We Have Become Comfortably Numb With Debt Levels.

* Chinese CPI falls to 1.3%
* U.K. Retail Sales fall to -0.2%…
* Richard Duncan’s thoughts on China..
* Two Daves point out debt problems.

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

Good day. And a Tom Terrific Tuesday to you! The Great Band, Chicago, greets me this morning with their song: Beginnings, which originally was recorded by the Chicago Transit Authority, the group’s first name, that had to be changed because of naming rights. I have more songs from Chicago on my iPod than any other group, even the Beatles! As a young teenager, I was a R&B, soul music kind of guy, and then a friend of mine gave me an album by Chicago to listen to. I remember being blown away by the brass section, and I was hooked. And after all these years, the core group still tours.

Well, the semi-rally for the currencies and metals faded away yesterday afternoon in the U.S. session. These two assets weren’t hammered like on Friday, no instead, they just gave back their gains made in the Asian and European sessions. We had more economists and rate hike flag wavers out talking yesterday, and I have to admit that I’m somewhat impresses, for they all seem to be singing from the same song sheet. Reminds me of the Pacific Gas & Lights song: Are you ready? Are you ready for a rate hike, because one’s coming, and if you’re ready it will carry you home.

This morning it appears that the overnight and early morning sessions have been all about trading the currencies and metals in tight ranges with mixed results. The Big News overnight was the latest CPI (consumer inflation) report from China, where they saw inflation drop to 1.3% Year on year, VS 1.6% at the last print. Economists immediately came out of the wall boards to cry for more stimulus in the form of lower rates to combat this drop in inflation. UGH! Before the financial meltdown, they would be constructing a monument of China and their ability to keep inflation below 2%! But not now. Things sure have changed, eh?

Since we’re talking about China, here’s an interesting tid bit regarding China and the U.S. I found this on the Daily Reckoning www.dailyreckoning.com yesterday, and it was a piece by Richard Duncan. I’ve talked glowingly about Richard Duncan many times in the past, so just about anything he writes, I want to read. I don’t always agree with everything he says, but, he makes me think, and that’s a good thing. I’m not all about funny lines, and song lyrics, and old time memories about things in the past. I actually use my chemo fogged brain and come up with things. Sorry, I digress. Back to Richard Duncan. This is important folks so pay attention here.

“China, on the other hand, does not want the dollar to strengthen any further relative to the euro and the yen. That’s because the yuan is closely tied to the U.S. dollar, so when the dollar strengthens against the euro and the yen, so does the yuan. A stronger yuan hurts Chinese exports to Europe and Japan. Therefore, China does not want the Fed to increase interest rates since higher U.S. interest rates would cause the dollar and the yuan to appreciate against other currencies.

If the Fed does increase U.S. interest rates, China may devalue the yuan vs. the dollar so that the yuan does not appreciate against other currencies. One theory suggests that the small yuan devaluation in August was a warning to the Fed not to hike rates or else China would devalue.

A large devaluation of the yuan would be a terrible blow to the Fed because it would push down U.S. inflation (perhaps into negative territory), making it much more difficult for the Fed to reach its 2% inflation target.” – Richard Duncan

Chuck again, yes, Richard Duncan isn’t the only well respected analyst that thinks China is going to devalue the renminbi once they get the wink and nod from the IMF that the renminbi is now a part of SDR’s. Speaking of which I keep reading that the announcement of that is going to take place this month. Should be an interesting time for everyone. I suggest you get out those daily journals that you kept in 2007/08, and start writing again.

Alrighty then. The U.K. printed their latest Retail Sales report this morning, and Retail Sales fell -0.2% year on year, and if you put back in the performance between food stores, sales fell even further to -1.1%… I think this pretty much hammers the last nail into the rate hike’s coffin for the UK. But I have to say that at least the Bank of England (BOE) and their Gov. Mark Carney, saw the writing on the way with the weak economic data, and decided to back off their talk regarding a rate hike, as opposed to the what’s going on in the U.S. where economic data, besides housing and labor, just keeps printing weaker and weaker, but the Central Bank is hell bent and determined to hike rates in spite of the weak data.

The euro. Oh the poor euro. nobody likes me, everybody hates me, think I’ll eat some worms. The euro has to be feeling this way again, and it’s not because of the PIGS, it’s not because of Grexit, or France’s Le Pen Party calling for an exit, or Frexit. Sure the euro isn’t seeing any favors done for it by the European Central Bank’s QE/ or negative rates, but this isn’t about the Eurozone folks.. it’s about the dollar. Goldman Sachs says it will be at parity by year-end, and everyone else’s forecast fall in between where the euro is now and parity. I guess we’ll have to play this out and see where the euro ends up. I’ll say this, and I really didn’t want to talk so much about a rate hike today, since I spent yesterday writing a dissertation on it, but should the Fed opt to pass on the rate hike in December, like I believe they will do, the euro sure isn’t going to see parity, it will be once again be bought with enthusiasm. For the dollar will be getting sold, and like I said, it’s about the dollar.

Well, my longtime friend, and colleague, Chris Gaffney, is a CFA, which is a Chartered Financial Analyst. that’s pretty impressive folks, and he’s learned everything he knows from me! HAHAHAHA! No seriously, the CFA title is quite an impressive deal. Well, as a perk of his CFA membership he receives a CFA Smart Brief each day and from time to time they have polls in the Smart Brief. I usually participate in the polls, and did today too. Today’s poll was quite interesting, it asked the question: Has Global Debt Become Too Unsustainable? 40% of the smarter than the average bear CFA’s responded YES. 26% responded NO. 23% responded Strongly, Yes.. 6% responded Strongly NO, and the rest were undecided.

I have to wonder what the 26% that responded NO, are looking at. this current debt / credit cycle is going to implode one day, not today, not tomorrow, or next week or month, but one day, it’ll be a classic Minsky Moment, when everyone becomes complacent with the debt levels, and then BANG! I know, I know, this debt / credit cycle has gone on longer than I would have thought it could, but remember, in the beginning it was just Japan, then the U.S. joined in, and soon, the U.K. was in the mix, and then the Eurozone, and the latest to join the mix is China. So, we have the largest economies of the world all with debt levels that a decade ago, the Chicken Littles would have been all over the streets calling for the end of the world, just thinking that the debt levels would be this HUGE. I would sure hate to think that we’ve all become Comfortably Numb with the debt levels.. But maybe, eh?

And that’s the perfect segue to this next discussion. It’s quite long, so make sure the coffee cup is filled up. Ok, are you back now? Here we go. strap yourself in..

In my monthly letter to clients of EverBank World Markets called: The Review & Focus, I have a reccurring section of the letter titled: An Inconvenient Debt. This is where I update the clients on the ever growing debt in the U.S. and the attempts by some to hide the actual numbers. For instance, now get this, because I’ve seen this before, but my friend Dave Gonigam over at the 5 Minute Forecast, caught it before I did! And he reported it immediately.

“The CBO said last month that the deficit for fiscal year 2015 was $439 Billion. But as you know the real tell is how much the national debt grew during that time. You can run year-over-year figures using any date on the calendar. So going with November 5, the most recent available as I write here, the National Debt has gone from $17.923 Trillion to $18.610 Trillion, that’s an increase of $687 Billion in a year!”

Chuck again. So, the CBO reports a deficit of $439 Billion, but the National Debt increases $687 Billion. Why the difference? I have a good idea why, but I’ll keep that to myself so I don’t get this held up in the review! See? You can teach old dogs new tricks!

And then I came across this quote from David Walker, the former head of the GAO (government accounting office) who has been on a mission to expose the Gov’t’s true debt, so all Americans can then decide if their representatives are doing what’s right for the country or not. Let’s listen in to David Walker.

“Dave Walker, who headed the Government Accountability Office (GAO) under Presidents Bill Clinton and George W. Bush, said when you add up all of the nation’s unfunded liabilities, the national debt is more than three times the number generally advertised.

“If you end up adding to that $18.5 trillion the unfunded civilian and military pensions and retiree healthcare, the additional underfunding for Social Security, the additional underfunding for Medicare, various commitments and contingencies that the federal government has, the real number is about $65 trillion rather than $18 trillion, and it’s growing automatically absent reforms,” Walker told host John Catsimatidis on “The Cats Roundtable” on New York’s AM-970 in an interview airing Sunday.

Chuck again. He’s just talking about current debt folks. Instead of $18 Trillion , he believes it’s actually closer to $65 Trillion, and then let’s not forget the Unfunded Liabilities that are projected to be over $125 Trillion, and of which professor Lawrence Kotlikoff says is more than $200 Trillion!

OK, enough talk about debt, deficits, and accounting. I was never good with numbers any way! HA! But before we move on here. Lost in the shuffle of the Jobs Jamboree on Friday, was the print of Consumer Credit. And the September print here blew the doors off! Speaking of becoming Comfortably Numb with debt levels. Consumer Credit (read debt) rose from $16 Billion in August to $28.9 Billion in September! That’s what I said, $28.9 Billion! In one month! What the heck is going on here? Retail Sales were weak, so just what the heck was being bought? Oh. you dolt Chuck. New Houses! Come on do the V-8 head slap, you dolt!

I told you yesterday that the U.S. Data Cupboard was basically empty or void of Tier 1 data until Friday this week, so there’s just nothing here to view. That means the currencies and metals have no reasons to move in any direction today. Tomorrow is a Holiday.. Veteran’s Day. And then we come back on a Tub Thumpin’ Thursday to no data but the Monthly Budget Statement, which sometimes prints on the scheduled day, and sometimes not. I guess it depends if all the receipts for expenditures by the White House have been turned in or not! HA!

Gold is flat this morning. And still trading below $1,100.. And Silver, which 10 days ago, was trading with a $16 handle, has fallen to $14.54. I know I get in trouble for talking about “sales” but I can’t pass this up. Our metals guru, Tim Smith, sent me a note the other day, that a new program is going to start with the 5 Blessings coins, Silver and Gold, for the holidays. Think about that. 10 days ago you would have spent a $1.50 more per ounce for Silver coins than you would today. I hear that K-Mart is bringing back their Blue Light Specials. I used to love to talk about a currency being on Blue Light Special, back in the day when I could say stuff like that without all the collateral damage. This is where the lyrics to a song plays well. See if you can catch this one. I think I could say something if you know what I mean, but if I really say it, the radio won’t play it, unless I lay it between the lines.

Before I head to the Big Finish today, I came across this on MarketWatch and thought it to be interesting. The story centers around a recent study that found that Americans over 30 are more miserable than they’ve ever been.. Well, since the data began being recorded that is. which happened to be in 1972. the other finding was that adults between the ages of 18-29, were more happy than ever! Now did we really need research to tell us this stuff? Of course young people are happier than older people, for they think that they can overcome the pain points that people over 30 have come to know. I just thought, what the heck, no wonder Alex always has a smile on his face! HA!

To recap. A dreadfully dull night for the currencies and metals, after pushing back yesterday morning, the currencies and metals gave back that push back in the U.S. session. UGH! Tight ranges are in store today, since there is no U.S. Data to deal with for direction. Overnight, China posted a much weaker CPI at 1.3%, which brought about the calls for more rate cuts and stimulus. The U.K. printed weaker Retail Sales this morning, and debt levels around the world are a real problem. But do you care?

Currencies today 11/10/15. American Style: A$.7055, kiwi .6540, C$ .7535, euro 1.0735, sterling 1.5110, Swiss $ .9960, . European Style: rand 14.3615, krone 8.67555, SEK 8.6765, forint 292.05, zloty 3.9570, koruna 25.1945, RUB 65.39, yen 123.30, sing 1.4220, HKD 7.7510, INR 66.30, China 6.3602, pesos 16.81, BRL 3.7960, Dollar Index 99.14, Oil $44.02, 10-year 2.32%, Silver $14.54, Platinum $913.06, Palladium $611.88, and Gold. $1,093.20

That’s it for today. Well, I mentioned it above, but tomorrow is Veterans Day. It’s a bank holiday, so there won’t be a Pfennig tomorrow. Even though I tell you this now, there will be at least a few emails in the Pfennig Replies box, tomorrow, asking me where their Pfennig is. I always have fun with those! My dad was a Veteran of WWII. He never really wanted to talk about all of that, but I could pry some things from him if I was persistent! It’s time to head to the country, to the farm area where he was born and now is laid to rest, and put a new American Flag in the ground at his grave. I did some looking back at past Pfennigs this time of year for I recalled adding a poem for Veterans Day, but couldn’t find one. Did I make that up? Oh well, I do know that I have one for you today, so there! I just received the latest Harry Bosch book by Michael Connelly, in the mail, and I’m looking forward to getting started on that one! I went out to get the paper yesterday morning, and saw frost on the grass. OK, it’s time to start thinking about heading south! I do NOT like Cold weather! And with that, it’s also time to get this out the door. I sure hope you have a Tom Terrific Tuesday!

Here’s the poem by Joanna Fuchs

On Veterans Day we remember again
Our men and women who served;
We honor them now for what they did then:
The liberties they preserved.

Let’s never forget their sacrifice,
The hard, heavy work they have done;
They did what was asked, crucial needs they fulfilled,
With a telephone, pencil or gun.

We’re happy and proud to honor them;
They gave so much more than they got.
Our heroes, our veterans kept freedom safe;
All of us owe them a lots

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