What Will NY Traders Think Of Currency / Metals Rally?
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In This Issue.

* Currency / metals trade flat.

* Yen halts slide. for now.

* Foreign Investors flock to China.

* Frank on the Fiscal Cliff.

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

What Will NY Traders Think Of Currency / Metals Rally?

Good day. And a Marvelous Monday to you! I hope your Thanksgiving Day and weekend was grand. We began decorating the house inside and outside. I just love it this time of year, when the houses all get decorated, and lit up. The markets were open on Friday, and last night, so it's back to business as usual this week. Did you see the highlights of the football game in Miami yesterday? The water sprinklers started a cycle right in the middle of the game! Instead of having a play of the game, they had a "spray of the game". HAHAHAHAHAHA!

Well. The currencies and metals had a field day on Thursday in the foreign markets. It became very clear to me that the foreign traders are all about taking the dollar lower when there is no fear of a U.S. reversal. It also has become very clear to me that the U.S. market participants are fighting Big Ben Bernanke and the Fed Heads every step of the way. How so? Ahhh grasshopper. We should know by now that The Fed is in on the Gov't's wish to have a cheaper dollar in order to pay debts with cheaper dollars, and that's why they've carried out 3 rounds of Quantitative Easing (QE), one round of Operation Twist, have kept interest rates near zero for a very long time, and have stated that they will remain there for some time to come.. All these things have been done to weaken the dollar, but. the U.S. market participants (not me!) aren't letting that happen. Well, they've allowed a lot of it to happen the past 11 years, but. there's more work to be done. Just get a Fed Head on the Butler patio, and we'll get the truth! Oh, and I can. handle the truth!

So, the currencies and metals rallied on Thursday in the foreign markets and then attempted to hold on in Friday's sessions. Here in the U.S. on Friday, the senior traders all took the day off to make it a 4-day weekend in the Hamptons, and the junior boys and girls were left to trade, which meant "don't screw anything up!" And they didn't. there was some profit taking that happened, but other than that, the volume was Olive Oyl thin.

The overnight markets of Asia and Europe haven't really had any direction, as they all wait to see what their U.S. counterparts think about this currency and metals rally. If anything, the currencies and metals are weaker by a small margin this morning. For instance, Gold is down $4, as I write, and the euro is flat.. I'm actually a little surprised that the euro is flat and not getting hammered this morning, given the goings on with Greece this past weekend.

On Friday, it appeared that there would be an agreement on the measures of the latest bailout payment to Greece. But then this past weekend there was a story in the press regarding a Greek deal that didn't sound so much like a "given".. compared to what was being said on Friday. Putting uncertainty right smack dab in the middle of this trading session. And we should all know by now that the markets don't like "uncertainty". But. as I said, so far this morning, the euro has shrugged off this news and is trading flat on the day.

The Japanese yen halted it slide the past two trading sessions. I'm actually surprised a bit, for it looked as though the yen was ready for a nice long ride on the slippery slope. And it still is headed in that direction, but has paused for the cause. That's a good thing for investors looking for an exit door with yen. At least the exit doors haven't gotten overcrowded yet. But seeing the latest minutes by the Bank of Japan (BOJ) could send the crowds in that direction. The new members of the BOJ sounded very dovish, and proposed the wording changed in their statement, to reflect their dovish position. I don't know how the BOJ could make their current easing measures any more accommodating. But apparently the new members of the BOJ think so..

Well.. I've been telling you about the economic recovery in China for some time now. so I liked seeing a story on Reuters this past weekend about how foreign investors are flocking back to the Chinese economy and markets. They have pumped $4 Billion into Chinese equity funds in the past two months. The article quoted a few investment analysts who believe that China is a better value right now than it was 5 years ago, and undervalued VS the rest of Asia. Don't look at me and be confused. I told you China would recover faster than everyone else, because they had a treasure chest of reserves and the ability to direct where those funds for recovery would be spent. And that's exactly what's going on here.

The currency rally of late last week, pushed the Aussie dollar (A$) back above $1.04. this currency has gone back and forth through the $1.04 handle for a couple of months now. And Let me remind you that I told you that $1.04 seems to me to be a good value for the A$... There's not much in the way of data expected from Australia this week, except one report later in the week, so the A$ will struggle to hold on to $1.04.

In fact, I would think that the Thanksgiving Day rally in the currencies and metals will be on tenterhooks this week. Remember, the Fiscal Cliff is closer to us by one week, and there's been no word from D.C. of a deal to avert the Fiscal Cliff. Remember, what I told you about the Fiscal Cliff. that the markets are scared to death that it will bring about major problems for the U.S. economy and there could very well be a repeat of 2008, where investors flock to the so-called safe havens of dollars and Treasuries.

Two currencies that have been on my hit parade for some time now. Norwegian krone and Swedish krona continue to be tarred with the same brush as the euro. I'm concerned about the next Riksbank (Sweden) meeting in December, where I'm pretty sure we'll see another rate cut. And therefore, right now, I prefer Norway over Sweden. But, to me that's like saying I prefer one thing over another, but still like both! Sort of like me preferring one Beatles song over another.

I was reading an article by Vedran Vuk, who's taken the conn of David Galland's weekly letter while David relocates his family. Vedran is a smart cookie folks. and he had this title to his article, which I thought was very clever. "Even if Gold is Stupid, It's Still Smart". And then he goes about explaining how it's to everyone's preferences, and who's to judge the preferences of others? I liked his article very much, because it helps explain why there still millions of investors that don't own Gold.

Speaking of Gold. At $1,751, which is where it's trading right now as I write, it looks very expensive. But if you ask the 20 or so Gold analysts that write about Gold, the large majority of them would tell you that Gold is cheap compared to where they see it going. I don't know if Gold is going as high as some of the analysts say it will go. But, what I do know is that Gold is a store of value. I don't get all caught up in the price of Gold, except when the price manipulators take it down. I like it for its store of value and wealth.

The U.S. data cupboard gets caught up this week, and will have a truck-load of data to look starting today with some minor reports but heating up tomorrow . So, with no data anywhere today, it will be interesting to see how the senior traders here in the U.S. view the currency and metals rally from last week.

Then There Was This. I was delighted to see an email from my long time friend, and Big Boss, Frank Trotter yesterday. I told you that he's an excellent writer, and here's a treat for us. Frank's thoughts. "As both the fiscal cliff of legislation approaches and just the reality that fiscal policy needs to be dealt with, another potential is starting to creep out of hiding. We have long said that politicians have three alternatives when it comes to fiscal policy: 1) Cut spending and be run out of office; 2) raise taxes and be run out of office, or; 3) keep on the same pathway and plan to debase the currency so that debts can be paid back with money that has less purchasing power. Smart politicians have for many years selected door #3 creating the situation we have before us today. Now #4 may come into play.

One solution for national politicians has been used before but certainly has the potential to become the primary tool. Maintain current revenue policy and push the spending programs back onto state, provincial, and local governments. Hard liners on both sides can claim victory: no increase in taxes as and the deficit shrinks, no loss in benefits sustaining promises made. Instead of kicking the can down the road we'll see hot potato on rocket fuel. We'll see how this plays out but watch out for the shifting shell game." - Frank Trotter

Chuck again. I love it when Frank sends me notes for the Pfennig!

To recap. The currencies and metals rallied hard late last week, with the U.S. senior traders all out for a 4-day weekend. It will be interesting to see how the NY traders want to take this rally. The currencies and metals have drifted a little weaker overnight, as they wait to see the outcome too! The Japanese yen halted its ride on the slippery slope, but for how long? And foreign investors are flocking back to the Chinese economy and markets.

Currencies today 11/26/12. American Style: A$ $1.0440, kiwi .82.10, C$ $1.0065, euro 1.2960, sterling 1.60, Swiss $1.0760, . European Style: rand 8.8770, krone 5.6675, SEK 6.6330, forint 217.40, zloty 3.1710, koruna 19.51, RUB 31.01, yen 81.05, sing 1.2250, HKD 7.75, INR 55.72, China 6.2250, pesos 12.98, BRL 2.0775, Dollar Index 80.23, Oil $88, 10-year 1.66%, Silver $34.19, and Gold. $1, 751.00

That's it for today. Well. did you hear that J.R. Ewing died? Yes, Larry Hagman died this past weekend. Wasn't J.R. Ewing the guy you dislike, unless he's on your team? You bet! I remember a group of friends would all get together on Friday nights to watch Dallas. Pretty funny thinking about that now. Well, my beloved Missouri Tigers football team unmercifully ended their season on Saturday. I think the coach lost his team this year, as they appeared to be going through motions on Saturday. At least the basketball team is off to a good start! And I'm going crazy not seeing hockey on the TV. That's a shame that hockey will lose a ton of fans this year, just like they did the last time their season was wiped out by owner/ labor problems. Oh well, as someone that I love dearly says. "it's only a game". And thanks to Jerry, Alex and Kathy for a great job on getting the lights on the house yesterday! And with that. I thank you for reading the Pfennig, and hope you have a Marvelous Monday!

Chuck Butler


EverBank World Markets



Posted 11-26-2012 11:50 AM by Chuck Butler
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