China's Global Trade Financing Soars!
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    In This Issue.

    * Currencies eke out gains .

    * Gold gets whacked Big Time.

    * India's economy rebounding .

    * Kiwi. best performing Commodity Currency .

    And, Now, Today's Pfennig For Your Thoughts!

    China's Global Trade Financing Soars! .

    Good Day! And a Tom Terrific Tuesday to you! Whew! I couldn't believe it this morning when I woke up, before the alarm went off, and couldn't get back to sleep. I went to bed so dead tired, I felt like I could sleep for days, but then, there I was, awake, before the alarm! UGH! Oh well, I guess that's better than being in a panic because I overslept!

    It was as if a light bulb was turned on the minute we got close to December. The sun came out, and people were out dressing up their houses with lights and decorations. Good riddance to November! Another light bulb is finally getting turned on in the heads of economists and analysts around the world, to the fact that China is moving to the top of the class. But before I get into that, let's see what happened yesterday and overnight in the currencies and metals.

    First, the small gains that the Aussie dollar (A$) had eked out yesterday morning were wiped out as the day progressed, and then along came the Reserve Bank of Australia (RBA) who did leave rates unchanged, which is what I said all along that they needed to do, but do you remember how frantic the markets were about a December rate cut from the RBA? Well they turned out to be wrong, in a way. While the RBA didn't resort to debasing the A$ any further than they already had, they didn't miss the opportunity to take the A$ down further by expressing their feelings about the A$'s strength, saying that they were "still uncomfortable with the A$'s level".

    I'm uncomfortable with it too! But I'm looking at it differently than the RBA is! But you see, I don't count here. This is between the markets and the RBA..

    Well, there was more good news from India yesterday. Recall that in Monday's letter I highlighted the increase in the Indian GDP for their 2nd QTR. Well, add to that the news yesterday the India's Current Account Deficit narrowed in the 2nd QTR (July through Sept) to $5.2 Billion (in dollar terms) or 1.2% of GDP. Just to show the improvement in this data one year ago at this time India reported a $21 Billion Current Account Deficit, which was 5% of GDP. The rupee was one of the few currencies to eke out gains VS the dollar yesterday.

    The other currency to eke out a gain VS the U.S. dollar yesterday was the New Zealand dollar / kiwi. (NZ$) Kiwi as is its slang name (think of dollar or buck being interchanged) , has just about recovered the losses it incurred last week when the A$ was getting whacked daily with verbal intervention from the Reserve Bank of Australia. In recent months, kiwi has outperformed its Commodity Currency brothers, of A$, C$, rand, peso, real, ruble, and other smaller ones. I think that quite a few have gotten on my bandwagon that the Reserve Bank of New Zealand will most likely hike rates early in 2014, and view that as a positive to kiwi.

    And Gold got whacked again yesterday, Big Time! UGH! When I left for home, the shiny metal was down $25 on the day. This morning it's flat, but that's the early morning reading which takes place long before the price manipulators in NY arrive at their desks.

    Yesterday I left you with the thought that manufacturing indexes around the world were on the uptick, led by China. I then shared that fact along with the thought that the U.S. manufacturing index (PMI) would probably also print stronger later in the morning with my economic roundtable group. And right I was! The U.S. manufacturing Index (PMI) rose to 57.3 in October from 56.4 the previous month. Now I've long said that this report is very confusing to someone that tries to make heads or tails of the regional reports, which seem to always indicate a less rosy picture than is painted by the National PMI. But then, maybe not so confusing as long as you realize that the regional reports are what they are, and the National report is put together by the Gov't.

    But it made sense that the U.S. PMI was higher, given the PMI reports from around the world that also showed increased manufacturing activity. Is this enough to really get the Fed Heads to begin their Taper Capers? Well, that depends on how you view it. 57.3 is much stronger than it was at the end of 2008, when the index fell to 33.1. But if we go back to 2004 the index was at 61.4 (5/31/03) So, I would tend to believe that the Fed Heads would view this as "work still to be done". But then I look at things logically.

    Speaking of things that might or already has dragged down the economy, what about the SNAP program? So. the story that I first broke to you a couple of months ago, about how the U.S. Gov't was going to be snipping the Food Stamps amount each month is finally starting to get to the major media. Yes, leave it up to the major media to get a stale story, and then get everyone lathered up about it! But, this isn't the first "snipping" that will be done, folks. and none of this is good for the economy. We could continue to dig a deeper debt hole, and eventually ruin the economy, or stop digging and hurt the economy now, but maybe it recovers later.

    And the media is still fixated on Fed Tapering. I heard yesterday someone say that the markets are now focusing on a June data for Taper Capers to begin. June? I can barely see past Thursday this week when we are supposed to get our first snow of the season. I told the economic roundtable group yesterday that I didn't think the Fed would begin to taper, period. That really brought down the house! Everyone gasped and held their breath, because they wanted to laugh loudly at me. But they did well in not reacting like that! I saw a headline on the Bloomberg this morning titled: Yuan Forwards Touch One-Week Low on Concern Over Fed Tapering.

    Why are these people still talking and writing about tapering? Didn't Fed Heads Yellen and a few others already tell us what they were thinking about QE? That they had "more work to do", and other quotes that I chronicled in this letter? Do these writers and the markets think the Fed Heads are just giving us a head fake? A curve ball? I doubt it. I don't believe they are that creative. But then that's just me and my opinion, and I could be wrong!

    Alrighty then. Now let's talk about what's going on in China that has everyone buzzing this morning. According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the Chinese renminbi / yuan has overtaken the euro for second place in the currencies used in global trade finance, this year. Now, remember as far back as 5 years ago, when I started telling you about the currency swap agreements that China was signing with countries around the world? I told you that they would be removing the U.S. dollar from the terms of the trade, as had been the case for many, many years.

    I told you that this would eventually give the Chinese the wider distribution for the renminbi that they sought, and it would remove the dollar's relevancy around the world. Central Banks around the world would no longer have to hold as many dollars in their reserves in order to smooth out trade between countries.

    Well, look what we have here. SWIFT says that overseas exporters are using the renminbi more as the contract currency to increase the attractiveness and competitiveness of goods or services sold to China. And now, we see that China has gained 8.66% of letters of credit and collections, while the euro's percentage was 6.64%... Hong Kong, Singapore, Germany and Australia were the top users of the renminbi / yuan in trade finance. If we go back to January 2012, the renminbi / yuan's share of global trade finance was just 1.89%, while the euro's was 7.87%...

    So. how much renminbi do you own? I've said this for years, and I'll say it again now and many times in the future, the renminbi will be more important to the world than the dollar. I know that this percentage of the global trade finance for China is small potatoes compared to the dollar, but. this is the beginning of the change folks. mark it down in your journals.

    Well, the Black Friday Weekend sales reports were not good, with sales down 2.9%, but record amounts of shoppers. Hmmm. As the Great Hank Williams sang. You're window shopping, just window shopping, You're only lookin' around, You're not buyin', You're just tryin', To find the best deal in town.

    See, I bet you thought I was just a R&B, Rock and 60's pop kind of music lover. Ahhh grasshopper I was brought up in a house that had Hank Williams on all the time, and a dad that loved to sing along. Hmmm, I just thought of that, I guess that's where I get my singing along with every song!

    There's not much in the U.S. data cupboard today, and I don't see any zinger Fed Head speakers on the docket today, so the markets will be on their own. That usually means nothing happens and the currencies and metals trade sideways for the day. But, you never know, which is why I turn on the screens every day, just to see if today is the day that everyone wakes up and smells the debt coffee in the U.S.

    Did you see the thing on TV the other night on Amazon? That their guy thinks that he can be ready to have drones deliver less than 5 lb packages to your door. Wouldn't that be crazy to have all those things flying around in the air? While it sounds all sci-fi and cool and stuff, I would think the FAA would have something to say about this.

    Before I head to the Big Finish today, I wanted to respond to all the people that sent me emails or commented on the blog that my numbers were all wrong last week on the tax filers, and none tax filers. I didn't mean for that to go viral! (HA!, as if, right? ) I was just giving you some numbers that had been given to me by a CPA, so if they were incorrect, I'm sorry.

    And now. My connection to the server just went kaput, and I had to sit here idly waiting for it to reconnect for 20 minutes. have you ever had to just sit and wait for a computer for 20 minutes, it seems like hours!

    For What It's Worth. I came across something while going through my Google+ app last night. Koos Jansen of The Real Asset Co. had this on his post. "China is fully aware of gold price suppression and planning to overthrow it." Chuck again. I sure hope he's on to something!

    And then here's more FWIW. the great and admirable Richard Russell, had a couple of things to say about Gold and the U.S. dollar and debt. that I found on Here's Richard.

    "The inflationists and gold-haters have been able to drive gold down to a new low. The P&F chart of gold below looks scary, but as I see it, what we are looking at is an ever-larger and growing base for gold. The base has been forming ever since July of last year. It's been practically begging speculators to short gold. The more shorts, the better. I also think there's been a lot of tax-loss selling by fund managers in gold and particularly the gold miners."

    "A chart shows the dollar remains bullish -- but if the dollar hits the 78 box, that will trigger a sell signal and upset the whole apple cart. Many people wonder what will happen to the multi-trillion dollars of debt that the US owes. Debt, in terms of dollars, remains stable (albeit growing).

    But I believe the Federal Reserve and the Treasury are playing for time. If we continue to create dollars at the current rate, eventually the debt will appear manageable. The trick is that we must create dollars faster than we are creating debt. Eventually this must lead to hyperinflation. It all boils down to a slogan that I invented many years ago, "Inflate or die."

    Meanwhile keep your eye on the dollar. A decline to 78 will be the first sign of serious danger."

    Chuck again. The 78 Richard Russell is talking about is in the price of the Dollar Index, which is currently at 80.69. Nothing else new here, but always good to get a reading of what Richard Russell is thinking.

    To recap. Gold got whacked Big Time yesterday, but is flat this morning. Only a couple of currencies eked out gains VS the dollar yesterday, with good data from India helping the rupee, and good data from New Zealand helping kiwi. China has passed the euro for 2nd place among countries financing global trade. Remember, I told you 5 years ago, that China was building toward this.

    Currencies today 12/3/13. American Style: A$ .9125, kiwi .8240, C$ .9390, euro 1.3580, sterling 1.6415, Swiss $1.1055, . European Style: rand 10.36, krone 6.1090, SEK 6.5335, forint 223.15, zloty 3.0970, koruna 20.2060, RUB 33.26, yen 102.65, sing 1.2545, HKD 7.7525, INR 62.36, China 6.1352, pesos 13.25, BRL 2.3605, Dollar Index 80.67, Oil $94.08, 10-year 2.79%, Silver $19.20, Platinum $1,344.00, Palladium $710.65, and Gold. $1,223.69

    That's it for today. Here's your first alert, and of course there will be one later this week, but Friday is St. Nick's Day, which means you put your shoes outside your door on Thursday night. It's a cute little tradition that we started with our older kids. So, don't forget! The latest corruption index for countries is out, and Denmark and New Zealand are rated the cleanest! Good for them! Well, the talk on the desk yesterday was all about my beloved Mizzou Tigers chances for this weekend. It was fun to hear everyone get involved in talk that is usually just me talking it up and playing the Mizzou fight song whenever I get the chance! The desk was really buzzing! I loved it! My Mizzou Tigers finally getting some love from everyone, besides the voters who still have us #5. I sure hope the Tigers come to play this weekend, and not lay eggs like they did whenever they went to the Big 12 Championship Games. I attended one of those games in San Antonio with the family and it was a real bummer at the hotel the next morning. Ok. I hope you have a Tom Terrific Tuesday!

    Chuck Butler
    EverBank World Markets

    Posted 12-03-2013 12:27 PM by Chuck Butler
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