IMF Says “You Can Join The Club”.

* Dollar is softer today with most currencies stronger.
* RBI leaves rates unchanged.
* Eurozone PMI’s confirmed stronger.
* U.K. PMI plunges, what will the U.S. version do?

I want to apologize for the tardiness of the letter today… I had technical difficulties that were just corrected… I want to point out that the letter was written and posted to the website: as usual at the normal time this morning, in case there are any questions about my call that the ISM would fall below 50!

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

Good day. And a Tom Terrific Tuesday to you! And Welcome to December! One of my fave moths of the year! Mostly because of the way people act toward each other during this time, and the way we dress up our homes, and cities, and of course Christmas. It’s a very important time of year for me. Plus, I always take my last vacation of the year in December, and this year will be no different! Hopefully Frank, Chris and Mike are reading this and getting excited about those 6 days of getting to write the Pfennig! Big Head Todd and the Monsters greet me this morning with their song: Bittersweet. My longtime friend, (since 2nd grade!) Mike, loves Big Head Todd, so hopefully he now has that song in his head for the rest of the day!

Well, the deed is done! The IMF did indeed announce yesterday that they were adding the Chinese renminbi to their basket of reserve currencies that makes up their SDR’s (Special Drawing Rights) . I’m really hoping that soon, the use of SDR no longer has to have a descriptor of that it means every time I talk about the IMF currency for Central Banks. So, here’s the skinny. The IMF announced that the renminbi would have a 10.92% weighting in the basket. That should account for somewhere between 150 to 300 Billion dollars of renminbi that will have to be bought by the Central Banks over the next 5 years. So, what they means is that it’s not going to be a “everybody rush to the buying window at the same time deal” for renminbi. In fact, over time the buying effect on the renminbi’s price probably will be muted.

The Big loser in the deal was the euro. The euro saw the largest decrease in weighting. And the U.S. dollar saw the smallest. What? What? The U.S. dollar had, and still has the largest percentage weighting in the basket, with the old weighting at 41.90% and a new weighting of 41.73%… A tiny .17% decrease, while the euro saw a 6.47% decrease, yen saw a 1.07% decrease, and sterling saw a 3.21% decrease. I would have thought that the dollar would have seen a greater sized decrease in weighting. You don’t think that there was some smoky back room negotiations going on whereby the U.S. agreed to allow the renminbi into the “club” as long as their weighting didn’t take a big hit do you? I can’t talk about conspiracy theories any longer here, so all I can do is pose the question and let you decide. But I bet you can figure out what I’m thinking. That’s a funny. I know, that you know, that I know that you know.

Speaking of conspiracy theories. I received this email from a dear reader yesterday regarding the IMF announcement. “I think it’s funny how you’ve been talking about this since 07-08 when it was all just considered ‘conspiracy theory’ and finally it hits the main stream news!!!!” And another dear readers said, “Chuck is vindicated and a good predictor of what’s coming . . . !!” Yes, when I first heard the news yesterday morning, I had two thoughts go through my mind immediately. 1. And they told me that none of my conspiracy stuff ever came true. and 2. I wonder how many people in that room at the Orlando Money Show in February 2010, remember me telling them this would all change for the renminbi by the end of the decade?

Oh, there’s more to talk about today other than the IMF, SDR’s and the renminbi. But Shoot Rudy, this is huge! This is the first time since the euro was added that the IMF changed things. I also want to point out to all of the naysayers, and you all know who you are, that ridiculed me, and told me what a dolt I was for saying that the renminbi would climb to be a Main World Currency because it was the currency of China. and all that goes with a perceived closed Communist country that had a managed currency. Crazy eh? Well, this goes back to the initial currency swaps that I noticed China signing with countries to remove the dollar from the terms of the transaction in trade. Oh, and I will pound my chest on this one. I know for a fact, that I was the first writer to talk about these currency swap agreements.

Alrighty then, I’ll stop here. I was beginning to become Big Head Chuck! Now if only the Fed would cooperate? I wonder if they would reconsider their calls for a rate hike if they looked at the chart I just looked at from the Fed St. Louis, that reflects sales in thousands of dollars at Retail Trade Department Stores. Would you believe that from a starting point of 1992, sales rose to nearly 21,000 (in thousands) in 2001, and then falling year after year to now sit below the 1992, starting point of 14,000. it’s a very unsettling chart if you ask me. And yes, it doesn’t take into consideration online sales. But like I said yesterday, soon the department store closes, the shopping center closes, the employees lose their jobs, and the economy takes a big hit.

Ok. so here’s the difference between the text letter I send to your email box each day, and the Pfennig blog site, where I can display the chart I was talking about. So, if you would actually like to see the chart, give it a day, and then go to: I’ll send it to our social media director and hopefully she’ll get it uploaded quickly.

Alrighty then. The dollar appears to be a softer this morning, as the currencies, for the most part, are on the rally tracks VS the dollar this morning. Even the precious metals are participating. With the only two currencies not playing ball, and taking their bat and ball home today is the Chinese renminbi, and the Russian ruble.. It’s always a strange sight to see the Indian rupee rally when the renminbi is not rallying. But that’s the case today. I told you yesterday that the Reserve Bank of India (RBI) would be meeting today, and they did just that!

The RBI left rates unchanged, and RBI Gov. Rajan said that he was content with rates and inflation where they were at the moment. The markets took his talk to say that interest rates in India aren’t going anywhere for a few months. And that has led rupee traders to put the rupee on the rally tracks.

Switching gears to the Eurozone. Last week we had the “Flash PMI’s” print and show a rise in the Manufacturing index for the entire region to 52.8. Well, this morning, that 52.8 number was confirmed, and with that confirmation came the thought that the Eurozone economy might not need the additional stimulus that European Central Bank (ECB) president, Mario Draghi, is expected to announce on Thursday this week. Unfortunately, I don’t see Draghi, altering his appointed rounds on Thursday. So, all this “euro love” is not going to last very long. About as long as it takes to read the book on “What men know about women”! HA!

But, the “love” is there today. I thought the look under the hood of the Eurozone PMI was interesting in that, Germany, Italy & Spain saw nice increases in their manufacturing production, while France saw a reduction. It was the November reading, so maybe the Paris attacks were responsible for the slower manufacturing production in France.

Speaking of slower Manufacturing as evidenced by a lower PMI index number, that’s exactly what we have going on in the U.K. , where they saw their PMI index number fall from 55.2 to 52.7 in November. YIKES! That’s a HUGE drop for this data series. The Consensus thought the fall would be to 53.6, but the fall was even greater! The index number is still well above the 50 number, which is the demarcation between expansion and contraction, but it’s obviously heading in the wrong direction.

Much like the direction of the U.S. ISM Manufacturing Index. We used to call it the PMI like all other countries do, but we changed it to ISM, a few years ago. Well, the ISM will print today for November. I’ve pointed out that this index number has shown a steady fall from August of 2014, and last month sat barely above the 50 level at 50.1. The experts say it will rebound a bit in November and print at 50.5. I say, well, if apples are apples and oranges are oranges and all numbers are calculated correctly, wink, wink, then the index number will have fallen below the 50 level.

Which leads me to say that if you believe that all Gov’t data prints have not gone through the review process and had hedonic adjustments to them, then you would also believe that . God didn’t make the little green apples, and it don’t rain in Indianapolis in the summer time. Ahhh, a little song by O.C. Smith interjected here. Are you asking yourself right now. How does he do that? HA! I’m like the Michael Keaton character in one of my all-time fave movies: Night Shift. “I’m an idea man, I get ideas all day long. I can’t control them. I can’t even fight them. So I have this recorder and I record all my thoughts” HAHAHAHA!

And then as long as I’m on this “funny streak” this morning. My fave line in any movie ever made, came from this movie. And it’s a dolt guy watching the Flintstones on TV, and says out loud. “that Barney Rubble, what an actor” Now that’s funny!

OK. Back to work stuff! Well, Gold and the other precious metals are up in price today. Very nice to see when things go the way I believe they SHOULD go, given the fundamentals. Which drives me nuts sometimes. Shoot Rudy, if the dollar warranted the strength it had, if its fundamentals were strong and without question, I would be the first to say it deserved its strength, but that’s not the case. I do realize that some have said that the dollar is stronger right now because it’s the cleanest shirt in the dirty laundry. But that doesn’t mean a hill of beans to me when talking about Gold, Silver and so on.. The precious metals don’t belong in the dirty laundry, and they also don’t deserve to be whacked every time they get on the rally tracks.

Reuters is reporting that the U.S. Mint’s sales of American Eagle coins (Gold & Silver ) were very strong in November, with Gold tripling sales in November over sales in Rocktober, and Silver reaching a new annual record of sales. The U.S. Mint sold 97,000 ounces of American Eagle Gold coins in November, and selling out of most 2015 dated coins. So. This addresses the question I asked the other day, about how much longer will being able to buy at a cheaper price be enough to support the price of Gold? Well, through November, it certainly wasn’t in danger of being lost!

So, physical demand is still strong. China posted some very strong physical demand numbers too, but that’s nothing new for them. And still, the price of Gold, Silver, et al, slip and slide like someone that doesn’t know how to ice skate on the ice for the first time. Oooooh, Oooooh, I’m going to fall.. OUCH! That hurts!

The U.S. Data Cupboard has the aforementioned ISM data to print today. Construction Spending for Rocktober and vehicle sales for November will also print. The vehicle sales data should be interesting folks. The U.S. has reached 18 million car sales in a month only a few times in the past, and it appears that November will reach that number. Everybody gets a new car in 2015. And the car loans continue to stretch the imagination for creativity. But, I don’t want to be the Grinch that Stole the euphoria from 18 million car sales in November, so I’ll just leave that all right where it is for now.

To recap. The IMF did announce that they would add the renminbi to the their basket of reserve currencies that make up SDR’s. the actual move will take place next year, but for the record, the renminbi will receive an initial weighting of 10.92% with the biggest drop in weighting from the existing members coming from the euro, and not the U.S. dollar, which enjoys the largest weighting in the basket. Chuck wonders why the dollar was spared having a larger chunk taken from its weighting. The RBI left rates unchanged this morning allowing the rupee to break ranks with the renminbi and rally along with most of the currencies this morning. Eurozone PMI’s were confirmed at 52.8. and the U.K. saw their PMI’s slip to 52.7 from 55.1. And the U.S. will print their November PMI, called the ISM today.

Before we head to the Big Finish today. Did you, or your kids ever play the computer game: Where in the world is Carmen San Diego? It was also a kids show with the singing group: A-Capella. Well, I associate that with Frank Trotter. My longtime friend, and boss. The man who came up with the idea of a foreign denominated CD that would be FDIC Insured! Frank is a man on the go for EverBank, and some for himself. He’s not like me, in that 5 minutes after sitting on a beach, he would be stir crazy! So, with that in mind, we’ve found where in the world is Frank O. Trotter! And here he is!

“I am working out of a conference room in our Home Lending office this week in Avon, Colorado. As part of our nationwide coverage EverBank has a number of offices and activity in the mountain communities here in the Rockies across Colorado, Utah, Wyoming, Montana, and Arizona. It’s a busy place with clients coming in for consultation and members of the lending team heading out to meet with customers. For those not familiar, Avon sits at the base of the Beaver Creek ski area. Of course I’ve been sampling the snow and inspecting the chair lifts here at Vail-Beaver Creek from the perspective of a paying customer over Thanksgiving and I can report all is ready.

Ready for what? This weekend the “EverBank America’s Winter Opening” kicks off here at Beaver Creek with activity on and off the slope. The highlight for me will be the Audi Birds of Prey World Cup races held on Friday, Saturday, and Sunday. The Birds of Prey downhill is the opening event on Friday, winding down the icy and treacherous edge of the mountain at remarkable speeds. Take a look at all the events here on the Vail Valley Foundation site: and stop by, or watch on the great TV coverage on NBC and NBC Sports Network. If you are in the neighborhood stop in at the EverBank VIP lounge located in Beaver Creek Village and open to all. See you there!”

Thanks Frank! I went to Colorado in the winter one time in my life. I’m a warm sun, toes in the sand, watching the ocean kind of guy. Not a snow and cold kind of guy, so why would I go where there is more snow and cold? I do admit that a snowfall is beautiful, and then it isn’t.

Currencies today 12/1/15.American Style: A$ .7290, kiwi .6650, C$ .7505, euro 1.0605, sterling 1.5075, Swiss $ .9725,. European Style: rand 14.4440, krone 8.6785, SEK 8.6840, forint 292.85, zloty 4.0250, koruna 25.4820, RUB 66.62, yen 123.15, sing 1.4095, HKD 7.7525, INR 66.48, China 6.3973, pesos 16.51, BRL 3.9025, Dollar Index 99.98, Oil $41.91, 10-year 2.23%, Silver $14.18, Platinum $839.81, Palladium $549.22, and Gold. $1,068.27

That’s it for today. When I was a young man, I fell in the yard on day, and couldn’t get up, my back was a mess, and after years of chiropractors, acupuncture, potions and other things, I had a revolutionary type of back surgery, that’s all the rage now, micro-surgery using lasers, to remove the protruding / herniated disk. I was 18 again! Playing sports again, and once again thinking I was invincible. But then I herniated the same disk again. Just couldn’t leave well enough alone could I? But through the years, I’ve been able to keep the pain at bay, and function pretty well, that is until cancer came along. But the other day, I started having that same old feeling of stiffness and muscle ache, and now it’s a full blown back problem! Back in the day when this would flare up like this, the doctors would send me to bed with muscle relaxers, pain killers and anti-inflammatory medicines, and a few days later, all would be well again. I don’t want to go that route again, but this pain is really a, well go ahead and say it Chuck.. it’s a pain! So, now you know more about my past than some of my friends that didn’t know me back then. 1991, I had that revolutionary new surgery. 24 years ago. WOW! I’m sure you really wanted to hear about all this, but oh well, now you did! HA! I have to get this under control before this Friday. I have something special going on Friday, and can’t be like I am right now for that! OK. I need to get out of your hair today, and get this to the reviewers. I hope you have a Tom Terrific Tuesday!

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