Shop Till You Drop All Over The World!

Good day… U.S. consumers did the old “shop till you drop” routine in November, as retail sales soared 1%! WOW! There’s obviously going to be a lot of presents under the old Christmas tree this year. I was aware of, and wrote, that the retailers were discounting items, but I didn’t have any idea it was generating this type of response from consumers. Very interesting… Good Show!

So with retail sales shooting to the moon, the dollar rallied on Wednesday, but that rally was held to a mere half a cent versus the euro, as the rally died on the vine. With the dollar so entrenched in the weak dollar trend, these rallies, whenever they occur, should be held down, and should not cause too much havoc. However, like in all my presentations, I point out that when an asset is in a trend… The trend is not a one-way street! There is always volatility within the trend, and this is a prime example of that.

This morning in Europe, we’ve seen rate hikes from two Central Banks. First, Norway’s Norges Bank did, as I expected and wrote about the other day, raise rates 25 BPS to make their internal rate 3.5%. The thing I liked was a statement by the Norges Bank that indicated that more rate hikes are to come. Hey! Did you know that Norway is the world’s third largest oil exporter? So… You can imagine the Norges Bank’s concern with inflation pressures, eh?

The Swiss National Bank (SNB) also raised rates 25 BPS to push their internal rate to 2%. The SNB’s rate hikes this past year, have been like clockwork (ha!), with a 25 BPS hike every quarter since December of last year. The SNB’s Gov. Roth, said all the right things in the press conference following the rate announcement… So… I would expect the SNB to raise rates again in March… Just about the time your Pfennig writer will be climbing the walls from winter, and ready to head to Jupiter, Florida for Cardinals’ spring training!

Let’s keep the “good news” going. The hit parade in the United Kingdom continued this morning with retail sales unexpectedly rising for a second consecutive month in November. I think the Bank of England’s Monetary Policy Committee is grinding their teeth right now, as they passed up a rate hike opportunity last week, only to find out this week that inflation had hit a decade high, unemployment was dropping, and retail sales were soaring! I bet they are going over the calendar right now, to see when their next meeting occurs, so they can raise rates and get a handle on inflation before it goes to 3%!

In the South Pacific… New Zealand’s retail sales expanded faster than the “experts” forecast, thus making this the sixth consecutive month of strong retail sales. So… As I’ve said all along… The Reserve Bank of New Zealand is coming back to the rate hikes table. Just watch!

So… It looks like consumers all over the world have taken the “shop till you drop” mantra to heart! Well… Almost all over the world. Consumer spending in Japan is still tepid at best. And even with the Japanese economy set to grow for the sixth consecutive year, without consumer spending ramping up, the real meat & potatoes of economic growth is missing. But that won’t last forever! Consumers will spend again… In my opinion.

While I’m on Asia, I might as well give a report on the dynamic duo’s progress in China. U.S. Treasury Sec. Paulson and Fed Chairman Big Ben Bernanke are in China to “help” the Chinese see their way down the path of currency flexibility. I’ve written so much about their chances that I won’t bore you with that again. I’ll just say that the renminbi has gained more than its usual 0.3% per day versus the dollar in the past two days. But that doesn’t mean anything at this time. The renminbi isn’t floating with the markets setting the value, and until that happens, the Chinese could reverse these moves from the past two days in a heartbeat once the dynamic duo leaves.

Well… We closed out the funding for our MarketSafe Gold and Resource CD’s yesterday. You should have seen the “rush” at the end to get into these CD’s. It was pretty amazing. Now we have to put our heads together and come up with a new MarketSafe CD. We’ve done S&P 500, Gold, and Commodity ones so far. Coming up with the new “hoola-hoop” isn’t as easy as it sounds!

Today marks an OPEC meeting in which production levels will be discussed. These guys crack me up… They announce cuts in production, and then can’t get their members to follow along. For instance… OPEC has only achieved half of the 1.2 million barrels of oil a day cut they “agreed” on in October! So it’s all show and no go with these guys.

However, any announcement of a cut would put pressure on oil prices.

Gold and silver had a not-so-nice day yesterday, as they sold off along with the currencies when the dollar rallied. Just buying opportunities in my opinion… Just buying opportunities.

Currencies today: A$ .7825, kiwi .6875, C$ .8645, euro 1.3220, sterling 1.9650, Swiss .8250, ISK 69.15, rand 7.0, krone 6.1825, SEK 6.8750, forint 191.85, zloty 2.88, koruna 21.14, yen 117.50, baht 35.20, sing 1.54, HKD 7.77, INR 44.66, China 7.8229, pesos 10.84, dollar index 83.43, Silver $13.77, and Gold… $628.15

That’s it for today… I was saddened to hear that Peter Boyle had died yesterday. He was one of my favorite character actors… From the monster in Young Frankenstein, to Frank Barone, he made me laugh. “Mr. Super Bowl” Lacy Hunt also passed away yesterday. Mr. Hunt coined the term “Super Bowl” all those years ago… Have a great Thursday!

Chuck Butler
December 14, 2006

The Daily Reckoning