Sweden’s Riksbank Leaves All Unchanged.

* Currencies for the most part rally this morning.
* German ZEW improves for 2nd consecutive month!
* Krona is best performer overnight!
* RBA meeting minutes are upbeat!

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

Good day. And a Tom Terrific Tuesday to you! Well, The Doobie Brothers (before Michael McDonald) greet me this morning with their song: China Grove. A few years ago, at a company function, I heard out operations director, Vinnie sing that song during Karaoke, and did a fabulous job! That’s what I remember when I hear that song. Well, the Fed’s FOMC Meeting starts today, and will end tomorrow with the rate hike announcement. I’ve consigned myself to being wrong on this one folks. You can’t win them all, right? Well, the 1972 Miami Dolphins might argue with that! OK.. let’s try this. You can’t always be right! Not that I’m anywhere close to that, but I would think my track record is something to be proud of.

My friend, and publishing guru, Bill Bonner, believes the Fed’s rate hike will signal the end of the credit expansion, and that can’t be a good thing folks. I hear you saying, but It’s only going to be a 25 Basis Points rate hike, what can that hurt? Well, you see, it’s not the fact that the rate hike is only 25 Basis Points, it’s the fact that a rate hike took place. Because, as I’ve already told you, so if you were paying attention in class that day, this will be a repeat, but otherwise, I told you that once the Fed opens up Pandora’s Box of rate hikes, the markets, the media and hedge fund managers, will be among those that will be all over the Fed asking about when the next rate hike will come, how many does the Fed think there will be in total, and every other question that drives the Fed members crazy, and also drives the markets to trade like more rate hikes are on the way. But hearing no answers, the markets will simply make up a rate hike cycle, and trade to it.

And that is what hurts folks. Oh the Fed will try their best to throw cold water on the markets thoughts of more rate hikes, but I have to tell you that the Fed’s credibility has been shaken to the core, and the markets just aren’t going to go down that road with the Fed. But, that’s tomorrow. UGH!

Yesterday the currencies range traded in very tight ranges, except of course that wild and crazy S. African rand. The euro recovered the lost ground of early morning trading, and ended the day on an uptick. And Gold also got back on the positive side of the ledger, not by much, but a positive move nonetheless. There was no data from the U.S. and therefore no direction for the currencies and metals to gain movement from, and so the tight range trades on the day. You could tell that no one wanted to take a flyer on a currency or metal ahead of the FOMC, so we’ll probably have more of that today and tomorrow.

This morning, the currencies, for the most part, are in better shape, carving out gains VS the dollar, but again, the moves are not HUGE. There are a couple of non-participants to the rally this morning: The Chinese renminbi, and Russian ruble are both seeing selling once again, which is strange for the ruble, given the rebound in the price of Oil overnight.

The euro is back above $1.10 this morning. In Germany, the Eurozone’s largest economy, Investor Confidence, as measured by the think tank ZEW, posted a second consecutive month of improvement. This report’s goal is to indicate what’s ahead for the economy 6-months out, and this month the index rose to 16.1 from 10.4 in November. And beat the expectations of a rise to 15. So, all in all, I would have to say that things are looking better for the Eurozone economy, led out of the woods by Germany. Now, I’m not just basing that statement on this one report from the ZEW. No way! Instead, I’m talking about the aggregate of economic reports from the region recently. And again, I think the stronger data reports confirm what European Central Bank (ECB) President, Mario Draghi, did at the last meeting, and that is to step lightly on the stimulus accelerator. The markets weren’t so happy with Draghi, after the ECB meeting, but as time goes on, he certainly is looking like the smarter cookie in the jar.

In Australia, the Reserve Bank of Australia (RBA) printed their last meeting minutes, and in them there was a feeling of contentment with everything as it stands right now, and there wasn’t even a mention of the resiliency of the Aussie dollar (A$), a jab at the A$ has been a staple of RBA minutes, but not this time. And with that the A$ has pushed higher this morning.

But the New Zealand dollar / kiwi is outperforming the A$ this morning by a wide margin, and is attempting to breach 68-cents. The 200-Day Moving Avg. (DMA) is .6883, so kiwi has a long way to go to reach that, but it could very well be in its sights. But I would be cautious here, with the Fed’s FOMC on the docket for tomorrow. But for now, kiwi is the star performer of the S. Pacific region!

The Best performer overnight is the Swedish krona. It was a very close call, but the Riksbank did leave rates unchanged this morning. The Riksbank has called for inflation to rise to 2% next year, and they are closely tracking krona strength for any signs that it is getting in the way of that forecast. For now, though, the Riksbank is OK with the krona’s moves. I would have to say, no dookie! For the krona has lost so much ground to the not only the dollar but also to the euro that I would think the Riksbank would be happy about krona strength.

The wild and crazy S. African rand is back on the rally tracks this morning, with a big appreciation again, as traders and investors send a message to the President of S. Africa, Zuma, that they approve of his new Finance Minister. The three-day moves in the rand this week, prove once again what I’ve always said about the currency, and that is, that it’s just too volatile for my taste, and I wouldn’t touch the currency with your ten-foot pole! But having said that, when the rand is good, it’s good. and when it’s bad, it’s bad. If the volatility is no biggie for you, then the rand might be right up your alley! HA!

Well, the markets are beginning to come to the realization that the Fed is on track to hike rates tomorrow, and the reaction in the stocks and bonds hasn’t been constructive to the acceptance of a rate hike. U.S. stocks have turned down on the year, and the high yield bonds, think junk bonds, have seen some heavy losses in the past few days. I quoted Porter Stansberry in the Pfennig yesterday, and it’s something I don’t always do, as Porter is one of the smartest guys around, but he has this way of getting his point across, that gets under some people’s skin, but that’s no reason to not quote him, and so I’m going back to the well, here. And tell you that I saw a video of Porter’s talk at the New Orleans Investment Conference, and in it he paints a very ugly picture of the junk bond market. I would think it would be a good idea to behoove what he said about junk bonds, that they are in for trouble.

But what happens if both bonds and stocks react negatively in reaction to the rate hike? And then it gains momentum and the next thing we know we’re seeing a rout in stocks and bonds. What will the Fed do then? Well, they shouldn’t do anything, but they’ve worked so diligently on keeping bond yields/ rates low for a number of years now, to watch it all go up in flames, don’t you think? All that work, up in flames in a matter of days or weeks. I would be ticked beyond belief if it were me! Oh well, as my mother used to like to say, “you made your bed, now lay in it”.

Well, as I said above, Gold got back to a positive position yesterday, and has added another $3 or so to its value this morning. No big shakes, but positive moves which have been far and few in between recently. So, here’s a trivia question for you. When did China begin to accumulate physical Gold? Now, some might say that it was just in the past 15 years or so, as China Trade Surplus, and Reserves grew so large. Well, would you believe that there’s proof that their accumulation began as early as 1993? Gold researcher extraordinaire, Koos Jansen, uncovered a Dutch newspaper article detailing the sale of 400 Tonnes of physical Gold by the Dutch to China. it is thought that China would have added this amount to their reserves.

I can’t tell you enough about the Chinese accumulation, and I’m sure a lot of you are tired of hearing about it, but there’s something more going on here folks. Something bigger than just the Chinese trying to have the most physical Gold. I’ve told you all how James Rickards believes that the financial system of the world is going to collapse, and then all the countries come together and form a new system that’s Gold oriented, and those with the most Gold gets to make the rules, and that’s why China is accumulating so much physical Gold. I’m still having difficulty getting my arms around that whole scenario, but see its possibilities. And if all that should go down, then instead of the “Got Milk?” T-Shirts, they’ll be selling: “Got Physical Gold?” T-Shirts!

The beaten and beleaguered Platinum and Palladium duo have been looking a bit perky lately. I don’t know what happened to these two, as they were being traded on different pricing mechanisms than Gold, and doing just fine, and then someone decided that they be traded alongside Gold & Silver. Makes no sense to me, these two are Industrial Metals that double as investment metals. And while Silver does that too, these two are so associated with the new car phenomenon going on in the world (Hey, the Chinese want to drive new cars too!).

Speaking of Silver. The new and improved agreement between the countries of the world to reduce the pressure on Climate Change (don’t get me started on all that!) there could be more calls for more Solar Panels, which would be good for Silver, given the use of the metal in the making of the Panels. I’m just saying.

The U.S. Data Cupboard begins to get restocked this morning, but its first day back has the stupid CPI report for November. This data can no longer hold my attention, folks. It’s been cooked, massaged, rolled, and sprinkled with sugar too many times. But the markets, for some unknown reason, still follow it, so I have to do so too. UGH! Speaking of data that no longer gets much attention, that would be the Total Net TIC Flows, which will print today for Rocktober. This is the fancy way of saying: Net foreign purchases of securities.

Get ready for tomorrow’s Data Cupboard, as it is chock-full-o-data, which in the early morning might mean something to the markets, but I doubt it, given the Fed’s FOMC announcement will come in the afternoon.

To recap. The currencies are for the most part on the rally tracks this morning, but most of the moves are in tight ranges, with the exceptions coming from the Swedish krona, Mexican pesos, Indian rupee, and New Zealand kiwi, who all are pushing the envelope on currency appreciation this morning. Sweden’s Riksbank did leave everything unchanged as Chuck expected they would. The RBA meeting minutes were upbeat, and the German Investment Confidence Index rose for a 2nd Consecutive month according to ZEW. Gold turned its negative to a positive yesterday, and is back on the positive side of the ledger this morning, with small moves, but positive.

Before we head to the Big Finish today, I wanted to point out that India just announced their first Bullion bourse. it will be the country’s first physical Gold exchange. I find this to be quite interesting, as these HUGE consumers of Gold, India and China have both started their own Gold Exchanges, breaking away from the established London exchange. And all the shenanigans the price manipulators get away with at the COMEX here in the U.S.

Currencies today 12/15/15.American Style: A$ .7235, kiwi .6795, C$ .7300, euro 1.1005, sterling 1.5150, Swiss $1.1045, . European Style: rand 14.9655, krone 8.6385, SEK 8.4385, forint 297.85, zloty 3.9595, koruna 24.5660, RUB 70.42, yen 121.10, sing 1.4060, HKD 7.7500, INR 66.92, China 6.4559, pesos 17.27, BRL 3.8910, Dollar Index 97.60, Oil $36.90, 10-year 2.24%, Silver $13.73, Platinum $855.30, Palladium $554.30, and Gold. $1,064.19

That’s it for today. A Happy Birthday to my younger sister, Terri today! Terri lives in Houston and I don’t see her very often. She’s a cancer survivor, having battled breast cancer a few years ago. Today is the day that in the Butler House growing up, my dad would bring home our Christmas Tree. Every year on December 15th. My sister Barbara shared a picture with me of one of those classic family pictures in front of the Christmas Tree of all the kids from many years ago, last year. Man, we were a motley crew! I think the youngest sibling wasn’t born yet, so it was just 6 of us then. And today, means we’re down to single digits in the countdown to Christmas Eve. Are you ready? I’ve not done a stitch of shopping, UGH! Dobie Gray is singing his song: Drift Away on the iPod right now. Give me the beat boys, and free my soul, I want to get lost in your rock-n-roll and drift away. Well, I don’t want to jinx or put the kiss of death on this, but I thought I would tell you that I’m actually seeing and feeling some shrinkage of the mass in my mouth. It’s very slow, and small, but it’s something to work with, and for that I’m thankful. Praise to the Lord above, and shows once again the power of prayer from all of you who tell me that I’m in your prayers. I don’t want to get ahead of myself here, the shrinkage is small so far. But it does allow me to eat better, talk better, and not look so deformed when I go out in public. I did get to spend some time with my old friend and “brother” Mike yesterday. The two of us have seen so much, and been through so much in our lives.. Ok, time to get out of your hair for today. I hope you have a Tom Terrific Tuesday!

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