A Bonus Pfennig!
Daily Pfennig

Blog Subscription Form

  • Email Notifications


.........But First, A Word From Our Sponsor..........


The rarity of precious metals helps drive their value and potential significance to your portfolio. But for those not interested in making a mad rush to metals, EverBank has unearthed an exciting and equally rare investment alternative.

With our automatic purchase plan, you can start mining metals at your pace.

?Fund for as little as $100 a month

?Choose from gold, silver and platinum

?Pay no ongoing fees

Available only with the NON-FDIC INSURED Metals Select Unallocated Account1, this is a rare opportunity to strategically utilize dollar cost averaging to grow your metals ownership from one month to the next.

Start mining at your pace today. Learn more and view IMPORTANT DISCLOSURES at https://www.everbank.com/investing/metals/unallocated?referid=11808. Or call 800.926.4922.

EverBank is an Equal Housing Lender

© 2013 EverBank. All rights reserved. 13AGM0003.


In This Issue.

* Currencies have a day in the sun .

* It's a mixed bag for the currencies today.

* Chuck bashes the so-called debt reduction .

* Singapore loses its step for step with renminbi .

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

A Bonus Pfennig!

Good Day! And a Tom Terrific Tuesday to you! Guess what occurred to me this morning when my alarm went off? OK, I know, you'll never guess, so I'll just tell you. It occurred to me at that time, that in past years I did not write on New Year's Eve morning, choosing to sleep in so I could partake in New Year's Eve celebrations. Yes, in past years, yesterday's letter was the last one of the year. So, for your loyalty in reading the Pfennig, I present you with the BONUS Edition of the Pfennig!

Yes, the poor blokes like me, that work on New Year's Eve day. HAHAHAHAHAHA! I had a boss years ago, that would have said, "Quit your complaining, you're lucky to have a job!" A real charmer he wasn't! But in the old days, when I ran the operations of a bond division, I HAD to be at work on the last day of the year, so I guess that just carries over..

And no, I'm not going to carry on about this silly stuff throughout the letter! But, there's really not much going on to talk about, so maybe I'll just make this a question and answer Pfennig. No, wait Chuck, you need to have people asking questions for that to happen! Doh! Alrighty then, let's get you back to your regularly scheduled programming.

The currencies enjoyed a day in the sun yesterday with just about all registering gains of some measure against the dollar. The Big Winner on the day was the euro. (more on that in a minute) and the Big loser was Gold. As I turn on the screens this morning I can see that one day in the sun is all that was allowed for the currencies, as they have given back some of those gains. That's a broad statement, because when you drill down you see that the Aussie dollar (A$), kiwi, British pound sterling, Singapore dollar (S$) and a couple of others are booking gains VS the dollar this morning. It will be a range trading day for the currencies, folks, as there just aren't enough "players" in the game today.

Yesterday, I sat at my desk watching the euro go higher and higher, first flirting with 1.38, then going through 1.38 and continuing to push the currency gain envelope. I stood up so that everyone could hear me, and said, "Ah, look at the euro back to 1.38, you can kick it, but you can't keep it down". Remember, that at the beginning of November, the euro was trading over 1.38 and looking as if it was on a one-way trip to currency nirvana, but Mario Draghi had different ideas, and announced a rate cut when your Pfennig scribe didn't think it to be possible, or even reasonable that you cut rates when they're already so low you could step over them without a hitch in your giddyup.

And before you could say, "That darn Draghi" the euro dropped 3-cents, and now looked as though it would continue to lose ground VS the dollar. But here we are 2 months later, and the euro is back to 1.38! And once again it appears to be ready to move higher. Remember, a few weeks ago, I gave you my thoughts on why I believed the euro would reach 1.50 in 2014.

The boys and girls over at Barclays, don't agree with me on that. They believe that 2014 will be the year of the U.S. dollar. They truly believe that even though the Fed has stated that mid-2015 is their target date to hike rates here in the U.S., that rate hike expectations will be enough to help the dollar to move higher in 2014. They figure that when the Fed follows through on their tapering month after month, that the markets will begin to put pressure on the Fed to hike rates, and even IF there is no rate hike from the Fed, the expectations should be enough to attract investors to the dollar.

Well, you know me, and you know that I won't go along with that scenario. Yes, IF that were the case, you could certainly see dollar strength, but that's a BIG IF! And instead of saying "when the Fed Follows through." They should say, "IF the Fed follows through." Then their recommendation wouldn't have any foundation to speak of. And of course that's just my opinion, and I could be wrong!

So, let me state once again where I stand on this stuff, right here, right now on the last day of 2013. The Fed has announced that a tapering of $10 Billion to their now $85 Billion in bond purchases every month. It is my contention that while the Fed may carry through with one, two or maybe even three more cuts in their bond purchases each month, that they will eventually realize what they should have known from the beginning, that the U.S. economy has become addicted to stimulus, and it cannot stand on its own two legs for long. When the Fed Heads finally come to the realization of what I'm telling them now, and have told them for months on end, they will stop the reductions, and if things are as bad as I think they will be, then the Fed Heads will have to step back to the bond purchase table. And that won't be pretty for the economy, the dollar, or the Fed.

So, getting back to the euro. The single unit has seen some profit taking overnight, and slipped back below 1.38, so it's right back to where it was yesterday morning. UGH! But like I said, range trading is the call to order today, and maybe the rest of the week, after we come back from the New Year's Day holiday, for many of the top traders won't be back until next Monday, Jan. 6.

Well, a quick look around the world, and I see that Singapore announced that their economy stepped up the pace in 2013, finishing the year with a 3.7% growth rate. The Singapore Gov't had placed a target of 3.5% to 4% for economic growth this year, so looky there! The 3.7% came right smack dab in the middle of the target range. Funny how that happened, eh? Oh, I'm not saying that Singapore cooks their books. I'm actually saying" Funny how that happened!"

The Singapore dollar (S$) finally saw some love overnight, from this report, after spending the last 3 trading days on the red side of the ledger. The S$ is one of my fave currencies because of the way the Monetary Authority of Singapore (MAS) uses currency strength to fight inflation instead of arbitrarily hiking and cutting interest rates. But the S$ has lost about 3.4% to the dollar this year, which is strange in the fact that the Chinese renminbi / yuan has gained about 3% this year. These two currencies have been "linked" together currency trading-wise since the Chinese dropped the peg to the dollar in July of 2005.

So, while I expect the renminbi / yuan to continue to gain VS the dollar, as the Chinese continue their march toward convertibility, and a wide distribution of their currency, I would think the S$ would begin to "catch up" and not ketchup. "catch up"! HA!

Speaking of China. I came across some data yesterday that you don't see every day. In fact, this was the first time, ever, that the Chinese printed their Gov't Debt totals. So, here's the skinny on the Chinese Debt announcement.. China's National Audit Office (NAO) announced this afternoon that China's total government debt (including both central and local governments) amounted to RMB20.7trn as of this June, equivalent to 40% of China's GDP. However, including contingent liabilities, China's total government debt would exceed RMB30trn, or equivalent to 50-55% of China's GDP.

Two things to think about with this first time announcement. China's debt is not a problem. On the Pfennig blog site: www.dailypfennig.com I have a chart of the total Gov't obligations as a percentage of GDP at the top, and the Gov't debt is there as a component, so you can refer back to that now. But for the tried and true text readers only of the Pfennig, you'll have to take my word on this, that China's Debt would be so far to the left as you look at the chart that they wouldn't even register.

And second. remember,,, China holds a Treasure Chest of reserves, that's greater than $2 Trillion worth. enough said!

At this time I think it would be apropos to mention that according to the Congressional Budget Office (CBO) The Bipartisan Budget Act of 2013, you know the one I made fun of a couple weeks ago, said that they estimated that the debt reduction that they had achieved was $23 Billion over the next decade.. OK. Let's put this in perspective. The CBO estimates that our national debt will increase by $6.34 Trillion over the next decade. So, the $23 Billion in reduction, which was ballyhooed by the Gov't and media, is are you ready for this? Drum roll please! .. The $23 Billion will reduce our estimated growth in debt by 0.00363, or 1/3 of 1%...

So, why the parades and confetti for this deal? As I said in my Sunday Pfennig last week, it doesn't amount to a small hill of beans! I shake my head in disgust over how the media drank the Kool-Aid and tried to pass it around to us! I have to thank my friend Dennis Miller for sending along this ditty to me in a report that a CPA does called "by the numbers".

Well, as I said above, Gold couldn't find a bid yesterday, and lost ground once again, falling below $1,200 overnight, but has gained the figure back in early morning trading. 2013 wasn't a good year for Gold, as it suffered through its worse year in the past 30 years. I saw a quote by a trader at Saxo Bank, who correctly predicted, last year, that Gold would finish 2013 at $1,200.. Well, he is now saying that Gold prices may have already bottomed out. So, maybe he got lucky with the onetime forecast for Gold. Let's hope his forecast for the price of Gold is as good as Gold!

Yesterday I told you that we would see some Existing Home Sales data from the data cupboard, and thought that the markets would fail to notice the data, which is exactly what happened, as Existing Home Sales, for the fifth consecutive month, missed expectations. Year to year Home sales dropped 4%, its worst drop since 2011. Of course the spin doctors took this data and spun it to tell you a different story. "Although the final months of 2013 are finishing on a soft note, the year as a whole will end with the best sales total in seven years". said, the chief economist for the NAR.

Apparently, the chief economist is having a problem seeing a new trend!

For What It's Worth. I found this story on Google+, and it's by Koos Jansen, who had a website called: In Gold We Trust. This guy is very well respected folks, and does a lot of work for the folks at GATA. the title says it all. "China Accumulates Gold For The World Dream".

At the 2013 World Gold Markets Trend Conference, China's director of the Chinese Gold Market Research Center, Zu He Liang, spoke about what he sees for Gold in 2014. Let's listen in to what Mr. Zu had to say.

"Due to the fact that entire world is paying close attention to the price of gold shows that we are all pursuing a "World Dream". The "World Dream" is nothing but a pursuit for world peace, the healthy and stable development of the world's economy, and a world which is fair to every country and its citizens. The pursuit for gold reflects mankind's pursuit for the "World Dream". Gold represents mankind's yearning and aspirations for stability, and healthy economic development; it is a wonderful wish."

Chuck again. OK. Two things. 1. I love Google+! And 2. What a great speech, and one in which I'm sure if you read between the lines says, we won't achieve this without a Gold standard for money. For I'm sure he could point to the 100 years in which there was a Gold standard, and the world economy was quite stable, there was no inflation, and every country that participated in it benefitted from the Gold standard.

To recap. The currencies had a day in the sun yesterday, but it's a mixed bag of performances this morning. The euro traded over 1.38 yesterday, but profit taking has it back below that figure this morning. Chuck carries on and on about working on New Year's Eve, what a Doug Whiner! HA! We talk about the so-called debt reduction in the budget deal, and how Singapore has lost its step for step move with renminbi in 2013, and in Chuck's eye has some catching up to do!

Currencies today 12/31/13. American Style: A$ .8935, kiwi .8220, C$ .9405, euro 1.3775, sterling 1.6540, Swiss $1.1225, . European Style: rand 10.5360, krone 6.0760, SEK 6.4145, forint 215.60, zloty 3.0145, koruna 19.89, RUB 32.85, yen 105.00, sing 1.2635, HKD 7.7540, INR 61.79, China 6.0969, pesos 13.08, BRL 2.3605, Dollar Index 80.06, Oil $98.86, 10-year 2.99%, Silver $19.44, Platinum $1,357.50, Palladium $711.90, and Gold. $1,201.50

That's it for today. and this year! I guess we need to sing now. Ahem. as I clear my voice.

Should auld acquaintance be forgot,

And never brought to mind?

Should auld acquaintance be forgot,

And days o' lang syne!


For auld lang syne, my dear

For auld lang syne,

We'll take a cup o' kindness yet

For auld lang syne!

OK. for those wondering just what the heck that song is all about. According to Scotland.org, "Auld Lang Syne is one of Scotland's gifts to the world, recalling the love and kindness of days gone by, but in the communion of taking our neighbors' hands, it also gives us a sense of belonging and fellowship to take into the future."

OK, why didn't they just say that! HA! Well, the Winter Olympics are coming up in February, I think those winter sports guys are pretty crazy. Hockey, I get. jumping off a ski ramp that's 100's of feet in the air, I don't get. and so on. But I'll be watching it! Those athletes amaze me! So. whatever you do tonight, be careful! Don't drink and drive. And make sure you find your honey and give them a big hug and kiss at midnight! See you next year!

Chuck Butler
EverBank World Markets

Posted 12-31-2013 11:24 AM by Chuck Butler
Filed under: ,