Surprise! (NOT!) Japan Reenters A Recession.
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In This Issue.

* U.S. Retail Sales disappoint, reversing dollar trade.

* Sydney Australia is named a renminbi hub!

* WGC says India is #1 Gold Consumer again.

* U.S. Data Cupboard returns this week!

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

Surprise! (NOT!) Japan Reenters A Recession.

Good Day!... And a Marvelous Monday to you! Man is it cold out there! And the walk across the wind-tunnel bridge was nasty this morning! When it's cold outside, I'm glad the office is hot and stuffy on Monday mornings! Big wins this weekend from my beloved Tigers, the Rams and the Blues! Our sports teams were on top of their games this past weekend, which was not only fun to watch, but much needed considering their yo-yo performances so far this year (not the Blues!, they're kicking tail and taking names later so far this year!) I spent the weekend, watching games, and reading, so I'm ready for today. Of course I don't really thing most of what I read, I can talk about, given all the accusations and finger pointing that was written!

Well, good morning, and welcome to another edition of a Pfennig For Your Thoughts. Last week was the week with little to no U.S. data, and this week will be the opposite, with the FOMC's latest Meeting Minutes printing on Wednesday holding court for the markets as the best market moving data. And it's not really data, per se, but it will be words, that the markets are looking for, like talk that the words, "considerable time" should be removed, and just a look-see who is voting with Fed Chair Janet Yellen, and who is voting against her decision to keep rates near zero. So, more on the data this week later in the letter, as usual.

Last Friday, we had the dollar in the early morning trading with a stronger tone that it has been trading with all week, pushing the currencies and metals down on the day. But that was before Rocktober Retail Sales printed. The U.S. Retail Sales disappointed, just like I said they would. (the BHI told me!) Now, don't get me wrong, they weren't negative as they were in September, they actually grew at .3%, but that was below expectations, and I think by now we all know it's all about reality VS expectations these days.

Well it's not that the print was so bad, it really wasn't, just disappointing, as September's print was -.3%, so for the last two months U.S. Retail Sales have been running in place, and that got the rate hike campers to back off, and give way to the rates aren't going to rise anytime soon campers, and when that happened, the dollar got sold. The currencies all turned around and booked gains on the day, with the biggest turn-around in Gold, which at one point in the early morning was down $14, and but then turned-around to gain $12 on the day.

Well, aren't you breathing easier this morning? Yes, Chicken Little has gone home, and the monetary system that's currently in place was not pronounced dead in Brisbane, Australia at the G20 meeting this past weekend, as was being touted by the guy that called for it last week. Recall, I gave you the link to the story and said, "take with a grain of sand". Of course, just because it didn't happen this past weekend, doesn't mean we won't eventually see this happen. But if it does come about, we'll have much more warning than some guy that we've never heard of, crying wolf, a week before the suspected event.

I saw a headline story on the Bloomberg flash across the screen this morning, and it was titled: Gold trades below two-week high amid signs of physical buying. Geez Louise, that's been Gold's MO for the past 3 years! The Physical buying just can't seem to get Gold past the short paper trades. Our metals Guru, Tim Smith, gave an update on the Swiss Gold Referendum in the Sunday Pfennig, to which a few replied with a question, regarding Tim's assessment that the Gold price could get a boost from a passing of the referendum. "why would this push Gold higher, if all the buying of Physical Gold from China and Russia hasn't".

Good question. You see, it's all about "knowing". Right now, the markets have no idea when, if and with how much money the Chinese and Russians are going to come into the markets, and you have to believe that they only do it when the paper trades take the price of Gold lower, thus putting a current floor under the shiny metal. But.. IF, and it's a BIG IF the Swiss pass the Gold Referendum, the markets will "know" that Switzerland will have to buy about 1,700 tonnes of physical metal, which happens to be about the total annual Global production. So. "knowing" the Swiss have to buy, is a far different animal to the markets than having the Chinese come in the back door, stealth-like, back up the truck and then take off in the dark of the night. That's my story and I'm sticking to it! Hope it helps!

So, Gold is flat this morning, but with a bias to sell, at this point of the morning. Which continues to be puzzling to me, given the news this weekend that Japan had slipped back into a recession. Hmmm, imagine that! Japan, you know, the country that keeps pulling the printing press for yen out from the back room, for 2 decades now, can't seem to get the economy to take off. The country that has the largest Gov't debt ever, can't seem to get their economy to take off. And the country that has a deflationary economy for two decades now, and then saw a huge tax hike, with another rumored on the way, can't seem to get their economy to take off.

I saw an article this past weekend that I can talk about from Craig Paul Roberts, who I've quoted in these letters before. Well, Mr. Roberts believes that the Japanese are doing all these dastardly things to their currency, to save the dollar, as the U.S. request. WOW! Now that's a different view, eh? Yes, Mr. Roberts believes that the U.S. has requested Japan to have the yen fall on a sword to prop up the dollar. I guess turning a blind eye toward the price manipulation of Gold so that people don't turn to Gold instead of dollars, wasn't enough according to Paul Craig Roberts.

I know, I know that sure seems farfetched, but I'm kind of mind to believe it. But then you know me, Mr. Conspiracy!

The boys and girls over at Westpac Banking Corp. (Westpac) issued a report that makes a lot of sense to me, as they say that the long dollar position has become "crowded", and those hedge funds and other large speculators are looking at this as an opportunity to sell. Hmmm. That's interesting don't you think? Let's listen in to a currency strategist at Westpac, Sean Callow. "The failure of U.S. economic data to translate into higher U.S. yields does seem to be really putting a squeeze on long dollar positions VS a range of currencies."

Interesting way to look at it. And you know me, I love to read about interesting ways to look at things!

Well, last week, I told you that I expected a Big announcement from Chinese President, Xi, at the G20 meeting. And that's what we got! A Big announcement from Xi, that China was awarding Sydney Australia, a renminbi trading center. A hub, if you will. Now this one makes so much sense, you would wonder what too them so long to announce it? The amount of trade that goes back and forth between Australia and China, albeit slower now, is HUGE, and now having a bank in Australia where depositors will have the ability to exchange Aussie dollars (A$) directly into renminbi / yuan, will help trade even more!

China is Australia's biggest trading partner, as they are responsible for over $256 Billion of imports and buying more than 35% of its exports last year. China also announced that Australia will be granted 50 Billion renminbi / yuan or $8.2 Billion dollars, under the RMB Qualified Foreign Institutional Investor program. China continues to spread its wings folks, are you on board yet? Are you still skeptical that China can pull this change of the dollar reserve status off? Well. even if you are still skeptical, wouldn't it make sense to just take a flyer on renminbi just "in case"? I'm just saying.

The Russian ruble continues to receive its daily whacking, no matter what the Central Bank of Russia (CBR) does to relieve pressure on the currency. Large rate hikes, dropping the trading band for the currency, hasn't helped. Russia has what most countries want, a weak currency through no monetary or fiscal fiasco. I can see Japan and Eurozone leaders cornering Russia at the G20, and asking Russia, How are you doing this? We've had to put our futures on the chopping blocks and print money until the cows come home to get our currencies weaker, and invite inflation into our country, and it's like pulling teeth!

Of course Russia would only have to tell them simply, have your tanks infiltrate a sovereign country's soil. I don't mean to make light of that, but given all the fundamentals of Russia, that has been its problem, for the aggression has brought about sanctions that have crippled the Russian economy. And thus the weak currency.

Well, I saw the euro weaker this morning when I first turned on the screens, then I saw it rise to 1.25, then fall back. The single unit was higher than 1.25 overnight, trading up to 1.2525. The trading pattern of currencies receiving love in the overnight markets and getting whacked in the U.S. markets might be returning. At least we knew what was going on then, eh? Wink, wink.

Well, if the plunging Oil price is doing any good, it sure is empowering consumers, eh? And not just consumers here in the U.S. but also in faraway places such as India. India's Current Account Deficit has been narrowing, and allowing India to return to buying Gold by the boatload. And according to the World Gold Council (WGC) India has returned to its old stomping grounds, as "India is back to being the world's top Gold consumer". Now that was going to take a lot to move past China, and quite frankly I have a difficult time believing that India did just that, but the idea that India is back to buying boatloads of Gold is good news for Gold. At least it looks that way to me!

The Indian rupee though is not benefitting from this cheaper Oil price, which is strange, given that when the Russian / Ukraine conflict began and there were signs that there would be disruptions in Oil deliveries and the price of Oil rose, the rupee got whacked. Cheaper levels is where you want to look to buy anything, right? Well, we certainly have cheaper levels in rupees these days. And the future, with new PM Modi, and RBI Gov. Rajan, is looking brighter all the time, here folks.

I bet you didn't even know I was away for a minute or so (HA!) but I had to stop to sing along with Al Green, and his great song: Let's Stay Together. Al Green was one of my faves in the early 70's.

The U.S. Data Cupboard, gets restocked this week. It's seems like we went a month of Sundays without major data, didn't it? So, today, we will see two of Chuck's faves. Capacity Utilization and Industrial Production. The problem here is that they will both be a non-event for the markets, printing at consensus numbers, which aren't optimistic. But just put those down with the others like Factory Orders, Durable Goods Orders, Business Inventories, and Retail Sales that just don't show economic growth. I don't care what the Fed thinks are says, or what the Paul Krugmans think and say, this economy is going nowhere.. sure, it's functioning, Americans, for the most part are hardworking people, but growing? Hardly. the proof is in the pudding folks, and that pudding has been played around with too!

For What it's Worth. I saw this on Reuters and just had to comment on it. It's Mark Carney, our old friend (NOT!) from the Bank of Canada, and now with the Bank of England, who happens to be on the Financial Stability Board. let's listen in.

"Mark Carney, chairman of the Financial Stability Board, says regulators worldwide have largely resolved flaws that contributed to the financial crisis. The Group of 20 nations have "worked intensively over the past six years to correct the fault lines that led to the global financial crisis," Carney said. The regulatory focus is shifting to detecting risk and rebuilding trust. While the jobs is "substantially complete" further work remains in order to build a fully resilient system. The next phase for the FSB is to focus on new and constantly evolving risks from "shadow banking" or institutions that deal in credit outside traditional banking."

Chuck again. Hmmm.. Just about finished? I would say not! What about the Too Big To Fail Banks? What are you going to do about them? And what about all those derivatives on their books? I have to think that Carney is being overly optimistic here folks. But then when hasn't he been when dealing with media at the Bank of Canada and now the Bank of England?

To recap. The stronger tone that dollar had on Friday morning got wiped out by mid-morning, after Retail Sales were disappointing a some Fed members (Bullard and Kocherlakota) made remarks about interest rates remaining unchanged longer. Gold turned a $14 loss into a $12 gain on the day, and we ended the week on a high note in the currencies and metals. Overnight things are shifting back to a bias to buy dollars again, as Japan announced that they had re-entered a recession, and Paul Craig Roberts says that Japan is doing these nasty things to their economy and currency in an effort to help the U.S. dollar. China named Sydney Australia as the newest hub for renminbi deposits and currency exchange. Chuck wonders why it took them so long to announce this given all the trade that goes on between these two countries!

Currencies today 11/17/14. American Style: A$ .8730, kiwi .7925, C$ .8845, euro 1.2495, sterling 1.5645, Swiss $1.0405, . European Style: rand 11.1090, krone 6.7640, SEK 7.3995, forint 244.80, zloty 3.3795, koruna 22.1570, RUB 47.29, yen 116.25, sing 1.2980, HKD 7.7545, INR 61.73, China 6.1409, pesos 13.57, BRL 2.6150, Dollar Index 87.68, Oil $754.34, 10-year 2.29%, Silver $16.16, Platinum $1,207.75, Palladium $770.75, and Gold. $1,189.66

That's it for today. Well, I received a call yesterday from my St. Louis oncologist. Talk about not being ready or even thinking a doctor would call me at home on Sunday! So immediately, my mind started racing. But he soon calmed me down and said my scans showed my tumors remain stable, and no new growths anywhere were found. YAHOO!, but wait! I then went into my commando patient mode, and asked me no shrinkage was found? I take this medicine and have all the wonderful benefits of it (NOT!) and no shrinkage? But he responded, no. but no growth either. So, I hung up the phone, and sat there thinking that the medicine I take is doing good, just not as good I would like! But I'm still here! I'm still writing every day! And I'm still able to watch my beloved Missouri Tigers go on the road and win! I'm still able to play with my grandson, Braden (Friday night). So, all that and more. Last week was a bad week for me, health wise, let's hope this week is better! And with that, I'll get out of your hair for today, but not before hoping you have a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 11-17-2014 1:21 PM by Chuck Butler
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