readers!

To recap. The euro has finally trades outside the range it held last week, to the downside though, as Moodys sent out a warning that they will review each Eurozone member for a possible downgrade. We're still waiting for S&P to announce their downgrades, as the Eurozone leaders didn't do enough to satisfy the ratings agency. With the euro getting hammered this morning, the rest of the currencies, save the renminbi, are also weaker. Gold is down $30 this morning, and providing us a cheaper level to buy for sure!

Currencies today 12/12/11. American Style: A$ 1.0115, kiwi .7670, C$ .9765, euro 1.3265, sterling 1.5625, Swiss $1.0750, . European Style: rand 8.2350, krone 5.81, SEK 6.8175, forint 230, zloty 3.4220, koruna 19.2665, RUB 31.56, yen 77.80, sing 1.2975, HKD 7.78, INR 52.83, China 6.3606, pesos 13.75, BRL 1.8180, Dollar Index 79.21, Oil $98.14, 10-year 2.02%, Silver $31.28, and Gold. $1,680.10

That's it for today. A pretty laid back weekend for yours truly. That was the calm before the storm though, as this weekend will be jam packed with fun, and the following weekend is Christmas! Friday is my annual "shopping day" with my friends. We've done this for about 15 years now. Next Saturday, my long time friend, and colleague, Jennifer, will celebrate her birthday, and then Ty Keough will also celebrate a birthday. I'll be gone, so I wish them a Happy Birthday now. I was released by the radiation doctor on Friday. So, now I go back to the oncologist for the next phase. and with that. I'll end this, and get it out the door. Don't forget though. that the prettiest sight to see, is the Carol that you sing, right within your heart.

I hope you have a Marvelous Monday!

Chuck Butler


EverBank World Markets



Posted 12-12-2011 11:46 AM by Chuck Butler