Finally! Some Data To Chew On!

* Currencies are mixed today.
* Eurozone 3rd QTR GDP at 0.3%…
* What’s China up to?
* Gold exodus to the East continues.

And now. Today’s A Pfennig For Your Thoughts.

Good day. And a Happy Friday to one and all! A Friday The 13th! Are you a someone that gets into that stuff? I’m not, which is strange considering that I when I played ball, any kind of ballgame, if I won, then I would make darn sure I followed that same routine the next game. For the life of me I can’t think of the word that describes that right now, so I’ll just put that down to chemo brain. The Cornelius Brothers and Sister Rose greet me this morning with their song: too Late To Turn Back Now. Another example of the great music of the 70’s (pre-disco), where rock played well with R&B. I’ll tell you this, if you hear this song, and you don’t feel yourself wanting to sway to the music, then you’re deaf!

Speaking of too late to turn back now. That’s where Fed Chair Janet Yellen is with the talk of a rate hike in December. The other song that reminds me of her situation goes like this.. Ain’t but one way out baby, Lord I just can’t go out that door. Yes, the Allman Brothers song One Way Out. I read yesterday that one of my cohorts in our stance that the Fed wouldn’t hike rates this year, fell off the horse. He decided that the cards are now stacked against his stance and that the Fed has no other choice at this point but to hike rates in December.. Well, that leaves me, and from what I read on the 5 Minute Forecast, James Rickards, as the two analysts that still believe the Fed can’t hike rates in December.

What good does that do to be on the opposite side of this trade? Well, there always has to be someone on the other side of a trade that doesn’t see things the way the buyer does. Getting back to the Allman Bros. song One Way Out, I certainly don’t want to be saying: “Lord, I’m foolish to be here in the first place”.. And I could very easily just change my mind, what would it hurt? I mean doesn’t Keynes get credit although I don’t think he actually said this, for saying, ” When the facts change, I change my mind.” But that’s not me. I don’t change horses in the middle of the stream. And I do believe it would hurt someone, especially me, and my stances going forward. So, let them fall off the bandwagon, I’m staying right here sitting firmly on the bandwagon, not going anywhere!

Alrighty then, are you ever going to get to the currencies and metals today, Chuck? Well, maybe I won’t! Maybe, just maybe because you never know, I might just get on my soapbox and make this a “Chuck rants” day. How about them pickles? Sweet, Dill, Bread & Butter? HA! Nah, I wouldn’t do that to you dear reader. Those kinds of discussions are saved for the Butler patio, which is all buttoned up for the winter now.. It’s a sad day for me when we button up the patio, sort of like when we take down the Christmas decorations. But in reality, who really wants to hear about how there were more Fed members that talked about a rate hike that pushed the dollar higher? Just how high can the dollar go on “forecasts”? The Dollar Index, which was pushing toward 100 just about every day, seems to be backing off a bit this morning.

Of course, I’ve explained to you many times in the past that the Dollar Index is so heavily weighted with euros, that it’s just easier to see what’s going on with the dollar by looking at the euro/ dollar cross! And to that thought, the euro has climbed back over the 1.08 handle overnight, although right now it’s losing some of its gains after a weaker than expected 3rd QTR GDP print for the Eurozone came out. Eurozone 3rd QTR GDP rose 0.3%, which was weaker than the 2nd QTR rise of 0.4%… But come on, we’re splitting hairs here aren’t we? The Eurozone GDP is growing, in my opinion, about at the same pace as the U.S. That’s right, take out the “additions” that the U.S. Gov’t added last year to the GDP calculation, because they didn’t like the looks of the growth numbers, and we probably had negative growth in the 3rd QTR here in the U.S. But again, don’t let that get in the way of all the rate hike talk.

Other than the euro, which as I look at the currency screens has now fallen back below 1.08, the Aussie dollar, Canadian dollar / loonie, S. African rand, Indian rupee, and Russian ruble, all are on the positive side of the ledger VS the dollar this morning. Oh, and Gold is up $2. That leaves quite a few currencies on the down side VS the dollar this morning. And one in particular has marked 9 consecutive down days VS the dollar. Can you name it? It’s the Chinese renminbi, which was marked down again last night, marking the 9th consecutive day of a weaker renminbi.

And in Greece, they’re doing it again! The Greeks are protesting against austerity today. Bringing the Greek economy to a halt, which doesn’t help things one bit. Go Home! And quit your complaining (there’s another word I would have like to use there! HA!) ! I just don’t get it, folks. I really don’t.

I was doing some reading on the renminbi, and came to the idea that as I’ve told you previously, the Chinese were intervening to support the renminbi, now that the markets supposedly have the conn on the direction of the renminbi. Well, the Chinese have backed away from the intervention table, and have allowed the markets to move the renminbi lower, which China realizes is good right now, given the weakness in their economy. This scenario sure can’t be making the U.S. officials happy right now. I say you’ve not seen anything yet! If the Fed does hike rates to save face in December, I think you’ll see the Chinese come out with a HUGE devaluation of the renminbi.

You see, even though the peg to the dollar was broken officially in July 2005, the renminbi has traded with the dollar in mind since then, and why not? The Chinese hold over a Trillion dollars from their trades with the U.S. over the years. They hold the majority of these dollars in Treasuries, but in essence they are held in dollars. So, while the Chinese were on a path to greater appreciation of the renminbi they finally reached a saturation level, and needed to stop that appreciation path, and if you’ve noticed, and if you hold renminbi, I’m sure you have noticed, the renminbi has been pretty steady VS the dollar if not down a few percentage points in the past 3 years.

And as I explained the other day from one of my guest contributors, the Chinese can’t have the dollar get too strong VS the euro and yen, two of China’s biggest trading partners. Because if say, the euro gets weaker VS the dollar, and the renminbi remains level, the euro is naturally stronger VS the renminbi on the crosses. So, what can China do if the Fed hikes rates, and makes the dollar even stronger than it is right now, and they have given the control of the daily moves in the renminbi to the markets? They can devalue the currency. And that’s exactly what I expect them to do, IF, the Fed hikes rates in December. An eye for an eye. You hike rates, and make the dollar stronger, and we’ll devalue the renminbi, and then see what happens to your forecasts for higher inflation! That’s the message that China has been sending to the U.S. I’m sure. Of course I don’t know that as a fact. But I’m sure this is going on.

Alrighty then, I’ve got to move along here. Somebody could write a book on the China / U.S. relations, trade agreements, currency regimes, and so on. And Maybe someone has already. But it’s sure not going to be me! I already have enough time on a keyboard than the law allows! HA! Billy Paul is singing his great song: Me and Mrs. Jones right now, so I’m going to step away for a minute. OK, I’m back now. We’ve gotta be extra careful, that we don’t build our hopes up too high. I just realized that those lyrics could be used for all those traders who keep marking the dollar higher on their hopes that the Fed is going to hike rates!

In keeping with my theme this week, which was an Inconvenient Debt here in the U.S. and globally for that matter, but mostly what’s going on here, because that’s where 95% of you dear readers live, we saw yesterday that the U.S. Monthly Budget Statement was a deficit of $136.5 Billion. As if that’s not bad enough, the components of the deficit were quite interesting and troubling at the same time. Receipts were down -0.8%, and spending was up 3.9% year on year. And the Rocktober deficit was nearly $15 Billion more that it was for the same month last year. So, Rocktober is the first month of the new fiscal year here in the U.S.. And in light of what I showed you earlier this week which was a difference between how much the National Debt had risen in a year, VS what the CBO said the deficit was, I think I’ll keep a running total this year and post it daily in the currency roundup. Sounds like fun, eh?

On second thought, maybe not. I already spend a lot of time in the currency roundup. Besides that did you notice that I said that receipts fell -0.8%? That’s tax receipts folks. Which means the economy is slowing down. But I have to wonder who else sees it like that? Certainly not the traders that kept the pedal to the metal with dollar buying yesterday. And certainly not the so-called economists that claim they think the U.S .economy is growing just fine. But, I’ll just tuck that data in my back pocket and maybe pull it out again, when the you know what hits the fan with this economy, so I can point to it, and say. “see? I told you!”

So. Finally! The U.S. Data Cupboard is ready to give us something to sink our teeth into. Rocktober Retail Sales. I told you earlier this week that the BHI (Butler Household Index) indicated to me that this report will be “OK” not disappointing like previous ones, like last month when it printed at just 0.1%, and -0.3% without autos. But nothing like a Retail Sales report should look like at this point in time, 6 years with zero interest rates, and over $3.5 Trillion in Quantitative Easing.

But if you order now, we’ll also send you Rocktober PPI! Yes, PPI (wholesale inflation) and with all this dollar strength, you would have to figure that deflation is going to show up here sooner or later. We’ll also see the U. of Michigan Sentiment Index for the first two weeks of November. So, a busy day for the data cupboard, and a day of direction, hopefully.

And I told you earlier today that Gold was up $2. Give or take some change, the shiny metal has bounced around $2 this morning. But so what? What’s $2 when the paper trades can take a pound of flesh with one swoop! But in keeping with my thoughts last week, I’m going to stick to talking about other things than the price and how it got there. that is until some things change! So. I checked out which is where my fave Gold researcher, Koos Jansen hangs out. And there I found an interesting piece by Koos Jansen. let’s check it out together! ‘

“According to the most recent data from Eurostat the UK has net exported 37.6 tonnes of gold to China in September, an all-time record. This figure is up 25 % m/m and up 280 % y/y.

The UK started exporting gold directly to China in April 2014 when it shipped 5 tonnes to the mainland while for the first time bypassing Switzerland and Hong Kong. In total the UK net exported 114 tonnes to China in 2014. Year to date the UK has already net exported 210 tonnes of gold to China, annualized a whopping 280 tonnes – which would be 146 % more than last year. The exodus of gold from the West to the East is still in full swing.”

Chuck again. Well, isn’t that special, as the Church Lady used to say! China is taking in Gold from all over the world, and I love it in a funny way, that the Chinese keep reporting to the IMF and World Gold Council much lower levels of Gold holdings than they actually have. This accumulation has been going on for over a decade now folks. Remember when the daily reports were about Gold exports from Hong Kong to China? As Koos Jansen said above. “the exodus of Gold from the West to the East is in full swing”.

To recap. Well, it’s one of the those days, where Chuck spends most of the first part of the letter on the soapbox, then switches over to tell you that the currencies are mixed today, but the majority of them are on the downside VS the dollar today. The Eurozone printed a weaker 3rd QTR GDP number of 0.3%, VS 0.4% in the 2nd QTR, and the euro which had rallied above 1.08, got sold again. And then Chuck goes right back on his soapbox and spends an inordinate amount of time talking about China and the U.S. So, if you didn’t have time to get through the whole letter today, and rely on the recap, be glad. Chuck was really on roll today, and no one wanted to stop him when he was on a roll! HA!

Currencies today 11/13/15. American Style: A$ .7140, kiwi .6535, C$ .7525, euro 1.0775, sterling 1.5220, Swiss $ .9975, . European Style: rand 14.3355, krone 8.6605, SEK 8.6655, forint 289.85, zloty 3.9390, koruna 25.0920, RUB 66.63, yen 122.65, sing 1.4215, HKD 7.7505, INR 66.09, China 6.3655, pesos 16.77, BRL 3.8015, Dollar Index 98.73, Oil $42.04, 10-year 2.29%, Silver $14.30, Platinum $883.04, Palladium $556.50, and Gold. $1,184.76

That’s it for today. Leon Russell’s song Back To the Island is playing on the iPod right now. what a great song for someone like me that longs for the sound of the waves crashing into the beach. Well, I’m going to go out in public tonight, and hopefully no one will notice me. Little Delaney Grace is a munchkin in a local play production of the Wizard of OZ, so I love my little Delaney Grace and I love the Wizard of Oz movie, so how could I turn down that? My beloved Missouri Tigers get back on the gridiron tomorrow night with a game VS BYU. I sure hope they can put all that mess of this last week behind them and play football, for that is what they are in school to do, play football and get an education. A few of you have asked me why I haven’t talked about the stuff going on at Mizzou, and I just can’t, and won’t. I would make 50% of the people mad, and 50% of the people happy. And I’ll leave it at that! Well, it’s time to get off this bus today, and head to the weekend. I hope you have a Fantastico Friday, and Wild Weekend!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts