Monday’s Daily Pfennig

* Currency & metals rally ends.
* Jobs reports clears the runway for liftoff.
* Traders remember that the RBNZ meets this week!
* China tells us once again what they are doing.

And a Marvelous Monday to you! I’m greeted this morning with the group A-Ha and their song :Take Me On. And 80’s song. I don’t have many of those on my iPod, but this one belongs. Well, the College Football Playoffs are set.. Clemson, Alabama, Michigan St., and Oklahoma are in with the first round games scheduled for New Year’s Eve. Pretty exciting for the fans of those programs, for sure! December came in here with some chilly, but sunny/ pretty days, far better than those nasty days of November! Today, December 7, is also Pearl Harbor Day. I have to say that one of the most important things that I have done in my life is to visit the Pearl Harbor museum. If you’ve been there, you know what I’m talking about.

Well, all the Good Vibrations that were going through the currencies and metals on Friday morning have been silenced by the dollar, as the green/peachback gets its mojo back with a stronger than expected Jobs report on Friday. And then our friends over at OPEC (NOT!) decided to leave their production levels the same, but take out the daily limit for barrels of Oil. That news sent the price of Oil below $40, the Oil related stocks, bonds and currencies to the woodshed, and added to the problems of a rebounding dollar for the currencies and metals..

The petrol currencies, led by the Norwegian krone are getting whacked, no wait, not just whacked, but whacked good! The krone, ruble, real , loonie, pesos, and pound sterling are all taking it on the chin this morning, but none compare to the selling in the krone.

Other than the petrol currencies, the New Zealand dollar / kiwi is the worst performer overnight. The Reserve Bank of New Zealand (RBNZ) meets this week, and it was like the light bulb above traders’ collective heads got turned on, and they realized that they had been running the price of kiwi higher ahead of the RBNZ meeting and they did the V-8 head slap and began selling kiwi. It is thought by many economists that the RBNZ will opt to cut rates at this meeting, and it’s that thought that traders realized that they had forgotten about, and began to sell kiwi. I’m not sold on the rate cut by the RBNZ, and I’m holding a lit candle in hopes that the RBNZ returns to their prudent Central Bank background and passes on a rate cut.

As I look at the currency screen this morning, I can’t see one currency or metal that is carving out a gain VS the dollar this morning. The Jobs report last Friday, really has gotten the dollar bugs all goose bumped up and excited as you school girls over the latest heart throb, and when the dollar bugs are this excited, there’s no getting in the way of them and their march to higher levels for the dollar. Last Friday, morning, we were giddy about the currency and metals move, shoot Rudy, Gold was up $27 at one point on Friday, and today we have our tails between our legs once again, and hoping not to get swatted by the dollar bugs!

So. Since this turnaround in the currencies and metals was brought about by the Jobs Jamboree and then piled on by the OPEC announcement, we might as well talk about the Jobs Jamboree. I know, I know, I’ve said for months now that I’m going to stop giving the Jobs Jamboree any time of day, given the way the BLS trumps up the report. But, this report got everyone riled up, so we might as well, go to the tape and see what’s going one, eh?

So. the trumped up BLS version of the jobs created report printed on Friday. And the number reported by the BLS was 211,000 jobs created in November. That beat the expectations for 200,000, and pretty much has led the markets down the path of no return that will lead them to the Fed’s first rate hike in a decade. Gentlemen we have cleared the runway for liftoff. But have we now? The markets sure think so, along with just about every economist on earth. So it must be, right? Well, that might be so. But what I want to talk about is this Jobs report by the BLS. For once the BLS didn’t add tens of thousands of jobs with their birth/ death model, only adding 15,000 in November (you don’t think they finally got the message that so far this year there have been more business deaths than births do you? ) But then the people over at put a different spin on the BLS data. Let’s listen in. “according to the BLS’ Household Survey, while 375,000 foreign-born workers found jobs in November, a whopping 326,000 native-born Americans lost theirs.”

Ok. I’ll, just let that sit there and simmer a bit. And when you’re ready to go yell at the walls, let me know, and I’ll join you!

The things I prefer to look at when we have a Jobs Jamboree Friday, is the Avg Hourly Earnings, which remained Steady Eddie at 2.3% growth, and the Avg. Weekly Hours Worked, which actually fell from 34.6 to 34.5, and the Labor Participation Rate which remains very low at 62.5%… So, to me, someone who looks at things differently than the rest of the markets, there is no wage inflation to speak of, we aren’t booking long work weeks, which is a sign of a slowing economy, and our labor picture isn’t as rosy as the trumped up BLS report says it is.If things were different here, I would tell you so. Look, I live here, I buy gas, groceries and giggles here, and would love to see things be different, but when they aren’t good, but everyone tries to apply a coat of paint over them so you can’t see the cracks, I just have to point them out..

My wife always tells me that I should take things for what they seem to be. You know, “Don’t Worry, Be Happy” and maybe she’s correct (don’t tell her I said that!, boy would I have to live with that till the end of time!) and maybe I should just back away from the car slowly, and leave this life of pointing out cracks to someone else! Nah, what fun would that be?

The Russian ruble is second to kiwi as currencies with the worst performance this morning. The ruble got hit twice with stuff this past weekend. First we had the news that Russian inflation had fallen from 15.6% to 15% in November.. Wait a minute, isn’t falling inflation a good thing? Well, not in today’s perverted world of thinking, and the thought here is now that the Central Bank of Russia (CBR) will be able to resume their rate cuts. Recall, that the CBR ran interest rates very high last year in an attempt to halt the run on the ruble, and the CBR had begun to take away those very high interest rates. But then inflation jumped higher, and the CBR had to stop, but not it’s thought that they can resume getting rates back down to normal levels. But at what pace? I mean inflation is still 15% here!

But, it is what it is, here folks, and then the ruble got smacked with a stick by the OPEC announcement, so it was a double whammy for the ruble this past weekend. some days it just doesn’t pay to wake up and look at this stuff. That’s gotta be what the ruble traders had to say this morning.

The U.S. Data Cupboard had something for us on Friday, that got pushed to the back of the room by the Jobs Jamboree, and that is the Trade Deficit. The Trade Deficit for Rocktober printed and showed that the deficit widened to $43.89 Billion, when consensus was $40.5 Billion. But here’s the best part of this print. Now we have to go back a month in time, I wonder if we can use Bill & Ted’s Time Machine, oh well, no time for that. So, here we are back in November, and we see the Trade Deficit for September and it supposedly dropped by a large margin to $40.81Billion and the dollar bugs were pointing to it and shouting about how the U.S. economy was doing just fine because exports were kicking tail. Well, a funny thing happened on Friday. That $40.81 Billion Trade Deficit for September was revised upward to $42.46 Billion! And where are those dollar bugs now?

Today’s Data Cupboard has the Consumer Credit (read debt) for Rocktober, which is expected to drop from $28.91 Billion in September to $19 Billion in Rocktober. All that means is that consumers stopped spending in Rocktober. It’s that simple folks. Here in the U.S, the U.S. consumer spends what they don’t have, it’s what we do, we buy things on credit. So, when the monthly credit numbers drop, you can put that down to a slowing of consumer spending, and a slowing of consumer spending is not good for the U.S. economy. But don’t let that get in the way of the cleared runway for liftoff of interest rates by the Fed.

In 2008 and 2009, I was the lead writer of a publication that was distributed by the Sovereign Society, called: The Currency Capitalist. And it was at that time that I discovered and began writing about what China was doing with the signing of the currency swap agreements with their trading partners. Then in 2010, I began my quest to educate investors about what China was doing to unravel the dollar system. That all began with my talk at the Orlando Money Show in February 2010. It was there that I also told the audience about China’s mass accumulation of physical Gold, and threw out an idea for everyone to think about at that time, and it was that China would eventually want to float their currency, and when they did they would have their currency backed by Gold, in some form, percentage, whatever, but it would make the renminbi the most attractive currency in the world.

Through the years since, I’ve kept you up to date with the accumulation of physical Gold by the Chinese. But nothing more about their wanting use the Gold accumulation as a backing for the currency, until this past weekend. Gold researcher, extraordinaire, Koos Jansen, wrote on the website: about a seminar about Gold supporting the internationalization of the renminbi. One of the keynote speakers was Song Xin, President of the China Gold Association (CGA), Chairman of the Board of China International Resources Corporation, President of China National Gold Group Corporation and Party Secretary, who believes China’s economic power must be serviced by appropriate gold reserves to support the renminbi. So, let’s listen to what Mr. Xin had to say. This is important folks, so pay attention.

“For China the strategic mission of gold lies in the support of renminbi internationalization. Gold forms the base for a currency moving up in the international arena.

If the renminbi wants to achieve international status, it must have popular acceptance and a stable value. To this end. it is very important to have enough gold as the foundation and raising the ‘gold content’ of the renminbi. Therefore, to China, the meaning and mission of gold is to support the renminbi to become an internationally accepted currency and make China an economic powerhouse.

That’s why, in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan.”

Now, if there’s anything all of us should have learned about the Chinese by now is that they don’t nilly willy make statements that they don’t intend to carry out. When the Chinese premier said in in 2010 that it was time to remove the dollar reserve status, he meant it, and having the renminbi added to the IMF’s basket of reserve currencies is just another step in meeting that goal.

So, Gold really pulled up its bootstraps on Friday, and went on a rally that was impressive, but this morning the shiny metal is back to its normal trading and is down $3 as I write.. I was thinking about the Gold rally on Friday, and thinking about what could have been the fuel for that rally. Then I received an email from colleague Ty Keough, and in it he said, something about how maybe all the euro short trades had losses so big, the holders had to also close out their Gold shorts to pay for the euro losses. I smiled, and thought, “I have taught you well grasshopper”. For that’s the way my mind works. So, for whatever reason it ended up being, Gold added more than $20 to its figure on Friday, let’s hope that this move isn’t like a star that’s burning out. It shines the brightest before it burns out!

To recap. Well, the Jobs Jamboree on Friday, cleared the runway for liftoff of interest rates by the Fed, according to the markets. Chuck still doesn’t see it, but you won’t find him standing in the runway to get run over! OPEC left their production levels low, but removed their limit. which meant that the Oil producers no longer had to cheat when going over the production levels. This news brought the price of Oil to its knees, and the petrol currencies got whacked good. The dollar has all the currencies on the run this morning, but the petrol currencies are getting the snot knocked out of them. The RBNZ meets this week, and traders finally remembered that the consensus is for a RBNZ rate cut, and then realized that they had been buying kiwi, and how stupid that was going to look if the RBNZ did cut rates. So, kiwi is the worst performing non-petrol currency, currency this morning. And we had better be paying attention to what the Chinese are saying.

Currencies today: 12/7/15.American Style: A$ .7285, kiwi .6665, C$ .7430, euro 1.0800, sterling 1.5065, Swiss $ .9980. European Style: rand 14.4760, krone 8.6405, SEK 85265, forint 288.60, zloty 3.9960, koruna 25.0235, RUB 68.90, yen 123.45, sing 1.4045, HKD 7.7500, INR 66.72, China 6.3985, pesos 16.73, BRL 3.7445, Dollar Index 98.86, Oil $39.46, 10-year 2.27%, Silver $14.53, Platinum $876.19, Palladium $558.85, and Gold. $1,081.67

That’s it for today. Our first Day of Infamy. Pearl Harbor Day. On the Fox pregame show yesterday, they did the show from Pearl Harbor, and had 14 Pearl Harbor survivors in the attendance. Pretty cool. America was just playing their song: Tin Man, on the iPod. I told you about how when I hear song by the group America my memories go back to the basement of our old house in the city, and three teenage boys are learning how to play those songs on their guitars. Frank, Mike and Chuck. the Three Musketeers. Well, our subdivision had our annual progressive dinner on Saturday night. Must be 23 years or so, that we’ve done this. I had to laugh because by midnight everyone was saying their goodbyes. I said, “we must be getting really old, because this party used to last well past midnight”. But it was good to get to see everyone again from the neighborhood. I spent the night apologizing for my bad breath, and eventually I had gotten to everyone and I could stop that and have fun. I also got to see some of the boys and girls from the office on Friday afternoon, as we met for Happy Hour at one of our old places. This place shared a parking lot with our bank, and so it was just natural that we walked across the parking lot to have a cold one after a long week of work! So, it was fun being there again. Good choice Chris! And with that, I had better end this today. I hope you have a Marvelous Monday, and don’t forget to spend a minute in thought about Pearl Harbor.

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